(BRICS): An organizational ecology perspective

Technological Forecasting & Social Change 107 (2016) 28–36

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Technological Forecasting & Social Change

Technological innovation in Brazil, Russia, India, China, and South Africa (BRICS): An organizational ecology perspective Yu Cui a, Jie Jiao b, Hao Jiao c,⁎ a b c

School of Economics and Management, Beijing Information Science & Technology University, Beijing, China School of Economics and Management, Tsinghua University, Beijing, China Business School, Beijing Normal University, Beijing, China, No. 19, XinJie Kou Wai Street, Beijing 100875, China

a r t i c l e

i n f o

Article history: Received 11 April 2014 Received in revised form 28 January 2016 Accepted 1 February 2016 Available online xxxx Keywords: Technological innovation BRICS Organizational ecology Resources

a b s t r a c t This study investigates how a firm's engagement in technological innovation in Brazil, Russia, India, China, and South Africa (BRICS) is shaped by its organizational attributes. Drawing on the logic of organizational ecology theory, we suggest that a firm's engagement in technological innovation is influenced by its (1) organizational resource and capability (e.g., product certificate and employee training), (2) transactional-based competition (e.g., sales to government and export ratio), and (3) ownership structure (e.g., public listing, foreign ownership, and government ownership). Using the World Bank's data, we analyzed firms in BRICS economies and found partial support for the hypotheses. The results suggest that in BRICS economies, firms with more investment in employee training beyond on the job training and product certificates and that are publicly listed will have higher probability of engaging in technological innovation. Moreover, firms with a higher export ratio and a higher government ownership share will have lower probability of engaging in technological innovation. These results suggest that a firm's engagement in technological innovation is, at least in part, an organizational phenomenon influenced by the firm's resource conditions, required legitimization in the market, and founding conditions. © 2016 Elsevier Inc. All rights reserved.

1. Introduction The relationship between innovation (specifically technological innovation) and firm performance has attracted much research interest, but we still know relatively little about why some firms successfully use technological innovation to achieve a sustainable competitive advantage in rapidly changing environments while others do not. The extant literature suggests that technological innovation can result in superior performance by integrating resources and collaborating with partners (Teece, 1986; Howell and Higgins, 1990; Pillania, 2012; Kurt and Kurt, 2015). Our study aims to contribute to this literature by focusing on two issues that are relatively neglected: (1) how a firm's engagement in technological innovation is shaped by its organizational attributes; and (2) the actual conditions of technological innovation in Brazil, Russia, India, China, and South Africa (BRICS). With the aim of redressing this void, this study is designed to examine how technological innovation is influenced by organizational conditions, that is, why are firms in the same country or industry often disparate in their engagement in technological innovation? Why are some firms better than others in the same business or geographic region in technological innovation performance? What are some organizational attributes within a firm that are responsible for shaping a firm's ⁎ Corresponding author. E-mail address: [email protected] (H. Jiao).

http://dx.doi.org/10.1016/j.techfore.2016.02.001 0040-1625/© 2016 Elsevier Inc. All rights reserved.

technological innovation behavior? Answering these questions will help understand how to develop and implement technological innovation activities in emerging countries. Although a handful of studies have discussed macro-level antecedents of technological innovation, these studies emphasized national environments, social culture, industries, and networks (e.g., Shan et al., 1994; Goes and Park, 1997; Ahuja, 2000; Sonne, 2012), leaving a firm's organizational predispositions to technological innovation largely unaddressed. This study complements the studies above and explores organizational conditions within a firm which influence firm-level technological innovation. We view this as an important issue because, according to the organizational ecology theory, a firm's internal capabilities, continuous competitive pressure in industry, and founding conditions can affect its organizational behavior, such as its innovation strategy (Amburgey and Hajagreeva, 1996; Hannan and Freeman, 1989). Building on the logic of organizational ecology, which emphasizes both the shaping forces of organizational environments and capabilities on the development of organizations and imprinting effects of founding conditions (e.g., Baum and Oliver, 1996; Boeker, 1989; Hannan and Freeman, 1989), this study argues that technological innovation in a firm is influenced by a firm's resources and capability (e.g., product certificate and employee training), transactional-based competition (e.g., sales to government and export ratio), and ownership structure (e.g., public listing, foreign ownership, and government ownership).

Y. Cui et al. / Technological Forecasting & Social Change 107 (2016) 28–36

Using the World Bank's data, our analysis of firms in Brazil, Russia, India, China, and South Africa demonstrates that as the percentage of government ownership of a firm's total ownership increases, the firm will have lower probability of engaging in technological innovation. Moreover, technological innovation is also decreased when a firm has a higher export ratio. However, technological innovation is increased when a firm has a high level of product quality, employee training, and public-listed status. 2. Literature review and hypotheses development Conventionally, the ecological perspective is used to explain how social, economic, and political conditions affect the diversity of organizations and account for their changing composition over time (Baum, 1996). In emerging economies, where competition in the industry is fierce, technological innovation is often considered widespread and an effective business method employed by most firms to compete with others. We start from three perspectives, resource and capability, transaction-based competition, and ownership status, to explore their effects on technological innovation (Baum and Oliver, 1996; Hannan and Freeman, 1989; Manser et al., 2015). Fig. 1 highlights our overall theoretic framework. 2.1. The effect of resource and capability conditions on technological innovation Organizational ecology theory acknowledges that an organization's susceptibility and adaptation to environmental constraints is impacted by its resources and capabilities (Hannan and Freeman, 1989; Zhou and Li, 2008). For instance, the lack of resources in a firm may cause a firm to lack in technological innovation. Per this logic, this study focuses on two firm resource and capability variables, product certificate and employee training, that may have different effects on technological innovation. Generally speaking, if a firm obtains a product certificate, such as a Quality Management Standard ISO 9001 Certification, the firm will pay great attention to process improvement and produce a goodquality product. Marette and Crespi (2003) found that a quality certification can push a firm to develop a new product and improve an existing product, which can result in technological innovation. A product certification can have a positive effect on technological innovation in the following way. First, product certification system audits will ensure the independence of the technological innovation process in

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the organization. Love and Li (2000) believe that the technological innovation process will be in accordance with its actual goal due to the systematic and independent inspection function of product certification to avoid external interference with the product innovation and technological innovation. Second, product certification can improve the enterprise's reputation and enhance market competitiveness, which further provides enough resources for innovation (Graffin and Ward, 2010). Third, product certification can help a firm create a modern enterprise management system and promote the development of an innovation culture within the enterprise (Terziovski and Guerrero, 2014). Based on this line of discussion, we anticipate: H1. Firms with a product certification will have higher probability of engaging in technological innovation than those that are not certified. Employee training also contributes to a firm's predisposition for technological innovation. Acemoglu (1997) found that general training will lead to an amplification of product improvement and that firms are more willing to innovate when they expect the quality of the future workforce to be higher. Macdonald et al. (2007) found that European Commission funds for education and training for firms produced the desired innovation. Employee training is helpful for technological innovation by promoting interpersonal and organizational learning practices (Sung and Choi, 2014). Organizational expenditure for internal training employees predicts various learning practices and creates the conditions required to achieve organizational innovation, which in turn enhance the cohesive affinity and competitiveness (Birdi, 2007). We therefore expect: H2. Firms with more investment in employee training beyond on the job training will have higher probability of engaging in technological innovation.

2.2. The effect of transactional-based competition on technological innovation A key component of the organizational ecology is the shaping effect of environments on organizational development. Central to this view is the argument that environmental factors, such as competition and institutional rules, will affect the availability of resources for organizations as well as their legitimization in an environment, which in turn will determine the founding, survival, or changes of the organizations (Baum and Oliver, 1996; Hannan and Freeman, 1989). The ecological perspective

Fig. 1. An ecological framework of firm attributes and technological innovation.

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does not deny the role of the choices and actions of individual firms. Instead, it emphasizes that there are limits on the influence of firm choice and actions and that such limits are largely imposed by the environment (Baum, 1996). The environment generates both opportunities and threats, forming ecological contingencies to which firms must respond (Lubatkin et al., 2001). For firms in emerging economies, their susceptibility to environmental contingencies depends on transactional-based competition, such as sales to the government and the export ratio. Sales to the government are often positively correlated with discounts or kickbacks given to clients or customers (Tulchin and Espach, 2000). In emerging economies, alternative sources of resources are particularly rare given the underdeveloped factor markets and that the government plays an important role in the market (Boisot and Child, 1996). Illegal behavior may occur as managers attempt to cope with such barriers with limited options. Firms with a low technological capability can sell more products to the public or government sectors or state-owned enterprises through graft-involved business–government ties (Clarke and Xu, 2001). In this way, the enterprise is reluctant to improve business processes and cannot promise product quality. We thus hypothesize: H3. Firms with a higher proportion of sales to the government will have lower probability of engaging in technological innovation.

is largely unchanged for a long period of time (Baum, 1996). Specifically, we suggest that a public-listed status, foreign ownership, and government ownership are three institutional parameters of a firm's ownership status. When it is listed on a stock exchange, an enterprise must comply with a variety of rules and regulations that are stipulated by security exchange administration authorities and other regulatory agencies. Moreover, publicly listed enterprises must release new products or technological innovations to win the trust of investors and keep the price in the stock market high. Therefore, the practices and procedures of such companies in strategic decision-making are to focus on technological improvement. It is a commonly held standard that publicly listed companies are obligated to create and stimulate a more stringent innovative climate, and widespread agreement exists on the importance of establishing innovative codes to realize technological innovation (Autio and Lumme, 1998).The above discussion suggests that publicly listed enterprises will engage in more technological innovation than those that are not publicly listed. Accordingly, we propose: H5. Publicly listed firms will have higher probability of engaging in technological innovation than those that are not publicly traded.

However, firms with a larger export ratio, such as those selling a higher proportion of their manufactured products in foreign markets, will depend less on the home or local market and be subjected to the strict requirements of foreign customers compared to other firms concentrating on the home market (Rao, 1994). Due to the differences between overseas markets and domestic markets, exportoriented companies have to address export licensing requirements, customs clearance, commodity inspection, and other administrative formalities mandated by foreign governments, customers, and other business stakeholders overseas (Kumar, 2001). All of these activities are market-related or transactional-based. Moreover, when an enterprise's strategy focuses on foreign customers, the enterprise will have a deep understanding of foreign technology change and development. Due to the reaction to industrial technology opportunity change, the enterprise will have more active R & D investment activities (Cavusgil et al., 1993). Therefore, the enterprise must do its best to improve existing technologies and conduct research and development to invent new technologies. We therefore propose:

In recent years, along with the global economic integration deepening, transnational corporations have had to build more competitive innovation systems to address increasingly fierce market competition. In the process, R & D activities, which traditionally are controlled by a parent company, appeared to be the trend of globalization (Zedtwitz and Gassmann, 2002). As such, when foreign ownership accounts for a large proportion of ownership status, subsidiaries of transnational corporations will have higher levels of technological innovation. According to Pfeffer and Salancik (1978), one of the most important determinants of a firm's power is the importance of its controlled resources needed for maintaining legitimacy in the environment. In emerging economies, the government will generally encourage foreign investment. Moreover, because of the influence of the parent company, enterprises with a higher proportion of capital in the market will have a better reputation level. It is easier for them to obtain funds from banks and the capital market. Therefore, firms equipped with stronger resources through foreign ownership will have enough resources to engage in technological innovation. Therefore, we hypothesize:

H4. Firms with a higher direct and indirect export ratio will have higher probability of engaging in technological innovation.

H6. Firms with higher foreign ownership will have higher probability of engaging in technological innovation.

2.3. The effect of ownership status on technological innovation Organizational ecologists suggest that a firm's behavior is determined by its ecological contingencies. They acknowledge the effect of the initial founding conditions of an organization on its future development. This perspective holds that when organizations are established, they are imprinted with the social, cultural, and technical features of the environment. Organizations thereby establish certain patterns for organizing activities during the founding period, and as a result of inertia and institutionalization, organizations further develop coherent systems to support continuation of the established patterns (Boeker, 1989; Baum and Oliver, 1992). Empirical studies have provided strong support for the imprinting effect of initial conditions on subsequent development (e.g., Boeker, 1989; Baum and Singh, 1994; Dowell and Swaminathan, 2006). Guided by this line of thinking, we argue that a firm's ownership status will constitute an important initial condition that will have an imprinting impact on its subsequent technological innovation behavior. This imprinting effect persists insofar as a firm's ownership structure

Because the government controls land, real estate, finance, monetary funds, and other resources, firms with larger government ownership will have close relationships with the government to obtain preferential treatment. Because of the strict government control, many enterprises do not operate with a market-oriented strategy. The stimulation for technological innovation for these types of enterprises is not strong. They only believe that government policy can help their operation and ignore the role of technological innovation and are not in tune with customer needs and industry development trends. Margolis and Kammen (1999) conducted research on the energy industry in the USA and found that if R& D investment in the industry mainly came from the government, the probability of success in technological innovation will be low. Thus, reducing government ownership or increasing private ownership will help to motive enterprises to pursue technological innovation. Minoja et al. (2010) also revealed that private enterprises have higher innovation motivation and innovation efficiency than state-owned enterprises. In light of the above, we hypothesize: H7. Firms with higher government ownership will have lower probability of engaging in technological innovation.


3. Research method

Table 1 Descriptive statistics.

3.1. Data collection We acquired the dataset from the World Bank's Enterprise Surveys to measure all of the related variables in the study and test the above hypotheses. The World Bank's Enterprise Surveys collect data from key manufacturing and service sectors in every region of the world, with all types of sizes, locations, products, ownership, performance, investment plans, and market orientations. The Enterprise Surveys use standardized survey instruments and a uniform sampling methodology to minimize measurement error and yield data that are comparable across the world's economies. The use of properly designed survey instruments and a uniform stratification sampling methodology enhances the credibility of the data. Moreover, the Enterprise Surveys are targeted to a particular set of firms, including manufacturing, retail, and wholesale establishments with five or more full-time employees, located in major urban centers. Implementing the Enterprise Surveys involved a number of separate tasks. These activities included identifying and building an appropriate sample frame, hiring and training enumerators and their supervisors, piloting the survey, securing the participation of enterprises, making and tracking appointments and tracking refusals to participate, implementing the questionnaire, tracking survey completion and quality control, and entering data and quality control. These procedures ensure that the collection is reliable. Most importantly, the questionnaires contained qualitative questions asking for the manager's opinion on the business environment and for his motivation for business decisions. In detail, the Enterprise Survey questionnaire was designed to be administered in face-to-face interviews with senior business executives or entrepreneurs, managing directors, accountants, human resource managers, and other relevant company staff who know what actually happens in the business. Ideally, Enterprise Surveys are carried out in partnership with the organized private sector, such as a local chamber of commerce or business association. Accordingly, these procedures ensure the validity and reliability of the survey. To test our hypotheses, we selected Brazil, Russia, India, China, and South Africa (BRICS) from the database, which comprise a main proportion of emerging economies. The study employs the BRICS economies because they are distinguished by their large economies and significant influence on regional and global affairs (Todd et al., 2014). As of 2013, Brazil, Russia, India, China, and South Africa together accounted for approximately 20% of world GDP and 55% of the output of emerging and developing economies. Each of the five countries saw their GDP rise annually, in particular China, the GDP of which increased by roughly six times since 2003. The BRICS countries have been experiencing an economic boom over the past several years and therefore have seen significant gains in the production of goods and services. Additionally, unemployment rates have also been correspondingly low in these countries, with the exception of India. China, Russia, and Brazil maintained an unemployment rates of approximately 6% or less in 2013, indicating that their economies are still demanding workers to produce. Therefore, we chose BRICS economies as our sample to test the hypotheses. In the sample used in the present study, there are 1642 sample firms in Brazil, 3948 in China, 6061 in India, 1107 in Russia, and 603 in South Africa. The descriptive analysis of the sample is stated in Table 1. 3.2. Measurement Technological innovation was a dummy variable that was measured by the item “Has your company undertaken any of the initiative such as introducing new technology that has substantially changed the way that the main product is produced in the last three years?” If the respondent answers “YES,” we define the response as 1. If the respondent answers “NO,” we define the response as 0.

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Firm size (based on permanent workers) Ownership Export Sector

Country

Categories

Percent Cum. (%) (%)

Small (b20) Medium (20–99) Large (100 and over) Foreign Domestic Exporter Non-exporter Textiles Leather Garments Agroindustry Food Beverages Metals and machinery Electronics Chemicals and pharmaceutics Construction Wood and furniture Non-metallic and plastic materials Paper IT services Other manufacturing Telecommunications Accounting and finance Advertising and marketing Other services Retail and wholesale trade Hotels and restaurants Transport Real estate and rental services Mining and quarrying Auto and auto components Brazil China India Russia South Africa

25.86 38.84 35.29 8.81 91.19 13.61 86.39 4.84 2.88 11.1 0.22 4.72 0.34 10.29 11.71 7.06

25.86 64.71 100 8.81 100 13.61 100 4.84 7.72 18.82 19.05 23.76 24.11 34.4 46.11 53.16

1.26 3.53 1.85

54.42 57.95 59.8

0.5 2.63 0.73 0.67 2.01 2.01 3.82 16.95 0.32 0.49 0.49

60.3 62.93 63.65 64.32 66.33 68.34 72.16 89.11 89.43 89.92 90.41

0.44 9.15 12.29 29.55 45.36 8.29 4.51

90.85 100 12.29 41.84 87.20 95.49 100

The first set of independent variables involves organizational resources and capabilities. Product certification was quantified by whether the firm had received an ISO (e.g., 9000, 9002, or 14,000) certification (1 if yes, 0 otherwise). Employee training was measured by whether firms offered formal (beyond “on the job”) training to permanent employees (1 if YES, 0 if NO). Among the transactional-based competition variables we proposed, sales to government was measured by the item “Approximately what percentage of your domestic sales are to the government?” Export ratio was measured as the mean of two items, both in the percentage term, including (i) “What percent of your establishment's sales are exported directly?” and (ii) “What percent of your establishment's sales are exported indirectly (through a distributor)?” Finally, we used three variables to measure the ownership structure of the firms: public listing, foreign ownership, and government ownership. Public listing is a dummy variable (1 if the firm is a publicly listed company; 0 if no). In the survey, the item is “What is the current legal status of your firm?” where 1 is a publicly listed company; 2 is a private held, limited company; 3 is a cooperative; 4 is a sole proprietorship; 5 is a partnership; and 6 is other. Foreign ownership and government ownership, both in the percentage term, come directly from the survey questions, “What percentage of your firm is owned by foreign investment?” and “What percentage of your firm is owned by government/state investment?” respectively. In all tests, we controlled for the industry, member status in association, government, education, and culture.

S.D.

1.

2.

1.000 0.182⁎⁎⁎ −0.144⁎⁎⁎ 0.290⁎⁎⁎ 0.060⁎⁎⁎ 1.000 −0.077⁎⁎⁎ −0.029⁎⁎⁎ −0.116⁎⁎⁎ −0.020⁎⁎ −0.327⁎⁎⁎ 1.000 −0.069⁎⁎⁎ 0.069⁎⁎⁎ −0.050⁎⁎⁎ −0.044⁎⁎⁎ 0.107⁎⁎⁎ −0.174⁎⁎⁎ 1.000 −0.017⁎ 0.071⁎⁎⁎ 0.080⁎⁎⁎ 0.056⁎⁎⁎ −0.040⁎⁎⁎ −0.020⁎⁎ 0.052⁎⁎⁎ −0.010 −0.026⁎⁎ −0.089⁎⁎⁎ 0.010

1.000 0.026⁎⁎⁎ 0.275⁎⁎⁎ −0.045⁎⁎⁎ 0.199⁎⁎⁎ 0.072⁎⁎⁎ −0.065⁎⁎⁎ 0.048⁎⁎⁎ −0.022⁎⁎ 1.000 −0.043⁎⁎⁎ −0.006 −0.031⁎⁎⁎ 0.110⁎⁎⁎ −0.034⁎⁎⁎

1.000 0.014 0.016⁎ 0.010 0.173⁎⁎⁎ 0.173⁎⁎⁎ −0.164⁎⁎⁎ 0.033⁎⁎⁎ −0.142⁎⁎⁎ 0.265⁎⁎⁎ −0.458⁎⁎⁎

3.

3.2.4. Culture The different cultures of the BRICS countries have their effect on innovation, and therefore, we controlled the culture variable (Ulijn and Weggeman, 2001). In the article, we employ individualism to measure BRICS countries' culture. The fundamental issue addressed by individualism is the degree of interdependence a society maintains among its members. It has to do with whether people's selfimage is defined in terms of “I” or “We.” In individualist societies, people are supposed to look after themselves and their direct family only. In collectivist societies, people belong to “in groups” that take care of them in exchange for loyalty. The scores used for the individualism culture are based on the research of Hofstede and Hofstede (2005). Table 2 outlines the mean, standard deviation (S. D.), and correlation between all of the variables included in the study.

1.000 0.248⁎⁎⁎ 0.042⁎⁎⁎ 0.123⁎⁎⁎ 0.069⁎⁎⁎ 0.178⁎⁎⁎ 0.020⁎⁎ 0.182⁎⁎⁎ 0.181⁎⁎⁎ −0.078⁎⁎⁎ 0.100⁎⁎⁎ −0.079⁎⁎⁎

8. 4.

5.

6.

7.

3.2.3. Government Government plays an important role in technological innovation (Jiao et al., 2013; Lerner, 1999). To measure the effect of government on technological innovation, we include government interference in the model. Government interference was measured by the items in the percentage term “In a typical week, what percentage of senior management's time is spent in dealing with requirements imposed by government regulations [e.g., taxes, customs, labor regulations, licensing, and registration] including dealings with officials, completing forms, etc.?” To make it clear, we reversed the scale of government interference, meaning that positive coefficient represents positive relation. Moreover, we employed World Bank Governance Indicators (WBGI) as the measurement of government effectiveness to conduct robust test.

1.000 0.169⁎⁎⁎ 0.038⁎⁎⁎ −0.013 0.041⁎⁎⁎ 0.048⁎⁎⁎ −0.021⁎⁎ −0.129⁎⁎⁎ 0.265⁎⁎⁎ 0.175⁎⁎⁎ 0.090⁎⁎⁎ 0.241⁎⁎⁎ 0.274⁎⁎⁎

9.

10.

1.000 −0.044⁎⁎⁎ 0.100⁎⁎⁎ 0.127⁎⁎⁎

11.

3.2.2. Association member status Member status in association was a dummy variable as well (1 if YES, 0 NO), which was measured by the item “Is your establishment/firm a member of a business association or chamber of commerce?” Moreover, the extreme importance of the triple helix for the organization ecology of technological innovation should be addressed in the model (Etzkowitz and Leydesdorff, 2000; Etzkowitz et al., 2005). That is to say, technological innovation is not only the role of the firms themselves but also the role of their ecological environment, which is composed of two other important players: the government at all levels and the knowledge institutions (Chaudhuri, 1986; Rooks et al., 2005). The education provides firms with skilled personnel with high-quality and the government facilitates their activities. Therefore, we control these factors in the model.

1.000 −0.026⁎⁎⁎ 0.265⁎⁎⁎

12.

3.2.1. Industry Industry was a dummy variable. If the firm belongs to manufacturing industry, we defined it as 1. If the firm did not belong to a manufacturing industry, we defined it as 0.

1.000 0.034⁎⁎⁎


0.494 0.447 0.498 15.56 24.85 0.191 21.21 25.97 0.457 0.481 15.13 0.441 13.18

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⁎ p b 0.1. ⁎⁎ p b 0.05. ⁎⁎⁎ p b 0.01.

0.574 0.276 0.535 4.67 9.23 0.037 6.038 7.776 0.705 0.635 87.74 3.117 38.52

μ

! λμ ControlV μ :

Mean

X

1. Technological innovation 2. Product certification 3. Employee training 4. Sales to government 5. Export ratio 6. Public listing 7. Foreign ownership 8. Government ownership 9. Industry 10. Association member 11. Government Interference 12. WBGI 13. Individualism culture

P ðT innovation ¼ 1jxÞ ¼ Φ α 0 þ

Variables

In the dataset, the dependent variable technological innovation is a dummy variable. Probit regression is suitable for conducting empirical analysis. To test our hypotheses, we employed a stepwise hierarchical Probit regression approach to assess the explanatory power of each set of variables (Aiken and West, 1991). The models are as follows below. Model 1 is

Table 2 Mean, S. D., and correlation matrix.

3.3. Model specification


Model 2 is P ðT innovation ¼ 1jxÞ ¼ Φ α 0 þ

X

α i ORi þ

X μ

i

! λμ ControlV μ :

33

training. Third, we added transactional-based competition variables, including sales to government and the export ratio. Finally, we put the ownership structure, including public listing, foreign ownership, and government ownership, into the full model. 4. Results and discussions

Model 3 is P ðT innovation ¼ 1jxÞ 0 1 X X X ¼ Φ@α 0 þ α i ORi þ β j TC j þ λμ ControlV μ A: i

j

μ

Model 4 is ¼ 1jxÞ P ðT innovation 0 1 X X X X ¼ Φ@α 0 þ α i ORi þ β j TC j þ γ η OSη þ λμ ControlV μ A: i

j

η

μ

In the model, T_innovation stands for technological innovation. OR stands for organizational resource and capability, including product certification and employee training. Export ratio and sales to government are included in transactional-based competition (TC). OS is ownership structure, including public listing, foreign ownership, and government ownership. ControlV stands for control variables, including industry, member status in association, culture, and government. Because the dependent variable is a dummy variable, we conducted Probit regression to analyze the effect of organizational resource and capability, transactional-based competition, and ownership structure in relation to technological innovation. First, we put control variables, including industry, member status in association, culture, and government, into the model. Second, we added organizational resource and capability variables, including product certification and employee

We conducted a logistic regression to analyze the main effect of firm attribute variables in relation to technological innovation. Before doing so, we checked the variance inflation factor values of all of the variables in these models. All of the variance inflation factor values were approximately 1, indicating the absence of multicollinearity with the cloud results. The results indicate that technological innovation is very important in BRICS economies. Our analysis of enterprises in Brazil, Russia, India, China, and South Africa (BRICS) supported our hypotheses and demonstrated the relevance and usefulness of the organizational ecology theory in explaining firm attributes and technological innovation. The control variables, industry, member status in association, government, and culture have a positive influence on technological innovation, as shown in Model 1, Model 2, Model 3, and Model 4 in Table 3. This shows that firms involved in the manufacturing industry and those with association member status appear to be involved in more technological innovation practices. If the enterprise is a member in an association, it will have a higher level of technological innovation. More government interference and cultures with higher individualism trigger more technological innovation activities. 4.1. Resource and capability conditions on technological innovation As shown in Model 2 and Model 3, product certification and employee training have a positive effect on technological innovation, which suggests that firm's undertaking product certification and employee training will have higher probability of engaging in technological

Table 3 Technological innovation and firm attributes: probit regression analysis.*,** (Model 1)

(Model 2)

(Model 3)

(Model 4)

Technological Innovation




0.586⁎⁎⁎ (16.602) 0.349⁎⁎⁎

0.528⁎⁎⁎ (14.046) 0.247⁎⁎⁎

0.541⁎⁎⁎ (13.788) 0.238⁎⁎⁎

0.534⁎⁎⁎ (13.549) 0.237⁎⁎⁎

(12.323) 0.003⁎⁎⁎ (3.489) 0.019⁎⁎⁎ (17.742)

Product certification

(8.294) 0.004⁎⁎⁎ (4.537) 0.030⁎⁎⁎ (22.870) 0.371⁎⁎⁎

(7.668) 0.005⁎⁎⁎ (4.952) 0.030⁎⁎⁎ (21.947) 0.379⁎⁎⁎

(7.616) 0.005⁎⁎⁎ (4.811) 0.028⁎⁎⁎ (19.982) 0.376⁎⁎⁎

Employee training

(10.624) 0.477⁎⁎⁎

(10.341) 0.504⁎⁎⁎

(10.154) 0.505⁎⁎⁎

(13.760)

(14.092) −0.001 (−0.977) −0.002⁎⁎⁎

(14.050) −0.000 (−0.485) −0.002⁎⁎⁎

(−3.533)

(−3.023) 0.379⁎⁎⁎

Industry Association member Government interference Individualism culture

Sales to government Export ratio Public listing Foreign ownership Government ownership _cons LR chi2 Prob N chi2 PseudoR2 Note: t statistics in parentheses. ⁎ p b 0.1. ⁎⁎ p b 0.05. ⁎⁎⁎ p b 0.01.

−1.402⁎⁎⁎ (−16.981) 1176.01 0.0000 0.0943

−2.135⁎⁎⁎ (−21.936) 1500.67 0.0000 0. 1264

−2.173⁎⁎⁎ (−21.231) 1405.83 0.0000 0.1278

(3.668) −0.001 (−1.543) −0.003⁎⁎⁎ (−4.585) −2.073⁎⁎⁎ (−19.863) 1428.00 0.0000 0.1301

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innovation. The full model (Model 4) has a similar result. As Model 4 shows, product certification has a positive effect on technological innovation as well (p b 0.01). The coefficient is 0.307. In addition, employee training is significant at the 0.01 level. The coefficient is 0.247. Therefore, these results provide support to Hypothesis 1 and Hypothesis 3. The results demonstrate that if a firm has a product quality certificate in its operation process and better training for employees, technological innovation will be better than that of other firms. This derives from the ecological logic that firms differ in market competition. Specifically, firms with a high product quality and skilled employees are good at producing new products and process improvements. Cohen and Levinthal (1990) argued that the ability of a firm to recognize the value of new, external information; assimilate it; and apply it to commercial ends is critical to its innovative capabilities. Therefore, the government should encourage and support enterprises to do their best in achieving international certification and educating employees. Besides, international certification can help enterprises deal with processing product designs, testing the inspection procedures, and assessing operation management, which ensures that the technology innovation process can be in strict accordance with the requirements of customers. In BRICS economies, this ability to obtain legitimacy from different type of stakeholders is very important and useful in the organization, which can utilize the capacity to push technological innovation (Quadros et al., 2001; Li, 2009). Finally, training can help employees obtain the necessary skills in technological innovation, which can contribute to enterprises having better access to knowledge and technology spillover and motivates enterprises to improve research and development initiatives. Prajogo and Ahmed (2006) found that to achieve a high innovation performance, organizations first need to develop the behavioral and cultural context and practices for innovation, and only within such conducive environments is it possible for organizations to develop the capacity to utilize internal and external resources in research and development and

technology to more effectively deliver innovative outcomes and performance in the organization. 4.2. Transactional-based competition on technological innovation As shown in Model 3, among a firm's transactional-based competition, the export ratio has a negative effect on technological innovation (p b 0.01, β = − 0.004). However, the relationship between sales to government and technological innovation is not significant. Therefore, Hypothesis 3 and Hypothesis 4 are not supported. The full model (Model 4) has a similar result. The results also show that the export ratio is negatively associated with technological innovation, which is contrary to our research Hypothesis 4. We explain this observation in the following manner. Under the circumstance of direct investment and industry transfer from the developed countries and the emerging industrialized regions, numerous firms in BRICS economies employ OEM Manufacturing mode to participate in the global value chain system (Rodrik, 2006; Lall et al., 2006). Samiee and Roth (1992) found that a standard product with a low cost will have a positive effect on export performance. Standard products can promote the business of firms entering new markets rapidly and ensure the continuity of the products in different areas for the sake of scale of economy. Therefore, the enterprises only provide low technology, low profit, and labor-intensive products to the overseas market. Consequently, the government in BRICS economies should encourage firms to export high value-added products to international markets to strengthen national economic development. 4.3. Ownership status and technological innovation As shown in Model 4, the Probit regression demonstrates that public listing has a positive effect on technological innovation (p b 0.1, β = 0.230). Furthermore, government ownership is negatively associated

Table 4 Technological Innovation and firm attributes: probit regression analysis (Robust test).*,** (Model 5)

(Model 6)

(Model 7)

(Model 8)

Technological innovation




0.448⁎⁎⁎ (12.536) 0.297⁎⁎⁎

0.407⁎⁎⁎ (10.590) 0.213⁎⁎⁎

0.397⁎⁎⁎ (9.842) 0.198⁎⁎⁎

0.391⁎⁎⁎ (9.674) 0.199⁎⁎⁎

(10.482) 0.496⁎⁎⁎ (15.376) 0.021⁎⁎⁎ (19.334)

Product certification

(7.175) 0.399⁎⁎⁎ (11.433) 0.030⁎⁎⁎ (22.562) 0.396⁎⁎⁎

(6.402) 0.425⁎⁎⁎ (11.822) 0.030⁎⁎⁎ (21.366) 0.401⁎⁎⁎

(6.385) 0.426⁎⁎⁎ (11.855) 0.028⁎⁎⁎ (19.292) 0.396⁎⁎⁎

Employee training

(11.411) 0.353⁎⁎⁎

(11.018) 0.371⁎⁎⁎

(10.777) 0.371⁎⁎⁎

(9.816)

(9.999) −0.000 (−0.369) −0.002⁎⁎⁎

(9.924) 0.000 (0.135) −0.002⁎⁎⁎

(−3.456)

(−2.961) 0.434⁎⁎⁎

Industry Association member WBGI Individualism culture

Sales to government Export ratio Public listing Foreign ownership Government ownership _cons LR chi2 Prob N chi2 PseudoR2 Note: t statistics in parentheses. ⁎ p b 0.1. ⁎⁎ p b 0.05. ⁎⁎⁎ p b 0.01.

−2.620⁎⁎⁎ (−25.205) 1500.09 0.0000 0.1166

−2.856⁎⁎⁎ (−25.535) 1686.85 0.0000 0. 1385

−2.895⁎⁎⁎ (−25.154) 1576.88 0.0000 0.1401

(4.147) −0.001 (−1.516) −0.002⁎⁎⁎ (−4.453) −2.804⁎⁎⁎ (−24.080) 1602.00 0.0000 0.1428


with technological innovation (p b 0.01, β = −0.003). Therefore, these results provide support to Hypothesis 5 and Hypothesis 7. However, the relationship between foreign ownership and technological innovation is not significant. As such, Hypothesis 6 is not supported. Based on these results, this study provides empirical confirmation for the theory of imprinting founding conditions on subsequent development in organizational operation (Baum and Oliver, 1991). In the language of organizational ecology, a firm's governance conditions have an imprinting effect on the firm's organizational behavior, including its strategy formulation and innovation management activities (Aldrich and Wiedenmayer, 1993). Our analysis shows that firms listed in stock markets will have higher probability of undertaking in technological innovation activities. As expected, public ownership (i.e., listing on a stock exchange) is significantly associated with a greater intensity and a higher quality of technological innovation such that publicly traded companies tend to engage more in technological innovation to raise the stock price than those not publicly traded. Baumol (2001) observed that much of the innovation that contributes to economic growth is done by established publicly traded firms. For example, AmBev from Brazil, Hindustan Unilever from India, Henan Shuanghui Investment from China, and Aspen Pharmacare Holdings from South Africa, the world's most innovative companies ranked by Forbes in 2013, play important roles in their home country. George et al. (2002) found that publicly traded biotechnology companies employed business–university alliances to promote innovative activities for developing and commercializing new products. Acharya and Xu (2013) examined the relationship between innovation and firms' dependence on external capital by analyzing the innovation activities of privately held and publicly traded firms and found that public firms in external finance-dependent industries generate patents of higher quantity, quality, and novelty compared to their private counterparts. In addition, firms with greater government ownership will have lower probability of engaging in technological innovation activities. That is to say, we find that firms whose ownership partially consists of government investment tend to engage in less technological innovation activities. The results comply with the actual conditions. When business firms have more government ownership, they will get more attention and help from government. This existing monopoly position helps these firms obtain huge profits, which makes them reluctant to innovate. All of these factors foster a rigid organizational structure and make the firms relatively insensitive to market opportunities. For example, e-commerce develops very quickly in China. A large number of transactions require online payment to complete transaction. However, The big four state-owned commercial banks, including Industrial and Commercial Bank of China, Bank of China, Agricultural Bank of China, and China Construction Bank, disdained to develop this type of online payment service. However, Alibaba Group seized this opportunity by developing Alipay to meet customer's need. Launched in 2004, Alipay (www.alipay.com) is a commonly used third-party online payment solution in China. Alipay provides an escrow payment services that reduce transaction risks for online consumers. Shoppers have the ability to verify whether they are happy with goods before releasing funds to the seller. On November 11, 2013, Alipay set a record for the highest daily number of transactions, processing 188 million payments during a 24-h period. A number of these transactions (45.18 million), with a total transaction volume of RMB11.3 billion, were facilitated by mobile devices. This example illustrates that private firms are more innovative than state-owned firms. 4.4. Robust test To ensure the model reliable, we conducted a robust test. In Table 4, we employ World Bank Governance Indicators (WBGI) as the measurement of the government role in pushing technological innovation. Governance consists of the traditions and institutions by which authority in

35

a country is exercised. This includes the process by which governments are selected, monitored, and replaced; the capacity of the government to effectively formulate and implement sound policies; and the respect of citizens and the state for the institutions that govern economic and social interactions among them. In detail, the WBGI project reports aggregate individual governance indicators for 215 economies over the period form 1996–2012 for six dimensions of governance: Voice and Accountability, Political Stability and Absence of Violence, Government Effectiveness, Regulatory Quality, Rule of Law, and Control of Corruption. These aggregate indicators combine the views of a large number of enterprise, citizen, and expert survey respondents in industrial and developing countries. Therefore, we use these data to conduct robust tests. As shown in Model 5, Model 6, Model 7, and Model 8, there are the similar results, which illustrate that the results are reliable. 5. Conclusion and limitation These results demonstrate that a firm's institutional attributes or governance conditions impact the firm's propensity for technological innovation. Thus, firm-level technological innovation is endogenous in nature and heterogeneous across firms, which is the reason why firms in the same country or industry often disparate in their engagement in technological innovation and why some firms are better than others in the same business or geographic region in technological innovation performance. In detail, this study concludes that a firm's engagement in technological innovation is an organizational phenomenon influenced by the firm's resource and capability conditions, transactionalbased competition degree, and founding ownership structure conditions, such as public listing and government ownership. In sum, the results suggest that in BRICS economies, firms with more investment in employee training beyond on the job training, product certification, and ownership status in public listing will have higher probability of engaging in technological innovation. Furthermore, firms with a higher export ratio and higher government ownership share will have lower probability of engaging in technological innovation. These conclusions can help government officials formulate corresponding policies to promote technological innovation activities. At the same time, entrepreneurs and high management team can take steps to encourage technological innovation in the internal organization. In addition, there are quite a number of other contextual factors such as firm–university alliance, finance, strategy, and market environment that impact technological innovation. Because the way that the response variable was measured includes much subjective interpretation of what is technological innovation, measuring this variable in a quantitative way would be much better. With a more objective way to measure technological innovation, such as patents or licensed products or process will be employed in the future research. These are the limitations and will be explored in future studies. Acknowledgements The authors are indebted to Professor Fred Phillips and anonymous reviewers for their many constructive insights and suggestions. The research was supported by the National Natural Science Foundation of China (71572017), the Youth Social Science Talent funding Project, Beijing Federation of Social Science circles, Beijing, China (2015SKL011) and the Fundamental Research Funds for the Central Universities, Beijing Normal University, Beijing, China. References Acemoglu, D., 1997. Training and innovation in an imperfect labour market. Rev. Econ. Stud. 64 (3), 445–464. Acharya, V., Xu, Z., 2013. Financial dependence and innovation: the case of public versus private firms. NBER Working Paper No. 19708. Ahuja, G., 2000. Collaboration networks, structural holes, and innovation: a longitudinal study. Adm. Sci. Q. 45, 425–455.

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(Eds.), Handbook of Organizational Culture and Climate. Wiley, London, pp. 487–517. Zedtwitz, M., Gassmann, O., 2002. Market versus technology drive in R&D internationalization: four different patterns of managing research and development. Res. Policy 31, 569–588. Zhou, C., Li, J., 2008. Product innovation in emerging market-based international joint ventures: an organizational ecology perspective. J. Int. Bus. Stud. 39, 1114–1132. Yu Cui is an associate professor of management at School of Economics and Management, Beijing Information Science & Technology University, Beijing, China. Her research interests include strategy, technology management, and knowledge management. She has published well over thirty articles in major refereed journals such as Technological Forecasting & Social Change, Journal of Engineering and Technology Management, Asia Pacific Journal of Management, and Technological Analysis & Strategic Management, among others. Jie Jiao is an associate professor of management with Tenure at School of Economics and Management, Tsinghua University, Beijing, China. His research interests focus on firm growth strategy, innovation management, and international business. He has published well over thirty articles in major refereed journals, such as Journal of Banking and Finance, Journal of Occupational and Organizational Psychology, Journal of Management and Organization, Management World, China Soft Magazine, and Acta Psychologica Sinica, among others. Hao Jiao is an associate professor of management at Business School, Beijing Normal University, Beijing, China. His research interests include strategy, entrepreneurship management, innovation management, and dynamic capabilities theory within the context of emerging markets, among others. He has published well over fifty articles in major refereed journals in entrepreneurship and innovation management such as the Academy of Management Perspectives, Technological Forecasting & Social Change, Journal of Product Innovation Management, Asia Pacific Journal of Management, Chinese Management Studies, and Journal of Engineering and Technology Management, among others.