An inquiry on dimensions of external technology search and their influence on technological innovations: evidence from Chinese firms

A central part of technological innovation for industrial firms involves search for new external knowledge. A well‐established stream of literature on firms' external knowledge search has demonstrated that firms investing in broader search may have a great ability to innovate. In this paper, we explore the influences of technology search on firms' technological innovation performance along three distinctive dimensions: technical, geographic, and temporal dimensions, using a unique panel data set containing information on Chinese firms that were active in technology in‐licensing and patenting during the period 2000–2009. Our findings reveal that Chinese firms' technological innovation performances are related to external technology search in quite different ways from the ones suggested in the extant literature using evidence from developed countries. We find that Chinese firms searching ‘locally’ along the technical dimension have better technological innovation performance than those searching ‘distantly’. However, when a Chinese firm in‐license relatively old (mature) technologies or those from geographically nearby areas, it will be less bounded to searching familiar technical knowledge.     

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.     

Appropriability mechanisms for manufacturing and service firms: the contingencies of openness and knowledge intensity

Conventional wisdom argues that appropriating returns from innovation requires protection mechanisms. However, there will be limits to the effectiveness of formal and informal appropriability mechanisms for innovation performance. Their effectiveness will be contingent on the nature of the knowledge that firms are trying to protect and the openness of their innovation strategy (sharing knowledge while attempting to protect knowledge is known as the ‘paradox of openness’). Do these boundary conditions apply to both manufacturing and service firms equally though? Analyzing data from the UK Community Innovation Survey, this study provides evidence for a continuum – from discrete product manufacturing firms, whose products rely heavily on codified, explicit knowledge and for which formal methods are strongly associated with innovation performance, to knowledge-intensive service firms, which tend to rely more on complex tacit knowledge and for which innovation is linked to informal, not formal, appropriability. The findings show that the paradox of openness is a limited problem for service firms. The benefits of collaboration for innovation performance outweigh any reduction in the effectiveness of appropriability. For manufacturers, the benefits of collaboration disappear with high formal appropriability, and thus, discrete product manufacturers, contrary to conventional wisdom, may find it beneficial to reduce collaboration breadth and invest in informal appropriability mechanisms. Knowledge-intensive servitized manufacturers find formal methods effective but only with no or minimal collaboration.     

When the Former CEO Stays on Board: The Role of the Predecessor’s Board Retention for Product Innovation in Family Firms

Understanding product innovation in family firms is an important research endeavor given the economic predominance of those firms, their idiosyncrasies, and the importance of constant renewal for those firms to achieve transgenerational survival. Recently, family firm research has highlighted the role of next-generation chief executive officers (CEOs; i.e., successors) who are often seen as drivers for innovating a family firm’s products. However, prior research has typically neglected that predecessors, who are often portrayed as less willing to introduce product innovation, frequently remain involved postsuccession through occupying board positions and thus still substantially influence the decision-making processes and outcomes of family firms, such as product innovation. As a result, our understanding of the role of predecessors and their postsuccession involvement in family firms’ product innovation remains unclear. Building on stakeholder salience theory and on insights from the literature on innovation and succession in family firms, we develop hypotheses about how and under which conditions the predecessor’s board retention affects product innovation in family firms after succession. Building on more than 200 family firm CEO succession cases in small- and medium-sized, privately owned family firms, our results reveal that the predecessor’s board retention negatively affects product innovation. This negative effect is strengthened with increasing involvement of the predecessor in the successor selection process, and it is offset in the case of family succession. Our findings contribute to the emerging stream of research on family firm succession and product innovation and provide important implications for practice.     

The Roles of Knowledge Providers,Knowledge Recipients,and Knowledge Usage in Bridging Structural Holes

Studies have suggested that firms can benefit from bridging two or more otherwise disconnected firms in their ego networks (i.e., structural holes) as a potentially useful source of external knowledge for innovation. However, past research also noted that the relationship between bridging structural holes and firm innovation varies significantly. Building on the earlier research that has examined the industrial, structural, and institutional dimensions of this relationship, the purpose of this research is to study how the different characteristics of the external knowledge provided by bridging structural holes in a focal firm’s ego network might moderate the relationship between bridging structural holes and firm innovation. Using longitudinal data from the U.S. computer industry, this study showed that focal firms that bridged otherwise disconnected firms in their ego networks enjoyed higher levels of innovation. In addition, it showed that this relationship was particularly stronger when the focal firms and the disconnected firms that they bridged operated in similar rather than different markets but when the focal firms and the disconnected firms worked on different rather than similar technological domains. The results also revealed that the relationship was stronger when the focal firms’ knowledge specialization was low rather than high and when the focal firms emphasized incremental rather than breakthrough innovation. These findings show companies how they can benefit from bridging otherwise disconnected firms in their ego networks and help them make more informed decisions pertaining to such bridging activities.     

Application and performance impact of stage–gate systems – the role services in the firm’s business focus

Although service innovation is important, knowledge of new product and service development, including the positive effect of stage‐and‐gate‐type systems, has been derived almost exclusively from studies in the manufacturing sector. In the present paper, we address two important questions: How do differences in the firm’s business focus, which describes whether a firm puts more emphasis on products or services in its business activities, influence the usage of such formal innovation processes? Is stage‐and‐gate‐type systems’ impact on innovation program performance contingent on the firm’s business focus? Unlike previous studies, we not only differentiate service and manufacturing by industry classification codes but also apply a continuous measure to take into account the blurring of boundaries between the manufacturing and service businesses. Based on a comprehensive discussion of service‐specific characteristics and their implications for innovation management and using a cross‐industry, multi‐informant sample of innovation programs from 272 firms with 1,985 informants, we find empirical support for firms with a stronger focus on the service business being less likely to use stage‐and‐gate‐type systems. Furthermore, the use of stage‐and‐gate‐type systems fosters innovation program performance, and this effect becomes stronger as the business focus shifts toward services. This result implies that service‐based firms can benefit from stage‐and‐gate‐type systems to a greater extent than product‐based firms. Our research also demonstrates the gap between the desired level of innovation process formalization and its current usage in practice, especially for firms with a dominating service business.     

Do bank liquidity shocks hamper firms’ innovation?

This paper highlights the importance of bank-based finance for the innovation activity of UK firms. It identifies both theoretically and empirically how bank shocks affect firms’ innovation. We develop a theoretical model, and test its predictions using a new matched bank-firm-patent dataset for the UK. We find that bank distress during the 2008 and 2011 crises negatively affected firms’ innovation behavior. After carefully controlling for several potential biases in estimation we find that firms whose relationship banks were distressed not only patented less, but those patents were of lower technological value, less original and of lower quality. The negative effect is significantly larger in the case of small and medium size enterprises (SMEs). We also find that banks’ specialization in financing innovation mitigates the impact of bank distress on innovation.     

The effect of the innovative environment on exit of entrepreneurial firms

To foster ‘creative destruction,’ entrants must survive the turbulent conditions they face in their first crucial years in the industry. We investigate how the external knowledge milieu of an entrant, conceptualized as its innovative environment, causes systematic variation in survival patterns. We test our model from 3,431 firms in 33 industries over 80 years. We depict the innovative environment along two knowledge‐related dimensions, namely technology regime and technology intensity. While the aligned state of the innovative environment, where product innovation exists in tandem with abundant innovation opportunities, promotes entrant survival, we find that this beneficial effect is more pronounced for small entrants due to a possible mitigation of scale disadvantages. Copyright © 2006 John Wiley & Sons, Ltd.     

The management of technological innovation in the machine tool industry: a cross-national regional survey of Britain and Switzerland

Abstract
The research was undertaken during 1983 to find out why a country such as Switzerland has been able to manage innovation in a mature industry, such as machine tools, much more successfully than Britain. The methodology used was by structured interviews of Managing Directors in a sample of firms in the two important machine tool regions of Berne and Yorkshire/Humberside. The results cover the main types of innovation in products and processes, the reasons for innovation and the problems which were encountered by the companies visited. We found that the Swiss firms were strong on product innovation. The most important innovation was the introduction of computer numerical control (CNC), and the Swiss firms had on average introduced this earlier than the British firms and it accounted for a larger proportion of their turnover. The main problem for firms in both countries was in adjusting to upstream developments in electronic controls. The Swiss had better downstream market links with their customers who were mostly in foreign countries. Some British firms were handicapped by being part of company groups and used public sector grants for their innovation, whereas the largely independent Swiss firms carried out more self-financing.     

Non‐R&D innovation and firms’ new product performance: the joint moderating effect of R&D intensity and network embeddedness

Non‐R&D innovation increasingly plays a critical role in explaining firms’ new product performance. Yet, there has been little research on the consequences and contingent mechanisms of non‐R&D innovation for firms embedded in collaborative network environments. To address this research gap, we investigated a conceptual framework of non‐R&D innovation using data drawn from Chinese manufacturing firms. First, we found that non‐R&D innovation positively affects firms’ new product performance. Second, we discovered that high R&D intensity positively strengthens the impact of firms’ non‐R&D innovation on new product performance. Third, we provided critical analysis of the role of non‐R&D innovation in promoting new product performance, accomplished by enhancing R&D investment while simultaneously improving the degree of network embeddedness. Our findings extend both the non‐R&D innovation literature and open innovation literature while providing managers with several key recommendations.     

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 effect of radical innovation in/congruence on new product performance

Radical innovation is critical for many firms and for society. This research focuses on the impact of radical innovation congruence — the degree to which management values regarding radical innovation match radical innovation norms in the business unit. We offer a model and empirically test it to assess the impact of radical innovation congruence on new product performance. We find that radical innovation norms are positively associated with new product performance, whereas we find no such association for management values and new product performance. Contrary to our expectations, we did not find a significant effect of radical innovation congruence on new product performance; however, we did find that radical innovation incongruence can have a positive effect on new product performance but only when radical innovation norms are higher than management values. Thus, we suggest that the unintended situation of radical innovation incongruence may result in some positive consequences after all. Further, high radical innovation norms, far more than management values, seem to be critical determinants of new product performance.     

Value for value—The dynamics of supplier value in collaborative new product development

Suppliers are recognized as an important source of innovation. Research into supplier involvement in new product development has shown that benefits can potentially be reaped by customers. However, a relatively unexplored precondition is the willingness of suppliers to invest in their customers’ innovative efforts. In this exploratory, theory-extending research, we investigate the value that a supplier can experience from being involved in high tech firms’ new product development. We find that value comes in three forms for suppliers: (1) financial payment for sales volumes and product development services, (2) technological knowledge and product designs, and the (3) reputation of doing business with leading-edge firms Additionally, we place this in a dynamic, long-term perspective, and find indications for a positive or negative feedback effect, depending on the emphasis the buyer puts on collaborative innovation with the supplier and the extent to which suppliers can use competences, knowledge and reputation resulting from the collaboration in subsequent business development activities. The positive effect results in added value for both parties in the dyad, and the negative effect leads to the opposite.     

Passion for Work,Nonwork‐Related Excitement,and Innovation Managers’ Decision to Exploit New Product Opportunities

This article investigates the role of affect in innovation managers’ decision to exploit new product opportunities—a decision central to the innovation process. The model proposes that different types of passion can trigger managers’ exploitation decisions but that this effect is contingent on experiencing excitement from events outside their work environment. A field experiment with 90 owner–managers of young firms located in an innovation context (business incubators) shows that passion for work and nonwork‐related excitement levels interdependently impact innovation managers’ decision to exploit new product opportunities. Specifically, harmonious passion has a general positive effect on managers’ propensity to exploit. In contrast, the effect of obsessive passion is more complex and contingent on the additional excitement managers experience such that the positive relationship between obsessive passion and the decision to exploit is more positive with higher levels of excitement. These findings extend the product innovation management literature by acknowledging that decision‐makers’ affective experiences influence innovation decisions and provide a first step toward understanding the role of affect and passion in the product innovation context. Second, the finding that obsessive passion and nonwork‐related excitement interact in explaining opportunity exploitation decisions highlights the need to incorporate contingency relationships in models of innovation decision‐making. Third, in drawing on a field experiment and the experimental manipulation of managerial affect during the decision‐making task, this article answers a recent call in the project management literature to pursue less common methodological approaches and develop “broader theoretical schema” in order to enhance our understanding of innovation management. Finally, this study also has implications for practitioners because it can help innovation managers understand their own decision policies. To the extent that innovation managers are able to regulate their affective experiences, this improved understanding might prevent them from premature and faulty decision‐making.     

The Determinants of Seller‐Buyer Interactions during New Product Development in Technology‐Based Industrial Markets

A growing body of literature indicates that the new product development (NPD) process in technology‐based, industrial markets is characterized by collaborative seller‐buyer relationships. Unfortunately, the extant literature is deficient in some significant ways. For example, there is no theoretical framework that explicates the content of these relationships. Also, there is little empirical research on the antecedents or consequences of these relationships. Therefore, managers seeking guidance on how to manage their NPD relationships have lacked appropriate insights. Not surprisingly, ineffective relationship management is a major contributor to new product failure in such settings. Against this background, this study develops and tests a model of seller‐buyer interactions during NPD. The model is based on the relationship marketing literature and is rooted in Transaction Cost Analysis (TCA). It was tested using data from 296 small to mid‐sized firms in a variety of technology‐based, industrial markets. It specifies product co‐development, education, and post‐installation product knowledge generation as three key behavioral dimensions that characterize seller‐buyer interactions during NPD. Our results indicate that the intensity with which these dimensions are undertaken vary with buyer‐related (i.e., perceived buyer knowledge and prior relationship history) and innovation‐related (i.e., product customization and innovation discontinuity) characteristics. For example, perceived buyer knowledge has a positive impact on product co‐development while innovation discontinuity has a positive impact on education. Further, we find that a seller's satisfaction with undertaking these behaviors is moderated by the technological uncertainty in the seller's industry. As a case in point, satisfaction with undertaking product co‐development is reduced when technological uncertainty is high. Collectively, the overall support we find for our model can help NPD managers optimize their relationships with buyers during NPD.     

Stock of downstream complementary assets as a catalyst for product innovation during technological change in the U.S. machine tool industry

Research summary : We investigate the effect of incumbents' stock of downstream complementary assets on their product innovation during a disruptive technological change. We theorize that a firm's stock of downstream complementary assets, by providing critical information about shifting demand conditions, will play a catalytic role in firm adaptation during such a change. Using the advent of disruptive computer numerical control machine tools in the U.S. machine tool industry during the 1970s and 1980s as the context, we find that firms with greater stocks of downstream complementary assets are likely to be product innovation leaders during such a change. Managerial summary : Disruptive changes are challenging firms across industries. We concentrate on the U.S. machine tool industry during the 1970s and 1980s when Japanese manufacturers with disruptive computer numerical control systems challenged the U.S. manufacturers. We find that, under the threat of disruption, the greater the stock of downstream complementary assets a U.S. machine tool manufacturer has, the more likely it is to be the product innovation leader with the disruptive technology. Our findings provide novel insights for managers in companies that face disruptive changes and can help them avoid the consequences of such changes as predicted by prior research. Copyright © 2016 John Wiley & Sons, Ltd.     

Structural and relational influences on the role of reward interdependence in product innovation

This study examines the relationship between reward interdependence, or the extent to which managers' rewards are tied to the performance of colleagues in other functions, and product innovation. It also considers how structural and relational features of the organizational context might moderate this relationship. Our analysis of a sample of Canadian‐based firms reveals a positive relationship between reward interdependence and product innovation that is invigorated at higher levels of job rotation, social interaction, and interactional fairness, but we find no evidence of a moderating effect of decision autonomy. Consistent with a systems approach to organizational contingencies, we also find that the reward interdependence–product innovation relationship is stronger when the organization's context comes closer to an ‘ideal’ holistic configuration that is most conducive to knowledge exchange within the organization, with a more prominent role played by the relational sub‐context (social interaction and interactional fairness) than the structural sub‐context (job rotation and decision autonomy). The findings have important implications for innovation research as they shed light on how the extent to which individual rewards are tied to collective performance can be channeled to enhance innovation pursuits.     

A Comparison of New Service versus New Product Development: Configurations of Collaborative Intensity as Predictors of Performance

Collaboration among firms for innovation has received considerable attention. However, little is known about how firm‐to‐firm collaboration is configured in new service development (NSD) versus new product development (NPD). This study takes a multidimensional approach and measures firm‐to‐firm collaboration on different intensity dimensions of (1) processes (mutual communication, joint engagement, sharing responsibilities) and (2) ownership (relationship commitment and mutual trust). By showing that the phenomenon of collaboration is multifaceted, this study is able to knit a more comprehensive and cohesive understanding of the differences between NSD and NPD success as the result of different patterns of collaboration. Specifically, it utilizes survey data collected from 194 alliances to substantiate how NSD and NPD differ on these collaborative dimensions and then explores their impact on NSD versus NPD performance. The findings suggest that collaboration between firms in NSD is configured and works differently than collaboration between firms in NPD. The results further show that there is a stronger, positive relationship of intensity levels of joint engagement among firms involved in product development and performance than when a new service is developed. However, the intensity of mutual trust has a stronger, positive relationship with development performance when a new service is developed than when a new product is developed. Implications are discussed, and suggestions for future research are given.     

The impact of innovation intensity,scope, and spillovers on sales growth in Chinese firms

We investigate the relationship between innovation and sales growth of firms in China. Innovation theories suggest firms create the technological knowledge needed to have market impact with their products and drive sales growth in different ways. These include: (1) through firms’ overall innovation intensity, (2) through decisions on innovation scope (depth vs. diversity), and (3) through knowledge spillovers from technological neighbors. Little research exists on how effective these approaches are for emerging market firms in pursuit of growth. To address this, we integrate and test the effects of these different knowledge creation mechanisms using data from Chinese firms over a five-year period. Findings show that innovation intensity and knowledge spillovers positively impact sales growth. We also develop and test a model capturing the non-linear impact of innovation scope. As predicted, we find a U-shaped relationship for depth of innovation and an inverted U-shaped relationship for diversity of innovation.     

Service Regulations,Input Prices and Export Volumes: Evidence from a Panel of Manufacturing Firms

Using a panel of firm‐level data from Spanish manufacturers, this study shows that better service regulation reduces the price of intermediate inputs paid by downstream firms. The beneficial cost effects of services reforms extend to both large and small‐to‐medium sized corporations (SME’s), but the former tend to enjoy greater gains. This feature also manifests itself in international markets. We find evidence of an input cost channel through which service regulations affect the volume of exports of large manufacturers, while the evidence of such a channel is weaker for SME’s. Our estimates indicate that, from 1991 to 2007, large firms increased their volume of exports by an average of 20 per cent as a result of the direct input cost effect of services reforms, such that the firms that benefited the most typically belonged to industries more dependent on service inputs. Furthermore, convergence to the ‘best practice’ regulatory framework in services would have raised exports at least by an additional nine per cent. We conclude that firm size is relevant for the connection between services reforms, intermediate input prices and export volumes.