Innovation Capability and Competitive Advantage:

A Case Study of Two Brazilian Firms1

Adriana Marotti de Melloa, Wander Demonel de Limaa,c, Eduardo Villas Boasb,
Roberto Sbragiab, Roberto Marxa
a
Production Engineering Department of the Polytechnic School of the University of São Paulo (PRO/EP-USP), Brazil
b
University of São Paulo School of Economics, Business Administration and Accounting (FEA/USP), Brazil
c
Federal University of Itajubá (IEPG/UNIFEI), Brazil

Abstract--This study investigates practices used by firms to successful were not necessarily those that invested the most
link their innovative capability to competitive advantage. The resources in R&D [12]. Andreassi and Sbragia [2] also
basic assuption is that innovative capability is conditioned by a obtained similar results in their studies. It may therefore be
serie of factors regarding to cultural, resources, competences said that innovation goes beyond investment in R&D and
and external conexions that promote competitive advantage
through creation and introduction of new/improved products to
technology; it is a more wide-ranging and complex process,
the market. An exploratory and case study is used, based on two the result of complex interactions – on local, national and
Brazilian Firms in different industries. The results indicated global levels – between individuals, corporations and other
that the innovative capabilite assumes different meanings in knowledge-producing institutions that warrant further study
different settings, thus resulting in different impacts on firm [3].
competitive advantage. 1 Innovation can improve companies’ competitiveness, but,
in order to do so, it requires a different set of management
I. INTRODUCTION knowledge and skills than that used in running the firm’s day-
to-day operations [20]. This set of knowledge and
Innovation is a key element of corporate competitiveness management skills may be termed companies’ innovative
in the 21st century, and has therefore attracted special capacity, as defined by Hii and Neely [11]: the internal
attention from management researchers and practitioners. potential to generate new ideas, identify new market
Although this theme has been in the spotlight over the past opportunities and implement marketable innovations through
few years, its discussion is in no way recent. In the 18th exploration of the company’s existing resources and
century, Adam Smith noted the relationship between capital capacities.
accumulation and manufacturing technology, as he studied As innovative capacity is a key element of companies’
concepts relating to technological change, the division of competitiveness in the current global scenario, knowledge of
labor, production growth, and competition [10]. how to make this innovative capacity operational – that is,
One may observe a division of the research on innovation how the company should be organized and managed in order
into two large fields. The first, based on economic theory, to develop products, services, and processes that actually
focuses on the differences in patterns of innovation between offer sustainable competitive advantages over time – can be
countries and industry sectors, the evolution of technology quite interesting. This article seeks to contribute to the
over time, and differences in propensity to innovate in a discussion of this matter, and, more specifically, to
given sector; that is, a macro view of innovation. The second demonstrate how a company could create an organizational
area, focusing on the micro level and individual companies, environment conducive to the development of product
has the study of product development processes as one of its innovation, drawing from its corporate culture, its
concerns [7]. competencies and, finally, its relationship with other
However, in order to benefit corporate competitiveness, institutions. To this end, a literature search on the theme was
by providing new products or processes to set a company performed and an exploratory research on the innovation
apart from its competitors, innovation cannot be restricted to management process in two companies, both considered
researching new technologies and developing new products. innovative, and each belonging to a different industry sector
After development, new technologies may fail upon being in Brazil, was carried out .
transformed into products and services; products and The article is organized as follows: in section II, the
services, in turn, may be commercially unsuccessful despite conceptual basis of the study is synthesized; section III
successful development. A survey carried out by management presents research methodology; section IV has results of the
consultancy firm Booz Allen Hamilton notes that, within a empirical study carried out at the two subject companies; and
sample of 1000 innovative global companies, the most finally, under section V, results are discussed and
conclusions presented, noting some study limitations and
1
suggesting further research.
This paper was originally written as a coursework requirement for EAD
5837, “Management of Technological Innovation within the Firm”
(instructor: Prof. Roberto Sbragia), University of São Paulo School of
Economics, Business Administration and Accounting (FEA/USP), 2007.
 II. CONCEPTUAL BASIS process, including marketing, technological, and productive
aspects [12].
A. Innovation: Different concepts and perspectives
Innovation has been studied by many authors in different B. Innovative Capacity and Competitive Advantage
fields, and has therefore been defined in different ways. In its According to Tidd, Bessant and Pavitt [20], the innovation
epistemological sense, innovation could be defined as “doing process is key to the company’s business; it is associated with
something new” [20]. Accordingly, the common ground renewal and evolution of the business, renewing what the
shared by the several definitions of innovation is the idea of company has to offer and how it creates this. In order to do
“something new”, be it a characteristic of a product or so, each firm may adapt the innovation process to its own
service, of a process, a technique, or a new use for a product specificities, in order to integrate the process into the firm’s
or service. Tushman and Nadler [21] therefore distinguish way of building knowledge. Large companies, for instance,
two types of innovation: product innovation, when there is a may have their own R&D labs or may outsource research;
change in the product manufactured by the organization or small businesses, on the other hand, prioritize speedy,
the service it offers; and process innovation, which is a empirical development of solutions, based on practical
change in the way a product is manufactured or a service is problem-solving experience.
provided. Zawislak [24] includes management innovation in Barañano [4] argues that innovation is a complex
this type. technological, sociological, and economic process that
The definition adopted by the OECD/Eurostat Oslo involves a highly intricate set of interactions, both within the
Manual [18] divides innovation into four specific segments: firm and between it and its economic, technical, social, and
the implementation of a new or significantly improved competitive surroundings. Success is therefore not expected
solution for the company, be it a new product, process, to be satisfactorily justified by one or two factors alone.
organizational method or marketing method, with the According to the author, no element can be effective by itself
objective of reinforcing the company’s competitive and, thus, no one management tool or technique will be able
positioning, improving its performance or increasing its to create an environment that is conducive to innovation.
knowledge. According to the Manual, product innovation What is actually found is a set of different (though strictly
entails significant changes in the potentials and inter-related) factors that must work in an integrated manner
functionalities of products and services, which may include to create and reinforce an environment that fosters the
both completely new goods and services and important success of technological innovation in the company.
improvements to existing products. Process innovations are According to Hii and Neely [11], a company’s innovative
significant changes in production and distribution methods. potential is not derived from a single specific skill, but rather
Organizational innovation refers to the implementation of from a set of skills termed innovative capacity, which is
new organizational methods, new management practices, defined as the internal potential to generate new ideas,
such as changes in business practices, human resources identify new market opportunities and implement marketable
management, organization of labor or the firm’s external innovations through exploration of the company’s existing
relations. Finally yet importantly come marketing resources and capacities. It would be the result of the several
innovations, which involve implementation of new marketing interrelationships between its corporate culture, resources,
methods, including changes in product and packaging design, competencies, and relationships with other organizations, as
changes in product promotion and placement, and changes in shown in These four constituent factors of innovative
pricing methods for goods and services. capacity will be discussed below.
This paper focuses on product innovation, that is, the
development of new products or the significant improvement
Culture
Cultura
in product performance, such as to bring competitive
advantages to the developing companies. However, we
attempted not to limit our scope to the strictly technological
aspects of innovation, but to extend it as far as possible to all Resources
Recursos
processes capable of turning an idea into a product with an Capacidade
Innovative Competitive
Vantagem
edge on the market [3]. From this broader concept of product Inovadora
capacity Competitiva
advantage
innovation, the need is evident for an organizational Competencies
Competências
environment that is conducive to new product development –
not simply high-tech aspects, but also the development of
concept and ideas for products with market potential. As Redes Inter-
Interorganizational
heavy R&D spending is no guarantee of commercially networks
organizacionais
successful innovation development, the company must
develop the capacity to innovate throughout its value chain,
Figure 1 – Building innovative capacity
by working on different functional areas involved in the Adapted from Hii and Neely[11]
1) Organizational Culture environment” that connects and coordinates individual and
According to Hii and Neely [11], a company’s culture collective activities in order to attain desired goals. Within
molds its main abilities and its knowledge base, in tandem this concept, new products and services are created from the
with the existing physical structure and managerial management’s capacity to respond rapidly to opportunities in
environment. It influences the way in which things are done the market. According to Barney [6], a company’s resources
and employee relationships. Organizational culture may be divided into three separate categories: physical
determines which knowledge is valued and how it is diffused resources, human resources and organizational resources.
to employees, setting the company apart from its competitors. These constitute inputs to the productive process, in this case
Maximiano [14] also highlights the corporate culture’s ideas generated, which may also be classified as a fourth
capacity to differentiate. To the author, as well as defining the resource category.
way in which a company’s personnel interact with one Based on the studies reviewed, the following indicators
another and with the environment, organizational culture also were developed in order to measure the different categories
distinguishes one firm from another. In fact, organizational of resources: Innovation-directed financial resources – R&D
culture – comprising the set of knowledge valued and spending and spending on new product launch (Financial
diffused among employees – is what distinguishes a Resources); Number of people involved in innovation
particular company from others in all aspects, including its (Human Resources); Number of engineers, including
innovation process. Seeking to better understand the technicians, masters’ and doctorate holders (Human
generation and accumulation of knowledge within the Resources); Existence of a structured R&D function within
company and how it may contribute to forming the company (Organizational resources).
organizational culture, Lemon and Sahota [13] listed the main
repositories of knowledge in a company, namely: the 3) Competencies
environment; its mission, vision, and values; technology; Allied to resources, competencies are for the most part
knowledge structures; the management style and responsible for the quantity of new products and services
organizational structure; individuals; the collective; and developed by the firm [11]. Competencies may be defined as
organizational memory. the skills needed to coordinate and allocate company
To Hii and Neely [11], the management system, rewards, resources towards the fulfillment of tasks. They could be
incentives, and training are the bases that allow modeling of classified as a group of capacities or processes necessary for
the generation and accumulation of knowledge by employees. the conception and implementation of innovation.
They highlight the influence of an incentive system on Distinguishing personal competencies from organizational
employees’ beliefs regarding creative activities; the ones is of the utmost importance. Several authors have
management system is described by the routines that guide discussed the competencies employees of innovative
allocation of the company’s resources. Neely and Hii [17] companies should have, but the model proposed by Hii and
associate organizational culture to several factors, including Neely [11] focuses on organizational competencies. These
knowledge of the company’s mission and objectives, strategy competencies provide evidence of how the firm uses its
geared towards innovation, the existence of an organizational capacities to carry out processes.
structure that privileges teamwork, and encouragement to Of the countless processes executed by a company, some
take risks related to innovative activity. stand out as more characteristic of innovative organizations,
Molina-Palma [16] defines the organizational culture such as: the capacity to generate and pick up on ideas;
dimension of innovation by the following values: “being management of a project portfolio; formulation,
innovative and willing to experiment with new ideas, being communication, and management of corporate strategy,
opportunistic, not constrained by many rules, and willing to through the use of indicators; and the capacity to manage,
take risks”. With these characteristics, the author claims, develop and make use of all knowledge presented to the
managers who perceive the company’s culture to be highly company by employees [16].
innovative feel comfortable carrying out projects that are It is therefore paramount that companies that wish to be
new, untested, and risky. High management support for its innovative have knowledge of the market they are part of and
creation and maintenance is therefore of the utmost the technological trends of its sector, taking notice of
importance. opportunities of new products or services that may be
In short, based on the review of the literature, four developed. The innovative company should also have in
indicators that would constitute an innovation-directed place systematic processes for new product development that
organizational culture can be defined: innovation strategy in allow constant development and implementation of
the company; supportive high management; risk aversion; innovation in the firm’s products, be it radical or incremental.
and systems in place to encourage innovation. The following indicators were selected to identify, for the
purposes of this study, the innovative capacity of the subject
2) Resources companies with regard to their competencies: Processes of
Penrose [19] says that a firm comprises, firstly, a variety new idea generation; Processes of new product development;
of “productive resources” and, secondly, a “managerial New product implementation; Production management and
continuous improvement; Project management; Knowledge these connections can be a source of substantial
of the market; Knowledge of technology. knowledge to guide development of the company’s
technological assets.
4) Interorganizational networks
Adler and Shenbar [1] use the term “external assets” to Fleury and Fleury [9] also highlight the possibility of
characterize a company’s connection to the environment. seeking extra-organizational resources to help in the firm’s
They outline three types of relationship with external entities innovation process, after the company has learned to organize
that can be a source of innovation: its own resources. Based on the conclusions of the authors
1- Connections to consumers: relates to the extent of access studied, the following questions should be able to indicate
the company has to consumers’ decision-making process. how the interorganizational relationship would affect the
Also includes that which the company may learn from firm’s innovative capacity: Which are the main sources of
consumers, including new product ideas. innovation ideas used; and Who develops innovation
2- Connections to suppliers, sales teams, and sources of (company itself / third parties)
scientific and technical knowledge: relates to the quality
of the company’s connections to the best people in the C. Summary of Conceptual Basis
field and to whether these relationships are sufficiently Based on the studies analyzed and the dimensions
collaborative. identified, Table 1 summarizes the constituent variables of
3- Horizontal connections through partnerships and innovative capacity, their definition and the indicators
alliances, trade associations and informal relationships: selected to measured them through field research.

TABLE 1 – CONSTITUENT ELEMENTS OF INNOVATIVE CAPACITY IN COMPANIES

Variable Definition Indicators in company
Hii & Neely [11];
Molina-Palma [16]
Culture Company’s support of innovation - Company’s innovation strategy
- High management support
- Risk aversion
- Systems to encourage innovation
Resources Financial, physical, human, and intellectual - Financial resources directed at innovation –
resources that support innovation R&D/new product launch spending
- Number of people involved in innovation
- Number of engineers, technicians, masters’ and
doctorate holders
- Established, structured R&D function
Competencies Competencies developed by the company for - Processes of new idea generation
innovation development - Processes of new product development
- New product implementation
- Production management and continuous improvement
- Project management
- Knowledge of market
- Knowledge of technology
Interorganizational Sources of innovation do not exist within the - Which are the sources of ideas for innovation
Networks firm alone: they also comprise the its clients, - Who develops innovation
suppliers, competitors, and partnerships with
research institutes and universities

III. METHODOLOGY through the case study method. Nonetheless, qualitative

research has its disadvantages. The first is greater difficulty in
The question of how to make innovative capacity – that is, assessing the validity and reliability of results [15]. Another
how the company is organized and managed to develop disadvantage of such studies is the possibility of their
products, services and processes that actually offer becoming excessively complex and overly detailed, which
sustainable competitive advantages over time – operational in would hamper identification of the relationships most
companies still has not had its variables and theoretical important to the construction of a theory. Finally, qualitative,
constructs well defined and established in the literature. case study-based research may lead to non-generalizable
Therefore, this theme may be considered to still be at the results, as only part of the phenomenon is being studied [8].
theory building stage. Despite these drawbacks, qualitative case study research is,
When there is no certain definition for the constituent according to Eisenhardt [8], the best choice for research in
constructs and variables of the theory that would explain a stages where little is known of a given phenomenon.
given phenomenon, the case study is particularly useful as a As study subjects, two Brazilian companies displaying
research method [22]. For this reason, the research presented product innovation, acting in different sectors (metal
in this paper will be of a qualitative nature and carried out packaging and petrochemicals), which were rated as
innovative in the Índice Brasil de Inovação 2 were chosen.. and is still one of the study cases analyzed by the Innovation
Following procedures proposed by Yin [28], three data Forum of the Getulio Vargas Foundation (FGV-SP)3.
collection sources were used for the case study, namely,
documentation (provided by the companies and obtained at 1) Innovative Capacity at Brasilata
their websites), semi-structured interviews and direct a. Culture
observation. To Brasilata, innovation is a question of market
The interviews conducted could be considered the most survival, as metal packaging has been gradually replaced
important source of information for the study. Using semi- by other materials, such as PET, in the past few years.
structured questionnaires, executives, engineers, and The company’s strategy consists of obtaining
technicians of each subject company were individually competitive advantages over its current and potential
interviewed. At the packaging company (Brasilata), two competitors through product differentiation and cost
executives from the Human Resources department, one from reduction. As a result of this strategy, Brasilata has
the Quality department and one from Product Development, deposited 32 patents both in Brazil and abroad, 12 of
were interviewed. Four executives were interviewed at the which were developed over the past three years. The
petrochemicals firm (Oxiteno): two from the R&D area and company currently licenses the “Plus” and “Biplus”
one each from the Technology and Production departments. canning technologies, which allow re-closing of the
Another data collection method employed was in loco container lid several times after it is first opened,
observation. According to Yin [28], observation is an particularly to companies in Mexico and Italy, as well as
additional way of collecting evidence for a case study. other markets to which their products are exported.
Informally direct observations were made during field visits The company believes this performance is the result
to the firms in order to conduct interviews. This observation of developing a strongly innovation-driven corporate
was useful to provide additional information on the study culture. Since the 1980s, when the firm faced a severe
topics and include an interpretation of the interviewees’ financial crisis, constant innovation of management
perception of the theme. practices has been considered critical to its survival. An
example of this mindset is its highly peculiar approach to
IV. DESCRIPTION OF STUDY CASES people management, with a strong commitment on the
part of high management to the job stability of their
A. Brasilata employees (or “inventors”, as staff are referred to within
Brasilata S.A. Embalagens Metálicas is a locally owned the company). Another concern is with transparency and
company, founded in 1955, with three production units, in disclosure of financial information across all hierarchical
São Paulo (São Paulo), Estrela (Rio Grande do Sul) and Rio levels: the board holds monthly and quarterly meetings
Verde (Goiás). It employs around 900 staff and had earnings with all employees to present financial results.
of approximately R$ 360 million for the year 2006. It is a Another practice quite common in Brasilata is the
major player in the metal packaging sector (cans, pails, etc.) a constant encouragement of employees of all levels to
pulverized market largely composed of small and medium- suggest ideas and provide criticism, through what is
sized companies. Brasilata manufactures containers for food known as Projeto Simplificação (“Simplification
and chemicals (mostly paints and solvents). In the food Project”). According to one of our interviewees, the firm
market in particular, it faces competition from manufacturers considers the project to be the foremost promoting factor
of other types of packaging, such as Tetra Pak and PET of their innovation culture and a powerful knowledge
bottles. management tool. The project was set in motion in 1987,
Brasilata is recognized by the market as an innovative as part of a Total Quality Management/Kanban/Just-In-
company, an exception in a sector dominated by Time implementation program. It began as a program to
manufacturers that depend on suppliers for innovation. It has gather ideas on improving processes, but over time,
received several Brazilian and international awards for its became the main communication channel between top
products, including the Prêmio Brasil de Inovação, promoted management and operational staff.
by the State University of Campinas (Unicamp) in 2006. For In 2006, an average of 121 ideas were proposed per
three years (2000, 2001 and 2004), it was considered one of employee – a strikingly high volume, even by
the top companies to work for in Brazil by Exame magazine, international standards. Employees are held to the
number of ideas sent for analysis, and ways of
establishing a yearly goal of ideas per employee is
2
currently under study. One interviewee claimed the
The Índice Brasil de Inovação (Brazil Innovation Index) is based on data
from the Pesquisa Industrial de Inovação Tecnológica (Industry
program is successful only because it is the result of a
Technological Innovation Survey, PINTEC-2003/IBGE) and the Pesquisa continuous, 20-year to implement a work philosophy
Industrial Anual (Annual Industry Survey, PIA-EMPRESA-2003), provided
by the companies, and complemented by patent data provided by the Instituto
3
Nacional de Propriedade Intelectual (INPI, Brazilian patent office). The Data obtained from in-company interview, the Brasilata website
Index is an initiative of Inovação Uniemp magazine. (www.brasilata.com.br) and Barbieri [5]
 geared directly at innovation. This effort may be credited structure; around 90% of its staff works on the factory
to the company’s remarkably stable management, as its floor. There is no dedicated sector in charge of R&D, but
director-superintendent – who largely idealized there is a simple Product Development area with four
Brasilata’s management philosophy – has held the employees, including a coordinator who holds a Master’s
position for nearly 30 years. The company’s board of Degree in Packaging Development. The area is equipped
directors and management level are composed for the with machinery for prototyping and prototype testing.
most part of house employees who have been with the All employees in Product Development are originally
company for their entire careers, many employed from the operational area. This area is responsible for the
initially as interns or even from the firm’s operational technical development of product projects, but is not
sector. exclusively in charge of proposing ideas and technical
As part of the encouragement of an innovative solutions. The department analyses product ideas
corporate culture, any well-intentioned errors that may generated through Projeto Simplificação, and also
be committed during product or process development are receives suggestions from suppliers and technical
written off as “training expenses” by management. To assistants, who make regular visits to the company’s
one interviewee, “not trying something is worse than clients.
trying and getting it wrong…” Knowledge development
would only be possible through learning, and some errors c. Competencies / Interorganizational Networks
may be inevitable in the process. The innovation development process at Brasilata,
from idea inception to new product (or process)
b. Resources implementation, may be described by the model
Brasilata is quite a pared-down company, with few presented in Fig.2.
hierarchical levels and a simplified organizational

Idea External
Sources Support
Product
Development
Employees Clients
Clients Sales and Process Regulatory
Aftermarket service Development Authorities
Suppliers
Teaching and
Scholarly Research
articles Quality Implementation Institutions
Development
Agencies
Standards
and Legislation
Production Suppliers
Etc.
Etc.

Figure 2 – Brasilata innovation model.

After Barbieri [5] and in-company interviews.

According to the company, this model reflects the way in only sources of innovation. Relationships with clients,
which innovation is generated and developed by it, suppliers, and research institutions are also paramount to
accounting not only for ideas generated by employees and product development. As an example, we may mention a
clients, but also the firm’s relationship with external entities, partnership between Brasilata and CETEA (Packaging
such as research institutes, suppliers and development Technology Center of the São Paulo State Institute of Food
agencies. At the center of the model, reflecting the Technology) for product development abd testing. Brasilata
company’s internal organizational structure, interdependency also relies on its machinery and raw material suppliers for
may be noted between all the areas involved, reflecting the product development assistance. In the development of the
result of organizational changes undertaken by the firm and “Plus” paint pail, for instance, partnerships wuth the
the simplicity of its structure, which privileges contact company´s machinery supplier and clients were fundamental,
between all sectors. Therefore, there is no single structured as the new lid closing technology developed required changes
process for innovation development; it is ad-hoc, according in raw material specifications and process changes on the
to the type of innovation developed, which provides the client side.
company with greater agility in product development.
Ideas obtained through Projeto Simplificação are not the
 TABLE 2 – SUMMARY OF CONSTITUENT ELEMENTS OF INNOVATIVE CAPACITY FOUND AT BRASILATA DEVISED BY AUTHORS USING FIELD DATA

Variable Definition Indicators in company Found at Brasilata

Hii & Neely[11]; Molina-Palma, [16]
Culture Company’s support of innovation - Company’s innovation strategy - Product differentiation strategy consisting of innovation and cost
- High management support reduction.
- Risk aversion - Top management involved in innovation process. Director-
- Systems to encourage innovation superintendent is academic researcher in field and main
motivator of innovation in company.
- “Errors made with good intentions are training costs”.
- “Projeto Simplificação” (idea generation project) is main axis of
creating an innovation culture in company.
Resources Financial, physical, human, and - Financial resources directed at - 32 deposited patents, 12 of which in the past year
intellectual resources that support innovation – R&D/new product launch - No dedicated R&D function; instead, a Technical Development
innovation spending department, which employs four technicians with product and
- Number of people involved in process experience. Coordinator holds a Master’s Degree in
innovation Packaging Development.
- Number of engineers, technicians,
masters’ and doctorate holders
- Established, structured R&D function
Competencies Competencies developed by the - Processes of new idea generation - “Projeto Simplificação”, as main Knowledge Management and
company for innovation development - Processes of new product development competency development tool, Production management and
- New product implementation continuous improvement
- Production management and continuous - Ad-hoc innovation process, giving preference to the involvement
improvement of different departments in product development.
- Project management - Interaction with suppliers, clients, and research institutions as
- Knowledge of market way of developing technological competencies.
- Knowledge of technology

Interorganizational Sources of innovation do not exist - Which are the sources of ideas for - Employees, clients, suppliers, technical literature, standards, and
Networks within the firm alone: they also innovation regulations.
comprise the its clients, suppliers, - Who develops innovation - Innovation developed by company itself, giving preference to
competitors, and partnerships with ideas presented by employees.
research institutes and universities
B. Oxiteno Technology Center, a 41.000 square-foot facility that
Oxiteno Indústria e Comércio S.A. is a locally owned received an investment of around US$31 million in
subsidiary of the Ultra group, operating in Brazil and Mexico. laboratory equipment and pilot plants, used to develop
It is the top producer of ethylene oxide and its derivatives in new products and processes.
South America, and an important manufacturer of chemical The RD&E function is carried out by three different
specialties and catalysts. Its products are employed in the structures within the company. The first is the New
cosmetics, detergents, paints, PET packaging (plastic bottles), Business Development area, directly connected to the
textiles, and agrochemicals markets, among others. It is one company Superintendency, and responsible for
of the largest firms in the Brazilian petrochemicals sector, identifying new market opportunities in already existing
and exports its products to over 40 countries. Oxiteno technologies in the company or the market, and also for
employs around 1000 staff in its five Brazilian production developing new scenarios or technologies, such as
units: Camaçari (Bahia), Triunfo (Rio Grande do Sul), alcohol and oleochemicals. This area is also in charge of
Suzano, Tremembé and Mauá (São Paulo); the latter is home developing long-term operation strategies and projects.
to its Technology Center. The second area is Development and Applications,
connected to the Commercial department. This area is in
1) Innovative Capacity at Oxiteno charge of the technical development of new products or
a. Culture: new applications for products the company already
Oxiteno has been operational for over 30 years in the manufactures. It is structured according to the target
petrochemicals sector, manufacturing commodity market segments of the company’s products, and divided
chemicals, catalysts, and specialty chemicals (mainly into departments: Food Additives, Agrochemicals,
surfactants). With growing international competition and Personal Care, etc. The company also has laboratories
high oil prices, the profitability of basic chemicals has that provide analytical research support and a technical
been decreasing over the past few years; the company is information center, which conducts scientific literature
therefore attempting to shift its focus to the specialty and patent searches. It is focused on market needs,
chemicals market. In this scenario, product innovation identified by department technicians or by Sales and
has become critical. Marketing personnel.
Oxiteno’s corporate culture has always been directed The third area responsible for R&DE activity –
at operational excellence, focused on production cost Process and Technology –, attached to the Industrial
efficiency. Although operational excellence is still department, is directed at the development of new
strategically important to the company, its management processes to meet the needs identified by staff at
also believes that a stronger innovation-driven culture is Application or New Business. This department also
necessary. One marker of this trend is the offering of an includes the Catalyst Development area, which follows
Innovation Management course to mid-level managers. its own product development process, due to the
Although the company has obtained good results on specificity of its products.
the innovation front over the past years, it can still be
considered conservative with regard to its willingness to c. Competencies:
take the risks inherent to innovation. This stance may be The new product development at Oxiteno, from idea
partly explained by the sector’s characteristics. Oxiteno inception to the implementation of the new product (or
operates in a segment where the investment required to process), may be briefly described as shown in Fig.3.
develop a new product is high and amortization periods Depending on the type of project, the outlined steps may
are long; consequently, innovation proposals require be executed simultaneously, and their duration depends
greater maturity. on the type of product, its degree of novelty, and the
resources required – the development of a new molecule,
b. Resources: requiring new process, for instance, may take up to two
Oxiteno allocates approximately 2% of its net or three years.
earnings to RD&E (Research, Development and The catalyst development flowchart is similar, but the
Engineering), above the Brazilian average and that of its catalyst area (part of the Industrial department) is solely
sector. 4 Around 12% of its staff (approximately 140 responsible for the entire development process. The
people) is involved in RD&E activities. Of these 140, timeline of new catalyst development is longer – it may
28% have technical education, 61% are chemical, extend to five years – and its implementation depends on
engineers or chemists, and 11% hold master or doctoral client-side testing.
degrees. The Mauá (São Paulo) unit houses the firm’s

4
Average technological intensity (as measured by relative R&D spending
over earnings) of the 20 most innovative industrial activities in Brazil is
1,0%. Data source: IBGE, Pintec 2003.
 Concept
Process project
generation: Laboratory Pilot plant Process Process
Step New molecule or Tests Tests
development or
acquire Engineering Implementation
new application for technology
a current molecule

Mktg/Sales/ Development and Development and Process Process Industrial

Application Application technology
Application technology Units

Figure 3 – Simplified new product development flowchart

Devised by authors from study data

Oxiteno has an internal group, known as the particularly important to the catalyst area. The theory of
Technological-Scientific Committee, to aid in the catalyst development is still not fully established or
development of technological strategies. It is composed understood by the market and academia; it is still at the
of academic researchers and specialist consultants of the building stage, and therefore requires fairly heavy basic
petrochemicals industry, both Brazilian and from other research work – which would mean high risks and long
countries. This committee convenes every six months or development timelines for the company. In this segment,
so to discuss future trends in the sector and suggest agreements between companies and researchers at
strategic technology directions for the company. The educational institutions, to arrange the execution of
most recent meeting was late last year, where, among development stages more closely dependent on
other topics, the committee detected future opportunities exploratory research, are quite commonplace.
for growth in the surfactants and oleochemicals niche In areas that are considered strategic for the
segments. company’s future, but in which the company still has no
The current product development structure shows a internal competency, the establishment of partnerships
concern for meeting market needs and the needs of between the firm and research institutions or universities
specific segments. Consequently, a strong concern for is also common. An example of such a partnership was
the technical knowledge and expertise of employees can the joint publication with FAPESP (the State of São
be noticed. Even in commercial areas, the employment Paulo Research Foundation) of a call for proposals for
of engineers and/or chemists is commonplace, as the alcohol and sugar chemistry projects to be executed
company believes technical expertise to be paramount collaboratively. Another initiative is a nanotechnology
for competency building, and also considers client and research program for the catalysts, agrochemicals, and
supplier information to be important input for process thermoplastics segments, in partnership with the State
and product innovation. Due to the technologies and University of Campinas (Unicamp), the Federal
processes used by the company, a certain level of University of São Carlos (UFSCAR), the Federal
technical knowledge and training is required even of University of Campina Grande (UFCG), and the Federal
factory floor operators and laborers. University of Rio de Janeiro (UFRJ).
Oxiteno preferentially hires personnel through
internships and trainee programs, and targets graduates A summary of the constituent elements of innovative
of first-line universities and trade schools. capacity found at Oxiteno is presented in Table 3.

d. Interorganizational Networks: V. DISCUSSION AND CONCLUSIONS

The main source of innovation ideas for Oxiteno is its
customer base. A concern on the part of the company One may say that innovation is a wide-ranging and
with being directly in touch with its customers can be complex process, the result of interactions between several
seen in the structural organization of the Product factors, including individuals, customers and clients,
Development area. As well as product development, the competitors, suppliers, the market, research centers, and other
company also offers services to its clients, such as knowledge producing institutions. Innovation may indeed
analysis and testing in company laboratories or pilot improve corporate competitiveness; however, to become a
plants. reality, it requires a set of diverse management knowledge,
Another important source of innovation at Oxiteno is practices and skills. This set may be termed innovative
its network of relationships with universities and capacity of a firm, as defined above.
research institutes. Contact with academic research is
 TABLE 3 – SUMMARY OF CONSTITUENT ELEMENTS OF INNOVATIVE CAPACITY FOUND AT OXITENO DEVISED BY AUTHORS USING FIELD DATA.
Variable Definition Indicators in company Found at Oxiteno
Hii & Neely[11]; Molina-Palma,
[16]
Culture Company’s support of innovation - Company’s innovation strategy - Current strategy seeks to focus business on specialty chemicals with
- High management support high added value
- Risk aversion - Conservative company with regard to risk
- Systems to encourage innovation - Mid-level management took part in course on innovation
Resources Financial, physical, human, and - Financial resources directed at innovation – - 2% of net earnings invested in R&D
intellectual resources that support R&D/new product launch spending - 25 patents deposited in Brazil and abroad
innovation - Number of people involved in innovation - Around 140 employees (12% of staff) allocated to R&D
- Number of engineers, technicians, masters’ - 72% of R&D staff are university graduates or hold post -graduation
and doctorate holders degrees
- Established, structured R&D function - R&D function is allocated partly to Industrial Department
(Engineering and Catalyst Development) and partly to Commercial
Department (Product Development and Applications).
Competencies Competencies developed by the - Processes of new idea generation - New Business Development area and Technological-Scientific
company for innovation - Processes of new product development Committee evaluate future trends and propose new business ideas
development - New product implementation (such as oleochemicals)
- Production management and continuous - Input may also come from market or internal company needs
improvement - Structured New Product Development process, currently undergoing
- Project management critical analysis
- Knowledge of market - Market knowledge: structure of the Product Development area,
- Knowledge of technology segmented into markets serviced by the company
- Company privileges technical knowledge – emphasis on hiring
engineers, chemists, Master’s Degree and PhD holders; in contact with
universities
Interorganizational Sources of innovation do not exist - Which are the sources of ideas for - Customers and market are main sources of innovation. Other
Networks within the firm alone: they also innovation important sources are universities and research institutes, for segments
comprise the its clients, suppliers, - Who develops innovation more closely dependent on basic research (such as catalysts) or still
competitors, and partnerships with incipient (nanotechnology, alternative fuels, green chemistry)
research institutes and universities - Innovation is developed in-company, but makes use of partnerships
with universities and research institutes and outsourcing of highly
routine activities (such as engineering calculations)
 Its limitations considered, this paper sought to contribute Simplificação, which involves the participation of operational
to the debate on how companies may create organizational staff on proposing new ideas, incremental suggestions, and
environments conducive to innovation development, through new products. Although it is systematized, the innovation
its culture, resources, competencies, and through the use of management process appears to be less dependent on a
interorganizational networks; these factors, as a set, are formal organizational structure (product development is not
known as innovative capacity. In the pursuit of this restricted to a single department) and more dependent on (or
objective, two case studies of companies showing product more stimulated by) innovation-driven management
innovation obtained through different practices were practices, many of them simple, such as “idea boxes”. One
conducted. such practice is massive employee participation in the idea
Although the obtained results cannot be generalized to the generation process, allowing innovation to stem from the
universe of innovative Brazilian companies, they do tend to direct interaction of people from different departments.
confirm the basic premise that corporate innovation is largely A likely explanation, besides management practices
conditional to the existence of an organizational environment adopted, may be a characteristic of the sector Brasilata
conducive to its development. Innovation in companies is operates in; a low “technological density” sector, where
therefore not spontaneous, but rather the result of systematic empirical knowledge of the market and products may be
investment (not necessarily financial) and continuous effort accessible to a greater number of individuals who may then
towards it. act as “innovators”, contributing competencies whthout
In the subject companies – Brasilata and Oxiteno – the necessarily being employed by a structured, established R&D
success of innovation cannot be satisfactorily justified by one department or having in-depth technical expertise on the
or two single factors acting as “innovation promoters”. We theme. In such a scenario, organizational culture and
may safely say that, in these companies, no isolated element competency are more important to the promotion of
(culture competencies, resources, and interorganizational innovation than resources and interorganizational networks.
interactions) could possibly be effective. However, it became On the other hand, at Oxiteno, although organizational
clear during the course of this study that innovative capacity culture and competencies are important to innovation,
presents with different configurations in different companies, resources and interorganizational networks are more so.
that is, in some corporate environments, it may be more Oxiteno operated in a medium- to high-tech market segment,
strongly influenced by certain constituent factors and less so and has a structured innovation management process, based
by others. In Brasilata, for instance, innovative capacity is on interaction and relationships with clients, suppliers, and
built mostly upon its corporate culture and competencies, research institutions. Unlike Brasilata, where innovation may
while at Oxiteno it is built upon resources and stem from different in-company sources and employees at
interorganizational networks, as suggested by Fig.4. several departments, the technological complexity and
density of Oxiteno products and processes would make
spontaneous innovations, not based upon a structured R&D
effort, quite unlikely. This would explain the company’s
tendency of recruiting professionals with a solid background
in its target technology areas – specifically, chemical
engineers and chemists.
The main sources of ideas for innovation at Oxiteno are
the company’s clients and its R&D process. As there is a
structured R&D function, the company’s concern with being
directly in touch with clients is noticeable. In fact, the
company goes beyond product development and also offers
services to clients, such as analyses and testing in company
laboratories or pilot plants. Another important source of
innovation, as well as clients and R&D, is the firm’s
relationship with universities and research institutions.
Contact with academia is paramount to development in the
catalyst segment. The theory of catalyst development is still
not fully established, which generates greater risks for
developing companies and justifies higher investment in
Figure 4 – Dimensions of the Innovative Capacity at Brasilata and Oxiteno
basic research, which, according to one interviewee, is best
After Hii and Neely [11] done by universities.
An analysis of the results of our empirical study allows us
Innovative capacity at Brasilata is more specifically based to conclude that the building of innovative capacity can have
on the development of an innovative organizational culture different meanings in different types of companies that act in
and on competencies (knowledge), as represented by Projeto market segments featuring diverse levels of technology. A
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