Drivers and Effects of Internationalising Innovation by SMEs

This paper investigates the drivers and effects of the internationalisation of innovation activities in SMEs based on a large data set of German firms covering the period 2002-2007. We look at different stages of the innovation process (R&D, design, production and sales of new products, and implementation of new processes) and explore the role of internal resources, home market competition and innovationrelated location advantages for an SME's decision to engage in innovation activities abroad. By linking international innovation activities to firm growth in the home market we try to identify likely internationalisation effects at the firm level. The results show that export experience and experience in knowledge protection are highly important for international innovation activities of SMEs. Fierce home market competition turns out to be rather an obstacle than a driver. High innovation costs stimulate internationalisation of non-R&D innovation activities, and shortage of qualified labour expels production of new products. R&D activities abroad and exports of new products spur firm growth in the home market while there are no negative effects on home market growth from shifting production of new products abroad. --Internationalisation of Innovation,Globalisation,SMEs,Effects of Innovation,Absorptive Capacities,Market Structure

The contribution of international R&D to firm profitability

The internationalisation of corporate R&D opens up the chances to participate in international knowledge sharing. This increasingly motivates firms to accelerate the pace and extent of their international R&D activities in order to enhance innovativeness and consequently competitiveness and profitability. Such business ventures, however, might be associated with huge organizational costs as well as risks of outgoing knowledge spillovers. In this paper we empirically address the question whether international R&D activities boost profitability. We employ a large data set of about 1300 firms from the German Community Innovation Survey (CIS). The empirical results demonstrate that R&D location matters for profitability. Firms with both domestic and foreign R&D activities make significantly higher profits than all other firms, including those that carry out solely domestic R&D. We furthermore ascertain that the degree of R&D internationalisation affects profitability. Our findings suggest that medium decentralised firms which innovate in two or three foreign countries outperform firms with centralized or highly decentralized international R&D strategies. Notwithstanding, decentralized firms achieve a higher firm performance than firms that solely conduct R&D activities in their home country. --R&D,Innovation,Internationalisation,Firm performance,Profit

Drivers and Effects of Internationalising Innovation by SMEs

This paper investigates the drivers and the effects of the internationalisation of innovation activities in SMEs based on a large data set of German firms covering the period 2002-2007. We look at different stages of the innovation process (R&D, design, production and sales of new products, and implementation of new processes) and explore the role of internal resources, home market competition and innovationrelated location advantages for an SME's decision to engage in innovation activities abroad. By linking international innovation activities to firm growth in the home market we try to identify likely internationalisation effects at the firm level. The results show that export experience and experience in knowledge protection are highly important for international innovation activities of SMEs. Fierce home market competition turns out to be rather an obstacle than a driver. High innovation costs stimulate internationalisation of non-R&D innovation activities, and shortage of qualified labour expels production of new products. R&D activities abroad and exports of new products spur firm growth in the home market while there are no negative effects on home market growth from shifting production of new products abroad. --Internationalisation of Innovation,Globalisation,SMEs,Effects of Innovation,Absorptive Capacities,Market Structure

Internationalizing R&D Co-opetition: Dress for the Dance with the Devil

Competitors can be valuable sources and partners for innovation activities. Against the background of international expansion of firms and increased international competition, the R&D collaborations with international competitors (international co-opetition) is becoming an increasingly interesting way to gain access to well guarded knowledge from abroad. However, to be able to benefit from these paradox alliances, a certain level of international co-opetition readiness is required. On the one hand, this readiness is important to protect the companies’ intellectual property that should not be leaked to competitors. On the other hand, the firm has to be able to absorb and utilize the knowledge and capabilities of the collaborating competitor. Hence, we envision co-opetition as a balancing act between appropriability practices and absorptive capacities in a cross-border context. We test these dual hypotheses for a broad sample of roughly 1,000 innovative firms in the German manufacturing sector. We find that co-opetition with international competitors requires a shift in appropriability practices from informal methods (secrecy, lead time) towards formal ones (like patents and copyrights). Besides, we discover that the readiness for international co-opetition can be achieved by developing international collaboration experience through collaborations with international customers or suppliers

The influence of international dispersed vs. home-based R&D on innovation performance

Recent years have shown a surge of firms globalising their innovation activities in order to gain from international knowledge. This paper evaluates this strategy by investigating whether firms with international R&D are more innovative than firms doing R&D only in their home country. One main novelty is that we shed light on two competing hypotheses whether stronger dispersed international R&D activities hamper or stimulate innovation. Second, we employ two well-established market-based indicators for innovation (introduction of and sales growth rates due to new products) instead of looking at inventions (patents). Using German CIS data for about 2100 firms, the econometric results show that firms with international R&D are more likely to launch new products (firm and market novelties) than firms with home-based R&D only. They are also more successful in terms of higher sales growth with firm novelties. However, given the introduction of a market novelty, the location of R&D doesn’t matter for the sales growth with market novelties. The results concerning the degree of R&D internationalisation are mixed: The likelihood of introducing firm novelties increases with a stronger dispersion of foreign R&D activities (for market novelties only up to a specific point). The relationship between degree of R&D internationalisation and innovation success turns out to be inverse u-shaped

The Contribution of international R&D to firm profitability

The internationalisation of corporate R&D opens up the chances to participate in international knowledge sharing. This increasingly motivates firms to accelerate the pace and extent of their international R&D activities in order to enhance innovativeness and consequently competitiveness and profitability. Such business ventures, however, might be associated with huge organizational costs as well as risks of outgoing knowledge spillovers. In this paper we empirically address the question whether international R&D activities boost profitability. We employ a large data set of about 1300 firms from the German Community Innovation Survey (CIS). The empirical results demonstrate that R&D location matters for profitability. Firms with both domestic and foreign R&D activities make significantly higher profits than all other firms, including those that carry out solely domestic R&D. We furthermore ascertain that the degree of R&D internationalisation affects profitability. Our findings suggest that medium decentralised firms which innovate in two or three foreign countries outperform firms with centralized or highly decentralized international R&D strategies. Notwithstanding, decentralized firms achieve a higher firm performance than firms that solely conduct R&D activities in their home country

Intellectual property infringements due to R&D abroad? : A comparative analysis between firms with international and domestic R&D activities

This paper aims at analysing the risk of intellectual property (IP) infringements by competitors from abroad and in particular whether this risk is higher for international innovating firms. We distinguish three different types of IP infringements from abroad: the usage of firms’ technical inventions, product piracy and copying of corporate names and designs. Our analysis rests on the German data from the Europe-wide Community Innovation Survey (CIS). We use a unique data set of about 900 observations which are retrieved from two survey waves. While the earlier wave contains information about international and domestic innovation activities the later wave reports IP infringements. In a second analysis, the likelihood of infringements from innovation host countries and no innovation host countries abroad is examined. Before the empirical analysis, an explorative study has been carried out in China with interviews of German firms with innovation activities in China and with a legal advisor for small and medium sized German enterprises. The results show that firms with international R&D activities are increasing their chances to lose technological knowledge to their local competitors abroad. R&D activities in countries with weak intellectual property rights increase the risk for all types of infringement. Infringements by competitors from the host country are driven by the production of innovations in this country. Export intensity is the major driver of infringements from no innovation host countries. R&D activities in China and North America also increase the risk of an infringement. However, firms that innovate only in their home country experience significantly more product piracy cases than internationally innovating firms

Drivers for international innovation activities in developed and emerging countries

This paper aims to shed light on firm specific drivers that lead firms to internationalise their innovation activities. The paper draws a comprehensive picture of driving forces by including firm capabilities, characteristics of the firm’s competitive environment and the influence of innovation obstacles in the home country. In particular, the role of the potential driving forces is tested on the probability to carry out different innovative activities abroad (R&D, design/conception of new products, manufacturing of innovative products and implementation of new processes). In a second step these driving forces are used to observe their impact on the decision to locate innovation activities in various countries and regions (China, Eastern Europe, Western Europe and North America) as well as in groups of countries with similar levels of knowledge (country clubs). The analysis is based on the Mannheim Innovation Panel survey which represents the German CIS (Community Innovation Survey) contribution. Two survey waves are combined and result in a sample of about 1400 firms. The results show that the decision to perform innovation activities abroad is mainly driven by organisational capabilities such as absorptive capacities, international experience and existing technological competences of the respective firm. Innovation barriers at the German home base such as lack of labour and high innovation costs foster the set up of later-stage innovation activities abroad while the lack of demand demonstrates a barrier to the internationalisation decision for the development and manufacturing of new products. Location decisions receive the strongest influencing effects from the international experience of the firm. Firms which innovate in developing countries seem to require a more extensive level of international experience by international R&D cooperation

Drivers and Effects of Internationalising Innovation by SMEs

This paper investigates the drivers and the effects of the internationalisation of innovation activities in SMEs based on a large data set of German firms covering the period 2002-2007. We look at different stages of the innovation process (R&D, design, production and sales of new products, and implementation of new processes) and explore the role of internal resources, home market competition and innovationrelated location advantages for an SME’s decision to engage in innovation activities abroad. By linking international innovation activities to firm growth in the home market we try to identify likely internationalisation effects at the firm level. The results show that export experience and experience in knowledge protection are highly important for international innovation activities of SMEs. Fierce home market competition turns out to be rather an obstacle than a driver. High innovation costs stimulate internationalisation of non-R&D innovation activities, and shortage of qualified labour expels production of new products. R&D activities abroad and exports of new products spur firm growth in the home market while there are no negative effects on home market growth from shifting production of new products abroad

A Service of zbw Leibniz-Informationszentrum Wirtschaft Leibniz Information Centre for Economics The Contribution of International R&D to Firm Profitability The Contribution of International R&D to Firm Profitability Non-Technical Summary Das Wichtigste i

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Terms of use: Documents in EconStor may Download this ZEW Discussion Paper from our ftp server: ftp://ftp.zew.de/pub/zew-docs/dp/dp11002.pdf Non-Technical Summary Increased globalisation and competition caused more and more firms to relocate part of their R&D activities to foreign countries. This recent trend towards the internationalisation of R&D is motivated by expected gains through a better access to new knowledge, markets and more efficient production technologies. On the other hand, additional costs, e.g. for organising and coordinating dispersed activities, arise from the decentralisation of corporate R&D. Up to now, the empirical literature provides no evidence whether benefits do outweigh the financial and organisational costs of these international ventures. This research tries to fill this gap. Thus, the main question this paper tries to answer is whether international R&D activities increase firms' future profitability. In order to shed light on the relationship between international R&D activities and firm's profitability, we compare firms that have both domestic and international R&D with firms that perform R&D only at the home country as well as with firms that do not carry out own R&D activities. Since the internationalisation of R&D is a growing phenomenon in a sense that not only more firms are going abroad but that also the number of foreign R&D centres has raised for many firms, we furthermore evaluate how the degree of internationalisation affects profitability. The degree of internationalisation is measured by the number of countries in which a firm performs R&D abroad. Our research makes use of information that is provided within the Mannheim Innovation Panel (MIP). The MIP is the official annual innovation survey among German firms, and it is the German contribution to the European-wide harmonised Community Innovation Surveys (CIS). Based on more than 1300 observations, we first of all find that firms performing R&D in year 2005 make significantly higher profits in future years than firms without innovation activities. However, the stimulating effect on profitability is about twice as high for firms with domestic and foreign R&D compared to firms that perform R&D only in their home country. We can therefore conclude that firms which innovate globally are not only able to realise the benefits of these international ventures but that they are also able to limit the costs and risks. We furthermore provide evidence that firms with internationally more dispersed R&D operations achieve higher return on sales. However, a moderate number of R&D locations abroad (2-3 countries) seems to be most conducive to profitability. Firms with four or more R&D locations abroad seem to achieve lower profitability gains than medium centralized firms, but the profitability is still about twice as large as the one of firms performing solely domestic R&D. Das Wichtigste in Kürze Abstract The internationalisation of corporate R&D opens up the chances to participate in international knowledge sharing. This increasingly motivates firms to accelerate the pace and extent of their international R&D activities in order to enhance innovativeness and consequently competitiveness and profitability. Such business ventures, however, might be associated with huge organizational costs as well as risks of outgoing knowledge spillovers. In this paper we empirically address the question whether international R&D activities boost profitability. We employ a large data set of about 1300 firms from the German Community Innovation Survey (CIS). The empirical results demonstrate that R&D location matters for profitability. Firms with both domestic and foreign R&D activities make significantly higher profits than all other firms, including those that carry out solely domestic R&D. We furthermore ascertain that the degree of R&D internationalisation affects profitability. Our findings suggest that medium decentralised firms which innovate in two or three foreign countries outperform firms with centralized or highly decentralized international R&D strategies. Notwithstanding, decentralized firms achieve a higher firm performance than firms that solely conduct R&D activities in their home country