| Innovating against European rigidities: Institutional Environment and Dynamic capabilities |
| | Delmas, Magali A. | U. of California, Santa Barbara | delmas@bren.ucsb.edu | (805) 893-7185 |
| | European firms are confronted to the paradox of a strong R&D in many areas, but a low level of innovation as compared to their main competitors. Using European micro-data on how managers perceive factors hampering innovation, the purpose of this paper is to demonstrate that the risk-averse attitude of European firms and their difficulty to develop dynamic capabilities explains the weakness of European innovation. Specific attention is given to institutional factors, and in particular to pervasive rigidities and distortions that hamper the functioning of markets, increase costs, and prevent innovative responses.
The use of manager’s perceptions seems particularly well suited in the context of innovation where choices are taken with limited information. I find strong support that innovation is linked to the perceptions of the Institutional environment and the organization of competencies internally and between firms. Managers will direct their strategies toward innovation in an environment that provides them with access to complementary assets. Conclusions drawn from this perspective call for policies that will take into account the system in which innovation can take place.
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| | Keywords: Innovation; Policy; Europe |
| The Effect of Patenting on Liquidity: An Examination of US Pharmaceutical Firms |
| | Levitas, Edward F. | U. of Wisconsin, Milwaukee | levitas@uwm.edu | (414) 229-6825 |
| | Martinez, Richard J. | Baylor U. | rick_martinez@baylor.edu | (254) 710-6184 |
| | Much current organizational research views patenting as a firm's attempt at achieving a quasi-monopoly.
However, that fact that the costs of patenting are large, and that few patented inventions are subsequently transformed into marketable
products gives one cause to believe that there are additional reasons as to why a firm pursues patents.
We hypothesize that one motivation companies have to patent is to maintain short-term financial liquidity. Patenting activity can provide
a signal to capital markets, employees, and factor suppliers that the patenting firm has the potential to produce valuable products.
Such signals can reduce the costs of capital, labor, and supply procurement, thereby increasing liquidity. However, we suggest that the
effectiveness of this strategy is limited. Beyond a certain volume of patenting, liquidity decreases with increasing numbers of patents as
outsiders desire less exploration (i.e., patenting). Tests of this theory on a sample of US pharmaceutical firms confirms our hypothesis.
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| | Keywords: Liquidity; Patents; Pharmaceuticals |
| The Effect of Patent Systems on Firm Innovation: Evidence from the 1988 Japanese Patent Law Reforms |
| | Sakakibara, Mariko | U. of California, Los Angeles | mariko.sakakibara@anderson.ucla.edu | (310)-825-7831 |
| | Branstetter, Lee | U. of California, Davis | branstet@ucdavis.edu | (530)-752-3033 |
| | Does an expansion of patent scope induce more innovative effort by firms? This article provides evidence for this question by analyzing both interviews with practitioners and micro-level data. We show that the 1988 patent reforms in Japan expanded the scope of patent protection, as defined by the theoretical literature on patent design, based on interviews with practitioners. Interview results also suggest that organizational setting has an effect on firms’ response to changes in patent systems. Empirically analyzing data of 307 Japanese firms during the period 1980 to 1994, we find that this expansion of patent scope did indeed induce additional R&D effort by Japanese firms. However, the magnitude of the induced increase in R&D spending, while statistically significant and robust, was quite small in economic terms. We also examine whether or not this increase in R&D spending resulted in additional innovative output by examining firm patenting in the U.S. and Japan. We find evidence consistent with the hypothesis that innovative output increased. However, again, the magnitude of the induced effect is quite modest. Taken together, the empirical evidence suggests that firm responsiveness to even major changes in patent design is limited. |
| | Keywords: Patent system; Innovation; Patent scope |
| Organizing for Technological Innovation: The Impact of Geographic Centralization |
| | Chacar, Aya S. | London Business School | achacar@lbs.ac.uk | 44-171-262-5050 |
| | Numerous authors have pinpointed geography as a crucial factor behind superior performance and have lamented the little attention it has been given in management studies. More specifically, the organization of R&D in geographic space has been identified as an important but neglected determinent of innovative performance. Two polars of geographic organization of R&D have been mentioned in the literature, geographic decentralization and geographic centralization, defined as the lack of geographic dispersion of R&D laboratories, or their relative concentration in the few geographic locations. However, while some authors have lauded the benefits of geographic centralization, others have simply argued that decentralization is the preferred organization mode.
This 'academic confusion' as to the preferred mode of organization seems to be mirrored by 'practitioners' confusion'. Companies are reorganizing their R&D labs in geographic space, at very large costs, in an effort to arrive at an optimal organization design. Since 1986 for example, Bristol Myers and Beyer each merged into a single location their labs that were scattered around the US, while other companies such as Merck have been founding new labs in new geographic locations.
This paper posits that, considering the rarity and value of know-how, the dominent factor driving geographic organization is the need to use internal efficiently and maximize external know-how flows into the firm. Organization will fundamentally depend on whether external or internal know-how is more valuable.
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| | Keywords: Innovation; Centralization; Know-How |