26th International Association for Management of Technology Conference - IAMOT 2017

Although R&D and production are both indispensable in firms′ innovation activities, existing studies on innovation performance always consider the two processes separately when trying to find out factors that determine firms′ innovation performance. Considering only one process makes it hard to figure out which is more important for firms′ innovation performance. To compensate the aforementioned deficiencies, this article analyzes joint impacts of R&D mode and vertical integration on innovation performance of indigenous-brand automobile manufacturers (“indigenous brands” for short) in the background of Chinese automobile industry. Through reviewing existing literature, this article builds a conceptual framework of relationship between R&D mode, vertical integration and innovation performance. With micro data of Chinese indigenous brands from 1998 to 2007, Poisson regression and frontier stochastic method are used to test impacts of R&D mode and vertical integration on firms′ two different kinds of innovation performance: patent quantity and new product value. The result reveals that R&D mode and vertical integration exist total different impacts on firms′ different kinds of innovation output.Compared with independent R&D, two other R&D modes: technology import and technology outsourcing have insignificant crowding out effects on indigenous brands′ patent invention. However, technology outsourcing improves firms′ technical efficiency of new product production significantly and increases firms′ new product value; The relationship between vertical integration and patent quantity exhibits inverted U-shape while the relationship between vertical integration and new product value is negative; This result demonstrates that only with desirable coordination between activities of R&D and production, can indigenous brands transfer innovation input into efficient output. This research contributes both to literature of innovation performance and practice of innovation performance improvement for indigenous brands. On the one hand, the finding of different impacts of R&D mode and vertical integration on firms′ different kinds of innovation output certifies the necessity to consider different processes of innovation activities and to measure innovation performance in various ways. Concentrating on a single industry also helps avoid potential problems from ignorance on industry heterogeneity in traditional cross-industry analysis. On the other hand, this research provides direct guidelines to both policy makers and firm managers on helping indigenous brands improve their innovation performance, and the government′s indigenous brands support policies should make more emphasis on traditional manufacture technology when encouraging new energy technology. The indigenous brands themselves should also spend more resources on improving ability of key component manufacture and production management instead of only focusing on high speed new product development.