Minyuan Zhao

Conducting R&D in Countries with Weak Intellectual Property Rights Protection

Multinational enterprises (MNEs) are increasingly conducting research and development (RD MNEs that possess alternative mechanisms for protecting their intellectual properties will therefore find it attractive to conduct R&D at those locations. A theoretical framework is developed to capture the interaction between firm strategy and the institutional environment. The empirical analysis on a sample of 1,567 U.S.-headquartered innovating firms finds results consistent with the hypotheses that (i) technologies developed in countries with weak IPR protection are used more internally, and (ii) technologies developed by firms with R&D in weak IPR countries show stronger internal linkages. The results suggest that firms may use internal organizations to substitute for inadequate external institutions. By doing so, they are able to take advantage of the arbitrage opportunities presented by the institutional gap across countries.

Local R&D Strategies and Multilocation Firms: The Role of Internal Linkages

This study looks at the role of internal linkages in highly competitive clusters. We argue that, in addition to serving as a mechanism for sourcing knowledge, strong internal linkages help firms increase internalization and create higher levels of technological interdependence across firm locations. Firms with strong networks of internal linkages are able to maintain tighter control over local innovation and reduce the risk that knowledge outflows will advantage competitors in clusters. Our empirical analysis of the global semiconductor industry shows that industry leaders intensify internal linkages across locations when they collocate with direct market competitors, but not when they collocate with innovators in the same technological field. We also find that internal linkages are associated with more knowledge flow within firms and less knowledge expropriation by collocated competitors. Our results suggest that future research in cluster innovation should consider the critical role of multilocation firms, their internal organization across clusters, and their responses to technological and market competition in clusters. This paper was accepted by Bruno Cassiman, business strategy.

Corporate Capital Budgeting Decisions and Information Sharing

Firms must overcome agency and information asymmetry problems to make efficient corporate capital budgeting decisions; this is particularly true for firms with multiple units dispersed across geographic locations. Internal communication and coordination may therefore be crucial in reducing information asymmetry and achieving efficient resource allocation. We examine the relationship between corporate capital budgeting decisions and the degree of internal information sharing using a dataset of 342 U.S. firms from 1993 to 2002. Information sharing is measured by the internal linkages observed in firms’ research and development (R&D) activities worldwide. The efficiency of a firm’s capital budgeting decisions is measured by the deviation of the firm’s estimated marginal q from the theoretical tax-adjusted benchmark. We observe a significant relationship between value-enhancing capital budgeting decisions and stronger internal linkages. Specifically, corporate over-investment is significantly reduced with better information sharing across units. All results are robust to firm- and industry–level controls.

Cross-Regional R&D Collaboration and Local Knowledge Spillover

Abstract Firms are increasingly organizing cross-regional R&D collaborations among different units. Such collaborations should promote knowledge flows across distance and bring new knowledge to the local communities. However, the nature of cross-regional collaborations varies widely depending on the organizations within which they are organized. Compared with collaborations within small firms, collaborations in large firms tend to be routinized, which reduces the need for interpersonal interactions and increases the dependence on organizational structure. As a result, additional spillover from cross-regional collaboration is likely to be lower if the collaboration is within large firms. We extend this argument to the regional level and hypothesize that regions with a higher level of cross-regional collaborations tend to generate more valuable technologies, but when large firms dominate the formation of such collaborations, the marginal benefits of cross-regional collaboration are significantly reduced. Using a data set from the pharmaceutical industry between 1975 and 2001, we find support for our hypotheses. We conduct a series of robustness tests to check the consistency of our results.