Persistence of innovations: determinants of persistence and the effect of openness on innovation persistence

Abstract

Due to the influence of innovation on the performance of firms, a significant body of knowledge has now been developed on firms’ innovation behaviour, especially innovation persistence. Innovation persistence is characterised by the relationship between past innovations and the current ones. This thesis contributes to the body of knowledge in innovation persistence by investigating persistence from three perspectives. First, this thesis investigates the innovation behaviour in times of unstable economic environment with the data covering the 2008 global financial crisis, while taking into account all four types of innovation and the effect of joint adoption. Second, this thesis seeks to deepen our understanding of the underlying causes of innovation persistence by examining the explanatory power of four theoretical explanations for the presence of innovation persistence with a novel measure of innovation persistence. This new measure indicates whether or not a firm continuously innovate. Finally, this thesis bridges the gap between the research fields of innovation persistence and open innovation. The importance of external linkages has been confirmed in a substantial body of innovation research. This thesis investigates how openness in terms of firms’ external search knowledge (i.e. search breadth and search depth) affects firms’ determination to persist in innovations.
The research data used in this thesis is acquired from U.K. Community Innovation Survey (CIS) which is conducted at regular intervals by the Office for National Statistics (ONS) in order to trace firms’ innovative behaviour over time. The research data is retrieved from three waves of the CIS, from the sixth to the eighth waves covering the period from 2006 to 2012. Since the period of the research data overlaps with the global financial crisis burst in 2008. This thesis is able to inspect firms’ behaviour of innovation persistence in the financial crisis time. Findings of this thesis show that firms continue to innovate in times of the global financial crisis. There is innovation persistence in the product, process, organisational and marketing innovations. Moreover, complementarities between innovations increase firms’ tendency to persistent in innovation. The joint adoptions of product and process innovations and product and organisational innovations enhance the persistence in the process and organisational innovations, respectively.
Prior studies have proposed four theoretical explanations for innovation persistence – 1) R&D sunk cost, 2) success-breeds-success, a virtuous cycle between innovations across time, 3) appropriation mechanisms used to protect firms’ innovation achievements, and 4) innovation competence which refers to firms’ capabilities to conduct innovations. The examinations of the four potential drivers of innovation persistence indicate that this potential reasoning behind innovation persistence is more capable of interpreting the underlying causes of persistence in product innovation than the persistence in the other three types of innovations – process, organisational and marketing. In addition, the determinants of innovation persistence change with the changing circumstances of the financial environment. Previous R&D investment does not encourage firms to persist in innovations during the global financial crisis period, but the R&D investment made in the crisis time stimulate firms to innovate continuously. The established external linkages encourage firms to continue to innovate in times of the global financial crisis while the same drivers have no significant influence on subsequent innovations after the global financial crisis.
The effects of external search strategies are more profound in the persistence in product innovation than that in the other three types of innovation. Firms that search broadly are more likely to conduct product innovation and also to persist in product innovation. Besides, search depth has a positive influence on the persistence in marketing innovation. The cost-benefits analysis is much easier to be applied to a produce-based innovation than to the other types of innovation because the output of a product-based innovation tends to be a tangible property whose value could be clearly assessed. This characteristic of product-based innovations makes it easier for firms to make a contractual or collaborative arrangements with external parties.
This thesis contributes to the literature by investigating innovation persistence in the context of an economic crisis and examining the underlying causes of innovation persistence This thesis also provides new insights of the effect of the openness, i.e. the firms’ external search strategies, on the firms’ propensity to continue to innovate.

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ORCID for Jagannadha Tamvada: orcid.org/0000-0002-1225-3174

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