Journal of Chemical and Pharmaceutical Research, 2013, 5(11): Research Article

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1 Avalable onlne Journal of Chemcal and Pharmaceutcal Research, 2013, 5(11): Research Artcle ISSN : CODEN(USA) : JCPRC5 Compettve actons and performance of technologcal nnovatng frms: moderaton of ntellectual captal Shengle P and Haln Lan School of Busness Admnstraton, South Chna Unversty of Technology, Guanghzou ABSTRACT Market competton of Chnese pharmaceutcal and chemcal frms n Transton tme s obvously nterrupted by Chnese nsttutonal context, market fragmentaton. Ths damages the motvaton of the technology and nnovaton of Chnese pharmaceutcal and chemcal frms. For helpng these frms to fnd a sutable way to compete nnovatvely and dfferently, ths paper attempted to dscuss how Chnese nnovatng frms compete wth dfferent acton whle they facng two types of compettor at one tme, and how the ntellectual captal have nfluence to the process. Ths research not only enrched the theores of dynamc competton but also provde some theoretcal advce for frms under the specal nsttutonal context to compete wth nnovatve technology. Keywords: Dynamc competton, Market fragmentaton, Intellectual captal INTRODUCTION In tmes of knowledge economcs, technology and nnovaton become mportant strategc resource. Thus frms are gatherng and enhancng all nformaton and knowledge capabltes, whch means ntellectual captal (IC)[1]. After Chna jonng WTO, Chnese frms faced more nternatonal competton envronment and also concerned IC as a strategc resource[2]. But the processes of acqurng IC and applyng t nto the competton are nterrupted by the nsttutonal context of Transton Economy. One character of Chnese economy s the separatng and segmentng of provncal authortes, whch s called market fragmentaton(mf)[3]. MF s caused by the governmental over-authorty and local protecton[4]. Therefore, MF has at least two man nfluences to frms: one s that competng behavor can only have effects n dfferent governmental felds; and the other s that cross-regon frms are facng two man types of compettors, ncludng regonal frms n dfferent provnces and multnatonal enterprses (MNEs). Chen[5] proposed resource smlarty of focal frm and compettor as a key character of frm choosng compettve actons. The hgher the resource smlarty, the lower possblty of attack s taken. However, Chen only menton tangble captal could be appled n calculatng the resource smlarty, and followng scholars ddn t dscuss whether ntangble captal, such as IC, can also ft for ths theory. Ths paper, through emprcal analyss, tred to answer two questons: 1) what s the effectng mechansm of resource smlarty on IC between Chnese frm and ts compettor nto compettve acton; 2) under the MF, how can frm apply compettve acton basng on IC to gan better performance. IC and Resources Smlarty Snce late 1990s professonals and researchers n management began to attempt to defne the IC components, there has been no generally accepted defnton or classfcaton of IC[12]. Stewart (1997) defned IC smply as packaged useful knowledge [13]. Edvnsson and Malone (1997) enrched the defnton to knowledge that can be converted nto value [14]. Researchers, by case studes and emprcal surveys, found out that acqurng IC can help to enhance capabltes of organzatonal learnng and nnovaton. Reed et al. (2006)[15] developed an IC-based theory that IC s en effectve and effcent way to help frm acheve value added, and have hgher performance. Thus IC s vewed as a strategc resource, whch s the bass of frm ganng compettve advantage and superor fnancal performance. 138

2 But, a seres of compettve acton can only make a frm buld advantage. Chen[5] proposed two dmensons, market commonalty and resource smlarty, to explan the decson mechansm of competton acton. Chen argued that resource smlarty of strategc resources determnes the compettve actons choosng. If the strategc resources between two rvalry frms are lttle, then they have larger possbltes to cooperate nstead of competton. Whle the opposte, f strategc resources between two rvalry frms are bg, they wll have lager possblty to attach. Tll now, however, lttle research have explored the effects of smlarty of IC on compettve acton, nor emprcal study test whether the IC consst wth the basc vew of resource smlarty. MF and Its Influence on Compettve Acton The market fragment s sourced by over-powered of local government[3], and the regonal markets of dfferent provnces s over nterrupted and local protected by the local government[4]. Therefore for a frm, Chnese domestc market s more lke a bound of regonal markets among whch have polcy dfferences. Therefore qute a lot of regonal frms rely on regonal polces and nsttutonal barrer to buld compettve advantage. Most of these regonal frms choose dversfcaton n a certan governmental authorty feld[11]. These local frms often control a certan market share wth both market and non-market actons. Thus whle a frm enter the regonal market, they wll become a stable threats to the cross-regon frms. Therefore Chnese horzontal frms are facng a two-lne competton, ncludng MNEs and local frms. Nevertheless, the MF s dynamc. A specfc provnce, wth ts own geographc character and socal economc development stage, has a specal problem n economy transton. Therefore they need dfferent and flexble polces for the dynamc developmental ssues. Also dfferent provnces are varous ndustral structure, thus the ndustral polces are also varous. All these dfferences cause the development of market economy n each provnce are dfferent, whch eventually leads to two results: one s a sngle provnce have dfferent content and extent of the local protecton n dfferent perod, the other s the extent of varety of regonal nsttutons around the whole naton are varous n each perod. HYPOTHESIS Compettve Actons and Performance of Chnese Frms MF represents the polcy dfferences between provnces and regons. Thus accordng to governmental herarchy and authorty, the market space of domestc market has been separated nto one natonal market scope and a bound of provncal regonal markets. Facng two types of compettors, horzontal frms and technology frms have to take compettve actons n dfferent scopes of market. And ths wll damage the effects of market actons whch based on technology and product nnovaton. Whle the nfluence of MF s lttle, regonal frms whch relyng on regonal nsttutonal barrer wll be damaged. So MNEs become the man compettors of Chnese chemcal frms. MNEs have bgger advantages n technology nnovaton, therefore n natonal market scope. Frms wth devance compettve actons are easly get re-attacked by MENs. Chnese frms have bgger regonal flexblty than MNEs. Thus they should start devance compettve actons n dfferent regonal market, whch wll buld better nnovatve advantages whle avodng re-attack of MNEs. When the nfluence of MF s sgnfcant, MNEs have less compettveness whle regonal frms have bgger threats to Chnese technology frms. Under the MF, f a Chnese frm apples devance and nnovatve actons n varous regonal markets, t wll defntely cause non-market re-attackn all regonal markets. Regonal frms can even copy the new technology under permsson of local government, so nnovatng frms can't have "frst-move" advantage. However, f a frm starts devance actons n natonal scope, the market share may have lttle ncrease, but technology frm wll have less re-attack by regonal compettors. H1a: When effect of MF s lttle, regonal compettve devance has postve nfluence on performance. H1b: When effect of MF s sgnfcant, natonal compettve devance has postve nfluence on performance. Smlarty of IC and Compettve Acton Technology nnovaton could help frm acqure market share rapdly, ganng "frst-move" advantage. And market scale s one of the mportant move for frm to nvest for hgh technology nnovaton[6]. However, MF strongly damages the revenue from technology nnovaton. Because on one hand MF cause frm to lne out ts new product or technology n a certan market scope, whch provdes the tme and space of "second-move" advantage for other regonal frms. On the other hand, MF help regonal frms to buld market barrer basng on regonal polcy, whch makes frm wth technology and nnovatve capablty under a dsadvantage status. Under such crcumstance, the IC a frm acqures for nnovaton must be chosen and taken under a certan objectve and percepton. When the nfluence of MF s lttle, MNEs s the man compettor of Chnese technology frm, and under such context, Chnese frm can have better performance wth hgher regonal compettve devance. The smlarty of IC could reveal the understandng of the frm about the specalty of Chnese market. The better understandng about Chnese market, the more benefcal when a frm apples regonal actons. When the nfluence of MF s sgnfcant, regonal frms are the man compettor for Chnese technology frms, and natonal compettve acton should be helpful to gan hgher performance. Thus the smlarty of IC represents the capablty of a frm n searchng and analyzng nformaton 139

3 about technologcal nnovaton. Ths capablty can help to reduce the communcaton and management costs when frms turn new technology nto market actons. H2a: When effect of MF s lttle, IC has moderaton effect between regonal compettve devance and performance. H2b: When effect of MF s sgnfcant, IC has moderaton effect between natonal compettve devance and performance. MATERIALS AND METHODS Research Method and Sample Ths paper chose frms lsted n Shangha or(and) Shenzhen stock market as sample. 26 frms from ar-condtoner, pharmacy and automoble ndustres are chosen, wth ther annual reports and meda reports snce 2001 to 2012 gathered, coded, and analyzed. Compettve actons are usually categorzed by scholar basng the ndustral features. Basng on Mller and Chen(1996)[7], ths paper categorzed compettve actons nto 8 types: nvestment or merger, cooperaton and alles, proposng new products, proposng new technology, openng new store or enterng new market, changng organzatonal structure or marketng system, changng prces, and takng publc relatonshp actvtes. Varable Dependent Varable: Followng Mller and Chen[7], ths paper chose ROA as the ndex of dependent varable, the performance. To take over the ndustral dfference, ths paper standardzed the value of ROA. Independent Varables: Ths paper followed the measurement of compettve devance by Ndofor et al[8]. Where p p refers to the proporton of frequency of acton to all actons, and refers to the mean proporton of frequency of acton n the whole ndustry. Ths paper also calculated separately nto natonal compettve devance and regonal compettve devance, accordng to the scope of actons of sample frms. d e v a n c e ( p p ) 2 (1) Moderatng Varables 1. Smlarty of IC: Under "double-lne" competton, Chnese frms are facng a group of compettors, thus the character of resources smlarty should be measured as the comparson between strategc resources of the focal frm and the average level of the ndustry. As scholars are applyng Tobn's Q as a representng varable of IC[16], ths paper calculated the dfference between Tobn's Q of focal frm and the average value of the ndustry, then calculate the squared dfferences. 2. MF: Ths paper adopted the NERI ndexes of all provnces n Chna snce 2001 to 2012 [11], to ndcate that the essental of MF s the dfferences of regonal nsttutonal dfferences among provnces. However, just applyng market ndexes cannot represent the specfc mpacts of MF on frms. Moreover, frms are mpact varously by the regonal nsttutonal dfferences because of the locaton of headquarter. Therefore the varable about nfluence of MF MFt m t s measured as (2). Whereas refers to the market ndex n t year of the provnce where headquarter located, and refers to the market ndex n t year of other provnces n Chna. All measurement of compettve complexty, coordnaton and MF are categorzed accordng to the means (1 for lower than means, and 2 for hgher) of the sample n each ndustry. MF t 31 ( m m ) th 31 t 2 Control Varables: Because compettve behavor has strong assocaton wth resources and prevous growth of the frm [9], ths paper chose the tme of frm bult, net-proft of last year, and resources slack as control varables, whle resources slack majorly measured by sze of frm[10] and the current rato of (proporton of current assets to current debts) [9]. Also the three control varables are standardzed to avod the ndustral dfferences. RESULTS AND DISCUSSSION Ths paper use SPSS 16.0 to run a general leaner regresson analyss as table 1. When the nfluence of MF s lttle, regonal compettve devance has comparatvely sgnfcantly (p<0.1) postve effect on performance; whle when the nfluence of MF s sgnfcant, natonal compettve devance has sgnfcantly (p<0.01) postve effect on (2) 140

4 performance. Thus H1a s partally accepted, H1b s accepted. When the nfluence of MF s lttle, the smlarty of IC has partally sgnfcantly (p<0.1) postve effect between regonal compettve devance and performance. And when the nfluence of MF s sgnfcant, the smlarty of IC has sgnfcantly (p<0.01) postve effect between natonal compettve devance and performance. Thus H2a s partally accepted, H2b s accepted. Table 1: Regresson of compettve acton, smlarty of IC and performance Model 1: ROA (MF=1) Model 2: ROA (MF=1) Model 3: ROA (MF=2) Model 4: ROA (MF=2) (Constant) (-0.957) (-0.115) (-1.820) (-1.164) sze pre-proft current rato tme Natonal devance (Nde) Regonal devance (Nde) Smlarty of IC (SIC) SIC*Nde SIC*Rde *** (-3.759) 0.345*** (4.716) 0.333*** (3.987) (-1.298) (0.534) (0.827) *** (-4.048) 0.442*** (6.238) 0.405*** (6.153) 0.207** (2.738) (-0.882) (-0.238) (-0.953) (1.374) (1.784) (0.071) (1.963) (1.651) (0.250) 0.407** (2.961) (-1.574) 0.02 (1.643) (1.643) 0.374*** (4.474) 0.165* (2.289) (-0.062) (-1.667) *** (-4.114) 0.212** (2.968) *** (-4.139) R 2 adjusted R 2 adjusted F 8.167*** *** 3.633*** 7.994*** ***. Regresson s sgnfcant at the level (2-taled). **. Regresson s sgnfcant at the 0.01 level (2-taled). *. Regresson s sgnfcant at the 0.05 level (2-taled). Regresson s sgnfcant at the 0.1 level (2-taled) 1 Data n brackets s the T value of each varable, data out of brackets s the coeffcents. DISCUSSION AND CONCLUSION Generally speakng, the nfluence of MF on technologcal nnovaton and busness mode of Chnese frm s huge. In dfferent market scopes, a frm needs to apply ts capablty on knowledge and nformaton wth adopton to the nsttutonal context. Ths paper found that, when the nfluence of MF s lttle, a frm needs to start ts compettve acton basng on technologc nnovaton n regonal market scope, to avod drect competton wth MNEs, and to acqure market share rapdly. But when nfluence of MF s sgnfcant, a frm needs to take actons n natonal market wth ts technologcal nnovaton, to brng treats to all regonal frms wthout gettng any re-attack. Ths emprcal result complmented the classcal dynamc competton theory. Whle classcal theores are focus on one focal frm facng on one compettor and developed a seres of theores, ths paper explored the basc logc nto a more realstc pre-assumpton, a focal frm facng multple types of compettors. Ths paper found out that when a focal frm facng two types of compettors, the compettve devance s also a effectve character for competton acton management, but frm needs to apply acton n sutable market space accordng to nsttutonal context. If a frm wants to make ts nnovaton and dfferentaton as major competng strategy, ts IC wll drectly mpact the capabltes and effectveness of knowledge management. Emprcal analyss showed that, the hgher value of IC, the more percepton for a frm to gan hgher performance wth compettve devance. Frm wth hgher IC can choose better market scope to apply compettve actons. Especally when the nfluence of MF s sgnfcant, frm wth hgher value of IC wll have less percepton to use devance compettve actons n regonal market rather than n natonal market. Ths paper developed the dea of Chen: resources smlarty s not only for tangble resource, but also for ntangble resources such as IC, and under a certan nsttutonal context, resource smlarty s also one of the basc factors for a frm to decde ts compettve actons. Acknowledgement Ths paper s supported by Natonal Natural Scence Fundaton of Chna (No ) 141

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