1. The Mediating Role of Innovation Strategy on the Influence of Industry Structure and National Context on Firm Performance Brent B. Allred K. Scott Swan The College of William & Mary March 27, 2004 5th ANNUAL INTERNATIONAL BUSINESS RESEARCH FORUM Temple University Philadelphia, Pennsylvania

2. Research Questions How does industry structure and national context influence firm performance? Is this relationship mediated by innovation strategy?

3. Proposed Model Industry Structure - Dynamism - Concentration - Technological Change National Context - Level of Development - Economic Size - Patent Protection Firm Performance Innovation Strategy

4. Theoretical Background Industrial Organization Economics (Bain, 1956, Mason, 1939). Structure  Conduct  Performance

5. Theoretical Background International Trade Theories (Ricardo, 1817; Heckscher, 1919; Ohlin, 1933; Vernon, 1966) Ownership-Location Framework (Dunning, 1977) The Competitive Advantage of Nations (Porter, 1990)

6. Hypothesis 1 (Industry Dynamism) Hypothesis 1A: There is a positive relationship between industry dynamism and firm performance. Hypothesis 1B: Firm innovation strategy mediates the relationship between industry dynamism and firm performance.

7. Hypothesis 2 (Industry Concentration) Hypothesis 2A: There is a positive relationship between industry concentration and firm performance. Hypothesis 2B: Firm innovation strategy mediates the relationship between industry concentration and firm performance.

8. Hypothesis 3 (Industry Technological Change) Hypothesis 3A: There is a positive relationship between industry technological change and firm performance. Hypothesis 1B: Firm innovation strategy mediates the relationship between industry technological change and firm performance.

9. Hypothesis 4 (Level of Development Hypothesis 4A: There is a positive relationship between a country’s level of development and firm performance. Hypothesis 4B: Firm innovation strategy mediates the relationship between a country’s level of development and firm performance.

10. Hypothesis 5 (Economic Size) Hypothesis 5A: There is a positive relationship between a country’s economic size and domestic firm performance. Hypothesis 5B: Firm innovation strategy mediates the relationship between a country’s economic size and firm performance.

11. Hypothesis 6 (Intellectual Property Protection) Hypothesis 6A: There is a positive relationship between a country’s intellectual property protection and domestic firm performance. Hypothesis 6B: Firm innovation strategy mediates the relationship between a country’s intellectual property protection and firm performance.

12. Methodology Sample - 730 companies drawn from 10 manufacturing industries in 30 countries. Archival Data was drawn from the Datastream/Worldscope database and other sources of national contextual data. Hierarchical regression was used for the test of the mediation model following Baron & Kenny (1986).

13. Measures Firm Performance - Stock Return Innovation Strategy - R&D Intensity Industry Structure: Dynamism, Concentration, Technological National Context: Level of Development, Economic Size, Patent Protection

14. Results R&D Intensity fully mediates the relationship between industry dynamism and technological change and firm performance. R&D Intensity partially mediates the relationship between a country’s level of development and intellectual property protection and firm performance.

15. Conclusions Industry structure and national context were generally found to influence firm performance. These relationships are generally mediated (fully or partial) by innovation strategy. Both industry structure and national context should be taken into consideration with research regarding firm innovation and performance.

16. Role of IT on Firm Innovation and Performance Coordination Collaboration Competition