Empirical Analysis of ICT and Innovation Based on Firm-Level Evidence from Four ASEAN Economies: An Sem Approach

Abstract

Objectives Based on survey data of firms in four ASEAN economies, such as Vietnam, Indonesia, the Philippines, and Thailand from 2012 to 2013, this paper examines how ICT use such as B2B, B2C, EDI, SCM, ERP, CAD/CAM, groupware, SNS etc., incorporated with R&D capability, and managerial organization such as QM, cross functional team, enhance product as well as process innovation. In so doing, the following five hypotheses were postulated to be examined: (H1) External linkage improves ICT use and then ICT use promotes innovation; (H2) External linkage enhances innovation capability and then innovation capability promotes innovation (H3) Innovation capability improves ICT use and then ICT use promotes innovation. (H4) External linkage improves the technological level and then technology promotes innovation (H5) Innovation capability improves the technological level and then technology promotes innovation Background East Asian Economies are required to transform from production base of the world to knowledge based economies. For this goal, firms there have to achieve innovation by enhancing their innovation capability. The innovation process has been analyzing intensively and factors promoting innovation are obtained such as RD Christensen and Kaufman, 2009; Idota et al, 2013). Since most of new information is obtained outside the firm (Chesbrough, 2006), the collaborations with outside organizations such as MNCs (Multi-national corporations), universities, public research organizations, local firms, and so on are indispensable for local firms in developing economies (Cohen and Levinthal, 1990; Zahra and George, 2002). Previous studies thus far do not analyze fully the roles of ICT in the innovation process in developing economies, and this study focuses on how ICT is used and promote innovation. Methodology This study is based on mail surveys and phone interviews conducted to 1,232 firms in the Hanoi area and 1,000 in the Ho Chi Minh City area, Vietnam, 239 in the Batangas and other areas in the Philippines, 437 in the Jabodetbek area, Indonesia, and 878 in Greater Bangkok, Thailand. The total number of valid responses in these areas was 998 (26.36%). This study employs SEM (Structural Equation Models) which can examine the relationship among various variables which are related to each other. This analysis can be used even if they are endogenous and usual Least Squares cannot be applied. External linkage such as MNCs, local and public organizations, university, technology, innovation capability, ICT use and three types of innovation such as new product innovation, improving product innovation, and process innovation are used as variables. Three models are constructed based on three types of innovation and analyzed separately. Outline of results The three models examined are fitted well (GFI, AGFI, CFI<=0.9, RMSEA<=0.05). As a result, the factors extracted commonly from three innovation models are as follows; (i) ICT use; (ii) MNCs; and (iii) Innovation capability. The specific causalities obtained from three innovation models are as follows: (i) ICT use promotes new product innovation and process innovation (ii) MNCs promote process innovation via ICT use and internal capability (iii) Public organization and university enhance innovation capability which then improves product and process innovation. All hypotheses therefore are demonstrated except H2 which is denied since external linkage does not improve technology. Accordingly ICT use, technology and innovation capability are found to enhance innovation. Figure: Result of new product innovation