Giuliana Battisti

How Innovative are UK Firms? Evidence from the Fourth UK Community Innovation Survey on Synergies between Technological and Organizational Innovations

Using data from the Fourth UK Community Innovation Survey this paper explores the diffusion of a range of innovative activities (encompassing process, product, machinery, marketing, organization, management and strategic innovations) across 16,383 British companies in 2004. Building upon a simple theoretical model it is shown that the use of each innovation is correlated with the use of all other innovations. It is shown that the range of innovations can be summarized by two multi-innovation factors, labelled here ‘organizational’ and ‘technological’, that are complements but not substitutes for each other. Three clusters of firms are identified where intensity of use of the two sets of innovations is below average (56.9% of the sample); intermediate but above average (23.7%); and highly above average (19.4%). Distinctive characteristics are found to be common to the companies in each cluster. Finally, it is shown that innovativeness tends to persist over time.

Inter- and intra-firm effects in the diffusion of new process technology

Using primarily the example of Computerised Numerically Controlled Machine Tools (CNC) in the UK metalworking and engineering industry, it is shown that, even many years after the date of first use of a new technology, although the larger proportion of firms may be using that technology, because the extent of intra-firm diffusion is limited, the proportion of total industry output produced on that technology may be quite small. Using backward projection techniques it is further shown that intra-firm diffusion tends to lag behind inter-firm diffusion over the whole of the diffusion process and inter-firm diffusion patterns and extent may thus be poor indicators of overall diffusion. Although intra-firm diffusion is therefore crucial to the understanding of overall diffusion patterns the existing literature relating to it has severe limitations and there are no associated policy results. It is argued that much greater emphasis should be placed on intra-firm issues in future diffusion research. It is also suggested that discussions of intra-firm policy could usefully proceed within the context of already established general diffusion policy principles.

The Impact of Islamic Banking on the Cost Efficiency and Productivity Change of Malaysian Commercial Banks

This study employs Stochastic Frontier Analysis (SFA) to analyse Malaysian commercial banks during 1996–2002, and particularly focuses on determining the impact of Islamic banking on performance. We derive both net and gross efficiency estimates, thereby demonstrating that differences in operating characteristics explain much of the difference in costs between Malaysian banks. We also decompose productivity change into efficiency, technical, and scale change using a generalized Malmquist productivity index. On average, Malaysian banks experience moderate scale economies and annual productivity change of 2.68%, with the latter driven primarily by Technical Change (TC), which has declined over time. Our gross efficiency estimates suggest that Islamic banking is associated with higher input requirements. However, our productivity estimates indicate that full-fledged Islamic banks have overcome some of these cost disadvantages with rapid TC, although this is not the case for conventional banks operating Islamic windows. Merged banks are found to have higher input usage and lower productivity change, suggesting that bank mergers have not contributed positively to bank performance. Finally, our results suggest that while the East Asian financial crisis had a short-term cost-reducing effect in 1998, the crisis triggered a long-lasting negative impact by increasing the volume of nonperforming loans.

Inter and Intra firm Diffusion of ICT in the United Kingdom (UK) and Switzerland (CH) An Internationally Comparative Study Based on Firm-level Data

This paper attempts to at least partially redress a paucity of current literature on the joint analysis of inter and intra firm diffusion of innovations within as well as across countries. In particular, by using two data sets derived from independent country-specific surveys, it undertakes an international comparison of inter and intra firm diffusion of Information and Communication Technology (ICT) use in the UK and Switzerland. This allows one to address many of the problems that have prevented general conclusions on the drivers of inter and intra firm ICT adoption decisions. An encompassing model is proposed which gives quite satisfactory results for both countries. It is found that inter and intra firm ICT adoption decisions are driven by different factors, confirming the findings of Battisti and Stoneman [Battisti, G. and Stoneman, P. (2003) Inter and Intra Firm Effects in the Diffusion of New process Technology. Research Policy, 32, 1641–1655; Battisti, G. and Stoneman, P. (2005) The Intra Firm Diffusion of New Process Technologies. International Journal of Industrial organisation 23, 1–22.] and Hollenstein and Woerter [Hollenstein, H. and Woerter, M. (2004) The Decision to Adopt Internet-based E-commerce. An Empirical Analysis Based on Swiss Firm-level Data. KOF Working paper NG 89, Zurich.] that ‘first use’ and ‘intensification of use’ represent independent choices. The study also suggests that significant differences exist between the UK and Switzerland, probably as a result of their differing diffusion stages. In addition the importance of new organisational and managerial practices as drivers of diffusion stressed by recent theoretical and empirical work is supported for both countries. Overall the findings suggest that comparative research is a promising way to identify robust relationships and should be explored further.

The Diffusion of New Technology

Technological diffusion is defined widely as the process by which the market for a new technology changes over time and from which production and usage patterns of new products and production processes result. This chapter looks at both the demand and supply sides of this process at differing levels of aggregation, from the worldwide to the interfirm or household level, via consideration of intensive and extensive margins. Realized diffusion patterns are discussed and theoretical underpinnings of the diffusion process explored. Econometric models, data availability, and estimation are also considered although there is little attempt to be comprehensive re the latter given existing surveys. Diffusion policy is also addressed and some comments on future research directions offered.

Efficiency and total factor productivity change of Malaysian commercial banks

This paper analyses the efficiency of Malaysian commercial banks between 1996 and 2002 and finds that while the East Asian financial crisis caused a short-term increase in efficiency in 1998 primarily due to cost-cutting, increases in non-performing loans after the crisis caused a more sustained decline in bank efficiency. It is also found that mergers, fully Islamic banks, and conventional banks operating Islamic banking windows are all associated with lower efficiency. The paper estimates suggest mild decreasing returns to scale, and an average productivity change of 2.37% that is primarily attributable to technical change, which has nonetheless declined over time. Finally, while Islamic banks have been moderately successful in developing new products and technologies, the results suggest that the potential for Islamic banks to overcome their relative inefficiency is limited.

Assessing pupil and school performance by non-parametric and parametric techniques

AbstractThis paper discusses the use of the non-parametric free disposal hull (FDH) and the parametric multi-level model (MLM) as alternative methods for measuring pupil and school attainment where hierarchical structured data are available. Using robust FDH estimates, we show how to decompose the overall inefficiency of a unit (a pupil) into a unit specific and a higher level (a school) component. By a sample of entry and exit attainments of 3017 girls in British ordinary single sex schools, we test the robustness of the non-parametric and parametric estimates. Finally, the paper uses the traditional MLM model in a best practice framework so that pupil and school efficiencies can be computed.

Open innovation in services: knowledge sources, intellectual property rights and internationalization

The paper investigates the direction of knowledge flows and, more generally, the pattern of open innovation that is taking place within services across Europe. Using the Eurostat Fourth Community Innovation Survey (CIS4) dataset, on 17 service sectors across 18 countries, we find significant differences between service innovation leaders and followers. Key findings are that a concentration of radical innovation is to be found mainly in knowledge-intensive research and development sectors; that leading innovators across all sectors tend to use intellectual property rights to protect their ideas; and that leading service innovators engage in international sales. We do not find evidence that external sources of information acquisition are significant in radical service product innovation. By contrast, innovation followers rely more extensively on external sourcing of knowledge and new ideas (with decreasing returns to innovation performance), and tend not to export. These findings contribute significantly to our understanding of the knowledge flows and the asymmetries in knowledge sharing in service sectors across Europe.

The UK productivity gap in the service sector: do management practices matter?

Purpose – This paper aims to contribute to the debate on the drivers of the productivity gap that exists between the UK and its major international competitors. Design/methodology/approach – From the macro perspective the paper explores the quantitative evidence on the productivity differentials and how they are measured. From the micro perspective, the article explores the quantitative evidence on the role of management practices claimed to be a key determinant in promoting firm competitiveness and in bridging the UK gap. Findings – This study suggests that management practices are an ambiguous driver of firm productivity and higher firm performance. On the methodological side, qualitative and subjective measures of either management practices or firm performance are often used. This makes the results not comparable across studies, across firms or even within firms over time. Productivity and profitability are often and erroneously interchangeably used while productivity is only one element of firm performance. On the other hand, management practices are multi‐dimensional constructs that generally do not demonstrate a straightforward relationship with productivity variables. To assume that they are the only driver of higher productivity may be misleading. Moreover, there is evidence of an inverse causal relationship between management practices and firm performance. This calls into question most empirical results of the extant literature based on the unidirectional assumption of direct causality between management practices and firm performance. Research limitations/implications – These and other issues suggest that more research is needed to deepen the understanding of the UK productivity gap and more quantitative evidence should be provided on the way in which management practices contribute to the UK competitiveness. Their impact is not easily measurable due to their complexity and their complementary nature and this is a fertile ground for further research. Originality/value – This paper brings together the evidence on the UK productivity gap and its main drivers, provided by the economics, management and performance measurement literature. This issue scores very highly in the agenda of policy makers and academics and has important implications for practitioners interested in evaluating the impact of managerial best practices.

Fiscal incentives to consumer innovation: the use of unleaded petrol in Europe

This paper explores the diffusion of unleaded fuel in eight European economies with the particular objective of evaluating fiscal incentives to consumer innovation as an instrument of technology policy. The unique diffusion patterns observed in each country reflect differing changes in the composition of the car stock and the choices of consumers with cars capable of using both leaded and unleaded fuel. Data restrictions limit the detailed analysis to the second of these two issues. Estimating a consumer diffusion model using Error Correction techniques the results indicate that the main driving forces (apart from changes in the composition of the car stock) have been country specific trend terms that reflect changing tastes and learning. In general, fiscal incentives have not played a major role in the diffusion process. We attribute this to the limited extent of these incentives and argue that given the estimated elasticities larger incentives would have generated a much more significant impact. Other policy conclusions are also drawn.