100526 greve 2003

A Behavioral Theory of R&D Expenditures and Innovations : Evidence from Shipbuilding

- Henrich R. Greve

Song, JunhoDigital Contents Convergence, GSCST,

SNU26 May 2010

Introduction Organizational determinants of R&D and

innovation Method Result Discussion and conclusions

Henrich R. Greve

Biography:Ph.D. in Organizational Behavior from Stanford Gradu-ate School of Business 1994. Assistant professor (until 1998) and associate professor (until 2002) at the University of Tsukuba. Currently at the Norwegian School Business BI. Has held visiting appointments at Department of Sociology, Stanford University (1998) and Department of Economics, Keio Univer-sity (Japan, 1994). Lecturer at Department of Sociol-ogy, Stanford University (1998, while visiting) and at Gakushuin University (Japan, 1995)

Research interests focused on organizational change of strategies, performance feedback processes, and research methods.

Two processes for innovation – traditional way

Introduce

- a development theory : how the acquisition and management of knowledge and innovative people affect innovativeness what kinds of organizations have high levels of innovativeness

- a decision-making theory : how organizations solve the opposition between innovations and or-ganizational stability what conditions allow managers to take risks

Using behavioral theory to predict search intensity and innovation rates- how performance and slack affect R&D- how performance affects innovation rates

Data : 11 large Japanese shipbuilding firms : 1971 ~ 1996

This study

Overall Model

Organizational determinants of R&D and innovation

Managers evaluate based on their ‘aspiration level’

low

Problemistic Search : search that is stimulated by a problem… and is directed toward finding a solution to that problem

Slack Search: innovations that would not be approved in the face of scarcity but have strong subunit support

Solutions: existing in organizations’ environment or contacting with consultants …

Overall Model


Two important theoretical implications

1) R&D : one component of organizational search Innovations : one type of potential solution

2) Having innovations in a pool of solutions is a necessary condition for launching innovations

innovation

noninnova-tion

Solution Stock

Innovation Rate- R&D- Managerial de-mand for risky solu-tions

Hypothesis


[ Problemistic Search : Performance Relative to Aspirations]Ⅰ. When performance relative to aspiration level decrease, R&D intensity increases

[Slack Search : Organizational Resources]Ⅱ. When organizational slack increase, R&D intensity in-creases

[Decision Making : Risk PreferencesⅢa. When performance relative to aspiration level in-creases, the rate of launching innovations decreases

Ⅲb. The rate of launching innovations decreases more rapidly for performance increases above aspiration level than for performance increases below aspiration level

The Japanese Shipbuilding Industry : 1971 ~ 1996

Methods

Dependent Variables- R&D intensity : R&D expenditures divided by sales- Innovation launches : number of innovations made by a firm as re-ported by Techno Japan

Measures

Performance variables- ROA(return on assets) (ROS(return on sales), ROE(return on equity))

Methods

Measures

Slack variables- Absorbed slack : SGAE ( the ratio of selling, general and administrative expenses to sales)

- Unabsorbed slack : the ratio of quick assets (cash and marketable securities) to liabilities

- Potential slack : the ratio of debt gives lower borrowing ability (negative coefficient)

Industry control variables - Number of employees- Annual production- Annual growth- Annual freight rate

Results

H1

H2

Results

H3aH3b

Results

Discussion and Conclusions

The need to emphasize decision-making variables in innovation research , not knowledge management

Innovation development cycle, because of not quick reacting

Researchers can predict what kinds of firms are likely to launch innovations that change the evolution of an industry