Managing liquidity in research‐intensive firms: signaling and cash flow effects of patents and alliance activities

Levitas, Edward; McFadyen, M. Ann

doi:10.1002/smj.762

Cited by 117 publications

(78 citation statements)

References 65 publications

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“…A robust patent regime (such as that available to the bio-pharmaceutical industry) enables entrepreneurial firms to convert their research innovations into a valuable resource that can be commercialized via out-licensing (Levitas and McFadyen, 2009). Recent research has demonstrated the link between patent citations and the market value of a patent (Nair et al, 2011).…”

Section: Market Imperfection and Information Asymmetry: Social Statusmentioning

confidence: 99%

Outbound open innovation in bio-pharmaceutical out-licensing

McNamara

McLoughlin

2015

Technovation

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a b s t r a c tOur study investigates the outbound open innovation of firms engaged in technological venturing. Leveraging insights from the sociology theory and innovation literatures, we clarify whether social status helps entrepreneurial ventures overcome market imperfection and information asymmetry in outlicensing and illustrate the importance of specific aspects of social status building in this context. We also examine the effect of failure experiences on out-licensing. We take a dynamic view of desorptive capacity by studying an entrepreneurial venture's learning process, both internally, in terms of its own technology trajectory, and externally, through inter-organizational alliances. We apply a negative binomial model to our novel panel of 180 firms studied over an 18-year period with controls for stocks of clinical development activities, patenting and prior licensing activities. Empirical analysis enables us to observe the impact which the firms' technological and development status, reputation and desorptive capacity exert upon out-licensing volume. Prior outbound open innovation studies do not account for the heterogeneity of technology and R&D success and failure experiences observed in our study. We also demonstrate the contingency effect of external learning from alliances during the building-up of a firm's desorptive capacity, or the way in which the number of co-authoring partners in scientific publications negatively moderates the positive effect of the number of commercial alliances on the volume of its outlicensing deals. Our findings contribute to the understanding of external knowledge exploitation and complement important aspects of the literatures on outbound open innovation and desorptive capacity, offering empirically rich insights for bio-pharmaceutical firms into the drivers behind volumes of outlicensing deals.Crown

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Section: Market Imperfection and Information Asymmetry: Social Statusmentioning

confidence: 99%

Outbound open innovation in bio-pharmaceutical out-licensing

McNamara

McLoughlin

2015

Technovation

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“…The liquidity of such firms, when they are listed, may be reduced compared to other sectors that are easier to understand for a large public of investors (MANGEMATIN et al, 2003;LEVITAS;MCFADYEN, 2009).…”

Section: Economic Position (Ep)mentioning

confidence: 99%

Identification of external critical success factors in biotechnology firms

Gholamali

Abbasi

Zanjani

2014

Ind. Jour. Manag. & Prod.

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Biotechnology is expected to change production methods, the products themselves and the structure of the industries in the new economies.Hopefully, countries in the Middle-East, Latin America, Asia and Africa have already recognized the importance of biotechnology's promise. In this sense, the importance of externalities which might affect the success or failure of these companies becomes an issue of paramount importance. In the present study, we will try to identify the main external factors which could lead in the success of biotechnology firms in Iran.To do so, the research follows a qualitative research design to answer this main question. Based on our findings, critical success factors are categorized in the following categories: General Environment (GE), Political Position (PP), Economic Position (EP), and Market Position (MP).

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“…Thus R&D investment provides a very low inside collateral value which makes raising funds externally more costly for R&D projects than for other types of investments (Arrow, 1962;Berger and Udell, 1998;Harhoff, 1998). Thus, firms willing to pursue an ambitious R&D agenda may face serious difficulties to attract external investors or to obtain bank loans and may therefore pile up cash to finance their R&D. This leads to a trade-off between investing in current R&D projects and retaining cash for future ones (Levitas and McFadyen, 2009). …”

Section: Financial Constraints and The Nature Of Randdmentioning

confidence: 99%

“…More recently, Levitas and McFadyen (2009) who also study biotechnology firms in the U.S., find that the nature of the collaboration matters. Certain alliance activities -in particular with the aim of "exploitation" -provide important signaling mechanisms and thus lower the firms' need to hold liquid assets to finance their R&D activities.…”

Section: Collaboration and Liquidity Constraintsmentioning

confidence: 99%

Collaborative R&D as a Strategy to Attenuate Financing Constraints

Czarnitzki

Hottenrott

2012

SSRN Journal

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Die Dis cus si on Pape rs die nen einer mög lichst schnel len Ver brei tung von neue ren For schungs arbei ten des ZEW. Die Bei trä ge lie gen in allei ni ger Ver ant wor tung der Auto ren und stel len nicht not wen di ger wei se die Mei nung des ZEW dar.Dis cus si on Papers are inten ded to make results of ZEW research prompt ly avai la ble to other eco no mists in order to encou ra ge dis cus si on and sug gesti ons for revi si ons. The aut hors are sole ly respon si ble for the con tents which do not neces sa ri ly repre sent the opi ni on of the ZEW. Non-technical summaryUnderinvestment in research and development (R&D) due to financing constraints may result in a slowdown in productivity growth and consequently have particularly detrimental effects on technological progress, economic development and competitiveness. The question how firms encounter and deal with such constraints is a crucial one in economic analysis that has, however, received little attention so far.Firms may develop strategies to attenuate the constraint for instance by creating signals to lenders and investors, finding ways to reduce resource requirements and to exploit economies of scale and scope in R&D. We argue in this article that collaborative R&D may not only increase incentives for investing in R&D by alleviating market failures stemming from incomplete appropriability of returns to R&D investment, but it may also be beneficial with respect to market failures associated with the financing of R&D.R&D collaboration serves as such a quality signal to investors if the partner firm or institution possesses properties that increase the confidence with respect to successful projects outcomes.Being selected as desired collaboration partner is a quality signal in the sense that it is awarded by the partner. The partner is likely to be less prone to information asymmetries as he is engaged in related or complementary activities that allow a much more accurate assessment of the R&D project's value than one made by a financial institution, for instance.In addition to the signaling effect, collaboration may simply reduce the riskiness of the R&D endeavor by the realization of scope economies that also reduce the amount of funds that needs to be raised. Firms may for instance have an incentive to source (complementary) knowledge from collaboration partners, to reduce the resources needed to build-up that knowledge on their own. Since R&D often exhibits economies of scale it might well be that only a consortium of firms has the necessary resources both financially and physically to undertake the larger, more complex, and more expensive research projects and synergetic effects and risk pooling can broaden the research horizon of collaborating firms. Strategic R&D collaboration may thus be especially useful in the early stages of an R&D project, in particular in the research phase, when uncertainty and information asymmetries are high.Using firm-level panel data from the region of Flanders in Belgium and distinguishing between R&D and pure resear...

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Managing liquidity in research‐intensive firms: signaling and cash flow effects of patents and alliance activities

Cited by 117 publications

References 65 publications

Outbound open innovation in bio-pharmaceutical out-licensing

Outbound open innovation in bio-pharmaceutical out-licensing

Identification of external critical success factors in biotechnology firms

Collaborative R&D as a Strategy to Attenuate Financing Constraints

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