Innovation in the European chemical industry.

130 Pages·2002·1.46 MB·English

Albach, Horst et al.
Working Paper
Innovation in the European chemical industry
WZB Discussion Paper, No. FS IV 96-26
Provided in Cooperation with:
WZB Berlin Social Science Center
Suggested Citation: Albach, Horst et al. (1996) : Innovation in the European chemical industry,
WZB Discussion Paper, No. FS IV 96-26, Wissenschaftszentrum Berlin für Sozialforschung
(WZB), Berlin
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WISSENSCHAFTSZENTRUM BERLIN

F(cid:220)R SOZIALFORSCHUNG

SOCIAL SCIENCE RESEARCH
discussion papers
CENTER BERLIN

FS IV 96 - 26

Innovation in the European
Chemical Industry

Horst Albach, David B. Audretsch
Manfred Fleischer, Robert Greb, Evelyn H(cid:246)fs
Lars-Hendrik R(cid:246)ller, Ines Schulz

October 1996

ISSN Nr. 0722 - 6748

Forschungsschwerpunkt
Marktproze(cid:223) und Unter-
nehmensentwicklung

Research Unit
Market Processes and
Corporate Development
Final Report prepared for the European Commission,
Directorate General DG XIII-D-4, "Innovation and Technology Transfer",
Contract: Project EIMS 95/100.

Presented at the International Conference on "Innovation Measurement and
Policies", organized by the European Commission (Eurostat and DG XIII),
Luxembourg, 20-21 May 1996.

Zitierweise/Citation:

Horst Albach, David B. Audretsch, Manfred Fleischer, Robert Greb,
Evelyn H(cid:246)fs, Lars-Hendrik R(cid:246)ller, Ines Schulz, Innovation in the
European Chemical Industry, Discussion Paper FS IV 96 - 26,
Wissenschaftszentrum Berlin, 1996.

Wissenschaftszentrum Berlin f(cid:252)r Sozialforschung gGmbH,
Reichpietschufer 50, 10785 Berlin, Tel. [phone] - 0
ABSTRACT
Innovation in the European Chemical Industry
Firms in the European chemical industry have been among the most successful firms
world wide. However, they have had to undertake severe restucturing in order to main-
tain their market position. These efforts focused in particular on strengthening their
innovative capability as product and process innovation have become the most decisive
factors in global competition. In order to improve the innovative conditions, the
European Commission has supported the Community Innovation Survey (CIS).
1992/1993 was the first time that large-scale harmonised innovation surveys were
carried out in all Member States of the European Union. This study uses the CIS micro
data from nearly 2000 European chemical firms. This study focuses on the identification
of innovative trends within the chemical industry between 1984 and 1993. Using data
from annual reports of nine selected European stock companies, the study identifies
those areas of the chemical industry currently having the highest innovative potential.
Three speciality categories are identified as having the highest number of innovations
during this ten year period: chemicals, paints/varnishes, and plastics.

The CIS database provided evidence for the following trends: 1. increasing effort to
apply strategies of cost leadership, in particular for mass products such as basic chemi-
cals; 2. an increasing tendency to specialize in certain product areas; 3. a trend to con-
centrate on key areas and/or competencies, with the focus on the achievement of a
strong market position and the concentration on areas with a high synergistic effect; 4.
increasing activities towards strategic co-operation in the areas of production and R&D;
5. a continuing tendency towards globalization, in order to achieve a strong position in
global competition. Many firms focus on specialities since they are less vunerable to the
business cycle and allow higher profit margins to be achieved. The primary goal of firms
in all countries is to expand within local markets and to stabilize their market shares or
to increase them. In most firms, innovations are triggered by people inside the firm. The
analysis has shown that the major factors impeding innovative activity are financial
factors, in particular financial risk and lack of capital. In general, cost is seen as one of
the most obvious barriers to innovation in the chemical industry. For more basic innova-
tions, these costs are mainly due to R&D expenditure.
ZUSAMMENFASSUNG
Innovation in der chemischen Industrie Europas
Obwohl viele europ(cid:228)ische Unternehmen der chemischen Industrie in den vergangenen
Jahrzehnten zu den erfolgreichsten in der Welt z(cid:228)hlten, mu(cid:223)ten sie sich Anfang der
neunziger Jahre einem gravierenden Strukturwandel unterziehen, um ihre Position be-
haupten zu k(cid:246)nnen. Die F(cid:228)higkeit der Unternehmen, Innovationen hervorzubringen,
stand und steht dabei im Mittelpunkt. Mit dem Ziel, die Rahmenbedingungen f(cid:252)r
Innovationen zu verbessern, f(cid:252)hrte die EU-Kommission 1993 eine europaweite
Innovationserhebung, den Community Innovation Survey (CIS) durch. In dieser Studie
wurden die anonymisierten Antworten von nahezu 2000 Unternehmen der chemischen
Industrie analysiert. Um Innovationstrends aufzuzeigen zu k(cid:246)nnen, wurden dar(cid:252)ber
hinaus Gesch(cid:228)ftsberichte von neun gro(cid:223)en europ(cid:228)ischen Chemieunternehmen
ausgewertet. So wurden die Sparten Spezialit(cid:228)ten, Farben/Lacke und Kunststoffe als
diejenigen Sparten identifiziert, die im Untersuchungszeitraum (1984-1993) die meisten
Innovationen aufwiesen.

Anhand der CIS-Daten konnten folgende Trends festgestellt werden: 1. Trend zur Ver-
folgung einer Strategie der Kostenf(cid:252)hrerschaft (angestrebt wird eine g(cid:252)nstige Kosten-
struktur), damit zusammenh(cid:228)ngend 2. Trend zur Spezialisierung auf bestimmte
Produkte bzw. Produktgruppen, 3. Trend zur Konzentration auf Kernbereiche, 4. Trend
zur strategischen Zusammenarbeit von Unternehmen und 5. dauerhafte
Internationalisierung der Aktivit(cid:228)ten, um eine g(cid:252)nstige Position im globalen
Wettbewerb erlangen bzw. erhalten zu k(cid:246)nnen. Viele Unternehmen konzentrieren sich
zunehmend auf die Produktion von hoch veredelten Spezialit(cid:228)ten, da diese weniger
konjunkturabh(cid:228)ngig sind und aufgrund des geringeren Konkurrenzdrucks h(cid:246)here
Gewinnmargen erzielen. Das vorrangige Ziel der Chemie-Unternehmen aller L(cid:228)nder
(und in allen Segmenten) bestand darin, mit Hilfe von Innovationen innerhalb ihrer
lokalen M(cid:228)rkte zu expandieren und dort ihre Marktanteile zu konsolidieren oder sogar
auszubauen. In den meisten Unternehmen kommen die entscheidenden Anst(cid:246)(cid:223)e zu
Innovationen aus dem Unternehmen selbst. Als Faktoren, die die Einf(cid:252)hrung von
Innovationen hemmen, standen an der Spitze der Nennungen (allerdings mit nur bedingt
starker Gewichtung) finanzielle Faktoren, insbesondere "finanzielles Risiko und Mangel
eigener Ressourcen". Insgesamt wirkten alle mit Innovationen verbundenen Kosten als
"Hemmschuh", bei grundlegenderen Innovationen waren es aber in erster Linie die FuE-
Kosten.
Contents

List of Figures vii
List of Tables viii
Executive Summary x
Zusammenfassender (cid:220)berblick xiv

1. Introduction 1
2. The Chemical Industry 2
2.1 Products and Industry Structure 2
2.2 Typical Life Cycles: Two Examples 4
3. Measurement of Innovation Trends 8
3.1 The Measurement Approach 8
3.2 Selection of the Companies to be Investigated 8
3.3 Annual Reports as a Source of Information 9
3.4 Indicators of Innovative Activity 10
3.5 The Classification System for the Recording of Innovations 11
4. Innovation Trends I: An Analysis of Innovation Counting Data 14
4.1 An Analysis of Innovative Trends 14
4.1.1 An Analysis of Innovative Trends by Lines of Business 14
4.1.2 The Innovative Trends of the 1980s and 1990s 19
4.2 An Analysis of Innovation and Performance Measures 19
4.2.1 A Comparison of R&D Input Indicators 19
4.2.2 A Comparison of R&D Output Indicators 25
4.2.3 Growth in the Individual Lines of Business 27
4.2.4 Corporate Performance in the Individual Lines of Business 30
4.3 Limitations and Conclusion 32
5. Innovation Trends II: An Analysis of Corporate Strategies 35
5.1 Corporate Strategies and Innovation: Analysis of Annual Reports and First Insights
from the CIS Database 35
5.1.1 Changed Conditions in Europe 35
5.1.2 The Main Strategies Driving Innovation: Cost Leadership and Specialization 39
5.1.3 Concentration on Key Areas 44
5.1.4 The Trend Towards Strategic Co-operation 48
5.1.5 The Trend Towards Globalization 52
5.2. Conclusion 53

v
6. An Analysis of the CIS Data 55
6.1 The Chemical Industry in the CIS Sample 55
6.2 Organizational Characteristics Effecting Innovation 55
6.2.1 Objectives of Innovation 55
6.2.2 Information Sources 63
6.2.3 Barriers to Innovation 67
6.3. Innovative Performance 71
6.3.1 Measuring Innovative Activity 71
6.3.2 The Distribution of Firm Innovative Activity within the Industry 71
6.3.2.1 Innovating Firms 71
6.3.2.2 Innovation Expenditures 75
6.3.3 Comparison of Innovative Performance 76
6.3.3.1 Estimation of Elasticities of Innovative Output 79
6.3.3.2 Estimation of Returns to R&D 86
6.3.3.3 A Logit Model of Innovation 89
7. Conclusion and Recommendations 94
8. References 97
9. Appendix
9.1 Characteristics of the Selected Nine Companies 104
9.2 Some Considerations Concerning the Chemical Industry 106

vi
List of Figures

Figure 2.1 Product-Group Matrix 3
Figure 2.2 Life Cycles for Different Processes for the Manufacture of 6
Cord for Tires
Figure 2.3 Stage of Product Life Cycle for Various Polymeric Materials 6
Figure 4.1 R&D Intensities for Large Chemical Firms, 1984-1993 21
Figure 4.2 Return on Sales for Large Chemical Firms, 1984-1993 31
Figure 5.1 Employment for Large Chemical Firms, 1984-1993 36
Figure 5.2 Share of Pharmaceutical Products for Large Chemical Firms, 43
1984-1993
Figure 6.1 Firms Involved in R&D and Innovation (as a Percentage of all 74
Chemical Firms in 13 European Countries, 1992)
Figure 6.2 Innovation Intensity, R&D and Investment Intensity by Firm 77
Size for Chemical Firms in 13 European Countries
Figure 6.3 Innovation Intensity, R&D Intensity and Investment Intensity 77
by Segments of the European Chemical Industry for 8
Countries
Figure 6.4 Components of Innovation Expenditures by Firm Size for 78
Chemical Firms in 13 European Countries
Figure 6.5 Components of Innovation Expenditures by Sub-Sectors of 78
the Chemical Industry in 8 European Countries

vii
List of Tables

Table 2.1 Concentration of the Chemical Industry within the European Union 4
Table 2.2 Distribution of R&D Expenditures of German Chemical Firms 7
According to Product and Process Innovation and by Innovation
Significance (in percent)
Table 3.1 The 15 Leading European Chemical Companies - 1992 9
Table 4.1 Shares of Product and Process Innovations (in percent) 15
Table 4.2 Description of Trends: Comparison of Innovations in 1984/85 and 20
1992/93
Table 4.3 R&D Shares of Individual Lines of Business 23
Table 4.4 R&D Personnel-Intensity (10-year averages) 24
Table 4.5 Ranking of Innovative Core Activities by Individual Companies 25
Table 4.6 Innovative Shares According to Categories and Corporate Evaluation 26
(in percent)
Table 4.7 Growth Trends by Individual Lines of Business 28
Table 4.8 Mean Accounting Ratios 29
Table 4.9 Profitability and Sales Share of the Individual Lines of Business 32
Table 5.1 Chemical Labor Costs per Man-Hour 37
Table 5.2 Distribution of Firms by 1992 Turnover Size Groups and Segments of 40
Industry (in percent, 8-country sample)
Table 5.3 Distribution of Firms According to their R&D Expenditures Allocated 45
to Product and Process Innovation (in percent,
8-country sample
Table 5.4 Distribution of Firms According to their Shares of R&D Expenditures 46
for Product Innovations by Segment of Industry
(in percent, 8-country sample)
Table 5.5 Distribution of Firms According to their R&D Expenditures Allocated 47
to Process Innovations by Segment of Industry
(in percent, 8-country sample)
Table 5.6 Percentage of Firms Utilizing R&D Co-operative Arrangements by 50
Segment of Industry (percentages of the 8-country sample)
Table 5.7 Distribution of Firms According to the Type of R&D Co-operation 51
they Practise by Segment of Industry (in percent, 8-country sample)
Table 5.8 Importance of the Globalization of Markets According to Firm Size 54
(Based on the Objective "Creation of New Markets"; as a percentage
of the 8-country sample, pharmaceutical industry excluded)
Table 6.1 Distribution of Chemical Firms in the CIS Sample by Country and 56
Size (in absolute numbers and percentages)
Table 6.2 Distribution of Chemical Firms in the CIS Sample by Country and 57
Industrial Sector (in absolute numbers and percentages)
Table 6.3 Descriptive Statistics for Turnover, Employment, and R&D of the 58
Firms in the CIS Sample by Country, 1992
viii
Table 6.4 The Structure of the Objectives of Innovation 60
Table 6.5 The Importance of the Objectives of Innovation by Countries 61
Table 6.6 The Importance of the Objectives of Innovation by Sub-Sector of 62
Chemical Industry
Table 6.7 The Structure of the Sources of Information for Innovation 64
Table 6.8 The Importance of the Sources of Information for Innovation by 65
Countries
Table 6.9 The Importance of the Sources of Information for Innovation by 66
Chemical Industry Sub-Sector
Table 6.10 The Structure of Factors Hampering Innovation 68
Table 6.11 The Importance of Factors Hampering Innovation by Countries 69
Table 6.12 The Importance of Factors Hampering Innovation by Chemical 70
Industry Sub-Sector
Table 6.13 Descriptive Statistics for Innovation, R&D, and Investment by 72
Country, Sub-Sector, and Firm Size (Unweighted mean values of
intensities and shares of firms in percent)
Table 6.13a Distribution of Sales Shares According to the Stages of the Product 73
Life Cycle (Unweighted mean shares in percent)
Table 6.14 Estimated Elasticities of Innovative Output (New Product Sales) with 81
Respect to R&D Expenditures by Country for the Chemical Industry
(Including Pharmaceuticals)
Table 6.15 Estimated Elasticities of Innovative Output (New Product Sales) with 82
Respect to R&D Expenditures by Chemical Industry Sub-Sector
Table 6.16 Estimated Elasticities of Innovative Output (New Product Sales) with 83
Respect to R&D Expenditures by Size Group for the Chemical
Industry (Including Pharmaceuticals)
Table 6.17 Estimated Elasticities of Innovative Output (New Product Sales) with 85
Respect for Firm Size by Country and by Chemical Industry Sub-
Sector
Table 6.18 Country-Specific Regressions for Innovative Product Sales (for Major 87
Innovations) and R&D in 1992 (with Pharmaceuticals)
Table 6.19 Industry-Specific Regressions for Innovative Product Sales (for Major 88
Innovations) and R&D in 1992
Table 6.20 Logit Regression Estimates for Product and Process Innovators in the 93
European Chemical Industry (Including Pharmaceuticals)

ix