Modes of innovation,resources and their influence on product innovation: Empirical evidence from R&D active firms in Norway

Evolutionary theory of the firm argues that firms follow different approaches to innovation with implications for their performance. Consistent with evolutionary theory, this paper develops a taxonomy of innovation modes which capture the variation in firms' approaches to product innovation. The taxonomy is based on the open/closed innovation and exploration/exploitation literatures and identifies the following modes: “Open exploration”, “closed exploration” “open exploitation”, and “closed exploitation”. The paper theorizes that the identified innovation modes influence product innovation through their effect on the firms' technological and market resources. Using survey data from over 1000 R&D active firms in Norway analyzed with structural equation modelling it is shown how four modes of innovation are related to actual product innovation.     

Exploring early purchasing involvement in discontinuous innovation: A dynamic capability perspective

This paper aims to address the gap concerning our knowledge about early purchasing's involvement (EPI) in new product development (NPD) projects in contexts characterized by discontinuous innovation. We adopt a dynamic capability perspective to explore how existing sourcing and supplier relationship management capabilities are adapted when purchasing agents become involved in discontinuous innovations projects. We use an embedded case-study approach to study four NPD projects in a heating, ventilation, and air conditioning (HVAC) company. The case studies are based on interviews with managers and staff from the research and development, purchasing, and marketing departments, as well as suppliers involved in the projects. Our empirical findings capture emerging purchasing practices including a “reversed” sourcing process, purchasing-marketing interaction, and the coordination of “a learning atmosphere” between the R&D department and suppliers through proactive innovation meetings and creativity workshops. We derive propositions to conduct further research into the role of the purchasing department in times of discontinuous innovation. We also provide a framework of sourcing and supplier-relationship practices that firms can use when embarking on discontinuous innovation.     

Why adopt now? Multiple case studies and survey studies comparing small,medium and large firms

While a number of factors have been highlighted in the innovation adoption literature, little is known about whether different factors are related to innovation adoption in differently sized firms. We used preliminary case studies of small, medium and large firms to ground our hypotheses, which were then tested using a survey of 94 firms. We found that external stakeholder pressure and non-financial readiness were related to innovation adoption in SMEs; but that for large firms, adoption was related to the opportunity to innovate. It may be that the difficulties of adopting innovations, including both the financial cost and the effort involved, are too great for SMEs to overcome unless there is either a compelling need (external pressure) or enough in-house capability (non-financial readiness). This suggests that SMEs are more likely to have innovation “pushed” onto them while large firms are more likely to “pull” innovations when they have the opportunity.     

Business Models for Frugal Innovation in Emerging Markets: The Case of the Medical Device and Laboratory Equipment Industry

This study investigates business models for frugal innovation (i.e. a specific form of resource-constrained innovation) in the medical device and laboratory equipment industry in the context of emerging markets. Based on original data from five case studies, we investigate how firms can set up value creation and value capturing mechanisms to reach new customer segments in remote rural areas with unprecedented value propositions. With this research, we contribute to the literature on frugal innovation and business models in emerging markets. It is among the first empirical studies to apply a fine-grained perspective on resource-constrained innovation in emerging markets. In doing so, we focus on its most disruptive form, which is when these innovations entail entirely new applications. We advance and detail the value proposition for frugal innovation in these industries and argue that frugal innovation create new markets. Further, we show how firms set up their value creation and value capturing mechanisms to achieve the value proposition and identify two distinct Research & Development (R&D) strategies for frugal innovation.     

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.     

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.     

Listen to the market: Do its complexity and signals make companies more innovative?

This paper analyzes four modes of innovation that differ in their scope of newness (innovation generation and adoption) and in their degree of change (radical and incremental). Building a theoretical model based on the market orientation (MO) and contingency theory literature and using a sample of innovative firms, we find that MO positively influences the numbers of incremental generation and adoption of innovations. We also find that environmental complexity moderates the relationship between MO and radical and incremental innovation generation and the number of incremental innovation adoption. That is, we have found that highly complex environments enhance the introduction of radical and incremental internally generated innovations and harm the adoption of incremental innovation for market-oriented firms. These findings add to the innovation and MO literatures. Our results also have important implications for both the commercial activities and R&D policies of firms.     

Inter‐firm R&D collaborations and green innovation value: The role of family firms' involvement and the moderating effects of proximity dimensions

The present paper investigates the relationship between the involvement of family firms in R&D collaborations aimed at developing green solutions and the value of resulting innovations. To dig into this relationship, the moderating effects of two proximity dimensions (i.e., geographical distance and technological relatedness) are also assessed. Analyses are based on a sample of 156 joint patents classified into the “Alternative energy production” field, as defined by the International Patent Classification Green Inventory and successfully filed at the United States Patent and Trademark Office in the period 1997–2010 by publicly listed companies. According to our conjectures, results reveal a positive relationship between the involvement of family firms and green innovation value. Moreover, our findings show that this relationship is hindered when partners are geographically distant or technologically proximate. Eventually, we contribute to the literature on green innovation by unveiling under which conditions inter‐firm R&D collaborations lead to more valuable innovations.     

Two faces of corporate lobbying: Evidence from the pharmaceutical industry

In this study, we examine how political connections increase firms’ innovation performance. By examining firm-level lobbying activities, we find that political connections lead to a greater number of medical breakthroughs among pharmaceutical firms in our sample. We then examine the underlying ways that political connections enhance innovation among medical firms. Using hand-collected data on government subsidies, we find that politically connected firms have a higher chance of receiving subsidies from federal, state, or local government agencies. These government subsidies enhance medical innovation by insulating managers from short-term threats and mitigate their career concerns by creating a “failure tolerant” environment. Overall, we show that connections between firms and politicians come with increased innovation outcomes.     

Reprint of "Performance evaluation of China's high-tech innovation process :Analysis based on the innovation value chain"

The Chinese high-tech industry has developed greatly since the beginning of China's “National High-tech R&D (863) Program” and “China Torch Program”. This paper introduces a conceptual model extended from the innovation value chain model to simultaneously estimate the R&D and commercialization efficiencies for the high-tech industries of 29 provincial-level regions in China. To match reality, a network DEA incorporating both shared inputs and additional intermediate inputs is constructed to open the “black box” view of decision making units used in single-stage DEA. This study is the first attempt to link the R&D and commercialization with a solid theoretical foundation and feasible mathematical methods. The empirical findings show that most of the 29 regions have low efficiency in the commercialization sub-process compared to the R&D sub-process, although there are regional differences in China's high-tech industry. Pearson correlation shows that the R&D sub-process is not closely correlated to the commercialization sub-process in terms of efficiency. Our analysis can provide information for the formulation of policies to achieve high innovation efficiency.     

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.     

Performance evaluation of China's high-tech innovation process: Analysis based on the innovation value chain

The Chinese high-tech industry has developed greatly since the beginning of China's “National High-tech R&D (863) Program” and “China Torch Program”. This paper introduces a conceptual model extended from the innovation value chain model to simultaneously estimate the R&D and commercialization efficiencies for the high-tech industries of 29 provincial-level regions in China. To match reality, a network DEA incorporating both shared inputs and additional intermediate inputs is constructed to open the “black box” view of decision making units used in single-stage DEA. This study is the first attempt to link the R&D and commercialization with a solid theoretical foundation and feasible mathematical methods. The empirical findings show that most of the 29 regions have low efficiency in the commercialization sub-process compared to the R&D sub-process, although there are regional differences in China's high-tech industry. Pearson correlation shows that the R&D sub-process is not closely correlated to the commercialization sub-process in terms of efficiency. Our analysis can provide information for the formulation of policies to achieve high innovation efficiency.     

Building absorptive capacity to organise inbound open innovation in traditional industries

The discussion on open innovation suggests that the ability to absorb external knowledge has become a major driver for competition. For R&D intensive large firms, the concept of open innovation in relation to absorptive capacity is relatively well understood. Little attention has; however, been paid to how both small firms and firms, which operate in traditional sectors, engage in open innovation activities. The latter two categories of firms often dispose of no, or at most a relatively low level of, absorptive capacity. Open innovation has two faces. In the case of inbound open innovation, companies screen their environment to search for technology and knowledge and do not exclusively rely on in-house R&D. A key pre-condition is that firms dispose of “absorptive capacity” to internalise external knowledge. SMEs and firms in traditional industries might need assistance in building absorptive capacity. This paper focuses on the role of collective research centres in building absorptive capacity at the inter-organisational level. In order to do so, primary data was collected through interviews with CEOs of these technology intermediaries and their member firms and analysed in combination with secondary data. The technology intermediaries discussed are created to help firms to take advantage of technological developments. The paper demonstrates that the openness of the innovation process forces firms lacking absorptive capacity to search for alternative ways to engage in inbound open innovation. The paper highlights the multiple activities of which absorptive capacity in intermediaries is made up; defines the concept of absorptive capacity as a pre-condition to open innovation; and demonstrates how firms lacking absorptive capacity collectively cope with distributed knowledge and innovation.     

Agglomeration in an innovative and differentiated industry with heterogeneous knowledge spillovers

This paper introduces an agent-based simulation model to study the technological development, the economic performance of firms and the evolution of agglomerations in a differentiated industry. The analysis is based on the interaction and behavior of firms, which might share knowledge but at the same time are competitors on the goods markets. Firms do not only compete with quantities they can also introduce process and product innovations. The level of knowledge of a firm describes the capabilities to perform innovations. Knowledge can be accumulated by investing in R&D and by knowledge spillover, which depend on geographical and technological proximity. Simulation runs show that there is an incentive to agglomerate in young industries and that geographical proximity enhances innovation, especially the number of product innovations.      

Incentives to innovate in response to competition: The role of agency costs

This paper investigates the role of managerial ownership and incentive payment as potential drivers of innovation decisions by firms and as shifters of the competition-innovation link in the Russian manufacturing industry, where poorly protected property rights and a path-dependent market structure (typical for many transition economies) lead to a variety of outcomes. We use recent survey-based microdata for nearly 2000 non-listed companies in Russia. Our results suggest that managerial ownership, which initially evolved as a means of protecting against and resisting dysfunctional institutions, may stimulate decisions to undertake R&D and risky product innovations. Further, managerial ownership and competition are complementary motivations for R&D and innovation. Incentive payment to hired managers is a positive commitment instrument but has no impact on the competition-innovation link.     

Self-organization of R&D search in complex technology spaces

We extend an earlier model of innovation dynamics based on percolation by adding endogenous R&D search by economically motivated firms. The {0, 1} seeding of the technology lattice is now replaced by draws from a lognormal distribution for technology ‘difficulty’. Firms are rewarded for successful innovations by increases in their R&D budget. We compare two regimes. In the first, firms are fixed in a region of technology space. In the second, they can change their location by myopically comparing progress in their local neighborhoods and probabilistically moving to the region with the highest recent progress. We call this the moving or self-organizational regime (SO). The SO regime always outperforms the fixed one, but its performance is a complex function of the ‘rationality’ of firm search (in terms of search radius and speed of movement). The clustering of firms in the SO regime grows rapidly and then fluctuates in a complex way around a high value that increases with the search radius. We also investigate the size distributions of the innovations generated in each regime. In the fixed one, the distribution is approximately lognormal and certainly not fat tailed. In the SO regime, the distributions are radically different. They are much more highly right skewed and show scaling over at least 2 decades with a slope around one, for a wide range of parameter settings. Thus we argue that firm self-organization leads to self-organized criticality. The online version of the original article can be found under doi:.     

Are venture capitalist-backed IPOs more innovative? Evidence from an emerging market

This study examines whether venture capital (VC)-backed IPOs are more innovative than otherwise equivalent non-VC-backed IPOs. Using manually collected R&D records from annual reports and patent data from the Chinese State Intellectual Property Office (CSIPO) from 2007 to 2012, we find that VC-backed IPOs have higher R&D expenditures and more patents granted in the three years after IPOs. More specifically, they have more invention, application, and design patents in post-IPO. We use a two-stage instrumental variable, propensity score matching, difference-in-differences approach to mitigate selection biases and find our results to be consistent with our hypothesis. We conclude that VCs can positively influence IPO firms to increase R&D expenditures and innovative output levels in China. In addition, we document that the government ownership adversely affects innovation of VC-backed firms. Policy implications are discussed.     

A new intellectual property metric for standardization activities

This study formulates a method to measure the effects of standardization to assist in evaluating innovation and R&D policies. Its main purpose is to examine standardization activities within R&D organizations. This allows for a more appropriate policy evaluation framework than examining such activities within standard development organizations does. The study also redefines the conventional notion of intellectual property (IP) normatively and introduces the term “integrated IP” to reflect our new concept of joining IP and standardization activities. Our new concept captures the “fuzzy” impact of standardization on R&D to improve innovation management. The study presents a vector equation expressing the new IP definition and uses it to model revenues arising from a standard-essential patent for strategic IP management with standardization. The model indicates the importance of patents commercially required for product differentiation for the purpose of innovation with standards.     

How does R&D intensity influence firm explorativeness? Evidence of R&D active firms in four advanced countries

Despite R&D is seen as a starting point of innovation, firms usually confront a trade-off in allocating limited R&D resources to either exploratory or exploitative activities. Relative to the latter, the former produces a more distinctive variation from the prior knowledge base and helps the firm tap into new opportunity. Given the increasing importance of firm explorativeness in the fast changing environments, the influence of R&D investment on firm explorativeness is not yet conclusive in the literature, not to mention whether the increased R&D investment induces firms to become more explorative. This study aims to generate insight into how and when firm explorativeness is determined by their R&D intensity. As a notion of the use of knowledge new to the organization, firm explorativeness is treated as the degree of using knowledge new to the organization in the pursuit of innovation. Based on a panel data of 1267 firm-year observations in four advanced countries during 1999–2003, the results reveal that a higher level of R&D intensity makes firms more exploitative and less explorative. Nevertheless, the negative relationship between R&D intensity and firm explorativeness is found to be alleviated in the presence of technological opportunity or financial slack. The configurational model sheds further light on the combined and relative weight of two moderators.