Jung-Ho Lai

Organisational form and the economic impacts of innovation: the case of patent grant announcements

ABSTRACT This study investigates the impact of corporate diversification on the value creation of patent grants. We find that focussed firms experience significantly greater market reactions to patent announcements than diversified firms. Diversification into related industries has little effect on the wealth gains of granted patents, while diversification into unrelated industries significantly reduces the wealth gains. We further find that post-announcement operating performance is significantly associated with the degree of diversification. Overall, our findings suggest that the selection of diversification as a firms organisational structure has a negative influence on the value creation of innovation, and this influence is exacerbated when this diversification involves unrelated industries.

A Test of Agency Costs in Strategic Alliances

The incidence rate of strategic alliances has accelerated in recent decades, and alliances have become one of the most important entry modes into foreign markets (Hergert and Morris, 1988; Glaister and Buckley, 1996; Nielsen, 2007). Earlier studies show that multinationals use alliances to enter the markets of countries that enforce restrictive conditions on foreign investments (Hood and Young, 1979). Later research shows an increase in firms voluntarily entering into alliances in response to changing, unpredictable, globalized competition. By participating in cooperative ventures, multinationals stabilize the flow of needed resources, smooth global operations and increase the speed at which they can enter new markets (Lavie and Miller, 2008). The fewer resource commitments required in alliances further allow firms to more flexibly hedge uncertainty in overseas investments, compared with alternative entry modes, such as mergers and acquisitions and wholly owned greenfields (Brouthers, Brouthers, and Werner, 2008). However, despite the purported advantages underlying alliances, empirical evidence shows that there are as many enterprises that succeed in their alliance engagements as those that fail to do so (e.g., Das, Sen and Sengupta, 1998; Ren, Gray and Kim, 2009). The presence of a mixture of outcomes suggests that realization of the purported advantages of alliances depends on how the associated costs are controlled.