The impact of firm resources on innovation

Abstract

Purpose The purpose of this paper is to propose that the resources that a firm owns and has full control (firm-level resources) and resources that a firm access through direct connection with other firms (network-level resources) will impact firm innovation when effectively deployed by the firm. While previous research examined these factors separately, the author takes a holistic view and looks into their effects on innovation simultaneously. The author also introduces the moderating effects, i.e. the variables that can enhance firm innovation through their interaction with internal and external resources. Design/methodology/approach The author tested the role of financial resources and slack resources in the form of cash slack and human slack at the firm level, and network size, network tie strength, and network diversity at the network level on the firm innovation. Using generalized negative binomial model with Huber-White procedure, the author analyzed 306 firms from the biotechnology industry over a span of 17 years. Findings The analysis suggests that cash slack impact innovation negatively. However, this link is moderated by firm size such that for large firms cash slack affects innovation positively. Network-level resources all positively impact innovation and have more economic impact on firm innovation than firm-level resources. Furthermore, although human slack negatively affects innovation, its interaction with network size enhances innovation. Originality/value The research makes important contributions to both strategic management and innovation literatures especially when, the author considers the role of firm-level slack in driving firm innovation. Previous research reported conflicting findings about the availability of slack resources and firm performance. The results showed that the relationship between slack resources and firm innovation is negative and significant, both for available slack and human slack. This finding parallels with previous research which reported that constraints such as lack of slack resources can actually facilitate innovation. The author also contributes to the literature by introducing boundary conditions which can enhance firm innovation through their interaction with firm-level internal and network-level external resources. In this respect, to the author’s knowledge, this is among the first studies to combine the slack literature focusing on firm-level resources with the literature on network-level resources.

Innovation Indicators and the Innovation Process - Evidence from the European Innovation Scoreboard

“…This implies consequent focus on firm investment. This finding is supported by the research of Demirkan (2018), which highlights the idea that people as a resource can represent a driving factor of innovation, especially when addressing the introduction of new products. In addition, the author suggests that employment positively impacts innovation by contributing to the creation of relationships and exploration of new opportunities.…”

“…Moreover, the author's research concludes the positive impact of linkages and intellectual assets on innovation performance. In addition, Demirkan (2018) highlights that the resources existing in the firm are of considerable influence in terms of employment. Moreover, the author suggests that investing in the employee's skills and knowledge can result in a competitive advantage for any business.…”

A importância da folga financeira nas empresas que investem em inovação

“…O" Brien (2003) também chegou a identificar uma relação negativa entre os dois fatores, sendo contrário do resultado encontrado neste trabalho. Assim como Demirkan (2018), que afirmou que a relação ser positiva ou negativa depende do tamanho da empresa estudada. Porém, também tiveram autores que afirmaram que a relação não teve impacto significativo (DE LA HIZ, VILCHEZ; CORREA, 2018).…”

“…A literatura têm demonstrado atenção crescente sobre a importância da "estrutura financeira" para os investimentos em inovação, sendo que, as abordagens empíricas se dividem em analisar a relação do fluxo de investimentos em inovação com a estrutura de capital (LONG;MALITZ, 1985;SIMERLY;LI, 2000;VINCENTE-LORENTE, 2001) ou com a folga financeira (O'BRIEN, 2003;DEMIRKAN, 2018;LU;WONG, 2019), sendo essa última àquela que melhor representa a "estrutura financeira" de curto prazo capaz de garantir solvência às empresas enquanto realizam investimentos em inovação.…”

“…Sob a perspectiva teórica, a corrente majoritária dos estudos empíricos internacionais relata que a folga financeira exerce influência positiva nos investimentos em inovação (O'BRIEN, 2003;LEE, 2015;DEMIRKAN, 2018;LU;WONG, 2019),…”