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Effective Alignment of Innovation

European Manufacturing Survey 2006/7

dr. Paul E.M. Ligthart prof. dr. Ben Dankbaar &

dr. Peter Vaessen

correspondence: P.Ligthart@fm.ru.nl

Center for Innovation Studies

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http://www.european-manufacturing-survey.eu • Germany: Fraunhofer Institute System and Innovation Research • Austria: Division Technology Policy; ARC Systems Research • France: BETA, Université Louis Pasteur Strasbourg • Switzerland: Institut für Betriebs- und Regionalökonomie,

Hochschule für Wirtschaft in Luzern • Sabanci University Istanbul, Turkey; • Croatia: Economic Faculty, University of Zagreb • Netherlands: Nijmegen School of Management, Radboud

University Nijmegen • Slovenia: Faculty of Mechanical Engineering, University of

Maribor;• Spain: Department of Business Administration and Product

Design, University of Girona • Turkey: Competitiveness Center, Sabanci University Istanbul • And sponsor of NL-EMS, Rabobank

In collaboration with our EMS-partners

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Research Objectives

• Effective Alignment of Innovation– To gain insight in the interplay of different types

of innovation and how this affects business performance

– “best practices” that combine technological and organizational innovations (optimal configuration) leading to better (business) performances ;

– Determinants of these optimal configuration (s)”The need to overcome the split between innovation as

driven by supply factors versus innovation as driven by demand factors” (Freeman 1997).

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Main Dimensions of Innovation• Technological innovation – Administrative innovation

– Daft, 1978; Damanpour, 1991; Cooper, 1998

• Process innovation – Product innovation– Damanpour, 1991; Cooper, 1998; Tidd et. al., 2005

• Incremental innovation – Radical innovation(i.e. new for the business, new for business and market)– Daft, 1978

Main focus has been on determinants of (the types of) innovation (Totterdell, 2002), e.g.

- large, complex, participative firms, more product innovation (Scuilli 1998)- research oriented small firms, more product innovations (Rothwell’s 1983)- small (banking) firms adopt more process innovation (Scuilli 1998)- organisation size, more innovation activity (Anderson & King 1993)

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Three dimensional model of Innovation (Cooper, 1998)

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Two dimensional model of Innovation

Product Product / Service combinations

Product innovation

Process Innovative organisation

Process technology

Non-

Technological Technological

Classification of different paths of innovation (Kinkel, Lay & Wengel, 2005)

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Shift from Supply to Demand of Innovation

• ‘Different types of innovation, or innovations possessing different characteristics, will have a differential impact on the various consequences of innovation’(Totterdell et al. 2002, p. 345).

– Different types of innovations affected stakeholders differently (Totterdell et al. 2002), e.g.

• administrative innovation => employee relations

• Product/service combinations => customers

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Research hypotheses

• Differential effect of types of innovation on performances (Differential hypothesis)– Different types of innovation affect different indicators of business

performance

• Alignment of types of innovation increases performance(Alignment hypothesis)– Coherence between types of innovation increase business

performance

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Methodology• European Manufacturing Survey 2006-7

– Topics: utilisation of specific innovations in production process, new organisation concepts, product/services combinations, performance indicators, outsourcing, collaboration, staffing.

– 3344 production plants of Manufacturers (Industry: NACE 15-37) (focal respondent: managing director / plant manager)

– Multinational survey in 9 countries:(Germany, Switzerland, Austria, Spain, France, Croatia, Turkey, Slovenia, Netherlands)

– Different branches of the Manufacturing Industry:(Metal, Food, Textile, Construction, Chemical, Machinery, Electronic, Transport)

– Participation incentive: on-line benchmarking Website: http://www.european-manufacturing-survey.eu

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Operationalisation & Scaling: Technological Process Innovation

Reliability:

• Cronbach’s alpha: 0.76;

• 13 items,

• N=3150

0% 10% 20% 30% 40% 50% 60% 70% 80%

Computer Aided Design

Virtual reality design

Computer Aided Machines

Integration CAD\CAM

Industrial robots

Computer controled warehouse

Automated Machine Vision systems

Process integrated quality control

Cleanroom

Production planning systems

Simulation process design

Supply chain management

Bio-genetechnology

mean proportion

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Operationalisation & Scaling: Organisational Process Innovation

Reliability:

• Cronbach’s alpha: 0.73;

• 13 items,

• N=2708

0% 10% 20% 30% 40% 50% 60% 70% 80%

Continuous improvement process

Quality management

Regular individual potential review

Account working timeIntegration of tasks

Client/product specific production

Decentralisation of functionsJust-in-time supply

Internal zero-buffer principle

Balanced scorecardSimultaneous engineering

Environmental audit ISO 14001

Team work in production

mean proportion

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Operationalisation & Scaling: Product\Services combination

Reliability:

• Cronbach’s alpha: 0.78;

• 8 items,

• N=3268

0% 10% 20% 30% 40% 50% 60% 70% 80%

Design\consult\planning

Technical documentation'

Software development

Leasing\rent\financing

Assemblage\startup

Training

Maintenance\repair

Build-operate-own

mean proportion

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Operationalisation: Product Innovation \ RDinvest

• Product-innovation

N=3344

• RDinvest

N=2354

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

FIRM

FIRM+MARKET

Business with Product Innovation

no RDinvestments

decreased or equal RDinvest

increased RDinvest

Business with RD investments

mean proportion

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Descriptives: RDinvest, Types of Innovation

Type of Innovation Mean StDev N I II III IVRDinvest (percentage) 4.12 5.63

I lnRDinvest share R&D turnover 1.25 .86 2184 1II Tech_Inn Technological Innovativeness 4.82 2.93 3344 .250 1III Org_Inn Organisational Innovativeness 6.20 2.84 3344 .179 .574 1IV ProServices Product related services 3.32 2.27 3344 .349 .221 .187 1

MedianV Productinnovation (Kendal's Tau) 1 3344 .244 .199 .204 .196

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Descriptives: Performance Indicators

Performance Indicators

Mean UnitTrans-formed Stdev N I II III IV V

I lnDeliveryTime 41.97 day 3.01 1.23 3257 1II lnOnTime 89.21 % 2.64 1.02 3280 -0.314 1III lnScrapRate 3.06 % 1.04 .77 3155 0.205 -0.267 1IV lnProdLeadTime 562.10 hour 4.92 1.93 2956 0.584 -0.240 0.154 1V lnSetupTime 208.74 minute 4.09 1.58 2772 0.150 -0.075 0.062 0.199 1VI PEgrowth 1.42 employee 50.02 28.84 3172 0.022 -0.036 0.003 -0.004 0.019

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Omnibus Effects on Performance Indicators (delta_RSQ)

0.00 0.03 0.06 0.09 0.12

lnDeliveryTime

lnOnTime

lnScrapRate

lnProdLeadTime

lnSetupTime

PEgrowth

lnSize Country Industry dRDinvest7c Innovation InnAlignment

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Differential and Alignment Effects of Types of Innovationcontrolled for lnSize, Country, Industry, and RDinvest

lnDeliveryTime - lnOnTime +

lnScrapRate -

lnProdLeadTime -

lnSetupTime - PEgrowth +

B Sig B Sig B Sig B Sig B Sig B SigType of Innovation

dProductinnovation 0.148 *** 0.099 * 0.004 0.133 -0.100 -4.030 ***Tech_Inn 0.035 * -0.008 0.000 0.023 0.075 ** 0.186 Org_Inn -0.032 * 0.060 *** -0.029 ** -0.032 -0.014 0.250 ProServices 0.112 *** -0.014 0.030 * 0.146 *** -0.051 -0.244

Allignment of InnovationcTO_inn -0.007 ** 0.008 *** -0.004 ** -0.008 * -0.002 0.012 cTPS_inn 0.000 0.001 0.001 0.004 0.002 0.241 *cTPr_inn 0.000 0.004 -0.003 0.045 -0.017 0.176 cOPS_inn -0.004 -0.002 -0.007 ** -0.011 -0.002 -0.058 cOPr_inn -0.023 -0.004 0.006 -0.053 -0.017 -0.564 cPSPr_inn -0.010 -0.002 -0.021 -0.029 -0.019 0.544

RSQ full model 0.266 0.109 0.053 0.170 0.057 0.046

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Findings: Differential Hypothesis

• Types of Innovation have differential effects on the performance indicators– Product innovation:

(-) DeliveryTime, PEgrowth

(+) OnTime– Technological Process innovation

(-) DeliveryTime, SetupTime– Organisational Process innovation

(+) DeliveryTime, OnTime, ProdLeadTime– Product/Services combinations

(-) DeliveryTime, ScrapRate, ProdLeadTime

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Findings: Alignment Hypothesis

• Coherence between Types of innovations increases performances– Innovation Technological and Organisation combined

(+) DeliveryTime, OnTime, ScrapRate, ProdLeadTime– Innovation Technological and Product combined

(+) PEgrowth– Innovation Organisation and Product/Services combined

(+) Scraprate

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Conclusions I

• Innovation is more than investments in R&D, i.e.– Technological Process Innovation– Organisational Process Innovation– Product Innovation– Innovative Product/Service combination

• Alignment of Innovation (policies) suggests “best practices”, i.e. – Organisational Process Innovation (only positive effects)– Combining Technological Process Innovation and

Organisational Process Innovation (only positive effects)– …

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Conclusions II

• Limitations– Cross-sectional survey: no causal inferences– Effects are relatively small, additional insights

necessary

• Further research:– Search for of specific combinations of concrete

innovations belonging to these “Best Practices”– Impact of Radical versus Incremental Innovation

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Effective Alignment of Innovation

European Manufacturing Survey 2006/7

dr. Paul E.M. Ligthart prof. dr. Ben Dankbaar &

dr. Peter Vaessen

Center for Innovation Studies