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External Insights to Boost Internal R&D Efforts of the Fish and Seafood Export
Processing Industry in Sri Lanka

Article in Sabaragamuwa University Journal · December 2015

DOI: 10.4038/suslj.v14i2.7701

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Sabaragamuwa University Journal
Volume 14 Number 2; December 2015, pp 133-148
ISSN 1391-3166; eISSN 2386-2041
DOI : http://dx.doi.org/10.4038/suslj.v14i2.7701

External Insights to Boost Internal R&D

Efforts of the Fish and Seafood Export
Processing Industry in Sri Lanka

D.A.M. De Silva1 and Trond Bjorndal2

1
Department of Agribusiness Management, Faculty of Agricultural
Sciences, Sabaragamuwa University of Sri Lanka, P.O. Box 02,
Belihuloya, Sri Lanka. [email protected]
2
Centre for the Economics and Management of Aquatic
Resources(CEMARE), Portsmouth Business School, University of
Portsmouth, St. George’s Building, 141, High Street, Portsmouth,
Po1 2HY, United Kingdom. [email protected]

Abstract
This research is focused on the fish and seafood export industry of Sri Lanka,
considering its importance to the country’s economy. The objectives of the study
are to investigate the nature of open innovation practices among fish and seafood
exporters in Sri Lanka and to find out the role of open innovation on product and
process development, market identification, market expansion, brand image,
quality control, labelling and certification, sales promotion and advertising, and the
sustainability of the resource base. The empirical study is based on the data obtained
from 26 EU approved fish and seafood processing establishments. A structured
questionnaire followed by interviews with CEOs, R&D heads and quality controllers
were the principal data collection tools. Hansen and Birkinshaw’s capability measure
is used to measure the firm’s level on idea generation, conversion and diffusion.
Processing firms were divided into three groups; idea-rich/poor, conversion rich/poor
and diffusion rich/poor. Hypothesis testing proved the positive relationship between
firm performance and open innovation practices of the firms. Results reveal that firms
are idea rich, conversion and diffusion moderate. Moreover, the study has identified
open innovation partners, the nature of their support and the open innovation process
of the fish and seafood export processors.
Keywords: open innovation, fish and seafood processing, Sri Lanka

Introduction
The most critical point that producers and marketers have to understand is
“selling the way your customer wants to buy, not the way you like to sell”
(Grehalva, 2004). Especially when you are catering to geographically and
culturally distinct markets, the above mentioned considerations have extra
ordinary importance. Thus, knowing the customers actual buying behaviour is

133
 Sabaragamuwa University Journal 2015, V. 14 NO. 2 pp 133-148

important. Generally, customers do not buy only products, they buy solutions
or benefits. Therefore, producers who think in terms of the benefits are mostly
customer oriented.
One of the fast growing food industries in the world is the seafood industry.
Customers today have become more experienced, educated and sophisticated
about their fish and seafood selection due to which there has been a significant
change in consumers’ tastes. Fish and seafood marketers have to invest more
in order to compete with other protein foods like meat, poultry, and vegetables.
Today, fish and seafood products represent a significant opportunity to broaden
sales for supermarkets that become a point of destination for consumers who
are demanding a wider selection of top-quality items at competitive prices. In
2008, exports of fish and fishery products reached record value of 102 billion
US$ (FAO, 2010). Over half of this trade originated from developing nations
of Asia, Africa and Latin America and most of the products were destined for
the markets in the EU, Japan and the USA.
The current research is emphasising the fish and seafood export industry of
Sri Lanka, considering its importance to the country’s economy. The fish
and seafood export industry in Sri Lanka has emerged as a dynamic export
oriented sector providing considerable foreign exchange to the country. The
industry is recognised as a sector with high potential to earn foreign exchange
by exporting both marine and fresh water fish and fishery products to the
international market. The value of exports has increased from 103m US$
in 2005 to 202m US$ in 2010, indicating an average annual growth of 15%
(Ministry of Fisheries and Aquatic Resources, 2010). The country’s main
export destinations are the EU, Japan and the USA. In Sri Lanka, more than
120 exporters, including 26 EU approved export processing establishments,
export fish and seafood products to international markets.
In the case of research and development (R&D), even the sharpest leading
edge companies can no longer survive on their own R&D efforts, but they
must open up their networks and collaborate with others (OECD, 2007).
Maintaining R&D labs and staff becomes a big burden to both large and small
scale companies, and especially the case of developing nations is critical.
Different countries have different levels of R&D, many could boost their
merely pumping up R&D and it can wide the finer print about education,
business environments, innovation culture, infrastructure and institutional
support. Moreover, Sri Lanka was ranked 54th in the global innovation index
(Nationmaster, 2008).
The competitive advantages and the differences they create in firm performances
are often strongly related to the resources of firms and management
(Hall, 2010). In the current landscape, the resources, capabilities and core
competencies in the firm’s internal organisation are likely to have positive

134 D.A.M. De Silva and Trond Bjorndal

Sabaragamuwa University Journal 2015, V. 14 NO. 2 pp 133-148

influence on its performance when they are combined with complementary

resources in the external environment (Hall, 2010). Crowed sourcing or open
innovation make available for new resource avenues of different origins
that can be successfully employed for organisational value creation. Open
innovation platforms provide various opportunities to firms such as access to
the ideas and technologies that the firms cannot generate by themselves with
licensing and spin-off benefits.
An important source of external resources are (loyal) customers who provide
critical insights on how to improve the product, whereas connecting to
motivated customers promises the capture of emergent opportunities (Hall,
2010). Moreover, creative individuals and communities can be a very
important source of innovation, especially joint ventures with university and
research institutions may lead to create fruitful innovations. High levels of
literacy rate (94.2), educated and skilful youth with innovative skills (literacy
rate 97 for males and 99 for females between 15-24 years of age) provide a
better external environment for the crowed sourcing in Sri Lanka (UNICEF,
2010).
Present study aimed to investigate the nature of open innovation/co-
innovation practices of fish and seafood export processors in Sri Lanka.
Specific objectives of the study focused to identify the role of open innovation
in the export marketing and identify the contribution of open innovation on
firm performance. The paper is organised into three main sections: the first
section deals with the back ground information and conceptual frame work,
the second section discusses the research methodology of the study and the
last section consists of the findings, discussion and of conclusion.

Figure 01: Conceptual frame work

External Insights to Boost Internal R&D Efforts of the Fish and Seafood 135
Export Processing Industry in Sri Lanka
 Sabaragamuwa University Journal 2015, V. 14 NO. 2 pp 133-148

Conventional wisdom or the famous closed innovation model considered

the occurrence of innovations in closed environments often performed by
individuals, scientists or employees. However, open innovation explains
that firms can and should use external and internal ideas, and external paths
to market when firms need to advance their technology (Cesbrough, 2003).
Thus, the open innovation is the baseline for the conceptual framework of the
study. The conceptual frame work begins in the firm and ends in the market
where consumers receive the product or bundle of attributes. As per the open
innovation landscape, there are three phases involved between the firms and
consumers. These are idea generation; product development and marketing
(see Figure 1). In every stage it is important to study the ideas and resources
involved how they are involved, etc. As indicated in Figure 1 the ideas and
resources could generate from fish and seafood processors, and from external
support. Thus, it is important to identify and measure the external support
involved, how they are involved and what they support in every phase of
the conceptual frame work. Further, the conceptual framework explains
the draining of ideas and resources in all phases as spin offs, franchising,
partnerships, etc. Conceptual framework was based on the ideas of globalised
value chains, especially where the fish and seafood products belong. The open
innovation model believes that a company’s value chain no longer exists fully
within the company’s boundaries. Ideas, individuals and products flow across
company boundaries, to and from other companies, universities and countries
(Duke, 2004).

Methodology
The research is based on fish and seafood processing firms in Sri Lanka,
and the study population consisted of 103 registered fish and seafood export
processing firms. Sampling technique was purposive and the research sample
composed of 26 EU approved establishments. The EU approved fish and
seafood processing establishments were chosen for the first empirical test of
this study because all of these firms were catering to the EU, Japan and the
USA markets and not local markets. Data were collected in the 2011 and the
study was heavily based on primary data. The main data collection tool was
structured questionnaire followed by in-depth interviews with selected industry
statkeholders. The questionnaire was composed of three main sections: the first
part was designed to collect the information of the firm’s general information
such as product categories, turnover, markets, certification and traceability,
and marketing system.
The second part was designed to collect data on social networks and crowed
sourcing experiences. In this part of the questionnaire the Hansen and
Birkinshaw’s (2007) capability measure was used to measure the firm’s
level on idea generation, conversion and diffusion. Hansen and Birkinshaw’s

136 D.A.M. De Silva and Trond Bjorndal

Sabaragamuwa University Journal 2015, V. 14 NO. 2 pp 133-148

measure views innovation as a value chain where managers have to perform

six critical tasks, such as internal sourcing, cross-unit sourcing, external
sourcing, selection, development, and company wide spread of the idea. Based
on this method firms could be divided into three groups, namely idea-rich or
poor company, conversion rich or poor company and diffusion rich or poor
company. Moreover, the firms open innovation experiences were measured
by using 13 statements of Hansen and Birkinshaw’s measure. In addition,
nine other statements on open innovation concepts and their response on
sustainability were measured.
The final part of the questionnaire was prepared to collect information on
the firm’s cooperate partners, their destinations and roles. Moreover, follow
up interviews were scheduled with the CEOs, managing directors and chief
quality control officers of the selected firms. The main aim of conducting
personal interviews was to obtain detailed information on the social networks,
the role of the social networks and most of all to gather information on the
interviewee’s experience in the open innovation practices. The theoretical
arguments lead towards the development of the following hypotheses. The
firm’s performance was measured using two indicators; the number of products
introduced during the last three years and the number of markets catered to
during last three years.

Results and Discussion

The baseline information of fish and seafood processing establishments were
the first consideration and the background would support identify the ground
situation. Twenty six EU approved establishments were purposely selected,
of which 23 were owned by Sri Lankans and the key positions were also
held by the country’s nationals. Three establishments were operating as joint
ventures where foreigners collaborate with Sri Lankans. Of the sample 96%
of the establishments were operate as limited liability companies. Place of
head quarters for majority (87%) was Sri Lanka while rest has selected United
Kingdom and Japan for their head quarters.
R & D department was not presented in any organizational structure while
78% of the companies have own R&D employees attached to the quality
control or production departments. Majority of the firms (88%) have their
own R&D budget. Especially the amount of R&D expenditure varied from
5-10% where 46% spend 5% from their sale expenditure and 42% spend 10%
for R&D activities. Eighty eight percent of the companies have full time R&D
employee and the person act as an innovation leader to the firm.
Field survey has identified 42% of the companies have own innovative
products while 82% has products new to the firm but not to the global fish
and seafood market. Interestingly, considerable number of firms (68%)

External Insights to Boost Internal R&D Efforts of the Fish and Seafood 137
Export Processing Industry in Sri Lanka
 Sabaragamuwa University Journal 2015, V. 14 NO. 2 pp 133-148

manage own product or process development strategies. Study has identified

various institutions as social network partners for the fish and seafood
export processors. Social networks composed of both governmental and non
governmental institutions, i.e. universities, research institutions, industry
experts and consultants, competitors, raw material suppliers, retailers and
retail chains, wholesalers and traders, consumers, export development board,
Ministry of Fisheries, advertising and sales promotion, Non Governmental
Organizations
Common marketing strategy was to supply foreign retails and retail chains
while 22% of the firms using their own brand name as well as own promotional
campaign. Export composition of the processing companies composed of tuna
(yellow fin, skipjack and big eye), swordfish and shrimp were common in
the export basket. The majority of the processors were dealing with tuna and
swordfish with the exception of two companies. Export composition based on
several product categories, such as fresh, semi processed and ready to cook
forms. Majority (50%) of the processors were now producing ready to eat
forms which brings better returns.
Firms’ commitment on international market regulations, especially on
certification systems, is presented in figure 2. All respondents of the sample
were strengthened with HACCP, EU and traceability certifications. Whereas,
majority of the respondents maintain British Retail Consortium (BRC), US
Food and Drug Administration (FDA), and ISO series (9000, 14000 and
22000).

Figure 02: Commitment on international market regulations

138 D.A.M. De Silva and Trond Bjorndal

Sabaragamuwa University Journal 2015, V. 14 NO. 2 pp 133-148

External crowds, nature of their support and process of collaboration

Phase one - Idea generation

The majority (93%) of the export processors were directly linked with foreign
retail chains (ASDA, Tesco, Morison’s, Waitrose, Aldi, Marks and Spencer,
Wal-Mart, etc.). Retail chains provide regular market information such as
regulatory requirements (certification, health and safety issues, nutritional and
dietary considerations, tariff and taxes, legal and policy matters), consumer
demands (species preferences, product types, processing methods, packaging,
organic and environmental demands, seasonal demands, price concerns),
society and consumer concerns on sustainability, labour and animal rights,
and market trends. Moreover, importers, traders and wholesalers were also a
reliable source of market information and help to shape the process.
Local research institutions (ITI-Industrial technology Institute), research labs
and universities were facilitating through transfer of technologies, product and
process ideas, product upgrading and troubleshooting, contract research and
development, supplying standards and manuals, and market research. Long
established export processors were maintaining strong links with university
academics, researchers and employ interns regularly. Social networks with
foreign and local entrepreneurs, start-up companies and SMEs were providing
great help in the process of idea generation. Competitors, both local and
foreign, are always in a battle but the competitive spirit is useful in providing
market trends, ideas and regulatory requirements. Only few firms were
able to manage strong ties with their foreign consumers, while others have
shown poor customer relations. Majority of the sample (78%) totally depends
on their buyer’s requirements as they export directly to retail chains and
individual buyers in the international market. Manufacturing process totally
depends on buyer specific requirements. Consumer links are helpful in getting
valuable ideas on preferred species, product types, product design, packaging,
processing methods, seasonal demands and socio-cultural requirements.

Phase two - Product development

Firms holding sole responsibility of the product development stage accomplish
their tasks with external support. All export processors were maintaining
healthy relationships with governmental organisations which facilitate the
export industry. Principally, the quality control division of the Ministry of
Fisheries and Aquatic Resources provides legal and policy strength to the
export processors. Thus, it helps to manage stringent quality control procedures
and their regular inspection helps to secure firm position in the international
market.
Firms ofthe study sample were maintaining a traceability system (trace
back to the fishing point/ fishing vessel, etc.), HACCP procedures, ISO
External Insights to Boost Internal R&D Efforts of the Fish and Seafood 139
Export Processing Industry in Sri Lanka
 Sabaragamuwa University Journal 2015, V. 14 NO. 2 pp 133-148

9000/14000/22000 series, BRC (British Retail Consortium), US Food and

Drug Administration requirements, GAP (Global Aquaculture Practices)
and sustainability labelling (Friend of the Sea). Export Development Board,
Ministry of Trade and Commerce, Department of Customs, Board of
Investment were the leading government institutions facilitating the operation.
Firms maintaining closer links with universities and research institutions were
enjoying a wider product range and catering to a large number of market
segments compared to others with weaker links.

Phase three - Marketing

Value chain members provide great help in this stage, especially in catering
to the existing market or entering into new markets. Raw material suppliers,
including own vessels and crews were helping to manage and maintain the
quality control procedures. This step is utmost important when dealing with
highly perishable products. Moreover, outbound logistics such as air freight,
shipping, transport (local and foreign), insurance, etc., were facilitating
the process with timely supply of products to global markets. The majority
depend on retail chains in the UK, Germany, France, Switzerland, Italy,
the USA and Japan, and they were handling the entire marketing process
without intervention of the local processors. Moreover, trade exhibitions
and advertising campaigns help to identify new consumers, buyers, market
trends and regulatory background of the international markets. The Export
Development Board was facilitating in organising and participation in
international trade fairs and supporting in identifying foreign buyers.

Rating open innovation in fish and seafood value chains

The present study aims to identify the relationship between the firm’s
performance and the firm’s engagement with external sourcing of ideas or
open innovation. Table 01 presents the results of the analysis of in-house idea
generation. Laursen and Salter (2006) have identified the relationship between
the openness of UK firm’s external search strategies and their innovative
performance and results proved a positive relationship. Export processing firms
were rich in ideas and employees in different levels as well as divisions of the
organisation bring lots of bright ideas on product and process development.
Organization culture encourages its employee’s innovative behaviour and
facilitates for testing.
Table 01: Measurement of In-house idea generation
Statement Mean Std. Deviation
1. Our culture makes it hard for people to put 2.15 0.54
forward novel ideas
2. People in our company come up with lots of 4.03 0.19
good ideas on their own

140 D.A.M. De Silva and Trond Bjorndal

Sabaragamuwa University Journal 2015, V. 14 NO. 2 pp 133-148

Table 02 indicates the findings of the cross-pollination of business ideas

among different departments, divisions or units. The results revealed that most
of the innovative projects of the companies were the result of team work rather
than individuals. Moreover, respondents agreed on the statement on internal
collaboration of projects and members of all departments or divisions work
together to achieve desired tasks. Results of Table 01 and 2 highlighted that
companies were idea rich and positive on internal collaboration.
Table 02: Measurement of Cross-pollination among businesses
Statement Mean Std. Deviation
3. Few of our innovation projects involve team
2.38 0.80
members from different units or subsidiaries
4. Typically, our people collaborate on projects
4.00 0.00
internally, across units, businesses or subsidiaries

Table 03 brings the results of the external sourcing of ideas on product and
process development, technological know-how, market information, etc.
Firms have shown positive attitudes towards the external sourcing of ideas
and they regretted the concept of “not invent here”. Especially, they are
catering to geographically distinct markets and ready to accept the buyers
and consumers views on product and process development. Previous studies
support this argument. Sarka et al., (2008) analysed the impact of the open
innovation strategies employed in the food industry. Moreover, a literature
survey highlighted that open innovation strategies come in a variety of
forms and meet with a wide variety of outcomes including improved market
capabilities, economic returns, strengthened R&D efforts, etc.
Table 03: Measurement of external sourcing of ideas
Statement Mean Std. Deviation
5. Lots of good ideas for new products and
4.23 0.42
businesses come from outside the company
6. Our people often regret a “not invent here”
attitude – ideas from outside are considered as 4.00 0.00
valuable as those invented within

Results of the measurement of idea or product concept selection showing

positive results (see Table 04). They were neutral on risk taking attitude and
limited or no-availability of investment finance made it hard to put forward
novel ideas into operation. Processing firms were figuring positive attitudes
towards investing in new product or process concepts if available resources
permit them to do so.

External Insights to Boost Internal R&D Efforts of the Fish and Seafood 141
Export Processing Industry in Sri Lanka
 Sabaragamuwa University Journal 2015, V. 14 NO. 2 pp 133-148

Table 04: Measurement of idea/product selection

Statement Mean Std. Deviation
7. We have tough rules for investment in new
2.53 0.58
products-it’s often too hard to get ideas funded
8. We have a risk-taking attitude toward
3.34 0.84
investing in novel ideas

Results of the top management’s views on product development and internal

collaboration on that process are presented in Table 04. The respondents agreed
that new product development projects were not completed within time frames.
Resource constraints, mainly financial, human capital and technological
barriers, hinder the product development process. In addition, the industry
specific policy and infrastructure limitations made the burden on it. Statement
on the support of other departments and employees on manager’s product
development attempt received neutral mean scores. Furthermore, mangers of
established firms with large number of product range was highlighted that they
were receiving strong support on the conversion process and collaboration of
all parties were high to achieve the targets. Results (Table 04 and 5) support on
conversion of product concepts or ideas into practise and Sri Lankan fish and
seafood processing firms can be categorised as conversion moderate group.
Table 05: Measurement of idea/product development

Statement Mean Std. Deviation

9. New product development projects often don’t
2.84 0.36
finish on time
10. Mangers receive lots of support in
3.96 0.19
developing new ideas

The final three statements in Hansen and Birkinshaw’s capability measure

were targeted to identify the firm’s capacity on diffusion of product idea.
Results (Table 06) revealed that processing firms were behaving neutrally
on diffusion of ideas. They were reluctant to say that they were slow to roll
out new products and competitors’ attitude on their work. But the majority
agreed that they were not penetrating all possible markets and channels,
and not catering to wider market segments. Nelson and winter (1982) states
that external sources of variety allow firms to create new combinations of
technologies and knowledge. The product development process is itself a
form of problem-solving activity and associated search processes involve in
investments in building and sustaining links with users, suppliers, and wide
range of different institutions inside the innovation system (Hippel,1998).

142 D.A.M. De Silva and Trond Bjorndal

Sabaragamuwa University Journal 2015, V. 14 NO. 2 pp 133-148

Table 06: Measurement of idea/product concept diffusion

Statement Mean Std. Deviation

11.We are slow to roll out new products 3.30 0.97
12. Competitors are slow to copy our product
3.07 0.93
introductions
13. We don’t penetrate all possible channels,
customer groups and regions with new products 3.92 0.39
and services

The open innovation capability of the firms is presented in Table 07. Processors
disagreed with the statements that they were having few collaborative
innovation projects with consumers, retailers and suppliers. Especially, they
were managing collaborative initiatives with foreign retailers, retail chains,
consumers and suppliers on idea generation and sustainability of the resources.
Moreover, they have shown neutral responses on their collaborations with
traders, wholesalers, sales promotions and advertising personals. Results
revealed that their new product development incorporates the ideas of value
chain members.
Table 07: Measurement of open innovation capability

Statement Mean Std. Deviation

14. Few of our projects involve with external
2.65 1.01
members (consumers) of the company
15. Few of our projects involve with external
2.53 0.90
members (suppliers) of the company
16. Few of our projects involve with external
2.50 0.94
members (retailers) of the company
17. Few of our projects involve with external
members (traders and wholesalers) of the 3.00 1.01
company
18.We are well connected with sales promotions/
3.23 0.86
advertising/media personnel
19.We have open window to get ideas from
3.76 0.71
outsiders
20.Our new product development incorporate
4.30 0.47
ideas of value chain members
Sustaining fishery resources is of paramount importance and the industry
entirely depends on availability of the resources. The Sri Lankan fish and
seafood processing industry is catering mainly to the EU, the USA and Japan,
and their commitment to international market regulations was given higher
priority. Results revealed their agreement to ensure sustainability in the

External Insights to Boost Internal R&D Efforts of the Fish and Seafood 143
Export Processing Industry in Sri Lanka
 Sabaragamuwa University Journal 2015, V. 14 NO. 2 pp 133-148

production process and response to international market regulations (table 8).

Table 08: Measurement of commitment on sustainability
Statement Mean Std. Deviation
21. We are committed to produce sustainable
4.34 0.48
products
22.We are always follow international market
4.46 0.50
regulations and certifications
Measuring the relationship between open innovation and firm performance is
the principal target of this study. Performance of the export processing firms
was measured using two indicators, product and market achievements of the
considered period. Results of the firm performance (products and markets)
and open innovation are described in table 9 (9.1, 9.2, 10.3) and 10(10.1,
10.2, 10.3). The results reject the null hypothesis in favour of the alternative,
indicating a significant relationship between firm performance and open
innovation. Open innovation activities help to develop a wide range of new
products and product lines, introducing new species, processing techniques,
packaging materials, adapting to international market requirements, customer
relations, new market entry and cater for different market segments. Moreover,
exposure to open innovation leads to build the capacity in human, physical
and financial resources.
Table 09.1: Firms performance (Products) - Paired Samples Statistics
Std. Std. Error
Mean N
Deviation Mean
Products post & 11.6923 26 6.85139 1.34367
Pair 1
pre open innovation 26 .47068 .09231

Table 09.2: Paired Samples Correlations

N Correlation Sig.
Products post & pre open
Pair 1 26 .440 .025
innovation

Table 09.3: Paired Samples Test

Paired Differences
95% Confidence Interval Sig.
Std. Std. Error t df
Mean of the Difference (2-tailed)
Deviation Mean Lower Upper
Products Post
Pair 1 and pre open 7.38462 6.65779 1.30570 4.69548 10.07375 5.656 25 .000
innovation

144 D.A.M. De Silva and Trond Bjorndal

Sabaragamuwa University Journal 2015, V. 14 NO. 2 pp 133-148

Results revealed that firm performance based on products has significant

relationship with its open innovation activities. Nature of the Sri Lankan export
processing firms highlighted that R & D facilities were poor for innovative
product development activities. External sourcing of ideas facilitates them
to improve their innovativeness and results proved the link between external
sourcing of ideas and firm performance. Especially external sourcing of
ideas and its relationship with the performance provides solutions for the
resource poor firms to achieve success. Developing nations holding the lion’s
share of the international fish and seafood trade but most of the processing
firms rarely allocate resources for research and development. In one hand
ever changing consumer tastes, preferences, legal and regulatory changes
requesting the processors to rethink their products. On the other hand survival
of the processing firms in international market depends on their adjustments to
dynamic market requirement. Present findings show the promising direction to
the fish and seafood processing firms to perform well in international market
with diversified product range.
Table 10.1: Firms performance (markets) - paired samples statistics

Std. Std. Error

Mean N
Deviation Mean
Markets post & 6.8846 26 3.05060 .59827
Pair 1
Pre open innovation 4.3077 26 .47068 .09231
Table 10.2: Paired samples correlations

N Correlation Sig.

Pair 1 Markets pre & post open innovation 26 .499 .009

Table 10.3: Paired sample test

Paired Differences
95% Confidence Sig.
Std. Std. Error Interval of the t df
Mean Difference (2-tailed)
Deviation Mean
Lower Upper

No. of markets
Pair 1 post & pre open 2.57692 2.84497 .55794 1.42782 3.72603 4.619 25 .000
innovation

Role of markets is identifying appropriate marketing channels where their

inventions will pay off with promising returns (Bratvold, 2014). Content
creation remains with a huge undertaking of opportunity costs. But if firms
resources and R&D budget are stretched to limit or unavailable, what else
might firm has to do? Study has proved that crowd sourcing will facilitate

External Insights to Boost Internal R&D Efforts of the Fish and Seafood 145
Export Processing Industry in Sri Lanka
 Sabaragamuwa University Journal 2015, V. 14 NO. 2 pp 133-148

the creation of opportunity cost as well as content marketing where firm can
secure returns. Further, crowd sourcing speed the process of market content
creation, links existing as well as potential customers, encourage your target
audience to invest in the process, and offers diversity and creativeness.

Conclusion
The research focused on the fish and seafood export industry of Sri Lanka
which was aimed to investigate the nature of open innovation practices among
fish and seafood exporters, find the role of open innovation on product and
process development, market identification, market expansion, brand image,
quality control, labelling and certification, sales promotion and advertising,
and sustainability of the resources and find the relationship between open
innovation and firm performance.
Sri Lankan processors mostly deal with three species namely tuna, swordfish
and shrimp, mainly exported to the EU, the USA and Japanese markets.
Product lines include fresh, semi processed, ready to cook, and ready to eat
and an increasing trend was observed in value addition. Moreover, firms’
commitment to international market regulations was great and all of the firms
maintain HACCP, and EU certification and traceability system for products.
However, none of the firms have their own R&D department and firms rarely
allocate designated persons to the work of R&D. The mean result for R&D
allocation of the firms was 4.61% and some of the firms do not allocate a
separate R&D budget. Firms which do not maintain separate budgets for R&D
were directing funds for the product and process development whenever the
necessity occurs. The majority of the firms were lacking a separate R&D
department, and a full time leader on product and process development.
The common feature was top level managers and quality control heads were
dedicated on innovation process and acting as a leader.
Open innovation practices of the processing firms were identified in three
main categories, namely idea generation, product development and marketing.
First, open innovation enhances the firm’s idea generation and information
search functions. Second, the product development phase was critical to Sri
Lankan processors, like most of other developing nations, with investment
barriers. Government institutions involved in facilitating the process while
external sources or crowds playing great role behind the product development
process. Third, marketing has great importance to the process and firms dealing
directly with foreign retail chains manage the entire marketing process with
fewer burdens to the firms.
Study proves that processing firms were idea rich and were positively
collaborated internally for innovative projects. Firms were behaving moderately
on conversion of innovative ideas into products. The study reveals that lots

146 D.A.M. De Silva and Trond Bjorndal

Sabaragamuwa University Journal 2015, V. 14 NO. 2 pp 133-148

of innovative ideas cease in the investment planning and poor screening or

validation process. Resource constraints lag plans behind or made firms more
risk averse. Firms were behaving neutrally on diffusion of product ideas.
Human resources limitations made poor availability of strategic marketing
plans. Therefore, novel product ideas were not converted into final products
and could not reach into the final market. Healthy relationships were observed
with firm’s value chain participants. Moreover, firms were highly dedicated on
sustainability of the resources, especially the oceans with positive response to
international market regulations.
Prime objective of the study was to investigate the relationship between firm
performance and open innovation. Firm performance, both products and
markets, have significant relationship with open innovation. Fish and seafood
value chains no longer exist fully within one company, country or region.
The value chain begins with producers beyond the national boundaries and
caters to geographically diverse markets. Therefore, collaboration of different
people and their ideas can create economic value through intellectual property.
Moreover, healthy collaboration will act favourably on sustainability of the
oceans and other resources. Especially, the country’s education should generate
the best human resources and close the gap between industry and academia.
Thus, there is an urgent need to actively reach out to universities and research
institutions to bring out the best knowledge and technology. Idea of crowd
sourcing has merged with other ways to create new business dimensions for
the fish and seafood export processing industry.

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