Innovativeness in the Face of Decline: Performance Implications

Abstract

The recent global recession has focused efforts towards better understanding of both firm response and the outcome of that response to recession, or decline. Past research suggests that firms either respond by being conservative, reducing costs, etc., or, they proactively try to innovate out of the decline. This work examines the various responses to decline with respect to firm innovativeness. Using data from US manufacturing firms, it is shown that innovativeness has important performance implications even in dire economic times. However, increasing innovativeness levels during decline is not shown to be superior to maintaining innovativeness. Findings provide limited evidence that decreasing innovativeness is not a desirable downturn strategy. Potential, practical, and theoretical implications of the findings are presented.

Intra- And Extra-Organisational Foundations of Innovation Processes — The Information and Communication Technology Sector Under the Crisis in Portugal

“…Also, these are the companies that present relative increased presence in networks and internationalization patterns (Figure 1). These companies seem to follow the previously reported proactive innovation model during times of environmental decline or recession (Hansen, 2014;Srinivasan et al, 2005). Under this scenario, companies and their actors present confidence in their future.…”

“…In the opposite situation, companies with unfavourable conditions and more centralized decision-making processes are more likely to perceive innovation development as hinging on factors outside their control and to present lower frequencies of innovation outputs. These firms seem to engage on the previously reported conservative strategies to overcome the difficulties associated with periods of crisis (Staw et al, 1981;O'Malley et al, 2011;Hansen, 2014). These companies present relative decreased presence in networks and internationalization patterns, which reveals unequal access to and position in information and communication structures.…”

“…While some studies suggest that firms respond conservatively to environmental changes, decreasing costs, limiting information processing, increasing centralization and operational efficiencies, others suggest that firms adapt to changing environments engaging on proactive innovation strategies (Hansen, 2014;Nickell et al, 2013;Uzkurt et al, 2012). However the impacts of these strategies on firms' performance have shown divergent results, with some studies suggesting that increasing innovativeness through decline is financially beneficial (Nickell et al, 2013) while others not being able to support these premises (Hansen, 2014). As previously said, the overall innovation frequencies of the highly innovative ICT services' sector presented a 10% decrease between 2010 and 2012 (European Commission, 2014).…”

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“…All latent variables were acceptable, with the Cronbach's Alphas higher than 0.7. For further details on analysis please see Hansen (2014). Based on these findings, new composite variables were calculated using the mean of all remaining items in each variable.…”

Defining Mainstreams Of Innovation: A Literature Review

“…The expression "innovate or die" has been an accepted phrase in the popular business environment (Kavadas and Chao, 2007). Innovation is one of most important sources of competitive advantage (Hansen, 2014;Damanpour et al, 2009;Gunday et al, 2011;Lin et al, 2007;Abidin et al, 2013).The study of innovation hardly needs justification as scholars, practitioners and policy makers maintain that innovation is a primary source of competitive advantage, industrial change and economic growth (Boyne et al, 2006).…”