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R&D, Value Chain Location and Firm Performance in the Global Electronics Industry

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  • Namchul Shin
  • Kenneth Kraemer
  • Jason Dedrick
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    Abstract

    In today's global electronics industry, innovation is carried out by various value chain participants, including brand-name manufacturers (sometimes called lead firms), contract manufacturers and component suppliers, but there is little understanding of who benefits most from innovation in such networks. This research examines empirically the relationship of R&D spending and location in the value chain (lead vs. non-lead firms) to firm performance in the global electronics industry by using the Electronic Business 300 data set for 2000-2005. Our results show that firms spending more on R&D have higher gross profits, but do not have higher return on equity (ROE) and return on assets (ROA). There is a strong positive relationship between lead firms and performance as measured by gross profit, ROE and ROA, but the relationship between lead firms and gross profit becomes insignificant when the interaction term of R&D and lead firm is included in the analysis. Finally, lead firm status has a positive interaction effect on the relationship between R&D and gross profit. These findings suggest that the relationship of R&D to performance is mixed, but that lead firms can capture higher value (gross profit) from R&D than contract manufacturers and component suppliers.

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    Bibliographic Info

    Article provided by Taylor & Francis Journals in its journal Industry and Innovation.

    Volume (Year): 16 (2009)
    Issue (Month): 3 ()
    Pages: 315-330

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    Handle: RePEc:taf:indinn:v:16:y:2009:i:3:p:315-330

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    Related research

    Keywords: Electronics industry; global production network; innovation; lead firm; R&D; value chain;

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    Cited by:
    1. Lee, In Hyeock & Rugman, Alan M., 2012. "Firm-specific advantages, inward FDI origins, and performance of multinational enterprises," Journal of International Management, Elsevier, vol. 18(2), pages 132-146.
    2. Lema, Rasmus & Quadros, Ruy & Schmitz, Hubert, 2012. "Shifts in Innovation Power to Brazil and India: Insights from the Auto and Software Industries," MPRA Paper 49591, University Library of Munich, Germany.

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