Competitive drivers and international plant configuration strategies: a product‐level test

We analyze the determinants of the decision to invest abroad and the choice of spatial configurations of overseas plants for 120 Japanese firms active in 36 well‐defined electronic product markets. We find that key competitive drivers at the firm and industry levels have a critical impact on the choice between alternative international plant configurations. Regional configurations focused on Asia are chosen by firms with weaker competitiveness for products with established manufacturing technologies. Plant configurations focused on the United States and the European Union are chosen by technology‐intensive firms facing competitive threats in foreign markets. Global configurations are chosen by firms with a strong competitive position in the Japanese and world market for their core product businesses and are more common in the case of strong oligopolistic rivalry between Japanese firms. Copyright © 2005 John Wiley & Sons, Ltd.     

CEO incentives,innovation, and performance in technology‐intensive firms: a reconciliation of outcome and behavior‐based incentive schemes

Building on the agency view of corporate governance, we propose that technology‐intensive firms use both outcome and behavior‐based performance criteria for rewarding CEOs. Using a sample of 206 firms from 12 U.S. manufacturing industries, we find that as technological intensity increases CEO bonuses are more closely linked to financial results and that total CEO incentives are associated with two indicators of desirable innovation behaviors: invention resonance and science harvesting. Invention resonance refers to the impact a firm's inventions have on other firms' inventions, while science harvesting reflects a firm's commitment to scientific research. As technological intensity increases, aligning bonus with financial results, total incentives with invention resonance, and total incentives with science harvesting predict firm market performance. Copyright © 2006 John Wiley & Sons, Ltd.     

When is cash good or bad for firm performance?

Research summary: Cash can create shareholder value when used for adaptation to unfolding contingencies, but can also reduce value when appropriated by other stakeholders. We synthesize arguments from the behavioral theory of the firm, economic perspectives like agency theory, and the value‐creation versus value‐appropriation literatures to argue that the implications of cash for firm performance are context‐specific. Cash is more beneficial for firms operating in highly competitive, research‐intensive, or growth‐focused industries that are typical of contexts requiring adaptation in the face of uncertainties. Conversely, cash is more detrimental to performance in firms that are poorly governed, diversified, or opaque, as are typical of contexts where stakeholder conflicts, information asymmetries, or power imbalances can encourage value appropriation by other stakeholders. Managerial summary: Cash can create shareholder value when used for adaptation to unfolding contingencies, but can also reduce value when appropriated by other stakeholders. While cash‐rich firms have higher performance on average, with those in the 75th percentile having a market‐to‐book value 15 percent higher than those in the 25th percentile, we find that the performance benefits of cash depend on the context. Cash is more beneficial for firms operating in highly competitive, research‐intensive, or growth‐focused industries that are typical of contexts requiring adaptation in the face of uncertainties. Conversely, cash is more detrimental to performance in firms that are poorly governed, diversified, or opaque, as are typical of contexts where stakeholder conflicts, information asymmetries, or power imbalances can encourage value appropriation by other stakeholders. Copyright © 2015 John Wiley & Sons, Ltd.     

Innovation Management Practices Compared: The Example of Project‐Based Firms*

The importance of project‐based firms is increasing, as they fulfill the growing demands for complex integrated systems and knowledge‐intensive services. While project‐based firms are generally strong in innovating their clients' systems and processes, they seem to be less successful in innovating their own products or services. The reasons behind this are the focus of this paper. The characteristics of project‐based firms are investigated, how these affect management practices for innovation projects, and the influence of these practices on project performance. Using survey data of 203 Dutch firms in the construction, engineering, information technology, and related industries, differences in characteristics between project‐based and nonproject‐based firms are identified. Project‐based firms are distinguished from nonproject‐based firms on the basis of organizational configuration, the complexity of the operational process, and the project management capabilities of the firm. Project‐based firms also differ with regard to their level of collaboration and their innovation strategy, but not in the level of autonomy. A comparison of 135 innovation projects in 96 of the firms shows that project‐based firms do not manage their innovation projects different from other firms. However, the effects of specific management practices on project performance are different, particularly the effects of planning, multidisciplinary teams and heavyweight project leaders. Differences in firm characteristics provide an explanation for the findings. The implication for the innovation management literature is that “best” practices for innovation management are firm dependent.     

Old technology meets new technology: complementarities,similarities, and alliance formation

Alliance formation is commonplace in many high‐technology industries experiencing radical technological change, where established firms use alliances with new entrants to adapt to technological change, while new entrants benefit from the ability of established players to commercialize the new technology. Despite the prevalence of these alliances, we know little about how these firms choose to ally with specific firms given the range of possible partners they may choose from. This study explores factors that lead to alliance formation between pharmaceutical and biotechnology companies. We focus on the alliance tie as the unit of analysis and argue that dyadic complementarities and similarities directly influence alliance formation. We then introduce a contingency model in which the positive effect of complementarities and similarities on alliance formation is moderated by the age of the new technology firm. We draw theoretical attention to the intersection between levels of analysis, in particular, the intersection between dyadic and firm‐level constructs. We find that a pharmaceutical and a biotechnology firm are more likely to enter an alliance based on complementarities when the biotechnology firm is younger. Another noteworthy finding is that proxies for broad capabilities appear to be at least as effective, if not more so, in predicting alliance formation compared to fine‐grained science and technology‐related indicators, like patent cross‐citations or patent common citations. We conclude by suggesting that future studies on alliance formation need to take into account interactions across levels; for example, how dyadic capabilities interact with firm‐level factors, and the advantages and disadvantages of more or less fine‐grained measures of organizational capabilities. Copyright © 2007 John Wiley & Sons, Ltd.     

Offshoring Pollution while Offshoring Production?

Research summary: We examine the role of firm strategy in the global effort to combat pollution. We find that U.S. plants release less toxic emissions when their parent firm imports more from low‐wage countries (LWCs). Consistent with the Pollution Haven Hypothesis, goods imported by U.S. firms from LWCs are in more pollution‐intensive industries. U.S. plants shift production to less pollution‐intensive industries, produce less waste, and spend less on pollution abatement when their parent imports more from LWCs. The negative impact of LWC imports on emissions is stronger for U.S. plants located in counties with greater institutional pressure for environmental performance, but weaker for more‐capable U.S. plants and firms. These results highlight the role of local institutions and firm capability in explaining firms' offshoring and environmental strategies. Managerial summary: Using confidential trade, production, and pollution data of more than 8,000 firms and 18,000 plants from the U.S. Census Bureau for years 1992–2009, we find that U.S. plants release less toxic emissions when their parent firm imports more from low‐wage countries (LWCs). In addition, goods imported by U.S. firms from LWCs are in more pollution‐intensive industries. U.S. plants shift production to less pollution‐intensive industries, produce less waste, and spend less on pollution abatement when their parent imports more from LWCs. However, not all U.S. firms choose to “offshore pollution.” U.S. plants located in counties with greater institutional pressure for environmental performance offshore more, but more‐capable U.S. plants and firms offshore less. Copyright © 2017 John Wiley & Sons, Ltd.     

Which Service? How Industry Conditions Shape Firms’ Service‐Type Choices

This article studies the role of industry conditions as determinants of manufacturing and software firms’ decisions to offer services. It draws on the competence perspective on industry evolution and servitization to theorize and provide empirical evidence on how industry conditions affect firms’ choice to offer two distinct types of services—product‐oriented services and customer‐oriented services. It is argued that firms are likely to offer product‐oriented services in Schumpeterian industry environments to address high technological uncertainty by leveraging and reinforcing capabilities in the existing technology. In contrast, firms are likely to offer customer‐oriented services in non‐Schumpeterian industry environments to address value generation uncertainty by building competences in new technological or market areas. Based on longitudinal data on 410 public firms from manufacturing industries and the software industry, empirical evidence suggests that firms are indeed more likely to offer product‐oriented services in Schumpeterian industry environments, such as in the early stage of the industry life cycle and under conditions of high R&D intensity and competition, whereas they are more likely to offer customer‐oriented services in non‐Schumpeterian environments, such as in the later stages of the industry life cycle and in highly cyclical industries.     

Strategy,human capital investments,business‐domain capabilities,and performance: a study in the global software services industry

Research summary : In knowledge‐based industries, continuous human capital investments are essential for firms to enhance capabilities and sustain competitive advantage. However, such investments present a dilemma for firms, because human resources are mobile. Using detailed project‐level operational, financial, and human capital data from a leading multinational firm in the global IT services industry, this study finds that deliberate investments in improving general human capital can help firms develop superior capabilities and maintain high profits. This paper identifies two types of capabilities essential for success in this industry—technological and business‐domain capabilities—and provides empirical evidence justifying such investments. Theoretical and practical implications of capability‐seeking general human capital investments are discussed. Managerial summary : The primary managerial implication of this research is that capability‐seeking investments in developing general human capital through strategic learning (training and internal certifications) can enhance firm performance. Although investing in general human capital is risky, the firm considered this a strategic necessity in order to thrive in the fast paced IT services industry. By leveraging general technological skills in combination with business‐domain knowledge to address customer's business problems firms can earn and sustain higher profits. Our study also demonstrates how a developing‐country firm responded to strong competitive challenge from global rivals possessing superior capabilities by upgrading the capabilities of its employees through internal development. In doing so the firm was able to narrow the capability gap vis‐à‐vis its foreign peers and expand its business globally. Copyright © 2016 John Wiley & Sons, Ltd.     

Firm profitability,growth, and innovation

A new data base measuring company-level innovative activity is used to test how firm growth, profitability, size, and R&D intensity influence subsequent innovative activity. While R&D intensity is found to promote subsequent innovations, and smaller firms are identified as being more conducive to innovation activity than are larger firms, we find that the effect of company growth and profitability on subsequent innovation depends on the technological-opportunity environment. Profitability is found to promote subsequent innovative activity for firms in high-technological-opportunity industries but not in low-technological-opportunity industries. By contrast, high growth generates more innovative activity for firms in low-technological-opportunity industries, but not in high-technological-opportunity environments.     

出口行为如何影响企业环境绩效

本文首次采用中国制造业企业层面的能源消耗和产出微观数据,利用细分能源类型的二氧化碳排放因子换算得到微观企业环境绩效指标,即单位产出的二氧化碳排放量(二氧化碳排放强度),并试图以企业劳动生产率为桥梁,结合中国出口企业“生产率悖论现象”,研究中国企业出口行为对其环境绩效的影响机制。本文基于企业生产函数框架构建计量模型,实证结果表明:①出口造成中国企业二氧化碳排放强度显著增大,同时,排放强度随着企业出口密度的提高不断增长,出口并没有显著提升企业环境绩效,考虑不同生产函数形式后结论均较为稳健。②传统的“污染避难所问题”并不是造成中国出口企业二氧化碳排放强度更高的主要原因。③中国出口企业生产效率更低,进而导致更高的碳排放强度。④出口企业的低效率和低加成率(低利润率)进一步拖累了企业技术升级和环保投资,这是出口造成企业更为污染的重要原因。本文的研究弥补了贸易与中国微观企业层面环境绩效关系研究的缺口,从微观层面给予污染治理与减排策略以政策参考,证实了在国际贸易进程中不仅应制定宏观目标,还应直接着眼于微观企业,特别是促使出口企业提高自身的生产率,从而推动经济与环境的全面可持续发展。     

Intra-Industry Growth Dynamics in the Greek Services Sector: Firm-Level Estimates for ICT-Producing,ICT-Using,and Non-ICT Industries

The stochastic patterns of firm growth are examined with the use of a data set of 4,975 firms surviving in the Greek services sector over the 1995–2001 period. The analysis first takes into account the intensity of information and communication technologies (ICT) in the services industries and then, through a system dynamic panel data technique, investigates how initial size and past growth influence firm growth. The classification of industries as three ICT-related groups provides interesting results at both the aggregated group level and the disaggregated industrial level. In general, Gibrat’s Law is accepted for firms in ICT intensive industries, while it is rejected in non-ICT industries.     

A NEW PERSPECTIVE ON INDUSTRY R&D AND MARKET STRUCTURE*

This paper aims to shed some new insights on the long‐debated and both extensively and intensively explored relationship between market concentration and industry R&D intensity. In order to do so, this study develops, from a classic Dorfman‐Steiner [1954] model of firm R&D, a model of industry R&D, where consumer preference over quality and price, R&D technology, and the joint distribution of firm‐specific technological competence and market share jointly determine the level of industry R&D intensity. The joint distribution term, which reflects both the underlying distribution of firms‐specific technological competence and the strength of its link with market share, suggests that the concentration‐R&D relationship differs depending on the strength of the link or simply the appropriability of R&D in terms of market share: A positive relationship is predicted for low‐appropriability industries, where market concentration supplements low R&D appropriability, while a negative or an inverted U‐shaped relationship for high‐appropriability industries. An empirical analysis of data, disaggregated at the five‐digit SIC level, on R&D and market concentration of Korean manufacturing industries provides supportive evidence for the predictions.     

A Comparison of New Service versus New Product Development: Configurations of Collaborative Intensity as Predictors of Performance

Collaboration among firms for innovation has received considerable attention. However, little is known about how firm‐to‐firm collaboration is configured in new service development (NSD) versus new product development (NPD). This study takes a multidimensional approach and measures firm‐to‐firm collaboration on different intensity dimensions of (1) processes (mutual communication, joint engagement, sharing responsibilities) and (2) ownership (relationship commitment and mutual trust). By showing that the phenomenon of collaboration is multifaceted, this study is able to knit a more comprehensive and cohesive understanding of the differences between NSD and NPD success as the result of different patterns of collaboration. Specifically, it utilizes survey data collected from 194 alliances to substantiate how NSD and NPD differ on these collaborative dimensions and then explores their impact on NSD versus NPD performance. The findings suggest that collaboration between firms in NSD is configured and works differently than collaboration between firms in NPD. The results further show that there is a stronger, positive relationship of intensity levels of joint engagement among firms involved in product development and performance than when a new service is developed. However, the intensity of mutual trust has a stronger, positive relationship with development performance when a new service is developed than when a new product is developed. Implications are discussed, and suggestions for future research are given.     

R&D Partnerships and Innovation Performance: Can There Be too Much of a Good Thing?

R&D collaboration facilitates the pooling of complementary skills, learning from the partner as well as the sharing of risks and costs. Research therefore stresses the positive relationship between collaborative R&D and innovation performance. Fewer studies address the potential drawbacks of collaborative R&D. Collaborative R&D comes at the cost of coordination and monitoring, requires knowledge disclosure, and involves the risk of opportunistic behavior by the partners. Thus, while for lower collaboration intensities the net gains can be high, costs may start to outweigh benefits if firms perform a higher share of their innovation projects collaboratively. For a sample of 2735 firms located in Germany and active in a broad range of manufacturing and service sectors, this study finds that increasing the share of collaborative R&D projects in total R&D projects is associated with a higher probability of product innovation and with a higher market success of new products. While this confirms previous findings on the gains for innovation performance, the results also show that collaboration has decreasing and even negative returns on product innovation if its intensity increases above a certain threshold. Thus, the relationship between collaboration intensity and innovation follows an inverted‐U shape and, on average, costs start to outweigh benefits if a firm pursues more than about two‐thirds of its R&D projects in collaboration. This result is robust to conditioning market success to the introduction of new products and to accounting for the selection into collaborating. This threshold is, however, contingent on firm characteristics. Smaller and younger as well as resource‐constrained firms benefit from relatively higher collaboration intensities. For firms with higher collaboration complexities in terms of different partners and different stages of the R&D process at which collaboration takes place, returns start to decrease already at lower collaboration intensities.     

TARGETED ADVERTISING: THE ROLE OF SUBSCRIBER CHARACTERISTICS IN MEDIA MARKETS*

This paper seeks to establish the importance of targeted advertising in media markets. Using zip‐code level circulation for U.S. newspapers, I show that newspapers facing more competition have lower circulation prices but higher advertising prices than similar newspapers facing little or no competition. I explain this by showing that newspapers in more competitive markets are better able to segment readers according to their location and demographics. This leads to greater homogeneity in the characteristics of subscribers and raises advertisers' willingness to pay for such readers. The results imply a substantial benefit to advertisers and media firms from targeted advertising.     

Technological Diversification, Coherence, and Performance of Firms

Technological diversification at the firm level (i.e., the expansion of a firm's technology base into a wide range of technology fields) is found to be a prevailing phenomenon in all three major industrialized regions,—the United States, Europe, and Japan—prompting the term multitechnology corporation. Whereas previous studies have provided insights into the composition of technology portfolios of multitechnology firms, little is known about the relationship between technological diversification and firms' technological performance. Against a backdrop of the technology and innovation management literature, the present article investigates the relationship between technological diversification and technological performance, taking into account the moderating role of technological coherence in firms' technology portfolios. Hereby, technological coherence is defined as the degree to which technologies in a technology portfolio are technologically related. To measure the technological coherence of portfolios, a measure of technological relatedness of technology fields is constructed based on patent citation patterns found in 450,000 European Patent Office (EPO) patent grants. Two hypotheses are presented here: (1) Technological diversification has an inverted U‐shaped relationship with technological performance; and (2) technological coherence moderates the relationship between technological diversification and technological performance positively. These hypotheses are tested empirically using a panel data set (1995–2003) on patent portfolios pertaining to 184 U.S., European, and Japanese firms. The firms selected are the largest research and development (R&D) actors in five industries: pharmaceuticals and biotechnology; chemicals; engineering and general machinery; information technology (IT) hardware (i.e., computers and communication equipment); and electronics and electrical machinery. Empirical results, obtained by fixed‐effects negative binomial regressions, support both hypotheses in the present article. Technological diversification has an inverted U‐shaped relationship with technological performance. Technological diversification offers opportunities for cross‐fertilization and technology fusion, but high levels of diversification may yield few marginal benefits as firms risk lacking sufficient levels of scale to benefit from wide‐ranging technological diversification, and firms may encounter high levels of coordination and integration costs. Further, the results show that the net benefits of technological diversification are higher in technologically coherent technology portfolios. If firms build up a technologically coherent diversified portfolio, the presence of sufficient levels of scale is ensured and coordination costs are limited. At the same time, technologically coherent diversification puts firms in a better position to benefit form cross‐fertilization between technologies. The present article clearly identifies the important role of technological coherence in technology diversification strategies of firms.     

Mapping the antecedents of telework diffusion: firm‐level evidence from Italy

Previous literature has studied telework practices predominantly from the employees' perspective rather than exploring its use at the firm level. With the objective of contributing to reducing this research gap, the relationship between firms' adoption of telework and the firms' technological, organisational and environmental contexts is explored. Data were obtained from a survey conducted between 2005 and 2009 on a sample of 1,134 Italian firms in the Piedmont region. The results show an overall increase in the diffusion of telework primarily attributable to a rise in the adoption of ‘mobile’ work rather than home‐based forms of telework. The results also show that firms that had previously adopted information systems supporting core business processes and knowledge management were more inclined to adopt telework. Telework arrangements were more widely diffused among firms facing a growing and geographically dispersed market demand, and also in the contexts of higher levels of human capital and lower capital intensity.     

Value creation and value capture with frictions

We use a formal value‐based model to study how frictions—incomplete linkages in the industry value chain that keep some parties from meeting and transacting—affect value creation and value capture. Frictions arise from search and switching costs and moderate the intensity of industry rivalry and the efficiency of the market. We find that firms with a competitive advantage prefer industries with less, but not zero, frictions. We show that rivalry interacts nontrivially with other competitive forces to affect industry attractiveness. Firm heterogeneity emerges naturally when we introduce resource development. Heterogeneity falls with frictions, but the sustainability of competitive advantage increases. Overall, we show that introducing frictions makes value‐based models very effective at integrating analyses at the industry, firm, and resource levels. Copyright © 2011 John Wiley & Sons, Ltd.     

Strategic planning as a complex and enabling managerial tool

Research summary : The role of the strategic planning process in the ongoing generation of innovative knowledge is vital to the survival and growth of a firm, especially when technologies and market conditions are rapidly changing. We analyze data from a survey of firms in high‐technology industries to determine whether it is possible to break the commonly experienced trade‐off between strategic planning's positive influence on firm profitability and its negative influence on firm innovation. We draw on Adler and Borys's (1996) conceptualization of bureaucratic process types to identify several firm characteristics that have the potential to affect whether employees perceive strategic planning as enabling to their creative endeavors. We find that contingent effects between strategic planning and the identified firm characteristics exist that can break the trade‐off. Managerial summary : A tension exits in the literature about whether strategic planning hurts or helps innovative activity. Our analysis of data from 227 business units in high‐technology industries indicates that strategic planning is a complex process that can be perceived by employees as enabling or coercive. Our results confirm that strategic planning negatively affects innovative activity but positively affects profitability for average firms. We find, however, controllable firm characteristics—risk‐taking and knowledge‐based reward systems—affect the trade‐off. Given the higher levels of risk‐taking and knowledge‐based reward systems, firms can use strategic planning to achieve both high returns on investment and a high level of innovative activity. Copyright © 2015 John Wiley & Sons, Ltd.     

The dark side of institutional intermediaries: Junior stock exchanges and entrepreneurship

Research Summary : Our study shows how institutional intermediaries established to foster the creation of new firms might hinder new firm growth instead. We show that intermediaries can reduce new firm growth rates due to institutional conflict. To analyze this idea, we examine the setting of junior stock exchanges, which are commonly formed to facilitate entrepreneurial growth. The introduction of these exchanges focused investment into new technology firms, reduced investment in other sectors, and led to diminishing new firm growth. Our findings demonstrate how institutional conflict causes unintended effects and reveals the complexity of influencing entrepreneurship with institutional intermediaries. Managerial Summary : Investors and entrepreneurs face uncertainty when deciding what firms to start and fund. We show that an intermediation effort to make entry easier for entrepreneurs increases the uncertainty that entrepreneurs and investors face. For investors, the enthusiasm for technology firms engendered by the new exchange can motivate investment in marginal firms to maintain as desired deal flow. However, lower firm growth and less liquidity in the future is likely. For entrepreneurs, our results indicate that it is more challenging to manage technology firm growth as well as there is potential opportunity to investigate other industries. Finally, for policy‐makers and supporters of the new exchanges, our results imply that investment flows are altered as intended, but unless listing standards remain high, the virtuous cycle of investment upon which a healthy entrepreneurial climate rests may be disrupted, muting the intended effects of the new exchange.