their study discovered that R&D outsourcing is effective in lowering development costs and in increasing financial profits. As R&D outsourcing becomes a more common practice, there have been advancements in both theoretical and empirical literature on the factors that determine the acquisition of external knowledge and its effects on a firm’s innovative performance. Two of the most important issues identified so far are 1) the determinants of R&D outsourcing and 2) whether external knowledge acquired through R&D outsourcing leads to better performance. Several studies have provided some insights to these two issues. ) looked at innovative UK manufacturing industry to discover that the scale of plant and R&D input, as well as appropriability conditions are the key determinants of R&D boundary decisions. On the effects of R&D outsourcing, ), ), and ) pointed out that R&D outsourcing can help maximize innovation and overall firm performance when properly planned and executed. Although the determinants and effects of R&D outsourcing are discussed frequently in literature, the organizational factors influencing the effects have received relatively little attention from scholars in this Rather than focusing on why R&D outsourcing happens and its results, we will look at factors that influence the effect of R&D outsourcing on firm performance In attempting to do so, we will discuss the absorb capacity perspective of R&D outsourcing that explains how an internalizing mechanism can play a role in moderating the R&D outsourcing results. () On the empirical side, this study constructs a more accurate framework to examine the impact of R&D outsourcing on firm performance with panel data that can control firm effects and time effects. The results will enrich our understanding of the relationship between R&D outsourcing and firm performance, and identify the moderating effect of organizational composition. The remainder of the paper is organized as follows. The next section will review literature
Table 2. Definition of Variables and Data Sources Category Variables Definition Data source Dependent variable Firm performance Sales ln(amount of sales) KIS Independent variables Level of R&D outsourcing R&D outsourcing intensity Amount of R&D outsourcing/ Total R&D expenditure R&D Activity Survey Absorptive capacity Absorptive capacity via internal R&D effort R&D intensity R&D expenditure/ amount of sales KIS Absorptive capacity via organizational composition Ratio of R&D employee No. of researcher and assistant/Total employee of researcher in R&D employee No. of researcher/ R&D employee Ratio of PhD. researcher No. of PhD. researcher/ R&D employee
Ratio of Masters degree researcher No. of PhD. researcher/ R&D employee Ratio of FTE(Full time employee) researcher No. of FTE of researcher/ R&D employee Control variables Level of internationalization Openness Amount of export/amount of sales KIS Size Capital ln(Total capital) No. of employee ln(No. of employee) Financial soundness Capital adequacy ratio Stockholders' equity/total asset Level of market competition CR4 The sum of market share of 4 largest firms in KSIC 2 digit Year dummy Year dummy year
R&D outsourcing intensity(t-2) ⅹ Ratio of Researcher in R&D employee -0.(0.63) R&D outsourcing intensity(t-2) ⅹ Ratio of PhD. Researcher -0.(2.8) R&D outsourcing intensity(t-2) ⅹ Ratio of Master degree Researcher 0.6(0.5) R&D outsourcing intensity(t-2) ⅹ Ratio of FTE Researcher -0.(0.46) Year dummy Included Included Included Adjusted R2 0. 0.243 0.25 F-Value(P) 19.53 17.29 17. Notes: †p < 0.10, *p<0.05, **p<0.01, ***p<0.001 estimated standard errors are in parentheses.