Sourcing technological knowledge through corporate acquisition: Evidence from an international sample of high technology firms

We investigate the prevalence of the motive to source technological knowledge externally through corporate acquisition. Drawing on make-or-buy and organizational learning theories, we infer the implications of this explanation for the acquirers' pre-acquisition innovative characteristics. Using an international sample of 6106 high technology acquisitions during 1984–2000, we assess the contribution of innovative characteristics to the acquisition likelihood. For firms acquiring small private firms and former subsidiaries—but not public targets—the evidence is consistent with three propositions: (1) A firm's commitment to internal R&D is negatively affected by the decision to acquire; (2) Low R&D productivity increases the likelihood of acquisition; (3) A large knowledge stock predisposes firms to acquire because they perceive they are capable of selecting and absorbing targets. We conclude that acquisitions of small private firms and former subsidiaries are a viable R&D strategy to explore a range of potential future innovation trajectories for large public firms.     

Incongruities as a source of organizational renewal in corporate management of R&D

The heydays of the central R&D laboratory as the ‘dominant design’ of corporate R&D in large technology-intensive companies is over. The last decades have witnessed not only downsizing of central R&D, but also ongoing experimentation and restructuring of the modes of managing corporate R&D. What is the logic behind these ongoing restructurings? The paper argues that different kinds of organizational incongruities constitute critical sources of change in the organization of R&D. The paper seeks to align a contingency and an evolutionary perspective in analyzing two Danish technology-intensive companies characterized by highly different organizational trajectories.     

Sources of knowledge acquisition and patterns of knowledge-sharing behaviors—An empirical study of Taiwanese high-tech firms

The new knowledge acquisition and sharing stage represents the start of the organization's overall knowledge creation process. It is especially important for contributing to the critical foundation of organizational knowledge creation. This study explores the relationship between employees’ knowledge acquisition sources and the patterns of knowledge-sharing behaviors. We use structural equation modeling to test a sample of R&D professionals from high-tech companies in Taiwan. Data analysis suggests that most employees prefer to acquire knowledge from, and share knowledge with, their team members. This implies that greater familiarity between team members and strengthened cooperative relationships foster productivity. Furthermore, employees should be encouraged to participate in professional communities in order to acquire new knowledge. Knowledge acquired via these channels will facilitate the sharing of R&D knowledge within the organization.     

Foreign research and development in Swedish multinationals

In 1987, Sweden's 20 largest multinationals together operated some 170 foreign R&D units, employing 8100 people, 23% of their total R&D personnel. About 60% of the units were added after 1980, the majority through acquisitions of foreign companies.Four major motives for the operation of foreign R&D units are identified: (1) support to local production (5% of foreign R&D employment); (2) ‘market proximity’, i.e. adaptation of centrally developed products (and processes) to local market conditions (32%); (3) exploitation of foreign R&D results and resources (8%); (4) ‘political factors’, i.e. environmental factors more or less directly influenced by government action (34%). The remaining 20% of employment seemed to be motivated by a combination of factors.The primary aim of the first three types of foreign R&D units is to enhance a company's competitive position in ways not possible from a domestic location. Hence, they should be little cause of concern for Swedish policy makers.     

New forms of organisation and R&D internationalisation among the world's 100 largest food and beverages multinationals

This paper explores the strategic internationalisation of Research and Development (R&D) activities of the world's 100 largest food and beverages (F&B) multinationals (MNEs) in 1996 and 2000 with a sample of nearly 8000 affiliates for each period. We develop a global innovation strategy (GIS) structure where we analyse the R&D internationalisation process of F&B MNEs. We argue that in a fully developed GIS model the sourcing of creative inputs does not come exclusively from a ‘central’ R&D laboratory, but other overseas R&D laboratories or technological affiliates can also undertake genuine knowledge creation activity from capitalising on the scientific heterogeneity fostered in individual host countries as well as distinctive demand conditions. Our results indicate the increasing importance of overseas technological affiliates in the application of a GIS in the leading F&B MNEs, which determine the degree of their technological internationalisation. Two variants of technological affiliates reflect two broad knowledge-related activities, i.e. adaptation and genuine forms of knowledge creation.     

R&D intensity, value appropriation and integration patterns within organizational boundaries

Complementary insights from Transaction Cost Economics (TCE) and the Resource-Based View (RBV) of the firm are combined to predict the relationship between firm specific technological knowledge and patterns of integration within organizational boundaries. The findings show that the level of Research and Development (R&D) intensity (representing the creation of firm specific technological knowledge) has an inverted U-shaped relationship with the propensity of firms to integrate activities within organizational boundaries. At low levels of R&D intensity, firms’ propensity to integrate their activities is low, but increases with escalating levels of R&D intensity in order to avoid the misappropriation of value generated by technological knowledge. However, beyond a certain R&D intensity level, the propensity to integrate activities declines, since the level of technological knowledge is high enough to prevent imitation by third parties. As expected we further find that firms which follow this integration pattern outperform those which do not. As the level of R&D intensity increases, the integration of production and marketing activities enables firms to improve performance until a certain R&D intensity threshold, after which such integration negatively affects performance.     

R&D spillovers, patents and the incentives to innovate in Japan and the United States

National surveys of R&D labs across the manufacturing sectors in the US and Japan show that intraindustry R&D knowledge flows and spillovers are greater in Japan than in the US and the appropriability of rents due to innovation less. Patents in particular are observed to play a more central role in diffusing information across rivals in Japan, and appear to be a key reason for greater intraindustry R&D spillovers there, suggesting that patent policy can importantly affect information flows. Uses of patents differ between the two nations, with strategic uses of patents, particularly for negotiations, being more common in Japan.     

The local government market as a stimulus to industrial innovation

Supply and demand conditions that affect technological change in four functional areas of local government service delivery are described and analyzed. A consistent picture of small, fragmented markets, ‘lumpy’ demand, or uncertain markets is found, with demand shaped by a heterogeneous body of local procurement traditions and practices, low municipal technical capabilities, and risk-averse behavior by city officials and engineering consultants. Industries involved share a number of characteristics that bode poorly for industrial investment in innovation: low profit margins and uncertain financial futures. Firms that have the resources to invest in R&D do not tend to focus exclusively on municipal markets. The findings suggest that public policies directed toward improving the municipal market for innovative products by strengthening the cities' technological infrastructure will be more effective than policies directed toward the supply side such as increased R&D support.     

Heart of darkness: modeling public–private funding interactions inside the R&D black box

This paper is a first step toward closing the analytical gap in the extensive literature on the results of interactions between public and private R&D expenditures, and their joint effects on the economy. A survey focusing on econometric studies in this area reveals a plethora of sometimes confusing and frequently contradictory estimates of the response of company-financed R&D to changes in the level and nature of this category of public expenditures. Yet, a theoretical framework seldom is provided within which the empirical results are to be interpreted. Some such structure is necessary, in view of the multiple channels through which public research can affect private R&D performance, especially as not all the effects flow in the same direction. A major cause of “inconsistencies” in the empirical literature is the failure to recognize key differences among the various policy “experiments” being considered — depending upon the economy in which they are embedded, and the type of public sector R&D spending that is contemplated. Using a simple, stylized structural model, we identify the main channels of impact of public R&D. We thus can characterize the various effects, distinguishing between short- and long-run impacts that would show up in simple regression analyses of nominal public and private R&D expenditure variables. Within the context of our simple model it is possible to offer interpretations that shed light on recent cross-section and panel data findings at both high (i.e., national) and low (specific technology area) levels of aggregation.     

A catalytic and evolutionary approach to horizontal technology policies (HTPs)

This paper presents an evolutionary framework for horizontal technology policies (HTPs) especially market-friendly ones involving project-based incentives (e.g. R&D project based grants rather than tax-based incentives to yearly expenditures on R&D). HTPs are a category of technological policies whose objective is to promote technological development per se, and associated management and organizational routines, irrespective of industrial branch or technological area. They are being increasingly adopted by both advanced countries and newly industrialized countries in response to the new opportunities and threats opened up by the technological revolution and by the processes of liberalization and globalization; and they complement the more specific and well-known selective and vertical policies aimed at individual sectors and technologies. The analysis is conducted within a learning-to-innovate framework with emphasis on collective, organizational learning; search; and market-building. The outcome is a technology policy cycle with distinct infant, growth, and mature phases. Proactive ‘generation’ of a critical mass of projects for efficient learning and diffusion of innovation routines becomes the aim of the infant phase; while the mature phase of the policy should focus on policy restructuring including drastic reductions in the support of routi projects and enhanced support of more complex types of innovation. The paper also emphasizes the importance of a neutrality component in incentives in the infant phase of increasing selectivity; and of building policy capabilities for efficient policy design and implementation.     

Government and the decentralization of R&D

The purpose of this article is to show how costs and benefits of geographical decentralization of R&D can be identified and compared. The benefits for the region that receives R&D activities are studied in section 2. They stem from the short-run multiplier effect, the amelioration of human capital and the possible modernization of the local industrial structure. On the cost side examined in section 3, the observable impacts of the decentralization of R&D concern the loss of returns to scale and urban economies of the production of the R&D output. It is shown, in section 4, that the flows of costs and benefits must be discounted by the social cost of capital. The main conclusion of this article is that the decentralization of R&D in a large, sparsely populated country entails social costs and this would weaken its competitive position in world commerce. On the other hand, the issue of decentralization is more crucial for small countries (in terms of population and economic size) than for large ones, like the U.S., where critical masses of research efforts can be simultaneously attained in many fields and in many places.     

The ex ante assessment of knowledge spillovers: Government R&D policy, economic incentives and private firm behavior

This paper investigates the role of government R&D subsidy programs in stimulating knowledge spillovers. R&D subsidies are an effective public policy instrument when knowledge spillovers exist yet ex ante it is difficult to identify projects that have the greatest potential to increase innovation and economic growth. This paper derives a set of project and firm attributes that the literature finds generate knowledge spillovers and uses data on project proposals to estimate the degree to which a government R&D program conforms. We find that projects that were awarded R&D subsidies were more likely to have attributes such as participation in new research joint ventures and connections to universities and other firms. Following the post-award activities of firm, we find that receipt of a government R&D subsidy increased the funding from other sources when compared to firms that were not awarded funding.     

The determinants of the potential effectiveness of government-supported industrial research institutes

This paper analyses the main factors which determine the effectiveness of government-supported industrial research institutes (GSIRIs). GSIRIs are viewed as a sub-system of a larger, more complex system that is composed of the industrial environment, the universities, and the government. The interactions between GSIRIs and each of the components of their environment are examined.The potential effectiveness of a GSIRI is largely affected by the relationship, or ‘distance’, between industry's level of sophistication in performing its R&D activities and the nature of the university's applied research activities. The government influences this distance by affecting the supply of, and demand for, industrial R&D. Government usually intervenes by establishing specialized GSIRIs when the gap between industry's needs and the university's supply of R&D services is great. The role of a GSIRI may decline over time if industry becomes more sophisticated and/or the university becomes more applied.     

Spillovers from publicly financed business R&D: some empirical evidence from Germany

This paper investigates the effects of interindustry R&D spillovers from publicly financed business R&D on private R&D efforts and productivity using data of West German manufacturing industries. The results suggest that it is important to distinguish between the effects of spillovers from privately and publicly financed business R&D. In particular, estimation results provide evidence of productivity-enhancing effects of spillovers from privately financed R&D while results are less clear-cut for publicly financed R&D. Moreover, there is some empirical evidence that private R&D efforts of higher-technology industries are stimulated by spillovers from privately financed R&D but not by spillovers from publicly financed R&D. However, public funding of R&D in higher-technology industries seems to induce private R&D investments within these industries.     

Organizational environment, changing economic conditions, and the effective supervision of technical personnel: A management challenge

Industry's share of R&D funding is increasing while, at the same time, the half-life of technology is decreasing. This condition increases the pressure on technical managers to produce research that is creative and innovative but, at the same time, sensitive to the “bottom line.” Six conditions within the context of the organization play an important role in the management of technical employees: 1) Uncertainty in the work place increases the need for a supportive organizational climate and high information sharing, 2) Compensation appears to produce both functional and dysfunctional consequences for motivation, 3) Engineering personalities have a tendency to favor autonomous, challenging, and meaningful assignments, 4) Organizational structures influence the engineer's ability to process information, 5) The structure of the engineering task has been shown to affect job satisfaction, and 6) Career choices become an important consideration for mature engineers. Each of these issues, if not properly managed, can lead to stress, burnout and eventual employee turnover. Most important however, is the fact that if they are not managed properly, creative output from R&D organizations declines at a time when industry is assuming a greater share of the funding. When creativity declines, a reduction in the number of innovative solutions for products and processes is certain to follow. This condition can lead to serious problems when markets are changing dynamically. This paper reviews research findings related to each of the preceding issues and, discusses the role that each of them plays in the management of engineers and technical personnel. At the end of each discussion we provide some propositions worthy of further research.     

Liberalisation and R&D in network industries: The case of the electricity industry

Electricity sector liberalisation has coincided with a significant decline in R&D spending. This paper reviews the industrial organisation literature on R&D and innovation to explore the likely causes of the decline in R&D spending in the electricity sector. Meanwhile, R&D productivity and innovative outputs in utilities and equipment suppliers appear to have improved. However, a lasting decline in R&D expenditure can have a negative long-term effect on technological progress and innovation in the sector. We conclude that the decline in R&D could have been predicted from the literature. We also discuss the need to reorient the post-liberalisation technology policy.     

R&D priority-setting for global catastrophic risks: The case of the NASA planetary defense mission

"Mission-oriented" public research organizations invest in R&D to improve decision-making around complex policy problems from climate change to asteroid impacts, thus producing public value. However, the estimation of benefits produced by such R&D projects is notoriously difficult to predict and measure - a challenge that is magnified for global catastrophic risks (GCRs). GCRs are highly uncertain risks that may pose enormous negative consequences for humanity. This article explores how public research organizations systematically reduce key uncertainties associated with GCRs. Building off of recent literature highlighting the organizational and political factors that influence R&D priority-setting at public research organizations, this article develops an analytical framework for explaining R&D priority-setting outcomes that integrates the key stages of decision analysis with organizational and political dynamics identified in the literature. This framework is then illustrated with a case study of the NASA Planetary Defense Coordination Office, which addresses the GCR of near-Earth object (asteroid and comet) impacts. The case study reveals how organizational and political factors interact with every stage in the R&D priority-setting process - from initial problem definition to project selection. Lastly, the article discusses the extent to which the case study can inform R&D priority-setting at other public organizations, particularly those addressing GCRs.     

Who participates in R&D subsidy programs?: The case of Spanish manufacturing firms

Empirical evidence on the effectiveness of R&D subsidies to firms has produced mixed results so far. One possible explanation is that firms and project selection rules may be quite heterogeneous both across agencies and across industries, leading to different outcomes in terms of the induced additional private effort. Here we focus on the participation stage. Using a sample of Spanish firms, we test for differences across agencies and industries. Our results suggest that firms in the same industry face different hurdles to participate in different agencies’ programs, that participation patterns may reflect a combination of agency goals, and that patterns differ across high-tech and low-tech industries.     

The R&D performance through time of young, high-technology firms : Methodology and an illustration

This paper summarizes the pilot stage of a microeconomic study of the innovation performance through time of young, high-technology Israeli firms. It reports some results for a successful firm designing, producing and selling electronic instruments and systems. The paper begins by surveying some of the difficulties surrounding the collection and organization of data on R&D projects. One of them concerns the definition of the ‘Unit for Analysis’ - the R&D project. Three criteria are suggested for dividing the stream for innovative activities into R&D projects, and these are applied to group the tens of products, accessories and systems included in the analysis into nine projects. The paper subsequently defines a measure of “direct” project performance or profitability estimate - discounted operating profits per unit of fixed costs - and provides estimates based on R&D and sales data for the products of each project. The final sections analyze the variation of project profitability through time. The increasing profitability observed across generations of a product class is attributed to the adaptability of the firm to changes in the environment, particularly to the availability of new technology which requires the swift design and sale of more complex products. The qualitative history of the various projects suggests that this adaptability is due, to a large extent, to the skills, infrastructure and reputation of the firm accumulated from prior projects, i.e. that the “indirect” profitability of the latter is high. Some estimates of the indirect profitability of early projects are presented. A comparison of the spin-off mechanisms observed in the firm analyzed with those observed in firms of other industries is also undertaken.     

Articulation and codification of collective know-how in the steel industry: evidence from blast furnace control in France

In this article, we use the implementation of an expert system to improve blast furnace control in the French steel industry to illustrate the problem of knowledge articulation/codification. Blast furnace related knowledge still largely takes the form of empirical know-how in general and expert know-how tied to specific individuals in particular. Therefore, the articulation/codification of knowledge in this field is a difficult task requiring the identification and selection of ‘best practices’ for the purpose of codification. This process, in turn, affects daily routines and creates new forms of generic knowledge that make use of local knowledge. These new forms of generic information reinforce the tendency to appropriate private knowledge currently prevailing in Usinor, a large French steel company, and create new routes and new insights for R&D policy.