List of Tables
Paper 3 Process Innovation in User Firms: Exploring the Characteristics and Informal Nature of Process Innovation
Given the importance of process innovation and the lack of empirical research on its nature and attributes (cf. Pisano, 1997; Reichstein & Salter, 2006), we developed and conducted a questionnaire using a sample of Swiss manufacturing firms. The questions in the survey mainly deal with issues relating to the development of process innovation and associated managerial practices. It thereby allows us to address the following research question:
What are the characteristics and attributes of process innovations developed by user firms?
The questionnaire also specifically makes a distinction between major and minor process innovation (cf. Reichstein & Salter, 2006; Rosenberg, 1982). More precisely, in line with von Hippel (1976), we use the distinction between “major improvement innovation” and “minor improvement innovation.” In the questionnaire, major process innovation is defined as an innovation that gives the user firm a major functional improvement, whereas a minor process innovation has a minor functional utility for the user firm. In addition to investigating the general importance of major and minor process innovation, this study explores the characteristics and nature of process innovation. In particular, also based on the previous paper, we argue that there are informal innovative activities that go beyond both formal and informal R&D (cf. Dosi, 1988; King, 1999; Kline & Rosenberg, 1986; OECD, 1997; Rosenberg, 1976, 1982; Tremblay, 1998; Vincenti, 1990). We study this issue by exploring informal attributes of process innovation related to a firm’s accountancy, protection and appropriation practices. Moreover, building on the idea that innovation can take place without any formal R&D resources, it is important to identify which activities lead to innovation that might be of a more informal (or hidden) nature. We therefore particularly explore the role of learning-by-doing—as a form on-line experimentation and problem-solving—in process innovation (cf. Box & Draper, 1969; Dosi, 1988; Foray, 2004; Garvin, 1993; Hatch & Mowery, 1998; Jensen et al., 2007; Leonard- Barton, 1992b; Malerba, 1992; Rosenberg, 1982; Tremblay, 1998, 1999; von Hippel & Tyre, 1995).
We furthermore explore which practices firms implement to promote production floor workers’ contribution to process innovation. By bringing together literature on the economics of organization and agency, social psychology and human resource practices (Amabile, 1988, 1996; Baron & Kreps, 1999; Deci & Ryan, 1985; Edmondson, 1999; Ichniowski et al., 1997; Laursen & Foss, 2003; Lazear, 1998; Milgrom & Roberts, 1992, 1995), we show the importance of several specific practices—related to human capital, information sharing and communication, monitoring, and rewards. In essence, these aspects refer to the characteristics of a firm’s management and its employees (i.e. on-line workers who use production
technology) and how these can be developed and influenced to provide the right conditions and incentives to improve that particular part of a firm’s process innovation (or user innovation) capacity.
Paper 4 – Process Innovation in User Firms: Promoting Innovation through Learning-by-Doing
In the final paper, we more specifically investigate these managerial practices as well as how they drive learning-by-doing and in turn major and minor process innovation. We thereby add to the understanding of how learning and innovation takes place in user firms (cf. Adler & Clark, 1991; Hatch & Mowery, 1998; Macher & Mowery, 2003; von Hippel & Tyre, 1995). In particular, we study in more detail both the antecedents and the impact of learning-by-doing as a driver for process innovation. In addition, although relatively little is known about how user firms can promote this particular kind of innovation, the capabilities-related literature can serve as a useful platform for our investigation. In particular, it has become evident that human resource management practices play a major role in resource-, capabilities- or knowledge-based views of the firm (cf. Grant, 1996; Nonaka & Takeuchi, 1995; Pisano, 1997; Schuler & Jackson, 2007). However, while many studies focus on issues as productivity and financial performance (Becker & Gerhart, 1996; Huselid, 1995; Ichniowski et al., 1997; Youndt, Snell, Dean, & Lepak, 1996), studies specifically linking firms’ capabilities (such as human resources or intellectual capital) are much scarcer (Laursen & Foss, 2003; Subramaniam & Youndt, 2005). Moreover, studies that address determinants of creativity and innovative behavior typically focus on formal mechanisms such as innovation through R&D (Pisano, 1994; Scott & Bruce, 1994), and in addition only few studies investigate process (rather than product) innovation (Hatch & Mowery, 1998; Macher & Mowery, 2003; Pisano, 1997; Reichstein & Salter, 2006). This paper attempts to fill these gaps by specifically focusing on the development of process innovation and the contribution of the employees who are involved with using this process technology. Our related research question is:
What are the firm-level capabilities and practices that promote learning-by-doing and thereby process innovation in user firms?
In other words, we explore what drives learning-by-doing and process innovation To address this question, we first identify such capabilities and practices that relate to human capital for learning, experimentation and innovation (Baron & Kreps, 1999; Becker, 1993; Cannon & Edmondson, 2005; Lazear, 1998; Lee, Edmondson, Thomke, & Worline, 2004; Milgrom & Roberts, 1992; Thomke, 1998a, 2003; von Hippel, 1994; von Hippel & Tyre, 1995), information sharing and communication (Galunic & Rodan, 1998; Iansiti, 1998; Ichniowski et al., 1997; Laursen & Foss, 2003; Leonard-Barton, 1988; Macher & Mowery, 2003; von Hippel & Tyre, 1995), monitoring and support (Baron & Kreps, 1999; Foray, 2004; Garvin, 1993; Leonard- Barton, 1992b), and incentives and rewards (Amabile, 1996; Baron & Kreps, 1999; Deci & Ryan, 1985; Edmondson, 1999; Ichniowski et al., 1997; Lee et al., 2004; Milgrom & Roberts, 1992; von Hippel, 2005). We then use factor analysis to explore how these different individual management practices are implemented as complementary systems of practices. Subsequently, we use these factors as drivers of learning-by-doing which in turn can lead to major or minor process innovation in a system of structural equations by performing a three-stage least squares regression. We hereby add to the literature on user innovation and learning-by-doing and more generally contribute to the (process) innovation literature by investigating a particular kind of innovation, namely process innovation by user firms that can be both major and minor in nature. Furthermore, we provide insights that are useful for agency and capability-based views of the firms as to how a particular type of competitive advantage can be unlocked.