Philippine firms investing in innovation, study says

The majority of Philippine companies are investing in innovation to keep themselves competitive, according to a government study.

Citing the Survey on Innovation Activities (SIA) from January 2009 to June 2010, the Philippine Institute for Development Studies said 54.4 percent of survey respondents were “innovation active.”

The PIDS, National Statistics Office (NSO) and Department of Science and Technology (DoST) conducted the survey.

PIDS said the survey covered three major industries: (a) food manufacturing, (b) electronics manufacturing, and (c) information and communication technology.

The SIA covered establishments across four study areas: Quezon City; Metro Cebu (Cebu City, Lapu-lapu City and Mandaue City); Davao City; and the Philippine Economic Zone Authority (Peza) areas in Cavite and Laguna.

In NSO’s sampling process, 1,824 establishments were covered across the three major industries in the four study areas.

Target establishments were stratified into food and nonfood industry clusters with a 40:60 distribution.

As in other establishment surveys, target respondents for the SIA were the owners and managers of the sampled establishments.

According to the survey, 65.2 percent of large firms and 65 percent of medium-sized companies said they were innovators.

Among small companies, 48.6 percent said they were innovators while 34 percent of microestablishments said the same.

The average annual expenditure for innovation activities was about P12.4 million.

The average annual spending for large firms was P30.2 million, for medium sized companies P3.2 million, for small firms P2.96 million, and for microestablishments P51,200.

Overall, 37.6 percent said they were product innovators, mostly to introduce new products to their respective markets.

Among large firms, 46.4 percent cited product innovations and 42.5 percent of medium-sized companies said the same.

Among small companies, 32.7 percent said they were product innovators and 23.6 percent of microestablishments said the same.

At the same time, 43.9 percent of the total sample innovated on processes, mostly with very little outside help.

Among large firms, 56.4 percent cited process innovations and 50 percent of medium sized companies said the same.

Among small companies, 38.3 percent said they developed process innovations and 23.6 percent of microestablishments said the same.

Only 3.4 percent of the total sample said they had public financial support for innovation.

Medium sized companies had the most access with 7.5 percent, followed by large firms with 4.4 percent and small companies with 1.9 percent.

None of the microestablishments had public financial support for innovation.

Companies apparently had better access to non-financial government support.

Of the total sample, 21.5 percent said they had government assistance to innovate.

Medium sized enterprises again led the pack with 28.8 percent, followed by large firms with 26 percent, small companies with 15 percent, and microestablishments with 15.1 percent.

In a policy note titled “Why some firms innovate and why others do not,” PIDS research fellows Jose Ramon G. Albert, Rafaelita M. Aldaba, Francis Mark A. Quimba, and Donald Yasay said there has been mounting research on innovation, “with the recognition that innovation is a major driver of economic output, productivity and competitiveness.”

However, as the SIA showed, most companies do not yet consider government and research institutions as key partners in their innovative practices and are developing innovations internally.

Firms also need to be stimulated to cooperate for innovation, the PIDS research fellows said.

They said government must communicate its financial and non-financial programs and encourage cooperation between industry associations, universities, and research institutions.

The SIA is meant to be a systems-oriented and policy-relevant survey on innovation, PIDS said.

“Various studies have pointed to the Philippines’ meager expenditures on research and development (R&D) activities, especially when compared with those of its neighboring countries. Innovation, however, is not just confined to inventions and R&D,” the PIDS policy note stated.

The PIDS fellows said, “From an economics standpoint, an innovation must increase value, whether customer value or producer value.” They said innovation activities in a firm involve the implementation of new or significantly improved products or processes via technological innovation, or new marketing or organizational methods.

To provide indicators for benchmarking national performance, PIDS said, the Department of Science and Technology (DOST) planned for the conduct of the 2009 SIA.

The PIDS, NSO and DoST conducted the survey with funding support from the International Development Research Centre.

The SIA was self-administered, PIDS said.

The questionnaire was adapted from the European Union’s Community Innovation Survey Version 4, with some refinements to consider the Philippine setting.