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.     

Shareholders’ agreements and voting power: evidence from Italian listed firms

This work provides an empirical investigation of shareholders’ agreements signed in Italy over the past decade. The evidence shows that agreements produce a remarkable reshuffling of voting power (Shapley value) among participants. In particular, the first owner gains much voting power at low levels of ownership concentration, and his gain is decreasing in his ownership stake; the opposite happens for the other participants. In addition, the likelihood that a supermajority rule is included in an agreement contract is increasing in the first owner's share of equity. These findings are consistent with the hypothesis that agreements are used to correct situations where the first owner's power is at one of the two extremes: either too low (leading to insufficient monitoring over managers and gridlocks in decision-making) or too high (enabling him to extract large private benefits of control).     

Bank distress and firms’ investment during the Great Recession - evidence from Ireland

This article investigates the impact of bank distress on firms’ performance using unique data during the Great Recession for Ireland. The results show that bank distress, measured as banks’ credit default swap spreads (CDS), has negatively and statistically significantly affected firms’ investment expenditures. Interestingly, firms with access to alternative sources of external finance are not impacted by bank distress. The results are robust to accounting for external finance dependence, demand and trade sensitivities, which affect firm performance and the demand for credit.     

To what extent do earnings affect the R&D decision of Chinese manufacturing firms?

ABSTRACT

As R&D activities are involved in inherent uncertainty of large investment, high risk and long return periods, earnings, as the main source of internal financing, have been a significant factor of R&D decision in the firms. In contrast to the previous research, this study investigates the impacts of firm’s earnings on R&D decision, in which earnings are measured by the indicators of earnings level, earnings quality and earnings persistence, while separating firm R&D activity into two stages of (i) the decision to undertake R&D activity and (ii) the amount to be invested on innovation activities. We document that earnings level can increase the probability of undertaking R&D activity, but has no effect on R&D investment intensity. Earnings quality and earnings persistence have a promotional effect on both stages of R&D decision. The empirical evidence of the subsamples shows that the impacts of earnings are heterogeneous across different ownership and technology-intensity firms.     

Credit and business cycles’ relationship: evidence from Spain

This study provides evidence on the interaction between business and credit cycles in Spain during the period 1970–2014. The paper works on three analyses: the cycle turning points are identified; the main features of credit and business cycles are documented; and in both cycles the causal relationship is assessed. We find differences in the features of the business and credit cycle phases, which lead to a scant degree of synchronization over time. The lack of synchronization might be a sign that the cyclic interaction could be non-contemporaneous. Our results reveal that there is causation. A significant lagged relationship between business and credit cycles is found; specifically, fluctuations of the business cycle lead fluctuations of the credit to non-financial corporations and a lag exists with respect to the fluctuations of the credit to households. We also examine episodes of credit boom and credit crunch. In the period 1970–2014, Spanish credit booms did not involve deeper business cycle contractions and credit crunches were not associated with deeper and longer business cycle contractions. These differences are related with the great importance of the real estate sector in Spain.     

Home-country environment and firms’ outward foreign direct investment decision: Evidence from Chinese firms

This paper takes a holistic view and examines the environmental effect of the home country on firms’ outward foreign direct investment (OFDI) decisions. We construct an economic growth index to assess the overall economic environment of Chinese regions and find that the home country’s business environment is negatively associated with firms’ decisions to invest abroad, and that such a negative relationship can be intensified for firms with state ownership or without an export network. Moreover, unlike previous literature, we look at both the environmental effect on OFDI decisions and the consequential impact of OFDI on firm performance. We employ propensity score matching and difference-in-differences methods, as well as the Heckman two-step model, for our estimations. Our results show that OFDI does indeed improve Chinese firms’ productivity and sales. This paper, therefore, contributes to the literature by identifying a range of home country business environmental factors that have a combined effect on firms’ OFDI decisions, adding to a more comprehensive understanding of OFDI originating from emerging economies.     

Foreign capital,credit constraints and continuity of firms’ R&D

In this article, we investigate the role of foreign capital participation as a means for firms to overcome the obstacle posed by credit constraints to sustain R&D investments. Using data for Spanish manufacturing firms in the period 1990–2006, we show that firms with foreign capital are significantly less likely to stop already initiated R&D projects and also more likely to sustain R&D investment when facing credit constraints. Our results are robust to positive selection into foreign capital participation, which we control through a set of variables chosen from a propensity score estimation, and to firms’ fixed-effects.     

R&D based knowledge capital and future firm growth: Evidence from China’s Growth Enterprise Market firms

Building upon a dynamic stochastic general equilibrium (DSGE) model, this paper examines the role of knowledge-based capital (KC) in improving firms’ future growth in productivity. Based on the analysis of Chinese listed firms from 2006 to 2017 in the Growth Enterprise Market (GEM), we find KC often generates endogenous movements in productivity and earnings over the business cycles, suggesting that the nature of KC is pro-cyclical. Moreover, investment in KC is often classified as a corporate expense and is thus deducted from the current year’s profits. Therefore, firms with high R&D investments have significantly higher future productivity growth but lower current profitability than do those with lower R&D investments. Given these characteristics, KC’s benefits to productivity and future earnings are thus not immediate. For faster growth in the long term, firms should continue investing in KC even if they may face a short-term fall in corporate earnings as a result of internal knowledge investment, especially for fast-growing GEM firms.     

How open search strategies align with firms’ radical and incremental innovation: evidence from China

The purpose of this paper is to describe the ways in which open search strategies (i.e. open search breadth and open search depth) align with firms’ radical and incremental innovation. By analysing survey data collected from 162 firms in Chinese high-tech markets, we found that a firm pursuing radical innovation benefits more from open search breadth than open search depth to achieve its performance goals; in contrast, a firm processing incremental innovation benefits more from open search depth than open search breadth to improve its performance. Based on these results, managers should pay attention to the fit between open search strategies and radical/incremental innovation. This study not only contributes to the studies of search strategies by identifying the parallel relationship of open search strategies and two types of innovation, but also enriches the theory of open innovation with an empirical analysis.     

Human capital and firms’ innovation: evidence from emerging economies

ABSTRACT

We explore the relationship between human capital and firms’ innovation in emerging economies. Most papers consider the formal knowledge developed in R&D laboratories as a major source of innovation. However, a critical portion of knowledge required for innovation resides in human resources and is created outside any formalised R&D activity. We consider that, to improve their technological capabilities, firms should invest in different forms of human capital, namely highly educated workforce and experienced managers, but also in strategic human resource (HR) practices aimed at developing human capital by increasing employees’ firm-specific technical skills and competences. Besides looking at the type of innovation outcomes, we place greater emphasis on the strategies of innovation development, as these should signal an improved firms’ ability, not just to innovate, but to put their own creative effort in the development of innovation. Our results contrast with the traditional view of firms in emerging economies as mainly relying on the external acquisition of innovations, by showing their actual ability to develop new technologies. In this respect, HR practices aimed at fostering employees’ learning and autonomy at work appear more important than the educational attainment of workers, whilst the experience of managers does not seem effective.     

How does FDI affect domestic firms’ wages? theory and evidence from Vietnam

This paper explores the role of inward foreign direct investment (FDI) as a determinant of domestic firms’ wages, namely wage spillovers. We first construct a theoretical model to demonstrate that the presence of FDI firms affects domestic firms’ expected average wages via productivity spillovers and a cut-off capability. We then estimate FDI-induced wage spillovers by employing IV-GMM estimator with a five-year panel dataset of a growing service industry in Vietnam. Despite FDI firms on average pay 2.25 times that of domestic firms, they put a downward pressure on domestic firms’ wages. A one percent increase in FDI presence causes domestic firms to cut average wages by 2.03 percent. The estimations also find that firm-specific features are attributable to significant differences in their wages as well as FDI-linked wage spillovers.     

Board of directors’ quality and firms’ debt financing: the moderating effect of insider ownership – evidence from Omani firms

This study aims to examine the direct effects of board of directors’ quality and insider ownership on firms’ capital structure and the moderating effect of insider ownership on the relationship between board of directors’ quality and firms’ capital structure. The sample of this study consists of the time period 2005–2011. The final sample consists of 535 firm-year observations of public nonfinancial firms listed on the Muscat Securities Market (MSM). The hypotheses are tested using a random effects model. The results reveal that the coefficient sign on the board of directors’ quality is as predicted, but the coefficient sign is insignificant. Further, the results show that insider ownership is positively associated with leverage at the significant level of 10%, suggesting that the inside substantial shareholders employ higher leverage. With regard to the moderating effect of insider ownership, the findings show that the effect of the board of directors’ quality-leverage relationship becomes negative and stronger with increasing insider ownership.     

How R&;D investments influence TFP growth: Evidence from China’s large and medium-sized industrial enterprises

This paper investigates the potential channels through which R&D may influence TFP growth using industry-level panel data of China’s large and medium-sized industrial enterprises over the period of 2000–2007. Comparing with existing literature, we provide a closer look of the relationship between R&D and TFP growth by decomposing TFP growth into efficiency change and technical change components using Malmquist productivity index and distinguishing between upstream R&D spillovers and downstream R&D spillovers. We find TFP grow slightly during 2000–2007, and R&D investment indeed serves as an engine of productivity growth just as endogenous growth theories argued, which is largely because R&D accelerates technical progress even it also results in enlarging technical inefficiency. However, we find a robust negative effect of downstream R&D spillovers on TFP growth, the effects of upstream is positive but not statistically significant. In addition, we do not find the positive effects of human capital on TFP as endogenous growth theories indicated, but find human capital severs as “assimilation device” for R&D spillovers both in promoting TFP growth and increasing technical efficiency even the effects on technical progress is adverse.     

Does issuing equity help R&D activity? Evidence from unlisted Italian high-tech manufacturing firms

This paper evaluates the causal effect of issuing equities on the probability that a firm engages in R&D activity. Equity is a better source of external finance than debt for innovation. It does not require collateral, does not exacerbate moral hazard problems connected with the substitution of high-risk for low-risk projects, quite common when using debt, and, unlike debt, does not increase the probability of bankruptcy; equity also allows investors to reap the entire benefit of the returns of successful innovative projects. This paper focuses on high-tech firms for which asymmetric information problems are more pervasive. Implementing an instrumental variable estimation, we find that issuing equity increases the probability that the firm has R&D expenditures by 30–40%. We detect considerable heterogeneity in this effect: the impact of issuing equity is significant only for small, young and more highly leveraged high-tech firms. We also find interesting evidence that issuing equity increases R&D expenditures in relation to sales.     

What is the optimal rate of R&D investment to maximize productivity growth?

Governments in modern economies devote much policy attention to enhancing productivity and continue to emphasize its drivers such as investment in R&D. This paper analyzes the relationship between productivity growth and levels of R&D investments. The econometric analysis shows that more than 65 per cent of productivity growth variance is due to its dependence on gross domestic expenditure on R&D expressed as percentage of GDP (GERD). Economic analysis shows that productivity growth = f(GERD) is a concave function downwards due to diminishing returns to research investments. In addition, the research shows that the range of GERD between 2.3 per cent and 2.6 per cent maximizes the long-run impact on productivity growth and it is the key to sustained productivity and technology improvements that are becoming more and more necessary to modern economic growth.     

Individual’s financial investment decision-making in reward-based crowdfunding: evidence from China

This article extends the work of Cecere et al. (Appl. Econ., 49(57): 5802–5813, 2017) and explores the antecedents of backers’ decision to invest in projects from eight categories on a reward-based crowdfunding platform in China. We extract data from 2011 to 2016 from the pioneer Chinese reward-based crowdfunding site ‘Demohour’. Our empirical investigation using OLS reveals that feedback score, social capital (followers on Weibo, project sharing on social media) and project quality (number of updates) are key motivating factors in investment decision and subsequently, project success or failure. Robustness tests also confirm the findings.     

Beyond R&D activities: the determinants of firms’ absorptive capacity explaining the access to scientific institutes in low–medium-tech contexts

A firm's search strategy is to use innovation inputs from external sources such as suppliers, clients, competitors, universities and research transfer offices (RTOs) to complement their in-house knowledge. Thus, a firm needs to be capable of identifying and valuing the potential value of certain external knowledge, i.e. absorptive capacity. Most of the studies regarding search patterns are reduced mostly to medium–high- and high-tech industries in which only the level of investment in R&D activities as determinant of a firm's search strategy is considered. In addition, when the flows of external knowledge arise from firm–university interactions, the evidence is still inconclusive, specifically for SMEs and low–medium-tech environments. Therefore, the objective of this paper is to explore the pattern of a firm's search strategy through its absorptive capacity to acquire external flows of knowledge from universities and RTOs. The paper draws especially on the role of non-R&D innovation activities in low–medium-tech sectors. Seven hundred and forty three innovative firms from the Spanish Ministry of Industry are analysed. Results suggest that human resources and other non-R&D activities are the core drivers explaining the cooperation agreements to access external knowledge from universities and RTOs. Surprisingly, R&D expenditures do not contribute to the explanation. This paper presents important implications for policy-makers beyond the classic R&D policies.     

Foreign direct investment in R&D and domestic entrepreneurship in China’s manufacturing industries

This paper argues that internationalization of innovation and the related spillovers can also affect the likelihood of firm entry and exit into an industry. By making use of firm-level panel data from China over the period 2005 to 2007, this paper examines the impact of foreign direct investment (FDI) in research and development (R&D) and the related linkages on entry and exit likelihoods of domestic firms in (i) transport equipment and (ii) electrical machinery and equipment manufacturing industries. In order to evaluate the region-of-origin effect, this paper also separately examines the impact of FDI in R&D originating from (i) all countries except Hong Kong, Macau and Taiwan and (ii) Hong Kong, Macau and Taiwan. Furthermore, the impact of FDI in R&D on entry and exit of Chinese firms in the two industries is examined by splitting the data into large and small firms within the two industries. The results of the pooled probit regression reveal that FDI in R&D and the related spillovers can have a significant impact on the likelihood of entry and exit of domestic firms in transport equipment and electric machinery and equipment industries. The empirical analysis also suggests that the impact of changes in FDI in R&D and the related spillovers varies across firm size.     

The productivity impact of R&D investment: are high-tech sectors still ahead?

Our aim is to investigate the relationship between a firm's R&D expenditures and its productivity, looking at sectoral peculiarities. We use a unique longitudinal database consisting of 1809 US and European manufacturing and service firms over the period 1990–2008. Our main findings can be summarised as follows. Consistently with previous literature, the knowledge stock has a significant positive impact on a firm's productivity. More interestingly, the coefficient turns out to be significantly larger in the R&D-user services and high-tech manufacturing sectors than in the non-high-tech manufacturing sectors. Contrary to the ‘latecomer advantage’ approach, these outcomes suggest that firms in high-tech sectors are still ahead in terms of impact on productivity of R&D investments.