Innovating standards through informal consortia: The case of wireless telecommunications

We empirically examine the effects of industry consortia on the coordination of innovation strategies of the members. Our analyses utilize membership data from 32 consortia in wireless telecommunication technology subfields from 2000 to 2005 and prior art citations in standard-essential patents. We find that connections among firms in informal and technically-oriented consortia significantly increase the likelihood that firms cite each other's patents in subsequent patents essential for the UMTS wireless telecommunication standard. Inventions that are likely to become part of the UMTS system tend to build on inventions by firm peers who were members of the same consortia, controlling for patent or firm fixed effects, technology class, and other characteristics. Consortia may enhance productivity of invention and increase the incentives to invest in R&D by internalizing potential externalities. They may also enhance efficiency of standardization by facilitating the interaction of committee and market processes. Consortia thus structure and constrain the process of innovating standardized technologies. This is problematic if consortia are not truly accessible for all the relevant parties. Policymakers thus need to balance these effects. For managers, the results show that participation in a variety of technical consortia enables influencing peers' innovation strategies related to compatibility standards.     

Examining the new product innovation – performance relationship: Optimizing the role of individual-level creativity and attention-to-detail

New product innovation has been identified as the key to firms' marketplace success, profit and survival. Yet, the failure rate for new products is high. Because of the high costs associated with new product development, there is considerable theoretical and managerial interest in how to minimize the high failure rates of new products and what separates new product winners from losers. This study focuses on individual level ambidexterity – namely head of the R&D departments' capacity to engage in creativity and attention-to-detail simultaneously, a skill involving different centers of attention, and relying on somewhat incompatible behaviors and processes. The ability to engage in these behaviors simultaneously is seen as being ambidextrous. Drawing from the data of 150 advanced manufacturing firms in India (gathered from one CEO and one head of the R&D department for each firm), the results show that when an individual head of R&D engages heavily only in creativity, too many new, risky ideas may come and when he/she engages heavily only in attention-to-detail, he/she may suffer through a lack of novel ideas. Both approaches limit individual's contribution to enhancing product innovation – financial performance relationship. The results also show that an individual head of R&D needs to engage in high levels creativity and attention-to-detail in the pursuit of enhancing product innovation to achieve superior financial performance.     

The impact of formal control and guanxi on task conflict in outsourcing relationships in China

The purpose of this study is to explore how manufacturing firms manage task conflict with their outsourcing suppliers in the context of China. Using survey data collected from manufacturing firms operating in China, we found that when implementing R&D and manufacturing outsourcing, both formal control and Chinese guanxi are useful governance mechanisms for suppressing outsourcing task conflict. We also observe that Chinese guanxi moderates the impact of formal control on task conflict, especially when implementing R&D outsourcing. By investigating the roles of formal control and Chinese guanxi in outsourcing practices in China, this study contributes to a better understanding of how to manage task conflict effectively.     

Doing R&D and/or Importing Technologies: The Critical Importance of Firm Size in Taiwan’s Manufacturing Industries

We analyze the relationship between firm size and innovation inputs in Taiwan. Two inputs are considered: R&D and technology imports. Building on an existing theoretical framework, we test this relationship by estimating bivariate Tobit models in twenty 2-digit industries, using a panel of 27,754 firms observed from 1992 to 1995. We find that, in all industries, R&D intensity and/or technology imports intensity depend strongly on firm size, following an “inverted-U” pattern. Moreover, we find that most industries are only “mildly Schumpeterian”. Finally, our results provide some empirical evidence for complementarity between R&D and technology imports in the innovation process.     

Convergence and unbundling of corporate R&D in telecommunications: is software taking the helm?

This paper presents a view of the changing structure of corporate R&D in telecommunications – one that is close to Adam Smith’s insightful and enduring idea of division of labor – that perhaps we are witnessing the beginnings of vertical disintegration and unbundling of important segments of the industry’s R&D activity. The paper maintains that the emergence of an independent software industry – aided by the convergence of computer, telecommunications and imaging technologies – and the rapid growth of technology-based alliances are at the heart of this trend. So extensive is the vertical disintegration of R&D that, in 1997, the top 10 independent software vendors in the US spent more on R&D than the combined spending by AT&T and Lucent whose sales were well over three times as large. It appears that the source of future innovation in the telecommunications industry lies not in its services segment but rather in telecommunications and Internet equipment firms and independent software firms. Increasingly, the fortunes of large service providers like AT&T will depend less on innovation and more on their ability to configure and market complete one-stop-shopping solutions to customers by combining internal resources with outsourced technologies, products and services.     

Evolving technologies and standards regulation

The EU mandated a single standard for second generation wireless telecommunications, whereas the US allowed several incompatible standards to battle for market share. Motivated by this example, we argue that a single standard leads to a free riding problem, and thus to a significant decrease in marginal incentives for R&D investment. In this context, keeping two separate standards may be a necessary evil to sustain a high level of R&D expenditures. We also provide conditions such that a non-standardization equilibrium is better for consumers and for society as a whole.     

When do strategic alliances inhibit innovation by firms? Evidence from patent pools in the global optical disc industry

Research and development (R&D) consortia are specialized strategic alliances that shape the direction and scope of firm innovation activities. Little research exists on the performance consequences of participating in R&D consortia. We study the effect of patent pools, a unique form of R&D consortia, on firm performance in innovation. While prior research on alliances generally implies that patent pools enhance firm innovation, our study finds the opposite. Analyzing data on systemic innovation in the global optical disc industry, we find that patent pool formation substantially and significantly decreases both the quantity and quality of patents subsequently generated by licensors and licensees relative to the patenting activity of nonparticipants. Our empirical findings suggest that patent pools actually inhibit, rather than enhance, systemic innovation by participating firms. Copyright © 2011 John Wiley & Sons, Ltd.     

The up- and downside of collaboration in core and non-core technologies – Selective,contingent, and orchestrated openness in R&D collaborations

This paper contributes to the current debate about the “knowledge sharing-protecting” tension in R&D collaborations by introducing a new angle for analyzing this paradox. Considering the role of internal knowledge sources of the firm, the paper introduces and empirically analyses the interplay between three knowledge governance mechanisms (selective, contingent, and orchestrated openness) and the different technological fields of the firm (core, related non-core, and distant non-core technologies). Based on a unique first-hand large-scale project-level dataset from a Global 100 firm across a 10-year span, this research finds that R&D collaborations selectively conducted in firm’s related non-core technological fields promise the best innovation performance. Further, by orchestrating its projects across core and non-core technological fields in the same knowledge portfolio, the firm can leverage a network of inter-connected projects when collaborating with external partners. As such, the firm can strategically “distribute” collaboration risks across multiple projects, while optimize its access to external knowledge that it intends to get. Finally, contrary to the common assumption, this study does not find any discriminating factors against market-based partners in their contribution to innovation in both core and non-core technologies.     

A structural model on the impact of prediscovery licensing and research joint ventures on innovation and product market efficiency

Using a novel database on prediscovery licensing agreements (one type of R&D cooperation) as well as detailed firm-level and semiconductor market-specific information, we estimate the impact of prediscovery licensing agreements (PDLAs) on innovation and product market efficiency. Our results show that PDLAs reduce innovative activity in the semiconductor industry by 10 percent, or 4089 patents, throughout the 1989–1999 period. On the contrary, research joint ventures (a different type of R&D cooperation) increase innovative activity. Based on a structural model, we provide evidence that PDLAs increase production costs and semiconductor prices by 1 percent, which results in customers paying an additional $1.1 billion for semiconductors per year. Beyond the common concern that R&D cooperations facilitate coordination activities in product markets via price fixing, our study highlights that PDLAs can be used as an instrument to coordinate R&D activities, which can reduce innovation activity and increase costs and prices.     

Complementary assets,start-ups and incentives to innovate

We examine to what extent market conditions facilitating start-up formation affect firms' R&D investment and profits. We consider a model in which R&D efforts of an incumbent firm generate partly tacit technological know-how embodied in a key R&D employee, who might use it to form a start-up. The availability of complementary assets influences whether new firms are created and determine expected profits for start-up's founders. A large availability of complementary assets has the direct effect that the generation of start-ups is fostered. However, as a strategic effect, the incentives of incumbents to invest in R&D may be reduced because of the increased danger of knowledge loss occurring through start-up formation. We characterize the effects of an increase in the availability of complementary assets, showing that counter-intuitively there are cases in which it induces an increase in incumbents' R&D investment.     

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.     

A model for R&D performance measurement

R&D activities are increasingly costly and risky and, as a consequence, measuring their performance and contribution to value becomes critical. This paper illustrates a formal model for measuring R&D performance, based upon a balanced and synthetic evaluation of quantitative indicators from five different perspectives of performance: financial, customer, innovation and learning, internal business, alliances, and networks. The model is built in coherence with the suggestions coming from the theory of measurement in soft systems, which gives relevant guidelines for ensuring validity, objectivity and inter-subjectivity of the model. Then, an application in a real R&D setting is described, which helps to understand the model and to enlighten its main advantages and limits.     

How mergers affect innovation: Theory and evidence

This article analyses how horizontal mergers affect innovation of the merged entity and its non-merging competitors. Using data on horizontal mergers among pharmaceutical firms in Europe and applying propensity score matching estimators, we find that average patenting and R&D of the merged entity and its rivals declines substantially in post-merger periods. We show that this result is consistent with the predictions from an oligopoly model with heterogeneous firms, as well as a patent race model, when pre-merger R&D intensity is sufficiently high. Consistent with our theoretical model, we find that negative effects of mergers on innovation are concentrated in markets with high R&D intensity and in technology classes with overlap in pre-merger innovation activities of merging and rival firms.     

Empirical Evidence on the Success of R&;D Cooperation—Happy Together?

In this paper we analyse the effect of past R&D cooperation on current firms’ innovation performance. Success measures are: sales of innovative products, distinguishing between products new to the firm and new to the market, and cost reductions due to innovative processes. Particular attention is paid to the impact of different cooperation partners. The analysis rests on firm-level data of the annual German innovation survey. We find that R&D cooperation with competitors leads to greater cost reductions that are attributable to innovative processes. R&D cooperation with research institutes has a positive influence on a firm’s economic success with market novelties.      

Inter-firm complementarities in R&D: a re-examination of the relative performance of joint ventures

We compare duopoly outcomes between two alternative modes of research and development (R&D), viz. independent R&D and non-cooperative research joint ventures (RJVs), when there are complementarities between firm-specific R&D resources. When complementarity is high, RJVs lead to higher technological improvement and the reverse holds for low complementarity. In the intermediate range, the comparison depends on the relative imperfection in spillovers afflicting independent R&D. In sharp contrast to results on cooperative RJVs, non-cooperative RJVs lead to higher technological improvement when spillovers affecting independent R&D are low; the reverse holds for high spillovers. When RJVs yield higher technological improvement, they also yield higher industry profit and social welfare.     

The path of R&D efficiency over time

In this paper we investigate the pattern of R&D efficiency in terms of the number of product innovations achieved by firms over time. Using a panel dataset of Spanish manufacturing firms for the period 1990–2006, we follow the innovative performance of R&D active firms and observe that innovation rates change over firms' R&D histories. To explain these facts we propose a model that explicitly acknowledges the twofold composition of firms' R&D expenditures, comprising spending on both physical capital for R&D projects and payments to researchers. We regard this latter component of R&D as a source for dynamic returns to firms' R&D investments. Consequently firms' innovation outcomes clearly depend on how long they have been investing in R&D and also on whether there have been any interruptions in the temporal sequence of R&D activities. Our results suggest that R&D activities exhibit dynamic returns that are positive but at a decreasing rate, and that interruptions in R&D engagement reduce R&D efficiency.     

HETEROGENEITY OF FIRM CAPABILITIES AND COOPERATIVE RESEARCH AND DEVELOPMENT: AN EMPIRICAL EXAMINATION OF MOTIVES

This article proposes capability heterogeneity of R&D consortia participants as a condition to distinguish two competing motives for cooperative R&D: cost-sharing vs. skill-sharing. An analysis of 398 questionnaire responses from participants in Japanese government-sponsored R&D consortia finds that the relative importance of the cost-sharing motive in R&D consortia increases when participants’ capabilities are homogeneous or projects are large, while the relative importance of the skill-sharing motive in R&D consortia increases with heterogeneous capabilities. The skill-sharing motive is likely to increase a firm’s R&D spending, implying an additional consideration for management’s evaluation of cooperative R&D participation, as well as adding a new public policy implication of cooperative R&D. © 1997 by John Wiley & Sons, Ltd.     

A model of value assessment in collaborative R&D programs

This study examines the tasks, processes, and frameworks central to performance assessment in collaborative research organizations. The domain of the study is the partnered learning approach to research and development (R&D) management. The empirical results highlight relationships between context (center scale) and performance (value perceived by industry sponsors) in such R&D collaborations. Insights from this research are broadly applicable to the maintenance of alliances among firms involved in collaborative R&D and are generalizable to that context. Data gathered from a national population of 58 National Science Foundation (NSF) sponsored centers over a 3-year period reveal significant evolutionary patterns in the development of collaborative relationships. Successful industry university consortia leverage four core process relationships: (1) the creation of research capacity yielding advances in process and product knowledge; (2) technology transfer behaviors within the participants' organizations; (3) participant satisfaction with the outcomes; and (4) the continuity of industry sponsor support, i.e., commitment to the collaboration.     

Returns to food and agricultural R&D investments in Sub-Saharan Africa, 1975–2014

Research-enabled growth in agricultural productivity is pivotal to sub-Saharan Africa’s overall economic growth prospects. Yet, investments in research and development (R&D) targeted to many national food and agricultural economies throughout Africa are fragile and faltering. To gain insight into what could be driving this trend, this article updates, summarizes and reassesses the published evidence on the returns to African agricultural R&D. Based on a compilation of 113 studies published between 1975 and 2014 spanning 25 countries, the reported internal rates of return (IRRs) to food and agricultural research conducted in or of direct consequence for sub-Saharan Africa averaged 42.3%py. In addition to the 376 IRR estimates, the corresponding 129 benefit-cost ratios (BCRs) averaged 30.1. Most (96.5%) of the returns-to-research evaluations are of publicly performed R&D, and the majority (87.6%) of the studies were published in the period 1990–2009. The large dispersion in the reported IRRs and BCRs makes it difficult to discern meaningful patterns in the evidence. Moreover, the distribution of IRRs is heavily (positively) skewed, such that the median value (35.0%py) is well below the mean, like it is for research done elsewhere in the world (mean 62.4%py; median 38.0%py). Around 78.5% of the evaluations relate to the commodity-specific consequences of agricultural research, while 5.5% report on the returns to an “all agriculture” aggregate. The weight of commodity-specific evaluation evidence is not especially congruent with the composition of agricultural production throughout Africa, nor, to the best that can be determined, the commodity orientation of public African agricultural R&D.