Characterization of Companies Based on Willingness to Innovate and Competitiveness

Characterization of Companies Based on Willingness to Innovate and Competitiveness

Beatriz Corchuelo Martínez-Azúa (University of Extremadura, Spain) and Felipe Martín-Vegas (University of Extremadura, Spain)
DOI: 10.4018/978-1-5225-8479-7.ch011

Abstract

Companies, as agents of innovation systems, play a fundamental role in the innovative activity of economies. Nevertheless, the existence of barriers to innovation is becoming a low willingness to innovate by companies despite being an important element of competitiveness. These two perceptions are fundamental when deciding to innovate. It also influences the perception of government intervention to encourage innovation. The objective of this study is to analyze the characteristics of Extremaduran companies based on perceptions they have about these two variables: willingness to innovate and assessing innovation as an essential element of competitiveness. Data come from an ad hoc questionnaire focused mainly on variables related to innovation. Obtained results show four profiles of companies based on these characteristics and these results permit to connect them to perceived obstacles to innovation and demanded public policies. The characterization of the companies may be useful for public policies design to stimulate innovation.
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Introduction

It is commonly recognized that innovation is essential for the growth and well-being of economies. Companies, as agents of national and regional innovation systems, play a fundamental role in the innovative activity of economies. Innovation implies important benefits for companies, which is converted into increased productivity and competitiveness. However, knowledge generated by innovation has certain characteristics of public goods (Arrow, 1962; Nelson, 1959), which discourages firms from innovating (Geroski, 1995). This leads to that innovations can be imitated and appropriate, so it reduces the benefit of inventors. On the other hand, innovating carries high risks, depending on the type of innovation developed. In addition, innovation requires high costs in most cases and there are financing problems, especially by small and medium enterprises. These factors, together with other internal and external obstacles, discourage the innovative activity of the companies, resulting in the provision of this activity being inferior to the socially desirable one. Occurrence of market failures in the provision of innovative activities by firms justifies that, from an economic point of view, certain public actions are established, through the called Scientific and Technological policies. In practice, these policies tend to be oriented towards the activities more distanced from the market, in which the time taken to obtain results are higher compared with the lower possibilities of generating profits. Therefore, although the concept of innovation includes a wide range of activities, the spending on research and development (R&D) activities, considered an important factor in innovation process, is the most incentivized aspect. The objectives of these policies are not only stimulating realization of innovation activities by firms but also achieve an encouragement and support all the innovation system of the economy. These public actions act both from the point of view of regulation, as well as through non-financial incentives (systems of intellectual and industrial protection, cooperation and dissemination and transfer), and financial incentives (direct public subsidies, through subsidies and soft loans, and indirect, through tax incentives) (COTEC, 2000). Additionally, in current economy based on knowledge and innovation in its broad concept, the intervention of governments is justified by its positive role and the increase in welfare that it brings to societies.

This economic reality justifies the present study. The existence of barriers to innovation is translated into a low willingness to innovate by companies despite being an important element of competitiveness. These two perceptions are fundamental when deciding to innovate, which is influenced by a set of variables such as the size of the company, its degree of internationalization, the perception of internal and external obstacles to innovation, or the importance that companies attach to develop these activities. It also influences the perception of government intervention to boost innovation and the type of actions that would be demanded by companies to be encouraged to innovate or continue carrying out innovative activities. In this sense, the objective of this study is to analyze the characteristics of companies in the Extremadura region (Spain) based on the perceptions they have about these two variables: willingness to innovate and assessing innovation as an essential element of competitiveness. Based on both perceptions, this paper addresses three main research questions: what characteristics of companies influence the willingness to innovate and the consideration of innovation as an essential element of competitiveness?; How do the perceived barriers to innovation (internal and external) affect the willingness to innovate of companies and their consideration as an essential element of competitiveness ?; What kind of public actions based on these perceptions are demanded by companies?

Key Terms in this Chapter

R&D&I Public Policies: Projects and activities that a State designs and manages through a government and a public administration with the purpose of satisfying the needs of a society. In the case of R&D& I activities, in general, three types of actions are differentiated: regulatory, non-financial (industrial and intellectual property systems, cooperation, dissemination and transfer of results) and financial (direct public support by subsidies and/or soft loans and fiscal incentives).

Willingness to Innovate: Action to prepare to make innovations or carry out innovation activities. In business field this action can result in achieving greater competitiveness, productivity, profitability or increased sales and profit.

Barriers to Innovation: Factors that make it difficult a firm to innovate. Barriers to innovation can be external or internal to the company. If barriers offer sufficient resistance, then innovations are not likely to be adopted or implemented. A deeper understanding of these obstacles can help to keep a great innovation alive and ensure its full value is realized.

Market Failures: They occur when freely-functioning markets fail to deliver an efficient allocation of resources. The result is a loss of economic and social welfare. Market failure exists when the competitive outcome of markets is not efficient from the point of view of society as a whole. This is usually because the benefits that the free-market confers on individuals or businesses carrying out a particular activity diverge from the benefits to society as a whole. In the case of innovation, the existence of some sources of market failure as appropriability, financial restriction or high costs and uncertainty make that firms do not provide the level of innovation investment that it is socially optimal which justify, from an economic point of view, the government intervention to boost this type of activities in the market.

Innovation Systems: Group of elements that, in the national, regional or local environment, act to favor of any creation process, diffusion or use of economically useful knowledge.

Competitiveness: Capacity to compete. In business field, it is considered the capacity of a company to obtain profitability in the market compared to its other competitors.

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