Co-operation and co-opetition as open innovation practices in the service sector: Which influence on innovation novelty?

Abstract

This study aims to identify the influence of co-operation practices and the use of internal and external information sources on the propensity of firms to introduce new to the market innovations in the service sector. Data come from the 4th Community Innovation Survey, which covers the years 2002–2004. A logistic regression model is applied with the degree of novelty of good/service innovation as dependent variable. The analysis of the parameter estimates shows that firms provided with information from market sources and from internal sources as well as firms involved in science-based collaboration for their product innovations are more likely to introduce new to the market innovations, whereas information coming from competitors seems to have a negative influence on the degree of novelty of innovation.

Introduction

This paper explores the networked nature of the innovation process and its effect on novelty of innovations in the service industry.

As innovation is now widely acknowledged as one of the main drivers of economic growth, there has been an increasing interest in studying the innovation process. These studies have challenged the traditional linear model of innovation and have put forward the non-linear, dynamic and interactive nature of the innovation process (Kline and Rosenberg, 1986, Von Hippel, 1988). Innovation is therefore seen as the outcome of an interactive process between the firm and its environment, as the result of the collaboration between a wide variety of actors, located both inside and outside the firm. Co-operation is considered as an innovation stimulus and is expected to bring benefits such as achieving economies of scale and of scope, reducing uncertainty, gaining access to new markets or accessing complementary knowledge (Becker and Peters, 1998, Hagedoorn, 1993, Miotti and Sachwald, 2003). Co-operation for traditional R&D activities and its effect on both innovation input and output has been largely investigated, mainly in the manufacturing sector (Tether, 2002, Barge-Gil, 2010). Beyond formal co-operation, information from internal and external parties also plays a critical role in knowledge transfer and consequently influences the firm’s capacity to innovate (Linton, 2000).

As reported by EUROSTAT (2008), 26% of innovative firms were engaged in co-operation with other enterprises, universities, public research institutes, suppliers, customers and competitors in the EU-27. In the Member States, the most common co-operation partners were suppliers followed by customers (respectively, 17% and 14% of innovative firms), while the least common co-operation occurred with universities and research institutions (9%). The use of information sources in the EU-27 also varies significantly, depending on the type of source considered. In most surveyed countries, more than 40% of innovative firms declared using information available from inside the firm or its group. Although discrepancies across countries can be noticed, this indicates that the remaining 60% of firms declared not relying on this information source for their innovation activities. Whereas 25% of innovative firms obtained information from suppliers and customers, less than 10% of firms had recourse to information from competitors, universities and research institutions.

Although the overall co-operation level for innovation activities is similar in the manufacturing and service sectors, significant discrepancies can be observed in the choice of the co-operation agreements and information sourcing among these sectors. Co-operation within the group or with competitors occurs more frequently in service firms than in the manufacturing industry, while the opposite is observed for co-operation with universities and information obtained from scientific sources. This observation leads to the assumption that co-operation practices and information sourcing may slightly differ across sectors.

The service sector now accounts for more than 70% of value added in OECD countries. Prior research (Cainelli et al., 2006, Evangelista, 2006) indicates that the service sector does innovate, though to different forms and extents than the manufacturing industry. Despite its prominent role in our economies, the co-operation practices of firms belonging to the service sector, as well as their use of various information sources remain under-investigated (Tether and Tajar, 2008). Altogether, these facts and figures demonstrate the relevance of understanding the co-operation practices and use of information sources for innovation activities.

The contribution of this empirical research is twofold. Firstly, it aims to investigate the nature of co-operation practices and use of information sources in the service sector, taking into consideration its specificities. Secondly, it explores simultaneously the influence of different co-operation practices and the use of information sources coming from various origins on the propensity of firms to introduce new to the market innovations. In order terms, it examines if the novelty of the innovation introduced by service sector firms is stimulated by the nature of co-operation and type of information source exploited. The empirical investigation is conducted using the fourth Community Innovation Survey (CIS) data.

The remainder of this paper is organized as follows: Section 2 will provide an overview of the relevant literature and will develop the hypotheses. In Section 3, the dataset employed and methodology will be explained. Section 4 will introduce the results. Section 5 will provide a discussion of the results. Section 6 is devoted to implications and limitations of this study as well as perspectives for further research.