Is R&D risky?

Research summary : Many studies use research and development (R&D) intensity or R&D spending as a proxy for risk taking, but we have little evidence that either associates positively with firm risk. We analyze the relations between R&D intensity (R&D spending to sales) and R&D spending on the one hand and 11 different indicators of firm risk on the other, using data from 1,907 to 3,908 firms in various industries over 13 years. The analysis finds a general lack of consistent positive association between R&D and firm risk, making the use of R&D as an indicator of risk taking questionable. Furthermore, R&D intensity and spending do not correlate positively, suggesting they measure different constructs. We discuss potential reasons for these nonsignificant results. Our study demonstrates that researchers should avoid casual use of R&D as a proxy for risk taking without explicitly providing a clear definition and measurement model for risk. Managerial summary : Risk is a key construct in strategic management research. Many studies in this area measure risk taking by research and development (R&D) intensity (the ratio of R&D spending to sales) or R&D spending. However, since R&D intensity and spending have also been used to measure various other things such as information processing demands, this raises the question of whether R&D intensity and spending are valid indicators of firm risk. We examine this issue by considering the associations of R&D intensity and R&D spending with conventional measures of firm risk. We find a general lack of consistent positive association between R&D and firm risk, making the use of R&D as an indicator of risk taking questionable. Furthermore, R&D intensity and spending do not correlate positively, suggesting they measure different things. Copyright © 2016 John Wiley & Sons, Ltd.     

The national innovation system and foreign R&D: the case of Taiwan

R&D internationalization has increasingly involved countries outside the developed world. In addition, there has been a growing trend for countries in East Asia to seek to attract the R&D facilities of multinationals (MNCs). For such countries, they are faced with a fundamental question as to what kinds of impact MNCs' offshore R&D facilities will have on their own countries, especially in terms of technological innovation and industrial development. Set against the above backdrop, this paper sets out to examine a relatively new aspect of R&D internationalization related to global innovation networks and to open up the blackbox of the spillover effect regarding foreign R&D by examining the interplay of foreign R&D and Taiwan's national innovation system. The empirical part of the paper draws mainly upon intensive case studies of four high-profile foreign R&D facilities in the IT industry. The way foreign R&D interplays with Taiwan's NIS is examined in terms of the market & technology linkages.     

The derivation of R&D return indicators within a real options framework

The purpose of this paper is to rework the building blocks of real option applications and to introduce a basket option framework. We find that the characteristic parameters of the risk neutral density function implied in observed share prices within the real option framework represent a novel category of R&D return indicators. Empirical evidence for a set of 13 US bio-pharmaceutical companies is provided. The novel R&D return indicator can be used to analyse investor's expectations on R&D success of a particular firm. The implications of this indicator on decision making are mainly based on its information content on technological and market risk of the products under development in a particular firm. A proposal for a potential application of the stability index in innovation research is discussed as well. The study thus is at the interface between innovation research and (empirical) finance.     

Services innovation and the transformation of work: the case of UK telecommunications

Current transformations in technologies and industrial structure of UK telecommunications have important implications for skills and work organisation. This is examined in different divisions of a large UK telecommunications firm: call centres, customer service centres, engineering sectors and the R&D department. The effect of these transformations on the development of firm competences is discussed.     

Convergence and unbundling of corporate R&D in telecommunications: is software taking the helm?

This paper presents a view of the changing structure of corporate R&D in telecommunications – one that is close to Adam Smith’s insightful and enduring idea of division of labor – that perhaps we are witnessing the beginnings of vertical disintegration and unbundling of important segments of the industry’s R&D activity. The paper maintains that the emergence of an independent software industry – aided by the convergence of computer, telecommunications and imaging technologies – and the rapid growth of technology-based alliances are at the heart of this trend. So extensive is the vertical disintegration of R&D that, in 1997, the top 10 independent software vendors in the US spent more on R&D than the combined spending by AT&T and Lucent whose sales were well over three times as large. It appears that the source of future innovation in the telecommunications industry lies not in its services segment but rather in telecommunications and Internet equipment firms and independent software firms. Increasingly, the fortunes of large service providers like AT&T will depend less on innovation and more on their ability to configure and market complete one-stop-shopping solutions to customers by combining internal resources with outsourced technologies, products and services.     

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

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

University – industry collaboration in R&D: the role of labor market rigidity

We investigate how R&D university – industry collaboration (R&D UIC) is influenced by labor market rigidity. While it is well-established that an educated and skilled workforce will facilitate R&D UIC, another aspect of these alliances has been under-researched: the role of labor market rigidity, in particular the difficulties employers face in hiring and firing workers. We hypothesize that the size of the R&D labor pool in a country will encourage R&D UIC, and that the ease with which employers are legally allowed to hire and fire will directly and indirectly influence R&D UIC. Integrating data from various sources, we test our model on a sample of 73 countries for which information on the size of the R&D labor pool and labor market regulations are available. We also conduct a robustness test using a different proxy for R&D labor pool on a larger sample of 109 countries. Results confirm the strong link between a country's R&D labor pool and R&D UIC, as well as direct negative impacts of hiring and firing rigidity and an indirect negative impact of hiring rigidity. The findings have implications for managers, policy makers, and researchers of R&D collaboration between universities and industry.     

Schumpeterian economics: some observations on the relevance of his theoretical contributions to the management of industrial research and development

This paper investigates the relevance of the theoretical writings of Schumpeter to the management of research and development (R&D) in small and large industrial firms. Schumpeter's emphasis in his early work on three main aspects of industrial R&D; namely the importance of entrepreneurship, industrial innovation and resultant creative destruction, were major new insights that rejected the long‐standing view that equilibrium was the best state for any industrial economy. This paper, with the aid of relevant literature from both Schumpeter and others, seeks to relate his theoretical approach (that changed over time to favour large firm R&D) to the implication for industrial R&D, and in particular, the relationship between R&D in small and large firms. The paper concludes that if Schumpeter had lived to see the current industrial landscape, he might have returned to his early belief that entrepreneurial new small firms remain key harbingers of technological progress.     

Research and Development in Algeria

Since 1971, that is nine years after gaining its independence, Algeria has among some Third World countries formulated an ambitious Science and Technology (S&T) Policy. In the last few years, the relevant administrative structure has been completed by installing a centralised body at the highest level. Policy itself has changed very little, and remained in some aspects well behind developments in the structure. In this paper, the author intends to consider the evolution of both structure and policy of Algeria's research and development (R&D); and the extent of their coherence or harmony and their linkages with industry.
Even though structure and policy are the key factors affecting R&D effectiveness of a country, no significant success could be achieved without strengthening the relevant network allowing for the technical competence to be used effectively. Hence, the main theme of the paper concentrates on Algeria's need to review its R&D system to allow both structure and policy to be effective or cause relevant activities to be integrated within the production system, build better technological capabilities, and work for a more efficient industrial development.     

Inventive efficiency: How the U.S. compares with Japan

This study argues that inventive (R&D) efficiency may be an important factor in the competition for global market shares and goods and services. The authors compare R&D efficiency for 14 industrial groups in the United States and Japan using multiple indices of inventive efficiency. Findings show interesting differences in inventive efficiency across industrial groups and between the United States and Japan. United States food, textile, chemical, rubber, metals, fabricated metals, and other miscellaneous manufacturing industries appear to be relatively more efficient in inventive efficiency than their Japanese counterparts. In contrast, Japanese paper, petroleum, machinery, and scientific equipment industries display greater inventive efficiency than their United States counterparts. The electrical equipment, transportation, and stone industries in the two countries appear to be equally efficient. The implications of these differences are discussed.     

Three decades of research on corporate governance and R&D investments: a systematic review and research agenda

This paper reviews and systematizes the empirical research on the nexus between corporate governance (CG) and investments in research and development (R&D) published in leading business, management, economics and finance journals over the past 30 years. We find that CG is key in shaping R&D investments. Moreover, the effects of both firm- and country-level CG are important for both internal and external R&D investments. Drawing on our review, we welcome future studies to examine the effect of the interplay between various CG mechanisms and different types of R&D investments, and possibly identify mediating variables besides the moderating ones. Moreover, we highlight the need for future interdisciplinary studies, as well as investigations of private companies and across developing countries. Whenever causal interpretations are attempted, both sample selection and endogeneity problems should be addressed, along with testing the CG-R&D investment nexus for nonlinear dynamics. The implications of the study for both theory and practice are also discussed.     

Career paths, technological obsolescence and skill formation: R&D staff in Britain and Japan

This paper examines how scientists and engineers working in industrial R&D cope with the pressures of business and technological change and develop their careers. The data is drawn from a survey of nearly 1000 R&D staff working in large industrial corporations in Britain and Japan. Cross national comparisons are used to explore similarities and differences in coping strategies and in the human resource management challenges for companies. Particular attention is given to the problems of potential mismatch between RBD staff career orientations and available career opportunities.     

Radial and non-radial decompositions of Luenberger productivity indicator with an illustrative application

Viewing slacks as one possible source of inefficiency, and that inputs have differential importance in the production process, this paper develops, based on the directional Russell measure of inefficiency, the non-radial Luenberger indicator. This indicator is then shown as the sum of the individual input-specific Luenberger indicators. The Luenberger indicator and its various input-specific indicators are also then shown as the composite measure of efficiency change and technical change. This decomposition enables the researcher to empirically examine the contributions of each factor input towards the productivity change and its components—efficiency change and technical change. Our proposed decomposition scheme is then empirically illustrated to analyze the eco-productivity performance behavior of the 22 OECD countries during the period 1995-2004. Our results indicate that first, the productivity change estimates yielded from the non-radial Luenberger indicator are different from those yielded from its radial counterpart, when slacks are present; second, most of these countries are found experiencing productivity growth due to technical progress alone; and finally, as regards the order of input-specific contributions towards productivity growth, capital contributes the most, followed by savings in emissions and labor, respectively.     

R&D projects in the science sector

The purpose of this research was to determine and analyse diversity in various features of R&D projects implemented in the science sector in Poland, financed mostly from public funds. More exactly, the following aspects of R&D projects implemented in the science sector in Poland were examined: the relation between the actually achieved and the initially set goal, the project management methodologies and project time management methods used, features of the project team, the relation between the plan and the actual project realisation and management difficulties encountered in practice. These aspects and their diversity were examined in the context of the whole country, of various fields of science and various research units implementing pure research (the ‘R’ area) or applied research and experimental development (the ‘D’ area). The research was conducted by means of survey methodology covering a sample of participants of R&D projects in the science sector in Poland. The results were analysed by means of statistical methods (which constitutes a clear novelty with respect to the existing literature on R&D projects) and statistically significant phenomena gave rise to several important conclusions on how R&D projects implemented in the science sector are managed and what their realisation looks like in various fields of science and various institutions, in a relatively new EU members state and a former communist country like Poland. These conclusions may be the basis for important hypotheses (which require further research) on the project management quality in the science sector in Poland and in similar countries, which is closely linked to the problem of public money allocation, its efficient spending and control. Also, practical suggestions on improvement measures in the science sector with respect to R&D projects, limited not only to countries like Poland, but of a more general nature, are formulated.     

The Roles of Marketing and Industrial Design in Discontinuous New Product Development*

Radical or “discontinuous” products based on new technological breakthroughs are playing an ever‐increasing role in the success of firms. However, little research has been conducted that investigates the roles of marketing and industrial design (ID) in the development of these types of products. Further, past research has tended to overlook the role that industrial design, and the impact of the marketing‐industrial design interaction, can have on the development of discontinuous new products. Frequently, the term design is used broadly or is equated with engineering; thus, while the marketing–research and development (R&D) interaction is studied, the marketing–ID as well as the industrial design–R&D relationships are not considered. This article examines the roles of marketing and industrial design in the product development process for discontinuous innovations. Specifically, questions concerning how and the degree to which marketing and industrial design are integrated into the development process are investigated. The investigation employs multiple methods, or triangulation, in order to secure an in‐depth understanding of the roles of these disciplines. In the course of examining these questions, key factors influencing industrial design and marketing involvement are identified and preliminary models are examined. The research, which was conducted in two phases, employed a mixed‐method, multiple sample design. The methods used included a survey, field observation study, and depth‐interviewing. Data were collected from three different samples: R&D managers, project team members (including personnel from various disciplines—marketing, R&D, industrial design, engineering, etc.), and industrial design managers. The use of the different data sources and sampling of various groups of managers was employed in order to provide a rich context for investigating the research questions of interest. In addition, a preliminary analysis of factors (e.g., degree of product discontinuity, product innovation objectives, process discontinuity, process formality) identified in the first phase was conducted, and these relationships were explored further in the second phase of the research. Findings across the two phases of this research suggest that the development of discontinuous new products involves a process that is different from more conventional new product development—particularly as it concerns the roles of marketing and industrial design. The high degree of discontinuity inherent in such projects, along with the strong R&D orientation often surrounding them, results in delayed involvement of marketing and ID, as well as altering their roles in the new product development (NPD) process. Factors such as the degree of product discontinuity (DPD), process discontinuity (PCD), and process formality (PF) seemed to exert a differential influence on the involvement of marketing and ID. Although their roles and involvement are altered in discontinuous new product development, this research suggests that marketing and ID roles in this context involve increased challenges with respect to validation of key assumptions and product application directions. Additionally, managers operating in this development context need to explicitly consider the influence of factors such as discontinuity level in undertaking NPD projects with respect to how it affects the execution of industrial design and marketing activities.     

Assessing the WTO agreements on China's telecommunications regulatory reform and industrial liberalization

By drawing on new institutional economics, this paper contends that the “rules-of-law” specified by the World Trade Organization (WTO), as an exogenous institution for the member states, will theoretically influence its members’ domestic telecommunications regulatory institutions, but that the actual effects will be different and will depend on the institutional endowments of host countries and their institutional stances. Empirically, this paper examines the impact of China's prospective membership status in the WTO on its telecommunications regulatory reform and industrial liberalization and explores the institutional barriers preventing China from fully implementing the WTO Agreements in this sector.     

Realities of R&D as a business: MBI's experience

The level of effort in a R&D activity on research or development depends upon whether the R&D activity is basic or applied. In general, the R&D at a university is focused more on the research (R of R&D) whereas the emphasis in an industrial R&D is more on the development (D of R&D) and less on research. In the past, this created a gap difficult to bridge between the R&D needs of an industrial sector and the R&D output from university and governmental laboratories. The recent success in R&D as a business has mainly been due to understanding the critical steps needed to take an idea to a marketplace and, thus, the emphasis on R or D has become a moving target depending upon the need. MBI International, a non‐profit R&D organization, was created to bridge the gap between academic and industrial R&D and to validate, develop and demonstrate technologies having commercial potential in the industrial sector. In the process, MBI developed partnerships with universities, governmental agencies, foundations, and industries to resource innovative technologies, funds, physical facilities and market opportunities to make the R&D business a reality. In this paper, we present MBI's experience in developing and commercializing R&D technologies in several new spin‐off companies, joint ventures, and out‐licensing.     

区域工业企业R&D投入产出绩效的DEA评价及分析

为解释不同区域工业企业RD活动投入规模、结构和绩效之间的关系,找出区域工业企业RD活动的差异和特点,利用数据包络分析方法(DEA)的C2 R模型和BC2模型,构建了由2个投入指标和3个产出指标构成的区域工业企业RD投入产出绩效评价指标体系,运用详实的统计数据对2014年和2010年中国部分省市区工业企业的RD投入产出绩效进行了DEA测度及分析。结果表明,中国区域工业企业RD投入产出绩效的技术效率小于规模效率,各省市区工业企业RD投入产出绩效的技术有效性与规模有效性呈现很强的正相关关系。各省市区要根据自身的经济、技术基础,因地制宜地制定提高其工业企业RD投入产出绩效的有效对策。     

Market share,advertising, R&D,and profitability: An empirical analysis of leading industrial firms in Japan

This paper develops a dynamic model of a leader firm which chooses the time paths of R&D and advertising inputs so as to maximize the present value of expected profits. From this theoretical model simultaneous-equations system for market share, advertising, R&D, and profitability is derived and estimated using the data on the leading industrial firms in Japan. Our results show that, as far as top firms are concerned, market share and demand growth have significant positive effects on profitability, and an increase in the stock of goodwill increases market share as well as profitability.This study was financially supported by the Ministry of Education in Japan. Helpful comments were provided by H. Odagiri. Also I am indebted to an anonymous referee for advice and criticism on various points.     

论中国工业技术的现代化问题

中国工业生产技术的现代化既是提高生产效率和资源配置效率的主要途径，也是工业化的基本前提和主要表现。本文在明确工业技术进步与工业现代化关系的基础上，分析了我国工业技术水平与国外的差距及其原因，提出提高我国工业技术进步水平与创新能力、推进我国工业现代化进程的对策。