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Editor in Chief:

Bong Jin Cho (Korea, E-mail: bjcho@kmu.ac.kr)


Associate Editors
Dinah Adkins (U.S.A)
Sun Young Park (Korea)
JinHyo Joseph Yun (Korea)

Editorial Board:
Tanyanuparb Anantana (Thailand)
Dong Ok Chah (Korea)
Check Teck Foo (Singapore)
Jin Hwan Hong (Korea)
Ching Yao Huang (Taiwan)
Choong Jae Im (Korea)
Rajendra Jagdale (India)
Wen-Jang (Kenny) Jih (U.S.A)
Janekrishna Kanatharana (Thailand)
Tomoyo Kazumi (Japan)
William Walton Kirkley (New Zealand)
Hyeong San Kye (Korea)
In Lee (U.S.A)
Pui Mun Lee (Singapore)
Zhan Li (China)
Gilroy Middleton (Belize)
Karen E. Mishra (U.S.A)
Hadi K Purwadaria (Indonesia)
Saras D. Sarasvathy (U.S.A)
Enrico Plata Supangco (Philippines)
Richard White (New Zealand)
Chang Seob Yeo (U.S.A)
Yuli Zhang (China)

Richard P. Bagozzi (U.S.A)


Tan Yigitcanlar (Australia)

Hermina Burnett (Australia)


Deepanwita Chattopadhyay (India)
Daniel L. Friesner (U.S.A)
Chih-Hung Hsieh (Taiwan)
Yun Hwangbo (Korea)
Tommi Aleksanteri Inkinen (Finland)
R.M.P. Jawahar (India)
Lynn Kahle (U.S.A)
Akkharawit Kanjana-Opas (Thailand)
Phillip Kemp (Australia)
Harald F.O. von Kortzfleisch (Germany)
Abdul Aziz Ab Latif (Malaysia)
Ki Seok Lee (Korea)
David A. Lewis (U.S.A)
Xiaoming Liu (China)
Zhao Min (China)
Patricia Ordoez de Pablos (Spain)
Rosemarie Reynolds (U.S.A)
Aviv Shoham (Israel)
Zhen Wang (China)
Dong Kyu Won (Korea)
Benjamin J.C. Yuan (Taiwan)

ISSN 2071 - 1395

Asian Association of Business Incubation


Copyright2015 by AABI, All Rights Reserved

CONTENTS
Preface
Editor in Chief, Bong Jin Cho

5
Australian Innovation Ecosystem: A Critical Review of the National

Innovation Support Mechanisms


Jamile Sabatini Marques, Tan Yigitcanlar, and Eduardo Moreira da Costa

An Empirical Analysis about the Equipment-Intensive Public


Enterprise's Innovation Performances Affected by Service Innovation
Activity and Cooperation
Byoung-sun Kim, Sun-young Park, and Young-whan Nick Lee
29
Evaluating the Performance of Disaster Recovery Systemic Innovations
by Using the Data Envelopment Analysis
51
Chia-lee Yang, Benjamin J.C. Yuan, Chi-yo Huang, and Chih-neng Chang

Fueling Economic Prosperity through Incubation System: A Case Study


from an Eastern Indian Province
77
Manisha Acharya and Subhransu S Acharya

The Effect of Innovation Activities and Governmental Support on


Innovation Performance: Comparison between Innovative SMEs and
General Companies
93
Juil Kim and Sun-young Park
Publication Ethics and Malpractice Statement for the Asia Pacific
125
Journal of Innovation and Entrepreneurship

Call for Papers

133

Preface
Bong Jin Cho, Ph. D., Editor in Chief
Innovation is, we may think, more than often made by genius people, such as Edison, an
invention king, Michelangelo, an artistic genius, and Bill Gates and Steve Jobs, computer
prodigies. Professor David Burkus of Oral Roberts University, a strategic leadership expert in
innovation, claims1 that they are instead the figureheads of the strong teams, who have been
meticulously orchestrating the innovative work of their creative teams. The conditions that one
could be called as a genius require an excellent supporting team and excellent system that will
raise that genius, and incredible efforts performed by himself/herself.
For example, Michelangelo who was referred to as an artistic genius had a team with 13
highly talented artists. As well, Edison, who invented electric bulb, had the research team of
Monroe Park, and Steve Jobs also had an excellent a group of R&D team. Without a strong
support team, any of these figureheads could have not had such reputation. Not to say that the
figurehead was genius himself, rather s/he leaded the team in a creative and genius way. How
could Edison invent the electric bulb and many other inventions without his team including
Charles Bachelor and John Adams and many others? Steve Jobs and Bill Gates are known as the
inventors of the graphic computer interface; however, in reality the technology was developed by
the researchers of Xeroxs Palo Alto Research Center (PARC) in 1970. Even before that the early
prototype of this technology had been developed by Burniva Bush, an army engineer in 1945. It is
not common to invent any breakthrough at once by oneself without combination of any existing
technology and devices. In this sense, the figureheads are the leaders of creative and genius teams.
In short, innovation is about a productive combination of existing technology and devices
developed earlier with a genius as the team leader, who creatively operates the efficient system of
combinations with extraordinary hard working group of talented team members.
Invention is like a team sport such as football, rugby, basketball and volleyball as well as a
musical symphony. It is a well-known fact that artistic genius Michelangelo has worked over 20
hours a day only taking bread with some wine. He said that if they have known how hard I have
worked for painting this picture, they will never call me a genius. In the Lee Dynasty, there was
a scholar named Dasan Chung, Yak Yong who wrote more than 500 books in his life. Most of
these books had been written in his place of exile over a period of 18 years. It is believed that 25
Volume 9, No.2, 2015

books have been written in a year or two books per month for 20 years continuously. How could
this many books be written without the help of his fellow students? Of course, he was a great
scholar working hard. This is an efficient system to work forward to achieve a common objective
that the genius leader has adopted. To come up with an innovative idea might take only a
moment, but that moment is the accumulation of incredible works and intensive pursuit of
thoughts about what he/she has been working hard for a very long time.
2015 AABI General Assembly and APJIE International Conference on Innovation and
Entrepreneurship in Creative Economy was held in Korea on October 28 through 29, 2015 in
Daegu, Korea. The 2015 APJIE International Conference is focused on the innovation, Incubation,
Management of Technology and Service Innovation and Marketing in Creative Economy.
The main discussion of the conference is focused on investigating the main contributing
factors of innovation and entrepreneurship in creative economy with the performances affected by
the contributing factors. The APJIE Desk selected five papers, among the submitted 12 papers
from the conference, through a blind peer-review process.
The first paper introduces and reviews Australian innovation ecosystem for the national
innovation support mechanism. The second one focuses on the equipmentintensive public
enterprises innovation performance affected by service activity and cooperation. The third paper
is about the evaluating the performance of disaster recovery systemic innovations by using the
data envelopment analysis. The fourth paper is on the topic of fueling economic prosperity
through incubation system with a case study investigation from an Eastern Indian province. The
last paper covers the effect of innovation activities and governmental support on innovation
performance. The APJIE Desk is most grateful to the authors of these five papers for their
contribution to the journal with their quality submissions. We believe our readers all across the
globe will enjoy reading these papers.
The APJIE Desk also cordially offers our special thanks to AABI (president Yeung-Shik
Kim), KOBIA (president, Hyeong-San Kye), ISBA (president, Rajendra Jagdale) and STIC
(president, Zhen-Hong Zhu, president-elect of AABI) for their financial support for the
publication of the APJIE by the Emerald Publishing House in 2016 through 2018.
Thank you!

Source: An interview with professor David Burkus by the reporter HyeHoon Lee in London. From the excerpt by Dr,
Kwang Lee, professor emeritus, Keimyung University, Daegu Korea.

Asia Pacific Journal of INNOVATION AND ENTREPRENEURSHIP

Australian Innovation Ecosystem: A Critical Review of


the National Innovation Support Mechanisms
Jamile Sabatini Marques, Tan Yigitcanlar,
and Eduardo Moreira da Costa

Abstract
Innovation is understood as the combination of existing ideas or the generation of new
ideas into new processes, products and services, and widely viewed as the main driver of growth
in contemporary economies. In the age of the knowledge economy, successful economic
development is intimately linked to a countrys capacity to generate, acquire, absorb, disseminate,
and apply innovation towards advanced technology products and services. This development
approach is labelled as knowledge-based economic development and highly associated with a
capacity embodied in a countrys national innovation ecosystem. The research reported in this
paper aims to critically review the Australian innovation ecosystem in order to provide a better
understanding on the potential impacts of policy and support mechanisms on the innovation and
knowledge generation capacity. The investigation places Australias innovation system and
national-level innovation support mechanisms under the microscope. The methodology of the
study is twofold. Firstly, it undertakes a critical review of the literature and government policy
documents to better understand the innovation policy and support mechanisms in the country. It,
then, conducts a survey to capture Australian innovation companies perceptions on the role and
effectiveness of the existing innovation incentive programs. The paper concludes with a
discussion on the key insights and findings and potential policy and support directions of the
country to achieve a flourishing knowledge economy.

Key words: Innovation; innovation ecosystems; national innovation systems; incentive


programs; knowledge economy; knowledge-based economic development; Australia.

Visiting Doctoral Researcher, School of Civil Engineering and Built Environment, Queensland University of
Technology, 2 George Street, Brisbane, QLD 4001, Australia, Tel: +61.7.3138.9124, E-mail: jamilesabatini@gmail.com

Corresponding author, Associate Professor, School of Civil Engineering and Built Environment, Queensland University
of Technology, 2 George Street, Brisbane, QLD 4001, Australia, Tel: +61.7.3138.2418, E-mail: tan.yigitcanlar@qut.edu.au

Professor, Engineering and Knowledge Management, Federal University of Santa Catarina Campus Universitrio,
Trindade, CEP 88040-900, Florianpolis, SC, Brazil, Tel: +55.48.3721.2449, E-mail: educostainovacao@gmail.com

Volume 9, No.2, 2015

1. Introduction
Innovation basically means changing the way we do things (Zhao, 2005; Pancholi et al.,
2015). Australias economy is at significant risk due to its lack of innovation-driven industries.
This includes those sectors related to information and communications technologies (ICT),
sciences, creative industries (e.g., media- and design-based industries) and others that rely on high
levels of knowledge and human capital. It is widely accepted that innovation has a significant
influence upon economic growth (Porter, 1990; Glaeser, 2011; Caragliu & Nijkamp, 2014; Romer,
2014). It is estimated that innovation can boost economic growth by as much as 50% (OECD,
2010). However, Australia currently struggles to capitalise on the innovation opportunity and
heavily relies on knowledge and innovations generated overseas (OECD, 2012). This poor
performance is evident in the recent Global Competitiveness Index, where in the innovation
category Australia only ranks 19th out of 34 OECD countries (WEF, 2014). Compounding the
lack of innovative industries, there is limited industry diversity and an overdependence on
commodity exports in the country. This condition creates a significant risk to Australias mediumand long-term productivity growth and the sustainability of its economy (DoIS, 2013).
Recognising these challenges, the Australian government has recently called for a new agenda for
industry innovation and competitiveness (Commonwealth of Australia, 2014).

Although since the 1990s Australian government has prepared a number of policy
initiatives for seeking to diversify economic activities and improve the use of innovation as a tool
to achieve global competitiveness (Yigitcanlar et al., 2008a, 2008b), the strength in the resourcebased economy held back most of these efforts to establish robust knowledge economy
foundations in the country. Australia, especially during the latest mining and energy boom era
(2005-2013)due to heavy demand on Australian iron, coal, uranium, and gaswas one of the
worlds fastest growing economies. During this boom period, a confluence of events has boosted
world mineral prices and mining investments. This has significantly increased the citizens
purchasing powerraising per capita household disposable income by 13% and real wages by
6%, and decreasing unemployment by 1.25 percentage points. The large volume of export
performance achieved during this period has impacted Australian economy to grow faster
(Downes et al., 2014).

Australia, today, invests and supports science, technology and innovation (STI) modestly.
Consequently the export of new technologies is insignificantonly producing 3% of world
knowledge, and heavily relying on innovations generated overseas (Commonwealth of Australia,
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Asia Pacific Journal of INNOVATION AND ENTREPRENEURSHIP

2014). However, the end of the mining and energy boom redirected the attention of government to
diversification of the economy and investing on other options to support the innovation ecosystem
in the country. Almost in consensus Australian scholars advocate that the only way to sustainable
growth of the countrys economy is to increase individuals and businesses competitiveness levels
(see Enright & Petty, 2013). This is to say, with policy and support mechanisms well designed
and distributed, such as in Finland (see Satarauta, 2012), Australian entrepreneurs will be able to
enjoy the opportunities created by the global knowledge economy. Otherwise, Australias global
competition in the era of the knowledge economy may be harmed. With this idea in mind, in the
2014-2015 fiscal year the government allocated a budget of about $9.2 billion for supporting STI
education and R&D (for a detailed breakdown see DoIS, 2015). The budget is distributed through
the Commonwealth Governments Department of Industry and Science. This department is also in
charge of the development of the Australian innovation system (AIS), which an open network of
public and private organisations that produce and disseminate knowledge and practices that add
economic, social or environmental value to Australian products and services (DoIS, 2014).

Against this background, the study aims to provide a deeper understanding of the role and
effectiveness of existing policy and support mechanisms on Australias innovation and knowledge
generation capacity. The research scrutinises Australias innovation ecosystem thoroughly by
reviewing the literature and government policy documents, and surveying Australian innovative
companies. The study concentrates on the national scale, and undertaking explorations at the state
and local government level policy and incentive programs are beyond the scope of this research
that is a limitation of the study. The results of the review and analysis generate insights on the
innovation policy and national-level innovation support instruments along with Australian
innovation companies perceptions on the innovation incentive programs. Furthermore, the
findings pinpoint potential policy and support directions of the country to achieve a flourishing
knowledge economy performance.

2. Australian Innovation Support Programs


Australia was ranked as the 12th largest economy in the world with an estimated GDP of
around $1.5 trillion in 2014, and the 6th largest country with an area of over 7.5 million km2.
Amongst the developed countries, Australia positioned itself 5th in terms of its per capita income,
and took the 2nd position in the 2013 Human Development Index (HDI). On the one hand,
Australia is relatively disadvantaged globally due to its small population of slightly under 24
million people making it only the 51st most populated nation. This population size brings
Volume 9, No.2, 2015

limitations for the consumption economy and talent base of labour force. However, with
immigration policies, particularly the skilled migration scheme, Federal government targets to
support the required talented workforce and population increase. On the other, a reason for
Australias such a high ranked position was that about 60% of productivity growth in the country
was driven from intangible capital investmentthat is skills development, design and
organisational improvements and spill over effects. However, when compared to the other OECD
member countries, Australians are more likely to invest on machinery and equipment than
investing on intangibles (OECD, 2014). The main reason is that innovation in Australia is
generally practiced as concentrated efforts focusing on consolidating the competitive advantages
of sectors such as mining and agriculture, as opposed to investments on ICT, biotechnology,
nanotechnology and so on (Martinez-Fernandez, 2010). In other words, so far no other industry in
Australia has achieved a greater significance in economic development as much as mining and
agriculture. Particularly mining industries have built a national infrastructure throughout the
country for more than a century and Australias mining boom has produced generations of mining
technology services companies. Despite this innovation focus, one of the strengths of Australia is
the ability to rather quickly transform its innovation governance and legislation systems in order
to be at par with the world trends (OECD, 2015). With such capability at the end of the mining
and energy boom Australia still has the potential to make its transformation into a knowledge
economy.

2.1 Governance of Innovation in a Nutshell


In Australia, a number of governmental organisations play a pivotal role in delivering the
innovation agenda. In an attempt to better understand how Australian innovation system works,
these organisations that have been providing innovation incentives to companies are introduced to
understand their roles in delivering the countrys innovation policy.
The Department of Industry, Innovation and Science (DIIS): The mission of this
administrative office is to establish the connections between businesses, research institutes,
tertiary education bodies, government departments, and the society at large. Its main objective is
to sponsor and support productivity growth in Australia by means of developing human capital.
This department has seats in several national innovation committees to promote these networks,
according to the Australian Public Services Innovation Action Plan. The plan focuses on the
following four action areas: (i) Developing an innovation consciousness with the Australian
public services; (ii) Building innovation capacity; (iii) Leveraging the power of co-creation, and;
(iv) Strengthening leadership so there is courage to innovate at all levels. The aims of this plan
6

Asia Pacific Journal of INNOVATION AND ENTREPRENEURSHIP

are: (i) Recognise innovation as a process that can and should be systematically pursued; (ii)
Involve the users and citizens in the design and development of services and policies; (iii) Pursue
open processes that encompass a wide range of experience and expertise; (iv) Generate results
through involvement utilising partnerships and collaboration; (v) Facilitate the creativity inherent
in organisations, and welcome tests, pilots and experiments; (vi) Recognise risk as an inherent
part of innovation; (vii) Promote and celebrate innovation successes; (viii) Acknowledge that not
all innovation will succeed, but we can also learn from failures; (ix) Use procurement to spur the
generation and uptake of innovative solutions, and; (x) Be accountable for delivering and
implementing the plan and successor initiatives (see http://www.industry.gov.au).
The Australian Research Council (ARC): ARC is the main office of the Australian
government for the investment on research and training in all fields of science, including social
and human sciences. It is also responsible for mediating the relation between researcher
communities and the industry, government, non-profit organisations and the international
community. The ARC aims to integrate researchers and the industry. ARC manages the following
programs as major incentive sources to develop knowledge, associated with research scholarships
for the formation of researchers, and with the universities: (i) The Linkage Projects scheme aims
to set up or develop strategic long-term research alliances between higher education institutions
and other organisations, including the industry and users; increases the scope and focus of
researches in National Research Priorities; sponsor opportunities for researchers to develop
internationally competitive researches in cooperation with organisations out of the higher
education sector; and produce a national network of world-class researchers to meet the broadest
demands of the Australian innovation system; (ii) The National Competitive Grants Program
(NCGP) is one of Australias major investment mechanisms for R&D. This program grants
scholarships for basic and applied research, apart from funding research training in all academic
areas except clinical medicine and dentistrythe National Health and Medical Research Council
(NHMRC) looks after this area. (iii) The Excellence in Research for Australia (ERA), in turn, is
the program for evaluating the quality of researches conducted by the higher education institutions
of Australia. The ERA aims to guarantee the excellence of the conducted investigations. This
office publishes, for example, a comparison between the levels of researches carried out in the
country with international standards in each field (see http://www.arc.gov.au).
The Commonwealth Scientific and Industrial Research Organisation (CSIRO): CSIRO
aims to offer innovative solutions to the industry, society and the environment through the
development of cutting-edge science. The organisation employs over 6,500 workers and
researchers, distributed into 57 centres all across Australia, which dedicate to four programs: (i)
Volume 9, No.2, 2015

The national research flagships are multidisciplinary partnerships for large-scale research that use
the international-level expertise to serve the national priorities. The program commenced in 2003
and is one of the biggest efforts Australia has ever put into researching, with a total investment of
over $1.5 billion in the fiscal year of 2010-2011. The main sectors that has received support are:
climate adaptation, minerals down under, energy transformed, preventive health, food futures,
sustainable agriculture; future manufacturing, water for a healthy country, wealth from oceans and
light metals. (ii) The core research and services program comprises a series of research portfolios
that do not match the flagships. In 2010-2011, five CSIRO research groups managed 12 portfolios,
in the fields of energy, environment, food, health, life sciences, information sciences,
manufacturing, materials and minerals. (iii) The science outreach: education and scientific
publishing is a set of science education programs for primary and secondary school students and
teachers, as well as the general public. The maintenance of the CSIRO Discovery Centre in
Canberra is part of this program, and; (iv) National research infrastructure: national facilities and
collections is the CSIRO program responsible for the administration of two kinds of research
infrastructure: national research facilities and national biological collections. Apart from these
infrastructures, CSIRO comprises 30 other research installations, such as the Australian
Resources Research Centre (in Perth) and the High Resolution Plant Phonemics Centre (in
Canberra), and more than 30 collections of national importance, including the national tree seed
collection, the national soil archive and the cape grim air archive (see http://www.csiro.au).
The Chief Scientist for Australia: Apart from a large number of researchers focusing on
various R&D activities, Australia also has an Australian Chief Scientist, who provides high-level
independent counselling to the Prime Minister and other ministers on the issues related to STI.
The person in position, currently Professor Ian Chubb AC, is a defender of Australian science
worldwide and disseminates to the community and government the importance of STI, research
and empirical evidence. The Chief Scientist for Australia is also a spokesman for science to the
public in general, with the aim to promote the understanding, contribution and pleasure of science
as well as evidence-based reasoning (see http://www.chiefscientist.gov.au).
The Australian Taxation Office (ATO): As being the government taxation office ATO is
the main office that regulates the incentive programs related to innovation in the country (ATO,
2015). The incentives go through this taxation office takes place through tax reductionsi.e.,
R&D Tax Incentive Program (see https://www.ato.gov.au).
The Innovation Australia: Innovation Australia is an independent organisation created to
help the Australian government to manage its innovation programs and risky investment plans
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Asia Pacific Journal of INNOVATION AND ENTREPRENEURSHIP

designed to support industrial innovation through a number of programs: Clean Technology Food
and Foundries Investment Program; Clean Technology Innovation Program; Clean Technology
Investment Program; Climate Ready; Green Car Innovation Fund; Re-Tooling For Climate
Change; Renewable Energy Development Initiative (REDI); R&D Tax Concession (including the
R&D Tax Offset and 175% Premium Incremental Tax Concession); R&D Tax Incentive;
Commercialisation

Australia

Program

(CA);

Commercialising

Emerging

Technologies

(COMET); Commercial Ready (including Commercial Ready Plus); Industry Cooperative


Innovation Program (ICIP) and; R&D Start Program. There are also other similar Australian
venture capital programs including: Innovation Investment Fund (IIF); Innovation Investment
Follow-on Fund (IIFF); Early Stage Venture Capital Limited Partnerships (ESVCLP); Venture
Capital Limited Partnerships (VCLP); Pooled Development Funds (PDF); Pre-Seed Fund (PSF),
and; Renewable Energy Equity Fund (REEF) (see http://www.business.gov.au/grants-andassistance/innovation-rd/InnovationAustralia/Pages/default.aspx).
The Prime Ministers Science, Engineering and Innovation Council (PMSEIC): The
Council is an eminent advisory body for counselling the government about scientific and
technological developments. It is presided by the Prime Minister and composed by ministers, the
Chief Scientist for Australia and a handpicked group of eminent experts. In 2009, Australian
government launched, so-called Powering Ideas: An Innovation Agenda for the 21st Centurya
10-year reform agenda with the aim of making Australia more competitive. This innovation
agenda is based on the assumption that there are two action fronts to strengthen the Australian
innovation system: strengthening its constituents (businessmen, public managers, researchers,
workers, and consumers) and strengthening the connections among these parties. With this in
mind, the Australian government has adopted seven National Innovation Priorities to guide its
innovation policies. All priorities are considered equally important and complement the
Australian National Research Priorities (see http://www.ausinnovation.org/articles/poweringideas.html).
Public research funding to support high-quality research that addresses national
challenges and opens up new opportunities.
Building a strong base of skilled researchers to support the national research effort in
both the public and private sectors.
Incentive to cutting-edge industries, securing value from the commercialisation of
Australian R&D.
More effective dissemination of new technologies, processes, and ideas to increase
innovation across the economy, with a particular focus on SMEs.
Volume 9, No.2, 2015

Encouraging a culture of collaboration within the research sector and between


researchers and industry.
More involvement of Australian researchers and businesses in international
collaborations on research and development.
Joint work of the public and private sectors in the innovation system to improve
policy development and service delivery.

The Australian government targets to establish its National Innovation System until 2020,
in which: (i) The country clearly articulates national priorities and aspirations to make the best use
of resources, drive change, and provide benchmarks against, which to measure success; (ii)
Universities and research organisations attract the best minds to conduct world-class research,
fuelling the innovation system with new knowledge and ideas; (iii) Businesses of all sizes and in
all sectors embrace innovation as the pathway to greater competitiveness, supported by
government policies that minimise barriers and maximise opportunities for the commercialisation
of new ideas and new technologies; (iv) Governments and community organisations consciously
seek to improve policy development and service delivery through innovation, and; (v)
Researchers, businesses and governments work collaboratively to secure value from commercial
innovation and to address national and global challenges, and to measure the progress of
Australian

innovation

system

concerning

priorities

and

objectives

(see

http://www.ausinnovation.org/articles/powering-ideas.html).

2.2 Innovation Incentive Programs


Under the leadership of the aforementioned organisations innovation is supported through
a number of innovation incentives schemes. These schemes form the backbone of the Australian
innovation support mechanism. The incentive programs can be accessed through a single
government portal named Business. On this portal, entrepreneurs find the necessary information
to start a business as well as hints to guarantee the success of their enterprise (see
www.business.gov.au/Pages/default.aspx). The portal has a grants and assistance area including
several incentive programs. These programs are aimed at businesses of various sizes, in order to
generate productivity, innovation, competitiveness, and create new jobs. These programmes also
contain incentives for R&D, support for small businesses, tax and duty concessions, and
assistance for industries in transition. They support invention and technology development in
businesses by fostering collaboration between industry and researchers. The main incentive
programs include the followings.
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Asia Pacific Journal of INNOVATION AND ENTREPRENEURSHIP

The R&D Tax Incentives Program: This program the most popular one in the country, is a
broad-based, market-driven program accessible to all industry sectors. It provides a targeted tax
offset to encourage more companies to engage in R&D and help businesses offset some of the
costs of doing R&D. The program aims to help more businesses do R&D and innovate. It is a
broad-based entitlement program. This means that it is open to firms of all sizes in all sectors who
are conducting eligible R&D (see http://www.business.gov.au/grants-and-assistance/innovationrd/RD-TaxIncentive/Program-Information/Pages/default.aspx).
The Entrepreneurs Program: This program is Australian Governments major initiative to
promote business competitiveness and productivity at the firm level. It is part of the Australian
Governments new industry policy provided for in the Industry Innovation and Competitiveness
Agenda. This Agenda is part of the Economic Action Strategy of the Australian Government. It
unites and develops other economic reforms in order to foster Australias strengths and promote
business opportunities (see http://www.business.gov.au/advice-and-support/EIP/Pages/default.aspx).
The Entrepreneurs Infrastructure Program: This program counts on a national network of
over 100-experienced private sector advisers and it offers support to businesses through three
components: (i) Business management, which provides support for business to improve and grow;
(ii) Research connections, which promotes the collaboration of SMEs with the research sector as a
way to develop new ideas with commercial potential, and;(iii) Accelerating commercialisation,
which helps entrepreneurs, researchers, start-ups and businesses face key challenges when trading
new products, processes and services. The program uses quality facilitators and advisers with
expertise in the industry, to ensure that businesses receive all necessary information to better their
competiveness and productivity. It focuses primarily on providing informationrather than
financial assistanceso entrepreneurs can find solutions to their problems. The support offered to
businesses includes advice from experienced people from the private sector, co-funded grants to
trade new products, processes and services, funding to help businesses grow, and connection and
collaboration

opportunities

(see

http://www.australianbusiness.com.au/entrepreneurs-

infrastructure-programme).
The Industry Skills Fund Growth Stream: The $476 million Industry Skills Fund is a key
component in the Industry Innovation and Competitiveness Agenda of the Australian Government
and will provide up to 200,000 training places and support services over the next four years. The
fund prioritises SMEs, including micro businesses, and is delivered through the single business
service, which favours the access to essential information for all Australian businesses. The fund
offers assistance to the industry so it can invest in training and support services, as well as
Volume 9, No.2, 2015

11

develop innovative training solutions. The fund helps forming a highly skilled workforce that can
have access to new opportunities due to business growth, and that can adapt to rapid technological
change (see http://www.business.gov.au/grants-and-assistance/Industry-Skills-Fund/Pages/default.aspx).
Innovation and R&D Program R&D Tax Incentive: It aims to boost competitiveness and
improve productivity across the Australian economy by: (i) Encouraging industry to conduct
R&D that may not otherwise have been conducted; (ii) Providing business with more predictable,
less complex support, and;(iii) Improving the incentive for smaller firms to engage in R&D. The
R&D Tax Incentive replaces the R&D Tax Concession for R&D in income years commencing on
or after 1 July 2011. The R&D Tax Concession continues to be administered for R&D in income
years commencing prior to 1 July 2011.The R&D Tax Incentive provides benefits in two core
components (AusIndustry, 2012). A 45% refundable tax offset (equivalent to a 150% deduction)
for eligible entities with a turnover of less than $20 million per annum, provided they are not
controlled by income tax exempt entities, and; A non-refundable 40% tax offset (equivalent to
133% deduction) for all other eligible entities. Unused non-refundable offset amounts may be able
to be carried forward to future income years (see http://www.business.gov.au/grants-andassistance/innovation-rd/Pages/default.aspx).
In order to give special attention to the technology sector and considering that the tax
benefit is open to all sectors, software is subject to the same eligibility tests as other forms of
R&D, with the exception of certain software activities, which are excluded from being a core
R&D activity. This exclusion covers activities related to the development, modification or
customisation of software where the software is for the dominant purpose of internal
administration by the entity (or connected entities or affiliates) for which it was developed,
modified or customised. Software for internal administration includes management information
systems and enterprise resource planning software that is for use in the day-to-day administration
of a business. The software exclusion does not apply to software developed in-house that is of an
applied nature, forming an integral part of an electrical or mechanical device (such as home
appliances or industrial equipment). In general only R&D activities conducted in Australia or the
external Territories qualify for the R&D Tax Incentive. However in certain circumstances, R&D
activities conducted overseas may also qualify. For example, a company intending to claim a tax
offset for R&D activities conducted overseas must apply to Innovation Australia for a decision
(called a finding) about the eligibility of these overseas activities. Innovation Australia can issue
a finding that

overseas activities are eligible

for the R&D Tax Incentive (see

http://www.business.gov.au/grants-and-assistance/innovation-rd/RD-TaxIncentive/Pages/default.aspx).

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Asia Pacific Journal of INNOVATION AND ENTREPRENEURSHIP

The government also provides financial support for private firms to conduct innovation
projects. Nevertheless, there is less evidence that such investmentabout $1 billion every year
is justified by the extra innovation it helps produce. The largest government support for private
sector innovation is the R&D Tax Credit. The largest 3% of innovative firms take in 60% of the
creditover $1 billion per year. Nonetheless, there is little evidence that this tax credit
substantially increases the amount of actual R&D activity in large firms. By contrast, there is
good evidence that improving the framework conditions for innovation, particularly by reducing
the corporate tax rate, would have a significant impact on innovation in the long run. A lower
corporate tax rate encourages foreign direct investment (FDI), which in turn increases innovative
activity and encourages the diffusion of ideas from other countries. Australia would probably see
more innovationand increase living standards accordinglyif the R&D Tax Credit for large
firms and much of the direct support for private firm innovation were redirected into funding a
reduction in the corporate tax rate of up to 1.5%.Whereas governments should support innovation,
they should ensure public money is invested where it makes the biggest difference (see
http://www.business.gov.au/grants-and-assistance/innovation-rd/RD-TaxIncentive/Pages/default.aspx).

3. Australian Firm Awareness on Incentive Programs


The study undertook an online survey exercise to capture Australian innovation
companies perceptions on the role and effectiveness of the innovation incentive programs. The
survey contains six key questions and circulated through Survey Monkey online survey tool (see
https://www.surveymonkey.com) to the directors of Australian technology and innovation
companies. The survey prepared by the authors was sent out to the firms through email with help
from the Australian Information Industry Association (AIIA) and the Cooperative Research
Centres Association (CRCA) between May and August 2015. Contact details of the targeted
companies were obtained from the Australian Business Directory (see http://abdo.com.au). In
total 75 valid responses received, during the four month period that the survey was open, out of
surveys sent to 379 companies (19.79% response rate). The responses to survey questions are
presented below.
Q1. Are you aware that Australia has an Industry Innovation and Competitiveness
agenda? Of the 75 firms that responded to the survey, 38 claim to know the governments agenda
and 37 of them state that they are unaware of this agenda (see [Table 1]). Although the number is
balanced, considering that it is a relevant issue for the development of innovative firms, firm
owners should be more aware of governmental programs and seek more information about them.
It seems to be that the Australian government does not make much effective use of trade
Volume 9, No.2, 2015

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associations to disseminate its programs and plans. The general understanding of the government
officials is that governments website is a good enough source of information. They seem to
believe that it is the businessmens duty to find out about programs and support to which they are
entitled.

[Table 1] Results of the Survey Question 1

Q2. Are you aware that there are refundable, non-refundable and subsidised resources
that your business can use for innovation and R&D? Out of 75, 74 firms responded this question.
Amongst them 47 claimed to know about the available resources, whereas 27 declared not
knowing about the incentive lines (see [Table 2]). The number of firms (63.51%) that know about
the availability of Federal incentive programs to innovation is relevant, considering that Australia
makes little use of trade associations and barely conducts presentations to firms on this topic. The
survey findings show that, although the number is relevant when compared to the little effort put
on promotion, the government must focus on spreading the word about its sources of incentive
and public policies.

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[Table 2] Results of the Survey Question 2

Q3. Has your company ever used these types of resources for innovation and R&D? In
total 68 firms answered this question, and the alternatives listed Federal programs of incentive to
innovation (see [Table 3]). It was also possible to check the answer other with an option to
specify the program the entrepreneur had used. More than half of the firms that answered the
questionnaire (54.41%) do not use the incentive sources, including tax incentives, which is a
flagship of the Australian government program. R&D Taxes Incentives is the main program, used
by 35.29%; the program is considered simple and not very bureaucratic by government officials
for it can be applied for online. The EntrepreneursInfrastructure Program comes in third, used by
4.41%. This is a four-pillar line that contributes to the commercialisation of generated
goods/services. Lines such as the Linkage Projects Scheme (LPS), The National Competitive
Grants Program (NCGP), which are university-related programs, reached a very low rate of
response, 2.94% each. The Industry Skill Fund program did not produce any answer (0%). The
reason for no one choosing this program in this question is given by the Australian government
itself: since the name of the program was changed by the new administration, entrepreneurs did
not recognise it when it was renamed (formerly known as National Workforce Development
Program).This question gave respondents the choice to include other incentive lines in the field
other/specify. Nine answers came up: Export Market Development Grants/Austrade (EMDG),
Accelerating Commercialisation, and Commercialisation Australia Early Stage Grants, state
programs such as the Canberra Innovation Network, Commercial Ready and Climate Ready.
These programs were not originally listed as alternatives in this question since they are not
Federal programs with focus on innovation.

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[Table 3] Results of the Survey Question 3

Q4. If you have tried but have not been successful, please indicate the reasons. Although
Australia is not a very bureaucratic countryranked 11th less bureaucratic country in the world
entrepreneurs believe that government programs are bureaucratic. The alternative complex
application process/bureaucracy was checked by 47.06% of the respondents. 34 firms answered
this question (see [Table 4]).Two other answers to this question are worth mentioning, each one
highlighted by 23.53% of the respondents: the lack of personnel to prepare the application and the
high cost in application preparation. The cost of labour in Australia is very high and the incentive
program is not attractive since Australians believe the process is highly bureaucratic. The lack of
information about the programs and the lack of guarantees were highlighted by 17.65% of the
respondents. The reasons presented in the others, with 35.29% are: (i) Registered Research
Agency went into administration, and ATO penalised my application; (ii) Each successive
program gets smaller and smaller and the return on investment is such I cannot be bothered
anymore; (iii) Have not tried; (iv) No time to apply as being a small start-up company; (v) Not
tried; (vi) Commercialisation Australia need for funding criteria is hard to meet; (vii)
Requirements on matching funding are impossible to meet. You have to show you have
matching funds but why the funders of matching funds cannot meet the whole cost. You cannot
use future sales for matching funds; (iix) Unaware of what options were available and how to
prepare a successful submission; (ix) 9 of them not applied for; (x) Not know, and;(xxi) I have not
tried.

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[Table 4] Results of the Survey Question 4

Q5. For what purpose is your firm interested in this type of resource? This question is
useful to guide legislators that design public policies, since it shows the actual current needs of
the firms. This question was attended by 67 of the surveyed firms (see [Table 5]).Support for
R&D tops the list of needs (with 62.69%); Marketing, Sales and Fairs activities come in second
that demonstrates the importance of support to the commercialisation of goods. This information
reinforces innovative firms high dependency on human capital and know-how. These firms differ
from the traditional industry, whose capital is guaranteed by machinery and equipment. Therefore,
in the innovation and technology sector, talented labour is specialised and highly costly.
Incentives to the R&D of products and services are important in order to guarantee the continuous
process of innovation in the firm, very often anticipating the needs of the market. Of all
respondents, 46.27% highlighted the incentive to commercialisation. Internationalisation comes in
third (with 32.84%). This is an interesting fact that this alternative completes the top two
demandssince Australia is a vast country with little population, internationalisation is an
important aspect for sending products and services out to foreign markets. Australia has no
dedicated development bank (such in the case of many developing nations), so businessmen turn
to investment funds for financial resources. Inflation rates are low in the country and traditional
banks operate at low interest rates. Working capital comes in fourth in the survey; it was selected
Volume 9, No.2, 2015

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by 29.85% of the respondents. The reasons presented in the others, with 4,48% are: (i) Innovation
and entrepreneurshipno one calls it 'R&D' in start-ups; (ii) Developing intellectual property in
emerging areas such as cloud technologies, and;(iii) Engaging young innovators and students.

[Table 5] Results of the Survey Question 5

Q6. Please indicate on which incentive programs you would be interested in applying in
future. This is another answer that can guide the Federal government and contributes to designing
policies, since it demonstrates the firms expectations towards the incentive lines they intend to
use in the future. In total 62 firms answered this question (see [Table 6]). R&D Tax Incentive is
still the governments master program, according to the results of question 3. Answered by
54.84% of the respondents, Entrepreneurs Program comes in second, although this program was
selected by 4.41% in question 3. This shows that it is little used at the moment but entrepreneurs
are interested in knowing it better. Private Funds comes next, selected by 30.65%, which shows
that it is possible to integrate investment funds and firms through trade associations, by organising
Seed and Venture Forums. As mentioned earlier, in question 3 the program focused on Skills
Funds was not used widely (0% of responses) because the program name was changed by the new
administration. However, since 25.81% of the firm owners highlighted this answer, it
demonstrates an interest in using it in the near future. The same occurs with the Australian
Research Councils programs that reached a 25.81% rate of interest and demand by firm owners.
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Nevertheless, these days it is used by only 1.47%.A reasonable number of entrepreneurs (12.9%)
did not show interest in having access to incentive lines. It can be noticed that the firm owners or
managers have not been seriously considered the benefit of incentive, through programs such as
the R&D Tax Incentive. The main reason for this is that them not being able to spare time from
their business and clients to allocate time for an application preparation. The open-ended feedback
section of the question, other/specify, originated 12.9% of suggestions of state programs,
commercialisation and exportation, as well as feelings about the programs and disbelief in the
government: comments were, as written by respondents: (i) Accelerating Commercialisation,
QLD State Grants; (ii) Would not bother unless totally reformed to take into account available
resources of start-ups; (iii) The Entrepreneurs Program is hopeless and full of all the wrong
organisations; I am not the person responsible for this within the company, so I am not able to
speculate; (iv) I would love this information to be disseminated properly; (v) Commercialisation
Australia; (vi) Too much bureaucracy and therefore a waste of time. Also, I do not trust the
government to choose whom to give the grant to. Would only be interested in automatic selfselection grants; (vii) EMDG, and; (iix) Do not know enough about them to decide.

[Table 6] Results of the Survey Question 6

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4. Conclusions and Discussion


The review of the literature indicates that throughout the history knowledgeoutcome or
product of intellectual capitalhas always been an important driver of growth and development
(Carrillo et al., 2014). In the age of knowledge economy, the role of knowledge generation and
innovation has even become more prominent (Pancholi et al., 2014). Today innovation through
generation of new marketable knowledge is a primary driver of growth, both growth of nations
and growth of businesses (Brown, 2010; Drucker, 2014). Especially, today rising expectations
about future demand for new technologies increase the incentives for investments in innovation
by enlarging payoffs to successful innovations (Nemet, 2009).At present, many governments
around the world that aim to replicate the success of innovation nationse.g., the USA, Japan,
Germany, Finland, Israel, Estonia, and Koreaare making sure innovation activities are
incentivised and a sound innovation ecosystem is established (Wallsten, 2000; Coates & Holroyd,
2007; Kao, 2007; Wandersman et al., 2012; Breznitz & Ornston, 2013; Makkonen & Inkinen,
2014). As underlined by Maxwell (2015),firms perform innovation in order to reduce risk, reduce
costs, increase market share, increase margins and create new market opportunities, which leads
to increased profits and enterprise value. Furthermore, today, it is highly rare that a firm can
flourish or even survive without continuous innovation (Maxwell, 2015).
The review of the Australian innovation support schemes reveals that Australia has the
required basic foundation and infrastructure for the governance of the innovation ecosystem.
However, a closer and deeper look into individual policy and support programs along with the
results of the Australian technology company surveys reported in this paper reveal the following
invaluable insights on the opportunities and constraints of the Australian innovation ecosystem.
Firstly, both Federal and State levels policy documents indicate that innovation is not at
the forefront of the development agenda. Furthermore, there is no policy targeting to raise
awareness within the public and business circles to invest in the innovation economy. Australia
needs to communicate what innovation is, and start a national conversation, involving more
people, government, associations, universities and the broader society. The investigation has
shown that half of the innovative companies are not involved with the innovation conversation
and this is a serious problem. For instance, some of the successful initiatives or projects can be
used as communicating systems to create a culture of innovation and performance (see
Johannessen & Olsen, 2011).
Secondly, almost all of the universities in the country are public universities; nevertheless,
their research activities are not well integrated with companies and the innovation sector and their
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Asia Pacific Journal of INNOVATION AND ENTREPRENEURSHIP

priorities. Most of the Australian universities have no real incubators; as they are seen as white
elephanta business or investment that is unprofitable and is likely to remain unprofitable
(Roberts, 1996).Universities, with financial support from government, and collaboration with
industry and businesses, should play a more active role in developing knowledge and innovation
spacessuch as incubators, accelerators, and knowledge precinctsfor innovation in the country
to take off. This is to say, the way of conducting research at the universities has to change and
evolve into collaborative activities with government, industry and communityi.e., quadruple
helix model research partnership (Alfonso et al., 2012). Currently available incentive programs
are not aligned well with the universities, communities and companies needs. The required
mechanisms are not in place for university professors and researchers to engage and work closely
with businesses for new product, process or service development; rather the system motivates and
awards scholars for their academic writings. Creatively employing funding to universities in order
to support innovation is needed (see Millard & Hargreaves, 2015).Investigation of Finnish model
innovation collaboration would create some pathways for Australia (see Uotila et al., 2012).
Thirdly, Czarnitzki and Lopes-Bentos (2014) research on the effectiveness of innovation
support in Germany finds that innovation subsidies increase innovation intensity and performance.
However, in order to apply and receive the funding entrepreneurs need to know about available
schemes. This can be challenging at times. For instance, it is common in Australia that with every
new administration in office many of the departments are restructured. This restructuring also
applies to the innovation support schemes. These rather frequent changes leave entrepreneurs with
confusion and not much knowledge about the new innovation incentive programs. For those who
are keen to apply, the application process causes spending longer time in search of to find the new
schemes and their eligibility to apply. The outcome of these frequent changes is entrepreneurs
lack of knowledge on the innovation support programs; and, therefore, lesser applications to the
programsfor instance the Industry Skills Program.
Fourthly, today, the way firms are chosen to receive support is not transparent to
entrepreneurs. Some are chosen to growi.e., pick winnerswhere this model is considered as
political and to a degree biased. There needs to be more transparency at the selection criteria and
how the applications are evaluated against these criteria. Australia loses its talent and innovative
entrepreneurs to other regions of the world, such as South East Asia, Europe and North America,
where they can find more lucrative and more transparent innovation support programs. Unlike
Australia, some other governments share the risk of investment with the firm owners.
Fifthly, it can be said that the major reason of innovation failure in the country is the lack
of innovation culture and a healthy ecosystem. Australias tolerance for business risk of failure is
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21

very low, and this is reflected in the fact that there is a general reluctance of talented scientists and
researchers to make a move from the tertiary education sector to private R&D sector organisations.
For instance to support the innovation culture and knowledge-based economic development in the
country, Australia can develop new programs to attract bright minds to become entrepreneurs
similar to those in Canada and ChileQuebec First (http://www.quebecfirst.com/en/) and Start
up Chile (http://www.startupchile.org), respectivelysince attracting and retaining talented
people is directly associated with the raise in job creation and economic growth.
Sixthly, the lack or limited support to innovation in many countries, including Australia,
has led entrepreneurs to investigate new ways to support their marketable ideas. Crowdsourcing is
a new method to fill the void of funding need to innovate, especially for open innovationduring
the last few years open innovation has gained increasing attention as a potential paradigm for
improving innovation performance (see Marjanovic et al., 2012; Chebulski, 2013). This new
funding mechanisms can also be supported by Federal policies and incentives as part of the efforts
in forming a prosperous innovation ecosystem in Australia.
Seventhly, even though the importance of innovation to generate competitiveness is
acknowledged, the government confesses that currently Australias support to innovation is still
poor (see DoIS, 2014). Therefore, in addition to abovementioned insights, we conclude the paper
with some strategic suggestions for the country to advance its innovation ecosystem, and moving
economic focus from resource-based economy to knowledge economy:
Australia must develop or adopt a more informed and systematic approach for building
innovation and creativity in the country (Baum et al., 2009). This is to say; Australian
innovation system needs to be design to work more effectively, if the country really
desires to maintain the standard of living achieved during the recent resources boom
period.
Australia needs to further invest on its talent base and endogenous assets (see Lonnqvist
et al., 2014; Yigitcanlar, 2014),and work more focused to maintain its global economic
position in a world of rapidly emerging economies and tough competition. Australia can
learn from the other countries, such as the US, Germany, Singapore, and Finland
(Yigitcanlar, 2009; Yigitcanlar &Lonnqvist, 2013; Yigitcanlar et al., 2015), that are
taking risks with their entrepreneurs to further advance their innovative edges.
In order to improve the effectiveness of the Australian innovation ecosystem, the gap
between scientific research and market needs to be mapped carefully. That is getting the
right high value added products out of the brains and laboratories and placing into the
global market place. This requires further human and intellectual capitals investments in
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Asia Pacific Journal of INNOVATION AND ENTREPRENEURSHIP

the forms of financial and infrastructural support for higher education, R&D institutes,
and innovation companies particularly in the fields of STI. Rather than recently
introduced budget cuts to these critical sectors by the Federal government (Daley et al.,
2013), further support is crucially needed to establish a global competitive innovation
edge.
Lastly, the new Prime Minister Malcolm Turnbulls National Innovation and Science
Agenda is a welcome initiative, bringing hope to Australian entrepreneurs, researchers and
innovators in general. After a few years of lacking direction in this space, we might begin to see
the light at the end of the tunnel. Although, it is too early to comprehensively assess the impact
the new agenda will have on the Australian economy, one thing is certain that this initiative gives
hope that Australian economy will again accelerate and catch up with most developed digital
economies in the world (CiDE, 2015).

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Acknowledgements
The authors wish to acknowledge the financial and/or in-kind contributions of Queensland
University of Technology, Federal University of Santa Catarina, and Ministry of Education of
Brazil (CAPES-PDSE: 99999.004527/2014-03)in jointly supporting the research project.

Biographical notes
Jamile Sabatini Marques is a Visiting Doctoral Researcher at the School of Civil
Engineering and Built Environment, Queensland University of Technology, Brisbane, Australia,
and a PhD Researcher at the Federal University of Santa Catarina, Florianopolis, Brazil. Her
research focuses on government innovation incentive systems for technology company growth.
Tan Yigitcanlar is an Associate Professor at the School of Civil Engineering and Built
Environment, Queensland University of Technology, Brisbane, Australia. The main foci of his
research are clusters around three interrelated themes: Knowledge-based urban development;
Sustainable urban development, and; Smart urban technologies and infrastructures.
Eduardo Moreira da Costa is a Professor at the Graduate Program on Knowledge
Management at the Federal University of Santa Catarina Florianopolis, Brazil, and founder of the
Pi-Academy, a private company that promotes innovation for large corporations. His main
research area focuses on the development of more humane, smart and sustainable cities.

<received: 2015. 09. 11>


<accepted: 2015. 09. 27>

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27

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Asia Pacific Journal of INNOVATION AND ENTREPRENEURSHIP

An Empirical Analysis about the Equipment-Intensive


Public Enterprise's Innovation Performances Affected by
Service Innovation Activity and Cooperation

Byoung-sun Kim, Sun-young Park, and Young-whan Nick Lee

Abstract
This paper presents empirical performance improvements found as the result of the service
innovation activities in Seoul Metropolitan Rapid Transit (SMRT), which is considered as an
equipment-intensive pubic enterprise (EIPE hereunder). It also presents implications that may
be utilized in the fields of service innovation for public enterprises from the viewpoint of
Management of Technology. In trying to increase the effect of service innovations in SMRT, the
researchers assume that the same kind of efforts may be applied to many areas of Koreas
economy as a part of the recent campaign of creative economy driven by the government.
Important implications found in this study as following: First, it is necessary to build at least two
platforms for service innovation: to share technologies and to facilitate in-house communications.
Second, it is necessary to implement value-driven idea-sharing as corporate culture. Third, it is
necessary to support big data facility for service innovation as corporate policy.

Keywords: EIPE (equipment-intensive public enterprise), social infrastructure, service


innovation, innovation activity, innovation performance.

Ph.D., Instructor, Miller MOT School, Konkuk University, E-mail: subway5678@naver.com


Corresponding Author, Professor, Miller MOT School, Konkuk University, E-mail: sypark@Konkuk.ac.kr

Assistant Professor, Miller MOT School, Konkuk University, E-mail: nicklee@konkuk.ac.kr

Volume 9, No.2, 2015

29

1. Introduction
Due to economic growth, urbanization, and population increase, the social infrastructures
of the Republic of Korea have been increased rapidly. However, the government has not been able
to match up to the level of the expectations in response to ever increasing the demands because of
low budget, the lack of service standards, and continuously aging facilities. Demands for effective,
efficient, and economical facility managements and investments have been increasing. The social
infrastructure facilities are generally managed by Equipment-Intensive Public Enterprises (EIPEs
hereunder). Naturally, EIPEs have been playing prominent roles in the economy. According to
Sung, T. K. (2006), the technology innovation competence of enterprises is important not only for
their survival and business development, but also for their financial growth. He also pointed out
that the studies about service innovation are not sufficient enough to reflect the up-to-date
situation created by the rapid expansion of Koreas economy. He postulated that the reason is that
systemized databases for service innovation efforts, particularly for its service industry have never
been created and utilized.
In attempts to build such databases, Science and Technology Policy Institute, STEPI
(2010) ran a survey about the status of the overall innovation activities in manufacturing and
service industries in Korea and collected data sets hoping to help national policy-making and
research efforts for innovations. The survey was aimed to provide data sets for the purpose of
statistical analyses.
In such a background, the researchers in this study undertook an empirical analysis of the
service innovation performances and the improvements in Seoul Metropolitan Rapid Transit
(SMRT), an EIPE, which manages and operates some railroad infrastructure facilities in the
Republic of Korea. The researchers in the study gave questionnaires to the employees of SMRT,
and ran a peer evaluation survey for the service innovation activities performed by the internal
departments of the enterprise. They also ran a peer evaluation survey for the innovative
cooperation with external collaborating partners. Based on the data obtained from the surveys,
they analyzed the service innovation performances of SMRT as an example of EIPEs in Korea so
that the implications learned may be applied to others.

2. Theoretical Background and Previous Research


2.1 Theoretical Background
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Asia Pacific Journal of INNOVATION AND ENTREPRENEURSHIP

2.1.1 Social Infrastructure


Social infrastructures in general mean basic facilities that operate as the foundation of
economic activities. Social overhead capitals such as roads, airports, bridges, etc. are closely
related with economic activities and defined as infrastructures traditionally. Recently, public
facilities for sustainable living environment, such as parks, schools, and hospitals are also
included as other kinds of social infrastructures. This study focuses on SMRT, an EIPE, which
manages a social infrastructure. On the base of service innovation activity in EIPE, the effect of
performance improvement done by the activity was studied.

2.1.2 Equipment-Intensive Public Enterprise (EIPE) Defined


According to Korean Administrative Dictionary (2009) compiled by Korean Society of
Administration, an organization is defined to be a social unit with operating systems, for
specialization and integration, to achieve common goals. With its structures, processes and norms,
it interacts with environment. Thus, organizations may be categorized into two, depending on the
pursuit of profits, private and public. According to Korean Administrative Dictionary (2010), a
similar concept, quasi-government organization, exists. It is not a legal government organization,
but often referred as public as it performs functions that are considered to be public. A quasigovernmental organization is founded and operated independently from the departments of
governments. It is loosely controlled by of the departments of governments, and performs limited
administrative functions. It became emerged because the allocation of public goods and services
can be efficient and impartial. It is also considered as an alternative solution to autonomous
operations that often show many limitations in the ones run by government authorities.
Although the importance of the EIPEs to the national economy cant be overemphasized,
previous studies on EIPEs are hardly found. The researchers in this study define EIPE as
following:
EIPE is an enterprise to provide the service for public economic activities based
on equipment-intensive facilities and organizations.
2.1.3 Various Concepts of Innovation
The researchers in STEPI (2010) proposed to collect data for the following types of
innovation activities: R&D Including Internal and External Activities, Four Major Activities of
Innovation, Source of Information, Source of Funding, and Gathering Information Related
Volume 9, No.2, 2015

31

to Innovation Costs. In addition, Oslo Manual (2005) defines an innovation as following:


An innovation is the implementation of a new or significantly improved product (good or
service), or process, a new marketing method, or a new organizational method in business
practices, workplace organization or external relations.
Oslo Manual also divides innovation into four types: Service Innovation,
Organizational Innovation, Process Innovation, and Marketing Innovation. Adapting these
concepts, the researchers in this study empirically categorized the innovation performances of
SMRT into two ways to fulfill the purpose of the study: Performed Level of the Innovation
Activities and Collaboration Level of Internal & External Activities. With these, the
researchers in the study attempted to find the ways to improve the service innovation
performances in SMRT.

2.1.4 Service Innovation


As for the concept of service innovation, ever since it was raised by Miles (1993) the first
time, it has been referred and therefore, evolved in a large number of disciplines over the last 20
years. Oslo Manual (2005) proposed to categorize service innovation into the followings: The
Essential Characteristics of Product, Technical Information, Software, User Friendliness,
and Usage. It also stated that service innovation means the cases either a service is introduced in
the market, or it affects the sales of the company by introducing a new or considerably improved
products or services. A more comprehensive definition for service innovation was proposed by
Van Ark, et al. (2003). According to them, Service innovation is defined as following: a new or
considerably changed service concept, client interaction channel , service delivery system ,
and technological concept.
Each of them individually, but most likely in combination, leads to one or more (re)new
(ed) service functions that are new to the firm and do change the service/goods offered on the
market and do require structurally new technological, human or organizational capabilities of the
service organization. The definition also covers, according to the paper, the notions of
technological and non-technological innovation.

2.2 Previous Research


2.2.1 Previous Research on Service Innovation

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Asia Pacific Journal of INNOVATION AND ENTREPRENEURSHIP

The previous studies about the service innovation appear in various fields. Philippe Aghion,
et al. (2009) wrote, in their paper The Study on the Entry Effects on Existing Innovation and
Productivity, that entry effects were a long-term concern, and had been widely recognized as a
major driving force of economic growth. And the entry can cause the re-allocation of entries and
exits. And it can become a starting point to trigger the diffusion of knowledge. Also it affects the
innovation incentives of the existing companies.
David H. Henard, et al. (2010) said, in The Study on Reputation for Product Innovation:
Impact on Consumers that companies also compete to win the prestige of the relevant
configuration group, just as they fight each other to win customers. In Korea, Yu, P. J. et al.
(2011) studied the service innovation of Incheon International Airport Corporation, a public
enterprise. While it was on the public enterprise, the study is on the same subject as ours: it
focused on service innovation to overcome the service inseparability of consumption and
production and attempted to draw consumer engagement in the service production. In fact, SMRT
has been pursuing service diversification to maximize customer satisfaction by replacing out
dated legacy services with something new having the inseparability into the consideration.

2.2.2 Previous Research on Innovation Activity and Performance


As for a previous research related innovation activity, Anna Bergek et al. (2008) found that
many researchers and policy analysts performed empirical studies about innovation systems to
understand the present state of innovation structure to track the dynamics. Bergek pointed out that
the researchers unfortunately ended up experiencing difficulties in extracting practical guidelines
from this kind of research. It is because they took functional approaches to analyze the dynamics
of innovation systems in their analysis plans taken from previous studies.
Innovation performance may be represented as intellectual property rights such as patents,
utility models, and designs that bring revenue increases in business performance. Ji, S. G. et al.
(2005) stated that innovation resistance is not merely the opposition of innovation but the
reformation enforcer that changes the course of innovation performance. They pointed out that, to
enhance the impact of innovation performance, the analysis of innovation resistance is very
important. Kim, B. S. et al. (2013) did a research that was about the process innovation of a social
infrastructure as EIPE. Through this study, they proposed the budget optimization for operating of
the public facility. Lee, J. D. et al. (2014) did a research about business performances (financial
performance, etc.). They tried to verify influences of the marketing & technology competency as a
business core competency.
Volume 9, No.2, 2015

33

In Leem, T. J. et al. (2012), they classified performance measurement systems (PMS) into
the diagnostic utilization and interaction utilization. They also classified innovation types into
the exploring innovation and practical innovation. As for organizational performance, they
analyzed the relationships among the PMS utilization, innovation types and organizational
performance, and then classified them into financial and non-financial performance.

3. Hypotheses and Research Model


3.1 Hypotheses
In this study, the level of service innovation activity was surveyed for three years
(2011~2013) in SMRT. The survey respondents were asked to evaluate about the department they
belong to. They also were asked to evaluate about the cooperation level of innovation partners in
external organizations as applicable. Based on the survey, the service innovation performance of
SMRT was studied. Performance indicators used were of 5-point Likert scale to represent the
impact of the innovation performance of EIPE in accordance with service innovation activities.

3.1.1 Service Innovation Activity


To verify how the service innovation activities within the departments respondents belong
to, affected its performance, the researchers set the first set of hypotheses as shown in the [Table
3-1].

[Table 3-1] Hypotheses 1


H1. Service innovation activity in a public enterprise will affect to improve its
service performance.
H1-1. Service innovation activity will bring service quality improvement.
H1-2. Service innovation activity will bring either cost saving or revenue increase.

According to the research of Choi, B et al. (2006), the services of a company become
competitive after service innovation activities that improve its customer satisfaction. Also, Yu, P.
J et al. (2011) found, although results obtained in many previous studies may look different in
some degree, they could be integrated into five (5) types that brought the improvement of
customer satisfaction. To verify H1, the researchers defined the following dependent variables:
34

Asia Pacific Journal of INNOVATION AND ENTREPRENEURSHIP

service quality improvement (SQI) and cost saving or revenue increases (SCR). From the H1,
one may draw a proposition that the performance level of service innovation activity will affect its
quality improvement (SQI) and cost saving or revenue increases (SCR).
As for the remark, the variable, cost saving or revenue increase (SCR), includes the
concepts of cost saving and revenue increase combined together throughout this paper because
the results may be measured only in the form of profit increase.

3.1.2 Cooperation with Innovation Partners


Concerning the policy, STEPI (2010) included quality improvement, cost saving as
the items in the survey, Korean Innovation Survey of the Republic of Korea, from which the
data this study used. As for the practice, SMRT announced SMRT Transportation Plan (2013),
that declared its new demand excavation as the mission, and profit-making as the goal. To verify
how cooperation with innovation partner(s) in a public enterprise affected its performance, the
researchers used the second set of hypotheses as shown in the [Table 3-2].

[Table 3-2] Hypotheses 2


H2. Cooperation with innovation partner(s) in a public enterprise will affect to
improve their service performance.
H2-1. Cooperation with innovation partner(s) will bring their service quality improvement .
H2-2. Cooperation with innovation partner(s) will bring either cost reduction or revenue increase.

From the H2, one may draw propositions that the degree of cooperation with the
innovation partner(s) will have an impact on service quality improvement (SQI) in regard with the
service innovation performance. Also, as for the innovation performance of a public enterprise, it
will bring its cost saving or revenue increase (SCR).

3.1.3 General Characteristics of SMRT Employees


To verify how general characteristics of employees in a public enterprise affected its
performance, the researchers hypothesized that general characteristics of SMRT employees will
affect the service innovation as shown in the [Table 3-3].

Volume 9, No.2, 2015

35

[Table 3-3] Hypotheses 3


H2. Cooperation with innovation partner(s) in a public enterprise will affect to
improve their service performance.
H2-1. Cooperation with innovation partner(s) will bring their service quality improvement .
H2-2. Cooperation with innovation partner(s) will bring either cost reduction or revenue increase.

3.2 Research Model


To test the hypothesis through empirical analysis, the research model was used as shown in
[Figure 3-1].

ACS: Activity for the customer satisfaction's


improvement

ICC: Innovation cooperation with cooperative


vendors

ASD: Activity for the service diversity


ARE: Activity for replacing the existing old
service

ICO: Innovation cooperation with other


companies and competitors within the
same industry

AAE: Activity for adopting the external


Knowledge & technology

ICP: Innovation cooperation with private service


firm(consulting, a private research institute)

ABE: Activity for buying the external


mechanical equipment & capital goods

ICU: Innovation cooperation with University,


Higher Institute
ICG: Innovation cooperation with Governmentfunded research institute, Institute for public

[Figure 1] Research Model

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Asia Pacific Journal of INNOVATION AND ENTREPRENEURSHIP

4. Empirical Analysis
4.1 Data Collection and Analysis Methodology
4.1.1 Data Collection
This study surveyed the employees of SMRT. The survey respondents were categorized
into five groups: office staffs, locomotive engineers, rolling stock engineers, technical engineers,
and building maintenance engineers. A set of survey questionnaire was sent via E-mail or in
person to every employee. The ones responded were 271 of 6,463 total employees.

4.1.2 Analysis Methodology


As for the data analysis of this study, STATA 11 was used. To analyze the service
innovation performance of SMRT the survey respondents were asked to evaluate the service
innovation activities that were performed in their departments for the last 3 years (2011-2013)
using 5-point Likert scale. They also asked to evaluate the cooperation with innovation partner(s)
and service innovation performance as appropriate. With the data, the reliability and the
multicollinearity tests against each and every variable were performed.
The correlation analysis and the multiple regression analysis were also done to empirically
analyze the impact of the service innovation performance affected by the service innovation
activity and service innovation cooperation.

4.2 Analysis Results


4.2.1 General Characteristics of Data
From the analysis results, the researchers were able to get the general characteristics for the
survey respondents as shown in [Table 4-1].

Volume 9, No.2, 2015

37

[Table 4-1] General Characteristics of Data


(N=271)
Variables

Gender

Department

Population

Population

male

243

89.7

high school

19

7.0

female

28

10.3

office

48

17.7

junior college

68

25.1

university

177

locomotive

65.3

1.5

master

rolling stock

2.6

14

5.2

ph.Dr.

yes

140

51.7

205

75.6

no

131

48.3

less 10yrs

49

18.1

over 10yrs

222

81.9

yes

243

89.7

22

8.1

no

28

10.3

45

16.6

general

133

49.1

shift

129

47.6

Modified-daywork

3.3

142

52.4

48hr(shift)

129

47.6

technical

Job Grade

73

26.9

83

30.6

41

15.1

Age

(%)

Variables

Distributions

Contents

& building
Years of
Work

Distributions

Contents

Education
Level

Head Office
Experience

Official
Certificate
Working
Type

40hr
Work Hours
per Week

general/modified

(%)

2.6

Union

yes

228

84.1

2130

1.5

Affiliation

no

43

15.9

3140

70

25.8

minmean

74

27.3

4150

167

61.6

5158

30

11.1

Job
Satisfaction

mean(69.8)

meanmax

197

72.7

4.2.2 Correlation Analysis Result


Among the service innovation variables, the ones with correlation coefficient over 0.70 are
as shown in the [Table 4-2]: SQI and SCR (0.73), ACS and ASD (0.74), ASD and ARE (0.71),
AAE and ABE (0.73), ICC and ICO (0.74), ICO and ICU (0.71), ICP and ICU (0.79), ICP and
ICG (0.77), ICU and ICG (0.85).

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Asia Pacific Journal of INNOVATION AND ENTREPRENEURSHIP

[Table 4-2] Correlation Analysis Result


Service Innovation
Performance

Innovation
Activity

Innovation
Cooperation

SQI

SCR

.73*

ACS

.57

.48*

ASD

.62*

.54*

.74*

ARE

.60*

.55*

.60*

.71*

AAE

.65*

.62

.60

.55

.62

1
1

.58

.63

.49

.53

.63

.73*

ICC

.58*

.55*

.45*

.46*

.48*

.53*

.53*

ICO

.52*

.54*

.41*

.43*

.49*

.48*

.50*

.74*

ICP

.51*

.53*

.39*

.49*

.54*

.52*

.59*

.63*

.67*

ICU

.79*

ICG

.47

.48

ABE

.51

.53

.32

.36

.41

.42

.47

.46

.49

.46

.59

.58

.63

.62

.71
.68

.77

1
.85*

Remark) Reliable Level of 95%


SQI: Service quality improvement
SCR: Service cost reduction or revenue increase
ACS: Activity for the customer satisfaction's improvement
ASD: Activity for the service diversity
ARE: Activity for replacing the existing old service
AAE: Activity for adopting the external knowledge &
technology
ABE: Activity for buying the external mechanical equipment
&
capital goods

ICC: Innovation cooperation with cooperative vendors


ICO: Innovation cooperation with other companies and
competitors within the same industry
ICP: Innovation cooperation with private service firm
(consulting, a private research institute)
ICU: Innovation cooperation with University, Higher
Institute
ICG: Innovation cooperation with Government-funded
research institute, Institute for public

4.2.3 Analysis Result of Factors Affecting Innovation Performances


Before measuring the innovation performance of SQI and SCR for the service innovation,
Cronbach Alpha Coefficient, the result of measuring the reliability of variables are at 0.9237 for
the innovation activities, 0.8925 for the innovation cooperation, 0.8424 for the innovation
performances.
The researchers obtained numbers are shown in [Table 4-3]. It shows to effects on SQI and
SCR via the multiple regression analysis.

Volume 9, No.2, 2015

39

[Table 4-3] Multiple Regression Analysis Result


(N=271)

Service innovation performance


Innovation activity & cooperation

Activity for the customer satisfaction's improvement

Cooperation
With Partners

or revenue increase
(SCR)

Coef.

0.084

1.28

0.007

0.10

0.210

2.75

0.164

1.96

0.080

1.12

0.044

0.56

Activity for adopting the external knowledge &


technology

0.148**

2.31

0.111

1.59

Activity for buying the external mechanical equipment


& capital goods

0.109*

1.71

0.230***

3.28

Innovation cooperation with cooperative vendors

0.212***

3.40

0.084

1.23

Innovation cooperation with other companies and


competitors within the same industry

0.054

0.79

0.169**

2.24

Innovation cooperation with private service firm


(consulting, a private research institute)

-0.010

-0.15

-0.004

-0.05

-0.052

-0.64

-0.052

-0.58

Innovation cooperation with Government-funded


research institute, Institute for public

0.051

0.71

0.093

1.16

GC1: Gender (male)

0.209

1.34

0.116

0.68

GC2: Department (office sector)

0.246*

1.87

0.031

0.22

GC3: Work Experience(more than 10)

0.058

0.30

-0.023

-0.11

GC4: Year of Education (with a college)

0.019

0.19

0.084

0.79

GC5: Union Affiliation

-0.108

-0.84

-0.081

-0.58

GC6: Job Satisfaction(less than 70)

-0.058

-0.53

-0.055

-1.31

46

0.226

0.78

-0.662**

-2.09

79

0.064

0.31

-0.170

-0.75

Activity for replacing the existing old service

Innovation
Institute

General
Characteristics

Service cost saving

Coef.

***

Activity for the service diversity


Service
Innovation
Activity

Service quality
improvement
(SQI)

cooperation

with

University,

Higher

GC7: Job Grade

GC8: Age

VIF

less than 50

0.064

0.46

-0.038

-0.25

more than 51

-0.009

-0.04

0.520**

2.23

maximum value

4.98

4.98

Minimum

1.30

1.30

Mean

2.92

2.92

0.574

0.544

Adj-R2

0.540

0.508

F-value

16.82

14.92

Number of Observation

271

271

Remarks: 1) *p<.1, **p<.05, ***p<.01, 2) omitted variables: Job grade (13), Age(less than 40)

40

Asia Pacific Journal of INNOVATION AND ENTREPRENEURSHIP

The result of the service innovation performance is shown in, <Table 4-3>. It shows the
explanation-power of SQI, service innovation performance, is at 0.574. And the marginal effects
show significant values for service innovation activities, ASD (0.210), AAE (0.148), and ABE
(0.109). Also the innovation cooperation (ICC), with the service partners shows a significant
value at 0.212.

As for the general characteristics among the departments, the office sector is shown to be
significant (0.246) for service innovation performance compared to other non-office sectors
which include the locomotive, the rolling stock, the technical, and the building maintenance. With
the exception of the office sector, other general characteristics are not shown to be significant.
The explanation-power of SCR, the other service innovation performance was at 0.544. The
marginal effects show significant values for service innovation activities that are ASD (0.164) and
ABE (0.230). The innovation cooperation with the service partners is shown to be significant,
ICO (0.169).
As for the general characteristics of the organization, the job grade is shown to be
significant from the 4-6 group (-0.662) compared to the 1-3 group. And the age was shown to be
significant from the group of the more than 51 compared to the less than 40. However, other
general characteristics were not shown to be significant. As for the activity for the service
innovation of SMRT, the analysis result above indicates that the service quality improvement and
the service cost saving (or revenue increase) are found to be significant.
The researchers concluded that, SMRT needs to identify customer needs, and put
significant efforts to improve innovation performance. Also, in search of cooperation with the
external organization, the cooperation shows positive significance in the service innovation
performance only when the cooperation is done with service partners or competitors within the
same industry. Philippe Aghion, et al. (2009) stated that entry could lead the trigger of the
diffusion of knowledge in the paper, The Effects of Entry on Incumbent Innovation and
Productivity.
In this study, SMRT got the performance improvement for the service innovation from
cooperation with the external organization. Although somewhat limited, since the innovation
cooperation is confirmed to play a role as a trigger for the diffusion of knowledge, SMRT needs
not only to promote the internal innovation competency, but also n to encourage external
innovation competency. Considering the general characteristics of SMRT to service innovation

Volume 9, No.2, 2015

41

performance, the effect was shown to be significant only limited to department (office sector),
grade (4-6), and age (more than 51).
The researchers confirmed that other non-office sectors compared to office sector for the
innovation performance, age less than 40 compare to the ones more than 51 for service innovation
performance are small. From the findings, the researchers concluded that innovation performance
promotion plan may be necessary. For the innovation performance, negative effect of -0.662 for
cost saving (or revenue increase) was found in the Grade (4-6). The distribution ratio of the
Grade (4-6) was found at 74.1%.
Although the distribution ratio of the Age(less than 50) was found at 88.9%, it didn't affect
the service innovation performance. The researchers believe that SMRT must give efforts to find
ways to improve its service innovation performance.

4.2.4 Hypotheses Verification


To verify the hypotheses from the empirical analysis, the results are shown in the tables
from [Table 4-4] to [Table 4-6].

[Table 4-4] Hypotheses Verification for H1


Hypotheses

Result

Adopted
variables

H1. Service innovation activity in a public enterprise will affect to improve its service performance.
H1-1

Service innovation activity will bring the service quality


improvement.

partial

ASD, AAE,
ABE

H1-2

Service innovation activity will bring either cost reduction or


revenue increase.

partial

ASD, ABE

The hypothesis H1 was partially confirmed. The H1 was to verify how the internal
innovation competency of SMRT effects on each innovation performance. Furthermore, the
internal competency of SMRT effects on the innovation activity for each innovation.
The researchers in this study found the strengths and the weaknesses in the utilization
level of the internal innovation competency of SMRT. Also, the implications for developing the
internal innovation competency in the financial and non-financial side is found and offered.

42

Asia Pacific Journal of INNOVATION AND ENTREPRENEURSHIP

[Table 4-5] Hypotheses Verification for H2


Hypotheses

Result

Adopted
variables

H2. Cooperation with innovation partner(s) in a public enterprise will affect to improve their
service performance.
H2-1

Cooperation with innovation partner(s) will bring their service


quality improvement.

partial

ICC

H2-2

Cooperation with innovation partner(s) will bring either cost


reduction or revenue increase.

partial

ICO

As shown in [Table 4-5], H2 states Cooperation with innovation partner(s) in a public


enterprise will affect to improve their service performance and it was confirmed in a very
restrictive sense. Generally, the organizational culture of a public enterprise is conservative
against the changes caused by the external environment. This study confirmed that external
innovation competency to improve the innovation performance is needed to improve the business
performance by reacting to the changes of the external

environment. The obstacles from

adopting external innovation competency appear both in the financial and non-financial
innovation performance. As for the innovation of organizations, Henry Chesbrough (2010) stated
that successful leadership overcomes the obstacles of organizational change.
Victoria Joy G. Staplan (2007) studied a comparative analysis to build a model to
understand the factors that affect the job-related knowledge sharing in Knowledge Management
Systems. The research compared TAM (Technology Acceptance Model), TRA (Theory of
Reasoned Action), and TPB (Theory of Planned Behavior).

[Table 4-6] Hypotheses Verification for H3


Hypotheses

Result

Adopted
variables

H3. The general characteristics of SMRT will have an impact on the service innovation of public
enterprise.
H3-1. The general characteristics of SMRT will have an impact on the
service quality improvement.

partial

GC2

H3-2. The general characteristics of SMRT will have an impact on the


service cost saving or revenue increasing.

partial

GC7, GC8

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43

5. Conclusion
5.1 Summary and Implications
5.1.1 Summary
In this study, the researchers categorize SMRT as an EIPE that is consisted of the groups
of locomotives engineers, rolling stock engineers, technical engineers, and building maintenance
engineers. The results of the empirical analysis were summarized to help to improve the
innovation performance of SMRT.
Concerning Hypotheses 1, service innovation performance may be classified into
financial and non-financial, according to the emerging types of internal innovation competency.
The results found are as following:
- Financial: ASD (Activity for the service diversity, 0.164), and ABE (Activity for buying
the external mechanical equipment & capital goods, 0.230) show significant effects on SCR
(service cost saving or revenue increase)
- Non-Financial: ASD (Activity for the service diversity, 0.210), AAE (Activity for
adopting the external knowledge & technology, 0.148), and ABE (Activity for buying the external
mechanical equipment & capital goods, 0.109) show significant effects on SQI (Service quality
improvement).
From this study to enhance the innovation performance through SMRT's innovation
activity, the researchers found that two things must be considered.
1)

SMRT must consider that it is mainly an enterprise of engineers of the locomotive,

the rolling stock, the technical engineering, and the building maintenance.
2) After the establishment of social infrastructure, it tends to be non-replaceable
complementary goods.
Therefore, as the primary party of operation for the social infrastructure, SMRT has the
characteristics of equipment-intensive public organization with non-replaceable complementary
goods. The pursuit of value-oriented shared value (VOSV, hereafter) as its enterprise culture
has to be recognized to maximize the development of SMRT.
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Asia Pacific Journal of INNOVATION AND ENTREPRENEURSHIP

Concerning Hypothesis 2, in the case of the collaborative development with external


organization as the information source for innovating, Researchers have analyzed, that the
cooperation with innovation partners affects for the innovation performance. As in Hypothesis 1,
service innovation performance was classified into the financial innovation performance and the
non-financial innovation performance in accordance with the happening type of external
innovation competency against Hypothesis 2. As for the financial services innovation
performance, the cooperation with service innovation partners had given significant impact ICO
(Innovation cooperation with other companies and competitors within the same industry, 0.169)
against SCR (Service cost reduction or revenue increase). And as non-financial service innovation
performance, the cooperation with service innovation partner(s) had given significant impact ICC
(Innovation cooperation with cooperative vendors, 0.212) against SQI (Service quality
improvement).

Concerning Hypothesis 3, this study analyzed the general characteristics of SMRT which
affect the service innovation performance of public enterprise, and tried to propose SMRT's
direction from the results. In analyzing the service innovation performance, it was classified into
financial and non-financial. As for the financial service innovation performance, service
innovation had significant impacts to Job Grade (4~6, -0.662) and Age (more than 51, 0.520)
against SCR (Service cost reduction or revenue increase). As for the non-financial service
innovation performance, service innovation showed more significant impact from Department
(Office sector, 0.246) than the other, against SQI (Service quality improvement). As for the result,
innovation in non-Office sectors of SMRT needs to be preceded to improve the service quality as
the non-financial service innovation performance.

5.1.2 Implications
The focus of this study is on improving the service innovation performance of public
enterprise, an EIPE. The implications learned can be summarized as following:
First, this study suggests the needs for building a system for technology creation,
acquisition, and utilization for wealth creation. For wealth creation that occurred from 'the
competency of each organization' or 'the competitive advantage'.

SMRT must build 'TSS

(Technology Sharing System)' to maximize the service innovation performance. The TSS is to
increase service competitiveness and also to enhance internal service innovation competency.

Volume 9, No.2, 2015

45

Second, in the case of jointly developing the innovation with external organizations, the
researchers found that, to maximize the innovation performance, Communication System (CS) is
important to enhance the cooperation with innovation partners.
Third, big data for service innovation including periodic information is necessary by
policy support. It is for evaluating the effectiveness of a system to enhance the service innovation
performance. The adducible policy implication of the study is the need of a big data processing
system. The purpose of the system is to improve the service innovation performance for
maximizing 'the business performance' and 'the development of EIPE'.

5.2 Limitations and Future Research


This study focused on the differentiation of service innovation performance of SMRT.
Especially, it is significant in the sense that the service innovation of EIPE was somewhat
neglected by research community at large in the past. It also has some limitations as following.
First, there are problems about the sample data. The survey respondents answers were
somewhat in low quality. Since the survey was about SMRT's each sector(the office sector, the
locomotive engineering sector, the rolling stock engineering sector, the technical engineering
sector, the building maintenance engineering sector), the sample size for empirical analysis was
not sufficient to analyze each service innovation performance. Thus, it was difficult to get
statistically significant values.
Second, the service innovation performance was measured by the subjective indicators
from the staff of SMRT, and not the objective indicators. Therefore, the subjectivity of the staff
was concerned in the interpretation of innovation performance indicators. To eliminate the
possibility of subjectivity from being measured, the future studies may need to add objective
estimations such as 'Experts', 'External cooperation organization agents', 'External partners',
'General consumer', etc. To maximize the business performance (and the organization
development) of public sector, the service innovation research previously requires the
establishment & utilization of big data for each public sector.
Finally, the service innovation research about EIPE that manages social infrastructure is
somewhat scarce.
The researchers hope that this study serve as the starting point for the large increase of
innovation research for the same or similar industry in the future.
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Asia Pacific Journal of INNOVATION AND ENTREPRENEURSHIP

<received: 2015. 10. 07>


<revised:

2015. 12. 06>

<accepted: 2015. 12. 14>

The numbers such as SQI, SCR and so on in parentheses are denotations to be used in tables later in the paper.

Volume 9, No.2, 2015

47

Reference
Anna, B., Staffan, J., Bo C., Sven, L., & Annika, R. (2008). Analyzing the functional dynamics of
technological innovation systems: A scheme of analysis. Research Policy 37, 407-429.
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Administration dictionary in ROK (2009)
Choi, B., Bae, Y. I., & Lee, S. H. (2006). Process innovation and Service competition. Samsung
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2010 Product Development & Management Association, J PROD INNOV MANAG
2010(27), 321-335.
Henry, C. (2010). Business model innovation: Opportunities and barriers. Long Range Planning
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Ji, S. G., & Lee, G. D. (2005). The relationship of individual disposition, innovation resistance
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Kim, B. S., Park, S. Y., Lee, & Y. H. Nick. (2013). A study on the process innovation of public
facility maintenance as a social infrastructure: The case of Seoul Metropolitan Rapid Transit.
Asia Pacific Journal of Innovation and Entrepreneurship, 7(3), 7-24.
Kohli, A. K, & Jaworski B. G. (1990). Market orientation: Construct, research propositions, and
Managerial implication. Journal of Marketing, 54(2), 1-18.
Lee, J. D., Lee, Y. B., & Bae, Y. S. (2014). The effects of SMEs core competency and
competency strategy on their business performance. Journal of the Korea Entrepreneurship
Society, 9(3), 154-183.
Leem, T. J., Lee, S. W., & Kim, S. K. (2012). The effects of uses of performance measurement
systems on innovation type and organizational performance. Korean Accounting Association,
Korean Accounting Journal, 21(3), 59-94.
Lumpkin, G. T., & Dess G. G. (1996). Clarifying the entrepreneurial orientation construct and
linking it to performance. Academy of Management Review, 21, 135-172.
Miles, I. (1993). Services in the new industrial economy. Futures (Futures), 25 (6), 653672
Oslo, M. (2005). Guidelines for collecting and interpreting innovation data,. 3rd Edition, chapter
3. Basic Definitions, 2. Innovation.
Philippe, A., Richard, B., Rachel, G., Peter, H., & Susanne, P. (2009). The effects of entry on
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SMRT (Seoul Metropolitan Rapid Transit Corporation) Transportation Plan in ROK (2013).

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STEPI (Science and Technology Policy Institute, 2010). Report on the Korean innovation survey
2010: Manufacturing sector.
Sung, T. K. (2006). The determinants of firms innovative activity: A comparison of
manufacturing and service firms in Korea. Journal of Business Research, 21(4), 283-304
Van Ark, B., Inklaar, R., & McGuckin, R. H. (2003a). Services innovation, performance and
policy: A review. June, 2003, Research Series No.6, The Hague.
Victoria, J. G. S. (2008). Factors affecting a job-related knowledge sharing in knowledge
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Andong National University, 31-39.
Yu, P. J., & Lee, H. J. (2011). Service innovations in public enterprise: The case of Incheon
International Airport Corporation. Creativity & innovation, 4(2), 79-109.

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Asia Pacific Journal of INNOVATION AND ENTREPRENEURSHIP

Evaluating the Performance of Disaster Recovery Systemic


Innovations by Using the Data Envelopment Analysis
Chia-lee Yang, Benjamin J.C. Yuan, Chi-yo Huang,
and Chih-neng Chang

Abstract
Over the past decades, evolutions in disaster recovery (DR) technologies have proven to be
typical systemic innovations. Such innovations consist of various interrelated changes in information
technology (IT), telecommunications, Internet service provider management, backup server product
design, and so on. As data is regarded as a strategic corporate asset that must be protected, selecting a
reliable innovative IT DR system has become high priority for many organizations. Such decisionmaking problems usually face the challenges of seeking the most efficient DR system(s) to fulfill
requirements of specific tasks or projects. Typical examples include the backup of big data, the
recovery of operations in the case of emergencies being caused by natural or man-made disasters,
cyber-attacks, etc. Therefore, how to evaluate and select an appropriate innovative IT DR system is
critical for modern organizations. However, no existing studies have evaluated the performance of
systemic innovation, in general, and IT DR systemic innovations especially. Thus, this paper aims to
propose an analytic framework to evaluate the performance of IT DR systems. Given that IT DR system
performance evaluation problems are indistinct and involve various considerations, this paper
introduces data envelopment analysis (DEA) methods with derivations of the efficiency achievement
measure (EAM). An empirical study on evaluating three DR systems belonging to a Taiwanese
research institute will be used to demonstrate the feasibility of the analytic framework. This framework
can serve as an appropriate method for evaluating the performance of DR system efficiency and then
develop strategic plans for enhancing their performance.

Key words: Disaster Recovery (DR); Information Technology; Performance Evaluation; Data
Envelopment Analysis (DEA).

Doctoral Candidate, Institute of Management of Technology, National Chiao-Tung University, Taiwan; Principle
Engineer, National Center for High-Performance Computing, Taiwan. E-mail: joy.yang@nchc.org.tw

Professor, Institute of Industrial Economics, Jinan University, China; Institute of Management of Technology, National
Chiao-Tung University, Taiwan. E-mail: Benjamin@faculty.nctu.edu.tw

Corresponding author; Professor, Department of Industrial Education, National Taiwan Normal University, Taiwan. Email: georgeh168@gmail.com

Institute of Industrial Economics, Jinan University, Guangzhou, China. E-mail: Rod.Chang@mtigroup.com

Volume 9, No.2, 2015

51

1. Introduction
Over the past few years, there has been growing interest in system (or systemic)
innovations (Mulgan & Leadbeater, 2013), which are defined as large-scale transformations in the
way societal functions such as transportation, communication, housing, and feeding are fulfilled
(Geels, 2004). Such innovations are not matters of solving isolated problems but of overhauling
the entire system (de Bruijn, van der Voort, Dicke, De Jong, & Veeneman, 2004). Systemic
innovations by nature require interrelated changes in product design, supplier management,
information technology (IT), and so on (Teece, 2003). Many heterogeneous elements change
during a systemic innovation; such innovation is a coevolutionary process. Thus, these changes
involve technical innovations and innovations on the user side (Geels, 2005). In general, systemic
innovations can take place at different aggregation levels, but they always share the following
aspects: they are comprehensive, with a long-time horizon, requiring the efforts of many
stakeholders, and a change of perspective and a cultural shift among these stakeholders (de Bruijn
et al., 2004). The distinction between systemic innovations and autonomous innovation applies to
not just the manufacturer but also services (Chen, Wen, & Yang, 2014; Vesa, 2005).
Systemic innovations are embedded in certain institutions, structures, and values that will
have to change as well (de Bruijn et al., 2004). The idea behind systemic innovation is that regular
change will not suffice to solve them (de Bruijn et al., 2004). Chesbrough and Teece (1996)
initiated discussions on systemic innovations versus autonomous innovations, in terms of the
choice of innovation governance of internalization versus outsourcing in manufacturing
(Chesbrough & Teece, 2002). A system can be quite small and localized (for example, the system
of housing allocation or food sourcing in one town or city), and it can be national or global
(Mulgan & Leadbeater, 2013).
Innovations in the information technology (IT) disaster recovery (DR) systems are typical
systemic innovation since such innovations consist of various interrelated changes in information
technology (IT), carrier and support, backup servers design, and so on. During the past decades,
the IT DR system has been innovated, from a set of procedures to recover and protect IT
infrastructure when computer(s) shut down accidentally (Yang, Yuan, & Huang, 2015), to modern
systems in the cloud computation and big data era, which such innovative systems can cope with
disasters effectively and efficiently (Sahebjamnia, Torabi, & Mansouri, 2015). Disaster recovery
in the modern age is a detailed, step-by-step course of actions for quickly recovering after a
natural or manmade disaster; the details may vary depending on the business needs, and can be
developed in-house or purchased as a service (TechAdvisory.org, 2010). IT DR systems need to
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Asia Pacific Journal of INNOVATION AND ENTREPRENEURSHIP

be able to restore data and backup systems for the organization to ensure continuous operation,
even in the presence of extensive failures that may render an entire system un-operational and for
which local replication may be inadequate (Kant, 2009; Lumpp, Schneider, Holtz, Mueller, Lenz,
Biazetti & Petersen, 2008). Further, the primary DR system objectives reducing costs and
increasing efficiency while mitigating risk and better aligning IT with business initiatives are
often stymied by todays datacenter challenges (DuBois & Amatruba, 2013). A strategic approach
to evaluate the performance of innovative DR systems will help organizations meet their business
continuity objectives while considering both performance and cost issues.
Practical problems regarding performance evaluations of DR systems are complicated and
usually involve massive subjectivities and uncertainties (Claunch, 2004; Johnston, 2014; Ueno,
Miyaho, Suzuki, & Ichihara, 2010). A few researchers have studied issues related to performance
evaluations of DR infrastructure solutions (Chen, 2001; Covas, Silva, & Dias, 2013; Kant, 2009).
However, to the best of the present authors knowledge, very few or no researchers have explored
DR system performance in detail. To fill the research gap, this paper aims to propose an analytic
framework to evaluate DR system performance.
This study will first review the literature regarding possible aspects and criteria that could
be used in evaluating the performance of a DR system. We will then seek to confirm these aspects
and criteria through focus group interviews with experts. Because the IT DR system performance
evaluation problems are indistinct and involve various considerations, this paper introduces data
envelopment analysis (DEA) methods with derivations of the efficiency achievement measure
(EAM). An empirical study evaluating three DR systems belonging to a Taiwanese governmental
research institute will be used to demonstrate the feasibility of the proposed framework.
The rest of this paper is organized as follows. A literature review on DR systems, DR
objectives, and performance evaluations is presented in Section 2. The research methods of the
DEA are presented in Section 3. The empirical study evaluating DR systems performance for the
Taiwanese research institute is presented in Section 4. Advances in management practices and
comparisons between the empirical study results and past research results are discussed in Section
5. Finally, Section 6 summarizes the results and concludes the paper.

2. Literature Review
In order to review the latest DR system performance research and to construct an analytic
framework accordingly, related literature is reviewed and summarized below. This literature
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53

review focuses on past studies related to the concepts of systemic innovations, DR, DR systems,
objectives of DR systems, and performance evaluation criteria for DR systems.

2.1 Systemic Innovation


The initiation of systemic innovation study dates back to the late 1960s. According to
Marquis, innovations can be divided into three categories based on the scale of impacts: radical,
incremental, and systems (Marquis, 1969). However, according to Betz (2011), what Marquis
called a system innovation has not proven to be a useful distinction at that that moment because
all technologies are systems. Later, scholars (e.g., Chesbrough and Teece, 1996) initiated
discussions on systemic innovations versus autonomous innovations, in terms of the choice of
innovation governance of internalization versus outsourcing in manufacturing filled the gap and
compared systemic innovations with autonomous innovations.
Systemic innovation is defined as innovation related to complex systems such as
communication networks, which takes many years to develop and costs millions of dollars
(Marquis, 1969). According to Geels (2004), systemic innovations are defined as large-scale
transformations in the way societal functions such as transportation, communication, housing, and
feeding are fulfilled (Geels, 2004). Such innovation is not a matter of solving an isolated problem
but of overhauling the entire system (de Bruijn et al., 2004). Systemic innovations by nature
require interrelated changes in product design, supplier management, information technology
(IT), and so on. In addition, the distinction between systemic innovations and autonomous
innovation applies to not just the manufacturer but also to services (Chen et al., 2014; Vesa, 2005).
Chesbrough and Teece (1996) initiated discussions on systemic innovations versus
autonomous innovations, in terms of the choice of innovation governance of internalization versus
outsourcing in manufacturing (Chesbrough & Teece, 2002.) As with the broad concepts of
innovation, focus and definition have been placed on technological innovation to associate the
organization system. Further, complex product system innovations are also defined as high cost,
engineering-intensive products, systems, networks, and constructs (Thota & Munir, 2011). They
are business-to-business capital goods, which form the backbone of modern economy and society
(Ren & Yeo, 2006).
A system can be quite small and localized (for example, the system of housing allocation
or food sourcing in one town or city), and it can be national or global (Mulgan & Leadbeater,
2013). Many heterogeneous elements change during a systemic innovation; the systemic
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Asia Pacific Journal of INNOVATION AND ENTREPRENEURSHIP

innovation is a coevolutionary process; these heterogeneous elements involve technical


innovations and innovations on the user side (Geels, 2005). Systemic innovations are embedded
in certain institutions, structures, and values that will have to change as well (de Bruijn et al.,
2004). In general, systemic innovations can take place at different aggregation levels, but they
always share the following aspects: they are comprehensive innovations, with a long-time horizon,
requiring the efforts of many stakeholders, along with a change of perspective and a cultural shift
among these stakeholders (de Bruijn et al., 2004).

Processes of system change have a longtime horizon and are complex because of the many
interrelated actors and factors (van Mierlo, Arkesteijn, & Leeuwis, 2010). New research has been
undertaken, and theories have demonstrated that systemic innovations are characterized by
fundamental uncertainties, chaos, unintended consequences, conflicts, and unpredictable
trajectories of change, which cannot be understood from a reductionist perspective, or, for that
matter, from the perspective of direct causeeffect relations that seem to be at the core of former
problem-solving approaches (Prigogine & Stengers, 1990; Rotmans, Loorbach, & van de Brugge,
2005; (van Mierlo et al., 2010). Along with the vision on how systemic innovation takes place, the
ideas about how systemic innovation might be stimulated and managed have evolved
considerably (van Mierlo et al., 2010). Systemic innovation projects need not only to be reflexive
in design, planning, and management but also to be accompanied by a monitoring and evaluation
approach that supports and maintains such reflexivity (van Mierlo et al., 2010).

2.2 DR and DR systems


The terrorist attacks, data assaults, and natural catastrophes that occurred in recent years
have taught us that many types of disasters can hit organizations of every size, threatening to
disrupt operations and potentially even destroying those that are not fully prepared (Wallace &
Webber, 2010). As information systems continue to advance at a formidable speed and become an
ever-more universal and powerful tool in organizations, the influences of disasters can directly
injure information systems and impact the business continuity (Spillan & Hough, 2003;
Anthopoulos, Kostavara, & Pantouvakis, 2013). As the IT services without interruption are
expected, the supporting infrastructure has become critical to the success of most enterprises. To
meet the continuity needs of most organizations, one popular strategy is to set up a secondary DR
system and DR site that can support operations until the primary data center can be returned to
normal operations. Therefore, information infrastructure availability has become a critical issue,
attracting increasing attention from both IT researchers and practitioners. In general, the
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importance of IT DR can hardly be overestimated (Fothergill & Peek, 2004; Rose, 2007; Feng &
Li, 2011).
Modern information infrastructure is full of uncertainties. Such uncertainties are due to
years of acquisitions, investments, building and rebuilding, partial improvements, and temporary
fixes that finally become obsoletet (Clitherow, Brookbanks, Clayton, & Spear, 2008). Thus, more
organizations have begun to consider using DR system(s) being located in remote sites, which can
restore data and maintain IT system operations during or after occurrences of disasters (Lumpp et
al., 2008; Kant, 2009; Sembiring & Siregar, 2013). An IT DR site is a backup data center that
restores the full data and all functionalities of communications or equipment to a remote location
and synchronizes those data with the primary site in the event of primary site failure (King, Halim,
Garcia-Molina, & Polyzois, 1991; Sembiring & Siregar, 2013). DR sites should be as separate
from the primary site as possible (Ellis & Collins, 2013).
Numerous researchers have examined IT DR concepts and technologies, such as network
technology, storage, and so forth (Serrelis & Alexandris, 2006; Clitherow et al., 2008; Bianco,
Giraudo, & Hay, 2010;Ueno et al., 2010). However, very few previous research works have
focused on IT DR site selection and evaluation in general or on performance evaluation of DR
sites in particular. The DR site performance evaluation problems require multiple-criteria decision
making (MCDM), which usually involves multi-disciplinary knowledge including IT technology,
business continues process and disaster management (Bryson, Millar, Joseph, & Mobolurin, 2002;
Cegiela, 2006; Daim, Bhatla, & Mansour, 2013). A strategic approach to evaluate the
performance of DR sites will help organizations meet their business continuity objectives while
addressing both performance and cost issues.

2.3 Objectives of DR Systems


The most important key metrics for business continuity objectives to fulfill the
requirements of data dependability are Recovery Time Objectives (RTOs) and Recovery Point
Objectives (RPOs). RTOs define how quickly information systems and services must be
operational after a disaster, including recovery of applications and data and end-user access to
secondary-site applications. Thus, RTOs refer to the periods of time to recover from a disaster.
Meanwhile, Recovery Point Objectives (RPOs) define the point in time from which data must be
restored in order to resume processing transactions. RPOs are measured backward in time from
the instant at which that the organizations failure occurs as a result of the disaster event (Claunch,
2004; Johnston, 2014).
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RTO and RPO requirements are defined in the business impact analysis (BIA) stage of the
business continuity plan process. The BIA identifies what is at risk in the enterprise and which
business processes are most critical, thereby prioritizing risk management and recovery
investments. The direct and indirect impact of business interruptions is assessed over time. RTOs
and RPOs depend on the organizations ability and willing to protect data in a way that limits the
impact of disruption to the business (Claunch, 2004).
The definitions of RPOs and RTOs not only influence business risks and losses in or after
disasters, but also influence DR costs. Organizations often face the dilemma between business
losses and IT over-investment when decide RPOs and RTOs. On the one hand, business operation
downtimes, as defined by RPOs and RTOs, adversely affect recovery time costs, opportunity
losses, company reputation, legal considerations for breached service levels, customer confidence,
and drops in stock price (Garg, Curtis, & Halper, 2003; Wiboonrat, 2008). For example, Garg et
al. analyzed the financial impact of information breaches on corporations. The results show that
the average loss in share price on the day of an events occurrence was nearly 5.6 percent over a
three-day period after the event (Garg et al., 2003). On the other hand, the DR technologies are
selected to meet the data protection needs of the organization based on RTO and RPO. DR
systems are generally the best, albeit the most expensive, solution if no data loss is an issue
(Broder & Tucker, 2012). The RTO and RPO metrics will define the media size for backup, the
location where data is being recovered, and the type of the IT infrastructure. A short RTO and
RPO or lower outage tolerance will result in a higher cost of IT solutions. The DR objectives and
costs of investment are trade-off problems that have attracted researchers interests. For example,
Wiboonrat simulated the reliability and cost issues of two data centers and proposed an optimal
balance between data center system reliability and investment costs for each case (Wiboonrat,
2008).

2.4 Performance Evaluation of DR Systems


Within a business context, performance is defined in terms of efficiency and effectiveness.
Effectiveness is compliance with customer requirements, while efficiency is how the
organizations resources are used to achieve customers satisfaction levels (Neely, Gregory, &
Platts, 1995). Performance measures are the metrics used to quantify the efficiency and/or
effectiveness of actions of part or all of a process or system in relation to a pattern or target
(Fortuin, 1988; Neely et al., 1996). Performance measures should be chosen, implemented, and
monitored to capture the essence of organizational performance (Neely, 1999; Gunasekaran, Patel,
& McGaughey, 2004;Braz, Scavarda, & Martins, 2011; ).
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As DR is becoming increasing complicated and costly, the need to evaluate DR systems


performance has become more critical. For corporate IT decision makers, evaluation of DR
systems is extremely complicated, always involving various input and output factors. A lack of
well-defined criteria will result in wrong solutions and ultimately misle decisions.
A limited number of scholars have tried to study performance evaluations of DR
technologies. Early research focused on the performance evaluation of information systems or
backup technology (Bryson et al., 2002; King et al., 1991; Patterson et al., 2002), while recent
works have mainly focused on the DR mechanisms in the cloud computing environment (Ueno et
al., 2010; Wood et al., 2010; Ichihara, Miyaho, Ueno, & Suzuki, 2013). Some recent studies have
started to examine DR system location evaluation and selection. Such research works have
usually developed mathematical models and techniques to select DR sites locations (Dekle,
Lavieri, Martin, Emir-Farinas, & Francis, 2005; Ratick, Meacham, & Aoyama, 2008). While
some scholars have started to study the performance evaluation of DR mechanisms, to the best of
the authors knowledge, little to no research to date has evaluated the performance of DR systems.

3. Analytical Methods: DEA Method


DR system performance evaluation problems include a complex array of evaluation
aspects and criteria, which always include multiple inputs and outputs. The input criteria are
usually related to economic, technical, and risk management issues, while the output criteria may
include RTOs and RPOs. In order to define a reasonable analytic framework, the authors propose
a DEA method-based approach, which will be verified using an empirical study case.
The DEA is a mathematical programming approach that deals with the problem of
measuring the productive efficiency. The DEA is a non-parametric approach (Farrell, 1957) that
aims to build mathematical programming models to derive the comparative efficiency. The DEA
has become an important performance evaluation tool since its introduction by Charnes et al.
(Charnes, Cooper, & Rhodes, 1978) and allows constant returns to scale (called the DEA-CCR
model). The DEA-based approach involves the measurement of efficiency for a given decision
making unit (DMU) without any prior assumptions about the inputs or outputs. The DEA uses
linear programming methodology to define a production frontier for DMUs. Since DEA
incorporates multiple inputs and outputs of DMUs into an efficiency measure, which is consistent
with real-world situations, there has been rapid and continuous growth in the field. As a result, a
considerable amount of published research has appeared, with a significant portion focused on the

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Asia Pacific Journal of INNOVATION AND ENTREPRENEURSHIP

applications of DEA for efficiency and productivity evaluations in both public and private sectors
(Emrouznejad, Parker, & Tavares, 2008).
There are several models of DEA, such as the DEA-CCR model (Charnes et al., 1978); the
DEA-BCC model (Banker, Charnes, & Cooper, 1984); the Cross-Efficiency DEA model (Doyle
& Green, 1994; Sexton, Silkman, & Hogan, 1986); and the Super-Efficiency DEA model
(Andersen & Petersen, 1993). The CCR model (Charnes et al., 1978) assumes that production
exhibits constant returns to scale. Banker et al. (1984) extended the original CCR model by
considering variable returns to scale. For company managers, controlling the inputs is easier than
increasing total sales. Because both CCR and BCC models are input-oriented, which is consistent
with the evaluation needs of data centers, both the CCR and BCC models are introduced in this
research. The formulations of the research works are based on the authors earlier works (Chen &
Huang, 2012; Huang, Tzeng, Chen, & Chen, 2012).

3.1 DEA-CCR Model

The DEA-CCR model computes relative efficiency score (hi ) based on selected s outputs

(r 1,..., s)

and m inputs
s

max

using the following linear programming expression:

u y / v x
r

r 1

rj

s .t.

(i 1,..., m)

i 1

i ij

u y / v x
r 1

rj

i 1

i ij

(1)

ur , vi 0; r 1,..., s; i 1,..., m; j 1,..., n

It assumes the DMU has s outputs and m inputs, and there are n DMUs. The
are not zero, calculating as

ur

and

vi

ur ,vi 0 , is non-Archimedean number and is 10-6 .

3.2 DEA-BCC Model


The DEA-BCC model is input-oriented and has a variable

u0

(returns to scale). The

equations show as follows:


m

( vi xij )=1
i 1

Volume 9, No.2, 2015

59

r 1

i 1

( ur yrj u 0 ) / ( vi xij )

max hij

s.t.

r 1

i 1

( ur yrj u0 ) / ( vi xij ) 1,

(2)

ur , vi 0; r 1,..., s; i 1,..., m; j 1,..., n.


The Equation (2) was changed to ! . for solving
formula by using the fractional mathematical programming approach as follows:
s

max gj

( ur yrj u0 )
r 1

s.t.

v x =1
i ij

i 1

u y v x
r 1

rj

i 1

i ij

u0 0

(3)

ur , vi 0; r 1,..., s; i 1,..., m; j 1,..., n. .


The dual formula:
min Zj
n

s.t.

i 1

r 1

( si sr )

j ij

xij si 0,

j 1

si yrj ,

rj

j 1
n

j 1

(4)

j , si , sr 0; r 1,..., s; i =1,...,m; j 1,..., n.


4. Evaluating DR Systems of a Taiwanese Research Institute by DEA Methods
In this section, an empirical study of the proposed DEA-based evaluation framework will
be presented. First, the background of the empirical study case will be introduced and the DMUs
will be decided. Then, the input and output criteria will be derived based on experts opinions.
60

Asia Pacific Journal of INNOVATION AND ENTREPRENEURSHIP

Finally, an evaluation of three DMUs will be used to demonstrate the feasibility of the proposed
framework.

4.1 Selection of decision making unit (DMU)


We first select three DR systems belonging to a Taiwanese Research Institute (X center) as
DMUs for verifying the feasibility of the proposed framework. The X center is the most advanced
Taiwanese research institution providing super computation, cloud based computation and big
data services.

Since the establishment in 1991, the X center has provided DR services for

governmental and academic research institutes.


There are three DR systems systems A, B, and C belonging to the X center. All three
systems provide remote backup systems and reliable DR services. The three DR systems are
linked together by using a 100 Gbps backbone. The Storage Area Network (SAN) structure is
used along with the dual backbone optical fiber network, which is characterized by uninterrupted
data transmissions and thus not only significantly increases the data back up speed but also
achieves rapid data recovery in case of losses or failures.

4.2 Aspects and Criteria Derivations Using the Focus Group Method
The possible aspects and criteria for evaluating DR system performance will be derived
based on the comprehensive literature review results [Table 1]. First, government and industry
standards and existing enterprise IT architectures were considered. Then, experts were invited to
provide their opinions. Details regarding every aspect and criterion were derived based on the
experts opinions. The aspects of tangible and intangible resource are viewed as inputs, whereas
the aspects of DR objectives are considered outputs.
Ten experts related to the DR business in X center were invited to provide opinions using
the modified Delphi method. The experts selected include five senior IT managers who are
responsible for DR decisions in the X center, as well as five IT managers who use DR services
provided by the X center. All the experts have more than five years of work experience in the
related fields of business continuity management and/or DR plan definition.

Volume 9, No.2, 2015

61

[Table 1] Candidate Aspects and Criteria for Evaluating DR Systems Performance

62

Asia Pacific Journal of INNOVATION AND ENTREPRENEURSHIP

4.3 Evaluating Performance of DR Sites Using the DEA


First, the experts opinions regarding the input and output criteria are summarized in the
following [Table 2] as input datasets of the DMUs. Then, the analysis will proceed as follows: (i)
statistical selection of inputs and outputs; (ii) evaluating performance of the DMUs; and (iii)
conducting the sensitivity analysis.

[Table 2] Input Datasets of the DMUs


Outputs: DR
Inputs 1: Tangible Resource(A)

Inputs 2: Intangible Resource(B)


Objectives (C)

DMUs
a1

a2

a3

a4

a5

b1

b2

b3

b4

b5

c1

c2

System A

7.0

6.6

6.5

7.2

6.8

6.6

6.7

6.3

6.9

6.9

6.1

6.1

System B

6.6

6.7

6.7

6.9

6.3

6.1

6.0

5.9

6.1

5.7

6.2

6.0

System C

6.4

6.4

7.2

6.7

6.5

5.8

6.2

5.5

5.7

5.6

4.3.1 Statistical Selection of Inputs and Outputs


Using the Pearsons coefficient, we will test the bivariate correlation of the variables
relating to inputs and outputs, with the objective of detecting factors with the same significance so
as to eliminate them [Table 3]. We will redefine variables that do not fulfil the isotonic property,
which requires that there should be no negative correlation between inputs and outputs
(GarcERSnchez, 2006). Since the input criteria Telecommunication Infrastructure (
Carrier and Support (

a5 )

and Information Security Management Procedure (

a4 ),

b2 )

are

negatively related to the output criteria, the three criteria are eliminated due to their violation of
the isotonic property.

4.3.2

Evaluating the Performance of the DMUs

After justifying the variables theoretically and statistically, we will start with the definite
analysis of the intervening service by applying the BCC model. According to the empirical proof
obtained by various authors, BCC model will provide a level of pure technical efficiency. In turn,
we will estimate the CCR-efficiency index, which will allow us to calculate scale efficiency from
the quotient of both indexes (GarcERSnchez, 2006). The performance evaluation results have
been derived in comparison to those derived by the CCR and BCC models (Table 4). The
efficiency scores for the three systems are calculated utilizing both the CCR and BCC models.
Volume 9, No.2, 2015

63

The performance evaluation results present two major findings. Based on the evaluation
results derived using the CCR and the BCC models, all three of the DR systems achieved optimal
performance. These three DR systems can thus be seen as performance maximizers based on the
results derived by using the CCR and BCC DEA models. Some reasons for this are
straightforward. First, these three DR systems belong to same data center, share some common IT
characteristics and demonstrate the same tendencies in performance. The X center designed
similar and interconnected IT infrastructures and backup system architecture in order to provide
multi-system backup service. Second, the X center implements information security management
standards, such as ISO 27001 and CSA Star, to guarantee the same RTO and RTO service level
agreement across the three systems.

[Table 3] Correlation Matrix


a1

a2

a3

a4

a5

b1

b2

b3

b4

b5

c1

a1

1.000

a2

0.500

a3

0.545

0.999

1.000

a4

0.189

-0.756

-0.721

1.000

a5

0.371

-0.619

-0.577

0.982

1.000

b1

0.984

0.339

0.388

0.359

0.529

1.000

b2

0.454

-0.545

-0.500

0.961

0.996

0.604

1.000

b3

0.990

0.371

0.419

0.327

0.500

0.999

0.577

1.000

b4

0.901

0.075

0.127

0.596

0.737

0.963

0.795

0.954

1.000

b5

0.980

0.317

0.366

0.381

0.549

1.000

0.623

0.998

0.970

1.000

c1

0.619

0.990

0.996

-0.655

-0.500

0.470

-0.419

0.500

0.217

0.449

1.000

c2

0.866

0.866

0.891

-0.327

-0.143

0.764

-0.052

0.786

0.564

0.749

0.929

c2

1.000

1.000

[Table 4] Efficiency Scores for DEA Models and Sensitivity Analysis Results
DEA
Model
CCR

BCC

64

DMU1

Sensivity Analysis Results by Excluding One Criteria


DMU

Efficiency

DMU2

DMU3

DMU1

DMU2

DMU3

(Extreme (Extreme (Extreme (Extreme (Extreme (Extreme

c1

c2

a1

a2

a3

b1

b3

b4

b5

Case 1)

Case 1)

Case 1)

Case 2)

Case 2)

Case 3)

Site A

1.000

1.000

1.000

1.000

1.000

1.000

1.000

1.000

1.000

1.000

0.695

1.000

1.000

0.461

1.000

1.000

Site B

1.000

1.000

1.000

1.000

1.000

1.000

1.000

1.000

1.000

1.000

1.000

0.740

1.000

1.000

0.491

1.000

Site C

1.000

1.000

1.000

1.000

1.000

0.976

1.000

1.000

1.000

1.000

1.000

1.000

0.687

1.000

1.000

0.456

Site A

1.000

1.000

1.000

1.000

1.000

1.000

1.000

1.000

1.000

1.000

0.793

1.000

1.000

0.646

1.000

1.000

Site B

1.000

1.000

1.000

1.000

1.000

1.000

1.000

1.000

1.000

1.000

1.000

0.832

1.000

1.000

0.678

1.000

Site C

1.000

1.000

1.000

1.000

1.000

1.000

1.000

1.000

1.000

1.000

1.000

1.000

0.950

1.000

1.000

0.737

Asia Pacific Journal of INNOVATION AND ENTREPRENEURSHIP

4.3.3 Sensitivity Analysis Results


To demonstrate the discrimination capability of the proposed framework, we conduct a
sensitivity analysis by (1) increasing the value corresponding to any one criterion to the highest
goal to which organization can aspire (called aspired level), (2) simultaneously decreasing 10% of
both outputs and increasing 10% of all inputs of some specific DMU, and (3) simultaneously
decreasing 20% of both outputs and increasing 20% of all inputs of some specific DMU.
The sensitivity analysis results are also demonstrated in Table 4. At first, the results show
that increasing the value of any other criteria to the aspired level will not influence the
performance except the CCR results will be slightly biased for increasing the backup system
architecture (a3). Then, by simultaneously decreasing 10% of both outputs and increasing 10% of
all inputs of some specific DMU and also simultaneously decreasing 20% of both outputs and
increasing 20% of all inputs of some specific DMU, significant differences can begin to be
observed in cases in which the outputs decrease while the inputs increase. System C is the most
sensitivity system at extreme case, with the value of 0.456. Please refer to Table 4 for the
sensitivity analysis results.

5. Discussion
In the following discussion section, the managerial implications from the systemic
innovation perspective and from those of evaluation criteria and objectives of IT DR systems
performance will be discussed. Limitations and future research possibilities will be addressed.

5.1. Managerial Implications from Systemic Innovation Perspective


In the past, the DR was often regarded as the computer system or location problem
belonging to emergency management in organizations. However, regardless of the nature of the
customers and end users, many operating businesses need to be prepared for the unexpected
downtime, whether it is via natural disaster or human error. Thus, modern DR systems play roles
in ensuring business continuity has increased substantially. Hence, DR technology has evolved
significantly.
Todays IT DR systems are becoming increasingly complicated. Such systems integrate
various contexts including IT, business operations, management disciplines, etc. For example, in
the past, a private hot site, which is a mirror of the primary data center infrastructure in order to
Volume 9, No.2, 2015

65

take over immediately after the disaster, was extremely expensive because duplicate equipment
must be purchased and replaced at the same time. Now, modern hot site innovations allow users
to connect different equipment or share the same server space without concern for equipment
specification. Further, project management and information security management procedures are
also changing for the distributed backup. Top management support and commitment to DRP
operations, which include allocation of the time and resources required in the DR plan, also
change because the level of redundancy is affordable. Therefore, there are necessities for
evaluating systemic innovation performance.

The analytic procedure and results demonstrate that evolutions of DR systems are systemic
innovations, which include an interconnected set of innovations. According to the aspects and
criteria for evaluating DR system performance, which is summarized in [Table 1], almost all
technologies and management systems have been innovated during the past 5 to 10 years, no
matter from the aspect of backup servers ( a2 ), backup system architecture ( a3 ), the information
security management procedure ( b2 ), DR procedure ( b3 ), etc.
For example, Teefe (2014) recently summarized three novel DR technologies: server
virtualization, cloud computation, and mobile devices. Innovations not only exist in each
technology, the innovations also connect with each other. According to Teefe (2014), the novel
server virtualization, the process by which multiple servers are designed to operate out of the
same piece of hardware, has been innovated as new DR backup server ( a2 ) technology (Teeft,
2014). Cloud computing is another new DR innovation. According to Dix (2013), the cloud can
serve as a backup system architecture ( a3 ), which gives companies backups of data, failover of
servers, and the ability to have a secondary center far enough away to allow for regional disaster
recovery (Dix, 2013). Cloud computation provides backups and restorations to and from the cloud,
along with replication to virtual machines in the cloud, etc. Further, mobile devices can be an
intuitive part of any disaster recovery plan [DR Procedure ( b3 )], simply because almost everyone
has a cell phone or tablet on or near them at all times. Communication is key to disaster recovery,
so the connection with as many players as possible mitigates downtime (Teeft, 2014). Further,
organizations should assure to outline security protocols [Information Security Management
Procedure ( b2 )] regarding company data accessed on private devices in your businesss bring
your own device (BYOD) device policy (Teeft, 2014).

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Asia Pacific Journal of INNOVATION AND ENTREPRENEURSHIP

The Internet also connects the three DR innovations (server virtualization, cloud
computation, and mobile devices). These innovations also influence each other. For example,
Shafer noted that cloud computation is gaining popularity as a way to virtualize data centers
(Shafer, 2010). Some recent cloud computation innovation [e.g., CloneCloud (Chun, Ihm,
Maniatis, & Naik, 2010)] can automatically transform a single mobile device computation into a
distributed execution (mobile device and cloud computation). Apparently, advances in the DR
innovations are interlinked and influence each other. DR innovations are typical systemic
innovations.
According to Schilling (Schilling, 2005), the DEA is a useful quantitative method for
choosing innovation projects or systems. This study adopted the DEA as a systemic method to
evaluate innovative DR system performance and obtained reasonable and satisfactory results.

5.2 Managerial Implications from Evaluation Criteria of IT DR System


Performance
Based on the analytic results being demonstrated in [Table 3], we find that the input
criteria Telecommunication Infrastructure ( a4 ) and Carrier Support ( a5 ) are negatively
related to the output criteria. Both of Telecommunication Infrastructure and Carrier Support
are related to the Internet bandwidth. In general, critical business applications require high-speed
network to synchronous or replication data in order to meet RPO and RTO objectives. Enterprises
add their network and redundancy facilities for DR plans by leasing slow, copper-based T1 or E1
lines. Therefore, the Internet transaction fees are usually one of the major costs of DR sites
(Rajagopalan, Cully, O'Connor, & Warfield, 2012). However, the X center is a national research
institute with high-speed optical fiber backbone which support by government founding. The DR
Systems A, B, and C are linked together by dual optical fiber backbone network. The capacity of
optical fiber is large enough to achieve rapid data recovery with flexible and scalable ability.
Therefore, network capacity may not be the constraints in this situation. It depends on network
technology and organizations ability.

5.3 Managerial Implications from Objectives of IT DR Systems Performance


According to business continuous process, the DR objectives (RPOs and RTOs) are
determined by the Business Impact Analysis (BIA) phase, which differentiates critical and noncritical functions. A business function may be considered critical if such function is regulated by
Volume 9, No.2, 2015

67

mission, business and operationally based on business loss concerns (Claunch, 2004; Garg, Curtis,
& Halper, 2003; Wiboonrat, 2008). It implies that once the DR objectives have been defined, IT
departments evaluate the DR system performance by meeting their RPOs and RTOs goal.
However, this research observes that the DR system performance would be significantly different
if the outputs decrease while inputs increase [Table 4]. Inputs of DR system are also important for
DR system performance since DR system investment is undoubtedly the most costly task. Yang et
al. found that the DR objectives receive influences from IT system availability (Yang et al. 2015).
Wiboonrat found that 50% of DR solution for business unit applications is overinvestment for
system reliability. Thus, IT managers define critical business functions not only in consideration
of reputation, operation, and regulation, but also finance cost (Wiboonrat, 2008). The findings of
this work are consistent with the research results by Wiboonrat. M and Yang et al (Wiboonrat,
2008; Yang et al, 2015).

5.4 Limitations and Future Research Possibilities


There are two limitations of using the proposed MCDM framework of this study.
First, albeit some exiting researches have provided valuable insights for DR site selections, this
research is the first attempt to evaluate the performance of DR system(s) and site(s) via the Data
Envelopment Analysis (DEA) method. The raw data was derived based on Taiwanese experts
opinions, which may be controversial. In this regard, future DR system performance evaluation
researches may include studies of larger economies with more available experts.
Second, in the era of Big Data, more and more organizations are facing the needs of DR
for Big Data applications. The Big Data, which is characterized by data volume, variety, velocity,
variability, veracity, and complexity, have imposed heavy burdens on IT system performance in
data centers. The data volume may exceed the traditional IT system capability. Innovative IT
techniques and infrastructures may appear in the near future. Therefore, the novel aspects and
criteria maybe required for evaluating the performance of the DR systems in the era of Big Data.
In this regard, the current DR system performance evaluation framework may be challenged in the
future due to the emergence of novel IT applications.

6. Conclusion
As IT systems have become increasingly critical to the smooth operations of modern
organizations, the importance of ensuring the continuous operation and recovery of IT systems
68

Asia Pacific Journal of INNOVATION AND ENTREPRENEURSHIP

has increased. Although management understands the importance of DRs, adequate allocation of
budgets and resources is still worthy of investigation. In order to determine the DR sites
investment, management should appropriately evaluate the efficiency of DR sites performance. A
holistic approach to DR site performance evaluation must evaluate multiple factors on the
technical and business front.
The contributions of this research are twofold. On the one hand, existing research on DR
sites allows for assessment of the technological performance only. This research goes further by
providing methods to evaluate the overall DR sites performances. This study provides a
performance evaluation analytic framework of IT DR sites for data center and corporate IT
decision makers. The contributions of the studies that focus on a particular technological area are
very significant but are nonetheless limited from the viewpoint of investment since they do not
provide a complete picture. This research provides a complete picture of DR sites and
demonstrates the feasibility of the DEA method on related research topics.
On the other hand, the nature of DR is indistinct and involves various considerations to
identify and backup the data into new insights. This study defines the DR site efficiency factor
from the aspects of business continuity management as well as the enterprise IT infrastructure.
According to the performance evaluation results, firms can compare their DR sites efficiency
with that of others in the same industry and then develop strategic plans for enhancing their
performance. Thus, this research can provide future researchers with an overview of the DR site
with appropriate performance evaluation results.

<received: 2015. 05. 26>


<revised:

2015. 07. 24>

<accepted: 2015. 07. 30>

Volume 9, No.2, 2015

69

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Fueling Economic Prosperity through Incubation


System: A Case Study from an Eastern Indian
Province

Manisha Acharya and Subhransu S Acharya

Abstract
Entrepreneurship has been accepted as one of the best answers to mitigate the problem of
unemployment and is a cause of economic prosperity of any country. Thus, to create more jobs,
more entrepreneurs are needed in the society. Hence, various Government and non-Government
agencies are making efforts towards promoting entrepreneurship with an objective to create jobs.
Therefore, promoting innovation, entrepreneurship and resultant economic growth in all
countries have become issues of national significance. In India, different agencies of Government
of India are doing good work in helping business incubators to promote entrepreneurship with an
objective of economic prosperity of the country. The present paper gives a whole some idea about
the role of Incubation centres in converting Innovators to entrepreneurs in the Indian context. The
work involves a case study of a Technology Incubation centre in the Eastern Indian province of
Odisha and it has examined its role in creation of entrepreneurship in this part of the country.
The data source was mainly primary. The incubatees from the technology incubation centre were
subjected to a structured questionnaire survey. The financial and economic impact of the new
start-ups has been studied and it is inferred that there is justification in investing in promotion of
incubation system in a country.

Keywords: Innovation, Entrepreneurship, Business Incubation, Knowledge economy

Ph. D., Senior Incubation Manager, KIIT Technology Business Incubator, KIIT University, Bhubaneswar, India, E-mail:
drmanisha1971@gmail.com

Ph. D., Dy. General Manager, SIDBI MSME International Training Institute, Bhubaneswar, India, E-mail:

ssacharya1970@gmail.com

Volume 9, No.2, 2015

77

Introduction
Micro and Small Enterprises (MSEs) are important to almost all developing economies in
the world, having major employment, import dependency, and income distribution challenges.
Entrepreneurs and Economic development are two sides of the same coin. Entrepreneurs are key
to economic development of a country. Entrepreneurship and Economic development of a country
are inter-related. Entrepreneurs play a pivotal role not only in the development of industrial sector
of a country but also in the development of farm and service sector. Establishing Micro and Small
Enterprises (MSEs) is not as easy despite having innovative inventions or ideas. It takes more
than just having an idea of establishing a start-up. Planning and arrangement of scarce resources
like Finance, Infrastructure, Technology, Sourcing of raw materials, Market places (buyers) and
organizing Sales distribution channels are the major challenges for establishment and survival of
any enterprise. Majority of start-ups fail in their first year of inception. Many of these failures can
possibly be prevented if entrepreneurs get hand-holding support by an Institution having
specialized Incubation programs. An incubator's main goal is to produce successful Micro and
Small Enterprises with an array of targeted resources and services. These incubates grown in the
incubators have the potential to create jobs, develop technology for import substitution,
commercialize new technologies, and strengthen local and national economies. "Business
Incubators are playing a catalytic role in realization of dreams of innovators leveraging certain
congenial policy initiatives from Government.

Objective of the Present Study


The objective of this work is to ascertain whether the Technology Incubation process has had a
positive impact on the financial and economic indicators of success of incubated start-up enterprises.
These would include empirical analysis of turnover, employment and investment data over a period of
three years in respect of the incubated enterprises. In addition, the paper shall also deal with the
understanding of certain aspects related to the process of incubation. They are as under:
1. The process of promoting entrepreneurship through incubation centres.
2. The period of incubation support.
3. The incubation infrastructure usually made available to incubated companies.
4. Outside investment support available to incubated companies.

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Review of Literature
Incubators can be described as an institutional start-up enterprise support system. Like real
life incubators which provide a controlled and protective environment in which premature small
babies are placed for care, the Business incubators provide the ideators and innovators a chance to
adjust to outside environment, and grow stronger before they face the outside world. In a similar
fashion, the start-up entrepreneurs business idea is incubated in the incubation centers (Gupta K,
Rathore Shivali 2015 ) .
Entrepreneurship has been conventionally rated as risky career, to break the myth and to
augment the supply of new entrepreneurs through education, research and training, the incubation
centers have been established. Their objective is to help create and grow young businesses by
providing them with necessary support and financial and technical services. The start-up
companies spend on an average two years in a business incubator during which physical
infrastructure like office space, equipments etc. and most importantly funding support and need
based mentoring is provided by the incubators to the start-up businesses.
The concept of technology and business incubation first emerged in the United States in
the 1960s. It is widely believed that the Batavia Industrial Center, opened in Batavia2, New York
in 1959 was the first business incubator outside of the academic environment (Alseikh, 2009). A
Business Incubator was a facility designed to assist infant businesses to become established and
sustainable during their start-up phase. However, this concept did not gain much outreach until
the late 1970s. During the 80s, the industry experienced significant growth as many recognized
the value of creating and expanding new businesses to maintain local economies. There were a lot
of people who got fascinated by the idea and started developing incubators to support new
ventures and entrepreneurship. The concept gradually started gaining ground and about a dozen
incubators took shape in the U.S. However, in those initial years of evolution of the concept of
Incubation, a few from the community restrained themselves from supporting the concept as they
felt that it would restrict common economic development strategies related to the expansion of
large companies. During the same period, the concept reached UK and Europe by means of
innovation centres and technology parks. In the late 1990s, there were nearly twenty five
incubation environments in the U.K (Sahay, 2008). The establishment and nurturing of Small and
Medium Enterprises (SMEs) is a vital input in creating dynamic market economies in the
economic and social development of transition countries. Entrepreneurs are the key drivers of
economic growth, innovation, balanced regional development and job creation.

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Innovation, as widely believed, is the driver of an idea into a marketable commodity or


process having potential for wider acceptance by the intended target consumers. An entrepreneur
has the vision to identify and ability to bring together these two and converts it to a successful
Enterprise. He has the unique ability to bring along all co-ordinates on same plane to achieve the
desired objectives. The famous robotics engineer Joseph F. Engelberger asserts that innovations
require only three things i.e. a recognized need, competent people with relevant technology and
financial support. In order to synthesise the benefits of Innovation and Entrepreneur towards
larger goal of meeting welfare objectives of opportunity multiplication through Enterprise
creation, Governments across the world adopt various policies. They include delineation of
policies for creating National competitiveness which includes building educational, R&D and
Physical and healthcare infrastructures. However, the single most important and decisive Policy
intervention towards this end is the Institution of Business Incubators. Business Incubation is an
important tool at fostering innovative enterprise creation and growth. The Business Incubators are
an important cog in the wheel of the Ecosystem bringing together finance, academics, policy and
business. When the said instrument of intervention is to promote Technology Innovations, they
are christened as Technology Business Incubators or TBIs.
The Business Incubators bring together the advantages of providing shared physical
infrastructure including office space, R&D facility, communication facilities, finance through tie
ups with seed funds for start-up capital. The Technology Business Incubator [TBI] is an initiative
by Technical Institutions / Universities, Public research institutes, Government and private
institutions to promote new technology intensive or knowledge driven enterprise. A TBI
intervenes in the spatial processes of a knowledge economy, integrates innovation and enterprise
development policy and fosters innovative start-up entities. Technology Business Incubators are a
powerful economic development tool. They promote the concept of growth through innovation
and application of technology, support economic development strategies for small business
development, and encourage growth from within local economies, while also providing a
mechanism for technology transfer. Business incubation is the temporary, facilitative support
provided to start-up enterprises through the delivery of complex services and special environment
with the aim of improving their chance of survival in the early phase of the life span and
establishing their later intensive growth.

Indian Incubation Scenario-An Overview

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Asia Pacific Journal of INNOVATION AND ENTREPRENEURSHIP

India after independence has initiated a series of steps towards promoting Science and
Technology, Research & Development as also promoting Enterprises especially in Small Scale
Sector. A chain of Research Laboratories, Entrepreneurship Development initiatives including
setting up of Institutions like Entrepreneurship Development Institute of India (EDII), start up
financing initiatives like the State Finance Corporations etc. were set up. During the eighties, with
support from UN Fund for Science and Technology, three pilot Technology Business Incubators
(TBIs) were commissioned in India. The National Science & Technology Entrepreneurship
Development Board (NSTEDB), established in 1982 by the Government of India (GOI) under the
aegis of Department of Science & Technology, is the institutional mechanism to help promote
knowledge driven and technology intensive enterprises. Besides NSTEDB, other Institutional
mechanisms to promote Business Incubator support systems are piloted by Biotechnology
Industry Research Assistance Council (BIRAC) of Department of Biotechnology (DBT), Ministry
of Micro, Small & Medium Enterprises (MSME), GOI and

Technological Incubation and

Development of Entrepreneurs (TIDE), Department of Electronics and Information Technology


(DeitY), ICAR (Indian Council of Agricultural Research) etc. (Acharya, M, 2013) .\

Source: http://www.nstedb.com/booklet.pdf 2014

Outcome of Incubation system in India


At a macro level, as per a 2014 report of National Science & Technology Entrepreneurship
Development Board (NSTEDB), India, over 32,000 persons were employed by incubated and
graduated enterprises while a Turnover of over INR 15 billion was generated with more than 450
copyrights or patents.
So far, out of about 130 TBIs / STEPs in the country, 86 have been set up under the aegis
of NSTEDB. As per a tentative estimate, about 500 enterprises graduate out of Incubators and
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81

roughly 60 per cent of them are Technology based. As per the said estimate, about 500 enterprises
graduate out of Incubators and roughly 60 per cent of them are Technology based. The emergence
of service sector as a very strong contributor in the overall economic canvass of the country
coupled with emergence of knowledge based Enterprises has given a perfect dream platform for
the TBIs to incubate such Enterprises. The ICT based enterprises and ITESs, Tele-medicine and
Bio-informatics etc. are increasingly in demand for Incubation besides the frontier areas of BioTechnology, Nano-Technology, Energy & Environment.

A Brief on Business Incubator Support Schemes in India


1. The National Science and Technology Entrepreneurship Development
Board (NSTEDB), Department of Science and Technology (DST), Government of
India :
The NSTEDB, aims to create "job-generators" through Science & Technology (S&T)
interventions. Major objectives of NSTEDB are to promote and develop entrepreneurship by
using scientific methods and utilizing science and technology infrastructure in the country. The
NSTEDB has already catalyzed and supported several Science and Technology Entrepreneurs
Parks (STEPs), Technology Business Incubators (TBIs) etc. in addition to many Entrepreneurship
Development Cells (EDCs), in different parts of the country. According to Incubator Conclave
of STEPs and TBIs report (2012), there are 52 numbers of TBIs and STEPs in India who have
incubated over 1700 start-up companies. Some of the well know TBIs and STEPs are Centre for
Innovation and Incubation (CIIE) @ IIM Ahmedabad, SIDBI Innovation & Incubation Centre
(SIIC) @ IIT Kanpur, Venture Centre, NCL, Pune, IKP Knowledge Park, Hyderbad, TRECSTEP, Trichy, Science & Technology Park, University of Pune, SINE @ IIT Bombay, Technopark TBI, Trivandrum, KIIT-TBI, Bhubaneswar @ KIIT University, JSSATE-STEP, Noida,
STEP @ IIT Kharagpur, VIT-TBI, Vellore, ICRISAT, Hyderabad etc. The major thrust areas in
these incubation centers are IT & ICT, Healthcare, Biotechnology, Bioinformatics, Nanotechnology, Waste management, Electronics & Embedded system, other Engineering
manufacturing sectors, Renewable energy, Aerospace, Chemical and Material Science, Industrial
design etc.

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Asia Pacific Journal of INNOVATION AND ENTREPRENEURSHIP

Source: http://www.nstedb.com/booklet.pdf 2014

2. Support for Entrepreneurial and Management Development of SMEs


through Incubators of Ministry of MSME, Govt. of India:
Under the scheme "Support for Entrepreneurial and Management Development of SMEs
through Incubators" of Development Commissioner (DC) - MSME, 100 "Business Incubators"
(BIs) are being set up under Technology (Host) Institutions and each BI is expected to help the
incubation of about 10 new ideas or units. This scheme is operational since April 2008. The main
objective of this scheme is to assist incubation of innovative business ideas that could be
commercialized in a short period of time, resulting in the formation of MSMEs that have
distinctive presence in the market. Under this scheme, each BI will be given between INR 400
thousand to INR 800 thousand per idea/unit nurtured by them. The BIs are present in different
institute like IITs, NITs, Engineering Colleges, Technology Development Centers, Tool Rooms,
R&D and/or Technical Institutes etc. As per date available over their Website (http:// www.
dcmsme.gov.in/ schemes/incubator.htm), presently 129 BIs are approved under this scheme.

3 . Technology Incubation and Development of Entrepreneurs (TIDE)


Scheme of Department of Electronics and Information Technologys (DIT) :

Technological Incubation and Development of Entrepreneurs (TIDE) scheme of DIT was


launched in the year 2008. The Scheme has multipronged approach in the area of Electronics, ICT

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83

and Management. The following support for the Incubated Companies are available from TIDE
Centers:
i. The TIDE Centre provides operating space to the selected companies on rent for a
period of up to 2 years (extendable by one year).
ii. Each company selected for incubation gets financial support, in the form of soft loan,
of up-to INR 2.5million over a two (or three) year period (subject to satisfactory
performance). The amount of loan would be up to a maximum of 80% of the project
cost of the incubating company. The loan can be used for equipment and
consumables essential for the implementation of the project, subsistence allowance
of the promoters, staff salaries and other contingencies.
There are 27 total TIDE centers in India and around 80 start ups have been supported by
this scheme in India.

4. Bio-Incubator Support Scheme (BISS) of BIRAC, DBT


For empowering and enabling the Bio-tech based Innovation Eco-system in India, BIRAC is
playing a major role in India. There are twelve (12) number of BIRAC funded Bio-incubators in India
(Source: http://www.birac.nic.in/programmes.php). The BIRAC Bio-incubators focus on, inter alia,
medical devices, Bio-pharma vaccines and diagnostics, industrial Biotechnology etc. The Bio-incubators
endeavor to provide incubation space and other required services for entrepreneurs and start-up
companies for their initial growth. There are different schemes of BIRAC, like Biotechnology Ignition
Grant (BIG), Small Business Innovation Research Initiative (SBIRI), Biotechnology Industry
Partnership Program (BIPP), Contract Research Scheme (CRS) etc, which are the main source of
funding for Bio based Entrepreneurs.

Business Incubation Scenario in Odisha State, India


Odisha state, in the eastern coast of India lies between 17.49N latitude to 22.34N latitude
and from 81.27E longitude to 87.29E longitude. The state is well known for its rich mineral
resources. However, the state also is known as one of the lowest ranked states in terms of poverty.

Few of the challenges before the state economy, affecting its growth are as below:
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Asia Pacific Journal of INNOVATION AND ENTREPRENEURSHIP

The incidence of poverty in Odisha is high at 32.59% (2011-12) despite plenty of


natural resources in the state. The All India average is 21.92% for the corresponding
period.

State per capita income is Rs.25,891/- as against national average of Rs.39,961/during 2013-14.

Human Development Index at 0.30 vs. 0.55 at national level in 2011.

Creation of more livelihood and employment opportunities.

Lack of quality roads, ports, rail network, irrigation and market and storage
infrastructure for agriculture produce.

19 out of 30 districts are affected by Left Wing extremism making it difficult for
infrastructure and other developments.

Frequent natural calamities.

The sectoral performance reflects the change in the magnitude and composition of GSDP
of the state economy over time. From a pre-dominantly agricultural economy, the state GDP
during 2013-14 clearly marked a shift of the economy becoming more oriented towards industrial
and services sectors. The services sector, in tune with national economy, has exhibited dominance
with 59.02 per cent of state GDP. The share of agriculture sector in the GSDP, which was over
70% in the early 1950s, has come down to 15.58%, as per advanced estimates of 2013-14. About
60% population of the state draws its sustenance fully or partly from the agriculture sector.
In Odisha, there are eleven Business Incubation centers which are supported by DCMSME. However, there is only one Technology Business Incubation center (TBI) viz. KIIT
Technology Business Incubator supported by National Science and Technology Entrepreneurship
Development Board (NSTEDB), DST, GOI. This Incubation center is also supported by DBT
(BIRAC), DeitY(TIDE) and DC-MSME schemes of Govt. of India.

TBI for Enterprise Creation A Case Study of KIIT-TBI,


Bhubaneswar, Odisha
Established in year 2009, KIIT Technology business Incubator (KIIT- TBI), an initiative of
KIIT University, supported by the National Science and Technology Entrepreneurship
Development Board [NSTEDB] and Department of Science & Technology [DST], Government
of India is the only Technology Business Incubator in the state of Odisha and one amongst the
fifty-odd in the country. Besides NSTEDB, the KIIT-TBI is now recognized by other Central
Government agencies such as TIDE (DeitY), DC-MSME, BIRAC (DBT), TDB etc. The principal
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85

thrust of KIIT-TBI is Biotechnology and Information & Communication Technology (ICT).


Besides, KIIT-TBI is also focusing on other emerging areas in Engineering & Technology and
Rural Innovations.

During a very short period of its existence, KIIT-TBI has so far incubated 37 business
entities out of which nine have graduated out to set up full scale commercial enterprises. KIITTBI accelerates the development of entrepreneurial businesses by providing them with assistance,
which addresses the particular needs of new companies during the key stages of development
such as product characterization, prototyping, market development and continuous innovation etc.
KIIT-TBI provides various promotional supports like product launches, product seminars,
exhibitions and media interviews to facilitate product promotion and marketing activities for
incubated enterprises. It also has been conducting various capacity building and training programs
like Entrepreneurship Awareness Camps (EAC), Entrepreneurship Development Programs (EDP),
Techno

Entrepreneurship

Development

Programs

(TEDP),

Women

Entrepreneurship

Development Programs (WEDP) etc.

Impact Analysis of Incubation


Methodology
The present study has been carried out by empirical analysis of survey results obtained
through Interview method. The participants of the survey included the CEOs of around 35
Incubated start-up companies at KIIT-TBI. The sample constituted over 85% of the universe. The
targets were administered a structured questionnaire and their responses were recorded. A detailed
analysis of the survey was made and extrapolated to compile and arrive at the findings to
conclude the effect of Incubation intervention on the incubated enterprises.

The following hypotheses were proposed to be tested by way of the empirical analysis.
Null Hypothesis 1: There is no increase in sales revenue of start-ups with incubation
support.
Alternate Hypothesis 1: There is significant increase in sales revenue of start-ups with
incubation support.
Null Hypothesis 2: There is no increase in employment generation by start-ups with
incubation support.

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Asia Pacific Journal of INNOVATION AND ENTREPRENEURSHIP

Alternate Hypothesis 2: There is significant increase in employment generation by startups with incubation support.
Null Hypothesis 3: There is no increase in total investments in the start-ups with
incubation support.
Alternate Hypothesis 3: There is significant increase in total investments in the start-ups
with incubation support.

For the purpose of analysis, the data in respect of turnover, employment generation and
investments were obtained for first year and third year. This was done so because the incubation
support is available through a period of three years. The data so collected were summarized and
were subjected to test for equality of means. Further, they were also treated with dummy
variable analysis to test structural change.
Data Analysis: The results of the empirical analysis are presented below.
Test for Equality of Means of Incubated Enterprises in two periods
Variable

Mean

Sales Revenue P1

1891279.0

Sales Revenue P2

4634835.0

Employment Generation P1

5.206897

Employment Generation P2

12.000000

Total Investments P1

954310.3

Total Investments P2

2617586.0

p-value
0.0477

0.0001

0.0006

Significance during Period 2


Dummy Variable analysis to test the structural change
Variable

Coefficient

p-value

Sales Revenue

2743556.0

0.0347

Employment Generation

6.793103

0.0000

Total Investments

1663276.0

0.0048

Data Interpretation:
As can be observed from the above test results, there is a significant variation in sample
means of sales revenue for period 2 (end of Year 3) and period 1 (end of Year 1) with p value of
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0.047 i.e. less than 0.05 (significance less than 5%). Similarly, there is a significant variation in
sample means of employment generation with p value of 0.0001 i.e. less than 0.05 (significance
less than 5%). As regards investments too, significant variation in sample means of employment
generation was observed with p value of 0.0006 i.e. less than 0.05 (significance less than 5%).
Thus, the null hypotheses are rejected.
When subjected with dummy variable analysis, the coefficients of Sales revenue,
Employment generation and total investments remained at INR 2.7 million, 6.8 persons per
enterprise and investment of INR 1.7 million with p value of 0.035, 0.00 and 0.0048 respectively.

Discussion and Conclusion


The Incubators are the most vital cog in the Innovation Eco-system in the country. India
has consciously evolved a policy to encourage commercialization of Technologies and
Innovations from Research Institutions and other Institutions of higher learning. Now time is ripe
to rapidly upscale the model to galvanize more such engines of growth for capitalizing the benefit
of technological advancements for larger societal benefits!

The Indian economy in general and economy of Odisha state in particular, has undergone a
shift in composition, where the services sector is assuming a significant proportion. The share of
services sectors, especially IT, ITES, Telecom etc. are growing which indicates a shift towards a
knowledge driven economy. The state of Odisha is counted as one of the bottom ranking states in
terms of important development indices. However, of late, the state has initiated a number of steps
those have started showing encouraging results in terms of its ranking amongst Indian states in
ease of doing business index etc. With its capital city emerging as an educational hub of eastern
India and with quality Research and Development output from these institutions of excellence
coupled with contribution of national level R&D institutions in the state, there is a very good
opportunity for commercialization of such research outputs. With innovations from students,
faculties and others, there is a need to capitalize these and convert them to commercial enterprises
for societal benefits.

The Technology Business Incubators could be the force multipliers in the efforts of the
state to create an ambient eco-system for technology commercialization. The study attempted to
empirically map and quantify to an extent the contributions of the only TBI in the state. The
analysis of data from the TBI has revealed that there have been positive effects of incubation
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intervention. The impact has been both financial improvements (increase in sales revenue) and
economic contributions in terms of creation of additional employment and additional investments.
Thus, it can be inferred that the intervention through the incubation system has been yielding
dividends and there is a need to upscale the incubation system in the state and also the whole
country so as to meet the objectives of making the country a truly technology driven knowledge
economy and creating more employment opportunities.

<received: 2015. 09. 28>


<revised:

2015. 11. 25>

<accepted: 2015. 12. 05>

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Acharya, M. (2013). Challenges in managing incubation of innovation in biotechnology sector in
India. Asia Pacific Journal of Innovation and Entrepreneurship, 7(3), 53-69.
Acharya M. (2013). The journey through idea, innovation and enterprise: Role of technology
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Acharya, S. S., & Vaswani L. K. (2014). MSME growth for inclusive growth: Importance of a
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Acharya, S. S. (2012). Innovative MSME financing to manage and balance growth targets, capital
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Bulsara, H. P., Gandhi, S., & Porey P. D. (2013). Grassroots innovations to technoentrepreneurship through gian Technology business incubator in India: A case study of
nature technocrats. International Journal of Innovation, Sao Paulo, 1(1), 85-125
DCosta V. (2008). Enabling innovation and rntrepreneurship through partnerships. UNESCO
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Khalil A. M., & Olafsen E. (2010). Enabling innovative entrepreneurship through business
incubation. The Innovation for development report 2009-2010, European Business School,
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Lalkaka, R. (2002). Technology Bbusiness incubators to build an innovation based economy.
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A., & Dutta, P. K. (2005). Indian innovation system Perspective and challenges.

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Gupta, K. L, & Rathore, S. (2015). Study of incubation centres & its role in fostering
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Conference on Make in India Emerging Trends in Trade & Innovations for Effective
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Nkem, O. O., Mercy, U. O., & Kayode, O. B. (2014). Innovative policies in technology business
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Simon, S. & George, O. (2012). Measuring business incubation outcomes- An Irish case study.
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Soni, V. K., Khare, V. K., & Wani, V. P. Strategic Approach for Technology Business Incubators
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The Effect of Innovation Activities and Governmental


Support on Innovation Performance: Comparison between
Innovative SMEs and General Companies
Juil Kim and Sun-young Park

Abstract
Creating innovation performance through technological innovation and managerial
innovation and securing competitive advantage are coming to the fore as national issues beyond
organizational and individual dimensions. Korea is also putting much effort into strengthening
competitiveness of small and medium enterprises (SMEs) and creating national wealth by
aggressively introducing and implementing the innovation certification system for venture companies
and technological and/or managerial innovative SMEs to boost innovation of small companies
systematically.
This study analyzed the effects of various factors such as firm size, innovation activities and
governmental support on various types of innovation performance; product innovation, process
innovation, organizational innovation and marketing innovation, and derived differentiated
characteristics of innovative SMEs and discuses in-depth implications through comparison with
general companies.
As a result, the following implications were derived from the empirical analysis. First, there is
a need for differentiated management to motivate corporate entities to engage in the four major
innovation activities to improve innovation performance which is directly related to corporate
performance. In other words, corporate resources need be managed appropriately for the purposes
of innovation. This is important to a manager in charge of management, introduction and execution
of innovation seeks, since the effects of factors vary with different types of innovation. Second, the
factors affecting innovation performance differed between innovative SMEs and general companies.
Therefore, in relation to management and policy of SMEs, it is necessary to differentiate innovation
strategies according to different types of enterprises.

Keywords: venture business, innovative SMEs, firm size, innovation activity, governmental
support, innovation performance

Researcher, Korea Institute of S&T Evaluation and Planning (KISTEP), E-mail: juil@kistep.re.kr
Corresponding author: Professor, Miller MOT School, Konkuk University, E-mail: sypark@konkuk.ac.kr

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1. Introduction
Since Schumpeter proposed a theory of technological innovation, innovation has been
perceived as the driving force of capitalism and economic growth. Now, innovation is mentioned in
not only economics and business administration but also enterprises, hospitals, and the public and
third sectors as a determinant of organizational and individual competitive advantages. In the same
vein, researchers consider the true nature of innovation represented by technological and management
innovation, empirically analyse its determinants, processes and outcomes, and apply the findings to
organizational management processes in practice.
Innovative SMEs (small and medium-sized enterprises) have been regarded as important for
effectively implementing innovation and creating outcomes. Innovative SMEs refer to SMEs having
innovative capabilities, surpassing general SMEs in terms of innovative performance through
technological and managerial innovation, and promising to create added value in the foreseeable
future (Hicks & Hegde, 2005; Kang & Lee, 2012). Korean economic system is characterized by the
substantial roles of SMEs in employment and their measurable importance in all economic activities.
Therefore, enhancing national competitive advantages by strengthening SMEs' innovativeness has
become an issue of national significance.
In this context, policy, support and development measures for innovative SMEs have been
established. Particularly, an array of relevant policy initiatives have been taken since the enactment of
the Act on the Promotion of Technology Innovation of SMEs1in 2013. Specifically, prior to the
current system, the venture business certification criteria were formulated in 1997, followed by the
InnoBiz2 System for certifying technologically innovative SMEs in 2001 and the certification system
for managerial innovative SMEs in 2006 based on the Comprehensive Plan for Strengthening SMEs
Competitiveness framed by the Participatory Government in 2004.
Diverse research has been conducted concerning the measures for improving innovative
SMEs' innovation performance, which is perceived as a challenge at the national level. Yet, previous
studies have revealed the following limitations. First, a significant number of those studies are
concerned with the factors influencing management outcomes including sales or revenues without
considering the essential value of innovative SMEs, i.e. the roles of innovation performance and the
factors influencing the innovation performance (Sung, 2013; Lee & Chung, 2008; Chung, 2011; Jin et
al., 2012; Kwak & Suh, 2010; Yi, 2009).

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Second, some studies are focused only on particular types of innovative SMEs, and thus their
findings are far from generalizability (You, 2010; Yang & Song, 2007; Yoo & Yang, 2009; Yoon &
Seo, 2011; Kim, 2013). Also, those studies fail to compare innovative SMEs with general firms, and
have limitations in deriving differentiated characteristics and in-depth implications. Lee et al. (2008)
compare innovative SMEs with general SMEs in light of technological innovation performance and
managerial outcomes without verifying the influence of explanatory variables.
Third, as the proxy variables of innovation performance, only partial indicators of
technological innovation performance including patents and outcomes of new products are used,
which makes it difficult to discuss extensive outcomes of corporate innovation encompassing product
innovation, process innovation, organizational innovation and marketing innovation (Kim, 2013; Lee
et al., 2008; Yoo & Yang, 2009).
Thus, the present study verifies the effects of firm size, innovation activities and governmental
supports as the determinants of innovative SMEs innovation performance, and compares the findings
with those of general firms with a view to presenting differentiated theoretical and practical
implications for innovative SMEs. Moreover, factors influencing the comprehensive innovation
performance including product innovation, process innovation, organizational innovation and
marketing innovation are verified from multiple angles to derive some relevant implications for
innovation performance.

2. Rational and Literature


2.1 Innovation Theory
Innovation is a multidisciplinary topic discussed from academic and practical perspectives,
which is why the concept varies with different authors and contexts. As a pioneer who introduced the
comprehensive concept of innovation to economics and business administration, Schumpeter (1934)
defines innovation as a new combination, or a creative destruction of the established market
equilibrium. He emphasizes technology as a method of the new combination, and entrepreneurs as
the principal agents of the creative destruction. Building on Schumpeter's definition, Van de Ven
(1986) defines innovation as the process of new ideas being developed or filled by multiple members
engaging in transactions and lines within institutional environment. Amablie (1988) defines
innovation as the selection of creative ideas and a shift toward useful products, services and processes.

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Drawing on the extensive definitions of innovation, this study is to consider four principal
concepts that underscore the targets of innovation such as product innovation, process innovation,
organizational innovation and marketing innovation.
2.1.1. Product Innovation
Product innovation typifies the technological innovation, referring to creating unprecedented
novel products or altering and improving existing products. Tung (2012) defines product innovation
as applying differentiated technologies to introduce new products capable of delivering higher levels
of utility to customers than the old ones in the market. Similarly, according to Kristina & Dean
(2005), significant changes in technological features of products are an essential prerequisite for
product innovation.
A host of studies confirm the effects of product innovation on corporate market performance
(Yalcinkaya et al., 2007; Govindarajan & Kopalle, 2006; Sivadas & Dwyer, 2000; Henard &
Szymanski, 2001). For instance, Aboulnasr et al. (2008) argue that continuing efforts for innovation
by applying new ideas to products help extend their life cycles and ultimately sustain their
competitive advantages in the market. According to Kim & Huarng (2011), introducing new
knowledge and products to the market makes it possible to achieve innovation, which in turn allows
corporate competencies including financial performance and customer satisfaction to build up. In
short, against the backdrop of tougher competition, shorter lifecycle of products and ongoing
technological advancement, product innovation is viewed as ever more important (Ziamou &
Ratneshwar, 2003; Godener & Soderquist, 2004).
2.1.2. Process Innovation
In parallel with the product innovation, process innovation is viewed as representing the
technological innovation (Barney & Griffin, 1992; Dewar & Dutton, 1986; Tushman & Nadler, 1986).
Trejo et al. (2012) define the process innovation as the implementation of a new approach or the
significant improvement of production or delivery. That is, process innovation refers to introducing a
commercially worthwhile new production technique (Schumpeter, 1934), and is broadly applicable to
the process value chain involving production, data processing, delivery and service (Zaltman et al.,
1973). The OECD (2005) includes any substantive changes in process-related technology, tools and
software in the process innovation framework.
Papinniemi (1999) proposes a process innovation model from the perspective of business
reengineering, which is equivalent to management innovation, and emphasizes three core components
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of process innovation; enablers, targets and outcomes. First, the author attributes the process
innovation to technological enablers, dissatisfaction with the performance of existing products and
processes, and resource opportunities. Also, the author describes that shifts occur in such targets of
process innovation as processes, product structures, production organizations, man-machinecomputer connectivity, core sectors, user-friendliness, management and control. Lastly, as the
outcomes of process innovation, the author stresses such qualitative outcomes as flexibility,
improvement of quality and customer relationship and cost savings in addition to the betterment of
diverse quantitative indicators.
2.1.3. Organizational Innovation
Organizational innovation refers to introducing new methodologies to business practices,
internal organizations, and external relations with a view to implementing progressive or radical
changes (OECD, 2005). Organizational innovation is focused on organizations as both the principal
agents and targets of innovation, and is applied to multiple aspects including business practices,
knowledge management and interactions with external parties.
Organizational innovation is defined largely from two perspectives. First, studies considering
macroscopic innovation theories focus on not individuals but organizations as principal agents of
innovation. These studies regard organizational innovation as the overall process of introducing,
utilizing and commercializing new ideas in connection with products, services, processes,
technologies and systems for the purpose of organizational goal achievement, performance
improvement and customer satisfaction (Choe & Lee, 1997; Han, 2010, Park & Kim, 2008; Kessler,
2004; Kim, 1998). In other words, organization-led product innovation, process innovation, and
marketing innovation are described within a broad spectrum of organizational innovation framework.
Second, organizational innovation is defined in a narrow sense focused on changes and
improvement in managerial aspects and intangible methodologies involving organizational structure,
system, institution, consciousness, culture and behavior rather than technological aspects (OECD,
2005; Kenneth, 1967; Tidd & Bessant, 2009; Sundbo & Gallouj, 1998; Durst & Newell, 2001).
Although this definition may sound relatively narrower in scope than the abovementioned one, it
helps clarify the features of organizational innovation vis-a-vis other innovation targets such as
products, process and marketing. This study builds on the latter to define organizational innovation as
changing and improving business practice, knowledge management, flexibility in fulfilling business
practices, and external relations as part of new approaches to organizational operation (Ha et al.,
2010).
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Positive effects of organizational innovation on corporate performance have been verified by


many studies. Organizational innovation reduces the cost of corporate management and transactions,
and improves job satisfaction and labor productivity (OECD, 2005). Downs and Mohr (1979)
elucidate three benefits of organizational innovation, i.e. programmatic benefits, prestige benefits,
and structural benefits. Choe & Lee (1999) build on Downs & Mohr (1979) to ascribe financial,
symbolic and behavioral outcomes to organizational innovation.
2.1.4. Marketing Innovation
Marketing innovation has been less widely investigated and more ambiguously defined than
product innovation, process innovation and organizational innovation (Naidoo, 2010). Tidd &
Bessant (2009) define marketing innovation as an activity that takes place in market settings where
products and services of a firm are available, and name it position innovation which implies any
changes of the companys position in the market. Also, the authors include the innovation of essential
aspects of products involving customization together with changes in target market, pricing system
and distribution practice in the category of marketing innovation. The OECD (2005) defines
marketing innovation as a new method of marketing encompassing the innovation of product design,
package, distribution, promotion and pricing policy. Also, they describe that marketing innovation
helps respond effectively to customer needs, create a new market, position a product anew and
ultimately increase sales.
Given that marketing innovation is referred to as market innovation, it is perceived as a
determinant for new market creation and market success of products and services (Trienekens et al.,
2008). In a conceptual study on the sources of competitive advantage, Ren et al. (2010) assert that
marketing innovation can serve as a latent factor influencing the creation of sustainable competitive
advantage. Indeed, reviewing empirical analyses of marketing innovation and corporate performance,
Yang (2013) analyzes that market orientation increases marketing innovation, and ultimately
improves financial and non-financial corporate performance. Likewise, according to Hong & Chaiy
(2008), marketing innovation exerts positive effects on overall corporate performance. Naidoo (2010)
observes that marketing innovation influences the competitive advantages in differentiation and
pricing, which in turn becomes a pivotal factor of corporate survival.

2.2 Innovative SMEs


Innovative SMEs (small and medium-sized enterprises) are extensively defined across
academic disciplines and government policies. The OECD (2005) defines an innovation-active firm
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as engaging in one or more innovation activities relevant to product innovation, process innovation,
marketing innovation and organizational innovation. An innovative indicates when it successfully
innovates and create performance. The definition includes the two concepts in an inclusive category
of innovative firms. Chung (2011) defines a firm as an innovative SME when it proves superior to
other SMEs in view of technological innovation activities and relevant outcomes.
Based on the aforementioned rationale, innovative SMEs are defined, in general, as a policyrelated concept in Korea. Specifically, innovative SMEs are perceived to create more value through
innovation activities in terms of technology and management than general firms (Kang & Lee, 2012;
Lee, 2007). Currently, venture businesses, technological innovative SMEs and managerial innovative
SMEs are classified as innovative SMEs as per local policy initiatives. Venture businesses have been
lawfully stipulated since the latter half of the 1990s, whereas the lawful foundation for technological
and managerial innovative SMEs was not laid until 2013 when the Act on the Promotion of
Technology Innovation of SMEs was enacted. According to the applicable provision, innovative
SMEs including venture businesses are defined as the SMEs that are capable of securing
competitiveness or well-positioned for future growth potential by means of technology, management
and other innovation activities.
This study defines innovative SMEs from the perspective of local policy initiatives. That is,
innovative SMEs in this study include venture businesses, technological innovative SMEs and
managerial innovative SMEs that create more value than general firms through technological and
managerial innovation activities.

2.3 Literature
2.3.1. Firm Size and Innovation Performance
Effects of firm size on innovation activities and outcomes have been considered by many
researchers. First, the postulation that firm size serve as a positive factor of innovation is based on
Schumpeter (1942). Schumpeter (1942) posits that large enterprises are favorably positioned for
technological innovation with their capacity for implementing the economies of scale in terms of
R&D, production, marketing and financing. Schumpeters assertion that a large-scale company can
gain the market power in proportion to its size which in turn facilitates its technological innovation
activities has been widely known as the Schumpeterian hypothesis among the later generation of
researchers.
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The finding that the firm size positively affects innovation supports the Schumpeterian
hypothesis, forming the mainstream in the literature (Cohen, 1995; Yin & Zuscovitch, 1998; Cohen
& Klepper, 1992). Studies highlighting the positive effects of firm size on innovation provide the
following grounds (Arias-Aranda et al., 2001). First, large enterprises have competitive advantages in
respect of the stability and availability of internal resources, which allows them to effectively support
R&D projects. Second, companies boasting of high sales figures can appropriately distribute the fixed
innovation cost, e.g. process innovation, and thus improve the efficiency of R&D.
Third, effective trade-offs between non-production components, e.g. R&D, marketing and
finance, increase the chance of innovation, which is likely to arise more efficiently in large
companies. Fourth, as large enterprises are fitted with diversified divisions and thus can achieve the
economies of scope, they are highly likely to effectively reduce any innovation-related risk factors.
Conversely, some argue that the firm size has negative effects on innovation (Scherer & Ross,
1990; Acs & Audretsch, 1990, 1991; Pavitt et al., 1987; Bound et al., 1984) based on the following
grounds. First, corporate growth is likely to cause losses in terms of management, lessening the
efficiency of R&D activities. Second, large enterprises are characterized by bureaucratic management
across the board, which is detrimental to R&D activities. Third, individual entrepreneurs and
researchers contribution to innovation may not be properly rewarded in large enterprises, which
decreases individual members efforts for innovation and undermines the opportunities for innovation.
As for the relation between the firm size and innovation performance, research findings
mostly converge upon their positive (+) relationship (Sung, 2005; Kim, 1992; Yoon, 2006; Jang,
2011; Choi & Lee, 2011; Kim, 2009). Conversely, some report on their negative (-) relationship
(Kang, 1994; Scherer & Ross, 1990), while others argue the firm size influences some aspects of
innovation performance (Hong & Kim, 2009). Still others suggest both positive and negative effects
of firm size on innovation (Scherer, 1965). In addition, some researchers report on the insignificant
effects of firm size (Kamien & Schwartz, 1982).
Taken together, the relationship between firm size and innovation performance varies with
study targets, measures and analysis methods. Hence, it is unreasonable to affirm any unidirectional
relationship between them without allowing for relevant conditions. This study sets up a hypothesis
on the relationship between firm size and innovation performance as below based on the previous
findings.

Hypothesis 1. Firm size will influence innovation performance.


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2.3.2. Innovation Activities and Innovation Performance


Innovation activities collectively refer to scientific, technological, organizational, financial and
commercial processes implemented to practice innovation (OECD, 2005). More often than not, it is
easy to associate innovation with technological innovation, and to narrow technological innovation
activities down to R&D in discourses. Yet, the inclusive concept of innovation activities is not
limited to R&D (Arias-Aranda et al., 2001). Innovation activities are also seen in functional divisions
such as marketing and management (Lawrence & Lorsch, 1967; Song et al., 1997), which implies
that a series of innovative activities intended to meet market needs can be viewed as innovation
activities in terms of technological and managerial aspects (Tushman & Nadler, 1986).
Depending on targets and goals of activities, innovation activities are sub-divided into
technological innovation activities and managerial innovation activities. Technological innovation
activities are meant to implement and facilitate technological innovation involving product
innovation and process innovation, and typified by R&D. According to Kennedy & Thirlwall (1972),
the essence of R&D consists in research, i.e. exploration into new knowledge, and development, i.e.
technological activities for transforming research findings or scientific knowledge into new products
or processes.
Technological innovation activities are known to provide two benefits at two different levels
(Kim & Yun, 2009). First, technological innovation activities improve the performance, price and
quality of a product to increase customer satisfaction, to prevent customer churn, to secure new
customers, and ultimately to strengthen the competitiveness in the market. Second, technological
innovation activities improve business processes, enhance technological capabilities, increase the
responsive and absorptive capacities toward new technologies, and thus enable sustainable and stable
creation of profits.
Technological innovation activities concern the alteration and improvement of technologies
applicable to products and processes, whereas managerial innovation activities are defined as efforts
for making creative changes of corporate management system with intent to strengthen
competitiveness and to survive (Amabile, 1988). Pierce & Delbecq (1977) regard the managerial
innovation as a social process of accepting and applying new things within an organization,
emphasizing the difference from scientific discovery. Kimberly & Evanisko (1981) define managerial
innovation as the innovation of managerial skills and of programs, products and technologies that
influence the essence, quality and quantity of information acquired in the course of a decision making
process.
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Cho & Shin (1996) define managerial innovation as essentially altering the important parts of
a firm by deliberately carrying out plans or programs intended to change organizational members,
management system, structure, production process technologies and new products and services.
Taken together, managerial innovation activities may be construed as a series of activities intended
for effective organizational changes by responding to the dynamic internal and external environment
surrounding an organization.
Ultimately, innovation activities are intended to derive innovation performance, improve
managerial performance and attain competitive advantages. Accordingly, extensive empirical
analyses of the relationship between innovation activities and innovation performance mostly indicate
positive effects. First, R&D activities presented as the most dominant technological innovation
activities in many studies are found to be positively related to innovation performance (Kwon, 2011;
Kim, 2011; Ban & Kim, 2012; Lee & Limb, 2012; Serrano-Bedia et al., 2012; Hadjimanolis, 2000;
Romijin & Albaladejo, 2002; Lin et al., 2012; Wang & Kafouros, 2009; Becker & Dietz, 2004; Freel,
2003). In particular, many recent studies distinguish internal from external innovation activities, and
derive the findings that highlight the synergetic knowledge creation drawing on collaborative
innovation networks and coordinating the internal and external innovation capabilities and
knowledgeability (Kim, 2011; Lee & Limb, 2012; Serrano-Bedia et al., 2012; Hadjimanolis, 2000;
Lin et al., 2012; Becker & Dietz, 2004).
Previous studies on the relationship between technological innovation activities and
innovation performance employ such diverse dependent variables as new product sales (Kwon, 2011;
Serrano-Bedia et al., 2012; Wang &Kafouros, 2009), new product development and launch (Kim,
2011; Ban & Kim, 2012; Hadjimanolis, 2000; Becker & Dietz, 2004), product innovation (Kim,
2011; Ban & Kim, 2012; Romijin & Albaladejo, 2002; Freel, 2003), process innovation (Kim, 2011;
Ban & Kim, 2012; Freel, 2003), quality improvement (Ban & Kim, 2012), innovation certification
(Lee & Limb, 2012), patent counts (Romijin & Albaladejo, 2002), acquisition of new technology
(Lin et al., 2012), and R&D intensity (Becker & Dietz; 2004).
In contrast to the diverse measurements and empirical analyses of technological innovation
activities and resultant innovation performance, there is a paucity of empirical analyses of the
relationship between managerial innovation activities and managerial innovation performance.
Particularly, the performance of technological innovation can be measured in terms of patents, R&D
cost and new product launch (Tidd, 2001), whereas no clear-cut quantitative measurement for
managerial innovation exists (Damanpour & Aravind, 2011). Yet, many economists expound on the
socio-economic importance of managerial innovation (Sanidas, 2005), and its positive effects on
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productivity and employment (Edquist et al., 2001; Nyholm, 1995). Still, empirical analyses of the
relationship are insufficient. That said, some researchers have conducted empirical analyses. Park &
Lim (2013) focus on knowledge management and TQM (total quality management) among other
managerial innovation activities, and analyze that such activities are significant factors influencing
both product innovation and process innovation.
Yang and Song (2007) draw upon local indicators and data used in practice to select
managerial innovative SMEs for empirical analyses, and explicate such managerial innovation
activities as knowledge and information management, organizational management, personnel
management and customer management have statistically significant effects on quantitative and nonquantitative managerial innovation performance. Hong (2007) analyzes the effects of managerial
innovation activities on managerial performance and reports that the levels of application,
sustainment, support and progress of, as well as engagement in, managerial innovation activities are
significant variables, where the level of support exerts the most significant effects.
Based on the abovementioned findings, this study sets up a hypothesis on the effects of
innovation activities on innovation performance as below.
Hypothesis 2. Innovation activities will influence innovation performance.
2.3.3. Governmental Support and Innovation Performance
Most innovation activities incur costs. In addition, the immediate return on initial investment
in such activities is unlikely and any subsequent commercial success is often uncertain. Therefore, it
is difficult for principal agents of innovation to proceed with all innovation activities by relying
completely on internal resources, which is why financial support from external sources is needed. In
the same vein, each central government has established a range of financial and administrative
systems and laws to support innovation activities and made diversified efforts to elicit innovation
performance at the national level.
Innovation-related governmental support refers to government-led tax cuts, financing, and
provision of technological information and skilled human resources so that companies can unfold
R&D activities and thus effectively create innovation (OECD, 2005). Kirzner (1985) classifies the
governmental support for innovation activities into financing and personnel training. Particularly,
financing is the most common governmental support at home and abroad, providing practical aids
that helps overcome uncertainties and barriers that might arise in the course of commercializing

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innovation leading to market performance (Svensson, 2008). Also, financial support is known to
benefit SMEs and start-ups, in particular.
Studies on the relationship between governmental support and innovation performance are
divided largely into three types. First, most studies describe the positive effects of governmental
support (Audretsch et al., 2002; Yoon & Yoon, 2013; Yoon, 2006; Yoon et al., 2011; Chung et al.,
2013; Kim, 2008). Audretsch et al. (2002) analyze the performance of the Small Business Innovation
Research program led by the US Department of Defense and highlight the positive effects of
governmental support on R&D in the private sector. Yoon & Yoon (2013) use national R&D project
data and Korean patent data to analyze 8,729 private companies and emphasize that governmental
financial support for R&D effectively facilitates innovation-related exploration and innovation
capabilities.
Yoon (2006) surveys 907 manufacturers to comparatively analyze the effects of financial
support for research, tax incentives and other governmental support measures, and confirms the
positive effects of financial support on R&D activities. Yoon et al. (2011) verify the difference in
technological innovation performance between beneficiaries and non-beneficiaries of governmental
support among 2,056 venture businesses. According to Chung et al. (2013), governmental support
benefits external R&D collaboration and ultimately creates innovation performance. Kim (2008)
compares the corporate participants in a 4-year project under the auspices of governmental initiatives
with non-participant corporate entities to analyze the effects of governmental support on
technological innovation and corporate survival, and sheds light on the positive effects of
governmental support on technological projects and economic outcomes.

Next, other studies are skeptical of the relationship between governmental support and
innovation performance (Svenssen, 2008; Lichtenberg & Siegel, 1991; Park, 1995). Notably,
Svenssen (2008) surveys 1,678 patent-holding companies and 1,082 individual innovators and
concludes that governmental financial support exerts negative effects on innovation performance on
account of the generosity of governmental support that hinders the selection of appropriate marketoriented R&D projects. Still other studies derive no significant relationship between governmental
support and innovation performance as it varies with analysis targets and methods (Lichtenberg &
Siegel, 1991; Park, 1995).
Lastly, some studies focus on the complementary relationship between governmental support
and corporate R&D (Leyden & Link, 1991; David et al., 2000). Leyden & Link (1991) investigate
137 R&D centers in the US to compare the regression models between public and private R&D
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sectors. They derive a complementary relationship from each input value, which is ascribable to the
technological complementarity arising in the production phase. David et al. (2000) review empirical
studies in economics and report that governmental support for private R&D is likened to a substitute
rather than a complement.
Referring to previous studies classifying the governmental support for innovation into tax
incentives and direct support, this study formulates the following hypothesis (David et al., 2000;
Yoon, 2006; Chung et al., 2013).
Hypothesis 3. Governmental support will influence innovation performance.

3. Method
3.1 Model
The present empirical analysis model is shown in [Figure 1]. First, to compare the factors
influencing the innovation performance between innovative SMEs and general firms, three
independent variables are considered; firm size, innovation activities, and governmental support. In
reference to the OECDs Oslo Manual, the dependent variable, innovation performance, is explained
as the sum of four types of innovation performance; product innovation, process innovation,
organizational innovation, and marketing innovation. Next, the independent variable, firm size, is
measured based on sales figures. Regarding the innovation activities, seven specific variables are
provided such as the percentage of R&D personnel, internal R&D cost, external R&D cost, other
innovation activity cost, ownership of R&D centers, number of patents, and diversity of information
sources for innovation. Governmental support is classified into tax incentives and financing.

[Figure 1] Analysis Model


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105

3.2 Analysis

3.2.1. Data Collection


The empirical analysis draws on the data from the Science and Technology Policy Institutes
KIS 2010 (Korean Innovation Survey 2010: manufacturing sector). The technological innovation
survey was first conducted in the domestic manufacturing industry in accordance with the OECDs
Oslo Manual in 1996. The survey was conducted biennially by 2002, and triennially since 2005.
Since 2003, the service sector has been surveyed separately.
The 2010 technological innovation survey was based on the Korea National Statistical
Offices National Establishment Survey, where 3,925 out of 4,000 responses were extracted with a
multistage systematic sampling method from a population of 41,485 manufacturers nationwide that
had been founded three years before the survey and hiring over 10 full-time employees. The survey
was conducted from May to October, 2010. The sampling error was within 3.34% at a 95%
confidence interval.
To identify the differences in the factors influencing the innovation performance between
innovative SMEs and general companies, this study extracts the targets separately from the original
data. Excluding those firms with no innovation activities and large enterprises, a total of 1,083
entities consisting of 252 innovative SMEs holding both venture and InnoBiz certificates and 831
general companies with no innovation certificates are analyzed here.
3.2.2

Operational Definition and Measurement of Variables

First, referring to Cho (2010) analyzing the factors influencing the product, process,
organizational and marketing innovation performance, the question items about the launch and
introduction of each innovation are defined as variables in line with the dependent variable,
innovation performance. The product innovation performance is defined as either or both of the
following: (1) Launching a new product completely different from the existing product or (2)
Launching a new product significantly improved over existing products over the past three years
prior to the survey date. The process innovation performance refers to introducing one or more items
from the following to the corporate operation in practice: (1) A whole new or significantly improved
production process, (2) A whole new or significantly improved logistics, and (3) A whole new or
significantly improved support system. The organizational innovation performance refers to
introducing one or more items from the following to the corporate operation: (1) Change in business
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practices, (2) Change in knowledge management, (3) Change in business organizations e.g. flexibility
in business practices and inter-departmental integration, and (4) Change in relationships with external
organizations. The marketing innovation is defined as introducing one or more items from the
following to corporate practices: (1) Substantial change in product design and package, (2) Launching
a new brand for product promotion, and using new concepts of ad media and PR strategies, (3) Using
new sales strategies, e.g. product displays and new sales channels, and (4) Using new pricing tactics
including discounts and differentiation.
Next, by referring to Arias-Aranda et al. (2001) and Scherer (1965) regarding the independent
variable, firm size, this study validates the effects of firm size based on financial metrics. To be
specific, the log value of the mean sales figure for three years from 2007 to 2009 is used as the
independent variable.
The innovation activities consist of the percentage of R&D personnel, the cost of innovation
activities, the ownership of R&D centers, the number of patents, and the diversity of information
sources for innovation. The percentage of R&D personnel is calculated by dividing the mean number
of R&D personnel among the full-time internal employees for three years from 2007 to 2009 by the
total number of employees. The cost of innovation activities is categorized into the costs of internal
R&D activities, external R&D activities and other innovation activities spent for three years from
2007 to 2009. The cost of other innovation activities is the sum of the following three items
excluding R&D costs: (1) Cost of introducing capital goods including machine, equipment and
software, (2) Cost of introducing external knowledge and technology, and (3) Cost of preparation and
job training programs.
The log value of the cost for each of three innovation activities is used. The ownership of
R&D centers refers to operating any R&D centers. Any forms of departments responsible for R&D or
irregular R&D activities are considered as the non-ownership of any R&D centers. The number of
patents refers to the patents registered as of the end of 2009. The diversity of information sources for
innovation means the number of information sources used for corporate innovation activities from
2007 to 2009. Specifically, 12 information sources are presented: (1) In-house sources, (2) Group
affiliates, (3) Suppliers, (4) Companies in demand and customers, (5) Competitors and other firms in
the same industry, (6) External meetings, e.g. associations and co-ops, (7) New employees, (8)
Private service providers, (9) Universities, (10) Government-funded research centers and
national/public institutes, (11) Conferences, fairs and expos, and (12) Journals and books. The
number of information sources for innovation used is defined as a variable on an interval scale.

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107

The governmental support is classified into tax incentives and financing. The tax incentives
refer to the total amount of tax reduction for technological development supported from 2007 to 2009.
The financing refers to the total amount supported for technological development and projects. The
log values of tax incentives and financing are used as variables with respective deviations taken into
account.
3.2.3. Methodology
A statistical package program State 11.0 is used for the empirical analysis. Specifically, first,
descriptive statistical analysis involving means, frequencies and standard deviations is performed to
understand the factors influencing the innovation performance of innovative SMEs and general
companies. Also, the innovation performance is sub-divided into product innovation, process
innovation, organizational innovation and marketing innovation performance. Then, logistic analysis
is used to find out the factors influencing each innovation performance.

4. Result and Interpretation


4.1. Basic Statistical Analysis
252 entities are defined here as innovative SMEs holding certificates for both venture
businesses and technological innovative SMEs, accounting for 23.27% of the 1,083 firms surveyed.
As for the sales figures used to distinguish innovative SMEs from general firms, the general firms
yearly mean is 36.06 billion Won, which is larger than that of innovative SMEs by approximately 17
billion Won. As for the number of employees, general companies hire more employees than
innovative SMEs by about 34 individuals.
The number of R&D personnel as an indicator of the innovation activities is 9.24 in innovative
SMEs in comparison to 5.77 in general firms. Other indicators of innovative SMEs innovation
activities such as the cost of internal and external R&D activities, the cost of other innovation
activities and the number of patents exceed those of general firms.
In light of the governmental support, the three-year tax incentives for innovative SMEs
amount to 11.264 billion Won in comparison to 3.595 billion Won for general firms. In contrast, the
amount of financing for general firms is marginally greater than that for innovative SMEs.

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[Table 1] General Characteristics of Targets


Total
(n=1,083)

Innovative
SMEs
(n=252)

General
firms
(n=831)

Means
compared
(t-value)

Sales

32098.55
(61933.00)

19034.47
(31681.00)

36060.22
(68038.33)

-3.45***

Employees

95.26
(185.67)

69.27
(74.53)

103.14
(207.34)

-2.54*

R&D
personnel

6.58
(11.66)

9.24
(12.75)

5.77
(11.20)

4.17***

864.72
(3214.22)

1102.15
(2357.85)

792.72
(3429.92)

1.34

125.60
(691.61)

215.61
(775.74)

98.30
(662.09)

2.36*

1072.63
(4495.47)

1141.50
(3751.80)

1051.74
(4699.62)

0.28

Number of
patents

5.73
(18.16)

8.96
(18.93)

4.75
(17.81)

3.24**

Tax
incentives

53.80
(210.84)

112.64
(322.55)

35.95
(158.49)

5.11***

Financing

469.82
(6819.61)

469.28
(1438.37)

469.98
(7746.07)

-0.001

Item

General

Innovation
activities

Cost of
external R&D
activities
Cost of other
innovation
activities

Governmental
support

Mean (Standard deviation)

Cost of
internal R&D
activities

*p < .05; **p < 0.01; ***p < .001


Unit: Million Won / Personnel: number of persons

In terms of the number of innovative SMEs and general firms with manifested innovation
performance, innovative SMEs innovation rates are higher than those of general firms in the four
areas of innovation performance. The highest innovation rate is found in innovative SMEs product
innovation with 82.54% of innovative SMEs manifesting the product innovation performance. On the
contrary, the lowest innovation rate is found in general firms marketing innovation with only
31.53% of general firms engaging in marketing innovation.
Both innovative SMEs and general firms show the highest innovation rates in the product innovation,
followed by process innovation, organizational innovation and marketing innovation in the order
named.

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109

[Table 2] Innovation Performance


Total
(n=1,083)

Item

Innovative SMEs
(n=252)

General firms
(n=831)

# of
firms

Innovation rate

# of
firms

Innovation rate

# of
firms

Innovation
rate

Product innovation

730

67.41%

208

82.54%

522

62.82%

Process innovation

591

54.57%

158

62.70%

433

52.11%

Organizational innovation
Marketing innovation

505
380

46.63%
35.09%

152
118

60.32%
46.83%

353
262

42.48%
31.53%

# of firms: the number of firms with the given innovation performance manifested
Innovation rate: the percentage of firms with the given innovation performance manifested (= # of innovative
firms/n)

4.2. Hypothesis Test Result


[Table 3] Relationship between Product Innovation Performance and Firm Size, Innovation
Activities, and Governmental Support

Item

Total
(n=1,083)

Innovative SMEs
(n=252)

General firms
(n=831)

Coef.

/ i

Coef.

/ i

Coef.

/ i

External R&D

-0.12**
0.17
0.10***
0.06***

-0.02
0.24
0.02
0.01

-0.22
3.06
0.20*
0.17***

-0.01
0.21
0.01
0.01

-0.09
0.41
0.10***
0.04***

-0.02
0.09
0.02
0.01

Other innovation activities

0.05**

0.01

0.15*

0.01

0.04*

0.01

Ownership of R&D centers

0.14

0.03

-0.39

-0.03

0.15

0.03

0.02**

0.48e-02

-2.58e-03

-0.02e-02

0.03**

0.01

Firm size
R&D personnel
Internal R&D

Number of patents
Information sources
Tax incentives
Financing
Constant
Log Likelihood
Chi
Pseudo R

0.02
0.09***
0.02
0.32e-02
0.14e-02
0.03e-02
1.10
-574.00
219.34***
0.16

0.01
0.16**
-0.01
-0.07e-02
7.84e-04
0.01e-02
1.86
-81.91
69.59***
0.30

0.02
0.08***
0.02
0.37e-02
-3.98e-03
-0.09e-02
0.69
-482.10
132.60***
0.12

*p < .10; **p < 0.05; ***p < .01

The logistic analysis in [Table 3] is used here to test the hypothesis concerning the factors
influencing the product innovation performance.

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Asia Pacific Journal of INNOVATION AND ENTREPRENEURSHIP

According to the analysis, innovative SMEs cost of internal and external R&D and other
innovation activities as well as diversity of information sources for innovation serve as positive
factors of their product innovation performance. These independent variables exert significant effects
on the product innovation performance of general firms as well. The number of patents is
insignificant for innovative SMEs, whereas it has significant effects as positive factors on general
firms product innovation performance.
Likewise, the number of patents proves to be a positive factor of the product innovation
performance in the model of all firms surveyed as in the general firms. Also, the firm size proves to
be a negative factor of the product innovation performance of all firms surveyed.

[Table 4] Relationship between Process Innovation Performance and Firm Size, Innovation
Activities, and Governmental Support

Item

Total
(n=1,083)

Innovative SMEs
(n=252)

General firms
(n=831)

Coef.

/ i

Coef.

/ i

Coef.

/ i

External R&D

-0.02
-2.34***
-0.03*
0.06***

0.01
-0.58
-0.01
0.01

0.15
-2.63**
0.01
0.05***

0.04
-0.60
0.27e-02
0.01

0.01
-1.42
-0.04**
0.06***

0.35e-02
-0.36
-0.01
0.01

Other innovation activities

0.26***

0.06

0.24***

0.06

0.25***

0.06

Firm size
R&D personnel
Internal R&D

Ownership of R&D centers

0.21

0.05

-0.22

-0.05

0.26

0.07

Number of patents

1.58e-03

0.04e-02

-3.76e-03

-0.09e-02

2.90e-03

0.07e-02

Information sources

0.09***

0.02

0.01

0.18e-02

0.11***

0.03

Tax incentives
Financing
Constant
Log Likelihood
Chi
Pseudo R

0.01
0.29e-02
6.89e-04
0.02e-02
-1.10**
-625.61
241.07***
0.16

0.01
0.26e-02
-1.39e-03 -0.03e-02
-1.27
-145.87
41.18***
0.12

0.02
0.40e-02
1.11e-03
0.03e-02
-1.01*
-473.40
203.73***
0.18

*p < .10; **p < 0.05; ***p < .01

The logistic analysis in [Table 4] is used here to test the hypothesis concerning the factors
influencing the process innovation.
The percentage of R&D personnel and the costs of external R&D and other activities are the
factors influencing the process innovation of innovative SMEs. Particularly, the R&D personnel
proves to be a negative factor of the process innovation with a rather high marginal effect, 0.60%. In
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111

the model of general firms, four variables have significant effects, i.e. the costs of internal and
external R&D and other innovation activities and the diversity of information sources for innovation.
Notably, the cost of internal R&D activities proves to exert negative (-) effects.
In the model of all firms, the percentage of R&D personnel and the cost of internal R&D
activities have negative effects, whereas the costs of external R&D and other innovation activities as
well as the diversity of information sources for innovation prove to be the factors exerting positive
effects on the process innovation.

[Table 5] Relationship between Organizational Innovation Performance and Firm Size,


Innovation Activities, and Governmental Support
Item

Total
(n=1,083)
Coef.

Firm size
R&D personnel
Internal R&D
External R&D
Other innovation activities
Ownership of R&D centers
Number of patents
Information sources
Tax incentives
Financing
Constant
Log Likelihood
Chi
Pseudo R

Innovative SMEs
(n=252)

/ i

0.03
0.10*
0.92
0.23
0.01
0.13e-02
0.01
0.05***
0.03
0.10***
0.22
0.05
-1.70e-03 -0.04e-02
0.04
0.15***
0.01
0.03**
6.76e-04
0.02e-02
-2.05***
-608.45
279.54***
0.19

Coef.

/ i

-0.14
-0.03
0.25
0.06
0.06
0.01
0.01
0.05***
0.05
0.20**
0.41
0.10
-0.01
-0.12e-02
0.03
0.14***
0.02
0.39e-02
-0.01
-0.20e-02
-0.72
-142.21
54.12***
0.16

General firms
(n=831)
Coef.

/ i

0.03
0.14**
1.06
0.26
2.01e-03
0.05e-02
0.01
0.06***
0.02
0.09***
0.16
0.04
1.36e-04
0.00
0.04
0.15***
0.01
0.03**
2.67e-03
0.06e-02
-2.26
-462.99
207.16***
0.18

*p < .10; **p < 0.05; ***p < .01

The logistic analysis in [Table 5] is used here to test the hypothesis concerning the factors
influencing the organizational innovation performance.
The costs of external R&D and other activities and the diversity of information sources for
innovation serve as the positive factors influencing the innovative SMEs organizational innovation
performance. In contrast, these three variables in tandem with the firm size and the tax incentives
have positive effects on general firms organizational innovation performance. In comparison to the
negative effects of the firm size in the model of all firms, it serves as a positive factor influencing the

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Asia Pacific Journal of INNOVATION AND ENTREPRENEURSHIP

general firms process innovation. Likewise, the firm size has positive effects on all firms with a
comparable marginal effect, 0.03.

[Table 6] Relationship between Marketing Innovation Performance and Firm Size, Innovation
Activities, and Governmental Support
Total
(n=1,083)

Item

Coef.
Firm size
R&D personnel
Internal R&D
External R&D
Other innovation activities
Ownership of R&D centers
Number of patents
Information sources
Tax incentives
Financing
Constant
Log Likelihood
Chi
Pseudo R

Innovative SMEs
(n=252)

/ i

-0.03
-0.16***
0.16
0.04
0.03
0.01
0.01
0.03***
0.02
0.10***
-0.14
-0.03
0.01
0.11e-02
0.03
0.14***
0.46e-02
0.02**
4.07e-03
0.09e-02
-0.29
-630.26
143.01***
0.10

Coef.

/ i

-0.07
-0.29**
0.13
0.03
-0.02
-0.37e-02
0.02
0.01
0.08
0.02
-0.09
-0.02
0.01
0.21e-02
0.04
0.18***
0.01
0.24e-02
-0.01
-0.33e-02
0.75
-158.88
30.58***
0.08

General firms
(n=831)
Coef.

/ i

-0.03
-0.12**
0.08
0.02
0.03
0.01
0.01
0.03***
0.02
0.11***
-0.19
-0.04
4.22e-03
0.09e-02
0.03
0.13***
0.01
0.03**
0.01
0.22e-02
-0.34
-467.49
100.89***
0.10

*p < .10; **p < 0.05; ***p < .01

The logistic analysis in [Table 6] is used here to test the hypothesis concerning the factors
influencing the marketing innovation performance.
The firm size and the diversity of information sources for innovation are the factors
influencing the innovative SMEs marketing innovation performance. The diversity of information
sources for innovation serves as a positive factor, whereas the introduction and implementation of
marketing innovation decreases as the firm size increases. By contrast, the information sources for
innovation, the costs of external R&D and other innovation activities and the tax incentives have
positive effects on general firms marketing innovation. The firm size exerts negative effects on
marketing innovation in the model of all firms and those of innovative SMEs and general firms.

5. Conclusion and Implication


5.1 Conclusion
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113

The following conclusions are derived from the present empirical analysis. First, the firm size
has mixed effects on innovation performance. Specifically, the firm size exerts positive effects on
general firms organizational innovation, whereas it has negative effects on the marketing and
product innovation of all firms surveyed here.
Second, among the innovation activities, the percentage of R&D personnel, the cost of R&D
activities, the number of patents and the diversity of information sources for innovation influence the
innovation performance, whereas the ownership of R&D centers has insignificant effects on all types
of performance. The percentage of R&D personnel exerts negative effects on innovative SMEs
process innovation, whereas the number of patents has positive effects on general firms product
innovation. In case of the cost of R&D activities, the costs of external R&D and other innovation
activities exert positive effects on all models, excluding the innovative SMEs marketing innovation.
The cost of internal R&D activities is positively related to the product innovation only, whereas it is
negatively related to the general firms process innovation. The diversity of information sources for
innovation has positive effects on all types of innovation excluding the innovative SMEs process
innovation.
Third, concerning the governmental support, the tax incentives prove to be a positive factor of
general firms organizational innovation and marketing innovation, whereas the financing proves
insignificant.

5.2 Implication
The following implications are derived from the present findings.
First, differentiated management specific to each type of innovation is required to improve the
innovation performance directly associated with corporate performance. As described in the section
on the rationale, innovation is largely divided into technological innovation and managerial
innovation. The technological innovation is subdivided into product innovation and process
innovation. Similarly, the managerial innovation is subdivided into organizational innovation and
marketing innovation. The extent to which the factors affect each type of innovation may vary.
Likewise, the signs of effects may vary with the different types of innovation. Indeed, according to
the empirical analysis, the firm size is a positive factor of the product innovation, whereas it has
negative effects on the marketing innovation. In the same vein, the number of patents influences the
product innovation, whereas it has insignificant effects on the other types of innovation. As for the
governmental support, the tax incentives have statistically significant effects only on general firms
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Asia Pacific Journal of INNOVATION AND ENTREPRENEURSHIP

organizational and marketing innovation. In that each type of innovation is influenced by specific
factors, it is necessary to take differentiated managerial approaches to corporate capabilities and
resources in accordance with the direction of innovation pursued from the perspective of managers in
charge of managing, introducing and implementing different types of innovation. In addition, optimal
government policy measures specific to the nature of a given type of innovation need to be developed.
Second, the factors influencing the innovation performance differ between innovative SMEs
and general firms. The present empirical analysis highlights that the percentage of R&D personnel
and the cost of internal R&D activities are negative factors of the process innovation in innovative
SMEs and general firms, respectively. Also, the number of patents and the costs of external R&D and
other innovation activities prove to influence the general firms product and marketing innovation
only. Besides, the effects of the firm size on the organizational innovation and those of the tax
incentives on organizational and marketing innovation are significant in general firms only. Thus, it
is necessary to map out differentiated innovation strategies for different types of firms from the
perspective of management and policy measures for SMEs.
Third, the SMEs limited internal innovation activities and resources attributable to SMEsspecific smallness are manifest here. The percentage of R&D personnel and the cost of internal R&D
activities prove to be negative factors of innovative SMEs and general firms process innovation
performance, whereas the external innovation activities have positive effects on the relevant
indicators of diverse innovation performance. Also, the cost of internal R&D activities serves as a
positive factor of the product innovation only. These findings suggest that it is often harsh and
challenging for small and medium-sized manufacturers to achieve innovation performance with their
limited internal capabilities, and that collaboration with external parties is indispensable for SMEs to
attain any process innovation.

5.3 Limitation and Future Studies


Noting the difference between innovative SMEs and general firms, this study empirically
analyzes the factors such as firm size, innovation activities, and governmental support that influence
corporate innovation performance. The effects of each factor on corporate innovation performance
vary with different types of firms based on the analysis findings, from which the suggestion and
implications are derived. Yet, despite some meaningful findings, this study has the following
limitations. First, due to the limited empirical analysis based on the secondary data, limited variables
are selected and analyzed here. Given that a range of quantitative and qualitative factors including
specific collaboration networks, entrepreneurship, innovative disposition and intention for innovation
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115

may exist as the factors influencing the innovation performance in addition to firm size, innovation
activities and governmental support, relevant theoretical consideration and validation is limited here.
Next, although this study extensively deals with different types of innovation performance, it
measures the likelihood of implementation and introduction of innovation in terms of performance
indicators without shedding light on the relevance to financial and non-financial performance which
may be considered an ultimate goal of innovation performance.
These limitations warrant extensive further studies on the effects of qualitative factors
associated with innovative SMEs innovation performance and on their relationship with
management outcomes as well as some comparative analyses of diverse types of firms except SMEs.
The findings will serve as the reference data for implementing the strategies for creating competitive
advantages of all types of SMEs including innovative SMEs, and be conducive to deriving
implications for rejuvenating the national economy.

<received: 2015. 10. 14>


<revised:

2015. 11. 23>

<revised:

2015. 12. 06>

<accepted: 2015. 12. 07>

1
2

A law established to make and support policies for technological innovation of SMEs in Korea
Name of certification for innovative SMEs in Korea

116

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Publication Ethics and Malpractice Statement for the


Asia Pacific Journal of Innovation and Entrepreneurship
The Asia Pacific Journal of Innovation and Entrepreneurship, known as APJIE (the Journal
hereunder), is a refereed and highly professional journal covering entrepreneurship, innovation,
incubation and related topics. It aims to establish channels of communication and to disseminate
knowledge among policy makers, experts and professionals working in universities, government
departments, research institutions, as well as industry and related business.
The Journal publishes original papers, theory-based empirical papers, review papers, case
studies, conference reports, relevant reports and news, book reviews and briefs.
Articles in the Journal set out to validate and preserve the records of research so that ideas
and experiences may evolve to innovations in the long run. It is very important that the records
are accurate and trustworthy. Many parties, each of which plays an important role in achieving
these aims, are involved in the act of publishing. Therefore, it entails that the authors, the editor,
the peer-reviewers, and the publisher of the Journal have the responsibility to meet expected
ethical standards at all stages in their involvement with the publication of an article.
We at APJIE are committed to ensuring ethical standards at all stages of the publication
process. We follow the industry associations closely, such as the Committee on Publication Ethics
(COPE), and many international prestigious associations that set standards and provide guidelines
for best practices in order to meet these requirements.
A summary of our key expectations of editors, peer-reviewers, authors and publishers is as
follows:

1. Publication and Authorship


List of References and Financial Support
Published articles should have the relevant list of references. Additionally, sources of funding
for the research should always be disclosed by authors.
Originality and Plagiarism
The authors should ensure that they have written entirely original works, and if the authors
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have used the work and/or words of others, they must ensure that this has been appropriately cited
or quoted. Papers found with such problems are automatically rejected and authors are so advised.
Multiple, Redundant or Concurrent Publication
When a paper is submitted for possible publication, the submitting author, as per the APJIE
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All submitted papers are subject to a peer-review process. The factors that are taken into
account in the review are relevance, originality, organization, completeness, significance of the
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2. Author's Responsibilities
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It is compulsory for all authors seeking to have their paper published in the journal to
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The authors names must to be listed on the paper in order of their contribution to the article,
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Authors should present an accurate account of the work performed as well as an objective
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wherever possible. Fraudulent or knowingly inaccurate statements constitute unethical behavior
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Data Statement
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Fundamental Errors in Published Works
When an author discovers a significant error or inaccuracy in his/her own published work, it
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All authors should disclose in their manuscript all affiliations, funding sources, and financial
or management relationship that could be perceived as a substantive conflict of interest that might
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support for the project should be disclosed.

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Standards of Objectivity
The editors and reviewers are required to evaluate papers based on the content. The review
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Reviewers should identify relevant published work that has not been cited by the authors.
Any statement that an observation, derivation, or argument had been previously reported should
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any substantial similarity or overlap between the manuscript under consideration and any other
published paper of which they have personal knowledge.

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Confidentiality
Privileged information or ideas obtained through peer review must be kept confidential and
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Any selected referee who feels unqualified to review the research reported in a manuscript or
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The reviewers will evaluate manuscripts without regard to the authors' race, gender, sexual
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4. Editorial Responsibilities
Complete Responsibility and Authority to Reject or Accept an Article
The editor has ultimate responsibility for deciding which of the articles submitted to the
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decision will be based on the recommendation of the journal's editorial board members and
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Editors should have no conflict of interest in reference to articles they reject or accept.
Reviewers should not consider manuscripts in which they have conflicts of interest resulting from
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competitive, collaborative, or other relationships or connections with any authors, research


funders, companies, or institutions connected to the papers.
Acceptance of Papers
Editors should only accept a paper when they are reasonably certain about the content.
Furthermore, the editor should accept papers for publication subject to revision only when
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Fundamental Errors in Published Works
When the editor is informed of or discovers a significant error or inaccuracy in a published
work, it is the editors obligation to promote the publication of corrections, clarifications,
retractions and apologies, where this is deemed necessary.
Anonymity of Reviewers
The editors will make every effort to ensure the integrity of the review process by not
revealing the identity of the reviewers of a manuscript to the author of that manuscript.
Non-Discrimination
The editor and editorial staff will evaluate manuscripts without regard to the authors' race,
gender, sexual orientation, religious belief, ethnic origin, citizenship, or political philosophy. The
decision will be based on the papers relevance, originality, organization, completeness,
significance, clarity, overall quality and its relevance to the journal's scope.
Confidentiality
Privileged information or ideas obtained through peer review must be kept confidential and
not used for personal advantage. The editor and editorial staff must not disclose any information
about a submitted manuscript to anyone other than the corresponding author, reviewers, potential
reviewers, editorial team, and the publisher, as appropriate.

5. Publishing Ethics Issues


Monitoring/Safeguarding Publishing Ethics by the Editorial Board
Doubleblind peer review should be conducted for each paper to avoid academic dishonesty.
Furthermore, all files related to each paper should be kept properly, atleast including the paper,
the APJIE Publishing Agreement, and the APJIE Paper Review Form.
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Guidelines for Retracting Articles


1) The retraction of an article will be considered if there is clear evidence that the findings
are unreliable, either as a result of misconduct or an honest error, or if the findings have
previously been published elsewhere without proper cross-referencing, permission or justification,
or if the paper constitutes plagiarism, or if the paper reports unethical research.
2) The main purpose of retractions is to correct the literature and ensure its integrity rather
than to punish authors who misbehave.
3) The retracted article will not be removed from the APJIE online archives. However,
notices of retraction will be promptly published and linked to the retracted article, accurately
stating the information of the retracted article, the reason(s) for the retraction and who retracted
the article, which will be freely available to all readers.
4) Articles may be retracted by their author(s) or by APJIE. In some cases retractions are
issued jointly. Additionally, APJIE has the final decision on retractions. APJIE will retract
publications even if all or some of the authors refuse to retract the publication themselves once the
unethical behavior is confirmed.
Maintain the Integrity of Academic Record
All authors will make a commitment of the integrity of the academic record, including the
integrity of the data and figures in the paper, when they sign the APJIE Publishing Agreement.
Furthermore, the peer review will help the editors to verify the originality and integrity of the
submitted paper.
Preclude Business Needs from Compromising Intellectual and Ethical Standards
All business needs should be precluded from compromising intellectual and unethical
standards.
Fundamental Errors in Published Works
When the author discovers a significant error or inaccuracy in a published work, it is the
authors obligation to formally notify the editor promptly. The editors and editorial staff should
always be willing to publish corrections, clarifications, retractions and apologies where deemed
necessary.
No Plagiarism and No Fraudulent Data
Plagiarism and fraudulent data are forbidden. When such a case is brought up after the
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Asia Pacific Journal of INNOVATION AND ENTREPRENEURSHIP

papers publication in APJIE, a preliminary investigation will be conducted by APJIE. The


author will be informed by APJIE. In the event that the plagiarism and/or the fraudulent data are
confirmed, APJIE will contact the authors institute and funding agencies. Furthermore, APJIE
will mark the plagiarism paper on the PDF file of this paper or formally retract the paper.

Volume 9, No.2, 2015

131

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Asia Pacific Journal of INNOVATION AND ENTREPRENEURSHIP

Call for Papers


Introduction about APJIE
Asia Pacific Journal of Innovation and Entrepreneurship is a refereed and highly
professional journal covering entrepreneurship, innovation, incubation and related topics. It aims
to establish channels of communication and to disseminate knowledge among policymakers,
experts and professionals working in universities, government departments, research institutions,
as well as industry and related business.
The Journal publishes original papers, theory-based empirical papers, review papers, case
studies, conference reports, relevant reports and news, book reviews and briefs.
Commentaries on papers and reports published in the Journal are encouraged. Authors will
have the opportunity to respond to the commentary on their work before the entire treatment is
published.

Subject Coverage for Vol.9, No.3


This journal focuses on the strategy and management methods of business innovation and
Entrepreneurship. Subjects include, but are not limited to:
Case Study in Following Fields Respectively &
Innovation Management
Incubation Management
Economic Development
Entrepreneurship
Strategy and System Development
Entrepreneurial Marketing
Entrepreneurial Business Environment
Business Ethics

Submission Ways of Paper


1) APJIE (Asia Pacific Journal of Innovation and Entrepreneurship) officially announce a
Call for Papers for the Volume 9, No.3 which will be published in December 2015. The deadline
for manuscripts is October 15, 2015, respectively, which must be received on the Desk of APJIE
through electronic mailing system: apjie@Kobia.or.kr

Volume 9, No.2, 2015

133

Requirements of Papers
1) Formal conditions for acceptance
Papers will only be published in English. Each typescript must be accompanied by a
statement that it has not been submitted for publication elsewhere in any languages. Previous
presentation at a conference in any language should be disclosed.
All papers are refereed by three blind reviewers (the third blind reviewer will review the
manuscript only in case the two reviewers are split), and the Chief Editor reserve the right to
refuse any typescript, whether on invitation or otherwise, and to make suggestions, editorial
changes, and/or modifications on grammatical errors before publication. Typescripts that have
been accepted become the property of the publisher. It is a condition of acceptance that copyright
shall be vested in the publisher.
The publisher shall furnish authors of accepted papers with proofs for the correction of
printing errors. The proofs shall be returned within 14 calendar days of submittal. The publisher
shall not be held responsible for errors that are the result of authors oversights.
2) Typescript preparation
The original typescript and two other copies should be submitted on A4 or similar-size
paper, following with the APA style and using 10-point size and Times New Roman font type
with single-spaced typing and a wide margin on the left. Any paper that would occupy more than
20 pages of the Journal may be returned for abridgement.
A complete typescript should include in the following order: title, author(s), address(es),
abstract, keywords, biographical notes, introduction, text, acknowledgements, references and end
notes, tables, figure captions, figures, appendix.
3) Electronic copy
Authors are asked to supply their articles, where possible, on CD-R (Compact DiscRecordable). Please state the word processing program used (Microsoft Word is preferred).
4) International context
APJIE is an international journal, and authors should be aware of the worldwide readership.
Authors are encouraged to approach their chosen topic with an international perspective.
It should not be assumed that the reader is familiar with specific national institutions or
corporations. Countries and grouping of countries should be referred to by their full title (for

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Asia Pacific Journal of INNOVATION AND ENTREPRENEURSHIP

example, America, China and Europe are all ambiguous). Special attention should be paid to
identifying units of currency by nationality. Acronyms should be translated in full into English.
5) Title, abstract, keywords, addresses, biographical notes
Please assist us by following these guidelines:
Title: as short as possible
Abstract: approximately 200 words, maximum 300
Keywords: approximately 10 words or phrases
Address: position, department, name of institution, full postal address, e-mail address &
telephone number
Biographical notes: approximately 50 words per author, maximum 100

6) References
APJIE uses an alphabetical system in references order. References should be made only to
works that are published, accepted for publication (not merely submitted), or available through
libraries or institutions. Any other source should be qualified by a note regarding availability. Full
reference should include all authors names and initials, date of publication, title of paper, title of
publication (underlined), volume and issue number (of a journal), publisher and form (books,
conference proceedings), page numbers.
7) Figures
All illustrations, whether diagrams or photographs, suitable for printing in black and white,
are referred to as Figures and are numbered sequentially. Please place them at the end of the paper,
rather than interspersed in text.
Originals of line diagrams will be reduced and used directly, so please prepare them to the
highest possible standards. Bear in mind that lettering may be reduced in size by a factor of 2 or 3,
and that fine lines may disappear. Electronic copies of the figures are also required.
8) Translated works
Difficulty often arises in translating acronyms, so it is best to spell out an acronym in
English (for example, IIRP-French personal income tax).
Similarly, labels and suffixes need careful attention where the letters refer to words that have
been translated.
Volume 9, No.2, 2015

135

The names of mathematical functions may change in translation-check against an English or


American mathematical reference text.
9) Units of measurement
APJIE follows the Systme International for units of measurement. Imperial units will be
converted, except where conversion would affect the meaning of a statement, or imply a greater or
lesser degree of accuracy.
10) Fees
The authors are subject to pay the submission fee when they submit their manuscript to the
APJIE Desk for the review process and the publication fee after their manuscript has been
accepted for publication. If all the co-authors do not have any affiliation in Korea, they are
exempted from the following fees.
Submission fee of KW100,000
Publication fee of KW200,000 (in case of without financial support)
Publication fee of KW300,000 ( in case of with financial support)
Bank Account: Daegu Bank 086-13-399521 (under name of: Cho, Bong Jin (APJIE))
The receipt of fee(s) may be issued upon request to:
Email: apjie@kobia.or.kr
Phone: 82-10-5105-7693 or 82-70-7568-6371
Address: Mokwon Univ. O1-510, Doanbuk-ro 88, Seo-gu, Daejeon, Korea

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Asia Pacific Journal of INNOVATION AND ENTREPRENEURSHIP

AABI Presidential Board Member:


AABI President
Yeung-Shik Kim (Korea, yskim@kumoh.ac.kr)
Honorary President, Korea Business Incubation Association (KOBIA)
President, Kumoh National Institute of Technology

AABI Vice President


Lin Xu Wei, Director
Shanghai Technology Business Incubation Association

http://www.incubator.sh.cn
AABI Honorary President
R.M.P. Jawahar (India, jawa_ts@yahoo.com)
Executive Director of Tiruchirappalli Regional Engineering College - Science and
Technology Entrepreneurs Park (TREC-STEP)

AABI Advisor
Benjamin Yuan (Chinese Taipei, benjamin@faculty.nctu.edu.tw)
President of Chinese Business Incubation Association (CBIA)
Wang Rong (China, wangrong@tic.stn.sh.cn)
Honorary President, Shanghai Technology Business Incubation Association
Rustam Lalkaka (USA, rustam@lalkaka.com)
President of Business & Technology Development Strategies LLC
Hong Kim (Korea, kimhong@office.hoseo.ac.kr )
Dean of Graduate School of Global Entrepreneurship, Hoseo University

AABI Association Members:


Australia
Phillip Kemp, President
Business Innovation & Incubation Australia
http://www.businessincubation.com.au

China
Duan Junhu, Deputy Director General
Torch High-Tech Industry Development Center, Ministry of Science and
Technology, China
http://www.ctp.gov.cn
Zhen Hong Zhu, President
Shanghai Technology Innovation Center
Shanghai Technology Business Incubation Association

http://www.incubator.sh.cn
Hong Kong, China
Allen T.B. Yeung, Representative
Hong Kong Science and Technology Parks Corporation
http://www.hkstp.org

India
Dr. Rajendra Jagadale, President
Indian STEPs and Business Incubators Association
http://www.isba.in

Indonesia
Asril Fitri Syamas Syamas, Chairman
Association of Indonesian Business Incubation

Japan
Satoshi Hoshino, President
Japan Business Incubation Association
http://www.jbia.jp

Kazakhstan
Yerik Dukenbayev, President
The Kazakhstans Association of Business Incubators and Innovation Centers
http://www.kabic.kz

Korea
Hyeongsan Kye, President
Korea Business Incubation Association
http://kobia.or.kr, http://kised.or.kr

Kyrgyz Republic
General secretary, Zamira Akbagysheva
Union of Business Incubators and Innovation Centers of the Kyrgyz Republic
http://www.cango.net.kg

Malaysia
Andrew Wong, President
Multimedia Development corporation Sdn. Bhd(MSC central Incubator/
Accelerator, National Incubator Network Association)
http://www.mdc.com.my

New Zealand
Hamish Campbell, Representative
New Zealand Trade and Enterprise
http://www.nzte.govt.nz
Steve Corbett, Representative
Incubator New Zealand
http://www.incubators.org.nz

Pakistan
Akhtar Ali Qureshi, Representative
Technology Incubation Centre, National University of Sciences and Technology
http://www.tic.org.pk

Philippines
Mercedes M. Barcelon, Representative
Ayala Technology Business Incubator Network, Ayala Foundation, Inc.
http://www.ayalatbi.org

Singapore
Cham Tao Soon, Representative
Nanyang Technological University
http://www.ntu.edu.sg

Chinese Taipei
Benjamin Yuan, President
Chinese Business Incubation Association
http://www.cbia.org.tw
Ching-Yao Huang, Representative
NCTU Center of Academia and Industry Collaboration
http://www.iic.nctu.edu.tw

Thailand
Chusak Limsakul, President
Thai Business Incubators and Science Parks Association (Thai-BISPA)
http://www.thaibispa.or.th

Uzbekistan
Valijon Amanlikov, Representative
Association of Business Incubators and Technoparks of the Republic of
Uzbekistan
http://www.abit.uz

Vietnam
Representative, Dr. Pham Minh Tuan,
Vietnam Business Incubation Club
http://www.topica.edu.vn/incubation

Review Board:
Dinah Adkins (U.S.A)
Richard P. Bagozzi (U.S.A)

Tanyanuparb Anantana (Thailand)


Hermina Burnett (Australia)

Dong Ok Chah (Korea)


James K.C. Chen (Taiwan)
Jing-Yau Chen Cheng (Taiwan)
Man Kee Choe (Korea)

Deepanwita Chattopadhyay (India)


Alfred Li-Ping Cheng (Taiwan)
Yoon Shik Cho (Korea)
Myeong Gil Choi (Korea)

Check Teck Foo (Singapore)


Daniel L. Friesner (U.S.A)
C. Young Hong (Taiwan)
Satoshi Hoshino (Japan)
Ching Yao Huang (Taiwan)

Rolf P. Friedrichsdorf (Germany)


Ramasamy Ganesan (India)
Jin Hwan Hong (Korea)
Chih-Hung Hsieh (Taiwan)
Yun Hwangbo (Korea)

Seok Joon Hwang (Korea)


Choong Jae Im (Korea)
Rajendra Jagdale (India)
Wen-Jang (Kenny) Jih (U.S.A)
Lynn Kahle (U.S.A)

Ahmad Ibrahim (Malaysia)


Tommi Aleksanteri Inkinen (Finland)
R. M. P. Jawahar (India)
Seoung Min Kang (Korea)
Janekrishna Kanatharana (Thailand)

Akkharawit Kanjana-Opas (Thailand)


Phillip Kemp (Australia)
William Walton Kirkley (New Zealand)
Fredric Kropp (U.S.A)

Tomoyo Kazumi (Japan)


Kyung Ho Kim (Korea)
Harald F.O. von Kortzfleisch (Germany)
Hyeong San Kye (Korea)

Rustam Lalkaka(U.S.A)
Hyoung Tark Lee (Korea)
Ki Seok Lee (Korea)
David A. Lewis (U.S.A)
Xiaoming Liu (China)

Abdul Aziz Ab Latif (Malaysia)


In Lee (U.S.A)
Pui Mun Lee (Singapore)
Zhan Li (China)
P. K. B. Menon (India)

Gilroy Middleton (Belize)


Karen E. Mishra (U.S.A)
Kee Bong Park (Korea)

Zhao Min (China)


Patricia Ordoez e Pablos (Spain)
Sun Young Park (Korea)

Review Board: continued


Hadi K Purwadaria (Indonesia)
Saras D. Sarasvathy (U.S.A)
Aviv Shoham (Israel)
Ming Yen Wang (China)

Rosemarie Reynolds (U.S.A)


Michael Schaper (Australia)
Enrico Plata Supangco (Philippines)
Zhen Wang (China)

Richard White (New Zealand)


Andrew Wong (Malaysia)
Ho Tack Yi (Korea)
Benjamin J. C. Yuan (Taiwan)
Frederick W. S. Yung (Hong Kong)

Dong Kyu Won (Korea)


Chang Seob Yeo (U.S.A)
Tan Yigitcanlar (Australia)
JinHyo Joseph Yun (Korea)
Yuli Zhang (China)

Proofreading: Gilroy Middleton (Belize, Professor, University of Belize)


Graphic Design: Seong Jae Song (Korea, Professor, Hoseo University)
Secretariat General: Dr. Eun Sook Son & Secretariat: Ms. Hye Run Jeong

The APJIE Desk extends a hearty thanks to all of you


for your financial support!
Asian Association of Business Incubation (AABI)
Yeung-Shik Kim, President
http://www.aabi.info

Small and Medium Business Administration (SMBA)ISSN 2071 1395


Jungwha Han, Adiministrator
http://www.ctp.gov.cn

AABI Secretariat Office:

Korea Business Incubation Association (KOBIA)


Hyeongsan Kye, President
http://www.kobia.or.kr

Asian Association of Business Incubation (AABI)


100 Qin Zhou Road, Shanghai, 200235

Tel: 86-1304-4118-085
Indian STEPs and Business Incubators Association (ISBA)
Rajendra Jagadale, President
http://isba.in

Web site: www.aabi.info


Email: STIC@stn.sh.cn

Young Jeon Co., Ltd.


Hong Jang Lee, President
e-mail: yjchjlee@hanmail.net

Editorial Office:
Korea Business Incubation Association (KOBIA)

ISSN 2071 1395


AABI Secretariat Office:
Asian Association of Business Incubation (AABI)
100 Qin Zhou Road, Shanghai, 200235
Tel: 86-1304-4118-085
Web site: www.aabi.info
Email: STIC@stn.sh.cn

Editorial Office:
Korea Business Incubation Association (KOBIA)
Mokwon Univ. O1-510, Doanbuk-ro 88, Seo-gu,
Daejeon, Korea

Tel: +82-70-7568-6371
Mobile: +82-10-7190-1258
Web site: www.kobia.or.kr
Email: apjie@kobia.or.kr
Home Page: www.apjie.org
www.apjie.net

Vol. 9, No. 2