Innovation Complementarities in the Argentina Software sector

MORERO, HERNÁN ALEJANDRO

Santiago de Chile

Congreso; 7th Conference on Micro Evidence on Innovation in Developing Economies; 2013

United Nation University / IDB / Nucleo INTELIS

The economies of Latin America have experienced a profound economic growth in the last decade.  Development requires an increase of the knowledge intensive activities in the economic structure. In that context, it is important to analyze the extent that catching up processes emerges in high tech sectors, as Knowledge Intensive Business Services (KIBS). In that sense, the software and IT services is one of the more important KIBS that has drawn attention in past decades. The global software market US$ 880 Billion in 2009 (ABES, 2011) and, besides the leaders of the sector have remained in the developed world, over the 1990s many developing countries have catch up and gained a competitive position among the main global actors. This process has happened in three different waves (Britto, Cassiolato and Stallivieri, 2007; Arora et al., 2001; Niosi, Athreye and Tschang, 2012). The first wave was led by India. Due to its strong competitive advantage in skilled human capital and knowledge of the English language, both integrated in Business Process Outsourcing. The second wave included China and the Philippines: China took advantage of its large domestic market and became a major player, and the Philippines imitated India?s strategy, becoming experts in Business Process Outsourcing. The last wave involved Brazil and Argentina, among others countries (Niosi et al., 2012; Malerba and Nelson, 2011). These Countries following the Asian model, have recognized the importance of intangible goods - such as software and services in general - for their potential of direct economic impact. Therefore, policy makers and scholars in the region have become interested in the innovation process in the software industry.Nowadays, the understanding of the innovation process implies the recognition that firms do not innovate in isolation but there are external influences by mean of complementary information and knowledge that may become key drivers of firms? performance. Closed innovation views has been losing effectiveness due to a series of aspects (the reduction of the innovations life cycle, the innovation-based competition, etc.), enlarging the necessity of firms to expand their access to new knowledge. The new models of innovation explain the predominance of open firms? strategies that leads to the study of complementarity, underlining the fact that this is a context-specific aspect  (Arora, Gambardella and Torrisi, 2004; Cassiman and Veugelers, 2006; Chesbrough, 2003; Laursen and Salter, 2006; Mohnen and Röller, 2005). Successful innovation in firms depends upon the development and integration of new knowledge into the innovation process though diverse innovative activities, internal and external to the firm (Cassiman and Veugelers, 2002a). With this background, it became more and more important to establish if these activities are complementaries or substitutes related to innovation performance of the firm, to approach a better understanding of the nature of innovation processes in diverse production activities. Moreover, the empirical research has been focused on manufacturing sectors. However, the economic literature on services point out that the characteristics of the innovation process is essentially different in this kind of economic activity (Drejer, 2004). As the nature of innovation differs in these sectors, there are also reasons to consider that complementarities between innovative activities could differ in this type of sectors, mostly on KIBS. In this paper, we will follow the empirical rigorous method presented by Cassiman and Veugelers (2006) to test the existence of complementarity in the innovation strategies of Argentinean firms from the software sector. It intends to be a first step to further ongoing research on the degree that complementarity relations between innovation activities are influenced by diverse characteristics of the firms and contextual aspects. The paper is structured as follows: In section two, we present the theoretical background that frames the hypotheses development. In section three, we present the methodology and the description of the data, the construction of the indicators and the statistical methods used. Section four discusses the main results of the quantitative analysis, and section five presents some main concluding remarks.