Firms In High-tech Industries Research Articles

Can digital finance boost corporate green innovation

This paper explores the impact of digital finance (DF) on firms’ green innovation (GI) and finds that the development of DF is related to more GI. Besides, this effect is more notable in non-state-owned firms, firms in high-tech industries, or firms faced with a lower degree of market competition and non-east areas in China. We also find that DF can boost corporate GI by alleviating financing constraints and improving information transparency. Finally, results reveal that the DF development will bring an obvious enhancement in a firm's future accounting and market performance.

Does board composition matter for innovation? A longitudinal study of the organizational slack–innovation relationship in Nasdaq-100 companies

In high-tech industries, firms accumulate increasing amounts of excess resources. Existent research paints an ambiguous picture of these slack resources for innovation: while some slack is integral for innovation as fuel for experimentation, too much slack inhibits innovation by causing inefficiencies. However, firms in high-tech industries cannot develop and sustain competitive advantages in the long run without sufficient and steady investments in innovation. Additionally, the increasing complexities within these highly dynamic industries make it easier for managers to pursue their self-interests—often to the organization’s detriment. Against this backdrop, the role of the board of directors is particularly crucial in high-tech industries, as it determines the efficacy of the board’s governance and resource provisioning functions. This study proposes several board characteristics as moderators of the slack–innovation relationship. The dataset builds on a longitudinal sample of high-tech firms from the Nasdaq-100 Index between 2010 and 2020. The results advance management literature by extending the notion of slack resources as a double-edged sword to high-tech industries. The findings also show that this relationship is contingent on specific board characteristics: larger and more independent boards dampen this relationship, while longer board tenure, more board affiliations, and a larger share of women directors amplify it. Further, the findings caution managers to balance the necessity of slack resources for promoting innovation with its efficiency detriment. The results additionally inform practitioners on determining the optimal board composition in the face of mounting competitive pressures for sustained innovation.

Innovation Promoter or Inhibitor? Non-Family CEO's Effect on Innovation in Family Businesses

Increasing scholarly and practical attention is being paid to determining whether a nonfamily chief executive officer (NFC) is a remedy for the lack of firm innovativeness in the face of ever-changing markets. Departing from the inconclusive findings of NFC research, this article aims to revisit the NFC effect on a family firm's investment in innovation, which is subject to the contextual influence of governance arrangements. In a sample of 6201 firm-year observations of Taiwanese family firms in high-tech industries in the period from 2002 to 2017, we found that the mixed relationship between the NFC and innovation investment is better clarified by considering family involvement in management (FIM) and board independence (BI), both of which yield significantly negative and positive moderating effects on the innovation investment of NFCs, respectively. This article further examines the configurational effect of two moderators on the main relationship, and shows that the negative effect of FIM not only outweighs, but also deteriorates, the positive moderating effect of BI. Our findings contribute not only to family business research, but also to innovation literature by arguing that the risk-taking orientation of an NFC is not universally held, but rather is deliberately arranged for effect.

Local air pollution and corporate innovation

ABSTRACT We examine how local air quality shapes firm innovation. Using a panel dataset of Chinese listed firms from 2014 to 2017, we find significant decreases in R&D expenditure and patents for firms located in cities with severe air pollution. Moreover, we find that firms tend to mitigate the adverse effects of air pollution by shifting innovation activities to their subsidiaries located in areas with better air quality. Cross-sectional analyses reveal that the decreases are more pronounced for non-SOEs, financially constrained firms and firms in high-tech industries. We provide causal evidence using the instrumental variable method, a discontinuity regression design, and propensity score matching. Overall, our study highlights that air pollution is an important local environmental factor that affects firm innovation.

CEO Social Capital and the Value Relevance of Accounting Metrics

Equity investors value CEO social capital when pricing firm equity. When CEO social capital is high, the value relevance of the book value of equity declines, whereas the value relevance of earnings measures increases. Results are stronger for firms in high-tech industries where information asymmetries are higher. Social capital may be deconstructed into informational and reputational effects and we report that social capital is a meaningful determinant of value relevance in both scenarios. Results are robust to alternative variable definitions, controls and tests for endogeneity. The results strongly suggest that CEO social capital improves the information environment around firms, benefiting users of accounting metrics.

More is not always better: Reconciling the dilemma of R&D collaboration in high-tech industries in transition economies

To cope with highly competitive business environments, firms in high-tech industries are increasingly opening up their organizational boundaries and tapping into external resources via research and development (R&D) collaboration. Drawing upon organizational boundary theories, our study indicates that the marginal benefits of R&D collaboration in driving firms' new product innovations decrease while its marginal costs increase. To investigate this subject, we develop a conceptual framework to account for the relationship between R&D collaboration and firms' new product innovations. Further, drawing on both the knowledge-based and institutional perspectives, we examine the moderating effects of absorptive capacity and political ties on the R&D collaboration-new product innovation relationship. Using data from 315 high-tech manufacturing firms in China, we find that R&D collaboration has an inverted U-shaped impact on new product innovation, meaning that the new product innovation of firms initially increases and then decreases as the level of R&D collaboration increases. Further, we find that absorptive capacity (as an internal factor) and political ties (as an external factor) moderate this inverted U-shaped effect such that firms with greater absorptive capacities show a higher peak of maximum innovation performance at higher levels of R&D collaboration than firms with lower absorptive capacities. We also reveal that for firms with stronger political ties, the benefits of R&D collaboration are enhanced while the risks and costs of R&D collaboration are mitigated. Overall, this study contributes to a better understanding of the nonlinear relationship between firms' R&D collaborations and their new product innovation outcomes as well as the contingent conditions in this relationship.

Corporate responsibility towards employees and innovation: Evidence from an emerging market

Against a background of rising labor costs and the need to build a harmonious labor–capital relationship in China, this paper focuses on non-pecuniary incentives for employees and discusses the impact of corporate social responsibility (CSR) towards employees on innovation performance. The empirical results show that CSR towards employees significantly promotes corporate innovation, and that this effect remains robust after accounting for alternative proxies and endogeneity issues. In addition, the positive effect of CSR towards employees on innovation is more significant for firms in high-tech industries, with high levels of R&D inputs and high valuation of employee collaboration. Further analysis indicates that CSR towards employees does not promote R&D investment, but does significantly improve innovation efficiency and the marginal output of R&D investment and reduces the turnover rate of management-level staff with production and R&D backgrounds, which is conducive to stability of the innovation team. In addition, this paper also finds that for companies with high R&D expenditures, CSR towards employees significantly eases the sensitivity between executive turnover and performance, which helps executives resist pressure arising from a decline in short-term performance. The findings of this paper have implications for improving labor–capital relations and enhancing firm innovation capabilities.

Foreign investor engagement: Stock market liberalization and corporate green innovation in China

To confront the growing threat of climate change and achieve carbon neutrality, green governance has come under the spotlight globally. This paper investigates the effect of stock market liberalization on corporate green innovation, aiming to explore whether foreign investor engagement contributes to the green development of Chinese enterprises. Employing a staggered DID estimation, we find that firms generate a higher level of green innovation output after they experience the liberalization, and this effect is more pronounced when foreign investors become the focal firms’ top ten shareholders. Meanwhile, foreign investors who enter China’s A-share market with the implementation of this policy are value investors, indicating that stock market liberalization can help lead firms’ investment decision more future-oriented. We also find that financing constraints play a significant role in the association between stock market liberalization and corporate green innovation. The results of heterogeneity analyses show that the positive implication of liberalization on corporate green innovation is stronger for non state-owned enterprises, firms in high-tech industries and firms in less polluting industries. Our paper provides new insights into the economic effect of foreign investor engagement in emerging capital market and the factors affecting corporate green innovation in China.

R&D investment along the firm life-cycle: new evidence from high-tech industries

Traditional life-cycle theory typically holds that firms are more innovative in earlier life-cycle stages than in later stages. However, this may not apply to firms in high-tech industries that heavily rely on innovation to build competitive advantages and that are equipped with rich innovation-related knowledge. This paper analyses R&D investment along the life-cycle for high-tech firms, and investigates the boundary conditions of the hypothesised baseline effects by considering the moderating effects of three environmental factors (environmental complexity, environmental dynamism and environmental munificence). Analyses of high-tech manufacturing firms during 1989-2018 reveal that in comparison with firms in other stages, firms in introduction and decline stages make more R&D investment, especially in complex and moderately munificent environments. Besides, environmental dynamism significantly reduces R&D investment motivation in the decline stage but does not influence it in the introduction stage. Our results offer insights into high-tech firms' innovation pattern along their life-cycle.

The effectiveness of effectuation: a meta-analysis on contextual factors

PurposeEmpirical data on the impacts of entrepreneurial effectuation on firm performance are scattered and controversial. This study conducts a meta-analysis to obtain evidence on whether and under what conditions effectuation is valuable. A contextual framework is proposed that highlights the boundary condition of the performance impact of effectuation.Design/methodology/approachBoth the traditional approach of meta-analysis and advanced techniques of Bayesian meta-analytic tests are used to combine numerous studies from varied research contexts.FindingsMeta-analytic results show that effectuation generally has a positive impact on firm performance, and is context-dependent, leading to stronger performance for older firms and firms in high-tech industries and emerging countries.Originality/valueThe findings provide important implications for entrepreneurs who are considering applying effectuation. This study highlights that effectuation is context-dependent and the performance implications of effectuation are contingent on contextual factors at organizational, industrial and institutional levels. This study extends the contextual understanding of the effectuation–performance relationship.

How does stock market liberalization influence corporate innovation? Evidence from Stock Connect scheme in China

Using China's Stock Connect program as a quasi-natural experiment, we assess the impact of stock market liberalization on corporate innovation. The baseline result based on a difference-in-differences (DID) estimation suggests that allowing foreign investors to buy domestic stocks has a beneficial effect on Chinese firms' innovative outputs. Specifically, eligible firms affected by the Stock Connect scheme generate more and higher quality patents than other unaffected firms subsequently. Furthermore, we explore potential channels that may explain this beneficial effect in terms of improving corporate governance, reducing information asymmetry, and mitigating financial constraints. In addition, the effect is more pronounced for firms in high-tech industries. However, we find that the influence of stock market liberalization is insignificant in state-owned firms. Besides, the findings are generally robust to different measures of innovation and different methods of estimation. Overall, this paper provides new insights into understanding the positive effect of stock market liberalization in emerging market economies.

Knowledge transfer from universities to low- and medium-technology industries: evidence from Italian winemakers

The aim of the study is to explore the links that firms from low and medium technology (LMT) industries establish with universities for innovative purposes. Even though knowledge transfer from university to industry has generally increased over time, it has mostly been directed at firms in high-tech industries (HT) due to the belief that firms from LMT industries often lack the absorptive capacity necessary to take advantage of external knowledge. In the case of LMT industries, university-industry knowledge transfer has received less attention from management and innovation studies, and understanding the specific conditions where universities may contribute to the innovative effort of LMT firms largely remains unexplored. With the aim of contributing to this debate, the paper focuses on the wine sector, generally considered an LMT industry. Firstly, the study assesses to which type of innovation promoted by winemakers do universities effectively contribute. Secondly, the study examines under what conditions universities assume a relevant role in the innovative activity of LMT firms. To test our hypotheses, the study uses primary data collected through a survey targeting Italian wine SMEs and runs a set of econometric evaluations. Findings show that universities represent a relevant source of knowledge mainly for organizational and commercial innovation, but not for product innovation. For these purposes, university knowledge related to social sciences has a more relevant input for firms than does knowledge with higher scientific and technological content.

How did a local guerrilla turn into a global gorilla? Learning how transformational change happened under dynamic capabilities from the rise of Huawei

PurposeIn this paper, the authors tentatively develop a theoretical model that depicts how the dynamic capabilities of a firm may be driven by three macro-organizational foundations: visionary leadership, organizational culture, and empowered human resources. The authors propose that visionary leaders are the original driver of dynamic capabilities and that visionary leaders create a unique organizational culture and empowered human resources so that their organizations embrace the spirit of entrepreneurship, an orientation toward learning, and a commitment to mission-driven improvement.Design/methodology/approachThe authors use a case of the early success of a highly performing Chinese telecommunication equipment producer, Huawei Technology, to explain the theoretical model that shows how dynamic capabilities are developed as visionary leaders influence firm routines for learning, innovation, and strategic human resource policies, which in turn collectively create and update operational capabilities to deliver directly manipulatable competitive advantages.FindingsThe paper concludes by arguing that the sources of dynamic capabilities need not be dynamic. Instead, visionary leadership, organizational culture, and human resource policies are relatively stable factors in comparison with other possible competence-building mechanisms such as innovation or ambidexterity.Practical implicationsThe authors’ model provides a direction for firms in high-tech industries to develop dynamic capabilities in order to maintain competitiveness and sustain high performance.Originality/valueThis paper is the first to present three macro-level drivers of dynamic capabilities, and it is also the first to understand the success of Huawei from a dynamic capabilities perspective.

Trust and IPO underpricing

This study examines the impact of trust on initial public offering (IPO) underpricing using a large sample of IPO firms in China. We find that firms in regions of high social trust have lower underpricing, consistent with the notion that IPO firms in low-trust regions have to offer greater underpricing to secure participation. This result is robust to a battery of sensitivity tests and after controlling for endogeneity using instrumental variables. We also find that the negative relation between social trust and underpricing is more prominent for small and growth firms, and firms in high-tech industries, consistent with trust playing a more important role in asymmetric information environments. This relation is less pronounced for firms with high insider ownership and political connections, suggesting that investors rely less on trust in these cases; it is less salient when firms are in regions with high quality legal institutions and high average education levels, consistent with trust being a substitute for formal institutions.

Family involvement signals in initial public offerings

Utilizing signaling theory, this study examines the relationship between signals of family involvement (i.e., family ownership and management) and the performance of firms undergoing an initial public offering (IPO). Specifically, we argue that firms using family-oriented language in their IPO prospectus results in greater IPO underpricing due to the misalignment between IPO investors’ general perceptions of family business and their expectations for the IPO. Additionally, we argue that this misalignment is more pronounced for firms in high-tech industries, which are commonly more risk- and growth-oriented. Using a sample of 155 U.S.-based firms that made their IPO between 2009 and 2012, we find support for our hypotheses. Overall, our findings demonstrate that more observable signals of family involvement in an IPO may negatively influence IPO performance, particularly in high-tech industries.

Agglomeration Economies and the Firm TFP: Different Effects Across Industries

This paper analyzes the effect of agglomeration economies on firms’ total factor productivity. We propose the use of a control function approach to overcome the econometric issue inherent to the two-stage approach commonly used in the literature. Estimations are conducted separately for four industry groups, defined by technological intensity, to allow for non-uniform effects of agglomeration economies on firms given their technological level. In addition, R&D is included to account for the firms’ own efforts to foster productivity through creating and absorbing knowledge. Finally, radii as well as administrative boundaries are used for defining regions. The results confirm differences in the strength and even in the direction of agglomeration economies: While urban economies have the largest effect on TFP for firms in high-tech industries, they have no effect on TFP in low-tech industries. For firms in the latter industries, however, the variety of the local economic structure has an impact, while this is irrelevant for the TFP of firms in high-tech industries. Only localization economies have a positive and significant effect on TFP throughout, but the effect increases with technological intensity of industries. Throughout, R&D is also found to have a positive effect that increases with technological intensity.

Explaining the Current Innovative R&D Outsourcing to Developing Countries

While multinational firms from developed countries have used researchers from emerging areas to assist in the adaption of an existing product, few multinational firms have carried out innovative R&D, or R&D for the creation of a new product, in these areas. Using the threat of imitation and wage differences of researchers across regions, this study proposes a partial equilibrium model to explain the lack of innovative R&D in developing countries. I build a North-South model examining a single firm’s choice of research locations. The model predicts that weak IPR-protection in developing countries does not necessarily explain the lack of Southern research. In some situations, reduced IPR-protection can even increase Southern research. Harsh competition resulting from information leaks coupled with weak IPR-protection can explain much of the lack of innovative research investment in the developing world. My model also predicts that firms with low research needs, or firms in low-tech industries, locate their R&D in the North. Firms with medium research need locate in both countries while the firms with the largest research needs, or firms in high-tech industries, locate research in just the South.

Societal trust and open innovation

While open innovation provides a new paradigm to sustain a firm’s competitive advantage, opening up to external knowledge also entails substantial risks of appropriation and opportunism. Building on this “open paradox” framework, this study investigates whether societal trust—a key aspect of informal cultural norms—serves as an effective mechanism in improving relational governance among partners, thereby leading to better collaborative outcomes. Using a novel panel data on co-owned patents across 29 countries, we show that firms in high trust countries are able to produce a higher level of joint output (i.e., co-owned patents). This effect is more pronounced when perceived opportunism is higher (i.e., firms in high-tech industries, or in countries with less disclosure transparency), and when formal contracts are less enforceable (i.e., in countries with relatively weak legal systems). We further show that open innovation is the channel through which societal trust promotes innovative efficiency. Overall, our study establishes societal trust as a key factor in influencing the efficiency of open innovation.

Pulling the Plug? Investigating Firm-Level Drivers of Innovation Project Termination

Firms need to innovate and develop dynamic capabilities to create a sustainable competitive advantage. Due to this pressure, firms in high-tech industries invest a high percentage of their revenues in innovation. Despite the vast number of innovation success stories, only one in five innovation projects reaches the market. It is important to understand the drivers of project termination as many firms make sizable investments in innovation and these drivers may have a significant impact on their innovation performance. Therefore, the earlier recognition of unfeasible projects would avoid continued investment and release resources that could be invested in more profitable projects. This paper investigates firm-level factors influencing the termination of innovation projects based on a sample of 4385 firms in the Czech Republic and Germany. We find that firm size, research and development activities, organizational agility, and the level of internationalization are positively associated with innovation project termination. Surprisingly, marketing innovation is also positively associated with project termination. Our results contribute to an improved understanding of why some firms are better at identifying unsuccessful projects (earlier) than others. Identifying generalizable factors provides complementary insights into project-level factors of project termination that can have a remarkable impact on the profitability and survival of firms.

Pulling the Plug? Investigating Firm-Level Determinants of Innovation Project Termination

Firms need to innovate and develop dynamic capabilities to create a sustainable competitive advantage. Due to this pressure, firms in high-tech industries invest a high percentage of their revenues in innovation. Despite the vast amount of available innovation success stories, only one in five innovation projects will ever reach the market. It is important to understand the drivers of project termination as innovation expenditures embody a sizable investment for many firms, and may have a significant impact on firms’ innovation performance. Therefore, being able to recognize unfeasible projects (earlier) avoids continued investments and releases resources that can be invested in more profitable projects. This paper investigates firm-level factors determining the termination of innovation projects based on a sample of 4,385 firms in Czech Republic and Germany. We find that firm size, R&D activities, organizational agility, and the level of internationalization are positively associated with innovation project termination. Surprisingly, marketing innovation also positively associates with project termination. Our results contribute to a better understanding of why some firms are better at identifying unsuccessful projects (earlier) than others. Identifying generalizable factors provides complementary insights to project-level factors of project termination which can have a remarkable impact on firms’ profitability and survival.