Intangible Knowledge Assets Research Articles

Innovation Options and Profitability of Pharmaceutical Brand Manufacturers

Much research exists covering clinical development success rates, development costs of new drugs, and market launch impact on stock market valuation of companies, but little systematic work has been done to establish the impact of research input on new product launches and, in turn, their impact on profitability of drug manufacturers. This article investigates these relations using data from the world’s largest pharmaceutical brand manufacturers and their product launches in the US over a period of more than 25 years. The objective is to determine the impact of innovation intensity on innovation output intensity and of innovation output intensity on profitability. It is shown that there is a complete lack of evidence that launches of New Molecular Entities (NMEs) necessarily lead to higher profitability, suggesting that many launches of NMEs are not particularly successful from an economic point of view. Furthermore, it was found that intangible knowledge assets acquired by company mergers and acquisitions do often not live up to their valuation. This leads to the conclusion that such intangible assets seem to be overpriced on average. The more and more frequently used strategy of launching new drugs without NMEs like combination drugs or extension of indications increased short-term profitability making this a valid approach to avoid setbacks when patent protection of blockbuster drugs expires.

Globalization and Innovative Performance: An Analysis of Moderating Role of Intangible Knowledge Assets of a Country

Globalization and Innovative Performance: An Analysis of Moderating Role of Intangible Knowledge Assets of a Country

Allocation Of Residual Income Rights Under Internal Governance Empirical Results from the Hungarian Trucking Industry

The paper offers a property rights and monitoring cost explanation for the allocation of residual income rights between the carriers and truck drivers under internal governance. First, by applying property rights theory, we argue that the structure of residual income rights depends on the importance of noncontractible (intangible) assets of the truck driver to generate a residual surplus. The more important the truck driver’s intangible knowledgeassets, the more residual income rights should be transferred to him. In addition, we controlled for the monitoring costs as an additional explanatory variable of the allocation of residual income rights. According to agency theory, the higher the variable proportion of the driver’s income, the higher the monitoring costs.These hypotheses were tested by using data from the Hungarian trucking industry. The empirical results are supportive of the hypotheses.
 JEL- Index: G32, M2

Upgrading destruction?

Purpose The authors investigate natural disasters’ impact on manufacturing and services foreign direct investment (FDI), both, in contemporaneous and time-lag contexts. Manufacturing and services FDI account for different types of technology transfers, respectively, through tangible physical assets and intangible knowledge assets. This paper aims to hypothesize that natural disasters that have pronounced physical impact, have different effect on different sectoral FDI. Design/methodology/approach The authors merge a data set from emergency events database, which covers natural disasters occurrences with a sector-level data on FDI for 69 countries for the period 1980-2011, distinguishing between four different kinds of natural disasters such as meteorological, climate, hydrological and geophysical, as well as between different geographical regions. Findings Controlling for commonly accepted determinants of FDI, such as output growth, quality of institutions and natural resource abundance, the authors find that manufacturing FDI is negatively affected immediately after the disaster and positively in the longer run- a finding that is in unison with the “creative destruction” growth theory. Services FDI, on the other hand, do not show such pattern. Meteorological disasters have no effect on services FDI and climate and hydrological disasters have long-lasting negative effects. For both, manufacturing and services FDI, geophysical disasters have a positive impact on FDI in the long run. Research limitations/implications The study is limited to 69 countries for the period 1980-2011. Practical implications FDI bears tangible and intangible knowledge assets and provides means of financing, even in countries with under-developed banking systems and stock markets. FDI is impacted by climate change, manifested by intensifying and increase of frequency of natural disasters. Social implications Natural disasters destroy infrastructure and displace people. The rebuilding of infrastructure and intangible capital present an opportunity for upgrading. Originality/value This is the first study that analyzes the impact of natural disasters on sector-level FDI in a multicounty and regional context.

The bright side and dark side of trust: The mediating effect of franchisor trust on performance.

Previous literature has not examined the dual role of trust in franchise relationships. We extend the franchise and relational governance literature by showing that trust has both a “bright side” and a “dark side” in franchisor–franchisee relationships. Based on transaction cost and knowledge‐based reasoning, we argue that intangible knowledge assets and environmental uncertainty have an indirect effect on performance via trust, due to its relational risk and knowledge exchange effect. Using data from the franchise sector in Germany, we show that trust positively mediates the impact of intangible knowledge assets and negatively mediates the impact of environmental uncertainty on franchisor performance. The first effect refers to the “bright side” of trust showing that intangible brand name assets increase trust which, in turn, has a positive effect on performance. Conversely, the second effect refers to the “dark side” of trust highlighting that environmental uncertainty diminishes trust resulting in a negative effect on performance.

Determinants, Transactional Alignment, and Performance Outcomes of Franchise Contract Length

Purpose: In this paper, I explore the determinants, transactional alignment and performance outcomes of franchise contract length using transaction costs and resource-based theories. Design/methodology/approach: I hypothesize that franchisors choose contract length according to transaction cost theory (TCT) and resource-based theory (RBT) arguments. TCT explains the safeguarding function of contracts: the franchisors will offer longer contracts when franchisees’ specific investments are high and environmental uncertainty is low. RBT highlights the knowledge leverage function of contracts: the franchisors will offer longer contracts when the brand name and intangible knowledge assets are high. Franchise companies that design contract length aligned with transactional attributes will perform better. I test the misalignment hypothesis and comparative performance of franchise contracts by estimating two-stage least-squares regression and Heckman two-stage procedure that control for endogeneity and self-selection. Findings: Empirical data from the German franchise sector support the hypotheses. In addition to the safeguarding function, franchise contracts have an important knowledge leverage function. Longer contracts perform better due to the development of relational strategic assets and stronger commitment. Research limitations/implications: Franchisors must offer longer contracts when specific investments of franchisees, brand name, intangible knowledge assets are high, and environmental uncertainty is low. Franchisors should invest in the development of relational strategic assets and offer longer contracts for the benefit of superior performance. Originality/value: The study addresses the significant question of transactional alignment and comparative performance of franchise contracts. It empirically confirms the importance of resource-based theory in explaining contractual choices and performance.

Determinants of Decision Rights in International Joint Ventures The Role of Intangible Knowledge Assets and Uncertainty

This paper explores the determinants of decision rights allocation in international joint ventures (IJVs) by developing a theoretical framework based on the property rights and transaction cost explanations. We posit that the allocation of residual decision rights is influenced by the distribution of intangible knowledge assets important for the generation of residual income and by the environmental uncertainty. Based on the property rights theory, we show that the less contractible strategic knowledge assets have a stronger impact on the assignment of residual control rights to the JV partners than the more contractible operational knowledge assets. Under transaction cost economics perspective we focus on three environmental determinants: institutional uncertainty, cultural distance, and market uncertainty. We argue that the higher the environmental uncertainty in the host country, the more residual decision rights should be allocated to the local partner. Empirical data from IJVs in the CEE provide support of the hypotheses.

Determinants, transactional alignment, and performance outcomes of franchise contract length

PurposeThe purpose of this paper is to explore the determinants, transactional alignment and performance outcomes of franchise contract length using transaction costs theory (TCT) and resource-based theory (RBT).Design/methodology/approachThe author hypothesizes that franchisors choose contract length according to TCT and RBT arguments. TCT explains the safeguarding function of contracts: the franchisors will offer longer contracts when franchisees’ specific investments are high and environmental uncertainty is low. RBT highlights the knowledge leverage function of contracts: the franchisors will offer longer contracts when the brand name and intangible knowledge assets are high. Franchise companies that design contract length aligned with transactional attributes will perform better. The author tests the misalignment hypothesis and comparative performance of franchise contracts by estimating two-stage least squares regression and Heckman two-stage procedure that control for endogeneity and self-selection.FindingsEmpirical data from the German franchise sector support the hypotheses. In addition to the safeguarding function, franchise contracts have an important knowledge leverage function. Longer contracts perform better due to the development of relational strategic assets and stronger commitment.Research limitations/implicationsFranchisors must offer longer contracts when specific investments of franchisees, brand name, intangible knowledge assets are high, and environmental uncertainty is low. Franchisors should invest in the development of relational strategic assets and offer longer contracts for the benefit of superior performance.Originality/valueThe study addresses the significant question of transactional alignment and comparative performance of franchise contracts. It empirically confirms the importance of RBT in explaining contractual choices and performance.

CENTRALIZATION OF DECISION MAKING AUTHORITY IN INTERORGANIZATIONAL NETWORKS: EVIDENCE FROM THE AUSTRIAN AUTOMOTIVE INDUSTRY

The aim of this study is to examine the impact of p roperty rights and transaction cost variables (i.e. , intangible knowledge assets, relationship-specific investments and environmental uncertainty) on centralization o f decision making authority in the automotive networks. The th eoretical view is based on the property rights theo ry and transaction cost theory that offer a complementary perspective to the agency-theoretical explanation. The data were collected from a field survey in the Austrian automotive networks. The findings show that central ization of decision making authority in the automotive network s is related to the automaker’s and supplier’s inta ngible knowledge assets and relationship-specific investme nts as well as environmental uncertainty.

Contractibility, Strategy, and Network Dynamics: From Franchising to Licensing

The article examines the network dynamics from franchising to licensing due to the increase of contractibility of the franchiser's system-specific assets as determinant of the allocation of decision rights between the network partners. Based on the property rights approach, residual decision rights must be allocated according to the distribution of intangible knowledge assets between the franchiser and franchisee. Our analysis derives the following hypothesis: The more contractible the franchiser's system-specific assets, the higher is the tendency from franchising toward licensing. In addition, we investigate the impact of strategy change on the standardization (contractibility) of system-specific assets and the network governance. We argue that a change of strategy may increase the contractibility of system-specific know-how and consequently the tendency toward licensing. This study presents empirical evidence from company Getifix on the network dynamics from franchising to licensing.

Opening up new strategic options in the pulp and paper industry: Case biorefineries

Due to the global climate change discussion and drastic challenges within the external operational environment, many traditional pulp and paper industry (PPI) companies are forced to search for new value creating business opportunities. This paper discusses this development in the PPI and offers some illustrative examples to demonstrate the vital need for opening up new strategic options. To address these challenges, we launch a dynamic strategic framework for a PPI firm. This dynamic capabilities- and strategic options-based framework comprises of (i) sensing the weak signals of the operational environment, (ii) formulating them as strategic options in order to capture their upside potential, (iii) hedging against the downside risks of the options, (iv) exercising these options in often thin (i.e., imperfect) intangible knowledge assets markets, and (v) reconfiguring the existing knowledge base and capabilities to sustain competitive advantage obtained. The framework will be illustrated with strategic options possible for the PPI the main focus being on the interface between the PPI and energy industry by means of a forest biorefinery case.

HRD's Role in Identifying, Measuring, and Managing Knowledge Assets in the Intangible Economy

The problem and the solution. HRD's role in identifying, measuring, and managing knowledge assets in organizations is critical. Knowledge management refers to the ability of an organization to generate data, refine the data into information, and strategically use the information to make decisions.This article reviews relevant literature and demonstrates the role of HRD in identifying, measuring, and managing intangible knowledge assets in organizations. The article argues that in the 21st century, organizations are faced with tremendous challenges including financial meltdown, uncertain economy, cut-throat competition, globalized markets, economic marginalization, privatization and outsourcing of services, mergers, takeovers, rapidly advancing technology, rapid change, and generation of new knowledge.This article defines knowledge assets and examines the various forms of intellectual capital. The relevance of knowledge ratios to identifying, measuring, and managing knowledge assets in organizations is discussed.The success of tomorrow's organizations will lie in their capacity to learn, generate new knowledge, and successfully manage knowledge assets using new tools such as the balanced scorecard and the human resource scorecard.The article concludes by showing that knowledge is a new intangible asset most critical to the survival and thriving of both profit and nonprofit organizations.

Allocation of decision rights in joint ventures

AbstractPrevious studies in organizational economics and international business research have not tested a property rights view on the allocation of decision rights (DR) in joint ventures (JVs). The paper offers a test of the property rights explanation by using data from Hungarian JVs. Our analysis derives the following hypothesis: The more important the JV partner's intangible knowledge assets for the generation of residual surplus, the more residual DR are assigned to him. Copyright © 2009 John Wiley & Sons, Ltd.

Intellectual Assets & Knowledge Due Diligence

The ability of the acquirer and the acquired firm in managing new capabilities and skills following a transaction is considered to be one of the most important purchasing criteria in takeovers and mergers. Practitioners claim that M&A deals, which involve practices with strong knowledge management discipline, are better candidates for acquisition. Experience reveals that world-class organizations that are managing knowledge assets effectively increase innovation, accelerate speed to market, increase organizational competence, and improve productivity. In MA (2) screening market for acceptable growth opportunities; (3) targeting the candidates; (4) conducting due diligence investigations and post-acquisition integration planning; (5) allocating purchase price and negotiating; (6) signing and closing; and notably (7) implementing and finalizing post-merger integration. In our contribution, we will provide insight on the importance of intellectual capital in inorganic growth. Among other due diligence investigations, we argue that knowledge management due diligence audit is supposed to explain the relationship between (1) intangible knowledge assets (including the related processes, technologies and organisational culture) and (2) inorganic business growth through mergers and acquisitions.

Intellectual Property Rights - The New Wealth of Knowledge Economy: An Indian Perspective

Intellectual Property, in its literal sense means the things that originate from human brain. This creation of human mind or Intellectual Property is considered to be the most invaluable assets, when compared to movable or immovable property, in knowledge based industries. The industries that have knowledge as its core resource and where the profits are generated mainly through the commercialization of new ideas and innovations are categorized as knowledge industries. The emphasis is not on physical or tangible assets but on intangible knowledge assets. The value of Intellectual Assets determines the rank and competitiveness of the corporate organizations. Wealth generation through creation, production, distribution and consumption of knowledge and knowledge based products are the key characteristics of knowledge economy. The major growth industries such as micro-electronics, biotechnology and telecommunications are 'brain power' industries. These knowledge industries stimulate other industries in turn to become knowledge based. Until recently capital was a scarce commodity. With rapid globalization and easy access to international finance, capital is no longer scarce. It is the Intellectual Assets that are knowledge based, non-replicable, unique and proprietary are increasingly becoming scarce. World Intellectual Property Organization (WIPO) and World Trade Organization (WTO) are the key organizations at international level which sets standards, frames rules and regulations and acts as enforcers of Intellectual Property Rights (IPRs). The role of WTO is distinct from that of WIPO in respect of enforcement. The strong protection system for Intellectual Property Rights advocated by the WTO has enhanced the value of Intellectual Property Assets in the corporate balance sheet, though hidden hitherto. India is a founder member of GATT and therefore enjoys the same status in WTO also. India had necessary legislations to protect the IPRs even before the advent of TRIPS. India is emerging as the hub of 'knowledge economy' in South Asia. India has proved her strength in Information Technology. The Bio-technology and Pharmaceutical industry are considered to be the next avenues of proving the Knowledge Prowess of India. These industries are attempting to quantify their Intellectual Assets - comprising mostly of Intellectual Property, to enhance their performance. Some Information Technology and Pharmaceutical companies have explicitly valued their portfolio of Intellectual Assets, by appending to their financial statements. The Indian Accounting Standards are also being reformed, to accommodate the value of Intellectual Property in the Accounting Statements.

The impact of firm participation in R&D programmes on R&D partnerships

R&D subsidies designed to encourage innovation efforts by firms may have intended and unintended effects on the way they organize their innovation process. We present empirical evidence on how R&D subsidies affect firms’ R&D cooperation strategies. In particular, we investigate whether receiving public R&D subsidies affect the probability that a firm will set up an R&D partnership with a public research organization (PRO), or with other firms. Our main findings are: (i) public support significantly increases the chances that a firm will cooperate with a PRO, and (ii) public support also increases the likelihood that a firm will establish private partnerships, but to a smaller extent and only when firms have intangible knowledge assets. These results suggest that public R&D programmes trigger a behavioural change in firms’ R&D partnerships, alleviating barriers to cooperation.

Knowledge management capability: defining knowledge assets

PurposeThe purpose of this paper is to show that separate sources of knowledge are identified, described and clearly defined as organizational intangible knowledge assets. These knowledge assets are referred to as knowledge capabilities (KCs). knowledge management (KM) is utilized to leverage these assets with a view to systematic improvement in the process of achieving increased firm performance.Design/methodology/approachIn this paper knowledge capabilities are described in terms of their knowledge life cycle, tacit/implicit/explicit nature of knowledge, technology and organizational processes that encompass a firm's human capital identified as knowledge workers.FindingsThe paper finds that five knowledge capability are presented and described as expertise, lessons learned, policies and procedures, data and knowledge documents.Research limitations/implicationsThe paper shows that knowledge assets can be measured and improved in order to investigate causal relationships with identified measures of performance.Practical implicationsThe paper shows that by explicitly describing these knowledge assets, the KM activities within organizations can more effectively leverage knowledge and improve performance.Originality/valueThe paper sees that by drawing from both resource based and organizational learning literature, a knowledge management framework is presented to describe distinctly separate sources of knowledge within organizations. These knowledge sources are constructed as knowledge capabilities that can allow the assessment of organizational knowledge assets.

Structuring residual income and decision rights under internal governance: results from the Hungarian trucking industry

The paper offers a property rights and monitoring cost explanation for the allocation of residual income and decision rights between the carriers and truck drivers under internal governance. First, by applying the property rights theory, we argue that the structure of residual income rights depends on the importance of noncontractible (intangible) assets of the truck driver to generate residual surplus. The more important the truck driver's intangible knowledge assets, the more residual income rights should be transferred to him. Second, we controlled for the monitoring costs as an additional explanatory variable of the allocation of residual income rights. According to agency theory, the variable proportion of the driver's income should be higher where monitoring costs are higher. Third, we investigate the relationship between residual income and residual decision rights under internal governance. If the contractual relation is governed by an employment contract, residual decision and residual income rights may be substitutes because, under fiat, a certain incentive effect of the governance structure may result either from the allocation of high-powered incentives or the transfer of residual decision rights to the driver. These hypotheses were tested by using data from the Hungarian trucking industry. The data provide partial support for the hypotheses. Copyright © 2005 John Wiley & Sons, Ltd.

Centralization of franchising networks: evidence from the Austrian franchise sector

Based on the property rights approach, residual decision rights in franchising networks must be allocated according to the distribution of intangible knowledge assets between the franchisor and franchisee. Our analysis follows from this hypothesis: the more important the franchisor's system-specific assets for the generation of residual surplus, the more residual decision rights are assigned to the franchisor, and the higher is the degree of centralization of the franchising network. This property rights hypothesis is tested in the Austrian franchise sector. The results of the study suggest that the franchisor's intangible system-specific know-how and brand name assets have a stronger influence on the allocation of residual decision rights in the franchising network than the franchisee's intangible local market assets.

Allocation of Decision and Ownership Rights in Franchise Relationships

In this paper we examine the allocation of decision and ownership rights in franchise relationships. By applying the property rights approach decision rights must be allocated according to the distribution of intangible knowledge assets (know-how) between the franchisor and franchisee, and ownership rights must be assigned to those who have the residual rights of control (residual decision rights). Consequently an efficient channel structure requires colocation of knowledge and decision rights and complementarity between decision and ownership rights to maximize the value of the franchisor's and franchisee's knowledge assets. Our property rights analysis derives two hypotheses concerning the decision and ownership structure in franchise relationships which are tested in the Austrian franchise sector. This study presents the first empirical evidence that the property rights structure of franchising is characterized by colocation of knowledge assets and decision rights and complementarity between decision and ownership rights.