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The Role of Knowledge in R&D Efficiency
Abstract
Past research has recognized that both demand and capability influence the allocation of R&D resources. Scholars have had
an easier time getting a grip on demand than on capability. While it has been recognized that knowledge is an important part
of capability, to date, formalization of knowledge and its role in R&D activity has been unsatisfactory. This paper models
the role of knowledge in R&D. Various sources of such knowledge are considered. The model throws a different light on analyses
that employ a “knowledge capital stock,” and also illuminates the dual private and public nature of technological knowledge.
... A possible reason for the increasing importance of basic research may be found in the increasing complexity of products and production processes in most industries (Rycroft and Kash 1999). Another indication of the growing reliance of industrial innovation activities on (basic) scientific knowledge can be found in the analysis of citations to scientific literature in patent documents (Narin, Hamilton, and Olivastro 1997;Arora, Belenzon, and Patacconi 2018;Marx and Fuegi 2020). Analysing citations to scientific publications in USPTO patents between 1947 and 2020, Marx and Fuegi (2020) found that while USPTO patents before 1980 had less than one citation to science on average, this number increased to more than four citations per patent in 2020. ...
... We focus on the pharmaceutical industry, since this is a science-based industry where basic research plays an important role in innovation (McMillan, Narin, and Deeds 2000;Pavitt 1984;Pisano 2010). Patents in drugs and medicine classes cite significantly more scientific articles than patents in other classes (Narin, Hamilton, and Olivastro 1997) and cite basic scientific research more heavily (Narin and Olivastro 1992). The strong reliance of pharmaceutical firms on basic research becomes also apparent from the case histories of the discovery of 21 important drugs documented by Cockburn and Henderson (1998). ...
... This feature has been used by prior studies (e.g. Narin, Hamilton, and Olivastro 1997;Fleming and Sorenson 2004;Cassiman, Veugelers, and Zuniga 2008;Belderbos, Leten, and Suzuki 2017;Arora, Belenzon, and Patacconi 2018;Arora, Belenzon, and Sheer 2021) to justify the use of patent references as an information source on the knowledge base of patent applicants. ...
Employing a panel (1995–2015) of large R&D spending pharmaceutical firms, we investigate how internal basic research increases a firm’s innovative performance. We disentangle two mechanisms through which internal basic research affects technology development: (1) as strengthening of the firm’s absorptive capacity to build on externally conducted science, and (2) as a direct source of the firm’s innovation. We find that the positive relationship between internal basic research and innovation performance is significantly mediated by these two mechanisms, with the absorptive capacity mechanism relatively more important. The mediation relationships are more pronounced in recent years, with basic research as a direct source of innovation increasing in importance. This pattern is associated with a decline of corporate investments in basic research over time, and suggests that firms have adopted a more judicious and targeted approach to basic research aimed at getting more leverage out of a smaller commitment to basic research.
... These processes re ect the R&D activities performed by the rm. In line with Nelson and Winter (1982) and Nelson (1982b), we conceptualize R&D as a stochastic search process in which all rms in an industry face an identical distribution of outcomes. Both innovation and imitation are costly processes: rms invest in R&D a fraction of their past revenues in the attempt to implement incrementally new technologies, discover radically new innovations and imitate more advanced competitors. ...
... Both innovation and imitation are costly processes: rms invest in R&D a fraction of their past revenues in the attempt to implement incrementally new technologies, discover radically new innovations and imitate more advanced competitors. 5 Although these outcomes may di er across rms, all rms choose to undertake the same relative amount of R&D (Nelson, 1982b). In full agreement with this assumption, Coad and Rao (2010) nd that " rms behave as if they aim for a roughly constant ratio of R&D to sales", thereby adjusting R&D expenditures to experienced sales growth. ...
... Cohen & Levinthal (1990) suggest that external knowledge sources are important for innovation, but it depends on how capable an organization is to absorb and utilize this knowledge. The social capital of firms empowers the firms to attain knowledge (Fleming & Sorenson, 2004;Nelson, 1982) and firms' absorptive capacity enables it to value, assimilate and apply for innovation (Arora & Gambardella, 1994;Powell et al., 1996). More explicitly, when firm gets the knowledge from its social capital, the absorptive capacity of the firm impacts its utilization towards innovation (Kogut & Zander, 1992), the higher the absorptive capacity is, the higher the possibility of innovation is (Yu, 2013). ...
... More explicitly, when firm gets the knowledge from its social capital, the absorptive capacity of the firm impacts its utilization towards innovation (Kogut & Zander, 1992), the higher the absorptive capacity is, the higher the possibility of innovation is (Yu, 2013). Innovation is the combination of possessed and obtained knowledge (Fabrizio, 2009;Nelson, 1982) and a firm with higher absorptive capacity utilizes this acquired knowledge for better innovative capability (Laumann et al., 1978). Therefore, absorptive capacity can become the base for innovative capability as absorptive capacity refers to the ability of firms to apply external knowledge, whereas this innovative capability refers to the ability of firms to utilize knowledge to produce innovative products. ...
The globalization of markets provides opportunities for firms to collaborate on various activities. These collaborations are the resource of social capital for firms to achieve sustainable competitiveness. This study aims to investigate how social capital (i.e., structural, relational, and cognitive social capital) between firms in a developing economy and developed economy strengthens their innovation capability and enhance their industry 4.0 readiness. Using Smart PLS-SEM to analyse the data collected from 320 managers representing 81 manufacturing firms in Pakistan, we found that social capital is positively associated with industry 4.0 readiness, and innovative capability mediates this relationship. The study contributes to the existing knowledge of understanding industry 4.0 readiness and provides useful insights for firms in developing economy to improves their innovation capability during the industry 4.0 era. This study likewise reveals the significance of three dimensions of social capital, which can facilitate to bring in digital knowledge from developed economies to developed economies to get ready for the fourth industrial revolution.
... Innovation has played an important role in knowledge-based economy. It is key to productivity growth and firms' competitive advantage (Arora, Belenzon, & Patacconi, 2018;Fleming & Sorenson, 2004;Nelson, 1982). The production of innovations has been widely theorized as a process of searching and recombining existing knowledge components (Fleming, 2001;Savino, Petruzzelli, & Albino, 2017). ...
... One pivotal idea in innovation studies is that innovation results from searching and recombining prior knowledge (Nelson, 1982;Schumpeter, 1939). The literature has proposed various types of searches and examined their performance implications. ...
The development of inventions is theorized as a process of searching and recombining existing knowledge components. Previous studies under this theory have examined myriad characteristics of recombined knowledge and their performance implications. One feature that has received much attention is technological knowledge age. Yet, little is known about how the age of scientific knowledge influences the impact of inventions, despite the widely known catalyzing role of science in the creation of new technologies. Here we use a large corpus of patents and derive features characterizing how patents temporally search in the scientific space. We find that patents that cite scientific papers have more citations and substantially more likely to become breakthroughs. Conditional on searching in the scientific space, referencing more recent papers increases the impact of patents and the likelihood of being breakthroughs. However, this positive effect can be offset if patents cite papers whose ages exhibit a low variance. These effects are consistent across technological fields.
... As a result, the innovation output depends on the type of competition faced by firm. While demand innovation is a response to the customers' needs for new products (von Hippel, 1988), supply innovation is pushed by technological development (Dosi, 1982;Griliches, 1995;Nelson, 1982). Moreover, foreign competition is known to encourage domestic firms to invest in new technology (Singh and Gaur, 2013), an important source of process and ultimately product innovation. ...
... This can have an adverse effect on the success of product innovation efforts of domestic firms. Different types of competitions are related to different innovation activities (Adner and Levinthal, 2001;Dosi, 1982;Griliches, 1995;Nelson, 1982). Firm's innovation responses to competitive pressures from customers for both new products (product innovation) and cost reduction (process innovation) require adoption of certain innovation activities for successful output of the innovation effort. ...
Purpose
This study explores the link between the level of importance managers assign to competitive pressures from domestic competition, foreign competition and customers as factors in the key business decisions related to innovation and the outcome of firms' product innovation efforts.
Design/methodology/approach
The research sample is taken from the Business Environment and Enterprise Performance Survey by World Bank (2005). The relevant questions for the study were extracted from the survey. Logistic regression models were used for analysis using the ISLR library from R statistical software.
Findings
Managers' consideration of customer pressure for innovation as important in key business decisions related to innovation has a positive and sustainable effect, distinct from that of R&D and other innovative activities, on firms' success of product innovation efforts.
Research limitations/implications
The research acknowledges the need to verify the findings in a multicountry setting.
Practical implications
This research can help mediate the managers' assignment of importance to certain types of competition for innovation decisions in multicompetitive environment for improved success of product innovation efforts.
Originality/value
Simultaneous consideration of multiple competitive pressures by managers helps to identify the most suitable innovation activities for their respective firms and improve the chances of success of firms' innovation efforts.
... Operating at the scientific frontier can foster innovation but entails costs that are less and less sustainable for the average firm (Nelson 1982, Rosenberg 1990, Hicks 1995, Andrews et al. 2015, Ahmadpoor and Jones 2017. Research investments and scientific engagement are necessary to build absorptive capacity (Cohen and Levinthal 1990), explore the scientific landscape Gambardella 1994, Fleming andSorenson 2004), and gain a first-mover advantage on new findings (Arora et al. 2023). ...
Scientific conferences are an underexplored channel by which firms can learn from science. We provide empirical evidence that firms learn from scientific conferences in which they participate but also that this is conditional on intense participation. Using data from conference papers in computer science since the 1990s, we show that corporate investments in participation are both frequent and highly skewed, with some firms contributing to a given conference scientifically, some as sponsors, and some doing both. We use direct flights as an instrumental variable for the probability that other scientists participate in the same conference as a firm, altering the knowledge set to which the firm is exposed. We find that a firm’s use of scientists’ knowledge increases when they participate in the same conferences. Greater participation efforts, where the firm seeks the spotlight by both sponsoring the conference and contributing to its scientific discourse, foretell research collaborations and a stronger learning effect. Such learning is disproportionately concentrated among the most prominent firms and scientists rather than benefitting those without alternative interaction channels. Therefore, on average, firms learn from scientists that they encounter at conferences, but the substantial heterogeneity of the effect reflects the influence of reputation mechanisms in social interactions.
This paper was accepted by Ashish Arora, entrepreneurship and innovation.
Funding: S. Baruffaldi acknowledges financial support from the Swiss Science National Foundation (Reference No.: P2ELP1-161847).
Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2022.01373 .
... The insight that, in phases of radical technological change, organizations seek cooperation with external partners and that the success of a company depends not solely on its internal R&D activities but also on its ability to exploit external sources of knowledge was established in applied research as early as the 1970s (e.g., Tilton 1971;Nelson 1982). This process of "collective invention" has been explicitly described as an underestimated "fourth inventive institution," alongside governmental research institutions, companies, and individual inventors, by Allen (1983: 1) and related authors based on numerous historical examples (Table 1). ...
This paper provides a brief overview of the concepts of collective invention, user innovation, and open innovation. All three terms describe variants of distributed innovation processes and can be linked to further ideas of socioeconomic decentralization. First, the conceptual differences between collective invention, user innovation, and open innovation are elaborated. Second, exemplary case studies from the past decades are presented before more recent forms of distributed innovation in the development of information technologies are discussed. In this context, it becomes evident that distributed innovation processes and internal research and development activities in public and private sector organizations are not in competition with each other but rather in a complementary relationship.
... The presumption that they appropriate everything may be responsible for a belief that companies publish little or nothing. 14 Nelson, however, points out that corporate R&D produces both proprietary and non-proprietary information (Nelson, 1982 would argue that the end product, proprietary or public information, results from a two stage process. Stage one is producing the information, and stage two is appropriating or releasing it. ...
... Moreover, some scholars have found that the interaction between science and technology is becoming active [Meyer (2001[Meyer ( , 2002]. Rich scienti¯c research leads to the development of innovation and technology [Marx and Fuegi (2020); Rosenberg (1982)], and the progress of basic science also requires the support of more advanced technologies [Nelson (1982)]. Interdependence and coevolved relationships exist between science and technology. ...
With the rapidly changing business environment, the dynamic capability of an enterprise begins with sensing and grasping technology opportunities. Considering that the knowledge gaps between science and technology hinder the exploration of technology opportunities, previous studies proposed methods to extract technology opportunities by identifying the knowledge gaps between science and technology literature. This study improves upon previous methods for identifying knowledge fields contained in the literature by introducing a deep learning-based clustering approach. This study also proposes a way to reduce experts’ workloads in determining gaps in the field between science and technology literature. The key idea of the proposed method is to include technologies other than the technology in question. Additionally, pyrolysis technology can convert plastic wastes into useful materials and is considered a green technology. Therefore, this study applies our improved method to explore the technology opportunities of pyrolysis technology. The results show that our method can effectively identify technology opportunities. In the case of plastic wastes, the results show that recovering carbon fibers from plastic wastes and recycling metals from e-waste plastics are expected to be prevailing technological fields.
... Unlike codified knowledge that can be readily integrated into equipment, manuals, and tradeable goods, tacit knowledge is strongly connected to the workforce, establishing organisational routines, and collective learning processes. Learning heavily relies on trial and error attempts, endeavours to solve specific problems, and serendipity that essentially hinges on the context in which it occurs (Lundvall 1988;Nelson 1982;1991). Constraints on the cross-border mobility of workers and the necessity for specific configurations of tacit knowledge, often embodied within collaborative teams rather than individual workers, hinder the global transfer of technologies. ...
Pharmaceutical innovation relies on dense networks connecting diverse sectoral and national innovation systems components. These innovation systems incorporate a critical political economy aspect, highlighting the state's role in policymaking to support innovation and development. This study explores how Brazilian public policies aimed at developing the Health Economic Industrial Complex (HEIC) coevolved with pharmaceutical networks from 1970 to 2020. The research combines historical analysis of policies with SNA methods, analysing 398 pharmaceutical and life science deals in Brazil. The study highlights increased convergence between health, industry, and science, technology and innovation policies from 2004 to 2016 and political shifts from 2016 to 2022 that impacted policy implementation. The study first assesses public policy's influence on pharmaceutical networks in Brazil.
... Thus, using basic knowledge makes it more difficult to convert inventions into innovations; however, economic return may be more relevant if the conversion process occurs. Indeed, basic knowledge is said to transform the search for technological innovations from trial-and-error learning to a more directed form of problem solving (Fleming & Sorenson, 2004;Nelson, 1982). Therefore, search processes involving basic knowledge allow search agents to deconstruct a product/process into its functional components and better anticipate how each component will work and interact with the other components (Arora et al., 2021). ...
We study how sourcing of applied and basic knowledge is related to the likelihood and speed at which inventions become innovations as well as their profitability. By using a patent database with unique commercialization information, we reveal that inventions strongly based on applied knowledge lead to innovations more quickly, while inventions embedding basic knowledge lead to more profitable innovations. Sourcing both applied and basic knowledge (i.e., their combination effect) is negatively related to innovation speed. Explanations include the notion that inventions based on applied knowledge follow more established technological trajectories. Hence, such inventions relatively easily turn into innovations, but due to hard competitive pressure, profits are modest. Conversely, inventions embedding basic knowledge likely depart from conventional technological trajectories and market logic and are more difficult and/or riskier to transform into innovations. However, if such innovations are launched, the gains could be significant because of their improved performance and distinctiveness. Finally, recombining applied and basic knowledge may become too complex to handle, thus hampering innovation speed. From a managerial perspective, managers who seek to innovate quickly should exploit inventions embodying applied knowledge; however, those who seek increased profitability should exploit inventions embodying basic knowledge even if this may be more difficult and riskier. From a policy perspective, actions aiming to lessen the risks associated with commercializing inventions based on basic knowledge should be implemented.
... By the same token, firms differ widely with respect to the size and characteristics of the stocks of internal knowledge that can be used to generate new knowledge (Jones, 1995). Knowledge inputs and outputs also vary across firms because firms differ in their specific levels of competence in managing the knowledge generation process (Nelson, 1982). Inclusion of these variables stems from identifying the recombinant character of the knowledge generation process. ...
This Element combines the advances of the economics of knowledge and innovation implementing the Schumpeterian notion of creative response to understand the determinants and the effects of the rate and direction of technological and organizational change and its variance across time and space, firms, and industries. The notion of creative response provides an inclusive framework that enables to highlight the crucial role of knowledge in assessing the rate and direction of technological change and to clarify that no innovation is possible without the generation of new knowledge, while the generation of new knowledge augments the chances of innovation but does not automatically yield the introduction of innovation. Firms thus are faced with several strategic decisions to make the creative response possible. The Element elaborates on the analytical core of the notion of creative response and articulates its implications for economic policy and strategic management.
... Innovation is inherently a complex and risky process (de Faria et al., 2019;Kanter, 1989) and full of uncertainty (Nelson, 1982). The complexity, uncertainty and risk factors in the innovation process bring a high probability of failure (Välikangas et al., 2009;Cooper, 2011;Holmstrom, 1989;Jalonen, 2012). ...
Purpose
The purpose of this study is to measure and analyze the national innovation efficiency of organisation for economic co-operation and development (OECD) countries. This is to determine to what extent OECD countries efficiently use the elements that enable innovation activities possible in generating innovation outputs.
Design/methodology/approach
An input–output model was constructed to measure efficiency. The inputs and outputs in the research model are the input and output sub-indices of the Global Innovation Index. Data envelopment analysis was used to measure the national innovation efficiency levels of OECD countries.
Findings
The results show that national innovation efficiency is generally high in OECD countries. However, some countries lag behind in innovation efficiency. OECD countries’ ability to create and provide the elements that enable innovation activities is higher than their ability to create innovation outputs. OECD countries have a good innovation environment and a high level of resources, but they should focus on how to create more innovation outputs.
Originality/value
This study presents a measurement of national innovation efficiency of OECD countries which contributes “Innovation Strategy” agenda. The results empirically show that overall innovation indices cannot be the only indicator of the performance of national innovation systems. In this study, an innovation efficiency/performance matrix is constructed to present the relative positions of the countries to help in examining countries’ strengths, weaknesses and potentials based on innovation efficiency and innovation performance simultaneously. This study contributes to the literature by presenting a broader perspective and measurement of national innovation efficiency by taking an extensive number of indicators into account.
... The second phenomenon described as "breakthrough" is the employment of an invention to subsequently create further technological developments (Trajtenberg, 1990;Ahuja & Lapert, 2001;Zucker, Darby, & Armstrong, 2002). Likewise, Nelson (1982) also stated that existing inventions are able to serve as an input for future inventions in order to achieve further technological developments. Hence, an invention can be considered as a "breakthrough" when subsequent researchers use it as a foundation for newer inventions (Simonton, 1999;Fleming & Waguespack, 2007). ...
This monograph investigates the involvement of firms in strategic alliances and the interplay with organizational absorptive capacity and organizational ambidexterity. The theoretical work highlights the positive aspects, as well as the negative aspects, for firms engaging in strategic alliances. The main contribution relates to the evaluation of both positive and negative outcomes of various types of strategic alliances. This monograph presents different avenues for firms regarding how to benefit from strategic alliances in terms of innovation, while avoiding threats such as unintended knowledge spillovers.
... Sin embargo, dichas transformaciones no se explican ni se consideran en las teorías neoclásicas de crecimiento económico. Son economistas del desarrollo como Rosenstein-Rodan (1943), Prebisch (1950) y Hirschman (1958, evolucionistas como Nelson (1982) y Alcouffe y Kuhn (2004), y poskeynesianos como Pasinetti (1983) y Thirlwall (2002, los que han incorporado en sus análisis estas transformaciones y sus implicaciones en el crecimiento económico. De acuerdo con estos autores, la diversidad productiva de una nación está asociada a sus capacidades locales, tanto que el desarrollo económico debe ser concebido como un proceso en donde las capacidades se crean y adaptan. ...
Se analiza el comportamiento del indicador Economic Fitness como medida de la competitividad internacional de las economías de América Latina y su relación con las brechas de ingreso per cápita y el Índice de Desarrollo Humano (IDH). Se encontra-ron correlaciones positivas entre las brechas de ingreso por persona y el estancamiento de la competitividad internacional de las economías latinoamericanas, así como entre los niveles de desarrollo humano y la estructura productiva, suponiendo una relación de causalidad que va del desarrollo humano hacia la competitividad. También se muestra que la estimación del indicador a partir de las exportaciones en valor agregado interno cambia de manera significativa, lo que sugiere que la estimación original puede sobre o subestimar la competitividad.
... Looking in a wider scope, we can see that information can be costly to transfer because of the information itself, e.g., the way it is encoded (Nelson, 1982;Rosenberg, 1982;Pavitt, 1987), tacitness of knowledge (Nonaka and Takeuchi, 1995;Hildreth and Kimble, 2002), attributes of information seekers or providers (e.g., a lack of certain tools or a lack of "absorptive capacity") (Pavitt, 1987;Cohen and Levinthal, 1990), the amount or structure of the information that must be transferred (Rosenberg, 1976), specialized personnel (e.g., "technological gatekeepers") (Tushman and Katz, 1980), and specialized organizational structures (e.g., information transfer groups (Katz and Allen, 1985) and learning patterns (Nonaka and Konno, 1998)). Some other supportive factors, such as cultural difference (Szulanski, 1996;Bhagat et al., 2002;Cummings and Teng, 2003), relationship or knowledge gap between source and recipient (Szulanski, 1996;Tyre and Von Hippel, 1997), and exchange support (Wellman, 1996), also have an impact on the extent of stickiness. ...
The phenomenon of information stickiness is widely seen by a declined information vitality and is hypothesised with multiple causes, but research on it is scant. Therefore, it is necessary to unmask the myth and concretise the concept. This research adopts an agent-based simulation model incorporating information accumulation, attitudinal proposition, interest, and preference for searching and matching information to determine how identified antecedents affect four defined symptoms of information stickiness in a simulated virtual community. This paper demystifies these symptoms, which are embedded in various personal, relational, and environmental settings. Some aggregate-level outcomes of consumers’ message-triggered responses emerge as an endogenous outcome of information stickiness. Analysis of data is visualised and quantified for its longitudinal changes in information acquisition, group affiliation, information growth, and the system's vitality.
... Profits derived from new products may not be sufficient to meet R&D expenses, resulting in sunk cost. Following the debate surrounding R&D and profitability, Nelson (1982) has theorized that the gains derived from R&D accumulate over time and, in the majority of cases, the financial returns are obtained only in the future or after a time lag. As Edvinsson and Malone (1997) show, R&D investments produce intellectual property that, when properly managed, increases firm profitability in the future. ...
Clean energy companies often require more costly investment in technology innovation than traditional energy companies, which poses higher technological risks. Therefore, many inconclusive debates have arisen concerning whether the R&D investment can generate sustained returns for such companies. This paper adopts progressive modeling steps to address the problem by using a modified Cobb-Douglas production function, System Generalized Method of Moments (SYS-GMM) approach, and fixed-effect panel threshold model. The role of R&D investment; the non-linear relationship between revenue, innovation, efficiency, and risk; as well as the corresponding threshold effects in clean and traditional energy companies are analyzed. 840 firm-year observations of clean energy companies from the NASDAQ Clean Edge Index are collected and screened, and compared with 280 firm-year observations of listed traditional energy companies in the U.S. Moreover, four types of clean energy companies, comprising green energy, wind power, water, and smart grid companies, are calculated and summarized separately. The results show that, for clean energy companies, long-term R&D intensity is beneficial to returns, shortening the cash conversion cycle (CCC) value, and reducing the financial leverage can produce a positive effect on return on assets (ROA), while different types of clean energy companies are advised with tailor-made portfolio strategies. For traditional energy companies, controlling the financial leverage while properly increasing CCC can help improve their ROAs. In this context, policy recommendations are provided for stakeholders to optimize their investment strategies in various clean and traditional energy enterprises according to the time-lag effect and threshold effect.
... How should firms learn about new technological opportunities in order to evaluate whether they should exploit or invest in them? Being able to learn about a technology and evaluate it prior to costly investments has benefits (e.g., Nelson (1982)). Better information reduces errors in exploitation decisions both in the direction of investing in technologies that prove to have limited potential and in the direction of missed opportunities to exploit technologies that turn out to be significant. ...
... Luigi Orsenigo explored these factors further in greater detail during his academic career. The idea that knowledge is of crucial importance for the performance and growth of firms, regions, and countries became in recent years widely acknowledged in the literature (Nelson, 1982). As a result, research has increasingly focused on the question of how knowledge can be characterized and what is the impact of knowledge on the economy. ...
This volume presents selected contributions from the 2018 conference of the International Schumpeter Society (ISS). The selected chapters in this volume reflect the state-of-the-art of Schumpeterian economics dedicated to the three conference topics innovation, catch-up, and sustainability. Innovation is driving catch-up processes and is the condition for a transformation towards higher degrees of sustainability. Therefore, Schumpeterian economics has to play a key role in these most challenging fields of human societies’ development in the 21st century. The three topics are well suited to capture the great variety of issues, which have the potential to shape the scientific discussion in economics and related disciplines in the years to come.
The presented contributions show the broadness and high standard of Schumpeterian analysis. The ideas of dynamics, heterogeneity, novelty, and innovation as well as transformation are the most attractive fields in economics today and offer the most prolific interdisciplinary connections now and for the years to come when humankind, our global society, has to master the transition towards sustainable economic systems by solving the grand challenges and wicked problems with which we are confronted today.
Therefore, the book is a must-read for scholars, researchers, and students, interested in a better understanding of innovation, catch-up, and sustainability, and Schumpeterian economics in general.
... Luigi Orsenigo explored these factors further in greater detail during his academic career. The idea that knowledge is of crucial importance for the performance and growth of firms, regions, and countries became in recent years widely acknowledged in the literature (Nelson, 1982). As a result, research has increasingly focused on the question of how knowledge can be characterized and what is the impact of knowledge on the economy. ...
It is great to launch these conference proceedings from the ISS 2018 conference held in Seoul, July 2–4, Korea. The theme of the ISS 2018 was “Innovation, Catch-up, and Sustainable Development. Keun Lee, one of the guest editors of this volume, served as the President of the Society (2016–2018) and also as the main host or Chairman of the Organizing Committee, for the Seoul conference. Actually, it took 26 years to return to Asia: the last ISS conference in Asia was held in Kyoto, Japan, in 1992. And it turned out to be a good decision for the International Schumpeter Society to return to Asia: About 380 papers were presented out of the 469 initial submissions from more than 50 nations around the world. Among these 380 presentations, there were about 90 papers presented by young scholars who are either graduate students or new Ph.D. students.
... However, such transformations are neither explained nor considered in neoclassical theories of economic growth. Instead, it has been development economists (Rosenstein-Rodan, 1943;Prebisch, 1950;and Hirschman, 1958), evolutionists (Nelson, 1982 andAlcouffe &Kuhn, 2004), and post-Keynesians (Passinetti, 1981 andThirlwall, 2002) who have incorporated these transformations and their implications for economic growth into their analyses. A nation's productive diversity is associated with its local capabilities, so much so that economic development is a process in which firms and institutions create and adapt skills, knowhow, and infrastructure. ...
In this paper, we explore the Economic Fitness (EF) indicator from the World Bank Database that measures nations' level of international competitiveness. At the same time, using input-output tables, we present our estimations of this new metric, replacing the revealed comparative advantages (RCA) from exports in gross value with an estimate of RCA from exports in domestic value-added (DVA). We find that between 1995 and 2015, there is a positive relationship between Economic Fitness and per capita GDP for low and middle-income countries. Besides, from 2000 to 2014, there has been a widening gap between global exports in gross value and exports in value-added; we also show that the estimations of the EF using the domestic value-added content of exports change significantly. Suggesting that, given the increasing levels of productive links at the international level, the competitiveness of nations is also conditioned by the way they participate in global production networks.
... All individuals and firms around the world can work more efficiently in the economy by improving access to knowledge. Previous researches have indicated the knowledge effect on R&D productivity ( Nelson, 1982 ), and also explained the knowledge substantial share on firm productivity ( Nesta, 2008 ). ...
The relationship between information and communications technology (ICT) and productivity has been examined extensively, but no research has investigated the spatial spillover effects of ICT on labor productivity. Accordingly, this research aimed at investigating the ICT spillover effects on labor productivity in 28 European Union (EU) countries over 2007-2017. The spatial autocorrelation of labor productivity was validated using the global and local Moran's I statistics. Then, the equation for determining labor productivity was estimated using the spatial Durbin model. The results indicated that ICT spillovers played an important role in improving labor productivity in EU countries. A 1% increase in ICT index of the country i would result in an average 0.357% increase in the labor productivity of country i, an average 0.421% increase in the labor productivity of all other countries, and an average 0.778% increase in the labor productivity of all countries.
... Our study contributes to the literature on corporate investments in basic research by disentangling and comparing two key mechanisms through which engagement in basic research can improve firms' innovative performance (Rosenberg, 1990;Gambardella, 1992;Cockburn & Henderson, 1998;Della Malva et al., 2015;Arora et al., 2018;Arora et al., 2021) and by demonstrating that the relative importance of both mechanisms has changed over time. Further, our study adds to the literature on search strategies for innovation (Nelson, 1982;Fabrizio, 2009;Fleming and Sorenson, 2004) by confirming the important 'guiding' role of science in the search process for innovation. By investing in basic research, firms can leverage both internal and external scientific knowledge as a 'map' for technology developments. ...
... L'approche fondée sur les connaissances considère la firme comme une organisation créatrice de connaissances (Nonaka, 1994). Dans cette perspective, Brown et Duguid (1989) mirent en avant que cette connaissance se génère et se stabilise au sein de communautés de pratique, tandis que Nelson (1982) et Nonaka (1994) y voient une source fondamentale de rentes et d'avantage concurrentiel, guidant son évolution aussi bien que sa transformation interne. Deux courants s'opposent traditionnellement : les uns considèrent que la connaissance, rendue objective et codifiée, peut faire l'objet de régimes d'accumulation, à l'instar de Nelson ; les autres voient le réel avantage concurrentiel de la firme dans la dynamique d'articulation de ses connaissances tacites, à l'instar de Nonaka. ...
... The evolutionary theory was the first theory that discussed the spillover effects of FDI. It was first introduced in the 1980s by Nelson (1982) and later by Conner (1991). This theory was also examined by Cantwell (2000), showing the foreign activities of MNCs and the spillover effects on the development of host economies. ...
Objective – The purpose of this study is to investigate both “technology” and “knowledge” effects of foreign direct investment (FDI) on labour productivity in the medium-high manufacturing industries’ classification in Malaysia. Methodology/Technique –This study employs a Seemingly Unrelated Regression (SUR) estimator. Findings – The results conclude that diffusion of knowledge, which increases labour productivity, is greater via “learning effects” as compared to the investor countries’ capital investments in the medium-high manufacturing industries. Novelty –This study expands the body of knowledge about the benefits of FDI spillovers on labour productivity according to specific investor countries, however, are rarely researched particularly in developing countries and at the industry level. Type of Paper: Empirical. JEL Classification: E60, J24 Keywords: Foreign Direct Investment; Labour Productivity; Technology Spillovers; Knowledge Spillovers Reference to this paper should be made as follows: Yunus,N.M; Wahob, N.A. (2021). The Technology and Knowledge Spillover Effects of FDI on Labour Productivity, Journal of Business and Economics Review, 5(4) 51–58. https://doi.org/10.35609/jber.2021.5.4(5)
... Firms through experiential learning (E.L.) generate new knowledge based on existing skills and know-how of firms. Thus, when using internal knowledge, a firm does not face conflict and resistance from established norms (Kogut & Zander, 1992;March, 1991;Nelson, 1982). New knowledge generated through experiential learning (E.L.) may not be unique but difficult for competitors to copy (Grant & Baden-Fuller, 2004;Kogut & Zander, 1992). ...
Many past studies have examined the association between entrepreneurial orientation (E.O.) and organizational performance (O.P.). However, these studies have not adequately addressed the mediating roles of acquisition learning (A.L.) and experiential learning (E.L.) on organizational performance. Given this gap, we have developed a new model that contains six direct relationships, three mediating relationships, and one multi-mediating relationship. The focus of the study was on Indonesian Pharmaceutical SMEs. We have collected a sample of 365 respondents non-randomly. For statistical analysis, we have used Smart PLS version 3.2. The statistical analysis includes reliability, validity, and descriptive statistics. The results confirm that acquisition learning (A.L.), experiential learning (E.L.), and entrepreneurial orientation (E.O.) promote organizational performance (O.P.). We also found that entrepreneurial orientation (E.O.) impacts acquisition learning (A.L.) and innovative performance (I.P.) but does not affect organizational performance (O.P.). However, the results suggest that acquisition learning (A.L.) and experiential learning (E.L.) are positively linked. Our results also support all the mediating relationships.
... The evolutionary theory was the first theory that discussed the spillover effects of FDI. It was first introduced in the 1980s by Nelson (1982) and later by Conner (1991). This theory was also examined by Cantwell (2000), showing the foreign activities of MNCs and the spillover effects on the development of host economies. ...
A plethora of studies have revealed the importance of new knowledge transfer from foreign multinational corporations (MNCs) in encouraging higher labour productivity and sustainable competitive advantages. However, less attention is given to low labour productivity issue despite the presence of FDI, especially in the developing country context. Most of the studies only heavily emphasised on 'technology' effects rather than 'knowledge' effects on the host country as a result of the presence of foreign technology. As Malaysia is one of the major FDI recipients in Southeast Asia, the specific spillover effects of each FDI investor country in Malaysia, need to be studied. With an abundance of MNCs, international technology transfer is considered as an imported mode for technology acquisition in a developing country like Malaysia. However, the benefits of FDI spillovers on labour productivity function in Malaysia remain ambiguous, even when classified according to specific investor countries. Globalisation and liberalisation have seen trade and investment activities booming, thus increasing multilateral relations between Malaysia and other countries regardless of their level of development. Thus, this study may help the Malaysian government to justify the cost that should be invested to attract more FDI inflows towards the manufacturing industries in the short run. Keywords: spillover effects, Foreign Direct Investment, labour productivity, technology spillovers, knowledge spillovers
The unprecedented proliferation of standard-essential patents (SEPs) has exerted a transformative impact on the evolution of standards, fueling global technological innovation. Recognized as a linchpin for enabling rapid and widespread innovation diffusion, SEPs have become pivotal drivers of contemporary business strategies. While the superior value of SEPs vis-à-vis non-standard-essential patents (non-SEPs) is widely acknowledged, the intricate process underlying the transformation of patents into SEPs warrants a comprehensive investigation. Drawing on an extensive analysis of 4,859 SEPs and 775,669 non-SEPs granted by the United States Patent and Trademark Office (USPTO) from 1976 to 2014, this study employs a rigorous examination of ten commonly utilized patent indicators, delineating four critical dimensions: 1) collaboration, 2) knowledge, 3) diversity, and 4) legal protection. Through a strategic lens, this study shed light on the multifaceted factors that amplify the likelihood and hasten the speed of SEP declarations. The empirical findings of this study compellingly illustrate the predominantly positive influence exerted by most indicators on SEP declaration likelihood, effectively expediting the declaration process.
This paper examines how a firm’s choice of the type of experiment impacts on its potential exploitation of new technological opportunities. It does so in the context of the failure of successful firms (or disruption) where the literature has informally suggested that firms undertake errors in experimental choice. It is shown that firms will generically choose experiments that minimize false positives (a high-bar) or minimize false negatives (a low-bar) rather than strike a balance between the two. This is done to better inform decisions regarding the exploitation of technological opportunities. It is shown that these choices can differ between incumbents and entrants based on their fundamentals and because of the anticipation of competition between them.
This paper was accepted by David Simchi-Levi, business strategy.
This is an analysis of the wide theoretical context and consequential work of Richard Nelson and Sidney Winter. We assume as a norm for this chapter that we must do an embryological analysis of their texts, and those of contemporary thinkers. We begin by disentangling the avalanche of new ideas in the early individual works of Nelson and Winter. This flow of frames and concepts evolving, and the torrent of new questions that they pose, become interlaced and crystalize during their joint contributions in the 1970s and 1980s. In these decades we can distill the essence and critical development of Nelson and Winter in dialectic opposition with 20 th Century standard economics. The advances achieved during the 1990s and 2000s, with new protagonists coming to the front, lead us to the frontier of evolutionary economics. Then, the sudden irruption of the recession in 2008, and the sequence of shocks that have transmuted the global economy during the last decade, have unchained crucial innovations in evolutionary economics that expand the field far beyond the consolidated "beachhead".
Both internal knowledge – investment in internal R&D and information and communication technologies (ICT) as well as external knowledge – knowledge spillovers and active collaboration with partners are rapidly fostering firm productivity and innovation. In this study, we investigate the role of internal and external knowledge in firm productivity and innovation. In addition, we test interactions between investment in R&D and ICT as well as between knowledge spillovers and knowledge collaboration in their association to firm innovation and productivity. We use a recombinant innovation approach and four samples for firms in manufacturing, creative, ICT and science, and professional services industries during 2002–2014 and for pre‐and post‐crisis periods to perform our analysis. In addition to innovation and productivity, we also examine the role of internal and external knowledge as a conduit to the development of innovation internally and the co‐creation of innovation with external partners. Our results lead to managerial and policy implications.
This study examines the relationship between basic research and firm R&D productivity. In particular, this study focuses on the conditioning role of firm-level technological diversification in the relationship based on the idea that firms with a broad technological knowledge base are better positioned to fully harness the wide and unpredictable applicability of scientific knowledge. Using a unique panel dataset of Korean manufacturing firms during the period of 2003–2012, we find the following. First, firm-level technological diversification positively conditions the relationship between basic research and firm R&D productivity. In particular, unrelated technological diversification, rather than related technological diversification, has a positive conditioning effect on the relationship. Second, the positive conditioning effect of technological diversification is more pronounced for firms operating in high-tech industries or in less competitive industries. These results suggest that a broad technological knowledge base across unrelated technological fields is helpful or necessary for firms to better utilize basic research for enhancing their R&D productivity.
This paper investigates the conditioning role of R&D employee training in the effect of the stock of technological knowledge on firm R&D productivity. We suggest that the development of R&D human capital through training enhances firm-specific technological competence, thereby enabling firms to better utilize their stock of technological knowledge as a source of technological opportunities. Specifically, while a trap of path dependency may hamper the proper utilization of the firm-specific stock of technological knowledge, R&D employee training reinforces the standing-on-the-shoulders effect of the stock of technological knowledge, thereby offsetting, at least partially, its fishing-out effect due to depleting technological opportunities. Using panel data of Korean manufacturing firms, we show that R&D employee training positively moderates the effect of the stock of technological knowledge on firm R&D productivity. Furthermore, we suggest several factors that influence the positive moderating effect of R&D employee training such as the degree of knowledge sharing among R&D employees within each firm, the strength of industry R&D appropriability, and the industry R&D intensity.
New solutions in artificial intelligence and machine learning require researchers to study, in greater depth, the nature, and dynamics of emerging industries like biotechnology or pharmaceuticals. With his pioneering work, Luigi Orsenigo has demonstrated, in great detail, how new technologies create technological opportunities, change appropriability conditions, and cumulativeness in these emerging industries. Rooted in the evolutionary economics tradition, this approach is better suited in explaining the patterns of innovation, technological change, and the growth in very dynamic industries. In this context, our article reviews the evidence of Luigi Orsenigo’s contribution to the economics of innovation, to the tradition of history-friendly models, and to the discussion on the sectoral system of innovation. It concludes by pointing at some unresolved questions in these traditions and new fruitful alleys for future researchers.
Dieser Beitrag gibt einen Überblick über die Konzepte der Collective Invention, User Innovation und Open Innovation, die jeweils unterschiedliche Ausprägungen verteilter Innovationsprozesse beschreiben. Nach einer Aufarbeitung ihrer Entwicklungs- und Anwendungsgeschichte wird ihr praktisches Zusammenspiel entlang von exemplarischen Fallstudien illustriert. Abschließend erfolgt die Diskussion neuerer Entwicklungen im Bereich der Informationstechnologien sowie eine kritische Würdigung.
The advancement of technological innovations may facilitate the coordinated development of the economy and ecological environment (EGE); however, few studies have noted the role of innovation efficiency (INEF) as a bridge between economic development and EGE. To fill in this gap, this paper adopts DMSP/OLS nighttime light data to measure the level of economic development and the improved data envelopment analysis model to measure INEF, establishing an index system to quantify EGE. Then we propose the panel threshold-mediating (PTM) model that combines the panel threshold model and the mediating effect model. On these bases, considering INEF as a mediator, we use this novel PTM model to empirically test the nonlinear relationship between economic development and EGE in 283 Chinese cities from 2003 to 2018. The results indicate that (1) while economic development can improve EGE, its positive impact on EGE differs with different INEF thresholds. A higher INEF threshold indicates a stronger positive effect of economic development on EGE. (2) For the entire sample, the mediating effect of INEF between economic development and EGE is not significant. However, after applying the PTM model, we found that the mediating effect of INEF was concealed by the sample population. (3) When INEF is lower than 0.2381, its complete mediating effect is verified. When INEF is higher than 0.2381, its mediating effect is not significant. On the contrary, economic development directly improves EGE. (4) Industrial agglomeration, the scale of government expenditure, residents' education level, degree of opening up, and transport infrastructure are all conducive to EGE. These findings can help cities at different INEF levels to achieve coordinated development of economy and EGE.
How does public data shape the relative performance of incumbents and entrants in the private sector? Using a simple theoretical framework, I argue that public data reduces investment uncertainty, facilitates the discovery of new market opportunities, and increases the relative market share of new entrants relative to incumbents. I shed light on these predictions by estimating the impact of public data from Landsat, a U.S. National Aeronautics and Space Administration satellite mapping program, on the discovery rates of new deposits by incumbents (seniors) and entrants (juniors) in the gold exploration industry. I exploit idiosyncratic timing variation and cloud cover in Landsat coverage across regions to identify the causal effect of public data on the patterns of gold discovery. I find that Landsat data nearly doubled the rate of significant gold discoveries after a region was mapped and increased the market share of new entrants from about 10% to 25%. Public data seem to play an important, yet relatively underexplored, role in driving performance differences across firms.
This paper was accepted by Ashish Arora, entrepreneurship and innovation.
Using data on 800,000 corporate publications and patent citations to these publications between 1980 and 2015, we study how corporate investment in research is linked to its use in the firm’s inventions, and to spillovers to rivals. We find that private returns to corporate research depend on the balance between two opposing forces: the benefits from the use of science in own downstream inventions, and the costs of spillovers to rivals. Consistent with this, firms produce more research when it is used internally, but less research when it is used by rivals. As firms become more sensitive to rivals using their science, they are likely to reduce the share of research in R&D. (JEL D22, D25, G31, I23, O31, O33, O34)
Purpose
Because of the complexity of technological innovation and the dynamics of the technological environment, it is impossible for a single firm to have all knowledge needed for technological innovation, making it essential for firms to conduct cross-border knowledge search and integration. However, it is very difficult for firms to acquire and assimilate cross-border knowledge. The purpose of this paper is to explore how an open innovation platform (OIP) helps firms to effectively search and integrate cross-border knowledge, and to understand the key roles that OIP plays during the cross-border knowledge search and integration processes.
Design/methodology/approach
This paper takes the case analysis method, which provides a comprehensively understanding on the complex process of cross-border knowledge search and integration as well as the internal mechanism. Drawing on the research paradigm of Eisenhardt (1989), Bakker and Akkerman (2014), this paper analyzes and verifies the mechanism of OIP cross-border knowledge search and integration based on extensive interviews.
Findings
First, this paper analyzes the process of cross-border knowledge search and integration through Haier open partnership ecosystem (HOPE), which is theoretically divided into three stages, including motivation formation, cross-border knowledge search and integration. These three stages have been further decomposed into the following seven steps: demands discovery, problems definition, problems decomposition, resource search, resource evaluation, technology redevelopment and test. In addition, this study investigates the manifestation of interrelationships among these stages and steps, depicting the pathways through which HOPE facilitates the firm’s cross-border knowledge search and integration. The conclusions indicate that OIP timely discovers the consumer demands during the motivation formation stage, effectively decomposes problems and find related technology resources during the search stage and improves the efficacy of integration stage.
Research limitations/implications
This study reveals the mechanism of OIP cross-border knowledge search and integration and draws some valuable conclusions, which contribute to the literature on cross-border knowledge search, enrich the research on problem-solving and also propose a new perspective to study the roles of OIP on innovation. However, there are still some limitations. First, this study is built on a single platform (HOPE), further studies may focus on more platforms to ensure the conclusions of this paper. Second, this study conducts data analysis using a simple encoding analysis, so it is possible that some critical information is emitted while collating and analyzing data. Meanwhile, for the research methods, qualitative and quantitative methods can be combined to analyze related issues, then the correlation and corresponding mechanism can be incorporated into the same framework to further verify the conclusions and generalize the results.
Practical implications
This paper theoretically analyzes how and why HOPE helps firms search and integrate cross-border knowledge. It provides not only a reference for OIP but also a proven and effective way for companies’ acquiring and integrating cross-border knowledge. Then it will further improve firms’ innovative abilities, especially disruptive innovation abilities.
Social implications
Technological innovation, especially disruptive innovation is not only a driving force of firms’ sustainable development but also a vital driver of national development. This paper clarified that OIP can help firms conduct successful disruptive innovation through cross-border knowledge search and integration, which will further increase national innovative competence and improve social welfare.
Originality/value
This paper extends the literature on the process of cross-border knowledge search and integration, as well as the roles of OIP. From a managerial standpoint, the conclusions have practical implications for firms to successfully acquire and integrate cross-border knowledge.
The aim of this research has been to understand how R&D should be conceptualised for the arts and cultural knowledge domains, defined for policy purposes, measured and evaluated. The work has considered approaches to R&D from academia and practice. This is a piece of commissioned research which has been undertaken as a component of the Digital Research and Development (R&D) Fund for the Arts’ programme. The Digital R&D Fund for the Arts was a strategic partnership between the National Endowment for Science Technology and the Arts (Nesta), Arts Council England (ACE) and the Arts and Humanities Research Council (AHRC).
A number of recent empirical studies of technical change at the level of the individual firm have concluded that market demand is the dominant influence upon the innovation process, “calling forth” innovations in market economies. The pace of innovation in the private sector heavily influences the growth of national output and productivity, and these studies and their conclusions have therefore received much attention, having been extensively quoted in discussions of appropriate government policy for the encouragement of innovation. This paper reviews a number of these studies and concludes that their findings, and the interpretations of their findings in the secondary literature, are seriously flawed and, in many cases, invalid. The proposition that market demand governs the innovation process is by no means conclusively demonstrated in these studies, and they are therefore inadequate and inappropriate guides for the formulation of policy.Most of the studies examined employ a working definition of “demand factors” which is so broad as to embrace a range of possible influences upon innovation which should more properly be classified elsewhere. The concept of demand utilized in these studies bears little resemblance to the more restrictive and precise definition of market demand found in economics. In addition, the phenomena analyzed in these studies are a very heterogeneous lot; the studies do not address identical empirical questions, and their findings are, as a result, neither uniform nor unambiguous.Both demand and supply side influences are crucial to understanding the innovation process, and it is the exclusive preoccupation with only one set of these forces which is criticized in this paper. Some implications of the criticism for government policy toward innovation are discussed in the conclusion.
One of the central issues in science policy during the past decade has been the extent to which the national levels of expenditure on scientific education and research influence the standard of living. This paper provides empirical evidence to show that the pay-off from this investment in science is more complex and indirect than previously supposed.
This article outlines the production function approach to the estimation of the returns to R&D and then proceeds to discuss in turn two very difficult problems: the measurement of output in R&D intensive industries and the definition and measurement of the stock R&D "capital." The latter concept leads to a discussion of modeling of the spillover effects of R&D and to suggestions for possible measurement of such effects via the concept of technological distance between firms and industries. Somewhat more familiar econometric problems (multicollinearity and simultaneity) are taken up in the next section and another section is devoted to estimation and inference problems arising more specifically in the R&D context. Several recent studies of returns to R&D are then surveyed, and the paper concludes with a plea for a lowering of expectations as to what the available data can tell us and with suggestions for ways of expanding the current data base in this field.
Technological Information-Exchange in High-Technology Industries in the Silicon Valley The Transfer and Utilization of Technological Knowledge
- E Rogers
Rogers, E., "Technological Information-Exchange in High-Technology Industries in the Silicon Valley," in D. Sahal, The Transfer and Utilization of Technological Knowledge (Lexington, MA: D. C. Heath, 1981).