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PII- Potential Innovation Index: a Tool to Benchmark Innovation Capabilities in

International Context

Article in Journal of technology management & innovation · December 2013

DOI: 10.4067/S0718-27242013000500004

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Received Sep. 30, 2013 / Accepted Dic. 12, 2013 J. Technol. Manag. Innov. 2013,Volume 8, Issue 4

PII- Potential Innovation Index: a Tool to Benchmark Innovation Capabilities

in International Context

Daniel Galvez, Mauricio Camargo, Julio Rodriguez, Laure Morel

Abstract

Benchmarking has become a useful tool for companies, enabling better decision-making and improvement of internal
practices towards world-class performance. Nevertheless, concerning SMEs’ innovation capabilities from traditional
sectors, benchmarking applications have been scarce. This article uses a predefined metric named the “Potential Innovation
Index (PII)”, based on internal practices of the firms to compare innovation capabilities of two groups of similar SMEs from
2 different geographical, cultural and social contexts. Results were used to analyze similarities and differences, strengths
and weaknesses of the groups. Obtained results confirm the difficulties to innovate of this type firms, no matters the
sector or country, as over 55% of the companies studied were evaluated as having a low innovative performance. However,
regarding the index’s constitutive practices, significant differences were found. Which leads to infer that innovation support
strategies to enhance innovation must be adapted to the local context and culture.

Keywords: Benchmarking; innovation capabilities; Potential Innovation Index; SMEs; innovation practices.

Lorraine University / ERPI (Equipe de Recherche des Processus Innovatifs), 8, rue Bastien Lepage
54010 Nancy Cedex, France. Corresponding author, e-mail: [Link]-manriquez@[Link]

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 J. Technol. Manag. Innov. 2013,Volume 8, Issue 4

Introduction to the dedicated resources (inputs) or new products (out-

puts) (Milbergs 2004; Muller, Välikangas, and Merlyn 2005a).
It is a fact that innovation drives the firms to a superior Within this framework is the methodology proposed by
competitive level. In the long run, it is technological inno- (Morel and Camargo 2006), who defines the calculation
vation capability that constitutes a major source of com- of a potential innovation index IIP based on multi-criteria
petitive advantage. (Guan et al. 2006). Innovation has been evaluation of six criteria to evaluate the innovation capabili-
described as ‘‘the engine that drives revenue growth’’ ties within companies (creativity, new product development,
and considered as the basis for organizational survival. So Human resources management, strategy, project manage-
there is a need to understand the mechanisms driven the ment and knowledge management). According to their IIP
innovation process in order to manage it, and then support the companies can be classified into 4 categories (Proactive,
a continuous growth of the companies. However, this is a Preactive, Reactive, Passive), following a typology proposed
complex process depending on several factors and stongly by (Godet 1997) to explain the strategic vision of a com-
influenced by context and sectoral [Link] last years, pany into its market. So given this framework of innovation
a body of knowledge has been developped on the under- metrics, our main research question is: how does the IIP
standig of the innovation drivers and metrics(Milbergs 2004; enables to compare the innovative capabilities between two
Muller, Välikangas, and Merlyn 2005; Zawislak and Marins different contexts?
2008). Firms are prone to benchmark their current practices
versus other firms about several performance measures, in- This article seeks to use the IIP as a benchmark for compari-
novation performance included. In 1979 Xerox fulfilled for son competitive between two groups of companies similar
the first time the benchmarking based on the comparison to each other but from 2 different geographic areas, to ana-
of the best practices, from this moment his application has lyze similarities and differences, strengths and weaknesses of
expanded to various areas of operation inside the compa- the groups. The first group consists of SMEs in France while
nies (Hurmelinna et al. 2002; Lai, Huang, and Wang 2011; the second by its peers in Argentina.
Rorissa, Demissie, and Pardo 2011). The benchmarking has
been positioned as a useful tool of analysis for different or- Among the results the main similarity between samples in
ganizations allowing the identification, comprehension and that for both countries over 55% of the companies studied
adaption of the practices and processes related to the or- were evaluated as belonging to the low innovative category
ganizations helping to improve the results and performance (Passive). However, the performances of the innovation ca-
(Jarrar and Zairi 2001). At present, the benchmarking has pabilities are different, since the Argentinian companies sup-
a diversified field of applications, among them the area of port an equal level between the evaluated practices, while
supply chain (Garcia et al. 2012) and manufacturing (Herzog, the French companies promote clearly the strategy in de-
Tonchia, and Polajnar 2009) could be underlined. A domain cline of other practices. In order to expose our proposal,
in which the benchmarking has not been very used is the the present article has the following structure: section 2
innovation inside the companies, although there are some reviews the state of the art of measuring innovation capa-
works that have tried to realize a few first approaches (Rad- bilities in companies and the use of benchmarking as a tool
nor and Robinson 2001). of analysis. The section 3 presents the framework for meas-
uring innovation capability to be used as a benchmark. The
Nevertheless, in innovation practices, benchmarking applica- section 4 describes the methodology and characterizes the
tions have been scarce. In part, this lack can be explained study groups. The section 5 shows the analysis and results.
by the difficulty to measure innovation capability by mean Finally, a discussion of the potential limits and prospects of
of innovation practices, as those metrics correspond to the applying benchmarking in the field of innovation in the com-
intangible actives of the companies. Measuring innovation panies is presented.
level of an enterprise is a complicated and difficult task due
to the complexity of the processes and the effort needed Literature review
to of establish the variables to be measured. Innovation is a
transverse characteristic inside the companies, having a mul- Benchmarking
ticriteria dimension (Chiesa, Coughlan, and Voss 1996; Guan
and Ma 2003). In recent years many studies have attempted The benchmarking is a tool of evaluation of products, ser-
to overcome this need to measure innovation capability vices or processes within a group of organizations with
(Cheng and Lin 2012; Igartua, Garrigós, and Hervas-Oliver common characteristics, in order to determine the organi-
2010; Rodrigues, Fernandes, and Martins 2006). The evolu- zation best evaluated inside the area of study and to trans-
tion of innovation metrics aimed at measuring innovation mit this knowledge to the group. This better evaluation is
related to the processes and practices involved in it instead named as best practice.

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 J. Technol. Manag. Innov. 2013,Volume 8, Issue 4

Since the seminal work of (Womack, Jones, and Roos 2007), guel and Boscherini, 1996). Definitively it is possible to affirm
the benchmarking has been applied to different fields of that the innovation has a positive effect in the growth and
study such as (Phylipsen et al. 2002) who proposed a bench- development of the companies (Boly 2004; Love, Roper, and
marking of the energy efficiency in the Dutch Industry. The Bryson 2011; Zawislak et al. 2012).
supply chain is a topic widely discussed inside the studies of
benchmarking, (Rizet et al. 2012) analyzes the supply chain Hughes (2001) concludes that, for the growth based on the
in European companies particularly his CO2 emission. An- innovation in companies of the UK, the management abilities
other topic studied is the transport, (Henning et al. 2011) are more important than the financial factors. (Rosenbusch,
takes a benchmarking applied to the transport in New Zea- Brinckmann, and Bausch 2011) suggests that the innovative
land. The benchmarking in recent years has been emerging SMEs are more successful, and that for his relevancy in the
in new topics of study, most notably in marketing (Akdeniz, global economy is necessary the development of the innova-
Gonzalez-Padron, and Calantone 2010). tion capabilities of this companies type.

To make the benchmarking process is indispensable to as- To manage the innovation capabilities the first step is to be
sess the organizations’ performances, regarding a set of able of measuring this characteristic, therefore, the creation
metrics and thus compare them. This is the principal reason of metrics or methods to measure this capacity in the com-
why the benchmarking has not been more used in the inno- panies is crucial, to determine the current condition of the
vation area, since there is la lack of a widespread accepted company and define a strategy improvement. Many inves-
or common metrics to measure the innovation capabilities. tigations seek to determine the best form of evaluation of
Currently benchmarking applications have been developed the innovation, (Milbergs 2004; Muller, Välikangas, and Mer-
in some specific innovation practice and not of global form. lyn 2005) realize a literature review, analyzing the evolution
For example, (Griffin 1997) looks for the best practices in of the innovation metrics and defining new metric focusing
the development of new products, (Hurmelinna et al. 2002) on the measurement of the innovative processes. Other au-
analyzes high-tech Finnish companies determining the best thors affirm that the innovation within companies includes
practices for the success of R&D in buyer-supplier rela- different areas, therefore the best way of measuring the in-
tionship. In United Kingdom (Radnor and Robinson 2001) novation capabilities is by proposing and solving a multicrite-
makes the benchmarking based on the presence or absence ria problem (Feeny and Rogers 2003; Rodrigues, Fernandes,
of personal aspects, cultural aspects and process aspects and Martins 2006). (Adams, Bessant, and Phelps 2006) re-
that will support the innovation in a group of companies. alizes a bibliographical analysis of different propositions to
(Feeny and Rogers 2003) creates an indicator to measure measure the innovation in the SMEs and puts in evidence
the innovation capability of the Australian companies. More that at present the best way of measuring the innovation
recently, (Cagliano et al. 2011) show that it is possible to capabilities is using a multicriteria approach. The definition
explain different patterns in the adoption of new forms of of metrics or a method provides the basis for benchmarking,
work organization practices when considering company size since it delivers the possibility of measuring the companies
and cultural variables. Also, (McAdam et al. 2010), based on under the same criterion.
a comprehensive benchmarking study in the UK, proposes a
innovation model for SMEs determining the innovation prac- Methodology for measure innovation capabilities
tices to be measured, but without defining metric associated.
The data gathering methodology is based in this proposed
Innovation management in SMEs by (Corona 2005) who defined an potential innovation index
(PII), which is calculated using Multi criteria Decision Mak-
The innovation management has taken a fundamental role in ing Tools, and uses as criteria a set of innovation practices
the progress of SMEs, because it present competitive advan- defined by (Boly 2008).These practices are concrete actions
tages to the companies in relation to his market. The devel- executed by the enterprises to define their strategy, to guide
opment of the area of innovation allows to a company to be and to impel the innovation processes and to make evolve
prepared to face the current industrial world that changes the organization or its methods of work. After further re-
permanently. Among other things, the innovation manage- search work, (Assiélou 2008; Morel and Boly 2008; Rejeb et
ment gives to the products of the company the added value al. 2008; Sepulveda et al. 2010; Nemery et al. 2012; Boly et al.
that will make differ from his competition and gain com- 2013). A general referential framework of internal innovative
petitive advantages (Roper and Arvanitis 2012). The innova- practices for an ideal company has been proposed. So, the
tion in the companies can be defined as a great workgroup, assessment of a questionnaire to evaluate a firm practices
therefore the creation of networks (universities, centers of and the subsequent level of IIP, enables decision maker to
investigation, etc.) and business cooperation is crucial (Yo- compare the firm results with the referential.

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 J. Technol. Manag. Innov. 2013,Volume 8, Issue 4

The methodology defines, six main innovation practices (IP), ated firms, its value allows decision maker to sort the firms
subdivided into 18 sub-practices (see Table 1), and their as- by innovation performance in a classification created by
sociated importance (wi) which have been defined based on (Godet 1997), according to the nature of its system of inno-
a bibliographic investigation and a consultation with innova- vation, and classifies companies in four categories: Proactive,
tion experts. Note that the list can be enhanced or modified Preactive, Reactive and Passive. Each category describes a
as new innovation management practices emerge. strategic vision of the firm, as follows.

_______________________________________ * “Proactive” are the most dynamic and most of-

fensive companies, these who create technological changes
IP1. Creativity and Concept Genera- in a long-term vision. It results from it a control by these
tion (w1 = 0.175) last ones of the competitive environment.
a) Use of tools to increase the creativity * “Preactive” are companies that don’t ignite the
b) Integration of the clients and suppliers in changes, but which anticipate them by he use of a very active
the conception process system of technology watch. It is also dynamic and offensive
c) Organization, compilation and manage- companies but having a strategic vision with average term.
ment of information from the exterior * “Reactive” are companies which react to the
dynamics of their environment. This means that the only
IP2. New Product development (w2 = technological change drivers become from concrete de-
0.107) mands from the [Link] vision of economic planning is
a) Use of advanced tools for design aid short-term.
b) Existence of a methodology to the design * “Passive” are companies which adopt a defensive
process attitude in front of disturbances of the environment, that is
c) Hardware Equipment to say that they think only of surviving.
IP3. Human Resources Management (w3 =
0.068) The importance of this classification is that it enables en-
a) Management of competences and the skills trepreneur’s awareness on their real engagement to inno-
of the society vate and define internal strategies to improve their category.
b) Innovation stimulation Moreover, the methodology will enable policy makers to
IP4. Technological Strategy (w4 = 0.232) benchmark companies at sector o regional level to define
a) Strategy integrated to favor the innovation industrial policies or support ressources allocation.
b) Network operation
c) Client Importance Research Sample
d) Financing
The companies used for this study were evaluated in their
IP5. Project Management (w5 = 0.194) innovation capabilities using a questionnary following the
a) Project administration methodology exposed in the section 3, the data collection
b) Management of project portfolio for the evaluation is gathered by means of a visit to the com-
c) Organization of tasks tied to the Innova- pany where there is realized an interview with the director
tion of the company or any representative [Link] interview
IP6. Data and Knowledge Management (w6 = have an average duration of one hour. The companies evalu-
0.224) ated are divided in two groups; the Argentinian companies
a) Continuous Improvement of the innova- and the French companies.
tion process
b) Politics of Management of the intellectual The Argentinian group is composed by 34 companies lo-
property cated to the North-East of the country (NOA region), they
c) Knowledge Capitalization represent 52 % of the total of companies used in this study.
_______________________________________ The French panel consists in 32 companies; all of them are
located in Lorraine’s region (48 %).
Table 1 : Six innovation practices and its weights
Argentinian sample
Multicriteria computation of the index follows a flow-sort
algorithm as described in Nemery (2012), which uses the Of these 34 firms, 20 are older than 15 years and only 6 are
firm’s answers of the form, and the set of weights described younger than 5 years. The average number of employees is
in Table 1. Once the IIP index obtained for the set of evalu- of 36 for company; being 130 the greatest and 7 the minor

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 J. Technol. Manag. Innov. 2013,Volume 8, Issue 4

number of employees. From the current panel, 18 of the 34 Figure 4, shows an overview of SMES the panel, as it com-
firms are family managed. As shows the figure 1 the Argen- pares the IIP index and the size of the firm measured by
tinian companies come from two activity sectors; 25 work the number of employees. It provides evidence that there is
in food industry and 9 at construction. a correlation between the company size and the PII index.
Three different clusters are identified.
French Sample
- a first group, of small firms under 50 employees.
From the French panel, 3 firms have less than 5 years’ op- Most of them are classified as been Passives, with lower level
erating and only 15 have more than 15 years. The average of PII
number of employees is of 22 for company; being 143 the - a second group, of greater SMEs, between 50 and
greatest number of employees and only 3 the minor. The 150 employees. These companies are classified within the
companies belong to different sectors from activity, the fig- Reactive and Preactive categories and there are not Passive
ure 2 shows that most of the companies is of woodwork, firms within this cluster.
while the rest divides in 5 activity sectors in similar quanti- - a third cluster, of small very innovative companies,
ties (the construction, the industry of food, the metallurgy, under 50 employees. Classified within Reactive-Preactive
the industry of wood, others). categories.

Benchmarking and Analysis Regarding the geographical context, there is no signifi-

cant differences between both countries, as the average
Global analysis IIP for the French companies is of 0.266 and for the Ar-
gentinian companies is of 0.262. However, when look-
As shown by Figure 3, when comparing groups of studies it ing the values for the main innovative practices (Figure 5),
is possible to verify that in both countries over 55 % of the some differences appear.
companies are classified at the lower level of innovativeness
(Passive). Only 5% were classified as Preactive and there are
not proactive firms.

Construc1on  
26%   19%   16%  
Food  Industry   Metallurgy  
12%  
Construc3on   Food  industry  
28%   12%  
74%   Wood  industry  
13%  
Carpentry  

Others  

Figure 1. Sector participation for the Argentinian sample Figure 2. Sector participation for the French sample

French  companies   [Link]  companies  

25   1  

20  
0.75  

15  
IIP  

0.5  
French  Company  
10  
Argen9nian  Company  

0.25  
5  

0  
0  
Passive   [Link]   [Link]   [Link]  
0   20   40   60   80   100   120   140   160  
Employees  
Figure 3. Classification of innovativeness level by category Figure 4. PII index and category vs. enterprise size
and country (number of employees)

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 J. Technol. Manag. Innov. 2013,Volume 8, Issue 4

The average Argentinian companies shows rather similar The evaluated criteria have different importance on the cal-
level for the 6 evaluated practices, where creativity is a culation of the IIP, therefore, his contribution from the inno-
strong point and knowledge management is a weak point. vation capabilities of the company is different too (figure 7).
On the other hand, the French companies show a mixed The French companies base their innovation capabili-
performance between their practices, emphasizing strategy ties on the strategy practice that contributes with 34 %
as the strongest practice. the innovation index, while creativity contributes 22 %,
both represent little more than half of the innovation po-
It is in the strategy practice where the French companies tential of the companies. For Argentine companies strat-
make a major difference in comparison with the Argentina’s egy and creativity stand out as the practices that reach in
[Link] the 5 remaining practices show similar lev- major degree to the calculation of the innovation index,
els between both groups of study. with 24 % and 25% respectively.

Another way to compare both groups is to analyze the aver- The innovation potential index composition varies for
age evaluation of each of the six practices, taking the group the two groups, the Argentine companies emphasizes
of Argentinian companies as a base of comparison (axis y). a major homogeneity between 6 evaluated practices,
while in the French companies highlights as strong point
As shown figure 6, it is possible to see a clear difference strategy practice.
in favor of the French companies in the strategy prac-
tice, which is the best evaluated on average sound by 45 Analysis for innovation practice
% than their counterparts in Argentina. For the Argentin-
ian companies realize the counterweight the practices of Figure 8. values for innovative practices : Argentinian sample.
new product design and project management with 14 % In this box plot, for each practice the best evaluation, the
and 23 % respectively. In the three remaining practices the worst evaluation, the average and the standard deviation of
differences are minimal. the group are plotted. The Argentinian companies show a

Créa,vité  
1  

0.75   Knowledge  Mgt   8%  

KM   0.5   NPD  
Zone  Passive   -­‐23%   Projet  Mgt  
0.25   Zone  Réac,ve  

Zone  Préac,ve   Strategy   45%  

0  
Zone  Proac,ve  

French  companies   RH  Mgt   2%  

Argen,nian  companies  
Proj  Mgt   HR   -­‐14%   NPD  

-­‐5%  CR  
Stratégie  
-­‐30%   -­‐20%   -­‐10%   0%   10%   20%   30%   40%   50%  

Figure 5. Innovative practices values for French and figure 6. Percentage difference for practice of the French compa-
Argentinian SMEs nies in relation to the Argentinian companies (axis, 0%)

1  
0.9  
100%   0.8  
90%   Knowledge  Mgt   0.7  
80%   0.6  
70%   Projet  Mgt   0.5  
QuarDle  75%  
60%   Strategy   0.4  
50%   0.3   median  
40%   RH  Mgt   0.2  
QuarDle  25%  
30%   NPD   0.1  
20%   0  
CR  
10%  
D  

 
 

 
gt

gt

gt
CR

gy
NP

 M

M
te

0%  
 

e  
ra
RH

et

dg
St

oj

French  Companies   Argen<nian  

le
Pr

Companies  
o
Kn

Figure 7. Composition of the PII for the French and Argentinian Figure 8 shows the behavior of the group of Argentina’s compa-
companies. nies for each of 6 innovative practices.

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 J. Technol. Manag. Innov. 2013,Volume 8, Issue 4

homogeneous behavior, except in the practices New Prod- two quartiles are very compact, while the dispersion begin
uct Development and Project management, nevertheless to increase when going to 3rd quartile and overcoat in the
they present a higher dispersion degree. Another point to four quartile where they find the better evaluated compa-
note is that in the project management practice there is nies. This could imply that the dispersion observed in the
an enormous difference between the best evaluated com- evaluations of the French companies is produced largely by
pany 0.75 and the average of the group 0.24, this increases the better evaluated companies.
furthermore his dispersion. In addition, 75 % of the evalua-
tions in project management is practically under the median, Conclusion
which means that the dispersion is produced only for the 25
% of the companies better evaluated in this practice, which One of the principal conclusions that can be obtained from
moves between 0.25 and 0.75. this benchmarking is that without importing the geographi-
cal environment, all the SMEs of traditional sectors have
If the same analysis is realized in the French group the fol- a very low level of innovation. Of the total of companies
lowing graph is obtained. studied in this article, 95 % is classified inside in the two
lowest categories of innovation, and over 55 % in the worst
The French companies shows a different behavior than category. Only 3 of 66 companies achieve a level in innova-
their peers in Argentine, except in the creativity practice tion of regulating to well. One of the causes to which we
where major differences are not seen. In the 5 remaining can attribute this low level of innovation is the size of the
practices the French companies have a greater dispersion, companies. Another common point that shows the studied
especially in the NPD practice that shows the greater stand- groups is that, with few exceptions, there is a direct relation
ard deviation. On the strategy practice the French compa- between the number of employees of the company and his
nies cover practically the whole range of evaluation, since innovation level, that is to say, a larger company presents
the worse evaluated company is with 0.05, while the best a greater development of their innovation capabilities. The
obtains 0.95. This biggest difference between the behaviors identified clusters in figure 4, give us some evidences that a
of the French companies could be explained because they higher level of innovation on SMEs whit a greater number
come from a bigger variety of activity sectors. Finally, in most of employees is related to a major degree of formalization
practices evaluated it is possible to estimate that the first in their managerial processes. Also there is a small company

1  
0.9  
0.8  
0.7  
0.6  
0.5  
QuarDle  75%  
0.4  
0.3   median  
0.2  
QuarDle  25%  
0.1  
0  
 
D  

 
 

 
gt

gt

gt
CR

gy
NP

 M

 M

M
te

e  
ra
RH

et

dg
St

oj

le
Pr

o w
Kn

Figure 9. values for innovative practices : French sample.

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 J. Technol. Manag. Innov. 2013,Volume 8, Issue 4

group that stands out, because despite having a limited size References
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