Does board social capital influence chief executive officers' investment decisions in research and development?

The findings of the chief executive officer (CEO) characteristics–research and development (R&D) investment relationship remain incomplete if previous unexamined contingencies are not considered. Very few studies in this area have invariably focused on the constraints from the external environment and overlooked the important influence of board social capital on such relationship. This study uses insights from resource dependence theory to examine how the effects of CEO characteristics on R&D investment are contingent on board social capital. The results show that board social capital mitigates/enhances the negative/positive effect of CEO tenure/CEO educational level on R&D investment, supporting the view that board social capital, as an important conduit to link firms to critical information and essential resources in the environment, may offer better counsel to CEOs and enhance their decision‐making capabilities in moving toward R&D. One important implication is that firms wishing to encourage innovation through R&D spending should consider nominating directors with rich social capital to the board because they may assist CEOs in coping with R&D complexities and acquiring requisite resources, leading to a better planning of R&D.     

Determinants of R&D–Marketing Integration in High-Tech Japanese Firms

Although the R&D/marketing interface has been extensively studied in U.S. firms, this article reports the results of a study of this important relationship in Japanese high-tech firms. Based on published studies of U.S. firms, Mark Parry and Michael Song hypothesize that Japanese R&D managers' perceptions of the ideal level of R&D/marketing integration will reflect perceptions of both their firm's strategy and environmental uncertainty. They also hypothesize that perceptions of the level of achieved R&D/marketing integration are related to perceptions of organizational structure and climate. To test these hypotheses, they examine the survey responses of 274 Japanese R&D managers. Their analysis suggests that R&D managers' perceptions of firm strategy and the level of environmental uncertainty are significantly correlated with the perceived need for integration. Findings also indicate that R&D managers' perceptions of achieved integration reflect perceptions of the quality of R&D/marketing relations, the value placed on integration by senior management, the business background of R&D personnel and the risk-orientation of senior management.     

Where can capabilities come from? network ties and capability acquisition in business groups

While strategy researchers have devoted considerable attention to the role of firm‐specific capabilities in the pursuit of competitive advantage, less attention has been directed at how firms obtain these capabilities from outside their boundaries. In this study, we examine how firms' multiplex network ties in business groups represent one important source of capability acquisition. Our focus allows us to go beyond the traditional focus on network structure and offer a novel contingency model that specifies how different types of network ties (e.g., buyer‐supplier, equity, and director), individually and in complementary combination, will differentially affect the process of R&D capability acquisition. We also offer an original analysis of how other aspects of network structure (i.e., network density) in business groups affect the efficacy of network ties on R&D capability. Empirically, we provide an original contribution to the capabilities literature by utilizing a stochastic frontier estimation to rigorously measure firm capabilities, and we demonstrate the value of this approach using longitudinal data on business groups in emerging economies. We close by discussing the implications of our supportive results for future research on firm capabilities, organizational networks, and business groups. Copyright © 2010 John Wiley & Sons, Ltd.     

Proactive/Responsive Market Orientation and Marketing—Research and Development Integration

The level of integration between the marketing and research and development (R&D) functions may be gauged by degree of communication, information sharing, and collaboration between the functions during the new product development process. This article examines how a firm's strategic choice regarding market orientation may influence the relationship between marketing and R&D personnel, and how this relationship may affect organizational success. Under examination are both the responsive form of market orientation, in which a firm focuses on immediate customer needs and tends to be market driven, and the proactive form, in which the firm focuses on future market needs and tends to be invention driven. It is theorized that responsive market orientation will be more positively related to marketing‐R&D integration due to the market‐driven nature of the orientation. Conversely, it is theorized proactive market orientation will be more positively related to organizational success than responsive market orientation due to the innovation‐driven nature of the orientation. The study was implemented via a Web‐based survey and data analysis was performed using structural equation modeling techniques. The results of this study provide empirical evidence that both proactive and responsive market orientation exhibit a positive relationship with marketing–R&D integration, indicating that both forms of market orientation may lead to closer collaboration between the marketing and R&D functions. Despite the assumption that a proactive orientation is driven by innovation and technology in which R&D may play a more significant role, there is evidence that a high degree of synergy is developed between the groups when the focus is on future market needs. A market‐driven responsive orientation by necessity requires high integration between departments to commercialize products in a timely manner to meet current market needs. Proactive market orientation exhibits a positive relationship with market performance, whereas responsive market orientation does not. The result may show evidence of the “new product paradox," whereby developing products to address immediate market needs may result in lower market performance because the new products may be replacements for obsolete offerings or are actually cannibalizing sales of existing products.     

Board structure and firm capability: An environment-embedded relationship between board diversity and marketing capability

The role of the firm’s top governance team, the board, is largely missing in the capability literature. This paper takes the first step to link board diversity, one of the most critical traits of the board, to marketing capability. Further, this relationship is embedded into a contingency-based model involving a set of environmental factors, munificence, turbulence, and competition intensity. This model illustrates how the internal top governance traits and external factors may jointly and dynamically affect firm competency. The empirical results show that board diversity significantly increases marketing capability. This effect is stronger when a firm faces unfriendly market situations characterized by low munificence, high turbulence, and intensified competition. This study generates meaningful theoretical implications for marketing capability-building of business firms, especially in the business-to-business (B2B) settings in which reciprocal organizational engagements are more emphasized. It also advances firm governance theories and business environment studies, and provides useful guidelines for managerial practices.     

The Immediate Impact of New Product Introductions on Stock Price: The Role of Firm Resources and Size*

New product development and introduction is an ongoing important issue to facilitate a firm's success. To demonstrate the financial impact of new product introductions and the supporting role of firm resources and organizational structure, the authors collected 409 new product announcements from 1990 to 1998 and used event methodology and regression models in this research. Building on resources and capabilities perspectives, the present study argues that firm resources with emphases on research and development (R&D) are imperative to materialize new product concepts. However, the research revealed that R&D resources have dual effects on immediate shareholder value (i.e., abnormal stock returns). On one hand, when the firm commits only lower to moderate levels of R&D, investors would have perceived such R&D as expenditures reducing the firm's profit margin and thereby negatively evaluate R&D resources. Nevertheless, when the firm has dedicated its resources to R&D significant enough to signal investors its potential benefits can outweigh its costs, it generates positive shareholder value. Further, the study found that investors honor positive marketing resources that are critical to promote and launch new products to customers. Apart from resources perspectives, according to the organizational structure literature, firm size reflects the layers of bureaucracy within an organization. The research found a negative effect on shareholder value, indicating that investors evaluate more optimistically smaller firms that are likely to be more innovative and entrepreneurial resulted in more breakthrough products. In conclusion, this study provides value to practitioners in understanding the impact of firm size and, more importantly, to what extent they dedicate their resources in R&D and marketing to generate different performance outcomes.     

The Vital Role of Problem‐Solving Competence in New Product Success*

Problem solving, a process of seeking, defining, evaluating, and implementing the solutions, is considered a converter that can translate organizational inputs into valuable product and service outputs. A key challenge for the product innovation community is to answer questions about how knowledge competence and problem‐solving competence develop and sustain competitive advantage. The objective of this study is to theoretically examine and empirically test an existing assumption that problem‐solving competence is an important variable connecting market knowledge competence with new product performance. New product projects from 396 firms in the high‐technology zones in China were used to test the study's theoretical model. The results first indicate that problem‐solving speed and creativity matter in new product innovation performance by playing mediator roles between market knowledge competence and positional advantage, which in turn sustains superior performance. This new insight suggest that mere generation of market knowledge and having a marketing–research and development (R&D) interface will not affect new product performance unless project members have the ability to use the information and to interact to identify and solve complex problems speedily and creatively. Second, these results suggest that different market knowledge competences (customers, competitors, and interactions between marketing and R&D) have distinct impacts on problem‐solving speed and creativity (positive, negative, or none), which underscore the need to embrace a more fine‐grained notion of market knowledge competence. The results also reveal that the relative importance of some of these relationships depends on the perceived level of turbulence in the environment. First, competitor knowledge competence decreases problem‐solving speed when perceived environmental turbulence is low but enhances problem‐solving speed when perceived turbulence is high. Second, competitor knowledge competence has a positive relationship with new product performance when the environmental turbulence is high but no relationship when the environmental turbulence is low. Third, the positive relationship between problem‐solving speed and product advantage is stronger when the perceived environmental turbulence is high than when it is low, which implies that problem solving is more important for creating product advantage when environmental turbulence is high and change is fast and unpredictable. Fourth, the negative relationship between problem‐solving speed and new product performance is stronger when the perceived environmental turbulence is high than when it is low, which means that problem‐solving speed is more harmful for new product performance when change is fast and unpredictable. And fifth, the positive relationship between product quality and new product performance is stronger when perceived environmental turbulence is low than when it is high, which implies that product quality may more likely lead to new product performance when the environment is stable and changes are easy to predict, analyze, and comprehend.     

Social and organizational capital: Building the context for innovation

In the light of the key role intellectual capital has for firms' innovation capability, this paper analyzes the influence of two of their dimensions, organizational capital and social capital, on firms' product innovation, and the moderating role of radicalness. Unlike previous studies, the unit of analysis will not be the firm, but the R&D department. Thus, our research, conducted with a sample of Spanish industrial companies, provides a new insight with interesting results. First, our findings show that social capital favours firms' product innovation, especially under radical innovations. Second, organizational capital has an indirect effect on product innovation through positive influence on social capital. This implies that firms can stimulate communication and interaction among people, and therefore innovative activity, by means of explicit and codified knowledge (organizational capital).     

Marketing and technology resource complementarity: an analysis of their interaction effect in two environmental contexts

The dynamic capabilities perspective posits that a firm can leverage the performance impact of existing resources through resource configuration, complementarity, and integration, but little empirical research addresses these issues. We investigate the effects on performance of marketing capabilities, technological capabilities, and their complementarity (interaction), and whether these effects are moderated by low vs. high technological turbulence. Results from SEM two‐group analyses (with controls) show that both main effects positively impact performance in both environmental contexts. However, (1) their interaction effect is significant only in the high‐turbulence environment; (2) the marketing‐related main effect is lower in the high‐turbulence environment; and (3) the main effects of technology‐related capabilities are the same in both environments. Our research suggests that the synergistic performance impact of complementary capabilities can be substantive in particular environmental contexts: while synergistic rents cannot always be obtained, it is possible to leverage existing resources through complementarity. Copyright © 2005 John Wiley & Sons, Ltd.     

Outbound open innovation and its effect on firm performance: examining environmental influences

Firms may open up their innovation processes on two dimensions. While inbound open innovation refers to the acquisition of external technology in open exploration processes, outbound open innovation describes the outward transfer of technology in open exploitation processes. Prior open innovation research has focused on the inbound dimension, whereas the outbound dimension has been relatively neglected. Therefore, this article addresses the relationship between outbound open R&D strategies and firm performance. We use data from 136 industrial firms to test four hypotheses on the moderating effects of environmental factors in the relationship between open innovation strategies and firm performance. The results show that the degree of technological turbulence, the transaction rate in technology markets, and the competitive intensity in technology markets strengthen the positive effects of outbound open innovation on firm performance. By contrast, the degree of patent protection does not facilitate successful open innovation. The results are crucially important to managers because they show under what environmental conditions open innovation strategies enhance performance.     

Modes of cooperative R&D commercialization by start‐ups

This study empirically examines the determinants of heterogeneous firm‐level cooperative R&D commercialization strategies. While the volume of interfirm collaboration has increased dramatically in recent decades, the determinants of firm‐level choices among alternate modes of such cooperative activity remain relatively understudied. We develop a conceptual model of factors determining collaborative mode choice at the organizational portfolio level. These factors include the firm‐level appropriation environment, in which deal‐level choices have portfolio‐level spillover implications, as well as governance capabilities developed by the firm over time. Using a random sample of innovating biotechnology start‐ups, we assemble a firm‐year panel dataset that aggregates transaction‐level collaboration data to the firm‐year level, allowing us to characterize firms' portfolios of collaborative deals. We find broad empirical support for our model, suggesting that a firm's appropriation environment and governance capabilities strongly influence portfolio‐level collaboration mode choices. In addition, we explore the implications of governance capability development, finding that experience with particular modes, as well as deviations from existing capabilities, impact firm valuation. Copyright © 2009 John Wiley & Sons, Ltd.     

Conceptualizing and measuring capabilities: methodology and empirical application

This paper attempts to operationalize and measure firm‐specific capabilities using an extant conceptualization in the resource‐based view (RBV) literature. Capabilities are conceived as the efficiency with which a firm employs a given set of resources (inputs) at its disposal to achieve certain objectives (outputs). We expand on extant theoretical literature on relative capabilities, by delineating the conditions that have to be met for relative capabilities to be measured non‐tautologically. We then proceed to suggest an estimation methodology, stochastic frontier estimation (SFE), that allows us to infer firm capabilities. We illustrate this technique with a sample of firms in the semiconductor industry. Our findings underscore the heterogeneity in R& D capability across firms in this industry, as well as the persistence in these capabilities over time. We also find that the market rewards high R& D capability firms, in that they show the highest average values of Tobin's q. Copyright © 2004 John Wiley & Sons, Ltd.     

知识螺旋影响研发团队创新创意产生实证研究——内部社会资本的调节效应

为了研究研发团队内部知识的交互对于创意产生的机理,通过构建概念模型,研究知识螺旋对研发团队创新创意产生的影响,并分析内部社会资本的调节效应。采用结构方程模型和分层线性分析,基于274份样本的实证研究表明:一方面,知识螺旋显著积极影响研发团队创新创意产生,并且知识表出化、知识结合化、知识内在化及知识社会化分别积极影响创新创意产生;另一方面,内部社会资本不同维度在知识螺旋与创新创意产生关系中的调节效应各不相同,结构社会资本的调节效应并不显著,而认知社会资本和关系社会资本显著正向调节知识螺旋对创新创意产生的影响。根据研究结果,提出促进研发团队创意产生的建议。     

The right speed and its value

Slow investments cause substantial revenue losses, yet acceleration increases costs. This tradeoff implies that an optimal investment speed usually exists; it is faster the higher a firm's intrinsic speed capability. We hypothesize that it is a firm's intrinsic speed capability, rather than its speed relative to industry competitors per se, that boosts firm value. Using data on oil and gas facilities (1996–2005), we find that intrinsic speed capabilities augment firm value in a varied way: their value is larger with better corporate governance, lower cost of capital, and higher ability to draw value from R&D investment. Our work elevates the discussion of speed from a project‐level consideration to a firm‐level competitive advantage issue and raises the need to further explore its strategic value. Copyright © 2013 John Wiley & Sons, Ltd.     

A NEW PERSPECTIVE ON INDUSTRY R&D AND MARKET STRUCTURE*

This paper aims to shed some new insights on the long‐debated and both extensively and intensively explored relationship between market concentration and industry R&D intensity. In order to do so, this study develops, from a classic Dorfman‐Steiner [1954] model of firm R&D, a model of industry R&D, where consumer preference over quality and price, R&D technology, and the joint distribution of firm‐specific technological competence and market share jointly determine the level of industry R&D intensity. The joint distribution term, which reflects both the underlying distribution of firms‐specific technological competence and the strength of its link with market share, suggests that the concentration‐R&D relationship differs depending on the strength of the link or simply the appropriability of R&D in terms of market share: A positive relationship is predicted for low‐appropriability industries, where market concentration supplements low R&D appropriability, while a negative or an inverted U‐shaped relationship for high‐appropriability industries. An empirical analysis of data, disaggregated at the five‐digit SIC level, on R&D and market concentration of Korean manufacturing industries provides supportive evidence for the predictions.     

Innovation Process and Outcomes for Large Japanese Firms: Roles of Entrepreneurial Proclivity and Customer Equity

The authors investigate the structural relationships among entrepreneurial proclivity, innovation process characteristics (technological strength, marketing strength, and marketing–R&D integration), and customer equity in achieving business growth and financial return in the Japanese context. Following field interviews and a pilot test, survey data are collected from 207 pairs of marketing and R&D executives from strategic business units (SBUs) of large manufacturing companies in Japan. Based on the partial least squares analysis of data, the authors find nuanced effects of organizations' entrepreneurial proclivity on the critical organizational process, resource, and business performance. The study theorizes and empirically supports the idea that customer equity is a potent intermediary outcome that contributes to both top‐line (growth) and the bottom‐line (ROI) of a business. Specifically, the study shows that: (1) entrepreneurial proclivity directly and positively influences technology strength, marketing strength, and marketing‐R&D integration; (2) entrepreneurial proclivity's effect on business growth and financial return is positive and mediated by customer equity; (3) marketing–R&D integration has a moderating effect on the positive impact of technology strength on customer equity; and (4) customer equity is a strong driver of business growth and financial return. There is a dearth of research on entrepreneurship in Asia; very few empirical studies have been reported from Japan in particular. This study contributes to boundary testing of the theoretical relationships. Although entrepreneurial proclivity appears to be an inspirational concept, its actual adoption remains an important question for many Japanese companies. Those Japanese firms that aspire to be entrepreneurial need to be mindful what innovation processes and resources it takes to fulfill the positive influences of entrepreneurship.     

Opening the Black Box of Upper Echelons in China: TMT Attributes and Strategic Flexibility

Many scholars have suggested that strategic flexibility is a critical firm capability to survive in today's competitive arena. The decision to take strategic actions to make the firm more strategically flexible typically originates in the top management team (TMT). As the principal decision‐making unit of the firm, TMT members' information acquisition and processing capabilities and subsequent interpretation of environmental changes critically influence the decision to make the firm more strategically flexible to achieve a better fit with its market environment. Therefore, in order to understand how firms can adapt to environmental changes, scholars must study the sociopsychological processes of interaction among members of the TMT. This study examines the relationships between TMT's sociopsychological attributes (shared vision, social integration, and political ties) and strategic flexibility, which is decomposed into organizational flexibility and technological flexibility. The study further investigates how the level of competitive intensity can moderate the relationships. All the hypotheses are tested using structural equation models based on the survey data from 227 firms in China. The results show that organizational flexibility mediates the impact of TMT's social integration and political ties on technological flexibility. Surprisingly, a TMT's shared vision for the firm neither impedes nor facilitates the firm's effort in attaining the desired degree of organizational flexibility. However, TMT's shared vision does have a positive and direct impact on technological flexibility. Moreover, intense competition amplifies the positive impact of TMT social integration on the degree of organizational flexibility, but there is no significant moderating effect of competitive intensity on the relationship between a TMT's political ties and organizational flexibility. The results extend previous research by highlighting the importance of TMTs' sociopsychological attributes in driving technological flexibility, through the mediating impact of organizational flexibility.     

In Search of Innovation and Customer‐related Performance Superiority: The Role of Market Orientation,Marketing Capability,and Innovation Capability Interactions

Understanding the mechanisms through which firms realize the value of their market‐based knowledge resources such as market orientation is a central interest of innovation scholars and practitioners. The current study contends that realizing the performance impact of market orientation depends on know‐how deployment processes and their complementarities in functional areas such as marketing and innovation that co‐align with market orientation. More specifically, this study addresses two research questions: (1) to what extent can market orientation be transformed into customer‐ and innovation‐related performance outcomes via marketing and innovation capabilities; and (2) does the complementarity between marketing capability and innovation capability enhance customer‐ and innovation‐related performance outcomes? Drawing upon the resource‐based view and capability theory of the firm, a model is developed that integrates market orientation, marketing capability, innovation capability, and customer‐ and innovation‐related performance. The validity of the model is tested based on a sample of 163 manufacturing and services firms. In answer to the first research question, the findings show that market orientation significantly contributes to customer‐ and innovation‐related performance outcomes via marketing and innovation capabilities. This finding is important in that market‐based knowledge resources should be configured with the deployment of marketing and innovation capabilities to ensure better performance. In answer to the second research question, the findings indicate that market orientation works through the complementarity between marketing and innovation capabilities to influence customer‐related performance but not innovation‐related performance. Managers are advised to have a balanced approach to managing the deployment of capabilities. If they seek to achieve superiority in customer‐related performance, marketing capability, innovation capability, and their complementarity are essential for attracting, satisfying, building relationships with, and retaining customers. On the other hand, this complementarity would be considerably less important if firms placed greater emphasis on achieving superiority in innovation‐related performance. In contrast to many existing studies, this study is the first to model the roles of both innovation capability and marketing capability in mediating the relationship between market orientation and specific performance outcomes (i.e., innovation‐ and customer‐related outcomes).     

Interplay between internal investment and alliance specialization in R&D and marketing

A firm's efforts to build its technological and marketing capabilities are not limited to internal investments but can be extended to include external knowledge acquisitions. We examine the interaction between a firm's specialization in R&D or marketing through its internal investments and its alliances in two different industrial contexts. Our results, based on secondary data sources such as Compustat and SDC Platinum from 1985 to 2009, show that the interaction effects of internal specialization and alliance specialization are contingent on the types of tasks (i.e., R&D and marketing) and the industrial context (i.e., high- and low-tech industries). Our findings indicate that a firm in a high-tech industry is able to achieve greater gains by complementing its internal focus on R&D with its external focus on marketing or by focusing on R&D both internally and externally. In contrast, a firm in a low-tech industry is able to achieve greater performance when R&D and marketing complement each other, without regard for how they are aligned through internal investments and alliances. The firm is also able to improve its performance by focusing on marketing both internally and externally. These findings provide new insights into the complementarity between internal investments and alliances.     

Organizing for Inbound Open Innovation: How External Consultants and a Dedicated R&D Unit Influence Product Innovation Performance

Firms increasingly acquire technological knowledge from external sources to improve their innovation performance. This strategic approach is known as inbound open innovation. The existing empirical evidence regarding the impact of inbound open innovation on performance, however, is ambiguous. The equivocal results are due to moderating factors that influence a firm's ability to acquire technological knowledge from external sources and to transform it into innovation outputs. This paper focuses on a relevant yet overlooked category of moderating factors: organization of research and development (R&D). It explores two organizational mechanisms: one informal and external‐oriented (involvement of external consultants in R&D activities) and one formalized and internal‐oriented (existence of a dedicated R&D unit), in the acquisition of technological knowledge through R&D outsourcing, a particular contractual form for inbound open innovation. Drawing on a capabilities perspective and using a longitudinal dataset of 841 Spanish manufacturing firms observed over the period 1999–2007, this paper provides a fine‐grained analysis of the moderating effects of the two organizational mechanisms. The involvement of external consultants in R&D activities strengthens the impact of inbound open innovation on innovation performance by increasing marginal benefits of acquiring external technological knowledge through R&D outsourcing. Moreover, it reduces the level of inbound open innovation to which the highest innovation performance corresponds. Instead, the existence of a dedicated R&D unit makes the firm less sensitive to changes in the level of inbound open innovation, by reducing marginal benefits of acquiring external technological knowledge through R&D outsourcing, and increases the level of inbound open innovation to which the highest innovation performance corresponds. The results regarding the role of informal and formalized R&D organizational mechanisms contribute to research on open innovation and absorptive capacity, and also inform managers as to what organizational mechanism is recommended to acquire external technological knowledge, depending on the objectives that the firm pursues.