The Effect of Family Involvement on Innovation Outcomes: The Moderating Role of Board Social Capital

Innovation is an essential and yet puzzling part of family firms’ strategic focus. While family firms are generally characterized as conservative regarding their research and development (R&D) activities, researchers have recently argued that family firms can still achieve innovation-based competitive advantages. Seeking to understand the link between family influence and the outcomes of innovation, we suggest that it is necessary not only to observe the depth of family involvement, but also to differentiate between technological inventions and market innovations. We further posit that the board members’ social capital constitutes an important contingency for this link. We, therefore, investigate the relationship between family involvement and two different outcomes: the number of the firm’s inventions and the market relevance of innovations. Our analysis of S&P 500 firms comprises 1.85 million patents and manual evaluations of 1774 product announcements. The results of our estimations suggest that family involvement is negatively related to the number of inventions and positively related to the market relevance of innovations. They further show that internal and external board social capital moderate the relationship between family involvement and the number of inventions. This study adds to the discussion about family firm innovation by using socioemotional wealth to explain heterogeneity in innovation patterns and revealing that relational resources derived from board social capital are crucial boundary conditions for families’ influence on technological inventions. Taken together, it works toward a more holistic view of innovation in family-influenced firms.     

The Relationship of R&D/Sales to Firm Performance: An Investigation of Marketing Contingencies*

The relationship between a firm's performance and R&D spending is often imperfectly understood, despite the fact that R&D is often a cornerstone of an effective innovation strategy. Susan Holak, Mark Parry, and Michael Song extend the classic innovation-adoption paradigm developed by Rogers and propose a series of hypotheses describing variations in the relationship between the R&D/sales ratio and a firm's performance. Using data from the PIMS database and contrasting growth-stage and mature-stage firms, the authors report that firm and industry characteristics have an important bearing on the R&D-performance relationship. In addition, managers can influence the incremental effects of added R&D spending on the firm's performance by manipulating certain firm-contingent variables. Increased R&D spending can have either a positive or negative influence on gross margin under various circumstances.     

R&D spending,domestic competition,and export performance of Japanese manufacturing firms

This paper examines three factors influencing the export performances of Japanese manufacturing firms: R&D spending, domestic competitive position, and firm size. Export sales are positively associated with (1) R&D expenditures, (2) size of a firm, and (3) average R&D intensity of an industry. A firm's export ratio is related to the size of the firm, but not to the firm's and the industry's R&D intensities. Follower firms are characterized by higher export ratios than market leaders. The results indicate a relationship between the patterns of domestic competition and the international competitiveness of Japanese firms.     

How Do Interaction Activities among Customers and between Customers and Firms Influence Market Performance and Continuous Product Innovation? An Empirical Investigation of the Mobile Application Market

Mobile application markets (MAMs) significantly differ from other existing marketplaces at least in two aspects. First, customers (app users) and firms (app providers) frequently interact with each other in real time, which is not common in the conventional marketplaces. Second, many app providers incorporate customers’ opinions or suggestions into their software upgrades, representing one of the most unique and interesting aspects of MAMs. Therefore, it has become critical to understand the impact of interaction activities not only among customers, but also between customers and firms on the market performances of new products in MAMs. One of the most significant issues firms face is whether firms reflect on customers’ postpurchase interaction activities, and the next interesting question is how firms respond to them. This study explores the effects of customer‐to‐customer (C2C), customer‐to‐firm, and firm‐to‐customer interaction activities on market performance. In addition, this study investigates how communication activities influence a firm's tendency to pursue continuous product innovation through research and development (R&D). Using data obtained from a major MAM, T store, three models that are respectively related to product sales, product lifetime, and a firm's R&D activity for product upgrades, are applied to empirically test hypotheses concerning the effects of interaction activities. In our analyses of market performance, a hierarchical log regression model with 10,840 weekly transactions data set related to product sales (model A) and 291 aggregate transactions related to product lifetime (model B) is used. Results indicate that C2C and customer‐to‐firm communication activities have a positive impact on sales, but little relationship with product lifetime. However, a firm's continuous product R&D has a positive impact on both sales and lifetime performance. Our analysis of a firm's R&D (model C) shows that C2C and customer–firm communication increases a firm's R&D activity. Taken together, these results have important implications for customer–firm interactions, market performance, and R&D strategies.     

Coevolutionary Dynamics of Automotive Competition: Product Innovation,Change, and Marketplace Survival

Innovation and new model development have been paramount in the U.S. automotive industry. The industry has invested around $16–18 billion annually to launch new models and improve existing ones in response to incessant evolution of consumer preferences, competitive pressures, and changes in safety and emission regulations. Although these investments have significantly reduced cycle time and increased efficiency (e.g., through platform communization), it still costs around $1 billion to develop and launch a new model from scratch. Therefore, the strategic focus in the U.S. automotive industry is rapidly shifting away from manufacturing efficiency to product development and innovation as firms engage in an “arms race” to develop innovative new products ahead of the competition. The outcome of this new focus manifests itself in the total development time for a new platform vehicle, which is expected to drop from roughly four years in 1998 to two years in 2014. As development cycles continue to shorten, competition in the industry intensifies, and a new insight is needed to better understand how increased competition can affect the gains from innovations. The need for research to fill this gap is especially critical as executives continue to grow more cynical about returns offered by increases in research and development (R&D) expenditures and see no statistically significant relationship between R&D expenditures and firm performance. This study attempts to address this gap by adopting a coevolutionary perspective that analyzes the relationship between innovations and firm performance by accounting for the impact of competitive forces in the industry. First, this study explicitly models competitive interactions between firms, known in the ecology literature as the Red Queen competition, in which gains from innovations are relative and impermanent. Second, hypotheses are tested using a comprehensive data set comprising all automobile manufacturers ever known to compete in the U.S. automobile market at any time between 1891 and 2000. Complete coverage of 110 years enables precise analysis of the link between innovations and firm performance as well as the coevolution in the U.S. automobile industry. The results suggest that although extensiveness of an innovation is relevant, a firm's ability to keep up with the competition in the innovation arms race is a more significant driver of survival in the market. Thus, firms cannot simply evaluate their innovation efforts in a silo but must constantly assess their efforts versus the innovation launches of their key competitors. Based on the findings, automotive manufacturers must develop a structured product development program that allows for continual and steady new product introductions; otherwise, even momentary setbacks can have a damaging impact on a firm's ability to survive in the automotive marketplace.     

Beyond invention: the additive impact of incubation capabilities to firm value

Incubation is a process whereby the firm nurtures breakthrough discoveries and inventions to test their potential as new business platforms. The recent emergence of organizational roles associated with innovation incubation shows that internal incubation is becoming recognized as an important organizational capability. This development also suggests that firms that invest in discovery for competitive advantage recognize a need to leverage that investment more fully. While case studies describe incubation activities and note their importance, empirical research linking this capability to firm performance is limited. The current study represents an initial attempt at exploring the relationship empirically. Our main finding is that financial markets have difficulty valuing a firm's exploratory discovery investments and that the presence of an incubation capability positively moderates the impact of such investments on firm market valuation. The implication of this result is that investments in certain types of R&D may be suboptimized if there is not a parallel investment in a capability to incubate the opportunities that arise from potentially breakthrough inventions.     

Does R&D offshoring lead to SME growth? Different governance modes and the mediating role of innovation

Research summary : In this article, we address the role of R&D offshoring strategies in the sales growth of small‐ and medium‐sized enterprises (SMEs). We propose that different governance modes of R&D offshoring—insourcing versus outsourcing—may lead to growth, but that they differ in their effects. In turn, we argue that innovation mediates the relation between international R&D sourcing strategies and sales growth. Based on a large database of SME manufacturing enterprises in Spain, we find that offshore outsourcing positively affects sales growth both directly and indirectly, while offshore insourcing only affects sales growth indirectly via innovation results. The analysis reveals different contributions of each governance mode to sales growth and the mediating role of innovation in the relation between R&D offshoring and firm growth. Managerial summary : We analyze how different governance modes of international R&D sourcing—offshore insourcing and outsourcing—may contribute to growth in SMEs. Modes of offshore R&D outsourcing positively affect the growth of sales in two ways. One effect is direct, produced by improved efficiency, flexibility, enhanced resources, and access to new markets. And the other effect is indirect as offshore R&D outsourcing favors the achievement of innovations, and this in turn, positively affects firm growth. For their part, captive modes only exert an indirect effect. Offshore R&D insourcing contributes to the achievement of innovations, and thus, ultimately to firm growth in so far as these innovations enable SMEs to increase sales. Therefore, innovation results perform a mediating role in the relation between R&D offshoring and sales growth. Copyright © 2015 John Wiley & Sons, Ltd.     

Product Design Innovation and Customer Value: Cross‐Cultural Research in the United States and Korea

Innovation is one of the key drivers of success that a firm must utilize to develop a competitive advantage. The ability to innovate is especially important for a firm's survival in dynamic, changing environments. Customer demands are constantly changing, and more purchases are made when a firm's product design incorporates what customers perceive as cutting‐edge innovations. Satisfying customer demands is a distinct challenge for product designers because firms must develop a clear understanding of what aspects of design the customer wants. Although the importance of design has increased, very little research has been done to explain the relationship between product innovation and product design. Studies indicate that design innovation may create greater customer value through improvements in design value. Previous research has been limited and has not provided a clear concept of design innovation or defined the relationship between design innovation and marketing competencies. This paper seeks to offer a conceptual definition of design innovation, and to define the link between design innovation and marketing competencies. This paper utilizes cross‐cultural research to discover how these concepts differ due to cultural differences between the United States and Korea. This research contributes substantially to our understanding of the relationship between design innovation and customer value.     

Knowing when to leap: Transitioning between exploitative and explorative R&D

A common perspective is that consistent R&D investment facilitates innovation, while volatile spending implies myopic decision making. However, the benefits to exploiting extant competencies eventually erode, so firms must disrupt their R&D function and explore for new competitive advantage. We suggest that high‐performing firms recognize when extant competencies decline and increase exploratory R&D to develop new competencies at the appropriate time. We find that changes in R&D expenditure away from the firm's historic trend, in either direction, are indicative of transitions between exploitative and exploratory R&D and are associated with increased firm performance. Increases in R&D expenditure above the trend are associated with an increased likelihood of highly cited patents, suggesting that firms are making the leap between R&D‐based exploitation and exploration. Copyright © 2013 John Wiley & Sons, Ltd.     

Creating shareholder value via collaborative innovation: the role of industry and resource alignment in knowledge exploration

Collaborative innovation provides firms with a privileged opportunity to perform exploration in an externally oriented mode. The central challenges in exploration via collaborative innovation lie in the selection of relevant partners and in gaining access to potentially valuable external knowledge that the focal firm lacks. This article focuses on two aspects of inter-organizational alignment that affect knowledge differences and may thus help explaining the shareholder value implications arising from collaborative innovation: industry and resource alignment. Relying on data covering 97 bilateral collaborative innovations (194 innovation partners) in R&D intensive high-technology industries, we used event study methodology and follow-up hierarchical regression analyses to test our conceptual framework. With regard to industry alignment, results suggest that investors value greater industry distance between collaborating partners, especially when the partner firm provides high-level R&D resources. Furthermore, the results show a positive effect of supplementary resource alignment (i.e., a focal firm's R&D resources are supplemented by a partner firm's R&D resources) and, notably, a negative effect of complementary resource alignment (i.e., a focal firm's R&D resources are complemented by a partner firm's marketing resources) on investors' valuation of the collaboration's expected future performance. They, thus, contribute to research on shareholder value implications of collaborative innovation. From a managerial perspective, the study provides a better understanding of partner selection and shows how managers should position a collaboration to signal the shareholder value-creating potential to investors.     

The Immediate Impact of New Product Introductions on Stock Price: The Role of Firm Resources and Size*

New product development and introduction is an ongoing important issue to facilitate a firm's success. To demonstrate the financial impact of new product introductions and the supporting role of firm resources and organizational structure, the authors collected 409 new product announcements from 1990 to 1998 and used event methodology and regression models in this research. Building on resources and capabilities perspectives, the present study argues that firm resources with emphases on research and development (R&D) are imperative to materialize new product concepts. However, the research revealed that R&D resources have dual effects on immediate shareholder value (i.e., abnormal stock returns). On one hand, when the firm commits only lower to moderate levels of R&D, investors would have perceived such R&D as expenditures reducing the firm's profit margin and thereby negatively evaluate R&D resources. Nevertheless, when the firm has dedicated its resources to R&D significant enough to signal investors its potential benefits can outweigh its costs, it generates positive shareholder value. Further, the study found that investors honor positive marketing resources that are critical to promote and launch new products to customers. Apart from resources perspectives, according to the organizational structure literature, firm size reflects the layers of bureaucracy within an organization. The research found a negative effect on shareholder value, indicating that investors evaluate more optimistically smaller firms that are likely to be more innovative and entrepreneurial resulted in more breakthrough products. In conclusion, this study provides value to practitioners in understanding the impact of firm size and, more importantly, to what extent they dedicate their resources in R&D and marketing to generate different performance outcomes.     

The Impact of a Creativity‐supporting Work Environment on a Firm's Product Innovation Performance

Many scholars and practitioners have suggested that a creativity‐supporting work environment contributes to a firm's product innovation performance. Although there is evidence that such an environment enhances innovative behavior at individual level, very few studies address the effect of a creativity‐supporting work environment on product innovation performance at firm level, and the results are inconsistent. This paper examines the relationship between a firm's creativity‐supporting work environment and a firm's product innovation performance in a sample of 103 firms. For measuring a firm's creativity‐supporting work environment, a comprehensive and creativity‐focused framework is used. The framework consists of 9 social‐organizational and 12 physical work environment characteristics that are likely to enhance employee creativity. These characteristics contribute to the firm's overall work environment that supports creativity. The firm's product innovation performance is defined by two distinct concepts: new product productivity (NP productivity), which is the extent to which the firm introduces new products to the market, and new product success (NP success), which is the percentage of the firm's sales from new products. In most firms, different knowledgeable informants provided the data for the variables. The results show that firms with creativity‐supporting work environments introduce more new products to the market (NP productivity), and have more NP success in terms of new product sales (NP success). NP productivity partly mediates the relationship between creativity‐supporting work environment and NP success. The mediation model shows that the two paths from a creativity‐supporting work environment to NP success are about equally important: the direct path between creativity‐supporting work environment and NP success has a coefficient of .22, and the coefficient of the indirect path via NP productivity is .23. The creativity‐supporting work environment framework can be used in managerial practice to enhance employee creativity for product innovation. It allows applying a flexible and broad approach by influencing both social‐organizational and physical characteristics of the work environment.     

Performance implications of the buyer-supplier market orientation fit

Extant research examining the link between market orientation and performance offers few insights into how the interplay between a firm's market orientation (MO) and its key supplier's MO influences the firm's performance. Using archival and survey dyadic data from 876 firms (438 firm-supplier dyads), we explore the impact of MO fit (i.e., fit between the focal firm's MO and its supplier's MO) on the focal firm's performance (ROA). The findings indicate a direct and positive relationship between MO fit and ROA. This highlights the need for firms to focus both on their own MO and their key supplier's MO as sources of competitive advantage in today's business environment. The strength of the relationship between MO fit and ROA increases when the exchanged business volume increases between the focal firm and its supplier and when the respective relationship progresses in age. Furthermore, firms with MO fit perform best, followed by firms with higher supplier MO misfit (firm's MO is lower than its key supplier's MO), while firms with lower supplier MO misfit (firm's MO is higher than its key supplier's MO) are the laggards.     

Industry characteristics influencing the technical output: A case of small and medium size firms in the US

Using the small and medium size firms in the US as a sample, this paper reports on interrelationship among patents, publications and new products. Correlates of R&D expenditure, patents and papers and new products are presented. Relationships between firm size and R&D output and productivity are also investigated.
Since the study is based on correlational analysis, causal inferences are not drawn. The data indicates that the three indicators are related, but their strength of relationship varies with industries. Growth of sales is related with new products, but not with patents or papers.
Although the data point to the fact that small firms are more productive than their larger counterparts, there are many reasons to come to such a sweeping generalisation. Reporting of R&D data is not reliable for small firms as the very definition of R&D differs from firm to firm. Nature of R&D also changes as the firm grows in size; opportunities for patents or new products also change accordingly. These make it difficult to accurately measure and compare the R&D efficiency across firms of different sizes.     

Appropriability,preemption, and firm performance

The impact of strategies used to appropriate innovation rents on firm performance is analyzed using a sample of U.S. public manufacturing firms. Stronger appropriability at the firm level, achieved through patent protection or the ownership of specialized complementary assets, leads to superior economic performance, as measured by the stock market valuation of a firm's R& D assets. Among commonly used ‘nonconventional’ patent strategies, preemptive patenting allows incumbents to strengthen their market power. Consistent with theory, such effect is higher for incumbents with higher ex ante market power and facing a higher threat of entry, and lower when R& D competition is characterized by the discovery of drastic innovations. Copyright © 2008 John Wiley & Sons, Ltd.     

How to leverage the impact of R&D on product innovation? The moderating effect of management innovation

Although research and development (R&D) is a key indicator of (technological) innovation, scholars have found mixed results regarding its effect on product innovation and firm performance. In this paper, we claim that variations in R&D effectiveness can be explained by changes in a firm’s social system, in particular in its management innovation. It is still unclear how management innovation influences R&D effectiveness in terms of product innovation. In this study, we address this theoretical and empirical gap in the innovation literature. Our theoretical arguments and findings from a large-scale survey among Dutch firms show that R&D has a decreasingly positive relationship with product innovation, particularly for firms with low levels of management innovation. However, in firms with high levels of management innovation, this relationship becomes more J-shaped, especially in small and medium-sized firms. Our findings also appear to indicate that management innovation may be more important for competitive advantage than just R&D. Overall, our insights reveal that management innovation is a key moderator in explaining firms’ effectiveness in transforming R&D into successful product innovation.     

The Paradox of Openness: How Product and Patenting Experience Affect R&D Sourcing in China?

External R&D sourcing may help firms compete in an environment characterized by rapid technological changes. Yet, prior studies have produced conflicting findings on how a firm's technological experience affects the extent to which the firm engages in external R&D sourcing. Although many highlight that firms with extensive technological experience are equipped with more technological knowledge, collaborative skills, and absorptive capacity, encouraging greater levels of external R&D, others suggest the opposite due to potential exchange hazards and partnership conflicts. Adopting an external partner's perspective, the current study reconsiders this “paradox of openness” by analyzing how a focal firm's product experience and patenting experience affect an external partner's tendency to provide external R&D services to the focal firm. Specifically, this study explore how a focal firm's knowledge protectiveness and tacitness embedded in its product and patenting experience influences the external partners' motivation for knowledge transfer. This study predicts that a firm's product experience increases the focal firm's external R&D sourcing because it provides high levels of knowledge tacitness and external openness and can encourage external partners to share and exchange knowledge with the focal firm. In contrast, a firm's patenting experience decreases the focal firm's external R&D sourcing because it denotes knowledge explicitness and protectiveness and may discourage external partners to share and exchange knowledge with the focal firm. This study further predicts that patenting experience has a negative moderating effect on the relationship between product experience and external R&D sourcing. Using a data set of 575 high‐tech firms in China, this study finds support for our predictions. Our findings contribute to the growing literature on the knowledge‐based view and technology entrepreneurship in emerging markets.     

Incremental and Radical Innovation in Coopetition—The Role of Absorptive Capacity and Appropriability

This study examines why some firms are better able than others to reap benefits from collaborating with their competitors in innovation. Whereas on the general level, collaborative innovation has been studied widely, and firm‐specific success factors in collaboration between competitors (i.e., coopetition) have not been exhaustively addressed. Earlier literature describes coopetition as a risky but potentially rewarding relationship in which sharing, learning, and protection of knowledge are recognized as the key issues determining the possible benefits and hazards. This study provides evidence of factors related to this, suggesting that the firm's ability to acquire knowledge from external sources (potential absorptive capacity) and to protect its innovations and core knowledge against imitation (appropriability regime) are relevant in increasing the innovation outcomes of collaborating with its competitors. This study also distinguishes between incremental and radical innovations as an outcome of coopetition, and provides differing implications for the two innovation types. The empirical evidence for the study was gathered from a cross‐industry survey conducted on Finnish markets. The data are analyzed with multivariate multiple regression analysis. The results of the analysis suggest that (1) potential absorptive capacity and appropriability regime of the firm both have a positive effect in the pursuit of incremental innovations in coopetition, and (2) in the case of radical innovations, appropriability regime has a positive effect, while the effect of absorptive capacity is not statistically significant. However, the results also indicate that there is a moderating relationship between these variables, in that the potential absorptive capacity is positively associated with creation of radical innovations within high levels of appropriability regime. These results yield important theoretical and managerial implications. As a whole, the results presented in this study provide new evidence on which types of firms can reap success in the challenging task of collaborative innovation with rivals. In the case of incremental innovation, a firm‐level emphasis on knowledge sharing and learning will positively affect the results of coopetition, as will an emphasis on knowledge protection. Thus, when incremental developments are pursued in coopetition, firms should not only seek to exchange knowledge to create value but also remember to secure the firm‐specific core knowledge within the firm's borders to stay competitive. On the other hand, when the firm is pursuing radical innovation with its rivals, the heaviest emphasis should be on protecting its existing core knowledge and also emerging novel innovations and market opportunities. Capabilities in knowledge acquisition are also beneficial in these cases, but the full benefits of knowledge exchange realize only when the firm's knowledge protection mechanisms are sufficiently strong, allowing for safe knowledge exchange between rivals.     

Whether and when do alliance terminations pay off?

Engaging in multiple strategic alliances, a firm forms an alliance portfolio. While a larger alliance portfolio signals investors a firm's ability to exploit new opportunities and improve financial performance, having multiple alliances may also undermine financial performance due to a firm's limited ability to effectively manage these alliances. Announcing an alliance termination, a firm signals an intention to increase the effectiveness of a larger alliance portfolio. This article examines the extent to which alliance termination announcements create value for firms with multiple alliances. Building on the resource-based view of the firm and organizational learning literature, the paper hypothesizes a U-shaped relationship between alliance portfolio size and a firm's cumulative abnormal stock return following an alliance termination announcement. This effect is moderated by the amount of a firm's alternative resources and partner-specific experience that affect its ability to effectively manage multiple alliances. The results show that alliance termination announcements create firm value when an alliance portfolio is large.     

Giving fish or teaching to fish? An empirical study of the effects of government research and development policies

This study compares how government research and development (R&D) subsidy and knowledge transfer from universities and public research institutions stimulate a firm's new product development. More importantly, we emphasize that the effects of these governmental R&D policies on new product development can be achieved not only directly, but also via a mediating role – a firm's innovation capability. Furthermore, we test how other external knowledge sources (such as knowledge from universities and public research institutions) interact with government R&D support to stimulate new product development. The results, based on an investigation of 270 Chinese firms, suggest that both government R&D subsidy and knowledge transfer from universities and public research institutions enhance new product development. The results also show that although government R&D subsidy and knowledge transfer from universities and public research institutions has a direct impact on new product development, innovation capability does mediate the above relationships. Moreover, unlike the findings that other external knowledge sources have a direct influence on new product development as indicated by the previous literature, our findings suggest that external knowledge sources substitute with the government R&D subsidies and complement with knowledge transfer from universities and public research institutions. The results confirm the old sayings that teaching to fish (knowledge transfer from universities and public research institutions can complement with other external knowledge sources) is much better than giving fish (government R&D subsidies substitute other external knowledge sources). This paper enriches current literature of government R&D support policies to firm new product development by providing empirical evidences.