Ways to Boost Firms' Innovation within Innovation Ecosystems: Case

of European ICT Firms

Viktor Prokop, Jan Stejskal and Petr Hajek

University of Pardubice, Faculty of Economics and Administration, Studentska 05, Pardubice, Czech Republic

Keywords: Innovation; Public subsidy; ICT firms; Knowledge transfer; EU

Abstract: Latest studies show that innovation ecosystems have a significant impact on the ability to innovate and the

firms´ innovation absorption in different regions of the world, as well as in various industries. Therefore, the

development of innovation ecosystems is at the forefront of interests of both entrepreneurs and the public

sector and elected representatives. ICT firms are an important segment in all developed countries. These are

firms that depend on the ability to produce innovation. Therefore, in this segment, it is possible to realize the

research focused on the impact and significance of the various determinants of innovation ecosystems. The

aim of this paper is to analyze the various determinants of innovation ecosystem within ICT industries in 10

European countries. It is possible to find determinants influencing ICT firms' innovations across EU

countries. We have found that “information resources” and “ability to co-operate” are main determinants

with the highest influence on innovation outputs (and or course on firms´ competitiveness). Knowledge

transfer from academia or in-house research is also other important determinants. However, ICT firms

prefer in-house research or purchasing knowledge in the open market. The results can be used for definition

of political implications and for preparing public policies, including government spending programs.

1 INTRODUCTION

In the rapidly changing globalized world, firms are

pushed to find new sources of competitive

advantage. Innovations play a key role and represent

one of the most recognized sources of this

competitive advantage, specifically within

information and communications technology (ICT)

industries. Innovations in these industries are

substantial and increasingly seen as an important

determinant of the competitiveness of individual

regions, but also of entire economies (Lee at al.

2016). Houben and Kakes (2002) conclude that ICT

investment is a crucial input into the production

function of each firm - ICT can affect its

productivity and overall economic growth. From this

conclusion essential it can be implied that ICT has

the potential to influence the growth of individual

economies, including different macroeconomic

indicators. These statements are supported by the

conclusions of other studies that demonstrate the

fundamental impact of ICT on the production of

innovative production (Jorgenson et al., 2011; Kim

et al. 2014; Díaz-Chao et al., 2015). Therefore, firms

entering ICT markets must dynamically respond to

the changes (on the supply and/or demand side),

flexibly adapt to them, or find various ways to come

up with innovations within their innovation

ecosystems.

Formerly, firms have primarily focused on their

internal sources (such as R&D and creativity) to

respond issues mentioned above and to protect their

original knowledge and competitive advantage. It is

clear from observing the practice that many

companies are not willing to make major

restructuring changes. These companies prefer to

maintain their current status and often do not invest

in their development and competitiveness (Narula,

2002). However, this “lock-in strategy” brings not

only advantages but also disadvantages such as

inability to share knowledge, the costs of research

and development and significant investments into

R&D facilities and technologies (Prokop and

Stejskal, 2017). On the other hand, firms that are

part of business networks, business clusters, or

regional innovation systems see various

opportunities for self-development (can compare

their situation with This paper aims situation of

other interrelated firms) and that offer to firms a

Prokop, V., Stejskal, J. and Hajek, P.

Ways to Boost Firms’ Innovation within Innovation Ecosystems: Case of European ICT Firms.

DOI: 10.5220/0008928700220028

In Proceedings of the 1st International Conference on IT, Communication and Technology for Better Life (ICT4BL 2019), pages 22-28

ISBN: 978-989-758-429-9

variety of ways to boost their innovation potential

and to create successful innovations. Interactions

(external and internal) between firms in network as

well as between other entities (e.g. universities,

scientific research organizations, governmental and

support bodies, etc.) create an important

entrepreneurial ecosystem based on cooperation and

knowledge transfer, which many innovative theories

(open innovations, triple-helix etc.) considers as a

basis for the ability to generate commercialize

changes (Jiao et al. 2016).

Aforementioned drivers of innovations, however,

influence firms’ performance in different ways. This

leads to the situation that not every firm achieves

successful innovations within its innovation

environment. Therefore, the ability of a firm to

produce successful change varies greatly and

depends on its ability to exploit potentially available

resources (including ICT as a crucial production

factor). These differences in the use of production

factors are often linked to the quality and efficiency

of the functioning of regional innovation systems or

ecosystems (Nam and Barnett, 2010). Our study is

therefore focused on analysis within ICT industries

in 10 European countries (the Czech Republic,

Cyprus, Bulgaria, Estonia, Slovenia, Croatia,

Hungary, Lithuania, Portugal, and Romania)

together. It allows us to find innovation determinants

influencing ICT firms´ innovation across these

countries and to provide benchmarks and practical

policy implications.

This paper is structured as follows. Next part

includes a literature review focused on innovation

determinants and ecosystems. Third part describes

data and methods. Next, results are shown and

discussed. In the last part, we discuss conclusions

and implications for firms and innovation policies.

2 LITERATURE BACKGROUND

Hundreds of research studies around the world have

shown that innovation is a key driver of

competitiveness and economic growth. The

dependence between the firm's ability to generate

innovation and its economic success and the firm’s

economic growth has been demonstrated. Khin et al.

(2010) show in their study that there are significant

differences in the ability to generate output in ICT

firms through new products or services. ICT firms

that are unable to generate innovation lose their

competitive advantage, do not reach high sales and

lose their market share in (often international)

markets. On the contrary, the production of

innovations provides an advantage over other firms;

it strengthens the market position and has the

potential to increase the market share and profit of

the firm. That´s why, innovations contribute to other

economic subjects such as customers (or society as a

whole) and strengthens the knowledge economy

attributes. To achieve the described benefits, it is

essential for the firm to apply the innovation

approach responsibly, and (i) be willing to react

dynamically, (ii) have a strategic plan involving the

production of innovations as an important corporate

aim, and (iii) have internal processes adapted to

innovations production. Moreover, firms are not

isolated and therefore they must to deal with the

rapidly changing innovation ecosystems including

external economic subjects to collaborate with and

bring important knowledge assets to the firm as

inputs to innovation processes (Pellikka and Ali-

Vehmas, 2016).

The described processes occurring in innovation

ecosystems have gradually caused a high

dependence of economic entities (including firms)

on information and communication technologies and

services (Yunis et al., 2018). Innovative ecosystems

are systemic and complex systems that emphasize

the importance of links between collaborators (both

internal and external), among which information but

also knowledge transfer takes place. The ability to

make effective use of ICT differentiates individual

roles in the ecosystem (including, for example, the

role of government as a rule maker or innovative

policies, financial schemes, and frameworks) (Oh et

al., 2016). By participating in the innovation

ecosystem, the firm can successfully face various

challenges (whether external or internal) (Adner and

Kapoor, 2010). On a number of circumstances and

influences that come from external environment

(exogenous: industry, strength of globalization,

increased dependence on ICT, willingness to

cooperate in a given industry, etc.), or from internal

firm environment (endogenous: quality of workers,

setting up innovation processes, firm strategy,

management, etc.) (Verbano et al. 2015).

Endogenous variables can be influenced by behavior

and decision making of the firm. Moreover, thanks

to these variables, the firms are fundamentally

different. Ketata et al. (2015) emphasizes that the

ability of a firm to produce sustainably innovation is

precisely the ability of the firm to work with the

external and internal variables of the firm's

innovative ecosystem. Following arguments above,

we propose own conceptual framework (see Fig. 1)

that include both external and internal factors,

operating within firms´ innovation ecosystems that

Ways to Boost Firms’ Innovation within Innovation Ecosystems: Case of European ICT Firms

represent most recognized determinants of

innovations. These are information sources,

cooperation, research and development, creativity

and skills. Scholars agree that the ICT industry is

very specific based on the Schumpeterian patterns of

innovation. Firms in the ICT sector have high

opportunity applications and diversified knowledge

base with high variability over time, short product

life cycles and rapidly changing technologies. This

corresponds to the fact that ICT firms face rapid

technological change and, therefore, are heavily

involved in R&D and cooperation activities whose

intensity seems to be a central moderator of

innovations (Stejskal et al., 2018; Bustinza et al.,

2019). Collaborating with supply chain partners,

competitors, universities, research organizations, and

governmental bodies leads to synergies, spill-over

effects (including knowledge spill-over effects) and

faster and cheaper innovation (Tojeiro-Rivero and

Moreno, 2019). A number of other studies have

shown that a the amount of knowledge that a firm

obtains from various information sources (from

clients, consultants, universities, scientific journals,

conferences etc.) is an important determinant of

innovative absorption and capacity. Creativity and

different types of managerial skills are other

determinants of this group (Leiponen and Helfat,

2010).

Figure 1: Conceptual framework

To find innovation determinants influencing ICT

firms´ innovation across selected European countries

and to provide benchmarks and practical policy

implications, we define following research question:

RQ: Which determinants boost firms´ innovation

within ICT industries in the EU?

3 DATA AND METHODOLOGY

The study uses survey data from Community

Innovation Survey (CIS) 2008-2010. It is a research

organized by Eurostat every second year and

concerns innovation, science and research questions

in different firms in many EU member states (the

questionnaire is the same in all participating

countries). The CIS questionnaire works with its

own definition of innovation: "a new or significantly

improved good or service introduced on the market."

Variables are binary; therefore, logistic regression

analysis was employed.

This allowed to explain the relationship between a

set of explanatory variables and discrete responses.

The discrete (binary response Y of an individual

unit) can be only two values, denoted by 0 or 1.

Other studies (Schneider and Spieth, 2013; Prokop

et al., 2019)) used the same approach using binary

logistic regression models dealt with ICT industries

in the following countries: the Czech Republic,

Cyprus, Bulgaria, Estonia, Slovenia, Croatia,

Hungary, Lithuania, Portugal, and Romania. Primary

data was truncated by Eurostat during the pre-

processing phase. This analysis worked with the pre-

processed data set of 10,799 ICT firms. Employed

models had to identify the variables that have a

significant impact on firms´ innovation production

across EU countries (in the research sample). And

the analysis uses a combined set of all ten EU

countries. This procedure gives the possibility to

analyze the results of a whole group of countries and

to define the implications that apply in each

analyzed country.

Independent variables (inputs) as follow (see Fig.

1) were selected for analysis in accordance with the

above-mentioned literary research and data

availability in the CIS questionnaire. We also

include control variables occurring within firms´

innovation environment.

4 RESEARCH RESULTS

Results in Table 2 show that information sources,

cooperation, and R&D represent most significant

sources of firms´ innovation within ICT industries in

selected countries. More specifically, variables as

follows “information sources” in framework of the

enterprise or enterprise group, “clients or

customers”, “conferences and scientific journals”

and “trade/technical publications” are the most

significant information sources that positively boost

ICT firms´ innovation. The results support the thesis

ICT4BL 2019 - International Conference on IT, Communication and Technology for Better Life

Table 1. Independent variables

Information

Sources

within the enterprise or enterprise group (SENTG); suppliers of equipment, materials,

components, or software (SSUP); clients or customers (SCLI); competitors or other enterprises

in your industry (SCOM); consultants and commercial labs (SINS); universities or other

higher education institutions (SUNI); government, public or private research institutes

(SGMT); conferences, trade fairs, exhibitions (SCON); scientific journals and trade/technical

publications (SJOU); professional and industry associations (SPRO)

Cooperation cooperation arrangements on innovation activities (CO)

Research and

development

engagement in intramural R&D (RRDIN); engagement in extramural R&D (RRDEX);

engagement in acquisition of external knowledge (ROEK); engagement in training for

innovative activities (RTR)

Creativity and

skills

graphic arts/layout/advertising (SGALA); design of objects or services (SDOS); multimedia -

combining audio, graphics, text, still pictures, animation, video, etc. (SMED); web design

(SWDS); software development (SSWD); market research (SMKR); engineering/applied

sciences (SENAP); mathematics/statistics/database management (SMSDM)

Control variables national market/other regions of the country (MARNAT); other EU/EFTA/CC market

(MAREUR); public funding from central government (FUNGMT); public funding from the

EU (FUNEU); enterprise part of a group (GP)

Source: own processing

Table 1 Results of Analyses

p-value Beta

Information sources SENTG .022** .115

SSUP .000*** -.218

SCLI .000*** .315

SUNI .741 -.024

SCOM .069* .106

SINS .009*** -.148

SGMT .200 -.105

SCON .004*** .176

SJOU .003*** .200

SPRO .007*** -.179

Cooperation CO .000*** .688

Research and

development

RRDIN .000*** .439

RRDEX .776 .034

ROEK .000*** .436

RTR .000*** .391

Creativity and skills SGALA .417 .053

SDOS .010** .172

SMED .021** .153

SWDS .948 -.004

SSWD .010** -.152

SMKR .461 -.045

SENAP .249 .085

SMSDM .491 -.047

Control variables MARNAT .559 -.071

MAREUR .325 -.099

FUNGMT .275 .164

FUNEU .029** -.322

GP .743 .035

Legend: * statistically significant at p=.10, ** at p=.05 and *** at p=.01

Source: own processing

Ways to Boost Firms’ Innovation within Innovation Ecosystems: Case of European ICT Firms

that ICT firms are dynamic, and their production is

dependent on the availability of new information and

knowledge. Therefore, the results confirm the

assumption that ICT firms will acquire new

knowledge in a variety of ways, including

knowledge transfer within an enterprise group or

transfer from the academic sector (Chen et al.,

2018). Based on these conclusions, it is possible to

confirm that the knowledge sector is an important

cooperation partner for ICT enterprises. Therefore,

cooperation and sharing of information allow firms

to use different types of knowledge (especially tacit)

from internal or external sources and create a new

product. ICT firms are aware of the importance of

knowledge resources and are trying to use every

opportunity to acquire commercializable knowledge.

The results confirm the findings of the study (Yunis

et al., 2018), which argue that ICT firms must be

able to adapt quickly to market changes, customer

requirements and wishes, and use all new

opportunities to supply the market with their own

innovative products. It increases the importance of

clients and customers as a significant source of

information. Journals, conference papers, and

technical publications consequently provide firms

with information about new ideas and inventions

that are crucial for innovations.

As we mentioned above and showed in Table 2,

firms´ research and development represent another

significant determinant of ICT innovations. Pieri et

al. (2018) stated in their study that research and

development (as an activity) has great potential to

influence firm innovation processes. Their study

confirms the importance of R&D for increasing

productivity, economic growth, the emergence of

knowledge spill-over effects in cooperative and

knowledge-based networks. In our study, we show

that internal R&D, gaining knowledge through

acquisition and using various types of training are

the most significant R&D activities in selected

European countries. These results are in accordance

with Sakakibara and Porter (2001) which pointed

that internal research activities and knowledge

acquisition in this form is effective and dynamic for

innovation processes of ICT firms.

Variables "training for innovative activities" and

"acquisition of external knowledge" increase the

potential of ICT firms through the learning

processes. In addition, these activities motivate them

to connect or interact with other firms in the

environment (Huang et al., 2015; Kim, Kim, and

Koh, 2014).

Surprisingly, creativity and skills did not play

such an important role in the process of ICT firms´

innovation. Design and multimedia are only

determinants that helped to boost these activities. No

significant relationship was examined for some

variables. Obviously, ICT companies are using other

assets to generate innovation. It is possible to

assume that ICT companies are often focused only

on one of the determinants of "creativity and skills",

which reduces the meaning of the results. For two

variables (market research and engineering / applied

sciences) negative relationships were recorded,

which can be justified by the low sample rate.

Control variables showed identical results to

other studies. The same results are also found for

funding from the European Union budget, which

leads to an increase in bureaucracy and a high

degree of inefficiency due to time delays.

This section also includes limitations of this

study. The limitation is mainly due to the quality of

the primary data, the frequency of the sample and

the restrictions on ICT companies. It can be assumed

that the sample is large enough that any statistical

errors or deviations will not significantly affect the

results. Similarly, it should be noted that the results

can only be applied to the research sample, not to all

farms.

5 CONCLUSIONS

Our study focused on analyzing the determinants of

the innovation ecosystem that ICT companies use to

innovate. The results show that many of the

determinants examined have a real and real impact

on competitiveness and innovative absenteeism.

Earlier studies underline the importance of the

innovation ecosystem, the results of our study are in

line and supportive.

It should be noted that ICT firms in a specific

economic environment, the European Union, have

been examined. We must confirm that it represents

an unconventional market environment where public

bodies (both transnational and national or regional)

significantly influence the emergence, evolution and

functioning of the innovation ecosystem in

individual countries as well as across the European

Union. In our opinion, this is a non-replicated

environment that can be perceived as a laboratory in

the context of the global economy.

Our results strongly emphasize the role of

cooperation and innovative resources, largely also

by the influence of R&D organizations. This is

mainly due to the efforts of public policies and

strategies tied to European strategic documents,

which aim at a high level of competitiveness using

ICT4BL 2019 - International Conference on IT, Communication and Technology for Better Life

modern technologies and knowledge. This

fundamentally affects ICT firms, as these external

political processes influence the internal processes

of these firms.

The resulting knowledge- and cooperation-based

environment significantly influences ICT firms, thus

it is creating the significant pressure on other firms

(as well as on suppliers or customers). They must

adapt and cultivate their knowledge potential to

make them attractive to ICT companies. It is

therefore a typical manifestation of the existence of

triple-helix relations between economic subjects.

ACKNOWLEDGEMENTS

This work was supported by a grant provided by the

scientific research project of the Czech Sciences

Foundation Grant No. 17-11795S.

REFERENCES

Adner, R., & Kapoor, R. 2010. Value creation in

innovation ecosystems: How the structure of

technological interdependence affects firm

performance in new technology generations. Strategic

management journal, 31(3), 306-333.

Bustinza, O. F., Gomes, E., VendrellHerrero, F., &

Baines, T. 2019. Product–service innovation and

performance: the role of collaborative partnerships and

R&D intensity. R&D Management, 49(1), 33-45.

Chen, T., Huang, G., & Olanipekun, A. 2018. Simulating

the Evolution Mechanism of Inner Innovation in

Large-Scale Construction Enterprise with an Improved

NK Model. Sustainability, 10(11), 4221.

Díaz-Chao, Á., Sainz-González, J., & Torrent-Sellens, J.

2015. ICT, innovation, and firm productivity: New

evidence from small local firms. Journal of Business

Research, 68(7), 1439-1444.

Houben, A., & Kakes, J. 2002. ICT innovation and

economic performance: the role of financial

intermediation. Kyklos, 55(4), 543-562.

Huang, K. F., Lin, K. H., Wu, L. Y., & Yu, P. H. 2015.

Absorptive capacity and autonomous R&D climate

roles in firm innovation. Journal of Business

Research, 68(1), 87-94.

Jiao, H., Zhou, J., Gao, T., & Liu, X. 2016. The more

interactions the better? The moderating effect of the

interaction between local producers and users of

knowledge on the relationship between R&D

investment and regional innovation

systems. Technological Forecasting and Social

Change, 110, 13-20.

Jorgenson, D. W., Ho, M. S., & Samuels, J. D. 2011.

Information technology and US productivity growth:

evidence from a prototype industry production

account. Journal of Productivity Analysis, 36(2), 159-

175.Ketata, I., Sofka, W., & Grimpe, C. 2015. The

role of internal capabilities and firms' environment for

sustainable innovation: evidence for Germany. R&d

Management, 45(1), 60-75.

Khin, S., Hazlina Ahmad, N., & Ramayah, T. 2010.

Product innovation among ICT technopreneurs in

Malaysia. Business Strategy Series, 11(6), 397-406.

Kim, E., Kim, J., & Koh, J. 2014. Convergence in

information and communication technology (ICT)

using patent analysis. JISTEM-Journal of Information

Systems and Technology Management, 11(1), 53-64.

Lee, S., Nam, Y., Lee, S., & Son, H. 2016. Determinants

of ICT innovations: A cross-country empirical

study. Technological Forecasting and Social

Change, 110, 71-77.

Leiponen, A., & Helfat, C. E. 2010. Innovation objectives,

knowledge sources, and the benefits of

breadth. Strategic Management Journal, 31(2), 224-

236.

Nam, Y., & Barnett, G. A. 2010. Communication media

diffusion and substitutions: longitudinal trends from

1980 to 2005 in Korea. new media & society, 12(7),

1137-1155.

Narula, R. 2002. Innovation systems and ‘inertia’in R&D

location: Norwegian firms and the role of systemic

lock-in. Research policy, 31(5), 795-816.

Oh, D. S., Phillips, F., Park, S., & Lee, E. 2016.

Innovation ecosystems: A critical

examination. Technovation, 54, 1-6.

Pellikka, J., & Ali-Vehmas, T. 2016. Managing Innovation

Ecosystems to Create and Capture Value in ICT

Industries. Technology Innovation Management

Review, 6(10).

Pieri, F., Vecchi, M., & Venturini, F. 2018. Modelling the

joint impact of R&D and ICT on productivity: A

frontier analysis approach. Research Policy, 47(9),

1842-1852.

Prokop, V., & Stejskal, J. 2017. Different approaches to

managing innovation activities: An analysis of strong,

moderate, and modest innovators. Engineering

Economics, 28(1), 47-55.

Prokop, V., Stejskal, J., & Hudec, O. 2019. Collaboration

for innovation in small CEE countries. E+ M

Ekonomie a Management, 22(1), 130-144.

Sakakibara, M., & Porter, M. E. 2001. Competing at home

to win abroad: evidence from Japanese

industry. Review of Economics and Statistics, 83(2),

310-322.

Schneider, S., & Spieth, P. 2013. Business model

innovation: Towards an integrated future research

agenda. International Journal of Innovation

Management, 17(01), 1340001-40.

Stejskal, J., Prokop, V., & Hajek, P. 2018. Leverage of

Knowledge Sources in Firm Innovation Activities:

The Case of European ICT Industries.

Tojeiro-Rivero, D., & Moreno, R. 2019. Technological

cooperation, R&D outsourcing, and innovation

performance at the firm level: The role of the regional

context. Research Policy.

Ways to Boost Firms’ Innovation within Innovation Ecosystems: Case of European ICT Firms

Verbano, C., Crema, M., & Venturini, K. 2015. The

Identification and Characterization of Open Innovation

Profiles in I talian Small and Mediumsized

Enterprises. Journal of Small Business

Management, 53(4), 1052-1075.

Yunis, M., Tarhini, A., & Kassar, A. 2018. The role of

ICT and innovation in enhancing organizational

performance: The catalysing effect of corporate

entrepreneurship. Journal of Business Research, 88,

344-356.

ICT4BL 2019 - International Conference on IT, Communication and Technology for Better Life