Cross-level assessment of process innovation practices: an empirical approach to small and medium manufacturing enterprises in Southeast Asia

Abstract

Process innovation is the core that helps both firms and countries achieve development goals quickly and sustainably. However, how a country’s ecosystem aligns with the innovation development of domestic firms and reverses backwards is less discussed. This study examines how process innovation practices at different levels affect the firms’ and governments’ performance to build a global competitiveness roadmap. The data of 4,859 small and medium manufacturing firms in nine Southeast Asian countries are used to examine the critical process innovation practices at the firm level, then utilized the Global Competitiveness Index to determine whether the cross-level effects the relationship between process innovation practices and firms, and national competitiveness performance. A two-level hierarchical model shows that innovation investment positively impacts process innovation practices. Higher education, training, and labor market efficiency also have a cross-level influence on process innovation. Finally, firm performance is boosted by integrating process innovation with financial market growth and size. The contributions are: (1) demonstrating a direct and indirect impact of innovation investment on process innovation practices and (2) providing an in-depth look at the cross-level effect of process innovation on global competitiveness.