Firm Capacity Research Articles

Connecting the unconnected: Analogies and the development of insight in the absorptive capacity process

While innovation has been widely attributed to a firm's absorptive capacity (AC), product and marketing studies have found that insight is central to a firm's creativity and innovation. Creativity and innovation studies have found that individuals often relate to external information through an analogical reasoning process and that this process develops insight into a firm's innovation. Although the AC concept has been associated with this insight, it however faces significant difficulties explaining its development. This is because AC has been defined by a social structure where myopic tendencies can preclude its individual members from assimilating new external experiences. As insight often requires an exposure to previously unconnected or unrelated experiences, this myopia can reduce a firm's ability to produce insight in its AC process. By drawing on an individual level analogical reasoning process, this study argues that a firm's coherence and uniqueness offer a social structure that not only leverages this individual level analogical reasoning process but also produces an assimilation that develops insight in the firm's AC process. In using a sample of US biotechnology firms, this study finds empirical support for these arguments to explain the development of insight in ways not possible with AC explanations.

Global value chain participation and firm capacity utilization: Evidence from China

Based on firm- and customs transaction-level data from 2000 to 2006, this study employs the translog cost function to measure the capacity utilization of Chinese firms. It then uses a difference-in-differences (DID) model combined with propensity score matching (PSM) to examine the impact of global value chain (GVC) participation on capacity utilization. The empirical results show that GVC participation has a significant positive impact on firm capacity utilization and that this impact lasts for a long time. Our results are robust after considering several potential problems. Mechanism testing reveals that GVC participation improves firm capacity utilization by expanding market demand and promoting technological progress. Heterogeneity analysis shows that GVC participation has a more significant impact on general trade firms, private firms, high-tech industry firms and firms in the western region of China. This study reveals that GVC participation can effectively ameliorate China's overcapacity, providing new ideas for achieving overcapacity governance.

Sustainable Technology Diffusion Manufacturing Outwards FDI Firms: Evidence from China Using Numerical Simulation Methods

Technology diffusion plays an important role in the improvement of technological innovation capabilities and can provide strong support for sustainable economic development. This paper aims to analyze the influence mechanism of technology diffusion on sustainable development, such as the initial investment willingness, technology spillover effects and absorptive capacity, technology transfer prices and intellectual property protection, government subsidy support and penalties. However, there is a lack of systemic game mechanism and numerical simulation methods for heterogeneous enterprises. Based on the government, OFDI companies, and domestic companies that are not involved in FDI, we have proposed the evolutionary game model for technology diffusion on sustainable development. The results show that: (1) The government, OFDI firms, and domestic firms are influenced by each other’s initial willingness to a different extent; (2) Different combinations of technology spillover and absorptive capacity lead to different sustainable evolution results of technology diffusion; (3) Reasonable technology transfer pricing and enhancing the protection of property rights can improve the efficiency of the technology diffusion sustainable development system; (4) Both financial support and penalties encourage technology diffusion sustainable development, but excessive financial support reduces the government’s willingness to participate ultimately. Therefore, this paper proposes that the government should increase its willingness to participate and increase punishment for unreasonable pricing behaviors. The stronger the stimulus effect of OFDI firm technology spillover and domestic firm absorptive capacity, the stronger the stimulus effect; however, there is a certain threshold effect, at the same time increasing the property rights protection of OFDI firms and the penalties for opportunistic behaviors of domestic firms, and establishing a diversified financial support policy, will increase the efficiency of the technology diffusion sustainable development system.

Internationalisation, knowledge intensity, adaptive culture and absorptive capacity: a strategic entrepreneurship enabling logic for export firms

PurposeThis study proposes a logic to enable strategic entrepreneurship for export firms through absorptive capacity and adaptive culture to capitalise on the knowledge intensity from internationalisation.Design/methodology/approachThe study sample comprises 422 key role employees at 98 export firms in Ho Chi Minh City, Vietnam. The data are analysed using a structural equation model.FindingsThe results reveal that the firm's knowledge intensity may serve as a reservoir, absorbing and reconciling knowledge acquired from internationalisation and redistributing it to strategic entrepreneurship. A firm's absorptive capacity and adaptive culture can act as buffers, allowing internationalisation knowledge to permeate and transfer to administrative bodies and fostering strategic entrepreneurship.Originality/valueThis study proposes an integrated model of the relationship between the degree of internationalisation and strategic entrepreneurship through novel lenses of knowledge-based perspective with the organisational capabilities.

Analysis of post-disaster business recovery: Differences in industrial sectors and impacts of production inputs

Understanding how disaster recovery works at the firm level is critical for maximizing a firm's recovery and reducing its overall economic losses. Therefore, this study aims to empirically investigate the business recovery process following the 2011 Great East Japan Earthquake by examining different industry sectors and the relative influencing factors. Through postal mail, a total of 1289 questionnaire responses were received from firms that were affected by the earthquake in 2011, of which 434 were finally examined after eliminating those with incomplete responses. This study applies survival analysis models to identify the impact of sector type on the post-disaster recovery process. It also establishes panel data regression models to quantitatively estimate the impact of eight production input supplies, namely electrical power supply, water supply, communication, transportation, gasoline supply, facility availability, employee attendance, and raw materials supply, on business recovery. The results suggest that the ability to recover from the earthquake varies significantly by industrial sector, with non-manufacturing sectors recovering more rapidly than manufacturing sectors. Furthermore, the availability of production inputs determines a firm's production capacity recovery. The estimated coefficients in the regression model quantitatively measure the impact of a day earlier restoration of production inputs on production capacity increasement. For example, the restoration of electricity will increase production capacity by 82.7% and 83.35% in the manufacturing and non-manufacturing sectors, respectively. The findings provide empirical evidence for business managers to develop proactive plans to mitigate business risks and for decision makers to design recovery strategies.

Bricolage as an effective tool for the survival of owner-managed SMEs during crises

This study analyzes how the resources and capabilities of the owner-manager influence the firm’s capacity to survive during crises. We conceptualize that only the deliberate use of available resources (bricolage) can enhance this capacity, and that “making-do” behaviors mediate the influence of the owner’s social and human resources on the firm's capacity to survive crises. Based on a sample of 462 Chilean owner-managed small and medium enterprises (SME), we test our hypotheses using a complementary partial least squares-structural equation modeling (PLS-SEM) and fuzzy set-qualitative comparative analysis (fsQCA) approach. The results indicate that when founders deliberatively use their social and cognitive resources, they enhance the firm’s capacity to survive in crisis environments. The fsQCA results complement these outcomes by showing that low levels of survival capacity are related to low levels of bricolage and founders’ ties.

Assessing the impact of Financial Obstacles on Manufacturing Firm's capacity utilization: Bayesian Approach

This study investigates the relationship between financial obstacles and the capacity utilization of manufacturing firms. It departs from previous studies by employing a Bayesian linear regression analysis. The results demonstrate the considerable negative effect that financial constraints have on the capacity utilization of manufacturing enterprises, while access to credit lines has a positive effect. The sample consists of 1,494 private manufacturing firms in 31 European and Central Asian countries. Financial obstacles were perceived as a major impediment to business operations by 65% of the enterprises surveyed. Furthermore, 52% of enterprises in the sample have access to loans from financial institutions, while 47% have no access to credit lines. This implies that the manufacturing sector’s capacity to tap into financial market resources and surmount financial barriers both is vital to its survival and presents a significant challenge.

Capacity Allocation of Hybrid Power System with Hot Dry Rock Geothermal Energy, Thermal Storage, and PV Based on Game Approaches

This study utilizes hot dry rock (HDR) geothermal energy, which is not affected by climate, to address the capacity allocation of photovoltaic (PV) -storage hybrid power systems (HPSs) in frigid plateau regions. The study replaces the conventional electrochemical energy storage system with a stable HDR plant assisted by a flexible thermal storage (TS) plant. An HPS consisting of an HDR plant, a TS plant, and a PV plant is proposed. Game approaches are introduced to establish the game pattern model of the proposed HPS as the players. The annualized income of each player is used as the payoff function. Furthermore, non-cooperative game and cooperative game approaches for capacity allocation are proposed according to the interests of each player in the proposed HPS. Finally, the proposed model and approaches are validated by performing calculations for an HPS in the Gonghe Basin, Qinghai, China as a case study. The results show that in the proposed non-cooperative game approach, the players focus only on the individual payoff and neglect the overall system optimality. The proposed cooperative game approach for capacity allocation improves the flexibility of the HPS as well as the payoff of each game player. Thereby, the HPS can better satisfy the power fluctuation rate requirements of the grid and increase the equivalent firm capacity (EFC) of PV plants, which in turn indirectly guarantees the reliability of grid operation.

Testing Pecking Order Prediction of Financing Choices in NEPSE Listed Non-Financial Companies of Nepal

In a financial market with information, agency and contract enforcement problem, partially informed firms have difficulty to access in capital markets and they face some restrictions to get adequate external capital at similar cost of their internal funds. Hence, these firms display the preferential order of financing choices, for example; first they invest internal funds, second debt capital and equity as last resort. However, such preferences of financing order commonly known as Pecking Order are not similar in all cases due to the nature of firms, their financial health, borrowing capacity, and functioning of capital markets. Under this backdrop, this study attempted to test this Pecking Order Hypothesis (POH) in financing decisions of Nepalese firms. Moreover, it tried to examine the effect of firm's borrowing capacity, informational efficiency, financial risk, operating growth, taxes and internal profitability on pecking order financing preferences of firms. It used quantitative approach of analysis to examine the financing behavior of 16 non-financial NEPSE listed companies. Descriptive and inferential statistics i.e. Pooled Ordinary Least Square (OLS) regression approach was used to test the hypothesis and data comprised unbalanced panel (n=262 observations) obtained from annual financial reports of sampled companies. The study results revealed that firm specific financial risk including borrowing capacity, operating growth, internal profitability and information efficiency have significant impact in firms' financing polices. Firms have preferences to use debts instead of equity when they face financing deficiency and these preferences are prominent when firms plummet in severe financing constraints. Hence, this study concluded that a firm's capacity to trade off its financial risk with some firm specific attributes outlined the most of the financing policies of Nepalese enterprises. These financial risks absorption capacity of the firms could be considerably improved if firms improved their profitability, sales growth, information efficiency and spare borrowing capacity; hence, these factors are imperative to design the optimal capital structure of firms and maximize their values.

The effect of open innovation mindset on absorptive capacity: the mediation role of entrepreneurial alertness

Purpose- Applying new information across corporate borders is a strategy for innovation that uses absorptive capacity. In organizational research, the term open mindset is used to define a firm's ability to understand and accept new concepts or to critically evaluate its experience with new knowledge. The shift inflow or outflow initiative and notion advocated for this tactic. Applying opportunities for creation through innovation is the action of the entrepreneurial attentiveness. An evaluation of a firm's intelligence results from assessing the open mindset of individuals who perceive, evaluate, and seize new chances in contact with the environment. The purpose of this research is to investigate the impact of an open innovation mindset on the absorption capacity in small and medium-sized enterprises with the mediating role of entrepreneurial alertness. Methodology- The statistical population includes 430 managers of small and medium-sized businesses producing industrial, utility, and construction pumps. The sample size is 131 firm managers. In this research, the data collection tool is a questionnaire that has been distributed and collected using a non-probability sampling method. The validity and reliability of the questionnaire were evaluated during the pre-test. Smart PLS and SPSS software were also used to analyze the research data. Findings- Descriptive and inferential analysis have both been used in this study. The result of data analysis shows that open innovation has a significant effect on entrepreneurial alertness. It can also be mentioned that the impact of the open innovation mindset on absorptive capacity. Conclusion- The findings show that the open innovation mindset at the individual level increases the firm's absorptive capacity. Also, entrepreneurial alertness plays a mediating role between the impact of an open innovation mindset and absorptive capacity. The findings thus demonstrate that those who pay attention and have an open and interactive mindset while receiving opportunities and suggestions are more likely to succeed.

Re-examining the relationship between Foreign Direct Investment and Economic Growth in Nigeria

This study examined the impact of foreign direct investment on Nigeria economic growth at large using time series data from World Bank Development Indicators. The research employed Auto Distributed Lag Model (ARDL) to investigate the impact of FDI on Nigeria economic growth both in the short-run and long-run. It was revealed that foreign direct investment has positive significant impact on Nigeria economic growth within the period under review. The research therefore concludes, that foreign direct investment has significant impact on Nigeria economic growth collaborating the earlier findings in theoretical and empirical literatures. The research therefore, recommends among others that Nigeria government and other West-African countries should invest more in infrastructural development and on R&D to increase the country domestic firm absorptive capacity and inflow of FDI in the country.

Playing politics or playing right: Impacts of reputation-seeking on short-term disruptions management

When disruptive events cripple a firm's operational capacity, the decision-making dynamics relating to recovery management become complex. In this study, we examine how the reputation-seeking behavior of managers involved in disruptions management impacts their recovery decisions. We explore this issue from both an analytical and an empirical perspective. Our results from our analytic models demonstrate how recovery decisions made by a reputation-seeking manager differ from those by an efficiency-seeking manager (i.e., a manager who uses a cost-optimizing decision calculus). To test our theoretical findings, we collected data from senior executives and managers to obtain 281 usable responses. Our empirical analysis corroborates our theory, and shows that reputation-seeking managers, relative to their peers who are efficiency-seeking, recover capacity at a higher level. Managers who have a greater propensity for reputation seeking give higher directives to, and participate less in teamwork with, their subordinates during recovery from disruptive events. We also find that the directives stipulated by reputation-seeking managers for their subordinates (i.e., the work demanded from the subordinates) depend on the effort level of subordinates. Finally, we discuss the implications of these findings and highlight avenues for further research on the relationship between reputation-seeking behaviors and disruptions management.

Study on the Impact of Breakthrough and Incremental Innovation on Firm Capacity Utilization

Effectively resolving manufacturing overcapacity is an important way for China to stimulate economic vitality and achieve high-quality economic development. Although research on technological innovation to resolve overcapacity has attracted academic attention, less research has been conducted from the perspective of innovation intensity. This paper uses the panel data of 1447 A-share listed companies in China’s manufacturing industry from 2016 to 2020, based on a two-way fixed effects model. The paper divides technological innovation into two dimensions to explore the impact of breakthrough innovation and incremental innovation on enterprises’ capacity utilization. The results show that both breakthrough and incremental innovations can effectively improve the capacity utilization of enterprises; however, the breakthrough innovation has a greater degree of improvement. The moderating effect shows that a good institutional environment strengthens the positive relationship between breakthrough innovations and the capacity utilization of enterprises. The heterogeneity analysis finds that breakthrough and incremental innovations have a stronger effect on the capacity utilization of state-owned enterprises. This paper further improves the theoretical framework of the relationship between technological innovation and enterprise capacity utilization and provides a theoretical basis and motivation for the Chinese manufacturing industry to resolve overcapacity and respond to the national requirements for high-quality development.

Don’t stop me now: Incremental capacity growth under subsidy termination risk

Once a subsidy scheme is close to reaching its goal or loses political support, it may be terminated. An important question for policy makers is how to minimize the negative impact of the risk of subsidy termination on industrial investment. We assume the social planner aims to increase capacity and welfare and uses a subsidy, which has an uncertain lifetime, for the purpose. We examine a monopolist supplying an uncertain demand, faced with the option to expand capacity by irreversibly investing in small increments. We find that the firm installs capacity expansions sooner and, consequently, installs a larger capacity than a firm without a subsidy. A firm’s total investment during the subsidy’s lifetime increases with both the subsidy size and the likelihood of subsidy withdrawal. However, this happens at the cost of less investment directly after the subsidy has been retracted. The optimal subsidy size strongly depends on the point in time at which the social planner aims to maximize the welfare — the further into the future, the larger the welfare optimal subsidy. Furthermore, the welfare optimal subsidy size strongly depends on the social planner’s discretion over adjustments to the subsidy size.

Business Resilience in the Digital Transformation Era

During and after the pandemic, digital transformation is the driving force behind organizations' business resilience. In addition, continuous innovation should be encouraged. Business resilience is a firm's capacity to forecast, plan, respond and adapt to change in order to survive. Business resilience must be supported by digital transformation, one of the breakthroughs that can jump-start an entire organization. The interrelated factors include dynamic capabilities, technological capabilities, agile leadership, innovative ambidexterity, and knowledge stock.

Divestment of relational assets following acquisitions: Evidence from thebiopharmaceuticalindustry

AbstractResearch SummaryWe examine whether acquisitions affect the divestment of firms' alliance‐based relational assets. Using data from the biopharmaceutical industry and a matched case–control research design, we find that alliances are more likely to be terminated following acquisitions compared to alliances not subject to acquisitions. This higher termination likelihood is driven by acquisitions where the acquirer's alliance management capacity is stressed, and by alliances inherited from targets. The inherited alliance effect is attenuated by the target's partner's common connections with the acquirer but amplified by the target's partner's unique connections outside the merging firms' alliance portfolios. These findings are consistent with our relational view‐based theorizing on the post‐acquisition challenges of retaining alliance‐based assets, contributing to corporate strategy scholarship on alliances and acquisitions.Managerial SummaryIn many industries, firms' portfolios of interorganizational alliances enable them to realize novel complementarities and, thereby, enhance their performance. In such sectors, managers also frequently acquire other organizations to obtain access to critical resources. However, what managers may overlook is that acquisitions can destabilize existing alliance relationships. In this study, we show that the acquiring firm's capacity to effectively manage alliance‐based assets is stressed once it inherits the target firm's alliances. In general, target firm alliances become more challenging to sustain, and, in particular, those that hold a higher potential for novelty become more unstable. Consequently, when evaluating acquisitions, managers should look beyond obvious measures of a target alliance's value and assess the post‐acquisition integration challenges that may threaten its stability.

Firm capacity of PV+STG systems

The security of supply becomes a key variable of the electrical system. Due to the discontinuity of solar irradiance, PV generators are essentially not dispatchable and they operate only when there is solar resource but cannot ensure their availability when the energy is needed, so PV systems are considered having a null capacity credit. Energy storage is considered a key for the power sector and its sustainability and different options need to be exploited. The objective of this paper is analyse the optimum size of the required battery, its relations with the peak power of the generation system and the optimum operation setpoint of a PV+STG system for providing firm capacity

Storage and demand response contribution to firm capacity: Analysis of the Spanish electricity system

Provision of firm capacity will become a challenge in power systems dominated by renewable generation. This paper analyzes the competitiveness and role of battery storage, six types of pumped-hydro storage, open cycle gas turbine (OCGT), and demand response (DR) technologies in providing the firm capacity required to guarantee the security of supply in a real-size power system such as the Spanish one in horizon 2030. The paper contributes with detailed and realistic modeling of the DR capabilities. Demand is disaggregated by sector and activities and projected towards 2030, applying a growth rate by activity. The load flexibility constraints are considered to ensure the validity of the results. A generation operation planning and expansion model, SPLODER, is conveniently upgraded to properly represent the different storage alternatives addressed in the paper. The results highlight the importance of considering demand response for evaluating long-term firm capacity requirements, showing a non-negligible impact on the investment decisions on the amount of firm capacity required in the system and the optimal shares of wind and solar PV renewable generation. Results also show the dominance of cost-competitiveness of pumped hydro and OCGTs over batteries. Additionally, capacity payments are required to support firm capacity providers’ investments.

Investigating capacity credit sensitivity to reliability metrics and computational methodologies

Assigning capacity value to renewable energy sources (RES) is a challenge faced in planning their integration with the grid. The difficulties stem from the natural characteristics of variability and intermittency of wind and solar sources. The capacity credit (CC) analysis evaluates the system’s actual power output compared with a constant capacity generator, i.e., conventional generator and determines an effective capacity to use for planning and operation. This paper presents different factors that could affect the CC of a system. Two methods are proposed to determine the CC, namely equivalent firm capacity (EFC) and effective load carrying capability (ELCC). Since these methods are based on satisfying reliability criteria, daily loss of load expectation (LOLE), hourly loss of load (LOLH), and expected energy not served (EENS) have been employed as indices. To obtain the CC value, both methods apply two techniques: traditional and optimization. Genetic algorithm (GA) is the optimization approach used in this paper. Then, this work compares the two techniques and shows the superior performance of the optimization approach. Two hybrid systems, stand-alone (SA) and grid-connected (GC) modes, are proposed and used as case studies. The hybrid systems consist of photovoltaic (PV), wind turbine (WT), and battery energy storage system (BESS). In this work, three different scenarios are used to compare capacity credit: system as a whole, only wind, and no batteries. Finally, sensitivity analysis is carried out to examine the impact of varying the wind speed, solar irradiation, and load. It is demonstrated that the choice of reliability index plays an important role in determining the capacity credit and it is shown that EENS is a more comprehensive and consistent index of reliability.

The determinants and performance outcome of the firm's capacity to maintain customer loyalty

AbstractThis research aims to study the determinants and performance‐outcome of the firm's capacity to maintain a loyal customer base. Therefore, this research investigates the influence of sustainable product development on the firm's capacity to maintain customer loyalty. Furthermore, this research investigates the moderating influence of marketing resource intensity on sustainable product development and the firm's capacity to maintain customer loyalty. Moreover, this research investigates the firm profitability as a performance outcome of the firm's capacity to maintain customer loyalty. This research uses the panel dataset of 433 manufacturing firms from the United States. The findings from fixed‐effect regression analysis confirm the significant positive influence of sustainable product development on the firm's capacity to maintain customer loyalty. The moderation analysis confirms the significant positive influence of marketing resource intensity on sustainable product development and the firm's capacity to maintain customer loyalty. The results also confirm the contribution of the firm's capacity to maintain customer loyalty to firm profitability. This study contributes to the customer loyalty literature stream by theorizing the capacity to maintain customer loyalty construct and empirically studying its performance outcome, the contribution of sustainable product development in the firm's capacity to maintain customer loyalty and the moderating role of marketing resource intensity in this regard, under the resource‐based view. Based on the study findings, this research suggests that managers need to emphasize sustainable product development in the firms to strengthen the firm's capacity to maintain customer loyalty and recognize the interactional role of marketing resource intensity in this regard.