R&D Partnerships and Innovation Performance: Can There Be Too Much of a Good Thing?

Abstract

R&D collaboration facilitates the pooling of complementary skills, learning from the partner as well as the sharing of risks and costs. Research therefore repeatedly stresses the positive relationship between collaborative R&D and innovation performance. Fewer studies address the potential drawbacks of collaborative R&D. Collaborative R&D comes at the cost of coordination and monitoring, requires knowledge disclosure and involves the risk of opportunistic behavior by the partners. Thus, while for lower collaboration intensities the net gains can be high, costs may start to outweigh benefits if firms perform a higher share of their innovation projects collaboratively. For a sample of 2,735 firms located in Germany and active in a broad range of manufacturing and service sectors, this study finds that increasing the share of collaborative R&D projects in total R&D projects is associated with a higher probability of product innovation and with a higher market success of new products. While this confirms previous findings on the gains for innovation performance, we also observe that collaboration has decreasing and even negative returns on product innovation if its intensity increases above a certain threshold. Thus, the relationship between collaboration intensity and innovation follows an inverted-U shape and, on average, costs start to outweigh benefits if a firm pursues more than about two-thirds of its R&D projects in collaboration. This result is robust to conditioning market success to the introduction of new products and to accounting for the selection into collaborating. This threshold is, however, contingent on firm characteristics. Smaller and younger as well as resource constrained firms benefit from relatively higher collaboration intensities. For firms with higher collaboration complexities in terms of different partners and different stages of the R&D process at which collaboration takes place, returns start to decrease already at lower collaboration intensities.

Formalized Problem‐Solving Practices and the Effects of Collaboration with Suppliers on a Firm's Product Innovation Performance

“…Our first result is that firms who collaborated with suppliers for product innovation gain higher economic returns compared to those who did not collaborate. This result is in line with the literature that argues that collaboration with suppliers for innovation generally is beneficial for innovation because it allows the firm to access additional resources; to explore a wider set of possible solutions to specific problems, technological profiles, and application contexts; and consequently to reduce the uncertainty and costs of developing innovations (Clark and Fujimoto, ; Hottenrott and Lopes‐Bento, ; Un et al, ).…”

“…By defining the returns from innovation as the share of total turnover due to new products, these measures allow comparison of firms' innovation performance and, thus, can be considered a good proxy for the market returns from firms' innovative activities (OECD, ). Both measures of innovation performance have been used in previous work on collaborations based on CIS data (Grimpe and Kaiser, ; Hottenrott and Lopes‐Bento, ; Klingebiel and Rammer, ; Laursen and Salter, ; Leiponen and Helfat, ) and their use is well established in the field of innovation studies more generally (Mairesse and Mohnen, ).…”

“…To gain from their external partnerships firms need to be able to absorb and combine the knowledge developed in the collaboration to improve their competences, technologies, and product designs (Gesing, Antons, Piening, Rese, and Salge, 2015;Hottenrott and Lopes-Bento, 2016). The use of intrafirm organizational practices and tools improves the efficiency of new product development process and may influence a firm's ability to process, transfer, and use knowledge (Fixson and Marion, 2012;Foss, Laursen, and Pedersen, 2011;Huber, 1990;Levine, Higgins and Choi, 2000;Paulus and Yang, 2000;Schleimer and Faems, 2016).…”

Effects of University–Industry Collaboration on Technological Newness of Firms

“…It is expected that UIC intensity will increase the technological newness of a firm's innovation portfolio. However, a nonlinear relationship between UIC intensity and technological newness is expected: On the one hand, decreasing marginal returns of UIC intensity are likely because limited capabilities restrict the integration of too many external knowledge sources (Laursen and Salter, ) and coordination efforts increase (Hottenrott and Lopes‐Bento, ). On the other hand, increasing marginal returns of UIC intensity might exist because of learning effects and emerging trust toward the institution “university.” In addition, the nature of the effect is likely dependent on the diversity of the collaboration portfolio.…”

What kinds of R&D consortia enhance SMEs productivity? A hierarchical Bayesian approach for the analysis of a regional innovation policy

“…The advantage of larger consortia is that they allow pooling a higher amount of resources and competencies. However, they can also lead to an increase in transaction costs, generated by the presence of many partners who have to reach common decisions, and whose effort has to be monitored (Hottenrott & Lopes‐Bento, ). These two conflicting forces possibly explain why some contributions find that the presence of numerous members increase the chances of success of the project (Bizan, ; Schwarz et al, 2010), while others do not (Okamuro, ).…”