3. Research Method
3.3. Description of the Variables and Operationalization
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3.3. Description of the Variables and Operationalization.
3.3.1. Innovation
As we have seen in the section corresponding to the analytical framework, Innovation refers to the novelties introduced in the market. According to the Oslo manual, innovation can be divided in:
- Product: the introduction to the market for a new or significantly improved good or service in relation to quality, components, subsystems or end use.3
- Process: the implementation of a production process, distribution method or production support activities, new or significantly improved.
- Organization: a new way of organizing your company's business practices, the organization of the workplace or relations with agents external to your company, which have not been used by your company before
- Commercialization: the implementation of a new concept or marketing strategy that differs significantly from the usual methods used by your company, and that has not been used before.
In order to measure each type of innovation, the questionnaire asked relevant sub-items for each of them about the period 2012-2014.
Thus, with regard to the innovation in each product, the firm is asked for four sub-items:
(1) the firm was successful in introducing new goods; (2) the firm was successful in introducing new service; (3) significantly improved well; or (4) significantly improved service. All of those sub items represent a form of innovation in product, so if the firm responds "yes", at least, in one of those sub-items, the research will consider that the
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firm has innovated a product and it would not have experienced innovation in the product on the contrary case.
In this way, the variable innovation in the product will be operationalized as a dummy variable, where the variable will take the value of "1" if the firm has innovation in the product and "0" on the contrary case.
With regard to the innovation in process, the firm is asked for six sub-items: (1) A new method of production of goods or provision of services; (2) A new method of logistics, distribution or dispatch of inputs, goods or services; (3) A new activity to support the production such as maintenance or procurement systems, accounting or information;
(4) An improved method of producing goods or providing family services; (5) An improved logistics, distribution or delivery of inputs, goods or family services; or (6) A production support activity such as significantly improved maintenance or procurement, accounting or information systems. All of those sub items represent a form of innovation in process, so if the firm responds "yes" in at least one of those sub-items, the research will consider that the firm has an innovation in the process and it would not have innovation in the process on the contrary case.
In this way, the variable innovation in the process will be operationalized as a dummy variable, where the variable will take the value of "1" if the firm has innovation in process and "0" for the contrary case.
With regard to the innovation in the organization, the firm is asked for three sub-items:
(1) New business practices; (2) New methods of organizing work; or (3) New methods of organization of external relations with other companies or public institutions. All of those sub items represent a form of innovation in the organization, so if the firm responds "yes", at least, in one of those sub-items, the research will consider that the
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firm has an innovation in organization and it would not have innovation in the organization on the contrary case.
In this way, the variable innovation in the process will be operationalized as a dummy variable, where the variable will take the value of “1” if the firm has innovation in organization and “0” on the contrary case.
With regard to the innovation in commercialization, the firm is asked for four sub-items:
(1) Significant changes in the design or packaging of the good or service; (2) New ways or techniques of product promotion; (3) New methods to position the product in the market or in sales channels; or (4) New methods of establishing prices for goods or services. All of those sub items represent a form of innovation in commercialization, so if the firm responds "yes", at least, in one of those sub-items, the research will consider that the firm has an innovation in commercialization and it would not have innovation in commercialization on the contrary case.
In this way, the variable innovation in the process will be operationalized as a dummy variable, where the variable will take the value of "1" if the firm has innovation in commercialization and "0" on the contrary case.
Also, another important approach to measure innovation is the owning of a patent.
According to the web page of the World Intellectual Property Organization (WIPO), “a patent is an exclusive right granted for an invention, which is a product or a process that provides, in general, a new way of doing something, or offers a new technical solution to a problem”. Because, it represents a grand of novelty, some works4 use this as a proxy variable for innovation. This information is collected by the questionnaire but the
4 Examples of works that use patent as a measure of innovations are Bottazzi & Giovanni Peri (2003),
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wording of the question made reference to the application and not the position of the patent. However, the research will also evaluate this measure. And the firm will have innovation if they applied to the patent in the period 2012-2014. The variable will be a dummy variable.
Finally, it is possible to evaluate the innovation in the product through the use of the percentage of sales of innovative products. An important characteristic of the questionnaire is the incorporation of the question of percentage of sale according to the characterization of the product in terms of innovation for the year 2014. In other words, it is possible to measure the percentage of sales of innovative products by the company.
3.3.2. Networks
Networks can be understood “as complex webs of relationships among firms, universities, government agencies, and other organizations for generating and sharing knowledge relevant to technological innovation” (Rycroft, 2003, pg. 300).
In order to measure this dimension, the strategy will be to use of the questions related to the presence of linkages with a list of different agents or institutions. The list includes 13 items: (1) Universities, (2) Public research institutes, (3) Private research institutes, (4) Government CTI promotion programs, (5) Non-university laboratories, (6) CITE, (7) SENATI and other technical links, (8) Suppliers, (9) customers, (10) Parent company or other group companies, (11) Competitors or other companies, (12) Business guilds, (13) Consultants and experts. Also, the question is similar to a multiple-choice question, in other words, the firm can have linkages with more than one institution.
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For the study, it was established three categories of networks: knowledge networks, production networks, and customer networks. In the case of Knowledge Networks, the research considered that a firm has knowledge networks if it has relations with Universities, Public research institutes, Private research institutes, or Non-university laboratories. In the case of Production Networks, the research considered that a firm has Production networks if it has relations with Suppliers, Competitors or other companies, and Parent company or other group companies. In the case of Production Networks, the research considered that a firm has Production networks if it has relations with Suppliers, Competitors or other companies, and Parent company or other group companies. In the case of Customer Networks, the research considered that a firm has Customer networks if it has relations with Clients. These three (Knowledge, Product, and Customer) variables will be expressed as dummy variables with the value of 1 in the case of linkage with the respective network, and 0 on the contrary case
Another approach to the measurement of these variables will be the consideration of the nature of the relationship in the construction of the variable. The strategy proposed by this research is the differentiation between one relationship and another, taking into account that there are some relationships that might have more impact in the innovation performance. The information related to the type of relationship was asked for each link the company has with the thirteen actors indicated in the previous paragraph. The list of relationship includes eight types of relationship: (1) Request for financing, (2) Information request, (3) Training, (4) Testing of products / processes, (5) Technical assistance, (6) Engineering and designs (7) Investigation and development, (8) Other.
In the case of other, the specifications were reviewed and two relevant relationships were found: commercial relationship and joint studies. With these relationships, the
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amount of investment in R&D activities.In order to operationalize this variable, the first approach is to use the information about the decision of the firm to invest or not in R&D activities. The variable will take the form of a dummy variable where the value of "1" means that the firm made an investment in R&D activities and "0" on the contrary case. The second approach of this variable is to use the amount of money invested in R&D activities. In this last case, the variable will take the form of a continuous variable. And it would expect a positive relationship with innovation. In the analysis, the research will test the impact of both types of measure.
3.3.4. Absorptive capacity
Absorptive capacity refers to the capacity to “absorb” the information, and this implies the ability to identify, assess and convert the information into knowledge. The term
Value Categories
0 No relations or Commercial Relations 1 Request for financing
2 Information request
3 Training, Testing of products/processes, Technical and assistance
4 Joint studies, Engineering and designs and Investigation and development
Degree of Vinculation Table N° 01
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suggests that the firm has to own an internal infrastructure that helps it to take advantage of the internal and external information.
The research will use the presence of R&D departments and Informatics departments as a proxy to measure this variable. The variable will take the form of dummy variable where the values of "1" will mean that the firm has a suitable infrastructure to manage the external and internal information, and "0" on the contrary case.
3.3.5. Control Variables
As control variables, the research will use three main control variables: (1) Size of the firm, (2) Year of operation, and (3) intensity technology in the manufacturing sector.
With regard to the firm's size, many academic works expect that the innovation performance will be different between small and big companies. The expectation is that the big companies will tend to innovate more than small companies, so it is necessary to control the estimation by this variable.
The operationalization of this variable will be made using the definition of size established by the law 30056 of Peru. This law establishes definitions according to the next sales thresholds.
Table N° 02
Size Criteria Values of the research
variable
Microenterprise Sales < =150 UI 1
Small Enterprise 150 UI < Sales < =1700 UI 2 Medium Enterprise 1700 UI < Sales < =2300 UI 3
Big company 2300 UI < Sales 4
Operationalization of Variable Size
The UI (taxation unit) is 3 800 nuevos soles (the currency of Peru)
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With regard of the age of operation, there is not a common agreement of why the year is an important control variable but the general discussion emphasizes the differences between the new and mature firms, so a correct estimation has to include the period of time that the firm is operating. To create this variable, the procedure will be a subtraction between the year of the survey and the year in which the company began to operate.
Finally, taking into consideration the difference of technology between different manufacture activities, the United Nations Industrial Development Organization (UNIDO) created a category using the International Standard Industrial Classification (ISIC). The purpose of this variable is to group industries with a similar level of R&D intensity. With this variable, it is possible to make a better comparison taking into account the differences of technology intensity among industries. The classification is divided into three groups: (1) Medium-high and high technology, (2) Medium technology, and (3) Low technology. The research will use the ISIC (Rev.4) information provided by the survey in order to create this classification.
Table N° 03
Technology
Intensity ISIC Description
Division 20 Chemicals and chemical products Division 21 Pharmaceuticals
Division 26 Computer, electronic and optical products Division 27 Electrical equipment
Division 28 Machinery and equipment n.e.c.
Division 29 Motor vehicles, trailers and semi-trailers Division 30 Other transport equipment except ships and boats Division 22 Rubber and plastics products
Division 23 Other non-metallic mineral products Division 24 Basic metals
Division 32 Other manufacturing except medical and dental instruments Division 33 Repair and installation of machinery and equipment Division 10 Food products
Division 11 Beverages Division 12 Tobacco products Division 13 Textiles
Division 14 Wearing apparel
Division 15 Leather and related products
Division 16 Wood and products of wood and cork Division 17 Paper and paper products
Division 18 Printing and reproduction of recorded media Division 19 Coke and refined petroleum products
Division 25 Fabricated metal products except weapons and ammunition Division 31 Furniture
Manufacturing Industries at the 2-Digit Level of ISIC REV 4 by Technological Intensity
DOI:10.6814/THE.NCCU.IMAS.014.2018.A07
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The variable “origin of networks” refers to the “regional identity” of the organization that has the linkage with the firm. The inclusion of the variable origin of the network will help the research to deal with the second research question. In order to operationalize, the three questions that complement the question about linkages will be considered. First, the research will use the question regarding the three most important linkages. Second, it will be taken the information of each linkage that indicates if the network was national or foreign. Third, the list of the countries that were registered for those international relationships will be utilized. Because the most formal participation of Peru with the Asia Pacific is through the Asia-Pacific Economic Cooperation Forum (APEC), this economic membership will be taken as reference in order to define the region (or relevant definition of the region). The rest of economies will be grouped together in a category of non-Asia Pacific region. This last decision is taken as understanding the several numbers of regions that exist but it would be impossible to cover for the size of the sample.
The variable will be a nominal variable and it will include five categories: without relations, relation only with national organizations, relation only with organizations
Technology
Intensity ISIC Description
Division 20 Chemicals and chemical products Division 21 Pharmaceuticals
Division 26 Computer, electronic and optical products Division 27 Electrical equipment
Division 28 Machinery and equipment n.e.c.
Division 29 Motor vehicles, trailers and semi-trailers Division 30 Other transport equipment except ships and boats Division 22 Rubber and plastics products
Division 23 Other non-metallic mineral products Division 24 Basic metals
Division 32 Other manufacturing except medical and dental instruments Division 33 Repair and installation of machinery and equipment Division 10 Food products
Division 11 Beverages Division 12 Tobacco products Division 13 Textiles Division 14 Wearing apparel
Division 15 Leather and related products Division 16 Wood and products of wood and cork Division 17 Paper and paper products
Division 18 Printing and reproduction of recorded media Division 19 Coke and refined petroleum products
Division 25 Fabricated metal products except weapons and ammunition Division 31 Furniture
Division 16 Wood and products of wood and cork Division 17 Paper and paper products
Division 18 Printing and reproduction of recorded media Division 19 Coke and refined petroleum products
Division 25 Fabricated metal products except weapons and ammunition Division 31 Furniture
Manufacturing Industries at the 2-Digit Level of ISIC REV 4 by Technological Intensity
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from the Asia Pacific, relation only with organizations from other regions and relation with organizations from more than one region.
3.3.7. List of variables
In the previous sections, the research defines and operationalizes the variables that will be included in the study. This section shows the name of the variables that will be used in the statistical analysis and modeling.
Our dependent variable in this study is the innovation. The dimensions of innovation were already defined. And the names of variables are shown in the following table:
The independent variables are related with those that have a theoretical impact in the innovation. Their names are as following:
Table N° 04
Table N° 05
Value Categories
1 Without Relation
2 Relation only with national organizations
3 Relation only with organizations from Asia Pacific 4 Relation only with organizations from other regions 5 Relation with organizations from more than one
region.
Origin of Network
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Finally, the study includes some control variables that will help the research to increase its consistency. The name of those variables is defined as follows: