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Innovation strategies of firms: What strategies and why?

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Abstract

This paper analyzes various innovation strategies of firms. Using five waves of the Community Innovation Survey in Sweden, we have traced the innovative behavior of firms over a 10-year period, i.e. between 2002 and 2012. We distinguish between sixteen innovation strategies, which compose of Schumpeterian four types of innovations (process, product, marketing, and organizational) plus various combinations of these four types. First, we find that firms are not homogenous in choosing innovation strategies, instead, they have a wide range of preferences when it comes to innovation strategy and some of the innovation strategies are “commonly” used among firms. Second, using Transition Probability Matrix, we found that firms also persist to have such a diverse innovation strategy preferences. Finally, using Multinomial Logit model, we explained the determinant of each and every innovation strategies, while we gave special attention to the commonly used innovation strategies among firms.

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Notes

  1. A rapid review of the literature highlights a few different approaches. In the microeconomics of innovation, it is often assumed that firms concentrate wholly on product innovation (Du et al. 2007). In the industrial economics literature there has been a focus on the relationship between product and process innovation, and how firms distribute their innovation resources between these two types of innovation depending, inter alia, on the development phase of the technology (Utterback and Abernathy 1975). The mix between product and process innovation has later been analyzed theoretically by a number of authors (Klepper 1996; Yin and Zuscovitch 1998; Rosencrantz 2003), yet the empirical work is rare.

  2. Sometimes in the literature, organizational innovations are also termed “administrative innovations” (Afuah 1998) or more recently “management innovations” (Birkinshaw et al. 2008).

  3. One exception is Polder et al. (2010).

  4. Even in the case of product innovations, R&D accounts for barely a quarter of the total expenses necessary to generate an innovation (Kleinknecht et al. 2002).

  5. See, e.g. Mansfield (1968), Pavitt (1984), Scherer (1986), Dosi (1988), Cohen and Klepper (1996), Lööf and Heshmati (2002) and Andersson et al. (2012).

  6. External knowledge sources can be either a complement (Cassiman and Veuglers, 2002) or a substitute (Schmidt 2005) for internal knowledge sources (Pittaway et al. 2004).

  7. This is obtained after the usual data cleaning, i.e. dropping observations with zero turnover or zero employees.

  8. We have a situation where firm i can choose between any of sixteen various innovation strategies j, which are collectively exhaustive and mutually exclusive choices (\( \mathop \sum \limits_{j = 0}^{J} P_{ij} = 1) \). We only have alternative-invariant (case-specific) regressors and we do not have any alternative-specific regressors. In this situation, a good model to employ is Multinomial Logit.

  9. IIA assumption states that characteristics of one particular choice alternative do not impact the relative probabilities of choosing other alternatives. For example, if IIA is valid, how a firm i chooses between introducing only product innovation or only process innovation (\( P_{i,j = 1} /P_{i,j = 2} \)) is independent of any other possible choices of innovation strategy. We will test whether this assumption is met or not in our result section.

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Authors and Affiliations

  1. Centre of Excellence for Science and Innovation Studies (CESIS), KTH, Stockholm, Sweden

    Charlie Karlsson

  2. Jönköping International Business School, Jönköping, Sweden

    Charlie Karlsson

  3. Blekinge Institute of Technology, Karlskrona, Sweden

    Charlie Karlsson & Sam Tavassoli

  4. Centre for Innovation, Research and Competence in the Learning Economy (CIRCLE), Lund University, Lund, Sweden

    Sam Tavassoli

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  1. Charlie Karlsson
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  2. Sam Tavassoli
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Correspondence to Sam Tavassoli.

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Table 5 Variable definitions
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Karlsson, C., Tavassoli, S. Innovation strategies of firms: What strategies and why?. J Technol Transf 41, 1483–1506 (2016). https://doi.org/10.1007/s10961-015-9453-4

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