The political economy of a Soviet military R&D failure : steam power for aviation, 1932 to 1939

By studying a Soviet R&D failure, the prewar attempt to create a new aeroengine technology based on the steam turbine, we find out more about the motivations, strategies, and payoffs of principals and agents in the Soviet command economy. Alternative approaches to the evaluation of R&D failure are outlined. New archival documentation shows the scale and scope of the Soviet R&D effort in this field. The allocation of R&D resources resulted from agents’ horizontal interactions within a vertical command hierarchy. Project funding was determined in a context of biased information, adverse selection, and agents’ rent seeking. Funding was rationed across projects and through time. Budget constraints on individual projects were softened in the presence of sunk costs, but were hardened periodically. There is no evidence that rents were intentionally distributed through the Soviet military R&D system to win trust or reward loyalty; the termination of aviation steam power R&D in 1939 despite the sunk costs they represented was timely

Financing constraints for industrial innovation: What do we know?.

This article provides an overview of the most important insights from economic literature on private investment into research and development activity and how it may be constrained by market failure. The focus is on implications from empirical studies for the identification of financially constrained firms with respect to their innovative activities. The empirical evidence for incentive and financing problems for private sector investment in innovation projects has provided ground for governmental interventions to prevent welfare reducing underinvestment in innovation. However, the survey of the literature shows that designing efficient policy schemes is not straightforward as government funds are scarce, and the impact of financial constraints on investment may differ substantially across firms, types of R&D projects and the organization of financial markets in different countries.Innovation; R&D; Financial Constraints; Innovation Policy;

Managerial ownership, entrenchment and innovation

Principle-agent theory suggests managers might under-invest into R&D for reasons of risk tied to project failure, such as reduced remuneration and job loss. However, managers might over-invest into innovation for reasons of growth implying higher remuneration, power and prestige. Using a sample of 1,406 Belgian firms, we find, first, that managers holding no company shares under-invest into R&D compared to owners giving rise to the risk argument. Second, we find an inverse u-shaped relationship between the degree of managerial ownership and R&D. Thus, managers become entrenched, i.e. powerful enough to pursue their own interests. When entrenched, managers do not fear detrimental effects of risky innovation projects on their career, and hence tend to over-invest into innovation. --corporate governance,managerial ownership,entrenchment,innovation,R&D investments

The Value of Failures in Pharmaceutical R&D

We build a cumulative innovation model in which both success and failure provide valuable information for future research. To test this learning mechanism, we use a dataset covering outcomes of world-wide R&D projects in the pharmaceutical industry, and proxy knowledge flows with forward citations received by patents associated with each project. Empirical results confirm theoretical predictions that patents associated with successfully completed projects (i.e., leading to drug launch on the market) receive more citations than those associated to failed (terminated) projects, which in turn are cited more often than patents lacking clinical or preclinical information. We therefore offer evidence of the value of failures as research inputs in (pharmaceutical) innovationR&D competition, patent policy, pharmaceutical industry

Managerial ownership, entrenchment and innovation.

Principle-agent theory suggests managers might under-invest into R&D for reasons of risk tied to project failure, such as reduced remuneration and job loss. However, managers might over-invest into innovation for reasons of growth implying higher remuneration, power and prestige. Using a sample of 1,406 Belgian firms, we find, first, that managers holding no company shares under-invest into R&D compared to owners giving rise to the risk argument. Second, we find an inverse u-shaped relationship between the degree of managerial ownership and R&D. Thus, managers become entrenched, i.e. powerful enough to pursue their own interests. When entrenched, managers do not fear detrimental effects of risky innovation projects on their career, and hence tend to over-invest into innovation.corporate governance; managerial ownership; entrenchment; innovation; R&D investments;

Collaboration and organisational learning: A study of a New Zealand collaborative research programme

Collaboration with a research partner is one strategy that small and medium sized enterprises (SMEs) can pursue to counter their size-imposed research and development (R&D) resource and capacity constraints and to enhance their learning. The Technology for Business Growth (TBG) programme supports collaborative R&D projects between New Zealand industry and research institutions. This research attempted to gauge the effects of participation in a collaborative project on broader aspects of organisational learning, on the industry managers' subsequent attitudes towards R&D, as well as managers' perceptions of success and failure factors for collaboration. The majority of managers stated that their attitude to R&D had not changed (it was already positive prior to the project). However, their organisation's attitude towards the management of R&D projects had often changed, with many companies adopting the practices of project evaluation and planning enforced by the TBG application process, thus providing considerable evidence that organisational learning had taken place. Objective measures of subsequent R&D activity, such as increased spending on, and number of, R&D projects and increased employment of technical staff provide further evidence that the companies' learning experiences with collaborative projects may have encouraged them to invest more readily in R&D

The Value of Failures in Pharmaceutical R&D

We build a cumulative innovation model in which both success and failure provide valuable information for future research. To test this learning mechanism, we use a dataset covering outcomes of world-wide R&D projects in the pharmaceutical industry, and proxy knowledge flows with forward citations received by patents associated with each project. Empirical results confirm theoretical predictions that patents associated with successfully completed projects (i.e., leading to drug launch on the market) receive more citations than those associated to failed (terminated) projects, which in turn are cited more often than patents lacking clinical or preclinical information. We therefore offer evidence of the value of failures as research inputs in (pharmaceutical) innovation

International R&D cooperation: the perceptions of SMEs and Intermediaries

Despite the large number of studies on Research and Development (R&D) cooperation, this is, in general, focused on the firms’ perceptions, neglecting the perception of the R&D Intermediary (e.g., universities, technology centres, R&D institutes, intellectual property supporting offices). Moreover, cooperation has been analyzed on a national perspective with cooperation projects in R&D involving entities from different countries being rarely studied. In the present paper we gathered empirical evidence on the motivation, obstacles and outcomes of international R&D cooperation projects based on the perceptions from both firms and intermediaries. Resorting to an unique database that includes 473 R&D international cooperation projects, developed within the 6th Framework Programme, we demonstrate that the heterogeneity is quite large as far as the motivations are concerned for the international R&D cooperation. This high heterogeneity might explain the high failure rate of R&D partnerships, namely the ones involving firms and universities. Not losing sight of the necessary enhancement of the scientific and knowledge basis, essential for the technological progress of nations, evidence gathered seem to advise an attitude on behalf of Intermediaries more focused on firms’ intended results.international R&D cooperation, Intermediaries, firms

Risk Management In Research And Development (R&d) Projects: The Case Of South Australia

A definition of the effective methods of risk management in R&D projects has remained elusive. Similarly, there have been calls to devise effective risk management methods in R&D projects. To develop this area further, the purpose of this study is twofold. First, it validates the veracity of claims about the urgency of introducing effective methods of risk management to R&D projects in South Australia based on nine unstructured interviews with experts. Second, the study presents the outcomes of two case studies that deployed the extended version of the failure mode and effect analysis, namely, the RFMEA method in a South Australian organisation, to investigate how the method can facilitate the identification of effective contingency plans to mitigate high-priority risks. The findings showed that the RFMEA method would be effective for project managers in dealing with risk management issues in R&D projects. The discussions presented will provide guidelines for practitioners in the industry

Innovation Performance and Government Financing

External financing is important when inventors and small technology-based firms wish to commercialize their inventions. However, it is likely that problems related to adverse selection and moral hazard are present, and market failures occur, since inventors know more about the inventions than do potential external financiers. To overcome these problems, the Swedish Government has intervened in the market by offering loans with different terms to firms and inventors. Using a unique database on Swedish patents owned by individuals and small firms, this paper analyzes how different forms of external financing influence the outcome when patents are commercialized. The estimations show that projects with soft government financing in the R&D-phase have a significantly worse performance than projects without such financing, whereas projects with more market-oriented government loans perform as the average. Distinguishing between governmental financing alternatives with different terms makes it possible to draw the conclusion that government failure primarily depends on bad financing terms, rather than bad choices of projects. A policy implication is therefore that government institutions should make their loans more market-oriented already in the R&D-phase.Patents; Commercialization; Innovations; Outcome; External Financing; Government Intervention