INNOVATION CAPABILITIES IN AGRIBUSINESS: EVIDENCES FROM AN EMERGING COUNTRY
Federal University of Rio Grande do Sul, Brazil
Agribusiness has undergone a technological revolution that has led to unprecedented gains in productivity and variety. In emerging countries, however, the focus still remains on producing commodities. In this context, the value chain is mostly based on transactional relations, undermining the role of firms as agents of innovation.
Innovation studies (Fageberg and Verspagen, 2009) highlight the performance of firms throughout capabilities (Lall, 1992). Capabilities are the specific set of knowledge, skills and resources that are combined to execute a repertoire of routines (Nelson and Winter, 1982). Zawislak et al. (2012) have compiled the innovation capability literature into a four-fold model. For them, any firm has different arrangements of development, operations, management and transaction capabilities for innovation.
Recent study, made upon manufacturing firms, has shown the importance of development, management and transaction for innovation performance, but has stressed the lack of significance of operations capability (Alves et al., 2017).
Considering agribusiness in emerging countries, operations, however, is exactly what supports a typical commodity-based and transaction-driven firm (Kennedy et al., 1997). This helps explaining the low innovation activity all along the value chain. Firms are merely technological supplier/client dependents, price takers and, consequently, producers of low value added products.
Most of studies in agribusiness are meant to explain innovation at chain-level (Boehlje, Roucan-Kane and Bröring, 2011). However, one needs to understand innovation in the firm-level before uprising to the chain-level. Moreover, few scholars (Tepic et al., 2014; De Mori, Batalha and Alfranca, 2016) study innovation capabilities in agribusiness.
To understand the role of agribusiness firms for innovation, we must to answer the following questions: How does innovation capabilities work in agribusiness? How do capabilities arrange themselves? Which are the relevant capabilities of the firm in agribusiness? This paper aims to identify the innovation capabilities of Brazilian agribusiness firms.
This study uses the innovation capabilities model developed by Zawislak et al. (2012) to evaluate the Brazilian agribusiness. We test this model by using a database of 300 firms from an innovation survey conducted by the Innovation Research Center (NITEC, 2015), which evaluated the innovation capabilities of firms. Then, we performed a multi-regression to analyze the configuration of innovation capabilities and their impact on firms’ innovative performance. The choice by Brazilian agribusiness is due to its commodity-oriented approach, which is a fertile ground to understand how innovation capabilities works and how could shift to a value-added approach.
Table 1 - Innovation capabilities of agribusiness firms
Model R R² Adj. R² Std. Error Change Statistics
R² Change F Change df1 df2 Sig. F Change
1 .514 .264 .253 .87261038 .264 23.151 4 258 .000
Unstd. Coefficients Std. Coeff. t Sig. Correlations Collinearity Statistics
B Std. Error Beta Zero-order Partial Part Tolerance VIF
(Constant) .045 .054 .836 .404
Capability .282 .059 .256 4.787 .000 .257 .286 .256 .996 1.004
Capability .018 .053 .019 .352 .725 .024 .022 .019 1.000 1.000
Capability .306 .054 .300 5.612 .000 .316 .330 .300 .998 1.002
Capability .321 .053 .324 6.057 .000 .318 .353 .323 .998 1.002
The model is significant at p-level<0,001 and has a power of explanation (R²) around 27%. The transaction capability has the strongest effect on innovative performance with coefficient around 0.329, followed by management capability (0.306) and, development capability (0.257). All three capabilities have significant effect on innovative performance because their p-value is 0,001. However, operations capability has non-significant effect on innovative performance, considering p-value at significance level <0.05.
Considering the sample of 300 firms, the results shows that the agribusiness firms with best performance are those who focus on transaction, management and development capabilities, respectively. In contrast, operations capability is not relevant for innovative performance, what may help us to explain why agribusiness lost its capability to create value (Gasques et al., 2016). In other words, the most adopted strategy in emerging countries like Brazil is the focus on volume and price, which does not seems be the best fit to generate sustainable wealth. This scenario leads super crops and income for a short-term, but in the long-term it restrains the increase of diversity.
To achieve innovative performance in a commodities-oriented market, firms should invest in transaction and management capabilities in order to improve its strategic market positioning and enhance its process efficiency. After improving these two capabilities, the firm may increase its development capability to generate value-added products through R&D investment, hiring high skilled people, strengthening partnerships with science and technology institutions and so on.
Contribution to Scholarship
Our paper contributes to analyze the innovation in agribusiness from the firm-level, instead of the chain-level as most of studies has been doing. In this regard, it was possible to analyze the innovation of agribusiness firms, designing its innovation capabilities and understand how could be triggered economic development in this economic activity. The characterization of innovation capabilities allows the identification of possible trajectories that could guarantee the development of economies based on agribusiness, especially in emerging countries which are strongly supported by this economic activity.
Despite of these contributions, we acknowledge that our study has some limitations. Since the sample is based on the industrial link of the agribusiness, for futures studies, we recommend that researchers consider include producer (farmers) in the analysis. This addition will allow to disclose the different recipes for innovation in agribusiness, considering all the links of the sector (Reichert et al. 2016).
Contribution to Practice
Brazilian agribusiness firms should focus on transaction and management capability to innovate, focusing on reduce its transaction costs and find new ways to organize its activities. Moreover, the sector has to upgrade its development capability, improving quality, the value of the its product and, as a consequence, run off from price mechanism.
For policymakers, we suggest the formulation of programs to organize the sector oriented to niche market, instead of commodities-oriented markets. By doing so, the government will create solid bases for firms find new pathways for innovate, such as premium products and the terroir, since there will be variety.
Our paper contributes to the conference by using a innovation capabilities model applied to an economic activity that strongly supports developing countries, such as the agribusiness. We understand that innovation in agribusiness can be an alternative for value creation, socio-economic development, filling the needs of society in these countries.
Alves, A. C., Barbieux, D., Reichert, F. M., Tello-Gamarra, J., & Zawislak, P. A. (2017). Innovation and dynamic capabilities of the firm: Defining an assessment model. Revista de Administração de Empresas, 57(3), 232-244.
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De Mori, C., Batalha, M. O., & Alfranca, O. (2016). A model for measuring technology capability in the agrifood industry companies. British Food Journal, 118(6), 1422-1461.
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Tepic, M., Fortuin, F., GM Kemp, R., & Omta, O. (2014). Innovation capabilities in food and beverages and technology-based innovation projects. British Food Journal, 116(2), 228-250.
Zawislak, P. A., Cherubini Alves, A., Tello-Gamarra, J., Barbieux, D., & Reichert, F. M. (2012). Innovation capability: From technology development to transaction capability. Journal of Technology Management & Innovation, 7(2), 14-27.
R&D project governance with multiple and diverse partners: case study in the electricity sector
1University of Sao Paulo, Brazil; 2ISA CTEEP; 3Lunica
The electricity sector faces competitive pressures due to the emergence of new forces such as decentralization, decarbonization, and digitalization . Seeking innovative outcomes, a Latin American electricity company has designed an R&D model based on alliances with multiple partners, including universities and startups, leading to governance challenges and opportunities.
Martinez-Noya and Narula (2018) , in their review of R&D alliances literature, present different research branches, such as nature and typologies; motivations; projects scope; type of the partners and locations' role; contracts and agreements design; effects on firms performance. We decided to focus on the role of governance on R&D project with multiple and diverse partners. Gesing et al. (2015)  discuss mechanisms of governance for different partners, such as market and science-based collaborations, advocating a contingency view of open innovation. Fey and Birkinshaw (2005)  approach governance modes choices for external R&D and its impact on performance. Li et al. (2012)  address the issue of the complexity in multilateral R&D project governance. On alliances with multiple and diverse partners, Van Beers and Zand (2014)  found that partners with different functions, such as suppliers along with universities, affects positively radical innovation performance.
Martinez-Noya and Narula  point out that there are “few studies that have studied this fragmentation of the innovation process” (p. 200) when externalizing the R&D through multiple and diverse partners. Van Beers and Zand  also highlight the importance of a deeper understanding of R&D multiple collaboration schemes.
What are the governance challenges and opportunities that arise within external R&D projects with multiple partners with different profiles?
Orchestrating multiple and diverse partners has been pointed as relevant, even though not completely explored in the literature [5, 6]. Therefore, this paper aims to explore the implications of a new R&D model based on alliances with multiple and diverse partners. This paper follows a qualitative approach, discussing two case studies  of external R&D projects from a Latin American electricity company. Data were collected through interviews with project managers, participants, and the company’s representatives; observatory participation in meetings and workshops; on-site visits and access to internal documents.
The first case is about exploring Drones applications for inspection and maintenance of transmission lines, being the development of autonomous flight one of its main possibilities. The partnership structure involved two teams: a leading research laboratory focused on electrical and computer engineering; a startup focused on drone technologies. The partners were hired to work in a complementary way – the university focusing on algorithms development and the drone startup focusing on the applications possibilities. They were managed by a project manager appointed by the company. Data were collected over three months, in ten interviews with nine different stakeholders, two on-site visits, and one workshop. The second case has the goal to develop a fully automated monitoring solution for energy transmission line corridors and to propose socially responsible and economically viable exploitations of the corridors spaces. The partnership involved four teams: two research laboratories and two service companies. Data were collected in the early activities of the project, such as the set-up, kick-off, and ideation, through six interviews with six different stakeholders, four on-site visits, and one workshop. Documents regarding both projects were also analyzed.
Inspired by Lean Startup, Design Thinking and Agile concepts, the company approached the challenge of integrating multiple and diverse partners by utilizing short cycles of development with continued participation and feedback from the company. Autonomy for smaller decisions was given to the partners and interaction with the operational level of the company was encouraged. The results show that such strategies helped the projects achieve an increase in the rate of deliverables and at the pace of the project, inducing cross-fertilization between the partner’s works. Solutions were considered as having better fit and applicability in comparison to previous traditional R&D projects, intermediary results were already absorbed, and spin-off projects derived. From the standpoint of governance, some challenges were pointed out: (i) despite having complementary skills and capabilities, integration between partners is demanding, and conflict resolution skills from the PMO were seen as insufficient; (ii) interviewers also pointed out the need for higher consistency of meetings and involvement of the company for decision making and alignment; (iii)the active participation of the operational areas caused some bias in decision making, giving priority to short over long term strategic solutions; (iv) partnership complexity impacts the processes of knowledge management.
Contribution to Scholarship
This research presents two main contributions to the current literature. First, by exploring the context of external R&D with multiple and diverse partners, offering insights on governance and innovation management, such as roles and routines that promote alignment, collaboration and a faster pace of development. The second collaborates with recent studies of new innovation processes, such as agile-stage-gate for manufacturing , bringing prompting discussions around the importance of topics such as governance, university, and startup-industry collaboration and opportunities.
Contribution to Practice
The present research contributes to practice by improving the understanding of R&D management when it comes to dealing with multiple and diverse partners. In our findings, we highlight the importance of: (i) a clear and present role of the project manager for better integration between the partners and conflict resolution, such as managing the relationship between different mindsets from university and start-ups; (ii) understanding and managing different incentives for diverse partners; (iii) routines oriented to continuous, frequent feedback and active participation in the process; (iv) organizing decision-makers in a way that creates balance between short term and long-term horizons.
This research presents a new approach to creating a more dynamic R&D process. Being in an emerging country context, characterized by public universities and stated granted concessionaires, it aligns with the concern of the section on understanding how to develop, and get better management of ambitious innovation strategies.
 Di Silvestre, M.L., Favuzza, S., Sanseverino, E.R. and Zizzo, G., 2018. How Decarbonization, Digitalization and Decentralization are changing key power infrastructures. Renewable and Sustainable Energy Reviews, 93, pp.483-498.
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 Li, D., Eden, L., Hitt, M.A., Ireland, R.D. and Garrett, R.P., 2012. Governance in multilateral R&D alliances. Organization Science, 23(4), pp.1191-1210.
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SECTORAL PATTERNS OF INNOVATION CAPABILITIES
1Federal University of Rio Grande do Sul (UFRGS), Brazil; 2Unisinos University (UNISINOS), Brazil; 3Federal University of Rio Grande (FURG), Brazil
Sectors behave and perform differently in terms of innovative activities while firms are heterogeneous in the way they achieve innovation because of their innovation capabilities arrangements. How the sectoral patterns and the firms’ capabilities are intertwined may allow the design of policies and strategies that promote economic development through innovation.
Initially, we use two important branches of the Innovation Studies. (1) The focus on sector-specific technological regimes (Malerba and Orsenigo, 1997); and (2) the emphasis on technological trajectories and their relation to the specific paths (Pavitt, 1984).
They are, somehow, intertwined to draw the contours of the innovation activities across sectors. In other words, the nature of technology and knowledge, the industrial dynamics and the innovativeness of each sector must be in consonance with the repertoire of resources that firms accumulate to innovate. This reinforces the emergence of heterogeneity at the firm level (Nelson, 1991). The essence of this is the different arrangements of innovation capabilities of the firm. Among different models of innovation capability (since Lall, 1992 until Yam et al., 2011), this article relies upon the model proposed by Zawislak et al. (2012), in which every firm has development (DC), operations (OC), management (MC) and transaction (TC) capabilities.
Some scholars (e.g.; Faria and Andersen, 2017) had deepened the shape of innovation activities across sectors. What is still missing is the link between sectoral patterns and firm’s innovation capabilities. Therefore, the gap that this paper addresses deals with the arrangements of innovation capabilities of the firms in different sectors.
How to understand the conceptual shift from sectoral patterns to firm level heterogeneity? Do the innovation capabilities of the firms arrange differently across sectors? What are the sectoral patterns of innovation capabilities’ arrangements? In short, the objective of this paper is to identify the sectoral patterns of innovation capabilities.
To reach the paper objective, we have operationalized our study with survey data from the project “Paths of Innovation in the Brazilian Industry”, based on 1,331 Brazilian manufacturing firms (Alves et al., 2017). First, we have classified all industries within the sample into Pavitt’s (1984) sectoral taxonomy. Then, we validated the Innovation Capabilities Model using factor analysis. Finally, to verify the impact of the innovation capabilities on firms’ innovative performance and to verify how these capabilities are arranged to produce such results for each sectoral technological trajectory, we ran linear regression analysis for each group.
Professional interviewers collected data through computer-assisted telephone, resulting in 1,331 valid responses from senior managers or owners of 6,142 Brazilian manufacturing firms with five or more employees listed in the Catalogue of the Industry Association of Rio Grande do Sul (FIERGS), giving a 21.7% response rate. We excluded firms that were missing sector classification information, leaving 1,325 firms for analysis.
Respondents rated their level of agreement to each item constituting each capability (development, operations, management and transaction) and performance using a five-point scale ranging from “strongly disagree” (1) to “strongly agree” (5).
In the factor analysis, scale reliability tests confirm the presence of the four capabilities and the total variance explained is 54.43%. In the linear regression analysis, models for all four sectoral classifications were statistically significant (p=0.000).
Tab 1 - Innovation Capabilities’ Coefficients by Sectoral Classification (n=1325)
Supp Dom Scale Inte Spec supp Sci-based
(n=749) (n=313) (n=159) (n=104)
Adjusted R² 0.260 0.229 0.190 0.247
β β β β
DC 0.250*** 0.210*** 0.232** 0.315**
OC 0.084* 0.209*** 0.130¹ 0.124¹
MC 0.319*** 0.279*** 0.283*** 0.363***
TC 0.289*** 0.296*** 0.209** 0.289**
Note: ***p<0.001, **p<0.01, *p<0.05, ¹not sig.
Supplier dominated firms need a certain level of each capability. However, since they are not specialized, do not work in the technology frontier and are not based on large scale, they rely on management capability (MC) to keep efficiency and performance.
Although scale intensive firms need their operations capability (OC) to achieve scale, this is not the most influent capability. Instead, it is their transaction capability (TC), since, in scale-based markets, marketing can make the difference.
Specialized suppliers are mostly in the middle of value chains, where they neither define the design nor the price of their products. However, they must focus on developing customized solutions, which depends on development capability (DC) and keep internal efficiency (MC) to persevere.
Science based firms are the ones in which all the relevant capabilities (DC, MC and TC) have influence on the innovation performance (IP). The vanguard and leadership attest their competitive advantage.
Finally, it is noteworthy that the OC is not significantly relevant to any innovation capability arrangement across the sectors. The fact that emerging countries are normally much more operations oriented than developed countries, which tend to focus on technological development, helps to explain why emerging countries are often laggards.
Contribution to Scholarship
For a laggard country to catch-up it is not just a matter of changing the technological regime or leap-frogging from a level of R&D to another. Some emerging economies have, in fact, caught up and even forged ahead by the hand of strong national innovation policy and systems. Others, however, have not. Micro-dynamics, industrial organization and catching-up depend on building capabilites. Moreover, before being nationwide, catch-up is sectoral and thus firm dependent. To know the specificities of each sectoral arrangement of innovation capabilities helps on understanding which capability should be built and/or reinforce if a firm of certain sectoral pattern wants to catch-up. Beyond that, only by changing the capabilities arrangement will allow the re-shaping of the existing sectoral patterns. It is our assumption that the missing link of sectoral heterogeneity is the different arrangement of the innovation capabilities of the firms.
Contribution to Practice
The sectoral patterns of innovation capabilities helps on understanding the paths for reinforcing and building innovation capabilities. From low-tech sectors to high-tech ones, the capabilities’ arrangements tend to move from business-oriented (such as MC and TC) to more technology-based (DC). Supplier dominated firms, for example, should organize themselves for business before organize for product development. One should never rely on building operations capabilities for enhancing innovation performance, in any sector. Knowing this extends the possibility of employing more assertive strategic actions by the firms as well as to define more realistic innovation policy by public agents.
Those issues are especially relevant to emerging markets. It is necessary to know which are the capabilities to be built in order to manage catch-up process. Brazil, for instance, has based its policy mostly upon operations capability, which, as shown in this paper, undermines the innovation performance and, though, development.
Alves, A., Barbieux, D., Reichert, F., Tello-Gamarra, J. & Zawislak, P. (2017). Innovation and dynamic capabilities of the firm: Defining an assessment model. RAE-Revista de Administração de Empresas, 57(3), 232-244.
Faria, L. & Andersen. M. (2017). Sectoral patterns versus ﬁrm-level heterogeneity - The dynamics of eco-innovation strategies in the automotive sector. Technological Forecasting and Social Change, 117, 266–281.
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Malerba, F., L Orsenigo (1997). Technological Regimes and Sectoral Patterns of Innovative Activities. Industrial and Corporate Change, 6(1), 83–118
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Zawislak, P. A., Alves, A., Tello-Gamarra, J., Barbieux, D., & Reichert, F. M. (2012). Innovation capability: from technology development to transaction capability. Journal of Technology Management and Innovation, 7(2), 14-27.
Management Capabilities as Enablers for Firm Innovation: Lessons from an Emerging Economy
1São Paulo School of Business Administration at Fundação Getúlio Vargas, Brazil; 2Post-Graduate Program in Administration, Federal University of Rio Grande do Sul, Brazil; 3Federal University of Rio Grande do Sul
While the benefits of innovation for economic growth and firm sustainable competitive advantage are widely little attention if given the management capabilities (MC) necessary to enable innovation to flourish. This has special implications for practice and policy in emerging economies.
Innovation is generally recognized as the fundamental engine for economic development (Schumpeter, 1912), and a source for sustainable competitive advantage for the firm (Teece et al., 1997). Over a hundred years, innovation has often been portrayed as the product of continuous science and technology (S&T) and Research and Development (R&D) efforts (Mowery, 2000) which arguably have justified public policy and investment in these areas given the promise of its long term benefits (Freeman, 1987; Mazzucato, 2013). While evidence from advanced and some latecomer economies support this hypothesis (Kim, 1997; Hobday, 2000), many emerging economies have not been able to capitalize on R&D (Cier and Maloney, 2017). We argue that policymakers lack the tools to clearly understand and widely measure the underlying dynamic capabilities necessary to innovate at the firm level (Alves et al, 2017). At the core of this process, managerial capabilities play a key role as enablers of innovation.
While management has been pointed as a key factor for national and firm-level competitiveness (Bloom, 2010), managerial capabilities have often been neglected in the innovation literature, associated with processes that stifle innovation (Hamel, 2017). Understanding and measuring the influence management capabilities in the innovation performance remains a challenge for theory&practice.
In this paper, we measured the influence of management capabilities on innovation performance across the different profile of firms in Brazil.
To understand the influence of management capabilities the innovation performance of firms, we performed econometric/statistical analysis using data from an innovation survey conducted with Brazilain industrial firms. We analyze the influence of four groups of capabilities (development, operations, management and transaction capabilities) on the innovation performance. We placed special emphasis on how management capabilities’ influence changes across three strata of firms: non-professional family firms (NPFF), professional family firms (PFF), and professional firms (PF). The survey instrument was done through a questionnaire written and applied in Portuguese, following Churchill’s (1979) suggested procedures for developing superior measures.
We used data from an innovation survey from the Project entitled "Paths of Innovation in the Brazilian Industry" conducted by the Innovation Research Center at the Federal University of Rio Grande Sul. The full research was a four-year-long project funded by the National Council for Scientific and Technological Development (CNPq) and the Research Support Foundation of the State of Rio Grande do Sul. The project involved a first conceptual and qualitative phase to build and validate an innovation capability-based view of the firm which was followed by a major survey conducted with senior managers and owners of Brazilian industrial firms of 25 sectors of the economy (from lower to higher-technological intensities). A total of 1331 valid responses were collected, composing a 21.7% response rate. As an emerging economy sample, around 75% were from low or medium-low technological intensity (according to OECD standards). 65% of which were characterized as non-professional family-run firms, 25% professionalized family-run firms, and 12% professionally-run firms.
We look at the influence of management capabilities on innovation performance (IP) across the different profile of firms in Brazil. Similarly to previously published results, management capabilities account for the biggest influence on the IP of firms in the general sample, followed by transaction and development capabilities (Alves et al, 2017). These are the dynamic capabilities of the firm, while operations represent a minor force as an ordinary capability of the firm described by Teece (2014). By stratifying firms by size and technological intensity, similar results are obtained. However, when stratification correspond to "management types" of firms from 'non-professional family-run firms' (NPFF) to 'professional-family-run firms'(PFF) and 'professionally-run firms' (PF), the configuration of capabilities that influence IP take quite interesting turns. While NPFF follows the general description above, for PFF, IP is explained by a combination of development, management capabilities and to lower extent transaction capabilities. For PF, however, transaction and specially development capabilities play the leading role in driving innovation. Surprisingly, management becomes less important and operations capabilities assume a more relevant role to innovation. This may suggest that, as firms professionalize, internal technological and specific capabilities are strengthened and operations eventually fully integrated becoming a source for competitive advantage.
Contribution to Scholarship
If during the mid-twentieth century, as a novel solution, management concentrated its efforts into the organization of mass production processes, the following years, flexible and dynamic production processes greatly increased the performance of management in companies (Lazonick, 1992). Within this scenario, change has increasingly become the constant as technology never reaches it's limit and innovation undergirds economic activity. As perfect efficiency and stability is impossible, management is needed to mitigate uncertainties and deal with changes (Langlois, 2003). The goal of management capability goes beyond simple planning and control; its key role is to deal with the paradox of stability and change in order to allow innovations to occur (Pufal et al, 2014). This paper highlights the often neglected role of management capabilities to innovation. We hope this study contributes to the understanding of how management capabilities change and influence innovation across different types of firms, specially in emerging economies.
Contribution to Practice
This paper contributes to practice as it provides firms and decision makers with an instrument for assessing companies' capabilities allowing firms to eventually track and design a pathway based on priorities for strengthening and later building innovation capabilities over time. The study highlights the importance of firms’ heterogeneity and the need for policymakers to consider the diverse groups of firms when creating public policies to stimulate dynamics and economic growth.
This paper is fit the proposed theme as it brings light to one of the key obstacles brought about by The World Bank study on the “Innovation Paradox” for emerging economies: managerial skills and management capabilities as a base-step for innovation.
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Zawislak, P. A., Cherubini Alves, A., Tello-Gamarra, J., Barbieux, D., & Reichert, F. M. (2012). Innovation capability: From technology development to transaction capability. Journal of technology management & innovation, 7(2), 14-27.