Small High-tech Firms Research Articles

Risk tolerance towards research and development investment: the role of firm size and technology intensity

ABSTRACT This research examines how risk tolerance towards research and development (R&D) investment varies by firm size and technology intensity using a case study of four groups of manufacturing firms (i.e. large high-tech firms, small high-tech firms, large low-tech firms, and small low-tech firms) in South Korea. Our research contributes to the literature by offering the first empirical application quantifying different risk tolerances towards R&D investment of firms of varying sizes and technology intensities using total factor productivity and optimal portfolio frontiers. We find that the risk tolerance towards R&D investment is proportional to firm size, and high-tech firms tend to be more risk tolerant than low-tech firms given the same firm size. Furthermore, we find that large low-tech firms have a greater tolerance for risk than small high-tech firms when the present guaranteed return is lower, but risk tolerance is reversed as the current guaranteed return increases. These findings could be used to inform R&D project funding decisions in particular, our finding of higher risk tolerance of small high-tech firms with higher present guaranteed return suggests that government subsidies for R&D investment may function as the present guaranteed return for small high-tech businesses.

The Role of Speedier Public Funding for Small High-Tech Firms

The Role of Speedier Public Funding for Small High-Tech Firms

Entrepreneurial networks, geographical proximity, and their relationship to firm growth: a study of 241 small high-tech firms

Start-up firms in high-tech sectors normally engage in networking to overcome their lack of resources, knowledge, and competence constraints. A newly established firm’s network can provide a source of social capital, which may enhance its growth prospects. In this study, 241 new technology-based firms (NTBFs) in Sweden are studied during their early formative years to investigate how entrepreneurial networks and the geographical proximity to actors in these networks affect the early performance of these firms in terms of growth. Three underlying factors are identified in the analysis: geographical proximity and professional and consultative networks. This study finds that professional networks have a positive and significant effect on NTBFs’ growth, which indicate that utilizing these networks benefit the growth of both young and growing firms. NTBFs in initial stages can acquire business opportunities by constructing professional networks. In addition, several formal links positively affect growth, such as regional business partners, incubator networks, and links to universities.

Strategic Internationalization of Small High-Tech Enterprise from a Small Country: Advantage, Disadvantage and Strategy Development and Implementation

Despite the internationalization of high-tech enterprises from large counties often appearing on the news and in academic journals, small firms from small countries have been ignored. This research brings up a strategic entrepreneurship study focusing on small firms in a small country to fill the research gap. A qualitative method of case study is deployed in this study. The paper argues that small firms have advantages and disadvantages to engaging in the internationalization process through a detailed combined SWOT and Uppsala model analysis. However, extra caution must be taken in setting strategies for markets and partnerships. The paper concludes that cultural distance plays a pivotal role in success, and small high-tech firms must consider cultural norms in the internationalization process.

Effects of the Minimum Wage on Small Firms in China: Spillover Effects from Large Firms

Abstract This study investigates how minimum wage affects small firms through spillover effects from large firms. Using firm-level panel data from Anhui Province in China, we find that after a minimum wage increase, small firms will reduce workers’ wages and create jobs due to the inflow of displaced workers from large firms. This spillover effect is larger for micro firms and private firms, where minimum wage compliance tends to be lower. We also find that high-tech small firms are more affected than low-tech ones because of their greater demand for skilled labor. Our findings not only highlight the unintended consequences of minimum wage on small firms in China, but also help to explain the ambiguous employment effects of minimum wage on the covered sector in developing countries.

How important is family involvement for small companies’ growth?

PurposeOur paper seeks to further understand how family involvement in management influences firm growth.Design/methodology/approachUsing a sample of small high-tech firms, we classify three different types of firms: family firms managed by family-CEOs, family firms managed by non-family CEOs and non-family firms.FindingsConsistent with our expectations, we show that firms managed by family-CEOs have less firm growth in comparison with the other two groups. When the family firm is managed by non-family CEOs, the presence of another family member in management positions has a negative impact on firm growth. Finally, we found that founder-led family firms have better firm growth than descendant-led family firms.Research limitations/implicationsImplications for the theory of family firms are discussed.Originality/valueThe value of the present study is to analyse in depth the heterogeneity of the family business trying to close the gap by exploring the effect of family involvement on small firm growth. Thus, we will find different behaviours of these family companies, depending on the family member’s presence in management positions.

A fuzzy-based roadmapping model for enhancing high-tech small firms’ technological entrepreneurship capabilities: cases of Iran

ABSTRACTTechnology-based firms need to survive via technological changes. Technological entrepreneurship is concentrated on identifying and exploiting the tech-opportunities for creating product innovation. This paper introduces a fuzzy-based tool to promote innovation throughout firms in order to enhance technological entrepreneurship capabilities (TEC). The effort involves identifying components of TEC to develop the inference system, specifying the fuzzy relationship among these components, assessing the TEC in firms, and designing a TEC roadmap after a fuzzy-based gap analysis. Designed roadmaps introduce technological change priorities as a growth path to firms to move up along the ladder of competitiveness. Based on the results, a method for categorizing firms into four distinct levels that involve passive, reactive, proactive and innovative is introduced. Hence, firms have an action plan to enhance TEC from passive to innovative level in a time-based transition pathway.

Drivers of thoroughness of NPD tool use in small high-tech firms

Abstract This paper explores how thoroughly practitioners in small high-tech firms use tools in support of NPD activities. We present a mixed-methods study starting with a survey of 99 firms covering 76 tools across 12 functional perspectives on NPD, which shows wide variability in reported thoroughness of use. We investigate what drives this variability via 17 interviews. We find that the principal driver is institutional pressures that prioritise either rigorous process or pressure from targets. Based on these drivers and responses, we provide contingency-based advice as to how firms in different contexts can get the best results from using NPD tools.

Entrepreneurial learning in practice: The impact of knowledge transfer

The aim of this research is to provide perspectives on how entrepreneurial practitioners, specifically owners of high-tech small firms (HTSFs), engage with knowledge transfer and learn. The authors draw on extant research and report on the views and observations of the principals in two case study companies in the HTSF sector with regard to growing their ventures and developing learning while part of a Knowledge Transfer Partnership (KTP) programme. Entrepreneurial learning is an area of significant interest due to the growth of entrepreneurship and the varied ways in which learning can take place. There are many different interventions that can be used to transfer knowledge and develop learning, but there is limited, if any, consensus on their respective effectiveness. The researchers used an ethnographic approach in two companies over an 18-month period. The study concludes that the KTP intervention facilitates an opportunity for learning through disruption, with the key barrier to any new learning being established practice. Interestingly, the findings suggest that entrepreneurial learning is greatly facilitated by ‘on-the-job’ learning.

Size and value effects in high-tech industries: The role of R&D investment

We use monthly US stock data over 55 years from 1962 to 2017 to show that the R&D intensity at firms adds another important dimension to the size and value effects in describing stock returns, especially for small high-tech firms. A trading strategy that double sorts on R&D intensity and size or book-to-market ratio outperforms a simple small-minus-big (SMB) or high-minus-low (HML) strategy in producing higher and more significant portfolio returns. The most profitable schemes involve triple sorts by size, BM, and R&D intensity: the payoffs of buying high-BM/R&D-Active portfolio and selling low-BM/R&D-Inactive portfolio in the small-size/high-tech group and that of buying high-tech/high-BM and selling low-tech/low-BM in the small-size/R&D-active group generate a return of more than 2% on a monthly basis. Our results are robust to alternative classification method of assigning stocks in portfolios.

To survive or succeed? An analysis of biotechnology firms

In this paper, we address the question whether there exists differences in the determinants that support survival versus success of small and medium-sized high-tech firms. We examine this question in the context of Finnish biotechnology industry by analyzing the survival of all dedicated biotechnology firms in the period of 1978–2008. We argue and show that the success and survival of firms are not necessarily driven by similar determinants. Specifically, we find that while the role of different types of alliances, focused market scope as well as legitimacy of the industry seem to be important both in ensuring survival and enhancing successful performance, determinants related to sources of financing, clustering, and patenting show differences in terms of how they relate on survival and success.

Association of Professional's Base and Incentive Pay with Human Capital in Small High-tech Firms

Drawing on human capital theory, we propose divergent associations of base pay and incentive pay with professional employee human capital in small high-tech firms. Based on secondary data on 3,750 ...

Acquisitions of small high-tech firms as a mechanism for external knowledge sourcing: The integration-autonomy dilemma

Acquisitions of small high-tech firms by large incumbents are a prominent mechanism for external knowledge sourcing, whose success strictly depends on the choice of a wise post-acquisition implementation strategy. This paper theoretically discusses and empirically documents - on a sample of 458 deals in the 2001–2005 period - the antecedents of this choice by focusing on the integration-autonomy dilemma. Specifically, we jointly consider two main dimensions of the post-acquisition implementation: whether the acquiring firm absorbs the acquired one into its organization or keeps it separate as an autonomous subsidiary/business unit and whether the acquired CEO is replaced or retained. Separation with CEO retention corresponds to the minimum level of integration (and the maximum level of autonomy), whereas absorption with CEO replacement corresponds to the maximum level of integration (and the minimum level of autonomy.) We hypothesize that the acquiring firm chooses an implementation strategy with high level of integration when the acquired firm produces a component technology or operates in a related market. Indeed, in both cases, the interdependency between the two firms is high and thus the benefits of integration likely exceed the costs of the loss of autonomy. However, this positive association is weaker when the acquiring and acquired firms have common ground, originating from technological relatedness or prior alliances, which acts as a low-cost coordination mechanism. Results of econometric estimates largely confirm our hypotheses.

Teams in Small Technology-Based Firms: The Roles of Diversity and Conflict Management

This paper explores the effect of diversity and conflict management on the relationship between teamwork and organizational outcomes of small technology-based firms. To study the relationship between those variables, a quantitative research was conducted. The results of the survey involving 107 small Brazilian high-tech firms show that diversity and conflict management positively moderate the relationship between teamwork and organizational outcomes. So that, at higher levels of diversity and conflict management, best organizational outcomes. At the same time, it has been verified that conflict management is important regardless the level of diversity within teams. This research sheds new light on the factors that should be considered to become teamwork more effective in this specific context.

Choosing between internal and external development for innovation projects: antecedents and consequences

Unlike alliance proponents, we posited that high-tech small firms (HTSFs) may not prefer interfirm collaboration for innovation activities. Drawing on the transaction cost and corporate entrepreneurship perspectives, we proposed that boundary decisions in innovation activities are determined by the perceived uncertainties of innovation projects and entrepreneurial orientation (EO). We also examined the consequences of collaborative innovation. In a sample of 178 Korean HTSFs in software development, we found that some aspects of perceived uncertainty prevented collaborative innovation, and that EO moderated this effect, enhancing the outcomes of collaborative innovation. We discuss theoretical and practical insights of these findings.

Remote collaboration and innovative performance: the moderating role of R&D intensity

Collaboration with geographically distant partners may enhance a firm’s innovative performance. In practice, however, this may be complicated as personal contacts are more limited so that effective search and transfer of remote partners’ tacit knowledge is hampered. We tested the potential moderating role of R&D intensity which, by indicating technology-oriented absorptive capacity, may mitigate the problems associated with remote collaboration. Drawing on survey data of 248 high-tech small firms, we find that remote collaboration is positively related with innovation performance, but at low R&D intensity, the relationship vanishes.

Outsourcing, subcontracting-in and radical innovativeness

Purpose – The authors aim to develop and test hypotheses that link outsourcing and subcontracting-in activities of small high-tech firms to their radical innovativeness. In addition, they seek to investigate how a firm's strategy moderates the associations between their outsourcing and subcontracting-in activities and radical innovativeness. Design/methodology/approach – The authors utilized regression analytical technique and categorical moderation analytical technique to test their hypotheses on survey data of 579 firms. Findings – Results show that outsourcing has a positive association with radical innovativeness. In contrast, subcontracting-in shows a negative association with radical innovativeness. Finally, the influence of both outsourcing and subcontracting-in activities on radical innovativeness are contingent upon a firm's manufacturing strategy. Research limitations/implications – There are potential limitations relating to the authors' use of secondary data. There is a need to investigate the processes through which outsourcing and subcontracting-in relate to innovation performance. Practical implications – An implication of this study is that in order to develop radical innovativeness, firms need to consider their strategic or competitive inclination when evaluating their outsourcing and subcontracting-in decisions and activities. Social implications – There are also social implications since outsourcing and subcontracting-in activities involve social relationships. Originality/value – Linking boundary spanning activities of firms to innovation performance represents a contribution to the literature. Further, establishing that the effectiveness of such boundary activities depends on a firm's specific manufacturing strategy represents a contribution.

Technology sourcing decision making for new technology development projects: An empirical study of South Korean high-tech small firms

Although external development has been strongly recommended as an effective governance strategy for new technology development projects (NTDPs), it may not always be appropriate for high-tech small firms (HTSFs). This study examined South Korean HTSF decision makers’ consideration of internal and external development for NTDPs. Drawing on transaction-cost and resource-based perspectives, we identified five key determinants of governance decisions: respondents’ perceived levels of technological capability, entrepreneurial strategic orientation, specialized asset investment, technological uncertainty and environmental uncertainty. A questionnaire-based survey of Korean HTSFs in the telecommunications industry yielded a sample of 258 respondents. On the basis of a logistic regression analysis of the firms’ responses, we found that firms’ perceived technological capability, entrepreneurs’ strategic orientations, levels of technological uncertainty and redeployability of invested assets were key criteria in the decision-making process. Specifically, this study showed that technologically strong Korean HTSFs preferred to use internal development methods, but tended to choose external development methods when they perceived high levels of technological uncertainty and low levels of invested asset redeployability. Entrepreneurs’ strategic orientation also influenced the choice of an external development method. On the basis of our empirical results, we discuss the managerial and practical implications of our research.

Capabilities for innovation in small firms – a study of 131 high-tech firms and their relation to performance

Organisational capabilities have been widely discussed - most often at a conceptual level and from a large firm perspective. This paper examines the operationalisation and measurement of the capabilities for innovation in small firms and also how capabilities may be related to the firm's innovation performance. Based on a quantitative analysis of 131 small high-tech firms, this paper describes and analyses the dimensions critical for innovation with a special focus on very small high-tech firms. We propose a construct for investigation including five dimensions relating to small firm capabilities and their relation to innovation performance. We found 20 relationships between the capabilities dimensions and innovation performance, of which the performance dimension of 'patent' showed to be particularly correlated to capabilities. Our statistical analysis shows that two latent constructs have a positive effect on innovation performance: cooperation with universities and business planning and advice.

Innovation in the medical device sector: an open business model approach for high-tech small firms

Innovation in the medical device industry is progressing rapidly with many technologies heralded as major breakthroughs. The public are often well informed about these matters, which results in a patient pull for innovations that are years from market. HTSFs operating in this environment face huge challenges in terms of realising the latent economic potential from new innovations. Open innovation offers the prospect of lower costs for innovation, faster times to market, and the chance to share risks. By developing open business models medical device companies can capture the multifaceted ideas of scientists, engineers, clinicians and indeed patients; thus allowing beneficial technologies to reach the market more quickly in a way that is evidence focused. This study uses a qualitative approach to investigate the explicit and implicit business models within HTSFs in the health care sector and provides a useful contribution to understand the challenges and identify solutions in this multi-stakeholder environment.