Industrial and Corporate Change - Advance Access

Academic collaboration and organizational innovation: the development of research capabilities in the US pharmaceutical industry, 1927-1946

Furman, J. L., MacGarvie, M. — 2009-07-02

This article investigates the historical conditions that contributed to the birth of in-house research and development (R&D) capabilities in the early US pharmaceutical industry by examining qualitative and quantitative data on university–industry interaction between the 1920s and 1940s. This evidence suggests that labor markets, collaborative research, and contract research were the principal mechanisms by which early university science contributed to the development of in-house research capabilities in the emerging US pharmaceutical industry. This article further demonstrates a pattern in which firms with lesser R&D capabilities were generally constrained to work with local partners, while firms with greater internal R&D capabilities primarily engaged local partners for smaller-scale projects requiring generalist skills and distant partners for larger-scale efforts and extraordinary projects. We conclude by examining the implications of collaboration for those firms that did engage university academic partners. Our findings suggest that pharmaceutical firms that collaborated with universities during this period achieved higher rates of patenting and laboratory growth.

The practice of routines and representations in design and development

Hales, M., Tidd, J. — 2009-07-01

Using observational data from a longitudinal real-time field study, we contribute theoretically, empirically, and methodologically to the role of routines in new product design and development. We focus on the work being done by formal representations and formal routines in the design and development of a complex capital good. We find that, contrary to the emphasis in much of the literature, formal routines and representations, in particular those embodied in artifacts, while pervasive, play only a limited role. Rather, of greater influence are the various non-formal representations used to support interaction and communication: representations from routines (and elsewhere), instead of formal representation of routines. We propose a rebalancing of the relationships between routines and representations, a dialectical and mediating—in contrast to a linear and genetic—relationship.

Text and voice: complements, substitutes or both?

Andersson, K., Foros, O., Steen, F. — 2009-06-29

Text messaging has become an important revenue component for most mobile operators. We develop a simple model of demand for mobile services incorporating dynamics of information exchange. We show that when incoming communication stimulate outgoing communication, services that initially may be perceived as substitutes, such as mobile text and voice, may evolve into complements in terms of the price effect when the network size becomes large. We estimate the demand for text messaging in the Norwegian market and find that the cross-price effect of voice depends on the network size. Voice is a substitute for text messages for small network sizes, and a complement for large network sizes.

Do scientists get fundamental research ideas by solving practical problems?

Franzoni, C. — 2009-06-23

We discuss the problem-solving nature of scientific activity and maintain that contributions made in the form of improved methodologies, new technologies, and instruments for research are, and will increasingly become, central in experimental sciences and in fields traditionally the realm of pure intellectual speculation. The contribution of scientists to the development of new technologies and techniques for research purposes largely exceeds their contribution to developing technologies for industrial purposes, although the former easily blurs into the latter. We verify the effect of both types of contributions on the productivity of a sample of American star physicists, and show that improving research technologies always boosts the productivity of scientists, whereas developing industrial technologies is beneficial only when the technology stems from a research instrument.

Who profits from innovation in global value chains?: a study of the iPod and notebook PCs

Dedrick, J., Kraemer, K. L., Linden, G. — 2009-06-22

This article analyzes the distribution of financial value from innovation in the global supply chains of iPods and notebook computers. We find that Apple has captured a great deal of value from the innovation embodied in the iPod, while notebook makers capture a more modest share of the value from PC innovation. In order to understand these differences, we employ concepts from theories of innovation and industrial organization, finding significant roles for industry evolution, complementary assets, appropriability, system integration, and bargaining power.

Is inter-firm labor mobility a channel of knowledge spillovers? Evidence from a linked employer-employee panel

Maliranta, M., Mohnen, P., Rouvinen, P. — 2009-06-22

An employer–employee panel is used to study whether the movement of workers across firms is a channel of unintended diffusion of R&D-generated knowledge. Somewhat surprisingly, hiring workers from others’ R&D labs to one's own does not seem to be a significant spillover channel. Hiring workers previously in R&D to one's non-R&D activities, however, boosts both productivity and profitability. This is interpreted as evidence that these workers transmit knowledge that can be readily copied and implemented without much additional R&D effort.

Firm growth and type of debt: the paradox of discretion

O'Brien, J., David, P. — 2009-06-17

According to agency theory, debt is a useful governance mechanism for curbing the tendency of managers to over-invest in firm growth. First, we extend this view by using the theory of rules versus discretion to explain why the ability of debt to constrain excessive growth is contingent upon lenders relinquishing discretion and committing to rigid rules. Next, we draw on the financial intermediation literature to distinguish between two types of debt. We explain that transactional debt (i.e. public securities such as bonds and commercial paper) conforms to a rules regime, and thus can serve as effective governance mechanisms for limiting the agency costs of over-investment in growth. In contrast, relational debt (i.e. private loans from financial intermediaries) is best characterized as a discretionary regime, and therefore is less effective in curtailing these agency costs. Paradoxically, it is the very intention of lenders to act optimally in the future that may result in this governance breakdown. Our empirical analysis of a large sample of Japanese firms confirms that the type of debt influences both firm growth and the performance consequences of that growth.

Firms' transfer strategies with universities and the relationship with firms' innovation performance

Arvanitis, S., Woerter, M. — 2009-06-05

Based on a representative sample of Swiss firms we empirically investigated strategies for knowledge and technology transfer (KTT) activities between business firms and universities as well as other public research institutions. Based on a cluster analysis of 19 different forms for KTT, three types of KTT strategies were identified. They were significantly correlated mainly to (i) the absorptive capacity of a firm, (ii) several factors hampering KTT activities, and (iii) some characteristics of the transfer process such as the number of partners, the existence of contacts to foreign universities and the utilization of the mediating services of transfer offices. Furthermore, it was found that KTT strategies related to the "core" transfer activities such as R&D contracts are stronger correlated with innovation performance compared to strategies related to "softer" transfer forms.

Aligning branding strategies and governance of vertical transactions in agri-food chains

Raynaud, E., Sauvee, L., Valceschini, E. — 2009-06-03

This article looks at the i\nteractions between branding strategies and governance of vertical transactions. Branding strategy refers to the choice of information provided to consumers through a brand name. Governance refers to contractual agreements organizing transactions in vertical chains. We build on the logic of transaction costs economics to analyze these interactions. We provide an empirical analysis based on case studies to illustrate how governance structures are aligned with branding strategies. We show that the governance will depend on the salience of transactions. Critical or quality-relevant transactions are more tightly controlled than the others. We also explore the consequences of our results for the alignment principle described in Oliver Williamson's work.

Experimentation with strategy and the evolution of dynamic capability in the Indian pharmaceutical sector

Athreye, S., Kale, D., Ramani, S. V. — 2009-06-03

This article demonstrates that radical regulatory changes can be tantamount to technological revolutions by studying Indian pharmaceutical firms. It shows that radical regulatory changes such as the Indian Patent Act of 1970, the New Industrial Policy of 1991 and the signing of TRIPS (Trade Related Intellectual Property Rights System) in 1995 served to open up new economic opportunities and constraints in the wake of which the winners and losers were selected as a function of the dynamic firm capabilities most appropriate for the new market environment.

Does external knowledge sourcing matter for innovation? Evidence from the Spanish manufacturing industry

Vega-Jurado, J., Gutierrez-Gracia, A., Fernandez-de-Lucio, I. — 2009-06-03

This article presents empirical evidence on the effects of external knowledge-sourcing strategies on the development of both product and process innovations, and assesses the degree to which such effects are influenced by the firm's internal technological capacities. In our analysis, we consider two strategies for acquiring external knowledge (buying and cooperating) and two types of external sources (industrial agents and scientific agents). The analysis is based on a sample of 1329 manufacturing firms active in innovation activities taken from the Spanish Survey of Technological Innovation 2004. We find that the effects of the knowledge-sourcing strategies differ significantly across innovation types (product or process innovation). In addition, our results indicate that although internal R&D activities are associated with a greater use of external scientific knowledge sources (through cooperation), they do not seem to promote their exploitation for innovation development, that is, to say, they do not have synergistic effects.

The two faces of collaboration: impacts of university-industry relations on public research

Perkmann, M., Walsh, K. — 2009-06-03

We analyze the impact of university–industry relationships on public research. Our inductive study of university–industry collaboration in engineering suggests that basic projects are more likely to yield academically valuable knowledge than applied projects. However, applied projects show higher degrees of partner interdependence and therefore enable exploratory learning by academics, leading to new ideas and projects. This result holds especially for research-oriented academics working in the "sciences of the artificial" and engaging in multiple relationships with industry. Our learning-centred interpretation qualifies the notion of entrepreneurial science as a driver of applied university–industry collaboration. We conclude with implications for science and technology policy.

Macroeconomic effects of ownership structure in OECD countries

Gatti, D. — 2009-06-03

The article investigates the impact of ownership concentration (OC) on GDP growth, for a sample of 18 OECD countries over the period 1980–2004. The econometric analysis shows that more concentrated ownership can speed up growth, for countries approaching the technological frontier, provided that labor market regulation is sufficiently tight. In the absence of employment regulation, the logic of financial markets discipline applies and dispersed ownership appears as more favorable for growth. Based on econometric results, I calculate impact coefficients that allow to evaluate the growth points gained/lost following given variations in OC. This exercise reveals that a reform in the domain of ownership structure would have yielded, over the investigated period, sizeable effects in terms of growth. Importantly, these effects would have been unequally distributed across countries: Anglo-Saxon countries would have taken more advantage of deregulation (i.e. increased dispersion of ownership in a context of deregulated labor markets) while continental European countries would have benefited more from increased concentration of ownership in a context of reinforced labor regulation.

Big causes and small events: QWERTY and the mechanization of office work

Reinstaller, A., Holzl, W. — 2009-05-29

This article studies the adoption of typewriters in the United States, France, and Germany in the period between 1870 and 1930. The aim of the article is to show how specific problem-solving heuristics and routines, which have been developed to solve technical and social problems on the shop floor, have also shaped the organization of work and complementary technologies at the administrative level. We argue that performance criteria other than pure typing speed were relevant to the adoption of typewriters and the QWERTY keyboard, and reconsider the debates on path dependence surrounding the QWERTY keyboard.

Inter-firm reverse technology transfer: the home country effect of R&D internationalization

Criscuolo, P. — 2009-05-29

One consequence of the internationalization of R&D may be the transfer of foreign technology from the multinational to other firms in its home country. This phenomenon, which can be termed inter-firm reverse technology transfer and which has not been directly analyzed by either the international management or foreign direct investment literature, may have significant implications for policy—particularly in Europe. This article is a first attempt in this direction. Patent citation analysis on a database of EPO patents granted to 17 European chemical and pharmaceutical multinationals over the period 1985–2005 shows that they act as a channel for the transmission of knowledge developed in the United States, to other home country firms; these results are robust to the exclusion of examiner citations. We find that this technology transfer process is explained by the degree of home country embeddedness of the multinational firm, the US subsidiaries’ engagement in asset-augmenting activities, and the presence of a technology gap between the United States and the home country. These results point to an alternative understanding of foreign direct R&D investment and its implications for the home country's technological activity and general competitive performance.

Information technology and mindfulness in organizations

Valorinta, M. — 2009-05-28

The concept of mindfulness has lately been applied to organizations that are increasingly attentive to their environment and adaptive to unanticipated events. This article analyzes how information technology impacts mindfulness in organizations. Information technology is proposed to promote mindfulness by engaging organizations in more extensive search processes and by fuelling organizational innovations with a repertoire of routines. However, information technology is also found to decrease mindfulness and impede organizational adoption by promoting cognitive inertia and making the enactment of change more challenging. The article also identifies the practices IT-intensive organizations apply to promote more mindful behavior.

Knowledge management: does capture impede creation?

Jensen, P. H., Webster, E. — 2009-05-28

Economists and strategic management theorists interested in sustained competitive advantage often examine firms’ management of knowledge. Somewhat surprisingly, the interaction between knowledge creation and knowledge capture practices has received little attention. Using survey data from nearly 900 Australian firms we examine this issue, paying particular attention to whether knowledge capture impedes knowledge creation. We find that firms which favor closed-learning practices tend to rely more upon patents and secrecy, and eschew lead-time and brands as ways to capture profits. Firms that favor open styles of learning operate in the opposite manner.

Technological effects of M&As in Spanish manufacturing

Marin, R., Alvarez, I. — 2009-05-25

This article explores whether mergers and acquisitions (M&As) generate differentiated impacts on the acquiring firms’ R&D expenditures, patents granted, and product innovations. Considering M&As as a way of foreign expansion, we examine whether the technological effects differ between domestic and foreign-owned acquirers, assuming that the effects on the technological efforts and performance may differ across industries. The availability of statistical information for a stable sample of manufacturing companies in Spain during the 1990s allows us to follow a dynamic approach to the issue. Our findings confirm the existence of differentiated effects on technological inputs and outputs across industries, as well as diversity between domestic and foreign-owned firms involved in M&As.

Ownership, size, and the formal structure of organizations: evidence from US public and private firms, 1992-2002

Wang, L. — 2009-05-21

This study considers the effects of (i) ownership structure, (ii) prior size dynamics of growth and decline, and (iii) organizational size on changes in the formal structure of organizations. Using a broad sample of almost 70,000 US public and private firms, I test the arguments by estimating conditional logistic regressions using as dependent variables two dimensions of organizational structural differentiation: the number of formal subunits and hierarchical levels. The findings show that public firms are more likely to elaborate structurally, but less likely to simplify their structural differentiation. As organizations grow/decline in size, they apparently tend to increase/decrease their degree of structural differentiation. However, for a given change in size, the level of structural differentiation is less likely to increase during growth than it is to decrease during decline, indicating an asymmetric pattern. I also find that organizational size can serve as a facilitator or inhibitor for structural change, depending on the direction of change. Finally, I find that the asymmetric pattern of growth and decline works differently for large and small firms. The same proportional increase in size is more likely to generate structural differentiation for larger firms than for smaller firms. But the same proportional decrease in size has a smaller likelihood of causing structural de-differentiation for larger firms than for smaller firms.

The persistence of market leadership: evidence from Japan

Kato, M., Honjo, Y. — 2009-05-21

This article explores the persistence of market leadership in Japanese manufacturing industries over the period 1975–2004. By applying survival data techniques, we examine how long market leadership persists and how the duration of market leadership varies according to industry-specific characteristics. Our findings indicate that market leaders maintain their leadership positions for, on average, 20 years from 1975 in Japanese manufacturing industries. We provide evidence that market leadership tends to persist in capital-intensive and legally cartelized industries, whereas it is less likely to persist in demand-volatile, R&D-intensive, and import-intensive industries.

The structure of payments as a way to alleviate contractual hazards in international technology licensing

Cebrian, M. — 2009-05-19

This article proposes an empirical model in which the option of choosing between royalties, fixed payments or a combination of the two is made to mitigate contractual hazards in licensing contracts. We examine licensing contracts between Spanish and foreign firms during the 1960s and early 1970s using a new data source of 925 contracts. The link between patenting and licensing is also analyzed. The work provides evidence to support the hypothesis that the moral hazard problem truly influences the type of payment established in arm's-length contracts when there is an important technological gap between unaffiliated firms. This study also shows that the payment chosen depends on the size of the licensee firm.

Sunk costs, uncertainty and market exit: A real options perspective

O'Brien, J., Folta, T. — 2009-05-15

In this article, we examine whether the option value of keeping an operation alive will deter firms from exiting an industry. We find that uncertainty dissuades firms from exiting an industry, but only when the sunk costs of entering and exiting that industry are sizeable. Moreover, we argue and find that sunk costs can be influenced by the technological intensity of an industry, by the extent to which a firm competes on the basis of innovation, and by the firm's diversification strategy.

Excess sensitivity of consumption to income growth: a model of Loss Aversion

Pasini, G. — 2008-10-17

The article provides an empirical test on micro-data of a model of individual behavior based on Loss Aversion: utility is S-shaped, i.e. concave above reference consumption and convex below it. As a consequence individuals do not reduce current consumption in response to an expected income decline as long as uncertainty is high enough. Such a behavior is consistent with excess sensitivity of consumption to income growth, an empirical regularity which is hard to explain within a standard Life Cycle model. Loss Aversion is tested on an Italian dataset (the Bank of Italy's; Survey on Households' Income and Wealth). The conclusion is that excess sensitivity could be explained by a model that do not assume individuals to be expected utility maximizers.