An Empirical Analysis of R&D Transactions: Surrogate Technological Networks and Firm Performance

This paper uses statistical data from the annual R&D survey of financial flows received or spent by the firm for R&D activities. To describe R&D networks, attention is focused on the construction of four synthetic proxies from empirical literature on social networks: variety of partners, intensity, regularity of links, and centrality in networks. On the bases of the two available innovation surveys, we explore, through a cross section study, the impact of these different variables on technological performance of firms.     

The spatial component of R&D networks

We study the role of geography in R&D networks by means of a quantitative, micro-geographic approach. Using a large database that covers international R&D collaborations from 1984 to 2009, we localize each actor precisely in space through its latitude and longitude. This allows us to analyze the R&D network at all geographic scales simultaneously. Our empirical results show that despite the high importance of the city level, transnational R&D collaborations at large distances are much more frequent than expected from similar networks. This provides evidence for the ambiguity of distance in economic collaboration which is also suggested by the existing literature. In addition we test whether the hypothesis of local buzz and global pipelines applies to the observed R&D network by calculating well-defined metrics from network theory.     

Knowledge specialization and R&D collaboration

This paper contributes to the knowledge-based explanation of R&D networks. It argues that knowledge overlap and novelty are complementary inputs of a R&D alliance, in forms that depend upon the exploration breadth and depth of the R&D activity. The paper investigates how the hypothesis of specialization of the knowledge endowments can recover a number of characteristic empirical properties of a pattern of R&D collaboration in the economy. Implications for network evolution are discussed.     

The Cost of Misaligned Governance in R&D Alliances

Transaction cost economics argues that aligning transactionswith governance structures leads to more efficient outcomes.While empirical evidence demonstrates that firms choose governanceconsistent with transaction cost predictions, the performanceimplications of governance choices are less well explored. HereI examine the cost of misaligned governance in the context ofresearch and development (R&D) alliances. Two costs of misalignmentare evaluated: excessive contracting hazards and excessive bureaucracy.Using a sample of R&D alliances in the telecom equipmentindustry, I find that alliance governance selected accordingto transaction cost arguments improves collaborative benefitssubstantially over governance not so selected. Interestingly,governance misalignments imposing excessive bureaucracy reducecollaborative benefits more than misalignments imposing excessivecontracting hazards. These results provide empirical evidenceof the cost of misaligned governance and have implications forresearch on the limits of internal organization and links betweenorganizational form and innovation.     

Quantitative growth effects of subsidies in a search theoretic R&D model

Should government subsidize R&D and does it matter how these subsidies are allocated? We examine these questions in a dynamic model where R&D is described as sequential sampling from a distribution of new ideas. Successful discoveries affect future available resources and incentives for further R&D. Consequently, there may be under-investment in R&D. We study the effect of government interventions aimed at fostering growth through R&D. Calibrating the model with aggregate data from the Israeli business sector allows us to quantitatively compare two forms of support resembling those actually used to encourage R&D in the Israeli business sector: (i) an unrestricted subsidy that may be used at the recipients' discretion to finance R&D or other investments, (ii) a subsidy earmarked by the government for R&D activities only. While there is no theoretical way to determine which of the two subsidies will have a greater impact on search for new ideas and growth, we find that in the calibrated economy both subsidies have a significant but similar impact on the economy's output and TFP growth rates. Accordingly, in the case of the Israeli business sector, the incentives to conduct R&D were sufficiently strong, and no R&D-specific encouragement was needed. However, a sensitivity analysis reveals that for economies characterized by other parameter values this result may not be true. Correspondence to: B. Bental     

R&D boundaries of the firm: An estimation of the double-hurdle model on commissioned R&D,joint R&D,and licensing in Japan

This paper studies the firm’s decisions on in-house R&D and its procurement from outside through commissioned R&D, joint R&D, and technology acquisitions (i.e., licensing-in). Using the data about 14,000 manufacturing firms in Japan, we estimate a modified double-hurdle model in which the first hurdle determines whether the firm should perform any R&D at all and the second hurdle determines whether (and how much) it should perform each mode of procured R&D. The results generally support the two major theories—the transaction cost theory and the capability theory. The estimated positive effects of firm size, in-house R&D intensity, diversification, and vertical integration support the hypothesis that capability is needed for procured R&D, while the estimated positive effect of the index of appropriability by patents supports the hypothesis that this appropriability reduces transaction costs. In addition, we found that information flow from scientific sources and that from transaction-based sources affect the three modes of procured R&D differently.     

Networked research: European policy intervention in ICTs

We use social network analysis to evaluate ‘behavioural’ additionality aspects of public programmes supporting research and development (R&D). The paper appraises empirically the partnership and knowledge networks created around the R&D activities of the Information Society Priority of the Sixth Research Framework Programme of the European Community. These emergent, scale-free networks are found to play an important role in generating and, especially, in diffusing knowledge by attracting key industry actors and by strengthening overall network connectivity through public support. Public policy should try to facilitate the development of more European organisations that can be characterised as global network hubs, on the one hand, and to draw larger numbers of the most dynamic small and medium-sized enterprises (SMEs) into these programmes, on the other, to avoid technological lock-ins and mitigate the resistance or network reorientation toward more productive research areas.     

Corporate governance structure,managerial discretion,and the R&D investment in China

This article studies the influence of corporate governance factors on firm R&D investment in a transitional economy like China. By using the data from the listed companies in China, this article statistically tests the hypotheses on the relations between corporate R&D intensity and managerial discretion of CEOs, independent outside directors, degree of share concentration, share held by the state, and share held by a manager. According to the results, the managerial discretion of CEOs has a significant and negative correlation with the firm R&D investment. The number of the independent outside directors in the board has a positive influence on the R&D investment. And as the shares held by a manager increase, the firm R&D intensity will decrease at first, and then increase along an inverted parabolic curve. All these findings show that the improvement of corporate governance and stock incentive plan, and the cultivation of active and long-term stock investors, may finally lead to the upgrade of corporate innovation capabilities.     

The architecture of R&D joint projects: the social network analysis approach

This paper examines the effect of network properties on the performance R&D joint projects. In particular, we examine the impact of network cohesion, diversity and shape on the performance of these of exploration and exploitation R&D projects. We test these measures using data on projects from European R&D networks developed under the framework of Eureka projects. The empirical results indicated some network properties enhance the project’s performance and these differ depending on the kind of technological project developed. Our results suggest a lower heterogeneity, greater cohesion and network centralisation in exploitation than in exploration projects. Our findings show different types of structures depending on the aim of the joint project and that there exist different degrees of cohesion between the partners that comprise the core and the peripheral nodes.     

Identifying R&D partners through Subject-Action-Object semantic analysis in a problem & solution pattern

Today’s companies still rely heavily on expert knowledge rather than quantitative data with a systematic approach to effectively identify and choose Research and Development (R&D) partners. It is advantageous to identify and select potential R&D partners using a Problem & Solution (P&S) pattern. This paper presents a novel process for identifying R&D partners on the basis of solution similarities that assist technology managers in understanding the relationships between research targets. First, we choose a thematic dataset that contains problems and quantitative data with relative topic terms. Then, we extract Subject-Action-Object semantic structures in a P&S pattern from the dataset, and identify various solutions to a technical problem, with each as a subject. In addition, we provide correlation mapping to visualise the text characters and identify R&D partners. Finally, we validate the proposed method through a case study of the dye-sensitized solar cells sector.     

Effects of a blocking patent on R&D with endogenous survival activities

This study analyzes the effect of strengthening patent protection for innovation and economic growth by introducing a blocking patent into the endogenous growth model developed by Furukawa (Econ Lett 121(1):26–29, 2013a), which features survival activity of patent holders in the R&D sector with a variety-expansion model. Results show that strengthening patent protection can raise the economic growth rate and social welfare through an endogenous survival investment. Additionally, this study examines the effects of increasing subsidies for R&D. We find that increasing R&D subsidy rate can negatively affect economic growth and social welfare because of the investment for survival activities. This result shows the novel role of a blocking patent in determining innovation effects of R&D subsidies. Furthermore, we analyze the effect of patent breadth which is another patent instrument in this model on innovation and economic growth. Results show that the growth and welfare effects of the profit-division rule and the subsidy rate for R&D may vary with the size of patent breadth.     

Research & development and growth: A Bayesian model averaging analysis

We examine the effect of research and development (R&D) on long-term economic growth using the Bayesian model averaging (BMA) to deal rigorously with model uncertainty. Previous empirical studies, which applied BMA, investigated the effect of dozens of regressors on long-term growth, but they did not examine the effect of R&D due to data unavailability. We extend these studies by proposing to capture the investment in R&D by the number of Nobel prizes in science. Using our indicator, the estimates show that R&D exerts a positive effect on long-term growth. This result is robust to many different parameter and model prior structures as well as to alternative definitions of R&D indicator.     

Participatory planning of industrial R&D activities

This paper summarizes and comments on the methodology actually employed in participatory planning of R&D activities for the iron and steel industry in Turkey. Through an organized collaboration with more than a hundred managers, engineers, experts, and planners: (1) technical, managerial, financial, and social problems that are obstacles to the achievement of predetermined goals for the industry are identified and defined; (2) these problems are formulated as R&D candidate projects; and (3) a set of R&D candidate projects are selected for implementation in the 1980s.     

Comparison of excess social rates of return to product and process R&D

This paper reports results for a well established production function that includes research and development (R&D). By assuming zero depreciation, it can be used to provide estimates of excess social rates of return to R&D. The estimates distinguish spending on product and process innovations for three US manufacturing industries. The results suggest that, while excess social rates of return are found to be negative for product R&D, they are positive for process in each of the industries. They therefore suggest some scope for public R&D subsidies or tax benefits to process R&D but not to product R&D.     

A computational analysis of R&D support programs

We compare two common government R&D support programs, R&D tax credits and direct R&D grants. To study their effectiveness and the extent to which their design matters, we analyze these programs within a dynamic equilibrium model of imperfectly competitive industries. Adopting comprehensive welfare measures that take into account government, producer and consumer surpluses, we find that both schemes exhibit positive social returns. Mid-range R&D-intensive sectors exhibit higher social returns than either high or low R&D-intensive sectors. Both incentive schemes generate positive measures of R&D input additionality of magnitudes consistent with empirical R&D research. However, R&D grants that require firms to allocate subsidy funds to R&D spur less R&D than a more flexible R&D tax credit. Subsidy schemes can even induce competing firms to over-spend on R&D, generating negative producer surplus and possibly negative social returns.     

Proximity,networking and knowledge production in Europe: What lessons for innovation policy?

This paper aims at investigating the role of different types of proximity on the technological activity of a region within the context of a knowledge production function, where R&D expenditure and human capital are the main internal inputs. We thus assess to what extent the creation of new ideas in a certain region is enhanced by knowledge flows coming from proximate regions. In particular, we examine in detail different kinds of proximity by combining the usual geographical dimension with the institutional, technological, social and organizational proximity. The analysis is implemented for an ample dataset referring to 276 regions in 29 European countries (EU27 plus Norway, Switzerland) over the last decade. Results show that human capital and R&D are clearly essential for innovative activity with the former being much more effective in driving the production of knowledge. As for the proximity and network effects, we find that technological proximity outperforms the geographic one, whilst a limited role is played by social and organizational networks. As a result, the first policy message is that European regions still need to focus on policies aimed at increasing the endowments of well-educated labour force and therefore their knowledge base. Furthermore, we need innovation policies based on each region's specific innovation potential, due to the existing differences in geographical, cognitive, institutional, social and organizational structures and networks.     

A simple theory and evidence on the determinants of firm R&D

This paper derives a simple, but informative, model of firm R&D to figure out key factors that determine firm R&D effort. The model suggests a demand-pull, technology-push theory of R&D by showing that a firm's profit-maximizing R&D expenditure is determined jointly by both demand-side factors and technology-side factors. The former includes demand size (firm sales) and consumer preference over quality and price and the latter includes R&D cost structure or the production-cost effect of product R&D and firm-specific technological competence. In addition, the model shows that other things being equal, the stock of exogenous technological knowledge, including the firm's previously accumulated technological knowledge, relevant to current R&D which is negatively related with current R&D effort. An empirical analysis of firm R&D intensities and technological capabilities of more than 1600 firms in nine industries across six countries provides supportive evidence for the theory. Further, the theory implies that R&D intensity or the R&D-to-sales ratio is independent of firm size unless firm size affects technological competence and that given consumer preference and R&D cost structure facing all firms in the same industry, the distribution of firm-specific technological competence among firms determines the distribution of firm R&D intensities within the industry.     

The effect of risk-sharing government subsidy on corporate R&D investment: Empirical evidence from Korea

Despite the wide belief that the high social rates of returns to R&D investment justify government subsidy policy in advanced countries, there are only limited studies about whether the R&D subsidy as a means of risk-sharing stimulates R&D investment of small and medium sized enterprises (SMEs) in developing countries. This paper empirically investigates the issue, using a unique data set on government subsidy for new technology development of Korean manufacturing firms, listed and non-listed, for the period from 2000 to 2007. The paper employs the DID estimation procedure and controls for simultaneity of the subsidy for new technology development using 2SLS and two step Tobit procedure. Our empirical results show that there is no solid evidence for crowding-out effects of the government subsidy. These results suggest that government subsidies could help SMEs to overcome the barriers to risky R&D projects through sharing R&D failure risk with government and by reducing capital costs to undertake new technology development projects, and thus the subsidy policy for new technology development seems to be partly successful in promoting the R&D investment of the Korean SMEs.     

STRATEGIC R&D AND NETWORK COMPATIBILITY

We analyse the effects of network externalities in strategic R&D competition. We present a model of two firms competing with R&D investments and prices in a differentiated consumer market. Buyers form firm-specific networks which can be compatible. A high degree of compatibility and large spillovers moderate price competition due to weak strategic value of firm-specific networks and R&D investments, respectively. Asymmetry in product qualities brings out network effects that cancel out in conventional symmetric settings. The lower quality firm increases R&D and decreases its price as spillovers or network compatibility is increased. This happens when R&D and firm-specific network size have high strategic value.     

Upstream and downstream horizontal R&D networks

The existing literature on R&D networks has focused on networks among firms who compete in the product market (downstream networks). This article develops the literature by casting the analysis in the context of a vertically related industry, where both downstream firms and their upstream suppliers can form horizontal R&D networks.