Firm Capacity Research Articles

The division of innovative labour: when does customer codevelopment contribute to firm innovation performance?

ABSTRACTInnovative firms often involve customers in their product development to drive innovation outcomes. However, few have empirically examined how this division of innovative labour affects innovation performance. Drawing on prior studies and the knowledge-based theory of the firm, we theorise conditions under which customer codevelopment benefits innovation performance. By examining panel data from Swiss firms, we provide the first empirical account of the performance effects of customer codevelopment based on a large-scale survey sample. We find that a firm's absorptive capacity reinforces the relationship between customer codevelopment and innovation performance. We elaborate on the implications of these findings for the literatures on customer codevelopment and open innovation.

The Moderator of Innovation Culture and the Mediator of Realized Absorptive Capacity in Enhancing Organizations' Absorptive Capacity for SPI Success

Software process improvement (SPI) is critical to information system development. In the context of successful SPI, this research focuses on a firm's dynamic learning ability to see how it facilitates an effective means of acquiring and utilizing external SPI knowledge in responding to changing software development environments. Specifically, the authors propose a research model to investigate how two mechanisms of absorptive capacity are incorporated with innovation culture as a contextual factor to enable successful software process improvement. A survey was conducted including 125 SPI certified firms in China and Taiwan to examine the model. The findings indicate that a firm's potential absorptive capacity significantly influences realized absorptive capacity, which has a significant impact on SPI success and acts as a partial mediator between potential absorptive capacity and SPI success. Moreover, the results suggest that the mediating effect of potential absorptive capacity on SPI success via realized absorptive capacity is amplified when innovation culture is imposed.

Additional Capacity Value From Synergy of Variable Renewable Energy and Energy Storage

Current capacity markets often consider capacity credits from each resource independently, irrespective of the portfolio of resources, potentially overvaluing or undervaluing the capacity contribution of variable renewable energy (VRE) and energy storage (ES) in the grid. We propose a method for calculating the standalone and integrated capacity value of an added VRE resource with existing ES resources. The difference between the integrated and standalone value is the portfolio effect. This is the additional capacity value gained by the synergy of VRE and the existing fleet. Using chronological dispatch simulations and two different reliability metrics to estimate firm capacity, we demonstrate on a small test system that the portfolio effect can be substantial.

Firm borrowing capacity, government ownership and real earnings management

Purpose The purpose of this paper is to examine borrowing capacity (BC) of government-owned firms and whether real earnings management (REM) activities moderate the sensitivity of firm BC to government ownership. Design/methodology/approach A simultaneous equation analysis is applied to study 210 Tunisian non-financial firms over the 2001–2014 period. Findings The empirical results provide substantial evidence indicating that government-owned firms have higher BC and significant REM than other firms; the relationship between government ownership and firm BC is partially moderated by REM activities. Practical implications The findings imply that the implicit credit guarantee of government is not necessarily the unique determinant of firm BC and highlight the role of lenders in monitoring discretionary real transactions in government-owned and protected firms. These implications should be taken in to account by public sector policy makers. In particular, the findings predict that the current government accounting reform in Tunisia on the basis of IPSAS will, probably, improve information quality, but it is still insufficient to control real activities in public institutions. Originality/value This study extends a growing research stream on the relationship between BC and government ownership by focusing on the moderating effect of REM on this relationship and by considering the endogeneity issue. The findings provide evidence that government-owned firms use REM practices to improve their BC. Examining these practices in developing countries provides an opportunity to evaluate the efficiency of their public sector reforms and their effect on a firm’s performance and financing decisions.

Integrating Overbooking with Capacity Planning: Static Model and Application to Airlines

Many firms that practice overbooking are able to adjust capacity prior to the service time. This study proposes an integrated approach for a firm's overbooking and capacity planning. We formulate a static model that simultaneously optimizes the firm's capacity level and overbooking limit. We find that the optimal level of capacity with overbooking can be higher and lower than that without overbooking. This is because overbooking has both positive and negative effects on the marginal value of capacity. It suggests that the level of capacity can be set too low or too high if overbooking is not taken into account when making capacity planning decisions. Moreover, our analysis shows that overbooking leads to a lower optimal capacity level if and only if the marginal cost of capacity is below a threshold. It is also shown that a higher cost per denied service or a higher service level does not necessarily lead to a higher optimal capacity level. We then extend the static model to explicitly account for an airline's demand‐driven dispatch (i.e., reassignments of aircraft types to flight legs). Numerical experiments show that the integrated approach can significantly improve an airline's expected profit, compared to the sequential approach that optimizes capacity planning (aircraft type assignments) and overbooking decisions in two separate and consecutive steps. The benefit of the integrated approach remains significant when a service level constraint is imposed.

Cost-optimal reliable power generation in a deep decarbonisation future

Considering the targets of the Paris agreement, rapid decarbonisation of the power system is needed. In order to study cost-optimal and reliable zero and negative carbon power systems, a power system model of Western Europe for 2050 is developed. Realistic future technology costs, demand levels and generator flexibility constraints are considered. The optimised portfolios are tested for both favourable and unfavourable future weather conditions using results from a global climate model, accounting for the potential impacts of climate change on Europe’s weather. The cost optimal mix for zero or negative carbon power systems consists of firm low-carbon capacity, intermittent renewable energy sources and flexibility capacity. In most scenarios, the amount of low-carbon firm capacity is around 75% of peak load, providing roughly 65% of the electricity demand. Furthermore, it is found that with a high penetration of intermittent renewable energy sources, a high dependence on cross border transmission, batteries and a shift to new types of ancillary services is required to maintain a reliable power system. Despite relatively small changes in the total generation from intermittent renewable energy sources between favourable and unfavourable weather years of 6%, emissions differ up to 70 MtCO2 yr−1 and variable systems costs up to 25%. In a highly interconnected power system with significant flexible capacity in the portfolio and minimal curtailment of intermittent renewables, the potential role of green hydrogen as a means of electricity storage appears to be limited.

Green Capacity Investment Under Subsidy Withdrawal Risk

This article studies the effect of different subsidy characteristics, like its size and withdrawal probability, on optimal investment timing and size. We find that increasing the risk of subsidy withdrawal, as well as increasing subsidy size, increases the firm's incentive to invest earlier but decreases the optimal investment size. We show that the optimal investment size is larger when no subsidy is implemented, although the firm will invest later then. A subsidy increases total welfare when subsidy withdrawal risk is very low or absent. If a policy maker aims at maximizing welfare, we show that the larger the subsidy withdrawal risk, the smaller the optimal subsidy is. When the policy maker aims to increase capacity, a subsidy is ineffective. However, a lump-sum tax can increase the firm's optimal capacity, at the cost of a delay in investment.

The Relationship Among Organizational Symbols, Firm Absorptive Capacity, and Product Innovativeness

This paper leverages the current literature on the antecedents and consequences of firm absorptive capacity by investigating the relationships between covariant organizational verbal symbols, including stories, metaphors, and common language, covariant firm absorptive capacity variables (e.g., external knowledge acquisition, assimilation, transformation, and utilization), and firm product innovativeness. By studying 203 firms and interviewing their managers, this paper demonstrates that (a) using heuristic metaphors, (b) telling process-related stories, and (c) developing a common language positively relate to firms’ absorptive capacity. Remarkably, this paper also shows that telling relationship-based organizational stories is negatively associated with absorptive capacity in these firms. The discussion also shows that absorptive capacity has a positive relationship to a firm’s product development efforts and a mediating effect on the relationship between organizational symbols and product innovativeness.

Ranking Absorption Practices of Knowledge for Collaborative Innovation: Which is the Ideal Multi Criteria Decision Method

AbstractThis paper focuses on evolving an absorptive capacity (ACAP) assessment tool designed to help firms understand their ACAP maturity in processing external knowledge. ACAP maturity is evaluated based on a firm's capacity and willingness to do relevant ACAP practices. Although an earlier version of the ACAP tool was able to evaluate maturity and highlight immature practice, it could not determine how critical these practices were for improvement action. Thus, a means of eliciting the importance of practices and aggregating it with their ACAP maturity evaluations is needed. This paper provides summaries of the subjective weight elicitation methods and aggregation techniques which were identified from the domain of multi-criteria decision making. Criteria for comparing these methods are defined and analyzed to determine the most appropriate methods for the current application. The SRF method for subjective weight elicitation, aggregated with the maturity evaluations through weight sum models, is deemed the most appropriate for the current application. During testing with users, the SRF procedure was found to suffer from various usability concerns which will be investigated in future work.

The Management Challenge of Sustaining Competitive Advantage through Innovation in Nigerian Business Environment

Organizational learning refers to the sum total of individual and collective learning through training programs, experience, experimentation and work interactions within the organization. Thus, sustainable competitive advantage is the ability to offer superior customer value on an enduring or consistent basis, a situation in which competitors are unable to easily imitate the firm's capacity for value creation. It is worrisome that most literary works have not clearly linked organizational learning with sustainable competitive advantages, as is the case with intellectual capacity (knowledge-based resources) using the resource-based view of the firm. A survey approach was the research design used with particular reference to the South East Zone of Nigeria. Findings revealed that organizational innovation leads to sustained competitive advantage. The Z-statistic value with the corresponding probability value confirms that the organization to a large extent draws its competitive strength jointly from the following factors: creation of new products, changes in way of production, changes in architecture of production, improved ways of sourcing supplies, opening new market opportunities, providing goods and services that others are not yet offering or are not able to copy, being able to offer products of comparable quality at a lower price, maintaining a configuration of resources and capabilities that cannot easily be imitated by competitors, being able to attract customers from competitors due to a positive corporate image and encouraging employees to improve their personal skills. The results total Z-scores in absolute term shows that the listed factors pose challenges to the organization in the process of achieving sustainable competitive advantage through innovation. For further justification, we proceed to their joint significant analysis adopting the one sample Z-test. The proxies employed in this study for the measurement of sustainability agreed with resource-based view strategies on sustainability of competitive advantage in an unstable business environment.

Capacity credits of wind and solar generation: The Spanish case

This paper analyses the capacity credits (CCs) of renewable photovoltaic (PV), concentrated solar power (CSP) and wind technologies in the Spanish power system. This system has steadily increased the share of renewables, reaching a penetration level of over 30%. The predictions made by ENTSO-e suggest that this level will increase to 50% by 2030. Therefore, different scenarios are studied in this paper to investigate the evolution of renewable integration and assess the corresponding contributions to reliability. The assessment is performed using a sequential Monte Carlo (SMC) method considering the seasonality of renewable generation and the uncertainties related to renewable sources, failure issues and the maintenance of thermal-based units. The baseline for SMC is provided by historical annual time series of irradiance and wind power data from the Spanish system. In the solar case, these time series are transformed into power time series with models of CSP and PV generation. The former includes different thermal storage strategies. For wind generation, a moving block bootstrap (MBB) technique is used to generate new wind power time series. The CC is assessed based on the equivalent firm capacity (EFC) using standard reliability metrics, namely, the loss of load expectation (LOLE). The results highlight the low contribution of renewables to power system adequacy when the Spanish power system has a high share of renewable generation. In addition, the results are compared with those of similar studies.

Patent portfolio diversity and firm profitability: A question of specialization or diversification?

The relationship between patent portfolio diversity and firm profitability is conceptually opaque and empirically equivocal. We contribute to the literature with a systematic analysis of this relationship by carrying out an empirical investigation based on a sample of 391 international firms. We generate data for patent portfolio diversity at the level of sections, classes, and sub-classes of the International Patent Classification. As moderators of this relationship, we test non-self forward citations (revealing a stream of knowledge between the firm and the outside) and non-self backward citations (assessing the firm's absorptive capacity). Findings highlight how the relationship between patent portfolio diversity and profitability is non-linear and differentially moderated by both the level of non-self forward and backward citations. Accordingly, implications for theory development and managerial decision making are discussed.

A Novel Strategy for Distribution Network Reinforcement Planning considering the Firm Capacity of Distributed Generation Units

Network reinforcement strategy has a critical role for the success in the planning process of Distribution Network Operators (DNOs). Plans of reinforcements should indicate, in details, each necessary modification in the network. In several regulatory environments, DNOs are the unique responsible for their network reinforcements decisions. Thus, the plan of reinforcements should be adherent to forecasted power flow, that should predict which branches/substations will be in an overload situation or with inappropriate voltages levels. Therefore, DNOs need develop reinforcement planning methodologies to consider important aspects as the forecast of power consumed by loads and the forecast of power generated by distributed generation units (DGs). In the literature, there are several studies focused on forecasting of load/distributed generation and network reinforcement strategies. In these studies, DGs location/size were considered independent variable. In most cases, authors consider that DNOs have DGs possession. However, it is not true in some regulatory environments, in which DGs location/size cannot be controlled by DNOs. Since in these cases, DNOs still are the unique responsible for their network reinforcements decisions. In this context, this paper proposes a new network reinforcement strategy able to consider the power generated by DGs and their location/size as stochastic variables into the DNOs reinforcements plan, using the concept of DGs firm capacity. The proposed methodology allows to correlate the necessary modifications in the network (and consequently the monetary value of these modifications) with the level of confidence intended by DNOs planners.

Transnational Board Interlocks as a Source of Non‐experiential Knowledge for the Firm in Foreign Markets

AbstractBoard interlocks between firms headquartered in different countries are increasing. We contribute to the understanding of this practice by investigating the transnational interlocks formed by the 100 largest British firms between 2011 and 2014. We explore the association between different attributes of a firm's internationalization process, namely performance, structural and attitudinal, and the extent of the firm's engagement in transnational interlocks. We posit that the value of transnational interlocks as a non‐experiential source of knowledge will vary according to which of these three attributes becomes more prominent as the firm internationalizes. We do not find a significant relationship between the performance and structural attributes of internationalization, as measured by the firm's percentage of foreign sales and assets, respectively, and increased engagement in transnational interlocks. We do, however, find an inverted U‐shaped relationship between the attitudinal attribute of internationalization, represented by the psychic dispersion of the firm's foreign operations, and the firm's number of transnational interlocks. This non‐linear relationship reveals both a natural boundary for the firm's capacity to engage in transnational interlocks and a reduced willingness to engage in such ties once a certain degree of attitudinal internationalization has been reached.

Rethinking the electricity market design: Remuneration mechanisms to reach high RES shares. Results from a Spanish case study

Electricity systems experience a period of transition towards decarbonisation and face multiple uncertainties. Variable renewable energy resources undergo a rapid cost decline while policy makers push for stricter decarbonisation targets to limit global warming and to comply with international commitments such as the 2015 Paris Agreement. In this context, a better understanding on how today's electricity market design has to be modified to comply with high shares of variable RES generation is required. This work demonstrates the need to extend the current electricity market design by additional remuneration mechanisms to reach imposed quotas of renewable generation and provide investment incentives for new firm capacity. A Spanish case study presented in this paper explores the electricity system transition between 2025 and 2040. An electricity system resource expansion model (SPLODER) is used to study different policies and estimate the evolution of investments and costs over the transition period. Results indicate that the interactions between energy market prices, additional capacity and RES remuneration mechanisms are particularly sensible to policy decisions, demand growth and technological developments. Conclusions indicate that such remuneration mechanisms must account for the uncertainty of future electricity market developments and additional hedging alternatives are required to ensure the cost recovery of new generation technologies.

Optimal Contracting, Corporate Finance, and Valuation with Inalienable Human Capital

ABSTRACTA risk‐averse entrepreneur with access to a profitable venture needs to raise funds from investors. She cannot indefinitely commit her human capital to the venture, which limits the firm's debt capacity, distorts investment and compensation, and constrains the entrepreneur's risk sharing. This puts dynamic liquidity and state‐contingent risk allocation at the center of corporate financial management. The firm balances mean‐variance investment efficiency and the preservation of financial slack. We show that in general the entrepreneur's net worth is overexposed to idiosyncratic risk and underexposed to systematic risk. These distortions are greater the closer the firm is to exhausting its debt capacity.

Key settings for successful Open Innovation Arena

AbstractThe purpose of this paper is to examine settings for the Open Innovation Arena. In greater depth, this paper aims to analyse and reveal which factors influence the formation of an appropriate arena for doing open innovation and furthermore to prescribe how a firm can create an effective arena to gain access to external knowledge. This paper presents a review on open innovation literature with the purpose of examining the current understanding of factors influencing a firm's capacity to embrace and practice open innovation as well as understanding what is critical when fitting outside systems. It presents the results of a survey conducted among 25 researchers from INESC TEC, the Portuguese Institute for Systems and Computer Engineering, Technology, and Science. The study concludes that conditions, namely culture, leadership and strategy, are the main drivers to an open innovation arena, highlighting culture as the most important one.Highlights Nowadays, the goal of each organisation is to conquest competition and to win new customers. Firms must create physical locations where collaboration is encouraged. Companies must be able to diagnose, measure and question its innovation performance and potential. The Innovation Scoring System impacts a firm's capacity to embrace and practice open innovation; Impacting factors on Innovation Scoring System: Conditions, Resources, Processes and Results. Open Innovation is a powerful tool for the sustainable development of the companies.

Lifting the veil on the link between absorptive capacity and innovation: The roles of cross-functional integration and customer orientation

Drawing on the integration of organizational learning, contingency theory, and theory of jobs to be done, this study develops a moderated mediation model of how a firm's absorptive capacity influences innovation performance. We hypothesize that cross-functional integration may mediate the absorptive capacity-innovation performance link and that customer orientation may positively moderate the mediating effect of cross-functional integration. To test our hypotheses, we conducted a mail survey of manufacturing firms, obtaining 456 valid responses for data analysis. Regression and bootstrap analyses reveal that cross-functional integration partially mediates the effect of absorptive capacity on innovation and that customer orientation enhances the mediated effect. Specifically, the mediating effect of cross-functional integration is stronger and significant when customer orientation is high. In contrast, the mediating effect of cross-functional integration is weaker and insignificant when customer orientation is low. Overall, this study's findings contribute to advances in marketing theory on innovation by identifying cross-functional integration and customer orientation as two key factors that together explain why and under what conditions absorptive capacity affects innovation. The findings also advise managers that in addition to developing absorptive capacity, firms should cultivate a strong customer orientation, which directs cross-functional integration toward converting external knowledge into increased innovation performance.

Why Distributed?: A Critical Review of the Tradeoffs Between Centralized and Decentralized Resources

The recent proliferation of distributed energy resources (DERs) is creating new options for the delivery of key electricity services, including energy, firm capacity, operating reserves, and even alternatives to transmission or distribution network investments. Rooftop solar photovoltaics (PVs) have the highest profile of these resources, but DERs include any generator or energy-storage device connected at distribution voltage levels and characterized by relatively small capacities (e.g., a few kilowatts to a few megawatts). In addition, improved power electronics and communication and control technologies enable more efficient and dynamic electricity consumption as well as the ability for flexible demand (demand response) to serve as a DER in many contexts.

Utility-scale storage providing peak power to displace on-island diesel generation

Peaking power plants are used to provide power during periods that have both high load and limited supply from intermittent renewable energy. Wind power is intermittent and does not always provide electricity during periods of maximum demand. Despite this, it has grown to produce a significant portion of the electricity in some jurisdictions. Electricity systems require firm capacity that operate when called upon. Fossil fuel peaking plants are costly, providing a fraction of the annual energy at a great cost, but ensure system reliability. Utilizing storage systems to provide these services during peak times could allow integration of higher penetrations of renewable energies. Prince Edward Island, Canada has over 40% of its load produced by wind power but requires diesel generators during high load and low wind periods. The diesel generators ensure that the submarine cables are not overloaded and provide on-island power during other curtailments. The 1 MW/2 MWh storage system provided energy and capacity from December 2015 to March 2016 and was paid for these services by their local utility. The payment only covered 9% of the costs due to the high capital cost and short life expectancy of their storage system.