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The Mediating Role of Innovation Strategy on the Influence of Industry Structure and National Context on Firm Performance. Brent B. Allred K. Scott Swan The College of William & Mary March 27, 2004 5th ANNUAL INTERNATIONAL BUSINESS RESEARCH FORUM Temple University Philadelphia, Pennsylvania.

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Brent B. Allred K. Scott Swan The College of William & Mary March 27, 2004

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The Mediating Role of Innovation Strategy on the Influence of Industry Structure and National Context on Firm Performance

Brent B. Allred

K. Scott Swan

The College of William & Mary

March 27, 2004

5th ANNUAL INTERNATIONAL BUSINESS RESEARCH FORUM

Temple University

Philadelphia, Pennsylvania


Research Questions

  • How does industry structure and national context influence firm performance?

  • Is this relationship mediated by innovation strategy?


Proposed Model

Industry Structure- Dynamism- Concentration- Technological Change

InnovationStrategy

Firm Performance

National Context- Level of Development- Economic Size- Patent Protection


Theoretical Background

  • Industrial Organization Economics (Bain, 1956, Mason, 1939).

  • Structure  Conduct  Performance


Theoretical Background

  • International Trade Theories (Ricardo, 1817; Heckscher, 1919; Ohlin, 1933; Vernon, 1966)

  • Ownership-Location Framework (Dunning, 1977)

  • The Competitive Advantage of Nations (Porter, 1990)


Hypothesis 1 (Industry Dynamism)

  • Hypothesis 1A: There is a positive relationship between industry dynamism and firm performance.

  • Hypothesis 1B: Firm innovation strategy mediates the relationship between industry dynamism and firm performance.


Hypothesis 2 (Industry Concentration)

  • Hypothesis 2A: There is a positive relationship between industry concentration and firm performance.

  • Hypothesis 2B: Firm innovation strategy mediates the relationship between industry concentration and firm performance.


Hypothesis 3 (Industry Technological Change)

  • Hypothesis 3A: There is a positive relationship between industry technological change and firm performance.

  • Hypothesis 1B: Firm innovation strategy mediates the relationship between industry technological change and firm performance.


Hypothesis 4(Level of Development

  • Hypothesis 4A: There is a positive relationship between a country’s level of development and firm performance.

  • Hypothesis 4B: Firm innovation strategy mediates the relationship between a country’s level of development and firm performance.


Hypothesis 5 (Economic Size)

Hypothesis 5A: There is a positive relationship between a country’s economic size and domestic firm performance.

Hypothesis 5B: Firm innovation strategy mediates the relationship between a country’s economic size and firm performance.


Hypothesis 6(Intellectual Property Protection)

Hypothesis 6A: There is a positive relationship between a country’s intellectual property protection and domestic firm performance.

Hypothesis 6B: Firm innovation strategy mediates the relationship between a country’s intellectual property protection and firm performance.


Methodology

Sample - 730 companies drawn from 10 manufacturing industries in 30 countries.

Archival Data was drawn from the Datastream/Worldscope database and other sources of national contextual data.

Hierarchical regression was used for the test of the mediation model following Baron & Kenny (1986).


Measures

Firm Performance - Stock Return

Innovation Strategy - R&D Intensity

Industry Structure:

Dynamism, Concentration, Technological

National Context:

Level of Development, Economic Size, Patent Protection


Results

R&D Intensity fully mediates the relationship between industry dynamism and technological change and firm performance.

R&D Intensity partially mediates the relationship between a country’s level of development and intellectual property protection and firm performance.


Conclusions

  • Industry structure and national context were generally found to influence firm performance.

  • These relationships are generally mediated (fully or partial) by innovation strategy.

  • Both industry structure and national context should be taken into consideration with research regarding firm innovation and performance.


Role of IT on Firm Innovation and Performance

  • Coordination

  • Collaboration

  • Competition


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