Intellectual Capital Profiles: An Examination of Investments and Returns*

ABSTRACT Using data collected from executives in 208 organizations, this study takes a configurational approach to examine how human, social, and organizational capital coexist to form distinct intellectual capital profiles across organizations. We then examine how investments in human resource management (HRM), information technology (IT), and research and development (R&D) differ across these intellectual capital profiles and investigate differences in financial returns and Tobin's q between the profiles. Results indicate that a relatively small group of superior performing organizations exhibit high levels of human, social, and organizational capital. Most firms, however, tend to focus primarily on only one form of intellectual capital, and a small group of underperforming organizations have very low levels of all three types of intellectual capital. At a general level, HRM and IT investments appear to influence intellectual capital development more than R&D investments. More specifically, HRM investments tend to be higher in firms with profiles high in human and social capital, while IT investments are stronger in firms with profiles high in social capital. Further, HRM, IT, and R&D investments are all very high in the group of superior performing organizations that have high levels of human, social, and organizational capital.     

How to optimize the allocation of research resources? An empirical study based on output and substitution elasticities of universities in Chinese provincial level

Although significant progress has been made in China's basic research in recent years, there remains a wide gap between research in China and that from developed countries. How to optimize the allocative efficiency of research resources is of great importance for increasing research output. In this paper, using the fixed effect stochastic frontier model based on the translog production function, we estimate output and substitution elasticities of research and development (R&D) inputs at universities in China's provincial level during 2009–2016. We find that the R&D technical efficiency of China's universities, after a rapid growth, has tended to become relatively stable. Improvements of internationalization degree and exogenous R&D capabilities are conducive to promoting R&D technical efficiency, whereas expenditures from government grants inhibit the promotion of R&D technical efficiency; the effects of R&D capital deepening and internet penetration are not evident. The output elasticity of R&D capital is much higher than that of R&D personnel, suggesting that R&D capital is the main driving force of research output. The substitution elasticity between R&D capital and personnel has experienced a change from substitution to complementary since 2014. To realize sustained growth of research output, we should increase R&D input with positive output elasticity or reduce R&D input with negative output elasticity, making the necessary trade-offs according to the substitution relationship between the two R&D inputs.     

R&D performance assessment of industrial enterprises in China: A two-stage DEA approach

With the growing expenditure on the R&D activities of industrial enterprises above designated size (IEDSs) in China, it is important to evaluate the R&D efficiency of the Chinese IEDSs. However, few studies about R&D efficiency measurement of Chinese IEDSs have considered the internal structure of the R&D production process. To fill this gap, this paper investigates the R&D performance of IEDSs of 30 sample provinces on China's mainland from 2009 to 2014, based on a two-stage data envelopment analysis (DEA) model. The major findings from the empirical results are shown as follows: (i) serious imbalance exists in the R&D resources among Chinese IEDSs of 30 provinces; (ii) there is a decline in the average overall efficiencies after 2012; (iii) there are great differences regarding the performances of R&D activities among the Chinese IEDSs of 30 provinces; (iv) high attention to the R&D activities or strong scientific research atmosphere may promote the R&D efficiency of Chinese IEDSs; and (v) the IEDSs with the relatively high profitability or high government support in terms of R&D activities have relatively poor performance. Based on these findings, several policy suggestions are proposed for the R&D activities of Chinese IEDSs.     

Intangible investment in people and productivity

Organizational activity, information and communication technology work, and research and development (R&D) can be classified as work that creates intangible capital. We measure the returns to these three types of labor input by accounting for differences in their productivity compared with other labor inputs using Finnish firm-level data from 1998 to 2008. We apply a novel idea to use hiring as one proxy for productivity and demand shocks. We find that organizational workers increase total factor productivity and improve the profitability of high-productivity firms. R&D workers account for a large share of intangible capital; however, the returns to R&D are low. Investments in organizational competence are more likely to result in more rapid productivity growth. Firms with performance-related pay or domestically owned firms with extensive foreign activities have been among the highest performers with respect to the use of organizational work.     

Governance and effects of public R&D subsidies: Evidence from China

This study examines the effects of public research and development (R&D) subsidies and the governance of such subsidies on firm productivity based on the analysis of a firm-level panel dataset between 1998 and 2007 in China. It is found that public R&D subsidies tend to support more productive firms and the productivity of these government-backed firms is improved further after they get the government support. Less attention is paid to the observable or measurable performance measurements in ex-ante project selection, and the ex-post effects are stronger when the governance of the public R&D subsidies becomes more decentralized due to an exogenous policy change. In other words, better decentralization of governance is associated with more pronounced effects of R&D subsidies. Identification concerns are addressed with various approaches to confirm the treatment effect of public R&D subsidies and the governance of such subsidies.     

Impact of R&D and Technology Diffusion on Productivity Growth: Empirical Evidence for 10 OECD Countries

This paper examines the empirical evidence on the impact of performed R&D and of R&D embodied in intermediate and capital goods on productivity performance in 10 major OECD countries over the last two decades. To quantify intersectoral and international technology flows, industry-level embodied R&D variables were constructed from an input–output (IO) R&D embodiment model. The productivity variables used are discrete Divisia growth indexes of total factor productivity (TFP), which were estimated from an IO growth accounting model. The results from pooled regressions indicate that the rates of return of the R&D variables were positively significant and increasing in the 1980s. In particular, embodied R&D is an important source for TFP growth in services, indicating very high social returns of the flows of capital-embodied technology into this sector. Moreover, the information and communi-cation technology (ICT) cluster of industries played a major role in the generation and cquisition of new technologies at the international level.     

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.     

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.     

Assessing the technological innovation efficiency of China's high-tech industries with a two-stage network DEA approach

As significant strategic players in China's economy, high-tech industries need to evaluate and analyze the technological innovation activities from a system point of view to understand and improve their technological innovation efficiency and, thereby, promote their development. Different high-tech industries have different characteristics and thus benefit from different industrial development policies. However, few studies to date have discussed this issue from a systematic perspective. In this study, technological innovation activities are divided into a research and development (R&D) stage and a commercialization stage. A high-tech industrial evaluation framework of technological innovation efficiency based on two-stage network data envelopment analysis (DEA) is constructed with shared inputs, additional intermediate inputs, and free intermediate outputs. Our empirical results indicate that the overall efficiency of most industries is relatively low and the differences between the five high-tech industries (i.e., sub-sectors) we examined are large. The Spearman correlation shows that overall efficiency and R&D efficiency are more correlated than overall efficiency and commercialization efficiency. Additionally, R&D has better average efficiency. The sub-sector with the highest average efficiency is computers and office equipment, and the one with the lowest average efficiency is medicines. These findings indicate the inadequacy but potential for breakthroughs in the evolution of high-tech industries in China. The analysis proves that it is necessary to create different industrial policies to encourage effective progress in certain high-tech industries, and some guidelines for doing so are provided.     

Mining the R&D innovation performance processes for high-tech firms based on rough set theory

The research and development (R&D) innovation of firms continues to be viewed as an important source of competitive advantage to academics and practitioners. To explore and extract the R&D innovation decision rules, it is important to understand how the R&D innovation rule-base works. However, many studies have not yet adequately induced and extracted the decision rule of R&D innovation and performance based on the characteristics and components of the original data rather than on post-determination models. The analysis of this study is grounded in the taxonomy of induction-related activities using a rough set theory approach or rule-based decision-making technique to infer R&D innovation decision rules and models linking R&D innovation to sales growth. The rules developed using rough set theory can be directly translated into a path-dependent flow network to infer decision paths and parameters. The flow network graph and cause-and-effect relationship of decision rules are heavily exploited in R&D innovation characteristics. In addition, an empirical case of R&D innovation performance will be illustrated to show that the rough sets model and the flow network graph are useful and efficient tools for building R&D innovation decision rules and providing predictions. We will then illustrate that integrating the flow network graph with rough set theory can fully reflect the characteristics of R&D innovation, and, through the established model, we can obtain a more reasonable result than with artificial influence.     

Adoption,diffusion, and public R&D

This paper studies the impact of public RD&D (Research, Development, and Demonstrations) on the market penetration of a new government-sponsored technology. First, the technology adoption behavior of a firm under uncertainty is reviewed. Secondly, the diffusion of the new technology in a competitive industry that benefits from learning-by-doing is analyzed. Numerical simulations are conducted to determine the effect that variations in government R&D policies have on the rate and level of market penetration. Productive R&D investments affect thelevel of diffusion and R&D demonstrations therate of diffusion.     

Coordination in global R&D organizations: An examination of the role of subsidiary mandate and modular product architectures in dispersed R&D organizations

International research and development (R&D) operations require a significant amount of coordination between the headquarters and the subsidiaries in order to integrate the dispersed activities in one final product. This article explores what mechanisms multinational companies (MNCs) use to coordinate their overseas R&D units. Based on a multiple case study involving nine MNCs with overseas R&D subsidiaries of varying mandates, we find that R&D sites with high technology and/or market orientation tend to be coordinated by informal mechanisms while sites with little technology and/or market orientation tend to be coordinated by formal mechanisms. Furthermore, it appears that this relationship is strongly affected by the product’s architecture: while rather complex R&D activities are conducted at the systems level and at sites with high technology orientation, less complex R&D activities are conducted at the component level at sites with low technology and market orientation. Finally, the findings suggest that modular product architectures have a coordinating effect in global R&D activities which have the power to lower firms’ overall coordination effort. The findings bear important implications for the effective coordination of MNCs’ international R&D subsidiaries.     

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.     

Influence of partner diversity on collaborative public R&D project outcomes: A study of application and commercialization of nanotechnologies in the Netherlands

Several studies have indicated the importance of public R&D in the transfer and commercialization of nanotechnology. So far, few have focused on university–industry interaction and collaboration performance. In this study, we investigate the impact of technological diversity and value chain complementarity of partners on public nanotechnology R&D projects' performance. We enriched a database on the commercial outcomes of technology research projects from the Dutch Technology Foundation STW. To test our hypotheses, we selected 169 nanotechnology research projects from the database, which started in a five-year period from 1998 until 2003. Project performance was measured five years after completion of the project. Technological diversity has a U-shaped effect on the projects' commercial performance. Findings show a strong positive impact of value chain complementarity of partners on both application development and commercial performance of the projects.. The framework introduced in this study allows an evaluation of the effects of technological diversity and value chain complementarity on application development and the commercial performance of public R&D projects.     

Short-term R&D bias,competition on cost rather than innovation,and time to market

Mounting evidence indicates that capital markets often apply short-term pressure on firms to gain short-term results by focusing primarily on reported financial performance. As a result of short termism, it has been argued that companies are likely to cut expenditure on R&D which might otherwise improve longer-term performance. As there is a growing consensus that R&D is critically important to both organizational and national performance, short termism may have significant detrimental organizational consequences. One implication arising from a short-term R&D bias, and examined in this paper, is its effect on market time reduction. Arguments are examined that suggest a dominant R&D strategy is to reduce product time to market. Concerns have been expressed, however, that such a strategy is applicable in specific circumstances only. A review of the literature suggests that analyst and shareholder bias against high-risk, long-term research in favor of lower-risk, short-term product R&D influences organizations to reduce the time it takes to get a product to market when the emphasis in the marketplace is on cost competition rather than product innovation. The findings of the study suggest that when the emphasis on competition on cost rather than innovation is low, short-term R&D bias does not affect market time. In contrast, when the emphasis on competition on cost rather than innovation is high, the results indicate that short-term R&D bias positively influences market time reduction. The study concludes with suggestions for further research.     

Human resource practices and individual knowledge-sharing behavior – an empirical study for Taiwanese R&D professionals

Knowledge sharing is of central importance for the research and development (R&D) process. Because the process is extremely complicated and an employee possesses expertise only in a specific area, knowledge will not be available to others until the owner makes the objects of the knowledge available. It is, therefore, valuable to investigate how R&D professionals share knowledge with one another. This study explores the relationship between human resource (HR) practices and individual knowledge sharing in Taiwan's high-tech industries. The cross-sectional dataset comes from a sample of 368 R&D professionals from nine different high-tech companies. The findings indicate that the factor representing the perceived self-efficacy of knowledge sharing plays a very important role in the integrated knowledge-sharing model we developed. R&D professionals who believe that sharing will influence their performance will be more willing to share knowledge, and thus an effective sharing of knowledge will be more likely to take place. The results also show that HR practices, incentive compensation plans, performance appraisal systems, and face-to-face communication foster knowledge sharing among R&D professionals through the mediation of perceived self-efficacy and the willingness of knowledge sharing.     

Interindustry R&D Spillovers for Electrical and Electronic Products: The Canadian Case

This paper estimates the effects of interindustry R&D spillovers on the cost and production structure for 10 Canadian manufacturing industries. Because of their high-tech nature and productivity performance, spillovers from electrical and electronic products are distinguished from other spillover sources. Generally, spillovers from electrical and electronic products generate cost reductions and render production processes for Canadian manufacturing industries more capital intensive (i.e. either more physical or R&D capital intensive). Social rates of return for R&D capital are calculated for all 10 industries. The social rates are 5–11 times greater than are the private rates. Indeed, the social rates are high for all the industries. This implies that the electrical and electronic products industry is an important interindustry spillover source but, like other industries, a major spillover-using industry.     

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.     

What motivates R&D professionals? Evidence from decentralized laboratories in Greece

The challenge for research and development (R&D) professionals management is to meet the corporate objectives for effectiveness, productivity and profitability with the needs of technical employees for motivation, reward and satisfaction. Despite the continuous upgrading of the strategic importance of knowledge and technology, human resource management paid little attention to the distinctive characteristics of those highly educated knowledge workers, especially in an international perspective. Based on a large-scale survey of multinational enterprises' (MNEs') decentralized R&D laboratories in Greece, this paper offers insights on the perceived impact of intrinsic and extrinsic compensation on performance. Focused on three distinctive types of research implemented by MNEs, results record the existence of a multifaceted context of researchers' needs and satisfaction determinants, which is differentiated among the different roles of R&D laboratories. Our findings witness that in an EU peripheral economy, R&D professionals are motivated by extrinsic rewards and mainly by economic compensation.     

R&D and aggregate fluctuations

Empirical observations raise interesting questions regarding the sources of the excessive volatility in the R&D sector as well as the nature of the relation between the sector and aggregate fluctuations. Using US data for the period 1959–2007, we identify sectoral technology and capital investment-specific shocks by employing a Vector Autoregression. The identifying assumptions are motivated by a two-sector dynamic general equilibrium model. Controlling for real and nominal factors, we find that capital investment-specific shocks explain 70 percent of fluctuations of R&D investment, while R&D technology shocks explain 30 percent of the variation of aggregate output, net of R&D investment. Technology shocks jointly explain almost all the variation of output in the R&D sector and 78 percent of the variation of output in the rest of the economy. They also constitute the main factor of the procyclicality of R&D investment.