Research-intensive Industries Research Articles

INNOVATION, PATENTS AND ECONOMIC GROWTH

Empirical evidence demonstrates the value of intellectual property (IP) in creating economic growth, enhancing productivity and profitability, and increasing enterprise value. Research and Development (R&D) intensive industries, such as the life sciences, where patents are critical to competition, need an enabling environment to institutionalise innovation and IP generation and reward investments in IP. The US has approached IP strategically and created an IP infrastructure. Japan aims to develop into an "IP nation". China has an increasingly well-developed IP system. In contrast, the European Union (EU), which aims to become the world's leading knowledge-based economy, has a fragmented and expensive system of national patents. It lacks an environment which values investment in IP generation and management. Until recently, the EU enjoyed global competitive advantage in the life sciences, but this advantage has been lost. To regain this competitive advantage the EU must invest substantially in R&D, IP generation and commercialisation of these outputs.

A maturing industry: Strategic patenting trends, US and academic dominance, and the global biotechnology landscape

Patent analytical data has proved itself a key enabler in measuring the commercial focus and activity taking place within highly research and development (R&D) intensive industries such as biotechnology. Marks & Clerk has assessed biotechnology patent application and grant records from a range of international patent office and proprietary databases, with a view to gauging the industry's commitment to R&D and the particular areas of biotechnology that are attracting investment. Using this research, this paper seeks to provide a snapshot as to the current ‘state of play’ across the biotechnology sector, looking at strategic trends, technological focus and industry dominance. It also seeks to analyse indicators as to the future commercial development of the industry.

Debt, R&D investment and technological progress: A panel study of Japanese manufacturing firms' behavior during the 1990s

Based on a panel data set of Japanese manufacturing firms in research-intensive industries, we investigate quantitatively the extent to which outstanding debt affected firms' R&D activities during the 1990s. We find that massive amounts of outstanding debt had a significant, negative effect on R&D investment during that time. We also find that R&D expenditures were closely linked to firm-level total factor productivity growth over the same period. In fact, a ten-percentage-point increase in the debt–asset ratio lowered the rate of firm-level total factor productivity growth by 0.26 percentage points between 1999 and 2001, because it reduced R&D activities. J. Japanese Int. Economies 21 (4) (2007) 403–423.

Institutional Investors and Private Equity*

Entrepreneurial finance literature has highlighted that institutional investors are the main contributors to private equity funds. This paper complements these findings by documenting that institutional investors also invest directly in private equity. A major concern for such investments is the higher agency costs associated with private equity. We show that institutions invest in private firms with governance mechanisms that tend to reduce the expected agency costs and risk of minority expropriation. Good governance mechanisms further allow institutional investors to enjoy the benefits of syndication and thereby reduce idiosyncratic risk. In addition, we show that institutional investments tend to be followed by further improvements in corporate governance and tend to occur in high-growth firms within research and development intensive industries. Copyright 2008, Oxford University Press.

Mergers and acquisitions of German biotechnology startups

In research-intensive high-technology industries, it is often impossible for startup managers to build up internally all resources necessary for a successful company development. Hence, startups enter into strategic alliances with other companies or into mergers and acquisitions (M&As). Whereas alliances of startups are well studied in the literature, work on M&As mostly focuses on large corporations, but neglects deals between small entrepreneurial firms. In this exploratory study, we analyse six M&A cases of German biotechnology startups. We illustrate specific motives, benefits and problems associated with these deals. Our findings have implications for start-up managers and the future development of the German biotech industry.

Metropolisation of the European Economic Territory as a Consequence of Increasing Specialisation of Urban Agglomerations in the Knowledge Economy

The development of Europe's economic territory today can be characterised as a process of metropolisation of economic development potentials and innovation capacities. “Metropolisation” is a paraphrase for the selective concentration of research-intensive industries and knowledge-intensive services on metropolitan regions and major urban agglomerations. On this basis the metropolitan regions and urban agglomerations are functioning as the “motors” of the European economy. In this article the metropolisation of the European economic territory is being analysed with regard to the increasing specialisation of Europe's major urban regions on knowledge-intensive economic activities. Particular emphasis is being put on the different sectoral profiles and development paths of the European urban agglomerations' and metropolitan regions' knowledge-intensive economy. The result of this analysis is a differentiated representation of the developmental dynamics in the European Union urban system which allows to overcome simplifying general trend descriptions as for example the structural change of urban regions towards becoming “service centres”.

Debt, R&D Investment and Technological Progress: A Panel Study of Japanese Manufacturing Firms in the 90s

Based on a panel data set of Japanese manufacturing firms in research-intensive industries, we investigate quantitatively the extent to which debt outstandings in the 90s affected the firm's R&D activities. We find that massive debt outstandings had significantly negative effect on R&D investment in the 90s. We also find that investment on R&D was closely linked to the firm-level total factor productivity growth in the 90s. In fact, ten-percentage-point increase of debt-asset ratio lowered the firm-level total factor productivity growth rate by 0.72 percentage point for 1999-2001 by way of withering R&D activities.

Unternehmenskooperationen als Folge von Informations- und Kommunikations-technologieveränderungen: Eine theoretische Analyse

The number of inter-firm collaborations of complementary partners in research intensive industries is increasing. It is not sufficient to explain this development by technological advances in information technology within the theoretical framework of transaction cost economics. An incomplete contract analysis shows that only if the technological advances increase the transferability of both, the deployed knowledge and assets, will this lead towards more collaborations. If the result is an increasing transferability of knowledge and a decreasing transferability of assets will the overall effect remain unclear. If collaborations are motivated by the aim to overcome resource constraints and not by an increase in transferability, will the collaboration be terminated as soon as the resource constraints are overcome.

Technology development and acquisition strategy

There are various modes with which research-intensive firms can develop or acquire technologies, including internal R&D, technology licensing, cooperative R&D, minority investments in other firms, and acquisitions of other firms. This paper attempts to present a model that explains the key determinants of technology development and acquisition modes. It is theorised that time pressure and the strategic importance of the technology are the key factors that affect technology development and acquisition modes. In addition, a firm needs to consider the availability of an alliance partner or an acquisition target as well as internal resources including capital or the price of its own equity, and internal R&D capability. It is also suggested that as the strategic importance of the technology or time pressure to develop or acquire such technology changes, a firm needs to shift technology acquisition modes. Thus, the presented model incorporates the dynamic nature of competition in research-intensive industries.

Institutional Investors and Private Equity

The entrepreneurial finance literature has highlighted that institutional investors are the main contributors to private equity funds. This paper complements these findings by documenting that institutional investors also invest directly in private equity. A major concern for such investments is the higher agency costs associated with private equity. We show that institutions invest in private firms with governance mechanisms that tend to reduce the expected agency costs and risk of minority expropriation. Good governance mechanisms further allow institutional investors to enjoy the benefits of syndication and thereby reduce idiosyncratic risk. In addition, we show that institutional investments tend to be followed by further improvements in corporate governance and tend to occur in high-growth firms within research and development intensive industries.

Knowledge Seeking and Location Choice of Foreign Direct Investment in the United States

To what extent do firms go abroad to access technology available in other locations? This paper examines whether and when state technical capabilities attract foreign investment in manufacturing from 1987-1993. We find that on average state R&D intensity does not attract foreign direct investment. Most investing firms are in lower-tech industries and locate in low R&D intensity states, suggesting little interest in state technical capabilities. In contrast, we find that firms in research-intensive industries are more likely to locate in states with high R&D intensity. Foreign firms in the pharmaceutical industry value state R&D intensity the most, at a level twice that of firms in the semiconductor industry, and four times that of electronics firms. Interestingly, not only firms from technically lagging nations, but also some firms from technically leading nations are attracted to R&D intensive states. This suggests that beyond catching up, firms use knowledge-seeking investments also to source technical diversity.

Intersectoral and International R&D Knowledge Spillovers and Total Factor Productivity

Disaggregate panel data estimates are presented of equations that relate a set of OECD countries’ sectoral total factor productivity to domestic and to foreign R&D capital. The estimates indicate that there are both important international and national R&D knowledge spillovers and that these spillovers are intersectoral and intrasectoral in nature. They show that the influence of domestic R&D is stronger in the large economies and that this is caused by more important domestic intersectoral R&D spillovers. There is also evidence of a greater influence of domestic and of foreign R&D in research intensive industries and of an interaction between the domestic economy scale and the research intensity effects.

Patterns of Innovation in UK Industry: Exploring the CIS Data to Contrast High and Low Technology Industries

This paper is divided into two parts. The first part is an examination of the OECD classification of industries into high, medium and low technology industries, to look at the basis for this classification and to use that as a benchmark with which to classify the Community Innovation Survey (CIS) data for the UK into similar groupings. The industries are ranked according to their research intensities and the rankings between the two datasets are compared. Some features of the UK rankings are highlighted and anomalies between the two datasets pointed out. The second part of the paper goes on to use the OECD classification into high, medium and low technology industries, applied to the CIS dataset, to contrast patterns of innovation in high technology industries with those in low technology industries. We build on the three types of innovation surveyed in the CIS, namely product, process and organizational innovation and contrast those types across high and low technology sectors. The expected relationship between high technology industries and product innovation holds—that enterprises tend to do more product innovation, the higher their research intensity. But process innovation does not conform to this pattern and there is not such a clear division between high and low technology industries. However the way they do process innovations differs with high technology industries more reliant on internal resources whereas lower technology industries tend to do it using external resources in collaboration with others. Organizational innovation is more complex, with certain types of innovation done as widely by lower technology industries as by the more research intensive industries. This supports the idea that all types of innovation should be considered, with the diffusion of ICTs making an impact across the technological spectrum of industries and showing up in various forms of organizational innovation.

Real options in equity partnerships

AbstractWe examine factors influencing the decision to acquire additional equity in partner firms in research‐intensive industries. This decision involves choosing between flexibility and commitment. Option theory motivates hypotheses regarding the effects of uncertainty, valuation of developing technologies, and the threat of preemptive rivalry. Our main hypothesis is that the resolution of uncertainty for high‐value technologies motivates commitment decisions. We also argue that when the underlying growth option is at risk of preemption by rivals, greater uncertainty encourages commitment. An event history model tests these hypotheses using data from minority investments in the biotechnology industry. Copyright © 2002 John Wiley & Sons, Ltd.

The Innovation Potential and Thematic Leadership of Austrian Industries: An Interpretation of the Technology Delphi with Regard to the Old Structures/High-performance Paradox

The Austrian Technology Delphi searched for problem-oriented fieldsof potential leadership of Austrian scientists and firms. This study classifies the Delphi results according to standard industry classifications in order to facilitate their use by industrial economists and to propose an explanation of the old structures/high performance paradox. It reveals that expertsawarded the top marks for innovativeness to low- and high-qualification as well as to mainstream and research intensive industries, not to medium qualification and to marketing and labour-intensive ones. This implies that innovation is by no means restricted to high-tech industries and that the standard industry classifications are not well suited to deal with aspects of technology policy. Old structures need not hinder high performance.

The Development of Sweden's R&D-Intensive Electronics Industries: Exports, Outsourcing, and Territorial Distribution

Sweden's research-intensive electronics industries have thrived by developing export-market niches that rely greatly on continuous innovation and substantial expenditures in R&D. Over the past two decades, three R&D-intensive sectors (telecommunications equipment, electronic instruments, and computing-equipment manufacturing) have experienced a progressive territorial distribution, that has made them less reliant on the metropolitan concentration of the capital for their outsourcing and research arrangements. In this article we explore the relationship between R&D intensity, territorial distribution, subcontracting, and establishment performance in the R&D-intensive electronics industries. The export performance of these industries is considered first, along with its relationship with employment characteristics and territorial location. An analysis of the territorial distribution, and its relationship with establishment downsizing and subcontracting, provides insights on the significance of lower costs and higher R&D intensity for small-scale operations. Statistical analyses of R&D intensity and performance variables that include labour skills, plant size, production costs, fixed capital assets, and profitability, with establishment-level survey data, provide important insights on the effects of subcontracting and any spatial differences resulting thereof.

Industry urged to boost investment in R&D

To safeguard the nation's future, U.S. government spending on basic research should be maintained at 1% of gross domestic product (GDP). And the private sector's investment in R&D should increase to 2.0% of GDP from its current level of 1.6%. That's the thrust of Future of America's Research-Intensive Industries, a report prepared by the Menlo Park, Calif.-based Institute for the Future (IFTF). The report was released last week at a press conference on Capitol Hill. A host of eminent industrial, academic, and federal government figures were on hand to give it their approval. The report is the result of a year-and-a-half-long study funded by 23 major pharmaceutical companies. It was prepared by IFTF personnel working with a task force of 16 senior executives from the computer, pharmaceutical, software, semiconductor, electronic components, scientific instrument, communications, aerospace, and chemical industries. This groundbreaking study should jolt us as a nation out of our current state of ...

The Role of Acquisitions in Foreign Direct Investment: Evidence from the U.S. Stock Market

ABSTRACTThis paper examines foreign direct investment by studying shareholder wealth gains for 1273 U.S. firms acquired during the period 1970‐1987. Three findings stand out. First, cross‐border takeovers are more frequent in research and development intensive industries than are domestic acquisitions; furthermore, in three‐fourths of cross‐border transactions the buyer and seller are in related industries. These industry patterns suggest that costs and imperfections in product markets play an important role in foreign direct investment. Second, targets of foreign buyers have significantly higher wealth gains than do targets of U.S. firms. This cross‐border effect is comparable in size to the wealth effects of all‐cash and multiple bids, two effects receiving substantial attention in the finance literature, and is robust to inclusion of these two variables. Third, while the cross‐border effect on wealth gains is not well explained by industry and tax variables, it is positively related to the weakness of the U.S. dollar, indicating a significant role for exchange rate movements in foreign direct investment.

Institutional Holdings and Corporate R&D Intensity in Research Intensive Industries.

This paper examines the relationship between R&D spending and institutional ownership for firms based in five industries. Contrary to the view that institutional investors are having a damaging affect on R&D spending, the results suggest that higher levels of institutional ownership are associated with greater R&D expenditures.

Industry and Competitive Effects on the Choice of Entry Mode.

Entry by foreign firms into the United States is examined for 506 ventures between 1981 and 1985. Joint venture as an entry mode is favored over acquisition for research-intensive industries, while...