Deregulation, technology imports and in-house R&D efforts: an analysis of the Indian experience

This paper analyses the effects of the deregulation policy introduced in India in the mid-1980s on the relationship between technology imports and in-house R&D efforts. Using appropriate statistical techniques, it examines the interactions between policy regime, economic environment and the determinants of inter-industry variation in technology imports in Indian manufacturing. In doing so, it introduces R&D efforts as one of the main determinants. Literature suggests that there is simultaneity in the relationship between technology imports and R&D efforts. To tackle this problem, lagged R&D expenditure intensity is adopted as a proxy for in-house R&D efforts. The empirical results reveal that technology imports were only weakly related with the past in-house R&D efforts in the protective regime. Deregulation promoted complementarity between technology imports and R&D efforts significantly. The results also suggest that after deregulation, the impact of product differentiation, demand conditions and technology-related factors increased significantly in determining the inter-industry patterns of technology imports. Thus, unlike in a regulated regime where technology imports are viewed important for filling gaps in domestic technological capabilities, in a deregulated regime technology upgradation seems to be the major role of technology imports.     

Defense department payments for ‘company-financed’ R&D

The US Department of Defense funds a significant fraction of the in-house R&D of its defense contractors through its Independent Research and Development (IR&D) program. These IR&D funds, however, are reported as company-financed R&D in statistics compiled by the National Science Foundation. The program is most important in the aircraft industry, where we estimate that IR&D payments were 20% of the R&D reported as company-financed in 1973. Because special regulations govern the IR&D program, it would be more appropriate for most purposes to treat IR&D as part of federally-financed, not company-financed, R&D.     

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.     

Japanese-style evaluation systems for R&D projects: The MITI experience

This article examines some of the key features of Japanese evaluation systems utilized in evaluating R&D policies. The distinctive features of the system are that Japan depends upon in-house self-assessment combined with close cooperation and consensus-seeking behavior with the government and its advisory bodies. This system is markedly different from those predominant in countries where R&D policies are evaluated separately, independent from the sphere of decision-making. The system described here is subjective rather than objective in that the direct promoters of R&D plans were directly included in the evaluation activities. The system has evolved gradually in the course of Japanese technological development, and has been influenced also by Japan's particular internal and external environment. The system appears to have worked well in areas where research programs were modified to obtain incremental improvement or to create new types of R&D programs. However, recent constraints caused by budget deficits, together with the shift from applied to more basic research, have required a new type of evaluation system for Japan's R&D policy.     

Effects of foreign acquisitions on R&D activity: Evidence from firm-level data for France

This paper investigates the causal effect of foreign acquisitions on the research and development (R&D) activities of domestic target firms over the period 1994–2004. Using accounting data on French innovative manufacturing firms, we implement appropriate difference-in-difference estimation techniques associated with a matching propensity score procedure. We find that the acquisitions of French firms by foreign companies boost R&D spending. There is a simultaneous rise in the external and in-house R&D expenditures of French acquired firms. R&D is more contracted out to local research providers, in particular to local public laboratories and universities. The increase in internal R&D spending benefits to development, but also basic and applied research. Finally, the growth of the R&D budget is not only financed by internal resources but also receives financing from external partners, especially parent companies. Thus, our results call into question the idea that foreign takeovers hamper the R&D development of target firms and are detrimental to the national innovation system of the host country. First, acquisitions appear to bring efficiency gains enough to counterbalance the various costs of integration and market power effects, pushing firms to invest more in R&D. Acquisitions do not seem to incite managers to take shorter term and more financial driven decisions at the expense of R&D. Second, when motivated by technology sourcing and overseas R&D development, acquisitions might be used to access the specific know-how of target firms and to tap into the knowledge of the national innovation system. Then, purchaser firms could be more likely to develop the innovative capability of target firms and to strengthen their linkages with local partners than to reduce them and relocate R&D abroad.     

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.     

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.     

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.     

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.     

The innovative performance of in-house and contracted R&D in terms of patents and utility models

The standard empirical framework for analysing the R&D-patents relationship is widened both by examining the different role of in-house and contracted R&D in the innovative performance of firms, and by considering patents and utility models counts as measures of innovation output. Patents and utility models are considered to approximate for significant and incremental innovations, respectively. Applying count data econometrics to a panel data set of Spanish manufacturing firms surveyed in the period 1990-1996, a transcendental production function is estimated, which allows for non-constant elasticities of the R&D inputs. The results indicate that significant innovations are mainly gestated in-house, whereas contracted R&D seems more orientated towards innovations of incremental nature.     

Cooperative R&D and firm performance

We analyse the impact of R&D cooperation on firm performance differentiating between four types of R&D partners (competitors, suppliers, customers, and universities and research institutes), and considering two performance measures: labour productivity and productivity in innovative (new to the market) sales. Using data on a large sample of Dutch innovating firms in two waves of the Community Innovation Survey (1996, 1998), we examine the impact of R&D cooperation in 1996 on subsequent productivity growth in 1996–1998. The results confirm a major heterogeneity in the rationales and goals of R&D cooperation. Competitor and supplier cooperation focus on incremental innovations, improving the productivity performance of firms. University cooperation and again competitor cooperation are instrumental in creating innovations generating sales of products that are novel to the market, improving the growth performance of firms. Furthermore, customers and universities are important sources of knowledge for firms pursuing radical innovations, which facilitate growth in innovative sales in the absence of formal R&D cooperation.     

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.     

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.     

Measuring the returns of R&D—An empirical study of the German manufacturing sector over 45 years

Motivated by recent statistics that show significant growth in labor productivity, this paper seeks to analyze the long-term relationship between domestic R&D, knowledge stock and productivity dynamics. Time series data of the German manufacturing industry is used to estimate a variable cost function with the stock of knowledge being dependent upon current and past R&D spending. The estimates indicate that 50% of the effects of R&D on the knowledge stock appear within 4 years. However, the rate of return on R&D are shown to be drastically declining; recent rates of return on R&D are estimated to have reached an all-time low spanning the last 45 years. Current yields of R&D are only one third compared to the sixties. In conclusion, though the productivity slowdown of the seventies seems to have been overcome, this is not attributed to R&D investments.     

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.     

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.     

Innovation in the multinational firm with globally dispersed r&d: Technological knowledge utilization and accumulation

This paper employs evolutionary, resource-based, and knowledge-based perspectives to provide a framework for understanding technological knowledge sharing within the globally dispersed R&D function of the multinational firm. Elements from the three perspectives are inspected and drawn together. The constructs—knowledge, knowledge transaction, and performance—are articulated. Finally, two fundamental relationships are proposed: (1) kind of technological knowledge shared will impact the type of knowledge transaction undertaken and 2) type of knowledge transaction will impact R&D task performance.     

R&D cooperation and innovation activities of firms—evidence for the German manufacturing industry

The aim of the paper is to investigate in a simultaneous equation framework the role of R&D cooperation in the innovation process—in context with other factors—from two specific aspects. First, analysis focuses on the impact of R&D cooperation on firms’ innovation input and output. Second, analysis is undertaken as to how the number of cooperation partners affects the innovation behaviour of firms. Starting with the discussion of theoretically expected effects of successful R&D cooperation on the innovation activities of firms, the importance of inter-organizational arrangements in R&D is empirically investigated in respect of firms in the German manufacturing industry. The estimation results can be summarized as follows: joint R&D is used to complement internal resources in the innovation process, enhancing the innovation input and output measured by the intensity of in-house R&D or the realization of product innovations. On the input side, the intensity of in-house R&D also stimulates the probability and the number of joint R&D activities with other firms and institutions significantly.     

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.     

Endogenous technical advance and the stochastic trend in output: A neoclassical approach

In the recent endogenous growth literature, the trend in output is stochastic, while investment in scientific knowledge is treated as analogous to a capital stock. This paper models both research and development (R&D) and disembodied technical advance using neo-classical equations, which specify the equilibrium stocks as a function of prices and output. The elasticity of R&D in the production function, estimated using factor shares, is time-varying and increasing. Returns to scale are increasing in all factors. The most important aspect of the model is that the equilibrium rate of technical advance is not cyclically invariant, but co-moves with output at business cycle frequencies. This allows the production function to behave as a stochastic trend. Growth accounting demonstrates that long-term variations in the rate of productivity growth have been associated mainly with low-frequency fluctuations in the rate of disembodied technical advance, with secondary effects from the stocks of R&D and physical capital. During the high productivity period 1948–1972, technical advance contributed 1.48 percentage points per year to output, with 0.98 accounted for by R&D. The productivity slowdown of the mid-1970s was accounted by a gradual decline in the effect of R&D, and a more abrupt collapse in disembodied technology. The subsequent productivity revival was associated with two accelerations in disembodied technical advance, the first beginning in the early 1980s, and the second in the mid-1990s. The production function is simulated in a small econometric model. Model simulations find that exogenous shocks to the inflation rate generate significant variations in growth by inducing fluctuations in disembodied technology.