Innovation and growth in KIBS: the role of clients’ collaboration and service customisation

In this paper, we analyse KIBS firms and posit that two core attributes of KIBS, namely collaborative relationships with clients and product customisation, foster the ability to develop successful, new product innovations. We disentangle the role of customisation and collaboration choices by looking at how they jointly affect the impact of innovation over firms’ performance, asking to what extent and how firms should collaborate with clients and customise their services. We test our hypotheses on a sample of Italian KIBS firms. Our results show that product innovations that are new to the industry are relevant and, counter intuitively, show that most growing KIBS firms do not have the highest service customisation and collaboration breadth with their clients. Most growing firms develop mass customisation strategies and they leverage on focused collaboration strategies with clients.     

The innovative behaviour of Italian firms: A survey on technological innovation and R&D

This paper is based on the findings of a survey on technological innovation in the Italian industry.All Italian manufacturing firms were screened in the analysis and, at the end of a screening process, 8,220 of them, which had introduced relevant technological innovations over the period 1981–1985, filled out either a mail questionnaire or were covered through a personal interview.Data and preliminary comments on the following problem-areas are set in the paper: type of innovation introduced in the firm (product, process), impact of innovations on the firm's products and sales, cost of innovation, technological relevance of innovations introduced, impact of innovations on the utilization of input factors, factors linked to the introduction of innovation, performance of R & D.Data show that technological innovation is a complex aspect of company life; it relates to both products and production processes: in more than half of the cases firms introduced both product and process innovations, whereas only products or processes were introduced in about 20 per cent of cases, respectively. It is also apparent that the majority of innovations are new only for the firm, and that only a limited share are new for the sector or for the country. Looking at the techno-scientific quality of the innovations introduced, quite often innovations were classified as technical improvements or enhancements, and in a very limited number of cases they were considered as applications of a scientific breakthrough.The breakdown of the innovation costs shows that, on average, more than half of the cost is attributed to investment (machinery, equipment, etc) one fourth to engineering and design activity, one fifth to R & D and the remaining 5 per cent to marketing activities.The most important factor linked to the introduction of innovation appears to be the acquisition of plant and machinery. This confirms the result of previous analyses which show that the introduction of new technologies hinges upon new machinery and equipment, often the sole means for the acquisition of technology produced by other economic agents — a diffusion and adaptation process is occurring. R & D was mentioned in a limited number of cases.In the paper a quantitative and qualitative analysis of the R & D performed by the firm is reported. In particular, it is shown that the number of R & D performing manufacturing firms is more than double that which emerges from the annual survey on research and development activities carried out by the Italian Central Statistical Office.     

Innovation and firm growth over the business cycle

This paper investigates how the macroeconomic business cycle impacts the empirical relation between innovation and firm growth. Based on representative panel data of Swiss firms ranging from 1996 to 2014, the paper finds that firms with innovations based on R&D activities show higher sales growth rates than non-innovative firms in periods dominated by economic recessions. This finding is in line with the idea that recessions play an important role in the adaptation process of the economy towards the innovative. In contrast, the paper finds that firms with innovations based on other, non-R&D innovation activities show higher sales growth rates than non-innovative firms in periods dominated by economic booms. Hence, while firms with innovations based on R&D activities are more resilient to business cycle fluctuations than non-innovative firms, firms with innovations based on other, non-R&D innovations activities are more sensitive to business cycle fluctuations than non-innovative firms.     

Tcg R&D Networks

Whilst inter-organisational networks are increasingly significant in making production systems more flexible and responsive, these organisational arrangements could be even more important in other phases of the production cycle, and particularly in new product development. The literature on R&D and technological innovation has come to stress the role that 'networks of innovators' play in the R&D, product development and marketing phase of technological innovation. This 'fusion-network' model stands in marked contrast to the previously dominant model of innovation which envisaged the process as a linear sequence from one technology to another, with R&D conducted as a proprietary activity within a single firm. The Australian high-technology group TCG, which operates internally as a cluster of autonomous small firms, has developed a unique 'triangular' approach to fusion networking, which has now been perfected through several successful experiences with leading firms. Case studies of the approach are described, and its significance as an industry development strategy is analysed.     

Entrepreneurial networks and open innovation: the role of strategic and embedded ties

This paper considers the open innovation paradigm in the context of entrepreneurial firms. Based on an analysis of survey data, it examines the relationship between network ties and innovation. These are considered as the strategic network ties associated with open innovation and the embedded ties associated with entrepreneurial networks. It is found that both strategic and embedded ties are significantly associated with rates of innovation for entrepreneurial firms, although for the former this relationship is driven by a minority of larger or highly innovative firms. Strategic ties are most strongly linked to product and organisational innovations, whilst process innovations are more related to embedded network ties. There is some evidence of complementarity between the two forms of network tie. It is concluded that in the entrepreneurial context, the open innovation concept should be broadened to encompass the role performed by embedded network ties.     

Generating Stylistic Innovation: A Process Perspective

In contrast to technological innovation, little is known about how innovation arises in the creative industries. This inductive study of product development practices in five fashion firms examines how organizations in the fashion industry develop a particular type of innovation: stylistic innovation. The resulting theoretical framework reveals that successful fashion firms develop stylistic innovations based on a unique combination of three sets of interrelated product development practices—creative sensing (inspiration-based), stylistic orchestrating (coherence-focused) and agile synchronization (timing-driven). This study's main contributions to the innovation literature are its crystallization of the key properties of stylistic product innovation, its development practices and extension of thinking about how these properties are different from prior development practices found in traditional technological industries.     

Innovation and Entry in the US Disposable Diaper Industry

Economic analysis concerning new product innovation is dividedbetween the perspective (associated with Bain) that new productdesigns are based on product differentiation which erects barriersto new competition insulating incumbent firms, and the perspective(associated with Schumpeter) that innovation erodes the positionof incumbent firms. This paper offers an analysis of the USdisposable diaper industry which emphasizes the long-run effectsof technological competition and entry on market performanceover the short-run effects of incumbency advantages. As thedisposable diaper industry evolved, neither product differentiation,supported by large advertising expenditures, nor technologicalleadership in new product development insulated the major companyProcter & Gamble from the ‘gales of creatives destruction’.Spillovers created by the market leaders became the means ofsuccessful entry and the channels of technology diffusion thatsustained entrants in the technology race and enlarged consumerbenefits.     

Driving business performance: innovation complementarities and persistence patterns

Complementarities between technological and non-technological innovation are crucial determinants of firm performance. Although innovation complementarity has been extensively tested in the empirical literature, it has not been analysed in conjunction with innovation persistence. This fact is mainly due to the lack of data sets able to provide adequate longitudinal information. The capacities to develop market-oriented behaviour and introduce new organisational innovations, together with technological innovation, are the drivers of a firm’s productivity and profitability. We find that these activities complement technological innovation and that their impact is greater when they persist over time, thus introducing a more general concept of innovation persistence. We present an empirical model based on a large new panel of Italian manufacturing firms covering the period 2000–2012 which enables us to determine the precise impacts of a firm’s innovative attitude, in a broad definition that incorporates non-technological innovation and persistence, on its productivity and profitability.     

Social Capital and Effective Innovation in Industrial Districts: Dual Effect of Absorptive Capacity

This paper deals with the factors that affect the heterogeneity in the access to knowledge and its exploitation through innovation in firms located in industrial districts. The aim of the study is to analyze the moderating role of the components of the absorptive capacity – identification and combination – in the process that leads firms in industrial districts with social capital to obtain effective innovations through the knowledge acquisition. We have developed the empirical analysis on a sample of 166 firms located in the industrial districts of the footwear industry in Spain. Findings suggest that the firms in industrial districts improve the acquisition of novel and valuable knowledge from external networks of information when they have identification capabilities to explore their potential. The results also indicate combinative capability strengthens the acquired new knowledge to develop and exploit successful innovations.     

Growth of De Alio and De Novo firms in the new and renewable energy industry

Firms entering new markets are either de alio, with business experience in other areas, or de novo, without such experience. De alio firms enter markets in advantageous situations, while de novo firms enter markets with innovation capabilities. This study determines whether de alio or de novo firms achieve faster sales growth as well as the duration of their growth when they enter the new and renewable energy industry. Panel data for global companies that entered the new and renewable energy industry after the 1990s show that de alio firms achieved higher growth rate than did de novo firms in the initial stages, but that entry type’s contribution to sales growth gradually decreased and disappeared four years after entrance. The results indicate that accumulated resources and new entrants’ former experiences in other industries have positive effects, contributing to initial success after market entry for a limited time. This finding suggests that firms improve the R&Cs (resources and capabilities) that are appropriate to their new environments for sustainable development.     

The Nature of Innovation in R&D- and Non-R&D-Intensive Service Firms: Evidence from Firm-Level Latent Class Analysis

Innovation in services has been largely characterised by the predominance of non-technological innovation and low intensity in research and development (R&D) activities. However, most cross-industry analyses still overlook the organisational character of innovation in services. In this article, we use latent class analysis to examine the nature of innovation in 2148 firms from 20 service industries in Spain. On the basis of the analysis of 10 innovation types and 5 kinds of innovation activities, a taxonomy composed of 2 R&D-intensive and 2 non-R&D-intensive clusters is proposed. The findings indicate that organisational innovation counts for three of the four profiles, the new management techniques being the most common organisational innovation in all clusters. Furthermore, micro- and small-sized firms from several subsectors are more likely to be R&D-oriented than medium and large companies. The results underline the coexistence of different innovation patterns within the same industry as well as the predominance of hidden innovators in several industries.     

Innovation,creative destruction and structural change: firm-level evidence from European countries

The shift of employment from lower to higher productive firms is an important driver for structural change and industry dynamics. We investigate this reallocation in terms of employment gains and losses from innovation. New employment created by product innovation may be offset by employment losses in related products, known as ‘cannibalisation’ or ‘business stealing’ effects in the literature, by employment losses from process and organisational innovation and by general productivity increases. The paper investigates this effect empirically with a large data set from the European Community Innovation Survey. We find that employment gains and losses increase with technology intensity of the sector. High-technology manufacturing shows the strongest employment gains and losses from innovation, followed by knowledge-intensive services, low-technology manufacturing and less knowledge-intensive services. The net contribution of innovation to employment growth is mostly positive, an exception being manufacturing industries in recession periods.     

Technological Extinctions of Industrial Firms: An Inquiry into their Nature and Causes

After a buildup in the number of firms, new industries commonlyexperience a ‘shakeout’ in which the number of firmsdeclines sharply. Three theoretical perspectives on how technologicalchange contributes to industry shakeouts are analyzed. The theoriesare used to synthesize predictions concerning technologicalchange and industry evolution. The predictions inform an analysisof four US industries that experienced sharp shakeouts: automobiles,tires, televisions and penicillin. Using data on firm participationand innovation from the commercial inception of the four productsthrough their formative eras, we uncover regularities in howthe products evolved. The regularities suggest that shakeoutsare not triggered by particular technological innovations norby dominant designs, but by an evolutionary process in whichtechnological innovation contributes to a mounting dominanceby some early-entering firms.     

Patterns of Innovation Capabilities in KIBS Firms: Evidence from the 2003 Statistics Canada Innovation Survey on Services

The aim of this paper is to shed light on complementarities and substitutions between various types of innovation capabilities in knowledge-intensive-based service (KIBS) firms. The data used in this study are the responses of 2,625 innovative firms to the 2003 Statistics Canada Innovation Survey on services. The empirical results suggest the presence of three patterns of complementary innovation capabilities, one pattern of substitute activities and finally, four patterns of innovation capabilities that are independent from each other. Hence, the results suggest the presence of complementarities: first, between internal R&D, external R&D, acquisition of equipment and machinery, and marketing activities; second, between external R&D, acquisition of equipment and machinery, acquisition of external knowledge and marketing activities; third, between acquisition of equipment and machinery, acquisition of external knowledge and marketing activities. Such complementarities lead to the conclusion that, in practice, managers of KIBS firms consider the consolidation of these capabilities jointly instead of separately. The paper also discusses issues related to patterns of capabilities that are substitutes and independent from each other. The results of this study also show significant heterogeneity in the determinants of the different patterns of innovation capabilities.     

The influence of different knowledge workers on innovation strategy and product development performance in small and medium-sized enterprises

Despite significant interest on the topic of knowledge workers, the understanding of how they influence certain aspects of firm innovativeness remains limited. In particular, while different types of knowledge workers exist, their particular synergistic effects on new and improved product development within smaller firms has received less attention. Drawing on the knowledge-based view (KBV), we posit that innovation strategy plays an instrumental role in linking the effects of knowledge workers, thereby leading to greater product development outcomes from different types of knowledge workers. Moreover, some suggest that beyond a certain point, there is a diminishing return to increasing the proportion of knowledge workers in an organisation; however, the basis of this finding is within larger firms. This study investigates whether high-level (e.g. engineers and scientists) and low-level (e.g. technicians and machine operators) knowledge workers exert varying effects on performance in terms of new and improved product development. Data from 205 small and medium-sized high-tech manufacturing firms provide support that distinguishing among types of knowledge workers is important given that they impact new and improved product development differently. Furthermore, innovation strategy plays a synergistic role, positively mediating the effects of different types of knowledge workers on innovation outcomes.     

Firm size and compositions of R&D expenditures: evidence from a panel of R&D performing manufacturing firms

The effect of firm size on diverse compositions of R&D expenditures is analysed in detail using firm-level data on the Korean manufacturing sector. On the grounds that each type of R&D activity differs in terms of salability in disembodied form and growth potential due to innovation, a distinction between product vs. process, and new vs. incremental R&D is made. Empirical tests show that the firm size is significantly associated with both the new and incremental R&D. Moreover, firm size is found to be significantly associated with other types of R&D compositions such as the share of R&D devoted to incremental innovation and multidimensional combinations of product, process, new and incremental R&D. These findings support the idea that large firms possess innovative advantages over smaller firms and firm size is an important determinant for firms’ heterogeneous R&D activities. We also discuss the limitations and the implications of the findings.     

Combining Innovation and Capacity Utilization in High Throughput Systems: Moving Beyond the Product Life Cycle Model by Introducing Second-Order Innovations

The literature on the product life cycle and on high throughput systems has been preoccupied with studying an apparent lack of flexibility in capital-intensive production systems. Companies in capital-intensive industries need to maintain a high level of capacity utilization in order to stay economically viable, however, their efforts to uphold the throughput of their systems often have the unforeseen and unintended consequence of limiting their ability to introduce new products and services. Nevertheless, some companies have managed to resolve these tensions by introducing what we describe as “second-order innovations”, a type of innovation which acts on the innovation process itself and enables new products and services to be introduced without a steep decline in capacity utilization. By focusing on these cases and discussing their theoretical implications, we want to contribute to the existing literature on high throughput systems by identifying key mechanisms for introducing and maintaining such second-order innovations and describing the patterns of industrial evolution that they create.     

R&D and firm performance in the semiconductor industry

While the semiconductor industry is still dominated by large vertically integrated firms, fabless firms, which outsource their manufacturing, are gaining market share. Fabless firms are considered to have an advantage in product innovation, as they can focus their innovation efforts on chip design and can benefit from investments in process innovation made by their manufacturing partners. However, there is little empirical evidence of the performance of fabless firms compared to vertically integrated firms. This research empirically examines the relationship between R&D and the financial performance of fabless and vertically integrated firms from 2000 to 2010. Our results show that fabless firms maintain higher gross and net margins, earn a higher return on assets (ROA) and have greater intangible value (Tobin’s q) than vertically integrated firms when controlling for size, capital intensity and R&D ratio (R&D/sales). This supports the argument that fabless firms achieve greater performance by focusing on one part of the innovation process. The relationship of R&D ratio to net margin is negative for the whole sample, suggesting that the industry may be overinvesting in R&D. Notably, the negative relationship is greater for fabless firms, which spend a higher amount of their sales on R&D. The relationship of R&D ratio to ROA and Tobin’s q is negative, and there is no significant difference between fabless and integrated firms. We conclude that fabless firms outperform integrated firms overall, but are somewhat worse in terms of increasing profits and creating value from their R&D investments.