Analysis of the Variables Leading to the Identification and Incorporation of Innovation Capabilities by Firms in the Colombian ICT Sector.
| Autor | Pineda, Vanessa Garcia |
Introduction
Different authors have studied innovation capabilities (ICS); among these, some authors consider seven constituent ICS (Yam et al., 2004). These capabilities involve each organizational area and work in conjunction so that firms can achieve innovative results and be more competitive. ICS can be defined as the abilities of an organization to deploy and coordinate its various resources (usually in combination) to attain its goal (AlNuaimi & Khan, 2019). Their importance lies in the fact that they make it possible to determine a firms' level of innovation. However, the development of ICS in a firm requires quite a long time and cannot be merely attributed to the existence (or lack) of institutional incentives to build or develop them (Zhang & Merchant, 2020). Thus, organizations must deeply recognize their tangible and intangible resources, as well as their skills and knowledge, since resources that are valuable, rare, inimitable, or inherent in the organization (i.e., nonmarketable) are essential for a superior performance over competitors (Zhang & Merchant, 2020).
Knowledge is one of firms' main assets, and their learning capability is vital for knowledge development and growth. As stated by Zhang and Hartley (2018), ICS accumulate and change over time as organizational learning takes place. Therefore, they constitute a dynamic capability. With that in mind, addressing ICS becomes essential for strengthening the information and communications technology (ICT) sector. For instance, in Colombia, the sales of this economic sector--which consists of approximately 4,000 firms--amounted to COP 8.98 trillion in 2014 (MinTIC, 2019a). In addition, the contribution of the ICT sector to the country's GDP grew by 4.04% in the first two quarters of 2019 (MinTIC, 2019b). This industry is highly relevant given the current demand for technologies--the focus of the Fourth Industrial Revolution--in all production and knowledge areas, as the emergence of this revolution has led to a greater use of digital tools in various fields and at different levels. High-tech digital devices, platforms, and environments are increasingly being implemented to improve productivity, efficiency, and sustainability (Balogun et al., 2020). Furthermore, this sector is considered to be one of the most productive due to its technological base and automation-oriented approach.
Several studies into ICS in ICT firms have been developed around the world. Nevertheless, only a small group of authors in Colombia has specifically focused on studying these capabilities, mainly from a technological perspective (Arias & Castano, 2014). Hence, in light of the studies conducted so far, theoretical contributions regarding ICS applicable to this sector and with a highly representative power in the local and global economy must be made. For this reason, in this paper we will examine the variables leading to the identification and incorporation of ICS by ICT firms, applying these variables to the specific case of the city of Medellin, Colombia.
In line with the above, targeting this study to the case of the ICT sector in Medellin turns out to be relevant not only because this city is the epicenter of the Fourth Industrial Revolution in Colombia, but also because Medellin is the city that invests the most in science, technology, and innovation activities (ACTi) in the country, according to the Observatorio Colombiano de Ciencia y Tecnologia (2019). In addition, as a strategic line for economic and territorial development from a knowledge management approach, Medellin has been proposed as the Software Valley (Alcaldia de Medellin, 2020).
Through a systematic literature review (SLR) in the 6 most relevant international bibliographic databases, we can contribute to the analysis of the state-of-the-art on ICS within the ICT sector. This methodology seeks to reduce the biases inherent to subjective reviews. In addition, an SLR helps to conduct an auditable, orderly, and reproducible search process in order to critically assess the studies that satisfy the predefined research needs and questions (Macias et al., 2018). Additionally, it allows to approach some of the main focuses and determinants in the incorporation of these capabilities into the organizational structures of firms in the ICT sector. As a result of this incorporation, firms could strengthen their competitiveness in said sector. Finally, this type of research contributes to the analysis and interpretation of the literature on ICS across different production sectors, making it a relevant and representative topic to be addressed.
Theoretical basis
Literature review on innovation capabilities
Nowadays, firms face stiff competition. The need to be flexible and quickly respond to changes requires them to diversify and transform themselves. In this regard, innovation allows firms to add value to their services, products, or processes in order to differentiate in the market and achieve a competitive advantage. According to Chen and Cates (2018), the innovation capacity is a vital element for the competitiveness of organizations. In other words, "the more innovative a firm is, the more dynamic capabilities it possesses and the more likely it is to have superior performance" (Zhang & Merchant, 2020, p. 2). Therefore, a firm's ability to innovate is a critical success factor for its growth and performance (AlNuaimi & Khan, 2019).
In fact, in his five-forces framework, Porter makes it very clear that a fundamental aspect to define a firm's strategy is "to identify those strategic innovations that would most improve the industry's--and its own--profitability" (Porter, 1985, p. 7). Nonetheless, some characteristics prior to innovation, as well as a firm's own competencies and skills, allow them to be innovative. An innovation capability (IC) can be understood as the result of a nonlinear and cumulative learning process that is difficult to transfer (OECD & Eurostat, 2007).
Moreover, since innovation leads organizations to achieve a competitive advantage through investment in different resources and research and development (R&D) projects, ICS enable firms to have higher profits and returns on investment, as well as a greater positioning in the market (Macias et al., 2018). The R&D globalization phenomenon has actually been increasingly used to improve firms' ICS, increase their foreign market share, attract talents, and reduce R&D costs (Fan et al., 2019).
Other authors define ICS as a "comprehensive set of characteristics of a firm that facilities and supports its technological innovation strategies" (Burgelman et al., 2008, p. 1). For this reason, an IC "accumulates as a result of the various internal and external inputs" (Romijn & Albaladejo, 2002, p. 1056). From the resource-based view (RBV), those internal inputs are made up of the firm's human capital, which is understood as the employees' knowledge, skills, and internal efforts to improve firms' technology and technological tools. This translates into resources that are valuable, rare, inimitable, or inherent in the organization and essential to achieve a superior performance over competitors (Zhang & Merchant, 2020).
According to Garcia-Osorio et al. (2014), ICS can be defined as a set of characteristics or competencies that, when managed correctly, allow firms to have a good competitive performance. Thus, ICS enable organizations, through the improvement of their daily skills, to foster dynamic and absorptive capabilities to achieve better financial results (Felicio et al., 2019).
Consequently, in order to provide an in-depth analysis of ICS, these concepts should be defined, or the metrics that have been proposed to assess them must be addressed. Regarding the latter, studies into ICS have applied different metrics to quantify the level of accumulation of capabilities with respect to an ideal or reference value (Robledo et al., 2010), and most authors usually follow the metrics proposed by Yam et al. (2004). However, there are other metrics that are also often used, such as the Capability Maturity Model (CMM) adapted by the Business Process Management (BPM) discipline and introduced by Wang et al. (2008).
Table 1 provides a list of ICS along with their definition, based on the models proposed by each author. We may assert that all the proposed models are closely related and that the differences among them are few. For instance, they all include R&D, marketing, strategic planning, and resource allocation capabilities. It should be noted that the learning capability is one of the most important because knowledge absorption and accumulation is materialized in the different activities carried out by organizations (OECD & Eurostat, 2007). In addition, knowledge as a basis for change in companies allows firms to act effectively in order to obtain results in a rapidly changing environment (Gutierrez, 2019).
Based on the above, firms should incorporate these ICS into their daily activities and adopt them as a routine so that they can grow and strengthen their IC to achieve consistent innovative results (Essmann & Preez, 2009). Considering that ICS represent a key learning capability that is built from firms' R&D activities and innovative experiences (Lopez-Mielgo et al., 2012), it is important to recognize that the more difficult it is to understand knowledge, the more likely it is that a firm's R&D result will become a private asset with a greater indirect effect (Kim & Park, 2019). However, the R&D capability remains one of the scantest because it "tends to be concentrated in relatively few entities, particularly in the Business enterprise sector" (OECD, 2015, p. 180).
In this same vein, it is relevant to indicate that absorption capacity turns out to be a vital component so that the organization can continue to build on the knowledge of the company and continue to nurture this component, strengthening not only its internal but also external...
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