Innovation in Services & the Organization-Co-operation Mode of Innovation Bruce Tether # *, Stan Metcalfe* & Abdelouahid Tajar + # Advanced Institute of Management (AIM) Research * ESRC Centre for Research on Innovation & Competition University of Manchester + Centre for Survey and Census Research, University of Manchester CBR Summit: 29-30 March 2006 Innovation and Governance
The CBR’s Surveys of SMEs • CBR – major contribution in surveying SMEs since 1991 – Most recently comparisons of US and UK SMEs • CBR also pioneered CIS type Innovation surveys in the UK – c.f., The UK’s Official CIS-1 • For understanding innovation, CBR surveys have been advantageous in placing innovation in a wider context – e.g., Extent of Competition – e.g., Profit of Growth Orientation – Panel data helps overcome problems of endogeneity • Looking Forward – CBR / CRIC proposed collaborative work on Innovation in Services – Focus of my talk today CBR Summit: 29-30 March 2006 Innovation and Governance
Introduction: Innovation in Services • Services dominate advanced economies, • But are widely thought to be Innovation Laggards • Pavitt (1984) labelled services ‘Supplier Dominated’ i.e., as recipients not producers of new technologies • Community Innovation Surveys repeatedly show services are less likely to innovate than manufacturers with similar characteristics (e.g., Size, R&D commitment) – However, substantial variation exists within Services and Manufacturing – exceeds variation between Manuf. & Ser. • Suspicion remains that Measurement Systems favour Manufacturers – focus on technologies (& R&D) & ‘step- wise’ innovation rather than continuous improvement CBR Summit: 29-30 March 2006 Innovation and Governance
Innovation in Services: CBR Surveys 100% 77% 75% Proportion of Surveyed Firms 75% 62% 61% 60% 58% 53% 49% 50% 25% 0% Low (& LM) High (& High Tech Other Low (& LM) High (& High Tech Other Tech Man. MH) Tech & Tech. Services Tech Man. MH) Tech & Tech. Services Man. Ser. Man. Ser. CBR 1997 Survey CBR 1999 (from 1997-99 panel) CBR Summit: 29-30 March 2006 Innovation and Governance
Innovation in UK: 2002-2004 (CIS-4) 100% 85% 74% 72% 71% Proportion of Firms 68% 67% 75% 62% 59% 59% 58% 44% 50% 40% 39% 36% 25% 0% s g t . n s n g t s e n e s n c n n l e n a o o e d d t e . o e i n e i i r h i t i i t y a t m a t i m e i . a a t a i s v r r r l n c i n r r p i i i T c T t p l d t u u a U i b c i i g i M e n r u u l a u u e A t i n m u a q Q s t r q P l i a s e , r m n t E s E s r e e u t s e s & o a l , m R R t a r e l c t t e C a e W r t n l g a n o o c o e p & I n i h C i f p M a s , t u l i s p a W n s s P u n & l a O n i i , B e a c M c G , a d n t M i e o d t & r s a T o g H , n a n y o a g a t i l W r F n i P c o l i a i t t , r n S c , s t g c e i l r a n t e R t r c c i o l h E e i m t , p o e l s E e t l n C a h a t s C , r d E T , o s l o a l e F e u R F CBR Summit: 29-30 March 2006 Innovation and Governance
The Innobarometer Survey of 2002 • Innobarometer – carried out by EOS Gallup in Sept 2002 • Firms from across the EU interviewed by Telephone • Must have 20+ employees – in Industry or Services • Total of 3,014 firms took part • Our Analysis focuses on Answers to three Questions • Q1. Have your Innovation Efforts concentrated on: – The development of new products – The development of new processes – The development of new organizational changes CBR Summit: 29-30 March 2006 Innovation and Governance
The Innobarometer Survey of 2002 • Q2.What are your main Sources of Advanced Technology? – The acquisition of advanced machinery or equipment – Co-operation with suppliers or customers – Conducting in house R&D – Co-operation with Universities or R&D specialists – The acquisition of external intellectual property (e.g., licensing in) • Q3. What are your company’s Strengths at Innovation? – Technological advance and R&D competencies – Efficient production methods & making best use of resources – Flexibility and adaptability of production to market needs – Leadership in finding out and exploiting new market trends – Good co-operation practices with suppliers, customers or TAs – The qualifications and professionalism of our staff CBR Summit: 29-30 March 2006 Innovation and Governance
Identifying 3 Modes of Innovation Dimensions 1 & 2 from Correspondence Analysis P roj ect i on of vari abl e cat egori es i n di m 1 vs di m 2 di m ensi on 2 1. 0 ef f 22Y 0. 9 acq14Y 0. 8 0. 7 pro13Y 0. 6 0. 5 f l x22Y 0. 4 prd13N 0. 3 rad14N peo22N 0. 2 cop22N C op14N 0. 1 rdc14N t ec22N 0. 0 org13Y org13N -0. 1 C op14Y -0. 2 ef f 22N peo22Y f l x22N -0. 3 cop22Y -0. 4 pro13N t ec22Y -0. 5 rad14Y prd13Y acq14N -0. 6 rdc14Y -0. 7 CBR Summit: -0. 7 -0. 6 -0. 5 -0. 4 -0. 3 -0. 2 -0. 1 0. 0 0. 1 0. 2 0. 3 0. 4 0. 5 0. 6 0. 7 0. 8 0. 9 1. 0 1. 1 29-30 March 2006 Innovation and Governance di m ensi on 1
Identifying 3 Modes of Innovation q3-eff = 1 q2-acq = 1 Mode 2 q1-pro = 1 Process-Efficiency q3-flx = 1 q1-org = 1 Dimension 1 Mode 3 Mode 1 q2-cop = 1 Organization- Product-Research Co-operation Dimension 2 q3-tec = 1 q2-rad = 1 q1-prd = 1 q3-cop = 1 q3-peo = 1 q2-rdc = 1 CBR Summit: 29-30 March 2006 Innovation and Governance
Three Modes of Innovation • Mode 1: Product-Research Innovation Focus = Product; Source of Technology = In-house R&D; Co-ops with Universities or R&D Specialists; Strengths at Innovation = Technological Advance & R&D • Mode 2: Process-Efficiency Innovation Focus = Process; Source of Technology = Acquisition of Adv. Mach. / Equipment; Strengths at Innovation = Efficient Production Methods; Flexibility and Adaptability of Production to Market Needs • Mode 3: Organizational Cooperation Innovation Focus = Organizational Change; Source of Technology = Co-operation with Suppliers or Customers; Strengths at Innovation = Cooperation Practices & Professionalism of Staff • 1 st Round of Allocations: firms with 3+ / 4 characteristics CBR Summit: 29-30 March 2006 Innovation and Governance
Mode 1 The Product-Research Mode of Innovation Triangle, None after 1 st round: allocations 215 1,418 (48.5%) in 1 st round ( M1 only ) M1 & M2 M1 & M3 None after 2 nd Round 112 161 909 (31.1%) Circle, 102 155 Allocations (M1 & M2) (M1 & M3) in 2 nd round 10 6 (M1 & M2) 55 in all three (M1 & M3) ( M1, M2 & M3 ) - identified in 2 nd Round 413 38 821 ( M2 only ) ( M3 only ) (M2 & M3) Mode 3 Mode 2 M2 & M3 The Organization- 197 The Process-Efficiency 235 Co-operation (M2 & M3) Mode of Innovation Mode of Innovation CBR Summit: 29-30 March 2006 Innovation and Governance
Classified Firms by Country 100% 18% 90% 21% 23% 25% 28% 28% 29% 30% 31% 32% 34% 35% 36% 80% 45% 50% 19% 70% 20% 17% Proportion of Firms 18% 15% 16% 21% 23% 60% 19% 18% 14% 15% 22% 50% 10% 14% 40% 63% 30% 60% 60% 56% 55% 54% 52% 51% 51% 50% 49% 48% 45% 43% 20% 36% 10% 0% y g m s n k n d m y a e e d l l a d e n r i a i r n c c n u r u a a g o a n d a t e n a t i p m u d o s I g a m e l e l a e u n S t g b l l r n w r e r r r r n m A G i o e F e F e I B S P i h K G e D t x e d u N e L t i n U Mode(s) identified in 1st round; Mode(s) identified in 2nd round; No mode identified CBR Summit: 29-30 March 2006 Innovation and Governance
Classified Firms by Sector & Size 100% 90% 22% 24% 27% 30% 30% 30% 30% 30% 32% 32% 33% 34% 39% 80% 39% 70% Proportion of Firms 17% 26% 11% 15% 23% 19% 19% 60% 20% 16% 20% 13% 18% 17% 21% 50% 40% 30% 59% 57% 54% 53% 52% 52% 51% 51% 50% 50% 50% 49% 44% 20% 41% 10% 0% e l g g f f y s s s s s s i s u u a n g l e e e e e e n e a n n t c e E i o c c e e e s e r a a l i i i y y y u e R y M o v v v M l o o t r o o i l r r v c n o e e l e l l l p i a h p p p h h C h S S S m m m f c c c m W u e e s l & e r e a e e n e e T T T u n a h n B 9 9 9 + M w h h o t 4 0 o 4 9 O g i g & i o t - 2 4 0 t c h i i 0 c - 5 L H H - n n 0 0 u c 2 - - i u e d 5 5 r d F t F T e 2 s e M n w M o o C L Mode(s) identified in 1st round; Mode(s) identified in 2nd round; No mode identified CBR Summit: 29-30 March 2006 Innovation and Governance
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