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Motives for co-operation in innovation: Evidence from the 2005 Canadian Survey of Innovation
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by Tobias Schmidt, Department of Industrial Economics and International Management, ZEW Mannheim, Germany
This article summarizes the findings of an econometric study using data from the 2005 Canadian Survey of Innovation. The study looked at the decision of firms in the Canadian manufacturing sector to co-operate on innovation projects. The analysis reveals that the factors influencing the decision to co-operate in order to access external knowledge are very similar to those influencing cost-sharing motives. It also finds that public funding leads firms to co-operate in order to access external knowledge and research and development (R&D).
About this article
Context
Findings
References
About the author
About this article
This study was conducted while the author was visiting Statistics Canada as a visiting researcher in September 2006. Without the support of Fred Gault and his team in SIEID, as well as the financial support of the ZEW Mannheim, this study would not have been possible. The results of the analysis were published as a ZEW Discussion Paper (No. 07 - 018).
More information about the Survey of Innovation is available here.
The statistical unit of the survey is the establishment. In the text that follows “establishments” are referred to as “firms”.
Since the study addresses co-operation with external partners only, six firms which were co-operating only with other firms within their larger firm were excluded.
Context
“Yahoo!, eBay link up for online showdown” (The Gazette 2006) and “Ebay talks to Microsoft, Yahoo about foe” (Wall Street Journal Europe 2006) were the headlines that accompanied the discussions about a possible co-operative arrangement between some of the major players in the Internet and online search business. This is just one example of the growing importance of co-operation between firms in recent years. Co-operation between firms, and between firms and public research institutes, have not been confined to marketing or sales alliances; they have increasingly been targeted at R&D and innovation activities as well. Shorter product-life cycles, more complex technologies and increased possibilities to share knowledge and research results have led firms to seek partners for their R&D and innovation activities.
Initiated by this increase in inter-firm co-operation, a large body of empirical and theoretical literature on firms' motives to co-operate on R&D and innovation activities has accumulated (for example, see Hagedoorn 1993). The starting point for the analysis presented here is the firm's motives for conducting joint innovation activities. The model used is similar to that used in other studies which differentiate between different co-operation partners (Kaiser 2002, Belderbos et al. 2004). The focus here, however, is not on investigating the motives for cooperating with a certain partner, but rather to develop a typology of firms that co-operate for a given reason. To be more precise, this study looks at how firms' characteristics and measures of innovation activities influence their decision to co-operate on innovation with respect to their underlying motives.
Findings
Motives for innovation co-operation
Statistics Canada's Survey of Innovation 2005 contains a number of questions on firms' innovation co-operation behaviour, like the type of partner and their geographical location, and the motives for innovation co-operation. The latter is the main focus of this study. The survey asked firms to indicate their motives for innovation co-operation between 2002 and 2004 in two broad categories: development of innovation and commercialization of innovation. The first category covers sharing of costs, accessing R&D and accessing critical expertise, prototype development and scaling up production processes. The second category contains two commercialization motives: access to new markets and access to new distribution channels.
Table 1 presents some expanded figures for the different motives for innovation co-operation. The most important motive for co-operation across all industry types is to access external knowledge (R&D and critical expertise). Over 81% of all firms that co-operated between 2002 and 2004 did so for this reason. By comparison, commercialization motives (sharing costs and scaling up production processes) were less important; however cost-sharing was relevant to more than half of co-operating firms in science industries (53.7%) and specialized industries (64.2%), while scaling up production processes was cited as an important motive for R&D co-operation by 53.3% of co-operating firms in scale-intensive industries.
Table 1
Percentage of firms that co-operated on innovation activities for a given motive between 2002 and 2004, by industry type
Factors influencing motives for innovation co-operation
In order to be able to characterize firms that co-operate in innovation and R&D for various reasons, an econometric analysis was performed. The value of the dependent variable was set to one if a specific motive was used, while a set of firm characteristics and measures of innovation activities were used as the independent variables. Since a single firm may co-operate for many reasons, the decision to co-operate by the various reasons was estimated together rather than separately (using a multivariate probit). The weight of each observation was also taken into account in the empirical model. Regressions were performed on 4,021 observations, representing 10,860 firms.
The findings indicate that firms which co-operated in order to share the costs of developing innovative products and processes, and those that co-operated on innovation activities in order to access external knowledge are quite similar. Both have R&D activities that are relatively more oriented towards basic than applied research, and both are large and more often belong to industries related to science. Both also assign a high importance to strategic and formal protection methods. In other words, these firms are more research-oriented than other firms.
Firms that co-operated in order to scale up production processes and to commercialize innovations are more difficult to describe. For both groups, only a few significant variables were found. Both groups are similar in that the innovation intensity—measured as the share of innovation expenditures in total sales—has a positive effect after a certain threshold is reached, while the share of employees with university degrees and the share of employees involved in R&D activities do not.
Some evidence that public funding increases the flow of knowledge between actors in the national system of innovation was also found. Innovators are more likely to co-operate in order to get access to external R&D and expertise if they receive public funding than if they do not receive public funding.
References
Belderbos, R., M. Carree, B. Diederen, B. Lokshin and R. Veugelers (2004). Heterogeneity in R&D Cooperation Strategies. International Journal of Industrial Organization, 22 (8-9), 1237-1263.
Hagedoorn, J. (1993). Understanding the Rationale of Strategic Technology Partnering: Interorganizational Modes of Cooperation and Sectoral Differences. Strategic Management Journal, 14 (5), 371-385.
Kaiser, U. (2002). An Empirical Test of Models Explaining Research Expenditures and Research Cooperation: Evidence for the German Service Sector. International Journal of Industrial Organization, 20 (6), 747-774.
The Gazette (2006). Yahoo! eBay link up for online showdown. B6, Issue: May 26.
Wall Street Journal Europe (2006). Ebay talks to Microsoft, Yahoo about foe. p. 5, Issue: April 24.
About the author
At the time this article was written, Tobias Schmidt was with the Department of Industrial Economics and International Management, ZEW Mannheim, Germany. For more information about this article, please contact sieidinfo@statcan.gc.ca.
