Assessing the Impact of University-Firm Collaboration on Innovation-related Financial Performance
The consolidation of open business models on the industry side (Chesbrough, 2006) and of universities’ third mission on the academia side (Göransson & Brundenius, 2011) has generated a boost of university-firm collaboration worldwide, with expected benefits for both universities and firms, as well as for the surrounding region(s), in line with the concepts of national and regional innovation systems (Lundvall, 1992; Nelson, 1993; Cooke, Uranga, & Etxebarria, 1997). Despite there has been relevant research on the theme of university-firm collaboration (Perkmann & Walsh, 2007; Mascarenhas, Ferreira, & Marques, 2018), there is a lack of research focusing on how this collaboration affects the financial performance of firms. Therefore, in this paper we focus on the expected financial benefits for firms from such collaboration using a novel methodological approach, as explained later.
Through collaboration with university, firms can gain access to fundamental knowledge and the possibility of conducting high quality research, essential for innovation, as well as training, consultancy and technical support. In this sense, university-firm collaboration is expected to contribute positively to firm financial performance via innovation, by enhancing its absorptive capacity and therefore the development of new or improved products and practices at corporate level, which help firms to survive in a global and competitive market. Past literature has dedicated great efforts to analysing the determinants of university-firm collaboration, among other R&D and innovation collaborations, from both industry and academia perspectives, as well as to –albeit to a more limited extent– studying the effect of such collaboration on firm innovation performance (e.g. incremental/radical innovation, number of patents). However, further steps towards understanding the impact of university-firm collaboration on firm financial performance empirically are still missing. Consequently, this paper is aimed at empirically assessing the impact of collaboration with university on the innovation-related financial performance of firms.
We firstly implement the concept of innovation-related profitability, considering 1) the income generated by the products associated to the innovative efforts of firms and 2) the costs associated to investments on innovation as well as to R&D personnel and other R&D expenses. Secondly, and bearing in mind that innovative firms can have relevant differences in terms of size, we follow the methodology proposed by Grifell-Tatjé & Lovell (2015, 2016), in which the income obtained by the firm for each monetary unit dedicated to innovation is explained. This is a “profitability” approach that considers the income/cost ratio, in which Grifell-Tatjé & Lovell (2015, 2016, 2018) show that the “profitability change” can be explained in an accurate way through three components defined in an economic context given by the production theory: 1) changes in the total factor productivity, 2) changes in the prices of inputs and outputs, and 3) changes in the mix of inputs and outputs (Grifell-Tatjé & Lovell, 1999). For this, an “Implicit Malmquist Price Index” is introduced. Finally, this approach based on theoretical indexes is computed using non-parametric programming techniques known as Data Envelopment Analysis (DEA) (Charnes, Cooper & Rhodes, 1978). We use data from the Spanish Innovation Survey (PITEC) and analyse a sample of firms from the chemicals industry in Spain, comparing the innovation-related financial performance of collaborating and non-collaborating firms. Given the methodological approach explained above, we consider a mix of innovation-related inputs (e.g. R&D personnel, R&D working capital) and outputs (e.g. incremental/radical innovation sales), and their contribution to the innovation-related profitability change of firms.
Quite preliminary results show that firms that collaborate with university are more innovative, performing higher sales of both incrementally and radically innovative products. However, collaborating firms also show lower innovation-related profitability, mainly due to significantly higher innovation capital investments as well as to higher personnel unit costs. These preliminary findings may indicate that 1) firms that collaborate with university are more innovative as the result of significantly higher efforts in terms of innovation-related capital and personnel investments, causing that 2) such collaborating firms also show lower financial performance for innovation-related activities. That is to say, the significantly higher innovation efforts of collaborating firms do not pay back in terms of innovation-related financial performance, at least in the short term. Nevertheless, it must be recognised that innovation-related efforts and investments might only pay back and show more clear financial benefits for firms in the long and medium term.
What is the impact of collaboration with university on firm innovation-related financial performance?
- How can firm innovation-related financial performance be measured?
- Do collaborating and non-collaborating firms have significant differences in terms of innovation-related financial performance?
- How does university-firm collaboration influence firm innovation-related financial performance?