With this paper we hope to have contributed to research on the technology strategy of the firm.
Based on previous theoretical work, we asked two principal questions: what are the elements of technology strategy and how is the choice of technology strategy determined by factors external and internal to the firm. To address these problems we analyzed data from two runs of the Community Innovation Survey for Polish service firms. As in many previous CIS-based empirical studies, we started from a factor analysis. However, instead of accepting the resulting factors as strategy dimensions, we proposed our own strategy variables, guided by the components of technology strategy proposed by Zahra (1996) as well as insights from the literature on service innovations. The resulting set of variables included pioneer posture, R&D efforts, technology portfolio variables (capacity building, innovations in organization and marketing, process- and product- orientation of innovations), monitoring the science sector and monitoring the markets. We identified the correlations between variables and assessed their determinants. To that end we looked both at the factors external to the firm (industry) and at the hitherto less stressed in the literature, internal factors (indicators of a firm’s resource endowment: size and group membership). Including internal factors in the analysis increases substantially the explanatory power of our analysis. Our results suggest that technology strategies are determined by both kinds of variables, and the role of internal factors increases with the macroeconomic environment becoming less favourable.
CASE Network Studies & Analyses No. 454 – External vs internal determinants of firms ...
References
Adler, P. (1989), Technology strategy: a guide to the literatures. Research in Technological Innovation, Management and Policy, 4, 25–151.
Akaike, H. (1974), A new look at the statistical model identification, IEEE Transactions on Automatic Control 19(6), 716–72.
Auh, S., & Menguc, B. (2005), Balancing exploration and exploitation: The moderating role of competitive intensity. Journal of Business Research, 58, 1652– 1661.
Burgelman, R. A. (1991), Intraorganizational ecology of strategy making and organizational adaptation: Theory and field research. Organization Science 2, 239-262.
Burgelman, R.A. (2002), Strategy as vector and the inertia of coevolutionary lock-in, Administrative Science Quarterly 47, 325-357.
Castellacci, F. (2008), Technological paradigms, regimes and trajectories: Manufacturing and service industries in a new taxonomy of sectoral patterns of innovation. Research Policy, 37, 978 – 994.
Clausen, T., Pohjola, M., Sapprasert, K., and Verspagen, B. (2012), Innovation strategies as a source of persistent innovation. Industrial and Corporate Change, 21(3), 553–585.
Covin, J.G., and Slevin, D.P. (1989), Strategic management of small firms in hostile and benign environments. Strategic Management Journal, 10(1), 75–87.
Dodgson, M. (1991), Managing corporate technology strategy. International Journal of Technology Management, Special Publication on the Role of Technology in Corporate Policy, 95–102.
Drejer, A. (1996), Frameworks for the management of technology: Towards a contingent approach. Technology Analysis and Strategic Management, 8, 9–20.
Fagerberg, J., Srholec, M., and Verspagen, B. (2010), Chapter 20 - Innovation and economic development. In Bronwyn H. Hall and Nathan Rosenberg, editors, Handbook of the Economics of Innovation, Volume 2, pp. 833 – 872. North-Holland.
Ford, D. (1988), Develop your technology strategy. Long Range Planning, 21(5), 85–95.
Goldstein, H. (2003), Multilevel Statistical Models. Arnold: London.
Hall, B.H., Mairesse, J., and Mohnen, P. (2010), Chapter 22 - Measuring the returns to R&D.
In Bronwyn H. Hall and Nathan Rosenberg, editors, Handbook of the Economics of Innovation, Volume 2, pp. 1033 – 1082. North-Holland.
CASE Network Studies & Analyses No. 454 – External vs internal determinants of firms ...
Haltiwanger, J., Jarmin, R., and Miranda, J. (2010), Who Creates Jobs? Small vs. Large vs.
Young, NBER Working Paper 16300 (August).
A. Henry (2008), Understanding Strategic Management. Oxford University Press.
Ireland, R.D., & Webb, J.W. (2009), Crossing the great divide of strategic entrepreneurship:
Transitioning between exploration and exploitation. Business Horizons 52(5), 469-479.
Institute for Stuctural Research – IBS (2011), Innovation Diagnostics in Poland, mimeo
Laursen, K. (2012), Keep searching and you’ll find: what do we know about variety creation through firms’ search activities for innovation? Industrial and Corporate Change 21(5), 1181-1220.
Lavie, D., and Rosenkopf, L. (2006), Balancing Exploration and Exploitation in Alliance Formation, Academy of Management Journal, 49, 797-818.
Leiponen, A. (2012), The benefits of R&D and breadth in innovation strategies: a comparison of Finnish service and manufacturing firms. Industrial and Corporate Change, 21(5), 1255-1281.
Malerba, F. (2005), Sectoral Systems: How and Why Innovation Differs across Sectors, in J.
Fagerberg, D.C. Mowery, & R.R. Nelson (eds.), The Oxford Handbook of Innovation, Oxford:
Oxford University Press.
March, J.G. (1991), Exploration and exploitation in organizational learning. Organization Science, 2(1), 71–87.
Miles, I. (2007), Research and development (R&D) beyond manufacturing: the strange case of services R&D, R&D Management, 37(3), 249-268.
Nelson, R.R. (1991), Why do firms differ, and how does it matter? Strategic Management Journal, 12, 61–74.
Nelson, R.R. and Winter, S.G. (1982), An evolutionary theory of economic change. Belknap Press Series. Belknap Press of Harvard University Press.
OECD and EC (2005), Oslo Manual: Guidelines for Collecting and Interpreting Innovation Data.
The Measurement of Scientific and Technological activities. Organisation for Economic Co-operation and Development.
Patel, P.; Vega, M. (1999), Patterns of internationalisation of corporate technology: Location vs. home country advantages, Research Policy, 28(2-3), 145-155.
Pavitt, K. (1984), Sectoral patterns of technical change: Towards a taxonomy and a theory.
Research Policy, 13(6), 343 – 373.
CASE Network Studies & Analyses No. 454 – External vs internal determinants of firms ...
Pavitt, K. (1990), What we know about the strategic management of technology. California Management Review, Spring, 17–26.
Porter, M.E. (1980), Competitive strategy: techniques for analyzing industries and competitors.
Free Press.
Powell, W.W., & Grodal, S. (2005), Networks of Innovators. In J. Fagerberg, D.C. Mowery, &
R.R. Nelson (eds.), The Oxford Handbook of Innovation, Oxford: Oxford University Press.
Rothaermel, F.T., and Deeds, D.L. (2004), Exploration and exploitation alliances in biotechnology: a system of new product development. Strategic Management Journal, 25(3), 201-221.
Sapprasert, K., and Clausen, T. (2012), Organizational innovation and its effects. Industrial and Corporate Change, 21(5), 1283–1305.
Shaw, B. (1994), User/Supplier Links and Innovation. In M. Dodgson & R. Rothwell (eds.), The Handbook of Industrial Innovation, Aldershot: Edward Elgar.
Srholec, M., and Verspagen, B. (2012), The voyage of the Beagle into innovation: explorations on heterogeneity, selection, and sectors. Industrial and Corporate Change, 21(5), 1221-1253.
Subodh, K. (2002), Market concentration, firm size and innovative activity: A firm-level economic analysis of selected Indian industries under economic liberalization. World Institute for Development Economics Research, Discussion Paper No. 2002/108, November.
Szczygielski K. (2011), What are service sector innovations and how do we measure them?, CASE Network Studies and Analyses, No. 422.
Szczygielski, K. and Grabowski, W. (2012), Innovation strategies and productivity in the Polish services sector in the light of CIS 2008. CASE Network Studies and Analyses, 448.
Teece, D.J., Pisano, G., and Shuen, A. (1997), Dynamic capabilities and strategic management. Strategic Management Journal, 18 (7), 509–533.
Tushman, M. L., & O'Reilly, C. (1996), Ambidextrous organizations: Managing evolutionary and revolutionary change. California Management Review, 38, 8-30.
Zahra, S.A. (1996), Technology strategy and financial performance: Examining the moderating role of the firm’s competitive environment. Journal of Business Venturing, 11(3), 189 – 219.
Zahra, S.A., and Covin, J.G. (1993), Business strategy, technology policy and firm performance. Strategic Management Journal, 14 (6), 451–478.
CASE Network Studies & Analyses No. 454 – External vs internal determinants of firms ...
Annex
Annex 1. Result tables: factor analysis
Table 7. The Results of the Factor Analysis of the Varieties of Innovation Activities for year 2006
Factor 1 Factor 2
Internal R&D .676 -.109
Acquisition of external R&D .642 .020
Acquisition of machinery, equipment and vehicles needed
for innovation purposes -.001 .655
Acquisition of software for innovation .046 .765 Acquisition of external knowledge for innovation (purchase
or licensing of patents and non-patented inventions, know-how and other types of knowledge from other businesses or
organizations)
.493 .270
Training (internal or external) for innovative activities .500 .441 Marketing for product innovations (including market
research and launch advertising .655 .081
Other preparatory activities for product or process innovations, such as feasibility studies, testing, software
development)
.651 .082
Note: Factors are listed in the heading of each column and factor loadings are reported in the table. Extraction method: principal-components analysis. Rotation method: varimax. Number of observations: 1240 (firms that introduced product- or process innovations). Source: Community Innovation Survey 2006.
Table 8. The Results of the Factor Analysis of the Varieties of Innovation Activities for year 2008
Factor 1 Factor 2
Internal R&D 0.805 0.080
Acquisition of external R&D 0.815 0.022
Acquisition of machinery, equipment and vehicles needed for innovation purposes
0.023 0.708
Acquisition of software for innovation 0.075 0.715 Acquisition of external knowledge for innovation (purchase
or licensing of patents and non-patented inventions, know-how and other types of knowledge from other businesses or
organisations)
0.528 0.307
Training (internal or external) for innovative activities 0.286 0.675 Marketing for product innovations (including market
research and launch advertising)
0.345 0.460
Other preparatory activities for product and process innovations, such as feasibility studies, testing, software
development
0.534 0.410
Note: Factors are listed in the heading of each column and factor loadings are reported in the table. Extraction method: principal-components analysis. Rotation method: varimax. Number of observations: 1047 (firms that introduced product- or process innovations). Source: Community Innovation Survey 2008.
CASE Network Studies & Analyses No. 454 – External vs internal determinants of firms ...
Table 9. The results of the Factor Analysis of the Aims of Innovation for year 2006 Factor 1 Factor 2
Increasing range of goods or services .036 .867
Improving quality of goods or services .294 .737
Improving flexibility for producing goods or
services .787 .237
Increasing capacity for producing goods or
services .825 .203
Improving health and safety .558 .055
Reducing costs per unit produced or provided .750 .042
Entering new markets .114 .847
Note: Factors are listed in the heading of each column and factor loadings are reported in the table. Extraction method: principal-components analysis. Rotation method: varimax. Number of observations: 1240 (firms that introduced product- or process innovations). Source: Community Innovation Survey 2006.
Table 10. The results of the Factor Analysis of the Aims of Innovation for year 2008 Factor 1 Factor 2
Increasing range of goods or services .028 .868
Improving quality of goods or services .333 .648
Improving flexibility for producing goods or
services .729 .257
Increasing capacity for producing goods or
services .802 .239
Improving health and safety .753 .111
Reducing costs per unit produced or provided .772 .130
Entering new markets .238 .743
Note: Factors are listed in the heading of each column and factor loadings are reported in the table. Extraction method: principal-components analysis. Rotation method: varimax. Number of observations: 1047 (firms that introduced product- or process innovations). Source: Community Innovation Survey 2008.
CASE Network Studies & Analyses No. 454 – External vs internal determinants of firms ...
Table 11. The results of the Factor Analysis of the Sources of information for Innovation Activities for year 2006
Factor 1 Factor 2 Factor 3
Within the firm -0.076 0.611 -0.225
Other firms in the enterprise group -0.098 -0.135 0.789 Suppliers of equipment, materials,
services, or software
0.038 0.387 0.021
Clients or customers 0.065 0.756 -0.019
Competitors or other businesses in your industry
0.198 0.625 0.057
Consultants, commercial labs, or private R&D institutes
0.556 0.236 -0.049
Polish Academy of Science institutes 0.854 -0.096 0.101 Public research institutes (Polish: JBR) 0.813 -0.002 0.072 Foreign public research institutes 0.867 0.076 0.015 Universities or other higher education
institutions
0.887 0.105 0.123
Conferences, trade fairs, exhibitions 0.231 0.605 0.576 Scientific journals and trade/technical
publications
0.223 0.547 0.599
Professional and industry associations 0.603 0.301 0.311
Note: Factors are listed in the heading of each column and factor loadings are reported in the table. Extraction method: principal-components analysis. Rotation method: varimax. Number of observations: 1240 (firms that introduced product- or process innovations). Source: Community Innovation Survey 2006.
CASE Network Studies & Analyses No. 454 – External vs internal determinants of firms ...
Table 12. The results of the Factor Analysis of the Sources of information for Innovation Activities for year 2008
Factor 1 Factor 2 Factor 3
Within the firm -.116 .633 -.267
Other firms in the enterprise group -.053 -.191 .732 Suppliers of equipment, materials,
services, or software
.029 .392 .036
Clients or customers .060 .705 -.022
Competitors or other businesses in your industry
.158 .662 .061
Consultants, commercial labs, or private R&D institutes
.524 .245 -.063
Polish Academy of Science institutes .901 -.032 .062 Public research institutes (Polish: JBR) .873 -.012 .053
Foreign public research institutes .880 .027 .043
Universities or other higher education institutions
.809 .077 .086
Conferences, trade fairs, exhibitions .286 .558 .503 Scientific journals and trade/technical
publications
.243 .534 .556
Professional and industry associations .578 .340 .304
Note: Factors are listed in the heading of each column and factor loadings are reported in the table. Extraction method: principal-components analysis. Rotation method: varimax. Number of observations: 1047 (firms that introduced product- or process innovations). Source: Community Innovation Survey 2008.
CASE Network Studies & Analyses No. 454 – External vs internal determinants of firms ...
Annex 2. Result tables: determinants of technology strategy
Table 13. Internal and external determinants of strategy variable RD (Estimates of
Note: Probit analysis Number of observations: 1240 (2006) and 1047 (2008) i.e. firms that introduced product- or process innovations. Source: Community Innovation Surveys 2006 and 2008.
Table 14. Internal and external determinants of strategy variable CapB
2006
Variable Const SMALL GROUP_PL GROUP_FDI Ind_DEF
Coefficient 0.509 -0.260 0.279 -0.327 0.350
Note: Probit analysis. Number of observations: 1240 (2006) and 1047 (2008) i.e. firms that introduced product- or process innovations. Source: Community Innovation Surveys 2006 and 2008..
CASE Network Studies & Analyses No. 454 – External vs internal determinants of firms ...
Table 15. Internal and external determinants of strategy variable RADICAL
2006
Variable const GROUP_FDI Ind_BC Ind_DF Coefficient -0.340 0.163 -0.360 0.562
Note: Logit analysis for 2006 and probit analysis for 2008. Number of observations: 1240 (2006) and 1047 (2008) i.e. firms that introduced product- or process innovations. Source: Community Innovation Surveys 2006 and 2008.
Table 16. Internal and external determinants of strategy variables ORGMARKT_06 and ORGMARKT_08
2006
Variable const SMALL GROUP_PL GROUP_F DI
Note: Probit analysis Number of observations: 1240 (2006) and 1047 (2008) i.e. firms that introduced product- or process innovations. Source: Community Innovation Surveys 2006 and 2008.
CASE Network Studies & Analyses No. 454 – External vs internal determinants of firms ...
Table 17. Internal and external determinants of strategy SCIENCE
2006
Note: Normal TOBIT for 2006 and t-student TOBIT for 2008. Number of observations: 1240 (2006) and 1047 (2008) i.e. firms that introduced product- or process innovations. Source: Community Innovation Surveys 2006 and 2008.
Table 18. Internal and external determinants of strategy MARKETS
2006
Variable Const SMALL Ind_B Ind_DEF
Coefficient 1.599 -0.104 -0.178 0.256
Variable Const SMALL Ind_BC Ind_DF
Coefficient 2.042 -0.203 -0.270 0.177
Note: OLS estimates for 2006 and GLS estimates for 2008. Number of observations: 1240 (2006) and 1047 (2008) i.e. firms that introduced product- or process innovations. Source: Community Innovation Surveys 2006 and 2008.
CASE Network Studies & Analyses No. 454 – External vs internal determinants of firms ...
Table 19. Internal and external determinants of strategy PRODO
2006
Variable const GROUP Ind_BC Ind_DEF Coefficient 1.534 0.177 -0.344 0.373
Variable const SMALL GROUP_FDI Ind_C Ind_D Ind_EF Coefficient 2.122 -0.139 0.129 -0.331 0.319 0.184
Note: GLS estimates. Number of observations: 1240 (2006) and 1047 (2008) i.e. firms that introduced product- or process innovations. Source: Community Innovation Surveys 2006 and 2008.
Table 20. Internal and external determinants of strategy PROCO
2006
Note: OLS estimates. Number of observations: 1240 (2006) and 1047 (2008) i.e. firms that introduced product- or process innovations. Source: Community Innovation Surveys 2006 and 2008.
CASE Network Studies & Analyses No. 454 – External vs internal determinants of firms ...
Annex 3. Result tables: the relationship between strategy variables
Table 21. Analysis of the relationships between strategic variables for year 2006 Dependent variable: RDTeor
Variable Coefficient Std. error z statistic p-value
Const 0.122 0.042 2.925 0.003
SCIENCETeor 0.374 0.051 7.280 0.000
RADICAL 0.264 0.045 5.872 0.000
Dependent variable: CapBTeor
Variable Coefficient Std. error z statistic p-value
Const -0.000 0.020 -0.000 1.000
ORGMARKT_06Teor 0.242 0.101 2.402 0.016
Dependent variable: SCIENCETeor
Variable Coefficient Std. error z statistic p-value
Const -0.579 0.036 -15.880 0.000
RDTeor 0.917 0.183 5.003 0.000
Ind_C 0.207 0.143 1.444 0.149
Dependent variable: ORGMARKTTeor
Variable Coefficient Std. error z statistic p-value
Const -0.631 0.100 -6.302 0.000
PRODO 0.364 0.056 6.454 0.000
Dependent variable: MARKETS
Variable Coefficient Std. error z statistic p-value
Const 0.733 0.034 21.800 0.000
PRODO 0.525 0.010 50.240 0.000
CapBTeor -0.058 0.021 -2.780 0.005
Ind_E 0.122 0.054 2.275 0.023
Dependent variable: PROCO
Variable Coefficient Std. error z statistic p-value
Const 0.185 0.209 0.886 0.375
PRODO 0.574 0.119 4.819 0.000
ORGMARKT_06Teor -1.010 0.254 -3.971 0.000
Dependent variable: PRODO
Variable Coefficient Std. error z statistic p-value
Const -1.421 0.082 -17.410 0.000
MARKETS 1.921 0.037 52.100 0.000
Ind_E -0.233 0.105 -2.228 0.026
Note: 3SLS estimates. Number of observations: 1240 i.e. firms that introduced product- or process innovations.
Source: Community Innovation Surveys 2006.
CASE Network Studies & Analyses No. 454 – External vs internal determinants of firms ...
Table 22. Analysis of the relationships between strategic variables for year 2008 Dependent variable: RDTeor
Variable Coefficient Std. error z statistic p-value
Const -0.009 0.049 -0.174 0.862
SCIENCETeor 0.178 0.088 2.033 0.042
RADICAL 0.171 0.050 3.453 0.001
Dependent variable: CapBTeor
Variable Coefficient Std. error z statistic p-value
Const 0.000 0.022 0.000 1.000
ORGMARKT_08Teor 0.142 0.059 2.396 0.017
Dependent variable: SCIENCETeor
Variable Coefficient Std. error z statistic p-value
Const -0.373 0.037 -10.020 0.000
RDTeor 0.878 0.332 2.649 0.008
Ind_C 0.167 0.101 1.663 0.096
Dependent variable: ORGMARKTTeor
Variable Coefficient Std. error z statistic p-value
Const -0.725 0.212 -3.420 0.001
PRODO 0.331 0.096 3.442 0.001
Dependent variable: MARKETS
Variable Coefficient Std. error z statistic p-value
Const -0.295 0.052 -5.669 0.000
PRODO 1.046 0.023 44.870 0.000
CapBTeor -0.383 0.025 -15.070 0.000
Ind_E -0.082 0.021 -3.885 0.000
Dependent variable: PROCO
Variable Coefficient Std. error z statistic p-value
Const 2.207 0.480 4.599 0.000
PRODO -0.373 0.219 -1.706 0.088
ORGMARKT_08Teor 1.636 0.496 3.297 0.001
Dependent variable: PRODO
Variable Coefficient Std. error z statistic p-value
Const 0.251 0.047 5.284 0.000
MARKETS 0.971 0.024 41.140 0.000
Ind_E 0.081 0.021 3.961 0.000
Note: 3SLS estimates. Number of observations: 1047 i.e. firms that introduced product- or process innovations.
Source: Community Innovation Surveys 2008.
CASE Network Studies & Analyses No. 454 – External vs internal determinants of firms ...
Annex 4. Variance decomposition
Table 23. Results of the variance components ANOVA (Type III) analysis for strategies.
First row- 2006, second row- 2008
INDUSTRY GROUP SIZE SUPPORT
RD 20% innovations. Source: Community Innovation Surveys 2006 and 2008.