Drivers and barriers to innovation in the food processing industry continued. A comparison of the Netherlands and the Shanghai region in China.

Abstract

This paper aims at comparing the innovative potential of leading food processing companies in emerging and developed economies. We asked ourselves how the clearly differing economic and social conditions of two areas that are only comparable in terms of their number of inhabitants (about 16 to 18 million), namely a fast growing emerging economy (the Shanghai area in China) and a developed economy (The Netherlands) affect competitiveness and innovation of their leading prospector companies. Our study population consisted of 31 respondents (CEOs, CTOs and R&D directors) from 18 leading prospector companies in the food processing industry : nine in the Netherlands and nine in Shanghai. We focus on how the combination of external forces exerted by actors in the network (competitors, suppliers and buyers) and internal forces (especially innovation capabilities) affect competitiveness and innovation performance of these companies. A 52-item research questionnaire, based on industrial organization theory and the Resource-Based-View, was designed for this study, including quantitative questions on innovative input and output and business performance, and qualitative questions about competitive pressure and the quality of the innovation process. Interesting findings are that both innovative as well as business performance are predominantly related to the companies’ internal (innovation) capabilities. As expected, clear differences between Chinese and Dutch companies were found regarding the external forces as well as in the internal capabilities they deploy to survive The pressure from the external environment, especially the power of buyers and the threat of new entrants is clearly felt more strongly by the Dutch companies than by their Chinese counterparts. The Chinese companies report to significantly use more KPI’s to monitor the R&D process, whereas the Dutch companies are significantly more active in stimulating an innovative culture. Interestingly, however, neither of these differences leads to significant differences in business or innovation performance between the two groups in our study. The answer to the question whether agri-food companies in developed economies still have a competitive edge compared to those in emerging economies, such as China that emerges from the data collected so far points in the direction of the disappearance of the traditional advantage of the companies from developed economies: no significant differences could be found neither in innovation performance, nor in business performance among the companies from the Netherlands and the Shanghai region in China.