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.     

Innovation and Firm Growth: Is R&D Worth It?

The paper contributes to an emerging literature that critically questions the degree to which R&D, at the centre of national and transnational innovation policies, results in firm growth. The differences in how innovation affects firm growth is explored for small and large publicly quoted US pharmaceutical firms between 1950 and 2008. We observe that the positive impact of R&D on firm growth is highly conditional upon a combination of firm-specific characteristics such as firm size, patenting and persistence in patenting. For small firms, R&D boosts growth for only a subset of firms: namely, those that patent persistently for a minimum of five years. For large pharmaceutical firms, on the other hand, R&D may have a negative impact on growth; potentially resulting from the low R&D productivity these firms have suffered from since the mid-1990s. These results raise important issues around the R&D and firm growth relationship for small and large firms as well the role of persistence in innovation for boosting firm performance.     

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.     

Determinants of internal and external R&D offshoring: evidence from Spanish firms

This paper analyses the determinants of R&D offshoring of Spanish firms using information from the Panel of Technological Innovation. We find that being an exporter, international technological cooperation, continuous R&D engagement, applying for patents, being a foreign subsidiary, and firm size are factors that positively affect the decision to offshore R&D. In addition, we find that a lack of financing is an obstacle relatively more important for independent firms than for firms that belong to business groups. For these latter, we also obtain that the factors that influence the decision to offshore R&D differ depending on whether the firm purchases the R&D services within the group or through the market: a higher degree of importance assigned to internal sources of information for innovation as compared to market sources increases (decreases) the probability of R&D offshoring only through the group (market).     

Innovation and firm growth over the business cycle

This paper investigates how the macroeconomic business cycle impacts the empirical relation between innovation and firm growth. Based on representative panel data of Swiss firms ranging from 1996 to 2014, the paper finds that firms with innovations based on R&D activities show higher sales growth rates than non-innovative firms in periods dominated by economic recessions. This finding is in line with the idea that recessions play an important role in the adaptation process of the economy towards the innovative. In contrast, the paper finds that firms with innovations based on other, non-R&D innovation activities show higher sales growth rates than non-innovative firms in periods dominated by economic booms. Hence, while firms with innovations based on R&D activities are more resilient to business cycle fluctuations than non-innovative firms, firms with innovations based on other, non-R&D innovations activities are more sensitive to business cycle fluctuations than non-innovative firms.     

R&D,worker training and innovation: firm-level evidence

Firms that invest in R&D and also in worker training are expected to be successful innovators; yet, the extent to which these investments are mutually reinforcing has not been established. This paper addresses that question by analysing the decision to innovate and the number of innovations introduced. Our findings, which are based on a sample of Spanish manufacturing firms, confirm that R&D is more effective when firms also invest in worker training. Moreover, for some smaller firms, investing in workers’ skills (via training programs) boosts innovation even in absence of R&D. Meanwhile, on-the-job training in large firms might serve mainly to reinforce the effects of R&D. Regarding the number of innovations, our result signals that a higher absorptive capacity via higher ability of qualified workers (through schooling or training) leads to improved innovation performance.     

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.     

Policy-Induced Environmental Technology and Inventive Efforts: Is There a Crowding Out?

Substantial policy effort is devoted to stimulate environmentally friendly technology through regulation and subsidies. Since innovation is a crucial productivity driver, a potential crowding out of inventive efforts in affected firms may increase the cost of regulation. We study the effects of regulation-induced environmental technology on innovation activities for a sample of firms in Germany. We find some evidence for a crowding out of firms' in-house R&D, especially for firms facing financing constraints. Innovation outcomes and investments in innovation-related fixed assets are not affected. Moreover, subsidy-backed environmental technology does not crowd out R&D.     

Patterns of Innovation Capabilities in KIBS Firms: Evidence from the 2003 Statistics Canada Innovation Survey on Services

The aim of this paper is to shed light on complementarities and substitutions between various types of innovation capabilities in knowledge-intensive-based service (KIBS) firms. The data used in this study are the responses of 2,625 innovative firms to the 2003 Statistics Canada Innovation Survey on services. The empirical results suggest the presence of three patterns of complementary innovation capabilities, one pattern of substitute activities and finally, four patterns of innovation capabilities that are independent from each other. Hence, the results suggest the presence of complementarities: first, between internal R&D, external R&D, acquisition of equipment and machinery, and marketing activities; second, between external R&D, acquisition of equipment and machinery, acquisition of external knowledge and marketing activities; third, between acquisition of equipment and machinery, acquisition of external knowledge and marketing activities. Such complementarities lead to the conclusion that, in practice, managers of KIBS firms consider the consolidation of these capabilities jointly instead of separately. The paper also discusses issues related to patterns of capabilities that are substitutes and independent from each other. The results of this study also show significant heterogeneity in the determinants of the different patterns of innovation capabilities.     

Heterogeneous Partners,R&D cooperation and corporate innovation capability: Evidence from Chinese manufacturing firms

In this paper, we examine the differential impact of cooperation with heterogeneous partners on firms' innovation capabilities. We use the number of joint patent applications of Chinese manufacturing firms from 2008 to 2018 to measure cooperation with different types of partners and the number of corporate patents to measure the innovation capability of firms. The results indicate that R&D cooperation with other enterprises, universities, and research institutions all have a significantly positive impact on the innovation capability of enterprises. However, R&D cooperation with universities or research institutions has a higher positive impact on innovation capability than that with other firms. Different internal and external factors moderate the relationship between heterogeneous partners and the innovation capability of firms. Specifically, firms with higher absorptive capacity will benefit more from R&D cooperation with corporate partners. In contrast, in industries with higher market concentration or where firms are at the technological frontier, cooperation with universities will positively impact their innovation capabilities. Further research demonstrates that absorptive capacity has a more positive moderating effect when the cooperation is between firms in the same industry, compared to R&D cooperation between firms in different industries.     

Economic crisis and company R&D in Spain: do regional and policy factors matter?

The economic crisis which began in 2008 has had a far-reaching impact, including effects on the innovation behaviour of firms. Many companies have reduced their innovation-related activities, although some firms have been more resilient than others. Using a representative microdata panel of Spanish firms, we study the probability of companies abandoning in-house R&D during the crisis and its relationship to regional and policy factors. We find significant regional heterogeneity related to regional economic size and the type of the regional innovation system; regional government R&D support only reduces R&D abandonment rates in regions where a strong system of knowledge exploitation is in place.     

The interaction mode and geographic scope of firms’ technology alliances: implications of balancing exploration and exploitation in R&D

This paper proposes that the interaction mode, i.e. interactive and iterative, and geographic scope, i.e. domestic and international, of technology alliances generate sources of exploration and exploitation for firms. An implication of this idea is that firms can use these sources for balancing its internal focus on exploratory and exploitative research and development activities (R&D). Then, the paper suggests that the use of this balancing strategy has positive effects on a firm’s innovative performance. Using panel data based on Spanish manufacturing companies for the period 2004–2012, the empirical results confirm that firms balancing their internal exploration or exploitation in R&D with sources of external exploitation or exploration in their technology alliances are the firms with better prospects to produce innovation streams. Implications for the literature on complementarities in innovation, ambidexterity and R&D alliance formation are derived from the analysis.     

Post-Catch-Up Strategy for Medium-Sized South Korean Firms: Improving Technological Capabilities by Balancing R&D Intensity and Open Innovation

Abstract

This study examines how R&D intensity and open innovation affect the technological capabilities of firms in newly-developed countries, such as South Korea. East Asian latecomers are transitioning from a catch-up phase toward becoming leaders, and they are engaging in open innovation activities to drive this transition. This research quantitatively analyzes three kinds of open innovation activities—outside-in, inside-out, and coupled—to investigate their influence upon technological capabilities, while also considering the effect of R&D intensity. Data from 75 South Korean medium-sized firms were analyzed, and two major findings are reported. First, technological capabilities are enhanced by some open innovation activities and by R&D intensity. Second, R&D intensity negatively moderates the impact of open innovation activities on technological capabilities. Therefore, it may be concluded that firms with relatively low R&D intensity will gain the most benefit from increasing their open innovation activities.     

The Role of Time in Assessing the Economic Effects of R&D

This study investigates the impacts of R&D on firm performance. It extends previous research by constructing alternative stocks of R&D‐Capital that take into account that time plays an important role in assessing the pay‐off of industrial research. The results show that even when we employed R&D‐Capitals that placed more emphasis on the industrial research that had been undertaken 7 years ago, the effects of R&D were very (statistically) significant and relatively high, thereby suggesting that the life of R&D (on average) tends to be long. The results however, vary across organizations depending on both firm size and the technological opportunities that a company faces. It appears that the depreciation rate of R&D investments is higher in the case of technologically sophisticated firms. In contrast, strategic investments in industrial research generate a relatively constant effect on the performance of other firms, supporting the notion that the corresponding returns for such firms decay slowly.     

Foreign Subsidiaries and Technology Sourcing in Spain

Firms acquire external technological knowledge via different channels. In this paper, we compare the technology sourcing of foreign subsidiaries and domestic firms looking at domestic R&D outsourcing, international R&D outsourcing, domestic cooperation for innovation and international cooperation for innovation. We use data from the Spanish Technological Innovation Panel for the years 2005–2009 for 10,206 innovative firms operating in Spain. We apply a multivariate probit specification which allows for systematic correlations among the different choices. The results show that the different technology sourcing choices are interdependent and that foreign subsidiaries show a different pattern of external technology sourcing. Compared to affiliated domestic companies, foreign subsidiaries show a smaller propensity for external technology sourcing via R&D outsourcing from independent firms in the host country, for international R&D outsourcing and for international cooperation for innovation. In contrast, foreign subsidiaries show a greater propensity for domestic cooperation for innovation. However, foreign subsidiaries are not a homogenous group in this respect.     

The Performance of Independent Active SMEs in French Competitiveness Clusters

This article analyses the evolution of independent members of French independent competitiveness clusters. It compares small and medium-sized enterprises (SMEs) that participated in collaborative research projects, funded by French competitiveness clusters, against similar control companies that were not part of such projects and not funded by the policy, over the period 2005–2013. French competitiveness clusters seek to enhance SMEs’ size, performance, innovation and employment; the current study therefore assesses their outcomes in terms of capital invested and equity returns. The findings from a difference-in-differences analysis reveal that sales, employment, R&D investments, and value added all increase in relative terms, but financial returns exhibit significant relative decreases for the smallest companies, whereas larger firms record strong increases. The inability of the smallest SMEs to reap gains from their cluster membership should be a matter of great concern to both companies and policy-makers.     

Optimal R&D investments of the firm

This paper examines irreversible decisions on innovative activities where it takes time to complete an R&D project. The total amount of R&D investments that the firm needs to undertake in order to obtain the breakthrough in the innovation process is uncertain. R&D investments are limited by the restriction that they must be self-financed. It is shown that R&D investments are more valuable when the level of uncertainty is large. Especially, it is very attractive to undertake R&D investments if a project faces many uncertainties during its early phases. Furthermore we study how R&D behavior is influenced by different levels of the discount rate and the financing limit. Moreover, the effects of R&D subsidies, spillover benefits and a payoff that decreases over time are analyzed. Received: 9 October 1997 / Accepted: 19 March 1998     

Do R&D Spinoffs have Higher R&D Productivity? Evidence from Taiwanese Electronics Firms

The startup mode of spinoffs founded by R&D employees (R&D spinoffs) within the same industry is widespread in high-tech industries. The founders usually own specific human capital and key technological capability, enabling them to take the operational risk and to appropriate rewards of innovations under the industrial environment of rapid technological change. Whether high-tech R&D spinoffs, compared to their other spinoff counterparts, have better R&D productivity remains less well explored. According to the conceptual discussion of the advantages of intangible innovation assets embodied in company founders, this study argues that the founders' innovation cognition, knowledge externalities, absorptive capability and routine experience can help R&D spinoffs to have higher R&D productivity. We thus propose three hypotheses that are then empirically tested. Based on a sample of Taiwanese electronics firms, the empirical findings show that R&D spinoffs invest with a higher R&D intensity and on average have more patents issued. More importantly, the microeconometric estimates show that the patent and output elasticities of the R&D of R&D spinoffs are significantly higher than those of other firms, indicating that they actually have higher R&D productivity.     

Firm size and compositions of R&D expenditures: evidence from a panel of R&D performing manufacturing firms

The effect of firm size on diverse compositions of R&D expenditures is analysed in detail using firm-level data on the Korean manufacturing sector. On the grounds that each type of R&D activity differs in terms of salability in disembodied form and growth potential due to innovation, a distinction between product vs. process, and new vs. incremental R&D is made. Empirical tests show that the firm size is significantly associated with both the new and incremental R&D. Moreover, firm size is found to be significantly associated with other types of R&D compositions such as the share of R&D devoted to incremental innovation and multidimensional combinations of product, process, new and incremental R&D. These findings support the idea that large firms possess innovative advantages over smaller firms and firm size is an important determinant for firms’ heterogeneous R&D activities. We also discuss the limitations and the implications of the findings.     

Once bitten,less shy? The influence of prior misappropriation experience on R&D collaboration

Firms often face the challenge of collaborating for innovation and protecting themselves from misappropriation. Given this tension, we investigate the relationship between prior misappropriation of protected and unprotected intellectual property (IP) and R&D collaboration. We combine more than 600 firm observations from the German Community Innovation Survey with patent data and qualitative interview data. Our results consistently point to (1) less subsequent R&D collaboration after being copied (misappropriation of unprotected IP) and (2) more subsequent R&D collaboration after being infringed (misappropriation of protected IP) in the following three years. Moreover, we find indication that firms that are copied start to collaborate more during the subsequent period (four to six years later). Our study adds to a better understanding of the tension between appropriating innovation rents and remaining open to R&D collaboration. Further, we provide insights on how firms strategically leverage previous misappropriation experience to create value.