Firms In High-technology Industries Research Articles

The Impact of Trade Credit on Global Value Chain Position: Evidence from Chinese Manufacturing Firms

ABSTRACT Conventional wisdom argues that a well functioning financial system is essential to foster economic growth and development. While its financial market is still underdeveloped, China has not only achieved great economic growth and speedy export growth, but also elevated its position as an exporter in the global value chain (GVC). This paper examines the impact of trade credit on the GVC positions of Chinese manufacturing enterprises. The empirical study finds that trade credit has a significant promotional effect on enterprises’ GVC positions, and the effect is more pronounced for private firms, firms with high market position, and firms in high-technology industries. The mechanism analysis shows that trade credit heightens the export quality of products and alleviates the financing constraints of enterprises, thus promoting their GVC positions. The findings have implications for Chinese manufacturing firms to exploit the role of trade credit in promoting their GVC positions and fostering new advantages in international competition.

Internal and outsourced research and development: are they complements or substitutes?

ABSTRACT A theoretically ambiguous relationship exists between internal and outsourced research and development (R&D). Along these lines, previous empirical studies report mixed results regarding the nexus between these two broad forms of R&D activity. Using a firm-level unbalanced panel dataset from South Korea for the period 2006–2018, this study investigates the relationship between internal and outsourced R&D while considering the sunk cost of internal R&D activity and the technology level of firms. We find that the relationship between internal and outsourced R&D depends on the level of industry technology and the size of firms. A complementarity exists between internal and external R&D for larger firms in high-technology industries, while a substitutive relationship is discovered for small and medium-sized firms in medium- and low-technology industries. The results suggest that the complementary or substitutive nature of the relationship between internal and external R&D depends on the industry’s technology level and firm size.

CEO labor market and R&D investment in high-technology firms: an empirical study on the disciplinary effect of CEO labor market

AbstractPrevious corporate governance research has paid little attention to the role of chief executive officer (CEO) labor markets in controlling CEO behaviors because the CEO labor market has been considered inefficient. With the increasing mobility of top executives across firms, however, the potential of CEO labor markets to serve as an external disciplining force has been growing. In this study, we argue that CEOs will be more pressured to engage in desirable behaviors as the CEO labor market becomes more efficient. Using a longitudinal sample of S&P 1500 firms in high-technology industries in United States from 2011 to 2019, we found that CEOs tend to increase R&D investment as CEO labor market supply increases. We also found that the tendency is greater when external CEO succession is more frequent in the market. Our results demonstrate that CEO labor markets have the potential to function as an effective external governance mechanism.

Can Family Ownership Strengthen the Relationship Between Intellectual Capital and Performance in ASEAN High-Tech Firms?

This study investigates the positive relationship between intellectual capital and firm performance. It examines whether family ownership can strengthen the relationship between intellectual capital and firm performance of firms in high-technology industries in ASEAN. The data was collected from the BvD OSIRIS database and company annual reports from 2008-2014 and conducted on five countries in ASEAN, namely Indonesia, Malaysia, Philippines, Singapore, and Thailand. The final sample used in this study consists of a total of 1,310 observations. This study uses panel data regression model analysis, i.e. fixed effect regression and random effect regression. The results showed that intellectual capital has a positive relationship with financial performance. The result proved the role of intellectual capital in increasing firm finances and its importance as one of the primary resources in competing in the AEC challenges and as the firm's primary driver for the firm's success. It is not found in the relationship between intellectual capital and market performance. In the interaction relationship, the result is contrary to the alignment effect that becomes our previous prediction. The result is consistent with the entrenchment effect and indicates that family ownership can weaken the relationship between intellectual capital and financial performance. There is no evidence about the relationship between the interaction of intellectual capital and family ownership on market performance.

Do technological investments promote manufacturing productivity? A firm-level analysis for India

This paper assesses the effects of firms' investments in Information Technology (IT) and Research and Development (R&D) on their productivity growth. Unlike prior studies, our models examine individual as well as combined effects of these investments. We employ recently developed methods to control for transmission bias in production function estimation. For analysis, we utilise a panel of 900 manufacturing firms in India during 2000–2016. Our results show that (i) firms in high-technology industries are more productive than those in low-technology industries (ii) combined use of IT and R&D inputs yields higher productivity growth (iii) export-oriented firms are more technology-intensive and more productive than non-exporting firms (iv) exporting firms' productivity gains from IT investment are higher by around 0.03–0.04 percentage-points compared to non-exporting firms’

Coopetitive innovation alliance performance: Alliance competence, alliance’s market orientation, and relational governance

High-technology firms often partake in coopetitive alliances toward improving their innovation performance. As relational governance contributes significantly to explaining the coopetitive alliance success, this research examines the facilitation of relational governance in coopetitive alliances. Drawing from social contract theory, we propose that alliance’s market orientation (AMO) is a means to establish social and cooperative norms, which in turn, increases the viability of relational governance. The analysis of 246 coopetitive innovation alliances among firms in high-technology industries reveals that alliance competence is an important antecedent to AMO, and AMO plays a key role in facilitating relational governance toward improving alliance performance. Furthermore, environmental turbulence enhances the positive influence of relational governance.

Is Small and Independent Board a Better Board? An Example of High-Tech Firms

This paper examines board structure and the effect of board size and composition on firm value for firms in high technology industries for the period 1995-2008. I find that high-tech firms, generally characterized by asymmetric information and growth opportunities, have board sizes 2.9% smaller and a proportion of insiders 1.7% higher than non high-tech firms. Using Tobin’s Q as a measure of firm value, I document that Tobin’s Q is increasing in board size for high-tech firms. This result is consistent with the argument that transaction costs, such as political pressure from regulators and institutional investors, as well as listing requirements set by the SEC and major stock exchanges, may impede board upsizing for high-tech firms. My findings indicate that a uniform “one size fits all” reform of corporate boards may impair board effectiveness in some types of firms.

Laggards, Leading Imitators or Leapfroggers: How Are Emerging Markets Innovating?

Emerging market firms in high-technology industries have long been thought of as laggards. We argue that this paradigm needs to be reassessed. Using biotechnology as an example for a radical technology, we argue that emerging markets, compared to developed markets, are well positioned to pursue such technologies since they (1) have low path dependencies in traditional chemistry based therapies and choose to leapfrog older technologies and (2) have strong incentives to invest in imitative abilities in the radical technology. We examine drug development initiatives by both developed and emerging markets in 2000/2001 and 2010/2011. We find that emerging markets have become responsible for a substantial portion of new drug development initiatives worldwide. More importantly, these markets, much more than developed markets, have emphasized biotechnology for both imitative and innovative new therapies.

Diffusion Patterns in Convergence among High-Technology Industries: A Co-Occurrence-Based Analysis of Newspaper Article Data

Firms in high-technology industries have faced great technological and market uncertainty and volatility in the past few decades. In order to be competitive and sustainable in this environment, firms have been pursuing technological innovation, product differentiation, vertical integration, and alliances, which eventually drive industry convergence, defined as the process of blurring boundaries between previously distinct industries. Although industry convergence has greatly affected industrial structure and the economy, little research has investigated this phenomenon, especially its diffusion patterns; thus, it is still unclear which industries are converging more rapidly or have a higher potential for convergence. This paper explores these issues by investigating industry convergence in U.S. high-technology industries, using a large set of newspaper articles from 1987 to 2012. We perform a co-occurrence-based analysis to obtain information on industry convergence and estimate its diffusion patterns using an internal-influence logistic model. We find heterogeneous diffusion patterns, depending on convergent-industry pairs and their wide dispersion. In addition, we find that the potential degree of industry convergence is significantly negatively associated with its growth rate, which indicates that a great deal of time will be required for industry convergence between high-technology industries with this high potential to achieve a high degree of convergence.

Leveraging internal resources and external business networks for new product success: A dynamic capabilities perspective

Internal resources such as technological and human capital, together with a firm's business network, are vital sources of knowledge for new product development. Previous studies largely assume that a firm's internal resources and its external resources embedded in a business network are complementary in new product development. This study draws on the dynamic capabilities perspective to take the existing literature one step further. Our hypotheses were tested using a sample of 130 Chinese manufacturing firms in high-technology industries. Interestingly, the findings reveal a more complex picture of resource interplay between internal resources and external resources embedded in a firm's business network. More specifically, the findings show that a firm's power in its business network influences the effect of its internal resources on its ability to sense and seize opportunities, a vital dynamic capability. More importantly, the findings suggest that such dynamic capability plays a pivotal role in translating the benefits of resource-interplay into new product success.

Internal capabilities, external structural holes network positions, and knowledge creation

Social network theory suggests that firms bridging structural holes by connecting disconnected partners in a network benefit from timely access to diverse knowledge. However, the existing literature reports mixed evidence with regard to the performance implications of this view. Our study examines how a firm’s diverse knowledge base and knowledge-processing capabilities affect knowledge creation when a firm bridges multiple structural holes in an inter-firm network. The model is tested on a sample of 191 firms in high-technology industries. The dependent variable, knowledge creation, was measured by the number of patents generated. Results show that when a firm spans multiple structural holes, its diverse technological knowledge facilitates knowledge creation. However, when a firm already possesses well-developed knowledge acquisition capabilities, spanning structural holes reduces knowledge creation. This paper suggests that internal knowledge base and knowledge-processing capabilities determine the impacts of external network positions on firm knowledge creation. It provides implications on how a firm best capitalizes on external network positions.

Conditional technology spillovers from foreign direct investment: evidence from Indian manufacturing industries

This paper examines the productivity effect of technology spillovers via vertical linkages through foreign direct investment (FDI) in India. An analysis of firm-level panel data from the Indian manufacturing sector from 2000–2001 to 2007–2008 employing the semi-parametric method of Levinsohn–Petrin to correct the endogeneity bias in productivity estimation shows productivity improvements in domestic firms due to vertical technology spillovers are only through backward linkages from FDI. The study confirms that firms in high-technology industries benefit more from vertical technology spillovers from foreign firms compared to firms in low-technology industries. It also shows that minority-owned foreign firms are more prone to technology spillovers than majority-owned foreign firms. Nonetheless, domestic firms in high-technology industries are able to access both horizontal as well as vertical technology spillovers from majority-owned foreign firms. The paper concludes that technology spillovers from FDI are not spontaneous, but are constrained by the technological ability of domestic firms and the ownership structure of foreign firms.

The diminishing signaling value of patents between early rounds of venture capital financing

A long stream of research has documented the positive effects that patents bring about to emerging firms in high technology industries. The general consensus is that patents contribute to firm growth because they confer monopolistic market rights, offer protection from competitors, increase the negotiating position of patent holders and other benefits. What has received relatively less attention in the literature is whether patents act as a signal that attracts investors such as venture capital firms. The handful of studies that have addressed that question has not analyzed whether the signaling function of patents decreases after the initial attraction of venture capital, as information asymmetries between investors and target firms reduce. In this study we hypothesize that patent activity has a signaling value that diminishes once information asymmetries between investors and funded firms lessen. To study our proposition we draw upon a longitudinal dataset of more than 580 U.S.-based biotechnology firms to empirically demonstrate that biotechnology firms that have submitted patent applications substantially increase the level of funding they receive for their first round of financing. In line with a reduction of information asymmetries once the initial investment has materialized, patent applications and granted patents have no effect on the growth of venture capital funds raised during the second round of financing. We conclude the study with a discussion of avenues for new research, implications for policy makers that consider the usefulness of the current patent system and with insights that can be employed by managers of firms in knowledge intensive areas such as biotechnology.

Public funds and local biotechnology firm creation

A long stream of academic literature has established that public funding towards research and development matters for economic growth because it relates to increases in innovation, productivity and the like. The impact of public funding on the creation of new firms has received less attention in this literature despite theoretical constructs that support such association. In the present paper we study whether indeed there is a relationship between public research funds and local firm births in the context of the U.S. biotechnology industry. In doing so, we introduce a number of changes that strengthen the robustness of our findings when compared with existing literature. These changes include a direct measure of research expenditures and a considerably lengthier longitudinal dataset which allows us to capture a structural relationship and not a chance event. We empirically demonstrate that increases in the level of research funding from the National Institutes of Health towards biotechnology associate with increases in the number of biotechnology firm births at the Metropolitan Statistical Area level. Further, we reveal that public funds towards established firms associate with local firm births considerably more strongly when compared with funds towards universities and research institutes/hospitals. We conclude the paper with academic and policy implications of the present work that highlight the complexity of factors that underlie the creation of local firms in high technology industries.

Licensee technological potential and exclusive rights in international licensing: A multilevel model

Granting of exclusive rights is an important consideration for firms using licensing as a mode of entry into foreign markets, as exclusive contracts reduce licensors’ flexibility in a given market during the term of the agreement. By granting exclusivity to a licensee with greater technological potential, the exchange partners can increase the potential transactional value of the licensing agreement. At the same time, a licensee with strong technological potential will increase the threat of transactional hazards due to underinvestment and rent appropriation. In this paper, we develop and empirically test a model that evaluates the balancing of transactional value and transaction costs in exclusive licensing. In particular, we identify the conditions under which exclusive contracts are likely to be granted to foreign licensees with strong technological potential. Empirical results from a multilevel model, based on 375 international licensing agreements of US firms in high-technology industries during 1995–2008, show that licensees with a stronger technological potential are more likely to be granted exclusive rights in countries with strong intellectual property rights protection, and in industries with a high rate of technological change; but are less likely to be granted exclusive rights when there is a high degree of overlap between licensor and licensee products.

The geographic extent of venture capital externalities on innovation

A stream of literature has demonstrated that venture capital generates externalities that enhance the knowledge base of a given region and accordingly assist firms in high-technology industries to improve their innovative performance. What has gone largely unexamined in this literature is the geographic extent of such externality impact. In this research we address the issue at hand. We do so by analyzing the association between the patenting rate of all life sciences firms (LSFs) that have won Small Business Innovation Research grants from 1983 to 2006 and the venture capital investments that have occurred at increasingly distant spatial units from those firms. Controlling for firm-specific and environmental factors as well as for endogeneity concerns, we document that LSFs tend to produce more patents whenever they are situated in very close proximity to where venture capital investments occur. Further, we find that improvements of the patenting rate of focal firms largely emanate from investments that reflect the expertise of venture capitalists on advancing existing prototypes closer to commercialization. We conclude the paper with a discussion on research and policy implications of our findings.

Analysing Energy and Material Saving Technologies’ Adoption and Adopters

The main objective of this paper is to map the adoption of technologies for energy reduction and resources consumption in production. The aim is also to contribute to the identification and understanding of the characteristics of the manufacturing firms that use these kinds of energy and material saving technologies. Our research is based on data from the largest European manufacturing survey to date and it includes data from Spain and Slovenia. The results show that the use of specific energy saving technologies and material saving technologies in manufacturing firms is still modest. Dividing manufacturing firms based on technology intensity sectors and based on their relative energy efficiency we have concluded that firms in high technology industries focus less on energy efficiency than low technology firms. Some other specific relationships between the use of energy efficient technologies and adopters’ characteristics (e. g. use of environmental management systems) are presented in this paper.

Antitrust for High-Tech and Low: Regulation, Innovation, and Risk

Severe limitations on antitrust enforcement officials’ knowledge and the potential impact of ill-advised investigations and prosecutions on markets suggest that officials should exercise extraordinary caution in enforcement of restraints on single-firm conduct. Although it is common to depict antitrust enforcement as protecting market competition while other forms of regulation are seen as intrusions (justifiable or not) into market operation, antitrust enforcement has characteristics and risks similar to other forms of regulation. Indeed, government antitrust enforcement can be especially problematic, as it requires discretionary selection among an extraordinary range of possible targets, imposes significant burdens on companies that are under investigation or subject to suit, invites efforts by individual firms to motivate officials to deploy resources against rivals, and can seriously disrupt competition among firms. Antitrust authorities need to exercise special care in making enforcement decisions respecting conduct of individual dominant firms in high-technology industries, where antitrust enforcers’ abilities to understand and predict industry evolution are most limited and where enforcement actions are most likely to rest on debatable predicates about the effects of specific conduct. Critically, market boundaries that so often are taken for granted as setting the proper framework for evaluating effects of a leading firm’s conduct frequently fail to capture the most important sources of competition for the firm, which in many industries (including many high-technology industries with strong network effects) are dynamic and involve potential replacement of the technology that is associated with the government’s market definition. This has led to ill-advised enforcement initiatives which have dramatically burdened the target companies (even at the formal investigation stage) and has prejudiced market development without compensating benefits to consumers. Further, while network effects can establish or sustain dominance within a narrowly defined market, network effects also can have just the opposite effect: they can be the reason that a firm’s dominance comes to an end, as the success of a dominant firm is a spur to investment in competing technologies, including technologies that can replace the currently successful product or service. At a time when companies publicly identified as potential antitrust enforcement targets include a very large number of leading high-technology firms (among them, Facebook, Apple, Google, IBM, AT&T, Microsoft, and Intel), it is important to look critically at prior enforcement efforts predicated on similar theories. This article examines government enforcement decisions respecting four prior targets and draws lessons for enforcement going forward.

Is Small and Independent Board a Better Board? An Example of High-Tech Industries

This paper examines board structure and the effect of board size and composition on firm value for firms in high technology industries for the period 1995-2008. I find that high-tech firms, generally characterized by asymmetric information and growth opportunities, have board sizes 2.9% smaller and a proportion of insiders 1.7% higher than non-high tech firms. Using Tobin’s Q as a measure of firm value, I document that Tobin’s Q is increasing in board size for high-tech firms. This result is consistent with the argument that transaction costs, such as political pressure from regulators and institutional investors, as well as listing requirements set by the SEC and major stock exchanges, may impede board upsizing for high-tech firms. My findings indicate that a uniform “one size fits all” reform of corporate boards may impair board effectiveness in some types of firms.

High-Tech Immigrant Entrepreneurship in the United States

This article reports the results of a national survey that estimates the rate of immigrant entrepreneurship in a representative sample of high-impact firms in high-technology industries in the United States. The authors report key descriptive statistics about the companies and their founders. About 16% of the companies in the sample, for instance, number at least one immigrant entrepreneur among their founding teams, while about 77% of the immigrant entrepreneurs are U.S. citizens. Three multivariate analyses are carried out that compare high-impact, high-tech firms that count at least one immigrant in their founding teams with those that were founded by native-born entrepreneurs. It is found that the two groups of firms are similar with respect to economic and technological performance. Immigrant-founded firms are more likely to report that they have a strategic relationship with a foreign firm. The authors conclude by briefly considering the potential implications of their findings for immigration and economic development policy.