2.1. R&D Capability and Absorptive Capacity: Process-Based
A firm’s R&D can be seen as a series of organic systems to which input–process–output is connected [6
]. When R&D resources are used as an input it results in improved performance through the process of transformation. Therefore, although it is important to invest in R&D to maximize R&D performance, it is also highly important to utilize input components through effective and efficient R&D processes. That is, the firm’s overall R&D capabilities must be sufficiently secured to link its R&D investment to performance.
A firm’s R&D capability can be defined as the firm’s ability to integrate R&D strategy, project execution, project portfolio management, R&D expenditure, etc. [7
]. Specifically, R&D capabilities can be largely divided into internal and external capabilities. Internal R&D capabilities means the resources of the firm are established to develop R&D internally. This can be evaluated in terms of R&D intensity, human resources, etc. [8
]. It has been found that direct investment, such as R&D spending on sales and the number of R&D workers among total employees, has a positive impact on innovation performance [9
]. However, it is not possible for a company to perform all of the theoretical and technical demands required for innovation with its own internal capabilities, and external partners must be identified and specifically accessed to allow innovation [10
]. Thus, external R&D capability can be defined as the formalized structure of linkage with the external environment for undertaking R&D, such as human and material networks for research and development, strategic alliances, etc. [6
]. From the perspective of transaction cost theory, the network is considered important in that it is constitutes a strategy to reduce the firm’s costs, and from the perspective of strategic management theory, it is desirable to focus resources on specific sectors to enhance the firm’s competitiveness [11
]. In other words, a firm’s R&D capabilities can be enhanced by combining its internal capabilities with external knowledge resources.
In addition to the above conceptual definition, Dutta et al. [13
] argues that R&D capabilities in the new technology market are an essential component of a firm’s optimal performance, and that R&D capabilities can be understood as the dynamic means of enhancing a firm’s capabilities through knowledge creation and utilization, thereby maintaining or gaining a competitive advantage [14
]. In this study, we identify R&D activities as a process of knowledge creation and introduce the concept of absorptive capacity based on dynamic capability theory.
Cohen and Levinthal [15
], who first applied the concept of absorptive capacity at the firm level, argued that the most important capability for an entity to maximize its R&D effects is its absorptive capacity. In addition, the methods of obtaining technical knowledge were divided into methods of obtaining from the enterprise’s own R&D, acquiring knowledge generated from competing enterprises, or acquiring technologies developed outside of industry, such as government-funded institutions and universities. Furthermore, if a firm performs its own R&D, it can achieve more effective results by utilizing useful external information [16
]. However, it is not easy to measure the concept of absorptive capacity empirically. In particular, Duchek [17
] argued that different definitions of absorption capacity also result in different studies, which makes it impossible to present standard measurement methods, and that currently available measurement methods are diverse, but not clear and somewhat ambiguous. We analyzed the prior empirical studies based on quantitative analysis using the absorptive capacity concept by classifying them into input/output approaches and process approaches as shown in Table 1
. We would like to analyze the process approach in-depth to examine the process of knowledge integration according to the purpose of this study.
Researchers who have studied the process approach, such as Zahra and George [14
], measured absorptive capacity through cognitive processes to survey methodology. These researchers developed and measured a single question or a series of questionnaires that reflected absorptive capacity at the process level. The measurement of absorptive capacity by cognitive questionnaire is a useful measurement method in the sense that it demonstrates the complex concept of absorptive capacity. In addition, these survey measurements provide useful information about the degree of absorptive capacity by allowing them to be well aware of the entire process of knowledge acquisition, with no restrictions on input or output variables, contrary to proxy indicator [17
Zahra and George [14
] presented measurement items by classifying them as potential and realized absorptive capabilities, while Liao et al. [29
] presented measurement items by classifying them as external knowledge acquisition and intrafirm knowledge dissemination similar to those of Zahra and George [14
]. We will focus Zahra and George’s research [14
] in detail in the next paragraph. Murovec and Prodan [31
] divided absorptive capacity into “science-push absorptive capacity,” related to the acquisition of R&D knowledge, and “demand-pull absorptive capacity,” related to the acquisition of market knowledge. The study revealed that the two different absorptive capacities have a positive effect on product innovation and process innovation performance, respectively.
In this study, we believe that Zahra and George’s absorptive capacity model [14
] is a useful theoretical framework because absorptive capacity acts as a process. Zahra and George [14
] defined “potential absorptive capacity” as a process of exploration related to the acquisition and assimilation of knowledge and “realized absorptive capacity” as a learning process related to the transformation and exploitation of knowledge. The former was defined as a process of obtaining, analyzing, and understanding new technical knowledge from the outside and exploring the potential applicability of that knowledge, while the latter was defined as a utilization process of integrating knowledge acquired from the outside with internal existing knowledge and applying it to new product development [32
]. Ref. [14
] argued that the success of new product development, which is the result of absorption capacity, is determined by the efficiency (ratio) in which potential absorption capacity is converted to realized absorption capacity. That is, the process of absorptive capacity allows a firm to dynamically adjust and utilize its capabilities by obtaining, assimilating, and transforming external knowledge based on internal capabilities.
Based on this prior research, we hypothesized that R&D capabilities are determined by the internal capabilities built inside the firm and the external capabilities built by network activities, and that there will be a transition between the absorptive capacities produced within the entity.
The corporate R&D capabilities will have a positive effect on the absorptive capacities.
Internal R&D capability will have a positive effect on the potential absorptive capacity.
External R&D capability will have a positive effect on the potential absorptive capacity.
External R&D capability will have a positive effect on the realized absorptive capacity.
The potential absorptive capacity will have a positive effect on the realized absorptive capacity.
2.2. The Impact of R&D Capability and Absorptive Capacity on Innovation Performance: the Structural Model
Innovation refers to the implementation of new or significantly improved goods or services, production or delivery methods, new marketing methods, or new organizational methods in the course of business practices, workplace organization, or external relations [33
]. According to previous research [34
], innovation can be defined as a series of activities that creatively destroy existing methods, and produces, markets, and sells new products or services through new combinations of means of production, such as processes, markets, materials, and organizations.
Manufacturing industry-oriented technological innovation refers to the new invention or development of the process of introducing new products into the market, including new processes and services. The types of innovation are divided into product innovation and process innovation. Product innovation is the creation of new products and services to meet the needs of customers and markets. Process innovation refers to the production and service operation of an organization which, in the process of production, represents a change in equipment or work procedures to increase the level or efficiency of production [35
]. Thus, product innovation creates revenue and margin by developing new products that are differentiated from original products [36
], and process innovation is common in mass production because products are stabilized or standardized [37
Innovation by enhancing the R&D capability enables the development of new products and the utilization of new processes, thus providing product differentiation and cost advantages, and providing a major source of competitive advantage for companies [38
]. Reviewing the determinant factors of innovation performance, Souitariis [39
] demonstrated that R&D intensity and R&D human resources are highly important factors in innovation activities in the Greek manufacturing industry. In addition, the resource-based view suggests that it is not only a firm’s own R&D that stimulates its innovation capabilities, but also the introduction or joint development of R&D from the external environment [40
These previous studies were primarily aimed at identifying the quantity of resources a firm would devote to R&D and the quantity required to have a positive impact on its performance. However, new product development activities or acquisition of new technologies alone does not guarantee performance. Zahra and George [14
] and Murobec and Prodan [31
] identified absorptive capacity as a dynamic process of generating innovation and sought to identify the difference between the components and the causal relationship of the absorptive capacities, rather than R&D investment. In addition, empirical studies [41
] argue that absorptive capacity can contribute not only to new product development but also to the quality improvement of existing products.
Based on this previous research, we presented a conceptual model as shown in Figure 1
and hypothesized that the R&D capabilities and absorptive capabilities possessed by a firm would affect technological innovation performance such as process innovation and product innovation as follows:
The corporate R&D capabilities will have a positive effect on technological innovation.
Internal R&D capability will have a positive effect on technological innovation.
External R&D capability will have a positive effect on technological innovation.
The absorptive capacities will have a positive effect on technological innovation.
The potential absorptive capacity will have a positive effect on technological innovation.
The realized absorptive capacity will have a positive effect on technological innovation.
2.3. Necessity of Research by Industrial Sector
A firm’s innovation activities emphasize cooperation and interaction between innovation actors in addition to research and development, and the process of path dependency between technology and knowledge represents the industry sectoral specificity to which the firm belongs and creates an industry-specific technical paradigm [44
]. Since paradigm shift occurs due to the development of very radical technology development, firms need to absorb and innovate new technologies to cope with these changes.
A typical study of the technical characteristics of an industry can be cited as sectoral patterns of technological innovation in the industry. Malerba and Orsenigo [45
] expanded on previous research of industry-specific innovation patterns to include the concept of a technological regime based on the empirical study of sectoral innovation patterns by Pavitt [46
]. Since most previous studies of Korean industries are based on Pavitt’s industrial classification [46
], a lack of research on sectoral technological innovation exists. The innovation pattern generally refers to the way in which innovation progresses in a particular industry and is determined by the technological opportunity, appropriability regime, and demand [47
The technical characteristics of an industry are represented by the degree of technological opportunity presented by the firm dynamics. The degree of technological opportunity can be seen as a firm’s R&D efforts for innovation and technological progress that affect the performance of innovation. However, the factors mentioned previously that reflect the demand and technological characteristics of the industry are difficult to measure as theoretical concepts [48
]. Therefore, this study used the “classification of industrial sectors” approach to apply the concept of industrial characteristics to the subsequent empirical analysis process, and “industrial sectors” were classified using R&D intensity.
To reflect “industrial sector” in the concept of “industrial characteristics”, we present theoretical evidence and empirical analysis cases that demonstrate the association between R&D intensity and industrial characteristics. The relevance of the connection between technological opportunity and an industry’s R&D intensity as an industrial characteristic is confirmed in prior studies on the concept of technological opportunity. Prior studies have defined technological opportunities as strengthening R&D investment activities for firms in the industry and sequentially improving the performance of technological innovation. Scherer [49
] argued that differences in inter-industry R&D intensity reflect technical opportunities. Scherer [50
] and Scott [51
] demonstrated gaps between industries, such as R&D for innovation, through industry classifications that reflect technological opportunities. These studies classified petrochemical, electrical, and electronic industries as those with high technological opportunities. Mukhopadhyay [52
] classified industry types using the concentration ratio of the industry’s R&D intensity. Hatzichronoglou [53
] classified the manufacturing industry as high technology, medium and high technology, and medium and low technology according to R&D intensity, which is currently applied as the most general classification method. Whereas the chemical, electronics and telecommunications, automobile, medical, and semiconductor industries are generally classified as high-tech industries, the furniture, textile products, food, paper, printing, wood, metal casting, and plastic products industries are classified as medium and low-tech industries.
The high-tech category, also known as the cutting-edge, refers to very advanced and elaborate technology. New products and new processes generated by R&D conducted in high-tech industries have a spillover effect on other industries, which can help new products and productivity, expand business, and create high-wage jobs, enabling other commercial sectors to benefit [53
]. Based on these prior studies, we hypothesized that the technical characteristics of the industry are related to corporate R&D activities and innovation performance, therefore, there will be gaps between industries.
Manufacturing firms in the high-tech sector will show higher R&D capabilities, absorptive capacities, and technological innovation than those in the low-tech sector.
The structural coefficient between R&D capabilities, absorptive capacities, and technological innovation will vary across firms in the high-tech sector and firms in the low-tech sector.
We presented a research model that reflects all hypotheses as shown in Figure 2