Technology Exploitation Paths: Combining Technological and Complementary Resources in New Product Development and Licensing

Abstract

Technological resources in the form of patents, trade secrets, and know-how have become key assets for modern enterprises. This paper addresses a critical issue in technology and innovation management, namely, the commercial exploitation of technological resources resulting from research and development (R&D) investments. Extracting economic value from these resources by maximizing the benefits for shareholders is an extremely challenging task because technological resources are intangible, idiosyncratic, uncertain, predominantly tacit, and with poorly defined property rights. In their attempt to extract the maximum value from their technological resources, firms increasingly combine their internal exploitation through new product development (NPD) with external exploitation through licensing. However, most existing studies on NPD and technology licensing have treated the two exploitation paths independently and in isolation, which has resulted in two separate research streams using different theories and addressing different managerial challenges. The purpose of this paper is to contribute to filling this gap by developing and testing a comprehensive conceptual framework that simultaneously considers the antecedents affecting the successful implementation of NPD and licensing strategies as well as their consequences on firm profitability. The paper in particular investigates the effects of the interplay between technological resources and three types of complementary resources, marketing, manufacturing, and relational. We test the model using structural equation modeling on a sample of 733 Spanish manufacturing firms observed from 2003 to 2007. The data provide support for the existence of different paths to market firm technologies: an internal path, whereby the ownership of technological resources fully explains NPD performance, and an external path, whereby high intensity of marketing and relational resources reinforces the positive effect of technological resources on licensing performance. This sustains the relevance of the resource-based value-enhancing effects of complementary resources in licensing, as opposed to the motivation-reducing effects advanced by transaction cost-based literature. Moreover, the empirical analysis shows a substitution effect between NPD and licensing, whereby their simultaneous pursuit at intense levels is associated with lower profit margins. This provides evidence of the much theorized, but seldom tested, rent dissipation effect. These findings offer several contributions to research on licensing, NPD, open innovation, and the resource-based view of the firm. On a managerial level, they suggest that achieving maximum value from proprietary technologies may not entail exploiting them both through external and internal paths. Managers are also informed that the resource combinations that enhance licensing performance include marketing and relational resources

Network embeddedness and new product development in the biopharmaceutical industry: The moderating role of open innovation flow

“…Literature review on SC and firm performance All the aforementioned SC studies basically focus their researches on patents as measure of innovation performance. However, new product development is a quite common measure of firm's 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 7 innovation performance both in OI (Fey and Birkinshaw, 2005;Laursen and Salter, 2006;VegaJurado et al, 2009;Un et al, 2010;Bianchi et al, 2011;Tomlinson and Fai, 2013;Bianchi et al, 2014) and alliance literatures (Deeds and Hill, 1996;Rothaermel and Deeds, 2004;Kalaignanam et al, 2007). As shown in Table 1, none of the previous works adopt a new product development perspective as measure of innovation.…”

Strategy, operations, and profitability: the role of resource orchestration

“…While the value of resource configurations to produce outputs has been exclaimed by RBT theorists, the actual combination of resources and the number of configurations that might lead to success have rarely been reported (e.g., Bianchi et al, 2014). As commented by Holcomb et al (2009), RBT has not fully explored the actions firms take to create and sustain advantages.…”

“…These resource investments are expected to have a positive direct effect on firm profitability. For instance, technological resources obtained through R&D are reported to lead to high-impact product innovation through greater flows of new knowledge, increasing the likelihood of generating products that are new to the market (Bianchi et al, 2014), and in turn profitability; Sirmon and Hitt (2009) illustrate how lower investment relative to rivals in physical capital (e.g., property, plant, and equipment) may result in older equipment and less effective information technology and ultimately poor performance. They also illustrate how higher investment relative to rivals can also undermine performance, which resonates with costs incurred (e.g., cost of goods sold and selling, general and administrative expense); Vomberg et al (2014) demonstrate how firm size measured by the number of employees can result in inertia and damage performance; DeNisi and Smith (2014) relate bundles of human resource practices (e.g., pension and retirement expense) to firm-level performance; while Bianchi et al (2014) uncover resource combinations of marketing and relational resources (included here as advertising) that generate competitive advantage.…”

“…Firms with specific resource bundles may improve performance through a range of additional factors such as strategy, engagement in strategic alliances (Hess and Rothaermel, 2011), new product development and licensing (Bianchi et al, 2014), and organizational competencies and practices (Aral and Weill, 2007). Typically in such studies, the effect of individual resources-under moderation, mediation, or interaction with additional constructs-is examined against a dependent variable such as performance.…”

“…Rather, it is contended that central to resources generating competitive advantage is management's abilities to deploy these to determine competitive advantage (i.e., managerial resource orchestration as a strategic lever). So, while operational levers are necessary, they must be effectively synchronized to realize advantages (Bianchi et al, 2014;Holcomb et al, 2009). …”