Enhancing the Financial Returns of R&amp;D Investments through Operations Management

Yiu, L.M. Daphne; Lam, Hugo K.S.; Yeung, Andy C.L.; Cheng, T.C.E.

doi:10.1111/poms.13186

Cited by 60 publications

(47 citation statements)

References 144 publications

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“…We follow Yiu et␣al. (2020) and use operating income, capital expenditure, number of employees, and inventory for SFA estimation, as shown below.

\begin{matrix} \ln (I n c o m e_{italicijt}) & = β_{0} + β_{1} \ln false(C a p E x p_{ijt} false) + β_{2} \ln false(L a b o r_{ijt} false) + \\ β_{3} \ln false(I n v e n t o r y_{ijt} false) + V_{italicijt} ‐ U_{italicijt}, U_{italicijt} \geq 0, \end{matrix}

\begin{matrix} O E_{italicijt} & = \exp (‐ U_{italicijt}), \\ γ_{j} & = σ_{U_{j}}^{2} / (σ_{U_{j}}^{2} + σ_{V_{j}}^{2}), \end{matrix}

where Income ijt represents firm i ' s income in industry j in year t ; CapExp ijt represents the firm's capital expenditure; Labor ijt denotes the firm's number of employees; Inventory ijt represents the firm's inventory; U ijt is a nonnegative random variable assumed to be iid ˜ N( μ j ,

σ_{U_{j}}^{2}

) and associated with technical inefficiency; V ijt is an error term assumed to be iid ˜ N(0,

σ_{V_{j}}^{2}

) and distributed independently of U ijt . If U ijt = 0, then OE ijt = 1, and the OE is located at the production boundary; otherwise, it is below the boundary.…”

Section: Methodsmentioning

confidence: 99%

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Does CSR Reduce Idiosyncratic Risk? Roles of Operational Efficiency and AI Innovation

Sethi

2021

Production and Operations Management

118

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In the context of Industry 4.0, corporate social responsibility (CSR) plays an increasingly important role in firm risk management. To mitigate risk and improve operational productivity, artificial intelligence (AI), a key disruptive technology, has been increasingly employed in many industries. In this study, we examine the relationship between CSR and idiosyncratic risk (IR) as moderated by AI innovation and operational efficiency based on data from 1614 firms in China during the period from 2010 to 2017. The empirical results show that CSR can negatively affect IR, while beyond a certain level, it acts in the opposite direction, exhibiting a U‐shaped relationship. In particular, operational efficiency shifts the turning point of the U‐shaped curve to the right, implying that firms with high operational efficiency can obtain a higher optimal benefit by improving their CSR. Furthermore, AI innovation flattens the U‐shaped curve, thereby weakening CSR's positive impact on IR. This result indicates that AI innovation is not always beneficial. As AI innovation can have some substitution effect on CSR, enterprises should focus on either CSR or AI innovation as their main differentiation strategy to maximize the utilization of resources. We further instrument CSR using the social expenditure ratio of the province where the firm is headquartered to address a potential endogeneity concern. Finally, we provide several prominent managerial implications for enterprises, governments, and investors.

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“…We follow Yiu et␣al. (2020) and use operating income, capital expenditure, number of employees, and inventory for SFA estimation, as shown below.

\begin{matrix} \ln (I n c o m e_{italicijt}) & = β_{0} + β_{1} \ln false(C a p E x p_{ijt} false) + β_{2} \ln false(L a b o r_{ijt} false) + \\ β_{3} \ln false(I n v e n t o r y_{ijt} false) + V_{italicijt} ‐ U_{italicijt}, U_{italicijt} \geq 0, \end{matrix}

\begin{matrix} O E_{italicijt} & = \exp (‐ U_{italicijt}), \\ γ_{j} & = σ_{U_{j}}^{2} / (σ_{U_{j}}^{2} + σ_{V_{j}}^{2}), \end{matrix}

σ_{U_{j}}^{2}

) and associated with technical inefficiency; V ijt is an error term assumed to be iid ˜ N(0,

σ_{V_{j}}^{2}

) and distributed independently of U ijt . If U ijt = 0, then OE ijt = 1, and the OE is located at the production boundary; otherwise, it is below the boundary.…”

Section: Methodsmentioning

confidence: 99%

“…We then estimate the SFA model by industry and follow Yiu et␣al. (2020) to remove industries with fewer than 10 companies to reduce the bias caused by the small sample size. The firms with negative capital expenditure are also excluded.…”

Section: Methodsmentioning

confidence: 99%

Does CSR Reduce Idiosyncratic Risk? Roles of Operational Efficiency and AI Innovation

Sethi

2021

Production and Operations Management

118

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“…Following prior studies, e.g., [ 64 , 65 , 66 , 67 ], we measured a firm’s value based on Tobin’s Q. Since Tobin’s Q takes all the available information of a company to investors into account, it is a market-based and forward-looking measure of a firm’s value [ 65 , 68 ]. This measure fits this research well because firms investing in the reduction of toxic chemicals in their productions and operations and the developments of absorptive capacity and buffer resources can influence their future market value.…”

Section: Methodsmentioning

confidence: 99%

“…Firms with a higher sales growth are usually perceived as having higher sales potency and better business prospects to enhance the firm value [ 81 , 82 ]. Finally, we measure the labor intensity as a ratio of employee number to total assets [ 68 , 83 ]. A greater labor-intensive firm tends to rely more on the skills and competency of the workforce, so it runs a higher risk of generating more defects in operations [ 84 ], thus might deteriorate the firm reputation and its future value.…”

Section: Methodsmentioning

confidence: 99%

The Interactions of Absorptive Capacity, Buffer Inventory, and Toxic Emissions on Firm Value

Yiu

2021

IJERPH

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A significant amount of research has been conducted on the impacts of emissions reduction, absorptive capacity, and buffer inventory on firm performance. According to the resource-based view (RBV), absorptive capacity and buffer inventory are organizational capabilities and resources to create sustainable competitive advantages. Yet, the resource orchestration perspective (ROP) of the RBV emphasizes that firms need to develop a new capability to orchestrate and deploy their existing capabilities and resources. From an organizational learning perspective, firms with the low-level release of toxic chemicals have established a structured system and systematic organizational routines, strengthening their learning capabilities to share and use internal and external information across functional areas for continuous improvements. This study explores and seeks to understand toxic emissions through systematic operational routines as an organizational mechanism. These routines orchestrate and deploy the firm-specific absorptive capacity and buffer inventory to generate a sustainable competitive advantage. We examine the impacts of the absorptive capacity and buffer inventory on firm value in terms of Tobin’s Q, respectively. We also explore how such impacts are moderated by toxic emissions. Our results show that the absorptive capacity significantly enhances the market value of firms. However, the relationship between the buffer inventory and firm value is insignificant. Our additional analyses indicate that the impacts of the absorptive capacity and buffer inventory on the firm value are both significantly positive when firms release low toxic chemicals. Our results further suggest that firms can maximize their market value with a high absorptive capacity, high buffer inventory, and low toxic emissions.

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“…Generalised method of moments (GMM). To estimate a regression model, GMM relies on instruments that are highly correlated with the endogenous regressors to be instrumented but orthogonal to the error term to address endogeneity concerns (Lam et al, 2016;Yiu et al, 2020). However, different from traditional instrumental variables (IV) techniques that use external variables as instruments, GMM constructs instruments based on the transformations of existing variables.…”

Section: Methodsmentioning

confidence: 99%

Guest editorial

Cheng

Lam

Lyons

et al. 2020

IJOPM

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Guest editorial1. Researching the use of social media in operations and supply chain management: what can we learn from other business disciplines?The recent coronavirus disease 2019 (COVID-19) pandemic highlights the importance of social media for operations and supply chain management (OSCM). Due to the widespread of the virus nationally and internationally, governments around the world have implemented various measures such as travel restrictions, social distancing, workplace hazard controls, facility closures and even national lockdowns, causing significant operations and supply chain disruptions to businesses and organizations (Evans, 2020;Singh, 2020). To minimise such disruptions and maintain daily operations, many firms have adopted social media tools that "build on the ideological and technological foundations of Web 2.0 and allow the creation and exchange of User Generated Content" (Kaplan and Haenlein, 2010, p. 61) to facilitate communication, interactions and collaborations amongst internal employees as well as with external supply chain partners (PMR, 2020;Rodriguez, 2020). For instance, several major enterprise social media players such as Facebook Workplace, Microsoft Teams and Slack have seen an explosive growth in daily active users since the pandemic (Nellis, 2020;Vanian, 2020). As Julien Codorniou, Facebook Workplace's Vice President, pointed out, the COVID-19 pandemic has accelerated the need for remote working and online collaboration tools and "what was supposed to happen in five years just happened in two months" (Rodriguez, 2020). Although it might be the first time for some firms to use enterprise social media tools as a result of the pandemic, social media, in fact, have been increasingly adopted for OSCM over the past few years. For example, a survey conducted by MIT Sloan Management Review a few years ago suggests that 87% of maturing companies use social media to spur innovation while 60% integrate them into operations (Kane et al., 2014). Our search via the Factiva news database [1] over a 10-year period also indicates that the number of articles mentioning social media and OSCM had increased significantly by more than 500% from 2010 to 2019, as shown in Figure 1.Despite the increasing popularity and importance of social media for OSCM, it seems that our research community has paid limited attention to the emerging social media phenomenon. As shown in Figure 2, we were able to identify only 17 empirical social media papers published in the top three Operations Management (OM) journals, i.e. Journal of Operations Management (JOM), International Journal of Operations and Production Management (IJOPM), and Production and Operations Management (POM) (Chartered Association of Business Schools, 2018) as of 2019. On average, there were about three social media papers published in each year across the three journals or one paper per journal-year. It should also be noted that the first Guest editorial 509This special issue would not have been possible without the generous help of many collea...

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Enhancing the Financial Returns of R&D Investments through Operations Management

Cited by 60 publications

References 144 publications

Does CSR Reduce Idiosyncratic Risk? Roles of Operational Efficiency and AI Innovation

Does CSR Reduce Idiosyncratic Risk? Roles of Operational Efficiency and AI Innovation

The Interactions of Absorptive Capacity, Buffer Inventory, and Toxic Emissions on Firm Value

Guest editorial

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