Local and Global Knowledge Complementarity: R&D Collaborations and Innovation of Foreign and Domestic Firms

We analyze how research and development (R&D) collaborations affect product innovation for subsidiaries of foreign multinational firms and domestic firms. We build on the knowledge-based view to propose that subsidiaries and domestic firms differ in their ability to benefit from alternative R&D partners as a result of the variation in their knowledge complementarities. Specifically, we propose that subsidiaries may benefit more from undertaking R&D collaborations with customers and competitors, whose deeper knowledge of local conditions better complements the more global knowledge base of subsidiaries. In contrast, we argue that domestic firms may benefit more from engaging in R&D collaborations with suppliers and universities, whose more global nature of knowledge better complement the deeper local knowledge base of domestic firms.     

R&D,productivity, and market value: An empirical study from high-technology firms

Although prior research has addressed the influence of production activity and research and development (R&D) on productivity, it is not clear whether production and R&D affect the market value of a firm. This study proposes and verifies an R&D value chain framework to explore the relationship among productivity, R&D, and firm market values, as measured by Tobin's q theory. By doing so, we attempt to link new theoretical insights and empirical evidence on the effects of R&D efforts and basic production activities to the market valuations of high-technology firms. The value chain data envelopment analysis approach was proposed to estimate parallel-serial processes of basic operations and R&D efforts. This approach can be used to simultaneously estimate the profitability efficiency and marketability efficiency of high-technology firms. This area has rarely been studied, but it is particularly important for high-technology R&D policies and for further industrial development. Using the R&D value chain perspectives of model innovations and extensions proposed in several previous studies, we examined the appropriate levels of intermediate outputs. Production efficiency and R&D were combined to estimate the appropriate levels of intermediate outputs for high-technology firms. Based on the intermediate output analyses, we developed an R&D efforts decision matrix to explore and identify operational and R&D efficiency for high-technology firms. Our sample firms are displayed on a four-quadrant action grid that provides visual information on current short-term operational efficiency and decision making on long-term R&D strategic positions. The empirical findings from the R&D value chain model can provide information for policymakers and managers and suggest the adoption of various policies that place more emphasis on profitability and marketability strategies.     

Governing inter-organisational R&D supplier collaborations: a study at Jaguar Land Rover

This article discusses the importance of collaboration with suppliers and partners during research and development (R&D) technology projects. It details how this can be accomplished using the collaborative enterprise governance (CEG) concept to manage a technology project. CEG is based on the premise that parts of companies work with parts of other companies, which are reconfigured on dynamic bases according to a variety of different internal and external factors. This article presents an overview of the founding literature, the CEG and its methodology, and examples based at Jaguar Land Rover in the UK. CEG has been used here to explain why some technology projects have succeeded while others have done less well. This article concludes by offering new propositions, inducted through grounded theory, relating to the successful management of R&D projects, which should be picked up by future research studies in the area.     

Development of absorptive capacity over time and across boundaries: The case of R&D consortia

Absorptive capacity (AC) has been identified as the ability of firms to acquire, assimilate, and apply external knowledge, and thus as a pre-condition for learning from knowledge environment. However, extant literature has focused on AC as (1) a static and (2) a firm-centred concept. In particular, there is little conceptual framing and empirical evidence of how AC develops over time and across boundaries. Taking R&D consortia as the unit of analysis and based on insights from three in-depth case studies of collaborative R&D, our contribution is a framework for AC development over time and across inter-organizational, intra-organizational, and practice boundaries at different stages of collaboration in R&D consortia. Using this framework, we identify a set of mechanisms which enable the development of AC and we discuss the preconditions for these mechanisms. For R&D managers, our research implies that in order to enhance effectiveness of knowledge transfer and learning in R&D consortia they need to develop a strategy that (1) supports learning and AC development throughout the whole cycle of the collaboration, not only by focusing on intra-firm capabilities, but in particular by providing flexible interfaces for overcoming a variety of interaction and learning boundaries between heterogeneous R&D partners, and (2) enables the integration of created and acquired knowledge within the organization once the collaboration is over.     

The effect of knowledge collaboration on business model reconfiguration

This study examines whether and to what extent the presence and intensity of knowledge collaboration across different partners affects business model reconfiguration (BMR). We build on the business model (BM) literature and operationalize BMR by introducing the presence and intensity of collaboration and firm size effects as main explanatory factors in affecting the propensity of incremental and radical BMR. We analyze a large sample of UK firms during 2002–2014 to capture the effect of knowledge collaboration and firm size on BMR. Positively incremental forms of BMR will be influenced by the presence and intensity of knowledge collaboration, while radical forms of BMR are affected by the intensity of collaboration with customers and the collaboration with suppliers by large firms. Furthermore, firms of different sizes do not equally benefit from knowledge collaboration with suppliers for both incremental and radical BMR, while they do equally benefit from collaboration with other partner types.     

Do R&D activities foster globalization of young innovative companies? Empirical evidence from the Italian energy industry

Although executives and scholars interested in “globalization” and “R&D activities” mainly focus their attention on corporations, the relevance that young innovative companies – YICs are assuming is compelling them to redefine their focus. With reference to YICs, some scholars investigate the influence of globalization on R&D activities, while others inquire the impact of R&D activities on their globalization. This paper shares the second approach and sets out to investigate whether and to what extent R&D activities managed by YICs affect their globalization.By enacting Law n. 221/2012, the Italian Government has posed particular attention on YICs. Accordingly, primary and second-hand data concerning 2070 Italian YICs with high technological value in the energy industry – YICsei and 12,278 Italian YICs (operating in other industries) are used to carry out stochastic frontier analyses – SFAs. These allow testing whether R&D activities (measured through investments, personnel, and outputs) foster the globalization of these firms. SFAs reveal that none of the three factors affects the globalization of Italian YICsei; instead, R&D personnel and R&D outputs foster the globalization of Italian YICs.Achieved results open new research avenues about the impact of R&D activities on the globalization of YICs.     

Globalisation and trends in international R&D alliances

The growth of collaborative activity is greatly influenced by the process of globalisation. This paper focuses on the narrow area of collaborative R&D activity, and takes a ‘macro,’ as well as a firm perspective of the effects of these developments. Globalisation has affected the need of firms to collaborate, in that firms now seek opportunities to cooperate, rather than identify situations where they can achieve majority control. The use of collaboration is particularly acute in capital- and knowledge-intensive sectors. These are also the sectors where firms have expanded internationally fastest, as they need to compete in various markets simultaneously, but also to exploit and acquire assets and technology that may be specific to particular locations. The increasing similarity of technologies across countries and cross-fertilisation of technology between sectors, coupled with the increasing costs and risks associated with innovation has led firms to consider R&D alliances as a first-best option in many instances.     

Internationalization of R&D and Innovation Performance in the Pharma Industry

This research investigates the effect of R&D internationalization and contingency variables on innovation performance. A number of prior studies addressing this question have concluded in diverse and inconsistent findings, which can be attributed only partly to sample selection and measurement discrepancies. Using a longitudinal dataset of global pharmaceutical firms, we partly solve this ambiguity in the R&D internationalization and innovation performance relationship. The results reveal an S-shaped relationship, suggesting the benefits of R&D internationalization ultimately overcome the costs after critical levels of R&D internationalization. This finding combines and unites prior findings of a U-shaped, followed by an inverse U-shaped curve. In addition, we find that the experience in conducting R&D internationally, but not the degree of general internationalization, moderates the relationship between degree of R&D internationalization and performance. This suggests that the effect is contingent on the knowledge of internationalization path of the firm but can flourish in the absence of overall internationalization as well. Implications for theory and practice are derived.     

Within-cluster determinants of output efficiency of R&D in the space industry

Dynamic slacks-based data envelopment analysis is applied to measure output performance efficiency of space R&D active private firms. Fractional logit panel analysis is used to identify associations between this firm level R&D output efficiency and space industry level R&D specialisation, presence of anchor firms, and public R&D capacity within geographical clusters.Primary data collected for the entire population of space R&D active firms in Belgium for the period 2011–2015 reveals that an environment specialized in the focus firm's space activities exerts a positive influence on R&D output efficiency. The public space R&D capacity and the presence of space anchor firms within the cluster do not influence R&D output efficiency. Firm age, a mixture of space and non-space R&D, and larger amounts of public funding positively affect R&D output efficiency. These findings should be seen in a context of a space industry dominated by SMEs and in a five year time-span.     

The value of board monitoring in promoting R&D: a test of agency-theory in the US context

Prior agency-theory research has presented conflicting findings regarding the importance of board monitoring in motivating R&D. We reinvestigate this literature by examining the value monitoring exerts in abating both the agency costs of underinvestment and overinvestment in R&D. We argue that monitoring that relies on board independence has both benefits and costs associated with promoting R&D. While we assert that intense monitoring by the board heightens underinvestment in the US context, it can also provide discipline over a firms free cash flows. We test our theory using a longitudinal panel data set consisting of a cross-section of S&P 1500 US-firms between 1997 and 2007. On average our study finds inside directors increase overinvestment in R&D, but facilitate better resource allocation when a firm has rich growth opportunities. Also, while too much emphasis on outside directors heightens underinvestment in R&D, a more independent board encourages better resource allocation when firms have high free cash flows that need to be paid back to owners. Thus, our results suggest a more inclusive perspective of agency-theory can help managers make better R&D investment decisions.     

The impact of service R&D on the performance of Korean information communication technology small and medium enterprises

In recent years, research and development (R&D) in the service industry has attracted a great deal of attention from both academia and industrial firms. However, compared to the manufacturing sector, little research exists on the implications of R&D for the financial and/or non-financial performance of firms in the service industry. The purpose of this study is to examine the impact of service R&D on the performance of information communication technology (ICT) firms. We identify five categories of R&D activities and investigate their impact on the financial and non-financial performance of 100 ICT firms, with a focus on small and medium enterprises (SMEs) in South Korea. We postulate positive relationships between R&D efforts and a firm's performance. However, the findings only partially support our hypotheses; unexpected results demonstrate that the presence of R&D management negatively influences a firm's performance. We present detailed statistical results and discuss the implications of the study.     

What effect does the aggregate industrial R&D offshoring have on you? A multilevel study

The present study argues that R&D offshoring is not only a matter of firm's decision as in previous literature, but also has an important industrial externality component. For a sample of manufacturing and services industries in the period 2005–15, I study the externalities coming from R&D offshorers in a given industry and the heterogeneous effects of enterprises' internal knowledge base characteristics. The evidence points to offshoring externality (OE) presenting an inverted U-shape with respect to the firms' innovative processes. However, firms with higher levels of human capital and/or internal R&D investments obtain higher returns coming from the OE. Overall, it seems that a strategy (R&D offshoring) that is highly beneficial for enterprises individually, might be also optimal for the Spanish economy.     

Disentangling reciprocal relationships between R&D intensity,profitability and capital market performance: A panel VAR analysis

Research and development (R&D) investments are strategic choices that firms make to create and sustain competitive advantage. Extant literature proposes that firms’ R&D investments and their profitability and capital market performance are reciprocally related. However, the direction of these relationships and their temporal nature are unclear. We take a real options perspective to argue that the long-run firm performance effects of R&D investments are better than their short-term ones, and that the initial level of R&D intensity influences the nature of these relationships. We apply panel vector autoregression (P-VAR) to a sample of 6623 U.S. firms over the 1990–2020 period in order to test our hypotheses. Our results indicate that increases in R&D intensity have negative effects on profitability in the short term, yet these effects diminish relatively quickly. The effects of increases in R&D intensity on capital market performance are positive and persist over time. Consistent with our predictions, they are contingent on the initial levels of R&D intensity and performance. The findings are fundamentally in line with the real options perspective employed here, yet they add important nuance to our understanding of when, how, and under which conditions R&D investments and firm performance affect one another.     

How does the combination of R&D and types of knowledge matter for patent propensity?

This paper examines whether the combined effects of R&D efforts and the types of knowledge obtained from the invention process determine patent propensity. With this aim, we investigate a unique, manually collected sample of firms and the Spanish and European Patent Offices to analyze how the combination of R&D and knowledge codifiability, observability and simplicity influence the patent decision. Our results contribute to the literature and assist R&D managers by showing that codified knowledge has a positive impact on patent propensity. Furthermore, we find that knowledge observability and simplicity only influence patent propensity when they are combined with internal R&D expenditures.     

Patents,R&D investments and post-IPO strategies

This paper empirically investigates the effect of going public on the evolution of high-tech entrepreneurial firms, focussing in particular on the interaction between innovation variables and financing and investment strategies. Specifically, I confront the effects of the IPO on firms with higher R&D investments versus firms with more patents. Firms with higher R&D investments typically view the IPO as a mechanism to raise external equity, used to pursue investments and to acquire participation in other companies, whereas those with more patents raise more debt capital and invest less after the IPO, as compared to high-tech entrepreneurial firms. I suggest that a large number of patents is an index of technological maturity for high-tech ventures, even more than age and size, that helps investors to individuate firms with a lower level of risk.     

Effect of R&D expenditures and funding strategies on the market value of biotech firms

Market value of biotech firms is important to investors and venture capitalists who keep this industry alive and dynamic. It is a particularly valuable index of investors' estimate of current and future success of the firms in this industry because other conventional indices of performance and success are inappropriate. Our hypothesis is that market value in this industry can be explained in terms of funding strategies and R&D expenditures. Using all sixty publicly-held biotech firms, that are included in a national directory for such firms engaged in the research of biotech products for human use, we estimate multiple regression models that explain most of the variance in market value using funding strategies and R&D expenditures (R-squared = 0.93). Our models also demonstrated that small biotech firms (< $10 million in total revenue) are substantially different from larger ones.     

Make,buy or both? R&D strategy selection

The aim of this paper is to increase our knowledge of a firm's innovative behaviour by jointly analysing its internal resources, industry characteristics and appropriability conditions as drivers of its R&D strategy selection: make, buy and make-buy. Based on panel data (1992–2005) covering 1539 Spanish manufacturing firms, results show that firms lacking organisational resources and competing in stable markets prefer the buy strategy. Firms with a high level of technological resources that are immersed in high-tech industries are prone to selecting the make-buy strategy. Internationalised firms with high levels of appropriability prefer the make strategy.     

A fuzzy set approach for R&D portfolio selection using a real options valuation model

Making R&D portfolio decision is difficult, because long lead times of R&D and market and technology dynamics lead to unavailable and unreliable collected data for portfolio management. The objective of this research is to develop a fuzzy R&D portfolio selection model to hedge against the R&D uncertainty. Fuzzy set theory is applied to model uncertain and flexible project information. Since traditional project valuation methods often underestimate the risky project, a fuzzy compound-options model is used to evaluate the value of each R&D project. The R&D portfolio selection problem is formulated as a fuzzy zero–one integer programming model that can handle both uncertain and flexible parameters to determine the optimal project portfolio. A new transformation method based on qualitative possibility theory is developed to convert the fuzzy portfolio selection model into a crisp mathematical model from the risk-averse perspective. The transformed model can be solved by an optimization technique. An example is used to illustrate the proposed approach. We conclude that the proposed approach can assist decision makers in selecting suitable R&D portfolios, while there is a lack of reliable project information.     

Supply chain contamination: An exploratory approach on the collateral effects of negative corporate events

The present work investigates the impact of negative events on supply chain partners. Through a contextualised discussion of the literature on supply chains and on the efficient market hypothesis, it is proposed that negative events negatively impact the market value of suppliers and customers. Following an exploratory approach, 307 companies (21 source companies, 158 suppliers and 128 customers) comprehending 20 cases of environmental disaster, corporate social irresponsibility, operational failure, corporate fraud and corruption were analysed. Results show that in 12 out of the 20 cases investigated supply chain partners indeed had their market value penalised, encompassing, to a greater or lesser degree, all five categories of cases considered. Yet, while both suppliers and customers absorbed the outcomes of negative events, suppliers seem to be at greater risk of sustaining such losses. Likewise, cases in which the source companies were also negatively affected seem to be slightly more prone to cause losses among suppliers and customers. In this sense, the concept of supply chain contamination is coined to address the observed outcomes. The study offers new insights into the applicability of the efficient market hypothesis and contributes to the assessment of the dissemination of negative events in supply chains, a theme that, despite its potential detrimental consequences for firms and stakeholders, has not yet been sufficiently treated in the Management literature.