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Measuring and Explaining Innovative Capability: Evidence from Southeast Asia

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  • Tomohiro Machikita
  • Yasushi Ueki

Abstract

type="main"> What causes firm-level product innovation in developing economies? This paper answers this question by emphasizing the role of process improvements that are influential in product innovation. We construct a firm-level innovative capability score using novel, broad-based, but detailed data on various process improvement practices obtained from firms in Southeast Asia. We then investigate the factors that may affect innovative capability. We also estimate the effect of the innovative capability score on product innovation controlling for research and development intensity and other firm characteristics. Our empirical investigation identifies a chief executive officer (CEO)'s past experience at a foreign or large firm, and buyer pressure to adopt international standards as key determinants of innovative capability. Novel and unique findings from our examination include: (i) the impact of a CEO's past experience at a foreign or large firm on the innovative capability is larger for local enterprises and small- and medium-sized enterprises; (ii) the impact of share of foreign workers in the upper managerial levels only appears to be significant in foreign firms and larger firms; and (iii) buyer pressure is a more likely contributor to innovative capability compared with capital tie-ups with multinational enterprises or joint venture buyers that capture vertical technology transfers. Finally, our empirical results show that a firm in Southeast Asia is more likely to achieve product innovation if the firm has had a higher innovative capability.

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  • Tomohiro Machikita & Yasushi Ueki, 2015. "Measuring and Explaining Innovative Capability: Evidence from Southeast Asia," Asian Economic Policy Review, Japan Center for Economic Research, vol. 10(1), pages 152-173, January.
    • Handle: RePEc:bla:asiapr:v:10:y:2015:i:1:p:152-173
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    Cited by:

    1. Masatsugu Tsuji & Hiroki Idota & Yasushi Ueki & Hidenori Shigeno & Teruyuki Bunno, 2016. "Connectivity in the Technology Transfer Process among Local ASEAN Firms," Contemporary Economics, University of Economics and Human Sciences in Warsaw., vol. 10(3), September.
    2. Takatoshi Ito & Kazumasa Iwata & Colin McKenzie & Shujiro Urata, 2015. "Innovation in East Asia: Editors' Overview," Asian Economic Policy Review, Japan Center for Economic Research, vol. 10(1), pages 1-18, January.
    3. Cassey Lee & Dionisius Narjoko, 2015. "Escaping the Middle-Income Trap in Southeast Asia: Micro Evidence on Innovation, Productivity, and Globalization," Asian Economic Policy Review, Japan Center for Economic Research, vol. 10(1), pages 124-147, January.
    4. Zhang, Man & Hartley, Janet L., 2018. "Guanxi, IT systems, and innovation capability: The moderating role of proactiveness," Journal of Business Research, Elsevier, vol. 90(C), pages 75-86.
    5. Ganeshan Wignaraja, 2015. "Comment on “Measuring and Explaining Innovative Capability: Evidence from Southeast Asia”," Asian Economic Policy Review, Japan Center for Economic Research, vol. 10(1), pages 174-175, January.

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