Abstract:Based on the transaction cost theory, this study analyzes how the social value of research and development partners (measured by the average number of partners of the central enterprise's research and development partners) acts on the breakthrough innovation of the enterprise, and analyzes the regulatory role of the technological diversity and geographical diversity of the research and development alliance partners. Based on the data on the construction of R & D alliances in China's pharmaceutical manufacturing industry from 1997 to 2017, using negative binational regression analysis, it is found that:(1) in the R & D alliance portfolio, the relationship between the social value of R & D alliance partners and the breakthrough innovation of enterprises is inverted U-shaped;(2) the technological diversity of R & D alliance partners weakens the inverted U effect of partner social value on enterprise breakthrough innovation;(3) The geographic diversity of R & D alliance partners enhances the inverted U effect of partners' social value on enterprise breakthrough innovation. The conclusion of this paper not only perfects the existing research and development alliance portfolio literature and partner diversity research literature, but also provides important ideas for enterprise managers to select partners and alliance portfolio management based on transaction cost theory.

Based on the research of listed enterprises in China's pharmaceutical manufacturing industry from 1997 to 2017, this paper explores the influence of the social value of research and development alliance partners on the breakthrough innovation of enterprises from the perspective of transaction cost theory, as well as the regulatory role of the technological diversity and geographical diversity of research and development alliance partners. The results show that :( 1) The relationship between the social value of R & D alliance partners and enterprise breakthrough innovation is inverted U-shaped; on the one hand, R & D alliance partners with high social value can bring the technology and information of enterprise innovators in the whole industry, and they have strong cooperation ability and cooperation experience, which can promote the absorption and utilization of heterogeneous technology and resources of central enterprises, so as to promote the breakthrough innovation of enterprises, partners with high social value have high bargaining power and will use their high bargaining power to profit for themselves, thus increasing transaction costs and alliance risk, which is not conducive to breakthrough innovation. (2) In the R & D alliance portfolio, partner technology diversity positively regulates the inverted U-shaped relationship between partner social value and firm breakthrough innovation, which is shown as the higher the partner technology diversity, the smoother the inverted U-shaped relationship between partner social value and firm breakthrough innovation. (3) In the R & D alliance portfolio, partner geographic diversity negatively adjusts the inverted U-shaped relationship between partner social value and firm breakthrough innovation, as shown by the higher the partner geographic diversity, the steeper the inverted U-shaped relationship between partner social value and breakthrough innovation.

The conclusion of this study not only has certain theoretical value, enriches the existing research and development alliance portfolio and partner diversity literature, but also provides important ideas for enterprise managers to select partners and alliance portfolio management. First, this study enriches the R & D alliance portfolio literature. Previous studies have analyzed the mechanism of partners' social value, but mostly based on the perspective of binary alliances, less attention has been paid to the mechanism of partners' social value on firm breakthrough innovation at the level of R & D alliance portfolio. Based on the transaction cost theory, this study puts forward and verifies the inverted U-shaped influence of R & D alliance partners on enterprise breakthrough innovation. Secondly, based on the transaction cost theory, this study explores the influence of R & D partner technology diversity and geographical diversity as boundary conditions on the social value of R & D alliance partners and the breakthrough innovation of enterprises. In the process of building a portfolio of R & D alliances, enterprises will inevitably establish cooperative relationships with diversified partners, and the diversity of partners will affect the absorption and utilization of technology and resources from the portfolio of R & D alliances, affect the transaction costs of R & D alliances, and thus affect the breakthrough innovation of enterprises. However, the existing research ignores the diversity characteristics of R & D alliance partners, especially the regulatory role of technological diversity and geographical diversity. This study proposes and explores that the technological diversity of R & D partners will weaken the inverted U-shaped relationship between partner social value and enterprise breakthrough innovation, and geographic diversity will enhance the inverted U-shaped relationship between partner social value and enterprise breakthrough innovation, which enriches the existing research literature on partner diversity to a certain extent.

Finally, this study suggests that managers should be aware of the advantages and disadvantages of cooperating with high-level social value partners. Although, a high level of social value partners can bring enterprises throughout the industry resources and information. However, the high average social value of partners makes such partners have high bargaining power, which increases the resistance of R & D alliance portfolio resources and information exchange and the cost and complexity of R & D alliance portfolio management. In the process of constructing the R & D alliance portfolio, the managers of the enterprise should maintain the average social value of a medium-level partner to avoid its negative effect on the development of breakthrough innovation. Moreover, business managers should be aware of the key role of R & D partners in relation to the technological diversity and geographical diversity of the central enterprise. In the process of partner social value from low to medium level, the technical diversity of partners will weaken the positive effect of partner social value, but the geographical diversity will enhance its positive effect. At this point, to achieve better breakthrough innovation outputs, business managers should try to build a geographically diverse portfolio of R & D alliances rather than a technically diverse portfolio of R & D alliances. In the process of partner social value from medium level to high level, partner technical diversity will weaken the negative effect of partner social value, but geographical diversity will enhance its negative effect. At this point, business managers should try to build a technically diverse portfolio of R & D alliances rather than a geographically diverse portfolio of R & D alliances, so that companies can take full advantage of the social value of their partners and mitigate their adverse impact on the output of breakthrough innovation.

Key words:Partner Social Value, Partner Technology Diversity, Partner Geographical Diversity, Enterprise Breakthrough Innovation

Abstract: In a volatile business environment, firms usually build and operate a set of R&D alliances with multiple external partners as R&D alliance portfolios to achieve economic and technological objectives. However, due to the less transparent information disclosure process in emerging markets, it is difficult for firms to obtain reliable information about potential partners through public sources. As a result, firms trend to view the high frequency with which a specific partner is selected by other firms as a convincing signal of quality, because others′ actions can help the focal firm to reduce information asymmetries associating with partner selection decisions. Thus, the R&D alliance portfolio is often featured with high partners′ social value. Previous studies have examined how partners′ social value of the R&D alliance portfolio influence firms′ innovation outcomes, however, the conclusions are inconsistent. Specifically, how partners′ social value influences firms′ critical innovation still remains unknown. This study attempts to fill this gap by drawing on transaction cost theory to examine how partners′ social value of R&D alliance portfolio (which is measured as the average of the linkages of all partners in R&D alliance portfolio) influences firms′ critical innovation.

Because few of the previous studies focus on exploring the boundary effect of partners′ social value on firms′ critical innovation, while, the attributes of participants in the alliance portfolio can indeed affect the information obtained by the focal firm from external partners, especially the technological diversity and geographic diversity of R&D partners in the R&D alliance portfolio. Still, how partners′ technological diversity and geographic diversity moderate the relationship between partners′ social value and firms′ critical innovation remains unclear.

The empirical study, leveraging Chinese listed biopharmaceutical firms during a twenty-year period (1997-2017), and using a negative binomial regression model, aims to fill these gaps by posing two research questions. First, how partners′ social value of R&D alliance portfolio influences firms′ critical innovation. Second, how partners′ technological diversity and geographic diversity moderate the relationship between partners′ social value and firms′ critical innovation. Our results indicate that: (1) Partners′ social value has an inverted U-shaped effect on firms′ critical innovation; (2) Partners′ technological diversity weakens the inverted U-shaped effect of partners′ social value on firms′ critical innovation. The higher the technological diversity of the partners, the inverted-U shaped relationship between partners′ social value and firms′ innovation is weakened; (3) Partners′ geographic diversity has enhanced the inverted U-shaped effect of partners′ social value on firms′ critical innovation. The higher the geographical diversity of partners, the inverted-U shaped relationship between partners′ social value and firms′ critical innovation is steeper. Because existing research provides multiple measurements of firms′ critical innovation, we also use the number of citations of firms′ patent as the measurement of firms′ critical innovation to conduct a robustness test, the results further indicate that the conclusion of this article is still robust.

Relevant research results not only help supplement the existing literature on alliance portfolio and partner diversity but also can provide useful references for managers of the focal firms to select partners and manage their R&D alliance portfolio, thereby improving their innovation capabilities and innovation investment efficiency.

Key words: partners′ social value, partners′ technological diversity, partners′ geographic diversity, firms′ critical innovation

Author: Bi Jingyu, Shane

Author: School of Management, Xi'an Jiaotong University

School of Economics and Management, Tongji University

The full text has been published in Scientific Research Management, Issue 1, 2021.