HRM as a predictor of innovation

There is growing evidence available to suggest that HR practice is an important predictor of organisational performance. In this article, we argue that HR practices also have the potential to promote organisational innovation. We describe a longitudinal study of 22 UK manufacturing companies and examine the relationship between such practices and product and technological innovation. Results reveal that training, induction, team working, appraisal and exploratory learning focus are all predictors of innovation. Contingent reward, applied in conjunction with an exploratory learning focus, is positively associated with innovation in technical systems. Furthermore, training, appraisal and induction, combined with exploratory learning focus, explain variation between companies in product and technological innovation above and beyond the main effects observed. © 2006 Blackwell Publishing Ltd.

Innovation, ownership and profitability

There is lots of evidence that innovating firms are persistently more profitable than non-innovators, but little agreement on why this is the case. It may be because innovators are somehow able to protect their new products from the competition which normally erodes profits, or because innovating firms have superior capabilities and are able to introduce multiple innovations over time. And very little is known about the relationship between innovation, external ownership and profitability, despite the fact that foreign-owned firms are frequently highly innovative and very profitable. This paper considers the relationship between innovation, ownership and profitability for a panel of manufacturing plants in Ireland and Northern Ireland. We consider the link between innovation and profits separately for innovators and non-innovators, and for indigenous innovators and non-innovators and externally-owned plants. We also consider the determinants of innovation over the distribution of plant-level profitability, and find that the determinants of profitability – including innovation and external ownership – are quite different for low and high-profitability plants. We find support for the view that innovators and non-innovators have different profitability determinants, and that externally-owned plants have their profitability determined in a quite different way from indigenous enterprises. For indigenous non-innovators only the sector matters. Profitability in these enterprises is dictated largely by the industry they are in, with plants having virtually no means of differentiating their profitability from the norms of the industry. By contrast, indigenously-owned innovators are able to differentiate their profit performance from industry norms to some extent. Absolute size matters (negatively) and they get a strong boost from product innovation, but having a high market share does not matter for the profitability of indigenously-owned innovators. Externally-owned plants have a quite different set of profitability determinants from both of these groups. What matters for these plants is not the boost they get from innovating (there is none) but instead their position in the domestic market – a high market share boosts profitability. In policy terms our results suggest both optimistic and cautionary messages. On the positive side our results suggest that efforts to promote innovation activity among indigenously-owned plants are likely to have significant longer term benefits through their capability effects. For the development agencies in Ireland this is a reassuring result. On the more negative side, the lack of any relationship in our models between the innovation activities of externally-owned plants and their (profitability) performance raises potential concerns. This finding may reflect the lack of linkages between externally-owned plants and their Irish resource base, in turn raising some worrying issues about the ‘embeddedness’ of much FDI into Ireland and therefore its ‘stickiness’ in the face of Ireland’s increasing high relative cost base.

The limits of open innovation:openness and (quasi-)markets in the organization of innovation

Recent studies have stressed the importance of ‘open innovation’ as a means of enhancing innovation performance. The essence of the open innovation model is to take advantage of external as well as internal knowledge sources in developing and commercialising innovation, so avoiding an excessively narrow internal focus in a key area of corporate activity. Although the external aspect of open innovation is often stressed, another key aspect involves maximising the flow of ideas and knowledge from different sources within the firm, for example through knowledge sharing via the use of cross-functional teams. A fully open innovation approach would therefore combine both aspects i.e. cross-functional teams with boundary-spanning knowledge linkages. This suggests that there should be complementarities between the use cross-functional teams with boundary-spanning knowledge linkages i.e. the returns to implementing open innovation in one innovation activity is should be greater if open innovation is already in place in another innovation activity. However, our findings – based on a large sample of UK and German manufacturing plants – do not support this view. Our results suggest that in practice the benefits envisaged in the open innovation model are not generally achievable by the majority of plants, and that instead the adoption of open innovation across the whole innovation process is likely to reduce innovation outputs. Our results provide some guidance on the type of activities where the adoption of a market-based governance structure such as open innovation may be most valuable. This is likely to be in innovation activities where search is deterministic, activities are separable, and where the required level of knowledge sharing is correspondingly moderate – in other words those activities which are more routinized. For this type of activity market-based governance mechanisms (i.e. open innovation) may well be more efficient than hierarchical governance structures. For other innovation activities where outcomes are more uncertain and unpredictable and the risks of knowledge exchange hazards are greater, quasi-market based governance structures such as open innovation are likely to be subject to rapidly diminishing returns in terms of innovation outputs.

The microstructure of the foreign exchange market:the determinants of bid-ask spreads in the foreign exchange market

The purpose of this thesis is to shed more light in the FX market microstructure by examining the determinants of bid-ask spread for three currencies pairs, the US dollar/Japanese yen, the British pound/US dollar and the Euro/US dollar in different time zones. I examine the commonality in liquidity with the elaboration of FX market microstructure variables in financial centres across the world (New York, London, Tokyo) based on the quotes of three exchange rate currency pairs over a ten-year period. I use GARCH (1,1) specifications, ICSS algorithm, and vector autoregression analysis to examine the effect of trading activity, exchange rate volatility and inventory holding costs on both quoted and relative spreads. ICSS algorithm results show that intraday spread series are much less volatile compared to the intraday exchange rate series as the number of change points obtained from ICSS algorithm is considerably lower. GARCH (1,1) estimation results of daily and intraday bid-ask spreads, show that the explanatory variables work better when I use higher frequency data (intraday results) however, their explanatory power is significantly lower compared to the results based on the daily sample. This suggests that although daily spreads and intraday spreads have some common determinants there are other factors that determine the behaviour of spreads at high frequencies. VAR results show that there are some differences in the behaviour of the variables at high frequencies compared to the results from the daily sample. A shock in the number of quote revisions has more effect on the spread when short term trading intervals are considered (intra-day) compared to its own shocks. When longer trading intervals are considered (daily) then the shocks in the spread have more effect on the future spread. In other words, trading activity is more informative about the future spread when intra-day trading is considered while past spread is more informative about the future spread when daily trading is considered

Investigating Turkey's national innovation and learning system

The national systems of innovation (NIS) approach focuses on the patterns and the determinants of innovation processes from the perspective of nation-states. This paper reports on continuing work on the application of an NIS model to the development of technological capability in Turkey. Initial assessment of the literature shows that there are a number of alternative conceptualisations of NIS. An attempt by the Government to identify a NIS for Turkey shows the main actors in the system but does not pay sufficient attention to the processes of interactions between agents within the system. An operational model should be capable of representing these processes and interactions and assessing the strengths and weaknesses of the NIS. For industrialising countries, it is also necessary to incorporate learning mechanisms into the model. Further, there are different levels of innovation and capability in different sectors which the national perspective may not reflect. This paper is arranged into three sections. The first briefly explains the basics of the national innovation and learning system. Although there is no single accepted definition of NIS, alternative definitions reviewed share some common characteristics. In the second section, an NIS model is applied to Turkey in order to identify the elements, which characterise the country’s NIS. This section explains knowledge flow and defines the relations between the actors within the system. The final section draws on the “from imitation to innovation” model apparently so successful in East Asia and assesses its applicability to Turkey. In assessing Turkey’s NIS, the focus is on the automotive and textile sectors.

An empirical investigation of the effect of rights issue announcements on share returns and the determinants of abnormal returns on the Kuala Lumpur Stock Exchange

This thesis examines the effect of rights issue announcements on stock prices by companies listed on the Kuala Lumpur Stock Exchange (KLSE) between 1987 to 1996. The emphasis is to report whether the KLSE is semi strongly efficient with respect to the announcement of rights issues and to check whether the implications of corporate finance theories on the effect of an event can be supported in the context of an emerging market. Once the effect is established, potential determinants of abnormal returns identified by previous empirical work and corporate financial theory are analysed. By examining 70 companies making clean rights issue announcements, this thesis will hopefully shed light on some important issues in long term corporate financing. Event study analysis is used to check on the efficiency of the Malaysian stock market; while cross-sectional regression analysis is executed to identify possible explanators of the rights issue announcements' effect. To ensure the results presented are not contaminated, econometric and statistical issues raised in both analyses have been taken into account. Given the small amount of empirical research conducted in this part of the world, the results of this study will hopefully be of use to investors, security analysts, corporate financial managements, regulators and policy makers as well as those who are interested in capital market based research of an emerging market. It is found that the Malaysian stock market is not semi strongly efficient since there exists a persistent non-zero abnormal return. This finding is not consistent with the hypothesis that security returns adjust rapidly to reflect new information. It may be possible that the result is influenced by the sample, consisting mainly of below average size companies which tend to be thinly traded. Nevertheless, these issues have been addressed. Another important issue which has emerged from the study is that there is some evidence to suggest that insider trading activity existed in this market. In addition to these findings, when the rights issue announcements' effect is compared to the implications of corporate finance theories in predicting the sign of abnormal returns, the signalling model, asymmetric information model, perfect substitution hypothesis and Scholes' information hypothesis cannot be supported.

Determinants of sales performance in insurance industry:a cross-cultural comparison between the UK and Malaysia

This thesis is concerned with an empirical investigation of the factors that predict a successful salesperson, using a cross-cultural comparison of two countries: the UK and Malaysia. Besides collecting quantitative data, qualitative data on organisational, environmental and cultural factors were also collected through interviews, personal and case observations. The quantitative data consist of sixteen independent factors and three dependent factors. The independent variables include self-efficacy, self-esteem, locus of control, self-monitoring, extrinsic motivation, intrinsic motivation, experience, training perception, role ambiguity, role conflict, role inaccuracy, gender, age, education, race and religion. The dependent variables are performance target achieved, performance earnings and performance ratings. Questionnaires were distributed to about 500 salespersons in each country, from three insurance companies in the UK and two insurance companies in Malaysia. Response rates were 75 and 50 percent from the UK and Malaysia respectively. The survey results indicated that a salesperson's performance in the UK is predicted by self-efficacy, internal locus of control, self-esteem, extrinsic motivation, experience, training perceptions, role conflict and gender. In Malaysia, a salesperson's performance is predicted by self-efficacy, self-monitoring, experience, role conflict, role ambiguity, education, gender, race and religion. Self-efficacy, experience, role conflict and gender are common predictors of salespersons' performance in both cultures. The likely explanation for these results is culture differences, i.e. UK has a homogeneous culture, while Malaysia has a heterogeneous one. Results from the case observations, such as organisational and environmental factors, give supporting evidence in explaining the empirical results. Implications from the findings are discussed from two aspects: (1) theoretical implications for divergence/convergence theory, Hofstede's model, Churchill's model, and (2) managerial implications for selection, training, motivation and appraisal.

Differential perception of innovation with particular reference to the organisational context

Differential perception of innovation is a research area which has been advocated as a suitable topic for study in recent years. It developed from the problems encountered within earlier perception of innovation studies which sought to establish what characteristics of an innovation affected the ease of its adoption. While some success was achieved In relating perception of innovation to adoption behaviour, variability encountered Within groups expected - to fercelve innovation similarly suggested that the needs and experiences of the potential adopter were significantly affecting the research findings. Such analysis being supported by both sociological and psychological perceptual research. The present study sought to identify the presence of differential perception of innovation and explore the nature of the process. It was decided to base the research in an organisational context and to concentrate upon manufacturing innovation. It has been recognised that such adoption of technological innovation is commonly the product of a collective decision-making process, involving individuals from a variety of occupational backgrounds, both in terms of occupational speciality and level within the hierarchy. Such roles appeared likely to significantly influence perception of technological innovation, as gathered through an appropriate measure and were readily identifiable. Data vas collected by means of a face-to-face card presentation technique, a questionnaire and through case study material. Differential perception of innovation effects were apparent In the results, many similarities and differences of perception being related to the needs and experiences of the individuals studied. Phenomenological analysis, which recognises the total nature of experience in infiuencing behaviour, offered the best means of explaining the findings. It was also clear that the bureaucratic model of role definition was not applicable to the area studied, it seeming likely that such definitions are weaker under conditions of uncertainty, such as encountered in innovative decision-making.

Determinants of sponsorship fit:a multilevel analysis

Sponsorship fit is frequently mentioned and empirically examined as a success factor of sponsorship. While sponsorship fit has been considered as a determinant of sponsorship success, little knowledge exists about the antecedents of sponsorship fit. In the present paper, individual and firm-level antecedents of sponsorship fit are examined in a single hierarchical linear model. Results show that sponsorship fit is influenced by the perception of benefits, the firm’s regional identification, sincerity, relatedness to the sponsored activity, and its dominance. On a partnership level, results show that contract length contributes to sponsorship fit while contract value is found to be unrelated.

Determinants of employment growth at MNEs:evidence from Egypt, India, South Africa and Vietnam

Many foreign investment operations into emerging markets are small, and are likely to have only a limited impact on the local economy. However, host governments often expect transfer of advanced technology from multinational enterprises (MNEs) operating in these markets to local firms by way of inter-firm mobility of skilled labourers. The extent of such transfers would be limited, among other factors, by the size of the pool of skilled labourers that can potentially be mobile between MNEs and local firms. This, in turn, is determined by employment growth at the MNEs. We develop an empirical specification that models this employment growth, by drawing on both the economics and international business literature. This model is then estimated using firm-level data from four emerging markets. We find that wholly owned foreign direct investment operations have higher employment growth, while local industry and institutional characteristics moderate the growth effect. This suggests that policies encouraging foreign investors to set up in form of joint ventures may not actually raise the benefits for the host economy.

Determinants of entry mode choice of MNCs in emerging markets:evidence from South Africa and Egypt

It is now stylized that the importance of foreign direct investment for developing countries and emerging markets arises from the impact of the presence of multinational corporations (MNCs) in the host country on the productivity of local firms, by way of technology diffusion and competition. There is also general agreement that the extent of technology transfer by an MNC to a developing country affiliate depends on the extent of its control on the local affiliate and that, in turn, the extent of this control depends on the mode of entry of the MNC into the host country. However, the existing literature is based on the experience of developed countries and as such does not contribute to the literature on development economics. This article addresses this lacuna using unique firm-level data from South Africa and Egypt. Our results indicate that the determinants of entry mode choice not only differ between developed and developing countries, but also among developing countries. They also bring into question the role of MNCs in fostering productivity growth in developing countries.

National system of innovation and technological learning:an integrated framework for understanding technological capability development in the Russian forestry sector

One of the issues in the innovation system literature is examination of technological learning strategies of laggard nations. Two distinct bodies of literature have contributed to our insight into forces driving learning and innovation, National Systems of Innovation (NSI) and technological learning literature. Although both literatures yield insights on catch-up strategies of 'latecomer' nations, the explanatory powers of each literature by itself is limited. In this paper, a possible way of linking the macro- and the micro-level approaches by incorporating enterprises as active learning entities into the learning and innovation system is proposed. The proposed model has been used to develop research hypotheses and indicate research directions and is relevant for investigating the learning strategies of firms in less technologically intensive industries outside East Asia.