Defining and measuring the innovativeness of firms

In this paper an encompassing, output orientated, indicator of the innovativeness of firms which defines innovation as the successful exploitation of new ideas, is formalised as the contribution of innovative activity to firm profit growth and measured as the difference between growth in the (endogenously determined) nominal profits of the firm and an appropriately weighted sum of exogenously determined (i) growth in wage rates and (ii) inflation/demand shifts in the market for the firm’s output. The measure can be calculated for any firm using publicly available accounting data. For an unbalanced sample of 16,457 quoted firms over the period 1988-2012, operating in 39 sectors, and in 38 countries, the mean value of the innovativeness measure over the whole panel data set is estimated as 5.15% p.a. Statistically significant differences in innovative performance within and across countries, sectors and time are identified

The Prices of Material and Intermediate Inputs in UK Manufacturing

In this paper we explore the patterns and determinants of the prices or raw material and intermediate inputs in to UK manufacturing using the net (n) and gross (g) price indexes of materials and fuels (PIMF) as indicators. It is shown that (i) the PIMF series exhibit considerable fluctuations and nominal growth over time but real reductions (ii) PIMFn is stationary around a step mean, while PIMFg is stationary around a step mean and an underlying step trend with both series showing similar structural breaks (iii) the PIMF series are independent of the demand for inputs and thus cost determined. A model of the cost of MII is developed that endogenises the prices of such inputs produced within the UK between 1979 and 2000. The main drivers of PIMFn and PIMFg are shown to be a stochastic trend, the prices of imported semi manufactured inputs, oil prices (including duties) and commodity prices, the latter three also reflecting exchange rate changes. In addition it is shown that the PIMFg is affected by lagged output prices.price index of materials and fuels, manufacturing

Serial innovators in the UK:does size matter?

This article aims to shed light on the presence and importance of a significant number of small firms amongst serial innovators. Contrary to the common expectation in the innovative persistence literature, we posit that small serial innovators also benefit from operating within patterns of creative accumulation. However, it is in the quality of the technology and in the very nature of the knowledge accumulation process that the differences between small and large serial innovators can be found. Using a sample of 811 UK-based, highly innovative companies that patented over 66,000 inventions from 1990 to 2006, we find evidence in support of our theory. While large serial innovators experience higher innovation rates due to the scale of their innovation efforts, small serial innovators benefit more from processes of search depth characterized by the internal recombination of their previous knowledge. We find that important differences exist also in the very nature of the technologies being developed by small and large serial innovators

Technological diversification within UK's small serial innovators

This paper investigates the determinants of technological diversification amongst UK’s small serial innovators (SSIs). Using a longitudinal study of 339 UK-based small businesses accounting for almost 7000 patents between 1990-2006, this study constitutes the first empirical examination of technological diversification amongst SMEs in the literature. Results demonstrate that technological diversification is not solely a large-firm activity, challenging the dominant view that innovative SMEs are extremely focused and specialised players with little technological diversification. Our findings suggest a non-linear (i.e. inverse-U shaped) relationship between the level of technological opportunities in the environment and the SSIs’ degree of technological diversification. This points to a trade-off between processes of exploration and exploitation across increasingly volatile technology regimes. The paper also demonstrates that small firms with impactful innovations focus their innovative activity around similar technological capabilities while firms that have introduced platform technologies in the past are more likely to engage in technological diversification.<br/

The efficiency and productivity of Malaysian banks:an output distance function approach

This study employs stochastic frontier analysis to analyze Malaysian commercial banks during 1996-2002, and particularly focuses on determining the impact of Islamic banking on performance. We derive both net and gross efficiency estimates, thereby demonstrating that differences in operating characteristics explain much of the difference in outputs between Malaysian banks. We also decompose productivity change into efficiency, technical, and scale change using a generalised Malmquist productivity index. On average, Malaysian banks experience mild decreasing return to scale and annual productivity change of 2.37 percent, with the latter driven primarily by technical change, which has declined over time. Our gross efficiency estimates suggest that Islamic banking is associated with higher input requirements. In addition, our productivity estimates indicate that the potential for full-fledged Islamic banks and conventional banks with Islamic banking operations to overcome the output disadvantages associated with Islamic banking are relatively limited. Merged banks are found to have higher input usage and lower productivity change, suggesting that bank mergers have not contributed positively to bank performance. Finally, our results suggest that while the East Asian financial crisis had an interim output-increasing effect in 1998, the crisis prompted a continuing negative impact on the output performance by increasing the volume of non-performing loans

Efficiency in Islamic and conventional banking:an international comparison

The paper investigates the efficiency of a sample of Islamic and conventional banks in 10 countries that operate Islamic banking for the period 1996 to 2002, using an output distance function approach. We obtain measures of efficiency after allowing for environmental influences such as country macroeconomic conditions, accessibility of banking services and bank type. While these factors are assumed to directly influence the shape of the technology, we assume that country dummies directly influence technical inefficiency. The parameter estimates highlight that during the sample period, Islamic banking appear to be associated with higher input usage. Furthermore, by allowing for international differences in the underlying inefficiency distributions, we are also able to demonstrate statistically significant differences in efficiency across countries even after controlling for specific environmental characteristics and Islamic banking. Thus, for example, our results suggest that Sudan and Yemen have relatively higher inefficiency while Iran and Malaysia have lower estimated inefficiency. Except for Sudan, where banks exhibits relatively strong returns to scale, most sample banks exhibit very slight returns to scale, although Islamic banks are found to have moderately higher returns to scale than conventional banks. However while this suggests that Islamic banks may benefit from increased scale, we would emphasize that our results suggest that identifying and overcoming the factors that cause Islamic banks to have relatively high input requirements will be the key challenge for Islamic banking in the coming decades

How can firms in the UK be encouraged to create more value? A discussion and review paper

This paper investigates how firms in the UK might be encouraged to create more value through strategic innovation. Our approach is an integrative one, drawing on both the extant literature - covering the value chain, innovation and the low skill/low quality equilibrium debate - and the two systematic reviews completed by the AIM Scholars - covering promising practices and networks. In the paper we argue that there are three basic strategies that firms can adopt to create more value through strategic innovation: Increasing efficiency and effectiveness through the adoption of better practices; Innovating to produce products or services that generate more revenue — through either higher prices or larger volumes — but realised while remaining at the same position in the value chain. Fundamentally changing position in the value chain and moving to a position where the products and services that are being delivered inherently generate more value. We contend that increased value is likely to be created if firms adopt one or more of these three strategies. However, adoption is likely to represent significant challenges to management. Such challenges are linked to the levels of firm competency and their ability to construct, acquire and communicate knowledge during the innovation and subsequent implementation process. Addressing these challenges form the basis of our policy and research implications

The growth of services : towards a better understanding of service measurement, performance and innovation

In an increasingly globalised world economy, firms in the developed world are encouraged to move up the value chain in order to remain competitive. In many cases this means offering services, either as a stand alone, or increasingly as a complement to existing products, either alongside or directly incorporated into those products