Absorptive capacity and innovation: when is it better to cooperate?

Cooperation can benefit and hurt firms at the same time. An important question then is: when is it better to cooperate? And, once the decision to cooperate is made, how can an appropriate partner be selected? In this paper we present a model of inter-firm cooperation driven by cognitive distance, appropriability conditions and external knowledge. Absorptive capacity of firms develops as an outcome of the interaction between absorptive R&D and cognitive distance from voluntary and involuntary knowledge spillovers. Thus, we offer a revision of the original model by Cohen and Levinthal (Econ J 99(397):569–596, 1989), accounting for recent empirical findings and explicitly modeling absorptive capacity within the framework of interactive learning. We apply that to the analysis of firms’ cooperation and R&D investment preferences. The results show that cognitive distance and appropriability conditions between a firm and its cooperation partner have an ambiguous effect on the profit generated by the firm. Thus, a firm chooses to cooperate and selects a partner conditional on the investments in absorptive capacity it is willing to make to solve the understandability/novelty trade-off.     

Absorptive capacity, efficiency effect and competitors�� spillovers

Standard innovation surveys do not consider incoming spillovers for non-innovative firms. As a consequence, empirical works may overestimate the absorptive capacity effect, particularly among competitors. The Swiss innovation surveys presented here measure the importance of knowledge for both innovating and non-innovating firms. This original feature enables us to show that knowledge from rivals actually deters manufacturing firms from engaging in R&D activities. We therefore provide stronger evidence that the efficiency effect due to intra-industry spillovers is larger than that generally estimated by data from standard surveys. The R&D based absorptive capacity is weaker than expected, and non-innovative firms as well as non-R&D firms heavily rely on their rivals’ knowledge to maintain their technological capacities.     

Knowledge spillovers,absorptive capacity and total factor productivity in China’s manufacturing firms

Applying the stochastic frontier framework, this study explores the diffusion and absorption of technological knowledge in China’s manufacturing firms, based on a panel of more than 10,000 local and foreign-invested firms over the period 1998–2001. Our empirical approach allows us to distinguish between technological progress (TP) and technical efficiency (TE) in analysing whether R&D, exports and the presence of foreign direct investment simultaneously enhance TP through knowledge spillovers in a single framework and whether different types of domestic absorptive capacity moderate external knowledge spillovers in relation to TE. The results show that there are positive inter-industry productivity spillovers from R&D and foreign presence, whereas evidence of intra-industry productivity spillovers from FDI to Chinese firms is less robust. We find evidence that absorptive capacity is one of the key determinants to quantitatively explain intra-industry differences in productivity of local Chinese firms. The findings have important policy implications.     

R&D spillover effects on firms’ export behavior: evidence from South Korea

This paper investigates the spillover effects of R&D investments made by foreign multinational enterprises (MNEs) and domestic firms on their export activities, using a manufacturing firm-level panel dataset from South Korea. The theoretical framework predicts two conflicting spillover effects: positive technology spillovers and negative market rivalry spillovers. Thus, the net spillover effect is determined by the relative degree of the two conflicting spillovers. The empirical results show that negative intra-industry spillovers exist from the R&D of foreign MNEs on the export performance of firms, which implies that, in general, negative market rivalry spillovers dominate positive technology spillovers. However, notably, in the case of firms equipped with absorptive capacity, the negative spillovers can be alleviated; firms can gain positive spillovers by muting negative ones. Firms without absorptive capacity cannot avoid such negative effects. This paper shows that absorptive capacity is vital in capturing positive spillovers as firms build competency by accumulating their own know-how and improving their ability to capture better external technologies.     

The two ways of FDI R&D spillovers: evidence from the French manufacturing industry

Using French firm-level panel data, this study investigates R&D spillovers from inward foreign direct investment (FDI) with respect to both horizontal and vertical linkages (backward and forward). Using a Crepon, Duguet and Mairesse (CDM) model, we estimate an R&D-augmented Cobb–Douglas production function to assess the impact of R&D spillovers on firm performance. The results emphasize that international spillovers (from foreign affiliates to local firms) have a greater effect on firm performance than reverse spillovers (from local firms to foreign affiliates) and are more likely to be backward than forward. Moreover, the effect of backward spillovers depends on a firm’s absorptive capacity and is amplified in the case of outsourcing relationships.     

Founders’ human capital and external knowledge sourcing: Exploring the absorptive capacity of start-up firms

ABSTRACT

This study highlights the importance of founders’ human capital on firms’ absorptive capacity for explaining the external knowledge sourcing (licensing-in and joint R&D) of start-up firms, using panel data from original questionnaire surveys conducted in Japan. The results of a probit model with an endogenous regressor show that firms managed by founders with a high level of specific human capital, measured as prior innovation experience and industry-specific work experience, tend to engage in external knowledge sourcing because of their superior absorptive capacity. The findings indicate that this type of human capital also promotes research and development (R&D) investment. Contrariwise, this study finds that firms managed by founders with a high level of general human capital, measured as educational attainment, tend to invest more in R&D, which enhances their absorptive capacity and thereby promotes external knowledge sourcing. Finally, the implications of these findings are discussed from the perspective of public policy.     

International R&D Spillovers,Absorptive Capacity and Relative Backwardness: A Panel Smooth Transition Regression Model

We investigate how a country's absorptive capacity and relative backwardness affect the impact of international R&D spillovers on domestic Total Factor Productivity (TFP). To account for nonlinearities, we adopt a Panel Smooth Transition Regression approach, where a country's TFP elasticity to the foreign R&D stock is allowed to change smoothly across various identified extreme values, and the change is related to observable transition variables: human capital (capturing the country's absorptive capacity) and relative backwardness. The results suggest that absorptive capacity is positively associated with international R&D spillovers. In contrast with previous results, relative backwardness is instead found to have a negative and significant impact on international knowledge spillovers.     

Driving forces for research and development strategies: an empirical analysis based on firm-level panel data

This paper investigates empirically different ways to organize research and development (R&D) within Swiss firms. Based on a longitudinal data set comprising three cross-sections (1999, 2002, and 2005) of the Swiss Innovation Survey, four different types of R&D strategies could have been separated; firms combine in-house R&D with R&D co-operations (coop) or in-house R&D with external R&D (buy), or they conduct in-house R&D, external R&D, and R&D co-operations (mixed), or they exclusively rely on in-house R&D (make). It is the aim of this paper to understand what drive firms to go for different strategies. Based on econometric estimations controlling for correlations between the dependent variables and endogeneity among the independent variables, it was found that concepts related to the absorptive capacity, incoming spillovers, and appropriability, the importance of different knowledge sources, the competitive environment, costs, and skill aspects as well as technological uncertainty are essential factors to determine a firm's decision to choose a specific way to organize R&D.     

Synergizing independent and cooperative R&D activities: the effects of organisational slack and absorptive capacity

Firms undertaking independent and cooperative research and development (R&D) activities simultaneously often have difficulties to realise their synergistic effects. This study contends that such difficulties are caused by tensions between two types of R&D activities in terms of resource competition and knowledge leakage. Moreover, organisational slack and absorptive capacity may affect these tensions and thereby play important role in synergizing independent and cooperative R&D activities. Based on a survey data of 286 firms, this study finds that such two types of R&D activities jointly have a negative impact on firm performance. Furthermore, organisational slack aids in synergizing them, while absorptive capacity has an adverse impact. These findings enrich our knowledge on the interrelation of independent and cooperative R&D activities and shed light on how firms can synergize them.     

Firms’ productivity growth and R&D spillovers: An analysis of alternative technological proximity measures

This paper aim at assessing the impact of R&D spillovers on firms’ economic performance as measured by productivity growth. The construction of R&D spillovers is based on Jaffe's methodology (1988, 1996) which associates econometrics and data analysis. The main objective of the paper is to extend Jaffe's methodology by examining alternative methods for measuring R&D spillovers and to test their impacts in terms of the robustness of results. In particular, the method used to classify firms into technological clusters as well as the metrics implemented to appreciate firms’ technological proximities which enter the construction of spillovers are further investigated. In addition to R&D spillovers, firms’ own R&D capital, labour and physical capital are estimated by means of a Cobb–Douglas production function. The data set consists of a representative sample of 625 worldwide R&D intensive firms over the period 1987–1994.     

R&D competition, absorptive capacity, and market shares

This paper deals with an oligopolistic industry where firms are engaged in cost-reducting R&D activity to maximize their market shares. The existence and uniqueness of a feedback-Nash-optimal R&D strategy for each firm are discussed. Our simulations highlight that variations in spillovers hardly influence the firms' R&D investment, if their absorptive capacities to exploit extramural knowledge depend on their R&D efforts. Moreover, extramural knowledge cannot completely replace in-house R&D. However, a high level of public R&D favors the firm with the most restrictive R&D expenditure constraint and/or with the lowest initial R&D stock, provided it invests in R&D.     

The impact of technology intermediaries on firm cognitive capacity additionality

Whereas the provision of R&D subsidies has been central to public policy for many years, governments have recently become increasingly involved in stimulating cooperation for innovation and R&D. In many countries, financial support for technology intermediaries has become one of the key measures of indirect public support. However, little research has assessed the impact of indirect policy measures. In this paper, we shed light on the conditions under which technology intermediaries contribute to knowledge and networking outcomes generated by the firms that call upon them. We hereby focus on firm network and competence additionality as measures for cognitive capacity additionality and study the impact of technology intermediaries on firms. In doing so, we distinguish between R&D and R&D related activity technology intermediaries engage in. The results indicate that absorptive capacity of the technology intermediary does not affect cognitive capacity additionality generated by firms in R&D activities, while the results for R&D related activities are mixed and depending on the type of cognitive capacity additionality studied. The absorptive capacity of firms does not directly affect cognitive capacity additionality, but the results of mediation analysis show that firms with higher levels of absorptive capacity use the services of the technology intermediary more intensively, and subsequently generate higher levels of cognitive capacity additionality.     

Human resource management for learning through knowledge exploitation and knowledge exploration: Pharmaceuticals in Mexico

This paper investigates the influence of human resource management practices on the likelihood that a firm performs in-house R&D. R&D is broadly interpreted as learning—a mechanism promoting absorptive capacity and supporting technology capability-building. Firms can choose between two learning strategies: they can exploit existing knowledge, or perform more complex explorations and acquire new knowledge. Different knowledge requirements associate with distinct R&D outcomes with varying degrees of novelty for the firm. Findings are supported with evidence from the pharmaceutical industry in Mexico. The analysis reveals positive linkages between human resource management practices and learning at firm level. The relationship is contingent on factors such as expected R&D outcomes, or the novelty of the knowledge required by the firm. The provision of training revealed the more consistent, positive influence on the likelihood that pharmaceuticals firms perform R&D in Mexico.     

A dynamic model of R&D competition

This study considers a dynamic model of R&D competition in a situation of no uncertainty with identical firms in a perfect foresight. We are going to find out about the effects of firms' absorptive capacity on R&D strategies in the presence of technological spillovers. The conditions for the existence and uniqueness of a feedback–Nash equilibrium on firms' R&D expense will be also discussed. Numerical simulations will show as the introduction of the absorptive capacity reduces the impact of spillovers degree on firms' R&D strategies.     

Collective learning,innovation and growth in a boundedly rational,evolutionary world

We formulate a simple multiagent evolutionary scheme as a model of collective learning, i.e. a situation in which firms experiment, interact, and learn from each other. This scheme is then applied to a stylized endogenous growth economy in which firms have to determine how much to invest in R&D, where innovations are the stochastic product of their R&D activity, spillovers occur, but technological advantages are only relative and temporary and innovations actually diffuse, both at the intra and interfirm levels. The model demonstrates both the existence of a unique long-run growth attractor (in the linear case) and distinct growth phases on the road to that attractor. We also compare the long-run growth patterns for a linear and a logistic innovation function, and produce some evidence for a bifurcation in the latter case.     

Strategic timing in R&D agreements

We study the endogenous formation of R&D agreements in a R&D/Cournot duopoly model with spillovers where also the timing of R&D investments is endogenous. This allows us to consider the incentives for firms to sign R&D agreements over time. It is shown that, when both R&D spillovers and investment costs are sufficiently low, firms may find difficult to maintain a stable agreement due to the strong incentive to invest noncooperatively as leaders. In this case, the stability of an agreement requires that the joint investment occurs at the initial stage, thus avoiding any delay. When spillovers are sufficiently high, the coordination of R&D efforts becomes a profitable option, although firms may also have an incentive to sequence noncooperatively their investment over time. Finally, when spillovers are asymmetric and knowledge mainly leaks from the leader to the follower, investing as follower may become extremely profitable, making R&D agreements hard to sustain unless firms strategically delay their joint investment in R&D.     

A contribution to the theory and empirics of Schumpeterian growth with worldwide interactions

This paper proposes an integrated theoretical and methodological framework characterized by technological interactions to explain growth processes from a Schumpeterian perspective. Global interdependence implied by international R&D spillovers needs to be taken into account in both the theoretical and empirical models. For this task, spatial econometrics is the appropriate tool. The econometric model we propose includes the neoclassical growth model as a particular case. We can therefore explicitly test the role of R&D investment in the long-run growth process against the Solow growth model. Finally, the properties of our spatial econometric specification allow the explicit evaluation of the impact of home and foreign R&D spillovers.     

Role of human resource practices in absorptive capacity and R&D cooperation

This paper reconceptualises absorptive capacity as a strategic human resource construct and analyses its role in determining R&D cooperation and innovation in firms. In spite of widespread consensus on the role of absorptive capacity in innovation, the literature has so far concentrated only on traditional R&D and human capital based indicators of absorptive capacity. Furthermore, most firm-level studies investigating this relationship are cross-sectional in nature and there is need for longitudinal evidence. Employing the IAB Establishment Panel Survey on about 1200 private sector establishments in Germany during 2007–2011, we apply a structural model that links firms’ human resource practices, R&D collaboration strategies and finally their innovation outcome. Findings from the first stage of the empirical analysis suggest that adoption of employment practices positively affects horizontal, institutional and consulting-based R&D cooperation, while compensation programs positively affect only horizontal R&D cooperation. In the second stage, the effect of cooperative R&D conditioned upon human resource practices on innovation performance is examined. Results indicate that firms having institutional and consulting-based R&D cooperation relationships are more often associated with higher incremental product, process and new-to-market innovation, whereas the effect is relatively weaker in case of horizontal R&D cooperation.     

Technology flows between sectors and their impact on large-scale firms

In this article we highlight the importance of technology flows between sectors and their impact on the labour productivity of large-scale corporations. Based on theoretical considerations, we explore technological spillovers between the sectors of an economy. Large-scale corporations usually focus on certain sectors but make use of a wide range of technological knowledge from other sectors. Thereby, technological knowledge built up in sectors by continuous R&D activities does not spill over without bounds but is directed by firms’ absorptive capacities. We use firms’ patent portfolio to empirically calculate the sector affiliation and therewith the firms’ absorptive capacities in order to estimate the impact of technology diffusion on labour productivity. Fortune 500 firms serve as data base.     

International Transmission of Technology and Trade: The Role of Cross-country Heterogeneity

In the framework where the channel of international transmission of technology is trade in intermediate inputs, this paper investigates the role of heterogeneities across countries. In particular, this paper analyzes how cross-country differences in production structure, national innovative capacity, and absorptive capacity affect the scope and magnitude of international R&D spillovers on productivity. The study is based on the industry-level data set that covers eight OECD countries from 1970 to 1995. It finds that accounting for cross-country differences in each of production structure (using country-specific input–output relations) and national innovative capacity (using patents granted per R&D investment) yields significantly different spillover effects than previous studies. This suggests that the effect of international R&D spillovers depends on both production structure and the pattern of international trade. Further, it finds the absorptive capacity of a country is positively related to spillovers.