Firm-level Technological Capabilities Research Articles

Too Much of a Good Thing: The Dual Effect of R&D Subsidy on Firms’ Exploratory Innovation

The primary purpose of this article is to explore how public research and development (R&D) subsidies influence firms-level exploratory innovation, as well as the internal organizational contingencies that moderate the impact of R&D subsidies. By employing panel data of a group of manufacturing firms in Jiangsu Province from 2010 to 2014, we find a dual effect of R&D subsidies on firms’ exploratory innovation, which is shown as an inverted U-shaped pattern. This suggests that R&D subsidies within an appropriate range can facilitate firms’ exploratory innovation. Additionally, we propose that firm-level technological capabilities positively moderate this curvilinear effect; however, firms’ R&D collaborations with universities and public research institutes do not have such a moderating effect. The results of this article enrich our understanding of the impact of R&D subsidies, especially on firm exploratory innovation. Based on the findings of this article, we contribute implications on government policymaking and firm strategic technological practices.

Towards a firm-level technological capability framework to endorse and actualize the Fourth Industrial Revolution in developing countries

An essential precondition for developing countries to engage in the Fourth Industrial Revolution (4IR) is to accelerate the creation and accumulation of firm-level technological capabilities necessary for digital transformation. Through an analysis of secondary data collected from a systematic review of the 4IR literature, we build on Lall's (1992) and Bell and Pavitt's (1995) frameworks, to develop an updated framework of firm-level technological capabilities which accounts for the refined set of human and organizational activities and resources required by firms for the uptake of 4IR technologies and processes along their digital transformation journey. The framework proposes four levels of increasingly complex technological capabilities across six thematic groups of technological and organizational functions. The framework represents an initial basis for examining the micro-level capabilities required by firms to launch, endorse and actualize the 4IR. Our analysis leads to a definition of 4IR firm-level technological capabilities which better reflects the new realities of this revolution. We discuss the implications of the proposed framework, and we conclude with the contributions of our study from the academic, policy and management perspectives.

Technological capability, eco-innovation performance, and cooperative R&D strategy in new energy vehicle industry: Evidence from listed companies in China

To promote low-carbon economy and sustainable energy consumption, new energy vehicles (NEVs), a typical eco-innovation, are drawing intensive attention from manufacturers, administrators and academics. Despite extensive literature investigates factors that affect research and development (R&D) of NEVs, yet little is known about the role of technological capability as well as the interaction between internal technological capability and external resources (e.g., ownership, government subsidy and external cooperation). This might lead to the overlook of technological capabilities and the misallocation of external resources. In present study, we investigate how firm-level technological capability (measured by R&D expenditure) affects its eco-innovation performance (measured by eco-innovation patents), as well as the moderating impacts of ownership and governmental support (i.e., subsidy). Further, we explore the correlation between firm’s technological capability and its R&D strategy (i.e., internal R&D or cooperative R&D). Our investigation is based on a unique set of panel data from 127 listed companies in the Chinese automotive industry, spanning from 2009 to 2018. The empirical findings demonstrate that firm-level technological capability is positively related to eco-innovation performance, and state ownership intensifies this positive relationship. Surprisingly, increasing government subsidy tends to weaken this correlation. The results also show that firms with higher technological capabilities prefer cooperative R&D, while those with lower technological capabilities tend to choose internal R&D. These findings promote the understanding on the cost-effectiveness of R&D investment in the NEV industry, and also shed light on the interactions of internal and external resources. The study offers managerial implications to promote the prosperity of the NEV industry.

The co-evolution of learning mechanisms and technological capabilities: Lessons from energy technologies in emerging economies

Despite a voluminous literature on firm-level technological capability building in developing countries, there is still limited knowledge about the relative importance of different learning mechanisms as firms deepen their technological capabilities. To address this knowledge gap, this paper investigates the sources of learning used by firms in the Malaysian biomass boiler industry and the Chinese wind turbine industry enabling them to advance from production capabilities to innovative capabilities. The paper presents a framework that distinguishes between sources of learning to the firm that are: internal, local and global in nature. The paper finds that the learning mechanisms shifts in a co-evolutionary pattern within and across these categories as firms develop increasingly higher levels of technological capabilities. The main contribution of the paper lies in the development and exploratory empirical application of a framework, which allow more systematic assessments of the relative importance of various types of learning sources as latecomer firms develop higher levels of technological capabilities.

Institutional support, regional trade linkages and technological capabilities in the semiconductor industry in Malaysia

This article examines the relationship between host-site institutional support and regional trade linkages on firm-level technological capabilities in the semiconductor industry in Malaysia. An evolutionary perspective was used to measure technological capabilities using knowledge embodied in machinery, organization, processes and products. The results show that host-site institutional support and regional trade linkages were correlated with technological upgrading. The relationship between host-site institutional support and technological upgrading was stronger than that between regional trade linkages and technological upgrading. The results show that host-site institutional support is more important than regional integration in influencing firms' capacity to upgrade their technological capabilities.

Host-site support, foreign ownership, regional linkages and technological capabilities: evidence from automotive firms in Indonesia

This study analyses the influence of host-site institutional support, foreign ownership and regional production linkages on firm-level technological capabilities using data from automotive firms in Indonesia. The results show that host-site institutional support and foreign ownership are positively correlated with technological capabilities. In addition, regional linkages show a significant and positive link on technological capabilities. However, regional linkages and foreign ownership explain more strongly technological capabilities than host-site institutional support in automotive firms in Indonesia. This evidence suggests that the supporting high-tech environment require further strengthening to stimulate higher technological capabilities in the automotive industry in Indonesia.

Host-site institutions, production networks and technological capabilities

This article examines critically the literature on industrial policy, regional production specialization, global production sharing, global value chains and global production networks to analyse technological capability development in clothing, automotive and semiconductor firms in China and Southeast Asia. Host-site institutional support and regional production linkages were identified as having a strong influence on firm-level technological capabilities. The article then provides the justification and the structure of the automotive, clothing and semiconductor industries, which are characterized by strong international division of labour.

Epilogue: implications for promoting firm-level technological capabilities

This conclusion draws theoretical and policy implications for technological capability building from the host-site institutional support and production linkage experiences in China and Southeast Asia. While connecting with production chains have been instrumental in the integration of developing sites in global markets, sites that managed upgrading from low to high value-added activities in the automotive, clothing and semiconductor industries relied strongly on institutional support at host sites. Hence, the global value chain approach is useful in understanding integration in the capitalist world economy. However, only sites with effective industrial policy successfully transformed subsequently to designing and R&D activities.

Upgrading to lead firm position via international acquisition: learning from the global biomass power plant industry

This article examines the case of a Chinese firm that has upgraded to lead firm position in the global biomass power plant industry mainly through acquisitions of technological frontier firms in Denmark. Sustaining the lead firm position was, however, challenged by difficulties in developing innovative capability. Drawing on the literature on (i) firm-level technological capability and (ii) knowledge transfer in international acquisitions, we explain the reasons for insufficient innovative capability building. Based on these empirical findings, we suggest maintaining the existing upgrading framework but applying it analytically in a more flexible manner that avoids linearity, hierarchy and segmentation while stressing the co-existence of and inter-relationships between the different types of upgrading.

Determinants of Technological Capability of Firms in a Developing Country

This paper examined the factors associated with the accumulation of technological capability among metalworking firms in Nigeria. A questionnaire was administered to 200 firms, of which 133 (66.5%) responded. Data were gathered on internal and external factors which are believed to influence capability build-up in the firms. The empirical evidence suggests that prior work experience of the entrepreneur, in-house training of technical staff and networking with the industry association had significant and positive influence on the accumulation of firm-level technological capability. Collaboration between the firms and research institutes was found to be weak. We conclude that firm-specific assets such as entrepreneurs’ training and experience as well as in-house training are highly important for the build-up of technological capability in developing country firms. The relative importance of interaction through the industry association casts some doubt on the relevance of university-industry interactions for these firms.

Finance as a ‘forgotten technological capability’ for promoting African local pharmaceutical manufacture

Abstract Finance capability as a firm-level technological capability has been neglected in debates on financing of increased sub-Saharan Africa local pharmaceutical drug manufacture, as it has in industrial development more generally. Finance capability has to date not been explicitly included in firm-level technological capabilities. Access to finance for African local pharmaceutical manufacture is not just about getting money. There are technological capabilities and complexities surrounding access to finance. Specifically for African pharmaceutical manufacture, there is little theorization and engagement with the specialist and knowledge-intensive capabilities needed by pharmaceutical firms and financial institutions. Based on fieldwork on the financing of antiretroviral drug manufacture in Zimbabwe in 2011, and interviews with pharmaceutical and financial institutions’ executives up to 2013, this article sets out to better understand financial capability development, especially skills, knowledge and learning by doing. This research generates empirical data on finance capability and uses it to extend theory on technological capability, and suggests how such inclusion can improve the firm-level technological capability framework.

Innovation capabilities and international performance of firms: a quantile regression approach

This study examines the relationship between various dimensions of a firm’s technological innovation capabilities and its international performance. We use panel data with multiple indicators of firm level technological capabilities including generation, dissemination, strength and speed of innovation. We employ a quantile regression analysis which allowed us to test the impact of innovation capability on international performance of high, average and poor performers. Our empirical findings indicate significant disparity between the ordinary least square and quantile regression results.

Foreign Equity and Technological Capabilities: A Comparison of Joint-venture and National Automotive Suppliers in India

Using the evolutionary framework, this paper examines differences in technological capabilities between joint-ventures with over 10% foreign equity and fully national owned suppliers located in the greater Delhi region. In a country where automotive manufacturing emerged from the relocation of foreign capital and with only 3 automobile assemblers supplying essentially the domestic market until 1991, India has experienced tremendous upward movement in firm-level technological capabilities to generate rapid growth in automotive exports to record a positive trade balance by 2000. Against the background of rapid expansion, this paper uses a sample of 84 tiers one and two suppliers to compare technological capabilities between joint-ventures with foreign equity and wholly national owned suppliers. The results show considerable participation of both joint-venture and national firms in cutting edge technological capabilities. The two tailed ‘t’ tests, and the knowledge intensity exercises show joint-ventures enjoying higher overall technological capabilities, training expense in payroll, process technology expenditure in sales and R&D expenditure in sales than national firms. The Tobit regressions show that once export-intensity and firm size is accounted for, joint-ventures enjoy a statistically significant higher technological capability with its superior process technology over national firms. Overall, the evidence shows that foreign equity is still important in the technological operations of automotive suppliers in India.

Catching up with the technological frontier:Micro-level evidence on growth and convergence

In this article we study how firm heterogeneity influences productivity catching up using plant-level data from Mexico. The article addresses three issues: first, it evaluates the process of convergence towards the global versus the local technological frontier in a middle-income country such as Mexico. Second, it systematically evaluates the role of technological efforts in determining the speed of convergence towards each of these technological frontiers. Third, it assesses the role of openness and trade integration in determining the speed of convergence and presents a horse race between integration and technological effort in explaining the determinants of heterogeneity in influencing the process of convergence toward both the domestic and the global technological frontier. Our results suggest that building firm-level technological capabilities is important for catching up with the global frontier. A policy focused on trade alone will facilitate convergence towards the best technological practices available locally, but it will fall short of encouraging convergence with the global frontier. Copyright 2010 The Author 2010. Published by Oxford University Press on behalf of Associazione ICC. All rights reserved., Oxford University Press.

Mudanças em regimes industriais e acumulação de capacidades tecnológicas: evidências de empresas de celulose e papel no Brasil

A despeito da profusão de estudos sobre capacidade tecnológica em nível de empresas ao longo dos últimos 30 anos, há escassez de estudos sobre similaridades e diferenças entre empresas do mesmo setor industrial, em termos de acumulação de capacidades tecnológicas e suas implicações para o aprimoramento de indicadores de performance técnico-econômica ao longo de diferentes regimes industriais, especialmente no contexto de países de industrialização recente, como é o caso do Brasil. Baseando-se em evidências de primeira mão colhidas à base de extensivos trabalhos de campo, este artigo examina essas questões em três grandes empresas de celulose e papel no Brasil (1970-2004). O estudo encontrou: (1) Diferenças inter e intraempresariais em termos da maneira e velocidade de acumulação de capacidades para funções tecnológicas específicas ao longo dos diferentes períodos; (2) Tais diferenças refletiram-se, com diferentes graus de intensidade, no aprimoramento dos indicadores de performance técnico-econômica; (3) As empresas responderam positivamente às mudanças para uma economia aberta partir dos anos 1990; (4) Porém, os aprimoramentos em seus indicadores de performance técnico-econômica não derivaram das mudanças do regime industrial per se, mas, principalmente, dos seus esforços internos para acumulação tecnológica.

Can Garment Exports from Cambodia, Laos and Burma be Sustained?

This paper examines institutional and firm-level technological capabilities to assess the capacity of Cambodia, Laos and Burma to sustain garment exports over the long term. Although the preferential access enjoyed by products from these countries in the developed markets has helped attract strong foreign direct investment inflows that have supported rapid growth in employment and exports, the empirical evidence shows that institutional support needs to be upgraded if garment exports from the three countries are to be sustained. Burma and Laos show the least potential to benefit among the three countries from this opportunity, with the former experiencing severe political instability and trade sanctions by the USA and the latter landlocked and endowed with a small labour force. The paper argues that unless the institutional and firm-level technological capabilities are developed further, all three countries will find it difficult to retain a significant presence of garment firms once the trade privileges are withdrawn.

Garment manufacturing in Cambodia and Laos

This paper uses the systemic quad to examine the strength of the embedding support and firm-level technological capabilities of garment firms in Cambodia and Laos. Although garment exports have surged in both countries, it is argued in the paper that its sustenance will require institutional capacity building. Laos is the more disadvantaged of the two countries as it is landlocked and endowed with too small a labour force. The paper argues that unless the institutional and firm-level technological capabilities are developed further, both countries will find it difficult to retain a significant presence of garment firms once the preferential trade privileges are withdrawn.

DYNAMIC OF TECHNOLOGICAL CAPABILITY ACCUMULATION AND INNOVATION IN SUBSIDIARIES OF TRANSNATIONAL CORPORATIONS (TNCS): THE TRAJECTORY OF MOTOROLA BRAZIL - DOI:10.5585/RAI.2008242

Embora exista uma ampla quantidade de estudos sobre capacidades tecnologicas tanto no contexto de economias industrializadas como no de economias emergentes, ainda ha uma carencia de estudos que examinem a dinâmica (velocidade) do processo de acumulacao de capacidades tecnologicas, especialmente no contexto de subsidiarias de empresas transnacionais (ETNs) em economias emergentes como o Brasil. Consequentemente, o conhecimento sobre esse fenomeno tende a ser ainda superficial e escasso. Este artigo objetiva contribuir para o campo de estudo sobre acumulacao de capacidades tecnologicas, particularmente para inovacao, em subsidiarias de ETNs. Baseando-se em evidencias empiricas de primeira mao, coletadas a partir de extensivo trabalho de campo, o estudo subjacente a este artigo examina a direcao e velocidade da acumulacao de capacidade tecnologica na Motorola Brasil durante o periodo de 1996 a 2006. O estudo encontrou que, ao longo de dez anos, a empresa moveu-se atraves de niveis inovadores de capacidades ate atingir niveis proximos a fronteira internacional de inovacao, especialmente para as funcoes gestao de projetos e engenharia e processos de software. Por isso, uma perspectiva dinâmica sobre o desenvolvimento tecnologico em nivel de empresas e a luz de mensuracoes compreensivas de capacidades tecnologicas, alinhadas ao contexto de economias emergentes, capta a realidade e as nuancas do processo de inovacao em empresas de setores industriais especificos. Especificamente, os resultados aqui se alinham a estudos anteriores que tem encontrado um comportamento tecnologico pro-ativo e inovador de subsidiarias de ETNs em economias emergentes. Tais evidencias sao importantes para iluminar estrategias de inovacao em nivel de empresas, governos e bancos de investimentos.

Non-Competition Agreements and Research Productivity in the Biotechnology Industry

This paper examines the impact of the state-level legal structure, namely the legal support for non-competition agreements, on research productivity. Specifically, we study how California's unique lack of non-competition agreement laws influences product develop when controlling for local munificence and firm-level technological capability. Our results indicate that California's unique legal structure is negatively associated with research productivity as measured by the number of products in development at the time a biotechnology firm goes public. Further, firm size moderates this relationship such that the effect is stronger for smaller biotechnology firms.

Learning and Innovation

Much innovation research views catch-up as a process that at low levels of development starts with imitation, and whose end point is innovation; and it posits that different stages require different frameworks to explain what is going on. In its more extreme versions it adds a horizontal to the over-time differentiation and demands that individual or groups of countries be appreciated for their contextual dissimilarities, requiring in each case yet another tailor-made model. The purpose of this review essay is to argue that to derive and justify different sui-generis frameworks from differential catch-up experiences is a non-sequitur, theoretically unsatisfactory, empirically unhelpful and not constructive for policy. Conceptually, all the pieces for a more unified approach are in place. We know how firms gain competitiveness through dynamic capabilities and complementary assets. We also know that firm-level technological capabilities are related to national (and perhaps regional) technological capabilities. Finally, we know that governing and supporting institutions matter in addressing the uncertainty resulting from problems of information, coordination, and so forth. This provides an opportunity to apply insights from theories of firm behaviour and new evolutionary thinking on technologies and institutions to historically informed, comparative studies of firm-based catch-up over the last decade or so.