Received theory and conventional wisdom suggest that developing countries are mere importers of the capital goods and advanced technology produced by the most advanced firms in the developed world (Vernon, 1966; Rosenberg, 1976; Bell and Pavitt, 1993).

However, in recent years there has been growing evidence of successful innovative firms emerging from developing countries, as part of the process of globalisation (Dunning et al. 1997; Chudnovsky et al., 1999; Cantwell and Mudambi, 2005; Narula and Benito,2007; Goldstein and Godinho, 2010; Cantwell and Amann, 2012). Notwithstanding, there is still a gap in the literature on latecomers catching up, as most of these studies are fundamentally contextualised in thriving and growing economies with mild-to-strong institutional support (e.g., Asian Tigers, BRICs, and Multilatinas). Little attention has thus far been paid to the case of successful latecomer firms coming out of declining and crisis-ridden economies, with little state support. For this reason, Argentina presents a particularly interesting context for analysing latecomer firms, as the country has suffered a considerable decline in its industrial base, technological capability, and international competitiveness, in the midst of turbulent macroeconomic conditions (Schvarzer, 2000; Katz, 2006). As a result, we should not expect the emergence of internationally successful latecomer firms from such a harsh environment. However, preliminary observations suggests that a number of manufacturing firms in Argentina actually circumvented the product and process technology gap by fostering also organisational and marketing innovations, as a response to a new business strategy in time of crisis.

Based on that empirical evidence, the objective of this paper is to make use of econometric tools to investigate which were the corporate characteristics that could have made other manufacturing enterprises more resilient to Argentina’s adverse economic conditions. Specifically, the focus will be on the extent to which organisational and marketing innovations, alongside product and process innovations, had a positive impact on manufacturing firms’ sales and productivity during Argentina’s most recent economic crisis (1998–2001).

The dataset used in this study is the Second Innovation Survey of Argentina (INDEC, 2003), which contains detailed information for a sample of 1,688 manufacturing firms during the period 1998–2001, a timeframe coinciding with Argentina’s most severe economic crisis since the 1930s. Given some cross-sectional limitations of the data, ordinary least squares (OLS) methods for regression analysis are complemented with the instrumental variable (IV) approach whenever possible, in order to mitigate any potential endogeneity bias in the main variable of interest. 

This article represents a first attempt to empirically measure the contribution of non-technological innovations on latecomer firms’ performance in Argentina while, at the same time, introducing conceptual and methodological discussions that it is hoped will contribute to future research along these lines. 

The structure of the paper is organised as follows. Section 2 contains the conceptual framework that underpins the main ideas used in this research on catch-up, latecomer firms and non-technological innovations and crises. Section 3 briefly depicts the main features of the dataset in question and displays some descriptive statistics. Section 4 presents the empirical equations to be tested and describes the main variables to be used. In Section 5, some data limitations are discussed along with the estimation strategy to overcome them. Then, Section 6 presents the econometric analysis and empirical findings of this study. Finally, in Section 7, the conclusions of this paper are drawn and some tentative implications for policy, methodology and further research are discussed.

The statistical results regarding the role of non-technological innovations were, however, mixed. There may have been retro-causality for marketing innovations, whereby the drop in total sales could have led to an increase in marketing innovations in the affected firm, rather than vice versa. In the case of organisational innovations, the introduction of  new business strategies, routines, procedures, quality management systems, etc., turned out to have no effect on firm performance. In contrast, when these activities were measured as inputs or efforts oriented toward organisational change, they effectively had a  positive impact on firm performance. An alternative model was specified estimating IVs, which indicated that organisational innovators indeed fared much better than non-innovators.

Most likely, the increasing restocking of capital via the acquisition of new machinery, along with the sharp reduction in employment levels during the 1990s in Argentina, led many firms to direct their innovation efforts towards organisational change, in line with the new productive structure (Schvarzer, 2000; Katz, 2006). Due to difficulties in measuring the variables of interest, firm managers were probably not able to accurately report whether or not the goals of this ongoing process of organisational restructuring had been achieved successfully or not. In the present study, organisational innovations were therefore best measured as inputs, rather than as outputs, thus indicating the presence of organisational capabilities at the firm level (Nelson and Winter, 1982; Dosi et al., 2000). 

Organisational capabilities are particularly important during times of crisis, when firms are forced to make nimble adjustments in their composition of capital and labour, as well as in how production is organised. Freeman and Soete (1997) further highlighted the importance of capacity of adaptation for firms facing unstable and changing environments, such as the one that prevailed in Argentina from 1998 to 2001. The findings presented in the current study are also in line with the preference for flexibility found among firms operating in crisis-ridden countries like Argentina (Fanelli and Frenkel, 1995). Finally, since the econometric results showed that organisational innovations had a stronger impact on total sales (0.13) than on labour productivity (0.09), they are therefore likely to relate to organisational concepts such as quality audits and certifications (ISO), the decentralisation of planning, and customer-oriented structures aimed at improving corporate flexibility (Armbruster et al., 2008).

Papa, J. (2016) "Better Bend than Break: An Econometric Study on Non-Technological Innovations during Crisis Times in Argentina", International Journal of Technological Learning, Innovation and Development, Vol. 8(2), pp 197-224, January 2016