1. 6/7/2016 Innovation and Firms in Asia Lakhwinder Singh Punjabi University India

2. 6/7/2016 Firms and Asian Economies in Global Context  Dramatic shift of the sources of economic expansion from Western Developed Coutnries to the Asian continent  Increasing Economic Influence of Asian Countries and Firms  OFDI from Asia was US$ 383 billion in 2014  Contribution to World GDP 38%, Export Share 32.9% and 32.9% Manufacturing Value added  Asia Emerged as the Engine of Growth for the Global Economy

3. 6/7/2016 Economic Transformation of Asia  Increasing importance of industrial production (41.3%: 2010) in GDP.  Five out of the top ten most competitive industrial economies of the world (Japan, South Korea, Taiwan, Singapore, and China)  Forbes and Fortune Global list more than 172 ccompanies from Asia  Sources of economic growth have undergone significant transformation from capital accumulation to technological progress, especially in the first decade of 21st century.

4. 6/7/2016 The Rise of Asian Firms: Theory and Empirics  Emergence of Asian Firms as Global Players- Capturing Markets and Innovations Domains. Asian Firms successfully formed capabilities both during the Import Substitution and recent phase of globalization.  Coase-Williamson Theory-Firms are Islands of Consciousness Power in a sea of Market Transactions  Coase-Williamson Tradition stressed on the Costs of Formulating, Enforcing and Monitoring Contracts  Shifted the emphasis from Production of more resources to allocations of resources.

5. 6/7/2016 Evolutionary-Capability-Learning Theories of the Firm  Smith (1776) Expansion of the firm-Division of Labor and Enhancement of Skills (Capabities) through Learning-by-doing.  F H Knight (1921) Emphasised on the Role of Knowledge and Uncertainty in the existence and growth of firms.  Penrose (1959) incorporated the role of tacit knowledge and elusive nature of skills within the firm.  Nelson and Winter (1982) identified evolution of technical routines for producing goods by the firms.  Lundval (1992) and Freeman (1987) used NIS framework and emphasized the role of building innovative and learning capabilities.

6. 6/7/2016 Internationalization of Firms  Dunning's theory emphasized on the unique competitive advantage possessed by the firms. Motives of internationalization- Efficiency Seeking, Market Seeking and Strategic Asset Seeking.  Emerging body of empirical literature on the rise of influence of Asian firms emphasis on the role of innovative capability building in the firms through global interaction (Amman and Catwell 2012).

7. 6/7/2016 Internationalization of Firms  The process of innovation capability building in China, India, South Korea, Taiwan and Malaysia were conducted by Li and Cantwall (2012); Lee and Mathews (2012); Kale (2012); and Rasiah (2012) shows the rise of innovations in the Asian firms.  Theory of firm and empirical studies came to the conclusion that growth and internationalization of firms is complex and multidimensional phenomenon.  Transition of firms from imitation to innovation capabilities requires co-evolution of actors (firms) and its environment.

8. Country Product Innovation Process Innovations Organizational Innovations Marketing innovations Innovative Active Firms Innovative firms Per capita income US$PPP 2012 Japan19.620.228.822.93328.532545 South Korea13.5814.79.224.217.528231 China25.125.33029.17945 India12.1 3835.535.618.53285 Indonesia20.218.13955.232 4154 Malaysia43.644.137.750.25753.513676 Philippines37.643.957.850.454.450.23752 Average24.53 36.0037.2338.0332.7613369.71 Standard Deviation 11.9314.4114.1218.2112.5914.1612228.40 Coefficient of Variation 48.6458.7639.2248.9233.1143.2291.46 Table 1: Intensity of Innovative Manufacturing Firms across Asian Countries (Figures in percentages) Source: UNESCO (2015).

13. CountryMicroSmallMediumLargeTotal China21.27 India5.2198.40811.712.285.68 Indonesia6.27.16.4 Japan9.08615.02230.0611.27 Malaysia2732.9342.2334.2 Philippines1725.233.84231.2 Republic of Korea3.575.086.9716.444.0219 Table 2(a) Percentage of Product and Process innovators in manufacturing by size classes

14. CountryMicroSmallMediumLargeTotal China India36.646.5262.7647.3738.02 Indonesia3842.639 Japan25.6135.8149.8728.83 Malaysia33.33333.3346.2137.72 Philippines38.752.37066.957.8 Republic of Korea13.2918.6424.4743.4714.68 Table 2(b) Percentage of organizational innovators in manufacturing by size classes

15. CountryMicroSmallMediumLargeTotal China India34.06844.6257.4543.8635.53 Indonesia58.542.655.2 Japan21.424.9437.9322.85 Malaysia38.447.3964.1450.2 Philippines43.450.553.85350.4 Republic of Korea98.929.8321.629.16 Table 2 (c) Percentage of marketing innovators in manufacturing by size classes

16. CountryIndiaJapanRepublic of Korea Innovative Firms Innovative Active firms Innovative FirmsInnovative Active firmsInnovative Firms Innovat ive Active firms food product13.331.5231.4635.4316.7320.89 beverages21.838.1829.6433.7926.2132.31 Tobacco products8.315.27 textiles21.335.7741.6542.5411.716.91 wearing apparel21.636.7322.4630.137.58.18 Leather and related products22.746.124.9227.0710.5615.72 Wood and products of wood and cork, except furniture : manufacture of articles of straw and plaiting materials 11.521.4218.6523.242.516.47 Paper and paper products14.538.5121.4123.1411.8616.65 Printing and reproduction of recorded media23.2946.627.1227.995.499.3 Coke and refined petroleum products19.132.5835.3538.3821.132.11 Chemicals and chemical products19.535.745.6253.4137.2653.64 Basic pharmaceutical products and pharmaceutical preparations 29.740.4555.686030.271.81 Rubber and plastic products20.1946.730.213511.2615.96 Other non-metallic mineral products9.725.0214.4816.5413.517.15 basic metals14.330.4920.4125.2112.4515.72 fabricated metal products, except machinery and equipment 20.3834.8228.6133.3816.1622.51 Computer, electronics and optical products30.3752.5933.9139.8220.4331.36 Electronic-equipment23.3938.5636.443.8627.237.61 Machinery and equipment n.e.c.25.2341.4228.9135.2623.4330.73 motor vehicles, trailers and semi-trailers31.551.33328.2233.1614.3219.68 Other transport equipment16.127.49.513.414.418.9 furniture25.447.52425.218.619.3 Other manufacturing25.537.334.047.811.9 Repair and installation of machinery and equipment 22.234.412.715.9 Innovative firms in manufacturing18.535.628.533.017.524.3 Table 3 : Distribution of innovative and Innovative active Firms across industrial products

17. Country In House R&D Contracted- out (External) R&D Acquisition of Machinery, Equipment and Software Acquisition of external knowledge Training Market introduction and Innovations Other Preparations India35.511.467.616.139.216.714.8 Indonesia58.416.247.82746.559.394.2 China63.2722.16628.171.560.636.9 Malaysia69.2817.459.821.971.448.164.5 South Korea86.3714.851.911.447.32744.2 Japan55.9523.249.152.253.73738.3 Average61.4615.8557.0326.1254.9341.4548.82 Standard Deviation 15.275.917.9013.0412.4116.1824.96 Coefficient of Variation 24.8437.2813.8549.9222.5939.0351.12 Table 4: Types of Innovative Activities of Manufacturing Firms across Asian Countries (Figures in percentages)

19. Country Enterprise or enterprise group suppliers of equipment, materials and components or software Clients or customers Competitors or other enterprises in their sector Consultants, commercial laboratories or private R&D institutes Universities or other higher education institutions Government or public research institutes Conferences, trade fairs, exhibitions Scientific journals and trade/technical publications Professional and industry associations China49.4921.6359.729.6417.118.9324.726.6811.9714.77 India58.5443.358.9532.6316.827.9411.0329.7415.1424.46 Indonesia0.41.31.81.30.90.4 0.9 Japan33.6520.730.467.486.155.094.784.5722.88 Malaysia723939.633.939.617.117.325.122.923.2 Philippines70.749.566.237.921.210.17.121.716.715.7 South Korea47.3516.127.7211.283.393.936.066.665.164.92 Average47.4527.3640.6322.0215.027.6410.2016.4810.6812.40 Standard Deviation 24.7517.1422.8514.8313.315.328.3011.998.259.64 Coefficient of Variation 52.1662.6556.2367.3688.6069.6581.4272.7677.2677.70 Table 5: Sources of Inputs (information) rated highly important by innovative firms across Asian countries

20. Country Enterprise or enterprise group suppliers of equipment, materials and components or software Clients or customers Competitors or other enterprises in their sector Consultants, commercial laboratories or private R&D institutes Universities or other higher education institutions Government or public research institutes Indonesia25.715.9810.28.44.9 Japan31.4519.8816.915.714.37 Malaysia32.8528.821.1925.4720.7117.38 Philippines91.292.694.167.664.747.150 Republic of Korea 11.5112.758.086.279.9912.8 Average40.6736.6024.9524.7120.3819.89 Standard Deviation 35.7433.1324.6523.5115.7117.45 Coefficient of Variation 87.8990.5298.8095.1677.0987.74 Table 6: Interaction of innovative firms with institutions across Asian countries

22. CountryIndiaIndonesiaJapanMalaysiaPhilippines Republic of Korea Average Standard Deviation Coefficient of Variation Lack of funds within the enterprise or enterprise group 58.711.810.9950.4719.124.5627.6122.4281.23 Sources outside the enterprises 31.961.35.1946.1910.211.0617.6517.5599.46 High costs of innovation 36.031.311.9761.920.916.8324.8221.4486.37 Lack of qualified personnel 53.261.314.2438.3311.715.7722.4319.3786.35 Lack of information non technology 31.151.39.0120.478.211.7513.6510.5877.56 Lack of information on markets 34.821.37.5521.42109.3314.0712.0885.83 Difficulty in finding co- operation partners 1.36.3523.335.668.528.53100.17 Market dominated by established enterprises 24.321.35.264014.75.6115.214.7196.81 Uncertain demand for innovative goods or services 19.651.38.7736.99.914.4715.1712.2880.97 No need to innovate due to prior innovations by the enterprise 3.797.6124.472.8764.15 No need to innovate due to no demand 6.857.382.485.572.6948.28 Table 7: Highly important hampering factors reported by active innovative firms across Asian countries

23. CountryIndiaIndonesiaJapanMalaysiaPhilippines Republic of Korea Average Standard Deviation Coefficient of Variation Lack of funds within the enterprise or enterprise group 67.150.810.7938.1723.910.8125.2724.2477495.95465 Sources outside the enterprises 43.750.64.1232.214.53.9416.5183317.64584106.8258 High costs of innovation28.50.88.9845.11265.8119.216.8899987.96869 Lack of qualified personnel 44.210.611.135.339.55.9917.7883317.6288699.10352 Lack of information non technology 32.090.67.812.6113.33.4511.6416711.1857396.08354 Lack of information on markets 35.020.66.4513.248.23.5111.1712.44674111.4301 Difficulty in finding cooperation partners -0.65.6912.618.62.616.0224.77487979.29059 Market dominated by established enterprises 23.70.65.2534.4162.4313.7313.444797.92208 Uncertain demand for innovative goods or services 20.30.67.0932.4912.16.4113.16511.5404887.66028 No need to innovate due to prior innovations by the enterprise --46.627.43.425.361.94614136.30861 No need to innovate due to no demand --7.625.991312.429.75753.48165135.68179 Table 8: Highly important hampering factors reported by non- innovative manufacturing firms across Asian countries

25. 6/7/2016 Conclusions  Asian Firms Unlike Wester Developed Coutnries Firms are doing more social innovations compared with that of technological innovations.  Product and process innovations are stable and rising across Asian country firms.  There is increasing tendency towards catch up in innovation intensity among Asian country firms  There is high degree of concentration of innovations in large sized category of firms

26. 6/7/2016 Conclusion  Japan and South Korea are competing in the same category of broad product lines  Increasing tendency towards in-house R&D.  Weak National Innovation System Except Japan and South Korea  Deficiency of internal and external funds but related to stage of innovations.  Public policy should accord high priority to attend the problems of both innovative and non-innovative firms