Chinese Returnee Entrepreneurs - Academic Conferences Limited
Chinese Returnee Entrepreneurs - Academic Conferences Limited
Chinese Returnee Entrepreneurs - Academic Conferences Limited
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Proceedings<br />
of the<br />
6th European Conference<br />
on Innovation and<br />
<strong>Entrepreneurs</strong>hip<br />
Robert Gordon University, Aberdeen<br />
Scotland, UK<br />
15-16 September 2011<br />
Volume Two<br />
Edited by<br />
Dr Heather Fulford<br />
Centre for <strong>Entrepreneurs</strong>hip<br />
Aberdeen Business School<br />
Robert Gordon University<br />
Scotland, UK
Copyright The Authors, 2011. All Rights Reserved.<br />
No reproduction, copy or transmission may be made without written permission from the individual authors.<br />
Papers have been double-blind peer reviewed before final submission to the conference. Initially, paper<br />
abstracts were read and selected by the conference panel for submission as possible papers for the<br />
conference.<br />
Many thanks to the reviewers who helped ensure the quality of the full papers.<br />
These Conference Proceeding have been submitted to the Thomson ISI for indexing.<br />
Further copies of this book can be purchased from http://www.academic-bookshop.com<br />
ISBN: 978-1-908272-14-0 Book<br />
Published by <strong>Academic</strong> Publishing <strong>Limited</strong><br />
Reading<br />
UK<br />
44-118-972-4148<br />
www.academic-publishing.org
Contents<br />
Paper Title Author(s) Page<br />
No.<br />
Preface vii<br />
Programme Committee ix<br />
Biographies of Conference Chairs, Programme<br />
Chair, Keynote Speaker and Mini-track Chairs<br />
Biographies of contributing authors xii<br />
Strategizing Through Networking in Interplay With<br />
Aspired Positions<br />
Identifying the Social and Cultural Factors that affect<br />
Teenager’s Entrepreneurial Readiness in Iran<br />
Assessing the use of M-Learning Support in a Higher<br />
Education Context: A Study Approach Based on<br />
Innovation Spreading<br />
Comparing the Approaches of two UK Universities to<br />
Teaching Business Enterprise<br />
Conceiving Science Policies’ Contribution to<br />
Regional Development: Evidence From Netherlands<br />
and Sweden<br />
Formalising Network Development in Manufacturing<br />
SMEs<br />
The Effect of TQM and R&D Capability on Innovation<br />
Performance<br />
Social Technology Interaction for Innovation<br />
Generation in a Propelling Middle East Country: The<br />
Development of LINKING Oman Program<br />
Social <strong>Entrepreneurs</strong>hip in the Middle East With<br />
More Emphasis on the Gulf Region<br />
Teaching <strong>Entrepreneurs</strong>hip to non Business Majors:<br />
The Case of EARTH University Constructivist<br />
Learning Approach<br />
i<br />
Lise Aaboen, Frida Lind and Anna<br />
Dubois<br />
Arezou Abasian, Mostafa Alimiri, and<br />
Amin Salari<br />
Steven Abrantes and Luis Borges<br />
Gouveia<br />
xi<br />
1<br />
8<br />
13<br />
Nigel Adams and Joan Lockyer 24<br />
Antonios Aggelakis 33<br />
Merja Airola, Erno Salmela and Ari<br />
Happonen<br />
42<br />
Ali Ekber Akgün et al 51<br />
Abeer Al-Mukhaini, Luiza Sarayeddin<br />
Yaqoob Al-Farsi and Mohammed Al-<br />
Mughairi<br />
61<br />
Mohammed Alsahlawi 68<br />
Irene Alvarado-Van der Laat and<br />
Aloyce Lekuton<br />
Strategy for Social Enterprises or Never Say Never Christos Apostolakis 84<br />
Teaching methods in entrepreneurship education:<br />
the case of business students in Iran<br />
From Technological Innovation to Innovation in<br />
Management Practices: The Case of Episkin®<br />
Impact of PDDC in Promoting <strong>Entrepreneurs</strong>hip in<br />
Pakistan: A Case Study of Dairy Farmers<br />
Necessity versus Opportunity Immigrant<br />
<strong>Entrepreneurs</strong>: the Case of Argentineans in Spain.<br />
A Case Study of Entrepreneuring: Redesigning<br />
Technologies for a Commercially Viable Cancer<br />
Detection Product<br />
Zahra Arasti, Mansoreh Kiani<br />
Falavarjani and Narges Imanipour<br />
73<br />
92<br />
Claire Auplat 98<br />
Farah Naz Baig and Saima Husain 104<br />
Fabiola Baltar, Aleix Gregori and<br />
Ignasi Brunet<br />
112<br />
Lynne Baxter and Cathie Wright 121
Paper Title Author(s) Page<br />
No.<br />
Linking Industry-University in Proximity: The<br />
Innovative Outcome of R&D Contracts in SMEs<br />
Dialogic Dissensus Approach – a Model for<br />
Research Based Facilitation of Innovation?<br />
Stimulating / Blocking Factors of Female<br />
<strong>Entrepreneurs</strong>hip in Rural Areas of Western<br />
Romania<br />
Jungian Archetypes, Social <strong>Entrepreneurs</strong> and the<br />
‘Big Society’<br />
Ambiguity – A Useful Component of “Fuzziness” in<br />
new Product Development<br />
Workplace Related Determinants on Innovation<br />
Success and Characteristics<br />
Does Really Innovative Work Behaviors of Emloyees<br />
Mediate the Innovative Performance Impacts of<br />
Intrapreneurship?<br />
Comparative Analysis of two Software Companies’<br />
Performances Using the Balanced Scorecard as a<br />
Competitive Intelligence Tool<br />
The Influence of Triad Participants on the<br />
Competitiveness of Regions: the Zlín Region in<br />
Europe<br />
ii<br />
Cristina Bayona-Sáez and Raquel<br />
González-Eransus<br />
128<br />
Jørgen Bloch-Poulsen 136<br />
Elena Botezat 144<br />
Mary Brown 151<br />
Eric Brun 159<br />
Cagri Bulut, Selin Gencturk and<br />
Duygu Seckin Halac<br />
Cagri Bulut, Seray Begum Samur and<br />
Duygu Seckin Halac<br />
Alexandru Capatina and Dragos<br />
Cristea<br />
167<br />
173<br />
183<br />
Jaromír Černý 190<br />
The Regional Cluster of SME’s in Romania Gabriel Croitoru, Alexandru Badea,<br />
Florin Radu and Valentin Radu<br />
The Role of the University in the Promotion of the<br />
Entrepreneurial Culture Under the Triple Helix Model<br />
The Steps of an Organisational Routine’s<br />
Transformation: The Case of the Employee Driven<br />
Innovation Routine at the French National Railways<br />
Company (SNCF)<br />
Beyond Entrepreneurial Education: The Access to<br />
Finance as an Obstacle to Female <strong>Entrepreneurs</strong>hip<br />
in Western Romania<br />
Sensitive Innovation – How to Conceptualise<br />
Heterogenic and Intangible Innovation Processes<br />
Innovative Practices and Success of Small Agro-<br />
Processing Enterprises in Ghana<br />
<strong>Entrepreneurs</strong> and the Choice Process for Business<br />
Partners<br />
Location Determining Factors of Rural and Urban<br />
Knowledge Intensive Business Services: Empirical<br />
Evidence<br />
The Role of Business Opportunity Prototypes at the<br />
Recognition and Decision Stages of the<br />
Entrepreneurial Process<br />
Exploring the Synergy Between Total Quality<br />
Management and Innovation<br />
197<br />
Isidro de Pablo et al 205<br />
Carine Deslee 214<br />
Anca Dodescu, Alina Badulescu and<br />
Tomina Saveanu<br />
225<br />
Katia Dupret Søndergaard 235<br />
Smile Dzisi and Faustina Aku Otsyina 242<br />
Scott Erickson 250<br />
Cristina Fernandes, João Ferreira and<br />
Carla Marques<br />
Sílvia Fernandes Costa, António<br />
Caetano and Susana Correia Santo<br />
António Fernandes, Luís Lourenço<br />
and Maria Jose Silva<br />
256<br />
269<br />
278
Paper Title Author(s) Page<br />
No.<br />
Black, Asian and Minority Ethnic Small Businesses<br />
Owners: The Comparative Experiences of Women<br />
and Men<br />
An <strong>Entrepreneurs</strong>hip Training Program that works:<br />
Ahikaa<br />
Innovation Performance, Innovation Capacity and<br />
Growth in Small Enterprises: an Enterprise-Level<br />
Analysis<br />
The Role of Networks for Small Technology-Based<br />
Firms<br />
Creating an Index of Local Software Economy<br />
Maturity: Driving Innovation and Productivity<br />
What we have Learned About Time in Corporate<br />
<strong>Entrepreneurs</strong>hip Research: Some Growth<br />
Recommendations From a Transition Economy<br />
<strong>Entrepreneurs</strong>hip and Enterprise Development in<br />
Middle Belt States of Nigeria<br />
Strategic Management in Public Enterprise Based on<br />
a Corporate <strong>Entrepreneurs</strong>hip Model: The Nigerian<br />
Experience<br />
The role of Emotional Intelligence in the<br />
Entrepreneurial Intention of University Students<br />
Modelling innovations in maternity care based upon<br />
uncertain evidence.<br />
Competitive Advantages of the Romanian<br />
<strong>Entrepreneurs</strong> in the Foreign Trade Sector<br />
The Models of Innovative Behaviour in Europe and<br />
Russia<br />
A new Model of Factors That Influence Innovation<br />
Activities – Application to Basque Country Innovative<br />
Companies<br />
Innovation and Competitive Advantage in Mexican<br />
Firms<br />
Knowledge Management and Open Innovation in a<br />
Bioengineering Research Case<br />
Social and Symbolic Capital in Firm Clusters: An<br />
Empirical Investigation of Relational Resources and<br />
Innovation Capabilities<br />
Innovation and regional economic development, in<br />
Romania – theoretical aspects<br />
Impact of the Family and Non-Family Relational<br />
Capital on the Adoption of Innovation in Canadian<br />
Family Businesses: a Conceptual Model<br />
New Generation of the University Strategy<br />
Formulation Processes to Achieve a Competitive<br />
Advantage in Egypt<br />
iii<br />
Sandra Fielden and Marilyn Davidson 285<br />
Dennis Foley, Ngatata Love and<br />
Catherine Love<br />
292<br />
Helena Forsman 299<br />
Mário Franco and Heiko Haase 309<br />
Malcolm Fraser, Jennifer Harrison and<br />
Stephen Kelly<br />
Bartłomiej Gabryś and Mariusz<br />
Bratnicki<br />
319<br />
327<br />
Cephas Gbande, 337<br />
Cephas Gbande and Helen Elena<br />
Jekelle-Mohammed<br />
Parvaneh Gelard and Korosh<br />
EmamiSaleh<br />
Alan Gillies, Alison Holbourn, and<br />
Karen Shawhan<br />
Adriana Giurgiu, Mihai Berinde and<br />
Adrian Negrea<br />
346<br />
353<br />
362<br />
368<br />
Oleg Golichenko and Yulia Balycheva 378<br />
Álvaro Gómez Vieites, Carlos Suárez<br />
Rey and Begoña Pereira Otero<br />
Mario Gómez and José Carlos<br />
Rodríguez<br />
388<br />
400<br />
Manel González-Piñero et al 408<br />
Susanne Gretzinger and Susanne<br />
Royer<br />
417<br />
Corina Grigore 426<br />
Izold Guihur and Vivi Koff 429<br />
Mahmoud Hassanin 436
Paper Title Author(s) Page<br />
No.<br />
Identifying Environmental Influencing Factors on the<br />
Growth of Research-Based Spin-Offs in Iran<br />
A Multi-Faceted Approach to Innovation Capacity<br />
Building<br />
Social <strong>Entrepreneurs</strong>hip: Setting Boundaries for a<br />
Conceptual Framework<br />
Building Technological Innovation Capabilities:<br />
Enhancing Technological Innovation Performance<br />
iv<br />
Seyed Reza Hejazi, Atefeh Zolfaghari<br />
and Arta Farhoudi<br />
446<br />
John Howard 457<br />
Xiaoti Hu, Regina Frank and Laurie<br />
Cohen<br />
466<br />
Hüseyin İnce et al 476<br />
Uncertainty in the Innovation Process Harri Jalonen and Annina Lehtonen 486<br />
Trends in Financial Services Delivery: Implications<br />
for a User-centric Mobile Banking Business Model<br />
On the impact of entrepreneurship education: selfefficacy<br />
and shift in perceptions<br />
Volume 2<br />
The role of state in innovation to stimulate<br />
entrepreneurship: Emerging Countries Perspectives<br />
The Fertile Synergy Between Artistic<br />
Experimentation and Scientific Research<br />
Conceptions and Attitudes towards Social<br />
<strong>Entrepreneurs</strong>hip and Social Enterprises: The Case<br />
of Northern Greek For-Profit Companies<br />
<strong>Entrepreneurs</strong>hip and the Dark Triad of Personality:<br />
How Narcissism, Machiavellianism, and<br />
Psychopathy Relate to Entrepreneurial Intention and<br />
Performance<br />
The Hidden Dimensions of Cognition in the<br />
Production Processes of Innovation<br />
<strong>Chinese</strong> <strong>Returnee</strong> <strong>Entrepreneurs</strong>: The Essential<br />
Human Capital for a <strong>Chinese</strong> Innovative State<br />
Is Your Open-Innovation Successful? The<br />
Moderating Role of the Human and Organizational<br />
Internal Context<br />
Moderating Effects of Venture Types on Motivation<br />
and Venture Growth – Some Lessons From Women<br />
<strong>Entrepreneurs</strong> in Ghana’s Tourism Industry<br />
China's Talent Policy towards Overseas <strong>Returnee</strong><br />
<strong>Entrepreneurs</strong>: Origin, Trends and Impact<br />
How Small Enterprises Manage Resource Scarcity in<br />
their Product Innovation Processes<br />
Esad Kadušić, Petar Bojović and<br />
Amela Žgalj<br />
493<br />
Alexandros Kakouris 504<br />
Oskar Kayasan 511<br />
Eva Kekou 519<br />
Panayiotis Ketikidis and Panagiotis<br />
Parcharidis<br />
524<br />
Matthias Kramer et al 535<br />
Erwan Lamy and Noreen O’Shea 543<br />
Nicholas Laroche et al 550<br />
Valentina Lazzarotti, Raffaella<br />
Manzini, and Luisa Pellegrini<br />
559<br />
Angela Lemaire and Hong-bumm Kim 570<br />
Kai Liu 579<br />
Lars Lofqvist 583<br />
Tight time - to be or not to be Creative? Eva Lovén 593<br />
Commercialization of University Research: A View<br />
from the Social Science and Humanities<br />
Manjari Maheshwari and Ranjana Bird 599
The Governance of International Enterprises Under<br />
the Influence of Innovative Phenomena<br />
<strong>Entrepreneurs</strong>hip and Innovation in Greece: Do<br />
Small and Medium Enterprises Innovate?<br />
Research-Based Spin-Off Creation Models in Polish<br />
Economic Conditions<br />
v<br />
Simone Manfredi, Mirella Battista and<br />
Fabio Nappo<br />
609<br />
Maria Markatou 622<br />
Adam Mazurkiewicz, Beata<br />
Poteralska and Urszula Wnuk<br />
Service Innovation: A Smaller Firm Perspective Edward McKeever, Sarah Jack and<br />
Danny Soetanto<br />
A Study of IT Innovation Adoption and<br />
<strong>Entrepreneurs</strong>hip in Malaysia<br />
Climar, S.A.: <strong>Entrepreneurs</strong>hip and “Design-driven<br />
Innovation”. A Case Study in the Lighting Business<br />
The Influence of Action in International Markets on<br />
Marketing Innovation: Study of Portuguese Firms<br />
How Community Context Impacts the<br />
Entrepreneurial Process at Commercialization<br />
Challenged Universities<br />
Beyond Financial Performance and Corporate<br />
Greening: Mapping out the Research Field of<br />
Sustainability <strong>Entrepreneurs</strong>hip<br />
Consumer Integration in the Innovation Process and<br />
Its Impact on the Success of Innovations<br />
Absorptive Capacity as a Device for<br />
<strong>Entrepreneurs</strong>hip : A Primer on Firm-Level<br />
<strong>Entrepreneurs</strong>hip and Economic Performance<br />
The Issues surrounding the delivery of<br />
<strong>Entrepreneurs</strong>hip Education are evident at all levels<br />
of Education<br />
Peer Assessment: A Conduit for Developing<br />
Graduate Attributes?<br />
Innovation and Entrepreneurial Approach: A<br />
Sociological Contingency Explication of the Success<br />
in Traditional Sectors<br />
<strong>Entrepreneurs</strong>hip Development through<br />
<strong>Entrepreneurs</strong>hip Education with Special Emphasis<br />
on the Role of Business Incubators: Evidence from<br />
the Czech Republic<br />
<strong>Entrepreneurs</strong>hip, Institutions and Economic<br />
Development: A Configuration Approach<br />
Identification and Classification of Entrepreneurial<br />
Competencies Mapped With Human Personalities<br />
The Organisation of Knowledge in High Technology-<br />
Based Firms: Evidence From the Emilia-Romagna<br />
Region<br />
Patent Aggregating Companies: Motives, Activities<br />
and a Classification<br />
<strong>Entrepreneurs</strong> as Agents of Change: Sustainable<br />
Innovation in the Dutch Construction Industry<br />
629<br />
637<br />
Sedigheh Moghavvemi et al 646<br />
José Monteiro-Barata 655<br />
Jacinta Moreira and Maria José Silva 665<br />
Peter Moroz, Kevin Hindle and Robert<br />
Anderson<br />
673<br />
Pablo Munoz and Dimo Dimov 684<br />
Ramazan Nacar and Sitki Gozlu 692<br />
Emeran Nziali 700<br />
Breda O’Dwyer and Clare Rigg 712<br />
Judy Pate et al 721<br />
Massimiliano Matteo Pellegrini 729<br />
Petra Taušl Procházková and<br />
Michaela Horová<br />
Colin Reddy, Boris Urban and Ralph<br />
Hamann<br />
737<br />
742<br />
Morteza Rezaei-Zadeh et al 753<br />
Ugo Rizzo and Francesco Nicolli 762<br />
Frauke Rüther, Nicole Ziegler and<br />
Martin Bader<br />
Henk Schout, Damon Hassanpur<br />
Golriz and Saskia Harkema<br />
770<br />
778
Creating a Collaborative Learning Space Using<br />
Wikis: Interaction in Enterprise Projects With<br />
International Student Groups<br />
Differentiating Between SMEs and Large Enterprises<br />
in External Knowledge Linkages<br />
Pedagogical Methods and Models for<br />
<strong>Entrepreneurs</strong>hip Education in Romania: Case study<br />
Strategic Creativity as a Strength in Microsized<br />
Enterprises<br />
Formal R&D Management , Research Collaboration<br />
and R&D Outsourcing in SMEs<br />
Strategy of the Future: Rising Stock Options<br />
Through Innovative Performance Measurement – is<br />
it Possible?<br />
Using the Balanced Scorecard and Forecasting<br />
Tools for Innovation Strategy Development<br />
Role of Intelligence Generation Activities in Building<br />
Legitimacy for Ideas in the Front-end of Innovation<br />
Awakening Resilience! An Innovative Pedagogical<br />
Approach: Enculturated and Domain-Centered<br />
Learning<br />
New Perspectives on Open Innovation: Sources of<br />
Openness for Innovation in UK high-tech SMEs<br />
The Role of Standardization and Standards in the<br />
Context of <strong>Entrepreneurs</strong>hip: Conceptional Model<br />
and Insights from Case Studies<br />
Examination Into the Firm Without Fundamental<br />
Technology: A Case Study of Nintendo<br />
Comparative Assessment of <strong>Entrepreneurs</strong>’ and<br />
Non-<strong>Entrepreneurs</strong>’ Cognitive Style Index<br />
Positive Leadership, Shared Values and Key<br />
Performance Indicators in the Pursuit of High<br />
Performance<br />
Much Room to Foster the Motivation of Researchers:<br />
Evidence from Slovenia<br />
vi<br />
Anne Smith, Keith Halcro and Peter<br />
Duncan<br />
787<br />
André Spithoven and Peter Teirlinck 795<br />
Zsuzsanna Szabó and Liviu Marian 805<br />
Tiina Tarvainen 812<br />
Peter Teirlinck and André Spithoven 820<br />
Yanka Todorova 827<br />
Yanka Todorova, Dimitar Birov,<br />
Elissaveta Gourova<br />
832<br />
Outi Vanharanta and Jaana Näsänen 837<br />
Christopher Walach 844<br />
David Weiss 853<br />
Simone Wurster and Knut Blind 861<br />
Kiyohiro Yamazaki 874<br />
Mohammad Reza Zali, Saeed Rezaei<br />
Toroghi, and Maryam Mirzaei<br />
Przemyslaw Zbierowski and Mariusz<br />
Bratnicki<br />
882<br />
891<br />
Elizabeta Zirnstein 899<br />
PhD Papers 907<br />
Research and Technology Organizations (RTOs)<br />
role in Innovation Systems<br />
Analyzing intellectual property rights: Current private<br />
reward system and alternative institutional solutions<br />
Toward a Theory of Indigenous <strong>Entrepreneurs</strong>hip in<br />
Screen Production<br />
Jaione Agirre Uranga and Antonio Gil<br />
Ruiz<br />
909<br />
Maiia Deutschmann 920<br />
Ella Henry 930<br />
Literature Review of Business Incubation Søren Berg Jørgensen 939<br />
Entrepreneurial Success Model of Services SMEs Noor Hasni Juhdi 946<br />
Application of Structural Equation Modelling to<br />
Assess the Impact of Entrepreneurial Characteristics<br />
on Students’ Entrepreneurial Intentions<br />
Saeid Karimi, Harm Biemans, Thomas<br />
Lans, Zahra Arasti, Mohammad<br />
Chizari and Martin Mulder<br />
954
An Investigation Into Small Business Activities of<br />
Croatian Migrants in Australia<br />
A Conceptual Framework of the Relationship<br />
Between Values and Small and Medium<br />
<strong>Entrepreneurs</strong>’ Export Intentions<br />
A Framework Relating Innovation Strategy and<br />
Business Growth in Small to Medium Sized<br />
Enterprises (SMEs)<br />
A Conceptual Framework of Agribusiness Product<br />
Development: Carrot, Stick or Both?<br />
Paving the Path for Innovation: the case of<br />
Romanian SMEs<br />
Innovation Capital and Firm’s Performance in<br />
Malaysian Public Companies<br />
Can Innovation be Institutionally-Driven?- The Case<br />
of Institutional <strong>Entrepreneurs</strong> in the Restructuration<br />
of the Mauritian Vegetable Supply Chain.<br />
Technological Competence and Sustainable<br />
Competitive Advantage of Technology-Intensive<br />
SMEs - a Quantitative Approach<br />
Firm Innovation and Role of Geography and Clusters<br />
in Bosnia-Herzegovina - Firm Level Insights<br />
Exploring the Role of Perceived Media Needs and<br />
Technology Characteristics in Determining Social<br />
Media Adoption: Conceptual Framework<br />
vii<br />
Miro Ljubicic, John Breen and Santina<br />
Bertone<br />
Kim Hoe Looi , and Yusniza<br />
Kamarulzaman<br />
967<br />
975<br />
Roopa Nagaraju and.Elly Philpott 984<br />
Sophie Payne-Gifford 997<br />
Irina Purcarea and Marieta Olaru 1006<br />
Azlina Rahim, Ruhaya Atan and<br />
Amrizah Kamaluddin<br />
1013<br />
Brinda Ramasawmy and Fatiha Fort 1020<br />
Birgit Stelzer and Leo Brecht 1029<br />
Amira Vejzagic-Ramhorst, Panayiotis<br />
Ketikidis and Robert Huggins<br />
Izzal Asnira Zolkepli and Yusniza<br />
Kamarulzaman<br />
Work in Progress 1057<br />
How narrative structures entrepreneurial discovery Adam Bock and Gajendran<br />
Kandasamy<br />
Fostering Innovation in Product Design through<br />
Business Incubators in the Arab World<br />
Importance of Entrepreneurial Activity for<br />
Entrepreneurial Orientation<br />
How to Support Innovation Process of SMEs in<br />
Metals Industry and Mechanical Engineering<br />
Innovative e-Tool for Construction SMEs: Enabling<br />
Collaborative Restoration of Old Buildings<br />
1040<br />
1048<br />
1059<br />
Emhamad Hamad and Leslie Arthur 1064<br />
Torsten Fiegler and Michael<br />
Schefczyk<br />
Anneli Manninen, Jukka Laitinen and<br />
Tarja Meristö<br />
Mikel Sorli, Alberto Armijo and Alfredo<br />
Soeiro<br />
1069<br />
1073<br />
1077
Preface<br />
These proceedings represent the work of contributors to the sixth European Conference on <strong>Entrepreneurs</strong>hip<br />
and Innovation (ECIE 2011), hosted this year by Robert Gordon University, Aberdeen, UK. The Conference<br />
Chair is Professor Alistair Anderson, and the Programme Chair is Dr Heather Fulford, both from the Centre for<br />
<strong>Entrepreneurs</strong>hip, Aberdeen Business School, Robert Gordon University.<br />
The opening keynote is given by Alistair Anderson. The second day will be opened with a keynote from<br />
Professor Cam Donaldson, Glasgow Caledonian University, Scotland, UK. Cam will address the issue of Social<br />
Enterprise.<br />
ECIE has grown and continues to evolve. Now in its sixth year the key aim remains the opportunity for<br />
participants to share ideas and meet the people who hold them. The scope of papers will ensure an interesting<br />
two days. The subjects covered by the papers illustrate the wide range of topics that fall into this important and<br />
growing area of research.<br />
With an initial submission of 309 abstracts, after the double blind, peer review process there are 105 academic<br />
papers, 16 PhD papers and 6 work-in-progress papers published in these Conference Proceedings. These<br />
papers represent research from Australia, Belgium, Bosnia and Herzegovina, Bulgaria, Canada, Costa Rica,<br />
Czech Republic, Denmark, Finland, France, Germany, Ghana, Greece, Iran, Ireland, Italy, Japan, Malaysia,<br />
Mexico, New Zealand, Nigeria, Norway, Oman, Pakistan, Poland, Portugal, Puerto Rico, Romania, Russia,<br />
Saudi Arabia, Slovenia, South Africa, Spain, Sweden, Switzerland, The Netherlands, Turkey, UK and USA.<br />
I hope that you enjoy the conference.<br />
Heather Fulford<br />
Programme Chair<br />
September 2011<br />
viii
Conference Executive<br />
Professor Alistair Anderson, Robert Gordon University, Aberdeen, UK<br />
Dr Claire Auplat, Advancia-Negocia Business School, Paris, France<br />
Dr Sandra Fielden, University of Manchester, UK<br />
Dr Helena Forsman, University of Winchester, UK<br />
Dr Heather Fulford, Robert Gordon University, Aberdeen, UK<br />
Professor Panagiotis Georgiadis, University of Athens, Greece<br />
Brendan Galbraith, University of Ulster, Northern Ireland, UK<br />
John Howard, University of Central Lancashire, UK<br />
Dr Alexandros Kakouris, University of Athens, Greece<br />
Professor Veli-Pekka Niitamo, Nokia-IT, The Netherlands<br />
Dr Bill Sutherland, Robert Gordon University, Aberdeen, UK<br />
Dr Ann-Charlotte Teglborg, Advancia-Negocia Business School, Paris, France<br />
Dr Marianne Tremaine, Massey University, New Zealand<br />
Dr Doan Winkel, Illinois State University, USA<br />
Committee Members<br />
The 2011 conference programme committee consists of key people in the Innovation and <strong>Entrepreneurs</strong>hip<br />
community. We would like to thank the following people for their participation.<br />
Zafer Acar (Okan University, Istanbul, Turkey); Bulent Acma (Anadolu University, Turkey); Saleh Al-Jufout<br />
(Tafila Technical University, Jordan); Khedidja Allia (University of Science and Technology, Algiers, Algeria);<br />
Randa Almahasneh (The Hashemite University, Zarqa, Jordan); Ibrahim Al-oqily (Hashemite University, Zarqa,<br />
Jordan); Rumen Andreev (Bulgarian Academy of Sciences, Sofia, Bulgaria); Zacharoula Andreopoulou (Aristotle<br />
University of Thessaloniki, Greece); Senguttuvan Annamalai (Madha Engineering College, India); Erik Arntsen<br />
(University of Agder, Kristiansand, Norway); Johannees Asamer (Austrian Institute of Technology, Vienna,<br />
Austria); Omid Askarzadeh (Polad Saab Shargh, Tehran, Iran); Matthias Assel (high Performance Computing<br />
Centre Stuttgart, Germany); Robert Atkinson (The Information Technology and Innovation Foundation,<br />
Washington, USA); Michael E. Auer (Carinthia Tech Institute, Villach, Austria); Claire Auplat (Imperial College<br />
Business School, London, UK); Ashwini Awasthi (MLSM College, Sundernagar, India); Kamarulzaman Ab. Aziz<br />
(Multimedia University Malaysia, Malaysia); Miroslav Baca (University of Zagreb, Varaždin, Croatia); Susan<br />
Bagwell (London Metropolitan University, UK); Oras Baker (UCSI University, Kuala Lumpa, Malaysia); Tabarak<br />
Ballal (The University of Reading, UK); Ulla Bard (HAMK University of applied science, Finland); Alan Barrell<br />
(Centre for Enterprise Learning, University of Cambridge , UK); Tuzin Baycan (Istanbul Technical University,<br />
Turkey and George Mason University, USA); Sid Ahmed Berrani (France Telecom, Rennes, France); Cristin<br />
Bigan (Ecological University of Bucharest, Romania); Ferrucio Bilich (University of Aveiro, Portugal); Dietmar<br />
Boenke (Reutlingen University, Germany); Ana Maria Bojica (University of Granada, Spain); Benjamin<br />
Botchway (American University of Nigeria, Nigeria); John Bourne (Olin College, Massachusetts, USA);<br />
Raymond Boyle (University of Glasgow, Scotland); Tina Bratkovic (University of Primorska, Slovenia);<br />
Alexander Brem (VEND consulting, Nuremburg, Germany); Fraser Bruce (University of Dundee, UK); Sheryl<br />
Buckley (University of Johannesburg, South Africa); Luigi Buglione (Nexen, Rome, Italy); Cagri Bulut (Yasar<br />
University, Izmir, Turkey); Jeffrey Burke (National Pollution Prevention Roundtable, Washington DC, USA);<br />
Kevin Burt (University of Lincoln, UK); Marina Candi (Reykjavik University, Iceland); Elias Carayannis (George<br />
Washington University, USA); Eduardo Castro (Research Institute of Theoretical and Applied Physical<br />
Chemistry, Buenos Aires, Argentina); Carreto Chadwick (Instituto Politecnico Nacional, Mexioc DF, Mexico);<br />
Abdellah Chehri (Laval University, Quebec, Canada); Toly Chen (Feng Chia University, Taichung, Taiwan);<br />
Ping-Hei Chen (National Taiwan University, Taipei, Taiwan); Shi-Jay Chen (National United University, Maio Li,<br />
Taiwan); Kuo-Sheng Cheng (National Cheng Kung University/Institute of Biomedical Engineering, Taiwan);<br />
Chuang-Chun Chiou (Dayeh University, Changhua, Taiwan); Evrard Claessen (Universiteit Antwerpen,<br />
Antwerpen, Belgium); Colin Clark (University of Aberdeen, UK); Nick Clifton (University of Wales Institute,<br />
Cardiff, UK); Greg Clydesdale (Massey University, Auckland, New Zealand); William Cooper (University of<br />
Strathclyde, Scotland); Costas N. Costa (Cyprus University of Technology, Lemesos, Cyprus); Nigel Culkin<br />
(University of Hertfordshire, Hatfield, UK); Fengzhi Dai (Matsue College of Technology, Japan); Leo-Paul Dana<br />
(University of Canterbury, Christchurch, New Zealand); Francesco D'auria (University of Pisa, Italy); Bertrand<br />
David (Ecole Centrale de Lyon, France); Rogerio Atem De Carvalho (Instituto Federal Fluminense, Campos,<br />
Brazil); Sven H. de Cleyn (University of Antwerp, Antwerp, Belgium); Isidro De Pablo (Universidad Autónoma de<br />
Madrid, Spain); Armando Carlos de Pina Filho (Federal University of Rio de Janeiro , Brazil); Maria Chiara<br />
Demartini (University of Pavia, Italy); Charles Despres (Conservatoire des Arts et Metiers, Paris, France); Anca<br />
Dodescu (University of Oradea, Romania); Michael Doellinger (University Hospital Erlangen, Germany); Salah<br />
Doma (Sinai University, El-Arish, Egypt); Alex Douglas (Liverpool John Moores University, UK); Scott Droege<br />
ix
(Western Kentucky University, Bowling Green, USA); Vasco Eiriz (University of Minho, , Portugal); Engin Deniz<br />
Eris (Dokuz Eylul University, Turkey); Burca Felekoglu (University of Cambridge, Turkey); Maria Joao Ferreira<br />
(Universidade Portucalense, Porto, Portugal); João Ferreira (University of Beira Interior, Covilhã, Portugal);<br />
Sandra Fielden (University of Manchester, UK); Alan Fitzgerald (Aston University & Kingston University, UK);<br />
Helena Forsman (Lappeenranta University of Technology, Lahti, Finland); Maria del mar Fuentes (University of<br />
Granada, Spain); Heather Fulford (Aberdeen Business School, UK); Erdei Gábor (University of Debrecen,<br />
Hungary); Brendan Galbraith (University of Ulster, UK); Laura Galloway (Heriott-Watt University, Edinburgh,<br />
Scotland); Guido Giebens (University of Antwerp Management School, Belgium); Alan Gillies (Hope Street<br />
Centre, Liverpool Science Park, UK); Andrew Goh (University of South Australia, Australia); Ebru Gunlu (Doluz<br />
Eylul University, Turkey); Jukka Hallikas (Lappeenranta University of Technology, Finland); Khaled Hamid<br />
(Virginia Commonwealth University, Richmond, USA); Saskia Harkema (The Hague University of Applied<br />
Sciences, The Netherlands); Sayed Mahdi Golestan Hashemi (Iranian Research Center for Creatology, TRIZ &<br />
Innovation Management. Iran); Takashi Hirao (Tokyo University of Science, Suwa, Japan); John Howard (Public<br />
Health and Clinical Sciences, UK); Amy Hsiao (Memorial University of Newfoundland, St Johns, Canada); Dil<br />
Hussain (Aalborg University, Denmark); Cong Thanh Huynh (University of Granada, Spain); Paul Jones<br />
(University of Glamorgan, UK); Alexandros Kakouris (University of Athens, Greece); Yusniza Kamarulzaman<br />
(University of Malaya, Kuala Lumpur, Malaysia); Mira Kartiwi (International Islamic University Malaysia,<br />
Malaysia); Trish Kernan (University of Winchester, UK); Panayiotis Ketikidis (CITY College - International<br />
Faculty of the University of Sheffield, Greece); Gyeung-Min Kim (Ewha Womens University, Seoul, Korea); Sam<br />
Kongwa (Walter Sisulu University, Mthatha, South Africa); Kothandaraman Kumar (Indian Institute of<br />
Management Bangalore, India); Brent Lane (Kenan-Flager Business School, University of North Carolina, USA);<br />
Jonathan Lean (University of Plymouth Business School, UK); Kiefer Lee (Sheffield Hallam University, UK);<br />
Joao Leitao (University of Beira Interior, Portugal); João Leitão (Technical University of Lisbon, Portugal); Jun Li<br />
(University of Essex, UK); Yipeng Liu (University of Mannheim, Germany, www.ifm.uni-mannheim.de); Loykie<br />
Lomine (University of Winchester, UK); Angeline Low (University of Technology Sydney, Mosman, Australia);<br />
Sam Lubbe (University of South Africa, South Africa); Randa Mahasneh (The Hashemite University, Jordan);<br />
Klofsten Magnus (IEI/PIE/Helix Centre of Excellence, Sweden); Neil Marriott (University of Winchester, UK);<br />
Juan Martínez (Universidad Politécnica de Cataluña, Spain); Philip McClenaghan (University of Teeside, , UK);<br />
Caroline Miller (Keele University, Newcastle-Upon-Lyme, UK); Zoran Mitrovic (University of Western Cape,<br />
South Africa); Norbert Morawetz (University of Hertfordshire, Hatfield, uk); Isabel Mota (Universidade do Porto,<br />
Porto. , Portugal); Jens Mueller (Management School, Waikato University , New Zealand); Maurice Mulvenna<br />
(University of Ulster, Newtownabbey, UK); Jan Nab (Utrecht University, Netherlands); Desai Narasimhalu<br />
(Singapore Management University, Singapore); Artie Ng (The Hong Kong Polytechnic University, Hong Kong);<br />
Birgit Oberer (Kadir Has University, Turkey, www.khas.edu.tr); "Jukka Ojasalo (Laurea University of Applied<br />
Sciences, Espoo, Finland); Mohand-Said Oukil (King Fahd University of Petroleum and Minerals, Dhahran,,<br />
Saudi Arabia); Antti Paasio (Turku School of Economics, Turku, , Finland); Piotr Pachura (Czestochowa<br />
University of Technology, Poland); Jatin Pancholi (Middlesex University, London, UK); Deepti Parachuri<br />
(SETlabs, Infosys Technologies Ltd., Hyberabad, India); Mika Pasanen (University of Kuopio, Finland); Shaun<br />
Pather (e-Innovation Academy, Cape Peninsula University of Technology, Cape Town, South Africa); Ige Pirnar<br />
(Yasar University, Turkey); Nataša Pomazalová (University of Defence, Brno, Czech Republic); Adina Simona<br />
Popa (University "Eftimie Murgu" OF Resita, Romania); Jean-Michel Quentier (ESC-Bretange, Brest, France);<br />
Sudhanshu Rai (Copenhagen Business School, Frederiksberg, Denmark); Catarina Ramalho (University of<br />
Lisbon, Portugal); Ganesan Ramaswamy (College of Business Administration, King Saud University, Kingdom<br />
of Saudi Arabia); Colin Rigby (Keele University, UK); Cheryl Rodgers (University of Portsmouth, UK); Jonas<br />
Rundquist (Halmsted University, Sweden); Paulo Rupino Cunha (University of Coimbra, Portugal);<br />
Balasundaram Sadhu Ramakrishnan (National Institute of Technology, Tiruchirappalli, India); Enrico Santarelli<br />
(University of Bologna, Italy); Simone Scagnelli (University of Turin, Torino, Italy); Cezar Scarlat (“Politehnica” of<br />
Bucharest, Romania); Mark Schatten (University of Zagreb,Varaždin, Croatia); Jeanne Schreurs (Hasselt<br />
University, Diepenbeek, Belgium); Erickson Scott (Ithaca College, USA); Maria Theresia Semmelrock-Picej<br />
(Klagenfurt University Biztec, Austria); Namchul Shin (Pace University, New York, USA); Eric Shiu (The<br />
University of Birmingham, UK); Dorotea Slimani (Innventia AB, Sweden); David Smith (Nottingham Trent<br />
University, UK); John Sparrow (Birmingham City University, UK); Padma Srinivasan (ICFAI Business School,<br />
India); Mangaleswaran Thampoe (Vauniya campus of the University of Jaffna, Sri Lanka); Thomas Thijssen<br />
(Hospitality Business School at Saxion, Netherlands); Milan Todorovic (University Union Nikola Tesla, Serbia);<br />
Marko Torkkeli (Lappeenranta University of Technology, Finland); Christopher Turner (University of Winchester<br />
, UK); Lorraine Uhlaner (Nyenrode Business University, Breukelen, Netherlands); Bernard Vollmar (Carl von<br />
Ossietzky Universität Oldenburg, Oldenburg, Germany); Catherine Wang (University of London, UK); Peter<br />
White (YTKO Ltd, Cambs); Doan Winkel (Illinois State University, United States); Fabiola Wust Zibetti<br />
(University of Sao Paulo, Brazil); Aziz Yahya (Universiti Teknikal Malaysia Melaka, Malaysia).<br />
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Biographies of Conference Chairs, Programme Chairs<br />
and Keynote Speakers<br />
Conference Chair and Keynote Speaker<br />
Programme Chair<br />
Professor Alistair Anderson as Director of the Charles P. Skene Centre for<br />
<strong>Entrepreneurs</strong>hip, Professor Anderson’s main role is to develop their research activities.<br />
He is also involved as research coordinator for the Business and Management group of<br />
Aberdeen Business School. In addition to his own and the Centre’s research, he enjoys<br />
supervising a number of PhDs. Dr Anderson also teaches on some of RGU’s<br />
entrepreneurship and research methods courses. In addition to his role at the Centre, he<br />
has a number external duties including; membership of several journal Editorial Boards;<br />
external examining and doctoral supervision; reviewing and validations.<br />
Dr Heather Fulford is Reader in <strong>Entrepreneurs</strong>hip and <strong>Academic</strong> Director of the Centre<br />
for <strong>Entrepreneurs</strong>hip at Aberdeen Business School, The Robert Gordon University,<br />
Scotland. Her research interests include social enterprise start-up and governance and<br />
social entrepreneurship education. She is currently working on a Knowledge Transfer<br />
Partnership in a leading social enterprise, and supervising a number of doctoral students in<br />
aspects of social entrepreneurship. Her lecturing commitments included postgraduate and<br />
undergraduate modules on new venture creation.<br />
Keynote Speaker<br />
Professor Cam Donaldson holds the Yunus Chair in Social Business & Health at<br />
Glasgow Caledonian University. From 2002-2009, he held the Health Foundation Chair in<br />
Health Economics at Newcastle University, where he was founding Director of the Institute<br />
of Health & Society and professor in the Newcastle University Business School. He held<br />
the Svare Chair in Health Economics at the University of Calgary from 1998-2002, having<br />
first become a professor of health economics in 1996 whilst at the Health Economics<br />
Research Unit at the University of Aberdeen. Over the past 25 years, Cam has published<br />
over 190 peer-reviewed articles in economics, medical, health policy and health<br />
management journals and has co-authored or edited several books on various aspects of health economics and<br />
public service delivery.<br />
Mini Track Chairs<br />
Dr Claire Auplat researcher in innovation, eco-entrepreneurship and environmental<br />
strategies, has worked on the co-industrial and institutional emergence of<br />
nanotechnologies for the last decade, firstly at Rice University (US), then at Sciences Po’s<br />
chair of sustainable development (France) and at Imperial College business school (UK),<br />
and now at Advancia School of entrepreneurship (France). Claire is a member of the<br />
French Research Council (ANR) specialist committee on eco-innovation (ECOTECH). Her<br />
areas of interest cover public policy and entrepreneurial dynamics, innovation and<br />
sustainable development. She has published widely in these areas and is a member of<br />
the editorial board of Society and Business Review, International Journal of <strong>Entrepreneurs</strong>hip and Small<br />
Business and Scandinavian Journal of Management.<br />
Dr Sandra Fielden is a Senior Lecturer in Organisational Psychology in the Manchester<br />
Business School at the University of Manchester. She has been editor of Gender in<br />
Management: An International Journal over the last 10 years, and received an Outstanding<br />
Service in 2010. For the last 4 years Sandra has been co-chair of the ‘Gender and<br />
Management’ track at the British Academy of Management and European Academy of<br />
Management and a founder member of the ‘Gender in Management’ special interest<br />
group. She is co-editor of ‘International Research Handbook of Successful Women<br />
<strong>Entrepreneurs</strong>’ and ‘International Handbook of Women and Small Business<br />
<strong>Entrepreneurs</strong>hip.<br />
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Dr Helena Forsman is a Senior Lecturer in Management (<strong>Entrepreneurs</strong>hip and<br />
Innovation) at the Business School, University of Winchester. Currently she is involved in<br />
two ongoing research projects: “Networking as an Accelerator of Innovations in Small<br />
Enterprises” and “The Relationship between Growth and Innovation in SMEs”. In this<br />
capacity she is collaborating with several European research organizations. In addition,<br />
she is running her own consulting business. In recent years Helena has been a productive<br />
author of academic publications in the field of innovation development in SMEs. She has<br />
also published articles on entrepreneurial learning with a special interest on how to link<br />
innovation efforts of SMEs to serve as learning challenges of university students.<br />
John Howard is a qualified Nurse and is a senior lecturer and course leader for the MSc by<br />
eLearning in Health Informatics at the University of Central Lancashire. John's research<br />
interests have developed from an initial focus on training needs analysis to include maturity<br />
modelling, open systems data models and the role of individual competency in the change<br />
process. Lately he has focused on using these approaches, derived from work in change<br />
management within the Health Care domain to Innovation in general and in the setting of Small<br />
and Medium Sized Enterprises in particular.<br />
Dr Alexandros Kakouris is a part time lecturer in entrepreneurship and innovation at the<br />
University of Athens. He holds a Ph.D. in Physics and a M.Sc. in Adult Education. He has<br />
been involved in entrepreneurship research since 2006, mainly with educational issues. His<br />
special interest concerns the fostering of entrepreneurship and innovation to science<br />
graduates and the support of youth entrepreneurship through counselling. He also<br />
specialises in nascent entrepreneurship and virtual business planning.<br />
Dr Ann-Charlotte Teglborg, researcher in employee driven innovation is Professor of<br />
employee driven innovation and intrapreneurship and the Manager of the Intrapreneurship<br />
program of Advancia’s Master Degree in <strong>Entrepreneurs</strong>hip. She is presently Administrator of<br />
Innovacteurs, a French professional association dedicated to participatory innovation and an<br />
active member of the EDI- network dedicated to the European research on Employee driven<br />
innovation and Work place learning. Her last article has been published in Transfer-Sage.<br />
Dr Marianne Tremaine is a senior lecturer at Massey University, New Zealand and part of the<br />
indigenous Kai Tahu tribe. She specialises in cross-cultural communication, women and<br />
leadership, equal employment opportunity and managing diversity.<br />
Dr Doan Winkel is an Assistant Professor of <strong>Entrepreneurs</strong>hip at Illinois State University. He<br />
received his Ph.D. from the University of Wisconsin – Milwaukee. His research has been<br />
published in the New England Journal of <strong>Entrepreneurs</strong>hip, the Journal of Occupational and<br />
Organizational Psychology, and the Journal of Vocational Behavior. His current research<br />
interests include the impact of entrepreneurship education, innovative teaching methods in<br />
entrepreneurship, and work-life balance.<br />
Biographies of contributing authors (in alphabetical<br />
order)<br />
Lise Aaboen has a PhD from Chalmers University of Technology, where she currently holds a post doctoral<br />
position. Her research interests include incubators, NTBFs, early customer relationships, strategy and<br />
commercialization of technology and/or design-based ideas. She has published in Technovation, the<br />
International Journal of Management and Enterprise Development and the International Journal of Business<br />
Innovation and Research.<br />
Arezou Abasian is studying for a Master of Science in <strong>Entrepreneurs</strong>hip at Tehran University, Iran. Her<br />
research interests include entrepreneurship education, social entrepreneurship and especially children’s and<br />
teen’s entrepreneurship. She has published on child entrepreneurship. She established the first Iranian<br />
xii
“entrepreneurship and creativity kindergarten”, She has designed and written software and programs for<br />
educating teachers and families together with a guide for training kids.<br />
Ayesha Abrar is a doctoral researcher in <strong>Entrepreneurs</strong>hip at Essex Business School, University of Essex. She<br />
is researching entrepreneurial learning within the context of creative industries of UK with a gender specific<br />
approach.<br />
María-Teresa Aceytuno-Pérez (Ph.D in Economics) is Assistant Lecturer at the University of Huelva (Spain).<br />
Her research is focused on technology transfer from university to industry and the creation of academic spinoffs.<br />
She has published several papers in indexed journals. She is the editor of Revista de Economía Mundial, a<br />
Spanish scientific journal indexed by SSCI.<br />
Nigel Adams is Programme Director of the BSc Business Enterprise at the University of Buckingham. He<br />
teaches, advises and mentors students taking the innovative two year honours degree in Business Enterprise,<br />
during which they start and operate their own company. Nigel is also is the Managing Director of Nigel Adams &<br />
Company Ltd.<br />
Antonios Aggelakis is a PhD candidate in science, technology and innovation policy, at the University of Crete<br />
(MSc University of York, UK; BA University of Crete, Greece). He is also currently a researcher at the Center for<br />
Technology Transfer & Development, University of Crete. His research interests include science and technology<br />
policies, technology transfer, economic geography.<br />
Jaione Agirre Uranga has worked as a researcher in TEKNIKER technology centre since October 2005 in the<br />
Innovation Management Area. She has focused on business collaboration and knowledge management<br />
projects. Moreover, Jaione has finished her PhD thesis research and is waiting to present it.<br />
Abeer Al-Mukhaini holds a BS Honors degree from Caledonian College (computer engineering). She is<br />
currently studying for an MBA at Hull University. She served as country program manager on the Women in<br />
Technology program, demonstrating the exceptional leadership and management skills one observes in<br />
professionals at middle and senior executive levels. Se won the Best Executive Award (2009) at the Women in<br />
Business conference. She works in The Research Council Innovation Office, as executive assistant.<br />
Mohammed Alsahlawi is Professor of Economics & Ex-Dean at King Fahd University of Petroleum and<br />
Minerals. He holds a Ph.D. in Economics from the University of Wisconsin. He was a member of the Advisory<br />
Board, Saudi Arabian Supreme Economic Council and Director of the Human Resources Development Fund.<br />
He serves on international journals editorial boards and his publications have appeared in energy economics<br />
journals.<br />
Irene Alvarado Van der Laat has a Ph.D in Economical and Entrepreneurial Sciences and coordinates EARTH<br />
University’s Entrepreneurial Program, and has several published articles. She’s received the best investigation<br />
prize at the VII International Entrepreneur Congress (El Salvador, 2004) and is the Highly Commended Award<br />
Winner of the Literati Network Awards for Excellence (2011).<br />
Mohd Hasril Amiruddin is a lecturer in Technical Education (Mechanical) at the Universiti Tun Hussein On<br />
Malaysia (UTHM), Johor, Malaysia. He is presently furthering his studies in a PhD of Technical and Vocational<br />
Education at the Universiti Kebangsaan Malaysia. He obtained his Masters of Education in Education<br />
Technology from Universiti Putra Malaysia.<br />
Christos Apostolakis has a MA in Business Administration from Bournemouth University, an MA in Public<br />
Admin & Public Policy from University of York and a Ph.D. from De Montfort University – Leicester all in UK. He<br />
currently works as lecturer in Strategy at Bournemouth University Business School whilst being one of the<br />
school’s Business and Management Programme Coordinators. His current research interests revolve around<br />
strategy and social entrepreneurship.<br />
Zahra Arasti has a PhD. in management (subject: women's entrepreneurship in Iran) from the University of<br />
Toulon, France. She also holds a Master of Science in Industrial Engineering from the Institute National<br />
Polytechnic of Grenoble (INPG), France and a Bachelor of Science in Industrial Engineering from the Sharif<br />
University of Technology, Iran.<br />
xiii
Claire Auplat (PhD) has worked on issues related to innovation for the last decade, firstly at Rice University<br />
(US), then at Sciences Po’s chair of sustainable development (France) and at Imperial College business school<br />
(UK), and now at Advancia School of entrepreneurship (France). Her areas of interest cover public policy,<br />
entrepreneurial dynamics and sustainable development.<br />
Selvamalar Ayadurai holds a Ph.D in Political Science from the National University of Malaysia. She is a<br />
Consultant Trainer specialized in the area of Corporate <strong>Entrepreneurs</strong>hip. She is also an Adjunct Lecturer with<br />
the University of Newcastle, Australia and a Senior Lecturer in Malaysia. She is the Founding President of an<br />
NGO aimed at creating self-sustainable communities through micro-credit financing.<br />
Fabiola Baltar is a Professor of Economics at the University of Mar del Plata, Argentina. She received her PhD<br />
in Economic and Business at Rovira i Virgili University, Spain. Her areas of research are: ethnic<br />
entrepreneurship, decision-making strategies in SMEs and virtual research methodologies.<br />
Julia Balycheva master, PhD student, is a junior research associate of the Central Economics and<br />
Mathematics Institute of Russian Academy of Sciences, Moscow, Russia<br />
Sadegh Baradaran is a student at the University of Tehran for Technological <strong>Entrepreneurs</strong>hip. He studied<br />
Industrial Engineering at the Sadjad institute in Mashhad. His research covers topics of Technological<br />
Innovation, Technopreneurship, Entrepreneurial opportunities as well as Problem solving and systematic<br />
innovation. He teaches <strong>Entrepreneurs</strong>hip and Creativity methods in general courses.<br />
Cristina Bayona-Sáez is a Doctor in Business Administration from the Public University of Navarre (UPNA),<br />
where she has been a professor since 1993. Her research interests have concentrated on the study of<br />
innovation, and on firm-university cooperation. Since 2008 she has been the Head of the Knowledge Transfer<br />
Office of the UPNA.<br />
Sheena Bell, MA, MBA, MSc (Education) is a Senior University Teacher and Business & Management<br />
Undergraduate Programme convenor in the University of Glasgow Business School. She teaches<br />
<strong>Entrepreneurs</strong>hip and Organisational Behaviour at masters and undergraduate levels, which are her areas of<br />
research interest.<br />
Søren Berg Jørgensen Industrial PhD Fellow at Roskilde University in Denmark. He is doing his PhD in<br />
collaboration with Business Link Zealand, which is a regional organization that provides guidance to<br />
entrepreneurs and businesses.<br />
Dimitar Birov is an Associate Professor in the Faculty of Mathematics and Informatics of Sofia University,<br />
Bulgaria. He has experience as research fellow, lecturer, and project manager at Sofia University, University of<br />
Orleans and University College of Dublin. His industrial experience includes software developer, software<br />
architect and consultant. His primary research interests are in software engineering and software architecture,<br />
programming languages and knowledge management.<br />
Knut Blind took his doctoral degree in Economics in Freiburg, Germany. Since 1995 he has been leading<br />
several research groups at Fraunhofer Institutes. In April 2006 Mr. Blind was appointed Professor of Innovation<br />
Economics at the Berlin University of Technology. Since May 2008 he holds also the chair of standardisation at<br />
the Rotterdam School of Management.<br />
Jørgen Bloch-Poulsen is a senior external lecturer at Copenhagen University (the Masters Programme in<br />
Conflict Mediation) and Roskilde University, Denmark (the Masters Programme in Professional<br />
Communication). He holds a MA Research (mag.art.) in History of ideas/Philosophy. He is an Associate<br />
Professor in Philosophy of Science at the University of Roskilde since 1972. He has been an Action Researcher<br />
and Organizational Consultant since 1986 and is a Partner in Dialog.<br />
Adam Bock is Lecturer of <strong>Entrepreneurs</strong>hip at the University of Edinburgh Business School. His research has<br />
focused on business models and organisational change at innovative entrepreneurial firms. Publications<br />
include “The business model in practice and its implications for entrepreneurship research” (ET&P 2011)and<br />
"Inventing <strong>Entrepreneurs</strong>" (Prentice Hall 2008).<br />
Elena Botezat is Prodean at the Faculty of Economic Science, University of Oradea, Romania and School<br />
Director in the entrepreneurial project ”<strong>Entrepreneurs</strong>hip and Equal Opportunities. An inter-regional model for<br />
xiv
women entrepreneurial school”. Her activities include research on social entrepreneurship education,<br />
counseling, tutoring, usage of virtual learning environments, coordinating projects financed by the European<br />
Commission.<br />
Mary Brown is a Lecturer in Management and Organizational Behaviour at Aberdeen Business School, Robert<br />
Gordon University. Her PhD (2007) was about cultural change in churches through the lens of Jungian type<br />
theory. She is a qualified user of the Myers Briggs Type Indicator and is currently investigating the contribution<br />
of Jungian archetypes to organizational behaviour study.<br />
Eric Brun, PhD is an Associate Professor at the University of Stavanger (UiS), Norway. He holds a Masters<br />
Degree in Medical Technology and a PhD in Innovation Management, both from NTNU - the Norwegian<br />
University of Science and Technology. Prior to joining UiS, he worked within product development in the<br />
medical device industry.<br />
Cagri Bulut, PhD is Chair of the Department of Business Administration and Vice Dean of the Faculty of<br />
Economics and Administrative Sciences, Yasar University, Izmir, Turkey.<br />
Alexandru Capatina, PhD is Lecturer at the “Dunarea de Jos” University of Galati, Romania, and a<br />
Postdoctoral fellow of “Al. I. Cuza” University of Iasi, Romania. His researcj interests are Customer Relationship<br />
Management, Cultural Intelligence, Business Simulations and Management Information Systems. He is author &<br />
co-author of six books, more than 60 articles published in journals and Proceedings of conferences. He has<br />
participated at different international conferences focused on business management and marketing in France,<br />
Poland, Turkey, Croatia, Tunisia, Algeria, Brazil and Mexico.<br />
Jaromír Černý is a lecturer in the Faculty of Management and Economy at Tomas Bata University in Zlin. He<br />
studied at Žilina University/Slovak Republic and Lodz Polytechnics/Poland. He graduated his doctoral studies<br />
on the topic of Produce Optimalization, Transportation and Sale of goods, where he focused on value flow<br />
optimalization in manufacturing systems supply chains.<br />
Laurie Cohen is Professor of Organisation Studies at the School of Business and Economics, Loughborough<br />
University.<br />
Isidro De Pablo López (Madrid-Spain, 1952) MBA State University of New York, and a PhD in Business<br />
Administration by the Universidad Autónoma de Madrid (Spain). Now he is Full Professor in Business<br />
Organization at UAM, where he is currently in charge of the Center for Entrepreneurial Initiatives (CIADE).<br />
Carine Deslee from the University of Lille has been studying Participative Innovation in the context of the SNCF<br />
company during her PhD under the direction of Pr Desreumaux. Her other research interests are concerning<br />
innovation, strategic changes, routines, organizational learning and the role of managers in various contexts<br />
such as distribution.<br />
Maiia Deutschmann studied Organizational Management at the Economy and Law Institute in Kiev, Ukraine<br />
and International Business Administration at Europe University Viadrina in Frankfurt (Oder), Germany. Since<br />
2008 she has been a scienfitic and teaching assistant at the chair of International Management, Europe<br />
University Viadrina.<br />
Anca Dodescu, Ph.D is Professor of European Economics and Regional Economics, Dean of the Faculty of<br />
Economics, University of Oradea, Romania. Monnet European Module “European Economic Integration”, and<br />
Manager of the Project “<strong>Entrepreneurs</strong>hip and the Equality of Chances. An Inter-regional Model of Women<br />
School of <strong>Entrepreneurs</strong>hip.<br />
Katia Dupret Søndergaard MA/PhD is Assistant Professor in Organisational Psychology, Aarhus University,<br />
Campus Copenhagen, Denmark She does ethnographic research in the area of employee driven innovation and<br />
intangible innovation processes in the public sector. Her research interests also lie within professional identities,<br />
professional engagements and disengagements with technologies, mental health and health promotion.<br />
Smile Dzisi (PhD) is a Senior Lecturer in the School of Business and Management Studies at Koforidua<br />
Polytechnic. Her research and teaching interests are in <strong>Entrepreneurs</strong>hip and Organizational Behaviour. She<br />
has published in the area of female and indigenous entrepreneurship. She is an organizational development<br />
consultant and entrepreneurial enhancement expert.<br />
xv
Scott Erickson is Associate Professor and Chair of the Marketing/Law Department in the School of Business at<br />
Ithaca College, Ithaca, NY. He holds a PhD from Lehigh University and Masters degrees from Thunderbird and<br />
SMU. He has published widely on intellectual property, intellectual capital, and competitive intelligence.<br />
Cristina Fernandes (MSc in Management) She is a teacher of Instituto de Linguas e Administração de Leiria<br />
(ISLA), is a doctoral Student of Management Doctoral Programme of the University of Beira Interior (UBI) –<br />
Portugal. She research interest is about KIBS and Regional Competitiveness. She has published several papers<br />
in international journals.<br />
Sílvia Fernandes Costa is a Phd Candidate in Human Resources Management at ISCTE-IUL, Instituto<br />
Universitário de Lisboa, Portugal. She completed a Masters Degree in Social and Organizational Psychology<br />
with a dissertation about the recognition of business opportunities. Her main research interests are studying<br />
entrepreneurship from a cognitive perspective.<br />
João Ferreira (PhD in Management) is Associate Professor of Strategic Management and <strong>Entrepreneurs</strong>hip at<br />
the University of Beira Interior (UBI) – Portugal. He is researcher of NECE – Research Unit in Science<br />
Business. His research interests include: strategy, competitiveness and entrepreneurship. He is Reviewer Board<br />
of some International Journals. He is also editor of several international journals. He has published in a range of<br />
international journals.<br />
Torsten Fiegler works as a research assistent at the chair of entrepreneurship and innovation at the<br />
"Technische Universität Dresden". He supports the course “Financing with Venture Capital” and was<br />
responsible for different workshops on Due Diligence and Business Model Generation during the semester.<br />
Dennis Foley is of Aboriginal descent (Gai-mariagal/Wiradjuri), a Professor of Aboriginal Studies researching/<br />
publishing in the fields of Aboriginal history, cultural studies, management/ entrepreneurship and education. He<br />
is a Fulbright and double Endeavour Fellow having researched and lived in Hawaii, New Zealand and Ireland<br />
researching Indigenous enterprise and the Irish Pavee.<br />
Mário Franco is an Assistant Professor in <strong>Entrepreneurs</strong>hip and SMEs Administration at the Department of<br />
Management and Economics, Beira Interior University, Portugal. He holds a PhD in Management from Beira<br />
Interior University (2002). His research focuses on strategic alliances, business networks, entrepreneurship and<br />
innovation management. He is a member of the NECE-Research Unit in Business Sciences, Beira Interior<br />
University.<br />
Regina Frank is a Lecturer in Innovation and <strong>Entrepreneurs</strong>hip at the School of Business and Economics,<br />
Loughborough University.<br />
Bartłomiej Gabryś is Assistant Professor and Chair in <strong>Entrepreneurs</strong>hip at the University of Economics in<br />
Katowice, Poland. He received his Ph.D. in corporate entrepreneurship. His present research focuses on<br />
corporate entrepreneurship and growth. His research has been presented at EURAM, Academy of<br />
management, Asian Academy of Management or published by Wolters/Kluver and Routledge.<br />
Cephas Gbande from the Nasarawa State University, Nigeria. Education: Received ACIB, 1984; DMS, 1985,<br />
DipM 1987, MSc 1990, MA 1991 and PhD 1995 all in UK. Work Experience, HOD Business Administration,<br />
Senior Lecturer since 2006, Corporate Strategy and MIS. He has worked in UK and Nigeria.<br />
Parvaneh Gelard is an Assistant Professor and faculty member of Management at the Islamic Azad University<br />
South Tehran branch. She has a PhD in management Science. Her thesis subject was about women’s<br />
<strong>Entrepreneurs</strong>hip. She has many articles published in Journals and International <strong>Conferences</strong> about<br />
entrepreneurship and management. Her current research interests are women’s <strong>Entrepreneurs</strong>hip,<br />
entrepreneurship and management.<br />
Alan Gillies is a Director of Informatics at the Hope Street Centre in Liverpool. Formerly Professor of<br />
Information Management at UCLAN in Preston, he holds honorary academic positions there and in Cluj<br />
Romania. Alan uses informatics to support the Hope Street Centre’s goal of improving health and social care by<br />
evidence-based innovation.<br />
xvi
Adriana Giurgiu is a Director (National Co-ordinator) of the SVACEX Project, Scientific Director of the<br />
Research Centre on Sustainable Development and Competitiveness; Jean Monnet Professor and Module<br />
Leader - "EU Sustainable Development and Competitiveness"; Specialist in International Trade and European<br />
Economics at the Faculty of Economic Sciences, University of Oradea.<br />
Aleix Gregori is a doctoral candidate in the Economics and Business Doctoral Program at the Rovira i Virgili<br />
University, Catalonia, Spain. He is interested in the areas of Health Economics, Innovation, Theory of the Firm,<br />
and <strong>Entrepreneurs</strong>hip. He is member of the Social and Organizational Analysis Group at Rovira i Virgili<br />
University, directed by Dr. Ignasi Brunet.<br />
Oleg Golichenko is Doctor of Economic Sciences, economist and specialist in field of national innovation<br />
systems. Currently he is a research associate at the Central Economics and Mathematics Institute of Russian<br />
Academy of Sciences, Professor of Science and Innovation Development at the Higher School of Economics;<br />
Intellectual Property Economics of Moscow Physics and Technique Institute and Institutional Economy of New<br />
Russian University, Moscow, Russia.<br />
Álvaro Gómez Vieites is an associate Professor at Novacaixagalicia Business School – University of Vigo. His<br />
Ph.D is in Economics and Business Administration from the National University of Distance Education (UNED).<br />
He holds a Master in Business Administration from Novacaixagalicia Business School. He has been a Computer<br />
Engineer at UNED and a Telecommunications Engineer at the University of Vigo. He is author of 25 technical<br />
books and several articles.<br />
Manel González-Piñero has a MBA and Master’s degree in Management Techniques (UB). Bachelor’s Degree<br />
in Business Administration and English Studies (UB). Currently, he is the Innovation Manager at the Biomedical<br />
Engineering Research Centre of the Technical University of Catalonia (UPC) and Associate Professor of<br />
Political Economy at the Business School (UB). He has long experience in Innovation Management and<br />
<strong>Entrepreneurs</strong>hip.<br />
Raquel González Eransus has forged her investigating and professional trajectory in different public and<br />
private institutions. Her work and publications have concentrated on the sociology of work, labour market<br />
policies, lifelong learning policies, qualifications and socio-professional insertion.<br />
Elissaveta Gourova is Associate Professor at the Faculty of Mathematics and Informatics of Sofia University,<br />
Bulgaria. She has professional experience as research fellow at IPTS in Spain and project manager at Sofia<br />
University. Her primary research is cross-disciplinary focused on Knowledge management, ICT impact, and<br />
digital divide. She has more than 60 publications.<br />
Susanne Gretzinger holds a PhD from the University of Paderborn within the field of strategic sourcing. Her<br />
research is within the field of "Strategic Marketing" and "Management of organizational Relationships". Special<br />
issues are: Strategic Sourcing, Innovation Management, Organizational Relationships, Networks, Clusters, the<br />
impact of Social and Symbolic capital on value creation.<br />
Izold Guihur is professor of management at Université de Moncton, in Canada. Her curiosity for innovation has<br />
guided her experience as engineer, teacher, and researcher. Her current research interests include the role of<br />
rich information, networks and relational capital in the process of innovation, in the contexts of small and<br />
medium enterprise and of family business, especially.<br />
Heiko Haase Full Professor of <strong>Entrepreneurs</strong>hip and Innovation Management at Department of Business<br />
Administration, University of Applied Sciences Jena, Germany. He studied Industrial Engineering receiving a<br />
PhD in Economic Sciences from Ilmenau University of Technology (2003). His Research areas comprise<br />
entrepreneurship, small/medium-sized enterprises, technology transfer and intellectual property. He<br />
Coordinates the Center for Innovation and <strong>Entrepreneurs</strong>hip of the University of Applied Sciences Jena.<br />
Duygu Seckin Halac is a PhD Candidate and Research Assistant. Department of Business Administration,<br />
Yasar University, Izmir, Turkey.<br />
Bernd Hallier gained his MA-degree in Economics from Hamburg University/ Germany. His PhD focused on<br />
micro-and macro-effects due to IT at the retail/wholesale level. Today he is Managing Director of the EHI Retail<br />
Institute and President of the European Retail Academy.<br />
xvii
Emhamad Hamad HND, BA, MSc. is a PhD student at Nottingham Trent, University. He was a public sector<br />
employee, 1985-2005 and has been a Faculty member of the Collage of Economics, Omar Al-Mukhtar<br />
University since 2005. He was Coordinator of the Faculty of Economics, Al-Qubbah Branch, 2006 and Head of<br />
the department of Business Administration, Omar Al- Mukhtar University, 2007.<br />
Jennifer Harrison is Department Head Accounting Finance and Quantitative Methods in the Southern Cross<br />
Business School at Southern Cross University’s Gold Coast Campus in Australia. Her research interests are<br />
focused on two main areas: strategic entrepreneurship, particularly within ICT firms; and impression<br />
management in the financial disclosures of listed companies.<br />
Mahmoud Hassanin is a PhD candidate in Tomas Bata University, Zlin, Czech Republic. He works as an<br />
assistant teacher in a private university in Egypt. He is interested in topics such as: innovation, open innovation,<br />
technology commercialization and knowledge-based-economy.<br />
Seyed Reza Hejazi PhD <strong>Entrepreneurs</strong>hip Faculty, 16th, kargare shomali, Tehran, Iran. He is currently a<br />
Member of the <strong>Entrepreneurs</strong>hip Faculty at Tehran University. He holds a PhD Degree (nanomaterials) and an<br />
MSc Degree (Metallurgy Engineering) from the Sharif University of Technology, Tehran. He obtained his<br />
Bachelor of Science Degree (Metallurgy Engineering) from the Shiraz University, Iran.<br />
Ella Henry is a Māori woman, Senior Lecturer in the Māori Development Faculty at AUT. Ella will complete her<br />
PhD in 2011. She holds an MPhil (Management Studies) and a BA (Sociology, Māori Studies), from the<br />
University of Auckland. She has also worked in screen production over the last twenty years.<br />
Gerold Holtkamp is a director of the joint technology transfer office of the Osnabrueck universities, Germany.<br />
His expertise in technology transfer and entrepreneurship is based on 25 years in industry and universities. His<br />
interest is focused on specially adapted support instruments for scientific entrepreneurs.<br />
John Howard is a Senior Lecturer in Health Informatics within the School of Health at the University of Central<br />
Lancashire. He is also Course Leader for the MSc in Health Informatics. John’s research interests include<br />
change management models, competency frameworks and Innovation capacity.<br />
Xiaoti Hu. Is a PhD research student at the School of Business and Economics, Loughborough University. Prior<br />
to his postgraduate studies at Loughborough he worked as Project Officer in the China Guangcai Programme.<br />
Harri Jalonen is Principal Lecturer at the Department of Business Administration, Turku University of Applied<br />
Sciences, Finland. He has long-term research experience dealing with the knowledge and innovation<br />
management issues in different organizational contexts.<br />
Noor Hasni Juhdi is a candidate for a DBA degree at the Graduate School of Business, UKM, Malaysia. Her<br />
research interests are in the area of entrepreneurship, positive psychology and services management. She<br />
received her BBA from University of Miami, Florida in 1990, and Master in Management from Graduate School<br />
of Management, UPM, Malaysia in 2006.<br />
Esad Kadušić did his master thesis at the Faculty of Electrical Engineering in Sarajevo, where he is a Senior<br />
Assistant. He is employed at BH Telecom JSC Sarajevo as head of the department for planning and<br />
development. He has published over 30 scientific papers. Currently he is focused on his doctoral studies in<br />
electrical engineering and economy.<br />
Saeid Karimi holds a BSc and an MSc in Agricultural Education. After finishing his MSc studies, he was<br />
employed as an instructor at the Bu-Ali Sina University. He started his PhD project at the Wageningen<br />
University in 2009. The title of his project is: “Evaluation and Improvement of <strong>Entrepreneurs</strong>hip Education in<br />
Higher Education in Iran”.<br />
Oskar Kayasan is Professor of Strategy with considerable international experience and an ability to<br />
communicate effectively at senior academic and management level. His current research involves the study of<br />
global and regional strategies in emerging countries from globalization phenomenon. Areas of competence<br />
include Global Strategy and Strategy Renewal in Emerging Countries<br />
Eva Kekou has a multidisciplinary academic background (art history,literature & political theory).She has<br />
presented at international conferences (re:media live, isea 2011,ecie 2010,subtle technologies,amber<br />
xviii
conference etc.). She is interested in how art, media & technology intersect and notions of media art, public<br />
space with a keen interest in locative media practises and psychogeography. Having lived and taught in a<br />
number of countries she is now based in Greece where she is active in research and works part time as a<br />
curator of museum exhibitions.<br />
Panayiotis Ketikidis is the Vice Principal for Research, Innovation & External Relations of CITY College – An<br />
International Faculty of the University of Sheffield, and the Chairman of the Management Committee &<br />
<strong>Academic</strong> Director of the Doctoral Programme at the South East European Research Centre (SEERC). He has<br />
over 25 years of experience in management, education, research.<br />
Ipek Kocoglu holds a BS degree in Manufacturing Systems Engineering from the Sabanci University, Turkey.<br />
He has a MS degree in Science and Technology Strategies from the Gebze Institute of Technology (GIT),<br />
Turkey. He is a PhD student in Faculty of Business Administration, Management Science GIT, Turkey.<br />
Jukka Laitinen, MSc (Econ.), graduated from the Turku School of Economics in 2004. Currently, he works as a<br />
project researcher in Corporate Foresight Group CoFi/Laurea University of Applied Sciences. His current<br />
research areas include scenario analysis and innovation management.<br />
Nicolas Laroche is currently completing the third year of his PhD thesis at the University of Auvergne<br />
(Clermont-Ferrand, France), the subject of which is ‘the role of universities in local innovation system’. He has<br />
previously completed a Master’s in economy (Business Intelligence and Local development).His main research<br />
interests are the Economy of Innovation, <strong>Entrepreneurs</strong>hip and Innovation, and Business Intelligence.<br />
Valentina Lazzarotti is an Assistant Professor at the Institute of Technology, Università Carlo Cattaneo, where<br />
she teaches Business Economics, Organization and Management Control Systems. Her Master’s Degree was<br />
in Business Administration, from Bocconi University, and her PhD in Management, from the Politecnico di<br />
Milano. Her research interests include R&D performance measurement and accounting for innovative activities.<br />
She has published a number of papers in international journals.<br />
Angela Lemaire is a senior lecturer in entrepreneurship and organisational behavior at the School of Business<br />
at Takoradi Polytechnic, Ghana. Her research interest is in women entrepreneurs, focusing on their<br />
motivations, venture type preferences, growth indicators and the type of government support required for their<br />
businesses.<br />
Kai Liu is lecturer in International Business at Northampton Business School, the University of Northampton.<br />
His research interests include economic sociology, entrepreneurship and innovation in regional and community<br />
context, intercultural communication, and creative and cultural industries in both UK and China.<br />
Miro Ljubicic is assistant Manager of the Information Communication Technology Department at Kangan<br />
Institute. Miro has expertise is in ICt, including Cisco, Microsoft, A+ and Operating Systems and is currently<br />
completing a doctorate at Victoria University. His research interests are in Management, <strong>Entrepreneurs</strong>hip and<br />
Diversity<br />
Joan Lockyer is Principal Lecturer at the Institute of Applied <strong>Entrepreneurs</strong>hip at Coventry University. She<br />
leads on the development of the IAEs programmes and teaches at undergraduate and postgraduate level. Her<br />
primary research interests are entrepreneurial leadership; change management; social and female<br />
entrepreneurship. She also operates as an independent consultant.<br />
Lars Löfqvist is a PhD student at University of Gävle, Sweden, where he does research and teaches courses<br />
in innovation management, new product development and product design. His research interests include<br />
different forms of innovation and design processes and their context. Lars has a Master’s degree in Industrial<br />
Design Engineering (2006) and a Licentiate degree (2009).<br />
Kim Hoe Looi graduated with an Honours degree in Science majoring in Statistics and obtained his MBA in<br />
Applied Finance & Investments from UKM. He is presently a PhD candidate in the Faculty of Business and<br />
Accountancy in University of Malaya researching internationalization of Malaysian SMEs.<br />
Elena Lopez Cano has a Degree in Laws and in Politic Science (UB). 1998-2001: Technician in Promotion in<br />
Linguistic and Computers Research Group (UB).2001-2008: Project Manager of research projects in the<br />
Technology Transfer Office (UPC). 2008-now: Tech Transfer Legal Consultant in the IPR Office (UPC). 2008now:<br />
collaborates as a tutor of Law Degree (UOC).<br />
xix
Eva Lovén works as an Associate Professor in the Department of Management and Engineering (IEI) at<br />
Linköping University, Sweden. She has published articles in journals such as Systems Research and Behavioral<br />
Science, the International Journal of Innovation Management, the International Journal of Agile Manufacturing,<br />
and the International Journal of Industrial Ergonomics.<br />
Manjari Maheshwari is a post doctoral researcher associated with the office of Vice President Research at the<br />
University of Windsor, Ontario, Canada. She recently completed her PhD in Management from Carleton<br />
University in Ottawa, Ontario, Canada. Her research interests include innovation management, information<br />
systems and university research commercialization.<br />
Simone Manfredi is Research Assistant in Business Administration at the University of Cassino. His research<br />
activity has focused on budget issues, the knowledge economy, international accountability and economic<br />
evaluations, including results emerging from empirical studies and international comparative perspectives.<br />
Leslie Martinich, Principal Consultant at Competitive Focus, provides education and consulting services in<br />
innovation management. With more than 25 years of experience, she has led teams at IBM, Compaq, Novell,<br />
Vignette and several startup companies. She serves as the lead faculty member at the Engineering Leadership<br />
Institute at the University of Texas at Austin.<br />
Carla Susana Marques (PhD in Management) is Assistant Professor of Management at University of Trás-os-<br />
Montes e Alto Douro (UTAD) – Portugal. She is a research member of CETRAD Research Unit - Research Unit<br />
in Multidisciplinary Science (Economic, Business and Sociology). Her research interests include: Her research<br />
interests include innovation, the management of change, social entrepreneurship and entrepreneurship in rural<br />
areas. She has published in a range of international and national journals.<br />
Adam Mazurkiewicz is the Director of the Institute for Sustainable Technologies, National Research Institute in<br />
Radom, Poland. He is coordinator and supervisor of many R&D projects resulting in industrial implementation.<br />
He is an expert in the area of systems engineering, machine construction and maintenance, materials<br />
engineering and knowledge and technology transfer. He is author and co-author of over 250 publications<br />
including 10 monographs.<br />
José M. Monteiro-Barata is an Assistant Professor of Economics, R&D Management and Industrial<br />
Organization at the School of Economics and Management of the Technical University of Lisbon, (ISEG/UTL).<br />
He holds a PhD in Economics from the UTL, is Former Vice-President of ISEG/UTL and Coordinator of<br />
Graduate and Post-Graduate courses at the Portuguese School of Bank Management (APB).<br />
Jacinta Moreira holds a PhD in management from the University of Beira Interior, Covilhã, Portugal. Her<br />
research interests are in marketing innovation, marketing of cities, and business innovation. She has published<br />
papers and conducted studies on these themes. She is a marketing professor at the Polytechnic Institute of<br />
Leiria, Portugal.<br />
Peter Moroz is an Assistant Professor at the Paul J. Hill School of Business. He has had an active career in<br />
both governments, working as an economic advisor to cabinet and as an entrepreneur with over three small<br />
businesses.<br />
Sabine Müller is presently a doctoral student affiliated with the department of Management at the Aarhus<br />
University in Denmark. She holds a master’s degree in Business Administration and Economics. Her doctoral<br />
research primarily encompasses entrepreneurship and regional development in rural economies.<br />
Pablo Munoz. is a PhD researcher in the field of Innovation and <strong>Entrepreneurs</strong>hip at Newcastle University<br />
Business School. He holds a BA in Social Communication, an MBA from IEDE Business School and an MSc in<br />
Innovation, Creativity and <strong>Entrepreneurs</strong>hip from Newcastle University. Previously, he held the post of<br />
Postgraduate Director, School of Communications and Lecturer of Innovation Management, at Universidad del<br />
Desarrollo, Chile. He currently conducts research on sustainability entrepreneurship and the emergence of<br />
sustainability-oriented innovations.<br />
Ramazan Nacar is currently a PhD candidate on the Management Engineering program at Istanbul Technical<br />
University, Turkey. He also works as a Research Assistant at the Division of Production Management and<br />
Marketing, Yalova University. His previous research interests included consumer behaviour, technology<br />
marketing, marketing theory, innovation and R&D.<br />
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Roopa Nagaraju is a PhD candidate at the Business School, University of Bedfordshire, U.K. She holds a<br />
Masters degree in Business Administration from the University of Bedfordshire, UK. Her area of research is<br />
Innovation strategy and business growth in SMEs. She is also working on a project for local government to find<br />
the interventions required for the growth of innovative SMEs.<br />
David Nixon is a Doctor of Management candidate at the University of Maryland University College. He<br />
received a Master’s of Business Administration with a concentration in Finance from the University of Baltimore<br />
in 2001 and a Bachelor’s of Science in Electrical Engineering from Morgan State University in 1995.<br />
Emeran Nziali is a mature PhD student in entrepreneurship at the Pantheon-Sorbonne (Faculty of Economics),<br />
University of Paris. His doctoral research project is concerned with formalisation of entrepreneurship and its<br />
socio-economic impacts. Previously, he post graduated in macroeconomics and quantitative analysis, and had<br />
consultancy activities with a private agency involved in telecommunications.<br />
Karen Orengo Serra is professor of International Business at the Graduate School of Business Administration,<br />
University of Puerto Rico, Río Piedras Campus. Her research interests are internationalization of SMEs in the<br />
context of economic integration policies, business networks, entrepreneurial strategic orientations of SMEs, and<br />
born-global firm’s internationalization.<br />
Breda O’Dwyer is an entrepreneurship/marketing lecturer with the Institute of technology, Trailee. She has<br />
studied in Dublin City University, University of Bridgeport, Conneticut, Harvard Business School and an<br />
<strong>Entrepreneurs</strong>hip fellow of NCGE United Kingdom. Breda has managed the Tom Crean Business Centre and is<br />
a leading member of the executive group pioneering entrepreneurship in the region.<br />
Noreen O’Shea is a lecturer and researcher in <strong>Entrepreneurs</strong>hip at Advancia School of Management and<br />
<strong>Entrepreneurs</strong>hip. Her research topics include the role of tacit knowledge and intuition in entrepreneurial<br />
strategy; coaching and mentoring practices in and for small firms as well as developments in policy-making,<br />
particularly for women entrepreneurs.<br />
Ruslan Pavlov is a senior researcher at the Central Economics and Mathematics Institute, and post graduated<br />
from the same institution. His research interests include the diversification of business and big cycles and the<br />
social responsibility of business.<br />
Sophie Payne-Gifford is a doctoral student at the University of Reading, in the School of Agriculture, Policy<br />
and Development. She has a Master’s in Environmental Policy from the University of Oxford and a Bachelor’s in<br />
Anthropology from Carleton University. Her research interests include innovation systems, private sector R&D,<br />
agricultural research, and environmental policy.<br />
Massimiliano Matteo Pellegrini is a research fellow at the University of Florence. He has a PhD in<br />
management from the University of Rome and also studied at the Wharton school and at the University of<br />
Nurnberg. His principal interests are firms’ networking, innovation and inter-organizational advantage.<br />
Nora Picon Garcia is PhD candidate and Teaching Assistant of International Business at the Graduate School<br />
of Business Administration, University of Puerto Rico, Rio Piedras, Puerto Rico. Her main academic research<br />
interests are <strong>Entrepreneurs</strong>hip and Home Based Business, Innovation, Business and Industry development and<br />
orientation.<br />
Irina Purcarea is a teaching assistant at the Academy of Economic Studies in Bucharest, Romania. She is<br />
currently completing her PhD, the topic of which is ‘Developing SMEs capacity to innovate with the aim of<br />
increasing their competitiveness’, and has been part of the research team of several research projects related to<br />
SMEs in Romania.<br />
Azlina Rahim is currently in her final year of a full time PhD programme at the Universiti Teknologi MARA,<br />
Selangor, Malaysia. Although her PhD research focuses on innovation capital, her research concern focuses on<br />
intellectual capital and corporate reporting in Malaysia. She has been a member of the teaching staff at the<br />
university since 1998 and specializes in financial accounting.<br />
Hafiz Rahman holds a Management Degree from Andalas University (1996). He worked in a West Sumatra<br />
Government Provincial Owned Holding Company and became lecturer-researcher at Andalas University (2001).<br />
He won a Scholarship, German <strong>Academic</strong> Exchange Services (DAAD) to study at the Universitaet Leipzig,<br />
xxi
(2001–2003). His Masters in Small Business Studies focused on <strong>Entrepreneurs</strong>hip and Institutional Support for<br />
SMEs.<br />
Brinda Ramasawmy is researching for a PhD (Sep 2008-Dec 2011) at International Centre for Higher<br />
Education in Agricultural Science, Montpellier SupAgro, France. Her PhD supervisor is Dr Fatiha FORT and she<br />
is examining the adaptation strategies in the Mauritian vegetable supply chain in the context of an institutional<br />
change.<br />
Colin Reddy is a Lecturer at the University of Johannesburg’s Department of Business Management. Prior to<br />
this he practised as a researcher on Black Economic Empowerment. Colin’s recent research efforts and<br />
resulting conference papers have been in the area of <strong>Entrepreneurs</strong>hip within the African continental context.<br />
Ugo Rizzo received a European PhD (Doctor Europaeus) from the University of Ferrara in 2010, where he is<br />
now a postdoctoral Research Fellow. His research interests focus on economics of innovation; particularly<br />
technology transfer from university to industry, entrepreneurship, the theory of the firm and innovation policy.<br />
José Carlos Rodríguez graduated from the Université du Québec à Montréal. His research interests are in<br />
innovation and technology management, international business and strategy, and system dynamics modelling.<br />
He has published in several journals and conference proceedings on subjects related to university-industry<br />
technology transfer, intellectual property and innovation, as well as strategy and competitive advantage.<br />
Frauke Rüther is a visiting scholar at the Intellectual Property Research Institute of Australia (IPRIA, University<br />
of Melbourne, Australia) and research associate at the Institute of Technology Management (University of<br />
St.Gallen, Switzerland). Her main research interests are the external exploitation of patents and technology<br />
market intermediaries.<br />
Korosh Emami Saleh, has a master degree in industrial management Korosh is a Member of Islamic Azad<br />
University Saveh Branch, Iran. Research interests include <strong>Entrepreneurs</strong>hip, <strong>Entrepreneurs</strong>hip education and<br />
management.<br />
Seray Begum Samur is an MBA Student in the Department of Business Administration, Yasar University, Izmir,<br />
Turkey.<br />
Anne Smith lectures in entrepreneurship and innovation at Glasgow Caledonian University. Survival, success<br />
and growth of firms are the foundation of her research, which are interests derived from being in the third<br />
generation of her family business. Anne has successfully published articles in a range of international<br />
entrepreneurship journals covering enterprise education, learning and rural entrepreneurship.<br />
Mikel Sorli, PhD Industrial Engineer, is currently manager of the Design Engineering Area in TECNALIA. He is<br />
working with industrial companies promoting the use, and integrating, developing and implementing tools in the<br />
fields of Knowledge Based Engineering, PDM systems and advanced Design methodologies. He has good<br />
expertise on European research projects.<br />
Katja Soyez is a research assistant and PhD candidate at the Technische Universität Dresden. Her main areas<br />
of research are consumer innovation, pro-environmental consumer behaviour and cross cultural marketing. She<br />
teaches marketing, cross-cultural marketing and marketing research in the Master’s programme.<br />
André Spithoven is a senior researcher at the Belgian Science Policy Office and part time researcher at the<br />
Vrije Universiteit Brussel. He publishes on R&D data, technology transfer intermediaries, industry-science<br />
relationships, open innovation, and spatial organisation of innovation and has co-edited books on the<br />
internationalization of R&D, as well as publishing in international refereed journals.<br />
Birgit Stelzer has worked since 2009 as a research assistant at the Institute of Technology and Process<br />
Management of the University of Ulm in Germany. Her research interests are the strategic technology and<br />
innovation management, with a focus on business processes. Furthermore, she works on methods and tools<br />
supporting decision making in technology management.<br />
Tiina Tarvainen is a researcher in leadership and management at the University of Eastern Finland. Her<br />
special interests concern enterprise vitality, entrepreneurship, innovation, entrepreneurial personality, and<br />
entrepreneurial trust in future.<br />
xxii
Petra Tausl Prochazkova joined the University of West Bohemia in 2006. She is a coordinator of international<br />
projects at the International Office and since 2008 a member of the Faculty of Economics, where she has<br />
started her PhD study. Her emerging research is focused on entrepreneurship, start-up entrepreneurs, the<br />
business environment and entrepreneurship education.<br />
Peter Teirlinck is a lecturer in ‘Innovation Management’ and ‘Business Research Methods’ at Hogeschool-<br />
Universiteit Brussel. He also works for the Belgian Science Policy Office as a policy expert. His current research<br />
areas are innovation management in SMEs and impact assessment of public funding for research, innovation,<br />
and technological development.<br />
Marion Titgemeyer is a senior scientific manager and an assistant professor in business studies at the<br />
University of Osnabrueck and the University of Applied Sciences Osnabrueck, Germany. She holds a PhD in<br />
Economics from the University of Osnabrueck. Her research interests include entrepreneurship as well as<br />
taxation and accounting.<br />
Yanka Todorova is an expert with 20 years of cross-sector business experience in innovation strategies<br />
management, performance and risk management, audits, forensic expert litigations, and IPR. She is a guest<br />
lecturer at several universities in Bulgaria. She has a degree in economics, an MSc in Information Sciences,<br />
and has just completed a PhD in Innovation Strategy and Technology <strong>Entrepreneurs</strong>hip.<br />
Outi Vanharanta works as project manager and researcher at Aalto University School of Science in Helsinki<br />
Finland. Her research project focuses on different forms of interaction between customer and firm during radical<br />
innovation efforts. Her special interest lies in the capitalization of customer intelligence of which she is currently<br />
conducting her PhD dissertation.<br />
Christopher Walach - Doctoral candidate at the University of Maryland University College. His dissertation<br />
examines the elements that make up a resilient response to traumatic situations and preparing for and<br />
mitigating these occurrences in advance. He presents a pedagogical method comprised of synthesized<br />
resilience literature and narrative commentary to help organizations prepare for future loss, crisis, or disaster.<br />
His research interests include innovation, resilience, and preparing organizations for future crises and disasters.<br />
David Weiss is a doctoral researcher at the Department of Engineering, University of Cambridge. His current<br />
research assesses the impact of location on Open Innovation in SMEs. David holds an MPhil in Innovation,<br />
Strategy, and Organisations from the Judge Business School, University of Cambridge and a BSc in Economics<br />
from the University of Groningen / <strong>Chinese</strong> University of Hong Kong.<br />
Urszula Wnuk is a researcher at the Institute for Sustainable Technologies – National Research Institute in<br />
Radom, Poland working for the Innovative Strategies Team. Participated in the realisation of the sectoral<br />
foresight project and the strategic programme in the field of mechanisms and structures supporting innovation<br />
commercialisation. Author and co-author of several reports and articles.<br />
Catherine Wright BSc(Hons) (Durham), MBA (UoE), PGCAP (HWU) is a part-time teaching fellow specializing<br />
in Innovation Management and Business Venturing. She has 20 years practitioner experience managing<br />
economic development projects at international, national and local level. She has worked with Scottish<br />
Enterprise delivering successful projects promoting e-business to Scottish SMEs.<br />
Simone Wurster works as a research fellow at the chair of Innovation Economics at the Technische Universität<br />
Berlin. She wrote her PhD thesis about Born Global Standard Establishers at the University of Potsdam,<br />
Germany and successfully defended it in November 2010.<br />
Kiyohiro Yamazaki is a Lecturer at the Chukyo University. Before joining Chukyo University, he graduated from<br />
the Kobe University, and received his Ph.D. from the Department of Management at Kobe University. His<br />
research focuses on Strategic Management and Management of Technology.<br />
Mohammad Reza Zali is the Faculty member at Faculty of <strong>Entrepreneurs</strong>hip, University of Tehran and GEM<br />
Iran Director. His research interests include Social Network around <strong>Entrepreneurs</strong>, Organizational Behavior and<br />
Corporate <strong>Entrepreneurs</strong>hip. He is currently working on Inter firms collaborations, and supervising a number of<br />
master students in aspects of entrepreneurship based on GEM data.<br />
xxiii
Przemysław Zbierowski, Ph.D. is a researcher in entrepreneurship and senior lecturer at University of<br />
Economics in Katowice, Poland. His research interests encompass high performance organizations and positive<br />
organisational scholarship. He is the national leader of Global <strong>Entrepreneurs</strong>hip Monitor Poland.<br />
Elizabeta Zirnstein, LLM, is a senior lecturer at Faculty of Management, University of Primorska, Slovenia. As<br />
one of leading experts in the field of legal aspects of innovations in Slovenia she is actively involved in several<br />
national research and consultancy projects. She is also a doctoral candidate at Law Faculty of Ljubljana,<br />
Slovenia.<br />
Atefeh Zolfaghari studies Master of Science on <strong>Entrepreneurs</strong>hip in Tehran University and works as a<br />
researcher in Iranian academic center for educational, cultural and research (ACECR) company. Her research<br />
interests are academic spin-off, technology transfer. She has one published paper in Iranian magazine and one<br />
oral acceptation and works on the research about ACECR spin-offs.<br />
Izzal Asnira Zolkepli is a PhD candidate at the Graduate School of Business, University of Malaya, Malaysia.<br />
ASTS fellowship, School of Communication, University of Science, Malaysia. BA (Hons) in Mass<br />
Communication majoring in Advertising, University Technology MARA, Malaysia and MA in Advertising, RMIT<br />
University, Melbourne, Australia. Worked as an advertising/PR practitioner. PhD research in consumer media<br />
consumption and new media with focus on technology adoption and usage patterns.<br />
Katalin Zsuzsanna Szabó, Dean of the Faculty of Economics, Law and Administrative Sciences of Petru Maior<br />
University, Tirgu Mures, Romania. He holdsa PhD in Mathematics and has published research papers and<br />
books. He is a founding member of the Association of Economic Faculties in Romania and Manager/member in<br />
national and european projects.<br />
xxiv
The Role of State in Innovation to Stimulate<br />
<strong>Entrepreneurs</strong>hip: Emerging Countries Perspectives<br />
Oskar Kayasan<br />
European Research Centre, University of London, UK<br />
oskarkay@gmail.com<br />
Abstract: This paper has developed a multidirectional model of the predictor for state-business pragmatism of<br />
innovative entrepreneurship is developed. Specially, a set of exogenous variables comprising a sequence of<br />
relationship are hypnotised to be related to state-business interplay as a strategic responses to changing global<br />
business environment. Four dimensions comprise the predictive model: i) Micro level variables -<br />
owners/stakeholders ability, ii) Intermediate level variables - societal dynamics - business involvement, iii)<br />
Institutional level variables - national systems dynamics, and finally, iv) Macro level variables - bundle/regulatory<br />
global environment affiliated with the comprehensive emerging new operates in global market. The research<br />
question posed is, what are the levels, and specific types of state-business interplay found in the global<br />
entrepreneurships; what are the predictors of these state-business interplay; and how do the innovation specifics<br />
impact`s strategic competitive advantage.<br />
Keywords: <strong>Entrepreneurs</strong>hip, globalisation, interplay dynamics, state-business, sustainability.<br />
1. Introduction<br />
The current dilemmas of state-business pragmatism of entrepreneurships from globalisation<br />
perspectives are examined. Despite the diversity of countries, the entrepreneurship is currently<br />
experiencing relatively fast growth which led by rather complex settings of business-state<br />
engagements. This paper has examined the sustainability of such unadventurous business formation<br />
within unconventional state-business interlocking. In particular, focus on whether the current state of<br />
various forms of entrepreneurship settings can be re-shaped by complementary state interference to<br />
enhance sustainability in the globalisation phenomenon. It also examines the dynamics and<br />
competitive capabilities of entrepreneurship (i.e. family firms, groups, conglomerates), and their<br />
unconventional state-led business advantages. In recent years, the rise in various forms of<br />
entrepreneurships such as private (i); public (ii); state (iii); regime, and societal (iv), entrepreneurship<br />
at this point reflects the overall resilience in the various economic crises. The consequence of<br />
undermining the unfair and dishonest arrangement (state-business) has significant impact on<br />
transparent entrepreneurial models, which we are witnessing in many countries in the world. Today,<br />
new form of entrepreneurship strategies in the many part of the world are entangled with sociocultural<br />
and religious misperceptions, as demonstrated with an unusual business-arrangements and<br />
unfair socio-economic settings. Globalisation has not reduced the importance of entrepreneurship<br />
opportunities, on the opposite, this paper argues, it has revalorised and emphasized the significant of<br />
interplay. Whereas state and business are traditionally regarded as contextual factors, this paper<br />
recognizes their dynamic nature, regarding interplay as economic phenomena. However,<br />
comprehensive analysis of new entrepreneurship models by state-business interplay has explored<br />
that there is a fault line of sustainability of such representation. This paper shows that the state<br />
intruding circumstances does not necessarily reflect a coherent entrepreneurship strategy that is likely<br />
to continue more often-ambiguous goals for both state and business.<br />
2. Theoretical perspectives<br />
A theoretical multidirectional model of the predictor for state-business relation of innovative<br />
entrepreneurship in emerging economies is developed. To briefly define the term “emerging<br />
economies”, an emerging economy is a country that makes an effort to improve its economic<br />
performance to catch up with the economies of more advanced nations. The various exogenous<br />
variables, comprising a sequence of state-business complex relationship are hypnotised as a<br />
strategic approach to innovation There are four dimensions comprise the predictive model: i)<br />
owners/stakeholders ability, ii) societal – business dynamics, iii) national – international systems<br />
dynamics, and finally, iv) regulatory- applicability of innovations for the global business environment.<br />
Although, the role of public policy and of the state in stimulating entrepreneurship, innovation and<br />
technology districts is becoming a growing area of technology and innovation research as well as a<br />
source of debate among economic policymakers throughout the emerging and transforming<br />
economies special in China. Emerging and transforming economies are characterized by fundamental<br />
and comprehensive institutional transformations as their economies begin to mature. How<br />
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entrepreneurship functions in environments where innovation, and technology that differ so<br />
fundamentally from those of the mature markets where entrepreneurship was initially developed has<br />
only begun to be addressed. This paper builds a framework to further the understanding of<br />
entrepreneurship practice in emerging and transforming markets. Specific attention is focused on the<br />
impact of networks in the model, in particular, how networks and other informal institutions can act to<br />
supplement or replace formal institutions when they are weak.<br />
2.1 Literature Review<br />
Literature review drawn from various areas of academic disciplines: The main focus of research in<br />
state and entrepreneurship theories, we draw on insights from state (regime) and public policy and<br />
entrepreneurship theory. The state and public policy have been seen as fundamental to Asia’s<br />
innovation and business system (Fruin, 1992; Wade, 1990; Amsden, 2001; Amsden and Chu, 2003).<br />
International alliance recognised by Doz and Scuen (1997) and Ghemawat, Porter and Rawlinson<br />
(1986); the opportunities and risk of emerging market ((Cavusgil, 1997; Garten, 1997a; Kock and<br />
Guillen, 2001); type of ownership in `EMs` (Andrade, Barra, and Elstrodt, 2001; Khanna and Palepu,<br />
1997; Kock and Guillen, 2001); as networks of social significance (Hamilton, 1997; Orrù et al., 1997;<br />
Keister, 2004; Granovetter, 2005); various relationship or venture capital investment but falling short<br />
of an outright acquisition (Business International 1987; Terpstra and Simonin 1993); examining<br />
patterns of global business expansions by forming corporate alliances (Hergret and Morris 1988;<br />
Osborn and Baughn 1997; Porter and Fuller 1986; Terpstra and Simonnin 1993).<br />
This paper is about creating a typology of global frameworks for understanding emerging new<br />
business system models where public policy and of the state in stimulating entrepreneurship in the<br />
21 st century. There has been research by exploring the potential for creating a typology of three types<br />
of global entrepreneurship models. Firstly, there is the pure market-driven technology district such as<br />
Silicon Valley in the U.S. and Cambridge in the U.K (Saxenian, 1992; Miller & Garnsey, 2001).<br />
Secondly, there are state-driven technology districts, which are mainly targeting foreign multinational<br />
companies, such as in Sophia Antipolis in France and Singapore in Asia; Albert, 1991; Dore, Lazonick<br />
and O’Sullivan, 1999). Thirdly, there are state-driven business districts, which especially nurture local<br />
companies, such as the Hsinchu Science and Industrial Park in Taiwan (Amsden, 2001; Amsden and<br />
Chu, 2003.<br />
3. Emerging entrepreneurship models<br />
Most commonly, the term entrepreneur applies to someone who establishes a new entity to offer a<br />
new or existing product or service into a new or existing market, whether for a profit or not-for-profit<br />
outcome (Hebert, R.F. and Link, A.N, 1988). Business entrepreneurs often have strong beliefs about<br />
a market opportunity and are willing to accept a high level of personal, professional or financial risk to<br />
pursue that opportunity. Business entrepreneurs are often highly regarded in western culture as<br />
critical components of its capitalist societies (Casson, M., 2005). <strong>Entrepreneurs</strong>hip is the practice of<br />
starting new organisations, particularly new business generally in response to identified opportunities<br />
(Younkins, E., 2000). <strong>Entrepreneurs</strong>hip is often a difficult undertaking, as a majority of new<br />
businesses fail. Entrepreneurial activities are substantially different depending on the type of<br />
organization that is being started. <strong>Entrepreneurs</strong>hip ranges in scale from solo projects (even involving<br />
the entrepreneur only part-time) to major undertakings creating many job opportunities. Extensive<br />
attention has been given in recent years to the role of entrepreneurship in facilitating global economic<br />
development, with research indicating that much employment growth originates from the<br />
“entrepreneurial sector” of the economy. In many parts of the world, emphasis has also been placed<br />
on the so-called “informal sector” as a contributor to the economic welfare of society.<br />
Emerging and transforming economies are characterized by fundamental and comprehensive<br />
institutional transformations as their economies begin to mature. How entrepreneurship functions in<br />
environments that differ so fundamentally from those of the mature markets where entrepreneurship<br />
was initially developed has only begun to be addressed. This paper builds a framework to further the<br />
understanding of entrepreneurship practice in emerging and transforming markets. Specific attention<br />
is focused on the impact of networks in the model, in particular, how networks and other informal<br />
institutions can act to supplement or replace formal institutions when they are weak. The purpose this<br />
paper would be develops further the concept of a typology of global entrepreneurship models in the<br />
following ways. Firstly, this paper would analyse the state-business interplay to develop various<br />
innovative activities that are needed in the context of emerging markets. Secondly, this paper would<br />
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analyse in more depth based on case studies, these different models of entrepreneurship, technology<br />
and innovation with variety cases of emerging markets. Thirdly, we would look at cases from new<br />
emerging countries such India, China, Turkey and Brazil. This paper argues that comparisons<br />
between the emerging economies would also contribute to the comparative literature on international<br />
management in the 21 st century.<br />
3.1 Comparative entrepreneurship models for innovation<br />
From the early writings of Joseph Schumpeter until the present day, much of the research on<br />
entrepreneurship has focused on answering two questions: Who is an entrepreneur? and What does<br />
an entrepreneur need to do to start a successful business? Little theorizing and research has been<br />
conducted to explore what happens to entrepreneurs after they build a successful enterprise (Maria T.<br />
Brouwer, 2002). Indeed, the assumption seems to be that once a new enterprise is viable the<br />
entrepreneur's subsequent career path ceases to be of interest since it may not focus on traditional<br />
entrepreneurial activities. Past perspectives used in entrepreneurship may be limited; a move towards<br />
a more dynamic model that not only includes cognitive but also emotional and physiological elements<br />
may be more useful in the study of the phenomenon of entrepreneurship. A model of experience is<br />
developed based on the theory of connectionism from the recent psychological literature. This model<br />
recognizes the interaction of the entrepreneur, not only with the environment but also with the venture<br />
and venture creation process. Action theory suggests that organizations are “continuously<br />
constructed, sustained, and changed by actors’ definitions of the situation – the subjective meanings<br />
and interpretations that actors impute to their worlds as they negotiate and enact their organizational<br />
surroundings (Astley & Van de Ven 1983). Strategic choice view indicates the pliability of the<br />
environment based upon the decisions and actions taken by the individual (Pfeffer and Salancik 1978;<br />
Lorange 1980). This indicates that a holistic monitoring of this process of interpretation will reveal the<br />
reasons behind entrepreneurial decisions and behavior.<br />
The importance of entrepreneurship research in business schools, and the increasing amount of<br />
research on the topic in disciplines such as management, international business and institutional<br />
analysis have indirectly shown the potential role of applied economic theories of entrepreneurship.<br />
Schumpeter’s (1934) famous concept of “creative destruction” and other more recent works such as<br />
Kirzner (1997) have helped to clarify the differences between the Austrian approach to economic<br />
theories and the neoclassical theories, driven by research schools such as the University of Chicago<br />
(Arrow, 1974). In terms of entrepreneurship research, we believe that the traditional neoclassical<br />
economics frameworks do not allow a sufficient interdisciplinary approach to analyse the richness and<br />
complexity of entrepreneurship within the global environment.<br />
The study of entrepreneurial choice and development has evolved by using the theories and<br />
methodologies of established social sciences such as economics, sociology, institutional analysis and<br />
psychology. Such methods need to be developed to be able to take account of the complexity of the<br />
dynamic and changing variables as well as the high level of uncertainty (Yu, 1997), which determine<br />
entrepreneurship. It was Joseph Schumpeter (1934) who long ago pointed out the vital role of<br />
entrepreneurship - the finding of new combinations of resources in organisations. The individual<br />
entrepreneur is able to take risks, innovate, and make progress both in good times and in the face of<br />
adversity. The same abilities are pervasively evident in some vibrant organisations today (Bhide,<br />
2000; Baden-Fuller and Stopford, 1992). In this sense, entrepreneurial activity can be part of the<br />
broader society, including public policy and government-business relations. Thus the discipline of<br />
applied economics recognises the links between economic frameworks and entrepreneurship.<br />
3.2 The interplay of state- entrepreneurship arrangements<br />
It acknowledges shifts in institutional resources among private sector and citizens groups that have<br />
moved the locus of initiative and change outside the state. Policy development increasingly occurs in<br />
an intermediate arena that is neither governmental nor private. Interaction and negotiation between<br />
the government and the private sector has become unavoidable as firms have developed internal<br />
capacities for analysis and action. Their increasing competence has highlighted the importance<br />
securing their active participation to make policy effective. Environmental and citizens groups have<br />
increased their capacity to pursue their aspirations outside of state policy. The cases reviewed in this<br />
report acknowledge these trends, but suggest that successful policy-making still depends on the<br />
ability of the government to work collaboratively with the private sector and citizens groups. At the<br />
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Oskar Kayasan<br />
same time, the robustness of this institutional transformation means that strategies for pursuing<br />
sustainable development will need to be synchronized with changes in organizational relationships.<br />
This paper approach explores an insight compatible with this emerging institutional environment. One<br />
way that radical change happens in complex systems is when “something starts somewhere and<br />
grows.” Therefore, we work from the assumption that radical change is necessary and a pool of<br />
available “greener” technologies creates a ready supply of positive steps. The public entrepreneurship<br />
network (PEN) is our model to capture the dynamics of change and the implications for action by<br />
government agencies and other actors interested in sustainable development. Five key features<br />
distinguish public entrepreneurship networks:<br />
� - A pattern of inter-organizational cooperation that spans public, private, and civic spheres and<br />
develops through<br />
� - Interaction in problem centred networks.<br />
� - Public regarding local initiative supported by a set of<br />
� - Specific organizational roles related in an<br />
� - Institutional ecology that facilitates development.<br />
Public entrepreneurship networks combine local initiative that has a distinctively entrepreneurial<br />
character with a strong orientation to sustainability and other public goals. This is accomplished in part<br />
because of the variety of organizations that participate in these networks. Public entrepreneurships<br />
networks are characterized by both the pattern of development and the key facilitative roles that have<br />
to be played for development to thrive. These roles stress facilitative rather than managerial activities<br />
and tend to parallel the range of entrepreneurial roles that private sector actors have played in the<br />
dynamic economic sectors like information technology over the past few decades. They include:<br />
- Pioneers who recognize opportunity, seize initiative, and catalyze action by making commitments.<br />
� - Public venture capitalists who understand and embrace risk and package financial, social, and<br />
human capital to meet project driven needs.<br />
� - Superintendents who provide an environment in which innovation can flourish by fostering the<br />
development of relationships that are sustained through formal and informal networks.<br />
� - Mediators who build consensus on goals and direction and bring directed problem-solving to<br />
bear on conflicts that threaten to stall or derail the development of ventures.<br />
� - Stewards of the common good who focus attention on the common good, maintain standards for<br />
responsible behavior, and facilitate the coalescence of democratic community around programs of<br />
action.<br />
Given what is at stake, it is neither practical nor desirable to rely on private and non-governmental<br />
actors to consistently fulfil these roles. Emerging and Transforming countries public actors must<br />
participate to ensure that public entrepreneurship networks function effectively and stay oriented to<br />
publicly endorsed goals. Yet government action must not threaten the ecology of relationships that<br />
generates the attention and energy that make these networks effective. This sets a challenge for<br />
government agencies. Their participation is essential. Yet efforts to “legislate” change may disrupt the<br />
very patterns of development they seek to promote. Identifying public entrepreneurship networks and<br />
understanding how they work is only the first step. Emerging and Transforming countries must learn<br />
how to facilitate the creation of these networks and enhance their impact.<br />
3.3 State-business involvement in techno-parks developments<br />
Audretsch and Fritsch (2002) proposed two explanations for the mixed evidence regarding the<br />
relationship between new firm formation and regional development or technology districts. Firstly, they<br />
found evidence for the existence of long time lags needed before the main effects of new firm<br />
formation on employment change become evident. Secondly, they suggested that regions may be<br />
characterized by different growth regimes in which new firms and entrepreneurship assume different<br />
roles and accordingly lead to different effects (Burke, A.E. 1995). This enabled us to investigate the<br />
transition between different types of growth regimes in further detail. Furthermore, our analysis is not<br />
on the level of planning regions but on the level of districts ('Kreise') and we have explicitly accounted<br />
for spatial autocorrelation in the analysis, which turns out to be highly relevant. There are three major<br />
ways in which such technology based industrial districts are created. First, they can be created over<br />
time, and are then often based around a major research university. This happened in Silicon Valley,<br />
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Oskar Kayasan<br />
which has benefited from the technologies developed within universities such as Stanford (Saxenian<br />
1994). Silicon-fen is a similar example of benefiting from the technologies and knowledge generated<br />
by Cambridge University (Miller & Garnsey 2000). The growth of such clusters of innovation can<br />
therefore be explained in terms of Applied Economics including market exchange and competitive<br />
advantage (Porter 1990). Secondly, they can be regulated and created through government<br />
intervention, which in turn can subsidise foreign high technology companies and MNCs to locate in a<br />
particular part of the world. The best examples of this are in Southern France, in Sophia-Antipolis,<br />
which has now attracted over 1,500 high technologies companies (Miller and Garnsey 2000) and<br />
Singapore, which has become the leading centre of multinational corporations in technology in the<br />
Asian region. These developments are best explained in terms of the dynamic interactions between<br />
firms and governments in a global context, within the disciplines of Management and International<br />
Business. Thirdly, industrial districts can be created through government intervention in stimulating<br />
and developing local technology companies; the best example of this is the Hsinchu Science and<br />
Industrial Park (HSIP) in Taiwan.<br />
These cases can be considered within their institutional, social context and legitimacy, relying in their<br />
development on the formal and informal rules within the context of the national society in which they<br />
operate. This paper will apply this typology to the context of emerging and transforming markets.<br />
There is strong empirical evidence that comparison of China, India, Brazil, Mexico, Turkey and South<br />
Africa, would be a contribution to the academic literature in international management and<br />
comparative business systems.<br />
4. The adoption of methodology<br />
Methodology adapted to examine whether emerging new role of state to simulate the entrepreneurial<br />
activates has a positive impact in innovation from emerging countries perspectives. This research<br />
applied multi-level study approach, and how national based cases relate to participatory action<br />
research. The methodology is based on breaking the key areas of emerging new state-business<br />
system domain’ into defined systems, the functioning of which are viewed from emerging countries<br />
perspectives.<br />
The study was conducted in most emerging countries since financial crises in 2008, focussing on the<br />
development of theory through a case analysis approach (Eisenhardt, 1989; Yin, 1994). This study<br />
gathered qualitative data from 10 emerging countries and 5 variables chosen within each country is<br />
selected to better understand the role of state to stimulate entrepreneurial involvement in innovation.<br />
4.1 Multi-level data sources<br />
The big emerging countries are (alphabetical ordered) chosen: Brazil, China, India, Indonesia,<br />
Mexico, Poland, Russia, South Africa, South Korea and Turkey. The core investigation in to examine<br />
the role of state in innovation to stimulate entrepreneurship in Emerging countries perspectives (i.e.<br />
country characteristics) and innovation concepts (i.e. entrepreneurial interest and activities) as a new<br />
competitive advantage.<br />
4.2 Hypotheses are developed<br />
The paper is to examine the role of state in innovation to stimulate entrepreneurship in Emerging<br />
Countries Perspectives. To address this research area, we formulate hypotheses to be empirically<br />
tested through the use of a logistic regression. The hypotheses presented below aim to identify the<br />
significant role of states to stimulate entrepreneurial activities and capability on innovation in<br />
Emerging Countries.<br />
H1: Formal and informal barriers are negatively related to the implementation of the<br />
innovation policy in Emerging Countries.<br />
H2: National characteristics “skills and technology and investment gap” are negatively<br />
related entrepreneur`s productivity for innovation in Emerging Countries.<br />
H3: There is significant positive relationship between state involvement in innovation and<br />
stimulate entrepreneurship in Emerging Countries.<br />
H4: The innovative activities of entrepreneur`s are positively affected by the role of state<br />
for innovation in Emerging Countries.<br />
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4.3 The method, variables process<br />
Oskar Kayasan<br />
Chosen method of investigation in emerging countries: i) state interest specifics method, ii) frontier<br />
analysis (data envelope analysis) of societal and industrial importance, iii) primary and secondary<br />
research and case studies on role of state in innovations, iv) quantitative assessment of stateentrepreneurship<br />
complementary cooperation and activities. The choice of variables that were<br />
examined in model was based on a review of the literature. The probability of innovating is influenced<br />
by the following factors:<br />
� In order to determine by formal and informal barriers “obstructive government policies, weak<br />
institutions, informal economy, lack of rule of Law” are have been chosen as variables.<br />
� Emerging countries national characteristics have many constraints to stimulate innovation, mainly<br />
short of skills, trained human capital, technology gap and lack of investment” are identified.<br />
� Those entrepreneurial firms R&D activities and innovation are to determine the role of state is<br />
actively involved in the progress “create conditions, provide political support, facilitates<br />
innovations, offer vision and partnership” are selected.<br />
� Finally, The implicit and explicit state `government` initiatives by innovation policies in horizontal<br />
action lines “technological development, international insertion, industrial modernisation,<br />
production capacity, strategic industry options” are recognized.<br />
The model variables process explains the results of the systematic relation between the roles of state<br />
and entrepreneurial activities to innovation in Emerging Countries experiences.<br />
5. The role of state in entrepreneurship models<br />
In some emerging and transforming economies, there are conflicting laws and regulations at various<br />
levels of government operations, which actually impact negatively on development (in particular,<br />
industrial development) and frustrate the efforts of potential investors, both domestic and foreign.<br />
Such inconsistencies can only be effectively addressed through public-private partnerships. In the<br />
context of reforming Emerging Economies, the emerging role of public policy and of the state<br />
entrepreneurship not only indicates a significant institutional change, but also reflects changes of the<br />
mechanisms of stratification. A culture of public-private partnerships is gradually emerging in China to<br />
critically assess patterns of development, define new policies and strategies that transforming the<br />
economic/industrial landscape. Countries that have established national and sustained public-private<br />
partnership/consultative mechanisms, such as Turkey, Russia, Poland and South Africa, have<br />
generated considerable benefits...for example, in terms of change of attitudes of the stakeholders in<br />
the public and private sectors.<br />
The paradigm of `the role of state to stimulate the entrepreneurs in innovation (model: 1), the creation<br />
of gaps between the formal policies and actual practices is ubiquitous in innovations.<br />
Model 1: The state-entrepreneurship paradigm<br />
<strong>Entrepreneurs</strong><br />
Characterized:<br />
• opportunities<br />
• dynamism<br />
• new Ideas<br />
• resources<br />
• solutions<br />
• innovations<br />
• risk<br />
relevance<br />
• creativity<br />
Environment Settings<br />
Entreprene<br />
Entrepreneurial<br />
Activities<br />
STATE<br />
Source: Author own construction 2011<br />
Entrepreneurial<br />
Characteristics<br />
Emerging Countrie<br />
Formal/Informal<br />
Innovations<br />
National<br />
Characteristics<br />
516<br />
Globalization<br />
Factors<br />
The Role of<br />
STATE<br />
Industry/Market<br />
Mechanism
Oskar Kayasan<br />
The role of state to stimulate entrepreneurship in innovation is covering the interaction of variety of<br />
national characteristics and entrepreneurial activities seeking to use various methods to achieve its<br />
objectives (see model 1). <strong>Entrepreneurs</strong> and state (political) actors seek to create opportunities for<br />
gain tangible or intangible resources in given environment. Our model (1) shows that formal and<br />
informal environmental settings is complex interplay of variety actors such as entrepreneurs, state<br />
players and functions such as industry and market mechanism, globalisation factors creates a unique<br />
form of entrepreneurship. According to our model (1), difference of interplay suggests that it may be<br />
much more difficult to explore anonymous state-led arrangements. Importantly, entrepreneurs are<br />
likely to undertake actions that foster innovations if they are also personally (or group, organisation)<br />
benefits from these actions rather than simply private share of value created.<br />
Here with we can explore more detail about the nature of the Emerging Countries <strong>Entrepreneurs</strong>hip<br />
models in coming posts, but let’s take a look at some of the emerging concepts of State and private<br />
<strong>Entrepreneurs</strong>hip.<br />
Table: 1: Emerging entrepreneurship models<br />
M.I: State and private structure is more analogous. The size, scope, level of development and population<br />
precludes close control of the economic trends. The informal economy is driving force of more<br />
SME`s entrepreneurial activates in most emerging countries.<br />
M.II: Emerging Countries works on a Stakeholder model, not a Shareholder model. Ultimate responsibility<br />
is to policy-makers, not profit-oriented shareholders. Complex interplay of economic rationality and<br />
political rationality and overall goals that may not align with traditional economics.<br />
M.III: Socio-economic systems are not dysfunctional, operating the way it is supposed to executing a<br />
policy of national government. The reality is that state involvements in entrepreneurial activities are<br />
very much live with positive effects.<br />
M.IV: Corruption is the “statist dividend” and it is not going away. Many headlines in most emerging<br />
countries reflect political realignment, maneuvering and reigning-in of those who have gone too far.<br />
The corruption and/or informal business system has become part of the emerging new model in<br />
most emerging countries/<br />
M.V: The role of sate has been rather encouraging in promoting many entrepreneurial-led innovation<br />
policies. The network between ruling party or government and supportive entrepreneurs is creating<br />
many legal issues as well new opportunities in investing various innovative activities.<br />
Source: Author own research 2011<br />
The model that is emerging is a new kind of State and Private <strong>Entrepreneurs</strong>hip. This emerging<br />
system is a refinement of the old-style partnership in some areas of overall state and private<br />
enterprises. Bureaucratic and administrative ‘direction’ has replaced politburo mandates, but the<br />
means of production are still organized by a central authority. Implications for policymakers in<br />
emerging economies are rather different type of entrepreneurial settings, which need to be<br />
considered. This paper proposes typologies of new entrepreneurship model and tentative enterprise<br />
policy recommendations for the future development of state and private enterprises in Emerging<br />
Countries.<br />
6. Conclusion<br />
In conclusion, there is the need for state initiatives in order to stimulate various innovative activities<br />
such as business districts. A positive interaction between growth and entrepreneurship is grounded<br />
on the innovation activity that entrepreneurs convey. Thus, a significant entrepreneurial supply in the<br />
economy stirs up scholarly interest. The first argument in this paper suggested that interplay between<br />
the state-business to initiate various innovative projects. The problem is that private capital tends to<br />
go where it can grow quickest, and the delivery of state has not generally been a dynamic sector. A<br />
second argument concerned the concept of state-business partnerships in developing business<br />
districts needs tailoring to combine the best of the private and public partners. This requires hard<br />
work, consensus, courage, and compromise from both private and public enterprises and various<br />
regulatory bodies. The emergence of state-business innovative activities is a profound entrepreneurial<br />
change in most emerging countries such as China, India, Brazil, Mexico, South Africa and Turkey.<br />
This dynamic process happens in an interconnected, multilevel system consisting of the state,<br />
organizations and individuals. Whereby state in a better position to understand and appreciate each<br />
other's views and role in promoting economic and social development. Therefore, developments of<br />
variety of innovation by creating business districts are one of the important steps in the emerging role<br />
of state-business interplay in stimulating entrepreneurship. Our research finding shows that the statebusiness<br />
undertakings do not necessarily reflect a constructive entrepreneurial interest in innovations<br />
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Oskar Kayasan<br />
but that is likely to continue towards more ambiguous development progress in emerging countries.<br />
Although, time-gap has been the issue between developed and emerging countries but the active role<br />
of state in innovation phenomenon is a fundamental to interlocking for global dynamic systems<br />
overtime in most emerging countries.<br />
References<br />
Albert, Michel. 1991. Capitalism against Capitalism. Centre for Economic Research, Paris.<br />
Amsden, Alice. 1989. Asia’ next giant: South Korea and late industrialization. New York: Oxford University<br />
Press.<br />
& W. Chu. 2003. Beyond Late Development: Taiwan’s Upgrading Policies. Cambridge, MA: MIT Press.<br />
Baden-Fuller, C. and Stopford, JM 1992 Rejuvenating the Mature Business, London: Routledge<br />
Binks, M. and Vale, P. (1990). <strong>Entrepreneurs</strong>hip and Economic Change. Maidenhead: McGraw-Hill.<br />
Bhide, Amar V. 2000. The Origin and Evolution of New Business. New York: Oxford,<br />
Burke, A.E. (1995), “The Re-emergence of entrepreneurial analyses”, in Burke, A.E.,<br />
ed., Enterprise and the Irish Economy, Dublin: Oak Tree Press, 4-20.<br />
Casson, M. 1990. <strong>Entrepreneurs</strong>hip. Aldershot, Elgar<br />
Casson, M. (1982), The Entrepreneur. An Economic Theory, Oxford: Martin Robertson.<br />
Casson, M. (2005). '<strong>Entrepreneurs</strong>hip and the theory of the firm'. Journal of Economic Behavior & Organization,<br />
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Review of Economic Policy, 15/4: 102-120<br />
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Griffits, W.E., Hill, R. C. and Judge, G.G. (1993), Learning and Practicing Econometrics, New York: John Wiley<br />
and Sons, Inc.<br />
Hebert, R.F. and Link, A.N. (1988). The Entrepreneur: Mainstream Views and Radical Critiques. New York:<br />
Praeger, 2nd edition.<br />
Hobday, M. 2000 . 'The project-based organisation: an ideal form for organising complex products and systems?'<br />
Research Policy<br />
Holm, Peter. 1995. “The Dynamics of Institutions: Transformation Processes in Norwegian Fisheries.”<br />
Administrative Science Quarterly 40: 398-422.<br />
Judge G. G., Griffits, W.E., Hill, R. C., Lutkeponl, H. and Lee, T. (1985), The Theory and Practice of<br />
Econometrics. (Eds.) New York: John Wiley and Sons.<br />
Kirzner, Israel. 1997. "Entrepreneurial Discovery and the Competitive Market Process: An Austrian Approach".<br />
Journal of Economic Literature. Vol. XXXV. (March): 60-85.<br />
Knight FH (1921/61). Risk uncertainty and profit. Kelley, 2nd edition.<br />
Maria T. Brouwer (2002). 'Weber, Schumpeter and Knight on entrepreneurship and economic development'.<br />
Journal of Evolutionary Economics, vol. 12(1-2), p. 83. Heidelberg<br />
Miller, D. and E. Garnsey 2000. "<strong>Entrepreneurs</strong> and technology diffusion: How diffusion research can benefit<br />
from a greater understanding of entrepreneurship." Technology in Society 22(4): 445-465 Top of Form<br />
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Sociological Review 54: 663-81.<br />
OPIE, The Theory of Economic Development. An Inquiry into Profits, Capital, Credit, Interest, and the Business<br />
Cycle, Oxford: Oxford University Press (1963 (1934)).<br />
Pyndyck, R. S. and Rubinfeld, D. L. (1991), Economic Models and Economic Forecasts, 3 rd Ed., New York: Mc<br />
Draw Hill, Inc.<br />
Saxenian, A.L. 1994. Regional Advantage: Culture and Competition in Silicon Valley and Route 128 Cambridge,<br />
MA: Harvard University Press.<br />
Saxenian, A. & J. Hsu. 2001. The Silicon Valley-Hsinchu Connection: TechnicalCommunities and Industrial<br />
Upgrading. Industrial and Corporate Change, 10(4): 893-920.<br />
Schumpeter, J.A. (1911), Theorie der wirtschaftlichen Entwicklung. Eine Untersuchung über Unternehmergewinn,<br />
Kapital, Kredit, Zins und den Konjunkturzyklus ; translated by R.<br />
Schumpeter, Joseph A. 1934. The Theory of Economic Development. Cambride: Harvard University Press. (New<br />
York: Oxford University Press, 1961.) First published in German, 1912<br />
Schumpeter, J.A. 1942. Capitalism, socialism and democracy. NY: Harper.<br />
Wade, R. 1990. Governing the Market. Harvard University Press, Cambridge MA.<br />
Younkins, E. (2000) "<strong>Entrepreneurs</strong>hip Properly Understood", Le Quebecois Libre, July 8, 2000, No.<br />
64.<br />
518
The Fertile Synergy Between Artistic Experimentation and<br />
Scientific Research<br />
Eva Kekou<br />
Department of media, communication and culture, Panteion University, Greece<br />
ekekou@syros.aegean.gr<br />
Abstract: Science and art naturally overlap. Both are a means of investigation. Both involve ideas, theories, and<br />
hypotheses that are tested in places where mind and hand come together—the laboratory and studio. Artists, like<br />
scientists, study—materials, people, culture, history, biology, religion, mythology— and learn to transform<br />
information into something else. In ancient Greece, the word for art was τέχνη techne, from which technique and<br />
technology are derived—terms that are aptly applied to both scientific and artistic practices. A new paradigm is<br />
presented in the way artists are engaging with the world through transdisciplinary practise and connective<br />
aesthetics. Bringing together art, science and philosophy by creating, participatory audience experiences,<br />
performances and installations. This type of work pushes the boundaries and critically questions the means of<br />
knowledge production in the 21 st century. ‘Artists are innovators, if a new piece of technology or a new medium,<br />
becomes available; Artists want to try it, to experiment with it-from microbiology to robotics; from tissue culture to<br />
neuroscience. Some artists take on the role of a scientist in almost a performative way and some scientists<br />
become artists themselves. Philosophy and ethics is always at its core and political ends’ Dumitriu. Forms of<br />
«connective aesthetics» are used to engage the audience in a participatory experience that extends and<br />
generates new outcomes throughout exhibition and go beyond simple interactivity, throwing authorship into<br />
question’( Anna Dumitriu. 2010) This paper is going to investigate how art, science and technology are linked<br />
together. Furthermore, will look at how artists use scientific progress and technological advances as means of<br />
expression.I will use a number of projects which are all innovative and adress issues of art, science and<br />
technology to study how artists and scientists could have an interchangeable and how audience responds to<br />
these practises.<br />
Keywords: art, science, innovation, technology, connective aesthetics, transdisciplinary practice, audience<br />
1. Introduction<br />
Science and art overlap in a number of ways . Both are a means of investigation. Both involve ideas,<br />
theories, and hypotheses that are tested in places where mind and hand come together-the laboratory<br />
and studio. Artists, like scientists, study-materials, people, culture, history, biology, religion,<br />
mythology- and learn to transform information into something else. In ancient Greece, the word for art<br />
was τέχνη techne, from which technique and technology are derived-terms that are aptly applied to<br />
both scientific and artistic practices. There is true value to be uncovered in considering the genuine<br />
synergy that can ensue when the boundaries between art and science are crossed. Science often<br />
functions as starting point and inspiration for artists. Moreover, scientific innovations have, repeatedly,<br />
fueled artistic evolutions and, even, revolutions. The above observations are quite familiar. There is,<br />
however, an aspect that is frequently overlooked and that is the feedback from the artistic process<br />
back to the scientific. As science often overemphasizes the quantitative, the measurable it fails to<br />
adequately capture the subjective, the phenomenological. This feedback channel from art back into<br />
science is worth acknowledging and, under a transdisciplinary approach, actively encourage.<br />
A new paradigm is presented in the way artists are engaging with the world through transdisciplinary<br />
practise and connective aesthetics. Bringing together art, science and philosophy by creating,<br />
participatory audience experiences, performances and installations. This type of work pushes the<br />
boundaries and critically questions the means of knowledge production in the 21 st century.<br />
'Artists are innovators, if a new piece of technology or a new medium, becomes available; Artists want<br />
to try it, to experiment with it-from microbiology to robotics; from tissue culture to neuroscience. Some<br />
artists take on the role of a scientist in almost a performative way and some scientists become artists<br />
themselves. Philosophy and ethics is always at its core and political ends' Dumitriu. Forms of<br />
«connective aesthetics» are used to engage the audience in a participatory experience that extends<br />
and generates new outcomes throughout exhibition and go beyond simple interactivity, throwing<br />
authorship into question'( Anna Dumitriu . 2010)<br />
This paper is going to investigate how art, science and technology are linked together. Furthermore,<br />
will look at how artists use scientific progress and technological advances as means of expression. I<br />
will use a number of projects which are all innovative and address issues of art, science and<br />
519
Eva Kekou<br />
technology to study how artists and scientists could have an interchangeable and how audience<br />
responds to<br />
2. Historical background<br />
«I am enough of an artist to draw freely upon my imagination. Imagination is more<br />
important than knowledge. Knowledge is limited. Imagination encircles the world.» Albert<br />
Einstein<br />
'Science and art naturally overlap. Both are a means of investigation. Both involve ideas, theories,<br />
and hypotheses that are tested in places where mind and hand come together-the laboratory and<br />
studio. Artists, like scientists, study-materials, people, culture, history, religion, mythology- and learn<br />
to transform information into something else. In ancient Greece, the word for art was techne, from<br />
which technique and technology are derived-terms that are aptly applied to both scientific and artistic<br />
practices.'( Eskridge.Chicago. 2008) Robert Eskridge<br />
Leonardo da Vinci, painter and draftsman of the High Renaissance, is best known as an artist whose<br />
works were informed by scientific investigation. Leonardo observed the world closely, studying<br />
physiology and anatomy in order to create convincing images of the human form. He believed that the<br />
moral and ethical meanings of his narrative paintings would emerge only through the accurate<br />
representation of human gesture and expression. For this Christian artist, science and art were<br />
different paths that led to the same destination-a higher spiritual truth. His Sketch of Uterus with<br />
Foetus (c. 1511-13) is one of several thousand drawings he produced in his lifetime in which artistic<br />
and scientific investigation are bound together.<br />
The Astronomer (1668) by Dutch painter Johannes Vermeer is another example of the profound<br />
connection between science and art. The people of 17th-century Netherlands had an exploratory<br />
spirit. Equally interested in this world and the larger universe, the familiar and the exotic, they were<br />
intent on looking and investigating. It was here in the early 17th century that the microscope and<br />
telescope were first developed. Vermeer's painting celebrates an astronomer. Yet it equally<br />
celebrates the work of artists and the materials of this world. The globe at which the astronomer<br />
gazes evidences the link between science and art most pointedly, for it demonstrates this<br />
astronomer's-and his culture's-combined interest in finely crafted objects and scientific systems, such<br />
as cartography and astronomy.<br />
In the late-19th and early-20th centuries, the physiological, psychological, and phenomenal effects of<br />
color and light were of primary concern to Impressionist and Post-Impressionist artists such as Edgar<br />
Degas (1834-1917), Vincent van Gogh (1853-1890), Auguste Renoir (1841-1919), Paul Gauguin<br />
(1843-1903), and Claude Monet (1840-1926). Considered by many to be the greatest nature painter<br />
in modern-art history, Monet suggested that our sense of our physical environment changes<br />
continuously with our shifting perceptions of light and color.<br />
20th-Century Art and Science<br />
Pablo Picasso's (1881-1973) portrait of art dealer Daniel-Henry-Henry Kahnweiler(1910) combines<br />
Monet's ideas about the contingency of time and Seurat's theory about the perception of discrete<br />
elements. Here, Picasso breaks up the figure and objects in his composition in the style known as<br />
Cubism. Painted just a few years after Albert Einstein put forth his theory of relativity, which asserts<br />
the contingent nature of observing reality, Picasso's work similarly illustrates the elusive presence of<br />
his subject-Mr. Kahnweiler. Picasso's Cubist painting style, like studying Einstein's scientific theory,<br />
requires careful analysis, but it rewards the viewer's effort with perception and understanding.<br />
Today, light-and-space artist James Turrell seeks to link the terrestrial and celestial realms in his work<br />
at Roden Crater, a natural cinder volcano situated on the southwestern edge of the Painted Desert in<br />
northern Arizona. Since 1972, Turrell has been transforming the crater into a large-scale artwork by<br />
subtly manipulating and reshaping its form. Like Renaissance artist Leonardo da Vinci did, Turrell<br />
uses his knowledge of engineering, and, like Seurat and Monet, he employs his knowledge of the<br />
effects of light and space. When Turrell completes his gigantic project, visitors standing in the middle<br />
of the crater on the reflective material with which the artist has lined it will feel suspended between the<br />
sky and earth.<br />
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Eva Kekou<br />
There has long been a connection between art and science, one that can be traced back to the<br />
Egyptian pyramids. History proves that the two disciplines cannot exist without each other, enduring in<br />
constantly changing and evolving relationships<br />
http://arsscientia.blogspot.com/2008/04/consilience.html<br />
There is a number of examples throughout the history of art, philosophy and culture which prove how<br />
art, science and technology are strongly related and can not exist without contribution of diverse<br />
diciplines. Todays materialised world and culture is a representative example of transdisciplinary<br />
research and work. New technologies continually arise, offering repeated opportunities to artists in<br />
search of the technologically novel. As todays cultural products are shaped in a mobilised and<br />
globalised world, I will take an example which can be representative for the evolution of<br />
transdisciplinatity in media art- a highly innovative sector where boundaries of art, science and<br />
technology are highly challenged.<br />
Stephen Jones calls this phenomenon the "rolling new," and in his book with the name<br />
'Synthetics'5,he describes how artists in Australia used new technologies in their art, from the early<br />
days of digital computing in the 1950s to a landmark exhibition in 1975. Jones looks at not only the<br />
artists and the artworks they produced but also at the evolution of computing technologies and video<br />
displays as these new forms of media developed into tools that artists could use. He also examines<br />
the collaborations that sprang up between artists and the technologists who taught them how to use<br />
these new devices. The process, he finds, was reciprocal: the offerings of the engineer could inspire<br />
the artist as much as the needs of the artist could inspire the engineer.Jones discusses the<br />
constraints imposed by the limitations of new technologies as they developed and shows that different<br />
types of output and display technologies made for the production of very different kinds of images.<br />
[He explores the development of computer graphics, the use by artists of such new conceptual<br />
paradigms as post-object art, and the emergence of video art in the late 1960s and early 1970s.] By<br />
1975, the art and technology movement in Australia reached something of a watershed. And yet,<br />
Jones writes, the early electronic artists laid the foundation for today's burgeoning culture of new<br />
media art in Australia.<br />
Robert Eskridge http://www.artic.edu/aic/education/sciarttech/2a1.html<br />
2.1 Innovation is not restricted to technology, nor is it confined by the conventional<br />
margins of art"<br />
As an example of innovative transdisciplinary work in the field of art, I will refer to Anna Dumitriu's<br />
work. Her work blurs the boundaries between art and science. Her installations, interventions and<br />
performances use a range of digital, biological and traditional media including live bacteria, interactive<br />
media and textiles.<br />
For the purposes of this paper I will refer indicative to Dumitrius performance project «The Myth of<br />
Consciousness», as it meets with the transcidisciplinary character of art, science and technology and<br />
it well demonstrate how art in our days is more broadly related with expression and notions of<br />
research.<br />
We tend to think we know what a conscious experience is and our inner mental lives are filled with<br />
assumptions about the conscious experiences of others, we presume to know how they feel and we<br />
assume they have some insight into what we are feeling. In short we have what's known as a "theory<br />
of mind" and can identify other "minded" subjects. But how will our theories play out as developments<br />
in artificial life (AL) technologies and robotics begin to create agents that give the impression of being<br />
"minded" (and arguably limited forms of artificial consciousness)?<br />
2.2 Performance art as methodology for scientific research<br />
‘In 2008 Anna Dumitriu created a pilot performance art work entitled "The Myth of Consciousness"<br />
which focused on perspectives of embodiment and situatedness in evolutionary robotics<br />
(Varela,Thomson and Rosch, 1992) That work has now been extended to investigating notions of<br />
what "conscious experience" might mean for a robotic agent in contrast to a human (the artist herself).<br />
The methodology being used for this investigation is performance art and Dumitriu is attempting to<br />
take on the role of a robot agent by reducing her sensory input down to that of her collaborator Mary<br />
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Eva Kekou<br />
(a medium sized robot whose only interaction with the world is through her (sic) limited sensors and<br />
wheels).<br />
The work focuses on sensing the environment through interactions with it and building on those<br />
sensations to create an emergent impression of the "useful fiction" of consciousness (Metzinger,<br />
2004, Dennett, 1993). This is how a robot with limited sensors and a basic evolving neural network<br />
might approach the problem.<br />
Epigenetic robotics looks at how an "infant" robot might learn and "grow" in an environment. It<br />
privileges movement as the key indicator of brain development. Dumitriu is limiting her sensory<br />
perceptions (through blindfolds and various types of anaesthetic) and movement (through restraints)<br />
as she attempts to engage with her physical and mental development. The work attempts to<br />
instantiate in Dumitriu's physical body the limited sensory and movement functions that might be<br />
available to a robot agent to attempt to create an embodied representation of how "consciousness"<br />
might emerge through a physical and sensorial ability to interact with the environment. It is a selforganizing<br />
process that is shaped by experience.<br />
From a philosophical point of view the project takes a new and unusual approach to try to understand<br />
if it might be possible to build a robot that embodies our notion of what consciousness might be;<br />
embodying a sense of self and a view of the world.<br />
3. The knowledge argument<br />
The performance and role taking methodology for the work is inspired to an extent by Frank<br />
Jackson's philosophical thought experiment, known as "the knowledge argument"(Jackson, 1982). He<br />
tells the story of Mary (after whom Dumitriu's robot is named), a brilliant neuroscientist, who studies<br />
the colour red in her research, but has been brought up in and continues to live in a completely black<br />
and white world, devoid of colour. She knows all there is to know about the colour red that can be<br />
researched through the methodologies of the physical sciences but has never seen it, then one day<br />
she is able to observe red with her own eyes. The question Jackson poses is ‘does she learn anything<br />
new about the colour red through the experience of seeing it? Though his argument is unbalanced<br />
and anticipates its own answer (and has since been retracted by Jackson) there is something<br />
interesting in the idea that experience is so important for knowledge, something that performance art<br />
could help with perhaps.<br />
In her experiments Dumitriu has attempted to enact "robot experience" with particular focus on<br />
Francisco Varela's work on how a robot might be considered to "mindfully" interact with the<br />
environment in which it is embedded.<br />
3.1 The Performance experiments<br />
Taking on the role of a robot agent is not a trivial process. The idea that a robot phenomenology is<br />
something that we could have access to is a contentious and flawed idea, however, an attempt to<br />
mimic the phenomenological experience of a robot should be of interest. The possibility of<br />
impoverishing the artist's sensory experience to that of a robot is not achievable and neither is the<br />
idea of an artist replicating the functionality of a wheeled robot through her own physicality. However<br />
the performative experiments will reveal to both the wider public and to invited scientists and<br />
philosophers many of the issues inherent in developing machine consciousness, potentially revealing<br />
new insights. ‘(Dumitriu.2010 unpublished paper)<br />
3.2 Deafferentiation<br />
Looking to neuroscience there is an interesting condition of deafferenation where patients lose<br />
proprioception in part or all of their bodies. Sensory feedback is removed but motor control is still<br />
retained. This is also applied to this project from an artistic persepctive.The experience of the artist<br />
attempting to practically understand the physical and psychological effects of the experience may<br />
offer new insights and this is of great interest to the medics involved.<br />
This may take several attempts to remove proprioception and retain motor control but if successful<br />
Dumitriu's ability to control her arm will be limited to motor functions and visual input. She will not feel<br />
her arm or its position but will be able to control it as long as she can see it.<br />
522
4. The future of the Project<br />
Eva Kekou<br />
As the project develops, the artist will begin to move towards a future, older self; the body is<br />
augmented; she relies on "spare parts" to repair her failing body, looking at how consciousness might<br />
change in but not diminish through the ageing process as we become transhuman. When combining<br />
multiple sensors in robots the notion of attention becomes highly relevant, which sensor overrides the<br />
other to produce behaviour? In humans this seems highly trivial and something we are simply able to<br />
do by instinct. In a robot this is a very difficult problem and highlights just how little we understand<br />
about the workings of the human mind..(Anna Dimitriu's interview.2011) These are a few questions<br />
which rise up and discussed implicitlly through this project.<br />
Performance art offers a suitable means of investigating conscious experience through playful<br />
experimentation. Through the artist's performance and movement the team may investigate the role of<br />
the physical and the non-physical in conscious experience as described in Jackson's Knowledge<br />
Argument.<br />
Apart from this project Anna Dumitriu offers a variety of multidisciplinary projects which all are<br />
embedded with notions of art, science and technology and they all challenge traditional notions and<br />
ideas using highly innovative and transdisciplinary methods.<br />
5. Conclusion<br />
Distinctions between art and science seem to be somewhat obsolete and counterproductive in the<br />
21st century.Synergy seems to be the main focus and interest of multidisciplinary practise. Art uses<br />
science and technology to further its scope. Similarly, science may turn to art practice in order to<br />
explore the cognitive, the subjective, the phenomenological. It is a direction that should be followed<br />
with caution so as not to fall in the trap of pseudoscience. However, the need for caution is no<br />
argument for not exploring this direction, quite the contrary. Dumitrius' work can be considered a<br />
prime example where the above schema takes place. Science and technology informs her art that, in<br />
turn, may provide insights that are of great relevance to researchers. The argument for<br />
transdisciplinary work becomes even stronger with cases like these.<br />
Holistic approach of the world underlines the statement that nothing can be seen, viewed or<br />
experienced as such. Everything operates in relation to the system which enables its existence and<br />
operation. Sebsequently, art,science and technology operate in a progressive system of innovation<br />
which constitures the experience of the world through new broader and participatory dimension.<br />
Synergy is a keyword in a complex era where collaboration and lead to innovative insights of world<br />
and scientific renaissance.<br />
References<br />
DENNETT, D. (1993) Consciousness Explained, London, Penguin.<br />
JACKSON, F. (1982) Epiphenomenal Qualia. Philosophical Quaterly, 32, 127-36.<br />
METZINGER, T. (2004) Being No One, Cambridge, MA, MIT Press.<br />
NAGEL, T. (1974) What is it like to be a bat? The Philosophical Review.<br />
VARELA, F., THOMSON, E. & ROSCH, E. (1992) The Embodied Mind: Cognitive Science and Humn<br />
Experience, MIT Press.<br />
http://www.artic.edu/aic/education/sciarttech/2a1.html<br />
http://arsscientia.blogspot.com/2008/04/consilience.html<br />
http://web.mac.com/annadumitriu/AD/News_and_Links.html<br />
(accessed 20/07/11)<br />
523
Conceptions and Attitudes towards Social<br />
<strong>Entrepreneurs</strong>hip and Social Enterprises: The Case of<br />
Northern Greek For-Profit Companies<br />
Panayiotis Ketikidis 1, 2 and Panagiotis Parcharidis 1<br />
1<br />
CITY College – International Faculty of the University of Sheffield,<br />
Thessaloniki, Greece<br />
2<br />
South East European Research Centre (SEERC), Thessaloniki, Greece<br />
ketikidis@city.academic.gr<br />
pparcharidis@city.academic.gr<br />
Abstract: An effort to define the context of Social <strong>Entrepreneurs</strong>hip and Social Enterprises in the Northern Greek<br />
for-profit business field has inspired and directed the realisation of this research. Social <strong>Entrepreneurs</strong>hip and<br />
Social Enterprises are issues that present high academic interest, and are still in developing stage. This study<br />
seeks to outline the context of this important research field, and to explore the conceptualisation and the attitude<br />
of Northern Greek for-profit companies towards Social <strong>Entrepreneurs</strong>hip and Social enterprise practices. A<br />
literature review is presented covering themes relevant to Social <strong>Entrepreneurs</strong>hip and Social Enterprises, and<br />
provides the background to design the research, which combines quantitative and qualitative methodology in<br />
order to achieve the study's objectives. In the context of the quantitative approach, a web-based survey with the<br />
participation of 72 Northern Greek for-profit companies was carried out, and following descriptive data analysis,<br />
indicators of Social <strong>Entrepreneurs</strong>hip practices and concepts were examined. In the context of the qualitative<br />
approach, 10 interviews with key managers of Northern Greek for-profit companies were conducted in order to<br />
investigate attitudes towards the themes in question. The results suggest that Northern Greek for-profit<br />
companies seem to be socially oriented, and managers tend to welcome Social <strong>Entrepreneurs</strong>hip practices.<br />
There are misperceptions of the terms, and Social Enterprises seem to be perceived as non-profit organisations.<br />
Despite the fact that there were valuable and interesting findings, the conduct of the web-based survey limited<br />
the sample size, presenting a low response rate, and an in-depth statistical analysis of relationships and<br />
correlations was not executed. This study is a first step in examining Social <strong>Entrepreneurs</strong>hip in Northern Greece;<br />
and contributes to the enrichment of the general knowledge of the researched field.<br />
Keywords: social entrepreneurship, social enterprises, northern Greece, for-profit companies<br />
1. Introduction<br />
During the last two decades, there has been a rising academic interest in examining social<br />
entrepreneurship and social enterprises. In fact, several authors have provided different theoretical<br />
directions concerning social entrepreneurship (Austin et al, 2006; Hartigan, 2006; Korosec and<br />
Berman 2006; Mair and Marti, 2006; Peredo and McLean, 2006; Drayton, 2002; Dees, 2001) and<br />
social enterprises (Haugh, 2005; Roper and Cheney, 2005; Harding, 2004; Dees, 1998). Each of<br />
them has demonstrated different traits of the researched terms in order to contribute to the<br />
development of a general framework. In detail, even though recently the focus has been on social<br />
enterprises and social entrepreneurship, the topic presents research gaps and controversial issues.<br />
Several aspects of social entrepreneurship can be identified (Martin and Osberg, 2007; Hartigan,<br />
2006; Korosec and Berman; 2006; Mair and Marti, 2006; Nicholls 2006; Peredo and McLean, 2006;<br />
Pomerantz 2003; Roberts and Woods, 2005; Drayton, 2002; Dees, 2001); while, many authors<br />
discuss about different types of social enterprises, since they belong to a sector where many forms of<br />
these organisations can be identified. According to Zahra et al., despite of the increasing academic<br />
interest in social economy and social entrepreneurship, there is no common conceptual agreement<br />
and understanding of these concepts (Zahra et al, 2009).<br />
The main objective of this paper is to explore the conceptualisation and the attitude of Northern Greek<br />
for-profit companies towards social entrepreneurship and social enterprises’ practices. The following<br />
sections briefly outline concepts about social entrepreneurship; provide insights of social enterprises;<br />
present possible links of the researched terms with the corporate social responsibility; provide the<br />
benefits, the barriers and the limitations of social entrepreneurship and social enterprises; and<br />
examine three case examples in order to clarify the researched issues. Finally, it follows a section<br />
dedicated to the methodology used, an interpretation of the data gathered and collected, resulting in<br />
some concluding remarks concerning social entrepreneurship and social enterprises.<br />
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Panayiotis Ketikidis and Panagiotis Parcharidis<br />
2. The landscape of social entrepreneurship and social enterprises<br />
Although its beginnings go back to the 1980s, literature related to social entrepreneurship and social<br />
entrepreneurs started conceptualising these terms in the late 1990s and the beginnings of the 2000s.<br />
It should be addressed that the particular research field has been benefited from the previous work on<br />
the term entrepreneurship (Austin et al, 2006; Mair and Marti, 2006) (Figure 1). Alertness (Tang,<br />
2009; Anderson, 2005; Kirzner, 2009, 1997), risk-taking (Brouwer, 2000, 2002), innovation (Langlois,<br />
2007; Brouwer 2002) and creativity (Wennekers and Thurik, 1999) are traits that dominate<br />
entrepreneurship, and they are also applicable to social entrepreneurship. Indeed, several authors<br />
have employed characteristics of the traditional entrepreneurship in order to develop the dimensions<br />
of the term social entrepreneurship. These dimensions are provided as it follows, and social<br />
entrepreneurship can be considered as:<br />
� The creation of social value through innovation, risk-taking, and recognition and the exploitation of<br />
opportunities so as for the society to be improved (Hartigan 2006; Peredo and McLean, 2006;<br />
Weerawardena and Mort, 2006);<br />
� A multidimensional collaboration between profit-seeking ventures, non-profit organisations and<br />
community organisations, aiming at the social good (Korosec and Berman 2006; Mair and Marti,<br />
2006; Roper and Cheney, 2005; Pomerantz, 2003);<br />
� Actions of one or more individuals with the goal to ameliorate the society through collaboration in<br />
the public, private and not-for-profit sector (Roper and Cheney, 2005) (Figure 1).<br />
<strong>Entrepreneurs</strong>hip<br />
Social<br />
<strong>Entrepreneurs</strong>hip<br />
Figure 1: Link between entrepreneurship and social entrepreneurship<br />
Non-profit Sector<br />
Figure 2: Forms of social entrepreneurship<br />
Public Sector<br />
Social<br />
<strong>Entrepreneurs</strong>hip<br />
Collaboration<br />
525<br />
Private Sector
Panayiotis Ketikidis and Panagiotis Parcharidis<br />
Social <strong>Entrepreneurs</strong> are conceptualised as:<br />
� Individuals who spot problematic aspects of the society, trying to resolve them, creating better<br />
social conditions (Drayton, 2002);<br />
� Individuals who enter the business world with the social impact as their primary motive (Roper<br />
and Cheney, 2005; Prabhu, 1999);<br />
� A mean in order for an investment to be transformed into social good (Weerawardena and Mort,<br />
2006);<br />
� Young and altruistic individuals, urge to fight injustice (Prabhu, 1999);<br />
� Innovative directors socially responsible, administrators of non-profit organisations and<br />
philanthropists (Roper and Cheney, 2005).<br />
2.1 Insights of social enterprises<br />
The realisation of the entrepreneurial concepts in the social sphere follows after the theoretical<br />
foundation of social entrepreneurship. Social enterprises are the impersonation of the above (Figure<br />
3), and they are ventures that are created by social entrepreneurs (Haugh, 2005). In particular, social<br />
enterprises can be understood as:<br />
� Innovative ventures in the social sphere, with different structure, strategy and norms from the nonprofits,<br />
responding to socio-political changes and problems, and producing valued results for the<br />
society through their programs (Korosec and Berman, 2006; Dart, 2004);<br />
� Enterprises with social ends (primary goal) which generate revenues (secondary goal) from their<br />
activity, like mainstream businesses, and they reinvest them internally so as to grow as firms,<br />
reaching more people in need (Hartigan, 2006; Harding, 2004; Lingane and Olsen. 2004);<br />
� Ventures in the private, public and not-for-profit sector (Roper and Cheney, 2005):<br />
� In the private as ventures who have social impact through their trading activities (pure social<br />
enterprises);<br />
� In the public as a collaboration between community organisations with profit-seeking corporations;<br />
and<br />
� In the not-for-profit sector as non-profit organisations with the structure and the mentality of<br />
traditional businesses, operating with donations and grants;<br />
� An alternative way of thinking beyond financial transactions, broadening the individualistic<br />
conceptualisation of the traditional profits (Ridley-Duff, 2007).<br />
<strong>Entrepreneurs</strong>hip<br />
Social<br />
<strong>Entrepreneurs</strong>hip<br />
Social<br />
Enterprise<br />
Figure 3: Evolution of social enterprise<br />
Overall, pure social enterprises are placed between the philanthropic or non-profit organisations and<br />
the traditional or commercial businesses. A pure social enterprise combines the traits of the above<br />
extremes (Figure 4). Social enterprises are characterised by mixed motives, benevolence on the one<br />
hand and self-interest on the other. They deal with a double bottom line; social ends and profit<br />
motives (Dees, 1998). That is to say, the method that they follow is balanced between their social<br />
mission and the market drivers (Mort et al, 2003). They differentiate form the conventional<br />
businesses, given that they reinvest their surpluses in the business or in the community, and they do<br />
not seek to maximise the profits for the shareholders or the owners. Then, their goal is to provide<br />
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Panayiotis Ketikidis and Panagiotis Parcharidis<br />
social and economic value; the first one for alleviating social problems and the second one for<br />
expanding, meeting and satisfying as much as possible social needs. In relation with social<br />
enterprises’ capital, they combine the donations and grants with the revenues from their operations in<br />
order to function. Since they are in the middle of non-profits and traditional firms, their workforce,<br />
which is limited (Vidal, 2005), can consist of volunteers or fully paid staff, who can benefit tax<br />
provisions by the state or discounts from the suppliers.<br />
Non-profit<br />
Organisations<br />
Social<br />
Enterprise<br />
Combination<br />
of Traits<br />
Commercial<br />
Businesses<br />
Figure 4: Position of a social enterprise<br />
Table 1 presents the taxonomy of the academic articles that particularly aimed at the term social<br />
enterprise.<br />
Table 1: Taxonomy of the literature on social enterprises<br />
Author (Year)/<br />
Methodology<br />
Theme Issues Critique/ Comment<br />
Cannon (2000)/ Community organisations and Mainstream business<br />
Literature review social entrepreneurs<br />
should get more<br />
and cases studies<br />
initiatives in order for the<br />
of the public sector<br />
public sector to be more<br />
effective<br />
Catford (1998)/ Traits of social entrepreneurs Social entrepreneurs<br />
Literature review<br />
need supportive<br />
environments in order to<br />
operate<br />
Cornelius et al Social enterprises and corporate Identification of markers Community<br />
(2008)/ Literature social responsibility that measure corporate organisations based<br />
review<br />
social responsibility corporate social<br />
practices<br />
responsibility activities<br />
are often well<br />
developed in private<br />
sector<br />
Dart (2004)/ Institutional perspectives of Moral legitimacy is Social enterprises are<br />
Literature review<br />
social enterprises<br />
connected with the understood in more<br />
emergence of social narrow and revenue-<br />
enterprises<br />
generation terms<br />
Dees (1998)/ Case The need to commercialise the Options for the non-profit Need for innovation in<br />
examples<br />
non-profit organisations organisations in order to<br />
be more effective<br />
the social sector<br />
Defourny and Different types of social<br />
Trends and future The meaning of social<br />
Nyssens (2008)/<br />
enterprises<br />
developments in enterprise varies<br />
Literature review<br />
European countries between the European<br />
and presentation of<br />
social enterprises<br />
countries<br />
527
data in European<br />
coutnries<br />
Author (Year)/<br />
Methodology<br />
Harding (2004)/<br />
Case studies of the<br />
UK<br />
Henton et al (1997)/<br />
Case studies of the<br />
US<br />
Kerlin (2006)/<br />
Literature review<br />
between European<br />
and American<br />
theories<br />
Lingane and Olsen<br />
(2004)/ Analysis of<br />
studies on<br />
entrepreneurs<br />
Moore et al (2009)/<br />
Literature review<br />
and exploratory<br />
study in the UK<br />
Mort et al (2003)/<br />
Literature review<br />
Ridley-Duff (2007)/<br />
Literature review<br />
Tracey et al (2005)/<br />
Literature review<br />
Vidal (2005)/<br />
Literature review<br />
and report for the<br />
Spanish case of<br />
work integration<br />
Panayiotis Ketikidis and Panagiotis Parcharidis<br />
Theme Issues Critique/ Comment<br />
Social enterprises play an<br />
important role for the creation of<br />
economical and social needs<br />
Civic entrepreneurship and<br />
communities<br />
Synopsis of definitions of social<br />
enterprises between European<br />
and American academics and<br />
practitioners<br />
Measurement of the enterprises’<br />
social return on investment<br />
The meaning of social<br />
enterprise remains a<br />
matter of debate<br />
Characteristics and<br />
leadership roles of the<br />
civic entrepreneurs<br />
Historical factors,<br />
institutional and legal<br />
environments shaped the<br />
conceptualisation of<br />
social enterprise<br />
Guidelines for<br />
measurement<br />
Criteria for responsible practices The majority of the<br />
criteria are applicable in<br />
the UK<br />
The need for introduction of new<br />
social enterprises and the<br />
improvement of the existing<br />
ones<br />
A framework for social<br />
enterprises proposed by<br />
individualistic and<br />
communitarian philosophy<br />
Community organisations and<br />
corporate social responsibility<br />
The work-integration in social<br />
enterprises<br />
Social entrepreneurship<br />
as a multidimensional<br />
model<br />
Social enterprises have<br />
adopted other<br />
approaches so as to deal<br />
with the social exclusion<br />
Traits of the community<br />
organisations<br />
Work-integration social<br />
enterprises aim to help<br />
individuals who are<br />
socially excluded to<br />
return to the labour<br />
market<br />
The key traits of social<br />
enterprises are their<br />
social aims and social<br />
ownership in<br />
combination with the<br />
generation of profits<br />
Nowadays,<br />
communities need to<br />
collaborate with civic<br />
entrepreneurs in order<br />
to compete<br />
Both regions can learn<br />
from the experience of<br />
the other in relation<br />
with social enterprises<br />
Further research is<br />
needed in the field<br />
The framework offers<br />
a way to understand<br />
the diversity of the<br />
field<br />
2.2 Barriers and limitations about social entrepreneurship and social enterprises<br />
The fact that, social entrepreneurship and social enterprises are modern and in a developing stage<br />
terms may lead to misperceptions. As a new field, it is needed more research in order for the social<br />
entrepreneurship theory to be built (Nicholls, 2006). Particularly, the main barriers and limitations that<br />
these modern terms face are:<br />
� The indiscrimination between social enterprises, non-profit organisations and mainstream<br />
businesses, since their primary aim is closely connected (Martin and Osberg, 2007);<br />
� The misconception between social enterprises and mainstream businesses that employ socially<br />
responsible practices (Cornelius et al, 2008; Defourny and Nyssens, 2008);<br />
� The different understanding of their meaning and the distinctive forms of social enterprises among<br />
US and Europe, and between the European countries (Defourny and Nyssens, 2008; Kerlin,<br />
2006);<br />
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Panayiotis Ketikidis and Panagiotis Parcharidis<br />
� The practical implications to operate on one hand in a market-driven environment, where<br />
mainstream businesses are familiar with. On the other hand, the public resistance in order to raise<br />
funds, achieving donations or gain political advantages.<br />
2.3 Case examples<br />
The reflection of the concepts about social entrepreneurship and social enterprises is provided in this<br />
section. Three case examples are presented briefly in order for the practical aspects of the<br />
researched terms to be outlined.<br />
2.3.1 Grameen Bank<br />
Grameen Bank is a microfinance institute that reflects the vision of its founder. Dr. Yunus has been<br />
aiming to eliminate the poverty of the world and launched this social enterprise that is based on the<br />
following dimensions:<br />
� Loan offers to those who have extremely low income and especially to marginalised people<br />
(Haque and Harbin, 2009; Yunus, 2007; Kobeissi, N. and Damanpour, 2003; Schicks, 2007). Its<br />
lending policy is easily accessible from the borrowers since it does not require collateral (Haque<br />
and Harbin, 2009);<br />
� Lending under the premise that the borrower will use the credit to develop his/ her business so as<br />
to be created work opportunities, since credit is viewed as a weapon against poverty and<br />
unemployment. Indeed five per cent (5 %) %) of the bank members move out of the poverty on a<br />
year basis (Yunus, 2007);<br />
� Scholarship programs and healthcare for all the bank members so as to ameliorate their living<br />
conditions (Yunus, 2007);<br />
� Collaboration between the institution and the borrowers in order for the latter to be able to repay<br />
the loan or to improve the outcomes of their work (Haque and Harbin, 2009; Kobeissi, N. and<br />
Damanpour, 2003);<br />
� A special business model based on a shareholder scheme where the client is part of the<br />
ownership team, affecting this way the bank’s operations. That is to say, repayments are at the<br />
same time credits for other clients (Schicks, 2007).<br />
2.3.2 The Fifteen Restaurant<br />
Fifteen is one of the most popular United Kingdom’s social enterprises (www.socialenterprise.org.uk).<br />
It was launched by the famous chef Jamie Oliver on 2002 and it operates with four (4) stores<br />
according to the following criteria:<br />
� Providing help with training programs to disadvantaged people from 16 to 24-years-old that would<br />
like to become chefs. The majority of Fifteen’s employees has criminal background or has<br />
suffered from addictions or homelessness and they have the desire to work on the food industry<br />
(www.socialenterprise.org.uk);<br />
Aiming to raise awareness of the importance of the nutritious food. In fact, it serves food of the<br />
highest quality made from the best ingredients (www.fifteen.net);<br />
� A business model that is based on profit generation of a conventional restaurant and on the hiring<br />
policy; it offers employment opportunities to special populations whose desire is to work in the<br />
food industry (www.jamieoliver.com).<br />
2.3.3 The Body Shop<br />
Body Shop is a manufacturer and retailer of natural biodegradable cosmetics. It was founded by<br />
Annita Roddick and combines the profit values with the social ones (Hartman and Beck-Dudley,<br />
1999). The company’s philosophy is based on the founder’s ambitions to produce natural cosmetics<br />
and through their trading to have an impact on the society and the environment. As a business,<br />
follows the socially responsible practices path. The following aspects provide a clearer picture of Body<br />
Shop:<br />
� Creation of an environment full of values, like trust and respect, among its stakeholders through<br />
its innovative hiring practices and employees’ training programs. Consumers make responsible<br />
choices of products that the trained and informed employees sell (Sillanpaa, 1998);<br />
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Panayiotis Ketikidis and Panagiotis Parcharidis<br />
� Social and environmental concerns since the company organises or participates in many<br />
campaigns for the protection of the environment (www.thebodyshop.com) and collaborates with<br />
many non-profit organisations to improve the life of the marginalised people (Roy and Ghosh,<br />
2008);<br />
� A business model that is characterised by the profit generation through the product selling and its<br />
social and environmental policies with the production of environmental-friendly cosmetics and<br />
their social concerns.<br />
Table 2: Comparison of key traits of social entrepreneurship and social enterprises with case<br />
examples<br />
Traits of Social <strong>Entrepreneurs</strong>hip and Social Enterprises<br />
Partnership with Profit-Seeking Organisations<br />
(Pomerantz, 2003)<br />
Meet Needs of Special Populations (Korosec and<br />
Berman, 2006)<br />
Social Impact through Trading Activities (Roper and<br />
Cheney, 2005)<br />
Collaboration with Non-Profit Organisations (Tracey et al,<br />
2005)<br />
Reinvestment of Profits (Harding 2004)<br />
Social Ends and Profit Generation (Dees, 1998)<br />
3. Analysis and discussion of key findings<br />
3.1 Methodology<br />
Grameen<br />
Bank<br />
�<br />
�<br />
�<br />
�<br />
�<br />
�<br />
Case Examples<br />
Fifteen<br />
Restaurant<br />
�<br />
�<br />
�<br />
�<br />
�<br />
The Body<br />
Shop<br />
This paper explores the conceptualisation of social entrepreneurship and social enterprises, and the<br />
attitudes of Northern Greek mainstream businesses towards social entrepreneurship and social<br />
enterprises concepts and practices. A combined quantitative and qualitative approach was employed<br />
in order to fulfill the research purpose and to reach to a much deeper understanding of the issues in<br />
question (Hohental, 2006). In practice, the quantitative approach allowed the statistical analysis of the<br />
collected data (Saunders et al, 2007). Qualitative approach was used to describe special phenomena<br />
and produce data that were rich in detail (Lasch and Yami, 2008).<br />
In the context of the quantitative approach, the findings of the literature inspired the design of an<br />
online questionnaire. The participants of this survey were required to report their understanding in<br />
terms of social entrepreneurship and social enterprises’ policies and practices. They were further<br />
asked about concepts that reflect social oriented behaviors. Finally, they were required to report their<br />
comprehension of the researched terms.<br />
Moreover, the sample that participated was purposive, selecting 800 companies operating in Northern<br />
Greece. This non-probability sample is considered justifiable, since it most likely covers most of the<br />
active companies that operate in different cities of Northern Greece and in distinctive fields. Hence, a<br />
web based administration of the questionnaire was followed, since it was fast, flexible and cost-saving<br />
procedure (Kwak and Radler, 2002; Cook et al, 2000) and 72 companies participated. The analysis<br />
was realised, following descriptive data analysis in order to demonstrate indicators of the issues in<br />
question.<br />
In the context of the qualitative approach, conducting interviews was a tool that provided more<br />
qualitative information, more depth, more representation and more value (Palmerino, 1999).<br />
Interviewees were asked about their beliefs towards current managers and their companies, nonprofit<br />
organisations, social practices and private initiatives, social enterprises’ concepts, and obstacles<br />
and challenges of social entrepreneurship in the Greek context. In detail, issues that identified in the<br />
literature review influenced the designing of the interview questions. Dees’ approach (1998, 2001) of<br />
social entrepreneurship and social enterprises guided the qualitative approach. Thus, semi-structured<br />
530<br />
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Panayiotis Ketikidis and Panagiotis Parcharidis<br />
interviews were realised so as to understand the meaning that the interviewees give to the present<br />
research topic (Saunders et al., 2007).<br />
Furthermore, the research was based on a convenience sampling, and 10 qualitative, semi-structured<br />
interviews with managers from different fields were conducted. Their companies operate in<br />
Thessaloniki but, their activities have impact in Northern Greece. At last, the interpretation of the<br />
findings was carried out through content analysis.<br />
3.2 Indicators towards social entrepreneurship and social enterprises practices<br />
The online survey has demonstrated that, although the majority of the respondents are motivated by<br />
the salary or the generation of profits, there was a tendency of social contribution, as a work motive.<br />
Also, social enterprises are placed between non-profit organisations and conventional businesses,<br />
with social contribution as a primary mission (Dees, 1998). The examined traditional companies are<br />
motivated by growth and profit generation, given that they are for-profit companies. Moreover, the<br />
majority of the companies neither donates nor collaborates with non-for profit organisations. Though,<br />
there is a significant percentage of social orientation among the respondents’ answers.<br />
Furthermore, there are three categories of social entrepreneurs who want to reach more people in<br />
need; managers of mainstream businesses with social responsible practices, managers of non-profit<br />
organisations and philanthropists (Roper and Cheney, 2005). The vast majority of respondents are<br />
inclined to managers of mainstream businesses, while the other two categories are of equal<br />
importance. Additionally, social enterprises reinvest their profit or dividend in order to grow and satisfy<br />
their social goals (Hartigan, 2006; Harding, 2004; Dees, 1998). A great portion of the responses of the<br />
online survey reveal that, the profits or dividends of the examined companies are used by the owners,<br />
while they tend to consider the above policy of social enterprises as important. Also, social<br />
enterprises’ workforce can comprise of volunteers (Vidal, 2005; Dees, 1998) and marginalised people<br />
(Fifteen Restaurant). Respondents tend to consider as important the volunteer work, while they are<br />
less sure about the importance of hiring marginalised people.<br />
In addition, on one hand, respondents believe that cooperatives or community organisations and nonprofit<br />
organisations tend to be more important than businesses in the context for their contribution to<br />
the society. On the other hand, responses demonstrate that businesses tend to contribute more to the<br />
economy of a country than cooperatives or community organisations and non-profit organisations.<br />
Also, responses of the survey demonstrate that, cooperatives or community organisations and nonprofit<br />
organisations best satisfy the needs of special populations; cooperatives or community<br />
organisations best correspond to governmental reductions or to the incapability of the local<br />
authorities.<br />
Overall, responses reflect that, non-profit organisations or community organisations function better<br />
towards social purposes, while businesses function better towards economical ends. Since in the<br />
Greek context there is no official definition of the term social enterprise (Ziomas et al, 2001, in<br />
Borzaga and Defourny (eds), 2004), it could be said that, a venture that employs traits of the two<br />
extremes, for-profits and non-profits (Dees, 1998), could operate, having social and economical ends.<br />
However, the majority of the respondents tend to consider a social enterprise as a socially oriented<br />
organisation, describing it as a non-profit organisation or a community organisation, while a few<br />
consider it as a business.<br />
3.3 Attitudes towards social entrepreneurship and social enterprises<br />
Interviewees reveal that the basic job motive is the salary in order for the individuals to satisfy their<br />
materialistic needs. However, they have mentioned that, social contribution can be additional job<br />
motive for the current managers. In the context of the companies’ mission they argue that their main<br />
purpose is to generate profits. Though, social recognition and creating better life conditions, through<br />
their products or services, are mentioned as other companies’ mission. Furthermore, interviewees<br />
state that, non-profit organisations and community organisations are important. Though, each of them<br />
may face operational problems and obstacles, or may be misunderstood in the context of the extent to<br />
which they are indeed non-profit. A possible collaboration between businesses and non-profit<br />
organisations is considered as necessary by the interviewed managers. In this way, malfunctions of<br />
the State or the non-profit organisations can be solved. However, they mention that the above can be<br />
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Panayiotis Ketikidis and Panagiotis Parcharidis<br />
realised only by companies that they have secured their operational costs or in general by big<br />
companies, and that, in such collaborations there is lack of communication.<br />
In the context of social corporate responsibility, interviewees reveal that, it is an important social<br />
practice in order for the conventional businesses to contribute to the society. Though, due to the<br />
current difficult financial situation, such policies could not be employed by small companies. Also,<br />
many interviewees refer to companies with corporate social responsibility as social enterprises. In<br />
addition, in terms of social enterprises hiring policies, although none of the managers has employed<br />
marginalised people, they welcome such a hiring policy, if the possible employee fulfills the<br />
requirements of the job. Also, the majority of the interviewees accept the volunteer work, and many of<br />
them have implemented it in their operations as student internships. However, some of them believe<br />
the volunteer work cannot be applied to for-profit companies.<br />
Further, interviewees state that, all the entrepreneurial traits (innovation, creativity, risk-taking and<br />
alertness) are necessary so as to identify and exploit an opportunity. In the context of private<br />
initiatives towards the social sphere, they claim that, since there is a gap they can fill it. They consider<br />
these initiatives as important and they mention that, they can be realised as joint ventures between<br />
companies or as collaboration with the State. Though, managers state that, companies cannot<br />
substitute the role of the State. At last, interviewees welcome organisations with double bottom line<br />
(profit generation and social ends). They state that these ends should be supplementary. Although<br />
double bottom line could be an ideal scenario, a company that has social ends could generate more<br />
profits. However, it is believed that for-profit companies have an indirect social purpose, through the<br />
payment of taxes to the State, which in turn will redistribute them with its social policies.<br />
3.4 Research limitations<br />
Generally, the main limitations of this paper are associated with the participants’ responses that might<br />
have been subjective, due to the understanding of the questions, and due to the introduction and<br />
translation across languages of relative new terms, despite the efforts to mitigate this risk by providing<br />
explanations on the subject. In the context of the quantitative part, the study was limited by the<br />
sample size, since generally, web-based surveys present low response rate (Cook et al, 2000). Also,<br />
the nature of the field, which mainly focuses on generation of theory and literature review, led the<br />
paper to be more based on concepts of the literature in order to design the web-questionnaire.<br />
Therefore, a more in-depth statistical analysis of relationships and correlations was not feasible to be<br />
provided by this study.<br />
4. Conclusions and recommendations for further research<br />
The topic of social entrepreneurship and social enterprises has emerged as a response to the<br />
economical, technological, political and demographical changes of the three last decades (Henton et<br />
al, 1997). Greece stands far behind in the execution and definition of these terms, and little research<br />
has been done in the Greek academic field (Defourny and Nyssens, 2008; Ziomas et al, 2001, in<br />
Borzaga and Defourny, 2004). This paper is a first step in examining social entrepreneurship in<br />
Northern Greece, contributing to the general knowledge of the field.<br />
The findings have demonstrated that Northern Greek for-profit companies seem to be positively<br />
inclined to social orientation. Though, interviews have revealed that problems may emerge in this<br />
direction. Also, there are indicators of social entrepreneurship and social enterprises among<br />
conventional businesses in Northern Greece, while managers’ attitude tends to welcome such<br />
practices. Additionally, the conceptualisation of social enterprises tends to non-profit organisations<br />
side for the respondents of the questionnaire. Although interviewees seem to comprehend social<br />
enterprises, there are misperceptions of the researched terms. Overall, the interviewees’ attitude<br />
towards social enterprises as a venture tends to be positive and as an activity in Northern Greece<br />
tends to be challenging, since various obstacles may occur in the Greek context. The findings of this<br />
study reflect tendencies and attitudes of the Northern Greek for-profit companies towards social<br />
entrepreneurship and social enterprises. It may be suggested that similar studies should be<br />
conducted in other Greek regions in order to examine the general Greek behavior towards the<br />
researched theme. Also, it would be interesting to carry out similar studies in specific sectors of the<br />
Greek industry in order to examine how the traits of social entrepreneurship are evaluated and<br />
comprehended by each of them.<br />
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Panayiotis Ketikidis and Panagiotis Parcharidis<br />
Future research should investigate and explore the conceptualisation of social entrepreneurship by<br />
non-profit or community organisations. This will permit the examination of how non-profits perceive<br />
this concept. Then, it may be feasible to conclude about a framework of social enterprises in the<br />
context of non-profits and for-profits point of view. In general, future research should develop a more<br />
specific definition about social entrepreneurship and social enterprises. This fact will strengthen the<br />
theoretical foundations on which researchers can step on, in order to carry out more advanced<br />
studies about these terms.<br />
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<strong>Entrepreneurs</strong>hip and the Dark Triad of Personality: How<br />
Narcissism, Machiavellianism, and Psychopathy Relate to<br />
Entrepreneurial Intention and Performance<br />
Matthias Kramer 1, 2 , Beate Cesinger 3 , Dominik Schwarzinger 3 and Petra Gelléri 3<br />
1<br />
Reutlingen University, Germany<br />
2<br />
Dublin City University, Ireland<br />
3<br />
University of Hohenheim, Stuttgart, Germany<br />
Matthias.Kramer@Reutlingen-University.de<br />
beate.cesinger@uni-hohenheim.de<br />
d.schwarzinger@uni-hohenheim.de<br />
petra.gelleri@uni-hohenheim.de<br />
Abstract: The Dark Triad of Personality (DT) - narcissism, Machiavellianism, and subclinical psychopathy - has<br />
recently attracted interest in management research. This paper aims at shedding light on how this cluster of three<br />
undesirable and interpersonally problematic behavior styles is linked to entrepreneurial intention and<br />
performance in business planning. For this purpose, we present findings from two empirical studies among<br />
<strong>Entrepreneurs</strong>hip students participating in a business plan competition. Our results show that narcissism and<br />
psychopathy are positively related to entrepreneurial intention, perceived desirability, and perceived feasibility.<br />
The examination of effects on performance criteria revealed different patterns for narcissism and<br />
Machiavellianism in business planning. A comparative analysis reveals that Machiavellians outperform<br />
narcissists. Their higher performance is not mirrored by an elevated interest in an entrepreneurial career but<br />
seems to emanate from their general competitive attitude. Although narcissists initiate more steps towards<br />
venture creation and are highly attracted by an entrepreneurial career, their desire and intention may be an<br />
expression of their self-enhancement and self-portrayal biases. Based on these results, we offer avenues for<br />
further research and implications for practitioners.<br />
Keywords: dark triad of personality, entrepreneurial personality, entrepreneurial intention, performance in<br />
business planning<br />
1. Introduction and research question<br />
Comprehensive meta-analyses have consistently found robust patterns for personality as a predictor<br />
for entrepreneurial behavior (e.g., Brandstätter 2010). Recently, a new research area on the Dark<br />
Triad of Personality – narcissism, Machiavellianism and subclinical psychopathy – has emerged in<br />
psychological personality research (e.g., Paulhus & Williams 2002). While other areas of<br />
management research have commenced investigating the dysfunctionality of the Dark Triad (e.g. van<br />
Fleet & Griffin 2006), its momentum in <strong>Entrepreneurs</strong>hip has yet not been examined. This paper aims<br />
at closing this gap by studying how narcissism, Machiavellianism and subclinical psychopathy relate<br />
to entrepreneurial intention and performance in early business planning. For this purpose we<br />
conducted two explorative empirical studies.<br />
Our aim is to contribute to the <strong>Entrepreneurs</strong>hip literature by extending personality research beyond<br />
the big five and to provide a more differentiated view on entrepreneurial personality. Further, while<br />
most prior research has focused on the Dark Triad’s dysfunctionality, our empirical findings suggest<br />
that certain aspects of these traits might be functional in the entrepreneurial context.<br />
2. Theoretical background<br />
2.1 The Dark Triad of Personality<br />
The Dark Triad of Personality (DT) reflects a cluster of three undesirable and interpersonally<br />
problematic behavior styles, sharing a socially malevolent character, behavior tendencies towards<br />
self-promotion, duplicity, exploitation, and manipulativeness (Lee & Ashton 2005). Empirical studies<br />
have shown the DT traits to be highly problematic in professional life, above all due to their linkage to<br />
counterproductive workplace behavior (Dahling, Whitaker & Levy 2009; Babiak, 2007; Judge, LePine<br />
& Rich 2004).<br />
Narcissism is characterized by dominance, exhibitionism, and exploitation as well as feelings of<br />
superiority and entitlement (Lee & Ashton 2005). Clinical characteristics include a grandiose sense of<br />
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Matthias Kramer et al.<br />
self-importance, exaggerated self-esteem, and fantasies of unlimited success and power (DSM-IV-<br />
TR; American Psychiatric Association 2000). These dispositions are – in a more or less moderate<br />
form – also incorporated in the subclinical conceptualization of narcissism (Chatterjee & Hambrick<br />
2007). Narcissistic executives are good at creating and seizing opportunities (Bass 1990), but also<br />
tend to engage in excessive risk-taking and grandiose initiatives (e.g., Kets de Vries 1994). They were<br />
found to prefer own power and prestige to the performance of the firm (e.g., Kets de Vries 1997).<br />
Machiavellianism portrays interpersonal strategies driven by deception, manipulation (Jakobwitz &<br />
Egan 2006), egotism, money, power, and competition (Jones & Paulhus 2009). Being highly resultoriented<br />
and pursuing merely their personal goals, people scoring high on Machiavellianism scales<br />
have been found to be more successful than low scorers because of their ability to focus on the best<br />
winning strategy in difficult situations where improvisation is required (Christie & Geis 1970; Fehr,<br />
Samsom & Paulhus 1992). Moreover, they are better off in unstructured work settings with scope for<br />
decisions and power (Gable, Hollon & Dangello 1992) and tend to choose business careers where<br />
competition is highly valued (Fehr, Samsom & Paulhus 1992).<br />
Psychopathy is described as a specific combination of problematic affective, interpersonal and<br />
behavioral features (Cooke, Michie & Hart 2006) including a grandiose sense of self-worth (Hare<br />
1999) and thrill-seeking behavior (Paulhus & Williams 2002). Psychopaths are characterized by<br />
extroverted charm (Hare 1999) and charisma (McCormick & Burch 2005), and inspire people to have<br />
confidence in them (Ray & Ray 1982). They are attracted by power (Hercz 2001), prestige, and<br />
control (Deutschman 2005). In contrast to the popular opinion, psychopaths may achieve a high social<br />
status, because they are recognized as intelligent, charming, ingenious, and entertaining (Hare 1999).<br />
However, psychopathy also results in short-term decision making to maximize one’s own wealth and<br />
power (Boddy 2006).<br />
2.2 Entrepreneurial intention<br />
Entrepreneurial intention (EI) is a fundamental, legitimate and single construct in <strong>Entrepreneurs</strong>hip<br />
theory and research (e.g., Krueger, Reilly & Carsrud 2000). It is not a proxy for entrepreneurial<br />
behavior, but rather relates to potentially enterprising individuals, their cognitions of business<br />
opportunities, and (future) decisions of whether or not to create new ventures (Thompson 2009). Not<br />
all individuals have such intentions (Krueger 2007) and EI reflects one’s objective to pursue an<br />
entrepreneurial career without a definite temporal point of occurrence (Pruett et al. 2009). One<br />
subfactor of EI, ‘perceived desirability’, reflects the individual and social attractiveness of becoming an<br />
entrepreneur; ‘perceived feasibility’ relates to how one perceives his/her ability to successfully pursue<br />
an entrepreneurial career. The ‘propensity to act’ reflects the willingness to pursue a decision taken,<br />
and captures beliefs in oneself’s power to draw things (Krueger 1993).<br />
2.3 Performance in business planning<br />
Writing a business plan is decisive for the future fate of start-ups (Franke et al. 2006; Karlsson &<br />
Honig 2009). Furthermore, raising interest in a business idea is relevant for venture capitalists’<br />
investment decisions (Hall & Hofer 1993). Research indicates that venture capitalists base their<br />
judgment primarily on the first few pages of a plan (Zacharakis & Shepherd 2001). Moreover, the<br />
quality of the written business plan is considered as an important indicator of a venture’s potential for<br />
success (Chen, Yao & Kotha 2009). Additionally the presentation of a business plan is a process in<br />
which investors have to be persuaded (Elsbach & Kramer 2003). Hence, the quality and passion for a<br />
business idea strongly influences financiers’ decisions (Chen, Yao & Kotha 2009).<br />
3. Study 1: Relationship between the Dark Triad and Entrepreneurial Intention<br />
Study 1 explores whether and how the DT affects EI. According to our theoretical discussion,<br />
individuals with a higher than average manifestation of the DT have tendencies toward self-promotion<br />
and are attracted by status, dominance, prestige, and monetary aspects, which might be well<br />
reflected in an entrepreneurial career, thus being particularly attractive for these individuals.<br />
Therefore, we propose:<br />
Hypothesis 1: The DT traits and EI are positively correlated.<br />
Hypothesis 2: The DT traits and perceived desirability are positively correlated.<br />
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Matthias Kramer et al.<br />
Having an extreme belief in their self, narcissists and psychopaths should perceive an entrepreneurial<br />
career as feasible, allowing us to propose:<br />
Hypothesis 3: Perceived feasibility is positively correlated with narcissism and psychopathy.<br />
The aforementioned goal- and result-orientation of Machiavellians and narcissists’ and psychopaths’<br />
overestimation of their abilities both result in a strong belief to accomplish one’s formulated goals.<br />
Hence, we assume that high DT scorers exhibit a strong propensity to act. Higher scores in DT traits<br />
are not only associated with an increased EI and desire to found but also with more steps taken<br />
towards realizing this endeavor.<br />
Hypothesis 4: Propensity to act and the DT traits correlate positively.<br />
Hypothesis 5: The number of steps initiated for venture creation correlates positively with the DT.<br />
3.1 Measures<br />
DT. To measure narcissism, Machiavellianism and subclinical psychopathy, factor analytically derived<br />
short versions of the German Narcissistic Personality Inventory (NPI; Schütz, Marcus & Sellin 2004),<br />
a Machiavellianism Scale (MK; Cloetta 1972) and the Psychopathy Inventory ‘Kieler Psychopathie<br />
Inventar – Revision’ (KPI-R; Köhler, Hinrichs & Huchzermeier 2006) were administered. Unless<br />
otherwise mentioned, all items were rated on a seven-point Likert scale.<br />
Participants rated their identification with aspects of the DT with 12 items for narcissism (e.g., ‘I am a<br />
born leader’), 13 items for Machiavellianism (e.g., ‘For me it’s easy to manipulate other people’), and<br />
44 items for psychopathy (e.g., ‘People say that I am cold or heartless’). Items of each scale were<br />
averaged to create an index of narcissism (NAR: α = .87), Machiavellianism (MACH: α = .60),<br />
psychopathy (PSYC: α = .86,) and three standard psychopathy sub-factors (see Cooke & Michie<br />
2001) of arrogant and deceitful interpersonal style (ADIS: α = .81; 16 items), deficient affective<br />
experience (DAE: α = .82; 17 Items), and impulsive and irresponsible behavioral style (IIBS: α = .81;<br />
11 items).<br />
EI. We measured the general individual EI by one item (‘Have you ever considered starting your own<br />
business?’), perceived desirability given the statement ‘If you started your own business how would<br />
you feel’ by three items (e.g., ‘I would love doing it’) (α = .62), and perceived feasibility by five items<br />
(e.g., ‘How certain of your success would you be?’) (α = .71) according to Krueger (1993). Propensity<br />
to act was assessed by Burger and Cooper’s (1979) desirability of control scale by 19 items (e.g., ‘I<br />
prefer a job where I have a lot of control over what I do and when I do it’) (α = .72). Since experience<br />
and information received about venture creation strongly influences perceived desirability and<br />
feasibility (Petermann & Kennedy 2003), we additionally assessed the number of steps taken for<br />
setting up an own venture (e.g., ‘nothing’, ‘written a business plan’).<br />
3.2 Sample and instrument<br />
We approached 185 students from <strong>Entrepreneurs</strong>hip education modules who additionally participated<br />
in a state-wide business plan competition. 60 individuals (50% male) voluntarily completed the online<br />
survey (response rate 30.83%). Participants were aged 21-43 years (mean = 25.6, SD = 3.6) and<br />
were of high educational level (77% hold a first university degree, e.g. bachelor, diploma).<br />
3.3 Results<br />
DT scales were intercorrelated with r = .32 for NAR and MACH, r = .60 NAR and PSYC, and r = .50<br />
MACH and PSYC. All correlations are significant on 1%-level (below r = .33 on 5%-level), and are in<br />
line with previous findings (e.g., Lee & Ashton 2005; Paulhus & Williams 2002).<br />
Table 1 shows correlations of the DT and psychopathy subfactors with (1) general intention, (2)<br />
perceived desirability, (3) perceived feasibility, (4) propensity to act, (5) the amount of information and<br />
training received for creating a venture, and (6) the number of steps taken for setting up a venture.<br />
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Table 1: The Dark Triad of Personality and Entrepreneurial Intentions<br />
NAR MACH PSYC ADIS DAE IIBS<br />
(1) General Intention .26 .04 .30* .22 .28* .13<br />
(2) Perceived Desirability .47* .23 .54** .41* .40* .02<br />
(3) Perceived Feasibility .48* .16 .57** .36 .48* .09<br />
(4) Propensity to act .59** .10 .34 .53** -.06 -.13<br />
(5) Steps .33* .00 .20 .27* .25 -.11<br />
Note. n = 55 for (1), 60 for (2), 59 for (3), 25 for (4), (5).*p < .05; **p < .01<br />
We found significant correlations between EI and PSYC (r = .30) and its subfactor DAE (r = .28). For<br />
NAR and EI we found a moderate (r = .26) but not significant effect. Perceived desirability was related<br />
to NAR (r = .47), PSYC (r = .54), ADIS (r = .41), and DAE (r = .40). Furthermore, perceived feasibility<br />
was significantly related to NAR (r = .48), PSYC (r = .57), and DAE (r = .48). Propensity to act was<br />
again positively related to NAR (r = .59) and the psychopathy subfactor ADIS (r = .53). Despite the<br />
fact that PSYC and entrepreneurial activities did not correlate significantly, NAR (r = .33) and ADIS (r<br />
= .27) showed a significant relation to the steps taken for venture creation.<br />
4. Study 2: Relationship of the Dark Triad to business planning performance<br />
Prior empirical evidence suggests negative effects of the DT in professional contexts. As individual<br />
performance largely depends on individual goals (Locke & Latham 1991) and start-ups center around<br />
the founder, the DT should have direct implications on various performance criteria already in early<br />
business planning (e.g., financial planning). According to our theoretical discussion there is evidence<br />
that people with high scores in the DT are able to present themselves and their ideas convincingly.<br />
Thus, when it comes to the presentation of a business plan, we assume that the DT has positive and<br />
functional effects and propose:<br />
Hypothesis 1: Performance in early business planning correlates negatively with DT traits.<br />
Hypothesis 2: Planning figures for capital requirement, turnover, and profit in business plans correlate<br />
positively with DT traits.<br />
Hypothesis 3: Performance in the presentation of business plans correlates positively with DT traits.<br />
4.1 Measures<br />
DT. see above.<br />
Performance. We derived a list of critical formal and content-related performance criteria for the<br />
written business plan and presentation with relevance to successfully starting and financing a new<br />
venture. The overall quality of the plan was measured with one item (‘How do you rate the overall<br />
quality of the business plan?’), the ability to raise interest in the idea by one item (‘Does the Executive<br />
Summary raise your interest in the business idea and to read further?’), and quality of the content of<br />
the business plan by two items ((a) to what extent students were able to transport a unique selling<br />
proposition and (b) how well did they elaborate a competitive differentiation). Formal quality criteria<br />
included design and layout of the business plan, and completeness of the appendix. Measures for<br />
capital requirement, turnover and prospected profit were excerpted from the students’ business plans.<br />
Additionally, we measured passion for the business idea (‘How passionate was the entrepreneur for<br />
the business idea?’), professionalism (‘How professional did the entrepreneur react to questions and<br />
criticism in the discussion?’), and whether the presentation was perceived as exaggerated (‘How<br />
adequate were gestures and expressions during the presentation?’). Again, we included an overall<br />
rating of the presentation (‘How do you rate the overall quality of the presentation?’). All items<br />
concerning formal aspects, content of the business plan, and the presentation were jointly rated on an<br />
11 point scale by two lecturers who had supervised the <strong>Entrepreneurs</strong>hip education modules.<br />
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Matthias Kramer et al.<br />
A subsample of n = 35 entrepreneurship students who had already participated in our online survey<br />
(study 1), developed own business ideas into business plans and presented them in a business<br />
planning competition to an expert jury with the aim to win funding for realizing these ideas.<br />
4.3 Results<br />
Concerning the content criteria for the quality of the business plan, only ADIS correlated significantly<br />
with the ability to raise interest in the business idea (-.35; p < .05). With regard to formal criteria for the<br />
business plan, we found that NAR correlated negatively with the completeness of the appendix (-.38;<br />
p < .05). In contrast to our first hypothesis, we found that MACH correlated positively (.39; p < .05)<br />
with the overall quality of the business plan. Although we found consistent positive correlations<br />
between NAR and key financial planning figures, these relationships are not significant. Regarding<br />
our third hypothesis, the psychopathy subfactor IIBS correlates negatively with the adequacy of<br />
gestures and expressions during the business plan presentation (-.37, p < .05). All other direct<br />
relationships were not significant (See table 2 for an overview of all results).<br />
Table 2: The Dark Triad of Personality and business planning performance<br />
NAR MACH PSYC ADIS DAE IIBS<br />
Business Plan Content<br />
Raising interest -.28 .16 -.12 -.35* .11 .02<br />
USP -.16 .18 -.02 -.19 .18 -.01<br />
Competitive differentiation -.31 .31 -.12 -.33 .16 -.05<br />
Capital requirement .25 -.10 .00 .24 -.16 -.11<br />
Turnover .20 -.07 .01 .16 -.14 -.04<br />
Profit .20 -.08 .00 .16 -.14 -.04<br />
Business Plan Form<br />
Layout -.32 .31 .04 -.30 .30 .08<br />
Appendix -.38* .31 -.10 -.29 .20 -.11<br />
Business Plan Overall Quality -.21 .39* .00 -.17 .25 -.08<br />
Presentation Skills<br />
Passion -.19 .02 -.29 -.19 -.09 -.31<br />
Gestures -.25 .27 -.22 -.09 .03 -.37*<br />
Discussion -.01 -.09 -.23 -.04 -.19 -.22<br />
Presentation Overall Quality -.37 .22 -.22 -.25 .07 -.25<br />
Note. n = 29 - 35. *p < .05<br />
Furthermore, we observed significant differences between the DT traits in their correlations to all<br />
performance criteria. We found that NAR and MACH significantly differ from each other (5%-<br />
significance level for z-values below -1.96) in their relation to the quality of design and layout of the<br />
business plan (MK: r = .31/ NPI: r = -.32; z = -2.28), and the completeness of the appendix (MK: r =<br />
.31/ NPI: r = -.38; z = -2.50). Further significant differences between MACH and NAR appeared with<br />
regard to the content of the business plan attenuating a clear competitive advantage (MK: r = .31/<br />
NPI: r = -.31; z = -2.4) and for the overall rating of the business plans’ quality (MK: r = .39/ NPI: r = -<br />
.21; z = -2.15). All of these criteria were significantly better for students with higher scores in MACH<br />
than for students with higher scores in NAR. The same applies to the overall quality of the<br />
presentation (MK: r = .37/ NPI: r = -.22; z = - 2.07).<br />
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Matthias Kramer et al.<br />
5. Conclusions and research implications<br />
Our findings and our research agenda attempt to close the research deficit about the momentum of<br />
the DT in <strong>Entrepreneurs</strong>hip. In the present paper we examined the relationship between the DT traits<br />
and EI, and selected performance criteria in business planning among <strong>Entrepreneurs</strong>hip students who<br />
participated in a state-wide business plan competition.<br />
We found promising results for the relation between EI, perceived desirability and narcissism,<br />
respectively with psychopathy in Study 1. We conclude that narcissists and subclinical psychopaths<br />
apparently perceive an entrepreneurial career to fulfill their aspirations for status, dominance,<br />
prestige, success, power, and money. Missing effects on Machiavellianism and EI presumably rely on<br />
how realistically narcissists, Machiavellians, and subclinical psychopaths approach life.<br />
Machiavellianism is associated with a world view of pragmatic tough-mindedness (Jones & Paulhus<br />
2009) and a lack of gross psychopathology (Christie & Geis 1970) which may attenuate their EI and<br />
perceived desirability. In contrast, narcissists and psychopaths exhibit unrealistic and inflated views of<br />
their abilities (e.g. Chatterjee & Hambrick 2007; Gabriel, Critelli & Ee 1994). This difference might also<br />
explain the non-significant correlation between perceived feasibility and Machiavellianism: while the<br />
unrealistic self-perception makes subclinical psychopaths and narcissists believe to be potentially<br />
successful entrepreneurs, Machiavellians do not underestimate the challenges associated with<br />
venture creation. The relationship between propensity to act and narcissism, and ADIS may reside in<br />
subjects’ illusions of power and their self-perceived ability to have accomplished goals as intended.<br />
Narcissism and ADIS were positively related to the steps initiated for founding a venture. We believe<br />
that their motivation of self-promotion, future prestige and wealth are not restricted to an elevated<br />
intention, but lead to real attempts to start a venture.<br />
Results from Study 2 show a differentiated effect of the DT on performance in early business<br />
planning. We found the expected negative correlations for ADIS and narcissism with content and<br />
formal performance criteria in business planning. In contrast to our hypothesis Machiavellianism has<br />
positive effects. This pattern is also discernable in the differences between narcissism and<br />
Machiavellianism, and their correlations to further performance criteria. Hence, a certain degree of<br />
Machiavellianism is obviously beneficial when starting an entrepreneurial career, because this trait is<br />
associated with a competitive attitude in life (Christie & Geis 1970), task orientation and an ability to<br />
perform in difficult and ambiguous situations (Fehr, Samsom & Paulhus 1992). On the other hand, we<br />
assume that the narcissistic overestimation results in less effort and minor results in developing<br />
business plans. Aside from a general and non-significant positive tendency for narcissism, our results<br />
did not confirm the correlation between the DT and key parameters in financial planning, possibly due<br />
to methodological reasons. Furthermore, the proposed positive relationship between the DT and<br />
performance in the presentation of the business plan was not confirmed by our results.<br />
Altogether, our data indicate the following pattern: narcissists score high in aspects which are related<br />
to their self-portrayal and their quest for self-enhancement such as the general intention and<br />
desirability to become an entrepreneur. In contrast, when they are confronted with tasks which require<br />
an enduring effort, such as writing a business plan, they show inferior performances. Although<br />
narcissists have initiated more steps towards venture creation, their intention might be limited to a<br />
mere fancy about an entrepreneurial career but they might fail to successfully start a firm. This<br />
behavioral pattern might accord to Thompson (2009) who states that individuals may have a<br />
whimsical desire to become entrepreneurs yet never go beyond. Machiavellians’ by trend higher<br />
performance does not result from a domain-specific interest in entrepreneurship, but rather from the<br />
general competitive situation and their need to succeed in any situation. Overall, our results support<br />
that the DT relates to performance in business planning.<br />
Of course there are limitations to our study, foremost by the student sample and its small size. Further<br />
data collection is on-going to resolve the latter limitation. Associated with the student sample and<br />
applying Krueger’s (1993) model of EI is the limitation that we did not assess actual performance<br />
among entrepreneurs and we do not have any implications of the DT on actual entrepreneurial<br />
behaviour. Our research is at an early stage and we encourage scholars to engage in theory building<br />
efforts by case study designs. While studies in management merely highlight dysfunctional aspects of<br />
the DT in organizational contexts, we assume – based on the increased EI and steps towards venture<br />
creation – that these (generally dysfunctional) traits can have functional aspects in <strong>Entrepreneurs</strong>hip.<br />
Busenitz and Barney (1997) for example show that entrepreneurs’ overconfidence in decision making<br />
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Matthias Kramer et al.<br />
in comparison to managers enables them to meet the challenges of decision making under high<br />
uncertainty. However, the DT’s inherent motives for power, money, and prestige may not suffice for a<br />
sustainable growth path, but may also result in self-centered behavior, excessive risk taking and<br />
irrational decision making. These assumptions, yet empirically not investigated, call for psychological<br />
diagnostic methods to assess the DT’s context-specific effect on entrepreneurial behavior along the<br />
venture cycle.<br />
Despite these limitations, our research has implications for practitioners. Venture capitalists and<br />
counselors should be aware that a displayed high desirability to become an entrepreneur might not be<br />
a sincere interest, but could be a manifestation of narcissistic or psychopathic tendencies. Since<br />
venture capitalists often exhibit an overconfidence bias in investment decisions (Zacharakis &<br />
Shepherd 2001) we caution that they could exacerbate their unrealistic expectancies with dark<br />
personality founders resulting in poor performances or failure.<br />
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542
The Hidden Dimensions of Cognition in the Production<br />
Processes of Innovation<br />
Erwan Lamy and Noreen O’Shea<br />
Advancia, Paris, France<br />
elamy@advancia-negocia.fr<br />
noshea@advancia-negocia.fr<br />
Abstract: The aim of this communication is to highlight the ways in which the hidden dimensions of cognition,<br />
such as intuition, tacit knowledge, know-how, serendipity and habitus, contribute to the production processes of<br />
innovation. A typology of innovation is first proposed, followed by a framework in which the cognitive and creative<br />
processes inherent in these hidden dimensions are presented. A juxtaposition of both typologies enables a<br />
preliminary matching exercise, pointing out possible links between the different types of innovation identified and<br />
the knowledge generated through the articulation of these cognitive processes.<br />
Keywords: cognition, innovation, typology, knowledge<br />
1. Introduction<br />
The question about where innovation comes from, from which part of the mind it emanates is of<br />
interest to many. Within an economy which depends on innovation for social, technological and<br />
economic progress, in which ‘an innovation society’ is a requisite for future development on all levels,<br />
the answers that may shed light on such a question are worthy of attention. There are many<br />
contenders willing to engage in this issue. Business schools include creativity sessions in their<br />
programmes to stimulate the innovative capacities of their students. Strategies and tactics for<br />
innovative business practices are high on the list of ‘best-sellers’ in specialized bookshops. Research<br />
laboratories and teams invest time and money in attempting to unearth the mysteries of the innovative<br />
spirit. The academic discipline developed around entrepreneurship has focused on clarifying the<br />
triggers that characterize entrepreneurial behavior, actions and outcomes.<br />
All of these studies, research programmes and publications have produced significant results.<br />
However, the overall approach to understanding which cognitive mechanisms trigger innovation<br />
remains fuzzy because there is still no clear framework enabling one to understand the contributions<br />
of such mechanisms to the innovation process. We believe that without such a framework, continued<br />
research and reflexion on the subject will remain unfocused, leaving a whole range of possible<br />
intellectual sources to innovation in the dark.<br />
The purpose of this paper is to provide such a framework. We will begin by revisiting the notion of<br />
innovation, pinpointing the essential elements which define it (section 1). We will then move on to<br />
highlight the different ways in which the human mind can contribute to the production processes of<br />
innovation (section 2). We will specifically focus on identifying the circumstances under which the<br />
hidden dimensions of cognition come into play. This will enable us to provide a conceptual mapping of<br />
these cognitive dimensions as possible catalysts that influence the innovative process (section 3). A<br />
set of conclusions on the results of this exercise will complete the paper.<br />
2. A typology of innovation<br />
The Oslo manual (OECD, 2005) has provided a definition of technological innovation, (which we<br />
believe also covers organizational innovations) and which we will use as a starting point. The<br />
definition is as follows:<br />
Technological product and process (TPP) innovations comprise implemented technologically new<br />
products and processes and significant technological improvements in products and processes. A<br />
TPP innovation has been implemented if it has been introduced on the market (product innovation) or<br />
used within a production process (process innovation) (ibid: ch. 3, p.31).<br />
Two dimensions with regard to innovation are underlined: a new idea and its implementation. We will<br />
begin by exploring the first dimension from the scientific viewpoint of its design, such as that used for<br />
a new car or a computer. In itself, newness is a vague notion. May one consider that an idea is new<br />
because it has been successfully transformed into a product? It stands to reason that a new product,<br />
similar in every way to an older version is not innovative. The distinction between initiation and<br />
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Erwan Lamy and Noreen O’Shea<br />
imitation has been made by Baumol (1986), whereby new products are defined by their position on a<br />
continuum (Cheah, 1990), anchored at one end by innovations that are truly novel and at the other by<br />
innovations that are simply refinements of something that already exists. Thus, does the novelty or<br />
perhaps more appropriately, originality of a concept or idea, lie in the fact that it is similar to no other?<br />
How is this possible? As Heraclite (c. 542 BC – c. 540 BC) reminds us, one never bathes twice in the<br />
same river! Taking this further, it can be said that an idea which springs to the mind of an individual is<br />
in no way similar to that of any other idea, because of the particular circumstances and state of mind<br />
and perception at the moment the idea emerged. This leads to examining newness of concept in<br />
terms of its degree of dissimilarity with older versions, reviving the still unresolved question of the<br />
objective versus subjective nature of opportunity discovery and recognition (Kirzner, 1999;<br />
Schumpeter, 1983; Alvarez & Barney, 2007), rendering the specific threshold level around which<br />
originality can be determined, difficult to establish.<br />
Studying newness of concept in terms of its importance encounters similar difficulties. The classic<br />
distinction between radical and incremental innovations (Tödtling et al, 2009) does not deal with the<br />
issues of intuition and subjectivity. There is no doubt that the steam engine is a significantly more<br />
important innovation than the Dyson but is such a categorization and its generalization to all<br />
innovations, relevant? Are Smartphones a radical innovation or simply an improvement on existing<br />
mobiles? Do mobile phones count as radical or incremental innovations? Furthermore, the notions of<br />
newness and importance remain relative. What passes for new in a given organization or region may<br />
not be so, if considered on a wider level. Before appearing as a novelty in the Western world in the<br />
15th century, printing already existed in Asia. Similarly, what degree of importance do historians who<br />
study technical developments from the wheel to the computer, assign to perceived innovations such<br />
as Iphones and Ipods?<br />
A whole range of technical, psychological, social and economic issues are raised when determining<br />
newness and importance of concept, requiring multidimensional levels of analysis. As a characteristic,<br />
newness does not enable one to distinguish between different types of innovation that emerge, nor<br />
does it call on varying degrees of intellectual and cognitive input. The same mechanisms are<br />
orchestrated to produce innovation, whether of the radical or incremental kind.<br />
The second dimension defining innovation – implementation - is more helpful in the construction of<br />
our framework, although it also requires analysis to shed light on its contribution to our typology of<br />
innovation. Inherent in this dimension is the notion of usefulness (Bozeman & Link, 1983). However,<br />
usefulness cannot be confused with utilization. A significantly high number of new product<br />
developments fail to reach market (McMath & Forbes, 1998; Bobrow & Shafer 1987; Cooper, 1975).<br />
For example, Apple’s Newton (an early line in personal digital assistants) was a commercial failure<br />
due to its high price and large size but its handwriting recognition feature, even though flawed at the<br />
outset, was certainly innovative in its time. Taking into account the temporal dimension (from concept<br />
through to market), can one link innovation to a new product that has not yet reached market, as was<br />
the case, for example, with the advertising campaign announcing the advent of the portable<br />
computer? Strict adherence to the Oslo manual would render this difficult, however artificial this may<br />
appear. In fact, it is quite common to highlight the innovative qualities of a new product or process<br />
before it arrives on the market. Witness the present discourse on nanotechnologies.<br />
What distinguishes innovation from its previous phase of invention is the existence of a project to<br />
implement it, but again the lines are blurred if one tries to determine the particular moment during<br />
which an invention is transformed into an innovation because project implementation is envisaged.<br />
However, the notion of implementation is more useful than that of newness or importance of concept,<br />
in determining different types of innovation. Two situations may be distinguished: when the project for<br />
implementation precedes the emergence of a concept to carry it forward, or when the project is<br />
designed following the emergence of the concept. In the first case, project implementation may be<br />
designed requiring the search for a relevant, still unknown idea in order to respond to a specific<br />
demand. This demand may require a new product or process to solve a particular problem, or it may<br />
concern the search for optimizing an existing system, structure or framework (neither of which are<br />
mutually exclusive nor necessarily linked). For both searches, the method used can be either scientific<br />
or empirical, the former of which depends on mobilizing scientific knowledge. When the idea first<br />
emerges, several sources can be identified. Serendipity may have played a role in inadvertently<br />
pointing out the value of a new idea. This has been defined as “the accidental discovery of something<br />
that, post-hoc, turns out to be valuable” (e Cunha et al, 2010:320). A well-known example in the<br />
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literature is that of Fry (Fry, 1987), a chemist at 3M and founder of Post-it notes, who was looking for<br />
a bookmark technique to enable him to find his place in the bible during choir singing sessions and hit<br />
upon the idea of using adhesive for the purpose. The use of intuition, dreams or other mechanisms<br />
generated through creative thinking may also contribute. Isaack, following Jung (1924), defines<br />
intuition as “that psychological function which transmits perceptions in an unconscious way” (1978:<br />
919, italics in the original). Using the ‘feelings, hunches, guesses’ that are generated through the<br />
perception, an intuition forms rapidly, leading to a state of knowing, without relying on explicit analysis<br />
to get there (Isaack, 1978). The idea can also emerge, following the mobilization of either empirical or<br />
scientific knowledge. It is this study of the sources that generate a new idea which enables us to<br />
design our framework and propose a first version of our typology for innovation, as Table 1 shows.<br />
Table 1: Framework for typology of innovation<br />
For each of the eight types of innovation identified, we can now discuss the ways in which the<br />
intellectual mechanisms come into play. To guide this discussion, three dimensions of innovation are<br />
used: the actors involved in the innovation process, the rules guiding the innovation process and the<br />
overall context in which it occurs.<br />
Three categories of actors can be distinguished: the individual, the group and the system. The<br />
individual entrepreneur, of the Schumpeterian variety, exemplifies this first category. The second<br />
refers to collective innovations, resulting from the aggregation of actions generated by several<br />
individuals. Calling on Goldman’s definition of systems-oriented social epistemology (2010), the third<br />
category, often neglected, can be defined as the system, made up of a formally constituted collective<br />
or group whose remit is to innovate. An R&D department in a given organization is an example of<br />
such a system, as opposed to a group of employees working on innovation issues. The latter is not<br />
commissioned to produce innovation process and, as such, is not bound by the specific set of rules<br />
pertaining to such work. However, a group of people officially part of an employee-driven innovation<br />
programme does constitute a system.<br />
The rules which guide and organize innovation processes are not only applicable to systems; they<br />
also exist for the first two categories and can be of two kinds: explicit and implicit. The rules provide a<br />
grammar of action, determining or conditioning the ways in which to carry out the activities inherent in<br />
the process. The famous coffee machine syndrome, which enables employees to get together and to<br />
have informal exchanges and discussions, potentially leading to the generation of new ideas, is one<br />
example of these rules, of the implicit kind. Other more explicit types of rules come into play,<br />
particularly when the innovation process is being formalized, requiring the use of roadmaps or the use<br />
of problem-solving tools such as TRIZ (Altshuller, 1973). Finally, the innovation process is carried out<br />
in a given context, with multiple interactions from the political, cultural, economic or social dimensions<br />
in presence. Inclusion of these three dimensions enriches our framework, as can be seen in Table 2<br />
below.<br />
This framework should enable us to situate the different intellectual mechanisms that come into play<br />
in the production processes of innovation. For each type of innovation, and taking into account each<br />
dimension, we can explore these mechanisms and pinpoint the place of the hidden dimensions of<br />
cognition, particularly that of the role of tacit knowledge.<br />
3. Innovation and intellectual mechanisms<br />
In order to analyze and position the intellectual mechanisms in use in the production of innovation, we<br />
will first present a typology to clarify these sources. Three types can be identified: affective processes,<br />
creative processes and knowledge sources, constituting the overall range of cognitive activity. It<br />
stands to reason that overlapping will occur, as the production of knowledge calls on emotions and<br />
creative processes can mobilize knowledge sources. Affective processes are comprised of emotions<br />
(generally considered as intentional or target-centered, short-lived responses to an event and charged<br />
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with a high degree of intensity, (reported by Gooty et al, 2010)), affects (which are not intentional,<br />
have longer-lasting states and with a lower degree of intensity (ibid)) or feelings (a more complex<br />
affective state than emotions, coupled with a dimension for representation). All of these play an<br />
important role in the production of innovation processes, particularly as they enable us to perceive our<br />
values and preferences, including those considered rational.<br />
Table 2: Framework for typology of innovation<br />
Baron & Tang (2011) identify a link between positive affect and creativity processes, highlighting the<br />
fact that it facilitates the switch between alternative cognitive sets; broadens cognitive categories and<br />
enhances “unusual or remote associations” (2011:51), all of which are considered components of the<br />
creative process. Moreover, and building on Amabile’s work (1996), the same authors note a positive<br />
link between creativity and innovation, in that the new ideas and concepts that are generated by the<br />
former, fuel the latter (Baron & Tang, 2011). Creative processes call on a whole range of mental<br />
mechanisms, about which more theoretical clarification is required. Associationist theory underlines<br />
the connections people can make between disparate ideas. Creativity builds on such associations<br />
through the use of analogies, metaphors and imitations, but also mobilizes the ideas that emanate<br />
from intuition and dreams, in which imagination plays a central role in generating original ideas.<br />
Reasoning and deduction processes are also aided by creativity in cases of application of knowledge<br />
or when one derives a new idea from an older one. This can be a constructive process (for example,<br />
when inferences are made from the findings of unpublished research) or it may be destructive, when<br />
new knowledge emerges through breaking with an existing mental model, as was the case when<br />
Einstein discovered the theory of relativity by abandoning the notion of absolute space and time.<br />
Concerning knowledge sources, we will focus on propositional knowledge, know-how and tacit<br />
knowledge. We will also explore the notion of habitus (Bourdieu, 1990) which refers to the personal<br />
knowledge that one develops through everyday interactions within a given social field. We call on the<br />
classic definition accorded to propositional knowledge, as that of justified, true belief (since Plato).<br />
Five sources contribute to this knowledge type: perception (I know that this apple is green because I<br />
can see it); memory (I know that my keys are on the table because I remember putting them there);<br />
logical reasoning (I know that my student will have to repeat because she got a bad mark and this<br />
means she will not have enough credits for the year); introspection (I know that I am, because I think<br />
and no amount of skepticism can change that); testimony (I know that the earth turns around the sun<br />
because I read that in a book on astronomy).<br />
As regards know-how and habitus, it would be reasonable to consider that they can be acquired<br />
though experience and routine habits. Because this source of knowledge is codifiable, it would be<br />
equally reasonable to presume that testimonials (both written and oral) can help in the transfer<br />
process. However, tacit knowledge, by its very nature remains non articulable and non-codifiable,<br />
making the mechanisms for its acquisition difficult to understand. Experience, apprenticeship and<br />
learning appear to be conducive in providing interactions that bring tacit knowledge to the fore. As<br />
Tsoukas points out “Tacit knowledge cannot be ‘captured’, ‘translated’, or ‘converted’ but only<br />
displayed – manifested in what we do” (2005:158).<br />
This leads us to propose the following typology of intellectual mechanisms, including its hidden<br />
dimensions (underlined in grey) inTable 3 below:<br />
These different mechanisms come into play in each of the eight types of innovation presented in the<br />
typology in Table 2 above. Obviously, they do not function separately, each in their own individual<br />
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way but intermingle in order to contribute to the production of innovation, as will be seen in the<br />
following section.<br />
4. The hidden dimensions of cognition in the production processes of<br />
innovation<br />
It is beyond the scope of this communication to carry out an exhaustive analysis which would result<br />
from the matching of the innovation typology with the corresponding intellectual mechanisms. Our<br />
main purpose here is to begin the exploration of the ways in which the juxtaposition of the two<br />
typologies can inform our reflexions on the role and place of these mechanisms in contributing to the<br />
production phase of innovation.In the case of innovations developed using scientific-based problemsolving<br />
approaches (type 1), propositional knowledge, such as theories and experimental data, is the<br />
main type of knowledge mobilized. Nevertheless, the hidden dimensions of cognition also play a role.<br />
On an individual level, intuition and tacit knowledge help to identify the relevant theoretical and<br />
conceptual tools required for breaking down and understanding the different components of the<br />
problem under study. Choices of particular methods over others may also be guided by the<br />
unconscious use of personal values and preferences With regard to the role of tacit knowledge in<br />
innovation, Nightingale (1998), in a theoretical paper that analyzes the contributions of science to<br />
innovation, underlines the output of science as “the tacit ability to understand and interpret patterns of<br />
behavior in nature…this ability cannot be directly applied to produce technology, but does play a vital,<br />
indirect role in innovation” (1998:689). Describing knowledge as a cognitive process, Nightingale<br />
deftly depicts the tacit background knowledge accumulated over time and through experience by<br />
individuals and which enables them to “recognize patterns and make connections between memories”<br />
(1998:693), reinforcing learning through problem-solving activities. Creative processes can also<br />
participate in generating innovative scientific methods for problem-solving, but in this particular type of<br />
innovation, their contribution is secondary as it is focused on the methods employed rather than the<br />
innovation outputs envisaged. For innovations of this kind, creative processes do not play a direct<br />
role.<br />
Processes State<br />
Association Metaphor<br />
Analogy<br />
Association<br />
Creative processus<br />
Dreams<br />
Intuition<br />
Imagination<br />
Application<br />
New ideas,<br />
New « concepts »<br />
Derivation<br />
Perception<br />
Memory<br />
Creative<br />
Destructive<br />
Reasoning<br />
Propositional<br />
Cognitive Introspection<br />
processes Testimonial<br />
Knowledge<br />
Experience<br />
Know-how<br />
Testimonial<br />
and Habitus<br />
Experience Tacit<br />
Affective processes Emotions<br />
Affects<br />
Sentiments<br />
Values and preferences<br />
Table 3: Typology of intellectual mechanisms with hidden dimensions<br />
From a collective view-point, the context in which the innovative strategy is being managed will<br />
determine the role of the hidden dimensions of cognition. The collective mobilization of scientific<br />
knowledge will vary considerably in a small ‘low-tech’ firm as compared with that of an R&D<br />
department in a large firm and the activation of ‘habitus’ or one’s dispositional dimension will also<br />
intervene. Habitus, says Bourdieu, “ensures the active presence of past experiences, which,<br />
deposited in each organism in the form of schemes of perception, thought and action, tend to<br />
guarantee the ‘correctness’ of practices and their constancy over time, more reliably than all formal<br />
rules and explicit norms” (1990:54). In a large firm, the engineer or researcher who has been<br />
assigned the task of searching for an innovative solution to a problem must know how to navigate<br />
among the different groups in order to retrieve and activate the cognitive resources required for<br />
solving the problem. She must know how to correctly formulate questions and raise issues with<br />
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Erwan Lamy and Noreen O’Shea<br />
different categories of people, how to focus on topics relevant for the context and situation in which<br />
she finds herself, how to use appropriate language and vocabulary. Her cognitive processes,<br />
mobilized to find a solution, will necessarily be fuelled by her specific ‘habitus’.<br />
In the case of an empirical approach to problem-solving, know-how and tacit knowledge come to the<br />
fore. Empirical mastery of a technique relies on experience in a more crucial way than in the case<br />
where scientific methods are used. As tacit knowledge, resulting in specific know-how, is<br />
accumulated through experience and experimentation, it stands to reason that in the case of this type<br />
of innovation (type 2), it will play its role. The mastery of a software programme or a mathematical<br />
formula relies on a whole range of intangible, non-articulable knowledge, stored in the memory in the<br />
form of tacit rules and activated “in a particular context and under the imperative of achieving<br />
particular goals” (Jones et al, 2005:10). This question of context is also crucial, particularly the cultural<br />
context. Empirical approaches are often tainted with an illegitimate brush, requiring strong beliefs and<br />
convictions with regard to the value of the knowledge inherent in their contributions.<br />
In the case of type 3 – innovations which originate following the application of optimization strategies<br />
– the specificity of this situation with regard to problem-solving needs to be examined in order to<br />
identify the contribution of the hidden dimensions of cognition. In comparison with problem-solving,<br />
the search for optimization strategies appears to rely more on practices steeped in routines, in which<br />
case know-how and tacit knowledge will again be mobilized. Calling on a more operational form of<br />
knowledge, the search for optimization will nevertheless rely on knowledge which remains tacit<br />
because “it cannot be articulated fast enough, because it is impossible to articulate all that is<br />
necessary to a successful performance” (Nelson & Winter, 1982:81-82). It would seem probable,<br />
however, that creative processes are not present in the production processes of this type of<br />
innovation.<br />
They do appear to come into their own regarding innovations which originate following the emergence<br />
of a new idea or a new concept. Their role varies, however, according to whether the innovative<br />
approach has relied on serendipity, on the exploitation of new scientific or empirical knowledge, or<br />
following the application of creative processes to generate an innovation. In this last case, their<br />
contribution is minor, given that they generate the idea that initiates the innovation strategy. Intuition<br />
may have played a role in identifying a new idea; a dream may be at the origin of a new concept;<br />
associations and analogies may have been produced and analyzed during creative sessions. Further<br />
along in the process, creativity can help in imagining the innovation and in working out and designing<br />
the necessary steps to render it operational. Having a new idea is not sufficient, particularly when<br />
there appears to be no corresponding market demand. In this case of ‘push technology’, creativity<br />
contributes to preparing the groundwork for constructing the demand, to be tried and tested in a novel<br />
market environment.In the case of an innovation which emerges following the application of new,<br />
scientific or empirical knowledge, or through the use of a serendipitous experience, creativity,<br />
although useful, is not the only requisite. New ideas do not just appear out of nowhere. There is a<br />
whole layer of unconscious tacit and implicit knowledge which, in particular circumstances and<br />
contexts is called upon, to make sense of the signals which are constantly being transmitted to and<br />
fro, from the mind to the environment in which it is situated. These early warning signals need to be<br />
exploited in the interests of innovation. If the phenomenon of vulcanization had been captured by<br />
someone other than Goodyear, it may easily have passed by unnoticed.<br />
5. Conclusion<br />
The study of the different components of the hidden dimensions of cognition presented in this paper,<br />
has pointed towards the existence of what we term a ‘prepared mind’ which seems to support and<br />
feed them, enabling them to generate those signals which, in turn, appear to generate and justify the<br />
attention we pay to them. These hidden dimensions do not exist in a vacuum. With regard to tacit<br />
knowledge, Polanyi, credited as the founding father of this concept, underlines the fact that tacit<br />
knowledge “can be possessed by itself”, while explicit knowledge “must rely on being tacitly<br />
understood and applied”, leading him to propose that all knowledge is either tacit or rooted in tacit<br />
knowledge and that “a wholly explicit knowledge is unthinkable” (1966:7). This background tacit<br />
knowledge that all human beings possess and constantly accumulate provides the vocabulary and<br />
grammar that guide reflexions and actions, inevitably playing a role in the discovery processes that<br />
Polanyi favours. As regards intuition, Simon (1987), described it as ‘analyses frozen into habit’,<br />
highlighting the pre-existing experiences that we call on for pattern recognition purposes when faced<br />
with decisions and choices. The use of serendipity, which is usually associated with chance and<br />
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Erwan Lamy and Noreen O’Shea<br />
happenstance, is not just a question of luck. Merton & Barber, remark on the fact that “luck tends to<br />
favor prepared minds - those ready to benefit from it” (2004:17). The second point that we can make<br />
concerns the articulation and activation of these dimensions. When faced with a problem-solving<br />
activity, for example, the human mind will call on different types of knowledge to evaluate possible<br />
options. Personal judgment will thus be required to make sense of all the ‘noise’ that emerges. This<br />
may be the factor that mobilizes the hidden dimensions of cognition, enabling one to make the<br />
necessary connections between the world of experience and that of abstract representation. There<br />
are no rules guiding such judgment. It is the interplay of the personal values and preferences, past<br />
experiences and accumulated knowledge of the individual actors that determine the actions to be<br />
taken. The matching process which we have begun to carry out in first analyzing and then juxtaposing<br />
the typology of innovations with the intellectual mechanisms has helped us to identify the role played<br />
by their hidden dimensions in the production of innovation. We have pointed out that these<br />
dimensions, particularly those associated with creativity, do not function in the same way for all<br />
innovation types (their role is minor with regard to problem-solving or optimization types). More<br />
empirical research is required in order to give robust substance to the hidden dimensions within these<br />
mechanisms so as to clearly define them and thus determine their contribution in providing triggers for<br />
innovation.<br />
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549
<strong>Chinese</strong> <strong>Returnee</strong> <strong>Entrepreneurs</strong>: The Essential Human<br />
Capital for a <strong>Chinese</strong> Innovative State<br />
Nicholas Laroche 1, 4 , Alexandre Cabagnols 2 , Pascale Hénaut 3 and P. Romond 1<br />
1<br />
Clermont Université, Université d’Auvergne, Clermont-Ferrand, France<br />
2<br />
Clermont Université, Université Blaise Pascal, Clermont-Ferrand, France<br />
3<br />
Soluscience, Biopole Clermont-Limagne, Saint-Beauzire, France<br />
4<br />
CNRS, Clermont-Ferrand, France<br />
nicolas.laroche@u-clermont1.fr<br />
alexandre.cabagnols@polytech.univ-bpclermont.fr<br />
henaut@soluscience.fr<br />
P-Charles.ROMOND@u-clermont1.fr<br />
Abstract: Do <strong>Chinese</strong> entrepreneurs, who have gained academic and/or professional experience abroad,<br />
develop different commercial or technology strategies compared to their competitors? Are they a real enrichment<br />
to the <strong>Chinese</strong> industrial sector? Within a single country - China- we can distinguish two different populations of<br />
biotech enterprises: one set up and led by returnees (the majority of whom have been to the USA), the other by<br />
"mainland" <strong>Chinese</strong> entrepreneurs. <strong>Returnee</strong>s are defined as “migrant entrepreneurs” who have left their country<br />
of origin for a certain period to then return to it. They have been exposed to an occidental culture (mainly North<br />
American and European) and have benefited from an enrichment of their human capital by means of research<br />
visits or research fellowships at the best universities worldwide. In our study we compare the technological and<br />
product positioning of the two populations of enterprises. We distinguish between the enterprises positioned in<br />
mature market segments (who exploit already existing commercial opportunities) and those positioned in<br />
emerging market segments, which explore new opportunities. For the present paper we collected data on the<br />
<strong>Chinese</strong> biotech sector. We studied 19 returnees’ societies and 23 “mainland <strong>Chinese</strong>” societies. Based on this<br />
sample, we test the influence of the head manager status (returnee/ or not) on the intensity of their companies'<br />
innovative behaviour. The results show that the firms managed by returnees are more strongly positioned in<br />
emerging markets compared to the firms that are managed by mainland <strong>Chinese</strong>. We conclude that returnees in<br />
the <strong>Chinese</strong> biotech sector contribute to the diversification of the markets on which the <strong>Chinese</strong> industry is<br />
positioned and to its technological catching-up towards US standards.<br />
Keywords: innovativeness / human capital / china / entrepreneurship / biotechnology / international mobility<br />
1. Introduction<br />
The new growth theory (Romer 1990) highlights that human capital, knowledge and economic growth<br />
are connected. It has been shown that highly skilled personnel and entrepreneurs facilitate the<br />
emergence of high technology industries (Maier, Kurka & Trippl 2007). As shown by the formation and<br />
development in Taiwan of the Hsinchu Science-based Industrial Park, migrants returning home with<br />
capital, contacts, and knowledge, can induced economic growth (Saxenian 2003).<br />
Research suggests that scientists with significant experience abroad are more entrepreneurial as<br />
mobility has allowed them to acquire more skills and a higher social capital. Therefore, they are able<br />
to identify more easily entrepreneurial opportunities (Krabel, Siegel & Slavtchev 2010). Top scientists<br />
gain access to non-local knowledge when attending first class universities (Liu, Wright, Filatotchev &<br />
Dai 2010). Mobility is also a way to gain human capital through cultural influence: National cultures<br />
sustain or hamper innovative behaviour. They impact the level of entrepreneurship and<br />
entrepreneurial orientations through cultural values and institutional factors (Hofstede 1980; Busenitz<br />
& Lau 1996). When studying the rate of new business created, important differences emerge between<br />
countries like the USA, Sweden or Japan (Reynold, Hay & Bygrave 2000). Innovation rates also differ.<br />
For each stage of economic development, various kinds of knowledge and skills are necessary. The<br />
more advanced an economy plans to be, the more it will need highly skilled people with the capacity<br />
to promote inventions to innovations (Yusuf 2007).<br />
In China, there has been a long history of migration. Since 1978, students have been sent abroad and<br />
still leave their country for foreign universities. Policies have been implemented to encourage their<br />
return in order to promote innovation and new skills within the country. It would be interesting to<br />
measure the influence of these policies, in order to assess their effectiveness/efficiency. In other<br />
words: Are “returnees” specifically useful to the transition from a production system to an innovative<br />
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system, as expected by the <strong>Chinese</strong> government? Does the duration of the stay abroad have any<br />
particular influence?<br />
To what extent is the return of highly qualified people to their home country, beneficial to the<br />
emergence of a new high tech industry? The aim of this exploratory research paper is to examine<br />
whether companies led by returnees show a different level of innovativeness compared to their<br />
“mainland” counterparts.<br />
To this end we develop a problem-centred methodology to quantify these two aspects by analysing<br />
and comparing the products of biotech companies led by two sub-populations of entrepreneurs in<br />
China.<br />
The first group in our sample consists of <strong>Chinese</strong> entrepreneurs (“mainlanders”), who never left their<br />
home country, but studied and created their business in China. The second group (“returnees”) has<br />
completed part of their studies abroad, mainly in the United States of America, before returning to<br />
China and setting up a business here. Our study focuses on founder-entrepreneurs.<br />
The remainder of the paper is organised as follows. Section 2 gives an overview of the literature and<br />
previous findings on international mobility as a way to gain scientific knowledge, and cultural influence<br />
on entrepreneurial behaviour within migrant people. We then introduce our methodological approach<br />
with presentation of the sample and variables used. The findings of our empirical analysis are<br />
provided in Section 4. Finally, Section 5 concludes.<br />
2. Literature review<br />
Human talents are an important economic asset (Solimano 2008). The new growth theory (Romer<br />
1990) highlights that human capital, knowledge and economic growth are connected. International<br />
mobility of highly skilled people is viewed as a key factor for the emergence of high technology<br />
sectors. The geography of talents is linked to the geography of economical development (Florida<br />
2002) and the mobility of scientists is one of the key mechanisms of knowledge spillover (Maier,<br />
Kurka & Trippl 2007). Indeed, international scientific mobility increases human capital and personal<br />
innovative capacities (Barr, Baker, Markham & Kingon 2009). This mobility, through access to<br />
different scientific environments, allows the mastery of innovative technologies, difficult to reach for<br />
those who did not take part in this mobility (McEvily & Zaheer 1999). When hiring highly qualified<br />
scientists, firms can expect a better innovation process, major outputs and competitive advantages<br />
(Herrera, Muñoz-Doyague & Nieto 2010). Few studies have considered entrepreneurs as knowledge<br />
spillover channel. Some authors (Acs, Braunerhjelm, Audretsch & Carlsson 2008; Audretsch &<br />
Lehmann 2006) developed a knowledge spillover theory of entrepreneurship in which knowledge can<br />
be seen as an important factor fostering entrepreneurial opportunities. Scientists-entrepreneurs, back<br />
home, should have a better vision than other non migrant entrepreneurs. For instance, scientists and<br />
engineers trained mainly in the U.S., participated in the ICT revolution in Taiwan (Saxenian 2006):<br />
thanks to their knowledge and their networks they were able to identify more quickly new economic<br />
opportunities, to raise funds more easily and to build partnerships. The founder-entrepreneur is the<br />
key to understand a firm’s strategy. He does not only shape the R&D strategy but his qualities, his<br />
own innovation capabilities influence the innovation process of the firm (Arvanitis & Stucki 2010). The<br />
innovative capability depends mainly on university education and prior R&D experience.<br />
Beyond the impact of innovative capacities acquired through migration, migrant entrepreneurs’<br />
behaviour may also have been modified by the entrepreneurial culture of the host country. For<br />
migrants, immersed in a new dominant culture, changes occur in personal and professional behaviour<br />
(Berry, Poortinga, Segall & Dasen 2002; Guan & Dodder 2001). <strong>Chinese</strong> students or scientists, living<br />
in the USA or another occidental country should therefore see their entrepreneurial orientation<br />
modified by these dominant cultures. When comparing innovative attitudes (innovativeness),<br />
Americans entrepreneurs or students seem to be more orientated towards innovation than any other<br />
nation / culture (S.M. Lee, Lim & Pathak 2009; Hyrsky & Tuunanen 1999). Innovativeness reflects a<br />
firm’s tendency to engage in and support new ideas, novelty, experimentation and creative processes<br />
that may result in new products, services or technological processes” (Lumpkin & Dess 1996).<br />
3. Methodological approach<br />
We study the impact of the international mobility on the entrepreneurial orientation through the<br />
comparison of two sub-populations of <strong>Chinese</strong> biotech entrepreneurs. The first group consists of<br />
<strong>Chinese</strong> ("mainlander") entrepreneurs, who have never left their home country, but studied and set up<br />
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their businesses in China. The second group ("returnees") has completed part of their studies abroad,<br />
before returning to China and setting up a business there.<br />
3.1 Data construction<br />
The construction of the sample is not random and follows a quasi-experimental design. We have<br />
decided to concentrate our study on the biotechnology sector and more precisely on those firms<br />
involved in human health (development of drugs based on genetic engineering, vaccines, antibodies<br />
and blood-derived drugs), with active molecules in their pipelines destined for the commercialization<br />
as medical treatments. Those firms exclusively orientated towards the provision of services were not<br />
included in the sample. Our goal was to compare firms whose technologies, products and markets are<br />
similar making the status of the CEO (returnee or not) one of the main sources of difference. The data<br />
were gathered from different sources: data bases, commercial sites and press articles.<br />
One can consider that the human health biotech industry has its origins in the creation of Genentech<br />
(1976), with the launch of monoclonal antibody based diagnostic kits (1981), or the commercialization<br />
of the first recombinant insulin by Eli Lilly (1982). Consequently we searched only for biotech firms<br />
created in China from the early 80's onwards. By the end of the process the sample consisted of 42<br />
firms: 19 returnees and 23 mainlanders, 9 had to be discarded because of a lack of data. The firms<br />
were created between 1986 and 2007, mainly on the East coast of the country. From a geographic<br />
point of view, there are no differences between the areas where the returnee and the mainlander<br />
entrepreneurs have chosen to create their businesses. Both groups concentrate on the East coast of<br />
the country, with a particularly large number of firms in the Guangdong province. This province has<br />
been a Special Economic Region (SER) since 1980 and the first biotech firms in China were<br />
systematically set up in that province because it benefited from preferential policies.<br />
3.2 Variables<br />
We looked at different descriptors concerning the characteristics of the firms (date of creation, type of<br />
funding, connection with universities ...), CEO and top-managers identity (returnee or not, age,<br />
curriculum-vitae, positions at universities ...), current project portfolio specificities (number of projects,<br />
molecules being developed (their pipelines), targeted diseases...). The information concerning the<br />
ongoing R&D projects was gathered during the winter 2009-2010. Unfortunately some information<br />
was not available for mainlander entrepreneurs.<br />
In this paper we will study 3 groups of variables:<br />
Characteristics of the firm (available for all the firms in the sample):<br />
� Creation: Date of creation<br />
� Nb_proj_ets: Number of ongoing projects which may be used as an indication of the size of the<br />
firm<br />
Characteristics of the projects (available for all the firms in the sample, one observation per project):<br />
� Class_prod: Therapeutic class of the project refers to the kind of disease that is treated (see<br />
Table 1)<br />
� Class_tech: Technological class of the project refers to the kind of molecule that is developed to<br />
create a new drug (see Table 2).<br />
� %BS: Percentage of Best Sales in the class. This percentage is calculated with the list of the<br />
currently 200 top selling pharmaceutically active molecules (TSM) in Europe (Anon 2009). First<br />
we identified for each of these 200 TSM their technological class of origin. Second, we summed<br />
the number of “top sales drugs” in each class and computed the percentage of these 200 best<br />
sales drugs that emerged from each class to obtain the variable %BS.<br />
The variable %BS can be interpreted in different ways. In this study it will be used as a proxy for the<br />
innovativeness and technological and commercial uncertainty that is associated with the engagement<br />
in a specific therapeutic or technological class:<br />
� A higher value of %BS indicates that very successful technological and commercial results have<br />
already been achieved in the technological or therapeutic class under consideration.<br />
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Consequently new firms face lower levels technological and therapeutic uncertainty since other<br />
successful firms have paved the way.<br />
� A lower value of %BS indicates that few technologically and/or commercially successful projects<br />
have been obtained in that class. The degree of risk carried by these firms is certainly higher and<br />
the levels of innovativeness for the discovery of new technological/therapeutic solutions are<br />
probably also more challenging.<br />
The analysis of table 1 and 2 indicates that either in term of therapeutic classes or technological<br />
classes the variables %BS and %HG (percentage of returnee projects in the total number of projects<br />
of the class) are significantly negatively correlated. It points out that returnees tend to engage in<br />
technologies and applications (therapeutic classes) that have not yet proven their commercial<br />
potential whereas mainland firms prefer developing projects that are positioned on technologies and<br />
applications that are already well known.<br />
Table 1: Distribution of the projects by therapeutic classes (ranked by increasing %BS)<br />
N° Therapeutic class %BS<br />
Number of<br />
projects Ni<br />
Ni/N<br />
Nb. Projects by<br />
returnees NBR<br />
%HG projects=<br />
NBR/Ni<br />
3 HIV / AIDS 0 5 0,03 3 0,6<br />
8 Other (diagnostics) 0 15 0,09 15 1<br />
10 Autoimmune disorders 0,037 7 0,04 2 0,28571<br />
7 Blood disorders 0,037 10 0,06 7 0,7<br />
4 Diabetes 0,056 6 0,04 4 0,66667<br />
6 Cancer 0,09249 59 0,36 37 0,62712<br />
9 Other 0,102 10 0,06 4 0,4<br />
2 Infectious diseases 0,149 27 0,16 14 0,51852<br />
1 Neurological disorders 0,158 12 0,07 4 0,33333<br />
5 Cardiovascular diseases 0,186 14 0,08 3 0,21429<br />
N=165 1,00 NBR=93<br />
NB: The correlation coefficient between %BS and %HG is equal to r=-0,6725 with a p-value of 0,03<br />
which is significant at 5%. i : therapeutic class; %BSi: Percentage of Best Sales in the i th therapeutic<br />
class. Ni: total number of ongoing project launched in the i th therapeutic class; N: total number of<br />
ongoing projects; %Pi=Ni/N: proportion of ongoing projects in the i th therapeutic class; NBRi : number<br />
of ongoing project conducted by the returnees in the i th therapeutic class ; NBR: total number of<br />
ongoing projects conducted by the returnees; %HGi=NBRi/Ni : proportion of project conducted by<br />
returnees in the i th therapeutic class<br />
Table 2: Distribution of the projects by technological classes (ranked by increasing %BS)<br />
n° Technological Class (i) %BS<br />
Number of<br />
projects Ni<br />
Ni/N<br />
Nb. Projects by<br />
returnees NBR<br />
%HG projects=<br />
NBRi/Ni<br />
6 Other 0,006 16 0,097 16 1,000<br />
9 Cellular therapy 0,062 9 0,055 9 1,000<br />
7 Monoclonal antibody 0,077 13 0,079 8 0,615<br />
8 Gene therapy 0,093 5 0,030 3 0,600<br />
2 Small molecule 0,102 74 0,448 38 0,514<br />
4 rh hormone 0,102 11 0,067 6 0,545<br />
3 rh protein 0,109 18 0,109 5 0,278<br />
5 Peptide 0,126 8 0,048 7 0,875<br />
1 Vaccine 0,135 11 0,067 1 0,091<br />
N=165 1,00 NBR=93<br />
NB: The correlation coefficient between %BS and %HG is equal to r=-0,6864 with a p-value of 0,04<br />
which is significant at 5%. j : technological class; %BSi: Percentage of Best Sales in the j th<br />
technological class. Ni: total number of ongoing project launched in the j th technological class; N: total<br />
number of ongoing projects; %Pj=Nj/N: proportion of ongoing projects in the j th technological class;<br />
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NBRj: number of ongoing project conducted by the returnees in the j th technological class; NBR: total<br />
number of ongoing projects conducted by the returnees; %HGj=NBRj/Nj : proportion of project<br />
conducted by returnees in the j th technological class<br />
Characteristics of the CEO and top-managers of the firms managed by returnees (not available for<br />
mainland firms):<br />
� Age<br />
� Duration: total duration of the stay abroad<br />
� RK0: Shangai ranking in 2003 of the last university at which the manager studied in China.<br />
� RK1: Shangai ranking in 2003 of the last university at which the manager studied abroad (to<br />
complete a PhD or a post-doc).<br />
� d_RK: difference between RK1 and RK0. It measure the increase of scientific and technological<br />
level gained through the stay abroad.<br />
Table 3: Main characteristics of the 19 returnees CEO of the sample<br />
Variable Mean Std-deviation Minimum Maximum<br />
age 52,67 6,68 45 67<br />
duration 10,27 5,74 4 20<br />
RK0 452,7 91,51 275 500<br />
RK1 62,88 80,20 1 275<br />
The duration of the stay abroad gives an indication of the length of the exposure to the foreign culture.<br />
Consequently we use it as a proxy for the measure of the “cultural impregnation” of the entrepreneurs.<br />
We expect that longer durations should be associated with technological positioning closer to the<br />
occidental model than shorter durations.<br />
RK0 and RK1 measure the level of scientific and technological competency of the manager. RK0, the<br />
ranking of the university of departure in China, will be used to grasp the fact that part of the scientific<br />
and technological competencies of the entrepreneur has already been developed in China. d_RK<br />
measures the impact of the stay abroad on the level of scientific and technological competency of the<br />
manager. Most of the time, the capacity to innovate is linked to the level of educational attainment and<br />
to scientific excellence (Dobson & Safarian 2008; S.-H. Lee, Wong & Chong 2005; Pelz & Andrews<br />
1976). Consequently we are expecting that RK0 and d_RK should be positively correlated with higher<br />
levels of innovativeness as a preference for the launching of projects positioned in technological<br />
classes with low percentages of top sells products (low value of %BS).<br />
4. Empirical analysis / results<br />
Our empirical analysis deals with two questions:<br />
� What is the impact of the international mobility of the CEO on the attractiveness of innovative<br />
projects (comparison between returnees and mainland)?<br />
� What is the impact of the duration of the stay on the attractiveness of innovative projects?<br />
4.1 CEO‘s international mobility impact on the attractiveness of innovative projects<br />
The descriptive analysis that has been reported in the Table 3 indicates that the percentage of best<br />
sales in technological classes (%BS) is negatively correlated to the percentage of projects conducted<br />
by returnees. The interpretation may be the following: the higher the innovativeness of a technological<br />
class (lower %BS), the higher is its attractiveness for returnees since their stay abroad is always a<br />
mean to achieve more scientific and technological competencies.<br />
The problem is that the positioning of the project in technological classes with different values of %BS<br />
may also be explained by other factors:<br />
� The engagement of a firm in more or less risky technological classes may be related to its age.<br />
Older firms with more experience may be more inclined to take more risk.<br />
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� The increase of the number of projects may be considered as a mean of internal diversification,<br />
which could make possible the financing of riskier projects possible.<br />
We introduce the variable %BS as an endogenous categorical and ordinal variable that will be<br />
modelled with a cumulative logit model. The variables HG (<strong>Returnee</strong> or mainland), creation (date of<br />
creation of the firm) and nb_proj_ets (number of projects conducted in the firms) are introduced as<br />
explanatory variables. The output of a cumulative logistic regression analysis is firstly an estimation of<br />
the impact of each explanatory variable on the probability to choose a lower value of %BS and<br />
secondly an estimation of the probability for a specific firm to engage a project in a specific<br />
technological classes (characterized by its %BS value). Results are reported in the Table 4<br />
Table 4: Maximum likelihood estimation of a cumulative logistic model on 165 projects<br />
Explanatory variables<br />
%Best_Sales<br />
↓<br />
(1)<br />
(ordinal scale variable)<br />
Intercept(0) (2) -64,354 (81,453) (3)<br />
Intercept(0,037) -63,593 (81,451)<br />
Intercept(0,056) -63,36 (81,45)<br />
Intercept(0,093) -61,507 (81,441)<br />
Intercept(0,149) -60,52 (81,437)<br />
Intercept(0,158) -59,786 (81,435)<br />
HG_e 0,85* (0,346)<br />
date_creation 0,031 (0,041)<br />
nb_proj_ets 0,018 (0,021)<br />
Number of observations : 165 Projects<br />
L0 556,201<br />
L1 541,01<br />
Likelihood Ratio 15,1914<br />
Pr > ChiSq 0,0017<br />
Percent Concordant 61,5<br />
*<br />
p-value lower than .05; in parenthesis we report standard deviations.<br />
1)<br />
%BS is the percentage of top sales drugs in the technological class in which the project is<br />
conducted<br />
2)<br />
%BS is treated as a 8 level ordinal variable (the highest level %BS=0,186 is used as a reference for<br />
the other intercepts with lower values of %BS)<br />
3) The lowest value of %BS is modelled so that estimated coefficients with a positive sign indicate that<br />
higher values of the explanatory variable lead to lower values of %BS<br />
Table 4 reports a non-significant impact of the variables date of creation and number of projects<br />
whereas the variable HG=1 (returnee) has a positive impact on the probability of launching projects in<br />
sectors with lower values of %BS. Our conclusion is that the attractiveness of highly innovative/risky<br />
research projects is higher for a firm whose CEO has been exposed to a foreign culture and/or has<br />
reached higher scientific and technological competencies.<br />
4.2 Impact of the duration of the stay abroad on the attractiveness of innovative<br />
projects<br />
Unfortunately we could not retrieve the CVs of the mainland CEOs. Consequently performing a full<br />
analysis of the whole dataset was impossible. Nevertheless some interesting hypotheses can be<br />
tested on the subsample of projects conducted by the firms managed by returnees.<br />
As indicated earlier, the variable duration of the stay abroad may be used as a proxy of the exposition<br />
to an occidental culture where RK0 measure the initial level of competence of the managers and<br />
d_RK measures the gain of competencies made via the stay abroad. Since the CEO is not the only<br />
top manager, we gathered information about the CVs of the whole board of directors and computed<br />
the best initial rank before the stay abroad (RK0min) and the best final rank (RK1min) to finally<br />
compute the d_RKmin=RK1min-RK0min, which measures the improvement of competence gained<br />
through mobility of the best scientists in the management team. To obtain intuitive results we have<br />
rescaled the Shanghai ranking from -500 to 0 (500 lowest rank and 0 best rank).<br />
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Estimated parameters of the cumulative logistic model are reported in the Table 6.<br />
In line with the results obtained in the previous section, dates of creation have no significant impact on<br />
the attractiveness of projects with high/low values of %BS. In that subsample of returnees, the<br />
number of projects (nb_proje_ts) launched by the firm has a significant impact on the value of %BS. A<br />
higher number of projects leads to a higher attractiveness of the technological classes with higher<br />
values of %BS (i.e. less innovative).<br />
We also observe that, the higher the initial ranking of the top managers (RK0), the higher the<br />
attractiveness of technological classes with high values of %BS (ie. less innovative classes!). The<br />
exactitude of this result is confirmed in Table 6: the firms in which the best rank of the managers is<br />
highest are those that on average are engaged in projects with the highest values of %BS, in other<br />
words projects supposed to be less innovative.<br />
Table 5: Mean value of %BS by RK0min<br />
RK0_min<br />
of the managers<br />
Number of projects Mean value of %BS<br />
-500 60 0.07197<br />
-325 24 0.10238<br />
-275 8 0.13263<br />
The same result is obtained with the variable d_RKmin which measures the increase of scientific and<br />
technological competencies gained through the stay abroad.<br />
One possible interpretation of this result is that scientists with higher scientific and technological<br />
background do not hesitate to engage in research where the competition is already strong (since the<br />
value %BS indicates the existence of many and successful competitors). Scientists with lower<br />
scientific background may prefer focusing on technologies where the standards are not well defined<br />
and where the competition is more blurred.<br />
Finally we also observe that the duration of the stay abroad is without impact on the value of %BS.<br />
Table 6: Maximum likelihood estimation of a cumulative logistic model on 93 projects by returnees<br />
Explanatory variables<br />
↓<br />
%Best_Sales<br />
(scale variable)<br />
Intercept(0) 141,4 (135,9)<br />
Intercept(0,056) 143,4 (135,9)<br />
Intercept(0,093) 145,9 (136)<br />
Intercept(0,149) 147,3 (136)<br />
date_creation -0,074 (0,068)<br />
nb_proj_ets 0,088* (0,034)<br />
duree_sejour_ceo -0,047 (0,052)<br />
min_rk01 -0,026* (0,005)<br />
d_rk_min -0,02* (0,005)<br />
Number of observations 93 Projects by <strong>Returnee</strong>s<br />
L0 265,02<br />
L1 196,034<br />
Likelihood Ratio 68,9861<br />
Pr > ChiSq
Nicholas Laroche et al.<br />
(1) %BS is the percentage of top sales drugs in the technological class in which the project is<br />
conducted<br />
2) %BS is treated as a5 level ordinal variable (the highest level %BS=0,186 is used as a reference for<br />
the other intercepts with lower values of %BS). Compared to Table 4, some modalities of %BS have<br />
been merged in order to avoid sparse observations.<br />
3) The lowest value of %BS is modelled so that estimated coefficients with a positive sign indicate that<br />
higher values of the explanatory variable lead to lower values of %BS<br />
5. Conclusion<br />
For several decades the <strong>Chinese</strong> government has encouraged its students to complete their studies<br />
abroad and has devised policies to facilitate their return, hoping to promote thus innovation and new<br />
skills within the country.<br />
The aim of the current study was to see whether we could observe consequences of the policies<br />
implemented, by examining whether companies led by returnees show a different level of<br />
innovativeness compared to their “mainland” counterparts.<br />
We developed an exploratory research framework in order to quantify innovativeness, choosing a<br />
small and focused sample. We analysed and compared the products of biotech companies led by two<br />
sub-populations of entrepreneurs in China. The first group consists of <strong>Chinese</strong> entrepreneurs<br />
(mainlanders), who have never left their home country, but studied and created their businesses in<br />
China. The second group (returnees) has completed part of their studies abroad, before returning to<br />
China and setting up a business there. We also analysed whether the duration of the stay abroad has<br />
an influence on risk taking and innovativeness. The paper is based on the use of a specific indicator:<br />
%BS (percentage of the “best sales products” in the sector). It is supposed to apprehend the<br />
innovativeness, the technological uncertainty, market potential and competitive pressure of the<br />
different therapeutic classes.<br />
Our conclusion is that the attractiveness of highly innovative research projects is higher for a firm led<br />
by a CEO who has been exposed to a foreign culture and has reached higher scientific and<br />
technological competencies. However, firms led by “returnee” CEOs do not solely engage in more<br />
innovative projects but also diversify their activities by engaging in projects where competition is<br />
already strong and where the degree of innovativeness are lower.<br />
Interestingly, although the experience abroad influences the attitudes towards innovative projects, the<br />
length of the time spend abroad seems to be irrelevant.<br />
Given the nature of our research, the sample was small and our conclusions should not be<br />
generalized without some further investigations.<br />
However, if developed further, our methodology might prove to be a useful tool for policy makers to<br />
evaluate the efficiency of policies implemented in order to encourage and increase innovativeness<br />
and risk taking throught returnees.<br />
References<br />
Acs, Z.J., Braunerhjelm, P., Audretsch, D.B. & Carlsson, B. (2008). The knowledge spillover theory of<br />
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Anon (2009). Pharmaceutical Sector Inquiry: final report. [online] European Commission.<br />
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558
Is Your Open-Innovation Successful? The Moderating Role<br />
of the Human and Organizational Internal Context<br />
Valentina Lazzarotti 1 , Raffaella Manzini 1 , and Luisa Pellegrini 2<br />
1<br />
Carlo Cattaneo University – LIUC, Castellanza, Italy<br />
2<br />
University of Pisa, Italy<br />
vlazzarotti@liuc.it<br />
rmanzini@liuc.it<br />
Luisa.Pellegrini@dsea.unipi.it<br />
Abstract: We explore the relationship among firm absorptive capacity, open-approach to innovation<br />
and innovative performance. We operationalize absorptive capacity as a multi-item construct which<br />
considers social capital and some organizational features. Open-approach to innovation is interpreted<br />
as an approach achievable in continuum in terms of intensity of collaboration with partners. Innovative<br />
performance considers several factors: the enlargement of the company’s competence base and the<br />
improvement of the time to market.On the basis of data collected from 106 Italian companies, we find<br />
that a low level of absorptive capacity impacts negatively on the firm orientation in adopting a more<br />
open approach. We also study the relationship between openness and firm innovative performance:<br />
this relation is positively moderated by absorptive capacity. This suggests that openness is not critical<br />
per se to enhance innovative performance and that a favourable social-organizational context is<br />
needed to make collaboration a success.<br />
Keywords:Open Innovation degree, Technological Collaborations, Absorptive capacity, Innovative<br />
Performance<br />
1. Introduction<br />
We explore the relationship among innovative performance, open-approach to innovation and firm<br />
absorptive capacity (ACAP). We assume that the ability of a firm to recognize the value of new<br />
external information, assimilate it and apply it to commercial ends (i.e. absorptive capacity) is critical<br />
to establish and carry out collaboration. Since openness of firms to external sources of innovation<br />
requires considerable effort and time to build up an understanding of the norms, habits and routines<br />
within different external knowledge sources, firms need absorptive capacity in order to be able to<br />
process external information and knowledge. Although R&D spending is applied widely in as a<br />
measure of absorptive capacity, this is a narrow measure of the firm’s ability to assimilate external<br />
information, since many, in particular smaller firms simply do not have an R&D department. Thus we<br />
try to develop a multi-item construct to measure firm absorptive capacity which considers social<br />
capital and some organizational features as factors that better represent such capacity. Besides, we<br />
define: openness as an approach achievable in continuum (i.e. openness degree) in terms of intensity<br />
of collaboration with few or many partners; innovative performance as a multi-item construct, taking<br />
into account several factors such as the enlargement of the company’s competence base and the<br />
improvement of the time to market.<br />
Collecting data from 106 Italian manufacturing companies, First we find that a low level of absorptive<br />
capacity impacts negatively on the firm orientation in adopting a more open approach, despite the<br />
several pressures to openness. Second, we find that the relationship between openness and firm<br />
innovative performance is positively moderated by absorptive capacity measures. This suggests that<br />
openness is not critical per se to enhance innovative performance and that a favourable socialorganizational<br />
context is needed to make collaboration successful. The results are important for<br />
managers: they show under what internal-context conditions open innovation (OI) enhances firm<br />
innovative performance.<br />
The following paragraph analyses literature which supports our investigation framework and puts<br />
forward two research hypotheses. The third paragraph describes the research methodology; the<br />
fourth and the fifth paragraphs present the results and their discussion, respectively. Finally the sixth<br />
paragraph is devoted to research limitations and conclusions.<br />
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ValentinaLazzarotti, RaffaellaManzini, and Luisa Pellegrini<br />
2. Theoretical background and hypotheses<br />
Scholars have addressed the motivating forces behind OI: risk sharing, costs reduction, access to<br />
specialized skills and creativity are undoubtedly the most recurrent. However, the possibility to get<br />
most out of OI requires firm’s ability to absorb external knowledge (Cohen and Levinthal, 1990), in<br />
that inter-organizational knowledge flows do not materialize automatically and firms have to develop<br />
internal skills in order to tap into external sources of technology (Vanhaverbeke et al., 2007). Two<br />
types of abilities are involved: the ability to evaluate information, while scanning the market for<br />
technology (‘absorptive capacity_what’), and the capability to integrate new external knowledge into<br />
the innovation process (‘absorptive capacity_how’) (Zahra and George ,2002).<br />
The first dimension – ‘absorptive capacity_what’ – relates to the company’s know-what and influences<br />
the OI degrees in that it is associated with the ability to recognize and value new external knowledge:<br />
companies get in touch with others in order to monitor the latest technological developments. The<br />
more firms are able to know, evaluate and understand external technologies, the more they will be<br />
willing to open their innovation process to the external partners: the consequent expansion of their<br />
internal knowledge base, will allow the significant amplification of their ACAP (Vanhaverbeke et al.,<br />
2007). Hence, the ‘absorptive capacity_what’ is an important prerequisite for OI (Huizingh, 2011). In<br />
the investigation framework (Figure 1) this relationship is depicted through the arrow between<br />
‘ACAP_what’ and the ‘degree of opening’.<br />
Such relationship is moderated by size, R&D intensity, market evolution and objectives of<br />
collaboration.<br />
As regards size, although small companies, often lacking resources and competence to innovate by<br />
themselves, would have great benefits from exploiting the OI model, larger companies are endowed<br />
with a bigger technology portfolio, a more systematic approach in the innovation processes and larger<br />
resources (Lichtenthaler, 2008; van de Vrande et al., 2008). Therefore, larger firms have wider<br />
internal technological knowledge that is suitable for recognizing the value of external information; to<br />
put it differently, to the extent that the development of current knowledge requires resources, resource<br />
constrained small firms are likely to have both a narrower and shallower absorptive capacity than their<br />
larger peers (de Jong and Freel, 2010). Besides, larger firms do not seem to be able to completely<br />
rely on internal activities due to the diversity of the technological knowledge they use.<br />
The second moderating variable regards internal R&D intensity through which firms create their base<br />
of technological knowledge (Chesbrough, 2006). If true that ACAP can’t be simply reduced to a byproduct<br />
of a firm’s own R&D investments (Vanhaverbeke et al., 2008), it is also true that firms’<br />
capability to evaluate outside information depends on the internal knowledge assets that, built through<br />
investments in R&D, help firms recognizing the value of other external information and extracting<br />
more knowledge from the environment. Indeed, an important by-product of ongoing R&D investments<br />
is the creation of firm-specific knowledge that enables a firm to screen, evaluate, and take advantage<br />
of external knowledge (Rothaermel and Alexandre, 2009).<br />
‘Market evolution’ regards increased costs of technology development, shortening of product life cycle<br />
and reduction of economies of scale in R&D (Chesbrough, 2006): these variables make investments<br />
in R&D harder and harder to be afforded by a single company and, as a final result, erode the<br />
foundations that underpin the closed innovation model. This construct moderates the relationship<br />
between the ‘ACAP_what’ and the ‘OI degree’ because it gives external technology sourcing a<br />
compelling nature (Vanhaverbeke et al., 2008; p. 251).<br />
Also the objectives firms have when opening their innovation funnel can play a moderating role:<br />
according to Huizingh (2011), one distinction is for offensive motives (e.g., stimulating growth) or for<br />
defensive motives, such as decreasing costs and risks.<br />
Industry can play a moderating role (Laursen and Salter, 2006). In industries with high levels of<br />
technological opportunities and extensive investments in search by other firms, a firm need to search<br />
more widely and deeply in order to access critical knowledge sources. In contrast, in industries with<br />
low technological opportunities and modest investments in search by other firms, a firm has weaker<br />
incentives to draw from external sources and may instead rely on internal sources. However the role<br />
played by industry is unclear: some studies show that there are minor differences in OI approaches<br />
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ValentinaLazzarotti, RaffaellaManzini, and Luisa Pellegrini<br />
between industries (e.g., Chesbrough and Crowther, 2006; Lichtenthaler, 2008; Lichtenthaler and<br />
Ernst, 2009), whereas Gassmann (2006) suggests the nuclear and military industries as typical<br />
examples of closed innovation industries.<br />
Formally stated:<br />
Hp1: despite the different opening pressures (including that held by R&D intensity), a low absorptive<br />
capacity-what is an important variable in explaining (with negative impact) the degree of openness.<br />
The arrow between the ‘degree of opening’ and ‘innovative performance’ shows that firms must open<br />
their innovation process in order to gain a competitive edge (Dahlaner and Gann, 2007; Lichtenthaler,<br />
2008; Pisano and Verganti, 2008). Cassiman and Veugelers (2006) found that innovating firms are<br />
performing better when they combine internal innovation activities with external technology sourcing.<br />
This relationship is moderated by size, industry, R&D intensity and the ‘absorptive capacity_how’. As<br />
regards size, large organizations may be more likely to achieve higher performance owing to their<br />
extensive resource bases; however, smaller organizations may be more innovative owing to their<br />
flexibility (Subramaniam and Youndt, 2005).<br />
Also the nature of the industries is known to influence firms’ innovative performance (Subramaniam<br />
and Youndt, 2005): hence industry may moderate the relationship between OI and performance and<br />
this implies that OI is more effective in one industry than in another.<br />
We also accounted for R&D spending, as innovative performance is the intended outcome of most<br />
R&D efforts.<br />
The effect of the ‘OI degree’ on ‘Performance’ is moderated also by the ‘absorptive capacity_how’,<br />
which allows firms to be able to absorb new external knowledge in order to get most out of OI in terms<br />
of performance. This is not a passive process in which innovating firms automatically can profit from<br />
knowledge spillovers, but rather requires firms to adjust their internal organizational structures,<br />
routines and innovation processes in order to fully exploit technological knowledge within the<br />
organization (‘intensity of organisational mechanisms’) (Vanhaverbeke et al., 2007; 2008) and to lever<br />
on the knowledge embedded within, available through, and utilized by interactions among individuals<br />
and their networks of interrelationships (‘relational social capital’). Formally stated:<br />
Hp2: internal contextual factors (representing absorptive capacity-how) have a moderating positive<br />
influence on the relationship between openness and performance of innovation processes. In other<br />
words, the relationship between openness and performance is only indirect in the sense that,<br />
removing the effect of the contextual factors, it is not significant.<br />
Figure 1: Investigation framework<br />
561
3. Methodology<br />
3.1 Sample and data collection<br />
ValentinaLazzarotti, RaffaellaManzini, and Luisa Pellegrini<br />
Our target population was “manufacturing Italian companies” (NACE Rev2 Codes; AIDA Bureau Van<br />
Dijk database). Our sample consisted of 7000 cases: eight months after the survey’s launch the<br />
response rate is low (106 respondents), probably because of the low level of “cultural acceptance” by<br />
Italian firms on the usefulness of such studies. However, the study is still of some significance: first it<br />
answers the suggestions put forward by leading authors (Chesbrough, 2006; Gassmann et al., 2010)<br />
to investigate the relationship between OI and performance in medium-low tech industries (Bianchi et<br />
al., 2003); secondly it is encouraged by industrial institutions (i.e. Italian Chambers of Commerce) in<br />
that it attempts an analysis of industries that represents Made in Italy.<br />
The measurement scales are reported in Appendix. Next we indicate how we operationalized the<br />
variables involved in the framework and if the measures are either adopted or adapted from<br />
previously published scales in the literature, or newly created. In any case, we will use data from the<br />
survey in order to go through all the standard procedures of scale development and refinement<br />
(reliability, validity, and dimensionality determination).Given the limited number of responses, we<br />
carried out interviews in order to benefit in terms of depth of analysis, consistently with case-study<br />
methodology (Yin, 2003). This did not prevent us to use quantitative tools, for which the check of the<br />
assumptions (i.e. outliers, normality, linearity, etc.) was performed.Data was collected through<br />
questionnaires; a pilot test was conducted with a group of senior managers and academics in order to<br />
assess the quality of the measure items.<br />
3.2 Variables<br />
3.2.1 Model I<br />
Dependent variable.<br />
The dependent variable, degree of openness, is inspired by Laursen and Salter<br />
(2005; 2006) and previously tested by authors (Lazzarotti and Manzini, 2009). We aimed at capturing<br />
both partners’ variety and intensity of cooperation with them. Thus we built a variable (degree of<br />
openness) composed of:<br />
� partner variety: firms were asked whether in the last five years they collaborated with University<br />
and Research centres, Technical and Scientific Service Companies, Governmental institutions,<br />
Customers, Suppliers, Competitors, Firms operating in different sectors of activity. This measure<br />
is adapted from Laursen and Salter (2006). Our adaptation, similarly to what Keupp and<br />
Gassmann (2009) did, consists of the change of both the number/typology of sources and<br />
measurement (we adopted a seven-point Likert-type scale, being 1 = strongly disagree;<br />
7=strongly agree). We will use survey data to go through all the standard procedures of scale<br />
development and refinement.<br />
� a measure of intensity of collaboration: Although literature suggests that in the first phases of the<br />
innovation funnel the inbound process prevails, while the outbound process mostly regards the<br />
last phases of the funnel (Gassmann and Enkel, 2004) and this is particularly true for SMEs (Lee<br />
et al., 2010), to our best knowledge literature does not propose any measure regarding the<br />
intensity of collaboration in the phases of the innovation funnel that could be either adopted or<br />
adapted. Therefore, we created a new measure: firms were asked how much in the last five years<br />
they collaborated with the above actors in each phase of the innovation funnel (Idea Generation,<br />
Experimentation, Engineering, Manufacturing set up, Commercialization).<br />
The degree of openness was the sum of these two (standardized) variables: highpositivevalues<br />
indicated high variety and high intensity and thus high degree of openness, negative values vice<br />
versa (while, positive/negative values close to zero indicated intermediate approaches).<br />
Independent variables. We used the absorptive capacity-what (Vanhaverbeke et al., 2007), composed<br />
of three items (Cronbach’s α: 0,85): difficulty of knowing, evaluating and understanding external<br />
technologies.<br />
The other independent variables represent factors that could push to openness, for which we wanted<br />
to control the effects:<br />
� Size. We applied the European Commission’s (2005) criteria which are based on workers<br />
number, turnover and annual balance sheet total. Large respondents were very few, consistently<br />
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ValentinaLazzarotti, RaffaellaManzini, and Luisa Pellegrini<br />
with the sample. However,wedistinguishedthose very small from all the others, in particular from<br />
the middle ones. Given the large companies paucity, we introduced size as a dummy variable in<br />
order to search the effect of middle versus small size, (0=small; 1=middle and large);<br />
� R&D intensity: according to Lichtenthaler and Ernst (2009), it was operationalized in terms of firmlevel<br />
R&D expenditure as a percentage of sales, (transformed in log10 to improve normality);<br />
� Market evolution. Operazionalized through three items representing the changes that, while<br />
challenging the closed innovation model, push toward OI (Chesbrough, 2006; Cronbach’s α:<br />
0,85). Such items concern the growth of the costs of technology development, the shortening of<br />
product life cycle and the reduction of the economies of scale in R&D;<br />
� Industry. We controlled for any extraneous effects of industry, whose role, as seen in the<br />
theoretical background, is controversial. We operationalized industry through a dummy variable<br />
which distinguishes the Made in Italy industries (consistently with sample) from all the others.<br />
Thus we grouped: 1= pertaining to NACE Rev2 codes 25 and 28, that are the most important,<br />
plus those (24, 26, 27,; 29 – 30), less important, but similar to some extent to 25 and 28; 0 = the<br />
other industries (from 10 to 22, plus 31 and 32);<br />
� Objectives of collaborations: firms were asked if their opening was due to offensive or defensive<br />
motives (Huizingh, 2011):<br />
o aims to extend skills, competences and creativity (Cronbach’s α: 0,86);<br />
o aims to share risks and costs; Cronbach’s α: 0,82).<br />
3.2.2 Model II<br />
Dependent variable. We selected a measure of innovative performance that had to do with innovation<br />
processes, rather than the “end result” in terms of new products or economic and financial results.<br />
This is consistent with West and Gallagher (2006), who, differently from main literature, do not focus<br />
on new product development, but rather wonder to what extent OI can improve process innovation<br />
(Huizingh, 2011). Thus we employed a four-item scale based on Calantone et al. (2002) (Cronbach’s<br />
α: 0,82).<br />
Independent variables<br />
� Degree of openness, as operationalized above.<br />
Other factors beyond OI degree may influence innovative performance:<br />
� Size (for the operationalization see above);<br />
� Industry (for the operationalization see above);<br />
� Log10 R&D intensity (for the operationalization see above);<br />
� Absorptive capacity-how (Vanhaverbeke et al. 2007): extant literature shows difficulties in<br />
quantitatively measuring something like absorptive capacity which has an intrinsic qualitative<br />
nature (Murovec and Prodan, 2009). The few extant quantitative studies do not measure the<br />
absorptive capacity but rather its suggested indicators (usually R&D): as a result, when examining<br />
the ACAP influence on innovation, it is not clear whether it is really absorptive capacity that<br />
influences innovation or is it the proxies (R&D) that influence innovation directly. In our opinion, in<br />
the operationalization of the ACAP-how still there is a lack in capturing the rich theoretical<br />
arguments and the multi-dimensionality of the absorptive capacity construct, which should take<br />
into account on the one side the organisational/managerial mechanisms supporting collaboration<br />
with the external actors and, on the other side, the importance of the relational social capital, i.e.<br />
the knowledge embedded within, available through, and utilized by interactions among individuals<br />
and their networks of interrelationships (Subramaniam and Youndt, 2005). Hence we grasped the<br />
idea of ACAP-how through:<br />
o Organizational and managerial mechanisms (scale based on MINE SURVEY TOOL<br />
2.1, Cronbach’s α: 0,94)<br />
o Relational social capital (scale adapted from Subramaniam and Youndt, 2005);<br />
Cronbach’s α: 0,91).<br />
4. Analytical procedure<br />
To test our hypotheses the entry order of variables in the regression model was relevant. In fact, in<br />
model I, we wanted to find out how much of the overall variance was explained by ‘ACAP-what’ after<br />
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ValentinaLazzarotti, RaffaellaManzini, and Luisa Pellegrini<br />
the effects of variables which could push towards ‘openness’. Similarly, in model II, we tried to search<br />
whether the relationship between ‘openness’ and ‘performance’ was significant, removing the effects<br />
of variables which could influence ‘performance’, in particular the factors representing the ‘ACAP-how’<br />
(i.e. organizational and managerial mechanisms and relational social capital). Therefore we chose the<br />
SPSS linear hierarchical multiple regression that is the appropriate methodology to evaluate how<br />
much each independent variable adds in the explanation of the dependent variable, with respect to<br />
what has been explained by the previously entered variables (Barbaranelli, 2006). In model I, in fact,<br />
we aimed at isolating the effect of ‘ACAP-what’ on the ‘openness degree’. Thus, we entered ‘ACAPwhat’<br />
in the last step of model I (seven model/step), after all the other independent variables, included<br />
‘R&D intensity’ (i.e. all drivers for openness) were introduced.In model II, because of our objective of<br />
isolating the effect of the ‘openness degree’ on ‘performance’, we entered the ‘OI degree’ in the last<br />
step (six model/step), after all the other independent variables were introduced. In particular, in this<br />
model our attention was focused on the role of the internal contextual factors that, in our conception,<br />
represent the ‘ACAP-how’ (organizational and managerial mechanisms and relational social capital)<br />
as moderator factors on the relationship between ‘OI degree’ and ‘performance’. Thus, it was<br />
important to introduce ‘ACAP-how’ before ‘OI degree’ in order to remove its effect on the relationship<br />
between ‘openness’ and ‘performance’. Anyhow, we still controlled the effect of ‘size’, ‘industry’, and<br />
‘R&D intensity’ too.We also tried different entry orders for the other variables (i.e. drivers for<br />
‘openness’ or ‘performance’): obviously, different orders led to different coefficients, but R 2 and “R 2<br />
change” for ACAP variables did not change substantially. Moreover, we did not have any theoretical<br />
assumptions on the entry order of the other variables, so their specific order entry was not so<br />
important: we only assumed that they had relationship with ‘openness’ and ‘performance’ in model I<br />
and II, respectively. Thus it was sufficient they were entered before ‘ACAP-what’ in the model I and<br />
‘openness degree’ in the model II.<br />
5. Results<br />
Descriptive statistics in Table 1 include information on ‘OI degree’ that can be understood considering<br />
how we constructed the standardized variable and additional information about its minimum and<br />
maximum values (3,1 ; 5,28) that suggest a rather limited degree of openness of the sample. Also the<br />
mean values of the variables used to define the ‘OI degree’ are quite low, especially in terms of<br />
intensity of collaboration (respectively, mean of partner variety is 3,77 on a seven-point scale; mean of<br />
intensity of collaboration is 8,52 on a possible total score equal to 35).Table 2 shows the result of the<br />
first hierarchical regression which aims to find what factors can explain the ‘OI degree’: rows ‘R 2<br />
change’ and ‘F change’ specify how much of the dependent-variable variance is explained by each<br />
independent variable when it is inserted in a model/step and if this change is significant, respectively.<br />
Size resulted in a non-significant increasing of the explanation of variance equal to 3%, compared to<br />
the model in which no independent variable was taken into account. Similarly, the explanation of the<br />
‘OI degree’ variance made by ‘industry’ (inserted in model 2) and ‘risk and cost sharing’ (introduced in<br />
model 5) is very low and insignificant. On the other hand, relevant explanations of the variance are<br />
assignable to ‘skills and creativity’, (inserted in model 4), ‘R&D intensity’ and, above all, to ‘ACAPwhat’.<br />
Lastly, a small but significant contribution is made by ‘market evolution’.<br />
Moreover, coefficients of model 7 confirm that the highest contribution to the equation is led by<br />
‘ACAP-what’, whose (negative) relationship with ‘OI degree’ is not moderated by the other variables<br />
(zero-order correlation, very similar to partial correlation).<br />
Table 3 regards descriptive statistics and correlations in model II.<br />
In the second hierarchical regression (Table 4), we studied the relationship between ‘OI degree’ and<br />
‘innovative performance’. R 2 change shows that the most relevant explanation of variance is made by<br />
the ‘organizational and managerial mechanisms’, followed by the ‘relational social capital’. R&D<br />
intensity makes a small but significant explanation, whilst the ‘OI degree’ adds nothing. Coefficients of<br />
model 6 confirm the contribution of ACAP-how’. Zero-order and partial correlations show that the<br />
direct relationship between ‘OI degree’ and ‘performance’ is very weak: after removing the effect of<br />
the other variables (in particular, the ‘organizational and managerial mechanisms’ and the ‘relational<br />
social capital’), the relationship is small and not significant.<br />
564
ValentinaLazzarotti, RaffaellaManzini, and Luisa Pellegrini<br />
Table 1: Descriptive statistics and correlations in model I<br />
Variables Mean S.D. 1 2 3 4 5 6<br />
1. OI degree -,03 1,6 ,22* ,38*** ,17* ,33** -,46***<br />
2. Market evolution 4,01 1,5 ,28** ,13 -,04 -,07<br />
3. Skills-creativity 4,70 1,4 ,39*** ,14 -,20*<br />
4. Risks-costs 4,09 1,6 -,01 -,19<br />
5. Log10 R&D ,52 ,47 -,18<br />
6. ACAP-what 3,64 1,9<br />
* p< .05; ** p
ValentinaLazzarotti, RaffaellaManzini, and Luisa Pellegrini<br />
As limitations, it is true that R 2 and “R 2 change” are not so impressive, but the values are acceptable<br />
according to other studies in the field. Moreover the independent variables are correlated, but within<br />
acceptable values in order to avoid the collinearity issue.<br />
6. Discussion<br />
The results of the first regression model show that firms are to some extent motivated towards<br />
opening. These pressures can be attributed to the market evolution that seems to cover all industries<br />
and company sizes (which in fact are not relevant factors in explaining the openness degree) and to<br />
the goal of extending skills, competences and creativity. Moreover, firm-level R&D intensity, as<br />
traditional ACAP measure, is positively related to the OI degree, confirming that firms consider OI as<br />
complementary to internal R&D and not its substitute (Lichtenthaler 2008): indeed R&D intensity<br />
makes companies capable of absorbing knowledge from the outside (Cohen and Levinthal 1990;<br />
Zahra and George 2002). However, the low average level of openness highlights the existence of<br />
some major obstacles that - synthesized in the variable ‘ACAP-what’ - inhibit opening. In other words,<br />
going further the traditional and too generic ACAP measure (Laursen and Salter 2005; Vanhaverbeke<br />
et al. 2007), we find some additional reasons to explain the openness degree. In particular, results<br />
support Hypothesis 1: even though companies are pushed towards openness, if their absorptive<br />
capacity (in terms of difficulty of knowing, evaluating and understanding external technologies) is low<br />
they are not able to open. Therefore, a low ACAP-what explains (with negative impact) the degree of<br />
openness. Limitations are early evident: more research is needed to define the extent of absorptive<br />
capacity-what, in order to seek the causes of the abovementioned difficulties. However, from this first<br />
result the investigated firms have drawn some thoughts to begin to delineate and understand these<br />
obstacles.<br />
The results of the second regression model support Hypothesis 2: accordingly with most literature,<br />
without a favourable context, opening is not effective. Indeed, many studies emphasise the need of<br />
investigating how firms can implement OI (Chesbrough et al. 2006; Chesbrough and Crowther 2006;<br />
Dahlander and Gann 2007; Pisano and Verganti 2008), while stressing the importance of the “right<br />
conditions” in terms of company’s strategy, capabilities, organizational factors, managerial tools, etc.<br />
Anyway, the relevant message is that OI is far more complicated than “the more openness, the better”<br />
(Dahlander and Gann 2007). It can be costly (with respect to benefits) and not always coherent with<br />
the firm’s context.<br />
We tried to investigate the role of the organizational, managerial and human context by defining two<br />
variables that would represent the ACAP-how: the selected items tried to identify what it takes, in<br />
terms of organizational and social resources, to ensure that the partnership works. Model II results<br />
show that these factors are strongly related to innovation performance and that the openness degree<br />
holds benefits only if it is associated with them.<br />
7. Conclusions<br />
This study explores the relationship among innovative performance, open-approaches to innovation<br />
and firm’s ACAP in a sample of manufacturing Italian companies. The limitation due to the low<br />
number of respondents was overcome through directly interviewing the large majority of respondents.<br />
In this way, we attempted to enrich at least the reliability of the answers. Anyhow, the number of<br />
respondents is not so limited to preclude the use of quantitative tools (Barbaranelli 2006). In our<br />
attempt to go beyond the traditional concept of absorptive capacity (R&D intensity), we defined and<br />
employed this capacity in two conceptions, i.e. what and how.Also these concepts are subject to<br />
some limitations and, surely, further effort is necessary in defining them more precisely.As main<br />
results, we find that the openness degree is inhibited by the ACAP-what, while the ACAP-how is a<br />
relevant moderator factor on the relationship between openness and performance. In other words,<br />
openness is not critical per se to enhance innovative performance and a favourable social,<br />
organizational and managerial context is needed to make collaboration a success.<br />
The contribution of this paper is at the academic and managerial level. As regards research<br />
implications, to our best knowledge, it is one of the first attempts to define more in detail the concept<br />
of absorptive capacity. At the managerial level, firms can find suggestions for understanding under<br />
what internal conditions OI could enhance firm innovative performance.<br />
566
References<br />
ValentinaLazzarotti, RaffaellaManzini, and Luisa Pellegrini<br />
Barbaranelli, C. (2006) Analisi dei Dati: Tecniche Multivariate per la Ricerca Sociale, LED Edizioni.<br />
Bianchi, P., Labory, S., Parrilli, M.D., and Paci, D., (2006), “Small and Medium-sized enterprises in an era of<br />
globalisation: the case of Europe, Asia and Latin America”, in International Handbook of Industrial Policy, pp<br />
380-403, Edward Elgar.<br />
Calantone, R., Cavusgil, S.T. and Zhao, Y. (2002) “Learning Orientation, Firm Innovation Capability and Firm<br />
Performance”, Industrial Marketing Management, Vol 31, pp 515-524.<br />
Cassiman, B. and R. Veugelers (2006) “In Search of Complementarity in Innovation Strategy: Internal R&D and<br />
External Knowledge Acquisition”, Management Science, Vol 52, No. 1, pp 68-82.<br />
Chesbrough, H, Vanhaverbeke W. and West J. (2006) Open Innovation: Researching a New Paradigm, Oxford:<br />
Oxford University Press.<br />
Chesbrough, H. (2006) Open Business Models: How to Thrive in the New Innovation Landscape, Harvard<br />
Business School Press, Boston.<br />
Chesbrough, H. and Crowther, A. K. (2006) “Beyond High Tech: Early Adopters of Open Innovation in Other<br />
Industries”, R&D Management, Vol 36, pp 229–236.<br />
Cohen, W.M. and Levinthal, D.A. (1990) “Absorptive Capacity: a New Perspective on Learning and Innovation”,<br />
Administrative Science Quarterly, Vol 35, pp 128–152.<br />
Dahlander, L. and Gann, D. (2007) “How Open Is Innovation?”, Paper read at DRUID Summer Conference.<br />
Appropriability, Proximity, Routines and Innovation, Copenhagen, CBS, Denmark, June 18 – 20, now in<br />
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de Jong, J.P.J and Freel, M. (2010) “Absorptive Capacity and the Reach of Collaboration in High Technology<br />
Small Firms”, Research Policy, Vol. 39, pp 47–54.<br />
Gassmann, O. (2006) “Opening Up the Innovation Process: Towards an Agenda”, R&D Management, Vol. 36,<br />
No. 3, pp 223–228.<br />
Gassmann, O., Enkel, E., (2004) “Towards a Theory of Open Innovation: Three Core Process Archetypes”,<br />
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No. 3, pp 213-221.<br />
Huizingh, E.K.R.E. (2011) “Open Innovation: State of the Art and Future Perspectives”, Technovation, Vol.<br />
31, pp 2–9.<br />
Laursen, K. and Salter, A. (2005) “The Paradox of Openness, Appropriability and the Use of External Sources of<br />
Knowledge for Innovation”, paper read at Academy of Management Conference, Honolulu, Hawaii, USA.<br />
Laursen, K. and Salter, A. (2006) “Open for Innovation: the Role of Openness in Explaining Innovation<br />
Performance among U.K. Manufacturing Firms”, Strategic Management Journal, Vol 27, No. 2, pp 131–150.<br />
Lazzarotti, V. and Manzini, R. (2009) “Different Modes of Open Innovation: a Theoretical Framework and an<br />
Empirical Study”,Journal of Innovation Management, Vol 13, No. 4, pp 1-22.<br />
Lee, S.,Park, G., Yoon, B. and Park, J. (2010) “Open innovation in SMEs — an intermediated network model”,<br />
Research Policy, Vol. 39, pp.290–300.<br />
Lichtenthaler, U. (2008) “Open Innovation in Practice: an Analysis of Strategic Approaches to Technology<br />
Transactions”, IEEE Transactions on Engineering Management, Vol 55, No. 1, pp 148-157.<br />
Lichtenthaler, U. and Ernst, H. (2009) Opening up the innovation process: the role of technology aggressiveness,<br />
R&D Management, Vol. 39, No. 1, pp. 38-54.<br />
MINE SURVEY TOOLS 2.1, www.minesurvey.polymtl.ca (Survey), ÉcolePolitechnique Montreal, Social Sciences<br />
and Humanities Research Council of Canada, Industrial Research Institute.<br />
Murovec, N. and Prodan, I. (2009) “Absorptive Capacity, Its Determinants, and Influence on Innovation Output:<br />
Cross-Cultural Validation of the Structural Model”, Technovation, Vol. 29, pp. 859-872.<br />
Pisano, G. P. and Verganti, R. (2008) “Which Kind of Collaboration Is Right for You?”,Harvard Business Review,<br />
Vol. 86, No. 12 (December 2008), pp. 78-86.<br />
Rothaermel, F.T. and Alexandre, M.T. (2009) “Ambidexterity in Technology Sourcing: The Moderating Role of<br />
Absorptive Capacity”, Organization Science, Vol. 20, No. 4, July–August 2009, pp. 759–780.<br />
Subramaniam, M. and Youndt, M. A. (2005) “The Influence of Intellectual Capital on the Types of Innovative<br />
Capabilities”, Academy of Management Journal, Vol. 48, No. 3, pp. 450–463.<br />
van de Vrande, V., deJong, J., Vanhaverbekec, W., and de Rochemont, M. (2008) “Open Innovation in SMEs:<br />
Trends, Motives and Management Challenges”, Technovation, Vol 29, pp 423–437.<br />
Vanhaverbeke, W., Cloodt, M., Van de Vrande, V. (2007) “Connecting absorptive capacity and open innovation”,<br />
Working paper.<br />
Vanhaverbeke, W., Van de Vrande, V. and Chesbrough, H. (2008), “Understanding the Advantages of Open<br />
Innovation Practices in Corporate Venturing in Terms of Real Options”, Creativity and Innovation<br />
Management, Vol 17 No 4, pp 251-258.<br />
West, J., and Gallagher, S. (2006) “Challenges of Open Innovation: the Paradox of Firm Investment in Open-<br />
Source Software”, R&D Management, Vol. 36, No. 3, pp. 319–331.<br />
Zahra, S.A. and George, G. (2002) “Absorptive Capacity: a Review, Re-Conceptualization and Extension”,<br />
<strong>Academic</strong> Management Review, Vol. 27, pp 185-203.<br />
567
Appendix<br />
ValentinaLazzarotti, RaffaellaManzini, and Luisa Pellegrini<br />
We used a seven-point Likert-type scale (1=strongly disagree; 7 = strongly agree) variables:<br />
1. partner variety: in the last five yearsyou collaborated with a wide variety of external actors.<br />
2. intensity of collaboration with each partner on each phase: in the last five years you<br />
strongly collaborated with the following partners (University and Research centres, Technical<br />
and Scientific Service Companies, Governmental institutions, Customers, Suppliers,<br />
Competitors, Firms operating in different sectors of activity) in the following phases (Idea<br />
generation, Experimentation, Engineering, Manufacturing set up, Commercialization).<br />
We considered all the combinations partner/phase; for each combination the maximum available<br />
score is 7. Hence, the maximum score along the funnel as concerns each partner is 7 points *5<br />
phases = 35 and that the maximum score for a firm which collaborates with all types of partners<br />
(seven types) in all the phases is 35*7 partners = 245, thus resulting again in 35 the maximum<br />
value for an average measure of intensity of collaboration (independently by the type of partner).<br />
3. Market evolution<br />
i. The costs of technology development have increased<br />
ii. The product life cycle has been reduced<br />
iii. The economies of scale in R&D have been reduced<br />
4. Objectives of collaboration<br />
a. aims to extend skills, competences and creativity:<br />
i. Expand our company’s competence base<br />
ii. Integrate competences from diverse areas and disciplines<br />
iii. Increase our internal flexibility with regard to innovation<br />
iv. Stimulate creativity and idea generation capability<br />
b. aims to share risks and costs:<br />
i. Reduce or share innovation risks<br />
ii. Reduce or share innovation costs<br />
5. Organizational and managerial mechanisms<br />
i. Top management is committed towards the maximization of the<br />
collaborations results<br />
ii. For each collaboration project, there is a “champion” who facilitate the<br />
collaboration success<br />
iii. Our company formally evaluates the objectives and risks of collaboration<br />
iv. Our company analyses and selects the potential partners with a formal and<br />
explicit process<br />
v. Our company analyses and evaluates with a formal and explicit process the<br />
possible different organizational forms for the collaborations<br />
vi. Our company uses project management techniques to manage<br />
collaborations<br />
vii. Our company formally monitors the progress and the potential problems of<br />
the collaborations<br />
viii. Our company formally measures the final performance and the results of<br />
collaborations<br />
ix. Our company formally and explicitly analyses the reasons for the success or<br />
failure of collaborations<br />
6. Relational social capital<br />
i. Our employees are skilled at collaborating with each other to diagnose and<br />
solve problems<br />
ii. Our employees frequently exchange information on their specific area of<br />
expertise<br />
iii. Our employees share information and learn from each other<br />
iv. Our employees interact and exchange ideas with people from different areas<br />
of the company<br />
v. Our employees exchange their ideas with many colleagues<br />
vi. Our employees interacts with people from other departments not only in<br />
relation to their areas of expertise<br />
vii. There are moments (formal or informal) for the interaction with colleagues<br />
from other departments<br />
viii. In our company the information exchanged with colleagues regards various<br />
areas of expertise<br />
568
ValentinaLazzarotti, RaffaellaManzini, and Luisa Pellegrini<br />
ix. Our employees can be easily adapted to new situations<br />
7. Innovative performance (performance of innovation processes)<br />
i. Stimulate creativity and idea generation capability<br />
ii. Reduce the risks associated with the innovative activities<br />
iii. Improve the average cost of development of new products/processes<br />
iv. Reduce the time to market of new products/processes<br />
569
Moderating Effects of Venture Types on Motivation and<br />
Venture Growth – Some Lessons From Women<br />
<strong>Entrepreneurs</strong> in Ghana’s Tourism Industry<br />
Angela Lemaire 1 and Hong-bumm Kim 2<br />
1<br />
Takoradi Polytechnic, Ghana<br />
2<br />
Sejong University, South Korea<br />
angufas@yahoo.com<br />
hbkim@sejong.ac.kr<br />
Abstract: This study on women in Ghana’s tourism industry examined how the relationship between motivation<br />
and venture growth may be influenced by preferred venture types. The following research questions were raised:<br />
What motivates Ghanaian women to set up tourism businesses? What indicators do they use to describe venture<br />
growth? What types of tourism ventures do they prefer? How does the preferred venture type influence the<br />
causal relationship between motivation and venture growth? The mixed methodology approach was used for both<br />
data collection and analysis. . The findings suggest that women in Ghana’s tourism industry are motivated by<br />
personal, strategic and circumstantial factors. Their growth indicators include revenue, customer attraction and<br />
retention, and self-sustaining factors. It was also revealed that the women mostly preferred accommodation and<br />
catering ventures. A positive relationship between some motivation factors and venture growth for all venture<br />
types was observed, with the strongest emerging between personal motivation factor and growth.<br />
Keywords: women; motivation; venture growth; tourism; venture types<br />
1. Introduction<br />
<strong>Entrepreneurs</strong>hip indisputably has been globally accepted as the engine for economic growth<br />
(Galloway, Anderson, Brown and Wilson, 2005; Coyle and Leeson, 2004; Hisrich and Ozturk, 1999).<br />
In Ghana, just as in most African countries, though entrepreneurship and tourism are still evolving,<br />
they have been identified as strong potentials for general socio-economic growth and for the<br />
improvement of the socio-economic status of women in particular ( UNWTO, 2007; Abor and Biekpe,<br />
2006; Tshikuku, 2001; NEPAD Document, 2001).<br />
Many studies have addressed the issues of entrepreneurial motivation and venture growth (Morris,<br />
Miyasaki, Watters and Coombes, 2006; Alsos, Isaksen and Ljunggren, 2006; Marlow, 2005; Noor,<br />
2004; Carter,Brush, Greene, Gatewood, and Hart, 2003; Bennet and Dann, 2000;<br />
Lerner,BrushandHisrich,1997; Birely and Westhead, 1994). The relationship between motivation and<br />
venture growth has also received some scholarly attention (Cassar, 2007; Morris et al, 2006;<br />
Robichaud, Lerner, Brush and Hisrich, 1997; Kolveried, 1992). Unfortunately, the extent to which<br />
situational factors (such as venture type preference) can influence the entrepreneurship phenomenon<br />
in general has not received sufficient attention (Gartner, 1985),a gap which this study attempts to<br />
address. The focus on women, the tourism industry and a developing country context addresses the<br />
dearth of information on these important factors which could significantly influence understanding of<br />
the entrepreneurship phenomenon (Bruton, Ahlstrom and Obloj, 2008; Aidis, Welter, Smallbone and<br />
Isakova, 2006; Lerner, Brush and Hisrich, 1997). This study specifically seeks answers to the<br />
following questions: What motivates Ghanaian women to set up tourism businesses?; What indicators<br />
do they use to describe venture growth?; What types of tourism ventures do they prefer?; How does<br />
the preferred venture type influence the causal relationship between motivation and venture growth?<br />
Entrepreneurial Motivations<br />
Entrepreneurial motivations are goals business owners aspire to achieve through businesses they<br />
establish (Robichaud, et al, 2001). According to Carter et al (2003), innovation, independence,<br />
recognition, roles, financial success and self-realisation are important motivations for selfemployment.<br />
Mitchell (2004) cites the need for independence, material motives, the need to<br />
contribute to family security and the need to make a difference in the business and achievement.<br />
From a study of entrepreneurs in Vietnam, Benzing, Chu and Callanan (2005) posit that the desire ‘to<br />
be my own boss”, the desire “to increase my income” and the desire “to create a job for myself” are<br />
very important motivation factors. Similarly, Chu, Benzing and McGee (2007) in a study of Kenyan<br />
and Ghanaian entrepreneurs, state the desire “create a job for myself” and the desire “to increase my<br />
income” as the two strongest motivations.<br />
570
Gender and Entrepreneurial Motivation<br />
Angela Lemaire and Hong-bumm Kim<br />
There are mixed findings on the impact of gender on entrepreneurial motivation. For example, Bennet<br />
and Dann (2000) and Fagenson, 1993 suggest that men and women offer similar reasons for selfemployment<br />
such as, the desire for independence, the desire to make money and challenge<br />
However, there is also support for gender differences in entrepreneurial motivations according to<br />
Cater et al (2003), Bennet and Dann, (2000) and Gatewood et al (1995). Cater et al (2003) for<br />
instance, contend that there are significant differences between the way men and women rate the<br />
various motivation factors. Gatewood et al (1995) also argue that women place more premium on the<br />
“pull” factors than the “push” factors, the opposite being true for men. On the contrary, Buttner and<br />
Moore (1997) and Orhan and Scott (2001) also argue that the “pull” factors influence the men more<br />
than the women.<br />
Venture Growth<br />
The growth of small/medium enterprises is receiving increasing attention recently (Gibb, 1993). Many<br />
studies which have focused the growth of small /medium enterprises used financial (objective)<br />
indicators such as net profit, revenues, return on investments, return on sales and return on equity<br />
(Chaganti et al, 2002, Orser, et al, 2000; Richard, 2000). Non-financial (subjective) indicators include<br />
personal fulfillment, ability to help others, achievement of personal goals and balance between work<br />
and family (Morris et al, 2006; Brush, 1992). Studies have shown that women describe venture growth<br />
with both financial and non-financial indicators (Morris et al, 2006; Brush, Carter, Gatewood, Greene,<br />
and Hart, 2006). However, some studies suggest a general underperformance of women on financial<br />
measures than on the non-financial measures (Ayadurai and Sohail 2006).<br />
Growth Indicators of Tourism Ventures<br />
Unique conditions of tourism ventures warrants the use of indicators which are distinct from those of<br />
other industries (Haber and Reichel, 2005; Geltz and Carlson, 2000), for example, turn over, profits,<br />
number of employees in the previous year, customer numbers, customer spending (Wood, 2002);<br />
bedroom occupancy rate, annual revenue, break-even-point and guest satisfaction (Morrison and<br />
Teixeira 2004). Haber and Reichel (2005) advocate the use of both subjective and objective<br />
measures in assessing growth of tourism ventures to capture intangible but critical dimensions of the<br />
tourist experience.<br />
Tourism Venture Types<br />
One way of grouping tourism businesses is to do so by activities (Haber and Reichel, 2005). Ghana<br />
Tourist Board has classified the tourism industry by activities - accommodation, transport (car rentals),<br />
catering and tour ventures (Ghana Tourist Board Document, 2005). There appears to be no<br />
systematic study on the preference of Ghanaian women for any particular venture type. However, an<br />
examination of data of tourism venture owners from the Ghana Tourist Board in 2007 revealed<br />
women dominated the catering and accommodation businesses.<br />
2. Methodology<br />
Figure 1 presents the conceptual model for this study.<br />
Motivation Factors<br />
(MF)<br />
Figure 1: Conceptual model<br />
Types of Tourism<br />
Ventures Women Prefer<br />
(VT)<br />
(<br />
571<br />
Venture Growth<br />
(VG)
� What is the impact of MF on VG?<br />
Angela Lemaire and Hong-bumm Kim<br />
� How is the causal relationship between MF and VG affected by VT?<br />
The population comprised Ghanaian women entrepreneurs who had founded tourism ventures, A<br />
sample of 242 women were drawn from six out of the ten administrative regions of Ghana. These<br />
regions were selected for their rich tourism potentials, high numbers of tourism ventures and<br />
attraction sites. Quota sampling was used to ensure the number of participants for each data<br />
collection exercise was representative of the venture types identified and also reflected the numerical<br />
strength of these venture types in each of the selected regions. Judgment sampling was used to<br />
select participants with at least two years experience who could help answer the research questions.<br />
Multiple investigators (researcher, research assistants, interview audits), multiple sets of participants<br />
(no participant took part in more than one data collection exercise) and multiple instruments(focus<br />
group, survey and in-depth interviews) were used to collect data. Mixed methodology was employed,<br />
integrating qualitative and quantitative techniques for data collection and analysis (Cresswell, Fetter<br />
and Ivankova, 2004). The study started with a focus group meeting for 12 women to tease out their<br />
motivations, preferred venture types and venture growth indicators. The data from the focus group<br />
were then used to design a questionnaire to survey 200 women. Responses for motivation and<br />
venture growth were measured on a scale of “1” (not significant) to “5” (very significant). Preference<br />
for venture types was measured on a simple “yes” or “no” basis. The response rate for the survey was<br />
151 (75.5%) usable responses. Additionally, the focus group data was used to design a protocol for<br />
in-depth interviews of 30 women. In all a total of 192 women out of the 242 targeted participated in<br />
this study.<br />
Patterns and consistencies within the discussions and interviews with participants were established<br />
and used to form the basis of explanations (Korobov, 2001, Tapsell et al, 2000). The survey<br />
data were factor analysed and regressions were run to determine the relationship among the<br />
variables.<br />
3. Results<br />
Respondents’ Demographics<br />
A total of 192 women participated in the three data collection exercises – 12 focus group participants,<br />
150 (out of 200) survey respondents and 30 interviewees. Table 1 shows the demographic statistics.<br />
Table 1: Summary of respondents’ demographics<br />
Characteristics Responses in Percentage<br />
Type of Business<br />
accommodation<br />
catering<br />
transport<br />
tour<br />
Years in Business<br />
25 -30<br />
10 – 24<br />
2 – 9<br />
Age<br />
20 – 29<br />
30 – 39<br />
40 – 49<br />
50 – 59<br />
60 and above<br />
Marital Status<br />
never married<br />
married<br />
divorced<br />
widowed<br />
Education<br />
none<br />
middle/JHS<br />
572<br />
47.4%<br />
35.2%<br />
3.2%<br />
2.3%<br />
13.5%<br />
37.5%<br />
48.7%<br />
2.1%<br />
13.1%<br />
38.2%<br />
31.9%<br />
14.6%<br />
5.2%<br />
73.8%<br />
13.9%<br />
9.6%<br />
4.8%<br />
11.6%
secondary<br />
diploma<br />
degree<br />
others<br />
Angela Lemaire and Hong-bumm Kim<br />
24.9%<br />
41.8%<br />
6.3%<br />
10.6%<br />
Characteristics Responses in Percentage<br />
Entrepreneurial Experience<br />
some<br />
none<br />
Entrepreneurial Background<br />
some<br />
none<br />
32.8%<br />
67.2%<br />
44.9%<br />
55.2%<br />
Table 2 presents shows the factor analysis results for motivation and venture growth. The various<br />
values indicate that factor solution was good.<br />
Table 2: Factor loadings for motivation and venture growth<br />
Variable Component Eigen % of Cumulative % of<br />
Motivation<br />
- cronbach reliability<br />
coefficient – A= 0.615<br />
KMO= .740<br />
Bt. test of sig = .000<br />
Venture Growth<br />
- cronbach reliability<br />
coefficient – A= 0.738<br />
KMO= .664<br />
Bt. test of sig = .000<br />
Value<br />
Variance<br />
Variance<br />
Personal 2.83 31.5 31.51<br />
Strategic 1.18 13.15 44.67<br />
Circumstantial 1.06 11.81 56.48<br />
Revenue 2.615 43.58 43.58<br />
Customer<br />
Attraction/Retention<br />
1.054 17.57 61.15<br />
Self-Sustaining 1.023 17.05 78.21<br />
In Tables 3, frequencies of responses from focus group and interviews are presented, as well as<br />
rotated components from the survey which give a clearer picture of the variables. Venture type<br />
preference was measured on a “high” or “low” and the frequencies are presented.<br />
Table 3: Rotated component from survey and responses from focus group and in-depth interviews<br />
Variable Properties Focus Group<br />
Responses<br />
Motivation Redundancy<br />
New venture<br />
Invest excess capital<br />
Fulfill a need<br />
Respect/Prestige<br />
Money<br />
Personal Satisfaction<br />
Independence<br />
Passion/Interest<br />
Venture<br />
Growth<br />
Venture<br />
Types<br />
Ability to expand with little external<br />
financial support<br />
Sales<br />
Income<br />
Word of mouth customers<br />
Customer satisfaction<br />
Ability to purchase more inputs with<br />
little external support<br />
Accommodation<br />
Catering<br />
Tour<br />
Transport<br />
Source: Field Interviews/Surveys, 2007<br />
573<br />
(%)<br />
8.3<br />
25<br />
41.7<br />
66.7<br />
66.7<br />
75<br />
75<br />
91.7<br />
83.3<br />
91.7<br />
75<br />
83.3<br />
100<br />
100<br />
100<br />
100<br />
100<br />
100<br />
0<br />
0<br />
Interview<br />
Responses<br />
(%)<br />
46,7<br />
53<br />
80<br />
53<br />
87<br />
86.7<br />
86.7<br />
83.3<br />
60<br />
83.3<br />
86.7<br />
70<br />
70<br />
73.3<br />
83.3<br />
83.3<br />
36.7<br />
96.7<br />
0<br />
0<br />
Rotated<br />
Component from<br />
High<br />
76.5<br />
87.8<br />
33.3<br />
7.4<br />
Survey<br />
.926<br />
.544<br />
.841<br />
.579<br />
.512<br />
.501<br />
.773<br />
.783<br />
.609<br />
.983<br />
.806<br />
.870<br />
.874<br />
.805<br />
.893<br />
.870<br />
.<br />
Low<br />
23.5<br />
12.2<br />
66.2<br />
92.3
Regressions<br />
Angela Lemaire and Hong-bumm Kim<br />
After preliminary assessments and given that P (personal motivation), S (strategic motivation) and C<br />
(circumstantial motivation) are mutually orthogonal (no correlation between them), the regression<br />
VG = β + β P + β S + βCseemed<br />
most plausible to explore. Below (Tables 4, 5 and 6) are<br />
VG = β + β P + β S + β C :<br />
option 0 1 2<br />
statistics generated with SPSS 16 in respect of 0 1 2 3<br />
Table 4: R 2 Values for various levels of venture types<br />
Level of VT R R Square Adj. R Square<br />
Std. Error of the<br />
Estimate<br />
Transport 0.827 0.683 0.548 0.57389<br />
Accommodation 0.701 0.491 0.477 0.60653<br />
Tours 0.701 0.491 0.457 0.61616<br />
Catering 0.725 0.526 0.515 0.58261<br />
Table 5: p-values for various levels of venture types<br />
Level of VT<br />
β 0<br />
p-value<br />
β 1<br />
p-value<br />
β 2<br />
p-value<br />
β 3<br />
p-value<br />
ANOVA<br />
p-value<br />
Transport 0.261 0.009 0.286 0.532 0.036<br />
Accommodation 0.000 0.000 0.568 0.996 0.000<br />
Tours 0.007 0.000 0.149 0.200 0.000<br />
Catering 0.000 0.000 0.686 0.961 0.000<br />
As shown in table 5. above, p− values corresponding to t - test for β 2 and β 3 were greater than<br />
0.10, which is consistent with correlation values observed above suggesting that S and C are not so<br />
significant in determination of VG. However almost all p− values in respect of t - test for β 1,<br />
and F<br />
test for overall utility of<br />
0 1P VG = β + β + β2S+ βCat<br />
various levels of VT are less than 0.01,<br />
showing the regression equation could be useful in interpreting the relationship between VG and MF.<br />
Table 6: Table of standardized β s for predictor Variables P, S and C at various levels of VT.<br />
Level<br />
Variable Transport Accommodation Tours Catering<br />
P 1.012 0.684 0.599 0.715<br />
S -0.294 0.042 0.173 0.027<br />
C -0.158 0.000 0.140 0.003<br />
4. Discussion<br />
Respondents’ Characteristics<br />
The low level of education of the women (diploma holders mostly) may be because in Ghana, male<br />
children are mostly educated than females (Bour, 2007). The most preferred business type is<br />
accommodation followed by catering where activities are similar to traditional household activities of<br />
women (Bour, 2007). Also, most of the women were aged between 40 and 49, and have been in<br />
business for 2 – 9 years, an indication that tourism in Ghana is in its infancy. Many of the women had<br />
neither previous entrepreneurial experience nor background and yet appeared to be successful<br />
contradicting earlier findings (Henley, 2005).<br />
Motivation Factors<br />
Findings from this study also suggested reasons Ghanaian women set up tourism ventures were<br />
personal factor (passion/interest, personal satisfaction, need for independence, need to make money<br />
and opportunity to fulfill a need); strategic factor (need to invest excess capital and need to found a<br />
new venture) and circumstantial factor (redundancy). Except for passion/interest, need to invest<br />
excess capital and redundancy, these findings compare with those from advanced countries (Morris<br />
et al, 2006; Carter et al, 2003; Buttner and Moore, 1997; Lerner, Brush and Hisrich, 1997).<br />
Passion/interest appearing to be unique to participants in this study may be because Ghanaian<br />
574
Angela Lemaire and Hong-bumm Kim<br />
women by tradition are brought up to enjoy housekeeping, cooking and caring for guests (Bour, 2007;<br />
Dolphyne, 2000; Brown, 1994). The need to invest excess capital being a motivator could be due to<br />
the desire of the women to secure financial security for themselves and their children (Gooding and<br />
Mischel, 2007). As some put it “it is not good to put all one’s eggs in one basket”. Redundancy<br />
being another distinct motivator for these participants could be because unlike in advanced countries,<br />
the educational level of Ghanaian women is generally low, compared to her male counterparts, (Bour,<br />
2007) making her a ready target for redundancy.<br />
Growth Indicators<br />
From the findings, women described venture growth in terms of revenue (increase in income and<br />
sales); customer attraction and retention factor (increase in word-of-mouth customers and customer<br />
satisfaction); and self-sustaining factor (increased purchases of inputs and ability to expand with little<br />
external financial assistance). Apart from the revenue factor the others were non-financial. This<br />
confirms earlier findings that women preferred to describe venture growth in non-financial terms<br />
(Morris et al, 2006; Moult and Anderson, 2005). However there is evidence suggesting an emphasis<br />
on financial measures as well, confirming findings of Benzing et al, (2006). Also, the non-financial<br />
indicators in this study were more than the financial measures. This could be because the ventures in<br />
this study were tourism ventures which by nature warranted the use of non-financial growth indicators<br />
(Geltz and Carlson, 2000; Haber and Reichel, 2005). Further, a comparison of these factors with<br />
those used in earlier studies on tourism ventures (Wood, 2000; Morrison and Teixera, 2004; Haber<br />
and Reichel, 2005; Bergin-Seers and Jago, 2007) revealed that customer satisfaction was universal<br />
and critical in assessing a service industry such as tourism.<br />
The Impact of Venture Types on the Causal Relationship Between Motivation and Venture Growth<br />
From the regressions, at the level of transport ,the least preferred venture type by the women,<br />
personal factors of motivation had the highest beta value of 1.012. What this means is that, though<br />
transport ventures are not the preferred options for women in tourism, there are high chances of<br />
growth should women set up such ventures. Strategic factors (S) and circumstantial factor (C)<br />
recorded negative values for transport, suggesting that women wishing to invest excess capital in<br />
another venture may not consider transport ventures at all. This may be because transport ventures<br />
required much capital, technical knowledge, time and a strong personality, as the women expressed<br />
during the interview – “one has to be tough to operate a transport business”. Studies have shown<br />
that women preferred small and manageable businesses which were compatible with their life-styles<br />
(Alsos et al, 2006; Marlow, 2005). The circumstantial factor recording negative beta value suggested<br />
a transport business may not be advisable for a woman who had lost her job due to redundancy as<br />
such a business could be too capital intensive.<br />
From the results women with personal factors of motivation run accommodation ventures with<br />
success. The reasons are similar to those advanced for the transport level. Another reason might be<br />
that because the skills required running accommodation ventures are similar to those the Ghanaian<br />
female child is trained to acquire (Brown, 1994). The strategic factors have relatively weak influences<br />
on venture growth, meaning women running accommodation ventures as additional businesses will<br />
have minimal venture growth since it might be too much for them to manage, given the demand on<br />
their time and family responsibilities (Alsos et al, 2006). However running accommodation as<br />
additional business may be done with marginal success since it is similar to the woman’s traditional<br />
role of caring for guests and visitors. The influence of circumstantial factors at this level is .000 which<br />
means that it might not be an option for those who have lost their jobs as it is capital intensive.<br />
At the tour level, once again the women with personal motivation factors appeared more successful at<br />
running tour businesses. The strategic and circumstantial factors have their highest beta values<br />
(albeit weak) under tour ventures, meaning that the women could run a tour venture as an additional<br />
business or investment with some degree of success. This is probably because it is less expensive to<br />
start a tour venture. As one woman put it “all you need is an address, a telephone and laptop”.<br />
Additionally, women are known to have good human relations skills (Brush, 1987) which are good for<br />
running a tour business. Also for the same reasons, women with circumstantial motivation may run<br />
tour businesses with some degree of success.<br />
575
Angela Lemaire and Hong-bumm Kim<br />
At the catering venture level, personal factors still exerted the strongest influence for the reasons<br />
previously explained. Traditionally women do the cooking (Brown, 1994) and so they find catering<br />
ventures easier to operate .Thus, though weak forms of relationships were observed between<br />
strategic factors and venture growth, it appeared adding on a catering venture to another tourism<br />
business could be done with some degree of success. Regarding the circumstantial factor, another<br />
weak form of relationship with venture growth was observed. This means that those who set up<br />
catering ventures due to circumstantial factor only may do so with caution. In the words of one<br />
interviewee “you cannot do this job if you do not love it”. That is to say that one will have to be<br />
“pulled” into this type of business to succeed instead of being forced by circumstances such as<br />
redundancy.<br />
5. Conclusion<br />
This study assessed the extent to which situational factors such as venture types could influence the<br />
relationship between motivations and venture growth indicators of women entrepreneurs. It threw<br />
more light on the evolving phenomenon of women entrepreneurship in the context of a developing<br />
country, thereby aiding a more comprehensive appreciation of entrepreneurship as a whole. Whilst<br />
some similarities between the findings and those from advanced countries were observed, the focus<br />
on a specific industry - tourism and a developing country brought to the fore some significant<br />
differences as well, so far as women’s motivations and venture growth indicators were concerned.<br />
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578
China's Talent Policy towards Overseas <strong>Returnee</strong><br />
<strong>Entrepreneurs</strong>: Origin, Trends and Impact<br />
Kai Liu<br />
Northampton Business School, The University of Northampton, UK<br />
kailiuk@email.com<br />
Abstract: he notion of "brain drain” seems gradually reversed to "brain circulation" (Saxenian, 2000, Saxenian,<br />
2005) or even "brain gain" (Pan, 2011) in some developing nations. One example is China, which has been the<br />
largest international students sending country for over a decade, has now started to regain brain power through<br />
design and implementation of policies to attract overseas students to work or start up new ventures in their home<br />
country. This paper focuses on <strong>Chinese</strong> government's policies towards returnee entrepreneurs whose critical role<br />
of transferring much needed technology know-how in strengthening the country’s innovation capacity have been<br />
widely reorganised as key strategic assets by the <strong>Chinese</strong> government. A set of policies have been developed<br />
and evolved over the last decade to promote such type of entrepreneurship. This study traces the origin and<br />
development of those policies and summarises the major policy measures that have been introduced at both<br />
national and local levels. An initial assessment of the impact of those policies shows the policies are successful in<br />
terms of creating awareness among <strong>Chinese</strong> overseas and they also work well in certain industries and certain<br />
cities, but the policies reside on the premises that those who can benefit from such favourable policies need to be<br />
verified and approved by government and their businesses also need to be in so-called “strategically important”<br />
sectors. The policies' highly selective nature means a large number of returnee entrepreneurs are excluded from<br />
benefiting from those policies and this also further fuel the debate whether the state should be using policy tools<br />
to deliberately favour certain types of entrepreneurs in certain sectors than others.<br />
Keywords: China, talent policy, international students, returnee entrepreneurs, science parks, overseas <strong>Chinese</strong><br />
1. Introduction<br />
China's rapid rise as a leading economic power on the world stage is often attributed to its<br />
comparative advantage of low wages and the mass production of low value-added goods, but in<br />
recent years China is also moving fast in the technological arena with a rapid accumulation of<br />
technological and scientific knowledge. <strong>Returnee</strong> entrepreneurs from overseas, especially those who<br />
work or study in the developed economies such as the USA and other OECD countries play an<br />
increasingly important role in bringing much needed technological know-how back to China.<br />
Successful returnee-founded ventures can be found in almost every sector, ranging from retail to<br />
internet and biotech industries. Despite such successes, official statistics show 1.62 million students<br />
from China studied overseas since 1978, but only 497,000 returned to China. The number of Science<br />
and Engineering PhD graduates returning to China from the US is only 8% (Wang et al., 2011). In<br />
recognising the critical role of returnee entrepreneurs, the <strong>Chinese</strong> government introduced various<br />
policy initiatives to encourage returnees-led entrepreneurship. Although studies on returnee<br />
entrepreneurs start to add contributions (Dai & Liu, 2009; Wright, Liu, Buck & Filatotchev, 2008) to our<br />
understanding of such important phenomena, the wider policy frameworks which enable the<br />
emergence of such a phenomenon have received little attention from academia. This paper intends to<br />
fill this knowledge gap by tracing the origin, rationale and specific measures of those policies. An<br />
initial assessment of the potential impact of such policies will also be discussed.<br />
Based on the reviews of theories of transnational entrepreneurship and brain circulation (Saxenian,<br />
2000, 2002, 2005) and entrepreneurial policy (Gilbert, Audretsch & McDougall, 2004; Lundström &<br />
Stevenson, 2005), the research examines mixed sources of data, which include official policy<br />
documents, speeches and minutes of key governmental leaders, and information from two websites:<br />
one is funded by the government (www.1000plan.org) and the other is funded by the overseas<br />
<strong>Chinese</strong> community (www.haiguinet.com). The analysis mainly focuses on 1) policy development and<br />
trends in national and regional contexts; 2) the policy's impact on returnee entrepreneurs and regional<br />
economic development. The analysis shows that China's unique political system and institutional<br />
arrangement provides both structure and incentives for national and local governments to encourage<br />
returnee entrepreneurship, and technology-based ventures that are most sort-after as it fits the state's<br />
strategic thinking on industrial upgrading. Specific policy initiatives include special treatments of<br />
returnees' residential status, ready-made science parks, direct financial rewards and favourable tax<br />
regimes. Despite Beijing and Shanghai leading the pursuit of returnee entrepreneurs in the last<br />
decade, there is a growing trend for provinces and second-tier cities to emerge as popular choices for<br />
returnee entrepreneurs.<br />
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Kai Liu<br />
2. Brain Drain, Brain Circulation and Transnational <strong>Entrepreneurs</strong>hip<br />
Brain drain is essentially a phenomenon whereby the outflow of talented individual from developing to<br />
developed nations result in skill shortage in the sending countries. For example, most students from<br />
developing nations who arrive in the USA to pursue postgraduate degrees remain in the USA as<br />
academics, government scientists, industrial engineers or researchers after completing their studies.<br />
Few return home on completing their studies. This feature has been a trend in the 1980s but now<br />
highly skilled engineers and professionals from Taiwan, mainland China and India have been<br />
returning in growing numbers. Saxenian (2007) has noted the active engagement of <strong>Chinese</strong> and<br />
Indian engineers in technology startups in Silicon Valley, California, he referred to them as ‘the new<br />
Argonauts’ when describing their roles of connecting technological spheres around the globe. Some<br />
early researches have also shown that local ethnic associations in California that promote<br />
entrepreneurial endeavours in both host and home countries have institutionalized the international<br />
circulation of technical expertise (Saxenian and Hsu, 2001, Wong, 2006, Zhou and Tseng, 2001).<br />
Their findings have led to the coinage of the term ‘brain circulation’ (Saxenian, 2007), which describes<br />
the phenomenon of skilled immigrants becoming increasingly beneficial to both home and host<br />
countries. The changing pattern of migration and circulation suggests that, beyond cultural affinities,<br />
which one can regard as more or less constant for the foreign-born generation of immigrants, political<br />
and economic forces bring about the major changes in the flows. In particular, while studies have<br />
shown that the circulation of professionals and institutionalized links can give rise to new models of<br />
the global division of labour; few studies have looked into the process of national and local<br />
institutional formation that supports transnational entrepreneurial activities. This paper reports some<br />
policy initiatives from <strong>Chinese</strong> central and local governments to attract the flow of returnee<br />
entrepreneurs to build businesses in some strategically important sectors.<br />
3. <strong>Chinese</strong> students' study abroad and return: A brief history<br />
<strong>Chinese</strong> students studying abroad have a long history that can be dated back to the mid-nineteenth<br />
century. Upon completing their studies, most of the students returned without hesitation. Those<br />
students brought back with them the vision to develop a modern China and much needed scientific<br />
knowledge for the key industries. It is fair to say that in its first 30 years of communist rule, China did<br />
not experience a shortage of high-quality personnel for its economic, educational and scientific<br />
enterprises. For example, 14 of the 23 most important contributors to China’s strategic weapons<br />
programmes on atomic and hydrogen bombs, missiles and satellites honoured by the state in 1999<br />
had foreign doctorates granted by such institutions as Berlin (two), Caltech (two), Edinburgh (two),<br />
Michigan (two), Harvard, Yale and Paris; only two did not have foreign qualification and research<br />
experience. At that time, the main problem was that the country did not better utilise them and<br />
instead abused and prosecuted them during various political campaigns, including the Cultural<br />
Revolution (Cao, 2008). In 1978, Mr. Deng Xiaoping initiated "reform and open door" policies. Mr.<br />
Deng, being a returnee himself (Deng studied and worked in France between 1920-1926), had very<br />
open-minded attitude towards sending students to study overseas. Although there are concerns about<br />
potential "brain drain" problems, Deng believed that it would benefit the country if even a small<br />
percentage of students returned (for detailed review, see Pan, 2011). But, in reality, majority of the<br />
students choose to stay overseas with only a small fraction returning home. In 1987, during a major<br />
debate over the lack of returnees, Mr. Zhao Ziyang, then general secretary of the <strong>Chinese</strong> Communist<br />
Party (CCP) Central Committee, argued that the so-called ‘brain drain’ was in reality to ‘store<br />
brainpower abroad’, which would be utilised eventually (Zweig et al., 1995). However, political and<br />
social unrest in 1989 briefly hindered sending students abroad. The then <strong>Chinese</strong> leader Deng<br />
Xiaoping toured southern China in 1992, during which he reaffirmed the reform and open-door policy.<br />
With regard to overseas study, he also called for the return of all overseas students regardless of their<br />
previous political orientations, and tried to convince them that it would be better for them to return<br />
home and to make contributions. Here, Deng clearly intended to correct the negative impressions<br />
created by the 1989's Tiananmen protest in the minds of overseas <strong>Chinese</strong> students and of the world<br />
at large. Later, an official 12-point slogan on returnee policy was introduced to emphasise the<br />
importance of getting people to come back and offered them the “freedom to come and go” after they<br />
had returned. This policy was the first hint that the state would consider a free flow of overseas<br />
returnees back and forth. Figure 1 below shows the number of students that returned between 1978<br />
and 2004. An observable trend is the steady increase of students returning after overseas studies<br />
(although there are some fluctuations between 1988 and 1994). There are big jumps in terms of<br />
returnees' number since 2000. The main reasons are more students choose to study abroad and it<br />
also means more students choose to return.<br />
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Figure 1: Number of <strong>Returnee</strong> Students<br />
Kai Liu<br />
4. The Evolution of Policies towards <strong>Returnee</strong> <strong>Entrepreneurs</strong><br />
Some returnee students started to come back to China in the early 1990s for entrepreneurial<br />
opportunities although it is difficult to identify who the first were. In 1996, Mr. Chaoyang Zhang, a MIT<br />
graduate who started an Internet portal website (www.sohu.com) with the backing of American<br />
venture capital became one of the largest Internet businesses in China. Although Mr. Zhang is one of<br />
the most high-profile returnee entrepreneurs in China and SOHU remains a leading Internet<br />
technology company, its founding process did not receive any favourable government policies. During<br />
that period, returnee entrepreneurs were warmly welcomed during 1990's but they were essentially<br />
treated same as other entrepreneurs in the private sector. In 2001, the Ministry of Education<br />
conducted studies on China's returnee entrepreneurs because of the rapid growth of returneesfounded<br />
enterprises. The study shows by the end of 2000, returnee students had set up more than<br />
4,000 high-technology companies in the PRC, with a total annual revenue of RMB 10 billion (US$<br />
1.25 billion) (Ministry of Education, 2001). This report also made some policy suggestions which were<br />
later adopted. China’s policy towards returnees as a whole have been complex and have shifted over<br />
time. Differing government sectors have espoused different views, based largely on their institutional<br />
interests. Among all the institutions, the <strong>Chinese</strong> Community Party's Organisation Department, the<br />
Ministry of Education, the Ministry of Labour and Social Security, the Ministry of Foreign Affair, the<br />
Ministry of Science and Technology are the key institutions responsible for overseeing and<br />
implementing policies towards returnee entrepreneurs. There are thousands of policies introduced<br />
since 2000 at both national and local levels. It is impossible to list each policy, but most of these fall<br />
into the seven categories listed below:<br />
� Direct financial rewards in the form of awards and grants<br />
� Preferential tax policies in the form of tax exemptions and reductions<br />
� Relaxed immigration control (long term residential cards for those who joined foreign nationalities)<br />
� Newly created returnee entrepreneurs service centre which promised one-stop-shop services for<br />
all business needs<br />
� Special polices for satisfying returnee entrepreneurs' family needs include helping returnees’<br />
sponsor to get jobs and schooling of children<br />
� Special science and technology parks for returnee entrepreneurs<br />
� Various promotion activities including returnee entrepreneurs’ week and annual returnee<br />
entrepreneurs' competition.<br />
Representatives of High-level ministries as well as municipal governments from large cities such as<br />
Shanghai and Beijing and provincial governments pay regular visits to Silicon Valley to recruit<br />
<strong>Chinese</strong> technology professionals and encourage them return home. The visiting <strong>Chinese</strong> officials<br />
usually hold dinners or meetings with overseas students and use the occasion to publicise the<br />
favourable policy and business environment in China. In recent years, such visits have become more<br />
frequent and geographically dispersed to include other major cities, such as New York, London,<br />
Frankfurt, and Tokyo.<br />
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Kai Liu<br />
Many municipal governments have established "Returning Students Venture Parks" within the<br />
Development Zones of High and New Technology Enterprise. These parks are exclusively for<br />
enterprises run by returnees and while they offer infrastructure and financial benefits like other<br />
science parks, they also address special needs of returnees, from accelerating bureaucratic<br />
processes involved with establishing residency to insuring access to prestigious primary and<br />
secondary schools for their children. By 2000, there were 23 "<strong>Returnee</strong> <strong>Entrepreneurs</strong> Science Parks"<br />
across China, and many other municipalities had policies to attract returning students. The "<strong>Returnee</strong><br />
<strong>Entrepreneurs</strong> Science Park" in the Zhongguancun, Haidian district of Beijing, for example, reports<br />
that it housed 48 companies and 68 returning students in 1998. This is the oldest and largest of the<br />
three overseas returnee parks located in Beijing--which collectively housed 114 companies. It is<br />
difficult to determine the extent to which such policies toward returning students have contributed to<br />
China's success in technology industries, or even to the rate of return of overseas students. However<br />
it is worth noting that these policies are quite similar to those policies pursued by Taiwanese<br />
policymakers in the 1970s and 1980s that played a central role in the creation of a transnational<br />
community linking Taiwan and Silicon Valley.<br />
5. Discussion and conclusion<br />
<strong>Chinese</strong> government value returnee entrepreneurs mainly for their three unique qualities: First,<br />
technological and scientific knowledge; Second, global mindset and perspective; Third, the cultural<br />
connections and willingness to serve their home country. In comparisons with other foreign owned<br />
companies, returnee-funded enterprises are often treated as China's "own" businesses, even the<br />
returnees' nationality are not <strong>Chinese</strong> anymore. Although the success of these policies seems evident<br />
in some industrial sectors, such as IT and Internet companies, their effectiveness remains to be<br />
proved. There are also some criticisms about the policies for their selective nature and process, in<br />
order to be eligible for policy benefits, the returnee entrepreneurs normally need to have at least a<br />
PhD or master degrees, and have certain forms of intellectual property (eg. patents). The technology<br />
itself need to be in the so-called "strategically important sectors", such as Bio-technology, clean<br />
technology and aerospace technology. Those highly selective policies basically exclude majority of<br />
overseas returnee students. Some people think the policies discriminate against domestic<br />
entrepreneurs and are calling for fair treatments for all. However, the central government still think<br />
those policies are necessary for strengthening national innovation capacity in some key industries.<br />
To sum up, the policies encourage returnee entrepreneurship is only a recent phenomena, but its<br />
rationale can be traced back to China’s long-advocated "catch-up" strategy and pressing need to<br />
develop certain fields of technology to enhance national technological capacities. With China's<br />
increasing economic power, the government has the resources to pursue such type of policies and<br />
the policies have successfully created wider awareness among overseas <strong>Chinese</strong> communities,<br />
although a successful analysis and assessment of the impact of these policies would take some time.<br />
References<br />
CAO, C. 2008. China's Brain Drain at the High End. Asian Population Studies, 4, 331-345.<br />
Ministry of Education 2001. The situation of the returned overseas students and policy suggestions: a research<br />
report on returned overseas students. Minstiry of Education. Beijing, China<br />
Pan, S. Y. 2011. Education abroad, human capital development, and national competitiveness: China’s brain<br />
gain strategies. Frontiers of Education in China, 6, 106-138.<br />
Saxeniain, A. 2000. The Bangalore boom: From brain drain to brain circulation. Bridging the digital divide:<br />
lessons from India, Lessons from India, Bangalore: National Institute of Advanced Study<br />
Saxenian, A. 2005. From brain drain to brain circulation: Transnational communities and regional upgrading in<br />
India and China. Studies in Comparative International Development (SCID), 40, 35-61.<br />
Saxenian, A. L. 2007. The new Argonauts: Regional advantage in a global economy, Harvard Univ Press,<br />
Boston.<br />
Saxenian, A. L. & Hsu, J. Y. 2001. The Silicon Valley–Hsinchu connection: technical communities and industrial<br />
upgrading. Industrial and corporate change, 10, 893.<br />
Wang, H., Zweig, D. & Lin, H. 2011. <strong>Returnee</strong> <strong>Entrepreneurs</strong>: Impact on China’s Globalization Process. Journal<br />
of Contemporary China, Vol. 20, No. 70, pp. 413-431, June 2011.<br />
Wong, B. P. 2006. The <strong>Chinese</strong> in Silicon Valley: Globalization, social networks, and ethnic identity, Rowman &<br />
Littlefield Pub Inc.<br />
Zhou, Y. & Tseng Y. F. 2001. Regrounding the ‘ungrounded empires’: localization as the geographical catalyst for<br />
transnationalism. Global Networks, 1, 131-154.<br />
Zweig, D., Chen, C. & Rosen, S. 1995. China's brain drain to the United States: Views of overseas <strong>Chinese</strong><br />
students and scholars in the 1990s, Institute of East Asian Studies, University of California, Berkeley,<br />
Center for <strong>Chinese</strong> Studies, Berkeley.<br />
582
How Small Enterprises Manage Resource Scarcity in Their<br />
Product Innovation Processes<br />
Lars Lofqvist<br />
University of Gavle, Sweden<br />
lars.lofqvist@hig.se<br />
Abstract: Small enterprises have scarce resources, which is the main factor hindering their innovation of new<br />
products. Despite this resource scarcity, some small enterprises do innovate. The research question is: how do<br />
small enterprises manage resource scarcity in their product innovation processes? A multiple case study of three<br />
different small enterprises was used to answer the research question. The enterprises implement several<br />
approaches to use existing resources more efficiently or increase existing resources, such as reducing formality<br />
and including customers and users in the innovation processes, intertwining innovation processes, working<br />
concurrently on innovation and operational processes, adopting lead-user inventions, and only starting innovation<br />
processes when a current customer asks for or needs the potential new product. The efficiency of these<br />
approaches is found to be explained by common small enterprise characteristics. One conclusion from this study<br />
is that resource scarcity can be managed and small enterprises’ specific characteristics can facilitate innovation if<br />
these are recognized and used as strengths.<br />
Keywords: Product innovation, innovation, resources, small enterprises, SMEs, lead-users<br />
1. Introduction<br />
There is no lack of good ideas for new products in small enterprises, but scarce resources usually<br />
prevent the realization of these ideas into new products (Rothwell & Dodgson, 1994). The realization<br />
of new products is done through innovation, which is defined as the process of turning opportunity into<br />
new ideas and of putting these into widely used practice (Tidd & Bessant, 2009). Resources are<br />
defined, in accordance with Wernerfelt (1984), as those tangible and intangible assets which are tied<br />
semi-permanently to the firm. Examples of different kinds of resources are in-house knowledge,<br />
employment of skilled personnel, external contacts, efficient processes and capital. In small<br />
enterprises most available resources are put on urgent problems that must be solved to make the<br />
business run on a daily basis (Hadjimanolis, 2000). Developing new products in small enterprises also<br />
means high risk, much higher in comparison with larger enterprises. One reason is the inability to<br />
spread risk among different innovation projects, since small enterprises have narrower markets and<br />
fewer products. An innovation project that turns out unsuccessful cannot easily be outweighed by<br />
other successful ones (Nooteboom, 1994). Despite the resource scarcity and high risk, some small<br />
enterprises do innovate and develop new products; this study investigates how they manage the<br />
scarcity of resources in their product innovation processes.<br />
2. Frame of Reference<br />
2.1 Small enterprises<br />
This study defines a small enterprise as an enterprise with less than 50 employees. Small enterprises<br />
have broadly similar characteristics across sectors (Bessant & Tidd, 2007) and have scarce resources<br />
(Ghobadian & Gallear, 1996; Rothwell & Dodgson, 1994; Zontanos & Andersson, 2004). Small<br />
enterprises have behavioral advantages (Rothwell & Dodgson, 1994) with flexibility, low level of<br />
bureaucracy, and rapid internal communication and decision making (Vossen, 1998). Informality is a<br />
central theme in small enterprises and most processes are informal, Separate departments are often<br />
missing in small enterprises and employees have multifunctional roles, working in many different<br />
situations (Pilemalm, 2002).<br />
A constant occupation with operational tasks can lead to lack of strategic thinking and limited time<br />
horizon in small enterprises and strategy is usually informal and flexible (Hadjimanolis, 2000).<br />
Contributing to the limited time horizon is the fact that small enterprises’ external environment is<br />
uncertain and turbulent (Ratcliffe-Martin & Sackett, 2001) and they have little control over this<br />
environment (Carson, 1995). This high external uncertainty makes long-term strategies less useful<br />
and short-term returns more favorable than long-term returns. The preference for short-term returns is<br />
also connected to small enterprises being very sensitive to any disturbance in the cash flow through<br />
the enterprise; a constant cash flow is necessary for the enterprise’s existence. They find it difficult to<br />
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wait long for returns on investments or sales (Mazzarol & Reboud, 2005), and securing revenue is<br />
highly important for the cash flow (van de Vrande et al., 2009).<br />
Small firms have limited knowledge and use external contacts to overcome this (Nooteboom, 1994).<br />
Relationships with customers are an important aspect of networking (Hadjimanolis, 2000); vertical<br />
networking with suppliers and customers is the most common. Important factors in networking in small<br />
enterprises are longitudinal relations and trust (Freel, 2000). Small enterprises are usually close to<br />
their customers and users and communication is easy (Hadjimanolis, 2000; Nooteboom, 1994;<br />
Rothwell & Dodgson, 1994). This proximity to customers and markets means easy access to accurate<br />
market information and thus better marketing decisions (Dallago, 2001). The main marketing<br />
technique is relationship marketing with current customers, which suits small enterprises because it is<br />
cheap, has low risks, allows direct contact with the targeted market and is highly flexible (Zontanos &<br />
Anderson, 2004).<br />
2.2 Innovation in small enterprises<br />
Small enterprises’ main beneficial characteristics in innovation are flexibility, agility in reacting and<br />
responding to changed market conditions, rapid communication and decision making within the<br />
organization (Vossen, 1998) and closeness to their customers (Rothwell & Dodgson, 1994). <strong>Limited</strong><br />
access to finance (Zontanos & Anderson, 2004) and scarce resources are among the predominant<br />
characteristics that hinder innovation (Rothwell & Dodgson, 1994). Small enterprises’ scale-related<br />
disadvantages mean that extra resources need to be found externally for innovation and small<br />
enterprises frequently engage in some form of external linkages with external actors in innovation<br />
(Hadjimanolis, 2000; van de Vrande et al., 2009). Regarding innovation in small enterprises, there are<br />
no relevant differences between service and manufacturing firms (van de Vrande et al., 2009).<br />
Product innovation processes in small enterprises are informal and weakly structured (Hadjimanolis,<br />
2000; Pilemalm, 2002). Informality is a strength in small enterprises’ product innovation processes,<br />
because informal communication, coordination and decision making are efficient in a small<br />
organization setting (Hadjimanolis, 2000). Small enterprises seldom have the resources or<br />
infrastructure to have a formal and strategic procedure for developing new products (Bolinao, 2009).<br />
There is a high degree of customer involvement, networking and employee involvement in small<br />
enterprises’ product innovation processes (van de Vrande et al., 2009). Product innovation processes<br />
commonly interact with other processes in small enterprises (Pilemalm, 2002).<br />
There is a strong market pull effect in small enterprise innovation (van de Vrande et al., 2009) and<br />
small enterprises have good contact with their customers’ needs (Schmidt-Kretschmer et al., 2007).<br />
Most success in small enterprise innovation is gained if new products fit closely with existing<br />
customers and users; innovation should focus on what customers want (Ledwith, 2000).<br />
The cost for innovation has a greater impact on a small enterprise than a large enterprise (Madrid-<br />
Guijarra et al., 2009). Despite this, most small enterprises develop new products without external<br />
financing (Mazzarol & Reboud, 2005). Small enterprises usually finance their own product innovation<br />
processes with their own revenue and use overdraft to gain sufficient finance for innovation (Freel,<br />
1999). Resources are not only needed to develop the new products but are also needed to be able to<br />
take advantage of the economic rent of new products, so fast diffusion and adoption of a new product<br />
on the market is important for a small enterprise (Mazzarol & Reboud, 2005). Diffusion of the new<br />
product becomes easier when there are customers that are willing to adopt the new product (Mazzarol<br />
& Reboud, 2006).<br />
Studies of the development phase in innovation have been done by Guimarães et al. (1996). They<br />
found that the development phase in small enterprises were informal, dynamic and iterative, highly<br />
search-oriented with cyclical loops of learning experiments. Knowledge needed in the process was<br />
mainly gained from suppliers or other owner-managers. The small enterprises were close to their<br />
customers and external feedback from customers during the development phase was extensive. Lack<br />
of knowledge and resources necessitated improvising and creativity in how to use existing knowledge<br />
and resources in the best ways.<br />
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Lars Lofqvist<br />
2.3 Dealing with resource scarcity in small enterprises’ product innovation processes<br />
From the above description of common small enterprise characteristics and innovation processes,<br />
some ways of managing resource scarcity in product innovation processes can be derived. These<br />
approaches are connected to such resources as knowledge, efficiency in product innovation<br />
processes and finance. Approaches described in the literature for dealing with this resource scarcity<br />
are:<br />
� Networking to gain resources that the enterprise does not have in house; a flexible and quick way<br />
to gain knowledge (Hadjimanolis, 2000; van de Vrande et al., 2009).<br />
� Use relationship marketing with customers, which is cheap, has low risks, allows direct contact<br />
with the targeted market, and is highly flexible (Zontanos & Anderson, 2004).<br />
� Continual creativity on how to use existing resources in the best way (Guimarães et al., 1996).<br />
� Use flexible and informal product innovation processes (Hadjimanolis, 2000).<br />
� Tie customers to the product innovation processes to obtain easier diffusion of the new product<br />
(Mazzarol & Reboud, 2005, 2006).<br />
� Trying to reduce the time for returns on investments in innovation (Mazzarol & Reboud, 2005).<br />
3. Research question<br />
Several scholars state that small enterprises have scarce resources (Ghobadian & Gallear, 1996;<br />
Rothwell & Dodgson, 1994; Zontanos & Anderson, 2004) but how this affects product innovation<br />
processes in small enterprises and how small enterprises deal with this is only covered to a limited<br />
extent. This knowledge gap justifies this study. Consequently, the exploratory research question is:<br />
How do small enterprises manage resource scarcity in their product innovation processes?<br />
4. Research methods<br />
4.1 An exploratory case study approach<br />
To answer the research question a qualitative multi-case study approach (Yin, 2003) is used. This<br />
study has an exploratory research question and examines product innovation processes that are<br />
complex, with unclear boundaries that are affected by and dependent on their contexts (Bessant &<br />
Tidd, 2007). Case study methodology is appropriate when the units of study are not fully understood,<br />
complex and hard to isolate from their real-life context (Yin, 2003). Thus, case study methodology<br />
suits this study well.<br />
4.2 Case selection<br />
Small enterprises with their own products and product innovation processes were recruited for this<br />
study. Three enterprises in Sweden that fulfilled these demands were chosen due to their difference<br />
in the number of new or improved products launched. Table 1 briefly describes the three studied<br />
enterprises.<br />
Table 1: Some characteristics of the three enterprises in the study<br />
Enterprise 1 Enterprise 2 Enterprise 3<br />
Type Manufacturer B2B, Software/Service B2B, Manufacturer B2B and B2C<br />
Employees 23 9 25<br />
New products or<br />
product improvements<br />
launched per year<br />
Approximately one Many Several<br />
Customers One big, many small Many small Many small<br />
Closeness and Quite close and regular Very close and daily Very close and daily<br />
interaction with current interaction and<br />
interaction and<br />
interaction and<br />
customers<br />
communication<br />
communication<br />
communication<br />
4.3 Research process<br />
Product innovation processes, as well as the context, were observed in Enterprises 1 and 2 over a<br />
period of five months, four days a week, and documented in field diaries. The observations made it<br />
possible to study innovation activities when they occurred in their natural environment. Semistructured<br />
interviews were carried out with persons involved in the product innovation processes. A<br />
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Lars Lofqvist<br />
basic interview guide was used; product innovation processes were first covered on a general level<br />
and then questions about specific product innovation processes were asked and described by the<br />
interviewees. In Enterprise 1 five interviews were conducted, in Enterprise 2, six interviews. In<br />
addition to these interviews many innovation issues were discussed informally with interviewees and<br />
others at the enterprises or in the enterprises’ external environment. The studies of Enterprises 1 and<br />
2 were performed prior to the study of Enterprise 3. Since Enterprise 3 had a substantial amount of<br />
secondary data available about the enterprise and its product innovation processes, that study<br />
differed from the other two. Examples of the secondary data included brochures, newspaper articles,<br />
the enterprise’s own newspaper, extensive website information and different manuals. Neither<br />
Enterprise 1 nor 2 had much secondary data. This secondary data from Enterprise 3 made it possible<br />
to get a good understanding of their product innovation processes. A visit was paid to Enterprise 3<br />
with a two-and-a-half-hour semi-structured interview with the product development manager, a 15minute<br />
informal meeting with the owner of the enterprise, and a short guided walk around the<br />
enterprise premises. The findings from the studies already conducted of Enterprises 1 and 2 made it<br />
possible to fine-tune questions and to focus more upon the most relevant and interesting areas in<br />
small enterprises’ product innovation processes. All findings were compiled, analyzed and checked for<br />
accuracy with the enterprises.<br />
The data about the product innovation processes in the different enterprises were later mapped in<br />
sequence on an abstract level and approaches to the use of resources were identified, allowing<br />
comparison of the three companies (see Tables 2 and 3).<br />
5. Findings<br />
5.1 The product innovation processes in Enterprise 1<br />
The development of new products is generally rare in Enterprise 1. Approximately one new product or<br />
improved product is developed and launched each year. Still, the enterprise has many good ideas<br />
suitable for new products, but the ideas are usually not explored, mainly due to lack of resources. The<br />
enterprise has a history of abandoning product innovation processes because of lack of resources<br />
and/or lack of customers to buy the product in the end. Occasionally the enterprise does develop new<br />
products when their main customer explicitly asks for a specific new or improved product.<br />
The product innovation processes are executed in a cyclical, nonlinear way with prototyping, by trial<br />
and error, with regular feedback from the customer and others inside or outside the enterprise’s<br />
trusted informal network. The innovation process is a learning process by the ones developing the<br />
new product, with the problem and solution space explored concurrently. The process is informal and<br />
dynamic and flexible to cope with other operational tasks that need to be handled on a daily basis.<br />
The mix of innovation and operational work requires that the ones responsible for the product<br />
innovation processes sometimes work on operational tasks and innovation tasks concurrently. When<br />
operational tasks take their full attention, the one involved use the time spent on operational tasks for<br />
the incubation of ideas, so they gain new ideas and a fresh eye for the design problem when they<br />
resume working on the product innovation process. The product innovation processes are executed<br />
without a formal planning and documentation procedure and no deep analysis of the design problem<br />
is done before starting to find solutions. The enterprise once did try to plan a product innovation<br />
process in a formal and structured way, but this approach did not work because of the flexibility<br />
needed in the turbulent internal and external environment of the enterprise. Many unforeseen, urgent<br />
problems happened, in manufacturing or in the customer use of the products, that quickly spoiled the<br />
plan for the product innovation process. Feedback from customers and other trusted people inside or<br />
outside the enterprises is used to evaluate the process and keep it on track. During the product<br />
innovation processes there is continual creativity on how to use existing scarce resources, such as<br />
lack of knowledge, personnel, time, and finance, more efficiently.<br />
It is not common but lead-user inventions as described by von Hippel (1988) do exist. The customers<br />
and users modify the enterprise’s products on their own, and the enterprise sometimes adopts these<br />
inventions to make product improvements. A lot of effort is put into reusing existing solutions in new<br />
products to save development efforts.<br />
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5.2 The product innovation processes in Enterprise 2<br />
Enterprise 2 develops new products and new versions of current products and executes several<br />
different product innovation processes concurrently. The enterprise only starts to develop a new<br />
product if there is a current customer that requests it. Particular customers also often finance the<br />
development of new products directly. Enterprise 2 develops both their main software product and<br />
related customer-specific software products. There is an abundance of good ideas for new products in<br />
the enterprise and a form of portfolio management is practiced. The main idea with this form of<br />
portfolio management is not to spread risk among different innovation projects, but to search for<br />
synergy effects between different product innovation processes to save resources and to package<br />
customer-specific projects with solutions reusable in other product innovation processes. The novelty<br />
value of the new products is relatively low, which means that the development work and the final<br />
characteristics of the new products can be accurately determined in advance. Low novelty is a<br />
characteristic of design problems in software design because the constraints of language and<br />
systems make the problems more structured and less ill-defined (Jonassen, 2000). This low novelty is<br />
the main enabler for this kind of portfolio management and means that larger product innovation<br />
processes can be formally planned. Smaller product innovation processes are not planned in a formal<br />
way.<br />
Most other aspects of innovation are informal in the enterprises. During the product innovation<br />
processes an intense communication is held with the customers and users to get feedback on the<br />
processes; frequently, customers themselves are deeply involved in the product innovation processes<br />
and do innovation work for free for the enterprise. Those involved in the product innovation processes<br />
have additional responsibilities to handle daily. The external and internal environments are turbulent,<br />
with many unforeseen things happening on a daily basis, such as user or technical problems with the<br />
current products. This mix of innovation work and operational work means people sometimes do<br />
operational tasks and innovation tasks concurrently. Time spent on operational tasks allows for the<br />
incubation of new ideas for the design problem when they resume the product innovation process.<br />
Creativity is used in determining how to use existing scarce resources more efficiently. The enterprise<br />
also intertwines their product innovation processes with their other operational processes, to gain<br />
synergy effects on the usage of resources. An example of this is when sales, collection of<br />
requirements, marketing, support and feedback on product innovation processes usually are done<br />
during contact with customers and users.<br />
5.3 The product innovation processes in Enterprise 3<br />
Enterprise 3 has a strong tradition of innovation and several product innovation processes are<br />
executed concurrently. There is an abundance of promising ideas for new products. The product<br />
innovation processes are executed by two to three persons who also have other responsibilities in the<br />
enterprise and must do other operational tasks. Therefore, those responsible for the innovation work<br />
sometimes work on operational and innovation tasks concurrently. As with Enterprises 1 and 2, time<br />
spent on operational tasks is used for the incubation of new ideas for the design problem. Both the<br />
internal and external environments are turbulent with many unforeseen occurrences, such as<br />
customer problems with the enterprise’s products. The enterprise conducts an intense interaction and<br />
communication with its customers and users during the product innovation processes and has many<br />
lead-users who design new products or modifications of the enterprise’s products that they give away<br />
for free to the enterprise. Sometimes lead-user inventions become new products. The enterprise finds<br />
it hard to evaluate ideas for new products without testing them through some development work. The<br />
product innovation processes are informal, flexible and unstructured and done in a cyclical,<br />
experimental way by trial and error, exploring the problem and solution spaces concurrently. The<br />
product innovation processes are executed without a formal planning and documentation procedure<br />
and no deep analysis of the design problem is done before starting to find solutions. During the<br />
product innovation processes that are executed concurrently the different ideas are compared; the<br />
most promising ones survive and become new products in the end. Those ideas that become new<br />
products solve problems that current customers have. The product innovation processes are open for<br />
feedback from customers, users and others inside the enterprise or in the enterprise’s external<br />
network. Enterprise 3 actively invites feedback on their product innovation processes to be sure that<br />
they are on the right track with the ideas and new products. Efforts are made to reuse existing<br />
solutions in new products. There is a continual creativity on how to use existing scarce resources,<br />
such as knowledge, personnel, and time, more efficiently in the product innovation processes. The<br />
enterprise intertwines their product innovation processes with their operational processes to gain<br />
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synergy effects on the usage of resources. An example of this is when sales, collection of<br />
requirements, marketing, support and feedback on product innovation processes usually are done<br />
during contact with customers and users.<br />
6. Analysis and discussion<br />
All enterprises had an abundance of promising good ideas for new products but also scarce supplies<br />
of knowledge, personnel, time and capital. The enterprises had approaches for managing their<br />
scarcity of resources in their product innovation processes, which can be derived from the<br />
descriptions of the studied product innovation processes. Tables 2 and 3 shows those approaches<br />
that deal with resource scarcity. A dot in the table means that the approach is used in the particular<br />
enterprise. These approaches are divided into approaches that increase the resources (Table 2) and<br />
approaches for using existing scarce resources more efficiently (Table 3). The different approaches<br />
and their connection to how resource scarcity is managed in small enterprises’ product innovation<br />
processes will be explained and discussed after the tables.<br />
Table 2: Approaches to increase resources in the product innovation processes<br />
Approaches to increase resources Enterprise 1 Enterprise 2 Enterprise 3<br />
Targeting current customer(s) that need or demand ●<br />
the potential new product from the very beginning of<br />
the product innovation process<br />
● ●<br />
Intense interaction, communication and feedback from ●<br />
the targeted customer(s)<br />
● ●<br />
Intense interaction, communication and feedback from<br />
potential users<br />
● ●<br />
Interaction, communication and feedback from others ●<br />
in the enterprise’s network<br />
●<br />
Customers doing innovation work for the enterprise for<br />
free<br />
●<br />
Adopting lead-user inventions ● ●<br />
Table 3: Approaches to use existing resources more efficiently in the product innovation processes<br />
Approaches to use existing resources more efficiently Enterprise 1 Enterprise 2 Enterprise 3<br />
Informal and flexible product innovation processes ● ● ●<br />
Formally planned product innovation processes ●<br />
Concurrent work on both operational and innovation ● ● ●<br />
tasks<br />
Time doing operational tasks used for incubation of<br />
ideas and solutions in the product innovation<br />
processes<br />
Synergy effects (intertwinement) between operational<br />
processes and product innovation processes to use<br />
the same resources<br />
Synergy effects (intertwinement) between different<br />
product innovation processes to use the same<br />
resources<br />
Reusing existing solutions in the product innovation<br />
processes<br />
Continual creativity on how to use existing scarce<br />
resources most efficiently<br />
● ● ●<br />
● ●<br />
●<br />
● ● ●<br />
● ● ●<br />
6.1 Approaches to increase resources in the product innovation processes<br />
The closeness the studied enterprises have with their customers and users results in a network of<br />
trusted external contacts with which communication is easy, which is common for small enterprises<br />
(Hadjimanolis, 2000; Nooteboom, 1994; Rothwell & Dodgson, 1994). This closeness with trusted<br />
actors gives the enterprises accurate market information (Dallago, 2001). Furthermore, networking<br />
and communication with customers is cheap, has low risks, allows direct contact with the targeted<br />
market, and is highly flexible (Zontanos & Anderson, 2004), which suits small enterprises well that are<br />
accustomed to being flexible (Vossen, 1998) because of their turbulent environment (Ratcliffe-Martin<br />
& Sackett, 2001). This informal communication matches the informality of their product innovation<br />
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processes (Guimarães et al., 1996). But networking and closeness and communication with<br />
customers and users are not only about gaining valuable knowledge needed in the product innovation<br />
processes but also increasing resources. The studied enterprises did not start a product innovation<br />
process unless a clearly defined current customer needed or demanded the products, an approach<br />
suggested by Ledwith (2000). This approach has several resource-increasing benefits. In Enterprises<br />
2 and 3 not only the customer, but also users, are interested in and want the product to be developed.<br />
This, together with the friendly and close contact and communication, means that these customers<br />
and users are available through the whole product innovation process to ask for advice, ideas and<br />
feedback but also to validate that the product innovation process proceeds in the right direction. Thus,<br />
more formal marketing research is not necessary, which saves resources in the form of time, capital<br />
and knowledge about formal marketing research, because the enterprise gets qualitative marketing<br />
knowledge directly from the targeted customer. The customers are deeply involved in the product<br />
innovation processes, which for Enterprises 2 and 3 means customers did innovation work for free for<br />
the enterprises. In Enterprise 2 the customer did innovation work for free in the product innovation<br />
processes and in Enterprise 3 the customers created lead-user inventions that they gave away for<br />
free, saving on innovation work for the enterprise if they adopted the invention as one of their own<br />
products.<br />
To work closely with targeted current customers and users also has benefits in the later part of the<br />
product innovation process, when diffusion to the market takes place. Because the targeted<br />
customers are already present and were involved in the product innovation process, co-developed the<br />
product, and have a feel for and need for the product, diffusion and adoption become fast and easy.<br />
As stated by Mazzarol and Reboud (2005), resources are needed not only in the development of the<br />
product but also in the diffusion and adoption of the new product on the market. The approaches used<br />
by the enterprises in this study decrease resources needed for diffusion and adoption of the new<br />
products, which matches the findings by Mazzarol and Reboud (2006). The speed of product adoption<br />
is important (Mazzarol & Reboud, 2005), mainly due to the small enterprise’s sensitivity to disturbance<br />
in the cash flow (Mazzarol & Reboud, 2005). Small enterprises often use overdraft when developing<br />
new products and this affect the cash flow negatively (Freel, 1999), which in turn makes fast returns<br />
on investment crucial.<br />
Enterprises 1 and 3 networked with people other than their customers and users to gain additional<br />
feedback, knowledge and ideas. This kind of networking, typically present in small enterprises’<br />
product innovation processes (Hadjimanolis, 2000; van de Vrande et al., 2009), was not practiced in<br />
Enterprise 2, which only communicated with customers and users during their product innovation<br />
processes. Freel (2000) states that vertical networking is the most important kind of networking in<br />
innovation in small enterprises, which indirectly means that networking with people other than<br />
customers and users can be of minor importance. This latter point is supported by the findings in<br />
Enterprise 2.<br />
6.2 Approaches to use existing resources more efficiently in the product innovation<br />
processes<br />
The approaches to use existing resources more efficiently relate to how the enterprises work in their<br />
product innovation and operational processes. More efficient processes also save resources in the<br />
form of available time and needed personnel. The studied enterprises had informal and flexible<br />
product innovation processes in practice. Handjimanolis (2000) state that informality is a strength in<br />
small enterprises’ product innovation processes. Bolinao (2009) further state that small enterprises<br />
seldom have a formal and strategic procedure for developing new products. Enterprise 2<br />
distinguished itself by their formal planning of larger product innovation processes, yet the processes<br />
were executed in a flexible and informal way. This planning was facilitated by the fact that the<br />
enterprise creates software, which has low-novelty design problems (Jonassen, 2000). This low<br />
novelty means that the final product can be determined with great certainty in advance. Because most<br />
characteristics and properties were known in advance, the process to develop the product was easier<br />
to foresee and plan. Still, the product innovation process in Enterprise 2 was flexible and informal.<br />
High flexibility was needed because the studied small enterprises work in a turbulent external<br />
environment, which is common for small enterprises (Ratcliffe-Martin & Sackett, 2001). Flexibility is<br />
needed because small enterprises have little control over this turbulent environment (Carson, 1995)<br />
and must cope with it with the natural flexibility that small organizations have (Vossen, 1998). The<br />
turbulence was caused by the many urgent things that arose that must be dealt with on a daily basis,<br />
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such as trouble in manufacturing or a customer’s or user’s problems with the enterprise’s current<br />
products. Unsolved manufacturing problems would quickly affect the cash flow negatively, an<br />
undesirable risk because small enterprises are very sensitive to disturbance and dips in the cash flow<br />
(Mazzarol & Reboud, 2005). The customers’ and users’ problems with current products must also be<br />
solved quickly, because good relations with current customers secure the cash flow. From the above<br />
discussion we can conclude that flexibility is not only beneficial to the product innovation process but<br />
naturally results from a turbulent environment and cash-flow issues.<br />
The informality in the product innovation processes was striking. The natural setting for innovation in<br />
small enterprises is a small organization. Decisions are taken quickly and communication is easy and<br />
efficient (Vossen, 1998). Formality, written rules and documentation are less necessary, because<br />
most important things in the product innovation processes are easily shared and understood in a<br />
small organization. Formal approaches seem not to yield any advantages, but only create<br />
unnecessary work for small enterprises. Larger enterprises can benefit because of their lack of<br />
flexibility, internal communication problems and need to communicate decisions throughout the<br />
organization. As Bolinao (2009) state, the small enterprise infrastructure, without separate<br />
departments and many different decision makers, does not fit with formal approaches in innovation.<br />
We can conclude that lowering the degree of formality and using informal and flexible product<br />
innovation processes saves resources in small enterprises’ product innovation processes.<br />
Other approaches include ways of executing product innovation processes that are connected to the<br />
operational processes, mainly due to the ones involved having other responsibilities in the enterprises<br />
connected to the daily operational work. Multifunctional roles by employees are common in small<br />
enterprises and product innovation processes commonly interact with other processes in small<br />
enterprises (Pilemalm, 2002), as was also the case in the studied enterprises. In all three enterprises<br />
employees sometimes concurrently worked on both innovation and operational tasks to use existing<br />
resources more efficiently. Time spent on urgent operational work was indirectly used to incubate<br />
ideas and solutions and to bring a fresh eye for the design problem and solution space to the<br />
innovation work. This also increased the efficiency of resource usage, because non-innovation time<br />
was indirectly used for the product innovation processes.<br />
Quite similar to concurrent work on both operational and innovation tasks is the approach of creating<br />
synergy effects through intertwinement between operational and product innovation processes used<br />
by Enterprises 2 and 3. The difference is that here the resources were used for a different purpose,<br />
just as when sales, collection of requirements, marketing, support and feedback on product innovation<br />
processes occurred during contact with customers and users.<br />
Enterprise 2, which was accustomed to running several product innovation processes concurrently,<br />
actively searched for synergy effects and intertwinement between these product innovation processes<br />
so several product innovation processes could use the same resources. Work done in one product<br />
innovation process that also could be used in another saved resources in the form of personnel and<br />
time. This was done with the help of their form of portfolio management when the product innovation<br />
processes were planned to get synergy effects. The main enabler for this approach was the low<br />
novelty of the enterprise’s products. Reusing existing solutions was an approach practiced by all three<br />
studied small enterprises, because it also saved resources in the form of knowledge, personnel and<br />
time. In general there was a continual creativity on how to use existing scarce resources in the most<br />
efficient way in the examined enterprises’ product innovation processes, a finding that matches<br />
Guimarães et al. (1996).<br />
7. Conclusions<br />
Small enterprises focus on current customers’ needs and problems when starting product innovation<br />
processes if they suffer from scarce resources. This focus saves resources and permits getting<br />
qualitative knowledge, marketing information, feedback and ideas from both customers and users<br />
during the whole product innovation process. Executing the product innovation processes in close<br />
interaction and communication with the targeted customers and users results in several benefits, as<br />
they do innovation work for free or create lead-user inventions that can be adopted by the small<br />
enterprise to implement in new or improved products. Customers and users also provide feedback on<br />
whether the product innovation process is on the right track. Furthermore, co-development of new<br />
products with customers means that the customers care more about the product, enabling fast and<br />
easy diffusion and adoption of the new product at the end of the product innovation process.<br />
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The study also shows that informal and flexible product innovation processes are resource efficient in<br />
small enterprises. Formal product innovation processes are seen to be inefficient because the need<br />
for and value of formality is low in a small enterprise. It is possible to plan product innovation<br />
processes in a formal way for low-novelty products, but the execution of these product innovation<br />
processes still requires flexibility and informality to cope with the turbulent environment common in<br />
small enterprises.<br />
Small enterprises are creative about how to use existing scarce resources in the most efficient way,<br />
and they try to reuse existing solutions in new products to save resources. These enterprises also<br />
intertwine product innovation processes with each other and with operational processes, to get<br />
synergy effects of the usage of resources. Employees in small enterprises sometimes work<br />
concurrently on innovation and operational tasks to use existing resources more efficiently. The study<br />
also shows that time doing operational work in a small enterprise is used indirectly for incubation of<br />
ideas and solutions in product innovation processes.<br />
In conclusion, this study shows that resource scarcity can be handled; and small enterprises’ specific<br />
characteristics facilitate innovation if these characteristics, such as flexibility, informality, rapid<br />
communication, rapid decision making, and closeness to customers and users are recognized and<br />
used as strengths.<br />
References<br />
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Small Business Economics, Vol. 15, No. 4, pp 303-319.<br />
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pp 707-719.<br />
Freel, M. S. (2000) “External Linkages and Product Innovation in Small Manufacturing Firms”,<br />
<strong>Entrepreneurs</strong>hip & Regional Development, Vol. 12, No. 3, pp 245-266.<br />
Ghobadian, A. and Gallear, D. N. (1996) “Total Quality Management in SMEs”, Omega, Vol. 24, No. 1, pp 83-<br />
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Jonassen, D. H. (2000) “Toward a Design Theory of Problem Solving”, Educational Technology, Research and<br />
Development, Vol. 48, No. 4, pp 63-85.<br />
Ledwith, A. (2000) “Management of New Product Development in Small Electronic Firms”, Journal of European<br />
Industrial Training, Vol. 24, No. 2/3/4, pp 137-148.<br />
Madrid-Guijarra, A., Garcia, D. and Van Auken, H. (2009) “Barriers to Innovation Among Spanish Manufacturing<br />
SMEs”, Journal of Small Business Management, Vol. 47, No. 4, pp 465-488.<br />
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An Exploratory Study”, International Journal of <strong>Entrepreneurs</strong>hip and Innovation Management, Vol. 5, No.<br />
5/6, pp 483-494.<br />
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Economics, Vol. 6, No. 5, pp 327-347.<br />
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Improvements, Licentiate thesis, KTH Royal Institute of Technology, Stockholm.<br />
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Vol. 15, No. 1/2, pp 22-39.<br />
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Requirements – Results of an Empirical Study”, In Proceedings of the 16 th International Conference on<br />
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van de Vrande, V., de Jong, J., Vanhaverbeke, W. and de Rochemont, M. (2009) “Open Innovation in SMEs:<br />
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592
Tight time - to be or not to be Creative?<br />
Eva Lovén<br />
Department of Management and Engineering (IEI), Linköping University,<br />
Sweden<br />
eva.loven@liu.se<br />
Abstract: This study examines the role of creativity in an efficient product development organisation.<br />
Specifically, this study examines how engineers cope with these demands of being simultaneously creative and<br />
efficient. The engineers described the demands in different ways; “extremely lean organization”, “not enough<br />
time for development”, and “pressed time schedule”. The answers the engineers provided also describe how<br />
difficult it was to be simultaneously creative and efficient. The engineers had either the intention to be or not to<br />
be creative when it came to efficient product development; that is, they either (1) confronted and opposed high<br />
demands or (2) adapted and worked more than they could handle or (3) avoided being creative and focused on<br />
efficiency. This study shows that the engineers themselves were forced to set the limit when unreasonable<br />
demands arose. The first group stressed the importance of resisting creative work when the demands of work<br />
were too high. The strategy was to discuss with the managers why it was impossible to be both creative and<br />
efficient. The second group adapted to the demand of being simultaneously creative and efficient, but often took<br />
more work than they could handle. The fear of saying “no” to a supervisor’s demands forced creativity forward,<br />
but this was a dangerous balancing act as this could result in demands beyond worker’s time constraints. For<br />
this group, this choice could be a health risk. The third group avoided being creative and concentrated only on<br />
being efficient when the pressure of both efficiency and creativity was perceived as being too much. This group<br />
often avoided presenting a “good” idea because then they would be responsible for implementing the new idea.<br />
This meant they chose a “secure solution” (even if the “solution” was incomplete) rather than taking a risk on a<br />
more innovative solution. The work organization needs to support the demand of being simultaneously creative<br />
and efficient.<br />
Keywords: creativity, efficiency, lean, innovation, employees, initiative<br />
1. Introduction<br />
Several studies have examined the role of creativity in organizations (Ekvall, 1996; Amabile et al.,<br />
1996; Sternberg, 2005). For example, Ekvall (1996) studied how an organization’s climate influences<br />
creativity and Amabile et al. (1996) studied how work environment can encourage creative thinking.<br />
Sternberg (2005) has written a handbook covering a wide range of issues and topics in the creativity<br />
field. Similarly, there is a significant amount research that examines the role of efficiency in<br />
organizations. Many organisations, however, require their employees to be simultaneously creative<br />
and efficient. Three studies show that it is difficult to combine creativity and efficiency (Amabile, 2002;<br />
Mehri, 2006; Richtnér and Åhlström, 2006). According to Amabile (2002), cognitive processes take<br />
time and without reasonable time for those processes, it is difficult to be creative. On the one hand, it<br />
is important for an organization to build in slack time for employees so they can develop new ideas or<br />
solutions to old problems (i.e., to encourage innovation); on the other hand, slack time can be seen as<br />
an inefficient use of time (Richtnér and Åhlström, 2006). The challenge for companies is to find a<br />
balance between reducing slack while maintaining an ability to innovate. The relationship between<br />
slack and innovation has only recently been examined using empirical evidence (Richtnér and<br />
Åhlström, 2006). The demands for efficiency – the need for standardised processes and designs –<br />
can reduce creativity or innovation, advances that often require slack where employees can freely<br />
ruminate about possible innovative solutions to problems without the pressure to produce a timely<br />
solution. Creativity has its own demands – e.g., freedom, dynamics, challenge, debates, and risk<br />
taking – that may produce tension in an organization; however, creativity also demands supportive<br />
climate for generating ideas, playfulness/humour, trust/openness, and time to consider ideas (Ekvall,<br />
1996).<br />
Researchers that focus on innovation argue it is possible to combine creativity and efficiency (O’Reilly<br />
and Tushman, 2008). Some studies on innovation view the employee as a “resource” and not as an<br />
individual with his or her own will who can make decisions and demands. Research about creativity in<br />
the innovation area can benefit by focusing on individual initiatives (Frese and Fay, 2001; Rank et al.,<br />
2004; Binnewie et al., 2007; Shalley et al., 2004). Therefore, this article focuses on how employees<br />
initiate creativity in a product development organisation.<br />
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2. Creativity and efficiency<br />
Eva Lovén<br />
Amabile et al. (2002) show how time pressure affects creativity. People who produce high creative<br />
thinking under extreme time pressure feel they are moving toward a specific and reachable goal, as if<br />
they are on a mission. They can focus on creativity part of the day because they are undisturbed and<br />
protected, feeling challenged and involved in their work. In this context, being creativity is seen as a<br />
way to identify problems and generate or explore ideas. People who produce low creative thinking<br />
under high time pressure believe their work has no specific and reachable goal, as if they are running<br />
on a treadmill. These people feel their work day consists of dealing with distractions: highly<br />
fragmented workdays, too many requirements, too many meetings with groups rather than with<br />
individuals, and last minute changes in plans and schedules.<br />
To address this apparent conflict between creativity and efficiency, “conflict theory” is used. Thomas<br />
(1992) illustrates five strategies: competing, collaborating, compromising, avoiding, and<br />
accommodating. According to Thomas (1992), a series of studies using different methodologies has<br />
confirmed that individuals use two orthogonal dimensions to differentiate among the five intentions. A<br />
competing intention (uncooperative, assertive) represents an attempt to prevail or win one’s position –<br />
to satisfy one’s own concerns at the other’s expense. This has also been called forcing, win-lose,<br />
dominating, and contending. The opposite of competing is an accommodating intention: an attempt to<br />
satisfy the other’s concerns at the neglect of one’s own concerns. A compromising intention<br />
(intermediate in both cooperativeness and assertiveness) is understood as a midway between<br />
competing and accommodating. Compromising is an attempt to attain moderate but incomplete<br />
satisfaction of both parties’ concerns – giving up something but also holding out from something. In<br />
contrast, a collaborating intention (cooperative assertive) represents an attempt to satisfy fully the<br />
concerns of the two parties using an integrative settlement (other terms include solving, synergy,<br />
integrating, and confronting). The avoiding intention reflects a desire to ignore or neglect the concerns<br />
of both.<br />
The relationship of these categories (competing, collaborating, compromising, avoiding, and<br />
accommodating) is illustrated in the model below, figure 1. The figure is used to understand the<br />
employees intention to be creative or not in an efficient organisation.<br />
One axis reflects the concern for the company’s demands for both creativity and efficiency. The other<br />
axis represents the employees’ concern for their own interests. Workload (Karazek and Theorell,<br />
1990; Janssen, et al., 2004), satisfaction with work (Nordqvist et al., 2004), and time for implementing<br />
ideas (West, 2002) are some examples that could influence the individuals desire and capacity to<br />
innovate. Janssen (2004) shows that potential cost of innovation could be an increase in workload<br />
because an innovation requires change. According to Karazek and Theorell (1990), if work places<br />
have high demands on employees, then employees should have significant control over the way they<br />
conduct their work otherwise there is a risk for diseases. Employees who perceived a high degree of<br />
time pressure were less satisfied and felt that set goals were less often attained (Nordqvist et al.,<br />
2004). West (2002) concludes that generating creative ideas in a group is relatively easy; however,<br />
implementing creativity (new products and innovations) is difficult and takes time depending on<br />
resistance and structural and cultural barriers.<br />
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Eva Lovén<br />
Concern for the company’s demands of both creativity and efficiency<br />
Figure 1: The employees intention to be creative or not in an efficient organization. (Inspired by<br />
Thomas, 1992)<br />
3. Method<br />
This qualitative study examined a global manufacturing company that deals with short lead-time in<br />
product development projects and needs efficient production with enough creative ability for<br />
development. Ten male engineers (27 years old to 60 years old) were interviewed at the company<br />
and all of the interviewed engineers worked in the product development department. They all had an<br />
engineering education and had worked at the company between 1 and 38 years.<br />
The interviews consisted of several predetermined questions: e.g., Can you describe how you handle<br />
the balance between creativity and efficiency in your work? Can you describe situations when you<br />
were creative? The answers were then categorised into the five strategies Thomas (1992) identified<br />
as ways to deal with conflict – competing, collaborating, compromising, avoiding, and<br />
accommodation. These categories were used to address the apparent conflict between creativity and<br />
efficiency. The engineers used three of the five categories (compromising, accommodating, and<br />
competing). Below is the background information of each of the three groups of engineers.<br />
Table 1: Background of the engineers<br />
Age Number of years at the company<br />
Compromising<br />
35 3<br />
Accommodating<br />
39 4<br />
55 28<br />
Competing<br />
27 1 1/2<br />
28 1 1/2<br />
30 1<br />
38 1 1/2<br />
39 12<br />
53 29<br />
60 38<br />
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Eva Lovén<br />
4. Creativity in an efficient product development organization<br />
The interview answers show that all the engineers talked about high demands in work. They<br />
described these demands in different ways: “extremely lean organization”, “not enough time for<br />
development”, “time demands unreasonable”, and “pressed time schedule”. The answers the<br />
engineers provided also described how difficult it was to be simultaneously creative and efficient:<br />
Creativity is appreciated and encouraged, but there is more focus on that it should go<br />
fast.<br />
The space for creativity does not exist. The creativity has not vanished, but it is not given<br />
the same time or space.<br />
It is too much to do to be creative. You need to clean your thoughts and not rush further.<br />
Too much time pressure – the development process has been shortening down too<br />
much. You choose secure cards to have time.<br />
Clearly, the engineers felt their work situation (low creativity under high time pressure) was more like<br />
running on a “treadmill” than being on a “mission” (Amabile et al., 2002). The engineers felt that their<br />
workday was highly fragmented with too many activities. They also described their workday as<br />
consisting of many last minute changes in their plans and schedules:<br />
Daily problems cutting down. It is seldom that you can sit down a whole hour. At the<br />
same time, I will not sit down all day.<br />
We are as a [poorly organized] fire brigade. One goes that direction and another goes<br />
another direction. No one has told us where the fire is.<br />
All the engineers believed that they had a good working group and everybody in the group had the<br />
right attitude. That is, they believed the group worked hard and produced quality work, but the<br />
demands placed on the group by supervisors were too high. As entrepreneurs, they appreciated the<br />
need to consider customer complaints and problems. In addition, several of the engineers noted that it<br />
was only when they were involved in a skunk works project – a project with a high degree of<br />
autonomy and unencumbered by organizational bureaucracy – that real innovative ideas were<br />
developed. They also looked at how competitors had solved problems and many of the engineers<br />
noted that some of their best ideas were not developed during work.<br />
How did these engineers deal with high time pressure and demands of creativity? They seemed to<br />
use three of Thomas’s (1992) five strategies: (1) compromising – confronted and opposed high<br />
demands; (2) accommodating – adapted and worked more than one could handle; and (3) competing<br />
– avoided being creative and focused on efficiency, see figure 2.<br />
4.1 Compromising – confronted and opposed high demands<br />
In the first group, one of the respondents talked about the importance of resisting when the demands<br />
of work are too high. That is, there was a high price to pay for such work. Several of the engineers<br />
had quit. He expressed that he learned to handle the high demands of the manager, which was<br />
something he learned at the start of his employment with the company. His strategy was to discuss as<br />
often as possible with his managers why it was impossible to be both creative and efficient. He was<br />
forced to say out right that “we can’t manage” some of the demands placed on him. The engineer said<br />
that he felt creative by himself and he managed to be creative in work. This study shows that a trustful<br />
and open climate is important, a finding that is also supported by Ekvall (1996). The fear to say “no” to<br />
supervisor’s demands forced creativity forward and the respondent pointed out that this was a<br />
dangerous balancing act as this could result in demands beyond the engineer’s time constraints. In<br />
addition, he said that some of the engineers were paralysed by these demands, but others could<br />
handle the situation.<br />
4.2 Accommodating – adapted and worked more than one could handle<br />
According to this group of engineers, the product development manager has a dominant position in<br />
the product development department. The product development manager was an important driving<br />
force and initiator of many ideas, but he was also demanding and challenging. The engineers felt that<br />
they were steered by the manager. He made decisions easily and they did what he wanted. When the<br />
manager came up with his ideas and solutions, the engineers found it difficult to present their own<br />
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Eva Lovén<br />
views. The respondents in this group expressed that they adapted to the demand of being<br />
simultaneously creative and efficient and that they took more work than they could handle:<br />
My manager is extremely creative and driven: This is a big advantage. He sees only<br />
possibilities. We are hanging onto the handbrake. The downside is that we do more work<br />
than we can manage. We are an extremely lean organization.<br />
For this group of engineers, the situation could be unhealthy in the long run. Karazek and Theorell<br />
(1990) show that if there exists high demands in work, then workers should have significant control of<br />
their work processes. The engineers tried to live up to the demands, but they had very little control of<br />
how they could conduct their work.<br />
4.3 Competing - avoided being creative and focused on efficiency<br />
The third group (seven engineers) stated they avoided being creative and focused on being efficient.<br />
Earlier they could develop different variants of a solution, but now they chose one “secure card” (one<br />
solution). Solutions were considered as finished although the engineers were aware of some<br />
problems with the solution. There was no time to develop the solution further and solve the problems,<br />
so they introduced solutions with problems anyway. They also avoided being creative and<br />
concentrated only on being efficient: they felt that if they did came up with a new idea, they would be<br />
responsible for implementing the idea, adding to there are already demanding work schedule.<br />
Figure 2: Different employee intentions to be creative or not in the efficient product development<br />
organization.<br />
West (2002) believes that generating creative ideas in a group is relatively easy, but to implement<br />
creative ideas (new products and innovations) is difficult and takes time depending on resistance and<br />
structural and cultural barriers. The engineers seem to agree with West:<br />
There is a fear to come up with a good idea. Then you also got the task to implement the<br />
idea. This means that ideas do not come to the surface for some of us. I do what I<br />
should; otherwise, I got too much to do and that is not tenable.<br />
If you have an idea, you also must implement the idea. There is no one to delegate to.<br />
You must do it by yourself. You shut down when there is too much to do. Some<br />
experience this tiredness.<br />
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5. Conclusion<br />
Eva Lovén<br />
This paper focused on how engineers handle the apparent conflict between creativity and “tight time”<br />
in a product development department. The engineers either confronted and opposed high demands or<br />
adapted and worked more than they could handle or avoided being creative and focused on<br />
efficiency. Most of the engineers (seven of ten) chose not to be creative when the pressure of both<br />
creativity and efficiency was perceived as being too much, which is a healthy sign. This group avoided<br />
being creative so they would not be responsible for implementing new ideas. They chose secure<br />
cards and introduced solutions knowing that some problems still existed. Only one engineer<br />
expressed that there existed high demands, but there existed also possibilities to oppose and make a<br />
decision together with the manager. The engineer seems to be relatively alone to experience the<br />
climate in that way. Fear, adaptability, and evasive behaviour were evident. Two engineers<br />
implemented more ideas than they could handle. This could be a health risk for the engineers. This<br />
study shows that the engineers themselves were forced to set the limit when unreasonable demands<br />
arose. The work organization had not developed a way to support the demand of being<br />
simultaneously creative and efficient. This study shows that to develop employee-driven innovations<br />
an organization needs to provide space and time for both creativity and efficiency. The research in<br />
innovation needs to understand and get close to the creative individual and her/his creative work. This<br />
small, modest study is merely a first step to better understanding innovative employee work behaviour<br />
in a simultaneously creative and efficient product development organisation.<br />
What are the managerial implications?<br />
� If there exists a strong feeling of trust, engineers can express their opinions and employee<br />
initiatives can be taken without fear of being simultaneously creative and efficient.<br />
� When employees come up with new ideas, it is important that they are given time to develop and<br />
implement their ideas. If this is not possible, the ideas can be given to a separate organisation<br />
within the organization that can help implement the ideas.<br />
References<br />
Amabile, T. Conti, R., Coon, H., Lazenby, J. and Herron, M. (1996) “Assessing the work environment for<br />
creativity”, Academy of Management Journal, Vol. 39, No. 5, pp 1154-1184.<br />
Amabile, T., Handley, C. and Kramer, S. (2002) “Creativity under the gun”, Harvard Business Review, August, pp<br />
52-61.<br />
Binnewie, C., Ohly, S. and Sonnentag, S. (2007) “Taking personal initiative and<br />
communicating about ideas. What is important for the creative process and for idea<br />
creativity?”, European Journal of Work and Organizational Psychology, Vol. 16, No. 4, pp 432-455.<br />
Ekvall, G. (1996) “Organizational climate for creativity and innovation”, European Journal of Work and<br />
Organizational Psychology, Vol. 5, No. 1, pp 105-123.<br />
Frese, M. and Fay, D. (2001) “Personal initiative: An active performance concept for work<br />
in the 21st century”, Research in Organizational Behavior, Vol. 23, pp 133-187.<br />
Janssen, O., van de Vliert, E. and West, M. (2004) “The bright and dark sides of individual and group innovation:<br />
a special issue introduction”, Journal of Organizational behaviour, 25, 129-145.<br />
Karasek, R. and Theorell, T. (1990) Healthy work: Stress, productivity and the reconstruction of working life, New<br />
York, Basic Books.<br />
Mehri, S. (2006) “The darker side of lean: An insider’s perspective on the realities of the Toyota production<br />
system”, Academy of Management Perspectives, May, pp 21-42.<br />
Nordqvist, S., Hovmark, S. and Zika-Viktorsson, A. (2004) “Perceived time pressure and social processes in<br />
project teams”, International Journal of Project Management, Vol. 22, pp 463-468.<br />
O´Reilly III, C.A. and Tushman, M.L. (2008) “Ambidexterity as a dynamic capability: Resolving the innovator’s<br />
dilemma”, Research in Organizational Behavior, Vol. 28, pp 185-206.<br />
Rank, J., Pace, V. L. and Frese, M. (2004) “Three avenues for future research on creativity,<br />
innovation and initiative”, Applied psychology: An international Review, Vol. 53, No. 4, pp 518-528.<br />
Richtnér, A. and Åhlström, P. (2006) “Influences on organisational slack in new product development projects”,<br />
International Journal of Innovation Management, Vol. 10, No. 14, pp 375-406.<br />
Shalley, C. E., Zhou, J. and Oldham G. R. (2004) “The effects of personal and contextual<br />
characteristics on creativity: Where should we go from here?”, Journal of Management.<br />
Vol. 30, No. 6, pp 933-858.<br />
Sternberg, R.J. (2005) Handbook of creativity. Cambridge University Press, New York.<br />
Thomas, K.W. (1992) Conflicts and negotiation processes in organizations. In Dunnette, M. and Hough, L (eds.)<br />
Handbook of Industrial and Organizational Psychology. PaloAlto, CA:Consulting Psychologists Press.<br />
West, M.A. (2002) “Ideas are ten a penny: It’s team implementation not idea generation that counts”, Applied<br />
Psychology: An International Review, Vol. 51, No. 3, pp 411-424.<br />
598
Commercialization of University Research: A View from the<br />
Social Science and Humanities<br />
Manjari Maheshwari 1 and Ranjana Bird 2<br />
1<br />
Research Associate, University of Windsor, Windsor, Canada<br />
2 ,<br />
Vice President Research, University of Windsor Windsor, Canada<br />
mmaheshwa@gmail.com<br />
rpbird@uwindsor.ca<br />
Abstract: There is a considerable emphasis on universities to be major players of the knowledge based<br />
economy. University research is seen as a driver of economic growth. Increasingly, universities are trying to<br />
integrate their research with the development of commercial products and subsequent creation of spin-off<br />
companies. However, most of this commercialization effort is focused around natural sciences, engineering and<br />
medical fields. The commercialization needs of social sciences and humanities (SSH) researchers which<br />
constitute a major brain power in the universities are largely ignored. In this paper, we propose a<br />
commercialization map for SSH disciplines by searching, extracting, and analysing the relevant existing literature.<br />
In addition, we have gathered evidence through internet search and content analysis of some successful case<br />
studies on commercialization of SSH research. This report provides insights and recommendations for both the<br />
policy makers and university administrators which could be used in developing the core strengths of universities<br />
and increased commercialization of SSH research. It is concluded that SSH research could play a vital role in<br />
social and economic innovations.<br />
Keywords: University research commercialization, social sciences and humanities, knowledge transfer,<br />
innovation<br />
1. Introduction<br />
Interest in commercialization of university research has increased steadily over the past two decades<br />
(Henderson et al., 1998; Rothaermal et al., 2007; Thursby et al., 2009). Universities across the globe<br />
are looking for ways to commercialize their research and knowledge for developing greater economic<br />
and practical relevance (Fini et al., 2010). Commercialization of university research is now considered<br />
a key driver for national competitiveness (Ambos et al., 2008). Several universities are also trying to<br />
brand and position themselves as entrepreneurial universities and knowledge enterprises (Crow,<br />
2010). Declining revenues and increasing economic and societal pressures to deliver have become<br />
major policy concerns for university administrators. With big universities in US such as Stanford, and<br />
Massachusetts Institute of Technology (MIT) showing the way, many more universities today are<br />
making serious efforts in activities leading to research commercialization. However, in these efforts<br />
we find that the focus has been clearly on addressing the commercialization needs of natural<br />
sciences, engineering, and medical disciplines. Commercialization needs of the social sciences and<br />
humanities (SSH) have been largely ignored. These disciplines tend to get lesser policy attention and<br />
lesser funding for commercialization (Benneworth and Jongbloed, 2010).<br />
Based on a number of reports (UNESCO, 2010; Impact, 2008; ESRC, 2010), we argue that the value<br />
of commercializing SSH research to the national economy and society at large cannot be<br />
underestimated. ESRC (2010) report emphasized the importance of conducting social science<br />
research citing a number of successful examples such as “how social science saves lives”, “coping<br />
with large scale redundancies”, and “eradicating illiteracy”. It is a well accepted fact in the academic<br />
and practitioner community that SSH research creates value. Several successful examples of<br />
university research commercialization in SSH disciplines exist (Pilegaard et al., 2010; Nelson, 2005;<br />
Bazeley, 2006). Universities stand to miss great potential value in terms of revenues and boost they<br />
can provide to the local, regional, and national economy, by not paying proper attention to<br />
commercialization of SSH research. Bazeley (2006) shows that social scientists though quite active in<br />
their fields and making significant impact on society and culture are largely absent from their<br />
universities research commercialization map. A recent study by Fini et al. (2010) finds that many<br />
social science researchers are engaging in entrepreneurial activities but most of them choose to<br />
commercialize their intellectual property (IP) outside the university system. Social scientists often<br />
channel their incomes and fees from commercially successful research through their companies. On<br />
the other hand, the bureaucratic university system cannot be considered developed to nurture these<br />
entrepreneurial ventures and may hamper such activities prematurely by strangling them through<br />
unfavourable policies and procedures.<br />
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Manjari Maheshwari and Ranjana Bird<br />
Presence of technology transfer offices (TTO’s) in most of the universities in North America and<br />
Europe is an indication of the popularity of technology commercialization activities within the university<br />
environment. The technology transfer lens takes our attention to those university activities that can be<br />
easily measured by using some metrics. However, heavy use of patents as a measure for university<br />
research commercialization in empirical studies of university industry technology transfer is<br />
disproportional and ignores the economic importance of non-patent channels of research transfer and<br />
commercialization (Agrawal, 2001). This trend is worrisome as it does not take into account the<br />
potential of university research associated with SSH disciplines such as management, anthropology,<br />
art, music, and language. As Crossick (2006) rightly points out, this view fails to notice the important<br />
contributions of SSH disciplines where tangible returns are hard to measure and do not fit into the<br />
traditional knowledge transfer metrics criterion.<br />
In the literature, terms such as knowledge flows (Meagher et al., 2008), knowledge utilization (Landry<br />
et al., 2001), knowledge mobilization (Phipps and Shapson, 2009), research dissemination (Bazeley,<br />
2006), and research valorization (Benneworth and Jongbloed, 2010) have been frequently used to<br />
show the impact of SSH research. Benneworth and Jongbloed (2010) in their research analyzed<br />
some key commercialization initiatives undertaken by various funding agencies and found that little<br />
success was achieved in terms of SSH commercialization. Policies and goals for innovation in the<br />
universities are often based on the output indicators such as patents or new products supporting the<br />
hard sciences and neglecting the soft sciences. Thus, applying the traditional model of university<br />
technology commercialization may not work for commercialization of SSH research. A gap exists in<br />
the literature to address the commercialization needs of SSH researchers. We address this gap by<br />
developing a commercialization map for SSH research.<br />
Our methodology for this paper involved extensive literature review. We queried journal databases<br />
using the key words such as university research commercialization, university research knowledge<br />
transfer, technology commercialization, and SSH research commercialization. Literature review<br />
revealed a lack of emphasis on SSH research commercialization justifying the exploratory nature of<br />
research. We looked at the reports and policy papers from various funding agencies and policy<br />
governing bodies such as Social Science and Humanities Research Council (Canada), Economic and<br />
Social Research Council (U.K.) and Organization for Economic Co-operation and Development. We<br />
also looked at the websites of research offices of all the 21 universities in the province of Ontario in<br />
Canada. Not surprisingly, we found that while most of the universities have technology/innovation<br />
transfer offices within their research services, elements associated with the commercialization of<br />
research from SSH disciplines were visible on websites of only two of the research offices. The<br />
majority of the offices were mainly focused on technology commercialization activities. Lack of<br />
presence of SSH projects/research on websites is an indication that universities are not doing enough<br />
to promote SSH research commercialization. Based on best practices and practitioner oriented<br />
reports and evidence gathered through internet and content analysis of some successful case studies<br />
on commercialization of SSH research we develop SSH research commercialization map. Case<br />
studies were randomly selected from the internet and academic articles.<br />
The paper is organized into four sections. After presenting a brief overview of research problem and<br />
research motivation in the introduction section, the second section deals with the specifics of SSH<br />
research commercialization in terms of successful cases, enabling factors and the commercialization<br />
map. In the third section, recommendations are provided for university research commercialization<br />
stakeholders to work on developing the core strengths of the universities research system by focusing<br />
on the neglected area of SSH commercialization. Finally, the paper ends with a conclusion section.<br />
2. Social Science and Humanities Research Commercialization<br />
The terms innovation and commercialization have been used interchangeably in the literature to<br />
depict successful exploitation of new ideas/knowledge and research generated by industry and<br />
university researchers. We use the term commercialization to show how SSH research/innovation<br />
creates social and economic value. Commercialization of research is a creative and a complex<br />
process involving a number of stakeholders with diverse goals, perspectives, and backgrounds.<br />
Technology commercialization has long been the mainstay of university research commercialization<br />
with many academic research articles focussing on the traditional linear model of innovation and<br />
commercialization (Zhao, 2004; Henderson et al., 1998; Thursby et al., 2009). However, in reality,<br />
technology commercialization is a subset of the university research commercialization ecosystem. In<br />
the linear approach, the production of knowledge which is carried out by the academics is distinct<br />
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Manjari Maheshwari and Ranjana Bird<br />
from its transfer/application which in most of the cases is carried out by TTO. This approach does not<br />
provide enough leverage for the academics to influence the path of research transfer and<br />
commercialization (Benneworth, 2001). This approach may not work for SSH research<br />
commercialization as the context specificity of the SSH research calls for mutual collaboration and<br />
production and dissemination/application of knowledge may be difficult to separate. In the next three<br />
sub-sections, we present three successful case studies, summary of enabling factors and a roadmap<br />
to SSH research commercialization.<br />
2.1 Successful case studies<br />
The three cases are presented briefly due to space constraints. However, readers are encouraged to<br />
explore the cases in detail.<br />
FM Sound Synthesis: FM sound synthesis, is a classic case of SSH research commercialization<br />
originating from the Music department of Stanford University. Its commercial success shows that<br />
patenting and licensing can extend beyond engineering and bio-medical sciences into humanities.<br />
Nelson’s (2005) article clearly explains the dilemma faced by the stakeholders involved in the project.<br />
Successful relationship between technology and music which started with patenting and licensing FM<br />
sound synthesis to Yamaha resulted in a broad portfolio of licenses emerging from the<br />
interdisciplinary focus present at the music department. A significant number of differences between<br />
the music logic and commercial/technical logic had to be overcome before the innovation could be<br />
commercialized.<br />
TermShare: TermShare, a lab spin-off from the business school of a medium size university in<br />
Europe is an excellent example of academic entrepreneurship originating from SSH (Pilegaard et al.,<br />
2010). <strong>Academic</strong> entrepreneur combined the research in linguistics, knowledge management, and<br />
technology to develop a software product. The project started with the development of first English-<br />
Danish/Danish-English medical dictionary. This established the entrepreneur’s credibility within the<br />
institutional framework and helped him in sourcing grants and funds and moving up in the<br />
administrative ranks. A center of excellence in medical language was established which later turned<br />
into a knowledge communication lab. Technology played a big role in getting the required funds. Spinoff<br />
was created; the entrepreneur was appointed managing director and he continued to remain the<br />
lab manager and researcher. The entrepreneur made perfect use of his personal linkages to gain<br />
legitimacy in the business world which helped in venture`s success.<br />
Stevens Institute for Innovation (http://stevens.usc.edu/): The main aim of Stevens Institute for<br />
Innovation at University of Southern California is bringing ideas to the society. The integrated<br />
approach where entrepreneurship centers work with TTO`s has clearly provided the impetus needed<br />
for the research projects to achieve commercial success, especially for SSH researchers. Alelo<br />
(http://www.alelo.com/), a home-grown spin-off from Information Sciences department provides<br />
language and culture training solutions. The solutions focus on communicating in context and have<br />
been successfully used in high stress foreign environment such as the use by military personnel in<br />
war zone in Afghanistan. Consulting between a professor from the School of Cinematic Arts and Xrez<br />
(www.xrez.com) resulted in the development of gigapixel panoramic photography technique.<br />
Leadership skills and the experience that the leader brought in have played a big role in the success<br />
of the Institute. The vision of shared sense of enterprise and the creation of an entire institutional ecosystem<br />
based on the formal and informal linkages within the academic and business community has<br />
resulted in successful SSH research commercialization from the University.<br />
2.2 Summary of Enabling Factors<br />
A number of key factors emerged from the content analysis of the cases described above. One of the<br />
key characteristic is the presence of twin skills in the academic researcher as illustrated in TermShare<br />
case. Understanding of both the business and research viewpoints helped the researcher in<br />
commercializing his research in a successful manner. The case also highlights the role of informal<br />
linkages in gaining acceptance within the business and academic community. A supportive<br />
institutional framework and a well developed eco-system, as illustrated in Steven`s Institute case goes<br />
a long way in building the confidence of SSH researchers in commercialization endeavours.<br />
Leadership experience and vision, is common among all the cases described above. Cases also<br />
highlight the importance of interdisciplinary approach to solving problems. In today’s world,<br />
technology plays a big role in not only providing a tool for dissemination of research but it is also an<br />
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integral part of many research projects. Last but not the least, researchers contact with the nonacademic<br />
community and the informal linkages that develop over the years enable in establishing the<br />
legitimacy of research.<br />
2.3 Commercialization Map<br />
SSH research does not have a strong connection with the production of wealth (Gibbons et al., 1994)<br />
and that technology commercialization is what brings revenue to the universities. We challenge this<br />
impression and provide a commercialization road map for SSH researchers. We build the map using<br />
the concept of knowledge supply chain (Choi et al., 2004). Choi et al. (2004) refer to knowledge<br />
supply chain as the supply chain involving IP. We further extend the notion of knowledge supply chain<br />
and apply it to SSH research domain. The process of SSH research commercialization is developed<br />
by applying the concept of knowledge supply chain to the flow of knowledge across the stages of<br />
knowledge creation, output, transfer, and outcome (Figure 1).<br />
Knowledge input in the commercialization process happens when new ideas emerge or a special<br />
need is identified, when existing ideas are challenged, or when new behavioural discoveries come<br />
into sight. Knowledge output takes many forms such as academic publications, development of new<br />
processes, methodologies and tools, and the new skills imparted to the students. The most common<br />
output for SSH researchers is a publication, which mostly caters to the academic audience and is<br />
supported by the university reward and tenure process. SSH researchers not only lack the motivation<br />
to conduct research with commercial outcomes but are also unaware about the various knowledge<br />
transfer mechanisms available to them.<br />
Contrary to the belief, many knowledge transfer mechanisms exist for SSH researchers. The most<br />
common and well documented mechanisms are patenting and licensing which are considered more<br />
suited for technology commercialization. However, cases of patenting and licensing occur in SSH<br />
disciplines. Consulting, contract, and joint and interdisciplinary research are some of the other more<br />
common knowledge transfer mechanisms for SSH disciplines. These mechanisms are less<br />
documented and in most cases work outside the formal channels of university research<br />
commercialization. SSH research also gets disseminated and commercialized using informal linkages<br />
where benefit of research may not be directly visible and there are no standard means to quantify and<br />
measure the impact. Recently, web portals are being used by SSH researchers in commercializing<br />
their research outputs. iBRIDGE network (www.ibridgenetwork.org) and Flintbox (www.flintbox.com)<br />
are the two most common portals being successfully used by researchers with very little<br />
administrative costs and bureaucracy burden associated with them.<br />
The key to calculating the impact associated with SSH research is to focus on the multiple pathways<br />
through with knowledge transfer occurs and trickles down in the form of knowledge activity into the<br />
industry and society at large (Mars et al., 2009). If a spin-off is created or a license is issued direct<br />
monetary benefit can be counted and measured indicating economic activity. Influence of SSH<br />
research on policy decisions and behavioural patterns indicate social activity. However, measurement<br />
of monetary benefit for such activities is not simple. Finally, knowledge activity produces knowledge<br />
outcomes by generating economic and social value. When formal commercialization mechanisms are<br />
used economic benefits are more visible such as creation of new products, new jobs, and profits. In<br />
many other cases, when less formal mechanisms are at work and contributions to the society are<br />
subtle such as improved quality of life and changed behaviour of people, social value becomes the<br />
knowledge outcome.<br />
3. Recommendations for Stakeholders<br />
Based on the existing literature, reports, and case study evidences, this section lists the various<br />
recommendations for university research commercialization stakeholders (Figure 2). Besides<br />
university administrators and funding agencies, community and the individual researcher play an<br />
important part in taking the case of SSH research commercialization forward. SSH research<br />
commercialization should be looked as a shared process involving commitment from various<br />
stakeholders involved across all the stages of the commercialization process.<br />
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Figure 1: SSH Research Commercialization Map<br />
Manjari Maheshwari and Ranjana Bird<br />
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Figure 2: SSH Research Commercialization Recommendations<br />
3.1 University Specific Recommendations<br />
Recognize research commercialization in the tenure and promotion process: Tenure and promotion<br />
processes at universities have become highly strict in terms of publication of research. Application of<br />
research is not considered in alignment with tenure and promotion process. SSH researchers do not<br />
have the motivation to take the extra step of research commercialization when due credit is not given<br />
to such initiatives at the university level. We recommend that universities include aspects related to<br />
knowledge dissemination and commercialization in deciding for tenure and promotion. This will aid in<br />
solving lack of motivation problem to some extent. It should not be made mandatory but due<br />
recognition should be given to those who decide to focus on research commercialization.<br />
Design a self sustainable research commercialization model: Technology commercialization is just<br />
one of the ways by which university research gets commercialised. Universities have been working on<br />
a revenue maximization model by focussing on a few highly lucrative ideas which results in many<br />
missed opportunities. In reality, very few patents result in big revenues. We recommend that<br />
universities shift their commercialization model to output maximization and invest in more number of<br />
research projects, not necessarily the high paying ones. This may also enable self sustainable model<br />
for research commercialization. A self sustainable model aims at converting the success story of on<br />
project/research into a broad portfolio of successes and is able to sustain itself even when the funding<br />
dries up. For example, the Community University Research Alliance (CURA) program started by<br />
SSHRC has been identified as having focus on individual research and researchers rather than on a<br />
portfolio of research (Benneworth and Jongbloed, 2010). The potential market for most of the<br />
research originating from SSH disciplines could be very small and it is difficult to sustain a profitable<br />
commercial outcome on a single research project unlike the science and engineering disciplines<br />
(Martinez et al., 2010). Nevertheless, it should be noted from the case studies provided in the<br />
preceding section that there are opportunities to for SSH discipline to develop highly<br />
commercializable products.<br />
Recognize the alternate ways of research commercialization in TTO’s mandate: IP protection is not<br />
the only way to commercialize knowledge and research. However, for non-patentable research more<br />
options need to be created by focusing on both economic and social outcomes. In many cases of<br />
SSH research, the object of transfer is the indirect contribution made by the researchers in developing<br />
and improving services and influencing decision making processes. Many researchers have been<br />
disseminating and commercializing their research through informal linkages. However, such transfer<br />
is less visible as compared to the formal channels of commercialization. Contractual tools that are<br />
designed keeping in mind a tangible product or a component may be ill-suited for SSH researchers<br />
(Martinez et. al, 2010). They often face contractual difficulties and delay in payments. Thus, we<br />
recommend that the various stakeholders understand the limitations of the existing contractual tools in<br />
university research commercialization and work towards a more transparent arrangement for SSH<br />
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research commercialization. This will also help in increasing the visibility of SSH research<br />
commercialization.<br />
Hire boundary spanners for promoting commercialization initiatives: TTOs should hire personnel that<br />
have the expertise to recognize the needs of SSH researchers and create opportunities for forms of<br />
knowledge other than technology. Hiring persons with boundary spanning skills who not only<br />
understand the market and societal needs but also the needs of social scientists is important for<br />
furthering the agenda of SSH research commercialization.<br />
Revise measurement indicators: It is difficult to assess the impact of SSH research in terms of<br />
traditional measures of number of patents and licenses. For example, SSH research that brings about<br />
change in attitudes of people towards some kind of societal issue is hard to measure. Benefits of<br />
SSH research are more subtle and cannot be directly emulated from the physical sciences and<br />
engineering fields. <strong>Academic</strong>s in social sciences are more likely to be involved in entrepreneurial<br />
activities that are not based on patented inventions (Fini et al., 2010). A broader set of metrics and<br />
measurement indicators are needed in understanding the commercial outcomes of university research<br />
commercialization including economic and social outcomes.<br />
3.2 Researcher Specific Recommendations<br />
Change in the mindset: <strong>Academic</strong> researchers are not very good at selling their research. Most of<br />
SSH researchers are afraid to use the term commercialization and are not aware of the<br />
commercialization possibilities. In a formal workshop setting, which included researchers from both<br />
the hard and soft sciences, we conducted a short survey and found that the researchers were<br />
unaware of commercialization possibilities in fields other than technology and life sciences and<br />
believed that commercialization is not related to SSH research. We recommend that a change in<br />
attitude and mindset of SSH researcher is needed for SSH research commercialization to happen.<br />
Social scientists should take lead role in the innovation and commercialization cycle of university<br />
research. SSH research commercialization is not new as can be seen from the cases studies<br />
mentioned in the previous section. SSH researchers should work toward removing the underdog<br />
status and should work towards overcoming the conservative mindset when it comes to university<br />
research commercialization initiatives. Study by Harman (2005) found that SSH research is being<br />
mostly driven by faculty interests and is less conducive to commercialization. SSH faculty is mostly<br />
concerned with securing ongoing resources rather than on collecting funds through commercial<br />
outcomes.<br />
Recognize the role and impact of SSH research dissemination: SSH research in most cases does not<br />
yield immediate results. The delayed impact of SSH research has to be accounted for when<br />
assessing the overall impact of SSH research. SSH research acts as a support mechanism for many<br />
private sector industries. Many times regulatory compliance issues result in contract based research<br />
between private companies and academic researcher. SSH research acts as an enabler for<br />
technology related research. Research contracts between linguistic department and software<br />
companies developing voice recognition software is a common occurrence. It is essential for the<br />
researchers to perceive significant benefits from their research in order for the institution to recognize<br />
their efforts.<br />
3.3 Funding Agency Specific Recommendations<br />
Bridge the innovation gap through SSH research: There is enough evidence to argue that innovation<br />
gap is becoming wider at an increasing rate (OECD, 2001; OECD, 2010) The arguments floating in<br />
the academic circles and policy level suggest that better commercialization of the publicly funded<br />
research will hold the key to reducing the innovation gap (Hoye et al., 2007; Arundel and Bordoy,<br />
2008). We argue that SSH research works as a bridge and helps in the adoption and implementation<br />
of technological solutions and innovations. SSH research is found to reduce the magnitude and after<br />
the fact impact of a problem of a technical solution. For example, in AIDS prevention and control,<br />
many technical solutions have been provided but it is the SSH research that works at the prevention<br />
level in working towards AIDS cure. We recommend that SSH research be recognized by the funding<br />
agencies as a catalyst and enabler in solving the problems associated with technology and technical<br />
solutions.<br />
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Shift in expenditure strategy of funding agencies: SSH research can be needs driven or curiosity<br />
driven. Needs driven research has more chances of getting commercialized as a need is already<br />
established. Curiosity driven research may be based on a gap in the academic literature which may<br />
not be of interest to non-academics. Funding agencies should take this into account in funding<br />
allocation. In many cases, SSH research is based on past needs and is in evaluative mode, which<br />
may be needed at times. However, there should a distinction in the funding strategy for the research<br />
that focuses on past events and the one that focus on current or future needs. It may be difficult to<br />
commercialize research that is based on past needs as compared to the one based on current and<br />
future needs. Funding agencies in part should focus on targeted research to encourage and<br />
popularize SSH research commercialization.<br />
3.4 Community Specific Recommendations<br />
Engage the community: SSH research affects society or community in one way or the other and<br />
engaging the community in the research process helps in research dissemination and<br />
commercialization. Knowledge mobilization (KM) programs such as the KM in AM series at York<br />
University in Toronto, is one the many successful example of researchers engaging community for the<br />
benefit of research (Phipps and Shapson, 2009). By involving local and regional economic<br />
development boards researchers will become aware of the pressing needs of the communities. SSH<br />
research is highly context specific and in many cases caters to the local and regional needs of the<br />
society and organizations. For example, if a researcher is studying the impact of unemployment on<br />
health in a particular region, then proximity of the researcher will aid in knowledge transfer. Relevance<br />
of the research may also increase when a timely dissemination is able to influence decision making<br />
resulting in economic and social outcomes for the region.<br />
Recognize the importance of social needs in innovation: It is a well known that social needs trigger<br />
innovation. For example, the social need to collaborate has resulted in one of the most fascinating<br />
innovations of all time: social networking on internet. Websites such as Facebook and twitter have<br />
paved way for a whole new area of SSH research and the issues surrounding them. Social need to<br />
collaborate any time and at any place has acted as a catalyst for most of the innovation happening<br />
around digital media and internet. We recommend that SSH researchers realize the impetus provided<br />
by social and cultural needs to innovation and capitalize on it in a positive manner.<br />
3.5 Recommendations across Stakeholders<br />
Focus on interdisciplinary research: Our case study examples show that interdisciplinary research has<br />
a greater chance of getting commercialized. <strong>Academic</strong>s are known to work in silos and isolation. We<br />
recommend an increased emphasis on interdisciplinary research from university administrators and<br />
funding agencies which will encourage academic researchers to come out of their comfort zone and<br />
build on the strengths of other disciplines in their research endeavours and collaborate across<br />
disciplines. Medical anthropology, nanoethics, and mathematical linguistics are some of the examples<br />
of interdisciplinary areas of research with great commercialization potential.<br />
Improve channels of communication between the producers and users of SSH knowledge: One of the<br />
characteristic of SSH research is the inseparable nature of knowledge production from knowledge<br />
use. We recommend that the producers of knowledge (academics) be actively involved in the<br />
dissemination of knowledge through various formal and informal means. For example, arranging<br />
seminars and workshops to showcase SSH research and raising the profile of SSH researchers<br />
among the local and regional communities helps in building credibility of SSH research. This can be<br />
done through either setting up of interdisciplinary centers within the university or through the<br />
university research commercialization wing.<br />
Rethink the role of management schools: Management teaching and research has shown its inability<br />
to play a promising role in furthering the agenda of university research commercialization.<br />
Management research is often criticized for being in the evaluative mode rather than in discovery or<br />
new knowledge creation mode (Pfeffer, 2007). We recommend that management researchers take a<br />
more proactive role in developing potential ideas and research. This can be made possible by setting<br />
up interdisciplinary centers and interdisciplinary teams within the universities. Management schools<br />
should incorporate entrepreneurship as an integral element of their teaching philosophy including<br />
offering courses for students and faculty from various disciplines. Interaction of TTO’s with business<br />
schools and entrepreneurship centers should be encouraged by university administrators.<br />
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4. Conclusion<br />
Manjari Maheshwari and Ranjana Bird<br />
Purpose of this paper is to create research commercialization awareness among SSH researchers<br />
and other university research commercialization stakeholders. There are a number of individual,<br />
institutional, and policy challenges in dealing with SSH research commercialization. In this paper, we<br />
have focused on the process of SSH research commercialization. We have proposed a<br />
commercialization map for research originating from SSH disciplines and provided recommendations<br />
to the various stakeholders involved in the process. The paper contributes to the limited literature on<br />
SSH research commercialization by providing a primer to the process and possibilities in this very<br />
important but neglected area of university research commercialization. With social innovation and<br />
social entrepreneurship holding the key in the present economic scenario, the research provides<br />
value by developing a systematic way for SSH researchers to think about the social and economic<br />
outcomes of their research. We are not advocating that all SSH research can or should be<br />
commercialized. What we propose in the paper is that there is a path to research commercialization<br />
for those who want to take the journey to commercialization. We agree with Nelson’s (2005) findings<br />
that sometimes just a single successful case may be good enough to start a series of revenue<br />
generating activities within SSH. This research can also serve as starting point for those researchers<br />
who want to work in the area of SSH research outcomes.<br />
Acknowledgement<br />
The authors would like to thank Dr. Bharat Maheshwari for his constructive and encouraging<br />
comments. We feel that our paper has greatly benefited from his input.<br />
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The Governance of International Enterprises Under the<br />
Influence of Innovative Phenomena<br />
Simone Manfredi, Mirella Battista and Fabio Nappo<br />
University of Cassino, Italy<br />
s.manfredi@unicas.it<br />
Abstract: In recent years, the social, economic and political environment in which the modern enterprise is<br />
characterized by a phase of drinking that takes on a subjective meaning, with an increasing value to the<br />
intangible components of the product and/or services purchased by the customer. It’s widely acknowledged that<br />
the company has emerged as immaterial the knowledge society. This paper aims to analyze the relationship<br />
between innovative capacity and the ownership of international enterprises more innovative in 2009. In this<br />
regard, this work aims to assess the way in which innovation activities are carried out, not so much to define a<br />
quantitative approach to measuring the ability to innovate, but to highlight the "practice" in carrying out innovation<br />
activities themselves. More specifically, these "practices" are intended to clarify with examples of the innovation<br />
in business, without having to resort to the calculation of specific quantitative indicators, going to use an analysis<br />
approach based on a variety of aspects. In particular, the work deepens the characteristics of the ownership of<br />
these companies, divided into three main forms of government: the public company, the company controlled by a<br />
shareholder and the family business. In this case, the structure of corporate governance of companies has been<br />
analyzed based on two variables: the firm size and the degree of concentration of ownership structure (or Degree<br />
of Ownership Concentration). The empirical analysis highlights the relationship between the propensity to invest<br />
in highly innovative and structure of corporate governance of companies of the undertakings concerned, going to<br />
examine the nature of institutional investors and their ability to influence, in companies where they own a<br />
significant share of equity, the decisions of the economic subject in R&D. Finally, the paper aims to provide<br />
interesting insights for understanding in substantive terms the way in which businesses operate on investments in<br />
R&D, while also allowing the identification of potential problem areas.<br />
Keywords: Corporate governance, innovation, R&D, evaluation<br />
1. Foreword<br />
Over the last years, the social, economic and political context in which modern enterprises (Zanda<br />
1974) work is characterised by a consumption phase that has a subjective meaning (Zanda 2009)<br />
with more and more stress on the intangible components of the product and/or service client (Rullani<br />
2004) buy. It is now considered a fact that the society of immaterial is considered the society of<br />
knowledge (Trequattrini 2008).<br />
As a matter of fact, the competitive development of enterprises is linked to knowledge based<br />
innovation (Gans, Stern 2003).<br />
Innovation derives from creativity and knowledge, which is to say from an interdisciplinary culture<br />
which tends to change (Viale 2008; Mazza, Quattrone, Riccaboni 2008). Change can be understood<br />
as any change in product or process that creates a competitive advantage in the market.<br />
According to a shared theory, knowledge based theory can provide virtually unlimited potentials to<br />
success and economic growth (Romer 2003).<br />
However, despite the recognized importance of innovation, the problems inherent in its<br />
conceptualization, measurement and integration are still significant and largely unsolved.<br />
One of the issues most relevant in terms of innovation has focused on the process of measurement<br />
itself, which of course began with the emergence of R&D and is considered finished when we obtain<br />
patents, trademarks, trade secrets and/or tacit knowledge.<br />
It should, however, noted that the study of the relationship between the development of innovation<br />
and the characteristics of the structures of corporate governance (Trequattrini 1999) has been<br />
addressed in numerous works and within different theoretical perspectives. Moreover, the doctrine<br />
has largely recognized the inherent management difficulties "accounted for" innovative activities.<br />
In this regard, some scholars have examined the possibilities and how to design and implement a<br />
measurement system dedicated to the performance of innovative activities.<br />
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Simone Manfredi, Mirella Battista and Fabio Nappo<br />
However, some measurement systems, rooted in very traditional logic, have, from the start, showed<br />
their limitations (for example, the positive evaluation of the innovative capacity according to the<br />
number of approved patents/trademarks). In fact, the non-possession of patents does not preclude<br />
innovative behavior. Similarly, the possession of patents does not imply innovation (ie a creative idea<br />
does not necessarily translate into products and / or services in the marketplace).<br />
In this regard, this study aims to evaluate the way in which innovation activities are carried out, not so<br />
much to define a quantitative approach to measuring the ability to innovate, but to highlight the<br />
"practice" in carrying out innovation activities themselves.<br />
This objective can be summarized in the following research question: what forms of corporate<br />
governance particles in the development of innovation at the enterprise level?<br />
More precisely, these "practices" are intended to clarify with examples of the innovative capacity of<br />
firms, without having to resort to the calculation of specific quantitative indicators, going to use an<br />
analysis approach based on a variety of aspects.<br />
In this case, in order to analyze the relationship between innovation and governance, the work<br />
explores the look on the features of the company's most innovative international business in 2009.<br />
In particular, the corporate governance structure of firms has been analyzed based on two variables:<br />
the firm size and the degree of concentration of ownership structure (or degree of ownership<br />
concentration).<br />
In this respect, the choices of ownership have resulted in essentially three main categories of<br />
business: large listed companies to publicly traded (the public company), companies with one or more<br />
shareholders, the small and medium business (family businesses).<br />
The analysis of the shareholding structure of the sample of firms has focused also on the nature of<br />
the attention of institutional investors and their ability to promote the innovative capacity in the public<br />
company and in companies with a controlling shareholder.<br />
In conclusion, in order to have an international vision of the level of technological and business<br />
innovation as a simplification of the application-type question, the innovative capacity of firms<br />
belonging to the sample was detected by the methodology used by the Boston Consulting Group in<br />
study conducted over fifty companies with the highest innovative capacity of 2009, published in the<br />
journal of the American economy, BusinessWeek.<br />
Finally, the contribution is designed to offer interesting insights into how significant in terms of<br />
operating companies in terms of investment in R&D, allowing the identification of potential problem<br />
areas.<br />
2. An evaluation of innovation capacity – theory and praxis<br />
In this paragraph is meant to represent the analysis of data on the innovative capacity and ownership<br />
of the most innovative companies in 2009.<br />
Innovation capacity can be defined as the aptitude enterprises have to success innovation, not only<br />
their products/services and process, but also their organization (Belussi, Gottardi 2000).<br />
The factors (Marengo 1996) that influence the level of innovation of enterprises can be divided in four<br />
big categories:<br />
� the capacity of understanding opportunities and menaces in the surrounding environment;<br />
� the capacity of making internal changes happen;<br />
� the capacity of turning change into financial result;<br />
� the capacity of keeping this condition in time.<br />
Many international strategic business consulting companies have chosen an analysis of innovative<br />
capacity based on praxis.<br />
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In order to correctly represent the level of innovative capacity of the main most innovative enterprises<br />
of 2009, the methodology of the Boston Consulting Group has been used.<br />
The BCG in December 2008 sent the managers from the most important international enterprises a<br />
questionnaire in which they had to chose the most innovative enterprise of 2009.<br />
The 2.700 managers interviewed gave their answers anonymously. The votes in the questionnaires<br />
were collected by BCG according to the typology of innovative activity led by the enterprise voted.<br />
In the survey all the innovative activities have been divided in four groups: product innovation,<br />
process innovation, clients’ experience and business model.<br />
In order to make the analysis more objective, the BCG annulled the votes of managers who had voted<br />
for their own enterprises.<br />
To summarize, from all the votes in the questionnaires, the Boston Consulting Group (BCG) in April<br />
2009 published on the American economic journal Business Week, the chart of the enterprises with<br />
the highest innovation capacity (cfr. Fig. 1).<br />
The analysis of the data on innovative capacity provided by the questionnaires sent to enterprises all<br />
over the world led to the following observations.<br />
Investment on innovation show a flat trend with a tendency to low compared to the ones in the<br />
previous example, because of recession and the many merging that took place on the market.<br />
Until a couple of years ago, enterprises used to consider innovation a “must”, a priority. Nowadays,<br />
research and development seem to have very little space.<br />
Thanks to the inversion of tendency of global economy, enterprises started to have problems. Income<br />
reductions and new competitors which completely changed the balance of various industrial sectors,<br />
such as car sales, banks and entertainment have become central.<br />
The annual survey of 2009 highlighted that innovation is too expensive when there is a crisis.<br />
What the research of Business Week shows is that the tendency to innovation (and to risky choices)<br />
is higher when the context is good (not excellent) rather than when the context (enterprise or national<br />
one) is not very good (but not bad) (Putnam 2004).<br />
In the first two positions of the 2009 chart there are Apple and Google.<br />
Even though it stay at the top of the 2009 chart, Apple was affected by the international crisis. It had<br />
33% less votes than in 2008.<br />
Google, second best in the 2009 chart, had 31% less votes than in 2008.<br />
Not all enterprises during the crisis have been able to make long term investment, so to spend on<br />
R&D. For instance, General Motors, compared to the 2008 chart, was not able to enter the top fifty<br />
most innovative enterprise chart.<br />
In the other positions are enterprises from fifteen countries which had never appeared in the chart<br />
before.<br />
This is the most important change since 2005. The 2009 chart includes European and Asian<br />
companies, such as Infosys (India), LG (South Chorea), Telefónica (Spain) and Lenovo (China).<br />
Nevertheless, it is important to notice that, compared to the past, there are more enterprises in the<br />
chart: they used to be 25, they are now 50.<br />
Figure 1: The fifty most innovative enterprises of 2009<br />
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Chart<br />
2009<br />
Enterprise Country Kind of enterprise Kind of innovation (%) Sector<br />
1 Apple U.S. Public company Product (47%) Information Technology<br />
2 Google U.S. Public company Clients' experience (26%) Information Technology<br />
3 Toyota Motor Japan Public company Process (35%) Auto<br />
4 Microsoft U.S. Public company Process (26%) Information Technology<br />
5 Nintendo Japan Società per azioni Product (48%) Electronics<br />
6 IBM U.S. Public company Process (31%) Information Technology<br />
7 Hewlett-Packard U.S. Public company Process (39%) Information Technology<br />
8 Research In Motion Canada Società per azioni Product (53%) Information Technology<br />
9 Nokia Finland Società per azioni Product (38%) Telecommunications<br />
10 Wal-Mart Stores U.S. Public company Process (49%) Retail<br />
11 Amazon.com U.S. Public company Clients' experience (41%) Retail<br />
12 Procter & Gamble U.S. Public company Process (27%) Retail<br />
13 Tata Group India Public company Product (44%) Sector conglomerate<br />
14 Sony Japan Società per azioni Product (40%) Electronics<br />
15 Reliance Industries India Public company Clients' experience (35%) Sector conglomerate<br />
16 Samsung Electronics South Korea Società per azioni Product (41%) Electronics<br />
17 General Electric U.S. Public company Process (36%) Sector conglomerate<br />
18 Volkswagen Germany Società per azioni Clients' experience (38%) Auto<br />
19 McDonalds U.S. Public company Clients' experience (55%) Retail<br />
20 BMW Germany Società per azioni Clients' experience (37%) Auto<br />
21 Walt Disney U.S. Public company Clients' experience (68%) Entertainment industry<br />
22 Honda Motor Japan Società per azioni Product (47%) Auto<br />
23 AT&T U.S. Public company Product (33%) Telecommunications<br />
24 Coca-Cola U.S. Public company Clients' experience (38%) Retail<br />
25 Vodafone Britain Public company Product (25%) Telecommunications<br />
26 Infosys India Società per azioni Process (40%) Information Technology<br />
27 LG Electronics South Korea Società per azioni Product (46%) Electronics<br />
28 Telefónica Spain Società per azioni Business model (40%) Telecommunications<br />
29 Daimler Germany Società per azioni Product (40%) Auto<br />
30 Verizon Communications U.S. Public company Clients' experience (38%) Telecommunications<br />
31 Ford Motor U.S. Public company Product (36%) Auto<br />
32 Cisco Systems U.S. Società per azioni Process (27%) Information Technology<br />
33 Intel U.S. Public company Process (35%) Information Technology<br />
34 Virgin Group Britain Società per azioni Clients' experience (45%) Sector conglomerate<br />
35 ArcelorMittal Luxembourg Società per azioni Business model (63%) Sector conglomerate<br />
36 HSBC Holdings Britain Società per azioni Process (32%) Banking<br />
37 ExxonMobil U.S. Public company Process (47%) Sector conglomerate<br />
38 Nestlé Switzerland Società per azioni Product (47%) Retail<br />
39 Iberdrola Spain Società per azioni Clients' experience (40%) Sector conglomerate<br />
40 Facebook U.S. Non quotata Clients' experience (51%) Information Technology<br />
41 3M U.S. Public company Product (44%) Sector conglomerate<br />
42 Banco Santander Spain Società per azioni Business model (37%) Banking<br />
43 Nike U.S. Public company<br />
Clients' experience and<br />
Product (36% for each)<br />
Retail<br />
44 Johnson & Johnson U.S. Public company Clients' experience (42%) Sector conglomerate<br />
45 Southwest Airlines U.S. Società per azioni Clients' experience (45%) Sector conglomerate<br />
46 Lenovo China Società per azioni Business model (35%) Information Technology<br />
47 JPMorgan Chase U.S. Public company Process (62%) Banking<br />
48 Fiat Italy Società per azioni Product (30%) Auto<br />
49 Target U.S. Società per azioni Clients' experience (60%) Retail<br />
50 Royal Dutch Shell Netherlands Public company Process (45%) Sector conglomerate<br />
Source: our elaboration based on data provided by the Boston Consulting Group and BCG-ValueScience and published on<br />
BusinessWeek, April 2009.<br />
Despite recession and merging, many of the enterprises from the 2009 chart have continued to<br />
innovate, finding their own winning strategy (Lacchini 1988).<br />
Some enterprises, such as Procter&Gamble and Vodafone collaborated to cushion long-term costs.<br />
Others, like Tata, were helped by in-house experts. Some others, like Research in Motion focused on<br />
personnel training; top IT enterprise IBM moved to countries where there is a lower work price (like<br />
India), and tried to widen its services through new acquisitions.<br />
To sum up, in the annual analysis of 2009, led by the Boston Consulting Group and published in the<br />
American economic journal BusinessWeek, the fifty most innovative enterprises showed they were<br />
able to find new ideas and aware of the fact that this is the only way to succeed.<br />
In this paper, according to the above mentioned methodology, we believe that this chart can represent<br />
the level of innovation of the fifty most innovative enterprises of 2009.<br />
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Simone Manfredi, Mirella Battista and Fabio Nappo<br />
We think that the level of innovative capacity lowers with the lowest chart positions.<br />
Therefore, we presume that the level of innovative capacity of the sample enterprises corresponds to<br />
the position they have in the chart.<br />
In order to analyze the relation between innovative capacity and the property organization on the most<br />
innovative enterprises of 2009, in the following paragraph we try to show which of the different<br />
property organizations can be really efficient when facing and solving the problem of the asymmetrical<br />
information that characterised technological development activities.<br />
3. The property organization of sample enterprises<br />
The tendency to innovation seems to be influenced by the kind of governance and in particular by the<br />
property organization of enterprises.<br />
Data on property structure of the sample, provided by Business Week allow to reconstruct each and<br />
every enterprise’s property structure.<br />
Enterprise property structure is composed by two large groups of shareholders, insider control and<br />
institutional investors.<br />
Insider control are members of the property who control the enterprise, which is to say the owner or<br />
the owners. Shareholders can be considered the owner if he or she controls the enterprise through a<br />
chain control in which every control link over stirs set limits.<br />
Such enterprises have been divided into two large groups: public companies and Ltd in which major<br />
shareholders own a significant group of shares, and, therefore, actually control the enterprise. The<br />
latter are called referral shareholder enterprises.<br />
The limit to be reached in order to get the control (Faccio, Lang 2002) is 20% of vote rights.<br />
In order to determine the level of property concentration, the public companies where this limit is<br />
respected. While the referral shareholder enterprises are the ones where this limit is exceeded.<br />
Institutional investors belong to the category of financial operators (bodies or companies). They can<br />
systematically invest, since they have substantial financial capitals<br />
Such investors are divided into two groups: institutional investors with long-term (e.g. social security<br />
founds) and short-term (e.g. investment bans or private founds) (Zahra 1996) targets. The first are<br />
interested in enhancing the long-term value of their portfolio, the latter in maximizing the annual<br />
performance, stopping, if necessary, a non profitable investment.<br />
In the following chart, the data on property structure of some enterprises published by Business<br />
Week. These data have been recalculated, in order to be used in this analysis (cfr. Fig. 2).<br />
4. Analysis and results<br />
The analysis consists of three phases. Firstly, there is a brief description of the sample, the<br />
identification of the level of property concentration. Then, the focus is on the composition of<br />
institutional investors and their effect on enterprise organization. Finally, there is the analysis of the<br />
relationship between propriety concentration and innovative concentration.<br />
4.1 First step: the level of propriety concentration<br />
The analysis of the degree of concentration of ownership allows you to represent the owners of the<br />
sample of firms. In this regard, the composition is very similar to ownership structures reported for the<br />
countries examined in previous studies (La Porta, Lopez-De-Silanes, Shleifer 1999).<br />
More specifically, public companies (52%) are the most popular in the USA (42%). Then in India (4%),<br />
Great Britain (2%) and Japan (2%).<br />
Figure 2: The property structure of the fifty most innovative enterprises of 2009.<br />
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Chart<br />
2009<br />
Enterprise Country Kind of enterprise Kind of innovation (%)<br />
Institutional<br />
investors (%)<br />
Sector<br />
1 Apple U.S. Public company Product (47%) 73% Information Technology<br />
2 Google U.S. Public company Clients' experience (26%) 82% Information Technology<br />
3 Toyota Motor Japan Public company Process (35%) 2% Auto<br />
4 Microsoft U.S. Public company Process (26%) 64% Information Technology<br />
5 Nintendo Japan Società per azioni Product (48%) - Electronics<br />
6 IBM U.S. Public company Process (31%) 62% Information Technology<br />
7 Hewlett-Packard U.S. Public company Process (39%) 78% Information Technology<br />
8 Research In Motion Canada Società per azioni Product (53%) 68% Information Technology<br />
9 Nokia Finland Società per azioni Product (38%) 18% Telecommunications<br />
10 Wal-Mart Stores U.S. Public company Process (49%) 38% Retail<br />
11 Amazon.com U.S. Public company Clients' experience (41%) 72% Retail<br />
12 Procter & Gamble U.S. Public company Process (27%) 60% Retail<br />
13 Tata Group India Public company Product (44%) - Sector conglomerate<br />
14 Sony Japan Società per azioni Product (40%) 10% Electronics<br />
15 Reliance Industries India Public company Clients' experience (35%) - Sector conglomerate<br />
16 Samsung Electronics South Korea Società per azioni Product (41%) - Electronics<br />
17 General Electric U.S. Public company Process (36%) 51% Sector conglomerate<br />
18 Volkswagen Germany Società per azioni Clients' experience (38%) - Auto<br />
19 McDonalds U.S. Public company Clients' experience (55%) 75% Retail<br />
20 BMW Germany Società per azioni Clients' experience (37%) - Auto<br />
21 Walt Disney U.S. Public company Clients' experience (68%) 67% Entertainment industry<br />
22 Honda Motor Japan Società per azioni Product (47%) 3% Auto<br />
23 AT&T U.S. Public company Product (33%) 58% Telecommunications<br />
24 Coca-Cola U.S. Public company Clients' experience (38%) 66% Retail<br />
25 Vodafone Britain Public company Product (25%) 7% Telecommunications<br />
26 Infosys India Società per azioni Process (40%) 18% Information Technology<br />
27 LG Electronics South Korea Società per azioni Product (46%) - Electronics<br />
28 Telefónica Spain Società per azioni Business model (40%) 3% Telecommunications<br />
29 Daimler Germany Società per azioni Product (40%) 35% Auto<br />
30 Verizon Communications U.S. Public company Clients' experience (38%) 60% Telecommunications<br />
31 Ford Motor U.S. Public company Product (36%) 46% Auto<br />
32 Cisco Systems U.S. Società per azioni Process (27%) 75% Information Technology<br />
33 Intel U.S. Public company Process (35%) 67% Information Technology<br />
34 Virgin Group Britain Società per azioni Clients' experience (45%) - Sector conglomerate<br />
35 ArcelorMittal Luxembourg Società per azioni Business model (63%) 4% Sector conglomerate<br />
36 HSBC Holdings Britain Società per azioni Process (32%) 3% Banking<br />
37 ExxonMobil U.S. Public company Process (47%) 50% Sector conglomerate<br />
38 Nestlé Switzerland Società per azioni Product (47%) - Retail<br />
39 Iberdrola Spain Società per azioni Clients' experience (40%) - Sector conglomerate<br />
40 Facebook U.S. Non quotata Clients' experience (51%) - Information Technology<br />
41 3M U.S. Public company Product (44%) 68% Sector conglomerate<br />
42 Banco Santander Spain Società per azioni Business model (37%) 2% Banking<br />
43 Nike U.S. Public company<br />
Clients' experience and<br />
Product (36% for each)<br />
90% Retail<br />
44 Johnson & Johnson U.S. Public company Clients' experience (42%) 66% Sector conglomerate<br />
45 Southwest Airlines U.S. Società per azioni Clients' experience (45%) 82% Sector conglomerate<br />
46 Lenovo China Società per azioni Business model (35%) - Information Technology<br />
47 JPMorgan Chase U.S. Public company Process (62%) 76% Banking<br />
48 Fiat Italy Società per azioni Product (30%) - Auto<br />
49 Target U.S. Società per azioni Clients' experience (60%) 91% Retail<br />
50 Royal Dutch Shell Netherlands Public company Process (45%) 13% Sector conglomerate<br />
Source: our elaboration on data provided by the Boston Consulting Group and the BCG – Value Science published in Business<br />
Week, April 2009.<br />
Control shareholder enterprises (46%) spread in a more consistent way. They mainly belong to,<br />
though, Germany (6%), Spain (6%), Japan (6%) South Chorea (4%) and Italy (2%) (Shleifer, Vishny<br />
1997), as showed in previous studies (Faccio, Lang 2002).<br />
The USA seem to be characterised by more developed financial markets and there is wider interest<br />
from institutional investors, compared to those from Continental Europe) (Gompers, Metrick 2001).<br />
Innovative capacity influences market value, which affects enterprises’ property organization.<br />
The difference between the two systems are still big, even though they have diminished in time<br />
(Rajan, Zingales 2003).<br />
Developed and fractioned financial markets are the basis of the existence and development of<br />
innovative enterprises. During financial crises, enterprises tend not to boost innovation, since markets<br />
lacks trust in exchange between financial operators.<br />
Success operations in exchange economy derives from mutual trust and implicit rules (Sen 1994).<br />
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The level of property concentration can be considered a necessary condition, even though it is not<br />
sufficient to push enterprises to invest more on innovation.<br />
The level of property concentration, in the development of strategy and enterprise performance,<br />
represents a still controversial issue.<br />
The following chart focuses on another aspect: the link between property concentration and kind of<br />
innovation.<br />
In 2009, public companies invested mainly on process innovation (22%). Concentrated property<br />
enterprises invested their capital on enhancing product innovation (20%).<br />
Public companies used technological knowledge discovered in the past to improve existing products,<br />
while referral shareholders companies collected from the external environment important information,<br />
which they used to discover new products.<br />
Small dimensions – referral shareholders enterprises – allow these companies to acquire new<br />
knowledge, which derives from R&D laboratories of great universities and companies, in a shorter<br />
time and in a cheaper way.<br />
Such process usually lead to the creation of small and medium enterprises (Bellini, Zollo 1997).<br />
The flows of information and knowledge between enterprise and external environment feed the initial<br />
stock and help gain knowledge, which enterprises use in time to compete and model the “knowledge<br />
structure” of enterprises (Lyles, Schwenk 1992).<br />
Enterprises’ Knowledge stock has aspecific financial value, since it is linked to enterprise strategies,<br />
business targets, technology market characteristics that enterprises use, product and services to be<br />
sold markets. The “knowledge structure” is determined in a continuous and dynamic way (Penrose<br />
1959).<br />
To sum up, we think that in the same circumstances the value created by major shareholder<br />
controlled enterprises is higher than the one created by public companies (Grossman, Hart 1988).<br />
Small and medium enterprises with a control shareholders have a strong innovative energy.<br />
They support specific knowledge, even in relation to big enterprises.<br />
4.2 Second step: institutional investors<br />
From the analysis of the property organization of sample enterprises it figures that institutional<br />
investors have different natures. Enterprises have institutional investors with long-term, which can<br />
positively affect on the development of the innovation produced.<br />
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Simone Manfredi, Mirella Battista and Fabio Nappo<br />
Our approach is based on recent studies on enterprises (Ramaswamy, Minfang, Veliyatah 2002).<br />
They highlight how institutional investors’ identities reflects on targets, strategies and results of<br />
enterprises.<br />
On the basis of these studies, we will later analyse the difference between shareholders in term of<br />
targets, tendency to risk and capacity of monitoring of institutional investors.<br />
Shareholders who aim to keep their control share in the long term, in the same conditions, foster<br />
enterprises’ innovative capacity (Porter 1992).<br />
In terms of risk taking, it varies depending on the nature of every single institutional investor and it can<br />
turn into a big problem for companies controlled by families, since these invest most part of their<br />
capital on entrepreneurial activities, and face, at the same time the problems related to stability and<br />
enterprise control (e.g. Fiat).<br />
Consequently, stable family companies seem to have minor incentives to invest on innovation.<br />
Finally, in terms of ability of monitoring, permanent investors tend to use strategic systems control. In<br />
theory family control enterprises seem to be characterised by less asymmetrical information and risks<br />
linked to managers’ opportunistic behaviours, since, shareholders and mangers usually are the same<br />
person.<br />
Knowledge of the external environment from members of the family fosters the development of high<br />
level innovative capacity activities.<br />
Nevertheless, the relationship between institutional investors and the effort enterprises make can be<br />
ambiguous, since it is not easy to foresee which one of these influences can affect the final result the<br />
most.<br />
In relation to what expressed on the identity of institutional investors, we think that the final effect<br />
depends on the nature and the targets of institutional investors who mainly work within the markets<br />
(Zahra 1996) and on their level of action (David, Hitt, Gimeno 2001).<br />
In this regard, it is measured, first, the percentage of capital held by institutional investors.<br />
This chart shows that institutional investors tend to invest on public companies (55%) rather than on<br />
enterprises with a control shareholder (32%).<br />
It figures that institutional investors’ investment choices are influenced by the level of property<br />
concentration.<br />
It is not possible to draw any ultimate conclusion, since the lack of data on some enterprises do not let<br />
us have a correct analysis of the phenomenon.<br />
Therefore, in order to highlight the greater propensity of institutional investors to invest in the public<br />
company, the percentage of equity held by institutional investors has been increased by an offset (or<br />
shift), or a number with the distance function in a manner more marked in the list, the publicly held<br />
firms with a shareholder.<br />
This has made possible on the one hand to be consistent with the average date provided by Business<br />
Week, which evaluate the share owned by institutional investors as about 70% of the capital owned<br />
by public companies; on the other hand to properly include in a chart these data.<br />
In the following chart, the percentage shares of capital invested by institutional investors including<br />
offset (cfr. Fig. 3).<br />
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Simone Manfredi, Mirella Battista and Fabio Nappo<br />
Figure 3: The percentage share invested by institutional investors in the fifty most innovative<br />
enterprises of 2009 including offset<br />
Chart<br />
2009<br />
Enterprise Country<br />
Kind of<br />
enterprise<br />
Kind of innovation (%)<br />
Institutional<br />
investors<br />
(%)<br />
Institutional<br />
investors +<br />
offset (15%)<br />
1 Apple U.S. Public company Product (47%) 73% 88% Information Technology<br />
2 Google U.S. Public company Clients' experience (26%) 82% 97% Information Technology<br />
3 Toyota Motor Japan Public company Process (35%) 2% 17% Auto<br />
4 Microsoft U.S. Public company Process (26%) 64% 79% Information Technology<br />
5 Nintendo Japan Società per azioni Product (48%) - - Electronics<br />
6 IBM U.S. Public company Process (31%) 62% 77% Information Technology<br />
7 Hewlett-Packard U.S. Public company Process (39%) 78% 93% Information Technology<br />
8 Research In Motion Canada Società per azioni Product (53%) 68% 68% Information Technology<br />
9 Nokia Finland Società per azioni Product (38%) 18% 18% Telecommunications<br />
10 Wal-Mart Stores U.S. Public company Process (49%) 38% 53% Retail<br />
11 Amazon.com U.S. Public company Clients' experience (41%) 72% 87% Retail<br />
12 Procter & Gamble U.S. Public company Process (27%) 60% 75% Retail<br />
13 Tata Group India Public company Product (44%) - 20% Sector conglomerate<br />
14 Sony Japan Società per azioni Product (40%) 10% 10% Electronics<br />
15 Reliance Industries India Public company Clients' experience (35%) - 15% Sector conglomerate<br />
16 Samsung Electronics South Korea Società per azioni Product (41%) - - Electronics<br />
17 General Electric U.S. Public company Process (36%) 51% 66% Sector conglomerate<br />
18 Volkswagen Germany Società per azioni Clients' experience (38%) - - Auto<br />
19 McDonalds U.S. Public company Clients' experience (55%) 75% 90% Retail<br />
20 BMW Germany Società per azioni Clients' experience (37%) - - Auto<br />
21 Walt Disney U.S. Public company Clients' experience (68%) 67% 82% Entertainment industry<br />
22 Honda Motor Japan Società per azioni Product (47%) 3% 3% Auto<br />
23 AT&T U.S. Public company Product (33%) 58% 73% Telecommunications<br />
24 Coca-Cola U.S. Public company Clients' experience (38%) 66% 81% Retail<br />
25 Vodafone Britain Public company Product (25%) 7% 22% Telecommunications<br />
26 Infosys India Società per azioni Process (40%) 18% 18% Information Technology<br />
27 LG Electronics South Korea Società per azioni Product (46%) - - Electronics<br />
28 Telefónica Spain Società per azioni Business model (40%) 3% 3% Telecommunications<br />
29 Daimler Germany Società per azioni Product (40%) 35% 35% Auto<br />
30 Verizon Communications U.S. Public company Clients' experience (38%) 60% 75% Telecommunications<br />
31 Ford Motor U.S. Public company Product (36%) 46% 61% Auto<br />
32 Cisco Systems U.S. Società per azioni Process (27%) 75% 75% Information Technology<br />
33 Intel U.S. Public company Process (35%) 67% 82% Information Technology<br />
34 Virgin Group Britain Società per azioni Clients' experience (45%) - - Sector conglomerate<br />
35 ArcelorMittal Luxembourg Società per azioni Business model (63%) 4% 4% Sector conglomerate<br />
36 HSBC Holdings Britain Società per azioni Process (32%) 3% 3% Banking<br />
37 ExxonMobil U.S. Public company Process (47%) 50% 65% Sector conglomerate<br />
38 Nestlé Switzerland Società per azioni Product (47%) - - Retail<br />
39 Iberdrola Spain Società per azioni Clients' experience (40%) - - Sector conglomerate<br />
40 Facebook U.S. Non quotata Clients' experience (51%) - - Information Technology<br />
41 3M U.S. Public company Product (44%) 68% 83% Sector conglomerate<br />
42 Banco Santander Spain Società per azioni Business model (37%) 2% 2% Banking<br />
43 Nike U.S. Public company<br />
Clients' experience and<br />
Product (36% for each)<br />
90% 105% Retail<br />
44 Johnson & Johnson U.S. Public company Clients' experience (42%) 66% 81% Sector conglomerate<br />
45 Southwest Airlines U.S. Società per azioni Clients' experience (45%) 82% 82% Sector conglomerate<br />
46 Lenovo China Società per azioni Business model (35%) - - Information Technology<br />
47 JPMorgan Chase U.S. Public company Process (62%) 76% 91% Banking<br />
48 Fiat Italy Società per azioni Product (30%) - - Auto<br />
49 Target U.S. Società per azioni Clients' experience (60%) 91% 91% Retail<br />
50 Royal Dutch Shell Netherlands Public company Process (45%) 13% 28% Sector conglomerate<br />
Source: our elaboration based on data provided by the Boston Consulting Group and BCG-ValueScience and published on<br />
BusinessWeek, April 2009.<br />
4.3 Third step: the relationship between property concentration and innovative<br />
capacity<br />
We are going to analyse the relationship between property concentration and innovative capacity, by<br />
using the data from fig. 3, in order to compare public companies and enterprises controlled by a<br />
referral shareholder.<br />
617<br />
Sector
Simone Manfredi, Mirella Battista and Fabio Nappo<br />
The graph shows the progress of the above mentioned data: on the X assis there are all the<br />
innovative enterprises included in the sample, while on Y axis there are the correspondent percentage<br />
of capital owned by institutional investors<br />
The average level of innovative capacity is higher in public companies. As a matter of fact, the<br />
tendency line shows that enterprises with a control shareholder tend less to invest on highly<br />
innovative activities.<br />
As a result, the analysis both highlights how public companies are more likely to invest on highly<br />
innovative activities, but it can also refer to the sector they belong to.<br />
The most innovative public companies work mainly in conglomerate sector (14%), in IT (12%) and in<br />
retail (12%).<br />
Vice versa, enterprises controlled by a referral shareholder are mainly in sectors like cars (10%), IT<br />
(12%) and electronics (8%).<br />
To sum up, the results of the analysis highlight the existence of a relation between the level of<br />
property concentration and the tendency to invest on high level innovative activities as showed by<br />
previous studies (Munari, Sobrero 2003).<br />
5. Conclusions<br />
At the beginning of this paper, the Authors have highlighted the purpose of providing empirical<br />
evidence of the relationship between property organization and innovative capacity by using the fifty<br />
most innovative international enterprises of 2009.<br />
In theory we have analyzed them, as well as the influence the level of property concentration has on<br />
investment on highly innovative activities.<br />
The results show that public companies have a wider innovative capacity, which is to say invest more<br />
on R&D compared to enterprises controlled by a single shareholder.<br />
Many other factors – apart from the characteristic of property structure can affect the tendency to<br />
invest on highly technological activities.<br />
The analysis has showed that it is necessary to control specific factors at innovation and sector<br />
typology level.<br />
By analyzing the nature of institutional investors, it has figured how shareholder identities tend to<br />
reflect on targets, strategies and results of enterprises.<br />
Institutional investors in governance organization of sample enterprises have long-term targets which<br />
boost investment on highly innovative activities.<br />
618
Simone Manfredi, Mirella Battista and Fabio Nappo<br />
At the beginning, the lack of data related to the percentage of institutional investors in every<br />
enterprise created a potential problem for the analysis of the sample.<br />
Then the problem has been faced by adding to the percentages of capital invested by institutional<br />
investors in public companies a 15% offset.<br />
The result of the research, though, has showed what had already been made clear by previous<br />
studies: the average level of innovative capacity is higher in public companies. As a matter of fact, the<br />
study has showed, also from a graphic point of view, how control shareholder enterprises tend to<br />
invest less on innovation.<br />
Nevertheless, there is an implicit, yet important aspect to be highlighted. Enterprises controlled by<br />
major shareholders, despite owning an average level of innovative capacity which is lower than public<br />
companies, have produced a higher percentage of product innovation.<br />
This has helped understand the reason why the value created by enterprises controlled by major<br />
shareholders is higher than the one produced by public companies.<br />
Therefore, value creation affects the financial value of enterprises, and, consequently, the level of<br />
property concentration.<br />
On balance, we can state that innovative capacity affect the financial value of enterprises. The latter<br />
affects property organization.<br />
The results can be analysed exclusively in relation to the limitations used in this paper.<br />
Despite being limited to the analysis, the evidence in this paper foster future empiric researches on<br />
this topic.<br />
Acknowledgment<br />
Even tought the paper is the result of all Authors, the first, the 3th paragraphs and the 4.1th are job of<br />
Simone Manfredi, the 2th and the 4.2th is the job of Mirella Battista, the 4.3th and 5th is developed to<br />
Fabio Nappo.<br />
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620
<strong>Entrepreneurs</strong>hip and Innovation in Greece: Do Small and<br />
Medium Enterprises Innovate?<br />
Maria Markatou<br />
University of Athens, Technological Education Institute of Larissa, Greece<br />
markatou@prd.uth.gr<br />
Abstract: Innovation is widely recognized as a key factor in the economic development of nations. Innovation is<br />
also essential for the competitiveness of firms. Its importance is intensified by factors like the increased global<br />
competition, the decreased product lifecycles and the rapidly changing consumer demands. Large firms play a<br />
key role in innovation but this doesn’t mean that there is no place for SMEs. The last years the environment for<br />
innovation has changed. The importance of SMEs to the innovation process has increased. The increasing<br />
incomes, the more “niched” market demand and the changing technologies have reduced the structural<br />
disadvantages of SMEs firm size. However, SMEs success is often dependent on the degree to which they<br />
embrace innovation. SMEs that successfully pursue innovation increase both their productivity and their<br />
likelihood of survival. In this paper we examine the role of the Greek SMEs in innovation generation. We will use<br />
patent records to measure innovation and specifically all patents that have been protected in Greece during the<br />
period 1989- 2005. Generally, the description and measurement of innovation is a difficult and rather complex<br />
task. Empirical research in this field uses R&D based indicators and patent data in most cases. Each of these<br />
indicators exhibits its own characteristics in terms of measurement, strengths and weaknesses. Patents are the<br />
main and formal product- result of R&D activities inside firms, but also outside firms. Especially on firm level,<br />
however, firms develop patents in order to make profits, and these patents are also indicative of the forthcoming<br />
new products and procedures that will be introduced in the market. This is the first research that studies<br />
innovation through patents among the Greek SMEs. Our analysis shows that small firms are the main owners of<br />
the granted patents in Greece. So, firms that employ up to 50 employees account for the 57.83% of our sample,<br />
while the share of large firms (more than 500 employees) is 6.02%. Most of these firms are engaged in the<br />
economic activities of machine tools, metal and plastic products, chemical substances and wholesale. The Greek<br />
SMEs have a medium age and are characterized by different levels of exports, selling their products mainly to the<br />
countries of European Union, the Balkans and the Middle East. SMEs are very important in the OECD area,<br />
representing a major share of the total number of firms and accounting for more than the 60% of the total<br />
employment and the 50% of the total value added. The above shares are higher for Greece. Our findings confirm<br />
the importance of SMEs in Greece, as these firms are also the main producers of innovation. In addition our<br />
findings could be used in the development of public policy aimed at supporting and encouraging the innovation<br />
among SMEs in Greece.<br />
Keywords: Greece, innovation, patents, SMEs<br />
1. Introduction<br />
Firms need to innovate in order to maintain their competitive advantage and ensure long- term<br />
continuity. Schumpeter viewed innovation as the main source of competition among firms<br />
(Schumpeter 1942). For Schumpeter innovation comes from large corporations which are able to<br />
exploit large economies of scale in production, distribution, management and R&D. Gradually the<br />
importance of economies of scale has reduced and the role of small firms in innovation and economic<br />
development has grown. This was the result of an increase in tastes, demands for variety and<br />
incomes. Small firms that do not embrace innovation within their core business strategy run the risk of<br />
becoming uncompetitive because of obsolete products and processes. Innovation is not just science<br />
and technology. It is also the creation of a multitude of new products and services, new marketing<br />
methods and changes in ways of organising businesses. In this framework SMEs play an important<br />
role.<br />
The measurement of innovation is difficult and complex. In this paper we have used patent data to<br />
measure innovation in Greece. Patent data and statistics have been used extensively as innovation<br />
indicators for many reasons (Grupp 1990; Archibugi & Pianta 1992). First, patents cover almost every<br />
field of technology with the only exception of software which, however, is not linked directly to the<br />
technical process and the development of products. Second, they can be used extensively, at<br />
different levels of aggregation and comparison because of the amount and detail of information they<br />
cover (Mogee 1991; Archibugi 1992). Third, patents capture those R&D activities that are not<br />
conducted in firms, but carried out by individuals, universities and research institutions. Forth, patents<br />
include a lot of useful information (e.g. year of invention, assignee and inventor names and<br />
addresses, and citations) which is available for many years, hence can be used for numerous<br />
analyses on technology, firm, industry and country level (OECD 1994).<br />
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Maria Markatou<br />
However, as every tool of analysis, the use of patent statistics has its own limitations. First, it has<br />
been argued that patents are not the only way to exploit firm - specific technology and hinder imitation<br />
(Pavitt 1988). Second, firms, industries and countries differ in their propensity to patent and this<br />
variance has to do, among other things, with different institutional procedures and legislation. Third,<br />
patent protection is one way to face possible competition. Other ways are the so-called “industrial<br />
secrecy” or the fast promotion and marketing of a product in the market. Firms have different attitudes<br />
in patenting and these attitudes depend on the degree of commercial exploitation of their patents and<br />
on firms’ technology and marketing strategies (Mansfiled, Schwartz & Wagner 1981). Fourth, the<br />
technological classification of patents can also be a problem. The high degree of detail and<br />
specialization, the relative difficulty in linking technology with production and the fact that a patent can<br />
by applied in many products make hard the study of patents at every level of analysis (Pavitt 1984;<br />
OECD 1994).<br />
The remaining sections of the paper are organized as follows: the second section presents the<br />
methodology and describes the data that we have used. The third section examines the main features<br />
of the Greek SMEs in relation to different parameters. In section four we synthesize and further<br />
discuss our results. The fifth section contains our conclusions.<br />
2. Methodology and data of analysis<br />
The analysis that follows is based on the elaboration of data of a sample of 250 Greek firms. We<br />
resulted in 250 Greek firms as follows: We first constructed a patent database with all patents that<br />
have been granted by the Greek patent office during the period 1989- 2005 (5033 patents in total).<br />
We then took the patents that are owned by Greek Firms. This sample of patents contains 729<br />
patents, which correspond to 338 Greek Firms. Taking the firm names, the surnames- names of the<br />
owners of these patents and their addresses we first confirmed the existence of these firms, we then<br />
cross- examined this data and, finally, we ended up with a sample of 250 Greek firms out of 338.<br />
Based on this sample we constructed a second database with economic, production, patent and other<br />
information for these firms (46 fields of information in total).<br />
For this analysis we also used the Icap Economic Guide. Icap is a Greek firm which, among other<br />
activities, collects data on Greek firms. Icap publishes its economic guide each year, which contains<br />
firm information on many fields. Each firm may have a maximum of 31 fields of information, such as<br />
Icap code, name, economic activity based on the ICAP taxonomy (and not based on the National<br />
Statistic Agency or Eurostat), year of establishment, legal status, number of employees, contact<br />
information (address, phone, fax- email), owner’s name, financial data shares and countries of<br />
exports and products. However, there is missing information in many fields and this had a cost on our<br />
analysis. We used the “Economic Guide of Icap” of the years 1990, 1995, 2000 and 2005.<br />
We elaborated and analyzed our data in two levels: the firm and the branch level. This paper aims at<br />
examining the issue of ‘entrepreneurship and innovation in Greece’ in relation to the SMEs. For this<br />
purpose we have studied the main features of the Greek firms with patent activities in a number of<br />
factors. We have grouped and classified our firm data based on different criteria, such as the branch-<br />
sector of activity, the products, the year of establishment, the number of employment, the export<br />
shares and its destination. The parameter of economic activities has been studied based on the<br />
NACE classification system at 2-digit, 3-digit and 4-digit code level. The examination of the<br />
parameters “year of establishment”, “employment” and “export shares” is based on the creation of<br />
classes of analysis. We have created 7 classes of time period for the “year of establishment” factor:<br />
“Till 1946”, “1947- 1956”, “1957- 1966”, “1967- 1976”, “1977- 1986”, “1987- 1996”, “1997- today”. For<br />
“employment” we have created 8 classes of analysis: “less than 20 employees”, “20- 50 employees”,<br />
“50- 100 employees”, “100- 200 employees”, “200- 300 employees”, “300- 400 employees”, “400- 500<br />
employees” and “more than 500 employees”. The analysis of “export shares” is based on the<br />
grouping of firm data according to 7 classes of analysis: “less than 5%, “5- 10%”, “10- 20%”, “20-<br />
30%”, “30- 40%”, “40- 50%”, “more than 50%”. Finally, for the two level analysis of the factor<br />
“countries of export destination” we have used classes of “geographical continent” (e.g. “America”,<br />
“Asia”, “Africa”, “Europe” and “Oceania”) and classes of “geographical region” (e.g. “Balkans”, “North<br />
America”, “European Union” and “South- East Asia”). In most cases we have examined the above<br />
factors in time (15- 20years) in order to first centre changes of major or minor importance and second<br />
coincide with the time period of the examined Greek patent activity (1989- 2005).<br />
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Maria Markatou<br />
3. Results: Production activities, age, size and exports<br />
The branch distribution based on firm activities and patents shows that both the economic and the<br />
patent activity of the firms are concentrated in few economic branches and particularly in the<br />
“fabricated metal products”, “machinery and equipment”, “rubber and plastic products” and “chemicals<br />
and chemical products”. However one main difference between the two distributions is that most of<br />
firms are engaged in “fabricated metal products” while most of patents originate from the branch of<br />
“machinery and equipment”. The “fabricated metal products” lead to metal structures, parts of<br />
structures and other metal products, such as the manufacture of builders’ carpentry and joinery of<br />
metal. The branch of “machinery and equipment” ends up in the manufacture of other general and<br />
special purpose machinery, such as machinery for packaging, metal processing and waste treatment.<br />
The “rubber and plastic products” lead to the manufacture of plates, sheets, tubes and profiles. In our<br />
last important branch, the “chemicals and chemical products”, a large part of the observed production<br />
concerns the manufacture of pharmaceutical preparations, toilet preparations and various agrochemical<br />
products.<br />
Most of firms have been established after 1967 and before 1996. This is the dominated pattern, but<br />
with three main exceptions. The first concerns the firms that are engaged in services, which are<br />
generally younger, being established after 1987. The second exception is only related to the branch of<br />
“other non-metallic mineral products”, where the 30% of the firms have been established before 1946.<br />
The third exception involves two “important” branches, namely the “fabricated metal products” and the<br />
“machinery and equipment”. In these two branches the 40% of the firms have been established after<br />
1987.<br />
Most of firms need from five to thirty years after their establishment to develop a new technology and<br />
protect it through the existing patent system. This time period is shorter for the non- manufacturing<br />
firms and longer for those of the manufacturing sector. However, there is a group of 18 firms, for<br />
which this time period is very short or non-existent. We believe that, for these firms, the development<br />
of a new technology and its protection was the main cause for the beginning of a new business<br />
activity and the real motive for the establishment of a new firm.<br />
Most firms are SMEs, employing up to 250 employees. There are no important differences between<br />
the manufacturing and the non- manufacturing firms when we combine their respective shares<br />
according to the same classes of size. The large, for the Greek standards, firms (>500 employees)<br />
and the very small (
Maria Markatou<br />
“chemical products” and “furniture and other manufacturing products” are directed to the North African<br />
countries and Oceania respectively.<br />
4. Synthesis of results- discussion<br />
Our results confirm the importance of SMEs in the development of innovation in Greece. Our results<br />
are also similar with those of other Greek studies and reports. The only relevant and available report<br />
so far is the GSRT report (2001). GSRT is the official government body for science and technology in<br />
Greece and the report we refer to has studied several aspects of the innovativeness of the Greek<br />
firms. The similarities are obvious: First, the GSRT report has found that “machinery and equipment”,<br />
“electrical machinery and apparatus”, “radio, television and communication equipment and apparatus”<br />
and “fabricated metal products” are the most innovative branches. On the contrary the branch of “food<br />
and beverages”, although it is the most important in Greece based on its total number of firms,<br />
exhibits relatively small innovation activity (6.2%). This means that four out of five branches are the<br />
same between our analysis and the GSRT report. In our study, the branch of “food and beverages”<br />
performs in a similar way, capturing the 6.4% of firms and the 5.64% of patents during the period<br />
1989-2005. Second, our analysis has shown that the small firms are the main owners of the granted<br />
patents in Greece. So firms that employ up to 50 employees account for the 57.83% of our sample.<br />
This result is also similar with the GSRT result, where the 56% of firms employ up to 50 employees,<br />
while the very large firms (more than 500 employees) show low innovation activity, accounting only for<br />
the 7.2%. In our analysis the share of very large firms is 6.02%. However, if we take into<br />
consideration only the firms of the manufacturing sector, then the very small firms (500<br />
employees” the 5.76%. Therefore, the very small and small firms are the main owners of patents and<br />
the main innovators in Greece, while firms with a medium size follow.<br />
Our results concern a sample of 250 firms. How can we compare them with the respective national<br />
pattern? In table 1 we present the total- national branch distribution based on the ICAP database<br />
(column 3) and we compare it with our branch distribution (column 2). What we can see is that the<br />
firms of the above “important” branches account for the 56% of our sample and the 44.44% of the<br />
national total. If, however, we do not consider the share of wholesale (5 th most important branch in our<br />
sample), then the 48% of the Greek firms and the 54.36% of their patents (columns 2 and 5) are only<br />
related with the 9.22% of the Greek firms (column 2). The “wholesale trade” is a very important<br />
branch, accounting for the 7.6% in our sample and the 35.42% in the respective national total. In<br />
addition, if we also take into consideration the relative weight of our branches, then our initial<br />
taxonomy differentiates (column 4). With the new taxonomy the most important branches are the<br />
following: “Basic metals”, “radio, television, communication equipment and apparatus”, “machinery<br />
and equipment”, “electrical machinery and apparatus” and “fabricated metal products”.<br />
Table 1: The main economic features of the firms with patent activities during the period 1989- 2005<br />
in Greece- analysis per branch (2-digit codes)<br />
Branches of Economic<br />
Activity<br />
Distribution<br />
branches<br />
(sample) %<br />
Distribution<br />
branches<br />
(national) %<br />
Sample/ National<br />
Firm Distribution<br />
%<br />
Patent<br />
Distribution<br />
branches<br />
(sample) (%)<br />
Food products- beverages 6.40 8.16 1.49 5.64<br />
Textiles 1.20 2.18 1.05 0.85<br />
Tanning- dressing of leather 0.40 0.56 1.35 0.17<br />
Wood- products of wood and<br />
cork<br />
0.80 0.89 1.71 0.85<br />
Pulp, paper, paper products 3.20 0.93 6.56 2.91<br />
Publishing, printing,<br />
reproduction of media<br />
0.40 3.36 0.23 0.51<br />
Chemical products 8.80 2.11 7.94 10.26<br />
Rubber- plastic products 9.60 2.11 8.66 9.74<br />
Other non-metallic mineral<br />
products<br />
2.80 3.43 1.55 2.39<br />
Basic metals 5.60 0.72 14.74 3.59<br />
Fabricated metal products 16.40 3.08 10.12 15.56<br />
Machinery- equipment 13.60 1.92 13.44 18.8<br />
Electrical machinery and<br />
apparatus<br />
5.20 0.88 11.21 8.21<br />
624
Branches of Economic<br />
Activity<br />
Distribution<br />
branches<br />
(sample) %<br />
Maria Markatou<br />
Distribution<br />
branches<br />
(national) %<br />
Sample/ National<br />
Firm Distribution<br />
%<br />
Patent<br />
Distribution<br />
branches<br />
(sample) (%)<br />
Radio, television<br />
communication equipment<br />
1.60 0.21 14.29 3.08<br />
Medical, precision and<br />
optical instruments<br />
0.40 0.31 2.44 0.68<br />
Motor vehicles, trailers,<br />
semi- trailers<br />
1.20 0.26 8.82 0.85<br />
Other transport equipment 0.40 0.43 1.75 0.17<br />
Furniture; Manufacturing<br />
n.e.c.<br />
5.20 2.20 4.48 4.27<br />
Total manufacture 83.20 33.74 4.69 88.55<br />
Agriculture, animal<br />
husbandry, hunting<br />
0.40 1.57 0.48 0.85<br />
Other mining- quarrying 1.60 0.74 4.12 0.68<br />
Construction 0.40 9.97 0.08 0.17<br />
Wholesale- commission<br />
trade<br />
7.60 35.42 0.41 5.64<br />
Retail trade 0.40 9.27 0.08 0.17<br />
Post- telecommunications 0.40 0.80 0.95 0.34<br />
Renting of machinery and<br />
equipment<br />
0.40 1.73 0.44 0.17<br />
Computer- related activities 3.20 3.08 1.98 2.05<br />
Other business activities 2.00 1.62 2.35 1.2<br />
Health- social work 0.40 2.06 0.37 0.17<br />
Total rest branches 16.80 66.26 0.48 11.45<br />
Total branches of economy 100.00 100.00 1.90 100<br />
Year of<br />
Establishment<br />
(period)<br />
Time between<br />
establishment<br />
and first patent<br />
Employment<br />
(classes)<br />
Patent<br />
Intensity<br />
(mean,<br />
branch)<br />
Export<br />
Shares<br />
(classes)<br />
Direction of exports<br />
(regions)<br />
2 n -3 rd period 29.31 Small 0.050 Medium Eur. Union<br />
3 rd period 15.33 Small 0.052 Medium Eur. Union<br />
3 rd period 7 Small Medium Eur. Union<br />
2 nd period 23.5 Very small 0.190 Medium Balkans<br />
3 rd period 15.12 Small-Medium 0.017 Medium European Union<br />
2η period 20 Small Medium Europe<br />
2 nd period 25.81 Small-Medium 0.040 Medium Balkans-Eur. Union<br />
2 nd -3 rd period 18 Small-Medium 0.071 Medium Balkans-Eur. Union<br />
3 rd period 26.42 Small 0.038 Medium Balkans-Eur. Union<br />
2 nd -3 rd period 19.64 0.072 Medium Balkans-Eur. Union<br />
2 nd -3 rd period 18.073 Small 0.080 Medium Balkans-Eur. Union<br />
3 rd -4 th period 17.47 Small 0.176 Medium Eur. Union<br />
3 rd -4 th period 17.84 Small 0.169 Medium Balkans-Eur. Union<br />
2 nd -3 rd period 16.75 Large 0.080 Medium Eur. Union<br />
3 rd period 10 Very small High Eur. Union<br />
2 rd & 3 rd<br />
16.33 Very small 0.271 South-East Asia<br />
period<br />
4 rd period 3 Very small Balkans<br />
3 rd period 14.23 Small 0.062 Medium Balkans-Eur. Union<br />
17.43 0.102 Medium Balkans-Eur. Union<br />
3 rd period 20 Medium Low Balkans-Eur. Union<br />
1 st -2 nd period 31.25 Very Small 0.042 High Eur. Union<br />
3 rd period 9 Small<br />
3 rd period 13.63 Very small 0.195 Low Balkans-Eur. Union<br />
3 rd period 7 Very small Balkans<br />
1 st period 42 Very large<br />
3 rd period 12 Very small<br />
625
Year of<br />
Establishment<br />
(period)<br />
Time between<br />
establishment<br />
and first patent<br />
Employment<br />
(classes)<br />
Maria Markatou<br />
Patent<br />
Intensity<br />
(mean,<br />
branch)<br />
Export<br />
Shares<br />
(classes)<br />
Direction of exports<br />
(regions)<br />
3 rd period 10.62 Small-Medium 0.072 Medium Balkans-Eur. Union<br />
3 rd -4 th period 6.4 Small 0.0362 Low Balkans-Eur. Union<br />
3 rd -4 th period 9 Very large<br />
16.09 0.066 Balkans-Eur. Union<br />
16.76 0.08 Balkans-Eur. Union<br />
Our results show the importance of certain economic branches in the development of innovation in<br />
Greece. However, are these branches characterized by fast, medium or low growth rates? In table 2<br />
we present the development trends of the Greek manufacturing branches based on the SEV (Greek<br />
Industry Association) Report (2003). In total, ten branches have been characterized by fast growth<br />
during the period 1995-2003. Among these branches are three, which are classified in our top<br />
positions based on our results: “Chemicals and chemical products”, “rubber and plastic products” and<br />
“fabricated metal products”. The 35% of firms and their patents are classified in these three branches<br />
based on our analysis. The second most important branch (based on the total number of firms) and<br />
the first most important branch (based on the number of patents) is a “medium growth” branch (e.g.<br />
“machinery and equipment”). On the contrary, the declining branches during the period 1995-2003,<br />
are those with low and very low shares of patents and so firms based on our analysis. Concluding, in<br />
the “fast growth” branches are concentrated the 49.2% of firms and the 52% of patents. In the<br />
“medium growth” branches are recorded the 28% of firms and the 31.31% of patents, while only the<br />
5.6% of firms and the 4.78% of patents are related to the declining branches. This means that half of<br />
the firms and of the patents originate from “important” branches, namely branches of “fast growth” and<br />
high indexes of production.<br />
Table 2: Trends and prospects in the branches of manufacturing, classification of branches based on<br />
their technology level and exports in Greece and in OECD countries<br />
Branches of<br />
economic activity<br />
Weighted<br />
index<br />
Share of the<br />
production<br />
level- Indexes<br />
of production<br />
(2003)<br />
Taxonomy of the<br />
branches based on<br />
their technology<br />
level 1<br />
Share of<br />
firms and<br />
patents<br />
(our<br />
results)<br />
Export<br />
shares<br />
for Greece<br />
and OECD<br />
countries<br />
Branches-fast growth rates (1995- 2003)<br />
Motor vehicles,<br />
trailers<br />
0.59 141.41-241.4<br />
Medium-high<br />
technology<br />
1.20-0.85 1.5-14.5<br />
Chemical products 8.47 66.02-166<br />
High, Medium-high<br />
technology<br />
8.80-10.26 9.7-12.8<br />
Medical, precision,<br />
optical instruments<br />
0.35 54.24-154.2 High technology 0.40-0.17 0.8-4.4<br />
Publishing, printing 3.44 48.76-148.8 Low technology 0.40-0.51 0.85-2.65 2<br />
Fabricated metal<br />
products<br />
4.14 41.10-141.1<br />
Medium-low<br />
technology<br />
16.40-<br />
15.56<br />
14.6-7.1 3<br />
Coke, refined<br />
petroleum products<br />
4.58 35.91-135.9<br />
Medium-low<br />
technology<br />
12.5-2.1<br />
Basic metals 7.38 34.72-134.7<br />
Medium-low<br />
technology<br />
5.60-3.59 14.6-7.1 3<br />
Rubber, plastic<br />
products<br />
4.28 34.69-134.7<br />
Medium-low<br />
technology<br />
9.60-9.74 3.3-2.7<br />
Radio, television,<br />
communication eq.<br />
1.61 27.42-127.4 High technology 1.60-3.08 3.1-8.6<br />
Electrical machinery<br />
and apparatus<br />
2.45 25.93-125.9<br />
Medium-high<br />
technology<br />
5.20-8.21 2.9-5<br />
Branches-medium growth rates (1995- 2003)<br />
Other non-metallic<br />
mineral products<br />
6.84 23.93-123.9<br />
Medium-low<br />
technology<br />
2.80-2.39 3.8-1.5<br />
Food products,<br />
beverages<br />
22.48 17.86-117.9 Low technology 6.40-5.64 16.6-6 4<br />
Machinery and<br />
equipment<br />
3.29 17.25-117.3<br />
Medium-high<br />
technology<br />
13.60-<br />
18.80<br />
4.4-11.5<br />
Furniture;<br />
Manufacturing n.e.c.<br />
1.97 13.36-113.4 Low technology 5.20-4.27 1.2-2.9 5<br />
Recycling 0.05 5.62 Low technology 1.2-2.9 5<br />
626
Declining branches (1995- 2003)<br />
Branches of<br />
economic activity<br />
Weighted<br />
index<br />
Maria Markatou<br />
Share of the<br />
production<br />
level- Indexes<br />
of production<br />
(2003)<br />
Taxonomy of the<br />
branches based on<br />
their technology<br />
level 1<br />
Share of<br />
firms and<br />
patents<br />
(our<br />
results)<br />
Export<br />
shares<br />
for Greece<br />
and OECD<br />
countries<br />
Pulp, paper and<br />
paper products<br />
3.63 -7.07-92.9 Low technology 3.20-2.91 0.85-2.65 2<br />
Tobacco products 1.94 -11.01-89 Low technology 16.6-6 4<br />
Textiles 8.12 -15.76-84.2 Low technology 1.20-0.85 21.2-5.1 6<br />
Wearing apparel,<br />
dressing, dyeing of<br />
fur<br />
6.43 -21.00-79 Low technology 21.2-5.1 6<br />
Wood, products of<br />
wood and cork<br />
1.35 -23.74-56.8 Low technology 0.80-0.85 0.85-2.65 2<br />
High (aerospace),<br />
Other transport<br />
equipment<br />
5.06 -30.11-69.9<br />
Medium-low<br />
(shipbuilding, ship<br />
repairing)<br />
1.3-5.7<br />
Tanning, dressing of<br />
leather<br />
1.49 -43.21-56.8 Low technology 0.40-0.17 21.2-5.1 6<br />
Office machinery and<br />
computers<br />
0.07 -71.71-28.3 High technology 0.9-5.5<br />
1 2<br />
The classification of branches is based on specific OECD criteria. Branches: Publishing, printing,<br />
reproduction of recorded media- pulp, paper products- wood, products of wood and cork. 3 Branches: Basic<br />
metals- fabricated metal products. 4 Branches: Food products, beverages- tobacco products. 5 Branches:<br />
Recycling, furniture; manufacturing n.e.c.. 6 Branches: Textiles- wearing apparel; dressing and dyeing of furtanning<br />
and dressing of leather.<br />
Source: SEV (Greek Industry Association) 2003, OECD 2005 & 2006.<br />
Let us now link our branches with the factors of technology and export shares. The branches of “fast<br />
growth” are both “high- medium technology” and “medium- low technology” branches. On the contrary<br />
in the branches of both “medium growth rates” and in the declining branches the “low technology”<br />
class dominates. In total, only the 2% of firms, the 3.25% of patents and the 4.8% of exports are<br />
related to branches of “high technology”. In OECD countries the share of exports in branches of “high<br />
technology” accounts for the 18.5%. In “high- medium technology” branches, the above shares are<br />
28.8% (number of firms), 38.12% (number of patents) and 19.8% (export shares) based on our<br />
sample. The respective export share for all OECD countries is 49.5%. In the branches of “medium-<br />
low technology” we can record the 34.4% of firms, the 31.28% of patents and the 34.2% of exports.<br />
The respective export share for all OECD countries is 13.4%. Finally, the above shares are 17.6%<br />
(number of firms), 15.2% (number of patents) and 39.85% (export shares) for the branches that are<br />
classified in the “low technology” class. The respective export share for all OECD countries is 16.65%.<br />
Therefore, the 63.2% of firms with patent activities during the period 1989- 2005 are engaged in<br />
economic activities of “medium- high” and “medium- low” technology. In the first activities the Greek<br />
exports are much lower that the respective OECD average. In the last activities we can point out the<br />
opposite (e.g. the Greek exports are much higher than the respective OECD average). At the same<br />
time the shares of firms, patents and exports in activities of “high technology” are very small based on<br />
our sample, while there is an important 17.6% share of firms. This share contains firms with “low<br />
technology” activities, but with very important export shares. Concluding, the Greek firms with patent<br />
activities during the period of 1989-2005 originate from branches with “fast” and mainly “medium”<br />
growth. However, these branches are also characterized as “medium- low” and “low” technology<br />
branches, the products of which account for the 75% of the total Greek exports.<br />
5. Conclusions<br />
SMEs are very important in the development of innovation in Greece. The examination of their<br />
features showed that most of them have been established during the period 1967-1996 and are<br />
characterized by different levels of exports, selling their products to the countries of European Union<br />
and the Balkans. A large part of Greek firms combines its manufacturing with its commercial activities.<br />
Almost the 50% of these firms and more than the 50% of their total patent activity are concentrated in<br />
four manufacturing branches and more specifically in the “fabricated metal products”, “machinery and<br />
equipment”, “chemicals and chemical products” and “rubber and plastic products”.<br />
627
Maria Markatou<br />
Examining carefully the firm production activities and the related products we can focus on four<br />
points: First, a large part of these production activities is directly and indirectly related to the so called<br />
“construction industries”. These industries have a long history and tradition in Greece. Second, the<br />
case of “fertilizers, nitrogen compounds, pesticides and other agro-chemical products” is obviously<br />
related to the agricultural sector, which is, in any case, very important in Greece. The third production<br />
and specialization trend concerns the pharmaceutical preparations. This case is different, meaning<br />
that it is well known that the majority of chemical products and particularly the pharmaceuticals are<br />
mainly protected by the patent laws and its system. Four, there is a group of forty two firms which<br />
develop patents, although these firms are non- manufacturing. The economic activities of these firms<br />
are related to the branches of agriculture, mining, wholesale and services. We believe that this result<br />
needs further examination, meaning that there is an obvious question: How can we explain this non-<br />
manufacturing patent activity? Is it a matter of creativity from isolated employees or self-employed<br />
businessmen that is expressed this way and is finally certified by the granting of one or more patents?<br />
Is it a conscious business choice and perhaps an economic transition from non manufacturing to<br />
manufacturing activities? We suggest that further research should be executed on this field.<br />
References<br />
Archibugi, D. and Pianta, M. (1992) The technological specialization of advanced countries, A report to the EEC<br />
on International Science and Technology Activities, Kluwer <strong>Academic</strong> Publishers, Dordrecht.<br />
Archibugi, D. (1992) “Patenting as an indicator of technological innovation: a review”, Science and Public Policy,<br />
Vol 19, No. 6, pp 357-368.<br />
Grupp, H. (1990) “Technometrics as a missing link in science and technology indicators”, in: Measuring the<br />
Dynamics of Technological Change, Sigurdson J. (ed), Pinter, London.<br />
GSRT. (2001) Study of the innovativeness of the Greek firms, GSRT, Athens (in Greek).<br />
Mansfield, E., Schwartz, M. and Wagner, S. (1981) “Imitation costs and patents: en empirical study”, The<br />
Economic Journal, Vol 91, pp 907-918.<br />
Mogee, M. (1991) “Using patent data for technology analysis and planning”, Research Technology Management,<br />
Vol 34, No. 4, pp 43-49.<br />
OBI. Special bulletins of Industrial Property, years: 1989- 2005, ΟΒΙ, Athens (in Greek).<br />
OECD. (1994) Oecd Patent Manual, OECD, Paris.<br />
OECD. (2005) Oecd Factbook for years 2005 and 2006, OECD, Paris.<br />
Pavitt, K. (1984) “Sectoral patterns of technological change. Towards a taxonomy and a theory”, Research<br />
Policy, Vol 13, pp 343-365.<br />
Pavitt, K. (1988) “Uses and abuses of patent statistics”, in: Handbook of quantitative studies of science and<br />
technology, Raan, AGJ. (ed), North Holland, Amsterdam.<br />
Schumpeter, JA. (1934) The theory of Economic development, Harvard University Press, Cambridge, Mass.<br />
SEV. (2003) The Greek Economy (2003), SEV, Athens (in Greek).<br />
628
Research-Based Spin-Off Creation Models in Polish<br />
Economic Conditions<br />
Adam Mazurkiewicz, Beata Poteralska and Urszula Wnuk<br />
Institute for Sustainable Technologies – National Research Institute (ITeE-PIB),<br />
Radom, Poland<br />
adam.mazurkiewicz@itee.radom.pl<br />
beata.poteralska@itee.radom.pl<br />
urszula.wnuk@itee.radom.pl<br />
Abstract: Nowadays technology transfer and commercialisation are at the core of most governmental actions<br />
designed to support innovation and competitiveness and academic research- and technology-based spin-off<br />
companies have received increasing attention by authorities in majority of scientifically highly developed<br />
countries. Research-based spin-offs in Poland have become the most promoted and desired mechanism of<br />
knowledge and technology commercialisation. Their creation has already become a central point of numerous<br />
national and regional programmes and projects fostering entrepreneurial behaviour among academic and nonacademic<br />
researchers. Even though there are still a number of legal, economic and social barriers in the way of<br />
this form of scientific entrepreneurship in Poland, such ventures have already grown in popularity. However, due<br />
to the specificity of the Polish economy, there needs to be a unique research-based spin-off creation model<br />
developed, particularly for the publically funded non-academic R&D institutions – Public Research Organisations<br />
(PROs). The authors of this article, on the basis of selected international case studies analyses, have examined<br />
two models of research-based spin-off ventures creation: the downstream and the upstream model and following<br />
this investigation they have developed the most effective, in their opinion, spin-off creation model for Polish public<br />
research institutes. The model they have come up with is based on the downstream spin-off creation model, in<br />
which the innovative solution developed at the parent institution is at the core of this commercialisation<br />
undertaking. There are two sub-models of the downstream spin-off creation model and the difference between<br />
them concerns the means of financing the establishment of the spin-off enterprise. The first of these sub-models<br />
assumes direct financing of the business start up by the R&D sector, usually by the parent organisation itself,<br />
whereas in the later the means of financing the new venture creation come from external funds, i.e. external<br />
investors or structural funds. The model developed by the authors of the paper comprises and further elaborates<br />
on both these sub-models of the downstream research-based spin-off creation model.<br />
Keywords: technology transfer, research results commercialisation, Public Research Organisations (PROs),<br />
research-based spin-offs, spin-off creation models, Poland<br />
1. Introduction<br />
Nowadays, a lot of attention has been paid to technology transfer and commercialisation, and most<br />
governmental actions are designed to support innovation creation and industrial deployment. The<br />
development of the advanced and competitive knowledge-based economies forces the governments<br />
to establish effective mechanisms and structures stimulating the transformation of knowledge<br />
between the R&D sector and the industry or the local governments (Kowalczyk et al. 2000).<br />
Knowledge transformation and technology transfer should be a strategic mission of all Public<br />
Research Organisations (PROs), as active participation in these processes helps generate increased<br />
research funding, engages more scientists and business people in the development and diffusion of<br />
innovations and brings socio-economic benefits, not only to the institute itself, but also to the entire<br />
region or country. (EU Commission 2008). Elaborating on the recommendations of the Lisbon<br />
Strategy that perceives innovation as the motor for economic change and research-industry sectors<br />
collaboration as the key factor enhancing competitiveness and national welfare, Commission of the<br />
European Communities (EU Commission 2008), states further that each country needs to consider all<br />
types of possible technology transfer mechanisms and structures in order to promote the use of<br />
publicly-funded research and maximise its socio-economic impact. The Commission recommendation<br />
particularly advises the authorities to develop and publicise clear licensing policies and support the<br />
creation of research-based spin-offs. Contemporary policies of EU governments thus stress the<br />
importance of PROs and universities in the process of technology creation, transfer and<br />
commercialisation. As a result they have introduced various legislative mandates, which through the<br />
introduction of regulations concerning Intellectual Property (IP) and the creation of start-up and spinoff<br />
ventures, foster entrepreneurship, support commercialisation and help accelerate the process of<br />
technology diffusion from PROs and universities to local, national or even international businesses<br />
(Wnuk 2010). There have also been a number of governmental initiatives enacted to stimulate<br />
entrepreneurial behaviour at R&D institutions, which together with legal regulations, led to a<br />
629
Adam Mazurkiewicz et al.<br />
significant rise in the commercialisation of research results and a rise in the number of innovationpromotion<br />
agencies and organisations designed to support academic entrepreneurs in launching their<br />
own technology- and innovation-based enterprises. In OECD countries, the governments are urged to<br />
improve the efficiency of public research and to stimulate knowledge and technology transformation<br />
into commercial realities, and PROs are encouraged to engage in close alliances with the business<br />
sector, both to enhance the relevance of their research and to facilitate its industrial implementation<br />
(OECD, 2004). Spin-offs from higher education institutions and PROs have thus become a key issue<br />
for science and technology policy in all industrialised countries (Mustar 2001). This paper seeks to<br />
contribute to the topic of scientific entrepreneurship and aims at bringing the readers closer to the<br />
problem of the spin-off creation processes, mainly at Polish PROs. The authors of this article explore<br />
the different research-based spin-off creation models and on the basis of literature review and case<br />
studies analyses develop a unique integrated model that would meet the requirements and<br />
expectations of the Polish R&D sector.<br />
2. Technology transfer to economy<br />
2.1 Mechanisms and structures for technology transfer<br />
There are a lot of technology transfer mechanisms and structures and each country can choose from<br />
the available, or design new procedures and practices tailored made to its needs. The mechanisms<br />
and structures for technology transfer facilitate the support of institutional and financial activities<br />
directed at the enhancement of the cooperation between the parties involved in the know-how<br />
exchange, and thus accelerate innovation commercialisation processes. Before engaging in the<br />
research over spin-off creation processes, the authors of the article analysed globally available<br />
knowledge transformation and technology transfer mechanisms and structures and worked on the<br />
development of Poland-specific models of know-how and innovation exchange between the public<br />
research sector and the national economy (Mazurkiewicz 1999; Kowalczyk et al. 2000; Mazurkiewicz<br />
2002). The authors distinguished between four different knowledge transformation and technology<br />
transfer mechanisms: direct support mechanisms, fiscal mechanisms, capital and credit guarantee<br />
mechanisms and mechanisms of venture capital (Table 1).<br />
Table 1: Selected mechanisms and structures of knowledge transformation (KT) and technology<br />
transfer (TT)<br />
KT and TT<br />
Mechanisms<br />
KT and TT<br />
Structures<br />
Source: Authors<br />
Market-based<br />
mechanisms<br />
Direct support<br />
mechanisms<br />
contracts and agreements<br />
(i.e. Corporative Research and Development Agreements<br />
(CRADAs, Memorandums of Understanding (MOUs))<br />
transnational, framework, national, regional, programmes,<br />
commissioned research projects and grants<br />
(i.e. 7 th Framework Programme, Innovative Economy Operational<br />
Programme in Poland)<br />
Fiscal mechanisms tax allowances and tax credits<br />
Capital and Credit<br />
Guarantee<br />
mechanisms<br />
Mechanisms of<br />
venture capital<br />
Technology Platforms<br />
Technology Parks<br />
Technology Incubators<br />
Technopoles<br />
Innovation Relay Centres<br />
(IRCs)<br />
Business and Innovation<br />
Centres (BICs)<br />
Technology Transfer<br />
Office<br />
<strong>Academic</strong><br />
<strong>Entrepreneurs</strong>hip<br />
Incubators<br />
<strong>Academic</strong> Advising<br />
Centres,<br />
etc.<br />
national programmes, initiatives and schemes financing<br />
technology development and guaranteeing loans for small<br />
business creation<br />
seed, start-up and early-stage capital<br />
(i.e. Australian Cooperative Research Centres (CRCs), French<br />
Regional Innovation and Technology Transfer Centres (Centre<br />
Régional d'Innovation et de Transfer de Technologie<br />
(CRITTs)) Swedish Governmental Agency for Innovation<br />
Systems (Vinnova), British Technology Strategy Board, the<br />
Finnish Funding Agency for Technology and Innovation<br />
(TEKES), Polish Agency for Enterprise Development (PARP)<br />
630
Adam Mazurkiewicz et al.<br />
Direct support mechanisms are all kinds of agreements and contracts between the research<br />
organisations, corporations or governments, as well as transnational, national and regional innovation<br />
development and strategic programmes that encourage an undisturbed flow of information and even<br />
personnel exchange between PROs and the business sector and at the same time stimulate<br />
technology commercialisation activity.<br />
The market based instruments for the support of innovation development and deployment include<br />
fiscal mechanisms, capital and credit guarantee mechanisms, grants and venture capital funds,<br />
whose main aim is to stimulate and promote entrepreneurial behaviour among scientists and provide<br />
them with tools and resources needed for the development of innovation and future commercialisation<br />
of research results.<br />
The analysis of structures for knowledge transformation and technology transfer led to the conclusion<br />
that, despite falling into same structural and organisational categories, like Technopoles or<br />
Technology Platforms, their internal practices and policies vary and the level of governmental support<br />
and engagement differs in order to best fit into the socio-economic context of a given country.<br />
However, the objective to set up the aforementioned structures is common for all the countries, that is<br />
to stimulate scientific entrepreneurism and the creation of research-based spin-offs.<br />
2.2 Spin-off creation processes<br />
Research-based spin-offs are defined as new companies set up by a host institute (university,<br />
technical school, public/private R&D department) to transfer and commercialise inventions resulting<br />
from the R&D efforts of the departments (Clarysse et al. 2000) and are understood to be ventures<br />
which are an excellent way to commercialise research results and are of economic significance for<br />
innovation activity (Helm and Mauroner 2007). The creation of such ventures that have spun off from<br />
PROs and universities is presently the most common mechanism of technology and innovation<br />
commercialisation in the USA and most leading EU Member States. First spin-offs emerged in the<br />
USA in the 1950s and since 1990s have been gradually introduced in Europe, where the US capacity<br />
to transform research results into high-growth firms appears to be a model to emulate (Mustar et al.<br />
2008).<br />
Spin off processes need to be carried out with a lot of care and deliberation in order for the venture to<br />
succeed in the general sense and to meet the goals and objectives of the parent institution (Roberts<br />
and Malone 1995). This means, that different R&D organisations may apply different policies and<br />
procedures for the spin-off process and that there are different spin-off creation models available.<br />
Spin-offs from publicly funded research make a significant direct contribution to innovation, but also<br />
have a great indirect impact on the cultural change in public research organisations (OECD 2004).<br />
<strong>Academic</strong> spin-offs are valuable in at least five ways (Shane 2005):<br />
� They stimulate the regional economic development;<br />
� They are means of commercial deployment of university technologies;<br />
� They help universities with their major missions of research and teaching;<br />
� They are disproportionately high performing companies;<br />
� And they generate more income for the university than licensing to established companies.<br />
This can also be said about non-academic research- and technology-based spin-off ventures<br />
established by the employees of PROs as:<br />
� They have a strong positive influence on the local economic development;<br />
� They encourage entrepreneurial behaviour amongst researchers and involve the inventors in the<br />
process of technology commercialisation, and thus are an effective tool for the commercial<br />
implementation of emerging or breakthrough technologies;<br />
� They also are a more profitable form of commercialisation than licensing, as by holding the equity<br />
in a spun out venture, parent institutions can generate more income than from company licenses<br />
and royalties on sales of final products based on the institute-developed technology.<br />
New research-based venture spin off processes can follow two strategies: market pull and technology<br />
push (Clarysse et al. 2005). The market pull strategy can be applied in a highly developed and<br />
631
Adam Mazurkiewicz et al.<br />
entrepreneurship-oriented surrounding, where the region acts as an incubator for the spin-off<br />
company and the parent institution benefits from the local high level of innovations. However, the<br />
greater the pull, the greater the threat to the freedom of research direction and impartiality (Roberts<br />
and Malone 1995). Technology push, on the other hand, is the strategy that is mostly applied in the<br />
environment characterised by a weak entrepreneurial focus and a low demand for innovation, where<br />
PROs play an important role in technology incubation and actively support spin-off creation<br />
processes. Thus, technology push, from the point of view of the R&D institution is a far more costly<br />
method of forming a new venture.<br />
Polish government has recently become extremely engaged in the issue of spin-off ventures creation,<br />
and there have been a number of programmes and projects stimulating scientific entrepreneurship<br />
started. The authors of the article are themselves engaged in the realisation of “Innovative Systems of<br />
Technical Support for Sustainable Development of Economy" Strategic Programme, whose objective,<br />
apart from the design, development and practical implementation of innovative process and product<br />
technologies, is to design novel model process solutions in the domain of knowledge transformation<br />
and technology transfer that would enhance the efficiency and effectiveness of the commercialisation<br />
process of the obtained material results both on the national and international market. The research<br />
activity in the field of research-based spin-offs carried out within the framework of the programme has<br />
so far concentrated on socio-economic and legislative aspects of spin-off ventures creation in<br />
selected countries (i.e. USA, Great Britain, Germany, Spain, Israel, China), and case studies analyses<br />
of selected spin-off companies were conducted. As a result, though many studies (Roberts and<br />
Malone 1995; Etzkowitz et al. 2000; Wright et al. 2007) differentiate between many types and models<br />
of the spin-off process, the authors of analysed two most commonly applied spin-off creation models,<br />
based on the aforementioned market pull and technology push strategies. The two models of<br />
research-based spin-off ventures creation identified are: the downstream and the upstream model. As<br />
far as the first of these models is concerned, the authors have distinguished between the two<br />
additional sub-models concerning the funding of the spin-off process. The first of these sub-models<br />
assumes direct financing of the business start up by the R&D sector, usually by the parent<br />
organisation itself, whereas in the later the means of financing the new venture creation come from<br />
external funds, i.e. external investors or structural funds. On the basis of international case studies,<br />
the authors have conducted an in-depth analysis of these research-based spin-off creation models<br />
and a need to design a Poland-specific model emerged.<br />
2.2.1 Downstream spin-off venture creation model<br />
Downstream model of a spin off process is based on technology push. Spin-offs that follow the<br />
downstream development process begin with a core proprietary technology and gradually learn how<br />
to manufacture and market commercial, innovation-based products. Figure 1 depicts the stages of a<br />
downstream spin-off creation process.<br />
Figure 1: Stages of a downstream spin-off creation process (source: Authors)<br />
First two stages of the aforementioned process consist of the identification, assessment and<br />
protection of technologies with a commercial potential. At those stages it is still possible for the<br />
researchers and the PROs to decide whether the creation of the spin-off venture is going to be the<br />
most effective and profitable form of technology commercialisation or whether the selection of other<br />
options would turn out to be more beneficial (i.e. licensing or a one-off sale). Stage two is also the<br />
stage where business proposals and plans are drawn. The third stage is the stage at which PROs<br />
need to channel their spin-offs towards potential sources of funding (internal and/ or external). It is the<br />
stage of seeking business advice and initial (seed) funding. Once financial support is obtained, the<br />
venture can formally be incorporated, and spin-off start-up process undertaken: prototypes can be<br />
promoted and business models and markets validated. Although in practice, the founding of spin-offs<br />
is not as linear a process as the one presented in Figure 1, the model offers a clear insight into a spinoff<br />
creation process.<br />
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Adam Mazurkiewicz et al.<br />
In a downstream model, the spin-off venture is innovation-based and is established in order to<br />
commercialise innovative technologies originating from the R&D institution. This model is applied in<br />
developed economies in which:<br />
� PROs receive grants and loans from public funds,<br />
� Are eligible to obtain additional means of financing their R&D<br />
activity from international funds (as<br />
in the case of the EU Member States - European Structural<br />
Fund)<br />
� And thus have financial resources to invest in a spin-off creation process.<br />
Depending on the sources of seed funding, the downstream spin-off creation<br />
model can be further<br />
divided into two sub-models: the R&D financed spin-off model (Figure 2) and the business<br />
financed<br />
spin-off model (Figure 3).<br />
Figure 2: R&D financed spin-off creation model (ource: Authors)<br />
Figure 3: Business financed spin-off creation model (source: Authors)<br />
Applying the division of spin-off policies (Roberts and Malone 1995), the authors have come to the<br />
conclusion that downstream spin-off creation processes presented in Figures 2 and 3 analogically<br />
correspond with high selectivity-high support and low selectivity-low support strategies, where<br />
selectivity is understood as the rate, severity and intensity of the selection criteria for the creation of<br />
spin-offs, whereas support as the level of managerial and financial assistance given by the parent<br />
R&D institution.<br />
In the R&D financed<br />
model (Fig. 2), the parent institution plays an active role in supporting the<br />
process<br />
of establishing a spin-off venture. The high support-high selectivity strategy applied by PROs<br />
in this model relies on selecting research results characterised by a high level of maturity and a high<br />
level of commercialisation ability and increasing the chance of the researchers to succeed in an<br />
entrepreneurial environment. The researchers engaged in the creation of a new business retain their<br />
position as scientific workers and divide their time to working both in a spun out venture and at the<br />
parent institution, which also helps them by providing infrastructure and funds necessary for the<br />
creation of the new enterprise. This model is usually applied in the developing or transforming<br />
economies, however some prestigious institutions in developed countries use it as well (as in the case<br />
of the Amtech Corporation (presently Transcore Inc.) spun out from the Los Alamos National<br />
Laboratory (USA)) (Carayannis et al. 1998). In a business financed model shown in Figure 3, PROs<br />
are passive actors in the spin-off creation process and provide no support whatsoever (i.e. they do not<br />
help the researchers financially, do not agree on them using available infrastructure and do not<br />
facilitate the innovation incubation). In this model PROs put the emphasis on the number of<br />
enterprises spinning out from them. The low selectivity-low support policy applied by them reduces<br />
the cost of spin-off establishment borne by the R&D institution. The selection of the highest potential<br />
business plans and the financing of the spin-off creation process are then left in the hands of external<br />
entrepreneurs.<br />
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2.2.2 Upstream spin-off creation model<br />
Adam Mazurkiewicz et al.<br />
Contrary to the downstream spin-off creation model based on technology push, the upstream model<br />
applies a business pull strategy, in which the venture is created to meet the requirements of the<br />
market and to generate income for the development of internal R&D infrastructure, which will then<br />
lead to the creation of an innovative solution. This reverse development process from sales and<br />
services to innovation development is shown in Figure 4.<br />
Figure 4: Upstream spin-off creation model (source: Authors)<br />
This model of a business establishment is usually applied in underdeveloped or transforming<br />
economies, where PROs do not have extensive financial resources that could be used to support this<br />
process. This process was, for example, applied in the establishment of Lenovo Group Ltd (Xie and<br />
White 2004). The authors are of the opinion that in the upstream spin-off creation model a high<br />
selection-low support policy is applied. Due to the lack of external funds financing their functioning,<br />
PROs are highly selective in assessing the disclosures and requests for spin-off, but at the same time<br />
they are willing to support such proposals in terms of providing the researchers with necessary<br />
infrastructure needed for the spin-off incubation, which the spun out business is more than welcome<br />
to use, but for the exchange of shares and equities, for example.<br />
3. Model of the spin-off process in Poland<br />
Due to weak entrepreneurial orientation, Polish PROs need to adopt the most effective and<br />
advantageous spin-off creation model which, taking into consideration their specific legal and<br />
economic reality, will help them catch up with the scientifically highly developed countries. The<br />
authors have suggested a Poland-specific model which is presented in Figure 5.<br />
Figure 5: Research-based spin-off creation model in Polish economic reality<br />
Since innovation is at the core of its creation, the model presented above is a downstream spin-off<br />
creation model. It assumes the twofold financing of the spin of process, however suggests the spinoffs<br />
be enterprises dependant on parent institutions, and the funds “filtered” through PROs. Even<br />
though international studies on research-based spin-offs (Roberts and Malone 1995; Etzkowitz et al.<br />
2000; Franklin, Wright and Lockett 2001; Wright et al. 2007) suggest that these ventures are more<br />
successful when they are business entities independent of the R&D organisation and when the<br />
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Adam Mazurkiewicz et al.<br />
researchers leave the parent institution, this does not apply to the legislative, financial and<br />
organisational conditions governing the functioning of PROs in Poland. Since the investment in R&D<br />
activity in Poland is still low and research institutions frequently do not even have sufficient funds to<br />
finance their own research activity, not to mention the entrepreneurial activity of their employees, the<br />
spun off ventures should be an additional income generator for Polish PROs. The entrepreneurial<br />
researchers should retain their position at parent institutions, as this would be of benefit for both the<br />
spin-off and the PRO itself. Through having shares in spun out ventures Polish PROs would be able<br />
to accumulate funds that could then be of help in the process of supporting the creation of future<br />
research-based enterprises. In that way Polish PROs could be more proactive, and highly selective<br />
towards their spin-off projects and would be capable of providing greater incubation capabilities to the<br />
ventures spun out from them. This in turn would result in the growth of the level of their<br />
competitiveness as, besides publications, patents or licenses, spin-off companies and other<br />
organisational arrangements such as Technology Transfer Offices (TTOs) or technology incubators<br />
are traditional indicators of measuring commercialisation of research results and their number decides<br />
on high level of innovation, entrepreneurship and competitiveness of not only a given scientific and<br />
research organisation, but the entire national economy as well (Wnuk 2010). At the initial stage of<br />
their creation, research-based spin-offs in Poland should thus be business entities dependant on their<br />
parent institution, as in the Polish economic reality that would be the most effective and beneficial<br />
means of research results commercialisation. Of course, in the business development process, the<br />
spin-off would be encouraged to expand and become independent of the PRO, but the PRO would<br />
retain its shares or royalties on future sales of commercial products based on the technology<br />
developed as a result of the responsibilities of the position held by the employees - Polish legal<br />
regulations concerning IP ownership, indicate that the IP generated in publicly funded research<br />
should belong to the employer – the research institution not an individual researcher.<br />
What is worth mentioning here as well, is the fact that though Polish legislation concerning IP<br />
ownership is similar to that of the UK or the USA, for instance, as far as legislation concerning<br />
scientific and academic entrepreneurship is concerned, there is a huge gap between Poland and<br />
other EU-27 countries and the USA (Wnuk 2010). Most EU Member States and the USA promote<br />
academic and scientific entrepreneurship and put pressure on PROs and universities to launch spinoff<br />
companies and high-tech start-up enterprises, but at the same time they give all research<br />
institutions a free hand as far as legislation concerning the creation of spin-offs is concerned. On the<br />
contrary, the matter of spin-off ventures in Poland is entirely regulated by the government, and Polish<br />
legislation rather hampers not supports the creation of research-based spin-offs. The functioning of<br />
Polish PROs is regulated by the Law on Research Institutes of April 30, 2010. The Act does state that<br />
PROs are allowed to diffuse research results, create capital companies, purchase shares and stocks<br />
in such enterprises and attain income from them, but only with the supervisory ministry’s (here the<br />
Ministry of Science and Higher Education) official consent. Without the Ministry’s consent PROs<br />
cannot engage in this form of business activity. This approach towards scientific entrepreneurship, in<br />
consequence, maintains the innovation and technology gap between Poland’s economy and more<br />
innovative economies of the world.<br />
4. Conclusions<br />
While the creation of research-based spin-offs is a common phenomenon in the USA and most EU<br />
Member States, it still is at its infancy stage in Poland. <strong>Limited</strong> by legal regulations, funds, structural<br />
and organisational stagnation, as well as the lack of modern equipment and young, qualified<br />
personnel, Polish PROs and universities rank low on entrepreneurship, compared to research and<br />
educational institutions from abroad. For these reasons, spin off processes adopted by Polish PROs<br />
thus need to be tailored to the particular needs and requirements of the Polish economic and legal<br />
reality. The authors of this paper attempted to present and elaborate on the globally applied models of<br />
spinning off business enterprises at PROs, and on that basis to design a country-specific model for<br />
Poland. The model they have come with is a variation on the downstream spin-off creation model, as<br />
this is the model in which innovative technological solution is at the core of the business<br />
establishment process. Even though Polish PROs still battle with financial problems, despite<br />
numerous political and legal reforms, the authors have deliberately rejected the upstream spin-off<br />
creation model, which aims at generating income for both the PRO and the spun out venture itself, as<br />
this model is not a case of the creation of the spin-off venture based on research and technology, but<br />
rather an entrepreneurial undertaking of R&D sector employees that may lead towards the<br />
development of innovation, and then establishment of a new technology-based company. Despite its<br />
thought over structure, the authors of the model however, do realise that the designed model may<br />
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Adam Mazurkiewicz et al.<br />
happen not to always be effective in practice. This may be the result of i.e. researchers’ motivation to<br />
spin off a research-based company and the lack of their willingness to remain dependant on the<br />
parent institution; the changing trends in technology transfer, which might mean that in a few years<br />
time new mechanisms and structures of knowledge and research results commercialisation will be<br />
favoured; the cuts in national and European structural funding; or transfers of funds towards other<br />
aspects of R&D activity.<br />
References<br />
Carayannis, E. G., Rogers E. M., Kurihara K., Allbritton M. M. (1998) ‘High-Technology spin-offs from<br />
government R&D laboratories and research universities’, Technovation vol. 18, no. 1, pp. 1-11.<br />
Clarysse, B., Heirman, A., Degroof, J. J. 2000, An Institutional and Resource based Explanation of Growth<br />
Patterns of Research Based Spin-offs in Europe, [Online], Available:<br />
http://www.babson.edu/entrep/fer/XXIX/XXIXA/XXIXA.htm [04.04.2011].<br />
Clarysse, B., Wright, M., Lockett, A., Van de Velde, E., Vohora, A. (2005) ‘Spinning out new ventures: a typology<br />
of incubation strategies from European research institutions’, Journal of Business Venturing, vol. 20, pp.<br />
183-216.<br />
Commission of the European Communities (2008) ‘Commission Recommendation on the Management of<br />
Intellectual Property in Knowledge Transfer Activities and Code of Practice for Universities and Other Public<br />
Research Organisations’, Brussels, Belgium, April.<br />
Etzkowitz, H., Webster, A., Gebhardt, C., Terra, B. R. C. (2000) ‘The future of the university and the university of<br />
the future: evolution of ivory tower to entrepreneurial paradigm’, ResearchPolicy, vol. 29, p. 320.<br />
Franklin, S. J., Wright, M., Lockett, A., (2001) ‘<strong>Academic</strong> and surrogate entrepreneurs in university spin-out<br />
companies’, Journal of Technology Transfer, vol. 26, pp. 1267-141.<br />
Helm, R., Mauroner, O. (2007) Success of research-based spin-offs. State-of-the-art and guidelines for further<br />
research [Online], Available: http://www.springerlink.com/content/182627531271530m/fulltext.pdf<br />
[06.04.2011].<br />
Kowalczyk, B., Mazurkiewicz, A., Trzos, M. (2000), Wdrażanie innowacji – struktury organizacyjne, ITE Press,<br />
Radom.<br />
Law on Research Institutes (2010) Section 2.2 p. 1, and Section 12 p. 3 [Online], Available:<br />
http://isip.sejm.gov.pl/DetailsServlet?id=WDU20100960618 [31.03.2011].<br />
Mazurkiewicz, A. (1999) Modelowanie transformacji wiedzy do praktyki w budowie i eksploatacji maszyn, ITE<br />
Press, Radom-Pozań.<br />
Mazurkiewicz, A. (2002) Transformacja wiedzy w budowie i eksploatacji maszyn wybrane zagadnienia, ITE<br />
Press, Radom.<br />
Mustar, P. (2001) ‘Spin-offs from Public Research: Trends and Outlook’, STI Review, no. 26, Special Issue on<br />
Fostering High-tech Spin-offs: A Public Strategy for Innovation, OECD, pp. 165-172.<br />
Mustar, P., Wright, M., Clarysse, B. (2008) ‘University spin-off firms: lessons from ten years of experience in<br />
Europe’, Science and Public Policy, vol. 35, no. 2, March, pp. 67-80.<br />
OECD (2004) ‘Science and Innovation Policy, Key Challenges and Opportunities’, Meeting of the OECD<br />
Committee for Scientific and Technological Policy at Ministerial Level, Paris, France, 29-30 January.<br />
Public Funds Act of August 27, 2009, section 49 point 1, p. 25 [Online], Available:<br />
http://isip.sejm.gov.pl/DetailsServlet?id=WDU20091571240 [31.03.2011].<br />
Roberts, E. B., Malone, D. E. (1995), Policies and Structures for Spinning Off New companies from Research<br />
and Development Organizations, [Online], Available:<br />
http://dspace.mit.edu/bitstream/handle/1721.1/2569/SWP-3804-32616509.pdf?sequence=1 [05.04.2011]<br />
Shane, S. (2005) <strong>Academic</strong> entrepreneurship. University Spinoffs and Wealth Creation, Edward Elgar Publishing<br />
Ltd, Cheltenham, UK, Edward Elgar Publishing Inc., Northampton, MA, USA.<br />
Wnuk, U. (2010) ‘Legal Regulations and Governmental Initiatives Fostering Research Results<br />
Commercialisation’, Maintenance Problems Quarterly, no. 3/2010, pp. 175-185.<br />
Wright, M., Clarysse, P., Mustar, P., Lockett, A. (2007) <strong>Academic</strong> <strong>Entrepreneurs</strong>hip in Europe, Edward Elgar<br />
Publishing, Cheltham, UK, Northampton, MA, USA.<br />
Xie, W. and White, S. (2004) ‘Sequential learning in a <strong>Chinese</strong> spin-off: the case of Lenovo Group <strong>Limited</strong>’, R&D<br />
Management, vol. 34, no. 4, pp. 407-420.<br />
636
Service Innovation: A Smaller Firm Perspective<br />
Edward McKeever, Sarah Jack and Danny Soetanto<br />
Lancaster University Management School<br />
e.mckeever@lancaster.ac.uk<br />
s.l.jack@lancaster.ac.uk<br />
d.soetanto@lancaster.ac.uk<br />
Abstract: Since the term service innovation first emerged, concerns have been raised about the merging of the<br />
two concepts (i.e. service and innovation). The purpose of this paper is to contribute to this debate and broaden<br />
understanding about what the term might actually mean. To do so we consider what goes on between<br />
entrepreneurial firms and their environments so that service innovations are brought about. We argue that<br />
through environmental enactment and organisational learning, entrepreneurial firms actively ‘generate’ service<br />
innovations and turn ideas into purposeful changes in the way services are delivered. They do this by developing<br />
and acting upon a deep and interactive understanding of their customers as well as their wider environments. We<br />
therefore propose that service innovation is best understood as a highly social process whereby firms seek to<br />
improve their performance based on interactive knowledge acquisition, reflective interpretation and learning.<br />
Keywords: service innovation; small firms<br />
1. Introduction<br />
A major sea change facing all organisations at present is the accelerated globalisation of competition<br />
and the gradual redistribution of economic activity from manufacturing to services, particularly in most<br />
developed economies (Ettlie and Rosenthal, 2011). These macro trends, which follow closely many of<br />
Gershuny’s (1978) predictions regarding the service dominated nature of post industrial societies,<br />
illustrate the emergence of a newly reconstituted competitive arena in which many of the rules and<br />
rewards of the past have changed (Arrow, 1983). Illustrating this shift, Ng, Maull and Smith (2009)<br />
found that even traditional manufacturing companies now often generate the majority of their<br />
revenues from services. de Jong et al (2003) have argued that this means that all firms are now<br />
service firms to some extent and that service research has not kept up with the demands of economic<br />
reality (Ng et al, 2009). Gronroos (2001) has called for more research that will enable organisations in<br />
this new service era to function more effectively and productively. In response, researchers have<br />
shown a growing interest in service innovation with initial insights emerging (Fuglsang, 2002). But to<br />
date there has been a collective struggle to comprehensively capture what this new combination of<br />
terminology actually means (Chase and Garvin, 1989; de Jong et al, 2003; Lovelock and<br />
Gummesson, 2004). Flint et al (2005) have argued that despite best efforts and achievements to date,<br />
little is known about whether service innovation is purposeful, ad hoc, informal or spontaneous.<br />
Spohrer and Maglio (2008) concluded that the service innovation concept remains theoretically<br />
problematic.<br />
It is in the spirit and tradition of seeking conceptual validation that this paper takes a step back and<br />
asks two overarching questions, what is service innovation, and how does it occur? By drawing upon<br />
the concepts of market relations and organisational learning, we explore the process of how service<br />
innovations are generated and developed. In dealing with our research questions, a conceptual view<br />
of service innovation is offered based on what we see as an active and reflective learning process.<br />
This work offers the view that service innovations are constructed and reconstructed based on active<br />
interpretation and learning. We demonstrate that service innovation occurs because organisations<br />
invest in ‘knowing’ and ‘reknowing’ their environments in a way which facilitates constant comparison,<br />
reinterpretation and recombination. The contribution of this paper is in developing and testing a<br />
number of theoretical propositions regarding the nature of service innovation. The paper proceeds as<br />
follows. First, we explore the relationship between entrepreneurial organisations and innovation.<br />
Second, we highlight the distinctions between services and products. Thirdly, we discuss the<br />
usefulness of the ‘learning’ concept to understand service innovation. Our research is then presented<br />
followed by a discussion and conclusion.<br />
2. Background<br />
Addressing questions relating to the nature of service innovation can be elusive. Terms can be<br />
confusing, and meanings can be unclear due to the interdisciplinary nature of emerging research. For<br />
example the term service and services, in particular, are used to refer to a large range of phenomena<br />
like buying a haircut, sending a parcel or renting a hire car (Ng et al, 2009; Miles, 2007; Berry et al,<br />
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Edward McKeever, Sarah Jack and Danny Soetanto<br />
2006). Similarly, conceptualisations surrounding innovation, such as life cycle models, are subject to<br />
multiple definitions and ambiguity (Utterback and Abernathy, 1975). Therefore it is essential that we<br />
establish our key terms and the conceptual bounds of our contribution.<br />
3. Entrepreneurial organisation and innovation<br />
Since Schumpeter’s (1934) seminal theory of economic development, researchers from across the<br />
social sciences have drawn a link between entrepreneurship and innovation (Freel, 2000). At the most<br />
extreme Hagedoorn (1996, p.884) argued that entrepreneurship “is the personification of innovation.”<br />
According to Van de Ven (1986, p.591), each innovation is an “idea ... may be a recombination of old<br />
ideas, a scheme that challenges the present order, a formula, or a unique approach which is<br />
perceived as new.” According to this largely Schumpeterian view, each ‘new combination’ contributes<br />
to ongoing waves of creative destruction, whereby entrepreneurial forms of organisation destroy and<br />
reconfigure previously dominant orders (Mishra and Zachary, 2011). Flint et al (2005) concluded that<br />
innovation does not need to be ground breakingly new to the world, just new in the eye of the<br />
beholder.<br />
Despite the diversity of opinion regarding how entrepreneurship should be defined (Brazeal and<br />
Herbert, 1999); the trend has been for researchers to err on the side of a broader interpretation.<br />
These expanded definitions have more recently referred to innovation by entrepreneurial firms as a<br />
much more complex, dynamic and interactive social as well as economic process (Sorenson,<br />
Mattsson and Sundbo, 2010). This view stresses interactions and reflexivity between organisational<br />
members as much as the innovations themselves. According to Flint et al (2005, p.115), “innovation is<br />
inspired by [organisational] actors responding to and interpreting a dynamic environment,<br />
continuously reflecting on their interpretations, the interpretations of others, and responses by others<br />
to their actions (i.e. innovations).” This shift from linear to process interpretations of innovation can be<br />
seen in Van de Meer’s (2007, p.192) definition that; “Innovation is the total set of activities leading to<br />
the introduction of something new, resulting in strengthening the defendable competitive advantage of<br />
a company.” Within the paradigmatic trends outlined above, it is possible to witness a shift towards a<br />
more open and system level view which is now understood as profoundly social and embedded in<br />
ongoing structures of institutional, political and social context (Anderson, Park and Jack, 2007).<br />
According to Kalantaridis and Bika (2011), these contextual specificities give rise to unique sets of<br />
rules and conventions, as well as norms which influence competitive behaviour. Within what is now<br />
widely understood as open innovation infrastructures, contributors have referred to the ‘ideas’<br />
recognised by Van de Ven (1996) coming together from many sources including users, suppliers,<br />
competitors or business service firms (Chesbrough, 2003). The dominant view of innovation at<br />
present would seem to revolve around recognising its individually strategic and participative nature<br />
while also appreciating that it takes place and is contextualised within sets of complex and open<br />
processes involving many actors (Zheng, 2010). It is against this theoretical backdrop that we now<br />
discuss the specificities of services and innovation.<br />
4. Services and innovation<br />
The differences between services and physical products have been debated at length in the<br />
management and industrial marketing literatures (Araujo and Spring, 2006). At a general level,<br />
services can be defined by what Fisk, Brown and Bitner (1993) have termed their intangibility, the<br />
inseparability of their production and consumption, and their heterogeneity and perishability. Kotler<br />
(1994) argued that intangibility is the single feature common to all services. Because of the absence<br />
of a physical product there is no explicit transfer of ownership, and customers must place trust in the<br />
service provider (de Jong et al, 2003). This has led to a growing consensus that services are<br />
performances involving a shared interaction, even a social relationship between service providers and<br />
consumers. In this sense services can be described as inseparable and simultaneous. This means<br />
that they are produced and consumed in their performance and so require substantial interaction and<br />
mutual attention between producer and consumer (Cooper and De Brentani, 1991). Services have<br />
also been described by the extent of their variability and heterogeneity (Araujo and Spring, 2006). In<br />
this sense, no two deliveries of the same service are identical (Kotler, 1994). Bitner et al (2008) have<br />
distinguished these differences in terms of ‘high tech’ and ‘high touch’ customer-provider interactions<br />
which they see leading to ‘moments of truth’ where customers experience and appreciate the value of<br />
a service. Finally, services have been described as perishable, in that if they are not being consumed<br />
they cannot be stored. So services are not standardised widgets in the manufacturing sense, and<br />
their non standardised process nature requires that we seek ways to conceptualise their innovation in<br />
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terms of organisations and entrepreneurship.Table 1 provides an illustration of the main differences<br />
between innovation in services and manufacturing as it appears in the literature.<br />
Table 1: Differences between innovation in services and manufacturing<br />
Source Differences with manufacturing<br />
Araujo and Spring (2006) Service innovations do not require much R&D.<br />
Service firms tend to invest less in fixed assets to support<br />
innovations. Service firms spend less money on buying patents and<br />
licences.<br />
Barras (1986) In the service sector a lower percentage of revenues are invested in<br />
innovation. Service innovations are notoriously hard to protect and<br />
open to imitation.<br />
De Brentani (1989) Service innovations are easier to imitate. An explicit human<br />
resource strategy has a larger influence on the success of new<br />
services than on new manufactured products.<br />
Den Hertog (2000) Technology is less important for new service development.<br />
OECD (2000) Service innovation is not limited to changes in the product’s<br />
characteristics. It usually involves changes in the delivery process<br />
and client interface as well.<br />
Sirilli and Evangelista (1998) A lack of well educated co-workers is a main barrier to innovation in<br />
service firms, more often than in manufacturing. Organisational<br />
problems often prevent new services from being successful;<br />
organisational aspects fulfil a key role.<br />
Adapted from de Jong et al (2003)<br />
So services can be seen as a much closer and complex ‘dance’ of provider and customer than in a<br />
traditional manufacturing setting. In this sense, service innovation can essentially be seen as creating,<br />
managing and improving what is the customer’s ‘experience’ of being part of a value creation process<br />
through their participation in a service event. Chesbrough (2003) has argued that while service<br />
innovations can be categorised by their source and driving force, eventually entrepreneurs are<br />
motivated by a need to remain profitable (Johne and Storey, 1998). This would suggest that service<br />
innovations arise as organisations strive to understand and meet customer needs, and act on these<br />
understandings. It is within the framework of markets and customer value that we address the<br />
competitive orientation of service innovators.<br />
5. Markets, Customers and Value<br />
Flint et al (2005) have argued that market orientation refers to the behaviour and attitude of an entire<br />
organisation. A strong market focus has been argued to manifest itself in the behaviour of<br />
organisations and their members as they generate, analyse and respond to what Jaworski and Kohli<br />
(1993) label as intelligence, or understanding. This generation of ‘understanding’, has been described<br />
as a complex process of sense making. In the words of Flint et al (2005, p.116) managers and<br />
organisations; “attempt to make sense of their dynamic market environment through processes such<br />
as brainstorming exercises, competitive product analysis, trend analysis, scenario exercises, and<br />
direct customer input where they reflect on their insights and past attempts to respond to similar<br />
situations, and negotiate interpretations and responses such as innovation ideas.” It is within this<br />
complex set of activities that researchers have recognised a prominent focus on customer value<br />
perception and creation. So the activities outlined above can be understood as attempts to<br />
understand the multifaceted nature of customer value perception. Researchers in the field of industrial<br />
marketing have argued that what customers value changes over time, and that attention to these<br />
trends provides opportunities to stay up to date with current and changing customer value perceptions<br />
(Flint and Mentzer, 2000; Flint, Woodruff and Gardial, 2002; Woodruff and Gardial, 1996). According<br />
to these authors, service innovation requires that information relating to what customers value needs<br />
to be drawn together in a way which provides a holistic picture of overall customer needs. It is within<br />
this customer focused context that research has highlighted a learning orientation, or a desire and<br />
process for collecting and acting on insights and understandings. This is increasingly understood as<br />
falling within the conceptual boundary of organisational learning.<br />
6. Organisational Learning<br />
Boulding (1956) came to the conclusion that business organisations, even small ones are highly<br />
complex interpretive systems which make sense of their environments. Influenced by the work of Daft<br />
and Weick (1984) in organisational learning and Cope (2005) in entrepreneurial learning, service<br />
innovation can be interpreted as an adaptive learning process whereby organisations, guided by<br />
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Edward McKeever, Sarah Jack and Danny Soetanto<br />
entrepreneurs and managers develop a body of knowledge (Blazevic and Lievens, 2004; Flint et al,<br />
2005). From a review of the organisational learning literature we draw here upon the concepts of<br />
information and knowledge acquisition and interpretation as well as learning to capture the practice<br />
and process of innovation in the absence of a tangible product. According to Blazevic and Lievens<br />
(2004), the internalisation and combination of new and existing knowledge is central to the realisation<br />
of new service offerings (Huber, 1991). The dominant view within the organisational learning<br />
literature, and the one adopted here is that knowledge is acquired, interpreted and acted upon by<br />
members of a firm as a means of remaining competitive.<br />
Acquisition refers to the process by which information is sought and obtained. According to Kogut and<br />
Zander (1992), information can come from anywhere, and can be generated directly from<br />
experiences, or vicariously from the observation of others as well as from the existing knowledge<br />
contained within the organisation (Blazevic and Lievens, 2004; Schein, 1993). Within the acquisition<br />
metaphor, information from the outside environment is combined with existing knowledge, with some<br />
organisations being better at this than others. The terms, combinative capacity (Kogut and Zander,<br />
1992), organisational memory (Huber, 1991) and absorbtive capacity (Cohen and Levinthal, 1990) are<br />
often associated with this acquisition – combination process. Drawing on the original literature, the<br />
notion of an interpretation stage can be understood as a process of collective reflection whereby<br />
information is given meaning (Duncan and Weiss, 1979; Hedberg, 1981; Weick, 1979). According to<br />
this view, interpretation provides the basis for organisational learning to happen. This is because it<br />
facilitates the achievement of consensus on what information actually means and the possible<br />
consequences of its use (Easterby-Smith, 1997). The third stage of Daft and Weick’s (1984) model is<br />
learning, which they distinguish from interpretation by the inclusion of action. According to this view,<br />
learning involves an updated response or action based on the results of interpretation (Argyris and<br />
Schon, 1978; Cope, 2005). It is at this stage that new knowledge relating to the relationship between<br />
actions and consequences emerge, and new cognitive theories are formed by managers,<br />
entrepreneurs and organisations. According to Cope (2005), individuals and organisations enter a<br />
cycle whereby learning provides new data and experiences for further reflection and interpretation.<br />
The three stages are interconnected through a feedback loop.<br />
Figure 1: Relationships among information Acquisition, Interpretation and Learning<br />
(Adapted from Daft and Weick, 1984)<br />
So it would seem that service innovation might usefully be understood through a learning lens. But<br />
what seems central to this process is the interpretation and arrival at an informed consensus on the<br />
meaning and consequences of change (Easterby-Smith, 1997). It is this consensus which is<br />
recognised as forming the platform on which new ways of doing things are formed. In this way service<br />
innovation requires a confrontation and reinterpretation of existing conditions and practices, and the<br />
achievement of enhanced service delivery. Each newly refreshed consensus, it would seem,<br />
represents a renegotiation of the innovation stance of the organisation. Figure 1 then serves two<br />
purposes, first it underpins the view that interpretation precedes and informs innovative actions, and<br />
secondly it provides an appreciation of service innovation as the applied practice of internalised and<br />
shared understandings. Table 3 provides a summary of key themes identified in the literature.<br />
7. Entrepreneurial Reinterpretation and Service Innovation<br />
Using the framework of organisational learning as understood by Daft and Weick (1984), service<br />
innovation can be understood as an outcome of critical or transformative interpretive learning (Cope,<br />
2003). Building on the thinking of Flint et al (2005), it would seem that service innovation involves a<br />
sequence of learning activities that begins with a disorienting dilemma and concludes with a<br />
reinterpretation of purpose and intent. We thus state that:<br />
Proposition 1: Service innovation is a form of entrepreneurial behaviour influenced by the<br />
interaction of the firm, its customers and its environment, and is characterised by active<br />
reinterpretation<br />
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Edward McKeever, Sarah Jack and Danny Soetanto<br />
Building upon Chesbrough’s (2003) view that service innovations are motivated by a desire to remain<br />
profitable, and Johne and Storey’s finding that entrepreneurs strive to understand customer needs<br />
and act upon opportunities to better serve these, we thus state that:<br />
Proposition 2: Reinterpreted service practices may give rise to direct and indirect<br />
performance benefits.<br />
Table 3: Key Themes in the Literature<br />
Research Themes Key Contributors<br />
Innovations are ideas perceived as new by stakeholders;<br />
are complex, dynamic and interactive processes;<br />
are interpreted responses to a dynamic<br />
environment;<br />
are a response to market intelligence;<br />
Services are intangible, inseparable & simultaneous;<br />
are performances where value is co-created;<br />
Service Innovations are hard to protect and open to imitation;<br />
usually involve changes in the delivery process;<br />
are less likely to receive financial investment;<br />
Markets & Customers Market orientation refers to behaviour and<br />
attitude;<br />
Organisations make sense of market<br />
environments;<br />
Organisational Learning is an adaptive process of knowledge<br />
development;<br />
involves knowledge acquisition, interpretation<br />
and learning;<br />
involves the arrival at an informed organisational<br />
consensus;<br />
involves the construction of shared cognitive<br />
maps;<br />
8. The Research<br />
Van de Ven (1986)<br />
Sorenson et al (2010)<br />
Flint et al (2005)<br />
Rogers (1995)<br />
Kotler (1994)<br />
Araujo and Spring (2006)<br />
Barras (1986)<br />
OECD (2000)<br />
de Bretani (1989)<br />
Flint and Mentzer (2000)<br />
Jaworski and Kohli (1993)<br />
Shivastrava (2004)<br />
Daft and Weick (1984)<br />
Easterby-Smith (1997)<br />
Levitt and March (1988)<br />
In understanding the characteristics of service innovation, this article is based on qualitative research<br />
into the lived experiences of entrepreneurial organisations who took part in doctoral research carried<br />
out by McKeever (2010). In particular it focuses on the experiences of one organisation which had<br />
been taken over and its future reinvigorated through an explicit focus on services. Since the aim of the<br />
present study is not to generalise, but to explore the nature of service innovation as a phenomenon,<br />
this approach seemed appropriate. The Logek Company was chosen because of its turbulent history<br />
and subsequent revival made it a rich case to explore (Korsgaard and Anderson, 2011).<br />
8.1 Data Collection and Analysis<br />
The principal data collection was through phenomenological interviews (Thompson et al, 1989; Cope,<br />
2005). The long interview technique (McCracken, 1988) was used to take a grand tour of the topic<br />
under investigation, where the content and form of the emerging data determined the direction of<br />
interviews. The aim was to explore in some depth an entrepreneur orchestrating service innovation<br />
and how this contributed to business success. Three in-depth interview sessions were conducted and<br />
which lasted between 1 ½ and 3 hours. In all 6 hours of interview data was collected. Data was<br />
analysed through a process of coding and used to inform subsequent interviews. Data was collected<br />
to a point of theoretical saturation where conceptual categories and their contents were pursued to<br />
exhaustion. The approach used to analyse the data involved coding it, identifying concepts and<br />
highlighting their constituent sub categories. This meant reading and re-reading interview material,<br />
revisiting notes and material generated. In essence, this took the form of looking at the data and<br />
asking ourselves, “what is going on here?” This involved the constant comparative method (Glaser<br />
and Strauss, 1967; Silverman, 2000) and an iterative reviewing of the data with emerging categories<br />
and concepts. This has become an accepted approach and one reported in previous work (Human<br />
and Provan, 1997; Jack, 2005).<br />
641
Table 2: Logek in Context<br />
Name Nature of<br />
Business<br />
Bill Logistics and<br />
freight forwarding<br />
Edward McKeever, Sarah Jack and Danny Soetanto<br />
9. Understanding Service Innovation<br />
Employees Established Background<br />
145 37 years Established shortly after the discovery<br />
of North Sea oil by a local consortium.<br />
Was floated on the London stock<br />
exchange. It went through several<br />
mergers and acquisitions before being<br />
acquired privately.<br />
In this section a discussion of data and findings from the study are presented around three main<br />
themes emerging from the Logek case; 1) Context and circumstance; 2) Process improvements, and<br />
3) Synergies, new markets and recombinations<br />
9.1 Context and Circumstance<br />
Having not used the term service innovation in interviews, but stated an interest in the Logek revival<br />
Bill began by contextualising himself and the firm. He told us, “I’ve been involved in this part of the<br />
industry for twenty odd years. I transferred from one business to another until this opportunity arose...<br />
the market is in decline..... it [the company] had a series of kicking’s and morale was extremely low.”<br />
This comment led to an appreciation that for Bill, the context and environment in which the firm was<br />
operating was influencing the options available. When asked about the people in the firm, he<br />
explained that in his case, “I told them we are in a position and we have to get out of it. There’s a<br />
thing around context and circumstance.” These conversations led to an appreciation that Bill<br />
understood the wider context in which Logek was situated, and had posed this as a reinterpretation<br />
challenge. He told us, “You have to energise your people when things are bad. To display that you<br />
know what you are talking about.” This contextualisation provided an appreciation that external<br />
pressures had created a pressure on the firm in which innovation and entrepreneurial renewal were<br />
required in order to survive. This was in keeping with the findings of Johne and Storey (1998) relating<br />
to an entrepreneurial focus to remain or regain profitability. Bill explained the need to remain focused<br />
on the combination and application of knowledge; “It’s very much what you carry between your ears<br />
and to exploit that. We are looking for areas where there is a synergy.” This section has highlighted<br />
some of the antecedent pressures and forces to innovate identified by Blazevic and Lievens (2004). In<br />
this sense then, Bill was problematising the company’s situation and driving a ‘reinterpretation’.<br />
9.2 Process Improvements<br />
Leading on from discussions around renewed customer focus, Bill explained that a key outcome of<br />
this was a series of process improvements within the parameters of existing contracts. Bill explained;<br />
“Everything nowadays goes out to tender. The only way you can make a contract more lucrative is to<br />
seriously add value, bring more to the party...do something different.” When asked for an example of<br />
how this worked, he explained; “We managed to shave ten days off the process time on an invoice. It<br />
only took us about a day and a half’s effort to do it. No-one else had done it before. We said we think<br />
we can do more for you and are you interested in working with us?” This provided an appreciation of<br />
the enactment and discovery described by Daft and Weick (1984), and demonstrated a<br />
reinterpretation of existing practices aimed at strengthening and developing closer market relations.<br />
Bill used the phrase “getting more business out of the same customer” to describe this practice.<br />
He explained that part of this was developing a relationship with what he called his “counterpart” in<br />
the client firm; “The relationship at that level is extremely important. You have to be able to<br />
communicate very clearly what it is you are going to do and why you are going to do it.” So if<br />
shortening a process time by studying and understanding the needs of existing customers was a<br />
service innovation, it also set in motion a cycle of expectation. The closeness which emerged through<br />
these acts of improvement seemed to demonstrate the development of social capital and an attempt<br />
to strengthen and insulate relationships. However, these relationships and process improvements<br />
were all underpinned by a desire to remain profitable. When asked about the role of the customer in<br />
he told us; “Ultimately their side of the bargain, in return for all we do for them is to pay their side of<br />
the bills. So that’s the final judgement.” These views pointed to incremental service improvements<br />
being governed by a mix of social and economic concerns (Anderson and Jack, 2002). However,<br />
what seemed to drive more revolutionary service innovation within the broader context was that the<br />
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Edward McKeever, Sarah Jack and Danny Soetanto<br />
North Sea oil and gas sector was seen to be in terminal decline. These conversations drew attention<br />
to what we saw as macro level recombinations in the Schumpeterian (1934) sense as Logek and the<br />
UK oil and gas sector entered a new period of restructuring.<br />
9.3 Synergies, New Markets and Recombinations<br />
Bill explained that since taking over, as well as focusing on incremental improvements in how they<br />
served existing customers, they were looking at reconfiguring the company’s position in the wider<br />
market. Bill used the phrase “the market is on the move” to describe this macro process. In a<br />
statement which seemed to capture the fluidity of this wider innovation process, he told us; “Twelve<br />
months ago we were operating in a single service manner. Now we probably have got about eight.<br />
Now we will probably refine that over the next three years down to about five. And one of the ones<br />
that we drop may be the one we were in a year ago.” When asked about this restructuring and the<br />
companies plans to operate in overseas markets, Bill warned that this was not a simplistic exercise,<br />
he told us that; “We are looking for areas where there is a synergy with other sectors. Is this what they<br />
do? Can we apply our know-how there? Can we add value to that? That’s expensive in terms of time,<br />
because you really have to understand what you are going into.” This statement again refers to active<br />
investments in understanding and interpretation of the external environment. It became apparent that<br />
a key currency in this process was time, and spending it studying and understanding the technical as<br />
well as the social and cultural complexities of new opportunities.<br />
When asked for an example of these complexities and potential barriers, Bill alluded to some of the<br />
issues which can constrain efforts to take their specialist services, knowledge and expertise into new<br />
markets. He told us; “Mexico for example is a big area of interest for oil based companies right now.<br />
Mexico is quite inefficient because they use way more people than they should. You don’t go in to a<br />
state run company and say we are going to reduce jobs anywhere in the world. But that’s what some<br />
people are doing. These views highlighted the social and cultural issues involved in bringing together<br />
information and knowledge from different contexts. When asked how these problems were overcome,<br />
Bill explained that “So you are getting this phenomenon within the logistics industry where there is a<br />
whole new tier of contracts appearing. We have cultivated some of these engineering contractors and<br />
you get a better deal out of them.” In many ways this new tier of contracts seemed to have created a<br />
habitus, or conceptual space which provided grounds for reinterpreting and renegotiating a new set of<br />
rules for a new context. What was particularly interesting was that the previously mentioned<br />
innovation of shaving the processing time of a contract would have been wholly inappropriate in a<br />
Mexican context. So in this section we have tried to demonstrate the interpreted and negotiated way<br />
in which Bill saw the development of new service combinations to suit overseas markets.<br />
10. Discussion and Conclusion<br />
Taking a customer focused and learning perspective has helped us generate a deeper appreciation of<br />
the dynamic process through which service innovations can be seen as the outcomes of reinterpreted<br />
practices. Appreciating that innovation is increasingly seen as being influenced by the wider<br />
environment in which organisations are immersed, such a perspective seems appropriate. From the<br />
experiences and examples provided by the entrepreneur, it would seem that Logek was going through<br />
a process of active learning and reinterpretation at two levels. The first was with regard to its<br />
relationship with individual clients, the second was its location and position within the overall structure<br />
of the industry. Through our conceptualisation, we have shown that service innovation, as a<br />
manifestation of an entrepreneurial orientation can impact on the performance and profitability. The<br />
direct benefits highlighted revolved around generating more revenue from existing customers and<br />
seeking out new applications for existing knowledge. The indirect benefits revolved around the<br />
strengthening of personal and business relationships, the generation of social capital, and the<br />
development of a more optimistic view of the future. In the case of Logek, this process seemed to<br />
revolve around a sterner focus on understanding ‘contextual events’, ‘external synergies and<br />
revenue’, ‘organisational learning’ and the maintenance of an ‘internal consensus’.<br />
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Edward McKeever, Sarah Jack and Danny Soetanto<br />
Research in management and entrepreneurship often fails to reflect the full extent to which reflective<br />
interpretation impacts on the behaviour of organisations (Cope, 2003; 2005). Addressing our research<br />
question has highlighted the importance of viewing service innovation as a complex process involving<br />
whole organisations, the entrepreneurs and teams governing them, and the environments in which<br />
they are operating. Shane and Venkataraman (2000) have argued that this process perspective of<br />
innovation and entrepreneurship provides greater opportunities for researchers to explore “how, by<br />
whom and with what effects opportunities to create future goods and services are discovered,<br />
evaluated and exploited” (p.218). If service innovation is an active outcome of entrepreneurship, then<br />
the notion of reinterpretation of customer needs and environmental context needs more attention<br />
because it helps us to understand how service innovations move from being ideas to being driven by<br />
motivated actions. We call for more research into the role of the entrepreneur in all this, and their<br />
connections as a way of further understanding the role of the social in influencing the ambition, scale<br />
and nature of service innovations.<br />
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Van de Ven, A. (1986), Central problems in the management of innovation, Management Science, 32(5),<br />
Organisation Design, pp.590-605<br />
645
A Study of IT Innovation Adoption and <strong>Entrepreneurs</strong>hip in<br />
Malaysia<br />
Sedigheh Moghavvemi¹, Noor A. Mohd Salleh 1 , Wenjie Zhao 1 and Xianxue<br />
Kang 2<br />
1<br />
Faculty of Business and Accountancy, University of Malaya, Kuala Lumpur,<br />
Malaysia<br />
2<br />
Faculty of Business, London South Bank University, London, UK<br />
moghavvemi_2006@yahoo.com<br />
akmasalleh@um.edu.my<br />
zhao511@yahoo.com<br />
kineeykang2000@gmail.com<br />
Abstract: Current study seeks to revise and validate the Entrepreneurial Potential Model in technology<br />
acceptance context and investigate IT innovation adoption by entrepreneurs in their companies. Two<br />
independent variables from the entrepreneurial potential model, perceived desirability and perceived feasibility,<br />
were employed to examine entrepreneurial intention toward technology adoption. Performance expectancy was<br />
added as a new independent variable to investigate entrepreneur’s intention to adopt and use IT innovation in<br />
their companies. We also hypothesized that age and gender moderates the relationship between the<br />
determinants and dependent variable. This study used real entrepreneurs as samples to collect data. The survey<br />
data was collected from 1000 Malaysian entrepreneurs in Kuala Lumpur. This paper used the structural equation<br />
model to test the proposed model. The results found that perceived desirability and perceived feasibility are<br />
significantly and positively related to entrepreneurial intention to adopt and use IT innovation, whereas the direct<br />
effect of performance expectancy on an entrepreneur’s intention is not. The moderating variables (age and<br />
gender) revealed that performance expectancy was positive and significant toward behavior intention for men<br />
and young entrepreneurs compared to female and aged entrepreneurs. Results also showed that younger<br />
women are more interested compared to men to use IT innovation if they feel they have enough skill and ability to<br />
use it.<br />
Keywords: <strong>Entrepreneurs</strong>hip, IT innovation adoption, entrepreneurial potential model, performance expectance,<br />
perceived desirability, perceived feasibility<br />
1. Introduction<br />
Due to the new economy, companies get their competitive advantage from ideas rather than things,<br />
and an intimate relationship exists between growth and innovation (Carayannis & Sagi 2001). In<br />
general, innovation is defined as the creation or adoption of a new idea to a population, and the<br />
degree of newness is used as a base to distinguish the generation of innovation from its adoption<br />
(Damanpour & Wischnevsky 2006; Damanpour 2006; Lee & Runge 2001). In a technological view, IT<br />
innovation is only considered as an innovation when it is felt to be new by the potential adopter. The<br />
application of IT innovation is the most significant current discussion and driving force behind many<br />
socioeconomic changes (Dierckx & Stroeken 1999; Dierckx 1998). Peter Druker considers innovation<br />
in technology as an aspect of entrepreneurship and believes that innovation and entrepreneurship are<br />
the main force in maintaining the dynamics of organizations, economics, and communities (Hongrone<br />
2008). Schumpeter considers entrepreneurship as the introduction of a “new combination” of existing<br />
technology with new processes or employment or improved products, delivered to increase market<br />
segments through a new organizational form. He distinguished entrepreneurial processes and<br />
business management from each other.<br />
Many researchers used different theories and models to understand the entrepreneurship<br />
phenomenon and measure pre-entrepreneurial event to determine entrepreneurial intentions to start<br />
new venture or taking action (e.g. adopt new technology) (Bird 1988; Shapero,1982; Zampetakis<br />
2008). Most of these studies used a sample of different groups of university students to investigate<br />
entrepreneur’s behaviors (Krueger & Brazeal 1994; Krueger et al. 2000; Shook & Bratianu 2008;<br />
Coduras et al.2008; Veciana et al. 2005; Meeks 2004; Guerrero et al. 2008 ) and a few studies have<br />
analyzed other groups of people to study entrepreneurship (Guerrero et al. 2008). Some researchers<br />
investigated the inadequacy of using students as samples for entrepreneurship study (cited in Meeks<br />
2004) because stable career anchors emerge only with work experience (Meeks, 2004).<br />
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Sedigheh Moghavvemi<br />
One of the most comprehensive and definitive theoretical models in the context of entrepreneurship is<br />
Entrepreneurial Potential Model that Krueger and Brazeal developed in 1994 to measure<br />
entrepreneur’s perception to start new venture or perform behavior. The current study revised and<br />
validated this model in the context of technology acceptance to measure individual dimension of<br />
adoption and use of technology, and analyzed the entrepreneur’s intention to adopt in their job. We<br />
added performance expectancy to measure the effect of perceived usefulness on entrepreneur’s<br />
intention to adopt innovation. Literature shows that if people believe the innovation is useful and<br />
would help them to improve performance, they would adopt it. This paper measured the effect of age<br />
and gender in the model, since literature showed the differences between men and women in<br />
technology acceptance and entrepreneurship context. Researchers attempt to find: (1) the reasons for<br />
entrepreneur’s intention to use IT innovation in their job; (2) to measure the differences between<br />
male/female, and young/old entrepreneurs’ perception toward performance expectancy, perceived<br />
desirability and perceived feasibility to adopt and use IT innovation. This paper is organized by the<br />
following parts: (a) Literature Review on IT Innovation and Entrepreneurial Model, (b) Theoretical<br />
Framework, (c) Research Methodology, (d) Research Findings, and (e) Discussion and Limitations.<br />
2. Literature review on IT innovation and entrepreneurial model<br />
2.1 IT Innovation<br />
Generally, information technology refers to any artifact that has its technological base comprised of<br />
computers or communications hardware and software (Cooper & Zmud 1990). IT innovation is defined<br />
as an operational or administrative idea, practice, or object which is perceived as new by an<br />
organizational unit whose underlying basis is IT (Lee & Xia 2006). Damanpour (1996) categorized<br />
innovation into a range of types, including new process technology, new products or service, new<br />
administrative systems or organizational structures, new plans or programs pertaining to<br />
organizational members (Ling & Nasurdin, 2010). Swanson & Ramiller (1997) argued that Information<br />
Technology (IT) - digital computing and communications technology- prepares the essential material<br />
for innovation in information system. IT innovation is critical to an organization’s success, and is<br />
considered as a primary management tool and resource to enhance a firm’s competitiveness (Jin<br />
2007); and is also the leading cause of increased productivity and quality as it also facilitates interorganizational<br />
transactions and collaboration. It is considered as a new technology pattern that affects<br />
the management, control of production and service systems throughout the economy based on<br />
radical innovation in electronic computers, control systems, software engineering, and<br />
telecommunication that have significantly reduced the cost storing, processing, communicating and<br />
disseminating information.<br />
The adoption decision takes place at the micro-economic level, and the potential adopter of the<br />
innovation often is an enterprise, or an individual. Innovation adoption refers to an individual or<br />
organization’s decision and the choice it makes to accept or reject an existing innovation and its<br />
passing through a sequence of stages before the acceptance of a new product. Innovation adoption in<br />
organization create change in the organization toward improves its level of performance or<br />
effectiveness. Based on Subramanian & Nilakanta (1996) organizations adopt innovations for many<br />
reasons, including: (a) responding to an external environmental change, (b) a consequence of<br />
strategic initiatives proactively pursued by decision makers in the organization, (c) the innovation<br />
adoption in organization is desirable, and (d) innovations energize the adopting organization and<br />
increase organizational performance. Innovative organizations have identifiable organization<br />
characteristics, and distinct innovative and non- innovative organizations (Swami & Porwal 2005). IT<br />
innovations are either adapted to respond to change in external or internal organization’s environment<br />
or to influence the environment (Lee & Xia 2006).<br />
2.2 Entrepreneurial potential model<br />
Krueger and Brazeal (1994) defined entrepreneurship as “the pursuit of an opportunity irrespective of<br />
existing resources” and entrepreneurs as “those who perceive themselves as pursuing such<br />
opportunities”. Krueger & Brazeal’s model (1994) takes a social psychology perspective on how to<br />
test the notion of entrepreneurial potential and is a “process-based, theory-driven micro model with<br />
macro consequences” (Veciana et al. 2005) (see Figure 1). The Entrepreneurial Potential Model<br />
theorized that an entrepreneurial event requires the potential to start a business that is defined on<br />
three critical constructs; (1) perceived desirability (attitude and social norms), (2) perceived feasibility<br />
(self-efficacy, perceived behavioral control) and credibility (Krueger & Brazeal 1994; Krueger et al.<br />
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Sedigheh Moghavvemi<br />
2000; Guerrero et al. 2008). Credibility requires the behavior to be both desirable and feasible, and<br />
these antecedents affect the intentions toward the behavior (Krueger & Brazeal 1994; Krueger et al.<br />
2000; Coduras et al. 2008; Veciana et al. 2005).<br />
Figure 1: Entrepreneurial Potential Model from Krueger and Brazeal (1994)<br />
Perceived desirability is defined as the “degree of attraction an individual perceives towards a<br />
specific behavior, such as becoming an entrepreneur” (intrapersonal and extra personal) (Krueger<br />
and Brazeal 1994; Krueger et al. 2000).<br />
Perceived feasibility is defined as the “perception regarding their own ability to carry out a specific<br />
behavior (becoming an entrepreneur, starting a business)”. It contains self-efficacy and perceived<br />
behavioral control.<br />
Intention is defined as a person’s willingness to pursue a given behavior and represent an individual’s<br />
commitment toward target behavior (Shapero 1982; Krueger & Brazeal 1994; Stopford & Baden-Fuller<br />
1994) (Krueger 2000).<br />
2.3 Theoretical framework<br />
Based on the literature review, we revised the Entrepreneurial Potential Model (Krueger & Brazeal,<br />
1994) and validated it in the context of technology acceptance to investigate entrepreneur’s intention<br />
to adopt and use IT innovation. The research model tested in this study is shown in Figure 2. We<br />
considered perceived desirability, perceived feasibility and performance expectancy as determinants<br />
of behavioral intention to adopt and use IT innovation. We hypothesized that age and gender will<br />
moderate the influence of these factors toward behavioral intention. This study used real<br />
entrepreneurs as samples, therefore we did not consider potential in the framework and not test the<br />
unobserved variable credibility since the previous researcher mentioned that if the behavior is<br />
desirable and feasible, it is credible. We did not measure the moderating effects of precipitating<br />
events and propensity to act. Influence of precipitating events is more effective when entrepreneurs<br />
want to start a new venture. The proposed theoretical model was developed to provide a<br />
comprehensive understanding of the determinants that affects the adoption of innovative IS among<br />
entrepreneurs.<br />
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Figure 2: Theoretical Research Framework<br />
Sedigheh Moghavvemi<br />
We defined perceived desirability as the degree of attraction entrepreneurs perceives towards IT<br />
innovation that leads them to adopt and use new technology in their company. If they have a positive<br />
perception toward a new technology, they would be more interested to adopt and use it in their work.<br />
Age and gender was theorized to have a moderating effect on the influence of perceived desirability<br />
on behavioral intention. The effect will be stronger for women and particularly for aged women.<br />
H1: <strong>Entrepreneurs</strong> perceived desirability will have positive effect on their intention to<br />
adopt IT innovation in their job.<br />
H1a: The effect of perceived desirability on behavior intention to use IT innovation is<br />
stronger for women entrepreneurs than men entrepreneurs.<br />
H1b: The effect of perceived desirability on behavior intention to use IT innovation is<br />
stronger for younger entrepreneurs than aged entrepreneurs.<br />
The current study defines perceived feasibility as the entrepreneur’s perception of their skills,<br />
knowledge and ability to adopt and work with IT innovation. If they feel they have enough skills and<br />
ability to use new technology in their work, they would be more interested to adopt and use it. Age<br />
and gender moderate the influence of perceived feasibility on behavioral intention. The effect is<br />
stronger for women and aged entrepreneurs.<br />
H2: Entrepreneur’s perceived feasibility will have a positive effect on their intention to<br />
adopt innovation in their job.<br />
H2a: The effect of perceived feasibility on behavior intention to use IT innovation is<br />
stronger for women entrepreneurs than men entrepreneurs.<br />
H2b: The effect of perceived feasibility on behavior intention to use IT innovation is<br />
stronger for aged entrepreneurs compared to young entrepreneurs.<br />
Literature shows that the usefulness of the innovation is more important to entrepreneurs, and if they<br />
believe that using IT innovation will help them to attain benefits in job performance, they are more<br />
likely to adopt and use IT innovation in their job. This study defines performance expectancy as the<br />
degree to which entrepreneurs believe that using the innovation will help them attain gains in their job<br />
performance or get benefits in their job. The construct is equal to perceived usefulness in the<br />
Technology Acceptance model, and Theory of Plan behavior; extrinsic motivation in Motivational<br />
Model; job fit in model of PC utilization; relative advantage in Innovation Diffusion theory; and<br />
outcome expectation in Social Cognitive theory (Venkatesh et al. 2003). We hypothesized that<br />
entrepreneurs will adopt and use IT innovation if they feel that new the technology will improve their<br />
job performance or give them a competitive advantage in the market. Age and gender moderates the<br />
effect of performance expectancy on behavior intention. The effect is stronger for men and younger<br />
entrepreneurs. The effect of is stronger for men, because men are considered to be more taskoriented;<br />
and for younger entrepreneurs, extrinsic reward is more important to them (Mooris &<br />
Venkatesh 2000). The use of IT innovation is easier for younger entrepreneurs than the elderly, since<br />
younger entrepreneurs are more familiar with information technology. Aged entrepreneurs may wish<br />
to use IT innovation in their job, but do not have enough knowledge and skills to do so.<br />
H3: An entrepreneur’s feeling of performance expectancy will have positive effect on their<br />
intention to adopt innovation in their job.<br />
H3a: The effect of performance expectancy on behavior intention is stronger for male<br />
entrepreneurs compared to female entrepreneurs.<br />
H3b: The effect of performance expectancy on behavior intention is stronger for young<br />
entrepreneurs compared to aged entrepreneurs.<br />
3. Research methodology<br />
Due to the structural equation modeling (SEM) technique, a large sample was required. According to<br />
Hair et al. (2006), the minimum target sample size is at least five times as many observations as the<br />
number of variables to be analyzed, and a more acceptable sample size would have ten observations<br />
per variable. Previous studies in the entrepreneurship field usually take students as samples to collect<br />
data. Since stable career anchors emerge only with work experience, this study used real<br />
entrepreneurs as samples. To provide an adequate level of confidence, the questionnaire papers<br />
were distributed to the managers/directors of 1,000 enterprises in Kuala Lumpur (KL), as KL is the<br />
capital city of Malaysia. However, only 420 questionnaires were returned, and 412 of them were<br />
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Sedigheh Moghavvemi<br />
considered to be usable in this study. The constructs or variables used in the questionnaires were<br />
adopted from previous researches. The questions that measured perceived desirability and perceived<br />
feasibility were adopted from Krueger and Brazeal (1994), and performance expectancy and intention<br />
to use IT innovation construct adopted from Venkatesh et al. (2003). Likert scales (1-7) ranging from<br />
‘strongly agree’ to ‘strongly disagree’ was used for all the construct items in the present research.<br />
4. Research findings<br />
4.1 Profile respondent<br />
The number of male entrepreneurs is more than female entrepreneurs. This is usual in Malaysia’s<br />
work environment where there are lesser women entrepreneurs entering the workforce compared to<br />
most western or developed countries. In terms of types of industry, most entrepreneurs worked in<br />
Service Sector 134 (32.5%). In term of business antecedents in their family, 145 (41.3%) have an<br />
entrepreneur relative (father or mother), but 206 (58.7%) do not. The characteristics of the<br />
respondents are in the Table 1 for this current study.<br />
Table 1: Characteristics of the respondents<br />
4.2 Data analysis<br />
Characteristics Number % Percentage<br />
Gender<br />
Male<br />
Female<br />
Age<br />
≤20<br />
20-29<br />
30-39<br />
40-49<br />
≥50<br />
Industry type<br />
Manufacturing<br />
Service<br />
Education<br />
Telecommunication<br />
banking and finance<br />
agriculture<br />
others<br />
Business antecedents<br />
Family entrepreneurs<br />
No family entrepreneurs<br />
306<br />
106<br />
44<br />
83<br />
169<br />
80<br />
36<br />
65<br />
134<br />
43<br />
46<br />
28<br />
9<br />
87<br />
160<br />
252<br />
74.3%<br />
25.7%<br />
10.7%<br />
20.1%<br />
41.0%<br />
19.4%<br />
8.7%<br />
15.8%<br />
32.5%<br />
10.4%<br />
11.2%<br />
6.8%<br />
2.2%<br />
21.2%<br />
38.8%<br />
61.2%<br />
As discussed by Garver and Mentzer (1999), SEM is a powerful technique that combines the<br />
measurement model (confirmatory factor analysis or CFA) and the structural model (path analysis)<br />
into a simultaneous statistical test (Hair et al. 2006). SEM is a statistical tool used to explain the<br />
relationships between multiple variables and examine the structure of inter-relationships expressed in<br />
a series of equations, similar to a series of multiple regression equations (Hair et al. 2006). Hair et al.<br />
(2006) noted that the measurement model provides a basis for assessing the validity of the structural<br />
theory, testing the model fit and construct validity of the proposed measurement model in the CFA<br />
once a satisfactory measurement model is obtained. The second step is to test the structural theory in<br />
the path analysis. In this report, AMOS 18.0 was used as the main statistical analysis tool to purify the<br />
measurement items and test the hypothesis relationship. It was used to reduce the items that were<br />
not fit for the measurement model from confirmatory factor analyses. Measurement validity and<br />
theoretical relationships were also tested in this research.<br />
4.3 Confirmatory factor analysis<br />
Confirmatory factor analysis (CFA) provides a confirmatory test of measurement theory for the<br />
constructs and explains how measured variables logically and systematically represent constructs<br />
involved in a theoretical model (Hair et al. 2006). The primary approaches for measurement item<br />
purification for the test include multiple CFA iterations with the maximum likelihood estimation (MLE)<br />
method that iteratively improves parameter estimates to minimize a specified fit function and ensure<br />
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Sedigheh Moghavvemi<br />
that stable MLE solutions are as small as 100 to 150 of the sample size (Hair et al. 2006). According<br />
to the path estimates, standardized residuals, and modification indices, some of the items were<br />
deleted from the model CFA to improve the model fit indices. The final fit for the model in the<br />
calibration sample was excellent, with GFI=0.912, TLI=0.956, CFI=0.964, RMSEA=0.069, and<br />
CMIN/DF=2.975.<br />
4.4 Reliability and validity assessment<br />
Once the hypothesized model was “purified,” the refined measurement model was used to test the<br />
construct validity and reliability through CFA. Hair et al. (2006) believes that assessing the construct<br />
validity of a proposed measurement theory is one of the advantages of CFA. It describes the extent to<br />
which a set of measured items actually reflect the theoretical latent construct. Construct validity can<br />
be formed by unidimensionality, reliability, convergent validity, and discriminant validity.<br />
Unidimensionality. Unidimensionality refers to the measured and latent variables whereby the critical<br />
ratio of regression weight are all statistically significant (CR>1.96; at α ≤ 0.05). In the current study,<br />
the standardized parameter estimates of the model were higher than 0.70, and the signs of parameter<br />
estimation were all in the same direction to measure specific latent variables. The overall model fit<br />
indices were in excellent positions. The standardized regression weights were all higher than 0.5.<br />
Thus, the result suggests that the construct is unidimensional in this study.<br />
Reliability. Based on the formula of construct reliability (CR) (Garver and Mentzer 1999) and variance<br />
extracted (VE) (Hair et al. 2006), the result of VE and CR were calculated. For the research model,<br />
the CR on all constructs was greater than 0.70 (from 0.85 to 0.89). The output of VE were higher than<br />
0.5. Thus, this result proved to support the reliability of this study.<br />
Convergent Validity. Steenkamp and Trijp (1991) and Hair et al. (2006) found that convergent validity<br />
assesses the overall fit of the measurement model: the magnitude, direction, and statistical<br />
significance of the estimated parameters between latent variables and their indicators. In this study,<br />
the overall fits of the measurement model were within the acceptable index. The magnitudes of the<br />
standardized parameter estimations were higher than 0.50, and the directions to measure specific<br />
latent variables were all the same. The estimated parameters were all statistically significant between<br />
the latent and measured variables. Thus, the results proved convergent validity in this study.<br />
Discriminant Validity. With regard to testing discriminant validity, a pair-wise comparison (Long 1983;<br />
Hair et al. 2006) was used in this study. The correlation of a pair of constructs was fixed to equal 1.0<br />
as a constrained model was free to vary as an unconstrained model. In comparing the two models,<br />
the chi-square difference was tested to check whether the models were statistically significant for<br />
confirming discriminant validity. All χ 2 differences were significant at the p < 0.01 level, and the fit<br />
indexes for unconstrained models were all better than the constrained models. This indicates that the<br />
results were strongly supported by the discriminant validity criterion.<br />
4.5 Testing the hypotheses<br />
Once an acceptable measurement model is available, the structural model evaluation should be able<br />
to start. The results of the structural model show that the model achieved a good level of fit, χ 2 =<br />
336.146, χ 2 / df = 2.975, GFI = 0.912, TLI = 0.956, CFI = 0.964, RMSEA = 0.069. The result also<br />
reported that 68.9 per cent of the variance associated with behaviour intention was accounted for by<br />
its three predictors: performance expectancy, perceived desirability, and perceived feasibility.<br />
4.5.1 Testing Hypotheses on Behavioral Intention<br />
Investigating the relationship between the independent variables and the behavior intention (see<br />
Table 2), and the perceived desirability on the behavior intention, hypothesis 1 was supported. It<br />
explained that if perceived desirability is high, the intention to adopt IT innovation will also increase as<br />
the high degree of attraction entrepreneurs. Refer to hypothesis 2, the result supported as β = 0.326<br />
(p = 0.000). This means that intention for IT innovation would increase as entrepreneur’s ability to<br />
adopt and work with IT innovation is high. As for hypothesis 3, result shows that performance<br />
expectancy is not significant to the behaviour intention because β is equal to 0.053 (p = 0.343). It<br />
means that performance expectancy is not influenced by the intention of using IT innovation in this<br />
study.<br />
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Sedigheh Moghavvemi<br />
Table 2: Hypothesis Testing on Behavior Intention<br />
Hypotheses β S.E. C.R. P Support<br />
H1 PD → BI 0.515 0.091 7.187 0.000* Yes<br />
H2 PF → BI 0.326 0.062 5.735 0.000* Yes<br />
H3 PE → BI 0.053 0.081 0.948 0.343 No<br />
β: Standardized Regression Weight S.E.: Standardized Error<br />
C.R.: Critical Ratio *p< 0.05<br />
To test the hypothesized moderation model in the SEM, two group models can be used in the core<br />
model (Hair, et al., 2006). In the current study, gender and age are the two moderating variables for<br />
the research model. Refer to the perceived desirability; the result revealed that hypothesis 1a was<br />
supported; and the β for women is higher than the men. It means the effects of perceived desirability<br />
on behaviour intention to use IT innovation of women is stronger than men. Comparing the age of<br />
entrepreneurs, results show that the effects of perceived desirability on intention to use IT innovation<br />
is stronger for younger entrepreneurs. Hypothesis 1b is supported.<br />
Regarding the perceived feasibility, results found that the effect of perceived feasibility on behaviour<br />
intention of using IT innovation is stronger for women entrepreneurs rather than men entrepreneurs,<br />
as β for women is higher than the men. Hypothesis 2a was supported. Research also found that the<br />
relationship between perceived feasibility and intention to adopt and use IT innovation for the elderly<br />
is higher than young entrepreneurs. Hypothesis 2b was supported.<br />
On performance expectancy, the results showed that the effect of performance expectancy on<br />
intention to use IT innovation is stronger for male entrepreneurs rather than female, as β for men is<br />
higher than the women. Hypothesis 3a was supported in the current research. For the young<br />
entrepreneurs, the effect of performance expectancy on intention to use IT innovation is stronger than<br />
aged entrepreneurs. The results supported hypothesis 3b.<br />
Table 3: Hypotheses Testing on Moderating Effects<br />
Hypotheses β C.R. P Support<br />
Gender<br />
PD→BI H1a Yes<br />
Male Group (n=306) 0.479 5.703 0.000*<br />
Female Group (n=106) 0.582 4.225 0.000*<br />
PF→BI H2a Yes<br />
Male Group (n=306) 0.257 3.896 0.000*<br />
Female Group (n=106) 0.410 3.742 0.000*<br />
PE→BI H3a Yes<br />
Male Group (n=306) 0.179 2.666 0.008*<br />
Female Group (n=106)<br />
Age<br />
-0.157 -1.415 0.157<br />
PD→BI H1b Yes<br />
Young Group (n=127) 0.557 4.168 0.000*<br />
Old Group (n=285) 0.467 5.534 0.000*<br />
PF→BI H2b Yes<br />
Young Group (n=127) 0.060 0.482 0.630<br />
Old Group (n=285) 0.394 5.977 0.000*<br />
PE→BI H3b Yes<br />
Young Group (n=127) 0.305 2.744 0.006*<br />
Old Group (n=285) 0.000 0.006 0.995<br />
β: Standardized Regression Weights;<br />
*: P ≤ 0.05<br />
C.R.: Critical Ratio<br />
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Sedigheh Moghavvemi<br />
5. Discussions and lmitations of the study<br />
As the results show in the current study, perceived desirability and perceived feasibility were positive<br />
influences on behavior intention. Perceived desirability was the most important variable to influence<br />
behavior intention, followed by perceived feasibility. This result supports the Entrepreneurial Potential<br />
Model from Krueger and Brazeal (1994), where perceived desirability and perceived feasibility are the<br />
two important variables in determining the behavior intentions. This study validates this model in<br />
technology acceptance context, and results show that researchers can use this model to measure<br />
individual perception toward technology adoption. Testing the effects of age and gender is very<br />
important for technology acceptance, as well as for entrepreneurship. Different studies in both area<br />
shows that there are differences between men and women in entrepreneurship and in use of new<br />
technology as well. Adding these two moderating variables to the model would improve the model.<br />
Regarding the moderating effect, gender and age are the new variables to explore the relationship<br />
between performance expectancy, perceived desirability, perceived feasibility and behaviour<br />
intention; the results showed that gender influenced the relationships between perceived desirability,<br />
perceived feasibility and performance expectancy with behaviour intention. Results showed that the<br />
effect of perceived desirability on intention of using IT innovation is stronger for aged female<br />
entrepreneurs. This research also found that perceived feasibility on intention to use IT innovation is<br />
stronger for aged female entrepreneurs. Although performance expectancy was not significant on the<br />
intention to use IT innovation, when investigating the gender and age as moderating variables, the<br />
data found that young male entrepreneurs are more likely to use IT innovation in their job. This is<br />
consistent with the literature in technology acceptance as Venkatesh et al.(2003) investigating the<br />
effect of age and gender on technology acceptance and results show that men are more task<br />
oriented. Young men are more interested in using new technology if they perceive that it will increase<br />
their job performance and gain benefits in their job. The results showed support on these gaps from<br />
previous studies.<br />
This study tried to avoid common method variance when designing the questionnaire, but in the data<br />
analysis it was not measures. Since method common variance is an important issue to data analysis,<br />
future researchers should measure the effect it has in the data analysis. The number of male and<br />
female in the entrepreneurship field is not equal and our respondents were mostly men compared to<br />
women. There are differences between men and women in the entrepreneurship field, and future<br />
research can use equal samples, if possible, to measure the differences between males and females<br />
in this context. Another important issue is the effect of culture in the model, because different<br />
countries have different perceptions about using new technology and the risk of using it as well as<br />
different views about entrepreneurship. Future researches can measure the effect of culture in the<br />
model.<br />
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Thinking Skills and Creativity Journal154-162.<br />
654
Climar, S.A.: <strong>Entrepreneurs</strong>hip and “Design-driven<br />
Innovation”. A Case Study in the Lighting Business<br />
José Monteiro-Barata<br />
Economics Department, Instituto Superior de Economia e Gestão-Technical<br />
University of Lisbon (ISEG-UTL), Lisbon, Portugal<br />
jmbarata@iseg.utl.pt<br />
Abstract: This case study is included in a public research project (Fundação para a Ciência e Tecnologia - FCT):<br />
“Design as a Company’s Strategic Resource: a Study of the Impacts of Design” (Project FCT no.<br />
PTDC/AUR/70607/2006). In this project, the case studies were preceded by an extensive online questionnaire<br />
with the aim of contributing to producing an overall view of the status of design in Portuguese manufacturing<br />
industry, namely, to assess the impacts of design on competitiveness (see, for example, the initiative of the<br />
Danish Design Centre 2003). In line with the nature of the project of which this case study is a part, the emphasis<br />
will be on the role of design in companies. The conceptual basis of the study is the relationship between design<br />
and the dynamics of innovation of enterprises. Contextually, we are looking at a case of entrepreneurship<br />
(business initiative and development) based on design-driven innovation and the proposition of new “meanings”<br />
(Verganti 2009). Design takes on the role, therefore, of enhancing the client’s “experience”, in conjunction with<br />
the general management, R&D, marketing and the commercial and operating structure of enterprises (Brown<br />
2009). In recent years, the case study methodology has become popular in the study of firms and their routines.<br />
This is what is meant by the "method of cases" that will be used to focus on Climar, S.A. - a Portuguese SME in<br />
the business of "lighting solutions", which was created in 1977. The conclusion that will be drawn is that greater<br />
insertion of the “design function” within the company as well as continued investment in “design people” will be<br />
necessary conditions for sustaining the future of this Portuguese SME. In the context of a new economic era, this<br />
case study demonstrates how the design strategy can expand the “pure good" to “complex service". The aim is to<br />
offer global “lighting solutions” as "experience" and "new meaning" for clients and markets: the power of<br />
entrepreneurship.<br />
Keywords: “Design-driven innovation”, entrepreneurship, case study, lighting industry, SME<br />
1. Introduction<br />
This case study - Climar, S.A., a Portuguese SME in the lighting business - is part of a state research<br />
project, for the Fundação para a Ciência e Tecnologia (FCT) - the Portuguese Science and<br />
Technology Foundation. In this project, the case studies were preceded by an extensive online<br />
questionnaire with the aim of producing an overall view of the status of design in Portuguese<br />
manufacturing industry, namely, to assess the impacts of design on the competitiveness of<br />
Portuguese industry (see, for example, the initiative of the Danish Design Centre 2003).<br />
In line with the nature of the project of which this case study is a part, the emphasis will be on the role<br />
of design in companies. The conceptual basis of the study is the relationship between design and the<br />
dynamics of innovation of enterprises. Contextually, we are looking at a case of entrepreneurship<br />
(business initiative and development) based on design-driven innovation (Kyffin and Gardien 2009)<br />
and the proposition of new “meanings” (Verganti 2009). Design takes on the role, therefore, of<br />
enhancing the client’s “experience”, in conjunction with the general management, R&D, marketing<br />
and the commercial and operating structure of enterprises (Brown 2009).<br />
In terms of format, this paper will consist of four other parts in addition to this Introduction – Part 1.<br />
Part 2 will provide a very brief review of the relationship between design and innovation and the<br />
methodology which serves as the basis for this paper: case studies methodology. Part 3 will begin<br />
with a summary of how the case study at Climar was carried out. This will be followed by details of the<br />
company’s historical, economic and strategic background. Part 4, meanwhile, will discuss the central<br />
issue: design management at Climar, S.A. (covering recent initiatives in the field of design, marketing<br />
and innovation; the company’s positioning in relation to design; and investments in design). The fifth<br />
and final part is entitled “Discussion and Concluding Remarks” and will summarize, essentially, the<br />
impacts of design on the company.<br />
2. Innovation and design: A brief review of the literature<br />
As Keller (2004) states, innovation can be considered as a combination of invention, design and<br />
marketing. For a company, creativity is the generation of ideas, design is the “formatting” of ideas and<br />
innovation is placing those forms in new and/or different contexts. Therefore, design falls within the<br />
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“creation-production-consumption” triangle (Walsh 2000) and corroborates the empirical proof that<br />
design is linked to the performance of the business (Hertenstein et al. 2005; Walsh et al. 1992; Roy<br />
and Riedel 1997). As Hollanders and van Cruysen (2009) state, creativity and design are connected<br />
to innovation, since creativity contributes to the expansion of usable ideas, and design increases the<br />
possibility of those ideas achieving commercial success.<br />
Recently, the notions of “design management”, “design thinking” and “design-driven innovation”,<br />
presented, respectively and by way of example, by Mozota (2003), Brown (2009) and Verganti (2009),<br />
have defined a broad and highly promising field of current and future work in the area of the creation<br />
of value, quality of life and sustainability.<br />
Case studies can be an ideal tool for the necessary combination between an analysis and an<br />
interpretation of facts, in the sense that it is possible to find an explanation for the “how” and the “why”<br />
of a certain phenomenon in its own real context. In particular, in areas about which little is known or<br />
where there may be less experience, conducting case studies of carefully selected companies may<br />
present itself as a very useful way of obtaining internal knowledge of the companies’ routines and<br />
their decision-making procedures (Yin, 1994; Stake, 1995). In this perspective, the aim is much more<br />
about finding and discovering relevant business information than about testing relationships by<br />
analytical processes. Accordingly, in recent years, case studies have become a rather popular<br />
method for studying companies, and these have been particularly widespread within postgraduate<br />
training courses.<br />
Thus, the central issue in this case study, in the context of SMEs, is to assess whether the use of<br />
design in all the significant dimensions of the company (in the value chain) fosters growth in the<br />
turnover, productivity and profitability. In short, the aim is to identify the main points of contact<br />
between the design management process and the sustained levels of competitiveness. This is our<br />
intention with the “case study methodology” which will be used below to study the company Climar,<br />
S.A. – a Portuguese SME in the lighting business.<br />
3. Climar,S.A.: General characteristics of the company<br />
3.1 The case study at Climar<br />
Within the scope of the aforementioned FCT project, 12 case studies were selected, according to the<br />
nature of the sector, the size and the level on the “design ladder”. Following the setting of dates and a<br />
study of the previously completed online questionnaire and other documents and written information<br />
supplied by the company, a visit to the company was scheduled. This visit was carried out by two<br />
researchers in the project team – Carlos Santos and the author of this paper – and took place on 15<br />
September 2008. Our main host was José Sucena (Climar’s CEO).<br />
The researchers departed from Lisbon at 10 a.m. and, following our reception in Águeda at 12.30,<br />
participated in a working lunch (1.00 p.m.). After lunch we were taken on an extensive tour of all the<br />
different sectors of the company (both administrative and production sectors). This tour began at 2.30<br />
p.m. and also included a visit to the company showroom. José Sucena accompanied us throughout<br />
the visit, which ended with a series of formal interviews with the CEO, beginning at 6.00 p.m., and the<br />
internal divisions responsible for design.<br />
3.2 Main historical references<br />
The history of the company Climar begins shortly after the arrival of democracy in Portugal (see<br />
Jornal Litoral Centro, 13 December 2006). Its start-up was never, therefore, restricted by the rules<br />
which constrained the development of new industries which strongly characterised the period before<br />
1974 – the Law of Industrial Conditioning.<br />
The company was set up on 27 June 1977 with a single aim of establishing itself in the convector<br />
heaters industry. However, from very early on Climar realised that, since this was a seasonal product,<br />
exclusive production of this product was very limiting.<br />
The company has three current partners, António Mota, Eduardo Sucena and José Sucena, although<br />
the first two were the pioneers. Shortly after António Mota joined the firm in 1979 – following an<br />
invitation from his former classmate on the Higher Institute of Engineering’s Machine Engineering<br />
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José Monteiro-Barata<br />
course, Eduardo Sucena – an analysis was carried out of the possibility of diversifying production in<br />
order to avoid the seasonal nature of the heating products. As a result, at the beginning of the 1980’s,<br />
because the factory system was compatible with that used to manufacture the first lighting products,<br />
Climar redirected its efforts and began to take its first steps in a new production experience: lighting.<br />
The capacity it demonstrated, the obvious success and the conclusion that it would be totally<br />
impossible to work on a seasonal basis were the main criteria for the decision that Climar took just<br />
one year after it began production of lighting (1982). In 1983 the company decided to devote itself<br />
entirely to lighting, initially concentrating mostly on the production of ferromagnetic ballasts.<br />
An important milestone in Climar’s development occurred in 1989 when José Sucena, who was also<br />
just about to become a mechanical engineer, specialising in industrial management, joined the<br />
company’s staff. The introduction of a new culture of management, innovation and quality, with<br />
sustained growth of exports, made it possible to abandon mainly standardised production and to opt<br />
for products with greater added value, by developing innovative and specialised products and<br />
systems in the field of lighting, known as “lighting solutions”.<br />
The company’s premises have remained in the municipality of Águeda (in the centre of Portugal),<br />
initially occupying an area of around 1000 m2, but from 1996 onwards covering an area of around<br />
15,000 m2. 1996 was particularly important as the company inaugurated its new and modern<br />
premises, with which Climar prepared itself to face the challenges of the new millennium (Figure 1).<br />
Figure 1: Evolution of CLIMAR’s premises. From left to right: 1993 and the current premises in 1996,<br />
2001 and 2005 (Source: www.climar.pt)<br />
The end of 2006 was also particularly significant for Climar in terms of infrastructures, since it marked<br />
the inauguration of the company’s exhibition area, in which the company invested heavily as it would<br />
become the showroom for the main business areas in which the company was represented (Figure 2).<br />
Therefore, and by means of this initiative, the company’s capacity for innovation was unequivocally<br />
demonstrated.<br />
Figure 2: Inauguration of the Showroom, 29 November 2006 (Source: www.climar.pt)<br />
The visibility that Climar was gaining, with its great dynamism and recognised quality, enabled the<br />
company to be associated with large-scale works in Portugal, such as the new Historical Centre of<br />
Évora, underground stations in Porto and Lisbon, the renovated Campo Pequeno bull ring, and the<br />
new stadium of Sporting Clube de Portugal, among others. The firm’s participation in the works at the<br />
Lisbon and Porto underground were, in fact, seen as the first experiment in which an integrated<br />
solution was implemented, not only in terms of the lighting (direct, indirect or emergency), but also<br />
regarding surveillance and sound.<br />
3.3 Brief description of the economic and financial situation<br />
Climar’s history has been characterised by sustained growth, both in terms of turnover and number of<br />
employees. In 2010 it surpassed the 10-million euro barrier in annual turnover and had approximately<br />
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José Monteiro-Barata<br />
140 staff, 55% of whom were blue collar workers and 16% of whom had higher education degrees.<br />
3.3.1 Capital structure and basic organisational framework<br />
The Board of Directors is made up of the engineers, António Mota and José Sucena, although the<br />
division of the company’s capital between the directors has not been established.<br />
While José Sucena was not exclusively responsible for this, it is possible to identify his entry into the<br />
company’s management, in 1989, as a critical moment in enhancing the process of innovation, via the<br />
introduction of a new culture based on modern and strict management, in which design played a key<br />
role. According to the company, its great pillars of organisation are currently: i) Quality management;<br />
ii) Environmental quality; iii) Design and product development; iv) Technical innovation; v) Production;<br />
vi) Project.<br />
3.3.2 Turnover and employment<br />
Climar’s activity is solely and exclusively in the lighting business. However, as a result of the<br />
investment made and options taken in the past, in particular in the last decade and a half, the<br />
company has taken on a role in the research and development (R&D) and design field. As in most<br />
SMEs, the so-called R&D activities are simply activities for the development or upgrading of products,<br />
and there is even a certain temptation in some circumstances to confuse these development activities<br />
with other activities more connected with the routine work of the planning/design offices (production of<br />
collections in the textile sector, mould design, etc.).<br />
Figure 3: Turnover and number of employees (Source: Graphs supplied by the company)<br />
Climar has managed to present relatively sustained growth in its turnover, such that we can now<br />
safely point to an average level of ten million euros (Figure 3). The most important business areas,<br />
which are also those responsible for almost the entire turnover, are the following: hospitals; shopping<br />
centres and superstores; hypermarkets; underground stations; hotels; residential areas; and<br />
decoration.<br />
It is also important to highlight the fact that around 80% of Climar’s target market belongs to the<br />
professional segment, and is divided more or less evenly between architecture offices, design offices<br />
and investors. The remaining 20% is aimed at traditional retail.<br />
In terms of employment, the company has established staff levels between 130 and 150 employees,<br />
who are in continuous training. There is also a concern to maintain the fundamental balance between<br />
blue collar and white collar workers (Figure 4).<br />
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José Monteiro-Barata<br />
Figure 4: Employees of CLIMAR (Source: CLIMAR Catalogue 2008)<br />
3.4 Markets<br />
Climar has positioned itself in a segment in which quality is the distinguishing factor, and this is<br />
proved by the selected export markets – countries which do not prioritise the price of the product,<br />
essentially countries in the European Union. Even so, the company continues to develop the standard<br />
product, although at a residual level, which competes with other products made in Portugal and with<br />
those coming from the Eastern markets or Eastern Europe, with characteristics of cheap and intensive<br />
labour. The company’s internationalisation has been supported by a structured network of distributors<br />
on a global scale, although the large European market continues to represent Climar’s main business.<br />
In fact, exports have considerable weight in the turnover and are responsible for around 15 to 20%.<br />
The following countries should be mentioned: Spain, France, Belgium, Holland, Sweden, Norway,<br />
England, Germany and some countries in the Middle East as well as some Portuguese-speaking<br />
countries.<br />
3.5 Strategy<br />
Currently, the company’s strategy involves conceiving, designing and manufacturing “lighting<br />
solutions” with innovative content, with the aim of setting itself apart due to the high level of<br />
differentiation. Several factors can be pointed to in order to explain Climar’s success in the<br />
implementation of this strategy: the human resources, the production equipment, the partners, the<br />
service and, in particular, the “innovation by design” (Figure 5).<br />
Milling machine CNC Mangle Automatic Electrification Machine<br />
Warehouse<br />
Painting Technical Office<br />
Figure 5: Images from CLIMAR (By Rita Almendra)<br />
Considering Climar’s development over the last three decades, the Board accepts that in the 1980’s<br />
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José Monteiro-Barata<br />
the price-quality relationship was at play. The 1990’s was marked by the introduction of a new<br />
variable, with the design-price-quality trinomial. More recently, in the last decade, the offer of<br />
“solutions” dominated. The principle on which these value propositions are based is concerned, quite<br />
clearly, with the offer of accompaniment at the works site.<br />
Some time ago, four concepts were established which guide the company’s strategy:<br />
“New lighting solutions”, refers to the capacity to intervene and act in the design, manufacture and<br />
implementation of lighting devices, in a short space of time and with an efficient response capacity;<br />
Business partnerships, basically associated with the setting up of the IACOM group (2005), which<br />
includes, besides Climar, the participation of Arquiled, Osvaldo Matos, iGuzzini (from Italy) and lastly<br />
Inusual (from Spain) (Figure 6);<br />
Quality. Climar invested heavily between 1989 and 1990 in the certification of the company and of its<br />
products. Currently, the company has ISO 9001:2008 certification and the fact that its main products<br />
are guaranteed by the CERTIF may also be highlighted, as well as certification with the ENEC brand,<br />
that is, the award given to products that are in line with European standards;<br />
Environment. The preservation and sustainability of the environment represent a commitment that<br />
Climar has assumed. As a result, the company has begun the process of preparing for environmental<br />
certification, that is, the ISO 14001. Many of the company’s products already include components<br />
which use energy rationally (electronic ballasts, condensers, etc.) and there are others that are<br />
specifically aimed at saving energy, such as LED’s.<br />
Figure 6: INUSUAL partnership (Source: www.climar.pt)<br />
4. Design and innovation at Climar<br />
4.1 Recent highlights in the field of design, marketing and innovation<br />
“Innovation is a process that extends to all areas of a company; it is impossible to innovate only in one<br />
sector or another of the company’s activity” (J. Sucena). The main highlight in terms of design,<br />
interacting heavily with marketing and innovation, was the construction of a showroom par excellence,<br />
as previously mentioned, and which basically served to crystallise Climar’s intention: the desire to be<br />
a company that leads and innovates (Figure 7).<br />
Figure 7: Showroom at the CLIMAR premises (Source: www.climar.pt)<br />
This space was developed with the aim of presenting what Climar does best by activity or by theme. It<br />
is therefore divided into seven areas (with a total of 650 m 2 ) where the “new lighting solutions” are<br />
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José Monteiro-Barata<br />
presented, these being projects which include the state of the art, that is, the company’s most recent<br />
and innovative offers, as well as a large room of around 450 m 2 where one can see all the decorative<br />
lighting solutions which are geared towards the hotel industry and shopping centres.<br />
The concept contained in the slogan “new lighting solutions” represents the company’s efforts to<br />
radically change the design, manufacture and use of lighting devices, considering them to be<br />
elements that enlarge areas or the objects which are the target of this illumination.<br />
According to local observation and analysis of the data, it can be seen that innovation constitutes a<br />
key element in the competitive positioning within the lighting solutions market, and differentiation<br />
through design is the touchstone on which Climar’s strategy rests. “Design – whether communication<br />
design or product design – is one of the mainstays in the process of innovation” (J. Sucena).<br />
4.2 The company’s positioning in terms of design<br />
The company recognises the importance of design in the qualitative leap it made between the 1980’s<br />
and 1990’s and the new millennium, in particular, in the process of internationalisation. As is only<br />
right, design cannot be given all the credit, but must share it with the investment that was made in<br />
technological innovation, in production flexibility – powerful CAD/CAM systems – and the training of<br />
the human resources, with the aim of offering differentiated products and with optimised time to<br />
market. Until quite recently, Climar was developing three new products a week, on average.<br />
Besides innovation and design, as previously stated, Climar also developed the client service<br />
component which has been crucial in maximising the benefits obtained.<br />
Like other companies which have been the object of case studies and which have shown vitality in the<br />
area of design and innovation, one may note investment in relationships with the main state and<br />
private educational and research establishments which promote design in general and product design<br />
in particular.<br />
4.3 Design management at Climar. Investment in design<br />
Having developed their efforts, the company was then able to concentrate on responding to the<br />
continuous challenge of surpassing the clients’ expectations, in a cycle of evolution which is only<br />
within reach of the best and most well-prepared companies, sustained by “fundamentals” and “back to<br />
basics” with regard to industrial management, flexibility, speed of service, innovation, creativity,<br />
efficiency and effectiveness of response. As a result, Climar has managed to map out its own route,<br />
doing so in a coherent and serious fashion with a commitment to the aims and needs of its clients.<br />
At Climar, all staff members have special importance, whether they are developing, researching,<br />
producing or promoting products. “Companies are nothing more than a reflection of the people who<br />
work in them” (J. Sucena). The constant commitment to teamwork thus enables all the possible knowhow<br />
to be brought together in each project, resulting in the constant launching of new models or in the<br />
improvement of existing ones (Figure 8).<br />
Figure 8: New products CLIMAR 2010 (Source: www.climar.pt)<br />
The uninterrupted improvement in working conditions, the continuous training and the raising of<br />
awareness as to the development processes – the “design” of the industrial process – have proved to<br />
be crucial, for example, for Climar to be able to attain extremely low levels of toxic industrial waste,<br />
with the aim of increasingly reducing the environmental impact generated by the company’s activity.<br />
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José Monteiro-Barata<br />
Finally, special reference must be made to the after-sales service which is constantly gaining in<br />
efficiency and effectiveness.<br />
By way of a conclusion on the results of the investment in design and innovation, we can state that<br />
three types of production have co-existed at Climar for almost twenty years: standard products, added<br />
value products and “solutions”:<br />
� Standard products,<br />
in which multiple machines mass produce a certain type of production on an<br />
assembly line;<br />
� Added value<br />
products, which are produced by different assembly cells, each of them requiring a<br />
small number of people, able to produce and test in sequence. Given their specific nature, as a<br />
rule, these products leave Climar in smaller batches;<br />
� Solutions,<br />
products with a strong service component which are mostly presented and “tried out” in<br />
a special pavilion (showroom), and represent lighting solutions.<br />
The company’s design dimension has been sustained by a range of inter-related factors. At the heart<br />
of these factors we may highlight the following:<br />
� Presence<br />
at international fairs, for the in loco observation of critical information for design, with<br />
special mention for those held in Germany – an innovation factor which is highly valued by<br />
companies in Portugal;<br />
� Frequent challenges<br />
resulting from orders coming from architects, designers and investors<br />
(“demanding clients”, as a competitiveness factor) (Figure 9);<br />
Figure 9: Underground station in Porto, designed by the architect Souto de Moura (Source: CLIMAR<br />
Catalogue 2008)<br />
� Trend benchmarking,<br />
via in-depth research and assessment of the main international trends<br />
noted, for example, in Flos, Artemide or Nelly Rodi’s trends catalogue; and<br />
� Development<br />
of own means and resources, namely:<br />
� A specialist<br />
engineer in industrial management charged with designing new projects, aided<br />
by a designer (from IADE);<br />
� Three<br />
staff members responsible for communication design, charged with working with the<br />
media (media entities, press releases, advertisements and publicity – and anything that might<br />
result in “15 seconds of fame” for the brand) and attending fairs;<br />
� Engineering office for the development of clients’ specific projects in conjunction with the<br />
commercial department; and<br />
� Outsourcing of an established external designer for very specific areas.<br />
5. Discussion and concluding remarks<br />
In terms of format, this case studied revealed:<br />
Shareholders<br />
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José Monteiro-Barata<br />
António Mota, Eduardo Sucena and José Sucena (brothers). All are mechanical engineers.<br />
Background<br />
Created in 1977, as a convector heater company, Climar abandoned this production in 1982 in order<br />
to specialise in lighting solutions, initially focused primarily on the production of ferromagnetic ballasts,<br />
which were also abandoned in 1988. From that year on, the company has been engaged in constant<br />
innovation: the inclusion of condensers for the suppression of electromagnetic interference in all<br />
products (1996); development of the first luminotechnical calculation programme (1997); adoption of<br />
the first automatic electrification machines (2000); specialised technical lighting in conjunction with<br />
architecture offices (2002); new markets of hospital trunking and ceiling lighting (2004).<br />
The process of innovation began with José Sucena’s entry into management, in 1989, while still in his<br />
last year of his mechanical engineering degree, specialising in industrial management. The<br />
introduction of a culture of new management, innovation, quality and internationalisation (we can also<br />
do this; look for a market; not be afraid of failing; it is more important to know why we have lost an<br />
order than to know why we have won) opened the doors to the increased rejection of standardised<br />
production and the adoption of innovative and specialised lighting products and systems (around 500<br />
references).<br />
Design Management<br />
This direction set the scene for an increased design dimension within the company, strengthened by:<br />
� Requests for orders by architects, designers and investors;<br />
� Presence at international fairs;<br />
� Benchmarking of the main international references (Flos, Artemide, and Nelly Rodi trends<br />
catalogue);<br />
� The existence of its own means, namely: one engineer (industrial management, Universidade de<br />
Aveiro) charged with designing new projects, aided by a designer (from Instituto de Artes Visuais<br />
e Design - IADE); three staff members responsible for communication design (media and fairs);<br />
an engineering office for the development of clients’ specific projects in conjunction with the<br />
commercial department; use of an external designer for specific areas.<br />
Impacts<br />
� Growth in turnover (from 5 million euros in 1997 to around 10 million euros in 2010);<br />
� Penetration of international markets (Spain, Germany, Belgium, Norway, United Kingdom,<br />
Angola, Middle East);<br />
� Sustainability and development of the company<br />
5.1 Discussion<br />
The company has no specific methods for measuring the impact of design on the business<br />
performance. The fact that the company does not have implemented analytical accounting also<br />
contributes to an obvious limitation in measuring performance in general and, particularly, with regard<br />
to design.<br />
One of the main aspects for discussion that may be highlighted is the apparent lack of definition with<br />
regard to the insertion of design within the organisation of companies. That is to say, design is<br />
sometimes referred to as non-innovative activities, since innovation is understood to be, by its nature,<br />
strictly technological; on other occasions, design is referred to as merely creative activities, reducing it<br />
to conception (“the conceptual side of the expression”, Damerell 2007). In both cases, the company<br />
ultimately has some difficulty in using design as a facilitator and motivator of innovation and<br />
competitive success. The actual holistic nature of design – which, in itself, constitutes potential -,<br />
particularly in the context of SMEs, is responsible for this difficulty in the management and<br />
organisation of the “design function”.<br />
It also seems relevant to mention that, according to the particular case studied, the concept of design<br />
may converge significantly with the concept of innovation, especially when there is virtuous interaction<br />
between the design and the designers and the management of the company in the adoption of an<br />
innovative approach in all substantial areas of the business (Danish Design Centre 2003).<br />
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5.2 Concluding remarks<br />
José Monteiro-Barata<br />
In this case study, in the context of a highly competitive economic period, the objective will be to offer<br />
“lighting solutions” as an “experience” and “new meaning” for consumers and markets (Verganti<br />
2005).<br />
From this case study one may conclude that the sustained growth and the level of competitiveness<br />
attained were favoured by the use of design at the generation of ideas stage, during the production<br />
process and even in the marketing and customer service.<br />
In short, greater assessment of the organisational insertion of the “design function” into the company,<br />
namely, the defining of a consolidated design structure (department, etc.) and the continuation of<br />
investment in “design people” will be necessary conditions, among others, for the competitive<br />
development of this Portuguese SME.<br />
We will end with a positive note from our main interlocutor at Climar (José Sucena): if we carry out<br />
[this study] carefully, it makes us think. If we had to pay to have this study done, it would not do us<br />
any harm.<br />
Acknowledgements<br />
The author would like to express his sincere thanks to the Fundação para a Ciência e Tecnologia<br />
(FCT) (Project FCT no. PTDC/AUR/70607/2006) for its support for this study, as well as to the<br />
reviewers for their helpful comments and suggestions.<br />
References<br />
Brown, T. (2009) Change by Design: How Design Thinking Transforms Organizations and Inspires Innovation,<br />
HarperCollins, New York.<br />
Damerell, I. (2007) “New Divisions. Multimodality in visual education” Cumulus Working Papers, Series G.<br />
Schwabisch Gmund.<br />
Danish Design Centre (2003) The Economic Effects of Design, NAEH, Copenhagen.<br />
Design Council (2004) The Impact of Design on Stock Market Performance: An Analysis of UK Quoted<br />
Companies, 1994-2003, Design Council, London.<br />
Designium (2005) Modelling the Strategic Impacts of Design in Businesses, Final Report, Helsinki.<br />
Hertenstein, J., Platt, M. and Veryzer, R. (2005), “The Impact of Industrial Design Effectiveness on Corporate<br />
Financial Performance”, Journal of Product Innovation Management, Vol 22, No. 1, pp. 3-21.<br />
Hollanders, H. and Van Cruysen, A. (2009) Design, Creativity and Innovation: A Scoreboard Approach, PRO<br />
INNO/INNO Metrics Report.<br />
Keller, R. (2004) “A Resource-Based Study of New Product Development: Predicting Five-Year Later<br />
Commercial Success and Speed to Market”, International Journal of Innovation Management, Vol 8, No. 3<br />
pp. 243-260.<br />
Kyffin, S. and Gardien, P. (2009) “Navigating the innovation matrix: An approach to design-led innovation”,<br />
International Journal of Design, Vol 3, No. 1, pp.57-69.<br />
Mozota, B. (2003) Design management: using design to build brand value and corporate innovation, Allworth<br />
Press, New York.<br />
Romão, L., Almendra, R., Dias, E., Barata, J., Nevado, P., Urbano, P., Marcelino, J. Dias, J. and Gomes, F.<br />
(2007) “An online survey’s design to capture Portuguese companies’ perspective of Design”, Proceedings of<br />
the 2007 Conference of Defsa International Design Education, 3-5 October, Cape Town.<br />
Roy, R. and Riedel, J.C. (1997) “Design and Innovation in Successful Product Competition”, Technovation , Vol<br />
17, No. 10, pp. 537-548.<br />
Stake, R. (1995) The Art of Case Study Research, SAGE Publications, London.<br />
Verganti, R. (2009) Design Driven Innovation: Changing the Rules of Competition by Radically Innovating What<br />
Things Mean, Harvard Business Press, Boston.<br />
Walsh, V. (2000) “Design, Innovation and the Boundaries of the Firm”, Design Management Journal, Vol 1, No. 1,<br />
pp. 74-92.<br />
Walsh, V., Roy, R., Bruce, M. and Potter, S. (1992) Winning by Design. Technology, product design and<br />
international competitiveness, Blackwell Publishers, Oxford.<br />
Yin, R. (1994) Case Study Research, Design and Methods, Applied Social Research Methods Series, SAGE<br />
Publications, London.<br />
664
The Influence of Action in International Markets on<br />
Marketing Innovation: Study of Portuguese Firms<br />
Jacinta Moreira 1 and Maria José Silva 2<br />
1<br />
Management and Technology Department, Scholl of Technology and<br />
Management, Polytechnic Institute of Leiria, Portugal<br />
2<br />
Management and Economics Department, University of Beira Interior (UBI),<br />
Covilhã, Portugal<br />
jacinta.moreira@ipleiria.pt<br />
msilva@ubi.pt<br />
Abstract: This article aims to analyze the impact of the strategy of acting in international markets on marketing<br />
innovation, action in international markets being understood here as a factor stimulating the capacity for<br />
marketing innovation, in the context of Portuguese companies. On this basis, we consider a theoretical<br />
framework which includes characterization of marketing innovation and the underlying option of acting in<br />
international markets as a determinant. Based on the literature, investigation hypotheses are formulated, which<br />
are tested using the secondary data supplied by the Science and Higher Education Observatory (OCES),<br />
belonging to the 4 th Community Innovation Survey (CIS 4), supervised by EUROSTAT. The method used will be<br />
the logistic regression model. The results obtained show that acting in international markets influences firms’<br />
tendency to innovate in marketing.<br />
Keywords: marketing innovation, innovative capacity, cis, internationalization, markets<br />
1. Introduction<br />
As a result of the increasing globalization of economic activity, progressive market integration and the<br />
continuous evolution of consumers’ desires and needs, with obvious impacts in terms of the strategic<br />
option for internationalization, companies face new challenges and increasingly strive to innovate,<br />
especially from a marketing perspective. As such, marketing innovation becomes a determinant factor<br />
of company success, mainly for those with a presence in geographically diverse markets, thus forming<br />
one of today’s most interesting phenomena.<br />
The objective of this study is to analyze the impact of action in international markets on companies’<br />
capacity for marketing innovation, centring analysis on the study of Portuguese firms. Companies’<br />
capacity for marketing innovation is understood in this study as innovation in the design and<br />
packaging of goods and services and innovation in sales and distribution methods.<br />
To test empirically the hypotheses formulated in relation to the factor under analysis, secondary data<br />
were used, provided by the OCES – Science and Higher Education Observatory, belonging to the 4 th<br />
Community Innovation Survey: CIS 4, supervised by EUROSTAT. Logistic regression models are<br />
applied to the data obtained, allowing empirical contrast of the hypotheses formulated about the factor<br />
studied.<br />
The study is structured as follows: based on the relevant literature on the subject of marketing<br />
innovation and firms’ strategic option of acting in geographically diversified markets, section two<br />
proposes a conceptual model and hypotheses are formulated to be tested empirically on the statistic<br />
model. Section three defines the sample, describes and characterizes the variables used in the<br />
empirical study and the logistic regression model is presented. Section four analyzes the data<br />
obtained. The last section presents final considerations, the main limitations found in the study and<br />
suggests future investigation.<br />
2. Literature review<br />
Marketing innovation has registered growing theoretical and empirical interest in recent years. The<br />
concept of marketing innovation can take numerous forms, such as successful new products, more<br />
creative marketing programmes, new sales techniques and better performance (Slater and Narver,<br />
1994; Atuahene-Gima, 1996; Chou, 2009).<br />
According to CIS 4 (2005), marketing innovation consists of carrying out a new marketing concept or<br />
strategy, different from the company’s existing marketing methods and therefore not previously used,<br />
665
Jacinta Moreira and Maria José Silva<br />
contemplating alterations in the design or packaging of the product, product distribution and<br />
promotion or even pricing policy, allowing increased presence of the company’s goods and services in<br />
current or new markets.<br />
Heunks (1998) and Shergill and Nargundkar (2005) define marketing innovation as innovation in<br />
marketing programmes or methods, including the four P’s of marketing: product, price, promotion and<br />
distribution. Harms, Rohmann, Heinrich, Druener and Trommsdorff (2002) consider innovation as a<br />
new element of the marketing-mix, able to promote new and obvious advantages to companies which,<br />
according to Chou (2009), form the central element of differentiation and higher performance.<br />
From the proposed definitions, marketing innovation is seen to be of the greatest importance in<br />
understanding consumer demand, inasmuch as a new product or service is developed for a particular<br />
market, where the potential value and growth of that market determine the success of the product or<br />
service (Trienekens, Uffelen and Omta, 2008). According to Waarts (2005), marketing’s main task is<br />
to create an innovative source of supply, based on needs. Maciariello (2009) claims the major<br />
objective of innovation consists of creating new markets for the organization, in that new expectations<br />
are made possible, new standards and new ways of satisfying the target market are formed.<br />
From the work of the presented authors, we gather that innovations form the basis for company and<br />
market success, and for Harms et al. (2002) and Chou (2009), lasting and sustainable economic<br />
growth can only occur if companies constantly make new products or services available, in that these<br />
result in competitive advantages and higher financial returns for companies.<br />
Based on the above, we conclude that marketing innovation can be very relevant for future market<br />
development, although to be so, it must respect two essential requirements: direct contact between<br />
the company and the customer and competition-oriented positioning. Regarding the first aspect,<br />
clients are naturally the central elements when testing the new product or service, and so the state of<br />
satisfaction shown affects a priori all the company’s strategic planning. Concerning positioning, and<br />
due to constant changes in the market, its importance should be continually increased, as only<br />
companies that contribute with constructive solutions manage to extend their success to other<br />
markets (Harms et al., 2002).<br />
From the conceptual framework studied and despite marketing innovation being a very recent area,<br />
we find some concern among authors about identifying and defining determinant factors of marketing<br />
innovation within the organization’s internal and external resources. Regarding the first situation, see<br />
for example the work of Ray and Knight (1991), Waarts (2005) and Maciariello (2009), who identify as<br />
determinants of marketing innovation the degree of technology incorporated and the marketing<br />
activities carried out. As for external factors, Heunks (1998) highlights cooperation as the main<br />
determinant of companies capacity for marketing innovation, Drucker (1999) and Harms et al. (2002)<br />
emphasize the analysis of market opportunities, understood as R&D activities, while Moreira (2010),<br />
besides the factors already identified, analyzes market action as one of the main determinants of<br />
firms’ capacity for marketing innovation.<br />
Market action, as a concept derived from market orientation, defines the company’s strategic path as<br />
a factor stimulating organizational superiority and sustainable competitive advantages (Narver and<br />
Slater, 1990; Slater and Narver, 1994; Jaworski, Kohli and Sahay, 2000). However, the company<br />
depends on the level of demand and the ability to identify and respond to customers’ needs and<br />
desires, namely with new products or services on the market.<br />
On a global scale and faced with market conditions, namely consumers’ increasing requirements and<br />
demands, companies need to innovate, otherwise they run the risk of being overtaken by their<br />
competitors and consequently forced out of the market. Day (1994) and Porter and Stern (2001) even<br />
state that the ability to identify customers’ needs in local markets can be used by firms to anticipate<br />
the needs of customers in other markets, namely international ones, although Slater and Narver<br />
(1995) consider that sometimes the excessively marked culture and climate of some organizations<br />
can be an impediment to market orientation towards the outside.<br />
Recently, Chou (2009) and Mohr and Sarin (2009) recognized that market action can be a reactive<br />
and proactive instrument to be used by firms, in that it can be used from a prospective viewpoint to<br />
identify latent needs in different markets, and based on these needs, allow the creation of products<br />
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Jacinta Moreira and Maria José Silva<br />
that imply firstly satisfaction and consequent value supplied to the purchaser, and secondly increased<br />
organizational performance in its present market.<br />
Nevertheless, faced with the diversity of markets, the firm will have to define appropriate strategic<br />
positioning, and according to studies developed by Silva (2003) and Harris and Li (2009), positioning<br />
can be defined in terms of geographical option. According to CIS 4 (2005) and Harris and Li (2009),<br />
this positioning can be determined through the company acting in terms of geographically internal and<br />
external markets.<br />
The impact of exportation on innovation activities, related to presence in external markets, has in fact<br />
been greatly emphasized in recent literature, especially due to its direct influence on the<br />
competitiveness and economic growth of industries and countries (Bernard and Jensen, 2004;<br />
Bernard, Redding and Schott, 2007; Harris and Li, 2009). According to Harris and Li (2009),<br />
companies that export present a set of advantages over companies oriented towards the local market,<br />
namely: (i) higher survival rate; (ii) higher growth rates; (iii) greater productivity; (iv) greater volume of<br />
intensive capital; (v) payment of higher salaries; (vi) more efficient use of technology, with its<br />
management in the hands of more qualified employees.<br />
We conclude that market action can be an indicator of companies’ capacity for innovation, in that they<br />
are currently absorbed by the phenomenon of globalization, which forces them, due to competition, to<br />
modernize and accompany market tendencies. In terms of marketing, that innovation can be reflected<br />
for example in improved product design and quality and in new sales and distribution methods (CIS 4,<br />
2005).<br />
Aiming to analyze the process of marketing innovation in companies and considering the literature<br />
review carried out, this study highlights factors related to market action, as these factors have an<br />
integral and interactive effect on the firm’s marketing innovation. The factors to be studied in this<br />
investigation arise from those defined by the 4 th Community Innovation Survey (CIS 4), as presented<br />
in Table 1.<br />
Table 1: Explanatory Factors for Marketing Innovation<br />
Market Action:<br />
Action in regional markets<br />
Action in national markets<br />
Action in international markets<br />
Source: CIS 4 (2005)<br />
Company survival depends to a large extent on the level of market demand, which is formed directly<br />
in the market action adopted, which in turn is assumed to be a fundamental factor of the organization,<br />
making sustainable competitive advantages possible. However, market action implies the company<br />
has a greater capacity than its competitors to identify and respond to customers’ desires and whims,<br />
namely through innovative formats.<br />
Also, in a global market such as today’s, the need for firms to innovate emerges more and more. This<br />
fact takes on a crucial value in the Portuguese business context, where competitiveness,<br />
internationalization and globalization appear as strategic vectors. According to Chou (2009) and Mohr<br />
and Sarin (2009), market action is essential for companies to identify market needs, especially<br />
externally, to which they must supply innovative answers. The relationship between export activities<br />
and innovation activities was tested and confirmed empirically in the studies by Alvarez (2001),<br />
applied to emerging economies, by Silva and Leitão (2007), concerning Portuguese industrial firms<br />
and more recently in the studies by Harris and Li (2009), applied to manufacturing companies in the<br />
United Kingdom.<br />
It is therefore important to analyze the influence of market action on the capacity for innovative<br />
marketing in Portuguese companies, and for this purpose, the following hypothesis is formulated:<br />
Hypothesis 1: Companies that sell to the external market show a greater tendency to<br />
innovate in marketing than companies that sell to the internal market.<br />
The hypothesis formulated here was tested empirically according to the investigation design<br />
presented as follows.<br />
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3. Investigation Design<br />
Jacinta Moreira and Maria José Silva<br />
3.1 Presentation of Data: Population and Sample<br />
The data used in this investigation were gathered by the OCES, in collaboration with the INE –<br />
National Institute of Statistics, in the 4 th Community Innovation Survey. Data collection took place<br />
between June and November 2005, although the period of reference is the years 2002 to 2004.<br />
The population on which the analysis falls includes all Portuguese industrial, commercial and service<br />
firms with at least 5 employees, included in the economic activity categories (CAE) of 11, 14 to 37, 40,<br />
41, 51, 52, 55, 60 to 67 and 72 to 74 (CAE – Rev.2.1, 2003), which included a total number of 22 749<br />
firms registered with the FGUE – INE’s General File of Statistical Units. The sample was formed by<br />
the INE, based on the methodological specifications imposed by EUROSTAT, with initial extraction<br />
from the population of a sample formed of 7 079 firms, which was later corrected to 6 243 firms. Of<br />
the companies included in the corrected sample, 4 643 gave a valid response to the survey in<br />
accordance with the norms defined by EUROSTAT, this being considered the final sample.<br />
Portuguese companies will be considered as innovative in marketing if during the period 2002 to<br />
2004, they introduced some marketing innovation related to (i) alterations to the design or packaging<br />
of any goods and/or service or (ii) new or significantly improved sales or distribution methods.<br />
3.2 Description and Characterization of Data<br />
The capacity for marketing innovation corresponds to the dependent variable and is measured from<br />
the information gathered about marketing innovation found (i) in the design or packaging of goods or<br />
services and (ii) sales and distribution methods. Considering the first dimension of marketing<br />
innovation – innovation in the design or packaging of goods or services – this takes the value of “1” if<br />
the company innovated in terms of the design or packaging of any goods or service and the value of<br />
“0” otherwise, i.e., if there was no innovation in the items indicated. The same procedure in carried out<br />
in relation to the second dimension – innovation in sales or distribution methods.<br />
Concerning the independent variables, these are represented by the set of sub-variables considered<br />
in the market action variable. Market action is understood in this study as action in internal markets<br />
and external markets, to enable typification of strategic positioning in terms of the company’s<br />
geographical option. To obtain more specific information, a categorical variable of three classes was<br />
created, namely local/regional market, national market and international market. Of the three<br />
categories, the model considers one variable as a reference and two as dummy variables. The same<br />
categorized factor of analysis was used in the empirical investigation by Romijn and Albaladejo<br />
(2002), while Masso and Vahter (2008) categorized companies in terms of exports.<br />
3.3 Method: Logistic Regression Model<br />
=From the theoretical review of the literature carried out and the proposed conceptual model, the<br />
capacity for marketing innovation was found to be a complex phenomenon influenced by a vast set of<br />
factors. Given the need to explore the relationships between those factors and the capacity for<br />
marketing innovation, more specifically the aim is to study the statistical relationship of a dependent<br />
variable with more than one explanatory variable, and we decided to use the Logistic Regression<br />
Model (Logit Model). This model was also found to have been widely used in the empirical studies<br />
analyzed (conf. Silva, 2003; Masso and Vahter, 2008; Silva and Leitão, 2009; Moreira, 2010; Moreira<br />
and Silva, 2010, among others), appearing therefore as an appropriate analytical technique for the<br />
conceptual model proposed, since it includes a categorical dependent variable and various<br />
independent variables, as is presented below:<br />
IM = β0 + β1aMg_rl + β1bMg_n + β1cMg_i + β2Dim + εi<br />
Where: IM= Marketing Innovation; εi = Residual; β = Coefficients; Mg_rl = company operating in the<br />
regional/local geographical market; Mg_n = company operating in the national geographical<br />
market; Mg_i = company operating in the international geographical market; Dim = size.<br />
The next step was application of the logistic regression model to the data from the Community<br />
Innovation Survey, aiming to obtain results which are presented and discussed below.<br />
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4. Data Analysis<br />
Jacinta Moreira and Maria José Silva<br />
In this phase of the study, logistic regression models were applied to the data from the Community<br />
Innovation Survey, to test the proposed model. The Wald statistic was used as test statistic to analyze<br />
the behaviour of the variables and the quality of adjustment of the proposed models.<br />
Marketing innovation can be understood as i) alterations to the design or packaging of goods or<br />
services, or ii) new or significantly improved sales or distribution methods. Therefore, concerning the<br />
first variant of marketing innovation, the following hypothesis was defined from the general hypothesis<br />
presented in section 2 of this study:<br />
Hypothesis 1a: Companies that sell to the external market show a greater tendency to<br />
innovate in the design and packaging of goods and services than companies that sell to<br />
the internal market.<br />
In order to test empirically the hypothesis formed, an Innovation in Design and Packaging model was<br />
drawn up, with the results of the logistic regression presented in Table 2.<br />
Table 2: Logistic Regression of the Model of Innovation in Design and Packaging<br />
Market Action:<br />
Regional market<br />
National market<br />
International<br />
market<br />
Estimate<br />
of<br />
coefficient<br />
s<br />
0,076<br />
0,584<br />
0,581<br />
Model A Model B Model C<br />
Test<br />
value<br />
0,477<br />
0,000<br />
0,000<br />
Estimate of<br />
coefficients<br />
0,584<br />
0,578<br />
Test<br />
value<br />
0,000<br />
0,000<br />
Estimate of<br />
coefficients<br />
0,588<br />
0,583<br />
Stand.<br />
Dev.<br />
0,126<br />
0,087<br />
Wald Test<br />
value<br />
21,779<br />
44,479<br />
Size 0,570 0,118 23,326 0,000 1,768<br />
Constant -2,364 0,000 -2,298 0,000 -2,979 0,173 297,358 0,000 0,051<br />
Quality of model<br />
adjustment:<br />
Correctly predicted<br />
Chi square<br />
81,8<br />
81,8<br />
82,5<br />
109,756 0,000 109,245 0,000 127,941<br />
Log likelihood 4289,544<br />
4290,055<br />
3695,879<br />
Number of cases 4643 4643 4119<br />
Bearing in mind the previous table and from analysis of the first model obtained (Model A), using the<br />
Wald test statistic we find one variable (regional/local markets) that is not statistically significant at<br />
5%, which implies forming a new model (Model B), where the variable is excluded. Regarding Model<br />
B, we find firstly that the independent variables are statistically significant at 5%, and secondly, that<br />
the quality of adjustment does not show expressive alterations in relation to Model A, confirmed by<br />
the parameters presented. Subsequently, aiming to analyze the robustness and consistency of the<br />
explanatory variables, a “company size” control variable was introduced into the model, obtaining the<br />
final model - Model C.<br />
Hypothesis H1a relates the company’s capacity to innovate in design and packaging to the effects of<br />
acting in external markets. From the literature review made, it was found that firms involved in<br />
exporting are more likely to develop innovations, the reason for using “operating in international<br />
markets” as the variable of reference. Therefore, considering the results of the model, this assumption<br />
is in fact confirmed, having also been tested and validated in the studies by Silva and Leitão (2007)<br />
and Harris and Li (2009).<br />
Concerning the data shown in the model, operating in external or international markets is seen to be<br />
positively related to the firm’s capacity to innovate in marketing in terms of design and packaging, as<br />
proven by the value of the estimate associated with the variable (0,583). Considering the marginal<br />
effects associated with the variable, firms that sell to the external market are seen to have an<br />
advantage of 1,792 in developing innovations in design and packaging over other firms, confirming<br />
therefore hypothesis H1a. However, a positive and significant relationship is also found between firms<br />
operating in national markets and innovation in design and packaging, which leads us to conclude<br />
that operating in the national market, although considered a dummy variable in this study, is also a<br />
determinant of marketing innovation in the dimension studied.<br />
After analyzing the effects of the independent variable on the firm’s capacity to innovate in marketing<br />
in the field of the design and packaging of goods and services, the study deals next with the effects of<br />
669<br />
0,000<br />
0,000<br />
0,000<br />
Exp<br />
(B)<br />
1,801<br />
1,792
Jacinta Moreira and Maria José Silva<br />
the market action variable on the firm’s capacity to innovate in marketing in terms of sales and<br />
distribution methods, defining the following hypothesis:<br />
Hypothesis 1b: Companies that sell to the external market show a greater tendency to<br />
innovate in sales and distribution methods than companies that sell to the internal<br />
market.<br />
To test the formulated hypothesis empirically, a logistic regression model was drawn up for Innovation<br />
in Sales and Distribution Methods, as presented in Table 3.<br />
Table 3: Logistic Regression of the Model of Innovation in Sales and Distribution Methods<br />
Market Action<br />
Regional market<br />
National market<br />
International<br />
market<br />
Estimate of<br />
coefficients<br />
-0,022<br />
0,547<br />
0,321<br />
Model A Model B Model C<br />
Test<br />
value<br />
0,864<br />
0,000<br />
0,001<br />
Estimate of<br />
coefficients<br />
0,548<br />
0,322<br />
Test<br />
value<br />
0,000<br />
0,001<br />
Estimate of<br />
coefficients<br />
0,432<br />
0,367<br />
Stand.<br />
Dev.<br />
0,149<br />
0,107<br />
Wald Test<br />
value<br />
8,365<br />
11,826<br />
Size 0,621 0,138 20,214 0,000 1,862<br />
Constant -2,628 0,000 -2,647 0,000 -3,371 0,203 276,649 0,000 0,034<br />
Quality of model<br />
adjustment:<br />
Correctly<br />
predicted<br />
Chi square<br />
88,3<br />
88,3<br />
89,3<br />
39,420 0,000 39,391 0,000 53,204<br />
3302,913<br />
3302,942<br />
2741,975<br />
Log likelihood<br />
Number of cases 4643 4643 4119<br />
In the initial model (Model A) using the Wald test statistic, the variable of regional/local markets was<br />
found not to be statistically significant at 5%, and should therefore be removed, which in turn means<br />
formulation of a new model (Model B). Analyzing Model B, we find the independent variables are<br />
statistically significant at 5% which, together with analysis of the model’s quality of adjustment,<br />
confirms its global significance. In order to analyze the robustness of the model and consistency of<br />
the explanatory variables, another regression model was created, in which a control variable<br />
(company size) was introduced, obtaining Model C.<br />
As already mentioned, underlying Model C is hypothesis H1b, related to the effects of operating in<br />
external markets on the company’s capacity to innovate in sales and distribution methods. In this<br />
context, the model data show that operating in external or international markets has a positive and<br />
significant effect on the company’s capacity to innovate in sales and distribution methods, as<br />
indicated by the estimate value associated with the variable (0,367). In this connection, considering<br />
the marginal effects associated with the variable, we conclude that companies selling to the external<br />
market have an advantage of 1,443 in developing innovations in sales and distribution methods over<br />
companies that sell to the internal market, confirming therefore hypothesis H1b, which corroborates<br />
the studies by Silva and Leitão (2007) and Harris and Li (2009).<br />
In this model, and similarly to the previous one, a positive and statistically significant relationship is<br />
found between operation in national markets and innovation in sales and distribution methods (0,432),<br />
which lets us conclude that acting in national markets is also a determinant of marketing innovation in<br />
terms of sales and distribution methods.<br />
5. Final Considerations<br />
This study aimed to identify and analyze the influence of operating in international markets on the<br />
capacity for marketing innovation in Portuguese firms. Therefore, so as to increase comprehension of<br />
marketing innovation and test the impact of the strategy of operating in geographically diversified<br />
markets, an investigation hypothesis was formulated, supported by the literature review made of the<br />
subject, in which the variable of market action was considered as independent variable.<br />
The factor of market action refers to the firm’s strategic option in terms of positioning in the market<br />
which, according to the literature review carried out, has an influence on firms’ capacity for marketing<br />
innovation, particularly when understood from the viewpoint of internationalization. The results of the<br />
model confirm the significance of the factor in the study of marketing innovation, even finding the<br />
factor has a positive and significant effect on marketing innovation, and so we conclude companies<br />
operating in international markets show a greater tendency to innovate in marketing, both in design<br />
and packaging and in sales and distribution methods than companies that sell their goods and<br />
670<br />
0,004<br />
0,001<br />
0,000<br />
Exp<br />
(B)<br />
1,540<br />
1,443
Jacinta Moreira and Maria José Silva<br />
services to the national markets. However, it was also determined that the variable of “operating in<br />
national markets”, despite being considered a dummy variable, has a positive and significant effect on<br />
marketing innovation, understood in the dimensions referred to, which to some extent reinforces the<br />
factor’s effect on marketing innovation.<br />
Critical reflection on the study presented gives rise to some considerations which can be understood<br />
in the form of contributions, limitations of the study and suggestions for future investigation, as is<br />
presented as follows. The study’s main contribution consists of investigating marketing innovation, in<br />
itself little explored in the literature, and the strategy of internationalization as a determinant factor of<br />
the capacity for marketing innovation in Portuguese firms, thereby seeking to increase understanding<br />
of the subject. The investigation proposed an empirical study based on a logit model, aiming to<br />
analyze the effects of a selected set of explanatory variables on the capacity for marketing innovation<br />
in Portuguese companies.<br />
The main limitations of this study arise from the fact of not having made a detailed analysis in terms of<br />
sector, in order to identify those Portuguese sectors with the greatest tendency towards<br />
internationalization, and consequently marketing innovation and she also influences the age of<br />
businesses or not the propensity to expand into these other markets. Nor was it possible to form a<br />
longitudinal study, considering data from CIS 6, so as to assess evolutionary tendencies in the sphere<br />
of marketing innovation in the Portuguese context. Another limitations result of not having studied the<br />
relation of cause and effect with regard to the fact that portuguese companies operating in national<br />
and international market because they were more or less innovative.<br />
In order to allow new empirical evidence about marketing innovation, we propose a repetition of the<br />
empirical study with data from other European countries where the 4 th Community Innovation Survey<br />
was carried out. In addition, it would be pertinent to complement this study with the data from CIS 6,<br />
so as to allow analysis of marketing innovation over a longer period, or even repeat the investigation<br />
based only on those data, obtaining more up-to-date information and allowing assessment of<br />
evolutionary tendencies in the marketing innovation developed by firms. Finally, it is considered<br />
pertinent to make an analysis sector by sector, so as to allow identification of sectors or clusters with<br />
a greater tendency to develop marketing innovations.<br />
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672
How Community Context Impacts the Entrepreneurial Process at<br />
Commercialization Challenged Universities<br />
Peter Moroz 1 , Kevin Hindle 2 and Robert Anderson 1<br />
1<br />
University of Regina, Regina, SK, Canada<br />
2<br />
Deakin University, Melbourne, Vic, Australia<br />
Peter.moroz@uregina.ca<br />
Kevin.hindle@deakin.edu.au<br />
Robert.anderson@uregina.ca<br />
Abstract: This study compares and contrasts high and low performing universities engaged in entrepreneurial<br />
activities. We take a socio-spatial approach to identifying key holistic differences between these two sets. Our<br />
findings suggest that the challenges faced by the majority of universities attempting to commercialize research<br />
may be difficult to overcome, especially when policy developed by studying exemplar cases is used to guide<br />
practices within communities that are contextually dissimilar.<br />
Keywords: <strong>Academic</strong> entrepreneurship, entrepreneurial university, commercialization<br />
1. Introduction<br />
The general research problem addressed in this paper is based upon the observation that a small<br />
number of universities are very good at commercializing research and facilitating universityentrepreneurial<br />
firm interactions while the remainder (and large majority) are not (Kirby, 2006; Shane<br />
et al., 2007; Moroz, Hindle & Anderson, 2008). Although there are a multitude of studies that seek to<br />
link the activity of entrepreneurship to the performance of universities engaged in commercializing<br />
their research, it is yet unclear as to whether or not the best practices, processes and policies enacted<br />
within top performing institutions (the few) may be translated into increased performance in those that<br />
are struggling in this area (the many). This problem is exacerbated by the ambiguous nature of the<br />
concept of entrepreneurship, specifically when discussing the manifold outcomes that may result from<br />
activities that are related to or associated with the entrepreneurial process as applied to a university<br />
context. It is further complicated by the fact that there are few current means to holistically classify<br />
the many specific contextual types of universities that exist in order to determine how the<br />
characteristics of each type interact to enable or constrain the commercialization of valuable<br />
innovations by entrepreneurial agents.<br />
The extant literature is populated by a diverse number of studies that seek to understand<br />
entrepreneurship at university from the perspective of successful examples of those that are<br />
considered to be top performing in the areas of commercialization and technology transfer. Thus the<br />
observation of exemplars such as MIT, Stanford, Cambridge and others have had a large impact on<br />
the formation of policy and best practices based on the contexts studied. Yet, no extant<br />
classifications of universities based on indicators of performance have emerged that allow<br />
researchers to form pattern based sets for which to test a range of assumptions on how<br />
entrepreneurial processes work within these sets and what activities/outcomes may be best suited to<br />
each. The criteria for distinguishing an entrepreneurial university are not based on uniform or agreed<br />
upon outcomes and often rely on normative researcher assumptions as to what constitutes<br />
performance. Thus it is difficult to reliably and validly compare and contrast university contexts<br />
(specifically between those that are doing well and those that are not), how these contexts impact<br />
upon the entrepreneurial process and ultimately, the relationship to performance.<br />
The incorporation of commercial and technology transfer based mandates into the realm of university<br />
academics is evidenced to be a significant and complimentary component of a region’s capacity to<br />
innovate and contribute to economic growth (Audretsch, Lehmann, & Warning, 2005). Yet there is<br />
growing debate as to the effectiveness of commercialization policies, the true impact of<br />
entrepreneurial activity and whether or not certain outcomes are more valuable than others (Harrison<br />
& Leitch, 2010). The importance of this area of inquiry is framed by the pressing need to develop<br />
effective policies for transferring knowledge between the university and the marketplace that uses a<br />
contextualized view of entrepreneurship (Clark, 2004; Colyvas & Powell, 2009). We interpret this<br />
perspective to equate context to the situational events and processes that shape behavior (and the<br />
emergence of entrepreneurial opportunities). Thus context is best understood through the study of<br />
mult-dimensional levels of analysis that weave together circumstances, conditions and the individuals<br />
673
Peter Moroz, Kevin Hindle and Robert Anderson<br />
embedded within them to better understand the phenomenon. In effect, there is an urgent need to<br />
move from a narrow focus on the opportunity-individual nexus to that of a contextualized socio-spatial<br />
understanding of how entrepreneurial opportunities emerge (Shane, 2002). We seek to provide a<br />
multi level ‘omnibus’ perspective of how the entrepreneurial process may be impacted (and vice<br />
versa) within a well defined socio-spatially framed context, that of commercialization challenged<br />
universities and the ‘communities’ of which they consist (Johns, 2006).<br />
The focus of our argument is that if context does indeed play a role in how entrepreneurial behavior is<br />
stimulated, directed and focused in universities then a performance based approach is a valid means<br />
for seeking out complex patterns that explain why outcomes differ between those that do well and<br />
those that do not (Westhead & Howorth, 2007). Furthermore, patterns detected within classified<br />
contexts may provide insight into whether or not specific processes, policies and best practices may<br />
work in one set and not in another. There is growing evidence to suggest that some universities have<br />
over time, built up certain capacities and developed processes that enable them to be more<br />
productive in achieving outcomes that are classified as entrepreneurial (Colyvas, 2007; Etzkowitz,<br />
2002). Thus temporal observation of a universities evolutionary pathway of commercialization<br />
activities may yield dramatically different contexts from a nascent stage to an experienced/successful<br />
stage. Applying strategies developed within a later successful stage to a nascent stage may suffer<br />
from neglect to control for the contextualized differences between them, thus mediating their<br />
effectiveness. As well, the goals and objectives amongst stages may also radically differ, making the<br />
achievement of specific outcomes in one stage problematic within another.<br />
Other scholars find that not only past success, but prestige and available resources are significant to<br />
predicting future entrepreneurial success (Shane & Stuart, 2002). Contextually speaking, those<br />
universities that draw upon elite institutional factors are much better equipped to directly translate<br />
these resources into seemingly higher levels of outcomes. This munificence in resources can be<br />
broken down into many different categories, such as access to capital, the proximity of the right type<br />
and structure of social networks and even to geography that acts as an attractor to resources that<br />
may not actually be impactful on the creation of new knowledge, entrepreneurship and innovation<br />
within a space, but may be complimentary and help grow what has already been seeded into vibrant<br />
technological clusters. Those universities that do not benefit from knowledge spillovers and the<br />
human, social and financial resources that are plentiful within a defined social space may be faced<br />
with vastly different contextual issues and circumstances. Thus the same rules may not exactly apply<br />
to all with respect to how entrepreneurial activity is stimulated, the nature of the entrepreneurial<br />
processes used and the outcomes best suited for different contexts. We seek to test these<br />
hypotheses and develop beginning theory by examining the differences in social, institutional and<br />
geographical contexts among universities who are found to differ greatly in the revenues of<br />
commercialization outcomes they produce (Weick, 1995).<br />
Our approach to address these gaps and test our hypotheses is as follows. First, we review the<br />
literature on the contextualization of entrepreneurship. The distillation of this research points to the<br />
growing significance of socio-spatiality in entrepreneurship research and a means for studying it in a<br />
novel way by using the concept of community as proposed by Hindle (2010). Second, an examination<br />
of case studies of ‘entrepreneurial universities’ confirms the bias toward the study of high performing<br />
universities and major gaps in the study of low performing universities from a context centric point of<br />
view. Third, we cite work that uses an empirically justified taxonomic analysis of university<br />
commercialization performance to define what we mean by the term “challenged university” as a key<br />
classification. This work is then used to categorize universities into two general types that are related<br />
to the outcomes of entrepreneurship: high commercialization revenue (HCR) and low<br />
commercialization revenue (LCR) universities. Fourth, we briefly outline the data collection and data<br />
analysis methods used in our overall methodology. Fifth, we present our findings in the form of an<br />
empirically justified conceptual framework that provides a contextualized overview of how the LCR<br />
university context may impact upon the entrepreneurial process. Implications and limitations of the<br />
research are discussed and a brief conclusion presented.<br />
2. The Study of Context and Entrepreneurial Process<br />
2.1 Defining entrepreneurial process<br />
Understanding the processes by which new ventures emerge is one of the core objectives of<br />
entrepreneurship researchers (Low & MacMillan, 1988, p. 1; Vesper, 1980). Bygrave (2004) defines<br />
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Peter Moroz, Kevin Hindle and Robert Anderson<br />
the entrepreneurial process as ‘all the functions, activities, and actions associated with perceiving<br />
opportunities and creating organizations to pursue them’. But entrepreneurial process(es) are<br />
ultimately governed by the rules, factors and unique circumstances provided by certain contexts<br />
(Baumol, 1990). For any model of entrepreneurial process to be meaningful, the study of context that<br />
is both discursive and integrative of organizational, social and environmental domains is vital<br />
(Ucbasaran, Westhead, & Wright, 2001). This position is echoed by Schoonhoven and Romanelli<br />
(2001) who demand a greater understanding of the conditions conducive to the creation of new<br />
ventures. Birley (1985) suggests that research focused on the entrepreneurial process “requires<br />
greater precision about the way in which the potential entrepreneur seeks to use the environment in<br />
creating the optimum business format out of his product idea”.<br />
2.2 Context, socio-spatiality and community<br />
Moving the emphasis of entrepreneurship from the individual to embrace the treatment of context is<br />
thus of growing interest to researchers (Welter, 2011). An approach to understanding context that is<br />
balanced between the external and internal realities of ‘people acting entrepreneurially’ in a defined<br />
space suggests that successful combinations of enterprising individuals and valuable business<br />
opportunities cannot be fully or effectively understood when examined separately from each other.<br />
Over time, the entrepreneurial process takes on a co-evolutionary perspective where the<br />
entrepreneur(s) through the act of interpreting the world around them (discovering, evaluating and<br />
exploiting economic opportunities) may also influence the contextual realities that impact upon the<br />
creation of a new venture (Sarason, et al., 2006; ). These contextual realities may be framed in many<br />
ways which include spatial (Katz & Steyaert, 2004), geographical (Audretsch & Keilbach, 2004), social<br />
(Anderson & Jack, 2002), organizational/institutional (Aldrich, 1979; North, 1990) and macro-societal<br />
conceptualizations (Weber, 1978) among others.<br />
A perspective for understanding context as socio-spatiality that is much rarer (especially in the<br />
entrepreneurial university literature) is the concept of community. It is argued by scholars to be an<br />
important area of future research in understanding the geographic, discursive and social dimensions<br />
of entrepreneurship (Steyaert, 2005). There are many definitions of community (Dasgupta, 1996).<br />
However, there is a dearth of research that attempts to incorporate the concept of community as a<br />
multi-dimensional unit of analysis. The importance of research involving the process of<br />
entrepreneurship and its relationship to the act of entrepreneurship within the specific context of its<br />
occurrence is thus often overlooked (Katz & Steyaert, 2004). After careful consideration, and seeking<br />
parsimony, we select Hindle’s concept of community as a conceptual lens for viewing the research<br />
problem (see Hindle, 2010). In this manner we seek to provide a way of looking at the problem of<br />
context that has not been addressed within the substantive area of entrepreneurship at university.<br />
More detailed information as to its usage is provided in the methods section.<br />
3. Entrepreneurial University Types<br />
While there are several studies that seek to provide a taxonomy of university spin offs (Djokovic &<br />
Souitaris, 2008; Hindle & Yencken, 2004), institutional infrastructure, such as technology transfer<br />
offices (Markman, et al., 2005) and strategies (Clarysse, et al., 2004), there are only a handful of<br />
studies that directly tackle the need for classifying entrepreneurial university ‘types’. Categories of the<br />
entrepreneurial university have been sorted by Armbruster (2008) into several conceptual variations<br />
that include ‘self regulative universities’(Hölttä, 1995), ‘adaptive universities’ (Sporn, 2001), ‘enterprise<br />
universities’ (Hay, et al., 2002), and vague references to ‘innovative’ or ‘discovery’ universities<br />
(Garnsey & Heffernan, 2005). Barring the above, we could find few approaches that provide a<br />
taxonomy of entrepreneurial university types based on, or relevant to, performance. Although there<br />
are cases that specifically classifies a ‘type’ of university simply by denoting its size relative to others<br />
(see Martinelli et al., 2008), the majority of case studies seek to provide insight without regarding how<br />
well these insights may be translated to other potentially divergent university contexts.<br />
3.1 The entrepreneurial university as a contextualized ‘type’<br />
A typical and well used methodological strategy is to choose cases that can be held up as examples<br />
of successful performance or that demonstrate certain characteristics that are desirable or valued<br />
(Stake, 2000; Yin, 1994). These studies usually attempt to draw out best practices, antecedents to<br />
specific outcomes and even develop theory. The entrepreneurial university case study literature is no<br />
different. There is a relatively large body of work that represents case studies of those universities<br />
that are deemed to be successful at commercialization, technology transfer and interaction with<br />
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entrepreneurial firms. What is useful about these studies is that they loosely point to a typology that is<br />
fairly well defined by a broad factor: performance. What is problematic is that there are no uniform<br />
criteria used to define entrepreneurial performance. Thus these combined works cannot be validly<br />
classified as a distinct type. These studies may only be classified as a loose set based on subjective<br />
researcher (or social) normative perceptions. A categorical breakdown of this body of works can be<br />
found in table 1.<br />
Table 1: Breakdown of entrepreneurial university literature<br />
Of the case studies reviewed, the majority (17) were of universities based in the USA with UK<br />
universities second (8). The most studied university was MIT (8) followed by Stanford (3). While the<br />
majority of this research uses iterations of the case study method, there were five which used<br />
quantitative methods on data collected from a single university, and two that just used an interview<br />
method. The most studied level of analysis was the university as an institution or organization (17)<br />
followed by the region or system (8) and only 5 studies looked specifically at individuals (usually<br />
faculty). There was considerable variance in the outcomes measured. Several authors reported<br />
spinoff formation as a key indicator of a university being entrepreneurial. Yet little rigor was set out in<br />
determining the survival rates or the impact and revenue / job growth details of these spinoffs. As<br />
well, links to industry appear to be another key outcome, but with little in the way of comparable<br />
measures. Other variables measured also exhibited similar qualities: it was difficult to ascertain<br />
exactly what the net value effect (to innovation) was, or how these effects could be compared. This<br />
overview confirms that there are no current means for classifying universities that engage in<br />
entrepreneurial activities based upon performance measures.<br />
4. A Performance Based Taxonomical Approach for Exploring University<br />
Context<br />
This problem has prompted an exploratory study that categorizes universities into two performance<br />
based types, high commercialization revenue (HCR) and low commercialization revenue (LCR)<br />
universities by using an empirically justified taxonomical method (Moroz P.W., Hindle, & Anderson,<br />
2011). In this study the authors explored the institutionalization of entrepreneurship within universities<br />
and found that it is most often associated with the practice of technology transfer (Moray & Clarysse,<br />
2005; Rinne & Koivula, 2005; Roessner, 2001; Rothaermel, et al., 2007). Due to the heterogeneous<br />
nature of universities, the institutionalization of academic entrepreneurship in the form of technology<br />
transfer varied greatly in terms of its uptake and implementation by universities across the world,<br />
leading to a small but highly visible cohort of universities taking the lead (Etzkowitz, 2002). The<br />
success of this leading cohort of universities in commercializing knowledge has had a significant<br />
effect on the processes considered to be best practices and has resulted in the blurring of<br />
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entrepreneurship and technology transfer with a multitude of institutionalized processes and<br />
outcomes (Bozeman, 2000; Shane, 2005).<br />
When university entrepreneurship is conceptualized as technology transfer, a wide range of social<br />
and economic outcomes are often considered beyond new venture creation (again, see Bozeman,<br />
2000). The indicators used to measure these outcomes have become highly important to how<br />
universities set mandates, allocate resources and ultimately impact society. But the effects of this<br />
institutionalization on university based entrepreneurship may also distort outcomes, especially when<br />
proxies fail to accurately capture what they are intended to measure (Chrisman, et al., 1995). As well,<br />
the choice of metrics employed also significantly shapes practice, regardless of the intended<br />
impacts—what gets measured gets done (Langford, et al., 2006). Perhaps the most important<br />
influence on how and what is measured is the incorporation of national benchmarking. One of the<br />
unintended consequences of benchmarking is that it can result in the comparison of all universities<br />
with those perceived to be top performing with attention focused on ‘rank’ rather than on the efforts,<br />
struggles and costs expended on generating certain outcomes. Furthermore, emulation of metrics<br />
adopted by top performing institutions may be particularly detrimental to universities that do not share<br />
similar environments, resources, or past success (Colyvas, 2009). Simply put, the best practices in<br />
one setting may not be convertible into success in other settings due to the differences in context<br />
(Mowery & Sampat, 2005).<br />
These issues point to an urgent need for applying an empirically justified, performance based<br />
taxonomic approach to the study of entrepreneurship as contextualized through the modern research<br />
university. Using a well correlated indicator of technology transfer, total gross revenues (TGR) from<br />
commercialization, data collected on university performance across three nations, Denmark, Australia<br />
and the USA, was analysed. Scatter plots and non-parametric statistical results revealed that across<br />
all three nations, a similar pattern held: that the top universities produced the majority (mean of 62%)<br />
of national TGR and that there was a substantial drop off between this set and all other universities.<br />
This empirical evidence supports Etzkowitz’s (2002) assumption of the disproportional impact of this<br />
cohort of leading universities. The yield of this study was realized through the classification of two<br />
empirically observed sets through the following definitions:<br />
� A high commercialization revenue (HCR) university may be classified as belonging to a set that is<br />
above a cut off point near the 10 per cent mark of an industrial nation’s university population<br />
ranked by a measure of TGR.<br />
� A low commercialization revenue (LCR) university may be classified as belonging to a set that is<br />
below a cut off point near the 10 per cent mark of an industrial nation’s university population<br />
ranked by a measure of TGR.<br />
We apply the definition of LCR universities as a proxy for classifying ‘challenged’ universities with<br />
respect to engaging in entrepreneurship. The taxonomic framework developed serves to better focus<br />
the perspective of researchers, policymakers and practitioners on the aspects of context and allows<br />
for the pursuit of questions that deal with the differences between ‘types’ of universities relevant or<br />
associated with entrepreneurial activities. Three questions relevant to this paper may now be<br />
explored: 1) what are the differences between HCR and LCR university contexts with respect to<br />
facilitating or constraining entrepreneurial activities? 2) how does the LCR context in general impact<br />
upon the entrepreneurial process and 3) do the policies, best practices and processes developed by<br />
studying entrepreneurship within an HCR university context transpose well onto a LCR university<br />
context?<br />
5. Method<br />
This section provides a brief overview of the research design and methodology employed in this<br />
paper. In order to explore and answer the questions posed above, a four part research design is<br />
developed. Part one involved the application of the taxonomic rules devised in Moroz, et al., (2011) to<br />
categorize and select the appropriate cases from the extant literature for examining HCR university<br />
contexts. These rules are also used to separate and categorize universities into LCR sets in three<br />
nations: USA, Denmark and Australia. The nations selected for this study were chosen using<br />
comparative rankings with Canada 1 . Purposive sampling of extreme/deviant cases that belonged to<br />
the LCR set in each nation was aided using specific criteria for selection (Eisenhardt & Graebner,<br />
1<br />
Innovation rankings placed USA above, Denmark equal to and Australia below Canada in an aggregation of innovation<br />
indicators.<br />
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Peter Moroz, Kevin Hindle and Robert Anderson<br />
2007; Yin, 1994). Part two involved the application of Hindle’s Bridge (Hindle, 2010a) as a structural<br />
tool for analyzing the data from rigorous content analysis of the cases belonging to the HCR set (see<br />
figure 1 below). A framework (HCR1) for illustrating the relationship between context and<br />
entrepreneurial process is developed. Part three consists of a methodology that employs triangulated<br />
semi structured interviews, mind mapping and secondary data analysis to yield a second framework<br />
(LCR1) that provides an illustration of the relationship between context and entrepreneurial process in<br />
the LCR set. Hindle’s Bridge is once again used as a means for organizing, structuring and analyzing<br />
the data collected. The yield of part four is a final framework (LCR2). This framework is developed<br />
by comparing and contrasting HCR1 and LCR1 and illustrates the key issues, circumstances and<br />
factors significant to understanding the contextualization of the entrepreneurial process within an LCR<br />
context (see figure 2 below for a graphic overview of the research design).<br />
Figure 1. A diagnostic tool for evaluating the entrepreneurial status of a community<br />
Figure 2: Four part research design<br />
6. Research Findings<br />
The assumption behind Hindle’s bridge is that “individual’s or group’s attitudes and behaviours as a<br />
member of the community influence the kinds of entrepreneurial process that are both feasible and<br />
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desirable” within a defined social and geographic space (Hindle, 2010). Employing this ‘diagnostic<br />
tool’ as a means for examining and analyzing the entrepreneurial potential of any given community,<br />
we are able to synthesize a general ‘picture’ from six LCR universities across three highly diverse<br />
(population, GDP, GERD, innovation rankings, culture and geography, etc) national contexts.<br />
Comparison and contrast of a general HCR framework (built using extant literature survey and<br />
content analysis) and a general LCR framework (built using empirical data collected via intensive<br />
fieldwork) produced a further set of conceptual areas that were found to be specifically applicable to<br />
the LCR or ‘challenged’ university context. These frameworks are covered in other papers and are<br />
left out for sake of parsimony (see Moroz, 2011b, etc).<br />
Figure 3 LCR2: How context influences the entrepreneurial process<br />
In its entirety, the LCR2 framework consists of seven key categories related to context, three domains<br />
evident in every entrepreneurial process, three general outcomes that may arise and two factors key<br />
to the sustainability of these outcomes (see figure 3). The seven categories may be viewed as<br />
conceptual ‘sweet spots’ that are deemed as significant to understanding the LCR context. The<br />
underlying factors and properties of these conceptual categories are concerned with the issues that<br />
both constrain and support the facilitation of entrepreneurial activity by individual agents across the<br />
strategic, personal, and tactical domains that are common to all entrepreneurial processes (Hindle,<br />
2010b). Thus the conceptual framework not only provides an illustrative conceptual map of the LCR<br />
context, but also provides a guide for establishing a set of best practices for the application of<br />
concepts to the goal of identifying, improving and testing constructs that impact upon the<br />
entrepreneurial process. A brief synopsis of the key concepts/findings in the LCR2 framework is<br />
provided in table 2 below due to space limitations.<br />
7. Discussion<br />
Our discussion of the results of this research begins with an attempt to answer the three questions<br />
posed above using the empirical analysis of the data collected. The first question was: what are the<br />
differences between HCR and LCR university contexts with respect to facilitating or constraining<br />
entrepreneurial activities? The findings of this study overwhelmingly support past research that point<br />
to historical success, munificence in resources and institutional prestige as key indicators of<br />
entrepreneurial university success in the commercialization of knowledge. A comparison of HCR and<br />
LCR contexts illustrates the sizeable gaps in overall research quality and the resources available to<br />
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exploit the creation of intellectual property: HCR universities benefit from a relative munificence of<br />
research expenditures, the proximity to capital, geographical knowledge spillover effects and the<br />
wealth in human and social capital (found to be abundant in large technological clusters) while the<br />
sample of LCR universities did not. Thus advantages in critical mass and experience compounded<br />
with availability of quality science explain a significant portion of performance. What is notably distinct<br />
to the HCR set arises from the creation of two different kinds of virtuous circles where revenues from<br />
the commercialization of IP are targeted back to research development (inventive processes) and<br />
direct and indirect capacity development (entrepreneurial processes). Thus three effects are realized:<br />
1) the growth of research through internal funding of projects or gifts, 2) the direct facilitation of USO’s<br />
through the development of training programs, more TTO staff, financial support programs, POC and<br />
POM grant, the establishment of seed funds that translate into a greater capacity and propensity to<br />
take equity stakes in USO’s, and 3) the facilitation of twin skills through greater numbers of faculty,<br />
students and surrogate entrepreneurs gaining experience through disclosing research, patenting IP,<br />
selling these patents and starting new ventures (either as a direct USO or an indirect USO that is not<br />
directly tied to the university itself). For example, the mandate of the Washington Research<br />
Foundation (WRF) is to “assist universities and other non-profit research institutions in the state of<br />
Washington and to provide support through gifts and grants, for scholarship and research” (WRF<br />
website, 2010).<br />
Table 2. Significant contextual factor and description of conceptual basis and constructs<br />
The conceptual framework produced as LCR2 provides evidence that partially answers the second<br />
question asked: how does the LCR context in general impact upon entrepreneurial process?<br />
Commercialization activity in the LCR context is rare, driven by weak entrepreneurial sub communities<br />
that are hampered by a lack of critical resources and clear mandates to shape change, strong cultural<br />
barriers framed by polar logics between academic and commercial activities and the lack of twin skills<br />
competencies to overcome them in part due to weak policies for the support and selectivity of<br />
entrepreneurial outcomes. These issues are compounded by the effect of institutional blinders that<br />
function to overlook opportunities that are more feasible, well suited to current strengths and that bear<br />
less risk and opportunity costs over typical commercialization pathways in HCR contexts.<br />
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Peter Moroz, Kevin Hindle and Robert Anderson<br />
More specifically, the study of context does present evidence that contrasts with previous studies that<br />
suggest that equity investment in USO’s may be the most productive outcome of a university<br />
entrepreneurial process: the average value of equity held by universities is greater than average<br />
annual licensing income (Bray & Lee, 2000). In fact, it may be argued that the majority of LCR<br />
universities in our sample might be better off establishing partnerships with industry/other institutions<br />
that could better support these activities with resources and experience externally instead of<br />
continued investment into independent commercialization infrastructure (Degroof & Roberts, 2004).<br />
The last question is, do the policies, best practices and processes developed by studying<br />
entrepreneurship within an HCR university context transpose well onto a LCR university context? In<br />
general, there are many contextual factors that are immutable or extremely difficult to impose from<br />
one set to the other: institutional prestige, quality research, proximity to resources and past success<br />
that leads to the creation of virtuous circles. This evidence suggests that policies aligned with<br />
supporting entrepreneurial activities that have been well seeded with resources that generate both<br />
inventive and entrepreneurial processes may not always be applicable to the LCR context. But the<br />
identification of conceptual areas in the LCR2 framework suggests that there are other less immutable<br />
factors that may translate well across both sets, such as twin skills capacity development through<br />
entrepreneurship education and industry co-op programs, social capital development through the<br />
establishment of formal and informal networks with external community stakeholders and the creation<br />
of new specialized units with clear commercialization mandates to shelter, support and help<br />
innovative sub communities span necessary boundaries between academia and the market.<br />
The development of these conceptual areas are presented as the “interim struggles” on which<br />
beginning theory must be built upon, but do not qualify as theory in and of itself. Although they<br />
provide empirically generated insight into the LCR university context, further development, refining<br />
and testing is required.<br />
8. Conclusion<br />
There are many limitations to this study that can only be considered briefly in this paper. They<br />
include, among others, the sampling method, research design and the generalized nature of the<br />
assumptions provided. Despite these limitations, this study provides evidence that brings into<br />
question the efficacy of further investing in some forms of expensive commercialization infrastructure<br />
found to be significant amongst top performing universities and suggests further examination of other<br />
pathways for universities with weaker or challenged entrepreneurial community contexts. Last of all,<br />
this paper illustrates the importance and utility of a socio-spatial ontology to help assist our<br />
understanding of entrepreneurship by framing it as more than just a dialogic involving individuals and<br />
entrepreneurial opportunities.<br />
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683
Beyond Financial Performance and Corporate Greening:<br />
Mapping out the Research Field of Sustainability<br />
<strong>Entrepreneurs</strong>hip<br />
Pablo Munoz and Dimo Dimov<br />
Newcastle University Business School, Newcastle upon Tyne, UK<br />
pablo.munoz@newcastle.ac.uk<br />
dimo.dimov@newcastle.ac.uk<br />
Abstract: Sustainability entrepreneurs are seen as key actors in facing contemporary structural problems and<br />
creating sustainable growth and wealth. They bring into being a new approach to business opportunities that<br />
resolves the dualistic divide between business ventures and altruistic endeavours, in favour of a new logic based<br />
on the creation of economic value beyond corporate boundaries while improving the social and ecological<br />
environments. Despite the recent surge of research interest on this topic, there remains a lack of understanding<br />
of the nature of this phenomenon. Therefore, there is a need to define boundaries, connect theoretical fields and<br />
provide deeper explanations of sustainability entrepreneurship beyond current approaches to corporate<br />
sustainability and social entrepreneurship. This paper seeks to address some of these issues by focusing on the<br />
distinctive importance of sustainability entrepreneurship within entrepreneurship research and developing a<br />
conceptual framework aimed at mapping out the field while at the same time adhering to empirical relevance. In<br />
doing so, we define sustainability entrepreneurship as the scholarly examination of how and by whom<br />
opportunities to create future goods and services are recognised, evaluated, and exploited, while improving the<br />
development of society, the economy and the environment, allowing future generations to meet their own needs.<br />
Based on this definition, we draw upon literature on entrepreneurship theory and sustainable development and<br />
propose three avenues for further research on this topic: theoretical and empirical definition of sustainability<br />
entrepreneurs, the process of development of sustainability-oriented venture opportunities and the interaction<br />
between institutions and sustainability entrepreneurship. Within each avenue we pose relevant research<br />
questions that are of both descriptive and explanatory nature, and aim to bring closer the conceptual and<br />
empirical aspects of sustainability entrepreneurship. Focusing on these dimensions and questions helps visualise<br />
and analyse currently disparate conditions, features, and outcomes of sustainability entrepreneurship, thus<br />
increasing the intensity and quality of future theoretical and empirical work.<br />
Keywords: sustainability entrepreneurship, entrepreneurship research, venture opportunities, sustainable<br />
development<br />
1. Introduction<br />
There is a growing recognition that modern societies face a number of structural problems primarily<br />
derived from unsustainable business practices. Despite the positive impact of incremental changes,<br />
mainly driven by logic of ecological modernisation, major transformations are still required to move<br />
forward and achieve sustainable development (Grin et al. 2010). In pursuing this goal, there is an<br />
emergent agreement that sustainability entrepreneurs are to be considered as the engine in this<br />
process of change and key actors in creating sustainable growth and wealth, thus in achieving<br />
sustainable development (Cohen et al. 2007; Dean et al. 2007; Gibbs 2009; Tilley et al. 2009b; Hall et<br />
al. 2010; Patzelt et al. 2010). Sustainability entrepreneurship (SE) seems to bring into being a new<br />
approach that resolves the dualistic divide between business ventures and altruistic endeavours<br />
(Parrish, 2007) in favour of a new logic based on the creation of present value for the economy,<br />
society and the environment while contributing to the well being of future generations.<br />
Aside from its aspirational appeal, there remains a lack of understanding of the nature of SE and how<br />
it may unfold (Hall et al. 2010). The challenges of sustainability have been tackled in various other<br />
fields, from environmental economics to new institutional theory (Cohen et al. 2007; Dean et al. 2007;<br />
Pacheco et al. 2010) but with disparate results; these studies remain prescriptive and unconnected<br />
(Hall et al. 2010). To fill this gap and bring theoretical coherence to this research topic, scholars<br />
emphasise the need for boundaries definition (Shepherd et al. 2011), greater ties between theoretical<br />
fields (Hall et al. 2010) and further efforts to elaborate the logic of SE beyond financial performance<br />
and corporate greening (Cohen et al. 2007; 2008).<br />
This paper seeks to address some of these unresolved issues by developing a conceptual framework<br />
aimed at mapping out the research field of SE while at the same time adhering to empirical relevance.<br />
It draws upon literature on entrepreneurship and sustainable development and proposes three<br />
avenues for further research: theoretical and empirical definition of sustainability-driven<br />
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entrepreneurs; the development process of entrepreneurial opportunities in SE; and the interaction<br />
between institutions and sustainability entrepreneurship. Aside from the importance of critically<br />
analysing the possibilities and limits of SE (Hall et al. 2010), focusing on these avenues helps<br />
visualise and analyse currently disparate conditions, features, and outcomes of SE. In this regard,<br />
within each avenue, the paper poses relevant research questions that are of both descriptive and<br />
explanatory nature, and aim to bring closer the conceptual and empirical aspects of SE.<br />
The contribution of the paper to current research on SE lies in providing conceptual framing for the<br />
field of study and offering guidelines for increasing the intensity and quality of future theoretical and<br />
empirical work. It not only provides background for improved understanding of sustainability<br />
entrepreneurship as a research field, but also offers new insights for advancing the study of the<br />
complexities of the entrepreneurial act.<br />
2. The distinctive importance of sustainability entrepreneurship<br />
The concept of sustainable development has become of major relevance in management literature<br />
and business education (Hall et al. 2010). It has crossed the boundaries of corporate social<br />
responsibility towards new perspectives that stress the necessity of a more holistic approach to<br />
entrepreneurial value creation. For this emerging scholarly field to take strong roots, its research<br />
questions need to be situated in a concrete framework to visualise the specific conditions, features,<br />
and outcomes that account for sustainability entrepreneurship, and its distinctive importance within<br />
entrepreneurship research needs to be well established. In this regard, following Venkataraman<br />
(1997), two questions need to be addressed: what exactly is the subject matter of sustainability<br />
entrepreneurship?, and what is the distinctive contribution of this field to a broader understanding of<br />
business enterprise?<br />
Given the E in SE, there are natural roots in entrepreneurship research. However, the<br />
entrepreneurship literature has so far been unable to capture or explain, both at conceptual and<br />
empirical levels, the logic of creating present value for the economy, society and the environment<br />
while contributing to the well being of future generations. Even though traditional definitions of<br />
entrepreneurship (e.g. Venkataraman, 2007) do consider the impact of the entrepreneurial activity, SE<br />
appears to refer to a new logic in the process of opportunity development, through which three<br />
different outcomes are simultaneously pursued, i.e. social sustainability, environmental sustainability<br />
and economic sustainability.<br />
Indeed, Dean and McMullen (2007:58) define “sustainable entrepreneurship as the process of<br />
discovering, evaluating, and exploiting economic opportunities that are present in market failures,<br />
which detract from sustainability, including those that are environmentally relevant”. Similarly,<br />
Hockertz and Wüstenhagen (2010:482), define it as “the discovery and exploitation of economic<br />
opportunities through the generation of market disequilibria that initiate the transformation of a sector<br />
towards an environmentally and socially more sustainable state”. More recently Shepherd and Patzelt<br />
(2011:137) offer the following definition: “sustainable entrepreneurship is focused on the preservation<br />
of nature, life support, and community in the pursuit of perceived opportunities to bring into existence<br />
future products, processes, and services for gain, where gain is broadly construed to include<br />
economic and non-economic gains to individuals, the economy, and society”.<br />
What is missing in the above definitions is an overarching goal or logic based on which economic,<br />
social, and environmental sustainability can be put under one mantra. Accordingly, and drawing upon<br />
Shane et al. (2000) and The Brundtland Report (1987), we propose that SE is “the scholarly<br />
examination of how and by whom opportunities to create future goods and services are recognised,<br />
evaluated, and exploited, while improving the development of society, the economy and the<br />
environment, allowing future generations to meet their own needs”. This definition establishes not only<br />
the different dimensions along which development is to be directed, but also an overarching concern<br />
with the fate of future generations.<br />
To make the argument that SE is to be considered on its own merits as an important field within<br />
entrepreneurship research, we need to refute the intuitive counterfactual argument that SE is simply a<br />
particular form of entrepreneurship. In other words, if one could argue that any SE activity meets the<br />
broader definition of entrepreneurial activity, then SE is simply a subset of entrepreneurship. If on the<br />
other hand, we could show that SE activities would not necessarily qualify as entrepreneurial activities<br />
if judged on economic merits alone, then a case can be made for SE as important enough for<br />
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requiring especial scholarly attention. In the exposition of our argument, we will use the illustrative<br />
case of British entrepreneur Arthur Potts Dawson and its new venture The People’s Supermarket,<br />
where he aims to create a commercially sustainable, social enterprise that achieves its growth and<br />
profitability targets whilst operating within values based on community development and cohesion.<br />
The People’s Supermarket is not only about social and environmental entrepreneurship, whereby only<br />
social and environmental objectives are to be pursued; nor is it only about economic<br />
entrepreneurship, although it strives for obtaining economic profit. Potts's approach combines all<br />
components of sustainable development equally, holistically and integrally (Tilley et al. 2009b), which<br />
means that this kind of entrepreneurial activity is about simultaneously achieving the three objectives,<br />
and committing to securing the economic welfare and social well being of future generations, and<br />
ensuring a long-term sustainability of the environment (Young et al. 2006).<br />
Let's consider what it means to be pursuing the social and environmental objectives concurrent with<br />
pursuing economic viability. At any decision point, there is a compelling argument that can be made<br />
about possibilities to strengthen the economic bottom line through the logic of economy of scale or<br />
scope and based on maximising sales per square meter of retail space. Shunning this logic means<br />
being subject on high opportunity costs based on economic logic alone. Arguably, no entrepreneur<br />
operating on economic principles alone would settle for the operational and value chain configuration<br />
selected by Potts in the name of serving the community and the environment. In other words, this<br />
particular form of business activity would not exist under a logic that defines opportunities as the<br />
situations in which revenues simply exceed costs.<br />
In doing so, this approach encompasses all three kinds of entrepreneurial activity simultaneously<br />
including the preservation of the well being of future generations; this without a doubt expands the<br />
prevailing entrepreneurial logic. Given this particular complexity and the practical relevance of SE in<br />
improving the development of society, the economy and the environment, it seems appropriate to<br />
think of sustainability entrepreneurship beyond any possible reductionist view. Its merits require<br />
particular attention within entrepreneurship research, which calls an appropriate theoretical and<br />
methodological definition.<br />
3. Three avenues for empirical study of sustainability entrepreneurship<br />
Although we agree with Sherperd et al. (2011) in terms of the relevance of scholarly diversity within<br />
boundaries of SE, we emphasise the need of a more concrete approach for conducting sustainability<br />
entrepreneurship research. In doing so, and alongside the argument for its distinctive importance, we<br />
propose mapping out initial boundaries around three basic elements: person, process and context,<br />
leading to three building blocks upon which future research might focus its attention, i.e. (1)<br />
theoretical and empirical definition of sustainability-driven entrepreneurs; (2) the development process<br />
of entrepreneurial opportunities in SE; and (3) the interaction between institutions and SE. Each<br />
dimension is explained and discussed in the following sections.<br />
3.1 Theoretical and empirical definition of sustainability-driven entrepreneurs<br />
Studying sustainability entrepreneurs requires the development of operational definitions that not only<br />
define proper sampling frames but also capture the conceptual richness of these actors. While<br />
descriptions of such entrepreneurs have involved various characteristics such as motivation<br />
(Schlange, 2006), knowledge (Patzelt et al. 2010), entrepreneurial orientation (Kuckertz et al. 2010),<br />
cognition (Schlange, 2009) and ways of understanding and organising their new ventures (Parrish,<br />
2010), none of these are by themselves distinguishing features of sustainable entrepreneurs.<br />
At this point, the questions to be answered are how might we recognise sustainability entrepreneurs<br />
within a group of entrepreneurs and why do they behave in a particular way; when their degree of<br />
membership in the conceptual category “sustainable entrepreneur” depends not only on one single<br />
feature, i.e. an overall commitment to sustainability issues; but rather a complex set of conditions.<br />
Without having a clear idea of what defines sustainability entrepreneurs and to what extent do they<br />
differ from traditional entrepreneurs, establishing a reliable sampling frame becomes difficult to<br />
achieve. Therefore, operational definitions need to be developed in ways that reflect the complex<br />
constellation of characteristics and conditions. This requires on the one hand going beyond<br />
conventional linear models towards set theoretic representations that focus on the degree of<br />
membership in a theoretically defined group, and on the other hand developing and calibrating a<br />
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measurement tool for judging membership and not membership in the group of sustainability<br />
entrepreneurs.<br />
Although there exist differences among entrepreneurs in terms of entrepreneurial mindset, values and<br />
orientation; developing a convention for whether a person can be deemed to be a sustainability<br />
entrepreneur requires more precise analysis based on the calibration and intersection of a number of<br />
heterogeneous conditions that current research attaches to SE. Such analysis requires departure<br />
from traditional measures based on a liner modelling logic - which cannot incorporate the logic of<br />
necessary and sufficient conditions inherent in complex relationships - and encourage the use of<br />
alternative techniques such as fuzzy set theory and analysis. The latter, unlike mainstream statistical<br />
tools, offer a middle path between quantitative and qualitative measurement, through which is<br />
possible to capture the complexity of the associated causal relationships, enabling the researcher to<br />
judge the degree of membership in a conceptual category of interest (Ragin, 2008).<br />
The precision of a membership definition depends on its infusion and support by theoretical and<br />
substantive knowledge of relevant criteria (Ragin et al. 2005). In this regard, the model of SE<br />
proposed by Young and Tilley (2006) offers distinctive criteria for measuring membership in the<br />
conceptual category of sustainability entrepreneurs. Drawing upon McDonough and Braungart (2002)<br />
triple bottom line model and Dyllick and Hockerts model (2002) of corporate sustainability, the authors<br />
offer twelve elements (Table 1) that emerge from combining the three dimensions of entrepreneurship<br />
(economic, social and environmental) with a higher plane of sustainability entrepreneurship in a twoway<br />
relationship.<br />
Table 1: Distinctive criteria for measuring membership in the group of sustainability entrepreneurs<br />
Economic conditions and Social conditions and sustainability Environmental conditions and<br />
sustainability entrepreneurship<br />
Economic equity<br />
Inter-generational equity<br />
Eco-efficiency<br />
Socio-efficiency<br />
entrepreneurship<br />
Social responsibility<br />
Futurity<br />
Sufficiency<br />
Socio-effectiveness<br />
sustainability entrepreneurship<br />
Environmental stability<br />
Environmental sustainability<br />
Ecological equity<br />
Eco-effectiveness<br />
Although each of these criteria can be useful for conceptually describing a sustainability entrepreneur,<br />
it is not clear how they can play out in substantive, empirical terms. Hence, the theoretical and<br />
empirical definition of sustainability entrepreneurs, and the subsequent explanation of their behaviour,<br />
will depend on the researcher's ability to develop appropriate measurement techniques, aimed at<br />
drawing a line between SE and any other form of entrepreneurship. This entails not only identifying<br />
the combinations of criteria that differentiate sustainability entrepreneurs from other entrepreneurs but<br />
also determining whether the criteria themselves can be differentiated in empirical terms.<br />
In understanding the theoretical and empirical definition of sustainability entrepreneurs, we offer four<br />
relevant research questions around which further studies can be conducted.<br />
� How can sustainability entrepreneurs be empirically recognised?<br />
� What sets of conditions account for the existence of sustainability entrepreneurs?<br />
� Why sustainability entrepreneurs behave the way they do, combing all three kinds of<br />
entrepreneurial activity in one single venture?<br />
� To what extent sustainability entrepreneurs differ from traditional entrepreneurs?<br />
3.2 The development process of entrepreneurial opportunities in SE<br />
A key element in describing entrepreneurial action is to understand the process through which<br />
entrepreneurs recognise, evaluate and exploit venture opportunities. Despite the advances in the field<br />
of entrepreneurship research, current explanations of opportunity recognition based on<br />
entrepreneurial knowledge and economic motivation, are insufficient for modelling the recognition of<br />
opportunities for sustainable development. Patzelt et al. (2010) suggest that the recognition of<br />
sustainable development opportunities is perhaps more complex than the recognition of such<br />
opportunities motivated solely by economic gain for the entrepreneur.<br />
Although some authors have provided useful insights into the entrepreneurial process driven by<br />
sustainability issues (Choi et al. 2008), we still lack empirical examination and evidence of how this<br />
process will actually unfolds (Hall et al. 2010). Part of the difficulty in bringing the conceptual and<br />
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empirical representations of the process closer lies in the inoperability of existing conceptual models<br />
for understanding individual cases. Thus, while it is conceptually elegant and appealing to emphasise<br />
the objective nature of opportunities (Shane et al. 2000; Eckhardt et al. 2003), it has been argued that<br />
an entrepreneurial opportunity is something that “prospectively can only be discussed as a<br />
speculative idea and that can be fully articulated and explained only retrospectively” (Dimov,<br />
2010:60).<br />
Although opportunities can be an unit of analysis in their own right, as exemplified by conceptual<br />
discussion of the nature and types of opportunity (Eckhardt et al. 2003), and although some of the<br />
associated environmental factors can be seen as a source of sustainability-driven venture<br />
opportunities (Cohen et al. 2007; Dean et al. 2007), such conceptions offer little in terms of<br />
understanding how individual entrepreneurs recognise, develop, and exploit such opportunities.<br />
In explaining the process of opportunity development, Dimov (2010) proposes to go beyond the<br />
traditional focus of causal explanations i.e. the immediate trigger or efficient cause, and incorporates<br />
into the explanatory body of entrepreneurial action a more complex set of possible causes: material,<br />
final and formal. Accordingly, in the context of sustainable development, the meaningful question is<br />
not what differential conditions precede a sustainability entrepreneurial action, but why this action<br />
occurs the way it does. Therefore, in explaining the process of development of sustainability-oriented<br />
venture opportunities, it is not about asking why SE is different than traditional entrepreneurship, as<br />
any likely response implies using tautological arguments, but about enquiring why the process of<br />
recognition and development of opportunities for sustainable development occurs the way it does.<br />
To make entrepreneurial opportunities empirically tractable, it is necessary to divide the process of<br />
opportunity development into distinctive units of observation, as suggested by Dimov (2011) and<br />
summarised in Table 3 below. Each of these units represents a fertile ground for empirical<br />
examination in that it allows us to introduce more refined and focused research questions which in<br />
turn can help gather more substantive empirical evidence.<br />
Table 2: Operationalisation of the opportunity development process in SE<br />
Units of observation Empirical evidence<br />
Opportunities Actions, events and circumstances that precedes the recognition of sustainability-<br />
recognition<br />
oriented venture ideas<br />
Entrepreneurial action Relationship between immediate goals and set of actions, which explains how a<br />
Interaction with<br />
market structures<br />
sustainability-oriented venture idea gets elaborated in actionable terms<br />
Entrepreneurial statement position whereby the relationship between sustainability<br />
entrepreneurs and exchange partners is formed<br />
In understanding the development process of venture opportunity in SE, we offer six relevant<br />
research questions around which further studies can be conducted.<br />
� How do opportunities for sustainability entrepreneurship develop?<br />
� Why does the process of recognition of opportunities for sustainable development unfold the way<br />
it does?<br />
� Why does sustainability-oriented entrepreneurial action occur the way it does?<br />
� Why does the process through which sustainability entrepreneurs interact with market structures<br />
unfold the way it does?<br />
� What are the causes behind the recognition of opportunities, entrepreneurial action and<br />
interaction with market structures in SE?<br />
� What are the main differences in how this process unfolds in traditional entrepreneurship<br />
compared to sustainability entrepreneurship?<br />
3.3 The interaction between institutions and sustainability entrepreneurship<br />
Baumol's (1990) argument that the productive vs. unproductive nature of entrepreneurship reflects the<br />
prevailing rules of the game is of key relevance in analysing SE, as the latter requires major changes<br />
in prevailing institutional arrangements. Meek et al. (2010) and O’Neill et al. (2009) support this<br />
institutional approach in analysing the role of social and cultural factors in sustainability<br />
entrepreneurship. The former empirically demonstrate how policy and social norms, i.e. incentives,<br />
consumption patterns, norms of conformity and of family interdependence, play an integral role in the<br />
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creation of environmentally responsible economic activity. The latter stress the relevance of cultural<br />
settings in generating entrepreneurial value beyond profit and market penetration.<br />
Thus, only appropriate conditions may lead to producing social, environmental and economic wealth;<br />
unfortunately, the extant market incentives compel entrepreneurs to environmentally degrading<br />
behaviours (Pacheco et al. 2010). In order words, if the appropriate conditions do not prevail, social,<br />
environmental and economic wealth will not be produced, and entrepreneurs could end up creating<br />
unproductive or destructive forms of entrepreneurship (Harbi et al. 2010). The question then is how<br />
and by whom the rules of the game towards a more sustainable society will be changed, when the<br />
entrepreneurial activity depends to a great extent on the reward structure of the economy.<br />
Alongside changes in technologies, key drivers in producing the required transformations for<br />
sustainable development are both the process of institutionalisation of new meaning systems,<br />
symbolic elements and behavioural patterns within extant markets, and the actors that lead such<br />
process of change. Therefore, central to understanding the implications of the presence of<br />
sustainability entrepreneurs in competitive markets is the study of the dynamic relationship between<br />
changes in institutional rules and their catalytic role (Parrish et al. 2009) in producing these changes.<br />
In this initial stage, sustainability entrepreneurs emerge simultaneously as institutional entrepreneurs.<br />
By means of discourse building, mobilising allies, creating networks and legitimising new concepts<br />
(DiMaggio, 1988) they act as “catalysts for structural change and take the lead in being the impetus<br />
for, and giving direction to, change” (Leca et al. 2008:3). As Pacheco et al. (2010) argue,<br />
sustainability entrepreneurs have the agency to develop the necessary institutions, i.e. new sets of<br />
cognitive, normative and regulative rules, that enable the exploitation of sustainability-driven venture<br />
opportunities. This implies the expansion of the concept of SE, from recognition and development of<br />
venture opportunities in extant economic structures to the creation of new institutional structures - e.g.<br />
norms, property rights, economic incentives and government legislation - that improve the<br />
competitiveness of sustainable behaviours. Accordingly, throughout the creation of sustainabilityoriented<br />
new ventures and their entrepreneurial position statements, sustainability entrepreneurs<br />
create not only positive solutions, but also redefine the professional knowledge and develop new<br />
standards and formal rules that delineate the playing field (Hwang et al. 2005), prompting changes in<br />
current institutional logic.<br />
Even though it might be argued that, due to its innovative nature, any kind of entrepreneurial action<br />
have an effect on institutional arrangements playing thus a catalytic role; entrepreneurship in its<br />
traditional form, acts upon extant economic structures and market incentives, reproducing the current<br />
institutional logic. Relevant to the field therefore is analysing, on the one hand, the contextual<br />
variables affecting sustainability entrepreneurship, i.e. the role of institutional factors in acting as<br />
structural enablers and barriers. And on the other hand, the capability and potential contribution of<br />
sustainability entrepreneurs towards modifying the dynamics and developmental trajectory of a<br />
competitive market by means of producing changes to current institutional structures, i.e. meaning<br />
systems, symbolic elements and behavioural patterns. This means incorporating the insights and<br />
methods of both theoretical approaches new institutionalism and institutional entrepreneurship,<br />
systematically and systemically. This requires an analysis of the processes by which structures, i.e.<br />
schemas, rules, norms, and routines, become established as authoritative guidelines for social<br />
behaviour (Scott, 2008), and of how actors can contribute to changing institutional rules despite<br />
pressures towards stabilisation (Batillana et al. 2009).<br />
In understanding the interaction between institutions and SE, we offer four relevant research<br />
questions around which further studies can be conducted.<br />
� What is the role of institutions in recognising and developing sustainability-driven venture<br />
opportunities?<br />
� What is the potential contribution of sustainability entrepreneurs to producing changes to current<br />
institutional logic?<br />
� How does current institutional logic shape the behaviour of sustainability entrepreneurs?<br />
� How might sustainability entrepreneurs change the current institutional logic towards a more<br />
sustainable society?<br />
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4. Concluding remarks<br />
Pablo Munoz and Dimo Dimov<br />
Sustainability entrepreneurship as a research field is in its beginnings and we hope that this paper will<br />
help advance its development. We aimed to provide conceptual basis for stimulating scholarly thought<br />
and improving the understanding of sustainability entrepreneurship as an important field within<br />
entrepreneurship research. The three research avenues and associated research questions offer a<br />
common platform for uniting a diverse academic community interested in a timely and important issue.<br />
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691
Consumer Integration into Innovation Process and Its Impact<br />
on Success of Innovations<br />
Ramazan Nacar and Sitki Gozlu<br />
Istanbul Technical University, Istanbul, Turkey<br />
nacar@itu.edu.tr<br />
gozlus@itu.edu.tr<br />
Abstract: Developing innovation depends on and is vital for the survival of firms. However, a huge mass of innovations<br />
do not succeed in the market. There are many studies that researched the critical factors affecting the<br />
success or failure of innovations. A large part of the literature on this topic depends on the two main theories;<br />
product life cycle and Rogers’s adopter categorization. These two models consider consumers being passive. In<br />
fact, active participation of consumers in innovation development process could enhance the success of innovations.<br />
In this theoretical study, a critical literature review has been accomplished in order to understand the role of<br />
consumers in innovation development process and its effects on the success of innovations. Categorization of<br />
current literature in a prosumer based view reflects that all the related theories on innovation development take<br />
into account buyer characteristics and behaviour. However, they are not concerned about suppliers’ new product<br />
development and marketing activities as proactive variables. Moreover, not only introduction and diffusion but<br />
also adoption and consumption stages of innovations are also the main factors affecting the success of innovations<br />
in the market. Only demand or supply side factors might only partly succeed. The new innovation development<br />
perspective, which is proposed in this study, encompasses all the related variables under varying factors<br />
where many of them are context dependent. Thus, this view strengthens the studies and application in innovation<br />
development with consumer’s integration. This perspective could be worked in a balancing and iterative way.<br />
After all, new products that perfectly meet consumers’ needs and wants can be developed, which then succeed<br />
in the market.<br />
Keywords: innovation, success of innovation, integration of consumers, innovation development process<br />
1. Introduction<br />
There are many uncertainties about market, technology, cost of production, and development process<br />
itself. For the survival of the firm, introducing new products and innovations to market is crucial and<br />
also very challenging. Furthermore, it is also unpredictable that whether the product will succeed or<br />
not. Even though it is hard to achieve, firms need to extend their product lines and increase their market<br />
competitiveness (Balachandra and Friar, 1997). For example, when a new product is introduced in<br />
a high technology market, it most probably replaces one of the existing products. However, this implies<br />
more complexity both in the adoption and consumption stages. How will the new product be<br />
introduced? How will it be integrated to existing products? How will the existing products be replaced<br />
(Lloyd, 2001)?<br />
Since the Schumpeter’s work in 1942, many studies have been done on innovations (Schneider and<br />
Veugelers, 2010). In the literature, a large range of research streams exist that have tried to uncover<br />
the critical factors of success or failure of innovations. However, single measure or composite models<br />
have not been developed so far (Balachandra and Friar, 1997). Existing literature have highlighted<br />
basically demand-side factors, but ignored supply-side factors (Ansari, Fiss and Zajac, 2010).<br />
Rogers’s Diffusion Theory should not only take into account buyer characteristics and behaviour but<br />
also suppliers’ new product development and marketing activities as proactive variables (Tzokas and<br />
Saren, 1992).<br />
The diffusion of new products in the market is important for the success of firms. In order to understand<br />
the nature and process of diffusions, the theory of diffusion is insufficient to analyse different<br />
products and markets (Bernhardt and MacKenzie, 1972). The model that is considered to study the<br />
specific innovation should be appropriate to the product and market. Hence, the diffusion theory is still<br />
incomplete unless it recognizes the proactive roles of consumers. In today’s world, crowdsourcing, cocreation,<br />
user innovation, customer integration, and open innovation, as wikis, social networks, usergenerated<br />
contents in online area, have become the key terms for innovations management field<br />
(Füller, 2010).<br />
Previous studies are mostly concentrated on product development and production from firm side.<br />
However, it should be more appropriate to take into account the active roles of consumers in production<br />
process (Füller, 2010; Hoffman, Kopalle and Novak, 2010). Contemporary approaches in sus-<br />
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tainable innovation generation studies emphasize both the production and consumption patterns together<br />
(Hoffman, 2007). The active role for consumers in the production process will be more suitable<br />
in the consumer good industry (Hoffman, Kopalle and Novak, 2010). On the other hand, traditional<br />
approaches have considered consumers as passive users (Hoffman, 2007). It is important to implement<br />
an on-going innovation process, which will also succeed in the market (Siagri, Barbaro and Buttolo,<br />
2009). For this reason, it is a strong need to assume a prosumer based view, which integrates<br />
both supply and demand side activities in consumer base. Only demand side factors might only partly<br />
succeed (Ansari, Fiss and Zajac, 2010). Thus, to aid successful diffusion of innovations, managers<br />
need to have a prosumer perspective. Moreover, products have different characteristics and consumers’<br />
knowledge levels are different from one another, as a result there is a strong need to understand<br />
which consumers are more suitable for what kinds of products (Hoffmann, 2007).<br />
2. Factors affecting success of innovations<br />
An innovation is the changes of activities and consequences of these changes. These changes create<br />
uncertainties both in the market and consumer behaviour. However, for a successful adoption and<br />
diffusion, these uncertainties need to be decreased (Bernhardt and MacKenzie, 1972).<br />
New products and innovations become unsuccessful at a high ratio in the market (Jayaram and Narasimhan,<br />
2007). Seventy-five percent of new products introduced to market do not become successful<br />
(Siagri, Barbaro and Buttolo, 2009). Lots of studies have tried to find out the factors affecting the success<br />
or failure of R&D projects and introduction of innovations. These studies outlined many factors<br />
that are responsible of success or failure of new product introduction. These factors could be categorized<br />
under two headings, such as controllable-internal factors (technology and organization) and<br />
uncontrollable-external factors (market and environment) (Balachandra and Friar, 1997; Ansari, Fiss<br />
and Zajac, 2010). In addition to this, supply-side and demand-side factors could also be used as the<br />
categories (Tzokas and Saren, 1992).<br />
Due to collaborative and context-specific nature of diffusion process, it is inspired by the characteristics<br />
of products and the consumers (potential adopter) (Choi, 2009; Füller, 2010). Innovations are not<br />
only a matter of technology or finance, but also a matter of human and culture (Siagri, Barbaro and<br />
Buttolo, 2009). However, diffusion of new products is mainly affected by supply-side activities (Tzokas<br />
and Saren, 1992). In addition to this, environmental factors such as culture, change agents, etc. also<br />
affect the diffusion process. If the environment is not suitable for the product, it will not be able to<br />
deeply diffuse, even not to enter the market. Political and social factors, public interest in the product<br />
and social acceptability of the product are important and supportive factors for the diffusion of the<br />
product (Balachandra and Friar, 1997). Depending on the affecting factors, different diffusion models<br />
are possible (Bernhardt and MacKenzie, 1972; Füller, 2010).<br />
Although market, technology, environment, and organization related factors and their impact on success<br />
or failure of new product development and introduction to the market are extensively studied<br />
previously, there is no single measure for anyone of them. Thus far, even the factors are alike, their<br />
definitions are different. Moreover, the findings of these studies contradict. Besides, some of the studies<br />
have integrated various sub-factors under other headings and some others integrated those different<br />
categories (Balachandra and Friar, 1997).<br />
In order to understand the nature of innovations’ success, the literature is categorized under two factors;<br />
producer (firm)-product (controllable, internal and supply) and consumer (uncontrollable, external<br />
and demand). This categorization is mostly based on a prosumer view. In this way, it might be available<br />
to understand innovation development and diffusion process well with respect to an evolutionary<br />
nature of consumer. Other than focusing on post-adoption and consumption phases, this study takes<br />
into account both production and consumption stages together.<br />
2.1 Producer (firm) and product related factors<br />
The firm and its characteristics affect the adoption and diffusion rate of innovations. Many studies in<br />
the literature mainly focused on new product development, adoption, diffusion, and post-adoption<br />
processes. These studies considered innovation as given and studied consumers’ perceptions of<br />
innovations. However, this approach is not suitable with the dynamic nature of innovation development<br />
where an idea becomes a product (Tzokas and Saren, 1992). Firms’ attributes should be in a<br />
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condition that takes into account perceptions of consumers (Eneh, 2010) and then develop innovation<br />
within this framework.<br />
Economies of scale and scope, complementariness with other competences, industry of the firm<br />
(Tzokas and Saren, 1992) and managerial control (Jayaram and Narasimhan, 2007) are the basic<br />
factors that affect innovative performance of firms. Moreover, these factors do not only affect the activities<br />
during diffusion of the innovation, but also pre-launch activities of innovations (Tzokas and<br />
Saren, 1992). Other characteristics that affect firms are market concentration, technological opportunities,<br />
and the stage of the technology life cycle. Firm size is another factor, where small firms generally<br />
produce more innovations than larger ones (Siagri, Barbaro and Buttolo, 2009). Schneider and<br />
Veugelers (2010) stated that firms that are effective in mixing newness, smallness, and high R&D<br />
intensity are more innovative and more successful than other firms in the market. In addition to this,<br />
small firms are more eager to generate radical innovations, where large and existing firms focus on<br />
incremental innovations. The reason that incumbent firms do not spend money on radical innovations<br />
is the cannibalization of their existing products (Schneider and Veugelers, 2010). In addition, true<br />
innovations also disturb larger firms (Siagri, Barbaro and Buttolo, 2009).<br />
Identification of the value of new and external information, assimilating it and applying to products<br />
(Ansari, Fiss and Zajac, 2010), technical proficiency, interacting and communicating with customers<br />
(Hoffmann, 2007), and getting scientific knowledge are essential specifications that firms should possess<br />
in order to develop successful innovations (Tzokas and Saren, 1992). Firms as the R&D engines<br />
should observe and affect consumer needs and then develop and adapt new products for consumers<br />
(Lloyd, 2001; Hoffmann, 2007). Moreover, they should behave in a way as they are a third party between<br />
consumer and product (Lloyd, 2001). Understanding consumer needs and expectations will<br />
enhance firms to develop successful and compatible products for the market (Tzokas and Saren,<br />
1992; Hoffmann, 2007). This will absolutely change the method of existing firms and accelerate the<br />
speed of adoption and diffusion of innovations. Firms should initiate some motivations and characteristics<br />
of consumers (Füller, 2010). Firms should be a good moderator between consumers and products.<br />
They could easily communicate with consumers in the innovation development process, which<br />
means openness to communication of staff (Hoffmann, 2007).<br />
In addition to firm-related factors, product characteristics also affect the success of diffusion and<br />
adoption of innovations. The higher the product standards, the higher is the diffusion rate because<br />
this will eliminate the compatibility problem and lead consumers not to consider product risks (Tzokas<br />
and Saren, 1992). In order to increase success of innovations, it is very important to learn and eliminate<br />
the degree of uncertainty of innovations (Balachandra and Friar, 1997).<br />
R&D and advanced technologies used in the production process of the innovation will make it more<br />
attractive and applicable by consumers (Tzokas and Saren, 1992). Moreover, the appropriate technological<br />
fit between consumers-products and compatibility with the consumers’ existing technologies<br />
should exist for potential consumers’ adoption (Ansari, Fiss and Zajac, 2010). Technical performance<br />
and style of products should also be compatible with the needs and expectations of consumers in a<br />
way that also seem qualified (Jayaram and Narasimhan, 2007). In addition to these, products need to<br />
fit both culturally and politically with the values, beliefs, philosophical orientation and practices of consumers.<br />
Subsequently, such kinds of fits increase the speed diffusion of innovations (Ansari, Fiss and<br />
Zajac, 2010). Perceived value of product is an important factor in the success of diffusion. Rather than<br />
technology push products, demand pull products are more successful in the market in terms of diffusion<br />
(Balachandra and Friar, 1997).<br />
2.2 Consumer related factors<br />
In traditional adoption and diffusion literature, the categories describing the characteristics of consumers<br />
(Eneh, 2010) are determined after product introduction. However, consumer innovativeness is<br />
a different construct, which is actually the traits of consumers (Hoffmann, Kopalle and Novak, 2010).<br />
Since consumers are the real source of innovations (Füller, 2010), the success of diffusion of innovations<br />
depends on these categories and the transition between them (Eneh, 2010).<br />
Consumer innovativeness is a crucial trait that allows firms to integrate consumers in innovation development<br />
process, which also increases the success of innovations (Hoffmann, Kopalle and Novak,<br />
2010). Many consumers want to participate in the innovation development process in order to be influential<br />
in many aspects of products with the help of today’s social computing tools (Vannoy and Pal-<br />
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via, 2010). In order to satisfy consumer needs appropriately and reduce failures of innovations, consumers<br />
have to be integrated in the innovation development process (Füller, 2010). The consumers<br />
assuming roles in the innovation process should have an emergent nature and be a lead user (Hoffmann,<br />
Kopalle and Novak, 2010). In the literature, many studies based on different theories describe<br />
the consumers taking part in innovation process, but are not concerned about the question of why<br />
(Füller, 2010).<br />
Consumers should dynamically contribute to modify new technologies to successfully fit to their conditions<br />
both positively and negatively (Choi, 2009). It is a strong need to define the benefits and quality<br />
of innovations in terms of consumers’ objectives. The adoption will only occur in a situation where the<br />
benefits of innovations exceed the consumers’ perceived value of those benefits (Bernhardt and<br />
MacKenzie, 1972). Acceptance and diffusion of innovations in the market depend on the objectives<br />
and perceptions of consumers or adopters (Balachandra and Friar, 1997).<br />
The right consumers in the innovation development process should have an emergent nature. Emergent<br />
nature is the capability of imaging and envisioning successful development of innovations in the<br />
marketplace (Hoffmann, Kopalle and Novak, 2010). The right consumers for the innovation development,<br />
who are talented and capable to forecast further developments, will increase the market success<br />
of innovations. This talent and capability is a matter of personality trait and actually is unique<br />
(Füller, 2010; Hoffmann, Kopalle and Novak, 2010). The consumers that are able to envision the integration<br />
between existing products and new innovations will be suitable for the future success of innovations<br />
(Hoffmann, Kopalle and Novak, 2010). For example, openness to new things, intellective selffocus,<br />
synergistically study, information process, creativity, exploratory curiosity, imaginative, optimism<br />
(Hoffmann, Kopalle and Novak, 2010), self-development, reputation-building, recognition, community<br />
support (Füller, 2010) are the key characteristic of innovator consumers. In this way, participation<br />
and engagement of consumers in innovation development process will further the success of<br />
diffusion process (Hoffmann, Kopalle and Novak, 2010).<br />
Past experiences of consumers provide them to easily understand the product concepts, even though<br />
they are complex, and offer new product concepts while developing new products (Hoffmann, 2007).<br />
For example, innovators as in the Rogers’s adopter category traits have an active and important role<br />
in developing new innovations even these innovations are difficult to understand due to their complex<br />
technical information (Savery, 2005). In addition to this, consumers’ contribution to different stages of<br />
innovation development will be different between consumers depending on their expectations and<br />
interests. Furthermore, the time for participation also varies from consumer to consumer (Füller,<br />
2010).<br />
Due to adoption decision dependence on perceptions of adopters, the adopters will determine what<br />
effects of diffusion of an innovation could matter. Thus, innovations should be defined not in technical<br />
terms but in perceptions of consumers. What is more important is that these effects are not known<br />
well unless the suspicions in the decision process are solved (Bernhardt and MacKenzie, 1972;<br />
Füller, 2010). Moreover, these perceptions and expectations not only determine what is expected<br />
from interactions with producers, but also influence the consumers to engage in an interaction (Füller,<br />
2010).<br />
It is also an important topic to understand two issues. What is the motive of consumers to co-create<br />
and what do they expect from this process? Motivation of consumers is also an important factor that<br />
affects the success of product development process (Hoffmann, 2007). The basic motive of consumers’<br />
interaction with producers in new product development process is that consumers are satisfied.<br />
Firms should provide some economic and non-economic incentives for consumers’ participation in the<br />
innovation development process. Not the outcome of the process, but also the interaction experience<br />
itself could also compromise other benefits (Füller, 2010).<br />
3. The relationship between consumers’ integration and the success of innovations<br />
Many studies in the literature with various perspectives have aimed to determine and identify the essential<br />
factors for success of innovations in the market. However, many of them are based on contextual<br />
studies. This contextual nature of innovation development somehow could constrain the generality<br />
of the topic (Balachandra and Friar, 1997). Success of innovations depends on both development<br />
and supply side of the market. Thus, for the sustainability of the innovation development process,<br />
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Ramazan Nacar and Sitki Gozlu<br />
consumers should also be considered as active participants in supply stages. In this way, as they are<br />
producers of innovations where they are also the consumers, success of innovations will be enhanced<br />
in a self-sustained way.<br />
Rogers (1995) listed five characteristics of innovation those affect the diffusion success of innovations.<br />
These are relative advantage, compatibility, complexity, triability, and observability. Moreover,<br />
ambiguity, magnitude, risk and status are also added as the characteristic factors that affect the diffusion<br />
success. Balachandra & Friar (1997) mentioned about technology of the product. Especially high<br />
degree of innovativeness of the product increases its chance to diffuse in the market. Perceived value<br />
of the product in the market is the most key factor that affects the diffusion success of the product. All<br />
these characteristics are related with the product itself. Therefore, other studies in the related literature<br />
also take adopter and consumer characteristics into consideration. The main theme behind the<br />
latter studies was that adaptation and diffusion process is not only based on product characteristics<br />
but also on adopter and consumer characteristics (Ansari, Fiss & Zajac, 2010).<br />
Producers try to change their production process in order to produce consumer oriented products,<br />
and consumers also want products that satisfy their needs. Otherwise, consumers decide not to purchase.<br />
However, active and constructive roles of firms always treat consumers as they are passive<br />
and reactive. In fact, they do not want to be passive and reactive and this view does not reflect the<br />
real potential of consumers (Hoffmann, 2007).<br />
Two models are mentioned in the literature that study consumer-product relationship. One of them is<br />
product life cycle and the other is Rogers’s adopter categorization. However, these two models only<br />
take into consideration one single product and try to explain its normally-distributed behaviour (Lloyd,<br />
2001). The adoption process is framed as awareness, interest, evaluation, trial use, and adoption<br />
stages where these stages could take from minutes to decades (Balachandra and Friar, 1997). There<br />
is no study in the literature that deals with on-going fit between characteristics of products and consumers.<br />
However, integrating consumers into innovation development process many of these stages<br />
could be eliminated or shortened.<br />
Adoption of products and their success pattern of adoption will depend on the fit between the characteristics<br />
of product and adopter. Thus, this fit could be defined as its compatibility with perceived<br />
needs, demands, goals, objectives, and the structure of adopters. Diffusion of innovations changes<br />
over time and across adopters, and also affected by technical, cultural, and political factors. These<br />
factors affect diffusion process in different ways and thus cause distinct patterns (Ansari, Fiss and<br />
Zajac, 2010). The products will be well-suited with needs and expectations of consumers, which then<br />
will increase the adoption and diffusion rate (Tzokas and Saren, 1992).<br />
In the marketing literature, product purchase is divided into two parts; products purchase and product<br />
use (Lloyd, 2001). The sale of a new product does not mean that the product will be used appropriately.<br />
Thus, for the firm not only selling but also the usage of the product by consumers is important.<br />
Moreover, the aforementioned traditional two models share the view that success depends on time.<br />
Once the product is introduced and sold in the market, it will follow the curve (Lloyd, 2001). Furthermore,<br />
researches’ interest in innovation development literature is the relationship between various<br />
factors (Balachandra and Friar, 1997). Hence, there is a need to study these relationships and success<br />
of innovation development by model building. Consumers are important sources of innovation<br />
and R&D ideas. Co-creation with consumers consent firms to develop products according to market<br />
needs that increase the market performance of products (Hoffmann, 2007).<br />
Innovation development is a two-way communication where firms and consumers interact and exchange<br />
information. In the traditional innovation development this is one-way (Choi, 2009). Interaction<br />
of firms with consumers in the innovation development process will increase the knowledge of firms<br />
about the needs and wants of consumers (Tzokas and Saren, 1992), which is really essential for<br />
firms. This will also increase the rate of innovating new products. Motivated consumers in the product<br />
development process precisely design products depending on their needs and wants (Hoffmann,<br />
2007).<br />
Consumer-product relationship is both complex and dynamic; it goes beyond the purchase transaction<br />
to last stage of both consumers and product change (Lloyd, 2001). The form of fit or misfit will<br />
determine the diffusion success of innovations. Also, this fit is not static, but dynamic and multidimen-<br />
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sional (Ansari, Fiss and Zajac, 2010). Successful innovations should meet the needs of consumers,<br />
which require a consumer focused view for firms. This is an important characteristic of firms that consumers<br />
sometime could not be aware of their needs. Thus, firms should able to direct consumers in<br />
the innovation process. This is even more important in highly innovative products (Balachandra and<br />
Friar, 1997).<br />
Products that have superior success in the market could be developed by efficient communication<br />
between producers and consumers. Because much information could be gathered while using the<br />
product, consumers possess that precise information. This kind of information could not be obtained<br />
by firms’ own efforts and internal sources (Hoffmann, 2007). Besides marketing communications such<br />
as advertising, promotion, etc. that increase consumers’ awareness and the adoption rate (Tzokas<br />
and Saren, 1992), educating consumers by integrating them in the development process is also important.<br />
This then will reduce these marketing communication efforts and costs (Tzokas and Saren,<br />
1992). After all, success of innovations will be increased.<br />
On the other hand, consumers’ participation in the product development process will provide many<br />
activating roles for consumers such as cooperation and co-creation. Firms are also to be open to<br />
learning and change. Consumer or market orientation is a key factor for new product success. Many<br />
studies express that consumers’ participation in product development process enhances diffusion<br />
success of new products (Hoffmann, 2007). It is a strong need to define benefits and quality of innovations<br />
in terms of consumers’ objectives. The adoption will only occur in a situation where the benefits<br />
of innovations exceed the consumers’ perceived value of those benefits (Bernhardt & MacKenzie,<br />
1972).<br />
Due to consumers’ desire to interact with other likeminded consumers, firms should use consumers’<br />
collaboration and community knowledge in varying environments (blogs, web, club, etc.) as the<br />
source of new idea or problem solving for the innovations. Even this collaboration of firms with consumers<br />
will enable consumers to easily prefer that firm to others (Hoffmann, 2007; Füller, 2010).<br />
Therefore, the capabilities such as interaction with consumers and gathering outside consumer<br />
knowledge will make firms to become successful along with the innovation process and put that<br />
knowledge into practice. Getting required information from the market or consumers, distribution of<br />
knowledge within the firm, interpretation, evaluation and usage of knowledge will be useful only if the<br />
firm is capable to process it. In addition, firms should also be aware what kind of information they<br />
need in order to lessen information overload (Hoffmann, 2007).<br />
The right consumers for the innovation development who are talented and capable to forecast further<br />
developments will increase the market success of innovations. This talent and capability is a matter of<br />
personality trait, actually which is unique (Füller, 2010; Hoffmann, Kopalle & Novak, 2010). Consumers<br />
those are able to envision the integration between existing products and new innovations will be<br />
suitable for future success of innovations (Hoffmann, Kopalle & Novak, 2010). For example, openness<br />
to new things, intellective self-focus, synergistically study, information process, creativity, exploratory<br />
curiosity, imaginative, optimism (Hoffmann, Kopalle & Novak, 2010), self-development, reputationbuilding,<br />
recognition, community support (Füller, 2010) are the key characteristic of innovator consumers.<br />
By this way participation and engagement of consumers in innovation development process<br />
will further the success of diffusion process (Hoffmann, Kopalle & Novak, 2010).<br />
Consumer integration in the product development model will not only increase the innovations’ success,<br />
but also educate consumers, as well. Consequently, this will cause increase of consumer acknowledgement<br />
to use high and long learning products, which have compound characteristics (Lloyd,<br />
2001). Consumer involvement in the product development process increases the knowledge base<br />
and knowledge variety used in the process. In addition to consumers’ everyday product use knowledge,<br />
technical knowledge of firms creates a synergistic environment that allows mutual learning<br />
(Hoffmann, 2007). For example, while SMS messages and P2P (peer-to-peer) music sharing were<br />
developed for other purposes, they were co-created by producers and consumers. Later they have<br />
become different products, which are now being used for diverse purposes. This situation also increases<br />
the rate of adoption, diffusion and acceptance because some of the users of mentioned<br />
products have already been participated in the development process (Vannoy and Palvia, 2010).<br />
Firms mostly obtain required information from consumers as their needs and wants. However, they do<br />
not let consumers take part in decision-making or selection of new products (Hoffmann, 2007). Highly<br />
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Ramazan Nacar and Sitki Gozlu<br />
developed social computing tools will be beneficial for helping consumers to participate in the innovation<br />
development process (Vannoy and Palvia, 2010). Moreover, in order to gather required information<br />
from the market, not market potential but market existence is important for some authors (Balachandra<br />
and Friar, 1997). According to Eneh (2010), gathering needs of early adopters and early<br />
majority adopters will improve innovations’ success for adoption and diffusion. In order to achieve this<br />
success, each adopter category has to be treated in an appropriate way that sufficiently integrates<br />
them in the development process.<br />
Many studies and researches on new product development worked on new product development<br />
techniques such as mental analogies, visual depiction and animation, Web based testing, and conjoint<br />
analysis. However, they all have ignored the importance of consumers and not dealt with consumers’<br />
participation in new product development process. In today’s environment it is more suitable<br />
to studying trait-based approaches to develop successful innovations (Hoffmann, Kopalle and Novak,<br />
2010). In order to prevent firms’ focusing on their customers, firms should also integrate other potential<br />
consumers in the product development process, which will further make the new product highly<br />
communicated through the market (Hoffmann, 2007).<br />
An Example: INNOCOPE – INNOvating through COnsumer-integrated Product dEvelopment<br />
INNOCOPE is a method for getting consumers in the product development process. It is mainly developed<br />
for generating sustainability-related product concepts by GELENA research team. INNO-<br />
COPE’s main theme is new product usability and acceptance by consumers (Hoffmann, 2007; INNO-<br />
COPE Project Team, 2011).<br />
Consumers’ experience and tacit knowledge could be gathered while they use the product at the<br />
same time that is intended to be developed (Hoffmann, 2007; Füller, 2010). Mutual learning between<br />
consumers and producers and empowerment of consumers increase knowledge of consumers and<br />
firms which then lead to change in behavior for both of them (Hoffmann, 2007).<br />
4. Conclusions<br />
There is a growing need for a comprehensive model, which integrates both supply and demand side<br />
of the innovations. Other than focusing on post-adoption and consumption phases, this study takes<br />
into account both production and consumption stages together. Innovations, even diffusion process,<br />
are affected by both producers and consumers. In order to increase the perceived value of innovation,<br />
consumers should also be integrated in the innovation development process, which then leads to high<br />
success in diffusion of innovations. By integrating consumers into innovation development process,<br />
innovations could be compatible with needs, wants and expectations of consumers. However, existing<br />
literature on this topic still lacks to develop a single measure and complete model from a prosumer<br />
view for innovations. Innovation theories are still incomplete unless they recognize the pro-active roles<br />
of consumers.<br />
The perspective that is based on producer- and product-related factors and consumer-related factors<br />
could encompass all the related variables under varying factors where many of them are context dependent.<br />
Thus this view could strengthen the studies and application in innovation development with<br />
consumer’s integration. This perspective will also enhance to develop more parsimonious models,<br />
which are crucial in practice. Moreover, these models could be tested in different studies with diverse<br />
methodologies that deal with success/failure of innovations.<br />
This new perspective is not solely macro-level or micro-level; it considers both consumers and firms at<br />
the same time, which takes into consideration organizational change and characteristics of individual<br />
consumers. Consumers should be able to correct the misinterpretation of market research results and<br />
provide feedback to firms. Only market research itself is not a sufficient method for developing new<br />
products (Hoffmann, 2007; Füller, 2010). In addition to these, firms could direct their limited efforts<br />
and sources to essential areas in order to develop successful innovations.<br />
Increasing diffusion speeds is an important topic for firms to achieve. Adoption and diffusion of an<br />
innovation within a firm does not guarantee that success of innovations (Eneh, 2010). Consumers’<br />
participation in innovation development process improves both the emergence and diffusion of this<br />
process (Hoffmann, 2007).<br />
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Ramazan Nacar and Sitki Gozlu<br />
This perspective is a mixture of top-down and bottom-up approach or developer-based and adopterbased<br />
approach or technology-push and market-pull. The new models considered to be developed<br />
could provide firms advantages of trying, testing, and exploring new products and innovations with<br />
consumers. Since market determines the success of innovations, it should also control the development<br />
stage of innovations. After all, a knowledge network within firms and consumers could be established,<br />
which delivers superior competitive advantage to firms. The integration of consumers into innovation<br />
development process could also be named as consumer knowledge management while<br />
developing innovations, but first new models should be introduced.<br />
In the market, consumers are the ones who have an emergent nature, which is the capability to envision<br />
how new products should be developed. This is very important in business-to-consumer markets<br />
in order to increase new products’ market success (Hoffmann, Kopalle and Novak, 2010). Until now,<br />
there were not enough studies on consumers’ co-creation of innovation that develops new models.<br />
New methods for innovation development highlight that consumers are the crucial participants of the<br />
process (Hoffmann, 2007).<br />
This new innovation development perspective could be worked in a balancing and iterative way. After<br />
all, new products that perfectly meet consumers’ needs and wants will be developed, which then succeed<br />
in the market (Hoffmann, Kopalle and Novak, 2010).<br />
References<br />
Ansari, S. M., Fiss, P. C. and Zajac, E. J. (2010) ‘Made to Fit: How Practices Vary as They Diffuse’, Academy of<br />
Management Review, Vol. 35, No. 1, pp 67-92.<br />
Balachandra, R. and Friar, J. H. (1997) ‘Factors for Success in R&D Projects and New Product Innovation: A<br />
Contextual Framework’, IEEE Transactions on Engineering Management, Vol. 44, No. 3, pp 276-287.<br />
Bernhardt, I. and MacKenzie, K. (1972) ‘Some Problems in Using Diffusion Models for New Products’, Management<br />
Science, Vol. 19, No. 2, pp 187-200.<br />
Choi, H. J. (2009) ‘Technology Transfer Issues and a New Technology Transfer Model’, The Journal of Technology<br />
Studies, Vol. 35, No. 1, pp 49-57.<br />
Eneh, O. C. (2010) ‘Technology Transfer, Adoption and Integration: A Review’, Journal of Applied Sciences, Vol.<br />
10, No. 16, pp 1814-1819.<br />
Füller, J. (2010) ‘Refining Virtual Co-Creation from a Consumer Perspective’, California Management Review,<br />
Vol. 52, No. 2, pp 98-122.<br />
Hoffmann, D. L., Kopalle, P. K. and Novak, T. P. (2010) ‘The Right Consumers for Better Concepts: Identifying<br />
Consumers High in Emergent Nature to Develop New Product Concepts’, Journal of Marketing Research,<br />
Vol. 48, pp 854-865.<br />
Hoffmann, E. (2007) ‘Consumer Integration in Sustainable Product Development’, Business Strategy and the<br />
Environment, Vol. 16, pp 322-338.<br />
INNOCOPE Project Team. (2011, May 27). The INNOCOPE Method. Retrieved May 27, 2011, from INNOCOPE<br />
Project: http://www.gelena.uni-oldenburg.de/en_info_inno.html<br />
Jayaram, J. and Narasimhan, R. (2007) ‘The Influence of New Product Development Competitive Capabilities on<br />
Project Performance’, IEEE Transactions on Engineering Management, Vol. 54, No. 2, pp 241-256.<br />
Lloyd, S. M. (2001) ‘Consumption Ecology: The Role of Time and Space in the Adoption, Integration and Consumption<br />
of Technology Products in Everyday Life’, Advances in Consumer Research,Vol. 28, pp 79-86.<br />
Rogers, E. M. (1995) Diffusion of Innovations, 4 th edition, New York: The Free Press.<br />
Savery, C. A. (2005) ‘Innovators or Laggards: Surveying Diffusion of Innovations by Public Relations Practitioners’.<br />
Master Thesis, Ohio, Akron, United States: University of Akron.<br />
Schneider, C. and Veugelers, R. (2010) ‘On young highly innovative companies: why they matter and how (not)<br />
to policy support them’, Industrial and Corporate Change, Vol. 19, No. 4, pp 969-1007.<br />
Siagri, R., Barbaro, A. and Buttolo, N. (2009) ‘Using Innovation, Research and Finance to Build a Company with<br />
a Multi-Option Strategy’, in C. Petti (ed.) Cases in Technological <strong>Entrepreneurs</strong>hip: Converting Ideas into<br />
Value, Cheltenham - Massachusetts, United Kingdom - United States: Edward Elgar Publishing, Inc.<br />
Tzokas, N. and Saren, M. (1992) ‘Innovation Diffusion: The Emerging Role of Suppliers versus the Traditional<br />
Dominance of Buyers’, Journal of Marketing Management, Vol. 8, pp 69-79.<br />
Vannoy, S. A. and Palvia, P. (2010) ‘The Social Influence Model of Technology Adoption’, Communications of the<br />
ACM, Vol. 53, No. 6, pp 149-153.<br />
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Absorptive Capacity as a Device for <strong>Entrepreneurs</strong>hip : A<br />
Primer on Firm-Level <strong>Entrepreneurs</strong>hip and Economic<br />
Performance<br />
Emeran Nziali<br />
CES – MATISSE, University Paris I Panthéon-Sorbonne, France<br />
emeran.nziali-teukam@malix.univ-paris1.fr<br />
Abstract: Audretsch and Thurik (2002) is one of the rare attempts to link entrepreneurship to economic<br />
performance. Whereas its theoretical background highlights the role played by small firms (henceforth SF) in the<br />
conduct of innovation, the empirical model it is based on does not. Rather, it compares SF contribution to<br />
economic growth to that of large firms without illustrating how innovation is instrumentalized for entrepreneurship.<br />
This is the purpose of our paper which arguments that absorption capacity as a device can help in such a project.<br />
For this, it mixes conceptions of entrepreneurship as innovation conduct with that of entrepreneurship as<br />
opportunity exploitation. It suggests to distinguish economic agents involved in entrepreneurship from<br />
opportunities sources being exploited. The paper elaborates on how to turn the process into variables, measure<br />
and introduce them into a model for regressions and tests at an aggregated level. Specifically, literature on SF<br />
and innovation helps to define entrepreneurial capacity which is for a country or industry its share of SF whereas<br />
the vast work on technological change is useful to quantify opportunities. Variables interact and entrepreneurship<br />
matters when ones obtain a significant coefficient suggesting absorption or exploitation. It happens for critical<br />
levels of SF presence which must be considered carefully for at least two reasons: (1) critical levels of firm size<br />
are specific to our dataset and moving from them for country or industry purposes need subsequent works. (2)<br />
Respective influences of entrepreneurship components are not of same intensities, that of opportunities being the<br />
most important, it incentives for interest in other agents involved in exploitation. Our dataset documents heighten<br />
manufacturing industries (ISIC Rev.3 with two digits) and countries such as France, USA, Great-Britain, Italy,<br />
Denmark, Finland and Germany.<br />
Keywords: entrepreneurship, knowledge, absorptive capacity, innovation, firm size<br />
1. Introduction<br />
Recently, the realm of entrepreneurship has been challenged with contributions issued from SF'<br />
resurgence literature highlighting their involvement in innovative activities and further their impact on<br />
economic performance as concern on entrepreneurship (Audretsch and Thurik 2002; Audretsch,<br />
Keilbach and Lehman 2006). Until those contributions that domain of economics had known very little<br />
changes in spite of its oldness (Schumpeter 1911). Reasons to that are numerous and include the<br />
dominance of the interest for large firms, general interest in innovation -distinct from entrepreneurship<br />
specific ones - the crisis inside entrepreneurship domain - unable to reach a clear cut definition – and<br />
therefore difficulties to be measured.<br />
Nowadays progresses have been realized, and if entrepreneurship is still crossed by different<br />
conceptions, scholars admit there can be many ways to tackle it. Some clearly consider it as<br />
multilevel and subscribe to a pluriparadigmactic lecture (Fayolle and Verstraete 2005) entering<br />
<strong>Entrepreneurs</strong>hip through four paradigms: innovation (Drucker 1985), business opportunity<br />
(Stevenson and Jarillo 1991; Bygrave and Hoffer 1991), organization creation (Gartner 1995), or<br />
value creation (Gartner 1990).<br />
They are all associated with the advent of entrepreneurship as a process suggesting to interest in<br />
what is being doing rather than agent doing it (Gartner 1988). It therefore opens possibilities to be<br />
interested in entrepreneurship through different kind of agents useful to the process rather that<br />
concentrating on individuals solely. Insights on the entrepreneurial firm are part of that change and<br />
does not limit entrepreneurial agents to individuals. The contribution of Audrestch and Thurik did not<br />
consider those last points.<br />
In fact, while challenging our understanding of entrepreneurship through the study of connections<br />
between SF and innovation, Acs, Audretsch, and their colleagues' attempt to formalize and test the<br />
impact of entrepreneurship on economic growth rests on a comparison of SF' contribution to growth<br />
without elaborating explicitly on innovation as necessary for the purpose. It concluded to a positive<br />
impact of entrepreneurship since SF' contribution was greater than that of large ones. The result<br />
being in accordance - not with the specific concern on entrepreneurship but- with general interests on<br />
SF dynamism and their relative superiority (Carree and Thurik 2002). So, besides the (econometric)<br />
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model they constructed did not elaborate on the gist of entrepreneurship, arguments on SF as proxy<br />
for entrepreneurship are dubious.<br />
There's no doubt that they host a large part of individuals acting as entrepreneurs (Parker 2004), are<br />
dynamics, more and more innovative, but it is not the case for all of them. We would have expected<br />
from such a paper to illustrate how that category of economic agents instrumentalizes innovation, but<br />
it is not the case. To our concern such a project will gain in looking how to associate simultaneously<br />
(small) firms and innovation in the construct of entrepreneurship's variable and later its impact on<br />
performance. It is the purpose of this paper.<br />
Therefore, while “maintaining” innovation as the core of entrepreneurship, we suggest first that there<br />
can be practical benefits to associate it with the concept of opportunity exploitation (Messeguem<br />
2006). In his dominant formulation it suggests to consider the agent entrepreneur as distinct from the<br />
opportunity source he may exploit (Shane 2003). Nevertheless, rather that considering individuals as<br />
the vehicle of the action we rest on incumbent firms. This is in accordance with an emerging literature<br />
elaborating on the entrepreneurial engagement of the whole firm. Second, the interest in firms<br />
entrepreneurial activities matches a popular concept of absorption capacity (Cohen and Levinthal<br />
1990) concerned with how firms can innovate from external knowledge that surround them. Data used<br />
for this task also contribute to the singularity of this paper, they will be introduced later. The rest of<br />
the paper is organized as follows.<br />
The next section synthesizes our empirical strategy. It briefly introduces the rationale of<br />
entrepreneurship, highlights the case for firms and discusses the model to regress. The third one<br />
presents data and variables while the last one is concerned with results of the baseline model and<br />
conclusion follows.<br />
2. Empirical strategy<br />
2.1 The rationale of entrepreneurship<br />
2.1.1 Firm in the realm of entrepreneurship<br />
There would not have any problem to introduce firm if the ongoing subject was innovation for it is<br />
commonplace that incumbent firms can be involved in innovative activities. Nevertheless the world of<br />
“economists” restraining entrepreneurship to individuals, the popular view on relation between<br />
entrepreneurship and firm considering the second as an outcome of the first, this paragraph is<br />
necessary. Let us recall it is a specific view relating entrepreneurship to organization creation (Gartner<br />
1990) and excluding that firms can be part of it. The fact is that incumbent firms also create<br />
organizations and are involved in entrepreneurship in the sense of innovation.<br />
Economist are very slow in considering this type of entrepreneurship even if they had no problem with<br />
their involvement in innovative activities. It is not the case with scholars issued from the managerial<br />
side (Zahra, Jennings, Kuratko 1999). In this paper we shall consider the whole firm - and not a part –<br />
as an economic agent capable of entrepreneurial acts.<br />
2.1.2 Opportunity and entrepreneurship<br />
Opportunity has come to gain in popularity in entrepreneurship. While its origin can be founded in<br />
Austrians (Kirzner 1979; Casson 1982) it had been diffused those days with works of authors such as<br />
Shane who considers, entrepreneurship as a process consisting in discovering and exploiting<br />
opportunities. “Discovery” is not without importance since it suggests that exploitation is not<br />
constrained to firms’ opportunity production and opportunities are distinct from entrepreneurial agents.<br />
Our project of formalization will therefore take care of distinguishing – both in data and variable -<br />
“opportunities” from “agents” exploiting. In that conception, opportunities are related to change and<br />
are of three major origins : social , political and technological (Shane 2003). The last one has inspired<br />
a proficient literature through the theme of technological change, as it is concerned with capitalism<br />
transformation.<br />
For this School (Neo-schumpeterians), opportunities do not exist by their self and must be created. It<br />
claims for the advent of a particular context to secure exploitation for creating firms (or organizations)<br />
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(Teece 1986). Not concerned with those specific conditions, we acknowledge that even if all those<br />
conditions of appropriability, etc. were set up, producing firms could not both exploit the entire new<br />
knowledge and control its external effects since spillover exist. The later constitutes an opportunity<br />
source which diffuses and benefits to agents not directly involved in their production; the query on if<br />
they have the means for exploitation is another one. Specific sources that can be measured have<br />
been identified.<br />
2.1.3 Instrumentalizing absorptive capacity<br />
We have elaborated on entrepreneurship as involvement in innovation and need to introduce<br />
“absorptive capacity”, to complete the framework. It matches innovation, but yet it doesn't for<br />
entrepreneurship.<br />
As soon as one considers opportunities exploitation, and innovation as two of the features of<br />
contemporary entrepreneurship, absorptive capacity appears as assembling them. For a firm it<br />
captures the idea that the success in innovation is constrained to the ability to recognise the value of<br />
external knowledge, assimilate and apply it to commercial ends. It can therefore be useful to empower<br />
entrepreneurship studies and analyse its economic impacts. We want here to instrumentalize firmlevel<br />
considerations for aggregated ones - industrial or macroeconomic – by assessing how it matters<br />
for a group or category of firms.<br />
Formulating such a project remains a challenge since it necessitates to introduce complex<br />
considerations and components such as institutions or infrastructures necessary to obtain<br />
multiplicative effects happening at that level (Criscuolo and Narula 2008). Nevertheless its<br />
achievement goes beyond this simple paper which want to analyse a "specific moment" in<br />
opportunities exploitation and asses its impacts on economic performance. It will therefore lead to<br />
partial observations since the lack of some components for a close formalization will certainly affect<br />
the power of the model below.<br />
2.2 Recalling main economics' issues<br />
2.2.1 <strong>Entrepreneurs</strong>hip and economic performance<br />
“Economic performance” is generally measured either in terms of the standard of production or the<br />
rate of growth - even if there can be other measures. We are concerned with performance at country<br />
and industrial level, our data documenting the two dimensions.<br />
Yet, a voluminous literature attempts to explain it by innovation but, very limited papers are<br />
simultaneously concerned with entrepreneurship. Interested in innovation to, this paper wishes to<br />
introduce entrepreneurship among growth determinants suggest to distinguish inventive activities,<br />
new knowledge production (that means sources of opportunities) from their specific process of<br />
exploitation. They will not create value unless they had been turned into innovation.<br />
2.2.2 A case for firms' sizes<br />
In this attempt we are inspired by contributions issued from SF literature (Audretsch 1995). According<br />
to them there is no doubt on entrepreneurial qualities of SF and they can be used to proxy the<br />
capacity of an industry, a country or a region to pursue entrepreneurial activities. It can be stated as<br />
follows: the level of SF presence in any industry, nation or region, coupled to their involvement in<br />
innovative activities, can help to proxy the entrepreneurial dynamism of that industry region or country<br />
: it is entrepreneurial capacity (henceforth EC).<br />
EC does not constitute a guarantee for the advent of innovation but suggest a probability for. Taking it<br />
as a premise does not mean that we agree with it. It helps us in distinguishing among firms more<br />
disposed to be involved (or not) in entrepreneurial behaviour. We will see that size as external feature<br />
help in sorting firms into categories so that they can be introduced in models.<br />
We could have done differently but as a departing point, it helps in introducing other views of<br />
entrepreneurship, not restricted to small size.<br />
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2.3 Statistical method<br />
Emeran Nziali<br />
2.3.1 Opportunity exploitation as entrepreneurship<br />
Formalize opportunity exploitation and test its impact on economic performance necessitates to<br />
distinguish the two components of the process : firms and opportunities sources. <strong>Entrepreneurs</strong>hip<br />
happens when firms transform technological knowledge into economical value. If so, the<br />
corresponding variable will enter the regression with a significant coefficient as codified in the model<br />
below.<br />
2.3.2 The model<br />
The idea behind the model is to capture interactions between the main variables. For this we use<br />
interaction models techniques necessitating the inclusion - in the regression - of a multiplicative term<br />
constituted by the two variables (Friedrich 1982).<br />
The model states that performance ( perf ) depends on interactions between opportunities (variable<br />
know ), and the entrepreneurial category of firms ( capent is the variable of EC ). It is formalized by<br />
the crossed variable capent × know and rest on the idea that firms are capable of absorption<br />
(exploitation).<br />
perfip, t = β0 + β1 capentip, t −1 × knowip, t −1 + β2 capentip, t −1 + β3 knowip, t −1 + β4 −icontrolsip, t −1<br />
+ ε<br />
(1.1)<br />
capent × know is a multilevel variable whereas others are low-order ones. Presence of single<br />
variables capent and know obey to setting rules of this kind of model, and controls to the general<br />
assessment of this specific regression.<br />
Our dataset documents the evolution of groups of firms - relating to their size - in economic activities<br />
performed in different industries (i) and countries (p). We lag the exogenous of one period to control<br />
for the endogeneity. We give more details below and introduce corresponding variables.<br />
2.3.3 Assessing the impact of Opportunities<br />
While the main variables may interact, we do not exclude their respective influences to be of different<br />
intensities. Their interpretation can be of particular interest, necessitating therefore the computation of<br />
marginal effects of one variable conditionally to the other (Brambor, Clark and Golder 2006). The<br />
marginal effect of a variable is the derivative of a function of that variable resulting from the preceding<br />
estimate, the other variable being considered as constant.<br />
The theoretical background of this paper suggesting to highlight conditions for exploitation to happen,<br />
we will first be interested in marginal effect of opportunities ( emK ) on Performance – conditional to<br />
specific values of capent . Its formula appears below :<br />
∂E(<br />
perf / capentX )<br />
=β � �<br />
2+β 1capentX<br />
∂know<br />
(1.2)<br />
The marginal effect of opportunities ( emK ) will therefore helps in appreciating the impact on<br />
performance of an increase in one unit of opportunities conditionally to specific values of capentX .<br />
3. Other quantitative elements<br />
3.1 Data and variables<br />
To regress these models, estimate and test their coefficients, we need the measures of: (i)<br />
performance (ii) EC (iii) opportunities sources and (iv) Controls. Data relate to seven OECD countries<br />
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(France, Germany, Finland, Denmark, Italy, Great Britain and United States), and eighteen<br />
manufacturing industries at the two digit level (ISIC Rev. 3) over the period 1989 - 1995. They are<br />
collected from different datasets such as: "OECD Firm level project" (Scarpeta, Hemmings, Tressel<br />
and Woo 2002) or ANBERD (Analytical Business Enterprise Research and Development).<br />
A minimal sorting of data was realised so that the sample could be the least distorted. Tables below<br />
present details on manufactures (Table 1) and descriptive statistics (Table 2). Next paragraphs<br />
introduce variables.<br />
Table 1: List of industries (ISIC Rev.3*) and countries<br />
ISIC code Industry names Country names<br />
15-16 Food, drink & tobacco Denmark<br />
17-19 Textiles, Clothing, Leather and footwear Finland<br />
20 Wood & products of wood and cork France<br />
21-22 Pulp, paper & paper products, printing & publishing Italy<br />
23 Mineral oil refining, coke & nuclear fuel Germany<br />
24 Chemicals Great-Britain<br />
25 Rubber & plastics United States<br />
26 Non-metallic mineral products<br />
27 Basic metals<br />
28 Fabricated metal products<br />
29 Mechanical engineering<br />
30 Office machinery<br />
31 Electrical machinery and apparatus nec<br />
32 Radio, television and communication equipment<br />
33 Medical precision and optical instruments<br />
34 Motor vehicles<br />
35 Other transport equipment<br />
36-37 Furniture, miscellaneous manufacturing; recycling<br />
*ISIC : Industry Standard International Classification, United Nations 1989<br />
Table 2: Variables and descriptive statistics<br />
Exogeneous Exogeneous Endogeneous<br />
Name Definition Mean Std Dev Min Max<br />
Performance measures<br />
vagr value added growth rate 0.033 0.155 -0.456 1.730<br />
prodgr productivity growth rate 0.058 0.176 -0.585 1.832<br />
Interaction variables<br />
know Share of knowledge production expenditures 2.787 3.583 0.001 18.977<br />
capentX Employement share of firms with less than X<br />
employees<br />
capent20 0.139 0.11 0.001 0.619<br />
capent50 0.249 0.159 0.001 0.796<br />
capent100 0.342 0.189 0.020 0.899<br />
capent500 0.586 0.237 0.035 0.985<br />
Other controls<br />
indushr value added share of an industry 0.210 0.611 0.001 4.392<br />
investgr investment growth rate 0.934 1.790 -1.155 17.687<br />
privo ratio of credits issued to the private sector 0.775 0.232 0.321 1.143<br />
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3.1.1 Endogenous<br />
Emeran Nziali<br />
To measure perf , we retained two variables : the growth rate of value-added ( vagr ) on one hand,<br />
and that of productivity ( prodgr ) on the other.<br />
vagr is obtained while calculating for each industry and country, the ratio of the value added of the<br />
actual year on that of the past year all subtract from one; prodgr parallels the former on the method<br />
of calculus, industries and countries.<br />
3.1.2 Components of entrepreneurship and Variable of test<br />
EC : capentX is the first explanatory variable. Each firm has its own absorptive capacity therefore it<br />
simply proxies an autonomous capability necessary to discover and exploit opportunities at an<br />
aggregate level. We have already motivated our choice to build it on the basis of SF’ presence. It is<br />
obtained by doing - for each year – the ratio of the number of employed persons within firms of less<br />
than " X " employees to the total employment of each country or industry. " X " takes the value : 20;<br />
50; 100 or 500 corresponding to different classes of firm size; 20 is the main and the others help in<br />
checking the robustness.<br />
New knowledge: know It is our measure of opportunity sources. It is the share of total expenditures<br />
of research and development (R&D) in production. It is an estimate of efforts realized by each industry<br />
to increase the volume and quality of its knowledge.<br />
On the basis of those variables, we have builded our variable of test:<br />
3.1.3 Controls<br />
capentX × know .<br />
Previous researchers have identified a variety of variables that can influence economic performance.<br />
We introduce some of them so that the hypothesized effects of capentX × know on performance<br />
could exist over them.<br />
empshr (employment share) controls the effects of convergence. It is the share of each country’s<br />
industry new employees in the total volume of employment for the precedent year.<br />
investgr : investment growth rate. Investments of previous periods used to impact performance of<br />
future periods.<br />
privo : various institutions are likely to influence economic performance. One of the most important<br />
relates to finance. We stated that the propensity for a firm to finance its activity increases with the<br />
level of credit issued from financial institutions. The proxy for financial environment will thus be the<br />
ratio of credit to private sector to nominal Gross Domestic Product (Levine, Loayza and Beck 2000). It<br />
is the same in a country for all industries.<br />
We add for each industry and/or year, and/or country a dummy to control for specific phenomena that<br />
can influence performance and are not mentioned here. Rewriting the model presented above by<br />
introducing its corresponding variables we obtained:<br />
(1.3)<br />
perfip,t =β 0+β 1capentip,t -1 × knowip,t<br />
-1<br />
+β capent +β know +β empshr +β privo<br />
2 ip,t -1 3 ip,t -1 4 ip,t -1 5 p,t -1<br />
I -1 P-1 T -1<br />
∑ ∑ ∑<br />
+λ indus + λ pays + γ +ε D<br />
i i p p t t ip,t<br />
i p<br />
t=1<br />
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3.2 Factors to test<br />
3.2.1 Principal and low-order effects<br />
Emeran Nziali<br />
When interesting ourselves in testable coefficients, we need to distinguish between the coefficient of<br />
interacting terms and those of low-order variables, and between principal and marginal effects.<br />
Contrary to the additive models where coefficients of independent variables describe average effects,<br />
here they describe effects of an exogenous on the endogenous when other exogenous have<br />
particular values: they are all coefficients β2−5 . They reflect particular situations which are not subject<br />
to general interpretations, and largely useless for the purpose under test (Braumoeller 2004). We will<br />
not interest ourselves in them, in the profit of the solely coefficient β1 of capentX × know and later<br />
their marginal effects.<br />
3.2.2 Interaction effects<br />
β 1 , the coefficient of the crossed variables relates the main effect of the model. If it is not significant,<br />
existing opportunities does not specifically benefit to third (small or large) firms. <strong>Entrepreneurs</strong>hip<br />
does not have a major impact on performance. There can be many reasons to it, knowledge does not<br />
diffuse well, is specific, or the group of SF under investigation does not meet the required conditions<br />
for absorption. Producing internal new knowledge will therefore be an important condition to enter<br />
entrepreneurship.<br />
If β 1 is significant there are two possibilities. If positive, there is a complementarity between<br />
entrepreneurship components since Knowledge benefits to small incumbents firms, not producing it.<br />
If negative, knowledge benefits only to producing firms (we hypothesized it is large ones). Diffusion<br />
has occurred but its effect contradicts SF projects. It has a global reducing effect on performance : it is<br />
substitution.<br />
In each of these cases it is necessary to consider and estimate marginal effect.<br />
3.2.3 Marginal effects<br />
Statistical analysis of coefficients is made on the basis of conditional standard deviations<br />
correspondents and specifically estimated for various values of the conditional variable. It is done on<br />
the basis of the ratio obtained by dividing the estimated marginal effect by its standard deviation.<br />
Significance will depend on the analysis of the conditional standard deviations to :<br />
� β �<br />
2 + β1<br />
capentXip,<br />
t<br />
� 2<br />
� � � 2<br />
σ � � �<br />
β � �<br />
2β + capentX 2 ip, t σ β 2capentX<br />
1β+ 1 ip, t σ β1β2 (1.4)<br />
� σ µδ is the covariance of the sample between μ and δ. We will evaluate these effects and their<br />
significance for the minimum, one deviation under and over the mean, the mean, and the maximum of<br />
each conditional variable.<br />
Marginal effect being a linear function, to assess its whole impact, we need to obtain more than the<br />
specific values suggested above but also its trend for various values of the conditional variable. We<br />
will synthesize them in tables - estimates codified for their positive, negative or non significant values.<br />
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4. Results<br />
4.1 Main results identifying<br />
4.1.1 First and general results<br />
Emeran Nziali<br />
We carried out regressions with ordinary least squares techniques, and consigned the results in<br />
tables 3, 3bis, 5 and 6 below. Table 3 presents the results of tests of the effects of entrepreneurship<br />
using vagr as endogenous while Table 3bis is concerned with prodgr . There are various regressions<br />
according to the inclusion or not of dummies for fixed effects. Combinations go from (1) to (8) for<br />
temporal, industry, or country effect solely or a mix of them.<br />
Let us consider Table 3 when “20” is the firm size limit and there are no fixed effects. It corresponds to<br />
model (1) with capent 20 as proxy of EC. The interaction variable enters the regression with a non<br />
significant coefficient suggesting no opportunities exploitation and no impact of entrepreneurship on<br />
Performance. One can observe that this result does not change, when we consider other<br />
combinations of fixed effects (regressions (2) to (8)) in the lines of “20”.<br />
Therefore SF considered at that level do not benefit from externalities coming from that opportunities<br />
sources. Maybe they are successful in exploiting other sources different from the one we introduced.<br />
It also suggests that neither small nor large firms do have any advantage in exploiting external<br />
knowledge. In the following we will examine results obtained with other varieties of capentX ,<br />
combinations of fixed effects and assess respective influences of components of the interacting<br />
variable.<br />
Table 3: <strong>Entrepreneurs</strong>hip and Economic performance<br />
Firm size < 20<br />
Firm size < 50<br />
Firm size < 100<br />
Firm size < 500<br />
Table 3 : <strong>Entrepreneurs</strong>hip and Economic performance<br />
Total of seven countries, Interaction variables capentX x know<br />
Endogeneous : value added growth rate (vagr)<br />
Models<br />
(1) (2) (3) (4) (5)<br />
(6) (7) (8)<br />
Capent 20 -0.027 -0.048 0.014 -0.023 0.012 -0.048 0.028 -0.006<br />
(0.72) (1.03) (0.30) (0.60) (0.16) (1.07) (0.57) (0.09)<br />
Know -0.018 -0.183 -0.014 -0.026 -0.147 -0.101 -0.022 -0.067<br />
(0.69) (1.43) (0.59) (1.09) (1.19) (0.71) (1.00) (0.50)<br />
capent20 x know 0.009 0.006 -0.035 0.008 -0.035 0.004 -0.037 -0.037<br />
(0.33) (0.22) (1.31) (0.29) (1.24) (0.15) (1.45) (1.39)<br />
Capent50 -0.041 -0.058 -0.018 -0.038 -0.029 -0.053 -0.007 -0.036<br />
(1.34) (1.48) (0.45) (1.25) (0.47) (1.44) (0.19) (0.63)<br />
Know -0.020 -0.182 -0.018 -0.028 -0.144 -0.100 -0.025 -0.064<br />
(0.80) (1.41) (0.78) (1.20) (1.16) (0.70) (1.21) (0.48)<br />
capent50x know 0.009 0.007 -0.026 0.009 -0.027 0.007 -0.026 -0.027<br />
(0.52) (0.42) (1.59) (0.53) (1.53) (0.40) (1.68)* (1.62)<br />
Capent100 -0.039 -0.048 -0.014 -0.039 -0.006 -0.045 -0.011 -0.017<br />
(1.42) (1.44) (0.39) (1.46) (0.12) (1.45) (0.30) (0.35)<br />
Know -0.019 -0.183 -0.015 -0.028 -0.147 -0.101 -0.024 -0.067<br />
(0.75) (1.42) (0.69) (1.17) (1.18) (0.70) (1.16) (0.49)<br />
capent100 x know 0.014 0.014 -0.013 0.014 -0.012 0.013 -0.013 -0.013<br />
(1.10) (1.07) (1.09) (1.10) (0.99) (1.05) (1.20) (1.07)<br />
Capent500 -0.041 0.015 -0.024 -0.049 0.003 -0.048 -0.032 -0.012<br />
(1.56) (1.78)* (0.60) (1.87)* (0.06) (1.59) (0.85) (0.24)<br />
Know -0.020 -0.185 -0.013 -0.029 -0.150 -0.103 -0.022 -0.069<br />
(0.80) (1.44) (0.59) (1.26) (1.20) (0.72) (1.11) (0.50)<br />
capent500 x know 0.015 -0.048 0.000 0.014 0.000 0.014 -0.000 0.000<br />
(1.80)* (1.47) (0.03) (1.81)* (0.05) (1.76)* (0.03) (0.02)<br />
Dummy_year no no no yes no yes yes yes<br />
Dummy_country no yes no no yes yes no yes<br />
Dummy_Industry no no yes no yes no yes yes<br />
* significant at 10%; ** significant at 5%; *** significant at 1%<br />
Robust t statistics in parentheses; Absolute value of t statistics in parentheses<br />
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4.1.2 Sensitivity to different limit of small size<br />
Emeran Nziali<br />
We also considered respectively, “50” “100” and “500” as limits of SF size; capentX<br />
becoming capent 50 , capent 100 or capent 500 . For the first two variables and model of type (1),<br />
results obtained are not different than those above with capent 20 . Nevertheless, with capent 500<br />
the coefficient is positive (.015) and significant (10%). In other words there is no effect of<br />
entrepreneurship on performance unless we consider “500” as the limit for small size.<br />
We should be careful in interpretation that results. Since adopting “500” as firm size limit leads to a<br />
positive and significant coefficient, it does not mean that it is to be considered as pertinent (or optimal)<br />
limit size to reap the benefits of external knowledge. One must distinguish between the dataset under<br />
analysis, and countries or industries composing it. Subsequent works need to be realised with data<br />
conformed with their specific context to assess the implications of this result for specific industries or<br />
countries for at least two reasons.<br />
First the standard deviation of capent 500 and the gap between minimal and maximal values still<br />
important, suggesting it is not common to all countries our industries. Second, capent 500 and other<br />
capentX being highly correlated, it suggest that absorption become possible when the cumulated<br />
contribution of SF – to total employment volume - reaches a critical level. Yet, such a ratio can be<br />
reached for limits different from “500” with datasets specific to country or industry. Therefore the<br />
message behind the significance of capent500 is simple : the expected relation can exist elsewhere<br />
since it already exists in our mixed dataset. It must nevertheless be considered as contextual since it<br />
does not exist a level of SF presence matching all countries or industries.<br />
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Emeran Nziali<br />
4.1.3 Sensitivity to controlling different country and industry effect<br />
Controlling for industry our country effects, solely or simultaneously, seems to have the same impact<br />
with “20”, “50” and “100” as limits of small size, but it does not with “500”. In fact the significant<br />
coefficient of capent500 × know is obtained for regressions (1), (2), (4) and (6) corresponding to<br />
regressions where industry effects are not controlled – significance disappearing when it is the case<br />
independently of the type of combinations with other fixed effects. Accordingly it appears that<br />
controlling industry effects diminishes the probability to observe absorption.<br />
4.2 Relative contribution of entrepreneurship components<br />
4.2.1 Marginal effect of entrepreneurial capacity<br />
We have noticed above an absence of absorption except for the limit case of “500”. What do the data<br />
tell us about the respective influences of entrepreneurship’s components and their effects on<br />
performance for this last case and others ? We need for this to move to marginal effects (Tables 5<br />
and 6).<br />
Tables do not report the estimates but tell us about their significance and the slope of the function. In<br />
the first case it indicates "0" for non significant, "1" for a significant and positive and "-1" for significant<br />
and negative. In the second case it indicates if the slope is increasing or decreasing.<br />
Results are classified according to the type of model ((1) to (8)), there's a panel (A, A’, etc.) for each<br />
firm size and distinctive columns for vagr (left) and prodgr (right).<br />
Let's begin with marginal effect of EC ( emEC ). For capent 20 , it tells about the effect - of a one unit<br />
increase - on vagr for given values of know .The first panel of Table 5 presents a list of “0” meaning<br />
that estimates of emEC are not significant. Variations in the level of SF presence do not globally<br />
change the trend for any value of opportunities. What about the marginal effect of know ( emK )?<br />
4.2.2 Marginal effect of opportunities<br />
Estimates of marginal effects of opportunities are reported in Table 6. Contrary to Table 5, the panel<br />
of “20” (E’) in Table 6 sets a large number of “1” suggesting that a one unit increase in know has a<br />
positive impact on vagr for values of capent 20 spanning from the minimum to the “mean+std.err”<br />
(regressions (1) and (2)); one can also observe that the corresponding slope is positive.<br />
For regressions (3),(7) and (8) - models with non significant coefficient - emK takes negative values,<br />
but the slope is negative suggesting the negative effect is limited when we move towards important<br />
value of capent 20 . The presence of these two types of marginal effects emK > 0 and<br />
emK < 0 suggest to pay attention to the industry content of the dataset. In spite of a global increase<br />
of opportunities is good to performance, it remains that specific technological context still important.<br />
It is so because of the structure of our dataset. Otherwise results could be different with data not<br />
distinguishing between industries. One must be careful with universal discourses on entrepreneurial<br />
capacity of SF when conditions on opportunities are not known.<br />
4.2.3 Comparing firms and opportunities<br />
One can deduce from these observations on emEC and emK that economic agents (firms) and<br />
opportunities are not equal in the entrepreneurial process. It could have been trivial since a condition<br />
for exploitation is to have opportunities rather than SF. Nevertheless, SF are important but not more<br />
than other agents which can also be involved in exploitation; the most important remaining<br />
accessibility to opportunities.<br />
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Emeran Nziali<br />
Table 5: Synthesized marginal effects of entrepreneurial capacity on performance (emK)<br />
Table 6: Synthesized marginal effects of technological opportunities on performance (emK)<br />
5. In Conclusion<br />
Before concluding we must add that we have also examined the results obtained with the second<br />
endogenous prodgr . It confirms those obtained with vagr .<br />
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Emeran Nziali<br />
In the following of Audrestch and Thurik introducing SF as entrepreneurial agents of the<br />
contemporary period, this paper suggest to be careful in using this discourse with any regard on the<br />
hosting context. Once opportunities exist, SF are involved in the process of exploitation but nothing<br />
tell us they are better in that than other agents (here large firms). It uses new data and quantitative<br />
method, with a conception of entrepreneurship opportunity oriented.<br />
The reduced or nonexistent impact of an increase of one unit of capentX (EC) on performance, is so<br />
because data do not tell us about the relation between firm size and absorptive capacity. Therefore<br />
any interest in variations in SF presence dissociated from its counterpart in term of absorptive<br />
capacity will be less powerful to our understanding of entrepreneurship and its impact. There is in this<br />
material for policies of entrepreneurship.<br />
This study has been realized on data covering the 1988 – 1995 period, it could be necessary to use<br />
more recent data to validate the results. To reach specific results on critical levels of SF presence<br />
more studies need to be realized on longitudinal data specific to countries and industries if SF<br />
entrepreneurship appears to be relevant.<br />
References<br />
Audretsch, D. and Thurik, Roy, (2002) “Linking <strong>Entrepreneurs</strong>hip to Growth,” OECD STI Working Paper, 2081/2.<br />
Alvarez, S.A., and Barney, J.B. (2007) Discovery and creation: Alternative theories of entrepreneurial action.<br />
Strategic <strong>Entrepreneurs</strong>hip Journal, Vol1, pp 11-26.<br />
Brambor Thomas, Clark William and Golder Matt (2006) "Understanding Interaction Models: Improving<br />
Empirical Analyses." Political Analysis, Vol14: pp 63-82.<br />
Braumoeller, F. (2004) "Hypothesis Testing and Multiplicative Interaction Terms". International Organization,<br />
Vol58, No.4, pp. 807-820.<br />
Bygrave W.D. and C.W. Hofer (1991) "Theorizing about <strong>Entrepreneurs</strong>hip“, <strong>Entrepreneurs</strong>hip Theory and<br />
Practice, Vol16, No.2.<br />
Casson, Mark C. (1982) The Entrepreneur: An Economic Theory, Oxford: Martin Robertson,2nd. ed. Edward<br />
Elgar.<br />
Cohen, W., and D. Levinthal (1990) “Absorptive Capacity: A New Perspective on Learning and Innovation”’,<br />
Administrative Science Quarterly, Vol35 No.1, pp 128–152.<br />
Drucker P. F (1985) Innovation and <strong>Entrepreneurs</strong>hip, New York, Harper and Row.<br />
Friedrich, R. (1982) "In defence of multiplicative terms in multiple regression equations", American Journal of<br />
Political Science, Vol26, No.4, pp. 797-833.<br />
Gartner W. B. (1995) “Aspects of Organizational Emergence”, in Bull and al., <strong>Entrepreneurs</strong>hip – Perspectives on<br />
Theory Building, Pergamon.<br />
Gartner W.B. (1988) “Who is an entrepreneur? is the wrong question”, American Journal of Small Business,<br />
Gartner, William B. (1990) “What are we talking about when we talk about <strong>Entrepreneurs</strong>hip?“ Journal of<br />
Business Venturing, Vol5 No.1, pp 15-28.<br />
Kirchhoff, B.A. (1991) <strong>Entrepreneurs</strong>hip's contribution to economics. <strong>Entrepreneurs</strong>hip Theory and Practice,<br />
Vol16, No.2, pp 93-112.<br />
Kirzner I.M. (1979) Perception, Opportunity, and Profit. University of Chicago Press: Chicago, IL.<br />
Langlois, R.N. (2007) The entrepreneurial theory of the firm and the theory of the entrepreneurial firm. Journal of<br />
Management Studies.<br />
Levine, R.N., Loayza and T. Beck (2000) Financial Intermediation and Growth: Causality and Causes. Journal of<br />
Monetary Economics, Vol46, pp 31– 77.<br />
Messeghem K. (2006) “L’entrepreneuriat en quête de paradigme : apport de l’école autrichienne”, 8e Congrès<br />
International Francophone en Entrepreneuriat et PME.<br />
Criscuolo P. and Narula, P., (2008) "A novel approach to national technological accumulation and absorptive<br />
capacity: aggregating Cohen and Levinthal," European Journal of Development Research, Taylor and<br />
Francis Journals, Vol20 No.1, pp 56-73.<br />
Parker SC. (2004) The Economics of Self-employment and <strong>Entrepreneurs</strong>hip. Cambridge University Press:<br />
Cambridge, MA.<br />
Shane S. (2003) A General Theory of <strong>Entrepreneurs</strong>hip: The Individual—Opportunity Nexus. Edward Elgar:<br />
Cheltenham, U.K.<br />
Stevenson H.H. and Jarillo J.C. (1990) “A Paradigm of <strong>Entrepreneurs</strong>hip : Entrepreneurial Management”,<br />
Strategic Management Journal, Vol11, pp 17-27.<br />
Teece, D.J., (1986) Profiting from technological innovation. Research Policy, Vol15, No.6, pp 285–305.<br />
Verstraete T. et Fayolle A. (2005) “Paradigmes et entrepreneuriat” , Revue de l’Entrepreneuriat, Vol4, No.1, pp<br />
711
The Issues Surrounding the Delivery of <strong>Entrepreneurs</strong>hip<br />
Education are Evident at all Levels of Education<br />
Breda O’Dwyer and Clare Rigg<br />
Institute of Technology, Tralee, Ireland<br />
Abstract: There is a great body of literature on the theory of innovation, how people collaborate and the role,<br />
structure and types of innovation ecosystems that occur (Rhodes, 1961; Johnson, 1972; Isaksen, Dorval &<br />
Treffinger, 1994; Davila, Epstein & Shelton, 2006). “There is a great body of literature on the theory of<br />
innovation, how people collaborate and the role, structure and types of innovation ecosystems that occur. While<br />
many companies consider themselves innovative, most lack a common lexicon for understanding how their<br />
investments in innovation translate into business value”, De Cusatis, IBM (2010). The same may be said of<br />
educational providers, who might ‘advocate’ creativity within the content of educational programmes whilst<br />
providing a different reality at a strategic and operational level. Taking empirical examples of entrepreneurship<br />
education at all levels in Ireland, this paper aims to explore the way institutional practices can work against the<br />
espoused desire for better approaches to fostering and implementing creativity through the delivery of<br />
programmes. Bureaucracy, lack of funding, use of traditional and proven (albeit dated) practices of course<br />
development, poor planning, lack of consultation, fear of stepping outside the comfort zone and failure to ‘think<br />
outside the box’ have stunted the growth of entrepreneurial approaches to education. It is possible to view these<br />
negative practices as immovable concrete barriers and accept them as a ‘fait accompli’. On the other hand it is<br />
possible to regard them as high level hurdles which can be conquered through a creative and innovative<br />
approach. Creativity and innovation underpins real time entrepreneurship and hence entrepreneurship educators<br />
need to be creative and innovative in its delivery albeit in the academic environment. The structure of this paper<br />
is as follows: the next section presents the empirical context of entrepreneurship education in Ireland, followed by<br />
an overview of our conceptual thinking. The paper then discusses the methodology applied in this research to<br />
date. The initial findings of the perceived blocks towards entrepreneurship education across three different levels<br />
of education are then presented. This is followed by a conclusion which includes an innovative model towards<br />
entrepreneurship education and recommendations for future research.<br />
Keywords: Creativity in Education; Barriers to entrepreneurship education; Multi- Level Delivery<br />
1. Introduction<br />
Following practical based research a group of individuals representing industry and education in<br />
County Kerry, Ireland joined forces to a creative and innovative approach to entrepreneurial<br />
education. The second and third level (university level) initiatives began in 2007 under the<br />
programme referred to as The Young Entrepreneur Programme www.youngentrepreneur.ie . This<br />
was the direct result of the combined efforts of academia and industry. The founding partners are the<br />
Institute of Technology, Tralee, Shannon Development and the successful global entrepreneur and<br />
founder of Tweak.com, Jerry Kennelly. The primary school programme was launched by these<br />
partners in 2010 in partnership with Mary Immaculate College (an Irish based teacher training college)<br />
and can be seen in www.juniorentrepreneur.ie. The philosophy of these programmes is about<br />
fostering and nurturing entrepreneurship at a younger age, providing the participants with lifelong<br />
learning skills. The frequent and interactive approach applied by the programme between the<br />
educators, participating students and entrepreneurial mentors has created an equal empathy by all for<br />
the challenges faced in the development and implementation of an entrepreneurial culture and<br />
environment. This has resulted in the removal of the apparent concrete blocks and replacing them<br />
with a ‘can do’ attitude, viewing them as simple hurdles which need to be overcome.<br />
The pedagogical approach adopted is one of problem solving, with a real understanding that its<br />
implementation in the education environment is one of significant behavioural change. This<br />
innovative model of entrepreneurship education is iterative. It is evolving. Part of its innovativeness is<br />
the fact that it is equally informed by educators and business in real time. Most importantly its<br />
innovativeness is exhibited in its focus on adding value to the participants by lowering the barriers to<br />
entrepreneurial education using a collaborative approach to optimise impact at an educational<br />
institutional level. This is in agreement with Henry Ford, who is quoted as having once said that<br />
“Coming together is a beginning, Keeping together is progress, Working together is success”,<br />
BrainyQuote.com.<br />
2. Conceptual background<br />
The call for entrepreneurship education to foster and develop creativity within individuals has been<br />
widely made. Gelb (2000) proposes the Leonardo da Vinci method of creativity which incorporates:<br />
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� Curiosita – constantly curious<br />
� Dimonstrazione -test<br />
� Sensazione- elaborate senses<br />
� Sfumato- comfortable with ambiguity<br />
� Arte/scienze – whole brain thinking<br />
� Corporalita – sharpen the saw<br />
� Connessione – connectivity.<br />
Breda O’Dwyer and Clare Rigg<br />
The da Vinci method is founded on an holistic approach to creativity. This approach recognises the<br />
need to welcome ambiguity and to use this to investigate a number of solutions to the problem at<br />
hand. It acknowledges the synergy of different inputs from different strata in the identification of a<br />
solution. The need for each participant to be willing to contribute and to learn is important as each<br />
one becomes more astutely aware of the other’s limitations and challenges, underpinned with multiple<br />
opportunities.<br />
Schaefer (1973) believed that being creative requires us to:<br />
� Deliberately remove barriers of tradition and habit that block creativity<br />
� Examine and remove perceptual barriers<br />
� Recognise and remove emotional barriers<br />
� Recognise and overcome limited resources<br />
� Practice divergent thinking<br />
� Practice convergent thinking<br />
� Pursue new experiences<br />
� Make time to think<br />
� Collaborate<br />
� Make time to study.<br />
According to Schaefer creativity takes time and a willingness to charter new territories – collectively.<br />
<strong>Limited</strong> human, capital and or financial resources will challenge the implementation of certain<br />
solutions. Furthermore, solutions will be driven by emotional inputs and subjective thoughts. It is<br />
critical that all solutions are welcomed through the divergent thinking process, but the final solution is<br />
selected by applying the convergent process to secure the optimum ‘buy-in’ and successful outcome.<br />
As an entrepreneurship educator, these are ideas we have attempted to implement within<br />
programmes at primary, secondary and third level education. With experience of championing<br />
entrepreneurship education across schools and universities/institutes of technology it has been<br />
striking how varied has been the reception across the different institutions.<br />
Despite these theories of fostering and developing creativity, Amabile (1996) has identified the<br />
following as creativity killers:<br />
� Expected Evaluation<br />
� Surveillance<br />
� Reward<br />
� Competition<br />
� Restricted Choice<br />
� Extrinsic Orientation<br />
The presence of an actual or the perceived presence of expected evaluation of one’s work can hinder<br />
one’s creativity. People who are concentrating on how their work will be viewed or evaluated by<br />
superiors and/or peers are less creative than those who are not worried about such an evaluation.<br />
The presence of an external extrinsic reward/motivation can make the individual feel more pressured<br />
to succeed and this in turn can restrict the creativity being explored and enjoyed in the process. The<br />
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Breda O’Dwyer and Clare Rigg<br />
attention is drawn to the evaluation of the outcome rather than the fun and creative opportunities that<br />
could be created in the absence of the evaluation.<br />
People who are being aware of being watched are less creative than those who are not being<br />
watched. The focus will shift to ‘looking busy’ at the expense of taking time to think and explore ideas<br />
and options and be creative. The quantity of outputs may increase but the quality of the creativity will<br />
decrease. Research by Amabile (1996) has shown that surveillance, whether implied or actual,<br />
increases stress and anxiety in the creative person.<br />
People who are more driven by a larger extrinsic financial reward tend to be less creative due to the<br />
associated increase in accountability and managerial surveillance. There is a direct correlation<br />
between the increase in financial reward and the decrease in the levels of the individual’s creativity.<br />
Studies to date have shown that without personal motivation, outside rewards must be more frequent<br />
and larger in order to maintain the status quo.<br />
Individuals who feel personally threatened by the ability of a colleague will be less creative than those<br />
focusing on the competition. People will need to have personal intrinsic rewards and motivations to<br />
be truly creative. While competition is healthy, it is important that the type of competition promotes<br />
internal motivations in order to optimise individual and overall group creativity. Otherwise the focus<br />
will become about the completion of the competition and not the creativity.<br />
Individuals who have their work restricted or limited in any way will be less creative. The presence of<br />
freedom to choose is particularly pertinent to a person’s creativity. This may require flexibility in the<br />
systems and structures applied in the workplace and/or the process applied in a particular exercise. It<br />
is important that individuals possess the freedom to adopt the process to suit their particular<br />
environment and resources, in order to optimise creativity.<br />
Finally, individuals who think only about the extrinsic rewards associated with their efforts will be less<br />
creative that those who are primarily intrinsically motivated. The focus will be on receiving the<br />
increase in salary, the promotion rather than on thinking of a more creative outcome which may not be<br />
rewarded the increased salary but yet more creative.<br />
Jones (1987) has identified the following as blocks to creativity:<br />
� Inhibiting Problem-Solving Strategies<br />
� Rigid Values<br />
� Lack of Perception<br />
� Poor Self-Image<br />
The strategic barriers that inhibit problem solving strategies are those that limit one’s personal ability<br />
to see solutions or solve problems. These include one’s inability to embrace uncertainty, or to remain<br />
open to alternative solutions suggested by others, and/or the refusal to work with and to allow one’s<br />
imagination to offer new ideas.<br />
The rigid values refer to one’s belief system and are based on what one believes to be right or wrong,<br />
good or bad. Tradition influences one’s beliefs and may act as a block and reduce flexibility in the<br />
exploration of something new, something different. Rigid values may prevent an individual from<br />
embracing change and innovation and rather to stick with what one knows and what has been proven<br />
and tested.<br />
Lack of perception may be due to one’s ability or reluctance to look at something from a totally<br />
different perspective. This may be due to the failure to use all of one’s senses when identifying a<br />
solution and looking at is as one always did in the past. The individual may blame the lack of the<br />
obvious resources to solve the problem as opposed to finding alternative ways around it. Participants<br />
who have found themselves in this situation have reported feelings of frustration, annoyance,<br />
humiliation and/or fear. It is easier to use the traditional way of doing things rather than feeling like<br />
this by experimenting with new ways of doing things.<br />
Poor self-image may prevent creativity by one’s deep sense of fear of failure in putting forward their<br />
opinion and/or solution. The innate sense of possible rejection or the sense of appearing to be<br />
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impolite by offering an alternative has prevented individuals in being creative and contributing to<br />
innovative solutions.<br />
3. Methodology<br />
These killers and blocks to creativity were the focus of this study, which was conducted in the Munster<br />
Region of Ireland across 21 Primary Schools, 22 Second Level Schools, and two third level<br />
institutions: the Institute of Technology, Tralee, and the University of Limerick. Collectively these<br />
educational institutions have delivered entrepreneurship education to approximately 3000 students<br />
since 2007. Our focus was particularly on the institutional barriers which can potentially block and/or<br />
kill attempts to stimulate creativity in entrepreneurship education.<br />
The data for this study was collected through participant observation, journaling and use of<br />
opportunistic feedback from participating clients. It was possible to access information from a number<br />
of the educators at different levels, through the authors’ direct involvement in the design and delivery<br />
of the entrepreneurship programmes at Primary, Secondary and Third level.<br />
In the academic year 2010/2011, these programmes facilitated the interaction between 1,400<br />
students, over 60 educators and 50 business mentors across all three levels of education. The<br />
process involves a curriculum, educator training, mentor training, mentor school visits, templates,<br />
feedback and three seminar type events at the beginning, middle and end of the programmes. The<br />
overarching aim of the programmes is to foster and nurture an entrepreneurial educational<br />
environment through promoting a multi range of lifelong skills as follows:<br />
Technology<br />
Costs<br />
Storytelling<br />
Creative<br />
thinking<br />
Figure 1: Multi-Skills of <strong>Entrepreneurs</strong>hip<br />
4. Early findings<br />
MULTI-SKILL ENHANCEMENT:<br />
Drawing<br />
Writing<br />
Money<br />
Problemsolving<br />
Listening<br />
skills<br />
Teamwork<br />
Presentation<br />
Collaborative<br />
skills<br />
The work of the previous four years has provided a platform for a plethora of research agendas.<br />
These programmes have changed the way the participants think about business. They have changed<br />
the way business interact with education and have the potential to intertwine into the education<br />
curriculum in a formal way – eventually. They have fundamentally acknowledged and collaborated<br />
with the educators in overcoming the challenges witnessed and encountered in the education system<br />
towards being simply - entrepreneurial.<br />
In particular, the blocks to creativity in the educational institutions are of special interest with regards<br />
to growing and revising the initiatives in the future. The initial findings of research to date have<br />
included:<br />
� lack of appropriate physical space for creative thinking and delivery;<br />
� adherence to traditional assessment methods;<br />
� provision of the modules as elective subjects;<br />
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� monolithic versus collaborative approaches to problem solving;<br />
� bureaucratic approaches to course development;<br />
� fear of practical expert input;<br />
� lack of funding,<br />
� intensive timetabling with limited time to foster true innovation<br />
� focus on technical skill enhancement of students as opposed to a holistic personal development.<br />
Each of these findings will now be discussed in detail.<br />
4.1 Lack of appropriate physical space for creative thinking and delivery<br />
“The physical “press” in the context of creativity, means the physical and psychological climate we<br />
operate in. Social, home, or corporation, press affects our ability to use creativity. Press is from the<br />
Latin “pressus” meaning a closet or a container. Press includes all those external and internal<br />
barriers on the workplace that “press” in on us. These factors can either help or hinder us in our<br />
creative pursuit”, (Fox&Fox, 2008, p. 36).<br />
Over the last four years the authors have observed educators operating in the traditional class room<br />
with rows of seats, the teacher’s desk located at the top, typically grey walls, with average natural light<br />
access to the room and the large blackboard situated behind the teacher’s desk. This environment on<br />
first observation does not promote creativity. Educators at the primary level in particular are required<br />
to use their own assigned classroom for all activities throughout the academic year. The educators at<br />
the second and third level have greater flexibility where they have access to other classrooms. It is<br />
possible to hold the class in these rooms as a change of environment but nonetheless the physical<br />
appearance of the rooms is not that different. However, the educators have attempted to overcome<br />
this through the use of the interactive electronic white boards, the introduction of colour into room<br />
through posters or otherwise and sound through the various technology links. Classes may be held in<br />
the assembly hall to allow greater space and room for creative based activities. Furniture in the<br />
rooms may be rearranged to facilitate group thinking and idea generation and development.<br />
According to one educator “this is great – but it is so much hassle. It is highly time consuming and<br />
making the space conducive to creativity requires a lot of effort and commitment – but the children<br />
learn so much from it and that makes it all worthwhile”.<br />
Other educators do not engage in this because they feel that it is not their responsibility to create this<br />
space and regard its absence as a negative influence and simply disengage from the activity and/or<br />
the promotion of it. The apparent lack of enthusiasm would appear to increase as one progresses<br />
from the various levels of education, primary to secondary to third level. Although it is possible to<br />
overcome this, the sustainability and the longevity of entrepreneurial based education are at risk.<br />
4.2 Adherence to traditional assessment methods<br />
It is possible to draw an analogy between entrepreneurial based education and that of problem based<br />
learning. It is also possible to include the concept of action based learning which has the ability to<br />
solve complex problems and to significantly increase the speed and quality of individual, team and<br />
organisational learning. Whatever approach to innovation in curriculum design and delivery we adopt,<br />
it is the assessment of student learning which often proves most problematic for even the most<br />
experienced educator to change. Although much has been written about approaches to enquiry and<br />
problem-based learning and action learning, curriculum design, the role of the educator and various<br />
aspects, much less attention has been given to the purposes and principles of assessment in<br />
entrepreneurial based education.<br />
Compliance with the traditional methods of assessment does not allow one to capture the individual’s<br />
creative learning and development. Instead it simply measures the ‘creative product’ known as the<br />
outcome. Fundamentally this means that much of the true learning is not being assessed. Yet<br />
creativity is made up of the Creative Press, the Creative Person, the Creative Process and the<br />
Creative Product (Fox&Fox, 2008, p. 6). The challenge at primary level is one where it is necessary to<br />
link the entrepreneurial project into as many aspects as possible of the curriculum design. The<br />
programme is delivered as part of a gap year programme at secondary level known as ‘transition year’<br />
as otherwise it would ‘distract’ from achieving graded results for college entry. More scope is<br />
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available for its introduction at third level but underlying fears on using a less traditional form of<br />
assessment hinders its adoption. The response from some educators has been that “if it is not<br />
possible to measure it – then I am not interested”. These genuine fears and concerns do limit the<br />
adoption of entrepreneurial based education across all levels.<br />
4.3 Provision of the modules as elective subjects<br />
This refers more to the third level sector more than the primary or secondary levels. However, the<br />
formal adoption of entrepreneurship education at the primary and secondary levels is still in its infancy<br />
and its adoption as part of the curriculum is based more on the ‘goodwill and individual educator’s<br />
motivations’ than on any formal approach. The introduction of entrepreneurship modules as electives<br />
does hinder its adoption and ‘buy in’ by educators. Typically elective modules will run only if sufficient<br />
numbers of students apply for the module. Low numbers will threaten the economics of running the<br />
module and it simply may not happen as will prove to unviable. The educator may find that their<br />
previous hard work in designing and delivering the module has been in vain and hence the educator<br />
may find themselves lecturing on a less preferred module, so “why bother doing it in the first<br />
instance”.<br />
4.4 Monolithic versus collaborative approaches to problem solving<br />
Individual educators will differ in their approach to problem solving and will differ in their cognitive<br />
style. Some may prefer visual versus verbal presentations. Traditionally educators solved these<br />
problems individually and presented their solution to the group. Recent advances in educational<br />
psychology have pointed to the role of ‘domain-specific knowledge in problem solving - such as<br />
knowledge of specific strategies or problem types that apply to a particular field’ (Sternberg & Zhang,<br />
2001). Rather than focusing on a monolithic approach to problem solving, these approaches promote<br />
the inclusion of multiple intelligences in problem solving. This requires a collaborative and inclusive<br />
approach in solving the problem. Although some of the educators in this research did not always<br />
witness such collaboration, they welcomed it and practiced it within their class rooms.<br />
4.5 Bureaucratic approaches to course development<br />
The bureaucratic approach to course development has hindered rather than helped entrepreneurship<br />
based development at all levels. Many educators as part of this research were cited as saying “if only<br />
we could convince our superiors to include this formally in the time table ... if only it could be included<br />
in the formal examination structure”. For others the reply has been “why bother...it is too much hassle<br />
to get the course approved and I have others things to do with my time”.<br />
These responses are not uncommon nor are they unjustified. <strong>Entrepreneurs</strong>hip based courses<br />
require the use of alternative and multiple teaching pedagogies as illustrated in Figure 2:<br />
These approaches will require the use of debates, mime, formal examinations, thinking outside the<br />
box, networking, pitching and looking and approaching things differently. The challenge of formally<br />
assessing these and their inclusion in the syllabus may not be accepted by the academic course<br />
development board for a number of reasons. This may be due to the perceived lack of resources,<br />
the inability to educationally deliver the learning outcome at a particular level, the perceived over<br />
dependency on the student’s individual learning. The time required to research and convince the<br />
granting board of its academic relevance and meaning may be perceived to ‘be more than it’s worth’<br />
or ‘too long and arduous’.<br />
The adoption of collaborative rather than a monolithic approach as mentioned previously may be used<br />
in part to overcome this approach. Furthermore it is possible to address this bureaucracy through<br />
forward planning and formal recognised benchmarking to minimise any fears or delays in granting its<br />
inclusion due to lack of practical based evidence.<br />
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Figure 2: Multi- Pedagogical Approaches to teaching <strong>Entrepreneurs</strong>hip<br />
4.6 Fear of practical expert input<br />
Some of the educators felt uncomfortable in bringing in the business expert into the classroom. They<br />
may have had feelings of inadequacy or fear of asking the appropriate questions or indeed of the<br />
class of asking the appropriate questions. Equally the ‘practical experts’ may have felt a certain level<br />
of unease on entering the class room, wondering if they would be able to give the appropriate<br />
answers. In some cases this was due to the fact that the practical expert had in fact exited the<br />
education system prematurely in his/her own life time. The mutual respect between the educator and<br />
the practical expert has facilitated the role and added value of the practical expert input in the<br />
entrepreneurial education process. Entrepreneurial and educational training must be provided for<br />
both parties, separately as educators and practical experts and collectively.<br />
4.7 Lack of funding<br />
The delivery of entrepreneurial based modules can be financial resource intensive. This may be due<br />
to the requirement of team teaching and/or the provision of materials for its delivery. Failure to<br />
overcome these scarce resources has and may continue to hinder its development and adoption at all<br />
levels of education. It is necessary to be creative in attaining these resources and requires significant<br />
planning and interaction between course providers, management and funding providers. It requires<br />
the true implementation of the Harvard definition of entrepreneurship by Stevenson,<br />
“<strong>Entrepreneurs</strong>hip is the pursuit of opportunity beyond the resources you currently control”, Sahlam et<br />
al (1995).<br />
4.8 Intensive timetabling with limited time to foster true innovation<br />
The educators at all levels expressed the limitations placed on entrepreneurship education due to the<br />
restrictions of the formal timetabling structures operating within their institutions. All educators are<br />
formally obliged to deliver the required curriculum as stipulated by the associated learning outcomes<br />
of their courses/ programmes and the appropriate formal examinations. Flexibility in determining<br />
these timetables differs between primary, secondary and third level, with greater flexibility being<br />
available to the latter. Changes to the timetabling will require managerial input and in some cases<br />
input from the relevant Government Department, particularly for the primary and secondary levels.<br />
However, it is possible for the third level sector to exercise greater autonomy in the timetabling of<br />
entrepreneurship based modules. This may require blocking of times to facilitate intensive group work<br />
as well as practical expert intervention. It will also require cross timetabling between the Schools of<br />
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Engineering, Science and Business to allow students to work in teams and to benefit from the<br />
collaborative intelligences of multiple disciplines as opposed to the monolithic approach as mentioned<br />
previously. As one educator commented ‘these pose certain challenges to the institution but are not<br />
insurmountable’.<br />
4.9 Focus on technical skill enhancement of students as opposed to a holistic<br />
personal development<br />
Formal curriculum and course outlines and assessments tend to focus on the technical skill<br />
enhancement of the student as opposed to the individual’s holistic educational personal development.<br />
This is necessary in order for the student to achieve the associated learning outcomes and<br />
examinations. <strong>Entrepreneurs</strong>hip based education challenges this approach and supports a more<br />
holistic approach to the educational development of the student. Research amongst employers has<br />
shown that although graduates possess the technical qualifications of their respective fields they often<br />
lack the ability to think independently, to solve problems as oppose to identifying them, to network and<br />
to present confidently either on their own or as a member of a group (Institute of Technology, Tralee,<br />
2010). Despite these findings the education system has continued to support the traditional ‘tried and<br />
tested’ approach, although change is beginning to take place.<br />
5. Conclusion<br />
Much research has been done to date in recognising the limitations and challenges of<br />
entrepreneurship education. Research on the secondary and primary level has reported on the<br />
initiatives being taken at those levels but less so on the challenges being experienced in their<br />
delivery. However, the research on the third level sector has also focused on what changes are<br />
needed there to adopt a university culture of entrepreneurship. Professor Alan Gibbs (2002) put<br />
forward what he believed to be the module of entrepreneurship for the 21 st century. This model<br />
focused on a number of key characteristics including:<br />
� Instilling empathy with entrepreneurial values<br />
� Creating a vision of, and empathy with, the way of life of the entrepreneurial person<br />
� Focusing on the conative (value in use) and affective (enjoyable and stimulating) aspects of<br />
learning as well as cognitive<br />
� Creating the capacity for relationship learning, network management, building know-who and<br />
managing on the basis of trust-based personal relationships<br />
� Focusing upon an holistic approach to the management of organisations<br />
� Widening the context beyond the market (Gibbs, 2002).<br />
This research has identified these to be true not only of the third level sector but equally at the primary<br />
and secondary levels. The initial findings clearly indicate the need for more investigation. Further<br />
work is being carried out in identifying the uniformity of the challenges facing all levels of education.<br />
However, the adoption of a multifaceted approach to entrepreneurship education as presented in<br />
Figure 3 has been applied at the Primary, Secondary and Third Level sectors across a number of<br />
educational institutions in the Munster Region in South West Ireland with positive outcomes.<br />
This model illustrates the need for a creative approach and one which requires a collaborative<br />
approach as opposed to a monolithic one. It requires the cooperation of business and academia and<br />
a cognisance of the challenges faced by both. In particular, it aims to provide a holistic development<br />
of the participating pupils and students and also of the educators and practical experts. The creative<br />
approach adopted by this model recognises the challenges as high hurdles which can be overcome in<br />
time rather than as concrete blocks which prevent implementation of change and the embracement of<br />
opportunity. The external and intrinsic motivations of all participants are recognised. However, future<br />
research is required that will investigate the challenges and opportunities witnessed and experienced<br />
by the collective group of educators in the implementation of this model.<br />
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ENTREPRENEURSHIP EDUCATION<br />
Critical Thinking & Problem Solving<br />
Team Work<br />
Networking<br />
Real Time Solutions<br />
Business<br />
<strong>Entrepreneurs</strong>hip<br />
Education<br />
Educators<br />
Figure 3: Multi-faceted approach to <strong>Entrepreneurs</strong>hip Education<br />
References<br />
Amabile, T. (1996). Creativity In Context: Update To The Social Psychology Of Creativity, Westview Press.<br />
Davila, T., Epstein, M. and Shelton, R. (2006) Making Innovation Work. Wharton School Publishing, Philadelphia,<br />
PA.<br />
Fox, J.M. & Fox, R. (2008). Exploring the Nature of Creativity, Kendall Hunt Publishers.<br />
Gelb, M. (2000). How to Think like Leonardo da Vinci: Seven Steps to Genius Every Day, Dell.<br />
Gibbs, A. (2002). Towards the Entrepreneurial University, A National Council for Graduate <strong>Entrepreneurs</strong>hip<br />
(NCGE) report presenting and shaping the environment for graduate entrepreneurship in higher education.<br />
http://brainyquote.com/quotes/quotes/h/henryford121997.html<br />
Isaksen, S.G., Dorval, K.B. and Treffinger, D.J. (1994) Creative Approaches to Problem Solving. Kendall/Hunt<br />
Publishing, Dubuque, IA.<br />
Johnson, D.M. (1972) Systematic Introduction to the Psychology of Thinking. Harper & Row, New York.<br />
Jones, L. (1987). The development and testing of a psychological instrument to measure barriers to effective<br />
problem solving, Unknown publisher.<br />
Macdonald, R. (2005). Assessment Strategies for enquiry and Problem Based Learning, Handbook of Enquiry &<br />
Problem Based Learning, Barret, T.,Mac Labhrainn, I. And Fallon, H. (eds) Galway:<br />
http://www.nuigalway.ie/celt/pblbook/ pp 85-93.<br />
Marquardt, M. and Waddill, D. (2004). “The power of learning in action learning: a conceptual analysis of how five<br />
schools of adult learning theories are incorporated within the practice of action learning”, Action Learning:<br />
Research and Practice, Vol.1 No.2, pp. 185-201.<br />
Morris, J. (1987), Action Learning: Reflections on a Process, Journal of Management Development, Special Issue<br />
Action Learning, Vol 6, No. 2 pp 57-69.<br />
Rhodes, M. (1961) An Analysis of Creativity, Phi Delta Kappa, 42, 305–11.<br />
Sahlman, W, Stevenson, H., Roberts, M. and Bhide, A. (1999), The Entrepreneurial Venture, 2 nd ed., Harvard<br />
Business School Press.<br />
Schaefer, C. (1973). Developing creativity in children: An idea book for teachers D.O.K. Publishers.<br />
Sternberg, Robert J., and Zhang, Li-Fang, eds. 2001. Perspectives on Thinking, Learning, and Cognitive Styles.<br />
Mahwah, NJ: Erlbaum.<br />
Steps to Success, Institute of Technology, Tralee 2010.<br />
Whitehead, Alfred North. (1929). The Aims of Education. New York: Macmillan.<br />
720
Peer Assessment: A Conduit for Developing Graduate<br />
Attributes?<br />
Judy Pate¹, Sheena Bell¹, Helen Purchase² and John Hamer²<br />
¹The Business School, College of Social Sciences, University of Glasgow,<br />
Scotland<br />
²School of Computing Science, College of Science and Engineering, University<br />
of Glasgow, Scotland<br />
judith.pate@glasgow.ac.uk<br />
sheena.bell@glasgow.ac.uk<br />
Helen.purchase@glasgow.ac.uk<br />
hamer@dcs.gla.ac.uk<br />
Abstract: The research question that shapes this study concerns the extent to which students’ involvement in the<br />
practice of peer assessment facilitates the development of graduate attributes in a single semester<br />
undergraduate corporate entrepreneurship course. The literature advises that peer assessment has the potential<br />
to develop the graduate attributes that are widely claimed to be in demand in the labour market and that might be<br />
viewed as antecedent conditions for entrepreneurial behaviour as well as being generally understood to be a<br />
necessary in any undergraduate degree programme. This study draws on the experiences of students in a<br />
corporate entrepreneurship course, employing a mixed methodology that utilises quantitative and qualitative data<br />
collection and analysis. It is in the comparison of the before and after data regarding students’ peer review<br />
experiences that this study’s approach differs from previous work in this area, mostly addressing post-peer<br />
review outcomes. While the perceptions of students were positive regarding their experience of the peer review<br />
process, there was actually a demonstrable shortfall between the outcomes that they anticipated and those that<br />
they perceived at the end of the peer review exercise. A significant conclusion, among a number drawn from this<br />
study, is that such beneficial outcomes of peer review may more realistically be developed as an integrated part<br />
of the subject understanding and knowledge development, so that they are embedded in the very learning<br />
processes, preferably extending quite naturally to the extended time frame of whole programme involvement.<br />
Keywords: peer assessment; peer review; graduate attributes<br />
1. Introduction<br />
In the last two decades, higher education has witnessed unprecedented change as it faces the everincreasing<br />
demands from intertwined political, social and economic pressures (Tomlinson, 2008).<br />
Overall, it can be observed that three key stakeholders (government, industry and students) demand<br />
a direct and improved engagement between higher education and the market place, a pressure that<br />
appears unlikely to disappear in the near future. In essence, governments and industry are directing<br />
universities to prioritise the needs of the labour market in modernising their provision of higher<br />
education. The development of such human capital is seen as central to business and economic<br />
success. Equally, from a student perspective, heavy student costs and debt, through changing<br />
support and funding in the UK, has compelled students to consider career value as a return on their<br />
choice of programme, and the most tangible measure of this is their potential success in the labour<br />
market (Gedye et al., 2004). Thus, arguably, students now arrive at university with a different<br />
perspective from past students. They now perceive themselves, at least in part, as paying customers<br />
or clients who are entitled to a market advantage when they emerge as in a very competitive marketplace<br />
(Tomlinson, 2008). In this can be observed the influence of key stakeholders, who speak of the<br />
same concerns, all pressing and promoting the virtues of developing graduate attributes. Universities<br />
are increasingly being asked to measure their success in terms of their students’ career trajectory and<br />
as entrepreneurial and labour market entrants (Mason et al, 2009). Moreover, they are clearly<br />
challenged by the practical requirements of preparing their students for these needs through<br />
developing their graduate attributes as skills for enterprise. In essence Green et al (2009) suggest<br />
that the pressure of mass higher education twined with reduced income per student has caused<br />
institutions to take steps to cope. Blackmore (2009:857) summarises the current context of higher<br />
education succinctly:<br />
Universities increasingly face contradictory pressures to change their practices of teaching and<br />
research – market pressures to meet industry and student demand, government pressures to be more<br />
accountable for their use of decreasing public funds, accreditation pressures to meet professional<br />
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standards, technological pressures to use online learning, and academic pressures to maintain<br />
international status in teaching and research.<br />
Given these challenging pressures, there is an increased call for mechanisms for developing graduate<br />
attributes that allow lecturers to cope with competing demands. In this paper we examine the effects<br />
of introducing peer review as an approach to formative assessment that allows such development to<br />
be embedded within subject learning in an undergraduate degree programme. To this end, the<br />
research question that informs this paper is, to what extent does peer assessment facilitate the<br />
development of graduate attributes?<br />
2. Literature review<br />
The following review of the literature, that informs this empirical study, examines the nature of peer<br />
review and explores graduate attributes as they relate to the purposes of university education.<br />
2.1 Peer assessment and review<br />
There are a number of terms in the literature associated with exercises that involve students in the<br />
process of assessing, reviewing, grading and providing feedback of other students’ work (Rieber,<br />
2006). Such terminology is often used interchangeably but, in fact, may refer to different measuring<br />
approaches that involve varying levels of assessment, including formally grading student group work<br />
contributions or similar for a completed piece of individual work, or reviewing and providing feedback<br />
without any involvement in grading. In a comprehensive literature review, Gielen et al. (2011:2)<br />
present six associated terms for peer assessment in education, that include: ‘peer review’; ‘peer<br />
rating’; ‘peer feedback’; ‘peer marking’; ‘peer correction’; ‘peer appraisal’. This study examines the<br />
outcomes of an ungraded exercise involving students in peer review and peer feedback activity that is<br />
referred to in this paper as ‘peer review’.<br />
Persuasive arguments advocate that peer review extends the focus of a deeper learning experience<br />
(Nulty, 20010) beyond subject content onto the development of students’ engagement in deeper<br />
learning through becoming knowledgeable about learning itself, alongside developing subject<br />
knowledge and understanding. Such learning, it is suggested, happens in both the reviewing of<br />
peers’ work and in receiving the assessment of others and then in acting on that feedback to adjust<br />
their own work (Yang, 2010). A number of studies have established that peer review can be seen to<br />
encourage independence through less dependence on the tutor (Brindley, 1998; Boud and Falchikov,<br />
2006; Vickerman, 2009; Gielen et al, 2011). Others present the view that peer review has the<br />
potential to increase active student participation, autonomy and empowerment in the learning process<br />
(Brown et al, 1995; Dyrud, 2001; Cassidy, 2006; Thuy Vu and Dall’Allb, 2007, Odom, 2009), issues<br />
noted as necessary for their professional futures as graduates. Clearly, there is potential to form a<br />
meaningful link between the activity of student peer review and the development of a wide range of<br />
skills. These have been summarised by Falchikov (2004:114-16 in Nulty, 2010) and arguably link to<br />
the promotion of graduate attributes through the development of transferrable skills such as<br />
evaluation (Brown et al, 1995); as well as discursive interaction (Thuy Vu and Dall’Allba, 2007); critical<br />
thinking, self evaluation, reflective practice, (Stanier, 1997; Langan and Wheater, 2003; Thompson et<br />
al, 2005); and self confidence (Brew, 1999; Prins et al, 2005); and directly to the organisational<br />
engagement in appraisal, involving all employees in the audit of self and others (Greenan et al.,<br />
1997).<br />
2.2 Graduate attributes<br />
It is important to note that there is no single agreement either within higher education, or more widely<br />
between universities, employers (Busch, 2009) or policy makers on a single typology of graduate<br />
attributes (Barrie, 2004; Barrie, 2007; Haigh et al. 2010). Instead, there remains, at best, recognition<br />
that there is value in the cooperation and mutual engagement of all stakeholders and, at worst,<br />
conceptual confusion (Green et al., 2009) and conflicting perceptions of each stakeholder group. This<br />
study does not attempt to unpick or examine the nature of the different stakeholder interpretations or<br />
engagements but addresses the graduate attributes as transferrable skills that are generally accepted<br />
as part of the development of graduates that happens in any university (Bowden et al., 2000; Barrie,<br />
2004; Bridgestock, 2009; Hughes and Barrie, 2010). More specifically, it has selected for<br />
examination, those also aligned with a corporate entrepreneurship course and that have been<br />
suggested are antecedent conditions for entrepreneurial behaviour, such as work discretion/autonomy<br />
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Judy Pate et al<br />
(Kuratko et al., 2005, cited in Woollard, 2010); reflective practice, self-awareness and able to selfevaluate<br />
(Nabi et al., 2010).<br />
Table 1 draws together and demonstrates the potential relationship between these peer review<br />
processes and a generally accepted range of graduate attributes (Greenan et al., 1997; Bowden et<br />
al., 2000; Barrie, 2004; Cassidy, 2006; Bridgestock, 2009; Busch, 2009; Zehrer, 2009; Haigh, 2010;<br />
and Papadopoulos, T., 2010) that are, arguably, necessary for entrepreneurial behaviour.<br />
Table 1: Peer review activities mapped against potential graduate attributes enhancement<br />
Student practice involved in peer review<br />
activities<br />
1. Reflective practice in reviewing the<br />
work of others through critical thinking<br />
and testing of own and others’ subject<br />
knowledge.<br />
2. Receiving feedback on their own<br />
work from colleagues and being able to<br />
evaluate the feedback from others<br />
through re-evaluating own work.<br />
3. Being able to take action to revise on<br />
work based on feedback received.<br />
4. Participation, engagement and active<br />
involvement in the learning processes<br />
and being less dependent on the tutors.<br />
Associated graduate attribute outcomes<br />
attributed to the peer review process<br />
Critical and independent thinking<br />
Able to evaluate the work of others<br />
Reflective practice<br />
Confident<br />
Able to be autonomous and independent<br />
Effective and sensitive communication<br />
Develop knowledge and understanding of own<br />
subject discipline<br />
Able to work collaboratively with others,<br />
including showing mutual respect<br />
Collaborative and cooperative skills<br />
Critical and independent thinking<br />
Able to evaluate own work<br />
Reflective practice<br />
Knowledge and understanding of own subject<br />
discipline<br />
Self-aware<br />
Able to self-evaluate<br />
Able to function with confidence<br />
Autonomous and independent learner<br />
Able to learn<br />
In Figure 1, the relationship of the four peer review processes in this study, with the associated<br />
graduate attribute outcomes (also considered as antecedent entrepreneurial behaviours) is further<br />
refined. This model summarises peer review as enabling students to develop to: be self-aware and<br />
capable of reflective practice; be capable of critical and independent thinking; be able to evaluate the<br />
work of others; function with confidence; be autonomous and independent; be able to effectively and<br />
sensitively communicate; develop knowledge and understanding of own subject discipline; be able to<br />
work collaboratively with others, including showing mutual respect.<br />
As an essential aspect of this learning model, Figure 1 depicts peer review and the development of<br />
graduate attributes during the years of a degree programme. The final outcomes are seen in the<br />
matching of student learning and development to enterprise and labour market needs.<br />
2.3 The peer review exercise<br />
The approach to this peer review exercise, aimed at graduate attribute enhancement, was to embed it<br />
so it avoids being a supplementary activity, separate from subject knowledge learning. It involved 190<br />
students taking a single corporate entrepreneurship elective as part of undergraduate degree<br />
programmes across the University of Glasgow. A focal component of the course was a series of visits<br />
by industry guest speakers, who had been invited to present a live case study and to answer<br />
questions posed by groups of students. Student groups prepare the questions in advance through<br />
reviewing the literature on the central themes of the course. This activity is then used to assist<br />
students in preparing an individual student report submitted for course assessment. A series of peer,<br />
on-line review activities was introduced to assist groups to formulate these questions. A one-hour<br />
lecture slot was devoted to explaining the use of the Aropa peer review software system to students.<br />
Additionally, instructions were issued at the start of each of the four task weeks to explain and remind<br />
students of the tasks and deadlines. No coursework marks were awarded for the peer review<br />
exercise and participation was not compulsory.<br />
723
Time<br />
Time<br />
Problem<br />
solving<br />
Critical,<br />
independent<br />
thinking<br />
Judy Pate et al<br />
3. The labour market interface<br />
where employer expectations/entrepreneurial behaviours<br />
and graduate attributes meet<br />
Autonomous<br />
learning<br />
approach<br />
2. Graduate<br />
attributes outcomes<br />
Reflective<br />
practice &<br />
evaluation<br />
of others’<br />
work<br />
Actively<br />
involved in<br />
learning<br />
process<br />
Communication<br />
skills<br />
1. Student<br />
peer review<br />
practice<br />
Ability to<br />
learn<br />
Receive<br />
feedback<br />
on own<br />
work<br />
Act on<br />
feedback<br />
on own<br />
work<br />
Cooperative,<br />
collaborative<br />
approach<br />
Self-aware and<br />
self-evaluation<br />
capability<br />
Time<br />
Teamworking<br />
Figure 1: Peer review activities mapped against potential graduate attributes enhancement,<br />
developed over a degree programme<br />
3. Methodology<br />
In this study a mixed methodology was employed, utilising quantitative and qualitative data collection<br />
and analysis, designed to capture students’ perceptions and experiences of peer review and to<br />
assess the extent to which students perceived peer review might enhance key graduate attributes.<br />
The first phase was quantitative and survey based and student participation was voluntary and<br />
anonymous. Two questionnaires were devised, with measures that were informed by previous<br />
studies reported by Thuy Vu and Dall’Alba (2007); Brew et al. (1999); Pharo and Salas (2009); and<br />
Vickerman (2009). A likert scale was used, where 1 represented strongly disagree and 5 equalled<br />
strongly agree. One questionnaire was issued at the start of the course (pre-peer review), with a<br />
response rate of 68% (129) and the second at the end (post-peer review) with a response rate of<br />
46%% (89). The questions remained the same in the two questionnaires, allowing direct comparison<br />
between them to be made. A paired sample t-test statistic was calculated to compare the means<br />
between questionnaire 1. and 2 responses and where the p value was less than 0.05, the change was<br />
deemed statistically significant.<br />
The qualitative second phase consisted of three, focus groups conducted by a researcher not<br />
involved in the course, each with around 6 student volunteer participants, lasting around forty minutes<br />
724<br />
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Judy Pate et al<br />
and after peer-review involvement. The focus group sessions were recorded, later transcribed and<br />
the data was subsequently analysed by coding and drawing out key themes. The purpose of this<br />
phase was to gain greater insight into the rationale and reasoning behind the student perceptions<br />
identified in the quantitative phase. It is in the comparison of the before and after data regarding<br />
students’ peer review perceptions, that this study’s approach concentrates and so, in essence, differs<br />
from previous work in this area, which has mainly studied student outcomes post-peer review. In<br />
making such a comparison, the intention is to learn from any change in position from the student<br />
cohort, rather than in the simpler analysis of a single set of post-experience data.<br />
4. Findings and discussion<br />
This paper examines the extent to which peer review acts as a means to developing key graduate<br />
attribute attributes. This section begins by presenting the quantitative data before presenting the<br />
qualitative findings in order to explore more deeply the comparison of pre- and post-experience<br />
students’ perceptions of the value of peer review.<br />
4.1 Students’ Attitude to Engaging in Peer Review Activities<br />
Before assessing the potential developmental aspect of peer review it was important to initially<br />
establish the extent to which students’ value and trust the peer review process. The findings<br />
presented in Table 2 reveal that at both the start of the course, before peer review, and also after<br />
experiencing peer-review, students held fairly positive perceptions with regard to being involved in<br />
reviewing and assessing their colleagues’ work. Students appear to be relatively happy and to trust<br />
their peers’ ability to comment on their work and they felt that their peers will do so fairly and<br />
accurately. It is worth highlighting that students perceive peer review to be valid and legitimate and<br />
that feedback is not regarded as the sole responsibility of lecturing staff. One aspect that concerns<br />
them, although they express trust in their colleagues, is that they are less strongly sure that they will<br />
have the knowledge base required to review their peers.<br />
Table 2: Survey results compared: student perceptions of peer review (scale: 1 = strongly disagree<br />
and 5 = strongly agree). Where the p value was less than 0.05, the change was deemed statistically<br />
significant.<br />
Pre- Post- T value P<br />
Statement<br />
Mean Mean Df
Judy Pate et al<br />
review exercise believed that, as a result of peer review, they increased or developed: subject<br />
knowledge and understanding; self reflection; collaboration; confidence; peer learning; and evaluating<br />
others’ work, the development that took place fell short of their hopes at the outset. The only<br />
measure that was unmoved by their experience of peer review was their belief in the greater value of<br />
feedback from their lecturer, although this was more neutrally than strongly held.<br />
Table 3: Survey results compared: student perceptions of peer review outcomes<br />
(scale: 1 = strong disagree and 5 = strongly agree).<br />
Where the p value was less than 0.05, the change was deemed statistically significant.<br />
Statement Pre- Post Mean T value P value<br />
Mean<br />
Df
Judy Pate et al<br />
perceptions were positive regarding peer review and its impact in developing the graduate attributes<br />
and entrepreneurship precursor behaviours with which the study was concerned. It is also of note,<br />
that the post-experience responses are generally in line with the positive outcomes of previous<br />
studies where only post peer review experiences were measured, for example in the study by<br />
Greenan et al. (2007). As a result of this study, other significant themes emerged that inform<br />
implementation of peer review activity within a degree programme. Firstly, confidence in their own<br />
and peers’ knowledge base as well as their peers’ abilities to review, is vital and underpins the<br />
legitimacy of the exercise. Secondly, it is evident that students viewed their peers’ opinions as<br />
second rate to those of the lecturer when receiving feedback. Thirdly, there is fear of a one way flow<br />
of knowledge between students and concern that peers could appropriate their work. A further<br />
undercurrent appears to be the strategic and competitive learner, who may need additional incentives<br />
to fully engage in the activity. The richer data from the focus group findings suggest that<br />
implementation issues and the students’ short and limited experience of peer review may be partly at<br />
the heart of some of the negative outcomes. A final and important conclusion to be drawn from this<br />
study is that graduate attributes and associated entrepreneurial behaviours, that might be developed<br />
through peer review, will be most appropriately positioned as an integrated part of the subject<br />
understanding and knowledge development, so that they are embedded in the very learning<br />
processes, preferably extending quite naturally to the time frame of whole programme involvement.<br />
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728
Innovation and Entrepreneurial Approach: A Sociological<br />
Contingency Explication of the Success in Traditional<br />
Sectors<br />
Massimiliano Matteo Pellegrini<br />
University of Rome “Tor Vergata” and Friedrich-Alexander University, Italy<br />
massimiliano.pellegrini@unifi.it<br />
Abstract: The social dimension of entrepreneurship has assumed a predominant importance in the recent years.<br />
A multitude of works have provided insights about the network effects on firms and entrepreneurial results.<br />
Apparently, these works are contradictory and ours wants to stimulate a greater attention on the possibility to<br />
study the entrepreneurial network with a contingent approach, in order to redeem this inconsistency of results. In<br />
particular, we directed our attention both to the evolutionary stage of the firm and to the industry environmental<br />
conditions in which firms are embedded. Keeping an indiscriminate evaluation of network over these variables,<br />
can be dangerous and even misleading. The entrepreneurial output, on which we are focusing on, is the<br />
innovation rate and our study takes place in a context of established entrepreneurial firms in the reality of district<br />
(Italian and European very traditional context). While there is a well-developed the body of studies on young and<br />
technology-intense firms, studies are still lacking about less dynamic and more traditional industries. For this<br />
reason, we prefer a qualitative approach to sound in depth all the potential origins of the entrepreneurial network<br />
effect. We adopted a semi-grounded approach in creating our case studies. Additionally, one researcher has<br />
lived in the targeted district of the study for almost 25 years, allowing an ethnographic approach in the<br />
triangulation of the data. Our findings suggest a strong predominance of the strong ties to back the<br />
entrepreneurial action. First, strong ties are well-connected with incremental innovations. Second, for the for the<br />
radical innovations, as well, they play a determinant role in the implementation of these changes. To relations<br />
with bridging actors have been assigned the merit of radical innovations’ discovery. However, when bonding<br />
players with whom cooperate to share the implementation of these innovations didn’t exist, a lot of projects had<br />
been discarded. In some cases, entrepreneurs had overcome the problem of strong ties’ lack supporting the<br />
social cost of new strong ties’ formation by themselves or reducing the external dependency with a major level of<br />
internal implementation. This has been possible when they possessed at the moment of the opportunities’<br />
discovery a good level of firm’s internal capital (reserve of available resource like human capital or financial<br />
prosperity). This situation can be explained by the fact that strong ties, in some cases, can be replaced by a<br />
sufficient level of internal resources and capabilities.<br />
Keywords: Entrepreneurial networks, innovation, traditional industries, weak and strong ties<br />
1. Theoretical framework and research questions<br />
<strong>Entrepreneurs</strong>hip in its social facet has been recognized as fundamental. It has been demonstrated<br />
that personal networks of the entrepreneurs have a sharp influence on the venture performance<br />
(Larson, Starr, 1993). The relevant literature struggles in trying to restore theoretical conflicts on what<br />
kind of network configuration can boost entrepreneurial deeds and outputs. A traditional<br />
contraposition persists: a certain kinds of ties influence corporate performance with a better<br />
knowledge sharing, allowing an high synergic action (Coleman, 1988; Ahuja, 2000) i.e. strong or<br />
bonding ties. Conversely, other network relations support performance refreshing the information and<br />
knowledge patrimony available for companies (Burt,1992), otherwise called weak or bridging ties.<br />
Both approaches during the years have accumulated research supports with strong empirical and<br />
theoretical claims (Borgatti, Foster, 2003), driving the non-convergence and inhomogeneous<br />
understanding of network effect on entrepreneurial action (Parkhe et al., 2006; Jack, 2010).<br />
To redeem this situation, some authors have proposed to undertake studies on network with a<br />
contingency approach (Hite, Hesterly, 2001; Elfring, Hulsink, 2003).<br />
From an accurate literature review two principal directions can form our theoretical contingency<br />
compass: Evolution and environmental conditions (Table 1).<br />
The Evolutionary stage of the firm has been largely recognized as a discrimination element on<br />
network utility. As a matter of fact, if networks can be considered like other resources (tangible or<br />
intangible), during the business life cycle, the endowment of a specific resource or a mix of them can<br />
swing over time (Gulati et al., 2000). What represents a vital asset in a particular evolution’s phase<br />
can lose its benefit in others. The situation is well expressed by the famous “embeddedness paradox”<br />
(Uzzi, 1997). Expressly, a nascent entrepreneur can undertake in an easier way the entrepreneurial<br />
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Massimiliano Matteo Pellegrini<br />
action if he/she can rely on an already strong web of connections. These benefits can be expressed<br />
e.g.: in a better access, at minimum cost, to necessary resources (Starr, MacMillan, 1990; Hanlon,<br />
Saunders, 2007); Betterments of legitimacy to the market eyes (Zimmerman, Zeitz, 2002); Protection<br />
from opportunistic behaviours (Colombo et al., 2009; Gnyawali, Park, 2009).<br />
More controversial, instead, is the agreement about the network’s potential outcomes in an<br />
entrepreneurial established firm. In this case, complications arise due to a potential stratification of<br />
network (multiplex) and to a mixed set of firm’s goals, beyond the simply surviving (Cafferata, 2009).<br />
Granovetter’s thesis (1973) “the power of weak ties” assigns to sparse network favourable benefits in<br />
delivering fresh flows of information and knowledge (mostly explicit). Collaborating mostly with kindred<br />
partner can lead to a homologation of knowledge and redundancy of information, decreasing the<br />
firm’s innovative power (Maurer, Ebers 2006). A poor replacement of the initial social capital is usually<br />
followed by inertia and potential poor performances (Westlund, Bolton, 2003).<br />
However, the process of replacing old partners is entrenched by a persistent emotional involvement<br />
(Kim et al., 2006: 704). Also, strong ties never lose influence in reducing the cost of the innovations’<br />
implementation (Obstfeld, 2005). For these reasons, on established firms’ network, it is possible to still<br />
see an “open debate” in which we want to address our research questions.<br />
If the evolution’s phase is an undeniable facet with which the network must find a coherence, it can be<br />
asserted, as well for environmental conditions in which the network intercourses are embedded (Jack<br />
et al., 2008). As presented in more than one network study, environmental conditions of an industry<br />
determinate a pressure toward the entrepreneurial action. As a result, the entrepreneurial network<br />
tends to strengthen or loosen its ties (Zaheer, Bell 2005; Koka, Prescott, 2008; Hoffmann 2007).<br />
Additionally, comparisons between industries show different inclinations to cooperate, moving the<br />
locus of innovation from an internal border to an external social lieu (Powell et al., 1996; Rowley et al.,<br />
2000). Usually, the majority of works on entrepreneurial network looks at the fast-innovative and<br />
knowledge-intensive industries. These contexts are particularly suitable for analyses because the<br />
cooperation as formal agreement (e.g. technological partnering, R&D development, Licensing etc.) is<br />
very intense and the innovation rate is high and mostly explicit (possibility to apply for patents and<br />
copyrights) (Ahuja, 2000). Eventually, the gathering of information is facilitated because even<br />
traceable through secondary data, allowing wide range quantitative studies.<br />
Instead general stable environments show a less external propensity to structurally cooperate<br />
(Rosenkopf, Schilling, 2007) as formal alliances and partnerships, but the network of this set is not<br />
immobile (Uzzi, 1997). Especially in district context, relations appear the firm’s “life blood” kept as<br />
informal collaboration but very intense (Becattini, 2000). The typical tendency is to consolidate ties<br />
with trusted partners in order to exploit reciprocal experience curves and shared knowledge. Due to a<br />
minor dynamicity, breakthrough innovations are less frequent and the principal way to innovate is the<br />
incremental, but continuous, innovations. All of that forces on the methodological level a major<br />
comprehension of micro-dynamics of innovation hardly detectable with large (but not in depth)<br />
inquires.<br />
To synthesize, we can use the “exploration-exploitation” March’s framework (1991). For the former<br />
industries, their structural characteristics facilitate ways of growth based on the exploration as<br />
“creation of new knowledge and capabilities”. The latter set instead has a genetic code of evolution<br />
tied to the exploitation of capabilities and to their refinements.<br />
Table 1: Contingency approach to the entrepreneurial network<br />
Industry type<br />
1° Knowledge-intense<br />
Start-ups<br />
2° Traditional<br />
Start-ups<br />
Evolution phase<br />
3° Knowledge-intense<br />
established firms<br />
4° Traditional<br />
established firms<br />
As we presented, analyzing the literature, a lack of attention has clearly emerged on the established<br />
firms. Looking at Table 1, the start-up phase of both kinds of industries are quite well stressed, the<br />
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Massimiliano Matteo Pellegrini<br />
former in the traditional alliances studies, the second in the entrepreneurial literature (Anderson et al.,<br />
2010). We focused our attention on the fourth quadrant (established/traditional) because it is a very<br />
well-know topic of the Italian literature, but usually it is approached in a systemic way (district as unity<br />
of analysis) and as Jack (2010: 128) reported “Even the rich conceptual and empirical material on<br />
Italian industrial districts can be criticised on the grounds of lacking a thorough and detailed network<br />
analysis”.<br />
In this ground field we have interest to inquire the peculiar network’s effect on the innovative rate. In<br />
particular, we address two relevant questions:<br />
� How do the established entrepreneurial firms use their ties in relation of innovation?<br />
� Does a predominant network configuration capable to boost the innovation process exist?<br />
2. Method<br />
For what we premised, this topic remains almost fragmented in the relevant literature, which would<br />
justify a qualitative approach (Eisenhardt, 1989).<br />
Additionally, since the innovation’s predominance type is incremental and the relation’s predominance<br />
type is informal, the best way to inquire the phenomenon is a qualitative approach, which can provide<br />
much more data for the conceptualization (Uzzi, 1997). Indeed, it allows us to deeply study the “real<br />
entity” of innovation, directly judged by the actors of the changing, and more than this, an accurate<br />
understanding of the true and important external affiliations, as well as their formations and uses in an<br />
entrepreneurial firm.<br />
Although this, the set of networking studies in entrepreneurship has reached a good consistency. Any<br />
further step in this direction should re-think and re-consider the previous consolidate knowledge and<br />
methodological approaches (Blackburn, Kovalainen, 2009). We have followed this suggestion<br />
structuring our case study with the same guidelines used in qualitative studies of network<br />
entrepreneurship (Anderson et al., 2005; Jack, 2005; Jack et al., 2008), which are well adherent to<br />
our purpose.<br />
We tried to study our research questions with four in-depth cases of companies belonging to the<br />
fashion and textile district of Florence-Prato. This district was selected for the following reasons:<br />
� Intense knowledge of the relational dynamics of the district. One of the researchers has lived and<br />
worked in the district for more than 25 years. Our research diaries have been revised with an<br />
ethnographic lens . Many times this precious “eye” has permitted a better interpretation of the<br />
data obtained by the interviewees.<br />
� Additionally, familiarity of the firms targeted in the study. All the entrepreneurial teams in charge in<br />
the four companies are well-known by the researchers. This has allowed for an extended period<br />
of interviews (one year), sided by informal meetings almost weekly e.g. dinners at the<br />
entrepreneurs’ homes, breaks at lunch time or informal visits at the factory. Obviously, this was<br />
possible since our researchers have had long friendships with the entrepreneurs and their<br />
relatives. Hence, if the formal interview-time was roughly 10 to 20 hours (which is already over the<br />
average for this type of studies), the informational flows expand over the years. This strong<br />
connection also reduced the natural reticence of the entrepreneurs in disclosing important<br />
strategic issues of their deeds. Despite this, the sample has been selected with strictly criteria e.g.<br />
different business histories, dimensions, attitudes toward innovation, in order to reach a<br />
theoretical saturation (Eisenhardt, 1989). This process should insures the results against the risk<br />
of depicting common patterns derived only by similarities in the firms’ characteristics.<br />
We started our studies in 2008, with very open questions (like in Jørgensen, Ulhøi, 2010) like “Can<br />
you describe your process of innovation?”, “How do the ideas for a new product comes about?” or<br />
“What role do the ties with your partners (clients, suppliers etc) play in relation to the innovation?”.<br />
The interviews were made by the researcher embedded in the district for 25 years. He registered the<br />
interviews and took personal notes about the recounted events. We proceeded in two steps<br />
(Creswell, 2007): after of a first round of interviews (around a quarter of the total time), our taped<br />
interviews were transcribed in a diary and reviewed in a research commission made by a develop<br />
manager in an university incubator, two full professors in entrepreneurship and three junior professors<br />
in management, particularly interested in networking and innovation. Each case study was singularly<br />
revised by each member with relative notes and passed to another (Hill et al., 1999) . At the end of<br />
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Massimiliano Matteo Pellegrini<br />
these processes, we had confidence in all the cases. Thus, it was possible to redact a preliminary set<br />
of emergent issues.<br />
With these seminal results, we came back to our interviewees and started to re-focus our question<br />
and inquire about peculiar aspects of the network contingency. In doing this, we started what<br />
Anderson et al. (2010: 125) called the “dance of theory and data”, in other words, a semi-grounded<br />
approach. Our research design was initially informed by a general framework, but we have kept it<br />
flexible in order to be able to catch new insights coming from the qualitative analysis (Finch, 2002).<br />
Continuously, we have referred to the existent and recent literature to complete our picture. Also, this<br />
second round of interviews led to another diary in which we started the real codification of the data.<br />
Here, the informal meetings have become crucial since we had the chance to receive a judgment on<br />
the right assignation in the coding of critical elements asserted by the same interviewees or their close<br />
relatives (cousins, siblings and children). We stopped our process when our research commission<br />
found a nearly homogenous agreement on the results. At the end, in order to strengthen the validity of<br />
our analysis, the final output of each firm was shown to the same interviewees and we asked them<br />
how our interpretation corresponded to their visions of network (Shaw, 2006). With the exception of<br />
one episode on minor aspects, our respondents were in line with our findings.<br />
3. Findings<br />
Unfortunately, for space constraints, since each of our case is a 45 pages work (applying this format),<br />
here we only reported few respondents’ complete statements, which are particular representative.<br />
Nevertheless, what we highlighted are insights of common trends in the entrepreneurs’ replies.<br />
In table 2, we described our company profiles (the names of companies and people are imaginary).<br />
Table 2: Description of our cases<br />
Firm Year<br />
of birth<br />
Alpha-Ita<br />
weaving and textile<br />
mill<br />
Beta-Ita<br />
woolen and final<br />
textile fabric mill<br />
Gamma-Ita<br />
weaving and textile<br />
mill<br />
Delta-Ita<br />
weaving and textile<br />
mill<br />
Early<br />
‘90<br />
Middle<br />
‘80<br />
Middle<br />
‘80<br />
End of<br />
‘60<br />
Class of<br />
employees<br />
Class of<br />
sales<br />
N. of<br />
interview<br />
hours<br />
N. of last 5ys<br />
radical<br />
innovations<br />
Medium Medium 10 1<br />
Big Large 20 3<br />
Medium<br />
Medium-<br />
Big<br />
Medium<br />
-Large<br />
18 2<br />
Large 17 2<br />
Interviewees<br />
CEO (Amy)*,<br />
Chief<br />
manager<br />
(Aaron)<br />
CEO<br />
(Bastian)*,<br />
R&D<br />
manager<br />
(Ben)*<br />
Pres. (Carl)*,<br />
CEO<br />
(Chad)*,<br />
Sales<br />
manager<br />
(Cody)*<br />
CEO (Dan)*,<br />
Production<br />
manager<br />
(Drew)<br />
Legend:<br />
Class of employees: Medium 15-30; Medium-Big 31-45; Big plus 46;<br />
Class of sale: Medium 10-14,9; Medium-Large 15-24,9; Large plus 20;<br />
Year of birth: for some companies it is the date of transformation in Spa (Inc. company). Firm existed under another legal<br />
form;<br />
(*) Next to the name of the interviewees means that they are part of the same family of the founder or of the actual main<br />
shareholder or majority family coalition.<br />
Data Source: Italian Chamber of commerce archives (2008)<br />
In the table, we reported only the major radical innovations, which we are going to stress later on, but<br />
our approach has also permitted to understand the micro and incremental innovations accumulated<br />
in the last past 5 years. Some examples from the interviews are: changing the components in a loom<br />
(the trim’s size affects fabric’s consistency, insertion of a chasing); new software for cost<br />
management; streamlining of the stock movements procedure; new protocol for the cyclic<br />
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Massimiliano Matteo Pellegrini<br />
maintenance; new dyeing techniques; changing combing fibers’ storage; modification of the<br />
percentage in the chemical agents during the bleaching phase in order to render the fibers more or<br />
less “pure” etc.<br />
We have focused our first findings on this topic. For each firm, we were able to gather from 15 to 30<br />
episodes of this incremental nature. As a matter of fact, the number of incremental innovations is<br />
impressively higher, actually around tenfold higher than of radical innovations’ number. Forgetting to<br />
depict these dynamics, the “core” of innovation for traditional sector, prejudices any serious analysis,<br />
reveling also the appropriateness of our approach. Despite the fact of belonging to the most<br />
innovative firm, Ben commented: “We live thanks to the little things, chasing at any expenses product<br />
innovations can be harmful […] We are very dynamic but our evolution is slower than the great<br />
leading industries”.<br />
After this accurate understanding we have tried to trace the influence of the network relation on that.<br />
In many cases (almost 65%), to the questions inquiring the “Where” and “How” the idea of changing<br />
was found, the respondent, without any our indications, expressly mentioned a network relation. Chad<br />
asserted “One of our reliable dyeing companies proposed to us […] to implement this new dye<br />
technique, and our production manger thought it was good idea. We trusted them [edit: the company]<br />
due to our long relationship”. Sometimes the network relation wasn’t a business one. For example, in<br />
Dan's case the relationship was with a friend “During a party organized by my wife, Alex told me about<br />
how he was enthusiastic about his new cost management software […] I made some personal<br />
research and contacted the provider. Now we have it too, and my accountancy guys really<br />
appreciated it”.<br />
For circa the 70% of cases in which a network relationship was mentioned as a source of incremental<br />
innovation, the embeddedness of those ties seem to be very strong. Expressions like “friend”,<br />
“guy(s)”, “partner”, “long-time acquaintance” and “buddy” are recurrent. Furthermore other<br />
confirmations about the “force” of these ties it comes from our informal inquiring on these relations.<br />
We recorded very detailed intercourses’ descriptions from the same interviewee or from his loved<br />
ones and in the best situation we had the chance to directly assist to meetings, conference calls etc.<br />
Hence, we are quite confident about our classification.<br />
The second bundle of results is instead referred to the radical innovations (product innovations).<br />
We approached the topic in the same way, inquiring before the type of innovation and then the<br />
network implications. Here, the situation is almost the reverse. Our respondents addressed a major<br />
importance to network relations in discovery innovation (80%) through the participation in shows and<br />
trade fairs, or by new suppliers. The dominant relation’s type is ascribable as weak ties for the<br />
etymologic contradiction of the expression used before as “new”, “never met before” and “external”<br />
referring to the real context of interactions (almost 85% of times).<br />
Even if the “inspiration” to our respondents came from a weak connection, they immediately switched<br />
their attention on how the innovation can really take place. In doing so, the common worry was “how<br />
can I develop it?” (Aaron), “Can some of my guys [edit: old subcontractors] handle these new<br />
standards and workmanships?” (Ben). Their perplexities are not about the difficulty of having a new<br />
partner but more on the consequence of this action: “Finding a new partner is not so difficult but<br />
before they started to understand our needs and our ways to do business a long time has passed […]<br />
We had such a bad year when we did it […] non conformed goods and returned notes without<br />
counting losses of time and money” (Bastian).<br />
Hence, for our respondents weak ties are bringers of new idea, but the real implementation is<br />
something more interesting and decisive in the decision to adopt or not adopt an innovation. Julia was<br />
very clear about that: “We received such good proposes from our production manger [edit: the<br />
proposes came from an encounter with a new supplier] two years ago. Unfortunately, in that moment<br />
we were able neither to internally develop it [edit: the innovation] nor to deliver it to our good subcontractors<br />
[…] [edit: so] we skipped it!”.<br />
Another important aspect that our inquiries show was that of the particular condition in which<br />
entrepreneurs has undertaken radical innovation despite the lack of bonding ties. The three cases<br />
that we have ascribed in this archetypal situation, reporting a very similar scenario. At the moment of<br />
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Massimiliano Matteo Pellegrini<br />
the idea’s discovery the firm had a very good level of “unexploited” or better “underexploited”<br />
resources (human skilled capital, financial and investment prosperity).<br />
When we asked what the resources were and where they came from, we often received a response<br />
referring to the family environment. For example, Cody said “After I recognized this potential new<br />
branch for my business [edit: talking about a new technical fabric] I went to talk to my father and<br />
uncle. I asked for a support in the developing of this idea through a major personal financial<br />
commitment of my family. That money plus a little compression of profit for a couple of years, let us<br />
have our new best-selling product”. Bastian also experienced a similar situation “At the time in the<br />
district we didn’t know anyone who could satisfy these new particular standards so we started a new<br />
collaboration, but in doing so we had sharp productivity reduction. We were all together as a family<br />
and decided to back the idea even with personal guarantees”.<br />
This aspect claims for a major consideration of family matter when entrepreneurial studies are<br />
approached (especially in district and SME context), as also other authors have auspicated (Anderson<br />
et al., 2005; Rodriguez et al., 2009; Sullivan, Marvel, 2011).<br />
4. Discussion<br />
Our findings seem to drive some interesting main conclusions:<br />
� <strong>Entrepreneurs</strong> have heavily recognized importance of strong ties. Even in the established phase<br />
these ties still deliver incremental innovations. Since these innovations are the base of the<br />
traditional established companies, the dimension of the ties are not residual, as Jack (2005) has<br />
proposed.<br />
� Weak ties are mostly used in the discovering phase of a radical innovation (Anderson et al.,<br />
2010). However, after this first phase, strong ties come back into play in the implementation<br />
phase, when innovative ideas need to find a practical feasibility. If there are no available ties with<br />
whom cooperate, in some case projects are dropped.<br />
� In some cases, “bald” entrepreneurs rely more on internal capital to manage in autonomy radical<br />
innovations, with a good level of available resources to imply in this costly process. Hence,<br />
sometimes strong ties are replaced by availability of resources’ stocks to bare the major effort of<br />
the innovation (Lee et al., 2001) reducing the external reliance with an internal development.<br />
� For these clues, as some authors have proposed, we can support the idea of balance network’s<br />
structure (Capaldo 2007; Hoffmann, 2007; Tiwana 2008). A network constituted by a central core<br />
of bonding actors and a large and unconnected periphery of bridging actors. This state relieves<br />
the redundancy of information ameliorating the innovativeness, thanks to the connection to “far”<br />
and new partners. Once the ideas and innovations’ opportunities are delineated, the central part<br />
of bonding relations can effortlessly develop them. In our specific case of traditional sectors, the<br />
core part seems to be the engine which defines the periphery structure, because the cohesive<br />
network drives the implementation of strategies (Dess, Shaw, 2001: 452) and this phase is the<br />
“strategic orientation focus” in these industries.<br />
Our principal limitations are relative to the use of qualitative approaches i.e. the limited transferability<br />
of findings, but cross-case implementation should, in part, relieves this worry. Another criticism can be<br />
made about the retrospective biased. At the time of meeting, the interviewees were asked to<br />
remember the last 5 years of the innovation projects. This can lead to memory problems or personal<br />
interpretations which can distort what really happened (Amit et al., 2001). Even in this case we can<br />
find a restorative element in our research design: the multiple interviews and the informal meetings.<br />
One individual, for different reasons, can fix biased events in his memory, but it seems more complex<br />
to have the same path in the memories of other people. These people are credible as well because<br />
they are very close to the respondent and at the same time, very involved in the business.<br />
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Uzzi, B. (1997) “Social structure and competition in interfirm networks: The paradox of embeddedness”,<br />
Administrative Science Quarterly, Vol.42,No.1,pp.35-67.<br />
Westlund, H. and Bolton, R. (2003) “Local Social Capital and <strong>Entrepreneurs</strong>hip”, Small Business Economics,<br />
Vol.21,No.2,pp.77-113.<br />
Zimmerman, M.A. and Zeitz, J.G. (2002) “Beyond Survival: Achieving New Venture Growth by Building<br />
Legitimacy”, Academy of Management Review, Vol.27,No.3,pp.414-431.<br />
736
<strong>Entrepreneurs</strong>hip Development through <strong>Entrepreneurs</strong>hip<br />
Education with Special Emphasis on the Role of Business<br />
Incubators: Evidence from the Czech Republic<br />
Petra Taušl Procházková and Michaela Horová<br />
University of West Bohemia, Pilsen, Czech Republic<br />
pprochaz@rek.zcu.cz<br />
mhorova@kfu.zcu.cz<br />
Abstract: Within the context of the support of entrepreneurship development and entrepreneurial thinking and<br />
behaviour in the society a large emphasis is presently worldwide placed on motivation of potential, especially<br />
graduate, entrepreneurs and preparation of young entrepreneurs by means of integration of entrepreneurship<br />
education into the education system. Education institutions play a significant role for business start-ups and<br />
should be able to react on actual needs of entrepreneurship education. This paper is focused on problems of<br />
entrepreneurial education and linkages between entrepreneurship education and development of<br />
entrepreneurship and competitiveness in the Czech Republic. The level of entrepreneurship education and its<br />
influence on entrepreneurship development is evaluated thanks to authors´ empirical research realized in the<br />
year 2010. For this research was used questionnaire method divided in two parts and focused on two respondent<br />
groups. Respondents of the first questionnaire were university students with business education. This survey was<br />
aimed to relations of university students to entrepreneurship and evaluation of provided school education and its<br />
contribution to entrepreneurial skills development. The second questionnaire was carried out by Czech<br />
enterprises and was focused on the preparation of the graduates for practice. The aim was to discover the main<br />
missing entrepreneurial knowledge and skills. The obtained results were compared with similar existing surveys<br />
in the Europe, especially with Eurobarometer. The survey results shown that the level of entrepreneurship<br />
education in the Czech Republic (neither generally in the European Union) is not so positively evaluated. A<br />
significant part of interviewing graduates does not feel that provided education influences their interest in<br />
entrepreneurship activities. The majority of them prefer a status of an employee than an entrepreneur. They feel<br />
to have lack of entrepreneurial competency. Since last years there has been implemented several activities at the<br />
Czech universities in order to support graduate entrepreneurs but still it seems not have such extent and system<br />
access as at some foreign institutions. There is missing a comprehensive conception of entrepreneurship<br />
education and general education system that leads to entrepreneurship behaviour development in the Czech<br />
Republic. The entrepreneurship education is provided at some universities on the base of individual access. The<br />
survey results demonstrated the insufficient integration of entrepreneurial skills education into education systems<br />
in the Czech Republic. Not only the state should react to these facts by creation of entrepreneurship development<br />
politics, but especially each university should consider a crucial factors and methods of entrepreneurship<br />
education. It must be still considered that investments to the human capital are the decisive factor of<br />
competitiveness. Finally, there are stated the recommendation for entrepreneurship education development at<br />
the universities in the Czech Republic. Especially, the idea of business incubators aimed to graduate<br />
entrepreneurs is discussed.<br />
Keywords: <strong>Entrepreneurs</strong>hip, entrepreneurship education, entrepreneurial skills, business incubator, start-up<br />
1. Introduction<br />
The entrepreneurship support presents a comprehensive set of instruments and programmes whose<br />
mission is to extend information about entrepreneurship in public, support the entrepreneur’s image,<br />
incite to life’s career of entrepreneur and facilitate start of business activities and their development. It<br />
is commitment for long time period that requires a systematic support primarily creating by<br />
government. There is no doubt that entrepreneurship education and entrepreneurship training play<br />
significant role by the support of entrepreneurship activities and entrepreneurship development. The<br />
GEM Report A Global Perspective on <strong>Entrepreneurs</strong>hip Education and Training (GEM 2010) defines<br />
entrepreneurship education as “building of knowledge and skills either about or for the purpose of<br />
entrepreneurship generally, as part of recognized education programs at primary, secondary or<br />
tertiary-level educational institutions”. <strong>Entrepreneurs</strong>hip training is more specialized; it is formed<br />
above by practice and next education before business start. The function of education institutions in<br />
preparing process to entrepreneurial thinking and behaviour of young people, especially graduates, is<br />
also very important.<br />
S. C. Parker (2009) argues that education plays an essential role between the determinants<br />
influencing access to entrepreneurship. The education represents the most important element among<br />
other elements as are access to risk, income, age or experience. On the other side poor<br />
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Petra Taušl Procházková and Michaela Horová<br />
entrepreneurship education can very negatively influence access to entrepreneurship. The education<br />
quality is also an important part. For example it is proved, that the students of British secondary<br />
schools have got a higher tendency to be doing business than students of other secondary schools.<br />
As well in the U.S. it is demonstrated, that the regions in which the entrepreneurial education is<br />
included in educational programmes show one percent more number of young entrepreneurs than the<br />
regions which work with traditional educational programmes. Lot of individuals don’t choose<br />
entrepreneur career because they don’t have enough information and experience. The increase of<br />
foreknowledge about entrepreneurship through educational programmes is one of the possibilities<br />
how to change it (Bridge and O’Neill and Martin 2009). The European Union is aware of the<br />
importance of these facts too and focused on the support of entrepreneurship education and training<br />
in the last years.<br />
The Final Report of European Commission Expert Group didn’t bring positively results about the<br />
entrepreneurship education in the Czech Republic. In this report is featured: “There is no generally<br />
accepted system of entrepreneurship teaching in the Czech Republic. Education in entrepreneurship<br />
is running at some universities, more or less on the basis of individual approaches.” (European<br />
Commission 2008).The entrepreneurship education is understood as an instrument which should help<br />
to development of creative and innovative behaviour of individuals. There is also close relation<br />
between entrepreneurship education and development of entrepreneurship and competitiveness.<br />
Entrepreneurial information and knowledge should be already provided at primary and secondary<br />
schools so that they can be further develop at universities. Other countries perceive the need of<br />
entrepreneurship education increase, for example in the North America the education is aimed mainly<br />
at three areas: entrepreneurship, small enterprises management and starting of new business (OECD<br />
2010).<br />
The authors of the paper focused on the level of entrepreneurship education in the Czech Republic<br />
and possibilities how to improve preparation of potential entrepreneurs which were investigated on the<br />
basis of carried out empirical research. The obtained results were then compared with similar existing<br />
surveys in the Europe, especially with Eurobarometer.<br />
2. Author’s empirical research<br />
During the year 2010 there has been made a research among two groups of respondents. One group<br />
was aimed at university students with business education (mainly graduate students). This groups<br />
represent from the authors´ view a decisive part of possibly start-up entrepreneurs. There were<br />
researched relations of university students to entrepreneurship, evaluation of provided school<br />
education in accordance with entrepreneurial skills by this group. Second group is represented by<br />
entrepreneurs who were asked on their opinion to the level of entrepreneurial culture in the Czech<br />
Republic and their view on skills and experience of fresh graduates. The aim of the surveys was to<br />
identify opinion of public (represented by students) and entrepreneurs on entrepreneurial culture, level<br />
of entrepreneurship education and in general on the conditions of business environment in the Czech<br />
Republic. For the research was used questionnaire method, both questionnaires were provided by<br />
electronic form thanks to the Google Docs tool. This way of communication with respondents makes<br />
them easier to fill in the form and help authors to get back more responses (more Horová and Taušl<br />
Procházková 2011). The gained results are compared to the EU survey of Eurobarometer – study<br />
<strong>Entrepreneurs</strong>hip in the EU and beoynd (European Commission 2010).<br />
2.1 The results of first research (university students view)<br />
During the first questionnaire were asked 400 students and authors got the feedback from 189<br />
respondents. Table describing a demography structure of respondents is followed. Quite low<br />
evaluated results were shown when students had been asked on evaluation of level of<br />
entrepreneurship education at school. Students evaluated the education especially from the view of<br />
gained skills, experiences and know-how which can be used for business start-up. 58 % respondents<br />
do not agree with the statement that their school education is beneficial for them. Results of<br />
Eurobarometer show low numbers too: in this survey 67 % respondents from the Czech Republic do<br />
not agree and 58 % respondents from the EU (European Commission 2010).<br />
If students can choose, they would prefer the possibility to be employed (54 %) rather than be an<br />
entrepreneur (41 %) and 5 % of respondents will not choose any of these options. Answers on this<br />
question are closer to the opinion of EU respondents (45 % are for an entrepreneur status) based on<br />
738
Petra Taušl Procházková and Michaela Horová<br />
the Eurobarometer survey. Respondents from the Czech Republic (again based on the<br />
Eurobarometer survey) prefer only from 32 % an entrepreneur status.<br />
Table 1: Demography structure of respondents (questionnaire No. 1 among university students)<br />
Demography structure of respondents<br />
Sex Age Educational attainment<br />
22,75 %<br />
Male<br />
77,25 %<br />
Female<br />
88,36 % age between 20-25; 6,88<br />
% age between 25-30;<br />
1,59 % age between 36 - 40; 1,06<br />
% age between 31 - 35 and 41 –<br />
45;<br />
0,53 % age between 17 - 20 and<br />
45 and above<br />
5,29 % secondary education<br />
92,59 % bachelor degree<br />
2,12 % master degree<br />
Imagine that you can choose your kind of occupation. What would you<br />
prefer?<br />
An entrepreneur<br />
status<br />
41%<br />
Figure 1: Preferences of occupation<br />
Nor of these<br />
possibilities<br />
5%<br />
An employee<br />
status<br />
54%<br />
Only 18 % of respondents consider seriously the entrepreneurship, remaining 82 % no. So it is<br />
interesting to compare percentage share of real entrepreneurial intention of respondents with their<br />
preferences of occupation (41 % prefer to be an entrepreneur – see figure 1, nevertheless only 18 %<br />
of respondents have real entrepreneurship intensions). The main reasons for this fact are: above all<br />
lack of experiences, missing an entrepreneurial idea or sense and courage to run a business.<br />
Detailed results are illustrated in figure 2.<br />
The main reasons why young people don't want to run a business<br />
No courage to run<br />
a business<br />
15%<br />
Missing<br />
entrepreneurial<br />
idea<br />
19%<br />
Figure 2: Why young people don’t consider entrepreneurship<br />
739<br />
Fear of finance<br />
11%<br />
Lack of<br />
experiences<br />
55%
Petra Taušl Procházková and Michaela Horová<br />
2.2 The results of second research (entrepreneurs view)<br />
The topic of entrepreneurial culture and education was discussed in the second survey by the<br />
entrepreneurs. There were asked 300 entrepreneurs and the feedback came from 165 respondents.<br />
Respondents of this questionnaire were only small and medium size companies based on the<br />
Direction of European Commission No. 70/2001. Most of the companies are from Pilsen region (72, 2<br />
%), Demography structure is described on Table 2.<br />
Table 2: Demography structure of respondents (questionnaire No. 2 among entrepreneurs)<br />
55 % micro-company<br />
Size of the company<br />
28 % small size<br />
company<br />
17 % medium size<br />
company<br />
The asked entrepreneurs evaluated the preparedness of the graduates for practice. There is no<br />
corporate view whether graduates are good and sufficiently prepared or not, as show figure 3. 50 % of<br />
respondents agreed and 50 % disagreed with argument that Czech graduates are sufficiently<br />
prepared and have knowledge useful for practice. No optimistic results were obtained by question of<br />
the educational institutions role for future activities of individuals in practice. 37 % of respondents<br />
consider this role of educational institutions as indifferent.<br />
The graduates are sufficently prepared for practice, they have needed<br />
knowledge<br />
Rather disagree<br />
43%<br />
Absolutely<br />
disagree<br />
7%<br />
Absolutely agree<br />
6%<br />
Rather agree<br />
44%<br />
Figure 3: Preparedness of graduates for practice form the view of entrepreneurs<br />
The most frequent answers to the question what is missing the graduates were: ability of orientation in<br />
entrepreneurship environment, ability of problems solving and lack of basic professional skills. It was<br />
stated that only 28, 4 % of asked entrepreneurs cooperate with educational institutions (most frequent<br />
in the form of student practice).<br />
3. Conclusion<br />
The survey results shown that the level of entrepreneurship education in the Czech Republic (neither<br />
generally in the European Union) is not so positively evaluated. A significant part of interviewing<br />
graduates does not feel that provided education influences their interest in entrepreneurship activities<br />
(55, 6 % of respondents). The majority of them prefer a status of an employee than an entrepreneur.<br />
They feel to have lack of entrepreneurial competency. From the view of entrepreneurs, they don’t<br />
have corresponding entrepreneurial skills and knowledge too. The education plays a significant role<br />
by creation of entrepreneurship qualification of young people and so it should be focused on<br />
entrepreneurship education and training of individuals. It is possible to find many examples of good<br />
practice, especially in foreign countries, in which is clear emphasis on cohesion of education with<br />
entrepreneurial sector, cooperation between schools and enterprises and obtaining not only<br />
theoretical but practical experiences with entrepreneurship. Since last years there has been<br />
implemented several activities at the Czech universities in order to support graduate entrepreneurs<br />
but still it seems not have such extent and system access as at some foreign institutions. The authors<br />
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Petra Taušl Procházková and Michaela Horová<br />
positively evaluate these ongoing activities such as entrepreneurship propagation by means of<br />
organization different entrepreneurial competitions for young people or establishing cooperation<br />
between universities and enterprises. They think that establishment of counselling centrums and<br />
especially business incubators by universities creates a very good instrument to gain experience and<br />
know how for business start-up. The university students or graduates have here convenient<br />
environment for adapt to entrepreneurial world, they get here necessary professional skills and<br />
courage to run a business. In an incubator they learn solving the problems and learn the orientation in<br />
entrepreneurship that is required from entrepreneurs.<br />
3.1 Business incubators role<br />
Business incubators are a very cost-effective instrument for the promotion of public policy objectives<br />
as confirmed the study carried out by the Centre of Strategy & Evaluation Services (CSES) for<br />
European Commission. According to this study the European incubators are generating around<br />
30 000 gross new jobs per annum. And if indirect effects are taken into account (the higher spending<br />
in local economies brought about by additional direct employment and new jobs created in local<br />
supply chains) the number increase to around 40 000 jobs per annum (Centre of Strategy &<br />
Evaluation Services 2002 Part 1). There are a large number of different definitions and possible<br />
models of incubators. Thought they have basic common features, there can be significant differences<br />
relating to stakeholder objectives, target markets or configuration of incubator facilities and services.<br />
Generally business incubator is a space intended for business support of start-up of new businesses<br />
and helping to maximise their growth potential. It is the space where are created advantageous<br />
conditions for starting entrepreneurs, for example favoured tenancy, sharing of infrastructure, free<br />
services or provided business support services for attractive prices that should display best practice<br />
development. In general, there are four main areas of support: entrepreneur training (it is often part of<br />
“pre-incubation), business advice, technology support and financial support (from incubator venture<br />
capital funds or external providers).<br />
One of possible solution for entrepreneurship education development in the Czech Republic is also to<br />
intensify the role of business incubators by universities aimed to graduate entrepreneurs. We can<br />
search number of best practice examples regarding to entrepreneur training at some European<br />
universities. For example the Centre of Innovation and <strong>Entrepreneurs</strong>hip at Linköping University in<br />
Sweden, BIC Liguria in Italy specialized for young people involving promotional seminars at the<br />
University of Genova or CEEI Valencia in Spain that run a comprehensive training programme<br />
(Centre of Strategy & Evaluation Services 2002 Part 2). In the Czech Republic the business<br />
incubators have been operated since 1990, in larger degree since 2000, especially after the<br />
integration to the European Union in the year 2004. Concerning the incubators by universities, we can<br />
find five incubators of this type in the Czech Republic by big universities whose activities is important<br />
to develop in the future. In Pilsen region where the empirical research was provided, there is no<br />
university incubator. Therefore, an idea about establishing such incubator with help of the University<br />
of West Bohemia is coming on the mind as an evident solution. This university incubator should be<br />
intended especially for potential entrepreneurs (academic employees, students, graduates or external<br />
firms) that would give support services. It will also concern particularly to the time before they launch<br />
their business (so-called pre-incubation). The incubator should provide services as identification of<br />
potential entrepreneurs from graduates, training of their business skills and competency, helping in<br />
start-up phase with business plan developing and business forming.<br />
References<br />
Bridge, S. and O’Neill, K. and Martin, F. (2009) Understanding Enterprise, Palgrave Macmillan, Basingstoke.<br />
Centre of Strategy & Evaluation Services (2002). Benchmarking of Business Incubators. Part 1. [online],<br />
http://www.cses.co.uk/upl/File/Benchmarking-Business-Incubators-main-report-Part-1.pdf<br />
Centre of Strategy & Evaluation Services (2002). Benchmarking of Business Incubators. Part 2. [online],<br />
http://www.cses.co.uk/upl/File/Benchmarking-Business-Incubators-main-report-Part-2.pdf<br />
European Commission, Enterprise and Industry (2008) <strong>Entrepreneurs</strong>hip in Higher Education, especially in Non-<br />
Business Studies. [online] http://ec.europa.eu/enterprise/newsroom/cf/itemshortdetail.cfm?item_id=3366.<br />
European Commission (2010) Eurobarometer Survey on <strong>Entrepreneurs</strong>hip, [online]<br />
http://ec.europa.eu/enterprise/policies/sme/facts-figures-analysis/eurobarometer/index_en.htm#h2-1.<br />
GEM (2010) Global <strong>Entrepreneurs</strong>hip Monitor, [online] http://www.gemconsortium.org/.<br />
Horová, M. and Taušl Procházková, P. (2011) Podnikatelská kultura, image podnikatele a jejich řízení, University<br />
of West Bohemia, Pilsen.<br />
OECD (2010) SMEs, <strong>Entrepreneurs</strong>hip and Innovation, OECD. ISSN 978926408031.<br />
Parker, S. C. (2009) The Economics of <strong>Entrepreneurs</strong>hip, Cambridge University Press, Cambridge.<br />
741
<strong>Entrepreneurs</strong>hip, Institutions and Economic<br />
Development: A Configuration Approach<br />
Colin Reddy 1 , Boris Urban 2 and Ralph Hamann 3<br />
1<br />
University of Johannesburg, South Africa,<br />
2<br />
Wits Business School, University of Witwatersrand, South Africa<br />
3<br />
Graduate School of Business, University of Cape Town, South Africa<br />
creddy@uj.ac.za<br />
Abstract: The purpose of this research is to examine the interaction between formal and informal institutions and<br />
its subsequent effect on the relationship between economic development and entrepreneurial activity. Towards<br />
this, we also develop an integrative framework linking formal and informal institutions to entrepreneurial<br />
conditions. This research is among the first to use a three-way interaction in a cross-national study including both<br />
formal and informal institutions and both developed and developing nations. The study argues that it is important<br />
to understand the relationship between economic development and national entrepreneurial activity in terms of<br />
the mechanisms of interaction between a nation’s formal and informal institutions. In addition, this framework will<br />
be valuable to theorists wishing to extend the opportunity theory of Shane and Venkataraman (2000) to cross<br />
national studies. To test the hypotheses, we analyse eight years of GEM expert study and World Bank data. An<br />
ANOVA analysis justifies the pooling of panel data. We use hierarchical regression analysis to determine the<br />
three-way interaction effects. Since World Bank new enterprise data is used, the study is limited to the formal<br />
economy i.e. legally registered companies, easily traceable to economic growth. The alignment of formal to<br />
informal institutions matters. When they are not in alignment, compensating mechanisms sets off a Kirznerian<br />
tendency towards equilibrium. A complementary mechanism does not have the same effect instead resulting in<br />
reduced entrepreneurial activity. High entrepreneurial activity through enterprise formation is not always<br />
necessary. Despite the debates around the importance of small enterprises (Birch, 1979) in increasing<br />
entrepreneurial activity, such contexts with complementary institutional mechanisms still attain high levels of<br />
economic development. There appears to be an ideal mix of new enterprise activity and existing corporate<br />
entrepreneurship accompanying economic development. Evident then is the neglect of corporate entrepreneurial<br />
activity or intrapreneurship in economic development discussions.<br />
Keywords: entrepreneurship, institutions, economic development, resources, opportunity<br />
1. Introduction<br />
The problem is that current theory has not yet resolved the uncertainty around how formal and<br />
informal institutions at various levels of economic development (ED) actually interact to facilitate<br />
national level entrepreneurial activity (EA). We have yet to determine the mechanisms underlying this<br />
process (Sobel et al., 2007) which, is complicated by the heterogeneity and uncertainty of national<br />
contexts despite attempts at broad classifications like developed and developing nations.<br />
A configuration approach better differentiates outcomes favourable in some dimensions but not in<br />
others. It goes beyond the direct effects between two variables, to introduce a third variable (Wiklund<br />
and Shephard, 2005; Lumpkin and Dess, 1996). Our purpose is to use this approach to examine the<br />
interaction between formal and informal institutions and its subsequent effect on the relationship<br />
between economic development and entrepreneurial activity. This is significant because it contributes<br />
to the development of cross national comparisons, an important gap in research (Szyliowicz and<br />
Galvin, 2010; Bruton et al., 2008). By understanding these processes, research goes beyond an<br />
understanding of specific environmental influences to examine instead how factors interact towards<br />
certain outcomes.<br />
The article is organised as follows. First, we review extant perspectives on entrepreneurship and<br />
institutions. Second, we develop scientific hypotheses on configurations and their respective nature.<br />
Third, we describe the methodology used to examine these hypotheses. Fourth, we put forth the<br />
empirical support. Finally, we discuss the findings, implications, limitations and research possibilities<br />
derived from our work.<br />
2. Theoretical framework and hypotheses<br />
In order to disentangle the underlying mechanisms of how formal and informal institutions interact to<br />
affect EA, we rely on a theoretical explanation of the role of opportunity and incentives. It is the<br />
institutional environment that is behind the incentive structure which guides and influences a potential<br />
742
Colin Reddy, Boris Urban and Ralph Hamann<br />
entrepreneur’s action (Boettke et al., 2003). Underlying such actions is the discovery and subsequent<br />
exploitation of opportunities (Kirzner, 1980; Shane and Venkataraman, 2000). The discovery of<br />
opportunity is not an extrinsic process but rather an intrinsic one within the control of the individual<br />
(Shane, 2000).<br />
Opportunity theory thus forms the basis of this study. We supplement this with the economic theories<br />
of opportunity costs and supply and demand logic (Verheul et al., 2001) as well as occupational<br />
choice theory (Lucas, 1978) to explain entrepreneurial behaviour across varying levels of ED. To<br />
bring in the role of institutions we look again towards an economic explanation using formal and<br />
informal institutions (North, 1990). Note that informal institutions also involve a sociological<br />
perspective.<br />
Economic<br />
development<br />
Social<br />
capital<br />
conditions<br />
Human<br />
capital conditions<br />
Opportunity and<br />
incentive conditions<br />
Financial<br />
capital<br />
conditions<br />
Entrepreneurial<br />
activity<br />
Figure 1: Framework of Institutional Forces behind Contingent <strong>Entrepreneurs</strong>hip Conditions<br />
The resultant framework (Figure 1 above) shows institutions having a moderating or contingent effect<br />
on a non-recursive relationship between ED and EA. The relationship is indicated as non-recursive<br />
since the direction of the ED-EA relationship is still contested. Thus, the framework is of use in studies<br />
where either of ED or EA is the dependent variable. National entrepreneurial contexts are delineated<br />
into human capital (HC), social capital (SC), financial capital (FC) and opportunity and incentive (O&I)<br />
conditions. Adequate HC, SC and FC conditions are required to perceive incentives and exploit<br />
opportunities. Operating behind O&Is and FC are public formal institutional forces whilst individualbased<br />
informal institutions are behind SC and HC.<br />
2.1 Hypothesised configurations<br />
The configuration assertion implies the existence of multiple institutional combinations explaining EA<br />
for similar conditions. Universalistic assertions, in contrast, suggest that only certain individual<br />
institutions are better in all conditions (Delery and Doty, 1996). Our interest only in the interaction<br />
between formal and informal institutions precludes configurations including ED, SC and HC as well as<br />
ED, FC and O&Is. Such conditions explain either only formal or informal institutions. We suggest the<br />
following configurations:<br />
Hypothesis 1a: ED, SC, and O&Is (Bruton and Ahlstrom, 2003; Bruton and Rubanik,<br />
2002; Welter and Smallbone, 2009; Smallbone et al., 2006; Smallbone and Welter,<br />
2009).<br />
743
Colin Reddy, Boris Urban and Ralph Hamann<br />
Hypothesis 2a: ED, HC, and O&Is (Foss et al., 2008; Ardichvili et al., 2003; Naudé, 2011;<br />
Davidsson and Honig, 2003; McMullen et al., 2008; Manolova et al., 2008; Iyigun and<br />
Owen, 1996; Marvel and Lumpkin, 2007).<br />
Hypothesis 3a: ED, SC, and FC (Ahlstrom and Bruton, 2010; Li and Zahra, 2011;<br />
Casson, 2010; Yiu et al., 2007).<br />
Hypothesis 4a: ED, HC and FC (Roper and Scott, 2009; Irwin and Scott, 2010)<br />
Figure 2: Summary of Hypothesised Interactions<br />
Formal and informal institutions do not necessarily interact in the same way (Williamson, 2009).<br />
Figure 2 above shows the nature of the hypothesised configurations, discussed below.<br />
In determining the nature of the above configurations, we look at how formal and informal institutions<br />
interact and related perspectives on opportunity costs and risk-avoidance (Kihlstrom and Laffont,<br />
1979). We refer to institutions that contribute weak incentives for citizens to start enterprises as “weak<br />
institutions” and those that contribute strong incentives as “strong institutions”.<br />
Depending on the structure created by institutions, ED leads to two different paths to<br />
entrepreneurship. One path is characterised by an ED context where formal institutions are not<br />
aligned to the informal institutions of the local society, creating relative uncertainty but a dynamic<br />
environment where entrepreneurs thrive. Opportunity costs are always changing and information<br />
flows are in disequilibrium. This path manifests in high EA.<br />
The other path is characterised by an ED context where formal and informal institutions are in<br />
alignment and results in relative certainty. Because of the more efficient information flow, resource<br />
providers and other entrepreneurial citizens are aware of opportunities resulting in higher competition<br />
and thus increasing risks and opportunity costs. Only large high growth enterprises run by highly<br />
skilled individuals are worth pursuing in this context.<br />
Citizens may be pushed or pulled into EA (Stanworth and Curran, 1973). Push factors underlie the<br />
unfavourable risk-reward profile of wage employment or unemployment (Audretsch and Thurik, 2000;<br />
Evans et al., 1989). Examples include low wages (Wennekers, 2006), limited independence and<br />
freedom in paid employment, poor social security benefits. Pull factors underlie a generally favourable<br />
risk-reward profile. Examples include independence and autonomy, the potential to earn high profits,<br />
or the opportunity to reduce taxation costs.<br />
2.1.1 Institutions not in Alignment<br />
When formal institutions are not in alignment with longstanding informal institutions, strong institutions<br />
play an important compensating role, resulting in a still positive effect of ED on EA. This positive effect<br />
744
Colin Reddy, Boris Urban and Ralph Hamann<br />
implies that citizens or existing firms will continue to start enterprises in developed nation contexts<br />
more than those within developing nations do.<br />
It is possible to have institutions that are not in alignment among developed nations. Global<br />
competition forces developed nations to exploit their distinctive strengths, creating natural limits to<br />
convergence (Biggart and Guillén, 1999). If political institutional structures evolve slowly while the<br />
pace of technological advance accelerates, the potential increases for technology, institutional<br />
context, and governments’ technology policies to fall out of alignment. Researchers have observed a<br />
U-shaped relationship between EA and ED with increasing EA at high ED because more individuals<br />
can access the resources necessary to start their own enterprises in knowledge-intensive<br />
environments with abundant opportunities. Examples include the US, Norway, Iceland and Hong<br />
Kong (Bosma and Levie, 2010).<br />
Therefore, despite the institutions not in alignment, EA continues to rise as ED increases.<br />
Alternatively, when informal institutional conditions like SC and HC are weak, incentives arise from<br />
strong formal institutions e.g. tax incentives and policies promoting access to technology<br />
opportunities. Such an institutional structure results in greater ease and legitimacy of entry, but growth<br />
remains difficult, resulting in lower HC entrepreneurs exploiting them to start many small, low-growth<br />
firms (Eesley, 2009). The lower HC entrepreneurs have lower opportunity costs and thus require<br />
lower returns from EA. They also have less incentive or capacity to save and accumulate the<br />
resources needed for entry so they are affected more by a reduction in fixed start-up costs.<br />
Alternatively, when start-up costs increase, the greatest decrease in EA arises from those of lowest<br />
ability (Nanda, 2011). If lower HC citizens have more difficulty gathering the fixed start-up costs of<br />
entry, because resource providers are more uncertain of the survival of their firms, then supportive<br />
formal institutions by lowering the costs of entry have a greater impact on EA among such individuals.<br />
Unlike developed nations, among developing nations the above situations result in low EA. Strong<br />
formal institutions are ineffective when corresponding informal institutions are weak (Boettke et al.,<br />
2003; West et al., 2008). Lower consumer demand and demand variety is one reason why even<br />
citizens with high HC and SC will not take up EA. Arguments and evidence of the low formal EA within<br />
developing nations where institutions are not in alignment arise from several sources. In Africa the<br />
imposition of formal institutions were not aligned to informal norms (Leeson, 2005). In Mexico strong<br />
formal institutions are not supported by informal institutions (Lee and Peterson, 2000). There are<br />
some transition economies with strong informal relations compensating for weaker formal institutions<br />
(Aidis et al., 2009; Smallbone et al., 2006). The resultant incomplete information makes personal trust<br />
essential for entrepreneurs to sustain and develop their ventures (Welter and Smallbone, 2009;<br />
Welter and Smallbone, 2011). However trust and thus network knowledge is low among Eastern<br />
European business networks (Puffer et al., 2001). In Russia, only through repeated business<br />
interactions is trust developed allowing little opportunities for new entrants (Höhmann and Welter,<br />
2005).<br />
According to our conceptual framework (see Figure 1), SC and HC underlie informal institutions whilst<br />
O&Is and FC underlie formal institutions. Thus,<br />
Hypothesis 1b: ED has a positive impact on EA when any one of SC and O&I conditions<br />
is (i) weak or (ii) not aligned. Underlying the interaction between SC and O&I is a<br />
compensating mechanism.<br />
Hypothesis 2b: ED has a positive impact on EA when any one of HC and O&I conditions<br />
is (i) weak or (ii) not aligned. Underlying the interaction between HC and O&I is a<br />
compensating mechanism.<br />
Hypothesis 3b: ED has a positive impact on EA when any one of HC and FC conditions<br />
is (i) weak or (ii) not aligned. Underlying the interaction between HC and FC is a<br />
compensating mechanism.<br />
Hypothesis 4b: ED has a positive impact on EA when any one of SC and FC conditions<br />
is (i) weak or (ii) not aligned. Underlying the interaction between SC and FC is a<br />
compensating mechanism.<br />
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2.1.2 Institutions in Alignment<br />
Colin Reddy, Boris Urban and Ralph Hamann<br />
Examples of high ED contexts with aligned institutions that contain low EA include the Scandinavian<br />
nations. These nations tend to exhibit low income disparity, large scope of the public sector, high per<br />
capita income, high female labour participation rates, and a relatively low degree of dissatisfaction<br />
with life (Wildeman, 1999).<br />
EA behaviour is different among developing nations with aligned or complementary formal and<br />
informal institutions. During the eight year-period 2000 to 2008 developing nations have a higher<br />
trend in both the number of total and new businesses, with some nations doubling their numbers<br />
during the period, whereas developed nations show little variation during the same period (Klapper et<br />
al., 2009). For instance, there exists a cluster of high EA developing nations with weak formal and<br />
informal institutions. Note for example, Williamson’s (2009) observation of middle-income nations with<br />
weak formal and informal institutions e.g. South Africa, Nigeria, Portugal, Columbia, Peru and Turkey.<br />
Developing nations with strong HC and strong O&I conditions are on the increase. Complementarity<br />
of resources is crucial within developing nations (Meyer and Peng, 2005). Nations such as Lithuania,<br />
Bulgaria, Estonia, and Latvia have had high rates of EA as well as high proportions of high-growth<br />
companies each year this decade (Calcagnini et al., 2011).<br />
There are higher levels of EA in developing nations because opportunity costs are low and quality<br />
wage work is difficult to find (Gollin, 2002). Thus, the reduction in opportunity costs should increase<br />
EA rates because more people are able to earn more in entrepreneurship relative to wage<br />
employment. Low-skilled workers form enterprises given the income disparity and corresponding<br />
effects of globalization on low-skill industries.<br />
Finally, the low new enterprise activity accompanying high ED levels could be due to the substitution<br />
effects of existing corporate entrepreneurship or intrapreneurship. The number of large enterprises<br />
tend to increase with an increase in ED (Ghoshal et al., 1999), which in turn reduces the EA within a<br />
nation (Choi and Phan, 2006; Parker, 2009). Nevertheless, the presence of a number of large<br />
enterprises and higher levels of employee autonomy among high- income nations increases the levels<br />
of intrapreneurship.<br />
The above arguments suggest the following hypotheses,<br />
Hypothesis 1c: ED has a negative impact on EA when both SC and O&I conditions are<br />
aligned whether weak or strong. Underlying the interaction between SC and O&I<br />
conditions is a complementary mechanism.<br />
Hypothesis 2c: ED has a negative impact on EA when both HC and O&I conditions are<br />
aligned whether weak or strong. Underlying the interaction between HC and O&I<br />
conditions is a complementary mechanism.<br />
Hypothesis 3c: ED has a negative impact on EA when both HC and FC conditions are<br />
aligned whether weak or strong. Underlying the interaction between HC and FC<br />
conditions is a complementary mechanism.<br />
Hypothesis 4c: ED has a negative impact on EA when both SC and FC conditions are<br />
aligned whether weak or strong. Underlying the interaction between SC and FC<br />
conditions is a complementary mechanism.<br />
3. Research method<br />
3.1 Dataset<br />
We employed 8 years of country-level panel data from the GEM expert survey, national start-up rates<br />
from the World Bank Group <strong>Entrepreneurs</strong>hip Survey (WBGES) and GDP per capita from the<br />
International Monetary Fund for the years 2000 to 2007. The data was grouped by year and nation<br />
containing a total of 176 year-nation observations in 45 nations. Research on similar GEM data used<br />
the fixed effects estimation (Levie and Autio, 2008). Intuitively, fixed effects are adequate for samples<br />
at a national level since nations and experts were not randomly sampled.<br />
Levene and ANOVA tests (Kwon and Arenius, 2010) accepted the null hypothesis that the year<br />
groups are equal whilst the null hypothesis of equal nation groups was rejected. The ED variable is<br />
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Colin Reddy, Boris Urban and Ralph Hamann<br />
expected to detect some fixed effects reflecting the heterogeneity of nations. Similarly will multiple<br />
configurations. We thus pool the data.<br />
The expert responses were combined into multi-item scales for each EFC. An index was created from<br />
the experts’ responses to items on a 5-point Likert scale (where ‘‘completely true’’ = 1 and<br />
‘‘completely false’’ = 5). Factor loadings of individual scale items were used as weights when<br />
computing the resulting multi-item scale.<br />
3.2 Variables and measures<br />
Table 1: Variables and Measures<br />
Variable Description<br />
Our definition of entrepreneurship is those activities of an individual or a group aimed at initiating<br />
EA economic activities in the formal sector under a legal form of business (Klapper et al., 2010).<br />
Virgil (2009) found that average total EA measured by GEM, does not correlate linearly to GDP.<br />
She used WBGES data (Klapper et al., 2009; Klapper and Delgado, 2007) dividing new company<br />
registrations by total registrations in that year to arrive at national start-up rates. These correlate<br />
linearly to GDP. Whilst GEM data represents the potential supply of entrepreneurs, World Bank<br />
data represents the actual rate (Acs et al., 2008).<br />
Liao and Welsch’s (2003) measures were mapped onto GEM data. Cognitive SC related to the<br />
SC GEM EFCs for social and cultural norms. Relational SC, ‘State and local governments provide<br />
good support for those starting new firms” mapped onto GEM EFC measures for government<br />
services. We supplemented this with the GEM measure for business services. For structural SC,<br />
we used, “You know someone personally who started a business in the past 2 years”. This item<br />
has been validated by Klyver et al. (2008). For the purposes of a national level item of structural<br />
SC we calculated the percent of ‘yes’ responses.<br />
We used the GEM EFC for finance. We removed an item within a pair that correlates over 0.9<br />
FC and those that severely reduce the overall reliability of the scale.<br />
HC<br />
O&Is<br />
ED<br />
Curtin et al. (2009) point to PSED data that measures both explicit (education) and tacit<br />
experience (work experience). The primary and higher education and entrepreneurial capacity<br />
EFCs in GEM data match the PSED HC measures.<br />
Gabr and Hoffmann (2006) operationalise these through several policy areas like entry<br />
barriers/regulation, access to foreign markets, technology transfer, private demand conditions<br />
and procurement regulations. We found matching items within the GEM EFCs including policy,<br />
regulations, R&D transfer, and market dynamism and openness.<br />
ED was measured by means of log GDP per capita data available from the IMF website. This is<br />
not far off from the World Bank’s main criterion for classifying economies viz. gross national<br />
income (GNI) per capita. Based on its GNI per capita, every economy is classified as low<br />
income, middle income, or high income. Low-income and middle-income economies are referred<br />
to as developing economies.<br />
Some items were omitted due to poor fit or high collinearity. Discriminant validity assessments<br />
showed that multi-item scales indicated its respective variable only. See Table 1.<br />
3.3 Analysis<br />
The ED variable was common among all configuration tests. We used hierarchical linear regression to<br />
test the hypotheses (Jaccard et al., 1990; Preacher, 2010). Since variables contained multiple<br />
indicators, we analysed the three way interactions including each indicator separately. To avoid<br />
multicollinearity the independent variables were centred. This involved calculating each nation’s mean<br />
of repeated measures and subtracting this from the respective repeated measure (Aguinis and<br />
Gottfredson, 2010)<br />
Each step of the hierarchical analysis involves the next higher order of interaction being added and<br />
incremental R square tests of statistical significance evaluated. An interaction effect exists if, and only<br />
if, the interaction term gives a statistically significant contribution over the direct effects of the<br />
independent variables (Cohen and Cohen, 2003). We evaluated jointly the magnitude of higher-order<br />
regression coefficients and lower-order terms.<br />
Preacher (2010) and Kim et al (2001) describe how to plot the nature of the significant interactions.<br />
Such plots show the effect of one selected variable, given different combinations of values for others.<br />
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Colin Reddy, Boris Urban and Ralph Hamann<br />
Since our data set contains more high-income nations, we use two standard deviations from the mean<br />
to establish low and high cases.<br />
4. Results<br />
Table 2 displays the means, standard deviations and correlations. Correlations are significant and<br />
thus we use mean centring to remove multi-collinearity. Variation inflation factors (not shown) were<br />
below 2 whereas values less than 4 are recommended (Field, 2009).<br />
Table 2: Uncentred variable means, standard deviations and correlations<br />
Mean SD 1 2 3 4 5 6 7 8 9 10 11 12 13 14<br />
1. startup 0.100 0.037 1<br />
2. Structural SC 0.395 0.108 ‐0.013 1<br />
3. Cogntive SC 3.343 0.412 .282** ‐0.047 1<br />
4. Entrepreneurial<br />
Capacity<br />
2.596 0.386 0.145 .323** .459** 1<br />
5. Government Services 2.749 0.505 .247** ‐0.019 .180* .221** 1<br />
6. Finance 2.903 0.472 0.125 ‐.166* .272** .194** .531** 1<br />
7. Education 2.093 0.341 .358** 0.101 .293** .402** .242** .259** 1<br />
8. Education (Tertiary) 2.805 0.338 0.082 ‐0.019 .445** .307** .201** .193* .342** 1<br />
9. Policy 2.661 0.514 .199** ‐0.134 .255** 0.118 .700** .589** .280** .196** 1<br />
10. Regulations 2.333 0.638 .370** .165* .359** .473** .568** .348** .396** .335** .630** 1<br />
11. Technology Transfer 2.486 0.353 0.132 ‐0.015 .242** .308** .724** .548** .301** .421** .677** .598** 1<br />
12. Market Openness 2.75 0.342 .317** 0.078 .293** .539** .494** .503** .482** .268** .419** .487** .556** 1<br />
13. Private Services 3.056 0.366 .155* ‐0.03 .300** .339** .486** .389** .432** .478** .415** .444** .625** .613** 1<br />
14. GDP per capita 24231 16026.374 .245** .159* ‐0.007 .262** .536** .160* .352** 0.078 .388** .554** .531** .435** .396** 1<br />
**. Correlation is significant at the 0.01 level (2‐tailed).<br />
*. Correlation is significant at the 0.05 level (2‐tailed).<br />
Three-way interactions containing FC conditions were not statistically significant (see Table 3). Rsquares<br />
are small in size but this is expected when interaction terms are considered (Jaccard et al.,<br />
1990). Lower order terms are meaningless (Cohen and Cohen, 2003).<br />
The two significant configurations confirming hypotheses 1a and 2a are:<br />
� General entrepreneurial capacity type HC, technology type O&Is and ED<br />
� Regulatory type O&I, structural SC and ED<br />
Table 3: Start-up rate: Configurational (n= 176, unstandardised coefficients, centred data)<br />
Hypotheses H1c H2c H3c H4c<br />
GDP per capita (log) 0.021 0.032 0.019 0.016<br />
Finance 0.011 0.002<br />
Regulations 0.01<br />
Structural SC 0.031 0.023<br />
Technology transfer 0.012<br />
Entrepreneurial capacity 0.009 0.014<br />
Regulations x Structural SC ‐0.122<br />
Regulations x GDP per capita 0.015<br />
Structural SC x GDP per capita ‐0.933** ‐0.744<br />
Entrepreneurial capacity x Technology transfer 0.002<br />
Entrepreneurial capacity x GDP per capita 0.243* 0.182<br />
Technology transfer x GDP per capita ‐0.013<br />
Finance x Structural SC ‐ 0.135<br />
Finance x GDP per capita ‐ 0.054 ‐0.062<br />
Finance x Entrepreneurial capacity 0.028<br />
Structural SC x Regulations x GDP per capita ‐5.194**<br />
Entrepreneurial capacity x Technology transfer x GDP per capita ‐<br />
2.024***<br />
Finance x Structural SC x GDP per capita ‐1.531<br />
Finance x Entrepreneurial capacity x GDP per capita ‐ 0.397<br />
R square 0.039 0.054 0.029 0.036<br />
Adjusted R square ‐0.001 0.014 ‐0.012 ‐0.005<br />
R square change<br />
*** 1% significance<br />
** 5% significance<br />
* 10% significance<br />
0.022 0.035 0.003 0.013<br />
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Colin Reddy, Boris Urban and Ralph Hamann<br />
The nature of these configurations confirms hypotheses 1b, 1c, 2b and 2c. To illustrate this we show<br />
hypothesis 2c (see Figure 3 below).<br />
Figure 3: Nature of Interaction: Entrepreneurial Capacity (HC), Technology Transfer (O&Is) and ED<br />
5. Discussion and conclusions<br />
Post 2000, societies’ increasingly positive perceptions toward entrepreneurship, has not necessarily<br />
resulted in an increase in EA through new enterprise formation. In any case, high ED need not be<br />
accompanied by high EA of the enterprise formation type. In some societies such as those in Europe,<br />
EA remains low despite their high ED status and correspondingly high incomes per capita. Aside from<br />
opportunity costs and risk-avoidance assessments, this thesis claims that an assessment of whether<br />
formal and informal institutions are in alignment is an important explanation for variations in EA as a<br />
function of ED. Results here show that as ED increases there is a converging trend towards a limited<br />
range of EA in the form of new enterprises. Within the immense cross-national heterogeneity,<br />
Kirznerian forces are at work to restore equilibrium. Underlying this are the institutional forces of<br />
isomorphism (DiMaggio and Powell, 1983). The underlying implication here, evident through a<br />
configuration approach, is that accompanying ED is an ideal mix of new enterprise activity and<br />
existing corporate entrepreneurship or intrapreneurship (Bosma et al., 2010). Evident then is the<br />
neglect of intrapreneurship in current ED discussions.<br />
Though our configurations apply for a special case of formally registered enterprises, they may be<br />
generalized. For instance, if formal enterprise activity drops it does not imply that EA is absent but<br />
most likely means that other forms of EA are taking place (Shane, 2009) like necessity type<br />
entrepreneurship (Bosma et al., 2009). Our entrepreneurship measure is supported by observations<br />
that the key drivers of economic growth are large formally registered firms (Baumol, 2004;<br />
Schoonhaven and Romanelli, 2001; Shane, 2009; McGrath, 2003).<br />
This research has responded to the observation that an examination of institutional influences on the<br />
relationship between ED and EA is under-researched (Casson et al., 2010). An assessment of<br />
whether formal and informal institutions are in alignment extends assessments based on opportunity<br />
costs and risk-avoidance (Bosma and Levie, 2010). This research is among the first to use a<br />
configuration approach to determine the contingencies of both formal and informal institutions across<br />
a broader spectrum of both developed and developing nations. The framework used here will be<br />
valuable to theorists wishing to extend the opportunity theory of Shane and Venkataraman (2000) to<br />
cross national studies. Theorists (Baker et al., 2005) have identified this as a weakness in Shane and<br />
Venkataraman’s (2000) theory. Whilst the work of Verheul et al (2001) has attempted to do this<br />
through their eclectic theory of entrepreneurship there is a large focus on formal institutions such as<br />
policy and government in their framework whereas here we attempt to focus equally on formal and<br />
informal institutions. The study thus serves as a launching point for a multidisciplinary and macro view<br />
749
Colin Reddy, Boris Urban and Ralph Hamann<br />
that could add future insights into the antecedents and consequences of the opportunity construct<br />
(Short et al., 2010). In addition, recently, a call for research was made where one does not control for<br />
a nation’s level of ED but instead examines entrepreneurship at varying levels of ED (De Clercq et al.,<br />
2011).<br />
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752
Identification and Classification of Entrepreneurial<br />
Competencies Mapped With Human Personalities<br />
Morteza Rezaei-Zadeh 1 , Brendan Cleary 2 , John O’Reilly 3 , Abdolhossein<br />
Abdollahi 4 and Eamonn Murphy 5<br />
1<br />
University of Limerick; Ireland<br />
2<br />
Enterprise Research Centre, University of Limerick, Ireland<br />
3<br />
Department of education and professional studies, University of Limerick,<br />
Ireland<br />
4<br />
Psychology Department, University of Limerick, Ireland<br />
5<br />
Dean of Enterprise Research Centre, University of Limerick, Ireland<br />
Morteza.RezaeiZadeh@ul.ie<br />
Brendan.Cleary@ul.ie<br />
John.OReilly@ul.ie<br />
Abdolhossein.Abdollahi@ul.ie<br />
Eamonn.Murphy@ul.ie<br />
Abstract: Entrepreneurial competencies play an instrumental role in creating and growing new enterprises and<br />
thereby encouraging growth in an economy. To promote the development of increased entrepreneurial<br />
competencies in an economy, first they need to be identified and classified. In the last decades, many studies<br />
investigating entrepreneurial competencies have been published. Some of those are based on existing literature,<br />
while others are empirical studies in a variety of contexts. This article, as a part of a bigger project, is focused on<br />
identifying and classifying entrepreneurial competencies and characteristics. Based on more than 60 (mostly)<br />
peer reviewed articles, 65 entrepreneurial competencies were identified. These competencies were then<br />
classified according to the one level model of Entrepreneurial Competencies. An analysis was conducted to<br />
examine correlations between this model and the “five factor model of personality”, considered to be one of the<br />
most widely used psychological models for classification of personalities. Finally, we derived some interesting<br />
conclusions as a result of mapping between entrepreneurial competency levels and five factor model of<br />
personality.<br />
Keywords: entrepreneurial competencies, personalities, classification, mapping<br />
1. Introduction<br />
“The entrepreneur is the central actor in generating entrepreneurial activity. Thus, it is important to<br />
understand the motivational characteristics and variables associated with entrepreneurial behaviour<br />
spurring people to become entrepreneurs” (Tajeddini and Mueller, 2009, p. 1). In recent years, there<br />
have been considerable studies and publications on entrepreneurial competency as well as its growth<br />
consequences; however, as Wong et al. (2005) mentioned, even though someone has scored high on<br />
an entrepreneurial personality measure, it does not necessarily mean that they will become an<br />
entrepreneur without a definite intention of becoming one. Furthermore, the impact of internal and<br />
external contextual factors needs to be considered in this area.Many researchers such as Pearson<br />
and Chatterjee (2001), Kumara and Sahasranam (2009) and Holt et al. (2007) argue that despite<br />
extensive studies examining the personality traits of entrepreneurs, there remains a lack of consensus<br />
on what personality attributes distinguish entrepreneurs from non-entrepreneurs. Entrialgo et al.<br />
(2000) believe that this lack of consensus may be due to the theories and methods used to identify<br />
these characteristics. So they suggest that comparative research for identifying entrepreneurial<br />
features have to be done.<br />
2. Methodology<br />
In many previous empirical and literature studies, there are some sporadic findings and evidence<br />
about entrepreneurial characteristics and competencies. Following the review guidelines suggested<br />
by Creswell (1994), which described that the aim of a review is to summarize the accumulated<br />
knowledge in terms of interest issues that research has yet to resolve and also using the constant<br />
comparative method (Lincoln and Guba, 1985), this study tried to create a comprehensive list of 65<br />
entrepreneurial characteristics based on more than 60 (mostly) peer-reviewed articles. Then, based<br />
on their definitions and restrictive concepts, a classification of these competencies and mapping them<br />
with Big Five models of personality was conducted.<br />
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3. Findings<br />
Morteza Rezaei-Zadeh et al<br />
3.1 Identification of entrepreneurial competencies<br />
There are many diverse definitions about entrepreneurship and its relative subtitles. Our specific<br />
definition for “entrepreneurial competencies” based on the Boyatzis’s (1982) definition of competency<br />
is: “Certain characteristics or abilities of the person that enable him/her to demonstrate the<br />
appropriate entrepreneurial behaviour including: identifying opportunities, start-up and maintenance of<br />
business.”According to this definition, the following list of entrepreneurial competencies was identified<br />
in this study.<br />
� Internal Locus of Control: This feature was indicated as an entrepreneurial competency by<br />
Wong et al (2005), Pearson and Chatterjee (2001), etc. It, in particular, is defined by Rotter (1966)<br />
as the perceived control over the events of one’s life (Sapuan, 2009).<br />
� Innovation: “Schumpeter (1934, 1942) was one of the first economists to highlight the importance<br />
of business innovation, referring to the process of creative destruction. According to this process,<br />
wealth was created when change occurred, either by the introduction of a new set or a new<br />
production method, the opening of a new market, the conquest of a new source of provisioning or<br />
the creation of a new organization” (Entrialgo et al, 2000, p. 188). Moreover, this phenomenon<br />
was one of the most frequent sited characteristic as the specific function of entrepreneurship in<br />
several research, such as: Roper (1998), Leko-Šimić et al. (2007), Schubert (2010), etc.<br />
� Perception and Propensity to take risk: “Cantillon (one of the first authors to formally use the<br />
term `entrepreneurship’) pointed out in his work, published in 1755, that the main factor to<br />
differentiate entrepreneurs from employed workers was the uncertainty and risk taken by the<br />
former” (Entrialgo et al, 2000, p. 188). Since then, risk-taking has been one of the concepts most<br />
commonly used by researchers including Kumara and Sahasranam (2009), Petrakis (2010) to<br />
describe entrepreneurial orientation.<br />
� Tolerance of ambiguity: “Tolerance of ambiguity is the perceived extent of desirability or<br />
undesirability of a situation” (Pearson and Chatterjee, 2001, p. 277). According to Sadeghi and<br />
Steki (2010), and Kordnaeij et al. (2007), there are some evidences that entrepreneurs express<br />
greater ambiguity tolerance than others.<br />
� Need for achievement: “Whilst Murray (1938) identified the need for achievement as a basic<br />
requirement that affects behaviour, McClelland first established the construct in the<br />
entrepreneurship literature by positing that a high need for achievement predisposes a young<br />
person to seek out an entrepreneurial position to attain more achievement satisfaction that could<br />
be derived from other types of positions” (Entrialgo et al, 2000, p. 190). This feature is one of the<br />
widely-accepted characteristics of entrepreneurs and many authors such as Amiri et al. (2009),<br />
Rezaei and Rahsepar (2009) and Pistrui et al. (2001) have pointed to it importance.<br />
� Self-confidence: “<strong>Entrepreneurs</strong> have confidence in their own ability to both accomplish any<br />
goal they set for themselves, also overcome the odds, and succeed where others may fail”<br />
(Tajeddini and Mueller, 2009, p. 10). Some scholars, for example, Kumar Jha (2008), Schmitt-<br />
Rodermund (2004), Jahangiri (2008) note that, compared with others, entrepreneurs demonstrate<br />
a higher degree of self-confidence.<br />
� Need for autonomy: “A high level of autonomy expected from the entrepreneurial work is<br />
typically considered one of the key motivating factors influencing the decision to pursue an<br />
entrepreneurial career” (Schjoedt, 2009, pp. 621-622). Tajeddini and Mueller (2009) and Schjoedt<br />
(2009) describe and categorize some benefits of increased autonomy in an organization.<br />
� Creativity: A motto of entrepreneurs is this: "If the personnel are motivated, then the customers<br />
shall be satisfied and consequently the stockholders are benefited from the profits". It seems that<br />
recognition of these preferences without creativity shall actually be impossible (Sadeghi and<br />
Steki, 2010). This significant competency of entrepreneurs has been one of the key aspects of<br />
many empirical and literature studies in this area such as: Mends and Kehoe (2009), Jahangiri<br />
and Mobaraki (2009), Silberzahn and Silberzahn (2010) etc.<br />
� Team-building & Team-working: Important emphasis has been put on networking and teambuilding<br />
skills since evidence indicate that entrepreneurs equipped with these skills are more<br />
successful than entrepreneurs who do not possess them (Izquierdo and Deschoolmeester, 2010).<br />
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Morteza Rezaei-Zadeh et al<br />
�<br />
This evidence was approved by other scholars, for example, Boojihawon et al. (2007), Byrne<br />
(2010).<br />
Decision making ability: The empirical study by Izquierdo and Deschoolmeester (2010) about<br />
the “identifying entrepreneurial competencies which should be emphasized in entrepreneurship<br />
and innovation education at the undergraduate level” has shown that: “most of respondents (87.5<br />
per cent of entrepreneurs) indicated that decision making is a highly important competency that<br />
must be exhibited by entrepreneurs in their entrepreneurial endeavours” (p. 197). This evidence<br />
has been supported by Kumara and Sahasranam (2009), Kumar Jha (2008) and (Hynes et al.<br />
(2009).<br />
� Opportunity identification, evaluation and grasping: “Successful entrepreneurs have the<br />
ability and willingness to recognize and capitalize on opportunities” (Weaver et al. 2009, p. 108).<br />
A host of empirical studies such as “The higher education academy art design media subject<br />
centre and the national endowment for science, technology and the arts (2007)”, Krueger (2009),<br />
Macosko et al. (2009) and Samli (2009) show that “opportunity spotting” is one of the common<br />
entrepreneurs’ characteristics.<br />
� Pro-activity and hard-working: Pro-activity which is pointed out as an entrepreneurial<br />
competency by Penrose (1959), is related to taking the initiative, anticipating and carrying out new<br />
opportunities and creating or participating in emerging markets (Entrialgo et al, 2000). Also some<br />
scholars such as Kumara and Sahasranam (2009) and Kordnaeij et al. (2007) described the<br />
importance of this characteristic among entrepreneurs.<br />
� Leadership and Management ability: Barkham (1994) concluded that “Only those<br />
�<br />
entrepreneurs with some experience in the management of people are likely to take on significant<br />
numbers of workers in the early years of the firm” (p. 124). Also Kumar Jha (2008) evaluates the<br />
ability of pineapple growers in “leadership” as one of their main entrepreneurial characteristics.<br />
Enthusiastic optimists: Mends and Kehoe (2009) carried out an experimental study at the<br />
University of Illinois at Urbana Champaign (UIUC) about the “academic entrepreneurship” and<br />
based on their findings, “enthusiastic optimists” was found to be one of the selected<br />
characteristics of successful entrepreneurial faculty members. This finding was confirmed by<br />
Saremi and Alizade Sani (2009).<br />
� Multi-experience and multi-tasking identity: Steven B. Belkin and Heather Evans show<br />
multitasking is a critical aspect of the venture creation process (Schjoedt, 2009). Also according to<br />
the findings presented by Mends and Kehoe’s (2009) experimental study, multi-experiences is<br />
one of the selected characteristics of successful entrepreneurial faculty members:<br />
�<br />
“entrepreneurial faculty have diverse work histories and link their previous experiences to current<br />
projects. They use this diversity of experiences as a spring-board for new classroom applications<br />
and research areas of focus” (p. 82).<br />
Global vision: According to Boojihawon et al. (2007) global vision is a key driver that enables<br />
focus for strategy, and permeates throughout the organizational network. It provides the major<br />
motivation for the initiation of human behaviour towards entrepreneurial actions” (p. 567).<br />
� Persistent in following their aims: Lans and Gulikers (2010) mention that Gibb (2002) in his<br />
article on entrepreneurship training refers to “perseverance to achieve goals” as a key<br />
entrepreneurial behaviours. Other scholars such as Izquierdo and Deschoolmeester (2010),<br />
Jahangiri (2008) stressed on this impressive factor in the entrepreneurial behaviour.<br />
� Task motivation: According to the findings of an empirical study in the UK (The higher education<br />
academy art design media subject centre and the national endowment for science, technology<br />
and the arts, 2007) - also based on the findings of Izquierdo and Deschoolmeester (2010) high<br />
levels of motivation is one of the common entrepreneurs’ characteristics.<br />
� Communication skills and human relation: Izquierdo and Deschoolmeester (2010) describe<br />
that “communication and human relation are important for entrepreneurship as entrepreneur has<br />
to be able to persuade and discuss with various stakeholders such as customers, clients,<br />
suppliers, competitors, service providers and the like” (p. 196). Additionally, Hynes et al. (2009)<br />
and Kumara and Sahasranam (2009) have pointed out the importance of this capability for<br />
entrepreneurs.<br />
There are many other entrepreneurial competencies which have been identified and described in<br />
previous studies. Because of the space limitation, we only mention the title of those characteristics in<br />
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Morteza Rezaei-Zadeh et al<br />
an alphabetical order as follows: Ability for information seeking, Ability for problem solving, Ability for<br />
time-planning, Ability for goal-setting, Accounting, marketing and sale skills, Adaptability and flexibility,<br />
Analytical strength, Applied in orientation, Assertiveness, Belief in the effect of personal effort on<br />
outcomes, Challenge ability, Commercial understanding, Conceptual skills, Concerning for high<br />
quality of work, Connectors and builders, Customer-service skills, Deal making and negotiation,<br />
Desire to have high earning, Determination and consistent, Engineering skills, Entrepreneurial<br />
perception of time, Estimation skills, Experiential and continues learning, Finance/cash management,<br />
High extraversion, ICT proficient, Implementation abilities, Initiators, Integrity, Intuitive ability (a sixth<br />
sense), Job involvement, Motivation others ability, Need for “Variety”, Need for feedback, Need for<br />
power, Non-traditional, Practical work experience, Responsibility acceptance, Seeing the market from<br />
a different angle, Self-evaluate, Self-understanding and perception, Strategic thinking, Stress and<br />
failure coping, Venture and career evaluation and Visionary.<br />
3.2 Classification of entrepreneurial competencies:<br />
There are some models to classify the entrepreneurial characteristics outlined above. Two of these<br />
models were chosen in this study, including: A classification based on the “levels of entrepreneurial<br />
competencies” (DCMS, 2006b) and a classification based on the Big Five model of Personality (Holt<br />
et al., 2007). An initial diagram of those models is illustrated below:<br />
Figure 1: A Model of Classification of Entrepreneurial Competencies Based on their Levels<br />
According to the above figure, there are some restrictive definitions of entrepreneurial characteristic<br />
levels based on the Oxford Dictionary (2010). Accordingly, a “motive” is a reason for doing something,<br />
while a “trait” is a distinguishing quality or a genetically determined characteristic, typically one<br />
belonging to a person. Also “self-concept” is defined as an idea of the self-constructed from the<br />
beliefs one holds about oneself and - responses of others. Finally, “knowledge” is a notion about<br />
facts, information, and skills acquired through experience or education, while “skill” is described as a<br />
particular ability to do something well.<br />
Figure 2: Model of classification of entrepreneurial competencies based on the Big Five Model of<br />
personality<br />
Big Five Factors of Personality Model has five dimensions of personality which have been used by<br />
psychologists to describe human personality in a broad domain-. According to the definitions<br />
suggested by Holt et al (2007, pp.42-43), there are summaries of the description of these domains:<br />
� Extraversion; represents one’s tendency to be sociable, assertive, and active.<br />
� Agreeableness; represents one’s tendency to be trusting, compliant, and altruistic.<br />
� Openness; represents one’s tendency to be imaginative, unconventional, and inventive.<br />
� Conscientiousness; represents one’s tendency to be thorough, confident, and dependable.<br />
� Neuroticism; represents one’s tendency to be anxious, tense, and insecure.<br />
As is clear, entrepreneurial competencies have a strong affiliation with the human personalities,<br />
following a separate classification of the above identified entrepreneurial competencies according to -<br />
each of the above models, a correlation between two models was conducted in this study. The result<br />
of this correlation is mentioned in the below figure:<br />
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Morteza Rezaei-Zadeh et al<br />
Figure 3, Classifying and mapping between entrepreneurial competencies and person<br />
757
4. Discussion and conclusion<br />
Morteza Rezaei-Zadeh et al<br />
As it has been mentioned, this study provided a comprehensive list of entrepreneurial competencies<br />
based on the peer review of more than 60 prior empirical and literature studies. Some of these<br />
characteristics are more being cited than others, while all of them have their own importance and<br />
support by some evidences in this area.<br />
According to the classification of those competencies based on their levels, and as it can be seen in<br />
the below chart, distribution of these competencies amongst the 3 identified levels is nearly equal,<br />
while social role and self-concept level has a little more share than others.<br />
28%<br />
Entrepreneurial Competencies<br />
38%<br />
34%<br />
Motives and Traits Level<br />
Social Role and Self-Concept<br />
Level<br />
Knowledge and Skills Level<br />
Figure 4: Distribution of entrepreneurial competencies based on their levels<br />
As it has been mentioned before, the Big Five model of personality which is one of the most famous<br />
psychological models of human personalities was the base of the second classification of identified<br />
entrepreneurial competencies. As it is shown in the chart below, Openness with 38 per cent has the<br />
biggest share in the relationship with entrepreneurial competencies, while Neuroticism and<br />
Agreeableness with 5 and 8 per cent has the lowest relationship with entrepreneurial competencies. It<br />
can be concluded that general appreciation for art, emotion, adventure, unusual ideas, imagination,<br />
curiosity, and variety of experience which are the dimensions of openness have a strong correlation<br />
with entrepreneurial behaviours. Openness represents one’s tendency to be imaginative,<br />
unconventional, and inventive, so this close connection between openness and entrepreneurship<br />
shows that entrepreneurs have these personalities, which differentiate other conventional people. On<br />
the other hand, the weak link between Neuroticism and entrepreneurial competencies shows that<br />
entrepreneurs do not want to experience unpleasant emotions such as anger, anxiety, depression, or<br />
vulnerability. Furthermore, the same weak connection between entrepreneurial characteristics and<br />
Agreeableness supports the prior finding about the tendency of entrepreneurs to be unconventional. It<br />
is generally accepted that agreeableness of unconventional people is less than conservative ones.<br />
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Morteza Rezaei-Zadeh et al<br />
Figure 5: Distribution of entrepreneurial competencies based on their relation to Big Five model of<br />
personalities<br />
By Looking more closely at the distribution of entrepreneurial features amongst different human<br />
personalities, it can be seen that the distribution of these characteristics in terms of some<br />
personalities such as openness, extraversion and neuroticism is followed by a consist and same<br />
pattern, while conscientiousness and agreeableness have not a similar levels amongst different<br />
personalities. For instance, there is not any correlation between the “knowledge and skills level” of<br />
entrepreneurial competencies and “conscientiousness”. It can be concluded that most of the<br />
entrepreneurial knowledge and skills which are acquirable through experience or education, have not<br />
a tendency to show self-discipline and preference for planned rather than spontaneous behaviour.<br />
This finding has been supported by the findings on the preferred learning styles of entrepreneurs.<br />
These studies show that entrepreneurs tend to learn in an experiential style and learning by doing.<br />
This approach of learning almost occurs in the real context of life and business and it has less<br />
planned process. In contrast, there is a strong correlation between conscientiousness and social role<br />
and self-concept level and also motives and traits level. Probably, this link is due to the acquisition of<br />
entrepreneurial competencies in these two areas is conducted in a pre-planned process.<br />
Big Five<br />
100%<br />
90%<br />
80%<br />
70%<br />
60%<br />
50%<br />
40%<br />
30%<br />
20%<br />
10%<br />
0%<br />
Motives and<br />
traits level<br />
Social role and<br />
self-concept<br />
level<br />
Knowledge and<br />
skill level<br />
Neuroticism 1 1 1<br />
Extraversion 6 5 8<br />
Openness 7 11 7<br />
Conscientiousness 8 5 0<br />
Agreeableness 0 3 2<br />
Figure 6: Correlation between levels of entrepreneurial competencies and different personalities<br />
Also, as it can be seen in the figure 6, there is no correlation between entrepreneurial motives and<br />
traits level and agreeableness. As another finding of this study, it can be claimed that motives and<br />
genetically-determined characteristics of entrepreneurs are not linked by their trusting, compliant, and<br />
altruistic tendencies. To be more precise, trusting and altruistic features of entrepreneurs are acquired<br />
through two other contexts (social role and self-concept level and knowledge and skill level). These<br />
characteristics are not motivation-based or genetically-determined characteristics. As the final<br />
conclusion of this study, it can be seen in the above figure that, much of the correlation between<br />
openness and entrepreneurial competencies occurs in the social role and self-concept level. It can be<br />
concluded that people with openness personality tend to have entrepreneurial ideas which selfconstructed<br />
from the beliefs that entrepreneurs hold about oneself and the responses of others and<br />
vice versa. The findings of this study are limited to the studied articles and research. It is possible that<br />
with increasing or changing the scope of reviewed articles, some of the above results and<br />
discussions, should modify little.<br />
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761
The Organisation of Knowledge in High Technology-Based<br />
Firms: Evidence From the Emilia-Romagna Region<br />
Ugo Rizzo and Francesco Nicolli<br />
University of Ferrara, Italy<br />
ugo.rizzo@unife.it<br />
francesco.nicolli@unife.it<br />
Abstract: This work investigates how knowledge is organised during the process of development of high<br />
technology-based firms (HTBFs). The existing literature on entrepreneurship lacks accurate analysis of the<br />
processes that lead an idea of business to become an established firm. The present paper seeks to move one<br />
step towards filling this gap, by dynamically investigating the process development of a self-contained population<br />
of 76 HTBFs in the Northern Italian region of Emilia-Romagna. This work studies how production processes and<br />
governance structures are organised by firms and how such organisational structures change during the<br />
development process. By clustering the firms in similar organisational configurations at three different points in<br />
time, the results show that it is possible to observe that firms develop along different, sometimes overlapping<br />
paths. The work tries to enrich the understanding of the entrepreneurial process and seeks to put forward some<br />
reflections on the theory of the firm. Finally some policy implications are also provided.<br />
Keywords: entrepreneurial process; high technology-based firms; theory of the firm; cluster analysis<br />
1. Introduction<br />
Economics and management literature on innovation widely acknowledged the fact that firms mostly<br />
develop idiosyncratically and therefore these firms built specific and difficult to imitate competences<br />
(Prahalad and Hamel 1990). Consequently, innovation process mainly become a localised process, in<br />
which history and environment play a fundamental role. Such literature highlights the heterogeneity<br />
character of firms resource endowments and behaviours (Penrose 1959), and calls for a dynamic<br />
approach to the study of the firm.<br />
Most academic studies on high tech entrepreneurship, many related to technology transfer from<br />
university to industry, tend to concentrate on the classic identification of the determinants. Such<br />
studies do not analyse entrepreneurship in a process framework. Although most literature tends to<br />
consider HTBFs as homogeneous entities that develop in a linear manner, some efforts have recently<br />
been produced to shed light on the heterogeneity of such firms (Mustar et al 2006) on the one hand,<br />
and to investigate the process through which such firms come to life and develop, on the other hand<br />
(Vohora et al 2004). However, these lines of investigations appear less developed: the present work<br />
aims to investigate the heterogeneity of HTBFs in relation to their development process. By HTBFs<br />
we broadly refer to those firms that operate in high technology sectors.<br />
Research works on this topic tend to be based on the study of production processes or on the<br />
analysis of exchange and coordination processes, that is the governance structure of the firm. Such<br />
approaches are usually kept distinct: the former aims to identify the resources that an entrepreneur,<br />
scientist, team, university or local area should arrange in order to stimulate the phenomenon in a best<br />
practice diffusion manner; the latter aims to discover the preferred governance structure HTBFs must<br />
adopt for the coordination of their activities.<br />
As a result, most academic literature not only considers the subject in a static framework, but also<br />
analyses the topic partially. In order to overcome these limits, a more useful theory of the firm should<br />
employ a framework able to join production with governance analysis (Langlois and Foss 1997). The<br />
present paper seeks to move a step in this direction by pointing to the study of knowledge as the<br />
basic element: we observe which organisational configurations firms adopt at different points in time<br />
of their development route, with regard to their approach to production processes and governance<br />
structure. By focusing on both production and coordination processes we are able to observe<br />
knowledge not only in terms of embedded stocks in resources within the firm, but also in terms of<br />
approaches to the external environment. In other words, we observe the evolution of the knowledge<br />
base in both within and across the firm boundaries. In order to do so we match the insights derived<br />
from academic literature on the topic with the characteristics of innovative firms and we identify some<br />
types of organisational configurations HTBFs can display. Subsequently, we observe if and how firms<br />
of our population modify their organisational configurations during their development process.<br />
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Ugo Rizzo and Francesco Nicolli<br />
The paper is structured as follows: section 2 reviews the academic literature on HTBFs; section 3<br />
identifies the organisational structures of different types of innovative firms and seeks to match such<br />
configurations with the insights of the previous section. Research design and empirical analysis are<br />
developed in section 4 and 5. Finally, some concluding remarks are provided.<br />
2. Literature review<br />
<strong>Entrepreneurs</strong>hip is a process that takes place in circumstances of bounded rationality, in which the<br />
entrepreneur is the figure able to perceive a latent business opportunity. Our work concerns the<br />
process of transforming this opportunity into a business. The conceptual starting point of this work is<br />
to recognise that firm’s behaviours are the output of interdependences between the production<br />
processes, and exchange and coordination processes. Firms are therefore entities that develop highly<br />
idiosyncratically (Nelson 1991). We do not aim to investigate why some business opportunities<br />
become a firm or not, but how firms develop.<br />
The entrepreneurial process is complex, where many different elements play a role, directly or<br />
indirectly. Scholars mainly concentrated on identifying which elements would favour the occurrence of<br />
the process in a successful manner. Literature therefore highlighted the features of an ideal<br />
entrepreneur: someone with an industrial background (Landry et al. 2006, Krabel and Mueller 2009),<br />
possibly with both technical and managerial experience and with strong networking assets (Shane<br />
and Stuart 2002, Walter et al 2006). Similarly, the context in which the entrepreneurial process occurs<br />
should: be endowed with a high concentration of high tech firms and universities in order to favour the<br />
circulation of knowledge (Friedman and Silverman 2003); be endowed with the required<br />
complementary assets an idea of business needs in order to develop; and provide the presence of<br />
venture capitalists (Powers and McDougall 2005). The new firm should also be formed by a scientific<br />
board in which academic scientists should be present in order to allow absorptive capacity. If the<br />
HTBF is an academic spin-off, there are also features of a university or technology transfer office that<br />
favour the process, such as the experience of the parent organisation in entrepreneurial practices and<br />
in patenting activities, its networking assets, and so on (Lockett and Wright 2005, Powers and<br />
McDougall 2005). Finally, the innovation to be exploited should be protected by patents in order to<br />
increase the likelihood of success (Shane 2002, 2004) and to reduce the probability of losing the<br />
innovation rents (Teece 1986).<br />
Although the identification of the determinants to the creation and success of firms represent the main<br />
objective of such literature, recently some efforts have been made in order to understand how firms<br />
are organised and how they develop. In particular they firstly study the heterogeneity character:<br />
research works are mainly concentrated on identifying different typologies of HTBFs according to their<br />
resource base (Heirman and Clarysse 2004), their sectoral affiliation or output type of product and<br />
customers (Druilhe and Garnsey 2004), their financial needs and constrains (Druilhe and Garnsey<br />
2004), the characteristics of the organization they are spinned-off (Audretsch and Lehmann 2005), the<br />
characteristics of ties with the parent organization or with the supporting partner infrastructure (Wright<br />
et al. 2004).<br />
Regarding the development process of HTBFs, the seminal work by Roberts (1991) identifies some<br />
developmental stages, mainly related to the capacity of getting financial investment funds. Some<br />
works recently investigated the issue, mainly in respect to academic spin-offs (Vohora et al. 2004,<br />
Clarsse and Moray 2004). Clarysse and Moray (2004) explored the evolution in the decision making<br />
process and in the human resources organization of the very early stages of firm development: their<br />
findings reveal that hierarchies are very flat in the beginning and a slow learning process leads the<br />
building of an organisational structure.<br />
In a dynamic approach Vohora et al. (2004) described the processes of acquisition and building of<br />
capabilities during the firm creation and development. They identified a route every academic spin-off<br />
needs to encompass in order to become and established firm in the market. Muller (2010) undertook<br />
a duration analysis and found that different firms proceed in the growing path at a different speed.<br />
Finally, Druilhe and Garnsey (2004) pointed to the non-linearity of the process development: they<br />
revealed that the academic spin-off development process leads to change in their resource<br />
endowment and connected business model. They highlighted the role of resources in shaping such<br />
changes, both within the firm and in the environment. This paper follows this line of investigation and<br />
763
Ugo Rizzo and Francesco Nicolli<br />
aims to enrich our understanding of the variety of paths a firm may undertake in its development<br />
process.<br />
3. The organisation of knowledge in the firm development process<br />
By organisation of knowledge we intend to emphasise the joint analysis of production processes on<br />
the one hand and governance mechanisms, or coordination processes on the other hand. We studied<br />
the production processes by analysing the firm resource endowments, together with some available<br />
characteristics of the operational processes, such as the firm requiring complementary assets, the<br />
kind of complementary assets, and the presence of patented invention. Conversely, to investigate the<br />
governance mechanisms adopted by the firm we refer to Teece’s paper (1996) that concerns the<br />
organisational configuration recognized in different typologies of innovative firms. In particular Teece<br />
(1996), identifying five organizational factors which are hierarchies, integration, degree of<br />
specialisation, culture and external linkages, distinguishes various archetypes of innovative firm,<br />
according to different combinations of degrees of these organizational factors.<br />
Matching Teece (1996) analysis with literature on HTBFs, it seems reasonable to consider the<br />
development process of HTBFs as a route that leads a stand-alone inventor to become a Silicon<br />
Valley-type of firm. In other words, at constitution, HTBFs display the features of a stand-alone<br />
inventor (e.g. Clarysse and Moray 2004): a recently created HTBF tends to be very specialised,<br />
luckily with a patented invention to exploit, has very flat hierarchies, has a low level of integration, and<br />
possibly has some connections with the external market environment. If the stand-alone inventor is a<br />
laboratory, it can displays some level of horizontal integration.<br />
At the end of the development route, successful HTBFs, usually used for case study research, display<br />
the features of the Silicon Valley-type of firm: some level of integration and hierarchies, still quite a<br />
specialised scope yet more differentiated than at the beginning, and strong linkages with the market<br />
place.<br />
We conjecture the following: firstly we expect to observe various firms organised differently, both<br />
within the same time period and across different time periods; secondly we expect to find a variety of<br />
different paths of evolution followed by different firms. Finally, within the variety of paths, we also<br />
expect to observe a reasonable number of firms to shift their organisation from that of the stand-alone<br />
inventor to that of the Silicon Valley-type of firm.<br />
4. Research design<br />
4.1 Data<br />
The data is made up of the population of business ideas awarded by the Regional Authority to receive<br />
a specific policy supporting tool, named “Spinner”, observed at three different point in time. This policy<br />
aimed, also, to support high tech business ideas become firms. A total of 76 business ideas were<br />
awarded, which represent a consistent and representative sub sample, considering that according to<br />
the regional observatory website on start-up firms, there were 144 HTBFs active in the region in 2008.<br />
Moreover, our population of HTBFs could be considered a self-contained population of firms for two<br />
main reasons: firstly, all firms have been awarded similarly, secondly, the characteristics of the region<br />
strengths such consideration. Indeed, the Emilia-Romagna region appears to be a suitable economic<br />
system to investigate because of the shared cultures and values on the one hand, and the high<br />
number of SMEs involved in robust networking relationships, the consequent high level of division of<br />
labour and the elevated level of formal and informal institutional activities, on the other (Brusco 1982,<br />
Leonardi and Nanetti 1990, Doloreux and Parto 2005).<br />
The database was created from three different sources, each represented a specific point in time of<br />
the development process of these business ideas. The first point in time, named T0, gives a picture of<br />
the situation described in the project with which the teams applied to the regional call. Only awarded<br />
projects have been considered. Each award, based on the evaluation of such projects, corresponded<br />
to a one- or two-year supporting programme, depending on the specificities of each project, in which<br />
one or two people per project were provided with a grant and specific training at both a scientific and<br />
managerial level. Moreover, the award made it possible to take advantage of some consultancy<br />
services, such as services on intellectual property rights and marketing. Consequently, in the first year<br />
(or two, depending on the duration of the award), the winning team should have tested the feasibility<br />
of the business and constituted the firm together with the provision of a business plan at the end of<br />
764
Ugo Rizzo and Francesco Nicolli<br />
the award. The business plan represents the source of information about the second point in time,<br />
called T1, and reveals the situation of the firm at the moment of constitution. One year after the point<br />
of constitution, the firms were surveyed a third time, T2. Therefore our three time periods represent<br />
three snapshots of the business idea before its exploitation, at the firms’ constitution, and after one<br />
year of the firms being on the market.<br />
4.2 Methodology<br />
In the analysis we concentrated on two aspects: the resource endowments together with the<br />
production processes, and the governance structure. The first aspect refers to the characteristics of<br />
human capital and production. Concerning human capital, we investigated the percentage of<br />
academics, of people with previous industrial experience and of unemployed (or temporary) workers<br />
in the team. The percentage of people with industrial experience represents a proxy of the<br />
entrepreneurial and managerial capabilities of the team, while the unemployed workers should be<br />
considered because seeking work seems to be, at least in Emilia-Romagna, one of the main reasons<br />
why young academic researchers start a business (Rizzo 2010). Concerning production, we looked at<br />
the characteristics of the innovation, distinguishing between patented and non-patented inventions,<br />
and at the characteristics of the operations in terms of complementary assets: we investigated the<br />
presence of generalised complementary assets as well as the presence of specialised<br />
complementary assets (Teece 1986). In particular, we assumed that if the operational activities are<br />
conducted entirely internally there are no complementary assets; if some phases of the operations are<br />
conducted in partnership with other organisations, we assumed the presence of specialised<br />
complementary assets, while we assumed the presence of general complementary assets in<br />
intermediate cases.<br />
Regarding the governance mechanisms adopted by the firm, we sought to investigate as much as<br />
possible Teece’s (1996) organisational factors. We therefore considered the number of products (or<br />
services) provided to the market as a proxy of specialisation; the scientific differentiation of the team,<br />
in terms of scientific bachelor’s degree, as a proxy of horizontal integration; the ratio between<br />
employees and total personnel as a proxy for the presence of hierarchies: the higher the ratio, the<br />
higher the level of hierarchies, meaning that if the ratio is equal to 0 there are no hierarchies at all;<br />
and finally the presence of direct channels connecting the firm to the market (in terms of sales) as a<br />
proxy for external linkages already present.<br />
Table 1 sums up the variables and their implication for the empirical analysis. All these variables were<br />
collected during three different periods of time, except the variable ‘hierarchies’ that is only present in<br />
T1 and T2: at time T0 there were no employers or employees, but only a team of proponents.<br />
Technically, we are trying to classify the HTBFs organisation of knowledge in different points in time<br />
of their development, based on the variables collected in Table 1.<br />
According to both literature on HTBFs and on governance configurations, two opposite types of firm<br />
can be identified. The first one has the features of a stand-alone inventor, is not even connected to<br />
the university environment and is organised as follows: no academics nor industrially experienced<br />
people in the team, but many unemployed workers; no presence of complementary assets, but,<br />
possibly, a patent to protect the innovation; no hierarchies, but probably some level of horizontal<br />
integration; possibly some external linkages with the market and a very specialised production. We<br />
could label such theoretical type of firm as the ‘unemployed stand-alone inventor’.<br />
On the opposite theoretical extreme there is a type of firm that we would call the ‘Silicon Valley spinoff’:<br />
a firm aiming to exploit a product that is potentially very profitable, which displays the presence of<br />
academics and personnel with previous industrial experience and no unemployed workers; the<br />
presence of patents and specialised complementary assets; some level of hierarchies and integration;<br />
less specialised production and connections with the market that have not necessarily been<br />
developed because the product should be powerful enough that it does not need a direct link to the<br />
market for it to be successful.<br />
5. Empirical analysis<br />
The analytical tool identified to investigate how firms are structured according to the variables of<br />
reference and to see eventual movement towards different groups is the cluster analysis. The aim of<br />
the analysis is twofold: first it tries to identify if HTBFs can be clustered according to our variables,<br />
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Ugo Rizzo and Francesco Nicolli<br />
and second it seeks to reach a deeper understanding of the development paths of such firms. The<br />
idea is that different firms assemble in different groups according to the different periods of time. In<br />
other words, firms in the same group at the same stage of development may move to, or come from,<br />
different groups. From a statistical point of view this means the firms should be classified into different<br />
groups in the three different time stages, and then it should be studied if the composition of the stage<br />
is the same over time or if there is a kind of recombination of firms among clusters, which may<br />
illustrate their development path.<br />
Table 1: Variables descriptions<br />
Variable<br />
group<br />
Production<br />
processes<br />
Governance<br />
mechanisms<br />
Variable name Research hypothesis<br />
<strong>Academic</strong>s Percentage of academics among firm personnel<br />
Unemployed<br />
Percentage of unemployed or temporary workers among firm<br />
personnel<br />
Industrial experience<br />
Percentage of people with industrial experience among firm<br />
personnel<br />
Patents Presence of patent(s) protecting the product(s) (dummy)<br />
Partnership<br />
If positive reveal the presence of specialised complementary assets<br />
(dummy)<br />
Not-only internal If positive reveal the presence of general complementary assets<br />
production<br />
(dummy)<br />
Hierarchies Ratio between employers and total personnel<br />
Horizontal integration<br />
Ratio between numbers of different bachelor’s degree scientific field<br />
of the personnel and number of personnel<br />
Direct market external<br />
linkages<br />
Presence within the firm of a direct channel to sell on the market<br />
Specialisation Number of products put on the market<br />
All variables were standardized and according to the results of the correlation matrix of variables, we<br />
decided not to include the variable “Direct market external linkages” due to collinearity issues (with the<br />
variable ‘Partnership’). The main analysis is conducted using hierarchical methods, and as a<br />
robustness check we also performed the same analysis through the use of non-hierarchical<br />
techniques, with both random and non-random seeds, which provided consistent results compared to<br />
the main analysis. Considering that we would like to identify groups of similarity, following Hair et al.<br />
(1998), we used the squared Euclidian distance and the Ward grouping method as distance<br />
measures, while we considered the presence of a significant jump in the value of the agglomeration<br />
coefficient to select a specific cluster solution.<br />
5.1 Findings<br />
The cluster analysis, as shown in Table 2, identified four different groups of firms at each point in<br />
time, according to the specific variables used in the analysis, which relate to different organizational<br />
structures of the firm itself. These groups show similar characteristics across the three time periods,<br />
and we named them in the same way accordingly. In particular, it is possible to identify a first cluster,<br />
characterised by a very high product specialization (firms in this group generally have only one<br />
product, therefore are highly specialised), shallow hierarchies, a low percentage of academic<br />
personnel, and a low level of horizontal integration. This cluster corresponds to the ‘unemployed<br />
stand-alone inventor’ type of firms. As shown in the table below, the numerousness of this cluster<br />
seems fairly time invariant: there are eleven firms of this type in T0, eleven in T1 and fourteen in T2.<br />
Moreover, except for the case of the two firms that move from Cluster 1 to Cluster 4 between T0 and<br />
T1, all the firms in Cluster 1 at T0 also remain in Cluster 1 in the following period. The situation<br />
changes slightly if we consider the transition between T1 and T2, where one firm moves directly to<br />
Cluster 4, four firms move to the intermediate Cluster 2 and three other firms join Cluster 1.<br />
Conversely, Cluster 4 represents the most structured type of organizational configurations<br />
encountered among the clusters, characterized by a lower specialization at product level (more<br />
products per firm), presence of some forms of hierarchies (a higher share of employees), a higher<br />
share of academic participation in the firm and the presence of general complementary assets. We<br />
named such cluster ‘Silicon Valley spin-off’. In this case there are eight firms at T0, fifteen at T1, and<br />
twelve at T2. In this case the movements among clusters are less apparent, but more significant.<br />
Except for one firm (the centroid of the cluster), which is part of this cluster in all periods of time, a<br />
766
Ugo Rizzo and Francesco Nicolli<br />
high level of mobility can be noted around this Cluster 4. In particular, two firms move to Cluster 2<br />
between T0 and T1, while the other firms move from Cluster 4 to Cluster 3 between T1 and T2. Finally<br />
there is a group of firms joining Cluster 4 at time T2 and coming from the intermediate Clusters 2 and<br />
3.<br />
Table 2: Cluster analysis results<br />
Cluster<br />
number<br />
Cluster name<br />
Cluster 1<br />
Unemployed standalone<br />
inventor<br />
Cluster 2<br />
Intermediate<br />
stand-alone<br />
Cluster 3<br />
Intermediate<br />
Silicon Valley<br />
Cluster 4<br />
Silicon Valley<br />
spin-off<br />
Total number of firms<br />
within the clusters<br />
N. of<br />
firms at<br />
T0<br />
% of<br />
firms at<br />
T0<br />
N. of<br />
firms at<br />
T1<br />
% of<br />
firms at<br />
T1<br />
N. of<br />
firms at<br />
T2<br />
% of<br />
firms at<br />
11 16% 11 16% 14 24%<br />
40 57% 25 37% 14 24%<br />
11 16% 16 24% 17 30%<br />
8 11% 15 23% 12 22%<br />
70 100% 67 100% 57 100%<br />
The two intermediate clusters, Cluster 2 and Cluster 3, display configurations in-between the two<br />
extremes: in particular Cluster 2, that we could name ‘intermediate stand-alone’, contains firms that<br />
organised themselves more similarly to the stand-alone inventor type of firm, that is to Cluster 1,<br />
whilst Cluster 3, named ‘intermediate Silicon Valley’, groups firms that tend to organise more similarly<br />
to the Silicon Valley spin-off firm, that is to Cluster 4.<br />
Such clusters are the most populous ones, as shown in the table, and moreover register the highest<br />
level of mobility in our population. The significant tendency of firms to move from Cluster 2 to Cluster<br />
3 is particularly notable. The figure – developed only for illustrative purposes – highlights the more<br />
significant movements of firms among clusters.<br />
We must also note that the total number of observations vary among the different periods of time for<br />
two reasons. Firstly firms undergo a selection process that reduces the number of firms while they<br />
proceed along the development process: in particular there are 76 observations at T0, 74 at T1 and 57<br />
at T2. Secondly there are also some discrepancies regarding variation due to the presence of outliers,<br />
which are usually dropped from the analysis. Outliers are always detected and isolated on annual<br />
base.<br />
Figure 1: Organisational structures movements in the development process<br />
767<br />
T2
Ugo Rizzo and Francesco Nicolli<br />
Our findings confirm our conjectures. First of all, the cluster analysis revealed that different firms<br />
organise differently among themselves and a significant number of them modify their organisational<br />
structure during their development process. Secondly, the cluster analysis confirms the theoretical<br />
insights we derived from literature, that is that at the earliest stage of development, firms tend to<br />
organise as stand-alone inventors, while they tend to move towards a Silicon Valley-type of firm when<br />
reaching more advanced stages of development. These insights are particularly evident when we look<br />
at the percentage of firms of each cluster in the different snapshot. As a matter of fact, Cluster 2 has a<br />
high decrease in the number of firms, while a significant increase in firms is experienced by Clusters 3<br />
and 4. As clearly observable from Table 2, at time T0 there are 73% of firms between clusters 1 and 2,<br />
that means that the high majority of firms tend to structure similarly to a stand-alone inventor;<br />
conversely such two clusters represent only the 48% of firms at time T2, where more than half of the<br />
firms are structured more similarly to a Silicon Valley-type of firm.<br />
We also observed some opposite changes in structure, that is from more structured organisation (i.e.<br />
Silicon Valley-type) to less structured ones (i.e. stand-alone inventor): as observed by the literature<br />
(Vohora et al 2004) it is presumable that such changes are mainly due to the need of the firm to reorganise,<br />
and to move back to a sort of new initial stage of development.<br />
Nevertheless it is important to note the presence of limits in this work, among which the limited<br />
timeframe: analysis studying the development process of HTBF from an idea of business to a Teece’s<br />
Silicon Valley type of firm would require a longer time interval.<br />
6. Conclusions<br />
This work has sought to analyse the paths followed by a self-contained population of HTBFs<br />
throughout their early development process. It has been noted that, according to economics and<br />
management literature, HTBFs organisational structure tends to resemble the stand-alone inventor<br />
model at the very beginning, when the business is just an idea to be tested if feasible, and to change<br />
toward a model similar to the Silicon Valley-type of firm. Our empirical findings give evidence of such<br />
insights.<br />
In addition, our work further articulates the study carried out by Druille and Garsney (2004), by<br />
pointing to the heterogeneity of paths that HTBFs belonging to the same context follow in their<br />
development process. We gave evidence that firms organise differently among each other and shape<br />
specific paths of development that are likely to be different and sometimes overlapping. Our work<br />
therefore contributes to the description of the heterogeneity of HTBFs, refusing the assumption that<br />
their process development is homogeneous. Thus, although there is a tendency of HTBFs to modify<br />
their organisational structure from a stand-alone inventor type at the very early stages of development<br />
to a Silicon Valley-type of firm when reaching a more advanced phase of development, the paths that<br />
firms undertake to accomplish such changes is strongly heterogeneous.<br />
Moreover, the present work also discusses the theory of the firm. According to economists of<br />
innovation, an appropriate theory of the firm should join analysis on production with analysis on<br />
governance, therefore, being dynamic. We sought to make a step in this direction, firstly by<br />
accounting for the dynamic character of the development process of firms, and secondly by analysing<br />
how knowledge is organised in both within and across the firm boundaries.<br />
Finally, our considerations lead to some policy implications: both academics and policy makers should<br />
consider the heterogeneity of firm structures and the variety of development paths that lead a<br />
business idea to become an established firm in the market. Instead of replicating some recognised<br />
best practices, policies should give more attention to firm specific features and to their firm specific<br />
route of development.<br />
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Transfer, Vol. 29, pp. 269-285<br />
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769
Patent Aggregating Companies: Motives, Activities and a<br />
Classification<br />
Frauke Rüther 1, 2 , Nicole Ziegler 1 and Martin Bader 1<br />
1 University of St.Gallen, Switzerland<br />
2 University of Melbourne, Australia<br />
frauke.ruether@unimelb.edu.au<br />
nicole.ziegler@unisg.ch<br />
martin.bader@unisg.ch<br />
Abstract:As part of a changing innovation paradigm from close innovation to open innovation, companies<br />
increasingly sell and buy patents. For the observer, corporate buyers which produce goods and services and<br />
therefore hold patents to protect them are intuitive players in the market for patents, but a new phenomenon is<br />
observable. In recent years, companies which seem to have none of the traditional buying motives have emerged<br />
as new significant players in the market for patents. Even though these companies do not produce goods and<br />
therefore do not need patents in their historical meaning, they acquire patents and aggregate large patent<br />
portfolios. We indicate them as patent aggregating companies. Extant literature on this new phenomenon is<br />
limited to anecdotic reports of single cases and often emotionally charged. A profound analysis of buying motives<br />
and the business models of patent aggregating companies is lacking. Based on an exploratory case study<br />
design, we investigate strategies, business models, and activities of 27 patent aggregating companies. Our<br />
findings confirm that patent aggregating companies are a young phenomenon. These companies are highly<br />
diverse regarding their motives to aggregate patents, their funding structure, their way of venture creation, and<br />
their focus on industry and patents they aggregate. We identify four main drivers that have enhanced the patent<br />
aggregating business: (1) corporate recognition of patents as asset; (2) financial pressure and risk diversification<br />
needs of producing companies; (3) an increasingly complex patent landscape; (4) the large financial opportunities<br />
for bold entrepreneurs. Based on our findings we derive eight types of patent aggregating companies. Four types<br />
acquire patents to generate revenues by exploiting the patents. Based on how these companies exploit the<br />
patents we distinguish between patent acquisition funds, patent enforcement funds, patent incubating funds, and<br />
patent trading funds. The other four types acquire patents to serve their members, their customers or the society<br />
(commercially or not). Patents are only a means and the exploitation of them follows more diverse objectives than<br />
sole revenue generation. We cluster this companies in defensive patent funds, non commercial patent funds,<br />
patent pools, and patent securitization funds.<br />
Keywords: markets for technology, open innovation, technology transfer, innovation financing, patent<br />
enforcement, patent aggregating companies<br />
1. Introduction<br />
Traditionally, patents are used to protect own products and processes from being copied by third<br />
parties, to ensure freedom to operate, and to generate temporary monopolies (Granstrand 2000;<br />
Gassmann & Bader 2007). In recent years, shorter product and technology life cycles (Grindley &<br />
Teece 1997; Chesbrough 2003) and increased costs of research and development (R&D) have<br />
brought firms to shift to more open models of innovation (Chesbrough 2003; Gassmann 2006) and<br />
license or sell patents to external partners. In this new era of open innovation markets for patents and<br />
technology have emerged (Arora, Fosfuri & Gambardella 2001).<br />
Companies buy patents for mainly two main reasons: technological reasons and defensive reasons.<br />
By buying for technological reasons, a company gains excess to new knowledge, is able to entry new<br />
markets, and saves R&D costs as well as reduces R&D risks (Grindley & Teece 1997; Reepmeyer,<br />
Gassmann & Rüther 2011). Patents bought for defensive reasons help the company to obtain<br />
freedom to operate, to build up a blocking position against competitors, or to round out the patent<br />
portfolio for cross-licensing negotiations with competitors (Cohen, Nelson & Walsh 2000; Shapiro<br />
2001). Beside producing companies which buy patents based on above mentioned reasons, in recent<br />
years companies which do not produce goods have emerged as buyers and are now, even that they<br />
have none of the traditional buying motives, significant players in the market for patents.<br />
Even though these companies do not produce goods and therefore do not need patents in their<br />
historical meaning, they acquire patents and aggregate large patent portfolios. We indicate them as<br />
patent aggregating companies. Patent aggregating companies are defined here as organizations that<br />
have acquired more than 10 patents, do not have R&D as a core competency, and do not produce<br />
own physical products.<br />
770
Frauke Rüther et al.<br />
Although the academic interest in external patent exploitation and companies which are involved in<br />
these processes has increased, existing research is limited to external exploitation at companies,<br />
technology acquisition of corporate buyers, exclusive groups of patent buyers and technology market<br />
intermediaries. Often patent aggregating companies are lumped together undifferentiated. Either they<br />
are suspected of acquiring patents only as litigation opportunity (so called 'patent trolls', e.g., Chien<br />
2009). Or they are appreciated as white knight in underdeveloped markets for technology (so called<br />
'patent elves', e.g., Geradin, Layne-Farrer & Padilla 2008). Extant literature on this new phenomenon<br />
of patent aggregating companies is limited to anecdotic reports of single cases. A profound analysis<br />
of buying motives, activities, and the business models of patent aggregating companies is lacking.<br />
Additionally, publications are often emotionally charged and terms are connoted. Why these patent<br />
aggregating companies have emerged, who they are and why they aggregate large patent portfolios,<br />
however, remains an open question.<br />
Therefore, in this paper we aim to integrate and expand existing literature on markets for technology,<br />
external patent exploitation and patent market intermediaries. Applying a qualitative case study<br />
approach, we analyze why patent aggregating companies have emerged and we develop a<br />
classification of patent aggregating companies which explains their motives to aggregate patents and<br />
differences in their business models.<br />
The paper is structured as follows. In the next chapter a literature review of extant research on why<br />
companies hold patents and patent transactions is provided. Then, a description of the methodology<br />
and the analyzed firms follows. Thereafter, the findings are presented and drivers of patent<br />
aggregating business are presented. Subsequently, a classification of patent aggregating companies<br />
is derived. We conclude by providing a brief outlook and further research possibilities.<br />
2. Literature review<br />
Operating in a knowledge society, intellectual property increasingly transits from a legal matter to a<br />
strategic issue. The question why firms hold patents has become important in the past years for<br />
academics and practitioners and a number of empirical studies analyze the reasons for patenting<br />
(Arundel & Patel 2003). In literature traditional motive for patenting as protecting innovations,<br />
secureing freedom to operate (Granstrand 2000), blocking competitors (e.g., Blind, Cremers &<br />
Mueller 2009), preventing competitors from developing around the own technology (Arundel & Patel<br />
2003) and building up large portfolios to improve the own negotiation position in cases of litigation<br />
(Cohen, Nelson & Walsh 2000) are anaylzed.<br />
Through the trend to open the innovation process, a new motive for companies to hold patents has<br />
arose (Chesbrough 2003; Gassmann 2006). Due to opening up the innovation process and<br />
collaborating with external firms, patents are now also generated to be exchange instruments (Blind et<br />
al. 2006). For example, studies show that firms use patents increasingly to leverage R&D risks<br />
(Reepmeyer, Gassmann & Rüther 2011). In open innovation systems patents are also used to<br />
acquires knowledge, a research area studied intensely during the 1990s (e.g., Granstrand et al.<br />
1992). Additionally, studies observe that companies file patents for purely monetary and financing<br />
motives (de Rassenfosse 2011).<br />
Although studies recognizing non corporate patent buyers are burgeoning, they focus merely on these<br />
companies as technology market intermediaries (e.g., Benassi & Di Minin 2009; Monk 2009) or as<br />
threat or opportunity for other market players (e.g., Geradin, Layne-Farrer & Padilla 2008; Chien<br />
2009). From a practitioner point of view, Millien & Laurie (2008) provide a collection of various IP<br />
business models. They classify emerging and established IP business models in 17 different types<br />
among them four different types of patent aggregating companies. In the academic literature Benassi<br />
& Di Minin (2009) analyze patent brokers and their activities. They develop a typology of patent<br />
brokers which includes the identification of two types of patent aggregating companies. Other recent<br />
studies are limited to the distinction of defensive and offensive patent aggregating companies (e.g.,<br />
Wang 2010). Most literature on patent aggregating companies is limited to a certain business model<br />
of buying infringed patents and enforcing them against large electronic companies. Even published in<br />
academic journals or written by academic institutions, literature is often connoted either positive<br />
(Rubin 2007) or very negative (e.g., Henkel & Reitzig 2008). Analyzing studies that explain the<br />
reasons for patenting, the reasons why corporate buyers acquire patents and emerging business<br />
models in the IP sector, existing literature is not able to explain why patent aggregating companies<br />
have emerged, where the differences in their business models are and why these companies<br />
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Frauke Rüther et al.<br />
aggregate large patent portfolios. This paper aims to close this gap by analyzing the drivers of patent<br />
aggregating business and developing a classification which explains the different motives and<br />
business models of patent aggregating companies.<br />
3. Research methodology<br />
Due to the novelty and complexity of the research object, we chose a qualitative research approach.<br />
Case study research permits to address detailed questions in order to gain deeper insights in the<br />
business models and the strategies of patent aggregating companies (Yin 2009). Our data collection<br />
is based on semi-structured interviews, annual reports, company documents, and available public<br />
information.<br />
A comprehensive directory of patent aggregating companies does not exists, therefore we identified<br />
and selected patent aggregating companies using secondary source of information. To build the<br />
sample we used snowball sampling (Heckathorn 2002). Applying snowball sampling between<br />
February and May 2010, we identified 27 patent aggregating companies (see Tab. 1).<br />
To collect data, we interviewed company members, mainly partners or top managers, and asked<br />
questions on the business model of the company, the key partners, strategy, and key activities.<br />
Except for information on financial performances, the interviewees were very cooperative. Only few of<br />
the companies disclose financial information. The data was enriched and completed by an analysis of<br />
press articles, company publications and presentations, internet homepages, and additional<br />
interviews of industry insiders. The reflection of the insights gained with scientific literature allowed to<br />
develop a conceptual frame which sets the basis for further investigation to answer the research<br />
question (Eisenhardt 1989).<br />
In order to contribute to the research question we analyze the business models, the acquisition<br />
motives and strategies, and the differences between them. We investigate the patent aggregating<br />
companies considering the four components of a business model according to Shafer, Smith &<br />
Linder (2005): strategic choices, value network, create value, capture value.<br />
Table 1: Patent aggregating companies in the research sample.<br />
Patent aggregating<br />
company<br />
Headquarters<br />
Acacia Research Newport Beach, CA,<br />
USA<br />
Year of<br />
foundation<br />
Focus of industry Webpage<br />
1993 Electrical<br />
engineering<br />
Alliacense Cupertino, CA, USA 2004 Electrical<br />
engineering<br />
Allied Security Trust Lambertville, NJ,<br />
USA<br />
2007 Electrical<br />
engineering<br />
www.acaciaresearch.com<br />
www.alliacense.com<br />
www.alliedsecuritytrust.com<br />
Alpha Patent Fond Frankfurt, Germany 2007 No industry focus www.steinbeis-tib.com<br />
AlseT New York, NY, USA 2000 No industry focus www.alsetip.com<br />
Capital Royalty Houston, TX, USA 2005 Life Science www.capitalroyalty.com<br />
Coller IP Capital London, UK 1990 No industry focus www.collercapital.com<br />
Eco Patent Commens Geneva, Switzerland 2008 No industry focus www.wbcsd.org/web/epc<br />
Fergason Patent Menlo Park, CA, USA 2001 Electrical<br />
engineering<br />
http://fergasonpatents.com<br />
Golden Rice Freiburg, Germany 2000 Life Science www.goldenrice.org<br />
IgnitIP Mountain View, CA,<br />
USA<br />
2002 No industry focus www.igniteip.com<br />
iiinnovation Luxembourg, 2010 Electrical http://iiinnovation.com<br />
Luxembourg<br />
engineering<br />
Intellectual Ventures Bellevue, WA, USA 2000 No industry focus www.intellectualventures.com<br />
IP Holdings Suffern, NY, USA 2000 Electrical<br />
engineering,<br />
Life Science<br />
www.ip-holdings.com<br />
IP Navigation Group Dallas, TX, US 2005 No industry focus http://ipnav.com<br />
772
Patent aggregating<br />
company<br />
Headquarters<br />
MPEG LA Greenwood Village,<br />
CO, USA<br />
Open Invention<br />
Network<br />
Frauke Rüther et al.<br />
Year of<br />
foundation<br />
Focus of industry Webpage<br />
1996 Electrical<br />
engineering,<br />
Life Science<br />
Durham, NC, USA 2005 Electrical<br />
engineering<br />
www.mpegla.com<br />
www.openinventionnetwork.com<br />
Techquity Austin, TX, USA 2008 No industry focus www.techquitycap.com<br />
Papst Licensing St. Georgen,<br />
Germany<br />
1992 No industry focus www.papstlicensing.com<br />
Patent Invest Fond Pullach, Germany 2005 No industry focus www.patentfonds.de<br />
Patent Select Fond Schönefeld, Germany 2006 No industry focus<br />
Paul Capital<br />
Healthcare<br />
Rembrandt IP<br />
Management<br />
San Francisco, CA,<br />
USA<br />
Bala Cynwyd, PA,<br />
USA<br />
1999 Life Science www.paulcapital.com<br />
2004 No industry focus www.rembrandtip.com<br />
Royalty Pharma New York, NY, USA 1996 Life Science www.royaltypharma.com<br />
RPX Corp. San Francisco, CA,<br />
USA<br />
2008 Electrical<br />
engineering<br />
Sipro Lab Telecom Montreal, Canada 1994 Electrical<br />
engineering<br />
www.rpxcorp.com<br />
www.sipro.com<br />
Via Licensing San Francisco, CA; 2003 Electrical www.vialicensing.com<br />
USA<br />
engineering<br />
Source: interviews, annual reports, company documents<br />
4. Drivers of the patent aggregating business<br />
Although statistics or growth rates of reliable sources are not available, our interviewees agreed that<br />
the market for patent transaction is steadily growing and patent buying and in-licensing has become<br />
quite common between companies, inventors and research institutes. Whereas in the past most firms<br />
have agreed to licensing contracts, our interviewees confirmed that reassignments of patents have<br />
increased. Based on our interview data, we identify four drivers that have influenced the patent<br />
aggregating business.<br />
The first important driver is the general increase of the acceptance of patents as an important asset.<br />
Shifting the focus from using patents to secure rents of innovation to an increasing external<br />
exploitation through e.g., patent sales laid the foundation for the patent aggregating business. This<br />
shows that the patent aggregating business could only develop based on a new trend to open patent<br />
models and a different use of patents.<br />
The general attitude towards open patent models changed because companies operate in a different<br />
economic environment than in the past. Short product life cycles, high R&D expenditures, increasing<br />
competition, and the approach of shareholder value leads to the second driver that has influenced the<br />
patent aggregating business: the financial pressure weigh on companies. Utilizing patent aggregating<br />
companies can help producing companies to generate additional cash flows and often at the same<br />
time to reduce risks. Selling royalty interests resulting from out-license, a producing company can<br />
generate capital immediately and receives an insurance if the in-licensing company cannot pay its<br />
royalties. Selling infringed patents generates immediate cash flows for the original patent owner and,<br />
not being involved in litigation, it may not stir any further dispute between competitors. Also, the risks<br />
of R&D can be shared selling patents to patent aggregating companies that further develops the<br />
technology.<br />
Many patent aggregating business models are driven by the third factor: the increasing complexity of<br />
the patent landscape. Patent applications are increasing and patent offices in the US and Europe<br />
show a significant backlog of patent application. Therefore, it can no longer be guaranteed that all<br />
granted patents have a high quality. That leads to an increasing risk for producing companies<br />
regarding unintended patent infringements, patent thickets, and uncertainty of patent granting. Based<br />
on this, several patent aggregating companies could emerge by offering services in this area.<br />
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Frauke Rüther et al.<br />
The fourth factor that drives patent aggregating companies is the large financial opportunity of patents<br />
and patent exploitation. Not just since BlackBerry maker Research in Motion agreed to pay USD<br />
612.5 million to patent holding company NTP to settle a long-running dispute in 2006 (Magliocca<br />
2007), the public is aware of the potential size of patent infringement law suits. Due to the fact that<br />
patent aggregation is a very young business model it is risky but at the same time lucrative for the<br />
companies or company founders that survive this risks.<br />
5. A classification of patent aggregating companies<br />
The above mentioned factors account for the emergence of patent aggregating companies. But the<br />
analyzed patent aggregating companies differ substantially regarding their activities, their strategies,<br />
and also the value proposition they provide. According to Shafer et al. (2005) we analyzed the patent<br />
aggregating companies' business models and derived eight types. This classification answers the<br />
question why patent aggregating companies built up large patent portfolios.<br />
The eight types can be divided into two groups. The first group are types that acquire patents to<br />
generate revenues by exploiting the patents. Based on how these companies exploit the patents we<br />
distinguish between patent acquisition funds, patent enforcement funds, patent incubating funds, and<br />
patent trading funds. The second group are types that acquire patents to serve their members or their<br />
customers or the society (commercially or not). Patents are only a means and the exploitation of them<br />
follows more diverse objectives than sole revenue generation. We cluster these companies in<br />
defensive patent funds, non commercial patent funds, patent pools, and patent securitization funds.<br />
Patent acquisition funds aggregate large patent portfolios to generate revenues from every possible<br />
type of exploitation. This could be the establishment of licensing programs, patent enforcement,<br />
investments in R&D, and other strategies. The exploitation strategy of the single patent or patent<br />
portfolio does not follow a general strategy and is decided from case to case. Patent acquisition funds<br />
do not focus on a certain industry. They buy patents or exclusively in-license patents which are either<br />
infringed or have a valuable technology from single inventors, research institutions, and corporate<br />
sellers. In most cases, the original patent owner receives a lump sum payment and does not<br />
participate on the generated revenues. Depending on the exploitation strategy, patent acquisition<br />
either sell or out-licensing on an exclusive or non-exclusive basis to other patent aggregating<br />
companies, corporate buyers, or financial investors.<br />
Patent enforcement funds aggregate large patent portfolios to generate revenues from a stick<br />
licensing approach. They enforce the aggregated patents and establish licensing programs. Patent<br />
enforcement funds focus mainly on patents covering technology in the high tech industry. They are<br />
either very narrow or very broad in their technology focus and only aggregate patents which are<br />
already in use and possible infringed. The original patent owners are single inventors, research<br />
institutions, small and medium enterprises (SME) and large corporations (MNE). If the original patent<br />
owner is not involved in the enforcement activities, she receives a lump sum payment and does not<br />
participate on the generated revenues. In cases where the patent owner is involved, the generated<br />
licensing revenues are split between the original patent owner, the patent enforcement funds, and if<br />
applied the financial investors. Infringed patents or their exclusive licenses are reassigned to a special<br />
purpose vehicle (SPV) owned by the patent enforcement fund. The fund then contacts potential users<br />
of the patent either by letter writing and negotiation or by filing a lawsuit immediately. Do the targeted<br />
companies in fact use the patent, they are forced to take a non exclusive license from the patent<br />
enforcement fund.<br />
Patent incubating funds aggregate large patent portfolios to exploit the underlying technology and to<br />
generate revenues from a carrot licensing approach. They aggregate patents, invest in further R&D,<br />
and out-license this enhanced technology to other companies. The quality of the acquired patents is<br />
as important as the opportunities of the technology. Therefore, patent incubating funds focus mainly<br />
on promising, often juvenile, technologies from a broad range of industries. The original patent<br />
owners are mostly single inventors, research institutions, and SME. Often the original patent owner<br />
has not the financial resources to develop the technology further and commercialize it. Selling the<br />
patents to the patent incubating fund, the patent owner receives a lump sum payment. Often the<br />
parties agree on a back license. The patent incubating fund mandates then external R&D institutes for<br />
a further development, including for example prototyping or expanding the geographical scope of the<br />
patents. After the refinement phase, the fund contacts potentially interested companies and offers<br />
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them an exclusive license or the reassignment of the patents. In most of these deals as transfer of<br />
know how is involved.<br />
Patent trading funds aggregate large patent portfolios to generate revenues from acquiring patents,<br />
bundling them to new portfolios, and selling these bundles at a higher price. They focus on patents<br />
that cover interesting technologies as well as on the sole, sometimes already infringed, legal rights<br />
from different industries. The original patent owners are single inventors, research institutions, SME<br />
and MNE. The original patent owner often sells patents to the patent trading fund because the patents<br />
have become redudant. Selling the patents to the patent trading fund, the patent owner receives a<br />
lump sum payment and the patents are reassigned to the patent trading fund. Based on the large<br />
acquired portfolio from different companies, the patent trading fund then bundles the patents to new<br />
portfolios. Based on the strategy for the different portfolios the fund contacts either potentially<br />
interested companies and offers them patents and know how for the entrance in a new market. Or the<br />
fund contacts companies that are already using the technology without a license and offers freedom<br />
to operate.<br />
Defensive patent funds aggregate large patent portfolios to provide attached producing companies an<br />
insurance against patent litigation lawsuits initiated from non-practicing companies. Defensive patent<br />
funds focus on patents covering technologies in the high tech industry. They aggregate patents which<br />
are already used by their attached producing companies and could become a threat if these patents<br />
are bought by another company, as e.g., patent enforcement funds, patent acquisition funds, or<br />
patent trading funds. The original patent owners are single inventors, research institutions, SME, and<br />
MNE. The original patent owner sells the patents to the defensive patent fund and receives a lump<br />
sum payment. The attached producing companies receive non exclusive licenses from the<br />
aggregated portfolios. Interested companies can join the defensive patent fund if relevant patents are<br />
acquired. After a time span of around one to two years, which gives non-member companies the<br />
possibility to join and provide the members with a license, the patents are sold to other producing<br />
companies or to patent enforcement funds, patent acquisition funds, or patent trading funds.<br />
Non commercial patent funds aggregate large patent portfolios to neutralize licensing issues and<br />
make patents available for a broad range of users. The users do normally not have to pay royalties for<br />
applying the patents, but they have to commit to certain conditions. Often patents in non commercial<br />
patent funds are donated. If a non commercial patent fund intents to buy patents, these acquisition<br />
activities are funded by public authorities, nonprofit organizations or companies which have major<br />
interests in this non commercial patent fund. Non commercial patent funds are always set up for a<br />
special purpose and therefore focus only on patents which serve this purpose. Thus, the original<br />
patent owners are diverse. The original patent owner either donates the patents because she is<br />
interested in the purpose of the fund or can gain tax reduction by donation. Or the original patent<br />
owner sells the patents or provides exclusive licenses to the non commercial patent fund. Having<br />
aggregated the patents, the non commercial patent funds administrate the patent portfolios and<br />
enlarge them, but they normally do not take action in enforcing or commercializing them in other<br />
ways.<br />
Patent pools aggregate large patent portfolios to provide access to essential patents for practicing a<br />
certain standardized technology and to avoid problems for producing companies arising from patent<br />
thickets. Usually, patent pools are of major strategic interest for the patent owners and do not buy<br />
patents. Patent pools focus on patents covering the basic technology of the standard and are mainly<br />
active in the high tech industry. To avoid single transactions with the large number of patent users,<br />
the original patent owners that can be single inventors, research institutions, SME and MNE, transfer<br />
certain rights concerning their patents to the patent pool. The patent pool issues then non exclusive<br />
licenses on behalf of the original patent owner, collects royalties, and distributes them among the<br />
patent owners.<br />
Patent securitization funds aggregate patent portfolios as security for the capital they provide to<br />
patent owners. Patent securitization funds collect funds of private and institutional investors to pass it<br />
to capital seeking companies. Patent securitization funds focus on the pharmaceutical industry, on<br />
patents which are already licensed to third parties and cover products that are approved, or in stage<br />
III of the approval process, by the Food and Drug Administration (FDA). For securitization of patents<br />
steady and long term cash flows are necessary which are difficult to obtain in other industries. The<br />
patent owner, often a research institution or a small biotechnology or biopharma company, sells the<br />
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patents to a SPV owned by the patent securitization fund and receives a lump sum payment. The<br />
SPV issues bonds to rise the patent's purchase price paid to the original owner. The bonds are<br />
backed by the royalty interests from the license of the patent.<br />
The types of patent aggregating companies we have identified seem to be mutually exclusive. Some<br />
of the companies may provide other services as consultancy in patent management, licensing agent<br />
activities, or brokerage services. Also it is possible that the business model changes and a company<br />
that started as patent acquisition fund becomes a pure patent incubating fund or a patent enforcement<br />
fund. Additionally, it has to be mentioned that the patent market is in full swing and the player in the<br />
patent market are subject to changing market conditions.<br />
6. Conclusion<br />
Shifting to new models of innovation, companies now use patents not only to secure temporary<br />
monopolies but also to actively sell and license patents. As part of this paradigm change, patent<br />
aggregating companies have emerged and are becoming major players on the market for patents. In<br />
this article, we have analyzed this new business model which focuses on the aggregating of patent<br />
portfolio.<br />
Our contribution to research on the market for patents and technology and patent management is<br />
twofold. First, we have presented reasons why patent aggregating companies have emerged. Based<br />
on our interview data, we identify four drivers that have influenced the patent aggregating business:<br />
(1) corporate recognition of patents as asset; (2) financial pressure and risk diversification needs of<br />
producing companies; (3) an increasingly complex patent landscape; (4) the large financial<br />
opportunities for bold entrepreneurs.<br />
Second, we provide a vivid picture of patent aggregating companies. Patent aggregating companies<br />
follow diverse strategies and perform various activities. Based on our analysis of patent aggregating<br />
business models, we derive eight types of patent aggregating companies. This classification answers<br />
the question why patent aggregating companies built up large patent portfolios.<br />
Our research on patent aggregating companies and their classification is limited to firms with head<br />
quarters in the US and Europe. Due to limited information and a lack of a comprehensive data vase,<br />
we applied snowball sampling to derive our sample and cannot control whether all relevant patent<br />
aggregating companies were included in our initial list. Due to the confidentiality agreements of the<br />
patent aggregating companies, we conducted only very limited quantitative data.<br />
Due to the novelty of the phenomenon, our research provides a first picture of patent aggregating<br />
companies and serves as basis for future research. Further investigations could shed light on success<br />
factors of patent aggregating companies. Also important would be to answer how producing<br />
companies could utilize patent aggregating companies to leverage their patent portfolios and how<br />
producing companies in general benefit from them.<br />
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777
<strong>Entrepreneurs</strong> as Agents of Change: Sustainable<br />
Innovation in the Dutch Construction Industry<br />
Henk Schout, Damon Hassanpur Golriz and Saskia Harkema,<br />
The Hague University of Applied Sciences, Centre for Innovation and<br />
<strong>Entrepreneurs</strong>hip, The Hague, The Netherlands<br />
h.j.schout@hhs.nl<br />
d.hassanpurgolriz@hhs.nl<br />
s.j.m.harkema@hhs.nl<br />
Abstract: Over recent years aspects of sustainability have claimed a central role in many countries. As a result<br />
research for sustainability has become an important driver for innovation. This paper describes developing a<br />
model that supports SMEs in integrating sustainability in their business and innovation processes. In general<br />
innovation and entrepreneurship are important in the realm of national economies because they hold the key to<br />
the continuity and growth of companies and economic growth within a country. National governments are<br />
spending vast sums of money to enable and improve innovation management and entrepreneurial behaviour<br />
within organizations. This is also the case in The Netherlands. Partnerships involving universities (education),<br />
companies (preferably SMEs) and industrial associations (business) and representatives from governmental<br />
organizations (community) are stimulated and should be geared towards: the development of sustainable<br />
networks, a contribution to regional economic growth within sectors, the development of learning communities in<br />
which best practices are shared, knowledge circulates and knowledge is created through applied research and<br />
last but not least sustainable relations are developed between universities and the business community. Within<br />
the centre for innovation and entrepreneurship at our university we have taken the initiative to develop an<br />
innovation programme for entrepreneurs in the construction industry to help them integrate sustainability in their<br />
business processes, while simultaneously professionalizing students and teachers. Sustainability and concern for<br />
the environment are two of the main reasons for entrepreneurs to look for opportunities to innovate. Policy<br />
measures are aimed at reduction of CO2 emission, waste management and alternative use of energy sources<br />
and materials. In line with these measures companies are urged to integrate sustainability in their business<br />
processes and search for innovative sustainable solutions. This paper describes the experiences with a number<br />
of SMEs in the construction industry and the barriers entrepreneurs encounter on the road towards sustainability.<br />
We focus on the role of the entrepreneur in the process of sustainable innovation and development. We<br />
conducted exploratory research and through an organisational analysis and in-depth interviews with the<br />
owners/managers of the companies insight was gained in innovation processes towards sustainable<br />
development. Conclusions show that one of the main bottlenecks is the dilemma posed by the need for profit for<br />
the continuity of a company, while taking into account people and planet. The dilemmas of innovation are<br />
described as issues that need to be addressed and which influence the innovative capacity of companies and<br />
organizations. This paper deals with the underlying factors related to the dilemma between sustainability and<br />
growth/profit.<br />
Keywords: entrepreneurship, change agents, sustainable innovation, construction industry<br />
1. Introduction<br />
Ever since the first showing of Al Gore’s film An Inconvenient Truth, sustainability has stood high on<br />
the national agenda of most countries. Concern for the environment is one of the main reasons in<br />
combination with opportunities to innovate. In general, innovation and entrepreneurship are important<br />
in the realm of national economies because they hold the key to the continuity and growth of<br />
companies (e.g. Hage, 1999; Cooper, 1987; Van de Ven, 2007) and economic growth within a<br />
country. It is therefore obvious that national governments are investing money to enable and improve<br />
innovation management and entrepreneurial behaviour within organizations with sustainability in<br />
mind. Policy measures are aimed at reduction of carbon dioxide emission, waste management and<br />
alternative use of energy sources and materials. In line with these measures companies are urged to<br />
integrate sustainability in their business processes and search for innovative sustainable solutions.<br />
Sustainability should contribute towards economic development is the key message. There are<br />
several ways in which the right kind of economic activity can protect or enhance the environment.<br />
These include energy efficiency measures, improved technology and techniques of management,<br />
better product design and marketing, waste minimization, environmentally friendly farming practices,<br />
making better use of land and buildings, and improved transport efficiency. The challenge of<br />
sustainable innovation and development is to promote ways of encouraging this kind of<br />
environmentally friendly economic activity, and of discouraging environmentally damaging activities.<br />
In a nutshell this is our definition of sustainability besides the fact that the purpose of sustainable<br />
development and innovation is not merely to gain profit, but to contribute towards the well-being of<br />
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people and show responsibility towards our planet. Hence the output indicators for sustainable<br />
business are mostly defined in terms of the 3 p’s profit, planet and people. This is our frame of<br />
reference in the sections to follow.<br />
At present, the majority of people live in urban areas. Cities consume 75% of the world's energy and<br />
are responsible for 80% of greenhouse gas emissions and buildings are accountable for about 24% of<br />
the world’s CO2 emissions (IEA, 2008). This illustrates not only the relevance but also the importance<br />
of the sustainability measures undertaken by national governments in all areas especially in the<br />
construction industry. Cities and urban areas have a large carbon footprint and consequently<br />
decarbonisation of these areas has become the global goal on national and international agendas.<br />
On a European level 40% of total energy consumption is absorbed by Europe’s 160 million buildings<br />
which represent 40% of Europe’s CO2 emissions. Most of the energy from buildings (57% of domestic<br />
consumption) is used for space heating (ACE, 2004). Hence, the countries of the European Union<br />
have committed themselves to reduce their overall emissions to at least 20% below 1990 levels by<br />
2020 (EU, 2008). The ambitious Dutch government has promised to go beyond this EU-level by<br />
reducing its CO2 emission to 30% in 2020. This ambition level and the important influence of buildings<br />
in reducing carbon dioxide emissions, has resulted in Dutch sustainability plans, which focus on the<br />
construction industry. The construction industry could be a key player when it comes to contributing<br />
towards a more sustainable society and environment.<br />
The buildings in the Netherlands are accountable for one third of total CO2 emissions in the country. In<br />
addition, as much as 40% of the yearly waste production originates from the building and construction<br />
sector and it is this industry which consumes half of the total amount of raw materials (Groesbeek,<br />
2009). That is why sustainability depends on buildings -- and in the slipstream the construction<br />
industry -- being ‘sustainable’ and on integration of sustainability in business processes and business<br />
approach.<br />
Approximately, one in ten companies in the Netherlands is related to the construction sector and with<br />
6% of the Gross Domestic Product (GDP) this sector takes a significant position in the Dutch<br />
economic output. The bulk of the Dutch companies (99%) in the construction industry are SMEs, of<br />
which the majority (93%) have less than 10 employees. SMEs are responsible for about threequarters<br />
of the total employment in the whole sector (EIM, 2009). This study shows that the large<br />
number of policy programmes implemented successfully in the Netherlands in a short period of time<br />
has had a counter effect on innovation in the country. High uncertainties about future policies cause<br />
firms to postpone investments in sustainable innovation activities.<br />
Although the construction sector still has a reputable economic share in the Netherlands, the relative<br />
share is declining (Verweij et al, 2000). Moreover, the global financial crisis has been disastrous for<br />
the construction industry in The Netherlands. In 2009 orders for firms of architects were halved,<br />
having dramatic effects on contractors and suppliers in 2010 and the prospects for 2011 are far from<br />
positive.<br />
According to De Jong and Muizer (2005) in which 58 different business sectors were studied, the<br />
construction industry ranked 55. This demonstrates one of the main problems characteristic to this<br />
sector: the lack of innovative spirit among entrepreneurs to engage in sustainable business models. In<br />
general when it comes to implementing policy measures aimed at stimulating sustainable business<br />
and innovation, SMEs play an important role. The Dutch construction industry shows to be good at<br />
adopting new technologies, for example in new building materials and particularly on a logistical level,<br />
but is very poor at being innovative (De Bruijn and Maas 2005) and has a reputation for being<br />
conservative (Pries and van Heijgen, 2005). In addition, a pro-active approach towards sustainability<br />
is lacking. SMEs that innovate in sustainable ways are mostly driven by government rules and<br />
regulations and in second instance by customer demand or end-user requirements.<br />
2. Dynamics of the Dutch building and construction industry<br />
The studies above show some interesting aspects that constrain innovation in the construction<br />
industry. The main issue is that the market structure does not offer any incentives to innovate. First,<br />
the firms are not engaged in continuing collaborative relationships as they team up mostly on a<br />
project basis. Moreover, there is lack of trust in the exchange of knowledge between collaborating<br />
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parties. The supply and value chain of the construction process is intricate and this restrains<br />
collaboration in the innovation process.<br />
The traditional main actors in the building sector are the client/initiating organisation, architect,<br />
advisor, contractor, and the supplier and sub contractor (Maas, 1997). In this traditional organisation<br />
model (see Figure 1) the responsibilities for the initiation, design, and construction phases are strictly<br />
separated. The client puts up a requirement specification with the assistance of an architect or a<br />
project management advisor. The architect then designs the building and is sometimes supported by<br />
an advisor. Only when the design is completed a contractor is selected to construct the building.<br />
Initiation Design Construction<br />
Development<br />
Maintenance<br />
Advisor<br />
Supplier,<br />
subcontractor<br />
Client<br />
Architect<br />
Contractor<br />
End-user<br />
Figure 1: Organisation model in the construction industry<br />
Traditionally, these actors are responsible for the development of their own products and services.<br />
However, nowadays the end-users are an increasingly important group (Verweij et al., 2000; de Bruijn<br />
and Maas, 2005; Benthem, 2006) although they are still not included in these traditional models.<br />
Benthem (2006) studies collaboration in the construction sector focussing on the interaction between<br />
traditional actors in the construction industry, based on the work of Maas (1997). He suggests that<br />
construction firms tend to compete on price rather than on quality and that there is not enough<br />
knowledge transfer between companies. These aspects account for poor innovation performance.<br />
Another reason for the negative reputation of the industry where innovation is concerned is that<br />
traditional construction firms focus on technological innovations and less on market driven innovations<br />
(Bouwend Nederland, 2005). It is precisely the latter type of innovations that are visible to the endusers<br />
and to society. Although the sector obviously lags behind in innovation, the innovation monitor<br />
of Twynstra The Bridge Consultants (2007) shows that the construction sector is the only Dutch<br />
sector where improvement of innovation is one of the strategic priorities. The Dutch construction<br />
industry is often characterised by its “specific nature”. The products of this sector have a very long life<br />
cycle, with high costs and a regional focus. The processes are dominated by a tough competition on<br />
price and are based on ad hoc approaches, leading to high failure costs. Only 0.2% of the turnover in<br />
building and construction is spent on R&D investments; very low compared to the percentage in<br />
capital-intensive (3.6%) and labour-intensive (1.7%) industries. Building and construction also score<br />
low in terms of the proportion of knowledge employees in the total workforce.<br />
3. Research programme<br />
Against this background our research programme was developed exploring sustainability in terms of<br />
processes and business models. We focus on SMEs in the construction industry in the West of<br />
Holland. In economic terms this is an important region that has a high strategic importance. It is a<br />
densely populated area with several industries that play an important role to the Dutch economy. In<br />
addition it is the region where the Dutch government is based and large legal institutions, embassies<br />
and well-known and reputable universities. Consequently, it is an urban area with a varied and<br />
diversified landscape. For the construction industry it is a ‘market’ where a lot can be gained in terms<br />
of sustainability. The problem in this sector is twofold. On the one hand, as we described in the<br />
previous sections, companies in this sector are not innovative. On the other hand the sector is urged<br />
to innovate and develop products and processes geared at contributing towards the targets defined in<br />
relation to reduction of CO2 emission and becoming a more sustainable innovator and contributing<br />
towards a more sustainable environment, a so-called ‘low-carbon’ economy (Lisbon Council, 2009).<br />
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Following from this problem definition a research question was defined:<br />
How can sustainability be incorporated into a company’s operations, in order to maximise its ability to<br />
gain competitive advantage and improve its competitive position; and what is the role of the<br />
entrepreneur in the process?<br />
Our research programme is centred around four sustainability themes: cradle-to-cradle, social<br />
corporate responsibility, climate-neutral construction and customer orientation in the building process.<br />
The main assumption underlying our programme is that in order to maintain competitive advantage<br />
and market attractiveness - especially in times of economic crisis - companies need to distinguish<br />
themselves through sustainable innovation processes and business models. In so doing they<br />
contribute towards developing a more sustainable society. Due to their scale however, SMEs have a<br />
hard time selecting technological opportunities, translating them into commercial solutions, making<br />
the right choices and translating them into a feasible and competitive sustainable innovation strategy<br />
for the company. The programme aims to support companies in their search for sustainable<br />
opportunities, while simultaneously exploring the barriers and pitfalls they encounter in that process.<br />
The participating companies in this programme differ in type. They more or less cover the entire value<br />
chain within the construction industry and represent the total group of SMEs operating in this industry.<br />
Participants are architects, engineering consultants, contractors, builders, installation firms and<br />
specialist suppliers, e.g. of glass. Companies also differ in turnover, employability and innovative<br />
capacity (see Table 1). With innovation capacity we mean the ability of an organization to gear their<br />
efforts towards the development of new products and processes. It is reflected here in the number of<br />
employees dedicated to Research & Development.<br />
Table 1: Participating enterprises in figures<br />
Average Range<br />
Min. Max.<br />
Annual turnover € 17.5 mln € 0.4 mln € 80 mln<br />
Total no. of employees 47.4 6 153<br />
No. of employees in R&D 1.1 1 6<br />
The main research objective is to gain insight in the way companies in this sector innovate and define<br />
restrictions for ‘sustainable innovation’ on the four themes mentioned above. As an overlay across<br />
these four themes, four aspects were defined relating to internal processes that play a role in the<br />
management of innovation processes: competencies, co-operation and collaboration, the organization<br />
of the building process and the internal organization (see Figure 2).<br />
Collaboration, competencies, organization of the<br />
building process, internal organization<br />
Climate neutral construction<br />
Social Corporate Responsibility<br />
Cradle-to-cradle<br />
Customer orientation in the building process<br />
Figure 2: Themes of the research programme of the CI&E relating to internal processes<br />
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In addition to the main research objective, enterprise objectives were formulated. These primarily<br />
focus on the formation of networks and dissemination of knowledge, aimed at embedding sustainable<br />
results in the industry on completion of the programme. The idea is that by creating networks<br />
knowledge is disseminated among companies and learning is stimulated.<br />
4. Methodology and research design<br />
In general terms, the current programme aims at strengthening multidisciplinary collaboration,<br />
knowledge creation and circulation among entrepreneurs, education and research. Using best<br />
practice examples of companies in the construction industry, a model is used that might serve as a<br />
driving mechanism for sustainable process and product innovation that fits the nature and<br />
characteristics of the companies in this industry.<br />
The research is longitudinal and exploratory and aims to gain a practical insight in the day-to-day<br />
operations of the participating companies. It is aimed at eliciting knowledge and lessons through an<br />
inductive approach. The knowledge thus gained might eventually prove to be useful for the entire<br />
construction industry and possibly for other industries as well. In short, it is a way of looking at current<br />
operations and combining them with entrepreneurs’ ambitions in order to arrive at generally applicable<br />
theories.<br />
The overall aim of the programme is twofold. Firstly, the objective of the programme is to contribute to<br />
the innovative capacity of participating SMEs and development of problem-solving skills. Secondly,<br />
the objective is to create an environment in which students, lecturers and companies can share<br />
knowledge, learn and work towards specified goals.<br />
Considering these aims, we had to find a way of linking entrepreneurs, students and faculty. Our<br />
method consists of three elements:<br />
� A process model in which entrepreneurs, undergraduate students and faculty are brought<br />
together<br />
� A research model guiding data collecting in the research process.<br />
� A theoretical model that provides a framework for the research and the companies.<br />
5. The process model<br />
In our programme undergraduate students analyse the companies and support them towards the<br />
identification of a sustainable strategy and improvement of their business and innovation processes.<br />
The process model (see Figure 3) was developed to ensure that students are linked to entrepreneurs<br />
within a fairly rigid system of the academic timetable in universities of applied sciences. Four periods<br />
of 20 weeks provide the basis for this model. In each of which one or two students are matched with<br />
one of the entrepreneurs in the construction industry, following an intake by one of the faculty<br />
members.<br />
The research was carried out through<br />
� A baseline measurement at the start of the programme,<br />
� An in-depth scan of the company through structured questionnaires<br />
� In-depth semi-structured interviews with the owners/managers of the companies.<br />
The data collected allowed us to make a profile of the company and detect specific problem areas.<br />
The individual process between student and entrepreneur is supported by network meetings with a<br />
number of companies. During network meetings entrepreneurs, students and faculty gather to<br />
address topics that are relevant to more than one company or that can serve as best practice models<br />
to others. Preferably these meetings take place on location, i.e. at one of the participating<br />
organisations, rather than at the institute of higher education. Topics relate to the four main project<br />
research themes in sustainability: cradle-to-cradle, social corporate responsibility, customer<br />
orientation, climate neutrality. The process model is a development tool through which we aim to raise<br />
the awareness of the participants towards sustainability, change their attitude and eventually their<br />
behaviour. These changes have to become visible in the organization.<br />
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Figure 3: Process model for innovation programmes linking universities and SMEs<br />
<strong>Entrepreneurs</strong> were primarily evaluated on the extent to which their behaviour changed through<br />
participation in the programme. The output indicator for changed behaviour is measured in terms of<br />
visible actions leading to sustainable product or process innovation.<br />
The assessment of the students took place via the reports in which they had to write an action plan for<br />
the company where they had been based. The report also assessed students on research skills, their<br />
ability to apply knowledge in a practical context and their capacity to reflect on that knowledge and<br />
offset it against existing theories.<br />
Faculty were evaluated on two aspects: the extent to which they adapted their curricula on the basis<br />
of the experience and knowledge gained and the broadening of their knowledge base as a result of<br />
the supervision of students and their own involvement with the companies.<br />
6. The research model and theoretical framework<br />
The research model is complementary to the process model. To determine the strategic themes and<br />
problems in the industry, key-players and stakeholders were interviewed. In general terms we are<br />
interested in establishing how SMEs in this sector innovate and what are barriers for innovation. For<br />
the theoretical model we used the broader definition of innovation put forward by De Jong (2006) that<br />
innovation is purposefully innovating products, processes and work methods. This definition fits in well<br />
with the one brought forward by Tidd and Bessant (2009), who speak of the innovation space within<br />
an organisation. Four types of innovation can be distinguished: paradigm, position, process and<br />
product innovation. These innovations can be incremental or radical and according to their<br />
contribution to organisational growth and continuity can be classified as more or rather less<br />
successful. Innovation according to Tidd and Bessant is directly linked to the entrepreneurial skills of<br />
the owner / managing director who needs to recognise opportunities and assess their innovation<br />
value.<br />
Data collection takes place through the inductive approach. Data triangulation is leading in the<br />
approach, as it contributes to the robustness and reliability of the data. In spite of the inductive<br />
approach, we decided to build a theoretical framework through desk research. Not so much as to<br />
validate that theory, nor geared at the development of a new theory, according to the method<br />
developed by Glaser and Strauss (1967), but to bring focus to the research and serving as ‘a pair of<br />
glasses’ through which to look at our study object. The innovation model of Tidd and Bessant (2009)<br />
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acts as a framework for that purpose. They describe phases that an organisation should go through<br />
from strategic innovation to implementation. Four aspects are important according to the authors:<br />
� Looking for opportunities and recognising them<br />
� Selecting opportunities and formulating a strategy<br />
� Implementing the strategy<br />
� Learning from that implementation<br />
Innovation is seen as a continuous process supported by routines and methods that contribute to a<br />
successful process and outcome.<br />
We use a modified version of their model (see Figure 4) as we introduce reflection and learning<br />
stages after each of the steps in the model, thus introducing a continuous learning experience.<br />
Awareness Selection Implementation<br />
Learning<br />
Figure 4: Modified innovation management model of Tidd and Bessant<br />
Against the background of the research question this has proved to be a valuable method to observe<br />
reality in similar research programmes we have undertaken in the manufacturing and glasshouse<br />
horticultural industries.<br />
7. Discussion and findings<br />
Attracting companies in the region to participate in our sustainability programme was difficult and<br />
efforts were not very productive. Most of the firms we approached showed little interest in participating<br />
in this programme. Thus, so far 24 companies have participated in our programme, whereas more<br />
than 300 firms were approached. From the figures it follows that though awareness of sustainability is<br />
present in companies, the interest and motivation to actually do something, is low. <strong>Entrepreneurs</strong> play<br />
a key role in that respect. However, the results seem to indicate that the entrepreneurs in the<br />
construction industry involved in our programme are reluctant to take the lead in incorporating<br />
sustainability into their company’s operations. In this respect they can hardly be called ‘agents of<br />
change’.<br />
If we look at the participating companies, results show that only 20% of the companies employ people<br />
in a dedicated R&D position, whereas only 40% have innovated by creating products or services that<br />
are new to the firm. Business models were not innovated. The companies all score low in terms of the<br />
percentage of knowledge employees of the total workforce with a background in higher education.<br />
Yet, all these aspects are necessary to create an innovative spirit and ambience within the company<br />
and develop competencies to generate new business models based on sustainability.<br />
During the network meetings the aim was to raise awareness and disseminate knowledge on<br />
sustainability as a business opportunity. The participation of the companies in these meetings was<br />
low. For example during a network meeting with one of the biggest housing corporations, a possible<br />
major client to the participating companies, only 15% of the companies did participate. This again<br />
shows the lack of pro-active attitude and motivation to participate in programmes which focus on a<br />
long-term strategy and require a vision on investing for the future.<br />
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The results of the in-depth scan of the companies show that, although most of the companies are<br />
aware of the urgency to innovate their business model focused on sustainable strategy, their shortterm<br />
problems and deadlines make it impossible to implement their plans. In the process, under the<br />
pressure of the market, the sense of urgency to integrate sustainability in their business processes<br />
diminishes. Most of the companies also complain about the large number of government policy<br />
programmes and the counter effect of these policies on their daily business. Because of these policies<br />
costs are rising, especially for SMEs without R&D.<br />
In general, companies are not pro-active when it comes to acquiring knowledge on the subject. This<br />
makes the step to change their behaviour difficult, since learning starts with changing models about<br />
doing business in a sustainable way (Harkema, 2004). The main motivation for participating in this<br />
programme is not the vision to make the company sustainable, but the fear to lag behind in<br />
comparison to competitors. Almost all entrepreneurs stress the difficult financial situation, caused by<br />
the economic crisis, and the hard competitive atmosphere of the construction industry to fight on<br />
(lowest) price.<br />
There appears to be a structural mentality among these entrepreneurs of shifting responsibility up or<br />
down the chain. The result is a so-called ‘circle of blame’, which seems to restrict the adoption of a<br />
pro-active attitude. This ‘circle of blame’ can be explained as follows: investors, encouraged by the<br />
attention and priority to consider people and planet besides profit, advocate that they wish to invest in<br />
sustainable construction projects, but that there is a limited supply of sustainable products or services.<br />
On the other hand architects and contractors claim that investors are not interested in sustainable<br />
projects, as they select the most lucrative proposals, in terms of price. They in turn cannot afford to<br />
propose projects which are sustainable but not always low-priced. The circle closes with the end-user<br />
being forced to choose a product which is not sustainable.<br />
This wide-spread attitude in the value and supply chain makes it very difficult to adopt sustainable<br />
business models as alternatives to the conventional way of doing business, where price and costs are<br />
the main drivers for innovation, besides being regarded as the only guarantee to safeguard new<br />
orders.<br />
The internal organization of the companies is a reflection of the dominant business model in this<br />
sector. A more in depth case-study carried out among three of the companies that participated in the<br />
programme, showed that organizational culture also plays an important role. Culture can contribute to<br />
developing awareness of the importance of sustainability as a business proposition, but also as a way<br />
of working and developing a new frame of mind towards the goals of a company.<br />
Additionally, the market structure does not motivate entrepreneurs to be innovative. First of all,<br />
building companies work together in constantly changing projects, each with a unique building or<br />
construction. There tends to be an absence of trust in exchanging knowledge in such random work<br />
teams. Secondly, contracting procedures do not encourage innovation. The construction industry is<br />
mainly a capacity supplier, within strictly defined conditions. However, there is innovation in the<br />
construction process, particularly at a logistical level, but real chain-integration to diminish failure<br />
costs remains limited.<br />
In summary, these characteristics of the market and organisational culture restrict the adoption of<br />
sustainability as an alternative option of doing business. The results of the research so far, show that<br />
where innovation and particularly sustainability are concerned, the construction industry does not<br />
have a pro-active attitude and does not know where to begin. The owners/managers of SMEs<br />
complain about high uncertainties involved with future policies. These cause firms to postpone<br />
investments in R&D and sustainable innovation activities. Without a dramatic change in attitude in the<br />
value and supply chain of the construction industry, sustainable innovation will remain a scarce<br />
commodity.<br />
References<br />
Association for the Conservation of Energy (2004) Briefing on the energy performance of buildings directive,<br />
ACE, London<br />
Benthem, A. (2006) Samenwerking en innovatie in de bouwketen, Master thesis Science and Innovation<br />
Management, University Utrecht.<br />
Bouwend Nederland (2005) Kadernota Innovatie, Bouwend Nederland: de vereniging van bouw- en<br />
infrabedrijven. Nov. 2005<br />
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Cooper, R.J. (1987) Winning at new products, Kogan Page: London.<br />
De Bruijn, P.J.M., N. Maas (2005) Innovatie in de bouw. TNO Bouw en Ondergrond: TNO rapport EPS 2005-13<br />
Economisch Instituut voor het Midden en Kleinbedrijf (2009) Ondernemen in sectoren, feiten en ontwikkelingen<br />
2008-2010, EIM, Zoetermeer.<br />
European Commission (2008) Europe's climate change opportunity, EU, Brussels:<br />
European Commission (2010) Europe 2020, EU, Brussels<br />
Glaser, B. and Strauss, A. (1967) A discovery of grounded theory. Strategies for qualitative research, Sociology<br />
Press, Cambridge.<br />
Groesbeek, M.J. (2009) Duurzamer ondernemen, Business Contact, Amsterdam<br />
Hage J.T., (1999) Organisational innovation and organisational change, Annual Review of Sociology, Vol 25(7):<br />
597-622.<br />
Harkema, S.J.M. (2004) Complexity and emergence in innovation projects. An application of complex adaptive<br />
systems theory, Universal Press: Veenendaal.<br />
International Energy Agency (2008) Key World Energy Statistics, IEA, Paris<br />
Jong, J.P.J. (2006) Innovatie in het MKB, EIM, Zoetermeer.<br />
Jong, J.P.J. and Muizer, A.P. (2005) De meest innovatieve sector van Nederland, Ranglijst van 58 sectoren,<br />
EIM, Zoetermeer<br />
Lisbon Council (2009), Newsletter, Vol. 6, No.2<br />
Maas, G. (1997) Samenwerkingsvormen in de bouw, SBR. Stichting Bouwresearch.<br />
Noally, J. (2010) Improving the energy efficiency of buildings, CPB, Centraal Plan Bureau<br />
Onstek, J. (2003) <strong>Entrepreneurs</strong>hip and vocational education, European Educational Research Journal, Vol 2(1),<br />
pp. 74-84.<br />
Pagter, H. de and Harkema, S.J.M. (2009) Enabling innovation within SMEs in the manufacturing industry, IPDM<br />
Conference, Twente.<br />
Pries, F. & Heijgen, P. van (2005) Een eeuw innovatie in de bouw, de specifieke rol van handel en toelevering.<br />
In: Building Business, April 2005, online: http://www.buildingbusiness.com/artikel.asp?ID=1249<br />
Rennings, K. (2000) Re-defining innovation. Eco-innovation research and the contribution from ecological<br />
economics, Ecological Economics, Volume 32, Issue 2, pp. 319-332.<br />
Tidd J. and Bessant, J. (2009) Managing Innovation: integrating Technological, Market and Organisational<br />
Change. Wiley & Sons Ltd: Chichester.<br />
Twynstra The Bridge Consultants (2007) De bouw innoveert wél weer, July 10, 2007, online:<br />
http//.bouwweb.nl/persmap2006/060203innovatie.html<br />
Van de Ven, A., Polley, D., Garud, R. and Venkataraman, S. (2007) The innovation journey, Oxford University<br />
Press: New York.<br />
Verweij, M., H. Praat, H. Sturm, R. Jansen, R. Goedegebuure (2000) Clustermonitor Bouw. Den Haag: Ministerie<br />
van Economische Zaken.<br />
Woude, H.H. van der and Harkema, S.J.M. (2008) Innoveren binnen handbereik. Een exploratie naar innovatie<br />
bij MKB-bedrijven in de maakindustrie, De Haagse Hogeschool, Den Haag.<br />
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Creating a Collaborative Learning Space Using Wikis:<br />
Interaction in Enterprise Projects With International<br />
Student Groups<br />
Anne Smith, Keith Halcro and Peter Duncan<br />
Glasgow Caledonian University, Glasgow, UK<br />
Anne.smith@gcu.ac.uk<br />
Keith.Halcro@gcu.ac.uk<br />
p.b.duncan@gcu.acuk<br />
Abstract: Stakeholders’ demands are creating an ever more complex teaching and learning environment for<br />
Higher Education. One important strand of these demands is the need to develop students’ international<br />
awareness and understanding - a theme government and employers now view as critical to individual,<br />
organisational and collective betterment. More generally, the requirement to meet the complexity of these<br />
demands is straining universities’ finite resources and is requiring alternative, pedagogic delivery and support.<br />
Therefore, this educational landscape requires new ways of working across various boundaries such as<br />
functions, disciplines and cultures. However, the solutions that will support such new ways of working are only<br />
just emerging. The purpose of this paper is to explore the concept of Web 2.0 technology, specifically Wikis, to<br />
engage in boundary crossing activities between individuals and groups who may be required to collaborate<br />
remotely on temporary/transient projects. The concept of remote, collaborative learning is emergent and requires<br />
new thinking in terms of teaching and learning. Enterprise education demands interaction and engagement,<br />
which is often based around action- and experiential-learning pedagogies. This paper will report on the results of<br />
a study which investigated the design requirements of Wikis in enterprise education to meet the requirements of<br />
international students. The results of this study demonstrate that universities can use Wikis as a way of<br />
connecting students in an educational environment, irrespective of their location. Critically, the study investigated<br />
different types of Wiki usage, the process of Wiki usage, different levels of student experience pre and post Wiki<br />
activity and reflections on learning. The implications of the results are threefold: Firstly that informed decisions<br />
can be made on the application of Wikis in enterprise education for international students. Secondly, the<br />
research fosters an understanding of how a Wiki can contribute towards development of business opportunities<br />
and market sensitivity. Finally, and in terms of policy implications, the results suggest that Wikis can offer a<br />
solution to universities reaching out across cultural, social and geographical boundaries.<br />
Keywords: Wikis, enterprise education, collaborative learning, international students<br />
1. Introduction<br />
Higher education is undoubtedly a complex landscape of stakeholder requirements. government<br />
legislation and strategies whether emanating from Westminster (BIS 2009) or the devolved<br />
parliaments in the UK (e.g. Welsh Government 2009) means that the universities’ stakeholders will<br />
demand change (The Department of Education, 2010; ESRC, 2011). University stakeholders include<br />
not only students and academics, but extend to government, other public sector bodies, business and<br />
the third sector. The British Government’s Spending Review is forcing universities to re-double their<br />
efforts to source alternative income streams. This drive is replicated globally, as governments<br />
pressure universities to behave more commercially; perhaps the most evident manifestation is the<br />
sector’s increasing number of international students. This group of students represents an<br />
increasingly important financial stream to universities, but also pedagogically it offers universities a<br />
source of multi-cultural knowledge and therefore a means of adding value to stakeholders’<br />
experiences. The conundrum for universities is how to marry financial imperatives with international<br />
students’ expectations/demands. International stakeholders’ expectations are complicated by cross<br />
cultural and geographical boundaries which have shaped an array of social and educational<br />
experiences and practices, some which align to UK practices, but others which are significantly<br />
different.<br />
These stakeholders may require different ways of interaction and demand a different allocation of<br />
resources to meet their needs. Such complexity requires new solutions. The Higher Educational<br />
Institution (HEI) believes this drive will materialise in new ways of delivering the educational<br />
experience. This thinking is already influencing school education, for example “The importance of<br />
Teaching” (The Department of Education, 2010) highlights the role of technology will play in shaping<br />
the way educators and students interact and communicate. It is crucial that HEI does not become<br />
paralysed by what is clearly a period of radical innovation (ESRC Shaping Society, 2011; The<br />
Department of Education, 2010). At this stage however, it is unclear what these expectations are<br />
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likely to be. Foresight is indeed useful and one interesting view of the future is presented by<br />
Friedrich, Peterson and Koster (2011), through the evolution of a Generation ‘C’; a concept linked to<br />
generation ‘Y’ thinking (Martin, 2005; Paul, 2001; Weiler, 2004).<br />
Communication and interaction are an integral element of activity and as Engestrom (2008) contends,<br />
if activity based learning is to succeed communication is essential. The current innovations in<br />
communication have resulted in a convincing societal adoption of social networking supported by web<br />
2.0 technologies (Martin, 2005; Paul, 2001; Weiler, 2004). Web 2.0 offers the opportunity for 24/7<br />
connectivity which facilitates chat, sharing and collaboration. It is this level of communication that is<br />
challenging how society approaches learning... The adoption of Web 2.0 by Generation Y and C is<br />
changing how both ‘consumers’ and ‘providers’ think about and engage with family,<br />
management/work and learning (see for example Tapscott, 2008). The problem is clear, to avoid a<br />
communication paralysis Universities need to find ways to adopt and embed Web 2.0 fully into their<br />
pedagogy. One pedagogical discourse noted as being innovative is that offered in enterprise<br />
education. This practice has attracted many notable studies (Cope and Watts, 2000; Leitch and<br />
Harrison, 1999; Pittaway and Cope 2007a; Pittaway and Cope 2007b; Rae 2000; Rae 2002; Rae<br />
2009; Rae and Carswell 2000). These studies demonstrate that enterprise education is often<br />
concerned with personal interaction, communications and engagement. In order to develop ideas<br />
around the relationship between enterprise education, pedagogy and Web 2.0, this paper will firstly<br />
explore the pedagogical discourse of enterprise and entrepreneurship education before focussing on<br />
the specific requirements of Web 2.0 and in this instance Wikis. The paper will then discuss data<br />
generated from international students undertaking programmes in Enterprise with the aim to better<br />
understand how, as stakeholders, they can benefit from the use of technology in the more formal<br />
classroom setting. Furthermore, the transformation of formal communications into societal<br />
communications and embedding them into pedagogy will be explored.<br />
2. Literature review<br />
This section reviews the literature surrounding entrepreneurship and enterprise education before<br />
considering the emergent literature on Wikis in education. The recent Global <strong>Entrepreneurs</strong>hip<br />
Monitor GEM special report into education and training (2010) commented that whilst<br />
entrepreneurship education deals very specifically with entrepreneurial intent and action, enterprise<br />
education deals with a more general view of enterprising activity. This paper is concerned with that<br />
more general view of enterprise education as ‘enterprising activity’.<br />
The results from the GEM Education and Training Special Report (2010) show that in certain market<br />
contexts entrepreneurship education and enterprise education is likely to stimulate different levels of<br />
activity. The data reveals that certain societal and economic barriers mark less innovative economies<br />
and hinder entrepreneurial intent. It might be considered that context therefore is critical in the<br />
practice of entrepreneurship. However, GEM suggests that there are areas requiring further research,<br />
such as developing skills for opportunity recognition. Pittway and Cope (2007a) reveal through their<br />
systematic review of entrepreneurship education that pedagogy is indeed one of the more developed<br />
areas of this research topic. Their work reveals a discourse concerned with action, learning by doing<br />
and experience. For example, Rae (2009) discusses action learning and links discussion towards the<br />
theory of adult learning. This action learning process Raelin (1999) notes is clearly a highly<br />
interactive form of learning requiring communication supported by ongoing cycles of this activity using<br />
tacit and explicit knowledge. Furthermore, action learning is synonymous with activity in transient and<br />
temporary work groups. Leitch and Harrison (1999) suggest that enterprise education lends itself to<br />
modelling a process on to an activity, hereby producing a replicable learning design that multiple<br />
students can undertake and learn; an obvious example is business planning activity. This argument<br />
resonates with designs required for international student groups; and, more generally, experiential<br />
learning in Higher education (Hyland, Trahar, Anderson and Dickens, 2008; Kolb, 1984; Grisoni,<br />
2002). However, Rae (2000) and Rae and Carswell (2000) introduce the idea that personal<br />
development is a notable feature and characteristic specifically identified in the learning behaviour of<br />
entrepreneurs. This is a very useful concept presenting the idea that societal contributions are very<br />
much embedded in the learning construct of the student. Fayolle and Kyro (2008), suggest that the<br />
connections between context, entrepreneurs and education are fundamental to our understanding of<br />
how entrepreneurs learn and how society develops innovation.<br />
Extensive studies of this nexus of influences discussed in the earlier part of this paper suggests Web<br />
2.0 offers educators, students, policy makers and entrepreneurs a mechanism to develop our<br />
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Anne Smith, Keith Halcro and Peter Duncan<br />
learning. Firstly, evidence shows that students enjoy the social and collective collaboration, the ability<br />
to access 24/7, unconstrained by location (Al-Khalifa, 2008; Chinn and Williams, 2009; Chu, 2008;<br />
Hui et al, 2008; Halcro and Smith, 2010; Laff, 2007). Nonetheless, there are drawbacks. The social<br />
dimension of Web 2.0 might be viewed as incompatible with the formal learning space associated with<br />
a university (Cole, 2008; Halcro and Smith, 2010; Kai-Wah Chu, 2008; Smith, Halcro and Chalmers,<br />
2010; Trentin, 2008). However, Web 2.0 in the form of Wikis, blogs and so on are a global feature<br />
and therefore should be transferable to a multi-cultural education setting – enterprise teaching.<br />
Learning strategies within this context may be promising, but complex.<br />
This section highlights the agreement in terms of action learning and experiential learning designs as<br />
pedagogically robust in entrepreneurship and enterprise education. Furthermore, and of specific<br />
interest to this study, is the notion that these pedagogies are dependent on interaction and<br />
communication. However what we need to reveal is how collaborative learning requirements of<br />
international students might be met in enterprise education using Wikis. This paper will use results<br />
from an international group of students and their experience of Wikis in an educational setting to<br />
better understand their collaborative learning needs.<br />
3. Methodology<br />
This paper reports on results generated by one group of international students and is the third paper<br />
in a series from a broad “Wikis in Enterprise Contexts” study. This broader study commenced in 2008<br />
and will continue until 2012. The broader study has involved a variety of action research tests and<br />
trials using Wikis in an array of enterprise contexts. The methods applied in the broader study have<br />
involved mixed methods (Borrego, Douglas and Amelink, 2009; Bryant, 2007; Hohenthal, 2006).<br />
Mixed methods have been criticised owing to the contradictions inherent in their contrasting<br />
philosophies and approaches, especially on issues such as analytical validity (Borrego et al, 2009).<br />
However, mixed methods were considered highly appropriate, as they created opportunities to<br />
triangulate the final results (Borrego et al, 2009). Furthermore, in the context of the study, mixed<br />
methods is arguably not problematic, as a plurality of methods allows the choice of method which is<br />
‘fit for purpose’ for understanding the particular enterprise context being examined.<br />
The particular study presented in this paper focuses on the thinking and actions of international<br />
students undertaking three postgraduate management programmes and who used Wikis within the<br />
context of two postgraduate level modules dealing with an enterprise context. A paper-based<br />
questionnaire was distributed, at the end of trimester, to the 62 students taking both modules. Twentyfive<br />
international students responded and included the following countries: Belgium, Canada, China,<br />
India, Malaysia, Nigeria, Pakistan and Sudan. The questionnaire contained a mixture of Likert scale<br />
question items and semi-structured questions. Data was analysed through a combination of Excel<br />
spreadsheets and content analysis. Through this lens, students’ experiences create an insight into<br />
aspects of educational design (Boje, 2001; Rae, 2002).<br />
This paragraph describes the learning process undertaken by the students. The process mixed<br />
students, irrespective of their nationality, gender or work experience, in order to enrich the learning<br />
experience and provide a diversity of experiences. Each group worked remotely on an agreed<br />
industry or enterprise topic. The students constructed their Wikis over a five week period. Each<br />
student was asked to contribute to the group Wiki, both in and out of the classroom. The purpose of<br />
the task was to encourage the students to investigate and mine the Web for text, internet links, video<br />
clips or any other relevant material. The Wiki enables multimedia data to be embedded and layered,<br />
allows a multi-layered ‘deep’ document to be created on the internet from a relatively small word count<br />
of top layer content. By constructing layers of data, great depth can be achieved, so bringing the<br />
student closer to the industry and market place with the intentions of improving their entrepreneurial<br />
alertness and market sensitivity (Ardichvili, Cardozo and Ray, 2003; Bhave, 1994). At the end of this<br />
experience, students were tasked with delivering a business report based around the content of the<br />
Wiki which focused on synthesis, structure and presentation of work; the tasks had both a<br />
collaborative and individual element.<br />
Forming a narrative of sorts, the following section presents and discusses the findings of the<br />
experiences of the students; the student journey through Wiki creation and development. The<br />
students’ comments present their voices to portray how they learned to use Wikis and how Wikis<br />
might be applied in entrepreneurship and enterprise education.<br />
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4. Findings and discussion<br />
Anne Smith, Keith Halcro and Peter Duncan<br />
The previous sections have suggested that entrepreneurship and enterprise education is underpinned<br />
by the social nature of learning whether that is through formal or informal networks and contexts.<br />
Web 2.0 has been presented as an alternative medium and tool to carry innovation and enterprise<br />
education pedagogy; supporting the notable attributes of interaction and collaboration (Cope and<br />
Watts, 2000; Leitch and Harrison, 1999; Pittaway and Cope, 2007a; Pittaway and Cope, 2007b; Rae<br />
and Carswell, 2000). However, the use of Web 2.0 as a tool for entrepreneurship and enterprise<br />
education is an emergent concept and as previously discussed, requires detailed and contextual<br />
research to better understand its application.<br />
Respondents were asked introductory questions to establish their previous experience of Wikis and<br />
internet usage. Seventeen of the twenty-one students reported that there were unfamiliar with<br />
developing a Wiki, but four stated some degree of familiarity. Those that stated some degree of<br />
familiarity indicated they had previously developed a Wiki. This limited awareness of the nature and<br />
practice concerning Wikis was evident in the introductory computer workshop classes. This session<br />
was designed to develop students’ technical skills (for example accessing the Wiki; saving;<br />
adding/editing text; adding hyperlinks/images/video). Respondents were asked how important they<br />
considered the internet was to their learning. A majority; twenty-two students circled that the internet<br />
was ‘extremely important’ with a further three ranked considering it ‘important’. When asked how<br />
important sharing information was to their learning experience, sixteen respondents considered it<br />
‘extremely important’, whilst nine believed it to be important. From this starting point it is evident that<br />
international students recognise the importance of the internet and are equally positive in their<br />
opinions regarding the importance of sharing information. These views are from international<br />
students belonging to the global community of generation Y who value the internet, connectivity,<br />
sharing and interaction not only in social contexts, but also in learning contexts (Cole, 2008; Martin,<br />
2005; Paul, 2001; Weiler, 2004).<br />
In order to better understand the student experience in context, the research team were interested to<br />
isolate comments/narrative relating specifically to the learning and enterprise context. Therefore<br />
questions focused on what the students had enjoyed most and least about their experiences in<br />
creating a Wiki and working as a group. The answers were analysed and sorted into two contexts:<br />
the learning context; and the enterprise context. These contexts are considered below, supported by<br />
the students’ own voices along with observations from the academic team.<br />
4.1 The learning context<br />
The learning context is one where personal development and effectiveness is important and where<br />
experience and reflection is evident through action (Rae, 2009). The connection between learning<br />
and Wiki process is evident in the following student comment:<br />
‘I enjoy it because we can share experience’.<br />
However students were invited to balance the positive experiences with negative or least enjoyable<br />
ones. Interestingly, the least enjoyable experience associated with the Wiki was expressed as:<br />
‘Sometimes we have different thinking. We cannot (do not) have common goal.’<br />
Students tend not to enjoy conflict, one voicing their dislike of unfair workload by stating:<br />
‘When other members are not motivated to put in the effort.’<br />
Wikis cannot solve the inherent problem of team effort and perceived inequality of effort. However,<br />
Wikis may provide a space where the tensions and conflicts of group project issues can be played out<br />
in a controlled and monitored environment. Most Wikis provide data on statistical usage; frequency,<br />
deletions, contributions, times and so on. Aware of these issues from the beginning, the teaching<br />
team had briefed the students that that they would use these tools to support and monitor groups and<br />
individuals. The statistics revealed who posted what and when, as well as who deleted what and<br />
when. These statistics are important, because students could use the statistics to manage group<br />
behaviour proactively, for example in demonstrating to each other the quantity and timeline of<br />
contributions made. This mechanism is an invaluable, objective instrument in confronting the<br />
perennial group work problem of equity (Lee-Davies, 2007). However evaluating the quality of<br />
contributions may require a more nuanced approach. For example, how to balance the added value<br />
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Anne Smith, Keith Halcro and Peter Duncan<br />
of an ‘early’ contribution of ‘raw material’ against a much later/shorter edit to provide a<br />
synthesis/evaluation of material.<br />
Overall, students expressed a balanced view of Wikis. Positive learning experience centred on the<br />
ability to share and collaborate with information, as found in one student’s comment:<br />
‘The ability to share ideas and information with my colleagues simultaneously ... also the<br />
ability to know who edited what post and why.’<br />
This statement complemented another’s comment that<br />
‘[t]he fact that you could work with several people on the same project without having to<br />
meet physically’<br />
meant that the group was unconstrained by spatial and to an extent chronological demands. These<br />
benefits may explain the overwhelmingly positive student response to the ideas of Wikis as a sharing<br />
and collaborative platform. A weakness of traditional group working is that students frequently allocate<br />
tasks to one another, before separating to produce their element of the task. In order to prevent<br />
individuals pursuing independent activities periodic meetings are introduced to review activities. The<br />
weakness of this process is the time lag between creation and review. Wikis, by contrast offer a near<br />
synchronous working environment which allows contributors to add and edit material, thus providing<br />
instant feedback. This mechanism may remove a cause of group friction (Barcelona and Rockey,<br />
2010). The positive comments expressed by many students to this group activity contrasts with the<br />
widespread antipathy often expressed by students to group work (Cumming 2010). The physicality of<br />
a learning location is important to international students as for many they have different working<br />
patterns and the flexibility of remote working was enjoyed by most respondents. The comments<br />
however, were not always laced with such positive views. The negative side of group dynamics<br />
spilled out in the observation below which suggests that instant feedback in the form editing was not<br />
always welcome<br />
‘the abuse of the Wiki, where a group member would just completely wipe out the<br />
contribution of other members with no justifiable reason.’<br />
This sense that ‘one was the group and the group was one’ led some to believe that changes could<br />
be made unilaterally, hence the comment<br />
‘well, since everyone had (the) same rights, others can make adjustment to your work or<br />
delete without consent’.<br />
This approach irritated a number of students, resulting on one occasion, in academic intervention and<br />
mediation. The argument is that this behaviour conveys a sense of disrespect belittling the<br />
contribution and the contributor, features that destroy effective team work (Cumming, 2010). The<br />
literature repeatedly recognises that creating an effective team requires clear and agreed boundaries<br />
often in pursuit of a task requiring substantial input (Campany, Dubinsky, Druskat, Mangino and<br />
Flynn, 2007). This sense of effort was evident in the creation of a Wiki and found expression in the<br />
statement:<br />
‘it takes time as a result of having to source your input from the internet that provides a<br />
lot of information.’<br />
However the learning context was captured by one student who said:<br />
‘It was [a] very creative and interactive process.’<br />
In summary, students’ comments highlight a desire for fairness, within a managed environment that<br />
allows them to be creative and collaborative. The academic challenge is to use the Wiki capability to<br />
deliver technically on these key issues. However, the technical design is only one part of the learning<br />
design; knowledge and context form the other.<br />
4.2 Enterprise context<br />
The entrepreneurial process (Ardichvili, Cardozo and Ray, 2003; Bhave, 1994) as practiced by the<br />
assessments the students undertook, involved a learning design that required them to seek out<br />
knowledge and improve their alertness to market opportunity, sectors and industries. Although it<br />
might appear disconnected to look to Web 2.0 and specifically Wikis as a solution to learning designs<br />
for enterprise education, it seems that the reality might be quite the opposite; there are commonalties<br />
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Anne Smith, Keith Halcro and Peter Duncan<br />
and connections. One student comment in particular provides insight to opportunity recognition<br />
processes:<br />
‘I enjoyed the learning process. It forces you to research many angles to a certain topic<br />
and allows you to decide the best definitions and examples.’<br />
This comment provides insight to the entrepreneurial processes where depth of research involves<br />
enhancing sensitivity to the market place or industry. It suggests that through the process of Wiki<br />
contribution, students are simulating what is essentially the development of entrepreneurial alertness<br />
(after Ardichvili, Cardozo and Ray, 2003). This is evidenced further through the following comment<br />
that the task undertaken was a<br />
‘very interesting way to learn, you become more involved in the subject.’<br />
There were examples contained in assessment submissions where students had mined the Internet<br />
and the knowledge and information being generated and captured was indeed extensive. Of course<br />
the Wiki does not place the student in the market place or in (business) networks, but the power of the<br />
Internet and a Wiki tool can effectively bring the enterprise theme into the classroom.<br />
This discussion has focused on two key areas: the technical context and the enterprise context. The<br />
student comments are explicit in terms of how they learned using Wikis and how Wikis might be<br />
applied in entrepreneurship and enterprise education.<br />
5. Conclusion<br />
The results of this study demonstrate that universities can use Wikis as a way of connecting multicultural<br />
students within an educational environment unconstrained by setting or time. Critically the<br />
study investigated the process of Wiki usage and student experience of Wiki activity. Three key areas<br />
have emerged; application of Wikis, understanding or comprehension through usage and the<br />
boundary crossing capability desired by policymakers.<br />
Application: students enjoy remote working with 24/7 connectivity but along with the benefits of<br />
collaborative effort issues relating to group dynamics and equity of contribution are still important.<br />
Collaborative effort can be formally monitored but this relates to more quantitative (e.g. timing/number<br />
of edits) rather than qualitative (e.g. quality) measures.<br />
Understanding: Processes involving mining for industry and market data can contribute towards<br />
development of market and industry sensitivity as well as entrepreneurial alertness. Further<br />
understanding might involve more detailed learning designs around opportunity development and<br />
identification.<br />
Policy and capability: Stakeholder’s can access a low cost technology that is accessible, flexible and<br />
usable. Wikis as a part of the Web 2.0 applications is a tool that an international student is<br />
comfortable with and one that can function not only as a social platform but also as a more formal<br />
learning environment with a capability to cross social and cultural boundaries.<br />
The implications of the results are threefold: Firstly that informed decisions can be made on the<br />
application of Wikis in enterprise education. Secondly, the research informs an understanding of how<br />
a Wiki can contribute towards development of business opportunities, alertness and market<br />
sensitivity. Finally, in terms of policy implications, the results suggest that Wikis can offer a solution to<br />
universities reaching out across cultural, social and geographical boundaries.<br />
Future work: the extent and scope of Wikis to enhance student learning and sensitivity to<br />
entrepreneurship and enterprise education, in areas such as opportunity identification, networks and<br />
knowledge building would benefit from further research to inform the development of effective learning<br />
designs.<br />
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794
Differentiating Between SMEs and Large Enterprises in<br />
External Knowledge Linkages<br />
André Spithoven 1 and Peter Teirlinck 2<br />
1 Belgian Science Policy Office and VrijeUniversiteitBrussel<br />
2 Hogeschool-Universiteit Brussel<br />
aspitje@yahoo.com<br />
Abstract: This paper focuses on the existence of external knowledge linkages in SMEs by stressing their<br />
differences with those used in large enterprises. Four external knowledge linkages were considered (search<br />
strategies, external R&D, research collaboration, and protection mechanisms) and their impact on innovative<br />
performance in terms of generating innovative revenue is empirically examined. Findings show that SMEs and<br />
large enterprises differ. First, the mix of external knowledge linkages is less relevant for SMEs. SMEs use<br />
external knowledge sourcing less than large enterprises, but use them more intensely if they do. SMEs also<br />
benefit from a limited set of external R&D channels and have less collaboration partners than large enterprises.<br />
SMEs benefit more from using protection mechanisms than large companies. SMEs benefit from users; whereas<br />
large enterprises benefit more from suppliers and technology partners.<br />
Keywords: SMEs, Large enterprises, External knowledge linkages, Product innovation, Firm performance<br />
1. Introduction<br />
Firms' innovation strategies have recently been characterised by a tendency towards more openness<br />
making outside information increasingly necessary (Laursen and Salter, 2006) and research<br />
collaborations useful (Cassiman and Veugelers, 2002). Additionally, firms have become more active<br />
in licensing and selling results of their internal R&D to external parties (Arora, 2002). Technical<br />
progress and changes in consumer demand require companies to be open to external ideas,<br />
complementing internal R&D, to remain competitive (Veugelers, 1997). In order to respond to these<br />
changes, firms need to adapt their strategies.SMEs are major actors in the innovation system (Lee et<br />
al., 2010) as they act as catalysts because of their interrelatedness with other firms and players<br />
(Bianchi et al. 2010). This research offers a picture of differences between SMEs and large<br />
enterprises by demonstrating how external knowledge linkages contribute to generating innovative<br />
revenue. These linkages have several dimensions: informative search strategies, external technology<br />
acquisitions, research collaborations and protection methods. Most authors focus on one of these<br />
dimensions. To capture the impact of all external linkages on innovative performances they should be<br />
brought together. Edwards et al. (2005) state that work on SMEs and innovation has largely remained<br />
theoretical. Hence, our research contributes to the debate by offering some empirical evidence on the<br />
different dimensions of external linkages and their impact on innovative revenue. The paper is<br />
organised as follows. Section two considers the theoretical aspects of open innovation and firm size in<br />
terms of their expected impact on firm performance. Section three looks at the data, the variables and<br />
the empirical strategy. The empirical results are presented in section four. Section five concludes.<br />
2. Theoretical background<br />
2.1 External linkages for innovation<br />
Gassmann (2006) argued that firms are no longer in a position to perform all R&D internally. External<br />
linkages for innovation have become crucial (Chesbrough, 2003). Firms look for ideas and information<br />
to enhance performances. As the complexity of innovation increases, the knowledge base of firms<br />
has become inadequate to control all aspects of innovation. Hence boundary spanning activities are<br />
highly relevant for SMEs since they face resource constraints, scale limitations and have fewer<br />
technological assets to bargain with (Narula, 2004). Consequently small firms need external linkages<br />
more than large firms to access external knowledge for innovative purposes (Mesquita and Lazzarini,<br />
2008).<br />
Chesbrough and Crowther (2006) discern ‘inbound’ and ‘outbound’ linkages. Inbound linkages point<br />
to the search for external information sources to complement in-house R&D activities and the<br />
acquisition of external technology. Search strategies exert an impact in the innovation activities of<br />
firms (Katila and Ahuja, 2002). Previous research documented useful information sources: customers,<br />
suppliers, competitors, universities, public research organisations, consultants, professional and<br />
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industrial associations, etc. (Leiponen and Helfat, 2010). Smaller firms are less endowed with<br />
resources to screen the external environment than larger firms (Van de Vrande et al., 2009).<br />
Outsourcing is another means to acquire external knowledge (Van de Vrande et al., 2009). External<br />
technology acquisition covers external R&D, acquiring machines for reverse engineering, equipment<br />
and software and other external knowledge through e.g. licences. External technology acquisition<br />
implies the incurrence of costs and here SMEs face a lack of financial resources and the necessary<br />
number of skilled workers to incorporate the external technology acquisition (Vossen, 1998).<br />
Chesbrough and Crowther (2006) also stressed the not-invented-here syndrome as a barrier to SME<br />
involvement in external technology acquisition.<br />
Outbound linkages describe external paths to markets to commercialise internal innovations firms<br />
developed before. Chesbrough (2003) points to several of these paths: patenting, spin-offs, and<br />
disinvestments. Legal protection by patents serves to generate revenues from licences, but also<br />
serves to enforce strategic competitive advantage through standard setting based on internal<br />
developed technology (Nagaoka and Kwon, 2006). Patenting, and consequent licensing possibilities,<br />
open up insights into new markets (Lichtenthaler, 2008b). Patents also contribute to the reputation of<br />
firms as a technology pioneer (Lichtenthaler and Ernst, 2007). Lee et al. (2010) argue that<br />
commercialisation is especially important for SMEs when compared to large enterprises.<br />
In addition to inbound and outbound linkages Gassmann and Enkel (2004) add ‘coupled’ linkages<br />
which unite in- and outbound linkages. Research cooperation is an exponent hereof. First, research<br />
collaboration improves the learning efficiency in absorbing external knowledge, increasing the impact<br />
on innovative performance of incoming spillovers (Romer, 1990). Collaboration reduces outgoing<br />
spillovers, by internalising them among partners. Cooperative agreements require a sufficient degree<br />
of knowledge protection to reduce free-rider opportunities by outsiders (Cassiman and Veugelers,<br />
2002). Second, research cooperation complements knowledge from other actors and grants access to<br />
intangible tacit knowledge which does not spill over and cannot easily be bought (Katsoulakos and<br />
Ulph, 1998). According to Edwards et al. (2005) SMEs look at cooperation to broaden their technical<br />
competences. Narula (2004) warns that SMEs are lacking technological assets to be of interest for<br />
technological partners such as universities. Lee et al (2010) stress that, due to limited resources, the<br />
key motive of SMEs to cooperate on innovation is to generate economies of scale, to ensure support<br />
services, to reduce risk, to increase flexibility in operation and to market their products. SMEs have a<br />
superior ability to use external linkages more efficiently than large enterprises. These authors also<br />
point to potential negative effects of cooperation: the need for monitoring entails costs and brings<br />
threats of leakage of key knowledge.<br />
2.2 Firm performance<br />
Based on Leiponen and Helfat (2010) innovative revenue is used as performance measure. Massa<br />
and Testa (2008) found that 30% of revenue was due to innovative activities. Cassiman and<br />
Veugelers (2006) argue that the share of innovative revenue might be larger for SMEs than for large<br />
enterprises.To examine whether SMEs differ from large enterprises we use, following Herstad et al.<br />
(2008), a composite indicator capturing the range of firms' external knowledge linkages. SMEs are<br />
assumed to have a greater need for external knowledge linkages to boost innovation performance.<br />
The following hypothesis is made.<br />
Hypothesis 1: The mix of external knowledge linkages exerts a positive impact on the<br />
share of innovative revenue and these are more important for SMEs than for large<br />
enterprises.<br />
As this mix is useful for making general statements, the question arises which external knowledge<br />
linkages are the most important ones. The foregoing discussion revealed four dimensions: search<br />
strategies, external technology acquisition, research collaboration and protection mechanisms.<br />
Laursen and Salter (2006) find a curvilinear relation between a firms’ search strategy and their<br />
innovation performance in terms of revenue. Leiponen and Helfat (2010) also find diminishing returns<br />
to the breadth of information sources as it becomes increasingly difficult to manage a larger number of<br />
search channels. Hence, the following hypothesis is made.<br />
Hypothesis 2: SMEs make relatively more use of search strategies than large firms to<br />
generate revenue from innovative products<br />
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External technology acquisition is identified as an important ingredient for firm growth (Van de Vrande<br />
et al., 2009). The relation remains ambiguous because external technology acquisition is dependent<br />
on firms’ resources. SMEs are assumed to rely more on external technology than large enterprises<br />
because SMEs lack human and financial resources (Narula, 2004). There is the danger for SMEs of<br />
becoming too dependent on external technology acquisition. If SMEs revert to external technology<br />
acquisition it also has to dispose of a certain amount of internal R&D capacity in order to absorb this<br />
knowledge (Cohen and Levinthal, 1990).<br />
Hypothesis 3: SMEs make relatively more use of external technology acquisition than<br />
large firms to generate revenue from innovative products<br />
The situation differs in the case of research collaboration. Although SMEs use collaboration to extend<br />
their technological competences (Lee et al., 2010); they have a limited capability in engaging in<br />
collaboration due to fewer technological assets to offer to the partner (Narula, 2004). Larger firms are<br />
in a better position to engage in research collaboration.<br />
Hypothesis 4: SMEs make relatively less use or research collaboration than large firms to<br />
generate revenue from innovative products<br />
SMEs protect their innovations from being copied or benefit from them by selling the technology<br />
(Lichtenthaler, 2008a). But since these protection mechanisms are costly, SMEs also use “strategic”<br />
protection mechanisms such as complexity of design or lead time to market (Cassiman and<br />
Veugelers, 2006).<br />
Hypothesis 5: SMEs make relatively less use of protection mechanisms than large firms<br />
to generate revenue from innovative products<br />
When looking at the drivers of external knowledge linkages several actors in the innovation system<br />
come into play. Von Hippel (1976) stressed the role of users. Massa and Testa (2008) pointed to the<br />
customer knowledge as a positive element in SMEs compared to large companies. Von Hippel (1988)<br />
added suppliers and competitors as actors. Faems et al. (2005) cited technological partners such as<br />
universities and public research organisations. Because of the resource constraints of SMEs they are<br />
assumed to be less involved with technological partners that offer more basic research results<br />
implying longer gestation periods before releasing an innovative product (Lee et al., 2010). On the<br />
other hand, Tidd and Trewhella, 1997) posit that SMEs prefer technological partners due to the risk of<br />
negative spillovers to competitors.<br />
Hypothesis 6: Interactions with customers has a larger impact in SMEs compared to<br />
large enterprises when generating revenue from product innovations. On the contrary,<br />
interactions with suppliers and technological partners have a stronger impact for large<br />
firms compared to SMEs.<br />
3. Data, variables and empirical strategy<br />
3.1 Data<br />
This research draws from the fourth European Community Innovation Survey (CIS) of Belgium<br />
covering the period 2002-2004. This survey has the advantage that: it is pre-tested and has a long<br />
history thus turning the CIS survey into a reliable information source; and it has gained external<br />
validity because the same questionnaire has been used in most European countries. The CIS follows<br />
the definitions of the Oslo Manual (OECD, 2005) and provides a good coverage of the items that<br />
could potentially be used to examine external knowledge linkages (Laursen and Salter, 2006).Using<br />
the business register (Belfirst), the target population of the survey cover all enterprises with 10 or<br />
more employees that are active in various economic activities excluding the public sector. A postal<br />
survey was stratified according to size and economic activity. The survey is voluntary. A total of 3,322<br />
private enterprises responded, of which 1,427 were innovative. Our research is restricted to the<br />
analysis of innovative firms because these respond to questions related to external knowledge<br />
linkages. Corrected for missing values with respect to the variables a remaining sample of 967 firms is<br />
used. No non response bias was found. To compare SMEs with large companies the sample is split<br />
up: SMEs are defined as firms with less than 250 employees; large companies with 250 or more.<br />
3.2 Variables<br />
The dependent variable is the share of revenue in 2004, INNOREV, due to innovations between 2002<br />
and 2004. Several control variables are introduced. The ownership of firms, GROUP, is emphasised<br />
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as the Belgian economy hosts many foreign multinational firms. This variable takes the value 1 if the<br />
firm belongs to a group and 0 otherwise. Second, the international orientation of the market, INTER,<br />
for its products gives information on the competitive pressure on the firm. The industry dummies are<br />
based on the classification developed by Marsili and Verspagen (2002). They use empirical data<br />
(such as patents, R&D statistics, innovation surveys) to develop a typology of four regimes:<br />
continuous process (IND_CONT); fundamental process (IND_FUND); product engineering<br />
(IND_ENGI); and science based (IND_SCIE). Marsili and Verspagen (2002) only consider<br />
manufacturing. Therefore, the knowledge intensive services (IND_KNOW) are added. Fourth, the<br />
R&D intensity, RDINT, is a proxy for absorptive capacity (Cohen and Levinthal, 1990). Cassiman and<br />
Veugelers (2006) point to the complementarity between internal R&D and the use made from external<br />
knowledge relations.<br />
Four dimensions of external knowledge linkages are used. Following Laursen and Salter (2006) the<br />
dimensions on external knowledge linkages are measured in terms of ‘breadth’ and in terms of<br />
‘depth’. These dimensions are: search channels of information; external technology; research<br />
cooperation; and protectionist mechanisms. Because all dimensions have different numbers of items<br />
in their composition, we have rescaled them between 0 and 10.<br />
Search strategy. Nine information sources make up the search strategy of the firm: suppliers; clients;<br />
competitors; consultants; universities; public research organisations; professional or industrial<br />
associations; trade fairs or conferences; and scientific journals or trade/technical publications. The<br />
breadth of the search strategy, SEARCHB, uses average of the information sources. The depth of the<br />
search strategy, SEARCHD, is the average of the nine information sources if they are indicated by<br />
firms as being highly important.<br />
External technology acquisition. External technology acquisition is captured in five ways: firms can<br />
acquire products and processes developed by others: outsource (part of) R&D; buying advanced<br />
machines, equipment and software and other external knowledge. The breadth of external technology<br />
acquisition, EXTERNB, is the average score of these five items. The depth of external technology<br />
acquisition, EXTERND, is calculated by comparing the position of the item in relation to the median<br />
scores. If the expenditures are above median, the item gets the score of 1.<br />
Cooperation. Firms indicate if they have cooperated with a type of partner on their innovation: clients;<br />
suppliers; competitors; consultants and private R&D organisations; universities; and public research<br />
organisations. Respondents did not have to indicate the number of partners within each partner type.<br />
The average score of these six types of partners is the breadth of cooperation, COOPRDB. Firms<br />
identified the importance attached to this cooperation. If ‘high’, the score was 1, and 0 otherwise. The<br />
average score is a proxy of the depth of cooperation, COOPRDD.<br />
Protection. The CIS reviews four formal protection measures: patents; industrial design; trademarks<br />
and copyrights. If used the protection mechanism gets the score 1, and 0 otherwise. The breadth of<br />
the protection, PROTB, is the average score of these four items. The calculation of the depth was not<br />
possible.<br />
Composite indicators. Two composite indicators capture the overall external knowledge linkages of<br />
firms. A composite indicator is an aggregate of several single indicators characterising a<br />
multidimensional (Herstadt et al., 2008). The aggregation of composite indicators is linear as they are<br />
the average scores of all breadth measures, OINNOB, and depth measures, OINNOD. The two<br />
composite indicators are also rescaled between 0 and 10.<br />
Drivers of external linkages. The ‘drivers’ of external linkages have been largely neglected in empirical<br />
research. The CIS captures three types of partners by looking at the information sources and partners<br />
in research cooperation. Innovative revenue is user driven when customers are involved as either an<br />
inspirational source of information or through research cooperation (von Hippel, 1988). User<br />
interaction, USER, is calculated as the average of using clients as information source plus using them<br />
as collaborative partner. Innovation is supplier driven when suppliers are imposing certain standards<br />
or methods. Supplier involvement, SUPP, is calculated in a similar vein as user involvement.<br />
Technological partners, such as universities or public research centres, provide new scientific<br />
insights. The involvement of technology partners, TECHPART, has 10 items which are calculated<br />
similar to the ones on users and suppliers. It was not possible to use external technology acquisition<br />
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or protection mechanisms because no difference could be made between users, suppliers and<br />
technology partners.<br />
4. Analysis<br />
Table 1 contains the descriptive statistics of the variables and stresses the differences between SMEs<br />
and large enterprises.<br />
Table 1:Differences between SMEs (792 observations) and large enterprises (175 observations)<br />
Variable Small and medium enterprises Large enterprises Difference<br />
Mean Standard Mean Standard<br />
deviation<br />
deviation<br />
INNOREV<br />
i. Control variables<br />
0.088 0.171 0.089 0.177 -0.001<br />
GROUP 0.530 0.018 0.926 0.020 -0.395***<br />
RDINT 0.071 0.007 0.046 0.009 0.025**<br />
INTER 0.818 0.014 0.863 0.026 -0.045<br />
IND_CONT 0.303 0.016 0.383 0.037 -0.080**<br />
IND_FUND 0.081 0.010 0.143 0.027 -0.062**<br />
IND_ENGI 0.299 0.016 0.251 0.033 0.048<br />
IND_SCIE 0.051 0.008 0.069 0.019 -0.018<br />
IND_KNOW 0.266 0.016 0.154 0.027 0.112***<br />
ii. External<br />
knowledge drivers<br />
USER 0.259 0.184 0.400 0.259 -0.141***<br />
SUPP 0.265 0.166 0.417 0.238 -0.152***<br />
TECHPART 0.150 0.161 0.281 0.220 -0.131***<br />
iii. External<br />
knowledge linkages<br />
Breadth<br />
OINNOB 3.410 1.625 5.046 1.901 -1.636***<br />
SEARCHB 7.308 2.816 8.489 2.101 -1.181***<br />
EXTERNB 3.338 2.239 4.503 2.477 -1.164***<br />
COOPRDB 2.012 2.790 4.676 3.491 -2.664***<br />
PROTB<br />
Depth<br />
0.982 1.735 2.514 2.687 -1.533***<br />
OINNOD 2.022 1.379 2.941 1.687 -0.919***<br />
SEARCHD 1.566 1.510 2.013 1.788 -0.447***<br />
EXTERND 3.041 2.286 3.305 2.326 -0.264<br />
COOPRDD 1.458 2.296 3.505 3.095 -2.046***<br />
Note: The symbols ***, ** and * denote the statistical significance at the 1%, 5% and 10% level.<br />
Table 1 demonstrates that the share of innovative revenue realised 8.9% for large enterprises against<br />
8.8% for SMEs, and the difference proved insignificant.<br />
Most firms are part of a domestic or foreign group but the difference according to size is large: SMEs<br />
(53.0%) and large enterprises (92.6%). Most firms, SMEs as well as large enterprises, are active on<br />
international markets. SMEs outperform large enterprises on R&D intensity (7.1% versus 4.6%)<br />
pointing to highly research intensive innovative SMEs. The distribution of the sample over the industry<br />
dummies reveals that innovative SMEs are relatively more active in knowledge intensive sectors;<br />
whereas large enterprises are relatively more active in sectors with activities using continuous<br />
processes and fundamental processes. Looking at the drivers of external linkages Table 1 shows that<br />
these proportions are significantly lower for SMEs than for large enterprises.<br />
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All scores on external knowledge linkages in Table 1 range between 0 and 10. The key finding is that,<br />
overall, firms give higher scores for breadth measures than depth measures. Hence the findings<br />
corroborate the usual assumption that large enterprises rely more on external knowledge linkages.<br />
We expect several factors to have an impact on the share of innovative revenue. Fractional logit<br />
regressions are used since the dependent variable varies between 0 and 100% (Papke and<br />
Wooldridge, 1996). Breadth and depth measures are treated separately since the two are highly<br />
correlated. The impact of external knowledge linkages can be seen in terms breadth in Table 2 and<br />
depth in Table 3. Six models test the hypotheses.<br />
Table 2: Generating innovative revenue – breadth measures<br />
Dependent variable<br />
is the share of<br />
innovative revenue<br />
(INNOREV)<br />
Model (i) Model (ii) Model (iii)<br />
SME Large<br />
firm<br />
SME Large firm SME Large firm<br />
i. Control variables<br />
GROUP -0.053 -1.283 -0.095 -1.381 -0.075 -1.617<br />
(0.148) (0.465)*** (0.148) (0.455)*** (0.150) (0.450)***<br />
RDINT 1.413 2.044 1.156 2.111 1.148 1.694<br />
(0.409)*** (0.777)*** (0.442)*** (0.810)*** (0.452)** (0.815)**<br />
INTER 0.341 0.947 0.349 1.041 0.304 0.943<br />
(0.208)* (0.400)** (0.124) (0.339)*** (0.211 (0.394)**<br />
IND_CONT -0.533 -1.515 -0.562 -1.550 -0.534 -1.647<br />
(0.216)** (0.342)*** (0.219)** (0.368)*** (0.220)** (0.387)***<br />
IND_FUND -0.611 -2.062 -0.613 -2.094 -0.542 -2.054<br />
(0.356)* (0.533)*** (0.355)* (0.517)*** (0.358) (0.453)***<br />
IND_ENGI -0.141 -0.203 -0.165 -0.149 -0.119 -0.146<br />
(0.202) (0.398) (0.203) (0.388) (0.207) (0.390)<br />
IND_SCIE 0.313 1.681 0.249 1.655 0.330 1.546<br />
ii. External linkages<br />
drivers<br />
(0.333) (0.494)*** (0.322) (0.463)*** (0.322) (0.454)***<br />
USER 0.919 0.759 1.224 1.085 1.176 1.047<br />
(0.407)** (0.611) (0.461)*** (0.626)* (0.452)*** (0.613)*<br />
SUPP -0.420 -1.049 0.017 -0.926 -0.272 -0.916<br />
(0.668) (0.723) (0.720) (0.708) (0.772) (0.693)<br />
TECHPART 0.180 -1.488 0.865 -2.080 0.770 -2.326<br />
iii. External<br />
knowledge linkages<br />
- breadth<br />
(0.816) (0.951) (0.847) (1.029)** (0.912) (1.067)**<br />
OINNOB 0.044 0.280<br />
(0.090) (0.124)**<br />
SEARCHB -0.047 0.363 0.128 -0.886<br />
(0.036) (0.130)*** (0.127) (0.263)***<br />
EXTERNB -0.008 0.064 -0.170 0.435<br />
(0.037) (0.059) (0.086)** (0.221)**<br />
COOPRDB -0.053 0.024 -0.171 0.130<br />
(0.055) (0.078) (0.080)** (0.192)<br />
PROTB 0.127 0.038 0.123 0.052<br />
(0.047)*** (0.056) (0.047)*** (0.056)<br />
SEARCHB2 -0.013 0.084<br />
(0.010) (0.021)***<br />
EXTERNB2 0.021 -0.038<br />
(0.010)** (0.020)*<br />
COOPRDB2 0.017 -0.011<br />
(0.008)** (0.016)<br />
Constant -2.876 -2.718 -2.638 -5.010 -2.775 -1.240<br />
(0.263)*** (0.725)*** (0.297)*** (1.137)*** (0.422)*** (1.202)<br />
Observations 792 175 792 175 792 175<br />
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André Spithoven and Peter Teirlinck<br />
Notes: The reference category for sectors is the knowledge intensive ones (IND_KNOW); the robust<br />
standard errors are between brackets; the symbols ***, ** and * denote the statistical significance at<br />
the 1%, 5% and 10% level.<br />
Model (i) shows that the impact on revenue from the composite indicator of breadth measures of the<br />
external knowledge linkages are insignificant for SMEs, but significant in the case of large enterprises.<br />
This corroborates the case study findings of Dodgson et al. (2006) and Huston and Sakkab (2006).<br />
Large enterprises select a variety of information sources, external R&D items, cooperation partners or<br />
protection measures, and this mix will have a positive impact on innovative revenue.<br />
Model (ii) looks at the various external knowledge linkages to stress differences between SMEs and<br />
large enterprises. The share of innovative revenue is positively influenced in SMEs by the use of<br />
different formal protection mechanisms. The fact that SMEs are particularly active in knowledge<br />
intensive services might account for this. Activities like software development rely on copyrights as a<br />
protection method; whereas business services use trademarks. Although costly, patents are also used<br />
by small high tech firms like spin offs. All this accounts for the significant breadth measure on<br />
protection for SMEs. Large enterprises benefit significantly from a breadth of search strategies. This<br />
might be linked to the presence of firms in science based activities that are very knowledge intensive.<br />
Since large firms have more resources, a large variety of information sources is screened. Search<br />
strategies are well documented in the literature (e.g. Dodgson et al., 2006). Next, protection measures<br />
in large enterprises are insignificant, perhaps because more emphasis is placed on patenting as a<br />
preferred method opposed to other protection measures.<br />
The picture changes when we allow for non-linearity in model (iii) 1<br />
. For SMEs the reliance on a variety<br />
of external technology has a u-shaped impact on innovative revenue. Using a few of them, as will be<br />
the case for SMEs, already has a substantial impact on the revenue due to new products. The same<br />
logic applies to the partners in research cooperation: only a few different types of partners are needed<br />
to exert a positive impact on the share of revenue. Large enterprises have a different set of external<br />
knowledge linkages. Here, the variety of information sources shows a u-shaped pattern. In the case of<br />
large firms, however, this might also be explained by having a multitude of these sources as seen<br />
from model (ii). The effect of using a variety of external R&D channels in the case of large enterprises,<br />
is an inverse u-shaped one: external technology acquisition is confined between boundaries and the<br />
large enterprises are not advised to outsource too much of it as external technology and internal R&D<br />
still have to be combined within the company (Cassiman and Veugelers, 2006). This finding is in line<br />
with the argument on attention allocation used by Katila and Ahuja (2002).<br />
All models indicate that the reliance on users in the search strategies and research cooperation of<br />
SMEs have beneficial impact on innovative revenue. The significantly negative impact for large<br />
enterprises in using technology partners, in models (ii) and (iii), suggest that the complex nature of the<br />
research involved by universities and public research centres takes some time to lead to a significant<br />
growth in revenue.<br />
Our control variables demonstrate some interesting findings. Group membership has a negative<br />
impact on the share of revenue of large enterprises, which indicates that the innovation serves as part<br />
of an international strategic decision to develop the product in Belgium and consequently realise the<br />
revenue at international markets or use the innovative product within the company product mix.<br />
Further, the R&D intensity has a significant positive impact on the share of innovative revenue.<br />
The fact that international market penetration exerts a positive influence on innovative revenue<br />
indicates that firms – especially large enterprises – are internationally orientated. A difference is that<br />
SMEs are more oriented at domestic markets than large firms.<br />
Table 3 looks at the effects of the intensity by which external knowledge linkages are used.<br />
1<br />
The findings for SMEs in the case of protection measures do not change because the quadratic variable could not be added<br />
due to multicollinearity.<br />
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Table 3:Generating innovative revenue – depth measures<br />
Dependent variable<br />
is the share of<br />
innovative revenue<br />
(INNOREV)<br />
Model<br />
(iv)<br />
Model (v) Model (vi)<br />
SME Large firm SME Large firm SME Large firm<br />
i. Control variables<br />
GROUP -0.032 -1.092 -0.020 -1.103 0.012 -0.766<br />
(0.149) (0.473)** (0.149) (0.462)** (0.147) (0.445)*<br />
RDINT 1.420 2.426 1.345 2.488 1.505 2.851<br />
(0.407)*** (0.711)*** (0.406)*** (0.710)*** (0.412)*** (0.724)***<br />
INTER 0.371 1.006 0.379 1.106 0.395 1.331<br />
(0.212)* (0.365)*** (0.209)* (0.376)*** (0.196)** (0.401)***<br />
IND_CONT -0.543 -1.452 -0.572 -1.463 -0.506 -1.459<br />
(0.216)** (0.333)*** (0.216)*** (0.332)*** (0.216)** (0.342)***<br />
IND_FUND -0.615 -1.816 -0.586 -1.822 -0.549 -1.777<br />
(0.358)* (0.477)*** (0.357) (0.464)*** (0.354) (0.482)***<br />
IND_ENGI -0.143 0.008 -0.156 0.016 -0.105 0.168<br />
(0.201) (0.371) (0.203) (0.363) (0.206) (0.371)<br />
IND_SCIE 0.317 1.794 0.309 1.874 0.387 1.777<br />
ii. External linkages<br />
drivers<br />
(0.333) (0.461)*** (0.331) (0.481)*** (0.337) (0.479)***<br />
USER 0.878 0.719 0.704 0.686 0.839 0.773<br />
(0.395)** (0.646) (0.426)* (0.644) (0.442)* (0.641)<br />
SUPP -0.421 -0.995 -0.368 -1.203 -0.510 -1.402<br />
(0.595) (0.761) (0.640) (0.722)* (0.646) (0.730)*<br />
TECHPART 0.172 -0.849 -0.155 -1.056 -0.351 -1.226<br />
iii. External<br />
knowledge linkages<br />
- depth<br />
(0.703) (0.783 (0.726) (0.934) (0.755) (0.945)<br />
OINNOD 0.064 0.235<br />
(0.081) (0.095)**<br />
SEARCHD 0.108 0.038 0.232 0.665<br />
(0.046)** (0.072) (0.114)** (0.225)***<br />
EXTERND -0.029 0.069 -0.265 -0.095<br />
(0.036) (0.069) (0.083)*** (0.253<br />
COOPRDD 0.045 0.124 -0.168 -0.031<br />
(0.052) (0.074)* (0.090)* (0.187)<br />
SEARCHD2 -0.024 -0.099<br />
(0.020) (0.035)***<br />
EXTERND2 0.034 0.025<br />
(0.010)*** (0.029)<br />
COOPRDD2 0.030 0.020<br />
(0.011)*** (0.017)<br />
Constant -2.875 -2.528 -2.819 -2.506 -2.666 -3.267<br />
(0.252)*** (0.680)*** (0.278)*** (0.692)*** (0.293)*** (0.648)***<br />
Observations 792 175 792 175 792 175<br />
Notes: The reference category for sectors is the knowledge intensive ones (IND_KNOW); the robust<br />
standard errors are between brackets; the symbols ***, ** and * denote the statistical significance at<br />
the 1%, 5% and 10% level.<br />
The findings on the control variables are similar as those in Table 2. The significance on the intensity<br />
by which SMEs uses clients in model (iv) varies with the significance resulting in models (v) and (vi).<br />
In the case of the large enterprises there is – with the weak negative significance of suppliers in<br />
model (v) and (vi) – no convincing impact of the drivers on the generation of innovative revenue.<br />
Model (iv) shows that the intensity by which the combined dimensions of external knowledge linkages<br />
in large firms are used is positively related to innovative revenue. Together with the results of model<br />
(i) on the breadth of external linkages one is inclined to belief that external linkages are largely limited<br />
to large enterprises when it comes to augmenting the share of innovative revenue. The separate<br />
dimensions of external knowledge linkages nuance these results. SMEs benefit from the intensity by<br />
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André Spithoven and Peter Teirlinck<br />
which they are involved in their search strategy. The general effect for large enterprises found in<br />
model (iv) is attributed mildly to cooperation in model (v), pointing to reinforced influence from the<br />
combined external knowledge linkages.<br />
Model (vi) introduces non-linear effects. The findings differ between SMEs and large enterprises. For<br />
SMEs the significance using search strategy more intensive is similar than in the previous model but<br />
remains linear. In the case of the large enterprises, the findings of Laursen and Salter (2006) for the<br />
UK are corroborated by those for Belgium: there is a curvilinear relation between the intensity of<br />
search strategies and innovative revenue.<br />
SMEs differ from large enterprises in respect to external technology acquisition and cooperation. For<br />
SMEs, both depth dimensions have a U-shaped relationship with innovative revenue. That means<br />
that, in the initial phase using external technology acquisition at low intensity is most beneficial. The<br />
more intense the SMEs revert to use external technology acquisition, the less revenue from the new<br />
products is generated but, after a certain threshold, stepping up the intensity of external technology<br />
acquisition again pays off. A similar logic applies to the intensity of use of research cooperation<br />
partners. SMEs with a too low or too high intensity of cooperation benefit most, in terms of the share<br />
of innovative revenue. A reason for the existence of these ‘valleys’ might be attributed to the attention<br />
allocation problem identified by Katila and Ahuja (2002).<br />
5. Conclusion<br />
This paper focused on the existence of external knowledge linkages in SMEs by stressing their<br />
differences with those used in large enterprises. Four external knowledge linkages were considered<br />
(search strategies, external technology acquisition, research collaboration, and protection<br />
mechanisms) and their impact on innovative performance in terms of generating revenue was<br />
empirically examined. In addition the role of the actors in firms’ networks as drivers of external<br />
linkages was examined.Let us consider the first hypothesis that the mix of external knowledge<br />
linkages is more positive on innovative revenue for large enterprises than for SMEs. Both in terms of<br />
breadth and depth the hypothesis is accepted.<br />
The second hypothesis – that SMEs use innovative search strategies relatively more than large<br />
enterprises – showed that search strategies proved to be very effective for large enterprises for<br />
generating innovative revenue. Only in the case of intensity on search strategies in the linear model<br />
the SMEs outperform the large enterprises.Hypothesis three stated that SMEs use external R&D<br />
relatively more than large enterprises. There was no relation with innovative revenue (or difference<br />
with large enterprises) in the case of breadth measures (linear model). In the non-linear model the<br />
SMEs and large enterprises show opposite relationships: a u-shaped relation in the case of SMEs;<br />
and an inverted u-shaped relation in the case of large enterprises. That means that SMEs benefit<br />
from a very limited set of external R&D channels. Large enterprises can increase the number of<br />
channels, but have to watch out for choosing not too many. In the case of depth measures only the<br />
SMEs show a u-shaped relationship to generating innovative revenue.<br />
The fourth hypothesis assumed that SMEs are relatively less involved in collaboration when<br />
generating innovative revenue. When generating innovative revenue, large enterprises have a<br />
positive linear relationship, pointing to the fact that SMEs are less involved and so the hypothesis<br />
should be accepted. The significant negative non-linear relationship of SMEs seems to corroborate<br />
this once more.The use of protection mechanisms by SMEs is hypothesised to be less relevant than<br />
for large enterprises. When generating innovative revenue, SMEs show a much higher significance<br />
and estimated coefficient than large enterprises. Hence hypothesis five should be rejected.Hypothesis<br />
six stated that generating innovative revenue in SMEs where more driven by their users than larger<br />
enterprises. This was hypothesised the other way around in the case of suppliers and technological<br />
partners. The empirical assessment proved that this hypothesis could be accepted. In the case of<br />
technological partners (breadth) and suppliers (depth) the large enterprises benefited less from them<br />
than the SMEs did. This might be attributed to the gestation period of the products involved because<br />
the effects on the share of innovative revenue from these products might not show up in the time<br />
frame considered.<br />
Acknowledgments<br />
This study benefitted financial support from FWO Vlaanderen (project G.047.08N<br />
803
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804
Pedagogical Methods and Models for <strong>Entrepreneurs</strong>hip<br />
Education in Romania: Case study<br />
Zsuzsanna Szabó and Liviu Marian<br />
Petru Maior” University of Tîrgu Mureş, Tîrgu Mureş, Romania<br />
szabo.zs.katalin@gmail.com<br />
liviu.marian@yahoo.com<br />
Abstract: Unfortunately, the entrepreneurial education in eastern European countries is rather theoretical.<br />
Literature shows that in these countries, after the fall of the “Iron Curtain”, the developed and implemented<br />
entrepreneurship is of the “crypto-communist” type, mainly based on the entrepreneurs who took advantage of<br />
their positions and relations and developed businesses between disarrayed industries and traders. Because of<br />
this issue, real role models for the entrepreneurial education for youths are missing. The transition in Romania<br />
started in 1990 and was more difficult than in other central and eastern European countries. It is recognized that<br />
communism destroyed the entrepreneurial system. In Romania, a number of universities have started to develop<br />
programs for entrepreneurship through models and case studies, in which students are encouraged to develop<br />
their own business plans and ideas through creative methods. The paper shows teaching methods, ways in<br />
which models and case studies are created to stimulate Romanian entrepreneurship. A new teaching method,<br />
the entrepreneurial paradigm, used at Petru Maior University, will also be presented.<br />
Keywords: <strong>Entrepreneurs</strong>hip, post communism, education, Romania<br />
1. <strong>Entrepreneurs</strong>hip Education in Higher Education Institutes (HEI)<br />
The entrepreneurial education at universities first began in Japan (1938 at Kobe University with the<br />
course of Shigeru Fijii), and in the USA (1947 a course of Myles Mace at Harvard Business School)<br />
and later, in 1984 in the USA the first Price-Babson College Fellows program was offered (Katz &<br />
Jerome, 2003). In the last decade of the twentieth century, in a series of countries like Australia,<br />
Brazil, India, Southern Korea, England, Ireland, France, Germany, Holland, entrepreneurial education<br />
programmes were started at university levels. At the same time, the transition to the market economy<br />
began in Croatia, the Czech Republic, Hungary, Poland, Slovakia, Slovenia and the Baltic countries.<br />
“Until a few years ago, most of these countries were really following other systems rather than the<br />
capitalist system. That has all changed since the fall of the Berlin Wall” (Galbraith & Stiles, 2006).<br />
The interest in entrepreneurship education in Europe is relatively new but increases rapidly (Dana,<br />
2001). Research and entrepreneurship activities in Europe were investigated by Hisrich & O'Cinneide<br />
(1996), Guzmán & Liñán (2005). Katz et al. (2003) indicates that worldwide 1600 HE Institutions offer<br />
2200 courses in entrepreneurship. Henry et al. (2005), Hannon (2006) and Gibb (2006) underline that<br />
entrepreneurship is teachable, and because it is perceived as behaviour patterns it can be shaped<br />
through experience. The major role of entrepreneurial education in universities was studied by<br />
different researchers (Franke & Lüthje, 2004). Sang, Daesung, & Seong-bae (2005) analysed the<br />
entrepreneurship in different national and organizational cultures, identified the differences, interest and<br />
intentions to develop businesses at student groups level and the influence of some significant variables<br />
on the entrepreneurial education: motivation, education, knowledge, faith in own forces, abilities in<br />
creating and managing businesses, team work, etc. Two conclusions of the above mentioned work have<br />
to be underscored “…entrepreneurial education represents the trigger that motivates and impulsions<br />
business creation based on turning the knowledge to account, the important entrepreneurs have not<br />
grown instantly, they are the product of society and a national culture oriented towards<br />
entrepreneurship…” (Sang, Daesung, & Seong-bae, 2005)<br />
Eastern European countries, including Romania, can not take advantage of an initial, natural and<br />
challenging model, the nationalized and centralized system of the communist economies having<br />
reduced to zero the entrepreneurial capacities of today’s adult persons who should be success<br />
models for youngsters. According to Smallbone & Welter (2001), the recent history of these countries<br />
can’t represent an authentic model for the entrepreneurship based on knowledge. Over 40% of the<br />
Eastern European countries’ businesses represent: “the translation of the already performing activities<br />
from the public sector, the identified type of entrepreneurship being a type of ‘nomenclature business’,<br />
with thousands of companies operating in a formal economy, with only one employee, part-time<br />
business, without any elements of innovation and value for client, in these companies the<br />
bureaucratic structures from the state sector being copied and respected just so”. (Smallbone &<br />
Welter, 2001)<br />
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Zsuzsanna Szabó and Liviu Marian<br />
Unfortunately, in the Romanian higher education, despite the numerous political initiatives, there is a<br />
reduced attention given to the entrepreneurial education and there is no scientific approach of the<br />
formative actions at university level. Because of this, in the knowledge based society, specific<br />
processes of Romanian entrepreneurship can be carried out appropriately, efficiently and effectively.<br />
2. Teaching entrepreneurship, pedagogical methods and procedures<br />
“The important role of education in promoting more entrepreneurial attitudes and behaviors is now<br />
widely recognized”(Final Report of the Expert Group of the EC, 2008).<br />
The purpose of entrepreneurship education is much wider than training on how to start a business.<br />
Based on this interpretation of entrepreneurship education the specialists, the trainers, the teachers<br />
can be enrolled in two categories. One direction claims that the success of the education can be<br />
measured by the number of new firms, businesses built up by the persons who participated in the<br />
training. Only this percent is valuable. This opinion is not in concordance with the EU request.<br />
Statistical data shows that if the employee is a person with an entrepreneurial thinking then all<br />
enterprises can benefit from that, so the entrepreneurial thinking can influence the economic growth.<br />
To introduce entrepreneurship in curricula at all levels of educational system and to establish<br />
adequate key teaching methods became a general interest worldwide.<br />
The methods must be based on undertaking some practical entrepreneurial activities and creativity<br />
exercises which means that in order to promote the entrepreneurial spirit a sustainable pedagogical<br />
change is needed. Pedagogy can become an instrument in the development of entrepreneurial<br />
culture (Allan, 2005). In UK, the National Council for Graduate <strong>Entrepreneurs</strong>hip, formulates the<br />
objectives of linking the desired entrepreneurial behaviours and skills to be acquired by students. This<br />
material enumerates 11 skills with 31 different pedagogies and shows the relations between them<br />
(www.ncge.org.uk). Allan G. (2005) published the main characteristics of the entrepreneurial<br />
behaviours, attributes and skills.<br />
The EESC SOC/242 Brussels (2006) recommends that the entrepreneurship education in higher<br />
education can be: developing products, identifying business opportunities, and customer and market<br />
relationships. Improving creativity and innovation is important, it is a part of business planning and of<br />
establishing and running a company.<br />
The Final Report of the Expert Group (March 2008) of the European Commission – proposes that<br />
higher education institutions offer interdisciplinary courses to cover main aspects such as: generating<br />
ideas and recognizing opportunities, creating a new venture/organization, growing a young venture.<br />
The entrepreneurship education can be explored through the combination of classroom teaching and<br />
the analysis of case studies and invited lecturers. Students must be encouraged (workshops,<br />
competitions, charity fund-raiser activity, setting up mini companies, to sell a product or provide a<br />
service) to plan to set up and execute their own business projects.<br />
The Danish experience is remarkable (Torben Bager, 2007). The applied and appropriate teaching<br />
methods at Danish universities and colleges are presented on www.idea-denmark.dk.<br />
One of the roles of entrepreneurship education can be the stimulation of the technology transfer and<br />
the commercialization of the academic research. EC Final Proceedings (2006), propose for all<br />
institutes which are interested in entrepreneurship education, the following most relevant measures:<br />
improve partnership between universities and SME sector, improve partnership between regional<br />
government, high schools and SMEs, enable students to achieve practical experience in small<br />
enterprises during their study, involve successful entrepreneurs in the education process for example<br />
through guest speakers, create conditions for establishing practical teaching centres at small<br />
enterprises (SME companies), bring education closer to the real life.<br />
The necessity to involve entrepreneurs in training programs is widely recognized and case studies are<br />
considered the most important means to achieve that.<br />
In Eastern Europe the transition of the economic system means social changes too. Researchers<br />
studied and analyzed the political, social and economic changes after the collapse of communism in<br />
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Zsuzsanna Szabó and Liviu Marian<br />
CEE countries. Peterson (2003) underlined that “in communism the professional life of individuals was<br />
controlled and organized by the state. Therefore, people in post communist countries have to learn to<br />
be proactive and act independently” (Peterson, & Johnson, 2003). Suutari & Riusala (2001) stated<br />
that: “The former socio-economic system shaped the way of thinking of individuals and their<br />
behaviour; they were influenced by a strong collectivist ideology.”<br />
From this point of view, the following question must be formulated: - which pedagogy and teaching<br />
methods are most adequate, most appropriate in order to achieve the proposed goals in CEE<br />
countries?<br />
Peterson’s study (2003) covers the reality in Romania. “The educational system under communism<br />
was not oriented toward producing entrepreneurial skills and did not provide knowledge about<br />
business management; universities in the CEE countries have developed educational programs in<br />
business sciences on the basis of Western European and American programs since the collapse of<br />
communism. Thus, the younger generations of students have acquired knowledge about business<br />
management in the market economy” (Peterson & Johnson, 2003). Kusnezova (1999), and Aidis &<br />
Van Praag (2004) remark that:”… the practices of employees and the management style of<br />
executives are still similar to those in the central planned economy…which is not supportive in an<br />
entrepreneurial context” (Kusnezova, 1999).<br />
Kenny & Trick (1995), Dannis (2003), Suutari & Riusala (2001) recognized that: “The most difficult<br />
challenge of the transition in the post communist countries is to change the mentality of individuals.”<br />
(Suutari & Riusala, 2005) Information about the entrepreneurs’ environment in the post communist<br />
countries can be obtained for example in the papers of Field (2003), Lyles, Saxton, & Watson (2004),<br />
Smallbone &Welter (2001).<br />
3. Considerations on the case study used in Entrepreneurial Education<br />
Exploratory or normative case studies represent one of the methods used for carrying out surveys in<br />
economic sciences. Associated to a set of mnemotechnical questions, the case study assures the<br />
student the identification and awareness of some aspects in a concrete situation or in a context which<br />
is often imagined by a teacher. The expansive development of the case studies used in the field of<br />
management benefits from a conceptual and theoretical support materialized in guidebooks, design,<br />
sequential models, textbooks, notebooks, forms, almost typical reporting systems; and they are,<br />
according to the prestigious school of Harvard, “the main connection to the real world, tools for<br />
developing managerial skills, having an increased participative and challenging character for the<br />
current way of thinking” (the Brochure of the MBA programs).<br />
H. Mintzberg, in his book, entitled Managers Not MBAs: A Hard Look at the Soft Practice of Managing<br />
and Management Development (2004), does not contest the case study, but rather the frequency of<br />
its usage, highlighting the limits of this method and the threats that result from the excessive usage of<br />
this pedagogical tool, mainly due to the theoretical and static characteristics, which require<br />
competences only in the field of physical, social and mathematical sciences, abounding in statistical<br />
processing.<br />
The Romanian School of management and entrepreneurship uses case studies on a small scale.<br />
From the data processed in the specialized survey (the Brochure of the MBA programs) it results that:<br />
� out of 37 universities that have Bachelor and Master programs in economic sciences only<br />
58% use the case study as a pedagogical method;<br />
� out of 35 disciplines at Bachelor level only 12% use case studies with applications;<br />
� out of 20 disciplines at Master level only in 11% case studies are used;<br />
� of the case studies used in the management and entrepreneurial education only 8% are<br />
created on the structure of the Romanian economy, the rest of 92% are case studies taken from<br />
the specialist, mainly American, literature;<br />
� of the teaching staff specialized in management, only 3.5% know how to create a case study!<br />
It is hard to suppose that entrepreneurial education, different from the management one, can be<br />
suffocated in a theoretical and formal research by generalized models. Furthermore, it is hard to<br />
assume that a case study with an example of best practice in France will have the same results for a<br />
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Zsuzsanna Szabó and Liviu Marian<br />
target group from Romania, with a significantly different economic, social, cultural and legislative<br />
environment.<br />
Mintzberg, with good reason, draws attention to the quality of the case study in relation to the person<br />
creating it, most of the times a professor with remarkable theoretical knowledge but with a<br />
rudimentary practice, that “pours” in the example we created, according to a formal alchemy, false<br />
information or half-truths and in the next stage, in the role of moderator, coordinates debates towards<br />
an ending established a priori.<br />
4. The entrepreneurial paradigm<br />
In 1994, based on some huge gaps related to the capacity of Romanian universities to assure a<br />
minimum practice period for engineering and economics students, because of the major change in the<br />
communist industrial system, professor I. Abrudan initiated and implemented, at the Technical<br />
University of Cluj-Napoca, a pedagogical system of unifying theory and managerial practice in a<br />
process in which “the manager comes for a few hours among students and shares with them some of<br />
his managerial experience within a free dialogue. This is the way a series of weekly meetings began,<br />
with managers from different fields of activity, specialist seminars having a generic topic: the<br />
management paradigm. ”<br />
Following the model created by professor I. Abrudan who, between 1994 and 2008, was a<br />
collaborator of the “Petru Maior” University, in the Management Department, a new didactic procedure<br />
was created, which was entitled “the Entrepreneurial Paradigm” and focused on promoting the<br />
fundamental aspects that generate entrepreneurship: creativity, innovation, motivation, business startup<br />
and implementation.<br />
The entrepreneurial paradigm takes place according to a well established procedure:<br />
� the guest for the next meeting is announced one week in advance so that students can find<br />
out some information about that person and the firm that will be the subject of the next debate.<br />
The initial research gives the student the possibility to be informed about the debated subject and<br />
about the way the business is perceived by rest of the business environment;<br />
� the guest is introduced by the moderating professor who asks the guest to refer to the main<br />
features of the business, the entrepreneurship motivation, the first steps of the business and the<br />
way the start-up of the business was perceived by stakeholders;<br />
� in 30-40 min., the guest presents the main aspects of the business, the problems he had to<br />
face and draws the attention to the mistakes he made;<br />
� afterwards, students ask questions; these are directed towards a better defining of the<br />
business context, the multinational factors, the level of specialist or complementary competences<br />
and skills, help received from the state, effects of/background established by the economic<br />
legislation etc.;<br />
� the guest answers the questions and tries to complete the initial presentation so that students<br />
are able in the end to understand the creative component, the initiative in the entrepreneurial<br />
approach;<br />
� in relation to the development of the meeting, the moderator highlights some directing ideas<br />
and asks the students to write an essay of maximum 5000 words on the guest and his business,<br />
the papers must be handed in at the next meeting and they will be commented after having been<br />
read in a synthesis seminar, which takes place after 5 “entrepreneurial paradigm” meetings.<br />
Being carried out in the 2 nd year of the Master in Business Administration, the “entrepreneurial<br />
paradigm” offers the students the opportunity to meet 10 business people from the region that the<br />
university perceives as representative.<br />
A statistics of some significant elements of the business background of those invited to the<br />
entrepreneurial paradigm shows that:<br />
� only 37% of the guests had a Bachelor degree when they started the business, 42% of those<br />
with an average level of education completed their studies after starting the business;<br />
� only 23% started the business exclusively with their own funds;<br />
� 70% of the businesses are based on a technology and less on a well defined product;<br />
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Zsuzsanna Szabó and Liviu Marian<br />
� the motivation of the entrepreneurial approach measured in percentages is the following: 34%<br />
did not have another alternative, 21% wished for independence in action; 14% wished for high<br />
profits, 10% had a business idea, 8% imitated the behaviour of some people they knew;<br />
� 45% do business with the state or with state-owned companies.<br />
The elements supporting the Romanian entrepreneurship:<br />
� 68% - confidence in their strengths;<br />
� 52% - supporting family and relatives;<br />
� 51% - opportunities in Romanian businesses;<br />
� 32% - structural programs and projects;<br />
The elements which are unfavourable to entrepreneurship:<br />
� 70% - fiscal and legislative instability;<br />
� 65% - fluctuations in currency<br />
� dissatisfactions with the social environment<br />
Figure 1: Entrepreneurial Paradigm used by “Petru Maior” University<br />
The paradigm is based on the collaboration with SMEs sector, and it functions as a two-way process,<br />
with entrepreneurs from businesses being involved in teaching at the university and students being<br />
involved in projects inside firms and organizations. The paradigm is built up on discussions between<br />
students and entrepreneurs; students can learn from entrepreneurs’ experience how they put into<br />
practice their dreams, ideas, what it means to assume risks and how they can learn from their own<br />
failures. On the other hand these meetings encourage knowledge and technology transfer.<br />
The effective cooperation can be successful for both parties. Students and teachers have something<br />
to contribute to enterprises, based on their theoretical knowledge and SMEs have something to<br />
contribute to universities based on practical knowledge. In this respect, for universities the<br />
collaboration should be long term oriented (building start-ups, development of new entrepreneurship<br />
courses and study programs) and for the enterprises short term benefits can be obtained (through<br />
involvement of student groups and teachers in innovation activities, in developing radical innovation<br />
ideas, in the connection to research activities).<br />
This cooperation supports/encourages the mobility of teachers between universities and businesses,<br />
it can increase the number of part time positions, invited lecturers positions, thus it can create a new<br />
category of teachers who have substantial entrepreneurial and business experience and limited<br />
research experience.<br />
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Zsuzsanna Szabó and Liviu Marian<br />
The paradigm’s long term benefit can be the minimization of the gap between the world of business<br />
and the world of research and teaching. The paradigm produces benefits for both universities and the<br />
private sector.<br />
5. Conclusions<br />
The teaching of entrepreneurship is not yet sufficiently integrated in higher education institutions'<br />
curricula.<br />
Europe has recognized that education and entrepreneurship are no longer two separate issues. Now,<br />
to their mutual benefit, more and more bridges link the two. It is important to realize that<br />
entrepreneurship education is different from general business and economic studies: its goal is to<br />
promote self-employment, creativity and innovation. The diffusion of entrepreneurship is particularly<br />
weak in some of the new EU countries which joined the EU in and after 2004. In Romania we can find<br />
only pilot attempts in teaching entrepreneurship. The scope of entrepreneurship education is much<br />
wider than training on how to start a business, or on how to write a business plan. It includes the<br />
development of personal attributes and development of such skills like self-confidence, creativity,<br />
initiative, vision, risk-taking and many others, therefore education in this respect must be started as<br />
soon as possible, as it is the only sure way of changing the mentality of people in post-communist<br />
countries.<br />
There are currently only a few entrepreneurship teaching staff in Romania. There are also little<br />
incentives to motivate and reward teachers for getting involved in entrepreneurial teaching and<br />
interaction with students. At the time being it is not recognized that it is important to build a career in<br />
entrepreneurship in addition to research as main promotion criterion.<br />
The teaching of entrepreneurship must have in view that there is a different economic and cultural<br />
background between the advanced EU countries and the newcomers, where entrepreneurship and<br />
enterprising is still a relatively new phenomenon, where in addition to the Lisbon strategy and the<br />
Oslo Agenda the primary aim is to promote entrepreneurship, assist in the creation of new SMEs and<br />
strengthen the private SME sector (Szabó & Szabó, 2009). From this point of view, the used teaching<br />
methods must be in concordance with each country’s particularities.<br />
‘It is known that entrepreneurship in its broadest sense can stimulate and encourage innovative and<br />
creative mindsets, and should be highlighted in the Lisbon Agenda as one of the key tools to generate<br />
more growth and better jobs as well as to achieve social cohesion and combat social exclusion. In our<br />
global society, it is crucial that the entrepreneurial mindset is both nurtured and developed at macro,<br />
meso and micro level, providing a holistic approach while respecting the specific character of each<br />
level.’ (M. Sharma, 2009)<br />
In this respect, Universities should be proactive not only in elite communities, or where individuals can<br />
afford education, but also within outreach community programs to encourage entrepreneurship. Social<br />
inclusion in Europe is a major challenge and the Universities have a key role here. In this respect it is<br />
crucial to build up a university network in order to support a dynamic cultural change across society.<br />
6. Acknowledgement<br />
This paper is supported by the Sectorial Operational Programme Human Resources Development<br />
(SOP HRD), financed from the European Social Fund and by the Romanian Government under the<br />
contract number SOP HRD/89/1.5/S/62988.<br />
References<br />
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Soviet Union. Washington: World Bank.<br />
Abrudan, I. (1999). Premise si repere ale culturii manageriale Romanesti. Romania: Dacia.<br />
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Field, J. (2003). Social capital. London: Routlege.<br />
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Franke, N., & Lüthje, C. (2004). Entrepreneurial intention of business students: A benchmarking study.<br />
International Journal of Innovation and Technology Management Vol 1 no 3 .<br />
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<strong>Entrepreneurs</strong>hip:Adversity, Risk and isolation. Amsterdam: Elsveier Ltd.<br />
Gibb, A. (2006). <strong>Entrepreneurs</strong>hip/ Enterprise Education in Schools and Colleges: Are we really building the<br />
onion or peeling it away? National Council for Graduate <strong>Entrepreneurs</strong>hip Working Paper, vol 39 , 1-34.<br />
Gibb, A. (2005). The National Council for Graduate <strong>Entrepreneurs</strong>hip Towards the Entrepreneurial University.<br />
Guzmán, J., & Liñán, F. (2005). Perspectives on Entrepreneurial Education: A US-Europe Comparison.<br />
Madrid:Jean Monnet European Studies Centre, Universidad Antonio de Nebrija.<br />
Hannon, P. D. (2006). Teaching pigeons to dance. Education and Training Vol 48 no 5 , 296-308.<br />
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taught: Part I-II. Education and Training Vol 47 no 2, no 3 , 98-111, 158-169.<br />
Hisrich, R. D., & O'Cinneide, B. (1996). Entrepreneurial activities in Europe-oriented institutions. Journal of<br />
Managerial Psychology , 45-64.<br />
Katz, J. A. (2003). Doctoral Education in the Field of <strong>Entrepreneurs</strong>hip. Journal of Management , vol. 29, no.3, pp<br />
309-331.<br />
Katz, J. A. (2003). The Cronology and intellectual trajectory of American entrepreneurship education:1876-1999.<br />
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Kenny, & Trick, B. (1995). Reform and Management Education. A case from Czech Republic. Journal of East-<br />
West business , 69-95.<br />
Kusnezova, N. P. (1999). Roots and Philosophy of Russian <strong>Entrepreneurs</strong>hip. JEEMS , 45-72.<br />
Lyles, M. A., Saxton, T., & Watson, K. (2004). Venture survival in a transition economy. Journal of Management,<br />
vol 30 , 351-375.<br />
Peterson, Robert; M & Kevin D, Johnson;. (2003). The Entrepreneurial Audit: Innovation Efficiency in the 21th<br />
Century. US Associations of Small Business and <strong>Entrepreneurs</strong>hip Conference Proceedings .<br />
Sang, L. M., Daesung, C., & Seong-bae, L. (2005). Impact of <strong>Entrepreneurs</strong>hip Education.Acomparative study of<br />
the U.S. and Korea. International <strong>Entrepreneurs</strong>hip and Management Journal Vol1 no 1 , 27-43.<br />
Sharma, M. (2008). Summary Proceeding of the Roundtable on "<strong>Entrepreneurs</strong>hip Education" . Comparative<br />
Study on <strong>Entrepreneurs</strong>hip Education-National Case Studies (p. 422). Tirgu-Mures: Faculty of Economics of<br />
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Slovakia: Faculty of Economics of Technical University of Kosice.<br />
Szelényi, I. (1988). Socialist entrepreneurs. Madison: University of Wisconsin Press.<br />
811
Strategic Creativity as a Strength in Microsized Enterprises<br />
Tiina Tarvainen<br />
University of Eastern Finland, Joensuu, Finland<br />
tiina.tarvainen@uef.fi<br />
Abstract: <strong>Entrepreneurs</strong>hip emerges from innovation and continuous creativity enables enterprises to operate,<br />
grow and succeed. These concepts, innovation and creativity, are the main ideas of entrepreneurship. The<br />
significance of welfare service enterprises especially has fundamentally increased in the 21 th century. These<br />
enterprises are usually micro-sized and entrepreneurs are deeply committed to their enterprises. Moreover, this<br />
business sector is fairly new and there are numerous innovative enterprises. Hence, it is important to analyze the<br />
creativity of these especially innovative organizations. This paper introduces the elements of creativity and<br />
innovation in the welfare service sector. The strategy of this research is a multiple case study. Nevertheless, this<br />
is not a classical case study. In addition, the findings of this research are based on several enterprises and the<br />
phenomenon is in focus rather than the cases themselves. More profoundly, the research strategy is also<br />
extensive and mixed methods were used. The data were collected from questionnaires, the informants being<br />
welfare service entrepreneurs in eastern and north-eastern Finland. Data were analyzed using quantitative and<br />
qualitative methods. In summary, the welfare service entrepreneurs valued innovation and creativity. In addition,<br />
the enterprises also have an innovation and creativity oriented culture, accordingly they motivate their personnel<br />
to operate independently and creatively. Most importantly, the entrepreneurs experienced the innovation aspects<br />
as strategic for the operation of their enterprises. In conclusion, the results showed that the ability to innovate and<br />
create is regarded as an important success factor in the welfare enterprises. However, the competition in the<br />
welfare service sector has intensified. Above all, national medium-sized and larger organizations are taking over<br />
the markets and the entrepreneurs also mentioned these actors as a significant threat. The factors which enable<br />
welfare microenterprises to continue operating need to be studied. Furthermore, the results showed that the<br />
enterprises valued innovation and creativity, and these elements were seen as crucial to their continuation.<br />
Nevertheless, creating innovation is not systematic but rather haphazard, even if these enterprises have an<br />
innovation-oriented culture. Whether these micro-sized enterprises could be more innovative and creative than<br />
national larger organizations, if these activities were more carefully considered is an interesting question.<br />
Keywords: creativity, innovation, welfare service enterprises<br />
1. Introduction<br />
The ability to think creatively is more important than ever before in business and in people's lives<br />
(Hong and Milgram 2010), and especially in frequently changing environments (Carmeli, Reiter-<br />
Palmon and Ziv 2010). In addition, innovative ability has been seen as an essential element for an<br />
organization's operations (Pathak 2008; Hughes 2003), and further, innovations require creativity<br />
(Klijn and Tomic 2010, Heunks 1998). Creativity creates innovations, which in turn contribute, for<br />
example, to economic, social or ethical values (Hughes 2003). Previous studies have drawn attention<br />
to factors which influence creativity and also innovativeness. However, creativity in the field of microsized<br />
enterprises has not been a major focus in previous studies.<br />
Despite the importance of creativity as a major part of organizational development and<br />
entrepreneurship as a remarkable employer, the research of entrepreneurial creativity remains<br />
limited. Unfortunately, only few studies have focused on the influence of creativity on enterprises'<br />
activities and most of these have concentrated on analyzing* the processes of creativity actions, not<br />
the effects themselves. This paper scrutinizes aspects of creativity and innovation and how the<br />
attitudes of entrepreneurs towards these appear in the welfare service sector. The aim of this study is<br />
to define the attitudes of entrepreneurs towards creativity and innovativeness in the field of private<br />
welfare services. The welfare service sector especially has been viable in the 21 th century in Finland<br />
(e.g. Lith 2006) and this development has required creative and innovative activities and individuals.<br />
Future studies should examine the relationship between these attitudes and the performance of the<br />
enterprises. The implications of this research for future studies and management practices are to<br />
discuss the importance of management considerations of creativity for the development of an<br />
enterprise. Creativity should be understood as a part of operational and strategic management for<br />
increasing and developing performance. This paper aims to pay attention to this phenomenon.<br />
Furthermore, this research could guide the practices of further studies. In the following sections, first,<br />
the theoretical framework is evaluated, and then the method and empirical background are<br />
introduced. Finally, the conclusion, limitations and recommendations for further studies are presented.<br />
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2. Theoretical background<br />
Tiina Tarvainen<br />
An organization is also more adaptable to changes if there is an innovative atmosphere (Geroski and<br />
Machin 1992). An organizational culture which supports creative activities is not an obvious but rather<br />
a conscious choice by a leader (Carmeli et al. 2010; Amabile 1998). Further, human resource<br />
management should also be strategic and support the creativity of personnel (Mumford 2000).<br />
Moreover, creative thinking is person-based and divergent thinkers have many solutions to problems,<br />
whereas constrictedly thinking persons can create only one solution (Hong and Milgram 2010).<br />
Carmeli et al. (2010) observed that being a creative employee requires psychological safety, which<br />
frequently depends on inclusive leadership. Consequently, a creative organizational culture requires<br />
both support from a leader and creatively thinking individuals. Besides, thinking creatively also<br />
demands support from groups inside the organization (Mumford, Dansereau and Yammarino 2000).<br />
Moreover, the abilities to think creatively and handle failures should also be noticed and encouraged<br />
in the educational sector (Hughes 2003).<br />
An entrepreneur's perceptions and background (e.g. education) contribute especially to the creativity<br />
of small firms (Heunks 1998). However, academic intelligence is not a requirement to be a creative<br />
individual (e.g. Klijn and Tomic 2010). The meaning of enterprises to the entrepreneurs is frequently<br />
more than a means of earning a living. <strong>Entrepreneurs</strong> value other indicators of success more highly,<br />
for example, customer satisfaction and social responsibility, than financial factors (Ahmad and Seet<br />
2009). Furthermore, the atmosphere in the enterprise can support or discourage innovativeness<br />
(Naranjo-Valencia, Jiménez-Jiménez and Sanz-Valle 2011). A creative atmosphere requires for<br />
example “freedom, positive challenge, supervisory encouragement, work group supports,<br />
organizational encouragement, and sufficient resources” (Amabile 1997; e.g. Carmeli et al. 2010).<br />
Furthermore, market environment has an influence on creativity (Katila and Shane 2005). Contextual<br />
issues also contribute to ethical decision-making, which correlate positively with creativity (Mumford,<br />
Waples, Antes, Brown, Connelly, Murphy, and Devenport 2010).<br />
In Heunks’ (1998) opinion the meaning of creativity is to foster innovations and, further, productivity is<br />
not significant in younger enterprises. It should also be noted that productivity is not always the<br />
purpose of creativity. On the contrary, the purpose could be the further development of operations or<br />
services aiming to operate more efficiently and be customer-oriented (Amabile 1997; Heunks 1998;<br />
McAdam, Reid, Harris and Mitchell 2008). Measuring innovativeness is complex and indicators or<br />
instruments to analyze innovativeness may vary depending on the size of the enterprise or<br />
organization. The innovativeness indicators of larger organizations are not entirely suitable in the field<br />
of SMEs (Carayannis and Provance 2008). Moreover, classification into innovative and noninnovative<br />
firms is not relevant in the meaning of the relations of productivity and growth to innovative<br />
actions. In fact, Freel (2000) suggested a classification of three levels; (1) successful innovative<br />
actions, (2) failed innovative actions, and (3) non-innovative actions. Naturally, failed innovative<br />
actions could impair the performance of an enterprise at several levels in contrast to non-innovative<br />
enterprises. The ability for creative thinking and innovative actions is especially valued in times of<br />
depression or highly competitive markets (Geroski and Machin 1992).<br />
In Amabile's (1998) model creativity requires three elements: expertise, creative thinking skills and<br />
motivation. However, expertise and motivation, for example, do not support creativity in every<br />
situation. The expert may have been limited to some special field and be unable to create new things<br />
outside this field. The creativity may be domain-specific (Baer 1998) or domain-general or both (Hong<br />
and Milgram 2010). Accordingly, both approaches could be suitable depending on the requirements of<br />
the business line. Motivation by rewards does not support creativity in every case, in fact, it could<br />
decrease creative actions (Amabile 1998), and undermine the trust and cooperation of personnel<br />
(Ferrin and Dirks 2003). Thus the intrinsic motivation is the key element to create and be creative<br />
(Amabile 1997; Ruscio, Whitney and Amabile 1998). Intrinsic motivation also depends on an<br />
individual's age; younger people have been claimed to be more motivated than older ones (Klijn and<br />
Tomic 2010). Moreover, people can be motivated by various levels of autonomy or social needs (e.g.<br />
support from others) and leaders should recognize both these approaches to achieve an effective<br />
motivational strategy (Mumford et al. 2000; Dew 2009).<br />
3. Method<br />
The method of this research is partly a case study, whose objective is to enhance the understanding<br />
of how creativity contributes to the vitality of enterprises. But this is not a classical case study,<br />
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Tiina Tarvainen<br />
because one of the aims is also to find a new explanation for the vitality of enterprises. Furthermore,<br />
the findings of this examination are based on numerous organizations not only a few, which makes<br />
this a multiple case study (e.g. Eriksson and Kovalainen 2008). A multiple case study creates<br />
understanding from a larger group of objects. In addition, this research is based more on content than<br />
theory, since the phenomenon of organizational vitality is not well known. This research concentrated<br />
on addressing creative activities as a part of vitality. However, only few articles on the vitality of<br />
organizations have been published. Nonetheless these articles have not analyzed* vitality themes in<br />
the context of welfare services or micro-sized enterprises. The theoretical background of this<br />
investigation is the theory of entrepreneurship and creativity and evidence of organizational vitality in<br />
a wider perspective. The theories of organizational success, growth and competitiveness are also a<br />
part of the background.<br />
The phenomenon is in the focus of this research, not the cases proper. More profoundly, the research<br />
strategy of this study is extensive and the aim is to create new understanding and explain the<br />
elements which create, promote or destroy vitality in the context of creativeness. Such an approach is<br />
not mainly interested in individual cases. Several cases were chosen due the theoretical ambition? to<br />
promote as general findings as possible, and to avoid the bias in the data (e.g. Burton-Jones 2009).<br />
Every separate case increases the understanding of the phenomenon as a whole. The cases are only<br />
instruments which create the larger understanding (e.g. Eriksson and Kovalainen 2008).<br />
Mixed methods were also used (e.g. Miller and Gatta 2006). This study includes both quantitative and<br />
qualitative data (e.g. Molina-Azorín 2009). A questionnaire survey was carried out on December<br />
2010. The questionnaires were addressed to all welfare service enterprises of the focal area of this<br />
research. The total population of interest was 448 enterprises (Joensuu Regional Development<br />
Company 2010; The Federation of Finnish Enterprises 2010). The questions in the questionnaire<br />
addressed vitality themes from the literature. Both questions and statements were used and<br />
respondents chose the most suitable option from a five-point Likert scale, where 5 meant “totally<br />
agree” and 1 ”totally disagree”. There were also some open-ended questions.<br />
4. Sample<br />
The population of interest was welfare service enterprises in eastern and north-eastern Finland.<br />
According to Statistics Finland (2008) welfare service enterprises are divided into three categories.<br />
The first section “human health activities” includes services such as “private hospital services, medical<br />
and dental practices, and other human health activities such as physical therapy services”. The<br />
second section “residential care activities” includes services with accommodation for special groups<br />
such as “mentally retarded, elderly, disabled persons, and professional family care activities for<br />
children and young people”. The third section “social work activities without accommodation” includes<br />
activities such as “home help services for different special groups and, for example, day-care for<br />
children”. These categories of Statistics Finland (2008) are not suitable for the purposes of this study,<br />
because they are fairly extensive and conceptual. In this study the welfare enterprises are divided into<br />
eight business lines based on the answers to the questionnaire. These sections are physiotherapy,<br />
residential care, psychotherapy, medical and dental practices, social work activities without<br />
accommodation, home help services, other social services such as acupuncture services, and other<br />
fields of activity.<br />
The sample consisted of 448 enterprises. Of the questionnaires, 131 were completed and returned,<br />
resulting in a 29 percent response rate. Seventy-five percent of responding enterprises were located<br />
in eastern Finland (North Karelia) and 25 percent in north-eastern Finland (Kainuu). Analysis of the<br />
enterprises' background information indicated that 59 percent of owners were female, 19 percent<br />
were male and 22 percent of enterprises had both female and male owners. Typically they were<br />
single entrepreneurs (67 percent). Family enterprises accounted for 38 percent of respondents. The<br />
enterprises were primarily 5-10 years old (28 percent), 1-4 years old (25 percent) or 11-20 years old<br />
(24 percent). The three main lines of business were residential care (28 percent), physiotherapy (18<br />
percent) and private medical services (12 percent). The enterprises were primarily micro-sized and<br />
employed 1-4 employees (76 percent) and 91 percent of enterprises employed 1-20 persons. The<br />
mean number of personnel was 2.6 persons and 57 percent of enterprises had only an entrepreneur<br />
an no other personnel. The enterprises of interest were located in sparsely populated areas (42<br />
percent) or in cities (38 percent), twenty percent of enterprises were located near cities or in core rural<br />
areas.<br />
814
5. Results<br />
5.1 Analysis of the questionnaire<br />
Tiina Tarvainen<br />
In the questionnaire the entrepreneurs responded to four statements on innovativeness. They chose<br />
suitable response options where 5 = “totally agree” and 1 = “totally disagree”. These four statements<br />
are as follows: (1) “Our enterprise is innovative”, (2) “Our enterprise is more innovative than other<br />
similar enterprises”, (3) “Innovativeness is essential for the existence of our enterprise”, and (4) “Our<br />
enterprise supports personnel's creative actions”. In the following table (Table 1) values are also<br />
categorized based on the age of the enterprises.<br />
According to the questionnaire responses the entrepreneurs considered their enterprises to be<br />
innovative. Enterprises less than one year old were reportedly especially innovative, whereas those<br />
over 20 years old were the least innovative of all. The welfare service sector as a whole was<br />
reportedly quite innovative. Nevertheless, entrepreneurs considered their enterprises quite more<br />
innovative than other similar enterprises. Again, the highest mean (3.83) and similarly the lowest<br />
standard deviation (.753) were in the group of start-up enterprises, while the lowest mean (3.28) was<br />
among enterprises 5-10 years old. Innovativeness was considered a vital element for the survival of<br />
an enterprise. Innovativeness as a vital element was essential both to younger and older enterprises,<br />
but enterprises less than five years old valued innovativeness rather more than enterprises with<br />
established operations. Welfare enterprises supported personnel's creative activities. Similarly<br />
innovativeness was been seen as a vital element, the creativity of personnel was deemed essential.<br />
Enterprises over 20 years old valued creative activities among personnel less (mean 4.05) than did<br />
newer enterprises (means 4.35-4.67), nonetheless the mean value of the oldest group is still<br />
significantly high.<br />
Table 1: Enterprises' innovative activities on various age levels<br />
Below one<br />
year<br />
1-4 years 5-10 years 11-20 years Over 20<br />
years<br />
Mean SD Mean SD Mean SD Mean SD Mean SD<br />
Our enterprise is innovative 4.17 .753 4.00 .871 3.97 1.075 4.07 .730 3.76 .995<br />
Our enterprise is more innovative<br />
than others<br />
Innovativeness is essential for the<br />
existence of our enterprise<br />
Our enterprise supports<br />
personnel's creative actions<br />
3.83 .753 3.36 1.062 3.28 1.023 3.70 .993 3.38 1.024<br />
4.00 .707 4.07 .980 3.81 1.120 4.08 1.017 3.81 .873<br />
4.40 .548 4.38 .970 4.35 .977 4.67 .620 4.05 .740<br />
Table 2 presents the summary of statistics. Note that among these four statements the Cronbach's<br />
Alpha is 0.797.<br />
Table 2: Summary item statistics<br />
Mean Minimum Maximum Range Variance N of Items<br />
Cronbach's<br />
Alpha<br />
Item Means 3.95 3.45 4.38 .923 .143 4 .797<br />
The correlations are introduced in Table 3. The enterprises considered themselves innovative, and<br />
also more innovative than other similar enterprises. Moreover, innovativeness was a vital element.<br />
The personnel's creative activities were deemed significant, but this statement correlates with the<br />
statement “Our enterprise is innovative” more than with other statements. The entrepreneurs<br />
supported less personnel's creativity for achieving greater creativeness and the personnel's<br />
creativeness was less important for the survival of enterprise even if the mean values of these<br />
statements were also high (Table 1).<br />
815
Table 3: Correlations<br />
Our enterprise<br />
supports personnel's<br />
creative actions<br />
Our enterprise is<br />
more innovative than<br />
others<br />
Innovativeness is<br />
essential for the<br />
existence of our<br />
enterprise<br />
Tiina Tarvainen<br />
Our enterprise is<br />
innovative<br />
Pearson Correlation .564 **<br />
Covariance .417<br />
N 105<br />
Pearson Correlation .627 **<br />
Our enterprise<br />
supports personnel's<br />
creative actions<br />
.362 **<br />
Covariance .582 .301<br />
N 116 105<br />
Pearson Correlation .634 **<br />
.294 **<br />
Our enterprise is<br />
more innovative than<br />
others<br />
.605 **<br />
Covariance .577 .238 .613<br />
N 117 104 114<br />
**. Correlation is significant at the 0.01 level (2-tailed).<br />
In conclusion, innovativeness was essential to welfare enterprises of various ages. The mean values<br />
of two age categories; below one year, and 11-20 years, were higher in every statement than the total<br />
mean of all enterprises, whereas 5-10-year and over 20-year-old enterprises were under the total<br />
means in every statement. Moreover, the correlations between the statements of enterprise's<br />
innovativeness and compared to other enterprises, and the importance of innovativeness were<br />
notable.<br />
5.2 Analysis of open-ended responses<br />
The open section included two questions, (1) “Which three elements are important to the vitality of<br />
your enterprise?”, (2) “Which three elements are important to the competitiveness of your<br />
enterprise?”.<br />
The analysis of the open-ended responses highlighted interesting questions. Innovativeness was not<br />
a common answer to the question of organizational vitality or competitiveness, even if it was<br />
mentioned as crucial to the operation of the enterprise in the questionnaire section. Firstly, a total of<br />
100 entrepreneurs answered the question on organizational vitality. Eight entrepreneurs mentioned<br />
innovation or creativity as a vitality element. Respondents were mainly from the field of residential<br />
care (three enterprises) and located in sparsely populated areas (four enterprises). Mainly (four<br />
enterprises) these were start-up enterprises (under four years old) or at the age of 5-10 years old<br />
(three enterprises). Secondly, in the question on organizational competitive elements there were a<br />
total 102 answers. Innovativeness or creativity were mentioned by seven entrepreneurs. Mainly (four<br />
enterprises) these entrepreneurs were in the field of other welfare services (e.g. acupuncture, family<br />
counseling or therapy, and other social therapy services). The enterprises (five enterprises) were<br />
located in sparsely populated areas and were mainly at the stage of start-up (three enterprises) or<br />
aged of 5-10 years (two enterprises).<br />
In conclusion, the innovativeness and creativity seemed to be an important vitality element especially<br />
to residential care services, whereas the elements of competitiveness were reportedly more important<br />
in other welfare services. The enterprises in sparsely populated areas and those aged under ten<br />
years valued innovativeness and creativity as a vitality or competitive element. However, the results of<br />
the open-ended responses are not extensive due the lack of respondents. Either way, innovativeness<br />
and creativity were noted as a part of enterprise's existence.<br />
5.3 Enterprise's strategic activity<br />
Welfare service enterprises are usually micro- and small-sized and the entrepreneur is both a<br />
manager and a part of the personnel. Therefore the meaning of strategy could be complex. Several<br />
enterprises had no written strategy, but nonetheless the entrepreneur had planned and committed to<br />
a strategy. Probably for this reason, the discrepancy in the responses about written strategy was<br />
remarkably high (total 1.440; Table 4), whereas in the answers about innovativeness the deviation<br />
was less (highest value 1.011). The start-up enterprises had a business plan and a strategy, while<br />
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Tiina Tarvainen<br />
from one to ten years after establishment the strategy required updating. Again, enterprises aged 11-<br />
20 years more frequently had a written strategy. However, this study was not able to analyze<br />
innovativeness as a strategic action. In spite of this, the answers show similarities between activity of<br />
innovation or strategic actions between the various age levels. The enterprises should also consider<br />
the importance of strategy to operational management, and further creativity and innovativeness as a<br />
part of strategic management.<br />
Table 4: Existence of written strategy<br />
Age of the enterprise<br />
Our enterprise has a written strategy<br />
Mean Std. Deviation<br />
Below one year 4.17 .983<br />
1-4 years 3.58 1.523<br />
5-10 years 3.19 1.575<br />
11-20 years 4.45 1.121<br />
Over 20 years 3.50 1.235<br />
Total 3.70 1.440<br />
6. Discussion<br />
This study considered innovativeness among welfare enterprises in eastern and north-eastern<br />
Finland. The results indicate that these enterprises consider themselves innovative. Furthermore,<br />
innovativeness is of the utmost importance to them, as Pett and Wolff (2009) also found in their<br />
research. Enterprises also valued personnel and its active creative thinking. Even if the enterprises<br />
seemed innovative and creative, they diverged in activity at various age levels. Sager and Dowling<br />
(2009) likewise found in their research that strategic activities in the field of marketing could depend<br />
on a company's life cycle stage. In this study enterprises aged below one year and between 11 and<br />
20 years were more active in every statement than other enterprises.<br />
The results of the questionnaire showed that the enterprises appreciated innovativeness and creative<br />
thinking. However, the open-ended responses about vitality and competitive elements did not support<br />
these results. According to this study the enterprises were innovative, but innovativeness as the<br />
element of vitality or competitiveness only concerned a few enterprises. In addition, a strategic<br />
entrepreneurship approach promotes creativity and innovation, especially among employees and the<br />
approach was deemed necessary (e.g. Harms, Schulz, Kraus, and Fink 2009). Innovativeness was<br />
based significantly on leadership, organizational culture, continuous improvement, knowledge<br />
management and demands of markets (McAdam et al. 2008). Accordingly, the analysis of an<br />
enterprise's strategic innovativeness requires deep and wide analysis, and consideration of all these<br />
factors (e.g. Woodman, Sawyer and Griffin 1993).<br />
This study has limitations in that it concerns one industry in two areas of Finland and the population of<br />
interest was not substantial. Moreover, the data collected were not comprehensive. However, these<br />
results are interesting and the phenomenon requires more studies with larger samples in several<br />
areas and with larger data collections of both quantitative and qualitative material. Nonetheless, the<br />
aim of this paper was not to generalize (e.g. Onwuegbuzie and Leech 2010), but to introduce the<br />
aspects of innovativeness in the field of welfare services. The results could advise both entrepreneurs<br />
and researchers to consider the innovativeness and creative atmosphere as strategic decisions.<br />
These aspects were important according the results, but this study was not able to ascertain how<br />
these aspects affected the daily or strategic operations and performance. Innovativeness seemed<br />
essential and could also be a competitive advantage, especially in highly competitive markets (e.g.<br />
Geroski and Machin 1992).<br />
The importance of innovativeness and creativity to younger enterprises should be studied, likewise<br />
which factors explain the difficulties in middle-aged enterprises. Another interesting question is, does<br />
a location in a sparsely populated area contribute to innovativeness? In this study the location of<br />
enterprises was only addressed in the open-ended responses, whereas the age of an enterprise was<br />
of interest in the questionnaire. Moreover, future studies should address if innovativeness is important<br />
at all to vitality or competitiveness. Consequently, it would be interesting to analyze whether an<br />
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Tiina Tarvainen<br />
enterprise reportedly valuing innovativeness as a vitality or competitive element differs those<br />
enterprises not valuing innovativeness or creativity. Furthermore, this study did not estimate<br />
innovativeness as a strategic activity among enterprises, but this raised the discussion of the<br />
correlation of these elements. Drejer (2008) proposed that innovativeness should be managed and<br />
also perceived as a part of strategic decision-making, but managing creativity is no simple operation<br />
(Huber 1998). Hence, future work should examine more specifically if enterprises' strategies include<br />
innovative activities or if innovativeness in general was a strategic element. The need to improve<br />
strategic creativity should be noted. In fact, systematic creativity management can make a real<br />
contribution to an enterprise’s performance.<br />
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819
Formal R&D Management and Research Collaboration and<br />
R&D Outsourcing in SMEs<br />
Peter Teirlinck 1,2 and André Spithoven 2<br />
1<br />
Hogeschool-Universiteit Brussel, Stormstraat 2, 1000 Brussels<br />
2<br />
Vrije Universiteit Brussel, Pleinlaan 2, 1040 Brussels & Belgian Science<br />
Policy, 1050 Brussels<br />
Peter.Teirlinck@hubrussel.be<br />
André.Spithoven@belspo.be<br />
Abstract: The views on ‘distributed’ or ‘open’ innovation emphasize the use of external knowledge in order to<br />
innovate. Particularly for SMEs, research cooperation and R&D outsourcing can offer possibilities to complement<br />
the often limited internal research resources. However, external knowledge relations potentially bring in their<br />
wake a loss of technology assets. his paper focuses on research cooperation and R&D outsourcing in SMEs.<br />
Two functions of research cooperation are envisaged: generating new knowledge and exchanging existing<br />
knowledge previously developed within the firm. The paper addresses two items that are underdeveloped in the<br />
current literature. First, attention is paid to the heterogeneity in terms of firm size of SMEs. A distinction is made<br />
between micro, small-sized, and medium-sized firms. Second, consideration is given to the formal management<br />
of R&D activities. This is related to the management of the potential risks inherently involved in external<br />
knowledge relations. It is measured by the presence of a formal R&D manager within the SME. A descriptive<br />
quantitative empirical analysis is presented based on firm-level data provided by the OECD business R&D survey<br />
for Belgium covering the period 2004-2005. The starting point is a representative sample of 140 (quasi-)<br />
permanent R&D active SMEs. The analysis reveals marked differences in R&D outsourcing behaviour according<br />
to the size of the SME. In this respect, medium-sized firms are found to be significantly less involved in R&D<br />
outsourcing (one out of four firms) compared to micro and small-sized firms (one out of two firms is engaged in<br />
R&D outsourcing). On average, two-thirds of the (quasi-) permanent R&D active firms have a formal R&D<br />
manager and there are no marked differences according to firm size. The presence of an R&D manager turns out<br />
to be significantly associated with the firm’s engagement in R&D outsourcing and with knowledge exchange in<br />
research cooperation. There is no interaction effect between the presence of an R&D manager and firm size to<br />
explain firm engagement in research cooperation and R&D outsourcing.<br />
Keywords: SME, firm size, R&D manager, R&D collaboration, R&D outsourcing<br />
1. Introduction<br />
Research cooperation and R&D outsourcing can offer SMEs important ways to undertake research<br />
with relatively low capital and limited risk involvement in case of failure. However, these activities<br />
might bring in their wake a potential loss of technology assets. Therefore, the decision to engage in<br />
R&D outsourcing and research cooperation has important implications for the management and<br />
organization of innovation processes (van de Vrande et al. 2009). For the time being, the<br />
management of innovation in SMEs is still being more a process of trial and error than professional<br />
management (Gassman et al. 2010).<br />
Following Narula (2004) marked differences can be expected in terms of internal firm requirements for<br />
R&D management between activities related to research collaboration versus R&D outsourcing.<br />
Considerable managerial resources are required in particular for cooperation agreements, both<br />
because of the collaborative aspect and because of the tendency to use collaboration where<br />
technology is tacit (Narula 2004). With regard to R&D outsourcing, according to Veugelers (1997),<br />
there is a need to maintain a minimum level of in-house capacity in order to utilise the codified results<br />
of research performed outside the firm.<br />
Therefore engagement in research cooperation and/or R&D outsourcing has important implications<br />
for research in companies that are faced with size limitations and, in a context of open innovation,<br />
increasingly have to devote resources to other aspects of the value chain in order to effectively<br />
market the internally developed and externally sourced knowledge. Especially SMEs are faced with<br />
these limitations.<br />
In the literature on open innovation and external knowledge relations the particularities of SMEs are<br />
somewhat neglected (Gassman et al. 2010). Moreover, it can be argued that there could be marked<br />
differences among SMEs. Using the EU definition for an SME and related to firm size, an SME ranges<br />
from a very small firm with a few employees to a medium-sized firm with up to 250 employees.<br />
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Teirlinck Peter and André Spithoven<br />
This paper addresses decisions in SMEs to engage in research cooperation and R&D outsourcing by<br />
taking into consideration the role of the presence of a formal R&D manager and the heterogeneity in<br />
firm size. For the latter, a distinction is made between micro, small-sized, and medium-sized<br />
enterprises. Both the focus on external knowledge linkages in SMEs and the role of the R&D manager<br />
are underdeveloped items in the literature on open innovation (Gassman et al. 2010; Spithoven and<br />
Teirlinck 2010). This paper intends to increase our knowledge to fill this gap.<br />
Section 2 provides an overview of the literature regarding research cooperation and R&D outsourcing<br />
in SMEs and the requirements in terms of R&D management. Section 3 formulates the research<br />
questions. The dataset is described in Section 4 and Section 5 highlights the empirical findings.<br />
Section 6 presents the main findings and conclusions.<br />
2. Literature review<br />
=Market failure, increasing complexity and competitive pressure for the development of new products<br />
and processes in combination with raising budgets and risks related to innovation drive companies to<br />
use external knowledge to complement their in-house innovative activities (Chesbrough 2003;<br />
Coombs et al. 2003; Howells et al. 2003). The complementary characteristics of these activities to<br />
internal R&D can be related to the tacit nature of innovation and the risks associated with loss of<br />
technological competitiveness. This requires a sufficient internal R&D activity (Cohen and Levinthal<br />
1990). In this respect, Narula (2004) identifies a distribution of competences at firm level between inhouse<br />
R&D, research cooperation, and R&D outsourcing.<br />
External knowledge sourcing can take different forms of which research cooperation and R&D<br />
outsourcing are two prominent ones (e.g. von Hippel 1988; Chesbrough et al. 2006). Research<br />
cooperation can be formal collaboration and - more flexible - informal network activities. It can involve<br />
both joint development of knowledge within a cooperation agreement as well as the exchange of<br />
previously internally developed knowledge in cooperation (Cohen and Levinthal 1990; Coombs et al.<br />
2003). The outsourcing of R&D activities can be connected to the firm’s inability to conduct all R&D<br />
activities internally and the resulting need to capitalize on external knowledge (Gassman 2006).<br />
So far, little attention has being paid to the implementation of external knowledge sourcing in SMEs<br />
(the focus mainly has been on large - multinational - enterprises, Gassman et al. 2010). A notable<br />
exception is van de Vrande et al. (2009), using a sample of 605 Dutch SMEs, and concluding that<br />
open innovation practices (in- and out-licensing of proprietary technologies, external networking, R&D<br />
outsourcing) have been increasingly adopted by SMEs in the period 1999-2005. From the existing<br />
literature (see e.g. Audretsch and Vivarelli (1996), Narula (2004)) this could be related to the fact that<br />
SMEs tend to have a higher R&D productivity compared to large firms. This is largely due to the ability<br />
to innovate by exploiting more efficiently knowledge created outside the firm (which in general can be<br />
related to a lower path-dependency). However, SMEs might be disadvantaged due to their absolute<br />
size limitations which may be enhanced by tendencies towards multiple technological competences<br />
and cross-border competition (Narula 2004). This refers to the cognitive limits on what firms can and<br />
cannot do by emphasising that - besides the firm size independent challenge to consistently innovate<br />
at the technological frontier within the dominant paradigm - there is a minimum threshold size of a<br />
research group within any area, and this represents a constraint to SMEs (Pavitt 1998). Taking into<br />
account these arguments it can be argued that,<br />
As mentioned before, in a context of open innovation, SMEs increasingly have to devote resources to<br />
other aspects of the value chain in order to effectively market the internally developed and externally<br />
sourced knowledge. Also, SMEs in particular tend to be concerned about the possible loss of<br />
technological assets due to outsourcing and especially cooperation agreements. The latter can be<br />
related to their often vulnerable position to maintain a sufficiently high level of internal competences in<br />
only a few (or even a single) technological areas (Narula 2004) and to the limited opportunities to<br />
engage in cooperation or outsourcing due the smaller technological portfolio. Therefore, it comes to<br />
no surprise that the engagement in research collaboration and R&D outsourcing activities has major<br />
implications for the management and organization of innovation processes in SMEs (van de Vrande<br />
et al. 2009). In the words of Gassmann et al. (2010) it necessitates ‘increased professionalism’ in the<br />
sense of professionalizing the internal processes to manage open innovation more effectively and<br />
efficiently. In order to strengthen the competitive advantage (Wong and Aspinwall 2004) of SMEs,<br />
appropriate knowledge management (development and exchange) is important to accelerate the<br />
information flow and to enhance the integration of knowledge, innovation, and creativity in the<br />
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Teirlinck Peter and André Spithoven<br />
organisation. This requires a well-developed knowledge management system (Malhotra 2003) with<br />
considerable attention to knowledge exchange by means of ex-post R&D cooperation through patents<br />
and licensing (cf. Katz and Ordover 1990). Especially, this is relevant for the exchange of internally<br />
developed knowledge in research cooperation.<br />
Based on their empirical analysis for the Netherlands, van de Vrande et al. (2009) highlight the<br />
existence of important managerial problems affecting small businesses involved in external<br />
knowledge sourcing. Taking into account that as SMEs grow they tend to increasingly develop more<br />
formal structures, van de Vrande et al. (2009) think of a critical size to be reached for SMEs in order<br />
to be able to formalize the innovation practices, manage innovation portfolios and reserve structural<br />
funds to finance innovation.<br />
3. Research questions<br />
Based on the literature review, this paper examines the relation between external knowledge sourcing<br />
(by means of research cooperation and R&D outsourcing) and form management of research in<br />
SMEs. Within SMEs a distinction is made between micro (very small) firms, small firms, and mediumsized<br />
firms (see Section 4). The research hypotheses are:<br />
Hypothesis 1: ‘Small’ SMEs tend to be more engaged in R&D outsourcing and face fewer<br />
requirements in terms of a formal R&D manager;<br />
Hypothesis 2a: ‘Large’ SMEs and SMEs having a formal R&D manager tend to be more<br />
engaged in the development of knowledge in research cooperation;<br />
Hypothesis 2b: ‘Large’ SMEs and SMEs having a formal R&D manager tend to be more<br />
engaged in the exchange of internally developed knowledge in research cooperation;<br />
The hypothesis (1) that small SMEs tend to be more engaged in the outsourcing of R&D activities is<br />
based on less abilities for small firms to conduct all R&D activities internally and the resulting need to<br />
capitalize on - licensed or bought - external knowledge (Gassman 2006). Also the aspect of<br />
vulnerability of knowledge leaking is important (Narula 2004). Hypotheses 2a and 2b are based on the<br />
argument of a minimum threshold size to internally develop knowledge (Pavitt 1998) and on Narula’s<br />
(2004) motive that research cooperation agreements in particular require considerable management<br />
resources because of the tendency to engage in collaboration in case the nature of technology is<br />
tacit. The role of the manager can be supposed especially important for knowledge development<br />
(Malhotra 2003).<br />
4. Data description<br />
4.1 Survey<br />
Firm-level data are provided by the bi-annual OECD business R&D survey for Belgium. This postal<br />
survey collects data regarding R&D (employment, cooperation, outsourcing …). Firms are defined at<br />
the level of the smallest legal entity: i.e. those having a VAT number. The survey includes both firms<br />
known from the past to be R&D active, and a monitoring of firms declaring to be R&D active (e.g. by<br />
means of press releases, demands for R&D grants, and regularly organised random and stratified<br />
samples among the population of firms in Belgium). The presented analysis is based on the R&D<br />
survey organized in the year 2006 and offering results for 2004 and 2005. It was not possible to use<br />
more recent data because more actual surveys do not distinguish research managers among the<br />
R&D personnel. The target population includes 368 (quasi-) permanent R&D active SMEs with 10<br />
employees or more in Belgium in the period 2004-2005. An SME is defined as a firm with less than<br />
250 employees; not being controlled for more than 25% by firms that are not SMEs; an annual<br />
turnover less than 50 million euro and/or a balance total less than 43 million euro).<br />
4.2 Data description<br />
This paper relates external knowledge sourcing with firm size and formal R&D management. Table 1<br />
presents the variables of interest. With regard to external knowledge relations, attention is paid to firm<br />
engagement in outsourcing, development of knowledge for use in the internal R&D activities, and the<br />
exchange of previously internally generated knowledge in the framework of research cooperation.<br />
The OECD (2002) acknowledges R&D managers as employees involved in the management of the<br />
conception and generation of new knowledge, products, processes, methods and systems. With<br />
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Teirlinck Peter and André Spithoven<br />
regard to firm size, the analysis focuses on different categories of SMEs. Guided by the differences<br />
found by van de Vrande et al. (2009), within SMEs we make a further distinction by size class.<br />
Whereas van de Vrande et al. (2009) for the Netherlands distinguish between two categories: 10-99<br />
and 100-499 employees, we take a more refined classification and use the EU definition of SMEs<br />
(see Section 4.1). A distinction is made between micro (10 or more and less than 20 employees),<br />
small-sized (20 or more and less than 50 employees) and medium-sized (50 or more and less than<br />
250 employees) firms.<br />
It can be argued to include the firm’s sector of activity as a control variable. With regard to external<br />
knowledge relations, open innovation mainly started in the high-tech sector but there is a trend for the<br />
low-tech sector to exploit the potentials of opening up the innovation process. Also, little attention is<br />
paid to the service sector (Gassmann et al. 2010). Therefore, we did use an extended Pavitt (1984)<br />
sector classification (distinguishing labour intensive, scale intensive, resource intensive, specialised<br />
suppliers, and science based manufacturing, and specialised supplier and information intensive<br />
services) to differentiate among the sector activity of the firms. However, sector classification did not<br />
reveal to be of any importance for explaining research activities (at least not in terms of external<br />
knowledge relations behaviour and presence of R&D managers/personnel). This is not surprising<br />
since only permanent R&D active firms are included. In other words, the sector of activity is less<br />
important to determine the R&D characteristics conditional upon the firm being (quasi-) permanently<br />
engaged in R&D. This is in line with earlier findings by Teirlinck et al. (2010). Therefore, we do not<br />
include/report sector classification in the remainder of the analysis.<br />
Table 1: External knowledge sourcing and firm size: descriptive statistics SMEs (N=140)<br />
Variable description Number<br />
of obs.<br />
External knowledge relations<br />
R&D outsourcing = 1 if the firm is engaged in outsourcing of R&D activities in the period<br />
2004-2005; 0 otherwise<br />
Knowledge development in research cooperation = 1 if the firm developed knowledge<br />
used for internal R&D in the framework of a research cooperation in the period 2004-<br />
2005; 0 otherwise<br />
Knowledge exchange in research cooperation = 1 if the firm exchanged knowledge<br />
based on internal R&D in the framework of a research cooperation in the period 2004-<br />
2005; 0 otherwise<br />
Presence of R&D manager<br />
No R&D manager: the firm has no (part-time or full-time) R&D manager to manage the<br />
conception and generation of new knowledge, products, processes, methods and<br />
systems<br />
R&D manager: the firm has no R&D manager to manage the conception and generation<br />
of new knowledge, products, processes, methods and systems<br />
SME size<br />
Micro: the firm has 10 or more and less then 20 employees<br />
Small-sized: the firm has 20 or more and less then 50 employees<br />
Medium-sized: the firm has 50 or more and less then 250 employees<br />
Share<br />
62 44%<br />
41 29%<br />
34 24%<br />
46 33%<br />
94 67%<br />
37 26%<br />
61 44%<br />
42 30%<br />
Over two-fifth of the R&D active SMEs engage in R&D outsourcing. Close to one third is involved in<br />
knowledge development in research cooperation and around one-fifth in the exchange of knowledge<br />
in research cooperation. Note that these activities are not mutually exclusive.<br />
On average, an SME employs 0.75 full time equivalent managers. This represents about one fifth of<br />
the total R&D personnel and 3% of total firm employment. Two thirds of the (quasi-) permanent R&D<br />
active SMEs have an R&D manager whereas one third has no formal management of their R&D<br />
activities. The latter is rather surprising for a firm (quasi-) permanently involved in R&D and confirms<br />
the absence of formal innovation management in SMEs (Tidd and Bessant 2009).<br />
In the sample there are 37 firms with 10 or more and less then 20 employees. 61 firms have 20 or<br />
more and less then 50 employees. 42 employ more than 50 and less than 250 employees. Between<br />
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Teirlinck Peter and André Spithoven<br />
these size groups some important differences can be noted. With regard to external knowledge<br />
relations about half of the micro and small sized firms are engaged in R&D outsourcing. For mediumsized<br />
firms this is only about one fourth. Pairwise t-tests revealed R&D outsourcing to occur<br />
significantly less in medium-sized firms. For research cooperation it turns out to be the micro firms<br />
that are least engaged (both in terms of knowledge development in research cooperation and<br />
knowledge exchange based on internal research). In particular in terms of knowledge exchange,<br />
small sized firms are mostly engaged. This reveals a rather inverse U-shaped profile for research<br />
cooperation according to the size of the SME.<br />
On average, an SME has 5.04 R&D employees, representing 17% of the total labour force. Mediumsized<br />
firms have a significant lower share of R&D personnel in the total firm employment. Concerning<br />
the employment of R&D managers, the average R&D active SME employs 0.75 full time equivalent<br />
(FTE) R&D managers and 2.25 R&D experts. The absolute share of R&D managers and experts<br />
however does not significantly differ among the size classes (this can be explained by the fact that the<br />
high average value for R&D experts in small firms is the result of a relatively high variance within this<br />
size class).<br />
4.3 Selection bias<br />
Due to both unit and item non-response, out of the population of 368 (quasi-)permanent R&D active<br />
SMEs, only 140 firms reveal detailed information on R&D personnel, research cooperation and R&D<br />
outsourcing agreements. With regard to the representativeness of this sample, a comparison has<br />
been made with the 228 firms not included in the analysis. A Student t-test comparing means<br />
between both groups in terms of internal R&D expenditures, the total R&D personnel, the share of<br />
R&D personnel in total employment, and the engagement in R&D outsourcing revealed no significant<br />
differences between the firms included in the analysis and those excluded because of incomplete<br />
data. The distribution in terms of size classes (micro: 27% - small-sized: 44% - medium-sized: 29%)<br />
nearly exactly matches between the group of firms included and those excluded. In terms of sector<br />
activity, based on a Chi-square test and 5% significance level, there is no significant different<br />
distribution between the group of firms included in the analysis and those excluded.<br />
5. Empirics<br />
In the analysis we put firm size centre stage and therefore split the file according to the three sub-size<br />
classes that have been identified within SMEs: micro, small-sized, and medium-sized firms. In order to<br />
further highlight differences in R&D external knowledge relations related to the presence of an R&D<br />
manager and firm size of SMEs, use is made of a two-way analysis of variance. The presence of an<br />
R&D manager and firm size are used to run the test in the two-way analysis of variance for answering<br />
the research question: ‘Are the presence of an R&D manager and firm size related to the firm’s<br />
research cooperation and R&D outsourcing behaviour?’. This approach is more efficient than one-way<br />
analysis of variance and also helps increase statistical power of the results. The results are reported<br />
in Table 2.<br />
The results presented in the upper part of Table 3 confirm the findings based on Table 2. Firms that<br />
have an R&D manager and that are small-sized achieve the highest mean score for engagement in -<br />
both knowledge development and exchange in - research cooperation and in R&D outsourcing.<br />
Medium-sized firms without an R&D manager have the lowest mean score for R&D outsourcing. Micro<br />
firms without an R&D manager are least engaged in knowledge development and knowledge<br />
exchange in research cooperation.<br />
The results on the ‘between-subjects effects’ are indicated in the lower part of Table 3. The<br />
significance value of ‘R&D manager’ is lower than the threshold value (0.05). Therefore, the presence<br />
of an R&D manager positively affects the test scores on R&D outsourcing and knowledge exchange<br />
in research cooperation. For knowledge development in research cooperation this is only significant at<br />
10% level. The size of the SME significantly affects the score on R&D outsourcing but does not<br />
impact on the scores for knowledge exchange and development in research cooperation. The<br />
interaction between the presence of an R&D manager and the SME’s size is not significant, leading to<br />
the conclusion that the combination of ‘the presence of an R&D manager’ and ‘firm size’ do no affect<br />
the test scores for R&D outsourcing and knowledge exchange and development in research<br />
cooperation.<br />
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Teirlinck Peter and André Spithoven<br />
Table 2: Two-way analysis of variance: presence of research managers and SME firm size related to<br />
knowledge exchange and development in research cooperation and R&D outsourcing (N=140)<br />
Presence of R&D<br />
manager<br />
No Micro<br />
Yes Micro<br />
Test of Between-<br />
Subjects Effects Df<br />
Intercept 1<br />
R&D manager 1<br />
SME size<br />
R&D manager * SME<br />
2<br />
size 2<br />
Corrected Model 5<br />
R squared<br />
6. Conclusions<br />
SME firm size N R&D outsourcing Knowledge<br />
development in<br />
research cooperation<br />
Small-sized<br />
Medium-sized<br />
Small-sized<br />
Medium-sized<br />
Knowledge<br />
exchange in<br />
research<br />
cooperation<br />
Mean (St. Dev) Mean (St. Dev) Mean (St. Dev)<br />
16 .50 (.52) .06 (.25) .06 (.25)<br />
17 .29 (.47) .29 (.47) .18 (.39)<br />
13 .08 (.28) .23 (.44) .08 (.28)<br />
21 .48 (.51) .33 (.48) .24 (.44)<br />
43 .61 (.49) .36 (.48) .36 (.49)<br />
30 .33 (.48) .33 (.48) .27 (.46)<br />
Mean Square (sig) Mean Square (sig) Mean Square (sig)<br />
17.433 (.000) 8.667 (.000) 4.645 (.000)<br />
1.010 (.037) 0.650 (.081) 1.011 (.019)<br />
1.790 (.022) 0.180 (.426) 0.356 (.373)<br />
0.659 (.240) 0.229 (.580) .001 (.997)<br />
3.821 (.007) 1.200 (.340) 1.612 (.117)<br />
.11 .04 .06<br />
This paper tested in an empirical way the relation between the engagement of (quasi-) permanent<br />
R&D active SMEs in external knowledge sourcing by means of research cooperation and R&D<br />
outsourcing and the presence of a formal R&D manager. With regard to research cooperation a<br />
distinction is made between knowledge development and knowledge exchange activities. The EU<br />
definition of an SME is used. Within SMEs a distinction has been made between micro (10-19<br />
employees), small-sized (20-49 employees) and medium-sized (50-249 employees) firms. Use is<br />
made of data from a representative sample of 140 firms provided by the bi-annual OECD business<br />
R&D survey for Belgium covering the period 2004-2005. Over two-fifths of the SMEs are engaged in<br />
R&D outsourcing. Close to one third is engaged in knowledge development in research cooperation<br />
and over one-fifth exchanges knowledge in research cooperation. However, the descriptive analysis<br />
revealed marked differences according to firm size. Micro and small-sized firms are significantly more<br />
engaged in R&D outsourcing than medium-sized firms. Half of the micro and small-sized firms are<br />
engaged in R&D outsourcing compared to one fourth of the medium-sized ones. Also, micro firms are<br />
significantly less involved in knowledge exchange and development in research cooperation. Smallsized<br />
firms are most likely to be engaged in research cooperation. This reveals a rather ‘inverse Ushaped’<br />
profile for research cooperation according to the size of the SME. This is not in line with van<br />
de Vrande et al. (2009) finding that medium-sized firms are more likely to engage in technology<br />
exploration activities. The different results found are likely to be related to the different size class<br />
taken by van de Vrande et al. (2009). They consider firms sized 10-99 as small and firms sized 100-<br />
499 employees as medium-sized. Our analysis shows, that at least in a Belgian context, these<br />
classifications are too broad since they hide important within-class differences.<br />
Close to two thirds of the (quasi-) permanent R&D active SMEs have a formal R&D manager. There<br />
are no marked differences according to size class: both the number of R&D managers and their share<br />
in the total R&D personnel can be considered equal among the three size classes considered. Firms<br />
that have an R&D manager and that are small-sized achieve the highest mean score for engagement<br />
in - both knowledge development and exchange in - research cooperation and in R&D outsourcing.<br />
Medium-sized firms without an R&D manager have the lowest mean score for R&D outsourcing. The<br />
same is true for micro firms without an R&D manager and with respect to knowledge development<br />
and knowledge exchange in research cooperation. Based on a univariate analysis of variance with<br />
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Teirlinck Peter and André Spithoven<br />
firm size and the presence of an R&D manager as factors, the presence of an R&D manager revealed<br />
to positively affect the test scores on R&D outsourcing and knowledge exchange in research<br />
cooperation. The size of the SME significantly affects the score on R&D outsourcing but does not<br />
impact on the scores for knowledge exchange and development in research cooperation. The<br />
interaction between the two factors ‘presence of an R&D manager’ and ‘SME size’ is not significant,<br />
leading to the conclusion that the combination of ‘the presence of an R&D manager’ and ‘firm size’<br />
does not affect the test scores for R&D outsourcing and knowledge exchange and development in<br />
research cooperation. Therefore we can say that there clearly are differences in terms of formal R&D<br />
management and according to the SME’s size for firm’s engagement in research cooperation and in<br />
R&D outsourcing. Therefore, the key message resulting from this paper is that - within the open<br />
innovation debate and related to external knowledge sourcing - SMEs should be considered as a<br />
heterogeneous group of enterprises. There are important differences according to the size of the SME<br />
and according to the presence of a formal R&D manager which need to be taken into consideration.<br />
These findings have some major implications for innovation and R&D policy. First, they provide<br />
support for a more size tailored innovation support towards R&D active SMEs. Moreover, in order to<br />
stimulate knowledge exploration by means of research cooperation and outsourcing, evidence is<br />
presented not only to stimulate research itself but also to stimulate formal R&D management within<br />
SMEs. This is particularly relevant since one third of the R&D active firms tend not to have a formal<br />
R&D manager.<br />
Acknowledgments<br />
This study was supported financially by the FWO Vlaanderen (project G.047.08N).<br />
References<br />
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Economics, 9, 249-258.<br />
Chesbrough H. (2003) Open Innovation: The New Imperative for Creating and Profiting from Technology,<br />
Harvard Business School Press, Boston, Mass.<br />
Chesbrough H., Vanhaverbeke W. and West J. (2006) Open Innovation: Researching a New Paradigm, Oxford<br />
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Coombs, R., Harvey, M. and Metcalfe, S. (2003) ‘‘Analysing Distributed Processes of Provision and Innovation’’,<br />
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Gassman, O. (2006) “Opening up the innovation process: towards an agenda”, R&D Management, 36, 3, 223<br />
Gassmann, O., Enkel, E., and Chesbrough, H. (2010) “The Future of Open Innovation”, R&D Management,<br />
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Practice for Surveys on Research and Experimental Development, OECD, Paris<br />
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826
Strategy of the Future: Rising Stock Options Through<br />
Innovative Performance Measurement – is it Possible?<br />
Yanka Todorova<br />
University of Sofia, Faculty of Mathematics and Informatics, Sofia, Bulgaria<br />
yanka@todoroff.co.uk<br />
Abstract: Purpose: This study investigates effective and innovative strategy for performance measurement in an<br />
organization. The main focus is measurement of intangibles. The purpose of the research is an attempt to add<br />
unmeasured by now knowledge as a capital, which could, lead to change in financial evaluation methods of the<br />
companies, and in the same time might be limited by ethical issues. Design methodology/ approach: The<br />
research approach used for the purpose of this paper is based on qualitative observational research.<br />
Ethnographic research combined with literature review form powerful wide-ranging and in the same time<br />
personally oriented approach. Findings: Developing a strategy is not news anymore. Balanced Scorecard<br />
methodology is one of the most powerful tools for developing of strategy, digging deeply into performance<br />
measures. Measuring non-measurables or so-called intangibles, is a difficult task. In some cases it has never<br />
been done. Businesses have implemented widely quantitative and qualitative performance measures, with a<br />
majority of quantitative ones. But when it comes to subtle qualities and their quantities, for example human<br />
capital or knowledge in the company, it comes to uncertainties. There is capital which currently is not possible to<br />
be measured. There isn’t a methodology of doing this. Furthermore, there isn’t an agreement who should<br />
possess this value – the company, or the personality. In addition, there aren’t codes of law in legislative systems<br />
dealing with such issues, which could reflect on new evaluation of the businesses and their market assessment.<br />
Research limitations: As the research has been held in business (Fortune 100), and higher education institutions<br />
in UK, Germany and Bulgaria, as an excerpt of European Union (EU) countries, it is limited to EU and its<br />
legislative systems and social environment. Originality/ value: This paper analyses and suggests monetizing<br />
intangibles as a natural step over measuring performance. It discusses the questions related to the readiness of<br />
the society to evaluate knowledge and add it into the balance sheets in the businesses. Developing intellectual<br />
property portfolio of the company is just one of the ways to add value to the company. There is a knowledge,<br />
which is still not measured at all. The paper rise the issues related to monetising intangible capital which is going<br />
to lead the business and society to next level revolution.<br />
Keywords: innovation, knowledge management, performance measurement, strategy development, monetizing<br />
intangibles, futurism<br />
1. Introduction<br />
In the course of the last century accounting system and its financial measures have been kings and<br />
queens in business measurement. However, during the past few decades has been gradually<br />
observed shifting the focus of measuring organizational performance from traditional financial<br />
accounting system, to advanced non-financial measures. Organizations (incl. private sector,<br />
government, and academia) began to develop and implement a system, parallel to accounting one.<br />
This, so-called, “parallel” system is based exclusively on performance measurement and<br />
management tools including recognised as one of the best tool in this sense, the Balanced Scorecard<br />
(BSC), based considerably on non-financial measures. The Harvard Business Review, in 1997,<br />
nominated the Balanced Scorecard as one of the most important management practices in the last 75<br />
years (Frigo 2002)<br />
According to Eccles (1991), back in the 1951 Ralph Cordiner, the CEO of General Electric,<br />
commissioned a high-level task force to identify key corporate performance measures. The categories<br />
the task force singled out were timeless and comprehensive: in addition to profitability, the list<br />
included market share, productivity, employee attitudes, public responsibility, and the balance<br />
between short- and long-term goals. This is one of the first signs that the dominant function of<br />
financial measures slowly began to decrease. <strong>Academic</strong>s and practitioners began to identify the<br />
limitations of the traditional management accounting system few decades ago. As stated by Curtis<br />
(1985), accrual - based performance measures have been found to be obsolete as numbers<br />
generated by the traditional management accounting system have been lacking to support the<br />
investments in new technologies and markets.<br />
Kaplan & Norton (1996b, p. 7) suggest that in today’s knowledge economy the traditional financial<br />
measures have been failing to measure the intangible assets, which are essential for successful<br />
performance in global markets. More recently, during the last two decades, organizations have<br />
implemented a number of wide - ranging performance measurement and performance and risk<br />
827
Yanka Todorova<br />
management system tools. Good examples of such tools, well known already, are Activity - Based<br />
Costing / Management (ABC / M), Benchmarking, Total Quality Management (TQM), Business<br />
Process Reengineering (BPR) and of course, the Balanced Scorecard (BSC).<br />
Sveiby and Armstrong (2004) state that in the time of thinking about and doing a performance<br />
measurement, there is a need of agreement on the purpose. They define three main purposes for<br />
measurement - control purpose (report performance to internal management), report to external<br />
stakeholders, and then learning motive: measure for learning. Behn (2003) suggests leaders of public<br />
agencies to consider next eight primary purposes for using performance measurement: to evaluate;<br />
control; budget; motivate; promote; celebrate; learn; and improve. He points out that for the<br />
measurement of performance, the only real and ultimate purpose, is to improve performance.<br />
The author consider as even more important measuring the knowledge. In our days, everybody wants<br />
to measure performance. Yes, this is the right way. But.. isn’t it all overreacted? Isn’t it too narrow<br />
focused effort? Sveiby in his short biography on the web (2011) says that his live is a journey of<br />
unlearning. Interesting point. Having this in mind, may be is time for stepping back and analysing<br />
current context and environment.<br />
2. Memories of the future<br />
Nowadays, chatting over a webcam is a common experience. However a century ago, video phones /<br />
video conferencing were the peak of futuristic ideas. In fact, as figure 1 shows, people were<br />
envisaging video phones beforehand every home even had a regular telephone.<br />
Figure 1: Retro futuristic vision from 1912 about future videoconferencing<br />
Our memories for their future (the future of our ancestors) appear as our current life. It is a basic<br />
knowledge, blending with basic feelings, as of today’s perspective. Based on human beings’<br />
memories, our present is much safe, and every person becomes with “basic” insurance. Opposite to<br />
humans, organizations don’t have memories, and thus, they need to be well prepared with strategies<br />
and action plans, as key factors for surviving. Image makers, futurists, strategists, entrepreneurs, all<br />
they do their job depending of the current specific needs.<br />
Naturally comes the question: what are current specific needs? There is actually avalanche of<br />
questions. Wacker and Ryan (2002) suggest “good questions are the real scarcity”. Simply asking<br />
questions, exploring, experimenting, creating theories and looking for evidence could lead to<br />
approaching the unidentified. In accordance with Einstein (in Sternberg 1999) “Anyone who is<br />
technically proficient can solve a problem that is already formulated, but it takes true originality to<br />
formulate a problem in the first place.”<br />
3. Recognition of the problem<br />
Back in last century, Einstein (1931) (also found in Holtzman 1951) describe fantasy as more<br />
important even than knowledge. He compares knowledge as limited, while fantasy includes the entire<br />
world. According to Goethe (2002) people don’t differentiate art and science with enough<br />
understanding. Goethe considers science as a derived knowledge, and art more like science used in<br />
service of action. From present perspective the future is science blended with art. Forecasting the<br />
828
Yanka Todorova<br />
future is hardly ever known as easy scientific job. Forecasting is based on analysing past events,<br />
identifying patterns and then implementing it in sketching assumptions about future events.<br />
Assuming a pattern as a solution for a single problem in a specific context, there is a condition of<br />
context to be at least similar to future context – stability – time - hypothesis. Hansmann (1983) states<br />
“Strictly speaking, the condition is never entirely met in economic reality, and this essentially rules out<br />
any forecast”.<br />
Currently, organizations have a hard time for implementing their strategies which can be seen by poor<br />
rates of initiatives’ success. Isaksen (2006) at Harvard study shows key efforts of Fortune 100<br />
companies in a period of 1980-1995 initiating change. In average one billion USD were invested by<br />
these companies in the period in R&D programmes. The results of the study shows that only one third<br />
of the companies are able to recapture their investments as a result of introduced changes, and the<br />
good news is that part of the initiatives lead to increasing the company stock. Ormerod (2005, also<br />
2007) states that the organizational capacity to practice cognitive market information and turn it into<br />
knowledge is small compared to the problems which confront them.<br />
The attempt for performance measurement should never stop. This is the way to get a progress and<br />
success, whatever it means. There is no room for a vacuum in the Earth. As a result of dissatisfaction<br />
in evaluating business performance with using financial measures, methods and methodologies for<br />
better performance measurement and management appeared. Mr. Robert Eccles (1991) in his<br />
performance measurement manifesto state “At the heart of this revolution lies a radical decision: to<br />
shift from treating financial figures as the foundation for performance measurement to treating them<br />
as one among a broader set of measures. “ He also raise very important question related to the willing<br />
of the managers to publish anything more than the required by the law financial information.<br />
There are question rising in public if or even when authorities will be required to provide nonfinancial<br />
measures in their reports. It simply couldn’t be asked, since in the law is clearly stated what are<br />
obligations of the companies regarding financial ant tax requirement. Furthermore there isn’t an<br />
official requirement for keeping a track of nonfinancial measures. Information technology plays a<br />
critical role in performance measurement processes.<br />
There are new technologies tools developed and offered on market in time manner regarding<br />
appearance or change in main methods or methodologies. For example soon after development of<br />
BSC, there were offered on marked technological tools for this methodology. The methodology by<br />
itself is recognized as leading in the area. Technological tools offer variety of possibilities. Universities<br />
teach their students on both – methodology and technology. An important obstacle is the high price. It<br />
would be difficult for a mid - size company to invest in full cycle of developing and implementing a<br />
strategy, including nonfinancial measures.<br />
4. The solution<br />
At the bottom of every complicated situation are usually hiding simple reasons and principles.<br />
Recognition from the society and well-being. Business in our days becomes more and more<br />
complicated. The most powerful and successful organizations are recognised by the society as<br />
leaders in certain area. Human beings tend to see the tree, rather to see the whole forest. Those who<br />
are born leaders, and are developed themselves further equipped with entrepreneurial and strategy<br />
thinking become successful, recognised by the society and well - being. Shortly said, become rich,<br />
and not only in financial meaning. Contrary to human being, a company can’t be born with the<br />
leadership quality, but just with entrepreneurial spirit of its shareholders. Let see what is happening in<br />
sport’s or art’s business. The most successful individuals in these business areas are very talented,<br />
and they have value, they are measured already, even in our days. Yet, this value is not presented in<br />
the balance sheets. If for example a manager of a soccer team consider to buy a top 50 soccer<br />
player, then could be quite precise estimated how much money will be spent for the transfer, and how<br />
much money could be expected as earnings for the next year. Could be estimated even the end of<br />
season’s position of the team. Similar picture is for the artists and musicians. All they are, at some<br />
point of view, entrepreneurs, and all of them are measured. Even most famous people are measured<br />
and ranked post factum, as for example IQ ranking of Goethe. At his time there wasn’t a way for such<br />
estimation.<br />
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Yanka Todorova<br />
Organizations has the same needs – to be recognised, and to be well – being, e.g. rich. The same<br />
principles are in commercial companies, as well as in academia or government (with small varieties).<br />
Most of their working time, managers invest in designing and implementing different performance<br />
measures. It is expensive; time consuming, and dependable of the knowledge capacity of the top<br />
executives and other leaders. The result usually is at high extent unpredicted. But, at the same time it<br />
is extremely necessary in today’s competition. Let’s think about a comparison of two Fortune 100<br />
companies. Let’s suppose these two companies has the same digits we compare: for example the<br />
same amount on stock market, the same amount of personnel, and personnel involved in R&D, the<br />
same amount spent per year for innovations. Could it be measured and predicted the success of<br />
these two companies a certain period later on, one year, five years? With the only lawful instrument –<br />
accounting, it wouldn’t be possible (intellectual property or patent portfolio is separate case). Using<br />
non - financial measures for this purpose is irrelevant, in view of local specifics of tools and measures<br />
used in both companies. What would happen if intangible capital could be measured and “monetized”.<br />
To simplify the case, for the purpose of this paper would be easier to narrow the case from monetizing<br />
intangibles as a whole, to measuring and monetizing the human capital. In this case, if it happens,<br />
and when it happens, the value of these two companies would differ according to specific value of<br />
innovative minds employed in there. Currently, there are constant changes in stock exchange even<br />
depending of “yellow” news. If value of intangibles is included in balance sheets, then we could expect<br />
a dynamic process of evaluation, a process ‘in motion”, which is hardly achievable with current<br />
nonfinancial indicators.<br />
One could say “I don’t want to be measured if I am not a freelancer!”, and the meaning is “I don’t want<br />
to be measured after working hours!”, and even “I don’t want to be measured at all!”. That is the real<br />
problem- ethical issue. It is not a problem intangibles to be measured. It is just a matter of<br />
mathematical formulas and mechanisms. It is just a matter of time. It will happen. No matter if we want<br />
it or not. This is the normal course of life. For good or bad.<br />
Inventors, as kind of rebellions know that it is much easy to orate revolution, than to exercise it. At first<br />
place, there is a need of conviction. Then very careful planning, and preparation. The author believes<br />
that monetizing intangible capital is achievable, and what is more, is expectable. The open question<br />
for discussion is related to the ethic. How should people be treated so at the same time their<br />
innovative spirit and art in the soul and mind to be rewarded, and preserved, at the time of giving to<br />
the business their knowledge? Who is the owner of the knowledge, and how to divide or differentiate<br />
it?<br />
Is the society ready for this revolution?<br />
5. Conclusion<br />
In our knowledge economy the major part of any organization exists in a form of intangibles, which to<br />
be noted are not presented in balance sheets. Those intangible values currently are not adequately<br />
articulated in financial meaning, including stock. At present we all are witnesses of inadequate way of<br />
evaluation of an organization. And what is more, monetizing of intangible capital is far behind<br />
knowledge management, and knowledge audits. It is the author believes that it is the time for new<br />
revolution in our society. We all are participants in managing two parallel systems at the same time –<br />
financial system, which is obligatory by the legislations around the world, and another one, “nonfinancial”,<br />
shortly said for performance measurement. It is time these two systems to blend together. It<br />
is possible with pure mathematical base complemented with financial tools, to be built up new<br />
methodology for evaluating organizational value. Next step should be a change in the legislative<br />
systems, mainly related to accounting law. The biggest question is not related to the possibility of<br />
creating this methodology. The author of the paper or some other scientist or practitioner / team will<br />
make it happen. It is just a matter of time. The biggest questions are related to ethical issues: Would it<br />
be ethical to measure intangibles? Furthermore, having in mind that the human capital is the core of<br />
the intangible assets, would it be ethical to be measured human knowledge in motion? Is human<br />
society ready for this challenge?<br />
Acknowledgements<br />
The author expresses gratitude to all colleagues, officials and friends in Germany, England, Greece,<br />
and Bulgaria for their guidance and encouragement in carrying out this research project work.<br />
Hopefully this research project would lead to finalizing the design and development of the<br />
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Yanka Todorova<br />
methodology for defining financial valuation of intangibles, or shortly said methodology for Monetizing<br />
Intangible Capital.<br />
References<br />
Behn, R.D. (2003). Why Measure Performance? Different Purposes Require Different Measures. Public<br />
Administration Review, 63(5), p.586-606. Available at: http://doi.wiley.com/10.1111/1540-6210.00322.<br />
(Accessed on 04/04/2011)<br />
Curtis A. (1985). “The Modern Accounting System”, Financial Executive, January – February, pp. 81-93.<br />
Eccles, R.G. (1991). The performance measurement manifesto, Harvard Business Review, 69(1), p.131-137.<br />
Einstein A. (1931). Cosmic Religion: With Other Opinions and Aphorisms, p. 97<br />
Frigo, Mark L. (2002). A Balanced Scorecard Framework for Internal Auditing Departments, IIA Research<br />
Foundation, p. 14.<br />
Goethe, J.W. (2002). Wilhelm Meisters Wanderjahre, oder die Entsagenden. Frankfurt:<br />
Hansmann, K.-W.: Kurzlehrbuch Prognoseverfahren, (1983) Wiesbaden: Gabler.<br />
Holtzman, H. (1951). Transformation Arts Communication Environment, New York: Wittenborn, Schultz, Inc.,<br />
Publishers<br />
Isaksen, S.G. and Tidd. J., (2006). Meeting the Innovation Challenge: Leadership for Transformation and Growth,<br />
Chichester, England: John Wiley and Sons. Available at:<br />
http://eu.wiley.com/WileyCDA/WileyTitle/productCd-EHEP000869.html. (Accessed on 04/04/2011)<br />
Kaplan, Robert S. and Norton, David P. (1996a). “Using the Balanced Scorecard as a Strategic Management<br />
System”, Harvard Business Review, January – February, p.76.<br />
Kaplan, R.S. & Norton, D.P., (1996b). The Balanced Scorecard: Translating Strategy into Action, Harvard<br />
Business Press. Available at:<br />
http://library.gcu.edu:2048/login?url=http://www.netlibrary.com/AccessProduct.aspx?ProductId=7252.<br />
(Accessed on 04/04/2011)<br />
Ormerod, P. (2005). Why Most Things Fail: Evolution, Extinction and Economics. New York: Pantheon Books<br />
2005.<br />
Ormerod, P. (2007). Why Most Things Fail: Evolution, Extinction and Economics , John Wiley and Sons.<br />
Sternberg, R.J. (1999). Handbook of Creativity, Cambridge University Press. Available at:<br />
http://books.google.com/books?hl=en&lr=&id=5xgZO7-ESp8C&pgis=1. (Accessed on 04/04/2011)<br />
Sveiby, K. -E. and Armstrong Ch. (2004). Learn to Measure to Learn ! Opening Key Note Address IC Congress. ,<br />
p.1-9.<br />
Sveiby, K. -E. (2011). Short biography http://www.sveiby.com/about_us.html<br />
Wacker, W. and Ryan, M. (2002). The Deviants Advantage: How Fringe Ideas Create Mass Markets. London:<br />
Crown Business<br />
831
Using the Balanced Scorecard and Forecasting Tools for<br />
Innovation Strategy Development<br />
Yanka Todorova, Dimitar Birov, Elissaveta Gourova<br />
University of Sofia, Faculty of Mathematics and Informatics, Sofia, Bulgaria<br />
yanka@todoroff.co.uk<br />
birov@fmi.uni-sofia.bg<br />
elis@fmi.uni-sofia.bg<br />
Abstract: Purpose: Today technology evolution and innovations enrich the knowledge society. Organizations<br />
have in hand rich varieties of methods in their attempts to measure the performance of their own strategies and<br />
business, and their business health. There are good practices in developing strategies. There are also good<br />
practices of using and implementing forecasting tools. But which combination could lead to success is the biggest<br />
pain for the companies. Should the company exchange its strategic decision maker? Or should the company<br />
choose different strategic tools? Or how to reach future and see what will be the need then, so to start developing<br />
it now? What combination of tools and soft techniques should be implemented? Those are hard questions, and<br />
answers are even harder. This paper can’t offer an answer of them, but an attempt to arrange the<br />
priorities.Design / methodology / approach: The design methodology used for the purpose of this paper is based<br />
on qualitative research, interviews, together with literature review. As a result comes powerful general and in the<br />
same time personally oriented approach. Findings: Developing a strategy is one of the milestones in business<br />
lifecycle. Balanced Scorecard methodology is proven powerful tool for developing of strategy. Combined with<br />
forecasting tools for visioning, it could come to the point need to an organization. Soft skills together with<br />
scientific tools form powerful instrument. Authors envision as good reason for measuring intangibles placing the<br />
Human Capital and its knowledge at the top of the evolution business tree. As a path to this is believe that<br />
intangibles could be monetized. This is valid especially at the time of current recession with all its varieties. It is a<br />
time for revolution and for a new jump. This might be based on patterns and mixed with advanced innovative<br />
analysis and solution. Inventing such methodology should involve changes in legislative systems incorporating<br />
financial and nonfinancial tools especially related to intangibles and its integration in balance sheets.Research<br />
limitations: One of the most sensitive, delicate and difficult issue is related to create right mission and vision,<br />
although only future could prove if the vision and mission are right or not. The outcome is normally clear only<br />
when the future comes, and with it the financial results of the strategy, developed on the basis of these vision and<br />
mission. For this purpose are used forecasting tools as scenarios, trends, picture of the future methods etc.<br />
There are well known methodologies for developing a strategy. There are also forecasting tools for defining and<br />
developing visions. Combining these two is limited by human decisions from one organization to the other.<br />
Limitation of the research is related to well-known published good practices as well as not so well known<br />
organizational practices and methods. There are additionally other strategic tools, not published and not known<br />
as good or any practices at all. It is usual practice, as many companies close innovations internally in the<br />
company. Originality / value: The paper discusses the need of creativeness and art work alongside technology<br />
based strategy development and organizational performance measurement. It presents analysed results of<br />
narrative research and interviews among executives and top and middle layer management in famous innovative<br />
organizations in business and academia in Germany and United Kingdom. The paper gives valuable insight for<br />
arisen need of development of new methodology, technology based and in the same time with futuristic<br />
elements.<br />
Keywords: innovation, knowledge management, forecasting tools, strategy development, futurism, balanced<br />
scorecard<br />
1. Introduction<br />
Technology evolution and innovations shape the knowledge society, nowadays. The foundation of the<br />
information era has been developing in the last decades, while the emerging knowledge society<br />
raises new challenges for education, research and innovation – the ‘knowledge triangle’ (Todorova et<br />
al. 2011). The growing importance of Knowledge Management (KM) presently has been recognized<br />
by several organizations world-wide, and its respected impact for faster innovation than competitors,<br />
higher efficiency and productivity, better quality of products and services, and subsequently, higher<br />
growth (Gourova et al. 2011). It is not surprising, therefore, that researchers and practitioners are<br />
looking for designing successful knowledge management systems and strategies, learning from past<br />
experience and best practices available (Debowski 2006, Mertins et al. 2003, Dalkir 2005). However,<br />
each case is a specific one, and the organisation should determine which KM methodology and/or<br />
strategy best fits to its internal environment and corporate strategy (Tiwana 1999, Gourova 2010). The<br />
decision could be based on the codification or personalisation strategy (Handsen et al. 1999), or to<br />
determine the KM strategy to have a general focus, and to be run as a business strategy or have a<br />
more narrow focus – on managing intellectual capital, knowledge creation or transfer, or just the<br />
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Yanka Todorova, Dimitar Birov, Elissaveta Gourova<br />
knowledge for their customers (Wiig 2004). The decision depends on the expected benefits for<br />
organisational competitiveness and growth, and on the expected return of investments in case of<br />
deployment of sophisticated technology solutions, knowledge codification and/or capturing tools.<br />
Is the KM strategy successful one? Does it bring the expected benefits? This requires control and<br />
monitoring of the implementation, and measurement. However, intellectual capital measurement, and<br />
subsequently knowledge assets, creates large difficulties (Todorova at all, 2010). There is hardly<br />
anything more difficult in development and management of organizational strategy than development<br />
of metrics that assess organizational knowledge-based assets due to their intangible nature.<br />
Nowadays organizations use rich varieties of methods in their attempt to measure the performance of<br />
their own strategies. One the most popular methods recently is Balanced Scorecard (BSC),<br />
developed by Kaplan and Norton (1996a, 1996b). Frigo (2002) states, that according to Harvard<br />
Business Review (1997), Balanced Scorecard is one of the most important management practices in<br />
the last 75 years. BSC methodology is an analysis technique translating an organization business<br />
strategy into quantifiable goals and monitoring the subsequent performance against these goals.<br />
Kaplan & Norton (1996b) suggest that in the global environment, crucial for successful performance<br />
management of the organization is measuring the intangible assets which traditional financial<br />
measures are not fit for. However, the balanced scorecard methodology does not provide a tool for<br />
estimation of the financial value of intangible assets.<br />
The paper discusses the need of creativeness and art work alongside technology based strategy<br />
development and organizational performance measurement. It presents analysed results of narrative<br />
research and interviews among executives and top and middle management in famous innovative<br />
organizations in business and academia in Germany and United Kingdom. Authors consider this type<br />
or research for the discussed specific purpose as much more valuable than typical mass<br />
questionnaires. This type of research gives valuable insight for arisen need of development of new<br />
methodology, technology based and in the same time with futuristic elements. More detailed overview<br />
and insights is about to be published.<br />
2. Recognition of hidden snags<br />
Fox (1982) made statement two decades ago, which is still valid in our days: “90 per cents of carefully<br />
planned strategies do not work”. Developing and implementing a strategy is time and effort –<br />
consuming hard work. Even harder is predicting its results. In most of the cases the results of design<br />
and implementation of organizational strategy significantly differentiate from planned results at the<br />
beginning of the process.<br />
An organization could use a number of methodologies, tools and techniques for development,<br />
implementation and management of strategies, including performance measurement. The rank and<br />
success of the organization depends not just on the chosen tools, but mainly on a carefully chosen<br />
set of tools and the consequences of applying them. Here, soft factors, and in particular Human<br />
Capital (HC), should be in the centre of the Strategy Management process. The success of any<br />
strategy depends, in addition to its clear and measurable goals, on the leadership and the<br />
engagement and commitment of all employees in the implementation process and activities planned.<br />
As mentioned earlier, knowledge nowadays has become a key factor for success and<br />
competitiveness of organisations world-wide. It is acknowledged by many researchers that the<br />
knowledge management strategy should be closely linked to the corporate one (Tiwana 1999,<br />
Gourova 2010). However, the main issue is to be based on a clear understanding of the available<br />
knowledge resources and needs of the organisation. While traditional methods like SWOT, STEEP,<br />
Porter analysis could be used for the preparation of a corporate strategy in general, the knowledge<br />
management strategy should be based on analysis of the knowledge positioning of the organisation<br />
among its competitors, and clear understanding of the internal knowledge status. The knowledge<br />
audit could comprise several analysis methods (Figure 1) in order to provide the necessary basis for<br />
decision making, but also for monitoring and assessment of the following strategy implementation.<br />
833
Figure 1: Knowledge audit focus<br />
Yanka Todorova, Dimitar Birov, Elissaveta Gourova<br />
Subsequently, the knowledge audit results should be depicted for developing the vision for the future<br />
of the organisation and what kind of strategy goals could be set in order to lead to the desired future<br />
scenario. While the traditional foresight methods (e.g. exploratory or normative, quantitative or<br />
qualitative methods) might help for shaping the vision of the organisation, the Balanced Scorecard is<br />
a suitable tool for linking the goals set with the required actions and their measurement for reaching<br />
the expected target.<br />
Currently, organizations have hard time for implementing their strategies which can be seen by poor<br />
rates of initiatives’ success. Isaksen et al. (2006) shows key efforts of Fortune 100 companies in a<br />
period of 1980-1995 initiating change. In average, within the period these companies invested 1 billion<br />
USD in R&D programmes. However, only one third of them were able to recapture their investments<br />
as a result of introduced changes, and the good news is that part of the initiatives led to increasing the<br />
company stock. Ormerod (2005, 2007) states that the organizational capacity to practice cognitive<br />
market information and turn it into knowledge is small compared to the problems which confront them.<br />
Back to the bottom, there is one simple question, which every organization should answer to: why it<br />
exists? In most of the cases, the answer comes through analysing organizational mission and vision.<br />
According to Pillkahn (2008), mission statements usually account for the global business policy, the<br />
relationship to customers and employees, the relationship to the state and the overall economy, and<br />
for the management principles of an enterprise. Accordingly, vision statements should be individually<br />
developed, and last, a goals statement must reflect the enterprise market and societal orientation.<br />
Pillkahn (2008) states that there is not THE strategy: strategy is a dynamic process that must be<br />
continuously called into question and adapted accordingly (e.g. in the context of a monthly review that<br />
accounts for evidence of triggers). The basic condition for a successful enterprise is that goals,<br />
strategies, actions and structures fit together.<br />
3. More ‘art’ and creativity in design of strategy for future success<br />
According to Jump Associates (2005), General Electric (GE) faced a milestone when Six Sigma<br />
mastery was no longer enough to meet the company’s audacious growth targets. CEO Jeffrey Immelt<br />
set a new goal: every GE business to grow by at least eight per cent each year. To step in this<br />
direction, GE prepared their top managers with additional knowledge and experience - most<br />
promising managers were chosen for the prestigious Business Management Class for a journey<br />
through the best practices and tools for innovation. The major attributes of an innovative organization,<br />
which are subject of constant education and practicing and which are compared to the ten innovative<br />
organizations are: challenge/involvement, freedom, trust/openness, idea time, playfulness / humor,<br />
conflict, idea support, debate, and risk taking. The result showed that the team was mainly aligned<br />
with the innovative organizations. Prokesch (2009) states that John Dineen (which became the head<br />
of GE Healthcare in July 2008) alarmed GE leaders that they should rethink their individual and<br />
collective roles, including specifics related to their time spending. Following the goal to manage not<br />
only the present, but also the future, Dineen and his teams made a decision to become more<br />
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Yanka Todorova, Dimitar Birov, Elissaveta Gourova<br />
strategically oriented into the future. For this purpose they delegated most of the responsibilities to the<br />
layer below. In that way leaders could detach themselves from current problems and spend more time<br />
on prospects that would create the future.<br />
There is a huge difference between trying to predict the future and then managing it, and inventing the<br />
future. Thanks to the science we could not only predict the future at certain extend, but also to draw a<br />
picture of the future which incorporates current believes of good and green. Even the innovative<br />
companies which have developed their R&D strategies are not equipped with implemented<br />
Knowledge Management strategies. Developing strategy for Knowledge Management in the<br />
organization is truly innovative process, which involves knowledge, boldness and power to invent, not<br />
only to predict the future. Furthermore, implementing the strategy for Knowledge Management, if<br />
there is such, is even harder and sometimes beyond the current known horizon. As of today this<br />
innovative process is far from open innovation. The society as a whole and scientists as part of it are<br />
witnesses, and in certain cases, are active players of this innovation process which for now is<br />
predominantly closed innovation, and as such is not well known in details for the public. One of the<br />
outcomes of inventing the future is managing future inventions. There are “best practices” in this<br />
regard, but they are known as portfolio of innovations and not as roadmaps or patterns for making it.<br />
It is widely accepted to be discussed best practices, although there is a lack of recognised criteria for<br />
what is “best practice”. In this paper are discussed good practices or simply results of narrative<br />
research and interviews with representatives of world-wide recognised organizations in industry and<br />
academia from Germany and the UK. Research shows that it is difficult to be developed and<br />
implemented innovation or knowledge management strategy even in most innovative and famous<br />
companies.<br />
Predominant part of the respondents is in executive and top management positions. More than 90 per<br />
cent of them state that with current available scientific and management tools it is almost impossible<br />
to range so much variety of subjects related to intangibles. According to 62 per cent of the<br />
respondents, developing the future of the company is a task for marketing and sales departments.<br />
Respectively only 38 per cent envision this role as role of futurists. It is to be mentioned that 90% of<br />
those 62% are with main technical background subsequently equipped with management skills.<br />
Having in mind these 38%, all of the respondents states that their most innovative minds are “inside<br />
of” marketing and sales or R & D departments, or strategy departments, naming them as “researcher”,<br />
“strategy person”, or “marketing person”, not to mention “sales person”.<br />
Answering the question related to the role of financial departments as well as the financial indicators,<br />
approximately 97 per cent of the respondents point out them as lagging function and indicators. The<br />
research shows that there are not well known good practices related to finances of the future or even<br />
measuring intangibles – 17% of the respondents state that they “know something” about it, and 56%<br />
consider as not worth it efforts.<br />
As one of the outcomes of the research and its analysis could be mentioned that practitioners are<br />
tend to follow well known (or not so well known) developed methodologies, and to make further<br />
development with closed innovations making assessed risk. It is a job of the scientists to make a<br />
foundation for the new jump.<br />
4. Conclusion<br />
As Martelli (2001) states, our business and scientific environment have far more than enough<br />
methods of examining the future. Some of the methods for similar purpose are even contrasting. In<br />
the field of future studies and strategy development there are contradictory definitions end even<br />
principles. This chaos brings hard times for organizations not only because of the development and<br />
management of organizational / corporate or any other strategy, but mainly because of a need for<br />
business survival. Sveiby (2002) suggests to measure for value creation - not for control or PR. He<br />
states that intangibles are difficult and expensive to measure and the results are so uncertain, so the<br />
reason for measuring intangibles had better be a good one.<br />
Creating and developing of organizational strategies, sometimes even implementing all of the<br />
developed strategies is highly creative and art work. It is even more creative and innovative when it<br />
comes to knowledge management strategy.<br />
835
Yanka Todorova, Dimitar Birov, Elissaveta Gourova<br />
Authors envision as good reason for measuring intangibles placing the Human Capital and its<br />
knowledge at the top of the evolution tree. Path to this is believed that intangibles could be monetized.<br />
This is valid especially at the time of current recession with all its varieties. It is a time for revolution<br />
and for a new jump.<br />
Currently monetizing the intangibles is not possible. There are still not invented nor described<br />
methodology or even patterns for that. This is a true challenge for the future science and business.<br />
When it comes to the reality, it could incorporate for example financial tools, balanced scorecard<br />
methodology, certain mix of forecasting tools and may be picture of the future method with its intra-<br />
and extrapolations. This might be based on patterns and mixed with advanced innovative analysis<br />
and solution. Inventing such methodology should involve changes in legislative systems incorporating<br />
financial and nonfinancial tools especially related to intangibles and their integration in balance<br />
sheets.<br />
References<br />
Dalkir, K. (2005). Knowledge management in theory and practice, Elsevier Butterworth Heinemann, Oxford.<br />
Debowski, (2006). S, Knowledge Management, John Wiley & Sons Australia Ltd., Sidney.<br />
Fox, H.W., (1982). Monitoring Internal Support of Strategies. Mid-South Business Journal, July 1982.<br />
Frigo, M. L. (2002). A Balanced Scorecard Framework for Internal Auditing Departments, IIA Research<br />
Foundation, p. 14.<br />
Gourova, E., (2010). “Knowledge management strategy for Small and Medium Enterprises”, Proc. of IEEEAM,<br />
Applied computer science, Malta, 15-17 Sept. 2010, pp. 639-648.<br />
Gourova, E., Atanassova P. and Todorova Y. (2011). “Knowledge audit tools”, EuroPLoP 2011, Irsee, 13-17 July<br />
2011<br />
Hansen, M. T., Nohria N. and Tierney T. (1999). “What’s Your Strategy for Managing Knowledge?”, Harvard<br />
Business Review, vol. 77, pp. 106-116.<br />
Isaksen, S.G. and Tidd. J., (2006). Meeting the Innovation Challenge: Leadership for Transformation and Growth,<br />
John Wiley and Sons Chichester.<br />
Jump Associates (2005). ‘GE Gets a Crash Course in Innovation Methods’, Jump Associates, Available at:<br />
http://www.jumpassociates.com/ge-gets-a-crash-course-in-innovation-methods.html (Accessed on<br />
04/04/2011)<br />
Kaplan, R. S. and Norton, D. P. (1996a). “Using the Balanced Scorecard as a Strategic Management System”,<br />
Harvard Business Review, January – February, p.76.<br />
Kaplan, R.S. and Norton, D.P., (1996b). “The Balanced Scorecard: Translating Strategy into Action”, Harvard<br />
Business Press. Available at:<br />
http://library.gcu.edu:2048/login?url=http://www.netlibrary.com/AccessProduct.aspx?ProductId=7252.<br />
(Accessed on 04/04/2011)<br />
Martelli, A., 2001. “Scenario Building and Scenario Planning: State of the art and prospect of evolution”, Futures<br />
Research Quarterly, 17(2), p.57–74.<br />
Mertins K. , Heisig, P. and Vorbeck J. (2003). Knowledge Management – Concepts and Best Practices, Springer<br />
Verlag, Berlin-Heidelberg.<br />
Ormerod, P. (2005). Why Most Things Fail: Evolution, Extinction and Economics, Pantheon Books New York.<br />
Ormerod, P. (2007). Why Most Things Fail: Evolution, Extinction and Economics, John Wiley and Sons, .<br />
Pillkahn, U., (2008). Using Trends and Scenarios as Tools for Strategy Development: Shaping the Future of Your<br />
Enterprise, Publicis Corporate Publishing.<br />
Prokesch, S. (2009). “How GE Teaches Teams to Lead Change”, Harvard Business Review 87, pp. 99-107.<br />
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www.sveiby.com/articles/IntangibleMethods.htm (Accessed on 07.04.2011)<br />
Tiwana, A., (1999). The Knowledge Management Toolkit, Prentice Hall, NJ.<br />
Todorova Y, Gourova E. and Birov D., (2010). “Measuring Knowledge Management and relation with Balanced<br />
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836
Role of Intelligence Generation Activities in Building<br />
Legitimacy for Ideas in the Front-end of Innovation<br />
Outi Vanharanta and Jaana Näsänen<br />
Aalto University School of Science, Helsinki, Finland<br />
outi.vanharanta@aalto.fi<br />
jaana.nasanen@aalto.fi<br />
Abstract: Ideas must become legitimate within organizations in order to get through the decision making in frontend<br />
of innovation (FEI) and reach the actual product development stage and finally commercialization. This paper<br />
presents an empirical study on legitimacy building through intelligence generation activities. The empirical<br />
material consists of 40 interviews gathered in R&D departments of three companies. In our study we found that<br />
customer orientation activities and more specifically, intelligence generation is a powerful means to acquire<br />
legitimacy for ideas in FEI. Through these activities the acceptance of ideas may be advanced either intentionally<br />
or unintentionally. We identified six different ways through which intelligence generation legitimates ideas in FEI:<br />
(1) commitment of developers and internal customers to the product, (2) avoidance of resistance towards the<br />
product, (3) facilitation of future efforts, (4) concretization of technological potential to decision makers, (5)<br />
demonstration of developers’ technological capabilities to decision makers, and (6) sustaining decision makers’<br />
interest towards the idea. Previous research presents ways to gather understanding about customer needs and<br />
preferences in order to develop products that cater to those needs as well as acquire an understanding of<br />
possible market potential. This study shows that these activities have a larger impact on organizations by<br />
providing means for achieving acceptance for the ideas. In this paper we show a previously unrecognized<br />
outcome for intelligence generation activities and demonstrate concrete examples of the exploitation of these<br />
activities in organizations. The objective of legitimation of ideas through customer orientation activities has not<br />
been discussed in previous literature, thus this study widens the understanding of the objective and impact of<br />
customer orientation in FEI. This research brings into attention that intelligence generation is a powerful<br />
mechanism through which ideas are legitimated to internal customers, developers and decision makers, and trust<br />
towards developers is created.<br />
Keywords: innovation, front-end, legitimacy, customer orientation, intelligence generation<br />
1. Introduction<br />
Previous literature lists various methods by which customer understanding can be generated through<br />
different depths of involvement in the innovation process (see e.g. Kaulio, 1998 and Lagrosen, 2005).<br />
Especially in the front-end of innovation (FEI) the identification of customer and user needs is one of<br />
the focal activities (Khurana & Rosenthal, 1997; Cooper, 1980). FEI is defined as those activities that<br />
come before the formal product development process (Koen et al 2001) including activities from<br />
opportunity identification to the development of concept and required technology. During this stage,<br />
the decision is made whether or not a product development process will be initiated and whether<br />
resources will be allocated for the project. In our empirical research on generating customer<br />
understanding, we noticed that in addition to the information generated for the development purposes,<br />
the intelligence generation activities act as an important factor for the legitimization of ideas.<br />
The process of realizing innovation can be seen as a process of bringing a new idea to organizational<br />
actors’ attention in order to gain organizational and social acceptance for the idea and to manage<br />
cooperation between relevant actors (Van de Ven, 1986). Achieving acceptance for ideas is vital for<br />
gaining support and resources for implementing them. Previous research on institutionalism provides<br />
an understanding of how ideas and practices “win acceptance” (Suchmann 1995; Zimmerman & Zeitz<br />
2002) and this literature has shown that building legitimacy is crucial to the persistence of ideas and<br />
practices in concrete ventures. By legitimacy, we refer to the state of the process that explains and<br />
justifies activities (see, Berger and Luckmann 1996). When an idea is legitimate it is perceived<br />
“desirable, proper or appropriate within some socially constricted system of norms, values, beliefs and<br />
definitions” (Suchmann, 1995).<br />
Acquiring legitimacy for ideas is a focal element for the process of idea progression in organizations.<br />
Previous research has shown that new ideas and practices can be easily considered “illegitimate”<br />
(Dougherty and Heller, 1994) and therefore, they must be linked to the existing widely accepted<br />
cultural framework of beliefs, values and norms (Walker, 2004; Hargadon and Douglas, 2001;<br />
Zelditch 2001). Furthermore, they must be compatible with the existing structure and culture of<br />
organizations (Burns and Wholey 1993) in order to be accepted. In addition, possibilities for the<br />
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development and establishment of ideas and practices are related predominantly to their legitimacy,<br />
not only to their technical quality (Scott, 2001; Suddaby and Greenwood, 2005).<br />
Research on legitimacy (e.g. Dougherty and Heller, 1994) has shown different ways of weaving of<br />
new ideas and practices into the established practices of organizations: 1) making new activities<br />
conform with existing institutionalized practices; 2) making activities legitimate “ceremonially” by<br />
associating an innovation with a legitimate practice, but continuing to behave in the old way; 3) using<br />
legitimate practices in order to reframe new activities so that people can understand how to carry<br />
them out. Our approach differs from that by claiming that legitimization occurring through intelligence<br />
generation activities is not necessarily intentional but it is a sort of a by-product of these activities.<br />
In this paper, we study the intelligence generation activities as a method for legitimating ideas in FEI.<br />
First, we will go briefly through previous discussion concerning market orientation in the context of<br />
innovation after which we present our methodology. In the fourth section we discuss our main findings<br />
and implications.<br />
2. Related research<br />
Market orientation refers to the activities of market intelligence generation, dissemination of that<br />
intelligence throughout the organization and infusion of it to organizational activities (Kohli and<br />
Jarowski 1990). The concept of market orientation consists of three components: customer<br />
orientation, competitor orientation and inter functional coordination (Narver and Slater 1994). In this<br />
paper we focus on customer orientation and limit our scope to intelligence generation activities whose<br />
objective is to build a fundamental understanding of customers’ current and future needs (Kohli and<br />
Jarowski 1990). In our study we adapt customer orientation to fit the project level analysis from the<br />
perspective of new product development.<br />
One central stream of previous literature regarding the relationship between market orientation and<br />
innovation deals with the question whether customer orientation benefits or hampers innovation.<br />
Several studies indicate that market orientation results in successful new products (e.g. Salomo et al<br />
2003; de Brentani 2001; Atuahene-Gima et al 2005; Narver et al 2004) and that the more input from<br />
customers is acquired during the innovation process, the better. Some scholars argue, on the other<br />
hand, that being too close to the customers may prove detrimental to innovation and thus firm<br />
performance (e.g. Hayes and Abernathy 1980; Christensen and Bower 1996). If companies focus on<br />
fulfilling customers’ needs they may miss opportunities for radical new technologies and emerging<br />
markets. In this paper, we will not discuss the impact of customer orientation in the future success of<br />
the product, however it is important to understand the ambiguity of the relationship between these<br />
concepts also in this context.<br />
Another central stream of previous research in this field has focused on the different depths and<br />
modes of customer involvement in innovation through which customer intelligence is generated. Also,<br />
the timing of these activities has been of interest for researchers. It has been found that customer<br />
understanding is generated through a variety of formal and informal market research activities. These<br />
activities may involve customers in the innovation process either indirectly through e.g. interviews,<br />
surveys and focus groups (Kaulio 1998) or directly through e.g. concept testing (Kaulio 1998),<br />
information acceleration (Urban et al 1997) and lead user method (e.g. von Hippel 1988). The<br />
purpose of these methods is to capitalize on customers’ expertise and acquire understanding of their<br />
needs and preferences. In his research on user involvement in the context of new service<br />
development, Alam (2002) found that customer involvement has additional goals than the ones<br />
mentioned above. He found that organizations have the following objectives for the involvement of<br />
customers in the process: reduced cycle time, user education, rapid diffusion of innovation, improved<br />
public relations and the improvement of producer-user relationships. In this paper, we investigate the<br />
“additional goals” of market orientation and argue that intelligence generation activities have a larger<br />
impact on organizations than previous research suggest.<br />
3. Methodology<br />
Our objective was to gain a qualitative in-depth understanding of legitimacy building through<br />
intelligence generation activities and provide interpretations for the phenomena emerged from the<br />
data. From this follows that our research approach is qualitative multiple case study (see, e.g. Stake<br />
1995). The empirical material consists of 40 interviews - each of them lasting approximately one hour<br />
to two - gathered from R&D departments in 3 companies. One of the companies operates globally in<br />
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the field of communication and the other operates mainly in Europe providing metal products and<br />
services. The third company is a broadcasting corporation.<br />
In our qualitative analysis, we searched intelligence generation activities from the transcribed<br />
interviews and found six ways being related to idea legitimization in the organizations. These activities<br />
were analyzed further based on the idea of a data-driven approach (for detailed discussion of this<br />
approach, see e.g. Strauss and & Corbin 1990). Then, we analyzed each activity in detail and<br />
discussed our findings with previous research.<br />
In the material that follows all personal and company details have been changed.<br />
4. Findings<br />
We identified six different ways of constructing legitimacy for ideas within organizations through<br />
employing intelligence generation activities. Below, we discuss these ways of legitimation through<br />
presenting most central intelligence generation activities that emerged from our data. Interestingly,<br />
each of these activities was related to several ways to legitimate ideas.<br />
4.1 Commitment of customers to the product<br />
Our empirical data showed that commitment of internal customers to specific products in the front end<br />
phase was pursued by involving customers to the idea generation process and by disseminating<br />
information about the product at early stages of the development process. In one of the case<br />
companies studied, the customers targeted with the new innovation effort were company employees<br />
(i.e. internal customers) who were asked to participate in idea generation sessions of a new piece of<br />
equipment for production. The customers were asked to participate in idea generation sessions to<br />
provide input to the development process on technological details considering their specific needs.<br />
The involvement of customers to the idea generation process made customers familiar with the<br />
product from the very beginning of the development process. The fact that they were being heard as<br />
the technical details were designed was regarded as increasing their commitment to the product and<br />
thus lowering the barrier to eventually take it to use. Some customers were also motivated to<br />
contribute to the subsequent phases of the development process as well and willing to allocate their<br />
time further in the project. “…that is one side of it [involvement of customers in ideation process] the<br />
good planning so that we get a good product but then there is the - in my opinion bigger thing- that<br />
the customers become like familiar with the project and commit to it and all that… “ [chief technology<br />
officer]<br />
Commitment to the product was also aimed for by simply disseminating information about the concept<br />
development project to all internal customers and keeping them informed about the progression of the<br />
project. The internal customers themselves were proactive and provided feedback to this information<br />
and contributed through online discussions to the refinement of concept specifications.<br />
Both customer involvement and intelligence dissemination involved the proactive contribution of<br />
customers to the innovation process as they reflected the proposed ideas with their own needs and<br />
provided suggestions accordingly. Their contribution can be viewed as acting as a means for<br />
accepting the proposed idea and committing themselves to the development process as well as finally<br />
use of the product.<br />
4.2 Avoidance of resistance towards the product<br />
Through the same activities as commitment to the product was pursued as described above,<br />
avoidance of resistance towards the product was regarded eventual. The organization aimed at<br />
avoiding the situation where customers would resist a sudden change and thus not be willing to adopt<br />
the new technology. All customers were informed about the development project and they were being<br />
kept knowledgeable about its progression. “…like if we do it in a way that we start from the middle of<br />
the process [without idea generation phase] and then it [the product] is finalized and just given to the<br />
crowd then there is all kinds of grousing and groaning always…” [chief technology officer]<br />
By involving customers to the idea generation process and keeping them informed about the purpose<br />
of the product and the progression of the project, customers understood the need for the product and<br />
why it includes specific features. Also, the fact that customers had been given the opportunity to<br />
participate was regarded as a strong argument against possible negative feedback on the final<br />
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product. In addition, the fact that a significant number of customers had been involved in the process<br />
gave a signal to the wider organization that the idea was supported and thus likely met customers’<br />
requirements. The fact that they had contributed to the idea generation was regarded as reducing the<br />
risk of resistance towards the final product.<br />
4.3 Facilitation of future efforts<br />
Our empirical data suggests that customer involvement in the idea generation process provided also<br />
a possible means to facilitate future efforts. The involvement of customers in the idea generation<br />
process from different parts of the organization brought together employees with very different<br />
backgrounds and different lengths of employment within the organization in question. Thus, they had<br />
very differing presumptions of how development projects are “supposed to be” carried out within the<br />
organization. One group of organization members was skeptical about the very tight schedule<br />
planned for the development project whereas the younger customers who had been working within<br />
the organization for a shorter time believed that it was possible to carry out such a project in the given<br />
time frame. The people involved in the management of the pre planning process noticed that as the<br />
project progressed, at some point the attitudes of the more suspicious employees started to shift to a<br />
more positive direction in terms of the possibility to execute such development projects in a rather<br />
limited time. Thus, it was considered that bringing these two very differing “cultures” of customers<br />
together in the idea generation phase was very useful in terms of dissemination of a new way of<br />
planning and executing development projects efficiently in future. “…these two groups of people<br />
clashed in these workshops and partly it first slowed down the whole proces a little, but I think there<br />
was a small fruitful beginning in all this that now the old guys understood that in this organization we<br />
can work differently and the product will actually be completed…” [manager]<br />
By showing that what was previously considered impossible was actually possible through the<br />
involvement of customers in the idea generation process, old assumptions were broke, which may<br />
pave the way for future ideas as the new way of executing innovation projects becomes generally<br />
accepted. Also, cycle time reduction was brought up as another significant outcome of customer<br />
involvement in the idea generation process. It was argued that the method of involving users early on<br />
in the idea generation may prevent bad ideas from being developed further and thus the employment<br />
of this method would provide strong justification for good ideas in future.<br />
4.4 Concretization of technological potential<br />
Technological potential was concretized through creating mock-ups and piloting the technology in real<br />
life context. Mock-up (here demo) building was related to intelligence generation activities in two<br />
ways: first, it provided quasi-customer understanding to the developers as it made it possible to have<br />
the idea in a physical form and developers aimed at creating understanding of user-experience based<br />
on their own experiences. Second, when a demo was further developed the developers captured a<br />
video showing the developers experimenting with the technology. In addition to presenting this video<br />
inside the organization to create awareness, they uploaded it on Youtube in order to acquire feedback<br />
and ideas for real life use cases from potential end-users. As the idea itself was possible to<br />
demonstrate in a demo mode, this added to the interest towards the idea as depicted in the following<br />
data extract: “As we realized that it is possible to do nice videos which can be published inside the<br />
firm and to some extent also externally, this hyped up the idea.” [manager]<br />
Creating concrete mock-ups aiming to imitate user-experience as well as showing these mock-ups to<br />
the end users increases the interest towards the idea, which again may increase the push to build<br />
more mock-ups. Demos and videos can be seen as an innovative narrative being powerful to<br />
translate the idea across the organization so that organizational actors can perceive them legitimate<br />
and comprehensible (Barter and Garud 2009). This suggests that these activities as such pushed the<br />
idea forward in the organization although they did not necessarily have a very convincing linkage with<br />
real user experience and did not necessarily advance the technological development as such.<br />
Through piloting the developers were also able to prove the functionality of the technology in an<br />
authentic environment and develop interest towards the product amongst potential customers. In the<br />
organization studied, they began piloting in a shopping centre and planned to create awareness of the<br />
technology gradually so that after a certain time period, this technology would become even that<br />
mundane that lack of it would be noticed by customers. ” Well, we have some pilots but we could say<br />
that inside two years we have singular functional systems that can be introduced to large shopping<br />
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centers and malls and airports . Let’s say in five six years this system could be so general, that people<br />
start asking that hey, does this place have this certain technology system.” [manager]<br />
Although creating awareness among customers is crucial, piloting also plays a key role in selling the<br />
idea internally. It confirms two kinds of aspects of the idea: Piloting provides the possibility to<br />
demonstrate the idea in a concrete way which is a powerful way to show the feasibility of an idea. In<br />
addition, piloting in an authentic environment gives the impression within the organization that the<br />
idea is feasible as it can be presented in public. “Piloting is used very much for internal selling as it is<br />
good place for demonstrating it. When we demonstrate the technology in an authentic environment, it<br />
is much more credible than piloting in a laboratory. Besides, when it can be presented in public, it is<br />
easy to state that it is a good idea as it can be presented outside the organization.” [manager]<br />
These two activities of creating mock-ups and piloting are about making an idea visible and concrete<br />
so that others can understand it which makes it credible within organizations. Similarly, these activities<br />
legitimate the existence of technology for customers: they are able to find the real use cases for the<br />
technology themselves or gradually get used to the existing of technology so that lacking of it will be<br />
noticed.<br />
4.5 Demonstration of developers’ technological capabilities to decision makers<br />
Decision makers’ trust towards the developers’ ability to implement ideas was constructed during the<br />
phase of concept development through mock-up building which was described as intelligence<br />
generation activity in subsection 4.4. Through mock-ups the developers aimed at gathering quasi or<br />
real user experience and also legitimate the idea within the organization. Building mock-ups is a way<br />
to assure the managers of the developers’ competence and thus gain justification for their ideas as<br />
depicted in the following extract. “He is such a guy who has the ability to implement these things in<br />
practice not only think them in written form. He built a functional demo version of the technology and<br />
we got an idea that is really such that we can realize.” [manager]<br />
Our example demonstrates the way in which faith in development team is sustained through building<br />
mock-ups. In the organization studied, research projects wherein new ideas are explored can be<br />
terminated if it does not seem to be productive and therefore, it is important to legitimate the existence<br />
of the project continuously. In addition, the idea presenter’s track record was mentioned as one of the<br />
key factors when considering the idea seriously by managers. From this follows, that convincing the<br />
decision makers from the developers’ ability serves the developers in present innovation activities as<br />
well as in future efforts.<br />
4.6 Sustaining decision makers’ interest towards the idea<br />
When employees built mock-ups and conducted pilots, they showed enthusiasm towards the project<br />
as well as progression of the idea which again kept the decision makers interested in the project. As<br />
mentioned in section 4.4, demos create quasi-customer understanding and through them it is possible<br />
to test user experience. However, the progression of the demo was also important in order to evaluate<br />
if the project is advancing and thus worth of further resource allocation. By providing some new<br />
information semiannually about the progression of the project and the impact of customer orientation<br />
activities, decision makers did not lose interest towards the project and thus did not feel pressured to<br />
terminate it. “Our demo progressed all the time, we have learnt that you have to show semiannually<br />
that your work progresses. While we conduct other duties, we also build demos to show that these<br />
things go further all the time.” [team leader]<br />
Conducting the pilot experiment also acted as a way to sustain the interest of decision makers<br />
towards the technology in question as through the pilot experiment, employees were able to show the<br />
managers that the development of the idea is progressing well. The extract below shows that<br />
employees gathered information of potential stakeholders and doing so they were able to show that<br />
their idea had moved a step forward and gained a new level wherein potential customers found their<br />
idea useful. ”During last year we have conducted pilot experiments and discussed with potential<br />
stakeholders from airports and shopping malls who can utilize this idea. We collect that information<br />
and provide it to our organizations by stating that these stakeholders are willing to utilize our idea so it<br />
would be worthwhile for us to progress that idea and these would be our potential customers.”<br />
[manager]<br />
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Both these intelligence generation activities, building demos and conducting pilot experiments,<br />
provide concrete evidence that the idea moves forward continuously. While these activities are<br />
conducted, the idea becomes more acceptable as concrete activities producing new information seem<br />
to be a convincing method for showing progression.<br />
5. Discussion and implications<br />
Previous research presents ways to gather understanding about customer needs and preferences in<br />
order to develop products that cater to those needs as well as acquire an understanding of possible<br />
market potential. This study shows that these activities have a larger impact within organizations by<br />
providing means for achieving acceptance for ideas. In our study we found that customer orientation<br />
activities and more specifically, intelligence generation is a powerful means to acquire legitimacy for<br />
ideas in FEI.<br />
In our study we identified six ways in which ideas become legitimate through intelligence generation<br />
activities. These six ways support the process of realizing innovation in organization (Van de Ven,<br />
1986) first, by bringing a new idea to organizational actors’ attention through building commitment<br />
towards the idea and concretizing its technological potential. Our empirical data indicates that these<br />
activities supported the development of organizational and social acceptance together with activities<br />
which aimed at reducing the risk of resistance towards the idea and making a new method of idea<br />
generation acceptable. In addition, demonstration of technological competence supported the<br />
development of organizational and social acceptance for the developer in question. Cooperation<br />
between developers and decision makers ensured the sustainability of organizational interest towards<br />
the implementation of an idea.<br />
Previous research has identified different goals for intelligence generation in organizations, however<br />
its role in terms of idea legitimation has not been acknowledged sufficiently. Some weak references to<br />
this subject have been presented e.g. by Rice et al. (2001) who point out that early prototyping helps<br />
sell the project to the organization’s upper management. However, they do not discuss this<br />
phenomenon further. Also, Balachandra (1984) brings up the importance of managements “faith in<br />
individuals” when making go/nogo decisions. In order to ensure the implementation of an idea,<br />
building awareness for it within the organization is not sufficient. The decision makers must be<br />
convinced of developers’ capabilities. This paper shows how faith in individual developers can be built<br />
through intelligence generation activities.<br />
From a managerial perspective, this research provides an interesting view point to the organizational<br />
impact of customer orientation activities. As ideas gain legitimacy unintentionally when acquiring<br />
information about customer needs, the consequences of these activities may be difficult to anticipate.<br />
An idea may be hard to evaluate objectively once it has won acceptance within organization. As<br />
customer orientation fosters the legitimacy of the idea within organization, the termination of such<br />
innovation efforts may be unlikely. From the developer’s perspective, who has the motivation to take<br />
an idea forward within an organization, the understanding of the possible implications of these<br />
activities is useful.<br />
This study extends our understanding of the objectives as well as unintentional implications of<br />
customer orientation. We showed a previously unrecognized outcome for intelligence generation<br />
activities and demonstrated concrete examples of the exploitation of these activities in organizations.<br />
This research shows that the relationship between customer orientation and innovation performance<br />
may actually be more complex than what has previously been considered.<br />
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843
Awakening Resilience! An Innovative Pedagogical<br />
Approach: Enculturated and Domain-Centered Learning<br />
Christopher Walach<br />
University of Maryland University College, USA<br />
cwalach@gmail.com<br />
Abstract: Future organizational traumas, crises, and disasters will redefine the management field increasing<br />
demand for innovative and resilient pedagogical solutions. No organization is immune to the effects of trauma,<br />
whether direct or indirect, and many are unprepared. Organizations can avoid or lessen the impact of these<br />
devastating occurrences by developing an innovative learning approach toward a resilience process that includes<br />
experiential-based scenarios, reinforced by interaction, followed by the creation of community practice teams.<br />
These practice teams will be developed to function as best practice within the organization, helping leaders<br />
understand and implement an adaptable and flexible, domain-centered pedagogical model into their culture that<br />
affords individuals and their collective the resilience to survive trauma, crisis, and disaster. Derived from a<br />
literature review, the practical purpose of this article is threefold: (a) to provide insight on using an enculturated<br />
and domain-centered concept model for teaching resilience; (b) to introduce innovative and resilient<br />
methodologies and to determine the practicality of such approach within organizations; and (c) to provoke an<br />
intense interest in the feasibility of engendering qualities attendant to high levels of resilience among members of<br />
any organized entity.<br />
Keywords: resilience pedagogy, resilience domain-centered, enculturation model, innovative teaching<br />
1. Introduction<br />
Future trauma will redefine the management field in response to crises and disasters increasing<br />
demand for innovative and resilient pedagogical solutions. For example, James and Wooten (2010)<br />
point out, "Financial markets all but crashed, companies that once defined America tumbled…A lone<br />
gunmen killed 13 military men and women and severely injured 28 others in…one of the safest places<br />
in America—the military installation at Fort Hood, Texas" (p. xv). Individuals and organizations will<br />
experience a traumatic crisis at some point in their lives. One study found that 83% of individuals<br />
reported at least one traumatic event, the most prevalent being a witness to serious accidents or<br />
others being killed, injured, or raped (Bruce, Weisberg, Dolan, Machan, Kessler, Manchester,<br />
Culpepper, and Keller, 2001). When a crisis or disaster takes place, the individual affected must deal<br />
with trauma and must make sense of the situation (Weick, 1988). Those who cannot believe the crisis<br />
is actually real face spending their lives mentally reliving it. This assertion provokes two questions:<br />
Why do two people going into war together return with different mental incorporations of the<br />
experience? Why is it that one soldier is able to function normally while the other suffers from<br />
psychological problems? Those individuals who escape crisis without permanent trauma use an<br />
internal cognitive process of rationalization concluding: What is happening around here is bad, but I<br />
am not going to let this become traumatic for me. A cognitive schema forms that allows a person who<br />
just experienced a crisis to view what happened as not traumatic (Cyrulnik, 2005, p. 2) suggesting<br />
that a resilient conversation with the self takes place.<br />
Organizations can avoid or lessen the impact of crises with proper preparation that includes an<br />
enculturated teaching model of experiential-based scenarios reinforced by the interaction of others,<br />
the use of crisis and disaster metaphors, and the creation and development of community practice<br />
teams to serve as a best practice within organizations. These elements ultimately help leaders<br />
understand and implement an innovative, adaptable, and flexible domain-centered pedagogical model<br />
into their culture that affords individuals and their organizations a conceptual approach to the<br />
aftereffects of a crisis. The practical purpose of this paper is threefold: (a) to examine the ability of the<br />
proposed conceptual enculturated and domain-centered teaching model to transcend how leaders<br />
and organizations teach resilience; (b) to introduce innovative and resilient methodologies and to<br />
determine the practicality of such approach within organizations; and (c) to provoke an intense<br />
interest in the feasibility of engendering qualities attendant to high levels of resilience among<br />
members of any organized entity and provide insight into extending the study of resilience. Leaders<br />
who apply this enculturated and domain-centered organizational and pedagogical conceptual model<br />
comprised of synthesized resilience literature and narrative commentary to their organizations can<br />
effectively prepare for future loss, crisis, or disaster. This paper supports the conceptual and practical<br />
understanding of organizational resilience and derives from the literature one innovative pedagogical<br />
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approach toward culturally building and aggressively finding methods leading to developing resilience<br />
prior to trauma.<br />
This paper reveals its focus throughout several sections. First, a review includes the resilience<br />
literature, theoretical view of symbolic interaction, views on the self, and on how people develop their<br />
perspective. Second, listed are views on the domain-centered and enculturated approach toward<br />
teaching and training resilience. Third, provided in detail is an outline summary of an innovative and<br />
resilience pedagogical conceptual model. Fourth, described is an analysis of the proposal of<br />
establishing a resilient community of practice. In this effort, a cumulative set of premises under each<br />
section supports an innovative learning approach toward a resilience process, concluding with<br />
implications and suggestions for the future.<br />
2. Literature review<br />
Innovation and resilience practitioners are attempting to keep pace with the recent global crises and<br />
disasters. The essential effort is for researchers and management practitioners to continue seeking<br />
practical solutions to address future crises and disasters. Multiple perspectives in resilience are<br />
evident (Luthar, 2006). Resilience has been described as: (a) the ability to maintain a stable<br />
equilibrium (Bonanno, 2004); (b) the process of coping with adversity, change, or opportunity in a<br />
manner that results in the identification, fortification, and enrichment of resilient qualities or protective<br />
factors (Richardson, 2002); (c) the developable capacity to rebound from adversity, conflict, or failure<br />
(Youssef and Luthans, 2007); (d) tolerance of the threat situation (Hunter, 2006); and (e) a function of<br />
organizational situational awareness, manages keystone vulnerabilities, and has an adaptive capacity<br />
(Sevelle, Brunsdon, Dantas, Le Masurier, Wilkinson, and Vargo, 2007). Operational resilience is an<br />
enhanced awareness perspective and the readiness to adapt to trauma, crisis, or disaster. Active<br />
enculturated knowledge creates this awareness and the readiness to respond to traumatic conditions.<br />
Readiness to adapt in a resilient way to difficult situations is the essence of this perspective.<br />
Traumatic situations include natural disasters, fires, explosions, terrorist attacks, workplace violence,<br />
military combat, or the single or multiple deaths of anyone within any organization. Considering past<br />
traumas, efforts to teach and train resilience have grown exponentially since 2001.<br />
For example, in one of the largest endeavors undertaken, the Comprehensive Soldier Fitness, the<br />
U.S. Army contracted the University of Pennsylvania to explore the field of psychology in order to<br />
improve their resilience (Casey, 2011). According to General George W. Casey, U.S. Army Chief of<br />
Staff, this effort uses a holistic approach for developing psychological resilience, with education in<br />
resiliency as the focus, and transforming the culture as the significant future challenge (Casey, 2011).<br />
This is merely one sound example of organizations intending to transform their culture into a resilient<br />
one.<br />
2.1 Theoretical basis for the model<br />
Primarily focusing upon the symbolic interaction perspectives of George H. Mead (Morris, 1967) and<br />
Herbert Blumer (1986), with a consideration of the latest views in neuroscience from Antonio Damasio<br />
(2010), symbolic interaction (SI) is best summarized by three premises: (a) human beings act toward<br />
things on the basis of meaning; (b) meaning is derived from social interaction; and (c) meaning is<br />
derived from an individual interpretive process (Blumer, 1986, p. 2). Similarities between SI and<br />
neuroscientific perspectives are evident, specifically regarding how Damasio (2010) and Mead<br />
(Morris, 1967) describe the self as a process. Damasio (2010) explains the self-process as:<br />
The self comes to mind in the form of images, relentlessly telling a story of such<br />
engagements. The images of the modified protoself and of the feeling of knowing do not<br />
even have to be especially intense. They just have to be there in the mind, however<br />
subtly, little more than hints, to provide a connection between object and organism. (p.<br />
204)<br />
Similarly, Mead defines self-formation as, “a social process which implies interaction of individuals in<br />
the group…” (Morris, 1967, p. 164). Both the neuroscientific and SI perspectives suggest that images<br />
(a picture or a metaphor) play a foundational role developing a future self. This future self may show<br />
itself in the form of what perspectives people exhibit, in the metaphors they use, and in their<br />
descriptions of trauma. Previous trauma narrative analysis suggests that people develop images in<br />
their minds in order to make sense of their situation (Walach, 2011). These trauma narratives would<br />
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be important in a resilience teaching pedagogy and a way to incorporate methods to develop an<br />
absorbing resiliently focused self.<br />
2.2 The self and perspectives<br />
Premise: Resilience processes combined with social interaction and direct social activity (this activity<br />
related to social interaction) influence or transform the self.<br />
From the best ancient teachers—Socrates, Plato, and Aristotle—to the best modern era teachers,<br />
several perspectives help establish the nature of the self. Mead’s self interpretation is one in which<br />
social interaction plays a central role: “The self…has a development; it is not initially there, at birth, but<br />
arises in the process of social experience and activity…it develops in the given individual as a result<br />
of his relations to that process as a whole and to other individuals with that process” (Morris, 1967, p.<br />
135). That is, “…Mead saw the self as a process and not as a structure” (Blumer, 1986, p. 62).<br />
Damasio (2010) similarly reflects that the brain processes involve “the body in its external, actionoriented<br />
aspects…and that these processes are greatly affected by individual experience” (p. 129).<br />
What are the behaviors, dispositions, practices, or cultural structures that would reflect the self and be<br />
adaptable? This question recalls a direct channel to the self that includes the meme by Richard<br />
Dawkins, the habitus by Pierre Bourdieu, and the reference group as perspective by Tamotsu<br />
Shibutani.<br />
Walter (2007; citing Dawkins, 1976) states that “meme is a unit of information residing in a brain…can<br />
include ideas, concepts, skills, and procedures…that are replicated from one mind to another” (p.<br />
693). Csikszentmihalyi (1994) explains the meme as:<br />
Dawkins used the meme term to describe a unit of cultural information comparable in its effects on<br />
society to those of the chemically coded instructions contained in the gene on the human<br />
organism...the meme is part of a conscious process directed by human intentionality…after a meme<br />
has come into existence, it begins to react with and transform the consciousness…and that of other<br />
human beings who come into contact with it. (p. 120)<br />
Reay (2004; citing Bourdieu, 1998, p. 81) states that “habitus is a socialized body...which has<br />
incorporated the immanent structures of a world or of a particular sector of that world—a field—and<br />
which structures the perception of that world as well as action in that world” (p. 432). Smith (2003;<br />
citing Bourdieu, 1990) adds that habitus is, “a principle of construction of the objects of knowledge, a<br />
system of structured and structuring dispositions" (p. 464). Fuchs (2003) says habitus is “a matrix of<br />
patterns of cognition, perception and action that produces in interplay with actual context conditions of<br />
the social field an actor is situated in, the praxis of this actor" (p. 395) and asserts that it is influenced<br />
by social patterns.<br />
Shibutani (1955) states that the term “reference group as perspective" is the social phenomena of the<br />
reference group as the inconsistency in behavior as a person moves from one social context to<br />
another. Shibutani (1955) explains, “All discussions of reference groups involve some identifiable<br />
grouping to which an actor is related in some manner and the norms and values shared in that group”<br />
(p. 562). When people transit the different environments and these reference groups’ change, if<br />
others reinforce the perspective, their responses provide support for the new perspective (Shibutani,<br />
1955, p. 569; citing Mead, 1938) and the new perspective would likely become permanent.<br />
In a cross-comparison of the meme, habitus, reference group, and SI, several common qualities are<br />
evident: (a) social interaction and dialogue (conversations of self-to-self and self-to-others); (b) selfanalysis<br />
or self-reflection of ideas, actions, or group participation; (c) malleable thinking, perceptions,<br />
behaviors, or perspectives within a cultural group; (d) cultural structures or formations develop where<br />
commonality of interaction, practice, or thinking exists in the same domain; (e) association to, the<br />
transporter of, or the storage entity for thoughts, perceptions, or behaviors; and (f) social systems<br />
influence each, but they also influence the social system, culture, or group.<br />
SI forms a conceptual umbrella over meme, habitus, and reference group to illuminate that people<br />
operate from a reference group perspective based on their interaction with their self and the self with<br />
others (Figure 1). This paper uses SI as the fundamental framework to explain influences on teaching<br />
pedagogies, to construct a pedagogically oriented conceptual model that uses social interactive<br />
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methods, and to illuminate the community of practice to sustain a comprehensive resilience body of<br />
knowledge.<br />
Figure 1: Locus of Resilience (LOR)<br />
Teaching resilience to people requires removing existing perspectives that act as a potential barrier to<br />
revealing an absorbing resilient self. This paper defines the locus of resilience as the central and<br />
connected focus of targeted behavior transformation. One could interpret the meme, habitus, and<br />
reference group as perspectives or influencers of the self. There is subtle reference to an absorbing<br />
self in some resilience research (see Bonanno, 2004; Carver, 1998; Richardson, 2002) generating the<br />
hypothesis that it is possible to develop an absorbing resilient self. Based on interaction, these<br />
domains embody perspective change, situation-to-situation, and are reflected in the locus of resilience<br />
(the term LOR, adapted from Luthar, 2006, p. 741). Lending support to this assertion, Lakoff and<br />
Johnson (1999, p. 78) write that second-generation cognitive science reveals the central role of our<br />
embodied understanding in the structure and content of our thought and that meaning is born from the<br />
ways in which we function in the world and make sense of it via bodily and imaginative structures.<br />
Similarly, Cyrulnik (2005, p. 11) concedes that certain events are metaphors of the self.<br />
2.3 Enculturated and domain-centered learning<br />
Premise: Teaching and training with a domain-centered enculturation approach is key and central to<br />
resilience learning and preparing for future crisis.<br />
Enculturation operates as people acquire a particular community’s subjective viewpoint (Brown and<br />
Duguid, 1991, p. 48; citing Brown, Collins, and Duguid, 1989). Schein (2004) states, “this is the<br />
process of the leader teaching the new member how to become accepted” (p. 245). Schein’s<br />
statement raises the following: Does culture or enculturation depend on the trauma domain? In one<br />
study, Amabile (1983, p. 363) proposed that the domain-relevant skills depend on innate cognitive,<br />
perceptual, and motor abilities as well as formal and informal education in the domain of endeavor. In<br />
another study, Robertson (1995) asserts, “work setting (social and physical factors) clearly comprises<br />
a number of specific elements that potentially can influence the behavior of organizational members”<br />
(p. 83). Relating the two latter perspectives to the self, Damasio (2010) explains that when we form<br />
our thoughts, the protoself is created. This protoself, “is a collection of maps that remains connected<br />
interactively with its source, a deep root that cannot be alienated” (p. 200). Does the physical<br />
environment that trauma occurs in make the difference in our mental mappings and in pedagogy? Are<br />
we developing the best resilient “protoself?” Damasio (2010) explains, “something critical must<br />
change in the very state of the protoself for it to become a self…that is, a core self…The mental<br />
profile of the protoself must be raised and made to stand out…It must connect with the events that it<br />
is involved in” (p. 202). Thus, people develop common frames of reference. Ford (1996, p. 1127)<br />
concludes that group norms can induce conformist behavior, suggesting that temporary and shortterm<br />
resilience teaching outside the domain from which the permanent behavior will reside might<br />
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induce a conformist behavior, which may not result in a permanent behavior change. Non-resilient<br />
behavior could quickly replace resilient behavior if leaders do not reinforce the new behavior in the<br />
permanent domain of practice. A resilience pedagogy that is not supported in the actual domain<br />
where the perspective is expected to grow will succumb to non-resilient behaviors, making a<br />
convincing argument for organizations to focus on the direct influencers of a malleable self—i.e.,<br />
enculturated and domain-specific practices. If leaders adopt a domain-centered resilience<br />
pedagogical approach, enculturation can operate within an organization.<br />
3. Resilience learning conceptual model<br />
Premise: Embodied resilience pedagogy has direct influence on changing the self into a resilient self.<br />
Future challenges call into focus concepts, methods, and processes that have the potential to unlock<br />
an absorbing resilient self. Building on this assertion, Kolb’s (1976) experiential learning brings out the<br />
different perspectives that may influence a self-transformation resulting in resilient behavior. Kolb<br />
(1976, p. 22) asserts that the learner needs four different kinds of abilities: concrete experience,<br />
reflective observation, abstract conceptualization, and active experimentation. Freitas and Neuman’s<br />
(2009) recent version of Kolb’s representation, the exploratory learning model, includes experiences,<br />
exploration, reflection, forming (abstract concepts), and testing in different situations (abstract, lived,<br />
and virtual)—incorporating several of Kolb’s explanations with the exceptions of 3D immersive<br />
environments, e-learning, and the “exploration as being a key learning construct through observations<br />
or through collaborative activities, communication, learning and social interaction” (refer to Freitas and<br />
Neuman, 2009, p. 345). This paper extends and remodels the Freitas and Neuman (2009) exploratory<br />
model into the practice and sustainment of resilience by teaching resilience principles seeking to<br />
change the meme, habitus, or reference group perspectives, and to sustain resilience knowledge and<br />
the resilient self through the concept of community of practice. Freitas and Neuman (2009) assert that<br />
one might consider Kolb’s model as descriptive rather than an analysis of how people learn. The<br />
conceptual model in Figure 2 shows SI used as a fundamental framework in its adapted form as both<br />
descriptive and analytic.<br />
This model relies on several human behavior operational assumptions: (a) individuals experience<br />
trauma as individuals; (b) learning and training in the permanent domain where future trauma will<br />
likely occur closely aligns with social interaction and evolving cognitive patterns linked to the<br />
permanent domain; (c) teaching resilience and eliciting resilient behavior would follow resilient<br />
principles or attributes derived from actual trauma or trauma commentary; (d) resilient behaviors or<br />
perspectives would not develop from a single and brief teaching and training session, but would occur<br />
through a series of iterative resilience experiential exercises—a series of increasingly more complex<br />
resilience exercises and simulations would occur with each iterative resilience cycle; (e) leaders will<br />
reinforce behaviors and perceptions leading to resilience in the actual domain with the group that will<br />
experience trauma together; (f) the non-resilient interaction of others will replace resilient behavior<br />
unless leaders create an atmosphere to reinforce the new resilient perspective; (g) if people bring<br />
forth the meme, habitus, or reference group, it would be an important consideration in trying to<br />
understand “how students navigate their way through the…educational system” (Dumais, 2002, p,<br />
45); and (h) the study of and the students of resilience is the main unit of study by the teachers.<br />
The central feature of this model is the locus of resilience surrounded by all other behaviors,<br />
dispositions, perspectives, or cultural associations brought into the learning environment. Leaders can<br />
adapt future resilience exercises to individuals or groups participating in pre-crises preparations;<br />
therefore, the locus of resilience becomes the target for resilience transformation. The transformation<br />
objectives of iterative resilience teaching and training include: (a) to build situational awareness and<br />
specific sense making from trauma scenario reactionary reference points; (b) to reflect on and employ<br />
identified resilience principles; (c) to develop permanent conversation intervention methods with the<br />
self—establish resilient dialogue reference points; and (d) to incorporate resilience principles into<br />
future reactions to actual trauma. Each series of iterative resilience exercises is intended to strip away<br />
non-resilient behavior and replace it with resilient behavior. For example, leaders could structure one<br />
program to teach resilience metaphors where the participants replace current images, pictures, or<br />
cognitive interpretations during the resilience exercises (exploration, reflection, and forming abstract<br />
concepts) with metaphors that would form the basis for permanent neural mappings (Lakoff and<br />
Johnson, 1999). Linking metaphors and their use to neural activity, Lakoff and Johnson (1999) assert<br />
that embodied metaphors “provide a neural learning mechanism and a precise neural computational<br />
mechanism for acquiring the metaphors and carrying out metaphorical inferences” (p. 56). Leaders<br />
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should model a typology of resilience metaphors from actual trauma. They should also use this<br />
resilience typology to analyze trauma conversations in specific behavior domains. Ford (1996, p.<br />
1117) asserts that accumulated experiences lead individuals to develop interpretive schema,<br />
preferences, expectations, and knowledge related to specific behavior domains. Articulating an<br />
education perspective, Sousa (2006, p. 49; citing Maquire, Frith, and Morris, 1999) shares that brain<br />
scans have shown that when new learning is readily comprehensible (sense) and can be connected<br />
to past experience (meaning), there is substantially more cerebral activity followed by dramatically<br />
improved retention. The ultimate goal of immersive resilience teaching and training is to build and<br />
sustain cognitive trauma reference points or neural mappings (Damasio, 2010, p. 145) for actual<br />
trauma and to develop a resilient conversation with the self. Conversations, according to Denning and<br />
Dunham (2010), “are important because they generate action and are easy to observe in narrative<br />
stories by and of innovators” (p. xvi). Figure 2 graphically shows the sustainment model element as<br />
the behavior continuity entity—defined as the organization’s resilience community of practice.<br />
Figure 2: Resilient self concept pedagogical model<br />
3.1 Resilient communities of practice<br />
Premise: Resilient communities of practice that are enculturated and domain-centered provide an<br />
embodied medium for innovation and resilience practitioners to sustain resilient discourse and<br />
behavior practices.<br />
Deliberate efforts to establish formal and informal resilient communities of practice will help leverage<br />
and sustain the resilience knowledge taught through enculturated (Osberg and Biesta, 2008, p. 316)<br />
and domain-centered learning. These efforts will help develop resilient behaviors and, in turn, will<br />
develop a resilient culture, becoming a "community of practice" (Lave and Wenger 1991; cited by<br />
Hara and Schwen, 2006). If learning is constructed as participation in a community of practice rather<br />
than the internalization of self-education (i.e., socialization) then the nature of that community is a<br />
crucial factor in the quality of the learning (Smith, 2003, p. 466). Cox (2005) suggests that the<br />
community of practice is a conceptual lens through which to examine the social construction of<br />
meaning of the self and the individual—“a central proposition of the community of practice is that<br />
learning is more than simply acquiring knowledge, it is about an identity change” (p. 528; citing Lave<br />
and Wenger, 1991). This identity change is reinforced through the resilient community of practice—a<br />
resilience practice deliberately established, practiced before trauma occurs, and championed by a<br />
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leader that can pull members together (S. J., personal communications, March 8, 2011) with a<br />
common resilient vision.<br />
4. Discussion and conclusion<br />
A search of resilience training applications and programs resulted in a multitude of models,<br />
frameworks, typologies, and efforts aimed at building or measuring resilience. In a comparative<br />
synthesis of literature-based resilience-training applications, this paper inquired into four models. This<br />
synthesis included an Online Resilience Training Program for Sales Managers (Abbott, Klein,<br />
Hamilton, and Rosenthal, 2009), a psychosocial resilience training program called READY (Burton,<br />
Pakenham, and Brown, 2010), the U.S. Army Comprehensive Soldier Fitness Program (Cornum,<br />
Mathews, and Seligman, 2011), and a teaching and learning resilience framework for health<br />
professionals (McAllister and McKinnon, 2009). Synthesizing these programs revealed commonalities<br />
among them including (a) a structured or traditional didactic, online, and workshop learning modules<br />
or instructional tutorials; (b) a core set of resilience attributes or cognitive skills; (c) reflection or<br />
reevaluation of current individual identities; and (d) all conducted their training or research outside the<br />
domain where trauma would likely occur. Points to note are that no program was exactly alike: two<br />
studies lacked a discussion of the role of organizational culture and the impacts of sustaining a<br />
resiliency program (Abbott et al., 2009; Burton et al., 2010); no study agreed on an evidence-based<br />
method to develop resilience.<br />
The resilience synthesis above raises the question of how organizations should implement the<br />
proposed Resilient Self Concept Pedagogical model in this paper. The literature-based research<br />
suggests that developing and sustaining resilience requires that a program is domain-centered,<br />
residual, and iterative. Research also suggests that organizations should integrate and reinforce new<br />
resilient behaviors with the culture, community, and enculturate new resilient behaviors and<br />
perspectives with core organizational resilience attributes within the context of dealing with potential<br />
trauma. The proposed pedagogical model aims to take advantage of all these developmental aspects.<br />
This paper describes one of several general methods toward implementing this paper’s conceptual<br />
model in Figure 3. Organizations can implement this model in sequential stages or they can select the<br />
most applicable stages for their organization.<br />
Figure 3: Preparation to train resilience checklist<br />
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Christopher Walach<br />
In the preparation to train resilience checklist, one of the central features toward developing resilience<br />
is to establish residual resilient cohorts that include a mixture of new and veteran members as part of<br />
the resilience training. Members would receive an initial assignment or selection to a specific cohort<br />
and remain with this cohort throughout their career. Once members complete their initial series of pretrauma<br />
exercises, they would come back to their same cohort even as new members populate these<br />
expanding groups. Trained in the elements of this model, an organization could then base their<br />
resiliency program on the Resiliency Self Concept Pedagogical model, designing their exercises<br />
based on the trauma experiences, exploration, reflection, forming, and testing aspects unique to the<br />
organization. The groups in the resiliency program become part of the organization’s resilient<br />
community of practice and part of a residual resilience knowledge-sharing group.<br />
Enculturated and domain-centered learning have a direct relation to how cultures develop, how<br />
leaders sustain them, or how cultures unexpectedly change because of trauma from a crisis or<br />
disaster. Reinforcing resilient behavior in a culture that does not understand resilience, has not<br />
received training and enculturation in the principles of resilience from actual trauma, or has not built<br />
prior trauma cognitive reference points may prove to be a difficult leadership endeavor. Future<br />
research and management efforts should focus on training leaders in a resilience pedagogy that<br />
resides in the domain where future trauma will occur and sustaining this pedagogy through a<br />
deliberate resilient community of practice—leaders can develop an enculturated resilient self through<br />
an exploratory, iterative, reflective, and immersive resilience process. By completing such a<br />
pedagogy, there are three benefits: (a) a better understanding of how the self receives, reflects, and<br />
interprets trauma; (b) a better understanding of communication processes with the self to the self, the<br />
self with others, and the interaction of the self as a process; and (c) a pre-trauma resilience<br />
knowledge base and cognitive reference points for future application of trauma metaphors for sensemaking<br />
during real trauma. An innovative and resilience teaching and training program that does not<br />
address these latter aspect of perspectives and preparing for trauma in advance is just another<br />
training program. Changing one’s awareness is to transform the self, which implicates how leaders<br />
should develop future resilience programs and resilient communities of practice and how they should<br />
integrate the socially interactive qualities previously discussed for this resilient self-transformation.<br />
After future pilot testing of the proposed model, any organization could take this innovative outline<br />
approach toward the resilience process and develop a practical pedagogy that prepares people in<br />
advance of trauma. The intent with such a resilience process is to awaken and develop an absorbing<br />
resiliently focused self!<br />
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852
New Perspectives on Open Innovation: Sources of<br />
Openness for Innovation in UK high-tech SMEs<br />
David Weiss<br />
University of Cambridge, Institute for Manufacturing, Cambridge, UK<br />
dw368@cam.ac.uk<br />
Abstract: Small- and medium-sized enterprises (SMEs) fuel economies around the globe and outweigh their<br />
large counterparts, not only in number but also in overall impact on society. At the same time, uncertainty in the<br />
global marketplace has given rise to a fundamental change in innovation strategies, causing Open Innovation<br />
(OI) to develop into standard practice in many organizations. However, the focus of OI studies on large<br />
multinational companies (MNCs) has led to an unfortunate bias within the literature. This study addresses this<br />
gap in current research by analysing the sources of openness for innovation in the context of UK high-tech<br />
SMEs. Theoretically, the paper refers to the resource-based view and stresses the importance of internal<br />
capabilities in OI activities. The research is based on three case studies of SMEs in the Cambridge technopole<br />
region, a mature high-tech business eco-system in the East of England. Qualitative data was collected through<br />
semi-structured interviews as well as in-depth research into the case-companies. The data was then coded and<br />
categorised in order to identify common sources of openness for innovation. The main findings reveal that while<br />
SMEs are generally open towards OI activities key differences remain within the OI process compared to larger<br />
companies. Credibility and trustworthiness of external actors involved seems essential to OI implementation in<br />
SMEs. Moreover, sources of openness for innovation in SMEs seem to be rather external compared to MNCs,<br />
which benefit from a more sophisticated internal eco-system. These differences are represented in a preliminary<br />
framework of OI implementation derived from the qualitative research. It is important to state that this is initial<br />
exploratory research with limits in terms of generalisablity, written as a grounded starting point for further<br />
research in the area of OI in SMEs.<br />
Keywords: Open Innovation; SMEs; Capabilities; Case Study; Innovation Sources<br />
1. Introduction<br />
Small- and medium-sized enterprises (SMEs) fuel economies around the globe. They outweigh their<br />
large counterparts, not only in number but also in overall impact on society, and are thus essential<br />
drivers for national wealth and governmental policy. At the same time, uncertainty in the global<br />
marketplace has given rise to a fundamental change in organisational innovation strategies. The<br />
amount of knowledge necessary to survive in today’s competitive markets is too large for any one<br />
company to handle and caused Open Innovation (OI) to develop into standard practices in many<br />
organizations. Defined as “the use of purposive inflows and outflows of knowledge to accelerate<br />
internal innovation, and expand the markets for external use of innovation, respectively” (Chesbrough<br />
et al. 2006), it describes a development away from traditional organisational views that ‘successful<br />
innovation requires strict control’ towards a set of more ‘open’ principles with regard to innovation<br />
processes.<br />
However, the focus of OI studies on large multinational companies (MNCs) has led to an unfortunate<br />
bias within the literature (Lee 2010; Van de Vrande 2009). This study addresses this gap in current<br />
research and the ongoing policy discussion about small enterprises by analysing sources of openness<br />
for innovation in the context of high-tech SMEs in the UK. The next section summarises previous<br />
literature on the topic followed by a working definition of the term ‘sources of openness’ in the context<br />
of open innovation. Section four explains the methodology used and section five gives an overview of<br />
the three case studies of SMEs in the Cambridge technopole region, a mature high-tech business<br />
eco-system in the East of England. Section six presents the results of the study, which are further<br />
discussed in section seven, which lays out differences with regard to MNCs and states initial insight<br />
into the sources of openness for innovation in SMEs. The last section concludes the study and<br />
discusses a number of implications.<br />
2. The Open innovation paradigm<br />
Trends towards open innovation practices were mentioned in organizational studies literature<br />
decades before Henry Chesbrough first introduced the term in 2003. Organisations have long tried to<br />
improve their competitive capabilities and benefit from external collaborations by engaging in strategic<br />
alliances and outsourcing strategies (Gulati 1998; Nooteboom 1999). In 1988, Eric von Hippel<br />
described four external knowledge sources useful for organizations: competitors, suppliers and<br />
customers, universities and government, and other nations. Moreover, early indications for the need<br />
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of external sources in corporate innovation can be found in Teece’s (1986) article on complementary<br />
assets, as well as Cohen and Levinthal’s (1990) work on absorptive capacity.<br />
Based on research on Xerox’s Palo Alto Research Centre (PARC), Chesbrough (2003a) proclaimed<br />
the beginning of an ‘era of open innovation’ by introducing a paradigm shift. He described a<br />
movement away from the ‘closed innovation’ paradigm based on PARC’s overly internal focus of its<br />
research output towards more open processes regarding organisational innovation strategies. In<br />
Chesbrough’s (2003a) open innovation model, firms commercialise external and internal ideas by<br />
deploying both outside and in-house pathways to the market. However, it is important to differentiate<br />
between merely outsourcing R&D and engaging in open innovation (Almirall & Casadesus-Masanell<br />
2010; Enkel, Gassmann, & Chesbrough 2009). Firms do not have to eliminate internal innovation<br />
practices in order to implement OI successfully (O’Connor 2006). Additionally, Chesbrough (2003b)<br />
states “as innovation becomes more open, intermediate markets have now arisen in which parties can<br />
transact at stages which previously were conducted entirely within the firm”. Specialized<br />
intermediaries that function as brokers or middlemen of open innovation collaborations have taken on<br />
an important role when dealing with rising information flows between organizations.<br />
2.1 Open innovation in MNCs<br />
There is a strong bias towards the study of large multinational companies within the OI literature. Most<br />
findings and implications of open innovation practices are based on MNC data. It seems there is still a<br />
very large variation in terms of openness among firms (Brunswicker & Vanhaverbeke 2010;<br />
Christensen, Olesen, & Kjar 2005) meaning that open innovation should not be regarded as the<br />
panacea to all innovation dilemmas per se. Christensen (2006) finds that large incumbent MNCs do<br />
apply elements of OI, but reports a ‘strong acquisition-based way of practicing open innovation’ by<br />
buying out small technology based start-ups at the embryonic stage of a new technology cycle.<br />
Lichtenthaler (2008) presents questionnaire-based data of 154 medium and large companies<br />
concluding that most firms in the sample still follow a relatively closed innovation strategy.<br />
Nevertheless, he describes a clear trend towards OI compared to previous innovation studies. He<br />
mentions, however, that smaller firms “are affected differently by open innovation compared to large<br />
companies” (p.155). A finding that could potentially have been distorted by the exclusion of SMEs in<br />
this study is that there seems to be no significant industry differences between OI in clusters.<br />
Lichtenthaler (2008) also claims that for MNCs, it is individual firm strategy rather than industry<br />
characteristics that determine the degree of open innovation.<br />
2.2 Open innovation in SMEs<br />
“SMEs are the largest number of companies in an economy, but they are under-researched in the<br />
open innovation literature.” (Gassmann, Enkel, & Chesbrough, 2010, p.7). This misrepresentation<br />
within the body of current OI literature paints a distorted picture of SMEs in today’s knowledge<br />
economy. Data from the National Science Foundation shows that the percentage of total US<br />
industrial R&D spending for small- and medium-sized companies (less than 1000 employees) has<br />
increased from 4.4% in 1981 to 24.7% in 2001. Large companies (more than 25,000 employees),<br />
however, accounted for 70.7% of US industrial R&D spending in 1981, but were left with only 39.4%<br />
in 2001 (source). This reveals a much more level playing field for industrial innovation activity<br />
compared to 30 years ago and emphasises that it would be wrong to assume that SMEs do not<br />
engage in open innovation as suggested by the current lack of literature (Hoffmann 1998). Gassmann<br />
et al. (2010) further explain that ‘while most of the firms described in earlier works on open innovation<br />
were large multinational firms, it has become apparent that smaller and medium-sized firms are also<br />
opening up their innovation process’ (p.3).<br />
2.3 The resource-based view and internal capabilities for OI<br />
In order to explain this shift in innovation standards we turn to a popular strand of organisational<br />
theory that emerged during the late 1980s addressing the role of a company’s internal resources in<br />
terms of its strategic focus. The resource-based view assumes that a firm derives sustainable<br />
competitive advantage from valuable, rare, inimitable and non-substitutable (VRIN) resources (Barney<br />
1986 & 1991). The firm’s competitiveness therefore depends on its distinctive and heterogeneous<br />
internal capabilities (Mahoney & Pandian 1992). Internal capabilities in form of core competencies are<br />
unique, hard-to-imitate sets of skills that render value to the company (Prahalad & Hamel 1990). Key<br />
issues of the resource-based view relate to the possession of these valuable resources and the<br />
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David Weiss<br />
question of how to recognize them. The main focus, however, lies on the actual transformation of<br />
VRIN resources into a sustainable competitive advantage for the firm (Coff 1997). Powell (2006)<br />
describes close ties between dynamic capabilities (of which internal capabilities are a part by<br />
definition) and technological innovation. Open innovation, especially within SMEs with limited<br />
resources, can help nourish and grow internal capabilities and resources for SCA by freeing up<br />
additional resources previously wasted on processes that were not at the core of the business model.<br />
Open innovation works against unrelated business diversification by giving companies the chance to<br />
focus on core internal capabilities (Christiansen 2006). Theerfore, SMEs can potentially overcome<br />
their ‘liability of smallness’ by opening up their innovation process, thus benefitting directly from open<br />
R&D activities (Keupp & Gassmann 2007).<br />
3. Sources of openness<br />
Due to the major differences to MNCs as well as the absence of previous literature, addressing the<br />
area of open innovation in SMEs poses a number of challenges (Gassmann 2006). OI practices can<br />
be analysed in a variety of ways, ranging from types of OI to its drivers (Docie 2010). Regarding the<br />
current state of OI literature on SMEs, however, it makes sense to consider the foundations of open<br />
innovation activities by evaluating the sources of openness for innovation.<br />
Previous literature on open innovation fails to clearly differentiate between such terms as ‘types of OI’,<br />
‘drivers of OI’ and ‘OI processes’. Introducing the term ‘sources of openness’ in an open innovation<br />
context therefore requires a clear definition of the concept. The Oxford English Dictionary defines a<br />
‘source’ as an origin or a beginning, the root of a process or development. For the purpose of this<br />
paper, a source can be a person, object, or process which causes, creates or originates initial<br />
‘openness’ within a firm. The term openness in turn is defined as a lack of obstruction, characterized<br />
by an attitude of ready accessibility. Openness with regard to knowledge flows describes a state<br />
without obstruction to passage. Openness for innovation in this sense illustrates the willingness,<br />
readiness, and ability of a firm to receive and provide information and knowledge to innovate. As a<br />
working definition for this study, ‘sources of innovation’ therefore represent the origin or root cause of<br />
a gap in an otherwise assumingly closed innovation system – the cause for the closed system to<br />
become porous to knowledge transfers outside the firm’s internal innovation system.<br />
4. Methodology<br />
This study was set up as a first step towards addressing the issue of underlying sources of OI in a<br />
SME context – an area widely under-researched until now. A qualitative approach based on a small<br />
number of case studies is used to delve deeper into the complexities of open innovation<br />
implementation in small enterprises. Initial findings aim to provide guidance to better understand<br />
some current OI issues rather than to conclude with a set of indisputable final results. This research<br />
refers to, but in no way claims to be comparable in terms of explanatory power to, larger, quantitative<br />
studies on OI in an MNC context. However, the cases aim to account for a certain degree of sampling<br />
error by focusing on a broad set of common OI problems faced by various types of SMEs as<br />
mentioned in previous literature. At the very least, this leads to important initial insights into unique<br />
challenges of SMEs confronted with the open/closed innovation dilemma.<br />
The case studies focus on three UK high-tech SMEs from the Cambridge technopole cluster.<br />
Qualitative data was collected through several rounds of semi-structured interviews conducted over a<br />
period of three months. Primary and follow-up interviews consisted of both open- and closed-ended<br />
questions. “Snowball” sampling was used to indentify other informants directly involved in the<br />
processes investigated. Additional data sources included archival data such as press releases and<br />
information from the companies’ websites. This led to a triangulation of data in order to improve the<br />
reliability of the information collected as well as the robustness of the interpretations (Miles &<br />
Huberman 1994). Within each organization, a variety of factors attributable to OI processes and their<br />
sources were examined. The data analysis included the assessment of similarities and differences,<br />
coding and categorizing, and constant comparison (Silverman 2006). Both within-case and crosscase<br />
analyses were used without any a priori hypotheses. Initial categories were formed, coded, and<br />
triangulated for the information obtained. The constant comparative method was used to identify<br />
different themes that became apparent from the data. Final finings were ultimately based on a blend<br />
of previous theoretical advancements, collected data from the different cases and independent<br />
interpretation.<br />
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5. Research context<br />
David Weiss<br />
This study focuses on high-tech SMEs located in one particular region of the UK. Case companies<br />
come from segments of high-tech industries previously studied for OI. Prior studies found a stronger<br />
presence of OI activities in high-tech industries (Brunswicker & Vanhaverbeke 2010). CEOs from all<br />
three case-companies also radiated neural or positive attitudes towards the underlying concept of OI.<br />
Assuming an initial tendency towards OI for these high-tech SMEs, the study focuses on the<br />
underlying sources of openness for OI within a single business eco-system. Analyzing three different<br />
high-tech companies, the results address widespread OI hurdles for high-tech SMEs, initially focusing<br />
on commonalities rather than differences. The ‘Cambridge technopole’ is a geographic area of intense<br />
high-technology innovation activity encompassing the City of Cambridge at its heart and the subregional<br />
Greater Cambridge hinterland of approximately 25 miles radius. Home to more than 4000<br />
high-tech companies, it benefits from the close proximity of the University of Cambridge, a variety of<br />
business incubators, innovation centers, and entrepreneurial advisory boards, as well as the presence<br />
of R&D labs of large multinational corporations. A high concentration of small- and medium-sized<br />
companies creates a business eco-system with great potential for open innovation analysis (Breschi &<br />
Malerba 2005).<br />
5.1 Case study company A<br />
Founded in early 2004, nanotech company A produces a variety of dime-sized devices that can be<br />
programmed to detect a wide range of chemical agents present in the air in very small quantities.<br />
Using nanofabrication technique, complete chemical detection systems are put on a chip, which can<br />
then be used in a range of applications, across industries. At the heart of the chip is a solid-state<br />
sensor whose operational parameters can be fine-tuned to detect a wide range of airborne of<br />
dissolved chemical agents in extremely small quantities. The detectors are manufactured exclusively<br />
by company A and made available on an OEM basis to other third-party application developers. Three<br />
years ago, the company’s inventor CEO was replaced with an experienced CEO from a larger hightech<br />
firm. Innovation had mainly been a focus of the company’s internal R&D lab, but the over the last<br />
two years the company had begun to engage with outside sources to evaluate the potential of<br />
external collaborations. At the end of 2010, company A was employing 42 people with revenue of 14<br />
million Pounds.<br />
5.2 Case study company B<br />
Part of the semiconductor industry, company B is an independent provider of System-on-Chip (SoC)<br />
infrastructures that enable rapid development of embedded systems based on advanced SoC. It is<br />
developing various flexible and generically compatible SoC debug support platforms. The platforms<br />
support SoC devices that combine multiple processor and peripheral cores from different providers<br />
and affords highly compact implementation. Set up in 2005, the company is still run by its founders<br />
who, as a serial entrepreneur, is actively trying to set up links between his own and other related<br />
firms. Staying on top of the market has been a big issue which has led to a number of external<br />
collaborations. However, IP issues led to a large legal bill for the company, which currently employs<br />
17 people with a 2010-revenue of 2.5 million Pounds.<br />
5.3 Case study company C<br />
Company C provides IP products that encompass all aspects of energy recycling to reduce the power<br />
used by electronic systems. Founded in 2002, the company is developing energy recycling<br />
techniques which can be used to recover power used communicating between chips. Its products<br />
include patented technology that uses the speed of submicron CMOS to actively mimic the voltagecurrent<br />
drive characteristics of a classic driver with a source terminator resistor. Company C also<br />
offers fully on-chip technology which allows heavily loaded interconnections to be driven using only<br />
50% of the power used by a conventional buffer. C is run by its initial founder who, through previous<br />
ventures, seems well aware of the importance of organizational embeddedness in its environment<br />
and external collaborations. However, the company struggles to find appropriate partners in<br />
developing further its current set of products. C employs 21 people and ended the year 2010 with<br />
revenue of approximately 4 million Pounds.<br />
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6. Findings<br />
David Weiss<br />
No single company can acquire all the relevant expertise in the world. Even though MNCs have far<br />
more resources to invest in innovation activities than SMEs, underlying motivations for OI should be<br />
similar: The desire to leverage external knowledge to make its own innovation process more efficient.<br />
However, OI implementation is much more complex than the decision to be more collaborative. The<br />
findings reveal that variations in OI practices are not only caused by dissimilar resource endowments<br />
for MNCs and SMEs but are also attributable to different underlying sources of openness. Therefore,<br />
it is important to look further than simply the motivation driving organizations towards OI. The cases<br />
suggest that open innovation for SMEs might be more of an externally focused challenge than initially<br />
assumed. While all three organizations expressed the wish to open up innovation processes they<br />
were highly aware of current and future obstacles to OI ventures. The following section presents the<br />
most common findings verifiable across all three cases.<br />
6.1 Main implications for OI in SMEs<br />
All three companies put great emphasis on considering the ‘cost of innovation’ itself as well as the<br />
‘cost of opening up the innovation processes’ in particular. The cases revealed the following major<br />
concerns in this area:<br />
� Costs<br />
� Risk<br />
� Exposure<br />
� Size<br />
� Resources<br />
SMEs find it harder to estimate the costs of opening up their innovation processes and frequently<br />
encounter difficulties hedging themselves against arising risks of increased openness. Compared to<br />
MNCs, SMEs have to expose a greater percentage of their overall business structure to open<br />
innovation practices. Moreover, SMEs tend to not be taken seriously enough due to smaller size or<br />
lack of resources (financial as well as human) to engage in elaborate OI practices. These findings<br />
also refer to the role of ‘credibility’ and ‘trustworthiness’ regarding open innovation systems for SMEs.<br />
Almost all interviewees mentioned the importance of making educated judgments about<br />
trustworthiness and credibility of the parties involved in knowledge transactions. It was emphasized<br />
that this is a mutual problem among innovation partners. SMEs are not established well enough to be<br />
able to effortlessly convey credibility to their innovation partners just like they themselves have trouble<br />
estimating the trustworthiness of their collaborators. Compared to larger companies, SMEs seem to<br />
be more reluctant to open up to external partners due to their proportionally higher risk exposure of<br />
their overall business as well as their limited resource base.<br />
6.2 Sources of openness in innovation<br />
� Despite common concerns about OI, SMEs are rarely able to rely on entirely closed innovation<br />
systems and still remain competitive within the market place. All three cases highlight efforts of<br />
SMEs to become part of more open innovation systems. Taking into account different resource<br />
endowments and their impact on OI capabilities, the findings also reveal a number of common<br />
sources of initial openness for innovation in SMEs based on the definition in section 3.<br />
� Market configuration: The external market structure leads to a more open approach to<br />
technological innovation and causes active knowledge transactions among parties.<br />
� Dynamics of the business eco-system: Inter-organizational relationships are predefined by a<br />
rather open business eco-system embedding companies in an active collaboration network.<br />
� Customer and supplier intimacy: Customers and suppliers demand to be involved in the<br />
innovation process to ensure more custom fit than internal SME structure could provide.<br />
� Intermediaries / brokers: Third party consultants establish collaboration, actively encourage more<br />
open innovation processes (IP exchange, university collaboration).<br />
� Technology development: Due to limited resources, technology can only be developed to its full<br />
extent with the help of external sources and thus opens up the innovation process horizontally.<br />
� People: Organization members need or desire external input into the innovation process.<br />
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The main sources of openness stressed across all three cases turned out to be market configuration,<br />
eco-system dynamics, and customer and supplier intimacy. The following section discusses these<br />
findings in more detail.<br />
7. Discussion<br />
For SMEs, the five main obstacles found in the case studies were mentioned in section 6.1. They<br />
show that SMEs have to be particularly careful trying to estimate the cost of opening up innovation<br />
processes and determine whether such as move would prove advantageous taking into account their<br />
limited resources. OI in SMEs needs to be planned and coordinated strategically and turns into a<br />
more rigorous number-crunching process compared to MNCs. SMEs expose a larger proportion of<br />
their business structure to OI risks. Having relatively more to lose, SMEs need to be especially careful<br />
and informed regarding the sharing of internal knowledge with external partners. The data suggests<br />
that CEOs who founded the SME are reluctant to engage in OI due to the fear of loss of vital IP to<br />
external sources. Moreover, in the transition from a closed to an open innovation system, ‘credibility’<br />
and ‘trustworthiness’ of the OI partners are key determining factors for SMEs throughout the entire<br />
process. Research on MNCs, on the other hand, suggest that they benefit from a recognized brand<br />
image which automatically establishes a certain level of trustworthiness (Chesbrough 2003). Figure 1<br />
illustrates the central role of credibility and trustworthiness in opening up innovation systems for<br />
SMEs.<br />
Figure 1: Key factors in OI processes for SMEs<br />
Previous literature summarizes some of the main incentives for firms to open up their innovation<br />
processes (Lichtenthaler 2008). However, it seems like main differences in OI implementation<br />
between MNCs and SMEs do not simply concern OI capabilities (i.e. resource endowments) but are<br />
to be found in the underlying sources enabling the transformation towards an open innovation system.<br />
While motivations behind OI are generally well understood and appear similar for companies of all<br />
sizes, there seem to be differences in the sources of openness when it comes to OI in SMEs and<br />
MNCs. As mentioned in section 3, sources of openness for innovation, are inherently different from<br />
drivers or forces of innovation. Sources of openness might be similar in nature but take on a different<br />
role during the OI process. This study attempts to shed more light on these sources for SMEs<br />
engaging in OI ventures. Although SMEs tend to be slower at opening up their innovation systems,<br />
their sources of openness for innovation most commonly identified from the case studies seem to be<br />
mostly of external nature. SMEs – taking into account similarities in OI motivations to MNCs as well as<br />
differences in resource endowments – seem to open up towards OI activities mainly through outside<br />
sources such as the configuration of the market in which they are placed or the dynamics of the<br />
business eco-system which penetrates the boundaries of formerly closed innovation systems.<br />
Moreover, linkages with clients and suppliers seem to be the main point of porosity within the closed<br />
system for SMEs.<br />
While the data from the case studies can merely offer a direction for further research into the sources<br />
of openness for SMEs, previous literature on MNCs provides more grounded findings in this area.<br />
Lichtenthaler (2008) gives a variety of clues about potential sources for MNCs. His research about OI<br />
in 154 large companies suggests that forces for OI in MNCs are more internally located than seems to<br />
be the case for SMEs. Table 1 attempts to put the preliminary findings of this study into perspective.<br />
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David Weiss<br />
Table 1: Differences in sources of openness between MNCs and SMEs<br />
Sources of openness MNC SME<br />
Characteristics Internal nature External nature<br />
Examples - Organizational - Market<br />
members configuration<br />
- Business - Intermediaries<br />
model<br />
- Customer /<br />
- Technology supplier<br />
- Design expectations<br />
It seems logical for internal sources to play a greater role for MNCs due to their larger size.<br />
Accordingly, internal sources of openness, such as a wider range of expertise within organizational<br />
members, grow in importance with the size of the organization.<br />
Based on these initial findings about sources of openness, Figure 2 introduces a framework putting<br />
the different stages of the OI process into context.<br />
Figure 2: Open innovation implementation process<br />
The framework depicts ‘sources of innovation’ as creators of initial openings within a closed<br />
innovation system. Sources of openness are thus different from drivers of open innovation – a<br />
characteristic that needs to be taken into account for further analysis of the OI phenomenon. MNCs<br />
and SMEs seem to differ in their underlying sources of openness even if implementers and drivers of<br />
the OI practices might well be similar for both types of firms. Finally, while it is important to understand<br />
the different stages of the framework, OI activities remain an essentially dynamic process evolving<br />
around inflows and outflows of knowledge from one porous system to the other. This framework aims<br />
to provide the context for more thorough research along the OI implementation process.<br />
8. Conclusions and implications<br />
Based on the case data, SMEs frequently express internal reluctance to open innovation practices.<br />
Exposure risks and innovation costs directly affect the core of small companies and thus create<br />
‘unwillingness’ from the inside. However, the paradox in this context is the external nature of sources<br />
of openness to innovation identified in this paper. For SMEs considering OI, it seems internal<br />
reluctance is met by external enablers of openness for innovation. This stands in contrast to previous,<br />
more grounded, findings on OI in MNCs, which suggest more dominant internal sources of openness<br />
to innovation with less emphasis on external enablers for larger companies (Kirschbaum 2005). While<br />
success in today’s business environment reflects a continuous trend towards more holistic innovation<br />
processes (Laursen & Salter 2006), SMEs need to carefully balance potential gains with cost of<br />
openness and risk exposures. This study presents initial exploratory findings regarding the sources of<br />
openness for innovation in SMEs. While the findings merely suggest a number of potential<br />
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explanations in this context, they ideally do provide a grounded starting point for further research into<br />
the topic of open innovation in small- and medium-sized enterprises.<br />
References<br />
Almirall, E. & Casadesus-Masanell, R., 2010. Open versus closed innovation: A model of discovery and<br />
divergence. The Academy of Management Review (AMR), 35(1), p.27–47.<br />
Breschi, S. & Malerba, F., 2005. Clusters, networks, and innovation, Oxford University Press, USA.<br />
Brunswicker, S. & Vanhaverbeke, Wim, 2010. The Interplay of Different Kinds of Openness and Organizational<br />
Innovation Practices in Explaining Innovation Performance<br />
Chesbrough, H., 2003a. Open Innovation: The New Imperative for Creating and Profiting from Technology,<br />
Oxford University Press, USA<br />
Chesbrough, H., 2003b. The era of open innovation. MIT Sloan Management Review, 44(3).<br />
Chesbrough, H., Vanhaverbeke, W. & West, J., 2006. Open innovation: A new paradigm for understanding<br />
industrial innovation. Open innovation: researching a new paradigm, 400, p.1–19.<br />
Christensen, J., Olesen, M. & Kjar, J., 2005. The industrial dynamics of Open Innovation—Evidence from the<br />
transformation of consumer electronics. Research Policy, 34(10), pp.1533-1549.<br />
Christensen, J.F., 2006. Wither Core Competency for the Large Corporation in an Open Innovation world? In<br />
Open innovation: researching a new paradigm, Oxford University Press, USA.<br />
Docie, R., 2010. How open is innovation? InvestorsDigest.Com, 39(6), p.699–709.<br />
Enkel, E., Gassmann, O. & Chesbrough, H., 2009. Open R&D and open innovation: exploring the phenomenon.<br />
R&D Management, 39(4), pp.311-316.<br />
Gassmann, O., 2006. Opening up the innovation process: towards an agenda. R&D Management, 36(3), pp.223-<br />
228.<br />
Gassmann, O. & Enkel, E., 2004. Towards a theory of open innovation: three core process archetypes. In R&D<br />
Management Conference. Citeseer, p. 1–18.<br />
Gassmann, O., Enkel, E. & Chesbrough, H., 2010. The future of open innovation. R&D Management, 40(3),<br />
pp.213-221.<br />
Hoffman, K. et al., 1998. Small firms, R&D, technology and innovation in the UK: a literature review.<br />
Technovation, 18(1), pp.39-55.<br />
Kirschbaum, R., 2005. Open innovation in practice. Research-Technology Management, 48(4), p.24–28.<br />
Laursen, K. & Salter, A., 2006. Open for innovation: the role of openness in explaining innovation performance<br />
among U.K. manufacturing firms. Strategic Management Journal, 27(2), pp.131-150.<br />
Lee, S., 2010. Open innovation in SMEs—An intermediated network model. Research Policy, 39(2), pp.290-300.<br />
Lichtenthaler, U., 2008. Open Innovation in Practice: An Analysis of Strategic Approaches to Technology<br />
Transactions. IEEE Transactions on Engineering Management, 55(1), pp.148-157.<br />
Miles, M. B., & Huberman, A. M., 1994. Qualitative data analysis: An expanded sourcebook. Thousand Oaks:<br />
Sage Publications, Inc.<br />
Silverman, D., 2006. Interpreting qualitative data: Methods for analyzing talk, text, and interaction. London: Sage<br />
Publications Ltd.<br />
Van de Vrande, V. et al., 2009. Open innovation in SMEs: Trends, motives and management challenges.<br />
Technovation, 29(6-7), pp.423-437.<br />
Von Hippel, E., 1988. The sources of innovation, Oxford University Press New York. West, Joel & Gallagher, S.,<br />
2006. Challenges of open innovation: the paradox of firm investment in open-source software. R&D<br />
Management, 36(3), pp.319-331.<br />
860
The Role of Standardization and Standards in the Context<br />
of <strong>Entrepreneurs</strong>hip: Conceptional Model and Insights<br />
from Case Studies<br />
Simone Wurster and Knut Blind<br />
Technische Universität Berlin, Chair of Innovation Economics<br />
Berlin, Germany<br />
simone.wurster@tu-berlin.de<br />
knut.blind@tu-berlin.de<br />
Abstract: Schumpeter’s pioneering research drew the interest of countless scholars worldwide to<br />
entrepreneurship topics. A relatively new field in this context is the international entrepreneurship research<br />
stream. The investigation of Born Globals - companies that operate in international markets from the earliest days<br />
of their establishment (see Knight and Cavusgil, 1996) is one of its main topics. Standardization has been crucial<br />
for the development of industrial society and standards have been important issues for international technology<br />
systems, business practice and economics (see Blind, 2004, Suarez, 2004, Shapiro and Varian, 1999). The<br />
underlying research stream is about 30 years old (see Egyedi and Blind, 2008) but there has been hardly any<br />
linkage to the Born Global research stream so far. The paper shows how Born Globals can successfully establish<br />
their technologies and/or products as international de facto standards. Model development is done in ten steps.<br />
Based on the completion of the 22 case studies (1) success factors are identified and coded in the case study<br />
documents (2). Four success factors groups related to the company, demand, competition and other issues are<br />
created (3) and the stages of the standardization process are modeled (4). Common success factors were<br />
identified and assigned to the phases of standard setting (5). Afterwards, three classifications of young standard<br />
establishers were developed (6). They reveal specific success factor constellations (7). Based on the<br />
constellations of the success factors and the frequency of their occurrence, a category ‘dynamics of<br />
standardization’ with specific dimensions is identified (8). Its dimensions are assigned to the process phases of<br />
standardization by an extension of the assignment of success factors to standardization stages (9). Finally, a<br />
dynamic model for setting and maintaining standards with the multi-dimensional core category ‘dynamics of<br />
standardization’ is developed (10). The model enriches the few theoretical frameworks of the Born Global<br />
research which are available so far, as well as first approaches that consider dynamic aspects in standards<br />
research (e.g. Egyedi and Blind, 2008).<br />
Keywords: Born Globals, de facto standards, standardization model<br />
1. Introduction<br />
Schumpeter’s pioneering research drew the interest of countless scholars worldwide to<br />
entrepreneurship topics. A relatively new field in this context is the International <strong>Entrepreneurs</strong>hip<br />
research stream. McDougall and Oviatt define International <strong>Entrepreneurs</strong>hip as ‘a combination of<br />
innovative, proactive, and risk-seeking behavior that crosses national borders and is intended to<br />
create value in organizations’ (McDougall and Oviatt, 2000:903). One of the most important<br />
contributions of international entrepreneurship research is Oviatt and McDougalls (1994) International<br />
New Ventures (INV) theory. International New Ventures are defined as<br />
‘(business organizations) that, from inception, [seek] to derive significant competitive advantage from<br />
the use of resources and the sale of outputs in multiple countries’ (Oviatt and McDougall, 1994:49).<br />
The academic interest in such companies is strong and growing and the importance of the field has<br />
been signaled by the appearance of special issues and forums in various journals (see e.g.<br />
McDougall and Oviatt, 2003; Oviatt and McDougall, 2005). After publication of the INV theory it<br />
became popular to name the companies Born Globals. Today International <strong>Entrepreneurs</strong>hip is<br />
mainly connected with Born Globals (see Lummaa, 2002). Based on a synthesis of the relevant<br />
literature Born Globals (International New Ventures) are defined as<br />
‘Companies that operate in international markets from the earliest days of their<br />
establishment and derive a substantial proportion of their revenues from sales in these<br />
markets’ (derived of definitions from Knight and Cavusgil, 1996:11, Knight, 1997:1 and<br />
Oviatt and McDougall, 1999; 2003).<br />
According to de Vries standardization is ‘the activity of establishing and recording a limited set of<br />
solutions to actual or potential matching problems directed at benefits for the party or parties involved<br />
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Simone Wurster and Knut Blind<br />
balancing their needs and intending and expecting that these solutions will be repeatedly or<br />
continuously used during a certain period by a substantial number of the parties for whom they are<br />
meant’ (de Vries, 1999:161).<br />
Three categories of technical standards can be distinguished: de facto standards, de jure standards<br />
and voluntary standards. De facto standards are ‘synonymous with best practices and often result<br />
from the practices of specific vendors who dominate a given market’ (Stephens, 2000:68).<br />
Case studies about standards and standardization mostly refer to established companies (see e.g.<br />
Bekkers, 2001, Blind, 2003, Blind et al., 2002, Blind and Iversen, 2004, Blind et al., 2004, Iversen et<br />
al., 2006, Gauch, 2008 and van de Kaa, 2007).<br />
Few examples of standardization activities by Born Globals have been published so far and the<br />
majority of the companies which are covered in the literature were failures. According to Schmidt-<br />
Buchholz (2001) 71% of the German Born Globals investigated agree with the statement ‘We want to<br />
introduce our product as soon as possible to the international market to establish it as an international<br />
standard’ (Schmidt-Buchholz, 2001:194). Hardly any of the companies investigated are still in<br />
business.<br />
2. Literature review<br />
2.1 Overview<br />
Based on meta-analyses of 103 and 127 research papers by van de Kaa et al. (2007) and van de Kaa<br />
(2009), the state of the art in standardization research comprises 31 success factors to establish<br />
standards. Success factors for the maintaining of de facto standards are hardly known. Suarez found<br />
only three factors (network effects, switching cost and installed base, see Suarez, 2004). The factors<br />
are particularly linked with the preconditions of established companies. Success factors for young<br />
standard establishers have not been investigated so far. Few factors have been found concerning the<br />
competition.<br />
In order to get a deeper insight, a broader perspective is necessary. Particularly Porter (1980),<br />
Schewe (1992) and Christensen (1997) provide important findings in related fields. Christensen<br />
(1997) shows, for example, how innovation can cause the failure of successful companies through<br />
their orientation to their present customers and their insufficient alertness concerning new<br />
technologies and markets (‘innovator’s dilemma’).<br />
Process-oriented success factor models for the establishment of de facto standards have been<br />
developed by Lee et al. (1995) and Suarez (2004). Lee et al’s (1995) model is characterized by<br />
unclear differentiations between external and internal factors. A description of the model element<br />
‘result’ is missing.<br />
Suarez (2004) developed a framework with five stages and milestones. The model shows stagespecific<br />
success factors for the establishment of standards by established companies. Limitations<br />
concerning their application for young companies are described in the next section.<br />
Success factors of Born Globals were reviewed in the literature as well. They can be clustered into<br />
success factors of the founders and the company in general, success factors of the product, the<br />
market and the broader environment. For a deeper insight, Holtbruegge and Eßlinger (2005) and<br />
Holtbruegge and Wessely (2007) provide an extensive overview. <strong>Academic</strong> literature which describes<br />
success factors for the establishment of standards by Born Global firms is not available so far.<br />
A comparison of the state of the art in Born Global research and standardization research shows<br />
many differences (see figure 1). The comparison shows that the recent findings of the two research<br />
streams are not appropriate to explain the establishment of standards by Born Globals.<br />
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Simone Wurster and Knut Blind<br />
Figure 1: Success factors in Born Global research and standardization research<br />
2.2 Identification of research gap and problem statement<br />
The state of the art in research so far does not provide an interface between Born Global research<br />
and standardization research. Krechmer (2006) wrote a paper titled ‘The Entrepreneur and<br />
Standards’. It describes standardization in different ages but there is no linkage to young companies.<br />
According to Swann (2000), standards have been investigated in nine research fields, but no research<br />
activities are included that specifically regard young companies. Swann’s (2010) updated overview<br />
about the state of the art in standards research also gives no information about entrepreneurship<br />
topics.<br />
The absence of a model for Born Global standardization processes is embedded in the general<br />
research gap of modeling dynamic processes and specific factors for their lasting success (e.g.<br />
McDougall and Oviatt, 2003).<br />
3. Research objectives<br />
The study aims at showing how Born Globals can establish their solutions as international de facto<br />
standards, and which factors facilitate lasting success (see figure 2).<br />
Figure 2: Targeted research gaps<br />
Ten sub-questions were derived:<br />
� Which success factors characterize successful standard-setting Born Globals?<br />
� What characteristics does a suitable market have?<br />
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� What other factors are important?<br />
Simone Wurster and Knut Blind<br />
� Which characteristics do the standardization processes have and what are the characteristics of<br />
individual process stages?<br />
� What benefits can be achieved through the standardization by new companies?<br />
� How can the companies maintain the standards in the long term?<br />
� What external factors contribute to the long-term maintenance of the standards?<br />
� What industry-specific success factors can be derived?<br />
� To what extent can specific standardization patterns be derived from the case studies?<br />
� What theoretical conclusions can be derived from the analysis of the empirical results?<br />
4. Research design<br />
To answer the research questions a qualitative, case-based research approach was chosen. It aims<br />
at developing a theory which relies on the paradigmatic framework of the Grounded Theory<br />
developed by Strauß and Corbin (1996) based on case studies according to Eisenhardt (1989) and<br />
Yin (2003). To follow that aim, an application of the paradigmatic model of the Grounded Theory was<br />
developed (see figure 3).<br />
The Stage of Causal Condition refers to the time when the idea for the product or technology emerges<br />
which later becomes the de facto standard. The phenomenon represents the establishment of the<br />
standard while the context consists of the demand, the competition and other relevant actors and<br />
characteristics of the environment. Based on Suarez’ (2004) framework, the phenomenon is divided<br />
into three stages: the R&D Stage, the Stage of Becoming the Market Leader and the Stage of<br />
Establishing the Standard.<br />
Figure 3: Application of the Grounded Theory model for the study<br />
Following Suarez (2004) and Christensen et al. (1998) the term ‘de facto standard’ is defined by a<br />
market share of ≥50% for three years (see Christensen et al., 1998, Suarez, 2004) and a rising<br />
market share or indicators of enduring success (see Suarez, 2004).<br />
‘Consequences’ describes the nature of the standard and its effects on the company and its<br />
environment. After the establishment of the standard, specific strategies are necessary to keep<br />
sustaining competitive advantages. The Stage of ‘Maintaining the Standard’ finishes with the<br />
establishment of a new standard that replaces the old one.<br />
5. Data sources<br />
Case studies were completed to collect data. Following Holtbruegge and Enßlinger (2005) and<br />
Holtbruegge and Wessely (2007) the following criteria were used to identify a Born Global:<br />
� first international activities within 3 years after the foundation of the company,<br />
� entry into a second international market less than 3 years later and<br />
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Simone Wurster and Knut Blind<br />
� activities in at least 5 countries and 2 cultural/global clusters.<br />
The focus was on Born Globals which established a de facto standard not later than by the age of 18.<br />
The requirement was operationalized by a market share of at least 50% for at least 3 years.<br />
Sources to identify potential cases were Biocom (2005), BMBF (2005), NASDAQ (2006), Deutsche<br />
Boerse (2008a,b,c), Stanford University (2006) and different international trade shows. More<br />
companies were identified by screening the standardization literature and Born Global literature, by<br />
following advice given by industry experts and additional internet research.<br />
As mentioned by Suarez (2004) the availability of exact market share numbers and the determination<br />
of the first time of domination were problems in several cases. As an alternative to a selection based<br />
on the use of market share numbers companies were chosen whose solutions were publicly<br />
described as de facto standards and which were not older than 18 years by the time of the first<br />
mention of the standards. Sixty-two companies were identified. One hundred and one people in<br />
different leadership positions and promoters were contacted by email. According to table 1, 22<br />
companies from seven countries remained and were analysed by case study research. Thirty-seven<br />
people agreed on interviews.<br />
6. Data analysis<br />
According to the principles of the Grounded Theory (see e.g. Strauss and Corbin, 1996) data<br />
collection and data analysis were linked. Additional literature review enriched the process.<br />
All interviews were transcribed and coded with Atlas.TI. The coding procedure consisted of two<br />
activities: coding success factors and coding process stages based on the model which was defined<br />
before. A table showing the success factors’ frequency in the case studies was produced.<br />
The next step was the identification of dominant success factors which appear in ≥ 50% of the case<br />
studies. The remaining factors were saved for further analyses.<br />
Co-occurrence analyses between the success factors and the seven elements of the created<br />
Grounded Theory model followed. The Grounded Theory element with the highest co-occurrence<br />
number was identified for each of the success factors. Another important task was to investigate<br />
specific patterns of the case studies. Case study analyses showed three different IP-strategies by the<br />
time the product or technology was introduced to the market. Based on the three clusters, different<br />
paths and sub-clusters were investigated.<br />
Based on the occurance of the success factors and the identified clusters a model with the the core<br />
category ‘dynamics of standardization’ and its specific dimensions was developed.<br />
7. Results<br />
7.1 Success factors and standardization process<br />
Following analytical coding procedures 160 influence factors were derived and arranged according to<br />
their frequency based on 3.720 quotations (codings). 29 firm-specific and 11 context-specific factors<br />
were important in at least 50% of the sample (see table 2).<br />
The results of the co-occurrence analysis between the success factors and the fundamental elements<br />
of the Grounded Theory are shown in table 3.<br />
Besides the success factors, various obstacles became obvious in the standardization processes but<br />
no single obstacle dominated the sample.<br />
7.2 Specific firm clusters<br />
Besides the general characteristics, three firm clusters and four specific cases were identified based<br />
on the different IP strategies which the companies use.<br />
Companies which start with a proprietary, closed approach towards IP<br />
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The cluster consists of companies which keep the proprietary approach (Close Conservers) and of<br />
companies which later combine the proprietary solution with an open solution (Opening Combines).<br />
Closed Conservers are companies which establish a proprietary standard. They often make use of<br />
patents. The standards are mostly maintained by customer lock-ins. Opening Combiners are<br />
companies which enter the market with a proprietary solution and share part of it later or combine it<br />
with a new, open solution. The standards are mainly maintained by partner lock-ins.<br />
Table 1: General information about the sample firms<br />
Company<br />
Year of<br />
establis<br />
h ment<br />
Country<br />
Indus<br />
-try<br />
Introducti<br />
on into<br />
the market<br />
Establish<br />
ment of<br />
the<br />
standard<br />
End of<br />
standard<br />
Time span in years<br />
as<br />
standard<br />
total<br />
1 1982 USA S 1984 1987 partially still<br />
existing<br />
4, 22+ 7, 25+<br />
2 1982 USA S 1982 1986 still existing 23+ 27+<br />
3 1987 USA S 1988 1995 2007 12 19<br />
4 1983 AUS /<br />
USA<br />
B 1983 1993 NN *) 3+ 13+<br />
5 1997 D B 1987 2000 still existing 9+ 22+<br />
6 1993 IL I 1993 1997 still existing 12+ 16+<br />
7 1986 USA CH 1986, 1989 1986, 1992 1991, 1994 2, 3 5, 5<br />
8 1993 D B 1998 2005 2007 2 9<br />
9 1995 USA I 1995 1997 2002 5 7<br />
10 1997 D B 1997 2007 still existing 2+ 12+<br />
11 1997 CH B 1997 2001 still existing 8+ 12+<br />
12 1982 USA S 1982 1985 1990 5 8<br />
13 1984 USA S 1985, 1997 1987, 2000 1996, still<br />
existing<br />
9, 9+ 11, 12+<br />
14 1978 USA S 1978 1981 1985 4 7<br />
15 1989 D B 1989 1996 still existing 13+ 20+<br />
16 1983 USA S 1983 1989 1994 5 11<br />
17 1984 D B 1986 2001 still existing 8+ 23+<br />
18 1989 D B 1993 2002 still existing 7+ 16+<br />
19 2001 USA I 2001 2009 still existing 1+ 8+<br />
20 1995 FIN I 1995 2006 still existing 12+ 15+<br />
21 1982 USA CH, S 1985 1988 still existing 21+ 24+<br />
22 2002 F/USA I 2002 2009 still existing 1+ 7+<br />
Industries: B= biotechnology, I= internet, CH= computer hardware, S= software<br />
*) Dominance in a mature market. Used market share data only cover the time until end of the 1990s.<br />
Companies which start with an ‘open’ approach towards IP<br />
Four companies started with an ‘open’ approach towards IP. Therefore, they are called ‘Open<br />
Starters’. All four companies showed individual IP strategic patterns. They are described in more<br />
detail in the passage ‘Special IP strategic patterns’.<br />
Companies which start with a hybrid solution<br />
Companies which, from the beginning, combine open and closed elements are called ‘Initial<br />
Combiners’. The approach provides much potential for success, but an appropriate balance between<br />
openness and protection is important. The standards are particularly maintained by partner lock-ins.<br />
Special IP strategic patterns<br />
Five companies showed extraordinatory patterns in their IP strategies. The ‘Open Conserver’ wanted<br />
to stimulate the development of the market by providing open solutions. Particularly at the beginning<br />
there were rich opportunities to use first mover advantages and to grow in an attractive way. Over the<br />
long term, the prospects differed. Differentiation from the competition through attractive proprietary<br />
solutions might have been important. Two companies were called ‘Closing Combiners’. They initially<br />
provided an open technology solution and combined it with proprietary solutions later. One company<br />
started with open source software. After several years it changed the latest version of the software to<br />
a proprietary (closed source) license. Therefore, the company is called a ‘Closer’. One company has<br />
existed as an Initial Combiner for a long time and was later forced by the competition to share its<br />
knowledge. Therefore it is called an ‘Opener’. It could overcome the problem by introducing a new,<br />
superior, proprietary innovation soon after and became a ‘Combiner’ again.<br />
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7.3 Development of the core category and its interactions in the model<br />
Based on the constellations of the success factors and the frequency of their occurrence, a category<br />
‘dynamics of standardization’ with specific dimensions is developed. Its dimensions are assigned to<br />
the process phases of standardization by an extension of the assignment of success factors to<br />
standardization stages. Table 3 shows all factors listed by frequency.<br />
Table 2: Relevant general success factors for the case study firms<br />
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Table 3: Relationship between the success factors and the Grounded Theory elements<br />
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Table 4: Frequency of the success factors<br />
Simone Wurster and Knut Blind<br />
The first three factors (standardizability, high added value and international applicability) occurred in<br />
all 22 case studies. Because of their dominance in all case studies they are regarded as the basis of<br />
the model. The interviews also show that a rapid international standard establishment demands an<br />
early internationalization of the company. The early positioning in lead markets has specific<br />
importance. Both factors were used to build the category ‘internationalization dynamic’.<br />
Further analysis led to the development of the category ‘innovation dynamic’. In the standard setting<br />
stage it is aligned with the rapid diffusion of the potential standards. Twelve success factors have<br />
been assigned to this dimension, e.g. sales & marketing cooperation, time of market entry and<br />
intensive communication activities. External factors included in the innovation dynamic dimension are<br />
for example the long lead time and the Innovator's Dilemma.<br />
Firm classification according to IP-strategies was one of three options to classify Born Global standard<br />
establishers and it was the most appropriate one. One important success factor in its context is the<br />
optimization of the IP strategy. On this basis, IP-specific dynamic is defined as the third element of the<br />
core category.<br />
Concerning the demand side, seven success factors were identified while four factors have dynamic<br />
characteristics. Therefore, the dimension ‘demand-side dynamic’ was created. Finally, the core<br />
category consists of four dimensions with dynamic features. It is therefore called ‘dynamics of<br />
standardization’ (see figure 4).<br />
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Simone Wurster and Knut Blind<br />
Figure 4: The core category ‘dynamics of standardization’<br />
Due to the simultaneous occurrence of the identified success factors and the process phases, the<br />
temporal significance of the subcategories can be visualized. Figure 5 shows the temporal importance<br />
of all dimensions of the core category ‘dynamics of standardization’ and their relevance for the whole<br />
standard-setting and maintenance process.<br />
Figure 5: Importance of the dynamics of standardization in different stages of the standardization<br />
process<br />
Initially, the innovation dynamic and the internationalization dynamic dominate. The demand-side<br />
dynamic, defined as a rapid adoption of the potential standard is particularly important after the<br />
introduction of the product. After obtaining leadership, IP-specific dynamic is most significant. The<br />
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maintenance of the standard is dominated by the innovation dynamic and the demand-side dynamic<br />
while a low demand-side dynamic is desirable.<br />
Based on in-depth analyses of the ‘dynamics of standardization’ and its interactions seven<br />
conclusions are derivable.<br />
� New markets in general are characterized by a lack of incumbents. This implies a low intensity of<br />
the group’s innovation dynamic. If there are large potential competitors, Innovator's Dilemmas,<br />
defined as an insufficient innovation dynamic of those competitors facilitate the success of the<br />
Born Globals.<br />
� The internationalization dynamic interacts with the market size and the origin of the Born Globals.<br />
Initial niche markets ceteris paribus increase the likelihood of a successful standardization, if the<br />
Born Global survives the first critical years. This survival can be facilitated by dynamic processes<br />
intended to generate international sales.<br />
� Based on the success factor ‘optimization of IP strategy’, the IP-specific dynamic also has a<br />
positive influence. However, there are certain specific assumptions. An IP-specific dynamic, which<br />
starts from a closed approach and is characterized by a partial opening leads, ceteris paribus,<br />
after obtaining solid leadership to a strong dominant position and to a durable standard.<br />
� Important elements of the demand-side dynamic are market growth and adoption behavior. A<br />
strong market growth increases the effect of an inadequate external innovation dynamic and<br />
thereby promotes ceteris paribus, the standard setting of the Born Global.<br />
� After the Born Global itself has taken a dominant position, it is important to maintain an<br />
appropriate internal dynamic of innovation. If it exceeds a critical intensity, the Born Global can<br />
ceteris paribus secure its position in the long term. The critical intensity of the innovation dynamic<br />
is determined by external conditions, specifically by the nature of the external innovation dynamic<br />
and of the market dynamic.<br />
� Cumulative advantage and lock-in effects are important variables of the stage of maintaining the<br />
standard. The danger of moving from an established standard is thereby reduced, but not<br />
preventable.<br />
� After the establishment of the standard, the demand-side dynamic may be influenced by the<br />
standard setters if a critical number of external new offers is not exceeded.<br />
8. Summary and conclusions<br />
The literature review demonstrated that a success factor model for the establishment of international<br />
de facto standards by Born Globals was missing. To close this gap a dynamic success factor model<br />
for the establishment and maintaining of standards by Born Globals was created. A particular<br />
contribution for Born Global research is the stage model and the detailed analyses of sustainable<br />
competitive advantages. The results also show the importance of paying more attention to the<br />
behavior of the environment (e.g. market pull and innovator‘s dilemmas) to explain the success of<br />
Born Globals. To increase the validity of the model, it is important to analyse more companies and<br />
sources and to test the model in other industries and future contexts.<br />
Concerning IP Oviatt and McDougall (1996) emphasizes the importance of effective knowledge<br />
protection for early internationalizers. The open approaches show that sharing knowledge can be a<br />
successful approach for Born Globals. To deepen the insight into these approaches more<br />
investigation and case studies are necessary. Three of the four special approaches started with an<br />
open technical solution. Three companies used open source approaches. According to Raymond<br />
(2001) open source concept emerged not earlier than in the 1990s. The establishment of a de facto<br />
standard needs time. Therefore, only a few Born Global standard establishers which use an open<br />
source approach exist so far. Hopefully there will be more successful Born Global standard<br />
establishers with open source solutions to investigate in the future.<br />
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873
Examination Into the Firm Without Fundamental<br />
Technology: A Case Study of Nintendo<br />
Kiyohiro Yamazaki<br />
Chukyo University, Nagoya, Japan<br />
kiyohiro@hotmail.com<br />
Abstract: The purpose of this study is to examine how the firm without fundamental technology to gain the<br />
competitive advantage. This study takes Nintendo in the home video game machine industry in Japan as an object<br />
of study. Nintendo does not own the fundamental technology of home video game machine, such as CPU and<br />
GPU. However, it could develop the Wii. As a result, this paper points out Nintendo gains the two advantages,<br />
economic advantage and organizational advantage.<br />
Keywords: firm without fundamental technology, economic advantage, organizational advantage, game machine<br />
industry, Nintendo<br />
1. Introduction<br />
Numerous attempts have been made by scholars (e.g., Wernerfelt, 1984; Barney, 1991)to demonstrate<br />
that management resources are different across individual firms, and each firm’s resources are an<br />
advantageous source for competition. This approach, which is called RBV (Resource-Based View of<br />
the Firm), points out that management resources and their abilities differ from one firm to another, and<br />
this heterogeneity leads to the differentiation of products and services. In particular, Prahalad and<br />
Hamel (1990) paid attention to firm-specific management resources. They maintained that<br />
heterogeneity is important and argued that it is advantageous for competing firms. These resources<br />
should not be easily imitated by other companies for the heterogeneity of resources to exist. The<br />
resource that can be easily imitated and obtained by competitors is at once imitated by them (Barney,<br />
1991). Therefore, ambiguous causality (Itami, 1987; McEvily and Chakravarthy, 2002), path<br />
dependency (Nelson and Winter, 1982), and a right to be protected legally and systematically (Rumelt,<br />
1984) are required.<br />
In addition, researchers have argued that resources should not be freely transferred to other firms<br />
(Dierickx and Cool, 1989; Peteraf, 1993). Ambiguous causality and path dependency make market<br />
dealings of resources difficult.<br />
As mentioned above, researchers have discussed that the possession of the core resource hinders<br />
gainings of competitive advantage (Levitt and March, 1988) while management resourcees generate<br />
competitive advantage. Leonard-Barton (1995) paid attention to the core capability as a source of a<br />
competitive firm’s advantage. However, this capability is not versatile. It can be a burden to the firm if it<br />
does not lead to corporate competitiveness. A firm’s corporate activity would be stiffened; the core<br />
capability becomes a core rigidity.<br />
A great deal of effort has been devoted to the fact that current firms having core resources and<br />
capabilities gain the competitive advantage. However, the reasons firms without core resources and<br />
capabilities have this strength have not been studied in academic research. That the firms with the core<br />
technology construct competitive advantage and that the possession of the core technology hinders the<br />
competitive advantage of firms have been discussed. However, researchers have not sufficiently<br />
discussed the reasons firms without the core technology can enhance competition.<br />
From the practical perspective, it can be pointed out that industries where the firm is without core<br />
technology can demonstrate strength in recent years. Firms lacking core technology obtain core<br />
devices when those devices outside firms are significantly modularized (Ulrich, 1995; Baldwin and<br />
Clark, 2000). The most important addition to be made to what we have said about the firm without core<br />
technology is the forming of the global innovation network (Dedrick, Kraemer and Linden, 2008; Linden,<br />
Kraemer and Dedrick, 2009). The firm could cooperate with several international partners for creating<br />
new value. Therefore, the firms without fundamental technology could develop excellent products and<br />
gain their competitive advantage with using the global supply chain in industries that were dominated by<br />
firms with core technologies. This paper then constructs the structure where firms without core<br />
technologies become competitive. Nintendo in the game machine industry will be the main focus of<br />
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Kiyohiro Yamazaki<br />
analysis. The paper clarifies the process in which Nintendo, despite lacking flat display panel<br />
technology, developed the competitive models.<br />
For the purposes of this paper, a fundamental technology is defined as a resource for designing and<br />
producing core devices. The elemental technology constituting a product is roughly divided into the<br />
fundamental technology and peripheral technology categories. The fundamental technology is a<br />
technology that satisfies two requirements. One requirement is a technology for working the “basic<br />
function” provided by a product. Secondary, when each firm enters the market, its fundamental<br />
technology is recognized as the technology composing the primary part of the product, and fundamental<br />
technology decided by the overall industry. The recognition subject is the set of manufacturers, and the<br />
timing for recognizing the fundamental technology is an introduction stage in the industry. It is the<br />
technology that is developed continually and improves the function level. In contrast, the peripheral<br />
technology is defined as the technology concerning all devices except the fundamental device.<br />
This definition of fundamental technology cannot necessarily be applied to all industries. There are<br />
industries in which the fundamental technology does not apply. The apparel industry is one such<br />
example, and reexamining this issue is necessary. However, this definition is effective in the industry<br />
examined in this paper.<br />
There is a difference between the fundamental technology and the core technology. The core<br />
technology that Prahalad and Hamel (1990) and Leonard-Barton (1995) examined is a technology that<br />
is unique to the firm and has multiple uses with several products. Therefore, recognizing the<br />
fundamental technology is different from differentiating the respective core technologies in each firm.<br />
The fundamental technology in this paper is decided in accordance with product features and a specific<br />
technology in one product, regardless of the firm’s intention. Therefore, the fundamental technology is a<br />
unique technology that is decided by the overall industry. The performance level of the product’s basic<br />
function does not often meet customer demand standards during the development or the introductory<br />
periods of the industry, and the biggest development task is for market expansion (Christensen, 1997).<br />
The product then becomes an improvement of the function level of the fundamental technology.<br />
Therefore, if the definition of the core technology is used, it is highly likely that all firms entering the<br />
market have some technologies and discussing firms without technologies is difficult.<br />
The purpose of this study is to examine how a firm without the fundamental technology can gain a<br />
competitive advantage. This study examines the case study of Nintendo in the home game video game<br />
industry. Nintendo did not own the CPU and GPU and not make by itself, and procured it from external<br />
firms. In its product development, Nintendo could develop the unique game machine Wii. As a result,<br />
this paper points out Nintendo gains the two advantages, economic advantage and organizational<br />
advantage.<br />
2. Case study<br />
In this section, we examine the case of Nintendo in the game machine industry, as a firm without<br />
fundamental technology. The data for this case study comes from several publications, an<br />
announcement of announcing to public, and various statistical materials from other firms and device<br />
makers. Especially, it refers to the homepage of Nintendo. This homepage shows that the President<br />
and Planning Manager have received the interview of the process until developing Wii.<br />
2.1 Fundamental technology in the game machine industry<br />
The CPU installed in “family computers” was a customized MOS technology 6502. The CPU and GPU<br />
semiconductor technology installed in a game machine supported the functions necessary to operate<br />
the game. The performance of a game machine is determined by the information processing and the<br />
drawing ability of the CPU and GPU.<br />
Each game machine manufacturer works on the core task of developing the game machine beyond the<br />
basic family computer to improve the drawing ability by installing the most efficient CPU and GPU, in<br />
order to achieve detailed graphics. The images produced by game machines in the 1980s lacked reality<br />
and were rougher than television images. Recognizing that the performance improvement of the CPU<br />
and GPU was important in game machines, the game machine manufacturers adapted the personal<br />
computer CPU and GPU for more vivid game imagery in their new game machines. Because Nintendo<br />
does not possess CPU and GPU semiconductor technology, it manufactures neither the CPU nor GPU<br />
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Kiyohiro Yamazaki<br />
for its Wii game machines but procures customized CPUs and GPUs from external semiconductor<br />
firms.<br />
This case study examines Nintendo’s advantages without fundamental technology through the Wii<br />
development case by analyzing its product development process.<br />
2.2 Nintendo game machines before development of Wii<br />
This section analyzes the product development of Nintendo’s Wii (Figure 1).<br />
Figure 1 “Wii”<br />
Nintendo introduced the Nintendo Entertainment System (equipped with an 8-bit CPU) in the market in<br />
July 1983 (Figure 2). As its product name implied, the Nintendo Entertainment System was developed<br />
for the entire family to play, and was different from earlier computer games. It aimed to be easy to<br />
operate and enjoy, and was developed under the concept “play control”. This concept did not<br />
compromise the graphics function of the game. It used an 8-bit CPU with the same 6502 processor as<br />
that installed in the Apple II in order to provide performance equal to that of an arcade game machine.<br />
In contrast, a low-cost IC semiconductor chip was purchased from Ricoh, and requested $20 or less the<br />
unit price did. Thus, the Nintendo Entertainment System could sell at a lower price while having a<br />
performance equal to that of competitors’ products. It sold 1.4 million units in one year, and the game<br />
machine industry was established and has since expanded. Eventually, it accounted for 90.9% of the<br />
worldwide sales of 8-bit machines.<br />
After the first half of the 1980s, other companies also introduced the 8-bit, 16-bit, and 32-bit CPUs in the<br />
market. The focus of gaming hardware development was on faster processing performance by the CPU<br />
and GPU to achieve the highest performance and highest resolution motion. Nintendo introduced the<br />
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Kiyohiro Yamazaki<br />
Nintendo Super Entertainment System in the market in November 1990, NINTENDO 64 in June 1996,<br />
and the GameCube in September 2001.<br />
1980<br />
1983<br />
1989<br />
1990<br />
1996<br />
1998<br />
1999<br />
2001<br />
2004<br />
2006<br />
2008<br />
Home game machine Mobile game machine<br />
Figure 2: “Nintendo game machine<br />
The 1990 Nintendo Super Entertainment System greatly improved the image processing performance<br />
with a 16-bit CPU. The NINTENDO 64 with a 64-bit CPU entered the market in June 1996. It had the<br />
VR4300 customized 64-bit CPU and Reality Co-Processor with a 32-bit RISC R3000 in its GPU. The<br />
GameCube followed NINTENDO 64 in September 2001 with an IBM Power PC Gekko 485MHz CPU<br />
and the Flipper GPU by ArtX Co.<br />
As mentioned above, the product development of the Nintendo Super Entertainment System and<br />
GameCube consistently focused on high-resolution game image quality. The image processing<br />
performance and the drawing ability were improved by speeding up the CPU and GPU (Figure 3). In the<br />
background, the improvement of the image processing performance may have been driven by<br />
3-dimensional CG rendered graphics, which was similar to that of their competitors.<br />
2.3 Rival game machines: Microsoft XBOX 360 and Sony PlayStation 3<br />
Microsoft introduced the Xbox 360 (Figure 5–17) in the market in 2005, with a CPU clock frequency of<br />
3.2GHz and a custom graphic processor Xenos 500MHz in its GPU. That equipment had operation<br />
processing performance equal to a desktop personal computer at that time. The size of the main body<br />
was 309 × 258 × 83mm (length × side × depth) and it was heavy, weighing about 3.5kg.<br />
Sony introduced the PlayStation 3 in the market in November 2006 that used a Cell Broadband Engine<br />
CPU with a clock frequency of 3.2GHz and a RSX (Reality Synthesizer) GPU with a clock frequency of<br />
550MHz. It had an arithmetic capacity equal to that of the personal computer with the CPU that Sony<br />
had developed jointly with Toshiba and IBM. Its GPU was developed based on the GeForce7800 GTX<br />
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Kiyohiro Yamazaki<br />
for the NDIVIA personal computer. The size of the body was 325 × 98 × 274mm (length × side × depth),<br />
and it weighed approximately 4.4–5 kgs, making it larger and heavier than the Xbox 360.<br />
MHz<br />
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Figure 3: “Speeding up of CPU”<br />
As mentioned above, the Xbox 360 and PlayStation 3 were game machines that advanced the evolution<br />
of CPU and GPU efficiency, consistent with the technology road map. The development of the<br />
next-generation game machine usually begins immediately after the previous generation enters the<br />
market, assuming that an existing technology is built upon in successive generations and development<br />
goals set consistent with the technology road map.<br />
2.4 Outline and competitive advantage of the Wii<br />
The Wii is a game machine that Nintendo introduced in the market in December 2006. It belongs to the<br />
same generation as the Xbox 360 and PlayStation 3, a rival model, and a successor to the GameCube.<br />
However, the Wii, Xbox 360, PlayStation 3, and GameCube have a marked difference. The Wii uses<br />
neither a high-performance CPU nor GPU compared with the Xbox 360 and PlayStation 3. The Wii’s<br />
CPU has a clock frequency of about 700MHz, called “Broadway,” which was jointly developed with IBM.<br />
Its GPU, called “Hollywood,” was developed in cooperation with ATI, which developed the GameCube<br />
GPU.<br />
Nintendo developed the Wii as a game machine with features different from existing products under the<br />
new concept of a “game machine for the entire family to play together.” The features enabling this<br />
concept are a joystick and a small, high-quality, and white wireless remote controller.<br />
The Wii remote controller uses a joystick that enables intuitive operation, moving up and down, and right<br />
and left. It provides a very simple and understandable user interface, perfect for new users. It also has<br />
the smallest and thinnest body among the Nintendo game machines, at 44 × 157 × 215.4mm (length ×<br />
side × depth). It was designed specifically to be placed by the television, which occupies a prominent<br />
place in people’s living rooms. Therefore, the Wii has a simple shape that can be set up inconspicuously<br />
on its stand, in harmony with other television peripherals.<br />
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Kiyohiro Yamazaki<br />
With its new concept and features, the Wii successfully concluded Nintendo’s expansion into its<br />
targeted game market population, the entire family. As a result, Wii sales exceeded five million units in<br />
two months of one year, and its foreign sales totaled about 15 million. The Wii has a market share of<br />
63% in the game machine market in Japan, whereas PlayStation 3 has 20%, PlayStation 2 has 13%,<br />
and Xbox 360 has 4%, respectively. Sales of Nintendo in 2008 totaled $16.7 billion.<br />
3. Advantages of a firm without fundamental technology<br />
3.1 Two advantages of a firm without fundamental technology<br />
There are two advantages for firms that lack fundamental technology. First, those firms have the<br />
flexibility to respond quickly to environmental changes at low costs—the economic advantage. Second,<br />
such a firm can demonstrate its own strengths without certain systemic organizational restrictions – the<br />
organizational advantage. This section clarifies the mechanisms of the strengths of firms without<br />
fundamental technology by focusing on these advantages.<br />
The economic advantage on the financial side of the firm brings advantages from building relationships<br />
with external sources in order to reduce the firm’s costs. In addition to cost reduction, such firms enjoy<br />
an organizational advantage in decision making and organizational behavior.<br />
3.2 Nintendo’s economic dominance<br />
Nintendo obtained its CPUs and GPUs externally because it lacked these technologies. The Wii’s<br />
Broadway CPU was jointly developed with IBM based on the Power PC technology and manufactured<br />
at the IBM factory in East Fishkill, NY. The Hollywood GPU was jointly developed with ArtX.<br />
By jointly developing their CPU and GPU with firms having powerful technologies, Nintendo could enjoy<br />
the advantage of their partner firms’ expertise. Nintendo chose to partner with IBM and ATI rather than<br />
developing their CPU and GPU in-house because those firms had the technology and know-how that<br />
Nintendo required. Another advantage is the power to select the optimal development partner from<br />
among a wide selection of manufacturers.<br />
A firm without fundamental technology is also free to change its development partner, depending on the<br />
evolving technology it needs and that technology’s best manufacturer. The family computer used<br />
Ricoh’s CPU, as did the Nintendo Super Entertainment System. The NINTENDO 64 changed to the<br />
customized NEC VR4300 CPU, based on the MIPS R4300. The GameCube switched to IBM’s Gekko<br />
CPU based on IBM’s Power PC. The Wii uses IBM’s Broadway which was originally developed for<br />
PowerPC.<br />
For its GPUs, Nintendo first used Ricoh’s GPU in its family computer and the Nintendo Super<br />
Entertainment System. In the NINTENDO 64, it switched to a RISC type microprocessor, the R3000<br />
developed by MIPS Technologies. For the GameCube, Nintendo again switched, this time to the ArtX<br />
Flipper, and then to ATI’s Hollywood for the Wii.<br />
As mentioned above, with each new game machine, Nintendo has appropriately changed its CPU and<br />
GPU providers. Such “ease of switching” enables low-cost, revokable choices of development partners<br />
when better options appear.<br />
3.3 Nintendo’s organizational advantage<br />
Without the semiconductor CPU and GPU technology in-house, Nintendo cannot differentiate its game<br />
machines based on CPU and GPU performance. However, because differentiation is necessary for<br />
competitive advantage, Nintendo differentiates in the other characteristics of its game machines.<br />
After 1994, Nintendo lost its top position in the game machine industry as its sales and market share<br />
numbers flattened. President Iwata pointed out the cause: their current game machine had become too<br />
complex, which discouraged consumers. In response to the consumer demand for an easier system,<br />
Nintendo developed the Wii, targeting those consumers who had either never played computer games<br />
or had stopped playing.<br />
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Kiyohiro Yamazaki<br />
The key concept of the Wii is that it is for the “entire family” and “everyone can play.” Its interface<br />
features intuitive operations so that people consider the Wii as a game system that the entire family can<br />
relate to, with a user-friendly interface and high performance. The Wii controller demonstrates these<br />
concepts in its comfort, user-friendliness, and simplicity so that everyone in the family can use it.<br />
As mentioned above, when the Wii was developed, Nintendo did not differentiate based on CPU and<br />
GPU performance but on the machine’s other characteristics. In order for the Wii to stand out in its<br />
market, Nintendo had to focus on features under its own control rather than machine specifications.<br />
Motivated to explore new concepts that would demonstrate its originality in other dimensions, such as<br />
the user interface, Nintendo hit upon the new concept, “a game that everyone in the family can play.”<br />
However, exploring different values as a competitive factor does not happen naturally. Nintendo had<br />
already been differentiating its products with increasingly high-performance CPUs and GPUs in the<br />
game machines preceding the Wii. Nintendo could respond effectively to the organizational sense of<br />
crisis that spurred the development of a different game machine with a unique market differentiator by<br />
following the industry’s technology road map. That strong organizational sense of crisis began with the<br />
GameCube’s decrease in competitive position. Several Nintendo managers felt this sense of crisis first,<br />
and then it expanded throughout the entire firm.<br />
The breakthrough concept enabled Nintendo to compete effectively even without having to differentiate<br />
in its semiconductor technology, but that radical change to a completely new competitive factor resulted<br />
from a crisis that drove it to create new product with a different concept.<br />
4. Conclusion<br />
In this manner, this case study demonstrates how a firm without fundamental technology can dominate<br />
the industry by focusing on its economic and organizational advantages, as Nintendo did in the game<br />
machine industry.<br />
Nintendo purchased its CPUs and GPUs, the fundamental devices of game machines, from<br />
development partner firms because it lacked semiconductor technology. Thus, it entered into joint<br />
development with IBM and ATI, the semiconductor manufacturers, to obtain the Broadway CPU and<br />
Hollywood GPU for the Wii. This flexibility for device procurement could be called “wide selection.”<br />
Nintendo also applied the advantage of “ease of switching” to obtain the best new fundamental<br />
technology for each generation of its game machines. It began with the Ricoh CPU in its family<br />
computer and Nintendo Super Entertainment System. In the NINTENDO 64, it switched to a RISC type<br />
microprocessor, MIPS Technologies’ R3000. For the GameCube, Nintendo switched to the ArtX<br />
Flipper, and then to ATI’s Hollywood for the Wii.<br />
Nintendo used its organizational as well as economic advantages. Because Nintendo could not easily<br />
differentiate its game machines only by using an ultra-high-density CPU and GPU, it experienced an<br />
organizational crisis that caused a major creative breakthrough decision: differentiate on elements other<br />
than CPU and GPU performance. This crisis, spurred by the overly complex GameCube’s disappointing<br />
market share, caused Nintendo to focus on those consumers who had never, or have not recently<br />
played computer games, and remembered its family computer developed under the concept that<br />
“everyone can play.” Thus, the Wii came to be developed as a game machine that everyone in the<br />
family can play.<br />
Nintendo did not consider differentiation of their game machine through having the highest performance<br />
CPU and GPU alone because it did not have the semiconductor technology. As it competed against<br />
Sony and Microsoft, and saw a decrease in the traditional computer game population, Nintendo was<br />
strongly motivated to take advantage of their customers’ familiarity with their games to appeal to a wider<br />
market of users. Because of this organizational sense of crisis, the Wii game machine was developed<br />
with a concept radically different from that of existing game machines.<br />
References<br />
Baldwin, C Y. and Kim B. Clark(2000)Design Rules: The Power of Modularity, MIT Press.<br />
Barney, J. B.(1991)”Firm Resources and Sustained Competitive Advantage”, Journal of Management, 17, 1,<br />
99-120.<br />
Christensen, C M.(1997)The Innovator’s Dilemma, Harvard Business School Press.<br />
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Dedrick, J., K. Kraemer, and G. Linden (2008) “Who profits from innovation in global value chain? A study of the<br />
iPod and Notebook PCs,” Sloan Industry Studies working papers, WP, 2008-2015.<br />
Dierickx, I. and K. Cool (1989)”Asset Stock Accumulation and Sustainability of Competitive Advantage,”<br />
Management Science, 35, 12, 1504-1514.<br />
Itami, H.(1987)Mobilizing Invisible Assets, Harvard University School Press.<br />
Leonard-Barton, D.(1995)Wellsprings of knowledge: Building and Sustaining the Sources of Innovation, Harvard<br />
Business School Press.<br />
Lieberman, M. and D. Montgomery(1988)”First-Mover Advantages,” Strategic Management Journal, 9, Summer,<br />
41-55.<br />
Linden, G., K. Kraemer and J. Dedrick (2009) “Who captures value in a global innovation network? The case of<br />
Apple’s iPod,” Communications of the Acm. 52, 3, 140-144.<br />
McEvily, S. and B. Chakravarthy(2002)”The Persistence of Knowledge-based Advantage: An Empirical Test for<br />
Product Performance and Technological Knowledge,” Strategic Management Journal, 23, 4, 285-305.<br />
Nelson, R. and S. Winter(1982)An Evolutionary Theory of Economic Change, Harvard Business School Press.<br />
Peteraf, M.(1993)”The Cornerstones of Competitive Advantage: A Resource-Based View,” Strategic Management<br />
Journal, 14, 3, 179-191.<br />
Prahalad, C K. and G. Hamel(1990)”The Core Competence of the Corporation,” Harvard Business Review, 68, 3,<br />
79-91.<br />
Rumelt, R.(1984)”Towards a Strategic Theory of the Firm,” in Competitive Strategic Management, R. Lumb(ed.),<br />
Pretice-Hall.<br />
Ulrich, K. T.(1995)”The Role of Product Architecture in The Manufacturing Firm,” Research Policy, 24, 419-440.<br />
Wernerfelt, B.(1984)”A Resource-Based View of the Firm,” Strategic Management Journal, 5, 171-180.<br />
881
Comparative Assessment of <strong>Entrepreneurs</strong>’ and Non-<br />
<strong>Entrepreneurs</strong>’ Cognitive Style Index<br />
Mohammad Reza Zali, Saeed Rezaei Toroghi, and Maryam Mirzaei<br />
University of Tehran, Iran<br />
mrzali@ut.ac.ir<br />
Abstract: Personal characteristics of entrepreneurs have been a central focus of research into entrepreneurship<br />
in recent decades; although, personality traits approach differentiates entrepreneurs from non-entrepreneurs.<br />
Currently, a new approach entitled “Entrepreneurial Behavior-Cognitive” is researched by scholars who consider<br />
cognitive differences. Cognitive perspective refers to the activities such as thinking, knowing and processing<br />
information. Thereupon, Cognitive style refers to the possibility that different people may carry out these<br />
processes differently, but in a relatively consistent manner. Cognitive styles are two approaches that reflect the<br />
analytical and intuitive sides of an individual. Intuitive individuals are likely to discover opportunities by observing<br />
cues or signals through unfamiliar and unorganized information that is processed in a synthetic and holistic<br />
manner. Analytical individuals rely on linear, sequential processing of information that enables them to evaluate<br />
and plan for the new venture. Cognitive Style Index (CSI) is an applicable tool to know individuals with high<br />
potentials for success in entrepreneurship by understanding the orientation of their cognitive style. The aim of this<br />
paper is to study the cognitive style of entrepreneurs and its dimensions (n=90) and compare it with the nonentrepreneurs<br />
(n=89). In this research the CSI questionnaire (Cronbach’s alpha=0.852) is used to assess the<br />
intuitive thinking style versus the analytical style. Based on the final result of this study, compared with the non<br />
entrepreneurs (CSI M = 39.6), entrepreneurs (CSI M = 30.5) are more advanced in their intuitive cognitive style.<br />
Statically, there was a significant difference. This could be a well defined explanation to why entrepreneurs just<br />
seem to be at the right place at the right time with the correct decisions, and provides a greater understanding of<br />
why entrepreneurs take a particular course of action such as finding and evaluating new opportunities and new<br />
venture creation processes.<br />
Keywords: entrepreneurship, entrepreneurial behaviour, cognitive, intuition, Cognitive Style Index (CSI)<br />
1. Introduction<br />
<strong>Entrepreneurs</strong>hip benefits society through economic growth which is the result of either the creation of<br />
new products, services and technologies, or raising productivity of existing goods and services.<br />
Entrepreneurial activity has been defined as the creating of an exploited opportunity where none<br />
existed previously, by one or more individuals (Brazeal and Herbert 1999). The ability of recognition<br />
and taking advantage of these opportunities makes the entrepreneur different from other managers<br />
Searching for opportunities, planning for the new venture, organizing resources, and implementation<br />
are the steps of new venture creation (e.g.,Timmons, 2005). These possibly nonlinear and<br />
frequentative stages are performed by aspiring entrepreneurs with different cognitive styles. However,<br />
how cognitive styles make a person capable of facing such challenges is still little known.<br />
According to Mitchell et al. (2002), ‘‘the research that contributes to a better understanding of<br />
information processing and entrepreneurial cognition has an important role to play in the development<br />
of the entrepreneurship literature’’ (p. 94). Others have suggested that cognitive perspectives may<br />
provide a means of differentiating entrepreneurs from non-entrepreneurs (Busenitz and Barney 1997;<br />
Stewart et al. 1998) and may provide a useful basis for understanding the opportunity identification<br />
process (Corbett 2005; Gaglio and Katz 2001; Krueger 2000) and how entrepreneurs use specific<br />
information to develop an enterprise (Busenitz et al. 2003).<br />
Cognitive style is recognized as a promising new semblance in the field of entrepreneurship research<br />
(Carland et al. 2002). It is widely perceived as an important determinant of individual behavior in the<br />
psychology literature (Sadler-Smith & Badger, 1998) and has been conceptualized as “a high-order<br />
heuristic that individuals employ when they approach, frame, and solve problems” (Brigham, De<br />
Castro, & Shepherd, 2007, p. 31). A study by Allinson et al. (2000) also indicated that the cognitive<br />
perspective has the potential to make an important contribution to the study of entrepreneurship and<br />
that cognitive style, in particular, could provide a basis for identifying those individuals who have the<br />
potential to become successful entrepreneurs. The present study compares entrepreneurs with nonentrepreneurs<br />
in terms of their cognitive styles.<br />
Entrepreneurial activity stems from an imbalance between the potential for something new and its<br />
realization. The entrepreneur has been defined as an individual who is instrumental in the conception<br />
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Mohammad Reza Zali et al.<br />
and implementation of the idea of the enterprise (Kets de Vries1977), as being opportunistic,<br />
innovative, creative, imaginative, ideas people who tend to be restless, proactive, and adventurous<br />
and thrive in the role of change agent (Cromie 2000). Kirzner (1982) defines an entrepreneur as one<br />
who identifies new market opportunities.<br />
Need for achievement (McClelland 1961), internal locus of control and a moderate orientation towards<br />
risk taking with a high tolerance of ambiguity (Koh 1996) are the other characteristics of entrepreneurs<br />
which are defined as symptomatic of intuitive, entrepreneurial behavior (Rotter 1966). Palich and<br />
Bagby (1995) suggest that entrepreneurs have no greater propensity to bear risk than nonentrepreneurs,<br />
but differences in cognitive style enable entrepreneurs to categorize and frame stimuli<br />
differently.<br />
One promising new methodology in creativity, innovation and entrepreneurship research is cognitive<br />
style, which stems from the field of individual psychological differences (Allinson et al. 2000;<br />
Brodzinski et al. 1990;Buttner and Gryskiewicz 1993; Carland et al. 2002; Ginn and Sexton 1990;<br />
Goldsmith and Kerr 1991). Cognitive Style refers to the activities of thinking, knowing and processing<br />
information.<br />
2. Cognitive style and entrepreneurial cognition<br />
According to Brigham et al. (2007, p. 31), research has shown that: (1) Cognitive style is a pervasive<br />
dimension that can be assessed, using psychometric techniques; (2) it is stable over the time; (3) it is<br />
bipolar; and (4) it describes different rather than better thinking processes.<br />
Entrepreneurial cognitions are defined as “. . . the knowledge structures that people use to make<br />
assessments, judgments, or decisions involving opportunity evaluation, venture creation, and growth”<br />
(Mitchell et al., 2002, p. 97). These cognitions are formed through an individual’s perception and<br />
interpretation of information, which, in the context of entrepreneurship, refer to any information (about<br />
the marketplace, technology, social, political, regulatory, and economic changes, etc.) that will<br />
ultimately lead to the discovery and exploitation of new business opportunities (Shane &<br />
Vankataraman, 2000).<br />
Researchers have postulated that cognition has the potential to make a significant contribution to the<br />
study of entrepreneurship (e.g., Allinson & Hayes, 1996; Allinson, Chell, & Hayes, 2000; Baron, 1998;<br />
Busenitz & Barney, 1997; Mitchell et al.,2002). An individual’s cognitive style may influence the<br />
preference for different types of learning, knowledge gathering, information processing, and decision<br />
making, many of the critical behaviors with which an entrepreneur is confronted on a daily basis. In<br />
addition, it can help individuals to focus their attention to specific areas of knowledge and certain<br />
tasks, and reduce the extent to which they concentrate on other, similarly important, knowledge and<br />
tasks .Cognitive style is generally thought of as a phenomenon with multiple dimensions, including<br />
decision making, learning, personality, and awareness (Leonard, Beauvais, & Scholl, 2005). One<br />
dimension, awareness—of people, ideas, objects, and incidents—is considered to be especially<br />
important (Allinson & Hayes, 1996; Leonard, Scholl, & Kowalski, 1999). This dimension can be<br />
conceptualized as a continuum ranging from intuitive to analytic, and has been frequently used to<br />
represent the whole construct of cognitive style (see, e.g., Brigham et al., 2007, who also used the<br />
label “decision-making style”).<br />
Earlier, Ornstein (1977) had referred to two modes of awareness that reflected the analytic and<br />
intuitive sides of an individual. Intuitive individuals are likely to discover opportunities by observing<br />
cues or signals through unfamiliar and unorganized information that is processed in a synthetic and<br />
holistic manner (Olson, 1985). This can help individuals identify an opportunity and motivate them to<br />
take action, as evidenced by the work of Miner (1997) who found intuition to be an important thinking<br />
mode of expert idea generators. Therefore, the intuitive cognitive style may be useful in the searching<br />
stage (i.e., opportunity identification) of the new venture creation process.<br />
Olson (1985) also described the analytic process, when individuals rely on linear, sequential<br />
processing of information that enables them to evaluate and plan for the new venture. Individuals with<br />
the analytic cognitive style may display competency in judging and evaluating information, and<br />
selecting actions to implement—skills that are needed in later stages of the new venture creation<br />
process (Olson).Empirical studies have demonstrated that cognitive style influences individual<br />
choices, is closely connected to workplace behaviors, and can facilitate the understanding of strategic<br />
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Mohammad Reza Zali et al.<br />
decisions in organizations (Hough & Ogilvie, 2005; Sadler-Smith, 1998). Moreover, cognitive style has<br />
proved to be a useful indicator to assess person-organization fit of owner-managers in small hightechnology<br />
firms, helping to predict satisfaction, intentions to exit, and actual turnover of the<br />
entrepreneurs that owned and managed such firms (Brigham et al., 2007).<br />
According to Carland et al. (1996) the process of all entrepreneurial action is the result of an<br />
individual’s decision to take that action. That decision, they suggest, is rooted in personality and<br />
cognition, and their study clearly demonstrates that intuition forms the basis for understanding<br />
entrepreneurs’ behavior patterns. <strong>Entrepreneurs</strong> with stronger intuition ‘‘translated vision into<br />
innovative action’’ (Carland et al.1996, p. 16). This leads to the research questions of the present<br />
study:<br />
� What are the key dimensions of Cognitive Style Index?<br />
� Is there any significant difference in each key dimension of cognitive style between entrepreneurs<br />
and non-entrepreneurs?<br />
� Are entrepreneurs more intuitive than non-entrepreneurs?<br />
3. Research methodology<br />
To conduct this study, in which a survey research design was used, two samples were selected<br />
amongst entrepreneurs and non entrepreneurs. The 90 entrepreneurs sample was drawn mainly from<br />
Science and Technology Park of the University of Tehran, determined by Cochran formula (t= 1.96<br />
(α=0.95), p=q=0.5, d= 0.05, N= 120). Since there is a extreme diversity in variables including the field<br />
of activity, age and work experience, this formula was used.<br />
The sample of 89 non-entrepreneurs was drawn from senior entrepreneurship students of The<br />
University of Tehran in accordance with Krejcie and Morgan (1970) since the population did not have<br />
a vast diversity.<br />
All questionnaires were filled via computer.<br />
4. The measurement of Cognitive Style Index<br />
Allinson, Chell and Hayes (2000) proposed that one could discern whether a person was more<br />
inclined to rational or intuitive behavior based on their cognitive style and this was done through the<br />
Cognitive Style Index (CSI). The Cognitive Style Index (CSI) is a self-report questionnaire, which<br />
consists of 38 questions whose aim is to ascertain whether a respondent’s cognitive style is either<br />
analytical or intuitive. The instrument is designed so that a person who is analytical is most likely to<br />
achieve a high score – maximum of 76. A low score would indicate that the respondent is more<br />
intuitive - the lower the score the more intuitive the respondent. More than 1000 adults participated in<br />
the development of the CSI. The principal objective was to develop a new measure which is<br />
psychometrically sound and convenient to administer. The CSI was developed because of the paucity<br />
of available instruments for large scale studies and because of the lack of independent evaluation of<br />
the few easy-to-use self-report measures of cognitive style (Allinson and Hayes, 1996). Evidence of<br />
the construct validity was provided by support for hypothesized relationships with selected<br />
instruments. Five instruments were used to validate the CSI; 16 PF (Catell, 1973), MBTI (Myers,<br />
1962), WEPS (Gordon, 1973), Learning styles questionnaire (Honey and Mumford, 1982) and finally,<br />
the Watson-Glaser Critical Thinking Analysis (Watson and Glaser, 1991). Results indicated a<br />
distribution of scores closely approximating theoretical expectations, excellent reliability in terms of<br />
internal consistency and temporal stability and good initial evidence of construct and concurrent<br />
validity (Watson and Glaser, 1991).<br />
This questionnaire is translated into Parsian. Its Cronbach’s alpha is 0.852.<br />
Since Allinson, Chell and Hayes (2000) did not mentioned the dimensions of the questionnaire and<br />
also did not determine which questions measure what factor, this article tried to determine them by<br />
using factor analysis.<br />
By Factor analysis 12 factors were driven out but since a few of them have less than 2 loading<br />
factors, they were reduced and the factor analysis was performed with 8 factors once more. These 8<br />
factors were entitled “logical thinking”, “acting within a procedure”, “rational decision making”,<br />
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Mohammad Reza Zali et al.<br />
“considering details and relevant factors”, “bearing uncertainty”, “informal and chaotic acting<br />
orientation”, “holistic view” and “being intuitive”. Table (1) introduces the constructs, their Cronbach’s<br />
alpha and loading factors.<br />
Table 1: Cronbach,s alpha, loading factor and constructs<br />
1- logical thinking (α=0.54)<br />
Cronbach's<br />
Alpha if Item<br />
deleted<br />
Loading<br />
Factor<br />
11.I rarely make ‘off the top of the head’ decisions. 0.848 0.629<br />
25.Most people regard me as a logical thinker. 0.851 0.6<br />
5.I am careful to follow rules and regulations at work. 0.849 0.435<br />
3.I am most effective when my work involves a clear sequence of tasks to be<br />
performed.<br />
2- acting within a procedure (α=0.68)<br />
0.847 0.409<br />
28.I find detailed, methodical work satisfying. 0.848 0.747<br />
29.My approach to solving a problem is to focus on one part at a time. 0.852 0.644<br />
6.I avoid taking a course of action if the odds are against its success. 0.847 0.499<br />
15.The best way for me to understand a problem is to break it down into its<br />
constituent parts.<br />
0.846 0.449<br />
9.I try to keep to a regular routine in my work. 0.846 0.36<br />
10.The kind of work I like best is that which requires a logical, step-by-step<br />
approach.<br />
3- rational decision making(α=0.63)<br />
0.844 0.347<br />
1.In my experience, rational thought is the only realistic basis for making<br />
decisions.<br />
0.847 0.677<br />
2.To solve a problem, I have to study each part of it in detail. 0.845 0.633<br />
16.I find that to adopt a careful, analytical approach to making decisions takes<br />
too long.<br />
0.851 0.558<br />
8.My understanding of a problem tends to come more from thorough analysis<br />
than flashes of insight.<br />
0.848 0.467<br />
13.Given enough time, I would consider every situation from all angles. 0.848 0.367<br />
26.To fully understand the facts I need a good theory.<br />
4- considering details and relevant factors (α=0.58)<br />
0.85 0.362<br />
21.My philosophy is that it is better to be safe than risk being sorry. 0.846 0.625<br />
23.I get on best with quiet, thoughtful people. 0.851 0.602<br />
19.I always pay attention to detail before I reach a conclusion. 0.849 0.591<br />
22.When making a decision, I take my time and thoroughly consider all relevant<br />
factors.<br />
0.844 0.529<br />
4.I have difficulty working with people who ‘dive in at the deep end’ without<br />
considering the finer aspects of the problem.<br />
5- bearing uncertainty (α=0.55)<br />
0.845 0.427<br />
18.I find that it is possible to be too organised when performing certain kinds of<br />
task.<br />
0.856 0.624<br />
33.I am the kind of person who casts caution to the wind. 0.847 0.588<br />
24.I would rather that my life was unpredictable than that it followed a regular<br />
pattern<br />
0.846 0.578<br />
35.I am always prepared to take a gamble. 0.849 0.533<br />
14.To be successful in my work, I find that it is important to avoid hurting other<br />
people’s feelings.<br />
6- informal and chaotic acting orientation (α=0.53)<br />
0.852 0.527<br />
36.Formal plans are more of a hindrance than a help in my work. 0.848 0.619<br />
30.I am constantly on the lookout for new experiences. 0.85 0.548<br />
17.I make most progress when I take calculated risks. 0.856 0.463<br />
12.I prefer chaotic action to orderly inaction. 0.849 0.456<br />
31.In meetings, I have more to say than most.<br />
7- holistic view (α=0.64)<br />
0.853 0.343<br />
34.I make decisions and get on with things rather than analyse every last detail. 0.845 0.63<br />
7.I am inclined to scan through reports rather than read them in detail. 0.852 0.618<br />
37.I am more at home with ideas rather than facts and figures. 0.847 0.515<br />
38.I find that ‘too much analysis results in paralysis’. 0.848 0.479<br />
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Mohammad Reza Zali et al.<br />
8- being intuitive (α=0.50)<br />
Cronbach's<br />
Alpha if Item<br />
deleted<br />
32.My ‘gut feeling’ is just as good a basis for decision making as careful<br />
analysis.<br />
0.852 0.742<br />
20.I make many of my decisions on the basis of intuition. 0.852 0.645<br />
27.I work best with people who are spontaneous.<br />
Total Croncach’s alpha=0.852<br />
KMO=0.725<br />
0.853 0.473<br />
5. Results<br />
Descriptive statistics including gender and age of respondents are shown in Table 2.<br />
Table 2: Descriptive statistics<br />
Gender<br />
Loading<br />
Factor<br />
Respondents N Mean Age Male Female<br />
<strong>Entrepreneurs</strong> 90 37.21 80% 20%<br />
Non- entrepreneurs 89 25.3 63% 37%<br />
For the purpose of investigating and gaining a better understanding of the differences between<br />
entrepreneurs’ and non-entrepreneurs’ cognitive styles, a contrastive study of the constructing parts<br />
of the cognitive style between these two groups is necessary. According to table 3 one of the<br />
components of the cognitive style is logical thinking with a mean of 5.50 for entrepreneurs versus 6.25<br />
for non-entrepreneurs which shows the greater value for non-entrepreneurs. It also represents that<br />
entrepreneurs’ holistic view (M=6.3) is more than non-entrepreneurs’ (M=5.2). This statement can<br />
also be said for the CSI scores of entrepreneurs (M=30.5) and non-entrepreneurs (M=39.6) which<br />
means entrepreneurs are more intuitive than non-entrepreneurs. All mean values are shown in table<br />
3. . <strong>Entrepreneurs</strong> were distinguished as having a dominant preference for intuitive versus nonentrepreneurs’<br />
analytic preference.<br />
Table 3: Constructs’ means<br />
Cognitive Style Index score<br />
logical thinking<br />
acting with procedures<br />
rational decision making<br />
considering details and<br />
relevant factors<br />
bearing uncertainty<br />
informal and chaotic acting<br />
holistic view<br />
Group Statistics<br />
type N Mean Std. Deviation Std. Error Mean<br />
E 90 30.48 10.236 1.079<br />
N 89 39.58 10.713 1.136<br />
Key dimensions of Cognitive Style Index<br />
E 90 5.50 2.029 .214<br />
N 89 6.25 1.681 .178<br />
E 90 5.89 3.085 .325<br />
N 89 7.30 2.882 .305<br />
E 90 7.24 2.501 .264<br />
N 89 7.93 2.354 .250<br />
E 90 4.57 2.623 .276<br />
N 89 5.81 2.662 .282<br />
E 90 6.18 2.144 .226<br />
N 89 4.46 2.398 .254<br />
E 90 7.71 1.756 .185<br />
N 89 6.40 2.230 .236<br />
E 90 6.31 1.929 .203<br />
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eing intuitive<br />
Mohammad Reza Zali et al.<br />
N 89 5.20 2.138 .227<br />
Group Statistics<br />
E 90 5.21 1.086 .114<br />
N 89 4.76 1.398 .148<br />
E: <strong>Entrepreneurs</strong> N:non-entrepreneurs<br />
The results of a number of independent sample t-tests are also shown in table 4. According to the table, the<br />
mean values of CSI score of both categories significantly differ. Considering the difference intervals, the mean<br />
value of entrepreneurs is less than non-entrepreneurs’. It is also true for “logical thinking”, “acting with process”,<br />
“rational decision making” and “considering details and relevant factors”. “Bearing uncertainty”, “informal and<br />
chaotic acting”, “holistic view” and “being intuitive” mean value of entrepreneurs are more and significantly<br />
different from non-entrepreneurs’.<br />
Table 4: Independent t-test results<br />
Cognitive Style Index score<br />
logical thinking<br />
acting with procedures<br />
rational decision making<br />
considering details and relevant<br />
factors<br />
bearing uncertainty<br />
informal and chaotic acting<br />
holistic view<br />
being intuitive<br />
Independent Sample Test<br />
t-test for Equality of Means<br />
t df Sig. Mean Std. Error 95% Confidence<br />
(2- Differenc Differenc Interval of the<br />
tailed<br />
)<br />
e<br />
e Difference<br />
Lower Upper<br />
- 177.00<br />
- -<br />
5.815 0 0.000 -9.106 1.566 12.197 6.016<br />
- 176.43<br />
- -<br />
5.814 1 0.000 -9.106 1.566 12.198 6.015<br />
Key dimensions of Cognitive Style Index<br />
- 177.00<br />
-<br />
2.681 0 0.008 -0.747 0.279 -1.297 0.197<br />
- 171.72<br />
-<br />
2.684 5 0.008 -0.747 0.278 -1.297 0.198<br />
- 177.00<br />
-<br />
3.169 0 0.002 -1.414 0.446 -2.295 0.534<br />
- 176.43<br />
-<br />
3.171 2 0.002 -1.414 0.446 -2.295 0.534<br />
- 177.00<br />
1.895 0 0.060 -0.688 0.363 -1.405 0.028<br />
- 176.57<br />
1.896 2 0.060 -0.688 0.363 -1.404 0.028<br />
- 177.00<br />
-<br />
3.145 0 0.002 -1.242 0.395 -2.022 0.463<br />
- 176.87<br />
-<br />
3.145 8<br />
177.00<br />
0.002 -1.242 0.395 -2.022 0.463<br />
5.051 0<br />
174.37<br />
0.000 1.717 0.340 1.046 2.388<br />
5.048 6<br />
177.00<br />
0.000 1.717 0.340 1.046 2.388<br />
4.358 0<br />
166.96<br />
0.000 1.307 0.300 0.715 1.898<br />
4.352 5<br />
177.00<br />
0.000 1.307 0.300 0.714 1.899<br />
3.643 0<br />
174.74<br />
0.000 1.109 0.304 0.508 1.709<br />
3.641 3 0.000 1.109 0.305 0.508 1.710<br />
2.390 177.00<br />
0<br />
0.018 0.447 0.187 0.078 0.816<br />
2.387 165.93<br />
3<br />
0.018 0.447 0.187 0.077 0.817<br />
Hypotheses Testing Independent sample t-tests shown in Table 1 reveal a number of interesting<br />
findings. <strong>Entrepreneurs</strong> who have demonstrated an ability to create a business venture are more<br />
intuitive (M = 30.5, SD = 1.07, n = 90) than the general population, non entrepreneurs (M = 39.6, SD =<br />
1.13, n = 89), and this difference was significant. Hypothesis is therefore supported.<br />
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Mohammad Reza Zali et al.<br />
The CSI results show that the cohort of entrepreneurs chosen for this study had a clear propensity for<br />
intuitive cognition. The entrepreneur’s mean score was significantly lower than that of nonentrepreneurs,<br />
thereby supporting the choice of entrepreneurs as an appropriate sample for this<br />
research.<br />
6. Conclusion<br />
‘The intuitive mind is a sacred gift and the rational mind is a faithful servant. We have<br />
created a society that honors the servant and has forgotten the gift.’ —Albert Einstein<br />
The purpose of this research is to evaluate the propensity of entrepreneurs to use intuition versus<br />
non-entrepreneurs. This research topic has been chosen to make it clear why some entrepreneurs<br />
seem to be better than others in decision making and opportunity recognition.<br />
Opportunity recognition, according to Shane and Venkataraman (2000), is the central basis of<br />
entrepreneurship. Whilst a great deal has been written about the process of finding and evaluating<br />
new opportunities, very little work has considered how entrepreneurs choose one opportunity over<br />
another, or the decision making process. This provides a greater understanding of why entrepreneurs<br />
take a particular course of action. This finding indicates and provides additional evidence about the<br />
role of cognitive style and its influence on the new venture creation process. This gives us a better<br />
understanding of how individuals learn and process information, more specifically the paths leading to<br />
entrepreneurial action.<br />
It is recognized that entrepreneurship is a multidimensional phenomenon (Palich and Bagby 1995),<br />
the present study does make an incremental contribution to the field and lends support to Shaver and<br />
Scott’s (1991) view that cognitive theory has an important part to play. The results also support their<br />
notion that entrepreneurs may categorize and subsequently, frame the same stimuli differently from<br />
non-entrepreneurs. In particular, finding suggests that cognitive style could be useful for identifying<br />
individuals who have the potential to become successful entrepreneurs (Allinson et al. 2000).<br />
<strong>Entrepreneurs</strong> are specifically more intuitive thinkers than non-entrepreneurs and consequently they<br />
have a holistic view of business opportunities and their exploitation and they see things as a big<br />
picture instead of considering every little detail. Because of this approach of viewing they are more<br />
capable to bear uncertainties and do different things which their relationships in a low level view could<br />
not be understood. In the other hand non-entrepreneurs are more rational decision makers and<br />
perform their plans within procedures.<br />
Using these characteristics of entrepreneurs, it could be concluded that in many aspects of<br />
entrepreneurship teaching programs a new intuitive approach should be taken and intuitive decision<br />
making capabilities should be considered.<br />
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890
Positive Leadership, Shared Values and Key Performance<br />
Indicators in the Pursuit of High Performance<br />
Przemyslaw Zbierowski and Mariusz Bratnicki<br />
University of Economics in Katowice, Katowice, Poland<br />
przemek@zbierowski.com<br />
Abstract: The study attempts to investigate the relationships between most significant positive traits of high<br />
performing SMEs – those concerning leadership and organisational culture, the use of key performance<br />
indicators (KPIs), and actual performance. The practical objective is to provide recommendations concerning<br />
leadership behaviours, creation of shared values and use of KPIs in achieving high organisational performance.<br />
Our prior study on positive phenomena and high performance in SMEs revealed that most significant positive<br />
factors contributing to success are: vision salience, empowerment (especially meaning and competence), trust,<br />
fairness and improvisation (especially spontaneity and persistence). We argue that those factors in SMEs are<br />
mainly shaped by leaders, often owners-managers of the firms. There is much evidence that leadership style<br />
(especially transformational one) has strong impact on performance (eg. Lim & Ployhart, 2004) therefore we<br />
decided to extend the model of positive traits with hope, optimism and transformational leadership (idealized<br />
influence, inspirational motivation, intellectual stimulation, and individualized consideration).Based on the<br />
feedback we received on our prior work we take a slightly different perspective of high performance. Instead of<br />
measuring performance using arbitrary measures we use KPIs to evaluate if the firm is successful against<br />
performance expectations (performance-to-plan). That approach requires qualitative research as we want to<br />
investigate the extent to which KPIs are used and the set of KPIs varies among firms, along with their importance<br />
and constant monitoring by owner-manager. We closely examine small group of gazelles (profitable, high<br />
growing SMEs with good reputation) focusing on relationships between positive traits and cultural factors, use of<br />
KPIs and performance. The qualitative methods are supported with data envelopment analysis (DEA). As the<br />
previous research shows there is high level of positive traits among leaders in high performing SMEs. There are<br />
however some differences in positive traits, transformational style dimensions and shared values, so there is not<br />
“one size fits all” pattern of high performance leader. The use of KPIs is rather low and informal, performance is<br />
mostly measured using key results indicators. The study has implications for research (more insight into high<br />
performing SMEs), business practice (best practice of behaviours and use of KPIs) and educators (focusing<br />
attention on crucial behaviours and shared values). The study adds to understanding high performance of SMEs,<br />
especially its antecedents in positive traits and use of KPIs. It merges well-established theories and notions (such<br />
as transformational leadership and KPIs) with new approaches (such as positive organisational scholarship<br />
(POS) and high performance organisation (HPO)).<br />
Keywords: key performance indicators; high performance; positive traits; transformational leadership<br />
1. Introduction<br />
For some time the scope of empirical research both in management and in entrepreneurship has<br />
switched from investigating the average to investigating the best. The notion of High Performance<br />
Organisations (HPO) fits well into that philosophy. It focuses on discovering the characteristics<br />
common for successful enterprises. Despite the evidence in this area is growing, there is little<br />
attention paid to characteristics of successful SMEs. The paper attempts to fill that gap empirically<br />
trying to investigate the features of gazelles – fast growing, profitable small and medium enterprises.<br />
Our prior study on positive phenomena and high performance in SMEs revealed that most significant<br />
positive factors contributing to success are: vision salience, empowerment (especially meaning and<br />
competence), trust, fairness and improvisation (especially spontaneity and persistence). We argue<br />
that those factors in SMEs are mainly shaped by leaders, often owners-managers of the firms. There<br />
is much evidence that transformational leadership has strong impact on performance therefore we<br />
decided to extend the model of positive traits with hope, optimism and transformational leadership.<br />
The main research question is: What methods and ways of management are used to achieve high<br />
performance? The practical objective is to provide recommendations concerning leadership<br />
behaviours, creation of shared values and use of KPIs in achieving high organisational performance.<br />
2. Theoretical background – POS and HPO<br />
The paper is rooted in two interconnected areas: positive organizational scholarship (POS) and high<br />
performance organisation (HPO). POS has its main inspiration in positive psychology (Seligman,<br />
2002), which proposes perspective different from traditional one, not replacing it, but attempting to<br />
supplement it. It redirects focus from what is wrong with people toward emphasizing human strengths<br />
that allow people to build the best in live, thrive and prosper (Seligman & Peterson, 2003). POS uses<br />
891
Przemyslaw Zbierowski and Mariusz Bratnicki<br />
the term “organisational happiness” as an analogy to people happiness. It can be cultivated by using<br />
strengths organisations already possess – kindness, originality, humour, optimism, and generosity.<br />
There is a growing body of literature concerning high performance organisations (Holbeche, 2005;<br />
Light, 2005; Lawler & Worley, 2006; Waal, 2005) and each of the authors presents a set of traits<br />
common to all robust organisations. Perhaps the most complete is the one by Waal (2005). In a<br />
recent analysis of ninety one studies on high performance organisations he found eight characteristics<br />
that can guide organisations to superior results.<br />
3. High performance of SMEs<br />
Organisational performance is a complex, multifaceted construct that should be examined with an eye<br />
towards complexity, including non-financial, forward-looking and perceptual indicators. Many scholars<br />
have theorized that modern performance, corporate governance and performance measurement<br />
systems attempt to address both profitability and growth, tangible and intangible issues (McGee,<br />
Thomas, & Wilson, 2005).<br />
Monitoring performance and setting performance measurement system has positive impact on firm’s<br />
performance. Performance measurement system helps to overcome organizational barriers and<br />
unveil the company true potential (Simmons, 2000), the use of the system improves overall quality of<br />
an organization (Bourne et al., 2002). Implicit in organization studies is the assumption that a choice<br />
of particular set of measures – or a specific set of methods of measuring – influences managers’<br />
assessments of organizational performance as well as decisions regarding organizational solutions<br />
(Nicholson-Crotty et al., 2006) and, ultimately, the success of an organization.<br />
Drawing upon strategic management theory and organization and management theory, we expect<br />
performance measurement to be an important element of building and sustaining competitive<br />
advantage (e.g. Fitzroy & Hubert, 2005) as well as organizational functioning and growth (e.g. Bititci,<br />
Mendibil, Martinez, & Albores, 2005). There is much evidence that organisations of various kind using<br />
performance measurement system based on key performance indicators achieve higher results<br />
(Parmenter,2007). Importantly, the organizational effectiveness construct is difficult to be defined and<br />
measured (Meyer & Gupta, 1994). Additionally, March and Sutton (1997) contended that an inquiry<br />
into a nature of effectiveness is one of the most permanent processes in the organization studies. The<br />
above arguments allow to formulate hypotheses:<br />
H1: High performing SMEs pay attention to wide range of success indicators.<br />
H2: High performing SMEs use and frequently monitor key performance indicators.<br />
4. Ways to high performance<br />
Literature review in POS and HPO and our former study show that the most important factors in<br />
achieving high SME performance are: salient vision, trust, transformational leadership, hope and<br />
optimism, empowerment, perception of fairness, strong shared values and action orientation as part of<br />
improvisation.<br />
Salient vision and strong shared values play an important role in creating high performance (Waal,<br />
2005, 2006). According to some scholars (Oswald, Mossholder & Harris, 1994) the influence of vision<br />
salience on performance is indirect, as it creates higher levels of attachment to organization and job.<br />
The vision is salient when organizational members feel that it is clearly articulated, leadership of the<br />
company shares values and the vision, and they are appropriate. It has been argued that values and<br />
vision must be clear and shared to have an impact (Beach, 1993). There is also much evidence that<br />
salient vision is a starting point for organizational success in positive meaning, as it creates spirit of<br />
the people, is a crucial part of developing leading culture as opposed to ordinary one (Prentice &<br />
Hunter, 2006). It has been observed for SMEs that vision is often articulated in values that are<br />
communicated throughout the company. It is therefore crucial for leading organizational citizens –<br />
people involved in job and committed to organization. Above lead to formulating hypotheses:<br />
H3: High performing SMEs have clear vision and strategy.<br />
H4: High performing SMEs have strong and clear shared values.<br />
There is much evidence that transformational leadership has strong impact on performance (Lim &<br />
Ployhart, 2004). There is also evidence that transformational leadership was more predictive of<br />
performance when it is assessed in maximum performance contexts. Previous research has found<br />
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Przemyslaw Zbierowski and Mariusz Bratnicki<br />
that transformational leaders are capable of developing important team processes: unit cohesion,<br />
team potency, collective efficacy, organizational trust and commitment, a sense of higher purpose or<br />
shared vision (Bass et al., 2003; Shamir, House, & Arthur, 1993). Some authors also suggest that<br />
hope and optimism are connected with transformational leadership and help to achieve high<br />
performance. Those considerations lead to formulation of hypotheses:<br />
H5: Leaders in high performing SMEs present transformational style.<br />
H6: Leaders in high performing SMEs present high levels of hope and optimism.<br />
Empowerment is the perception of being empowered (Corsun & Enz, 1999), it is also described as a<br />
empowered state of mind (Spreitzer, 1995; 1996). In this context empowerment may be considred as<br />
the result of the leaders’ actions and behaviours. As noted before, empowerment has a positive<br />
impact on job involvement (Ooi, Arumugam, Safa, & Bakar, 2007), performance (Logan & Ganster,<br />
2007; Chen, Kirkman, Kanfer, Allen, & Rosen, 2007) and employees’ well-being (Biron & Bamberger,<br />
2007).<br />
Our previous research showed that one of dimensions of improvisation – spontaneity and persistence<br />
is also related to high performance. We argue that that factor fits well with empowerment and is one of<br />
its outcomes therefore we propose to consider them together. Spontaneity and persistence is<br />
manifested mainly through action orientation and willingness to solve problems immediately<br />
(Hmieleski & Corbett, 2006) and leads to high performance. Therefore we propose following<br />
hypothesis:<br />
H7: Employees in high performing SMEs are empowered and have action-orientation.<br />
Some organizations develop greater propensities to trust than do others. This level of organizational<br />
trust that will govern the strategic actions of the organization (Cyert & March, 1963; Simon, 1957).<br />
There is also much recent evidence that trust at team and organization level has significant positive<br />
impact on performance of a company (Douglas & Zivnuska, 2008; Krishnan, Martin, & Noorderhaven,<br />
2006; Mayer & Gavin, 2005; Argyris, 1964).<br />
Research results suggest that in high performance environment there is a pressure for fairness<br />
(Colvin, 2006), and that the perception of fairness may create higher levels of performance (Aryee,<br />
Chen, & Budhwar, 2004). According to Kalleberg (2001) functional flexibility designed for high<br />
performance organisations demands also linking employees’ compensation to organisation’s<br />
performance. In high performing organisations performance-based compensation is perceived as fair,<br />
and supports the drive toward high performance (van Yperson, van den Bos, & de Graaff, 2005). As<br />
we argue that trust and perception of fairness are related we propose hypothesis:<br />
H8: There is a high level of trust and perception of fairness among employees of high<br />
performing SMEs.<br />
5. Research design, variables and measures, sample, and methods<br />
The method used in this study is a mixed qualitative and quantitative approach. We used semistructured<br />
interviews supported with questionnaires and data envelopment analysis (DEA).<br />
Research sample consisted of twelve high-performing SMEs. They were chosen through the ranking<br />
of “gazelles of business” run by business daily newspaper. Gazelles have had profit during last three<br />
893
Przemyslaw Zbierowski and Mariusz Bratnicki<br />
years, have had sales between 3 mln zlotys (around 750.000 GBP) and 200 mln zlotys (around 50<br />
mln GBP), have increased sales in last three years (every year), and have a good reputation. As the<br />
sample for data envelopment analysis must be homogenous steel products traders were chosen, as<br />
they have very similar profile of activity. A total number of 52 companies were included this year in the<br />
gazelles ranking (compared to 55 last year). The initial idea for this study was to capture the same<br />
firms covered by the research last year. That was problematic, as some of the previously researched<br />
companies have not been included in the latest ranking (as their performance dropped) and also<br />
some of companies included were unwilling to take part in the research as their performance dropped<br />
in the first months of 2009. Finally the sample consisted of 12 firms again, but only 6 were firms from<br />
2008 study.<br />
The interview with owner-manager consisted of open-ended list of 25 obligatory questions and some<br />
additional (created in the process of interview). The questions covered the assessment of<br />
performance, performance-to-plan, areas of performance monitoring, set of KPIs and the use of them,<br />
antecedents of firm’s success, strategy, leadership style, empowerment, improvisation, organisational<br />
culture and shared values, trust, fairness, hope and optimism. Each of the interviews lasted for about<br />
an hour and was followed by filling the questionnaire. The quantitative material was analysed using<br />
data envelopment analysis (xlDEA) and then basic statistical analysis was carried out using SPSS.<br />
The above described antecedents of high performance and measures of performance are inputs and<br />
outputs in the DEA model. Inputs are: vision salience measured by 3-item Oswald, Mossholder, and<br />
Harris’s (1994) measure, trust by 8-item modified Cook and Wall’s (1980) instrument, improvising by<br />
modified 9-item (3 items for dimension) Hmieleski and Corbett’s measure, empowerment by 12-item<br />
(3 items for dimension) Spreitzer’s (1995) instrument, and fairness by Jones and Martens’s (2007) 3item<br />
scale. All scales were 7-point Likert scales and where necessary has been adopted for the use at<br />
organisational level.<br />
Outputs: Growth was measured by increase of sales, profitability by ratio of profit to employment,<br />
credibility by 3-item 5-point assessment, fulfilment of organisation’s goal by respondents 5-point selfassessment,<br />
innovativeness by Kreiser, Marino, and Weaver’s (2002) 3-item 7-point innovativeness<br />
measure as part of entrepreneurial orientation scale, and job satisfaction by 3-item 7-point Michigan<br />
Organizational Assessment Questionnaire (MAOQ) (Cammann, Fichman, Jenkins, & Klesh, 1983).<br />
Additionally, age of organization, size (number of employees) were used as control variables.<br />
We used DEA to identify companies that are at the efficiency border and focus on them in order to<br />
uncover their ways to achieve high performance.<br />
6. Research results<br />
The results of data envelopment analysis show that out of 12 investigated firms 5 are on the high<br />
performance border. They were coded DPS, KDT, MGS, MST and RST. Two of the firms (DPS and<br />
MGS) were high performers also in last year’s study. What is interesting, the high performers<br />
identified in the study are not at the top of the list of gazelles according to the criteria of the ranking.<br />
They hold the places 14., 11., 16., 43. and 44. The difference comes from different approach. In the<br />
ranking only sales growth is taken into consideration while in our research the wide range of inputs<br />
and outputs in used in DEA model. In table 1 the sales growth, employment and turnover are<br />
presented. The sales growth is the two-years ration, eg. sales growth for 2008 is the sales growth in<br />
2008/sales growth in 2006. The turnover is in million zlotys. High performers are typically small firms,<br />
employing up to 25 people. Only one company is a medium-size enterprise employing 59 people.<br />
code DPS KDT MGS MST RST<br />
sales growth 2007 (%) 198 205 160 165 129<br />
sales growth 2008 (%) 206.05 227.77 193.14 147.49 140.97<br />
turnover 2007 14.61 78.87 34.99 61 13.86<br />
turnover 2008 23.94 101.70 42.81 64.79 15.55<br />
employment 25 18 25 59 30<br />
Table 1: Sales growth, turnover and employment of high performers<br />
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Przemyslaw Zbierowski and Mariusz Bratnicki<br />
High performers differ slightly in their assessment of firm’s performance. Some would clearly<br />
appreciate being included as gazelle, while the others are rather surprised (KDT). When asked about<br />
the indicators of success and high performance or what facts and information proves that they are<br />
high performing, typical answer are: growth of turnover and profit (DPS, MGS, MST, RST), high<br />
financial liquidity (KDT, MGS). That suggests that researched companies pay attention mostly to<br />
financial indicators and have conservative strategy. The following indicators of success are: good<br />
image built on high quality (MGS, MST), stable and well-qualified staff (MGS, RST), wide range of<br />
products available non-stop (DPS, MST) loyal clients (MGS), security (KDT), developing resources<br />
(KDT), satisfaction of employees (RST). No company has focused on single financial indicator of set<br />
of financial indicators, on the other hand financial facts play a major role in performance assessment.<br />
Above give partial support for hypothesis H1.<br />
When asked about relation of actual performance to performance expectations most of ownersmanagers<br />
of high performing firms (4 out of 5) replied that it doesn’t fully meet performance<br />
expectations. Only one owner-manager (KDT) replied that performance fully meets his performance<br />
expectations. It is consistent with other findings that owners-managers assess the performance<br />
slightly lower than it actually is.<br />
Owners-managers in running a company pay attention to various sets of factors and indicators: profit<br />
and economic efficiency (DPS), financial situation of clients (KDT), trade performance (MGS), stock<br />
and sales (MST), revenue, sales-personnel performance, contracts with key clients (RST). The use of<br />
key performance indicators is rather limited among research firms. It varies heavily from not setting<br />
any KPIs and paying no attention to any indicators except for profit and economic performance on<br />
monthly basis (DPS) to setting very specific set of indicators and monitoring them constantly (KDT).<br />
Only in the last example one can talk about real use of KPIs: the set is constant (own capital/stock,<br />
monthly sale, the amount of cash, average time of liabilities rotation, profit) and is monitored<br />
constantly. For the rest of firms the use of KPI is rather informal, they use some kind of indicators like<br />
costs, liquidity, ROA, but those indicators are monitored very rarely. Two of owners-managers admit<br />
that they do not use any indicators of performance in their daily work. Above results provide partial<br />
support for hypothesis H2.<br />
Asked about the way to success and high performance 3 out of 5 owners-managers list among others<br />
the ability to fulfil any order from the customer. That means keeping very high level of stock. One of<br />
the interviewees was proud of keeping at every time 550 different kinds of products (MGS), other<br />
claimed that the way to success was finding a niche of very specialised products and keeping every<br />
size of them on stock (DPS). This kind of approach reveals the concern for customers that is shared<br />
among researched companies. Some of interviewees provided wider range of antecedents of<br />
success: right approach to customer, high expectations from employees but high salaries, call centre,<br />
possibility of paying by credit card (MGS), continuous development (MST), honesty, reliability,<br />
investing in employees (RST).<br />
All of interviewees claimed that their companies have vision/mission and strategy but had problems<br />
verbalising it. What they were talking about was rather general strategic direction and leading shared<br />
values. Mission and strategy in four cases were part of ISO documentation (one of the companies<br />
does not have ISO certificate) and were treated as something too formal and unnecessary. Most of<br />
interviewees admitted that the strategy is informal (KDT, MGS, MST, RST), one of them admitted that<br />
although company has ISO there is no strategy and company “just responds to what competitors do”<br />
and that “the main strategy is to serve the customers” (KDT), for other the strategy is “identifying the<br />
needs of customers”. Customer satisfaction is the main driving force and serves well as main strategic<br />
goal for all researched companies. The values shared by leaders and employees in most cases were<br />
very clear and strong. The sets of values included honesty (KDT, MGS, MST, RST), reliability (MST,<br />
RST), commitment (KDT), sustainable development (MGS), flexibility (DPS). Interviewees were very<br />
confident about values shared in their companies, they clearly communicated those values and<br />
expected employees to follow them. Above provides support for hypothesis H4, but no support for H3.<br />
Most of interviewed leaders could be called transformational leaders. Their approach is rather informal<br />
and friendly, they keep relaxed atmosphere at the workplace and focus on tasks rather than on<br />
working hours and procedures. Concerning the type of leadership there was a difference between<br />
firms that were higher in the ranking (DPS, KDT, MGS) and firms lower in the ranking (MST, RST). In<br />
the first group there were personal ties between leaders and employees, the interviewees highlighted<br />
895
Przemyslaw Zbierowski and Mariusz Bratnicki<br />
friendly atmosphere, knowing employees well, helping employees in their personal problems (MGS),<br />
willingness to hear what employees want to say (KDT). This suggests individual consideration. There<br />
is also intellectual stimulation visible in the leadership style – a lot of freedom in activities. Idealised<br />
influence was manifested through presenting strong values and expecting employees to follow them.<br />
Above results provide support for hypothesis H5. Interviewed leaders also present high levels of hope<br />
and optimism that was clear especially in the time of credit crunch. Most of them claimed that the<br />
crisis works in favour of their companies which provides support for hypothesis H6.<br />
The leadership style presented by interviewees is partly based on empowerment, especially in terms<br />
of meaning and competence. In all of researched companies employees are convinced of importance<br />
of their jobs. One of the interviewees described that job is valuable and prestigious to employees<br />
(MGS), only in one case (RST) the owner-manager was not fully convinced of employees’ beliefs.<br />
Among most firms there is a high confidence of skills and knowledge necessary to do the job well.<br />
Owners provide trainings and employees usually had worked for a long time in their company that<br />
makes them confident. That provides support for hypothesis H7.<br />
In one case interviewee stated that there is trust among employees but there is no perception of<br />
fairness (MST). In one case there is neither trust nor fairness (RST), in three cases (DPS, KDT, MGS)<br />
there was both trust and fairness. Asked how trust and perception of fairness had been achieved<br />
interviewees mostly highlighted clear reward system, good communication, spending much time on<br />
talking to employees, clear rules, safety of employment and individual responsibility. Above results<br />
provide partial support for hypothesis H8.<br />
7. Discussion and conclusions<br />
Research results show very interesting way of managing company that leads to high performance.<br />
There was average concern for performance within researched group. It was difficult to measure the<br />
performance using KPIs as even though some KPIs were used there was no objectives for them so<br />
we were unable to measure performance-to-plan. The only useful indicator was satisfaction with<br />
performance, which in most cases was very high but didn’t reach the highest level.<br />
The ways of achieving success are rather conservative, there is rather low flexibility, innovativeness,<br />
risk taking, proactiveness among research firms. What is more important here is creating value for the<br />
customer. It means for all interviewees providing client with relevant product in the shortest possible<br />
time which means keeping high level of stock. Other method used was keeping high level of cash and<br />
maintaining high financial liquidity. Both of the ways are not very growth oriented as they ‘freeze’<br />
resources, but have proven to be effective in achieving high performance.<br />
Surprisingly, successful firms pay little attention to developing strategy and having salient vision. They<br />
might be called value-driven and all of them have strong organisational culture based on core values<br />
like honesty, reliability, commitment, serving customers. Those values are communicated within the<br />
firms and outside to stakeholders which helps in maintaining good relationships with customers.<br />
There is a wide use of empowerment within researched companies. Employees have a very positive<br />
attitude towards their jobs, they perceive them as something valuable, some of them living in small<br />
towns are respected for working for their firms. Also their confidence about professional skills is high.<br />
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Przemyslaw Zbierowski and Mariusz Bratnicki<br />
Generally there is also the atmosphere of trust and fairness among researched firms. Moreover, trust<br />
and perception of fairness are quite important for owners-managers; the company where results were<br />
lower in that area organised for employees an interpersonal training aimed at integration of the team<br />
and developing the atmosphere of trust and involvement, which is still rare in Polish conditions.<br />
There is a number of limitations of the study. First, it focuses only on one industry. That is the demand<br />
of DEA, but it limits the generalisation of research results. Another limitation is caused by small<br />
sample – it results in simplification of the model, and inability to investigate relationships between<br />
inputs and outputs without quantitative analysis. For future research big sample of homogenous<br />
companies should be used to enable quantitative analysis, investigating relationships between<br />
individual characteristics of organisation and measures of performance, and theory formulation. To<br />
generalise the results a comparison of a few industries should be carried out in future studies in the<br />
area. Finally, with the use of quantitative methods a better understanding of contingency and<br />
complexity of high performance characteristics should be achieved.<br />
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898
Much Room to Foster the Motivation of Researchers:<br />
Evidence from Slovenia<br />
Elizabeta Zirnstein<br />
University of Primorska, Faculty of Management, Koper, Slovenia<br />
elizabeta.zirnstein@gmail.com<br />
Abstract: Innovations are one of the key factors, influencing the development and the progress of any society.<br />
Innovation capabilities of companies depend on a variety of factors, such as R&D expenditure, knowledge<br />
management processes, culture, organization structure, management systems etc. In search of new, innovative<br />
ideas and solutions the undertakings tend to co-operate more and more often also colleges, universities and<br />
other public research institutions, in which research is actually one of their basic missions. If once the purpose<br />
and the pinnacle of scientific research work of scientists, employed at the universities and research institutes,<br />
was publication of research results in scientific magazines and presentations at the conferences (result of basic<br />
research), today the results of research are conveyed through patents, trademarks and other forms of<br />
commercial application to a much greater extent. Consequently, the degree of innovation is tightly related to the<br />
co-relation between the universities and economy. This paper seeks to provide insights into researchers’ motives<br />
to innovate. Although motivation has been investigated in many fields, there is not much to be found with regard<br />
to how to motivate the researchers at universities, research institutes and last but not least in the enterprises to<br />
research and to innovate. Hereby, we present the results of a research, which analysed what motivates and what<br />
hinders the Slovenian researchers, foremost those involved in patentable inventions, at their work. We asked the<br />
researchers which factors either as incentive or as obstacle influence most their scientific research work and in<br />
this regard the patent activity in different phases of research process. The picture of the factors (hindrances and<br />
motivators), collected through our research, could present a strong support in planning and forming the work of<br />
researchers at universities, research institutes and in enterprises. Based on the results obtained through the<br />
research we can conclude that the Slovenian universities and research institution have still a lot of work to do in<br />
the field of increase of efficiency of the scientific research activity. Considering the Herzberg motivation theory the<br />
factors, which especially encourage the researchers towards research work, should be integrated in the work<br />
environment as much as possible; those, taking their motivation away, should be eliminated or at least limited.<br />
The findings of the research will be of special importance to the management persons of universities, research<br />
institutes and enterprises, who are responsible for setting up an encouraging and motivational work environment<br />
with the aim to achieve higher innovation and more effective research.<br />
Keywords: scientific research, employee rewards, innovation, incentives and obstacles, Herzberg motivation<br />
theory, university incubators<br />
1. Introduction<br />
Business performance and innovation are believed to be closely linked. In general there is clear<br />
evidence that innovation play a crucial role to long term profitability and growth in firms (Geroski and<br />
Machin 1992; Sharma and Thomas 2008; Altman 2008; Roper, Du and Love 2008). Innovation<br />
abilities constantly fuel and renew competitive advantage as firms grow and mature (Miller 1983;<br />
Zahra and Covin 1993). There is little dispute that innovations are important for prosperity of firms,<br />
industries and society.<br />
Innovation capabilities of companies depend on a variety of factors, such as R&D expenditure,<br />
knowledge management processes, culture, organization structure, management systems etc. and on<br />
people. People are the main source of innovations within companies and other organizations. Studies<br />
show that a large majority of all innovations are created by company employees (Trimborn 2009).<br />
Employees’ innovation behaviour is therefore crucial for companies, that wish to increase their<br />
business performance and is determined by both the employees' proactivity and organization’s desire<br />
for employee innovation behaviour.<br />
Considering the aforementioned it is of the key essence for the undertakings to establish an<br />
appropriate environment within the undertaking in order to encourage innovation or to implement<br />
measures increasing innovation of employees. Thereby, they should pay attention to the fact that<br />
encouraging innovation and only innovation resulting in inventions, is not sufficient. Innovation in an<br />
undertaking has to be such that inventions are also efficiently implemented in the undertaking (e.g. if<br />
the invention improves work processes, there should be energy savings or material savings or similar)<br />
or commercially utilized. Innovation consists of successfully implementing creative ideas within an<br />
organisation. In addition to systems of encouragement and implementation of the innovation within an<br />
undertaking, the outsourcing of inventions is becoming more and more important. The undertakings<br />
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Elizabeta Zirnstein<br />
tend to cooperate with colleges, universities and other public research institutions, in which research<br />
is actually one of their basic missions.<br />
If once the purpose and the pinnacle of scientific research work of scientists, employed at the<br />
universities and research institutes, was publication of research results in scientific magazines and<br />
presentations at the conferences (result of basic research), today the results of research are<br />
conveyed through patents, trademarks and other forms of commercial application to a much greater<br />
extent. The scientific research work has been more and more application focused also at the<br />
universities and other research organisation and there is more cooperation with the economy. We can<br />
say that he gap between creating a scientific achievement and its applicability in practice is narrowing.<br />
Consequently, the number of academic inventions, presenting immediate commercial potential, is<br />
growing. Thus, the university know-how presents new source of industrial inventions. However, it is<br />
true that the problem of absence of links between the university and economy remains since research<br />
results are far more often recorded than the practical use of this knowledge in companies.<br />
Nevertheless, the recent researches in the Western World detect changing roles of universities and<br />
institutes. The researches at universities are more market-oriented; furthermore, the organisation of<br />
universities and institutes has been changing into the direction of »undertaking organisation«.<br />
Universities research is more and more directed towards commercial outcomes. To deal with this,<br />
universities have developed a variety of specialised units; the most important are technology transfer<br />
offices, science parks and incubators. The crucial function of technology transfer offices is to protect,<br />
manage and licence the university intellectual property, while incubators offer to start-ups and spinoffs<br />
a supportive environment (Bergek and Norman 2008) e.g. shared office services, access to<br />
equipment, provide hands-on-management assistance and access to financing (Rothaermel and<br />
Thursby 2005). On the other hand, science parks stimulate and manage the flow of knowledge and<br />
technology amongst universities, R&D institutions, companies and markets; they facilitate the creation<br />
and growth of innovation-based companies through incubation and spin-off processes and provide<br />
other value-added services (Ratinho and Henriques 2010). The underlying condition for success of all<br />
the abovementioned university activities and specialised units is in a stronger research performance<br />
that leads to new technologies, products and services.<br />
In the conducted research among the Slovenian researchers, we have analyzed the scientificresearch<br />
activity from the perspective of its encouraging and greater efficiency. Thereby we have<br />
focused on those researches, the result of which was an invention, which can be protected by a<br />
patent. As we are familiar with, the inventions are one of the most important and most prized results of<br />
the scientific-research work, because they influence the increase of competitiveness, economic<br />
growth and lead into long-term progress and development of any society. The purpose of this<br />
contribution is not to present the results of the abovementioned research in entirety, since this would<br />
require considerably more space. Thus, we shall present only the results referring to the motivation of<br />
researchers of application research work, the result of which are inventions and consequently patents.<br />
The findings of the research will be of special importance to the management persons of universities,<br />
research institutes and enterprises, who are responsible for setting up an encouraging and<br />
motivational work environment with the aim to achieve higher innovation and more effective research.<br />
2. Theoretical framework<br />
The term motivation derives from Latin „movere”, meaning to move. Motivation is defined as the<br />
degree to which a person wants and chooses to engage in specified behaviours (Mitchell 1982:<br />
81). Robbins (1993) defines motivation as „the willingness to exert high levels of effort towards<br />
organisational goals, conditioned by the effort’s ability to satisfy some individual need”. Robbins<br />
(1993) explains that need is an internal state of tension that stimulates drives within an individual.<br />
These drives than generate search behaviour to find particular goals that will satisfy the need and<br />
lead to the reduction of tension. Motivated employees are in a state of tension and they exert<br />
effort to relieve this tension. The greater the tension the higher the effort. From this point,<br />
motivational theorists (Maslow, McCllelland, Wroom, Porter and Lowler, Herzberg, Hackman and<br />
Oldham) differ and there are numerous theories of motivation. No matter which theory we prefer,<br />
it is common to all of them that better work results are achieved in work environments where the<br />
motivation of workers is higher. High motivation of workers also strengthens the satisfaction of<br />
workers. (Torrington & Hall 1987).<br />
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Elizabeta Zirnstein<br />
In previous research much has been written about the motivation of employees in general (for an<br />
overview see Ramlall 2004). However, only a small number of authors (Baker, Jensen and Murphy<br />
1988, Merges 1999, Zenger and Lazzarini 2004, Manso 2006, Kirstein and will 2006, Harhoff and<br />
Hoisl 2007) deals with how to motivate researchers, employed at universities, in public research<br />
organisations and private enterprises, how to enrapture them for their work thereby achieving better<br />
research results.<br />
The Herzberg motivation theory has been considered as the foundation of our research. The<br />
Herzberg theory has been applied and widely accepted in a variety of fields. For the context of this<br />
study, Herzberg theory seemed the most appropriate since it is based on the idea is that the task itself<br />
is the key to employee motivation. Prior work on employee motivation has highlighted a wide range of<br />
motives like desire for income, career advancement, desire for control etc (Sauermann and Cohen<br />
2010). While many of these motives are important to employees generally, prior work on motivation<br />
of researchers shows that their motives could be somewhat different. In contrast with job<br />
characteristics of other employees, researchers exercise a considerable degree of autonomy. As<br />
there is considerable degree of uncertainty about how to tackle the challenges and problems they<br />
were hired to solve, the researchers themselves often have greater expertise regarding particular<br />
problems than their superior managers (Sauermann and Cohen 2010). Moreover, their creative effort<br />
is hard to observe by managers; even their observable outcomes may not be very informative on their<br />
effort on the job. Consequently, opportunity for control and standard economic incentives is limited<br />
(Prendergast 1999). Thus, we expect that their performance on the job may depend heavily on the<br />
degree of challenge, responsibility, opportunity for personal growth and recognition. All these features<br />
should be integrated into researchers’ jobs in order that they be motivating.<br />
Considering the Herzberg motivation theory, the factors, which especially encourage the researchers<br />
towards research work (motivator factors), should be integrated in the work environment of<br />
researchers as much as possible; those, taking their motivation away (hygiene factors), should be<br />
eliminated or at least limited. However according to Herzberg the eliminating the causes of<br />
dissatisfaction (through hygiene factors) would not result in a state of satisfaction, instead it would<br />
result in a neutral state. Satisfaction (and motivation) would occur only as a result of the use of<br />
motivators. In order to find out which factors present motivator factors in the case of the Slovenian<br />
researchers we have conducted a quantitative research, presented hereinafter.<br />
3. The research<br />
The population of scientists, which was the base for the sample formation, comprised of altogether<br />
476 registered researchers in the data base COBISS, 1 who had at least one patent registered on 24<br />
February 2010. The limitation of the population to only those researchers, having a patent, was done<br />
on purpose, because the aim of the research was to acquire picture of motivators and hygiene factors<br />
foremost for those researches, focusing on innovation and not on basic scientific research. That is, we<br />
were interested in the population of researchers – innovators. Since the entire population was already<br />
very small (476), the data collection was very difficult; in addition either the electronic mail addresses<br />
were not available or the researchers have not consented with their publication in the national<br />
evidence of researchers. We have completed the base of electronic mail addresses and other contact<br />
data ourselves through internet research. In the final phase, the invitation to participate in the<br />
research has been submitted to 338 researchers.<br />
In the invitation letter, the project has been presented and the link to the internet questionnaire added.<br />
In the questionnaire we asked the researchers which factors either as incentive or as obstacle<br />
influence most their scientific research work and in this regard the patent activity in different phases of<br />
research process. The major part of the questionnaire and of the questions has been abstracted from<br />
the international research PATVAL concerning the motivation of researchers for patenting »European<br />
Inventors' Survey 2003«, conducted in 6 EU-countries. The questions from the aforementioned<br />
research have been partially adopted to the Slovenian environment and up-dated.<br />
The first responses to the invitations have been extremely poor, since we have received all together<br />
25 responses. Therefore, we have sent a reminder after 3 weeks and another one month later.<br />
1 COBISS (Co-operative Online Bibliographic System & Services) is a uniform library information system with shared<br />
cataloguing. It is also a database in which Slovene researchers register all their scientific results, such as scientific papers,<br />
books etc and also patents.<br />
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Elizabeta Zirnstein<br />
Altogether, we have received 50 responses. This was still not sufficient for a weighty analysis.<br />
Therefore, we have re-sent the mail with the questionnaire to all researchers in a hard-copy with a<br />
return receipt. In the final try, we have tried to contact the researchers also through telephone and we<br />
finally ended up with 72 useful responses, which represents a 21 % degree of responsiveness.<br />
4. The results<br />
The average age of respondents in the research amounted to 42.8 years. Among 72 respondents in<br />
the research, there were 56 men and 16 women. The achieved level of inventors’ education during<br />
the research was: 40 % of the respondents held PhD, 18 % held master's degree, 35 % were<br />
university graduated, 3 % held specialisation, 4 % held middle or lower education.<br />
In order to reach results regarding the impact of certain factors on the patent activity of Slovene<br />
researchers, we divided the research period in four separate sub-periods: “the period of generating<br />
the research idea and research, “the period of patenting and invention »and “the period of<br />
implementation of the patent in practice or its commercialisation”.<br />
First, we examined the employment status of the participants in the time of innovation process that<br />
concluded with patent application. As we can see in Table 1, almost half of participants were<br />
employed in companies (48,6 %), then at university (26,4 %), research institutes (16,7 %) and public<br />
entities (4,2 %).<br />
Table 1: Employment status of the participants<br />
Frequency Percent Cumulative %<br />
Valid Employed in company 35 48,6 48,6<br />
Employed at university 19 26,4 75,0<br />
Employed at research institute 12 16,7 91,7<br />
Employed in public entity 3 4,2 95,8<br />
Other 2 2,8 98,6<br />
Self- employed 1 1,4 100,0<br />
Total 72 100,0<br />
In order to reach results regarding the impact of certain factors on the patent activity of Slovene<br />
researchers, we divided the research period in three separate sub-periods: i) the period of generating<br />
the research idea and research; ii) the period of patenting an invention and iii) the period of<br />
implementation of the patent in practice or its commercialisation. First we have asked the researchers<br />
which factors influenced most their work in the sense of encouragement for research work<br />
(motivators) and which factors represent the hindrances (hygiene factors) during the first period<br />
(period of research). We report these results in Table 2.<br />
Table 2: Factors, influencing work in the sense of motivators and hindrances during the period of<br />
research<br />
N Min Max Mean Std. Er, Std. Dev.<br />
The satisfaction of 71 3 5 4.51 .075 .630<br />
working what I like<br />
Interest for such work 72 3 5 4.47 .074 .627<br />
Curiosity 71 3 5 4.46 .072 .605<br />
Pleasure in work 72 3 5 4.46 .079 .670<br />
Doing something 68 3 5 4.46 .077 .633<br />
useful and beneficial<br />
Possibility of later 68 1 5 4.43 .087 .719<br />
applications of results<br />
in practice<br />
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Elizabeta Zirnstein<br />
N Min Max Mean Std. Er, Std. Dev.<br />
Desire for something<br />
new<br />
70 3 5 4.40 .077 .646<br />
Personal challenge 71 1 5 4.34 .096 .810<br />
Intellectual satisfaction 70 1 5 4.31 .094 .790<br />
Goal-orientation<br />
project<br />
of 69 3 5 4.09 .096 .800<br />
Possibility to cooperate<br />
with industry<br />
63 1 5 4.02 .116 .924<br />
Desire for success 68 1 5 3.99 .099 .819<br />
Own reputation 67 1 5 3.96 .098 .806<br />
Intertwining<br />
professional work<br />
with 66 1 5 3.91 .114 .924<br />
Possibility of future 70 1 5 3.90 .100 .837<br />
recommendations<br />
Possibility of publicist<br />
activities<br />
65 1 5 3.65 .125 1.007<br />
Autonomy<br />
(independent<br />
distribution of time and<br />
money)<br />
59 1 5 3.64 .123 .943<br />
Complexity of the 63 1 5 3.62 .119 .941<br />
nature of problem<br />
Co-workers<br />
relationships<br />
67 1 5 3.60 .111 .906<br />
Part of work obligations 66 1 5 3.55 .106 .863<br />
Appropriate politics 61 1 5 3.54 .113 .886<br />
and management in an<br />
organisation<br />
Ensuring product or 56 2 5 3.52 .102 .763<br />
services standards<br />
Professional support 64 1 5 3.50 .104 .836<br />
Technical support 65 1 5 3.46 .112 .903<br />
Financial potential of a<br />
project<br />
67 1 5 3.36 .122 .995<br />
Ensuring salary 56 1 5 3.30 .151 1.127<br />
through<br />
projects<br />
research<br />
A way of acquiring 55 1 5 3.24 .156 1.154<br />
research funds<br />
Money for acquisition<br />
of research means<br />
59 1 5 3.22 .153 1.175<br />
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Elizabeta Zirnstein<br />
N Min Max Mean Std. Er, Std. Dev.<br />
Intertwining<br />
teaching work<br />
with 51 1 5 3.16 .152 1.084<br />
Time of testing an 64 1 5 3.09 .115 .921<br />
innovation<br />
Payment for work and<br />
rewards<br />
51 1 5 3.08 .122 .868<br />
Reporting manners (on 57 1 5 2.95 .145 1.093<br />
results<br />
funds)<br />
and use of<br />
Constraints and 53 1 5 2.81 .135 .982<br />
pressure<br />
superiors<br />
of the<br />
Poor administrative 61 1 4 2.46 .123 .959<br />
and<br />
support<br />
bureaucratic<br />
Legend: 1- very hindering, 5 – very encouraging<br />
By analysing the collected data we have formed a picture quite similar to the one of Herzberg (Table<br />
3). When interpreting the data we have to consider that the respondents have marked certain factors<br />
as irrelevant to their work (number of valid responses is stated in a special column). The factors on<br />
the outermost points, which have encouraged or hindered the researchers most at their work, should<br />
be pointed out. The most important among the motivators is “The satisfaction of working what I like”<br />
then “Interest for such work” in “Curiosity”. On the other side, i.e. among the factors, hindering the<br />
researchers’ work the most, are “Constraints and pressure of the superiors« and “Poor administrative<br />
and bureaucratic support of the institution«. Thereby it should be stressed that the pressure of<br />
superiors as the hindrance has been pointed out by the innovators at the universities and public<br />
research institutions as well as in the enterprises. The same applies for the factors showing as the<br />
most motivating. We found it interesting that the employed at universities and institutes see a much<br />
stronger obstacle compared to others in »technical«, »professional« and »administrative and<br />
bureaucratic« support of their home institution.<br />
Table 3: The most important motivators and hindrances for research work focused on innovations<br />
Motivators Hygiene factors<br />
The satisfaction of working what I like Constraints and pressure of the superiors<br />
Interest for such work Poor administrative and bureaucratic<br />
support<br />
Curiosity<br />
Pleasure in work<br />
The picture of factors (hindrances and motivators), collected through our research, could present a<br />
strong support in planning the research work, forming of work and an organisation. Considering the<br />
Herzberg motivation theory the motivation factors, which especially encourage the researchers<br />
towards research work, should be integrated in the work environment of researchers as much as<br />
possible; those, taking their motivation away, do not represent a motive, however in order to bring<br />
peace (not necessarily motivation) they should be eliminated or at least limited.<br />
In the questionnaire we have also asked the researchers which factors influenced most their work<br />
during the period of patenting the invention. As Table 4 shows, the work of researchers in this period<br />
has been most motivated by the references and gaining self-value; on the other hand the most<br />
restrictive factors were: knowledge of writing the patent application, access to capital market and<br />
regulation of relations between the innovators and institutions with regard to awards, arising from<br />
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Elizabeta Zirnstein<br />
patents. The results also show that universities and institutes support their researchers essentially<br />
worse from the administrative perspective compared to the economy.<br />
Table 4: The most important motivators and hindrances for patenting the invention<br />
Motivators Hygiene factors<br />
References Knowledge of writing patent application<br />
Gaining self-value Access to capital market<br />
Regulation of reward system for<br />
innovativeness<br />
At last we have asked the researchers which factors influenced most their work in the sense of<br />
hygiene factors and motivators during the period of implementation of the patent in practice or its<br />
commercialisation. The results (Table 5) show that the researchers (the entire sample) were most<br />
motivated by pleasure to participate and work with the economy and practice, presentation of<br />
knowledge and personal work in industry and realisation of own inventions in industry. Among those<br />
factors, which were the most hindering, were (besides the small size of the Slovenian market) also:<br />
financial pretentiousness, access to capital market and initial capital. Relating to the differences<br />
between the employed at universities and institutes and others the least motivating factor among the<br />
employed at universities and institutes was »Founding of own company«, »Realisation of knowledge<br />
in the form of cooperation with industry«, »Realisation of research capacities«, »Transfer of<br />
knowledge between the educational sphere and economy«, »Sale of patents to multinational<br />
companies«. The desire to commercialize academic know-how and opportunities for that is obviously<br />
much smaller by the researchers at universities and institutes compared to others.<br />
Table 5: The most important motivators and hindrances for implementation of<br />
patent/commercialization<br />
Motivators Hygiene factors<br />
pleasure to participate and work with the<br />
financial pretentiousness<br />
economy and practice<br />
presentation of knowledge and personal access to capital market and initial capital<br />
work in industry<br />
realisation of own inventions in industry<br />
5. Discussion<br />
We can influence the satisfaction of the employees, resulting in above-average work results, by<br />
introducing motivator factors into their work environment. If we successfully eliminate all those factors<br />
defined according to Herzberg as hygiene factors from the work environment we will prevent the<br />
dissatisfaction.<br />
We think that much could be done in the field of hygiene factors. However according to Herzberg this<br />
will not lead to increased motivation of the researchers; higher motivation can only be achieved by the<br />
use of motivators. With regard to the latter, the results of our research show that there are different<br />
motivating factors in different research periods. In the period of generating the research idea and<br />
research, the satisfaction of working what they like and curiosity were on the first place among the<br />
motivators. In the period of patenting the invention, the work of researchers has been most motivated<br />
by the references, gaining self-value and good connections with the industry. In the period of<br />
implementation/commercialisation of the patent, the researchers were most motivated by pleasure to<br />
participate and work with the economy and practice, presentation of knowledge and personal work in<br />
industry and realisation of own inventions in industry. The implication of these results is clear:<br />
motivation can be increased through basic changes of the research job: changes that allow increased<br />
challenge and responsibility, opportunities for advancement, personal growth of researchers and<br />
recognition. In order to increase the motivation of researchers there are many possibilities and job<br />
design measures that can be applied. These measures mostly depend upon research team leaders,<br />
directors of research or even senior management of an enterprise, university or institute: it is in the<br />
sphere of individual leaders how the work is distributed and whether the individuals will be instructed<br />
the work, which they really like and which presents challenge to them. It also depends upon the<br />
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Elizabeta Zirnstein<br />
leaders whether they will know how to present certain research work as interesting or not. Sometimes<br />
it is already sufficient to listen to the desires of individuals in a research group.<br />
Conclusion<br />
In our research that is presented hereby, we made an attempt to understand the motivation of<br />
researchers working at universities, research organisations and in business firms. We indentified<br />
key motivators and key hindrances in different phases of research process form generating a<br />
research idea to commercialising the results of the research. Our analysis could present a strong<br />
support in planning and forming the work of researchers at universities, research institutes and in<br />
enterprises. Based on the results obtained through the research we can conclude that the<br />
management persons of universities, research institutes and enterprises have to pay much more<br />
attention on setting up a encouraging and motivational work environment in order to increase<br />
efficiency of the scientific research activity, which is one of the key factors, influencing the<br />
development and the progress of the society.<br />
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Zahra, S. and Covin, J.G. (1993) “Business strategy, technology policy and firm performance”, Strategic<br />
management Journal, Vol 14, No. 6, pp 451-478.<br />
Zenger T.R. and Lazzarini S.G. (2004) “Compensating for innovation: do small firms offer high-powered<br />
incentives that lure talent and motivate effort?”, Managerial and Decision Economics, Vol 25, No. 6-7, pp<br />
329-345.<br />
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PhD<br />
Research<br />
Papers<br />
907
908
Research and Technology Organizations (RTOs) role in<br />
Innovation System<br />
Jaione Agirre Uranga, and Antonio Gil Ruiz<br />
Fundación Tekniker, Spain<br />
jagirre@tekniker.es<br />
agil@tekniker.es<br />
Abstract: The paper proposes a four dimensions absorptive capacity model, focused on analyzing Research and<br />
Technology Organization’s learning and innovation strategies. The model is composed by: (a) absorptive<br />
capacity, (b) learning processes, and (c) knowledge base theory in innovation system. The aim of this paper is to<br />
extend the knowledge-based view by providing an analysis model of how organization learn and manage<br />
knowledge to encourage innovation process. As RTOs are distributed knowledge systems, and active part of an<br />
innovation system, it is essential to theoretically identify and empirically test the existence and effectiveness of<br />
different strategies that promote interactions and knowledge creation. Based on RTO´s case analysis, we<br />
propose a RTO´s learning strategy classification, distinguishing between “science model”, “business model” and<br />
“open model”; which will allow identifying particular innovation challenges that RTO´s are facing as well as<br />
specific areas to promote innovations.<br />
Keywords: Absorptive capacity; RTO, Learning process; Knowledge base, open innovation.<br />
1. RTOs in Innovation System<br />
The role of Research and Technological Organizations (RTOs) in the innovation system 1 has<br />
traditionally been focused on supporting regional industry on their R&D activities and serving public<br />
sector to fulfil market under investments on R&D. However, RTO´s original role as knowledge<br />
generator and transformer in innovation system is evolving towards more open models. Moreover, the<br />
knowledge and technology have become increasingly complex, raising the importance of links<br />
between organizations as a way to acquire specialized knowledge (OECD, 2005), in order to generate<br />
input for the innovation process. Therefore, an increasingly global knowledge economy moving<br />
towards an “open innovation” model needs more collaborative approaches.<br />
Considering useful knowledge has become widespread, and knowledge and learning capacity is in<br />
the root of innovation process, organizations need to create a new and personalised logic of learning<br />
that embraces external knowledge in conjunction with internal R&D, in order to deliver the results to<br />
the marketplace.<br />
In this context, knowledge transfer between the RTO and agents in academic framework, such as<br />
universities and research centers and agents in the business framework is a key area of analysis. The<br />
model seeks to analyze how RTO learn from the academic environment, a subsystem of innovation<br />
that focuses primarily functions in the exploration of knowledge and from the business environment,<br />
innovation subsystem that focuses its primary functions in the exploitation of knowledge.<br />
Therefore, we distinguish three models of learning: RTO that focus their learning strategy in academic<br />
framework (1), RTO that focus their learning strategy in business framework (2), and RTO that focus<br />
their learning strategy combining both sources of knowledge (3).<br />
Absorptive capacity refers to an organization’s ability to identify, assimilate and exploit knowledge<br />
from external sources (Cohen & Levinthal, 1990). Absorptive capacity models are built on the basis<br />
that internal and external sources of knowledge are complementary, and they should be combined to<br />
improve the innovative performance of organizations. So there is a recursive relationship between the<br />
absorptive capacity and innovation processes, as the absorptive capacity increases the speed,<br />
frequency and magnitude of innovation and innovation increases firm´s knowledge base, becoming<br />
part of the organization’s absorptive capacity (Kim & Kogut, 1996).<br />
1<br />
Innovation system it is a system of interconnected institutions to create, store and transfer the knowledge,<br />
and skills which define new technologies, product, service; so it stresses that the flow of technology and<br />
information among people, enterprises and institutions is key to an innovative process.<br />
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Figure 1: RTO´s learning sources<br />
2. Absorptive capacity<br />
Jaione Agirre Uranga and Antonio Gil Ruiz<br />
Absorptive capacity is an organization’s ability to identify, assimilate, transform, and apply valuable<br />
external knowledge (Cohen & Levinthal, 1990), becoming a limit to the rate or quantity of scientific or<br />
technological information that an organization can absorb. Conceptually, it is similar to information<br />
processing theory, but at the organization level rather than in an individual level.<br />
Absorptive capacity models are built on the basis that internal and external sources of knowledge are<br />
complementary, and they should be combined to improve the innovative performance of companies.<br />
First, organizations require internal R&D capabilities to recognize and monitor interesting technologies<br />
developed elsewhere. Second, internal research capabilities are indispensable to effectively exploit<br />
external know-how. External knowledge can only be recognized; accessed and assimilated when<br />
organizations develop effective routines and adapt their organizational structure and culture to<br />
facilitate open innovation processes (Dalander and Gann, 2007).<br />
Cohen and Levinthal (1990) were the first identifying the term absorption capacity and developing a<br />
three-dimensional model composed of identification, assimilation and exploitation of knowledge.<br />
Identification refers to the ability to locate and acquire new and external knowledge, critical for the<br />
activity of the company. The assimilation of the knowledge refers to routines and processes required<br />
to analyze, process and understand the information obtained from external sources (Szulanski, 1999).<br />
The exploitation dimension refers to the routines that allow a company to improve, expand, and<br />
combine the new with existing knowledge in the company, so that they can leverage existing skills or<br />
develop new skills, through the new knowledge (Tiemessen et al, 1997).<br />
We conclude absorptive capacity is composed by identification, assimilation, transformation and<br />
exploitation dimensions, Transformation dimension is definitely worth considering within the<br />
absorptive capacity, since each of these capabilities are based on different kinds of processes and<br />
routines within the organization.<br />
Despite the growing popularity of using the absorptive capacity construct under different settings,<br />
empirical research on absorptive capacity was hindered by the lack of a clear operationalization of the<br />
construct (Lane et al, 2006), and therefore, the definition of critical routines contribute positively to<br />
absorptive capacity´s research. The most commonly proxies used to capture absorptive capacity in<br />
recent empirical studies are related to R&D activities, although, the evidence indicates they are not<br />
comprehensive enough to cover the rich content domain and multidimensionality of the construct.<br />
R&D is not enough on its own, and other factors, such as competitive intelligence and knowledge<br />
management practices, are also important. This paper extends and empirically validates Zahra and<br />
George (2002) contribution, developing the necessary scales used to operationalize absorptive<br />
capacity as a dynamic capability embedded in specific organizational processes.<br />
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Table 1: Absorptive capacity dimensions<br />
Jaione Agirre Uranga and Antonio Gil Ruiz<br />
Dimensions Identification Assimilation Transformation Exploitation<br />
Cohen y<br />
Levinthal<br />
(1990)<br />
Lane y Lubatkin<br />
(1998)<br />
Van den Bosch<br />
et al. (1999)<br />
Zahra y George<br />
(2002)<br />
Lane et al.<br />
(2006)<br />
Recognize and evaluate<br />
new knowledge that is<br />
critical, and external<br />
Recognize and evaluate<br />
new knowledge that is<br />
critical, and external<br />
Efficiency in terms of<br />
how companies identify<br />
new external knowledge.<br />
Identify and acquire new<br />
knowledge<br />
It is a process<br />
determined by internal<br />
and external elements<br />
3. Absorptive capacity model<br />
Assimilate<br />
external new<br />
knowledge<br />
Assimilate<br />
external new<br />
knowledge<br />
Determinants of<br />
the extent of<br />
knowledge a firm<br />
uses<br />
Routines and<br />
processes that<br />
allow companies<br />
to analyze,<br />
process, interpret<br />
and understand<br />
the information<br />
It is a process<br />
that allow<br />
companies to<br />
internalize new<br />
knowledge<br />
In figure 2, it is summarized the developed theoretical model:<br />
3.1 Identification<br />
Flexibility in<br />
access to<br />
additional<br />
knowledge and<br />
reconfiguration<br />
of existing, to<br />
change it.<br />
Ability to develop<br />
and refine the<br />
routines that<br />
allow to<br />
combine existing<br />
and new<br />
knowledge<br />
Exploit new<br />
knowledge<br />
Exploit and<br />
commercialize new<br />
knowledge<br />
Ability to expand<br />
and create new<br />
knowledge through<br />
the incorporation of<br />
new knowledge<br />
The results of the<br />
absorption<br />
capacity must be<br />
measured by both<br />
the business result<br />
and the generation<br />
of new knowledge.<br />
Identification dimension refers to a company's ability to locate, evaluate and acquire knowledge that is<br />
critical to company´s activities from external sources. The strategic nature of knowledge,<br />
characterized by its tacit and complex nature, depends on the following activities: Competitive<br />
intelligence, strategic planning, and monitoring and evaluations systems.<br />
3.1.1 a) Competitive Intelligence<br />
Prior knowledge base consists of individual units of knowledge within the organization (Kim, 1998),<br />
thus, prior related knowledge confers an ability to recognize the value of new information, assimilate<br />
it, and apply it to commercial ends. Competitive Intelligence allows organizations to identify and<br />
acquire externally generated knowledge that is essential for the development of innovative capacity.<br />
As few companies possess every resource for a continued innovation process is necessary to<br />
complement their internal capacity with external sources of knowledge (Almeida et al, 2003).<br />
Therefore, competitive intelligence systems defined as the action of defining, gathering, analyzing,<br />
and distributing intelligence about products, customers, competitors and any aspect of the<br />
environment needed to support executives and managers in making strategic decisions for an<br />
organization, contribute positively to knowledge identification. The developed scales to operationalize<br />
this activity are:<br />
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Jaione Agirre Uranga and Antonio Gil Ruiz<br />
Figure 2: Absorptive capacity model<br />
Table 2: Competitive Intelligence indicators<br />
Critical routines Focused on Development<br />
…. framework intensity<br />
Competitive Intelligence focused on<br />
customers<br />
Business 0/low/mid/high<br />
Competitive Intelligence focused on<br />
competitors<br />
Both 0/low/mid/high<br />
Competitive Intelligence focused on<br />
technologies evolution<br />
<strong>Academic</strong> 0/low/mid/high<br />
Competitive Intelligence System Both 0/low/mid/high<br />
Prospectively techniques Both 0/low/mid/high<br />
Attendance industry events such as fairs or<br />
congresses<br />
3.1.2 b) Strategic planning<br />
Both 0/low/mid/high<br />
Source<br />
McEvily, B. y<br />
Zaheer, A. (1999)<br />
Segarra, M. (2006)<br />
Millán y Comai<br />
(2006)<br />
As far as organization´s strategy establish the mission, goals and a set of actions available to<br />
develop it "(Fyol and Lyles, 1985), it will partly determine their ability to learn, therefore, the strategy<br />
influences learning by providing limits for decision making and a context for perception and<br />
interpretation of the environment (Fyol and Lyles, 1985; Ribbens, 1997). As the strategic orientation of<br />
a company is more proactive; its capacity to absorb new knowledge would be wider (Liao et al, 2003);<br />
moreover, when the members of an organization share a common vision of what they want to<br />
achieve, and what is the information they are looking for, this common view fed the absorptive<br />
capacity. Therefore, the availability of a shared strategic planning contributes to the development of<br />
the identification dimension of the absorption capacity. The developed scales to operationalize this<br />
activity are:<br />
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Table 3: Strategic planning indicators<br />
Jaione Agirre Uranga and Antonio Gil Ruiz<br />
Critical routines Focused on Development Source<br />
…. framework intensity<br />
Regular strategic reflection Both 0/low/mid/high Fyol y Lyles (1985)<br />
Senge, (1990)<br />
Strategic planning is written and accessible<br />
for all company members<br />
Both 0/low/mid/high Ribbens, (1997)<br />
Actions to communicate objectives and<br />
strategic lines in the medium and long term<br />
for employees of the organization<br />
Both 0/low/mid/high<br />
3.1.3 c) Monitoring and evaluations Systems:<br />
Organizations tend to stick to existing strategies and have a natural tendency to resist change<br />
(Welsch, Liao and Stoica, 2001), so an assessment system provides feedback, and allow evaluating<br />
organization activity (Kaplan, 1991:201), get essential information to adapt to changes in the market<br />
and in the innovation system. The monitoring and evaluation systems determine positively the<br />
learning capacity of the organization, influencing both the knowledge stock and its evolution through<br />
knowledge flows. Assessment systems are not exclusively control systems, but they are systems that<br />
allow monitoring in a contextual and integrated way. Responsiveness is considered an ability of an<br />
organization to detect the extra-organizational changes and to take measures to adapt to the situation<br />
by making changes internally, and developing active interferences to change something in the<br />
surroundings so that it was increasing this organization’s adaptiveness. Since absorptive capacity<br />
measures the organization's ability to adapt to changes in its environment, the greater the<br />
organization's responsiveness, the greater its absorptive capacity (Welsch, Liao and Stoica, 2001).<br />
The developed scales to operationalize this activity are:<br />
Table 4: Monitoring and evaluations indicators<br />
Critical routines Focused on Development Source<br />
…. framework intensity<br />
Researchers performance evaluation Both 0/low/mid/high Deming (1982)<br />
importance<br />
Monitoring and evaluation systems in project Both 0/low/mid/high<br />
evaluation<br />
Customer satisfaction activities Business 0/low/mid/high<br />
Not financial indicators measurement <strong>Academic</strong> 0/low/mid/high<br />
3.2 Assimilation<br />
Assimilation refers to organization's ability to absorb external knowledge, and it can be defined as an<br />
organization's routines and processes that allow external knowledge to understand, analyze, and<br />
interpret (Zahra and George, 2002, Szulanski, 2000). The particular characteristic of the identified<br />
knowledge and the specific routines to manage it are essential to ensure effective knowledge<br />
assimilation.<br />
3.2.1 a) Human Resources<br />
The level of academic degrees of employees affects absorptive capacity through the knowledge<br />
assimilation phase. Employees with higher levels of education in a particular area are usually better<br />
able to absorb new knowledge in that field. The developed scales to operationalize this activity are:<br />
The essence of the innovation process is the accumulation, transformation and application of new<br />
knowledge, and the concepts of knowledge bases and innovation modes contribute with a new<br />
perspective. The innovation process is also depending on their specific knowledge base,<br />
distinguished between three types of knowledge base: ‘analytical’, ‘synthetic’ and ‘symbolic’ (Asheim,<br />
1997). These knowledge based types indicate different mixes of tacit and codified knowledge,<br />
qualifications and skills, required organisations involved, as well as specific innovation challenges.<br />
On the one hand there are innovation strategies (STI-mode of innovation) that give main emphasis to<br />
promoting R&D and creating access to explicit codified knowledge; and on the other hand there are<br />
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Jaione Agirre Uranga and Antonio Gil Ruiz<br />
innovation strategies (DUI-mode of innovation) that are based on learning by doing, using and<br />
interaction.<br />
The STI learning mode is characterized by scientific learning based on scientific methods; while the<br />
DUI learning mode is mainly based on developing know-how, and through the interaction between<br />
companies in the value chain. It is useful to be aware of this distinction, to find ways for the two<br />
modes to support each other rather than come into conflict. They need to be balanced and integrated,<br />
since empirical researches (Jensen et al, 2004) conclude that organizations – combining the<br />
analytical and synthetic modes –are much more innovative than those that operate in the one of the<br />
two innovation mode.<br />
The developed scales to operationalize this activity are (table nº6):<br />
Table 5: Human resources indicators<br />
Critical routines Focused on Development<br />
…. framework intensity<br />
Educational distribution of the employees Both % of the total<br />
organization<br />
How great importance have for the<br />
Both % of the total<br />
management’s efforts to secure that the<br />
employees continuously develop their skill<br />
organization<br />
Quality circles/groups Business 0/low/mid/high<br />
Number of PhD in the organization <strong>Academic</strong> 0/low/mid/high<br />
3.2.2 b) Interaction mode<br />
Table 6: Interaction mode indicators<br />
Source<br />
Asheim (2005)<br />
Jensen, Jonson et<br />
al, (2004)<br />
Lundvall, et Lorenz<br />
(2007)<br />
Critical routines Focused on Development Source<br />
…. framework intensity<br />
the co-operation with universities and <strong>Academic</strong> 0/low/mid/high Asheim (2005)<br />
technological institutes<br />
Jensen, Jonson et<br />
Collaboration with customers Business 0/low/mid/high al, (2004)<br />
Lundvall, et Lorenz<br />
Interdisciplinary workgroups Both 0/low/mid/high (2007)<br />
Autonomous groups Both 0/low/mid/high<br />
Integration of functions Both 0/low/mid/high<br />
Systems for collecting proposals from<br />
stakeholders<br />
3.2.3 c) Knowledge conversion process:<br />
Both 0/low/mid/high<br />
Considering that knowledge and learning capacity are in the root of innovation process, organizations<br />
need to create a new and personalised logic of knowledge management (Nonaka & Takeuchi 1995;<br />
Senge 1990). Organizations can be understood as distributed knowledge systems, or specialized<br />
communities in the creation and assimilation of knowledge, so assimilation and coordination actions<br />
are ways to connect and interrelate knowledge of each of the members of the organization (Kogut and<br />
Zander, 1992).<br />
Organization´s rules and values determine and describe how they develop learning processes.<br />
Knowledge is embedded into practice which stresses the collective nature of knowing, in contrast to<br />
knowledge as an object that exists on its own. Moreover, the perceptions of individuals and social<br />
interaction processes, determine the shape and quality of relationships and behaviors.<br />
Therefore, the organization requires the existence of an effective internal communication and the<br />
capacity to assimilate and exploit the information carried by the sub-units (Van den Bosch, Volberda<br />
and de Boer, 1999).<br />
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Jaione Agirre Uranga and Antonio Gil Ruiz<br />
Critical routines Focused on<br />
…. framework<br />
Experience with similar knowledge and<br />
technology transferred<br />
Division of roles and responsibilities for<br />
implementing new knowledge<br />
Adequacy of knowledge interests and needs<br />
of the organization<br />
The company generates routines for the<br />
socialization, externalization and<br />
internalization of knowledge.<br />
Table 7: Knowledge conversion process indicators<br />
3.3 Transformation<br />
<strong>Academic</strong> +<br />
Business<br />
<strong>Academic</strong> +<br />
Business<br />
<strong>Academic</strong> +<br />
Business<br />
<strong>Academic</strong> +<br />
Business<br />
Development Source<br />
intensity<br />
0/low/mid/high � Nonaka y<br />
takeuchi<br />
0/low/mid/high<br />
(1995)<br />
� Szulanski<br />
0/low/mid/high<br />
(2000)<br />
� Jensen et al.,<br />
0/low/mid/high<br />
(2004),<br />
The ability to integrate new knowledge, or portions of it, with available knowledge in the organization,<br />
is essential to fulfil the learning process and to update the existing knowledge base in the<br />
organization. Transformation refers to the organization's ability to develop routines that combine<br />
existing knowledge with newly acquired and assimilated knowledge, so transformation can be<br />
achieved by adding or deleting knowledge, or interpreting existing knowledge in a different way.<br />
3.3.1 a) Create spaces to combine knowledge:<br />
Business and social relationships within the organization, becomes integration mechanisms that<br />
reduce the barriers between the assimilation and transformation of knowledge, increasing the<br />
absorption capacity of the company (Zahra and George, 2002). So, organizational structure allowing<br />
the maximum amount of communication between departments promotes organization's absorptive<br />
capacity.<br />
Table 8: New knowledge combination indicators<br />
Critical routines Focused on Development Source<br />
…. framework intensity<br />
Presentations and communications about<br />
developed projects for organization<br />
employees.<br />
The organization knows the people who may<br />
be interested in developed new knowledge<br />
The organization considers its ready to<br />
implement new knowledge to internal<br />
process and commercial objectives.<br />
The organization has provided the<br />
necessary resources in terms of time, space,<br />
equipment... for the application of new<br />
knowledge.<br />
3.4 Exploitation<br />
Both 0/low/mid/high Nonaka y takeuchi<br />
(2004)<br />
Li-Hua, R. (2003)<br />
Both 0/low/mid/high<br />
Both 0/low/mid/high<br />
Both 0/low/mid/high<br />
Exploitation refers to an organization's ability to apply new external knowledge commercially to<br />
achieve organizational objectives (Lane and Lubatkin, 1998), and it can also refer to the routines that<br />
allow organizations to refine, extend, and leverage existing competences or create new ones by<br />
incorporating acquired and transformed knowledge into its operations (Zahra and George, 2002).<br />
Exploitation can be measured by the number of an organization's patents or new products, indexed<br />
publications and creation of new spin-offs (Ematek, 2010)<br />
Research and Technology Organizations are institution dedicated to the production, dissemination<br />
and application of scientific and technological knowledge in any area of science and technology, with<br />
a multi-sector approach. They play roles in creating and marketing new products, processes and<br />
services, enabling collaboration between companies, and offering intensive knowledge services.<br />
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Table 9: Innovation indicators<br />
Jaione Agirre Uranga and Antonio Gil Ruiz<br />
Critical routines Focused on Development Source<br />
…. framework intensity<br />
Indexed publications <strong>Academic</strong> 0/low/mid/high Own development,<br />
based on Emaitek<br />
Spin-off <strong>Academic</strong> /<br />
business<br />
0/low/mid/high (2010)<br />
Income per employee Business 0/low/mid/high<br />
4. Method and Data<br />
4.1 Analysis Unit: Research and Technology Organizations (RTOs)<br />
RTOs aim is to connect the long-term research in universities and public research centers with the<br />
most immediate needs of companies, and therefore, its role should be to create usable technologies<br />
from recent scientific advances and transfer efficiently to the companies so that they can innovate in<br />
their products/ processes. And all this must be done by providing assurance to appropriate the<br />
results, becoming a good connector between science and the market” (Santamaría, 2003). Therefore,<br />
it is interesting to analyze RTOs activity as they can become strategic business partners for<br />
companies, as well as partners of other agents of the innovation system at different stages of the<br />
innovation process.<br />
Nowadays RTOs have in common that they are facing two main challenges: On the one hand, the<br />
linear model of basic research leading to applied research, and followed by market application, is no<br />
longer a realistic model. Research and product development have become an open activity with<br />
several interconnected stakeholders, with critical knowledge stock each of them. And, on the other<br />
hand, there is a growing pressure on the research community to demonstrate that investments in<br />
research generate results and in particular benefits for the sponsoring community.<br />
4.2 Case study method<br />
A case study is an empirical inquiry that investigates a contemporary phenomenon within its real-life<br />
context, especially when the boundaries between phenomenon and context are not clearly evident<br />
(Yin, 2002), that´s why, case study research method is particularly well-suited to this research, since<br />
the object of our discipline is the study of learning processes in RTOs.<br />
RTOs are closely linked to the history of the place they were created and they evolve, making it<br />
difficult to have a homogeneous data to make comparisons and statistical inferences. Given this<br />
reality of the object of study, the selection of cases will seek to analyze the different realities in order<br />
to analyze properties that are developed in different contexts, and finally, draw conclusions that can<br />
be generalized.<br />
The information obtained from interviews was completed with available data such as annual memory<br />
report, scholar papers, and any information offered by Research and Technology Organizations.<br />
Analyzed RTOS are named with new name in order to maintain confidentiality issues, and so, they will<br />
be called: Alpha, Beta, Gamma, Delta, Theta, Epsilon and Kappa.<br />
4.3 Innovation Indicators<br />
The public funding of RTOs is performance based, and consequently, productivity measures, such as<br />
citation indexes, patents, etc. have rapidly gained in importance. To analyze Research and<br />
Technology Organizations innovation process output, we decided to focus on the development of<br />
different indicators: (1) Scientific publications disseminate the results of laboratory or theoretical<br />
investigations and fieldwork conducted by Research and Technology Organizations and so, they<br />
become a good indicator of organization’s scientific excellence and (2) Spin-offs creation as a<br />
consequence of applied knowledge and technology center´s entrepreneurial ability. Finally, (3) the<br />
income per employee is a good indicator of RTO´s economic competitiveness. These innovation<br />
indicators capture R & D results that are statistically measurable.<br />
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5. Case analysis results<br />
Jaione Agirre Uranga and Antonio Gil Ruiz<br />
The empirical analysis demonstrates that organizations with greater absorption capacity have better<br />
results in innovation. However, not all organizations have the same innovation strategy, so the<br />
concept of success may be different in each case, and so, it is necessary to identify the centre´s<br />
learning strategy.<br />
The figure nº3 indicates the scientific productivity of the analyzed RTOs. Based on case study<br />
Gamma, Kappa and Alpha have focused their identify activities in academia, developing strong<br />
relationship with universities and research institutions; that would explain that they have good results<br />
in scientific indicators, such as scientific publication.<br />
Figure 3: Scientific publications per employee<br />
The figure nº4 indicates the entrepreneur activity of the analyzed RTOs. As Gamma and Alpha are<br />
the RTO´s with most spin-off contribution, we are able to make a positive relation between those RTO<br />
with a mayor academic profile tend to externalize technologies and services to companies, and<br />
concentrate RTO´s activity in research and development activities.<br />
Figure 4: Spin-off per employee<br />
The figure nº5 indicates the important differences regarding the income per employee between<br />
analyzed RTOs. Kappa has the best results in income per employee indicator and this can be<br />
explained by its open learning strategy. Kappa has both technological and industrial orientation, with<br />
strong relation with businesses in its field, as well as agents from academic framework.<br />
Moreover, Kappa has a steady development of all dimensions of absorptive capacity, contrasting<br />
other RTOs which have a much lower absorptive capacity development.<br />
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Figure 5: Income per employee<br />
Jaione Agirre Uranga and Antonio Gil Ruiz<br />
Based on case study, we have identified three models of RTO learning model: “business model”,<br />
focused on market, where identification activities are focus on companies, prioritizing the development<br />
of projects with them, and therefore, becoming a service supplier for these companies; an “academic<br />
model” with a clear technological orientation, where identification activities are focused on the<br />
academic environment, with researcher exchange practices, and an “open model” where agents from<br />
academia and business framework participate throughout the learning process, developing a<br />
technology-oriented projects.<br />
6. Conclusions<br />
This paper proposes an absorptive capacity model, bridging the Innovation Theory, Knowledge base<br />
theory, Absorption capacity and stakeholders learning processes, in order to analyze the role of RTO<br />
in the innovation system.<br />
Based on case study, we have identified three models of RTO learning model: “business model”,<br />
focused on market, becoming a service supplier for these companies; an “academic model” with a<br />
clear technological orientation, and an “open model” where agents from academia and business<br />
framework participate throughout the learning process.<br />
We will emphasize some theoretical lessons. Firstly, this study provides qualitative evidence of the<br />
positive relation between absorptive capacity and innovative performance. Secondly, the model<br />
provides a new perspective on RTO´s role in innovation system and in open innovation, pointing out<br />
the importance of learning strategies and knowledge management frameworks in organizations.<br />
Thirdly, this study identifies the huge innovative potential exist in RTO via knowledge combination<br />
instead of just specialization strategies. As illustrated by the data presented above, there are lessons<br />
to be learnt from successful RTOs that introduce specific organizational characteristics such as job<br />
rotation, inter-divisional teams, and reducing the number of levels in the organizational hierarchy.<br />
References<br />
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919
Analyzing Intellectual Property Rights: Current Private<br />
Reward System and Alternative Institutional Solutions<br />
Maiia Deutschmann<br />
European University Viadrina, Frankfurt (Oder), Germany<br />
deutschmann@europa-uni.de<br />
Abstract: The paper handles the problem of appropriate institutional arrangements that would stimulate<br />
innovativeness within a country. First, efficiency and appropriateness of the current system of intellectual property<br />
rights protection, called “current private reward system”, are being critically analyzed. Arguments that support or<br />
criticize the current system of intellectual property rights protection are based on economic and philosophical<br />
perspectives. Own empirical research based on the most recent data from the EU and other countries support<br />
the substantial importance of strong intellectual property protection for innovativeness. However, the results<br />
cannot stipulate whether the old “reward system” is the best alternative. Second, alternative mechanisms to<br />
stimulate innovativeness and technological progress are introduced and analysed. They are grouped in two<br />
types: a) amendments within the present private reward system and b) totally new public intellectual property<br />
systems. These are possibilities that would encourage innovation without providing (excessive) monopolistic<br />
rights to inventors.<br />
Keywords: intellectual property rights, intellectual property protection, private reward system<br />
1. Introduction<br />
Intensive intellectual work usually leads to impressive improvements in the fields of technology,<br />
services, art etc. Following, it increases national and international, material and immaterial wealth.<br />
One of the most important questions in the field of intellectual property rights is how to motivate the<br />
creation of intellectual property. The international society seems to have found an answer in<br />
strengthening intellectual property protection. It can be clearly seen in the legislation processes of the<br />
majority of countries as well as in the development of bilateral and international agreements.<br />
One of the most widely spread legal bases of international intellectual property rights protection is the<br />
Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement of the WTO. It is an attempt<br />
to reduce the gaps in the way intellectual property rights are protected around the world. The TRIPS<br />
agreement sets minimal standards in the following fields of intellectual property: copyright and related<br />
rights; trademark, including service marks; geographical indications; industrial designs; patents;<br />
layout-designs (topographies) of integrated circuits; undisclosed information, including trade secrets<br />
(WTO).<br />
Especially economic and political issues underlie the decisions of governments to provide investors<br />
with a long-term legal protection of their intellectual property.<br />
Despite its wide implementation (normal in the majority of industrialised countries) and several<br />
advantages, the present intellectual property rights regime and its appropriateness are still actively<br />
debated in the scientific and political community. The reason lies in the importance of intellectual<br />
property not only for innovative companies and individual inventors, but also for the future<br />
development of the world in many fields like health improvement, nutrition security, technological<br />
progress, welfare distribution etc. It is reasonable to rethink and rearrange the present system of<br />
intellectual property protection. Are there other ways that would encourage knowledge production and<br />
its distribution without securing property rights to the developers of new intangible assets?<br />
2. Theoretical background<br />
The core reason of opposing views on whether intellectual property should receive legal protection<br />
(like it is done for material property) or not, lies in the special characteristics of intellectual property.<br />
“Knowledge defies traditional understandings of property and principles of exchange” (Peters 2010, p.<br />
18). Contrary to the majority of tangible assets, it closely conforms to the features of a public good:<br />
� knowledge is non-rivalrous: the knowledge is not reduced while being used. By sharing with<br />
others, use, reuse and modification it may indeed add value;<br />
�<br />
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� Knowledge is barely excludable: it is difficult to exclude users and to force them to become<br />
buyers; it is difficult, if not impossible, to restrict distribution of goods that can be reproduced with<br />
little or no cost. (cf. Peters 2010, p. 18). For example, it is difficult to exclude someone from using<br />
a published knowledge (in scientific journals, conferences or in patent databanks).<br />
Taking these special characteristics of intellectual property rights into consideration, many<br />
researchers have analysed the applicability of the traditional view on property rights view to the<br />
question of intellectual property rights protection. For example, Richards (2002) came to the<br />
conclusion that the arguments of well-known philosophic defenders of exclusive rights, John Locke<br />
(labor theory of property), Friedrich Hegel (freedom theory of property), and Jeremy Bentham<br />
(utilitarian view), do not hold up well when applied to intellectual property. Furthermore, the author<br />
concludes that the applicability of the Coase theorem is also low (Richards 2002).<br />
Menell (2007) also analyses whether intellectual property should be accorded the same protections<br />
as tangible property and criticizes the applicability of Locke’s philosophy. Menell comes to the<br />
conclusion that the philosophical (and also legal, economic, and political) bases for protecting<br />
intellectual property and tangible property differ in significant ways (Menell 2007, p. 39).<br />
Lea (2006) analyses intellectual property rights from a moral perspective and comes to a conclusion<br />
that these rights cannot be justified. The utilitarian grounding of the intellectual property rights in a<br />
software industry was also proved to be weak.<br />
Yung (2009) analyses the soundness of the utilitarian grounding of intellectual property rights<br />
protection and comes to a conclusion that it “may not necessarily be justified”. (Yung 2009, p. 56).<br />
Despite of this reasonable critique (which is also shared by the author of this paper), the most<br />
fundamental economic argument in favour of a strong intellectual property protection – economic<br />
incentives 1 – should be awarded needed attention and respect. The newly created knowledge would<br />
not exist without its creator. The latter will not be interested in creating intellectual assets without<br />
being sure about receiving an exclusive property right for the knowledge created.<br />
3. The present intellectual property rights protection (IPRP) system and its<br />
strengths<br />
The most important reasons for the development and existence of the present system of IPRP are the<br />
following:<br />
� Knowledge development takes much time and money and can cause essential financial capital<br />
loss (e.g. investments in scientific projects that later fail to succeed). Therefore, the effort of<br />
developing new intellectual assets has to be awarded and the invested capital has to be<br />
amortized;<br />
� An inventor has to have the property right over the results of his work;<br />
� By issuing e.g. patents for an invention, the knowledge is not hidden but available to the public, so<br />
that every interested person could learn it 2 ;<br />
� The chance for extraordinary benefits in case of successful development of new intellectual<br />
assets (high profit margins, long-lasting first mover advantages, temporary monopolistic position)<br />
is a strong motivator for knowledge developers. Such chances will be safeguarded if the IPRP is<br />
strong. This would cause a general increase of the level of innovativeness in a society;<br />
� By introducing stronger IPRP, countries would attract MNCs which will be able to use their<br />
monopolistic advantage. Accordingly international trade and investment would rise. This would<br />
lead to an increase in knowledge diffusion as well.<br />
The explanation of the present property rights system is based mostly on utilitarian views and has<br />
been supported by many empirical studies. For example, Kanwar and Evenson (2003) were able to<br />
prove the relationship between IPRs and innovation empirically; “other evidence supports the<br />
existence of a positive relationship between IPRs and economic growth (Gould and Gruben 1996;<br />
1 However, it should be stressed here that the present intellectual property regime is only one among several other institutions that are able<br />
to create economic incentives and to stimulate substantial knowledge creation. (Calandrillo 1998, p. 306; Yung 2009, p. 56).<br />
2 For example, in Germany all patent (and other kinds of intellectual property rights), registration documents including technical descriptions<br />
of inventions, are freely available online. See: http://depatisnet.dpma.de.<br />
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Falvey et al. 2004, 2006a)” ( Falvey et al 2009, p. 374). The empirical results on the connection<br />
between FDI and IPR are, however, contradicting. “While Lesser (2002), Lee and Mansfield (1996),<br />
and Smarzynska (2004) found a positive effect of IPR on FDI, Kondo (1995), Nicholson (2007), and<br />
Seyoum (1996) reported otherwise“ (Adams 2010, p. 201).<br />
Due to contradicting results of empirical and theoretical investigation of the influence of the current<br />
system of intellectual property rights protection (IPRP), own empirical research was conducted. The<br />
following two relationships were in the focus of the analysis:<br />
� The interdependence of IPRP and innovativeness in a country and<br />
� The interdependence of IPRP and knowledge diffusion (FDI and trade)<br />
In the following the methodology of the empirical analysis is going to be described.<br />
4. Methodology<br />
First, it was analyzed whether the level of innovativeness depends on the level of intellectual property<br />
protection in a country.<br />
The object of analysis were the following 32 countries: United Kingdom, Turkey, Switzerland, Sweden,<br />
Spain, Slovenia, Slovakia, Romania, Portugal, Poland, Norway, the Netherlands, Malta, Luxembourg,<br />
Lithuania, Latvia, Italy, Ireland, Iceland, Hungary, Greece, Germany, France, Finland, Estonia,<br />
Denmark, Cyprus, Czech Republic, Croatia, Bulgaria, Belgium and Austria. The country choice is<br />
solely based on the availability of data as available at the time of analysis.<br />
The variables “innovativeness” and “IPRP” were measured for the year 2010.<br />
The latent variable “innovativeness” was operationalised with the help of the Innovation Index of the<br />
Innovation Union Scorecard (IUS) developed by the Maastricht Economic and Social Research and<br />
Training Centre on Innovation and Technology. The IUS Index of Innovativeness is based on 3 main<br />
types of indicators and with respective innovation dimensions (UNU-Merit 2010, p. 7f.):<br />
Enablers capture the main drivers of innovation performance external to the firm, including:<br />
� human resources dimension measures the availability of a high-skilled and educated workforce.<br />
It includes 3 indicators: *New doctorate graduates per 1000 population aged 25-34; *Percentage<br />
population aged 30-34 having completed tertiary education; *Percentage youth aged 20-24<br />
having attained at least upper secondary level education;<br />
� excellent research systems dimension measures the international competitiveness of the science<br />
base. It includes 3 indicators: *International scientific co-publications per million population;<br />
*Scientific publications among the top 10% most cited publications worldwide as % of total<br />
scientific publications of the country; *Non-EU doctorate students as a % of all doctorate students;<br />
� finance and support dimension measures the availability of finance for innovation projects and<br />
the support of governments for research and innovation activities. It includes 2 indicators: *Public<br />
R&D expenditures as % of GDP; *Venture capital (early stage, expansion, and replacement) as %<br />
of GDP.<br />
Firm activities capture the innovation efforts at the level of the firm, including:<br />
� The Firm investments dimension includes *Business R&D expenditures as % of GDP; Non-R&D<br />
innovation expenditures as % of turnover that firms make in order to generate innovations;<br />
� The Linkages & entrepreneurship dimension measures entrepreneurial efforts and collaboration<br />
efforts among innovating firms and also with the public sector. It includes: *SMEs innovating inhouse<br />
as % of SMEs, *Innovative SMEs collaborating with others as % of SMEs; *Public-private<br />
co-publications per million population;<br />
� The Intellectual assets dimension captures: *PCT patents applications per billion GDP (in PPS€);<br />
*PCT patent applications in societal challenges per billion GDP (in PPS€) (climate change<br />
mitigation; health); *Community trademarks per billion GDP (in PPS€); *Community designs per<br />
billion GDP (in PPS€).<br />
Outputs capture the effects of firms’ innovation activities, including:<br />
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Maiia Deutschmann<br />
� The Innovators dimension measures the number of firms that have introduced innovations onto<br />
the market or within their organisations, covering: *SMEs introducing product or process<br />
innovations as % of SMEs; *SMEs introducing marketing or organisational innovations as % of<br />
SMEs;<br />
� The Economic effects dimension captures the economic success of innovation in: *Employment in<br />
knowledge-intensive activities (manufacturing and services) as % of total employment; *Medium<br />
and high-tech product exports as % total product exports; *Knowledge-intensive services exports<br />
as % total service exports; *Sales of new to market and new to firm innovations as % of turnover;<br />
*License and patent revenues from abroad as % of GDP.<br />
The next latent variable, the level of intellectual property rights protection, is measured by the<br />
intellectual property rights protection index of the Global Competitiveness Report published by the<br />
World Economic Forum. The Intellectual Property Rights Protection Index is a part of the Global<br />
Competitiveness Index. Its measurement is based on expert answers to the following question:<br />
“How would you rate intellectual property protection, including anti-counterfeiting measures, in your<br />
country?” [1 = very weak; 7 = very strong] as a weighted average. (Schwab 2010, p. 367f.).<br />
The second question - the interdependence of IPRP and knowledge diffusion (FDI and trade) - was<br />
analysed for the majority of the countries of the world (103 developing, transition, and developed<br />
countries) for the year 2009 3 . The choice of countries is solely based on the availability of data on<br />
selected variables.<br />
The data for the trade, here expressed in imports of merchandize and services 4 , and the FDI, here<br />
expressed in inward foreign direct investment stock 5 , was taken from UNCTAD.<br />
The results of both research questions will be presented and discussed in the next section. The<br />
correlation of the variables of interest was analysed using SPSS.<br />
5. Research results and analysis<br />
The results of the correlation analysis for the IPRP and innovation index support the widely spread<br />
belief that the level of innovativeness in a society is strongly positively correlated with the level of<br />
intellectual property protection. See the statistical summary in the tables 1-2.<br />
Table 1: Descriptive statistics and correlation of the innovation index and the IPRP index, 2010 in 32<br />
countries.<br />
IPRP_201<br />
IN_2010 0<br />
IN_2010 Correlation Pearson 1 ,910 **<br />
Significance (2-w) ,000<br />
N 32 32<br />
mean ,463594<br />
st. deviation ,1755807<br />
IPRP_2010 Correlation Pearson ,910 ** 1<br />
Significance (2-w) ,000<br />
N 32 32<br />
mean 4,659375<br />
st. deviation 1,0745920<br />
**. The correlation is significant on the level of 0,01 (2-w).<br />
3 This is the most recent year for which the macro-economic data is available.<br />
4 Imports of merchandise and services are measured here in US dollars at current prices and current exchange rates in millions (UNCTAD).<br />
5 FDI stock is the value of the share of capital and reserves (including retained profits) attributable to the parent enterprise, plus the net<br />
indebtedness of affiliates to the parent enterprises. FDI stock is measured here in US dollars at current prices and current exchange rates in<br />
millions (UNCTAD).<br />
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IN_2010 – innovation index in 2010<br />
IPRP_2010 – the level of intellectual property rights protection in 2010<br />
Table 2: A simple scatter plot<br />
The correlation between the two analysed variables is extremely high. It could be caused e.g. by<br />
experts who strongly associate intellectual property rights protection with the innovativeness in a<br />
country. Due to that, they could have given appropriate estimations for the IPRP level during the<br />
interviews of the WEF discussed before. This is the general measurement problem of abstract<br />
concepts.<br />
Further conceptual work is needed here in order to be able to measure innovativeness and intellectual<br />
property protection completely separately.<br />
In the second empirical analysis we have the following findings:<br />
� The imports of merchandise and services strongly positively correlate with the national level of<br />
IPRP (see the statistical summary in the table 3).<br />
� Inward FDI stocks also positively correlate with the IPRP level (see table 4).<br />
Table 3: Descriptive statistics and correlation of the imports of merchandise and services and the<br />
IPRP index for 2009 in 103 countries.<br />
IPRP_2009 Imp_2009<br />
IPRP_2009 Correlation Pearson 1 ,435 **<br />
Significance (2-w) ,000<br />
N 103 103<br />
mean 3,744<br />
st. deviation 1,1830<br />
Imp_2009 Correlation Pearson ,435 ** 1<br />
Significance (2-w) ,000<br />
N 103 103<br />
mean 137966,5522<br />
st. deviation 276443,44272<br />
**. The correlation is significant on the level of 0,01 (2-w).<br />
IPRP_2009 – the level of intellectual property rights protection in 2009<br />
Imp_2009 – imports of merchandise and services in 2009<br />
Based on empirical results (presented in tables 3 and 4) we can summarise that the knowledge<br />
diffusion, expressed in FDI and trade, is increasing if a country has a strong intellectual property<br />
protection.<br />
Summarising the empirical analysis, we can state that the innovativeness level of a country and the<br />
knowledge diffusion between countries is supported by a strong IPRP system. However these results<br />
need to be further analysed. Much more explaining variables (like the quality of education, public<br />
policy etc) could influence the innovativeness and knowledge diffusion.<br />
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For example, the FDI decisions of course depends also on the overall risk level of a country, market<br />
size, growth rate, country’s strategic position, and many other parameters. This can also mean that<br />
the innovativeness could increase due to the FDI inflow, even if the IPRP is low.<br />
Table 4: Descriptive statistics and correlation of inward FDI stocks and the IPRP index for 2009 in 103<br />
countries<br />
IPRP_2009 FDI_2009<br />
IPRP_2009 Correlation Pearson 1 ,429 **<br />
Significance (2-w) ,000<br />
N 103 103<br />
mean 3,744<br />
st. deviation 1,1830<br />
FDI_2009 Correlation Pearson ,429 ** 1<br />
Significance (2-w) ,000<br />
N 103 103<br />
**. The correlation is significant on the level of 0,01 (2-w).<br />
FDI_2009 – inward FDI stock in 2009<br />
mean 155014,5265<br />
st. deviation 367449,25420<br />
6. The present intellectual property rights protection (IPRP) system and its<br />
weaknesses<br />
The arguments that undermine the present IPRP regime are:<br />
The most important disadvantage of the present system lies in the fact that it does not fully fulfil one of<br />
its original goals: motivating creation and spread of socially desirable knowledge.<br />
� The knowledge creation, technological progress, can slow down due to the prohibitions to invent<br />
around the patented intellectual asset and apply the results on the market 6 while the initial patent<br />
is still in power.<br />
� The diffusion of socially desired knowledge / market penetration of new intellectual assets is low.<br />
*The diffusion of knowledge between producers is prohibited due to the creation of a temporal<br />
legal monopoly on newly created intellectual assets. *As a rule, the monopolistic power leads to<br />
high monopolistic prices. This results in a relatively low market penetration, because many<br />
customers cannot afford monopolistic prices, which is especially the case in the medicine and<br />
computer software markets.<br />
� Strong intellectual property rights protection gives too much control to inventors. This fact is<br />
especially problematic in the case of new plants and their seeds (e.g. “seed-wars” in hybrid maize<br />
industry, biopiracy).<br />
� Moral aspects of strong IPRP have to be taken into consideration, e.g. the problematic patent<br />
protection of life-saving drugs. Many suffering people will not be able to buy them, which collides<br />
with the UN universal declaration of human rights that includes the right for the adequate medical<br />
treatment, article 25, paragraph 1.<br />
� There are many other national market characteristics that influence the creation of new<br />
intellectual assets, like the educational system in a country, demanding innovative customers,<br />
market size etc.<br />
� The present intellectual property protection system focuses on the extrinsic motivation of<br />
intellectual property developers. The inventors, however, could also have intrinsic motivation to<br />
innovate. Personal satisfaction, respect, and esteem can lead to knowledge creation without<br />
building a monopoly for intellectual property. Yung brings an example of a traditional Confucian<br />
China where “creative pursuits were not for money-making, which was a low-class engagement,<br />
6 The exceptions will be discussed below.<br />
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copying would not in anyway deter creative labouring and there would not be fewer new<br />
innovations and creations”. (Yung 2009, p. 50).<br />
� Other competitive advantages, not only the temporary knowledge monopoly, can motivate the<br />
creation of new intellectual property. These advantages could be the first mover advantages<br />
(Calandrillo 1998, p. 308 f.)<br />
� The general appropriateness of the current IPRP system for the present market characteristics<br />
and demands can be doubted. Many modern innovations exist or were created beyond the<br />
traditional IPRP system. For example, open innovation trends become louder in the business<br />
world. Companies from different industries such as: textile (skinnyCorp LLC), drinks (PepsiCo Inc.<br />
and Brauerei Beck GmbH & Co KG), automotives (Daimler AG), transportation/train construction<br />
(Bombardier Inc) and computer hard- and software (IBM Corp., open source Linux operation<br />
system) have employed different models of open innovation. Weber (2004) explains the<br />
phenomenon of open innovation with the totally different goals that companies follow as<br />
compared to the practice of “closed innovation”. The focus of open innovation does not lie in the<br />
protection of intellectual property, but in the maximisation of the ongoing development, growth<br />
and diffusion (Peters 2010, p.26). The relationship between creativity and open innovation<br />
systems is growing in significance. Johnson (2005) draws a strong set of connection between<br />
openness, creativity, and search processes.<br />
The present system of IPRP is attempting to reduce the worst effects of providing restricting rights on<br />
new intellectual assets to the inventors. These attempts and the corresponding regulation will be<br />
discussed in the following on the example of the international regulation of IPR through WTO. TRIPS<br />
has several exceptions from its minimal standards of intellectual property rights protection:<br />
Eligibility for patenting: government may refuse to grant patents for certain plant and animal invention<br />
(article 27, 3b); diagnostic, therapeutic and surgical methods for treating humans and animals and for<br />
dangerous invensions for humans, animals, plants life, or health (article 27);<br />
Research exception: to advance science and technology, researchers are allowed to use a patented<br />
invention for research in order to understand it better. This means they can market the product<br />
immediately after the patent expires (article 30);<br />
Bolar provision: government may allow the generic medicine producers to use patented inventions to<br />
obtain marketing approval without the patent owner’s permission (article 30);<br />
Anti-competitive practice: national governments are allowed to define provisions in their legislation<br />
that prevent the patent owners from abusing intellectual property rights, “unreasonably” restraining<br />
trade or hampering the international transfer of technology (articles 8 and 40);<br />
Compulsory licensing/ “other use without the authorization of the right holder” (article 31): government<br />
may allow someone else to produce a patented product without the permission of the patent holder.<br />
The reasons for compulsory licensing are not specifically named in TRIPS. It is important to note that<br />
compulsory licences cannot be given exclusively to licensees (i.e. they should not exclude the patent<br />
holder) and that they usually must be granted for serving a domestic market;<br />
Parallel/grey imports (i.e. products marketed by the patent’s owner or his licensees in one country and<br />
imported into another country without the approval of the patent owner) are allowed; other regulations<br />
can be issued by the national governments. The principle of “patent exhaustion” is used here, which<br />
means that after selling a patented product the producer does not have any rights about what<br />
happens to that patented product later (article 6 and Doha Declaration 5 (d)).<br />
Additionally, some other international treaties and conventions target the minimisation of the<br />
disadvantages of the present IPRP system. For example:<br />
� International treaty on plant genetic resources (declaration that the most important plants are the<br />
ownership of the planet and humankind as a whole; in force since 2004. See:<br />
www.planttreaty.org)<br />
� Convention on biological diversity (in force in 1993, see: www.cbd.int)<br />
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However, the special regulations in TRIPS and other treaties that handle the negative effects of the<br />
present IPRP system have a character of an exception and do not fully eliminate all disadvantages of<br />
the present IPRP regime. Thus, alternative institutional arrangements have to be discussed.<br />
7. Alternative institutional environment for intellectual property rights<br />
Two general ways to change the present regime of intellectual property rights protection are going to<br />
be discussed here7. The first handles amendments within the present system, the second proposes<br />
the creation of a totally new intellectual property system.<br />
Amending the present system could includes:<br />
� The reduction of the minimal and maximal patent protection time.<br />
� Introduction of a “compulsory licencing” to a wide range of intellectual property rights.<br />
� Stimulation of intrinsic motivation of inventors, e.g. introducing a Nobel Award for important<br />
scientific contributions with an obligatory “donation” of the patent to the society.<br />
The second institutional change proposition handles the introduction of a government-run reward<br />
system. “Contrary to the monopoly price and restricted use dilemmas created by current intellectual<br />
property rights, a publicly funded reward system seeks to maximize overall social welfare by retaining<br />
incentives to create while simultaneously optimizing the dissemination of information” (Calandrillo<br />
1998, p. 315). In a government run system of rewarded innovativeness, the inventor is paid for his<br />
intellectual property from the state budget. After receiving the payment, his/her intellectual property<br />
rights become a fully public good. The introduction of a government run system follows a public good<br />
view, which underlines that “information belongs in the public domain because free access to<br />
information is central to social cohesion and learning” (Maskus 2000, p. 27). In the government-run<br />
system, everyone will be allowed to freely use the “patents” and reproduce and commercialise them.<br />
On the one hand, the government-run system would be able to provide a financial incentive to<br />
knowledge development and, additionally, it could increase the extrinsic motivation of inventors<br />
because of its “payment-guarantee” for innovativeness. Such kind of a guarantee does not exist in the<br />
present system of property rights protection. The overwhelming majority of property assets enjoy<br />
intellectual property rights protection but stay unprofitable. On the other hand, such an intellectual<br />
property rights system would maximise the social welfare, because (theoretically) everyone who is<br />
able to pay a price higher that the production costs will receive the appropriate good. Hense, the<br />
technological development and national prosperity will rise.<br />
The government run system is not an easy issue to introduce. Its implementation is bound to many<br />
problems: *Even though the government-run system appears to be a better solution, the pathdependency<br />
will strongly impede the change. Or has the present IPRP regime already reached its<br />
lock-in? *The costs of running a new intellectual property system (“inventor’s lump sum” (ILS) and the<br />
management costs) are higher than the present one. *Methodological difficulties to estimate the<br />
appropriate ILS. *The transfer of risks of an innovation from the inventor to the country. Innovative<br />
work is risky, much capital can get lost in large new projects. Even the registration of a patent for a<br />
potentially profit-promising invention will not guarantee success. In a government-run reward system,<br />
at least a part of the marketing risk is relocated to the country.<br />
One of the most difficult methodological problems of the introduction of a government run system is<br />
the ILS assessment. Essential elements of the final ILS8 should include the following:<br />
� Investments - all investments made by an inventor should be refunded. In order to achieve this, a<br />
very transparent reporting system should be organized in each company for each R&D project.<br />
� Interests - ILS should include annual average interest rates on invested capital.<br />
� Utility level - ILS should take different utility levels into account. The government has to agree on<br />
a coefficient that would express the level of utility from low to high level of utility.<br />
� Innovativeness level - a coefficient should be developed that would reflect different levels of<br />
innovativeness from low level of innovativeness to pioneering innovations.<br />
7 Other institutional arrangements include funding of innovative programs, subsidising etc.<br />
8 The propositions concern in the first place the protection of technological knowledge, in Germany in the form of patents and utility models.<br />
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� Market size - ILS should reflect a potential market size.<br />
Further scientific work is needed to perfect the methodology of calculating the ILS as well as to<br />
conduct feasibility studies in order to proof the functionality of the government run system in all kinds<br />
of industries.<br />
A government run system (GRS) is not just a theoretical model. Calandrillo (1998, p. 317) shows<br />
several examples of actual use of a GRS in the USA, e.g. in the field of atomic energy.<br />
8. Conclusion<br />
The present paper has shown that the current system of intellectual property rights protection and the<br />
trend of strengthening IPRP is based on economic arguments and is supported by many empirical<br />
tests. The results of a correlation analysis confirmed a strong positive correlation between the level of<br />
the IPRP and the innovativeness in a country as well as a positive correlation between the level of<br />
IPRP and the knowledge diffusion.<br />
However, the current system of intellectual property rights protection has numerous weaknesses,<br />
which cannot be entirely solved by including exceptional provisions into existing agreements (e.g.<br />
TRIPS) or by establishing additional treaties and conventions. Due to that, the author discussed two<br />
alternative ways to change the present IPRP. One way includes several propositions of amending the<br />
presence IPR regime (like introduction of compulsory licensing to a wide range of IPR, reduction of<br />
minimal and maximal duration of intellectual property protection etc). The other way leads to the<br />
introduction of a government run system, which is able to achieve both the socially desirable<br />
knowledge diffusion and to stimulate knowledge creation. The suggestion was critically analysed. An<br />
attempt was made to solve an important problem of the government run system – the problem of<br />
assessing the inventor’s remuneration for his/her intellectual property. Essential elements of the final<br />
inventor’s lump sum were defined.<br />
The author hopes to stimulate further discussion on alternative IPRP systems. Maybe this could lead<br />
to a shift from the now mostly utilitarian nature of IPRP.<br />
References<br />
Adams, Samuel (2010): Intellectual property rights, investment climate and FDI in developing countries,<br />
International Business Research, Vol. 3, No. 3, pp. 201–209.<br />
Bong, Geul Chun (2008): Host country’s intellectual property rights and firm’s equity participation, in: Review of<br />
industrial organization, Vol. 33, No. 4, pp. 341–356.<br />
Calandrillo, Steve P. (1998): An economic analysis of intellectual property rights: justifications and problems of<br />
exclusive rights, incentives to generate information, and the alternative of a government-run reward system,<br />
in: Fordham Intellectual Property, Media and Entertainment Law Journal, Autumn 1998.<br />
Cornish, William R. (1996): Intellectual property: patents, copyrights, trade marks and allied rights, 3rd. edition,<br />
Sweet & Maxwell, London<br />
Falvey, R. E., Foster, N., & Greenaway, D. (2004): Imports, exports, knowledge spillovers and growth, in:<br />
Economic Letters, Vol. 85, No. 2, pp. 209–213.<br />
Falvey, R. E., Foster, N., & Greenaway, D. (2006): Intellectual property rights and economic growth, in: Review of<br />
development economics, Vol. 10, No. 4, pp.700–719.<br />
Falvey, R.E., Foster, N., Greenaway, D. (2009): Trade, imitative ability and intellectual property rights, in: Review<br />
of world economics, Vol. 145, No. 3, pp. 373–404.<br />
Gould, D. M., Gruben, W. C. (1996). The role of intellectual property rights in economic growth, in: Journal of<br />
development economics, Vol. 48, No. 2, pp. 323–350.<br />
Kanwar, S., Evenson, R. E. (2003). Does intellectual property protection spur technological change?, in: Oxford<br />
economic papers, Vol. 55, No. 2, pp. 235–264.<br />
Lea, David (2006): From the wright brothers to Microsoft: issues in the moral grounding of intellectual property<br />
rights, in: Business Ethics Quarterly, Vol. 16, No. 4, pp. 579–598.<br />
Maastricht Economic and Social Research and training centre on Innovation and Technology (UNU-Merit) (2010):<br />
Innovation union scorecard 2010. The innovation union’s performance scorecard for research and<br />
innovation, URL: http://www.sefi.be/wp-content/uploads/ius-2010_en.pdf<br />
Maskus, Keith E. (2000): Intellectual property rights in the global economy, Institute for international economics,<br />
Washington DC.<br />
Menell, Peter S. (2007): Should intellectual property be accorded the same protections as tangible forms of<br />
property? Intellectual property and the property rights movement, in Regulation, Autumn 2007.<br />
Peters, Michael A. (2010): Creativity, openness, and the global knowledge economy: the advent of usergenerated<br />
cultures, in: Economics, Management, and Financial Markets, Vol. 5, No. 3, pp. 15–36.<br />
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Richards, Donald G. (2002): The ideology of intellectual property rights in the international economy, in: Review<br />
of social economy, Vol. 60, No. 4, pp. 521–541.<br />
Schwab, Klaus (2010): The Global Competitiveness Report 2010–2011, World Economic Forum, Geneva,<br />
Switzerland.<br />
Yung, Betty (2009): Reflecting on the common discourse on piracy and intellectual property rights: a divergent<br />
perspective, in: Journal of business ethics, Vol. 87, No. 1, pp. 45–57.<br />
UN (1948): Universal declaration of human rights, URL: http://www.un.org/en/documents/udhr/index.shtml.<br />
WTO (1994): Trade Related Aspects of Intellectual Property Rights, URL:<br />
http://www.wto.org/english/docs_e/legal_e/27-trips.pdf.<br />
929
Toward a Theory of Indigenous <strong>Entrepreneurs</strong>hip in Screen<br />
Production<br />
Ella Henry<br />
Auckland University of Technology, Auckland, New Zealand<br />
ella.henry@aut.ac.nz<br />
Abstract: Māori are the indigenous people of New Zealand. This paper reports on a study of Māori who own<br />
screen production companies, and explores their reasons for becoming entrepreneurs. There has been an<br />
increase in research on indigenous entrepreneurship (Dana, 2007) and Māori entrepreneurship in particular. This<br />
may be attributed to the research conducted as part of the GEM NZ study, which found Māori were amongst the<br />
most entrepreneurial populations in the world (Frederick et.al. 2003, 2006). Whilst exploratory and descriptive<br />
studies have proliferated, there has been little attempt to elucidate theoretical frameworks, to better understand,<br />
predict and enhance Māori entrepreneurship. Nonetheless, researchers in this field acknowledge the importance<br />
of entrepreneurship to Māori economic development, and the critical role of Māori development for the New<br />
Zealand economy.Early findings have highlighted factors that all respondents hold strong, albeit varying, views<br />
about:<br />
Mana Tangata: Identity<br />
Manawanui: Efficacy, self-belief<br />
Mana Motuhake: Control, desire for self-determination<br />
Te Wairua Auaha: In combination, these variables enhance the creative spirit and emancipatory nature of their<br />
organisations<br />
The abovementioned variables are particularly noteworthy, as much of the literature on indigenous peoples<br />
focuses on the impacts of colonisation, imperialism and racism, and how these have profoundly and negatively<br />
affected their identity, self-efficacy and self-determination (Walker, 1990; Turpel, 1992; Maaka and Anderson,<br />
2006). This tentative theory highlights the capacity for emancipation that entrepreneurship provides to indigenous<br />
peoples. It is argued that this research will contribute to indigenous entrepreneurship and emancipatory<br />
indigenous entrepreneurship theory.<br />
Keywords: indigenous entrepreneurship, emancipatory entrepreneurship<br />
1. Introduction<br />
Māori are the indigenous people of New Zealand, a country which became a colonial outpost of<br />
Britain after the signing of the Treaty of Waitangi in 1840. At that time Māori were actively engaged in<br />
entrepreneurial endeavor, generating tribal wealth and dominating the New Zealand economy<br />
(Walker, 1990; Petrie, 2006). However, since then Māori have become over-represented in the most<br />
negative socio-economic statistics (Spoonley & Pearson, 2004).<br />
In recent years, there has been a surge in Māori business activity in screen production. This is a study<br />
of a sample of Māori entrepreneurs who own screen production companies that have produced a<br />
significant body of work. It analyses the reasons why they started their companies, as part of a<br />
broader study of their life-histories. It explores the links between their identity, careers and<br />
entrepreneurial intentions.<br />
2. Literature<br />
The following is a brief overview of the identity, career, entrepreneurship, and Māori screen production<br />
literature that informs this study.<br />
Baldwin (1897) proposed that the construction of the ‘self’ was derived from the dialectical process<br />
between the individual and those in their immediate environment. A recent study of Māori identity<br />
(Haukamau 2007) highlights the psychological and socio-cultural sources of ‘identity’, which is both<br />
‘socially’ and ‘individually’ constructed. Haukamau focuses on the role of positive ethnic-identity, as a<br />
means of affirming social worth, and the impact that knowledge of cultural identity has on well-being,<br />
self-esteem and self-efficacy.<br />
Writing on careers, Arthur et.al. state that, “This perspective is based on the straightforward<br />
observation that... nearly all careers cross multiple employer boundaries”. Furthermore, “All workers<br />
use their accumulated resources to enact their careers upon the surrounding environment. As<br />
individuals enact their careers they enact the environment itself” (Arthur et.al. , 1999, pp 11-12). This<br />
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body of literature lays a foundation for analysing Māori careers and Māori screen production, an<br />
industry which barely existed one generation ago, in organisations which they themselves have<br />
‘enacted’.<br />
In terms of entrepreneurship, Wadeson (2006) notes the early ‘trait’ approaches failed to produce<br />
clear-cut results about a specific set of traits associated with entrepreneurship. However, he<br />
acknowledges Shaver and Scott (1991, p.31) who view ‘achievement motivation’ as the only trait that<br />
appears to have a strong association with the creation of new ventures. Wadeson also discusses selfefficacy,<br />
“the degree to which someone believes he/ she has the ability to successfully complete a<br />
task” (op.cit, p. 99).<br />
Wadeson refers to Chen et.al. (2001), who found a positive correlation between self-efficacy and<br />
their decision to start a business. Further, Shapero and Sokol (1982, p. 83) state that the, “social and<br />
cultural factors that enter into the formation of entrepreneurial events are most felt through the<br />
formation of the individual value systems. More specifically, in a social system that places a high<br />
value on the formation of new ventures, the more individuals will choose that path”. Chell states that<br />
“Economic and sociological approaches have largely addressed the process and function of the<br />
entrepreneur, whilst under-theorising his/her nature” (2008, p. 266).<br />
More recent research has focused on social entrepreneurship. For Dees (1998, p3), “Social<br />
entrepreneurs... are entrepreneurs with a social mission”. Martin and Osberg (2007, p30) note that,<br />
“Social entrepreneurship signals the imperative to drive social change, and it is that potential payoff,<br />
with its lasting, transformational benefit to society, that sets the field and its practitioners apart”. Social<br />
entrepreneurship has, in turn, stimulated interest in indigenous entrepreneurship. Peredo et.al. state<br />
“Indigenous populations throughout the world suffer from chronic poverty, lower education levels, and<br />
poor health. The ‘second wave’ of indigenous development, after direct economic assistance from<br />
outside, lies in indigenous efforts to rebuild their ‘nations’ and improve their lot through entrepreneurial<br />
enterprise” (2004, p. 1).<br />
The Global <strong>Entrepreneurs</strong>hip Monitor New Zealand reports (Frederick et.al. , 2003, Frederick et. al,<br />
2006) found Māori to be amongst the most entrepreneurial in the world. Frederick and Henry (2005)<br />
identified certain characteristics of Māori entrepreneurs, who use, “innovative and entrepreneurial<br />
business practices not for the benefit of individuals per se, but rather for the benefit of the larger<br />
community” (2005, p. 133). Going further, Henry (2007) explored the history of Māori<br />
entrepreneurship, and defined ‘Kaupapa Māori entrepreneurship’ as, “entrepreneurial flair,<br />
underpinned by a sense of commitment to Māori community, whether it be whanau, hapū or iwi...<br />
entrepreneurship and innovation for, with and by Māori” (op.cit, p. 547).<br />
O’Neil and Ucbasaran (2010) draw together identity, career and entrepreneurship theory in their study<br />
of ‘sustainable entrepreneurs’. They explored how identity underpinned entrepreneurial behaviour.<br />
For them, the entrepreneurship literature focussed on ‘entrepreneurial roles’ such as founder, inventor<br />
or developer. However, they were more interested in ‘identity drivers’. They note that, “authenticity<br />
emerges as a pivotal identity condition leading to entrepreneurial activity... These entrepreneurs put<br />
effort into constructing an ‘authentic career’, so as to ‘break free’ from existing organisations they<br />
perceived to be unsustainable, which enabled them to enact ‘authentic identities’ in their own<br />
organisations, and to ‘break up’ unsustainable business practices. They concluded that,<br />
“entrepreneurship offers a means not only to enact desired entrepreneurial identities but also to<br />
express one’s authenticity and inwardly-derived values. (2010, p. 2). The notion of ‘authenticity’<br />
underpins the ‘authenticity-driven career’, which one pursues as a means to achieve personal<br />
integrity. They conclude that researchers must explore the context of the individual to understand their<br />
‘negotiated and socially constructed nature of authenticity’ (2010, p. 7). They make an important<br />
contribution to this study, arguing that entrepreneurship can deliver emancipation and social change.<br />
Their findings can be applied with equal force to ‘indigenous entrepreneurship’ and enable us to look<br />
at the ways that indigenous entrepreneurs have broken free from mainstream organisations, to enable<br />
them to break up non-indigenous business practices that they see as a constraint on their authentic<br />
indigenous identity.<br />
Before reporting on the findings, it is useful to provide a background to Māori involvement in screen<br />
production. Karetu writes, “Before the coming of the Pākehā to New Zealand, all literature in Māori<br />
was oral”. (1975, p. 31) The orator played an important role in the inter-generational transmission of<br />
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knowledge and culture. However, the changing status of Māori language, culture and identity since<br />
1840 has seen Māori oral-tradition become less prominent and valued. In terms of screen production,<br />
rather than being the story-teller, Māori have often been objectified by film-makers. Early ‘Māori’ films<br />
were vicarious peeks into a world that was alien to most Pākehā (New Zealanders of European<br />
descent).<br />
Ramai Hayward is the first Māori film-maker, working with husband Rudall Hayward since the 1940s.<br />
In the 1960’s, actor and opera singer Don Selwyn rose to prominence. In the 1980s he ran a film<br />
course for Māori youth, and in the 1990s he set up a production company that produced the first ever<br />
Māori language feature-film. Also in the 1970s, Merata Mita stormed the indigenous world with<br />
documentaries that exposed the underlying and institutional racism permeating New Zealand society.<br />
Alongside her, Barry Barclay directed the ground-breaking television series ‘Tangata Whenua’ in<br />
1974, which presented a uniquely Māori perspective on a range of topics. In 1987 Barry directed the<br />
film Ngāti, based on a story by Tama Poata, which was an important milestone in terms of Māori<br />
creative input into screen production. He went on to author a definitive text (Barclay, 2005) that<br />
proposed an indigenous theory of film-making, entitled ‘Fourth Cinema’ . Barry was a staunch<br />
advocate of ‘authentic authorship’ of indigenous moving images. The deaths of these ‘founders’ has<br />
left a void in Māori screen production, lamented at a recent Indigenous Film Symposium (Henry &<br />
Spooner, 2010). However, they have bequeathed a legacy to a new generation of Māori, who are<br />
working to fill that void, despite the ongoing struggle to gain recognition and support for the Māori<br />
screen industry.<br />
Māori have forced successive governments to commit to Māori broadcasting through claims to the<br />
Waitangi Tribunal. Among these, the Māori Broadcasting Claim states, “The claimants alleged Treaty<br />
breaches by the Crown in its broadcasting policies, and they sought... to ensure that Māori, their<br />
language, and their culture had a secure place in broadcasting in New Zealand” (WAI 176, 1994).<br />
One significant commitment saw the government fund the setup of the Māori Television Service in<br />
2004, which has heralded a new and vibrant era for Māori broadcasting.<br />
3. Methodology<br />
This study is underpinned by the Kaupapa Māori paradigm. This is a burgeoning field arguing that<br />
Māori should have the pre-eminent role in our own knowledge production (Smith, 1997; Smith, 1999;<br />
Pihama et.al., 2002; Simmons et.al., 2008; Kerr et.al., 2010). Henry and Pene (2001) teased out<br />
Kaupapa Māori as an ontological and epistemological standpoint. Rather than a specific set of<br />
research methods, it is a philosophy out of which knowledge production occurs for, with and by Māori.<br />
This research is conducted by a Māori, who is committed to contributing to an expanding Māori<br />
knowledge base, informed by Māori ontology and epistemology and drawing on a range of research<br />
methods.<br />
This paper is based on a series of interviews that were conducted with the owners of production<br />
companies that have produced in excess of $1million of programs, and who have been in business for<br />
more than ten years. In 2009, there were approximately twenty companies, owned by Māori, either<br />
individually or in partnership with others..............<br />
It reports on eight of the case studies. Interviewees were asked about their backgrounds, influences,<br />
education, training, careers and entrepreneurial experiences. Thematic analysis of the data allowed<br />
for the emergence of key variables which best captured the essential features of their entrepreneurial<br />
intentions and trajectory.<br />
4. Findings<br />
The Case Studies allowed for the identification of the following characteristics, which shaped and<br />
informed their identity and motivations to start their own production companies, to ‘emancipate<br />
themselves’ from other organisations, to ‘take control’ of their own stories and story-telling.<br />
Mana Tangata: Identity<br />
Mana tangata is defined as ‘power and status’ (Māoridictionary online). The word ‘mana’ refers to<br />
‘status’, as both an individual and set of shared (tribal, whānau) characteristics. Mana has a strong<br />
spiritual, rather than material connection to power and status. The word ‘tangata’ means ‘person’.<br />
Thus, the individual and their mana are hallmarks of personal and shared Māori identity.<br />
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Manawanui: Self-Efficacy<br />
Māori definitions for this word, including: being stout-hearted, steadfast, determined, persistent, and<br />
having clear aspirations. I have applied this word to the notion of self-efficacy and self-belief.<br />
Mana Motuhake: Self-Determination<br />
Terms like, ‘separate identity, autonomy and control over one's own destiny’ have been used to define<br />
Mana Motuhake. In this work, that definition is extended to include the notion of control over one’s<br />
business and entrepreneurial endeavour.<br />
Wairua Auaha: Emancipatory <strong>Entrepreneurs</strong>hip<br />
This literally means ‘creative spirit’, and in the context of this study means the manifestation of<br />
emancipatory entrepreneurship in the organisations they have created.<br />
4.1 Case 1<br />
BH (Ngāti Awa), is a journalist/writer/producer, who has worked for mainstream TV, and been<br />
involved with a number of different production companies and productions. He has worked in the<br />
industry since the mid-1980s. His companies have written and produced a range of dramas for<br />
mainstream and Māori television; he is currently writing and producing a feature film. He is in his 40s,<br />
and is married with one child. He was raised by his grand-father, the first Māori doctor in their tribal<br />
region, who reinforced his Māori culture and identity. He notes, “the whole thing of storytelling and<br />
genealogy, was actually instilled in me as a baby”, and, “being Māori to me means, I’m actually here,<br />
in the Māori world for some reason”. BH was very shy, but as a young man was convinced by an<br />
uncle he describes as ‘entrepreneurial’ to enrol in a Māori journalism course. “I hated journalism<br />
because I had to get over my shyness, actually that was the best thing I could have done, because<br />
you can’t tell stories unless you can talk to people”. After many years working in the screen industry,<br />
BH realised, “you have no power over your stories unless you own them”. For BH the company was<br />
an, “idea of pooling our talent together into a company that has a certain vision, that we want to push<br />
Māori things, under a Māori way of doing stuff”.<br />
4.2 Case 2<br />
CH (Ngāti Porou/ Ngāpuhi), is a journalist/ sports-writer/director/ producer, who has worked for<br />
mainstream TV and owned her own production company for over ten years. Her company is one of<br />
very few involved in IPTV. She has worked in the industry since the late-1980s. Her company has<br />
produced a wide range of current affairs and documentaries for mainstream and Māori television. She<br />
is in her 40s, is a lesbian in a long-term relationship, with step-children. She says, “being Māori, being<br />
a woman, being gay, have all impacted on my perspective of life”. CH is, “a second generation urban<br />
born Māori baby, of that generation that came to the city for better jobs”. She became interested in<br />
politics and current affairs after training in sports journalism in Australia. She was among the first<br />
generation of Māori raised in urban Auckland, and says, “we weren’t expected to succeed (at school),<br />
there was an expectation at home that we must succeed”. CH left mainstream broadcasting to start<br />
her own company when she realised, “my whole career pathway is more issues-based and as a result<br />
my passion lies there”, and she felt she could convey a Māori perspective on political and social<br />
issues more effectively outside the control of mainstream, as well as providing a conduit for non-<br />
Māori into our world.<br />
4.3 CASE 3<br />
PT (Te Rārawa, Ngāpuhi), musician/ radio-announcer/ actor/ comedian/ producer, since the late<br />
1980s, began his career as a car-salesman. He is involved in a variety of companies, one with his<br />
wife, that produce a variety of family, light entertainment and travel programs. He is in his 50s, is<br />
married and has children.<br />
Mana Tangata<br />
� “it ain’t about you, you are just a vehicle, an āhua, to tell a story”<br />
� “I believe I have a place within the industry, that’s vital in the portrayal of a Māori world”<br />
� “I wouldn’t use my people as a lever to make the masses laugh”<br />
� “Māori have a warrior gene, we also have a very large performer gene”<br />
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Ella Henry<br />
Manawanui<br />
� (my parents) “created a really wonderful home life, it was so simple, but man, it was good”<br />
� “we had Māori around us who kept telling us that we had some stuff”<br />
� “I was taught by my dad that doors don’t open, you have to give them a bit of a kick, or ring the<br />
bell,<br />
� “ we should rejoice in our bloody talents”<br />
Mana Motuhake<br />
� “you were at the total mercy of the production houses that grabbed you, as a perceived talent,<br />
and you were milked like a ‘cash cow’”<br />
� “Not a huge amount of money to be made, especially in Māori television, because our budgets<br />
are so light, the real reason is to have some direction and control of what you’re doing”<br />
� “the ability to make television with heart, my personal brief is to show off our people in a true light”<br />
CASE 4<br />
RK (Te Aupouri) worked in business and management until her 40s, when she became a partner in a<br />
recording studio. She then went on to produce documentaries and drama for mainstream and Māori<br />
TV. Her company has now diversified and includes three companies whose technology they have<br />
pioneered (VoiceQ, SingQ and QBook, see http://www.kiwamedia.com). She is in her 50s, divorced, a<br />
mother and grandmother.<br />
Mana Tangata<br />
� “we grew up learning how to walk on either side of the fence, Pākeha side or the Māori side, but<br />
no-one knew, was able to teach us how to walk down the middle”<br />
� “dad, a merchant seaman, mum, factory worker, brought up in Otara”<br />
� “I liked order, in paper work and stuff, I’m a quick learner, I don’t read very much, but, I listen and I<br />
watch”<br />
Manawanui<br />
� “I realised that, to be a producer, took all the skills that I had, those administrative, accounting<br />
business skills”<br />
� “I had to convince them that our Māori children did want to watch cartoons, in their own language,<br />
� “ anything’s possible, and that’s my mantra”<br />
� “probably no-one cares as much about your idea and your passion as much as you do”<br />
Mana Motuhake<br />
� “in order for me to discover what it was I really wanted to do then, I needed to take control of my<br />
own career”<br />
� “a lot of the changes that I’ve made in my business have been through necessity”<br />
� “I had to find a more cost effective way of the process of dubbing”<br />
4.4 Case Study 5<br />
RP (Tūhoe), journalist/writer/director/producer, has worked in broadcasting since the early 1980s, and<br />
has been a Māori-language activist since the 1970s. He has owned his own production company<br />
since the late 1980s and specialises in producing Māori-language programs, especially children’s<br />
programs. He is in his late 50s, and is in a long-term relationship.<br />
Mana Tangata<br />
� “our grandfather, was the rangatira of our area, and forbad us to speak English in their presence,<br />
then we went to school, you weren’t allowed to speak Māori there”<br />
� “we got to university, Māori wasn’t even an academic discipline, so, we had to agitate there to<br />
have Māori”<br />
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Ella Henry<br />
Manawanui<br />
� “you end up knowing these very complex waiata at a very young age, it was a pedagogy”<br />
� “I knew that Pākehas would prefer this persona, to the activist, so we had to hide our true<br />
agendas”<br />
� “the power of our kids, and the reo, it might have been the wairua”<br />
Mana Motuhake<br />
� “coming from a history of Tuhoe, a history of resistance against the Crown, our grandfather, I felt<br />
that he never relinquished his sense of sovereignty”<br />
� “if we understand the politics of power, they allowed us in, begrudgingly”<br />
� “it’s best that we make the programme and sell it to them, rather than them dictating to us”<br />
� “it was really a very painful experience, within the mainstream, very, very painful, and you have to<br />
compromise all the time”<br />
4.5 Case 6<br />
TK (Ngāti Pāoa, Waikato), actor/writer/director/producer, has worked in the industry for just over ten<br />
years. He has written and directed a short film and is a partner in a production company that<br />
specialises in Māori-language programming. He is heavily involved in industry organisations. He is in<br />
his early 30s, is married with children.<br />
Mana Tangata<br />
� “once a year we would do the big ride up from Christchurch, to Pukekohe, there was still a firm<br />
attachment to our turangawaewae”<br />
� “my father, was a jazz fusion drummer, one of the best things that he did was instilled a love of<br />
story”<br />
� “it’s about heart, passion and craft”<br />
Manawanui<br />
� “I had never been electrified in the same way that I was by this man, I left Christchurch and<br />
headed up to Wellington and joined his theatre”<br />
� “when you look at the anatomy of the journey, it was all leading to that path, happy coincidences,<br />
right-time, right-place, but not afraid to seize the opportunity”<br />
Mana Motuhake<br />
� “at that stage I wasn’t fully politically aware so it was just about the kaupapa and it was just about<br />
putting everything you could into bringing your vision to screen”<br />
� “the actual idea of having my own production company came about when I noticed that I would<br />
like to specialise in mātauranga Māori”<br />
� “Producing is something I can do, but it’s not something I love doing, I’m more attuned to<br />
directing”<br />
4.6 Case 7<br />
TW (Taranaki, Ngāti Awa), journalist/ actor/ director/ producer for mainstream and Māori TV, his<br />
company produces light entertainment and sports programs for Māori television, some of which is<br />
Māori-language. He became involved in screen production in his 30s; he is in his 40s and is married<br />
with children.<br />
Mana Tangata<br />
� “dad, was a spare parts, car manager, Mum, was all the, nurturing and cooking”<br />
� “I met rangatahi that spoke Māori, after two weeks, hanging out with them I said, I want to be like<br />
you”<br />
� “my passion for surfing, and also the belief that, showing people that we could use the reo<br />
anywhere”<br />
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Ella Henry<br />
� “it’s important to be passionate about anything you do”<br />
Manawanui<br />
� “they (parents) were both achievers too”<br />
� “coming in so late into the industry, I came with a bit of life experience, although I probably lacked<br />
technical skills”<br />
� “great skills you could learn from the ‘mother ship’, even though you were so defensive around<br />
any other broadcaster”<br />
Mana Motuhake<br />
� “we established our Māori radio station, and that was my introduction to broadcasting”<br />
� “all Māori rate themselves as story-tellers, and all Māoris, I believe, want to tell their own stories”<br />
� “I wasn’t even a year at TVNZ, before I was thinking, I’d love to make my own stuff”<br />
� “it’s keeping regular work going, not only for yourself personally, but for a team that you’ve<br />
gathered together, that you trust and love”<br />
4.7 Case 8<br />
WF (Ngā Rauru, Samoan), actor/ editor/ writer/ director/ producer, has been in the industry since the<br />
mid-1980s, working for mainstream and Māori television. Her company has produced a number of<br />
Māori-language programs for Māori television. She is in her 40s, and is in a long-term relationship.<br />
Mana Tangata<br />
� “(father) was probably the first foreigner she had ever seen, he was very exotic, very black, like I<br />
am”<br />
� “mum and dad were in this church, you had to go around, having to communicate with people led<br />
eventually to my interest in the theatre”<br />
� “I think you have to have a passion for the story, that’s what drives me”<br />
Manawanui<br />
� “my mother had this thing, she’d pile us all into the bed and she would tell us these tales of her<br />
growing up”<br />
� “one of my nicknames, as a child, was Ngutu (lips), and there’s not many careers that you can<br />
embark upon where having a big mouth is an asset”<br />
� “I am a very competitive person. I’m naturally, call it the warrior woman”<br />
Mana Motuhake<br />
� “I decided to become a producer and have my own company because it seemed to be expedient”<br />
� “behind it all was the same belief that led my mother to leave the Waitotara Valley and that was a<br />
belief that we as Māori people need to have control of our own destiny”<br />
� “I think that tino rangatiratanga means that we have to pay for our bread and butter or make our<br />
own bread and butter and not be on the dole and not use excuses like nobody employed us and<br />
really strive for our own economic independence”<br />
5. Conclusions<br />
In conclusion, the key variables that impact on the entrepreneurial intentions of these producers were<br />
found to be:<br />
� Mana Tangata: Their sense of identity, who and what they are and want to be<br />
� Manawanui: Their belief in themselves, motivations and influences<br />
� Mana Motuhake: Their desire for control, self-determination of their story-telling and business<br />
endeavours<br />
� Wairua Auaha: The expression and intent of their businesses, to emancipate themselves from<br />
non- Māori organisations, and deliver the freedom to tell authentic Māori stories, with, for and by<br />
Māori.<br />
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Ella Henry<br />
� It was considered that these form a ‘value-added’ process in which one builds upon the other in<br />
the order show in the diagram below:<br />
Mana<br />
Tangata<br />
Manawanu<br />
i<br />
Chart 1: The Māori Emancipatory <strong>Entrepreneurs</strong>hip Model<br />
Mana<br />
Motuhake<br />
Te Wairua<br />
Auaha<br />
This study contributes to the development of a comprehensive theory of Māori entrepreneurship in<br />
screen production, its characteristics and propensity for delivering self-determination and<br />
emancipation for Māori entrepreneurs and their communities of interest. It has found that Māori<br />
entrepreneurship is characterized by notions of self-determination and emancipation. But unlike<br />
orthodox discussions of entrepreneurship, which often as not has a single economic dimension, Māori<br />
entrepreneurship in screen production is as much about strengthening Maori identity as it is about<br />
starting Maori businesses.<br />
References<br />
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Publications, London.<br />
Baldwin, J.M. (1897) Social and ethical interpretations in mental development: A study in social psychology,<br />
Macmillan, New York.<br />
Barclay, B. (2005) Mana Tūturu: Māori treasures and intellectual property rights, Auckland University Press,<br />
Auckland<br />
Chell, E. (2008) The nascent entrepreneur, business development and the role of human resources. International<br />
Handbook of <strong>Entrepreneurs</strong>hip and HRM, edited by R. Barrett and S. Mayson. Edward Elgar, Cheltenham,<br />
UK.<br />
Chen, G., Gully, S. and Eden. D. (2001) Validation of a New General Self-Efficacy Scale, in Organizational<br />
Research Methods, Sage Publications. Vol. 4, No. 1, pp. 62-83<br />
Dana, L-P and Anderson, R. (2007) International handbook of research on indigenous entrepreneurship, Edward<br />
Elgar Publishing, Cheltenham, UK.<br />
Dees, J (1998) The Meaning of Social <strong>Entrepreneurs</strong>hip, Kauffman Centre for Entrepreneurial Leadership,<br />
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<strong>Entrepreneurs</strong>hip Monitor, New Zealand Centre for Innovation and <strong>Entrepreneurs</strong>hip, Unitec, Auckland.<br />
Frederick, H. and Chittock, G. (2006) Global <strong>Entrepreneurs</strong>hip Monitor Aotearoa New Zealand, Centre for<br />
Innovation and Entrepreneurial Research Report Series, Vol. 4, No. 1, Unitec, Auckland.<br />
Frederick, H. and Henry, E. (2005) Innovation and <strong>Entrepreneurs</strong>hip amongst Pakeha and Māori in New Zealand.<br />
In Stiles, C. H. and Gailbraith, C. (Eds.) Ethnic <strong>Entrepreneurs</strong>hip: Structure and Process. International<br />
Research in Business Disciplines, Vol. 4, Elsevier, UK.<br />
Henry, E. and Spooner, H. (2010) Handbook of the International Symposium on Māori and Indigenous Screen<br />
Production, Te Ara Poutama, AUT, Auckland.<br />
URL:http://hdl.handle.net/10292/1099<br />
Henry, E. (2007) Kaupapa Māori <strong>Entrepreneurs</strong>hip. In Dana, L. P., B. Anderson (Ed.) International Handbook of<br />
Research on Indigenous <strong>Entrepreneurs</strong>hip, Edward Elgar Publishing, Cheltenham, UK.<br />
Henry, E. And Pene, H. (2001) Kaupapa Māori Research, Locating indigenous ontology, epistemology and<br />
methodology in the academy, Journal of Organisation Studies, Sage Publications, Vol. 8, No. 2, May, pp.<br />
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http://www.unboundmedicine.com/medline/ebm/record/20017040/abstract/Kaupapa_Maori_Actio<br />
n_Research_to_improve_heart_disease_services_in_Aotearoa_New_Zealand_<br />
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entrepreneurship", International Journal of <strong>Entrepreneurs</strong>hip and Small Business, Vol. 1 pp.1-20.<br />
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938
Literature Review of Business Incubation<br />
Søren Berg Jørgensen<br />
Roskilde University, Roskilde, Denmark<br />
sberg@ruc.dk<br />
Abstract: Small companies are considered to represent the largest division for the creation of jobsin the<br />
economy and the affirmative influence of entrepreneurship in economic development seems to be wellrecognised.<br />
This hascaptured the attention of policymakers and given rise to a need for business-friendly<br />
initiatives targeting entrepreneurs and small businesses. The launch of publicly-supported business incubators<br />
appears to be one of these political initiatives. The purpose of this paper is therefore to provide the reader with an<br />
in-depth literature review on the subject of business incubation and to highlight gaps for further research.<br />
Literature within the field highlights different success and failure factors for business incubators. Some<br />
researchers argue that the primary value-added feature of business incubationis the structure and transfer of<br />
knowledge throughout the incubator network, thereby creating conditions that facilitate the commercialisation of<br />
the innovations of the incubatees. Others explicitly ground the importance of the relationship between the<br />
incubation manager and the incubatees in the interdependent co-production of a value-added incubation process,<br />
while newer research has focused on the importanceof the networking elements of the business<br />
incubationphenomenon, stating that this is the most value-added factor inbusiness incubatorinitiatives. These<br />
examples are only a few of those which seem to have an impact on BI initiatives and the entrepreneurial venture<br />
creation process which business incubators are meant to support. This paper therefore looks deeper into the field<br />
of business incubation. This review highlights different gaps in the literature and argues that business incubator<br />
initiators may believe that the value of their concept lies elsewhere, as customer satisfaction surveys have shown<br />
that there seems to be a mismatch between what entrepreneurs and startup companies want and what business<br />
incubatorsoffer. The lack of focus on entrepreneurship theory within the business incubation field raises the<br />
question of whether business incubationmanagers and initiators really understand their clients and the<br />
entrepreneurial venture creation process.<br />
Keywords: <strong>Entrepreneurs</strong>hip; business incubators<br />
1. Introduction<br />
Recently, attention has been given to the social and economic settings which revolve around<br />
entrepreneurs and the notion that successful entrepreneurship is a co-operative challenge that is<br />
reconciled by social networks instead of being a purely individual and competitive act (Casson et al<br />
2006: 300).This is supported by the belief that entrepreneurs operate within different forms of network<br />
and that the entrepreneur is part of a social context which consists of personal relationships that have<br />
an effect on the actions of the entrepreneur (Klyver 2007). This awareness of the connection between<br />
entrepreneurial success and social networks has directed political attention towards the area of<br />
business incubation,and publicly-supported business incubators and science parks are seen as tools<br />
for economic development via networks of entrepreneurs (Phanet al 2005). This has resulted in an<br />
increase in the implementation of business incubation initiatives on a global scale, leading to a need<br />
to understand the business incubation phenomenon which is more pressing than ever before. The<br />
purpose of this paper is therefore to provide the reader with an in-depth literature review on the<br />
subject of business incubation and to highlight gaps for further research.<br />
2. Defining business incubation<br />
Theierstein and Wilhelm (2001) definebusiness incubationas a regional development trend, referring<br />
to the specific spread of incubation, technology and innovation centres throughout Germany and<br />
Austria, which have been inspired by the hub of high-technology companies in Silicon Valley. Similar<br />
tendencies have been verified in the case of business incubatorsin China, with the introduction of the<br />
first business incubatorin 1987 leading to 670 business incubatorsin 2008 (Dechang et al 2010). This<br />
evolution and spread of the business incubationphenomenon has challenged the traditional<br />
understanding of business incubatorsand even the purpose of their establishment.<br />
Originally, business incubatorswere defined as organisations that provide office facilities,<br />
administrative services and professional advisors to entrepreneurs at the same location (Allen &<br />
McCluskey 1990). Phan et al (2005) mergedthe definitions of science parks and business<br />
incubatorsby referring to them as institutes: “We define these institutions as property-based<br />
organizations with identifiable administrative centers focused on the mission of business acceleration<br />
through agglomeration and resource sharing.”One may question whether or not one can fully merge<br />
the two different terms, as there appears to be a clear distinction (according to some researchers in<br />
939
Søren Berg Jørgensen<br />
the field) between the definitions and purposes of business incubatorsand science parks. For<br />
example, Westhead’s (1997) understanding of the concept of science parks is related to scientific<br />
research with the purpose of creating an environment that can transform “pure” research into<br />
commercial production. Eight years later,Phan et al (2005) highlighted the issue once again by stating<br />
the relevance of the discussion of the mergence of the different terms and definitions of business<br />
incubation. There is definitely a difference between the elements of, for example, the services or<br />
screening processes for new companies in relation to science parks or BIs dealing with non-research<br />
based startups. One cannot overlookthe difference in supply and demand between research and nonresearch-based<br />
companies, although there are many similarities, such as bridging the gap between<br />
the formation of a new business idea and the attempt stage (Grimaldi&Gandi, 2005).<br />
Bergek and Norrman (2007) argue that the business incubationconcept should not be used for<br />
organisations such as science parks and technology parks, as they are designed to support more<br />
mature companies. This discussion can be related to the matter of a business incubationinitiative<br />
being publicly or privately funded. Non-profit BIs often focus on creating jobs, contributing to the<br />
community or making use of unoccupied buildings, whereas university-based BIs have a clear-cut<br />
focus on commercialising research. The business model for private business incubators can vary, but<br />
the most commonly used approaches are investing in the incubated companies and generating<br />
income from rent or services (Ireland & Lumpkin 1988).Dechang et al (2010) claims that the main<br />
establishers of business incubationinitiatives have previously been non-profit government–driven<br />
organisations, but that this trend is changing and gaining a more enterprise-and market-based<br />
orientation. Conversely, studieshave shown that 79% of BIs worldwide are sponsored by academic<br />
institutions, governments or economic development organisations (Al-mubaraki& Busler 2010).<br />
Figure 1: Typology of business incubators (Aernoudt, 2004)<br />
A newer definition has been presented by Abduh et al (2007) which also refers to business incubation<br />
programmes as: “an enterprise development strategy aimed at accelerating the process of formation,<br />
development, and survivability of new enterprises in community,” thereby indicating that abusiness<br />
incubationprogramme can exist without the need for physical office facilities. Other organisations see<br />
themselves as incubation technology innovation centres (ITTs) if they promote and offer counseling<br />
for newly-established companies, despite the fact that they offer no physical office space (Thierstein&<br />
Wilhelm, 2001). Some researchers argue that business incubatorsshould be categorised based on<br />
their objectives or stakeholders,as the concept of BI is turning out to be more of an umbrella term<br />
(Aernoudt 2004).Thiersteinand Wilhelm (2001) support this, as the difference betweenbusiness<br />
incubatorscan also be seenbased on the infrastructure of each individual BI and how it is geared<br />
towards its specific clientele.<br />
Aernoudt’s (2004) typology provides a clear overview of a wide variety ofbusiness incubators, all with<br />
different philosophies, target groups and objectives. This wide-rangingtypology is a depiction of how<br />
the business incubation field and industry have expanded, and indicates that it isdifficult to<br />
categorisebusiness incubators, as they are often a combination of different types.<br />
Forexample,science parks are often a combination of technology incubators and basic research<br />
incubators, whereas according to Westhead (1997), a science park isonly a basic research incubator<br />
with the purpose of creating new discoveries. Peters et al (2004) point out that whether the business<br />
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Søren Berg Jørgensen<br />
incubatoris non-profit, for-profit or university-based has an impact on the business incubatorand the<br />
entrepreneurial process. Autio and Kloften (1998) conclude that the local context in which the<br />
business incubatoroperates influences the objectives of the business incubatoror the support of<br />
SMEs, which is also depicted in the activities that are embarked upon.<br />
It has become clear that achieving a distinct definition of the term business incubation is a challenge.<br />
A study of business incubatorsin Denmark concluded that business incubatorsconstitute a<br />
heterogenic group and that it was hard to see common objectives and goals among the investigated<br />
business incubators(Oxford Research 2008). The lack of a clear definition creates a problematic<br />
situation, in which it is difficult to create a systematic research review, that can begeneralised(Hackett<br />
& Dilts 2004). An appropriate question would therefore be whether or not it is possible to determine a<br />
definition of business incubationas well as creating a foundation for analysis without using a specific<br />
reference case.<br />
3. Assessing the business incubator<br />
Assessment studies of BIs have been carried out since the early 1970s. A qualitative assessment<br />
carried out by Money (1970) of American science parks is considered to be an original contribution to<br />
the field of business incubationresearch, as it showed that companies inside business<br />
incubatorsperformed better than companies outside in terms of higher turnover and survival rates<br />
(Autio&Klofsten 1998). The matter of survival rates has been a foundation for discussions within the<br />
assessment section of the business incubation field and has been presented in many assessment<br />
studies (Westhead&Storey 1992; Philips 2002; Pena 2004). Non-scientific or non-academic<br />
assessment studies are usually carried out by branch organisations such as National Business<br />
Incubation Network (NBIN) in the US. These practitioner studies have had success in terms of<br />
measuring survival rates and claiming rates of over 80% from the incubated companies (Bearse<br />
1998). Other studies claim less optimistic 55% survival rates (Roper 1999 derived from Hackett & Dilts<br />
2004). The evaluation of companies located onsite and offsitebusiness incubatorsis in theory, an<br />
appealing evaluation model, as it highlights the difference between the two and hence showsthe<br />
direct impact of the initiative (Westhead&Storey 1992). However,researchers argue that these<br />
highersurvival rates are based on the fact thatonly the most promising companies are accepted into<br />
the business incubatorsand therefore the companies in the business incubators are not representative<br />
of the companies to which they are compared (Udell 1990; Sherman & Chappell 1998). Few have<br />
taken this discussion further; however, Philips (2002) suggests that one way of getting over the<br />
screening bias is by using a control group of rejected companies to compare with the incubated<br />
companies.<br />
It is not just the assessment studies that have been questioned, but also the overall implementation of<br />
BIs. Researchers stress that simply placing entrepreneurs in BIs does not guarantee their success,<br />
and apart from their location and administrative facilities, the concept of BIs has been called into<br />
question (Hansen et al, 2000). Earlier studies have concluded that up to 87% of entrepreneurs would<br />
have started their business without the assistance of a business incubator (Allen &Rahman 1985).<br />
Theiersteinand Wilhelm (2001) conclude that there is a lack of proof that business incubationinitiatives<br />
have a noteworthy impact on lowering unemployment and that the jobs that are created by business<br />
incubatorswould have been created by other companies.<br />
Peters et al (2004) claim that entrepreneurial companies are directly affected by the screening<br />
process and services of BI programmes. This viewpoint is supported by Pena (2004), who states that<br />
the more entrepreneurs learn, the longer they stay in business. This conclusion was based on an<br />
analysis of 114 startup companies which participated in business incubation centres (BIC) and<br />
showed that the only significant elements which were related to a firm’s growth were the management<br />
training and assistance services offered by the BICs. The question still remains as to how and<br />
whythese startup companies were affected by the elements of the BICs. Furthermore, one might<br />
considerthat some supposedly supportive components might hinder theentrepreneurial process<br />
without the business incubationmanagers knowing. This issue seems to be relatively untouched within<br />
the field, probably because researchers would have to follow a number of entrepreneurs while they<br />
are exposed to the support and services offered by business incubators, which would be a timeconsuming<br />
process. The relevance of this type of research focus is immense, as the field has shifted<br />
towards a focus on the manager-incubatee-business incubatorservices relationship (see Abduh et al<br />
2007 and Dechang et al 2010).<br />
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Søren Berg Jørgensen<br />
As pointed out by Pena (2004), traditionally there seems to have been two main “camps” dividing<br />
researchers within the field. One focuses on business incubationitself, while the other focuses on new<br />
venture creation. Some argue that the development of business incubatorshas shifted from being<br />
government- to enterprise-based, as the operating model has changed from the non-profit public<br />
service model to one based on enterprise and markets (Dechang et al 2010). In the business<br />
incubationevaluation literature,there has been some discussion regarding the factors which generate<br />
success and those which hinder the entrepreneurial development and economic growth (Campbell &<br />
Allen 1987). However, this has not been investigated in depth, and different assessments highlight<br />
different success and failure factors (see Autio& Klofstein 1998; Bøllingtoft & Ulhøi 2005;EBST 2008).<br />
This area therefore needs to be investigated further.<br />
There is a need for the field to realise that the driving forcebehind business incubatorsshould be the<br />
entrepreneurs and how the elements of business incubation,e.g., assistance, support andbusiness<br />
incubation managers, can guide and add value to these individuals and companies through the<br />
complex entrepreneurial process of launching and establishing a business. The majority of<br />
assessment studies neglect this issue, and the focus is often shifted away from the entrepreneur. The<br />
need for a better understanding of the clients of business incubatorsinitiatives is strong. Furthermore,<br />
studies must create an understanding of the way in which the different elements of BIs generate value<br />
for the clients, instead of measuring different elements of their quantitative impact which saylittle of<br />
how and why entrepreneurs act as they do. Improving the current understanding of entrepreneurs will<br />
enhance the possibility that business incubatorswill be able to offer them relevant support which<br />
should help to increase their chances of survival and growth. The remaining section of this literature<br />
review will therefore focus on business incubationin relation to the entrepreneur.<br />
4. Business support and networks<br />
The fact that entrepreneurs are dependent on wide and useable networks has also echoed within the<br />
field of business incubation. Allen and Rahman (1985) state that business incubatorscan produce a<br />
positive environment for bettering entrepreneurship by helping startup companies to achieve success<br />
by linking entrepreneurs to more formal types of network such as banks, government programmes<br />
and seed and venture capital organisations. The importance of social networks and entrepreneurs<br />
does not seem to have changed over time, as Pena (2010) suggests that an increased and more<br />
focused use of networking possibilities inside and outside BICs could help to increase the likelihood of<br />
success for startup companies. Bøllingtoft and Ulhøi (2005) discovered a bottom-up approach which<br />
challenges the traditional top-down approach to business incubators, as entrepreneurs form their own<br />
business incubatorsas a means to help and provide networksof entrepreneurs.<br />
Peters et al (2004) define networking using business incubationterminology as offering the incubatees<br />
access to “managers, administrative, management, financial, legal, insurance consultants as well as<br />
to scientists, academics, prospective customers, either for a fee or free of charge.” This statement<br />
voices an understanding that networking is something that BIs can offer incubatees, but other<br />
research clearly stresses the importance of the co-production of networks as well as the importance of<br />
networking activities between tenants, BI managers and graduates (Rice 2002).<br />
Business incubatorsin a networking context are likely to assume the role of facilitators. Significant<br />
value for entrepreneurs is often hidden in their hazy daily interaction with business<br />
incubationmanagers and employees, who provide contacts, business advice and sales leads for<br />
potential customers. This interaction does not seem to happen via the more formal counseling<br />
sessions offered by business incubators(Oxford Research 2008). As facilitators, business incubators<br />
act as “brokers,” a term derived from social network theory, meaning that business incubatorscan be<br />
seen as mediators of social ties as they link entrepreneurs and startup businesses to potential<br />
partners, employees or customers. This point is considered to be one of the more important<br />
arguments for the value-added quality of business incubators, and researchers assume that the way<br />
in which the management of business incubatorsworks within this area is a determinant factor of<br />
business incubationsuccess (Peters et al 2004). Hughes et al (2007), with regard to this development,<br />
state that the business incubatormerelyprovides opportunities for value creation and the success of<br />
the business incubatordepends onhow the incubatees use the networks which are present in the<br />
business incubatorfor strategic networking.The challenge is then to figure out how business<br />
incubatorsand managers work withnetwork strategies and whether the entrepreneurs use and search<br />
for these networks.An interestingelement to the discussion on networks in business incubationwas<br />
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Søren Berg Jørgensen<br />
contributed by Hansen et al (2000), who discovered that only 26% of business incubators<br />
implementorganised networking activities as part of their programme, despite the fact thatbusiness<br />
incubationmanagers are aware of the importance of creating valuable networking activities fortheir<br />
companies.<br />
Focusing on offering proper networking activities might be worth the investment for business<br />
incubationmanagers, as it has been claimed by Tötterman and Sten (2005) that entrepreneurs<br />
whohave received a lot of support with regard to the creation of solid business networks were<br />
alsomore content with the other services made available to them by the business<br />
incubationprogramme, in contrast tothose who did not participate in such elements of the business<br />
incubationprogram. Scillitoe and Chakrabarti (2010) stress that this focus on networks is considered<br />
to be mostbeneficial if the networks consist of high-quality contacts rather than a large quantity of<br />
contacts, and thatbusiness incubationmanagers should therefore focus on one company at a time and<br />
its specific needs.This may present a practical challenge, as one can assume that business<br />
incubatorsoften create largenetworks in order to deal with as many of their clients as possible. For<br />
business incubationmanagers, itmay also prove to be a challenge to discern all of their clients’ needs,<br />
as business incubationmanagers often have otheroperational tasks which they mustprioritise. A study<br />
of business incubationmanagers concluded that they spend most of their working time on operational<br />
tasks in order to secure the future of the business incubationinitiative (Lewis 2001).<br />
Hughes et al (2007) focus on the fact that business incubatorsoriginally applied a top-down<br />
management style,thereby indicating that business incubation managers should provide and offer<br />
services to startup companies, whereas recent research has shifted towards the importance of the<br />
way in which incubatees can make use of business incubationnetworks and support elements. For<br />
instance,Fang et al (2010) stress that business incubationmanagers must assist entrepreneurs based<br />
on the assumption that the entrepreneur’s capability of obtaining knowledge will become critical to the<br />
success of the entrepreneur and the business incubationinitiative. It might be relevant to argue that<br />
there has been a recent paradigm shift, as the provider-receiver approach has shifted towards an<br />
understanding that business incubationsuccess depends on the business incubatormanagers’<br />
capabilities of enabling entrepreneurs to participate in the support and networking activities offered by<br />
the business incubator.<br />
Business support is considered to be an essential part of any business incubation initiative, as<br />
entrepreneurial companies which are interested in business incubationconcepts are also aware that<br />
they need guidance and business support in order to progress. Rice (2002) argues that business<br />
incubationmanagers should assist and guide entrepreneurial companies as if they were “quasipartners,”<br />
and explicitly grounded the importance of the relationship between the manager and the<br />
incubatees in interdependent co-production for a value-addedbusiness incubationprocess. Hence,<br />
entrepreneurs should be ready and willing to enter into a process of co-production, and according to<br />
Scillitoe and Chakrabarti (2010), the lack of allocated time spent by the manager interacting with the<br />
incubatees can result in the ultimate failure of the venture. As previously stated, many business<br />
incubation initiatives rely on some sort of governmental support, which also putsbusiness incubation<br />
managers in a challenging position, as they have to balance the needs of their sponsors with running<br />
an entrepreneurial and business-oriented environment. According to Abetti (2010), this leads to<br />
increased stress levels and a high turnover of business incubationmanagers, which could harm the<br />
aforementioned co-creation process.<br />
Entrepreneurial companies should learn to understand that business incubatorscan assist their<br />
companies in terms of both business and technology, but only if the incubatees make an effort to help<br />
the business incubationmanagers to understand their company and the technological challenges they<br />
are facing, in order to ensure that their company receives the right help from a qualified practitioner.<br />
However,ScillitoeandChakrabarti (2010) highlight that it is important that business<br />
incubationmanagers know that there are limitations to what they can and cannot assist their clients<br />
with. Often, managers have expertise in a related area of business and can offer a variety of support<br />
through their own partners or networks. In contrast,business incubation managers often have limited<br />
knowledge of the technological aspects of their clients’ businesses. Managers can therefore best<br />
contribute to their clients’ technological development by providing access to a pool of competent<br />
people with technological expertise, instead of wasting time attempting to understand the incubatees’<br />
technological needs, which might slow down the entrepreneurial process (Scillitoe&Chakrabarti,<br />
2010).<br />
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5. Further research<br />
Søren Berg Jørgensen<br />
Literature within the business incubation field highlights different success and failure factors. Dilts and<br />
Hackett (2004) argue that the primary value-added features of business incubatorsare the structure<br />
and transfer of knowledge throughout the incubator network, which create conditions that facilitate the<br />
commercialisation of theincubatees’ innovations. Rice (2002) explicitly grounds the importance of the<br />
relationship between the incubation manager and the incubatees ininterdependent co-production for a<br />
value-added incubation process. These examples are a few of the elements which seem to have an<br />
impact on BI initiatives and the entrepreneurial process, and this area therefore needs to be<br />
investigated in greater depth.<br />
Newer research has focused on the importanceof the networking elements of the business<br />
incubationphenomenon, stating that this is the most value-added factor ofbusiness incubation<br />
initiatives (Hansen et al 2000). However, business incubationinitiators might believe that the value of<br />
their concept lies elsewhere, as customer satisfaction surveys show that there seems to be a<br />
mismatch between what entrepreneurs and startup companies want and what business<br />
incubatorsoffer (Abduh et al 2007). This raises the question of whether or notbusiness<br />
incubationmanagers and initiators really understand their clients and the entrepreneurial venture<br />
creation process.<br />
References<br />
Abetti P. A. (2004) Government-supported Incubators in the Helsinki Region, Finland: Infrastructure, Results, and<br />
Best Practices, Journal of Technology Transfer,29,19-40.<br />
Abduh M., D’Souza, Quazi A., Burley H.T. (2007) Investigating and classifying clients’ satisfaction with business<br />
incubator services. Managing Service Quality, Vol. 17, No 1<br />
Aernoudt, A. (2004) Incubators: Tool for <strong>Entrepreneurs</strong>hip. Small Business Economics 23: 127-135. Allen D.N.,<br />
McCluskey R. (1990) Structure, Policy, Service, and Performance in the Business Incubation Industry.<br />
<strong>Entrepreneurs</strong>hip Theory and Practice, Winter.<br />
Allen D., Rahman S. (1985) Small Business Incubators: A positive environment for entrepreneurship. Journal of<br />
Small Business Management, July.<br />
Al-Mubaraki H.M., Busler M. (2010) Business Incubators findings from a worldwide survey, and guidance for the<br />
GCC States. Global Business Review, 11,1, 1-20.<br />
Autio E., Klofsten M. (1998). A Comparative Study of Two European Business Incubators. Journal of Small<br />
Business Management, Jan.<br />
Bearse P. (1998) A Question of Evaluation: NBIA’s Impact Assessment of Business Incubators. Economic<br />
Development Quarterly 12, 322.<br />
Bergek A., Norrman C., (2007). Incubator best practice: a framework.Technovation 28, 20-28.<br />
Bølling A., Ulhøi J.P. (2005) The networked business incubator-levering entrepreneurial agency? Journal of<br />
Business Venturing 20, 265-290.<br />
Campbell C., Allen D.N., (1987). The Small Business Incubator Industry: Micro-level Economic Development.<br />
Economic Development Quarterly 1 (2), 178–191.<br />
Casson M., Yeung B., Basu A., Waseson N.( 2006). The Oxford Handbook of <strong>Entrepreneurs</strong>hip. Oxford<br />
University Press.<br />
Dechang L., Qiang L., Hongwei W. (2010) Service Innovation Based on Operational model: a Case of Business<br />
Incubator. Service Systems and Service Management, 7th International Conference, 28-30 June, Tokyo.<br />
EBST, (2008). Danske Udviklingsparker-evaluering af danske udviklingsparkers eksisterende ydelser og deres<br />
effekter for iværksættere og mindre virksomheder.<br />
Fang S.C., Tsai F.S., Lin J.L., (2010). Leveragingtenant-incubator social capital for organizationallearning and<br />
performance in incubation programme. International Small Business Journal, Vol. 28, No. 1, 90-113.<br />
Grimaldi R., Grandi A. (2005) Business incubators and new venture creation: an assessment of incubating<br />
models. Technovation vol. 25, issue 2, Feb, 111-121.<br />
Hackett S.M., Dilts D.M., (2004) A Systematic Review of Business Incubation Research. Journal of Technology<br />
Transfer, 29, 55-82.<br />
Hansen M. T., Chesbrough H.W., Nohria N.,Sull D. N. (2000) Networked Incubators Hothouses of the new<br />
economy. Harvard Business Review, Sep-Oct.<br />
Hughes M., Ireland R.D., Morgan R.E. (2007) Stimulating Dynamic Value: Social Capital and Business Incubation<br />
as a Pathway to Competitive Success. Long Range Planning, Vol. 40, Issue 2, 154-177.<br />
Ireland R.D., Lumpkin, J.R., (1988). Screening practices of new business incubators: The evaluation of critical<br />
success factors. American Journal of Small Business 12, 4, 59-81.<br />
Klyver K. (2007) Shifting family involvement during the entrepreneurial process. International Journal of<br />
EntreprenurialBehaviour& Research, vol. 13. no 5, 258-277.<br />
Lewis D.A. (2001) Does technology incubation work? A critical review. U.S Economic Development<br />
Administration.<br />
Oxford Reseach (2008) Danske udviklingsparker- evaluering af danske udviklingsparkers eksisterende<br />
ydelser og deres effekter for iværksættere og mindre virksomheder.<br />
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Pena I. (2004) Business Incubation Centers and New Firm Growth in the Basque Country. Small Business<br />
Economics, Vol. 22, No 3-4, 223-236.<br />
Peters L., Rice M., Sundararajan M. (2004) The Role of Incubators in the Entrepreneurial Process. Journal of<br />
Technology Transfer, 29, 83-91.<br />
Phan P.H., Siegel D.S., Wright M. (2005) Science parks and incubators: observations, synthesis and future<br />
research. Journal of Business Venturing 20, 165-182.<br />
Phillips R.G. (2002) Technology business incubators: how effective as technology transfer mechanisms?<br />
Technology in Society Vol. 24, Issue 3, 299-316.<br />
Rice M.P. (2002) Co-production of business assistance in business incubators. An exploratory study. Journal of<br />
Business Venturing 17, 163–187.<br />
Scillitoe J.L., Chakrabarti A.K. (2010) The role of incubator interactions in assisting new ventures. Technovation.<br />
Vol. 30, Issue 3, 155-167.<br />
Sherman H., Chappell D. (1998) Methodological Challenges in Evaluating Business Incubator Outcomes.<br />
Economic Development Quarterly, 12:313.<br />
Theierstein A., Wilhelm B. (2001) Incubation, technology, and innovation centers in Switzerland: features and<br />
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Tötterman H., Sten J. (2005) Start-ups Business Incubation and Social Capital. International Small Business<br />
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R&D Management Journal 27,1, 45-62.<br />
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Kingdom. United Kingdom Science Park Association, Department of Trade and Industry.<br />
945
Entrepreneurial Success Model of Services SMEs<br />
Noor Hasni Juhdi<br />
Universiti Kebangsaan Malaysia, Malaysia<br />
hasni8878@yahoo.com<br />
Abstract: This study examines entrepreneurial success at individual level of entrepreneurs as the function of<br />
mainly psychological state constructs. Entrepreneurial success is asserted to comprise of financial and<br />
psychological measures of performance. Financial and psychological measures of performance as criteria of<br />
entrepreneurial success demand variance of understanding regarding relationships with the driving factors. This<br />
is a quantitative research and uses questionnaire survey for data collection. Respondents are the foundingentrepreneurs<br />
of established services SMEs in Malaysia. Using hierarchical multiple regression analysis, several<br />
hypothesis are expected to show positive relationships among the constructs hopefully answering the research<br />
questions such as: 1) To what extent entrepreneurial success is the function of positive psychological states such<br />
as psychological capital and entrepreneurial work engagement?; and 2) To what extent service orientation is<br />
related to entrepreneurial work engagement, and subsequently to entrepreneurial success among services SMEs<br />
in Malaysia? Drawing on positive psychology, the study proposes that there are strong relationships between<br />
entrepreneurial success and entrepreneurial work engagement. Additionally, it is expected that psychological<br />
capital and service orientation contribute to entrepreneurial success through entrepreneurial work engagement.<br />
Among others, the limitation of this study is cross-sectional in approach. Simple random sampling is used to<br />
ensure a broad representation of the target population since generalizability of the entrepreneurial success<br />
measurements is expected to be relevant at least for services SME population in Malaysia. As a conclusion,<br />
entrepreneurial success model needs to be expanded to consider the important roles of psychological states in<br />
understanding entrepreneurial success at individual entrepreneur level.<br />
Keywords: entrepreneurial success, psychological performance, entrepreneurial work engagement,<br />
psychological capital<br />
1. Introduction<br />
Entrepreneurial success is an important area of research. The normative criteria of success have<br />
been the acquisition of wealth, business growth, and profitability (Gorgievski et al., 2011) yet there are<br />
many limitations to relying only on financial measures of performance (e.g., Cooper & Artz, 1995;<br />
Dess & Robinson, 1984; Venkataraman & Ramanujam, 1986). It is suggested that non-financial<br />
performance is more relevant (Gorgievski et al., 2011) but should be specified further because it is<br />
equally important in describing entrepreneurial success (Davidsson et al., 2007). However, empirical<br />
research in relation to measuring non-financial performance within entrepreneurship study is lacking.<br />
Thus, this research proposes to investigate entrepreneurial success phenomena, where<br />
entrepreneurial success has both financial and psychological measures of performance.<br />
The business literature has established clearly that financial performance is the basis of success<br />
(Davidsson, 2005; Tang & Kacmar et al., 2010). For example, profitability is one of important<br />
entrepreneurial success criteria even at individual entrepreneur level (Gorgievski et al., 2011). In<br />
contrary, there are debates surrounding non-financial measures of performance. One difficulty with it<br />
is the operationalization of the construct (Tang & Kacmar et al., 2010). Consequently, the literature<br />
provides various possible non-financial measures of performance. In particular, satisfaction is<br />
reported as a significant criterion of entrepreneurial success (Greenhaus et al., 1990; Gorgievski et<br />
al., 2011; Haber & Reichel, 2005). However, satisfaction is not comprehensive as antecedent or<br />
outcome, at least from behavioral view (Judge et al., 2001). Meanwhile, other researchers and<br />
practitioners highlight endearment (Sisodia et al., 2007), entrepreneurial preparedness (Tang et al.,<br />
2010), and glory (Nadzir, 2010).<br />
With non-financial measures of performance, entrepreneurial success becomes complex because<br />
non-financial performance is a function of subjective variables (Dvir et al., 2010). For example,<br />
satisfaction over success is a result of ‘hard work’ (Hsu & Schombert, 2010). Although ‘hard work’ is<br />
an abstract notion, it can be reduced to measurable constructs (Cavana et al, 2003). Entrepreneurial<br />
work engagement, for instance, could be used to operationalize ‘hard work’. Entrepreneurial work<br />
engagement is adapted from behavior study. It is measurable and a valid positive psychological state<br />
(Schaufeli, Bakker & Salanova, 2006). Furthermore, empirical evidence shows that it has positive<br />
association with work outcomes (Poon & Yap, 2009). Therefore, when the concept is adapted as<br />
entrepreneurial work engagement, this study expects to explain variance of entrepreneurial success<br />
among entrepreneurs.<br />
946
Noor Hasni Juhdi<br />
Entrepreneurial work engagement requires the entrepreneurs having atypical resources, such as<br />
psychological capital. The literature highlights a need to examine psychological states as resources<br />
because psychological states as resources have emerged to be increasingly important factors in<br />
relation to small firm success (Runyan et al., 2007). Recently, empirical research examines the<br />
relationships between psychological capital and entrepreneurial success (Hmieleski et al., 2007,<br />
2008) but more consistent empirical evidences are expected. This study is interested in the role of<br />
psychological capital in explaining entrepreneurial success because its major dimensions such as<br />
confidence, hope, resilience, and optimism are also factors in entrepreneurial success.<br />
The decision to employ services SMEs as the research context is timely. In Malaysia, service is the<br />
only economic sector that registered growth and increased contribution to GDP in the first three<br />
quarters of 2009 (Tenth Malaysia Plan 2011-2015). Moreover, services’ contribution to GDP is<br />
targeted to increase to 66.5% in 2020 (Tenth Malaysia Plan 2011-2015). It is also noted that 99.2% of<br />
total business establishments in Malaysia is the SMEs and 86.5% of them are the services SMEs<br />
(Industrial Master Plan, 2006/2020). In the premise that services SMEs play a major economic role,<br />
this author suggests that the performance of services SMEs needs to be better understood.<br />
At this stage of study, there is no established theory yet to explain entrepreneurial success (Lussier &<br />
Halabi, 2010). Therefore, this study uses positive psychology as foundation to justify relationships<br />
where positive psychological states explain entrepreneurial success (Luthans & Youssef, 2007). In<br />
support, the literature highlights that the more positive the entrepreneurs, the more they are able to<br />
put things under control (Rise et al., 2010), so that business success becomes more probable.<br />
Drawing on positive psychology, this study proposes several positive relationships to answer the<br />
research questions. Firstly, this study examines the magnitude of positive relationships between<br />
entrepreneurial success and entrepreneurial work engagement. Secondly, the research aims to<br />
determine positive relationships between entrepreneurial success and other predicting variables, such<br />
as positive psychological capital and service orientation. Finally, the study aims to present mediating<br />
role of entrepreneurial work engagement in psychological capital-entrepreneurial success<br />
relationship; as well as that in service orientation-entrepreneurial success relationship.<br />
2. Significance of study<br />
The present study is significant in several aspects. Firstly, this study contributes to entrepreneurship<br />
body of knowledge by incorporating psychological measures of performance in developing<br />
entrepreneurial success construct as only limited studies have discussed subjectivity of<br />
entrepreneurial success (Audretsch, 2010; Gorgievski et al., 2011; Haber & Reichel, 2005). Secondly,<br />
this study offers an alternative avenue for examining entrepreneurial success through positive<br />
psychology approach, founded by Seligman (2000) by investigating deeper into the mental life of<br />
entrepreneurs. Such alternative approach is necessary because previous studies have done many<br />
attempts to examine business success but they have not come to a consistent conclusion due to a<br />
lack of theoretical underpinning in the studies (Leitch et al., 2010).<br />
3. Research objectives<br />
These are several research objectives in this study, given services SMEs in Malaysia as the research<br />
context:<br />
� To examine the influence of entrepreneurial work engagement on entrepreneurial success;<br />
� To examine the relationships of psychological capital and entrepreneurial success;<br />
� To examine the relationships of service orientation and entrepreneurial success;<br />
� To evaluate the relationships that psychological capital and service orientation have with<br />
entrepreneurial work engagement;<br />
� To determine the mediating effects of entrepreneurial work engagement on relationships between<br />
service orientation and entrepreneurial success;<br />
� To determine the mediating effects of entrepreneurial work engagement on relationships between<br />
psychological capital and entrepreneurial success.<br />
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4. Theoretical model<br />
Noor Hasni Juhdi<br />
Drawing on positive psychology, entrepreneurial success is a positive outcome of human strengths<br />
and virtue (Seligman & Csikszentmihalyi, 2000). More researchers assert that virtuous entrepreneurs<br />
are successful not only financially but also psychologically (e.g., Gorgievski et al., 2011). Meanwhile,<br />
career success literature highlights that people experience more subjective success than objective<br />
performance, given their full commitment to their work (Poon, 2005). In fact, non-monetary incentive is<br />
more rewarding, while monetary gains do not bring the greatest satisfaction from entrepreneurs’<br />
perspective (Alstete, 2008; Csikszentmihalyi, 2003). Thus, entrepreneurial success should comprise<br />
not only financial measures of performance but also other success criteria, such as satisfaction,<br />
feeling of gratitude, and preparedness (Sisodia et al., 2007; Tang et al., 2010). As regards reliability of<br />
non-financial measures of success, specific to the psychological measures of performance is under<br />
researched.<br />
Why are satisfaction, feeling of gratitude, and preparedness being representatives of psychological<br />
measures of performance in this study? Under positive psychology, satisfaction is a higher level state<br />
of self-effectiveness relative to what the entrepreneurs have tried to achieve (Cooper & Artz, 1995;<br />
Davidsson, 2005). Although satisfaction is relevant, it per se provides an incomplete description of<br />
entrepreneurial success (Gorgievski et al., 2011; Judge et al., 2001). Therefore, this study proposes a<br />
couple of other psychological aspects such as feeling of gratitude and entrepreneurial preparedness.<br />
Feeling of gratitude is a positive emotion as a result of the belief in achievement after hard work<br />
(Weiner, 1985). As a mental state, feeling of gratitude is a meaningful achievement (McCullough et<br />
al., 2002) from the perspective of successful entrepreneurs around the world (Anderson et al., 2007;<br />
Sisodia et al., 2007). Lastly, entrepreneurial preparedness is an entrepreneurial standard quality in<br />
making evaluation and judgment on opportunities based on available information (Judge et al., 2001;<br />
Tang et al., 2010). In sum, entrepreneurial success is a dynamic state, as the result of having positive<br />
states of mind. Thus, financial performance, satisfaction, feeling of gratitude, and preparedness are<br />
deemed relevant as the four criteria of entrepreneurial success.<br />
Such is said, entrepreneurial work engagement is appropriate to explain entrepreneurial success.<br />
Entrepreneurial work engagement is adapted from behavioral study. Work engagement is about how<br />
attentive and absorbed a person is in doing jobs (Bakker & Schaufeli, 2008). It is a degree of<br />
enthusiastic behavior (Bakker & Demerouti, 2008) and enthusiasm is the eccentric behavior of<br />
entrepreneurs (Csikszentmihalyi, 2003). Empirically, work engagement has strong relationship with<br />
individual outcomes (Xanthopoulou et al., 2009) and has positive relationships with life pursuits<br />
(Mauno et al., 2007) such as entrepreneurial success. Thus, previous researchers suggest that work<br />
engagement is strongly related to individual performance (e.g., Bakker & Demerouti, 2008; Macey &<br />
Schneider, 2008) even in different contexts (Salanova & Schaufeli, 2008). Therefore, work<br />
engagement has the potential to represent ‘hard work’ when operationalized as entrepreneurial work<br />
engagement in this study.<br />
This study maintains all three dimensions of work engagement (Schaufeli, Bakker, & Salanova, 2006):<br />
vigor, dedication, and absorption. The dimension of vigor refers to high levels of energy and mental<br />
resilience while working, willingness to invest efforts in one’s work, and keeping persistence in difficult<br />
situations (Schaufeli et al., 2006, 2008). The dimension of dedication refers to a strong psychological<br />
involvement in one’s work (Mauno et al., 2007), combined with a sense of significance, enthusiasm,<br />
inspiration, pride, and challenge (Schaufeli et al., 2006, 2008). Lastly, the dimension of absorption<br />
refers to total concentration in one’s work and finding it difficult to detach oneself from the work<br />
(Schaufeli et al., 2006, 2008). The whole construct of work engagement is adapted because all three<br />
dimensions are positive psychological states.<br />
Another important predicting variable of entrepreneurial success is psychological capital (PsyCap).<br />
PsyCap is a psychological state resource at individual level, built on positive psychology, and has four<br />
common dimensions – efficacy, hope, optimism, and resilience (Luthans, Luthans & Luthans, 2004;<br />
Luthans, Avolio, Avey & Norman, 2007). It is important to note that the founding authors (Luthans et<br />
al., 2004) affirm theoretically and empirically that PsyCap functions strongly as a single construct in<br />
research. In that basis, PsyCap is relevant to explain individual positive outcomes, such as<br />
entrepreneurial work engagement and entrepreneurial success in this study. PsyCap is different from<br />
economic capital, human capital or social capital. As proposed by Luthans, et al. (2004), PsyCap is<br />
concerned with “who you are” not “what you have” or “who you know”. Empirical evidence shows<br />
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Noor Hasni Juhdi<br />
positive relationship between PsyCap and positive psychological states (Avey et al., 2010). Therefore,<br />
this study views that PsyCap is latent characteristic of strengths causing entrepreneurial work<br />
engagement. Furthermore, empirical evidence shows that PsyCap is related to the overall business<br />
performance and firm competitive advantage (Luthans, Avolio, Avey & Norman, 2007). Therefore,<br />
PsyCap has the potential to explain entrepreneurial success. Thus, in the current research, PsyCap is<br />
expected to explain entrepreneurial success through entrepreneurial work engagement.<br />
Lastly, service orientation as an individual resource is a nontechnical competence in identifying and<br />
reacting to a new customer demand (Hogan, Hogan, & Busch, 1984). It is a differentiating factor and<br />
the winning factor when customers are the foundation of business (Schneider & Bowen, 1995). Note<br />
its importance in services SMEs, service orientation could predict entrepreneurial success (Carraher<br />
et al., 2009; Lytle & Timmerman, 2006). In sum, service orientation is a psychological state when the<br />
entrepreneurs’ concern is “attending to customer needs” (Lytle, Hom, & Mokwa, 1998) passionately<br />
during service encounters (Bitner et al., 2000), and enhancing customer feeling of delight and<br />
happiness (Rust & Oliver, 2000). Therefore, this study defines service orientation as a set of positive<br />
mental state that affects the quality of interaction between a provider and a customer through frontline<br />
employees. Thus, service orientation is about owners’ psychological concern towards employees’<br />
know-how to comply with customer needs and wants.<br />
5. Research Framework<br />
Psychological<br />
Capital<br />
(PsyCap)<br />
Service<br />
orientation<br />
Entrepreneurial<br />
work<br />
engagement<br />
Figure 1: Entrepreneurial Success Model of Services SMEs<br />
6. Research hypotheses<br />
ENTREPRENEURIAL<br />
SUCCESS<br />
• Financial<br />
measures of<br />
performance<br />
• Psychological<br />
measures of<br />
performance<br />
Entrepreneurial Success and Entrepreneurial Work Engagement<br />
The importance of entrepreneurial work engagement in explaining entrepreneurial success is<br />
supported by positive psychology theory. Seligman et al., (2000, 2005) views that each person has<br />
strengths and virtue to have meaningful life. These strengths and virtue allow him/her to work hard on<br />
something he/she dreams of. Similarly, each entrepreneur logically ought to view his/her ventures as<br />
very meaningful in his/her life and the life of others. It is compelling, therefore, for him/her to invest all<br />
types of resources available and to labor all his/her strengths, dedication, and absorption for one<br />
mission to be accomplished, i.e. being successful financially, psychologically or both.<br />
Hypothesis 1: Entrepreneurial work engagement is directly related to (a) financial<br />
performance and (b) psychological performance.<br />
PsyCap and Entrepreneurial Success<br />
In the current research, PsyCap may have some bearing on entrepreneurial work engagement and<br />
subsequently on entrepreneurial success. There is significant relationship between PsyCap and<br />
performance (Avey et al., 2010). More empirical evidence shows PsyCap’s positive influence on<br />
business performance (Luthans et al, 2005). Thus, PsyCap potentially predicts business success<br />
(Hmieleski et al., 2007).<br />
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Noor Hasni Juhdi<br />
Hypothesis 2a: PsyCap is positively related to (a) financial performance and (b)<br />
psychological performance.<br />
Entrepreneurial journey is full of adversity, failure, and critical events (Holcomb et al., 2009).<br />
Apparently, they need to be positive-minded in expecting positive outcomes. By having PsyCap, the<br />
entrepreneurs are capable to locate focus, energy and time for business. In other words, they need to<br />
be hopeful, resilient, optimistic, and confident to get involved, committed, and dedicated (dedication is<br />
a dimension of entrepreneurial work engagement) while pursuing for entrepreneurial success. Thus,<br />
PsyCap has the potential to positively relate with entrepreneurial work engagement by which could<br />
result in entrepreneurial success.<br />
Hypothesis 2b: PsyCap is positively related to entrepreneurial work engagement.<br />
Hypothesis 2c: Entrepreneurial work engagement mediates the relationship between<br />
PsyCap and entrepreneurial success.<br />
Service orientation and Entrepreneurial Success<br />
Service orientation could predict entrepreneurial success (Carraher et al., 2009). However, previous<br />
research was conducted in Western and European countries and the applicability in other countries<br />
remains inconclusive. As regards Asian and particularly Malaysian context, service orientation is<br />
relatively a new concept (Liu et al., 2003). Thus, service orientation’s impact on entrepreneurial<br />
satisfaction (a domain of entrepreneurial success in this study) is expected to materialize through hard<br />
work (entrepreneurial work engagement), according to Lytle and Timmerman (2006). Therefore, this<br />
study develops the following hypotheses for empirical testing.<br />
Hypothesis 3a: Service orientation is positively related to (a) financial performance and<br />
(b) psychological performance.<br />
Hypothesis 3b: Service orientation is positively related to entrepreneurial work<br />
engagement.<br />
Hypothesis 3c: Entrepreneurial work engagement mediates the relationship between<br />
service orientation and entrepreneurial success.<br />
7. Methodology<br />
7.1 Sample and data collection<br />
The sample size is determined through the list of small and medium services companies that appears<br />
in SMI/SME Business Directory Malaysia 2010. There are not less than 721 services firms in the<br />
directory. Simple random sampling approach is deemed appropriate for this study because 145<br />
responses are reachable, given the sample size (Dillon, 1997). The lists are numbered. Then, the<br />
numbered-cards are drawn at random until 145 cards are selected. The selected respondents are<br />
telephoned to affirm availability and to be informed about the research interest. Questionnaire is<br />
conveyed via mail or by hand, and returned via express-mail. Post-paid envelope is enclosed to<br />
improve respondence.<br />
7.2 Scale of Measurement<br />
Entrepreneurial Success. Financial performance is perceived profitability adapted from Haber and<br />
Reichel (2005) with α= 0.92. An example of the items is “I perceived high profitability last year”.<br />
Psychological performance is developed based on literature by key authors and empirical evidence in<br />
previous research. It is posited to have three domains: entrepreneurial satisfaction, feeling of<br />
gratitude, and entrepreneurial preparedness. Entrepreneurial satisfaction is adapted from<br />
Greenhaus’s et al., (1990) career satisfaction (α= 0.84) with a sample item such as “I am satisfied with<br />
the success I have achieved in my career.” Feeling of gratitude measures are adopted from<br />
McCullough et al., (2002) with α= 0.82. An example of item is “I have so much in life to be thankful<br />
for”. Entrepreneurial preparedness measures are adapted from Tang et al., (2010) with α= 0.83. An<br />
example of item is “When facing multiple opportunities, I am able to select the good ones”. The 18<br />
items are expert reviewed for content validity.<br />
Entrepreneurial Work Engagement. Work engagement construct has three dimensions: vigor,<br />
dedication, and absorption. There are 17 items with α= 0.80 to 0.90 and this study adapts all items<br />
from Schaufeli, Bakker, and Salanova (2006) to be entrepreneurial work engagement to fit with the<br />
study. An example of an item is “I feel happy when I am working hard enough”.<br />
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Noor Hasni Juhdi<br />
Psychological Capital. It is measured using 24 items, adopted from Luthans, Avolio, Avey, and<br />
Norman (2007) with α= 0.89. All domains should be taken together to result in high relation with<br />
outcome, suggested by the authors. An example of item is “I feel confident analyzing a long-term<br />
problem to find a solution”.<br />
Service Orientation. The development of scales is based on Lytle et al. (1998). From 35 items only 9<br />
items are theoretically applicable to small and medium firms’ situation. The items are reviewed by<br />
experts for content validity. Among others, sample items include the following:<br />
� “I am committed in providing resources to enhance employee ability to be excellent”<br />
� “I view customers as opportunities to serve rather than as sources of revenue”<br />
� “Employees receive personel skill trainings that enhance his/her ability to deliver high quality<br />
service”<br />
7.3 Data analysis<br />
This study uses hierarchical multiple regression analysis and Baron and Kenny‘s (1986) causal steps<br />
procedure for establishing the mediation model. Firstly, entrepreneurial success is regressed on the<br />
predicting variables (PsyCap and service orientation) to establish that there are positive relationships.<br />
Secondly, entrepreneurial work engagement is regressed on the predicting variables to establish<br />
predictor-mediator relationships. Thirdly, entrepreneurial success is regressed on both the predicting<br />
variables and entrepreneurial work engagement to provide estimate of partial mediation.<br />
8. Conclusion<br />
Financial performance, such as profitability, is fundamental in small-medium business success model.<br />
However, it is not all the measure of entrepreneurial success of services SMEs. Psychological<br />
measures of performance are also relevant criteria of entrepreneurial success. Both criteria are<br />
important in understanding entrepreneurial success though they are distinctive. Consequently,<br />
reasonable variance is possible when explaining how they are related to the driving factors. Together,<br />
entrepreneurial success as measured by financial and psychological criteria is the function of<br />
psychological state constructs. In addition, service orientation is very useful to explain entrepreneurial<br />
success in the context where customer relationship is important.<br />
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Application of Structural Equation Modelling to Assess the<br />
Impact of Entrepreneurial Characteristics on Students’<br />
Entrepreneurial Intentions<br />
Saeid Karimi 1 , Harm Biemans 1 , Thomas Lans 1 , Zahra Arasti 2 , Mohammad<br />
Chizari 3 and Martin Mulder 1<br />
1<br />
Wageningen University, The Netherlands<br />
2<br />
University of Tehran, Tehran, Iran<br />
3<br />
Tarbiat Modares University, Tehran, Iran<br />
saeid.karimi@wur.nl<br />
harm.biemans@wur.nl<br />
thomas.lans@wur.nl<br />
arasti@ut.ac.ir<br />
mchizari@modares.ac.ir<br />
martin.mulder@wur.nl<br />
Abstract: <strong>Entrepreneurs</strong>hip is considered to be an important driver for economic growth. Entrepreneurial<br />
intention is, based on the literature, suggested to be a predictor of future entrepreneurial behaviour.<br />
Entrepreneurial intention is influenced by several factors including entrepreneurial characteristics. Several studies<br />
have examined the relationship between entrepreneurial characteristics and success entrepreneurs. However,<br />
there is very little research available on personality factors that drive students’ intentions to start a new business.<br />
This study investigates the effect of entrepreneurial characteristics of students at Iranian universities on their<br />
entrepreneurial intentions. A survey instrument was designed to measure entrepreneurial intentions as<br />
dependent variable as well as entrepreneurial characteristics including need for achievement, risk-taking<br />
propensity, innovativeness, self-efficacy and need for independence as independent variables. The sample of<br />
347 students included students studying business, agriculture, and engineering at seven established universities<br />
at both graduate and undergraduate levels. Structural Equation modelling (SEM) was employed to test causal<br />
relationships among independent and dependent variables. The results indicate that entrepreneurial intention is<br />
significantly influenced by entrepreneurial self-efficacy and need for achievement. However, risk taking<br />
propensity and need for independence. do not have a direct significant impact on students’ entrepreneurial<br />
intentions. Furthermore, the results show that the effect innovativeness is mediated by entrepreneurial selfefficacy.<br />
The results of the study provide educators, administrators and policy makers inside and outside<br />
universities valuable insights with respect to entrepreneurship education. It may serve students better by<br />
increasing its focus on entrepreneurial self-efficacy and need for achievement.<br />
Keywords: entrepreneurial intention, entrepreneurial characteristics, university students, Iran<br />
1. Introduction<br />
Due to positive impacts of entrepreneurship such as increase of economic efficacies, bringing<br />
innovation to the market, and creation of new jobs (Shane & Venkataraman, 2000), during the past<br />
decade most developing countries around the world including Iran have paid more attention to<br />
entrepreneurship as a potential, fundamental, solution to various problems facing the country such as<br />
lack of improvement in economy, increasing unemployment rates, excessive number of graduates in<br />
relation to an inability of the private sector to provide work for the graduates (Karimi et al., 2010).<br />
While entrepreneurship has been viewed as crucial to Iran’s economic growth and development, it is<br />
surprising that relatively little research has been done on factors that influence individuals’ intention to<br />
start a new business in this interesting context.<br />
Cognitive approaches have attracted considerable interest recently (Baron 2004). Among them, much<br />
attention has been paid to the entrepreneurial intention - the intention to start one’s own business<br />
(Autio et al. 2001; Kolvereid 1996). The entrepreneurial intention is widely recognized as the first<br />
critical step in the process of becoming an entrepreneur (e.g., Bird, 1988; Krueger, Reilly, & Carsrud,<br />
2000). Some prior studies have investigated the impact of demographic profile, contextual factors,<br />
and personality characteristics on the entrepreneurial intentions of students in the past decades (e.g.<br />
Koh, 1996; Wang & Wong, 2004; Nabi and Holden, 2008; Harris and Gibson, 2008). Several scholars<br />
state that although fierce criticism in the nineteen nineties (Gartner, 1989), the explaining capacity of<br />
personality characteristics should still be considered as critical (Mazzarol et al. 1999; Rauch and<br />
Frese 2007; Wagner and Sternberg 2004). Hisrich et al. (2007) point out that due to design and<br />
methodological limitations, it is possible that the role of personality characteristics has been<br />
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underestimated in past entrepreneurship research. Interest in the role of personality characteristics in<br />
entrepreneurship process has recently re-emerged after a hiatus of almost 20 years (Zhao et al.,<br />
2010). Therefore, today, there is a need to clarify which personality characteristics play the most<br />
influential role in shaping the personal decision to start a firm. It is also noteworthy that not much<br />
research has been done on personality factors that drive the students’ intention to start up a new<br />
business (Luthje & Franke, 2003). In addition, in entrepreneurship research, mediating processes are<br />
rarely studied (Rauch and Frese, 2005) and, therefore, it is less clear whether personality<br />
characteristics such as innovativeness will have an indirect influence on entrepreneurial intentions<br />
through their effect on self-efficacy. It is worthy to note that all studies were conducted in,<br />
predominantly in Western countries; no study has so far tried to explain relative contribution of<br />
personality factors for students’ entrepreneurial intentions in an Iranian context. Our paper aims at<br />
filling this gap.<br />
2. Entrepreneurial characteristics<br />
The results of some recent studies show that entrepreneurial characteristics play an important role in<br />
influencing the students’ decision to become entrepreneurs (e.g., Zian et al, 2010; Fini et al, 2009).<br />
The literature demonstrates that individuals’ entrepreneurial intention is influenced by several<br />
individual characteristics. However, despite the research effort expended on this topic, the evidence is<br />
still inconclusive it. Within the literature on this subject there is research that both supports and<br />
disapproves the relationship among the characteristics mentioned below (Gurol and Astran, 2006).<br />
Moreover, most previous studies have investigated a number of personal characteristics associated<br />
with entrepreneurship independently (Tajeddini and Mueller, 2008). Therefore, several authors (Cools<br />
and Broeck 2006; Cromie 2000; Gürol and Atsan 2006; Mueller and Goić 2002) argue that identifying<br />
a cluster of relevant characteristics may be more useful to assess the entrepreneurial personality than<br />
focusing on a single characteristic. In this field research in order to define the entrepreneurial profile of<br />
students, we test the predictive value of five characteristics: (i) risk propensity (risk taking),(ii) need for<br />
achievement, (iii) need for independence, (iv) innovativeness, and (v) self-efficacy. These<br />
characteristics are included in the study since they are the most frequently cited as entrepreneurial<br />
characteristics in different studies in the entrepreneurship literature and evidences indicating<br />
association between them and entrepreneurship have been widely documented (Koh, 1996; Gurol<br />
and Astan, 2006).<br />
2.1 Propensity to take risk<br />
Risk taking is usually defined either as a probability function or as an individual disposition towards<br />
risk (Rauch and Frese 2007). In other words, risk propensity can be defined as a personality trait<br />
involving the willingness to pursue decisions or courses of action involving uncertainty regarding<br />
success or failure outcomes (Jackson, 1994). Results of various studies are not conclusive on<br />
relationship between risk propensity and entrepreneurial intentions. Gerry et al. (2008) stated that risk<br />
taking significantly influence students’ interest in and motivation for starting their own business. The<br />
findings of Gurel et al., (2010) and Yusof et al. (2007) indicated that there is a statistically significant<br />
relationship between propensity to take risks and students’ entrepreneurial intention. However,<br />
Douglas and Fritzsimmons (2007, 2008) and Busenitz & Barney (1997) found that risk taking is not<br />
related to entrepreneurial intention.<br />
We thus propose that:<br />
Hypothesis1: Risk propensity will influence students’ entrepreneurial intentions positively.<br />
2.2 Need for achievement<br />
Need for achievement can be defined as “behavior towards competition with a standard of excellence”<br />
(McClelland, 1953). In other words. need for achievement refers to expectations of doing something<br />
better or faster than anybody else or better than the person’s own earlier accomplishments<br />
(Hansemark, 2003). In entrepreneurship context, “need for achievement” refers to the perceived<br />
results and outcomes of creating a new business which significantly influence one’s propensity to take<br />
the challenges and responsibilities of starting and growing a new business (Hansemark, 1998;<br />
McClelland, 1961). Some studies indicated that need for achievement is one the strongest predictor of<br />
entrepreneurial behaviors ( McClelland, 1961; Pillis and Reardon, 2007; Babb and Babb, 1992). The<br />
study results of Gorul and Astan (2006) showed that need for achievement is found to be higher in<br />
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entrepreneurially inclined students, as compared to entrepreneurially non-inclined students. In line<br />
with this, the following hypothesis is developed:<br />
Hypothesis2: Need for achievement will influence students’ entrepreneurial intentions positively.<br />
2.3 Need for independence<br />
Need for independence can be defined as the need to do and say as one likes despite conventional<br />
expectations (Caird, 1991:181). Need for independence belongs to the most frequently stated<br />
reasons for becoming self-employed (Kolvereid, 1996a). According to Nieman et al. (2003, 30), many<br />
individuals leave their traditional jobs to become entrepreneurs. They are tired of working for<br />
somebody else and therefore establish their own venture. <strong>Entrepreneurs</strong> do not like to be tied to rules<br />
and regulations. They want to work independently and be their “own boss”. Douglas and Shepherd<br />
(2002) studied business alumni of an Australian university to determine factors influencing intentions<br />
to start a business. They suggested that need for independence is an important factor affecting career<br />
decisions and the intention to start a business. Kuratko et al., (1997) found that need for<br />
independence is a highly important determinant of the intention to start a business.<br />
This suggests the following hypotheses:<br />
Hypothesis3: Need for independence will influence students’ entrepreneurial intentions positively.<br />
2.4 Entrepreneurial self-efficacy<br />
Self-efficacy, or self-confidence in a given domain (e.g. entrepreneurship), is based on individuals’<br />
self-perceptions of their skills and abilities to accomplish a specific course of action within a given<br />
domain or achieve a desired outcome (Bandura, 1997). According to Markham et al. (2002), it is the<br />
perceptions of self-efficacy, rather than objective ability that motivate individuals to demonstrate<br />
entrepreneurial behavior. Empirical studies in the entrepreneurship literature have found<br />
entrepreneurs to have a higher leve of self-efficacy than non-entrepreneurs (e.g. Macko and Tyszka,<br />
2009). Several entrepreneurship theorists have proposed that self-efficacy plays an influential role in<br />
the new venture creation process (Boyd and Vozikis, 1994; Scherer et al., 1989). Some studies<br />
showed that entrepreneurial self-efficacy can be considered as one of the main personal<br />
characteristics which has a significant strong and positive impact on entrepreneurial intention and it is<br />
a crucial factor in increasing the likelihood of business start-up activity (Krueger et al. 2000; Boyd and<br />
Vozikis, 1994; Zhao et al., 2005). Therefore, on the basis of the above discussion, the following<br />
hypothesis is elicited:<br />
Hypothesis4: Entrepreneurial self-efficacy will influence students’ entrepreneurial intentions positively.<br />
2.5 Mediating effects of entrepreneurial self-efficacy<br />
Although entrepreneurial self-efficacy is often depicted as a direct predictor for entrepreneurial<br />
intentions, it can also mediate the effects of other variables ( e.g. Zhao et al., 2005). The model tested<br />
in this study considers that self-efficacy can have a mediating role in the relationship between<br />
innovativeness and entrepreneurial intentions. Innovativeness relates to perceiving and acting on<br />
business activities in new and unique ways (Robinson et al., 1991). As suggested by many scholars<br />
(e.g. Schumpeter, 1934; Mitton, 1989; Thomas and Mueller 2000), innovativeness is one the most<br />
fundamental aspect of entrepreneurship and an essential entrepreneurial characteristic. Bandura<br />
(1986) pointed out that self-efficacy for a specific domain may be influenced by four components,<br />
including one’s own psychological characteristics. Winkel et al., (2011) suggest that the relationship<br />
between certain personality constructs and one’s intentions can is mediated by self-efficacy (e.g.,<br />
Nauta, 2004). We, therefore, expect innovativeness to have a direct influence on self-efficacy and an<br />
indirect influence on entrepreneurial intentions through entrepreneurial self-efficacy. Having high<br />
levels of innovative behaviour will stimulate individuals that they pursue an entrepreneurial career<br />
because they feel more confident that they can fulfil the roles and the tasks necessary to succeed in<br />
starting up a new business. Therefore:<br />
Hypothesis5: Entrepreneurial self-efficacy will mediate the relationship between innovativeness and<br />
entrepreneurial intention<br />
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3. Research methodology<br />
Saeid Karimi et al.<br />
The survey focused on students who took the entrepreneurship courses both undergraduate and post<br />
graduate in seven Iranian universities during the academic year 2010-2011. These students were<br />
selected due to their enrolment into entrepreneurship courses which provided indication that their<br />
career interest is skewed towards entrepreneurship (Zainuddin and Ismail, 2009). A structured<br />
questionnaire was designed by the researchers to gather the data required for this research. Four<br />
hundred students were following entrepreneurship courses in the selected universities. Thus about<br />
400 questionnaires were distributed. With the approval and cooperation of lecturers, the<br />
questionnaires were distributed at the beginning of a session for undergraduates and graduate<br />
students. The students were given half an hour to complete the questionnaire. In total, 346<br />
questionnaires were collected indicating a response rate of 87%.<br />
4. Measures<br />
The questionnaire made use of a seven point Likert scale (1= strongly disagree to 7= strongly agree)<br />
questions to determine entrepreneurial intentions and characteristics. For all the scales, responses<br />
were coded in a way that higher scores mean higher entrepreneurial intention and personality traits.<br />
Entrepreneurial intention was measured by six items. These items are adopted from Linan (2009).<br />
Entrepreneurial self-efficacy was measured by a 4-item self-assessment scale adopted from Zhao et<br />
al. (2005). A 4-item measure of risk-taking propensity developed by Gomez-Mejia & Balkin (1989) was<br />
used in this study. Seven items from Cassidy and Lynn (1989) as utilized by Dohse and Walter,<br />
(2010) were used to measure need for achievement in this study. Need for independence was<br />
measured with four items. This measure was adopted from Dohse and Walter (2010). Innovativeness:<br />
An eight-item measure of innovativeness from the Jackson Personality Inventory Manual (JPI) as<br />
utilized by Mueller and Thomas (2000) was employed in this study.<br />
5. Statistical method<br />
The obtained data were then analyzed by using SPSS18 and AMOS18. The research steps and<br />
methods included instrument development, an exploratory factor analysis, a confirmatory factor<br />
analysis, and a test of a structural model. Structural Equation Modeling (SEM) was used to test the<br />
impact of five sets of antecedent factors, namely entrepreneurial self-efficacy, propensity to take risk,<br />
need for achievement, need for independence, and innovativeness, on the intention of students to<br />
become an entrepreneur. SEM is a method widely used in the behavioural sciences during the last 15<br />
years (Shook et al., 2004). It has the ability to estimate simultaneously several multiple regressions<br />
that may be interdependent (Blaikie, 2003). For the present study, the use of SEM is pertinent as it<br />
helps estimate a series of separate, but interdependent, multiple regression equations simultaneously<br />
for modeling students’ intention to new venture creation.<br />
6. Analysis and results<br />
6.1 Demographics of the participating students<br />
The sample consisted of 266 undergraduate students (%76.9) and 80 graduate students (%23.1). In<br />
general terms, the sample was integrated by 40% of agriculture engineering, 33% of business, 17% of<br />
humanity science and 20% of computer engineering. Based on the survey, female respondents<br />
represented %61.3 of the total respondents while male respondents included %38.7 of the sample. In<br />
the case of age distribution, the majority of the students were between 21-25 years of age (82.1%)<br />
and the average their age was 22.61 years old. Majority of the students (78%) were not having prior<br />
working experience.<br />
6.2 Exploratory Factor Analysis<br />
An Exploratory Factor Analysis (EFA) was used to reduce the items to a smaller, more manageable<br />
set of underlying factors.To examine the suitability of the data for EFA, Kaiser Mayer-Olkin (KMO)<br />
measure of sampling adequacy and Bartlett test of sphericity were used. A high value of KMO<br />
measure of sampling adequacy (0.838), highly significant Bartlett test of sphericity (chi-square:<br />
3229.408; Significance: p
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elimination of the items as stated above, ranged from 0.582 to 0.789, the second factor (self-efficacy)<br />
ranged from 0.674 to 0.754, the third factor (risk taking) ranged from 0.716 to 0.829, the forth factor<br />
(need for achievement) ranged from 0.752 to 0.804, the fifth factor (need for independence) ranged<br />
from 0.698 to 0.794, and the sixth factor (innovativeness) ranged from 0.651 to 0.760. It can be<br />
concluded that there is sufficient evidence of the unidimensionality. Based on the principal<br />
components analysis and VARIMAX procedure in orthogonal rotation, the results showed that the<br />
Eigenvalues for all the constructs were greater than 1.0, ranging from the lowest 1.141<br />
(innovativeness) to the highest of 6.179 (entrepreneurial intention) indicating that they constitute valid<br />
and important explanatory variables (Field, 2009, p. 660) .<br />
6.3 Reliability analysis<br />
The Cronbach’s alpha value for each construct is shown in Table 1. The reliability value for each<br />
construct was above or equal to the value of 0.70, which meets acceptable limits and indicated that<br />
the measurement scales of the constructs were stable and consistent. (Hair et al., 2006).<br />
Table 1: Exploratory factor analysis and the factor loadings<br />
Factor’s<br />
Name<br />
Entrepreneurial<br />
intention<br />
Entrepreneurial<br />
self-efficacy<br />
Propensity to<br />
take risk<br />
Need for<br />
achievement<br />
Need for<br />
independence<br />
Items Factor<br />
Loading<br />
- I’m ready to make anything to be .671<br />
an entrepreneur (Y1)<br />
- My professional goal is .787<br />
becoming an entrepreneur (Y2)<br />
- I will make every effort to start .789<br />
and run my own firm (Y3)<br />
- I’m determined to create a firm in .582<br />
the future (Y4)<br />
- I’ve got the firm intention to start .753<br />
a business someday (Y5)<br />
-I can successfully identify new .754<br />
business opportunities (X1)<br />
- I am able to create new products .754<br />
(X2)<br />
- I can think creatively (X3) .738<br />
- I can commercialize an idea or<br />
new development (X4) .674<br />
- I’m not willing to take risks when<br />
choosing a job or a company to .716<br />
work for (X5)<br />
- I prefer a low risk/high security<br />
job with a steady salary over a job .829<br />
that offers high risks and high<br />
rewards (X6)<br />
- I prefer to remain in a job that<br />
has problems that I know about<br />
rather than take the risk of .782<br />
working at a new job that has<br />
unknown problems even if the<br />
new job offers greater rewards<br />
(X7)<br />
.801<br />
- I view risk on a job as a situation<br />
to be avoided at all costs (X8)<br />
- I frequently think about ways I .804<br />
could earn a lot of money (X9)<br />
- I believe I would enjoy having .791<br />
authority over other people (X10)<br />
- I would like an important job .752<br />
where people look up to me (X11)<br />
- I care about performing better .778<br />
than others on a task (X12)<br />
-having freedom of choice over .756<br />
when I do my work is important to<br />
me (X13)<br />
-I prefer to determine the content .794<br />
of my work as far as possible on<br />
958<br />
Eigenvalue Percentage<br />
of variance<br />
6.179 25.748<br />
2.449 10.205<br />
2.33 9.706<br />
1.688 7.031<br />
1.350 5.624<br />
Cronbach<br />
alpha<br />
0.826<br />
0.85<br />
0.80<br />
0.70<br />
0.716
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my own (X14)<br />
-I dislike being subordinated to<br />
other people (r) (X15)<br />
.698<br />
Factor’s<br />
Items Factor<br />
Name<br />
Loading<br />
Innovativeness -I often surprise people with my<br />
novel ideas (X16)<br />
.705<br />
-People often ask me for help in<br />
creative activities (X17)<br />
.715<br />
-I prefer work that requires original<br />
thinking (X18)<br />
.760<br />
-I like to experiment with various<br />
ways of doing the same<br />
thing(X19)<br />
.651<br />
6.4 Measurement and Structural Equation Modeling<br />
Eigenvalue Percentage<br />
of variance<br />
1.141 4.753<br />
Cronbach<br />
alpha<br />
According to Hair et al. (2006) it is appropriate to adopt a two-step approach in Structural Equation<br />
Modeling (SEM): (a) the assessment of the measurement model, (b) and the assessment of the<br />
structural model. The first step, involving Confirmatory Factor Analysis (CFA), was to test the reliability<br />
and construct validity of the proposed measurement model. Once a satisfactory measurement model<br />
was obtained, the second step, involving SEM, was to test the structural theory: that is, the structural<br />
model that best fitted the data was identified, and then the hypotheses were tested.<br />
Figure 1: Six-construct measurement model<br />
959<br />
0.774
6.4.1 Assessment of the fit of the model<br />
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SEM has no single statistical test that best measures the ‘strength’ of the model’s fit. A model fit can<br />
be evaluated by examining several goodness of fit indices. As shown in table 2, this model fits the<br />
data reasonably well. Therefore, on the basis of the results obtained, the hypothesized model of six<br />
constructs is a suitable measurement model for this study.<br />
Table 2: Goodness-of-fit indexes for measurement mode<br />
Model χ2 χ2 /df GFI TLI CFI IFI RMSEA<br />
Measurement model 369.336 1.718 .917 .930 .940 .941 0.046<br />
6.4.2 The assessment of the measurement model<br />
As mentioned in the previous sections, CFA was necessary, before testing research hypotheses, in<br />
order to determine whether the proposed model was indeed an acceptable structural equation model.<br />
In the other words, CFA provides quantitative measures that assess the Goodness of Fit (GOF)<br />
indices and the validity and reliability of theoretical model.<br />
6.4.3 Construct validity<br />
Construct validity includes convergent and discriminant validities of the measurements: To assess<br />
convergent validity, we can use three criteria suggested by Fornell and Larcker (1981): 1) Factor<br />
Loadings, 2) Construct or Composite Reliabilities and 3) Average Variance Extracted (AVE) by each<br />
construct (CR).<br />
As a first step, the discriminant validity of the questionnaire analyzed through (CFA) on the items that<br />
measure the factors of entrepreneurial intentions, entrepreneurial self-efficacy, taking risk, need for<br />
achievement, need for independence and innovativeness.<br />
A first condition to confirm convergent validity in loading is that it should be significant (all the critical<br />
ratio > 1.96), and all standardized factor loading should be more than .50 (Janssen et al., 2008).<br />
Table 3 shows that all items exceed the critical ratio at the 0.05 level of significance and all loading<br />
are more than 0.5. The range of the critical ratio is 7.737 to 13.237. Both the standardized factor<br />
loading and critical ratio indicate good convergent validity.<br />
Table 3: Factor loading, construct reliability and AVE for the proposed model<br />
Latent variable Items Standardized<br />
Factor<br />
Loading<br />
Entrepreneurial<br />
intention<br />
Entrepreneurial<br />
self-efficacy<br />
Propensity to take<br />
risk<br />
Need for<br />
independence<br />
Need for<br />
achievement<br />
Y1<br />
Y2<br />
Y3<br />
Y4<br />
Y5<br />
X1<br />
X2<br />
X3<br />
X4<br />
X5<br />
X6<br />
X7<br />
X8<br />
X9<br />
X10<br />
X11<br />
X12<br />
X13<br />
X14<br />
X15<br />
Innovativeness X16<br />
X17<br />
X18<br />
X19<br />
.564<br />
.707<br />
.849<br />
.792<br />
.605<br />
.772<br />
.665<br />
.784<br />
.650<br />
.590<br />
.823<br />
.702<br />
.715<br />
.774<br />
.778<br />
.560<br />
.700<br />
.670<br />
.712<br />
.755<br />
.564<br />
.689<br />
.731<br />
.833<br />
960<br />
T-value P Construct<br />
Reliability<br />
(CR)<br />
10.604<br />
10.281<br />
8.723<br />
9.641<br />
11.476<br />
13.237<br />
10.740<br />
10.186<br />
9.544<br />
9.645<br />
10.443<br />
8.427<br />
7.733<br />
7.917<br />
8.232<br />
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The AVE estimate is the average amount of variation that a latent construct is able to explain in the<br />
observed variables to which it is theoretically related. A good rule of thumb is an AVE of .5 or higher<br />
indicates adequate convergent validity (Hair et al., 2010). An examination of the results reveals that<br />
all constructs met the 0.50 criterion.<br />
Construct (composite) reliability means that a set of latent indicators of constructs are consistent in<br />
their measurement. The rule of thumb for a construct reliability estimate is that .7 or higher suggests<br />
good reliability (Hair et al. 1998). As it can be seen in the table 4, all constructs had a construct<br />
reliability value higher than the recommended level of 0.70 (Hair et al., 1998).<br />
Discriminant validity compares the average variance extracted (AVE) estimates for each constructs<br />
with the squared inter-construct correlations (SIC) associated with that constructs. In general (as a<br />
rule of Thumb), all AVE estimates should be larger than the corresponding SIC (Fornell & Larcker,<br />
1981). As can be seen in Table 4, the average variance that was extracted, ranging from 0.50 to 0.56,<br />
is greater than the squared correlations of the six constructs, which falls to between 0.051 and 0.385.<br />
This means the indicators have more in common with the construct they are associated with than they<br />
do with other constructs (Fornell and Larcker, 1981). Therefore, the results have demonstrated<br />
evidence of discriminant validity for the study constructs.<br />
Table 4: Correlations and squared correlation between the dependent and independents variables<br />
Measures Mea<br />
n<br />
entreprene<br />
urial<br />
intention<br />
Entreprene<br />
urial selfefficacy<br />
Propensity<br />
to take risk<br />
Need for<br />
achieveme<br />
nt<br />
Need for<br />
independen<br />
ce<br />
Innovativen<br />
ess<br />
S.D<br />
.<br />
4.95 1.3<br />
7<br />
4.12 1.3<br />
2<br />
3.91 1.5<br />
5<br />
5.10 1.1<br />
3<br />
5.64 1.0<br />
5<br />
4.77 1.1<br />
5<br />
AVE entrepreneur<br />
ial intention<br />
.51<br />
6.4.4 Nomological validity<br />
1<br />
.56 0.552<br />
(.304)<br />
.51 0.227<br />
(0.0515)<br />
.51 0.561<br />
(0.314)<br />
0.50<br />
4<br />
0.352<br />
(0.1239)<br />
.50 0.513<br />
(0.263)<br />
Entrepren<br />
eurial<br />
selfefficacy<br />
1<br />
0.192<br />
(.0368)<br />
0.493<br />
(.243)<br />
0.352<br />
(0.0635)<br />
0.621<br />
(0.385)<br />
Propensi<br />
ty to take<br />
risk<br />
1<br />
0.226<br />
(.0492)<br />
0.189<br />
(0.051)<br />
0.228<br />
(0.0519)<br />
Need for<br />
achieve<br />
ment<br />
1<br />
0.492<br />
(0.242)<br />
0.555<br />
(0.308)<br />
Need for<br />
independenc<br />
e<br />
1<br />
0.483<br />
(0.233)<br />
Innovativen<br />
ess<br />
Nomological validity examines whether the correlations between the constructs in the measurement<br />
theory make sense. The construct correlations are used to assess this validity. The results support the<br />
prediction that all correlations between the six constructs are positive and significant.<br />
6.4.5 Assessment of structural model<br />
The structural model was tested using the six latent variables (constructs) and 24 observable<br />
indicators obtained through the CFA. The structural model includes the hypothesized relationship<br />
between latent constructs in the research model. As shown in Figure 2, the overall goodness of fit<br />
statistics shows that the structural model fits the data well.<br />
By using path coefficient and its corresponding t-value, we can test the null hypothesis for each path<br />
coefficient. Table 5 shows the coefficient of each hypothesized path (see Figure 2) and its<br />
corresponding critical ratio (C.R). It can be seen from this table, the predictive positive effect of selfefficacy<br />
to entrepreneurial intentions is supported (0.307, p < 0.001), which corresponds to the first<br />
research hypothesis. The second hypothesis is also supported, that is the need for achievement has<br />
a positive effect on entrepreneurial intentions (0.306, p < 0.05). Nevertheless, there was a lack of<br />
support for a positive relationship between the propensity to take risk and student’s entrepreneurial<br />
intentions. The results also show that need for independence and innovativeness don’t have a<br />
statistically significant influence on students’ entrepreneurial intentions. Hypothesized model also<br />
proposes that innovativeness exerts an indirect effect on intentions through self-efficacy. Overall, the<br />
961<br />
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Saeid Karimi et al.<br />
results in indicate that the exogenous variable (innovativeness) has indirect effects on entrepreneurial<br />
intention. This result therefore suggest that the endogenous variable, self-efficacy, provide mediating<br />
effects on entrepreneurial intention relationships. The model explained 40% of the variance in the<br />
entrepreneurial intentions and 45% of the variance in the entrepreneurial self-efficacy.<br />
It is worthy to note that none of the alternative models (indirect paths from the other factors except<br />
innovativeness to entrepreneurial intentions) fit the data well and they did not meet the goodness-of-fit<br />
criteria. That is, entrepreneurial self-efficacy did not mediate the relationships between the other<br />
characteristics and entrepreneurial intentions<br />
Table 5: Results of the structural equation modeling<br />
Variables Estimate<br />
(βvalue)<br />
S.E. C.R.<br />
(t-value)<br />
Entrepreneurial Intention
Saeid Karimi et al.<br />
Reardon, 2007). While previous theoretical and empirical research has suggested that innovativeness<br />
influences entrepreneurial intentions, this research shows that this relationship largely mediated by<br />
entrepreneurial self-efficacy. Individuals with high belief in their own ability to make new services,<br />
processes, and idea are more confident about their abilities to start up a new business. Therefore, this<br />
finding confirms entrepreneurial self-efficacy can mediate the relationship between certain personality<br />
characteristics and entrepreneurial intentions (Winkle et al., 2011). However, this study could not<br />
provide evidence that need for independence has a significant effect on the students’ entrepreneurial<br />
intentions. This conflicts with the idea that individuals with higher need for independence have higher<br />
intention to start up a new business (Kuratko et al., 1997; Douglas and Shepherd, 2002). Individualist<br />
cultures emphasize one’s independence from others (Triandis, 1994) whereas Iran has a collectivistic<br />
culture (House et al., 2004) and It maybe need for independence does not have a strong effect on<br />
entrepreneurial intentions in this kind of culture. Moreover, this study could not find a significant risk<br />
propensity on entrepreneurial intentions. This finding is in line with the results of Douglas and<br />
Fritzsimmons (2007, 2008) and Busenitz & Barney (1997), who found that there is no statistically<br />
significant relationship between risk taking and intention. However, it is not consistent with the<br />
findings of Gurel et al., (2010) and Yusof et al. (2007). Some researchers argue that risk propensity is<br />
a weak predictor of entrepreneurial behaviours because individuals have biases in the way they<br />
perceive risks given an event. That is, they may choose to take risks because they downplay the risk<br />
associated with the activity (e.g., Kahneman & Lovallo, 1993). In some studies, risk perception,<br />
defined as the subjective judgment of the amount of risk inherent in the situation, is accepted as a<br />
better predictor than risk propensity of entrepreneurial behaviour (e.g. Keh et al., 2002; Simon et al.,<br />
2000).<br />
The study provides valuable information and insight for those who formulate, deliver and evaluate<br />
educational policy. The results revealed that the intention to start up a new business is, to some<br />
extent, related to personality characteristics including self-efficacy, need for achievement and<br />
innovativeness. In other words, these characteristics are useful and significant means to comprehend<br />
the students’ entrepreneurial intentions. In order to avoid misdirected budgets, policy makers and<br />
university faculty need to identify students with higher level of these characteristics and encourage<br />
them to take part in entrepreneurship programmes. For instance, universities could try to base their<br />
selection process for courses in entrepreneurship partly on information provided by students about<br />
personality characteristics and preferences regarding entrepreneurship.<br />
In addition, educational programs should be seeking to foster and develop the above cited<br />
characteristics in all students. Several scholars claim that entrepreneurial self-efficacy (Wakkee et al.,<br />
2008; Rae and Carswell, 2000; Erikson, 2003), need for achievement (Hansmark, 2003), and<br />
innovativeness are considered to be learned characteristics, which can be changed and developed (to<br />
some extend) over time. According to Kirby (2004), most entrepreneurial characteristics can be<br />
developed in students, but we cannot develop them by using the traditional teaching methods. We<br />
should change not only what is taught but how it is taught. While in Iranian higher education, the<br />
application of content and new pedagogical methods that are best to development of entrepreneurial<br />
intentions and competencies is not so prevalent. According to Yaghoubi (2010), for instance, existing<br />
curriculum in higher agricultural education of Iran has not been successful in developing<br />
entrepreneurial competencies of students. He reports that inappropriate teaching methods,<br />
inappropriate educational content and syllabus, and inappropriate evaluation system are the important<br />
barriers to entrepreneurship promotion in this sector. Moreover, only few universities offer<br />
entrepreneurship courses for their students. In addition, unstable economic and political conditions<br />
discourage students from entrepreneurial activities. Under these conditions, we cannot expect good<br />
results from entrepreneurship education regarding development of entrepreneurial intentions and<br />
characteristics. .<br />
As a developing country with more than 2.5 million unemployed people that about 30 per cent of them<br />
are university graduates (Karimi et al., 2010), Iran must increase the focus of its higher-educational<br />
programs on entrepreneurial strategies, contents, and pedagogical methods and develop an<br />
entrepreneurial climate and culture at universities and society. Furthermore, Iran must create more<br />
stable economic and political conditions favourable to entrepreneurial activities. Such measures can<br />
process university graduates from job seekers into job creators and improve Iran’s economy.<br />
The findings of this research contribute to the growing body of literature on students’ entrepreneurial<br />
intentions and entrepreneurial characteristics. However, this study is not without its limitations. The<br />
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Saeid Karimi et al.<br />
sample of this study is on Iranian public universities using students in entrepreneurship courses.<br />
Future studies could include both Iranian public and private universities and other institutions so larger<br />
sample could be used to validate the findings in the present study. Furthermore, we have focused on<br />
personality traits as causes of the intention. However, entrepreneurial characteristics cannot be<br />
isolated from cultural, social, economic, political, demographical, and technological factors that<br />
surround a person. Therefore, it is strongly suggested to consider the impacts of such factors on<br />
entrepreneurial characteristics and intentions in the further studies. In this study, we examined the<br />
mediating role of self-efficacy in the relationship between innovativeness and entrepreneurial<br />
intentions. Self-efficacy can also mediate the effects of other entrepreneurial characteristics such as<br />
risk taking (e.g. Zhao et al., 2005). We encourage future research to examine the mediating role of<br />
self-efficacy in the relationship between other factors and entrepreneurial intentions. Future studies<br />
need to be longitudinal, and need to focus on the influences entrepreneurial characteristics on startup<br />
behaviours and success at business creation.<br />
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966
An Investigation into Small Business Activities of Croatian<br />
Migrants in Australia<br />
Miro Ljubicic¹, John Breen¹ and Santina Bertone²<br />
¹Victoria University, Melbourne, Australia<br />
²Swinburne University of Technology, Melbourne, Australia<br />
mljubicic@kangan.edu.au<br />
John.Breen@vu.edu.au<br />
sbertone@groupwise.swin.edu.au<br />
Abstract: Research by Global Entrepreneurial Monitor (GEM) states that around 12% of the world’s adult<br />
population aged between 18 and 64 are active entrepreneurs (GEM, 2002). In global terms the number of<br />
minorities entering the entrepreneurial arena has increased significantly (Levent et. al., 2006). These minority<br />
groups are a significant contributor to the economic growth and development at all levels of the world economy.<br />
Research also reveals that 98% of the businesses in Australia are small to medium enterprises that have<br />
contributed significantly to the economy of Australia. Around 33% of these small to medium enterprises are<br />
owned by first generation immigrants, either English or Non-English speaking background (ABS, 2006).<br />
Croatians form one of the larger ethnic communities in Australia (Kipp, Clyne and Pauwels, 1995; Collins, 1989),<br />
but are often left out in Australian migration research in particular when it comes to their involvement in<br />
entrepreneurial business activities. Semi-structured interviews were conducted with small to medium business<br />
operators at the beginning of this year (2011) and case studies were prepared describing entrepreneurial<br />
motivations and successes of small business owners of Croatian descent in Australia, the impact of such<br />
behaviours on business performance, and reports on applicability of existing social theories of ethnic<br />
entrepreneurship to Croatian entrepreneurial involvement. Specific questions have been explored such as,<br />
whether Croatian business start-ups stem from observing others in business, and if professional, more skilled<br />
migrants, arriving here in the 1990s, have greater or lesser propensity towards self-employment than less skilled<br />
migrants, arriving as Displaced Persons in the 1960s.<br />
Keywords: Croatian, ethnic entrepreneurship, Australia, ethnic business motivation, Croatian culture<br />
1. Introduction<br />
Small business comprises a significant component of the national economic activity and employment<br />
in Australia. Businesses operated by migrants have played an important role in this sector particularly<br />
adding to the value of Australian exports, often through their dealings with the home country of the<br />
business owners (Collins, 1997). The contribution of the ethnic small business operator is a topic of<br />
international interest. The fact that studies have been conducted in several countries underlines the<br />
importance of ethnic business activities and the need to understand the nature and level of<br />
entrepreneurial operations within the ethnic communities (Theophanous, 1996).<br />
Much of the literature focuses on those with strong ethnic group affiliations and those groups<br />
exhibiting high entrepreneurial participation rates and, explains entrepreneurial outcomes on the basis<br />
of those groups. Research has not yet established a defensible clear-cut theoretical basis why<br />
different ethnic groups have different propensities towards entrepreneurship.<br />
Entrepreneurial characteristics like personal traits/skills, the need for achievement, self-confidence,<br />
risk-taking aptitude, knowledge of the market, and creativity are different for people from different<br />
parts of the world and each country has its own norms and values. Hayton et al. (2002) and<br />
Hechavarria and Reynolds (2009) are of the view that cultural values usually reflect the degree to<br />
which a society considers entrepreneurial behaviours such as risk-taking to be desirable and<br />
promoting innovation and creativity. According to Carsrud et al. (2006) and Pruett et al. (2009) some<br />
societies tend to be more supportive of entrepreneurial activities than others, and they suggest that<br />
the degree of entrepreneurial intention is related to national culture.<br />
The Census in 2006 recorded 51 000 Croatian-born people in Australia of which an unknown number<br />
are self-employed, and there is little known about their contribution to the Australian economy.<br />
This paper attempts to address this knowledge gap by gathering data about the background,<br />
motivations, financing and performance of Croatian small businesses in Australia. It focuses on the<br />
factors that stimulate entrepreneurship among Croatians, the reasons why they decide to be self-<br />
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Miro Ljubicic, John Breen and Santina Bertone<br />
employed, the consultative support that they receive and the factors that influence the degree of their<br />
business success.<br />
The paper commences with a review of some of the significant literature pertaining to Croatian<br />
migration, and different theoretical views applicable to ethnic entrepreneurship. This is followed by<br />
the research methodology, a description of the findings and finally a discussion of the implications.<br />
1.1 Literature<br />
1.1.1 Croatian migration<br />
Migration has been a constant feature of human life since the earliest times. Migrants are an agent of<br />
social change in society and that affects emigrant and immigrant society. The consequences can be<br />
seen in economic, social, cultural and political life. Nations that exhibit a western style of living, like<br />
Australia and America, have welcomed millions of migrants into their arms to assist. The Croats were<br />
part of that world migration after World War I and significantly after World War II.<br />
Croats left their native land due to a profound dissatisfaction with Croatian economic and political life,<br />
and most of them saw no other means but to leave their birthplace<br />
. Migrants are very<br />
important part of the work force and they have contributed to the stable economic development of<br />
Australia. Socially, they often held poorer jobs regardless of their education because they were<br />
without social networks < http://www.croatiasa.com/page/63/>. The most visible and recognizable<br />
contributions are the cultural ones, but this too can produce misunderstandings. Migrants are<br />
continually changing themselves while also helping to reshape the new society.<br />
In the 19 th Century, the wine industry in the Croatian coastal region known as Dalmatia was hit by a<br />
disease called ‘phylloxera’, this prompted many Croatians to leave their homeland in search of a<br />
better life. The strong hostilities towards the Austro-Hungarian regime also led many Croatians to<br />
migrate to Australia in the 19 th Century. In the 1850s it was observed that some Croatian migrants<br />
were engaged in the Victorian gold fields (ABS, 2001).<br />
The Second World War contributed to mass exits of “Yugoslavs” and most of those settled in<br />
Australia. In socialist Yugoslavia, 1943-1991, official designation for those who wanted to declare<br />
themselves that way was with quotation marks, "Yugoslavs" (introduced in census 1971). A few years<br />
before the dissolution of Yugoslavia, most of those who declared themselves "Yugoslavs" reverted to<br />
or adopted the more local nationalities such as "Muslims" (in the sense of nationality), Croats,<br />
Macedonians, Montenegrins, Serbs and Slovenes. There were a number of different schemes under<br />
which migration to Australia took place; one of them was ‘Displaced Persons’, which many Yugoslavborn<br />
used to migrate to Australia (Hills 1990). Yugoslavs continued to grow in numbers throughout<br />
the 1960s and 1970s reaching more than 160 000 by the 1991 Census.<br />
The conflict of the 1990’s in the former Yugoslavia was another cause for Croatians to leave and look<br />
for refuge in the West. Conflict at that time forced many to leave and almost 30 000 people managed<br />
to escape and settle in Australia (Theophanous, 1996). The scheme that this group of migrants took<br />
advantage of was ‘Australia's Humanitarian program’. In 2001 more than 51 860 Croatia-born people<br />
were listed in Australia (ABS, 2001), and this number makes up around 1.3 per cent of total overseasborn<br />
people. This number dropped slightly according to the Census in 2006, a slight decrease of 1.7<br />
per cent.<br />
Croatian migrants in the post-World War II period worked in various government utilities in a variety of<br />
laboring and unskilled jobs. Many skilled professionals among them e.g. doctors, lawyers and<br />
engineers found that their professional qualifications were not recognized in Australia <<br />
http://www.croatiasa.com/page/63/>. For that reason they took up laboring work and, rebuilt their<br />
lives, elevated their families, and supported to the development of the Australian economy.<br />
968
2. Theories of Ethnic entrepreneurship<br />
Miro Ljubicic, John Breen and Santina Bertone<br />
There are many theories used to explain the differences among the various ethnic groups’<br />
involvement in entrepreneurial activities (Greene and Owen, 2004). These explanations are drawn<br />
from the literature about ethnic groups that demonstrate a high level of involvement in entrepreneurial<br />
activities (Wilson and Portes, 1980). The reasons supporting such decisions concerning entrance into<br />
business are significant and are of interest to researchers. Some theories have emphasized financial<br />
gain as the main motivation factor for most prospective entrepreneurs (Bonacich and Modell, 1980),<br />
however, it is clear that financial gain is not the only motivating factor. Outlined below are some of the<br />
theories explaining motivations behind ethnic groups participation in small business.<br />
2.1 Cultural theory<br />
This theory emphasises the availability of cultural resources as a primary cause of success in the<br />
establishment of a small business. The theory is considered valuable due to the significance that it<br />
attributes to the linkage between the unique cultural attributes of the immigrants and the<br />
entrepreneurial competence in the small businesses (Williams, 1987). According to this theory the<br />
economic environment in which an immigrant’s business operates is not as important as a<br />
contributory success factor as the individual’s character, shaped by the situations in the country of<br />
origin.<br />
Establishment of specified ethnic minority firms is often as a result of acquired historical practices<br />
strengthened by the possibilities of receiving newcomers, and synergy from the members of the ethnic<br />
group (Hills, 1990).<br />
Culturist explanations of why people start their own businesses point to distinctive cultural features<br />
and values of different ethnic groups (Light, 1980). Those features may be dedication to hard work,<br />
membership of a strong ethnic community, economical living, acceptance of risk, compliance with<br />
social value patterns, solidarity and loyalty, and orientation towards self-employment. Different ethnic<br />
cultures stress such qualities as self-sufficiency and carefulness in the host country, prompting<br />
members of the community towards self-employment. Similarly, strong family structures in many<br />
ethnic cultures, such as Croatians, may assist access to resources such as family capital, family<br />
labour as well as free information and advice if some family members are already in business or are<br />
professionally trained as solicitors or accountants.<br />
The traditional cultural links and contacts are usually very significant for the successful running of the<br />
majority of businesses. Immigrant ethnic groups may also have inherited business traits and<br />
experience acquired from their countries of origin, enabling them to move quickly from low paying jobs<br />
to businesses (Ward and Jenkins, 1983). The economic environment seems to be completely<br />
excluded by this view (Waldinger, Aldrich & Ward, 1990).<br />
2.2 Middle man minority theory<br />
Many social scientists disagree over the way middleman minorities are defined. However, based on<br />
the work of many scholars who have contributed to the development of middleman minority theory<br />
(Bonacich, 1973; Bonacich and Modell, 1980; Turner and Bonacich, 1980; Porter, 1981) the<br />
middleman minority group usually concentrates in small business, provides services to minority<br />
customers, depends on larger corporations for supply of merchandise, has a strong ethnic cohesion<br />
and is subject to stereotyping.<br />
The Middleman minority theory provides the explanation that, a minority group arrives in a geographic<br />
location where they are a recognizable minority, and as such develops enterprises that are located<br />
within the ‘middle’ of the economic system. First of all, this group faces discrimination from the<br />
majority group, in particular with regard to economic opportunities in the primary sector of the labour<br />
market and secondly, they tend to develop enterprises located in specific industrial sectors as the<br />
middleman. They negotiate products between producer and consumer and thirdly, this group exhibits<br />
strong elements of solidarity among its members. The middleman minority theory makes an<br />
assumption that many immigrants start out as temporary residents in a host country and that they plan<br />
on returning to their home country (Bonacich and Modell, 1980). The immigrant’s main goal in the<br />
country is to make money quickly to either send back home to his or her family or to take back with<br />
him or her upon returning home. According to Bonacich, (1973), immigrants who are self-driven are<br />
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Miro Ljubicic, John Breen and Santina Bertone<br />
inclined to seek self-employment in industries where start-up costs are relatively low, where<br />
competition is minimal, where capital can be raised quickly, and where assets can be easily liquidated<br />
and turned into cash.<br />
2.3 Ethnic enclave theory<br />
An ethnic enclave retains some cultural distinction from a larger, surrounding area. The formation of<br />
ethnic enclaves may be involuntary, due to ethnic or racial tensions. This may be because of housing<br />
discrimination that prevents members of ethnic or religious minorities from settling in other parts of<br />
town.<br />
Ethnic Enclave theory is an extension of middleman minority theory that adds the element of<br />
geographic concentration. If a small business owner is residing and owns business in physical<br />
proximity to their minority group, ethnic enclaves present strong cultural and economic linkages as<br />
well as physical concentration. Successful establishment and maintenance of immigrant enclaves<br />
calls for adequacy in capital and basic entrepreneurial skills. This is in addition to the availability of a<br />
regular and sustainable supply of enclave labour. The low wage for immigrants is a catalyst that has<br />
led to expansion of these enclaves with the consequent effect of creation of the opportunities<br />
necessary for economic development. An Ethnic enclave is therefore regarded by many as a resultant<br />
feature of the growth in the small business enterprises (Waldinger, 1986).<br />
Enclave theorists believe that those congregating in the enclave share cultural codes and expand<br />
trust. Business people are often likely to help others start up as they were themselves helped (Min,<br />
1988). Castles et al. (1989) studied small businesses in Sydney and found that ethnic small business<br />
catered for the population as a whole and had business links with non-ethnic firms.<br />
2.4 Blocked mobility theory<br />
This theory suggests that one of the reasons why non-English speaking background (NESB)<br />
immigrants become self-employed is their response to racialized blocked mobility. Potential business<br />
owners are faced with affective prejudice and discrimination and numerous obstacles to the<br />
recognition of their qualifications, obtained in their homeland, thus preventing them from being able to<br />
fully utilize their skills (Stromback and Malhotra, 1994; Lever-Tracy, Kitay, Philips & Tracy, 1991).<br />
Discrimination has denied a large proportion of immigrant groups the opportunity to make a living from<br />
the jobs offered within the mainstream economy, leaving them with the undesirable manual jobs and<br />
poor wages (Marceau, 1989). This theory is of particular relevance to Australia, for it links the<br />
available economic opportunities to the economic resources at the disposal of a given ethnic group.<br />
Blocked mobility theory also suggests that most immigrants have significant disadvantages hampering<br />
them upon arrival but which at the same time steer their behavior (Fregetto, 2004). Firstly, they lack<br />
human capital such as language skills, education and experience, which prevent them from obtaining<br />
salary jobs, leaving self-employment as the only choice. Secondly, a lack of mobility due to poverty,<br />
discrimination and the limited knowledge of the local culture, can lead ethnic minorities to seek selfemployment.<br />
This theory sees entrepreneurship not as a sign of success but simply as an alternative<br />
to unemployment (Collins et. al 1995).<br />
3. Research methodology<br />
This study is of an exploratory nature and the primary research method was in-depth semi-structured<br />
interviews. The in-depth interview is a technique designed to elicit a vivid picture of the participant’s<br />
perspective on the research topic. Researchers engage with participants by posing questions in a<br />
neutral manner, listening attentively to participants’ responses, and asking follow-up questions and<br />
probes based on those responses. They do not lead participants according to any preconceived<br />
notions, nor do they encourage participants to provide particular answers by expressing approval or<br />
disapproval of what they say (Veal, 2005).<br />
The subjects of the research were relatively few in number, the information obtained from each<br />
subject was expected to vary considerably and each interview was a ‘story’ in its own right. The<br />
interviews were conducted on the basis of a detailed questionnaire used as the basis for semistructured<br />
and open-ended questions by the interviewer. This method offered the advantage of<br />
ensuring that all issues were followed up. The interviews were semi structured allowing the<br />
interviewee to determine the level of detail they wanted to share with the interviewer. Occasional<br />
navigates were used, when needed within the interviews, in order to bring interviewee back to the<br />
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Miro Ljubicic, John Breen and Santina Bertone<br />
basic principles of the research. This enabled the interviewee to define their own reality in respect of<br />
their life experiences, and not frame these within the expectations of the researcher.<br />
A total of thirty interviews were conducted with small business operators from a Croatian background,<br />
located in two major Australian cities, Melbourne and Adelaide. One of the main difficulties of<br />
conducting this research was the absence of a comprehensive and reliable database of Croatian<br />
businesses in Australia. The introductions to the Croatian small business interviewees came from a<br />
range of sources including Chambers of Commerce, government small business agencies, and ethnic<br />
community groups, as well as introductions from the Croatian consulate.<br />
4. Findings and discussions<br />
4.1 Background of the migrants:<br />
The Croatian migrants interviewed for this study arrived in Australia at varying times, some as recently<br />
as the 1990s, while others arrived in the late 1960s and early 1080s. The more recent migrants, were<br />
more likely to be refugees, and had completely different social backgrounds from the earlier migrants.<br />
Most of them came under the “Australian Humanitarian Assistance” scheme introduced in 1991 and<br />
their nominated reason for migrating to Australia was escaping the war back home. Interviews<br />
revealed that most of those that came after 1990 had completed secondary school in Croatia while<br />
two had studied at a university. The emerging profile of this group is predominantly male, aged thirty<br />
or older with secondary school completed and most of them came with their family. This profile is<br />
consistent with the findings of Colic-Peisker & Walker (2003).<br />
The majority of migrants, who arrived during the first wave, in 1960s, originated from rural regions and<br />
were mostly unskilled workers who did not finish secondary school. The lack of education does not<br />
seem to have been a barrier to them gaining employment. Further this lack of formal education did<br />
not have any negative effect on their ability to run a business, and in fact some of them are now quite<br />
successful entrepreneurs. Upon arrival in Australia many of the migrants had very little knowledge of<br />
English, yet they generally had few problems in finding jobs.<br />
4.2 Commencing business in Australia:<br />
It was common for the interviewees to wait for some time before starting their own venture, averaging<br />
about eight years before their business start-up. This period was generally related to their need to<br />
become accustomed to their new location and to find employment in Australia. Most found<br />
employment in semi-skilled occupations and manufacturing industries and stayed in that job for some<br />
time before deciding to take any risk associated with commencing a new business. As they became<br />
more financially independent and more proficient in English, many started their own businesses and<br />
were strongly represented in the building, construction, manufacturing and service industries. Only<br />
three interviewees had previous experience in running a business, one of them had his own business<br />
in retailing and other two were managing someone else’s enterprise. The bulk of early settlers came<br />
from rural regions of Croatia where their survival depended on farming, so they had some exposure to<br />
monetary independence. Interviewees were questioned about the factors that influenced their<br />
decision to go into business and their responses were categorised as per table below.<br />
Table 1: Factors that influenced their decision to go into business<br />
Influence Number of responses<br />
Could not get salaried job 2<br />
Discrimination in labour market 2<br />
Salaried job underpaid 4<br />
Previous business experience 1<br />
Wanted independence 18<br />
Saw a business opportunity 18<br />
Wanted to better myself financially 24<br />
Easy to set-up 26<br />
Low risk 27<br />
Worked in this field 28<br />
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Miro Ljubicic, John Breen and Santina Bertone<br />
Table 1 indicates that the greatest influence on the decision to go into business among self-employed<br />
Croatian immigrants was because they worked in the same line of business. A second influence was<br />
that they felt they were able to take advantage of the low risk and low cost of setting up in a known<br />
sector. Thirdly many indicated that they wanted to better themselves financially, and fourthly they<br />
were able to take advantage of a business opportunity that they had identified. There was also a need<br />
for independence expressed by a majority of those interviewed. There was very little evidence of<br />
discrimination in the labour market or difficulties in accessing suitable employment that forced them<br />
into business.<br />
All entrepreneurs consulted with their inner family circle for business advice, some of them also had<br />
consultation with people in the same line of business. None of them had any consultation with either<br />
banks or accountants and some of them had never heard of any training organisations that provide<br />
support for business start-ups. Most of them used their own personal funds for their business startups,<br />
some of them were assisted by family members and very few approached banks for support.<br />
4.3 Business performance<br />
Croatian <strong>Entrepreneurs</strong> established themselves in a variety of industries and became particularly<br />
prominent in building, construction, service industries, and hospitality. Almost all had at least one<br />
family member working with them, either as an employee or a partner in business. Six of those<br />
interviewed were solo operators or one man businesses, while others employ in excess of ten people.<br />
Most of the businesses are located around the major cities in Australia. On average the businesses<br />
that we interviewed had been operating for twelve years.<br />
Out of the thirty businesses owners interviewed only three of them are scaling down due to their<br />
business underperforming, all others were either in a good or excellent financial state. More than half<br />
of those we interviewed reported their businesses had grown by 20 to 30 precent in the last five<br />
years, and others are just holding because they are a ‘one man shop’ and not wanting to employ<br />
anyone. Those that are in building/construction indicated that interest rates seemed to be the main<br />
concern yet others were hesitant in stating any cause of business pressure.<br />
5. Conclusions<br />
This paper has attempted to investigate many aspects of entrepreneurial behaviour among Croatians<br />
in Australia, based on interviews with 30 Croatian-migrant owned small businesses.<br />
Firstly, we explored two groups of arrivals with different education backgrounds. Migrants that arrived<br />
before the 1990s came from rural areas of Croatia and had some or no education upon arrival. Many<br />
migrants that entered our shores after 1990 had at least secondary school completed and some had a<br />
university degree.<br />
We also investigated the extent to which entrepreneurial entry into certain types of business like<br />
building and hospitality is influenced by copying others in the same line of business or the presence of<br />
family and community members in the same line of business. Our findings indicate that this is the<br />
case and this seems to be very consistent to the reasoning of Shinnar & Young (2008). The majority<br />
of interviewees indicated that working in the same line of business helped them to learn the tricks of<br />
the trade. The vast majority of those interviewed said that they were motivated by the desire for<br />
independence and financial prosperity. It is clear, however, that interviewees consider independence<br />
and financial prosperity to be important and are motivated by economic as well as non-economic<br />
reasons. Our research suggests that Croatian entrepreneurial entry depends quite significantly on the<br />
access to internal or informal rather than formal sources of advice and finance. The type of business<br />
chosen is influenced by previous experience and a perception of the business being relatively easy to<br />
enter and operate, gained from community members in the same line of business. It also indicates the<br />
crucial role played by informal networks of advice, information and finance, in determining the nature<br />
of entrepreneurial entry. The observed differences in motivation for entering self-employment do not<br />
appear to have any lasting effect on the degree of business success since our results indicate no<br />
strong evidence of differences in success based on year of arrival. To conclude, this paper has<br />
attempted to contribute towards a better understanding of the nature and significance of Croatian -<br />
owned small businesses in Australia. It highlights the key role played by informal (family and<br />
community) sources of advice, finance and information in stimulating entrepreneurial entry among<br />
members of this ethnic minority group in Australia. The fact that Croatians invest a substantial<br />
972
Miro Ljubicic, John Breen and Santina Bertone<br />
proportion of their own capital in a competitive and unfamiliar environment speaks volumes for their<br />
risk taking and entrepreneurial soul.<br />
It is valid to suggest that Croatians enter self-employment because they seize the opportunity as it<br />
arises. Our small study suggests that there was very little evidence of workplace discrimination which<br />
indicates that there was very little evidence of blocked mobility as the driver of their business activity.<br />
All of the above points to distinctive cultural features and values like; dedication to hard work, access<br />
to family capital and labour as well as free information and advice which are the characteristics of<br />
culturist explanations as to why people start their own business (Light 1980).<br />
This small exploratory study of one ethnic group is limited in its ability to generalise the findings to<br />
other ethnic groups and the broader population. However it does provide some direction for policy<br />
makers. There is a potential benefit in designing generic programmes aimed at increasing<br />
entrepreneurship among ethnic minority groups. In addition the traditional distrust of banks and other<br />
financial institutions among ethnic groups, which is partially alleviated by the greater use of family and<br />
friends’ resources, suggests that policies which educate to remove this distrust will help to provide<br />
access to a greater pool of funds for potential entrepreneurs.<br />
This study while exploratory provides a starting point for further research by identifying some findings<br />
regarding the effect of ethnicity on entrepreneurship. Further comparative qualitative studies would in<br />
particular be useful for studying the subject in more detail, and attempting to confirm or further<br />
investigate the suggested findings of this study.<br />
References<br />
Australian Bureau of Statistics (ABS), (2006) Census on Small Business in Australia, Canberra: ABS<br />
Publications.<br />
Australian Bureau of Statistics (ABS), (2001) Census of Population and Housing, Canberra: ABS Publications.<br />
Baycan Levent, T., Masurel, E. and Nijkamp, P. (2006) ‘Gender differences in ethnic entrepreneurship’,<br />
International Journal of <strong>Entrepreneurs</strong>hip and Innovation Management 6(3): 173-190<br />
Bonacich, E. (1973) A Theory of Middlemen Minorities, American Sociological Review 38, pp. 583-594.<br />
Bonacich, E. and Modell, J. (1980) The Economic Basis of Ethnic Solidarity: Small Business in the Japanese<br />
American Community, University Of California Press, Berkeley.<br />
Carsrud, A., Brännback, M., Elfving, J., Kickul, J. and Krueger, N. (2006) Florida International University. Pino<br />
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Castles, S., Collins, J., Gibson, K., Tait, D. and Alcorsco, C. (1989) ‘The Global Milkbar and the Local sweet<br />
Shop: Ethnic Small Business and the Economic Restructuring of Sydney’, Report to the office of<br />
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Colic-Peisker, V. and Walker, I. (2003) ‘Human capital, acculturation and social identity: Bosnian refugees in<br />
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Collins, J. (1989) The Migrant Small Business Sector in Australia, Kuring-gai College of Advanced Education,<br />
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Collins, J., Gibson, K., Alcorso, C., Castles, S. and Tait, D. (1995) A Shop Full of Dreams: Ethnic Small Business<br />
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Network Wollongong NSW<br />
Croatian emigrates around the globe!<br />
Viewed 18 March, 2011, .<br />
Croatian Information Centre – Croats In South Australia – A Brief History, viewed on 18 March, 2011, <<br />
http://www.croatiasa.com/page/63/>.<br />
Fregetto, E. (2004) ‘Immigrant and ethnic entrepreneurship: a U.S. perspective, in H.P.’ Welsch (ed.),<br />
‘<strong>Entrepreneurs</strong>hip: The Way Ahead’, New York: Routledge, pp. 253–68.<br />
GEM report 2002, Global <strong>Entrepreneurs</strong>hip Monitor Croatia, What makes Croatians Entrepreneurial, Slavica<br />
Singer et al, pp. 11- 48.<br />
Greene, P. G. and Owen, M. M. (2004). ‘Race and ethnicity’, In W. B. Gartner, (Eds.).<br />
Handbook of entrepreneurial dynamics : the process of business creation, pp. 26-<br />
38. Thousand Oaks : Sage.<br />
Hayton, J.C., George, G. and Zahara, S.A. (2002) ‘National culture and entrepreneurship: a review of behavioural<br />
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Hechavarria, D. and Reynolds, P. (2009) ‘Cultural norms & business start-ups: the impact of national values on<br />
opportunity and necessity entrepreneurs”, International <strong>Entrepreneurs</strong>hip Management Journal, Vol. 5, pp.<br />
417–437<br />
Hills, G. (1990) ‘Profile, Characteristics, Success Factors and Marketing in Highly Successful Firms’, Frontiers in<br />
<strong>Entrepreneurs</strong>hip Research Wellesley, Mass: Babson College.<br />
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Kipp, S,, Clyne, M. and Pauwels, A. (1995) ‘Immigration and Australia’s Language Resources’. Monash<br />
University and National Languages and Literacy Institute of Australia, Canberra: Australian Government<br />
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Lever-Tracy, C. D., Kitay, I., Phillips and Tracy, N. (1991) ‘Asian <strong>Entrepreneurs</strong> in Australia’, Canberra: Australian<br />
Government Publishing Service.<br />
Light, I. (1980) ‘Asian enterprise in America: <strong>Chinese</strong>, Japanese, and Koreans in Small Business’, In<br />
S.Cummings (Ed.) Self-help in Urban America: Patterns of minority ethnic enterprise, 33-57. Port<br />
Washington, NY: Kennikat.<br />
Marceau, J. (1989) Small Manufacturing Enterprises in Australia, Ministry of Employment and Training.<br />
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Pruett, M., Toney, B., Llopis, F. and Fox, J. (2009) ‘Explaining entrepreneurial intentions of<br />
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No. 6, 2009<br />
Shinnar, R.S., and Young, C.A. (2008) ‘Hispanic immigrant entrepreneurs in the Las Vegas Metropolitan Area:<br />
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242-262.<br />
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Origin, Canberra: BIPR/Australian Government Publishing Service.<br />
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Wesley.<br />
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New York University Press, Newark London.<br />
Waldinger, R., Aldrich, H. and Ward, R. (1990) Ethnicity and <strong>Entrepreneurs</strong>hip, Research Paper, Department of<br />
Sociology, University of North Carolina. Sage publications.<br />
Ward, R. and Jenkins, R. (1984) Ethnic Communities in Business: Strategies for Economic Survival, Cambridge<br />
University Press London.<br />
Williams, A.J. (1987) The Characteristics and Performance of Small Business in Australia, 1973-1985, University<br />
of Newcastle, Newcastle.<br />
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974
A Conceptual Framework of the Relationship Between<br />
Values and Small and Medium <strong>Entrepreneurs</strong>’ Export<br />
Intentions<br />
Kim Hoe Looi 1 and Yusniza Kamarulzaman 2<br />
1<br />
Taylor’s Business School, Taylor’s University, Subang Jaya, Selangor,<br />
Malaysia<br />
2<br />
Department of Marketing, Faculty of Business and Accountancy, University of<br />
Malaya, Kuala Lumpur, Malaysia<br />
kimhoe.looi@taylors.edu.my<br />
yusniza@um.edu.my<br />
Abstract: Globalization coupled with advancement in technology and communication present growth and<br />
opportunities for many businesses, including Small and Medium Sized Enterprises (SMEs) to operate<br />
internationally. The current trend of increased international involvement of SMEs on one hand and lack of<br />
academic research concerning their intentions to internationalize is a strong motivation for investigating<br />
International <strong>Entrepreneurs</strong>hip (IE). Scholars in different disciplines had shown much interest in understanding<br />
IE through variety of perspectives and theories. Each discipline mostly focuses only on its own theories and<br />
models, which has limitations in terms of analyzing and understanding entrepreneur from a bigger picture.<br />
Furthermore, there are conflicting results on the influence of cultural values on entrepreneurship due to the<br />
indirect effects of values on intentions and behavior. Although existing literature on international business and<br />
culture suggests the integration of values and intention, there was no empirical study conducted to prove the<br />
relationships to the best of our knowledge. The purpose of this paper is to study the motivation behind<br />
international and domestic small and medium entrepreneurs’ intentions to export to new markets as the<br />
intersection of international marketing, sociology and psychology of entrepreneur, i.e. a multi-disciplinary<br />
approach, which is the essence of entrepreneurship. This paper aims to contribute to the body of knowledge<br />
through the integrative conceptual framework of values (Schwartz et al., 2001), beliefs and intentions in the<br />
Theory of Planned Behavior (TPB) (Ajzen, 1991) for a broader understanding of individual entrepreneur's<br />
motivation to internationalize their businesses. This cross-sectional study will include 400 Small and Medium<br />
sized entrepreneurs from a nationally representative sample of SMEs in Malaysia. Data will be collected in the<br />
form of multiple-item questionnaire answered by individual entrepreneur defined as owner cum manager of small<br />
and medium enterprises drawn from food, beverages and agriculture industries. Structural equation modeling<br />
(SEM) will be employed in this study to test the hypothesized model consisting of latent and observed variables.<br />
If empirical support is found, this conceptual framework will be useful in designing entrepreneurship programmes<br />
and policies at the national level. It is also valuable to form the necessary basis for encouraging and developing<br />
entrepreneurial internationalization activities carried out within the context of SMEs.<br />
Keywords: SMEs, international entrepreneur, values, theory of planned behavior<br />
1. Introduction<br />
Global <strong>Entrepreneurs</strong>hip Monitor (2010) stated that international entrepreneurship contribute to a<br />
nation’s economy as well as its’ competitiveness. However, international marketing is very challenging<br />
for SMEs in view of its complexities and greater uncertainties. This is further complicated by the<br />
generally lack of resources and expertise for the majority of SMEs. Hence, although many SMEs may<br />
be thriving in their home markets but relatively few are successful internationally.<br />
For a small country like Malaysia, the motivations to adapt international orientations should be greater<br />
in line with existing body of literature.<br />
1.1 Internationalization of small and medium enterprises<br />
Factors like globalization, technology and communication advancement, amongst others, has been<br />
cited as facilitating internationalization. At present, internationalization literature is dominated by<br />
economic view and process view (Andersson, 2000) and there are not many investigations into the<br />
entrepreneur who is key decision-maker (Schumpeter, 1959; Reid, 1981; Andersson, 2000) and a<br />
main variable in internationalization of SMEs (Miesenbock, 1988 in Ruzzier et al., 2006). In other<br />
words, entrepreneur’s perspective studies is infrequent in small firm internationalization. Some prior<br />
influential studies on international entrepreneurship discussed culture and entry mode (Kogut and<br />
Singh, 1988), psychic distance (Johanson and Vahlne, 1990), entrepreneur as central factor in firm’s<br />
internationalization (Andersson, 2000) and major areas of interest (McDougall and Oviatt, 2000)<br />
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Kim Hoe Looi and Yusniza Kamarulzaman<br />
SME international entrepreneurs is an important area of research (Lu and Beamish, 2001; Ruzzier et<br />
al., 2006) with its potential significant contributions to the economy of a country (Kelley et al,, 2010).<br />
Global <strong>Entrepreneurs</strong>hip Monitor (2010) declares that IE, together with innovation, can increase<br />
competitiveness of a nation. International entrepreneurship is also an increasingly significant field of<br />
research (Shane and Venkataraman, 2000; Thomas and Mueller, 2000; Dimitratos and Jones, 2005).<br />
Besides that, it is attracting strong academic interest worldwide (McDougall and Oviatt, 2000, 2003<br />
and 2005) as well as is rich in research possibility and research opportunity (McDougall and Oviatt,<br />
2000, 2003; Oviatt and McDougall 2005; Acs et al., 2003). Ruzzier et al. (2006) conclude that since<br />
entrepreneur is the main factor in SME internationalization research, as such international<br />
entrepreneurship should emphasize on entrepreneurs itself. Although evidence shows that<br />
international marketing strategies can enhance competitiveness of a business. However, expanding<br />
business in international markets involves risks that make most small and medium entrepreneurs demotivated<br />
in view of their limited resources and capabilities.<br />
At the same time, the literature suggests that international entrepreneurship is multi-discipline (Oviatt<br />
and McDougall, 2005) as it include amongst others, sociology and psychology (Ireland and Webb,<br />
2007). Bradley (2005) posits that international marketing is both a cultural (i.e. anthropology,<br />
sociology and psychology) and an economic phenomenon. Hence, to arrive at a better understanding<br />
of small and medium international entrepreneurship phenomenon, this study aims to investigate their<br />
motivational drivers to export by utilizing a multi-faceted approach.<br />
2. Literature review<br />
The body of literature clearly shows that cultural values influence behaviors (Keesing, 1974; Berry,<br />
1989; Hofstede, 1991a, 1991b, 2001; Ratner, 1993; Schwartz, 1994, 2003, 2006, 2007, 2009;<br />
Schwartz et al. 2001; Lonner and Adamopoulos, in Berry ,1997; Bardi & Schwartz, 2003; Verplanken<br />
and Holland, 2002 cited in Adams, Licht and Sagiv, 2008; Davidov et al., 2008). It is also well<br />
supported in the literature that cultural values played an important role in shaping entrepreneurial<br />
behaviors (cf. Etzioni, 1987; McGrath et al., 1992; Steensma et al., 2000; Hayton et al., 2002; George<br />
& Zahra, 2002; Bosma and Levie, 2009; Tung and Verbeke, 2010).<br />
On the other hand, many researchers, such as Schumpeter (1959), Davidsson (1995), Madsen and<br />
Servais (1997), McDougall and Oviatt (2000), Thomas and Mueller (2000), McMullen and Shepherd<br />
(2006 in Ireland and Webb, 2007) and Hechavarria and Reynolds (2009), discussed the association<br />
between entrepreneurship and motivation while Schwartz (2009), after two decades of research on<br />
values, contended that values is motivation. Gasse (in Sexton and Smilor, 1986) used the term<br />
cognitive orientations to refer to the attitudes, beliefs and values of the entrepreneur whereas Licht<br />
(2010) used the term ‘entrepreneurial values’.<br />
TPB has received considerable attention in the theoretical and empirical literature. The journals<br />
consulted in the area of international business, culture and entrepreneurship point to the integration of<br />
values and theory of planned behavior (TPB), for example, Engle et al. (2010) suggested future<br />
research on the impact of culture on entrepreneurial intention model, Leung et al. (2005) emphasized<br />
the need for more comprehensive cultural models, Kirkman et al. (2006) proposed cultural valueoutcome<br />
linkages while Hayton et al. (2002) called on future researches to work on a comprehensive<br />
theoretical model of culture and entrepreneur behavior. Further review of the literature found some<br />
similar attempts at both conceptual and empirical level, to investigate the relationship between values<br />
and behavior. These include Entrepreneurial Event Formation (Shapero & Sokol, 1982), culture and<br />
entrepreneurship (Davidsson, 1995), Proposed cross-cultural consumer behavior model (Lee, 2000),<br />
Theoretical model (Karahanna et al., 2005) and link Schwartz value constructs to social behavior<br />
(Leung and Bond, 2004). However, there is not yet any attempt to examine the feasibility of<br />
integrating values and TPB into a single conceptual framework. In addition, no empirical study has<br />
been conducted to investigate the application of this new framework for entrepreneurs in general and<br />
SMEs in particular.<br />
The results of previous TPB studies on entrepreneurship are reviewed in terms of methodology. Most,<br />
if not all, utilized student as sample and this was justified by stating that it is a common practice.<br />
Consequently, most found that subjective norm is not significant in predicting intentions and<br />
eventually dropped from TPB model. This approach is flawed because Ajzen (1991) postulated that<br />
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Kim Hoe Looi and Yusniza Kamarulzaman<br />
all three antecedents of intentions have to be included. Furthermore, Schumpeter (1959) argued that<br />
the action of entrepreneur is constrained by social habits, to different degree. This leads to another<br />
interesting question on whether there are differences in the degree of influence for the three<br />
antecedents of intention in a collective society like Malaysia vis-à-vis an individualistic Western<br />
society where TPB is developed.<br />
Finally, at a broader level, Zahra and Dess (2001) contended that integration is more productive in<br />
entrepreneurship research. George and Zahra (2002) call for future studies to build theory on the<br />
relationship between culture and entrepreneurship and moved on to suggest that theories from<br />
sociology could be fruitfully employed. Dana, Etemad, and Wright (1999 in Dimitratos and Jones,<br />
2005) propose a more holistic and multidisciplinary theoretical approach to research design and<br />
interpretation of results. The present study aims to address this call and fill in the gap in literature.<br />
3. Research issues, research problems, research questions and research<br />
objective<br />
The literature review has highlighted areas that merit further scholarly investigation. Even though it is<br />
well documented in the existing literature on the association between culture and behavior, the<br />
empirical evidences seem to suggest otherwise.<br />
3.1 Research Issue number 1<br />
The primary research problem deals with the small effects of exogenous factors on entrepreneurial<br />
activity as found by Krueger & Carsrud (1993). Similarly, Bond et al. (2004) found a person’s value<br />
priorities often yield unsatisfactory behavior prediction results while Leung et al. (2005) reported the<br />
strength of relationship between culture and individual outcomes is relatively weak. Earley & Singh<br />
(1995) and Kirkman et al. (2006) use the term “black box” to describe this weak relationship.<br />
3.2 Research issue number 2<br />
The secondary research problem concerns the argument put forward by Hofstede (1993, 1994) and<br />
McSweeny (2002) that management theories are not universal. The implication is that the issue of<br />
transferability or applicability of Western entrepreneurship researches or contemporary ethnocentric<br />
management theory came into scrutiny in an Asian context (Steensma et al., 2000; McDougall &<br />
Oviatt, 2000; Thomas & Mueller, 2000).<br />
This study endeavors to address the current gap in entrepreneurship research by answering two<br />
research questions. The principal research question is “What is the relationship between Malaysian<br />
small and medium entrepreneurs’ values and their export intentions?”<br />
The supplementary research question asks “What are the relative importance of attitude, subjective<br />
norm and perceived behavioral control in influencing export intentions of Malay and <strong>Chinese</strong> small<br />
and medium sized entrepreneurs?”<br />
3.3 Research objectives<br />
The current paper concerns the development of a conceptual framework for a causal investigation of<br />
the influence of small and medium entrepreneurs’ values on their export intentions. In other words,<br />
this article aims primarily to propose a theory-driven, multi-disciplinary Malaysian small and medium<br />
entrepreneurship conceptual framework with better explanatory power for the relationship between<br />
values and export intentions.<br />
Additional objective is to compare entrepreneurial values, beliefs and export intentions between Malay<br />
and <strong>Chinese</strong> small and medium entrepreneurs.<br />
The last objective is to provide guidelines to government in the design of social interventions or policy<br />
initiatives to promote export by small and medium entrepreneurs.<br />
4. Development of conceptual framework<br />
4.1 IE Integrative conceptual framework<br />
The current study investigates international entrepreneurship as an intersection of international<br />
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Kim Hoe Looi and Yusniza Kamarulzaman<br />
marketing, psychology and sociology. It is based on the existing theoretical and empirical literature in<br />
international marketing, entrepreneurship, international entrepreneurship, psychology and sociology.<br />
This conceptual framework is integrative, complimentary and more rigorous as it attempted to apply<br />
theoretical and methodological insights from other disciplines (i.e. sociology and psychology) for an<br />
impactful international entrepreneurship studies. Therefore, this approach moves beyond previous<br />
research to provide a broader picture in view of the multi-disciplinary nature of entrepreneurship.<br />
Cultural factor is not controlled in this IE study as it has been directly integrated into the conceptual<br />
framework (Steensma et al., 2000).<br />
The relationship between values and behavior was briefly discussed in the literature review section<br />
but the link between a well-developed, theoretical concept of values to entrepreneurship intentions is<br />
missing. For example, Krueger and Carsrud (1993) argued that exogenous influences (e.g. cultural, a<br />
testable antecedent according to them) usually affect intentions and behavior indirectly, in other<br />
words, through changes in attitude. Besides, Verplanken and Holland (2002 in Licht, 2010) reiterated<br />
that the path from values to intentions is indirect, implying the existence of mediating variables.<br />
Furthermore, Earley and Singh (1995) called to stop using culture as a ‘black box’ and to adopt a<br />
more precise theoretical model that will enable researchers to identify how specific aspects of culture<br />
are related to a phenomena. In addition, Kirkman et al. (2006) recommended future research to<br />
develop or select relevant theories taking cognizant of the underlying dynamics of cultural valueoutcome<br />
linkages, in other words, what individual attributes (e.g. cognitions) might be more proximate<br />
to actions than cultural values? Similarly, Lonner and Adamopoulos (1997 in Berry et al., 1997), in<br />
discussing the indirect influence of culture on the dependent variable(s), believe that there may be a<br />
number of other, more proximal, influences for mental and behavioral activities.<br />
In conclusion, addition of TPB constructs as intervening variables (Ajzen, 1991) (or more proximal<br />
variables as called by some researchers), may significantly alter or enhance our understanding of the<br />
causal relationship between small and medium entrepreneurs’ values and their export intentions.<br />
Figure 1: Overall Conceptual Framework<br />
4.2 Discussion<br />
The following paragraphs discuss more theoretical thrust for the integrative conceptual framework<br />
consistent with extant empirical evidence. Firstly, TPB is suitable for entrepreneurship research<br />
because TPB predicts virtually all human behaviors (Azjen, 1991) and entrepreneurial decisions are<br />
intentional based on evidence in the literature as TPB has been used in entrepreneurship research<br />
(for example, Krueger and Carsrud, 1993; Krueger et al., 2000; Li, 2007; Linan and Chen, 2009;<br />
Engle et al., 2010)<br />
Secondly, the integration of values and TPB meets Aizen’s (www.people.umass.edu/aizen/) criteria of:<br />
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Kim Hoe Looi and Yusniza Kamarulzaman<br />
� Principle of compatibility in terms of target, action, context and time. Interestingly, values and TPB<br />
are also compatible in other aspects. Table 1 below summarizes the compatibility for integrating<br />
values and TPB with respect to unit of analysis; cognition; motivation and behaviour.<br />
� Causal factor, where values provide valuable information about behavioral beliefs, normative<br />
beliefs and control beliefs<br />
� Conceptually independent of TPB’s existing predictors, as can be seen in the definitions of TPB<br />
constructs (Table 2) vis-à-vis value constructs (Table 3) which are independent.<br />
� Applicable to a wide range of behaviors, where values has been used to predict many different<br />
behaviors<br />
Values TPB (Ajzen, 1991)<br />
Individual level (Schwartz, 1994) Individual level<br />
- Cognition (Keesing, 1974)<br />
- Values is cognitive functioning of<br />
entrepreneurs (Gasse, 1982)<br />
- Motivation (Schwartz, 2009)<br />
- Motivational & cognitive processes in<br />
individual level research (Davidsson, 1995)<br />
- Motivating forces of the entrepreneur (Cole,<br />
1942 in Brockhaus, 1982)<br />
Behavior (Schwartz, 2009) Behavior<br />
Table 1: Compatibility of Values and TPB<br />
Cognitive self-regulation<br />
Intention captured motivational factors<br />
Values construct Definition (Schwartz, 2003; 2009)<br />
Self-direction Independent thought and action - choosing, creating, exploring<br />
Stimulation Excitement, novelty and challenge in life<br />
Achievement Personal success through demonstrating competence according to social<br />
standards<br />
Power Social status and prestige, control or dominance over people and resources<br />
Conformity Restraint of actions, inclinations and impulses likely to upset or harm others<br />
and violate social expectations or norms<br />
Tradition Respect, commitment and acceptance of the customs and ideas that<br />
traditional culture or religion provides<br />
Table 2: Definitions of value constructs<br />
TPB Construct Definition (Aizen’s website)<br />
Intention An indication of a person's readiness to perform a given behavior<br />
Behavioral beliefs beliefs about the likely outcomes of the behavior and the evaluations of these<br />
outcomes (See example below)<br />
Normative beliefs beliefs about the normative expectations of others and motivation to comply<br />
with these expectations<br />
Control beliefs beliefs about the presence of factors that may facilitate or impede<br />
performance of the behavior and the perceived power of these factors<br />
Table 3: Definitions of TPB constructs<br />
Thirdly, the existing theoretical and empirical literature provided the theoretical underpinnings for<br />
integration of values and TPB, for example Verplanken and Holland (2002 in Adams, Licht and Sagiv,<br />
2008) proposed a causal relation between values and behavior. Moreover, Verplanken and Holland<br />
(2002 in Licht, 2010) argued that the path from values to behavior is not direct and involves mediating<br />
factors. Lastly, Leung (1989) suggested multiple levels of antecedent variables for cross-cultural<br />
differences for analysis at individual level (see Figure 2). In this model, Leung’s second level<br />
antecedent is supported by Schwartz and Bilsky (1987) and Schwartz (2009) who classified the<br />
universal requirements of human existence into:<br />
� biological organism needs<br />
� coordinated social interaction<br />
� group survival and welfare needs<br />
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Kim Hoe Looi and Yusniza Kamarulzaman<br />
Figure 2: Multiple levels of antecedent variables (Adapted from Leung, 1989)<br />
5. Research methodology<br />
This research will be employing two types of methodology, in that qualitative research will be followed<br />
by quantitative research. A focus group discussion will be carried out as it is the most appropriate for<br />
probing and understanding the insights of SMEs and for investigating topics relating to the perception,<br />
values, facilitating and impeding factors and the experience of SME owners concerning their intention<br />
in exporting. This will be followed with the quantitative data collection in which the main method is a<br />
questionnaire survey.<br />
This cross-sectional study will include 400 Small and Medium sized entrepreneurs from a nationally<br />
representative sample of SMEs in Malaysia. Data will be collected in the form of multiple-item<br />
questionnaire answered by individual entrepreneur defined as owner cum manager of small and<br />
medium enterprises drawn from food, beverages and agriculture industries. The conceptual model<br />
which consists of latent and observed variables will be empirically tested by employing structural<br />
equation modeling (SEM). Hypothesis will be developed and tested.<br />
6. Contributions<br />
The current study is not only interesting from an academic perspective, but may also have practitioner<br />
and policy implications.<br />
Firstly, this paper’s main contribution to the body of knowledge by building theory-driven, multidisciplinary<br />
conceptual framework to understand the causal relationship between values and small<br />
and medium entrepreneurs’ export intentions. It can show the theoretical robustness of the proposed<br />
conceptual framework if supported by data. In this manner, the notion of influence of values on<br />
intentions will be better understood with the inclusion of mediating variables to eliminate the use of<br />
“black box”. It can potentially demonstrate the fruitfulness of a more comprehensive or a crossdisciplinary<br />
approach of sociology, psychology and international marketing in studying the<br />
phenomenon of international entrepreneurship, which is multi-faceted in nature.<br />
Secondly, this study moves our knowledge about the impact of culture on entrepreneurship yet<br />
another step ahead by understanding the sociological and psychological motivation, i.e. identifying the<br />
relevant values, salient beliefs as well as facilitating and impeding factors in small and medium<br />
entrepreneurs’ export intentions.<br />
Thirdly, the conceptual framework in this study when empirically tested will provide important<br />
implication for policymakers. More specifically, the Malaysian government will have a new<br />
understanding on the importance of the cultural values of the target population in their effort to<br />
encourage Malaysian SMEs to export. In other words, implementation of effective behavioral change<br />
interventions must be compatible with small and medium entrepreneurs’ extant cultural values. With<br />
this new knowledge, the Malaysian government will now be able to customize their assistance to<br />
international small and medium entrepreneurs (to enter new markets) as well as domestic small and<br />
medium entrepreneurs (to begin exporting) according to their values.<br />
Fourthly, this study will assist policymakers to identify the degree of intention antecedents to support<br />
and provide incentives to intending Malay and <strong>Chinese</strong> international entrepreneurs. This has the<br />
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Kim Hoe Looi and Yusniza Kamarulzaman<br />
potential to increase the efficacy of Malaysian small and medium entrepreneurs to be better prepared<br />
to meet the global competition to further Malaysia’s position in world trade.<br />
7. Conclusion<br />
It is hoped that the ultimate findings here add to existing theory and evidence that argues for the<br />
causal relationship between values and small and medium entrepreneurs’ export intentions.<br />
Furthermore, this research has the potential to meaningfully inform the literature on the fruitfulness of<br />
investigating entrepreneurship utilizing multiple disciplinary perspectives as advocated by various<br />
scholars and may spur more research in this direction.<br />
The potential significant contributions to existing body of literature on entrepreneurship resulting from<br />
this study is the delineation of a set of values that is relevant to entrepreneurship; identification of<br />
salient behavioral, normative and control beliefs coupled with interesting insights of motivating or demotivating<br />
factors for small and medium entrepreneurs in their intentions to export to new markets.<br />
The important implications here is that if empirical support is found, this conceptual framework will be<br />
useful in formulating national level entrepreneurship development programmes and policies. Other<br />
than that, there is a potential to meaningfully inform the literature on initiatives to encourage and<br />
develop SMEs’ internationalization besides shed new light on developing useful curriculum for small<br />
and medium international entrepreneurial education.<br />
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983
A Framework Relating Innovation Strategy and Business<br />
Growth in Small to Medium Sized Enterprises (SMEs)<br />
Roopa Nagaraju and Elly Philpott<br />
Business and Management Research Institute, University of Bedfordshire,<br />
Luton, UK<br />
roopa.nagaraju@beds.ac.uk<br />
elly.philpott@beds.ac.uk<br />
Abstract: Purpose - In times of austerity there is much attention paid to the role of small business in economic<br />
recovery and the need for business growth in general. Business ‘growth’ is considered to be one of the most<br />
popular and widely known measures of any company’s success (Storey 1994).While advances have been made<br />
in the measurement of innovation at regional, national and European levels there is still ambiguity around the<br />
measurement of innovation at the firm level, recognition of firm level strategy and little attempt to relate grand<br />
theories in innovation strategy and growth to the SME context. This paper provides the starting point for a larger<br />
study which will reassess the relationship between innovation strategy and business growth in small business.<br />
Design / Methodology - The research approach is inductive. The author uses a literature review to explore<br />
relevant theory and to develop a provisional framework relating innovation strategy and business growth. The<br />
intention is to subsequently use the framework to empirically explore innovation and business growth in the high<br />
tech sector with a view to providing researchers with a mechanism of identifying high growth SMEs. The<br />
Originality and Value - The paper is original and has value in that it provides a fresh look at the literature in this<br />
area, providing a basis on which further empirical investigation can be undertaken with the SME sector. Paper<br />
type - The study forms the first stage of a PhD project. The author invites review of the provisional framework<br />
proposed.<br />
Keywords: SME, Innovation strategy, Business growth, Theory and frame work<br />
1. Introduction<br />
SMEs contribution to innovation and economic growth is one of the important topics discussed in the<br />
twentieth century literature of both economics and operations management literature (Rothwell 1994;<br />
Storey 1994; De Geus 1997; Taylor and Cosenza 1997).Although SMEs have many constraints in<br />
carrying out innovation, their size gives them some advantages over the larger companies, and this<br />
can sometimes lead SMEs to be more innovative. Their strong internal communication,<br />
entrepreneurial management style and close customer relationships helps them to react quickly to any<br />
technical and market changes (Rothwell 1994; Scozzi, Garavelli et al. 2005)<br />
On the other hand, they have many obstacles like financial constraints, existing knowledge, access to<br />
skilled labour, and limited access to market information, an external linkage which makes it difficult to<br />
maintain a consistence innovation process. Another important problem an innovative SME faces is<br />
lack of strategic vision to carry out the innovation development. It is revealed from the innovation<br />
literature that, a strategy to carry out a successful innovation helps the firm in 3 phases of innovation<br />
process namely, planning, development and learning (Scozzi, Garavelli et al. 2005).<br />
The objectives of the research were to explore the research questions:<br />
� How can we recognize innovation strategy within a small business?<br />
� How does innovation strategy within a small business relate to business growth?<br />
Journal articles were searched using the keywords – “innovation strategy”, “Business Growth”,<br />
“SMEs”, “Technological Innovation” and combinations thereof. Handbooks and key texts were sought.<br />
A secondary search looked at key theories and the work of key authors in more depth. This resulted<br />
in around 60 journals and texts from the economics and operations management literature. Four key<br />
important, inter-related yet distinct areas became manifest from this work. These were innovation,<br />
innovation strategy, business growth and business performance.<br />
The following sections describe the literature review of the above mentioned four key areas,<br />
development of framework relating to these factors and its wider implications. The paper concludes by<br />
considering the extent to which we have answered the research questions at this point and the<br />
limitations of the study so far.<br />
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2. Innovation<br />
Roopa Nagaraju and Elly Philpott<br />
Innovation is the first attempt to carry out invention into practice, where as invention is considered as<br />
the first occurrence of idea (Fagerberg 2005). From considering innovation as a random<br />
phenomenon, the researchers have gone on to study systematically. Literature on the topic dates<br />
back to the 1960’s (Burns and Stalker 1961) and, on an economic level, to the beginning of the last<br />
century (Schumpeter, 1912). Another important name in the literature of innovation is Eric Von Hippel,<br />
who contributed to the knowledge on innovation toolkits, innovation measurement, innovation policy<br />
and modes of the sources of innovation. It would seem that some definitions invoke the need for a<br />
successful commercial outcome e.g. ‘profit for the company’ while others do not. One can argue that<br />
implementation of an innovative idea is different to ‘successful implementation’.<br />
Innovation is defined as “the successful exploitation of new ideas” by BIS,UK (BIS 2011). No timeline<br />
is allocated to success nor measures inferred. This could imply immediate profitability or Intellectual<br />
Property / Intellectual capital banked for later use. The OECD (OECD 2011) has classified innovation<br />
into four categories, namely product innovation, process innovation, marketing innovation and<br />
organizational innovation. It defines innovation as, “implementation of a new or significantly improved<br />
product (good or service), or process, a new marketing method, or a new organizational method in<br />
business practices, workplace organization or external relations”. The problem with this definition is<br />
that it reflects innovation as a change in technological functionality but does not take any account of<br />
the payoff from the innovation either to the innovator per se or to the economy in general (Battisti et al<br />
,2008).<br />
The theories of innovation are used in the development of indicators. Kline and Rosenberg (Kline and<br />
Rosemberg 1986) made considerable progress in the development of innovation indicators. Their<br />
Chain-Link model of innovation looked at the various aspects of innovation and stressed that<br />
innovation can also be seen in the small changes in the product performance over a period of time;<br />
therefore an indicator should not overlook these changes.<br />
Cosh and Fu et al.(Cosh, Fu et al. 2005) describe a simple model of innovation propensity for a small<br />
business as well as measures for innovation efficiency. Innovation efficiency measures – how well<br />
companies convert inputs to outputs – are: 1) The number of employees; 2) Number of employees<br />
currently engaged in R&D (in full-time equivalents); 3) Percentage of your employees classified as<br />
scientists and high professionals; 4) Percentage of new or improved products the company sold in the<br />
last financial year. 1, 2 and 3 are clearly innovation inputs, while 4 is an innovation output.<br />
Freel (Freel 2005) describes innovation output (i.e., innovation intensity) as a function of proportionate<br />
R&D expenditure, the proportionate employment of qualified scientists and engineers and technicians<br />
and the existence of innovation-based cooperative relationships with a variety of external agents.<br />
Freel concurred with Cosh with he defines innovation output.<br />
Tales and Andreassi (Tales and Andreassi 2003) also found that innovation output in SMEs appeared<br />
related to strategic alliances and public support.<br />
Cosh and Fu et al (Cosh and Hughes 2002) found, in a study of UK SMEs, that past innovation is<br />
positively related to future growth but that the impact of innovation on profitability is less clear cut.<br />
Increased profitability and longevity of the business are much more difficult to measure and are not<br />
immediately obvious.<br />
Hollanders and Celikel Esser’s (Hollanders and Esser 2007) laudable work to define innovation output<br />
variables in econometric terms at regional and national levels has no doubt advanced the field<br />
significantly; however there are very few studies that relate innovation inputs and outputs (as<br />
manifested by recognizable outputs for a SME) at a practitioner level for collaborative projects.<br />
However, their study of innovation outputs at the country level, provide us with a basis on which to<br />
search for company-level measures of innovation. Hollander uses two categories of measures for<br />
innovation output -‘applications’ and ‘intellectual property’.<br />
Commensurate with the earlier work of Hollanders and Esser, the most recent European innovation<br />
scoreboard embraces six economic effects that can be translated at a company level (UNU-MERIT<br />
2009; UNU-MERIT 2009).These are the following: Employment in medium-high & high-tech<br />
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Roopa Nagaraju and Elly Philpott<br />
manufacturing (% of workforce); Employment in knowledge-intensive services (% of workforce);<br />
Medium and high-tech manufacturing exports (% of total exports); Knowledge-intensive services<br />
exports (% of total services exports); New-to-market sales (% of turnover); New-to-firm sales (% of<br />
turnover). Suitable company-level measures would be the following: A change in employment due to<br />
the innovation; A change in exports due to the innovation; A change in New to market sales due to the<br />
innovation; A change in New to firm sales due to the innovation.<br />
Adams and Neely et al (Adams, Neely et al. 2008) propose innovation output measures at the firm<br />
level based on a small survey of ICT firms. These are:<br />
� Financial performance – sales and profitability arising from the innovation;<br />
� Business performance – new customers and markets reached by the innovation;<br />
� Innovativeness – new products and services launched;<br />
� Knowledge conversion – reflecting new businesses created as a result of<br />
technological/knowledge development, and;<br />
� Knowledge utilisation – how effectively is the firm incorporating its knowledge assets into its<br />
product/service development.<br />
The literature points to the fact that in order to innovate, a small firm has to depend extensively on the<br />
interaction with its environment. We also conclude that innovation indicators are both hard (financial)<br />
and soft (HR and leadership related).Ambiguity remains in whether innovation addresses<br />
implementation of new ideas alone or whether something is only innovative if it is immediately<br />
profitable for the company that makes it. The latter definition appears to ignore spill over effects of the<br />
process of innovation. The definition of innovation, although variable across the literature, hinges<br />
upon the concept of ‘successful’ implementation. As success for a small company can be measured<br />
in terms of profit, growth or longevity then innovations that lead to this over time should be considered<br />
when considering innovation indicators.<br />
A strategy to involve all the actors of the innovation process and to maximise their contribution will<br />
help the firm to carry out the innovation successfully<br />
3. Innovation strategy<br />
According to David Smith, “an innovation strategy is a strategy for carrying out innovation” (Smith<br />
2006). An innovation strategy helps the firm not only in successfully realising an innovative idea, but<br />
also in exciting the customers, outperforming the competitors and building a new product portfolio<br />
(Bowonder, Dambal et al. 2010)<br />
The literature review suggest that to have an innovation strategy a firm has to have a strong belief in<br />
the role of internal environment in shaping the competitiveness of the firm (Hine and Ryan 1999).<br />
Internal environment is, as described by Tang (Tang 1998),organizational structure, resources,<br />
climate and culture. Small innovative firms have to take extra care to make sure the focus on<br />
innovation is not superseded by one on efficiency and pricing strategies, since they have to focus on<br />
a very limited range of critical activities. Tang (1998) is of the opinion that “organization theorists have<br />
pointed out that there is no single optimal organizational design that fits all. This view is concurred by<br />
Tid and Bessant (Tidd, Bessant et al. 2005 ) who agree with the model originally proposed by Teece<br />
and Pisano (Teece, Pisano et al. 1997) which states innovation strategy to be contingent upon 1)<br />
competitive and national positions, 2) technological paths, 3) organisational and managerial<br />
processes.<br />
Innovation strategies are classified into different types like ‘first mover’ and ‘follower/imitator’(Smith<br />
2006), ‘Explorative and Exploitative’(Morgan and Berthon 2008), ‘Radical/destructive and Incremental’<br />
(Moller, Rajala et al. 2008).The important factor about the strategy in a small firm is the omnipresence<br />
of the owner – manager in the every action and every decision taken (Reijonen and Komppula 2007).<br />
The strategy to achieve the goal of the firm is also determined by the characteristics, attitude,<br />
preferences, experience and expertise of the owner – manager.<br />
Bossnik (Cooper, Merrill et al. 1997; Bossink 2002) concludes that `Quality management of<br />
innovation’ appears to be a subset of `innovation management’ that contributes sometimes explicitly,<br />
and in most cases implicitly, to the development of innovations. Bossnik (2002) identifies a number of<br />
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Roopa Nagaraju and Elly Philpott<br />
quality concepts and tools that can be used for both ‘producing innovation content’ and ‘implementing<br />
innovation results’. The incorporation of a quality indicator is intended as a proxy for innovation in<br />
internal business processes which are distinct from the increased know-how associated with the<br />
product or service under development.<br />
It is well documented that firms differ in their ability to adopt new products, systems and services.<br />
Differences in adoption status are generally explained by scholars based on (i) particular<br />
characteristics of the firm and of the new products (JONG and VERMEULEN 2006); (ii) the type of<br />
industry the firms are in (Waarts and Everdingen 2005) and national culture and social capital<br />
(Hofstede 1991; Dakhli and De-Clercq 2004)<br />
The literature on innovation and innovation strategy in SMEs suggest, SMEs face difficulties in<br />
fostering innovation with an innovation strategy due to their limited organizational resource and<br />
supporting system (McEvily, Eisenhardt et al. 2004). It also suggests that, because of the nature of<br />
the indicators, innovation strategy may not be explicit in most SMEs but may need to be sought out.<br />
Many indicators provide insight into whether an ‘innovation strategy’ is actually in place. These<br />
indicators however may often be implicit within a small business; requiring additional research<br />
resources.<br />
4. Business growth and performance<br />
According to (Brush and Vanderwerf 1992) growth of an enterprise (especially an SME) is perceived<br />
as one of the most significant performance indicators. Business growth is dependent on various<br />
factors and it is a complex process. Various frameworks to measure the business growth are divided<br />
into six categories namely stochastics, descriptive, evolutionary, resource based, learning and<br />
deterministic (Dobbs and Hamilton 2007).<br />
Flamhlotz’s (Flamholtz 1999) framework on organisational growth includes seven stages. In the first<br />
stage, market and products are in the developmental stage, where as in the second stage the focus is<br />
on expansion of sales, market share and employees. The third stage’s focus is on what is called<br />
professionalization, where the firm tries to formalise the organisational goal, process and functions.<br />
These three stages are considered as important from small business perspective. The other four<br />
stages are consolidation, diversification, integration and decline and revitalisation.<br />
Traditionally growth in the small firms has been studied with four main perspectives. They are<br />
personal characteristics of the entrepreneur, organisational development, business management and<br />
the industry and location perspective (Reijonen and Komppula 2007).<br />
It is argued that innovation strategies helps the firm to adopt to the changes in its environmental<br />
circumstances and play an important role in enhancing the business performance and also to reduce<br />
a performance gap that might have emerged from changes in environmental circumstances (Song, Di-<br />
Benedetto et al. 1999; Morgan and Berthon 2008).<br />
According to Hodgetts and Kuratko (Hodgetts and Kuratko 2001) Strategic planning is one of the<br />
factors which contribute to the performance of an organization and it reduces the uncertainty by<br />
creating a better understanding of the environment. Their research showed 83% of the small<br />
enterprises do plan formally. Karus, et al.(Kraus, Harms et al. 2006) research showed there is a<br />
positive relationship between strategic planning and performance.<br />
The assessment of the growth of the firm cannot be done just with growth indicators, since it fails to<br />
look at the other strengths of the firm, which when nourished, can tremendously help the company to<br />
grow. When we are looking at the growth of the firm, we need to look at the current growth indicators<br />
as well as the future growth indicators which are closely related to innovation strategy and<br />
performance indicators.<br />
5. Framework<br />
From the literature review, we have identified the indicators which can be used to indentify innovation,<br />
innovation strategy, business performance and business growth in SMEs<br />
987
6. Relationships between indicators<br />
Roopa Nagaraju and Elly Philpott<br />
Most of the innovation and growth indicators can be accessed from outside the company with the<br />
available data on the public domain whereas there are many soft indicators related to innovation<br />
strategy and performance, which can be found only by interacting with the individual firm.<br />
The main difficulty in indentifying an innovative firm and also an innovation strategy lies in the<br />
ambiguity of the existing definitions. Further lack of resources and the working style of an SME make<br />
it difficult to find hard evidence to assess the existence of any innovation strategy and its influence on<br />
the growth of the firm.<br />
The economic literature tries to measure the innovation and growth through the indicators which can<br />
be available from the statistical data available from inside as well outside of the firm whereas the<br />
operational management literature looks at the indicators which are mostly only accessible within the<br />
firm because they are not generally on public record. The main difference in the view point of these<br />
two literatures on measuring the innovation and growth firm is that, the economic literature tends to<br />
look at hard indicators like finance and outputs, employment, whereas the operational management<br />
literature also includes soft indicators like quality, employee satisfaction, leadership etc.<br />
From the literature we listed the twelve indicators for innovation, twenty eight for innovation strategy,<br />
twenty five for performance and eight for business growth. Tables 1- 4 in Appendix 1 show the list of<br />
the above mentioned indicators<br />
The next section of the paper analyses the separate tables in Appendix 1 to produce a framework<br />
reflecting the relationship between indicators.<br />
7. Analysis of Literature<br />
In order to capture Operations Management and Economics views on indicators, the literature was<br />
classified as Innovation indicators, Innovation Strategy Indicators, Performance Indicators and<br />
Business growth Indicators. See Appendix 1 - Tables 1-4. We then removed duplication of terms<br />
within each table and looked for commonality between indicators in separate tables.<br />
By considering each indicator (coded) in turn we established 12 groups of terms that described the<br />
relationships between indicators and therefore the possible relationships between Innovation,<br />
innovation strategy, business growth and business performance.<br />
By further analysing the groups of indicators we established common themes for each vector on the<br />
framework.<br />
As this paper deals with the relationship between innovative strategy and business growth, it is these<br />
areas that we now analyse. Figures 2 and 3 show the common themes between innovation strategy<br />
and performance indicators and business growth indicators.<br />
In Figure 2, indicators of innovation strategy and performance indicators are divided into eight<br />
different categories. Indicators in each category are closely related by a common theme. First<br />
category is related to new product development, followed by employee training and development.<br />
Third category is improvement in the process, fourth is related to the growth and objective of the firm.<br />
It is followed by marketing and market research indicators. Last two categories are networking and<br />
quality management, and delivery speed.<br />
988
Roopa Nagaraju and Elly Philpott<br />
Figure 1: illustrating possible relationship between indicators<br />
Figure 2: illustrating common themes between innovation strategy and performance indicators<br />
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Roopa Nagaraju and Elly Philpott<br />
Figure 3 illustrates the common themes between innovation strategy and business growth. There are<br />
four categories. First is product development which is followed by process development R&D and<br />
market development.<br />
Figure 3: illustrating common themes between innovation strategy and business growth indicators<br />
Figures 4 – 7 which can be found in Appendix 2 illustrate the common themes between the indicators<br />
of innovation and innovation strategy, innovation and performance, innovation and business growth<br />
and performance and business growth.<br />
8. Analysis of findings<br />
When researchers attempt to predict growth by looking at traditional innovation indicators and<br />
performance indicators they appear to miss the indicators that actually indicate growth. The<br />
framework suggests difference between important indicators for growth and performance.<br />
The frameworks in Figures 2 and 3 give clear indicators to look for to assess a company for its<br />
innovativeness and the presence of innovation strategy. The indicators are also drawn to establish a<br />
relationship between innovation strategy and business growth and performance of the company.<br />
It is interesting to note that the indicators to assess innovation strategy and business growth of the<br />
company are very specific and fall under five categories, where as innovation strategy and<br />
performance indicators fall into as many as eight categories.<br />
9. Potential use of the frameworks<br />
Figures 2 and 3 can be used to identify innovative companies within a population using publicly<br />
available data. (We hypothesise that Figures 1, 2 and 3 can also be used to predict growth in<br />
innovative companies.) The author intends to test hypotheses on two groups of companies (past<br />
innovators and non-innovators) and thereby establish whether growth can be predicted.<br />
Hypotheses will be generated and tested on High Technology SMEs in Bedfordshire. High technology<br />
companies will be mined from publicly available databases using standard industrial codes. The<br />
author plans to use a questionnaire survey based on the indicators identified to establish the<br />
presence of innovation strategy and measure the level of the influence this has had on the business<br />
growth of the SME.<br />
10. Conclusion and Limitations of the study<br />
The analysis of the finding of the study leaves us with indicators to look for to relate innovation<br />
strategy and business growth in an SME. Here most of the indicators are soft indicators which require<br />
a researcher to interact closely with the firm to recognize them.<br />
The indicators for innovation strategy and business growth which are directly linked to each other are<br />
categorised into 4 groups. There is a product development, which can signify the growth of the firm<br />
with the increase in the number of new products. Then we have process management which can<br />
reduce the expenditure by increasing the profit of the firm. Investment in R&D indicates the company’s<br />
capacity to invest in acquiring knowledge to generate profit in the future. And the last category is<br />
related to marketing. Their market expansion, export, constant competitor analysis and benchmarking<br />
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Roopa Nagaraju and Elly Philpott<br />
helps the firm to understand their customer and perform better in the market. These indicators are<br />
also linked to performance of the firm which in turn can help to measure the growth of the firm.<br />
11. Limitations<br />
This is the first part of a PhD study and a theoretical paper. The framework is still undergoing testing<br />
and will eventually be tested on a sample of small companies in the high tech sector.<br />
The author has looked into the economics and operations management literature, but recognizes that<br />
alternative views exist in the strategy and management literatures. Every effort has been made to<br />
ensure that high quality sources have been used and therefore the work assimilated has some wider<br />
validity. The frameworks are based purely on literature review and discussion with senior academic.<br />
They have not as yet been scrutinized by external experts. The author invites comment on the<br />
frameworks proposed.<br />
In terms of reliability, the method of framework development has been described and hence could be<br />
followed by other researchers. However the common themes between indicators have only been<br />
reviewed with senior academics who corroborated the links made. The mapping of indicators to<br />
themes would therefore stand further critique. This activity however will be repeated using a focus<br />
group of experts to ensure that indicators have a greater consensus and to ensure that they are<br />
practical in terms of data collection.<br />
Acknowledgement<br />
We would like to thank Bedford Borough Council, Luton Borough Council, Central Bedfordshire<br />
Council, and University of Bedfordshire who supported this study.<br />
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Appendix 1<br />
Roopa Nagaraju and Elly Philpott<br />
Tables 1 – 4 show indicators for innovation, innovation strategy, business growth and business<br />
performance and the literature sources.<br />
Table 1: showing Innovation indicators and their literature source<br />
Code No Innovation indicator Sources and Authors<br />
I-1 Acquisition : external idea sourcing, external (Laforet and Tann 2006; Bowonder, Dambal et al.<br />
alliances<br />
2010)<br />
I-2 Extent to which major customers provide (O'Regan and Ghobadian 2005; Laforet and Tann<br />
specification for new product<br />
2006)<br />
I-3 Innovation prizes won / public support (Tales and Andreassi 2003; Laforet and Tann<br />
2006) Cosh and Fu (2002)<br />
I-4 Investment in R&D/ R&D expenditure (Branzei and Vertinsky 2006)<br />
I-5 Level of investment in systems and (Branzei and Vertinsky 2006; O'Regan, Ghobadian<br />
technology for office<br />
et al. 2006)<br />
I-6 Level of investment in systems and (Laforet and Tann 2006)<br />
I-7<br />
technology for shop floor<br />
New or improved ways working in last five<br />
years<br />
(Laforet and Tann 2006)<br />
I-8 No. of new product/services ideas or (Laforet and Tann 2006)<br />
I-9<br />
business model<br />
No. of new products improved/Modified (Laforet and Tann 2006) (Hollanders and Esser<br />
existing product<br />
2007)<br />
I-10 No. of patents (Branzei and Vertinsky 2006; Laforet and Tann<br />
2006) Adams and Neely et al.(2008)<br />
I-11 Profitability (Cosh, Fu et al. 2005); Battisti et al.(2008); Adams,<br />
Neely et al.(2008)<br />
I-12 The percentage of sales from the newest (Cosh, Fu et al. 2005; Hollanders and Esser 2007)<br />
product introduced<br />
Adams, Neely et al.(2008)<br />
Table 2: showing Innovation Strategy Indicators and its literature source<br />
Code No Innovation strategy indicators Sources and Authors<br />
IS-1 Adoption of external technology (Laforet and Tann 2006)<br />
IS-2 Automated Inspection (Laforet and Tann 2006)<br />
IS-3 Bench marking (Laforet and Tann 2006)Admas and Neely et<br />
al.(2008)<br />
IS-4 CEO involvement in NPD (Verbees and Meulenberg 2004; Branzei and<br />
Vertinsky 2006; Laforet and Tann 2006; Reijonen<br />
and Komppula 2007; Morgan and Berthon 2008)<br />
IS-5 Competitor analysis (Laforet and Tann 2006);Adams and Neely et<br />
al.(2008)<br />
IS-6 Computer aided design and drafting (Frank 2004; Verbees and Meulenberg 2004;<br />
Laforet and Tann 2006)<br />
IS-7 Development of new process and (Frank 2004; Verbees and Meulenberg 2004;<br />
continuous improvement<br />
Laforet and Tann 2006)<br />
IS-8 Development of new ways of working (Branzei and Vertinsky 2006; Laforet and Tann<br />
2006)<br />
IS-9 Digital interchange with customers (Laforet and Tann 2006)<br />
IS-10 Employee suggestion scheme (Laforet and Tann 2006)<br />
IS-11 Everyone knows criteria for evaluating new<br />
product projects<br />
(O'Regan and Ghobadian 2005)<br />
IS-12 Human capital development (O'Regan and Ghobadian 2005)<br />
IS-13<br />
IS-14<br />
IS-15<br />
Improve process to add value to the products (O'Regan and Ghobadian 2005)<br />
and services<br />
Improve process to reduce cost (Laforet and Tann 2006; Morgan and Berthon<br />
2008)<br />
In-house market research (Morgan and Berthon 2008)<br />
IS-16 In-house R&D (Kline and Rosemberg 1986; Morgan and Berthon<br />
2008)<br />
IS-17 Innovation feature in company’s objective (Laforet and Tann 2006)<br />
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Roopa Nagaraju and Elly Philpott<br />
Code No Innovation strategy indicators Sources and Authors<br />
IS-18<br />
IS-19<br />
Market development (Kline and Rosemberg 1986; Laforet and Tann<br />
2006)<br />
Networking (Laforet and Tann 2006)<br />
IS-20 New product team takes lead in (Laforet and Tann 2006)<br />
IS-21<br />
implementing NPD<br />
Product development (Kline and Rosemberg 1986; Laforet and Tann<br />
2006)<br />
IS-22 Regular Study of competitors (Branzei and Vertinsky 2006) Adams and Neely et<br />
al.(2008)<br />
IS-23 Regular study of the market (Branzei and Vertinsky 2006) Adams and neely et<br />
al.(2008)<br />
IS-24 Technology system in place (Branzei and Vertinsky 2006)<br />
IS-25 Training (Branzei and Vertinsky 2006)<br />
IS-26 Percentage of scientists or high tech (Freel 2005; Hollanders and Esser 2007)<br />
IS-27<br />
professionals employed<br />
No of employees (Cosh, Fu et al. 2005)<br />
IS-28 No employees engaged in R&D (Cosh, Fu et al. 2005)<br />
Table 3: showing Performance Indicators and its literature source<br />
Code No Performance indicator Sources and Authors<br />
P-1 Autonomy (Branzei and Vertinsky 2006; Terziovski 2010)<br />
P-2 Average profits per customer (Morgan and Berthon 2008)<br />
P-3 Capacity utilization (Branzei and Vertinsky 2006; Terziovski 2010)<br />
P-4 Customer development Adams and Neely et al.(2008)<br />
P-5 Customer satisfaction (Singh, Garg et al. 2010).<br />
P-6 Degree of innovation Adams and Neely et al.(2008)<br />
P-7 Delivery speed (Morgan and Berthon 2008; Singh, Garg et al.<br />
2010)<br />
P-8 Employee motivation (Singh, Garg et al. 2010)<br />
P-9 Employee productivity (Branzei and Vertinsky 2006; Singh, Garg et al.<br />
2010)<br />
P-10 Employee satisfaction (Singh, Garg et al. 2010)<br />
P-11 Hourly rate (Branzei and Vertinsky 2006)<br />
P-12 Image (Bowonder, Dambal et al. 2010)<br />
P-13 ISO certificates; quality initiatives (Singh, Garg et al. 2010);Bossink (2002)<br />
P-14 Job Satisfaction (Singh, Garg et al. 2010; Terziovski 2010)<br />
P-15 Liquidity (Madrid-Guijarro, Garcia et al. 2009)<br />
P-16 Market development / market share (Singh, Garg et al. 2010)Adams and Neely et<br />
al(2008)<br />
P-17 Number of employees / Size (Edelman, Brush et al. 2005; Branzei and<br />
Vertinsky 2006; Singh, Garg et al. 2010)<br />
P-18 Production margin (Singh, Garg et al. 2010)<br />
P-19 Profit / Price cost margin (Singh, Garg et al. 2010)<br />
P-20 Return of Sale (Morgan and Berthon 2008)<br />
P-21 ROI – return on investment (Morgan and Berthon 2008)<br />
P-22 Sales growth (Branzei and Vertinsky 2006; Morgan and Berthon<br />
2008)<br />
P-23 Supplier satisfaction (Branzei and Vertinsky 2006; Singh, Garg et al.<br />
2010)<br />
P-24 Total margin (Branzei and Vertinsky 2006)<br />
P-25 Turn over (Edelman, Brush et al. 2005; Dobbs and Hamilton<br />
2007)<br />
Table 4: showing Business growth indicator and its literature source<br />
Code No Business growth indicator Sources and Authors<br />
BG-1 Change in asset (Dobbs and Hamilton 2007)<br />
BG-2 Employment (Dobbs and Hamilton 2007)Barringer et al,<br />
BG-3 Export (Singh, Garg et al. 2010) (Cosh, Fu et al. 2005;<br />
Dobbs and Hamilton 2007; Hollanders and Esser<br />
2007)<br />
BG-4 Financial growth Barringer et al – (Dobbs and Hamilton 2007)<br />
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Roopa Nagaraju and Elly Philpott<br />
Code No Business growth indicator Sources and Authors<br />
BG-5 Market Share (Singh, Garg et al. 2010) Adams and Neely et<br />
al.(2008)<br />
BG-6 Past innovation (Singh, Garg et al. 2010)<br />
BG-7 Roi (Singh, Garg et al. 2010)<br />
BG-8 Sales (Dobbs and Hamilton 2007; Singh, Garg et al.<br />
2010)<br />
BG-9 Size of the firm (Barringer and Jones 2004); Terziovski (2010)<br />
BG-10 Technological progress (Barringer and Jones 2004; Dobbs and Hamilton<br />
2007)<br />
BG-11 Total assets (inc patents/copyright etc) (Barringer and Jones 2004)Adams and Neely et<br />
al.(2008)<br />
BG-12 Turnover on sales (Dobbs and Hamilton 2007)Dobbs and Hamilton<br />
(2007)<br />
Appendix 2<br />
Figures 4 – 7, illustrating the common themes between the indicators of innovation and innovation<br />
strategy, innovation and performance, innovation and business growth and performance and business<br />
growth.<br />
Figure 4: illustrating common themes between innovation and innovation strategy indicators<br />
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Roopa Nagaraju and Elly Philpott<br />
Figure 5: illustrating common themes between Innovation and performance indicators<br />
Figure 6: illustrating common themes between innovation and business growth indicators<br />
Figure 7: illustrating common themes between performance and business growth indicators<br />
996
A Conceptual Framework of Agribusiness Product<br />
Development: Carrot, Stick or Both?<br />
Sophie Payne-Gifford<br />
School of Agriculture, Policy and Development, University of Reading, UK<br />
s.payne2@pgr.reading.ac.uk<br />
Abstract: This PhD paper considers the factors that influence agribusiness innovation and product development.<br />
More specifically, this PhD paper is concerned with multinational corporate suppliers of the inputs to agriculture,<br />
ie the seeds and chemicals on which modern industrial agriculture relies. Although business is motivated by<br />
profit, the author argues that this is not the only factor driving agribusiness innovation; innovation and R&D are<br />
complex processes emerging from multiple interactions with multiple framework conditions. This paper attempts<br />
to unravel these conditions by developing a conceptual framework which will then guide the author's empirical<br />
fieldwork in an agribusiness setting. This is a conceptual paper is based on a strand of the author's PhD literature<br />
review. The conceptual framework begins with the agrifood supply chain as the starting point of conditions<br />
influencing agribusiness innovation. The author posits that all actors (farmers, wholesalers, retailers, and<br />
consumers) in the agrifood chain have an influence on agribusiness, albeit some indirectly felt, such as though<br />
consumer trends. The conceptual framework then expands outwards from the agrifood chain to include<br />
conditions such as regulation (the Pesticide Directive), incentives (such as tax credits), market factors (global<br />
trade agreements), the agroecological environment (soil, water, weather), and pressure groups. The conceptual<br />
framework also includes conditions internal to the business such as corporate structure and strategy. The author<br />
argues that if one of these framework conditions changes enough, it can have a ripple effect on the rest of the<br />
framework, potentially making a new R&D direction viable.<br />
Keywords: product development, agribusiness, innovation systems, R&D strategy<br />
1. Introduction<br />
What drives drives agricultural innovation? In particular, what motivates the private sector to develop<br />
agricultural products? Although agribusiness is undeniably motivated by profit (Knights and Willmott<br />
2004), and decisions on research portfolios will result from this, it is too simplistic to suggest that this<br />
is the only factor driving agribusiness innovation. The literature on systems of innovation helps us to<br />
understand that although economic considerations may shape research agendas (Rosenberg 1982),<br />
innovation cannot only be explained in economic terms (Hall et al 2003). The systems of innovation<br />
literature suggests that innovation in any sector is complex; it is a process emerging from multiple<br />
interactions (Engel 1995) with multiple influences such as policy, infrastructure, and market<br />
mechanisms (Klerks & Leeuwis 2008). The first strand of the authors doctoral research is to<br />
investigate the interplay of these interactions as they pertain to a specific subtype of innovation,<br />
product development, within agribusiness. In this analysis, agribusiness refers to the companies that<br />
develop and supply large commercial farmers with the inputs (seeds, fertilisers, pesticides) necessary<br />
for industrial, monoculture agriculture (Guthman 2004; Rosenthal 2004). It is not used in the wider<br />
sense of the industrialised food chain.<br />
A second strand of this research is to investigate whether corporate structure affects a company's<br />
research and development (R&D) portfolio and consequently the types of products available for<br />
modern agriculture. Drawing on the notion of 'lock-in' (Geels 2004), established agribusiness<br />
corporations may be 'locked-in' to a socio-technological regime (such as the seeds and chemicals that<br />
make up modern industrial agriculture) because they have invested considerable time and resources<br />
into building their competence in this area. It is possible that the established multinational<br />
corporations may not have the requisite skills and knowledge in their store of 'cognitive capital' (Geels<br />
2004) necessary to take advantage of opportunities outside their core business. Geels suggests that<br />
smaller, niche organisations are often more flexible and agile and at the cutting edge of technology.<br />
A third strand, deriving from the author's interest in environmental degradation, is to understand under<br />
what conditions agribusiness (big or small) may be interested in developing 'pro-environmental'<br />
products (or less damaging ones). The environmental challenges facing agriculture are clear:<br />
pollution (Durant 2004); water scarcity (UNFAO 2007); greenhouse gas emissions (Smith et al 2007);<br />
waste (CGIAR 2010); a changing climate (Rosenzweiz 2000); and the need to increase food<br />
production (Pinstrup-Anderson & Schiøler 2001). The author's PhD research proposes to explore the<br />
framework conditions that may support pro-environmental innovation as well as how corporate<br />
structure may influence a company's ability to respond to these environmental framework conditions.<br />
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Sophie Payne-Gifford<br />
This PhD research will contribute to the academic debates on agricultural systems of innovation for<br />
three reasons: Firstly, the innovation systems literature focuses at the systems level, for example<br />
analysing how the public/private research actors interact (eg Vanloqueren & Baret 2009; Narula<br />
2003). However, this research is focused on how the innovation system shapes agribusiness and its<br />
products; Secondly, discussion of the private sector in the innovation system acknowledges that<br />
money is a driving motivation (Vanloqueren & Baret 2009; Leeuwis 2004), but does not interrogate<br />
further to specifically investigate how change in the system results in more or less profit; Thirdly,<br />
authors focused on agricultural innovation often focus on one element of the system - such as<br />
innovation intermediaries (Klerkx and Leeuwis 2008); or corporate strategy (Vorley 2004). The author<br />
is trying to capture the complexity of each piece of the the system as they interact with each other to<br />
shape a product. Trying to capture this complexity responds to Leeuwis' suggestion that research<br />
students study innovation processes rather than points in time to allow entry into 'the black box'<br />
(Leeuwis (2004).<br />
2. An Economic Model from First Principles<br />
As a way to understand the innovation-scape of agribusiness product development the author started<br />
mapping the different push and pull factors to develop a conceptual framework, or in the<br />
(complimentary) words of one of her supervisors “an economic model from first principles.” The<br />
purpose of identifying these factors is to illustrate the point that, although agribusiness is motivated by<br />
profit, if one of these framework conditions is changed, it can have a ripple effect on the rest of the<br />
innovation system, thereby changing potential profitability. Although agribusiness may be primarily<br />
motivated by profit, the flows of profit to agribusiness are subject to various contortions in regional and<br />
global systems. If one of these contortions opens or closes access to a new market then this may<br />
have the potential to refocus research strategy in a different direction. The next part of this paper will<br />
elaborate on each of the framework conditions. Although the author is primarily interested in<br />
agrichemicals and ways to use them more efficiently, in explaining the framework, examples from<br />
outside the agrichem industry are utilised.<br />
2.1 The Agrifood Supply Chain<br />
To begin the analysis, it is useful to start with the supply chain in the modern agrifood sector (Figure<br />
1). Agrichem and seed suppliers, such as Syngenta or Monsanto sell to farmers the pesticide, seed<br />
and fertiliser inputs on which industrial, monoculture agriculture is dependent. Farmers use these<br />
inputs to produce raw foodstuffs which they then sell to food processors (and/or wholesalers).<br />
Processors and wholesalers sell foodstuffs to retailers who then sell them to us, the consumers. So<br />
where does the power to influence lie?<br />
2.1.1 Farmers<br />
Farmers have an influence on agribusiness as their primary customer. If farming practice or<br />
preferences change and farmers stop using a specific product, perhaps because of its toxicity, then<br />
agribusiness may consider developing a less toxic replacement product. Additionally, farming is also a<br />
private enterprise wherein profit is made or lost; although pesticides may increase revenues by<br />
reducing crop losses they are also a cost to the farmer (Sattler & Nagel 2010). In this way, farmers<br />
have power over agribusiness, as it is in their power not to use a certain product if it proves<br />
unprofitable.<br />
2.1.2 Processors, Wholesalers, Retailers<br />
With the exception of farmer's markets, farmed produce usually makes its way to consumers through<br />
one or more intermediaries, either being processed by processors and sold to retail outlets or by<br />
being sold to wholesalers in its raw form (ie fruit and veg) and then to retailers. These intermediaries<br />
exert influence over farmers by demanding or rejecting certain crops, or demanding certain<br />
characteristics.<br />
Increased processor demand for organic certified crops in California is driving farmers (small and<br />
large alike) to enter this niche market (Guthman 2004). At the time of her 2004 publication, the larger<br />
agrifood companies in California were interested in the processing side of organic farming but not yet<br />
involved in researching organic input alternatives - such as naturally occurring sulphur dust (Guthman<br />
2004). However, as and when organic farming extends beyond a niche market, agribusiness may<br />
start developing organic inputs or may seek to purchase an existing niche company.<br />
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Sophie Payne-Gifford<br />
Figure 1: The modern industrialised agrifood chain (source: author)<br />
2.1.3 Consumers<br />
At the end of the chain is us, the consumer. The power of consumers is a paradox: on the one hand<br />
we exert influence because we drive what supermarkets supply, but on the other we have very little<br />
power in that our choices are constrained by what supermarkets offer. Jansen and Vellema's cynicism<br />
on the power of consumerism goes further than this:<br />
Green consumerism neither changes legal frameworks nor decision-making in technology<br />
development….Even though the power balance has shifted from the production to the consumption<br />
side, this does not imply an increase in the power of consumers to define the conditions under which<br />
their food is being produced and what technologies are being developed (Jansen & Vellema 2004,<br />
16).<br />
Although consumers are constrained by what supermarkets make available, there is cause for<br />
optimism; consumers take action many times a day, in each item they purchase; everyday politics are<br />
enacted by our consumption (see Whatmore and Thorne 1997). Each Fairtrade, Organic, Freedom<br />
Food, Free Range, Amazon Alliance, Marine Stewardship purchase is logged in the supermarkets'<br />
databases. Although supermarkets constrain what shoppers can buy, consumer habits also drive<br />
supermarket behaviour. Everyday politics are transformed into money-flows which are transmitted up<br />
the commodity chain; These changing patterns of consumption (ie the growth in organics) are noted<br />
by supermarkets which is in turn noted up the chain, explaining why big business is entering organic<br />
food processing in California. Agribusiness is realising that organic food processing is no longer just a<br />
niche market, that it is profitable. And if it is profitable to enter organic food production and<br />
processing, it may also become profitable to enter organic agricultural product development.<br />
So although farmers are the direct consumers of agribusiness they are not the only actors that have<br />
power to influence agribusiness. Just as agrichem suppliers monitor patterns of behaviour among<br />
farmers, it is not too difficult imagine that they also keep track of changing patterns of retail<br />
consumption. Therefore, as it is too simple to state that the private sector is simply motivated by profit,<br />
it is also too simple to suggest that the agribusiness innovation process follows the flow of the<br />
agrifood supply chain; retail consumers do not only influence retailers and retailers do not only<br />
influence their suppliers. Therefore the flow of potential innovation influence(s) is not a linear one<br />
(Figure 2).<br />
999
Sophie Payne-Gifford<br />
Figure 2: Non-linear innovation influence in the agrifood chain (source: author)<br />
However, a nuanced account of how and why agribusiness develops products needs to take account<br />
of the wider innovation-scape as well: regulation (including intragovernmental); government<br />
incentives; market and trade factors; the physical/natural environment; and pressure groups also<br />
need to be considered.<br />
2.2 The Wider Innovation-Scape<br />
Further contemplation reveals that the supply chain actors in the agrifood sector are not the only<br />
actors involved in the agricultural innovation-scape; as suggested by Klerkx and Leeuwis (2008),<br />
market forces and policy also have a role to play, as do regulation, legislation and incentives. And just<br />
as consumers have an indirect influence on agribusiness, so too do market forces and policy.<br />
2.2.1 Regulation and Legislation<br />
Regulatory and legislative frameworks influence both agricultural companies and farmers to manage<br />
their impact on the natural environment and human health (as well as influencing other actors in the<br />
framework). For example, farmers in the UK are required to comply with a number of regulations such<br />
as keeping land in 'good agricultural and environmental condition' (DEFRA 2011). The forthcoming<br />
European Pesticides Regulation (REGULATION (EC) No 1107/2009), which will ban certain chemical<br />
compounds by farmers, should spur activity on the part of agribusiness. It would be interesting to<br />
investigate how agribusiness is preparing for this Regulation given the time it takes to develop and<br />
test new products – 10 years and £100 million per product according to Monsanto (Monsanto 2010).<br />
Although agribusiness may still be able to sell products containing these banned substances outside<br />
the European Union (EU) they will still want to maintain the European market. Interestingly, this<br />
regulation by itself will not necessarily encourage agribusiness to investigate commercially viable<br />
options for reducing pesticide use.<br />
2.2.2 Government Incentives<br />
This is the 'carrot' if regulation is the 'stick.' It mainly refers to monetary incentives that are meant to<br />
encourage action. Farmers are encouraged to manage their environmental impact, but are not<br />
specifically encouraged to innovate (which is not to say that farmers are not innovative in the<br />
environmental management of their farms). Businesses are obviously subject to different incentives,<br />
such as R&D tax relief. In the UK, in financial year 08/09, small, medium and large businesses eligible<br />
for corporate tax received £980m in tax relief on their R&D activities (BIS 2011). However, tax relief<br />
will not by itself encourage innovation in a particular sector, as it only provides tax relief on activities<br />
classified as research and development.<br />
The UK government has been considering how to focus innovation activity in the environmental sector<br />
through the Environmental Innovation Advisory Board (BIS 2004), although this Board is more<br />
concerned with the wider UK innovation system of public and private sector research establishments.<br />
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Sophie Payne-Gifford<br />
In 2005, the Environmental Innovation Advisory Board had identified priority areas, of which Pollutant<br />
Removal is one (BIS 2005), but had not considered incentives to prevent (agricultural) pollutants from<br />
entering the water network in the first place.<br />
2.2.3 Market and Trade Factors<br />
This condition includes those that may affect the ability of agribusiness or farmers to sell their goods<br />
and/or to maximise profit. Although the growth in organics in California is driven by consumer<br />
demand, it is the development of a new market that appeals to agribusiness. In reference to<br />
agribusiness R&D, Pinstrup-Andersen and Mengistu note that<br />
The main factors influencing a private firm’s investments in research and development (R&D) are the<br />
size of the potential market for new products from research [and] the ability of the firm to capture<br />
some of the benefits from the new technology...(Pinstrup-Andersen and Mengistu 2008, p.1128).<br />
For example, if worldwide intellectual property rights are strengthened, such as the Trade-Related<br />
Aspects of Intellectual Property Rights (TRIPS) under the Uruguay Round of the General Agreement<br />
on Tariffs and Trade (GATT), it becomes easier for agribusiness to secure a return on investment<br />
(Pinstrup-Andersen and Mengistu 2008). When a company is more able to secure a return on an R&D<br />
investment, they are more likely to investigate its possibilities. Given the time and cost of developing a<br />
new product it is not surprising the private sector invests in ventures on which they are more able to<br />
guarantee a profit. Changing the framework under which the private sector can secure profit may<br />
influence its R&D strategy.<br />
2.2.4 Pressure Group Influence<br />
Pressure groups for and against the development of certain technologies also exert influence, both on<br />
agribusiness and other parts of the system (such as the formulation of legislation and regulation). The<br />
TRIPS agreement mentioned above is noted to have been influenced by corporate lobbyists such that<br />
it was formulated in favour of developed countries in a position to take advantage of agricultural<br />
biotechnology (Glover 2002). On the other hand, environmental non-governmental organisations<br />
(NGOs), such as Greenpeace and Friends of the Earth, have long been opposed to genetically<br />
modified (GM) crops which has contributed to consumer resistance in Europe. This consumer<br />
resistance is part of the reason that pharmaceutical/life-science companies dropped their more risky<br />
agricultural portfolios in the 1990s to focus on their pharmaceutical investments: “Monsanto, for<br />
example, merged with Pharmacia and UpJohn in March 2000, while other firms divested their<br />
agricultural portfolios, preferring less risky and higher-return pharmaceutical investments” (Newell<br />
2003). At the same time as anti-GM lobbying there has also likely been pro-GM lobbying, either by the<br />
companies or by representative organisations.<br />
2.2.5 Physical Environment<br />
Agriculture is a unique economic activity in that it is site specific and constrained by soil fertility,<br />
rainfall, and natural (or introduced) pests (Merrington et al 2002). The physical environments of<br />
industrialised farmers drives what agribusiness develops (Pingali & Traxler 2002) and when<br />
considering extending their reach into new markets, agribusiness will have to consider whether they<br />
have products appropriate to those physical environments. The physical geography of agriculture<br />
makes agribusiness innovation different from other sectors of corporate innovation; unlike other<br />
businesses, agriculture should be difficult to offshore. Although agribusiness could consider offshoring<br />
an R&D station, it would have to find a site with similar characteristics to their target markets.<br />
In addition to the already existing physical environments for which agribusiness has developed<br />
products, climate change poses a new challenge (or opportunity) for agribusiness. A changing natural<br />
environment may change the inputs that farmers need, representing a new potential market. The<br />
challenge of the changing water cycle may already be spurring innovation in agribusiness. According<br />
to the president of the Tropical Agriculture Association (TAA), over the past 10 years agribusiness has<br />
shown more interest in drought tolerant cultivars (Andrew Bennett, keynote speech to TAA, June 7 th ,<br />
2010). The potential markets of countries that already need drought-adapted cultivars is probably not<br />
lost on agribusiness.<br />
Building on the agrifood chain in Figure 1 and 2 , the next stage of the conceptual framework may<br />
look like Figure 3.<br />
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Sophie Payne-Gifford<br />
Figure 3:<br />
Conceptual framework with external drivers of agribusiness innovation (source: author)<br />
2.3 The Internal Environment<br />
The next step in developing the framework is to consider the internal drivers of innovation as there are<br />
people and organisational conditions that contribute to product development. It may be that although<br />
the external environment is right for agribusiness to develop a particular product, it does not due to<br />
the internal organisational environment. Or conversely, external framework conditions could be wrong<br />
for a particular product, but the organisation commits to it anyway.<br />
A sensible place to start with in the internal environment is a company's R&D strategy (see Figure 4).<br />
Even if a company does not have a fully articulated strategy, there will be strategic decisions on R&D<br />
directions to take or to avoid. However, R&D strategy is influenced by other factors internal to the<br />
company such as size (ie large and multi-sited versus small and single-sited); the owners and<br />
financiers of the company (shareholders versus venture capitalists) and a vast array of 'people' factors<br />
(corporate culture, employee reward, managerial style, recruitment policy and so on).<br />
Figure 4: Conceptual framework of the internal environment (source: author)<br />
Not only do company size, ownership, and human resource issues influence R&D strategy, strategy<br />
has an influence on them: R&D strategy will influence whether to grow a company from a small one to<br />
a mid-sized one; will influence financing arrangements; and will determine recruitment needs.<br />
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2.3.1 R&D Strategy<br />
Sophie Payne-Gifford<br />
Agribusiness may employ a number of strategies such as buying smaller companies to get access to<br />
new cognitive capital or selling under-performing business units such as when Ciba-Geigy split its<br />
agricultural arm from its pharmaceutical arm. Syngenta was then born leaving Ciba-Geigy (now part of<br />
Novartis) focused on pharmaceuticals (Vorley 2004). Other strategies include extending existing<br />
patents; developing companion products; or collaboration with external partners.<br />
2.3.2 Company Size and Structure<br />
Size and structure will influence what a company does or is able to do. If a company has R&D sites in<br />
more than one location, and one site develops pesticides and the other researches gene technology,<br />
then R&D strategy will probably put pesticide development in one site and gene discovery in the<br />
other. Or as mentioned in the introduction, if a company is an established multinational corporation<br />
they may not be able to move quickly enough to take advantage of new opportunities, including not<br />
having staff qualified to develop those new opportunities. This is part of what Geels calls 'lock-in'<br />
(2004).<br />
2.3.3 Ownership and Financing<br />
Corporations are well known to be beholden to the wishes of their shareholders, that they are<br />
expected to produce profit for their shareholders (Bakan 2005). But what about different financing<br />
arrangements such as a start-up financed by a business loan from their bank; or a small enterprise<br />
financed by venture capital; or a mid-size company financed by private equity?<br />
In the experience of the Chairman of the Board of Directors of Arysta LifeSciences, different<br />
investment sources have different expectations: Banks are risk averse, focused on cash flows, have<br />
hundreds of investments and focus on short-term time-scales; Private equity investors have a smaller<br />
portfolio, take on some risk in exchange for a share of profits and have a mid-term focus of 4-6 years;<br />
Venture capitalists also have a smaller portfolio, but take on high risk, expect high return, and have<br />
long time-scales (Chris Richards' presentation to Society of Chemical Industry, March 21 st , 2011).<br />
These differing expectations will likely influence decisions a company makes on its R&D portfolio.<br />
2.3.4 People Issues<br />
And last but not least are the people that actually work in the offices, laboratories and test-plots. And<br />
their managers. And office politics. And how teams work together (or not). This framework condition<br />
has not been called Personnel or Human Resources because this conjures too specific a job function<br />
within these organisations.<br />
For example, Ciba-Geigy's Vision 2000, a precursor to the triple bottom line, was a plan of company<br />
culture change in the 1990s. It focused on responding to social and environmental issues and<br />
included retiring all staff over the age of 60 to reduce the age demographics of the company<br />
(Kennedy 1993). However, Vision 2000 was not 'owned' by all teams and business units. Rather, it<br />
was was the administrative domain of Corporate Safety and Environment (Vorley 2004). Being the<br />
remit of the health and safety team meant that the vision of environmental sustainability was<br />
potentially imposed on other teams. If Vision 2000 had been owned by the R&D function of Ciba-<br />
Geigy, this may have drove them to develop different kinds of products than they had in the past.<br />
Instead the focus was on less toxic products rather than changing the kind of business Ciba-Geigy<br />
was engaged in (Vorley 2004). It also means that these values may not have been transferred when<br />
Syngenta was created as a new company.<br />
3. Implications and Next Steps<br />
The conceptual framework is a descriptive device for making sense of the object of enquiry; it is<br />
meant to help capture the complexity of a key industry that needs to respond to a number of global<br />
challenges (or opportunities) regarding food security and environmental degradation. Capturing the<br />
complexity of agribusiness product development will hopefully lead to insights into the pinchpoints in<br />
this innovation system; the loci of power; the logjams of procrastination; the barriers of confusion and<br />
so on. From the point of view of agribusiness companies, understanding the complexity may help<br />
them plan their R&D portfolios better in terms of strategy or personnel. Or from the point of view of the<br />
government technocrat, it may help them to design interventions into the innovation system.<br />
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Sophie Payne-Gifford<br />
The next stage in the author's PhD research involves the continued development of the conceptual<br />
framework, particularly the as it relates to the internal environment, as the author is least familiar with<br />
this body of literature. Also necessary, is to develop focused questions for the period of empirical<br />
research, currently proposed as a period of ethnographic fieldwork. Specifically, two short periods of<br />
participant observation are proposed in companies with different structures to document how the<br />
framework conditions play out in the different field-sites as well as site visits to other actors in the<br />
innovation system.<br />
This period of multi-sited ethnographic fieldwork will show how different types of companies respond<br />
to their framework conditions to develop products - new ones as well as redeveloping existing ones. It<br />
will show which framework conditions, internal or external, enable innovation and which ones<br />
constrain it, attending in particular to those that support pro-environmental innovation – however this<br />
may be constituted. By describing the conditions that that enable product development, a template for<br />
routes to successful product development can be specified. Although qualitative research does not<br />
lend itself to generalisability, the outcomes of this research will still be beneficial to other actors in the<br />
agricultural innovation system in terms of identifying conditions beneficial to growth, both economic<br />
and environmental.<br />
References<br />
Bakan, J., 2004. The corporation : the pathological pursuit of profit and power. London: Constable.<br />
Bennett, A., 2010. The Future of Agriculture – Sustaining what, how and by whom? Keynote Speech to Tropical<br />
Agriculture Association, Hugh Bunting Memorial Lecture, June 7, 2010.<br />
BIS, 2011. About R&D tax credits. Department of Businesses, Innovation and Skills. Available at:<br />
http://www.bis.gov.uk/policies/innovation/business-support/rd-tax-credits/about [Accessed April 11, 2011].<br />
BIS, 2005. ENVIRONMENTAL INNOVATIONS ADVISORY GROUP: EIAG Paper Prioritising Environmental<br />
Technologies. Department of Businesses, Innovation and Skills. Available at: http://www.bis.gov.uk/<br />
files/file35315.pdf [Accessed April 11, 2011].<br />
BIS, 2004. Environmental Innovation: Taking the agenda forward. Away day workshop for EIAG and invited<br />
guests. Wednesday 2 June to Thursday 3 June 2004, The Swan at Streatley Hotel. Department of<br />
Businesses, Innovation and Skills. Available at: http://www.bis.gov.uk/files/file13493.pdf [Accessed April 11,<br />
2011].<br />
CGIAR, 2010. Integrated Pest Management and Crop Health — bringing together sustainable agroecosystems<br />
and people’s health. White Paper. Consultative Group on International Agricultural Research. Ibadan,<br />
Nigeria: SP-IPM Secretariat, International Institute of Tropical Agriculture (IITA).<br />
DEFRA, 2011. Cross Compliance. Department for Environment, Food and Rural Affairs. Available at:<br />
http://www.defra.gov.uk/food-farm/farm-manage/cross-compliance/ [Accessed April 11, 2011].<br />
Durant, R.F., 2004. Introduction. In Environmental governance reconsidered : challenges, choices, and<br />
opportunities. Cambridge, Mass.; London: Cambridge, Mass.; London : MIT.<br />
Engel, G.H., 1995. Facilitating Innovation : an action-oriented approach and participatory methodology to improve<br />
innovative social practice in agriculture., Landbouwuniversiteit te Wageningen.<br />
EU Pesticides Regulation: REGULATION (EC) No 1107/2009.<br />
Geels, F., 2004. From sectoral systems of innovation to socio-technical systems: Insights about dynamics and<br />
change from sociology and institutional theory. Research Policy, 33, pp.897-920.<br />
Glover, D., 2002. Transnational Corporate Science and Regulation of Agricultural Biotechnology. Economic and<br />
Political Weekly, 37(27 (Jul. 6-12, 2002)), pp.2734-2740.<br />
Guthman, J., 2004. Room for manoeuvre? (In)organic agribusiness in California. In Agribusiness & Society:<br />
Corporate Responses to Environmentalism, Market Opportunities and Public Regulation. London: Zed<br />
Books.<br />
Hall, A., Rasheed Sulaiman, V., Clark, N., Yoganand, B., 2003. From measuring impact to learning institutional<br />
lessons: an innovation systems perspective on improving the management of international agricultural<br />
research. Agricultural Systems, 78(2), pp.213-241.<br />
Jansen, K. & Vellema, S., 2004. Agribusiness and environmentalism: the politics of technology innovation and<br />
regulation. In Agribusiness & Society: Corporate Responses to Environmentalism, Market Opportunities and<br />
Public Regulation. London: Zed Books.<br />
Kennedy, C., 1993. Changing the company culture at Ciba-Geigy. Long Range Planning, 26(1), pp.18-27.<br />
Klerkx, L. & Leeuwis, C., 2008. Balancing multiple interests: Embedding innovation intermediation in the<br />
agricultural knowledge infrastructure. Technovation, 28, pp.364-378.<br />
Knights, D. & Willmott, H., 2007. Introducing organizational behavior and management. Australia: Thomson.<br />
Leeuwis, C., 2004. Communication for rural innovation: rethinking agricultural extension, Blackwell Science.<br />
Merrington, G. et al., 2002. Agricultural Pollution: Environmental Problems and Practical Solutions, London and<br />
New York: Spon Press, Taylor & Francis Group.<br />
Monsanto, 2010. Monsanto Announces Record 11 Project Advancements in Annual Research and Development<br />
Pipeline Update. Available at: http://monsanto.mediaroom.com/index.php?s=43&item=788 [Accessed April<br />
11, 2011].<br />
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Narula, R., 2003. Globalization & technology : interdependence, innovation systems, and industrial policy,<br />
Cambridge: Polity Press.<br />
Newell, P., 2003. Globalization and the Governance of Biotechnology. Global Environmental Politics, 3(2), pp.56-<br />
71.<br />
Pingali, P.L. & Traxler, G., 2002. Changing locus of agricultural research: will the poor benefit from biotechnology<br />
and privatization trends? Food Policy, 27(3), pp.223-238.<br />
PINSTRUP-ANDERSEN, P. & MENGISTU, T., Implications of Globalization for Agricultural Research. In J. VON<br />
BRAUN, E. DIAZ-BONILLA, & INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE, eds.<br />
Globalization of food and agriculture and the poor. New Delhi: Oxford University Press.<br />
PINSTRUP-ANDERSON, P. & SCHIOLER, E., 2001. Seeds of Contention: World Hunger and the Global<br />
Controversy Over GM Crops, International Food Policy Research Institute. Available at:<br />
http://www.ifpri.org/sites/default/files/pubs/pubs/fps/fps33.pdf [Accessed July 11, 2010].<br />
Richards, C., 2011. The challenges of funding innovation in a mid-sized multinational agrochemical company.<br />
Presentation to Society of Chemical Industry March 21, 2011. Funding Agri-Innovation: New Ventures in<br />
Food Security and Biorenewables.<br />
Rosenberg, N., 1982. Inside the black box : technology and economics, Cambridge: Cambridge University<br />
Press.<br />
Rosenthal, E., 2004. The DBCP pesticide cases: seeking access to justice to make agribusiness accountable in<br />
the global economy. In Agribusiness & Society: Corporate Responses to Environmentalism, Market<br />
Opportunities and Public Regulation. London: Zed Books.<br />
Rosenzweiz, C., 2000. Climate Change and Agriculture. In A. Eaglesham, W. F. Brown, & R. W. F. Hardy, eds.<br />
The biobased economy of the twenty-first century : agriculture expanding into health, energy, chemicals,<br />
and materials. New York: National Agricultural Biotechnology Council.<br />
Sattler, C. & Nagel, U.J., 2010. Factors affecting farmers’ acceptance of conservation measures--A case study<br />
from north-eastern Germany. Land Use Policy, 27(1), pp.70-77.<br />
Smith, P. et al, Chapter 8: Agriculture. In Climate Change 2007: Mitigation. Contribution of Working Group III to<br />
the Fourth Assessment Report of the Intergovernmental Panel on Climate Change. UNFCCC.<br />
UNFAO, 2007. Agriculture and Water Scarcity, United Nations Food and Agriculture Organisation.<br />
Vanloqueren, G. & Baret, P.V., How agricultural research systems shape a technological regime that develops<br />
genetic engineering but locks out agroecological innovations. Research Policy, 38(6), pp.971-983.<br />
Vorley, W., 2004. Reconciling shareholders, stakeholders and managers: experiencing the Ciba-Geigy vision for<br />
sustainable development. In Agribusiness & Society: Corporate Responses to Environmentalism, Market<br />
Opportunities and Public Regulation. London: Zed Books.<br />
Whatmore, S. et al., 1997. Nourishing Networks: Alternative Geographies of Food. In Globalising food: agrarian<br />
questions and global restructuring. Blackwell Publishing Ltd. pp. 287-304.<br />
1005
Paving the Path for Innovation: the case of Romanian<br />
SMEs<br />
Irina Purcarea and Marieta Olaru<br />
Academy of Economic Studies, Bucharest, Romania<br />
irina.purcarea@gmail.com<br />
olaru.marieta@gmail.com<br />
Abstract: Nowadays, an emphasis on innovation represents an important factor of competitiveness for the<br />
business environment, especially in what concerns the small and medium enterprises sector. Romanian SMEs<br />
acknowledge the importance of shifting towards an innovative approach and decide to engage in different types<br />
of innovation, in spite of the various obstacles they have to face. Recent researches, such as the research<br />
carried out in 2009 by the National Council of Medium Sized Private Enterprises in Romania, revealed that<br />
innovation efforts in Romanian SMEs are mostly oriented towards product innovation and innovation in<br />
technology. The paper is based on the research carried out in 2010, an integral part of the doctoral research that<br />
focuses on developing SMEs capacity to innovate with the view to increase their competitiveness. The<br />
questionnaire-based research was conducted between January and December 2010, on a sample of 161<br />
Romanian SMEs, from various economic sectors and covering different geographical areas. The main objective<br />
of the research was to investigate the different types of innovation Romanian SMEs engage in, with an emphasis<br />
on 4 types of innovation namely product/technology innovation, business model innovation, organizational<br />
innovation and process innovation. The paper seeks to identify the type of innovation Romanian SMEs are more<br />
inclined to pursue, at the same time trying to paint a picture of the innovation framework established. The paper’s<br />
findings concern Romanian SMEs orientation towards an innovative organizational culture and allowed a better<br />
understanding of the types of innovation identified by the SMEs questioned. The accuracy of data could have<br />
been influenced by certain factors such as culture, age and social status of the respondents. We believe that a<br />
future research in what concerns the underlying factors that SMEs should take into consideration when selecting<br />
a specific type of innovation to be implemented could represent the starting point in developing a model for<br />
innovation at company level.<br />
Keywords: innovation, SMEs, organizational culture<br />
1. Introduction<br />
There are many reasons why companies should innovate, such as new technologies, facing a<br />
changing business environment or customers becoming more demanding just to name a few. Special<br />
attention should be given to Small and Medium Enterprises (SMEs) in particular due to the fact that<br />
they represent an engine for growth and, because of their dynamism and flexibility, they constitute a<br />
significant source of new jobs, in some countries being in fact the only source of new jobs.<br />
The European integration led to an increased competition on both national and international markets,<br />
while the quality and the services offered to the customers are considered to be major factors of<br />
competitiveness for SMEs. Innovation is widely recognized as a key factor in the competitiveness of<br />
nations and firms. Increasing the speed of innovation however remains a challenge for Romanian<br />
small and medium enterprises. In order to provide clear directions on improving the innovation<br />
framework in SMEs, one should take a closer look at the type of innovation that SMEs are more<br />
inclined to implement as well as the constraints they deal with in this “innovative journey”.<br />
The paper relates to a questionnaire-based research conducted between January and December<br />
2010, on a sample of 161 Romanian SMEs, from various economic sectors and covering different<br />
geographical areas to investigate the different types of innovation Romanian SMEs engage in, as well<br />
as the most frequent obstacles to innovation signalled by the SMEs interviewed.<br />
2. Overview of the Romanian SMEs sector in relation to the economic crisis<br />
The structure of the business sector in Romania is based mostly on small and medium enterprises. In<br />
this context, the part played by the Romanian SMEs sector in what concerns economic development<br />
is strongly related to that of the entrepreneurs and entrepreneurial spirit in the Romanian society.<br />
In 2008 and 2009, the business sector in Romania was confronted with certain difficulties at<br />
macroeconomic level, as a result of the impact of the financial crisis, later the economic crisis.<br />
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Irina Purcarea and Marieta Olaru<br />
The Annual Report on the SMEs sector 2010, prepared by Post-Privatization Foundation, is a<br />
reflection of the situation of small and medium sized enterprises in 2009, which also included<br />
conclusions and recommendations based on the key findings of the report. The report acknowledges<br />
once again the powerful impact of the global economic crisis on the Romanian economy, affecting<br />
mainly employment and sales volume.<br />
In what concerns Romanian SMEs, the impact of the crisis can be summarized in terms of high<br />
difficulty in acquiring access to credits, which occurred due to banks’ low interest in small customers,<br />
the credit’s high costs as well as the increasingly stringent requirements applied to the analysis of<br />
projects and applicants’ trustworthiness. In this context, looking at the situation on the market which<br />
was completely different as compared to the previous year, the SMEs were obliged to take certain<br />
urgent measures in order to adjust administrative expenses. Such measures have resulted in<br />
diminishing investments, postponing or even abandoning certain investment projects, renegotiating<br />
contracts with suppliers, restructuring/ reducing activity, consequently personnel and wage reductions.<br />
The 2010 White Paper on SMEs in Romania emphasized that the SMEs that reduced their activity to<br />
the highest extent were those from the industrial and transport sectors, where over 52% of SMEs<br />
state that they had reduced their activity, followed by the construction sector (over 51%).<br />
In 2009, a study was conducted with the aim to analyse the impact of the crisis on SMEs in Romania.<br />
The study was prepared by the National Council of Small and Medium Sized Private Enterprises in<br />
Romania together with the consultancy firm Cult Market Research SRL. The respondents were<br />
required to specify areas where the company decided to cut costs (Figure 1) as well as specific<br />
measures to be taken to reduce the effects of the crisis in the following period.<br />
Figure 1: Areas for reducing costs in Romanian SMEs<br />
Source: www.immromania.ro<br />
The most important measures taken by the entrepreneurs were those directed towards reducing<br />
administrative expenses (71.9%) and diminishing investments (57.5 %). In what concerns the<br />
measures taken to reduce the effects of the crisis, the most suitable policy at this time, to reduce the<br />
effects of the crisis, appears to be keeping existing customers. According to the respondents, the<br />
investments are made in this area in particular, also in what concerns developing and launching new<br />
products.<br />
The latest evaluation of the SMEs sector displayed a very unfavourable evolution of Romanian<br />
SMEs. According to the 2010 SMEs rating developed by the National Council of Small and Medium<br />
Sized Private Enterprises in Romania, in the first semester of 2010, the number of profitable SMEs<br />
decreased by 2% compared to the first semester of 2009, while the average number of employees<br />
per SME decreased by 3.11% compared to the first semester of 2009. The same study revealed that<br />
SMEs’ investments decreased by 6.45% in the first semester of 2010 compared to the first semester<br />
of 2009. On the other hand the exports of private enterprises increased by 0.85% in the first semester<br />
of 2010 compared to the first semester of 2009.<br />
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Irina Purcarea and Marieta Olaru<br />
(Sima 2009) advocates for the identification of opportunities generated by the actual crisis the SMEs<br />
are facing at present, such as rethinking the management system, developing or reorienting the<br />
business towards more profitable areas of activity, establishing objectives related to possible<br />
acquisitions or mergers; reducing supplier costs or different administrative expenses, as well as<br />
access to funding programs, preferably with external funds so that a real and necessary capital<br />
infusion is realized.<br />
3. Study on the Romanian SMEs approach to innovation<br />
Innovation is a dynamic and continuous process, contributing to economic growth. Especially at times<br />
of crisis, as the times we are facing now, financing innovation in enterprises represents a way to<br />
overcome the crisis.<br />
In general, the weight of innovative enterprises increases in relation to the size of the enterprise.<br />
According to a study on innovation in the industry and services sectors between 2006 and 2008, in<br />
Romania, medium-sized enterprises display a higher extent of innovation activity (40.8%) whereas<br />
only 29.8% of small enterprises are innovative. It is also important to mention that the same study<br />
revealed that 19.7% of enterprises were technological innovators – introducing new or improved<br />
products and/or processes and 13.6% of enterprises oriented towards implementing new methods in<br />
business practices, external relations or new marketing methods.<br />
The paper is based on the research carried out in 2010 - an integral part of the doctoral research that<br />
focuses on developing SMEs capacity to innovate with the view to increase their competitiveness -<br />
seeking to identify the predominant type of innovation within Romanian SMEs, at the same time trying<br />
to paint a picture of the innovation framework established, with an emphasis on the innovation<br />
constraints.<br />
3.1 Methodology<br />
The questionnaire-based research was conducted between January and December 2010, on a<br />
sample of 161 Romanian SMEs, from various economic sectors and covering different geographical<br />
areas.<br />
The main steps in the research process that we took into consideration were: determining the<br />
research aims and objectives, choosing the method used, and analysis of data.<br />
The main objective of the research was to identify the predominant types of innovations Romanian<br />
SMEs engage in as well as the most common obstacles to sustained innovation.<br />
In what concerns the types of innovations, the respondents were presented with 4 types of innovation:<br />
� product/technology innovation,<br />
� business model innovation,<br />
� organizational innovation and<br />
� process innovation.<br />
Regarding the obstacles to innovation, the enterprises that took part in the research had to consider<br />
eight types of obstacles/constraints to innovation:<br />
� perceived risks;<br />
� higher costs;<br />
� lack of funds;<br />
� insufficient potential for innovation;<br />
� lack of qualified personnel;<br />
� lack of information;<br />
� managers and/or employees attitude towards change and<br />
� legislation, regulations and standards.<br />
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Irina Purcarea and Marieta Olaru<br />
The types of innovations proposed within this study and the constraints to innovation that the<br />
enterprises had to consider were selected based on the existing literature on innovation and recent<br />
surveys conducted on Romanian SMEs.<br />
In order to fulfil the research objectives set, a structured questionnaire was designed, which included<br />
closed-ended questions. Respondents were required to rank each statement on a scale from 1 to 5<br />
where: 1 – strongly disagree; 2 - somewhat disagree; 3 – no opinion; 4 - somewhat agree and 5 –<br />
strongly agree.<br />
This format helped us ascertain how strongly the respondents agree that one specific type of<br />
innovation reflects the enterprise’s innovation activity as well as gaining an insight into the most<br />
common obstacles Romanian SMEs face in their innovation activities.<br />
The questionnaires were personally administered and results were recorded first on paper and then<br />
on the computer in order to be able to report the findings using graphical representations.<br />
Figure 2: Distribution of SMEs according to the geographical region (28 counties)<br />
As Figure 2 points out, the majority of SMEs participating in the study were from Bucharest, namely<br />
74 enterprises interviewed, followed by Constanta (12 enterprises) and Braila (11 enterprises).<br />
Figure 3: Questionnaire distribution with respect to the position occupied by the SME representative<br />
Figure 3 shows the distribution of the questionnaires in relation to the type of position occupied by the<br />
representative filling out the questionnaire administered. As the graphical representation points out,<br />
the majority of questionnaires were filled out by the general manager of the company (94), 22<br />
questionnaires filled out by the administrator and 10 questionnaires filled out by the company’s quality<br />
manager.<br />
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Irina Purcarea and Marieta Olaru<br />
Figure 4: Distribution of SMEs in relation to the field of activity<br />
The data was collected from a sample of 161 SMEs randomly selected from among the small and<br />
medium enterprises activating in seven sectors of activity, namely public administration, commerce,<br />
constructions, production, services, transportation and tourism (Figure 4). The highest percentage of<br />
SMEs came from the services sector, namely 61 enterprises followed by commerce, with 48<br />
enterprises participating in the study and 29 enterprises from the production sector.<br />
3.2 Research findings<br />
The research conducted between January and December 2010, part of the doctoral research, relates<br />
to SMEs innovation activity from various perspectives. Firstly, the research sought to gain an insight<br />
into the type of organizational culture created, with an emphasis on the degree to which creativity and<br />
learning are encouraged at the level of the enterprise, the extent to which certain internal and external<br />
sources of learning are employed, and lastly, the predominant types of innovations implemented as<br />
well as the prevailing obstacles or constraints to innovation.<br />
For this paper, we have chosen to focus on analyzing the SMEs approach to innovation from two<br />
perspectives: the type of innovation activity prevalent at the level of the enterprise and the obstacles<br />
to innovation that are identified by the largest number of enterprises.<br />
Figure 5: SMEs distribution in relation to four types of innovation activities<br />
In what concerns the type of innovation activity, respondents were required to take into consideration<br />
4 types of innovation, namely tehnology or product innovation, business model innovation,<br />
organizational innovation and process innovation. Each respondent had to rank on a scale from 1 to 5<br />
the degree to which each of these 4 types of innovation best describes their enterprises’ innovation<br />
behaviour.<br />
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Irina Purcarea and Marieta Olaru<br />
Figure 5 points out that most SMEs focus on innovation in their business model (41.6%), followed by<br />
technology or product innovation implemented by 37.2% of the SMEs and process innovation<br />
implemented by 32.9% of enterprises.<br />
Between 2006 and 2008, the weight of innovative SMEs in Romania was 33% whereas 66.7% of the<br />
SMEs have not been innovating at all. Most SMEs focused on technology-related innovation and only<br />
13.6% implemented new methods related to business practices, workplace organization, external<br />
relations or new marketing methods. According to the 2009 research carried out by the National<br />
Council of Medium Sized Private Enterprises in Romania, innovation efforts in Romanian SMEs were<br />
mostly oriented towards product and technology innovation.<br />
Our research shows that in 2010 Romanian SMEs were mainly concerned with business model<br />
innovation. A possible explanation for Romanian SMEs orientation towards innovating in this<br />
particular area – their business model - is related to the actual crisis that urges enterprises to identify<br />
new opportunities and rethink their whole business.<br />
Figure 6: SMEs distribution in relation to eight types of obstacles/constraints to innovation<br />
Another direction pursued in our research was centred on identifying the most common obstacles or<br />
constraints to innovation SMEs face at the moment. In this section, respondents were required to take<br />
into consideration eight types of obstacles/constraints to innovation, namely perceived risks; higher<br />
costs; lack of funds; insufficient potential for innovation; lack of qualified personnel; lack of<br />
information; managers and/or employees attitude towards change and legislation, regulations and<br />
standards.<br />
According to a study regarding the Romanian SMEs sector between 2006 and 2008, in what concerns<br />
the barriers to innovation, most SMEs pointed out that the lack of qualified personnel and lack of<br />
external funding represents the most visible constraints to innovation.<br />
Figure 6 shows that 39.1% of SMEs consider the lack of funds an obstacle to innovation, followed by<br />
higher costs (34.7%) and legislation, regulations and standards (29.1%).<br />
4. Conclusions<br />
<strong>Entrepreneurs</strong>hip and SMEs are considered to be the main drivers of the EU’s economic<br />
performance, as engines of structural change, innovation and employment growth. The contribution of<br />
SMEs to creating a competitive economy should also be taken into consideration. In this respect,<br />
innovation plays a key role in improving SMEs competitiveness.<br />
The current research that the paper is based on looks at innovation from two perspectives: on one<br />
hand, the specific type of innovation implemented by Romanian SMEs and, on the other hand, the<br />
obstacles or constraints to innovation that they had to face in their innovative undertaking. Regarding<br />
the type of innovation implemented, the findings revealed that most SMEs (41.6% of SMEs) reported<br />
business model innovation as the main type of innovation employed. Considering the difficult times<br />
the business environment is facing and looking at reports from previous years, their orientation to<br />
business model innovation can be described as their quest for new opportunities that would help them<br />
in alienating the effects of the crisis.<br />
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Irina Purcarea and Marieta Olaru<br />
An identification of barriers to innovation can help companies in what concerns fostering an innovative<br />
culture within the firm. This aspect can also be perceived as a way in which employees are<br />
encouraged to identify new ideas as well as stimulating proper innovation management.<br />
Recent reports issued in 2009 on the obstacles to innovation for SMEs pointed out Romanian SMEs’<br />
difficulty in ensuring financial resources, high costs as well as the instability of legislation. In what<br />
concerns Romanian SMEs, our research showed that the lack of funds appears to be the most<br />
prevalent constraint to innovation, reported by 39.1 % of SMEs. Our research also indicated the high<br />
costs and legislation as obstacles to innovation reported by 34.7%, namely 29.1% of SMEs. It is<br />
important to mention, in this context, SMEs difficulty in accessing grants due to the fact that they are<br />
not able to meet the minimum eligibility criteria related to the financial situation of the enterprise<br />
(incurring financial loss), lack of experience in accessing European funding and difficult administrative<br />
procedures and criteria established by management authorities for accessing grants.SMEs, especially<br />
medium enterprises, need to invest more and more in research and development, human resources<br />
development and other intangible assets in order to maintain or develop market competitiveness. It is<br />
therefore highly important for Romanian SMEs, at the moment, to focus especially on gaining more<br />
experience regarding the management of European funds in addressing the lack of financial<br />
resources.<br />
The findings relate to Romanian SMEs and they are therefore specific to Romania. The research<br />
allowed us to gain an insight into the type of innovation activity SMEs carry out to the highest extent<br />
as well as enabling us to compare the current innovation activity to the innovation activity carried out<br />
by SMEs during 2006-2009. Identifying the most common obstacles to innovation in Romanian SMEs<br />
represents a starting point for providing future directions towards solving the obstacles in order to<br />
support the innovation activity and outcomes. Although the findings are specific to Romania, the<br />
study can be used in order to relate it to similar studies on SMEs in other EU countries and therefore<br />
be able to conduct comparative analyses on the findings. This may provide the basis for<br />
recommendations and initiatives to be considered in addressing certain innovation-related aspects. A<br />
more comprehensive examination of the innovation constraints in SMEs in relation to various types of<br />
innovation processes could be used as the basis for future research in this specific area. We also<br />
believe that a future research in what concerns the underlying factors that SMEs should take into<br />
consideration when selecting a specific type of innovation to be implemented represents the starting<br />
point in developing a model for innovation at company level.<br />
References<br />
Purcarea,I. (2010) Directions for enhancing innovation within Romanian SMEs, Proceedings of the 11th<br />
European Conference on Knowledge Management Volume two, <strong>Academic</strong> Publishing <strong>Limited</strong>, pp.1188-<br />
1195.<br />
Purcarea,I. (2009) The process of innovation in Romanian small and medium enterprises (book chapter). In: M.<br />
W. Staniewski and P. Szczepankowski eds. Management in the New Economy. Classic and modernity,<br />
Hannover: Druck und Verlag Europaische Akademie der Naturwissenschaften, pp. 201-218.<br />
Purcarea,I. (2008), The place of small and medium enterprises within the sustainable development framework,<br />
Contemporary Economics, No.3, pp.65-69.<br />
Sima,M. (2009) Factori majori de influenta ai competitivitatii IMM-urilor romanesti in contextul economiei actuale,<br />
[Online],<br />
http://cpo.ipa.ro/Documente/FACTORI%20MAJORI%20DE%20INFLUENTA.pdf (accessed on 12.04.2011)<br />
Renate,L. (2010) Internal and external innovation hindering obstacles at SMEs, [Online],<br />
http://www.ism.lt/bmra/2010/CP%2039%20Renate%20Lukjanska.pdf (accessed on 13.04.2011).<br />
Stoleriu,G., M.Olaru, I.Purcarea (2009), Developing an innovation-oriented organizational culture for Romanian<br />
Small and Medium, In: C. Rusu ed. Proceedings of the 6 th International Conference on Management of<br />
Technological Changes, Vol. 1, pp.417- 420.<br />
Evaluarea situatiei de ansamblu a IMM-urilor din Romania in semestrul I 2010 (Report), [Online],<br />
http://www.cnipmmr.ro/statistica/evaluarea-semestriala-11.pdf (accessed on 12.04.2011)<br />
Raportul Anual privind sectorul IMM din Romania, 2010 – Evolutii intre dificultati si provocari, [Online]<br />
http://www.postprivatizare.ro/romana/wp-content/uploads/2011/02/Raport_FPP_RO-13022011_web.pdf<br />
(accessed on 12.04.2011)<br />
Patronatul IMM-urilor: industria si transporturile – domeniile in care criza economica a afectat cel mai mult<br />
activitatea firmelor, [Online],<br />
http://www.euractiv.ro/uniunea-europeana/articles%7CdisplayArticle/articleID_20655/Patronatul-IMM-urilorindustria-si-transporturile-domeniile-in-care-criza-economica-a-afectat-cel-mai-mult-activitatea-firmelor.html<br />
(accessed on 11.04.2011)<br />
Impactul crizei asupra IMM-urilor din Romania, [Online],<br />
http://www.immromania.ro/retrieve.php?e=inf_noutati&m=972 (accessed on 11.04.2011)<br />
1012
Innovation Capital and Firm’s Performance in Malaysian<br />
Public Companies<br />
Azlina Rahim 1 , Ruhaya Atan 2 and Amrizah Kamaluddin 2<br />
1<br />
Universiti Teknologi MARA, Kampus Bandaraya Melaka, Malaysia<br />
2<br />
Universiti Teknologi MARA, Selangor, Malaysia<br />
azlina@bdrmelaka.uitm.edu.my<br />
ruhaya@salam.uitm.edu.my<br />
amrizah@salam.uitm.edu.my<br />
Abstract: Innovation has been recognized as one of the important factors of economic growth. U.S. Department<br />
of Commerce defines innovation as the design, development and implementation of new or altered products,<br />
services, processes, organizational structures, and business models to create value for the customer and<br />
financial returns for the firm practicing innovation. In Malaysia, innovation takes center stage in the New<br />
Economic Model that has been recently announced. In fact, many countries in the region and around the world<br />
now aspire to drive growth through innovation. Due to its importance, it inspires us to study on how an innovation<br />
capital affect to firm’s performance. The purpose of this study is to contribute to the understanding of innovation<br />
capital in Malaysian Public Companies. The study adopts a quantitative approach whereby the data of specific<br />
innovation drivers were retrieved from the annual reports of Malaysian Public Companies. The study will also<br />
investigate empirically the relation between the innovation capital and its impact on firm performance of<br />
Malaysian Public Companies. The study evaluates whether firms with high innovation intensities perform better<br />
than firms with low intensities. Due to the mix results in previous studies, it encourages the researchers to<br />
conduct such study and conclude these relationships. The results will extend the understanding of the role of<br />
innovation capital in enhancing the performance of companies in the developing countries. Therefore, the<br />
findings from this study may serve as a useful input for scholars and managers to better understand the<br />
implication of innovation capital to the firm performance. Thus, managers can use the innovation capital<br />
information to create higher value and maintain long-term competitiveness.<br />
Keywords: Innovation capital, firm performance, Malaysia<br />
1. Introduction<br />
Innovation is widely regarded as a critical source of competitive advantage especially in the changing<br />
environment (Mary and Marina, 2010). In the business world, innovation has received extensive<br />
attention. This has been supported by the result obtained from the survey made by leading business<br />
consultants - Boston Consulting Group, McKinsey & Company and Booz Allen Hamilton where their<br />
results indicate the importance of innovation, where it has been a high priority for corporate leaders<br />
around the world.<br />
The concept of innovation was originally raised by a prominent scholar, Dr Schumpeter; he believed<br />
that the definition of innovation is to efficiently use resources; a new way for production to meet the<br />
market’s requirements and to motivate the economic growth (Cheng et al., 2008). Furthermore, Clark<br />
and Guy (1998) believed that innovation is the procedure for transforming knowledge to and into a<br />
real product.<br />
Therefore, it is inevitable for companies who want to develop and maintain a competitive advantage to<br />
gain entry in the new market. It can be done by differentiating products and services from others and<br />
make it well accepted by customers. In fact, many countries in the region and around the world now<br />
aspire to drive growth through innovation. For example, country like US, EU including UK and France<br />
has focusing on innovation. Indeed, in Japan itself the Prime Minister Abe recognizes the promotion<br />
of innovation as of the main pillars of its policy agenda (Sumita, 2008).<br />
As for Malaysia, innovation takes center stage in the New Economic Model that has been recently<br />
announced. Innovation is the key mechanism that will propel Malaysia forward, and can be fostered<br />
by the utilization of technologies. Malaysia started to lay the foundation for the knowledge-based<br />
economy in the mid-1990s, among others, with the launching of the National IT Agenda and the<br />
Multimedia Super Corridor (MSC).<br />
Recently, the Economic Planning Unit under the Prime Minister’s Department has launching The<br />
Economic Monitor published by the World Bank with the theme of growth through innovation. It will<br />
provide useful insights to investors, analysts and the business community on the state and potentials<br />
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Azlina Rahim, Ruhaya Atan and Amrizah Kamaluddin<br />
of the Malaysian economy. As a result, it will embark Malaysia journey to become a high income and<br />
developed country. The knowledge-based economy presents the way forward to achieve sustainable<br />
rapid growth and remain globally competitive in the medium and long term.<br />
In the era where capital and labour seem abundant, innovation is the most important avenue to<br />
growth. For example; Mary and Marina (2010) consolidate the state of academic research on<br />
innovation found that the number of publications in the fields of business, finance, economics and<br />
management with innovation as the topic of research has grown at an average of 14 percent per year.<br />
It shows around 50 researches in 1981 to more than 1000 per year in 2008.<br />
Most of these researches concentrate on the study on perceived innovation which focuses on survey<br />
method. This is due to the unavailability of data from the companies. In Malaysia, there is scarce<br />
research on innovation. Many of the studies concentrate on the innovation and performance on SMEs<br />
(Ngah and Ibrahim, 2009). Recent study by Khin et al. (2010) present qualitative findings related to<br />
product innovation as well as their strategies and resources among ICT (information and<br />
communication technology) technopreneurs in the software sector of Malaysia.<br />
Being aware of the importance and the increasing interest on the area of innovation and performance,<br />
it triggers to conduct such study in Malaysia. This study will examine the innovation capital of<br />
Malaysian public companies for a ten-year period from 2000 to 2009. The study will also investigate<br />
empirically the relation between the innovation capital and firm performance of Malaysian Public<br />
Companies.<br />
Being the first to conduct the longitudinal study based on innovation capital and its relation to firm<br />
performance in Malaysian Public Companies, the findings will allow companies to benchmark<br />
themselves based on the level of innovation. Furthermore, the result from this study will extend the<br />
understanding of the role of innovation capital in the emerging economy like Malaysia.<br />
In addition, the study will contribute to intellectual capital literature and business practice by providing<br />
the information on the innovation capital of Malaysian public companies for ten-year period. Moreover,<br />
the study will present evidence of the relationship between innovation capital and firm performance of<br />
Malaysian companies.<br />
2. Literature review<br />
2.1 Definition of Innovation Capital<br />
Innovation has been recognized as an important driver of economic growth. Literature conceptualizes<br />
innovation in a variety of ways, as a process, and outcome of both (Damanpour and Gopalakrishnan,<br />
1998 and Jimenez and Sanz, 2011). The first definition of innovation was coined by Schumpeter in<br />
the late 20s. (Hansen and Wakonen, 1997). According to Schumpeter, innovation is reflected in novel<br />
outputs: a new good or a new quality of a work; a new method of production; a new market; a new<br />
source of supply; or a new organizational structure. (Mary and Marina, 2010)<br />
In January 2008, the U.S. Department of Commerce (DOC) released a report for identifying and<br />
measuring innovation in the national economy. According to this report, the innovation is defined as<br />
design, development and implementation of new or altered products, services, processes,<br />
organizational structures, and business models to create value for the customer and financial returns<br />
for the firm practicing innovation (Advisory Committee, 2008).<br />
Another extensively definition is from the Organisation for Economic Co-operation and Development<br />
(OECD), The Oslo manual. The 3 rd edition of Oslo manual (2005) defined innovation as the<br />
implementation of a new or significantly improved product, or process, a new marketing method, or a<br />
new organizational method in business practices, workplace organization or external relations.<br />
There are also other definitions that specifically focus on innovation capital. Bontis (2001) defined<br />
innovation capital as the knowledge and assets that enable the development and commercialization<br />
of new products. Furthermore, according to Cheng et al. (2005), innovation capital refers to results of<br />
innovation that take the form of intellectual property rights, such as patents and licenses, and is the<br />
key factor for a company’s ability to maintain long term competitiveness. It also includes the ability of<br />
a company to develop new products and processes.<br />
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Azlina Rahim, Ruhaya Atan and Amrizah Kamaluddin<br />
Literature also distinguishes different type of innovation. The Oslo Manual (2005), divided innovation<br />
into four areas: product, process, marketing and organizational. Further, a study by Wan et al. (2005)<br />
classifies innovation into different types as follows:<br />
1. Technical and administrative innovation: It was first proposed by Daft (1978). The technical aspect<br />
refers to products, services and production processes, and the administrative innovation refers to<br />
innovation that is generated from the managing and alteration of an organization’s structural and<br />
administrative procedures. (Daft, 1978; Damanpour, 1990).<br />
2. Product and process innovation: Product innovation deals with the production of new product or<br />
services. Process innovation is reflected in the improvements or introduction of new production<br />
process for products or services.<br />
3. Radical and incremental innovation: Radical innovation brings about a non-routine but clear change<br />
to the very core on how activities are carried out while incremental innovation is usually part of routine<br />
changes that do not deviate much from present organizational activities. (Dewar and Dutton, 1984;<br />
Ettlie et al., 1984, Wan et al., 2005).<br />
1.1 Innovation Capital Measurement<br />
Why it is crucial to measure innovation capital of a firm? It is because innovation is major determinant<br />
of productivity growth. (Advisory committee, 2008). According to the literature, the measurement of<br />
innovation is difficult due to broad nature of the scope of innovative activities. Rose et al. (2007)<br />
propose two frameworks for measuring innovation.<br />
The first framework measures innovation activity by measuring the intangible assets that are created<br />
into the innovation process at the firm or organizational level, which can be scaled to the national<br />
level. For the second framework, it measures innovation investments, especially the broader<br />
investments that set the stage for innovation.<br />
According to them, the choice of framework used depends on the objective of the exercise. The first<br />
framework provide data availability whereby the second framework able to capture the basic<br />
investments contributing to productivity and growth. (Rose et al., 2007).<br />
Another way of measurement is propose by Roger (1998). According to Roger, the measurement of<br />
innovation is based on input measures and output measures of innovation. Under input measures, the<br />
most extensive used proxy is the level of research and development (R&D) expenditure. The<br />
advantage of this measure is it provides a dollar figures for us in the analysis. (Roger, 1998)<br />
The output measures concentrate on the success of the firm. Normally, it can be proxies by profits,<br />
revenue growth, market capitalization and productivity (Roger, 1998). Another alternative measure of<br />
innovative output is to create variables for the number of new or improved products produced (Roger,<br />
1998).<br />
Measurement of innovation intensity (the share of firm revenue attributable to recently introduced<br />
products and services) may be another useful way to tract the impact of innovation. Firms with high<br />
level of innovation intensities would be expected to have better performance.<br />
Because it is clear that innovation measurement still in its infancy, the Advisory Committee (2008)<br />
chooses to recommend different methods to innovation measurement. The objective is to develop<br />
better estimates as to measure not only the innovation activities and inputs but also on innovation<br />
results and outputs. Improved data on innovation are essential for accessing the impact that the<br />
regulatory policies have on innovation. The data should allow for firm level analysis and sectorial<br />
analysis.<br />
According to Jimenez-jimenez and Sanz-Valle (2011) innovation can be measures in a variety of<br />
ways, as output; new product and processes, input; R&D expenditure, or timing; pioneers or late<br />
followers. This study will encompasses both measures; innovation input and innovation output in<br />
order to form a more complete representation of firm innovativeness.<br />
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Azlina Rahim, Ruhaya Atan and Amrizah Kamaluddin<br />
1.2 Innovation Capital and Firm Performance<br />
Innovation is the process of creating a commercial product from an invention (Hitt et al., 2005).<br />
According to Afuah (2003), the most important reason for innovation in an organization is to make<br />
profit. A firm makes profit by offering products or services at a lower cost than its competitors or by<br />
offering differentiated products at premium prices that more than compensate for the extra cost of<br />
differentiation. Innovation is widely agreed to be a fundamental determinant of firm performance.<br />
Understanding the nature and role of innovation requires analysis of the various types of innovative<br />
activities. The innovation type has a significant impact on business performance, especially<br />
incremental innovation (Oke et al., 2004).<br />
Most of the empirical studies on the relation between innovation and performance provide evidence<br />
that this relation is positive (Damanpour, 1991; Schulz and Jobe, 2001; Thornhill, 2006;<br />
Weerawardenaa et al., 2006). Meanwhile other research reports negative effects (Vermeulen et al.,<br />
2005) . Damanpour (1990) argued that the association between innovation and firm performance<br />
depends on the performance measurement and organizational characteristics. Subramanian and<br />
Nilakanta (1996) examine the relationship between innovativeness of firms, their organizational<br />
characteristics and organizational performance. The results show that the relationship exists. Further,<br />
it indicates that innovativeness does improve the organizational performance.<br />
Calantone et al. (2002) found a positive relationship between firm’s innovativeness and overall<br />
profitability. They adopted ROI, ROA and ROS as objective measures of performance.Feeny and<br />
Roger (2003) empirically examine the link between innovation and performance using a sample of<br />
Australian firms. The results revealed that innovation are important determinants for firm performance.<br />
Giulio et al. (2004) explores the relationship between innovation and economic performance in<br />
services at the firm level. The results show that innovating firms out-perform non innovating firms in<br />
terms of productivity and economic growth. It conclude that innovation have a positive effect on<br />
economic performances in the service sector. In addition, Liu et al. (2005) found that investing in R&D<br />
helps companies to generate innovative outputs, which allows them to increase revenues, reduce<br />
operating costs, and enhance firm value. Wan et al. (2005) studied the determinants of firm<br />
innovation in Singapore. The result indicate positive and significant relationships between<br />
organizational innovation and (1) decentralized structure; (2) presence of organizational resources;<br />
(3) belief of innovation is important; (4) willingness to take risks and (5) willingness to exchange ideas.<br />
Lin and Chen (2007) explore the relationship between innovation and organizational performance.<br />
They measure innovation based on types of innovation. The result indicate that administrative<br />
innovation tend to be more crucial factor in explaining sales as compared to technological innovation.<br />
Further, a recent survey by McKinsey (2008) found that companies which use innovation metrics and<br />
access innovation systematically got highest return from innovation. The survey concludes that<br />
companies would gain a deeper understanding on innovation performance if they paid more attention<br />
to input and output metrics. Jimenez-jimenez and Sanz-Valle (2011) examines the relationship<br />
between innovation and performance.The study explores the relationship using SEM with data from<br />
451 Spanish firms. The findings show that innovation contribute positively to business performance.<br />
Further, studies on innovation intensity by Loof et al. (2001) found that the result different within<br />
country. For example in Finland, the firm size has a negative effect on innovation investment, whereas<br />
in Norway the effect is positive. However, in Sweden the effect is not significant. These results show<br />
that the relationship between innovation and performance is complex and requires more research.<br />
Innovation also has demonstrated a strong and influential relationship with SMEs performance (Wolff<br />
and Pett, 2006; Montequin, 2006).<br />
In Malaysia, studies on innovation and performance were conducted by Ngah and Ibrahim (2009)<br />
where they focus on small medium enterprise (SMEs). Their study traces the intellectual capital of<br />
SMEs that contribute to product and process innovation, which lead to higher performance in SMEs.<br />
Due to lack of study in this area, it encourages the researchers to conduct such study and conclude<br />
these relationships. As on of the emerging market in Asia, there is a practical need for Malaysia to<br />
determine the innovation capital capability and understand the impact of innovation capital on the<br />
firms’ performance. Thus, the managers will be able to make decision on the utilization of their<br />
resources, as they have better understanding on the implication of innovation capital to the firm<br />
performance.<br />
1016
1.3 The Hypotheses<br />
Azlina Rahim, Ruhaya Atan and Amrizah Kamaluddin<br />
Schoenecker and Swanson (2002) have pointed out that innovation is the key to the success of many<br />
industries and the source of competitive advantage. Therefore, to sustain a leading position, a<br />
company must focus on R&D investment to accumulate innovation outputs. The more intensive the<br />
innovation activity, as measured by inputs and outputs, the better the performance of a company. This<br />
study will adopt innovation input and innovation output as a proxy to measure the innovation capital.<br />
Therefore, the study proposes the first hypotheses as follows:<br />
H1: Companies with higher innovation capital tend to have higher firms’ performance,<br />
ceteris paribus.<br />
Tseng’s (2004) empirical results showed that innovation capital has a positive impact on financial<br />
performance and firm value. If innovation determines firms’ performance, it is expected that innovative<br />
firms perform better than non-innovative firms. In order to determine the innovating and non<br />
innovating companies, the data will be classified based on the innovation output. This study defines<br />
innovating companies as the companies that produce new products or processes (Chan et al., 2004).<br />
Therefore, it is expected that there is a difference in the firm’s performance of innovating and non<br />
innovating companies. The following hypotheses is stated as follows:<br />
H2: There is a difference in the firms’ performance of innovating and non-innovating<br />
companies<br />
2. Research methodology<br />
Previous researchers used perceived innovation capital where they used survey method as to gain<br />
information on the innovation capital. However, since this study adopts quantitative approach, the<br />
financial data will be obtained from the annual reports. There are researchers that attempts to link<br />
financial data to innovation capital. (e.g.; Wang and Chang, 2005) where they use research and<br />
development (R&D) density to represent innovation ability. In addition, there are other studies used<br />
financial data. (Hermans and Kauranen, 2005; Wu et al., 2006; Cheng et al., 2010).<br />
2.1 Data collection<br />
The data will be collected from the secondary sources such as annual reports and DataStream<br />
databases. The study will examine annual reports of Malaysian Public Companies over a ten year<br />
period from 2000 to 2009. The samples that will be used for the study are the top hundred companies<br />
based on the market capitalization of Malaysian public companies in the Main Market of Bursa<br />
Malaysia. These companies were selected because based on researchers; firm’s size (Fritsch and<br />
Meschede, 2001) has been identified as one of the determinants of innovations. Therefore, it is<br />
expected that these companies will provide data related to the innovation.<br />
2.2 Conceptual framework<br />
The proposed framework for this study as shown in Figure 1, measure the innovation capital and its<br />
relationship with firms’ performance in major industry in Malaysian public companies. It shows that the<br />
innovation input and innovation output both influence firms’ performance. In order to avoid any<br />
interference by other variables, this study also controls the firm characteristic that might affect<br />
performance.<br />
Figure 1: The Conceptual framework<br />
1017
2.3 Variables measurement<br />
2.3.1 Dependent variable<br />
Azlina Rahim, Ruhaya Atan and Amrizah Kamaluddin<br />
The dependent variable for this study is firms’ performance. The proxies for firms’ performance are<br />
economic and financial performance. Based on the literature, there are a number of ways to measure<br />
firms’ performance such as operating revenue, operating income, return on assets (ROA), earnings<br />
before interest and tax (EBIT), return on equity (ROE), and economic value added (EVA). ( Bontis et<br />
al, 2000; Chen et al, 2005, Chu et al., 2008 and Cheng et al, 2010)<br />
Two dependent variables namely operating income/ sales (OI/S) and return on assets (ROA) will be<br />
used as a proxy measures for economic and financial performance. These variables were defined as<br />
follow:<br />
OI/S. Ratio of the operating income divided by total sales, used as a proxy for economic performance.<br />
(Nakamura, 2001; Lev, 2004; Zeghal and Maaloul, 2010)<br />
ROA. Ratio of the earnings before interests and taxes divided by book value of total assets, used as a<br />
proxy of financial performance. (Firer and William, 2003; Chen et al., 2005; Shiu et al., 2006; Zeghal<br />
and Maaloul, 2010)<br />
2.3.2 Independent Variables<br />
Previous research measures innovation in a variety of ways. A number of quantitative measures of<br />
innovation are possible including R&D, patents, as well as expenditure on training, investment and<br />
new technology. The indicators for innovation capital will be measured by innovation input and<br />
innovation output. This study will use R&D intensity as the proxy for innovation input.<br />
The variables on R&D intensity were adopted from Hermans and Kauranen (2005), Huang and Liu<br />
(2005), Wu et al. (2006) and Cheng et al. (2010). The R&D intensity equal to R&D expense divided by<br />
net sales revenue. For innovation output it will focus on new product and processes. (Chan et al.,<br />
2004). This study will use dichotomous variable where the variable will set equal to 1 if the firm had at<br />
least one new product or processes (innovating companies) or 0 otherwise (as non-innovating<br />
companies).<br />
2.3.3 Control Variables<br />
In order to investigate confounding effects on firms’ performance, this study refers to prior literature<br />
and uses firm level characteristics as the control variables. Three control variables will be used<br />
namely, size of firm, leverage and industry (Firer and Williams, 2003; Huang 2007).<br />
3. Conclusion<br />
This study addresses the understanding of innovation capital in the Malaysian economy. Innovation<br />
activities which are measured by innovation input and innovation output will portray the innovation<br />
situation in one of the emerging economy in the world. Additionally, this study will investigate the<br />
relationship between innovation capital and firm performance in an empirically verified model.<br />
Adopting a longitudinal sample, it is expected that companies had changed over a decade in<br />
response to their innovation activities This study contributes to the innovation capital literature in<br />
several ways. First, this study concentrates on a longitudinal study with a larger sample size. Second,<br />
this study provides the empirical understanding on the innovation capital for top Malaysian companies<br />
based on market capitalization. Therefore, this study contributes by filling a significant gap in<br />
understanding innovation capital and its effect on firm performance especially in Malaysian Public<br />
Companies. The results of this study may assist the companies especially the managers to better<br />
understand the implication of innovation capital to the firm performance. Thus, managers can use the<br />
innovation capital information to create higher value and maintain long-term competitiveness.<br />
References<br />
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Cohen, S. and N. Kaimenakis (2007), “Intellectual Capital and corporate performance in<br />
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intellectual capital measurement and knowledge management implementation in small and medium-sized<br />
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11th proceeding. Cranfield School of Management, Cranfield University.<br />
Rogers, M. (1998), “The definition and measurement of innovation”, Melbourne Institite Working Paper No. 10/9.8<br />
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Management Innovation Systems,Vol. 1, No. 1, pp. 1-13.<br />
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processes in SMEs.”, European Journal of Innovation Management, Vol 8, No 1, pp 120-137.<br />
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of Business Venturing, Vol 21, pp 687 – 703.<br />
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Intellectual Capital, Vol 2, pp 192-203.<br />
1019
Can Innovation be Institutionally-Driven?- The Case of<br />
Institutional <strong>Entrepreneurs</strong> in the Restructuration of the<br />
Mauritian Vegetable Supply Chain.<br />
Brinda Ramasawmy and Fatiha Fort<br />
UMR MOISA, Montpellier SUPAGRO, Montpellier, France<br />
ramasawmy.brinda@gmail.com<br />
fort@supagro.inra.fr<br />
Abstract: The reform of the sugar protocol between the European Union (EU) and the African Caribbean and<br />
Pacific (ACP) countries affected the Mauritian agricultural sector tremendously: it spelt a decrease of 36 per cent<br />
in the price of sugar for producers. In reaction, the Mauritian sugar industry has undertaken a massive<br />
diversification within sugar: production of other sugar cane products and by-products, as well as diversification in<br />
vegetable production at an industrial level. The entry of large sugar cane producers from the corporate sector on<br />
the vegetable market has had a number of repercussions on the vegetable supply chain, one of which being the<br />
emergence of institutional entrepreneurs. A qualitative study of the vegetable supply chain was conducted among<br />
the different actors concerned. It revealed the following findings: new entrants in the vegetable supply chain have<br />
caused an institutional change. Institutional entrepreneurs have emerged and in turn established new institutional<br />
rules and standards of practice that have changed the institutional structure of the vegetable supply chain. This<br />
paper identifies at a first stage, two main factors favouring the emergence of institutional entrepreneurs in an<br />
organisational field. Firstly, a moderate degree of institutionalisation provides the adequate environment for<br />
actors to deliberately initiate changes through entrepreneurial processes. Secondly the multiplicity of institutional<br />
referents across organisational fields, in this case, the sugar cane and the fresh vegetable supply chains,<br />
provides the right environment for creative entrepreneurial action. At a second stage, this paper identifies the<br />
innovative managerial and marketing practices brought about in vegetable production and distribution by the<br />
institutional entrepreneurs, and the impact of these new practices on incumbent actors. This study uses a<br />
sociological neoinstitutional perspective and provides empirical evidence of the factors affecting actors’ agency<br />
and more specifically the conditions in an organisational field that favour strategic behaviour among actors. This<br />
research also helps to shed some light on how changes in the institutional structure of a field can drive the<br />
innovation process. This paper can help in further research on innovation and institutional entrepreneurship.<br />
Keywords: Sociological neoinstitutionalism, institutional entrepreneurs, innovation, organisational field,<br />
institutional change, institutional strategy<br />
1. Introduction<br />
Innovation has been associated with the field of entrepreneurship since Schumpeter (1935), and<br />
Peter Drucker (1998) defines innovation as the means by which an entrepreneur either adds value to<br />
new resources for wealth creation or use existing resources to produce wealth by enhancing these<br />
resources. In addition, entrepreneurship is also associated with the field of strategy. Hitt et al (2001)<br />
consider strategic entrepreneurship as the integration of an entrepreneurial perspective (looking for<br />
opportunities) and a strategic perspective (looking for competitive advantage) in order to come up with<br />
entrepreneurial strategies that create wealth.<br />
The aim of this research paper is to study the concepts of innovation and strategic entrepreneurship<br />
from an institutional perspective. This study contributes to enrich the field of sociological<br />
neoinstitutionalism through emphasising the importance of institutional strategy and more specifically<br />
the role of the institutional entrepreneur as an actor responsible for innovative changes in an<br />
organisational field bringing about new practices through the destabilisation of institutionalised<br />
practices.<br />
The Mauritian vegetable supply chain has been selected as the organisational field under analysis<br />
following an institutional change occurring at the macroeconomic level with the reform of the sugar<br />
protocol between the EU and the ACP countries, of which Mauritius is a member. This research paper<br />
contributes to an empirical investigation on the conditions favouring the emergence of institutional<br />
entrepreneurs in an organisational field, and the innovative practices that these institutional<br />
entrepreneurs attempt to institutionalise at the expense of weaker existing institutionalised practices.<br />
The authors also investigated whether innovative practices brought about by institutional<br />
entrepreneurs can be institutionally-driven.<br />
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2. Theoretical background<br />
Brinda Ramasawmy and Fatiha Fort<br />
Our study draws from a multidisciplinary approach across organisational sociology, economic and<br />
management fields. The main theoretical field that has been explored is that of sociological<br />
neoinstitutionalism in order to understand the conditions that favour the emergence of institutional<br />
entrepreneurs in a given organisational field. These conditions having been established, we then draw<br />
from the literature on innovation and entrepreneurship to shed light on the strategic actions of<br />
institutional entrepreneurs.<br />
2.1 Sociological Neoinstitutionalism<br />
A good review of sociological neoinstitutionalism as a Theoretical Research Program (TRP) can be<br />
found in the work of Jepperson (2002). He refers mainly to the work of John W. Meyer and his<br />
collaborators in the 1970’s, which centers essentially on defocalising actors on purpose and seeing<br />
society as institutionalised knowledge and culture.<br />
Jepperson (1991) having denoted institutions as a “particular set of social reproductive processes”,<br />
DiMaggio and Powell (1991) distinguished between coercive, mimetic and normative processes of<br />
social reproduction, while Scott (1995) refined this classification and identified regulative, normative<br />
and cultural-cognitive elements as three types of ingredients underlying institutional order. Each<br />
ingredient offers a different rationale for claiming legitimacy.<br />
2.1.1 Some important concepts defined<br />
Two important concepts in the neoinstitutional theory that have been used in this study are defined<br />
here. First of all, institutional rules are defined by Giddens (1984) as “techniques or generalizable<br />
procedures applied in the enactment/reproduction of social practices.” Based on the structuration<br />
theory of Giddens (1984), rules structure practices and help to organise them. For Meyer and Rowan<br />
(1977) at an organisational level, an organisation functions within an environment where it has to<br />
incorporate institutionalised rules. These rules help actors to explain their actions to other actors, and<br />
are institutionalised over time through action.<br />
Secondly, institutional rules are enacted within a field of activity or domain referred to as<br />
‘organisational field’. An organisational field is defined as a set of interdependent populations of<br />
organisations participating in the same cultural and social subsystem (DiMaggio and Powell 1983;<br />
Scott and Meyer, 1983). The level of analysis is more at a systemic level than organisation-centric.<br />
The focus is therefore not on how organisations function in a given environment, but on the<br />
organisation of the environment with organisations as major players (Scott 2008). Hoffman (1997,<br />
1999) has put forward arguments whereby fields are formed around issues rather than in terms of<br />
common products or markets. In this perspective, the organisational field can be made up of<br />
companies, the state, Non Governmental Organisations, regulatory bodies, etc.<br />
2.1.2 From institutional stability to institutional change<br />
Institutions represent stability but do undergo exogeneous or endogeneous changes. Exogeneous<br />
changes may be due to disruptions arising in “wider or neighbouring systems” (Scott 2008) that lead<br />
to a questioning of existing rules and norms. Other sources of exogeneous changes may be due to<br />
new entrants who come with their new institutional logic and colonise existing stable fields (Scott et al<br />
2000; Thornton 2004). Sources of endogeneous changes include mismatches between the macro<br />
and micro environment in response to changes at the local level; and poor performance levels in<br />
relation to expectations (Sewell 1992; Dacin et al 2002).<br />
Following an institutional change, there is the process of resource mobilisation for the diffusion and<br />
legitimisation of the change. Actors acquire resources to buffer the risks of not following preestablished<br />
norms (DiMaggio 1988). During this resource mobilisation process, actors can look for<br />
resources in terms of cognitive, social or material support. Dorado (2005) identifies three distinct<br />
resource mobilisation processes: leverage, accumulating and convening. Leveraging refers to actors<br />
who, after having defined a project, look for support from subsidiary actors (backers), and then both<br />
the actors and the backers bargain for support and acceptance from individuals and organisations<br />
that have a stake in the organisational field. Accumulating refers to actions and interactions among<br />
independent actors, which ultimately lead over time to a dominant design. Convening is a process<br />
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Brinda Ramasawmy and Fatiha Fort<br />
used in fields with complex social problems and involves actors initiating collaborative arrangements<br />
among stakeholders in the field.<br />
2.1.3 The importance of agency in neoinstitutional theory<br />
In early works on institutional environments, institutional effects had a deterministic, or top-down<br />
perspective implying that successful organisations complied with their institutional environments and<br />
adopted isomorphic behaviours. However, this general assertion of homogeneity and passive<br />
organisations was modified to recognise that homogenising pressures were indeed present but in<br />
delimited organisational fields (DiMaggio and Powell 1983). Several empirical studies in the mid-<br />
1980’s illustrated the fact that “many organisational fields were fragmented and conflicted, containing<br />
competitive requirements and prescriptions” Scott (2008). In response to these findings, analysts<br />
started to recognize the importance of choice and agency among actors. In his major essay in 1988<br />
on interest and agency in institutional theory, DiMaggio called for an examination of the process of<br />
institutionalisation whereby “institutionalisation is a product of the political efforts of actors (…)”.<br />
Oliver (1991) reinforced the concept of agency in institutional contexts by combining institutional and<br />
resource dependence arguments to come up with a variety of strategic responses by organisational<br />
actors to institutional pressures. According to Oliver, although the most likely response was<br />
conformity, other possible responses include compromise, avoidance, defiance and manipulation.<br />
This leads us to the concept of institutional strategy.<br />
2.1.4 Institutional Strategy<br />
One conflict that arose in early work on institutional theory, mainly from the work of Meyer and Rowan<br />
(1977) was the fact that there was an opposition between institutional requirements and efficient<br />
performance as imposed by competitive markets. This opposition was reinforced by DiMaggio and<br />
Powell (1983) who argued that institutional pressures made organisations more similar without<br />
“necessarily making them more efficient”. In addition, this stand was emphasised by much of early<br />
research by institutional scholars focusing on public organisations and non-profits ones. In order to<br />
counteract the danger of classifying institutional theory as one that studies organisations shielded<br />
from competitive forces, a number of scholars in the early 1990’s posited that institutional processes<br />
provide the rules and norms that govern competition, and that the cultural aspects of institutions<br />
provide the elements for strategic actions (Powell 1991; Clemens 1997).<br />
According to Lawrence (1999), resources required for institutional strategies differ from those required<br />
for competitive strategies. Institutional strategy asks for the ability to fully define, support and defend<br />
the legitimacy or desirability of particular practices and organisational forms. On the other hand,<br />
competitive strategy acts on existing legitimated practices or makes use of existing social rules.<br />
In order to enact these institutional strategies, neoinstitutional scholars have borrowed the concept of<br />
an entrepreneur from the entrepreneurship literature. The term “institutional entrepreneur” first<br />
appeared in the foundational essay by DiMaggio (1988) whereby he defined institutional<br />
entrepreneurs as “organized actors with sufficient resources (who) see in them an opportunity to<br />
realize interests that they value highly.”<br />
For Schumpeter (1935), entrepreneurs identify opportunities that other actors do not see and come up<br />
with new technologies and concepts that lead to new economic activities. From a sociological neoinstitutional<br />
theory perspective, the institutional entrepreneur (IE, hereafter), who can be an individual<br />
or an organisation, seizes opportunities that allow him to adapt strategically to his environment<br />
(Suchman 1995) and hence favour the institutionalisation process (Lawrence and Suddaby 2006).<br />
The main aim of the IE is the pursuit of opportunities and the quest for legitimacy.<br />
Eckhardt and Shane (2003) following Venkataraman (1997) and Shane and Venkataraman (2000)<br />
have defined entrepreneurial opportunities as “situations in which new goods, services, raw materials,<br />
markets and organizing methods can be introduced through the formation of means, ends, or meansends<br />
relationships.” The interesting concept from this definition is that entrepreneurial decisions<br />
involve looking for, or identifying new ends or means that have been “previously undetected or<br />
unutilised by market participant” (Eckhardt and Shane 2003).<br />
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Brinda Ramasawmy and Fatiha Fort<br />
The quest for legitimacy is another aspect of the entrepreneurial process and helps the entrepreneur<br />
to use his managerial capabilities in order to exploit identified opportunities. According to Suchman<br />
(1995), legitimacy is “a generalised perception or assumption that the actions of entities are desirable,<br />
proper, or appropriate within some socially constructed system of norms, values, beliefs, and<br />
definitions.”<br />
Lawrence (1999) argues that actors need to ask the following questions to maintain legitimacy in an<br />
organisational field: “Where can I go?" and “What can I do?» The first question relates to what<br />
Lawrence calls rules of membership and institutionalised boundaries that delimit the entry to an<br />
organisational field. Membership rules help to organise “interactions, structures of domination, and<br />
information shared among actors engaged in a common enterprise.” (Lawrence 1999). The second<br />
question refers to the standards of practice within an organisational field. These standards of practice<br />
according to Lawrence (1999) “provide guidelines, norms, and legal prescriptions relating to how<br />
practices are to be carried out within some determinate institutional setting.”<br />
Our institutional entrepreneur can be compared to the Schumpeterian entrepreneur who is an<br />
innovator and an agent of change. Innovation is closely associated with entrepreneurship since the<br />
work of Schumpeter (1935) who mentioned the process of “creative destruction”. In order to innovate<br />
the IE requires that adequate fields conditions are present. Barley and Tolbert (1997) posit that<br />
institutional change is likely when actors participate wilfully and the field conditions facilitate the<br />
assembly of resources and provide a rationale to question scripted patterns of behaviour.<br />
Dorado (2005) identifies two characteristics of an organisational field, which impact on the search for<br />
opportunities: the degree of multiplicity of the field and its degree of institutionalisation.<br />
Multiplicity refers to the extent to which organisational fields are uncoupled and open to practices and<br />
resources from other fields (Greenwood and Hinings 1996, Whittington 1992, Seo and Creed 2002).<br />
The more open a field is, the more the presence of divergent institutional referents which give rise to<br />
tensions (ambiguous and contradictory rules) that favour actors’ agency. Tightly closed fields provide<br />
little exposure to multiple institutional referents and this is less likely to facilitate creative action;<br />
whereby fields that are too open lead to uncertainties and compel actors to adopt sense-making<br />
behaviours (Seo and Creed 2002; Beckert 1999). The degree of multiplicity also influences the type of<br />
resource mobilisation process adopted by actors. In a field with complex issues, convening is the<br />
appropriate approach to bring change; in open fields with compatible values among actors, leveraging<br />
can be used; and in closed fields, there is a lack of cognitive support and new institutional<br />
arrangements become institutionalised over time mainly through the accumulating process.<br />
The degree of institutionalisation defines the determining, constraining and enabling effects of<br />
institutions on actors (Zucker 1987; Barley and Tolbert 1997). The degree of institutionalisation of an<br />
organisational field range from extreme uncertainty (minimal institutionalisation), moderate<br />
institutionalisation, to extreme institutionalisation (Beckert 1999; Dorado 2005). Minimally<br />
institutionalised fields lead to sensemaking or routine behaviours from actors; while in extremely<br />
institutionalised fields, the patterns of behaviour are taken for granted so that no actor is likely to<br />
question them. Change happens imperceptibly over time through accumulation. A moderately<br />
institutionalised field according to Beckert (1999) allows for strategic action. The degree of field<br />
institutionalisation also affects the identification of opportunities by actors: Dorado (2005) describes<br />
highly institutionalised fields as opportunity opaque; moderately institutionalised fields as opportunity<br />
transparent; and minimally institutionalised fields as opportunity hazy.<br />
The following section is an empirical application of the concepts of institutional strategy.<br />
3. Research methodology<br />
3.1 Context of research<br />
The Mauritian vegetable supply chain was chosen as the organisational field under analysis for the<br />
following reason:<br />
The reform of the sugar protocol between the EU and the ACP countries has spelt a decrease of 36<br />
percent in the price of sugar and thus a consequential decrease in the revenue of sugar producers.<br />
From an average production of 700,000 tons of sugar in the early 1970’s, the total sugar production<br />
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Brinda Ramasawmy and Fatiha Fort<br />
has declined to an average 500,000 tons in the late 2000’s. The contribution of the sugar sector to<br />
the overall gross domestic product has also declined over the years and represent only 2.3 per cent,<br />
employs only 8 per cent of the active labour force, and accounts for 15 per cent of export revenues<br />
(Mauritius Chamber of Agriculture, 2010). Production of foodcrops and other agricultural products in<br />
the past has been encouraged by government through various incentives but remained at a low level<br />
because of the financially attractive sugar sector. With the sugar protocol reform, a greater<br />
diversification into foodcrops production has being favoured over the past 5 years. This diversification<br />
has therefore a direct impact on the vegetable sector and its incumbent actors whereby the corporate<br />
sugar producers are considered as new entrants in the vegetable sector and represent thus an<br />
exogeneous shock leading to an institutional change on the Mauritian vegetable supply chain (MVSC,<br />
hereafter).<br />
3.2 Methodology<br />
A qualitative survey was undertaken from September to December 2010 in the MVSC. A purposive<br />
sampling design was used whereby successive actors were selected to further extend the information<br />
already gathered until information saturation was achieved. The following types of actors were<br />
interviewed: large sugar cane producers who have diversified into vegetable production; incumbent<br />
vegetable producers (small, medium and large-scale); producers’ associations; vegetable distributors<br />
(wholesalers, auctioneers, super/hypermarkets), clients (deluxe hotels), and public organisations<br />
involved in agricultural research. The primary data was a series of digitally-recorded; semi-structured<br />
interviews that focused on each actor’s activities, his experience, his perception of the field, the rules,<br />
norms and practices of the field, the identification of competitors, clients, influential actors and<br />
organisations. The interviews also covered the actors’ strategies and their institutional and<br />
professional contexts.<br />
In total, 50 interviews were conducted, and transcribed interviews formed the primary database for<br />
analysis. All the interview transcripts were coded in an iterative manner with constant reference to the<br />
theory. The textual transcripts were then analysed with respect to the theoretical concepts mobilised.<br />
The main focus of the analysis was on the establishment of the institutional context of the<br />
organisational field, the institutional strategies observed and under what field conditions, and<br />
resources employed. In addition, the innovative practices brought about by emerging institutional<br />
entrepreneurs were also identified. The results of this analysis are presented in the following section.<br />
4. Results<br />
4.1 The institutional context of the Mauritian vegetable supply chain<br />
4.1.1 The Mauritian vegetable supply chain as an organisational field<br />
The MVSC has two main areas of activities: the production and the distribution areas. Other activities<br />
such as the sales of agrochemicals and other agricultural supplies are considered as peripheral<br />
activities; and the agroprocessing industry is not considered as part of the MVSC as this study<br />
considers only the production, distribution and sales of unprocessed vegetables on the domestic<br />
market.<br />
Figure 1.0 illustrates the MVSC as an organisational field at a mesoeconomic analytical level, with a<br />
diversity of actors having the same aim – vegetable production, distribution and sales as an economic<br />
activity. The main vegetables of importance in the MVSC include cooking tomatoes, carrots, crucifers,<br />
potatoes, onions and salad crops.<br />
The production area of activity consists mainly of small, medium and large scale vegetable producers;<br />
while the distribution area of activity consists of wholesalers, auctioneers and retailers. The shaded<br />
area marked A, overlapping between the production and distribution areas, refers to those actors who<br />
are involved in both areas of activity. Other actors of importance for the MVSC are located at the<br />
macroeconomic level and include governmental bodies (Ministries, public research organisations and<br />
public regulatory bodies), and NGO’s such as consumers’ associations.<br />
1024
Consumers’<br />
Associations<br />
Regulatory<br />
Bodies<br />
Agricultural<br />
Input<br />
Suppliers<br />
Brinda Ramasawmy and Fatiha Fort<br />
Production<br />
Area<br />
Figure 1.0: The Mauritian Vegetable Supply Chain<br />
A<br />
Mesoeconomic level<br />
(MVSC)<br />
Distribution<br />
Area<br />
Public<br />
Institutions<br />
Clients<br />
4.2 The emergence of institutional entrepreneurs in the MVSC<br />
Our analysis of the MVSC identified two institutional entrepreneurs (IE) one at the production level<br />
and one at the distribution level. For the sake of confidentiality the IE at the production level will be<br />
called Producer X and the IE at the distribution level, Distributor Y. They both are new entrants<br />
coming from the sugar industry into the vegetable supply chain and have a wealth of knowledge and<br />
experience that give them a high position in their social network which in turn give them credibility and<br />
legitimacy in the organisational field. Producer X is involved in large-scale mechanised production of<br />
cooking tomato, potato, onion, carrot and pumpkin; while Distributor Y is involved in the postharvest<br />
processing of field potatoes for sale to super/hypermarkets.<br />
The fields’ conditions (degree of multiplicity of institutional referents and degree of institutionalisation)<br />
in the MVSC provided the right environment for the emergence of these two IE. First of all, primary<br />
and secondary data collected provided evidence that the MVSC is an open field, permeable to ideas<br />
practised in other fields such as the mechanisation strategies adopted in the sugar industry. This<br />
openness allows display of tensions and the development of new institutional arrangements. Both<br />
institutional entrepreneurs, Producer X and Distributor Y; use leverage to mobilise their resources.<br />
Secondly, the MVSC can be described as a moderately institutionalised field, which hence favours<br />
entrepreneurial actions. This type of field also favour leverage as a resource mobilisation process.<br />
Table 1.0 below summarise the institutional change brought about by Producer X and Distributor Y in<br />
the MVSC. In this table, the innovative practices brought forward by the IE are listed. These practices<br />
have impacted on the existing institutionalised practices in the MVSC and have caused changes in<br />
the standards of practice and in the membership rules. The incumbent actors have reacted mostly by<br />
adopting a mimetic behaviour.<br />
5. Discussion<br />
The MVSC is a moderately institutionalised field. In the vegetable production area of activity, rules of<br />
membership are quasi-inexistent and incumbent producers still operate at an individual level.<br />
Standards of practice have remained mainly traditional at the small-scale production level, while<br />
medium and large-scale incumbent producers have invested to some extent on light mechanisation of<br />
their production activities. In the distribution area of activity, wholesalers and auctioneers have a<br />
dominant role with informal rules of membership. Standards of practice at the distribution level are<br />
based on traditional practices that favour high profit margins for the distributors at the expense of the<br />
producer and the consumer.<br />
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Brinda Ramasawmy and Fatiha Fort<br />
The MVSC, being an open field, has allowed new entrants coming from the corporate sector from the<br />
sugar industry who have brought along their own institutional referents as well. This has created<br />
ambiguity and contradictions in institutional rules leading to tensions and favouring actors’ strategic<br />
agency (Sewell, 1992, Seo and Creed, 2002, Whittington, 1992, Rao, 1998, Beckert, 1999, Dorado,<br />
2005).<br />
Table 1.0: Producer X and Distributor Y-Institutional entrepreneurs in the MVSC<br />
Field conditions:<br />
• Degree of multiplicity: Open (divergent institutional referents)<br />
• Degree of institutionalisation: Moderate<br />
• Type of opportunities: transparent<br />
Type of agency: entrepreneurship (strategic); Type of resource mobilisation process: leverage<br />
PRODUCER X DISTRIBUTOR Y<br />
Profile Large scale company Large scale company<br />
Main activities Involved in sugar and foodcrops<br />
production<br />
Diversification into large scale<br />
mechanically intensive vegetable<br />
production<br />
Innovative practices (changes<br />
in standards of practice)<br />
Innovative Managerial Practices:<br />
Use of trellising (stakes) for tomato<br />
plants<br />
Use of new seed varieties and other<br />
agricultural inputs<br />
Intensive mechanisation at production<br />
level<br />
Intensive mechanisation at post harvest<br />
level<br />
Involved in the assembling of<br />
potatoes produced by new<br />
entrants in the MVSC, post<br />
harvest manipulation of potatoes,<br />
packaging and sales to<br />
super/hypermarkets<br />
Innovative Marketing<br />
Practices:<br />
Washing and grading of potatoes<br />
and packaging<br />
Production of different potato<br />
varieties for various types of<br />
dishes<br />
Massive marketing campaign to<br />
promote potato consumption<br />
Changes in membership rules Professionalisation of a sector, which was too traditional and poorly<br />
structured.<br />
Impact of above changes on Better quality vegetables give a Quality packaged potatoes and<br />
competitive strategies of the competitive advantage over incumbent diversity of product (more<br />
Institutional <strong>Entrepreneurs</strong> producers<br />
varieties) gives a competitive<br />
advantage<br />
distributors<br />
over incumbent<br />
Impact of above changes on Incumbent producers/distributors having resources have adopted a<br />
incumbent actors in the MVSC mimetic behaviour<br />
Less resourceful producers/distributors are driven out of business<br />
The above field conditions have created the right environment for the new entrants in the field to<br />
identify opportunities for entrepreneurial strategies. In particular, these conditions have favoured the<br />
emergence of two institutional entrepreneurs, Producer X and Distributor Y who have enacted<br />
deliberate institutional strategies to improve their respective organisation’s competitive strategies.<br />
Both Producer X and Distributor Y can be described as politically skilled (Rao, 1998), “knowledgeable,<br />
purposive and reflexive actors” (Scott, 2008). These two IE come from the sugar industry, which is a<br />
highly institutionalised field with high barriers to entry. The rules of membership that structure the<br />
behaviour of our two institutional entrepreneurs include: access to privileged cognitive resources<br />
through ability to use the services of external consultants and recruit the best scientists; and ability to<br />
dominate through access to physical resources (capital, land, and other fixed assets). Both<br />
entrepreneurs being registered large scale companies operate within high standards of practice both<br />
normative and coercive as per public and private guidelines.<br />
The entry of Producer X and Distributor Y on the MVSC has changed the rules of membership and<br />
standards of practice in the following way: The majority of the incumbent actors in the MVSC both at<br />
the production and distribution levels operate at an individual and in a poorly organised way. The<br />
highly organised Producer X and Distributor Y have given a professional standard to production and<br />
distribution activities, leading to mimetic behaviours from incumbent actors in the MVSC.<br />
Producer X has changed the way vegetable production is managed traditionally by introducing<br />
intensive mechanisation at field levels, using new varieties of seeds and other inputs, using trellising<br />
for tomato plants to increase productivity, and by mechanising post harvest practices as well. In order<br />
to institutionalise these standards of practice, Producer X has mobilised the support of subsidiary<br />
1026
Brinda Ramasawmy and Fatiha Fort<br />
actors, vegetable wholesalers, retailers (supermarkets) and clients (deluxe hotels) in order to gain<br />
legitimacy in the organisational field. Producer X has then used the support of the subsidiary actors to<br />
convince “external constituencies” (Beckert, 1999) like traditional vegetable producers, public<br />
organisation involved in agricultural research, producers’ associations that the new standards of<br />
practice need to be institutionalised. It has been observed that some medium and large producers<br />
have adopted a mimetic behaviour and are applying a number of the innovative managerial practices<br />
of Producer X.<br />
Distributor Y has changed the way potato is marketed in Mauritius. Traditionally, consumers bought<br />
unsorted and unwashed potatoes from retail markets and fairs. Distributor X has invested into<br />
mechanical post harvest facilities including cold storage to facilitate the washing, grading, packaging<br />
and cold storage of potatoes. The products are then directly distributed to the retail sector. In addition,<br />
a massive marketing campaign was undertaken in December 2010 to promote potato as a healthy<br />
alternative staple food to rice and wheat for the Mauritian population. Several different potato varieties<br />
are marketed to give consumers the opportunity to try those new varieties. Distributor Y has also used<br />
leverage as a resource mobilisation process, making use of subsidiary actors to institutionalise its new<br />
standards of practice. It has been observed that individual wholesalers traditionally involved in the<br />
distribution of potatoes have started to imitate the packaging strategy of Distributor Y.<br />
Both Producer X and Distributor Y have identified a process need in their respective areas of activity<br />
and come up with innovative managerial and marketing practices respectively. These institutional<br />
entrepreneurs by changing the rules of the game have contributed to the restructuration of the MVSC,<br />
enriching the standards of practice and changing the rules of membership. These changes are not<br />
permanent though and once stability will be achieved in the MVSC, this will give rise to the right<br />
conditions for strategic and entrepreneurial actions again (Beckert, 1999).<br />
6. Conclusion<br />
Actors use institutional strategies to change the “nature of competition in their industry, either through<br />
its rules of membership or its standards of practice” (Lawrence 1999). Deliberate institutional<br />
strategies can therefore improve a firm competitive position. This research paper, using a sociological<br />
neoinstitutional perspective, and drawing from both economic and management science has<br />
attempted to demonstrate that organisations can change the institutional structure in which they<br />
operate through institutional strategies. Given the adequate field conditions, deliberate institutional<br />
strategies can help an innovative actor achieve competitive advantage. This research paper is based<br />
on an organisational field, vegetable supply chain, subject to exogeneous changes and particular to<br />
the context of a small island state, Mauritius. However, the field conditions favouring the emergence<br />
of institutional entrepreneurs have wider applicability to other contexts and fields of study. It would be<br />
interesting to carry out other empirical studies in different contexts and fields of study to analyse the<br />
field conditions that favour institutional strategies, and hence provide concrete evidence showing that<br />
innovation can indeed be institutionally-driven.<br />
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1028
Technological Competence and Sustainable Competitive<br />
Advantage of Technology-Intensive SMEs - a Quantitative<br />
Approach<br />
Birgit Stelzer and Leo Brecht<br />
University of Ulm, Institute of Technology and Process Management,<br />
Helmholtzstraße 22, 89081 Ulm, Germany<br />
birgit.stelzer@uni-ulm.de<br />
leo.brecht@uni-ulm.de<br />
Abstract: In scientific literature, the importance of innovation in order to ensure long-term business success is<br />
broadly discussed. Recent studies have shown that ‘technology-push’ innovation strategies have a higher<br />
positive impact on a firm’s performance compared to ‘market-pull’ approaches. According to the resource-based<br />
view (RBV), companies accumulate technological resources by exploration or exploitation to enable technologypush<br />
innovations striving for the development of core competencies. In our research, we focus mainly on<br />
technology-intensive small and medium sized enterprises (SMEs). We are especially interested in nontechnological<br />
capabilities such as managerial, organizational and social capabilities, how they contribute to the<br />
firm’s technological competence and influence long-term business success. We understand technological<br />
competence to be a multi-dimensional construct of second-order which contains five dimensions: learning<br />
capability, production management, R&D management, technology management and culture in R&D. These<br />
dimensions are determined by the firm’s resources. Therefore, our main research question is how to measure<br />
technological competence and how it influence innovation activities leading to a sustainable competitive<br />
advantage. In our model, we propose that the higher the technological competence, the higher the company’s<br />
innovation performance and its influence on a lasting business success. As we are interested in additional effects<br />
influencing the relationships mentioned above, we embed the model in a suitable framework. We include effects<br />
representing the company’s environment such as an intense competition or the speed of technology diffusion.<br />
Beyond that, we integrate factors which can boost innovation performance beyond core technology competencies<br />
such as marketing and sales activities. For testing the model’s inherent hypotheses, we use structural equation<br />
modeling with the partial least square (PLS) approach. In this paper, we present our model with constructs and<br />
relationships. So far, it has been evaluated on a qualitative level through expert interviews and focus groups. One<br />
key result from qualitative evaluation indicates that managerial capabilities as well as an innovation oriented<br />
culture have a highly significant impact on a company’s technological competence. Furthermore, the experts<br />
consider continuous innovation more important to maintain and achieve sustainable competitive advantage than<br />
a high innovation degree. In preparation for data analysis of the quantitative survey where we will contact more<br />
than 6.200 technology-intensive SMEs in Germany, we propose a multi-level validation procedure for testing the<br />
model.<br />
Keywords: technological competence, sustainable competitive advantage, technology strategy, resource-based<br />
view, structural equation modeling<br />
1. Introduction<br />
In literature, the importance of a company’s capability to innovate in order to ensure a long-term<br />
business success is broadly discussed. Recent studies have shown that ‘technology-push’ innovation<br />
strategies have a higher positive impact on a firm’s performance compared to ‘market-pull’<br />
approaches (Walsh 2002a; Kirchhoff 2007). Referring to the resource-based view (RBV), companies<br />
accumulate technological resources developing them further to distinct capabilities (Teece 1997)<br />
enabling the company to innovate and develop core competencies (Prahalad 1990). The decision of<br />
optimal combination of exploitation and exploration of resources and managerial capabilities is<br />
considered as a key element in technology management (Cetindamar 2008). Beyond core-technology<br />
competencies these managerial capabilities are considered highly important when striving for the<br />
development of sustained competitive advantage (Teece 1997; Barney 1991).<br />
Considering competencies as a complex bundle of specific skills including more than core-technology<br />
capabilities (Day 1994), the measurement of a firm’s technological competence becomes rather<br />
complex. Recent empirical research has adapted the measurement of technological competence from<br />
a single-item measure to a multi-dimensional construct (Huang 2010). Furthermore, empirical<br />
research has shown a positive association of technological competence and firm performance (Wang<br />
2004). However, the focus in this kind of research lies mainly on large companies. Scientific<br />
1029
Birgit Stelzer and Leo Brecht<br />
approaches concentrating on technology-intensive small and medium sized enterprises (SMEs) are<br />
rather rare (Terziovski 2010; Varis 2010).<br />
Hence, in our research we focus on technology-intensive SMEs striving to identify the components of<br />
technological competence and its impact on a sustainable competitive advantage. For this, we ask<br />
how technological competence could be measured and how it enables companies to innovate in order<br />
to ensure a long-term business success. By including a second group of larger companies, we are<br />
able to identify the main differences concerning the effect of technological competence on innovation<br />
performance and long-term business success between those two groups.<br />
Focusing on the RBV, we have identified the main elements of technological competence. We state<br />
that technological competence is an important impact factor for innovation performance enabling<br />
companies to achieve long-term business success. This basic model is enriched with additional<br />
effects representing the company’s environment or effects which boost innovation performance.<br />
We will use structural equation modeling with the partial least square (PLS) approach in order to test<br />
the model’s inherent hypotheses. The model has already been evaluated on a qualitative level using<br />
focus group interviews and face to face expert interviews. In the next step, we will carry out a<br />
quantitative survey. For this, we will contact more than 6.200 technology-intensive companies in<br />
Germany operating in the manufacturing industry.<br />
In the following, after considering the theoretical background, we derive the model’s hypotheses<br />
(section 2). Then, we present the model and its validation procedure (section 3). In section 4, we<br />
briefly show the research design. We finalize the paper presenting the key findings from qualitative<br />
research (section 5) and giving an outlook for our future research (section 6).<br />
2. Theoretical background and hypotheses<br />
In this paper, we address the main research question how technological competence could be<br />
measured and how technology-intensive companies achieve long-term business success. We focus<br />
mainly on SMEs in the engineering and automotive industries covering the complete value chain in<br />
B2B and B2C markets. Thus, we aim to answer the following sub-questions:<br />
� Beyond resources and production skills, which competencies matter to differentiate from<br />
competitors?<br />
� To what extent do technology-intensive SMEs need to innovate?<br />
� Which additional factors beyond technological competence can boost innovation performance?<br />
� How do different environmental settings influence the firm‘s performance?<br />
2.1 Technological competence and sustainable competitive advantage<br />
In scientific literature it is broadly accepted that technological competence plays a significant role in<br />
fostering a firm’s competitive advantage (Porter 1985; Hamel 1994). Referring to the RBV, companies<br />
represent a collection of specific resources and assets that significantly influence their performance<br />
(Wernerfelt 1984). These resources are transformed into unique skills (capability based view) (Barney<br />
1991) which must be renewed consequently in congruence to the changing market environment<br />
(dynamic capability based view) (Teece 1997). Resources are transformed into capabilities by specific<br />
and identifiable processes such as product development, strategic decision making or processes for<br />
knowledge accumulation (Eisenhardt 2000). Thus, the RBV and its further developed approaches<br />
suggest that the heterogeneity of rare, valuable, not substitutable, not imitable and not transferable<br />
resources (Barney 1991; Grant 1991; Peteraf 1993) ensures the effective development of new<br />
products and offers a firm a competitive advantage (Eisenhardt 2000). Consequently, in order to be<br />
competitive in the long term, a company has to develop specific areas of competence to enable<br />
innovative activities.<br />
The concept of a sustainable competitive advantage has also been discussed widely in strategic<br />
management literature (Porter 1985; Prahalad 1990; Hall 1993). Barney defines a competitive<br />
advantage as a result of a value-creating (business) strategy which is not simultaneously<br />
implemented by any current or potential competitor. The benefits of the strategy cannot be duplicated<br />
1030
Birgit Stelzer and Leo Brecht<br />
(Barney 1991). Especially for companies operating in technology-intensive and competitive markets, a<br />
high level of technological competence is needed to guarantee long-term success. This is valid for big<br />
multi-technology firms as well as smaller companies with a smaller resource-base and fewer<br />
possibilities to spread their operational risks (Terziovski 2010).<br />
Based on the RBV, we state that SMEs with high technological competencies are more often<br />
successful in innovation activities. This is an important factor to achieve and maintain a sustainable<br />
competitive advantage.<br />
2.2 Development of Hypotheses<br />
2.2.1 Technological Competence<br />
Empirical work has shown that technological competence has a positive association with innovation<br />
performance (Coombs 2006; Walsh 2002b). Day (Day 1994, p.38) defines competence as “complex<br />
bundles of skills and collective learning, exercised through organizational processes”. New research<br />
approaches (e.g. Huang 2010) have measured technological competence no longer using a single<br />
item but as a multi-dimensional construct. Resources (tangible and intangible) are transformed over<br />
time into capabilities (dynamic capability-based view, DCV) of different character: technical<br />
capabilities (learning capability), managerial capabilities on process level (production management,<br />
R&D management) and on strategic level (technology management) as well on a “soft skill” level<br />
(culture in R&D).<br />
Hypothesis 0: The technological competence of a firm is a multidimensional construct of<br />
second-order which contains five dimensions: learning capability, production<br />
management, R&D management, technology management and culture in R&D. The<br />
firm’s resources determine the five dimensions.<br />
Figure 1: Multidimensional construct of second-order of technological competence<br />
The DCV concludes that organizational learning is a strategic capability or resource important to the<br />
process of building and maintaining long-term competitive advantage (Teece 1997). According to<br />
Kogut (1992) organizational learning is classified in internal and external learning (learning from<br />
partners) and improves (technological) know-how and activities. The better the firm’s resource base,<br />
the higher the organizational learning capability.<br />
Hypothesis 1: The firm's resources are positively related to learning capability.<br />
The capability of efficiently organizing process activities is considered as part of an important<br />
coordination capability (Teece 1997; Iansiti 1994). Referring to technology-intensive firms, we state<br />
that the better the firm’s resource base, the higher the firm’s managerial skills within the production<br />
and R&D management.<br />
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Birgit Stelzer and Leo Brecht<br />
Hypothesis 2: The firm's resources are positively related to the management skills of<br />
production management.<br />
Hypothesis 3: The firm's resources are positively related to the management skills of<br />
R&D management.<br />
The coordination capability on a strategic level to guarantee effectiveness is very important in order to<br />
transform resources in valuable assets (Galunic 2001). The capability to explore or exploit<br />
technological opportunities allows companies to quickly respond to fast changing environments<br />
(Teece 1997). Cetindamar (2008) describes technology management from a capability driven view as<br />
a management discipline aiming to decide how combinations of resources and processes can be<br />
developed, deployed and protected. For this, we state that he higher the commitment to these<br />
management tasks in terms of appropriate resources, the higher the technological competence.<br />
Hypothesis 4: The firm's resources are positively related to managerial skills in<br />
technology management.<br />
The organizational culture is a learning process which represents the socialization and internalization<br />
of codes and collective cultural patterns (Schein 1986). Empirical work showed that an innovation<br />
orientated culture is an important factor for enhancing innovation performance (Bessant 2003; Lee<br />
2008). The appropriate resource allocation reflects the commitment to innovation of decision makers<br />
(De Brentani 2004).<br />
Hypothesis 5: The firm's resources are positively related to culture in R&D.<br />
2.2.2 Innovation performance<br />
In terms of innovation, we focus on product and process innovation. As shown above, levels of<br />
competence are built up from specific resources, technical, managerial and cultural capabilities.<br />
These areas of competence are the basis for realizing product innovations. Furthermore, during<br />
product innovation processes, resources, capabilities and thus competencies are renewed (Iansiti<br />
1994) building new processes. In our research, we define innovation performance as the target<br />
achievement of process or product related success factors of new products or new (technology<br />
related) processes and their contribution to the firm’s financial performance. We state that the higher<br />
the technological competence, the higher the innovation performance:<br />
Hypothesis 6: Technological competence is positively related to process innovation<br />
performance.<br />
Hypothesis 7: Technological competence is positively related to product innovation<br />
performance.<br />
Figure 2: Impact of technological competence on innovation performance<br />
2.2.3 Sustainable competitive advantage<br />
Technology represents an important source of competitive advantage and growth for companies in<br />
the manufacturing industry (Dussauge 1994). In innovation literature, it is widely accepted that<br />
innovation activities correlate positively with long-term competitive advantage. We state that<br />
technological competence per se is a necessary but not sufficient criterion for guaranteed long-term<br />
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Birgit Stelzer and Leo Brecht<br />
success. In other words, high innovation performance will generate a high impact on a long-term<br />
competitive advantage.<br />
Hypothesis 8: Process innovation performance is positively related to sustainable<br />
competitive advantage.<br />
Hypothesis 9: Product innovation performance is positively related to sustainable<br />
competitive advantage.<br />
Figure 3: Impact of innovation performance on sustainable competitive advantage<br />
2.2.4 Moderating and additional direct effects<br />
As companies are operating in markets with specific characteristics, we have embedded our basic<br />
model in a situation framework. Thus, we have identified moderating and other additional effects<br />
influencing the relationship between technological competence, innovation performance and<br />
sustainable competitive advantage. Integrating moderating effects is especially important for the<br />
understanding and interpretation of complex relationships (Henseler 2010). In our model, these<br />
effects represent the firm’s situation from a market-driven view (competitive environment, dynamics of<br />
the market, speed of technology diffusion) and from a company specific view. We consider effects<br />
which can be influenced directly (marketing and sales activities) or indirectly (product complexity) by<br />
the firm as well as effects which indirectly influence long-term business success (degree of product<br />
and process innovation, frequency of innovation). These effects influence either the strength of the<br />
relationship between technological competence and innovation performance (group 1) or the strength<br />
of relationship between innovation performance and sustainable competitive advantage (group 2).<br />
Figure 4 illustrates the moderating effects between technological competence and innovation<br />
performance.<br />
Marketing and sales activities<br />
Advertising the new product as well as distributing it using customer oriented distribution channels is<br />
crucial to successfully introduce the new product in the market (Cooper 2001). For this, we state that<br />
technology-intensive SMEs boost their innovation performance, when integrating marketing and sales<br />
activities.<br />
Hypothesis 10: The higher marketing and sales activities, the higher the impact of<br />
technological competence on product innovation performance.<br />
Product complexity<br />
We understand product complexity to be the extent of customizable attributes of the product. We state<br />
that companies handling a high degree of complexity are greatly challenged to renew their<br />
competence that results in a higher performance in process innovation as well a higher performance<br />
in product innovation<br />
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Birgit Stelzer and Leo Brecht<br />
Hypothesis 11: The higher the product complexity, the higher the impact of technological<br />
competence on process innovation performance.<br />
Hypothesis 12: The higher the product complexity, the higher the impact of technological<br />
competence on product innovation performance.<br />
Figure 4: Group 1: Additional effects influencing the relationship between technological competence<br />
and process innovation performance.<br />
Speed of technology diffusion<br />
The speed of technological changes in an industry influences the need for innovation activities (Teece<br />
1997; Drejer 2004). Furthermore, in technologically dynamic markets the product life cycles are<br />
usually shorter than in more static markets (Roy 1999). For this, we state that in turbulent<br />
technological markets, the impact of technological competence (especially the strategic capability of<br />
identifying the proper technological opportunities) on innovation performance is highly significant.<br />
Hypothesis 13: The higher the speed of technology diffusion, the higher the impact of<br />
technological competence on process performance.<br />
Hypothesis 14: The higher the speed of technology diffusion, the higher is the impact of<br />
technological competence on product innovation performance.<br />
Dynamics of the market<br />
In turbulent markets with a high degree of market entries and exits and, what is more important, fast<br />
changing customer requirements, companies need to adapt to the fast changing conditions in and<br />
effective and efficient way. Thus, a high technological competence is even more needed in dynamic<br />
markets.<br />
Hypothesis 15: The higher the dynamics of the market, the higher the impact of<br />
technological competence on process innovation performance.<br />
Hypothesis 16: The higher the dynamics of the market, the higher the impact of<br />
technological competence on product innovation performance.<br />
Figure 5 illustrates the moderating and mediating effects between innovation performance and<br />
sustainable competitive advantage.<br />
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Birgit Stelzer and Leo Brecht<br />
Figure 5: Group 2: Additional effects influencing the relationship between technological competence<br />
and process innovation performance.<br />
Degree of innovation<br />
Renewing the internal processes is an important factor to guarantee long-term business success. We<br />
state that a high degree of process innovation will strengthen the positive relationship between<br />
innovation performance and sustainable competitive advantage.<br />
Hypothesis 17: The higher the degree of process innovation, the higher the impact of<br />
process innovation performance on sustainable competitive advantage.<br />
Referring to product innovations, empirical work shows that radical innovations have a high impact on<br />
long-term business success (Leifer 2000; Di Benedetto 2008). We integrate this in our model by<br />
stating the hypothesis that the degree of product innovation will strengthen the positive relationship<br />
between product innovation performance and sustainable competitive advantage.<br />
Hypothesis 18: The higher the degree of product innovation, the higher the impact of<br />
product innovation performance on sustainable competitive advantage.<br />
Innovation frequency<br />
The RBV and the research body about (continuous) innovation management highlight the importance<br />
of continuously renewing the product portfolio in order to differentiate from competitors in the long run<br />
(Bessant 2003; Grant 1996; Lawson 2001). Thus, we state that producing a continuous stream of<br />
innovations strengthens the relationship between innovation performance and sustainable competitive<br />
advantage.<br />
Hypothesis 19: The higher the innovation frequency, the higher the impact of product<br />
innovation performance on sustainable competitive advantage.<br />
Competitive environment, frequency and degree of innovation<br />
A highly competitive environment makes it difficult for companies to gain long-term competitive<br />
advantages. We state that a continuous stream of innovations and a high degree of innovation will<br />
attenuate the negative impact of competitive advantage on long-term business success.<br />
Hypothesis 20: Competitive environment is directly negatively correlated with competitive<br />
advantage.<br />
Hypothesis 21: The higher the degree of product innovation, the lower the negative<br />
impact of a competitive environment for a sustainable competitive advantage.<br />
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Birgit Stelzer and Leo Brecht<br />
Hypothesis 22: The higher the frequency of innovation, the lower the negative impact of a<br />
competitive environment for a sustainable competitive advantage.<br />
3. Model and validation procedure<br />
3.1 Conceptual Model<br />
In the conceptual model, we summarize all hypotheses in an all-encompassing framework:<br />
3.2 Operationalization of Constructs<br />
In the first step, we have defined each construct in great detail. In the next step, based on theoretical<br />
and empirical work, we have derived indicators which had been specified and evaluated with experts.<br />
We have selected either reflective indicators or formative indicators to operationalize each constructs<br />
depending on our understanding of the construct. The indicators will be queried in the questionnaire<br />
using the following scales: seven-point Likert scale (1= strongly disagree, 7= strongly agree) as well<br />
as estimation scales such as “how would you describe the following items (1= very low, 7= very high).<br />
Figure 6: Operationalization of constructs<br />
3.3 Validation procedure<br />
The validation procedure for the conceptual model is made up of several steps. Firstly, all reflective<br />
indicators of first order will be tested applying explorative confirmative factor analysis. The formative<br />
indicators of first order are separately considered using tests of multicollinarity and external validity<br />
(Diamantopoulos 2001). In the next step, the multi-dimensional construct of technological competence<br />
will be tested. All reflective indicators (indicators of second order) will be tested using factor analysis.<br />
At this point it is important, that the assumed structure of the indicators is valid (Fornell-Larcker<br />
criterion) (Fornell 1981). Third, the measurement of the multi-dimensional construct of second order<br />
“technological competence” is conducted (Yi 2003). The result is a single measure (compositesecond-order-score)<br />
which is later used for testing the structural model. Next, the specification of the<br />
structural model with all validated constructs of first order and the composite-second-order-score is<br />
done. Two sub-models arise: sub-model 1 with all indicators of first order of the construct<br />
“technological competence” and sub-model 2 with the construct of “technological competence of<br />
second order” and its relationships to the subsequent constructs. For validation of the structural<br />
model, the endogenous variables’ determination coefficient (R 2 ) is used as well as the effect size (f 2 )<br />
(Götz 2010). In the last step, the additional factors and moderating effects are integrated step by step<br />
into the model (Chin 2003) and the path coefficients are tested for significance. Finally, for sub-model<br />
1 and sub-model 2, a multi-group analysis is conducted in order to identify differences between SMEs<br />
and larger companies (Sarstedt 2011).<br />
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4. Research design<br />
Birgit Stelzer and Leo Brecht<br />
We use structural equation modeling by applying the PLS approach in order to measure the<br />
technological competence. We choose the PLS algorithm as it is less restrictive in various<br />
requirements concerning data, theory and the operationalization of constructs (Götz 2010). As we<br />
integrate formative and reflective measurement models and a relatively high amount of items, the PLS<br />
algorithm outmatches the classical covariance structure analysis (Fornell 1987; Chin 1999). For<br />
developing an empirical verified PLS path model, three main steps are needed: development of<br />
conceptual model, data collection and verification of conceptual model. In this paper, we present the<br />
conceptual model including constructs and measures, based on theory, empirical research and<br />
qualitative evaluation using expert interviews (Bogner 2009) and focus groups (Morgan 1996).<br />
Figure 7: Procedure for development of the PLS path model<br />
The multidisciplinary group of experts was made up of individuals with roles in R&D, marketing and<br />
general management of SMEs as well as larger (mostly family owned) German companies from<br />
engineering and automotive industries. We conducted two focus groups with 4-6 experts from 5<br />
different companies and semi-structured face to face interviews. Within the expert interviews, we<br />
discussed the model’s inherent hypotheses. Within the focus groups, the conceptual model with<br />
constructs, relationships and indicators were specified and evaluated.<br />
We have completed the pretest of the questionnaire in June 2011. The sample data for the<br />
questionnaire survey will include German companies from the manufacturing industry with a focus on<br />
engineering and automotive companies (n=6200). The sample data will include SMEs with less than<br />
500 employees (over 96%) and larger companies with less than 7.000 employees (less than 4%).<br />
This allows us to test the model’s hypotheses for “classical” SMEs as well as for larger middle sized<br />
companies in order to identify significant differences between these groups.<br />
5. Findings<br />
In the expert interviews and focus groups, the following relationships have been evaluated as highly<br />
significant:<br />
� The relationship between the managerial capabilities “R&D management”, “technology<br />
management” and “culture in R&D” to technological competence are estimated to be significantly<br />
higher than “production management” and “learning capability” to “technological competence.<br />
� An innovation oriented culture is estimated to be highly significant for establishing technological<br />
competence.<br />
� Concerning the moderating effects describing the company’s environment, “competitive<br />
environment” and “speed of technology diffusion” are estimated to have a significantly higher<br />
effect than the moderator “dynamics of the market”.<br />
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Birgit Stelzer and Leo Brecht<br />
� Frequent innovation is considered more important to achieve and maintain a sustainable<br />
competitive advantage than a high innovation degree.<br />
6. Outlook<br />
Our objective of our paper was to design a conceptual model for measuring technological<br />
competence and its impact on a sustainable competitive advantage. Using structural equation<br />
modelling, we have derived the model’s inherent hypotheses. Referring to RBV, we have defined<br />
technological competence as a multi-dimensional construct of second order including technological,<br />
managerial and cultural capabilities determined by specific resources. Furthermore, we have<br />
proposed the hypothesis that technology-intensive companies will achieve long-term business<br />
success when realizing innovation activities (process and product innovation). Additionally, we have<br />
integrated moderating effects in the model representing the company’s environment or other effects<br />
which boost innovation performance. Next, we have defined the constructs and have explained briefly<br />
their operationalization. Finally, we have proposed a multi-level procedure for validation using the PLS<br />
approach.<br />
Our research adds to the body of quantitative approaches in innovation management aiming to detect<br />
the relationships of technological competence, innovation performance and a lasting business<br />
success. The future findings of the study will shed light on the key elements of technological<br />
competence and its impact factors on a lasting business success. Empirically, our research is at a<br />
work in progress stage and we are not yet able to affirm or reject any of the presented hypotheses.<br />
Generalization of our results will also be limited in terms of the target groups (German SMEs and<br />
larger companies from manufacturing industry with focus on engineering and automotive).<br />
Nevertheless, the model’s basic logic is theoretically established on a general basis so that the<br />
findings will be easily transferable to related settings.<br />
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1039
Firm Innovation and Role of Geography and Clusters in<br />
Bosnia-Herzegovina - Firm Level Insights<br />
Amira Vejzagic-Ramhorst 1 , Panayiotis Ketikidis 2 and Robert Huggins 3<br />
1<br />
University of Sheffield/SEERC, PhD Student<br />
2<br />
Southeast Europe Research Centre (SEERC) and City College, Greece<br />
3<br />
Cardiff School of Management, UK [mentor]<br />
aramhorst@hotmail.com<br />
Abstract: This paper aspires to be a contribution to research on clusters for developing economies and<br />
specifically transition economies, in the following way: by looking at knowledge spillovers and the role that<br />
proximity and trust play in facilitating these among firms in Bosnia and Herzegovina (BiH). There has been no<br />
published research on networks or clusters in BiH, while BiH is an interesting case given its transition to a market<br />
economy, its post-conflict legacy and low degree of trust associated with conflict, complex governance structure<br />
as well as high inflows of aid. First, a brief literature review to highlight key concepts applicable for the research<br />
is presented, including reference to research on developing and transitional economies. Following a section on<br />
BiH country context, the research methodology is presented, and finally (preliminary) findings of the field<br />
research are presented. The limitation of this paper is the size of the sample of firms (40 firms total) included in<br />
this research phase, therefore the findings presented are considered preliminary.<br />
Keywords: clusters, trust, innovation, Bosnia and Herzgeovina<br />
1. Introduction<br />
The purpose of this exploratory study is to examine the nature of network relations, knowledge<br />
spillovers and innovativeness of BiH firms and the role geography and trust play in facilitating these.<br />
To understand the process of knowledge spillovers and innovation, this research has placed firm<br />
level learning at the center of analyses with the objective of understanding if and how firm-level and<br />
cluster-level and network processes interact. As part of this research, firm level data has been<br />
collected based on a detailed questionnaire administered using in-depth structured interviews for a<br />
group of companies in BiH. The limitation of this research is a relatively small size of the sample of<br />
firms. In-depth surveys of firms from the sample will be complemented by case study of selected<br />
firm(s) (second stage of research) that will provide more qualitative understanding of the process of<br />
localized learning and innovation, with the objective of understanding how firm-level and cluster-level<br />
and network processes interact in a particular transitional context-BiH region. While there is limited<br />
empirical research in transition economies on clusters, policies that facilitate clusters and networks<br />
have gained increasing importance in transition countries of South-East Europe (SEE) and in BiH.<br />
Specifically, there has been no published research on clusters in BiH, while BiH is an interesting case<br />
given its transition to a market economy, its post-conflict legacy as well high inflows of aid and donor<br />
programs focused on cluster policies. This research can therefore serve as a source of valuable<br />
information for other researchers, development practioners and policy makers who design policies<br />
promoting clustering and inter-firm networks in the South East Europe and in BiH in particular.2.<br />
2. Literature review<br />
Most definitions share the notion of clusters as localised networks of organisations, whose production<br />
processes are closely linked through the exchange of goods, service or knowledge (Belussi (2004)<br />
provides a review of different cluster definitions). Knowledge in clusters can be created through<br />
various forms of local inter-organizational collaborative interaction, through increased competition and<br />
rivalry, and by spillovers following from local mobility and sociability of individuals (Porter 1998, 2000,<br />
Malmberg and Powell, 2005, Maskell 1999, 2000, Malmberg and Maskell, 2005, Belussi, 2004).<br />
However, literature (Beaudry and Breschi, 2003) also suggests that there can also be negative<br />
externalities from clusters, the “congestion externalities” reflected in cost of labour and real estate and<br />
including strong relational ties that may reduce flexibility and lead to technological lock-ins. In terms<br />
of empirical evidence, there is a large body of empirical studies on localized knowledge spillovers in<br />
clusters in developed economies (Malmberg and Power (2005) review over 100 empirical studies on<br />
this issue). In the context of knowledge spillovers and their localization, distinction between “tacit”<br />
and “explicit” is highlighted (Scott 2006, Ernst and Lundvall 1997, Johnson et al 2002). Tacit<br />
knowledge is difficult to transmit and can often be only transferred by means of close personal<br />
interactions, while explicit knowledge is codifiable. Both types of knowledge are symbiotic, and even<br />
though codified knowledge can be exchanged, to make it operational a firm needs to develop<br />
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Amira Vejzagic-Ramhorst, Panayiotis Ketikidis and Robert Huggins<br />
supporting tacit knowledge (Ernst and Lundvall 1997). The impact of social capital and social ties as<br />
“carriers” of economic knowledge, particularly the tacit one is highlighted in literature (Porter 1998,<br />
Porter 2000, Lorenzen 2007, Maskell 1999, Maskell 2000, Morina-Morales, 2005, Huggins 2007,<br />
Cooke et al 2005, Malmberg and Power, 2005). Rocha and Sternberg (2005) and Malmberg and<br />
Power (2005) note that the success of a cluster and its ability to foster knowledge creation depends<br />
on various forms of local inter-organizational collaborative interaction, the role of trust is highlighted as<br />
crucial in fostering collaborative interaction. Social capital is seen as a “local phenomena”, as some<br />
argue that interdependencies of different types of social relations makes dense combinations<br />
dependent upon proximity (Lorenzen, 2007). Other researchers (Amin and Cohendet 2005, Gertler<br />
and Levitte 2005) however argue that “social proximity” is possible without “geographical proximity”.<br />
Also, it has been argued that the trans-local connections play an important role in knowledge creation<br />
within clusters, highlighting the importance of global networks.<br />
Literature review on clusters in developing countries is far less comprehensive than for developed<br />
economies, and highlights that for clusters in developing countries, Porter’s conditions of the<br />
advanced diamond present in developed clusters do not hold (specifically, there is strong reliance on<br />
export markets, low local rivalry). On the other hand, from the existing literature review it does<br />
appear that inter-firm collaboration is important and that often external pressures spur this<br />
cooperation and upgrading by firms (some developing country studies: Tewari (1999), Kennedy<br />
(1999), Knorringa (1999), Nadvi (1999), Schmitz (1999), Rabellotti (1999), Visser (1999), Weijland<br />
(1999), Perez-Aleman (2000, 2005), Caniels and Romijn (2003), McCormick (1999)). However, it is<br />
important to understand how these external pressures get transmitted into concrete organizational<br />
changes within and between firms. Technological change is not something firms in developing<br />
countries simply “buy-in” from outside. On the contrary, technological change is rooted within the<br />
structure of the firm itself and therefore there is a much wider scope for understanding technological<br />
upgrading in developing countries than just focusing on “acquisition” of outside technology and<br />
equipment (Bell and Albu 1999, Ernst and Lundvall 1997, Dahlam and Nelson 1995, Kitanovic 2007).<br />
Successful development is possible, if firms are able to successfully use technology, which depends<br />
on their ‘technological capabilities’. The term 'technological capability' includes knowledge and skills<br />
needed to acquire, assimilate, utilize, adapt, and create technology (Bell and Albu 1999, Ernst and<br />
Lundvall 1997). The level of technological capability of a firm is influenced by its relationships with<br />
other actors, as firms operate in a complex industrial network characterized by competition and<br />
cooperation (Ernst and Lundvall 1997). Consequently, innovation is not only a technological, but also<br />
a social process resulting from informal and formal communication networks (Dahlman and Nelson<br />
1995, Bell and Albu, 1999). Similarly, Ernst and Lundvall (1997) stress that technological learning in<br />
developing countries has two challenges: the acquisition of the codified knowledge element of<br />
technology and the development of tacit, firm-specific knowledge.<br />
Clusters in transitional economies exhibit most of the features identified for clusters in developing<br />
economies, but also have specific ones related to region’s socialist history (Radosevic, 2000,<br />
Kitanovic, 2007, Jensen, 2004). An important dimension of the transition is the “tearing down of old<br />
and building up new linkages”, where the emerging market economy is expected to offer the myriad of<br />
decentralized information streams leading to the externalities and spillovers. However, this<br />
transformation can not be considered inevitable. Openness of the economy does provide incentives<br />
for restructuring but does not per se lead to technological development (Radosevic, 2000, Kitanovic,<br />
2007). The ability to respond to market incentives is, like in the developing country context,<br />
determined by the overall technological capability, a combination of knowledge, skills and<br />
organisation of firms, interactive learning and roles and strategies of firms, governments and<br />
institutions of countries. Moreover, technological change may be inhibited by the fact that some<br />
elements of technology are tacit (Radosevic, 2000, Kitanovic, 2007). Again, the networks are<br />
highlighted as a way to address the “tacitness” of knowledge. With transition and increasing FDI,<br />
global networks may play a role in the domestic innovation process, however development of clusters<br />
and networks in not automatic as foreign-owned subsidiaries need to build linkages and learn to work<br />
together and with local partners. Another key aspect for clusters in transition economies is the low<br />
level of social capital, or more narrowly trust. Post-communist societies are seen as a facing a “dual<br />
social challenge”, on one hand lack of generalized trust and very low collaboration in formal settings,<br />
and on the other high incidence family and informal networks, where ‘entry’ is discouraged (OECD<br />
2005, Bozovic, 2003, Ketels and Solvell 2007, Raiser et al 2003, Rasier et al, 2001, Humphrey and<br />
Schmitz, 2001, Mungiu-Pippidi, 2005, Bartlett and Bukvic, 2002 ). While this is suboptimal for the<br />
overall society, empirical and theoretical research (Cooke et al, 2005, Huggins, 2007) also suggest<br />
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Amira Vejzagic-Ramhorst, Panayiotis Ketikidis and Robert Huggins<br />
that firms that predominantly use family-based social capital have low rates of growth and innovation<br />
and as they grow their dependency shifts, away from social networks of owners towards network<br />
capital.<br />
3. Context: Bosnia and Herzegovina (BiH) –Country Profile<br />
During the first half of 1990s, BiH experienced the most devastating economic collapse of any<br />
economy in the Central and Eastern Europe since World War II. The war changed the social and<br />
economic map of the country (World Bank 2005). As IMF (2005) highlights “disruptions of civil war left<br />
plant and machinery severely outdated if not destroyed. Know-how was lost through large scale<br />
emigration and internal displacement of the labour force. And those enterprises, previously part of<br />
BiH’s vertically integrated industries found themselves isolated and without traditional local markets.<br />
And with the break-up of Yugoslavia, access to markets in the Former Yugoslav Republics was<br />
disrupted”. All of this left BiH’s GDP at less than 20 percent of its pre-war level (World Bank, 2005).<br />
In 1996 with the return of peace a major effort has been undertaken focused on BiH’s post-war<br />
economic recovery as well as its transition to a market economy. BiH has made notable economic<br />
progress since 1996 with real GDP that quadrupled between 1995 and 2004, however much of the<br />
economic growth has been fuelled by over $5 billion in donor loans and grants, rather than by private<br />
investment. Most firms in BiH are now privately owned, although the share of the private sector in<br />
output is only about 50 percent, this is among the lowest in the SEE region. Small and medium sized<br />
enterprises (SMEs) play a prominent role in BiH economy. EBRD reports in BiH there are only some<br />
200 enterprises that were classified as large enterprises compared to over 30,000 SMEs. Also, within<br />
the SMEs there is a pronounced share of micro-enterprises where over 85 percent of the SMEs in BiH<br />
are micro-enterprises with 10 or fewer employees. Moreover, foreign firms do not play a prominent<br />
role on the enterprise scene in BiH, this is despite the fact that levels of FDI in BiH have steadily<br />
increased in the past years. However, FDI inflows per capita to BiH are still among the lowest when<br />
compared to other SEE countries. Relatively low inflows of FDI have not only resulted in limited<br />
presence of foreign firms in BiH, but as World Bank (2005) argues, have resulted in poor integration of<br />
BiH enterprises into international production and distribution networks and their low competitiveness.<br />
BiH firms surveyed by World Bank and EBRD export only 10 percent of their sales and only firms from<br />
Serbia and Montenegro in the SEE region have lower export intensity (World Bank, 2005). Several<br />
empirical studies have shown that FDI has played an important role in transfer of technology in<br />
transitional economies (Doyle et al, 2001). Also as noted, several authors have argued that the<br />
knowledge creation within clusters is dependent upon trans-local connections (Amin and Cohendet<br />
2005, Gertler and Levitte 2005). However, in BiH this knowledge transfer is only beginning to take<br />
place and on a relatively limited scale.<br />
4. Research objectives and methodology<br />
Drawing on the above literature review, the objective of this exploratory study of firms in BiH is to<br />
examine the nature of network relations, knowledge spillovers and innovativeness of BiH firms and<br />
the role geography and trust play in facilitating these. Owing to lack of data in Bosnia and<br />
Herzegovina and the type of questions being asked, a field study was necessary. The researcher<br />
applied a qualitative interview methodology for a selected group of firms (40 total) to understand in<br />
depth the process of (localized) learning and innovation, with the objective of understanding whether<br />
and how firm-level and cluster-level and network processes interact. Consideration of the firms’ size<br />
(measured by employment data, classification based on EU definitions of micro, small, medium and<br />
large enterprises) was also given to avoid over or under representation of smaller (larger) firms in the<br />
sample. Finally, the sample of firms was subject to the a key constraint in that the firm had to agree to<br />
participate in the research and enable researcher to spend substantial time at its production site and<br />
with key employees of the firms.<br />
The qualitative interview methodology consisted of a semi-structured questionnaire and an openended<br />
interview with selected firms. The questionnaire used in these semi-structured interviews<br />
includes sections on firms’ general profile, financial performance, innovativeness and technological<br />
capacity, networking and spill-over effects, external environment and barriers to technological<br />
upgrading, and trust. The questionnaire and open- ended interviews were administered by visiting<br />
each firm at its production site and interviewing the director, production manager and additional staff,<br />
in some cases. In order to differentiate between proximate and distant linkage flows, questions have<br />
been systematically asked for both inter-firm linkages in proximity as well as for linkages to distant<br />
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Amira Vejzagic-Ramhorst, Panayiotis Ketikidis and Robert Huggins<br />
firms and institutions. In order to analyze the relative importance of various types of inter-firm<br />
linkages, latent indicators-asking for the perceived importance of inter-firm linkages were used.<br />
5. [Preliminary] Findings<br />
The qualitative field research has confirmed the writings of Ernst and Lundvall (1997), and Bell and<br />
Albu (1999) who point out that technological learning in developing countries has two challenges: the<br />
acquisition of the codified knowledge element of technology and the development of tacit, firm-specific<br />
knowledge. Specifically, the research has shown that firms value and do gain access to a common<br />
pool of codified knowledge (field research indicates high importance for direct cooperation [with<br />
suppliers of equipment/customers] and use of paid consultants as transmission mechanisms of<br />
knowledge for firms), nevertheless firms still have to undertake a learning process in which they<br />
develop the tacit capabilities required to use, adapt and further develop the imported technology. The<br />
field research has showed that few components of production technology are acquired ``ready-made''<br />
and then brought into use by firms using standard ``recipes''. Even in cases where the introduction of<br />
some element of new technology involved a relatively close approximation, the interactions with other<br />
elements in the production system have required creative problem-solving and innovative reconfiguration<br />
of at least some elements in the overall production system. Specifically, firms have<br />
been asked for importance of technological insights gained from adapting and improving existing<br />
technology in use, the so called “learning by changing'' (Bell and Albu, 1999), and this has shown to<br />
be the most important way for participating firms to gain knowledge [the average perceived<br />
importance of this transmission mechanisms by firms is 4.15 on scale of 1-5]. Therefore, internally<br />
generated change seems to be an equally important driving force behind continuing improvements to<br />
products and processes for firms in BiH.<br />
External sources also appear to play an important role as a source of knowledge for BiH firms.<br />
Moreover, examining the role that proximity plays in facilitating external knowledge spillovers, field<br />
findings suggest that the average (as perceived by firms) importance of knowledge spillovers from<br />
proximate firms and institutions is less than from distant firms and institutions and moreover that<br />
proximity to the source of knowledge is not important for firms’ ability to appropriate knowledge. A<br />
possible explanation for this can be based on the Giuliani and Bell (2004) framework (based on<br />
analyzing the Chilean wine cluster) who stress that instead of the common argument that the mesolevel<br />
cluster shapes micro-level firm behaviour, they argue for opposite direction of influence, where<br />
the “capacities of individual firms to absorb, diffuse and creatively exploit knowledge shape the<br />
learning dynamics of the cluster as whole”. Extending this concept to the BiH context, when BiH firms<br />
were asked to identify and rate barriers that hinder firm’s ability to access and utilize information and<br />
knowledge from other agents, BiH firms considered the weak technological capability of other agents<br />
[in their proximate environment] as a significant factor; other significant factors were firms’ own<br />
technological capability and the cost of acquiring information/knowledge. To illustrate this point, one<br />
of the participating firms cited an old Bosnian proverb “In life, you can only learn from the one who<br />
knows more than you.” Given this, it would appear that policy measures that foster inter-firm<br />
collaboration might not do as much, rather measures focused on strengthening firms’ knowledge<br />
bases might ultimately lead to greater knowledge creation and stronger intra-cluster and firm network<br />
diffusion. A similar argument for clusters in developed economies is advanced by Beaudry and<br />
Breschi (2003) that stress that innovativeness of the peer-firms in the cluster is more important than<br />
the size of cluster.<br />
Moreover, it is also clear that external sources of knowledge are not limited to machinery suppliers.<br />
Specifically, a very important external source of knowledge and impetus for innovation, providing not<br />
just knowledge about product specifications, but also a wide range of other elements (e.g., know-how,<br />
knowledge about suppliers and other), are customers, and specifically, distant customers; as<br />
illustrated by the case of an important furniture buyer “IKEA” which is seen by a number of BiH<br />
companies as critical for their technological upgrade, including new product and process<br />
development, but also for their supply chain management innovations. Similarly, a Slovenian<br />
customer had sent out metallurgical engineers for periods of several months to train the BiH partner<br />
firms in quality control and production engineering'' [This is similar to the finding of Nadvi's (1999)<br />
study of the Sialkot, Pakistan surgical instrument cluster, where links with foreign buyers were<br />
important sources of technological change. Also, Tewari (1999) emphasizes that tone of the key<br />
reasons for survival of a textile cluster in India was the learning relationship between first-time<br />
exporters and their foreign buyers].<br />
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Amira Vejzagic-Ramhorst, Panayiotis Ketikidis and Robert Huggins<br />
Literature highlights that technology support organizations can also play important knowledge<br />
``gatekeeper'' roles at the boundary of cluster knowledge-systems of firms in developing countries.<br />
Some of these may be public sector institutes, with varying degrees of support from local firms, which<br />
carry out research, or provide technical or training services [literature review provides a successful<br />
example in a developing country context for the Metal Industries Development Center in Sialkot,<br />
Pakistan Nadvi (1999)]. However, literature also points to different degrees of their effectiveness,<br />
where some seem to have been highly successful in bringing new knowledge, others have been<br />
much less effective (Bell and Albu, 1999). BiH firms do not perceive the technology support<br />
organizations as an important source of knowledge or as knowledge gatekeepers to other sources of<br />
knowledge [average perceived importance of knowledge flows from these organizations is very low,<br />
1.23 on scale of 1-5, and also their role as gatekeepers to knowledge flows is perceived to be almost<br />
nil.]. To summarize, the field research has shown that the innovative strength in BiH remains<br />
encapsulated at the firm level and that there are weak if any links with institutions such as universities,<br />
institutes, regional development agencies and other, also that innovation is not a product of formally<br />
articulated R&D activities. This finding is very much in line with the research of Arocena and Sutz<br />
(2000) that note that in developing countries, micro-innovative strength remains isolated and<br />
encapsulated at the firm level an that many institutions that are important for innovative activities do<br />
not exist, and that innovation in developing countries is highly informal, i.e. not product of formally<br />
articulated R&D activities. Among the firms interviewed, not a single firm had introduced or planned<br />
to introduce a patent in the last five years, while almost all of them had developed new or improved<br />
their products and introduced new or improved their existing technological processes and opened<br />
new markets<br />
The impact of social capital and social ties as “carriers” of economic knowledge, particularly the tacit<br />
one is highlighted in literature, moreover some argue that interdependencies of different types of<br />
social relations makes dense combinations dependent upon proximity, while other argue that “social<br />
proximity” is possible without “geographical proximity”. Interviewed individuals from participating BiH<br />
firms engage quite frequently in social activities outside work with organizations/individuals from<br />
whom the firm “sources” of knowledge, and these social contacts serve quite frequently as sources of<br />
knowledge for them. In addition, contrary to literature that suggests that trust in transition economies<br />
and BiH specifically is very low (Mungiu-Pippidi, 2005 Hakansson and Sjoholm, 2005, Smith, 2006,<br />
Pickering, 2006), participating BiH firms report that the degree to which they trust their business and<br />
cooperation partners, both proximate and distant, is high. Moreover, also contrary to literature review,<br />
their trust is slightly higher in their distant partners than proximate ones. Above findings can be<br />
examined in the context of literature review and other empirical studies (Iyer et al, 2005, Allesina and<br />
la Ferrara, 2000, Allesina and Rodrik, 2004, Glaeser, 2001) that suggest that locations that have<br />
ethnically diverse population have low levels of social capital and trust. Therefore, the reported lower<br />
degree of trust in proximate partners could reflect the fact that proximity in BiH context embodies an<br />
additional consideration, one of different ethnicity. Moreover, one needs to be careful in drawing<br />
conclusions for the reported overall high degree average. A useful reference is the research (Rus<br />
and Iglic, 2005) that shows that in weaker institutional environment such as the one present in BiH,<br />
actors base their economic relationships on contract and that when trust is used in as a basis of<br />
business relationships it is likely to be centered on interpersonal trust (Rus and Iglic, 2005). This<br />
could explain the high degree of the reported trust in business partners, but also signal that there is a<br />
high prevalence in use of interpersonal trust for selection/formation of business partnerships, however<br />
this may limit economic and knowledge generation potential of firms due to their reliance on strong<br />
ties embedded within cohesive groups marked with closure. This finding is in line with empirical and<br />
theoretical research (Cooke et al, 2005, Huggins, 2007) where it has been suggested that firms that<br />
predominantly use family-based social capital have low rates of growth and innovation and as they<br />
grow their dependency shifts from social networks of owners toward more open, cognitive networks.<br />
6. Conclusion<br />
The purpose of this exploratory study has been to examine the nature of network relations, knowledge<br />
spillovers and innovativeness of BiH firms and the role geography and trust play in facilitating these.<br />
As part of this research, firm level data has been collected based on a questionnaire administered<br />
using in-depth structured interviews for a group of companies in BiH.<br />
The limitation of this research is a relatively small size of the sample of firms. In-depth surveys of<br />
firms from the sample will be complemented by case study of selected firm(s) in the next stage of<br />
research.<br />
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Amira Vejzagic-Ramhorst, Panayiotis Ketikidis and Robert Huggins<br />
The field work has revealed that relying only a “statistical snapshot” of a cluster or an assumption of<br />
the existence of a cluster, since a cluster policy is in place, does not provide much insight into the<br />
nature and strength of local firm linkages, knowledge spillovers and social networks. Also, the<br />
preliminary findings have shown that geographical proximity by itself does not guarantee that<br />
cooperation and knowledge spillovers will take place. Although there is an increased awareness<br />
among firms of (potential) value of networks and clusters and growing (public policy) support for their<br />
establishment and growth, some of these forms of collaboration have been primarily donor driven and<br />
their long-term sustainability and effectiveness in terms of knowledge generation has not been<br />
critically evaluated. While network and cluster policies may play a role in the domestic innovation<br />
process, development of networks and clusters is not automatic as firms need to learn to work<br />
together and with local partners. Moreover, it has become clear that the relevance of patenting<br />
data as measures of innovation is much less clear in the case of “catching up economies”, as the<br />
technology effort of firms in these countries is mostly not at the world innovation frontier. However in<br />
the process of moving closer to the frontier, firms need to have skills to understand knowledge, be<br />
able to use its and to adapt for creating new knowledge. Research has also shown that learning<br />
about new technologies requires a certain level of absorptive capacity in order to be able to diffuse<br />
technologies produced elsewhere, and that the knowledge that firms need is often not available in<br />
codified form. Finally, research has also highlighted that operationalization of social capital is<br />
complex and that is important to understand local variation of social capital and local impact of social<br />
capital. Therefore, in the next stage of research, case study of selected firm(s) that will provide<br />
more qualitative understanding of the process of localized learning and innovation and the role social<br />
capital will be carried out.<br />
This work has extended the research of clusters and inter-firm networks into Bosnia and Herzegovina<br />
and can thus serve as a source of valuable information for researchers and other parties interested in<br />
policies promoting clustering and inter-firm networks in SEE and in BiH in particular.<br />
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1047
Exploring the Role of Perceived Media Needs and<br />
Technology Characteristics in Determining Social Media<br />
Adoption: Conceptual Framework<br />
Izzal Asnira Zolkepli 1 and Yusniza Kamarulzaman 2<br />
1<br />
Graduate School of Business, University of Malaya, Kuala Lumpur, Malaysia<br />
2<br />
Department of Marketing, Faculty of Business & Accountancy, University of<br />
Malaya, Kuala Lumpur, Malaysia<br />
izzalasnira@gmail.com/izzalasnira@siswa.um.edu.my<br />
yusniza@um.edu.my<br />
Abstract: A new world of collaboration and communication between marketers and consumers has been shaped<br />
by the growth and popularity of new online media, which, in this research paper, is referred to as social media.<br />
The number of social media users has continued to increase ever since its inception, and, at present, more than<br />
a billion people from all over the world are connected and considered to be networked through this media.<br />
Although there has been some research conducted to understand the phenomena of social media flocking, there<br />
is relatively little and inadequate theory-driven empirical research available to explain the application of social<br />
media and consumer tendency to use social media. The existing model of consumer media usage is observed to<br />
be less appropriate in capturing the depth of consumer social media needs because, unlike other media, it is<br />
supported by computer-mediated communication technology as its basic foundation. In addition, consumers<br />
adopt innovation in social media because of its perceived helpfulness in satisfying the consumer’s segment of<br />
needs that arise from two basic points of view: one being consumer social roles and the other being consumer<br />
personal disposition. As social media is highly interactive in nature and most likely user-controlled, it remains<br />
questionable whether the existing consumer media needs will have the same significant impact on social media<br />
as the previous media. Therefore, based on the understanding of the Tri-component Attitude Model and drawing<br />
upon Uses and Gratifications Theory (UGT) and Diffusion and Innovation Theory (DIT) this paper seeks to<br />
explain the adoption of this new online media in light of consumer perceived social media needs and the<br />
characteristics of social media technology. A conceptual framework for segmenting the behavioural response of<br />
the consumer to social media adoption is proposed based on the affective, cognitive and conative state of<br />
attitude formation. With the help of this framework the understanding of researchers and practitioners concerning<br />
consumer predictive needs and their relationship to the speed of consumer adoption behaviour in the social<br />
media will be better understood. It will also provide a deeper and more complete understanding in designing<br />
future targeting strategies and enhancing customer relationship management (CRM) with existing and potential<br />
consumers through the social media platform.<br />
Keywords: social media, technology adoption, technology characteristics, consumer media needs, media uses<br />
and gratifications, tri-component attitude model<br />
1. Introduction<br />
The emergence of social media suggests the existence of an advanced relationship and targets<br />
opportunities in the consumer markets (Drury, 2008, Bhagat et al., 2009, Mangold and Faulds, 2009,<br />
Schau et al., 2009). At the macro marketing level, this is evidenced by the continued fragmentation<br />
and the dynamics of postmodern markets, which, to some extent, contributed to instantaneous and<br />
simultaneous communication in the “Business-to-Consumer” (B2C) and “Consumer-to-Consumer”<br />
(C2C) market (Bhagat et al., 2009, Mangold and Faulds, 2009, Schau et al., 2009). In contrast, at the<br />
micro level, this is evidenced by inadequate consumer insight, which might mislead the future<br />
targeting and positioning strategy of marketers, especially when the expansion of social media<br />
marketing takes place (Dholakia et al., 2004, Peter and Olson, 2010).<br />
It is noted that the total consumer usage of the new media has escalated dramatically, especially in<br />
premier social media websites such as Facebook (Cheung et al., 2010). It has been reported that the<br />
total amount of time spent online by Facebook users increased considerably, from 3.1 billion minutes<br />
in December 2007 to 205 billion minutes in December 2008 (Nielsen, 2009), which is a considerable<br />
increase of approximately 566%. Furthermore, the increment of consumer spending hours on social<br />
media is expected to increase significantly over time. Thus, it attracts more consumers and marketers<br />
to flock into this medium as part of their activities (Bhagat et al., 2009, Parra-López et al., 2011). This<br />
raises the question, what drives consumers to flock to this new type of media?<br />
In the past few decades, studies on consumer media needs concerning electronic and print media<br />
have emphasised the psychological aspect of the media user (Katz et al., 1974, Blumler, 1979, Parker<br />
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Izzal Asnira Zolkepli and Yusniza Kamarulzaman<br />
and Plank, 2000, Xiang and Gretzel, 2010). Evidence shows that the consumer’s perceived<br />
helpfulness of traditional media is the essential driver of media adoption (Katz et al., 1974, Blumler,<br />
1979, Mersey et al., 2010). However, in today’s environment, consumers’ usage of traditional media is<br />
declining. It is gradually gravitating towards new types of media that promise a new way of<br />
entertainment, connection and communication (Bhagat et al., 2009). Consequently, consumers flock<br />
to social media that provide them with a new media experience and the opportunity to manage the<br />
media content (Rashtchy et al., 2007, Vollmer and Precourt, 2008). These results in consumers<br />
control over the media and a change in their behaviour and adoption patterns, as they perceive the<br />
technology embedded in the new media as highly important to support its perceived helpfulness<br />
attributes (Schau et al., 2009, Xiang and Gretzel, 2010).<br />
While the technology-based media is expanding, it remains questionable whether or not the<br />
consumer-perceived media needs of social media will still continue to have the same significant<br />
impact as traditional media as the nature of social media is highly interactive and consumer controlled<br />
(Bhagat et al., 2009). Thus, based on the Tri-Component Attitude Model (Rosenberg and Hovland,<br />
1960) and drawing upon the Uses and Gratification Theory (UGT) (Katz et al., 1974) and Diffusion of<br />
Innovation Theory (DIT) (Rogers, 2003), this conceptual paper focuses on explaining the consumer<br />
adoption of social media, which is presumed to contribute to a better understanding of consumer<br />
predictive needs and its relation to the speed of consumer adoption behaviour in social media. In<br />
return, this understanding will help marketers to design the marketing strategy and improve customer<br />
relationship management (CRM) with existing and potential consumers through the social media<br />
platform.<br />
Specifically, the objectives of this paper are:<br />
� To identify the dimensions of consumer-perceived media needs and perceived characteristics of<br />
social media technology that drive social media adoption.<br />
� To provide a theoretical understanding of the motivation that drives the affective and cognitive<br />
component of attitude formation in social media adoption.<br />
� To identify the type of media needs and technology characteristics that dominantly drives<br />
consumer adoption of social media.<br />
� To suggest a suitable marketing strategy that can determine ways of targeting and segmenting<br />
consumers in social media based on conative response.<br />
This paper mainly consists of three sections. The first section provides a review of the concept of<br />
social media adoption. Then the second section covers the conceptual model development and the<br />
last section concludes with conceptual contributions and implications.<br />
2. Literature review<br />
2.1 Towards the concept of social media adoption<br />
Before exploring the deeper part, let us first review the term “Social Media”. According to Cooke and<br />
Buckley (2007), the key understanding of social media is basically derived from user-generated<br />
content creation and the exchange of ideas between the communicator. It is an Internet based<br />
application that was built on the ideological and technological foundations of Web 2.0. Consequently,<br />
social media is largely utilised by consumers as the main actor through their own initiative to join and<br />
communicate instead of being promoted and encouraged by the marketer (Bernoff and Li, 2008,<br />
Kaplan and Haenlein, 2010). Social media is also known to marketers as a mass media vehicle for<br />
consumer-sponsored communication where communication is motivated voluntarily (Schau et al.,<br />
2009). Undoubtedly, social media represents the number one source of media for consumers at work<br />
and the number two source of media for consumers at home (Rashtchy et al., 2007). Consumer<br />
behavioural responses towards new media usage has changed their media consumption and media<br />
adoption pattern, as consumers perceive the increasing importance of the technology system offered<br />
by this medium (Mangold and Faulds, 2009).<br />
The shift in media usage pattern from traditional media into new media has prompted media scholars<br />
to reveal that the traditional model of media communication is no longer adequate to represent the<br />
new media and merging the traditional media model and new media ways of communication may<br />
serve as an increasingly more accurate representation (Perry, 2002). Consumer media usage is<br />
purposive and involves active behavioural control in which consumers seek content based on their<br />
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Izzal Asnira Zolkepli and Yusniza Kamarulzaman<br />
internal motivations (Eastin and Daugherty, 2005). These internal motivations are to meet the specific<br />
needs of the consumer and serve as the basis of attitude formation (Allport, 1967, O'Keefe, 2002,<br />
Daugherty et al., 2008). According to Eagly and Chaiken (1993), a person’s attitude signifies the<br />
individual’s psychological tendency, including the affective and cognitive component, which is<br />
expressed through a particular object that serves the various motivations of the consumer, which, if<br />
met, would satisfy the consumer’s various motivation needs to use media. However, due to various<br />
underlying psychological needs that are related to media usage, each consumer segment may<br />
choose to consume social media for entirely different reasons, which is one of the justifications of this<br />
paper.<br />
2.2 Perceived Media Needs<br />
Before justifying the tendency or inclination for choosing social media and their adoption, the attitudes<br />
towards the selection of media should first be analysed. By definition, attitude means a predisposition<br />
or a tendency to respond positively or negatively towards a certain idea, object, person or situation<br />
(Rosenberg and Hovland, 1960).<br />
According to Allport (1967, p8), attitude specifically refers to the ‘mental and neural state of readiness<br />
that is organised through experience’. Allport (1967) explains that attitude exerts a directive or<br />
dynamic influence upon the individual’s response to all objects and situations with which it is related.<br />
It influences the individual's choice of action, and responses to challenges, incentives, and rewards<br />
(together called stimuli). According to the Tri-Component Attitude Model (Rosenberg and Hovland,<br />
1967), attitudes consist of three major components – cognitive, affective and conative.<br />
The cognitive component contains thoughts or beliefs that individuals possess concerning the object<br />
whereas the affective component consists of positive and negative feelings or emotions towards the<br />
object, and the conative component contains an individual’s actions or intentions to act with respect to<br />
the object, which mainly indicates the tendency, intention and inclination (Fridja, 1986, Lazarus, 1991,<br />
Malhotra, 2005, Parra-López et al., 2011).<br />
Uses and Gratifications Theory states that audiences (the consumer) are active and usually seek to<br />
use media for satisfaction. This theory directs theoretical emphasis on the media content and active<br />
audience. Explicitly, in the media adoption study, Uses and Gratifications Theory (UGT) (Katz et al.,<br />
1974) suggested that people by their own choice choose certain media to gratify their needs, i.e.<br />
affective, and justify their action by asserting that different people use the same mass media for very<br />
different purposes, i.e. cognitive. UGT implies that individuals use and choose media based on their<br />
affective and cognitive response towards mass media as an object and its perceived helpfulness<br />
concerning its underlying psychological needs (Katz et al., 1974, Ruggiero, 2000, Terzis and<br />
Economides, 2010). Thus, based on the affective-cognitive attitude formation, it explains why people<br />
choose a specific medium over alternative communication media and the underlying needs that<br />
motivate people to use that particular media. Furthermore, users are goal-directed in their behavioural<br />
response and, therefore, are often aware of their affective-cognitive needs.<br />
As social media continues to provide people with a wide range of platforms and content, UGT is<br />
appropriate to investigate the computer-mediated communication situation through single or multiple<br />
sets of psychological needs, psychological motives, communication channels and content and<br />
psychological gratification (Rayburn et al., 1984, Lin, 1996, Cheung et al., 2010, Luo et al., 2010). A<br />
large body of literature suggests that media needs predict usage and that media usage influences<br />
consumer behavioural response, that is, gratification (Palmgreen et al., 1981, Rubin, 1983, Ko et al.,<br />
2005).<br />
Within this perspective, a certain level of cognitive and affective state of consumer needs, such as<br />
surveillance, information learning, entertainment, personal identity, para-social interaction,<br />
companionship and escape, is fulfilled (Katz et al., 1973, Blumler, 1979, Rubin, 1983, Xiang and<br />
Gretzel, 2010). Even so, the psychological gratification obtained is clearly present, as perceived by<br />
the consumer. Certainly, consumers make distinct selections across the multitude of channels of<br />
media and content choices offered to them (Abelman et al., 1997).<br />
The existing literature provides several ways of classifying consumer media needs and gratification.<br />
Some researchers report it as immediate and deferred gratification (Schramm et al., 1961, Ko et al.,<br />
2005) and some report it as informational-educational and fantasist-escapist entertainment (Weiss,<br />
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Izzal Asnira Zolkepli and Yusniza Kamarulzaman<br />
1971, Charney and Greenberg, 2002). Katz et al. (1973) see the media as a means used by<br />
individuals to connect themselves with or disconnect from others. Based on largely speculative<br />
literature from the social and psychology discipline, Katz et al. (1973) classified media needs into: (i)<br />
cognitive needs that require to strengthen information, knowledge and understanding, (ii) affective<br />
needs that require strengthening the aesthetic, pleasurable and emotional experience, (iii) personal<br />
integrative needs that require strengthening the credibility, confidence, stability and status that<br />
combine the first and second category of cognitive and affective needs, (iv) social integrative needs<br />
that require strengthening contact with the family, friends and the world, and (v) tension-release<br />
needs that require escaping or weakening the contact with the self and social role.<br />
Considering these general requirements of media needs, and other studies that take the same stance<br />
on this approach, this study uses three general applicable needs, which are assumed to be more<br />
accurate and relevant to social media studies, that is, sociable and usable (Preece, 2001, Phang et<br />
al., 2009). In addition, this is also supported by recent studies that stated that entertainment, pastime,<br />
escape, social interaction, information, convenience and coolness were highly related to web-based<br />
context, which is presumed to fit into three categories: personal integrative needs, social integrative<br />
needs and tension release needs (Kaye, 1998, Ferguson and Perse, 2000, Papacharissi and Rubin,<br />
2000, Charney and Greenberg, 2002, Ko et al., 2005, Diddi and R. Larose, 2006).<br />
In addition, extending the UGT paradigm based on consumer behavioural responses towards social<br />
media adoption, explains the consumer affective, cognitive and conative stage of the consumer<br />
adoption decision process (Peter and Olson, 2010).<br />
2.3 Perceived characteristics of social media technology<br />
The innovation characteristics serve as an important influence over an individual’s adoption decision.<br />
DIT predicts that media and other interpersonal contacts provide information and influence consumer<br />
behaviour. According to Rogers (2003), technology characteristics denote that before a set of<br />
behaviour reaches the conative stage of adoption, it is assumed that the consumers’ prior condition<br />
will interfere in the beginning stage of the adoption process. This paper counts prior conditions as ‘felt<br />
media needs’ in driving consumers to use and gratify media consumption. Therefore, the following<br />
hypothesis is proposed in accordance with the literature review:<br />
H1: There is a positive relationship between the perceived media needs of using social<br />
media and the perceived characteristics of social media technology<br />
In recent years, the vast majority of innovation diffusion studies focus on the adoption of product<br />
technologies, for instance, mobile phones (Roach, 2009), mobile gaming (Kleijnen et al., 2004), the<br />
Internet as a communication channel (Lin and Yu, 2006) and mobile Internet service (Pedersen,<br />
2005). Only a few studies have concentrated on the adoption of the new media, i.e. social media<br />
(Cheung et al., 2010, Shin and Shin, 2010, Fischer and Reuber, 2011). Thus, this paper<br />
conceptualises social media as an innovation that distinguishes it from other media communications.<br />
According to Luo et al. (2010), when needs are studied in relation to adoption, an integration of<br />
theories will bring an understanding of the extent to which innovation and its qualities correlate with<br />
the pursuit of certain gratification that leads to the acceptance and adoption of innovation (Rashtchy<br />
et al., 2007, Shin and Shin, 2010). DIT’s comprehensive nature enables it to understand electronic<br />
communication media in which computers have not only become home and business applications, but<br />
also fulfil work and play functions. While it is argued that DIT brings a new perspective to<br />
understanding the adoption decisions of online media consumers, such arguments should only be<br />
made with supporting evidence from a fair integration of media and IT theory.<br />
Understanding the five characteristics of innovation by definition (Rogers, 2003), (i) relative advantage<br />
is described as the degree to which an innovation is perceived as being better than its predecessor,<br />
(ii) compatibility is described as the degree to which an innovation is perceived as being consistent,<br />
(iii) complexity is described as the degree to which an innovation is perceived as being difficult to use,<br />
(iv) observability is described as the degree to which the results of an innovation are observable to<br />
others, and (v) trialability is described as the degree to which an innovation may be experimented with<br />
before adoption. In recent DIT literature, it was suggested that among the five characteristics of<br />
innovation attributes, relative advantage was one of the most frequently tested characteristics and<br />
most consistent predictors of adoption (Onkvisit and Shaw, 1989, Teo and Pok, 2003).<br />
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Izzal Asnira Zolkepli and Yusniza Kamarulzaman<br />
Among these five the weaker two are trialability and observability. Generally, these two characteristics<br />
have been found to have an insignificant impact on the adoption of certain technology, for instance,<br />
electronic payment systems (Plouffe et al., 2001). However, these two less strong characteristics of<br />
innovation will not be left untested since the social media is observable and transferable through word<br />
of mouth and friend recommendation (Haridakis and Hanson, 2009) and is also able to accept<br />
deactivation or withdrawal of participation (Valenzuela et al., 2009). In the context of this study, it is<br />
hypothesised as below:<br />
H2: The perceived characteristics of social media technology affect the consumer<br />
adoption of social media<br />
Besides having the technology characteristic as the mediator, it is also applicable to test the direct<br />
relationship of perceived media needs towards the adoption behaviour by evading the characteristics<br />
of technology. This is in relation to consumer media needs that are sometimes presumed to be<br />
overwhelming and irresistible (Cooke and Buckley, 2008). The characteristics of technology may be<br />
less important to consumers because the needs supersede the technology in some circumstances<br />
(Parker and Plank, 2000). In addition, the need to use social media might be more dominant than the<br />
technology characteristic itself. Thus, the direct relationship of this construct could be hypothesised as<br />
below:<br />
H3: There is a positive significant effect between perceived media needs and social<br />
media adoption<br />
3. Conceptual model<br />
The relationships between perceived media needs and perceived characteristics of social media<br />
technology are presented in the proposed research model based on the hypothesis outline. In this<br />
model, it explains that the perceived integrative needs, social integrative needs and tension release<br />
needs are the media needs antecedent for consumer adoption of social media. It can be elaborated<br />
with the help of the following figure. However, taking into account the social media quality that is<br />
technology-based, the technology characteristics of relative advantage, compatibility, complexity,<br />
trialability and observability are tested to observe whether the relationship strengthens the process.<br />
Figure 1: Conceptual framework for consumer needs for adoption of social media<br />
4. Conclusion and implications<br />
In this paper, the Tri-Component Attitude Model is used as the conceptual basis for examining factors<br />
that influence social media adoption. A framework is also proposed that helps to enhance the<br />
understanding of consumer predictive needs in technology-based media and its relation to the speed<br />
of consumer adoption behaviour. Thus, researchers could develop a conception of how to design<br />
social media market segmentation based on the affective and cognitive response needs of the<br />
consumers by learning that personal and social integrative needs, along with the tension-release<br />
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Izzal Asnira Zolkepli and Yusniza Kamarulzaman<br />
needs have a significant influence on adoption behaviour, and that this behaviour will be accelerated<br />
due to the five characteristics of technology.<br />
Furthermore, the exploration of consumer perceived media needs is highly contributable to marketers<br />
to strengthen their consumer relationship management by understanding the dominant needs that<br />
hold consumers to continuously use social media, and, thereby enable marketers to use it directly to<br />
access targeted consumers. In addition, this model could also help marketers translate consumer<br />
media needs into advertising tactics that will help them communicate their advertising messages<br />
directly to their target consumers based on consumer affective and cognitive needs.<br />
Ultimately, social media will become a very personalised place where consumers will manage their<br />
consumption of media in order to fulfil their needs and desires even more specifically in the future.<br />
Consumer needs were once considered as a private concept that is now in the public domain. From<br />
this study, researchers and marketers will be able to read and interpret this social phenomenon from<br />
the consumers’ point of view.<br />
For future research, the lifecycle of technology innovation could also be explored further, which can<br />
be extended from this model as an interesting study to understand the rapid movement of media and<br />
technology.<br />
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How Narrative Structures Entrepreneurial Discovery<br />
Adam Bock 1 and Gajendran Kandasamy 2<br />
1 University of Edinburgh,Edinburgh, United Kingdom<br />
2 Imperial College London, United Kingdom<br />
Adam.J.Bock@ed.ac.uk<br />
gaj@ic.ac.uk<br />
Abstract: Theories of opportunity discovery presume a rational world framework to explain entrepreneurial<br />
cognition and behaviour. A narrative rationality framework that complements Bayesian logic improves the<br />
description and interpretation of entrepreneurial discovery processes. We develop a preliminary theory of<br />
discovery which incorporates narrative sense-making. This emphasizes active, contextualized meaning-making<br />
during the crystallisation and communication stages of discovery. Extending Fisher’s narrative paradigm, we<br />
reconceptualise discovery as a dynamic, convergent process based on the coherence-seeking and narrative<br />
fidelity. Data from scientists and entrepreneurs grounds the analysis, while gedanken experiments facilitate<br />
interpretation and the development of a grounded theory of discovery that incorporates communication. We<br />
discuss implications for entrepreneurship research and present normative theory for discovery communication.<br />
Keywords: discovery, entrepreneur, narrative rationality, opportunity, innovation<br />
1. Introduction<br />
Entrepreneurial discovery is poorly explained by current theories (Klein, 2008). It cannot be predicted<br />
or induced, limiting access to observational data. Participant and observer recall, though powerful<br />
tools, suffer from post-hoc rationalization. Quantitative study generally fails to capture apparently<br />
idiosyncratic antecedents and processes. Because discovery is the heart of entrepreneurial action<br />
(Shane & Venkataraman, 2000), descriptive models are essential for explaining differential behavior<br />
(Baum, Frese, Baron, & Katz, 2007) and outcomes (Rauch, Wiklund, Lumpkin, & Frese, 2009). Our<br />
epistemological understanding of discovery, however, is rudimentary and rooted in frameworks of<br />
formal logic and economic assumptions.<br />
We propose that entrepreneurs employ narrative rationality to complement Bayesian logic in the<br />
discovery process. Because observational data on discovery is inherently limited by endogeneity<br />
arising via cognitive filters and sense-making, we utilize a cognition-in-the-wild approach (Hutchins,<br />
1995) to unpack the analytical and interpretative heuristics that underlie the recognition of novelty.<br />
Extending Fisher’s paradigm (1994), we show that discovery incorporates a narrative coherenceseeking<br />
heuristic to identify opportunities that “make sense” or “hang together.” The convergence to<br />
coherence operates against a backdrop of narrative fidelity— an assessment against prior experience<br />
and beliefs. This framework emphasizes active, contextualized meaning-making during the<br />
crystallisation and communication stages of discovery.<br />
Further, we note that discovery and the communication of discovery share similar characteristics.<br />
Data from scientists and entrepreneurs is used to ground the analysis, and gedanken experiments<br />
facilitate interpretation. We identify the key components of coherence and fidelity in the<br />
comprehension of novelty. Although developed within an entrepreneurship context, we believe this<br />
framework applies to knowledge discovery more generally.<br />
This study presents the first steps towards a more formalized and comprehensive theory of<br />
opportunity discovery. Integrating the cognitive and communicative elements of discovery within the<br />
narrative framework holds significant potential for explicating the critical antecedants and confounding<br />
factors in discovery events. We discuss implications for entrepreneurship research and practice.<br />
2. Theory<br />
Traditional models for discovery focus entirely on cognitive processes including mental preparation,<br />
incubation, illumination and verification (Wallace, 1926). The emphasis on “illumination” suggests both<br />
an instant of understanding (“eureka”) as a-logical processes. Despite this, only strictly rational<br />
search-and-problem-solving approaches have yielded to modelling (Kulkarni & Simon, 1988;<br />
Levinthal, 1997; Gavetti & Levinthal, 2000; Rivkin & Siggelkow, 2002; Gavetti, Levinthal, & Rivkin,<br />
2005). Within this context, empirical investigations of science and creativity can be organized into<br />
several overlapping categories, including historical or biographical (Wallace & Gruber, 1989),<br />
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Adam Bock and Gajendran Kandasamy<br />
sociological (Latour & Woolgar, 1979), computational and process models (Kulkarni & Simon, 1988;<br />
Darden, 1997; Hatchuel, Weil, & Le Masson, 2005), on-line and simulated studies (Penner & Klahr,<br />
1996; Dunbar, 2000), and physiologically-based models (Amabile, 1983; Martindale, 1999;<br />
Fauconnier & Turner, 2002).<br />
Entrepreneurial discovery is a subset of broader knowledge discovery, characterized by and specific<br />
to the argument of induced value theory (Smith, 1976), most commonly interpreted through the<br />
experience or action of the discovering entrepreneur. These individuals are alternately or<br />
simultaneously alert (Kirzner, 1997), informed by prior experience (Shane, 2000), risk-prone<br />
(Caliendo, Fossen, & Kritikos, 2009), or informed by processes of resource and goal assessment<br />
(Sarasvathy, 2001). Integrating the spectrum of opportunity discovery events across characteristicsbased<br />
or functional process-driven frameworks is hindered by the wide spectrum of entrepreneurial<br />
action that facilitates multiple interpretations. In addition, these frameworks implicitly assume that<br />
entrepreneurs employ fundamentally Bayesian logic to data interpretation and situational assessment.<br />
There are two critical flaws in applying the rational world framework to entrepreneurial discovery. First,<br />
discovery creates new-to-the-world knowledge, so the meaning of that knowledge is subjective, nonequifinal,<br />
and path dependent. Successful entrepreneurs may execute one of many opportunities,<br />
perhaps based on prior entrepreneurial experience(Gompers, Kovner, Lerner, & Scharfstein, 2010) or<br />
via enactment of hypothetical choices to gauge possible outcomes(Child, 1997). Discovery, then, is<br />
not an isolated, supra-rational event. Placed into a strict cognitive framing, even the moment of<br />
“eureka” is not instantaneous; it is the activation and self-recognition of knowledge and beliefs,<br />
possibly driven by powerful instigations. But the “eureka” is really a novel configuration of knowledge<br />
that makes sense in a way that prior information did not. Second, discovery as an individual<br />
phenomenon may have subjective meaning but is only realized in a socio-economic context via<br />
communication. The latter has been not been captured by the literature as an integral component<br />
within a discovery framework.<br />
2.1 Narrative, not logic<br />
Human cognitive processes simply cannot be mapped to Cartesian or Bayesian logical functions.<br />
Cognition is neither necessarily logical, a-logical, or illogical. Logic is a formal system that may be<br />
applied to outcomes of cognitive processes. But cognition relies on semantic and syntactic<br />
representation (Branigan, Pickering, Liversedge, Stewart, & Urbach, 1995), which may not incorporate<br />
strictly logical relationships. Formal logic is internally consistent, but internal consistency is not an<br />
inherent characteristic of cognition. Opportunity discovery, then, operates within a context of inference<br />
and interpretation.<br />
One of the most useful frameworks for understanding cognition is within a framework of narrative<br />
rationality. Fisher (1994; 1995) proposes that humans are fundamentally “narrative animals.” In other<br />
words, human cognitive processes have been acculturated to the structure of narratives. Plausibility,<br />
rather than perfect consistency, suffices for analysis; sense-making is a more descriptive heuristic<br />
than objective learning. Consider the following recollection of a hand sanitizing innovation:<br />
We basically went around hospitals… I can't really remember the reason we did that... If<br />
you think about where people's lives are significantly changed, is hospitals…We walked<br />
around a critical care facility, it was apparent there were so many things getting in the<br />
way of people performing their abilities, doing their job, being happy. It was around that<br />
time that MRSA started hitting the news... people were dying all over the<br />
place...Basically, the reason that MRSA is an issue, is because people are human. They<br />
forget, they get too stressed, they can't be asked, or are just too busy… We looked at<br />
decreasing the barriers to use. It sort of dawned on us that we could make it habitual. So<br />
if stress is an issue, let's make it something that people use when they are stressed.<br />
That's where we came up with the ball thing, that's going to feel nice...<br />
Numerous characteristics of narrative rationality are present here. There is a convergence to a belief<br />
that “makes sense” to the entrepreneur, regardless of whether all the data supports the conclusion or<br />
not, consistent with a narrative rationality approach (Fisher, 1994). There are elements of internal<br />
consistency (coherence) as well as the relation to the entrepreneur’s prior experience and beliefs<br />
(fidelity).<br />
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2.2 A working definition for discovery<br />
Adam Bock and Gajendran Kandasamy<br />
An important contribution of this study to the broader literature of discovery is the derivation of a<br />
working definition for discovery. The discovery event is commonly defined as seeing a novel<br />
configuration of information. Equally important, however, is the crystallization and articulation of<br />
information such that the novelty becomes self-evident and may be presented externally. Discovery is<br />
identified only when it is successfully communicated. We provide the following working definition for<br />
discovery: a favorable combination of circumstances arising via sense-making to novel conclusions<br />
that may be communicated without loss of coherence and fidelity. To see how this definition is<br />
applied, consider one of the most iconic scientific discoveries- Fleming’s discovery of penicillin:<br />
"[Fleming] was not nearly as excited as you might think, since he had not yet imagined<br />
the wondrous life-saving power of this mold. On September 28, he was simply curious.<br />
He simply felt this mold was worth a little study.” (Haven, 1994: 182)<br />
Three facts are worth noting immediately. First, although Fleming was neither the first to identify<br />
penicillin or note its antimicrobial characteristics, he came upon the knowledge in a manner that would<br />
be identified as a discovery externally. Second, although the discovery was serendipitous, it was not<br />
in fact truly accidental. The circumstances were not unusual and Fleming’s self-acknowledged key<br />
contributions were experience and curiosity:<br />
“It was, however, fortunate that, with the background I have briefly sketched, I was<br />
always on the lookout for new bacterial inhibitors, and when I noticed on a culture plate<br />
that the staphylococcal colonies in the neighbourhood of a mould had faded away I was<br />
sufficiently interested in the antibacterial substance produced by the mould to pursue the<br />
subject.” (Fleming, 1944:198)<br />
Finally, Fleming acknowledges that far from an isolated event, the discovery was the end-result of a<br />
lengthy process of action and thought:<br />
“After a lapse of fifteen years it is very difficult to say just what processes of thought were<br />
involved, but it seems necessary to go back much further than 1928 when the activity of<br />
penicillin was first observed.” (Fleming, 1944: 198)<br />
While the “discovery event” may be bounded within a specific, potentially very short timeframe, the<br />
event should not be interpreted out of context. The moment of observation, or the moment of<br />
understanding, do not represent “discovery” in isolation.<br />
2.3 The importance of communication<br />
Internal crystallization and its external communicatability, are not distinct aspects of discovery.. The<br />
communicatability plays an influential role in the crystallization process, precisely because cognition is<br />
semantic and syntactic in nature. On other words, if an innovation cannot be communicated, it is not<br />
technically a discovery. Discovery happens when crystallisation of communicatable knowledge is<br />
realised. To see this, consider both a real example and a though experiment describing discovery.<br />
First, consider the story of a consumer product presented in a novel, collapsible form, communicated<br />
via a single picture:<br />
"[The student] didn't think of anything more of it than as a nice piece of design. He just<br />
wanted to solve a problem. He was invited to enter [a] competition to get into the<br />
[university] incubator… he had no commercial experience or inclination to take anything<br />
forward commercially…. Nevertheless he put in an application in which was a picture, he<br />
didn't actually fill in the form… There's something great about someone putting in a<br />
picture as an application. But the product itself is obvious. When you look at it, it's<br />
obvious what it is and what it does. What captured me is, when I looked at it, I thought,<br />
'That could recreate a standard, it really could.'"<br />
Imagine, instead, a pre-stone age human exposed, in isolation, to fire, where hisl community had no<br />
prior experience with fire. The individual might envision a variety of potential implications for the<br />
discovery. But imagine that the exposure is purely experiential, and the individual returns to the<br />
community without the ability to recreate the phenomenon. Is it a discovery? Surely it is, in a strict<br />
cognitive reading, but it seems unlikely that the individual would be able to adequately explain the<br />
discovery to anyone else. Clearly, entrepreneurial discovery has not taken place.<br />
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Adam Bock and Gajendran Kandasamy<br />
2.4 Towards a comprehensive theory of discovery<br />
This framework provides the basis to develop a more comprehensive theory of discovery. First, this<br />
adds nuance to the role of prior knowledge (Shane, 2000; Gregoire, Barr, & Shepherd, 2010). The<br />
experiential basis and beliefs of the agent are dynamic and subject to reinterpretation, and<br />
incorporate less formal experience and beliefs. A theory based on coherence rather than Bayesian<br />
logic presents the potential to both explain more discovery events as well as facilitate objective<br />
research via neural network simulation. The relative weighting of coherence and fidelity in discovery<br />
processes is a valuable direction for future research. The manner in which fidelity influences<br />
coherence and vice versa requires a more granular level of analysis, for which principles of<br />
deliberative, emotional, perceptual, analogical, conceptual and unifying coherence (Thagard, 2000)<br />
could be helpful.<br />
3. Implications and conclusions<br />
A narrative theory of entrepreneurial discovery has implications for entrepreneurship research and<br />
venturing practice. In the narrative framework, sense-making relies on inference to the most plausible<br />
explanation rather than Bayesian logic. Because cognition utilizes symbolic actions or words that<br />
have sequence and meaning for those who create or interpret them, discovery shifts from a goalcentric<br />
insight to a meaning-making process. The entrepreneur develops a story that concurrently<br />
describes and rationalizes the purpose and characteristics of the opportunity. Narrative thus<br />
structures discovery, imposing mechanisms of sequence, causality, and relevance via a heuristic that<br />
is idiosyncratic, contextualized, and path dependent. Convergence to discovery depends on a<br />
complex interplay of observed data, extant beliefs, and contextual circumstances that vary by locus of<br />
novelty and knowledge types.<br />
From a practical perspective, opportunity discovery must be re-assessed as both recognition and<br />
communication. In other words, alertness is not sufficient for entrepreneurial discovery, because<br />
discovered opportunities are internally crystallized via semantic processes. The study and teaching of<br />
opportunity recognition may benefit from approaches that focus on various modes of communication<br />
both during and after the recognition event. Second, the communication process may shape the<br />
agent’s understanding of the opportunity itself. This may suggest an alternative form of knowledge<br />
creation and contrast with theories of absorptive capacity in explaining de novo venturing activities.<br />
The importance of communication in discovery may help explain certain venture capital activities,<br />
including vicarious learning and exploring related spaces without intent to invest. Finally, aspects of<br />
entrepreneurial self-efficacy associated with opportunity recognition and venture creation may be<br />
linked as much to challenges in communication as they are to exploitation.<br />
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Oxford University Press.<br />
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1063
The Concept of Innovation in Libya<br />
Emhamad Hamad and Leslie Arthur<br />
Product Design, School of Architecture, Design and the Built Environment,<br />
Nottingham Trent University, UK<br />
Emhamad.hamad@ntu.ac.uk<br />
Leslie.Arthur@ntu.ac.uk<br />
Abstract ; The importance of the role of innovation in the industrial development and its ability of a competitive<br />
modern industry has become basic need, that considered the key motivation for growth and development, which<br />
requires the preservation of human elements through provide creative educational environment appropriate to the<br />
innovation. In addition, the Arab world needs to consider new products with a strong technological content and<br />
high value that will support the competitiveness and durability of the industry. Therefore, the aim of this research<br />
was to gather information from within the categories that represent the key characteristics of the research:<br />
education, training, business, and innovation. A questionnaire was used to determine the current status of<br />
innovation in Libya as a part a wider development process. A survey was carried out with different stakeholders,<br />
including leading Libyan academics and professionals, working both in Libya and abroad. The questionnaire was<br />
distributed in Libya to academics in leading universities, teachers, officials, businesses, engineers, doctors<br />
working abroad, and Libyan students studying at the UK universities.This paper is based on the responses of 39<br />
survey respondents on the extent to which innovation is considered the key for growth. Innovation remains<br />
outside of the Libyan education curriculum, both in schools and universities. This strongly suggests that<br />
innovation could come after change culture process in the society. This paper is submitted with the purpose of<br />
stimulating debate concerning the challenges that face innovation management in Libya.<br />
Keywords: Innovation, Product design, Education Training and Libya<br />
1. Introduction<br />
Libya is a member of 22 Arab countries, occupy an excellent geographical location in the north of<br />
Africa on the Mediterranean coast, it has an enormous oil wealth. And during the last decade, Libya<br />
has signed several important commercial agreements with its international partners, this will lead to a<br />
very competitive market in Libya as in any other developed countries. The Libyan companies able to<br />
offer new and better products. In order to be competitive, manufacturing enterprises need to pursue<br />
innovation in their products and the way they generate them. These activities will allow Libyan small<br />
and medium size enterprises (SMEs) to take advantage of these agreements to design product,<br />
innovation and to increase their market share (Fries, J.and Obrien, C).<br />
Innovation helps countries and regions develop in the industrial and service sectors, and the growth of<br />
innovative businesses and services should be encouraged. Innovation has long been known to be a<br />
catalyst for growth, regardless of the conditions of the large economy. It has been a topic for<br />
discussion and debate for many decades. For instance, in the nineteenth century, economic<br />
historians observed that rapid economic growth was the result of technological progress (Trott 2005).<br />
The importance of the role of innovation in the industrial development and its ability of a competitive<br />
modern industry has become basic need, which considered the key motivation for being able to<br />
extend the life of existing products and services. However, the biggest challenge many countries face<br />
creating a culture that supports and embraces innovation such as Libya (Phillips 2007). In addition,<br />
Innovation plays an important role in the development of successful economies (O’Riordan 2008),<br />
especially countries and regions that lack the knowledge to innovate and improve their positions in the<br />
global market. Growth and development, which requires the preservation of human elements and to<br />
provide creative educational environment appropriate to innovation (United Nations 2005).<br />
2. Innovation<br />
Innovation may be defined as exploiting new ideas leading to the creation of a new product, process<br />
or service. According to (Smith 2010:5) innovation “The first commercial application or a new process<br />
or product or Innovation is the successful exploitation of ideas” these definitions are more effective<br />
because It is not just the invention of a new idea that is important, but it is actually bringing it to<br />
market, putting into practice and exploiting it in a manner that leads to new products, services or<br />
systems that add value or improve quality. It possibly involves technological transformation and<br />
management restructuring. Innovation also means exploiting new technology and employing and<br />
generate new value and to bring about significant changes in society. (Trott 2005 give one of the<br />
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Emhamad Hamad and Leslie Arthur<br />
more comprehensive definitions, citing of Myers and Marquis 1969) Innovation is not a single action<br />
but a total process of interrelated sub processes. It is not just the conception of a new idea, nor the<br />
development of a new market. The process is all these things acting in an integrated fashion.<br />
3. The problem<br />
According to the Global Competitiveness Report, 2010-2011(Schwab 2010) concluded that most Arab<br />
countries which include Libya, face numerous challenges related to the inefficiency of their goods,<br />
labour, and financial markets, as well as underdeveloped infrastructure and low level of technological<br />
adoption and innovation. Nonetheless, there is a growing interest in innovation and its potential<br />
contribution to the economy.<br />
This Paper set out to answer the following question:<br />
How do Libyan educators and professionals relate to the concept of innovation?<br />
4. The aim<br />
This paper will contribute to discuss understanding the innovation in education as a factor of success<br />
in economy. A central reason for studying aspects of innovation in Libya, where have been<br />
acknowledged that innovation is one of the engines of economic growth. Thus, the competitiveness of<br />
an SMEs is critical not only for the success of enterprises but also for the economy. It included lack of<br />
interest to study whether in schools or universities, because of the problem a lack of funding that<br />
would help the development of innovation in Libya.<br />
5. Method<br />
A questionnaire was distributed in Libya to academics in leading universities, teachers, officials,<br />
businesses, engineers, doctors working abroad, and Libyan students studying at the UK universities.<br />
The questionnaire was used to determine the current status of innovation in Libya as a part a wider<br />
development process. The purpose of this questionnaire was to gather information on the key areas<br />
of interest to this research: education, training, business, and innovation.<br />
6. Data<br />
The table below shows the number of respondents from each category; 39 out of 70 questionnaires<br />
were returned, which equates to a response rate of 56%. Which is a very acceptable rate at the busy<br />
schedule of the participate involved.<br />
The categories of key characteristics of the research as follows:<br />
<strong>Academic</strong>s Engineers Businesses Officials Teachers People<br />
working<br />
abroad<br />
7 6 4 4 6 5 7<br />
Students in<br />
the UK<br />
Figure1: Categories of questionnaire respondents<br />
The resulting data shows that a high 90% of respondents agreed that the combination of education<br />
and training are most important for development of innovation in product design, with 5% for<br />
education and 5% for training (See figure 2 below).<br />
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90%<br />
Emhamad Hamad and Leslie Arthur<br />
5% 5%<br />
Education<br />
Training<br />
Education & Training<br />
Others<br />
Figure 2: Which of the following do you think is the most important for the development of Innovation?<br />
21%<br />
28%<br />
8%<br />
10%<br />
33%<br />
Strongly agree<br />
Agree<br />
Do not know<br />
Disagree<br />
Strongly disagree<br />
Figure 3: People I work with are actively encouraged to put forward new ideas?<br />
About encouraging people to put forward new idea the percentage of respondents who strongly<br />
agreed/agreed was 43%. The percentage of respondents who either strongly disagreed/disagreed<br />
was 29 % with 28% answering ‘do not know’. (See figure 3). The above data allow the author to state<br />
that encouraging people for new ideas is considered an important element for their business activities.<br />
49%<br />
8% 7%<br />
Strongly agree<br />
13%<br />
23%<br />
Agree<br />
Do not know<br />
Disagree<br />
Strongly disagree<br />
Figure 4: Do you feel that the government supports innovation?<br />
This question aimed to determine the level of perceived governmental support for Innovation. The<br />
responses were 56% for either ‘disagree’ or ‘strongly disagree’, 21% for ‘strongly agree’ or ‘agree’,<br />
and 23% for ‘do not know’.<br />
Question 4) Do you think that innovation is important?<br />
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Emhamad Hamad and Leslie Arthur<br />
The purpose of this question was to gauge the opinions of respondents about the importance of<br />
innovation. 92% of respondents were sure that innovation is very important.<br />
Question 5) Should innovation and product design be taught in Schools or Universities?<br />
For this question, 90% of responses were either ‘yes’ or ‘possible’.<br />
Question 6) Are there any training programmes currently available in Libya that focus upon<br />
innovation?<br />
Of the responses, 72% indicated ‘no’ or that they did not know about any training programmes in<br />
Libya.<br />
Question 7) Do you know of any exchange programmes between Libya and the UK with the focus<br />
upon innovation?<br />
Most responses (33 out of 39) to this question were either ‘no’ or ‘do not know’.<br />
Question 8) Do you know of anyone who has attended a training course focussing upon innovation in<br />
product design in Libya?<br />
Almost 70% of responses were in the negative – most respondents did not know of anyone who<br />
attended a training course focus upon innovation in Libya – and 10% answers were ‘yes’, with the<br />
remaining responses given as ‘no’ answers.<br />
Question 9) Do you feel that the high school curriculum in Libya facilitates innovation?<br />
Of the responses, 49% were ‘do not feel that the school curriculum in Libya facilitates innovation’,<br />
while 51% ‘have no idea’, ‘do not know’ or provided no answer.<br />
Question10) Do you feel that the university curriculum in Libya facilitates innovation?<br />
Similar to the previous question, 47% of the responses were ‘no’, while the remaining responses were<br />
‘do not know’ and ‘no’ answers.<br />
This questionnaire depended on the knowledge, academic levels, and positions of responders. As<br />
such, there was a disparity in the answers. However, it was surprising that most respondents seemed<br />
to recognise the importance of innovation in product design.<br />
7. Discussion<br />
There is broad agreement that the innovation capacity of an individual is based on a number of skills,<br />
attributes, and values, but also on the organisational context within which these skills come into play.<br />
These include high performance levels in terms of: planning, organising, and communicating teaching<br />
and training. Findings from newer research on learning suggest that effective learning is based on a<br />
deep understanding of and engagement with core concepts and principles of the subject in order to<br />
achieve higher order learning and generic skills and capabilities associated with innovation (Smith,et<br />
al, 2003).<br />
According to (Shapiro, et al,. 2007) the idea of national or regional innovation systems playing a key<br />
role to economic prosperity and with non-technological and user-driven innovations increasingly being<br />
emphasised. This development accentuates the potential role of education and training for innovation.<br />
It is generally acknowledged that innovation is a key driver for economic growth. Many argue that to<br />
increase the contribution of higher education systems to innovation implies that universities share<br />
knowledge with society and reinforce the dialogue with all stakeholders. However, the challenge for<br />
education and training institutions is to adapt to the innovation practices that are predominant in the<br />
specific regional or local context and to stimulate innovation by supplying competences and<br />
knowledge that are required at the forefront of these practices.<br />
We believe that innovation requires learning and teaching approaches and strategies based on<br />
students gain knowledge through exploration and active learning. Libya needs to find ways to begin to<br />
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Emhamad Hamad and Leslie Arthur<br />
analyse and develop indicators on the impact and value of different types of novel or existing learning<br />
practices.<br />
8. Conclusion<br />
Libyan culture may act as a deterrent to the development of innovation, detracting from the<br />
development and implementation of novel approaches and products. Although that majority of survey<br />
responses reinforce the view that innovation is important, there is an apparent lack of innovation in<br />
Libya, in spite of a growing interest in the topic and its potential contribution to the economy and<br />
education. This paper contributes of the debate of lack of innovation in Libya and proposed for the<br />
Libyan government to adopt of innovation in their business and education.<br />
References<br />
Fries,J.and Obrien, C,.(n,d) Industrial Design and Innovation in Mexican Enterprises [Internet], Available from: <<br />
http: //www.idemployee.id.tue.nl/g.w.m.rauterberg/conferences > [Accessed 21 December 2010].<br />
Hague, P.N. (2002) Market Research: A Guide to Planning, Methodology and Evaluation. 3rd ed. London, Kogan<br />
Page.<br />
O’riordan, S. (2008) Research and Development in Financial Services and the Role of Innovation. Article ed.<br />
UCC, Financial Services Innovation Centre.<br />
Phillips, J. (2007) Creating a Culture of Innovation: Changing Your Culture to Accept and Embrace Innovation<br />
Implementation, [online],http://www.innovationpurpose.com/pdf. (Accessed 15 Sept 2010)<br />
Schwab, K. et al. (2010) the Global Competitiveness Report. World Economic Forum Geneva, Switzerland 2010.<br />
Shapiro, H, et al,. (2007) Background Paper on Innovation and Education, the European Commission, DG<br />
Education & Culture in the context of a planned Green Paper on Innovation<br />
Smith, D. (2010) Exploring Innovation. 2nd ed. Berkshire, McGraw-Hill Education.<br />
Smith, D.et al. (2003), Learning, teaching and Innovation, a review of literature on facilitating innovation in<br />
students, schools and teacher education with particular emphasis on mathematics, science and technology,<br />
Faculty of Education and Social Work, The University of Sydney.<br />
Trott, P. (2008) Innovation Management and New Product Development. 4th ed. England: Pearson Education<br />
<strong>Limited</strong>.<br />
United Nations (2005) Networking Research, Development and Innovation in Arab Countries [online]. United<br />
Nations, [online], http://www.escwa.un.org.<br />
1068
Importance of Entrepreneurial Activity for Entrepreneurial<br />
Orientation<br />
Torsten Fiegler and Michael Schefczyk<br />
Technische Universität Dresden, Germany<br />
torsten.fiegler@tu-dresden.de<br />
michael@schefczyk.net<br />
Abstract: A wide variety of more or less structured entrepreneurial programmes and lectures exists, but do they<br />
really change the willingness to establish a company? The entrepreneurial orientation is crucial to continue<br />
existing plans or to promote new entrepreneurial ideas. This nascent willingness of entrepreneurs has to be<br />
analysed in order to indicate the influences on entrepreneurial activity. The way the attitude to entrepreneurial<br />
orientation is influenced by entrepreneurial activity is fairly nebulous. Therefore, this paper mainly wants to<br />
investigate the relationship between these factors. The hypotheses were tested by the regression model to<br />
identify the value of interrelation of the entrepreneurial orientation. The data consists of 498 questionnaires,<br />
which were completed twice. The asked questions were answered before the entrepreneurial activity and<br />
additionally afterwards. During the arranged entrepreneurial activity the students had the task to create value in<br />
one week just by using one pen . The limited resource pen symbolized the resource restriction which symbolizes<br />
the restriction in real business. The results showed that the activities within the project influenced the selfemployment.<br />
The ability to start an entrepreneurial career is influenced by the participation in entrepreneurial<br />
activity. Moreover, we found that opportunity recognition has a strong significance but does not develop more<br />
intensively during the entrepreneurial activity. These insights have important implications for entrepreneurial<br />
programmes which are seeking a higher orientation of the participants to be an entrepreneur and for the<br />
configuration of entrepreneurial programmes. Future programmes have to improve the capability of opportunity<br />
recognition. The results also show that there is no significant effect on the personal attitude. The participants did<br />
not change their attitudes. To sum up, this analysis intents to measure the specific effects on the change of<br />
entrepreneurial orientation. This paper highlights entrepreneurial activity and their specific influences to the<br />
nascent willingness to establish a company.<br />
Keywords: entrepreneurial orientation, entrepreneurial activity, entrepreneurship education<br />
1. Introduction<br />
<strong>Entrepreneurs</strong>hip needs a call for action within the education (Neck and Greene 2011, Kuratko 2005).<br />
The identified research gap is to refer to the cognition process. Activity changes attitudes and this<br />
develops the entrepreneurial orientation. When an entrepreneur starts a business, it is a key lesson to<br />
understand how to generate economic and social value (Neck and Green 2011). Activities can form a<br />
stable fundament of experience e.g. how to manage limited resources or how to work together in a<br />
team. These activities cannot totally change the participants´ personal attitudes but seldom people<br />
are born as entrepreneurs. Therefore activity in the entrepreneurial setting is needed.<br />
The subject often ignored is the entrepreneurial motivation (Carsrud and Brännback 2011). It effects<br />
the professional motivation and entrepreneurial behavior to great degree. It also influences the desire<br />
to realize the opportunity recognition and to choose an entrepreneurial career. In this matter<br />
entrepreneurship programmes hast to be measured (Oosterbeek et al. 2010). To sum up the basic<br />
intention of this paper is to show whether entrepreneurial activity promotes the entrepreneurial<br />
orientation, which is necessary to establish a new business.<br />
2. Theoretical framework<br />
We assume that entrepreneurial orientation is influenced by entrepreneurial activity. Therefore three<br />
main entrepreneurial challenges have been selected. Firstly, the opportunity recognition is often<br />
highlighted as an important subject within the entrepreneurial process (Nicolaou et al. 2009, Shane<br />
2003). It is highly interesting to analyse whether a more frequent search for opportunities improve the<br />
capabilities of opportunity recognition.<br />
Proposition1: Entrepreneurial activity positively influences the capability of opportunity recognition.<br />
Secondly, the attitude to self-employment is a requirement of entrepreneurs (Tkachev and Kolvereid<br />
1999). A useful option to clarify a sustainable professional career decision is to think about<br />
alternatives of be self-employed. The entrepreneurial orientation will change because the black box is<br />
illuminated by trying it before.<br />
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Torsten Fiegler and Michael Schefczyk<br />
Proposition2: Entrepreneurial activity positively influences the desire for self-employment.<br />
Thirdly, the main influencing factors are often the entrepreneurs´ personal skills and attitudes (Golla et<br />
al. 2006). A different view existing in the literature about teaching entrepreneurs or being born as<br />
entrepreneur and entrepreneurial education is needless (Neck and Green 2011). Our research group<br />
is convinced that personal attitudes are influenced by the activities in the field of entrepreneurship.<br />
Proposition3: Entrepreneurial activity has effects on the personal attitude.<br />
Moreover the propositions cannot be seen isolated, the willingness to be an entrepreneur have to be<br />
seen correlated e.g. personal attitudes and opportunity recognition (Sambasvian et al. 2009). All<br />
these aspects are to contribute to highlight the interrelation between entrepreneurial activity and<br />
entrepreneurial orientation.<br />
3. Methodology<br />
To carry out this investigation the study design is a quantitative approach conducting a written survey<br />
among students about their behaviour towards entrepreneurship. This study contains information from<br />
1055 questionnaires but only 498 students answered the first and the second questionnaire<br />
completely. These students participated in the “Global <strong>Entrepreneurs</strong>hip Week”, in which they had to<br />
solve an entrepreneurial task. During this week the students had the goal to create value just by using<br />
one pen. The limited resource pen symbolized the resource restriction which real entrepreneurs have<br />
to face, too. In order to succeed in the entrepreneurship week the students had to search for<br />
appropriate opportunities. Personal skills were also required, so they had to work together in teams<br />
and realize their ideas in a corporate way. They acted as entrepreneurs implementing a widespread<br />
area of ideas from ecological, economical, social or artistic points of view.<br />
Our research group got two responses to the questionnaire, one before the “Global <strong>Entrepreneurs</strong>hip<br />
Week” and one afterwards. That way it was possible to measure differences in the students´ thinking<br />
and behaviour towards multifarious entrepreneurial setting. Main part of the questionnaire consisted<br />
of statements. The participants had to answer according to a six-point Likert scale if and how strong<br />
they agreed or disagreed with these statements. The questions were mostly based on<br />
entrepreneurship literature. Our research group asked about three main theoretical entrepreneurial<br />
perspectives in different items: professional orientation, attitude towards self-employment and<br />
opportunity recognition to find out changes within the entrepreneurial orientation. Firstly, the<br />
professional orientation referred to the psychological background of independence (Golla et al. 2006).<br />
Secondly, the attitude towards self-employment was asked about. There was the question whether<br />
being employed or self-employed is preferable (Tkachev and Kolvereid 1999). Thirdly, the opportunity<br />
recognition was tested by frequent opportunities of identification to start-up and enjoy thinking about<br />
new ways (Nicolaou et al. 2009). The independent variable of the entrepreneurial orientation in the<br />
questionnaire was like this: “Self-employment is a career opportunity even if I have many other<br />
professional offers”. The result was used as a metric scale.<br />
The data analysis was accomplished by the regression model to measure the importance of the<br />
influencing factors to the entrepreneurial orientation. In the first survey the R 2 had a value of 0,45. In<br />
the subsequent survey the R 2 rose to 0,49. In comparison with other correlated studies, the R 2 can be<br />
regarded as a good way of explanation (Golla et al. 2006, Nicolaou et al. 2009). In both surveys the<br />
variance analysis in SPSS calculated a significance level of 0 which cannot be explained this way.<br />
Table 1: Descriptive statistics<br />
Questionnaire<br />
before activity<br />
Variable Standardized<br />
coefficients<br />
Beta<br />
Questionnaire after<br />
activity<br />
Significance Standardized<br />
coefficients<br />
Beta<br />
Significance<br />
Independence ,159 ,003 ,108 ,000<br />
Self-employment ,544 ,000 ,649 ,000<br />
Opportunity recognition ,110 ,038 ,099 ,064<br />
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4. Discussion<br />
Torsten Fiegler and Michael Schefczyk<br />
The results of the data reveal that entrepreneurial activity influences the entrepreneurial orientation<br />
but very differently in particular propositions. In reference to first proposition it exists a correlation<br />
towards opportunity recognition and entrepreneurial orientation but it does not positively influenced by<br />
entrepreneurial activity - in this case proofed by the entrepreneurship week. The incentive to reap the<br />
rewards of ones´ labour not supported the decision to use entrepreneurial opportunities. This also<br />
meant that the experience gained during the entrepreneurship week, especially the development of<br />
individual values and ideas, resulted not in a different attitude towards opportunity recognition in the<br />
questionnaire. Another question in the survey, which was not analysed, was the cognition of<br />
opportunities by forum and internet-blog. The students frequently used the homepage to discuss<br />
intensively and some even copied other teams´ ideas. Surprisingly the effects of opportunity<br />
recognition and entrepreneurial orientation by using the internet forum or networks had no<br />
significance in the results of the questionnaire.<br />
The second proposition can be confirmed because the beta coefficient in the subsequent survey<br />
increased. The attitude towards self-employment improved between the first and the second<br />
questionnaire. Our research group is convinced that the participants became more aware of their<br />
willingness to establish a company. Therefore the ability to start an entrepreneurial career is<br />
influenced by participating in entrepreneurial activity.<br />
Finally the third proposition which referred to the personal attitudes was not confirmed either. The<br />
statistics showed that there was a correlation between independence and entrepreneurial orientation.<br />
Unexpectedly there was no change in the students attitudes in the course of entrepreneurial week.<br />
The motivation and decision to start an entrepreneurial career probably need more time to develop<br />
because attitudes are a very stable factor. Even the results from other studies shown negative or no<br />
effects from entrepreneurship programmes like the SMC (Oosterbeek et al. 2010).<br />
The interpretation of the entrepreneurial week included many central contents of entrepreneurial<br />
education e.g. identifying opportunities, handling resource restrictions and learning methodical skills<br />
(Neck and Green 2011). These items explicitly describe the demands on the students in the<br />
entrepreneurial week. The students had to do the project in teamwork. Using the abilities and strong<br />
points of others is an important experience of the entrepreneurial week. A limitation of the study was<br />
probably caused by the fact of having asked students. Having asked people with a longer work<br />
experience would have resulted in a different view on our questions. Also the fact that the<br />
entrepreneurial tasks did not implicate that the students had to invest their own money or risk their<br />
actual job may have influenced the responses in the questionnaire. Following researches have to<br />
illuminate this field more intensively.<br />
5. Conclusion<br />
Future research has to clarify whether new entrepreneurship programmes lead to improvements e.g.<br />
in the opportunity recognition. It might be interesting to analyse the changes with students in the<br />
course of time who are in subsequent lectures of <strong>Entrepreneurs</strong>hip. Therefore longitudinal analyses<br />
could explain the decisive influencing factors of entrepreneurial orientation. To sum up, this analysis<br />
highlights the importance of entrepreneurial orientation, which is intensively influenced by<br />
entrepreneurial activities. Our study shown important implications, that the opportunity recognition and<br />
personal attitudes did not change. In contrast the willingness to self-employment increased in cause<br />
of entrepreneurial activity.<br />
References<br />
Carsrud, A. and Brännback, M. (2011) "Entrepreneurial Motivations: What do we still need to know?", Journal of<br />
Small Business Management, Vol. 49, No. 1, pp 9–26.<br />
Golla, S., Halter, F., Fueglistaller, U., Klandt, H. (2006) Gründungsneigung Studierender: eine empirische<br />
Analyse in Deutschland und der Schweiz, Jahrbuch <strong>Entrepreneurs</strong>hip 2005/2006: Gründungsforschung und<br />
Gründungsmanagement, Berlin, Springer, pp 209-237.<br />
Kuratko, D. (2005) "The Emergence of <strong>Entrepreneurs</strong>hip Education: Development, Trends, and Challenges",<br />
<strong>Entrepreneurs</strong>hip Theory and Practice, Vol. 29, No. 5, pp. 577-597.<br />
Neck, H. and Greene, P. (2011) "<strong>Entrepreneurs</strong>hip Education: Known worlds and new frontiers", Journal of<br />
Small Business Management Vol. 49, No. 1, pp 55–70.<br />
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Nicolaou, N., Shane, S., Cherkas, L., Spector, T.D. (2009) "Opportunity recognition and the tendency to be an<br />
entrepreneur: A bivariate genetics perspective", Organizational Behavior and Human Decision Processes,<br />
Vol. 110, No. 2, pp 108–117.<br />
Oosterbeek H., Praag M., Ijsselstein A. (2010) "The impact of entrepreneurship education on entrepreneurship<br />
skills and motivation", European Economic Review, Vol. 54, No. 3, pp 442–454.<br />
Tkachev, A., Kolvereid, L. (1999) "Self-employment intentions among Russian students", <strong>Entrepreneurs</strong>hip &<br />
Regional Development, Vol. 11, No. 3, pp 269-280.<br />
Sambasivan, M., Abdul, M., Yusop, Y. (2009) "Impact of personal qualities and management skills of<br />
entrepreneurs on venture performance in Malaysia: Opportunity recognition skills as a mediating factor" Vol.<br />
29, No. 11, pp 798–805.<br />
Shane, S. (2000) "Prior knowledge and the discovery of entrepreneurial opportunities", Organization Science,<br />
Vol. 11, No. 4, pp 448–469.<br />
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How to Support Innovation Process of SMEs in Metals<br />
Industry and Mechanical Engineering<br />
Anneli Manninen, Jukka Laitinen and Tarja Meristö<br />
Laurea University of Applied Sciences, Turku, Finland<br />
anneli.manninen@keuda.fi<br />
jukka.laitinen@laurea.fi<br />
tarja.meristo@laurea.fi<br />
Abstract: To be able to produce new innovations most companies need external resources and competence.<br />
The innovation surroundings mainly set the limits to these resources. The position in the value chain and contact<br />
network with other companies has great effect in SMEs’ ability to innovate and adopt new innovations. Open<br />
innovation approach speeds up and enriches the innovation processes. It is important to create models to<br />
support different kinds of actors, information, competence and perceptions coming together in decentralized<br />
innovation platforms. Our target companies mainly operate in the rural area or near small cities. Their innovation<br />
networks consist, apart from company networks, mainly of developmental organizations, education and research<br />
institutions and other support organizations. Company know-how is based on experience rather than formal<br />
competence. Contact networks are directed towards customers and contractors. We aim to find the elements and<br />
networks for a regional innovation system which enhances SMEs’ ability to innovate and compete in the long<br />
range. Our framework includes elements from futures research and Learning by Developing (LbD) model. The<br />
empirical part of the research is based on company interviews and case studies. The target companies are<br />
Finnish SMEs operating in the metals industry and mechanical engineering in different local innovation<br />
surroundings. The regional and local perspective is an important element in innovation networks even though<br />
most companies are dealing with global challenges. We also include benchmark company interviews to widen the<br />
critical elements of a regional innovation system. The research clarifies the structures of a regional innovation<br />
system and the roles of SMEs, universities and other organisations within it. In synthesis, we introduce the future<br />
driven core competence framework for a successful SME, critical elements for their successful open innovation<br />
environment and implications for further development of LbD model and new services for SMEs, like visionary<br />
concept design.<br />
Keywords: innovation, networks, SME<br />
1. Background<br />
Rocket project is funded by ESF and covers the Southern Finland. Our research concentrates to<br />
examine, how universities can support SMEs in rural Metropolitan area and thus improve regional<br />
competitiveness.<br />
Regional competitiveness includes five critical components (Sotarauta et al, 2008), among which are<br />
the ability of the local companies to sell their products, the productivity of the production process and<br />
the effective use of local resources. As most of the companies are SMEs and the ability to sell<br />
depends heavily on new innovations, helping SMEs in their processes becomes crucial.<br />
The innovation system of a specific territory (Schienstock et al, 1998) consists of institutions whose<br />
interaction determines the production, diffusion and use of economically useful knowledge. It is a<br />
cumulative process, where innovations are results from processes of learning, searching and<br />
exploring. Key actors apart from companies are universities, private and public research institutes,<br />
organizations of technology transfer and the government. Common regional insight includes:<br />
� Defining roles of different stakeholders, levels of cooperation<br />
� Distribution of labor and resources in R&D&I<br />
� New business oriented university services<br />
To be able to produce new innovations most companies need external resources and competence.<br />
Their position in the value chain as well as their contact network with other companies has great<br />
effect in SMEs ability to innovate and adopt new innovations. A regional innovation system can<br />
enhance institutional learning and at the same time company innovation processes. Regional<br />
information networks may also explain differences in the efficiency of open innovation. (Kautonen<br />
2008, Cooke 2004).<br />
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Anneli Manninen et al.<br />
Finland (Mariussen 2005) has a relatively high score of metal industry for product innovation not new<br />
to the market. Product innovation for products new to the market score below average. The tendency<br />
is to perform better in market innovation than in upgrade innovation.<br />
An open innovation exploits the inwards and outward flow of information to speed up internal<br />
innovation process and explore new markets (Chesbrough 2008). An open innovation paradigm also<br />
changes the core competence of the company (Christensen 2008). Cooperation with universities is a<br />
way to faster learning and gaining new competence required by open innovation. Universities can be<br />
part of networks in many ways: education, research and students´ participation (Audrechts et al.<br />
2004).<br />
2. Framework and methodology<br />
Our methodological framework consists of futures research (Meristö et al, 2009), visionary thinking<br />
and the LbD model (Raij 2007). LbD model is a pedagogical approach in which learning is linked to<br />
applied research, development projects and regional developing. Main components are social<br />
interaction, knowledge and competence sharing, researching and problem solving. LbD improves<br />
mobilization of talent resources allowing new ways for innovative knowledge creation. Learning,<br />
research and development practices meet and add value to the model. For the companies LbD offers<br />
the knowledge, creativity and the contact network of the universities including their students and staff.<br />
Futures research and visionary thinking will bring the methodological framework a long time frame, a<br />
multidisciplinary approach as well as alternative paths to future from different viewpoints, especially<br />
from market, technology and society perspectives, i.e. the scenario filter model.<br />
We aim to support the innovation process of the SMEs by giving all our services for open use by the<br />
case companies. This means widening of the foresight perspective through company customer<br />
surveys and workshops, support for different stages of the innovation process, use of information and<br />
international networks for defining business potential, filling up competence gaps, the use of living<br />
labs, problem solving as well as benchmarking possibilities. We also drive for future competence<br />
development of the students attending workshops together with company people or doing training<br />
periods and final works.<br />
We use surveys, interviews, case studies and workshops in order to study both individual and joint<br />
needs of the companies and their customers. A long perspective brings strategic aspects to the work<br />
and combines e.g. scenario workshops to strategic planning and visionary concept design to the<br />
R&D&I process.<br />
3. General findings<br />
Practical implications are based on the preliminary survey, case and benchmark company interviews<br />
as well as a joint SME workshop in April 2011.<br />
First the electronic survey gave us information from 35 mechanical engineering companies in Western<br />
Uusimaa region (Laitinen et al, 2010). The majority of the respondents were small sized companies:<br />
about half of them had a turnover of less than one million euros. According to the respondents, the<br />
most important sources for innovation are customers, competitors and subcontractors. Regarding the<br />
phases of the innovation and development activities, the management of the whole process and<br />
foresight abilities were seen the most important ones. One third of the companies had experience in<br />
cooperation with universities. Most of them perceived the co-operation to be useful or very useful and<br />
a quarter not so useful. The rate of satisfaction seems to grow by the size of the company. Some of<br />
the companies wanted more flexibility, less bureaucracy, more technological knowledge and more<br />
practicality from the university side. The survey implicates that the structure of the innovation system<br />
should be flexible, its role is to support the SME’s not vice versa. It also becomes important to speak<br />
“the practical language of SME’s”.<br />
Secondly we started active cooperation with the case and benchmark companies in spring 2011. We<br />
interviewed the company representatives to find out their service needs. The interviews gave us<br />
information about the innovation process: company R&D is mainly based on discontinuous customer<br />
input and requests. Main development criterion is productability and changes are usually carried out<br />
in cooperation with equipment suppliers. Competition is tough; a competitive advantage is acquired<br />
through the development of the production processes as well as technological improvements. The<br />
production process needs constant adaption to the varying customer needs. Customer tailoring is<br />
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Anneli Manninen et al.<br />
carried out in cooperation starting from material selection and production planning to fast high quality<br />
delivery. New emerging markets would mean a jump to new ways of doing things. This is why the<br />
companies are looking for proactive methodology to improve their flexibility. Our cooperation started<br />
with proactive surveys on new customer needs as well as looking for university partners in specific<br />
technological sectors.<br />
The benchmarking companies are globally operating with over 250 employees. They have a steady<br />
market position and are involved in standardization work within EU. Operations include hundreds of<br />
subcontractors. Every project is customer tailored and uses fully automated planning interfaces with<br />
cost follow-up systems. Environmental aspects are considered highly important in both customeroriented<br />
products as well as own production lines. University cooperation includes trainees and<br />
diploma workers together with scientific problem solving with specialized universities. The other<br />
company also has a joint venture with Aalto University. The greatest future challenge is a profound<br />
customer orientation in different working environments and cultures.<br />
Thirdly we held a joint company and stakeholder workshop in April 2011. During the workshop an<br />
active discussion about the company needs was conducted. In the conclusion we could classify the<br />
expectations into three categories: 1) development of different company functions, 2) knowledge<br />
sharing and exposure to new ideas and 3) foresight and shaping attitudes.<br />
4. In conclusion<br />
According to Mariussen (2005) in the base metal sector the innovative edge is in the level of<br />
technological advancement used in the production methods. Typically technical excellence has been<br />
achieved at the deficit of development of marketing and strategic skills. Our preliminary findings<br />
support this view. Customer proximity and understanding customer needs require new capabilities<br />
apart from effectiveness of the production processes. Especially future needs of customers, changing<br />
needs and dealing with uncertainty are important issues.<br />
Expectations from the universities seem to depend on the size of the company. Smaller firms prefer<br />
university people to come and discuss cooperation possibilities face to face. All the companies need<br />
technology and information transfer services. The benchmark companies seek for highly specialized<br />
research data and problem solving also from international sources. Intellectual property rights and<br />
compensation for university patents become crucial in joint research efforts.<br />
All participating SMEs had prior experience in cooperation with universities. In most cases it was<br />
restricted to hiring students for limited survey or problem solving purposes. SMEs wish to widen their<br />
time perspective by conducting surveys on future customer expectations. They are also keen on<br />
networking with other SMEs not too close to their core competence.<br />
Messages for the universities by the bigger companies are clear: proactive basic research with 5-10<br />
year time perspective combined with specialization between universities would enhance long-term<br />
cooperation and commitment. Need for highly specialized research cooperation exists in their field of<br />
operation. The help in idea sorting process and proto testing would be appreciated.<br />
References<br />
Audrescht, D.R., Lehmann, E.E. and Warning, S. (2004) “University Spillovers: Does the Kind of Science<br />
Matter?” Industry and Innovation, 11(3), pp 193–206.<br />
Chesbrough, H. (2008) “Open Innovation: A New Paradigm for Understanding Industrial Innovation”, in<br />
Chesbrough, H., Vanhaverbeke, W. and West, J. (ed.) Open Innovation. Researching a New Paradigm,<br />
Oxford University Press, New York.<br />
Christensen, J.F. (2008) “Wither Core Competency for the Large Corporation in an Open Innovation World?”, in<br />
Chesbrough, H., Vanhaverbeke, W. and West, J. (ed.) Open Innovation. Researching a New Paradigm,<br />
Oxford University Press, New York.<br />
Cooke, P. (1998) “Introduction: Origin of the Concept”, in Braczyk, H., Cooke, P. and Heidenresich, M. (ed.)<br />
Regional Innovation Systems, UCL Press Ltd, London.<br />
Kautonen, M. (2008) ”Yksi alue, monta innovaatioympäristöä”, in Mustikkamäki, N. and Sotarauta, M. (ed.)<br />
Innovaatioympäristön monet kasvot, Tampere University Press, Tampere.<br />
Laitinen, J., Meristö, T., Kettunen, J., Tuohimaa, H. (2010) ”Successful partnership and innovation process model<br />
for SME’s – framework and empirical evidence”, in Proc. of The XXI ISPIM Conference 2010 Bilbao,<br />
Huizingh, Torkkeli, Conn, Bitran (ed.).<br />
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Mariussen, Å. (ed.) From Regional Development Coalitions to Commercial Innovations, Nordregio Report 2005:3,<br />
Stockholm.<br />
Meristö, T. and Laitinen, J. (ed.) (2009) “INNORISK: The Fountain of New Business Creation”, CoFi/Åbo<br />
Akademi 2009.<br />
Raij, K. (2007) “Learning by Developing”, Laurea-ammattikorkeakoulu, A58.<br />
Schienstock, G., Koski, P. and Räsänen, P. (1998) “The regionalization of Finnish innovation system”, in Braczyk,<br />
H., Cooke, P. and Heidenresich, M. (ed.) Regional Innovation Systems, UCL Press Ltd, London.<br />
Sotarauta, M. and Mustikkamäki, N. (2008) “Evolutionäärisen muutoskäsityksen ja itseuudistumisen kapasiteetin<br />
haaste”, in Mustikkamäki, N. and Sotarauta, M. (ed.) Innovaatioympäristön monet kasvot, Tampere<br />
University Press, Tampere.<br />
1076
Innovative e-Tool for Construction SMEs: Enabling<br />
Collaborative Restoration of Old Buildings<br />
Mikel Sorli 1 , Alberto Armijo 1 and Alfredo Soeiro 2<br />
1<br />
Innovation Systems Unit, TECNALIA, Derio, Spain<br />
2<br />
Department of Civil Engineering, University of Porto, Porto, Portugal<br />
mikel.sorli@tecnalia.com<br />
alberto.armijo@tecnalia.com<br />
avsoeiro@fe.up.pt<br />
Abstract: Big construction organisations strive to stay on the bleeding edge of the today’s global competition<br />
employing the latest Information and Communications Technology (ICT) tools, which allow them to streamline<br />
their works and stay competitive in the marketplace. Due to the ‘innovation prone’ nature of these companies,<br />
they are able to dedicate enough resources and capabilities to adopt expensive ICT existing solutions or even<br />
develop and customise their own tools. On the other hand, smaller construction companies, such as the Small<br />
and Medium Enterprises (SME) that comprise the majority of Europe’s building industry, do not always count with<br />
enough resources to promptly adopt expensive knowledge management software systems that would allow an<br />
efficient performance of collaborative construction works. Additionally, the sub-sector working on restoration,<br />
retrofitting and maintenance of old buildings, which may belong to the Cultural Heritage objects, requires a<br />
special need to efficiently protect sensitive features in the buildings, such as, historical, social and usage value.<br />
These requirements urge this sub-sector to find an immediate and affordable way to get their in-house know-how<br />
managed. In this regard, H-KNOW project is motivated by the increasing number of complex works of<br />
rehabilitation of buildings that require a rapid and systematic access to specific knowledge. The project approach<br />
is to provide this sub-sector with innovative solutions that facilitate a promptly access to suitable competitive<br />
knowledge through building a business cooperative network among SMEs and Research & Technical<br />
Development (RTD) partners. Based on the identification of a business opportunity, this networked infrastructure<br />
enables the creation of a private collaborative space, which empowers their members to share knowledge<br />
regarding a specific construction industry project derived from that business opportunity. Summarising, the<br />
project plans to develop technical solutions based on ICT that are affordable for the targeted SMEs, including<br />
knowledge sharing, collaboration management and training services for engineers. This Work in Progress paper<br />
presents an experience of the kind, based in the European funded H-KNOW project (FP7-NMP-214567).<br />
Keywords: innovative ICT web tools, collaborative networks, construction industry SMEs, e-Learning,<br />
restoration, knowledge management<br />
1. Background<br />
The growing number of sophisticated works required in old building restoration, retrofitting and<br />
maintenance activities urgently requests an advanced, systematic and promptly access to the relevant<br />
knowledge. In the complex sector of restoration, there is a still a non optimal information flow between<br />
the different actors taking a role in the processes, such as the final users of the building, the<br />
administration responsible for the works, the contractors, architects or SMEs involved in specific<br />
works. This situation becomes even more complex if multidisciplinarity is required (Archaeologists,<br />
Architects, Scientists, Sociologists, Engineers, etc). A highly promising approach to enable such an<br />
access, and to foster the advance of construction industry Small and Medium Enterprises towards the<br />
knowledge organizations paradigm, comprises the implementation of innovative forms of collaborative<br />
knowledge management and e-Learning services through the creation of novel business networks of<br />
Small and Medium Enterprises (SME) and Research & Technical Development (RTD) organizations.<br />
2. H-KNOW project: Advanced Infrastructure for Knowledge Based Services<br />
for Buildings Restoring<br />
Upon the above mentioned needs, H-KNOW project (January 2009 – December 2011) was submitted<br />
and, following a successful evaluation, got funded by the European Commission under contract FP7-<br />
NMP-214567. The project approach is to develop a software solution supported by a methodology<br />
suitable and affordable for SMEs, which includes innovative/competitive knowledge and training<br />
providing services surrounded by collaboration services.<br />
2.1 Objectives<br />
H-KNOW was conceived from the very beginning as offering innovative results in the form of a<br />
software system supported by a methodology.<br />
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2.1.1 H-KNOW Methodology<br />
Mikel Sorli, Alberto Armijo and Alfredo Soeiro<br />
H-KNOW Methodology is intended for the introduction of a radically new approach in provision of<br />
relevant knowledge to the construction industry small and medium enterprises dealing with restoration<br />
and maintenance of old buildings, including cultural heritage objects. The methodology guides the<br />
establishment of H-KNOW Collaborative Spaces comprised of SMEs and RTDs, who belong to the H-<br />
KNOW Community. The transformation from this general cooperative community into the precisely<br />
defined and joint-goal oriented H-KNOW Collaborative Spaces has been specifically elaborated within<br />
the project according to the ARCON (Camarinha-Matos 2006) reference model.<br />
2.1.2 H-KNOW Software System<br />
The software system of H-KNOW consist of an Internet based web tool aiming at SMEs as well as at<br />
research & technical development organisations (RTDs) dealing with old building restoration activities.<br />
This platform allows the creation of cooperative and collaborative business networks in order to<br />
facilitate the sharing of construction industry knowledge among the networked partners. The platform<br />
also includes systems for managing information, interaction and innovative training services through<br />
the employment of e-Learning facilities.<br />
2.2 H-KNOW Concept<br />
The basic rationale of the H-KNOW concept is described in Figure 1, which is a functional<br />
representation of the concept described later. Starting from the Open universe of organisations<br />
(SMEs and RTDs) dedicated to the construction industry (top-left), the generation of an H-KNOW<br />
Community can be initialised (top-right). Within this community, actors willing to share their expertise,<br />
interests and knowledge are accommodated. Upon detection of a specific business opportunity<br />
(bottom), the H-KNOW Community provides rapid, trustable and safe response for the creation of an<br />
H-KNOW Collaborative Space, which allows the collaboration in the execution of joint and<br />
multidisciplinary construction projects, as an answer to the business opportunity. The H-KNOW<br />
Collaborative Space created from the H-KNOW Community will have a set of characteristics that are<br />
far more difficult to achieve in a direct establishment from the Open Universe. In fact, the H-KNOW<br />
Collaborative Space is structured, the companies (SMEs or RTDs) in it have been “filtered” when<br />
joining the “club”, in many cases have worked together previously and, furthermore, have been<br />
continuously evaluated by its pairs (co-workers and collaborators).<br />
Figure 1: H-KNOW Concept, functional view<br />
3. H-KNOW Collaborative functionalities<br />
H-KNOW ICT platform was conceived as a SOA-based platform, which applies a Collaborative<br />
Reference Architecture (Ralli, C. 2005). The H-KNOW system enables highly efficient provision of<br />
state-of-the-art relevant knowledge from the building repair / maintenance domain, providing facilities<br />
for easy access to it either in a Common Knowledge Repository (CKR) or in other sources. The H-<br />
KNOW system:<br />
� Provides an infrastructure for the creation of cooperative and collaborative business networks<br />
through the application of Network Set-up Services<br />
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Mikel Sorli, Alberto Armijo and Alfredo Soeiro<br />
� Provides services for the collection, translation, discovery and reuse of the competitive knowledge<br />
created during repair/maintenance works (Knowledge Management Services)<br />
� Provides facilities for the knowledge analysis and its transformation into learning objects, and<br />
subsequent organisation of appropriate training courses (e-Learning services)<br />
� Enables the usage of services for innovative collaboration in knowledge sharing among SMEs<br />
and RTDs within different business and knowledge communities (Collaboration Management<br />
services)<br />
Figure 2 illustrates the H-KNOW concept, where the different services are depicted.<br />
Figure 2: H-KNOW Concept<br />
3.1 Network Set-up Services<br />
The Network Set-up Services enable the initial H-KNOW Community definition and H-KNOW<br />
Collaborative Spaces creation out of the initial community, based on business opportunities. Thus,<br />
this functionality allows some construction industry organisations, so called community founders, to<br />
establish a common ICT infrastructure based on a social networked website and organise themselves<br />
in a cooperative form called H-KNOW Community. This virtual breeding environment (ECOLEAD<br />
2006) is not static or closed, in the sense that it can be enlarged with new members in order to<br />
increase the cooperation possibilities. When a business opportunity arises within the H-KNOW<br />
Community, some members of the community can reorganise in a new networked form called H-<br />
KNOW Collaborative Space. This new temporal alliance involves collaboration processes, rather than<br />
the cooperation processes found at the H-KNOW Community level (Camarinha-Matos 2008). This H-<br />
KNOW Community can also be observed as an enabler of a knowledge based heterarchical fishnet<br />
structure (Schatten 2007), where H-KNOW Collaborative Spaces, symbolised as lifted nodes in the<br />
fishnet, are observed as dynamically created ad-hoc hierarchies anchored in the responded business<br />
opportunities.<br />
3.2 Knowledge Management Services<br />
Knowledge Management Services (Kazi 2005) enable users to store and classify project specific<br />
information within the H-KNOW Collaborative Spaces, to translate it from its original form into a form<br />
more suitable for its later reutilization, to share common resources using online shared directories (e-<br />
Libraries), and to find or discover resources through search engines. These services for Knowledge<br />
Management will also provide supporting Expert Systems, that is to say, reasoning systems based on<br />
Case Based Reasoning (CBR) (Aamodt 1994) technologies, in order to assist users in construction<br />
problems diagnostics and solutions. In addition, the services also enable carrying out statistical<br />
analysis on the knowledge contained in H-KNOW platform, and users’ interaction with this knowledge,<br />
for the identification of learning objects out of the knowledge contained in the platform.<br />
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Mikel Sorli, Alberto Armijo and Alfredo Soeiro<br />
The Knowledge Management and Collaboration Management services are based on Drupal platform<br />
(Drupal 2011), which is a free and open source Content Management System (CMS).<br />
3.3 Collaboration Management Services<br />
Collaboration Management Services are intended to provide human interaction or socialization<br />
services, which enable the users to interact each other within the composed services. The developed<br />
Collaboration Management Services are the following: Human resources discovery, Collaborative<br />
Team Creation, Selection of communication services and Collaboration tracking & tracing.<br />
3.4 E-Learning Services<br />
The e-Learning services enable the creation of learning objects / lessons based on inputs from the<br />
Knowledge Management services, and the organization of training courses. Being the innovative<br />
baseline for stepping up the creation of knowledge within H-KNOW, the e-Learning services are<br />
based on the existing Moodle platform (Moodle 2011), which works as an open Learning<br />
Management System (LMS), integrated within the Drupal platform via single sign-on (SSO)<br />
authentication mechanisms. The application of these e-Learning services for the users and for the<br />
users tasks are defined with emphasis on using proven authoring tools to create learning content that<br />
is reusable and can be recomposed (Rice, W. 2008). In this regard, Xerte Online Toolkits (Xerte<br />
Online Toolkits 2011), an online free and open source editor of learning objects, was integrated within<br />
Moodle platform.<br />
4. Conclusions<br />
The results achieved until now in the project are very promising and it is expected that at the end of it<br />
(December 2011), SMEs will be provided with a very useful tool for networked collaboration and e-<br />
Learning among SMEs and RTDs. Current focus is in construction industry, but there are clearly a<br />
wide variety of applications in many other sectors and types of industry. Elaborating on that idea,<br />
some plans for exploitation are already being developed and evaluated. According to the rules for this<br />
kind of projects, all partners in the consortium have rights, firstly, to internally use the project results<br />
and, secondly, to eventually participate in future commercial exploitation by means to be agreed<br />
(royalties, creation of a new society, etc) in an Exploitation Agreement that supersedes the initial<br />
Consortium Agreement.<br />
In principle, two exploitation ways have been foreseen. On the one hand, H-KNOW may be rented by<br />
an ICT provider as a service on-demand (SaaS) to a Construction Industry professional association,<br />
which would exploit the platform contents and offer it to its associates. The association would behave<br />
as a hub for its associates and would be responsible for handling the daily operative of the H-KNOW<br />
Community and H-KNOW Collaborative Spaces as well as feeding, updating, maintaining the<br />
contents and assuring their quality and users’ validation within the tool. On the other hand, a joint<br />
venture may be established for the commercialisation of H-KNOW. In both cases, the H-KNOW<br />
methodology would be implemented and adopted by the users via consultancy and a user’s<br />
handbook.<br />
It is obvious that on of the more common drawbacks of this type of collaborative services is the<br />
reluctance to share knowledge and on the opposite, the need of motivation to populate the system,<br />
create a critical mass and achieve a fruitful level of use. On this sense, the consortium thinks there<br />
are several reasons by which users may find the needed motivation, the more relevant ones being:<br />
easiness to generate better and higher added value business opportunities by combining different<br />
expertise from partners in the H-K Collaborative Space as well as increasing the sources from where<br />
the opportunities may rise; feeding trust and reliability among the partners in the Collaborative Space<br />
creating a core of top level partners; possibility of reaching higher levels of knowledge by sharing<br />
knowledge from different actors shifting the mind from competition to collaborating in adding value to<br />
the end customer.<br />
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Acknowledgements<br />
Mikel Sorli, Alberto Armijo and Alfredo Soeiro<br />
The authors are quite willing to acknowledge the European Commission by its support to the H-<br />
KNOW project as well as to all partners and collaborators in the project.<br />
References<br />
Aamodt, Agnar; Plaza, Enric (1994) “Case-Based Reasoning: Foundational Issues, Methodological Variations,<br />
and System Approaches”. Artificial Intelligence Communications, IOS Press, Vol. 7:1, pp. 39 – 59<br />
Camarinha-Matos, L.; Afsarmanesh, H. (2008) “Collaborative Networks: Reference Modelling”. Springer ISBN-13:<br />
978-0-387-79425-9<br />
Camarinha-Matos, L.; Afsarmanesh, H. (2006) “A Modelling Framework for Collaborative Networked<br />
Organisations”. PRO-VE’96 (Springer) – Helsinki, Finland, 25-27 Sept06<br />
Drupal (2011) “Drupal - Open Source CMS | drupal.org”, [Online], Available: http://drupal.org/ (accessed on<br />
07/04/11)<br />
ECOLEAD (2006) “European Collaborative Networked Organisations Leadership Initiative (D51.3)”. FP6 Europen<br />
project IP-506958<br />
Kazi, Abdul Samad (2005) “Knowledge Management in the Construction Industry: A Socio-Technical<br />
Perspective”. Idea Group Publishing, ISBN:159140360X<br />
Moodle (2011) “Moodle.org: open-source community-based tools for learning”, [Online], Available:<br />
http://moodle.org/ (accessed on 07/04/11)<br />
Ralli, C. (2005) “Collaboration Reference Architecture”, Workshop on e-Collaboration in working environments,<br />
VUB, Brussels, November, 2005<br />
Rice, W. (2008) “Moodle 1.9 E-learning”, Packt Publishing, 2008<br />
Schatten, Markus; Žugaj, Miroslav (2007) “Organizing a Fishnet Structure”. Proceedings of the ITI 2007 29th<br />
International Conference on INFORMATION TECHNOLOGY INTERFACES / Luzar - Stiffler, Vesna ; Hljuz<br />
Dobric, Vesna (ur.). Zagreb : SRCE University Computing Centre, 2007. 81-86<br />
Xerte Online Toolkits (2011) “Xerte - Open Source E-Learning Developer Tools”, [Online], Available:<br />
http://www.nottingham.ac.uk/xerte/toolkits.htm (accessed on 07/04/11)<br />
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Non<br />
<strong>Academic</strong><br />
Papers<br />
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Innovation Processes for SMEs: Moving from Serendipity<br />
to Strategy<br />
Leslie Martinich 1 and Mila Božič 2<br />
1 Competitive Focus, Austin, Texas, USA<br />
2 BE-I Institute, Dragomer, Slovenia<br />
leslie@competitivefocus.com<br />
mila.bozic@be-i.org<br />
Abstract: One of the barriers to innovation in small- and medium-sized enterprises (SMEs) is the lack of internal<br />
infrastructure to support the acceleration of innovation. In this paper we show how SMEs can use an Innovation<br />
Council to improve their effectiveness in commercializing innovations. The mechanisms and processes of an<br />
Innovation Council include idea generation, providing education for the project teams about the radical innovation<br />
life cycle, setting expectations, helping team members to accept ambiguity, forecasting technology futures,<br />
recognizing and evaluating opportunities, developing a fast track screening process and a fast track intellectual<br />
property process. In addition, the Innovation Council maintains an Innovation Repository, and regularly evaluates<br />
the ideas and projects. They define the Innovation Metrics appropriate to their business and manage an effective<br />
Innovation Portfolio. Innovation Metrics provide strategic direction for innovation activities within the business and<br />
guide the allocation of resources. We offer a sample of metrics. When an innovative idea is approved for initial<br />
funding, the Innovation Council forms a project team with team members with the necessary skills and helps<br />
them advance the project through stages. The Innovation Council holds a quarterly Innovation Roundtable, a<br />
meeting with 10-20 people, four to eight presentations and a chance for cross pollination of ideas. Many large<br />
enterprises use the mechanisms and processes of the Innovation Council. This paper describes the mechanisms<br />
and processes appropriate for SMEs, adapting the processes to fit a smaller organization. This presentation<br />
provides the scaffolding and structure for creating an Innovation Council within a business with fewer than 250<br />
employees, with explicit roles and responsibilities, most of which are already done on an ad hoc basis. SMEs can<br />
adopt this set of processes without adding headcount. Moving the organization from an ad hoc approach to<br />
innovation, to a structured process, moves it from serendipity to strategy.<br />
Keywords: Innovation, innovation management, innovation strategy, SMEs.<br />
1. Why do SMEs need an innovation strategy?<br />
Small- and medium-sized enterprises (SMEs) need an innovation strategy in order to grow their<br />
businesses. Simply having an idea and hoping to get lucky will not often result in success. Large<br />
firms have entire organizations devoted to innovation. SMEs can have an innovation strategy as well,<br />
and the lessons from larger firms can be adapted to fit their needs.<br />
What does such an innovation strategy look like? Executives may be concerned that innovation is too<br />
risky, but in fact the risk consists in not understanding the methods and infrastructure to support<br />
innovation. Someone within the organization should evaluate the landscape, paying attention to<br />
changes in technology, demographics, economics, the marketplace, political realities, and social<br />
behaviour. Someone within the organization should make the executive staff aware of opportunities<br />
and risks. Let’s call this person the Director of Innovation, the head of the Innovation Council.<br />
What do people on the Innovation Council do and who are they? And how does a SME develop an<br />
innovation strategy? These are the questions we will address in this paper.<br />
Leifer et al. (2000) and O’Connor et al. (2008) have addressed this concern for larger enterprises.<br />
They describe the role of an Innovation Hub and detail the management challenges that large<br />
organizations face. In this paper we will adapt some of their ideas and provide our own from our<br />
combined experience in innovation management.<br />
Drucker (1985) says that entrepreneurs find innovation risky, but that it is risky only because they do<br />
not understand what they are doing and they lack a methodology. He says that innovation needs to<br />
be purposeful, systematic and managed.<br />
2. What does the Innovation Council do?<br />
An Innovation Council for a SME consists of the Director of Innovation and several advisors. The<br />
advisors represent development, operations, manufacturing and marketing organizations. People<br />
with domain expertise may be included for their specific knowledge.<br />
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Leslie Martinich and Mila Božič<br />
In this section and sub-sections, we describe the things that an Innovation Council does.<br />
2.1 Idea generation, opportunity recognition, and evaluation<br />
Members of the Innovation Council have the responsibility for looking for new ideas and recognizing<br />
opportunities, and for meeting regularly to evaluate opportunities that they have exposed.<br />
2.1.1 Idea generation<br />
Members of the Innovation Council have two modes of idea generation. In the receptive mode, they<br />
receive ideas from others within the organization. And in the active mode, they look outside the<br />
organization, attending conferences, partnering with universities, reviewing technical literature. In the<br />
active mode, some members will also “scan the horizon,” focusing on technology trends and changes<br />
in the economic climate, the political landscape, the marketplace, demographics, and social<br />
institutions.<br />
2.1.2 Opportunity recognition<br />
Drucker (1985) says that there are seven sources of innovative opportunities. Members of the<br />
Innovation Council look at the sources of innovative opportunities, and examine whether any are<br />
germane to the organization. Initially, this involves an explicit discussion among members of the<br />
Innovation Council, but later becomes part of their background thinking.<br />
Drucker’s (1985) seven sources of innovative opportunities are<br />
• The unexpected success, failure or event<br />
� Incongruities among reality as it actually is, as it is assumed to be, and as it ought to be<br />
� Process needs<br />
� Changes in industry structure or market structure<br />
� Demographic changes<br />
� Changes in perception, mood, and meaning<br />
� New knowledge, both scientific and non-scientific<br />
Recognizing that a particular change presents an opportunity for innovation, the Innovation Council<br />
then evaluates the implications of pursuing that opportunity.<br />
2.1.3 Opportunity evaluation<br />
When the Innovation Council identifies an opportunity, it then evaluates the opportunity by asking<br />
questions such as<br />
� What would we have to do to convert this change into an opportunity?<br />
� Where would this lead us?<br />
� Do we have the expertise to exploit this opportunity?<br />
� Can we be successful?<br />
� Does the opportunity fit our long-term strategy?<br />
o If not, should our strategy and direction be modified or not?<br />
The Innovation Council meets regularly to evaluate opportunities and manage its portfolio. Meetings<br />
can be held as often as once a month or once a quarter, with opportunity evaluation being managed<br />
through electronic mail.<br />
2.2 Forming project teams<br />
Once an opportunity has been evaluated to have merit and to be worthy of pursuit, the Innovation<br />
Council forms a project team to pursue that idea. The project team often includes the idea originator<br />
as well as someone with experience bringing an innovation to market. In addition, the early team will<br />
include a few people with the technological expertise to move that idea forward.<br />
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2.3 Funding project teams<br />
Leslie Martinich and Mila Božič<br />
If the Innovation Council has a budget for new initiatives, then funding the project team is simply a<br />
matter of allocating those funds. In small enterprises, the Innovation Council can propose to the<br />
president that she provide funding for early-stage projects to see whether they will yield results.<br />
2.4 Providing education for project teams and for the organization<br />
The organization wants its innovative efforts to be successful, so the Innovation Council helps assure<br />
that by educating the project teams regarding the innovation life cycle. Within the organization, they<br />
can provide a one hour session to describe how the innovation life cycle works, the S-curve, and the<br />
various roles people play within an innovative organization.<br />
The Innovation Council can be an important mentor to the project teams by helping them understand<br />
and accept the ambiguities involved in early-stage innovations. The Innovation Council can help set<br />
expectations for the team, instructing them through case studies of how the innovation process<br />
unfolds, often with setbacks, twists and turns.<br />
To teach the entire organization, the Innovation Council provides education during an all-hands<br />
meeting or as a “lunch and learn” session. It is important for all people to understand their roles and<br />
to commit to the process. This is a leadership opportunity for the Director of Innovation or for the<br />
organization’s president to help people understand how the organization will be supporting innovative<br />
efforts.<br />
2.5 Forecasting technology futures<br />
The Director of Innovation or her staff create regular technology forecasts. They investigate<br />
technology trends and create a roadmap of future possibilities. For technology directly relevant to their<br />
organization, they include the S-curves of cumulative sales, performance, and patents. For<br />
technology within the scope of their interest, they include summaries of news and briefings.<br />
2.6 Executive briefings<br />
The Director of Innovation provides regular briefings to the executive staff, including technology<br />
trends and a summary of the state of the organization’s innovation portfolio.<br />
2.7 Developing a fast-track screening process<br />
As ideas are proposed, how do they get evaluated in a reasonable time? Ideas have a shelf-life, and<br />
sometimes that is a short shelf-life. This process must be reasonably quick.<br />
The Innovation Council includes two or three people who can function as “idea honers” who hone and<br />
sharpen the ideas, preparing to present them for evaluation. Idea honers are skilled writers with<br />
backgrounds in both technology and business. They ask questions of the idea originator: how would<br />
people use this, who would use this, what can it be used for? They help to write a description of the<br />
idea.<br />
Then they submit the idea to the primary screener who is responsible for quick turnaround on<br />
assessment. This person can be the Director of Innovation in a small organization, or, in a larger<br />
organization, someone who has that responsibility. This person provides the initial screening and<br />
sends the proposal to someone with expertise in the domain, if necessary.<br />
Just as a journal’s editor-in-chief scans submissions and directs them to department editors for a full<br />
review, the primary screener scans the proposals. The primary screener and the domain experts may<br />
(1) reject the proposal, sending it back to the idea honers and the idea originator with comments<br />
explaining that decision. Or, they may (2) ask for further clarification from the ideas honers and<br />
originator. Or they may (3) send it to the full Innovation Council for evaluation. Figure 1 depicts the<br />
process.<br />
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Figure 1: Fast-Track Screening Process<br />
Leslie Martinich and Mila Božič<br />
2.8 Developing a fast-track intellectual property process<br />
The Innovation Council also works with attorneys to define a fast-track intellectual property process.<br />
This process includes tasks related to describing the invention, researching the patentability of the<br />
invention, the commercial value of the invention, drafting a patent application and filing the patent<br />
application.<br />
2.9 Developing and maintaining the Innovation Repository<br />
An Innovation Repository is a database of innovation proposals and their status. The Innovation<br />
Council along with a database expert decides on the structure of the repository and the visibility of the<br />
contents. The Innovation Repository is essentially a document management system and can be<br />
implemented in a number of different ways.<br />
2.10 Define the organization’s innovation metrics<br />
Each organization has its own way of measuring its business, and it is up to the Innovation Council to<br />
define appropriate metrics for its company. Some sample metrics include<br />
• Return on investment<br />
o Percentage of revenue/cost savings from products/processes introduced in the last<br />
year<br />
o Number of innovations introduced in the last year<br />
o Percentage of sales from new products or services<br />
• Organizational capability<br />
o Number of innovations that significantly advance the existing business<br />
o Number of innovative ideas in the Innovation Repository<br />
o Improvement in customer satisfaction<br />
2.11 Managing the Innovation Portfolio<br />
Innovations can be categorized in many ways: radical product innovations, incremental product<br />
innovations, radical process innovations, incremental process innovations, management innovations<br />
and more. Just as an investor manages her financial portfolio, the Innovation Council manages its<br />
Innovation Portfolio.<br />
The first step is to define what the organization wants to have in the portfolio. Should it include three<br />
active radical product innovations in progress and 200 incremental product innovations? For a smallsized<br />
enterprise, it is perhaps reasonable to have just a few innovations in the portfolio.<br />
Managing that portfolio means tracking the progress of each innovation and measuring it against the<br />
metrics that have been chosen.<br />
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3. An Innovation Roundtable<br />
Leslie Martinich and Mila Božič<br />
The Innovation Council convenes an Innovation Roundtable meeting once a quarter. At this<br />
Roundtable, the innovators present information about their projects and the Innovation Director<br />
presents an update about the Innovation Portfolio.<br />
Often innovative ideas are sparked by the meeting of people from multiple disciplines, and the<br />
Innovation Roundtable provides such an opportunity.<br />
The Innovation Roundtable meeting includes 10 to 20 people and typically lasts for one entire day.<br />
4. Conclusion<br />
The management practices and infrastructure of larger enterprises can be utilized by SMEs to<br />
manage innovation. In this paper we have provided the basics for SMEs to use in beginning their<br />
efforts to be more successful at innovation. This is a practitioner paper rather than a research paper.<br />
We have provided the basics and the framework for SMEs to use to build their own innovation<br />
strategy, infrastructure and processes.<br />
References<br />
Drucker, P. F. (1985) Innovation and <strong>Entrepreneurs</strong>hip, New York: Harper & Row.<br />
Leifer, R., McDermott, C. M., O’Connor, G. C., Peters, L. S., Rice, M. P., Veryzer, R. W. (2000) Radical<br />
Innovation: How Mature Companies Can Outsmart Upstarts, Boston: Harvard Business School Press.<br />
O’Connor, G. C., Leifer, R., Paulson, A. S. and Peters, L. S. (2008) Grabbing Lightning: Building a Capability for<br />
Breakthrough Innovation, San Francisco: Jossey-Bass.<br />
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