Innovation output of medical high tech companies

Abstract

We are living in a knowledge society. Knowledge is considered as the most important production good in western societies nowadays. This study aims at gaining insights into the presence of knowledge and the conversion of knowledge into innovations at firm level. Three main concepts are used: information availability, absorptive capacity and innovation output. The concept of information availability is derived from geographical economics. The availability of information increases as the number of firms, knowledge institutions, suppliers and customers increases that are located at proximity [Porter, 2000]. Absorptive capacity is a concept that is defined as: “the ability of an organization to recognize the value of new, external information, assimilate it, and apply it to commercial ends” [Cohen and Levinthal, 1990]. Innovation output is concerned with the number of innovations and the type of innovations that firms introduce on the market. The hypothesis is that both information availability and absorptive capacity have a positive influence on innovation output. The data for this study was gathered from firms in the medical high technology sector. Considering the growing problem of ageing of the population in Western countries, innovative solutions are needed to make patient healthcare more effective. The firms are between 2 and 21 years old and have between 2 and 200 employees. Of the eleven cases in our sample, five firms are located in the South East of the Netherlands and six firms are located in the Randstad. These two regions show a different pattern of urbanization. A rough-set approach is used that can deal with small samples and fuzzy data. The data was gathered through questionnaires and interviews with respondents of the sample firms. No quantitative relation has been found between the location of a firm in the Netherlands and product innovation output. It seems that medical high tech firms benefit from a location closely to one Academic Medical Center (AMC) with which a strong relation has been built. More than one closely located AMCs does not lead to more product innovation output for a firm. To benefit from proximity, some of the respondents indicated that a firm should be located so close to an AMC, that a doctor can walk from the hospital to the firm and back during a coffee break or lunch. Considering firm location, ‘proximity to AMCs’ and ‘degree of urbanization’ turned out to be similar. Five AMCs are located in the Dutch metropolitan area (the Randstad) and three AMCs are located in different smaller urban areas outside the Randstad. The (qualitative) findings suggest that networks are more important to firms than being located in a metropolitan area or close to knowledge institutions. Locations and regions are considered to create conditions for firms. Variables as degree of urbanization and number of closely located AMCs are exogenous. The actual use of these conditions are endogenous and belong to firm characteristics. The number of face-to-face meetings firms have appears to positively influence product innovation output. Firms that have more external face-to-face meetings can exchange more information, that leads to the creation of more innovations. Both organizational and individual antecedents have been subject of this study. The Chief Innovation Manager (CIM) is a person in the organization who facilitates or initiates change and translates information for creation of innovations. The CIM is particularly relevant for absorptive capacity in Small and Medium Sized Enterprises (SMEs). Firms with a CIM that has specialized knowledge about marketing seem to have less product innovation output than firms that have a CIM without specialized knowledge. It seems that CIMs with specialized knowledge about marketing are able to select the most fruitful innovations. Organizational antecedents of absorptive capacity are education and experience level of the firm, and firm mechanisms. The experience level of firms with respect to marketing appeared to be negatively related to product innovation output. This is not a surprising outcome, since employees that spend their time on marketing are not able to spend their time on inventing and realizing product innovations. Firm mechanism, like connectedness and socialization tactics, are aimed at making communication and collaboration in an organization more effective. In this study, a positive influence of firm mechanisms on innovation output was not found. The influence of marketing- and product absorptive capacity on marketing- and product innovation output could not be tested. The medical high tech firms appeared to have too little marketing innovation output. A conceptual split in absorptive capacity related to a specific knowledge field or knowledge source seems relevant as other scholars have shown in earlier research [Murovec and Prodan, 2009; Schmidt, 2010]. Future research should give additional insights into types of absorptive capacity and knowledge fields to which it is related. The conceptualization of absorptive capacity as linked to antecedents of key managers (as the CIM) needs more attention in our opinion. Certainly in SMEs, the CIM plays an important role in the innovation process. In the literature, an extensive theoretical background of individual antecedents of absorptive capacity is lacking [except for Waalkens et al., 2008] and validated measurement instruments that can be used to assess the competences of key managers. The body of literature concerning ‘product champions’ [Markham and Aiman-Smith, 2001] could prove helpful in future research about individual antecedents of absorptive capacity.