Analysis of innovation and its environmental impacts on the chemical industry.

Author:Schreiber, Dusan
Position:Report
 
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Introduction

Globalization of the economy and the need to be competitive have driven organizations to invest in technology and innovation, valuing quality, knowledge and competencies, in order to find solutions that can confer advantages in an ever-more competitive and globalized market. However, it has been observed that environmental concerns have remained as a secondary priority for organizations, which has led to demonstrable reductions in environmental quality. It is only recently (beginning in the second half of the 20th century), that the relationship between economic development and the environment has been approached from a new perspective, characterized by understanding of nature itself and of the existing resources and by the search for sustainable management of the resources for which each country has responsibility.

In this scenario, framed by concerns about environmental issues and the need for more competitive economic development, Porter and Van der Linde (1995) have pointed to the existence of synergies between competitiveness and environmental preservation. The central argument is that imposition of adequate environmental norms and standards will encourage companies to adopt innovations that reduce their costs or add value to their products and processes and which can make a contribution to the competitiveness of organizations (Porter & Van Der Linde, 1995).

In light of this contextualization of innovation and environmental quality, this study presents an analysis on the process to introduce innovations by chemical companies in the Vale do Rio dos Sinos (hereafter the Sinos Valley), Rio Grande do Sul, Brazil, and motivations for developing environmental technologies. The study objective was to describe the characteristics of this specific process and to contribute to the debate, illustrating the importance of the subject and the necessity of confronting these issues in the Sinos Valley, in view of the region's development policies that privilege industrialization as the route to economic growth.

There is an as-yet incipient debate in Brazil about the determinant characteristics of firms that introduce innovation and about the consequences of this for their financial performance. Some Brazilian authors who have studied innovation in connection with the environment, such as PINTEC survey team (Andrade, 2004; Ferreira & Kiperstok, 2007; Instituto Brasileiro de Geografia e Estatistica [IBGE], 2010; Jaffe, Newell, & Stavins, 2004), state that innovation is growing in Brazil and that innovation is effective for reducing environmental impact. However, it can also be observed that one of the central issues in this debate is the fact that many organizations still see environmental questions as a source of costs rather than opportunities.

It can be stated that the majority of organizations consider innovation and technology to be indispensable, particularly with relation to environmental issues. Working from the premise that innovation can be usefully analyzed from two different perspectives, specifically, (a) as a driver of economic benefit, and (b) as a source of environmental impact (positive or negative), this study analyzes the environmental impacts of innovation in companies doing business in the chemical industry in the Sinos Valley region, Rio Grande do Sul, Brazil, using qualitative, quantitative, descriptive and exploratory methods, with a view to identify innovation in these firms, the environmental characteristics and the results of this innovation.

Innovation

Joseph Alois Schumpeter was a pioneer and one of the most important authors of literature on the subject and the person who most emphasized the relevance of innovation to economic development. According to Schumpeter (1982), innovation is the introduction of a new good to the market or a new quality of a good, introduction of a new method of production, opening of a new market, discovery of a new source of raw materials, or implementation of a new organization or method of organization.

In line with these concepts, Christensen (2002) has stated that innovation can be defined as formulation, combination or synthesis of knowledge to create new products, processes or services. Innovations in processes and services can revolutionize an industry, reducing costs, eliminating the number of production stages, or introducing new types of services.

Schumpeter (1982, p. 48) listed five different types of innovation, as follows,

(1) Introduction of a new good--that is one with which consumers are not yet familiar--or a new quality of a good. (2) Introduction of a new method of production, that is one not yet tested by experience in the branch of manufacture concerned, which need by no means be founded upon a discovery scientifically new, and can also exist in a new way of handling a commodity commercially. (3) Opening of a new market, that is into which the particular branch of manufacture of the country in question has not previously entered, whether or not this market has existed before. (4) Conquest of a new source of supply or raw materials or half-manufactured goods, again irrespective of whether this source already exists or it has first to be created. (5) Carrying out of the new organization of any industry, like the creation of a monopoly position (for example through trustification) discovery or the breaking up of a monopoly position.

As such, innovation is basically the introduction of a new product and/or process, a new market, or use of new materials and/or new market structures.

Kemp, Smith and Becher (2000) consider that the literature on innovation can basically be divided into two different approaches. The first approach analyzes the behavior of innovative individuals, starting from the premise that companies innovate through technological opportunities and that innovations occur where there are opportunities. The second approach considers innovation within a systemic concept of complex interactions between companies and their environments. However, the scope of this paper is limited to identification of innovation as a result rather than as a process. In other words, innovation is seen as a product or process or something new to the firm, rather than the way in which organizations manage the innovation process.

Bessant and Tidd (2009) have identified innovation types, stating that there are different types of novelty, ranging from minor improvements (incremental innovation) to radical changes that truly transform things, in terms of the way they are perceived or utilized. Sometimes these changes are common and simple and are restricted to specific sectors or activities, but in other cases they are so radical and difficult to achieve that they change the basis of society itself (Bessant & Tidd, 2009).

Incremental innovations occur continuously in all industries, but vary from country to country and sector to sector as a function of the demand for supply, sociocultural factors, opportunities, etc. This class of innovation includes improvements to product design and quality; improvements to processes; new technological and organizational arrangements; and new practices related to supplies and sales. Radical innovation occurs when existing paths are abandoned and a new technological route is inaugurated. In contrast with incremental innovation, radical innovation is not gradual, but sporadic, breaking through the limits of incremental innovation. Radical innovations lead to jumps in productivity and start off new pathways for incremental innovations (Bessant & Tidd, 2009).

Some authors (Organiza^ao para a Coopera^ao e Desenvolvimento Economico [OCDE], 2005; Tidd, Bessant, & Pavitt, 2008) claim that the most important types of innovation are innovations in products and processes. Innovations in products and processes are strictly related to concepts of technological innovation. The Oslo Manual (OCDE, 2005) extends this set with the addition of innovations in marketing and organizational innovations, expanding the range of innovations (OCDE, 2005). For the purposes of measuring types of information, this study therefore adopted the innovation classification recommended by the Oslo Manual (OCDE, 2005), which is oriented along Schumpeterian lines:

Product innovation: Introduction of a product or service whose characteristics or intended uses are new or significantly improved. This includes significant improvements to technical specifications, components and materials, the software implemented, ease of use, or other functional characteristics. Process innovation: Introduction of a new or significantly improved method for production or distribution. This includes significant changes to techniques, equipment and/or software. Marketing innovation: Introduction of a new marketing method with significant changes to product concept or packaging, product positioning, product promotion, or product pricing. Organizational innovation: Implementation of a new organizational method in company's business practices, in workplace organization, or in external relations.

In addition to fitting one of the types described above, for an action to be considered an innovation it must involve a certain degree of change or novelty. The degree of novelty can be discussed in terms of an innovation's scope of diffusion, which may be: new for firm, new for market, or new for global market (OCDE, 2005):

New for firm: the minimum requirement for an innovation is that the change introduced must be new to the firm introducing it. A production, process, marketing or organizational method may already have been utilized by other companies, but if it is new for a specific firm, then its introduction constitutes an innovation for that firm. New for market: innovations are defined as new for market when a firm is the first in its market to introduce a change. A market is defined as the firm and its competitors and may refer to a geographic region or a...

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