Innovation in Services & the Organization-Co-operation Mode of - - PowerPoint PPT Presentation

CBR Summit: Innovation and Governance 29-30 March 2006

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: Innovation and Governance 29-30 March 2006

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: Innovation and Governance 29-30 March 2006

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: Innovation and Governance 29-30 March 2006

Innovation in Services: CBR Surveys

60% 77% 62% 53% 58% 75% 61% 49%

0% 25% 50% 75% 100% Low (& LM) Tech Man. High (& MH) Tech Man. High Tech & Tech. Ser. Other Services Low (& LM) Tech Man. High (& MH) Tech Man. High Tech & Tech. Ser. Other Services CBR 1997 Survey CBR 1999 (from 1997-99 panel) Proportion of Surveyed Firms

CBR Summit: Innovation and Governance 29-30 March 2006

Innovation in UK: 2002-2004 (CIS-4)

85% 74% 72% 71% 68% 67% 62% 59% 59% 58% 44% 40% 39% 36% 0% 25% 50% 75% 100% E l e c t r i c a l a n d O p t i c a l E q u i p m e n t M a n u f a c t u r i n g n . e . c . T r a n s p

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CBR Summit: Innovation and Governance 29-30 March 2006

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: Innovation and Governance 29-30 March 2006

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: Innovation and Governance 29-30 March 2006

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Identifying 3 Modes of Innovation

Dimensions 1 & 2 from Correspondence Analysis

CBR Summit: Innovation and Governance 29-30 March 2006

Identifying 3 Modes of Innovation

q3-flx = 1 q1-pro = 1 q3-eff = 1 q2-acq = 1

Mode 2 Process-Efficiency

q1-org = 1 q3-peo = 1 q2-cop = 1 q3-cop = 1

Mode 3 Organization- Co-operation

q1-prd = 1 q2-rad = 1 q2-rdc = 1 q3-tec = 1

Mode 1 Product-Research

Dimension 1 Dimension 2

CBR Summit: Innovation and Governance 29-30 March 2006

Three Modes of Innovation

• Mode 1: Product-Research Innovation Focus = Product;

Source of Technology = In-house R&D; Co-ops with Universities

• r 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

• 1st Round of Allocations: firms with 3+ / 4 characteristics

CBR Summit: Innovation and Governance 29-30 March 2006 None after 1st round: 1,418 (48.5%) None after 2nd Round 909 (31.1%) 155 (M1 & M3) 102 (M1 & M2) 197 (M2 & M3) M2 & M3 235 M1 & M2 112 M1 & M3 161 55 in all three (M1, M2 & M3)

• identified

in 2nd Round Circle, Allocations in 2nd round Mode 1 The Product-Research Mode of Innovation Mode 2 The Process-Efficiency Mode of Innovation Mode 3 The Organization- Co-operation Mode of Innovation 821 (M3 only) 413 (M2 only) 215 (M1 only) 10 (M1 & M2) 6 (M1 & M3) 38 (M2 & M3) Triangle, allocations in 1st round

CBR Summit: Innovation and Governance 29-30 March 2006

Classified Firms by Country

63% 60% 60% 56% 49% 51% 55% 54% 51% 50% 52% 43% 48% 45% 36% 19% 20% 17% 18% 23% 21% 15% 16% 19% 18% 14% 22% 15% 10% 14% 18% 21% 23% 25% 28% 28% 29% 30% 31% 32% 34% 35% 36% 45% 50%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

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Proportion of Firms Mode(s) identified in 1st round; Mode(s) identified in 2nd round; No mode identified

CBR Summit: Innovation and Governance 29-30 March 2006

Classified Firms by Sector & Size

49% 50% 52% 51% 59% 57% 53% 41% 54% 44% 52% 50% 50% 51% 18% 20% 26% 19% 17% 11% 13% 21% 15% 17% 16% 20% 23% 19% 33% 30% 22% 30% 24% 32% 34% 39% 30% 39% 32% 30% 27% 30%

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Proportion of Firms Mode(s) identified in 1st round; Mode(s) identified in 2nd round; No mode identified

CBR Summit: Innovation and Governance 29-30 March 2006

1st Rnd Allocations by Sector & Size

6% 7% 19% 31% 6% 8% 5% 5% 8% 16% 12% 14% 32% 26% 16% 8% 7% 9% 12% 8% 14% 16% 13% 8% 31% 10% 16% 14% 18% 42% 46% 24% 40% 28% 32% 24% 17% 13% 51% 50% 48% 49% 41% 43% 47% 59% 46% 56% 48% 50% 50% 32%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

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Proportion of Firms

M1&3 M1: Product-Research M1&2 M2: Process-Efficiency M2&3 M3: Organization-Cooperation None of these

CBR Summit: Innovation and Governance 29-30 March 2006

All Allocations by Sector & Size

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Construction & Civil Eng Low Tech Manufacturing Med-Low Tech Manuf Med-High Tech Manuf High Technology Wholesale Retail Financial & Bus Services Functional Services Other Services 20-49 employees 50-249 employees 250-499 employees 500+ employees

Proportion of Firms

All Three M1&3 M1: Product-Research M1&2 M2: Process-Efficiency M2&3 M3: Organization-Cooperation None of these

CBR Summit: Innovation and Governance 29-30 March 2006

Formal Multivariate Analysis

• Ordered Logistic Regression Models show:
• Mode 1 – much more common amongst High Tech firms

and Medium-High Manufacturing Firms. Also Large Firms

• Mode 2 – Most common amongst Low-Tech Manufacturing

Does not vary with firm size

• Mode 3 – Much more common amongst Service firms,

especially Trade Services. Also Small Firms

• However, all sectors have some firms with each Mode;

No mode is exclusive to any sector or group of sectors

CBR Summit: Innovation and Governance 29-30 March 2006

Factors Impeding Innovation

• Further Analysis on Factors Hampering Innovation Shows:
• Service Firms (ex Trade) and Mode 3 Innovators more

likely to be hampered by problems with Human Resources

• High Tech Firms, Financial & Professional Services and

Mode 3 Innovators LESS likely to be hampered by lack of access to advanced technologies

• Mode 2 and Mode 3 firms more likely to be hampered by

poor Knowledge Sharing

• Mode 1 (and to lesser extent Mode 3) Innovators more

concerned about Protecting Knowledge (and IP)

CBR Summit: Innovation and Governance 29-30 March 2006

Conclusions

• Our Analysis Clearly Identifies a Third Organizational-

Cooperation Mode of Innovation – esp. Common in Services

• Innovation (in Services) tends to be Open (Chesbrough,

2003) and occurs between as much as within Firms

• Innovation (in Services) depends at least as heavily on

‘Social Technologies’ as on ‘Physical Technologies’ (Nelson), and indeed the Complementarities between these.

• Past innovation studies & measures have put emphasis on

physical technologies (i.e., Technological Product & Process Innovation) – Need to move beyond these to include social technologies, and management practices.

• Future CBR surveys might be a vehicle for methodological

experimentation beyond what is asked by the CIS?