Analysis of Technological Activities and Their Impact on the Financial Performance of the Firm Article - Essay Example

?Review Task: Critical review on the article “Technological Activities and Their Impact on the Financial Performance of the Firm: Exploitation and Exploration Within and Between Firms”. Summary It is vital to note that this paper analyzes technological strategies’ impact on financial performance of a firm. It is analytic in the sense of relating different firm articulations to financial scenarios. It is in the view of finding the best alternative, among various decisions, for a firm. The paper operates in two dimensions. To begin with, it analyzes explorative against exploitative strategies. Secondly, it analyzes collaborative versus solitary strategies. It further merges these two dimensions that give rise to four compartments of the research orientation. This pertains to collaborative explorative and exploitative activities. It also pertains to solitary explorative and exploitative activities. It is vital to note that the research relied on technology alliances literature and organizational learning theory. This refers to the secondary data used. The examples of secondary data in the study include statistics and literature on management and marketing theory. Statistics provided rich backgrounds for guiding the study and providing the study with grounds for management theories (Wang and Pizam, 2011, p. 87). However, the analysis was more complex as it involved the use of graphs and curves in reaching conclusions. This pertains to the use of Tobin’s Q index in measuring market performance. It was a market value indicator. The curves and graphs helped show relationships between variables. This pertains to financial performance and strategies’ relationships. Purpose of the study This study has notable purposes. For instance, it strives to find solutions for treatment of patents as regards their ages. In addition, it strives to give information for proper management decisions as regards different cases. This means that there could be different scenarios for management as regards the age of firms and invention. Besides, such information would be vital for balance of different strategies that bear financial success to firms. Concisely, this paper is critical for treatment of innovation in ways that accord feasible financial plans. In this sense, the research fills a gap that previous research in the field has missed. Methodology The research is a qualitative one that stresses abstract concepts such as innovation and value of decisions. However, it is vital to note that the research has quantitative aspects that it utilizes to analyze the data qualitatively. The overly qualitative aspect of the research reveals in the utility of terms such as explorative and exploitative aspects. The term exploitative is employed to refer to the age of patents and innovations. Exploitative aspects of a firm’s strategies refer to enhancing financial capabilities by means of strategies such as refinement and standardization. On the other hand, exploration refers to an act of raising performance platforms, or creating new capabilities, through means such as research and experimentation. This dichotomy is employed in the research whereby it accounts for quantitative aspects such as efficiency and financial success. However, it is vital to note that the results of such strategy articulations are quantitative (Cole 2004, p. 68). It is clear that this research is an experimental one that has two types of variables. This pertains to a dependent and an independent variable. The dependent variable, in this case, refers to a financial success. This is because it relies on different firms’ strategies for particular quantitative results. On the other hand, strategies are independent variables because they determine particular financial success of various scenarios (Fandel, 2003, p. 167). This makes a relation between these variables for easy plotting in graphs and curves. In this case, it makes the research develop an analytic approach. The distinction pertains to the idea that it analyses the results that the same research finds. It is vital to note the philosophical approach to this research. The ontological leanings refer to the view that knowledge is objective and should be realized through analysis and research. This research only relies on analysis at the realization of results. It does not impose an idea at the beginning of the research. If it were the opposite case, the research would have tried to move the same towards imposing an original idea. In this sense, the research is open to the solutions that its findings would give. The approach of the methodology is built on a deductive approach. In this case, it presented four hypotheses in respective scenarios. This guided the research into giving three possible scenarios out of the four scenarios. The third articulation of results would concern with a null situation. The first hypothesis relied on the idea that corporate strategies’ problem relies on achieving the balance of attention and resources between explorative and exploitative activities (Belderbos, 2011, p. 875). The deduction in these two scenarios regards the view that exploitative activities can improve efficiency in the short-run period. However, such a situation would lead to laxity and non-exploitation of exploration activities. This refers to the case of a performance trap that blinds the firm from realizing new capabilities. Similarly, a sole focus on exploration could cause a major detriment to firms. This refers to the case whereby a firm cannot concentrate its energies on realizing existent opportunities for profits and expansion (Adetule, 2011, p. 79). This is situation whereby a firm’s strategies follow a pattern cycle of change after failure. It compromises the ability of realizing a full potential of a particular strategy. As regards these arguments and management literature, the research came up with a hypothesis. The hypothesis said that there exists an inverted U-relationship between a firm’s explorative technological activities and financial success in a firm’s technological portfolio. The second hypothesis is built on the dimension of solitary and collaborative aspects. Collaboration has always been an argument for sharing and cutting down on costs. On the other hand, collaboration has always been an argument for maximum enjoyment of financial benefits of innovation. According to management literature, collaboration provides the benefit of minimizing of risks. On this basis, the research highlighted the hypothesis that collaborative technological activities enhance the financial success of a particular portfolio. However, the hypothesis generated a blur articulation because the research awarded a two-way speculation. This is because collaborative activities possess the detriment of inefficiency in coordination and sharing of innovation benefits (Swamidass, 2000, p. 119). This is a scenario whereby one firm could be largely responsible for financial success of a joint innovation. The third and fourth hypotheses employed the resource factor as the argument for the same. The first hypothesis stated that a greater collaborative exploitative activities result into decreased financial performance in a portfolio. The fourth hypothesis stated that a greater collaboration results into increased financial performance within a portfolio. It is essential to analyze the actual method in which the team conducted this research. The research involved an intensive study of firms across diverse industries. This involved the employment of a panel data set of the period from 1996 to 2003. The research began by considering 500 intensive European research and development firms. It also considered 500 intensive Japanese and US research and development firms. It is notable that this research utilized statistics of three sets of countries. This pertains to Japanese, US and European countries. This is appropriate due to the fact that these are technologically and industrially active countries. The research narrowed into a feasible sample of 168 firms. This possessed two attractive and constructive qualities. To begin with, it reduced the large sample into a workable and feasible one. In addition, it was a fair distribution of statistically rich firms among the Japanese, US and European firms. This suggests that the large number of European firms can only compare to both Japanese and US firms. The aspect of European and Japanese firms did not limit the research to Europe and Japan respectively. In addition, the research was extensive in consideration of industries to date. This regards the fact that every industry might possess its own set of strategy for financial success in a portfolio (White and Bruton, 2010, p. 78). In addition, this study could result into the same that can be integrated into comprehensive analysis. The industries included electrical and electronic, chemical, non-electrical machinery and IT hardware. It also included pharmaceutical and biotechnology industries. It is a vital idea that the research did not focus on software technology, because they may involve abstract concepts and dual results because they depend on substantial subjectivity. It is crucial that software companies consider research from a hardware perspective. This is because hardware involves quantity that easily projects relationships in graphs and analytic tools. The research utilized very essential tools in finding the answers to its questions. To begin with, the researchers used patents as measurements of the firms’ activities. Patents provide more information as regards details and ownerships. Patents are available and verifiable source of information that differs across companies. However, it is crucial to note that patents could have provided confusing information since they do not possess uniform value. In addition, the measurements had financial performance as a dependent variable. The research utilized the Tobin Q as a measurement and indicator of financial performance. Tobin Q relates to the ratio of the firm’s market value to the book value of the firm’s assets. This was reliable in the sense that the book’s assets neutralized the chances of attaining erroneous information from the market’s value. The aspect of the market’s value is vital in the sense of predicting future performance of a technological innovation. In close relation to the same, the research employed valuable control variables in attaining comprehensive results. Findings and Evaluation It is crucial to note the analytical and presentation tools that the research utilized in reaching its findings. It employed measures of coefficients in compiling the data for results. For example, the paper notes skewness between Tobin Q and measures of technological activities. In addition, it notes the variance in exploration and exploitation activities. Similarly, Pearson coefficients were evident as regards the same. It was manifested in the strong correlation between Tobin Q and its lagged value. It is vital to note that the results were in tables for notable empirical analysis (Amason, 2010, p. 34). To begin with, the research utilized least ordinary techniques to estimate regression. In addition, all regression models had lacked dependent variables for control of unobserved technological changes. Exploration share has a negative and a significant quadratic term. In addition, the same has a significant linear term that is positive. This confirmed the first hypothesis of a U-relationship between the firm’s financial performance and exploration activities. It is vital to note that the results disapproved the second hypothesis that postulated a decreased performance due to a great share of collaborative activities. The research concluded that firms attain proper financial performance by having a balance of explorative and exploitative activities. In addition, the disadvantages of collaborative activities, in terms of relational costs, outweighed the benefits of the same. Increase in financial performance due to collaboration activities is limited to the period before the peak performance. The study had notable limitations. For instance, it used the aspect of co-patenting information. Research utilizes it to indicate collaborative technological activities. This regards the fact that not all R&D activities result into patents (Drejer, 2002, p. 67). In some cases, patent applications apply to one partner rather than a whole collaboration. This means that future indicators should contain more variables other than patents (Haberberg and Rieple, p. 165). Implications This article realized concepts that could be vital for management and respective technological strategies. This research contributed to previous research by highlighting the strategic benefits of balance between explorative and exploitative activities. To begin with, it draws the distinction between explorative and exploitative activities in terms of patents. In addition, it is vital to note that previous research did not include financial performance to the realization of balanced strategies. The research splits this case into four domains whereby it analyzes the financial performance of the four strategies. Additionally, this research reveals an essential aspect in technological innovation. This pertains to the view that collaborative activities contribute to technological performance. However, technological and financial performances are not synchronized. Reference list Adetule, Jide, 2011. Handbook on management theories. Bloomington. Amason, Allen, 2010. Strategic management: from theory to practice. New York: Taylor & Francis. Belderbos, Rene, Faems, Dries, Leten, Bart and Van Looy, Bart, 2011. Technological activities and their impact on the financial performance of the firm: Exploitation and exploration within and between firms. Journal of Product Innovation Management, 27 (6), pp. 869–882. Cole, Gerald, 2004. Management theory and practice. Mason: Cengage Learning EMEA. Drejer, Anders, 2002. Strategic management and core competencies: theory and application. New Jersey: Greenwood Publishing Group. Fandel, Gunter, 2003. Modern concepts of the theory of the firm: managing enterprises of the new economy. New York: Springer. Haberberg, Adrian and Rieple, Alison, 2008. Strategic management: theory and application. New York: Oxford University Press. Swamidass, Paul, 2000. Encyclopedia of production and manufacturing management. New York: Springer. Wang, Yuocheng and Pizam, Abraham, 2011. Destination marketing and management: theories and applications. Cambridge University Press. White, Margaret, and Bruton, Garry, 2010. The management of technology and innovation: a strategic approach. Mason: Cengage Learning. Read More