The paper aims to explore how business type, which a firm chooses according to its core competence and competitive advantage, influences a firm’s innovation strategies that in turn affect its operating performance. The paper will explore that whether a firm’s R&D investments have positive and lagged effects on its operating performance. In addition, the paper will examine whether the patent counts of firm have positive effects on operating performance. The paper will examine whether the categories of patents of firm have different effects on operating performance. Finally, the paper will explore that what is the role of business type during the process of turning the innovation capital accumulated through R&D investments into operating performance? Does different business type influence on the value-added benefit of operating performance brought by R&D investments?
Researchers have studied on the influence of various intangible assets (i.e. R&D expenditure) to firm performance and stock price in recent years. The paper relates intangible assets to strategy research issues and analyzes how do business types of firms affect the linkage of R&D capitals and performance. As for strategy literature, based on resourcebased theory, researchers generally state that a firm will take core competence and competitive advantage into consideration while choosing a proper business type. However, no previous researches have studied on whether the choice of business type will influence innovation investment strategies and operating performance. This paper uses large sample data to demonstrate that business type will influence the creation of firm value through formulating strategies that will affect innovation development. This paper presents an important and clear research argument on the choice of business type, the formulation of innovation development strategies and creation of performance.
The results of the paper are as follows. First, the paper shows that R&D expenditures by a high-tech firm have positive and lagged effects on operating performance. The categories of patents (the invention patents, utility model patents and design patents) do have different effects on operating performance. Second, the paper suggests that the valueadded effect to operating performance of R&D investments by a high-tech firm will be affected by its own business type. The paper finds that on average, the performance resulted from R&D activities in OBM firms is better than that in ODM/OEM firms. The linkage of R&D investment and performance will increase gradually comparing ODM/OEM to OBM firms. Note particularly, the paper finds that R&D expenditures can contribute more for performance when firms adopt the hybrid type. Finally, the paper suggests that compared to ODM/OEM firms, the patent counts on average can create more benefits for OBM firms. The performance paths that the categories of patents can contribute for OBM and ODM/OEM firms show firm-specific features. Note particularly, the paper finds that compared with OBM firms, ODM/OEM firms cannot benefit from the invention patents, utility model patents and design patents.
Innovation capital and performance link, OBM, ODM/OEM, Core competence