Determinants of innovation in emerging market SMEs: Thirty-five years' evidence from advanced materials in Turkey

Abstract

This research investigates the dynamics of firm innovativeness in emerging markets. It explores how firms acquire knowledge externally, in what ways existing knowledge base and intensity of effort components of absorptive capacity contribute to the innovativeness of the firms. It also examines the complementarities arising from the favorable interaction of them in order to innovate. It addresses this question by examining change over a relatively long period of time - from 1967 onwards and comparing the trends in two different segments - `science-based' and `traditional' segments of the materials industry in Turkey. Multiple correspondence analyses and multinomial logistic regressions applied on a panel database with 408 observations suggest that while product/process improvement in science-based technology firms were achieved through knowledge acquisition via collaborative agreements during the period 1982-1996, their innovativeness shifted towards product/process development through firm-internal activities in the last period 1997-2001 and this shift was complemented by their aggressive approach to R&D and design, based on their dynamic managerial characteristics. Mature segment of the industry, on the other hand, followed a different route of first, during 1982-1996, conducting firm internal activities where they attempted reverse-engineering on the basis of arm's length technology purchases and then during 1997-2001 establishing collaborative agreements when their existing knowledge base has become insufficient. This shift was also accompanied by a lack of intensity of effort in areas other than design activities. Our findings suggest that while both existing knowledge base and intensity of effort in the firm are necessary conditions for innovativeness to complement the mode of technology acquisition, their mediating effect may cause differences according to the technological level of segments of a high tech industry.