Firm Innovation Research Articles

Higher education structure and firm innovation: Theoretical mechanisms and cross‐national evidence

AbstractThis paper examines the relationship between higher education structure and firm innovation. By drawing on and expanding Schumpeterian growth theory, we analyze this underlying mechanism and conduct empirical tests using a cross‐national survey database of 9,230 firms from 30 countries. The empirical results show that a higher education structure, exhibiting a heightened inclination towards fundamental disciplines such as mathematics and natural sciences (the percentage of graduates in these disciplines), is more conducive to fostering firm innovation. This innovation‐promoting effect is more noticeable in domestic and established enterprises and varies in accordance with a country's institutional conditions. This paper provides new insights into the study of the impact of higher education structure on firm innovation.

Information acquisition or just going through the motions? Institutional investors' site visits and green innovation

AbstractThe importance of green innovation in global sustainable development is increasingly recognized. Literature has documented that enhancing external oversight can improve green innovation performance. However, few studies systematically investigate the relationship between external supervisory behavior and green innovation. This study employs a game‐theoretic model to examine the relationship between institutional investors' site visits (SVs) and green innovation. Using a unique dataset covering SVs from 2012 to 2021, empirical findings reveal that institutional investors' SVs are dramatically favorable to green innovation performance, particularly among stress‐resistant institutional investors. More broadly, SVs by institutional investors with higher shareholdings and stronger reputations exhibit a substantial response to green innovation. Similarly, institutional investors' SVs significantly boost the green innovation of firms with inadequate environmental disclosure. Additional analysis documents that the quality improvement of green innovation significantly increases after institutional investors conduct more than three SVs in a calendar year. This study proposes that policymakers should improve the institutional environment for site visits, and enterprises can strategically involve institutional investors to enhance external monitoring mechanisms. The theoretical and practical implications of this contribute to boosting green innovation capabilities.

THE IMPACT OF COVID-19 PANDEMIC ON IT COMPANIES’ INNOVATION ACTIVITY IN THE USA

The study analyzes the impact of COVID-19 pandemic on such innovative activity indicators as R&D spending and the number of international patents of American IT companies. The sample includes 130 US companies from 2010 to 2021. The data are analyzed using the models with fixed individual effects and robust errors, Tobit and Heckman models. According to the findings R&D/Sales ratio has not changed during the pandemic. However, R&D expenditures increased during the pandemic for highly innovative firms and companies from the technology equipment sector increased analogue capitalized R&D. Besides, firms that had international patents before the pandemic granted more patents for registration during the pandemic. A one-year lag was found between innovations’ input in the form of R&D investment and innovations’ output in the form of international patents. These findings allow us to conclude that COVID-19 has a positive impact only on highly innovative companies in the United States.

Commentary: Company Innovativeness: A Radically New Perspective on an Old Concept

The article highlights misconceptions around the concept of innovativeness and argues for a broader understanding that encompasses both inward and outward-looking perspectives. It emphasizes the importance of perceived innovativeness as influenced by marketing, innovation culture, leadership, and emotional connection with customers. This customer-centric viewpoint not only offers a fresh lens through which to evaluate firm innovativeness but also underscores its significant implications for innovation management and future research directions.

Navigating the impact: A comprehensive analysis of ESG disclosure consequences through systematic review

AbstractThe purpose of this article is to provide a comprehensive and systematic assessment of the literature on the consequences of environmental, social, and governance (ESG) disclosure by means of content analyses. Using a systematic approach, a sample of 165 studies was collected from the Web of Science database and evaluated on the basis of econometric and content analyses, including publication trends, geographical distribution, theories and consequence associated with ESG disclosure (investment and innovation of firms, financing cost and method, operations and financial risk of firms, firm performance and value and others), provides some direction for future investigation. According to the analysis, the literature was more interested in the stakeholder theory when examining the effects of ESG disclosure on areas including company innovation and investment, financing costs and methods, financial risk and operations, business performance, and others. Even though most of the literature has focused on firm performance and value, there is still no clear understanding of the relationship. Also, limited work was found on the investment and innovation of firms, and financing cost and method, while the impact of operations and financial risk of firms has yet to be explored. Meanwhile, this study also identified the impact of ESG disclosure on analysts, audit fees, and earnings management as a new research direction. Finally, this study innovates new findings that institutional pressures may have an impact on the consequences of ESG disclosure, a topic not found in previous studies.

New industrial land use policy and firms’ green technology innovation in China—an empirical study based on double machine learning model

China is facing a serious land resource mismatch problem, which will profoundly affect the acceleration of economic growth and technological innovation. Reform of the industrial land allocation system can solve the mismatch of land resources, and that also has an important impact on the promotion of economic and technological development. This paper selects the data of Chinese A-share listed companies in Shanghai and Shenzhen from 2007 to 2020 as the research sample, constructs a double machine learning model, and empirically investigates the impact of a new industrial land use policy on firms’ green innovation behavior. The study shows that: (1) the new industrial land use policy significantly promotes firms’ substantive and strategic green technological innovation, and the effect on substantive green technological innovation is greater than that on strategic green technological innovation. (2) The enhancement of R&D investment sustainability and the “talent pool” effect are important mechanisms through which the new industrial land use policy influences firms’ substantive and strategic green technological innovation. Meanwhile, the new industrial land use policy is conducive to firms’ green co-innovation. (3) There is heterogeneity in the effect of the new industrial land use policy, which can significantly promote green technological innovation of firms in the eastern region, while it does not play a significant role in the green innovation behavior of firms in the central and western regions. The above research results enrich the research in the field of industrial land and innovation, help to understand more comprehensively the mechanism of new industrial land affecting firms’ green technological innovation, and provide policy insights for strengthening the application of industrial land allocation reform in firms’ green innovation.

A Review of Research on Structural Holes and Innovation Performance

With the development of globalization, firms are facing increasingly fierce competition. In such an environment, innovation has become an inevitable choice for companies to survive and develop, and is a hot topic studied by management scholars. Especially in high-tech industries, innovation has a particularly prominent impact on a company’s survival and prosperity. Technical innovation involves high levels of uncertainty and requires significant amounts of time and resources, so firms typically engage in strategic alliances to conduct joint research and exchange knowledge and information. In this process, innovation networks become an important source of innovation for companies, and the transfer, sharing, integration, and absorption of technical knowledge are all accomplished through innovation networks. As an important structure in innovation networks, structural holes can provide novel and heterogeneous information and knowledge. firms occupying positions in structural holes have information and control advantages, and by integrating different information, firms are more likely to create new knowledge. Therefore, the study of structural holes has become a focus of management research, and can play a significant role in promoting the development of social network and social capital theory. This paper systematically studies structural holes and innovation performance by reviewing existing research and defining the basic concepts and classifications of structural holes. In addition, relevant studies on the relationship between structural holes and innovation performance are summarized from the organizational, team, and individual levels, with a focus on the relationship between structural holes and firm innovation performance. Finally, based on the shortcomings of current research on structural holes and innovation performance, future research prospects are proposed to further promote the development of research in this area.

The role of information sources as a driver of innovation

AbstractAn extensive empirical literature shows the important role that information sources have on firm innovation. However, there is scarce evidence on the different typologies of between technological and non‐technological innovations and their expectations. We investigate how the wide number of information sources affect the propensity to innovate and its future expectations. At the methodological level, we apply a multivariate Probit to the Innovation Survey of Chilean companies (2013–2016). Our results show that internal information sources, suppliers, clients and the Internet are significantly associated with the development of technological and non‐technological innovations. Social innovations are affected only by internal and by market (primarily from consultancy firms) sources of information. Finally, internal information sources and the Internet affect firms' expectations to innovate. Our results indicate the importance of different information flows and how they may drive the generation of innovations.

From crisis to opportunity through innovation

PurposeThis study aims to explore the strategic decisions at innovation level implemented by firms to thrive and transform themselves during crises. This study also aims to provide insights to answer the question: Why do some firms decide to implement certain types of innovation during a crisis?Design/methodology/approachThis research was carried out through a multiple case study involving 22 firms. The methods were implemented in three steps to increase rigor and the replication of the study: identification and selection of cases, data collection through interviews triangulated with online information and analysis based on aggregating themes and finding patterns.FindingsIn the face of the COVID-19 pandemic, the companies analyzed focused their activities mainly on developing new features or functionalities for their products or services. Most of the firms implemented innovations across nearly all ten categories outlined by Keeley et al. (2013). Many of the implemented innovations involved personalized and superior service enhancements, process efficiency optimizations, channel diversification initiatives and new ways to collaborate to generate value. In general, the main drivers that led firms to decide to implement these innovations include reducing costs, enhancing operational efficiency, generating new revenue streams, augmenting sales and enhancing client relationships.Practical implicationsThis research significantly advances the convergence of innovation, strategy and crisis in three impactful ways. First, it constructs a pragmatic and evidence-based framework, consolidating the primary catalysts, innovation categories and strategies adopted by firms in response to the challenges posed by the COVID-19 crisis. Second, it offers insights for guiding decision-making processes related to innovation, presenting actionable recommendations derived from the study’s findings. Thirdly, this study highlights critical perspectives that can guide governmental intervention, facilitating the formulation of more tailored and effective policies to assist companies during crisis periods.Originality/valueThis study centers on developing countries, specifically examining Colombian firms, considering their unique characteristics and priorities. Surprisingly, there is a scarcity of studies delving into the innovation and transformation of firms during the COVID-19 crisis in nations sharing cultural, economic and political similarities with Colombia.

Introducing professional managers, salary incentive and family business innovation

This paper provides an in-depth discussion of the impact of introducing professional managers on the innovation of family firms for a sample of A-share listed companies in China from 2017 to 2022. The findings show that introducing professional managers in family firms significantly positively contributes to corporate innovation. In addition, the study finds that both equity and cash incentives given to professional managers are conducive to further promoting corporate innovation. The results of this study are of great practical significance for how family firms can rationally utilize professional managers to enhance corporate innovation.

Facilitating corporate sustainability integration: innovation in family firms

PurposeThe purpose of the study is to understand the relationship between family-driven innovation and the incorporation of corporate sustainability in German family firms.Design/methodology/approachThe study conducted 26 interviews with 22 German family firms. Thematic analysis was undertaken on the collected data resulting in five major themes.FindingsThe study identified five main themes of corporate sustainability-oriented innovation in family firms, which include measuring corporate sustainability performances, building corporate sustainability-oriented infrastructure, stabilizing/optimizing operations, enhancing operational flexibility/independence and knowledge management and development. The study also provides an activity-based guide for family firms to use innovation to achieve corporate sustainability goals and present the findings’ implications for policymakers.Originality/valueThe present study is the first study to empirically investigate the relationship between family-driven innovation and the incorporation of corporate sustainability at each of the corporate sustainability maturity levels.

The Effects of the Development Zone Upgrading on the Diversification of Firm’s Product Exports: Evidence from Chinese Exporters

Against the backdrop of frequent international trade frictions, reducing external risks in export trade through industrial policies has become crucial for China’s high-quality and steady foreign trade development. This paper examines the impact of development zone upgrading policies on the diversification of firm product exports by using a time-varying difference-in-differences model. We find that after the upgrading of development zones, the diversification of firm product exports increases by 2.13%, and concentration decreases by 1.33%. Moreover, this policy has a stronger impact on the diversification level of product exports for firms upgraded to customs special supervision areas, located inland, and engaged in general trade. These conclusions remain robust even after conducting additional robustness tests using alternative measures of the dependent variable, different identification methods for development zone upgrading, and controlling for other industrial policy effects. Furthermore, the upgrading of development zones improves export diversification through three main channels: enhancing firm innovation capabilities, optimizing management efficiency, and providing financial support to firms.

The ripple effect: How trade policy shocks impact innovation of Chinese firms

AbstractThis article examines how trade policy shocks impact firm innovation indirectly through information sharing across firms. Using a unique dataset of Chinese firms between 2000 and 2013, we identify connections between firms by exploiting spillover effects of antidumping. Empirical results show that antidumping has negative spillover effects on firm innovation through information exchanges across firms in market or product networks. Trade restrictions on extensive and intensive margins work as important channels through which the networks impact firm innovation. Our findings provide new empirical evidence on indirect effects of antidumping on firm innovation and better understanding on channels of trade policy shocks.

Nonmonetary awards and innovation: Evidence from winning China's Top Brand Contest

We use the short-lived, but high-profile, China Top Brand Award to examine the causal effects of nonmonetary awards on firm innovation. To do so, we create a panel dataset by matching official China Top Brand Award recipients to the innovation outputs of listed companies. Results from difference-in-differences estimates show that firms that received the China Top Brand Award have a higher number, and better quality, of filed patents. We find that the positive effects of winning the China Top Brand Award on innovation outputs operate through higher government subsidies to winning firms. We also find that the positive effects of award-winning are stronger among state-owned enterprises, larger enterprises, and better-performing enterprises, as well as in provinces with stronger intellectual property rights protection. Our results are robust to a series of sensitivity checks.

Institutional investor heterogeneity and green innovation in China: Does digital transformation matter?

This paper examines how different categories of institutional investors influence green innovation for Chinese-listed companies and investigates the impact of digital transformation on this relationship. Results show that pressure-insensitive investors significantly improve corporate green innovation, while pressure-sensitive institutions have no effect. Further evidence suggests this is due to the negative impact of long-term pressure-sensitive investors on green innovation. We further analyze whether digital transformation affects the relationship between institutional ownership heterogeneity and green innovation. Consistent with the view that digital transformation promotes timely information dissemination and alleviates information asymmetry, our findings demonstrate that both pressure-insensitive institutional investors and short-term pressure-sensitive institutional investors promote green innovation in firms with higher levels of digital transformation. Further analyses reveal that digital transformation at the city level amplifies the influence of institutional investors on green innovation, and the underlying technology architecture provides more value to the institutional ownership heterogeneity−green innovation nexus.

Commentary: Customer-Perceived Innovation: Considerations for Financial Performance and Methodological Approaches

As firms increasingly uncover their activities to key stakeholders through various media, the perception of these activities is becoming more important for firm performance. Traditionally, access to industry-wide databases provides important metrics on customer perceptions of performance, such as customer satisfaction and brand equity. In addition, numerous studies have highlighted firms' innovation-related actions (e.g., R&D spending and patent counts) as critical metrics linked to their financial performance. Perceived Firm Innovation (PFI) emerges as a relatively new and under-studied metric with the potential to impact a firm's financial success. Keiningham et al. are among the pioneers in this area. This commentary views their article as a vital initial step in understanding PFI’s impact. Considering that the service sector accounts for over 70 percent of the GDP in any developed country, service innovation is a broad phenomenon. Given the breadth of the area, we point to the challenge of capturing this phenomenon with a single metric like PFI. We also discuss crucial methodological considerations for future research, including estimation methods, sample size, and financial metrics.

Impact of cross-border mergers and acquisitions on firm innovation performance: from the perspective of dynamic capability theory

ABSTRACT This study constructs an empirical framework from the perspective of dynamic capability theory, and uses a combined dataset of Chinese listed companies from 2008 to 2020 to test the causal impact of cross-border mergers and acquisitions (M&As) on firm innovation performance by using propensity score matching, time-varying difference-in-differences model and instrumental variable method. The findings are as follows: (1) Cross-border M&A has a significant promoting effect on the innovation performance of acquiring firms. (2) Heterogeneity analysis shows that traditionally less innovative state-owned, non-manufacturing, and non-high-tech enterprises experience notable enhancements in their performance through cross-border M&As. The post-M&A innovation performance of enterprises in central China is strong, followed by enterprises in eastern China, while enterprises in western China show limited improvement. (3) Among the internal factors of firm dynamic capability, knowledge breadth and managerial capability positively moderate the impact of cross-border M&As on innovation performance, while knowledge depth and financing constraints play a negative moderating role. (4) Among the external factors of firm dynamic capability, local knowledge externalities and regional trade resilience play a positive moderating role. This study highlights the importance of firm dynamic capabilities in the cross-border M&As process and provides new insights into innovation strategies in emerging economies.

Partisanship, optimism, and firm innovation

AbstractPolitical partisanship significantly shapes firm executives’ economic outlook. We find that firms, whose managers share political alignment with the US president, achieve superior innovation outcomes, including higher patent counts, increased patent citations, and greater patent value. We establish a causal relationship through a difference‐in‐differences approach, focusing on periods around US presidential elections. This effect is more pronounced in firms with overconfident CEOs and during periods of heightened policy uncertainty, suggesting that partisan optimism stimulates innovation incentives. Firms led by partisan‐aligned managers generate patents with greater originality, generality, and an exploratory style.

Effects of alliance portfolio breadth and depth on exploratory and exploitative innovation: Evidence from Indian high-tech sectors

Firms increasingly pursue collaborative innovation using alliance portfolios (APs) to enhance innovation outcomes. AP breadth and depth are two important dimensions of collaborative innovation. AP breadth enhances a firm’s access to a variety of external knowledge whereas AP depth helps integration of external knowledge. This study examined how AP breadth and depth, separately and jointly, affect firm innovation. Drawing primarily on the organisational learning perspective, we suggested that AP breadth enhances a firm’s exploratory innovation but lowers its exploitative innovation. However, AP depth improves a firm’s exploitative innovation but diminishes its exploratory innovation. Further, we suggested that the interaction effect of AP breadth and depth is negative for exploratory innovation whereas it is positive for exploitative innovation. An empirical investigation conducted on a longitudinal dataset of Indian firms from high-tech sectors broadly supported our theoretical arguments.

Does exporting to China spur firm innovation activities in developing countries?

Trading with developed countries has been shown to promote technological progress. However, it remains unclear whether trade between developing countries promotes or hinders technological progress. To address this gap, the present study utilizes micro data from the 2006–2021 World Bank Enterprise Surveys for 139 developing countries to assess the link between exports to China and innovation activities. We analyze the relationship between exports to China and various proxies for firm-level innovation activities in other developing countries. Our findings suggest that exports to China significantly enhance innovation in other developing countries, regardless of the innovation measures used. The heterogeneous analysis shows that the effects are more pronounced for mature firms and exporters, while young firms and non-exporters are more likely to introduce process innovation directly, rather than spending more on R&D. This effect becomes more pronounced after the implementation of China's Belt and Road Initiative in 2013. The underlying mechanism is that exporting to China (only for capital-intensive goods) could increase the demand for skilled labor, thereby contributing to higher innovation activities among firms in developing countries, as evidenced by firms hiring a greater proportion of skilled labor. These labor adjustments could contribute to the increase in the likelihood of firms introducing process innovation and spending on R&D by 38% and 47%, respectively.