Cooperation in Innovation Networks: The Case of Danish and German SMEs

Abstract

Information is a critical resource in innovation processes. External information can be helpful in innovation processes to complete them successfully. SMEs in particular are therefore advised to draw on consulting in innovation processes, as they cannot ensure the necessary information flow internally due to the lesser resources they have compared to larger companies. To promote economically relevant information of SMEs, the public sector provides specific advisory services. These services, however, are rarely utilized compared to direct customer and supplier contacts. From strategic management's point of view, the involvement of intermediaries in the innovation process is accompanied by the risk of losing specific knowledge to the business environment. Based on an empirical comparative study of Danish and German SMEs - Danish companies utilize public as well as private consulting services more often - determinants of the usage of business consultancies in innovation processes are elicited. Key words: SMEs, innovation, networks, public policy 1. Introduction Economic Operations and thus innovations are embedded in social relations and structures (Granovetter 1985; Hagedoorn 2006). Therefore, the organizational units that create innovations are not individual businesses, but usually networks. From a resource-oriented point of view, networks hold a variety of advantages for their members, such as access to material and immaterial resources, information and knowledge. Powell et al. (1996), for example, conclude in their study on innovation behavior in pharmaceutical companies that companies that are not able to initiate networks or form a cooperation have strategic disadvantages on the market. In this context, especially small and medium-sized enterprises (SMEs) are considered to be dependent on the social capital of networks, because of the limited resources they have under direct control due to their size (Kaufmann/Todtling 2003). However, innovation networks are not only relevant for participating SMEs, they also affect the economy in general (Laforet/Tann 2006). On the one hand, SMEs generate a large share of the economic output, as well as a large share of the innovations. On the other hand, globalised SMEs using innovation as competitive strategy ensure that new knowledge spreads and nourishes the innovative capacity of the overall economy. In order to keep up in the competition with well-resourced businesses, SMEs inevitably depend on cooperation. Information even has to be collected beyond the borders of the cooperation network. ... Networks are vital providers of various kinds of knowledge not only from directly related relationships but also from indirect relationships (Tolstoy 2009: 207). At the same time, with the trends towards decentralization and outsourcing in the past two decades, SMEs have significantly gained in importance for innovative strength: as a result of the transformation of the valueadded chain, innovations have frequently shifted from large companies to small and medium-sized businesses and thus to networks (Asheim 2004). These are good reasons for policy makers to support the development and especially innovations of SMEs. For that purpose, business development services provide general information for SMEs. However, they also try to specifically arrange access to material and immaterial resources, to connect with network partners and to directly or indirectly integrate consultancies. Some of these measures might, however, be counterproductive. From a strategic management's point of view - and on this all common approaches agree, from New Institutional Economics with the transaction cost approach through the market-oriented viewpoint of industrial economics to the resource-based view of the firm - it is essential to protect certain information and not feed it into the networks, through which it spreads uncontrollably. All these approaches agree on the fact that knowledge is a scarce resource in the field of innovation and that it has to be protected. …