Application and success of R&D subsidies: what is the role of firm age?

This article evaluates the propensity of firms to apply for R&D public grants, their capacity for obtaining subsides and how these relate to the firm age. This analysis is particularly relevant in understanding why young firms may be more or less successful in their application for public subsidies. Using data from an extensive database of 19,236 firms in Catalonia, we estimate a maximum likelihood probit model with sample selection. Our results show that firm age does not exert a significant direct impact on the application propensity in R&D public call, but younger firms tend to show a larger propensity to receive an R&D subsidy. They also show that firm age exerts a moderating role through different internal resources. They highlight the need to design R&D public policies that explicitly favour applications by young firms to help overcome their obstacles to innovation.     

Does complementary technology within an ecosystem affect disruptive innovation? Evidence from Chinese electric vehicle listed firms

Complementary technologies are argued to be crucial elements for disruptive innovation. This is even truer in the consistent structure of ecosystems surrounding core disruptive innovations, where firms take interdependence as the premise to provide complementary technologies and create value jointly. Existing research at the disruptive innovation–ecosystem intersection spans a wide range of theoretical perspectives. However, it is still inconclusive about what types of complementary technology configurations might be most useful for the firms they collaborate with to create disruptive innovation. In an attempt to address these gaps, we consider diversity, quality, and novelty as distinguishing structural characteristics of complementary technologies. Empirical evidence from the Chinese electric vehicle listed firms from 2010 to 2019 reveals that the diversity, quality, and novelty of complementary technologies within ecosystems all contribute to subsequent disruptive innovation. Furthermore, we find an inverted U-shaped moderating effect of technological relatedness on the relationship between complementary technologies and disruptive innovation. At intermediate levels of technological relatedness, complementary technologies have greater benefits for disruptive innovation but are comparatively weaker when technological relatedness is low or high. Our findings crystallise a nuanced understanding of how firms orchestrate complementary activities within ecosystems in the disruptive innovation process, thus narrowing the gap with the technological frontier.     

The Changing Technological Profile of the Leading ICT Firms: Evidence from US Patent Data, 1981-2000

Drawing upon the patent data for 63 of the largest firms in the information and communication technology (ICT) sector for the period 1981-2000, this paper investigates how the technological profile of these firms has altered in relation to technological advantage, technological diversity and path dependency. Using a previously established measure of revealed technological advantage, the firms in the sample almost universally exhibited a decline over time in this measure. While this result is contrary to other multi-industry research, it may be unique to the ICT industry as many non-ICT oriented firms patent in the area as ICT technology underpins developments in more and more industries. In relation to technological diversity, there were high levels of intra-sector diversification, but little diversity beyond the ICT sector, supporting the notion that the emergence of technology markets will support specialization. In addition, strong evidence of path dependency was found indicating that firms adopt long-term strategies for developing their technology portfolios. Given the rapid growth of technology markets, these findings have considerable implications as to the nature and operation of these markets.     

Public R&D as a Standard-Setting Device

We propose a simple two-firm model with complementarities and imperfect knowledge about the optimal technology. Firms receive two signals about the technology, a public and a private one. We show that with complementarities public signals can serve as a coordination device between firms, even if the private signal is more precise. Our results point to an important function of standard-setting organizations and public R&D: providing a focal point for firms that might not coordinate otherwise.     

Technological Knowledge Intensity and Entry Mode Diversity

• This paper expands the entry mode literature by referring to multiple modes exerted simultaneously in different value chain activities within and across host markets, rather than to a single entry mode at the host market level. We apply competing theoretical perspectives—internalization theory and knowledge transfer efficiency considerations on the one hand, and organizational learning theory on the other—to argue that firms’ technological knowledge intensity affect their entry mode diversity across value chain activities, across host markets, and at the overall corporate level.
• Analyzing a unique dataset we show that high technological knowledge intensity is strongly associated with high entry mode diversity across value chain activities and at the corporate level, but only weakly associated with greater entry mode diversity across geographic host markets.

     

Assessing the performance of a vertically disintegrated chain by the DEA approach–a case study of Taiwanese semiconductor firms

The competitiveness of an individual firm depends upon the competitiveness of the value chain to which it belongs. The core constraint of virtually every chain is that chains are structured, measured and managed in parts, i.e. vertically disintegrated, rather than as a whole. Assessing the performance of vertically disintegrated firms can provide an insight of how each firm acts in such a value chain. This paper aims to study the operating performance of the vertically disintegrated chain in the integrated circuits (IC) industry. A performance evaluation was completed for 48 leading vertically disintegrated semiconductor companies in Taiwan, including 17 in design, 10 in fabrication and 21 in packaging/testing, using the data envelopment analysis (DEA) approach which inherently recognises tradeoffs among various measures. The empirical results indicate that the IC design firms perform better than IC fabrication and IC packaging/testing firms. Overall, semiconductor firms in Taiwan still have room for performance improvement. In addition, the empirical results suggest that an IC company's scale of size does play an important role in influencing its operating efficiency. One can increase performance by consolidating with other smaller units to achieve an optimal size. In addition, an analysis of operating performance by DEA can provide a semiconductor firms’ operations with insights into resource allocation competitive advantages, and help with strategic decision-making, especially regarding operational styles under an intense competitive environment.     

When do firms focus on public research? : evidence from U.S. medical device industry

Public research including universities and research institutes is an important source of innovation. This paper describes how a performance feedback model explains the conditions under which firms source external knowledge through universities and research institutes. In the U.S. medical device industry, we show that there is an inverted U-shaped relationship between performance below aspirations and knowledge sourcing from public research. Furthermore, we find that firms respond to historical aspirations more sensitively than social aspirations, and slack resources tend to attenuate the relationship between performance below historical aspirations and knowledge sourcing from public research.     

R&D and firm performance in the semiconductor industry

While the semiconductor industry is still dominated by large vertically integrated firms, fabless firms, which outsource their manufacturing, are gaining market share. Fabless firms are considered to have an advantage in product innovation, as they can focus their innovation efforts on chip design and can benefit from investments in process innovation made by their manufacturing partners. However, there is little empirical evidence of the performance of fabless firms compared to vertically integrated firms. This research empirically examines the relationship between R&D and the financial performance of fabless and vertically integrated firms from 2000 to 2010. Our results show that fabless firms maintain higher gross and net margins, earn a higher return on assets (ROA) and have greater intangible value (Tobin’s q) than vertically integrated firms when controlling for size, capital intensity and R&D ratio (R&D/sales). This supports the argument that fabless firms achieve greater performance by focusing on one part of the innovation process. The relationship of R&D ratio to net margin is negative for the whole sample, suggesting that the industry may be overinvesting in R&D. Notably, the negative relationship is greater for fabless firms, which spend a higher amount of their sales on R&D. The relationship of R&D ratio to ROA and Tobin’s q is negative, and there is no significant difference between fabless and integrated firms. We conclude that fabless firms outperform integrated firms overall, but are somewhat worse in terms of increasing profits and creating value from their R&D investments.     

How do top management team characteristics affect digital orientation? Exploring the internal driving forces of firm digitalization

The top management team (TMT) plays a key role in the process of the firm digital transformation. However, few studies have focused on the impact of TMT characteristics on the digital orientation of firms. In this paper, we simultaneously explore the impact of the dispersion, aggregation, and background characteristics of TMT on the digital orientation of firms. Based on the upper echelons theory and strategic orientation theory, we propose that the diversity and average education level of TMT positively impact firms' digital orientation. The average age and tenure of TMT have a negative impact on the digital orientation of firms. The overseas and financial backgrounds of TMT members have a positive impact on the digital orientation of firms. Our hypothesis was tested using large-scale longitudinal data and computer-aided text analysis methods from Chinese listed companies. This paper provides useful supplements to early research on digital driving factors and digital orientation in emerging economies, and also provides more universal suggestions for digital practices in firms.     

The Recent Growth Performance of US Firms in the Industrial Design Sector: An Exploratory Study

This paper assesses the competitive factors associated with company growth in the US industrial design sector. This small but technologically advanced sector delivers critical innovation inputs to firms that produce durable goods. Evidence from a survey of 85 US design companies suggests that competitive success hinges upon service diversity. Specifically, the most commercially buoyant companies have diversified their service offerings beyond product or component design. These firms have developed strategic competencies in fields such as contract research, prototype development, product testing, technological forecasting, market analysis and even advertising. Although most US design companies are small-to-medium-sized enterprises, successful firms do not differ from their less successful counterparts in terms of employment size, occupational structure, regional location or market focus (client sectors). Instead, the key differences lie in service diversity and the quality of human capital. The paper concludes with a brief discussion of the implications of the empirical findings for future research on the dynamics of the design industry.     

Diverse Institutional Environments and Product Innovation of Emerging Market Firms

• This study unbundled institutional environment into two distinct aspects: institutional distance (the degree of dissimilarity between the institutional environment of a firm’s home country and an economy into which it expands) and institutional diversity (the variety of all the institutional environments to which a firm is exposed), and related them to product innovation performance of emerging market firms.
• Data on 917 Chinese manufacturing firms in multiple industries over 3 years was analyzed.
• The results show a positive relationship between institutional distance and product innovation success. An inverted U-shaped relationship was found between the institutional diversity of a firm’s foreign markets and its product innovation success.

     

R&D,Value Chain Location and Firm Performance in the Global Electronics Industry

In today's global electronics industry, innovation is carried out by various value chain participants, including brand-name manufacturers (sometimes called lead firms), contract manufacturers and component suppliers, but there is little understanding of who benefits most from innovation in such networks. This research examines empirically the relationship of R&D spending and location in the value chain (lead vs. non-lead firms) to firm performance in the global electronics industry by using the Electronic Business 300 data set for 2000–2005. Our results show that firms spending more on R&D have higher gross profits, but do not have higher return on equity (ROE) and return on assets (ROA). There is a strong positive relationship between lead firms and performance as measured by gross profit, ROE and ROA, but the relationship between lead firms and gross profit becomes insignificant when the interaction term of R&D and lead firm is included in the analysis. Finally, lead firm status has a positive interaction effect on the relationship between R&D and gross profit. These findings suggest that the relationship of R&D to performance is mixed, but that lead firms can capture higher value (gross profit) from R&D than contract manufacturers and component suppliers.     

Management Compensation Systems in MNCs and Domestic Firms

• This is a study of the relationship between institutional settings and managerial compensation systems, based on extensive cross-national survey evidence.
• We compare differences in practices between Multinational Corporations (MNCs) and domestic firms across a range of capitalist archetypes.
• We find that MNCs are more likely to promote compensation systems that incentivise managers in line with organisational performance compared to domestic firms. Our findings also reveal persistent diversity reflecting firm type and institutional setting. We find that the gap between MNCs and domestic firms in terms of the usage of incentive-related compensation is less pronounced in Liberal Market Economies than in other settings. This suggests that it is a combination of being an MNC and the specific home locale that moulds approaches to managerial compensation. This reflects considerable hybridisation of practices within and between settings.

     

R&;D market value under weak intellectual property rights protection: the case of India

The relationship between R&D and market value has attracted the interest of many scholars within different fields, but scant attention has been paid to the countries with weak protection of intellectual property rights (IPR). This is unfortunate, since this problem is potentially highly relevant for IPR policy in developing countries. In particular, several questions arise when the problem of R&D market value is analyzed in a country where IPR protection is weak. First, there are concerns regarding incentives (i.e., private returns) for firms to invest in R&D when IPR is only weakly protected. Second, significant differences could emerge in the market valuation of R&D investments of domestic and foreign firms, above all in those industries where spillovers are more likely. To examine these issues, this paper investigates the market valuation of R&D investments of a panel of 219 R&D-reporting domestic and foreign firms publicly traded in India with an empirical analysis. First, the market valuation of the R&D capital for the whole sample is positive and higher than those obtained in U.S. or European countries from similar analyses. Second, in the sub-samples of the domestic and foreign firms, the market value of R&D investments of foreign firms is not significantly different from zero, while the valuation coefficient of domestic firms is four times higher than that obtained on the whole sample. Third, in science-based industries the difference between domestic and foreign firms is smaller than in the other industries. The policy implications of these findings are discussed.     

Technological Diversification Through Corporate Venture Capital Investments: Creating Various Options to Strengthen Dynamic Capabilities

Corporate venture capital (CVC) investment in technology-intensive entrepreneurial ventures has attracted increasing attention from established firms which recognize it as a useful learning investment strategy to create diversified technological options for future change. However, there is a lack of empirical research which examines the relationship between CVC investment and the corporate investors' technological diversification. In this study, we investigate the effects of CVC investments on corporate investors' technological diversity by using 20 years of panel data from corporate investors in five high-tech industries. As a result, we find that the total amount of CVC investments and the industrial diversity of portfolio companies exhibit curvilinear (inverted U-shape) relationships with the corporate investors' technological diversity. Moreover, the empirical results show that the absorptive capacity of corporate investors positively moderates the effects of CVC investments on the technological diversity.     

The Impact of Internationalization on Home Country Charitable Donation: Evidence from Chinese Firms

Does internationalization promote or inhibit home country charitable donation for firms from developing countries? This is an important question that remains poorly studied. This paper aims to address this question by focusing on Chinese internationalizing firms. We maintain that while broadening overseas markets brings financial returns to Chinese firms, their domestic charitable donation may decrease with the level of internationalization. Drawing on the resource dependence theory, we argue that the more Chinese firms depend on overseas sales, the less important domestic stakeholders are for their survival, and therefore they are less likely to make charitable donations within China. Further, we maintain that this negative relationship between internationalization and home country charitable donation is attenuated by Chinese firms’ state-ownership. This is because state-ownership provides the firms with alternative sources of critical resources that alleviate their dependence on the international markets. We tested and supported our theory using data collected from all public firms in China between 2008 and 2012. Theoretical and policy implications are provided.     

Firm market valuation and intellectual property assets

ABSTRACT

This paper investigates the relationship between the innovative activity of the top corporate R&D investors worldwide and their market valuation. The analysis exploits a sample of more than 1,250 publicly listed Multinational Corporations (MNCs) and their intellectual property rights (IPR) – patents and trademarks – filed between 2005 and 2012. The study contributes to the literature on the IPR-market value link by examining the premium resulting from the interactive use of different IPR. Moreover, the empirical setting allows differentiating the effects of an increase in market value derived from additional IPR (within-effects) with respect to the premium received for holding more IPR than the competitors (between-effects). The findings suggest that investors value the simultaneous use of the two IPRs and form their expectations by benchmarking firms. Finally, significant industrial specificities are observed in the individual effects of patents, trademarks and their interactions on the market value of firms.     

Enterprise-University Co-operation and the Role of Public Research Institutions in Regional Innovation Systems

The paper analyses the co-operative relationships that public research institutions in Germany have developed with manufacturing firms and with each other. We find that collaboration with firms is highly concentrated on regional partners. Research institutions contribute significantly to innovation processes in the respective regions by absorbing knowledge from beyond the region and making it available to local companies. In respect of co-operation between public research institutions themselves, we find that spatial proximity still matters, but to a lesser degree.     

Technologies, Products and Organization in the Innovating Firm: What Adam Smith Tells Us and Joseph Schumpeter Doesn't

Adam Smith's insights into the increasingly specialized natureof knowledge production are crucially important in understandingthe contemporary problems of managing innovating firms. Productsand firms are based on an increasing range of fields of specializedtechnological understanding. Competition is not based on technologicaldiversity, but on diversity and experimentation in products,etc. Firms rarely fail because of an inability to master a newfield of technology, but because the do not succeed in matchingthe firm's systems of coordination and control to the natureof the available technological opportunities.     

Reaching Out and Reaching Within: A Study of the Relationship between Innovation Collaboration and Innovation Performance

A large body of research has thoroughly discussed and examined agglomeration advantages for innovation of geographically concentrated firms. However, there is an increasing awareness that this intellectual tradition tends to overemphasize the role of geographic proximity in the transfer of knowledge between firms and to under-theorize the contribution of nonlocal knowledge flows. With a sample of 143 manufacturing firms from Singapore, this research attempts to answer three interrelated questions: (1) Does local networking effort provide firms with added value above and beyond what is available to them by just “being there?” (2) Does local collaboration contribute more to innovation performance than nonlocal collaboration? (3) What is the joint impact of local and nonlocal collaborations on innovation performance? We find that while local and nonlocal collaborations are statistically indistinguishable from each other in terms of their relative importance, they represent complementary spurs to innovation. Despite the unique research setting of Singapore as a city state, we argue that our findings may be generalizable to geographic systems in other parts of the world.