ICT and e-Business Impact in the Retail Industry - empirica

e-Business in the Retail Sector4.3 ICT and innovationThis section analyses ICT-related innovation activity. It focuses on two questions. First,what are the characteristics of firms that introduce ICT-enabled innovations? In terms ofthe extended SCM paradigm, this question is related to the effects of industry structureon firm conduct. Second, how do ICT-enabled innovations affect firm performance andorganisational change? This question is related to the effects of firm conduct onperformance and industry structure.Exhibit 4.3-1: Scope of the analysis in Section 4.3Structure Conduct PerformanceMarket / firmcharacteristicsICTadoptionSection4.3.2.ICT enabledinnovationSection4.3.3.Performanceindicators (e.g.turnover)Source: DIW/empiricaSection 4.3.1 provides empirical evidence on innovation from the e-Business Survey2007. The following sections offer further insights to what degree specific factors arelinked with ICT-enabled innovation in the retail industry (4.3.2), and whether companieswhich conduct ICT-enabled innovation are likely to exhibit superior performance (4.3.3).In the Structure-Conduct-Performance framework (see introduction to this section), thisanalysis explores links between ICT adoption and ICT-enabled innovation, links betweeninnovation and performance.4.3.1 Survey findings about ICT and innovationIntroduction to the importance of ICT for innovationThe growing diffusion of ICT in all areas of business is a major enabler of technologicalchange, innovation and ultimately economic development. ICT-driven innovation activityis central to the subsequent effects of ICT economic impact. As a general purposetechnology, ICT can have effects on all innovation at all stages of the supply chain in theretail industry. RFID, for example, is a technology innovation that is transformingwarehouse management in retail firms.The links between the adoption of new e-business technologies and innovation arebroadly recognised. ICT investments in general and e-business applications in particular,enable and drive both product and process innovation. They are drivers of processinnovation, because ICT implementation, to be successful, typically requires changes inworking routines. In micro-economic terms, a product innovation corresponds to thegeneration of a new production function. A process innovation, on the other hand, can beviewed as an outward shift of an existing supply function, which corresponds to lowervariable costs in the production of an existing product or service, and is therefore aproductivity increase. Thus, ICT-driven technological change moves firms towards newtechnological trajectory.96