Innovation and export performance:evidence from UK and German manufacturing plants

Using comparable plant-level surveys we demonstrate significant differences between the determinants of export performance among the UK and German manufacturing plants. Product innovation, however measured, has a strong effect on the probability and propensity to export in both countries. Being innovative is positively related to export probability in both countries. In the UK the scale of plants’ innovation activity is also related positively to export propensity. In Germany, however, where levels of innovation intensity are higher but the proportion of sales attributable to new products is lower, there is some evidence of a negative relationship between the scale of innovation activity and export performance. Significant differences are identified between innovative and non-innovative plants, especially in their absorption of spill-over effects. Innovative UK plants are more effective in their ability to exploit spill-overs from the innovation activities of companies in the same sector. In Germany, by contrast, non-innovators are more likely to absorb regional and supply-chain spill-over effects. Co-location to other innovative firms is generally found to discourage exporting.

From national innovation systems to national innovation capacity:internationalisation and technology transfer perspectives

The last decade or so has witnessed the emergence of the national innovation system (NIS) phenomenon. Since then, many scholars have investigated NIS and its implementation in different countries. However, there are very few investigations into the relationship between the NIS of a country and its national innovation capacity. This paper aims to make a contribution in this area by examining the link that currently exists between these two topics. Whilst examining this relationship, we also explore internationalisation and technology transfer, being cognate areas that have been investigated during the same period. This follows our assertion that the link between NIS and national innovation capacity is the mechanism of internationalisation and technology transfer. The NIS approach was introduced in the late 1980s (see Freeman, 1987; Dosi et al., 1988) and further elaborated later (see Lundvall, 1992; Nelson, 1993; Edquist, 1997). In essence, a country?s NIS is a historically grown subsystem of the entire national economy consisting of organisations and institutions which play a major role in the innovative activity in the country. In the NIS approach, interactions within organisations as well as the interplay between organisations and institutions are of central importance. The NIS approach has been used to reveal the structure of the innovation processes and the main actors involved in them in industrialised and emerging countries. Although the national focus remains strong, it has been accompanied by studies seeking to analyse the notion of systems of innovation at an international level and at a sub-national scale (Archibugi et al., 1999). Dosi in the edition of Archibugi et al. (1999) argues that the general background of the discussion of national systems is the observation of non-random distributions across countries of: corporate capabilities; organisational forms; strategies; and ultimately revealed performances, in terms of production efficiency and inputs productivities, rates of innovation, rates of adoption/diffusion of innovation themselves, dynamics of market shares on the world markets, growth of income and employment. They also mention that there are several approaches to NIS. Nelson (1993) focuses upon the specificities of national institutions and policies supporting directly or indirectly innovation, diffusion and skills accumulation. Patel and Pavitt (1991) have stressed the links between the national patterns of technological accumulation and the competencies and innovative strategies of a few major national companies. Amable et al (1997) and Soskice (1993) and Zysman (1994) focus on the specifics of national institutions including, for example, the forms of organization, financial and labour markets, training institutions, forms of state intervention in the economy etc. However, the most common reference is by Lundvall (1992) who argues that the focus on the national level is associated with the fact that national economies vary according to their production system and their institutional framework and these differences are in turn strengthened by different historical experiences, language and culture. On the other hand, the national innovation capability consists of abilities to create and carry new technological possibilities through to economic practice. The term covers a wide range of activities from capability to invent to capability to innovate and to capability to improve existing technology beyond the original design parameters (Kim, 1997). The term innovation is often associated by many with technological change at international frontiers. However, technological capability is not the same as innovation capability. Technological capability refers to assimilation, use, adaptation, and change to existing technologies. It also enables the creation of new technologies and development of new products and processes in response to changing economic environments. It denotes operational command over knowledge (Kim, 1997). It is manifested not merely by the knowledge possessed, but, more important, by the uses to which that knowledge can be put and by the proficiency with which it is applied in the activities of investment and production and in the creation of new knowledge (Westphal et al., 1985). Therefore, the analytical framework that is used in this paper is based on the way a country derives from its NIS a national innovation capacity. There are two perspectives that are identified on this way. These are internationalisation and technology transfer. Even though NIS is not directly related to national innovation capacity, to achieve national innovation capacity from NIS, the country should have the ability for technology transfer. Technology transfer is a link between these two phenomena. On the other hand, internationalisation can be either the input or the output of the relationship between NIS and national innovation capability. If a company is investing in a country because of its national innovation capacity, this can be regarded as an input to the relationship between NIS and national innovation capacity. If this company is investigating the national innovation capacity of a country then, for its internationalisation, the national innovation capacity should be important, which in turn means this company is active in innovation and innovation is also an important success factor. The interrelationship between the investment of the company and the NIS of the country (assuming that the country is competent and competitive in technology transfer) will generate and improve that country?s national innovation capacity. This is the output of internationalisation from the relationship between NIS and national innovation capacity. When companies are evaluating whether to internationalise, they investigate certain factors in the countries in which they are considering to invest. The ability to transfer technology is dependent on ability to adopt a new technology and also on the learning derived from this technology. If countries wish to attract innovation related investment they need to show their ability to have a NIS and also the capability to transfer technology. Without the technology transfer capability, the NIS is not functioning. Therefore, companies that internationalise will investigate the factors common to NIS, technology transfer, and their business needs. Through this paper we will demonstrate this link though its mechanisms. Our research will be through extensive literature review and identifying relevant aspects of previous research carried out by the authors. It will investigate certain factors of different countries that are successful in attracting innovation related foreign direct investment. Through these, we will point out the factors that are important for the link and mechanisms of NIS and national innovation capability.

Development and application of an electronic-manufacturing selection framework for SMEs

With a wide diversity of available technologies, it is extremely problematic for SMEs to identify, plan, prioritize and use the correct strategy. Electronic-manufacturing has been evolving for some time, but currently an effective planning framework to assist managers with implementing electronic-manufacturing planning is still lacking. A framework, built around three elements: the Balanced Scorecard, Quality Function Deployment and Value Chain Analysis, is proposed here to assist SMEs in managing complexity in e-manufacturing planning. A case study, carried out in Singapore, demonstrates the practicality and utility of the framework in the context of a real business environment. © World Scientific Publishing Company.

Modelling the innovation value chain

Innovation events – the introduction of new products or processes – represent the end of a process of knowledge sourcing and transformation. They also represent the beginning of a process of exploitation which may result in an improvement in the performance of the innovating business. This recursive process of knowledge sourcing, transformation and exploitation comprises the innovation value chain. Modelling the innovation value chain for a large group of manufacturing firms in Ireland and Northern Ireland highlights the drivers of innovation, productivity and firm growth. In terms of knowledge sourcing,we find strong complementarity between horizontal, forwards, backwards, public and internal knowledge sourcing activities. Each of these forms of knowledge sourcing also makes a positive contribution to innovation in both products and processes although public knowledge sources have only an indirect effect on innovation outputs. In the exploitation phase, innovation in both products and processes contribute positively tocompany growth, with product innovation having a short-term ‘disruption’ effect on labour productivity. Modelling the complete innovation value chain highlights the structure and complexity of the process of translating knowledge into business value and emphasises the role of skills, capital investment and firms’ other resources in the value creation process.

Implicating trust in the innovation process

In this paper, we describe the development of two new measures of innovation trust, ‘trust that heard’ and ‘trust that benefit’. We report the findings from their use in a survey of design engineers in two large aerospace companies. We test a range of hypotheses covering different plausible roles for trust and confirm a ‘main effects’ model, whereby the variables predict the number of ideas suggested and the number of ideas implemented. In addition, we replicate earlier findings by Axtel et al. (2000), namely that personal and job variables predict idea suggestion, whereas organizational variables predict implementation.

On the adoption decision and the intensity of use of complementary innovations: The intra firm diffusion of management practices across UK establishments

This paper contributes to the literature on the intra-firm diffusion of innovations by investigating the factors that affect the firm’s decision to adopt and use sets of complementary innovations. We define complementary innovations those innovations whose joint use generates super additive gains, i.e. the gain from the joint adoption is higher than the sum of the gains derived from the adoption of each innovation in isolation. From a theoretical perspective, we present a simple decision model, whereby the firm decides ‘whether’ and ‘how much’ to invest in each of the innovations under investigation based upon the expected profit gain from each possible combination of adoption and use. The model shows how the extent of complementarity among the innovations can affect the firm’s profit gains and therefore the likelihood that the firm will adopt these innovations jointly, rather than individually. From an empirical perspective, we focus on four sets of management practices, namely operating (OMP), monitoring (MMP), targets (TMP) and incentives (IMP) management practices. We show that these sets of practices, although to a different extent, are complementary to each other. Then, we construct a synthetic indicator of the depth of their use. The resulting intra-firm index is built to reflect not only the number of practices adopted but also the depth of their individual use and the extent of their complementarity. The empirical testing of the decision model is carried out using the evidence from the adoption behaviour of a sample of 1,238 UK establishments present in the 2004 Workplace Employment Relations Survey (WERS). Our empirical results show that the intra-firm profitability based model is a good model in that it can explain more of the variability of joint adoption than models based upon the variability of adoption and use of individual practices. We also investigate whether a number of firm specific and market characteristics by affecting the size of the gains (which the joint adoption of innovations can generate) may drive the intensity of use of the four innovations. We find that establishment size, whether foreign owned, whether exposed to an international market and the degree of homogeneity of the final product are important determinants of the intensity of the joint adoption of the four innovations. Most importantly, our results point out that the factors that the economics of innovation literature has been showing to affect the intensity of use of a technological innovation do also affect the intensity of use of sets of innovative management practices. However, they can explain only a small part of the diversity of their joint adoption use by the firms in the sample.

Organizing the innovation process:complementarities in innovation networking

This paper contributes to the developing literature on complementarities in organizational design. We test for the existence of complementarities in the use of external networking between stages of the innovation process in a sample of UK and German manufacturing plants. Our evidence suggests some differences between the UK and Germany in terms of the optimal combination of innovation activities in which to implement external networking. Broadly, there is more evidence of complementarities in the case of Germany, with the exception of the product engineering stage. By contrast, the UK exhibits generally strong evidence of substitutability in external networking in different stages, except between the identification of new products and product design and development stages. These findings suggest that previous studies indicating strong complementarity between internal and external knowledge sources have provided only part of the picture of the strategic dilemmas facing firms.

Organising the innovation process:complementarities in innovation networking

This paper contributes to the developing literature on complementarities in organisational design. We test for the existence of complementarities in the use of external networking between phases of the innovation process in a sample of UK and German manufacturing plants. Our evidence suggests some differences between the UK and Germany in terms of the optimal combination of innovation activities in which to implement external networking. Broadly, there is more evidence of complementarities in the case of Germany, with the exception of the product engineering phase. By contrast, the UK exhibits generally strong evidence of substitutability in external networking in different phases, except between the identification of new products and product design and development phases.

The innovation value chain

Innovation events - the introduction of new products or processes - represent the end of a process of knowledge sourcing and transformation. They also represent the beginning of a process of exploitation which may result in an improvement in the performance of the innovating business. This recursive process of knowledge sourcing, transformation and exploitation we call the innovation value chain. Modelling the innovation value chain for a large group of manufacturing firms in Ireland and Northern Ireland highlights the drivers of innovation, productivity and firm growth. In terms of knowledge sourcing, we find strong complementarity between horizontal, forwards, backwards, public and internal knowledge sourcing activities. Each of these forms of knowledge sourcing also makes a positive contribution to innovation in both products and processes although public knowledge sources have only an indirect effect on innovation outputs. In the exploitation phase, innovation in both products and processes contribute positively to company growth, with product innovation having a short-term ‘disruption’ effect on labour productivity. Modelling the complete innovation value chain highlights the structure and complexity of the process of translating knowledge into business value and emphasises the role of skills, capital investment and firms’ other resources in the value creation process.

Technology flows, outsourcing and productivity:an analysis of UK trade and FDI

By engaging in trade and foreign direct investment (FDI) with foreign partners, a country can access the R&D and related knowledge stocks of other countries (by accident or by design) and so benefit from those stocks of knowledge at a cost lower than that which would be incurred by developing the knowledge internally. This should lead to beneficial ‘spillover’ effects on the productivity of domestic firms. However, the literature on technology spillovers from trade and FDI is ambiguous in its findings. This may in part be because of the assumption in much of the work that trade and FDI flows are homogeneous in their determinants and thus in their effects. We develop a taxonomy of trade and FDI determinants based on R&D intensity and unit labour cost differentials, and test for the presence of spillovers from inward investment and imports on an extensive sample of UK manufacturing plants. We find that both trade and FDI have measurable spillover effects, but the size of these effects varies depending on the technological and labour cost differentials between the UK and its trading partners. There is therefore an identifiable link between the determinants and effects of trade and FDI which the previous literature has not explored. We also find that absorptive capacity matters for spillovers from FDI, but not from trade. Overall, these findings suggest that the productivity effects of FDI are largely restricted to plants with high absorptive capacity, while the productivity effects of imports occur largely among higher-technology plants regardless of their absorptive capacity.

Innovation, ownership and profitability

There is lots of evidence that innovating firms are persistently more profitable than non-innovators, but little agreement on why this is the case. It may be because innovators are somehow able to protect their new products from the competition which normally erodes profits, or because innovating firms have superior capabilities and are able to introduce multiple innovations over time. And very little is known about the relationship between innovation, external ownership and profitability, despite the fact that foreign-owned firms are frequently highly innovative and very profitable. This paper considers the relationship between innovation, ownership and profitability for a panel of manufacturing plants in Ireland and Northern Ireland. We consider the link between innovation and profits separately for innovators and non-innovators, and for indigenous innovators and non-innovators and externally-owned plants. We also consider the determinants of innovation over the distribution of plant-level profitability, and find that the determinants of profitability – including innovation and external ownership – are quite different for low and high-profitability plants. We find support for the view that innovators and non-innovators have different profitability determinants, and that externally-owned plants have their profitability determined in a quite different way from indigenous enterprises. For indigenous non-innovators only the sector matters. Profitability in these enterprises is dictated largely by the industry they are in, with plants having virtually no means of differentiating their profitability from the norms of the industry. By contrast, indigenously-owned innovators are able to differentiate their profit performance from industry norms to some extent. Absolute size matters (negatively) and they get a strong boost from product innovation, but having a high market share does not matter for the profitability of indigenously-owned innovators. Externally-owned plants have a quite different set of profitability determinants from both of these groups. What matters for these plants is not the boost they get from innovating (there is none) but instead their position in the domestic market – a high market share boosts profitability. In policy terms our results suggest both optimistic and cautionary messages. On the positive side our results suggest that efforts to promote innovation activity among indigenously-owned plants are likely to have significant longer term benefits through their capability effects. For the development agencies in Ireland this is a reassuring result. On the more negative side, the lack of any relationship in our models between the innovation activities of externally-owned plants and their (profitability) performance raises potential concerns. This finding may reflect the lack of linkages between externally-owned plants and their Irish resource base, in turn raising some worrying issues about the ‘embeddedness’ of much FDI into Ireland and therefore its ‘stickiness’ in the face of Ireland’s increasing high relative cost base.

The innovation decision:an economic analysis

Studies of the determinants and effects of innovation commonly make an assumption about the way in which firms make the decision to innovate, but rarely test this assumption. Using a panel of Irish manufacturing firms we test the performance of two alternative models of the innovation decision, and find that a two-stage model (the firm decides whether to innovate, then whether to perform product only, process only or both) outperforms a one-stage, simultaneous model. We also find that external knowledge sourcing affects the innovation decision and the type of innovation undertaken in a way not previously recognised in the literature. © 2007 Elsevier Ltd. All rights reserved.

Identifying innovation strategies: insights from the Greek food manufacturing sector

This paper examines the concept of innovation that is widely recognised as very important for all companies across different business sectors. The paper initially provides a review of the innovation literature in terms of types, classifications and sources of innovation that have been proposed over time. Then, the paper examines innovation in the context of the food industry, and in particular, it attempts to identify innovation strategies followed by Greek food manufacturing companies based on a specific model. Evidence from the Greek food manufacturing sector indicates that companies tend to innovate along the dimension of offerings that is more related to the traditional view of innovation (product and process innovation).

Investigating Turkey's national innovation and learning system

The national systems of innovation (NIS) approach focuses on the patterns and the determinants of innovation processes from the perspective of nation-states. This paper reports on continuing work on the application of an NIS model to the development of technological capability in Turkey. Initial assessment of the literature shows that there are a number of alternative conceptualisations of NIS. An attempt by the Government to identify a NIS for Turkey shows the main actors in the system but does not pay sufficient attention to the processes of interactions between agents within the system. An operational model should be capable of representing these processes and interactions and assessing the strengths and weaknesses of the NIS. For industrialising countries, it is also necessary to incorporate learning mechanisms into the model. Further, there are different levels of innovation and capability in different sectors which the national perspective may not reflect. This paper is arranged into three sections. The first briefly explains the basics of the national innovation and learning system. Although there is no single accepted definition of NIS, alternative definitions reviewed share some common characteristics. In the second section, an NIS model is applied to Turkey in order to identify the elements, which characterise the country’s NIS. This section explains knowledge flow and defines the relations between the actors within the system. The final section draws on the “from imitation to innovation” model apparently so successful in East Asia and assesses its applicability to Turkey. In assessing Turkey’s NIS, the focus is on the automotive and textile sectors.