gaining competitive advantage by technological innovation

149 Pages·2006·3.13 MB·English

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"Research is the translation from money into knowledge.
Innovation is the metamorphosis of knowledge into money"
Editors of -RXUQDO(cid:3)RI(cid:3)%XVLQHVV(cid:3)&KHPLVWU\, Vol. 2, No. 1, January 2005

"Necessity is the mother of invention"
Plato in 5HSXEOLF, 360 BC

"Change is the essential process of all existence"
Mr. Spock in 6WDU(cid:3)7UHN, star date 5730.2
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This thesis was submitted for the MBA outreach program Corporate Strategy and Economic Policy.
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EURDG(cid:3)IUDPHZRUN(cid:3)RI(cid:3)HFRQRPLF(cid:3)SROLF\(cid:15)(cid:3)WHFKQRORJ\(cid:3)GHYHORSPHQW(cid:3)DQG(cid:3)WUDQVIHU(cid:15)(cid:3)JRYHUQPHQW(cid:3)UHJXODWLRQV(cid:3)
DQG(cid:3) D(cid:3) JOREDOO\(cid:3) FRPSHWLWLYH(cid:3) HQYLURQPHQW(cid:3) (cid:11)ZZZ(cid:17)PVP(cid:17)QO(cid:12)(cid:17)(cid:5)(cid:3) As technology development and
technology transfer as such were hardly addressed in the MBA-courses, I as a technocrat was
directly interested to fill this gap during the writing of my thesis. I want to thank those who assisted
me with my thesis and MBA-study.
At first, I’m indebted to Dhruba Lahiri for assisting me during the writing of this thesis. The study
actually started when Dhruba lectured his MBA course in Suriname in August 2005. Impressed by
his broad knowledge and interesting course subject "Strategy, Strategic Design and Behaviour", we
had our first discussions that directly resulted in the current topic of my thesis. Dhruba, it certainly
has been an interesting study. Further, I want to thank the students who assisted in the CIS
questionnaire and spent much more time than foreseen: R. Kartomo, R. Natha, S. Pahlad, M.
Mathura, M. Adhin, J. Doelpawiro, A. Kromokarijo, J.-A. Djojodimedjo, S. Mohan, and D.
Resodikromo. I want to express my sincere appreciation to Hans Lim A Po and the FHR staff for
bringing the MBA outreach program to Suriname, assisting us during our study, and giving me the
chance to enrich my knowledge. Finally, I want to thank all the students of MBA2 for the wonderful
time. The grant from the Research Advisory Board (OAR) of the Anton de Kom Universiteit van
Suriname for this study is greatly acknowledged.
This MBA study could not have been completed without the support of my family: Naomi, Noah,
Berenice and Manuela, I love you all.

Wim Jansze
November 20, 2006

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Nowadays, in the knowledge-based era, technological innovation is seen as the primary driver to
create and maintain competitive advantage. But how does a developing country like Suriname
encourage technological innovation? The research study aims at a path that Suriname should follow
to increase the technological innovation level to gain competitive advantage. This is either by the
innovative and entrepreneurial culture of the companies (nature path), or by government polices and
infrastructure inputs (nurture path), or the best of both (hybrid path). The study mainly concludes
that currently the longer ’nature’ path is being pursued to achieve technological advance, while the
shorter ’hybrid’ path is advised for the future. This hybrid path can only be adopted if on the one
hand government changes its politics, technology policy and focus, and on the other hand the
innovative nature of the companies is enhanced.

In this study, technology is defined by the knowledge embodied in product, process and practice,
whereas innovation is defined as a new or significant improved product introduced to the local
market, or the introduction within the enterprise of a new or significantly improved process.
Founded on recognized literature models, the conceptual AEC-innovation model was developed in
which nature and nurture are identified, and from which nature and nurture paths were derived.

For this research, the methodologies of questionnaire, interview and desk study were used. The
technological innovation achievement of firms was assessed by primary research by a questionnaire
among a sample of 352 selected firms and an interview with the shareholder of Prescrete NV. The
technology policy of government was assessed by secondary research by surveying published
documents.(cid:3)

The questionnaire held among the 352 firms focussed on product and process innovation, effects of
innovation, and factors contributing and hindering innovation. The survey showed that only one out
of six companies is innovative, whereas 80% of the firms are micro to small sized companies that
employ about 28% of the workforce. Effects of innovation and hampered activities show that
innovation is not seriously taken by most firms as the driver for competitive advantage.
Consequently, Suriname is ranked at 100 of the 125 countries in the Global Competitiveness Report.
Despite, the case study on Prescrete NV showed that the development and use of technology were
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its key sources of competitive advantage. Also, innovative firms are those with the ability to link
into knowledge networks. However, assessing the private sector as a whole it is concluded that
nature exists in Suriname, but is weak and needs to be enhanced.

The government of Suriname does not have a technology policy. Therefore, an assessment on
fourteen IDB pre-conditions for a innovative and competitive economy was done by studying
published documents of government and international organizations. It was concluded that the
financial sector is not solid, containing out-dated investment legislation. Further, the bad
international image of Suriname, with bad corporate credibility and a lack of entrepreneurship in an
underdeveloped infrastructure, where for example utility prices are not real, are negative factors for
Suriname. Consequently, it is concluded that government hardly nurtures, that also explains the
underdeveloped technology level in general.

It is recommended that via the hybrid path enhancing of the innovative capacity of the firms is
priority to achieve technological advance. This is on the one hand by enhancing the capabilities of
the firms in the management of technological innovation and cross-technology synergy, and on the
other hand above all by means of an implemented technology policy with business-friendly
infrastructure inputs. This is, among others, a technology policy that propagates that technology is
the basis for economic diversification and that enables better access to information and
communication technology. In general, promotion of entrepreneurship, a solid financial sector, and
good management capabilities in the public and private sector are prerequisites that serve both
nature and nurture. From the innovation systems perspective, the ability of enterprises to link into
the appropriate knowledge networks must be strengthened.
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An outlook on technological innovation shows that, when adopting the hybrid path, a pro-active
government should focus on a service-based strategy, combined with a focus strategy for firms. This
can give Suriname a competitive advantage that can lead to sustainable development of the country
and its inhabitants.

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ACKNOWLEDGEMENTS.................................................................................................................iii
EXECUTIVE SUMMARY.................................................................................................................iv
BRIEF CONTENTS............................................................................................................................vi
TABLE OF CONTENTS....................................................................................................................vii
LIST OF FIGURES............................................................................................................................xii
LIST OF TABLES..............................................................................................................................xii

GLOSSARY......................................................................................................................................xiii
CHAPTER 1 INTRODUCTION....................................................................................................1
CHAPTER 2 THEORETICAL BACKGROUND........................................................................13
CHAPTER 3 CONCEPTUAL AEC-INNOVATION MODEL...................................................26
CHAPTER 4 NATURE: INNOVATIVE CULTURE OF THE ENTERPRISES........................34
CHAPTER 5 NURTURE: GOVERNMENT POLICIES AND INPUTS....................................44
CHAPTER 6 BUSINESS CASE STUDY PRESCRETE NV......................................................56
CHAPTER 7 ANALYSIS, DISCUSSION AND OUTLOOK.....................................................62
CHAPTER 8 CONCLUSIONS AND RECOMMENDATIONS.................................................70
BIBLIOGRAPHY...............................................................................................................................74
(cid:3)
APPENDIX A Questionnaire for first-year students (in Dutch)................................................... 78
APPENDIX B Results questionnaire for first-year students ........................................................ 80
APPENDIX C 352 randomly selected numbers............................................................................ 84
APPENDIX D Survey among enterprises; CIS questionnaire...................................................... 85
APPENDIX E SPSS results CIS questionnaire............................................................................. 95
APPENDIX F Rating of government policies .............................................................................. 120
APPENDIX G Interview of the business case study Prescrete NV............................................. 122
APPENDIX H Stakeholders in the National Technology Strategy project................................... 131
ABSTRACT .................................................................................................................................. 134
CURRICULUM VITAE................................................................................................................ 135
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ACKNOWLEDGEMENTS.................................................................................................................iii
EXECUTIVE SUMMARY.................................................................................................................iv
BRIEF CONTENTS............................................................................................................................vi
TABLE OF CONTENTS....................................................................................................................vii
LIST OF FIGURES............................................................................................................................xii
LIST OF TABLES..............................................................................................................................xii
GLOSSARY......................................................................................................................................xiii

CHAPTER 1 INTRODUCTION....................................................................................................1
(cid:20)(cid:17)(cid:20) General..................................................................................................................................1
(cid:20)(cid:17)(cid:21) Background information.......................................................................................................2
1.2.1 Defining technology.....................................................................................................2
1.2.2 Defining Innovation......................................................................................................3
1.2.3 Technology leaders and followers................................................................................4
1.2.4 Phase model for innovation..........................................................................................5
1.2.5 Technology and innovation in Suriname......................................................................6
(cid:20)(cid:17)(cid:22) Research approach................................................................................................................9
1.3.1 Problem description......................................................................................................9
1.3.2 Main research question.................................................................................................9
1.3.3 Hypothesis....................................................................................................................9
1.3.4 Research model...........................................................................................................10
1.3.5 Central questions.........................................................................................................10
1.3.6 Methodology used in this research project.................................................................11
1.3.7 Limitations..................................................................................................................11
(cid:20)(cid:17)(cid:23) Contents of the thesis..........................................................................................................11
(cid:20)(cid:17)(cid:24) Summary.............................................................................................................................12

CHAPTER 2 THEORETICAL BACKGROUND........................................................................13
(cid:21)(cid:17)(cid:20) Introduction.........................................................................................................................13
(cid:21)(cid:17)(cid:21) A global perspective...........................................................................................................13
2.2.1 Sustainable development............................................................................................13
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2.2.2 Evolution of technology development........................................................................14
2.2.3 Comparative and competitive advantage....................................................................15
2.2.4 MNEs and innovation.................................................................................................17
(cid:21)(cid:17)(cid:22) A national perspective........................................................................................................18
2.3.1 National strategies.......................................................................................................18
2.3.2 National innovation systems (NIS).............................................................................19
2.3.3 Technology diffusion..................................................................................................20
2.3.4 Role of government in technology transfer................................................................21
(cid:21)(cid:17)(cid:23) An enterprise perspective....................................................................................................22
2.4.1 Entrepreneurship.........................................................................................................22
2.4.2 Management of technological innovation...................................................................23
2.4.3 Innovation, market structure and firm size.................................................................24
2.4.4 Business start-ups.......................................................................................................25
(cid:21)(cid:17)(cid:24) Summary.............................................................................................................................25

CHAPTER 3 CONCEPTUAL AEC-INNOVATION MODEL...................................................26
(cid:22)(cid:17)(cid:20) Introduction.........................................................................................................................26
(cid:22)(cid:17)(cid:21) Development of conceptual AEC-model............................................................................26
(cid:22)(cid:17)(cid:22) Description of phases in the conceptual AEC-model.........................................................28
3.3.1 Phase I: Technology diffusion....................................................................................28
3.3.2 Phase II: gradual innovation.......................................................................................28
3.3.3 Phase III: Radical innovation......................................................................................29
3.3.4 Phase IV: Technology buy-out...................................................................................29
(cid:22)(cid:17)(cid:23) Phase transition in the conceptual AEC- model.................................................................29
3.4.1 Phase I to phase II: Nature or nurture.........................................................................29
3.4.2 Phase II to phase III: Venture.....................................................................................31
3.4.3 Phase III to phase IV: Technology buy-out................................................................31
(cid:22)(cid:17)(cid:24) Evolution stages versus phases of innovation in enterprises..............................................31
(cid:22)(cid:17)(cid:25) Summary.............................................................................................................................33

CHAPTER 4 NATURE: INNOVATIVE CULTURE OF THE ENTERPRISES........................34
(cid:23)(cid:17)(cid:20) Introduction.........................................................................................................................34
(cid:23)(cid:17)(cid:21) Assessment of innovative culture of enterprises.................................................................34
4.2.1 Survey questionnaire...................................................................................................34
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4.2.2 Sample size and selection of source of population.....................................................35
4.2.3 Questionnaire process and response...........................................................................37
(cid:23)(cid:17)(cid:22) Descriptive results of the questionnaire..............................................................................38
4.3.1 General........................................................................................................................38
4.3.2 General information on the businesses.......................................................................38
4.3.3 General outcome of current innovativeness................................................................40
4.3.4 Effects of innovation...................................................................................................41
4.3.5 Public funding and innovation co-operation...............................................................41
4.3.6 Sources of information for innovation........................................................................42
4.3.7 Factors hampering innovation activities.....................................................................42
4.3.8 Protection methods for innovation..............................................................................42
4.3.9 Other important changes.............................................................................................42
4.3.10 Non-response analysis................................................................................................43
(cid:23)(cid:17)(cid:23) Summary.............................................................................................................................43

CHAPTER 5 NURTURE: GOVERNMENT POLICIES AND INPUTS....................................44
(cid:24)(cid:17)(cid:20) General................................................................................................................................44
(cid:24)(cid:17)(cid:21) Fostering science, technology and innovation....................................................................44
5.2.1 National Technology Strategy project........................................................................44
5.2.2 Proposed strategy for Suriname by IDB in 2003........................................................44
5.2.3 Current execution of the National Technology Strategy............................................46
(cid:24)(cid:17)(cid:22) Desk research material........................................................................................................46
5.3.1 Suriname medium planning report MOP 2006-2011.................................................46
5.3.2 World Bank Doing Business Report 2007..................................................................47
5.3.3 The Heritage Foundation Report on Economic Freedom...........................................47
5.3.4 World Economic Forum Global Competitiveness Report 2006-2007.......................48
(cid:24)(cid:17)(cid:23) Assessment on 14 IDB preconditions.................................................................................48
5.4.1 A stable economy, fiscal responsibility and stable rules of the game........................48
5.4.2 Prices should be real, especially foreign currency and utilities..................................49
5.4.3 Open economy, with a low tariff and bureaucratic barriers to the inflow and outflow
of goods, capital and people.......................................................................................................49
5.4.4 Low inflation, reasonable interest rates and tax structure..........................................50
5.4.5 Solid financial sector..................................................................................................50
5.4.6 International image.....................................................................................................51
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5.4.7 Good government, regarding bureaucracy, corruption and regulation.......................51
5.4.8 Basic and secondary education beyond a reasonable level.........................................52
5.4.9 Availability of trained workers...................................................................................52
5.4.10 Physical, utilities and telecom infrastructure..............................................................52
5.4.11 Basic health and sanitation.........................................................................................53
5.4.12 Corporate credibility and entrepreneurship................................................................53
5.4.13 Values and culture......................................................................................................53
5.4.14 Sound management capability in the private and public sector..................................54
5.4.15 Conclusion on pre-conditions.....................................................................................54
(cid:24)(cid:17)(cid:24) Summary.............................................................................................................................55

CHAPTER 6 BUSINESS CASE STUDY PRESCRETE NV......................................................56
(cid:25)(cid:17)(cid:20) Introduction.........................................................................................................................56
(cid:25)(cid:17)(cid:21) Motivation...........................................................................................................................56
6.2.1 Selecting Prescrete NV...............................................................................................56
6.2.2 Case research question................................................................................................57
(cid:25)(cid:17)(cid:22) Business case study.............................................................................................................57
6.3.1 General information onPrescrete NV.........................................................................57
6.3.2 Establishment of Prescrete NV...................................................................................57
6.3.3 Role of government....................................................................................................58
6.3.4 Technology strategy....................................................................................................58
6.3.5 Technological collaboration.......................................................................................59
6.3.6 Commercialization process.........................................................................................59
6.3.7 Operations and production..........................................................................................60
6.3.8 R&D............................................................................................................................60
6.3.9 New product development..........................................................................................61
6.3.10 Complexity, risk, knowledge, creativity, learning......................................................61
(cid:25)(cid:17)(cid:23) Summary.............................................................................................................................61

CHAPTER 7 ANALYSIS, DISCUSSION AND OUTLOOK.....................................................62
(cid:26)(cid:17)(cid:20) Introduction.........................................................................................................................62
(cid:26)(cid:17)(cid:21) Analysis and discussion of results......................................................................................62
7.2.1 Retrospective view on methodology...........................................................................62
7.2.2 Nature; discussion on innovative culture of the companies.......................................62
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