innovation in food sme’s

Wageningen University & Research Centre

Department of Social Sciences Management Studies Group

Innovation in Food SME’s

The current state of innovation management and innovation measurement in Food SME’s

Student: Eddy Bergsma (811117057010) MSc program: Management, Economics and Consumer Studies Specialization: Management Studies Supervisor: Dr. F.T.J.M. Fortuin Co‐reader: Prof. Dr. S.W.F. Omta Thesis: Management Studies, MST 80433, 33 ECTS Date: August 2010 Keywords: Innovation management, Innovation measurement, Food industry and SME’s

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Preface This report is written as a thesis for the Master Management Economics and Consumer studies at Wageningen University and Research Centre. During more than a year I studied innovation management in food SME’s, a very interesting topic that is still relatively unexplored. Although very interesting, this research appeared to be very difficult now and then. Luckily there were various people who supported me in difficult times and therefore I would like to take the opportunity to thank all involved in this research.

In the first place I would like to thank for the support I got from my university supervisors. During difficult phases in the research I could always fall back to the patient and encouraging support of Frances Fortuin. Together with Mersiha Tepic she provided me with constructive comments and new perspectives to look at problems.

Next to the university support this research would not have been possible without the collaboration of the Innexus network. I am very grateful for all the Innexus members who were willing to give me some insight in the innovation process within their companies.

Last but certainly not least I would like to show my gratitude to family and friends who encouraged me to persevere in my endeavours to complete this thesis. Special thanks go to my girlfriend Janneke who supported me in my struggle on a day to day basis.

Arnhem, august 2010

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Index Management Summary ......................................................................................................................7

1. Introduction ....................................................................................................................................9

1.1 Background of the research .......................................................................................................9

1.2 Research objective and research framework ........................................................................... 10

1.3 Research questions ................................................................................................................. 11

1.3.1 General research question ................................................................................................ 11

1.3.2 Sub research questions ..................................................................................................... 11

1.4 Outline of the thesis ................................................................................................................ 12

2. Theoretical framework .................................................................................................................. 13

2.1 Innovation ............................................................................................................................... 13

2.1.1 Definition of innovation .................................................................................................... 13

2.1.2 Dimension of the innovation concept ............................................................................... 14

2.1.3 Stages in the innovation process ....................................................................................... 16

2.1.4 Innovation metrics............................................................................................................ 17

2.2 Key aspects of innovation management .................................................................................. 19

Conceptual model ..................................................................................................................... 20

2.2.1 Environment ..................................................................................................................... 21

2.2.2 Innovation strategy .......................................................................................................... 22

2.2.3 Innovation Culture & Climate ........................................................................................... 24

2.2.4 Innovation resources ........................................................................................................ 26

2.2.5 Innovation competencies & capabilities ............................................................................ 27

2.3 Innovation in food SME’s ......................................................................................................... 28

2.3.1 Characteristics of innovation in food................................................................................. 28

2.3.2 Innovation in SME’s .......................................................................................................... 30

2.3.3 Cooperation in innovation ................................................................................................ 32

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2.3.4 Expectation on innovation in Food SME’s ......................................................................... 34

2.4 Overview of relations between key concepts ........................................................................... 35

3. Methodology ................................................................................................................................ 37

3.1 Research strategy .................................................................................................................... 37

3.1.1 Type of research ............................................................................................................... 37

3.1.2 Operationalization of the conceptual model ..................................................................... 38

3.2 Data collection ........................................................................................................................ 40

3.2.1 Desk research ................................................................................................................... 40

3.2.2 Questionnaire design ........................................................................................................ 41

3.2.3 Interviews ........................................................................................................................ 41

3.3 Analysis of results .................................................................................................................... 42

4. Study sample ................................................................................................................................ 43

4.1 The Innexus network ............................................................................................................... 43

4.2 The participating companies.................................................................................................... 43

5. Findings ........................................................................................................................................ 45

5.1 Environment ........................................................................................................................... 45

5.2 Innovation network ................................................................................................................. 46

5.3 Business and innovation strategy ............................................................................................ 48

5.4 Innovation resources ............................................................................................................... 51

5.4.1 Financial resources ........................................................................................................... 51

5.4.2 Human resources ............................................................................................................. 51

5.5 Innovation Culture & Climate .................................................................................................. 52

5.6 Innovation competencies ........................................................................................................ 54

5.7 Innovation capabilities ............................................................................................................ 55

5.8 Business and innovation performance ..................................................................................... 59

5.9 Analysis of results .................................................................................................................... 62

6. Conclusion, discussion and recommendations ............................................................................... 64

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6.1 Conclusion .............................................................................................................................. 64

6.1.1 Answers to the research questions ................................................................................... 64

6.1.2 Overall conclusion ............................................................................................................ 66

6.2 Discussion ............................................................................................................................... 67

6.3 Recommendations .................................................................................................................. 68

6.3.1 Recommendations for further research ............................................................................ 68

6.3.2 Recommendations for innovation network ....................................................................... 68

7. References .................................................................................................................................... 70

Appendix I: The PESTEL analysis ........................................................................................................ 73

Appendix II: Porter’s diamond for competitive advantage of nations ................................................ 74

Appendix III: Relation concepts with questionnaire ........................................................................... 75

Appendix IV: Questionnaire Questionnaire Innexus .......................................................................... 77

List of figures

No Title Page

1.1 The research framework 11

2.1 The innovation Space adopted from Tidd et all. (2005) 15

2.2 The innovation Funnel 16

2.3 Flow diagram Stage-Gate model 17

2.4 Evolution of innovation metrics adopted from Milbergs and Vonortas (2006) 18

2.5 Innovation measurement areas adopted from Adams at all. (2006) 18/19

2.6 Conceptual model 20

2.7 The Five Forces Model (Porter, 1979) 22

2.8 The performance diamond (Cooper and Kleinschmidt, 2007) 23

2.9 Four generic innovation strategies (Hollander, 2002) 24

2.10 Contrast of innovation process in large and small firms (Hollander, 2002) 31/32

2.11 The closed innovation model and the open innovation model (Chesbrough, 2003) 33

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List of tables

No Title Page

4.1 Description of participating companies 44

5.1 Results of questions 1 till 5 and 9 till 12 45

5.2 Result of question 46 47


5.4 Results of questions 7 and 8 48

5.5 Results of question 36 and 37 49

5.6 Result of question 24 49/50






5.12 Results of questions 30,31,38,39 and 40 57



5.15 Results of questions7,13,14,15,17 and 19 60


2.12 The major differences between the open and closed innovation model (Chesbrough, 2003) 33

A.1 Porter’s Diamond of competitive advantage (Porter, 1990) 74

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Management Summary Project Background and objective

Although there is extensive literature from different angles on innovation management, there are still gaps in the existing knowledge. Most popular for research on innovation management and the measurement of innovation are study populations or case studies of big high-tech multinationals with large R&D departments. One of the gaps can be seen with respect to innovation in food SME’s. The food sector is often characterized as a low-tech industry sector according to the classification of the OECD (Organization for Economic Co-operation and Development) because of its low R&D spending as percentage of revenues. Despite the relatively low R&D investments the importance of innovation for this sector with its turbulent environment, due to increasing globalization, changing quality demands and price discount fights among retailers, is more and more understood. In the last few years some research has been done on innovation management in the food sector. These studies focused on multinational food companies or the food sector as a whole. Although SME’s represent 99% of food and drink companies and contribute 48% to the total turnover, the field of innovation in small and medium size food companies is still relatively underexplored. The research objective of this study therefore is: Explore to what extent theory on innovation management and innovation measurement is applicable for food SME’s by reviewing literature and assessing the current innovation process at food SME’s.

Methodology The study was based on an investigation of 12 food SME’s that cooperate in the food network Innexus. Innexus is a food network where small and medium sized enterprises in the food sector from the Northern part of the Netherlands join forces. The goal of the organization is to connect, inspire and facilitate member companies with the purpose of generating new business. Most of the Innexus member companies are business-to-business organizations that deliver ingredients to other food processing companies. Only a few of the companies also produce products that can be found in the supermarket. For this research a questionnaire has been developed based on a questionnaire that was used in previous research on innovation in large food companies. The original questionnaire was translated in Dutch and adapted to be applicable in small and medium size companies that often do not have formal R&D departments. Beside the translation and reformulation of questions from a SME point of view, also new questions were added to get more quantitative data.

The questionnaire used has been composed with a mixed methodology of both quantitative and qualitative questions. The quantitative part contains open questions about company characteristics such as turnover and amount of employees as well as specific questions about different aspects of innovation. The qualitative part of the questionnaire contains statements on innovation from different concepts perspectives with seven-point Likert scales in most cases ranging from strongly disagree (1) to strongly agree (7). In each Innexus member company one of the owners and/or board members was asked to complete the whole questionnaire and to discuss the answers in an interview. Besides that, the first respondent was asked to select two or more other employees that were familiar with the companies’ innovation process to give their opinion on the qualitative question part of the questionnaire as well.

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The response of the questionnaires and interviews were represented and compared with the result of previous research on innovation in food. Based on the result an answer was given to the general research question: To what extent is theory about innovation management and innovation measurement applicable for SME’s in food?

Conclusion In literature a lot can be found on the way an innovation process should ideally be managed. The literature study showed that besides the environment as external factor the following internal aspects of the innovation process are important to come to a satisfying innovation performance:

innovation strategy;

innovation resources;

innovation culture & climate;

innovation capabilities;

innovation competencies. In the food SME’s under study the innovation process is not managed as rigorously as most other business processes. Especially in the smallest companies studied during this research it became clear that innovation is managed ad hoc without a predetermined strategy and without a formal procedure. Besides the fact that innovation is not managed as a process also little is measured about the actual innovation performance. Even companies that have formulated some sort of innovation strategy in most cases only measure the financial results of their innovation process. Other aspects of the innovation process that could provide useful information when measured are in most companies neglected. Theory about innovation management and innovation measurement is therefore only on a small scale applicable for innovation in food SME’s. One must keep in mind that it does not suit most of the food SME’s organisations to manage and measure the innovation process closely because of the relatively simple and clear organisational structure. More than once respondents indicated that they expected that to apply a more formal innovation process and the use more innovation metrics would not be cost effective. Although not to a large extend applicable in the same way as in big multinational food companies, food SME’s could learn from theory on innovation management and innovation measurement. In the first place an innovation strategy would give more direction to the innovation process in food SME’s. Secondly innovation management theory could provide some reference points to make sure nothing is missed during the innovation process. Innovation metrics introduced on a small scale could provide valuable information to adjust the innovation process and to improve the actual innovation performance.

Recommendations On the basis of this research recommendations for further research as well as recommendation for the innovation network could be given. Further research is recommended to trace the most important drivers and barriers in food SME’s and to compare innovation in SME’s from the food industry with innovation in SME’s from other industries. The recommendations for both the network as a whole and the separate companies are to formulate an innovation strategy. Besides the innovation strategy the separate companies are also advised to start measuring innovation as a tool to monitor and improve their innovation process.

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1. Introduction

In this thesis the focus will be on innovation management and the measurement of innovation in food SME’s. This short introduction will start with some insight into the background of this research. In the second paragraph the objective of this research is formulated. In the following paragraph the research objective is operationalized into research questions. The last paragraph of this introduction will contain an outline of the thesis in total.

1.1 Background of the research Companies don’t operate in a vacuum but have to deal with their business environment in order to survive. This business environment is not only continuously changing, but it also changes at a fast pace nowadays. A computer bought today is almost worthless after three years because of new technological developments in the meantime. Next to the changing environment, markets are also growing to a global scale due to internet and expanding transportation possibilities. This has lead to an increased competition between companies that all try to adapt to changing customer demands faster and better than other players in the market.

Innovation is widely recognized as one of the most important ways of adjusting to different circumstances and shifting customer needs. Not only from an academic point of view but also within companies innovation gets increased attention as crucial factor for overall business performance in the long run. The awareness of the importance of innovation is reflected in a recent study from McKinsey (2008) that showed innovation as top priority (14%) or in the top 3 important priorities (51%) of the company’s strategic agenda according to 1,075 responding senior executives.

Innovation can contribute to the overall business performance in different ways. On the one side process innovation and business model innovations can reduce costs and therefore improve the margins on products and/or services sold. On the other side product/service innovations can create new business. Supply chain or system innovation alters the position of a company in the chain and can lead to both cost reductions and new business.

Because of the importance of innovation, innovation management is a popular subject of study for both academics and commercial consulting firms. Already in 1934 Schumpeter, an Austrian economist wrote about innovation as a process with an invention, innovation and commercialization phase (Schumpeter 1934). He studied the concept of innovation and in later work he introduced his famous theory about the innovation process as a process of creative destruction (Schumpeter 1942). Later on Porter (1985) stated that innovation is one of the most prominent factors determining the rules of competition between the different players in the business environment. To this day more and more organisations realize the value of innovation. The knowledge about innovation and the innovation processes is growing but there are still many aspects of innovation management that can be clarified in order to improve the innovative performance of companies.

Fortuin (2006) made a distinction in scientific literature about innovation based on different theoretical starting points and levels of study. The first perspective looks at innovation from a traditional economic-oriented point of view and examines differences in the pattern of innovation across countries and industrial sectors, the evolution of technologies and inter-sectoral differences in

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innovation. The second perspective focuses on the micro- and meso-level of how innovation is done in organizations from a management-oriented approach.

Within the management-oriented perspective an important area of research is on the factors that determine what makes a company’s innovation process successful. In other words: what are the drivers and barriers for innovation. Tidd et al. (2005) give a good overview of the research that has been done in the last decades on the fail- and success factors of the innovation process.

Although there is extensive literature from different angles on fail- and success factors in innovation, there are still gaps in the existing knowledge. One of these gaps can be seen with respect to innovation in food SME’s. Most popular for research on fail- and success factors in innovation management are large high-tech multinationals with large R&D departments (Batterink et al. 2006). On average the food sector can be characterized as a low to medium technology intensive sector. In the last few years some research has been done on critical success factors for innovation in the food sector (e.g. Batterink et al. 2006; Fortuin et al. 2007). These studies focus on multinational food companies or the food sector as a whole. In this research the focus therefore will be on innovation management and innovation metrics in food SME’s.

1.2 Research objective and research framework According to Verschuren en Doorewaard (1999) the first part of a conceptual research design is the research objective. In the research objective a well defined problem within the problem context is isolated to which the research can make a significant difference. As described above this research is aimed at improving the knowledge about innovation management and the measurement of innovation in food SME’s. Therefore the following research objective is formulated:

Explore to what extent theory on innovation management and innovation measurement is applicable for food SME’s by reviewing literature and assessing the current innovation process at food SME’s.

The first intention of the research was to find out what the drivers and barriers for innovation in food SME’s are. After some preliminary research it became clear that due to the current state of innovation measurement in SME’s this goal could not be reached within the limited possibilities of this research. Although the initial research question is altered, this research objective will provide insight into the relatively unexplored knowledge about innovation management in food SME’s. From this point of view the research can contribute to the scientific knowledge and can be seen as a first step for further research on barriers and drivers for innovation in food SME’s The main subject of this research is the innovation management in food SME’s with a special attention to the way innovation is and could be measured. As the research objective indicates, this is done in a two step analysis. In the first step (phase A) the current knowledge about innovation management with respect to important drivers and barriers for innovation is explored. In combinations with knowledge from an innovation metrics perspective the important drivers and barriers for innovation are translated into a questionnaire suitable for food SME’s. The successive step (phase B) of the research is to assess the current innovation process at food SME’s with the developed questionnaire. With the results of this questionnaire an indication on the

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current state of innovation management and measurement of innovation in food SME’s can be given. The steps to fulfil the research objective and to come to the results of the research are graphically shown in the following research framework:

Figure 1.1 The research framework

1.3 Research questions In order to achieve the above mentioned research objective, this goal is operationalized into a general and sub research questions. The research questions can be linked to the research framework shown in the previous paragraph.

1.3.1 General research question

The research objective can be reached if the general research question is answered and can therefore be seen as the central question in the research. For this research on innovation management and innovation measurement in Food SME’s the following general research question is formulated:

To what extent is theory about innovation management and innovation measurement applicable for SME’s in food?

The general research question is related to the theory part of the results phase (C) in the research framework. A tested and adjusted tool for assessing the innovation process in food SME’s is more a practical side result of this scientific research that is created to be able to answer the main theoretical research question.

1.3.2 Sub research questions

The general research question is a very broad question that can be divided into more focused sub research questions. In the theoretical part (A) of this research a literature study is done on theory of innovation in general. Within the extensive knowledge on innovation management the focus is respectively put on the measurement of innovation and the important aspects of the innovation process. The first focus of the theoretical phase is aimed at generating knowledge on how innovation can be measured. This resulted in the following sub research question:

Literature on innovation measurement

Literature on innovation in general

Characteristics of innovation in food and especially food SME’s

Literature study (A)

Developing tool for assessing the innovation process in food SME’s

Analyzing results of tool and comparing with available data from similar tool

Conducting tool and supporting interviews

Empirical part (B)

Conclusion on applicability of theory on innovation management and innovation metrics for food SME’s

Tested and adjusted tool for assessing the innovation process in food SME’s

Results (C)

Literature on key aspects of the innovation process

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A1: How can innovation be measured?

This research is focussed on the internal innovation process in food SME’s. The measurement of innovation is therefore also aimed at the internal innovation process. In order to measure effectively it is essential to know what important aspect of the innovation process are. The search for these key aspects is formulated in the following second sub research question:

A2: What are important aspects of the innovation process?

Because this research is conducted in a specific industry, in this research the food industry, it is important to know what the characteristics of innovation in the industry are. Not only is this research focused on innovation in the food industry but also within this industry the centre of attention goes to innovation in SME’s. Therefore the following sub research question is formulated:

A3: What are specific characteristics of innovation in food SME’s?

Next to the theoretical phase also sub research questions are prepared for the empirical part (B) of the research. The first part of the empirical part of the research is aimed at the development of a tool to assess the innovation process at food SME’s. The first sub research question is the link between the generated knowledge from the theoretical phase and the empirical development of the tool. This comes together in the following sub research question:

B1: How can the important aspects of the innovation process be measured in food SME’s

The last sub research question that is necessary to be able to give an answer to the general research question is related to the results that were generated with the developed tool. Conducting the tool forms the core of the empirical phase that provides the data that can be analyzed to answer the following sub research question:

B2: What is the current state of the innovation process at the participating food SME’s?

1.4 Outline of the thesis After this short introduction to the research, a theoretical framework will be provided in chapter 2. This theoretical framework forms the basis for the research and the main concepts used in this research are in this chapter graphically depicted in a conceptual model. The third chapter explains the methodology used to operationalize the theoretical knowledge in order to be able to reach the research objective. It will describe what kind of research is done and how data are collected and analyzed. In chapter 4 a short overview of the research domain will be given. This will provide some insight into the innovation network and separate companies participating in the research. Chapter five can be seen as the core of the research were the findings of the questionnaire and corresponding interviews are described. The results in this findings chapter form the basis to answer the (sub-) research questions. The last chapter is used to answer the (sub-) research questions and to formulate a conclusion. Next to the conclusion also a short discussion on the research and recommendations for both further research and recommendations for the participating companies are provided in this last chapter.

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2. Theoretical framework This chapter will provide the theoretical basis for the research and is related to the first phase as depicted in the research framework. It consists of four paragraphs of which three paragraphs are used to describe innovation from a general to a specific industry and company size perspective. The first paragraph discusses innovation in general. The second is aimed at describing aspects that influence the actual innovation process and contains the conceptual model as basis for this research. The third paragraph is used to focus on innovation in the food industry and SME’s as the specific company size under study. In the last paragraph an overview of the key aspects and their relations in the conceptual model will be given.

2.1 Innovation In this first paragraph of the theoretical framework the focus will be on innovation in general as the main concepts of this research. Innovation is a broad term and therefore a definition will be given in section 2.1.1. To get more insight in innovation, section 2.1.2 is used to briefly distinguish two dimensions of innovation that are represented in the innovation space. In section 2.1.3 the different steps of the innovation process are described. Specific attention is given to the theory about the measurement of innovation in the last section of this paragraph.

2.1.1 Definition of innovation

Innovation is the key concept of this research, but what is innovation all about? In newspapers advertisements and other media the word innovation can be read and heard a lot nowadays. It is used in very different contexts and with a broad range of different meanings.

In scientific literature innovation is a popular subject of study, but there’s no dominant definition of innovation and innovativeness so that there is an ambiguity in the way these terms are operationalized and utilized (Garcia and Calantone, 2002).

A definition of innovation that is often used comes from Schumpeter, an Austrian economist, who defines innovation as a process of creative destruction. In his view there is a constant competition for monopoly profits that go to the one that first introduces new commodities, new technologies, and new sources of supply or new types of organization. After a while the first mover advantages disappear when other entrepreneurs imitate or come with an own introduction that exceeds the original innovation and rewrites the rules of the game (Schumpeter, 1934).

Since Schumpeter a lot of research has been done on different aspects of innovation. Zaltman et al. (1973) reviewed the various meanings of the term ‘innovation’ and summarized them into three different perspectives. The first perspective looks at innovation as the new product, process or organizational form itself as the main focus of study. The second perspective emphasizes the user acceptance and implementation of the innovation as a process of diffusion. This way of studying innovation has later become the most important area of research for Rogers (1983) who wrote his famous book ‘The Diffusion of Innovations’ on this subject. The third and nowadays most popular perspective on innovation as object of study is the process of developing the innovation.

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In this research the third perspective as described by Zaltman et al. (1973) will be used to look at the key aspect of innovation management in the process of developing innovations. A management-oriented approach as stated by Fortuin (2006) forms the starting point for conducting research at SME’s (micro level) that cooperate in a food network in the northern part of the Netherlands (meso-level).

A good definition of innovation that corresponds with the focus of this research is stated in the Innovation Report 2003 of the UK Department of Trade and Industry.

Innovation is the successful exploitation of ideas into new products, processes, services or business practices, and is a critical process for achieving two complementary business goals of performance

and growth, which in turn will help to close the productivity gap.

This definition is adopted for this thesis because it clearly states that innovation is not a business output but the total process of idea generation till successful exploitation in organizations. A note that can be made in this context is that innovation is not equal to invention or only a matter of creativity but really a process that can and has to be managed. Besides that, the definition also indicates that innovation can effect organizations on two main objectives that many organizations incorporate in their business strategy; reducing costs on the one side and the generation of new business on the other side. The applicability of this definition for food SME’s will be discussed in section 2.3.4.

2.1.2 Dimension of the innovation concept

The definition chosen in the previous paragraph is still very broad. In this section two different dimensions, type of innovation and newness of the innovation, will be discussed. At the end of this section these two dimensions are combined in the so-called innovation space.

Type of innovation

One dimension of the innovation concept is the type of innovation. Francis and Bessant (2005) categorize four different types of innovation in what they call the 4P’s of innovation.

Product innovation: innovation to introduce or improve product;

Process innovation: innovation to introduce or improve processes;

Position innovation: innovation to define or re-define the positioning of the firm or its products in different markets or in the supply chain;

Paradigm innovation: innovation to define or re-define the paradigm, the mental models behind the business model of the organization.

Compared to the definition of innovation given in the first paragraph of this chapter, business practices can be interpreted as position as well as paradigm innovation. Both position and paradigm innovation have to do with new ways in how a business operates or practices in their business environment.

The main types of innovations that are relevant for this research at food producing SME’s are product and process innovations. Although position and paradigm innovation are also possible forms of innovation for these SME’s, they are not developed on a continuous basis as product and process

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Figure 2.1 The innovation Space adopted from Tidd et all. (2005)

innovation. In this research the focus will therefore be on innovation management for product and process innovations. Newness dimension of innovation

A second dimension of the innovation concept has to do with the degree of newness of the innovation. This level of newness is often indicated as a dichotomy of two extremes. On the one side the incremental or conservative innovations that are often small improvements of an older design. On the other side the radical or breakthrough innovations that introduce a completely new concepts that is not comparable to an existing product or service.

Similar typology about the newness of innovations but formulated from an impact point of view is the distinction Christensen (1997) introduced as the difference between sustaining and disruptive innovations. Disruptive innovations have a high impact on the leading technologies in a new market were different needs and expectations have to be fulfilled to stay competitive. Often previously successful mainstream companies in the old market are faced with new players that are better able to cope with the changed market conditions. In this way the newcomers rewrite the rules of the game. In line with Schumpter’s creative destruction theory (Schumpeter, 1934), the disruptive innovations lead to a disruption in existing market positions that force a new equilibrium. On the contrary the sustaining innovations are often build on existing technologies that meet the same or comparable needs and expectations in the market in a slightly better way than existing products or services. Because changes are relatively small, the impact on market positions and the leading rules in the game stay limited.

The innovation space

Tidd et all. (2005) combine the two dimensions of innovation, type of innovation and newness of the innovation, in what they call the innovation space. The figure shown below clearly indicates that on all four types of innovation incremental and radical innovations can be distinguished. Togheter the two dimentions of innovation form a circle, the socalled innovation space, in which innovations can be positioned.

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2.1.3 Stages in the innovation process

As stressed out before, innovation is not a single event but a process of succeeding events. The innovation process is often visualized as a funnel from idea generation to the actual launch and exploitation of the innovation.

Figure 2.2 The innovation Funnel, source: http://www.leader-values.com/Content/detail.asp?ContentDetailID=1106

As the form of the funnel indicates, there are much more ideas in the first idea generation stage than real products that are actually introduced or processes that are implemented at the end of the funnel. During the innovation process there are go / no-go decisions in which most of the ideas will be killed. A well known model that distinguishes different stages and go / no-go moments in the innovation process is Cooper’s stage-gate model (Cooper, 1990). The innovation process is in this model divided into different stages that are separated through gates. At the end of every stage there are criteria formulated that have to be met before the gate opens and the development can continue in the following stage. Although the stage-gate model can be customized at the situation in the company where it is used, the following stages are often distinguished:

1. Scoping stage, after an idea gets through the first idea screen it is quickly and inexpensively assessed on technical possibility and commercial potential in the scoping stage;

2. Business case stage, if the idea is technically possible and has commercial potential it will pass the second screen and in this second stage a business case is build that defines how the innovation process will be executed;

3. Development stage, the business case is judged on the product an project definition, the project plan and the justification of the project before it enters the development stage where the actual product or process is developed;

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4. Testing and Validation stage, if the development succeeds, in the testing and validation stage the product or process can be tested and validated as a last check before the product/process is introduced or implemented;

5. Launch stage, If the tests and validations give a satisfying result, the last stage is the actual introduction or implementation of the new product respectively new process in the launch stage.

In the figure below a flow diagram shows these five stages for a general stage-gate innovation process.

Figure 2.3 Flow diagram Stage-Gate model, source: http://www.prod-dev.com/stage-gate.php

Combined with the idea of the innovation process as a funnel, it can be concluded that at every gate some projects are killed because they did not meet the criteria that were formulated to be able to go to the next stage. At every gate a fewer amount of projects survives and the chances that the project will actually be completed increases. Although risks of failure are eliminated at the gates, the amount of risk increased too because there is already more money invested in the projects that reach the last stages.

2.1.4 Innovation metrics Like any other process in an organization it is important to make use of measurement instruments to manage the innovation process. The use of some kind of measurement makes it possible to quantify goals, evaluate the process and benchmark the organizations innovation competence with other organizations. The need for innovation measurement instruments is widely recognized by executives as can be concluded from the Measuring Innovation 2009 report of the Boston Consulting Group (BCG, 2009). This report states that 73 percent of the 160 respondents believe that innovation should be tracked as rigorously as other business operations. Surprisingly only 46 percent of the respondents said that their company actually does measure innovation like any other business process.

According to Cordero (1990) most organizations that measure innovation tend to focus on inputs and outputs of the innovation process and ignore the process in-between. This consists with the evolution of innovation metrics that Milbergs and Vonortas (2006) describe.

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Figure 2.4 Evolution of innovation metrics adopted from Milbergs and Vonortas (2006)

Although the use of innovation metrics is widely recognized as having a positive effect on the innovation performance, most companies refrain from using them because they do not know what and how to measure. Another reason why companies don’t measure their innovation process is that they give it low priority (BCG, 2009).

Adams et all. (2006) conducted a literature review on different innovation management models that provide a tool to measure innovation. They concluded that no one model covers all the important aspects of innovation and therefore they developed a synthetic and integrative framework as shown below.

Framework category Measurement areas

Inputs People

Physical and financial resources

Tools

Knowledge management Idea generation

Knowledge repository

Information flows

1st Generation

Input Indicators

(1950s-60s)

2nd Generation

Output

indicators

(1970s-80s)

3rd Generation

Innovation

Indicators

(1990s)

4th Generation

Process Indicators

(2000 + emerging focus)

R&D expenditures

S&T Personnel

Capital

Tech intensity

Patents

Publications

Products

Quality

Change

Innovation surveys

Indexing

Benchmarking innovation capacity

Knowledge

Intangibles

Networks

Demand

Clusters

Management

techniques

Risk/Return

System Dynamics

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Innovation strategy Strategic orientation

Strategic leadership

Organization and culture Culture

Structure

Portfolio management Risk/return balance

Optimization tool use

Project management Project efficiency

Tools

Communications

Collaboration

Commercialization Market research

Market testing

Marketing and sales

Figure 2.5 Innovation measurement areas adopted from Adams at all. (2006)

In the framework different categories of important aspects for innovation are distinguished. The categories are divided into different dimensions of measurement areas that all focus on a certain more specific aspect of the innovation process. Next to the framework, Adams et all (2005) also reviewed the literature on how to measure the specific aspects on innovation that they mention in their framework. Although there is a base set of innovation management measures present in literature, gaps can be identified on different aspects of innovation. Two types of measurement gaps can be distinguished: validity gaps and omission gaps. Validity gaps are present when there is not enough evidence that certain measures actually do capture outputs of innovation management. Omission gaps arise where measures are lacking although the importance of a certain innovation aspect is supported in literature.

2.2 Key aspects of innovation management In the previous paragraph it became clear that innovation is a complex process that can be studied from different levels of abstraction. To improve innovation processes it is important to know what aspects influence the innovation process and why some organizations have a more successful innovation performance than others. These aspects form the basis for the study on innovation management in food SME’s. Therefore the aspects described in this paragraph are part of the conceptual model that is graphically represented on the next page. The concepts in this model are elaborated on in the different sections of this paragraph. In the last section of the total chapter an overview of the concepts and their relations in the conceptual model will be given.

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Conceptual model

Figure 2.6 Conceptual model

Environment

Innovation Network

Innovation Competencies

Innovation Capabilities

Innovation Performance Innovation Strategy

Innovation Resources

Innovation Culture & Climate

Business Strategy Business Performance

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2.2.1 Environment

Within the important aspects of innovation management a distinction between external and internal factors can be made. External aspects influence the innovation process in companies, but are not or for only a very small part influenced by the company itself. Because of the impact on the innovation performance these external factors are shortly dealt with in this first section. The main focus of this research however is on the internal aspect of innovation management because these are much more adjustable for companies who want to improve their innovation performance.

Companies don’t operate in a vacuum but are influenced by several factors in the environment. Also the innovation performance of a business is affected by environmental circumstances. Different models can be used to examine factors that influence a company from the outside. In this research the focus is on innovation. Innovation is often regarded as an important way to create a competitive advantage. Therefore Porter’s five forces model is used as main model to describe the business environment. Other models like a PESTEL analysis or Porters diamond for competitive advantages of nations can also be used but they analyze factors in the environment at a more macroeconomic level. These models are explained and elaborated on in respectively appendix I and appendix II.

Porters five forces model is used to analyse the competitive environment of an industry. In this model Porter (1979) indicates the following five forces that determine the competitive position of a certain industry:

Rivalry, the competition among companies that offer similar product or services in the industry itself;

Bargaining power of suppliers, the power balance in the supply chain that is determined by the competitive position of suppliers to the industry;

Bargaining power of buyers, the power balance in the supply chain that is determined by the competitive position of buyers from the industry;

Threat of new entrants, the barriers to enter the industry for new companies. If initial investments are low and technologies used are common and not complex, it is easy to enter the industry with new products for other companies;

Treat of substitutes, products or services from other industries that could satisfy the same needs of buyers. Developments in substitute industries could make substitutes more attractive than the products or services from the industry under study.

The industry as a whole but also each individual company in this industry is faced with different powers within the supply chain and threats from substitutes and new entrants outside the current supply chain. In figure 2.7 the five forces model is graphically represented within its centre the industry under study and horizontally the current supply chain.

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Figure 2.7 The Five Forces Model source: http://apps.develebridge.net/amap/index.php/Porter's_Five_Forces

2.2.2 Innovation strategy

In the previous section the environment of a company is discussed. In this section we look at the way a company plans to interact with its environment and how this is formulated in the business strategy. After a short introduction to general strategic management, the focus will be on a specific part of the strategy, the innovation strategy.

Like innovation, strategy is also a term that has been explained in a lot of different definitions. For this research the definition of strategy formulated by Omta and Folstar (2005) will be used. They define strategy as:

A series of goal-directed decisions and actions that match an organization’s skills and resources with the opportunities and threats in its environment, to meet the needs of markets and to fulfil stakeholder expectations.

The reason this particular definition was chosen is that it clearly shows that in a good strategy both internal and external factors have to be brought in line to come to decisions that lead to a certain goal. Omta and Folstar (2005) discuss that an outside-in approach of strategy can be used to take into account the environmental factors that influence the decisions a company has to take to reach a competitive advantage. On the other side an inside-out approach of strategy will assure that the formulated strategy are in harmony with the internal resources, competencies and capabilities that are present in the company.

For most commercial companies an important goal integrated in their strategy is to perform better than other players in the market. One possibility a company has to perform better compared to its rivals is to innovate. Therefore it would be rational to incorporate innovation in the total business strategy and to formulate a specific innovation strategy.

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The importance of a formal innovations strategy on the innovation performance is endorsed by several studies on the drivers and barriers for innovation. Cooper and Kleinschmidt (2007) found in their study on the critical success factors for winning businesses in product development that having a product-, innovation- and technology strategy is of upmost importance. They included the innovation strategy as one of the four main drivers for new product development in their performance diamond.

Figure 2.8 The performance diamond source: http://www.stage-gate.eu/innovation-audit.asp

The importance of a formal innovation strategy can also be found in a study conducted by the American Management Association (AMA) among 1,396 executives of large multinational companies in North America and Europe. Next to insufficient resources, the absence of a formal innovation strategy is identified as the greatest barrier to innovation. More than 50% of the respondents ranked these two barriers among the top three barriers for innovation. A similar result is uncovered by a Conference Board study on the barriers for innovation success of 100 firms principally from the U.S. and Europe. No formal innovation strategy was cited by 49% of the respondents as one of the most common barriers to innovation (Troy, 2004).

Like stated before as essential for a good business strategy, internal and external factors must be aligned in an effective innovation strategy as well. Valikangas and Gebbert (2005) argue that one of the traps that curtail innovation occurs when a company pursues innovations requiring competencies that are very different from those that are available. Resources are another internal factor defining the new product performance as can be seen in the performance diamond (see figure) of Cooper and Kleinschmidt (2007).

Both innovation competencies and innovation resources are therefore important aspects of an inside-out approach to come to an adequate innovation strategy. The inside-out perspective on strategy is often explained with the resource based view (RBV) framework. This theoretical model tries to explain how competitive advantage is achieved and sustained within firms (Prahalad and Hamel, 1990; Grant, 1991; Teece et al., 1997) Together with other inside-out concepts within this resource base view on strategy, like the innovation climate and the innovation capabilities, these two internal factors are discussed in more detail later on in this chapter.

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The integration of external factors in the innovation strategy from an outside-in approach should be based on an analysis of the external environment. The different models discussed in the previous paragraph of this theoretical framework, the PESTEL analysis, the Five Forces model and Porter’s diamond, provide a structural approach on how to assess the factors in the external environment that affect the company’s innovative possibilities.

Although a business strategy should be unique for a specific company, some generic strategies could be distinguished. Miles and Snow (1978) suggest a categorization into four main business strategies: prospectors, analyzers, defenders and reactors. The innovation strategy can be regarded as part of the overall business strategy. Hollander (2002) therefore applied the proposed generic business strategies on the innovation strategy. In the table below the characteristics of the different innovation strategies are summarized.

Innovation Strategy Description

Prospectors Value being “first” with new products, markets and technologies even though not all efforts proves to be profitable. They respond rapidly to early signals concerning areas of opportunity.

Analyzers Seldom first to market with new products. However, by carefully monitoring the actions of major competitors, they can frequently be a fast follower, bringing a more cost-efficient or innovative product to the market.

Defenders Attempt to locate and maintain a secure niche in a relatively stable product or service area. They protect their domain by offering higher quality, superior service, or lower prices. These firms ignore industry changes that have no direct influence on their current operations.

Reactors Are not aggressive in maintaining established products and markets as competitors. They respond only when forced by strong environmental pressure.

Figure 2.9 Four generic innovation strategies, source: Hollander (2002)

2.2.3 Innovation Culture & Climate

For innovation to flourish in companies a balance between freedom and structure is needed. Freedom in necessary to give room for a creative process of generating new ideas that could lead to successful innovations. On the other hand some sort of structure is needed to give direction, to keep up the pace and to assure that the innovation process is profitable in the long run. The combination of freedom and structure forms the internal innovation environment of a company.

The degree of freedom and structure in a company is determined by both implicit and explicit rules for playing the innovation game. The implicit rules are for a large part reflected in the innovation culture of a company. On the other side, the explicit rules for dealing with innovation in the company are often written down as a formal procedure that describes the different steps taken in the innovation process. The more explicit and formal rules for innovation are also referred to as the innovation climate.

Ekvall (1996) indicates that in scientific literature there is not a common definition of organizational climate. One of the main contradictions is the relation between culture and climate. Some see the

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culture as part of the organizational climate while others make a clear distinction between culture and climate. In this research the distinction Ahmed (1998) makes between culture and climate for innovation is used. He defines the climate of the organization as organizational practices, procedures and reward systems deployed that is indicative of the way the business runs itself on a daily and routine basis. The organizational culture refers to deeply held beliefs and values and is therefore, in a sense, a reflection of climate, but operates at a deeper level.

As part of the innovation climate, the formal innovation process is an important driver for the innovation performance of a company. Cooper and Kleinschmidt (2007) found in their research that having a high quality new product process had the most impact on the profitability of business units. In this context they make the remark that it is not merely having a formal innovation process, but having a high quality formal innovation process that makes the difference. According to Cooper and Kleinschmidt a high quality formal innovation process must meet the following criteria:

An emphasis on up-front homework—both market and technical assessments—before projects move into the development phase;

Sharp, early product definition, before development work begins;

Tough Go/Kill decision points in the process, where projects really do get killed;

A focus on quality of execution, where activities in new product projects are carried out in a quality fashion;

A complete and thorough process, where every needed activity is carried out without hasty corner cutting;

A flexible process, where stages and decision points can be skipped or combined, as dictated by the nature and risk of the project.

Not only from a scientific point of view but also commercial consultancy firms acknowledge the importance of a formal innovation process as key to improving the innovation performance. In their report on overcoming barriers to innovation Accenture (2008) states that companies have to bridge several execution gaps. One of them is: a robust innovation process must be established to support the organization to facilitate the frequency, speed and consistency of innovation results.

Different researchers studied the innovation culture as a driver for the innovation performance. According to Senge (1990) an organization’s potential to unleash the creativity of its members is to a great extent determined by its innovation culture. Dobni (2008) distinguishes four different dimension of the innovation culture in companies:

Innovation intension: the innovation intension dimension of an innovation culture is related to the organization architecture and employee engagement that support and sustain innovation. Within this dimension factors as innovation propensity and organizational constituency can be distinguished

Innovation infrastructure: the innovation infrastructure dimension of an innovation culture assesses the training and education for employees that advances innovation as well as the degree of creativity and empowerment;

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Innovation influence: the innovation influence dimension of an innovation culture looks at both market and value orientation of employees in a company. It considers to what extent employees are aware of other actors in the market and customers value most that influence the innovation imperative;

Innovation implementation: the innovation implementation dimension of an innovation culture examines the ability of an organization to adapt to the environment in executing value-added ideas.

Creativity is a factor of the innovation infrastructure that is sometimes regarded as most important for innovation. Although innovation implies some level of creativity, it is certainly not a synonym. Amabile (1996) stated: Creativity by individuals and teams is a starting point for innovation; the first is necessary but not sufficient condition for the second. Innovation in the definition used for this research is much more than the often mentioned creative process of generating new ideas. In that way creativity is much more connected to an invention than it is to the much broader innovation concept like Martin (1985) stated: An invention may be viewed as a new idea or concept, but this invention only becomes an innovation when it is transformed into a socially usable product.

2.2.4 Innovation resources

Next to the presence of an innovation strategy and a good internal environment for innovation, the importance of sufficient resources has been regarded as an important driver for innovation. Cooper and Kleinschmidt (2007) state that a common dominator of top-performing businesses lies in the fact that they make sure that necessary resources are available for new product development. Also in the AMA study (Jamrog, 2006) and a Conference Board study (Troy, 2004) one of the most widely cited barriers to innovation were insufficient resources.

Several different resources can be distinguished that all influence the innovation process in a particular way. According to Hadjimanolis (2000) resources are defined as tangible and intangible assets of a company that are tied semi-permanently to the firm. Tangible resources are physical asset such as finance, human resources and facilities. Intangible resources are non-physical assets such as knowledge, brand names and reputation. With respect to innovation, portfolio management is necessary to allocate the available resources to the different project in an effective way.

Since resources are limited in every company, decisions have to be made to allocate the available resources. Most resources come down to the availability of financial funds since most of the resources can be bought if they are not jet available in the organization. Financial resources are therefore not surprisingly identified as most prominent resource bottle-neck in innovation (Ernst, 2002). However adequate funding is a critical input into the innovation process, high levels of R&D investments are not necessarily evidence of good innovation practice. They may simply mask process inefficiencies (Dodgson and Hinze, 2000).

Human resources are another important input for the innovation process. Only people with the right set of competencies and capabilities will be able to generate ideas and to transform them into successful exploitations. Both competencies and capabilities for innovation will be discussed in more detail in the next paragraphs. Not only having employees with the right competencies and capabilities is enough to make innovation happen. Also putting the employees on the innovation

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tasks that suit their competencies and capabilities and giving them enough time is essential for an effective innovation process.

In order to produce and test some prototypes of an innovation, facilities like laboratories, production machinery and in some cases an environment to apply and/or test the innovation are necessary. If facilities needed in the innovation process are not present or available in the company, there is often a possibility to hire or lend these from suppliers or other companies. Another facility that can be an effective tool to improve the innovation processes are ICT support systems. ICT tools can be used to monitor the innovation process and to support the portfolio management decisions. For some innovations ICT tools can also be used to run simulations that reduce both risks and cost of real tests.

Intangible resources are much harder to influence directly for a company than the tangible resources. Reputation is an intangible asset that has to be gained through a long time relationship with customers. Also brand names become valuable over a long time and are the result of good reputation and often an effective marketing strategy. Knowledge on the other hand can be promoted by good knowledge management with intellectual property (IP) management as a specific form of knowledge management. IP-management is important to legally use knowledge from others for innovations and to protect the own knowledge from illegal use by competitors. Knowledge management also involves the expansions and sharing of knowledge in the organization. New knowledge can come from all kind of sources like educations, seminars or literature but also from suppliers and competitors. Although knowledge can be managed, it depends much on the competencies and capabilities of employees to absorb new knowledge and to turn the new knowledge into innovations.

2.2.5 Innovation competencies & capabilities

Both innovation culture and climate as well as the innovation resources are preconditions for a company to be able to react on the external innovation environment. In their dynamic capabilities framework (DCF) Teece et al. (1997) extend the RBV framework to a constantly changing environment. In markets where the competitive environment is shifting, dynamic capabilities are necessary to integrate, build and reconfigure internal and external competencies. In the DCF, competitive advantage derives from a combination of competencies (skills and knowledge) with the managerial and technical systems (capabilities) that exploit those reservoirs in delivering value to customers (Leonard-Barton, 1995).

Next to the distinction between innovation capabilities and competencies, Fortuin (2006) also distinguishes internal or in-house and external competencies. In an increasingly complex business environment it is harder and harder for companies to have all competencies necessary to innovate inside the own organization. To obtain missing competencies more and more companies are cooperating with other parties in the innovation process. Not only the internal but also these external competencies have to be managed to come to successful innovations.

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Competencies are also referred to as tacit knowledge that is reflected in skills of employees. Knowledge and competencies are therefore two terms that are closely related. In order to maintain, increase and develop new competencies, knowledge has to be obtained and shared. As discussed in section 2.1.3 the innovation process can be divided into different phases. For every phase of the innovation process specific competencies are needed. Because a lot of these competencies are based on tacit knowledge, the focus in this research with respect to innovation competencies is on knowledge management. The questionnaire therefore contains question about investment in education, the educational level of employees, knowledge resources and the way intellectual property is regarded. Beside these questions directly related to knowledge management also two other important competencies, idea generation and flexibility, are assessed.

Innovation capabilities are closely related to the innovation competencies because the capabilities determine the way innovation competencies are used in the innovation process. Where innovation competencies are focused on specific skills needed in the innovation process, innovation capabilities are about the ability to manage these specific skills in an effective and efficient way. Beside the overall innovation management that has it focus on innovation as a process, also more general capabilities like communication and collaboration are necessary to come to a good innovation performance. Both communication and collaboration with respect to innovation have an internal and external component. Internal communication and collaboration is about how different departments and their employees involved in innovation communicate and work together in the innovation process inside the organization. The external communication and collaboration involves the contacts and cooperation with external parties like suppliers and customers.

2.3 Innovation in food SME’s The previous paragraph discussed innovation as a concept and innovation management in general. In this paragraph the focus will be directed to innovation in food SME’s. Therefore the first section discusses innovation in de food sector and the second sections deals with innovation in SME’s. Since the participating companies in this research are all member of an innovation network, a closer look at cooperation in innovation is taken in the third section. In the last section of this paragraph these three perspectives are combined and expectations on innovation in food SME’s are formulated.

2.3.1 Characteristics of innovation in food

As stated before, innovation is a popular subject for both academics and commercial consulting firms. Studies on innovation are however in most cases not industry specific and if innovation is studied in a specific industry, it are often high-tech industries like ICT or the pharmaceutical industry. The get a good understanding of innovation, differences between industries have to be taken into account because specific characteristics of an industry can have great influence on the innovative performance of companies. Therefore some characteristics of innovation in the food are shortly described in this section.

The food sector is often characterized as a low-tech industry sector according to the classification of the OECD ( 1994) because of its low R&D spending as percentage of revenues. The Confederation of the food and drink industries of the EU (CIAA) states in their 2008 report that R&D investments of the 15 European countries studied are only 0.24% of the total sector output (CIAA, 2008). Despite the relatively low R&D investments the importance of innovation for this sector with its turbulent

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environment, due to increasing globalization, changing quality demands and price discount fights among retailers is more and more understood (Batterink et al., 2006)

Earle (1997), describes innovation in the food industry as a combination of technological with social and cultural innovation. An innovation that starts as a new development in food technology can be spread by changing consumer eating patterns and thereby lead to social and cultural innovation. Next to the broad scope of food innovation Earle (1997) also stresses out that innovation in food can take place in the entire food supply chain including harvesting, primary and secondary processing, production, manufacturing and distribution.

Also within innovation in food a distinction between incremental and radical innovations like discussed before in section 2.1.2 can be made. Linnemann et all. (2006) applied this theory on the food industry with the following different newness levels of innovation in food:

Me-too products: “me-too” is a product that is basically the same as an existing one, but produced by another company. This category represents the largest group of new food products.

Line extensions: these are new variants of a well known product. Typical examples are new flavours for existing products or new tastes in a family of products. The design of these products can be characterized by relatively little effort and development time, small changes in the manufacturing process, little change in marketing strategy, and a minor impact on storage and/or handling techniques.

Repositioned existing products: these are current products that are again promoted in order to reposition the product. For example, by the increased attention for health products, a margarine brand was repositioned because of its natural high content of tocopherol (Vitamin E). The development time for repositioned products should be minimal and only the marketing department should put efforts in capitalizing the niche market.

New form of existing products: these are existing products that have altered to another form (e.g. solved, granulated, concentrated, spreadable, dried or frozen). For instance dried soups. These products may require an extensive development time because the physical properties of the product change drastically.

Reformulation of existing products: this group concern known products with a new formula. Reasons for reformulation can be reducing costs of ingredients, irregular supply of certain raw materials, or the availability of new ingredients with improved characteristics. Examples are products with better colour, improved flavour, more fibres, less fat, less sugar and salt etc. The design process for these products is usually inexpensive and needs a relatively short development time. However, for food products minor changes in composition might have great consequences, for instance on the chemical or microbial shelf life.

New Packaging of existing products: this involves accepted products with new packages concepts. For example, the technique of modified atmosphere packaged created opportunities to extend the shelf life of many food products. With respect to the design process, products may have to be reformulated for the new application (e.g. microwave packaging). Moreover, new packaging concepts may require expensive packaging equipments.

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Innovative products: these are defined as products resulting from changes in an existing product otherwise than described above. The changes must have an added value. The design process is generally longer and more expensive when more product changes are required. Marketing can be costly because consumers may have to be educated to the novelty. However, in some cases time and costs of innovation are relatively little, e.g. in the case of a successful innovative ready-to-cook product which was made by assembling frozen vegetables and a frozen pastry on a tray.

Creative products, also called true new products: this type of products is described as one newly brought into existence, i.e. never-before seen product. Typical examples are novel protein foods (or meat replacers) that are produced from vegetable proteins. Creative products commonly require extensive product development, tend to be costly (much market effort, new equipment) and have a higher failure chance.

2.3.2 Innovation in SME’s

In general the innovation process at SME’s is not studied extensively. Tidd et all. (2005) state that unfortunately most research attention has been devoted to the minority of small firms who emerge from high-technology opportunities and sometimes become very big. In their extensive book on Managing innovation Tidd et all. (2005) shortly summarize what is known until now about innovation in small firms at the end of some main chapters. Because so little is known about innovation in SME´s, only a short overview of their findings is given.

Innovation strategy in small firms: Although the challenges to the management of innovation present themselves in somewhat different ways than in their larger counterparts, small firms still need to determine a strategy. They also need to concern about their market position, technological trajectories and competence building and their organizational processes. Evidence shows that compared to large innovating firms, small innovating firms have the following characteristics:

Similar objectives- to develop and combine technological and other competencies to provide goods and services that satisfy customers better than alternatives, and that are difficult to imitate.

Organizational strengths – ease of communication, speed of decision-making, degree of employee commitment and receptiveness to novelty. This is why small firms often do not need the formal strategies that are used in large firms to ensure communication and coordination.

Technological weakness – specialized range of technological competencies, inability to develop and manage complex systems, inability to fund long-term and risky programmes.

Different sectors- small firms make a greater contribution to innovation in certain sectors such as machinery, instruments and software, than in chemicals, electronics and transport.

Positioning of small firms: Small firms are strongly influenced by the sector in which they operate because the sector characteristics determine opportunities for innovation even more than in large firms. Studies show that firms with fewer than 100 employees have a much lower frequency of innovation than larger firms. Innovation often takes place on informal than formal R&D and less frequent use of external sources of knowledge than in larger firms can be found. The main sources of innovation are customers, suppliers and internal management. Therefore personal contacts and

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close geographical proximity to suppliers and customers reinforce and augment the effectiveness of innovation in small firms. Personal contacts and close geographical proximity furthermore make it possible to distinct from larger firms in competences as flexibility and customer services.

Technological paths in small firms: Because of their small size, small firms tend to be specialized rather than diversified in their technological competencies and product range. However, as with large firms, it is impossible to make robust generalizations about technological trajectories and innovation strategies of small firms. With respect to different technological paths in small firms the following distinction can be made:

Superstars –small firms that through smart exploitation of a major invention grow at high rates.

New technology-based firms – start-ups often emerged from large firms and large laboratories that market products or processes in fast moving specialized areas.

Specialized suppliers – companies with relatively little formal R&D that closely interact with (often large) customers to make significant innovation that meet customer needs.

Supplier-dominated – largest group of SME’s where for a large part innovation depends on the integration and adaption of innovation developed by other companies.

Organizational processes in small firms: In small organization different business disciplines like marketing, production, P&O and R&D are less likely to be separated by physical and organizational distance than in large firms. In bigger organizations it is necessary to have specialized department responsible for different tasks in order to keep the organization manageable. A deliberate organizational design and formal procedures are essential to have an effective and efficient cooperation between the different departments in the firm. The organization structure and supporting formal rules and procedures function as a means of integrating knowledge, of supporting professional judgments and of getting things done.

In smaller organizations the technical and organizational skills of senior managers are more important in the way the firms are managed than organizational designs or formal procedures. The characteristics of the executives, like training, experience, responsibilities and external linkages, determine the success of a company also in the field of product development and innovation. Tidd et al. (2005) summarized the contrast on the innovation process in large and small firms as represented in figure 2.10. The differences described in general organizational process between large and small firms all comes back in the way the different tasks of the innovation process are executed.

Strategic tasks

Large firms

Small firms

Integrating technology with production and marketing

Organizational design

Organizational processes for knowledge flows across boundaries

Responsibilities of senior managers

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Figure 2.10 Contrast of innovation process in large and small firms adopted from Hollander (2002)

2.3.3 Cooperation in innovation

Like stated earlier in section2.2.1 about the environment, companies do not operate in a vacuum but are influenced and have to react on different aspects of their business environment. This business environment has become more and more complex over the years. One of the major concepts in the changing business environment is the globalization. Thanks to technological developments, especially in the ICT, the world has become one big playing field not only to sell products but also as production location and source of knowledge.

This globalization also has its influence on innovation within companies. On the one hand it has a positive impact on innovation possibilities by more and a wider range of more easily accessible sources of knowledge, a bigger market for new developed products and/or services and the ability to produce products and components at places where it is most cost effective. On the other hand the globalization also brings some disadvantages like more competition, a high rate of technological developments that is often hard to follow and the risks and costs involved in the protection of an innovation.

All together these changes in the business environment make innovation a more challenging task that on top of that also becomes more and more important to survive. One important and increasingly popular way to face the innovation challenge is to cooperate with other parties in the innovation process. Already in 1972 Rothwell indicated that network of innovators can leverage knowledge and therefore are one of the most powerful agents in creating innovation (Rothwell, (1972). More recently Chesbrough (2003) stated that there is a global innovation market where innovation is a pure commodity that can be bought, sold, licensed, lent and/ or reinvested. He introduces the concept of open innovation as a way different parties can cooperate in the innovation process.

The open innovation concept is a model introduced by Chesbrough (2003) of an innovation strategy in which a company sources for human capital outside the company. This in contrast to an innovation strategy where only human capital from within the company is used to innovate, a closed innovation model.

Monitoring and assimilating new technical knowledge

Own R&D and external networks

Trade and technical journals

Training and advisory services

Consultants

Suppliers and customers

Judging the learning benefits of investments in technology

Judgements based on formal criteria and procedures

Judgments based on qualification and experience of senior management

Matching strategic style with technological opportunities

Deliberate organizational design

Qualifications of managers and staff

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Figure 2.11 The closed innovation model and the open innovation model adopted from Chesbrough (2003)

In these two distinctive models graphically shown above, the innovation funnel as discussed in section 2.1.3 can be observed. The difference between the closed and open model lies in the contour of the funnel that represent the inside and outside of the focal company. In the open innovation model the funnel is metaphorically more a combination of a funnel and a colander. During the whole innovation process the company keeps interacting with external parties that can contribute to the innovation. Whereas in the closed innovation model only during input and output stage external parties are involved.

The difference between the closed and open innovation model is not only an organizational matter. It starts with a different perspective on the way innovation is perceived. The table below clearly shows the paradigm shift that has to proceed in order to be able to make the transition to the open innovation model.

Figure 2.12 The major differences between the open and closed innovation model adopted from Chesbrough (2003)

As stated before, innovation in food is a relatively unexplored subject of academic study. Recently though Jolink (2010) performed a study on people management to stimulate networking in the food

Closed innovation model Open innovation model

The smart people work for you; To profit from R&D, you must discover and

commercialize it yourselves; If you discover it first, you will get to market

first; If you create the most and best ideas you

will win; Control IP, so your competitors do not profit

from your ideas.

Not all the smart people work for you; External ideas can help create value, but it

takes internal R&D to claim a portion of that value for you;

It is better to build a better business model than to get to market first;

If you make the best use of internal and external ideas, you will win;

Not only should you profit from others' use of your intellectual property, you should also buy others' IP whenever it advances your own business model;

You should expand R&D's role to include not only knowledge generation, but knowledge brokering as well.

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industry. In this study it is stressed out that innovation has also become more and more important for food companies due to increased competition, changing consumer behaviour and rapid technological developments. Next to that, the source of innovation in food is often found in the combination of knowledge and competencies of different organizations. Therefore the innovation performance heavily relies on the ability to build and use external networks.

Although networking is important for innovation in food, the collaboration and intensity of the network can vary per type of innovation. Jolink (2010) distinguishes ten different types of external organization that all could have a role in networking for a long term innovation performance in food: (1) Direct (B2B) customers; (2) universities; (3) contract research organizations; (4) ingredient suppliers; (5) firms in the same industry; (6) firms in other industries; (7) machinery and equipment manufacturers; (8) high-technology small firms; (9) lead customers( e.g. consumer organizations) and (10) Consultants.

For incremental innovation the knowledge and comprehension of direct (B2B) customers and lead customers that are most close to the end consumer is often most valuable. On the other hand these two external parties lack knowledge of technological developments and innovation in other fields of interest that are often source of more radical innovations. Therefore external parties like firms in other industries, universities and different suppliers of both ingredients, machinery and technologies are regularly of better use for radical innovations.

2.3.4 Expectation on innovation in Food SME’s

In this research the industry under study is the food industry. In the last few years some research has been done on critical success factors for innovation in the food sector (e.g. Batterink et al. 2006; Fortuin et al. 2007; Fortuin and Omta, 2009). These studies focused on multinational food companies or the food sector as a whole. Although SME’s represent 99% of food and drink companies and contribute 48% to the total turnover(CIAA, 2008), the field of innovation in small and medium size food companies is still relatively underexplored and therefore focus of this research.

The definition of innovation as formulated in section 2.1.1 can also be used for innovation in food SME’s. It does not matter on witch industry you focus or what company size you study, innovations will always be the result of a critical process from idea to implementation. The way this process is carried out though is expected to differ with the company size as discussed in section 2.3.2. With respect to innovation measurement it is also expected that even less than in the bigger companies innovation metrics are used to monitor the innovation process in the food SME’s. Also the two business goals of performance and growth can be distinguished in food SME’s. As mentioned in section 2.3.1 the food industry can be characterized with specific types of innovation like described by Linnemann (2006). Because of limited resources it is expected that in food SME’s most innovation are aimed at incremental performance improvements. Innovative products and/or true new creative products tend to be developed by the bigger food companies that can provide the necessary resources needed for such radical innovations.

In section 2.1.2 it was already stated that position and paradigm innovations are not very common in food SME’s. Dekkers (2010) gave some examples of open innovation in food that indicated that mainly the bigger food companies practise this kind of cooperation. Although not common, the

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cooperation in an innovation network of the companies in this research can be seen as a first step to the open innovation paradigm. Since the members of the innovation network are all food (ingredient) producing companies, a shift of their position in the food supply chain is not expected to be influenced by the membership of the network. Based on the literature review the expectations of innovation management and innovation measurement in food SME’s can be summarized as:

Mainly incremental innovations due to lack of resources;

Limited formal innovation strategy and innovation process;

Hardly no measurement to monitor the innovation process;

Only cooperation for innovation on a small scale.

2.4 Overview of relations between key concepts In this paragraph the key concepts of the theoretical framework are summarized and linkages between the concepts are shortly explained.

Environment: As described in section 2.2.1 the environment of a company has its influence on the innovation process in different ways. One of the factors that influence the innovation process within a company from the outside is the industry the organization is operating in. The focus of this research is on innovation in the food industry with its specific characteristics as depicted in section 2.3.1 In the conceptual model the environment is indicated as the outer oval that forms the context for the rest of the model.

Innovation network: On a lower level the innovation network forms a more direct environment for the companies under study. In section 2.3.3 the importance of cooperation in innovation is pointed out. An innovation network could have influence on different aspects of the innovation process that ultimately lead to an innovation performance. In the conceptual model the innovation network is therefore shown as a smaller oval within the total environment that covers all the aspects that lead to an innovation performance.

Business / innovation strategy: An innovation strategy as part of the overall strategy is the starting point for the innovation process within the company. Like stated in section 2.2.2 an innovation strategy that is in line with the overall business strategy is one of the most critical factors in order to have a satisfying innovation performance. The innovation strategy is the starting point of the innovation process that has to be in aligned with the environment. Next to the important input from the environment the innovation strategy should also be based on the innovation performance so far. Therefore the innovation strategy is in the conceptual model given as starting point for the internal innovation process with a feedback loop coming from the innovation performance.

Innovation resources: In order to execute the innovation strategy, resources have to be released and allocated to the innovation process. The specific resources as described in section 2.2.4 and the quantity of each resource are directly related to the chosen innovation strategy. In the conceptual

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model this relation is represented by a thick arrow from the innovation strategy on the one side to the innovation resources on the other side.

Innovation culture and climate: Like the innovation resources also the innovation culture and climate has a direct relation to the innovation strategy. If a company wants to be innovative, the management must create an internal environment that stimulates innovation. Like discussed in section 2.2.3 this internal environment consist of both a culture and climate that promotes employees to be innovative. A thick arrow from the innovation strategy on the one side and the innovation culture and climate on the other side shows the strong relation in the conceptual model.

Innovation competencies: In section 2.2.5 the innovation competencies are considered to be the skills and knowledge that are needed to actually come to innovations. Innovation resources and an innovative culture and climate are both preconditions for the development and effective use of the innovation competencies. The relation between the innovation competencies and the innovation resources is stronger than the relation between the innovation competencies and the innovation culture and climate. With enough (financial) resources, skills and knowledge can be brought into the organization but these could be used efficient and effective if the innovation culture and climate is not directed to innovation. Therefore there are arrows from both the Innovation resources as well as the innovative culture and climate in the conceptual model but is the latter one a bit thinner.

Innovation capabilities: Also the innovation capabilities are related to both innovation resources and the innovative culture and climate. Like described in section 2.2.5 the innovation capabilities are about the managerial and technical systems that are in place to come to innovation. Managerial systems are strongly related to the culture within an organization and the innovation climate determines in a high degree the technical systems in place. Although this relation is strong, there is also a need of funds to attract and develop employees with sufficient innovation capabilities and to create and maintain a formal innovation process with procedures, metrics and controlling mechanisms. Therefore there thickness of the arrows is just the other way around than in the relation with the innovation competencies as can be seen in the conceptual model.

Business/innovation performance: In the end of the conceptual model the actual innovation performance as part of the overall business performance is illustrated. A satisfying innovation performance can be created by the right practical combination of innovation competencies and innovation capabilities in an organization. The innovation performance can be measured in different ways like shortly discussed in section 2.1.4 To learn from the actual innovation performance and adapt things that could be better it to use the result of the different measurements during the innovation process as input for a new or adapted research strategy. This is like stated before, the dashed feedback line in the conceptual model.

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3. Methodology

In this methodology chapter is explained how the research is executed. The first paragraph is used to describe the type of research and the operationalization of the theoretical concepts as part of the research strategy. How the data for this research are collected is represented in the second paragraph. In the last paragraph of this chapter the analysis of the data is discussed.

3.1 Research strategy The first section of this paragraph is used to explain what kind of research is executed in this study. In the successive section the operationalization of the theoretical concepts as described in paragraph 2.2 is given

3.1.1 Type of research

Baarda and De Goede (1993) distinguish different types of research based on three main goals a research can have. Descriptive research is used to describe different characteristics of a population. This type of research is also referred to as statistical research because often statistical techniques are used to analyze and represent the population characteristics in form of quantitative data. In explorative research the goal is to find relations between different aspects of the research and to formulate a theory with hypotheses about these relations. In this kind of research qualitative data are frequently used to be able to get a good and deep understanding of all aspects that influence the research topic. A last type of research is the theory testing research. In this type of research there is already a theory about a specific relation between different aspects of the research topic. The goal of this research is to test if an, on theory based, hypothesis is right. This research is often a combination of both qualitative data to confirm the theory and quantitative data to assess how strong the relation under study is. Between the different types of research there is no hard line that divides descriptive research from explorative research and explorative research from a theory testing research. In practice there is a smooth transition between the different types of research. In cases of inductive research, descriptive research is done to precede exploratory research that on its turn is often followed by theory testing research. If the type of research is clear, a suitable research design has to be chosen that fits with different aspects of the total research. The research design is not only dependent on the research objective but also on research constrains like the characteristics of the population, time and funds limitations and ethical aspects of the research. Baarda and De Goede (1993) argue that the survey, the experiment and the case-study are the most important forms of research designs. To these designs Verschuren en Doorewaard (2005) add a grounded theory approach and desk research. Others like Byman and Bell (2003) and De Vaus (2001) come up with alternatives like a cross sectional design or a longitudinal design.

Till now there is only very little known about critical success factors for innovation in SME’s and even less for innovation in food SME’s. This research will therefore be used to describe the current state of innovation measurement in food SME’s on the one side and to try to explore the key innovation management aspects in these companies on the other side. The type of research could consequently best be described as a combination of descriptive and explorative research. A theory testing research

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would not be possible since there is not sufficient research done in this specific field to extract a theory and hypothesis from.

To match with the type and goal of this research, a grounded theory approach is used to induce a theory out of the collected data about different aspects of innovation in food SME’s. For the data collection a mixed method as described by Creswell and Plano Clark (2007) with both quantitative as well as qualitative questions is used. The quantitative data are mainly used to detect how much of different innovation aspects is measured in the participating food SME’s. Qualitative data are on the other side collected to describe the current innovation situation in food SME’s. The small amount of respondents in this research makes it difficult to formulate a theory that can be generalized to the whole population. On the other side this research strategy makes it possible to get a deeper understanding about all kind of different aspect related to innovation in food SME’s.

3.1.2 Operationalization of the conceptual model

In de previous chapter a theoretical framework is given which forms the basis for the data collection. The main theoretical concepts of this theoretical framework are linked and graphically represented in the conceptual model at the end of the second chapter. In this section the concepts in the conceptual model are operationalized into different dimensions that are used as input for the questionnaire. The exact link between the concept dimensions and the questions can be found in appendix III. More detailed information about the questionnaire design is given in the next paragraph.

Environment: The first concept in the conceptual model is the environment that influences the innovation process within the companies. Because the focus of this research is on the internal innovation process within the companies, the specific dimensions of the environment concept described in section 2.2.1 are translated into the following more general dimensions:

Opportunities

Predictability

Constrains

Economic crises

Number of competitors

Innovation network: The innovation network is a specific part of the environment that receives special attention in this research because all participating companies are member of a specific network (see also the next chapter for the characteristics of this network). In this research the concept of innovation network is focused on the expectation member companies have from the network. This dimension is chosen because the network is still relatively young and has not many results that can be reviewed already.

Business / innovation strategy: The business and innovation strategy are two concepts that are closely related as explained in the previous chapter. Although these two concepts are closely

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related, they consist of separate dimensions. The dimension for the business strategy concept used in this research are about the prospector strategy and the strategic focus. The innovation strategy is split into external and internal alignment dimensions.

Innovation resources: The concept of innovation resources can be divided into many different dimensions. As stated in section 2.2.4 most of the resources necessary for innovation can be bought. Therefore financial resources can be regarded as some kind of umbrella dimension for all the different resources that can be obtained with sufficient financial funds. Beside the financial dimension, the human resources form a separate dimension that is very important to come to innovation. Only a small part of these human resources can be attracted with sufficient financial funds because in some cases people don’t want to work for a company no matter what financial compensation they get.

Innovation culture and climate: The innovation culture consists of a lot of different dimensions that could be studied. In this research however the innovation culture has been taken into account but is not assessed in detail. This also holds for the innovation climate concept that could also be split into different dimensions but in this research is focused on innovation as a process. Therefore the two dimensions of the innovation culture and climate concept in this research are innovation culture and innovation process.

Innovation competencies: Unlike the previous concept, the innovation competencies are assessed in several different dimensions. In this research the focus is on dimensions related to knowledge but also some skill dimensions like flexibility and idea generation are included. Together the following six dimensions were formulated:

Idea generation

Investment in education

Educational level

Flexibility

Knowledge resources

Intellectual property

Innovation capabilities: Also the innovation capabilities concept is studied in six different dimensions. Within these dimension a distinction between management capabilities, communication capabilities and collaboration capabilities is made. The management capabilities are split into innovation management and human capital management capabilities. For the communication and collaboration dimensions a division in internal and external aspects is included. This subdivision has lead to the following six dimensions of the innovation capabilities concept:

Innovation process management

Human capital management

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Internal R&D communication

External R&D communication

Internal collaboration

External collaboration

Business/innovation performance: The last concept in the conceptual model is formed by the actual performance. Like the strategy concept this performance concept consist of an overall business performance and an innovation performance as specific part of this total performance. The overall business performance is operationalized in the dimensions profit and the performance compared to the competition. The innovation performance as main objective of the innovation process is split into four different output indicators. These indicators form the following dimensions of the innovation performance concept:

Innovativeness

Timeliness

R&D financial performance

Amount of innovation projects

3.2 Data collection The data used in this research come from three main sources namely desk research, the questionnaire and corresponding interviews. The data collection for these three sources are separately described in the following three sections.

3.2.1 Desk research

Desk research is used to obtain a deeper understanding of the research topic based on existing knowledge in literature. This first step of collecting secondary data about the research topic is useful in preparing the collection of own (primary) data. Especially when comparing the generated data with already existing data it is essential to have a good fit. In this research different aspect of the broad innovation concept are assessed. The review of existing literature was based on the following aspects of this research on innovation in food SME’s:

Innovation as main concept in general

Measurement of innovation

Important aspects of innovation management

Innovation in the food industry

Innovation in SME’s

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Collaboration in innovation The literature review formed a basis for the development of the theoretical framework and the subsequent conceptual model as described in the previous chapter. The conceptual model was taken as a fundament to develop a questionnaire. The questionnaire design will be described in the next section.

3.2.2 Questionnaire design

To obtain data about the innovation in the participating food SME’s, a questionnaire was developed. For a large part the questionnaire used was based on an already existing questionnaire on innovation in food companies. In this research the questionnaire developed for large food companies (Fortuin and Omta, 2009) was adapted to be applicable in small and medium size companies. This involved leaving out irrelevant questions and reformulating questions to fit the SME organizations that often do not have formal R&D departments. Beside reviewing and adapting the questions from a SME point of view, also new questions were added. The new questions were added in the first place to get more quantitative data and in second place to get insight in the reasons for joining the innovation network and the satisfaction with the activities of this network till now. As stated above, the questionnaire has been composed with a mixed methodology of both quantitative and qualitative questions. The quantitative part contains open questions about company characteristics such as turnover and amount of employees as well as specific questions about different aspects of innovation. The qualitative part of the questionnaire contains statements on innovation from different concepts perspectives with seven-point Likert scales in most cases ranging from strongly disagree (1) to strongly agree (7). In questions where the strongly disagree to strongly agree range was not applicable, an alternative answer possibility was given that matched with the question. In each member company of the innovation network one of the employees, in most cases one of the owners and/or board members or the highest person responsible for innovation, was asked to complete the whole questionnaire. The names and contact details of these employees were provided by the network. Besides that, the first contact person was asked to select at least two other employees in the company that were familiar with the companies’ innovation process to fill in the qualitative question part of the questionnaire. In appendix IV the total questionnaire as it has been used in this research is included.

3.2.3 Interviews

Next to the questionnaire, an interview with the employee who filled in the whole questionnaire was held to discuss the answers of the questionnaire and to get more insight in the innovation situation in that particular company. In this research a semi structured interview design was used to get as much relevant information as possible. The questionnaire provided a structure to make sure all aspects of innovation in food SME’s came up to discussion. Besides that, the questionnaire as structure for the interview gave an opportunity to go deeper into interesting answers, to ask for missing data and to clarify unclear answers. All interviews were recorded and afterwards these data were used to summarize the information the

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interview respondents had given. The summary of the interview was also send to the interviewee to check if the summary provided a correct view on the innovation situation in the company.

3.3 Analysis of results In chapter 5 the results of the questionnaire and corresponding interviews are described. Each concept from the conceptual model forms a separate paragraph were all the questions and results related to that concepts are represented. The last section of the findings chapter will contain a further analysis of the results. The fist analysis is done on all the data retrieved from each separate participating company. Where possible, the quantitative data provided were checked by comparing it with available information on websites, company brochures and other public resources. Not for all quantitative data this check was possible, but some figures like turnover and amount of employees can often be found in publicly accessible resources. Comparing the data on some specific items from different sources could be an indication for the reliability of the other data provided. The response on the qualitative statement part of the questionnaire by three employees provides the opportunity to see if opinions about different aspects of innovation deviate a lot. Only three or less responses for the qualitative statements is not much but could indicate aspects of the total innovation process that are not experienced in the same way for each employee. For the employee who filled in the whole questionnaire and participated in the interview, the qualitative data could also be compared with the response given during the interview. Although the statements were shortly discussed, the focus in the interview was because of time restriction on the quantitative questions. Together with the interview, the multiple responses from one company on the statement questions will be used as a way of triangulation. Beside the comparison of data per company also the data from all the participating companies in the innovation network are compared. In this research special attention is given to a possible difference between the size of the company and on the fact if a formal innovation process was in place. To do this analysis the companies were divided into two groups respectively on turnover size and on whether or not they had a formal innovation process. The companies were respectively divided into two groups based on less or more than €25 million turnover in 2008 and the presence of a formal innovation process. A one tailed two sample T-test with unequal variances is then performed to determine significant difference between the two groups. Next to the analysis on differences between two groups within the total results also relations between concepts found in both literature and previous research are assessed. To find out if known correlations are also present in this study, result on related questions were plotted first. If the graphs indicate relations, the correlation could be further examined.

The last analysis is performed to compare the generated data with similar data from earlier research with the questionnaire that formed the basis for the development of the questionnaire used in this research. In this comparison average ratings per statement question are compared to detect differences. Since the data from earlier research were collected at big food companies, a difference in averages on a specific question could indicate a difference between innovation in big and small food companies. Besides the comparing of averages per statement, also relations between concepts found in earlier research are shortly compared and discussed.

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4. Study sample In this chapter a short introduction to the study domain will be given. The participating companies in this research project are all member of the Innexus network. Therefore some characteristics of the Innexus network will be described in de first paragraph of this chapter. The second paragraph contains some information about the separate companies that participate in this research.

4.1 The Innexus network The study will be based on an investigation of twelve out of fourteen food companies that cooperate in the food network Innexus. Innexus is a food network where small and medium sized enterprises in the food sector from the Northern part of the Netherlands join forces. The goal of the organization is to connect, inspire and facilitate member companies with the purpose of generating new business. Most of the Innexus member companies are business-to-business organizations that deliver ingredients to other food processing companies. Only a few of the companies also produce products that can be found in the supermarket. Not all of the Innexus companies fall in the European SME definition (European Commission, 2003) of having less than 250 employees and an annual turnover not exceeding € 50 million or annual balance sheet total of maximum €43 million. Depending on the year of reference, two or three companies have an annual turnover that is over € 50 million. Although these companies strictly not fall under the European SME definition, they still show characteristics of a medium sized enterprise if you look at the amount of employees and the way these, often family owned, businesses are organized. The Innexus network is a relatively young network that exists only a few years now. The network is still expanding and till now only one member left the network. The main activities of the network can be divided into two different categories. The Kick my Food activities and Build my Business projects are aimed at sharing knowledge respectively developing new food products and applications. Within the Kick my Food activities different seminars are held with a social theme that is related to the food industry like the aging of the population and the focus on healthy functional food to the impact of the sustainability awareness. Next to the seminars also disciplinary group meetings are held to share knowledge among representatives from departments responsible for export, procurement, R&D, P&O, production, ICT and technical support/maintenance within the member companies. The Build my Business projects are until now limited because of the relatively short active period of the network. Next to the short time span, the Build my Business projects are more complex than only sharing knowledge and therefore it is more difficult to start these kinds of projects that demand a close cooperation and attention for the different interest of its participants. Although it is not easy, a few projects have been done or are still executed where two or more member companies join forces to come to an innovation together.

4.2 The participating companies In this paragraph a short description of the participating companies is given. In this description the main activity, approximate turnover in 2008 and the amount of FTE are presented.

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Table 4.1 Description of participating companies

The overview in table 4.1 shows that the participating companies differ a lot in both turnover and the amount of FTE. The average turnover of around 55 million euro’s is slightly above the turnover limit of the European SME definition as mentioned in the previous section. With a turnover of 250 million euro’s company F could be regarded as an extreme. Without this outlier the average turnover is around 33 million euro’s. With respect to the amount of employees all participating companies are below the 250 FTE limit of the European SME definition. On average75 FTE are employed in the participating companies.

Company Main activity Approximate turnover in 2008

(in € x 1000)

Amount of FTE in 2008

A Production and marketing of ingredients for food and feed industry

30600 30

B Egg products for retail and other food producing companies

35000 55

C Supplier of ingredients for the food industry with emphasis on dairy products

37400 120

D Flour products for both industrial and entrepreneurial bakeries

58700 85

E Production of margarines, oils and fats for the food industry and food service

90000 129

F Production of cheese 250000 220

G Ingredients for food protection and fortification

17000 43

H Production of bread-crumbs, batters and tempura’s

12600 30

I Production of infant and toddler formulas and health supplements

7900 38

J Production of meat products for food processing industry

3700 18

K Production of confectionary specialties Unknown 59

L Production of ingredients for food industry with emphasis on bakery, confectionary, dairy and ice-cream industry

unknown unknown

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5. Findings

In this core chapter of the report the result on the questionnaire and corresponding interview will be described. The structure of this chapter is in line with de key aspects of innovation management as presented in paragraph 2.2. All concepts are subject of the paragraphs in this chapter. All questions cited in this chapter can be found in appendix IV.

5.1 Environment A total of ten questions were asked to assess the external environment that has influence on the innovation performance. All questions relate to a dimension of the environment concept as elaborated on in section 2.2.1 The answers to the questions give a good overview of how the respondents see their environment with respect to the opportunities, the predictability, the mayor constraint, the influence of the economic crisis and the number of competitors.

Except the question about the number of competitors, all questions were formulated with a 7 points Likert scale answer possibility from totally disagree (1) to totally agree (7) for questions 1, 3, 4, 5, 9, 10, 11 and very small (1) to very large (7) for questions 2 and 12. For the nine Likert scale questions the average, standard deviation and range are shown in the table below.

Question nr.

Question Average Std. Deviation

Range

1 The business environment is safe and provides little threat for the survival and well being of our company

5.1 1.6 1-7

2 The influence of the economic crisis on our business results are 3.2 1.3 1-6

3 The sector is rich in investments and marketing opportunities 3.5 1.4 2-7

4 Actions of competitors are easy to predict 3.8 1.2 2-6

5 Consumer trends and desires are easy to forecast 4.2 1.4 2-6

9 The bargaining power of our suppliers has a strong influence on the business results of our company

4.3 1.3 2-7

10 The bargaining power of our business buyers has a strong influence on the business results of our company

5.6 1.0 3-7

11 New entrants in our sector have a strong influence on the business results of our company

2.9 1.7 1-7

12 The number of substitutes for our products is 3.5 1.5 1-6

Table 5.1 Results of questions 1 till 5 and 9 till 12

The results show that the bargaining power of business buyers, as one op Porter’s five forces (1979), is indicated as the most influencing environmental factor with an average score of 5.6 on a 7 points Likert scale. This aspect of the environment not only has a high average score, but it also has the lowest variance with a standard deviation of 1.0 and a range between 3 and 7. An explanation for this high score could be the increasing power of the retail in the food supply chain caused by recent price wars and consolidations. During the interviews it was often said that

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supermarkets in the Netherlands have a very dominant role in the food sector and are putting more and more pressure on prices to sustain and increase market share.

The second highest score is on question 1 that relates to the stability of the external environment. Although the average score of 5.1 is high there is also a relatively big variance with a standard deviation of 1.6 and a range that includes the whole 7 points scale. The relatively high variance is in line with the feedback of one of the respondents on this question that words like safe, threat and well being could be subject to different interpretation. A safe business environment for instance could be interpreted as economically predictable and stable or as safe for the health of people working in the business.

The lowest average score was on another aspect of Porter’s five force framework (1979), the influence of new entrants on the business results. Beside the lowest average score this question also showed the highest variance with a standard deviation of 1.7 and the full range of this 7 points Likert scale used. An explanation for this low score was mentioned in an interview with one of the respondents where he stated that the business they operate in is relatively small and needs very specific knowledge. These two characteristics of the market make it not attractive for new entrants to enter. Another respondent explained that the market they operate in has a few dominant players and almost homogeneous products. It is for new entrants in this market therefore expensive and hard to differentiate and not easy to make up for higher prices caused by a lack of economies of scale.

Next to the nine Likert scale questions, also in question 16 respondents were asked about the number of competitors in the company´s main market. The result of this question shows that all companies operate in markets where 25 or less than 25 competitors are active on the company’s main market. Interesting is that for several companies, respondents of the same company indicate a different amount of competitors. A possible explanation could be found in the function of the respondents that might be related to more external contacts and therefore a better view on the competitive environment.

5.2 Innovation network An aspect of the external environment that is key in this research is the influence of an innovation network on the innovative performance of member companies. To gain insight into the functions of the network with respect to innovation, two questions were added to the original WIAT company questionnaire. In question 46 respondents were asked to rate the importance of different network functions.

The table below shows the output of question 46 on the importance of different functions of the Innexus network. All functions of the network have averages of round 5 except for the function of the network as a possibility to join forces for attracting new employees. This functions of the network scores with an average of 4.3 a little lower. Some of the respondents explicitly cited that they do not see many advantages in working together on the recruitment of new employees. On the contrary, other respondent see much benefits in cooperation for new employees. They think that companies within the network become more attractive if they can also offer career development opportunities at other network companies.

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Not only for the question about the function of the network as possibility to join forces for attracting new employees, but also for the other network functions the respondents give very different scores. This is reflected in standard deviations from 1.4 till 1.9 and scores that are given within the full or almost the full 7 points Likert scale. With an average of 5.3 and the lowest standard deviation, the function of the network as a possibility to gain knowledge about the market was indicated as most important. Other average scores above 5 are for the network as source of technological knowledge and the network as a way to keep in touch with other players. Together these three functions with the highest averages indicate that knowledge sharing is acknowledged as more important than concrete improvements or cooperation.

Question nr. 46

Question: How important are the following functions of the network:

Average Std. Deviation

Range

a. To gain new technological knowledge 5.1 1.6 2-7

b. To gain new knowledge about the market 5.3 1.4 2-7

c. To keep in touch with other players in the sector 5.1 1.7 1-7

d. To learn new competencies 4.7 1.5 1-7

e. To improve the innovative culture in the company 4.6 1.9 1-7

f. To improve structures and processes for innovation within the company 4.6 1.7 2-7

g. To gain economies of scale through cooperation within the network 4.8 1.6 2-7

h. To join forces for attracting new employees 4.3 1.6 1-7

i. To join forces in the development of new products and processes 4.9 1.8 1-7

Table 5.2 Result of question 46

Table 5.3 contains the results of question 47 that asked in which functions, as formulated in question 46, the Innexus network had contributed till now. It clearly shows that the network till now mostly served as a way to keep in touch with other players in the sector with the highest average of 4.0. On the other hand this question also has the highest variance with a standard deviation of 1.8. In accordance with the still relatively young Innexus network the average contribution scores are not very high yet. Good to note is that the highest contribution scores are found on the functions of the network that were rated most important in the previous question. Next to that also the lowest contribution score is in line with the function of the network as a possibility to join forces for attracting new employees that was rated least important in question 46.

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Question nr. 47

Question: Till now Innexus has contributed to the following goals of the network:


Range

a. To gain new technological knowledge 2.6 1.4 1-5

b. To gain new knowledge about the market 3.2 1.5 1-6

c. To keep in touch with other players in the sector 4.0 1.8 1-6

d. To learn new competencies 2.4 1.3 1-5

e. To improve the innovative culture in the company 2.5 1.2 1-5

f. To improve structures and processes for innovation within the company 2.3 1.2 1-5

g. To gain economies of scale through cooperation within the network 2.6 1.2 1-5

h. To join forces for attracting new employees 2.0 1.1 1-5

i. To join forces in the development of new products and processes 2.4 1.4 1-7


5.3 Business and innovation strategy The business strategy, and as part of it the innovation strategy, form the starting point for innovation in an organization. To find out what kind of general strategy the companies follow, question were asked about the position in the market as regards to the competitors and about aspects of the organization that are key to be competitive.

Table 5.4 Results of questions 7 and 8

In question 7 the Likert scale answer possibility had a range from follower (1) to market leader (7). The result with an average of 3.7 indicates that most of the company’s position themselves in the middle not being market leader but also not only following competitors. Interesting to note is that for almost all companies different respondent gave a different rating on this question. In one specific case a respondent stated the current position of the company as follower (1) where another respondent thought the position of the company was almost market leader with a score of 6 out of 7. A little higher is the average of question 8 about fighting competition to get market dominance. In line with the previous question a similar variation is found and also for this question responses for different respondents from the same company differ a lot in some cases. From question 7 and 8 can be concluded that most companies follow a strategy to achieve a strong position in the market not far behind the market leader but currently hold a position in the middle.

Question nr.


Range

7 The current position of our company compared to our main competitors can be characterized as

3.7 1.4 1-7

8 Our firm fights the competition and is directed to market dominance 4.5 1.5 1-7

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Besides that, the current market position and the positioning goal of the organization are not clear within all companies.

Table 5.5 Results of question 36 and 37

From the results on questions 36 and 37 it can be concluded that both internal and external alignment are looked after by evaluating the fit with customers’ needs and active participation in selecting innovation projects by higher management. With an average of 5.4 the internal alignment is a little bit better than the external alignment that got an average of 4.8. Variation in the answers from different respondents is equal for both questions and on a normal level with a standard deviation of 1.2 and a range between 3 and 7.

An innovation strategy is the specific part of the total strategy that is aimed at the development of new products, processes or new product-market combinations. To be effective, the innovation strategy has to be in line with both the general strategy and the external environment. To assess the internal alignment a bit deeper, a question was added to found out how frequently the innovation portfolio is on the agenda of the board. This was formulated as a multiple choice question K.1. By far, most companies (7 out of 11) stated that the innovation portfolio was discussed by the board every month or even more often. Only one respondent indicated that the board talked about the innovation projects during board meetings once a year. In the interviews this respondent clarified that innovation projects were monitored on a day to day basis by senior management but only once a year the board reviewed the portfolio and determined the innovation strategy. From the interviews it can be concluded that innovation projects are monitored close but in a very informal way. Often respondents indicated that the companies are of such a size that as a board member you can keep up to date by walking around without having to put the innovation as a formal point on the agenda for board meetings. The outcome of this question could therefore be biased by how literately innovation project as agenda point in board meetings was taken.

Question nr.


Range

36 We monitor on a regular basis the extent to which our products and processes align to our customers’ needs

4.8 1.2 3-7

37 The higher management and department managers are actively involved in the selection of innovation projects

5.4 1.2 3-7

Question nr. 24

Question: The following aspects are important for our company to be competitive:


Range

a. Price 5.6 1.2 3-7

b. Quality 6.1 0.9 4-7

c. Delivery speed 5.7 1.1 2-7

d. Unique products 5.4 1.0 3-7

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The output of question 24 on the key aspect of the company in the competitive environment shows that all aspects scored relatively high on importance. Among the different aspects quality and customer relations were rated most important with an average of 6.1 and a standard deviation of respectively 0.9 and 1.0. Also the other aspects had a relatively low variance of around 1 which indicates that there are not many differences between respondent about the important competitive aspects in the companies. Although the technical / technological superiority is slightly lower with an average of 4.7, there are no aspects that really stand out. In one of the interviews a respondent added flexibility as an important aspect for the company to be competitive.

To find out where the strategic focus within the innovation portfolio lies, in question 44 the importance of different types of innovation was asked. In the table below it can be seen that process and product innovation are the focus of the companies with an average of 5.4 and a standard deviation of 1.2. This is in line with what respondents told during the interview where often was stressed out that particularly product innovation was the type of innovation that occurs most.

Question nr. 44

Question: What is the importance of the following types of innovation within the innovation portfolio:


Range

a. Fundamental research on new technologies 4.3 1.6 1-7

b. Improvement and renewal of processes 5.4 1.2 2-7

c. Develop and introduce new products or services 5.4 1.2 3-7

d. Develop and market new applications for existing product or services 5.2 1.4 1-7

e. Introducing existing products or services on a new market 4.9 1.3 2-7


Although respondents in the interviews acknowledge the importance of fundamental research, most of the companies indicated that they were too small and did not have sufficient resources to be able to do innovation is this field. This is reflected in the lowest average of 4.3 for fundamental research on new technologies. Beside the lowest average this type of innovation also has the highest standard deviation. This could be the result of one company that is very knowledge intensive and does far more fundamental research compared to the other companies.

e. Product assortment 5.6 0.9 3-7

f. Technical/ technological superiority 4.7 1.2 2-7

g. Customer relations 6.1 1.0 2-7

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5.4 Innovation resources After innovation goals are formulated in an innovation strategy, resources are necessary to execute the innovation projects. The questionnaire contained several questions to review what financial and human resources the companies commit to innovation.

5.4.1 Financial resources

In questions C.1 till C.3 respondents were asked to examine how much is invested in innovation projects and if subsidies for innovation are used. During the interviews it appeared that most companies do not draw up an innovation budget before hand. Respondents indicated that funds for innovation projects were often assigned ad-hoc on the moment that there are specific plans to do an innovation project. The figures given are therefore estimates in most cases. The companies that do draw up an innovation budget base their budget on historic costs of innovation projects. In none of the cases the innovation budget is formed as a certain percentage of the turnover. Only one of the companies indicated that they expect to get subsidies via the Innexus network. In general subsidies play a minor role in the funding of innovation projects. As one of the respondents stated: subsidies are welcome but never a reason to do or not to do a innovation project. A single company stated that some less important innovation projects are only executed when subsidy is obtained.

Next to question C.3 about expected subsidies through the Innexus network in 2010, the respondents were also asked if they expect additional funds from cooperation within the innovation network in question C.4. In the notes attached to the questions in the questionnaire and in the interviews it was explained that these additional funds can come from cooperation in an innovation project with another Innexus member. If two or more members have a common innovation goal, financial benefits could arise from sharing costs and risks.

Again only one company, the same as who expected additional subsidies through Innexus, thought additional funds through cooperation with other Innexus members in innovation projects could be reached. More than once the interviewees explained that they could imagine that there are possibilities to have financial benefits from cooperation in innovation project, but that there are no concrete plans for cooperation in innovation projects for financial year 2010. They argue that due to the different activities of the member companies, the cooperation possibilities are not easy to execute and that most benefits are expected from knowledge sharing. In first instance these benefits are non financial and difficult to convert into additional funds for innovation.

5.4.2 Human resources

Next to the financial resources also human resources are an essential element that has to be managed if you want to come to innovation. The questionnaire contained questions about the total amount of FTE (E1), the educational background of the employees (E3), the amount of FTE involved in innovation (E2) and the investment in education for employees involved in innovation.

In 2008 the participating companies had an average of 75 FTE employed with a minimum of 18 and a maximum of 220. This clearly shows that with respect to the amount of FTE all companies can be classified as a SME. In the period from 2006 to the expected amount of FTE in 2010 almost all

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companies expect to grow. The two companies that do not only expect to grow show only relatively small changes over the years.

The results of the question on the educational background of the employees show that the majority of the employees in the participating companies have lower level education. This corresponds with the activities of the companies that for the largest part have the production of food as core business. Some of the participating companies however do (also) more knowledge intensive work which is reflected in relatively high numbers of employees with higher educational levels. One company that also does more fundamental research even has employees on PhD level.

Also corresponding with the fact that most of the companies have the production of food as core business is the numbers of employees that are involved in innovation. In 2008 more than half of the companies had only 1 or 2 FTE working on innovation. The company that also does fundamental research forms an exception with both absolute and as percentage of the total workforce the highest level of employees involved in innovation. Although the levels of FTE involved in innovation are low, in the period from 2006 to the expected amount of FTE working on innovation in 2010 only one company expects a minor decrease. All other companies expect to keep or slightly expand the amount of FTE involved in innovation during these years.

From the interviews it became clear that most respondents found it hard to answer the question how much they invested in education for the employees involved in innovation. Some indicated that they did not invest in special education with respect to innovation. Others indicated that this kind of education was often provided for free by suppliers of equipment or ingredients. Respondents also pointed out that investment in education for innovation purpose was not registered separately because it was not indicated as a structural expanse.

5.5 Innovation Culture & Climate Next to enough resources, a good culture and climate for innovation is an essential condition to come to innovations. Although the innovation culture is very important for organizations that want to be innovative, the innovation culture is not as easy to measure as for instance the resources for innovation. Two important aspect of the innovation culture, time to spend on innovation projects at own discretion and the way fault are seen, are included in the questionnaire as quantitative question N and qualitative question number 43.

From the interviews it became clear that none of the companies have made arrangements that give certain employees time to work on innovation projects at own discretion. Although it is not formally arranged, six out of the eleven respondents indicate that there is some time for certain employees to work on innovation projects on their own discretion. The estimated time to work on these innovation projects for the involved employees is around 10 to 15% of their working hours. Beside the direct answers on the question some respondent indicated that this question made them think why time to spend on innovation projects at own discretion was not formally arranged. On the other side other respondent stated that they think this kind of formally arranged time to work on innovation projects at the employee’s own discretion is only something for big multinational companies.

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On the statement in our organization there’s a culture where faults are seen as a learning moment (question nr. 43) the average score was 4.9 on a seven points scale from totally disagree to totally agree. This score indicates that in most companies the respondents perceive a culture where there can be learned from faults. On the other hand there are also some respondents that give a 3 score, which is slightly more to the disagree side of the scale. This might indicate that in some companies the culture is not so effective for innovation. To innovate effectively there must be room not only to try something and make fault put even more important, to learn from fault made.

Beside the innovative culture that is mostly formed out of implicit rules, there are also more formal rules with respect to innovation that determine an innovative climate as explained in paragraph 2.2.3. In the questionnaire respondents were asked if they work with a formal innovation process in their company (question L). Next to that respondents were also asked to estimate what percentage of innovation projects were aborted before completion. In the qualitative part of the questionnaire another two questions, questions 33 and 35, were asked to find out how the companies deal with the innovation process. In question 33 the respondents were asked if performance indicators were used to monitor the innovation process. If the company evaluates innovation projects afterwards to learn from the experiences was asked in question 35.

The result of the questionnaire shows that a little less than half of the companies, 5 out of 11, have a formal innovation process. From the interviews it became clear that in most companies the innovation process has some sort of structure but that it is not a formal procedure. In the companies that do have a formal innovation process, the procedures are often based on certain innovation models like Cooper’s stage-gate model and/or the House of Quality concept. Also a formal innovation process based on models from a project management perspective can be found.

During the interviews it appeared that none of the companies measures the percentage of innovation projects that are aborted before completion. The average of the estimated percentage of innovation projects that were aborted before completion was 16 % with a deviation of 15% and a range from 0 to 50%. The question was also asked for three different book years, but none of the respondents could tell if there was a development in this percentage the last six years. This result shows that on average it is estimated that only a small amount of the projects were killed during the process. During interviews some respondents indicated that this low percentage was caused by a good first analysis of the idea for an innovation project before even starting the project. On the other hand other respondents were convinced that the percentage was relatively low because the decision to kill a project was not easily made possibly as a result of not having a formal innovation process with stage-gates.

Next to managing innovation as a formal process, an important tool to control the innovation process is to measure the input, throughput and output. In question M.1 the companies were asked if they measure the total innovation performance. Also for this question 5 out of the 11 participating companies indicated that they measure innovation. From corresponding question M.2 (which indicators are used) and the interviews it became clear that primarily financial indicators, like turnover of new products, were used to measure innovation performance. Beside that the indicators used are mainly to measure the output of the innovation process. Input and throughput indicators

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are hardly used in the participating companies although one company mentioned that they measure the amount of innovation projects as an input indicator.

The question on the use of performance indicators for the innovation process was also asked as a statement in the qualitative part of the questionnaire with the following result:


The relatively low average score of 3.2 on a seven point scale for question 33 is in line with the results on the open question M. This shows that also other employees involved in the innovation process confirm that indicators are not commonly used to monitor the innovation process.

5.6 Innovation competencies Enough resources for innovation in combination with a culture and climate that stimulates innovation do not lead directly to innovation. The resources, culture and climate are more like necessary basic conditions that create an internal environment to develop innovation competencies and capabilities. In this paragraph the outcome from the questionnaire on the innovation competencies questions will be described. In the next paragraph the results on the questions with respect to the innovation capabilities will be addressed.

The questionnaire contained different question to find out more about the innovation competencies within the participating companies. The educational level and investment in education with respect to innovation are already described in the previous paragraph. Education could lead to specific knowledge that can be conceived as a distinctive competence. In question 22 respondents were asked if their company distinguishes itself from the main competitors by the educational level of their employees. With an average score of 4.3 and a deviation of 1.2 on a seven points scale this competence is not highly rated as a way to gain a competitive advantage.

Next to knowledge from employees inside a company also knowledge from other sources outside the company can contribute to innovation competencies. In the questionnaire the two F questions were included to get some information about the use of external sources of knowledge. In question F.1 respondents were asked to fill in the amount of visits last year from employees involved with innovation to respectively seminars, workshops and exhibitions. Question F.2 subsequently asked to fill in the amount of subscriptions to literature in the last year on respectively scientific journals, sector related magazines and databases. From the results in combination with the corresponding information from the interviews it became clear that in none of the participating companies these kind of external sources of knowledge are registered. Although in some companies reports from visits like workshops and exhibitions are made, an active knowledge management procedure is not in place. Like some of the external visits, it should be possible to track subscriptions to literature from recorded expenses in the financial administration. The data provided in the questionnaire were however all estimations of the real amounts. Several respondents indicated that they do not see the

Question nr.


Range

33 Performance indicators are used to monitor the innovation process 3.2 1.4 1-6

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urge of registering these kinds of data. On the other hand other respondents told these questions made them think of how knowledge management was organized in their organization and that they could see a lot of room for improvement. Because all provided data were rough estimations and respondents pointed out a big uncertainty, the data are not shown or used for further analysis.

In the statements part of the questionnaire also two competence related questions were asked. One, question 20, about flexibility as a competence to gain competitive advantage and another knowledge related question, question 21, about the use of intellectual property rights in the form of patents and licenses. Flexibility as a competence to distinguish from main competition gets a relatively high average score of 5.5 and the variance in scores is not very high with a standard deviation of 1.1. This result can be explained by the fact that the participation companies were all relatively small SME’s. Compared to bigger competitors these small firms are often more able to be flexible and therefore this competence is one of the main possibilities to gain competitive advantage. The result on the protection of products and processes is in line with what the respondents told during the interviews; that patents, licenses etc. are till now hardly used. In this type of food companies protection of product and/or processes is mostly based on trade secrets. One respondent indicated that brand protection is more common in this industry, but that branding and the protection of brands is often too expensive for SME’s.


5.7 Innovation capabilities Beside innovation competencies also innovation capabilities are necessary to actually come to an innovative performance. Important innovation capabilities are the abilities to manage, to communicate and to collaborate in the innovation process. The questionnaire contained different questions to assess the innovation capabilities. The management of the innovation process is closely related to the innovation climate discussed in paragraph 5.5. The innovation climate forms with formal procedures the basis for managing the innovation process. Questions like the use of a formal innovation process and the use of performance indicators to monitor the innovation performance are therefore discussed earlier. The management of the innovation process from a capabilities point of view is more about how the people in the organization use the formal procedures to make the innovation process effective and efficient.

Question nr.


Range

20 Our company distinguishes positively from our competitors by our flexible reaction on market changes

5.5 1.1 2-7

21 Our company distinguishes itself positively compared to our main competitors by the protection that our products and processes receive by patents, licenses etc.

2.1 1.2 1-5

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In the questionnaire the following two questions were asked to assess the management capabilities in the innovation process:


Although most of the participating companies don’t have a formal innovation process and/or don’t use performance indicators, they think they are able to manage the innovation process a bit more effectively compared to their main competitors. With an average score of 4.4 slightly above the middle of the seven points scale it is not a factor that makes the companies very distinctive. Also on question 35 the average score was with a 3.8 almost in the middle of the seven points scale. In the interviews some respondents explained that they do try to improve the innovation process based on gained experience, but that this was not a structural part at the end of innovation projects. Most improvements follow from experience in more organically way without explicitly codifying ‘lessons learned’. Beside management capabilities on the innovation process itself there are also capabilities related to the human resources involved in the innovation process. In the questionnaire respondents were asked if they exchange expertise with other companies by temporarily hiring employees with specific knowledge or skills (question O). Although three out of eleven participating companies indicated that they exchange expertise by temporarily hiring employees, none could specify how many hours employees of other companies were hired or how many hours own employees were hired out. Next to the quantitative question, the following two statements were given to find out how human resources involved in the innovation process are managed:

Question nr.


Range

18 Our company distinguishes itself positively compared to our main competitors by an effective innovation process

4.4 1.2 2-6

35 We consistently try to codify ’lessons learned’ at the end of innovation projects

3.8 1.3 1-6

Question nr.


Range

26 Our company has an active policy to stimulate and motivate employees (for instance by rewards) to be innovative

4.2 1.4 1-6

32 In our company are few administrative restrictions for employees involved in innovation (for instance regarding travel expenses, budget etc.)

4.4 1.4 1-7

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Both question results show an average that lies a little above the middle of the seven points scale. This is in line with what respondents told during the interviews. A few respondents indicated that employees are stimulated to be innovative but that this is managed ad hoc. Special reward systems and/or administrative restrictions are not in place because each innovation project is managed separately. Interesting to note is that one respondent explicitly stated that he does not believe in the effect of reward systems to stimulate innovation. He believes that innovation must come from intrinsic motivators of employees and that it is more important to facilitate the employees than to implement specific procedures. Communication is also an important capability to come to an efficient and effective innovation process. Internal communication is essential for the cooperation of employees, often from different departments, within the company to connect the different phases of the innovation process. External communication is of high value to make sure that innovations meet customer expectations and to obtain knowledge and resources that are not available within the own company. Five statements on internal communication were put in the questionnaire to explore the role of internal communication within the innovation process of the participating companies.

Table 5.12 Results of questions 30,31, 38, 39 and 40 *) from very poor (1) to very good (7)

All average scores on the internal communication questions are between 4.5 and 4.9. These results point out that the respondent think the internal communication with respect to innovation is at a reasonable level. In the interviews this view is supported by the statement that it is relatively easy to communicate in small companies. Interesting to note is that one of the bigger participating companies combined the departments of marketing and R&D to have closer communication lines.

Question nr.


Range

30 Current market information (such as segmentation, trends and feedback on competitors' products and processes) is passed on by marketing to employees involved in innovation on a regular basis

4.5 1.3 2-7

31 The progress of all innovation projects is regularly communicated with employees within the company that have to work with the innovation

4.6 1.2 2-7

38* The communication between the employees involved in innovation and the marketing department is ...

4.9 1,5 1-7

39* The communication between the employees involved in innovation and the production department is ...

4.6 1.1 2-7

40* The communication between the employees involved in innovation and the purchasing department is ...

4.8 1.2 2-7

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Also the external communication with customers and suppliers is assessed with the following two statements:

Table 5.13 Results of questions 41 and 42 *) from very poor (1) to very good (7) Like the results on the internal communication questions, also the questions about communication with external parties with respect to innovation show averages a little below 5. These scores indicate that there is room for improvement, but that the external communication is not a capability that needs immediately attention. A last innovation capability is the ability to cooperate with both internal and external parties. Cooperation is closely related to communication, but involves more the capability to manage differences in background, knowledge and expectations when working together with other parties. Beside the question on internal communication, also two questions about internal collaboration were asked.


Question nr.


Range

41* The communication between the employees involved in innovation and our main suppliers is ...

4.7 1.1 2-7

42* The communication between the employees involved in innovation and main customers is ...

4.9 1.2 1-7

Question nr.


Range

29 There are regular cross-functional screening processes (including for instance, marketing, purchasing, and manufacturing) to identify and select new product/technology opportunities

4.5 1.5 1-7

45a Which departments are beside the department involved in innovation also participating in the development of innovation projects: marketing

5.1 1.8 1-7

45b Which departments are beside the department involved in innovation also participating in the development of innovation projects: purchasing

4.8 1.3 1-7

45c Which departments are beside the department involved in innovation also participating in the development of innovation projects: production

5.1 1.2 2-7

45d Which departments are beside the department involved in innovation also participating in the development of innovation projects: sales

6.0 1.1 3-7

45e Which departments are beside the department involved in innovation also participating in the development of innovation projects: finance

4.3 1.4 2-7

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From these results it can be concluded that cross-functional meetings to screen innovation opportunities do take place but with an average of 4.5 not in every company on a regular base. This statement is supported by the response in the interviews and the answers on question 45. Especially between the department involved in innovation and the sales department there is a lot of cooperation to develop innovation projects. The finance department is obviously much less involved in innovation projects. The cooperation with external parties is assessed with more quantitative questions and one statement in the questionnaire. In question D.1 respondents were asked how much is spend on external innovation like research institutes, other companies and networks. During the interviews it became clear that most companies don’t outsource parts of their innovation process. If they do involve external parties it is in most cases a cooperation and not a company-client relation. The expenses for the client relations are moreover not recorded in a way that they can easily see how much of the innovation budget is used for outsourcing. Interesting to note is that some respondents explicitly indicated that they had bad experiences with external knowledge providers. Commercial knowledge providers are sometimes focused on how to make billable hours as much as possible. Public knowledge providers on the other side are often too little market oriented and slow. The purpose of question G.3 was to found out how many innovation projects were executed with participation of external parties. From the interviews it became clear that the participating companies do not have this information at hand and therefore most of the numbers given are rough estimations. Also the answers on question H, which externals partners are participating in innovation projects, are not based on actual date but approximations. Although there are no hard data available, it can be concluded that customers participate most often in innovation projects. In line with question D.1, research institutes are least involved in innovation projects. In statement question 34 the respondents were asked if their company uses joint ventures and alliances to make full use of the innovation capacity. The low average score of 3.3 on the seven points scale indicates that joint ventures and alliances are not common forms of cooperation with other companies to make use of the total innovation capacity. The relatively high standard deviation of 1.7 could be explained by different interpretations of joint ventures and alliances because respondents from the same company in more than one case gave very different scores.

5.8 Business and innovation performance In the end it all comes down to the overall performance and the innovation performance that can play an important role in the total results. First thing to note is that the participating companies were in general very open about (financial) results. Second prominent finding in this research is that the innovation performance is hardly measured in the participating companies. In the questionnaire a question (B) about profit and the profit development over book years 2006, 2008 and the expectations for 2010 was asked. Although most respondents gave an indication about profit, these results are not described further in this chapter. The question was primarily included as control question and to analyze correlations between certain aspects of innovation and the overall and innovative performance. With respect to profit developments almost all companies showed a profit increase from 2006 to 2008 and also expect to grow for 2010.

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Beside profit as a measure of business performance also the results compared to their main competition was assessed.

Table 5.15 Results of questions7,13,14,15 17,18 and 19 *) from follower (1) to market leader (7) * *) much lower (1) much higher (7)

Most remarkable in these business performance results are the low score for sales volume and the high score for reputation. Both extremes could be explained by the fact that the participating companies are relatively small SME’s. It was to be expected that sales volume are not that high in a market where also much bigger companies are active. The fact that reputation had such a high score might be caused by the flexibility competence as discussed in the previous section about innovative competencies. Beside the very high score for reputation, also the growth rate got a relatively high score of 4.8. This in line with the quantitative result described above in the question about profit development and the result on the turnover control variable. Like the profit development, also turnover development shows for most companies expected higher turnovers in 2010. The other three questions on market position, profitability and the financial position all have averages around the middle of the seven points scale. Together with the question on sales volume, the market position question has a standard deviation of 1.4. This variance could be caused by big differences in size of the companies within the participating group of food SME’s. As a relatively small company it is more likely to have a follower position than a bigger company that has more resources available to strive to the position of market leader. In the questionnaire the innovation performance of the participating companies is assed with different questions. In the first place respondents were asked to indicate the turnover realized from product introduced within the last three years (question A.2). Like already stated in the introduction of this chapter, respondents found it hard to answer the question because many of them don’t use this indicator. Besides that, the results are very dependent on the interpretation of the term new product. One respondent also noted that the turnover of new products, like normal turnover, could be biased by very fluctuating prices for ingredients. Therefore this question can be seen as an inducement to discuss the measurement of the innovative performance. The output however is because of the different interpretations and estimations not used for further analysis.

Question nr.


Range

7* The current position of our company compared to our main competitors can be characterized as

3.7 1.4 1-7

13** Compared to our main competitors our profitability is 4.3 0.9 2-6

14** Compared to our main competitors our sales volume is 2.7 1.4 1-6

15** Compared to our main competitors our growth rate is 4.8 1.0 3-7

17 Our company distinguishes positively from our competitors by a strong financial position

4.0 1.2 1-6

19 Our company distinguishes positively from our competitors by our good reputation in the market

6.0 0.9 4-7

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Next to the financial innovative performance, respondents were also asked to indicate how innovative they think their organization is on different disciplines.

Table 5.16 Result of question 23 *) from not innovative (1) to very innovative (7) From these result it could be concluded that the participating companies consider themselves most innovative in the field of product quality and least innovative on marketing. Especially the fact that innovation does not take place in marketing also came across in the interviews where respondents indicated that innovation is mainly focused on product development.

A specific part of the innovative performance is the timeliness of bringing innovation to the market. This could be a factor that is very determining for the innovative performance in a quick changing environment. Therefore respondents were asked for the average time-to-market (TTM) and possible developments in TTM over the years 2006, 2008 and 2010 (question J.1). Like turnover of new products this is also an indicator that is hardly used in the participating companies. This is also the case for the next question (J.2) about the percentage of innovation projects that is completed within project planning. Interesting to note is that some of the respondents indicated that they do not make a planning for innovation projects because innovation is not structural organized. In these organizations innovation takes place only when operational activities don’t need special attention or when it is necessary to fulfil a direct customer need. It is therefore also not surprising that on the statement 27, Our new products enter the market faster compared to our main competitors’ products, the average score is a little bit below the middle of the seven points scale with a 3.8. This also corresponds with the statement of one respondent that time is not a very important aspect in their business to business environment. Of course you must be on time, but in most cases product quality is much higher appreciated than quick deliveries.

With respect to the planning of innovation projects also the question (J.3) on the percentage of innovation projects that are completed within budged raised difficulties for some respondents because budgets are not always made beforehand. During the interviews one respondent stressed this out with the statement that most innovation costs are caused by labour hours and once a projects is started it “takes what it takes”.

Question nr.


Range

23a* How innovative would you consider your company to be in marketing

3.8 1.6 1-6

23b* How innovative would you consider your company to be in product design

4.4 1.1 2-6

23c* How innovative would you consider your company to be in product quality

5.1 1.2 2-7

23d* How innovative would you consider your company to be in distribution

4.0 1.4 1-6

23e* How innovative would you consider your company to be in production

4.3 1.2 2-6

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Because both budget and output of the innovation process are only measured on a limited scale there are hard data available to assess the ratio of innovation investment to the financial innovation performance. In statement 28 the respondents are nevertheless asked to assess the ratio between investments in and earnings from innovation. With a scale from very unsatisfying (1) to very satisfying (7) the average score is precisely in the middle of the range with a 4.0.

The last question on the innovative performance assessed how many innovation projects were done on average in a year (question G.1). Most respondents indicated that not more than ten innovative projects were done in a year but that the average was more around five a year. Only three companies stated that they did more innovation projects in a year, two of which only a little above ten a year. The other company showed very high numbers of innovation projects. During the interview it became clear that these high numbers were mainly caused by taking into account all projects that had lead to a new project number. This clearly indicates that also these results, like turnover of new products, are very depending on the interpretation of the term new product. Beside the different interpretation of the terms, it is also good to keep in mind that only a number of innovation projects do not say anything about the size, complexity and innovativeness of the projects labelled as innovation projects. In some interviews the question was raised how many innovation projects were most ideal for their organization. For the innovative performance it is in the end better to have done a few successful innovation projects than a lot of innovation projects that for the largest part failed.

5.9 Analysis of results In the previous paragraphs the results from the questionnaire and corresponding interviews were described. As mentioned in paragraph 3.3 also an analysis on the result was performed to check the data, to find out significant differences and relations within the study sample and to compare the results with previous research.

The first analysis was done on company level by checking the provided data with information from other resources. The possibility to check data appeared to be very limited because of a lack of secondary data. An explanation for this could be that most of the participating companies are privately owned and therefore have limited obligations to provide publicly accessible information. The secondary data that could be found were in line with the provided information. From this perspective there is no reason to doubt the reliability of the provided data. On company level also the multiple response on the statement questions were analyzed. In general the answers of different respondents from the same company were all closely together. On average only a few cases of the 81 questions showed high variances in ratings. These specific cases could be used as internal starting point for discussion but are not used for further analysis in this research.

Next to the analysis on company level, the results of the different participating companies are also compared and analyzed as a whole. In the first place the results are analyzed to find out if there are significant differences in results between the smaller and larger companies in the study population. Even at a relatively high significance level of 10% only a few questions showed significant differences on the t-test. Most of the significant differences were obvious because the results belonged to questions that are directly linked to the company size, like budget and the amount of FTE. The analysis on the influence of a formal innovation process showed even less significant differences.

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As discussed in chapter 2 on the basis of literature and previous research relations between concepts were presumed as presented in the conceptual model. To check relations in this study sample, graphs from results on questions that were related to presumed correlating concepts were plotted. None of the presumed correlations though could be found in this research. A possible explanation for this could be that in previous research with a similar questionnaire in most cases only one respondent per company filled in the questionnaire. This resulted in a smaller research sample and less variance than in the results of this research.

A last analysis was performed to compare the results on the qualitative statement part of the questionnaire with previous research. Like mentioned before this research was done on a much smaller research sample. The results of this previous research showed averages that were in most cases close to the middle of the 7 points scale with average ratings around 4. The averages and variances on the statement questions in this research deviate a lot more. An explanation for these differences could be that in this research also respondents participated that were involved in innovation but at a much lower level in the organisation. Another difference could be that the characteristics of the research sample used in this research show more variance with respect to company size. In the previous research all participating companies were bigger multinational companies. Differences between the two research result are not analyzed in detail on statement level in this research.

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6. Conclusion, discussion and recommendations In this final chapter the research questions as presented in the introduction will be answered and an overall conclusion will be drawn. The second paragraph contains a short discussion on the research. Next to the conclusion and discussion also recommendations will be formulated for both further research and for the innovation network in the last paragraph.

6.1 Conclusion The conclusion in this report will consist of two sections. In the first section an answer to the sub-research questions will be given based on the results of the literature research, questionnaire results and interviews. An answer to the general research question will provide an overall conclusion on the state of innovation management and innovation measurement in food SME’s in the second section.

6.1.1 Answers to the research questions

The sub-research questions all deal with a specific part of the research in order to acquire the knowledge necessary to meet the research objective. The firs sub-research question was related to the current knowledge on innovation measurement and was formulated as:

A1: How can innovation be measured?

From literature research it became clear that the innovation process is not measured as rigorously as most other processes in the majority of companies. If innovation is measured, often only input and output measures are used to determine the performance. Only the last decade more and more attention is given to the process itself with so-called throughput measures. Moreover innovation metrics used tend to be focussed on financial indicators only. Of course financial indicators can be useful in evaluating the innovation performance, but also not financial indicators could provide relevant information on aspects that could be improved. In literature specific innovation metrics can be found for different measurement areas. As presented in section 2.1.4 Adams et all. (2006) give a good overview of different measurement areas. They also studied the specific innovation metrics and came to the conclusion that although there is a base set of innovation management measures present in literature, gaps can be identified on different aspects of innovation. Two types of measurement gaps can be distinguished: validity gaps and omission gaps. Validity gaps are present when there is not enough evidence that certain measures actually do capture outputs of innovation management. Omission gaps arise where measures are lacking although the importance of a certain innovation aspect is supported in literature. In this research innovation metrics are formulated as part of the questionnaire design. Metrics included in the questionnaire are all linked to important aspects of the innovation process and based on literature or own apprehension.

In order to measure effectively it is essential to know what important aspect of the innovation process are and therefore the second sub research question was:

A2: What are important aspects of the innovation process?

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In the second paragraph of chapter 2 the key aspects of innovation management are described. This research has its focus on the most important aspects of the innovation process within companies. Literature on the most important aspects of innovation management shows that especially an innovation strategy, enough resources, a high quality innovation process and a culture that stimulates innovation are essential. The innovation process and a culture that is in favour of innovation are taken together in this research under the innovation culture & climate concept. Next to these concepts, innovation capabilities and innovation competencies are added as practical completion in the conceptual model. To come to a satisfying innovation performance it is important that all concepts depicted in the conceptual model are aligned and monitored.

The third sub research question looked at the specific characteristics of the industry and company size under study.

A3: What are specific characteristics of innovation in food SME’s?

Very little is known about innovation in food and even less about innovation in food SME’s. From literature one can learn that the food industry is categorized as a low-tech industry based on R&D spending as percentage of revenues. Despite the relatively low R&D investments the importance of innovation for this sector with its turbulent environment, due to increasing globalization, changing quality demands and price discount fights among retailers is more and more understood. With respect to the size of food companies it is known that SME’s represent 99% of food and drink companies and contribute 48% to the total turnover of the sector. Because of the turbulent environment cooperation between different players in the food industry is becoming more and more important to be able to come to (radical) innovations. Until now the open innovation model as a new paradigm on innovation has been put into practice mainly by large multinational food companies. On a small scale, SME’s in food are also joining forces as can be seen in the appearance of innovation networks like the Innexus network that is subject of study in this research.

The theory explored in the three previous sub research questions is used as input to answer the following sub-research question:

B1: How can the important aspects of the innovation process be measured in food SME’s

The answer on this question can be short because the way the important aspects of the innovation process in food SME’s could be measured are used to design the questionnaire. This questionnaire can be found in appendix IV at the end of this report.

The results of the questionnaire and corresponding interviews provided information to answer the last sub-research question.

B2: What is the current state of the innovation process at the participating food SME’s?

From the questionnaire results and interviews it can be concluded that innovation is regarded as very important for most participating SME’s. Although regarded as important, most companies in the research do not manage innovation with an innovation strategy and formal described innovation process. Innovation happens in many cases ad hoc and is not organized as a business process that gets continuous attention.

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Besides that there is hardly any information available about specific aspects of the innovation process because performance indicators are not in place. Even very basic information about the part of the turnover that is realized with innovations is in a large part of the companies not available. In some cases the turnover from innovation can be derived from registered data but are not used as source of information inside the companies. Especially in the smallest participating companies it is the entrepreneur that, in some cases based on experience and feeling, determines how the innovation process is organized at the moment an opportunity has been observed.

6.1.2 Overall conclusion

The research objective can be reached if the general research question is answered and can therefore be seen as the central question in the research. For this research on innovation management and innovation measurement in Food SME’s the following general research question is formulated:

To what extent is theory about innovation management and innovation measurement applicable for SME’s in food?

In literature a lot can be found on the way an innovation process should ideally be managed. In the food SME’s under study though the innovation process is not managed as rigorously as most other business processes. Especially in the smallest companies studied during this research it became clear that innovation is managed ad hoc without a predetermined strategy and without a formal procedure. Besides the fact that innovation is not managed as a process also little is measured about the actual innovation performance. Even in companies that have formulated some sort of innovation strategy in most cases only measure the financial results of their innovation process. Other aspects of the innovation process that could provide useful information when measured are in most companies neglected. Theory about innovation management and innovation measurement is therefore only on a small scale applicable for innovation in food SME’s. One must keep in mind that it does not suit most of the food SME’s organisations to manage and measure the innovation process closely because of the relatively simple and clear organisational structure. More than once respondents indicated that they expected that to apply a more formal innovation process and the use more innovation metrics would not be cost effective. Although not to a large extend applicable in the same way as in big multinational food companies, food SME’s could learn from theory on innovation management and innovation measurement. In the first place an innovation strategy would give more direction to the innovation process in food SME’s. Secondly innovation management theory could provide some reference points to make sure nothing is missed during the innovation process. Innovation metrics introduced on a small scale could provide valuable information to adjust the innovation process and to improve the actual innovation performance. A more specific recommendation for the companies can be found in the last paragraph of this chapter.

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6.2 Discussion

All research has its limitations. In this paragraph respectively the reliability and validity of the research are shortly discussed.

The reliability of a research is the degree in which repetition of the research would lead to the same results. Internal reliability indicates if repetition of the research with the same sample would lead to similar results. External reliability is related to the degree of similarity of results when the same research is used for another study sample from the same population. Although in general the companies were very willing to cooperate in this research, not all information asked in the questionnaire could be given. The main reason for this is that a lot of specific data on the innovation process is not kept in a database or is recorded otherwise. Especially information about aspects of the innovation process that involved parties outside the company were lacking. In most cases where factual data were missing, the respondents gave some rough estimation on how the actual quantities would be. In a few cases respondents could not make any estimations because they did not have any idea about frequencies or quantities asked. To check to correctness of the provided information, were possible, data from secondary sources were compared with the data provided in the questionnaire. The secondary sources used were mainly brochures and internet sites. Because much of the participating companies are privately held, not much information was available. For the information that could be found, no significant differences were found in the comparison with data provided in the questionnaires. The internal reliability of this research is expected not to be very high because of the frequent estimations. If the research would be repeated, the results could be very different when another person from the same company answered the questions. Though a comparison with secondary data showed no significant differences, this possibility to check the provided information was only very limited.

A total of twelve companies participated in this research. All participating companies filled in the questionnaire and cooperated in a corresponding interview. One company though only provided the qualitative data on the second, statements part of the questionnaire. Another company only provided non financial information in the quantitative part of the questionnaire. The qualitative statement part of the questionnaire was answered by all twelve companies. Although companies were ask to have the qualitative part of the questionnaire filled in by more than one person involved in innovation, two companies filled in the qualitative statements part only once. This research has more respondents than the previous research in food companies based on a similar questionnaire. Nonetheless it still is a very small sample of the total research population. Therefore the also the external reliability is expected not to be on a very high level. In this perspective the research is best regarded as a first impression on innovation management and innovation measurement in food SME’s. The validity of a research is the degree in which the research adequately measures the concepts included. Also validity has an internal and external component. The internal validity much depends on the operationalization of the main research concepts. In this research the questionnaire

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development is for a large part based on an already validated questionnaire. Therefore the internal validity of results obtained in this research is also expected to be on a reasonable level. The external validity is concerned with the adequate measurement of the concept as a possibility to generalize the findings to the whole population. Like the external reliability also the external validity is expected not to be representative for the whole population of food SME’s because of the relatively small sample size.

6.3 Recommendations This research is done to get more insight in the way food SME’s manage and measure their innovation process. The results of this research can be used as a starting point for further research as described in the first section of this paragraph. Besides as an inducement for further research, the results could also be used to improve the innovativeness of the participating companies in the innovation network. Recommendations for this goal are formulated in the second section.

6.3.1 Recommendations for further research

This research originally started with the objective to explore what the most important drivers and barriers for innovation in food SME’s are. During the research it became clear that this was a step too far with respect to the current state of innovation management and innovation measurement within most participating food SME’s. Nonetheless this research objective is still very relevant. Further research is recommended to trace the most important drivers and barriers. In such a research it is advised to make sure beforehand that participating companies are already measuring innovation on the innovation aspects that are under study or are willing to measure it. Only with enough reliable data it is possible to find out what makes a company a more successful innovator than others. A longitudinal research would be preferable to be able to see if changes in the innovation process really influence the innovation performance. Next to a research on the drivers and barriers for innovation in food SME’s a comparison of the innovation process within SME’s of different industries would be interesting. With such a research one could get more insight in innovation in SME’s in general and differences between innovation in smaller companies from various types of industry.

6.3.2 Recommendations for innovation network

On the basis of this research both Innexus as innovation network and the separate member companies are advised to draw up an innovation strategy. Part of this innovation strategy should be a clear definition of what respectively inside the network and within the companies is regarded as an innovation. Next to the innovation strategy, the companies are recommended to professionalize their innovation process. This does not have to involve that they implement a formal innovation process as can be found in larger companies, but could also mean that a checklist is created to make sure that all important aspects of the innovation process are taken care of. To create a good checklist, theoretical models like the quality function deployment model also called the house of quality can be helpful. To improve the internal innovation process, the companies are advised to use the knowledge already available in other member companies. Especially the smaller companies could learn from the bigger companies within the network how to professionalize their innovation process.

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The implementation of more innovation metrics would be most effective if first an innovation strategy is formulated and corresponding goals are set. Only measuring innovation on itself could provide some information that could be compared with similar metrics from other companies but is not as effective as measuring innovation aimed at reaching a certain innovation goal. With respect to measuring innovation in the network it should be clear that the use of metrics is only effective if all participating companies use the same definitions and measure in the same way. Also from a network perspective it is advised to specify beforehand what aspects of the innovation process you want to measure and where you want the purpose/goals of the innovation measurement are.

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Appendix I: The PESTEL analysis One of the tools that are often used to map the environment is a PESTEL analysis. PESTEL is an acronym for the Political, Economical, Sociological, Technical, Environmental and Legal aspect in the business environment. For the focus of this research the different aspects in this model are related to their influence on the innovation performance.

Political aspects, through subsidy policies governments can stimulate innovation overall or innovation in specific areas. Also the way the educational system is designed influences innovation through available knowledge and the presence of a good educated workforce;

Economical aspects, innovation projects have to be financed and therefore the economic situation determines the possibilities to gain necessary funds. On the demand site the economic situation also influences the need for certain innovations;

Sociological aspects, next to the economical situation also sociological aspects determine the need for innovations. Important social factors that have consequences for the needs of customers are the demographic composition of the population and their lifestyle;

Technological aspects, the technological state of affairs is a factor that determines what kinds of innovations are technically possible. Often the more radical innovations are based on technological developments that make things possible that were not able before;

Environmental aspects, natural resources can be seen as both stimulating and constraining for innovations. Nowadays a lot of innovations have as goal to save resources and to develop more efficient processes and environmental friendly products;

Legal aspects, although some innovations are technically possible, legislation in specific cases prevents product or processes to be developed. A well known example of legislation that constrains development is in the case of genetic modified organisms (GMO).

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Appendix II: Porter’s diamond for competitive advantage of nations

Next to the five forces model, Porter (1990) also developed a model to distinguish factors that influence the competitive advantages of nations. In this diamond shaped model (see figure 2.9) the factors governments and chance influence the following four dimensions of the national competitive environment:

Figure A.1 Porter’s Diamond of competitive advantage source: http://www.netlab.tkk.fi/opetus/s38118/s99/htyo/2/main.html

Firm strategy, structure and rivalry, the strategy and structure of a company is influenced by the national environment it operates in. Some nations tend to have more hierarchical and big companies while others are known for much more small family-owned businesses. Also rivalry within industries can differ from nation to nation and from industry to industry;

Related and supporting industries, an industry can profit from the presence of well developed related and supporting industries in the national environment;

Demand conditions, a large national market for the products or services of an industry make it possible for companies to focus. Because of this focus a nation can develop a competitive advantage when exporting the product to other countries;

Factor conditions, the presence of natural resources or relatively cheap and/or high quality other production factors can give an industry strong position in a global market.

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Appendix III: Relation concepts with questionnaire Concept Dimension quantitative questions

per company qualitative questions per company

Environment opportunities

3

predictability

1, 4, 5

constraints

9, 10, 11, 12

economic crisis

2

number of competitors

16

Innovation network expectations

46, 47

Business strategy prospector strategy

7,8,25

strategic focus

24 (a-g), 44

Innovation strategy external alignment

36

internal alignment K1 37

Innovation resources financial C1; C2; C3; C4

human D2; E2; E3

Innovation culture & climate culture N1; N2 43

innovation process J4; L1; L2; M1; M2 33

Innovation competencies idea generation K2 investment in education D2

educational level E3 22

flexibility

20

knowledge sources F1; F2

Intellectual property

21

Innovation capabilities innovation process management

18, 35

human capital management O1; O2 26, 32

internal R&D communication

30, 31, 38, 39, 40

external R&D communication

41, 42

internal collaboration

29, 45

external collaboration D1; G3; H1; H2; H3 34

Business performance Profit B

competitive performance

7, 13, 14, 15, 17, 19

Innovation performance innovativeness A2 23 (a-e)

Timeliness J1; J2 27

R&D financial performance J3 28

amount of innovation projects G1; G2; G3

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Control variables Turnover A1 6

Employees E1

product life cycle I

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Appendix IV: Questionnaire Questionnaire Innexus General questions asked once in every participating company

Financial year Financial year Expected in 2006 2008 2010

A.1 Total turnover (€) ………………… ………………… …………………

A.2 Turnover innovative products not older than 3 years (€) ………………… ………………… …………………

B Operational profit (indexation with ………………… ………………… ………………… financial year 2006 = 100)

C.1 Budget applied for innovation (€) ………………… ………………… …………………

C.2 Additional financing of innovation from subsidies ………………… ………………… ………………… not via Innexus (€)

C.3 How much additional funds for innovation from subsidies acquired via the Innexus network do you expect for financial year 2010(€) …………………

C.4 How much additional funds for innovation from cooperation within the Innexus network do you expect for financial year 2010(€) …………………

D.1 Expenditure on external innovation (e.g. research institutes, ………………… ………………… ………………… other companies and networks) (€)

D.2 Expenditure on training for employees involved in ………………… ………………… ………………… innovation projects (€)

E.1 Amount of employees (FTE) ………………… ………………… …………………

E.2 involved in innovation (FTE) ………………… ………………… …………………

E.3 Amount of employees per educational level: Academic ………………… ………………… ………………… Higher vocational level ………………… ………………… …………………Intermediate vocational level ………………… ………………… …………………

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F.1 By employees involved in innovation in the previous year visited amount of: seminars ………………… workshops ………………… exhibitions …………………

F.2 Amount of subscriptions to business related literature in last year scientific journals ………………… industry specific magazines ………………… databases …………………

G.1 Amount of innovation projects in last year that were started ………………… that continue from a previous year ………………… were finished …………………

G.2 Amount of internal innovation projects in the last year …………………

G.3 Amount of innovation projects with external partners in the last year …………………

H.1 Percentage of innovation projects in the last year were customers actively participated …………………

H.2 Percentage of innovation projects in the last year were suppliers actively participated …………………

H.3 of innovation projects in the last year were research institutions

actively participated …………………

I Average product life cycle (years/months) ………/……… ………/……… ………/………

J.1 Average(time to market ………………… ………………… ………………… (months)

J.2 Percentage of innovation projects that were executed ………………… ………………… ………………… according to the project planning

J.3 Percentage of innovation projects that were executed ………………… ………………… …………………

within the financial budget J.4 Percentage of innovation projects that were early ………………… ………………… …………………

aborted

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K.1 How often is the innovation portfolio reviewed by the executive board? □ Monthly □ Once per quarter □ Biannual □ Once per year

K.2 Estimated percentage of the origin of ideas: Board ………………… R&D department ………………… Other department ………………… Suppliers ………………… Customers ………………… End users ………………… L.1 Our innovation process is executed through a formal process were different phases with

corresponding go/ no go decisions are formulated YES / NO L.2 If yes, which phases are appointed and which go/ no go criteria are used

Phase go/ no go criteria ………………………………… ………………………………………………..………………………………… ………………………………… ………………………………………………..………………………………… ………………………………… ………………………………………………..………………………………… ………………………………… ………………………………………………..………………………………… ………………………………… ………………………………………………..………………………………… M.1 Within our company the total innovation performance is measured YES / NO M.2 If yes, which indicators/metrics are used: ………………………………… ………………………………… ………………………………… ………………………………… ………………………………… ………………………………… N.1 Within our companies employees have the possibility to spend time on innovation at own

discretion YES / NO N.2 If yes, which percentage of their time can they spend on innovation at own discretion: ………………………………… O.1 Our company exchanges expertise with other companies by temporarily hiring employees

with specific knowledge or skills YES / NO O.2 If yes, about how many hours in respectively the years 2006, 2008 en 2010: hired in ………………… ………………… ………………… hired out ………………… ………………… …………………

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Statement with respect to the position of the company in relation to its environment. 1. The business environment is safe and provides little threat for the survival and well being of our

company Totally disagree 1 2 3 4 5 6 7 Totally agree

2. The influence of the economic crisis on our business results are Very small 1 2 3 4 5 6 7 Very large

3. The sector is rich in investments and marketing opportunities Totally disagree 1 2 3 4 5 6 7 Totally agree

4. Actions of competitors are easy to predict Totally disagree 1 2 3 4 5 6 7 Totally agree

5. Consumer trends and desires are easy to forecast Totally disagree 1 2 3 4 5 6 7 Totally agree

6. We expect that the turnover of our current product in the coming years to Strongly decline 1 2 3 4 5 6 7 Strongly increase

7. The current position of our company compared to our main competitors can be characterized as Follower 1 2 3 4 5 6 7 Market leader

8. Our firm fights the competition and is directed to market dominance Totally disagree 1 2 3 4 5 6 7 Totally agree

9. The bargaining power of our suppliers has a strong influence on the business results of our company Totally disagree 1 2 3 4 5 6 7 Totally agree

10. The bargaining power of our business buyers has a strong influence on the business results of our company Totally disagree 1 2 3 4 5 6 7 Totally agree

11. New entrants in our sector have a strong influence on the business results of our company Totally disagree 1 2 3 4 5 6 7 Totally agree

12. The number of substitutes for our products is Very small 1 2 3 4 5 6 7 Very large

13. Compared to our main competitors our profitability is Much lower 1 2 3 4 5 6 7 Much higher

14. Compared to our main competitors our sales volume is Much lower 1 2 3 4 5 6 7 Much higher

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15. Compared to our main competitors our growth rate is Much lower 1 2 3 4 5 6 7 Much higher r

16. How many competitors are active on the company’s main market? □ 1 t/m 5 □ 6 t/m 25 □ more than 25 □ unknown

Our company distinguishes itself positively from our main competitors by: 17. A strong financial position

Totally disagree 1 2 3 4 5 6 7 Totally agree

18. An effective innovation process Totally disagree 1 2 3 4 5 6 7 Totally agree

19. A good reputation in the market Totally disagree 1 2 3 4 5 6 7 Totally agree

20. A flexible reaction on changes in the market Totally disagree 1 2 3 4 5 6 7 Totally agree

21. The protection of our products and processes by patents, licences etc. Totally disagree 1 2 3 4 5 6 7 Totally agree

22. The educational level of our employees Totally disagree 1 2 3 4 5 6 7 Totally agree

23. How innovative to you expect your company to be at the following disciplines: a. Marketing

Not innovative 1 2 3 4 5 6 7 Very innovative b. Product design

Not innovative 1 2 3 4 5 6 7 Very innovative c. Product quality

Not innovative 1 2 3 4 5 6 7 Very innovative d. Distribution

Not innovative 1 2 3 4 5 6 7 Very innovative e. Production

Not innovative 1 2 3 4 5 6 7 Very innovative

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24. The following aspects are important for our company to be competitive: a. price Unimportant 1 2 3 4 5 6 7 Very important b. quality Unimportant 1 2 3 4 5 6 7 Very important c. delivery speed Unimportant 1 2 3 4 5 6 7 Very important d. unique products Unimportant 1 2 3 4 5 6 7 Very important e. product assortment Unimportant 1 2 3 4 5 6 7 Very important f. Technical/ technological superiority Unimportant 1 2 3 4 5 6 7 Very important g. client relations Unimportant 1 2 3 4 5 6 7 Very important

25. Innovation is important for our company to be able to compete Totally disagree 1 2 3 4 5 6 7 Totally agree

26. Our company has an active policy to stimulate and motivate employees (for instance by rewards) to be innovative Totally disagree 1 2 3 4 5 6 7 Totally agree

27. Our new products enter the market faster compared to our main competitors’ products Totally disagree 1 2 3 4 5 6 7 Totally agree

28. The ration between investment in and revenues from innovation are Very unsatisfying 1 2 3 4 5 6 7 Very satisfying

29. There are regular cross-functional screening processes (including for instance, marketing, purchasing, and manufacturing) to identify and select new product/technology opportunities Totally disagree 1 2 3 4 5 6 7 Totally agree

30. Current market information (such as segmentation, trends and feedback on competitors' products and processes) is passed on by marketing to employees involved in innovation on a regular basis Totally disagree 1 2 3 4 5 6 7 Totally agree

31. The progress of all innovation projects is regularly communicated with employees within the company that have to work with the innovation Totally disagree 1 2 3 4 5 6 7 Totally agree

32. In our company are few administrative restrictions for employees involved in innovation (for instance regarding travel expenses, budget etc.) Totally disagree 1 2 3 4 5 6 7 Totally agree

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33. Performance indicators are used to monitor the innovation process Totally disagree 1 2 3 4 5 6 7 Totally agree

34. Our company uses joint ventures and alliances to fully exploit our innovation capacity Totally disagree 1 2 3 4 5 6 7 Totally agree

35. We evaluate each innovation process afterwards and try to learn from the experiences Totally disagree 1 2 3 4 5 6 7 Totally agree

36. We monitor on a regular basis the extent to which our products and processes align to our customers’ needs Totally disagree 1 2 3 4 5 6 7 Totally agree

37. The higher management and department managers are actively involved in the selection of innovation projects Totally disagree 1 2 3 4 5 6 7 Totally agree

38. The communication between the employees involved in innovation and the marketing department is ... Very poor 1 2 3 4 5 6 7 Very good

39. The communication between the employees involved in innovation and the production

department is ... Very poor 1 2 3 4 5 6 7 Very good

40. The communication between the employees involved in innovation and the purchasing department is ... Very poor 1 2 3 4 5 6 7 Very good

41. The communication between the employees involved in innovation and our main suppliers is ...

Very poor 1 2 3 4 5 6 7 Very good

42. The communication between the employees involved in innovation and main customers is ... Very poor 1 2 3 4 5 6 7 Very good

43. Within our company there is a culture where fault are seen as a possibility to learn Totally disagree 1 2 3 4 5 6 7 Totally agree

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44. What is the importance of the following types of innovation within the innovation portfolio: Fundamental research on new technologies Unimportant 1 2 3 4 5 6 7 Very important

Improvement and renewal of processes Unimportant 1 2 3 4 5 6 7 Very important

Develop and introduce new products or services Unimportant 1 2 3 4 5 6 7 Very important

Develop and market new applications for existing product or services Unimportant 1 2 3 4 5 6 7 Very important

Introducing existing products or services on a new market Unimportant 1 2 3 4 5 6 7 Very important

45. Which departments are beside the department involved in innovation also participating in the

development of innovation projects: Marketing Never 1 2 3 4 5 6 7 Always

Purchasing Never 1 2 3 4 5 6 7 Always Production Never 1 2 3 4 5 6 7 Always

Sales Never 1 2 3 4 5 6 7 Always Finance Never 1 2 3 4 5 6 7 Always

Questions with respect to Innexus netwerk

46. How important are the following functions of the network: a. To gain new technological knowledge

Unimportant 1 2 3 4 5 6 7 Very important b. To gain new knowledge about the market

Unimportant 1 2 3 4 5 6 7 Very important c. To keep in touch with other players in the sector Unimportant 1 2 3 4 5 6 7 Very important

d. To learn new competencies Unimportant 1 2 3 4 5 6 7 Very important

e. To improve the innovative culture in the company Unimportant 1 2 3 4 5 6 7 Very important

f. To improve structures and processes for innovation within the company Unimportant 1 2 3 4 5 6 7 Very important

g. To gain economies of scale through cooperation within the network Unimportant 1 2 3 4 5 6 7 Very important

h. To join forces for attracting new employees Unimportant 1 2 3 4 5 6 7 Very important

i. To join forces in the development of new products and processes Unimportant 1 2 3 4 5 6 7 Very important

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47. Till now Innexus has contributed to the following goals of the network: a. To gain new technological knowledge

Nothing 1 2 3 4 5 6 7 Very much b. To gain new knowledge about the market

Nothing 1 2 3 4 5 6 7 Very much c. To keep in touch with other players in the sector

Nothing 1 2 3 4 5 6 7 Very much d. To learn new competencies

Nothing 1 2 3 4 5 6 7 Very much e. To improve the innovative culture in the company

Nothing 1 2 3 4 5 6 7 Very much f. To improve structures and processes for innovation within the company

Nothing 1 2 3 4 5 6 7 Very much g. To gain economies of scale through cooperation within the network

Nothing 1 2 3 4 5 6 7 Very much h. To join forces for attracting new employees

Nothing 1 2 3 4 5 6 7 Very much i. To join forces in the development of new products and processes

48. What are next to the above mentioned goals the needs you want support of Innexus on: ……………………………………………………………………………………………………………………………………. …………………………………………………………………………………………………………………………………….

innovation in food sme’s

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