Three essays on value creating activities and innovation performance

Abstract

Schumpeter (1934) first brought the relevance of innovation to the forefront of research and business, and identified innovation as the primary driving factor in economic progress for entrepreneurs. Solow (1957) reemphasized that innovation and technical progress are the primary drivers for economic growth with seminal empirical studies. As Schumpeter (1934) showed, entrepreneurship enables technology innovation, which, in turn, enables economic development. However, entrepreneurial firms cannot win in competitive markets because of their limited R&D resources and, initially, their less attractive products (Diestre and Rajagopalan, 2012). Several researchers have defined entrepreneurship as a creative process in which individuals engage in forms of generative learning, and this activity permits the acquisition of new knowledge (Miller and Friesen, 1982

Popper and Lipshitz, 1998). Argyris and Schon (1978) argued that organizations that wish to invent new strategies capable of sustaining performance must acquire new knowledge. Likewise, innovation and entrepreneurship can be considered together and, in order to improve and sustain innovation, firms must adopt open innovation in order to locate and acquire external knowledge. This study aims to identify the effect of a firm’s innovation activity based on entrepreneurship and open innovation. Moreover, this study consists of three essays about entrepreneurship and open innovation. First, it presents the effect of open innovation on industrial change patterns, by looking into the evolution of entrepreneurship depending on the open innovation strategies. Second, it suggests the quantitative relationship between internal R&D strategy and firm performance, by estimating the required time for internal R&D strategy to create firm performance. Third, it also presents the quantitative relationship between external technology acquisition and innovation performance, along with the necessary time that the effect of technology acquisition reaches innovative performance. Because of the results of two studies, we can suggest the compared and specific results for internal and external R&D strategies. In the first study, which shows the evolution of entrepreneurship from the perspective of R&D strategies, where the internal technology is exported and external technology is acquired, technological innovation significantly affects evolution. Using the data of technology exportation and acquisition from Medtrack in the bio and pharmaceutical industry, the evolution of entrepreneurship was identified using network analysis from 1980 to 2012. Considering industry characteristics that the innovation process consists of six stages, from discovery to pending approval of the Food and Drug Administration(FDA), the major firms with entrepreneurship were presented for each stage. The results show that open innovation strategy affects the evolution of entrepreneurship. In the 1980s, various organizations, such as research institutes, universities, and firms, played a role in entrepreneurship, while participating in open innovation. However, in the 2000s, firms that are specialized a specific technology have the entrepreneurship. This implies that firms with a specific technology or capability play an important role as the level of technology matures. Especially, in recent years, biotechnology innovation has significantly affected the industry change pattern and evolution of entrepreneurship. These two studies estimate the required time for internal and external R&D strategies to create firm performance by using panel vector autoregression, in Chapters 3 and 4. The internal R&D strategy depends on the firm’s size, to make the value for firm with specific the needed time. When firms have high market power and are large size, the effect is created in a short time. The external R&D strategy affects a firm’s innovation performance through an absorptive capacity as a mediator. When the firm acquires the external technology, the effect is rapidly shown, as the firm is small. This study has several contributions. First, it helps to develop open innovation theory, comparing the internal R&D strategy with the external R&D strategy. The quantitative comparison between internal and external R&D strategies develops open innovation theory. It also suggests an appropriate strategy for firms, showing that the effect depends on the current competitive status and firm size. In order to increase the effect of entrepreneurship, open innovation strategy should be considered. Moreover, entrepreneurship can be achieved depending on the open innovation. Second, it identifies that there are dynamics in entrepreneurship and open innovation, showing that open innovation lead to the evolution of entrepreneurship. This is consistent with Schumpeter’s (1934) assertion that technology innovation and entrepreneurship are important for economic development. Last, this study is meaningful as it considers the financial and innovative perspectives. These innovation strategies may contribute not only to firm innovation performance, but also to financial benefits.