Who explores further? Evidence on R&D outsourcing from the survey of research and development

Building off the resource‐based view and the knowledge‐based view, our study aims to examine determinants of firms’ R&D outsourcing, using annually‐conducted firm‐level survey data of Japanese R&D companies from 1984–2012. This survey allows us to measure strategic R&D outsourcing, isolated from those more for cost‐reducing, such as prototyping, testing and inspecting. The results corroborate the argument of complementarity in scale between internal R&D and R&D outsourcing. We also find that firms employing more doctorate holders and diversifying in knowledge spaces tend to make more use of R&D outsourcing. This study sheds light on firms’ absorptive capacity, associated both with higher‐order R&D human capital and diversified knowledge spaces, as determinants of R&D outsourcing.     

Is R&D risky?

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

Measuring technological capability and performance

The relation between technological capability and firm performance is more complex than what is generally assumed. Researchers have not been able to consistently find empirical support for this apparently 'simple' relation. The objective of this study is to illustrate the theoretical and empirical complexity of this relation and explain why the use of different measures can lead to dramatically different results. In this study, we analyse the technological capability–performance relation in 201 large US public manufacturing companies. A variety of patent statistics and a measure of research & development (R&D) intensity are used as indicators for technological capability. The following six measures of performance are used as dependent variables: return on assets, return on equity, return on sales, market value, market value added, and economic value added. The results vary substantially, depending on which measures are used for the independent and dependent variables. A detailed understanding of precisely what each measure represents and the shortcomings of each measure is needed to explain why these differences exist. We conclude by discussing the effectiveness of a variety of technological capability measures using patent citations, and illustrate why a measure of R&D spending and the total number of patents are usually not valid measures of a firm's technological capability.     

Unveiling dimensions of organizational culture: an exploratory study in Malaysian R&D organizations

Previous literature indicated that research and development (R&D) activities are influenced, to a large extent, by the culture of the organization. While these studies have identified elements of culture that are conducive to R&D, identifying the existing dimensions of organizational culture in Malaysian R&D organizations has not been empirically explored. The measures for this study were originally developed for the sole purpose of capturing cultural aspects in R&D organizations in the Malaysian context. These measures were developed based on the relevant issues discovered from exploratory case studies and nine categories of cultural values identified from the literature. A sample of employees (n = 198) from 45 R&D organizations took part in this study. Factor analysis was adopted to uncover common underlying dimensions (factors) of the organizational culture construct. The findings suggest that the organizational culture construct in R&D organizations may best be represented through a structure of eight factors. The eight factors are teamwork and knowledge sharing, empowerment and recognition, conformity and impediments to R&D, risk‐taking, customer orientation, autonomy, social networking, and organizational design. Despite some methodological issues that arose from this study, this model has the potential to become a management instrument to measure the underlying culture in R&D organizations. R&D managers can deploy this model to establish the baseline level of research culture in their respective units and thus provide the foundation for management initiatives to drive R&D activities. This model can also be used as benchmarking parameters when an R&D organization intends to evaluate various aspects of their organizational culture in relation to others that are considered to be leaders in the industry.     

R&D and marketing productivities from cross-sectional data: A study of German chemical corporations

Abstract
The adoption of EC-regulations in German law on annual corporate reporting has introduced two new formats for profit and loss statements. Using this newly available data from a sample of German chemical companies, production functions are estimated with sales as an output measure, and R&D and marketing as input measures. It is shown that these factors are peripheral rather than complete substitutes. Marginal productivities of the factors imply the opportunity for relative increases of R&D expenditure over marketing expenditure.     

Outside CEOs and innovation

Research Summary: Innovation is the principle driver of firm and economic growth. Thus, one disturbing trend that may explain stagnant growth is a 65% decline in firms’ R&D productivity. We propose that the rise of outside Chief Executive Officers (CEOs) may be partially responsible for the decline because those CEOs are more likely to lack technological domain expertise necessary to manage R&D effectively. While this proposition was motivated by interviews with Chief Technology Officers (CTOs), we test it at large scale. We find that firm R&D productivity decays during the tenure of outside CEOs relative to that of inside CEOs. We further find this effect is more pronounced for firms with high R&D intensity and for firms employing outside CEOs with more remote experience, lending circumstantial support for the underlying assumption regarding lack of expertise. Note that this is not a call for boards to avoid outside CEOs, rather it is recommendation to consider the implications for innovation. Managerial Summary: While outside CEOs offer advantages over internal candidates, we argue one unintended consequence is weaker innovation. This argument was prompted by two coincident trends: a 65% decline in companies’ R&D productivity and a doubling of outside Chief Executive Officers (CEOs). The argument was reinforced by interviews with Chief Technology Officers (CTOs), who recounted shifts in orientation from R&D as an investment to R&D as an expense that occurred shortly in response to a new CEO. We felt this shift was more likely with outside CEOs because they may lack technological domain expertise necessary to effectively manage R&D. Our results are consistent with the argument—company R&D productivity decreases under outside CEOs. Note, however, that we don’t advocate avoiding outside CEOs, rather we recommend R&D firms consider technological domain expertise during CEO hiring.     

Measuring firms’ imitation activity

Although imitation is more abundant and prevalent than innovation in firms’ product and process development activities, it has been understudied in research on innovation and R&D management. For example, a valid and reliable objective firm-level measure of the intensity of imitation activity is lacking in the extant literature. This measure is necessary to understand the antecedents and consequences of firms’ imitation activity, which has implications for R&D management. In this paper, we present novel methods that employ patent infringement litigations data to improve on the validity and reliability of measuring firms’ imitation activity. We validate our proposed measure by presenting a first model and test of R&D as a multiple-output production function with R&D expenditure as the primary input, and innovation and imitation as joint outputs. This is in contrast to current R&D models as a single-output production function of either innovation or imitation. This study uses a sample of 227 public firms from the computer, semiconductor, and pharmaceutical industries in the United States during 1991–2010.     

The R&D Effectiveness Index: A Metric for Product Development Performance

Measuring the overall success of product development efforts has been frustrating because there is no generally recognized metric to measure effectiveness. The R&D Effectiveness Index is introduced to address this need. It measures effectiveness by comparing the profit from new products to the investment in new product development. The article provides the details for calculating the index along with alternative interpretations. Michael McGrath and Michael Romeri report that this index was validated through a study of 45 electronic systems companies. They found a strong relationship between the R&D Effectiveness Index and other performance factors and believe that the R&D Effectiveness Index can be used to compare performance, measure improvement, and evaluate business units. Its application is illustrated in a case study.     

What factors determine the subsidiary mode of overseas R&D by developing-country MNEs? Empirical evidence from Chinese subsidiaries abroad

This study examines the determinants of the subsidiary modes of overseas research and development (R&D) by Chinese multinational enterprises (MNEs). Based on resource-based view and absorptive capabilities, we propose that financial resources and technological resources have different effects on the selection of overseas R&D subsidiary modes, which are competence-exploiting mode or competence-creating mode. This is supported by the empirical results in this paper using data from a survey of 40 Chinese overseas R&D subsidiaries. The results demonstrate that the parent firms with richer financial resources and more R&D expenses prefer the competence-exploiting mode, while the parent firms with more R&D personnel favor the competence-creating mode. Additionally, this study finds that firms matching our mode choice model tend to enjoy a higher level of innovative performance.     

Partial adjustment toward target R&D intensity

Existing research assumes that once firms have determined their target R&D intensity, they can adjust instantaneously and fully to their target R&D intensity, regardless of their past R&D intensity. In this study, we draw on the partial adjustment framework to examine the dynamics of firms' adjustment toward their target R&D intensity. We find that firms usually do not adjust instantaneously or fully to their target R&D intensity; they typically close half of the gap between their past and target R&D intensity in a year. Furthermore, we find that the speed of adjustment varies widely across firms. Firms with more cash flows, less debt, and more new equity financing have higher speed of adjustment. We draw implications for the dynamics of R&D investments and Schumpeterian competition.     

Decision parameters in global R&D management

This paper addresses the question of which variables have what kind of impact on the decision to locate new R&D facilities in countries different from the home country of a corporation. In the first section of the paper we demonstrate the complexity of this question by referring to empirical research, managerial statements and literature. We then develop a conceptual model for the location decision of international R&D activities. This is based on Porter's (1990) framework of the factors constituting the competitive advantage of nations. In the final section of this paper we show how such a model helps us to understand and also to explain a number of management issues related to global R&D activities.     

Strategic management of intangible assets and value drivers in R&D organizations

This paper takes a resource-based view of the R&D process. Based on the literature, we forward a theory that allows us to predict the dynamic interaction and transformation of five key resources, namely human, relational, organizational, monetary, and physical. Utilizing visualization tools allows us to test this theory on various levels in order to draw insights from the data. The output of the analysis improves the strategic understanding of an organization. In particular, it improves the understanding of how intangible resources drive the value creation in an R&D organization. Further analysis of the data allows us to identify resources that are either under utilized or over utilized, which might indicate inefficiencies in the organizational performance.     

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

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

Managing innovative R&D teams

Successful R&D groups not only generate innovative ideas, but also transfers these newly created concepts through the organizational system for economic gain. While innovation is not a random process, managers often argue that R&D performance is hard to measure and even more difficult to manage. An exploratory field study into technology-oriented R&D environments determines the principle factors that influence innovation-based performance of R&D teams. The results identify specific barriers and drivers to innovative team performance and provide insight into the type of an organizational environment and managerial leadership that is conducive to innovative R&D team performance. The data further suggest that many of the performance variables have their locus outside the R&D organization. Yet, managerial leadership style, both at the R&D team level and at senior management, has significant impact on creativity that ultimately affects R&D performance.     

区域工业企业R&D投入产出绩效的DEA评价及分析

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

How to leverage the impact of R&D on product innovation? The moderating effect of management innovation

Although research and development (R&D) is a key indicator of (technological) innovation, scholars have found mixed results regarding its effect on product innovation and firm performance. In this paper, we claim that variations in R&D effectiveness can be explained by changes in a firm’s social system, in particular in its management innovation. It is still unclear how management innovation influences R&D effectiveness in terms of product innovation. In this study, we address this theoretical and empirical gap in the innovation literature. Our theoretical arguments and findings from a large-scale survey among Dutch firms show that R&D has a decreasingly positive relationship with product innovation, particularly for firms with low levels of management innovation. However, in firms with high levels of management innovation, this relationship becomes more J-shaped, especially in small and medium-sized firms. Our findings also appear to indicate that management innovation may be more important for competitive advantage than just R&D. Overall, our insights reveal that management innovation is a key moderator in explaining firms’ effectiveness in transforming R&D into successful product innovation.     

Persistence in R&D Performance and its Implications for the Granting of Subsidies

We study whether R&D subsidies can be used to encourage sustained R&D performance. To this end we measure the importance of true state dependence (TSD) in R&D performance and of subsidies’ inducement effects. Estimates that are based on a panel of Spanish manufacturing firms that are observed during the period 1998–2009 reveal that both magnitudes are positive and significant. Simulations that are carried out with the estimated parameters show that subsidies can generate permanent inducement effects for 9 % of Spanish manufacturing firms. The subsidy shares that are needed to generate permanent inducement effects among small firms (firms with fewer than 200 employees) are larger than those that are needed to generate permanent inducement effects among large firms (firms with 200 or more employees).     

The allocation of R&D resource

Abstract
The allocation of R&D resource in a multi-business organisation is often based more on current operating performance than on the relative potential for technological development of the businesses. The approach suggested in this paper attempts to overcome these problems by linking R&D allocation very closely to business strategy. The two key concepts are technology leverage, i.e. the extent to which technology can change the business environment in an industry to yield competitive advantage, and business leverage i.e. the current competitive strength of an individual business within an industry. Where technology leverage is weak, competitive advantage will be mainly dependent on factors other than R&D and it is suggested that levels of R&D effort at or below 1 % of turnover are appropriate. Where technology leverage is strong, R&D can be effective in maintaining strong business leverage by achieving technology mastery or in transforming a weak business position by creating a technological discontinuity. R&D intensities ranging from 3 to 15 or more % of turnover are thought to be appropriate in these cases. This framework can be used for policy debates on R&D allocation, for example whether the R&D allocation is appropriate for the business strategy or whether R&D could spearhead a more expansionist business strategy. The framework has been successfully used in ICI Chemicals and Polymers Limited during the annual R&D budget process.     

企业R＆D商业化能力研究

知识经济的飞速发展凸显出技术创新的重要性，企业R＆D商业化能力作为企业技术创新能力的重要组成部分越来越被人们所重视。本文认为，企业R＆D商业化能力的强弱在很大程度上影响着R＆D投入的收益多少．企业可以从多个层次来改善其R＆D商业化的水平．不同的商业化途径对R＆D的盈利水平亦有着显著影响。企业应该重视其R＆D商业化能力的改善．因为．它为企业在技术创新活动中实现真正意义上的自主提供了必要的资源支持．是企业实现自主创新战略的必然选择。     

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

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