COOPERATION AND COMPETITIONAMONG FIRMS

“The importance of internationalcooperation on innovation”

A case study on two European countries.

Eddal Adil & Longo Valentino

Parma, 15.03.2011

Goals of this work

• Stress on the importance of R&D and innovation activities

• Find factors that induce firms to cooperate in R&D sector

• Determinate why firms decide to cooperate with domestic or foreign firms

• Find variable that influence the chose of a domestic or a foreign partner at firm-level

• Define the situation in Germany and Portugal

Why is R&D important?

• Firms who invest in R&D want to innovate their products to “guide the market “and to be more attractive to external investors

• Innovation seems to be a duty for every firm

• But why different firms have different innovation levels?

• It depends on the sector they oparate in (i.e. agriculture, manufatcuring, services), their size,geographical location, etc.

• In a nowadays more globalized world, firms find more competitors operating in the markets they are interested in, because they don't have to consider only domestic competitors but also the foreign ones.

• But is globalization only an obstacle to development or it is also an opportunity?

• Firms that want to operate in different markets know that they can exploite the differences that they find in the different markets not only to gain more money and market shares, but also to better their knowledges analyzing the behavior of competitors and partners.

• From Equity-based alliances to looser forms of collaborations.

Globalization and cooperation

Why to look for a partner

• Increase of “open innovation”

• The need to:

1. decrease costs and create economies of scale

2. create economies of scope

3. spread risks

4. improve market access

Why to look for a partner?

• Characteristics of R&D cooperation:

1. intensive exchange of knowledge

2. mutual learning

3. open technological opportunities

4. absorptive capacity

… why a foreign one?• The growth of international competition and cooperation

• high cost for international projects

• wide diffusion of new technologies

• faster entry to market

• conforming to foreign government policies(IPR, taxation,ecc..)

• boostering of cooperation across borders by international organizations (E.U.)

Case study

Hypothesis

1.Firms engaged in innovation cooperation with domestic partners are different from those cooperating with foreign firms.

2.Differences with respect to the internationalisation of firms’ activities in a country lead to differences in the factors that influence innovation cooperation with foreign partners.

Case study

Germany Portugal

Why these two countries?

Case study

Different type of internationalisation environment and innovation systemGermany•very export-oriented country•established high-tech industry•share of innovators of 54%.Portugal•negative international trade balance•most exports come from labour-intensive sectors•its strenghts is in the services sector•share of innovators of 44%.

The Survey

Community Innovation Survey Third (CIS III)

• Behaviour of private firms about innovation cooperation

• Manufactoring and services sector

• Harmonization of the questionnarie across EU countries

Variables

Dependent variables

• Cooperated with at least one domestic partner (cod)

• Cooperated with at least one foreign partner (coforeign)

Definition of innovation cooperation:Innovation cooperation means active participation in joint R&D and other innovation projects with other enterprises or non-commercial institutions. It does not necessarily imply that both partners derive immediate commercial benefit from the venture. Pure contracting out of work, where there is no active collaboration, is not regarded as cooperation.

VariablesGermany Portugal

Firms that cooperate on innovation activities

478 (32%) 205 (26%)

Firms that cooperate at least with one domestic partner

459 (96% of cooperative firms)

175 (85% of cooperative firms)

Firms that cooperate at least with one foreign partner

181 (96% of cooperative firms)

109 (51% of cooperative firms)

Firms that cooperate with only domestic partners

297 (62% of cooperative firms)

96 (47% of cooperative firms)

Firms that cooperate with only foreign partners

19 (4% of cooperative firms) 30 (14% of cooperative firms)

Frims that cooperate with both domestic and foreign partners

162 (34% of cooperative firms)

79 (39% of cooperative firms)

Variables

Independent variables

• 1st group – Link outside

• 2nd group – Innovation activities

• 3rd group – Firm characteristics

Variables

Independent variables

• 1st group – Link outside

• Export

• Multinational

This first group of variables represents factors that should mainly influence the decision to cooperate with a foreign partner on innovation activities.

VariablesIndependent variables

• 2nd group – Innovation activities

• Absorptive capacity• R&D• Skill

• Innovation intensity• inno_int• inno_int^2

• Knowlodge spillover• spill_in• spill_out

Variables

Independent variables

• 3rd group – Firm Characteristics

• Public

• Firm Characteristics• size_2• size_3

• Other