1. University of Ljubljana
The Institute of Economics
F A C U L T Y O F
E C O N O M I C S
Zagreb
Competencies driving innovative performance of Slovenian and Croatian manufacturing firms
Janez Prašnikar,
Tanja Rajkovič
Faculty of Economics, University of Ljubljana
Maja Vehovec
The Institute of Economics, Zagreb
GDN
Zagreb, 27th November 2008

2. Presentation outline Theoretical background Competencies in R&D
University of Ljubljana
Presentation outline
F A C U L T Y O F
E C O N O M I C S
Theoretical background
Competencies in R&D
Operational model
Survey design
Clustering
Complete sample
Comparison between Slovenian and Croatian firms
Conclusions
Research propositions - hypotheses

3. Theoretical background Competencies in R&D - NPD
University of Ljubljana
Theoretical background Competencies in R&D - NPD
F A C U L T Y O F
E C O N O M I C S
NPD stages
Competencies
Business/market analysis
Technical development stage
Product testing
Product commercialization
Technological
competencies
Technical feasibility of products
Engineering studies, establishing product designs, prototyping
Influencing consumer tests design and results interpretation
Production plans and ramp-up
Marketing
Evaluation of market impacts of product feature options
Facilitating product feature decisions
Sample selection, testing, analysis
Marketing plans, product promotion, distribution
Complementary
(integrative/ integration/ combinative) competencies
Aligning new product features with potential customers’ needs, assessment of needed investment and risks
Alignment of technological and marketing knowledge
Translating testing results in design modifications
Coordination of production planning and demand management activities
Adapted after Swing & Song (2007), Fowler et al. (2000), Coates & McDermott (2002).

4. Theoretical background Competencies in R&D
University of Ljubljana
Theoretical background Competencies in R&D
F A C U L T Y O F
E C O N O M I C S
Source of competitive advantage
(Competence based theory, (Hamel & Heene, 1994))
Sustainable and synchronized utilization of resources
Spread across multiple products, markets, functions
Network of capabilities
Unlike capabilities not product and industry specific
COMPETENCIES
Cross industry comparisons

5. Operational model Environmental turbulence Technological competencies
University of Ljubljana
Operational model
F A C U L T Y O F
E C O N O M I C S
Environmental
turbulence
Technological competencies
Marketing competencies
Complementary competencies
Innovative performance
Business
performance
Non-financial measures of NPD process outcomes

6. Survey design Target segment:
University of Ljubljana
Survey design
F A C U L T Y O F
E C O N O M I C S
Target segment:
Manufacturing companies: CPA 2002 classification - products under code D (manufactured products) without product related industrial services
Medium size, large companies
Active during
Population: NSLO = 382, NCRO = 512
Preliminary results – valid responses:
 SLO: 50 firms, 65 product lines
 CRO: 36 firms, 40 product lines
Questionnaire:
Initially tested in 12 companies
Mailed by post
Targeted at R&D management
Questionnaire structure:
Self-assessment questions on competencies, innovative performance and NPD relative to main competitors (5-point scale)
Environmental turbulence (5-point Likert scale)

7. Operational model - variables
University of Ljubljana
Operational model - variables
F A C U L T Y O F
E C O N O M I C S
Technological competencies
Variables:
Advancement of R&D
Number of quality technological capabilities inside the firm or through STP
Prediction of technological trends
Marketing competencies
Variables:
Obtaining information about changes of customer preferences and needs
Acquisition of real time information about competitors
Establishing and managing long-term customer relations
Establishing and managing long-term relations with suppliers
Variables:
Good transfer of technological and marketing knowledge among business units
The intensity, quality and extent of R&D knowledge transfer in co-operation with strategic partners
Cost efficiency of product development
Clearly defined activities of business units in the corporate strategy of our firm
Complementary competencies

8. Operational model - variables
University of Ljubljana
Operational model - variables
F A C U L T Y O F
E C O N O M I C S
Baseline model:
Number of modified, improved and completely new products in period
Quality of products
Technological competencies
Marketing competencies
Complementary competencies
Innovative performance
New product development variables:
Time needed to develop an improved product (incremental innovation)
Time needed to develop a new generation product (radical innovation)
Contribution of the firm to
industry trends (trend setting)
Innovation VS imitation strategy

9. Clustering Identified 3 clusters of product lines by using:
University of Ljubljana
Clustering
F A C U L T Y O F
E C O N O M I C S
Identified 3 clusters of product lines by using:
Hierarchical clustering (Ward’s procedure, Squared Euclidian distance)
Segments compared using ANOVA (post hoc Duncan test, P<0,05)
Clustering performed on innovative performance variables
Clusters identified:
Technology followers with weak competencies
(Nproduct lines=43, Nfirms=39)
Technology followers with strong competencies
(Nproduct lines=30, Nfirms=23)
Technology leaders
(Nproduct lines=36, Nfirms=34)

10. Innovative performance New product development
University of Ljubljana
Clusters compared
F A C U L T Y O F
E C O N O M I C S
Segments
Variables
Weak
followers
Strong
Leaders
Innovative performance
Number of modified, improved and completely new products in period
2,79
2,93
4,25 + ++
Quality of products
2,88
4,33
4,22
New product development
Time needed to develop an improved product
2,81
3,23
3,72
+++
Time needed to develop a completely new product
2,65
3,10
3,94
Contribution of the firm to industry trends
2,62
2,77
3,47
Imitation VS innovation strategy
2,14
2,57

11. Technological competencies Marketing competencies
University of Ljubljana
Clusters compared
F A C U L T Y O F
E C O N O M I C S
Weak
followers
Strong
Leaders
Technological competencies
Advancement of R&D
2,65
2,86
3,65 + ++
Number of quality technological capabilities inside the firm or through strategic partnerships
2,81
3,30
3,92
+++
Prediction of technological trends
2,70
3,07
Marketing competencies
Obtaining information about changes of customer preferences and needs
2,74
3,23
3,86
Acquiring real time information about competitors
2,93
3,56
Establishing and managing long-term customer relations
3,14
3,67
4,11
Establishing and managing long-term relations with suppliers
3,21
4,00

12. Complementary competencies
University of Ljubljana
Clusters compared
F A C U L T Y O F
E C O N O M I C S
Weak
followers
Strong
Leaders
Complementary competencies
Good transfer of technological and marketing knowledge among business units
2,79
3,47
3,56 + ++
The intensity, quality and extent of R&D knowledge transfer in co-operation with strategic partners
2,69
3,10
3,58
+++
Cost efficiency of product development
2,53
2,97
3,42
Clearly defined activities of business units in the corporate strategy of the firm
2,86
3,43
3,78
Other
Added value of new products
2,55
3,20
3,53
Cost efficiency of the firm
2,81
3,37

13. Clusters compared – Environmental turbulence
University of Ljubljana
Clusters compared – Environmental turbulence
F A C U L T Y O F
E C O N O M I C S
Environmental
turbulence
Technological competencies
Marketing competencies
Complementary competencies
Innovative performance

14. Clusters compared – Environmental turbulence
University of Ljubljana
Clusters compared – Environmental turbulence
F A C U L T Y O F
E C O N O M I C S
Technological turbulence:
Rapidly changing technology in the industry
High impact of new technologies on business operations
and competition and bring about big opportunities
Difficulty of predicting tech. changes in the next 2 to 3 years
Smaller technological changes represent tech. advances
Environmental
turbulence
Market turbulence:
Extremely high market uncertainty
Almost impossible to predict accurately the rapidly changing
tastes and demands of consumers
Unpredictability of activities of major competitors
Intensity of the competition in the industry

15. Clusters compared – Environmental turbulence
University of Ljubljana
Clusters compared – Environmental turbulence
F A C U L T Y O F
E C O N O M I C S
Technological turbulence:
Rapidly changing technology in the industry
High impact of new technologies on business operations
and competition and bring about big opportunities
Difficulty of predicting tech. changes in the next 2 to 3 years
Smaller technological changes represent tech. advances
Weak
followers
Strong
Leaders
3,35
3,47
4,11 + ++
Environmental
turbulence
Market turbulence:
Extremely high market uncertainty
Almost impossible to predict accurately the rapidly changing
tastes and demands of consumers
Unpredictability of activities of major competitors
Intensity of the competition in the industry

16. Clusters compared – Slovenian VS Croatian firms
University of Ljubljana
Clusters compared – Slovenian VS Croatian firms
F A C U L T Y O F
E C O N O M I C S
Weak
followers
Strong
Leaders
SLO
CRO
No. of product lines 24 18 19 9 22 13
No. of different companies 17 16 7 21
Technological competencies
Advancement of R&D
2,79
2,47
3,16
2,12
3,86
3,18 ++ +
Marketing competencies
Acquiring real time information about competitors
3,00
2,89
3,27
4,00
Establishing and managing long-term relations with suppliers
2,88
3,67
3,58
4,11
3,68
4,54
Complementary competencies
The intensity, quality and extent of research and development knowledge transfer in STP
2,46
3,33
3,55
3,69
Cost efficiency of product development
2,75
2,28
3,37
2,56
3,59
3,23

17. Clusters compared – Slovenian VS Croatian firms
University of Ljubljana
Clusters compared – Slovenian VS Croatian firms
F A C U L T Y O F
E C O N O M I C S
Weak
followers
Strong
Leaders
SLO
CRO
No. of product lines 24 18 19 9 22 13
No. of different companies 17 16 7 21
New product development
Time needed to develop a completely new product
2,42
3,00
2,63
4,22
3,73
4,23 + ++
Contribution of the firm to industry trends
2,33
2,47
3,33
3,32
3,77
Other
Cost efficiency of the firm
2,54
3,11
3,26
3,44
3,68
3,92

18. Conclusions Three distinct segments of firms/product lines
University of Ljubljana
Conclusions
F A C U L T Y O F
E C O N O M I C S
Three distinct segments of firms/product lines
Significant differences in competencies
Minor effect of environmental turbulence
Technological, marketing and complementary competencies are simultaneously developed by most innovative firms
Strong marketing and complementary competencies can compensate for weaker technological competencies
Croatian technology followers with weak competencies are comparably better in making use of external sources of knowledge than their Slovenian counterparts

19. Conclusions The Lisbon strategy agenda
University of Ljubljana
Conclusions The Lisbon strategy agenda
F A C U L T Y O F
E C O N O M I C S
For technology follower countries technological competencies may be costly/time consuming to acquire  marketing and complementary competencies as a mean of catching up via incremental innovation
Imitation as a strategy for gradually developing technological competencies
Encouraging R&D cooperation through STP
Encouraging innovations based on good market expertise