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There has been growing interest in open innovation, where firms create value by combining internal and external ideas. Technology insourcing, however, has not been satisfactorily investigated in the empirical literature compared to technology outsourcing. In this paper, we examine the determinants of external technology sourcing by the type of counterpart in the new product development (NPD) process. We use a novel dataset at the product level, compiled by the Research Institute of Economy, Trade and Industry in 2011. We distinguish whether the technology partner is also a business partner, such as a supplier or customer. Our findings show that when the technology partner is not a business partner, patents play an important role in moderating the transaction costs in a partnership. On the other hand, when the technology partner is also a business partner, we find cospecialisation of technology and its complementary assets with the partner firm.

Using firm-level data on the Japanese manufacturing industry, this study identifies the causal effect of uncertainty on the dynamic relation between corporate investment and financing conditions. It demonstrates that the cautionary effect is increasingly dominant under high uncertainty irrespective of the type of corporate investment-capital investment and R&D-and that this result remains even in the weak instrument robust inference. Hence, the dominance of the cautionary effect over the financing constraint effect makes actual corporate investment decisions under high uncertainty indifferent to the firm's financing conditions.