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Jully 2008 Do firms know the scope of their R&D network? An empirical investigation of network awareness on French survey data Stéphane Lhuillery a , Etienne Pfister bc a Ecole Polytechnique Fédérale de Lausanne, Collège du Management de la Technologie b Direction de l’Evaluation, de la Prospective et de la Performance c BETA-Universités de Nancy and CNRS, France

Do firms know the scope of their R&D network? An … empirical investigation of network awareness on French survey data ... Some results of the empirical literature on R&D networks

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Page 1: Do firms know the scope of their R&D network? An … empirical investigation of network awareness on French survey data ... Some results of the empirical literature on R&D networks

Jully 2008

Do firms know the scope of their R&D network?An empirical investigation of network awareness on French survey data

Stéphane Lhuillerya, Etienne Pfisterbc

a Ecole Polytechnique Fédérale de Lausanne, Collège du Management de la Technologieb Direction de l’Evaluation, de la Prospective et de la Performance c BETA-Universités de Nancy and CNRS, France

Page 2: Do firms know the scope of their R&D network? An … empirical investigation of network awareness on French survey data ... Some results of the empirical literature on R&D networks

Jully 2008

Definition:

Whole set of external R&D relationships of a firm

All types of partners: firms, universities, government agencies

All types of relationships: formal/informal, close/distant, institutional/personal, etc…

Can be broadened to include indirect ties

The relationships of a firm’s partners

Definition:

Whole set of external R&D relationships of a firm

All types of partners: firms, universities, government agencies

All types of relationships: formal/informal, close/distant, institutional/personal, etc…

Can be broadened to include indirect ties

The relationships of a firm’s partners

Why consider R&D networks in economics ?

INTRODUCTION1. R&D networks in the economics of innovation

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Networks contribute to the innovation capabilities of a firm

Expands the pool of knowledge

Help attract and select R&D partners

How a firm benefit from its network depends on

its position within that network (periphery vs centrality)

the type of relationships within that network

the diversity of the network

The ability of the network to accept new entrants

Networks contribute to the innovation capabilities of a firm

Expands the pool of knowledge

Help attract and select R&D partners

How a firm benefit from its network depends on

its position within that network (periphery vs centrality)

the type of relationships within that network

the diversity of the network

The ability of the network to accept new entrants

Do firms really know the extent of their R&D network ?

Which ones do ?

INTRODUCTIONSome results of the empirical literature on R&D networks

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Jully 2008

Two common beliefs among scholarsTwo common beliefs among scholars

R&D alliances are good for (innovative) performances

Cooperation can be detrimental for innovation

Usual results are flawed : missing non-R&D alliances in models

Network is an efficient coordination mechanism

Firms in networks ignore if they have complete information or not

Firms do not know the architecture of the network they belong to

INTRODUCTION2. Challenging the literature on S&T interactions

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The research measuring the ignorance of agents in networks has been scantyThe research measuring the ignorance of agents in networks has been scanty

Agents imagine a network they believe to belong to (Stockman and Doreian, 1997; Janicik and Larrick, 2005)

Incomplete information in theoretical network models (Galeotti et al., 2008; McBride, 2008)

INTRODUCTION2. Incomplete information in networks: very few results

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Jully 2008

Sometime the indirect links between nodes are knownSometime the indirect links between nodes are known

INTRODUCTION3. Incomplete information in networks: Example 1

Page 7: Do firms know the scope of their R&D network? An … empirical investigation of network awareness on French survey data ... Some results of the empirical literature on R&D networks

Jully 2008 INTRODUCTION4. Incomplete information in networks: Example 2

Key For All Figures:

CYAN NODE = DBFORANGE = PROBROWN = Gov’tYELLOW = PharmaGRAY = VCWHITE = Other

Triangle = New EntrantCircle = IncumbentNode size = standardizednetwork degree, constantwithin figures

RED TIE= R&DGREEN = FinanceBLUE = CommercialMAGENTA = Licensing

From Powell et al., American Journal of Sociology, January 2005

Sometime the indirect links between nodes are difficult to knownSometime the indirect links between nodes are difficult to known

Page 8: Do firms know the scope of their R&D network? An … empirical investigation of network awareness on French survey data ... Some results of the empirical literature on R&D networks

Jully 2008 INTRODUCTION5. Incomplete information in networks: Example 2

The EPFL co-patenting network, according to different heuristics

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Page 9: Do firms know the scope of their R&D network? An … empirical investigation of network awareness on French survey data ... Some results of the empirical literature on R&D networks

Jully 2008 INTRODUCTION

6. Incomplete information in networks: the F firm point of view

Page 10: Do firms know the scope of their R&D network? An … empirical investigation of network awareness on French survey data ... Some results of the empirical literature on R&D networks

Jully 2008 INTRODUCTION6. Aims and Methods

This research aims at investigating:

To what extent firms know/ignore their network architecture

What are the determinants of ignorance of firms regarding their R&D network architecture

This research aims at investigating:

To what extent firms know/ignore their network architecture

What are the determinants of ignorance of firms regarding their R&D network architecture

We propose an econometric setting to analyze whether firms know the existence of indirect links between its R&D partners

We analyze the awareness of links among the three main R&D partners

Page 11: Do firms know the scope of their R&D network? An … empirical investigation of network awareness on French survey data ... Some results of the empirical literature on R&D networks

Jully 2008 INTRODUCTION7. Our research differs from previous works in two major ways

Our work prose an econometric model based on a unique postal survey providing a large and representative sample of firms with R&D dyadic links

We do not assume the link between nodes are known by network participants

The R&D links considered are declarative and qualitative: they are broader than the one approximated by other databases (MERIT CATI, patent data)

Our work prose an econometric model based on a unique postal survey providing a large and representative sample of firms with R&D dyadic links

We do not assume the link between nodes are known by network participants

The R&D links considered are declarative and qualitative: they are broader than the one approximated by other databases (MERIT CATI, patent data)

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Outline

1. The determinant of ignorance

2. Data and Variables

3. Empirical methods

4. Results

Page 13: Do firms know the scope of their R&D network? An … empirical investigation of network awareness on French survey data ... Some results of the empirical literature on R&D networks

Jully 2008 1.THE DETERMINANTS OF IGNORANCE 1.1 Categories

Determinants of awareness are difficult to identify. Four Classes can be considered

THE CARACTERISTICS OF NODES

o The firm

o The R&D partners

THE CHARACTERISTICS OF R&D LINKS

o The direct links

o The indirect links

Determinants of awareness are difficult to identify. Four Classes can be considered

THE CARACTERISTICS OF NODES

o The firm

o The R&D partners

THE CHARACTERISTICS OF R&D LINKS

o The direct links

o The indirect links

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• Experience: experienced firms are more aware of the existing network

• Size: small firms are depending more on external resources

• Intense and diversified R&D investors are more aware

• Affiliates rely more on their group and are less interested in indirect ties

• Uncertain and rapidly evolving technological environments can confer greater value to indirect ties

1.THE DETERMINANTS OF IGNORANCE 1.2. The firm’s characteristics

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• Collaborations focused on R&D and knowledge exchange aspects

• R&D collaboration more likely to supply information than R&D subcontracting.

• The length of the relationship

• Complementary competences are bridging two complementary networks.

1.THE DETERMINANTS OF IGNORANCE 1.3. The direct link characteristics

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Jully 2008

• Techno Center or PROs are more likely to disclose their ties

• R&D partners are more likely to disclose their relationships when they are similar

• Geographical proximity (even international…)

• Collocation of the two R&D partners

• Reputation is a positive driver of awareness

• Access to new market

1.THE DETERMINANTS OF IGNORANCE 1.4. The R&D partners’ characteristics

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Several possible dimensions here:• Regularity• Formal contracts • Formal organization (RJV as in CATI)• …

A severe methodological problem is that thecharacteristics of the indirect links

o are not often known by firmso Are difficult to ask in questionnaires

1.THE DETERMINANTS OF IGNORANCE 3. The undirect link characteristics

Page 18: Do firms know the scope of their R&D network? An … empirical investigation of network awareness on French survey data ... Some results of the empirical literature on R&D networks

Jully 2008 2.DATA AND VARIABLES2.1 Different data sources

2002 ERIE survey on partnerships. We use the one on R&D links

The 2000 R&D annual survey

2002 ERIE survey on partnerships. We use the one on R&D links

The 2000 R&D annual survey

Page 19: Do firms know the scope of their R&D network? An … empirical investigation of network awareness on French survey data ... Some results of the empirical literature on R&D networks

Jully 2008 2.DATA AND VARIABLES2.2 Cost data

The 3 main R&D partners are detailed in ERIE The 3 main R&D partners are detailed in ERIE

P1

P2 P3

Firmi

DL1 DL2

DL3

IL12

IL23

IL13 P4

P7 P6

P5 P8

IL47

IL34

IL57

Page 20: Do firms know the scope of their R&D network? An … empirical investigation of network awareness on French survey data ... Some results of the empirical literature on R&D networks

Jully 2008 2.DATA AND VARIABLES2.3 Different data sources

oMerging these two datasetsoExcluding R&D service firms (NACE=”731”) oExcluding firms with only intra-group partnerships

1461 firms involved in external R&D relationships.

oExcluding firms with less than two R&D partners declared496 firms with multiple links.

oReshaping the dataset in order to be at the indirect link level:1041 potential indirect ties whose existence may be known or not by

the responding firm.

oMerging these two datasetsoExcluding R&D service firms (NACE=”731”) oExcluding firms with only intra-group partnerships

1461 firms involved in external R&D relationships.

oExcluding firms with less than two R&D partners declared496 firms with multiple links.

oReshaping the dataset in order to be at the indirect link level:1041 potential indirect ties whose existence may be known or not by

the responding firm.

Page 21: Do firms know the scope of their R&D network? An … empirical investigation of network awareness on French survey data ... Some results of the empirical literature on R&D networks

Jully 2008 2.DATA AND VARIABLES2.4 Variables : Characteristics of the responding firm

o R&D intensity (R&DI)

oFirm size (SIZE) is measured by the logarithm of the number of employees.

oIndustry dummies: high-technology industries, medium-high-technology industries, medium-low-technology industries, low-technology industries.

oBusiness groups : Domestic or foreign business groups

Page 22: Do firms know the scope of their R&D network? An … empirical investigation of network awareness on French survey data ... Some results of the empirical literature on R&D networks

Jully 2008 2.DATA AND VARIABLES2.5 Variables : the type of the R&D partner

o Four types of R&D partner (PRO, TECHNO CENTRE, CONSORTIUM, ENTERPRISE)

o HOMOGAMY o BUSINESS GROUP is 1 if one of the partner belongs to the

same groupo Three geographical levels (LOCAL, NATIONAL,

INTERNATIONAL). o COLOCATIONo KNOWLEDGE as a asset providedo REPUTATION.

Page 23: Do firms know the scope of their R&D network? An … empirical investigation of network awareness on French survey data ... Some results of the empirical literature on R&D networks

Jully 2008 2.DATA AND VARIABLES2.6 Variables : Characteristics of the R&D collaboration

o ASYMMETRY

o COMPLEMENTARITY

o R&D SUBCONTRACTING

o LONGTERM

o MARKET ACCESS

Page 24: Do firms know the scope of their R&D network? An … empirical investigation of network awareness on French survey data ... Some results of the empirical literature on R&D networks

Jully 2008 3.METHODS3.1 A probit model with selection

1

2

( & 1)( 1)

P number of R D partners XP Awareness Z

β εβ µ> = +⎧

⎨ = = +⎩

An Heckman probit model

Page 25: Do firms know the scope of their R&D network? An … empirical investigation of network awareness on French survey data ... Some results of the empirical literature on R&D networks

Jully 2008 3. METHODS3.2 Additionnal control variables

• Three dummy variables (RANK1, RANK2, RANK3)

• NUMBER OF CENSORED TIES

• HEADQUARTER

Page 26: Do firms know the scope of their R&D network? An … empirical investigation of network awareness on French survey data ... Some results of the empirical literature on R&D networks

Jully 2008 4.RESULTS4.1 Descriptive stats

Variable Mean St. Dev. Variable Mean St. Dev.

AWARENESS 0.42 0.49 RD INTENSITY 2.57 1.47TECHNO CENTRE° 0.20 0.40 SIZE 5.29 1.79PROs° 0.46 0.50 FRENCH BUSINESS GROUP° 0.43 0.50

CONSORTIUM° 0.13 0.34 FOREIGN BUSINESS GROUP° 0.27 0.45BUSINESS GROUP° 0.27 0.44 HEADQUARTER° 0.07 0.25HOMOGENOUS 0.74 0.44 MEDIUM LOW TECH° 0.27 0.44

REPUTATION° 0.20 0.40 MEDIUM HIGH TECH° 0.29 0.45

COMPLEMENTARITY° 0.52 0.50 HIGH TECH INDUSTRY° 0.29 0.45

LOCAL° 0.44 0.50 RANK2° 0.70 0.46INTERNATIONAL° 0.45 0.50 RANK3° 0.60 0.49COLOCATION° 0.45 0.50 SELECTION 11.40 34.80LONG TERM° 0.54 0.50KNOWLEDGE TASKS° 0.59 0.49R&D SUBCONTRACTOR° 0.41 0.49ASYMMETRY° 0.47 0.50MARKET ACCESS° 0.37 0.48

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Jully 2008 4.RESULTS4.2 Econometric results (1)

variable Marginal effects Std. Err.

TECHNO CENTER° 0.010 0.027PROs° 0.045** 0.022CONSORTIUM° 0.015 0.027BUSINESS GROUP° 0.007 0.021HOMOGENOUS 0.041* 0.023REPUTATION° -0.013 0.023COMPLEMENTARITY° -0.016 0.019LOCAL° 0.007 0.019INTERNATIONAL° 0.025 0.025COLOCATION° 0.014 0.028LONG TERM° -0.016 0.017KNOWLEDGE TASKS° 0.237*** 0.042R&D SUBCONTRACTOR° -0.025 0.025ASYMMETRY° -0.016 0.018MARKET ACCESS° 0.039** 0.020

Page 28: Do firms know the scope of their R&D network? An … empirical investigation of network awareness on French survey data ... Some results of the empirical literature on R&D networks

Jully 2008 4.RESULTS4.3 Econometric results (2)

RD INTENSITY -0.024*** 0.011

SIZE -0.037*** 0.011

FRENCH BUSINESS GROUP° -0.078* 0.045

FOREIGN BUSINESS GROUP° -0.017 0.044

HEADQUARTER° 0.067 0.060

MEDIUM LOW TECH° -0.096* 0.056

MEDIUM HIGH TECH° -0.086* 0.044

HIGH TECH INDUSTRY° -0.106** 0.049

RANK2° 0.007 0.021

RANK3° -0.018 0.030

SELECTION 0.001 0.000

Page 29: Do firms know the scope of their R&D network? An … empirical investigation of network awareness on French survey data ... Some results of the empirical literature on R&D networks

Jully 2008 5. Conclusion

• Firms are often blind on their R&D network architecture• Awareness decreases with size and R&D• Proximity and colocalization do not matter

= Implicit criticism of the literature on the ability of firms to manage their network and their ability to improve theirperformances thanks to this optimization.

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Jully 2008 5.Conclusion

• THANK YOU