The Two Faces of R&D: Does Firm Absorptive Capacity Matter?

This paper examines the dual effect of firm R&D efforts on productivity growth for Swedish manufacturing firms. The R&D efforts do not only stimulate innovation but also enhance firms?? ability to identify, assimilate and exploit new knowledge from the environment (Cohen and Levinthal. Economics Journal 99:569?C596, 1989). In this paper, we assume that the principal channel of transmission of new knowledge is through I/O linkages. Our econometric evidence suggests that in addition to the firm??s own R&D activities, R&D spillovers embodied in traded goods within the industry, others imported from abroad, and technology spillovers transferred from the technological frontier within an industry are important determinants of firms?? productivity growth. Results suggest that domestic R&D spillovers following the I/O links between industries are of minor importance in this respect. We also analyze whether firms?? absorptive capacity matters for productivity growth. Analyzing absorptive capacity is particularly important for assessing the effective contribution of spillovers from other firms. The effect of a firm??s absorptive capacity is found to interact positively with imported R&D spillovers, whereas domestic rents spillovers seem to play a minor role for productivity growth.     

Determinants of R&D collaboration of service firms

This article examines the determinants of R&D collaboration of service firms. Different from manufacturing firms, we expect that types of innovation, public financing, innovation protection, purchase of external R&D, firm’s absorptive capacity, spillovers, and certain innovation barriers determine the firm’s decision to collaborate in R&D. Results indicate that firms that undertake R&D collaboration tend to undertake process innovation, receive public funding, can protect their innovations, and typically subcontract the development of their technologies. The article provides implications for theory and practice.     

Configurations of strategic R&D decisions and financial performance in small-sized and medium-sized firms

This paper links the strategic decisions made in R&D during the financially turbulent period of 2009 to the firm's financial health in the period 2010–2013. The focus is on decisions made in R&D-active small and medium-sized enterprises in terms of absorptive capacity, open innovation, type of R&D, and the organizational structuring of R&D. Based on a representative set of R&D-active firms in Belgium, qualitative comparative analysis reveals that the outcomes in terms of financial performance related to optimal configurations of strategic R&D decisions depend on the firm's size and on the time-lag under consideration. Managers in small-sized firms are advised to pay particular attention to a more functionally-structured R&D approach in configurations of strategic R&D decisions. To increase medium-term financial performance, managers in medium-sized firms benefit from more engagement in research-oriented activities, more in-house innovation, and the enhancement of absorptive capacity in sets of strategic R&D decisions.     

International technology spillovers and innovation: Evidence from Taiwanese high-tech firms

This paper uses Taiwanese high-tech firms’ data from 2003 to 2007 to investigate the impacts of international technology spillovers and firms’ R&D activities on firms’ innovation performance. We also consider absorptive capability and examine whether the technology spillovers have different effect on firms' innovation performance. We choose patent application counts to measure firms' innovation performance, and adopt panel Ordinary Least Squares (OLS) with fixed-effect and random-effect models as well as System Generalized Method of Moments (GMM) model to estimate. The empirical findings indicate the innovation performance of high-tech firms is positively affected by their R&D efforts, export performance, and the presences of multinational corporations. Furthermore, when absorptive capacity is taken into account, the technology spillovers by exporting and technology import would affect the innovation performance more.     

Internal Versus External R&D: A Study of R&D Choice with Sample Selection

This paper extends previous analyses of the choice between internal and external R&D to consider the costs of internal R&D. The Heckman two-stage estimator is used to estimate the determinants of internal R&D unit cost (i.e. cost per product innovation) allowing for sample selection effects. Theory indicates that R&D unit cost will be influenced by scale issues and by the technological opportunities faced by the firm. Transaction costs encountered in research activities are allowed for and, in addition, consideration is given to issues of market structure which influence the choice of R&D mode without affecting the unit cost of internal or external R&D. The model is tested on data from a sample of over 500 UK manufacturing plants which have engaged in product innovation. The key determinants of R&D mode are the scale of plant and R&D input, and market structure conditions. In terms of the R&D cost equation, scale factors are again important and have a non-linear relationship with R&D unit cost. Specificities in physical and human capital also affect unit cost, but have no clear impact on the choice of R&D mode. There is no evidence of technological opportunity affecting either R&D cost or the internal/external decision.     

Non-R&D SMEs: external knowledge,absorptive capacity and product innovation

The relationship between external knowledge, absorptive capacity (AC) and innovative performance for small and medium-sized enterprises (SMEs) is investigated empirically. Using data from a survey on firms located in North Norway, we ask whether AC plays a mediating role between different external knowledge inflows and innovative performance. The results are consistent with AC as an important mediator for transforming external knowledge inflows into higher innovative performance if we include all SMEs in the sample. However, this result is not robust when considering the sub-sample of non-R&D SMEs only. External knowledge inflows have a much stronger direct effect on innovation performance for non-R&D firms and leave a weak mediating effect of AC. Our findings suggest that measures of AC should be developed further in order to make AC a more relevant concept for empirical studies of SMEs without in-house R&D.     

The effect of international venturing on firm performance: The moderating influence of absorptive capacity

Companies have vigorously pursued opportunities for profitability and growth through international venturing. Yet, research evidence on the performance benefits of international venturing activities has been contradictory. Applying an organizational learning framework, we propose that the expected effects of international venturing activities on financial performance depend on companies' absorptive capacity. Data from 217 global manufacturing companies show that absorptive capacity moderates the relationship between international venturing and firms' profitability and revenue growth. These results urge executives to build internal R&D and innovative capabilities in order to successfully exploit the new knowledge acquired from foreign markets.     

Marketing Innovation in Rural Small Food Industries in Iran

Marketing innovation is essential for small industries to transform products into profit; therefore, understanding its nature and determinants is of utmost importance. This study aimed at understanding marketing innovation and its determinants in the 60 small food industries in the rural areas of Tehran province, Iran. Using a census sampling method, 111 managers of these firms were interviewed. Results showed that the firms’ performance in marketing innovation is generally weak, and a higher level of radical innovation in marketing is perceived compared to the incremental innovation. Also, a cause-and-effect relationship exists between both product and organizational innovations and marketing innovation. Furthermore, while incremental marketing innovation was negatively influenced by formal R&D unit, product diversification, and the manager’s years of experience, radical marketing innovation was affected by the capacity of production, product diversification, and managers’ age and education. The study concluded that in order to boost marketing innovation, innovation should be made also in products and organization. In addition, in order to facilitate the process of marketing innovation, practical and updated training for managers encouraging incremental innovation in marketing, product diversification, and improving R&D activities in the studied firms should be regarded.     

R&D innovation and the value of cash in the biotech industry

This study investigates how the market pricing of an additional dollar of cash held by biotech firms is conditional upon the industry's typical performance, R&D innovation. Under the proposed R&D innovation regime, I find i) an additional dollar of cash is priced higher if held by a firm with higher R&D innovation; ii) the role of R&D innovation is asymmetric depending on whether R&D activities move the drug discovery and development forward or backward; and iii) R&D innovation also differentiates the association between investment opportunities and value of cash observed by prior studies.     

The dynamics of exports and R&D in SMEs

A growing body of literature is exploring firm export and R&D activities. However, most studies examine the first one, whilst considering the second as an explanatory variable or vice versa. This paper contributes to this literature by exploring the joint dynamics of exports and R&D using data from a representative sample of small and medium-sized enterprises in Spanish manufacturing over the 1990–2006 period. The results confirm the existence of a strong interdependence between export and R&D activities. Indeed, engaging in export (R&D) activities will increase a firm’s chances of also engaging in R&D (export) activities. This, in turn, increases firms’ chances of succeeding in export (R&D) activities. Additionally, once we control for firm heterogeneity, strong persistence still remains in each activity due to true state dependence. The results are robust in the use of alternative measures of internationalization (i.e. imports) and innovative activities (product and process innovation).     

The influence of R&D investment on the use of corporate venture capital: An industry-level analysis

We consider how internal research and development (R&D) influences the use of corporate venture capital (CVC) and how this relationship varies across industries. We find that, in general, R&D investments increase the number of CVC deals in an industry. We also find that R&D investment has a particularly strong influence on the use of CVC in industries that are growing rapidly and changing technologically. Our analysis provides greater clarity on the relationships involving R&D and CVC in the presence of contingencies by integrating insights of absorptive capacity and real options reasoning.     

International spillovers and absorptive capacity: A cross-country cross-sector analysis based on patents and citations

This paper brings together the issues of knowledge spillovers and absorptive capacity, by assessing the role of prior R&D experience in enhancing a country's ability to understand and improve upon external knowledge. International spillovers are found effective in increasing innovative productivity in laggard countries, while technological leaders are a source rather than a destination of knowledge flows. Quantitative estimates of the effect of absorptive capacity on innovative performance, through knowledge spillovers, show that absorptive capacity increases the elasticity of a laggard country's innovation to international spillovers, while its marginal effect is negligible for countries at the technological frontier.     

Threshold effects,technology purchasing,and firm outcomes: An absorptive capacity perspective

External technology purchasing is frequently adopted as a strategy to facilitate technology innovation and to enhance firm performance. However, research shows that there is considerable heterogeneity across firms with respect to innovation output and firm performance after technology purchasing. This study uses an absorptive capacity perspective in proposing the existence of an R&D employees threshold and a technology purchasing scale threshold. Using a sample of 1460 high-tech companies in China, we find support for both thresholds. We also find that the two variables are complementary with each other, jointly promoting innovation when both thresholds are crossed.     

International spillovers and absorptive capacity: A cross-country cross-sector analysis based on patents and citations

This paper brings together the issues of knowledge spillovers and absorptive capacity, by assessing the role of prior R&D experience in enhancing a country's ability to understand and improve upon external knowledge. International spillovers are found effective in increasing innovative productivity in laggard countries, while technological leaders are a source rather than a destination of knowledge flows. Quantitative estimates of the effect of absorptive capacity on innovative performance, through knowledge spillovers, show that absorptive capacity increases the elasticity of a laggard country's innovation to international spillovers, while its marginal effect is negligible for countries at the technological frontier.     

Managing cross-border knowledge transfer for innovation: An introduction to the special issue

This introduction to the special issue maps the extant research on managing crossborder knowledge for innovation and classifies it into four clusters: knowledge spillovers and location, international alliances and R&D networks, knowledge transfer and absorptive capacity, and learning organization and capabilities. The eleven articles that compose the special issue are introduced, and a future agenda for international business research is proposed.     

R&D-Related Capabilities as Determinants of Export Performance

Empirical evidence from a sample of independent and privately held specialized suppliers all of which are engaged in formal R&D activities shows that specific R&D-related capabilities are determinants of different types of export performance. The major contribution of this paper is to take into account traditional measures of R&D activities as well as a broad range of R&D-related capabilities to further our understanding of the export behavior of SMEs in terms of volume and final destination of sales. Results suggest that the set of determinants varies with firms' internationalization process. In particular, determinants associated with the more global firms are significantly at odds with our traditional conception of a small firm and appear to be more aligned with the behavior generally found in proactive large exporters.     

Services vs. Manufacturing – How Does Foreign and Domestic Sales Impact on Their R&D?

While the distinction between manufacturing and services becomes increasingly blurred to some observers, we find, using a panel of Swedish firms, clear evidence that foreign sales (exports) are more important than domestic sales for stimulating R&D. This is particularly clear for manufacturing and this importance of foreign sales has increased over time, simultaneous to an opening up of the Swedish economy. Even though service industries have seen an increase in both R&D and trade over time, it is thus mainly manufacturing that has benefited from increased possibilities for absorptive capacity. This result suggests a clear dichotomy between manufacturing and services in terms of how they react to trade and how they turn towards the foreign market vs. the domestic market to find stimuli for innovation.     

Are ICT,Workplace Organization,and Human Capital Relevant for Innovation? A Comparative Swiss/Greek Study

This paper investigates and compares the relationships for Swiss and Greek firms between indicators for the intensity of use of modern information and communications technologies (ICT), several forms of workplace organization, and human capital, on the one hand, and several measures of innovation performance at firm level, on the other hand. For the Swiss firms, we find that ICT contribute to innovation activities (a) as enablers of process innovation (but not of product innovation) and (b) as means for increasing the efficiency of the R&D process. The organizational variables for “work design” and “employee voice” show significant positive correlations for most innovation indicators. Human capital matters primarily for R&D activities. The findings for the Greek firms indicate positive correlations of ICT with product and process innovation and of new “work design” with product innovation and R&D. No correlation of human capital with innovation could be found. No complementarities for the three factors with respect to innovation performance could be detected in either country.     

Steuerliche Förderung von Forschung und Entwicklung in KMU — Irrweg für Deutschland?

To foster R&D activities, German industry lobbyists and policymakers are discussing the introduction of tax incentives for R&D in small and medium enterprises (SME) — all the more because Germany is one of just six of the 35 OECD members without indirect R&D support. Based on a critical assessment of the arguments provided, we conclude that international experiences with R&D tax incentives are not as promising as often suggested. An appropriate transfer into the German tax system, considering its specificities, appears to be technically difficult. The high level of heterogeneity of German SMEs population suggests that not every SME requires R&D to be innovative, because empirical evidence shows multiple diverse innovation patterns that demand other forms of support. Acknowledging the existing range of SMEs, we propose that instead of introducing R&D tax incentives, the debate should be focused on how to strengthen and develop the existing innovation policy mix for SMEs.     

Innovation success of non-R&;D-performers: substituting technology by management in SMEs

This paper investigates the impact of in-house R&D and innovation management practices on innovation success in small and medium-sized firms (SMEs). While there is little doubt about the significance of technology competence for generating successful innovations, in-house R&D activities may be a particular challenge for SMEs due to high risk exposure, high fixed costs, high minimum investment and severe financial constraints. SMEs may thus opt for refraining from R&D and relying more on innovation management tools in order to achieve innovation success. We analyse whether such a strategy can pay off. Based on data from the German CIS, we find that R&D activities are a main driver for innovation success if combined with external R&D, using external innovation sources or by entering into co-operation agreements. SMEs without in-house R&D can yield a similar innovation success if they effectively apply human resource management tools or team work to facilitate innovation processes.