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How does innovation transform into economic value? There is a need for a better understanding on how learning (for innovation) is managed within organizations. Is there any relationship between different learning approaches (Science and Technology Innovation (STI) and Learning by Doing, by Using by Interacting based Innovation), innovation output (product and process innovation) and business performance (sales growth)?
Citation preview
Disentangling the relationship
between learning modes, innovation
output and economic performance:
Evidence from Spain
González-Pernía, J.L.
Parrilli, M.D.
Peña-Legazkue, I.
‘Regional Innovation in the Global Economy’ Institute for Research on Innovation (IRIS)
Stavanger, 11 December 2012
Motivation
• How does innovation transform into economic value? There is a need for a better understanding on how learning (for innovation) is managed within organizations.
• Is there any relationship between different learning approaches (STI and DUI), innovation output (product and process innovation) and business performance (sales growth)?
• Is it as expected on the basis of former studies (Jensen et al., 2007; Isaksen and Karlsen, 2011; Parrilli & Elola, 2011)?
Key Concepts
• STI learning mode: learning and innovation based on science and technology drivers such as R&D expenditure, human capital in S&T disciplines, investment in infrastructures.
• DUI learning mode: learning and innovation based on learning-by-doing, by-using and by-interacting, thus based on interactive experience and practice.
Literature on “STI-DUI”
• Traditional approach to Innovation based on Science and Technology drivers (STI approach): – R&D expenditure and infrastructure (Griliches, 1979; Greunz,
2005)
– human capital (Romer, 1994)
• This approach tends to identify determinants of: – innovation outputs (patents)
– economic performance (productivity growth)
• However, this approach does not explain the capacity of some economies (Denmark, Norway, Italy, …) to innovate and to be competitive despite their more modest effort in STI activities (i.e., reduced investment in R&D).
Literature on “STI-DUI”
• On these bases, Lundvall and the Scandinavian school
identified other drivers of innovation: later known as
innovation based on learning-by-Doing, by-Using and by-
Interacting (DUI) (Lundvall, 1992; Lundvall and Johnson,
1994).
• Interaction among all workers and firms, and daily practice
help increase innovation and have an impact on economic
performance.
Literature on “STI-DUI”
• Jensen, Johnson, Lorenz and Lundvall (2007) tested the relevance of both innovation modes, STI and DUI, on 4000 Danish firms (DISKO) concluding that the most productive innovation mode is the combination of the two: STI+DUI.
• Two recent studies (Aslesen et al., 2011 on Norway, and Chen et al., 2011, on China) confirm the result. Another one offers more nuanced results, i.e. international DUI vis-a-vis local DUI (Dahl-Fitjar and Rodríguez-Pose, 2012)
• & Parrilli and Elola (2011) found that such combination may not be the most effective in all contexts.
Contribution
What we know …
Drivers Outcome
STI
Innovation (innovation black box!)
DUI
What we don´t know … (though Dahl-F. & Rodriguez-P. worked on this)
Drivers Modes Performance
STI
Product Innovation Sales
Process Innovation Growth
DUI
Contribution (cont.)
What we seem to know …
• Combined STI-DUI approach leads to best new-to-market innovation results (Jensen et al., 2007)
What we don´t know …
• The STI and DUI effect (by considering both intra-firm and inter-firm indicators) on product and process innovation.
• Is STI more tighly linked to product innovation and DUI more tighly linked to process innovation or viceversa?
Contribution (cont.)
What we know …
• Both product and process innovation increase firm performance under a static view
• Most studies: one-country, one-period
What we don´t know …
• Whether this relationship works under a dynamic view
• Results for mutliple-regions and multiple-periods
Proposed Framework
Sales Growth
Product innovation
Process innovation
STI-mode of learning
DUI-mode of learning
STIxDUI-mode of learning
Strong relationship Weak relationship
DRIVERS MODES PERFORMANCE
Propositions
• Although, the STI-DUI combination is likely to be the most effective approach, it needs to be further studied.
• More specifically, our propositions are:
P1: STI higher effect on product innovation
DUI higher effect on process innovation
STI*DUI higher effect on both product/process
P2: Product innovation stronger effect on late performance
Process innovation stronger effect on early performance
Data and methodology • Source: Technological Innovation Panel (PITEC)
• Period of analysis: 2004-2009
• Unit of analysis: Firms
– 10 or more employees
– No incidence in employment
– Manufacturing and services
Nº cases: 8,682 firms
Average period: 3.9 years
Overall sample: 33,789 obs.
Basic empirical model: Random effects
)(= ,,1-ti,ti, tiiti uZXY
Description of variables
Construct Variables Measurement
Factor loadings Cronbach's
alpha Factor 1 Factor 2
STI
Intramural R&D % of sales 0,9014 0,0488
0,7299 Intramural R&D % of total personnel 0,877 0,0941
External R&D % of sales 0,6195 0,0259
DUI
New business
practices 0- No / 1- Yes 0,0541 0,8335
0,7087 New methods of
organising work 0- No / 1- Yes 0,0354 0,8503
New methods of
organising external 0- No / 1- Yes 0,1529 0,684
Percentage of variance explained 0,3322 0,3163
Control variables Measurement
Sales size Ln(Salest-1)
Enterprise group 0- No / 1- Yes
Manufacturing firm 0- No / 1- Yes
Technological firm 0- No / 1- Yes
Control variables Measurement
Spanish firm 0- No / 1- Yes
Private firm 0- No / 1- Yes
Firm age Age in years
Science park 0- No / 1- Yes
Description of variables
1. Organizational performance: • Annual sales change:
2. Innovation output: • Product innovation
• Process innovation
Dependent
variables
(Yit)
100 Sales
Sales= Sales
1-ti,
ti,
ti,
Standardized
scale indicators
Construct Variables Measurement Factor loadings Cronbach's
alpha Factor 1 Factor 2
Product
New goods 0- No / 1- Yes 0.8401 0.1673
0.7407 New services 0- No / 1- Yes 0.5240 0.2537
New products 0- No / 1- Yes 0.9139 0.2104
New to market % of sales 0.6316 -0.0524
Process
New prod. methods 0- No / 1- Yes 0.2939 0.6767
0.7502 New logistic systems 0- No / 1- Yes 0.0723 0.6125
New support act. 0- No / 1- Yes 0.0786 0.7611
New processes 0- No / 1- Yes 0.2072 0.8834
Percentage of explained variance 0.2944 0.2915
Results: Impact of STI and DUI on innovationa
Product Process
(1) (2) (1) (2)
STI i,t-1 0.139*** 0.063***
DUI i,t-1 0.076*** 0.125***
STIxDUI i,t-1 -0.016** -0.012*
STI i,t-2 0.120*** 0.052***
DUI i,t-2 0.078*** 0.132***
STIxDUI i,t-2 -0.014* -0.012
Observations 33,789 25,711 33,789 25,711
Cases 8,681 8,407 8,681 8,407
R2:
Within 0.008 0.002 0.008 0.002
Between 0.312 0.284 0.312 0.284
Overall 0.263 0.259 0.263 0.259
a Coefficients for control variables omitted due to space constraints
(STI > DUI) Prob > X2: 0.000 0.000 0.000 0.000 (DUI > STI) Prob > X2:
Results: Impact of innovation on performancea
Sales growth
(1) (2)
Producti,t-1 0.500*
Processi,t-1 0.603**
Producti,t-2 0.831***
Processi,t-2 0.582**
Observations 33,789 25,711
Cases 8,681 8,407
R2:
Within 0.182 0.200
Between 0.025 0.042
Overall 0.135 0.140
a Coefficients for control variables omitted due to space constraints
0.742 0.498 (Poduct > Process) Prob > X2: (Process > Product) Prob > X2:
Conclusions
1. Conducting STI and DUI activities is a complex and risky task – The combined effect does not seem to improve
each of the separate effects of STI and DUI
2. STI and DUI exert a positive effect on innovation – Stronger impact of STI on product innovation
– Stronger impact of DUI on process innovation
3. Potential short-term impact of process innovation, potential long-term impact of product innovation, but not statistically significant.
Implications
• Benefits from both product and process innovation
• Innovation policy actions should be concentrated not only on STI indicators, but also on DUI ones: – Experience-based knowledge driven by interaction of
agents within and out of the firm is also important
– But STI and DUI simultaneously may be challenging
• Despite the general evidence supporting subsidies to innovation, specific additionality of innovation programs should be measured and carefully assessed.
Many thanks!!
Any comment?
m.d.parrilli@orkestra.deusto.es
jogonzal@orkestra.deusto.es
ipena@orkestra.deusto.es
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