978-1-61284-952-2/11/$26.00 ©2011 IEEE 103 IEEE Int'l Technology Management Conference

Researching the 'Forgotten Sector': Low and Medium Tech (LMT) Innovation - Present Light on Future Trends

Muhammad Nouman, Lorraine Warren, Stephen Rhys Thomas University of Southampton

Scholl of Management, Highfield, Southampton, SO17 1BJ, UK Corresponding author email lw4@soton.ac.uk

Abstract

As a research topic and priority for policy formulation, resource allocation and strategy implementation, low-tech (LT) and low- and medium-tech (LMT) sectors have traditionally attracted lesser attention compared to high-tech sectors. This paper addresses questions concerning our current priorities in terms of research on innovation in LT/LMT sectors. A systematic literature review spanning the time period 1999 to 2010 has been conducted to address these questions. From the review, a research agenda is developed

Introduction Of late there has been an increasing focus in the literature

on low-technology (LT) and low- and medium-technology (LMT) sectors on how innovation occurs within them. Evidence of this reviving interest is the special issue of Research Policy journal on ‘Innovation in Low- and Medium-Technology Industries’ published in April 2009. This is a particularly noteworthy phenomenon as LT has been termed as the ‘forgotten sector in innovation policy’ (Hirsch-Kreinsen, 2008a). The increasing attention also derives from growing criticism of the ‘high-tech myopia’ which assumes that economic growth results primarily from high-tech (HT) sectors and innovation in these sectors driven by research and development (Von Tunzelmann & Acha, 2005). Identifying reasons for this HT bias, Radauer and Streicher (2007) suggest that these industries grow faster, leading us to believe that they contribute more to economic growth of a country. Additionally, the economies of developed countries are structured to favour high-tech sectors more while outsourcing LT and LMT to developing countries with lower labour costs. However, the argument favouring HT may be considered relatively weak because even in developed economies LT and LMT sectors comprise a dominant portion of national economies (Bender, 2004; Hirsch-Kriensen & Jacobson, 2008). They contribute more than 90% of growth output in highly developed economies including the EU, USA and Japan (Robertson et al., 2009) and dominate in many developing countries. Making the case for their significance Hirsch-Kreinsen (2008b) argues that innovation is not necessarily possible only because of intensive R&D but also a result of incremental product improvements, customer-focus and ‘optimisation’ of processing technologies. Additionally, innovation can occur as a result of tacit and experiential knowledge and formal/informal diffusion of this knowledge and learning among firms (Jacobson & Heanue, 2005 via Heidenreich, 2009). This is a relevant notion particularly because knowledge and technology are considered the key input for innovation (Edquist, 2005). Stressing the importance of studying LT innovation at firm-level, Kirner et al. (2009)

conclude that LT firms are at par with HT firms in terms of process innovations, especially process designs, but they lag behind in product innovations.

This paper begins to explore the following questions by means of a systematic literature review spanning 1999-2010:

(a) as a research community what are our current priorities in terms of research on LT/LMT innovation

(b) what do we need to address in terms of these priorities especially country contexts

(c) how have we studied LT/LMT innovation so far especially in terms of choice of methodologies and methods and whether we need to make some changes to our approaches or not

(d) how much do we know about LT/LMT innovation and what are the gaps that need to be addressed as a result of future work.

While LT and LMT innovations1 are mainly firm-specific phenomena, it is important that we study them within the industry or sector context, to achieve a fuller understanding of the dynamics that constitute the innovation ecosystem. The paper begins by outlining the scope of the sample gathered for the literature review undertaken. This is followed by a morphological exploration of the sample, and 13 initial observations. The papers were analysed for themes and content through a conceptualisation derived from the sectoral innovation systems (SSI) perspective (Muhammad, 2011).

This perspective has been discussed extensively elsewhere (Muhammad, 2011) and a full account would be beyond the wordcount of this paper, although a brief explanation is given in the following section. In essence however, the SSI perspective was developed as an holistic, systemic approach that would capture the likely fragmented and diffuse nature of the literature base. The themes identified in Figure 1 were used to get an initial sense of the nature of the literature, capturing morphological, conceptual and methodological themes.

1 During this review we note that many studies use the

terms LT and LMT together without acknowledging the difference between the two. Influenced from OECD classification LT sectors are characterized by R&D intensity between zero and 0.9 percent, LMT between 0.9 and 5 percent and HT above 5 percent (Hirsch-Kreinsen, 2008b). Consequently, the paper draws on this distinction when determining the scope of work.  

Methodology: developing the review The main focus of the review is on empirical studies

conducted during the last eleven years (1999 – 2009). However, a few key studies dating back to 1980s and other time periods have also been reviewed since they influence the more recent work. Online databases including Elsevier, Wiley Interscience, JStor and others have been accessed. The key words or terms searched in databases include ‘low technology innovation’, ‘low and medium technology innovation’, ‘LT’ and ‘LMT’. Additionally, the different sectors or industries these studies focus upon have been included to accommodate a given industry or sectoral perspective. The reviewed journals and papers suggest an emerging trend in terms of academic research into LT/LMT innovation overall. Between 1999 and 2007, there are an average 8 to 9 papers per year that cover some aspect of LT/LMT innovation. However for 2008 the number of articles increases by twofold to reach 17. For 2009 the number of articles increases almost threefold to reach 26. Even though the figure for 2010 is still incomplete, findings suggest a continuation of the trend with 22 articles till September-October 2010. Figure 2 captures this aspect (143 articles in total).

The literature has been further evaluated to determine the country or region contexts the empirical work focuses on, methodology/methods preferred by researchers and provide an analysis key insights offered by the studies. Figures 3 and 4 provide geographical spread of empirical work on LT/LMT innovations over the time period 1999-2010. Findings reveal a dominant focus on various European countries and USA which are developed economies (83% studies). However, only 11% research papers focus on developing countries mainly located in Asia, Latin America and Africa.

Figure 2: Number of publications on LT/LMT Innovation

(1999 to Sept-Oct. 2010)

Figure 3: Countries

LT/LMT Innovation (Reviewing Empirical

Determinants of innovation

Knowledgebase and Technologies

Learning Processes and Demand

Institutions

Interactions amongst agents, institutions, others

Agents (firms, non-firms)

Main Findings and Key

Insights Use of Methodology/Methods

Main Focus or Topic of Research

Country Sectors/Industries Studied

Figure1

Figure 4 Country contexts

Another purpose of literature review was to find out the methodologies/methods applied by researchers to study LT and LMT innovation. Figure 5 provides a categorization in this regard.

Findings suggest that most research relies on using

quantitative methods (67% papers) to illustrate some aspect of LT/LMT innovations while less than 20% apply qualitative methods. However, studies that employ a mix of quantitative and qualitative methods within the same research are far less than any of the other categories of methodologies/methods.

Having established the overarching morphology review of the sample, we also able to offer 13 initial observations:

Based on review of empirical work conducted between 1999 and 2010 and the subsequent summarization of information in the tables and charts shown above, following key observations emerge; 1. Studies on LT/LMT sectors have focused on aspects of

innovation that are extremely diverse as a result of having varying research focus, objectives, methodologies/methods, findings and contexts (geographical and sectoral).

2. Many studies focus on LT/LMT sectors characterized by small firms. This suggests a possible similarity with Pavitt’s (1984) taxonomical characteristics whereby supplier-dominated sectors are characterised by greater presence of small firms.

3. Many of the studies reviewed for this chapter do not exclusively cover LT and rather focus on LMT only or both LT and LMT together or HT making comparisons with LT/LMT.

4. Most studies do not take influence from the SSI-based approach to study innovation. Even though many authors use the word ‘sector’ at various junctures during their discussions, the usage cannot be termed as being synonymous with the word ‘sectoral’ as mentioned in SSI concept.

5. A dearth of studies is observed that present an all-encompassing SSI-based perspective of LT innovations that includes all of SSI’s elements and structure.

6. Some studies use the terms LT and LMT together or synonymously without drawing the distinction suggested by the OECD classification.

7. More clarity is required to draw the distinction between LT and LMT. Studies are needed that focus exclusively on LT sectors especially those with zero or negligible R&D intensity in order to truly understand the nature of innovation that is not driven by R&D at all.

8. Another aspect that emerges from the review is that most research on LT/LMT focuses on activities or determinants that drive innovation with little attention being paid to those that serve as barriers. This is particularly a relevant aspect in developing countries’ context where LT sectors in particular and others in general are affected more by barriers to innovation (Nouman, 2009).

9. A lack of empirical work was observed especially in the context of individual-level (micro) determinants, role of institutions, learning processes, demand, and interactions (especially firm-learning process, firm-demand and firm-institutions). More work is needed in this regard to enhance our understanding of innovation systems.

10. Most empirical work reviewed has been carried out in developed countries including many EU nations, USA and Far-Eastern states. No research, except for a few for Turkey, India, Kazakhstan and Jamaica were found that study LT innovations in developing countries’ industrial sectors. Also, no studies were found for Pakistan.

11. None of the studies reviewed for this chapter focus on innovation within marble sector. A few empirical works focus on mineral sectors in different countries but in all cases either the particular mineral sector is not mentioned or the research is focused on 5 to 10 different industries with mineral sector being one of them.

12. No studies could be found that investigate the existence and nature of sub-sectoral interactions (like Pakistan’s marble sector) within a LT or LMT sector and the influence of these interactions on innovations.

13. Most of the research work seems not to use a combination of inductive and deductive approaches to analyze innovation within LT/LMT sectors. Greater emphasis was found to be on use of quantitative methods (databases and surveys – 67% studies), thus drawing influence from positivist paradigm. For studies based in European countries, Community Innovation Survey (CIS) with its different versions was found to be the most commonly used database. A smaller number of studies (20%) apply qualitative approaches and are influenced by phenomenological paradigm. Very few

studies use case study approach and mixed methods (3%). While the influence of critical realism as the ontological and epistemological influence on researchers was found to be almost non-existent.

To enable greater critical bite, the papers were next analysed for themes and content through a conceptualisation derived from the sectoral innovation systems (SSI) perspective. SSI is a major approach to conceptualize and understand innovation, first presented by Freeman (1987) and later developed by Lundvall (1992) and Nelson (1993), which focuses on interactions and relationships between technological development and the institutional embeddedness of innovative firms. Lundvall (1992, pp.10) argues that it is the ‘structure of production’ and ‘institutional set-up’ that form the two dimensions of a system of innovation. Edquist (1997; 2005, pp. 181-208) describes the SIS concept to include determinants of innovation processes including social, political, economic, institutional, organizational and other factors. In order to keep the literature review focused and systematic research studies have been categorized in line with the elements of SSI including sector/firm/individual determinants, knowledge-base and technology, learning process, demand and institutions. Figure 6 below provides a categorization of the reviewed research work. The paper now turns to examining these categories in detail.

Figure 6: Number of Key Insights and Articles about LT and LMT Innovations

Determinants of LT/LMT innovation

Using evidence from case studies of 43 sectors in 9 EU countries Hirsch-Kreinsen (2008b, pp. 38) concludes that innovation can occur in LT sectors, however firms within such sectors are ‘innovative in a very specific way’ especially when compared to HT. Table 1 summarises major findings from this study;

Factors ‘Innovation modes’ in LT/LMT sectors

‘Key drivers’ New technologies, market demand

Strategies Broad, mainly incremental & architectural

Firm size Predominantly SMEs

‘Knowledge-base’ ‘Internal:’ reliance on practical knowledge, [possibly implicit]

‘External: codified’

Firm capabilities/competences

Reliance on management & unskilled workers

Links with institutions ‘Loose coupling with most institutional conditions other than industrial structure’ [sectoral structure]

Table 1: Adopted from Hirsch-Kreinsen (2008b, pp, 39)

Pavitt (1984) and later Pavitt et al. (1989) examine 2000

and 4000 innovations respectively to suggest a taxonomy comprising four sectoral patterns of innovation. These include (1) ‘supplier-dominated’ sectors, (2) ‘production intensive’ sectors including (2a) ‘large scale producers’ or ‘scale intensive’, (2b) ‘specialized suppliers’ and (3) ‘science-based’ sectors. Findings indicate size of firm and principal or core business activity as two major determinants of innovation. Wolfe (1994) and Souitaris (1999; 2002) further suggest the firm’s industrial sector and the overall environment of the country where the sector and its constituent firm exist are other important determinants, while Heidenreich (2009) suggests that LMT sectors generally adhere to supplier-dominated sectoral pattern suggested by Pavitt. Their innovations are process, organizational and market-oriented. Firms in such sectors also rely more on provision of support in terms of machines and equipment improvements from external sources rather than being able to generate them using internal capabilities. Pavitt (1984) himself points out that in ‘supplier-dominated’ sectors it is factors like professional skills, aesthetic designs, trademarks and advertising that firms can use to innovate rather than relying on advanced technologies. In some cases large customers and government supported research and extension services may also influence innovations among this sector. Focusing on collaborations Freel (2003) points out that existence of firm-level product and process innovations is not a sufficient precondition to support collaborative innovation within a sector. Results vary considerably when compared against Pavitt’s sectoral taxonomy. This suggests lack of conclusive evidence that sectors belonging to a particular taxonomy will demonstrate a particular level of collaboration to influence sectoral innovations. Based on this discussion, innovation in LT and LMT sectors can be studied by examining factors across two broad dimensions; firm-level factors and sector-level factors.

However, while examining firm-level factors this paper also focuses on the influence of individual within firms on innovation.

Firm level determinants: Based on a review of empirical studies (between 1993 and 2003) Becheikh et al. (2006) identify a total of 46 (36 internal to firms and 10 external) variables or factors suggested to influence innovation in different manufacturing sectors. Literature reviewed for the current paper reveals that most firm-level factors that influence innovation in LT/LMT sectors relate to knowledge, learning, marketing and others. Duguet (2006) suggests that LT/LMT firms mostly have incremental innovations that depend more on adoption of equipment goods provided by suppliers and informal research. Focusing on absorptive capacity Jantunen (2005) suggests that besides a firm’s knowledge stocks it is knowledge flows and utilization that influence its innovation capabilities. Other factors include acquisition and utilization of knowledge about customers and competitors as well as knowledge generated within the firm (Jimenez-Jimenez et al., 2008), knowledge about effectively using intellectual property rights and associated costs (Hanel, 2008), design, acquisition of know-how and training (Evangelista & Mastrostefano, 2006; Thornhill, 2006; Santamaria et al., 2009) and intra-firm transfer of knowledge (Macher & Mowery, 2003). On the other hand a lack of information can have inverse effects on innovation: for example firms may not be able to streamline NPD activities (Woodcock et al., 2000). Another set of factors relates to technologies. LT/LMT firms generally focus on technology adoption or assimilation of existing technologies (Gu & Tang, 2004) through purchase of latest machinery (Santamaria et al. 2009). However, skilled workers play a central role in technology adoption while some firms go for outsourcing (Magnani, 2006) in order to innovate.

The relationship of innovation in LT/LMT firms with knowledge and technologies cannot be disassociated from their learning. McAdam et al. (1998) underscore the importance of organizational learning and human capital in this regard. Focusing on services-oriented firms only, Dobni (2008) presents a seven-factors-model that influences an organization’s innovation culture. Of these, six firm-related factors include innovation propensity, organizational constituency, organizational learning, creativity and empowerment, market orientation and value orientation. Jimenez-Jimenez et al., (2008) suggest that organizational learning plays a more influential role compared to market orientation. However, Keskin (2006) clarify the relationship between a firm’s learning orientation and market orientation. Although the former influences innovation it takes mediating influence from the latter. Supporting this argument Aldas-Manzano et al. (2005) suggest that market orientation is not statistically related to innovativeness. However, some disagree to suggest a more direct influence of firm’s market orientation on product innovation (Hernandez-Espallardo & Delgado-Ballester, 2009) and process innovation coupled with firm’s efficiency focus (Bigliardi & Dormio, 2009). While others suggest a different set of marketing related factors such as use of quantitative marketing techniques for new product forecasting (Lynn et al., 1999).

How LT/LMT firms address marketing concerns links up with the issues of firm strategies. Strategies that focus on market access and maintaining customer connections (Hall & Bagchi-Sen, 2007), specialization in quality products (Morone & Testa, 2008), a high level of integration between marketing and R&D and focus on an ‘analyser or prospector’ business strategy (Pullen et al., 2009, pp. 219-220) and internal versus external process technology development (Swan & Allred, 2003) can influence innovation.

Marsili and Salter (2005) argue that LT sectors are characterized by greater diversity among innovators since fewer firms in these sectors innovate and thus tend to derive greater benefits compared to high-tech where innovation-based competition is more intense. However, there are many other factors internal to firms that influence innovation and can contribute to this diversity. These include firm size (Evangelista & Mastrostefano, 2006), manpower and natural resources (Hanel, 2008), financial and information constraints (Bigliardi & Dormio, 2009), working of teams to solve problems, more extensive and effective workflow and production scheduling (Macher & Mowery, 2003). Additionally, culture of ‘adhocracy’, informal processes, a functional team structure and an internal climate that is entrepreneurial in nature (Pullen et al., 2009, pp. 219-220), clarity of organizational goals and incentives in terms of speed-based rewards (Carbonell & Rodriguez-Escudero, 2009) are other factors. De Jong and Marsili (2006) and Dunk (2007) all suggest innovation budget as an important influencer. De Jong and Marsili (2006) go on to point out that innovation capacity, documented planning for innovation, consultation with external organizations (non-firms) and collaboration with other firms and non-firms are also determinants of innovation. Focusing on the importance of collaboration and external sources, Santamaria et al. (2009) point out a different set of factors including firms utilizing expertise of consultants, hiring better personnel and collaborations outside the firm including help from external sources of R&D. However, underscoring the low tendency among LT/LMT firms to participate in R&D programs Blanes and Busom (2004) identify reasons including human capital (lack of employee skills), path dependency (firms with no R&D experience less likely to participate), small firm size, financial constraints and domestic or non-international ownership. Referring to product innovation barriers amongst LT/LMT firms March-Chorda et al. (2002) point out costs associated with the development process, uncertainty about market acceptance, fear of failure, problems ensuing failure of product innovation and lack of top management support.

Individual level determinants: A key set of firm-level factors influencing innovation relate to the role of individuals within LT/LMT firms (most are small in size where the owner or manager’s influence is far greater than large firms). Very few insights emerge from literature review in this regard. For example, Entrialgo et al. (2000) suggest that a manager’s psychological traits influence a firm’s innovativeness and success through the mediating role of entrepreneurial processes within firms. Akgun et al. (2009) point out that deriving from individuals an organization’s emotional capability including dynamics of encouragement, displaying

freedom, playfulness, experiencing, reconciliation and identification‘ will have positive effects on a firm’s product and process innovation. While De Jong and Marsili (2006) highlight the importance of innovation orientation of managers as influencing factor on innovation.

Sector-level determinants: LT/LMT firms operate within their environments in the sense that the sector or industry they are part of strongly influences their ability to innovate. A review of studies reveals various sector-level factors that are difficult to categorize. However, provided below is an attempt to structure different insights and arguments in this regard. A key group within a sector are non-firms and LT/LMT firms’ collaborations and interactions with them play a crucial role. Explaining how firms innovate Tsai and Wang’s (2009) findings from their sample suggest that 95 % firms acquire technology from licenses and 32 % engage in R&D outsourcing. Also, sources of external technological knowledge including collaborations with research organizations, suppliers, clients and competitors play an important role. Industry-specific nature of technological regimes, institutions, networks and ‘systematic interactions’ enable the generation and dissemination of knowledge thus influencing innovation. Apart from firm size, sector-specific technological regimes and different NSI are two other major factors (Evangelista & Mastrostefano, 2006). Focusing on a group of non-firms De Jong and Marsili (2006) underscore the important role of innovation specialists, suppliers, customers and overall scientific development within the sector. However, the presence of such non-firms in itself is not enough: sector-specific strategies such as creation of well-integrated social and institutional clusters help a firm remain innovative (Morone & Testa, 2008).

Offering evidence for a particular type of non-firm, Bigliardi and Dormio (2009) suggest that universities and research centres are key sources of information influencing firm’s ability to innovate. However, cultural differences between universities and industry, lack of financial resources and property for expanding liaison activities, lack of ‘academic-entrepreneurial role models’, lack of incentives for industry to work with universities and vice versa serve as barriers to better collaboration between the two for innovation (Jones-Evans et al., 1999).

Apart from non-firm-related sector-level factors, there is a mix of many others identified by previous studies on LT and LMT firms and industries. These include customer demand and competitive pressure (Van-de-Vrande et al., 2009), technical uncertainty and conservative attitude of market (March-Chorda et al., 2002), availability of technological opportunities (Blanes & Busom, 2004) and innovation implementation context (Dobni, 2008). Although LT/LMT firms are generally characterized by low export intensity (Kirbach & Schmiedeberg, 2008) policy consistency, involvement of all stakeholders at the local level, assistance in locating and approaching customers, training employees, accessing finance can help them innovate (Vonortas, 2002). A sector characterized by fast-changing environment (Jantunen, 2005) and located in economically less prosperous region (Avermaete et al., 2003) provides firms with greater innovation capability. However, lack of consistent patent

activity, declining role of machinery sector in terms of patents and existence of adaptive technological innovations (not possible to patent locally) are hurdles to innovations (Albuquerque, 2000). Pointing out yet another group of sector-level factors Hansen and Serin (1999) focus on science-push, spread of wage labour, urbanization process, changing lifestyles and interactions of knowledge and technologies from various industries influencing LT/LMT innovations.

Other dynamics of LT and LMT innovation In addition to firm and sector-level factors discussed in

the previous sections, LT/LMT sectors have other dynamics in operation that can help us understand innovations within them. The review of literature for this paper indicates that these dynamics mainly relate to knowledgebase, technologies, learning processes, demand and institutions.

Knowledgebase and technologies: Von Tunzelmann and Acha (2005) found that LT/LMT sectors are generally mature industries where technologies and market conditions change more slowly. Knowledge search, identification and proof are the main activities. Most sectors are characterized by presence of informal knowledge and technologies that are a result of spill-overs (Schmidt, 2009; Hauknes & Knell, 2009) and purchase of embodied technologies (Robertson & Patel, 2007) from HT sectors. Even though HT sectors tend to be more innovation-oriented, results by Yang and Kang (2008) suggest that effect of firms’ innovation capabilities and knowledge on their performance is the same for LT/LMT and HT. Acquiring knowledge and technologies from other sectors underscores the importance of LT/LMT firms’ search patterns. These patterns focus on external sources of knowledge (Veugelers & Cassiman, 1999) by relying on market knowledge (competitor and customer knowledge). In this regard firms use knowledge access, reliability and transferability as trade-offs (Grimpe & Sofka, 2009). In addition to sources and search patterns for knowledge Waguespack and Birnir (2005) highlight the geographical nature of knowledge flows. Innovations tend to spread less widely and rapidly however those resulting from flows across different knowledge clusters and collaborations are more novel and diffuse faster. However, Vale and Caldeira (2008) suggest that LT/LMT sectors traditionally have low levels of knowledge appropriability, low cumulativeness amongst firms and low innovation activity. However knowledge acquired from other sectors speeds up innovation processes whereby firm competencies including combinations of tacit and codified knowledge play a key role. Tether and Tajar (2008) conclude that low-technology manufacturers are most likely to adapt ‘process-technologies mode’ of innovation. This mode is orientated to the flexibility and efficiency of production by relying on acquisition of advanced machinery and equipment. Underscoring their importance, technologies remain the most crucial input to innovation in LT/LMT firms (Bergek et al., 2008).

Another critical area of concern for LT/LMT firms is how they manage knowledge. Schmierl and Kohler (2005) opine that knowledge management and personnel policy contribute to development of a firm’s transformative capabilities

whereby incremental knowledge accumulation and informal on-job training are the norm. Rundquist and Halila (2010) suggest that firms focusing on knowledge integration and knowledge development about outsourcing perform better at New Product Development (NPD) while those concentrating on geographical proximity and cost do not do so well. Reliance on in-house knowledgebase generated through strong understanding of user conditions and LT/LMT SMEs’ flexibility due to small size enables them to do well on NPD (Lindman, 2002). Highlighting another aspect of innovation strategies Lee and Veloso (2008) point out that during times of uncertainty firms adjust their knowledge boundaries to create overlaps with the others for example suppliers.

Another dimension of managing knowledge stems from whether it has been acquired formally, informally or a combination of the two. While knowledge is mostly informal in LT/LMT sectors as pointed out earlier, Pederson (2005) observes that firms with more formal knowledge can manufacture value added products and collaborate more with the available technology infrastructure. This suggests a possible reason behind the inability of many LT sectors to produce value-added products. However, improving product design in order to innovate is the more common choice for firms with informal knowledge (Chiva-Gomez et al., 2004).

Learning processes: The knowledgebase present within LT/LMT sectors and the utilization of knowledge and technologies by firms cannot be completely understood without comprehending learning processes within these sectors. As pointed out earlier, knowledge tends to be mostly informal that results from informal learning processes especially at the firm-level. ‘Learning by doing’ is the norm (Von Tunzelmann & Acha, 2005)

Demand: As discussed earlier the dynamics of demand remain a key influencer on innovation amongst LT/LMT firms. Von Tunzelmann and Acha (2005) suggest that demand changes relatively slowly or remains stagnant because most LT/LMT sectors cater to ‘necessities’. Hence a common strategy to overcome stagnant demand is for firms to go for new markets. Also, it underscores the important role of new technologies as they can help firms improve quality of products (quality innovation) and change demand conditions.

To elaborate further on nature of demand in LMT sectors Guerzoni (2010) provides four sectoral patterns of demand (inspired from taxonomies suggested by Pavitt (1984) and Malerba and Orsenigo (1995). These patterns are:

(1) Passive markets – small market size and low user sophistication means firms are not encouraged to innovate

(2) Mass markets – characterized by standard goods. Market size is large but there is low user sophistication. Thus firms go for cost reducing process innovation.

(3) Niche markets – small market size because of niche customers discourages firms from process innovations. There is high user sophistication and greater involvement in helping the firm develop innovative product thus probability of product innovations is high.

(4) Dual markets – large market size and higher user sophistication means there will be two types of firms. The first ones focus on process innovations and produce products for large number of users. While the second ones focus on niches by providing product innovations for sophisticated consumers.

Institutions: A genuine lack of in-depth empirical work is observed in searching for studies that exclusively focus on role of institutions in relation to innovations in LT/LMT sectors. However, some of the findings reveal interesting dimensions. Underscoring a very important aspect of institutions, Casper and Whitley (2004) suggest that differences in institutional frameworks (including those that influence organization of labour markets) in various European countries and sectors influence innovation factors’ (discussed earlier) relative influence on innovation. Scott (2001, pp. 52) describes institutions in terms of ‘three pillars’ that is (1) ‘regulative’, (2) ‘normative’ and (3) ‘cognitive’. Geels (2004) argues that role of institutions in an innovation system should not be considered as only to maintain inertia or stability. Rather they are an essential component of the system and understanding them helps explain the interactions between actors and other elements of the system.

An important aspect to understanding the role of institutions in the context of LT/LMT sectors (like other sectors also) is to establish the relationship between institutions at the national/regional level (NSI and RSI) and sectoral level (SSI). For instance, Storz (2008) opine that national institutions have the ability to influence the structure of SSI through their sectoral effects. Carlsson (2006) believes that in the case of small businesses, sub-national institutions including sectoral ones may play a greater role. Malerba (2004) and Lee and Von Tunzelmann (2005) suggest that countries may demonstrate similarities across NSI especially in the case of high-tech industries however differences would emerge amongst them across sectoral components of NSI.

Studying the impact of technology parks on firm-level innovation, Radosevic and Myrzakhmet (2009) indicate that these parks alone do not support innovations. This stresses the importance of understanding the overall institutional infrastructures in place for LT/LMT sectors in order for us to understand innovation better. Fisher-Vanden and Terry (2009) investigated whether technology acquisition is enough for firms to innovate and improve product quality. Their findings suggest that even though government pressure on firms to improve product quality exists, access to the latest technologies alone will not suffice for firms to innovate: Technology acquisition factors and technology absorptive capacity factors will need to be in place. Robertson and Patel (2007) suggest that the sources and uses of knowledge amongst both LMT and HT firms are highly diversified that would require a similar effort in government policy to effectively manage this variation. These policies should focus on both innovation and diffusion not just for HT but also LMT sectors. For this governments should focus on provision of technological knowledge that is quick, inexpensive and is not barred by delay-inducing official procedures.

Conclusions The central questions for this paper were (a) as a research

community what are our current priorities in terms of research on LT/LMT innovation, (b) what do we need to address in terms of these priorities especially country contexts, (c) how have we studied LT/LMT innovation so far especially in terms of choice of methodologies and methods and whether we need to make some changes to our approaches or not, and (d) how much do we know about LT/LMT innovation and what are the gaps that need to be addressed as a result of future work.

It is increasingly evident from this research that R&D is only one of the inputs or determinants and not necessarily ‘the’ input or determinant of innovation. Although much more vital for HT sectors, this input’s significance in contributing to innovation in LT and LMT sectors and firms is far less important. In such sectors innovation relies on many other firm-level and sector-level factors and the dynamics of knowledgebase, technologies, learning processes, demand and institutions all having their peculiar characteristics. Have we as a research community realized that in order for economies to grow, countries need to strike a finer balance among HT, LMT and LT in terms of strategic priorities, policies and resource allocation and not overemphasize HT only? Further research will be needed to answer this vital question. However, this review of literature over the last decade reveals an increase in focus on LT and LMT and a sign of possible realignment of our emphasis on HT. This is evident from the sharp upturn in number of papers especially for 2008 (twofold increase), 2009 (threefold increase) and 2010 (not complete but showing signs of a continuing trend).

A very strong emphasis is emerging in terms of researchers’ priority for studying LT and LMT innovations in developed country contexts (83% papers). Even though LT/LMT has been the ‘forgotten sector’ in terms of research, this review reveals that developing countries are the ‘forgotten research contexts’. This is worrying sign because LT and LMT dominate the economies of these countries far more than developed nations. They need to be studied in more detail to help recommend policy interventions that enable them to improve through innovation and make a more positive contribution to the economies of poor nations, where it might be argued that the need is greatest.

Another major question this paper looks at is how LT/LMT innovation has been studied. Results suggest a very distinct preference for quantitative methodologies and methods (67% - 79% studies with more than half using datasets and archives developed at least a few years prior to researchers using them in their own studies). Consequently, such studies are characterized by ‘context stripping’ to achieve desired outcomes making it difficult to generalize results. As already demonstrated in this paper LT/LMT innovation (like other forms of innovation) being a non-linear process (Rothwell, 1992) is strongly influenced by a large number of firm and sector-level factors and the dynamics of knowledgebase, technologies, learning processes, demand and institutions. Thus it needs to be studied more in depth. This can be done by applying qualitative and mixed methods more that help us appreciate and understand the contextual

dimensions of LT/LMT innovations in specific countries especially developing economies: a largely ignored area in research.

The last question this paper addresses is how much do we know about LT/LMT innovation? While a relatively large number of insights that focus on firm and sector-level determinants, knowledgebase and technologies have been discovered, very little seems to be known about the role of individual, the nature of learning processes, the dynamics of demand and the nature and influence of institutions within LT/LMT sectors (as shown in figure 5). Since most LT/LMT sectors are characterized by small firms, the influence of the key individual (owner and/or manager) within firm becomes even stronger and needs greater attention. In order to address the gap on understanding the role of individual it is proposed that future studies on LT/LMT innovation put up a micro-meso-macro lens or framework. Under this approach the micro refers to the key individual within firm, the macro points to the firm itself and the macro relates to the sector and country context.

Learning processes remain a key element of the innovation process because of a strong association with knowledgebase and technologies while demand remains a key influencer as evident from various studies reviewed for this paper. Similarly, institutions in different countries have a strong influence on how individuals, firms, non-firms, other stakeholders and sectors interact and behave resulting in the existence or non-existence and nature of LT/LMT innovation. However, we cannot claim to know much about LT/LMT innovation if we continue to ignore the significance of learning processes, the dynamics of demand and the role of institutions. Based on the findings of this paper it is recommended that future research studies on LT/LMT innovation address the following issues; (a) Incorporate a wider geographical and regional agenda

by including developing country and sector contexts as well

(b) Apply a more in-depth focus by using qualitative and mixed methods more that help us gather more reliable results enhancing our understanding of LT/LMT innovation

(c) Adapt a comprehensive approach taking into account not just the firm, the sector, knowledgebase and technologies but also the role of individual, learning processes, demand and institutions: in other words, the full ecosystem.

Finally, we accept as a limitation of our study, we accept that we have not yet addressed the theoretical underpinnings of the papers; again, this is for a future study.

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