Does rivals' innovation matter? A competitive dynamics perspective on firms' product strategy

We build on the awareness-motivation-capability (AMC) framework of competitive dynamics research to examine how a signal of a rival's innovation, in the form of research and development (R&D) intensity, may influence a focal firm's product actions. We argue that a rival's R&D intensity increases a focal firm's awareness of a competitive threat and thus its motivation to react by increasing its product actions. However, this competitive impact is conditional on the focal firm's size and performance relative to the rival, as well as the strategic homogeneity of the two. We use the AMC framework to analyze such moderating effects.     

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.     

A Commentary on “Undergraduate Education: The Implications of Cross-Functional Relationships in Business Marketing–The Skills of High-Performing Managers”

ABSTRACT

This commentary reinforces the importance and need for developing the student's knowledge, abilities, and understanding of what is required to collaborate with the firm's internal and external constituencies, in the context of B2B marketing environment. It is an important goal to be achieved in the B2B marketing course. The new era of business marketing is built around achieving “collaborative advantage” with the new breed of customers who demand relatively more complex product and services arrangements as well as nature of relationships from their vendors. Today's customers also expect intellectual input and consultative selling approaches from group of diverse and independent marketing entities, whom they expect to work together to meet their requirements. The firm's success or failure in the market place may indeed be predicated on their ability to achieve this “collaborative advantage”. The commentary also expands the authors' suggestions in the areas of course pedagogy and design for building the student's know-how and capability for practicing the art-of-collaboration.     

Technology strategy and software new ventures' performance: Exploring the moderating effect of the competitive environment

Technology strategy (TS) is one of the most important aspects of any firm's strategic posture especially in dynamic environments such as the computer software industry. Not only do new ventures face the pressures that accompany all young companies (e.g., shortages of capital), but they also have to keep up with a rapid rate of technological change. Consequently TS, the sum of a firm's choices on how to develop and exploit its technological resources, can profoundly affect a venture's performance and survival.This empirical study examines the relationships between TS and new venture performance (NVP). By focusing on TS variables and analyzing their performance outcomes, the study offers insights into the factors that can influence the success of new ventures in a fast-paced environment. This study also examines key environmental moderators, those external environmental forces, which can significantly impact the strength or direction of the relationship between a firm's TS and NVP.The study examines five TSs that can enhance NPV. The first is radicality, which means developing and introducing new products ahead of competitors. The second is the intensity of product upgrades, which refers to a venture's commitment to introducing more refinements and extensions of its products than its competition. The third is the level of R&D spending, which indicates a venture's strong investment in internal research and development activities. The fourth is the use of external technology sources (e.g., strategic alliances and licenses) to augment a firm's own R&D efforts. The final dimension is the use of     

Attribution Effects of Time Pressure in Retail Supply Chain Relationships: Moving From “What” to “Why”

Retail supply chains must be responsive to consumer demand and flexible in adapting to changing consumer preferences. As a result, suppliers are often expected to deal with time pressure demands from retailers. While previous research demonstrates that time pressure can have longer term relational costs that reduce collaborative behaviors and overall relationship quality, this mixed‐methods study goes further by accounting for attribution effects to explain why the time pressure occurs. Specifically, supplier perceptions for the reason of time pressure being within or beyond a retailer's control, rather than time pressure itself, appear to have a stronger effect on relational outcomes. By investigating time pressure through the lens of attribution theory, this research opens a new inquiry of research that moves away from examination of outcomes themselves (the “what”), to examining “why” the outcome occurred.     

Alliance type,alliance experience and alliance management capability in high-technology ventures

We investigate a high-technology venture's alliance management capability. Thus, we develop a model that links differential demands of alliance type and the benefits of alliance experience to an observable outcome from a firm's alliance management capability. We test our model on a sample of 2226 R&D alliances entered into by 325 global biotechnology firms. We find that alliance type and alliance experience moderate the relationship between a high-technology venture's R&D alliances and its new product development. These results provide empirical evidence for the existence of an alliance management capability and its heterogeneous distribution across firms.     

Multilateral R&D alliances by new ventures

We examine the antecedents and outcomes of new ventures' formation of multilateral R&D alliances. Our results show an inverted U-shaped relationship between market uncertainty and a new venture's likelihood of forming multilateral R&D alliances. Top management team's social capital and ventures' technological capabilities are critical for new ventures to identify and capture alliance opportunities. Moreover, our analysis reveals value creation effects of multilateral R&D alliances for new ventures despite the challenges and difficulties associated. We further show that the value creation effect is a function of the type of exchange relationship (i.e., net- vs. chain-based) in the multilateral R&D alliance and that governance structure moderates this relationship.     

Parent inheritance,founder expertise,and venture strategy: Determinants of new venture knowledge impact

A genealogical theory of new venture creation posits that “parent” firm routines are transferred to “progeny” ventures founded by the former employees of these parents. This study examines how the knowledge available to a venture from its parent firms and individual founders, as well as its initial technological direction, influences its own creation of impactful knowledge. We argue that new knowledge creation involves the recombination of underlying knowledge elements and hypothesize that the degree to which the venture's knowledge domain overlaps with the parents' knowledge has positive, but diminishing effects on the impact of knowledge created by the venture. We also predict that the breadth of founders' personal knowledge has a positive effect, but that the divergence between individual founders' and parent firm's knowledge domains has a negative effect on the creation of impactful knowledge by the venture. We test our predictions using a sample of 219 biotechnology ventures founded over the eleven year period 1990–2000 and tracked through 2010. Our results contribute to the entrepreneurship, knowledge creation, and genealogical literatures.     

Brazil Post‐Lula: Challenges and Opportunities Facing the Brazilian Business Environment

The Brazilian economy indicates great potential for future economic growth. An increasing and affluent middle class, expanding exports, and foreign reserves are testimonies of Brazil's recent accomplishments. The country, however, still faces a number of challenges that may compromise its sustainable long‐term economic goals and objectives. This article focuses on the Luiz Inacio “Lula” da Silva government's economic performance. The article's main findings show increasing bottlenecks being created as a result of the Lula government's eight years of low economic growth rates, which have penalized the country's competitiveness. The newly elected president, Dilma Rousseff, will inherit a substantial investment deficit in the areas of infrastructure, education, health care, research and development (R&D), and innovation, as well as Brazil's worst public debt/gross domestic product (GDP) ratio in the past 100 years. These conditions will prevent Brazil from growing and developing at faster rates. This article also elaborates on Dilma Rousseff's most recent statements and discusses likely future paths for the Brazilian economy. © 2012 Wiley Periodicals, Inc.     

Export Market Participation,Investments in R&D and Worker Training,and the Evolution of Firm Productivity

This paper uses micro panel data for firms in the Taiwanese electronics industry in 1986, 1991 and 1996 to investigate a firm's decision to invest in two sources of knowledge – participation in the export market and investments in R&D and/or worker training – and assess their effect on the firm's future productivity. The firm's decisions to export and invest in R&D and/or worker training are modelled with a bivariate probit model that recognises the interdependence of the decisions. The effect of these investments on the firm's future productivity trajectory is then modelled while controlling for the selection bias introduced by endo‐genous firm exit. The findings indicate a significant interaction effect between exporting and R&D investments and future productivity, after controlling for size, age and current productivity. Firms that undertake both investment activities have significantly higher future productivity than firms that do one or neither. In addition, these firms are more likely to continue investing in these activities leading to further productivity gains. These findings are consistent with the hypothesis that export experience is an important source of productivity growth for Taiwanese firms and that firm investments in R&D and worker training facilitate their ability to benefit from their exposure to the export market.     

Japanese R&D management in the 1990s: An overture to the industrial revolution of the twenty-first century

In the past, the Japanese R&D effort has focused primarily on improving products. Today's Japanese industrial leaders believe that the twenty-first century will bring a new “industrial revolution” that will change the focus of R&D more toward creating new world-class products rather than merely improving old ones.     

What drives new product innovation in China? An integrative strategy tripod approach

This study explores the determinants that drive new product innovation by employing the integrative strategy tripod approach. We analyze data from the World Bank Enterprise Survey on 1,692 manufacturing firms in China using a novel methodological approach (a fuzzy set qualitative comparative analysis) that focuses on multiple conjectural causations. Interestingly, our findings suggest that R&D investment alone is not a sufficient condition to facilitate a firm's product innovation, but stable government policy is a necessary condition for R&D investment. Even with a low level of R&D investments, it can achieve innovation if those investments are made in conjunction with high technology information system investments for supporting customer relationships. Finally, we find that when firms perceive informal competition to be a significant obstacle to their operations and R&D investment, they tend to engage in corrupt actions to create innovation. Implications for research and practice are provided.     

Building a giant— Bank of America

A long‐term, durable, and well‐executed corporate strategy is essential for any banking institution working to build a world‐class financial firm. Over the course of several decades, Bank of America has set the gold standard with respect to timing, execution, and integration of newly acquired businesses. Bank of America's “Four Cornerstones” corporate strategy is the foundation of the firm's success story. This case study explores the “Four Cornerstones” corporate strategy and investigates whether or not Bank of America's recent bold acquisition of Merrill Lynch demonstrates the firm's hallmark corporate strategy and tactical execution. © 2009 Wiley Periodicals, Inc.     

Learning to export from neighbors

This paper studies how learning from neighboring firms affects new exporters' performance. We develop a statistical decision model in which a firm updates its prior belief about demand in a foreign market based on several factors, including the number of neighbors currently selling there, the level and heterogeneity of their export sales, and the firm's own prior knowledge about the market. A positive signal about demand inferred from neighbors' export performance raises the firm's probability of entry and initial sales in the market but, conditional on survival, lowers its post-entry growth. These learning effects are stronger when there are more neighbors to learn from or when the firm is less familiar with the market. We find supporting evidence for the main predictions of the model from transaction-level data for all Chinese exporters over the 2000-2006 period. Our findings are robust to controlling for firms' supply shocks, countries' demand shocks, and city-country fixed effects.     

“Autonomous,yet Connected”: An esthetic principle explaining our appreciation of product designs

Esthetic principles describe the levels or combination of design dimensions that are esthetically appreciated. Current principles focus on dimensions connected to product design itself (e.g., unity and variety) or dimensions that refer to a product design's relationship to other product designs (e.g., typicality and novelty). However, product design also has a social significance—they help consumers shape their identity—and this social dimension has hitherto been overlooked in research on esthetic appreciation. In this paper, we propose and investigate the social esthetic principle “Autonomous, yet Connected.” In four studies, we show that a product's design leads to the highest esthetic appreciation if it strikes an optimal balance between nurturing the two seemingly opposite needs for connectedness and autonomy. Further, we show how conditions of safety and risk moderate the effects of the principle, which suggests our principle may have evolutionary grounding.     

How incumbent firms foster consumer expectations, delay launch but still win the markets for next generation products

Consumers learn quality of many durable products through word-of-mouth information while firms launch new and improved products frequently in these markets. This paper examines firm incentives to invest in R&D to compete for patents in makets where consumers rely on word-of-mouth information and have expectations about the new products before launch. When its loss due to a possible entry is above a threshold, an incumbent has more incentives than a potential entrant to invest in R&D for patents. Moreover, if the current product is more profitable, its true quality is above consumer priors and the quality of the new product is below a threshold, it is optimal for the incumbent to launch the new product after a time lag. The later the optimal time of launch, the greater is the incumbent’s potential loss if entry occurs and greater its incentives is to invest in R&D versus that of the entrants. While potential entrants are generally thought to have more incentives to invest in a drastic innovation which results in a race to launch the new products, we show that the more drastic the innovation, the later the optimal time of launch and greater are the incumbent’s incentives to invest in R&D when the value added of the new product can be conveyed to all the consumers. Only when consumers are uncertain about the value added of the new product, the incumbent’s incentives are lower. We also demonstrate that by promoting consumer expectations about the new product before launch, an incumbent has more time to launch and higher probability of dominating its market.     

R&D investments in family and founder firms: An agency perspective

Investments in R&D can influence a firm's ability to develop new products and to create and adopt innovative technologies that may enhance productivity. However, due to uncertainty regarding the outcome, investments in R&D may lead to an agency problem between the owners and the managers of a firm. Family and founder firms are often considered to be different in their agency situation than other firms, which may have an influence on R&D investments. This paper analyzes R&D spending in family and founder firms versus other firms. The results show that while family ownership decreases the level of R&D intensity, ownership by lone founders has a positive effect not only on R&D intensity but also on the level of R&D productivity. The paper contributes to the understanding of the role of entrepreneurship in making high risk/high return R&D decisions.     

The impact of firmspecific capabilities on the amount of capital raised in an initial public offering: Evidence from the biotechnology industry

Going “public” has a magical sound to most entrepreneurial managers. By going public the firm increases its legitimacy in the business community, improves access to debt financing, and creates a means of exit for major shareholders. However, by far the most important reason for going public is to infuse a significant amount of investment capital into the firm. It is well documented that small businesses frequently fail because of insufficient funding and heavy debt loads. Issuing an initial public offering (IPO) allows entrepreneurial firms to overcome these pitfalls. Clearly, if access to capital is the major goal of going public, then the success of an offering is measured by the amount of capital raised by the firm. This study presents a model of the total amount of capital raised by a firm through an IPO. The explanatory variables include several indicators of the scientific capabilities of the firm including the location of the firm, the quality of the research staff, the number of products under development, the number of patents held by the firm, and the firm's prior spending on research and development (R&D). The model is empirically tested on a sample of 92 biotechnology IPOs. The results provide strong support for the hypothesized positive relationship between the total amount of capital raised by a firm's IPO and the scientific capabilities of the firm.Our results have important implications for entrepreneurs. First, an entrepreneur needs to develop and send credible signals indicating the value of the firm's intangible assets to the market. Second, the market values as deep a product pipeline as possible given a firm's resource constraints. Third, choice of location is a key strategic decision that should not be overlooked. Fourth, the market values firm-specific capabilities and will increase the capital it is willing to invest in a firm accordingly. Finally, the amount of capital a firm raises in its IPO can be influenced by entrepreneurial managers' strategic decisions.     

Strategic intent and performance: The role of resource allocation decisions

The notion that a firm's strategic intent can affect its performance through managerial actions has become prominent in the organization literature. In this research, we propose that strategic aggressive firms will foster decisions that favor holding low levels of slack and low levels of R&D investments, resulting in increased firm ROI, and that a firm's risk preference will moderate the indirect effect of strategic intent on performance. Findings from moderated mediation analyses on data from 130 firms in manufacturing industries support our hypotheses. Specifically, the indirect effect of a firm's strategic intent on a firm's performance is moderated by its risk aversion, such that when risk aversion is high, the indirect effect of strategic intent on performance through slack is strengthened. Similarly, the indirect effect of strategic intent on firm performance through R&D investments is strengthened, when risk aversion is high.