High-technology Firms Research Articles

Innovation, Networking and Proximity: Lessons from Small High Technology Firms in the UK

The article explores how the innovative performance of small high-tech firms relates to their external networking activities, and whether geographical proximity in their network relations matters. Data from a small sample of electronics firms and software developers in South East England are used to construct indicators of innovativeness, which are correlated with variables capturing intensity of external interactions and proximity benefits. The regional science base is found to have played a key role in nurturing new high-tech ventures, but science parks had not contributed to this. Interaction with parties with complementary capabilities such as suppliers and service providers is also associated with high innovative performance. However, the findings do not support the current policy fashion of encouraging regional networks revolving around firms in similar business activities and close customer relations.

When Bureaucrats Meet Entrepreneurs: The Design of Effective `Public Venture Capital' Programmes

Recently public efforts to finance small high-technology firms have proliferated. We review the motivations for these efforts and make some preliminary observations about their design. We explore the underlying challenges that the financing of young growth firms poses, the ways that specialised financial intermediaries address them, and the rationales for public efforts to finance these companies. The final section makes a set of observations about the ways in which the structure of these efforts can most effectively complement private sector activity. A frequent fault in programme design is the presumption that technological criteria can be divorced from business considerations when evaluating firms. The federal government has played an active role in financing new firms, particularly in high-technology industries, since the Soviet Union's launch of the Sputnik satellite. In recent years, European and Asian nations and many US states have adopted similar initiatives. While these programmes' precise structures have differed, the efforts have been predicated on two shared assumptions: (i) that the private sector provides insufficient capital to new firms, and (ii) that the government either can identify investments which will ultimately yield high social and/or private returns or can encourage financial intermediaries to do so. In contrast to other government interventions designed to boost economic growth, such as privatisation programmes, these claims have received little scrutiny by economists. The neglect of these questions is unfortunate. While the sums of money involved are modest relative to public expenditures on defence procurement or retiree benefits, these programmes are very substantial when compared to contemporaneous private investments in new firms. Government programmes in this arena have been divided between those efforts that directly fund entrepreneurial firms and those that encourage or subsidise the development of outside investors. In this paper, I will focus on 'public venture capital' initiatives: programmes that make equity or equity-like investments in young firms, or encourage other intermediaries to make such investments. In some such programmes, such as the Advanced Technology Program and the Small Business Innovation Research programmes discussed below, the funds are provided as a contract or outright grant. While these efforts have proliferated, a consensus as to how to structure these programmes remains elusive. While the design of regulatory agencies has been extensively studied from a theoretical and empirical perspective, little work has

Financing the New Economy: financial institutions and corporate governance

This paper examines the financial sector preconditions for the successful development of a high technology sector. It argues that there is a close relation between types of activities undertaken in different countries and their institutional structures. A distinguishing characteristic of the financing of high technology firms is their evolving pattern of control by different investor groups. While stock markets are an important component of the development of the most successful firms, they are not the most common. Regulation is a significant influence on institutional structure. The degree of risk taking by financial institutions and the diversity of their investments are affected by trade-offs between competition and stability and the emphasis placed on minority investor protection. For the most part, Europe has opted for high levels of investor protection and low levels of diversity; if it wishes to stimulate high technology sectors, it may have to change this balance.

Resource leveraging via networks by high-technology entrepreneurial firms

This study of 65 New Zealand-based high-technology firms examined resource leveraging via different networks in relation to firm age and growth. Age was not a significant factor in the type of network focus. However, age interacted with the type of network focus in terms of profit growth, and the highest sales growth was associated with resource leveraging via horizontal, or competitor-based, networks. Implications include continually assessing the origins of external resources and their impact on performance.

Predicting survival of high-technology initial public offering firms

Effectively understanding how technology management influences the performance of organizations requires a more longitudinal time horizon than traditionally used in management research. Further, the study of smaller, technology-intensive firms that are in the growth phase of the development life cycle is lacking in the literature. This exploratory study addresses these deficiencies by analyzing how the breadth and depth of technology management influences high-technology initial public offering (IPO) survival after five years. Content analysis is used to gather data on the technology management dimensions from the IPO prospectus of 95 high-technology firms that went public in the US in 1992. Using logistic regression analysis, the results show that high-technology firms who survive at least five years after an IPO have more intellectual property rights, more experienced senior executives, and spend less on R&D as a proportion of sales at the time of the IPO than their cohorts. These results suggest that enhancing structural inertia early by strengthening core technology resources contribute to survival after an event such as an IPO. Thus, effective management of technology processes may contribute to long-term survival of small- to medium-sized high-technology enterprises.

Implementing the lead user method in a high technology firm: A longitudinal study of intentions versus actions

The customer or user's role in the new product development process is limited or nonexistent in many high technology firms, despite evidence that suggests customers are frequently an excellent source for new product ideas with great market potential. This article examines the implementation of the Lead User method for gathering new product ideas from leading edge customers by an IT firm that had not previously done much customer research during their new product development efforts. This case study follows the decision‐makers of the firm through the process, where the end result is the generation of a number of useful product concepts. Besides the ideas generated, management at the firm is also impressed with the way the method makes their new product development process more cross‐functional and they plan to make it a part of their future new product development practices. Approximately one year later the firm is revisited to find out if the Lead User method has become a permanent part of their new product development process. The authors find, however, that the firm has abandoned research on the customer despite the fact that several of the lead‐user derived product concepts had been successfully implemented. Management explanations for their return to a technology push process for developing new products include personnel turnover and lack of time. Using organizational learning theory to examine the case, the authors suggest that the nontechnology specific product concepts generated by the lead users were seen as ambiguous and hence overly simplistic and less valuable by the new product development personnel. The technical language spoken by the new product personnel also increased the inertia of old technology push development process by making it more prestigious and comfortable to plan new products with their technology suppliers. The fact that the firm was doing well throughout this process also decreased the pressure to change from their established new product development routine. The implications for these finding are that: 1) it is necessary to pressure or reward personnel in order to make permanent changes to established routines, and 2) researchers should be careful at taking managers at their word when asking them about their future intentions.

Implementing the lead user method in a high technology firm: a longitudinal study of intentions versus actions

The customer or user’s role in the new product development process is limited or nonexistent in many high technology firms, despite evidence that suggests customers are frequently an excellent source for new product ideas with great market potential. This article examines the implementation of the Lead User method for gathering new product ideas from leading edge customers by an IT firm that had not previously done much customer research during their new product development efforts. This case study follows the decision-makers of the firm through the process, where the end result is the generation of a number of useful product concepts. Besides the ideas generated, management at the firm is also impressed with the way the method makes their new product development process more cross-functional and they plan to make it a part of their future new product development practices. Approximately one year later the firm is revisited to find out if the Lead User method has become a permanent part of their new product development process. The authors find, however, that the firm has abandoned research on the customer despite the fact that several of the lead-user derived product concepts had been successfully implemented. Management explanations for their return to a technology push process for developing new products include personnel turnover and lack of time. Using organizational learning theory to examine the case, the authors suggest that the nontechnology specific product concepts generated by the lead users were seen as ambiguous and hence overly simplistic and less valuable by the new product development personnel. The technical language spoken by the new product personnel also increased the inertia of old technology push development process by making it more prestigious and comfortable to plan new products with their technology suppliers. The fact that the firm was doing well throughout this process also decreased the pressure to change from their established new product development routine. The implications for these finding are that: 1) it is necessary to pressure or reward personnel in order to make permanent changes to established routines, and 2) researchers should be careful at taking managers at their word when asking them about their future intentions.

Managing the impact of high market growth and learning on knowledge worker productivity and service quality

Many high technology firms in the information technology, engineering, and internet content industries experience exponential growth but are also dependent on knowledge workers requiring extensive periods of training or apprenticeship. Under these conditions productivity management becomes a critical yet dynamically complex issue. This paper uses control theory techniques to dynamically solve this staffing problem at a strategic level. The novelty of this paper's formulation of the staffing problem lies in the use of time-discounting in combination with a special cost structure. The resulting optimal policy reflects the influence of both capacity shortfall and salary penalties. Under most real-world conditions, it will drive capacity and employment levels asymptotically towards a constant fractional shortfall. An illustration is presented using enterprise requirement planning (ERP) project implementers. One important managerial implication is that the interaction of extensive training requirements with market growth can cause firms to under-perform by delivering low levels of service at a high cost. Further this underperformance will escalate with increases in either market growth or training requirements. Finally, the paper puts this research into a framework with the experience curve and technology supply chain literatures to outline possible directions for future research.

The effects of alliance portfolio characteristics and absorptive capacity on performance: A study of biotechnology firms

In many high technology industries, strategic alliances have become important for improving a firm's financial performance by providing knowledge that can be used to develop the capabilities needed to introduce new products. Therefore, researchers have examined those characteristics of alliances that can contribute to the performance of high technology companies. There is agreement that the structure and knowledge flows within alliances can affect a firm's innovativeness. However, to date, researchers have studied alliances as individual events or transactions, failing to recognize their synergistic effects as a coherent portfolio. Viewing alliances as a portfolio of strategic agreements, we suggest that portfolio characteristics will be associated with a high technology firm's innovative and financial performance. Also, we suggest that portfolio characteristics will influence absorptive capacity. We test these propositions using a sample of 2456 alliances formed by 143 biopharmaceutical firms. The results indicate that alliance portfolio characteristics and absorptive capacity jointly influence performance. The implications of these findings for high technology firms are discussed.

The Impact of Securities Litigation Reform on the Disclosure of Forward‐Looking Information By High Technology Firms

This study evaluates corporate voluntary disclosure of forward‐looking information under the safe harbor provision of the Private Securities Litigation Reform Act of 1995. Using a sample of 523 computer hardware, computer software, and pharmaceutical firms, we find a significant increase in both the frequency of firms issuing earnings and sales forecasts and the mean number of forecasts issued following the Act’s passage. To provide more direct evidence that our findings are attributable to the Act reducing firms’ legal exposure, we develop a proxy for litigation risk and examine whether the increase in disclosure is more pronounced for firms at greatest risk of a lawsuit. As expected, we find that the change in disclosure is increasing in firms’ ex ante risk of litigation. Finally, we report that the safe harbor had no adverse impact on the quality of forward‐looking information. Forecast errors, whether directional or non‐directional, were not significantly affected by the Act’s passage.

First steps in internationalisation

There has been widespread dissatisfaction with step-stage development models of small firm internationalisation, and difficulties in applying comprehensive theories or explanations to the decisions and processes involved, resulting in calls for a return to exploratory research, and for a series of connected submodels covering different stages and dimensions of internationalisation. This paper attempts to address, at least partially, these demands. Empirical evidence from a sample of 213 small high-technology firms, consisting of quantitative data on their first steps in internationalisation, is presented and discussed. Descriptive statistics illustrate the frequency with which each type of cross-border activity is indicated across the sample, the time elapsed before each activity is established, and the combination in which they occur. The results indicate that, as expected from previous empirical evidence, trade-related activities, i.e., importing and exporting, are the modes of activity most frequently reported. Further examination reveals, however, that at least half of the firms in the sample include value chain activities other than trade in their first steps in internationalisation. These results raise questions relating to the conventional categorisations of foreign market entry modes and the design and interpretation of survey research relating to internationalisation.

Management Strategies of Venture Capital Funded Firms

Most studies on venture capital have focused on the strategies and criteria followed by venture capitalists (VCs), and there have been only a few efforts made to study high-technology firms funded by VCs. This article reports the findings from a study of the strategies of venture capital supportedfirms particularly in areas such as tech nology, people, marketing, finance and organisational growth. It is concluded that in the case of technology intensive firms, their strategies are naturally driven by tech nology, but along with this, it is their appreciation for and application of the other functional strategies that makes them winners. The result is the creation of a unique supply of complex resources within each organisation. Many of the entrepreneurs have been able to create and sustain market pull for their products because of the synergistic effect of their resources and strategies.

An examination of executive stock option repricing

Comparing a sample of firms that reprice executive stock options in 1998 to a control sample of firms with out-of-the-money options in 1998 that do not reprice, we find that the likelihood of repricing increases for young, high technology firms and firms whose options are more out-of-the-money. Further, we find that firms reprice in response to poor firm-specific, not poor industry, performance. However, we find no evidence that repricing is related to agency problems. Our results are consistent with firms repricing options to restore incentive effects and to deter managers in competitive labor markets from going to work for other firms.

The Role of Senior Management and Team Leaders in Building Collaborative New Product Teams

Most high-technology firms expect cross-functional new product teams to accelerate product innovation, increase creativity, and cut costs. However, the mere formation of teams seldom produces such results. This article reports findings from a recent study of new product development processes in 10 high-technology firms and highlights the actions of senior management and team leaders that are associated with highly collaborative new product teamwork.

Agricultural Biotechnology in the European Union: Alternative Technologies and Economic Outcomes

All seed firms in six EU countries were surveyed in May 1999 to determine how seed development budgets were distributed across three crop development technologies and the effects of the type of technology in use on employment, sales and exports. The results indicate that an evaluation of the economic consequences of an emergent technology such as genetic engineering should both consider the effect of competitive alternative technologies and survey all firms within the sector, rather than focusing on a subset of high technology firms. Only about 10% of the combined 1999 research budget of European seed firms was spent on genetic engineering, although this should increase to about 15% by 2002. Alternative technologies to develop new plant varieties, such as conventional plant breeding and conventional breeding combined with techniques that were developed for genetic engineering, are considerably more important economically. In fact, there is no difference in expected employment and sales per development employee by the type of technology in use, while export rates are highest among firms that combine conventional plant breeding with advanced techniques.

Why High-technology Firms Choose to Locate in or near Metropolitan Areas

Various studies have provided evidence of the advantages of the ability of metropolitan areas to attract hi-tech industries, which employ advanced technology and are strongly involved in the process of innovation. This paper presents the results of an empirical study of the location choice of Israeli hi-tech industries within a metropolitan area, carried out in the Northern region of Israel (which encompasses the Haifa metropolitan area and its surrounding localities) and based on field-survey data obtained from hi-tech plants. The study investigates the effect of different factors on location choice and also identifies the direct contribution of each factor to the probability of choosing the metropolitan area as a preferred location. The implications of these findings for industrial policy are also discussed.

Why High-technology Firms Choose to Locate in or near Metropolitan Areas

Various studies have provided evidence of the advantages of the ability of metropolitan areas to attract hi-tech industries, which employ advanced technology and are strongly involved in the process of innovation. This paper presents the results of an empirical study of the location choice of Israeli hi-tech industries within a metropolitan area, carried out in the Northern region of Israel (which encompasses the Haifa metropolitan area and its surrounding localities) and based on field-survey data obtained from hi-tech plants. The study investigates the effect of different factors on location choice and also identifies the direct contribution of each factor to the probability of choosing the metropolitan area as a preferred location. The implications of these findings for industrial policy are also discussed.

High‐technology firms' perceptions of their international competitiveness

Abstract This paper positions itself in the growing body of work on international entrepreneurship and investigates the perceptions of a small sample of high‐technology UK firms operating in overseas markets. Some firms were found to employ a number of modes of market entry other than the exporting route prescribed by much of the existing literature and the focus of government trade assistance that is available. Quantitative analysis is undertaken to establish that few statistical differences exist between two groups of firms — those involved only in exporting and those with activities incorporating multiple forms of market entry — in relation to their perceived performance and competitiveness in overseas markets. In managing the changing circumstances of dealing with overseas markets, academics, policy makers and trainers should encourage managers to plan and balance resource constraints in accordance with the modes of market entry undertaken. Copyright © 2001 John Wiley & Sons, Ltd.

ATLANTA IN THE TELECOMMUNICATIONS AGE: THE FIBER-OPTIC INFORMATION NETWORK

This paper addresses the role of the Atlanta metropolitan area as a telecommunications center based on the use of fiber optics. The major focus is on the intrametropolitan layout of this network, including fiber-optic access points, downtown and suburban fiber loops, and the location of data service and teleservice centers. The aim is to identify congruence between high-technology firms and fiber-optic lines that produce clustering within the metropolitan region. Atlanta has a dense fiber-optic infrastructure in place in the CBD-Midtown area and in several corporate clusters in the suburbs. A number of fiber-optic carriers compete in the Atlanta market—including BellSouth, with approximately 400,000 miles of fiber-optic cable—giving Atlanta more miles of optic fiber than any other metropolitan area in the United States. This extensive fiber network bestows fresh advantages to old downtown property and businesses and creates burgeoning opportunities in the suburbs as it literally undergirds the growth of edge cities at such locations as Perimeter Center and Cumberland-Galleria. Long-established Atlanta firms such as Coca-Cola have drawn fiber sites to themselves, whereas sites on fiber-optic loops attract new businesses seeking ready backbone and broadband access to other metropolitan areas in the United States and cities around the globe. This study also focuses on Atlanta's position within the U.S. intermetropolitan telecommunications hierarchy, where the metropolitan area ranks sixth in total number of backbone connections with other U.S. Metropolitan areas. [Key words: Atlanta, fiber optics, telecommunications.]

The Venture Capital Revolution

Venture capital has emerged as an important intermediary in financial markets, providing capital to young high-technology firms that might have otherwise gone unfunded. Venture capitalists have developed a variety of mechanisms to overcome the problems that emerge at each stage of the investment process. At the same time, the venture capital process is also subject to various pathologies from time to time, which can create problems for investors or entrepreneurs. This article reviews the recent empirical literature on these organizations and points out area where further research is needed.