Inward technology licensing and firm performance: a longitudinal study

Inward technology licensing (ITL) is often viewed as an important strategy adopted by firms to achieve innovation. However, relatively limited research has focused on evaluating the contribution of ITL to firm performance. The gap is all the more surprising since the benefits of external technology acquisition on innovation output have been emphasized in a lot of the literature. This study therefore sets out to investigate the extent to which the investment of ITL by firms affects their performance. In view of the relative abundance of data on variables for a longitudinal investigation, this analysis concentrates on the electronics-manufacturing industry. The longitudinal sample allows this examination to control the more extraneous effects and to provide more convincing evidence for examining the relationship of ITL and firm performance. A total of 341 Taiwanese electronics-manufacturing firms balanced over the period from 1998 to 2002 is taken as the analytical sample. The basic statistics indicate that acquiring technology externally shows an increasing tendency within the firms. The analyses, from the least square dummy variable method, reveal that ITL per se does not provide a significant contribution to firm performance; however, the positive impact of ITL on their performance increases with the level of the firms' internal research and development (R&D) efforts. Both the checks for robustness and the split-sample analyses validate the results. The findings not only highlight the importance of internal R&D efforts but also suggest that firms had better use ITL as a complement rather than a substitute of internal R&D for their competence.     

Determinants of Inward Technology Licensing Intentions: An Empirical Analysis of Australian Engineering Firms

This article empirically examines the factors that affect Australian engineering firms' propensities or intentions to adopt inward technology licensing (ITL) as a new product development method. Kwaku Atuahene-Gima reports results indicating that the major factors that influence the firm's propensity to adopt ITL are previous ITL experience, perceived relative costs and benefits of ITL, awareness of ITL opportunities, and the firm's internal new product development and R&D capabilities. The findings afford managerial insights into the firm's technology acquisition and marketing strategies.     

The Effects of Knowledge Depth and Scope on the Relationship between R&D Alliances and New Product Development

In this study, we extend the new product development (NPD) literature that proposes that firms' knowledge depth, defined as the reuse of well understood technical knowledge, and scope, defined as the use of newly acquired technical knowledge, and new knowledge accessed from R&D alliances all positively impact NPD. Building on the knowledge‐based view of the firm, we posit that the impact of firms' R&D alliances is limited when their internal knowledge depth and scope are adequate for NPD needs. We suggest that although firms form R&D alliances to gain the right to access external knowledge of R&D alliance partners, they are not obligated to invest in resources to integrate external knowledge from R&D alliances. We propose that they wait to see if their internal knowledge depth and scope prove sufficient for NPD. If the external knowledge proves to be unnecessary, firms choose not to invest the resources required to integrate this knowledge with their internal knowledge. Alternatively, we suggest an increased impact of R&D alliances on NPD when firms are more limited in their internal knowledge depth and scope. We propose that when knowledge depth and scope prove insufficient, firms make the additional investments required to integrate external knowledge from R&D alliances with their internal knowledge stock. This reasoning is consistent with real options theory as it has been applied in alliance research, where strategic alliances are characterized as real options. We find support for our hypotheses using panel data of 738 firm year observations for 143 U.S. biopharmaceutical firms operating in 2007. Our study contributes to the NPD literature and suggests new directions for future research.     

Financing behaviour of R&D investment in the emerging markets: the role of alliance and financial system

This paper examines the financing behaviour of research and development (R&D) investments in emerging markets. Drawing on institutional theory and using panel data of generalized methods of moment estimation for a sample of 302 firms from 20 countries during the period 2003–2015, we find that emerging market firms tend to use internal funds for financing R&D investments. Interesting results emerged when the sample was divided as alliance and non‐alliance firms, and bank‐based and market‐based financial systems. The results show that R&D financing behaves differently for alliance and non‐alliance firms. Alliance firms use both internal and external funds for R&D investments, while non‐alliance firms do not use external funds. We also document that a country's financial system influences the choice of available sources of finance. Firms from countries that follow a bank‐based financial system tend to rely on external funds while firms from countries that follow a market‐based financial system depend more on internal funds for financing R&D investments. This study is important as it provides new evidence on financing R&D investments in emerging countries taking into account the institutional arguments of financing choices, and so should guide stakeholders about appropriate sources of R&D financing.     

Giving fish or teaching to fish? An empirical study of the effects of government research and development policies

This study compares how government research and development (R&D) subsidy and knowledge transfer from universities and public research institutions stimulate a firm's new product development. More importantly, we emphasize that the effects of these governmental R&D policies on new product development can be achieved not only directly, but also via a mediating role – a firm's innovation capability. Furthermore, we test how other external knowledge sources (such as knowledge from universities and public research institutions) interact with government R&D support to stimulate new product development. The results, based on an investigation of 270 Chinese firms, suggest that both government R&D subsidy and knowledge transfer from universities and public research institutions enhance new product development. The results also show that although government R&D subsidy and knowledge transfer from universities and public research institutions has a direct impact on new product development, innovation capability does mediate the above relationships. Moreover, unlike the findings that other external knowledge sources have a direct influence on new product development as indicated by the previous literature, our findings suggest that external knowledge sources substitute with the government R&D subsidies and complement with knowledge transfer from universities and public research institutions. The results confirm the old sayings that teaching to fish (knowledge transfer from universities and public research institutions can complement with other external knowledge sources) is much better than giving fish (government R&D subsidies substitute other external knowledge sources). This paper enriches current literature of government R&D support policies to firm new product development by providing empirical evidences.     

The importance of internal and external R&D network linkages for R&D organisations: evidence from Singapore

This paper examines the importance of internal and external R&D networks for R&D organisations of multinational firms (MNCs) in Singapore and investigates corresponding R&D management requirements in this context, namely a late-industrialising country in Asia. A unique feature of Singapore is its ability to attract 'high quality' foreign direct investment, involving activities of higher value added and more complex technology without having developed full-fledged R&D activities among its business organisations, thus creating a challenging situation for subsidiary R&D managers, both in the internal R&D organisation as well as in the external research environment. This paper analyses these issues.
Based on in-depth interviews with 53 R&D subsidiaries of MNCs operating in Singapore, this paper identifies internal and external R&D management needs. Through our analysis of data gleaned from these interviews, we found that subsidiary R&D managers need to increase and/or maintain the strategic importance of their R&D site internally within their global corporate R&D organisation. This requires constant upgrading of the technological level at the R&D subsidiary and intense communication with headquarters as well as other R&D subsidiaries. Furthermore, our findings indicate that in the external research environment, subsidiary R&D managers need to create an efficient local network of external players. If these internal and external issues are properly addressed, the R&D subsidiary can effectively contribute to the corporate R&D organisation and be a critical partner in the local research network. Lessons learned from the Singapore experience include the need to develop sufficient local expertise as well as to change the mindset of managers to focus on creativity rather than precise execution.     

Strategies for knowledge use in R&D and their implications for innovative performance

We argue that research on R&D strategy and on the use of external knowledge in R&D in particular should differentiate between distinct uses of external knowledge. We distinguish between uses of external knowledge for replication (using knowledge as is) vs. for compounding (building on acquired knowledge by combining it together with internally developed knowledge). We theorize about the respective innovative performance implications of these two strategies and compare them with a self-reliant strategy of internal R&D. We also elaborate contingencies for each strategy, pertaining to firm capabilities and cooperation. We test our predictions using a large sample survey of Dutch innovators in multiple industries. Our findings indicate that compounding firms perform better than replicating firms when the share of sales that consists of innovations that are new to the market is assessed, but they do not outperform firms with an internal R&D strategy. Furthermore, these differences disappear when the share of sales consisting of less novel innovations is studied. This research demonstrates the importance of distinguishing between R&D strategies that replicate vs. compound external knowledge.     

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.     

Clustering and the R&D management of high-technology small firms: in theory and practice

Much of the policy assistance for high-technology small firms (HTSFs) over recent years has been directed at encouraging their research and development (R&D) collaboration through local networking and technology transfer. Following a consideration of why HTSFs are formed, and how they perform R&D in order to cope with the competitive environment, this paper explores the value of external collaborative R&D to internal R&D management, inside geographically concentrated incubators, science parks or clusters. It is concluded that, although R&D collaboration with external partners occurs in limited instances, much HTSF R&D is highly confidential, competitive and wholly internalised. This tendency, as far as it relates to R&D management, is significant in that it minimises the likelihood that local management collaboration between co-located firms will improve the performance of R&D projects.     

Why some firms never invest in formal R&D

In this paper we study the frequency of formal R&D investments. We link real options theory to the knowledge‐based view to explain how a firm's knowledge resources influence its frequency of investing in R&D to establish technological options. Specifically, we propose that a firm that lacks internal knowledge resources is more likely to never invest in R&D, a firm that has both internal and external knowledge resources is more likely to sometimes invest in R&D, while a firm that has internal knowledge resources but lacks external knowledge resources is more likely to always invest in R&D. Copyright © 2010 John Wiley & Sons, Ltd.     

Structuring innovation funnels for R&D projects under uncertainty

An innovative R&D project that creates a great business opportunity usually involves high technological and market uncertainty. It is easy to see that developing only one solution approach in the R&D project is too risky. The selectionism or the parallel development strategy can be applied to construct an innovation funnel that increases the flexibility to hedge against the uncertainty. However, little research has been devoted to selection of which alternative solution approaches should be included for the innovation funnel. This research aims to develop a simulation-based methodology that can help R&D managers evaluate and construct an innovation funnel containing promising alternative approaches for a novel R&D project to maximize project profit, while minimizing downside risk within an allowable loss. A new risk measure based on the concept of conditional value-at-risk from the finance literature is defined to evaluate the project downside risk. An example of drug development project is used to illustrate the proposed methodology. We recommend that firms should improve their capabilities on market research, concept screening, and R&D efficiency for taking full advantages of selectionism.     

How Internet technologies impact information flows in R&D: reconsidering the technological gatekeeper

Previous studies have firmly established the technological gatekeeper to be a key node in the innovation process – acquiring, translating, and disseminating external information throughout the R&D unit. However, the gatekeeper concept has received modest attention in recent times. We argue that the concept needs to be re‐examined in light of the recent advances in Internet technologies that have dramatically altered how knowledge workers source and share their information. Drawing on social network analysis and interview evidence from a medical devices R&D group, we find that the gatekeeper role is still vital, but no longer needs to be performed by a single individual. Instead, the modern R&D group can keep abreast of the latest technological advances through a combination of Internet‐enabled internal and external communication specialists. This study makes a number of important contributions. The gatekeeper theory is extended through the development of an updated conceptual framework. We also discuss the practical implications of our findings and advise R&D managers on how to organise resources to maximise optimal information flows.     

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.     

Influence of task type on the relationship between communication and performance: the case of software development

The relationships between communication patterns and performance of software development projects mostly resemble those of technical services, and not development projects, in hardware R&D. The local focus of software development projects in their information requirements is emphasized by the positive influence only of the informal and mostly internal literature, while external contacts, participation in conferences, and formal and external literature were inconsequential. The implications are two-fold: a) on the conceptual level they suggest that a trade-off between coordination and innovation requirements of the task might be an important determinant of optimal communication patterns; b) on the practical level it suggests that 'software development' consists of 'software engineering' and 'software production'. Consequently, it should be recognized that as such, these activities should be managed differently—the former as R&D, the latter as manufacturing.     

How do dynamic capabilities transform external technologies into firms’ renewed technological resources? – A mediation model

How externally acquired resources may become valuable, rare, hard-to-imitate, and non-substitute resource bundles through the development of dynamic capabilities? This study proposes and tests a mediation model of how firms’ internal technological diversification and R&D, as two distinctive microfoundations of dynamic technological capabilities, mediate the relationship between external technology breadth and firms’ technological innovation performance, based on the resource-based view and dynamic capability view. Using a sample of listed Chinese licensee firms, we find that firms must broadly explore external technologies to ignite the dynamism in internal technological diversity and in-house R&D, which play their crucial roles differently to transform and reconfigure firms’ technological resources.     

Towards networked R&D management: the R&D approach of Sonera Corporation as an example

In this paper the authors delineate the challenges of a dynamic environment to R&D management. The authors build on most recent ideas, such as the dynamic capability view of the firm, as strategic foundation for modern R&D management. Collaboration is emphasized as a meta-capability for innovation. These ideas are merged into a 'Networked R&D Management' approach that emphasizes internal and external collaboration networks as critical for companies operating in a dynamic business environment. The approach is illustrated with ICT industry as an example. The implementation of Networked R&D Management is reflected in the illustrative case discussion of R&D management of Sonera Corporation.     

Toward the development of benchmarking tools for R&D project management

This paper presents an audit model for the process of R&D project management that can be used to check the robustness and repeatability of processes and provide a template for internal and external benchmarking. The intention is to offer a 'fine-grained' model focusing rather closely on the R&D activities within the broader innovation process, thus complementing the more widely based innovation audit models that already exist.
Based on field-work in six business units in ICI and five companies from other industries, the paper sets out three major variants of the R&D project management process. These variants reflect the fact that R&D projects take place in different circumstances and have different objectives.     

Leveraging internal and external experience: exploration,exploitation, and R&D project performance

Although one tenet in the alliance literature is that firms learn from prior experience, we posit that any potential learning effects depend on the type of experience. In particular, we hypothesize that alliance exploitation experience has positive effects on R&D project performance, while alliance exploration experience has negative effects. We further posit that an internal exploration competence allows firms to leverage their external exploitation experience more fully. In contrast, when firms combine internal exploitation experience with external exploration experience, the negative effects on R&D project performance become more pronounced. To test this integrative model of organizational learning, we leverage a unique and detailed dataset of 412 R&D projects in biotechnology conducted by large pharmaceutical companies between 1980 and 2000. Using a competing risk event history model predicting successful product approval versus project termination, we find support for our theoretical model. Copyright © 2010 John Wiley & Sons, Ltd.     

Evaluating internal and external knowledge sources in firm innovation and productivity: an industry perspective

Both internal knowledge – investment in internal R&D and information and communication technologies (ICT) as well as external knowledge – knowledge spillovers and active collaboration with partners are rapidly fostering firm productivity and innovation. In this study, we investigate the role of internal and external knowledge in firm productivity and innovation. In addition, we test interactions between investment in R&D and ICT as well as between knowledge spillovers and knowledge collaboration in their association to firm innovation and productivity. We use a recombinant innovation approach and four samples for firms in manufacturing, creative, ICT and science, and professional services industries during 2002–2014 and for pre-and post-crisis periods to perform our analysis. In addition to innovation and productivity, we also examine the role of internal and external knowledge as a conduit to the development of innovation internally and the co-creation of innovation with external partners. Our results lead to managerial and policy implications.     

Technology sourcing and output of established firms in a regime of encompassing technological change

This paper argues that when the technological basis of an industry is changing, the firm's approach to technology sourcing plays a critical role in building the capabilities needed to generate new technical outputs. Using survey and archival data from the U.S. pharmaceutical industry during the period 1981–91, we find that different approaches to technology sourcing (internal R&D and external R&D) are related to different types of biotechnology‐based output at the end of the period. Internal R&D was positively associated with patent output. Acquisition activity was positively related to number of biotechnology‐based products. Greater use of R&D contracts and licenses was associated with stronger reputation for possessing expertise in biotechnology. These findings underscore the importance of taking a multifaceted approach to technology sourcing in order to build the absorptive capacity needed to generate new technical output. Surprisingly, we also found that involvement in joint ventures was negatively related to patent output. This raises interesting questions about the strategic use of joint ventures in a regime of encompassing technological change. Copyright © 2003 John Wiley & Sons, Ltd.