Deep or wide? Networking tie’s effect on innovation in the European food industry

Abstract

Nowadays, innovation is a crucial element of business development. The globalisation and new technological advances have forced many companies to invest more in innovation, in order to stay competitive in a fast-paced economy. A big difference is observed in the innovation performance of the European Union member states. Based on the European Innovation Scoreboard (2018), the majority of the Southern-European countries and the New Member States joined to the EU in 2004 are moderate innovators. On the top of the list, there are the Scandinavian and the Benelux countries, the UK and Germany, while Bulgaria and Romania are the modest innovators in Europe. From an innovation point of view food industry is seen as a slow sector, which is lagging behind the technology pushed possibilities and the costumers’ needs and expectations. In this research, we explore why European food companies do not perform any innovation activities and if they do so, what are the main determinants of their innovation performance? Due to the nature of the innovation distribution, the paper employs double hurdle as well as Heckman two-step model using the Community Innovation Survey (2012) data. These methods allow solving the selection bias problem, which inevitably arises in our case. Results confirm that networking scope as well as networking intensity, play a central role in explaining innovation performance. Furthermore, the size of a company, openness and market obstacles are also significant factors of innovation performance. In sum, the result indicates that those European food processing companies, who engage in innovation activity, have intensive innovation networks. Moreover, companies who targeted to innovate more proposed to extend their innovation networks. By contrast, above a certain level of network relations, the advantage of networks can turn into a negative effect on innovation performance.