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.     

Acquisition as a means for external technology sourcing: Complementary, substitutive or both?

This paper addresses the question of how a target firm's innovation activities relate to the acquiring firm's R&D characteristics, and more specifically, if the former substitute for, or complement the acquirer's activities. It investigates this question in three narrowly defined high technology industries by analysing the association of three R&D characteristics of acquiring firms with different measures of acquisition extent and content. The R&D characteristics referred to are: addressing R&D efforts, R&D outputs and absorptive capacity. Data was collected in each case for those firms whose combined sales revenue makes up 80% of the industry total and is used to test a set of hypotheses derived from extant literature. The findings confirm a substitutive relationship between acquisitions and acquirer research efforts as well as between acquirer and target patent output, whereas absorptive capacity is complementary to acquisition activities. The results reveal that acquirers target firms that hold a large number of patents in the fields where acquirer patenting is weak, and so address weaknesses in their own R&D output. This finding extends the extant literature on the role of external technology sourcing in the high technology context. Research findings are presented along with their implications and directions for future research.     

Innovation and export performance: a study of Italian high-tech SMEs

The objective of the paper is to examine the influence of innovation measures on the export intensity of Italian high technology small and medium firms. In fact, despite a growing number of empirical studies attempting to guide the approximation of the value of innovation and its relative impact on the export intensity, a distinction between innovation input and output indicators, both internal and external to the firms has not been clearly established. Drawing on the innovation and export management literature, we used a sample of Italian firms operating in the high tech settings within the manufacturing industry (HTSMEs). Applying a 3?years lag time approach, we ran various Tobit regression models. Our empirical results revealed that: (1) R&D employees do positively and significantly impact the export intensity of HTSMEs, whereas R&D expenditures do not; (2) the use of ??Universities?? as external R&D partners has a positive influence on the export intensity of HTSMEs; (3) ??Product innovations?? and the ??Turnover derived from innovative activities?? positively and significantly affect the export intensity of firms in our sample.     

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.     

The antecedents of new R&D collaborations with different partner types: On the dynamics of past R&D collaboration and innovative performance

We examine firms' propensity to adapt their R&D collaboration portfolio by establishing new types of R&D collaboration with different kinds of partners (suppliers, customers, competitors and universities & public research institutions). We argue that existing R&D collaboration with one of the two value chain partners (suppliers or customers) is associated with the formation of new R&D collaboration with the other value chain partner to ensure temporal alignment in innovation within the value chain. In contrast, issues related to governance and unintended knowledge spillovers suggest that ‘horizontal’ R&D collaboration with competitors only spurs R&D collaboration with other partner types if such competitor R&D collaboration has been discontinued earlier (‘delayed temporal alignment’). We posit that persistent prior R&D collaboration with institutional partners is an antecedent to the establishment of new R&D collaboration with industrial partners, and that discontinuation of a particular type of R&D collaboration is likely to lead to a restart of such R&D collaborative effort. Strong prior innovative performance is expected to increase the probability that firms establish R&D collaborations with new partner types, except for R&D collaboration with competitors, since the most innovative firms may fear leakage of proprietary knowledge to rivals. We find broad support for these predictions in a large panel of Spanish innovating firms (2004–2011). Our findings highlight that it is not just the configuration of R&D collaborations with existing partner types that predicts tie formation with new partner types, but also the intertemporal pattern of prior R&D collaboration and managerial discretion provided by past innovation success.     

The role of political ties and political uncertainty in corporate innovation

We examine the relationship between firms' political connections and corporate innovation in a European context. We also consider the moderating effect of political connections on the relationship between political uncertainty and firms' innovation. We use two different metrics of innovation: R&D (an input measure), and patent counts (an output measure). We find that firms with former politicians on their board of directors invest less in R&D than their counterpart firms. However, the presence of this type of director on the board is positively associated with the number of a firm's patent applications. It seems that, although political ties reduce the amount of resources devoted to R&D activities, they increase the effectiveness of intellectual rights protection. Results also show that political uncertainty decreases R&D investment but exacerbates the need for legal protection of innovation through patents. According to our results, political connections attenuate the effect of political uncertainty on firm innovation such that the negative (positive) effect of uncertainty on R&D intensity (patents) weakens when the firm is politically connected.     

An empirical analysis of the role of reference point in justice perception in R&D settings in Korea

This study examines the relationship of the respondent's reference point with regards to distributive and procedural justice in an R&D setting in Korea. The two characteristics: (1) the rewards difference between Korean public and private R&D institutes (the outcome level at the public R&D institutes is much less than that at the private ones), (2) and the similarity of procedures being used to determine R&D professional's rewards at both types of research institutes, provide an excellent real-life setting for studying the role of reference point. To avoid common method variance, we measured distributive and procedural justice separately. Consistent with the previous experiments, R&D professionals at the public R&D institutes indicated differentiated distributive justice levels according to R&D professionals' reference points. Results also showed that the presence of a social comparison other (suggested reference point) leads the R&D professionals at public R&D institutes to perceive procedural injustice. Finally, several theoretical and managerial implications were discussed.     

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.     

Technology development control styles in multinational corporations: a case study

Multinational firms tend to geographically disperse their R&D activities to a larger extent than in the past. International R&D seems to play an increasingly important role within the global process of technological innovation taking place in multinational corporations. As a consequence, firms are challenged to design global R&D organisations and manage foreign units playing a central role in their innovation process. A key managerial aspect is the balance between autonomy and control of foreign R&D units. This case study deals with management control styles over foreign R&D units. It is based on the results of an empirical analysis of 16 multinational firms operating in technology-intensive industries. It proposes a taxonomy of management control styles in foreign R&D and gives the cue for further research in the area of technology development control.     

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.     

Institutionelle Determinanten von F&E-Investitionen

Utilizing country level data we demonstrate that a strong degree of investor protection can mitigate both asymmetric-information and agency problems that come along with R&D financing. Accordingly, we find that a higher degree of investor protection is associated with higher R&D investments. Moreover, for a sample of Austrian listed firms, we are able to show that ownership identities are significant drivers of R&D investments.     

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.     

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.     

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.     

Government spending on research and development and industrial production in Singapore

The role of government policies in the economic growth of Singapore has been well documented. The governments actions, such as the provision of appropriate infrastructure, have resulted in massive inflow of foreign capital to Singapore. Government sponsorship of selected industries and foreign investment helped domestic firms to gain access to advanced technologies. During the 1990s there was a significant increase in government spending on research and development (R&D) that can be attributed to the development of advanced technologies by Singaporean firms. This paper examines the impact of government-funded R&D in fostering the development of Singapores industrial production in the 1990s. The study explicitly considers the performance of three industries within the manufacturing sector: the machinery and equipment industry, the electrical machinery industry, and the transport equipment industry. It is shown that the fluctuations in real government spending on R&D had a significant positive impact on the performance of the selected manufacturing industries.     

Explaining performing R&D through alliances: Implications for the business model of Italian dedicated biotech firms

In recent years management scholars and practitioners have been interested in Research and Development (R&D) partnering, especially in high-tech industries. While the motivations of research partnership formation have been widely explored in literature, little attempt has been undertaken to examine the effects of research partnerships on R&D productivity and the implications for business models of the new ventures. In this paper we try to shed some light on the business models of the young ventures involved in R&D partnerships and their effect on R&D productivity. Our hypotheses are that experience in previous alliances, repeated partnerships and tight relationships have positive effects on R&D productivity while rigid governance structures and public R&D subsidies have negative effects on such productivity. We discuss how these aspects affect the business models of biotech firms. We test our hypotheses on a sample of 55 Italian DBFs (Dedicated Biotech Firms). Results support our hypotheses. Managerial implications and further issues for future research are discussed.     

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 value of board monitoring in promoting R&amp;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.     

Macht und Einfluss verschiedener Abteilungen in fr��hen und sp?ten organisationalen Lebenszyklusphasen

The present research examines the performance consequences of the influence of four major departments (sales, marketing, R&D, and manufacturing) and integrates organizational life cycle stages as moderating variables. Further, the article derives a hypothesis that addresses the influence dispersion among the departments that is most beneficial for performance. In order to validate this research model empirically, survey data from small and medium-sized German firms were gathered. Findings show that the optimal distribution of influence among departments is a function of the organizational life-cycle stage. While no moderating effects of the life-cycle stage emerge for the sales or manufacturing departments, a strong marketing department contributes to organizational performance only in early stages, while a strong R&D department contributes only in later stages. Further, the estimation of the non-linear regression model shows that a medium level of influence dispersion among departments is most beneficial to organizational performance.     

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.