Capabilities and Innovative Performance in the Brazilian Agricultural Machinery Industry.
| Autor | Ruffoni, Estevao Passuello |
1 Introduction
The machinery and equipment industry plays a key role in economic development (Magacho & McCombie, 2017), so much so that machinery acquisition is a widely applied indicator of innovation activity in firms (Dutrenit et al., 2019; Goedhuys & Veugelers, 2012). Given the potential of this industry to promote economic progress, this study aims to identify how Brazilian agricultural machinery firms use their capabilities to achieve high innovative performance.
Technological advances in machinery and equipment provide considerable productivity gains, being associated with the fourth stage of the industrial revolution, Industry 4.0 (Frank et al., 2019) and Agriculture 4.0 (Wolfert et al., 2017). Productivity in agriculture is crucial to the world-wide food supply, especially due to increasing demand and the impact of climate change on growing conditions (Food and Agriculture Organization of the United Nations, 2017). This makes the agricultural machinery industry particularly relevant for a sustainable future, even more so in Brazil, one of the largest producers of food and agricultural commodities in the world (Vieira & Fishlow, 2017).
Generally, studies of innovation in machinery and equipment industry have sought to understand how new products (Acha et al., 2004; Dan et al., 2018) or new production processes (Asadi et al., 2019; Forrester et al., 2010) are developed. Servitization--the incorporation of services into products, which can lead to product, organizational or commercial innovations--has also been explored in this industry (Baines et al., 2019). A less representative set of studies has focused exclusively on organizational innovations, especially new project management methods for equipment development (Hobday, 2000).
However, important gaps remain in the literature. It would be useful to know the extent to which product, process, organizational or commercial innovations relate to innovative performance in the machinery and equipment industry. In other words, how do firms in this industry combine different innovation types to thrive?
As firms must develop their capabilities to innovate (Figueiredo et al., 2020; Lall, 1992; Teece, 2018), and because each innovation type is a consequence of a specific capability (Francis & Bessant, 2005; Guan & Ma, 2003; Janssen et al., 2016), an innovation capabilities approach was applied in this study. Agricultural machinery firms were analyzed using a four innovation capabilities model --development (product innovation), operations (process innovation), management (organizational innovation) and transactions (commercial innovation) (Zawislak et al., 2012).
The results obtained provide theoretical, practical and methodological contributions. The present research identifies that operations capability alone is unable to ensure high innovative performance, complementing previous studies, which have suggested that machinery and equipment manufacturers, in emerging economies, only focus on production processes innovations (Hobday & Rush, 2007; Kiamehr et al., 2015). To innovate, firms combine operations with development and management capabilities (DC*OC*MC), or with transactions capability (OC*TC). Therefore, besides developing new production processes, agricultural machinery firms also seek to improve their products, managerial methods, and commercial procedures. To help identify these combinations of capabilities, we employed an emerging analytical technique--fuzzy-set qualitative comparative analysis (fsQCA).
Including this introduction, the paper has five sections. Section 2 is divided into two subsections, where 2.1 reviews the literature on firms' innovation capabilities, and presents the innovation capabilities model, while 2.2 reviews the research on innovation in the machinery and equipment industry, particularly the specific features of the agricultural segment. Section 3 explains the research procedures adopted. Section 4 presents the results and discussions. Lastly, section 5 considers the implications of the findings, identifies the study limitations and suggests ideas for further research.
2 theoretical background
2.1 Firm innovation capabilities
A firm's capability is a set of resources and routines related to the processes involved with product development, manufacturing, and commercialization, as well as with the business management (Dosi et al., 2004). According to Teece (2007), dynamic capabilities are able to sense a market change and adapt the firm to it by acquiring and reconfiguring routines and resources, a process through which innovation emerges (Teece, 2018).
There is considerable research into firms' capabilities driven by technological innovation--i.e., capabilities to develop new products or new production processes (Figueiredo et al., 2020; Lall, 1992; Zhou & Wu, 2010). Service development can be considered within this same set of studies, since services are defined as intangible products (Janssen et al., 2016). Other studies adopt a broader approach, also considering firms' capabilities to innovate in business and marketing strategies, as well as in managerial and transactional processes (Francis & Bessant, 2005; Guan & Ma, 2003; Lawson & Samson, 2001).
This study applies the innovation capabilities model put forward by Zawislak et al. (2012) because it synthesizes these earlier approaches while maintaining a broad perspective. According to Zawislak et al. (2012), all firms have four capabilities, with each one being associated with a specific innovation type: development (product innovation), operations (process innovation), management (organizational innovation) and transactions (commercial innovation).
Development capability concerns a firm's resources and routines related to product development (Zawislak et al., 2018). It consists in procedures that aim to monitor, absorb, create and incorporate new technologies in products (Lall, 1992; Nagano et al., 2014; Zhou & Wu, 2010). Hence, this capability results from incremental improvements in existing products, such as quality or design enhancements, to the development of new ones, with new technological features and functionalities (Figueiredo et al., 2020).
Operations capability refers to a firm's resources and routines related to increasing the efficiency of production processes (Reichert et al., 2016). It encompasses process engineering activities (Lall, 1992; Figueiredo et al., 2020), and the production planning, programming, control and execution (Hopp & Spearman, 2021). Consequently, this capability results in new manufacturing procedures, shop floor layouts, production scheduling methods, or quality control systems, which generate lower production-related costs, and higher operational efficiency (Moldner et al., 2020).
Management capability describes a firm's resources and routines related to increasing the efficiency of managerial and decision-making processes (Zawislak et al., 2018). It involves developing new business strategies and models (Bonazzi & Zilber, 2014; Lawson & Samson, 2001), and implementing new management systems (Fierro Moreno et al., 2015), such as ERP (Enterprise Resources Planning) software (Sedera et al., 2016). Therefore, this capability results in a more effective use of human, material and financial resources (Lee et al., 2017).
Transactions capability concerns a firm's resources and routines related to improving transactions with the market, encompassing procedures aimed at developing brands, prospecting customers, product sales and distribution (Guan & Ma, 2003; Kamboj & Rahman, 2017), as well as procedures to search, select and assess suppliers (Li et al., 2016). Thus, this capability results in new marketing and supply chain strategies, and new commercialization and purchase processes (Francis & Bessant, 2005; Zawislak et al., 2012).
To shed light on the combinations of capabilities that lead agricultural machinery manufacturers to achieve high innovative performance, the next section looks at studies focused on innovation in the industry.
2.2 Innovation in the machinery and equipment industry
According to the Organisation for Economic Co-operation and Development (2016), the machinery and equipment industry invests significant amounts in research and development (R&D) activities. Considering the different segments, investments range from 6% of annual revenue, in transport equipment companies, to 30%, in aircraft manufacturers. The agricultural machinery firms invests around 7% of its revenue in R&D (Organisation for Economic Co-operation and Development, 2016), which permits a high level of technological innovation.
The development of new machinery and equipment can increase the productivity of several user industries and is fundamental for technological progress (Magacho & McCombie, 2017). Recently, the incorporation of software, hardware and artificial intelligence into machines has led to increased automation, precision and efficiency for user industries, characterizing a new stage of industrialization, the so-called Industry 4.0 (Muller et al., 2018) and Agriculture 4.0 (Wolfert et al., 2017).
Incremental improvements to products, such as in machinery aesthetics (Dan et al., 2018) and equipment modularization, have also been highlighted by studies. Product modularity enables mass customization--the offering of customized products while maintaining scale economies, obtainded through the design of a few modular components that can be assembled into a wide range of final products (Asadi et al., 2019; Trentin et al., 2015). Mass customization can be characterized both as product and process innovation, because when products are modularized, it simplifies production planning and control and reduces setup times (Qi et al., 2020).
Frequently in the agricultural machinery segment, a single company often manufactures a range of different products, such as tractors, planters, fertilizers, harvesters and several types of implements...
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