2. Literature Review
2.4. The regional dimension of innovation system and Asia Pacific region
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For example, in Motohashi (2015), this study found a positive impact of university-industry-government collaboration in Japanese firms, especially in small firms rather than large firms. Also, Adretsch and Lehman (2005, p. 1191) found that "firms located around universities are affected by the regional characteristics and by the output of universities". Another interesting study was done by D’Este and Patel (2007).
According to this study, "university researchers interact with industry using a wide variety of channels and they engage frequently in channels such as consultancy, contract research, joint research, or training" (D'Este & Patel, 2007, p. 1295).
2.4. The regional dimension of Innovation System and Asia Pacific Region
An interesting aspect to take into account is the concept of the transnational innovation system. The main idea is based in a modified (but deeper) version of the concept of the national innovation system but the scope of the networks and institutions can surpass the national borders and be considered at the supranational level (Chaminade &
Nielsen, 2011).
Due to the lack of capabilities or facilities of the developing countries, the region becomes important to the transfer of knowledge from an advanced member to a less developed member. This fact does not necessarily mean that there are not national linkages but these linkages are in training (Chaminade & Nielsen, 2011). Thus, for Buckow (2013), much of the innovation in China took place in the absorption of foreign technology and the network with its local firms and regional value chain has become the main source of innovation.
For a better understanding of this framework, Chaminade & Nielsen (2011)insert the
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definition of “region”. The concept of “proximity” in International Relations has two important categories: geographical proximity and relational proximity. The first one refers to the physical distance and it becomes important for accessibility, acceptable time and low cost. This concept was the main pillar of the popular notions with regard to the idea of a region, and it is important for innovation due to the face to face interactions that become important in the transfer of tacit knowledge. The second category refers to the "distance" in the relationship between the organization and institutions. This aspect put more emphasis on the intangible commonalities or networks. Because it is a wide concept, it is usually divided into some other aspects:
Cognitive proximity, Organizational proximity, Social proximity and Institutional proximity. This last aspect is more important in the conceptualization of the bottom up regional integration that is called as regionalization. This integration becomes important to explain the regional creation and evolution that is more related to the linkages between non–states actors. It also relies heavily on the economic trade and cooperation, and its "spatial" scope depends on the strengthening of its networks (Rodriguez, 2014).
In this sense, the networks become an important part of the regions that has this process of integration, increasing the possibility of the proliferation of innovation due to the possible presence of the transnational innovation system.
“This is the case of the Asia-Pacific region, where there is a spontaneous economic interdependence stimulated by the economic exchange between countries that create a dynamic and integrated production structure. Therefore, the APEC rises from a spontaneous regionalization process, an aspect that is reflected in the membership dynamics of the region, that is, to be a member of the APEC; it requires the trade indexes with the countries of the region. It is only this condition that has regulated the
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membership selection and explains the membership of Chile, Mexico, and Peru”
(Rodriguez, 2014, p. 555).
It is in this sense that is possible to argue that Peru’s firms would have linkages with other Asia Pacific organizations. Due to the presence of networks, it is possible to expect the possibility of an innovation system shaped by the presence of the interaction between the organization and institutions of the member economies. However, the presence and participation in a regional innovation system are not guaranteed, it is necessary an integration process which tends to move towards globalization of the world economy. These preconditions are necessary for effective functioning of the elements of a regional system (Vorobeva, Beletskaya, & Kolesnikov, 2016).
2.5. Studies of innovation and economic development of developing countries and Peru
Despite several studies of National System Innovation and the different types of networks that foster innovation in the companies, there are few studies comparing developing countries. According to Intarakumnerd, Chairatana and Tangchitpiboon (2002, p. 1446), "most of the research concentrate on how institutions and systems were built and shaped to produce ‘intensive learning' which facilitated technological catching-up processes in newly industrializing economies in Asia, namely, Korea, Taiwan, and Singapore". However, according to Arocena and Sutz (2000, p. 55), "NSI approach can be useful for studying the specificities of innovation processes and policies in the South, as well, and can draw attention to similarities and differences from those in the North (developed countries). But for that, the NSI approach needs to be complemented by a Southern perspective".
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In this line, Arocena and Sutz (2000) reviews different surveys of some Latin America countries and the researchers found a general characteristic related to these countries.
The first important characteristic is that the spending in R&D is low at the country level not reaching the recommendation of the UNESCO to reach at least the 1% of GDP.
There are few innovative firms that perform R&D activities indoors and the innovation is highly informal, in other words, it has not done in a specific R&D department and it usually is not planned by the firm. Also, the qualified personnel is crucial to innovation in these countries and the lack of these personnel is perceived as the main constraint to innovate. Finally, in terms of networks, it was found that the linkages with universities are low and focused on the relation with national universities. However, one interesting finding was the high level of relations between Mexican innovative enterprises and foreign clients and firms.
However, the low level of networks with universities does not imply that university is not relevant for the innovation of the firms. More micro-level studies in some of these countries indicated the importance of the university and the components of the system in the performance of some industries (including innovation). For example, Tosi, Gaya and Barbosa (2010) made a case study of the sugarcane industry, and found that universities, research centers, research programs, and firms played an important role in the evolution of the sugarcane industry and the innovations related to this sector such as developing new varieties of sugarcane, new process of production and new ways to produce ethanol. In term of the role of the university, the research indicated the importance of Ridesa, a network of federal universities, in the collaboration with the sugarcane firms and the creation of 67 varieties of sugarcane (Tosi, Gaya, & Barboza, 2010). An original way to address the importance of the university in the innovation was made by Giuliani and Rabellotti (2012). In this study, the authors attempted to
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show how the universities can connect the international science with the wine domestic industry of Chile and South Africa. In order to accomplish that attempt, the research focused on the role of the researchers involved in the wine sector and found that Chilean researchers possess more networks and also made more research about the wine sector, so this new knowledge is expected to foster innovation in this industry. Another interesting Latin American study related to the importance of the network in the innovation was developed by Kesidou and Romijn (2008). The research focused on the impact of Local Knowledge Spillover in the Uruguayan firms' innovation through a quantitative analysis using a survey in a Uruguay's software cluster. The study revealed that company spin-offs, informal interactions, and labor mobility were determinants in the innovation performance of the Uruguayan's firms. In the case of Peru, there are few studies about the influence of networks on innovation. One of these researchers was made by Hartmann and Arata (2011). In this paper, the authors analyzed the role of social capital (conceptualized as internal and external ties) in the innovation performance using the example of the smallholder wineries of Chaparra, an agricultural valley in the South of Peru (Hartmann &Arata, 2011). The study reveals two important facts: First, the degree of networks was important for the innovation performance.
Second, that “NGO became the key player in the local information networks”
(Hartmann & Arata, 2011, pp. 18-19). Other interesting work was made by Ortiz (2006). Although the author did not use the word innovation in the formulation of the main theme of its paper, the central idea of the study case used by him is a clear example of the importance of suitable networks and innovation. In this research, the author uses the case of Integrated Pest Management (IPM) in the potato industry to explain the evolution of the Peruvian agricultural knowledge and information system (AKIS), and claims that more efficient inter-institutional interaction within AKIS can promote a
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method of IPM with the goal to create locally-adapted alternatives that contribute to solving new problems. Other important research that captures the importance of the networks on the Peruvian firm’s innovation is made by Mytelka (2010). In this research, the author made a review of the problem and solution around the exportation of mango in the 1980’s and 1990’s by the Peruvian exporters. At that time, around 40% of the total area for fruit crops was affected by the fruit-fly, so United States banned the importation of Peruvian' mango (Mytelka, 2010). In order to solve this problem, the Peruvian government created the National Service of Agricultural Health (SENASA) which had the function of researching, train and diffuse the necessary knowledge to deal with that problem. A close relation with this actor, the producers (Peruvian companies) and the user (United States clients) also led to the creation of a solution and thus the Peruvian mango started to export again to United States (Mytelka, 2010).
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CHAPTER 3
RESEARCH METHODS
3.1. Description of the Method
The analysis would be developed mainly through quantitative methods. In order to deal with the first research question, this research proposes to use a logistic model to evaluate the influence of knowledge networks, customer networks and production networks in the probability to innovate. For the second research question, it is also planned to use a logistic model to determine the relevance of the connections coming from the Asia Pacific region on the probability of innovating. In the next paragraphs, the objective is to describe the database to be used, the variables needed and their operationalization. Finally, it will be formalized from both models using the operationalized variables and it will analyze different variations of those models incorporating other important dependent variables and some important control variables.
3.2. Description of the Data
The National Institute of Statistics and Informatics (INEI) and the Ministry of Production (PRODUCE), gathered information from 1452 manufacturing companies through an ad hoc innovation survey for a field operation period of 45 days.
The survey contains detailed information about innovation activities, human capital, linkages with organizations, the result of innovation, firm performance and other important information in the period 2012 -2014.
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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
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