Inside the black box of high-growth firms in a crisis-hit economy: corporate strategy,employee human capital and R&D capabilities

In an attempt to open the black box of high-growth firms within turbulent economic environments, this paper explores the role of corporate strategy, employee human capital and R&D capabilities in achieving exceptional growth performance in a crisis-hit economy. Relative and absolute growth measures based on both employment and sales are computed utilizing survey data on 1500 firms in the midst of the Greek crisis. Our findings indicate that adopting a geographical diversification strategy significantly increases the likelihood of becoming a fast-growing firm, irrespective of the growth metric used. Entering in diverse product markets and taking advantage of R&D capabilities appear to additionally contribute to relative employment change in HGFs of smaller size. Based on the absolute employment growth indicator, we provide some evidence that HGFs of larger size are able to grow fast through product diversification, acquiring other firms or by investing on training low-skilled employees. Nevertheless, hiring already highly educated persons seems to matter only for sales HGFs, while research collaborations are found to negatively affect the probability of growing fast in terms of sales.

     

How do firm characteristics affect behavioural additionalities of public R&D subsidies? Evidence for the Austrian transport sector

Interest of STI policies to influence the innovation behaviour of firms has been increased considerably. This gives rise to the notion of behavioural additionality, broadening traditional evaluation concepts of input and output additionality. Though there is empirical work measuring behavioural additionalities, we know little about what role distinct firm characteristics play for their occurrence. The objective is to estimate how distinct firm characteristics influence the realisation of behavioural additionalities. We use survey data on 155 firms, considering the behavioural additionalities stimulated by the Austrian R&D funding scheme in the field of intelligent transport systems in 2006. We focus on three different forms of behavioural additionality—project additionality, scale additionality and cooperation additionality—and employ binary regression models to address this question. Results indicate that R&D related firm characteristics significantly affect the realisation of behavioural additionality. R&D intensive firms are less likely to substantiate behavioural additionalities, while small, young and technologically specialised firms more likely realise behavioural additionalities. From a policy perspective, it may be concluded that direct R&D promotion of firms with a high R&D intensity may be misallocated. Attention of public support should be shifted to smaller, technologically specialised firms with lower R&D experience. The findings deliver important insights into interactions of public R&D support and R&D behaviour of firms operating in the Austrian transport sector, bearing significant implications for future policy designs.     

The effect of R&D novelty and openness decision on firms' catch-up performance: Empirical evidence from China

This paper explores the strategic dimensions of R&D decisions toward novelty and openness in explaining the performance of latecomer firms in a developing economy. A structural equation model of R&D decision-making is formulated using survey data from 279 Chinese firms. The dimension of R&D novelty is defined as the degree of technological newness found in firms' R&D projects, while R&D openness describes the degree to which technologies are acquired from external sources. Our results indicate that firms' R&D decisions regarding novelty and openness are associated with demand opportunities, market competition, technological capability, and external networks. Greater R&D novelty contributes positively to innovative output but does not affect sales growth. Greater R&D openness contributes positively to sales growth but negatively to innovative output.     

Value and risk dynamics over the innovation cycle

This paper studies investment in intellectual capital and corresponding value and risk dynamics over the innovation cycle. We assume that the innovation cycle consists of three phases, R&D, trial, and market introduction phases. We use a real option investment model to characterize firm value and risk dynamics over the innovation cycle and find that firm value is the sum of the value of assets in place and non-linear option values related to breakthrough, exit, and market introduction options. Firm risk over the innovation cycle is highly non-linear and quite distinct in different phases. During the R&D phase risk is high as the firm faces high operating leverage originating from R&D fixed costs together with technological uncertainty. During the trial phase risk is significantly lower and dominated by option risk to launch the product in the market while after the introduction of the product in the market risk is equivalent to the asset risk of the company. Our model is consistent with the view that positive excess returns of R&D intensive firms are a compensation for risk. Based on this insight we derive several testable predictions.     

CEO optimism,CEO selection,compensation, and corporate investment decision: The case of CEOs who were rehired as CEOs by another firms after turnover

What happens to CEOs after they are let go by their firm? This study is designed to investigate CEOs who are rehired as CEOs by another firms after turnover. CEOs defined as “moderately optimistic” and those who left voluntarily from their departing firms, are younger, have better prior performance, and work in larger firms are found to have a greater likelihood of being rehired as a CEO by another employer. Moreover, new-hire firms with higher growth opportunity and higher R&D expenditures are found to be significantly more willing to hire overconfident CEOs. Furthermore, more-optimistic CEOs are found to receive higher total compensation from their new-hire firms than CEOs who are less optimistic. Finally, overconfident CEOs working in firms with high growth opportunity and higher R&D show a significantly greater tendency toward increasing firm investment.     

On the R&D/marketing interface in knowledge intensive entrepreneurial firms

In this paper we focus on the performance impact associated with whether R&D or marketing takes the lead in product innovations and/or product development. We examine empirically the performance of a sample of entrepreneurial firms across 10 European Union countries for which we can identify alternative regimes in which R&D, or in which marketing, is viewed as being relatively more important in creating and sustaining the firm’s competitive advantage. We find that when R&D is the dominant strategy, firms realize greater growth in sales, other factors held constant.     

R&D cooperation and unintended innovation performance: Role of appropriability regimes and sectoral characteristics

This research empirically examines the relation between R&D cooperation and unintended innovation performance. The effects of appropriability and sectoral conditions on the unintended innovation performance in the context of R&D cooperation were also tested. Binary logistic regression was used to analyze the manufacturing firms sampled from the Korea Innovation Survey (KIS) 2012. Our estimation results show that for the high-tech focal firms under strong appropriability regime, cooperation with competitors increases the likelihood of their unintended innovation performance. For the high-tech focal firms under weak appropriability regime, cooperation with customer and user firms and universities increases the likelihood of their unintended innovation performance. For the low-tech firms under strong appropriability regime, cooperation with the customer and user firms and advisory organizations increases the likelihood of unintended innovation performance. For the low-tech firms under weak appropriability regime, cooperation with competitors and government research institutes increases the likelihood of unintended innovation performance. As a whole, the significance of this paper lies in shedding a new light on approaching the innovation performance with the notion of unintended innovation performance, which is shaped by different partner types and environmental conditions.     

An analysis of firm-level innovation strategies in the US biotechnology industry

This study examines factors that may affect innovation strategies and performance of firms in the biotechnology industry. Specifically, differences between factors common to firms with high R&D intensity and those to firms with low R&D intensity are investigated. Biotechnology firms with relatively higher levels of R&D intensity attribute their innovation performance to research-based innovation factors and strategies such as strengthening their own research capabilities, entering into research collaborations with universities, industry leaders and other biotech firms, and licensing their technology. These strategies can be summarized as alignment within the industry. Firms with relatively lower R&D intensity have a hybrid focus—they invest in R&D but may also have products on the market. These firms attribute their innovation performance more so to production-based innovation factors and strategies such as gaining market access and maintaining connections with customers. Their strategy focuses on competitiveness, marketing, and distribution channels, while not ignoring the importance of a strong research base and the need to advance technologically. In a sense, strategies employed to achieve successful innovation reflect the stage of innovation in which a firm is operating for a particular product or process.     

Internationalization of R&D and Operations in Dominant Product U.S. Firms

Abstract

An empirical study of a sample of 38 U.S. dominant product firms operating in manufacturing industries was undertaken to trace the patterns of internationalization of R&D and operations. First, the results of our analysis revealed that internationalization of R&D and operations were a significant part of the evolving internationalization strategies of the dominant product firms we studied. Second, while internationalization of operations was influenced by international configuration via global standardization, the internationalization of R&D was influenced by international configuration via national responsiveness and by competitive positioning via differentiation. Third, the results highlight the fact that the internationalization moves of dominant product firms are not all similar, but depend on the international configuration and competitive positioning pursued by the firms.     

Globalisation,industrial diversification and productivity growth in large European R&D companies

This paper aims to assess the impact of both geographic and industrial diversification of economic activities on the productivity performance of large European R&D Multinational Enterprises (MNEs). Based on the worldwide subsidiaries of these firms, we measure the performance of the firms according to their level of industrial diversification and globalisation that we proxy with the presence and importance of subsidiaries in the EU, North America and Asia–Pacific regions. The sample consists of large R&D firms that represent about 80 % of total European R&D. In general, the results indicate a positive impact from globalisation on firms’ R&D productivity, especially in the US, while a negative impact for industrial diversification is found.     

Making sense of innovation by R&D and non-R&D innovators in low technology contexts: A forgotten lesson for policymakers

This paper attempts to use an integrated theory based on the framework of a firm's internal and external sources of knowledge to analyze how R&D activities differ in innovation from non-R&D activities, especially in the context of low and medium-low tech (LMT) sectors where most of the firms are SMEs. Simultaneously, the paper also explores the key differences between R&D and non-R&D innovators. The empirical analysis is based on a representative panel of 2023 Spanish manufacturing firms from the Spanish Ministry of Industry for 2005 and 2006. Innovation in product and process is explained using non-R&D variables such as marketing, design or the hiring of tertiary degree employees. Only innovation in product is explained by R&D expenditures. Regarding innovation in process, the R&D variables work in a few specific cases. Therefore, innovation can be explained using non-R&D variables. The firms with more internal resources, those which conduct R&D activities, present a better absorptive capacity (AC) and this leads them to engage in cooperation agreements and to access external flows of knowledge. The paper has important implications for policymakers due to the fact that most policies for R&D are based just on R&D programmes.     

Short-term R&D bias,competition on cost rather than innovation,and time to market

Mounting evidence indicates that capital markets often apply short-term pressure on firms to gain short-term results by focusing primarily on reported financial performance. As a result of short termism, it has been argued that companies are likely to cut expenditure on R&D which might otherwise improve longer-term performance. As there is a growing consensus that R&D is critically important to both organizational and national performance, short termism may have significant detrimental organizational consequences. One implication arising from a short-term R&D bias, and examined in this paper, is its effect on market time reduction. Arguments are examined that suggest a dominant R&D strategy is to reduce product time to market. Concerns have been expressed, however, that such a strategy is applicable in specific circumstances only. A review of the literature suggests that analyst and shareholder bias against high-risk, long-term research in favor of lower-risk, short-term product R&D influences organizations to reduce the time it takes to get a product to market when the emphasis in the marketplace is on cost competition rather than product innovation. The findings of the study suggest that when the emphasis on competition on cost rather than innovation is low, short-term R&D bias does not affect market time. In contrast, when the emphasis on competition on cost rather than innovation is high, the results indicate that short-term R&D bias positively influences market time reduction. The study concludes with suggestions for further research.     

Real options game models of R&D competition between asymmetric firms with spillovers

Using real options game models, we consider the characterization of strategic equilibria associated with an asymmetric Research and Development (R&D) race between an incumbent firm and an entrant firm in the development of a new innovative product under market and technological uncertainties. The random arrival time of the discovery of the patent protected innovative product is modeled as a Poisson process. Input spillovers on the R&D effort are modeled by the change in the leader’s hazard rate of success of innovation upon the follower’s entry into the R&D race. Asymmetry between the two competing firms include sunk costs of investment, stochastic revenue flow rates generated from the product, and hazard rates of arrival of success of R&D efforts of the two firms. Under asymmetric duopoly, we obtain the complete characterization of the three types of Markov perfect equilibria (sequential leader–follower, preemption and simultaneous entry) of the firms’ optimal R&D entry decisions with respect to various sets of model parameters. Our model shows that under positive input spillover, preemptive equilibrium does not occur in the R&D race due to the presence of dominant second mover advantage. The two firms choose optimally to enter simultaneously if the sunk cost asymmetry is relatively small; otherwise, sequential equilibrium would occur. When the initial hazard rate is low relative to the level of input spillover, simultaneous entry would occur as an optimal decision, signifying another scenario of dominant second mover advantage. On the other hand, when the initial hazard rate is sufficiently high so that the first mover advantage becomes more significant, simultaneous equilibrium does not occur even under high level of positive input spillover.     

Over-investment in corporate R&D,risk, and stock returns

Large-size firms which significantly increase their R&D expenditures experience subsequently three-year-long negative abnormal stock returns on the magnitude of 56 basis-points per month. We find no robust evidence of significant event-induced abnormal returns for small-size sample firms or any systematic risk changes for the small- and large- size firms. We also find that the large-size sample firms generate relatively much larger cash flows (i.e., have significantly greater over-investment discretion) and have significantly larger (over-) valuation multiples than the small-size firms. Moreover, some of their operating performance measures show signs of deterioration instead of improvement following these R&D programs. These findings are consistent with the view that investors initially underestimate the over-investment in R&D by some large-size firms that appear to be overvalued and have high cash flows at the time of the investment, only to be disappointed later.     

Scientific research,firm heterogeneity,and foreign R&D locations of multinational firms

We examine the influence of host countries’ scientific research strengths on global R&D location choices by multinational firms. In an analysis of 277 new R&D activities identified for 175 firms in 40 host countries and 30 technology fields, we find that the strength of relevant university research positively affects the likelihood that host countries attract foreign R&D. When allowing for firm heterogeneity, university scientific research appears only a significant factor for firms with a strong science orientation in their R&D activities. Host countries’ corporate scientific research has no systematic influence on R&D location choices. Empirical results are replicated in an analysis at the regional level covering regions in Europe, the United States, and Japan.     

The differential effects of public R&D support on firm R&D: Theory and evidence from multi-country data

This paper aims to evaluate the effects of various forms of public research and development (R&D) support on firms’ incentives to invest in R&D. First, in order to identify potential channels through which public R&D support influences firm R&D, a formal model of firm R&D with public R&D support is developed and analyzed. Four potential channels are identified: the technological-competence-enhancing effect, the demand-creating effect, the R&D-cost-reducing effect and the (project) overlap (or duplication) effect. These multiple channels indicate that it is difficult to evaluate the aggregate effect of public R&D support and that there are differential effects of public R&D support on firm R&D, depending on various firm- or industry-specific characteristics. Second, the differential effects of public R&D support are empirically tested using unique firm-level data for nine industries across six countries. Public support tends to have a complementarity effect on private R&D for firms with low technological competence, for firms in industries with high technological opportunities and for firms facing intense market competition. In contrast, firms with high technological competence and firms that have enjoyed fast demand growth in recent years show a crowding-out effect, and firm size and age do not show any discernible differential effect.     

The impact of cluster connectedness on firm innovation: R&D effort and outcomes in the textile industry

Recent research into the clustering effect on firms has moved away from a simplistic view to a more complex approach. More realistic and complex causal relationships are now considered when analysing these territorial networks. Specifically, this paper attempts to analyse how cluster connectedness moderates the relationship of a firm's innovation effort and the results obtained from this effort. We want to question the commonly accepted direct and positive impact of R&D effort, and moreover, we suggest the existence of a saturation effect and that the level of cluster's inter-connectedness in the cluster moderates this effect. We have developed our empirical study focusing on the Spanish textile industrial cluster. This is a complex manufacturing industry that uses relatively low-technology manufacturing and R&D. Our findings suggest that the degree to which a firm is involved with, or connected to, other firms in the cluster can moderate the effect of the R&D effort on its innovation results. More generally, we aim to contribute to the discussion on the degree to which firms should be involved in the cluster network in order to operate efficiently and gain the maximum competitive advantages. Our findings have implications both in recent cluster and network literature as well for institutional policy.     

The impact of technological relatedness, prior ties, and geographical distance on university-industry collaborations: A joint-patent analysis

Empirical studies on R&D collaborations between universities and firms have mainly centered their attention on universities and firms' characteristics that favor the establishment of collaborative agreements. In this paper, I extend the current research framework investigating the role that specific technological and relational attributes may play on the relevance of such collaborations. Specifically, I focus on the effects exerted by three relevant factors, namely technological relatedness, prior collaboration ties, and geographical distance, on university-industry joint innovation value. I develop testable hypotheses about their impact on the innovative performance of R&D university-industry collaborations, and test them on a sample of 796 university-industry joint patents, developed by 33 universities located in 12 different European countries. Our results suggest that partners' technological relatedness has an inverted U-shaped relationship with innovation value. In addition, prior ties and geographical distance between universities and firms are both positively related to the achievement of higher innovative outcomes.     

Research collaboration and R&D outsourcing: Different R&D personnel requirements in SMEs

The literature on ‘open’ innovation emphasises the need to engage in external knowledge relations in order to innovate. Particularly for SMEs, research cooperation and R&D outsourcing can offer possibilities to complement the often limited internal research resources. However, they also bring in their wake requirements in terms of absorptive capacity and managerial skills of the internal R&D personnel.The paper focuses on the different requirements in terms of availability and training of research managers and R&D experts for research cooperation versus R&D outsourcing in SMEs. An empirical analysis of micro-level data provided by the OECD business R&D survey for Belgium reveals that the relation between R&D personnel requirements and research collaboration and R&D outsourcing depends upon the SME size. Therefore, to study this subject appropriately a distinction between very small, small, and medium-sized firms is relevant. Very small firms engage significantly less in research cooperation than medium-sized firms and the propensity to engage in research cooperation is positively associated with the share of PhD holders among the research managers and R&D experts. For R&D outsourcing a lower involvement is noted in medium-sized firms, and the propensity to outsource increases with the formal qualification level of the R&D personnel and with R&D training. Among the SME, small firms are most engaged in research cooperation and in R&D outsourcing. In the case of research cooperation they rely on highly qualified experts. For R&D outsourcing activities both the presence of research managers and R&D experts is important.