Exploring the effect of diversification strategy on R&D intensity using quantile regression: evidence from France

This study examines the relationship between firm diversification strategy and R&D intensity for a sample of large French companies between 2008 and 2012. Applying quantile regression, we provide evidence that the choice of diversification affects R&D intensity in a differentiated way. The results indicate that a low level of diversification (below the twentieth quantile) has no significant impact on R&D intensity. Conversely, a moderate or high level of diversification has a negative and significant impact on R&D intensity. These findings suggest that R&D intensity seems to be significantly higher in related-business firms than in unrelated-business firms.     

R&D strategy and innovation performance: the role of standardization

Firms now increasingly recognise the important role of R&D strategy in building technological advantage. However, few attempts have linked standardisation with specific R&D strategies in explaining innovation performance. To bridge this gap, this study empirically examines the relationships between R&D strategies, standardisation, and firms’ innovation performance. Based on a sample of 371 firms in China, we use structural equation modelling (SEM) and find that novelty-oriented R&D strategy generates greater accumulation of standardisation knowledge and standards diversity, while R&D openness only positively relates to this standardisation knowledge accumulation. Moreover, standardisation knowledge accumulation is positively related to both administrative and technical innovation performance, while a greater variety of standards only leads to higher administrative innovativeness. More importantly, our results reveal that accumulation of standardisation knowledge mediates the relationships between R&D novelty and administrative and technical innovation performances. Both the theoretical and practical implications that arise from these findings are discussed.     

Service-sector competition,innovation and R&D

The central prediction of the Aghion, Bloom, Blundell and Howitt model is an inverted U-shaped relationship between innovation and competition. The model is built on the assumption of a product market and has not yet been tested on the service sector. Using detailed firm-level data on Swedish service-sector firms, we find evidence of an inverse U-shaped relationship for exporting service-sector firms. A further breakdown of innovation expenditures shows that the inverse U-shaped pattern holds for intramural R&D and training, but not for extramural R&D. Finally, the results indicate that as competition increases, small firms tend to seek strategic alliances with competitors, whereas large firms tend to reduce collaboration with competitors. The behavior of large firms can partly be due to their superior capacity to handle innovation projects internally, which will become more important if increased competition results in higher pay-offs to innovation.     

The impact of R&D subsidy on innovation: evidence from New Zealand firms

This study examines the impact of government subsidy through R&D grants on innovation output for firms in New Zealand. Using a large database that links administrative and tax data with survey data, we find that R&D grants have a stronger effect on more novel innovation (e.g. applying for a patent or introducing new products to the world) than on incremental innovation (e.g. any product innovation) and that larger, project-based grants are more effective at promoting innovation than smaller, non-project-specific grants. There is little evidence that R&D grants have differential effects between smaller (<50 employees) and larger firms.     

High-growth versus declining firms: the differential impact of human capital and R&D

We provide evidence that both human capital and R&D increase the likelihood that a firm will be a high-growth firm in the industry. However, different from human capital, being an R&D active firm also increases the probability of substantial decline or failure, underscoring the risky nature of innovation. Quantile regression results show that, different from R&D, human capital is growth-enhancing for all firms, hence also those located in the lower quantiles of the distribution of growth rates across firms.     

A comparative analysis of the change in R&D efficiency: a case of R&D leaders in the technology industry

This paper measures the cumulative change in research and development (R&D) efficiency of globally leading R&D companies in the technology industry. We use Data Envelopment Analysis /Malmquist index to analyse 49 such companies. The change in R&D efficiency is analysed by decomposing the Malmquist index into ‘catch-up’ and ‘frontier shift’ indices, and by comparing cumulative indices to those at the starting period. Those cumulative indices are obtained at both a firm and an industry level. Results indicate that the overall R&D efficiency of these globally leading R&D companies declined slightly during the period 2007–2013. At a firm level, this study determines in detail how the trend of each firm in R&D activities differs from other companies.     

Location factors of international R&D activities: an econometric approach

A model is developed of the relation between adoption of an innovation by firms and firm size. Decision making is represented as a group assessment of the perceived ratio between expected returns after succesful introduction, and the risk that implementation will fail or will last too long to makc adoption worth while. In view of differences in thc assessment of uncertainty and corresponding demands on the perceived return-to-risk ratio, among influencers of decisions in the firm, decision making is taken as stochastic, with a probability of adoption related to (objective) net benefits, and probability of non-adoption related to risk. The model gives a new way of looking at the fact that small firms lag behind in the adoption of new technology. In contrast with previous models proposed by David and Davies the explanation has nothing to do with there being some critical size below which adoption is not profitable. The present model explains the adoption lag for smaller firms as the result of expected returns being proportional to size while risk of failed implementation is independent of size. The model is tested and estimated empirically on data for the adoption of computers in small scale retailing, in the Netherlands.     

R&D cooperation with scientific institutions: a difference-in-difference approach

Economists and business managers have long been interested in the impact of research and development (R&D) cooperation with scientific institutions on the innovation performance of firms. Recent research identifies a positive correlation between these two variables. This paper aims to contribute to the identification of the relationship between R&D cooperation with scientific institutions and the product and process innovation performance of firms by using a difference-in-difference approach. In doing so, we distinguish between two different types of scientific institutions: universities and governmental research institutes. For the econometric analyses, we use data from the German Community Innovation Survey. In total, data from up to 560 German service and manufacturing firms are available for the difference-in-difference analyses. The results suggest that R&D cooperation with universities and governmental research institutes has a positive effect on both product innovation and process innovation performance of firms.     

The productivity effects of local R&D outsourcing: the moderating role of subsidiary mandate and internal R&D

This study examined the moderating effects of two kinds of internal R&D (parent R&D and subsidiary R&D) on the relationship between local R&D outsourcing and subsidiary productivity as internal R&D challenges the collaborative relationships in the local environment. Due to the specific feature of a subsidiary mandate, we further investigate whether two distinct kinds of internal R&D have different moderating effects between exploitation-oriented subsidiaries and exploration-oriented subsidiaries, based on a sample of longitudinal data set of 263 Taiwan-based manufacturing subsidiaries over the period 2006–2009. The empirical results show that for exploitation-oriented subsidiaries parent R&D plays a significant and negative moderating role on the impact of local R&D outsourcing based on local collaboration, while a positive moderating role is observed with parent R&D and subsidiary R&D for exploration-oriented subsidiaries.     

Effect of proximity on recombination innovation in R&D collaboration: an empirical analysis

Recombination innovation is a process of creatively combining different knowledge domains in an invention. Recombination innovation in R&D collaboration – joint recombination process, which is integration of the organisation’s internal knowledge with the partner’s new knowledge, serves as the stepping stone of the knowledge search in the technological space. This paper tries to illuminate how different dimensions of proximity of the collaborating partners affect the probability of the collaborative innovation to be recombination innovation. Our result shows that technological proximity has a negative effect on joint recombination innovation. Geographical proximity has an inverted U-shaped effect on joint recombination innovation. The positive effect of organisational proximity on joint recombination innovation is not supported.     

R&D and productivity: evidence from large UK establishments with substantial R&D activities

ABSTRACT

We use Office for National Statistics' micro data for large UK establishments in the production industries in the period 1997–2008 to study the relationship between their productivity and the presence of substantial R&D activities, either at the production unit itself, or at other UK reporting units owned by the same enterprise group. We estimate that total factor (revenue) productivity is on average about 14% higher at the establishments which have substantial R&D themselves, compared to those with no R&D. Among the establishments with no R&D themselves, we estimate that productivity is on average about 9% higher at those which belong to enterprise groups which do have substantial R&D elsewhere in the UK in the same sub-sector. For the establishments with substantial R&D themselves, we also estimate a significant positive relationship between current productivity and past R&D expenditure using dynamic specifications which allow for both establishment-specific ‘fixed effects’ and a serially correlated error component.     

Spillovers from the USA to stock markets in Asia: a quantile regression approach

This article analyses return spillovers from the USA to stock markets in Asia by means of quantile regressions. Traditional studies consider spillovers as effects of the conditional means of foreign returns onto the conditional means of chronologically succeeding domestic markets’ returns. We, by contrast, study the full range of quantiles of the conditional distribution of the domestic markets’ returns. This enables us to document the detailed structure of spillovers across return quantiles. Generally, we find spillovers from the USA to Asia to be negative. Specifically, however, we reveal an asymmetric structure of spillovers with an increasing negative magnitude from lower to upper return quantiles. Theoretically, this pattern is consistent with an asymmetric overreaction of traders in Asia to news from the US market. Extensions from the baseline model further suggest the presence of contagion throughout the financial crisis of 2007–2008 as well as of calm-down effects over weekends.     

Spillovers,product innovation and R&D cooperation: a theoretical model

ABSTRACT

We analyze the impact of post-innovation knowledge spillovers on firms’ decisions to invest and cooperate in R&D, forming a research joint venture (RJV). We study the case of two potential investors involved in a non-tournament stochastic competition for developing a new but imitable product. We propose a theoretical model where cooperation may emerge as a subgame perfect Nash equilibrium of a three-stage game. In the first stage, firms decide whether to cooperate; in the second, they decide whether to invest; and in the third, they compete. We show that firms cooperate in R&D when the spillovers are high enough and the fixed costs associated with R&D activities are low enough; however, our analysis suggests that forming an RJV may not always be socially optimal, and subsidizing R&D cooperation may not be efficient. We propose an optimal scheme of subsidies, which should be designed according to the intensity of the spillovers, the level of the R&D costs, and the probability of innovation success. Finally, we show that in the case of mergers the private incentive to invest is maximized, and firms may not need public subsidies to cooperate. When subsidies are costly, not hindering mergers may be the second-best solution.     

Matching public support for private product-innovating R&D: a theoretical analysis

This paper develops a theoretical model of product innovation where research and development (R&D) effort by a monopolist firm is endogenous and its outcome uncertain. The government attempts to aid such efforts with a matching grant. We consider different scenarios depending on whether two parties act simultaneously, act sequentially, or take part in a dynamic cooperative game with a trigger strategy. We also consider cases (i) when the products are exported, (ii) when the firm lobbies for R&D subsidy, and (iii) when the firm is foreign owned. We characterize situations when government intervention increases the chances of product innovation and when it does not.     

Assessing the influence of differentiation strategy and R&D subsidies on R&D cooperation

This paper explores the R&D cooperation determinants of the innovative companies belonging to the Spanish manufacturing sector. Our findings suggest that the variable R&D subsidy is endogenous, significant, and has a strong positive influence on R&D cooperation. This is a clear indication that the achievement of public aid is often conditioned by the obligation for companies to cooperate in R&D. We have also found that the differentiation strategy variable is significant and has a negative influence on R&D cooperation. Companies positioned in a differentiation strategy probably own and use some different knowledge from other companies. Consequently, they will not have much interest in taking advantage of the spillovers generated by other companies. It is therefore logical that they are reluctant to establish cooperation agreements on R&D. Therefore, companies positioned in the differentiation strategy need public policies to support R&D that are not conditioned to the establishment of cooperation agreements.     

Knowledge spillovers and R&D subsidies to new,emerging technologies

Is knowledge spillover a rationale for supporting R&D on new, emerging technologies more than R&D on other technologies? In this paper, I analyze whether innovation externalities caused only by knowledge spillovers differ between technologies of different maturity. I show that R&D should not be subsidized equally across industries when the knowledge stocks differ. This is because knowledge spillovers depend on the size of the knowledge stock and the elasticity of scale in R&D production. R&D in the emerging technology should be subsidized more when the elasticity is smaller than one. However, R&D in the mature technology should be subsidized more when the elasticity is larger than one.     

Advertising and R&D: theory and evidence from France

Advertising and innovation are two engines for firms to escape competition and improve profits. We propose a model that encompasses both the static and dynamic interactions between R&D, advertising and competitive environment. It provides three main predictions. First, for a given competitive environment, quality leaders spend more in advertising in order to extract maximal rents; thus, lower costs of ads may favor R&D. Second, the inverted-U relation between competition and R&D still holds with the introduction of advertising. Third, more competition is associated with on average more advertising expenditures. Empirical evidence from a large panel of 59,000 French firms over 1990–2004 supports these three properties.     

Knowledge search modes and innovation performance: The moderating role of strategic R&D orientation

Prior studies implicitly assume that knowledge search modes are homogeneous, and little is known about the impacts of specific search modes on innovation. Drawing upon the knowledge search literature, we differentiate among four types of search modes and analyze their impacts on innovation performance. Moreover, we enrich the theoretical framework by recognising the moderating role of strategic R&D orientation in affecting the relationship between specific types of search modes and innovation performance. Using a unique dataset of 418 Chinese firms, we find that, except for inward licensing, value chain search, capital search, and industry-university-research institute collaboration (IUR collaboration) exert positive effects on innovation performance. Moreover, the empirical results indicate that a strategic R&D orientation amplifies the positive effects of value chain search and IUR collaboration while it mitigates the negative effect of inward licensing on innovation performance.     

Evidence on the impact of R&D and ICT investments on innovation and productivity in Italian firms

Both research and development (R&D) and information and communication technology (ICT) investment have been identified as sources of relative innovation underperformance in Europe vis-à-vis the USA. In this article, we investigate the R&D and ICT investment at the firm level in an effort to assess their relative importance and to what extent they are complements or substitutes. We use data on a large unbalanced panel data sample of Italian manufacturing firms constructed from four consecutive waves of a survey of manufacturing firms, to estimate a version of the CDM model of R&D, innovation, and productivity [Crépon–Duguet–Mairesse 1998. Research, innovation and productivity: An econometric analysis at the firm level. Economics of Innovation and New Technology 7, no. 2: 115–58] that has been modified to include ICT investment and R&D as the two main inputs into innovation and productivity. We find that R&D and ICT are both strongly associated with innovation and productivity, with R&D being more important for innovation, and ICT investment being more important for productivity. For the median firm, rates of return to both investments are so high that they suggest considerably underinvestment in both these activities. We explore the possible complementarity between R&D and ICT in innovation and production, but find none, although we do find complementarity between R&D and worker skill in innovation.     

R&D policy in a vertically related industry

In this paper, we analyze the effectiveness of public policy aimed to stimulate business-performed R&D in a vertically related market. We examine the role of an R&D active upstream supplier in a four-stage R&D model, where we incorporate public funding. The considered policy instrument is direct funding of firms’ R&D efforts. We calculate the optimal policies and show that they have a positive impact on firms’ R&D investments. From a welfare point of view, it is optimal to differentiate the subsidy rates between the upstream and the downstream markets. Competition in the product market leads to a higher subsidy rate to the upstream supplier than to the downstream firms. When concentration is high in the downstream market, the optimal solution is an R&D subsidy for these firms, otherwise the optimal solution is an R&D tax for the downstream firms.