Documente Academic
Documente Profesional
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Editorial Board:
Tanyanuparb Anantana (Thailand)
Dong Ok Chah (Korea)
Check Teck Foo (Singapore)
Jin Hwan Hong (Korea)
Ching Yao Huang (Taiwan)
Choong Jae Im (Korea)
Rajendra Jagdale (India)
Wen-Jang (Kenny) Jih (U.S.A)
Janekrishna Kanatharana (Thailand)
Tomoyo Kazumi (Japan)
William Walton Kirkley (New Zealand)
Hyeong San Kye (Korea)
In Lee (U.S.A)
Pui Mun Lee (Singapore)
Zhan Li (China)
Gilroy Middleton (Belize)
Karen E. Mishra (U.S.A)
Hadi K Purwadaria (Indonesia)
Saras D. Sarasvathy (U.S.A)
Enrico Plata Supangco (Philippines)
Richard White (New Zealand)
Chang Seob Yeo (U.S.A)
Yuli Zhang (China)
CONTENTS
Preface
Editor in Chief, Bong Jin Cho
5
Australian Innovation Ecosystem: A Critical Review of the National
133
Preface
Bong Jin Cho, Ph. D., Editor in Chief
Innovation is, we may think, more than often made by genius people, such as Edison, an
invention king, Michelangelo, an artistic genius, and Bill Gates and Steve Jobs, computer
prodigies. Professor David Burkus of Oral Roberts University, a strategic leadership expert in
innovation, claims1 that they are instead the figureheads of the strong teams, who have been
meticulously orchestrating the innovative work of their creative teams. The conditions that one
could be called as a genius require an excellent supporting team and excellent system that will
raise that genius, and incredible efforts performed by himself/herself.
For example, Michelangelo who was referred to as an artistic genius had a team with 13
highly talented artists. As well, Edison, who invented electric bulb, had the research team of
Monroe Park, and Steve Jobs also had an excellent a group of R&D team. Without a strong
support team, any of these figureheads could have not had such reputation. Not to say that the
figurehead was genius himself, rather s/he leaded the team in a creative and genius way. How
could Edison invent the electric bulb and many other inventions without his team including
Charles Bachelor and John Adams and many others? Steve Jobs and Bill Gates are known as the
inventors of the graphic computer interface; however, in reality the technology was developed by
the researchers of Xeroxs Palo Alto Research Center (PARC) in 1970. Even before that the early
prototype of this technology had been developed by Burniva Bush, an army engineer in 1945. It is
not common to invent any breakthrough at once by oneself without combination of any existing
technology and devices. In this sense, the figureheads are the leaders of creative and genius teams.
In short, innovation is about a productive combination of existing technology and devices
developed earlier with a genius as the team leader, who creatively operates the efficient system of
combinations with extraordinary hard working group of talented team members.
Invention is like a team sport such as football, rugby, basketball and volleyball as well as a
musical symphony. It is a well-known fact that artistic genius Michelangelo has worked over 20
hours a day only taking bread with some wine. He said that if they have known how hard I have
worked for painting this picture, they will never call me a genius. In the Lee Dynasty, there was
a scholar named Dasan Chung, Yak Yong who wrote more than 500 books in his life. Most of
these books had been written in his place of exile over a period of 18 years. It is believed that 25
Volume 9, No.2, 2015
books have been written in a year or two books per month for 20 years continuously. How could
this many books be written without the help of his fellow students? Of course, he was a great
scholar working hard. This is an efficient system to work forward to achieve a common objective
that the genius leader has adopted. To come up with an innovative idea might take only a
moment, but that moment is the accumulation of incredible works and intensive pursuit of
thoughts about what he/she has been working hard for a very long time.
2015 AABI General Assembly and APJIE International Conference on Innovation and
Entrepreneurship in Creative Economy was held in Korea on October 28 through 29, 2015 in
Daegu, Korea. The 2015 APJIE International Conference is focused on the innovation, Incubation,
Management of Technology and Service Innovation and Marketing in Creative Economy.
The main discussion of the conference is focused on investigating the main contributing
factors of innovation and entrepreneurship in creative economy with the performances affected by
the contributing factors. The APJIE Desk selected five papers, among the submitted 12 papers
from the conference, through a blind peer-review process.
The first paper introduces and reviews Australian innovation ecosystem for the national
innovation support mechanism. The second one focuses on the equipmentintensive public
enterprises innovation performance affected by service activity and cooperation. The third paper
is about the evaluating the performance of disaster recovery systemic innovations by using the
data envelopment analysis. The fourth paper is on the topic of fueling economic prosperity
through incubation system with a case study investigation from an Eastern Indian province. The
last paper covers the effect of innovation activities and governmental support on innovation
performance. The APJIE Desk is most grateful to the authors of these five papers for their
contribution to the journal with their quality submissions. We believe our readers all across the
globe will enjoy reading these papers.
The APJIE Desk also cordially offers our special thanks to AABI (president Yeung-Shik
Kim), KOBIA (president, Hyeong-San Kye), ISBA (president, Rajendra Jagdale) and STIC
(president, Zhen-Hong Zhu, president-elect of AABI) for their financial support for the
publication of the APJIE by the Emerald Publishing House in 2016 through 2018.
Thank you!
Source: An interview with professor David Burkus by the reporter HyeHoon Lee in London. From the excerpt by Dr,
Kwang Lee, professor emeritus, Keimyung University, Daegu Korea.
Abstract
Innovation is understood as the combination of existing ideas or the generation of new
ideas into new processes, products and services, and widely viewed as the main driver of growth
in contemporary economies. In the age of the knowledge economy, successful economic
development is intimately linked to a countrys capacity to generate, acquire, absorb, disseminate,
and apply innovation towards advanced technology products and services. This development
approach is labelled as knowledge-based economic development and highly associated with a
capacity embodied in a countrys national innovation ecosystem. The research reported in this
paper aims to critically review the Australian innovation ecosystem in order to provide a better
understanding on the potential impacts of policy and support mechanisms on the innovation and
knowledge generation capacity. The investigation places Australias innovation system and
national-level innovation support mechanisms under the microscope. The methodology of the
study is twofold. Firstly, it undertakes a critical review of the literature and government policy
documents to better understand the innovation policy and support mechanisms in the country. It,
then, conducts a survey to capture Australian innovation companies perceptions on the role and
effectiveness of the existing innovation incentive programs. The paper concludes with a
discussion on the key insights and findings and potential policy and support directions of the
country to achieve a flourishing knowledge economy.
Visiting Doctoral Researcher, School of Civil Engineering and Built Environment, Queensland University of
Technology, 2 George Street, Brisbane, QLD 4001, Australia, Tel: +61.7.3138.9124, E-mail: jamilesabatini@gmail.com
Corresponding author, Associate Professor, School of Civil Engineering and Built Environment, Queensland University
of Technology, 2 George Street, Brisbane, QLD 4001, Australia, Tel: +61.7.3138.2418, E-mail: tan.yigitcanlar@qut.edu.au
Professor, Engineering and Knowledge Management, Federal University of Santa Catarina Campus Universitrio,
Trindade, CEP 88040-900, Florianpolis, SC, Brazil, Tel: +55.48.3721.2449, E-mail: educostainovacao@gmail.com
1. Introduction
Innovation basically means changing the way we do things (Zhao, 2005; Pancholi et al.,
2015). Australias economy is at significant risk due to its lack of innovation-driven industries.
This includes those sectors related to information and communications technologies (ICT),
sciences, creative industries (e.g., media- and design-based industries) and others that rely on high
levels of knowledge and human capital. It is widely accepted that innovation has a significant
influence upon economic growth (Porter, 1990; Glaeser, 2011; Caragliu & Nijkamp, 2014; Romer,
2014). It is estimated that innovation can boost economic growth by as much as 50% (OECD,
2010). However, Australia currently struggles to capitalise on the innovation opportunity and
heavily relies on knowledge and innovations generated overseas (OECD, 2012). This poor
performance is evident in the recent Global Competitiveness Index, where in the innovation
category Australia only ranks 19th out of 34 OECD countries (WEF, 2014). Compounding the
lack of innovative industries, there is limited industry diversity and an overdependence on
commodity exports in the country. This condition creates a significant risk to Australias mediumand long-term productivity growth and the sustainability of its economy (DoIS, 2013).
Recognising these challenges, the Australian government has recently called for a new agenda for
industry innovation and competitiveness (Commonwealth of Australia, 2014).
Although since the 1990s Australian government has prepared a number of policy
initiatives for seeking to diversify economic activities and improve the use of innovation as a tool
to achieve global competitiveness (Yigitcanlar et al., 2008a, 2008b), the strength in the resourcebased economy held back most of these efforts to establish robust knowledge economy
foundations in the country. Australia, especially during the latest mining and energy boom era
(2005-2013)due to heavy demand on Australian iron, coal, uranium, and gaswas one of the
worlds fastest growing economies. During this boom period, a confluence of events has boosted
world mineral prices and mining investments. This has significantly increased the citizens
purchasing powerraising per capita household disposable income by 13% and real wages by
6%, and decreasing unemployment by 1.25 percentage points. The large volume of export
performance achieved during this period has impacted Australian economy to grow faster
(Downes et al., 2014).
Australia, today, invests and supports science, technology and innovation (STI) modestly.
Consequently the export of new technologies is insignificantonly producing 3% of world
knowledge, and heavily relying on innovations generated overseas (Commonwealth of Australia,
4
2014). However, the end of the mining and energy boom redirected the attention of government to
diversification of the economy and investing on other options to support the innovation ecosystem
in the country. Almost in consensus Australian scholars advocate that the only way to sustainable
growth of the countrys economy is to increase individuals and businesses competitiveness levels
(see Enright & Petty, 2013). This is to say, with policy and support mechanisms well designed
and distributed, such as in Finland (see Satarauta, 2012), Australian entrepreneurs will be able to
enjoy the opportunities created by the global knowledge economy. Otherwise, Australias global
competition in the era of the knowledge economy may be harmed. With this idea in mind, in the
2014-2015 fiscal year the government allocated a budget of about $9.2 billion for supporting STI
education and R&D (for a detailed breakdown see DoIS, 2015). The budget is distributed through
the Commonwealth Governments Department of Industry and Science. This department is also in
charge of the development of the Australian innovation system (AIS), which an open network of
public and private organisations that produce and disseminate knowledge and practices that add
economic, social or environmental value to Australian products and services (DoIS, 2014).
Against this background, the study aims to provide a deeper understanding of the role and
effectiveness of existing policy and support mechanisms on Australias innovation and knowledge
generation capacity. The research scrutinises Australias innovation ecosystem thoroughly by
reviewing the literature and government policy documents, and surveying Australian innovative
companies. The study concentrates on the national scale, and undertaking explorations at the state
and local government level policy and incentive programs are beyond the scope of this research
that is a limitation of the study. The results of the review and analysis generate insights on the
innovation policy and national-level innovation support instruments along with Australian
innovation companies perceptions on the innovation incentive programs. Furthermore, the
findings pinpoint potential policy and support directions of the country to achieve a flourishing
knowledge economy performance.
limitations for the consumption economy and talent base of labour force. However, with
immigration policies, particularly the skilled migration scheme, Federal government targets to
support the required talented workforce and population increase. On the other, a reason for
Australias such a high ranked position was that about 60% of productivity growth in the country
was driven from intangible capital investmentthat is skills development, design and
organisational improvements and spill over effects. However, when compared to the other OECD
member countries, Australians are more likely to invest on machinery and equipment than
investing on intangibles (OECD, 2014). The main reason is that innovation in Australia is
generally practiced as concentrated efforts focusing on consolidating the competitive advantages
of sectors such as mining and agriculture, as opposed to investments on ICT, biotechnology,
nanotechnology and so on (Martinez-Fernandez, 2010). In other words, so far no other industry in
Australia has achieved a greater significance in economic development as much as mining and
agriculture. Particularly mining industries have built a national infrastructure throughout the
country for more than a century and Australias mining boom has produced generations of mining
technology services companies. Despite this innovation focus, one of the strengths of Australia is
the ability to rather quickly transform its innovation governance and legislation systems in order
to be at par with the world trends (OECD, 2015). With such capability at the end of the mining
and energy boom Australia still has the potential to make its transformation into a knowledge
economy.
are: (i) Recognise innovation as a process that can and should be systematically pursued; (ii)
Involve the users and citizens in the design and development of services and policies; (iii) Pursue
open processes that encompass a wide range of experience and expertise; (iv) Generate results
through involvement utilising partnerships and collaboration; (v) Facilitate the creativity inherent
in organisations, and welcome tests, pilots and experiments; (vi) Recognise risk as an inherent
part of innovation; (vii) Promote and celebrate innovation successes; (viii) Acknowledge that not
all innovation will succeed, but we can also learn from failures; (ix) Use procurement to spur the
generation and uptake of innovative solutions, and; (x) Be accountable for delivering and
implementing the plan and successor initiatives (see http://www.industry.gov.au).
The Australian Research Council (ARC): ARC is the main office of the Australian
government for the investment on research and training in all fields of science, including social
and human sciences. It is also responsible for mediating the relation between researcher
communities and the industry, government, non-profit organisations and the international
community. The ARC aims to integrate researchers and the industry. ARC manages the following
programs as major incentive sources to develop knowledge, associated with research scholarships
for the formation of researchers, and with the universities: (i) The Linkage Projects scheme aims
to set up or develop strategic long-term research alliances between higher education institutions
and other organisations, including the industry and users; increases the scope and focus of
researches in National Research Priorities; sponsor opportunities for researchers to develop
internationally competitive researches in cooperation with organisations out of the higher
education sector; and produce a national network of world-class researchers to meet the broadest
demands of the Australian innovation system; (ii) The National Competitive Grants Program
(NCGP) is one of Australias major investment mechanisms for R&D. This program grants
scholarships for basic and applied research, apart from funding research training in all academic
areas except clinical medicine and dentistrythe National Health and Medical Research Council
(NHMRC) looks after this area. (iii) The Excellence in Research for Australia (ERA), in turn, is
the program for evaluating the quality of researches conducted by the higher education institutions
of Australia. The ERA aims to guarantee the excellence of the conducted investigations. This
office publishes, for example, a comparison between the levels of researches carried out in the
country with international standards in each field (see http://www.arc.gov.au).
The Commonwealth Scientific and Industrial Research Organisation (CSIRO): CSIRO
aims to offer innovative solutions to the industry, society and the environment through the
development of cutting-edge science. The organisation employs over 6,500 workers and
researchers, distributed into 57 centres all across Australia, which dedicate to four programs: (i)
Volume 9, No.2, 2015
The national research flagships are multidisciplinary partnerships for large-scale research that use
the international-level expertise to serve the national priorities. The program commenced in 2003
and is one of the biggest efforts Australia has ever put into researching, with a total investment of
over $1.5 billion in the fiscal year of 2010-2011. The main sectors that has received support are:
climate adaptation, minerals down under, energy transformed, preventive health, food futures,
sustainable agriculture; future manufacturing, water for a healthy country, wealth from oceans and
light metals. (ii) The core research and services program comprises a series of research portfolios
that do not match the flagships. In 2010-2011, five CSIRO research groups managed 12 portfolios,
in the fields of energy, environment, food, health, life sciences, information sciences,
manufacturing, materials and minerals. (iii) The science outreach: education and scientific
publishing is a set of science education programs for primary and secondary school students and
teachers, as well as the general public. The maintenance of the CSIRO Discovery Centre in
Canberra is part of this program, and; (iv) National research infrastructure: national facilities and
collections is the CSIRO program responsible for the administration of two kinds of research
infrastructure: national research facilities and national biological collections. Apart from these
infrastructures, CSIRO comprises 30 other research installations, such as the Australian
Resources Research Centre (in Perth) and the High Resolution Plant Phonemics Centre (in
Canberra), and more than 30 collections of national importance, including the national tree seed
collection, the national soil archive and the cape grim air archive (see http://www.csiro.au).
The Chief Scientist for Australia: Apart from a large number of researchers focusing on
various R&D activities, Australia also has an Australian Chief Scientist, who provides high-level
independent counselling to the Prime Minister and other ministers on the issues related to STI.
The person in position, currently Professor Ian Chubb AC, is a defender of Australian science
worldwide and disseminates to the community and government the importance of STI, research
and empirical evidence. The Chief Scientist for Australia is also a spokesman for science to the
public in general, with the aim to promote the understanding, contribution and pleasure of science
as well as evidence-based reasoning (see http://www.chiefscientist.gov.au).
The Australian Taxation Office (ATO): As being the government taxation office ATO is
the main office that regulates the incentive programs related to innovation in the country (ATO,
2015). The incentives go through this taxation office takes place through tax reductionsi.e.,
R&D Tax Incentive Program (see https://www.ato.gov.au).
The Innovation Australia: Innovation Australia is an independent organisation created to
help the Australian government to manage its innovation programs and risky investment plans
8
designed to support industrial innovation through a number of programs: Clean Technology Food
and Foundries Investment Program; Clean Technology Innovation Program; Clean Technology
Investment Program; Climate Ready; Green Car Innovation Fund; Re-Tooling For Climate
Change; Renewable Energy Development Initiative (REDI); R&D Tax Concession (including the
R&D Tax Offset and 175% Premium Incremental Tax Concession); R&D Tax Incentive;
Commercialisation
Australia
Program
(CA);
Commercialising
Emerging
Technologies
The Australian government targets to establish its National Innovation System until 2020,
in which: (i) The country clearly articulates national priorities and aspirations to make the best use
of resources, drive change, and provide benchmarks against, which to measure success; (ii)
Universities and research organisations attract the best minds to conduct world-class research,
fuelling the innovation system with new knowledge and ideas; (iii) Businesses of all sizes and in
all sectors embrace innovation as the pathway to greater competitiveness, supported by
government policies that minimise barriers and maximise opportunities for the commercialisation
of new ideas and new technologies; (iv) Governments and community organisations consciously
seek to improve policy development and service delivery through innovation, and; (v)
Researchers, businesses and governments work collaboratively to secure value from commercial
innovation and to address national and global challenges, and to measure the progress of
Australian
innovation
system
concerning
priorities
and
objectives
(see
http://www.ausinnovation.org/articles/powering-ideas.html).
The R&D Tax Incentives Program: This program the most popular one in the country, is a
broad-based, market-driven program accessible to all industry sectors. It provides a targeted tax
offset to encourage more companies to engage in R&D and help businesses offset some of the
costs of doing R&D. The program aims to help more businesses do R&D and innovate. It is a
broad-based entitlement program. This means that it is open to firms of all sizes in all sectors who
are conducting eligible R&D (see http://www.business.gov.au/grants-and-assistance/innovationrd/RD-TaxIncentive/Program-Information/Pages/default.aspx).
The Entrepreneurs Program: This program is Australian Governments major initiative to
promote business competitiveness and productivity at the firm level. It is part of the Australian
Governments new industry policy provided for in the Industry Innovation and Competitiveness
Agenda. This Agenda is part of the Economic Action Strategy of the Australian Government. It
unites and develops other economic reforms in order to foster Australias strengths and promote
business opportunities (see http://www.business.gov.au/advice-and-support/EIP/Pages/default.aspx).
The Entrepreneurs Infrastructure Program: This program counts on a national network of
over 100-experienced private sector advisers and it offers support to businesses through three
components: (i) Business management, which provides support for business to improve and grow;
(ii) Research connections, which promotes the collaboration of SMEs with the research sector as a
way to develop new ideas with commercial potential, and;(iii) Accelerating commercialisation,
which helps entrepreneurs, researchers, start-ups and businesses face key challenges when trading
new products, processes and services. The program uses quality facilitators and advisers with
expertise in the industry, to ensure that businesses receive all necessary information to better their
competiveness and productivity. It focuses primarily on providing informationrather than
financial assistanceso entrepreneurs can find solutions to their problems. The support offered to
businesses includes advice from experienced people from the private sector, co-funded grants to
trade new products, processes and services, funding to help businesses grow, and connection and
collaboration
opportunities
(see
http://www.australianbusiness.com.au/entrepreneurs-
infrastructure-programme).
The Industry Skills Fund Growth Stream: The $476 million Industry Skills Fund is a key
component in the Industry Innovation and Competitiveness Agenda of the Australian Government
and will provide up to 200,000 training places and support services over the next four years. The
fund prioritises SMEs, including micro businesses, and is delivered through the single business
service, which favours the access to essential information for all Australian businesses. The fund
offers assistance to the industry so it can invest in training and support services, as well as
Volume 9, No.2, 2015
11
develop innovative training solutions. The fund helps forming a highly skilled workforce that can
have access to new opportunities due to business growth, and that can adapt to rapid technological
change (see http://www.business.gov.au/grants-and-assistance/Industry-Skills-Fund/Pages/default.aspx).
Innovation and R&D Program R&D Tax Incentive: It aims to boost competitiveness and
improve productivity across the Australian economy by: (i) Encouraging industry to conduct
R&D that may not otherwise have been conducted; (ii) Providing business with more predictable,
less complex support, and;(iii) Improving the incentive for smaller firms to engage in R&D. The
R&D Tax Incentive replaces the R&D Tax Concession for R&D in income years commencing on
or after 1 July 2011. The R&D Tax Concession continues to be administered for R&D in income
years commencing prior to 1 July 2011.The R&D Tax Incentive provides benefits in two core
components (AusIndustry, 2012). A 45% refundable tax offset (equivalent to a 150% deduction)
for eligible entities with a turnover of less than $20 million per annum, provided they are not
controlled by income tax exempt entities, and; A non-refundable 40% tax offset (equivalent to
133% deduction) for all other eligible entities. Unused non-refundable offset amounts may be able
to be carried forward to future income years (see http://www.business.gov.au/grants-andassistance/innovation-rd/Pages/default.aspx).
In order to give special attention to the technology sector and considering that the tax
benefit is open to all sectors, software is subject to the same eligibility tests as other forms of
R&D, with the exception of certain software activities, which are excluded from being a core
R&D activity. This exclusion covers activities related to the development, modification or
customisation of software where the software is for the dominant purpose of internal
administration by the entity (or connected entities or affiliates) for which it was developed,
modified or customised. Software for internal administration includes management information
systems and enterprise resource planning software that is for use in the day-to-day administration
of a business. The software exclusion does not apply to software developed in-house that is of an
applied nature, forming an integral part of an electrical or mechanical device (such as home
appliances or industrial equipment). In general only R&D activities conducted in Australia or the
external Territories qualify for the R&D Tax Incentive. However in certain circumstances, R&D
activities conducted overseas may also qualify. For example, a company intending to claim a tax
offset for R&D activities conducted overseas must apply to Innovation Australia for a decision
(called a finding) about the eligibility of these overseas activities. Innovation Australia can issue
a finding that
http://www.business.gov.au/grants-and-assistance/innovation-rd/RD-TaxIncentive/Pages/default.aspx).
12
The government also provides financial support for private firms to conduct innovation
projects. Nevertheless, there is less evidence that such investmentabout $1 billion every year
is justified by the extra innovation it helps produce. The largest government support for private
sector innovation is the R&D Tax Credit. The largest 3% of innovative firms take in 60% of the
creditover $1 billion per year. Nonetheless, there is little evidence that this tax credit
substantially increases the amount of actual R&D activity in large firms. By contrast, there is
good evidence that improving the framework conditions for innovation, particularly by reducing
the corporate tax rate, would have a significant impact on innovation in the long run. A lower
corporate tax rate encourages foreign direct investment (FDI), which in turn increases innovative
activity and encourages the diffusion of ideas from other countries. Australia would probably see
more innovationand increase living standards accordinglyif the R&D Tax Credit for large
firms and much of the direct support for private firm innovation were redirected into funding a
reduction in the corporate tax rate of up to 1.5%.Whereas governments should support innovation,
they should ensure public money is invested where it makes the biggest difference (see
http://www.business.gov.au/grants-and-assistance/innovation-rd/RD-TaxIncentive/Pages/default.aspx).
13
associations to disseminate its programs and plans. The general understanding of the government
officials is that governments website is a good enough source of information. They seem to
believe that it is the businessmens duty to find out about programs and support to which they are
entitled.
Q2. Are you aware that there are refundable, non-refundable and subsidised resources
that your business can use for innovation and R&D? Out of 75, 74 firms responded this question.
Amongst them 47 claimed to know about the available resources, whereas 27 declared not
knowing about the incentive lines (see [Table 2]). The number of firms (63.51%) that know about
the availability of Federal incentive programs to innovation is relevant, considering that Australia
makes little use of trade associations and barely conducts presentations to firms on this topic. The
survey findings show that, although the number is relevant when compared to the little effort put
on promotion, the government must focus on spreading the word about its sources of incentive
and public policies.
14
Q3. Has your company ever used these types of resources for innovation and R&D? In
total 68 firms answered this question, and the alternatives listed Federal programs of incentive to
innovation (see [Table 3]). It was also possible to check the answer other with an option to
specify the program the entrepreneur had used. More than half of the firms that answered the
questionnaire (54.41%) do not use the incentive sources, including tax incentives, which is a
flagship of the Australian government program. R&D Taxes Incentives is the main program, used
by 35.29%; the program is considered simple and not very bureaucratic by government officials
for it can be applied for online. The EntrepreneursInfrastructure Program comes in third, used by
4.41%. This is a four-pillar line that contributes to the commercialisation of generated
goods/services. Lines such as the Linkage Projects Scheme (LPS), The National Competitive
Grants Program (NCGP), which are university-related programs, reached a very low rate of
response, 2.94% each. The Industry Skill Fund program did not produce any answer (0%). The
reason for no one choosing this program in this question is given by the Australian government
itself: since the name of the program was changed by the new administration, entrepreneurs did
not recognise it when it was renamed (formerly known as National Workforce Development
Program).This question gave respondents the choice to include other incentive lines in the field
other/specify. Nine answers came up: Export Market Development Grants/Austrade (EMDG),
Accelerating Commercialisation, and Commercialisation Australia Early Stage Grants, state
programs such as the Canberra Innovation Network, Commercial Ready and Climate Ready.
These programs were not originally listed as alternatives in this question since they are not
Federal programs with focus on innovation.
15
Q4. If you have tried but have not been successful, please indicate the reasons. Although
Australia is not a very bureaucratic countryranked 11th less bureaucratic country in the world
entrepreneurs believe that government programs are bureaucratic. The alternative complex
application process/bureaucracy was checked by 47.06% of the respondents. 34 firms answered
this question (see [Table 4]).Two other answers to this question are worth mentioning, each one
highlighted by 23.53% of the respondents: the lack of personnel to prepare the application and the
high cost in application preparation. The cost of labour in Australia is very high and the incentive
program is not attractive since Australians believe the process is highly bureaucratic. The lack of
information about the programs and the lack of guarantees were highlighted by 17.65% of the
respondents. The reasons presented in the others, with 35.29% are: (i) Registered Research
Agency went into administration, and ATO penalised my application; (ii) Each successive
program gets smaller and smaller and the return on investment is such I cannot be bothered
anymore; (iii) Have not tried; (iv) No time to apply as being a small start-up company; (v) Not
tried; (vi) Commercialisation Australia need for funding criteria is hard to meet; (vii)
Requirements on matching funding are impossible to meet. You have to show you have
matching funds but why the funders of matching funds cannot meet the whole cost. You cannot
use future sales for matching funds; (iix) Unaware of what options were available and how to
prepare a successful submission; (ix) 9 of them not applied for; (x) Not know, and;(xxi) I have not
tried.
16
Q5. For what purpose is your firm interested in this type of resource? This question is
useful to guide legislators that design public policies, since it shows the actual current needs of
the firms. This question was attended by 67 of the surveyed firms (see [Table 5]).Support for
R&D tops the list of needs (with 62.69%); Marketing, Sales and Fairs activities come in second
that demonstrates the importance of support to the commercialisation of goods. This information
reinforces innovative firms high dependency on human capital and know-how. These firms differ
from the traditional industry, whose capital is guaranteed by machinery and equipment. Therefore,
in the innovation and technology sector, talented labour is specialised and highly costly.
Incentives to the R&D of products and services are important in order to guarantee the continuous
process of innovation in the firm, very often anticipating the needs of the market. Of all
respondents, 46.27% highlighted the incentive to commercialisation. Internationalisation comes in
third (with 32.84%). This is an interesting fact that this alternative completes the top two
demandssince Australia is a vast country with little population, internationalisation is an
important aspect for sending products and services out to foreign markets. Australia has no
dedicated development bank (such in the case of many developing nations), so businessmen turn
to investment funds for financial resources. Inflation rates are low in the country and traditional
banks operate at low interest rates. Working capital comes in fourth in the survey; it was selected
Volume 9, No.2, 2015
17
by 29.85% of the respondents. The reasons presented in the others, with 4,48% are: (i) Innovation
and entrepreneurshipno one calls it 'R&D' in start-ups; (ii) Developing intellectual property in
emerging areas such as cloud technologies, and;(iii) Engaging young innovators and students.
Q6. Please indicate on which incentive programs you would be interested in applying in
future. This is another answer that can guide the Federal government and contributes to designing
policies, since it demonstrates the firms expectations towards the incentive lines they intend to
use in the future. In total 62 firms answered this question (see [Table 6]). R&D Tax Incentive is
still the governments master program, according to the results of question 3. Answered by
54.84% of the respondents, Entrepreneurs Program comes in second, although this program was
selected by 4.41% in question 3. This shows that it is little used at the moment but entrepreneurs
are interested in knowing it better. Private Funds comes next, selected by 30.65%, which shows
that it is possible to integrate investment funds and firms through trade associations, by organising
Seed and Venture Forums. As mentioned earlier, in question 3 the program focused on Skills
Funds was not used widely (0% of responses) because the program name was changed by the new
administration. However, since 25.81% of the firm owners highlighted this answer, it
demonstrates an interest in using it in the near future. The same occurs with the Australian
Research Councils programs that reached a 25.81% rate of interest and demand by firm owners.
18
Nevertheless, these days it is used by only 1.47%.A reasonable number of entrepreneurs (12.9%)
did not show interest in having access to incentive lines. It can be noticed that the firm owners or
managers have not been seriously considered the benefit of incentive, through programs such as
the R&D Tax Incentive. The main reason for this is that them not being able to spare time from
their business and clients to allocate time for an application preparation. The open-ended feedback
section of the question, other/specify, originated 12.9% of suggestions of state programs,
commercialisation and exportation, as well as feelings about the programs and disbelief in the
government: comments were, as written by respondents: (i) Accelerating Commercialisation,
QLD State Grants; (ii) Would not bother unless totally reformed to take into account available
resources of start-ups; (iii) The Entrepreneurs Program is hopeless and full of all the wrong
organisations; I am not the person responsible for this within the company, so I am not able to
speculate; (iv) I would love this information to be disseminated properly; (v) Commercialisation
Australia; (vi) Too much bureaucracy and therefore a waste of time. Also, I do not trust the
government to choose whom to give the grant to. Would only be interested in automatic selfselection grants; (vii) EMDG, and; (iix) Do not know enough about them to decide.
19
priorities. Most of the Australian universities have no real incubators; as they are seen as white
elephanta business or investment that is unprofitable and is likely to remain unprofitable
(Roberts, 1996).Universities, with financial support from government, and collaboration with
industry and businesses, should play a more active role in developing knowledge and innovation
spacessuch as incubators, accelerators, and knowledge precinctsfor innovation in the country
to take off. This is to say, the way of conducting research at the universities has to change and
evolve into collaborative activities with government, industry and communityi.e., quadruple
helix model research partnership (Alfonso et al., 2012). Currently available incentive programs
are not aligned well with the universities, communities and companies needs. The required
mechanisms are not in place for university professors and researchers to engage and work closely
with businesses for new product, process or service development; rather the system motivates and
awards scholars for their academic writings. Creatively employing funding to universities in order
to support innovation is needed (see Millard & Hargreaves, 2015).Investigation of Finnish model
innovation collaboration would create some pathways for Australia (see Uotila et al., 2012).
Thirdly, Czarnitzki and Lopes-Bentos (2014) research on the effectiveness of innovation
support in Germany finds that innovation subsidies increase innovation intensity and performance.
However, in order to apply and receive the funding entrepreneurs need to know about available
schemes. This can be challenging at times. For instance, it is common in Australia that with every
new administration in office many of the departments are restructured. This restructuring also
applies to the innovation support schemes. These rather frequent changes leave entrepreneurs with
confusion and not much knowledge about the new innovation incentive programs. For those who
are keen to apply, the application process causes spending longer time in search of to find the new
schemes and their eligibility to apply. The outcome of these frequent changes is entrepreneurs
lack of knowledge on the innovation support programs; and, therefore, lesser applications to the
programsfor instance the Industry Skills Program.
Fourthly, today, the way firms are chosen to receive support is not transparent to
entrepreneurs. Some are chosen to growi.e., pick winnerswhere this model is considered as
political and to a degree biased. There needs to be more transparency at the selection criteria and
how the applications are evaluated against these criteria. Australia loses its talent and innovative
entrepreneurs to other regions of the world, such as South East Asia, Europe and North America,
where they can find more lucrative and more transparent innovation support programs. Unlike
Australia, some other governments share the risk of investment with the firm owners.
Fifthly, it can be said that the major reason of innovation failure in the country is the lack
of innovation culture and a healthy ecosystem. Australias tolerance for business risk of failure is
Volume 9, No.2, 2015
21
very low, and this is reflected in the fact that there is a general reluctance of talented scientists and
researchers to make a move from the tertiary education sector to private R&D sector organisations.
For instance to support the innovation culture and knowledge-based economic development in the
country, Australia can develop new programs to attract bright minds to become entrepreneurs
similar to those in Canada and ChileQuebec First (http://www.quebecfirst.com/en/) and Start
up Chile (http://www.startupchile.org), respectivelysince attracting and retaining talented
people is directly associated with the raise in job creation and economic growth.
Sixthly, the lack or limited support to innovation in many countries, including Australia,
has led entrepreneurs to investigate new ways to support their marketable ideas. Crowdsourcing is
a new method to fill the void of funding need to innovate, especially for open innovationduring
the last few years open innovation has gained increasing attention as a potential paradigm for
improving innovation performance (see Marjanovic et al., 2012; Chebulski, 2013). This new
funding mechanisms can also be supported by Federal policies and incentives as part of the efforts
in forming a prosperous innovation ecosystem in Australia.
Seventhly, even though the importance of innovation to generate competitiveness is
acknowledged, the government confesses that currently Australias support to innovation is still
poor (see DoIS, 2014). Therefore, in addition to abovementioned insights, we conclude the paper
with some strategic suggestions for the country to advance its innovation ecosystem, and moving
economic focus from resource-based economy to knowledge economy:
Australia must develop or adopt a more informed and systematic approach for building
innovation and creativity in the country (Baum et al., 2009). This is to say; Australian
innovation system needs to be design to work more effectively, if the country really
desires to maintain the standard of living achieved during the recent resources boom
period.
Australia needs to further invest on its talent base and endogenous assets (see Lonnqvist
et al., 2014; Yigitcanlar, 2014),and work more focused to maintain its global economic
position in a world of rapidly emerging economies and tough competition. Australia can
learn from the other countries, such as the US, Germany, Singapore, and Finland
(Yigitcanlar, 2009; Yigitcanlar &Lonnqvist, 2013; Yigitcanlar et al., 2015), that are
taking risks with their entrepreneurs to further advance their innovative edges.
In order to improve the effectiveness of the Australian innovation ecosystem, the gap
between scientific research and market needs to be mapped carefully. That is getting the
right high value added products out of the brains and laboratories and placing into the
global market place. This requires further human and intellectual capitals investments in
22
the forms of financial and infrastructural support for higher education, R&D institutes,
and innovation companies particularly in the fields of STI. Rather than recently
introduced budget cuts to these critical sectors by the Federal government (Daley et al.,
2013), further support is crucially needed to establish a global competitive innovation
edge.
Lastly, the new Prime Minister Malcolm Turnbulls National Innovation and Science
Agenda is a welcome initiative, bringing hope to Australian entrepreneurs, researchers and
innovators in general. After a few years of lacking direction in this space, we might begin to see
the light at the end of the tunnel. Although, it is too early to comprehensively assess the impact
the new agenda will have on the Australian economy, one thing is certain that this initiative gives
hope that Australian economy will again accelerate and catch up with most developed digital
economies in the world (CiDE, 2015).
23
Acknowledgements
The authors wish to acknowledge the financial and/or in-kind contributions of Queensland
University of Technology, Federal University of Santa Catarina, and Ministry of Education of
Brazil (CAPES-PDSE: 99999.004527/2014-03)in jointly supporting the research project.
Biographical notes
Jamile Sabatini Marques is a Visiting Doctoral Researcher at the School of Civil
Engineering and Built Environment, Queensland University of Technology, Brisbane, Australia,
and a PhD Researcher at the Federal University of Santa Catarina, Florianopolis, Brazil. Her
research focuses on government innovation incentive systems for technology company growth.
Tan Yigitcanlar is an Associate Professor at the School of Civil Engineering and Built
Environment, Queensland University of Technology, Brisbane, Australia. The main foci of his
research are clusters around three interrelated themes: Knowledge-based urban development;
Sustainable urban development, and; Smart urban technologies and infrastructures.
Eduardo Moreira da Costa is a Professor at the Graduate Program on Knowledge
Management at the Federal University of Santa Catarina Florianopolis, Brazil, and founder of the
Pi-Academy, a private company that promotes innovation for large corporations. His main
research area focuses on the development of more humane, smart and sustainable cities.
24
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28
Abstract
This paper presents empirical performance improvements found as the result of the service
innovation activities in Seoul Metropolitan Rapid Transit (SMRT), which is considered as an
equipment-intensive pubic enterprise (EIPE hereunder). It also presents implications that may
be utilized in the fields of service innovation for public enterprises from the viewpoint of
Management of Technology. In trying to increase the effect of service innovations in SMRT, the
researchers assume that the same kind of efforts may be applied to many areas of Koreas
economy as a part of the recent campaign of creative economy driven by the government.
Important implications found in this study as following: First, it is necessary to build at least two
platforms for service innovation: to share technologies and to facilitate in-house communications.
Second, it is necessary to implement value-driven idea-sharing as corporate culture. Third, it is
necessary to support big data facility for service innovation as corporate policy.
29
1. Introduction
Due to economic growth, urbanization, and population increase, the social infrastructures
of the Republic of Korea have been increased rapidly. However, the government has not been able
to match up to the level of the expectations in response to ever increasing the demands because of
low budget, the lack of service standards, and continuously aging facilities. Demands for effective,
efficient, and economical facility managements and investments have been increasing. The social
infrastructure facilities are generally managed by Equipment-Intensive Public Enterprises (EIPEs
hereunder). Naturally, EIPEs have been playing prominent roles in the economy. According to
Sung, T. K. (2006), the technology innovation competence of enterprises is important not only for
their survival and business development, but also for their financial growth. He also pointed out
that the studies about service innovation are not sufficient enough to reflect the up-to-date
situation created by the rapid expansion of Koreas economy. He postulated that the reason is that
systemized databases for service innovation efforts, particularly for its service industry have never
been created and utilized.
In attempts to build such databases, Science and Technology Policy Institute, STEPI
(2010) ran a survey about the status of the overall innovation activities in manufacturing and
service industries in Korea and collected data sets hoping to help national policy-making and
research efforts for innovations. The survey was aimed to provide data sets for the purpose of
statistical analyses.
In such a background, the researchers in this study undertook an empirical analysis of the
service innovation performances and the improvements in Seoul Metropolitan Rapid Transit
(SMRT), an EIPE, which manages and operates some railroad infrastructure facilities in the
Republic of Korea. The researchers in the study gave questionnaires to the employees of SMRT,
and ran a peer evaluation survey for the service innovation activities performed by the internal
departments of the enterprise. They also ran a peer evaluation survey for the innovative
cooperation with external collaborating partners. Based on the data obtained from the surveys,
they analyzed the service innovation performances of SMRT as an example of EIPEs in Korea so
that the implications learned may be applied to others.
31
32
The previous studies about the service innovation appear in various fields. Philippe Aghion,
et al. (2009) wrote, in their paper The Study on the Entry Effects on Existing Innovation and
Productivity, that entry effects were a long-term concern, and had been widely recognized as a
major driving force of economic growth. And the entry can cause the re-allocation of entries and
exits. And it can become a starting point to trigger the diffusion of knowledge. Also it affects the
innovation incentives of the existing companies.
David H. Henard, et al. (2010) said, in The Study on Reputation for Product Innovation:
Impact on Consumers that companies also compete to win the prestige of the relevant
configuration group, just as they fight each other to win customers. In Korea, Yu, P. J. et al.
(2011) studied the service innovation of Incheon International Airport Corporation, a public
enterprise. While it was on the public enterprise, the study is on the same subject as ours: it
focused on service innovation to overcome the service inseparability of consumption and
production and attempted to draw consumer engagement in the service production. In fact, SMRT
has been pursuing service diversification to maximize customer satisfaction by replacing out
dated legacy services with something new having the inseparability into the consideration.
33
In Leem, T. J. et al. (2012), they classified performance measurement systems (PMS) into
the diagnostic utilization and interaction utilization. They also classified innovation types into
the exploring innovation and practical innovation. As for organizational performance, they
analyzed the relationships among the PMS utilization, innovation types and organizational
performance, and then classified them into financial and non-financial performance.
According to the research of Choi, B et al. (2006), the services of a company become
competitive after service innovation activities that improve its customer satisfaction. Also, Yu, P.
J et al. (2011) found, although results obtained in many previous studies may look different in
some degree, they could be integrated into five (5) types that brought the improvement of
customer satisfaction. To verify H1, the researchers defined the following dependent variables:
34
service quality improvement (SQI) and cost saving or revenue increases (SCR). From the H1,
one may draw a proposition that the performance level of service innovation activity will affect its
quality improvement (SQI) and cost saving or revenue increases (SCR).
As for the remark, the variable, cost saving or revenue increase (SCR), includes the
concepts of cost saving and revenue increase combined together throughout this paper because
the results may be measured only in the form of profit increase.
From the H2, one may draw propositions that the degree of cooperation with the
innovation partner(s) will have an impact on service quality improvement (SQI) in regard with the
service innovation performance. Also, as for the innovation performance of a public enterprise, it
will bring its cost saving or revenue increase (SCR).
35
36
4. Empirical Analysis
4.1 Data Collection and Analysis Methodology
4.1.1 Data Collection
This study surveyed the employees of SMRT. The survey respondents were categorized
into five groups: office staffs, locomotive engineers, rolling stock engineers, technical engineers,
and building maintenance engineers. A set of survey questionnaire was sent via E-mail or in
person to every employee. The ones responded were 271 of 6,463 total employees.
37
Gender
Department
Population
Population
male
243
89.7
high school
19
7.0
female
28
10.3
office
48
17.7
junior college
68
25.1
university
177
locomotive
65.3
1.5
master
rolling stock
2.6
14
5.2
ph.Dr.
yes
140
51.7
205
75.6
no
131
48.3
less 10yrs
49
18.1
over 10yrs
222
81.9
yes
243
89.7
22
8.1
no
28
10.3
45
16.6
general
133
49.1
shift
129
47.6
Modified-daywork
3.3
142
52.4
48hr(shift)
129
47.6
technical
Job Grade
73
26.9
83
30.6
41
15.1
Age
(%)
Variables
Distributions
Contents
& building
Years of
Work
Distributions
Contents
Education
Level
Head Office
Experience
Official
Certificate
Working
Type
40hr
Work Hours
per Week
general/modified
(%)
2.6
Union
yes
228
84.1
2130
1.5
Affiliation
no
43
15.9
3140
70
25.8
minmean
74
27.3
4150
167
61.6
5158
30
11.1
Job
Satisfaction
mean(69.8)
meanmax
197
72.7
38
Innovation
Activity
Innovation
Cooperation
SQI
SCR
.73*
ACS
.57
.48*
ASD
.62*
.54*
.74*
ARE
.60*
.55*
.60*
.71*
AAE
.65*
.62
.60
.55
.62
1
1
.58
.63
.49
.53
.63
.73*
ICC
.58*
.55*
.45*
.46*
.48*
.53*
.53*
ICO
.52*
.54*
.41*
.43*
.49*
.48*
.50*
.74*
ICP
.51*
.53*
.39*
.49*
.54*
.52*
.59*
.63*
.67*
ICU
.79*
ICG
.47
.48
ABE
.51
.53
.32
.36
.41
.42
.47
.46
.49
.46
.59
.58
.63
.62
.71
.68
.77
1
.85*
39
Cooperation
With Partners
or revenue increase
(SCR)
Coef.
0.084
1.28
0.007
0.10
0.210
2.75
0.164
1.96
0.080
1.12
0.044
0.56
0.148**
2.31
0.111
1.59
0.109*
1.71
0.230***
3.28
0.212***
3.40
0.084
1.23
0.054
0.79
0.169**
2.24
-0.010
-0.15
-0.004
-0.05
-0.052
-0.64
-0.052
-0.58
0.051
0.71
0.093
1.16
0.209
1.34
0.116
0.68
0.246*
1.87
0.031
0.22
0.058
0.30
-0.023
-0.11
0.019
0.19
0.084
0.79
-0.108
-0.84
-0.081
-0.58
-0.058
-0.53
-0.055
-1.31
46
0.226
0.78
-0.662**
-2.09
79
0.064
0.31
-0.170
-0.75
Innovation
Institute
General
Characteristics
Coef.
***
Service quality
improvement
(SQI)
cooperation
with
University,
Higher
GC8: Age
VIF
less than 50
0.064
0.46
-0.038
-0.25
more than 51
-0.009
-0.04
0.520**
2.23
maximum value
4.98
4.98
Minimum
1.30
1.30
Mean
2.92
2.92
0.574
0.544
Adj-R2
0.540
0.508
F-value
16.82
14.92
Number of Observation
271
271
Remarks: 1) *p<.1, **p<.05, ***p<.01, 2) omitted variables: Job grade (13), Age(less than 40)
40
The result of the service innovation performance is shown in, <Table 4-3>. It shows the
explanation-power of SQI, service innovation performance, is at 0.574. And the marginal effects
show significant values for service innovation activities, ASD (0.210), AAE (0.148), and ABE
(0.109). Also the innovation cooperation (ICC), with the service partners shows a significant
value at 0.212.
As for the general characteristics among the departments, the office sector is shown to be
significant (0.246) for service innovation performance compared to other non-office sectors
which include the locomotive, the rolling stock, the technical, and the building maintenance. With
the exception of the office sector, other general characteristics are not shown to be significant.
The explanation-power of SCR, the other service innovation performance was at 0.544. The
marginal effects show significant values for service innovation activities that are ASD (0.164) and
ABE (0.230). The innovation cooperation with the service partners is shown to be significant,
ICO (0.169).
As for the general characteristics of the organization, the job grade is shown to be
significant from the 4-6 group (-0.662) compared to the 1-3 group. And the age was shown to be
significant from the group of the more than 51 compared to the less than 40. However, other
general characteristics were not shown to be significant. As for the activity for the service
innovation of SMRT, the analysis result above indicates that the service quality improvement and
the service cost saving (or revenue increase) are found to be significant.
The researchers concluded that, SMRT needs to identify customer needs, and put
significant efforts to improve innovation performance. Also, in search of cooperation with the
external organization, the cooperation shows positive significance in the service innovation
performance only when the cooperation is done with service partners or competitors within the
same industry. Philippe Aghion, et al. (2009) stated that entry could lead the trigger of the
diffusion of knowledge in the paper, The Effects of Entry on Incumbent Innovation and
Productivity.
In this study, SMRT got the performance improvement for the service innovation from
cooperation with the external organization. Although somewhat limited, since the innovation
cooperation is confirmed to play a role as a trigger for the diffusion of knowledge, SMRT needs
not only to promote the internal innovation competency, but also n to encourage external
innovation competency. Considering the general characteristics of SMRT to service innovation
41
performance, the effect was shown to be significant only limited to department (office sector),
grade (4-6), and age (more than 51).
The researchers confirmed that other non-office sectors compared to office sector for the
innovation performance, age less than 40 compare to the ones more than 51 for service innovation
performance are small. From the findings, the researchers concluded that innovation performance
promotion plan may be necessary. For the innovation performance, negative effect of -0.662 for
cost saving (or revenue increase) was found in the Grade (4-6). The distribution ratio of the
Grade (4-6) was found at 74.1%.
Although the distribution ratio of the Age(less than 50) was found at 88.9%, it didn't affect
the service innovation performance. The researchers believe that SMRT must give efforts to find
ways to improve its service innovation performance.
Result
Adopted
variables
H1. Service innovation activity in a public enterprise will affect to improve its service performance.
H1-1
partial
ASD, AAE,
ABE
H1-2
partial
ASD, ABE
The hypothesis H1 was partially confirmed. The H1 was to verify how the internal
innovation competency of SMRT effects on each innovation performance. Furthermore, the
internal competency of SMRT effects on the innovation activity for each innovation.
The researchers in this study found the strengths and the weaknesses in the utilization
level of the internal innovation competency of SMRT. Also, the implications for developing the
internal innovation competency in the financial and non-financial side is found and offered.
42
Result
Adopted
variables
H2. Cooperation with innovation partner(s) in a public enterprise will affect to improve their
service performance.
H2-1
partial
ICC
H2-2
partial
ICO
adopting external innovation competency appear both in the financial and non-financial
innovation performance. As for the innovation of organizations, Henry Chesbrough (2010) stated
that successful leadership overcomes the obstacles of organizational change.
Victoria Joy G. Staplan (2007) studied a comparative analysis to build a model to
understand the factors that affect the job-related knowledge sharing in Knowledge Management
Systems. The research compared TAM (Technology Acceptance Model), TRA (Theory of
Reasoned Action), and TPB (Theory of Planned Behavior).
Result
Adopted
variables
H3. The general characteristics of SMRT will have an impact on the service innovation of public
enterprise.
H3-1. The general characteristics of SMRT will have an impact on the
service quality improvement.
partial
GC2
partial
GC7, GC8
43
5. Conclusion
5.1 Summary and Implications
5.1.1 Summary
In this study, the researchers categorize SMRT as an EIPE that is consisted of the groups
of locomotives engineers, rolling stock engineers, technical engineers, and building maintenance
engineers. The results of the empirical analysis were summarized to help to improve the
innovation performance of SMRT.
Concerning Hypotheses 1, service innovation performance may be classified into
financial and non-financial, according to the emerging types of internal innovation competency.
The results found are as following:
- Financial: ASD (Activity for the service diversity, 0.164), and ABE (Activity for buying
the external mechanical equipment & capital goods, 0.230) show significant effects on SCR
(service cost saving or revenue increase)
- Non-Financial: ASD (Activity for the service diversity, 0.210), AAE (Activity for
adopting the external knowledge & technology, 0.148), and ABE (Activity for buying the external
mechanical equipment & capital goods, 0.109) show significant effects on SQI (Service quality
improvement).
From this study to enhance the innovation performance through SMRT's innovation
activity, the researchers found that two things must be considered.
1)
the rolling stock, the technical engineering, and the building maintenance.
2) After the establishment of social infrastructure, it tends to be non-replaceable
complementary goods.
Therefore, as the primary party of operation for the social infrastructure, SMRT has the
characteristics of equipment-intensive public organization with non-replaceable complementary
goods. The pursuit of value-oriented shared value (VOSV, hereafter) as its enterprise culture
has to be recognized to maximize the development of SMRT.
44
Concerning Hypothesis 3, this study analyzed the general characteristics of SMRT which
affect the service innovation performance of public enterprise, and tried to propose SMRT's
direction from the results. In analyzing the service innovation performance, it was classified into
financial and non-financial. As for the financial service innovation performance, service
innovation had significant impacts to Job Grade (4~6, -0.662) and Age (more than 51, 0.520)
against SCR (Service cost reduction or revenue increase). As for the non-financial service
innovation performance, service innovation showed more significant impact from Department
(Office sector, 0.246) than the other, against SQI (Service quality improvement). As for the result,
innovation in non-Office sectors of SMRT needs to be preceded to improve the service quality as
the non-financial service innovation performance.
5.1.2 Implications
The focus of this study is on improving the service innovation performance of public
enterprise, an EIPE. The implications learned can be summarized as following:
First, this study suggests the needs for building a system for technology creation,
acquisition, and utilization for wealth creation. For wealth creation that occurred from 'the
competency of each organization' or 'the competitive advantage'.
(Technology Sharing System)' to maximize the service innovation performance. The TSS is to
increase service competitiveness and also to enhance internal service innovation competency.
45
Second, in the case of jointly developing the innovation with external organizations, the
researchers found that, to maximize the innovation performance, Communication System (CS) is
important to enhance the cooperation with innovation partners.
Third, big data for service innovation including periodic information is necessary by
policy support. It is for evaluating the effectiveness of a system to enhance the service innovation
performance. The adducible policy implication of the study is the need of a big data processing
system. The purpose of the system is to improve the service innovation performance for
maximizing 'the business performance' and 'the development of EIPE'.
The numbers such as SQI, SCR and so on in parentheses are denotations to be used in tables later in the paper.
47
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49
50
Abstract
Over the past decades, evolutions in disaster recovery (DR) technologies have proven to be
typical systemic innovations. Such innovations consist of various interrelated changes in information
technology (IT), telecommunications, Internet service provider management, backup server product
design, and so on. As data is regarded as a strategic corporate asset that must be protected, selecting a
reliable innovative IT DR system has become high priority for many organizations. Such decisionmaking problems usually face the challenges of seeking the most efficient DR system(s) to fulfill
requirements of specific tasks or projects. Typical examples include the backup of big data, the
recovery of operations in the case of emergencies being caused by natural or man-made disasters,
cyber-attacks, etc. Therefore, how to evaluate and select an appropriate innovative IT DR system is
critical for modern organizations. However, no existing studies have evaluated the performance of
systemic innovation, in general, and IT DR systemic innovations especially. Thus, this paper aims to
propose an analytic framework to evaluate the performance of IT DR systems. Given that IT DR system
performance evaluation problems are indistinct and involve various considerations, this paper
introduces data envelopment analysis (DEA) methods with derivations of the efficiency achievement
measure (EAM). An empirical study on evaluating three DR systems belonging to a Taiwanese
research institute will be used to demonstrate the feasibility of the analytic framework. This framework
can serve as an appropriate method for evaluating the performance of DR system efficiency and then
develop strategic plans for enhancing their performance.
Key words: Disaster Recovery (DR); Information Technology; Performance Evaluation; Data
Envelopment Analysis (DEA).
Doctoral Candidate, Institute of Management of Technology, National Chiao-Tung University, Taiwan; Principle
Engineer, National Center for High-Performance Computing, Taiwan. E-mail: joy.yang@nchc.org.tw
Professor, Institute of Industrial Economics, Jinan University, China; Institute of Management of Technology, National
Chiao-Tung University, Taiwan. E-mail: Benjamin@faculty.nctu.edu.tw
Corresponding author; Professor, Department of Industrial Education, National Taiwan Normal University, Taiwan. Email: georgeh168@gmail.com
51
1. Introduction
Over the past few years, there has been growing interest in system (or systemic)
innovations (Mulgan & Leadbeater, 2013), which are defined as large-scale transformations in the
way societal functions such as transportation, communication, housing, and feeding are fulfilled
(Geels, 2004). Such innovations are not matters of solving isolated problems but of overhauling
the entire system (de Bruijn, van der Voort, Dicke, De Jong, & Veeneman, 2004). Systemic
innovations by nature require interrelated changes in product design, supplier management,
information technology (IT), and so on (Teece, 2003). Many heterogeneous elements change
during a systemic innovation; such innovation is a coevolutionary process. Thus, these changes
involve technical innovations and innovations on the user side (Geels, 2005). In general, systemic
innovations can take place at different aggregation levels, but they always share the following
aspects: they are comprehensive, with a long-time horizon, requiring the efforts of many
stakeholders, and a change of perspective and a cultural shift among these stakeholders (de Bruijn
et al., 2004). The distinction between systemic innovations and autonomous innovation applies to
not just the manufacturer but also services (Chen, Wen, & Yang, 2014; Vesa, 2005).
Systemic innovations are embedded in certain institutions, structures, and values that will
have to change as well (de Bruijn et al., 2004). The idea behind systemic innovation is that regular
change will not suffice to solve them (de Bruijn et al., 2004). Chesbrough and Teece (1996)
initiated discussions on systemic innovations versus autonomous innovations, in terms of the
choice of innovation governance of internalization versus outsourcing in manufacturing
(Chesbrough & Teece, 2002). A system can be quite small and localized (for example, the system
of housing allocation or food sourcing in one town or city), and it can be national or global
(Mulgan & Leadbeater, 2013).
Innovations in the information technology (IT) disaster recovery (DR) systems are typical
systemic innovation since such innovations consist of various interrelated changes in information
technology (IT), carrier and support, backup servers design, and so on. During the past decades,
the IT DR system has been innovated, from a set of procedures to recover and protect IT
infrastructure when computer(s) shut down accidentally (Yang, Yuan, & Huang, 2015), to modern
systems in the cloud computation and big data era, which such innovative systems can cope with
disasters effectively and efficiently (Sahebjamnia, Torabi, & Mansouri, 2015). Disaster recovery
in the modern age is a detailed, step-by-step course of actions for quickly recovering after a
natural or manmade disaster; the details may vary depending on the business needs, and can be
developed in-house or purchased as a service (TechAdvisory.org, 2010). IT DR systems need to
52
be able to restore data and backup systems for the organization to ensure continuous operation,
even in the presence of extensive failures that may render an entire system un-operational and for
which local replication may be inadequate (Kant, 2009; Lumpp, Schneider, Holtz, Mueller, Lenz,
Biazetti & Petersen, 2008). Further, the primary DR system objectives reducing costs and
increasing efficiency while mitigating risk and better aligning IT with business initiatives are
often stymied by todays datacenter challenges (DuBois & Amatruba, 2013). A strategic approach
to evaluate the performance of innovative DR systems will help organizations meet their business
continuity objectives while considering both performance and cost issues.
Practical problems regarding performance evaluations of DR systems are complicated and
usually involve massive subjectivities and uncertainties (Claunch, 2004; Johnston, 2014; Ueno,
Miyaho, Suzuki, & Ichihara, 2010). A few researchers have studied issues related to performance
evaluations of DR infrastructure solutions (Chen, 2001; Covas, Silva, & Dias, 2013; Kant, 2009).
However, to the best of the present authors knowledge, very few or no researchers have explored
DR system performance in detail. To fill the research gap, this paper aims to propose an analytic
framework to evaluate DR system performance.
This study will first review the literature regarding possible aspects and criteria that could
be used in evaluating the performance of a DR system. We will then seek to confirm these aspects
and criteria through focus group interviews with experts. Because the IT DR system performance
evaluation problems are indistinct and involve various considerations, this paper introduces data
envelopment analysis (DEA) methods with derivations of the efficiency achievement measure
(EAM). An empirical study evaluating three DR systems belonging to a Taiwanese governmental
research institute will be used to demonstrate the feasibility of the proposed framework.
The rest of this paper is organized as follows. A literature review on DR systems, DR
objectives, and performance evaluations is presented in Section 2. The research methods of the
DEA are presented in Section 3. The empirical study evaluating DR systems performance for the
Taiwanese research institute is presented in Section 4. Advances in management practices and
comparisons between the empirical study results and past research results are discussed in Section
5. Finally, Section 6 summarizes the results and concludes the paper.
2. Literature Review
In order to review the latest DR system performance research and to construct an analytic
framework accordingly, related literature is reviewed and summarized below. This literature
Volume 9, No.2, 2015
53
review focuses on past studies related to the concepts of systemic innovations, DR, DR systems,
objectives of DR systems, and performance evaluation criteria for DR systems.
Processes of system change have a longtime horizon and are complex because of the many
interrelated actors and factors (van Mierlo, Arkesteijn, & Leeuwis, 2010). New research has been
undertaken, and theories have demonstrated that systemic innovations are characterized by
fundamental uncertainties, chaos, unintended consequences, conflicts, and unpredictable
trajectories of change, which cannot be understood from a reductionist perspective, or, for that
matter, from the perspective of direct causeeffect relations that seem to be at the core of former
problem-solving approaches (Prigogine & Stengers, 1990; Rotmans, Loorbach, & van de Brugge,
2005; (van Mierlo et al., 2010). Along with the vision on how systemic innovation takes place, the
ideas about how systemic innovation might be stimulated and managed have evolved
considerably (van Mierlo et al., 2010). Systemic innovation projects need not only to be reflexive
in design, planning, and management but also to be accompanied by a monitoring and evaluation
approach that supports and maintains such reflexivity (van Mierlo et al., 2010).
55
importance of IT DR can hardly be overestimated (Fothergill & Peek, 2004; Rose, 2007; Feng &
Li, 2011).
Modern information infrastructure is full of uncertainties. Such uncertainties are due to
years of acquisitions, investments, building and rebuilding, partial improvements, and temporary
fixes that finally become obsoletet (Clitherow, Brookbanks, Clayton, & Spear, 2008). Thus, more
organizations have begun to consider using DR system(s) being located in remote sites, which can
restore data and maintain IT system operations during or after occurrences of disasters (Lumpp et
al., 2008; Kant, 2009; Sembiring & Siregar, 2013). An IT DR site is a backup data center that
restores the full data and all functionalities of communications or equipment to a remote location
and synchronizes those data with the primary site in the event of primary site failure (King, Halim,
Garcia-Molina, & Polyzois, 1991; Sembiring & Siregar, 2013). DR sites should be as separate
from the primary site as possible (Ellis & Collins, 2013).
Numerous researchers have examined IT DR concepts and technologies, such as network
technology, storage, and so forth (Serrelis & Alexandris, 2006; Clitherow et al., 2008; Bianco,
Giraudo, & Hay, 2010;Ueno et al., 2010). However, very few previous research works have
focused on IT DR site selection and evaluation in general or on performance evaluation of DR
sites in particular. The DR site performance evaluation problems require multiple-criteria decision
making (MCDM), which usually involves multi-disciplinary knowledge including IT technology,
business continues process and disaster management (Bryson, Millar, Joseph, & Mobolurin, 2002;
Cegiela, 2006; Daim, Bhatla, & Mansour, 2013). A strategic approach to evaluate the
performance of DR sites will help organizations meet their business continuity objectives while
addressing both performance and cost issues.
RTO and RPO requirements are defined in the business impact analysis (BIA) stage of the
business continuity plan process. The BIA identifies what is at risk in the enterprise and which
business processes are most critical, thereby prioritizing risk management and recovery
investments. The direct and indirect impact of business interruptions is assessed over time. RTOs
and RPOs depend on the organizations ability and willing to protect data in a way that limits the
impact of disruption to the business (Claunch, 2004).
The definitions of RPOs and RTOs not only influence business risks and losses in or after
disasters, but also influence DR costs. Organizations often face the dilemma between business
losses and IT over-investment when decide RPOs and RTOs. On the one hand, business operation
downtimes, as defined by RPOs and RTOs, adversely affect recovery time costs, opportunity
losses, company reputation, legal considerations for breached service levels, customer confidence,
and drops in stock price (Garg, Curtis, & Halper, 2003; Wiboonrat, 2008). For example, Garg et
al. analyzed the financial impact of information breaches on corporations. The results show that
the average loss in share price on the day of an events occurrence was nearly 5.6 percent over a
three-day period after the event (Garg et al., 2003). On the other hand, the DR technologies are
selected to meet the data protection needs of the organization based on RTO and RPO. DR
systems are generally the best, albeit the most expensive, solution if no data loss is an issue
(Broder & Tucker, 2012). The RTO and RPO metrics will define the media size for backup, the
location where data is being recovered, and the type of the IT infrastructure. A short RTO and
RPO or lower outage tolerance will result in a higher cost of IT solutions. The DR objectives and
costs of investment are trade-off problems that have attracted researchers interests. For example,
Wiboonrat simulated the reliability and cost issues of two data centers and proposed an optimal
balance between data center system reliability and investment costs for each case (Wiboonrat,
2008).
57
58
applications of DEA for efficiency and productivity evaluations in both public and private sectors
(Emrouznejad, Parker, & Tavares, 2008).
There are several models of DEA, such as the DEA-CCR model (Charnes et al., 1978); the
DEA-BCC model (Banker, Charnes, & Cooper, 1984); the Cross-Efficiency DEA model (Doyle
& Green, 1994; Sexton, Silkman, & Hogan, 1986); and the Super-Efficiency DEA model
(Andersen & Petersen, 1993). The CCR model (Charnes et al., 1978) assumes that production
exhibits constant returns to scale. Banker et al. (1984) extended the original CCR model by
considering variable returns to scale. For company managers, controlling the inputs is easier than
increasing total sales. Because both CCR and BCC models are input-oriented, which is consistent
with the evaluation needs of data centers, both the CCR and BCC models are introduced in this
research. The formulations of the research works are based on the authors earlier works (Chen &
Huang, 2012; Huang, Tzeng, Chen, & Chen, 2012).
The DEA-CCR model computes relative efficiency score (hi ) based on selected s outputs
(r 1,..., s)
and m inputs
s
max
u y / v x
r
r 1
rj
s .t.
(i 1,..., m)
i 1
i ij
u y / v x
r 1
rj
i 1
i ij
(1)
It assumes the DMU has s outputs and m inputs, and there are n DMUs. The
are not zero, calculating as
ur
and
vi
u0
( vi xij )=1
i 1
59
r 1
i 1
( ur yrj u 0 ) / ( vi xij )
max hij
s.t.
r 1
i 1
( ur yrj u0 ) / ( vi xij ) 1,
(2)
max gj
( ur yrj u0 )
r 1
s.t.
v x =1
i ij
i 1
u y v x
r 1
rj
i 1
i ij
u0 0
(3)
s.t.
i 1
r 1
( si sr )
j ij
xij si 0,
j 1
si yrj ,
rj
j 1
n
j 1
(4)
Finally, an evaluation of three DMUs will be used to demonstrate the feasibility of the proposed
framework.
Since the establishment in 1991, the X center has provided DR services for
4.2 Aspects and Criteria Derivations Using the Focus Group Method
The possible aspects and criteria for evaluating DR system performance will be derived
based on the comprehensive literature review results [Table 1]. First, government and industry
standards and existing enterprise IT architectures were considered. Then, experts were invited to
provide their opinions. Details regarding every aspect and criterion were derived based on the
experts opinions. The aspects of tangible and intangible resource are viewed as inputs, whereas
the aspects of DR objectives are considered outputs.
Ten experts related to the DR business in X center were invited to provide opinions using
the modified Delphi method. The experts selected include five senior IT managers who are
responsible for DR decisions in the X center, as well as five IT managers who use DR services
provided by the X center. All the experts have more than five years of work experience in the
related fields of business continuity management and/or DR plan definition.
61
62
DMUs
a1
a2
a3
a4
a5
b1
b2
b3
b4
b5
c1
c2
System A
7.0
6.6
6.5
7.2
6.8
6.6
6.7
6.3
6.9
6.9
6.1
6.1
System B
6.6
6.7
6.7
6.9
6.3
6.1
6.0
5.9
6.1
5.7
6.2
6.0
System C
6.4
6.4
7.2
6.7
6.5
5.8
6.2
5.5
5.7
5.6
a5 )
a4 ),
b2 )
are
negatively related to the output criteria, the three criteria are eliminated due to their violation of
the isotonic property.
4.3.2
After justifying the variables theoretically and statistically, we will start with the definite
analysis of the intervening service by applying the BCC model. According to the empirical proof
obtained by various authors, BCC model will provide a level of pure technical efficiency. In turn,
we will estimate the CCR-efficiency index, which will allow us to calculate scale efficiency from
the quotient of both indexes (GarcERSnchez, 2006). The performance evaluation results have
been derived in comparison to those derived by the CCR and BCC models (Table 4). The
efficiency scores for the three systems are calculated utilizing both the CCR and BCC models.
Volume 9, No.2, 2015
63
The performance evaluation results present two major findings. Based on the evaluation
results derived using the CCR and the BCC models, all three of the DR systems achieved optimal
performance. These three DR systems can thus be seen as performance maximizers based on the
results derived by using the CCR and BCC DEA models. Some reasons for this are
straightforward. First, these three DR systems belong to same data center, share some common IT
characteristics and demonstrate the same tendencies in performance. The X center designed
similar and interconnected IT infrastructures and backup system architecture in order to provide
multi-system backup service. Second, the X center implements information security management
standards, such as ISO 27001 and CSA Star, to guarantee the same RTO and RTO service level
agreement across the three systems.
a2
a3
a4
a5
b1
b2
b3
b4
b5
c1
a1
1.000
a2
0.500
a3
0.545
0.999
1.000
a4
0.189
-0.756
-0.721
1.000
a5
0.371
-0.619
-0.577
0.982
1.000
b1
0.984
0.339
0.388
0.359
0.529
1.000
b2
0.454
-0.545
-0.500
0.961
0.996
0.604
1.000
b3
0.990
0.371
0.419
0.327
0.500
0.999
0.577
1.000
b4
0.901
0.075
0.127
0.596
0.737
0.963
0.795
0.954
1.000
b5
0.980
0.317
0.366
0.381
0.549
1.000
0.623
0.998
0.970
1.000
c1
0.619
0.990
0.996
-0.655
-0.500
0.470
-0.419
0.500
0.217
0.449
1.000
c2
0.866
0.866
0.891
-0.327
-0.143
0.764
-0.052
0.786
0.564
0.749
0.929
c2
1.000
1.000
[Table 4] Efficiency Scores for DEA Models and Sensitivity Analysis Results
DEA
Model
CCR
BCC
64
DMU1
Efficiency
DMU2
DMU3
DMU1
DMU2
DMU3
c1
c2
a1
a2
a3
b1
b3
b4
b5
Case 1)
Case 1)
Case 1)
Case 2)
Case 2)
Case 3)
Site A
1.000
1.000
1.000
1.000
1.000
1.000
1.000
1.000
1.000
1.000
0.695
1.000
1.000
0.461
1.000
1.000
Site B
1.000
1.000
1.000
1.000
1.000
1.000
1.000
1.000
1.000
1.000
1.000
0.740
1.000
1.000
0.491
1.000
Site C
1.000
1.000
1.000
1.000
1.000
0.976
1.000
1.000
1.000
1.000
1.000
1.000
0.687
1.000
1.000
0.456
Site A
1.000
1.000
1.000
1.000
1.000
1.000
1.000
1.000
1.000
1.000
0.793
1.000
1.000
0.646
1.000
1.000
Site B
1.000
1.000
1.000
1.000
1.000
1.000
1.000
1.000
1.000
1.000
1.000
0.832
1.000
1.000
0.678
1.000
Site C
1.000
1.000
1.000
1.000
1.000
1.000
1.000
1.000
1.000
1.000
1.000
1.000
0.950
1.000
1.000
0.737
5. Discussion
In the following discussion section, the managerial implications from the systemic
innovation perspective and from those of evaluation criteria and objectives of IT DR systems
performance will be discussed. Limitations and future research possibilities will be addressed.
65
take over immediately after the disaster, was extremely expensive because duplicate equipment
must be purchased and replaced at the same time. Now, modern hot site innovations allow users
to connect different equipment or share the same server space without concern for equipment
specification. Further, project management and information security management procedures are
also changing for the distributed backup. Top management support and commitment to DRP
operations, which include allocation of the time and resources required in the DR plan, also
change because the level of redundancy is affordable. Therefore, there are necessities for
evaluating systemic innovation performance.
The analytic procedure and results demonstrate that evolutions of DR systems are systemic
innovations, which include an interconnected set of innovations. According to the aspects and
criteria for evaluating DR system performance, which is summarized in [Table 1], almost all
technologies and management systems have been innovated during the past 5 to 10 years, no
matter from the aspect of backup servers ( a2 ), backup system architecture ( a3 ), the information
security management procedure ( b2 ), DR procedure ( b3 ), etc.
For example, Teefe (2014) recently summarized three novel DR technologies: server
virtualization, cloud computation, and mobile devices. Innovations not only exist in each
technology, the innovations also connect with each other. According to Teefe (2014), the novel
server virtualization, the process by which multiple servers are designed to operate out of the
same piece of hardware, has been innovated as new DR backup server ( a2 ) technology (Teeft,
2014). Cloud computing is another new DR innovation. According to Dix (2013), the cloud can
serve as a backup system architecture ( a3 ), which gives companies backups of data, failover of
servers, and the ability to have a secondary center far enough away to allow for regional disaster
recovery (Dix, 2013). Cloud computation provides backups and restorations to and from the cloud,
along with replication to virtual machines in the cloud, etc. Further, mobile devices can be an
intuitive part of any disaster recovery plan [DR Procedure ( b3 )], simply because almost everyone
has a cell phone or tablet on or near them at all times. Communication is key to disaster recovery,
so the connection with as many players as possible mitigates downtime (Teeft, 2014). Further,
organizations should assure to outline security protocols [Information Security Management
Procedure ( b2 )] regarding company data accessed on private devices in your businesss bring
your own device (BYOD) device policy (Teeft, 2014).
66
The Internet also connects the three DR innovations (server virtualization, cloud
computation, and mobile devices). These innovations also influence each other. For example,
Shafer noted that cloud computation is gaining popularity as a way to virtualize data centers
(Shafer, 2010). Some recent cloud computation innovation [e.g., CloneCloud (Chun, Ihm,
Maniatis, & Naik, 2010)] can automatically transform a single mobile device computation into a
distributed execution (mobile device and cloud computation). Apparently, advances in the DR
innovations are interlinked and influence each other. DR innovations are typical systemic
innovations.
According to Schilling (Schilling, 2005), the DEA is a useful quantitative method for
choosing innovation projects or systems. This study adopted the DEA as a systemic method to
evaluate innovative DR system performance and obtained reasonable and satisfactory results.
67
mission, business and operationally based on business loss concerns (Claunch, 2004; Garg, Curtis,
& Halper, 2003; Wiboonrat, 2008). It implies that once the DR objectives have been defined, IT
departments evaluate the DR system performance by meeting their RPOs and RTOs goal.
However, this research observes that the DR system performance would be significantly different
if the outputs decrease while inputs increase [Table 4]. Inputs of DR system are also important for
DR system performance since DR system investment is undoubtedly the most costly task. Yang et
al. found that the DR objectives receive influences from IT system availability (Yang et al. 2015).
Wiboonrat found that 50% of DR solution for business unit applications is overinvestment for
system reliability. Thus, IT managers define critical business functions not only in consideration
of reputation, operation, and regulation, but also finance cost (Wiboonrat, 2008). The findings of
this work are consistent with the research results by Wiboonrat. M and Yang et al (Wiboonrat,
2008; Yang et al, 2015).
6. Conclusion
As IT systems have become increasingly critical to the smooth operations of modern
organizations, the importance of ensuring the continuous operation and recovery of IT systems
68
has increased. Although management understands the importance of DRs, adequate allocation of
budgets and resources is still worthy of investigation. In order to determine the DR sites
investment, management should appropriately evaluate the efficiency of DR sites performance. A
holistic approach to DR site performance evaluation must evaluate multiple factors on the
technical and business front.
The contributions of this research are twofold. On the one hand, existing research on DR
sites allows for assessment of the technological performance only. This research goes further by
providing methods to evaluate the overall DR sites performances. This study provides a
performance evaluation analytic framework of IT DR sites for data center and corporate IT
decision makers. The contributions of the studies that focus on a particular technological area are
very significant but are nonetheless limited from the viewpoint of investment since they do not
provide a complete picture. This research provides a complete picture of DR sites and
demonstrates the feasibility of the DEA method on related research topics.
On the other hand, the nature of DR is indistinct and involves various considerations to
identify and backup the data into new insights. This study defines the DR site efficiency factor
from the aspects of business continuity management as well as the enterprise IT infrastructure.
According to the performance evaluation results, firms can compare their DR sites efficiency
with that of others in the same industry and then develop strategic plans for enhancing their
performance. Thus, this research can provide future researchers with an overview of the DR site
with appropriate performance evaluation results.
69
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76
Abstract
Entrepreneurship has been accepted as one of the best answers to mitigate the problem of
unemployment and is a cause of economic prosperity of any country. Thus, to create more jobs,
more entrepreneurs are needed in the society. Hence, various Government and non-Government
agencies are making efforts towards promoting entrepreneurship with an objective to create jobs.
Therefore, promoting innovation, entrepreneurship and resultant economic growth in all
countries have become issues of national significance. In India, different agencies of Government
of India are doing good work in helping business incubators to promote entrepreneurship with an
objective of economic prosperity of the country. The present paper gives a whole some idea about
the role of Incubation centres in converting Innovators to entrepreneurs in the Indian context. The
work involves a case study of a Technology Incubation centre in the Eastern Indian province of
Odisha and it has examined its role in creation of entrepreneurship in this part of the country.
The data source was mainly primary. The incubatees from the technology incubation centre were
subjected to a structured questionnaire survey. The financial and economic impact of the new
start-ups has been studied and it is inferred that there is justification in investing in promotion of
incubation system in a country.
Ph. D., Senior Incubation Manager, KIIT Technology Business Incubator, KIIT University, Bhubaneswar, India, E-mail:
drmanisha1971@gmail.com
Ph. D., Dy. General Manager, SIDBI MSME International Training Institute, Bhubaneswar, India, E-mail:
ssacharya1970@gmail.com
77
Introduction
Micro and Small Enterprises (MSEs) are important to almost all developing economies in
the world, having major employment, import dependency, and income distribution challenges.
Entrepreneurs and Economic development are two sides of the same coin. Entrepreneurs are key
to economic development of a country. Entrepreneurship and Economic development of a country
are inter-related. Entrepreneurs play a pivotal role not only in the development of industrial sector
of a country but also in the development of farm and service sector. Establishing Micro and Small
Enterprises (MSEs) is not as easy despite having innovative inventions or ideas. It takes more
than just having an idea of establishing a start-up. Planning and arrangement of scarce resources
like Finance, Infrastructure, Technology, Sourcing of raw materials, Market places (buyers) and
organizing Sales distribution channels are the major challenges for establishment and survival of
any enterprise. Majority of start-ups fail in their first year of inception. Many of these failures can
possibly be prevented if entrepreneurs get hand-holding support by an Institution having
specialized Incubation programs. An incubator's main goal is to produce successful Micro and
Small Enterprises with an array of targeted resources and services. These incubates grown in the
incubators have the potential to create jobs, develop technology for import substitution,
commercialize new technologies, and strengthen local and national economies. "Business
Incubators are playing a catalytic role in realization of dreams of innovators leveraging certain
congenial policy initiatives from Government.
78
Review of Literature
Incubators can be described as an institutional start-up enterprise support system. Like real
life incubators which provide a controlled and protective environment in which premature small
babies are placed for care, the Business incubators provide the ideators and innovators a chance to
adjust to outside environment, and grow stronger before they face the outside world. In a similar
fashion, the start-up entrepreneurs business idea is incubated in the incubation centers (Gupta K,
Rathore Shivali 2015 ) .
Entrepreneurship has been conventionally rated as risky career, to break the myth and to
augment the supply of new entrepreneurs through education, research and training, the incubation
centers have been established. Their objective is to help create and grow young businesses by
providing them with necessary support and financial and technical services. The start-up
companies spend on an average two years in a business incubator during which physical
infrastructure like office space, equipments etc. and most importantly funding support and need
based mentoring is provided by the incubators to the start-up businesses.
The concept of technology and business incubation first emerged in the United States in
the 1960s. It is widely believed that the Batavia Industrial Center, opened in Batavia2, New York
in 1959 was the first business incubator outside of the academic environment (Alseikh, 2009). A
Business Incubator was a facility designed to assist infant businesses to become established and
sustainable during their start-up phase. However, this concept did not gain much outreach until
the late 1970s. During the 80s, the industry experienced significant growth as many recognized
the value of creating and expanding new businesses to maintain local economies. There were a lot
of people who got fascinated by the idea and started developing incubators to support new
ventures and entrepreneurship. The concept gradually started gaining ground and about a dozen
incubators took shape in the U.S. However, in those initial years of evolution of the concept of
Incubation, a few from the community restrained themselves from supporting the concept as they
felt that it would restrict common economic development strategies related to the expansion of
large companies. During the same period, the concept reached UK and Europe by means of
innovation centres and technology parks. In the late 1990s, there were nearly twenty five
incubation environments in the U.K (Sahay, 2008). The establishment and nurturing of Small and
Medium Enterprises (SMEs) is a vital input in creating dynamic market economies in the
economic and social development of transition countries. Entrepreneurs are the key drivers of
economic growth, innovation, balanced regional development and job creation.
79
80
India after independence has initiated a series of steps towards promoting Science and
Technology, Research & Development as also promoting Enterprises especially in Small Scale
Sector. A chain of Research Laboratories, Entrepreneurship Development initiatives including
setting up of Institutions like Entrepreneurship Development Institute of India (EDII), start up
financing initiatives like the State Finance Corporations etc. were set up. During the eighties, with
support from UN Fund for Science and Technology, three pilot Technology Business Incubators
(TBIs) were commissioned in India. The National Science & Technology Entrepreneurship
Development Board (NSTEDB), established in 1982 by the Government of India (GOI) under the
aegis of Department of Science & Technology, is the institutional mechanism to help promote
knowledge driven and technology intensive enterprises. Besides NSTEDB, other Institutional
mechanisms to promote Business Incubator support systems are piloted by Biotechnology
Industry Research Assistance Council (BIRAC) of Department of Biotechnology (DBT), Ministry
of Micro, Small & Medium Enterprises (MSME), GOI and
81
roughly 60 per cent of them are Technology based. As per the said estimate, about 500 enterprises
graduate out of Incubators and roughly 60 per cent of them are Technology based. The emergence
of service sector as a very strong contributor in the overall economic canvass of the country
coupled with emergence of knowledge based Enterprises has given a perfect dream platform for
the TBIs to incubate such Enterprises. The ICT based enterprises and ITESs, Tele-medicine and
Bio-informatics etc. are increasingly in demand for Incubation besides the frontier areas of BioTechnology, Nano-Technology, Energy & Environment.
82
83
and Management. The following support for the Incubated Companies are available from TIDE
Centers:
i. The TIDE Centre provides operating space to the selected companies on rent for a
period of up to 2 years (extendable by one year).
ii. Each company selected for incubation gets financial support, in the form of soft loan,
of up-to INR 2.5million over a two (or three) year period (subject to satisfactory
performance). The amount of loan would be up to a maximum of 80% of the project
cost of the incubating company. The loan can be used for equipment and
consumables essential for the implementation of the project, subsistence allowance
of the promoters, staff salaries and other contingencies.
There are 27 total TIDE centers in India and around 80 start ups have been supported by
this scheme in India.
Few of the challenges before the state economy, affecting its growth are as below:
84
State per capita income is Rs.25,891/- as against national average of Rs.39,961/during 2013-14.
Lack of quality roads, ports, rail network, irrigation and market and storage
infrastructure for agriculture produce.
19 out of 30 districts are affected by Left Wing extremism making it difficult for
infrastructure and other developments.
The sectoral performance reflects the change in the magnitude and composition of GSDP
of the state economy over time. From a pre-dominantly agricultural economy, the state GDP
during 2013-14 clearly marked a shift of the economy becoming more oriented towards industrial
and services sectors. The services sector, in tune with national economy, has exhibited dominance
with 59.02 per cent of state GDP. The share of agriculture sector in the GSDP, which was over
70% in the early 1950s, has come down to 15.58%, as per advanced estimates of 2013-14. About
60% population of the state draws its sustenance fully or partly from the agriculture sector.
In Odisha, there are eleven Business Incubation centers which are supported by DCMSME. However, there is only one Technology Business Incubation center (TBI) viz. KIIT
Technology Business Incubator supported by National Science and Technology Entrepreneurship
Development Board (NSTEDB), DST, GOI. This Incubation center is also supported by DBT
(BIRAC), DeitY(TIDE) and DC-MSME schemes of Govt. of India.
85
During a very short period of its existence, KIIT-TBI has so far incubated 37 business
entities out of which nine have graduated out to set up full scale commercial enterprises. KIITTBI accelerates the development of entrepreneurial businesses by providing them with assistance,
which addresses the particular needs of new companies during the key stages of development
such as product characterization, prototyping, market development and continuous innovation etc.
KIIT-TBI provides various promotional supports like product launches, product seminars,
exhibitions and media interviews to facilitate product promotion and marketing activities for
incubated enterprises. It also has been conducting various capacity building and training programs
like Entrepreneurship Awareness Camps (EAC), Entrepreneurship Development Programs (EDP),
Techno
Entrepreneurship
Development
Programs
(TEDP),
Women
Entrepreneurship
The following hypotheses were proposed to be tested by way of the empirical analysis.
Null Hypothesis 1: There is no increase in sales revenue of start-ups with incubation
support.
Alternate Hypothesis 1: There is significant increase in sales revenue of start-ups with
incubation support.
Null Hypothesis 2: There is no increase in employment generation by start-ups with
incubation support.
86
Alternate Hypothesis 2: There is significant increase in employment generation by startups with incubation support.
Null Hypothesis 3: There is no increase in total investments in the start-ups with
incubation support.
Alternate Hypothesis 3: There is significant increase in total investments in the start-ups
with incubation support.
For the purpose of analysis, the data in respect of turnover, employment generation and
investments were obtained for first year and third year. This was done so because the incubation
support is available through a period of three years. The data so collected were summarized and
were subjected to test for equality of means. Further, they were also treated with dummy
variable analysis to test structural change.
Data Analysis: The results of the empirical analysis are presented below.
Test for Equality of Means of Incubated Enterprises in two periods
Variable
Mean
Sales Revenue P1
1891279.0
Sales Revenue P2
4634835.0
Employment Generation P1
5.206897
Employment Generation P2
12.000000
Total Investments P1
954310.3
Total Investments P2
2617586.0
p-value
0.0477
0.0001
0.0006
Coefficient
p-value
Sales Revenue
2743556.0
0.0347
Employment Generation
6.793103
0.0000
Total Investments
1663276.0
0.0048
Data Interpretation:
As can be observed from the above test results, there is a significant variation in sample
means of sales revenue for period 2 (end of Year 3) and period 1 (end of Year 1) with p value of
Volume 9, No.2, 2015
87
0.047 i.e. less than 0.05 (significance less than 5%). Similarly, there is a significant variation in
sample means of employment generation with p value of 0.0001 i.e. less than 0.05 (significance
less than 5%). As regards investments too, significant variation in sample means of employment
generation was observed with p value of 0.0006 i.e. less than 0.05 (significance less than 5%).
Thus, the null hypotheses are rejected.
When subjected with dummy variable analysis, the coefficients of Sales revenue,
Employment generation and total investments remained at INR 2.7 million, 6.8 persons per
enterprise and investment of INR 1.7 million with p value of 0.035, 0.00 and 0.0048 respectively.
The Indian economy in general and economy of Odisha state in particular, has undergone a
shift in composition, where the services sector is assuming a significant proportion. The share of
services sectors, especially IT, ITES, Telecom etc. are growing which indicates a shift towards a
knowledge driven economy. The state of Odisha is counted as one of the bottom ranking states in
terms of important development indices. However, of late, the state has initiated a number of steps
those have started showing encouraging results in terms of its ranking amongst Indian states in
ease of doing business index etc. With its capital city emerging as an educational hub of eastern
India and with quality Research and Development output from these institutions of excellence
coupled with contribution of national level R&D institutions in the state, there is a very good
opportunity for commercialization of such research outputs. With innovations from students,
faculties and others, there is a need to capitalize these and convert them to commercial enterprises
for societal benefits.
The Technology Business Incubators could be the force multipliers in the efforts of the
state to create an ambient eco-system for technology commercialization. The study attempted to
empirically map and quantify to an extent the contributions of the only TBI in the state. The
analysis of data from the TBI has revealed that there have been positive effects of incubation
88
intervention. The impact has been both financial improvements (increase in sales revenue) and
economic contributions in terms of creation of additional employment and additional investments.
Thus, it can be inferred that the intervention through the incubation system has been yielding
dividends and there is a need to upscale the incubation system in the state and also the whole
country so as to meet the objectives of making the country a truly technology driven knowledge
economy and creating more employment opportunities.
89
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Abstract
Creating innovation performance through technological innovation and managerial
innovation and securing competitive advantage are coming to the fore as national issues beyond
organizational and individual dimensions. Korea is also putting much effort into strengthening
competitiveness of small and medium enterprises (SMEs) and creating national wealth by
aggressively introducing and implementing the innovation certification system for venture companies
and technological and/or managerial innovative SMEs to boost innovation of small companies
systematically.
This study analyzed the effects of various factors such as firm size, innovation activities and
governmental support on various types of innovation performance; product innovation, process
innovation, organizational innovation and marketing innovation, and derived differentiated
characteristics of innovative SMEs and discuses in-depth implications through comparison with
general companies.
As a result, the following implications were derived from the empirical analysis. First, there is
a need for differentiated management to motivate corporate entities to engage in the four major
innovation activities to improve innovation performance which is directly related to corporate
performance. In other words, corporate resources need be managed appropriately for the purposes
of innovation. This is important to a manager in charge of management, introduction and execution
of innovation seeks, since the effects of factors vary with different types of innovation. Second, the
factors affecting innovation performance differed between innovative SMEs and general companies.
Therefore, in relation to management and policy of SMEs, it is necessary to differentiate innovation
strategies according to different types of enterprises.
Keywords: venture business, innovative SMEs, firm size, innovation activity, governmental
support, innovation performance
Researcher, Korea Institute of S&T Evaluation and Planning (KISTEP), E-mail: juil@kistep.re.kr
Corresponding author: Professor, Miller MOT School, Konkuk University, E-mail: sypark@konkuk.ac.kr
93
1. Introduction
Since Schumpeter proposed a theory of technological innovation, innovation has been
perceived as the driving force of capitalism and economic growth. Now, innovation is mentioned in
not only economics and business administration but also enterprises, hospitals, and the public and
third sectors as a determinant of organizational and individual competitive advantages. In the same
vein, researchers consider the true nature of innovation represented by technological and management
innovation, empirically analyse its determinants, processes and outcomes, and apply the findings to
organizational management processes in practice.
Innovative SMEs (small and medium-sized enterprises) have been regarded as important for
effectively implementing innovation and creating outcomes. Innovative SMEs refer to SMEs having
innovative capabilities, surpassing general SMEs in terms of innovative performance through
technological and managerial innovation, and promising to create added value in the foreseeable
future (Hicks & Hegde, 2005; Kang & Lee, 2012). Korean economic system is characterized by the
substantial roles of SMEs in employment and their measurable importance in all economic activities.
Therefore, enhancing national competitive advantages by strengthening SMEs' innovativeness has
become an issue of national significance.
In this context, policy, support and development measures for innovative SMEs have been
established. Particularly, an array of relevant policy initiatives have been taken since the enactment of
the Act on the Promotion of Technology Innovation of SMEs1in 2013. Specifically, prior to the
current system, the venture business certification criteria were formulated in 1997, followed by the
InnoBiz2 System for certifying technologically innovative SMEs in 2001 and the certification system
for managerial innovative SMEs in 2006 based on the Comprehensive Plan for Strengthening SMEs
Competitiveness framed by the Participatory Government in 2004.
Diverse research has been conducted concerning the measures for improving innovative
SMEs' innovation performance, which is perceived as a challenge at the national level. Yet, previous
studies have revealed the following limitations. First, a significant number of those studies are
concerned with the factors influencing management outcomes including sales or revenues without
considering the essential value of innovative SMEs, i.e. the roles of innovation performance and the
factors influencing the innovation performance (Sung, 2013; Lee & Chung, 2008; Chung, 2011; Jin et
al., 2012; Kwak & Suh, 2010; Yi, 2009).
94
Second, some studies are focused only on particular types of innovative SMEs, and thus their
findings are far from generalizability (You, 2010; Yang & Song, 2007; Yoo & Yang, 2009; Yoon &
Seo, 2011; Kim, 2013). Also, those studies fail to compare innovative SMEs with general firms, and
have limitations in deriving differentiated characteristics and in-depth implications. Lee et al. (2008)
compare innovative SMEs with general SMEs in light of technological innovation performance and
managerial outcomes without verifying the influence of explanatory variables.
Third, as the proxy variables of innovation performance, only partial indicators of
technological innovation performance including patents and outcomes of new products are used,
which makes it difficult to discuss extensive outcomes of corporate innovation encompassing product
innovation, process innovation, organizational innovation and marketing innovation (Kim, 2013; Lee
et al., 2008; Yoo & Yang, 2009).
Thus, the present study verifies the effects of firm size, innovation activities and governmental
supports as the determinants of innovative SMEs innovation performance, and compares the findings
with those of general firms with a view to presenting differentiated theoretical and practical
implications for innovative SMEs. Moreover, factors influencing the comprehensive innovation
performance including product innovation, process innovation, organizational innovation and
marketing innovation are verified from multiple angles to derive some relevant implications for
innovation performance.
95
Drawing on the extensive definitions of innovation, this study is to consider four principal
concepts that underscore the targets of innovation such as product innovation, process innovation,
organizational innovation and marketing innovation.
2.1.1. Product Innovation
Product innovation typifies the technological innovation, referring to creating unprecedented
novel products or altering and improving existing products. Tung (2012) defines product innovation
as applying differentiated technologies to introduce new products capable of delivering higher levels
of utility to customers than the old ones in the market. Similarly, according to Kristina & Dean
(2005), significant changes in technological features of products are an essential prerequisite for
product innovation.
A host of studies confirm the effects of product innovation on corporate market performance
(Yalcinkaya et al., 2007; Govindarajan & Kopalle, 2006; Sivadas & Dwyer, 2000; Henard &
Szymanski, 2001). For instance, Aboulnasr et al. (2008) argue that continuing efforts for innovation
by applying new ideas to products help extend their life cycles and ultimately sustain their
competitive advantages in the market. According to Kim & Huarng (2011), introducing new
knowledge and products to the market makes it possible to achieve innovation, which in turn allows
corporate competencies including financial performance and customer satisfaction to build up. In
short, against the backdrop of tougher competition, shorter lifecycle of products and ongoing
technological advancement, product innovation is viewed as ever more important (Ziamou &
Ratneshwar, 2003; Godener & Soderquist, 2004).
2.1.2. Process Innovation
In parallel with the product innovation, process innovation is viewed as representing the
technological innovation (Barney & Griffin, 1992; Dewar & Dutton, 1986; Tushman & Nadler, 1986).
Trejo et al. (2012) define the process innovation as the implementation of a new approach or the
significant improvement of production or delivery. That is, process innovation refers to introducing a
commercially worthwhile new production technique (Schumpeter, 1934), and is broadly applicable to
the process value chain involving production, data processing, delivery and service (Zaltman et al.,
1973). The OECD (2005) includes any substantive changes in process-related technology, tools and
software in the process innovation framework.
Papinniemi (1999) proposes a process innovation model from the perspective of business
reengineering, which is equivalent to management innovation, and emphasizes three core components
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of process innovation; enablers, targets and outcomes. First, the author attributes the process
innovation to technological enablers, dissatisfaction with the performance of existing products and
processes, and resource opportunities. Also, the author describes that shifts occur in such targets of
process innovation as processes, product structures, production organizations, man-machinecomputer connectivity, core sectors, user-friendliness, management and control. Lastly, as the
outcomes of process innovation, the author stresses such qualitative outcomes as flexibility,
improvement of quality and customer relationship and cost savings in addition to the betterment of
diverse quantitative indicators.
2.1.3. Organizational Innovation
Organizational innovation refers to introducing new methodologies to business practices,
internal organizations, and external relations with a view to implementing progressive or radical
changes (OECD, 2005). Organizational innovation is focused on organizations as both the principal
agents and targets of innovation, and is applied to multiple aspects including business practices,
knowledge management and interactions with external parties.
Organizational innovation is defined largely from two perspectives. First, studies considering
macroscopic innovation theories focus on not individuals but organizations as principal agents of
innovation. These studies regard organizational innovation as the overall process of introducing,
utilizing and commercializing new ideas in connection with products, services, processes,
technologies and systems for the purpose of organizational goal achievement, performance
improvement and customer satisfaction (Choe & Lee, 1997; Han, 2010, Park & Kim, 2008; Kessler,
2004; Kim, 1998). In other words, organization-led product innovation, process innovation, and
marketing innovation are described within a broad spectrum of organizational innovation framework.
Second, organizational innovation is defined in a narrow sense focused on changes and
improvement in managerial aspects and intangible methodologies involving organizational structure,
system, institution, consciousness, culture and behavior rather than technological aspects (OECD,
2005; Kenneth, 1967; Tidd & Bessant, 2009; Sundbo & Gallouj, 1998; Durst & Newell, 2001).
Although this definition may sound relatively narrower in scope than the abovementioned one, it
helps clarify the features of organizational innovation vis-a-vis other innovation targets such as
products, process and marketing. This study builds on the latter to define organizational innovation as
changing and improving business practice, knowledge management, flexibility in fulfilling business
practices, and external relations as part of new approaches to organizational operation (Ha et al.,
2010).
Volume 9, No.2, 2015
97
as engaging in one or more innovation activities relevant to product innovation, process innovation,
marketing innovation and organizational innovation. An innovative indicates when it successfully
innovates and create performance. The definition includes the two concepts in an inclusive category
of innovative firms. Chung (2011) defines a firm as an innovative SME when it proves superior to
other SMEs in view of technological innovation activities and relevant outcomes.
Based on the aforementioned rationale, innovative SMEs are defined, in general, as a policyrelated concept in Korea. Specifically, innovative SMEs are perceived to create more value through
innovation activities in terms of technology and management than general firms (Kang & Lee, 2012;
Lee, 2007). Currently, venture businesses, technological innovative SMEs and managerial innovative
SMEs are classified as innovative SMEs as per local policy initiatives. Venture businesses have been
lawfully stipulated since the latter half of the 1990s, whereas the lawful foundation for technological
and managerial innovative SMEs was not laid until 2013 when the Act on the Promotion of
Technology Innovation of SMEs was enacted. According to the applicable provision, innovative
SMEs including venture businesses are defined as the SMEs that are capable of securing
competitiveness or well-positioned for future growth potential by means of technology, management
and other innovation activities.
This study defines innovative SMEs from the perspective of local policy initiatives. That is,
innovative SMEs in this study include venture businesses, technological innovative SMEs and
managerial innovative SMEs that create more value than general firms through technological and
managerial innovation activities.
2.3 Literature
2.3.1. Firm Size and Innovation Performance
Effects of firm size on innovation activities and outcomes have been considered by many
researchers. First, the postulation that firm size serve as a positive factor of innovation is based on
Schumpeter (1942). Schumpeter (1942) posits that large enterprises are favorably positioned for
technological innovation with their capacity for implementing the economies of scale in terms of
R&D, production, marketing and financing. Schumpeters assertion that a large-scale company can
gain the market power in proportion to its size which in turn facilitates its technological innovation
activities has been widely known as the Schumpeterian hypothesis among the later generation of
researchers.
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The finding that the firm size positively affects innovation supports the Schumpeterian
hypothesis, forming the mainstream in the literature (Cohen, 1995; Yin & Zuscovitch, 1998; Cohen
& Klepper, 1992). Studies highlighting the positive effects of firm size on innovation provide the
following grounds (Arias-Aranda et al., 2001). First, large enterprises have competitive advantages in
respect of the stability and availability of internal resources, which allows them to effectively support
R&D projects. Second, companies boasting of high sales figures can appropriately distribute the fixed
innovation cost, e.g. process innovation, and thus improve the efficiency of R&D.
Third, effective trade-offs between non-production components, e.g. R&D, marketing and
finance, increase the chance of innovation, which is likely to arise more efficiently in large
companies. Fourth, as large enterprises are fitted with diversified divisions and thus can achieve the
economies of scope, they are highly likely to effectively reduce any innovation-related risk factors.
Conversely, some argue that the firm size has negative effects on innovation (Scherer & Ross,
1990; Acs & Audretsch, 1990, 1991; Pavitt et al., 1987; Bound et al., 1984) based on the following
grounds. First, corporate growth is likely to cause losses in terms of management, lessening the
efficiency of R&D activities. Second, large enterprises are characterized by bureaucratic management
across the board, which is detrimental to R&D activities. Third, individual entrepreneurs and
researchers contribution to innovation may not be properly rewarded in large enterprises, which
decreases individual members efforts for innovation and undermines the opportunities for innovation.
As for the relation between the firm size and innovation performance, research findings
mostly converge upon their positive (+) relationship (Sung, 2005; Kim, 1992; Yoon, 2006; Jang,
2011; Choi & Lee, 2011; Kim, 2009). Conversely, some report on their negative (-) relationship
(Kang, 1994; Scherer & Ross, 1990), while others argue the firm size influences some aspects of
innovation performance (Hong & Kim, 2009). Still others suggest both positive and negative effects
of firm size on innovation (Scherer, 1965). In addition, some researchers report on the insignificant
effects of firm size (Kamien & Schwartz, 1982).
Taken together, the relationship between firm size and innovation performance varies with
study targets, measures and analysis methods. Hence, it is unreasonable to affirm any unidirectional
relationship between them without allowing for relevant conditions. This study sets up a hypothesis
on the relationship between firm size and innovation performance as below based on the previous
findings.
101
Cho & Shin (1996) define managerial innovation as essentially altering the important parts of
a firm by deliberately carrying out plans or programs intended to change organizational members,
management system, structure, production process technologies and new products and services.
Taken together, managerial innovation activities may be construed as a series of activities intended
for effective organizational changes by responding to the dynamic internal and external environment
surrounding an organization.
Ultimately, innovation activities are intended to derive innovation performance, improve
managerial performance and attain competitive advantages. Accordingly, extensive empirical
analyses of the relationship between innovation activities and innovation performance mostly indicate
positive effects. First, R&D activities presented as the most dominant technological innovation
activities in many studies are found to be positively related to innovation performance (Kwon, 2011;
Kim, 2011; Ban & Kim, 2012; Lee & Limb, 2012; Serrano-Bedia et al., 2012; Hadjimanolis, 2000;
Romijin & Albaladejo, 2002; Lin et al., 2012; Wang & Kafouros, 2009; Becker & Dietz, 2004; Freel,
2003). In particular, many recent studies distinguish internal from external innovation activities, and
derive the findings that highlight the synergetic knowledge creation drawing on collaborative
innovation networks and coordinating the internal and external innovation capabilities and
knowledgeability (Kim, 2011; Lee & Limb, 2012; Serrano-Bedia et al., 2012; Hadjimanolis, 2000;
Lin et al., 2012; Becker & Dietz, 2004).
Previous studies on the relationship between technological innovation activities and
innovation performance employ such diverse dependent variables as new product sales (Kwon, 2011;
Serrano-Bedia et al., 2012; Wang &Kafouros, 2009), new product development and launch (Kim,
2011; Ban & Kim, 2012; Hadjimanolis, 2000; Becker & Dietz, 2004), product innovation (Kim,
2011; Ban & Kim, 2012; Romijin & Albaladejo, 2002; Freel, 2003), process innovation (Kim, 2011;
Ban & Kim, 2012; Freel, 2003), quality improvement (Ban & Kim, 2012), innovation certification
(Lee & Limb, 2012), patent counts (Romijin & Albaladejo, 2002), acquisition of new technology
(Lin et al., 2012), and R&D intensity (Becker & Dietz; 2004).
In contrast to the diverse measurements and empirical analyses of technological innovation
activities and resultant innovation performance, there is a paucity of empirical analyses of the
relationship between managerial innovation activities and managerial innovation performance.
Particularly, the performance of technological innovation can be measured in terms of patents, R&D
cost and new product launch (Tidd, 2001), whereas no clear-cut quantitative measurement for
managerial innovation exists (Damanpour & Aravind, 2011). Yet, many economists expound on the
socio-economic importance of managerial innovation (Sanidas, 2005), and its positive effects on
102
productivity and employment (Edquist et al., 2001; Nyholm, 1995). Still, empirical analyses of the
relationship are insufficient. That said, some researchers have conducted empirical analyses. Park &
Lim (2013) focus on knowledge management and TQM (total quality management) among other
managerial innovation activities, and analyze that such activities are significant factors influencing
both product innovation and process innovation.
Yang and Song (2007) draw upon local indicators and data used in practice to select
managerial innovative SMEs for empirical analyses, and explicate such managerial innovation
activities as knowledge and information management, organizational management, personnel
management and customer management have statistically significant effects on quantitative and nonquantitative managerial innovation performance. Hong (2007) analyzes the effects of managerial
innovation activities on managerial performance and reports that the levels of application,
sustainment, support and progress of, as well as engagement in, managerial innovation activities are
significant variables, where the level of support exerts the most significant effects.
Based on the abovementioned findings, this study sets up a hypothesis on the effects of
innovation activities on innovation performance as below.
Hypothesis 2. Innovation activities will influence innovation performance.
2.3.3. Governmental Support and Innovation Performance
Most innovation activities incur costs. In addition, the immediate return on initial investment
in such activities is unlikely and any subsequent commercial success is often uncertain. Therefore, it
is difficult for principal agents of innovation to proceed with all innovation activities by relying
completely on internal resources, which is why financial support from external sources is needed. In
the same vein, each central government has established a range of financial and administrative
systems and laws to support innovation activities and made diversified efforts to elicit innovation
performance at the national level.
Innovation-related governmental support refers to government-led tax cuts, financing, and
provision of technological information and skilled human resources so that companies can unfold
R&D activities and thus effectively create innovation (OECD, 2005). Kirzner (1985) classifies the
governmental support for innovation activities into financing and personnel training. Particularly,
financing is the most common governmental support at home and abroad, providing practical aids
that helps overcome uncertainties and barriers that might arise in the course of commercializing
103
innovation leading to market performance (Svensson, 2008). Also, financial support is known to
benefit SMEs and start-ups, in particular.
Studies on the relationship between governmental support and innovation performance are
divided largely into three types. First, most studies describe the positive effects of governmental
support (Audretsch et al., 2002; Yoon & Yoon, 2013; Yoon, 2006; Yoon et al., 2011; Chung et al.,
2013; Kim, 2008). Audretsch et al. (2002) analyze the performance of the Small Business Innovation
Research program led by the US Department of Defense and highlight the positive effects of
governmental support on R&D in the private sector. Yoon & Yoon (2013) use national R&D project
data and Korean patent data to analyze 8,729 private companies and emphasize that governmental
financial support for R&D effectively facilitates innovation-related exploration and innovation
capabilities.
Yoon (2006) surveys 907 manufacturers to comparatively analyze the effects of financial
support for research, tax incentives and other governmental support measures, and confirms the
positive effects of financial support on R&D activities. Yoon et al. (2011) verify the difference in
technological innovation performance between beneficiaries and non-beneficiaries of governmental
support among 2,056 venture businesses. According to Chung et al. (2013), governmental support
benefits external R&D collaboration and ultimately creates innovation performance. Kim (2008)
compares the corporate participants in a 4-year project under the auspices of governmental initiatives
with non-participant corporate entities to analyze the effects of governmental support on
technological innovation and corporate survival, and sheds light on the positive effects of
governmental support on technological projects and economic outcomes.
Next, other studies are skeptical of the relationship between governmental support and
innovation performance (Svenssen, 2008; Lichtenberg & Siegel, 1991; Park, 1995). Notably,
Svenssen (2008) surveys 1,678 patent-holding companies and 1,082 individual innovators and
concludes that governmental financial support exerts negative effects on innovation performance on
account of the generosity of governmental support that hinders the selection of appropriate marketoriented R&D projects. Still other studies derive no significant relationship between governmental
support and innovation performance as it varies with analysis targets and methods (Lichtenberg &
Siegel, 1991; Park, 1995).
Lastly, some studies focus on the complementary relationship between governmental support
and corporate R&D (Leyden & Link, 1991; David et al., 2000). Leyden & Link (1991) investigate
137 R&D centers in the US to compare the regression models between public and private R&D
104
sectors. They derive a complementary relationship from each input value, which is ascribable to the
technological complementarity arising in the production phase. David et al. (2000) review empirical
studies in economics and report that governmental support for private R&D is likened to a substitute
rather than a complement.
Referring to previous studies classifying the governmental support for innovation into tax
incentives and direct support, this study formulates the following hypothesis (David et al., 2000;
Yoon, 2006; Chung et al., 2013).
Hypothesis 3. Governmental support will influence innovation performance.
3. Method
3.1 Model
The present empirical analysis model is shown in [Figure 1]. First, to compare the factors
influencing the innovation performance between innovative SMEs and general firms, three
independent variables are considered; firm size, innovation activities, and governmental support. In
reference to the OECDs Oslo Manual, the dependent variable, innovation performance, is explained
as the sum of four types of innovation performance; product innovation, process innovation,
organizational innovation, and marketing innovation. Next, the independent variable, firm size, is
measured based on sales figures. Regarding the innovation activities, seven specific variables are
provided such as the percentage of R&D personnel, internal R&D cost, external R&D cost, other
innovation activity cost, ownership of R&D centers, number of patents, and diversity of information
sources for innovation. Governmental support is classified into tax incentives and financing.
105
3.2 Analysis
First, referring to Cho (2010) analyzing the factors influencing the product, process,
organizational and marketing innovation performance, the question items about the launch and
introduction of each innovation are defined as variables in line with the dependent variable,
innovation performance. The product innovation performance is defined as either or both of the
following: (1) Launching a new product completely different from the existing product or (2)
Launching a new product significantly improved over existing products over the past three years
prior to the survey date. The process innovation performance refers to introducing one or more items
from the following to the corporate operation in practice: (1) A whole new or significantly improved
production process, (2) A whole new or significantly improved logistics, and (3) A whole new or
significantly improved support system. The organizational innovation performance refers to
introducing one or more items from the following to the corporate operation: (1) Change in business
106
practices, (2) Change in knowledge management, (3) Change in business organizations e.g. flexibility
in business practices and inter-departmental integration, and (4) Change in relationships with external
organizations. The marketing innovation is defined as introducing one or more items from the
following to corporate practices: (1) Substantial change in product design and package, (2) Launching
a new brand for product promotion, and using new concepts of ad media and PR strategies, (3) Using
new sales strategies, e.g. product displays and new sales channels, and (4) Using new pricing tactics
including discounts and differentiation.
Next, by referring to Arias-Aranda et al. (2001) and Scherer (1965) regarding the independent
variable, firm size, this study validates the effects of firm size based on financial metrics. To be
specific, the log value of the mean sales figure for three years from 2007 to 2009 is used as the
independent variable.
The innovation activities consist of the percentage of R&D personnel, the cost of innovation
activities, the ownership of R&D centers, the number of patents, and the diversity of information
sources for innovation. The percentage of R&D personnel is calculated by dividing the mean number
of R&D personnel among the full-time internal employees for three years from 2007 to 2009 by the
total number of employees. The cost of innovation activities is categorized into the costs of internal
R&D activities, external R&D activities and other innovation activities spent for three years from
2007 to 2009. The cost of other innovation activities is the sum of the following three items
excluding R&D costs: (1) Cost of introducing capital goods including machine, equipment and
software, (2) Cost of introducing external knowledge and technology, and (3) Cost of preparation and
job training programs.
The log value of the cost for each of three innovation activities is used. The ownership of
R&D centers refers to operating any R&D centers. Any forms of departments responsible for R&D or
irregular R&D activities are considered as the non-ownership of any R&D centers. The number of
patents refers to the patents registered as of the end of 2009. The diversity of information sources for
innovation means the number of information sources used for corporate innovation activities from
2007 to 2009. Specifically, 12 information sources are presented: (1) In-house sources, (2) Group
affiliates, (3) Suppliers, (4) Companies in demand and customers, (5) Competitors and other firms in
the same industry, (6) External meetings, e.g. associations and co-ops, (7) New employees, (8)
Private service providers, (9) Universities, (10) Government-funded research centers and
national/public institutes, (11) Conferences, fairs and expos, and (12) Journals and books. The
number of information sources for innovation used is defined as a variable on an interval scale.
107
The governmental support is classified into tax incentives and financing. The tax incentives
refer to the total amount of tax reduction for technological development supported from 2007 to 2009.
The financing refers to the total amount supported for technological development and projects. The
log values of tax incentives and financing are used as variables with respective deviations taken into
account.
3.2.3. Methodology
A statistical package program State 11.0 is used for the empirical analysis. Specifically, first,
descriptive statistical analysis involving means, frequencies and standard deviations is performed to
understand the factors influencing the innovation performance of innovative SMEs and general
companies. Also, the innovation performance is sub-divided into product innovation, process
innovation, organizational innovation and marketing innovation performance. Then, logistic analysis
is used to find out the factors influencing each innovation performance.
108
Innovative
SMEs
(n=252)
General
firms
(n=831)
Means
compared
(t-value)
Sales
32098.55
(61933.00)
19034.47
(31681.00)
36060.22
(68038.33)
-3.45***
Employees
95.26
(185.67)
69.27
(74.53)
103.14
(207.34)
-2.54*
R&D
personnel
6.58
(11.66)
9.24
(12.75)
5.77
(11.20)
4.17***
864.72
(3214.22)
1102.15
(2357.85)
792.72
(3429.92)
1.34
125.60
(691.61)
215.61
(775.74)
98.30
(662.09)
2.36*
1072.63
(4495.47)
1141.50
(3751.80)
1051.74
(4699.62)
0.28
Number of
patents
5.73
(18.16)
8.96
(18.93)
4.75
(17.81)
3.24**
Tax
incentives
53.80
(210.84)
112.64
(322.55)
35.95
(158.49)
5.11***
Financing
469.82
(6819.61)
469.28
(1438.37)
469.98
(7746.07)
-0.001
Item
General
Innovation
activities
Cost of
external R&D
activities
Cost of other
innovation
activities
Governmental
support
Cost of
internal R&D
activities
In terms of the number of innovative SMEs and general firms with manifested innovation
performance, innovative SMEs innovation rates are higher than those of general firms in the four
areas of innovation performance. The highest innovation rate is found in innovative SMEs product
innovation with 82.54% of innovative SMEs manifesting the product innovation performance. On the
contrary, the lowest innovation rate is found in general firms marketing innovation with only
31.53% of general firms engaging in marketing innovation.
Both innovative SMEs and general firms show the highest innovation rates in the product innovation,
followed by process innovation, organizational innovation and marketing innovation in the order
named.
109
Item
Innovative SMEs
(n=252)
General firms
(n=831)
# of
firms
Innovation rate
# of
firms
Innovation rate
# of
firms
Innovation
rate
Product innovation
730
67.41%
208
82.54%
522
62.82%
Process innovation
591
54.57%
158
62.70%
433
52.11%
Organizational innovation
Marketing innovation
505
380
46.63%
35.09%
152
118
60.32%
46.83%
353
262
42.48%
31.53%
# of firms: the number of firms with the given innovation performance manifested
Innovation rate: the percentage of firms with the given innovation performance manifested (= # of innovative
firms/n)
Item
Total
(n=1,083)
Innovative SMEs
(n=252)
General firms
(n=831)
Coef.
/ i
Coef.
/ i
Coef.
/ i
External R&D
-0.12**
0.17
0.10***
0.06***
-0.02
0.24
0.02
0.01
-0.22
3.06
0.20*
0.17***
-0.01
0.21
0.01
0.01
-0.09
0.41
0.10***
0.04***
-0.02
0.09
0.02
0.01
0.05**
0.01
0.15*
0.01
0.04*
0.01
0.14
0.03
-0.39
-0.03
0.15
0.03
0.02**
0.48e-02
-2.58e-03
-0.02e-02
0.03**
0.01
Firm size
R&D personnel
Internal R&D
Number of patents
Information sources
Tax incentives
Financing
Constant
Log Likelihood
Chi
Pseudo R
0.02
0.09***
0.02
0.32e-02
0.14e-02
0.03e-02
1.10
-574.00
219.34***
0.16
0.01
0.16**
-0.01
-0.07e-02
7.84e-04
0.01e-02
1.86
-81.91
69.59***
0.30
0.02
0.08***
0.02
0.37e-02
-3.98e-03
-0.09e-02
0.69
-482.10
132.60***
0.12
The logistic analysis in [Table 3] is used here to test the hypothesis concerning the factors
influencing the product innovation performance.
110
According to the analysis, innovative SMEs cost of internal and external R&D and other
innovation activities as well as diversity of information sources for innovation serve as positive
factors of their product innovation performance. These independent variables exert significant effects
on the product innovation performance of general firms as well. The number of patents is
insignificant for innovative SMEs, whereas it has significant effects as positive factors on general
firms product innovation performance.
Likewise, the number of patents proves to be a positive factor of the product innovation
performance in the model of all firms surveyed as in the general firms. Also, the firm size proves to
be a negative factor of the product innovation performance of all firms surveyed.
[Table 4] Relationship between Process Innovation Performance and Firm Size, Innovation
Activities, and Governmental Support
Item
Total
(n=1,083)
Innovative SMEs
(n=252)
General firms
(n=831)
Coef.
/ i
Coef.
/ i
Coef.
/ i
External R&D
-0.02
-2.34***
-0.03*
0.06***
0.01
-0.58
-0.01
0.01
0.15
-2.63**
0.01
0.05***
0.04
-0.60
0.27e-02
0.01
0.01
-1.42
-0.04**
0.06***
0.35e-02
-0.36
-0.01
0.01
0.26***
0.06
0.24***
0.06
0.25***
0.06
Firm size
R&D personnel
Internal R&D
0.21
0.05
-0.22
-0.05
0.26
0.07
Number of patents
1.58e-03
0.04e-02
-3.76e-03
-0.09e-02
2.90e-03
0.07e-02
Information sources
0.09***
0.02
0.01
0.18e-02
0.11***
0.03
Tax incentives
Financing
Constant
Log Likelihood
Chi
Pseudo R
0.01
0.29e-02
6.89e-04
0.02e-02
-1.10**
-625.61
241.07***
0.16
0.01
0.26e-02
-1.39e-03 -0.03e-02
-1.27
-145.87
41.18***
0.12
0.02
0.40e-02
1.11e-03
0.03e-02
-1.01*
-473.40
203.73***
0.18
The logistic analysis in [Table 4] is used here to test the hypothesis concerning the factors
influencing the process innovation.
The percentage of R&D personnel and the costs of external R&D and other activities are the
factors influencing the process innovation of innovative SMEs. Particularly, the R&D personnel
proves to be a negative factor of the process innovation with a rather high marginal effect, 0.60%. In
Volume 9, No.2, 2015
111
the model of general firms, four variables have significant effects, i.e. the costs of internal and
external R&D and other innovation activities and the diversity of information sources for innovation.
Notably, the cost of internal R&D activities proves to exert negative (-) effects.
In the model of all firms, the percentage of R&D personnel and the cost of internal R&D
activities have negative effects, whereas the costs of external R&D and other innovation activities as
well as the diversity of information sources for innovation prove to be the factors exerting positive
effects on the process innovation.
Total
(n=1,083)
Coef.
Firm size
R&D personnel
Internal R&D
External R&D
Other innovation activities
Ownership of R&D centers
Number of patents
Information sources
Tax incentives
Financing
Constant
Log Likelihood
Chi
Pseudo R
Innovative SMEs
(n=252)
/ i
0.03
0.10*
0.92
0.23
0.01
0.13e-02
0.01
0.05***
0.03
0.10***
0.22
0.05
-1.70e-03 -0.04e-02
0.04
0.15***
0.01
0.03**
6.76e-04
0.02e-02
-2.05***
-608.45
279.54***
0.19
Coef.
/ i
-0.14
-0.03
0.25
0.06
0.06
0.01
0.01
0.05***
0.05
0.20**
0.41
0.10
-0.01
-0.12e-02
0.03
0.14***
0.02
0.39e-02
-0.01
-0.20e-02
-0.72
-142.21
54.12***
0.16
General firms
(n=831)
Coef.
/ i
0.03
0.14**
1.06
0.26
2.01e-03
0.05e-02
0.01
0.06***
0.02
0.09***
0.16
0.04
1.36e-04
0.00
0.04
0.15***
0.01
0.03**
2.67e-03
0.06e-02
-2.26
-462.99
207.16***
0.18
The logistic analysis in [Table 5] is used here to test the hypothesis concerning the factors
influencing the organizational innovation performance.
The costs of external R&D and other activities and the diversity of information sources for
innovation serve as the positive factors influencing the innovative SMEs organizational innovation
performance. In contrast, these three variables in tandem with the firm size and the tax incentives
have positive effects on general firms organizational innovation performance. In comparison to the
negative effects of the firm size in the model of all firms, it serves as a positive factor influencing the
112
general firms process innovation. Likewise, the firm size has positive effects on all firms with a
comparable marginal effect, 0.03.
[Table 6] Relationship between Marketing Innovation Performance and Firm Size, Innovation
Activities, and Governmental Support
Total
(n=1,083)
Item
Coef.
Firm size
R&D personnel
Internal R&D
External R&D
Other innovation activities
Ownership of R&D centers
Number of patents
Information sources
Tax incentives
Financing
Constant
Log Likelihood
Chi
Pseudo R
Innovative SMEs
(n=252)
/ i
-0.03
-0.16***
0.16
0.04
0.03
0.01
0.01
0.03***
0.02
0.10***
-0.14
-0.03
0.01
0.11e-02
0.03
0.14***
0.46e-02
0.02**
4.07e-03
0.09e-02
-0.29
-630.26
143.01***
0.10
Coef.
/ i
-0.07
-0.29**
0.13
0.03
-0.02
-0.37e-02
0.02
0.01
0.08
0.02
-0.09
-0.02
0.01
0.21e-02
0.04
0.18***
0.01
0.24e-02
-0.01
-0.33e-02
0.75
-158.88
30.58***
0.08
General firms
(n=831)
Coef.
/ i
-0.03
-0.12**
0.08
0.02
0.03
0.01
0.01
0.03***
0.02
0.11***
-0.19
-0.04
4.22e-03
0.09e-02
0.03
0.13***
0.01
0.03**
0.01
0.22e-02
-0.34
-467.49
100.89***
0.10
The logistic analysis in [Table 6] is used here to test the hypothesis concerning the factors
influencing the marketing innovation performance.
The firm size and the diversity of information sources for innovation are the factors
influencing the innovative SMEs marketing innovation performance. The diversity of information
sources for innovation serves as a positive factor, whereas the introduction and implementation of
marketing innovation decreases as the firm size increases. By contrast, the information sources for
innovation, the costs of external R&D and other innovation activities and the tax incentives have
positive effects on general firms marketing innovation. The firm size exerts negative effects on
marketing innovation in the model of all firms and those of innovative SMEs and general firms.
113
The following conclusions are derived from the present empirical analysis. First, the firm size
has mixed effects on innovation performance. Specifically, the firm size exerts positive effects on
general firms organizational innovation, whereas it has negative effects on the marketing and
product innovation of all firms surveyed here.
Second, among the innovation activities, the percentage of R&D personnel, the cost of R&D
activities, the number of patents and the diversity of information sources for innovation influence the
innovation performance, whereas the ownership of R&D centers has insignificant effects on all types
of performance. The percentage of R&D personnel exerts negative effects on innovative SMEs
process innovation, whereas the number of patents has positive effects on general firms product
innovation. In case of the cost of R&D activities, the costs of external R&D and other innovation
activities exert positive effects on all models, excluding the innovative SMEs marketing innovation.
The cost of internal R&D activities is positively related to the product innovation only, whereas it is
negatively related to the general firms process innovation. The diversity of information sources for
innovation has positive effects on all types of innovation excluding the innovative SMEs process
innovation.
Third, concerning the governmental support, the tax incentives prove to be a positive factor of
general firms organizational innovation and marketing innovation, whereas the financing proves
insignificant.
5.2 Implication
The following implications are derived from the present findings.
First, differentiated management specific to each type of innovation is required to improve the
innovation performance directly associated with corporate performance. As described in the section
on the rationale, innovation is largely divided into technological innovation and managerial
innovation. The technological innovation is subdivided into product innovation and process
innovation. Similarly, the managerial innovation is subdivided into organizational innovation and
marketing innovation. The extent to which the factors affect each type of innovation may vary.
Likewise, the signs of effects may vary with the different types of innovation. Indeed, according to
the empirical analysis, the firm size is a positive factor of the product innovation, whereas it has
negative effects on the marketing innovation. In the same vein, the number of patents influences the
product innovation, whereas it has insignificant effects on the other types of innovation. As for the
governmental support, the tax incentives have statistically significant effects only on general firms
114
organizational and marketing innovation. In that each type of innovation is influenced by specific
factors, it is necessary to take differentiated managerial approaches to corporate capabilities and
resources in accordance with the direction of innovation pursued from the perspective of managers in
charge of managing, introducing and implementing different types of innovation. In addition, optimal
government policy measures specific to the nature of a given type of innovation need to be developed.
Second, the factors influencing the innovation performance differ between innovative SMEs
and general firms. The present empirical analysis highlights that the percentage of R&D personnel
and the cost of internal R&D activities are negative factors of the process innovation in innovative
SMEs and general firms, respectively. Also, the number of patents and the costs of external R&D and
other innovation activities prove to influence the general firms product and marketing innovation
only. Besides, the effects of the firm size on the organizational innovation and those of the tax
incentives on organizational and marketing innovation are significant in general firms only. Thus, it
is necessary to map out differentiated innovation strategies for different types of firms from the
perspective of management and policy measures for SMEs.
Third, the SMEs limited internal innovation activities and resources attributable to SMEsspecific smallness are manifest here. The percentage of R&D personnel and the cost of internal R&D
activities prove to be negative factors of innovative SMEs and general firms process innovation
performance, whereas the external innovation activities have positive effects on the relevant
indicators of diverse innovation performance. Also, the cost of internal R&D activities serves as a
positive factor of the product innovation only. These findings suggest that it is often harsh and
challenging for small and medium-sized manufacturers to achieve innovation performance with their
limited internal capabilities, and that collaboration with external parties is indispensable for SMEs to
attain any process innovation.
115
may exist as the factors influencing the innovation performance in addition to firm size, innovation
activities and governmental support, relevant theoretical consideration and validation is limited here.
Next, although this study extensively deals with different types of innovation performance, it
measures the likelihood of implementation and introduction of innovation in terms of performance
indicators without shedding light on the relevance to financial and non-financial performance which
may be considered an ultimate goal of innovation performance.
These limitations warrant extensive further studies on the effects of qualitative factors
associated with innovative SMEs innovation performance and on their relationship with
management outcomes as well as some comparative analyses of diverse types of firms except SMEs.
The findings will serve as the reference data for implementing the strategies for creating competitive
advantages of all types of SMEs including innovative SMEs, and be conducive to deriving
implications for rejuvenating the national economy.
<revised:
1
2
A law established to make and support policies for technological innovation of SMEs in Korea
Name of certification for innovative SMEs in Korea
116
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have used the work and/or words of others, they must ensure that this has been appropriately cited
or quoted. Papers found with such problems are automatically rejected and authors are so advised.
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unethical and is therefore unacceptable.
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All submitted papers are subject to a peer-review process. The factors that are taken into
account in the review are relevance, originality, organization, completeness, significance of the
findings, clarity, and overall quality. The possible decisions include honors quality, acceptable,
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2. Author's Responsibilities
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It is compulsory for all authors seeking to have their paper published in the journal to
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example, America, China and Europe are all ambiguous). Special attention should be paid to
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Volume 9, No.2, 2015
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http://www.incubator.sh.cn
AABI Honorary President
R.M.P. Jawahar (India, jawa_ts@yahoo.com)
Executive Director of Tiruchirappalli Regional Engineering College - Science and
Technology Entrepreneurs Park (TREC-STEP)
AABI Advisor
Benjamin Yuan (Chinese Taipei, benjamin@faculty.nctu.edu.tw)
President of Chinese Business Incubation Association (CBIA)
Wang Rong (China, wangrong@tic.stn.sh.cn)
Honorary President, Shanghai Technology Business Incubation Association
Rustam Lalkaka (USA, rustam@lalkaka.com)
President of Business & Technology Development Strategies LLC
Hong Kim (Korea, kimhong@office.hoseo.ac.kr )
Dean of Graduate School of Global Entrepreneurship, Hoseo University
China
Duan Junhu, Deputy Director General
Torch High-Tech Industry Development Center, Ministry of Science and
Technology, China
http://www.ctp.gov.cn
Zhen Hong Zhu, President
Shanghai Technology Innovation Center
Shanghai Technology Business Incubation Association
http://www.incubator.sh.cn
Hong Kong, China
Allen T.B. Yeung, Representative
Hong Kong Science and Technology Parks Corporation
http://www.hkstp.org
India
Dr. Rajendra Jagadale, President
Indian STEPs and Business Incubators Association
http://www.isba.in
Indonesia
Asril Fitri Syamas Syamas, Chairman
Association of Indonesian Business Incubation
Japan
Satoshi Hoshino, President
Japan Business Incubation Association
http://www.jbia.jp
Kazakhstan
Yerik Dukenbayev, President
The Kazakhstans Association of Business Incubators and Innovation Centers
http://www.kabic.kz
Korea
Hyeongsan Kye, President
Korea Business Incubation Association
http://kobia.or.kr, http://kised.or.kr
Kyrgyz Republic
General secretary, Zamira Akbagysheva
Union of Business Incubators and Innovation Centers of the Kyrgyz Republic
http://www.cango.net.kg
Malaysia
Andrew Wong, President
Multimedia Development corporation Sdn. Bhd(MSC central Incubator/
Accelerator, National Incubator Network Association)
http://www.mdc.com.my
New Zealand
Hamish Campbell, Representative
New Zealand Trade and Enterprise
http://www.nzte.govt.nz
Steve Corbett, Representative
Incubator New Zealand
http://www.incubators.org.nz
Pakistan
Akhtar Ali Qureshi, Representative
Technology Incubation Centre, National University of Sciences and Technology
http://www.tic.org.pk
Philippines
Mercedes M. Barcelon, Representative
Ayala Technology Business Incubator Network, Ayala Foundation, Inc.
http://www.ayalatbi.org
Singapore
Cham Tao Soon, Representative
Nanyang Technological University
http://www.ntu.edu.sg
Chinese Taipei
Benjamin Yuan, President
Chinese Business Incubation Association
http://www.cbia.org.tw
Ching-Yao Huang, Representative
NCTU Center of Academia and Industry Collaboration
http://www.iic.nctu.edu.tw
Thailand
Chusak Limsakul, President
Thai Business Incubators and Science Parks Association (Thai-BISPA)
http://www.thaibispa.or.th
Uzbekistan
Valijon Amanlikov, Representative
Association of Business Incubators and Technoparks of the Republic of
Uzbekistan
http://www.abit.uz
Vietnam
Representative, Dr. Pham Minh Tuan,
Vietnam Business Incubation Club
http://www.topica.edu.vn/incubation
Review Board:
Dinah Adkins (U.S.A)
Richard P. Bagozzi (U.S.A)
Rustam Lalkaka(U.S.A)
Hyoung Tark Lee (Korea)
Ki Seok Lee (Korea)
David A. Lewis (U.S.A)
Xiaoming Liu (China)
Tel: 86-1304-4118-085
Indian STEPs and Business Incubators Association (ISBA)
Rajendra Jagadale, President
http://isba.in
Editorial Office:
Korea Business Incubation Association (KOBIA)
Editorial Office:
Korea Business Incubation Association (KOBIA)
Mokwon Univ. O1-510, Doanbuk-ro 88, Seo-gu,
Daejeon, Korea
Tel: +82-70-7568-6371
Mobile: +82-10-7190-1258
Web site: www.kobia.or.kr
Email: apjie@kobia.or.kr
Home Page: www.apjie.org
www.apjie.net
Vol. 9, No. 2