Master - Thesis - Fernanda - Vilela1 MO Brazil PDF

Innovation Management and Market Orientation in Brazilian
Technology-based MSMEs
Master thesis for the attainment of the academic degree of

‘Master of Business Administration in Small and Medium-Sized Enterprise
Development’
International SEPT Program, University of Leipzig
Written by: Fernanda Vilela Ferreira
Student’s ID No.: 2107504
First supervisor: Prof. Dr. Utz Dornberger
Second supervisor: Dr. Noor Un Nabi
Date of assignment of topic: 15th April 2011
Date of submission: 29th August 2011
1
CONTENTS
1 Introduction ................................................................................................ 114
1.1 Context ............................................................................................................ 16
1.2 Justification ..................................................................................................... 17
1.3 Objectives ....................................................................................................... 19
1.4 Research questions .......................................................................................... 19
1.5 Relevance of the study ..................................................................................... 21
1.6 Limitation of the research ................................................................................ 21
2 Theoretical Framework .............................................................................. 22
2.1 Brazilian micro, small and medium-sized companies ....................................... 22
2.1.1 Brazilian technology-based MSMEs ................................................................ 24
2.2 Support for technology-based MSMEs ............................................................ 26
2.2.1 Venture Capital ............................................................................................... 26
2.2.2 Venture Capital in Brazil ................................................................................. 29
2.3 Innovation Management .................................................................................. 30
2.3.1 Technological Innovation: concepts ................................................................. 30
2.3.2 Innovation process ........................................................................................... 32
2.3.3 Managing Innovation ....................................................................................... 37
2.3.4 Measuring Innovation Management ................................................................. 38
2.4 Market Orientation .......................................................................................... 41
2
2.4.1 Definition of market orientation ....................................................................... 42
2.4.2 Measuring Market Orientation ......................................................................... 44
3 Methodology............................................................................................... 48
3.1 Research design ............................................................................................... 48
3.2 Variables of the study ...................................................................................... 49
3.3 Methods of data collection ............................................................................... 50
4 Field research ............................................................................................. 51
4.1 Areas of the study ............................................................................................ 51
4.2 Target group and research sample .................................................................... 52
4.3 Research partners ............................................................................................ 52
4.4 Established contact .......................................................................................... 53
4.5 Encountered problems ..................................................................................... 53
5 Data analysis .............................................................................................. 54
5.1 Introduction ..................................................................................................... 54
5.2 Personal background information .................................................................... 55
5.3 Company information ...................................................................................... 58
5.4 Innovation Management .................................................................................. 60
5.4.1 Innovation strategy .......................................................................................... 60
5.4.2 Organization and culture .................................................................................. 76
5.4.3 Innovation life cycle management ................................................................... 93
3
5.4.4 Enabling factors for innovation management ................................................. 115
5.5 Market Orientation ........................................................................................ 126
5.5.1 Intelligence generation ................................................................................... 126
5.5.2 Intelligence dissemination ............................................................................. 132
5.5.3 Responsiveness.............................................................................................. 137
5.6 Firm performance .......................................................................................... 146
5.6.1 Innovation Management performance ............................................................ 146
5.6.2 Market Orientation performance .................................................................... 160
6 Main results ................................................................................................ 168
7 Conclusion ............................................................................................................ 179
References....................................................................................................... 190
Annex I ............................................................................................................ 197
Annex II .......................................................................................................... 208
Annex III ......................................................................................................... 211
Appendix A...................................................................................................... 212
4
LIST OF TABLES
Table 2.1: Examples of industrial firms’ classification according to their size.......... 22
Table 2.2: Base of definition IBGE/Sebrae …………………………………............ 23
Table 2.3: Examples of innovation studies…………………………………………. 36
Table 2.4: Scales measuring Market(ing) orientation ………………………….….. 44
Table 3.1: Variables of the study…………………………………………………… 50
Table 6.1: Main differences found between VC backed and Non supported firms ... 176
LIST OF FIGURES
Fig 2.1: Phases of the innovation process 34

Fig 2.2: Actions concerning the Innovation Management 38
Fig 2.3: A.T. Kearney´s House of Innovation 39
Fig 2.4: Status of SMEs on IMP3rove Platform 41
Figure 5.2.1: Age of entrepreneur 55
Figure 5.2.2: Age of entrepreneur X Category of respondents 55
Figure 5.2.3: Sex of entrepreneur 56
Figure 5.2.4: Sex of entrepreneur X Category of respondents 56
Figure 5.2.5: Educational background 57
Figure 5.2.6: Educational background X Category of respondents 57
Figure 5.3.1: Number of employees 58
Figure 5.3.2: Number of employees X Category of respondents 59
Figure 5.3.3: Years in operation 59
Figure 5.3.4: Years in operation X Category of respondents 60
Figure 5.4.1: Vision´s attribute: documented for all staff to see 61
Figure 5.4.2: Documented for all staff to see X Category of respondents 61
Figure 5.4.3: Vision’s attribute: clearly linked to innovation 62
Figure 5.4.4: Vision’s attribute: well understood by customers and suppliers 62
5
Figure 5.4.5: Well understood by customers and suppliers X Category of respondents 63
Figure 5.4.6: Vision’s attribute: well understood by innovation partners 63
Figure 5.4.7: Well understood by innovation partners X Category of respondents 64
Figure 5.4.8: Innovation strategy 64
Figure 5.4.9: Innovation strategy´s attribute: result of the analysis of potential
65
business opportunities activities
Figure 5.4.10: Innovation strategy´s attribute: setting clear objectives for innovation
65
management activities
Figure 5.4.11: Setting clear objectives for innovation management activities X
66
Category of respondents
Figure 5.4.12: Innovation strategy´s attribute: guide to the idea management 66
Figure 5.4.13: Innovation strategy´s attribute: setting clear objectives for project
67
management in each innovation project
Figure 5.4.14: Innovation strategy´s attribute: guide to the improvement of current
67
product/service or process development
Figure 5.4.15: Innovation strategy´s attribute: basis for organizational changes and
68
business model development
Figure 5.4.16: Basis for organizational changes and business model development X
68
Figure 5.4.17: Innovation strategy´s attribute: Focused on the development of
69
innovation capabilities
Figure 5.4.18: Innovation Strategy: degree of communication 69
Figure 5.4.19: Degree of communication X Category of respondents 70
Figure 5.4.20: Innovation Strategy: degree of understanding 70
Figure 5.4.21: Degree of understanding X Category of respondents 71
Figure 5.4.22: Innovation Strategy: degree of implementation 71
Figure 5.4.23: Degree of implementation X Category of respondents 72
Figure 5.4.24: Innovation projects: alignment with innovation strategy 72
Figure 5.4.25: Innovation projects: balance between incremental and radical
73
innovation
Figure 5.4.26: Balance between incremental and radical innovation projects X
73
Figure 5.4.27: Innovation projects: balance with respect to risk and return 74
Figure 5.4.28: Balance with respect to risk and return X Category of respondents 74
Figure 5.4.29: Innovation projects: balance with respect to long and short-term
75
perspectives
Figure 5.4.30: Balance with respect to long-term and short-term perspectives X
75
Figure 5.4.31: Innovation projects: balance between low and high cost
76
Figure 5.4.32: Balance between low and high cost X Category of respondents
Figure 5.4.33: Staff attitudes towards innovation: excited about innovation 77
Figure 5.4.34: Staff attitudes towards innovation: open rather than skeptical towards
77
new ideas
Figure 5.4.35: Staff attitudes towards innovation: able to think “out-of-the box” 78
Figure 5.4.36: Able to think “out-of-the box” X Category of respondents 78
6
Figure 5.4.37: Staff attitudes towards innovation: Imaginative 79
Figure 5.4.38: Imaginative X Category of respondents 79
Figure 5.4.39: Staff attitudes towards innovation: reluctant to try out new methods 80
Figure 5.4.40: Reluctant to try out new methods X Category of respondents 80
Figure 5.4.41: Staff attitudes towards innovation: able to “sell” ideas internally 81
Figure 5.4.42: Able to “sell” ideas internally X Category of respondents 81
Figure 5.4.43: Staff attitudes towards innovation: Focusing on business impact 82
Figure 5.4.44: Focusing on business impact X Category of respondents 82
Figure 5.4.45: Capacity for innovation viewed by customers 83
Figure 5.4.46: Capacity for innovation viewed by customers X Category of
83
respondents
Figure 5.4.47: Capacity for innovation viewed by competitors 84
Figure 5.4.48: Capacity for innovation viewed by competitors X Category of
84
respondents
Figure 5.4.49: Capacity for innovation viewed by suppliers 85
Figure 5.4.50:Capacity for innovation viewed by suppliers X Category of
86
respondents
Figure 5.4.51: Capacity for innovation viewed by the entrepreneur 86
Figure 5.4.52:Capacity for innovation viewed by the entrepreneur X Category of
87
respondents
Figure 5.4.53: Degree of partnerships’ support and enhance: idea management
87
phase
Figure 5.4.54: Support to the idea management phase X Category of respondents 88
Figure 5.4.55: Degree of partnerships’ support and enhance: development phase 88
Figure 5.4.56: Support to the development phase X Category of respondents
89
Figure 5.4.57: Degree of partnerships’ support and enhance: launch phase
Figure 5.4.58: Support to the launch phase X Category of respondents 90
Figure 5.4.59: Number of external partners participating in innovation projects 90
Figure 5.4.60: Number of external partners participating in innovation projects X
91
Figure 5.4.61: Number of external partners that have cooperated in the last 3 years 91
Figure 5.4.62: Number of external partners that have cooperated in the last 3 years X
92
Figure 5.4.63: Number of people current working on innovation projects with
92
external partners
93
external partners X Category of respondents
Figure 5.4.65: Time for the most profitable from the development until
94
product/service on sale
94
product/service on sale X Category of respondents
Figure 5.4.67: Time for the most profitable product/service from the project
95
authorization until the breakeven point
95
7
Figure 5.4.69: Number of incremental innovation projects started in the last 4 years 96
Figure 5.4.70: Number of incremental innovation projects started in the last 4 years
96
X Category of respondents
Figure 5.4.71: Number of incremental innovation projects that showed success within
97
the last 4 years
Figure 5.4.72: Number of incremental innovation projects that showed success within
97
the last 4 years X Category of respondents
Figure 5.4.73: Number of radical innovation projects started in the last 4 years 98
Figure 5.4.74: Number of radical innovation projects started in the last 4 years X
98
Figure 5.4.75: Number of radical innovation projects that showed success within the
99
last 4 years
Figure 5.4.76: Number of radical innovation projects that showed success within the
99
last 4 years
Figure 5.4.77: Assessment of new ideas by an interdisciplinary team 100
Figure 5.4.78: Assessment of new ideas by an interdisciplinary team X Category of
100
respondents
Figure 5.4.79: Assessment of new ideas by a set of predefined criteria applied to all
101
innovation projects
101
innovation projects X Category of respondents
Figure 5.4.81: Assessment of new ideas by criteria tailored per project 102
Figure 5.4.82: Assessment of new ideas by criteria tailored per project X Category
102
of respondents
Figure 5.4.83: Assessment of new ideas by criteria derived from innovation strategy 103
Figure 5.4.84: Assessment of new ideas by criteria derived from innovation strategy
103
Figure 5.4.85: Provision of feedback to the suppliers 104
Figure 5.4.86: Provision of feedback to the suppliers X Category of respondents 104
Figure 5.4.87: Provision of feedback to the direct customers 105
Figure 5.4.88: Provision of feedback to the indirect customers 105
Figure 5.4.89: Provision of feedback to the indirect customers X Category of
106
respondents
Figure 5.4.90: Provision of feedback to marketing and sales personnel 106
Figure 5.4.91: Provision of feedback to product/service development personnel 107
Figure 5.4.92: Provision of feedback to research institutes and universities 107
Figure 5.4.93: Provision of feedback to research institutes and universities X
108
Figure 5.4.94: Provision of feedback to experts on intellectual property rights 108
Figure 5.4.95: Provision of feedback to experts on intellectual property rights X
109
Figure 5.4.96: Provision of feedback to network partners 109
Figure 5.4.97: Formal system for generating and assessing ideas 110
Figure 5.4.98: Formal system for generating and assessing ideas 110
Figure 5.4.99: Percentage of generated ideas taken to the development stage 111
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Figure 5.4.100: Degree of formalization of development processes 111
Figure 5.4.101: Percentage of innovation projects with well defined targets 112
Figure 5.4.102: Percentage of innovation projects with well defined targets X
112
Figure 5.4.103: Percentage of innovation projects that met launch-specific targets 113
Figure 5.4.104: Percentage of innovation projects that met launch-specific targets X
113
Figure 5.4.105: Frequency of customer data and feedback analysis 114
Figure 5.4.106: Frequency of customer data and feedback analysis X Category of
114
respondents
Figure 5.4.107: Definition of indicators to measure innovation activities 115
Figure 5.4.108: Definition of indicators to measure innovation activities X Category
115
of respondents
Figure 5.4.109: Incentives to stimulate innovation: extra money 116
Figure 5.4.110: Incentives to stimulate innovation: extra money X Category of
116
respondents
Figure 5.4.111: Incentives to stimulate innovation: direct recognition 117
Figure 5.4.112: Incentives to stimulate innovation: direct recognition X Category of
117
respondents
Figure 5.4.113: Incentives to stimulate innovation: innovation award 117
Figure 5.4.114: Incentives to stimulate innovation: permission to use company´s
118
facilities for free to test own ideas

118
facilities for free to test own ideas X Category of respondents
Figure 5.4.116: Incentives to stimulate innovation: provision of administrative
119
support to get external fund
119
support to get external fund X Category of respondents
Figure 5.4.118: Number of patents generated within the last 5 years 120
Figure 5.4.119: Number of patents generated within the last 5 years X Category of
120
respondents
Figure 5.4.120: Number of patents turned into market success 121
Figure 5.4.121: Number of patents turned into market success X Category of
121
respondents
Figure 5.4.122: Percentage of innovation projects with defined targets 122
Figure 5.4.123: Percentage of innovation projects with defined targets X Category
122
of respondents
Figure 5.4.124: Percentage of innovation projects that met targets 123
Figure 5.4.125: Percentage of innovation projects that met targets X Category of
123
respondents
Figure 5.4.126: Partnership with universities or research institutes 124
Figure 5.4.127: Partnership with universities or research institutes X Category of
124
respondents
9
Figure 5.4.128: Human research policy to stimulate staff qualification 125
Figure 5.4.129: Human research policy to stimulate staff qualification X Category
125
of respondents
Figure 5.5.1: Meeting with customers to find out future needs 126
Figure 5.5.2: Meeting with customers to find out future needs X Category of
126
respondents
Figure 5.5.3: In-house market research 127
Figure 5.5.4: In-house market research X Category of respondents 127
Figure 5.5.5: Detection of changes in customers’ preferences 128
Figure 5.5.6: Detection of changes in customers’ preferences X Category of
128
respondents
Figure 5.5.7: Poll of end users to assess the quality of products and services 129
Figure 5.5.8: Poll of end users to assess the quality of products and services X
129
Figure 5.5.9: Detection of fundamental shifts in the industry 130
Figure 5.5.10: Detection of fundamental shifts in the industry X Category of
130
respondents
Figure 5.5.11: Review of the likely effect of changes in business environment on
131
customers
Figure 5.5.12: Review of the likely effect of changes in business environment on
131
customers X Category of respondents
Figure 5.5.13: Interdepartmental meetings to discuss marketing trends and
132
development
Figure 5.5.14: Interdepartmental meetings to discuss marketing trends and
132
development X Category of respondents
Figure 5.5.15: Discussion of customers’ future needs between marketing personnel
133
and other departments
133
and other departments X Category of respondents
Figure 5.5.17: Dissemination of information about important events with customers 134
Figure 5.5.18: Dissemination of information about important events with customers
134
Figure 5.5.19: Sharing of data on customer satisfaction at all levels in the firm 135
Figure 5.5.20: Sharing of data on customer satisfaction at all levels in the firm X
135
Figure 5.5.21: Dissemination of information about competitors 136
Figure 5.5.22: Dissemination of information about competitors X Category of
136
respondents
Figure 5.5.23: Time to respond to competitor’s price changes 137
Figure 5.5.24: Time to respond to competitor’s price changes X Category of
137
respondents
Figure 5.5.25: Tendency to ignore changes in customers’ product/service needs 138
Figure 5.5.26: Tendency to ignore changes in customers’ product/service needs X
138
Figure 5.5.27: Review of product development efforts to be in line with what 139
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customers’ want
Figure 5.5.28: Review of product development efforts to be in line with what
139
customers’ want X Category of respondents
Figure 5.5.29: Periodical meetings to plan a response to changes in business
140
environment
140
environment X Category of respondents
Figure 5.5.31: Speed of response to competitor’s intensive campaign 141
Figure 5.5.32: Speed of response to competitor’s intensive campaign X Category of
141
respondents
Figure 5.5.33: Coordination between the different departments 142
Figure 5.5.34: Coordination between the different departments X Category of
142
respondents
Figure 5.5.35: Attention to customer complaints 143
Figure 5.5.36: Attention to customer complaints X Category of respondents 143
Figure 5.5.37: Ability to implement a marketing plan in a timely fashion 144
Figure 5.5.38: Ability to implement a marketing plan in a timely fashion X
144
Figure 5.5.39: Efforts to make changes in products/services 145
Figure 5.5.40:Efforts to make changes in products/services X Category of
145
respondents
Figure 5.6.1: Income data for 2009 146
Figure 5.6.2: Income data for 2009 X Category of respondents 146
Figure 5.6.3: Income data for 2010 147
Figure 5.6.4: Income data for 2010 X Category of respondents 147
Figure 5.6.5: Contribution of public research grants to total income 148
Figure 5.6.6: Contribution of public research grants to total income X Category of
148
respondents
Figure 5.6.7: Contribution of exports to gross income 149
Figure 5.6.8: Contribution of exports to gross income X Category of respondents 149
Figure 5.6.9: Percentage of total income from innovations not older than 3 years 150
Figure 5.6.10: Percentage of total income from innovations not older than 3 years X
150
Figure 5.6.11: Company’s expenditures on innovation over the last 2 years 151
Figure 5.6.12: Company’s expenditures on innovation over the last 2 years X
151
Figure 5.6.13: Company’s operational profit data over the last 2 years 152
Figure 5.6.14: Company’s operational profit data over the last 2 years X Category
152
of respondents
Figure 5.6.15: Company’s operational profit data generated from innovation 153
Figure 5.6.16: Type of innovation with more impact in the operational profits 153
Figure 5.6.17: Type of innovation with more impact in the operational profits X
154
Figure 5.6.18: Reduction in operational costs attributed to process innovation 154
11
Figure 5.6.19: Reduction in operational costs attributed to process innovation X
155
Figure 5.6.20:Growth driver with highest impact on profit growth over the last 4
155
years
Figure 5.6.21: Growth driver with highest impact on profit growth over the last 4
156
years X Category of respondents
Figure 5.6.22: Number of people employed over the last 4 years 156
Figure 5.6.23: Number of people employed over the last 4 years X Category of
157
respondents
Figure 5.6.24: Current impact of innovation management on business success 157
Figure 5.6.25: Current impact of innovation management on business success X
158
Figure 5.6.26: Future impact of innovation management on business success 158
Figure 5.6.27: Future impact of innovation management on business success X
159
Figure 5.6.28: Degree of current innovation management performance improvement 159
Figure 5.6.29: Degree of current innovation management performance improvement
160
Figure 5.6.30: Firm´s market share growth in primary market 160
Figure 5.6.31: Firm´s market share growth in primary market X Category of
161
respondents
Figure 5.6.32: Firm´s sales growth 161
Figure 5.6.33: Firm´s sales growth X Category of respondents 162
Figure 5.6.34: Firm´s success in achieving customer satisfaction 162
Figure 5.6.35: Firm´s success in achieving customer satisfaction X Category of
163
respondents
Figure 5.6.36: Firm´s success in retaining current customers 163
Figure 5.6.37: Firm´s success in retaining current customers X Category of
164
respondents
Figure 5.6.38: Firm´s success in attracting new customers 164
Figure 5.6.39: Firm´s success in attracting new customers X Category of respondents 165
Figure 5.6.40: Firm´s success in building a positive image 165
Figure 5.6.41: Firm´s success in building a positive image X Category of respondents 166
Figure 5.6.42: Time to market 166
Figure 5.6.43: Time to market X Category of respondents 167
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LIST OF ABBREVIATIONS
MSMEs - Micro, small and medium-sized enterprises
IBGE - Brazilian Institute of Geography and Statistics
IPEA - Institute of Applied Economic Research IPEA
PDP - Productive Development Policy
FINEP - Brazilian Research Project Financing Institution
CNPq - National Research Conseul
SEBRAE - Brazilian Service to Support Micro and Small Enterprises
BNDES - National Bank of Economic and Social Development
RAIS - Annual Social Information
R&D – Research and Development
VC - Venture Capital
GDP - Gross Domestic Product
13
ACKNOWLEDGEMENT
I give my heartfelt thanks to my supervisor Prof. Utz Dornberger, who gave me great
support to do this thesis.
I am grateful to the Deutscher Akademischer Austausch Dienst – German Academic
Exchange Service (DAAD) for granting me the scholarship to take part in this master
course.
I also confirm the support of the Center for Studies and Research in Entrepreneurship,
Innovation and Venture Capital from the Catholic University of Rio de Janeiro (NEP
Genesis). I am particularly grateful to Prof. Jose Antonio Pimenta Bueno for the
assistance, useful information and contacts available to complete my thesis.
I would like to thank all the people, firms, and other organizations, who have assisted
me in their own capacities in during the different phases of this research.
I also would like to thank my classmates and friends, in special Javier Changoluisa who
has always supported and encouraged me during my time in Germany.
My special thanks to my husband and my family. Their love, support, and
encouragement are the most precious things for me.
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ABSTRACT
This work aims to contribute with the understanding about the level of Innovation
Management and Market Orientation in Brazilian technology-based MSMEs. In order to
reach the levels of usage of both Innovation Management and Market Orientation
practiced by Brazilian technology-based firms and the performance levels attained by
such firms, a field research was carried out in Brazil to collect primary data through
structured interviews. For doing this, survey instruments were used as the basis for
structured interviews structured interviews personally conducted with the entrepreneurs
form the target firms. More specifically, the IMP rove Assessment tool, developed by
A.T. Kearney and supported by the European Commission under the Europe INNOVA
Initiative, was the basis to gauge Innovation Management practices of firms. The
MARKOR scale was the basis applied to gauge Market Orientation information.
Personal background information and company information were also included. At the
end, an overview about the behavior of the Brazilian technology-based firms with
respect to each dimension of Innovation Management and Market Orientation was
available. It was also possible to highlight the main differences presented between VC-
backed firms and Non-supported firms, emphasizing those differences that were
profound or classified through chi-squares tests as statistically significant. As
conclusions, the research results have revealed that, in general, Brazilian technology-
based MSMEs are practicing each dimension of Innovation Management to a different
level, with the “Enabling factors for innovation management” practiced at the highest
level among all. Market Orientation has been practiced slightly well by these firms, with
de component “Responsiveness” effectuated as the best. The main weaknesses showed
by Brazilian technology-based firms can be addressed to activities related to:
implementation and idea management and launch phases, regarding to Innovation
Management; and dissemination and marketing issues, regarding to Marketing
Orientation. Comparing the two groups of firms, Non-supported firms are performing
better the dimensions Innovation strategy, Enabling factors and Responsiveness, while
VC-backed firms Innovation Life Cycle Management, Intelligence generation and
Intelligence dissemination. The results presented in the performance of the two groups
of firms reflect these differences.
15
1 Introduction
1.1 Context
Micro, small and medium-sized enterprises (MSMEs) have been for a long time the
subject of attention from economic analysts because of their potential for income
generation and employment (La Rovere, 2001) and, more recently, for their role in the
reduction of regional inequalities.
Statistics about the importance of industrial MSMEs in Brazil, according to data from
2005 of the Brazilian Institute of Geography and Statistics (IBGE)1, show that they
account for 99% of the total number of companies in Brazil and are responsible for 56%
of formal employment, generating around 24% of the gross value of the industrial
production.
A study hold by the Institute of Applied Economic Research (IPEA) (De Negri and
Salerno, 2005), involving 72,000 industrial enterprises which account for about 95% of
Brazilian industrial production, showed that companies that innovate and differentiate
products generate higher quality jobs, employing better skilled workforce, better paid
and more stable employment. Innovate and differentiate products allow companies to
export more value-added products, obtaining price premium on its exports.
Besides, research in administration confirms that innovative firms outperform their

competitors in terms of market share, profitability, growth or market capitalization
(Garvin, 1991).
In this new economy, a private group of companies has been increasing due to its
important contribution to economic growth and job creation – the technology-based
MSMEs. In fact, the sector where the company operates has an important role in the
process of technological innovation: in the higher technological content sectors there are
more opportunities for individual and collective innovations, while in those with a low
content these opportunities have been more restricted (IBGE, 2007).
1
All the acronyms used in this work are referent to the names in Portuguese, excepted by MSMEs.
16
A comparative analysis of the innovation rates between the Brazilian technology-based
MSMEs and the universe of Brazilian industrial companies shows that the rates of
innovation displayed by the technology-based MSMEs are almost twice (7.2% and
9.9% respectively in the periods 2001-2003 and 2003-2005) of that displayed by the
universe of Brazilian industrial companies (Vilela, 2009).
Conscious about the importance of technology-based MSMEs, the Brazilian

Government in the context of the PDP (Productive Development Policy) is focusing on
the support of these companies. The perception that MSMEs based on innovative
technology couldn’t find adequate mechanisms to finance their growth in the traditional
credit system lead FINEP - a public company with ties to the Ministry of Science and
Technology- to support this start ups together with entities such as CNPq (National
Research Conseul), SEBRAE (Brazilian Service to Support Micro and Small
Enterprises) and BNDES (National Bank of Economic and Social Development) filling
the gap in financing for technology-based companies.
But besides financial support many Brazilian technology-based start-ups face different
problems such as entering in the market, expanding the market, sales difficulties, among
others.
1.2 Justification
The choice of technology-based MSMEs as an object of study can be justified by two

arguments: (i) related to economic order - encouraging the creation of MSMEs is seen
as one of the alternatives to the high rates of unemployment and economic stagnation
(Lundstrom and Stevenson, 2002) and (ii) related to technological development, which
highlights the growing importance of MSMEs in the process of generation and
dissemination of technological innovations (Rothwell and Zegveld, 1982, ACS and
Audretsch, 1990). For the complementary character of these two arguments, scholars
(De Negri and Salerno, 2005) state that companies which innovate are different from
their competitors, as well as more productive, have higher market shares, pay better
wages and export more. In particular, the technology-based MSMEs differ significantly
17
from MSMEs in general when it comes to efforts to innovate (Fernandes and Cortes,
1999; Fernandes, Cortes and Oishi, 2000, Fernandes et al., 2000).
Despite the different efforts started so far Brazilian technology-based MSMEs face
difficulties of implementation. These difficulties can be approached by the fact that,
traditionally, technological innovation appears to have been largely bypassed in
defining the management structures of high-technology companies. Most companies
build their structures around the traditional functions of finance, marketing, production,
human resources and R&D (Pavitt et al., 2005).
In fact, technology-based MSMEs are very particular companies that need to encompass
all the activities which contribute to the commercially successful outcome of the
innovation process (Martin, 1994). This includes innovation management and market
orientation.
A study developed by A.T. Kearney (Engel et al, 2007) shows that “companies that
have begun to approach innovation management in a more systematic way have
achieved significantly higher success rates in terms of transforming ideas into
marketable products and realizing successful innovation commercialization”.
But innovation management is difficult and risky: the majority of new technologies is
not enough to make up products and services, and most new products and services is not
a commercial success (Pavitt et al, 2005). Because of this, research on innovation has
long stressed the importance of understanding user needs when developing new
products (Cooper and Kleinschmidt, 1993).
According to scholars (Pelham and Wilson, 1996), market orientation is significantly

and positively correlated with the previous year's level of use of
innovation/differentiation strategy. A high level of market orientation does seem to
offer the small firm a strong source of competitive advantage and performance viability.
Market orientation coupled with formalization and an innovation/differentiation

strategy, positively affects new product success, which in turn influences growth/share
(Pelham and Wilson, 1996).
18
To these factors that motivated the choice of research topic can be added the fact that
available studies on Brazilian technology-based MSMEs focus on topics such as
technology-transfer, intellectual property, cooperation with universities, local
productive arrangements and funding sources for innovation. There is a lack of
empirical studies related to the Innovation Management and Market Orientation in
technology-based MSMEs in Brazil.
1.3 Objectives
The main objective of this research is to gain further understanding about the level of
Innovation Management and Market Orientation in Brazilian technology-based
MSMEs.
As secondary objectives, this research aims to investigate whether there are: (1)
differences in the level of such practices between firms supported and not supported by
Venture Capital and (2) distinction in firm performance between companies with
different levels of such practices.
1.4 Research Questions
In order to reach a target is important to know the way to go. In this case, high levels of
innovation management and market orientation can be achieved by isolating problems
and addressing these deficiencies in future intervention efforts. For doing this is
essential to know from where to start: to establish a base line level of innovation
management and market orientation.
So, “To what level is Innovation Management and Market Orientation practiced by
Brazilian technology-based MSMEs?’ is a question that should be answered.
In order to get data for answering the major research question, more specific questions
are formulated:
19
Q1 – To what level is “Innovation Management” practiced by the firms?
Q 1.1 – To what level is “Innovation Strategy” practiced by the firms?
Q 1.2 – To what level is “Organization and Culture” practiced by the firms?
Q 1.3 – To what level is “Innovation Life Cycle Management” practiced by the firms?
Q2 - To what level is “Market Orientation” practiced by the firms?
Q 2.1 - To what level is “Intelligence generation” practiced by the firms?
Q 2.2 - To what level is “Intelligence dissemination” practiced by the firms?
Q 2.3 - To what level is “Responsiveness” practiced by the firms?
Q3 - How is the performance of these firms?
Q 3.1 - How is the “Innovation Management performance” of these firms?
Q 3.2 - How is the “Market Orientation performance” of these firms?
Secondary research questions are formulated based on the secondary objectives oh this
research:
Q4 - Are there differences in the level of Innovation Management between VC-backed

and Non-supported firms?
Q5 - Are there differences in the level of Market Orientation between VC-backed and
Non-supported firms?
Q6 – Are there distinction in Innovation Management performance between VC-backed

Q7 - Are there distinction in Market Orientation performance between VC-backed and

20
1.5 Relevance of the study
The overall results of the study should:
- Contribute to the framework of studies related to Brazilian technology-based

MSMEs in an still restricted area of knowledge;
- Provide significant subsidies for the formulation of policies in support of
Brazilian technology-based firms;
- Provide information to the firms that allow them: 1) to establish a base line level
of innovation management and market orientation and 2) to isolate problems and
address these deficiencies in future intervention efforts.
1.6 Limitation of the research
Because of limited time and financial resource, this research only focuses on 30
technology-based companies located in 5 different Brazilian states. So, the limitation of
this study is geographical location and small scale of the sample. From that point, the
result of this study can not give an overall picture of the level of innovation
management and market orientation in Brazilian technology-based MSMEs. But it does
not prevent fulfilling the objective of this research, which is “gain further understanding
about the level of Innovation Management and Market Orientation in Brazilian
technology-based MSMEs.”
21
2. Theoretical Framework
2.1 Brazilian micro, small and medium-sized firms
The concept of MSMEs constitutes an important element in the formulation of public

policies aimed at economic development (Filion, 1991). Despite this, there is no single
universally accepted criteria for the classification of MSMEs. Different organizations
classify companies according to different concepts to meet specific purposes.
Different criteria are therefore used in Brazil to establish the classification of MSMEs.
For example, the simplified system of taxation (SIMPLES) adopts the criterion of gross
revenue as required under the Act 11307/0622, which provides that micro enterprise is
one whose annual revenue is less than or equal to R$ 240 thousand 3 and small enterprise
is one whose annual revenue is between R$ 240 thousand and R$ 2.4 million.
The Brazilian Service to Support Micro and Small Enterprises (Sebrae) and the National
Bank of Economic and Social Development (BNDES) adopt different concepts for the
classification of micro and small enterprises for the purpose of promotion. The first
follows the criteria of the Statute of Micro and Small Companies, based on the number
of employees and annual sales, while the second is based on gross operating revenues,
as shown in Table 2.1.
Table 2.1 - Examples of industrial firms’ classification according to their size
Sebrae BNDES
- Up to 19 employees
Micro - Annual revenue up to BRL 244 - Gross operating revenue (annual or
thousand annualized) up to BRL 1.2 million
- Up to 99 employees
- Gross operating revenue (annual or
Small - Annual revenue up to BRL 1.2
annualized) over BRL 1.2 million and
million
less than BRL 10.5 million
2 Available at: http://www.jusbrasil.com.br/legislacao/95780/lei-11307-06
3 USD 1.00 = BRL1.80

22
Medium ------------ - Gross operating revenue (annual or
annualized) over BRL 10.5 million
and less than BRL 60 million
Large ----------- - Gross operating revenue (annual or
annualized) over BRL 60 million
Sources: Sebrae and BNDES4
In addition to the definition used for purposes of promotion, Sebrae adopted for
study and research (eg: surveys on the presence of micro and small enterprises in the
Brazilian economy) the concept of "employed persons"5 in business, in accordance with
the IBGE criterion, as shown below:
Table 2.2 - Base of definition IBGE/Sebrae

Firm size Industry Services
Micro up to 19 employees up to 09 employees
Small from 20 to 99 employees from 10 to 49 employees
Medium from 100 to 499 employees from 50 to 99 employees
Sources: IBGE and Sebrae
The concept of MSMEs proposed by IBGE/Sebrae serve the purposes of this research
given that: (i) ranks the medium enterprise without the need to consider the annual
revenue, (ii) is used by the IBGE in order to produce Nationwide statistical studies, (iii)
is used by Sebrae to operationalize its interventions at the micro and small enterprises
and to accomplish its studies, and (iv) uses the number of employed persons, which
tends to be an easier information to access (available on the RAIS in the Ministry of
Labor and Employment 6) than the revenue.
4
Available at http://www.sebrae.com.br and http://www.bndes.gov.br
5
The concept of "employed persons" does not include only employees but also the owners. This
concept does not differentiate the links between people working and businesses.
6
RAIS - Annual Social Information, available at http://www.mte.gov.br/rais/default.asp
23
2.1.1 Brazilian technology-based MSMEs
There is also not a world consensus on the concept of technology-based companies.

Starting with the name as known in the United States and Europe, particularly in the
United Kingdom, NBTFs, which differs from "new technology-based companies" and
"companies based on new technologies".
According to scholars (Rickne et al., 1999), a definition for NBTFs would be "a
company whose strength and competitive advantage derived from the expertise of its
members in the natural sciences, engineering or medicine, and the subsequent
transformation of this know-how into products or services to a market". NTBFs are said
to operate in innovative and technology-intensive industries such as electronic
engineering, computer science, physics engineering, industrial economics, chemical
engineering, mechanical engineering, civil engineering and medicine. These industries
are relatively homogeneous in terms of rapid technological changes, innovation of
product, entrepreneurship, environmental uncertainty and high levels of competition
(Karagozoglu et al, 1998, Preece et al, 1998).
Some key characteristics of NTBFs, identified by the Bank of England (Bank of

England, 2001 apud Kiederich, 2007), are: (i) the value of NTBFs is dependent on the
long-term potential growth, which is derived from the amount and quality of scientific
knowledge and intellectual property that they have, (ii) at the beginning, the NTBFs
lack of tangible assets that can be used as collateral, (iii) initially, the products
developed by NTBFs have little or no track record, in majority have not yet been tested
in the market and are usually subject to high rates of obsolescence.
Brazilian studies (Carvalho et al, 1998) identified as “EBT” (acronym in Portuguese for
technology-based companies) the enterprises “engaged in the design, development and
production of new products or processes, also characterized by the systematic
application of technical and scientific knowledge (applied science and engineering)”.
According to Marcovitch et al (1986), high-tech companies "are those created to make

products or services using high-tech." Analysing the definition originally proposed by
these authors, Iron and Torkomian (1988) suggest individualize with this concept those
24
companies that "have the rare or unique expertise in terms of products or processes that
are commercially viable, that incorporate high level of scientific knowledge". Stefanuto
(1993), in turn, proposes to consider EBT those national companies that, in each
country, are among the technological frontier of its sector.
According to Fernandes et al (2004), if a profile of Brazilian technology-based MSMEs

could be set, a starting point would be to consider the historical and geographical
constraints to which they are exposed. This means recognizing the limits that these
companies face in access to knowledge, markets and credit at a particular time, under
the constraints of a given macroeconomic environment. Such limits are set in the
context of a national innovation system less dynamic than that in which operate their
American, European or Japanese competitors on the one hand, and a macroeconomic
environment of restricted associations between financial capital and productive capital
on the other.
For these authors, this assumption necessarily requires the translation of the
understanding of the concept of “technology-based company” used in developed
countries for the specific conditions of a developing country. Thus, Fernandes et al
(2004) suggest that there should be a differentiation between modernized and
technology-based companies. According to these scholars, "the strategically critical
character that technology has for this group of companies indicates that their innovative
effort should be guided not exactly to the technological modernization of the production
process, but essentially to the product characteristics: technology-based company
introduces new products that reflect new technologies developed by the company,
whether or not in partnership with other companies or research centers" (Fernandes et
al, 2004). Moreover, the authors add that this product must be in the market and be
economically viable, or is it just an invention, an applied scientific knowledge.
25
2.2 Support for technology-based MSMEs
Micro, small and medium-sized enterprises find many difficulties to leverage due to
lack of financial resources. When these organizations turn to banks, they face
difficulties due to poor billing history and the low liquidity of its assets that normally
are pledged as security (Pavani, 2003).
A significant difference between technology-based firms and other enterprises is that,

generally, there is not a marketable product either before or shortly after its formation.
Because of this, the initial financing of the company can not be based on the cash flow
of its anticipated sales (Pavitt et al, 2005).
In this case, technology-based MSMEs need to find other sources of capital. The types
of capital are aimed at businesses with different stages of development and degree of
risk. The higher the business risk, the greater the potential for growth and enhanced
financial returns required by investors. The investment funds seeking opportunities in
startups and early-stage companies are the seed capital and venture capital.
Seed Capital and Venture Capital (VC) are presented as a viable alternative for
technology-based SMEs because the investor bet in these companies believing on the
growth potential of these organizations, sharing the risk with the entrepreneur, seeing
gains with good pay, tied to distribution of profits, dividends from the company and the
effective return of capital (Pavani, 2003).
2.2.1 Venture Capital
Venture capital promotes funding for small company in exchange for part of the
organization through the acquisition, aiming thus the rapid rise and high profitability.
Venture capital sees high returns with big returns in excess of other assets available in
the market (Soledade et al, 1997).
In the process of traditional venture capital, the three main entities involved are: i)
institutional investors such as pension funds, individual capitalists, corporations and
26
insurance companies, ii) the entrepreneur it receives and makes use of resources, and iii)
agents or agencies intermediary, the venture capital firms, which usually identify, select,
monitor and operationalize investment, and raise additional funds to companies
(Brophy, 1996).
The main idea is that venture capitalists appear because they develop specialized skills
in selecting and monitoring projects. They are financial intermediaries with a
comparative advantage in environments where there is information asymmetry. Based
on this approach, Amit et alli (1998) suggest that venture capitalists act in environments
in which their relative efficiency in selecting and monitoring investment give them a
comparative advantage over other investors.
Due to its peculiarities, venture capital has great synergy with small technology-based
companies. There is evidence that support through venture capital means that young
companies grow faster, create more value and generate more employment than other
firms (Gorgulho, 1996). According to empirical researches (Keuschnigg, 2004),
companies backed by venture capital pursue more radical innovations and more
aggressive marketing strategies.
It is often claimed in the entrepreneurship literature that the human capital of

entrepreneurs and the (financial and non-financial) support provided by venture capital
(VC) investors are key drivers of the growth of high-tech start-ups.
A limited number of prior studies have analyzed the relationship between VC backing
and firm growth, providing mixed evidence. Hellmann and Puri (2000) examined a
stratified random sample of 149 VC and non-VC backed firms in Silicon Valley during
the period 1994–1997 and found that VC backed firms, especially innovators, had a
faster time to market. Manigart and Van Hyfte (1999) find that VC backed firms have
higher asset growth than non-VC backed firms in Belgium. Engel and Keilbach (2007)
use propensity score matching to identify a control sample of non-VC backed firms in
Germany and find that VC backed firms generate faster employment growth. In
contrast, Burgel et al. (2000) find that VC backing has no impact on the growth of firms
in Germany and the UK. Other studies of the growth of VC and non-VC backed firms
that went to IPO also show mixed results, with Jain and Kini (1995) and Audretsch and
27
Lehmann (2004) finding positive effects of VC on growth, while Bottazzi and Da Rin
(2002) find no effect.
Important problems with these studies include their often cross-sectional nature and a
typical failure to address the issue of endogeneity in VC backing. Bertoni et al. (2008)
using a 10 year panel study of 550 Italian high-tech start-ups show that VC backing,
especially by financial VCs rather than corporate VCs, strongly spurs employment and
sales revenue growth. A Spanish study of firms by Alemany and Marti (2005) using
panel data analysis of VC-backed start-ups shows that both VC backing and its amount
are associated with higher performance. Davila et al. (2003) show that VC backed firms
have faster employment growth.
Interestingly, the interdependence between VC investments and entrepreneurs’ human

capital has gone almost unremarked in the literature. Colombo and Grilli (2008) is an
exception. They examine the influence of the human capital characteristics of founders
on the growth of VC backed and non-VC backed high-tech start-ups. Using a sample of
439 Italian firms and after controlling for survivor bias and the endogeneity of VC
funding, they find that once a firm receives VC backing the role of founders’ skills
becomes less important in contributing to firm growth. This result points to the
importance of the coaching function performed by VC investors in enhancing the
performance of portfolio firms.
In addition to VC investors, technology-based firms may receive a positive contribution

to growth from interaction with other institutions. Among them, universities play an
important role. Colombo et al. (2009) analyze empirically under which circumstances
the universities located in a geographical area contribute to the growth of a special
category of local high tech start-ups, those established by academic personnel (academic
start-ups, ASUs). They examine the effects of a series of characteristics of local
universities on the growth rates of ASUs and compare them with the effects of the same
university characteristics on the growth of other (i.e. non-academic) high-tech start-ups.
They find that universities do influence the growth rates of local ASUs, while the
effects on the growth rates of other start-ups are negligible.
28
2.2.2 Venture Capital in Brazil
In Brazil, the activities of venture capital were institutionalized in the late '90s, after the
stabilization of the currency. Brazilian Venture Capital industry is “an enormously
dynamic industry, whose committed capital grew 50% per year between 2005 and 2008,
which invested USD 11 billion, maintains 482 portfolio companies, and doubled its
participation in GDP over this period 7. In addition, 71% of the VC organizations expect
to raise funds in the next years totalizing USD 20.9 billion. There is a considerable
volume of business in Venture Capital with the greatest emphasis on the Early Stage
(17%). This denotes an important concentration on the initial and intermediate stages of
entrepreneurial development guaranteeing the consolidation of the links that permit
sustained industry growth over the long term.
In particular, the Brazilian Development Bank (BNDES) has made invested in 33

different investment vehicles, including Private Equity, Venture Capital, PIPE and
Mezzanine investments, totalizing BRL 1.5 billion in capital commitments by the bank
(on average 20% of all vehicles), of which approximately BRL 0.6 billion has already
been invested.
In 2007, BNDES launched a program to support seed capital called CRIATEC. Born
from the BNDES initiative with a budget of BRL 80 million and managed by a
consortium formed between Antera Gestão de Recursos S.A. e Instituto Inovação S.A.,
Criatec is a seed capital fund destinated to innovative startup companies. With
investments of up to BRL 1.5 million, Criatec makes the allocation of resources in the
company in exchange for equity participation. Besides investment, Criatec actively
participates in the management of companies, providing strategic and managerial
support to entrepreneurs, helping in the selection and training of staff, setting targets
and track results8.
7
Overview of the Brazilian Private Equity and Venture Capital Industry, Research Report December
2008.
8
Information available at: www.fundocriatec.com.br
29
2.3 Innovation Management
The literature has emphasized the central role of innovation in knowledge-based

economy. At the macro level, reports a significant body of evidence that innovation is
the dominant factor in national economic growth and patterns of international trade. At
company level, experts point out that research and development (R&D) are perceived as
the factor of greatest capacity to absorb and use new knowledge of all kinds, making
innovative companies more productive and more successful than those that do not
invest in the generation of innovations (OECD, 2004).
Nowadays, it would be difficult to find someone willing to argue against the view that
innovation is important and tends to be increasingly important in coming years. But
there are still questions about the possibility to manage the complex and fraught with
uncertainty innovation process.
The answers to such questions may be based in the fact that despite the apparently
random and uncertain nature of the innovation process it is possible to find a basic
pattern of success. Not every process fails, and even in case of failure, some companies
seem to have learned how to treat it and manage it in order to take advantage in favor of
an effective innovation process. (Pavitt et al, 2005). In this sense, the term management
is not used in this work towards the creation and implementation of complex and
predictable mechanisms, but to create conditions within a company to facilitate the
effective resolution of multiple challenges in high indices of uncertainty.
2.3.1 Technological Innovation: concepts
According to Schumpeter (1934), the concept of innovation encompasses five distinct

types: (i) introduction of new products that may be new to consumers, or new items to
match the quality of an existing product, (ii) introduction of new production methods,
which have not been tested in the company’s field of business, that is not necessarily a
scientific discovery, (iii) opening new markets, where other companies in the same line
of business have not yet entered, and such markets have existed before or not, (iv)
30
development of new sources providers of raw materials and other inputs, (v)
establishment of a new industrial organization, either by creating a monopoly or by
fragmentation of a monopoly.
The concept of "technological innovation" by the Oslo Manual, in its third edition, is
"the implementation of a product (or service) new or significantly improved, or a
process or a new marketing method, or a new organizational method in business
practices, the organization of the workplace or external relations" (OECD, 2004, p.55).
Regarding to this concept, there are four types of innovation: product, process,
marketing and organizational. This classification has the highest possible degree of
continuity with the previous definition of product and process innovation used in the
second edition of the Oslo Manual: "technological product or process (TPP -
Technological Product and Process) will cover deployments of products or processes
technologically new and substantial technological improvements in products and
processes" (OECD, 1997). In order to consider a TPP innovation implemented it is
necessary that this have entered the market (product innovation) or used in the
production process (process innovation).
The general concept of innovation used in the second edition of the Oslo Manual refers
to product or process that is new or substantially improved for the company, not
necessarily new to the market or industry in which it operates. Within a more rigorous
analytical perspective, Schumpeterian, should not be considered as such innovations the
products and processes that are only new for the companies in which they were
introduced. These products and processes should be classified as technological diffusion
and absorption of innovations.
Having as a research object the technology-based MSMEs, this work adopts the more
stringent concept of innovation: “the product (or service) technologically new or
significantly improved for the domestic market and/or processes that are technologically
new or significantly improved for a particular industry". When compared to the generic
concept, this definition has a higher meaning in their impact in terms of gains in
competitiveness and accumulation of technological capabilities for technology-based
MSMEs that introduced them.
31
2.3.2 Innovation process
The importance of understanding the innovation as a process is that this knowledge

shapes the way that it is experienced (Pavitt et al, 2005).
This changed a lot over time. Early models viewed innovation as a linear sequence of
activities. The linear model, which emerged from the end of the second world war,
dominated the thinking about innovation in C & T for about three decades (Bush, 1945,
apud Earl and Araújo-Jorge, 2003). In this model, development, production and
commercialization of new technologies are seen as a sequence of well defined steps: (i)
scientific research that could lead to processes of invention, (ii) applied research, (iii)
experimental development, (iv) production, (v) introduction of marketable products and
processes (OECD, 1992). This could be because new opportunities arising as the result
of research has resulted in applications and refinements that eventually find their way
into the market (technology push), or because the market signaled needs of something
new that was originated through new solutions to the old problem (market pull).
The linear innovation approaches rely on two theoretical frameworks: (i) the classical
theories, which treat innovation mechanistically from endogenous variables to
businesses and as a product of their internal processes, (ii) the neoclassical theories,
which try to incorporate the external forces and assign technical change to external
factors (Ebner, 2000; Jackson, 1999 apud Conde and Araujo-Jorge, 2003).
The limitations of the linear model were perceived by the finding that investments in
R&D does not automatically lead to technological development, nor to the economic
success of technology use. The limitations of this approach are clear: in practice
innovation is a combinatorial process in which interaction is the critical element
(Coombs et al, 1985; Von Hippel, 1988; Freeman, 1997). This perception reinforced the
emergence of non-linear or interactive approaches.
From the 1980s, the interactive model (chain-link model) proposed by Kline and
Rosenberg (1986) became the model that was opposed to the linear model. Its design
combines the interactions in the internal environment of business and those between
32
individual enterprises and the system of science and technology more widely in which
they operate.
In recent decades, the analysis of interactions between the different actors of innovation
processes has become the focal point of many theoretical and empirical studies in the
field of economics of innovation (Nelson and Winter, 1982; Dosi, 1988; Lundvall,
1988). These approaches (evolutionary or neo-Schumpeterian) recognize the importance
of R&D in the innovation process and emphasize the central position occupied by
companies in developing new technologies.
Nelson & Winter (1982) consider the innovation as a process through which knowledge
and technology are developed based on the interaction between various actors and
factors. According to these authors, the market demand and marketing opportunities
have an influence in the products to be developed and the technologies that will be
successful (Meirelles, 2008).
Evolutionary approaches imply a view of business organizations as collective and

interactive learning, providing technological and individuals trajectories. From this
perspective, organizational and learning factors (learning-by-doing) have great
prominence and innovation process involves a series of scientific, technological,
organizational, financial and trade activities. The central feature of the innovation
process in interactive models is the existence of learning cycles between research,
production and marketing activities.
Based on the evolutionary approach, the following simplified model illustrates the
Innovation process:
33
Fig 2.1 - Phases of the innovation process
Source: Adapted from Pavitt et al , 2005
Fig 2.1 shows that the innovation process can be simplified in the following phases:
Search - The innovation process begins with a survey of several indications of

opportunities. These may be related to technology, market, competitive behavior,
changes in policy or regulatory environment, new social trends etc. and can come from
inside or outside the company.
Select - Explore the environment leads to the identification of a broad spectrum of

potential targets for innovation, however, even the best-equipped companies have to
strike a balance as to what to explore and to leave aside.
The task of making innovation happen - evolving from a simple idea to create
successful products, services and processes - is essentially tied to a gradual process of
reducing the uncertainty, going from the phases of search and selection to the
implementation (Pavitt et al, 2005).
Implement - The implementation phase can be seen as the phase that gradually
combines different forms of knowledge composing with it an innovation. In the initial
stages there is a high degree of uncertainty - details on technological feasibility, market
demand, competitive conduct, legislation and other influences are scarce. But during
this stage the uncertainties are replaced by the knowledge acquired in several attempts
and a growing cost. This phase can be explored in greater detail by considering three
34
key elements: (1) knowledge acquisition; (2) project execution; (3) launch and
innovation support.
The knowledge acquisition involves the combination of new and existing knowledge
(available within and outside the organization). It can also involve both the generation
of technological knowledge and the technology transfer. It represents a first draft of the
solution. The result of this stage in the process may be either progress to the next stage
of development or retroactive to the conceptual stage.
The project execution is the core of the innovation process. A clear strategic concept
and ideas to achieve it compose the initial data of this stage. The results in this stage
provide a developed innovation and a ready market (internal or external) for the
innovation launch.
Parallel to the solution of technical problems associated with the development of an

innovation there is a range of activities aimed at preparing the market where the product
will be launched. The launch stage can involve a consumer test - availability of product
prototype for the user, marketing test - sham sale of the new product, marketing
strategy, marketing plan etc.
Over the past 80 years, many studies on the innovation process, analyzing it from
different angles, has been developed. Different innovations, different sectors, companies
of different sizes and types operating in different countries etc. has been analyzed in
many different ways. The following table gives some examples of these studies.
35
Table 2.3 - Examples of innovation studies
Name of the
Central focus Reference
study
Rothwell
SAPPHO Project Success and failure factors in matched pairs of companies
(1977)
Wealth among Case studies of successful companies - all award winners Langrish
the knowledge “Queen’s Award for Innovation” (1972)
Performance Evaluation of cases, 10 years later, to analyze how they Georghiou

post-innovation have evolved (1986)
Historical review of 50 years of work funded by the U.S.

government on key projects. The main objectives were to Insenson
TRACES
identify effective sources of innovation and managerial (1968)
factors influencing success.
Investigation of UK companies to identify why some were

Industrial Carter and
more innovative than others in the same industry, size, etc..
technical Willians
Resulted in a list of managerial factors that pointed to
progress (1957)
technical advances
Detailed case studies in about 14 years of innovation.

Minnesota Poole et al
Resulted in a map of the innovation process and factors that
Studies (1989)
influenced it at various stages.
NEWPROD Long-term research on success and failure in product Cooper

Project development (2001)
Stanford Maidique
Case studies of product innovation with emphasis on
Innovation and Zirger
learning
Project (1985)
36
Extensive literature review of success factors in product Ernst
Ernst
innovation (2002)
An international study (17 countries) gathering data on Ledwith

Interprod
factors that influence the success or failure of new products (2004)
Case studies on service innovation and manufacturing, Vom

Innovation Wave based on experience of the London Business School Stamm
Innovation exchange (2003)
Source: Adapted from Pavitt et al, 2005
From this database of information is possible to find consensus on two key factors:
- Innovation is a process, not an isolated event;

- The influences on this process can be manipulated to affect the outcome, that is,
innovation can be managed.
2.3.3 Managing Innovation process
Innovation can increase competitiveness, but it requires a skill set and knowledge
management different from those commonly used in commercial management (Pavitt et
al, 2005). Companies have to have the capabilities to manage their process of
innovation, from their innovation strategy to original idea to final product. Only then
companies will know with which products, services, processes or business models they
will generate their revenues and profits in the near future.
Innovation is a management issue as there are choices to be made about resources and
their provision and coordination. Innovation management is not just a means in itself,
but is about developing and organising capabilities within companies and translating
them into competitive advantages and profits. Some actions concerning the management
of the innovation process are showed in the Fig.2.2.
37
Fig 2.2 – Actions concerning the Innovation Management
Source: Adapted from Instituto Inovação, 20109
As showed in Fig 2.2, the actions concerning the innovation management should cover
the entire innovation process. Examples of these actions are:
Direct the actions of innovation ensuring alignment with the innovation strategy;
Equip the company through the development of internal skills and external
partnerships;
Support the initiatives of innovation with resources and support from top management;
Sensitize all levels of the organization about the importance of innovation;
Learn from the experiences at all stages of the innovation process and make necessary
adjustments.
2.3.4 Measuring Innovation Management
The effective management of innovation is largely the result of design and effective
routines to increase and facilitate its emergence within the enterprise (Pavitt, 2005).
9
Available at: http://www.institutoinovacao.com.br/internas/servicos_gestao/idioma/1
38
According to Pavitt (2005), is possible to mount checklists and even simple schemes for
the effective management of innovation from many studies on success and failure in
innovation.
In fact, a large number of models for auditing innovation was developed, models that
provide a framework from which is possible to evaluate the performance of innovation
management (Johne and Snelson, 1988; Chiesa et al, 1996; Francis, 2001). Some
models are simple listings, others deal with structures, some with very specific sub-
processes.
A study developed by A.T. Kearney (Engel et al., 2007) shows that “best practice
innovation management begins with innovation strategy and continues through
innovation development to management of the entire innovation life cycle”. It covers all
dimensions of Innovation Management including: Innovation strategy, Innovation
organization and culture, Innovation Management processes, as well as enabling factors
for Innovation Management.
Based on this holistic approach to innovation management, A.T. Kearney developed the
‘House of Innovation” (Fig. 2.3). With this, SMEs, intermediaries, financial actors,
policy makers and academia dispose of a framework that links innovation management
with business impact.
Fig 2.3 – A.T. Kearney´s House of Innovation
Source: Engel et al., 2007
39
As summarized by Fig.2.3, A.T. Kearney’s House of Innovation addresses all relevant
innovation management dimensions (IMP3rove, 2007):
- Innovation Strategy with regards to comprehensiveness, forward focus and

communication;
- Organization and Culture with regards to the ability to create passion for
innovation and openness for new ideas;
- Innovation Life Cycle Management with regards to all levers which help to
accelerate idea-to-profit as well as optimize life cycle management through
continuous improvement;
- Enabling Factors for Innovation Management with regards to Intellectual
Property, Knowledge, Human Resources, Controlling- and IT Management;
- Innovation Management Success with regards to the right key performance
indicators to monitor and measure innovativeness.
Based on this holistic approach, the European Commission under the Europe INNOVA
supports an initiative, called IMP rove, to improve the innovation success in the
European SMEs.
The proof of the IMP3rove concept is provided by more than 3,500 European SMEs that
have been introduced to the IMP3rove approach since the launch in 2007 (Fig. 2.4).
More than 400 innovation management support service providers across Europe have
been trained in the IMP3rove approach. They now constitute an international network.
40
Fig. 2.4 – Status of SMEs on IMP3rove Platform
Source: IMP3rove Core Team, 201010
Because of this, this study takes the IMP3rove Assessment tool as the basis to gauge
information about the level of innovation management in Brazilian technology-based
MSMEs.
2.4 Market orientation
Small firms are noted for their more cohesive cultures and simpler organization
structures, thus diminishing the coordinating benefits of a strong market orientation
culture. Small firms are also noted for their fewer numbers of product lines and
customers, reducing the need for formal activities designed to gather and process market
information for marketing decision making. On the other hand, these characteristics of
small businesses may enhance the firms' ability to fully exploit a market-oriented
culture.
10
Available at: www.improve-innovatio.eu
41
It could also be argued that other internal firm variables and external variables have
such a significant effect on small-firm performance that the impact of market orientation
is negligible. For instance, undercapitalization and lack of planning have commonly
been cited by small-business researchers as the most significant influences on success or
failure (Robinson and Pearce, 1984). Internal small-firm structure aspects such as
formalization, coordination, and control systems may be such important determinants of
small-firm success as to render insignificant the impact of market orientation. On the
other hand, because small firms have been characterized as lacking systematic decision
making, strategic thinking (Robinson, 1982; Sexton and Van Auken, 1982), and a long-
term orientation (Gilmore, 1971), market orientation could be a highly significant
determinant of performance. A market orientation culture could provide small firms,
noted for their ad hoc and short-term decision-making patterns, with a much needed
firmwide focus for objectives, decisions, and actions.
2.4.1 Definition of market orientation
Although there are some discrepancies in the way of using “marketing” and “market”
orientation, it generally consists of orientation to both customers and competitors, and
integration the whole company’s efforts to achieve company’s goals through satisfying
customers’ needs.
According to scholars (Kohli and Jaworski I990; Narver and Slater 1990), market
orientation is defined as the process of generating and disseminating market intelligence
for the purpose of creating superior buyer value.
These authors divided market orientation into three principal components, those are: (1)
Customer orientation, that means the understanding of a firm about their target market
to create products/services fit to their customers’ need or desire;; (2) Competitor
orientation, means to understand about their current and potential competitors’
capabilities and strategies; and (3) Inter-functional coordination, that is coordinating all
the company’s resources of every individual function to create products/services for
target customers as their need or desire.
42
Narver and Slater (1990) also suggested two decision criteria. The first criterion is a
long-term focus, which includes suitable tactics and investments to prevent the ability of
overcoming the firm’s competitive advantage of competitors. Of course, this focus is
implicit in a marketing orientation. The second is short-term focus, which is seen as
both a component of market orientation and a consequence of it.
Consistent with Narver and Slater’s view of market orientation, Day (1990) argued that:
Market orientation represents superior skills in understanding and satisfying customers
as well as understanding competitors. Day and Nedunggadi (1994) found that a firm
operates according to market driven, balancing these two orientations, will achieve
better performance than emphasis on only one orientation.
Another concept is initiated by Kohli and Jaworski (1990) through a process-driven

model that emphasizes the stages of generating, disseminating and responding to market
intelligence as the essence of market orientation. They defined market orientation
concept through three basic components (processes) dealing with marketing
information, those are Generation of marketing intelligence all over the company
pertaining to customer needs, the Dissemination of intelligence across functions in the
company, and the organizational responsiveness to this market.
Although Narver and Slater (1990) and Kohli and Jaworski (1990) used distinct
theoretical bases to explain the market orientation concept, both groups agreed that the
market orientation is conceded to create great customer satisfaction and organizational
commitment of employees (Kohli and Jaworski, 1993). These two groups also have
some commonalities with respect to customers, competitors, functional integration and
market opportunities.
After Kohli and Jaworski (1990) and Narver and Slater (1990), many other marketing
scholars all over the world adopt their conceptual basic to develop the theory of market
orientation, such as Greenley, 1995; Pelham, 1996; Chan and Ellis, 1998; Baker and
Sinkula, 1999; Farrell, 2000;; Shoham and Rose, 2001;; Hult et al, 2003;; Ellis, 2005…
This creates fulfill literature reviews in terms of market orientation.
43
2.4.2 Measuring market orientation
Since market orientation has been one of the most important concepts of marketing
theory, many empirical researches have been carried out to measure it. Table 2.4
summarizes some studies over the last ten years that measure market orientation.
Table 2.4: Scales measuring Market(ing) Orientation
Author Construct Measure scale
Narver and Slatter (1990) Market orientation 7 pt. Likert-type
Naidu and Narayanna (1991) Marketing orientation Categorical and Thurstone-

type based on Kotler (1977)
Ruekert (1992) Market orientation Likert
Jaworski, Kohli & Kumar (1993) Market orientation Likert
Qureshi (1993) Marketing orientation Thurstone-type
Slater and Narver (1994) Market orientation Likert
Wrenn, LaTour & Calder (1994) Marketing orientation Thurstone
Day and Nedungali (1994) Market orientation Categorical
Greenley (1995) Market orientation 7 pt.Likert-type
Pelham and Wilson (1996) Market orientation 7 pt.Likert-type
Wrenn (1997) Marketing orientation Thurstone
Source: Bruce Wrenn, 1997
44
From table, four types of market orientation measures can be identified: Categorical,
Thurstone-type, Likert and Thurstone. Each type has its own advantages and
disadvantages. In order to assess the level of market orientation in Brazilian technology-
based companies, this research uses Likert scale.
Among many studies, the two most famous examples of using Likert scale are MKTOR
and MARKOR.
The first scale, MKTOR, with 21-item measure of market orientation, is given by
Narver and Slater (1990). According to their literature review of market orientation,
Narver and Slater operationalized market orientation as the comprising of three
behavioral dimensions (customer orientation, competitor orientation and inter-
functional coordination) and two decision-making criteria (long-term and short term
focus). However, the measures of the two decision criteria exhibited very low levels of
Cronbach's Alpha, so Narver and Slater (1990) deleted these sub-constructs.
Based on earlier studies by Kohli and Jaworski (1990) and Jaworski and Kohli (1993),
Kohli, Jaworski and Kumar (1993) developed the MARKOR scale (market orientation)
with the purpose of creating as an instrument to measure the degree of market
orientation of companies. They defined the MARKOR scale and the process of
measuring as: The market orientation scale (MARKOR) assesses the degree to which a
firm (1) engages in multi-department market intelligence generation activities, (2)
disseminates this intelligence vertically and horizontally through both formal and
informal channels, and (3) develops and implements marketing programs on the basis of
the intelligence generated.
As conceptualized by Jaworski and Kohli (1993), the three dimensions of market

orientation (MARKOR) are:
Intelligence generation: refers to the collection and assessment of both customer needs
and the forces (task and macro environments) that influence the development and
refinement of those needs. Importantly, multiple departments should take part in this
activity because each department has a unique market point of view (Kohli and
45
Jaworski, 1993). To give a supplemental suggestion, Narver and Slater (1994) said that
market orientation is a corporate culture that differentiates one business from another in
its tendency to always give superior value to its customers. A business with careful
market information collection and processing capabilities can predict more precisely
and make rapid changes in the market place and know what the superior value to
customers is (Pelham, 1996). Understanding the customer needs is critical. Failure to
define current and future customer needs will result in creating products and services
that do not satisfy customers.
Intelligence dissemination: In order for market orientation to operate correctly,

information developed in the intelligence generation stage must be shared with other
functions of the company. Superior performance from market orientation can only occur
when there is appropriate interfunctional coordination. Information exchange is crucial
to achieving this goal (Han, Kim and Srivastava, 1998). Successful dissemination or
sharing of information provides opportunity to marketers to ask questions and amplify
or modify interpretations to provide new insights. To reach this aim, businesses need to
provide favorable conditions for information exchange and discussion. This may
include information about technology, task forces, face-to-face meetings, integrator
roles, or liaison positions (Slater and Narver, 1994). Openness in communication across
every business functions assists in responding to costumers needs. Information
dissemination is critical to the success of the market orientation process.
Responsiveness: Superior performance can only be achieved by responding

continuously to the customer’s changing needs. Thus, once the marketers have gathered
the market intelligence, processed it by sharing it with the appropriate inter-functional
groups, then it is time to develop action plans. Kohli and Jaworski (1990) and Narver
and Slater (1990) emphasize that the scale of a business’s implementation of a market
orientation strategy depends on its desired level of organization-wide concern and
responsiveness to customer needs and competitive action.
From MKTOR and MARKOR scale, other researchers developed their measures of
market orientation, such as Pelham (1996). Although their initial idea is to develop a
46
“better” scale to measure market orientation, but in fact very little advance has been
made. So MKTOR and MARKOR are still considered as the best scales of measuring
market orientation.
It has been argued that Narver and Slater’ conceptualization is too broad, with measures
that do not tap specific behaviors that represent a market orientation (Kohli and
Jaworski, 1993). Furthermore, Kohli, Jaworski and Kumar (1993) argued that Narver
and Slater’s scale gives great emphasis on the role of customers and competition,
skipping to care about additional factors that drive customer needs and expectations.
Narver and Slater’s scale also does not tap the speed with which market intelligence is
generated and disseminated within an organization, and it includes a number of items
that do not tap specific activities and behaviors that represent a market orientation
(Kohli and Jaworski, 1993).
For those reasons, this study applies MARKOR scale to measure the level of market
orientation in Brazilian technology-based MSMEs.
2.5 Business performance
Although the concept of business performance has a variety of meanings (e.g. short- or
long-term, financial or organizational benefits), in the literature it is broadly viewed
from two perspectives, those are subjective and objective method.
The subjective method is primarily concerned with the performance of firms relative to
their own expectations or assessments or relative to the competition (Pelham and
Wilson, 1996).
The second method is the objective concept which is based on absolute measures of
performance (Cronin and Page, 1988). Objective measures relate mainly to financial
measures, e.g. return on assets (ROA), return on equity (ROE), return on investments
(ROI), growth in sales, growth in profits…
47
This study adopts both the subjective and objective concepts in order to gauge
information about the performance of Brazilian technology-based firms. The objective
concept is explored in the dimension of “Innovation Management Success”. The
subjective concept is used taken into consideration the market orientation performance
of firms relative to their competitors.
3. Methodology
For the purpose, the research can be considered "descriptive" as taxonomies proposed
by Vergara (2002, 2005) and Gil (1991, 1997). According to these authors, descriptive
research has as its fundamental goal the description of the characteristics of a given
population or phenomenon, or else the establishment of relations between variables. In
descriptive research, there is no interference from the researcher, who only attempts to
understand the frequency with which the phenomena occur. Such research may also
establish correlations between variables and define its nature, but without the
commitment of explaining the phenomena it describes (Vergara, 2002; Gil, 1991, 1997).
3.1 Research design
In order to develop this research two designs will be combined: 1) Cross-sectional

because it will be involved the collection of data at one point in time and 2) Casual-
comparative in order to examine the differences in the level of innovation management
and market orientation between firms supported and not supported by Venture Capital
and distinction in firm performance between companies with different levels of such
practices.
48
3.2 Variables of the Study
Components of variables are defined in Chapter 2.
In the section 2.3.2 can be found the variables regarding to Market Orientation, which
are: Intelligence generation, Intelligence dissemination and Responsiveness.
A total of 20 items are identified to measure the level of market orientation, including 6
items for intelligence generation, 5 items for intelligence dissemination and 9 items for
responsiveness (see Annex II).
The variables regarding to measure the level of Innovation Management are the
dimensions of the “A. T. Kearney’s House of Innovation” (section 2.4.2): Innovation
Strategy, Organization and Culture, Innovation Life Cycle Management and
Enabling Factors for Innovation Management. In order to measure the level of
innovation management, a total of 29 items are identified, including 4 items for
innovation strategy, 6 items for culture and organization, 14 items for innovation life
cycle process and 5 items for enabling factors (see Annex I).
The firm performance is splited into the following variables: innovation management
performance and market orientation performance. The innovation management
performance is defined as the dimension Innovation Management Success of “A. T.
Kearney’s House of Innovation”, composed by 11 items (See Annex I). The market
orientation performance is composed by 8 items (see Annex III).
Table 3.1 summarizes the variables of the study and their respective items:
49
Table 3.1 – Variables of the study
Variables Items
Innovation Strategy Q 3.1.1 – Q.3.1.4
Organization and Culture Q 3.2.1 – Q.3.2.6

Innovation
Management
Innovation Life Cycle Management Q 3.3.2 – Q 3.3.14
(Annex I)
Enabling Factors for Innovation

Q 3.4.1 – Q 3.4.5
Management
Intelligence generation Q 4.1.1 – Q 4.1.6

Market
Orientation Intelligence dissemination Q 4.2.1 – Q 4.2.5
(Annex II)
Responsiveness Q 4.3.1 – Q 4.3.9
Innovation Management Performance
Q 3.5.1 – Q 3.5.11
Firm (Annex I )
Performance Market Orientation Performance
Q 5.1 – Q.5.7
(Annex III)
Own elaboration
3.3 Methods of data collection
Primary data were collected through structured interviews. In order to reach the levels
of usage of both Innovation management and market orientation practices by the target
firms and the performance levels attained by such firms, survey instruments were
developed. More specifically, the IMP rove Assessment tool, developed by A.T.
Kearney and supported by the European Commission under the Europe INNOVA
Initiative, was the basis to gauge Innovation Management practices of firms (see survey
tool in Annex I). The MARKOR scale was the basis applied to gauge Market
50
Orientation information (see survey tool in Annex II). Finally, firm performance will be
gauged through the survey tool in Annex III.
In the Annex I, personal background information and company information are also
included.
Regarding to market orientation, all the items use 5-point Likert scale. Chosen
respondents will indicate the degree of how much they agree with the statement about
market orientation’s performance in their companies. The scale varies from number 1,
which means “strongly disagree”, to number 5 with the meaning of “strongly agree”.
Similar to market orientation measurement, the 8 items for business performance are
measured by 5-point Likert scale. But in this case, as the items correspond to subjective
measurements -relative to major competitors, number 1 means “far below” and number
5 means “far higher”.
Because all of instruments are designed in English, while the survey will be conducted
in Brazil, the questionnaire will be translated into Portuguese.
4. Field Research
In order to collect the primary data a field research was carried out. Data were collected
through personal interviews with the entrepreneurs from the target firms in two ways:
personal visits to those firms located in the State of Rio de Janeiro or via Skype (video
call) to firms located in São Paulo, Minas Gerais, Recife and Santa Catarina.
Concerning to time frame, the field research was undertaken within the period of
October 1, 2010 and March 15, 2011.
4.1 Areas of the study
Because of limited time and financial resources, the research had to be geographically
limited covering firms from five Brazilian states, namely: Rio de Janeiro, São Paulo,
51
Minas Gerais, Recife and Santa Catarina. Three of them are located in the Southeast
region in Brazil. The reason for this choice is that, according to data from the Brazilian
Association of Entities Promoting Innovative Enterprises (ANPROTEC) 11, in these 3
states are concentrated more than 70% of the total of Brazilian technology-based
MSMEs.
4.2 Target group and research sample
The target group of the research are the Brazilian technology-based firms (as defined in
Chapter 2), located in one of the 5 states that comprehend the areas of study, with at
least 2 years working and 5 employees.
The research sample comprises 30 technology-based firms, of whom 15 are supported

by Venture Capitalists (mainly by CRIATEC) and 15 are not supported companies.
4.3 Research Partners
NEP Genesis - Center for Studies and Research in Entrepreneurship, Innovation and
Venture Capital located at Catholic University of Rio de Janeiro (http://www.puc-
rio.br/).
Antera Gestão de Recursos S.A.- private company specialized in the management of

Seed Capital Funds (http://www.anteragr.com.br/).
Instituto Inovação S.A. - private company, whose main objective is to bring scientific
and technology knowledge to the market (http://www.institutoinovacao.com.br/).
Antera Gestão de Recursos S.A. and Instituto Inovação S.A. are part of the consortium
to manage the Criatec fund.
11
Available at http://www.anprotec.org.br/
52
4.4 Established contact
The main contact established during the field research was with the National Bank of
Economic and Social Development (BNDES)12. Located in the State of Rio de Janeiro,
under the Ministry of Development, Industry and Trade, BNDES is the largest
development bank in Latin America. With a social function, BNDES’ main goal is to
support projects that contribute to the development of the country, with the
technological innovation as one of its top priorities.
Because all the VC backed firms interviewed are from the Criatec fund, which belongs
to BNDES, this contact is very important. The contact was personally established with
the manager of the Capital Market area in BNDES, responsible for the Criatec fund.
4.5 Encountered problems
The main problem encountered during the field research was to get in contact with the
entrepreneurs from Non-supported firms. Besides to find out who are the entrepreneurs
from each Non-supported firm, it was hard to convince them to take part in the research.
Additionally, because entrepreneurs are too busy, some interviews were canceled more
than once by the same entrepreneur.
With VC backed firms was easier to get in contact because of the help from research
partners: they sent the firms a letter and advised the entrepreneurs to take part in the
research. Additionally they available the personal e-mails of entrepreneurs.
Another point was that, because of the large number of questions, the interviews took a
long time. This meant that some interviews had to be divided into two different days.
12
www.bndes.gov.br
53
5. Data Analysis
Background
The previous sample consisted of 30 Brazilian technology-based MSMEs, from which

15 VC-backed and 15 Non-supported firms. Contacts were made per email and phone
calls with all 30 firms. The interviewees were personally (personal visit or per skype)
carried out with the entrepreneurs from each firm. Each interview had in average 2
hours and 30 minutes of duration. At the end, a total of 28 firms were personally
interviewed.
SPSS 17.0 for Windows computer program was the main tool used to analyze collected
data. At the first level of quantitative data analysis, descriptive statistical procedures
involving cross-tabulations and frequencies distributions were used. At the second level
of analysis, chi-square tests to find out the association between category of respondents
and some variables were performed. In addition, in order to complement data and
exemplify some results, qualitative information was available in some cases.
5.1 Introduction
This section presents the data analysis of the research. The presentation is organized
according to the questionnaire sequence and the variables of the study. The section is
organized as follows: (i) personal background information; (ii) company information;
(iii) innovation management; (iv) market orientation; and (v) firm performance.
In each sub-section data are presented through graphics in two ways: 1) a pie chart with
the results of the total interviewed firms and 2) bar chart with responses divided in the
two categories of respondents (VC backed firms and Non-supported firms).
54
5.2 Personal background information
Here are presented the data related to the personal information, such as age, sex and
education level, of the interviewed entrepreneurs.
Figure 5.2.1: Age of entrepreneur
As can be seen in the

Figure 5.2.1, 75% of
entrepreneurs are between
31 and 50 years old.
Figure 5.2.2: Age of entrepreneur X Category of respondents
From Figure 5.2.2 can be

observed that the
entrepreneur´s age profile is
similar for both groups:
concentrated between 31
and 50 years old. A curious
aspect is that only VC
backed firms present
entrepreneurs between 20
and 30 years old.
55
Figure 5.2.3: Sex of entrepreneur
This figure shows that

the vast majority of
entrepreneurs are man.
From the 28 interviewed
entrepreneurs, just 2 are
women.
Figure 5.2.4: Sex of entrepreneur X Category of respondents
As Figure 5.2.4 shows the 2

women entrepreneurs are
from VC backed firms.
56
Figure 5.2.5: Educational background
This Figure reveals that

more than 85% of
entrepreneurs have Master
or Doctor degree.
Figure 5.2.6: Educational background X Category of respondents
When the two categories are

compared, the findings show
that entrepreneurs from VC
backed firms in general
shown to have a slightly
higher educational level. But
when the chi-square test was
performed on the findings
the results showed that there
was no significant difference
between the two categories
of respondents because the
calculated chi-square value was less than the tabulated one (1.53 against 7.82 at 3
degrees of freedom and 0.05 significance level).
57
5.3 Company information
Here are presented the data related to the company information, such as number of
employees and years in operation.
Regarding to the type of ownership, all of VC backed firms are joint stock companies
and all of Non-supported firms are limited companies.
Among the industries in which companies operate are: software, biotechnology,

pharmaceutical, oil & gas, advanced materials, agribusiness and chemical industry.
More information about each interviewed company can be found in the Appendix A.
Figure 5.3.1: Number of employees
According to Figure 5.3.1, 50% of

firms have between 5 and 19
employees. The majority (82%)
have no more than 49 employees.
58
Figure 5.3.2: Number of employees X Category of respondents
Comparing both categories, it is

clear that VC backed firms
present in general less
employees than Non-supported
firms: 80% of VC backed firms
have between 5 and 29
employees against 54% of Non-
supported firms. But when the
chi-square test was performed
on the findings the results
showed that there was no significant difference between the two categories of
respondents because the calculated chi-square value was less than the tabulated one
(3.51 against 11.07 at 5 degrees of freedom and 0.05 significance level).
Figure 5.3.3: Years in operation
This figure shows that only

25% of interviewed firms
are between 2 and 5 years in
operation. The other 75% of
firms are at least 6 years in
operation.
59
Figure 5.3.4: Years in operation X Category of respondents
Here is possible to see that both

categories remain the same
pattern of responses from the
total universe of surveyed
companies: more than 70% of
firms are older than 6 years.
There is a slightly difference in
the concentration of firms for
both categories: while there are
more VC backed firms between
6 and 7 years, there are more
Non-supported firms above 10
years. But when the chi-square test was performed on the findings the results showed
that there was no significant difference between the two categories of respondents
because the calculated chi-square value was less than the tabulated one (1.51 against
9.49 at 4 degrees of freedom and 0.05 significance level).
Here are presented the data related to the innovation management. The data were
separated into sub-sections according to the research variables: innovation strategy,
organization and culture, innovation life cycle management and enabling factors for
innovation management.
5.4.1 Innovation strategy
This variable includes the items Q 3.1.1 – Q.3.1.4 from questionnaire (see Appendix I).
Regarding to the item Q 3.1.1 (Does your company have a clear vision for its future?),
all interviewed firms answered it in a positive way. Figures 5.4.1 until 5.4.7 are related
to the vision´s attributes of firms.
60
Figure 5.4.1: Vision´s attribute: documented for all staff to see
Figure 5.4.1 reveals that

around 60% of firms have its
vision documented for all staff
to see. For approximately 18%
of firms (which answered more
or less) it´s vision is
documented but it is not
available for all staff. In these
cases it was possible to
perceive that firms´ vision is
restricted to the directors. For
the other 18% answered “no” it
means that they even have its vision documented.
Figure 5.4.2: Documented for all staff to see X Category of respondents
When the responses of the two

categories are compared, the
findings show that more VC
backed than Non-supported firms
(73% against 50%, respectively)
present its vision documented for
all staff to see. In the same way,
while just around 7% of VC
backed firms answered “no”, 33%
of Non-supported firms answered
that they do not have its vision even documented. But when the chi-square test was
performed on the findings the results showed that there was no statistically significant
difference between the two categories of respondents because the calculated chi-square
value was less than the tabulated one (3.18 against 5.99 at 2 degrees of freedom and
0.05 significance level).
61
Figure 5.4.3: Vision’s attribute: clearly linked to innovation
Figure 5.4.3 shows that vast

majority of firms answered
that have their visions
clearly linked to the
innovation.
Figure 5.4.4: Vision’s attribute: well understood by customers and suppliers
This Figure shows that more

than 64% of firms think that
their visions are well
understood by customers
and suppliers. Around 28%
of firms answered “more or
less”, one of these cases
said: “client still link our
firm to the university and do
not trust in our national
product”
62
Figure 5.4.5: Well understood by customers and suppliers X Category of respondents
This Figure reveals that both

total universe of companies
surveyed for this vision´s
attribute. In addition, the
responses of the two categories
show almost no difference
between them.
Figure 5.4.6: Vision’s attribute: well understood by innovation partners
This Figure indicates that great

majority of entrepreneurs think
that their firm’s vision is well
understood by innovation
partners. In some cases this is
due to the strong relationship
between the entrepreneur and
the university from where he
came, which is until now its
main innovation partner.
63
Figure 5.4.7: Well understood by innovation partners X Category of respondents

total universe of companies
surveyed for this vision´s
attribute.
Figure 5.4.8: Innovation strategy
This Figure indicates that vast

majority of interviewed firms
have an innovation strategy.
Because almost 90% of firms
answered in a positive way, it was
not necessary to construct a graph
with category of respondents.
Interesting here is that more than

one firm adopts the concept of
open innovation as the basis of its
innovation strategy.
64
Figures 5.4.9 until 5.4.17 are related to the innovation strategy´s attributes of firms.
Figure 5.4.9: Innovation strategy´s attribute: result of the analysis of potential

business opportunities activities
From this Figure can be observed

that 100% of respondents said that
it´s innovation strategy results
from an analysis of potential
business opportunities activities.
This answer was emphasized by

an entrepreneur: “We have a
business plan and made several
trips to analyze international
market”.
Figure 5.4.10: Innovation strategy´s attribute: setting clear objectives for innovation
management activities
This Figure shows that slightly more

than half of interviewed firms have
innovation strategy as a guide for their
innovation management activities.
For one of the 14% of firms that

answered “no”: “innovation
management is centralized in the
company's board without any
methodology”.
65
Figure 5.4.11: Setting clear objectives for innovation management activities X

findings show that more Non-
supported than VC backed firms
answered that their innovation
strategy sets clear objectives for
their innovation management
activities. In the same way,
while just around 9% of Non-
supported firms answered “no”,
21% of VC backed firms
answered that their innovation strategy does not set clear objectives for their innovation
management activities. But when the chi-square test was performed on the findings the
results showed that there was no significant difference between the two categories of
Figure 5.4.12: Innovation strategy´s attribute: guide to the idea management
This Figure indicates that the

majority of interviewed firms that
answered to this question said that
their innovation strategy guides
their idea management. Only
3,6% said “no” and 7,1%
answered more or less. Because
of this, it was not necessary to
construct a graph with category of
respondents.
66
Figure 5.4.13: Innovation strategy´s attribute: setting clear objectives for project
management in each innovation project
From this figure can be observed

that the majority of interviewed
firms that answered to this
question said that their innovation
strategy sets the objectives for
their project management in each
innovation project.
Figure 5.4.14: Innovation strategy´s attribute: guide to the improvement of current

product/service or process development

answered that their innovation strategy
guides the improvement of your
current product/service or process
development. Because more than 85%
of firms answered in a positive way, it
was not necessary to construct a graph
67
Figure 5.4.15: Innovation strategy´s attribute: basis for organizational changes and
business model development
This Figure shows that for the

majority of interviewed firms their
innovation strategy provides the
basis for organizational changes
and business model development.
In some cases it was possible to

confirm plans for the creation of a
start-up aiming to develop
products and services fleeing the
scope of the company.
Figure 5.4.16: Basis for organizational changes and business model development X

findings show that more Non-
supported than VC backed firms
strategy provides the basis for
organizational changes and
business model development.
But when the chi-square test was

performed on the findings the results showed that there was no significant difference
between the two categories of respondents because the calculated chi-square value was
less than the tabulated one (2.00 against 5.99 at 2 degrees of freedom and 0.05
significance level).
68
Figure 5.4.17: Innovation strategy´s attribute: Focused on the development of
innovation capabilities
From this Figure can be observed that

100% of respondents said that it´s
innovation strategy focuses on the
development of their innovation
capabilities.
Figure 5.4.18: Innovation Strategy: degree of communication
This figure shows that around

65% of interviewed firms have
their innovation strategy fully or
almost fully communicated to
their staff. For the almost 15%
of firms that answered that their
innovation strategy is almost
nothing communicated, it was
possible to perceive that firms´
innovation strategy is restricted
to the shareholders.
69
Figure 5.4.19: Degree of communication X Category of respondents
When the responses of the

two categories are compared,
can be observed that around
72% of both Non-supported
and VC backed answered that
their innovation strategy is
fully or almost fully
communicated to their staff.
Analyzing only the higher
degree of communication it is
possible to see some
difference between their responses: in this case, 73% of Non-supported firms answered
that their innovation strategy is fully communicated against 50% of VC backed firms.
But when the chi-square test was performed on the findings the results showed that
there was no significant difference between the two categories of respondents because
the calculated chi-square value was less than the tabulated one (3.08 against 7.82 at 3
Figure 5.4.20: Innovation Strategy: degree of understanding

almost fully understood by their
staff.
70
Figure 5.4.21: Degree of understanding X Category of respondents

findings show that a little bit
more Non-supported than VC
backed firms (82% against
71%, respectively) answered
that their innovation strategy is
fully or almost fully understood
by their staff. This difference is
accentuated when analyzing
only the higher degree of
understanding: in this case 73% of Non-supported firms answered that their innovation
strategy is fully understood by their staff against 43% of VC backed firms. But when
the chi-square test was performed on the findings the results showed that there was no
significant difference between the two categories of respondents because the calculated
chi-square value was less than the tabulated one (4.80 against 9.49 at 4 degrees of
freedom and 0.05 significance level).
Figure 5.4.22: Innovation Strategy: degree of implementation

almost fully implemented. For
the 18% of firms answering
“more or less”, a reason was
explained by an entrepreneur:
“There is lack of alignment. Not
all staff can understand the
importance of some activities”.
71
Figure 5.4.23: Degree of implementation X Category of respondents

findings show that around 72%
of both Non-supported and VC
backed firms answered that
their innovation strategy is fully
or almost fully understood by
their staff. Analyzing only the
higher degree of
implementation it is possible to
see a difference: 64% of Non-
supported firms answered that their innovation strategy is fully implemented against
36% of VC backed firms. But when the chi-square test was performed on the findings
the results showed that there was no significant difference between the two categories of
Figure 5.4.24: Innovation projects: alignment with innovation strategy

projects are aligned with their
innovation strategy. Because
almost 100% of respondent
firms answered in a positive
way, it was not necessary to
construct a graph with category
of respondents.
72
Figure 5.4.25: Innovation projects: balance between incremental and radical
innovation
From this Figure can be

observed that the number of
interviewed firms that present
a balance between
incremental and radical
innovation projects is equal to
the number of those that do
not present this balance.
Figure 5.4.26: Balance between incremental and radical innovation projects X


findings show that a little bit
more Non-supported than VC
backed firms (50% against
that their projects are balanced
between incremental and
radical innovation. Regarding
to the negative answer this
difference is even smaller:
47% of VC backed firms answered that there is no balance between their incremental
and radical innovation projects against 42% of Non-supported firms. This is supported
by chi-square test. The results showed that there was no significant difference between
the two categories of respondents because the calculated chi-square value was less than
the tabulated one (1.32 against 3.84 at 1 degrees of freedom and 0.05 significance
level).
73
Figure 5.4.27: Innovation projects: balance with respect to risk and return

observed that half of interviewed
firms answered that their
innovation projects are not
balanced with respect to risk and
return.
Figure 5.4.28: Balance with respect to risk and return X Category of respondents
Comparing both categories,

this Figure shows that only
33% of Non-supported
answered that their
innovation projects are
balanced with respect to risk
and return, against 47% of
VC backed firms. But when
the chi-square test was
performed the results show a
calculated value less than the tabulated one (0.49 against 5.99 at 2 degrees of freedom
and 0.05 significance level) implying that the difference between the two categories
with respect to this question is not significant.
74
Figure 5.4.29: Innovation projects: balance with respect to long and short-term
perspectives
This Figure indicates that a little

bit more than half of interviewed
innovation projects are not
balanced with respect to long and
short-term perspectives.
Figure 5.4.30: Balance with respect to long-term and short-term perspectives X


findings show that around 33%
of both Non-supported and VC-
their innovation projects are
balanced with respect to long
and short-term perspectives.
The difference here is in the
negative answer: 47% of VC-
there is no balance between their incremental and radical innovation projects against
67% of Non-supported firms. When the chi-square test was performed the results show
a calculated value less than the tabulated one (2.88 against 5.99 at 2 degrees of freedom
and 0.05 significance level) implying that the difference between the two categories
with respect to this question is not statistically significant.
75
Figure 5.4.31: Innovation projects: balance between low and high cost
This Figure shows that almost

half of interviewed firms
projects are not balanced
between low and high cost.
Figure 5.4.32: Balance between low and high cost X Category of respondents
Here is possible to observe that

both categories remain the same
pattern of response from the total
universe of surveyed firms (see
Figure 5.4.31).
5.4.2 Organization and culture
This variable includes items Q 3.2.1 – Q.3.2.6 from questionnaire (see Annex I).
76
Figure 5.4.33: Staff attitudes towards innovation: excited about innovation

answered that their staff is excited
about innovation. This answer was
emphasized by an entrepreneur:
“Researchers are so excited about
innovation that we sometimes have
trouble focusing on finalizing a
product because they already want to
begin to develop another”. Because
more than 85% of respondent firms
answered in a positive way, it was
not necessary to construct a graph with category of respondents.
Figure 5.4.34: Staff attitudes towards innovation: open rather than skeptical towards
new ideas
According to this Figure the great

answered that their staff is open
rather than skeptical towards new
ideas. One of the interviewed
entrepreneurs said: “When hiring,
we adopt the criterion passion for
R & D rather than the formation.
In most cases, the developers
bring the technical ideas”.
Because more than 89% of

respondent firms answered in a positive way, it was not necessary to construct a graph
77
Figure 5.4.35: Staff attitudes towards innovation: able to think “out-of-the box”
This Figure shows that majority

(64%) of interviewed firms
answered that its staff is not able
to think “out-of-the box”.
Figure 5.4.36: Able to think “out-of-the box” X Category of respondents
Comparing both categories it is

possible to see that more Non-
supported firms than VC-backed
firms (75% against 60%,
respectively) answered that their
staff is able to think “out-of-the
box”.
When the chi-square test was

performed the results show that the
calculated value was slightly less
than the tabulated one (5.30 against
5.99 at 2 degrees of freedom and 0.05 significance level) implying that the difference
between the two categories with respect to this question was profound though not
statistically significant at 0.05 level.
78
Figure 5.4.37: Staff attitudes towards innovation: Imaginative

of interviewed firms answered
that their staff is imaginative.
Figure 5.4.38: Imaginative X Category of respondents
Comparing the two categories, it is

clear that there are no significant
differences in the responses of
both. Around 74% of both Non-
supported and VC-backed firms
answered that their staff is
imaginative. Regarding to the
negative answer: 17% of Non-
supported firms answered that
their staff is not imaginative
against 7% of VC-backed firms.
79
Figure 5.4.39: Staff attitudes towards innovation: reluctant to try out new methods
Here can be observed that half of

interviewed firms answered that
their staff is reluctant to try out
new methods. It was possible to
perceive that most of these
responses are concentrated in
companies in which a majority of
the staff is focused on
manufacturing and maintenance
activities.
Figure 5.4.40: Reluctant to try out new methods X Category of respondents
Comparing the two

categories, it is clear that there
are differences in the
responses of both. While
around 67% of Non-
their staff is reluctant to try
out new methods, 40% of VC-
backed firms answered the
same. Regarding to the
negative answer: 17% of Non-
supported firms answered that their staff is not reluctant to try out new methods, against
47% of VC-backed firms. But when the chi-square test was performed on the findings
the results showed that there was no significant difference between the two categories of
80
Figure 5.4.41: Staff attitudes towards innovation: able to “sell” ideas internally

that their staff is able to “sell”
new ideas internally. This
answer was emphasized by an
entrepreneur: “We seek to
promote regular workshops to
foster the exchange of ideas”.
For the 10% that answered

“no”, one reason was mentioned
by an entrepreneur: “We miss bit
of entrepreneur blood on our R & D staff”.
Figure 5.4.42: Able to “sell” ideas internally X Category of respondents

possible to see that there are
almost no differences between
their responses: 80% of VC-
backed answered that their staff
is able to “sell” ideas internally
against 75% of Non-supported
firms. Regarding to the negative
answer: 17% of Non-supported
firms answered that their staff is
not able to “sell” ideas
internally against 7% of VC-backed firms.
81
Figure 5.4.43: Staff attitudes towards innovation: Focusing on business impact
This Figure shows that there is

no predominant response to
this question: it is possible to
see about a third of respondent
firms for each answer.
For almost one third that

answered that their staff is not
focused on business impact, a
reason is that it is restricted to
management and directors of
the company. For the little bit
more than one third that said “more or less”, according to an entrepreneur, it is because:
“Our company presents a blend of people from the market and the academy”.
Figure 5.4.44: Focusing on business impact X Category of respondents
Comparing both categories of

firms it is clear that there are
differences in their responses:
while 40% of VC-backed
staff is focused on business
impact, 25% of Non-
supported firms answered the
same. But when the chi-
square test was performed on
the findings the results
showed that there was no significant difference between the two categories of
82
Figure 5.4.45: Capacity for innovation viewed by customers

(almost 90%) answered that
their capacity for innovation is
viewed by customers to a high
or very high degree.
Figure 5.4.46: Capacity for innovation viewed by customers X


possible to see that a little bit
more VC-backed than Non-
supported firms (93% against
that their capacity for
innovation is viewed by
customers to a high or very high
degree. But when analyzing
only the higher degree is
possible to see a significant
difference: 83% of Non-supported firms answered that their capacity for innovation is
viewed by customers to a very high degree against 47% of VC-backed firms. When the
chi-square test was performed the results show that the calculated value was slightly less
than the tabulated one (4.75 against 5.99 at 2 degrees of freedom and 0.05 significance
level) implying that the difference between the two categories with respect to this
question was profound though not statistically significant at 0.05 level.
83
Figure 5.4.47: Capacity for innovation viewed by competitors

answered that their capacity
for innovation is viewed by
competitors to a high or very
high degree. This answer is
emphasized by more than one
entrepreneur: “We have some
competitors, who are also
partners, which are always
probing pair to see where
we'll get” and “Some competitors are interested in doing fusion and big companies
want to buy our equipment”.
In general, firms that answered “more or less” argued that multinationals are beginning
to worry about their capacity for innovation.
The only company which responded that their capacity for innovation is viewed by
competitors to a low degree argued: “Competitors in this market are not able to realize
our differential because they see only the final features”.
Figure 5.4.48: Capacity for innovation viewed by competitors X

Comparing the two

categories, it is clear that
there are significant
differences in the responses
of both. While around 83%
of Non-supported firms
answered that their capacity
for innovation is viewed by
84
competitors to a high or very high degree, 64% of VC-backed firms answered the same.
When analyzing only the higher degree these differences are even more significant:
75% of Non-supported firms answered that their capacity for innovation is viewed by
competitors to a very high degree against only 29% of VC-backed firms.
This result shows that the Non-supported firms’ capacity for innovation is viewed by
competitors to a higher degree than VC-backed firms’ capacity for innovation. This
finding is supported by chi-square test because the calculated value was greater than
the tabulated one (8.15 against 7.82 at 3 degrees of freedom and 0.05 significance level)
implying that there is a statistically significant association between category of
respondents and firm´s capacity for innovation viewed by competitors.
Figure 5.4.49: Capacity for innovation viewed by suppliers
This Figure shows that around

answered that their capacity for
innovation is viewed by suppliers
to a high or very high degree.
This answer was exemplified an
entrepreneur: “Suppliers do not
keep up with our needs, we often
need to import material”.
Another thing to be observed is

that 25% of interviewed firms did not answer to this question because they think that it
does not apply to their situation. In most of these cases there are no suppliers.
85
Figure 5.4.50: Capacity for innovation viewed by suppliers X
Here is possible to see that

the interviewed firms that
did not answer to the
question Q 3.2.2 c) belong
to the category of Non-
supported firms. Because of
this it is difficult to make
any comparison between
the responses of the two
categories.
Figure 5.4.51: Capacity for innovation viewed by the entrepreneur
This Figure indicates that

majority of interviewed
entrepreneurs (78%)
answered that their firm´s
capacity for innovation is
viewed by them to a high or
very high degree.
The following testimonials

from entrepreneurs illustrate
some reasons for the 18% of firms that answered “middle”: “We had to withdraw due to
the lack of capacity to approve innovation projects in the FINEP” and “Is still missing
bring products to market”.
86
Figure 5.4.52: Capacity for innovation viewed by the entrepreneur X
Comparing the two categories, it

is clear that there are significant
both. While 100% of the
entrepreneurs from VC-backed
firms answered that they view
their firm´s capacity for
innovation to a high or very high
degree, 58% of Non-supported
firms answered the same.
This result shows that entrepreneurs from VC-backed firms view their firm´s capacity
for innovation to a higher degree than those from Non-supported companies. This
finding is supported by chi-square test because the calculated value was greater than
implying that there is a statistically significant association between category o f
respondents and firm´s capacity for innovation viewed by the entrepreneurs.
Figure 5.4.53: Degree of partnerships’ support and enhance: idea management phase
This Figure shows that there is no

predominant response to the
question Q 3.2.3 a): answers vary
similarly from “not at all” to “to a
high degree”. Fleeing to this is
just the answer “to a very high
degree”, with a small minority of
respondents. But putting together
the extremes is possible to see the
87
predominance of the negative answer: 46% of interviewed firms answered that
partnerships do not support and enhance the idea management phase or do this to a very
low degree, while 28% answered that partnerships support and enhance the idea
management phase to a high or very high degree.
Figure 5.4.54: Support to the idea management phase X Category of respondents
Comparing the two categories it

is clear that there are almost no
both and that both maintain the
same pattern of responses of the
total universe of interviewed
companies. Just in the negative
answers “not at all” and “to a
very low degree” it is possible to
see some difference, which is not
significant as can be confirmed by chi-square test. The results showed that the
Figure 5.4.55: Degree of partnerships’ support and enhance: development phase

that around 46% of interviewed
firms answered that partnerships
support and enhance the
product/service development
phase to a high or very high
degree, while just 18% answered
that have no support or have
support from partnerships to a
very low degree.
88
Figure 5.4.56: Support to the development phase X Category of respondents

is possible to see that the
both are concentrated in the
answers “to a very low degree”
and “to a low degree”.
While 20% of VC-backed firms

answered that partnerships
support and enhance the
product/service development
phase to a very low degree, none of Non-supported firms have the same answer. In
compensation, 42% of Non-supported firms answered that they have some support from
partnerships (to a low degree), against 27% of VC-backed firms. But these are not
significant differences, as demonstrated by chi-square test in which the calculated chi-
square value was less than the tabulated one (2.96 against 9.49 at 4 degrees of freedom
and 0.05 significance level).
Figure 5.4.57: Degree of partnerships’ support and enhance: launch phase
This Figure indicates the

predominance of no support from
partnerships to the launch phase.
As can be observed, around 47%
that partnerships do not give any
support and enhance to the launch
phase or do this to a very low
degree against 29% that answered
“to a high degree” or “to a very
high degree”.
89
Figure 5.4.58: Support to the launch phase X Category of respondents

is clear that there are no
significant differences in the
responses of both and that both
maintain the same pattern of
responses of the total universe
of interviewed companies:
predominance of no support
from partnerships to the launch
phase.
Figure 5.4.59: Number of external partners participating in innovation projects
According to this Figure, the

majority of firms (64%) have
between 1 and 6 external
partners participating regularly
in their innovation projects. In
addition, the largest
concentration of responses is
partners.
90
Figure 5.4.60: Number of external partners participating in innovation projects X
Here is possible to see that

both categories maintain the
same pattern of responses of
the total universe of
interviewed companies: the
partners.
But when the chi-square test

was performed on the
findings the results showed that there was no significant difference between the two
categories of respondents because the calculated chi-square value was less than the
tabulated one (2.93 against 9.49 at 4 degrees of freedom and 0.05 significance level).
Figure 5.4.61: Number of external partners that have cooperated in the last 3 years
Comparing this Figure with

Figure 5.4.59, almost the
same numbers can be
observed. This result means
that the number of external
partners that have cooperated
in at least one innovation
project during the last 3 years
is the same as the number of
them that regularly participate
in innovation projects.
91
Figure 5.4.62: Number of external partners that have cooperated in the last 3 years X
Here again (as shown in the

Figure 5.4.60) it is possible to
see that both categories maintain
the same pattern of responses of
the total universe of interviewed
companies: the concentration of
responses is between 4 and 6
external partners.

compared, can be observed that
34% of Non-supported firms have more than 6 external partners against 20% of VC-
backed firms. Another difference is that while 13% of VC-backed firms have no
external partners cooperating in at least one innovation project during the last 3 years,
none of Non-supported firms answered the same. But when the chi-square test was

external partners
This Figure shows that only

have at least 50% of their
staff working on innovation
projects in which external
partners are involved.
92
external partners X Category of respondents
Comparing the two categories,

it is clear that there are
both. While around 31% of
VC-backed firms have all their
staff currently working on
innovation projects in which
external partners are involved,
17% of Non-supported firms
have the same. When
analyzing the responses from
at least 50% of the staff this difference is even more significant: 54% of VC-backed
firms have at least 50% of their staff currently working on innovation projects in which
external partners are involved against 25% Non-supported firms. Despite of this, these
are not statistically significant differences as demonstrated by chi-square test in which
5.4.3 Innovation life cycle management
This variable includes items Q 3.3.2 – Q 3.3.14 from questionnaire (see Annex I).
93
product/service on sale
This Figure indicates that there is

no predominant response to
question Q 3.3.2. Answers vary
similarly from “less than 12” to
“above 48”. Fleeing to this is just
the answer “37-48”, with a small
minority of respondents.
Despite of this, it is possible to see

that for the majority of
interviewed firms (64%) their
most profitable product/service took less than 36 months from the development to
getting on sale. A curious thing is that almost an equal number of firms answered “less
than 12”and “above 48”. This is probably due to the variety of industries in which
companies operate.
product/service on sale X Category of respondents
Comparing both categories it

is easy to see some difference
in their responses: 40% of
VC-backed firms answered
that their most profitable
product/service took more
than 48 months from the
development to getting on
sale against only 17% of Non-
supported firms. Despite of
this, these are not statistically significant differences as demonstrated by chi-square test
in which the calculated chi-square value was less than the tabulated one (3.05 against
9.49 at 4 degrees of freedom and 0.05 significance level).
94

half of interviewed firms did not
yet reach the breakeven point for
their most profitable
product/service.

compared, it is clear that there is
some difference between their
responses: 64% of VC-backed
firms did not yet reach the
breakeven point for their most
profitable product/service
against 33% of Non-supported
firms. But when the chi-square
test was performed on the
findings the results showed that there was no statistically significant difference between
the two categories of respondents because the calculated chi-square value was less than
the tabulated one (5.13 against 11.07 at 5 degrees of freedom and 0.05 significance
level).
95
Figure 5.4.69: Number of incremental innovation projects started in the last 4 years
This Figure shows that half of

interviewed firms have started
at least 7 (seven) incremental
innovation projects in the last 4
years.
Figure 5.4.70: Number of incremental innovation projects started in the last 4 years X
Figure 5.4.70 shows

differences between the
responses of the two categories.
60% of VC-backed firms have
started at least 7 (seven)
incremental innovation projects
in the last 4 years, against 41%
of Non-supported firms.
This difference is accentuated

when analyzing the number of
firms that have started none or until 2 (two) incremental innovation projects in the last 4
years: 41% of Non-supported firms against only 7% of VC-backed firms.
there was no statistically significant difference between the two categories of
96
Figure 5.4.71: Number of incremental innovation projects that showed success
within the last 4 years

around 45% of interviewed
firms answered that at least
50% of their innovation
projects showed success
within the last 4 years against
the other almost 45% that
answered less than 50% or
none.
Figure 5.4.72: Number of incremental innovation projects that showed success

within the last 4 years X Category of respondents

is clear that there are
differences between their
responses. While majority
(54%) of responses from
Non-supported firms are
concentrated between 25%
and 74% of their incremental
innovation projects, around
36% of VC-backed firms
answered “25%-49%” and 29% of them answered “100%”. In addition, only 7% of VC-
backed firms have none of their incremental innovation projects showing success within
the last 4 years, against 18% of Non-supported firms. But when the chi-square test was
97
Figure 5.4.73: Number of radical innovation projects started in the last 4 years

of interviewed firms (around
60%) have started between 1
and 2 radical innovation
projects in the last 4 years.
Figure 5.4.74: Number of radical innovation projects started in the last 4 years X
Here it is possible to see that

interviewed companies: the
between 1 and 2 radical
innovation projects in the last
4 years.
98
Figure 5.4.75: Number of radical innovation projects that showed success

half of interviewed firms have
none of their radical innovation
projects showing success
within the last 4 years. A
minority of 14% answered
“100%”.
Figure 5.4.76: Number of radical innovation projects that showed success


interviewed companies. The
concentration is in the
response: none of their radical
innovation projects showing
success within the last 4 years.
It can be also observed that
around 40% of interviewed
firms from both categories have at least 50% of their radical innovation projects
showing success within the last 4 years.
99
Figure 5.4.77: Assessment of new ideas by an interdisciplinary team
This Figure shows that the

(68%) assess new ideas by an
interdisciplinary team. This
answer was emphasized by an
entrepreneur: “In order to assess
new ideas we are all involved:
technical, commercial and
administrative areas.” The
following testimonials from
entrepreneurs illustrate some reasons for the 18% of firms that do not assess new ideas
by an interdisciplinary team: “I do it alone.” and “We are all chemical engineers.”
Figure 5.4.78: Assessment of new ideas by an interdisciplinary team X

Comparing the two

there are differences in the
responses of both. While
around 86% of VC-backed
firms assess new ideas by
an interdisciplinary team,
59% of Non-supported
firms do the same. In
addition, 25% of Non-
supported firms answered
that they do not assess new ideas by an interdisciplinary team, against 14% of VC-
backed firms. But when the chi-square test was performed on the findings the results
showed that there was no statistically significant difference between the two categories
of respondents because the calculated chi-square value was less than the tabulated one
100
innovation projects
From this Figure it is possible

to observe that a minority
(28%) of interviewed firms
assess new ideas by a set of
predefined criteria applied to
all innovation projects. In this
case, some criteria were listed,
such as: alignment with firm’s
strategy, market potential,
technical and economic
feasibility.
innovation projects X Category of respondents
This Figure indicates

responses of both categories.
While around 42% of Non-
supported firms assess new
ideas by a set of predefined
criteria applied to all
innovation projects, only
21% of VC-backed firms do
the same. In addition, 33% of
Non-supported firms
answered “no”, against 64% of VC-backed firms. But when the chi-square test was
101
Figure 5.4.81: Assessment of new ideas by criteria tailored per project
This Figure shows that only

assess new ideas by criteria
tailored per project defined
in the early development
phase.
Figure 5.4.82: Assessment of new ideas by criteria tailored per project X

This Figure shows differences

between the responses of both
categories. While around 33%
of Non-supported firms assess
new ideas by criteria tailored
per project defined in the early
development phase, 50% of
VC-backed firms do the same.
In addition, 50% of Non-
“no”, against 21% of VC-
backed firms. But when the chi-square test was performed on the findings the results
showed that there was no statistically significant difference between the two categories
of respondents because the calculated chi-square value was less than the tabulated one
102
Figure 5.4.83: Assessment of new ideas by criteria derived from innovation strategy

firms assess new ideas by
criteria derived from
innovation strategy.
Figure 5.4.84: Assessment of new ideas by criteria derived from innovation strategy X

interviewed companies:
assess new ideas by criteria
derived from innovation
strategy.
103
Figure 5.4.85: Provision of feedback to the suppliers

majority of interviewed firms that
answered to this question
regularly provide feedback to
their suppliers on suggestion that
that they have given to them.
A problem here is that a great

number of firms did not answer
to this question. One reason for
this is that these firms did not
receive any suggestions from their suppliers or there is not much interaction between
them.
For the 14% of firms that provide no feedback to their suppliers on suggestion that they
have given to them, the following reasons were mentioned: there is low loyalty of
suppliers and to train the supplier makes the project more expensive.
Figure 5.4.86: Provision of feedback to the suppliers X Category of respondents
Here it is clear that firms that did

not answer to this question are
mainly Non-supported firms.
Because of this, it is not possible
to make any comparison between
both categories.
104
Figure 5.4.87: Provision of feedback to the direct customers
This Figure shows that vast

regularly provide feedback to their
direct customers on suggestion
that that they have given to them.
Figure 5.4.88: Provision of feedback to the indirect customers

there is no predominant
response to this question. In
addition, a great number of
firms did not answer to this
question. Some reasons for
this are: these firms did not
receive any suggestions
from their indirect
customers, they have no
contact with them or they
even have indirect customers.
105
Figure 5.4.89: Provision of feedback to the indirect customers X

other remark is that the
responses of the two
categories do not show any
difference between them.
Figure 5.4.90: Provision of feedback to marketing and sales personnel

firms regularly provide
feedback to their marketing
and sales personnel on
suggestions that they have
given to them.
106
Figure 5.4.91: Provision of feedback to product/service development personnel

all interviewed firms that
regularly provide feedback to
their product/service
development personnel on
given to them.
Figure 5.4.92: Provision of feedback to research institutes and universities
This Figure shows that a little

bit more than half of
interviewed firms regularly
provide feedback to research
institutes and universities on
given to them.
It is also possible to see a

large number of missing
answers. Most of them are
due to non existence of partnerships with universities.
For the 18% of firms that answered “no”, an entrepreneur argued: “Our partnership
with the university is hard, usually punctual with a lab or a researcher”.
107
Figure 5.4.93: Provision of feedback to research institutes and universities X
Here it is possible to see

that firms that did not
answer to this question are
mainly VC-backed firms.
Furthermore, there are no
significant differences in the
responses of both.
Figure 5.4.94: Provision of feedback to experts on intellectual property rights

response to this question: an
equal number of firms
answered “no” and “yes”.
In addition, a large number of

firms did not answer to this
question. The reason for this
is that these firms did not have
any contact with experts on
intellectual property rights.
108
Figure 5.4.95: Provision of feedback to experts on intellectual property rights X

it is clear that there are
both. While around 56% of VC-
they regularly provide feedback
to experts on intellectual
property rights, 30% of Non-
same.
When the chi-square test was performed the results show that the calculated value was
slightly less than the tabulated one (5.03 against 5.99 at 2 degrees of freedom and 0.05
significance level) implying that the difference between the two categories with respect
to this question was profound though not statistically significant at 0.05 level.
Figure 5.4.96: Provision of feedback to network partners

firms regularly provide
feedback to their marketing
and sales personnel on
given to them.
109
Figure 5.4.97: Formal system for generating and assessing ideas
This Figure shows that most

interviewed firms do not
have a formal system for
generating and assessing
ideas.
Figure 5.4.98: Formal system for generating and assessing ideas
Here it is possible to see that,

although the majority interviewed
firms from both categories
answered that they do not have a
formal system for generating and
assessing ideas, VC-backed firms
showed more positive answers than
Non-supported firms (42% against
only 17%, respectively). But when
the chi-square test was performed
on the findings the results showed that there was no significant difference between the
two categories of respondents because the calculated chi-square value was less than the
tabulated one (2.08 against 3.84 at 1 degree of freedom and 0.05 significance level).
110
Figure 5.4.99: Percentage of generated ideas taken to the development stage
Because most interviewed firms

did not answer this question, this
result will not be taken into
consideration.
Figure 5.4.100: Degree of formalization of development processes
According to this Figure, all

the interviewed firms that
have their development
processes formalized or
successfully in place.
111
Figure 5.4.101: Percentage of innovation projects with well defined targets
This Figure indicates that majority of

interviewed firms (68%) had well
defined targets for at least 50% of
their innovation projects launched
during the past 3 years. According to
an interviewed entrepreneur, one of
the reasons for the 39% of the firms
that have 100% of their projects with
well defined target is that most of
their projects are ‘on demand’.
Figure 5.4.102: Percentage of innovation projects with well defined targets X


although a same percentage of
respondent firms from both
categories (around 45%)
answered that 100% of their
innovation projects launched
during the past 3 years had well
defined targets, VC-backed firms
showed, in general, more positive
answers than Non-supported
firms: 92% of VC-backed firms had well defined targets for at least 50% of their
innovation projects, against 63% of Non-supported firms. In addition, while 27% of
Non-supported firms answered that none of their innovation projects launched during
the past 3 years had well defined targets, no VC-backed firms answered in this way. But
when the chi-square test was performed on the findings the results showed that there
was no significant difference between the two categories of respondents because the
112
Figure 5.4.103: Percentage of innovation projects that met launch-specific targets
This Figure shows that,

although the large percentage of
missing answers, 46% of
at least 50% of their innovation
projects launched during the
past 3 years met launch-specific
targets. These missing answers
are due to, besides firms that
really did not answer to this
question, those firms that did
not answer or answered “none” to the previous question (Q 3.3.12 a).
Figure 5.4.104: Percentage of innovation projects that met launch-specific targets X


is possible to see that, in
general, Non-supported firms
have shown more success
than VC-backed firms in
achieving the launch-specific
targets for their innovation
projects during the past 3
years. But this difference is
not statistically significant
because the chi-square test
showed a calculated value less than the tabulated one (2.76 against 11.07 at 5 degrees of
113
Figure 5.4.105: Frequency of customer data and feedback analysis

observed that majority of
interviewed firms (around
60%) analyze data and
customer feedback at least
once a month.
Figure 5.4.106: Frequency of customer data and feedback analysis X


that both categories
maintain the same pattern
of responses of the total
universe of interviewed
companies: most of firms
analyze data and customer
feedback at least once a
month.
114
Figure 5.4.107: Definition of indicators to measure innovation activities

majority of interviewed firms have
no defined indicators to measure
their innovation activities.
Figure 5.4.108: Definition of indicators to measure innovation activities X

Here it is possible to see that both

categories maintain the same pattern
of responses of the total universe of
interviewed companies. The other
remark is that the responses of the
two categories do not show any
5.4.4 Enabling factors for innovation management
Regarding to the item Q 3.4.1 (Does your company use incentives to stimulate
innovation?), all of firms answered it in a positive way. Figures 5.4.109 until 5.4.117
are related to the incentives to stimulate innovation used by firms.
115
Figure 5.4.109: Incentives to stimulate innovation: extra money
This Figure indicates that there is no

predominant response to this
question: almost an equal number of
firms answered “no” and “yes”. In
this sense, less than half of
interviewed firms award extra
money to stimulate innovation.
Among the ‘forms of extra money’

mentioned by entrepreneurs who
answered “yes” are: bonus, company’s shares and royalties.
Figure 5.4.110: Incentives to stimulate innovation: extra money X


categories maintain the same pattern
of responses of the total universe of
interviewed companies. The other
remark is that the responses of the
two categories show almost no
116
Figure 5.4.111: Incentives to stimulate innovation: direct recognition
This Figure shows that a little bit more

than half of interviewed firms give
direct recognition to their staff in order
to stimulate innovation.
Figure 5.4.112: Incentives to stimulate innovation: direct recognition X


possible to see almost no difference
between their responses: 69% of VC-
backed firms give direct recognition
to their staff in order to stimulate
innovation, against 58% of Non-
supported firms.
Figure 5.4.113: Incentives to stimulate innovation: innovation award
This Figure indicates that almost all

firms do not offer an innovation
award.
117
facilities for free to test own ideas

allow their staff to use
company´s facilities for free to
test and develop their own ideas.

facilities for free to test own ideas X Category of respondents

possible to see some difference
between their responses: 92%
Non-supported firms allow their
staff to use company´s facilities
for free to test and develop their
own ideas, against 69% of VC-
backed firms.

performed on the findings the
(1.96 against 3.84 at 1 degree of freedom and 0.05 significance level).
118
support to get external fund

provide their staff with
administrative support to get
external fund.
Firms included in the 18% that

answered “no”, for one reason or
another, were not interested in
getting public fund.

support to get external fund X Category of respondents

companies. The other remark is
that the responses of the two
categories show almost no
119
Figure 5.4.118: Number of patents generated within the last 5 years

that half of interviewed firms
have generated none or 1 patent
within the last 5 years.
As mentioned by an interviewed
entrepreneur, one of the reasons
for the 32% of the firms that did
not generate any patent within
the last 5 years is that they do not
see patent as a protection tool.
Figure 5.4.119: Number of patents generated within the last 5 years X


that both categories maintain
the same pattern of
responses of the total
companies: half of
interviewed firms have
generated none or 1 patent
within the last 5 years. It is
possible to see some little
responses of both categories, but they are not significant as can be proved by chi-square
test where the calculated chi-square value was less than the tabulated one (1.61 against
9.49 at 1 degree of freedom and 0.05 significance level).
120
Figure 5.4.120: Number of patents turned into market success

although the large percentage
of missing answers, 35% of
interviewed firms answered
that 100% of their generated
patents within the last 5 years
were turned into market
success. These missing answers
are due to, besides firms that
really did not answer to this
question, those firms that did
not answer or answered “none” to the previous question (Q 3.4.2).
Figure 5.4.121: Number of patents turned into market success X


although a same percentage of
respondent firms from both
categories (around 55%) answered
that 100% of their patents
generated within the last 5 years
were turned into market success,
it is not possible to make any
comparison between both
categories. It is because that firms
that did not answered to this question are mainly Non-supported firms.
121
Figure 5.4.122: Percentage of innovation projects with defined targets

(79%) have at least 50% of their
innovation projects with defined
targets with respect to time,
budget and quality. In addition, a
little bit more than half of them
answered “100%”.
Figure 5.4.123: Percentage of innovation projects with defined targets X


companies: the vast majority of
respondent firms have least 50%
of their innovation projects with
defined targets with respect to
time, budget and quality. In
addition the largest
concentration of responses is in
the answer “100%”.
122
Figure 5.4.124: Percentage of innovation projects that met targets

(73%) have met the defined
targets for at least 50% of their
innovation projects.
Figure 5.4.125: Percentage of innovation projects that met targets X


responses. While around 44% of
Non-supported firms answered
that have met the defined targets
for 100% of their innovation
projects, none of VC-backed
firms answered the same. Besides,
the majority (61%) of VC-backed
firms is concentrated in the answer “50%-74%” while 77% of Non-supported firms
have met the defined targets for at least 75% of their innovation projects.
These results show that Non-supported firms present a higher percentage of innovation
projects that have met defined targets than VC-backed firms. This finding is supported
by chi-square test in which the calculated value was almost the same as the tabulated
one (9.18 against 9.49 at 4 degrees of freedom and 0.05 significance level).
123
Figure 5.4.126: Partnership with universities or research institutes
This Figure shows that the majority of

interviewed firms have universities or
research institutes as innovation
partners. For the almost 18% that
answered “no”, a reason is the
difficulty in the relationship with the
university. An interviewed
entrepreneur argued: “We have
difficulty in the relationship with the
university even though we are spin-off.
As an incubated company we still had
some support (people who understood the business, who have lived abroad), but now we
do not have even access to their laboratory equipment”.
Figure 5.4.127: Partnership with universities or research institutes X

Here it is possible to see that all the

interviewed firms that answered
“no” to this question are VC-backed
firms. This result shows a significant
difference between both categories:
100% of respondents from Non-
supported firms have partnership
with universities or research
institutes against 61% of VC-backed
firms.
This finding is supported by chi-square test in which the calculated value was greater
than the tabulated one (5.77 against 3.84 at 1 degree of freedom and 0.05 significance
124
level) implying that there is a statistically significant association between category of
respondents and partnerships with universities.
Figure 5.4.128: Human research policy to stimulate staff qualification
This Figure shows that the majority

of interviewed firms have some
human resources policy to
stimulate staff qualification.
Among the initiatives mentioned
by entrepreneurs who answered
“yes” are: training projects,
recruitment of courses, flexibility
in working hours and workload,
provision of material and
resources, assistance in graduation and post-graduation courses.
Figure 5.4.129: Human research policy to stimulate staff qualification X


categories maintain the same
pattern of responses of the total
universe of interviewed companies.
The other remark is that the
show almost no difference between
them.
125
5.5 Market Orientation
Here are presented the data related to the market orientation. The data are separated into
sub-sections according to the research variables: intelligence generation, intelligence
dissemination and responsiveness.
5.5.1 Intelligence generation
This variable includes items Q 4.1.1 – Q 4.1.6 from questionnaire (see Annex II).
Figure 5.5.1: Meeting with customers to find out future needs

of interviewed firms meet with
customers at least once a year to
find out what products or services
they will need in the future.
Figure 5.5.2: Meeting with customers to find out future needs X

Here it is possible to see significant

differences between the responses
of both categories: 85% of VC-
backed firms answered “strongly
agree” against 58% of Non-
supported firms. This result shows
that VC-backed firms are more
likely to meet with customers to
find out what products or services
126
they will need in the future. This finding is supported by chi-square test in which the
calculated value was greater than the tabulated one (7.86 against 7.82 at 3 degrees of
freedom and 0.05 significance level) implying that the difference between the two
categories with respect to this question was statistically significant.
Figure 5.5.3: In-house market research

majority (68%) of
interviewed firms do a lot of
in-house market research.
Figure 5.5.4: In-house market research X Category of respondents
Comparing the two

there are significant
responses. While 92% of VC-
they do a lot of in-house
market research, 58% of
Non-supported firms
answered the same. These
differences are even more
127
significant when analyzing the negative answers: 25% of Non-supported firms
answered “strongly disagree” or “disagree” against none of VC-backed firms.
Figure 5.5.5: Detection of changes in customers’ preferences

majority (72%) of
that they are not slow to
detect changes in their
customers’ product/service
preferences.
Figure 5.5.6: Detection of changes in customers’ preferences X

Here it is possible to see a

significant difference between
the responses of both
categories: 75% of Non-
“strongly agree” against only
23% of VC-backed firms.
This result indicates that Non-

supported firms a slightly
128
faster than VC-backed firms to detect changes in their customers’ product/service
preferences. This finding is supported by chi-square test in which the calculated value
was greater than the tabulated one (7.67 against 5.99 at 2 degrees of freedom and 0.05
Figure 5.5.7: Poll of end users to assess the quality of products and services

vast majority (78%) of
interviewed firms poll end users
at least once a year to assess the
quality of their product and
services.
Figure 5.5.8: Poll of end users to assess the quality of products and services X

129
Figure 5.5.9: Detection of fundamental shifts in the industry

majority (74%) of interviewed
firms answered that they are
not slow to detect fundamental
shifts in their industry.
Figure 5.5.10: Detection of fundamental shifts in the industry X


interviewed companies: they
are not slow to detect
fundamental shifts in their
industry. In addition, this
Figure indicates that Non-
supported firms are slightly
faster than VC-backed
firms.
130
Figure 5.5.11: Review of the likely effect of changes in business environment
on customers

firms periodically review the
likely effect of changes in their
business environment on
customers.
Figure 5.5.12: Review of the likely effect of changes in business environment

on customers X Category of respondents
This Figure shows that both

pattern of responses of the
companies. Comparing the
two categories, it is possible
to see some differences
between their responses: 25%
answered “strongly disagree”
or “disagree” against none of
VC-backed firms answered.
131
5.5.2 Intelligence dissemination
Figure 5.5.13: Interdepartmental meetings to discuss marketing trends

and development

majority (68%) of
interviewed firms have
interdepartmental meetings at
least once a quarter to discuss
marketing trends and
developments.
Figure 5.5.14: Interdepartmental meetings to discuss marketing trends

and development X Category of respondents

interviewed companies.
Comparing the two
categories, it is possible to
see some differences between
their responses. But these are
not significant differences, as
demonstrated by chi-square
test in which the calculated chi-square value was less than the tabulated one (3.78
against 9.49 at 4 degrees of freedom and 0.05 significance level).
132
and other departments

that their marketing personnel
spend time discussing
customers’ future needs with
other functional departments.
For the 15% of firms that do
not have this kind of
discussion, a reason is that most
of them do not have marketing
personnel.
The following testimonials from entrepreneurs illustrate some reasons for the 25% of
firms that answered “neither agree nor disagree”: “We promote this kind of discussion,
but there is no marketing personnel in our firm” and “In our company marketing
personnel work more as a collector than a disseminator of information”.
and other departments X Category of respondents

is possible to see that there are
no significant differences
between their responses. This
can be proved by chi-square test
in which the calculated chi-
square value was less than the
tabulated one (1.73 against 9.49
at 4 degrees of freedom and
133

to see that the majority (71%)
that important information
about their major customers
are disseminated through the
whole business unit within a
short period.


that both categories
maintain the same pattern
of responses of the total
companies. The other
remark is that the
134
Figure 5.5.19: Sharing of data on customer satisfaction at all levels in the firm

firms share data on customer
satisfaction at all level in the
business unit on a regular basis.
For those interviewed firms that
answered “disagree” a reason is
that data on customer
satisfaction is restricted to the
management level and the
directors of the company.
Figure 5.5.20: Sharing of data on customer satisfaction at all levels in the firm X
Comparing the two

categories, it is possible to
see some difference in
between their responses:
while around 77% of VC-
data on customer satisfaction
are shared at all level in the
business unit on a regular
basis, 58% of Non-
same. But this is not a significant difference, as demonstrated by chi-square test in
which chi-square value was less than the tabulated one (1.23 against 7.82 at 3 degrees of
135
Figure 5.5.21: Dissemination of information about competitors

majority (70%) of
that when one department
finds out something
important about competitors,
it is quickly to alert other
departments.
Figure 5.5.22: Dissemination of information about competitors X


is possible to see some
difference between their
responses. While around 92% of
VC-backed firms answered
“agree” or “strongly agree”, 75%
answered the same.

136
5.5.3 Responsiveness
Figure 5.5.23: Time to respond to competitor’s price changes
This Figure shows that, although

the large percentage of missing
answers, 43% of interviewed
firms answered that it does not
take them a long time to decide
how to respond to their
competitor’s price changes. For
the 25% of interviewed firms
that did not answer to this
question a reason is that it does
not apply to their situation.
Figure 5.5.24: Time to respond to competitor’s price changes X


both. While 78% of Non-
supported firms answered that it
does not take them a long time to
decide how to respond to their
competitor’s price changes, 42%
of VC-backed firms answered the
same. These differences are even
more significant when analyzing only the answer “strongly disagree”: 78% of Non-
supported firms against 17% of VC-backed firms. These results show that Non-
supported firms are faster to decide how to respond to their competitor’s price changes
than VC-backed firms. This finding is supported by chi-square test in which the
137
calculated value was greater than the tabulated one (11.92 against 9.49 at 4 degrees of
freedom and 0.05 significance level) implying that there is a statistically significant
association between category of respondents and the time to respond to competitor’s
price changes.
Figure 5.5.25: Tendency to ignore changes in customers’ product/service needs

firms do not tend to ignore
changes in their customers’
product/service needs.
For the firms that answered

“neither agree nor disagree”, an
interviewed entrepreneur
argued: “It depends on the type
of client requesting”.
Figure 5.5.26: Tendency to ignore changes in customers’ product/service needs X
Comparing the two categories, it is

clear that there are differences in
the responses of both. Although
almost the same quantity (around
80%) of both VC-backed and Non-
“disagree” or “strongly disagree”,
answered that tend to ignore
changes in their customers’
product/service needs against none of VC-backed firms.
138
This result is supported by chi-square test where the calculated value was greater than
implying that there is a statistically significant association between category of
respondents and the tendency to ignore changes in customers’ product/service needs.

customers’ want
This Figure shows that the vast

firms periodically review their
product development efforts to
ensure that they are in line with
what customers want.

customers’ want X Category of respondents

can be observed that Non-
supported firms are more likely to
periodically review their product
development efforts to ensure that
they are in line with what
customers want than VC-backed
firms. Figure shows that 92% of
Non-supported firms answered
“strongly agree” against 54% of
VC-backed firms. When the chi-square test was performed the results show that the
calculated value was slightly less than the tabulated one (4.66 against 5.99 at 2 degrees
of freedom and 0.05 significance level) implying that the difference between the two
139
categories with respect to this question was profound though not statistically significant
at 0.05 level.

environment

firms do periodical meetings to
plan a response to changes
taking place in their business
environment.

environment X Category of respondents

140
Figure 5.5.31: Speed of response to competitor’s intensive campaign

no predominant response to this
question. Almost an equal
number of interviewed firms
answered that they would
implement and that they would
not implement (32% and 29%,
respectively) a response
immediately to a competitor´s
intensive campaign target at their
customers.
Some reasons for the negative answers were mentioned by interviewed entrepreneurs:
“Currently our firm has little commercial structure”; “Our firm does not have a
marketing area” and “For our company it is not possible to implement this kind of thing
due to a lack of personnel and preparation.”
Figure 5.5.32: Speed of response to competitor’s intensive campaign X


it is possible to see some
responses: although almost the
same quantity (around 40%) of
both VC-backed and Non-
“agree” or “strongly agree”,
answered that if a competitor
were to launch an intensive
campaign target at their customers they would not implement a response immediately,
141
against 23% of VC-backed firms. But when the chi-square test was performed on the
findings the results showed that there was no significant difference between the two
Figure 5.5.33: Coordination between the different departments

firms have a good
coordination between the
activities of their different
departments. One of the
entrepreneurs who answered
“neither agree nor disagree”
argued: “We are few, so
people in our company do a
bit of everything”.
Figure 5.5.34: Coordination between the different departments X

This Figure reveals that more

VC-backed firms than Non-
“agree” or “strongly agree”
(92% against 58%,
respectively). It seems that
VC-backed firms present
more coordination between
the activities of their different
departments than Non-
142
supported firms. This finding is supported by chi-square test in which the calculated
value was greater than the tabulated one (8.85 against 7.82 at 3 degrees of freedom and
0.05 significance level implying that the difference between the two categories with
respect to this question statistically significant at 0.05 level.
Figure 5.5.35: Attention to customer complaints
This Figure shows that all

respondent firms answered that
customer complaints do not fall
on deaf ears.
Figure 5.5.36: Attention to customer complaints X Category of respondents

possible to see that Non-supported
firms are more likely to pay
attention to customers complaints
than VC-backed firms. But this is
not a statistically significant
difference because when the chi-
square test was performed on the
findings the calculated chi-square
value was less than the tabulated
one (1.96 against 3.84 at 1 degree of freedom and 0.05 significance level).
143
Figure 5.5.37: Ability to implement a marketing plan in a timely fashion
From this Figure it is possible to

see that 46% of interviewed firms
think they are able to implement a
marketing plan in a timely fashion.
For the 18% of firms that think not

to be able to implement a
marketing plan in a timely fashion,
one mentioned reason was that
they have no structure or enough
people to do this.
Figure 5.5.38: Ability to implement a marketing plan in a timely fashion X


compared, the results show
that Non-supported firms are
more able to implement a
marketing plan in a timely
fashion than VC-backed
firms.
This finding is supported by

chi-square test in which the
calculated value was greater
than the tabulated one (11.76
against 9.49 at 4 degrees of freedom and 0.05 significance level) implying that the
difference between the two categories with respect to this question was statistically
significant at 0.05 level.
144
Figure 5.5.39: Efforts to make changes in products/services

vast majority (82%) of
that their departments make
concerted efforts to do the
changes that customers would
like to see in a product or
service.
Figure 5.5.40: Efforts to make changes in products/services X


possible to see that Non-
supported firms are more likely
to do concerted efforts to do
the changes that customers
would like to see in a product
or service. As Figure 4.3.9
shows 92% of Non-supported
firms answered “strongly
agree”, against 54% of VC-
backed firms.
145
5.6 Firm performance
Here are presented the data related to the firm performance. The data are separated into
sub-sections according to the research variables: innovation management performance
and market orientation performance.
5.6.1 Innovation Management Performance
Figure 5.6.1: Income data for 2009

see that the interviewed firms’
income data for 2009 ranging from
“none” to above 8000 thousand of
Euros. In addition, the largest
concentration of responses (32%)
is in the range of 250-500
thousand of Euros.
Figure 5.6.2: Income data for 2009 X Category of respondents

compared, the results show that
both maintain the largest
concentration of responses in the
range of 250-500 thousand of
Euros. It is also possible to see
some differences in their responses:
Non-supported firms showed
income data for 2009 slightly above
146
those from VC-backed firms. But these are not significant differences, as demonstrated
by chi-square test in which the calculated value was less than the tabulated one (4.44
against 11.07 at 5 degrees of freedom and 0.05 significance level).
Figure 5.6.3: Income data for 2010

see that the interviewed firms’
income data for 2010 ranging from
“less than 50” to above 9000
thousand of Euros, a little bit
higher than 2009 (see Figure
5.6.1). But the largest
concentration of responses (32%),
as in 2009, is in the range of 250-
500 thousand of Euros.
Figure 5.6.4: Income data for 2010 X Category of respondents

compared, it is possible to see
some differences in their
responses: 27% of VC-backed
firms had income data “less than
50”, against none of Non-
supported firms. In addition, only
Non-supported firms present
income data “above 9000”. But
when the chi-square test was
147
Figure 5.6.5: Contribution of public research grants to total income
This Figure reveals that half

of interviewed firms have
“none” or “less than 25%” of
total income coming from
public research grants.
Figure 5.6.6: Contribution of public research grants to total income X

This Figure shows that both

categories maintain the
interviewed firms. Another
remark is that the responses
of the two categories show
almost no difference
between them.
148
Figure 5.6.7: Contribution of exports to gross income

firms did not have any
contribution coming from
exports to their gross
income.
Figure 5.6.8: Contribution of exports to gross income X Category of respondents

Another remark is that the
149
Figure 5.6.9: Percentage of total income from innovations not older than 3 years

of missing answers, 35% of
that 100% of their total
income come from
innovations not older than 3
years. In addition, more than
half of firms have at least
50% of total income coming
from these innovations.
Figure 5.6.10: Percentage of total income from innovations not older than 3 years X

compared, the results show
that both maintain the
largest concentration of
responses in “100% of total
income coming from
innovations not older than 3
years”.
It is also possible to see

some differences in their
responses: 54% of Non-
supported firms answered “100%”, against 36% of VC-backed firms. But these are not
significant differences, as demonstrated by chi-square test in which the calculated chi-
square value was less than the tabulated one (3.07 against 9.49 at 4 degrees of freedom
and 0.05 significance level).
150
Figure 5.6.11: Company’s expenditures on innovation over the last 2 years

response to this question: an
equal number of firms
answered “10%-25%” and
“above 100%”. In this sense,
despite of the large percentage
of missing answers, it is
possible to see the answers
concentrated in the two
extremes.
Figure 5.6.12: Company’s expenditures on innovation over the last 2 years X
Here it is clear the difference

between both categories:
while the majority of VC-
backed firms invested more
than 100% of their total
income on innovation over
the last 2 years, the majority
invested only 10%-24%.
But when the chi-square test

was performed the results show a calculated chi-square value less than the tabulated one
(2.83 against 9.49 at 4 degrees of freedom and 0.05 significance level) implying that the
difference between the two categories with respect to this question is not statistically
significant.
151
Figure 5.6.13: Company’s operational profit data over the last 2 years
This Figure shows that

of missing answers 35% of
that they had no operational
profit over the last 2 years. In
addition, only 14% of firms
answered that their
operational profit were
between 21% and 30%.
Figure 5.6.14: Company’s operational profit data over the last 2 years X

is clear that there are differences
between their responses. While
70% of VC-backed firms
answered that they had no
operational profit over the last 2
years, only 33% of Non-supported
firms answered the same. In
addition, another 33% of Non-
supported firms showed an
operational profit of 21%-30% of total income. But when the chi-square test was
152
Figure 5.6.15: Company’s operational profit data generated from innovation

to see a huge number of
missing answers. This is due
to the fact that only firms that
answered to the Q 3.5.4 (see
Figure 5.6.13) and showed
some operational profit over
the last 2 years were able to
answer this question.
Figure 5.6.16: Type of innovation with more impact in the operational profits

interviewed firms did not answer
to this question. Similar reasons
to those presented in the
comments of Figure 5.6.15 can
be argued here. Despite of this, it
can be observed that there is a
predominance of product
innovation impacting more
firms´ operational profits.
153
Figure 5.6.17: Type of innovation with more impact in the operational profits X
This Figure indicates that both

pattern of responses of the
companies: predominance of
product innovation impacting
more firms´ operational
profits.
Due to the discrepancy in the

number of respondent firms
from the two categories (5 VC-backed against 9 Non-supported firms), a comparison
between them will not be taken into consideration.
Figure 5.6.18: Reduction in operational costs attributed to process innovation
This Figure shows that, although

the large percentage of missing
answers, 43% of interviewed
firms answered that any
reduction in operational costs can
be attributed to processes
innovation.
154
Figure 5.6.19: Reduction in operational costs attributed to process innovation X

it is possible to see some
responses. While 22% of VC-
from 25% to 49% of reduction
in operational costs can be
attributed to processes
innovation, none of Non-
same.
Figure 5.6.20:Growth driver with highest impact on profit growth over the last 4 years

no predominant response to this
question: almost an equal number
of firms answered “external
growth” and “internal growth”.
155
Figure 5.6.21: Growth driver with highest impact on profit growth over the last 4
years X Category of respondents
From this Figure it is clear

that for VC-backed firms the
external growth had the
highest impact on their profit
growth over the last 4 years,
while for Non-supported
firms the organic growth was
the most striking.
This finding is supported by

chi-square test in which the
calculated value was almost
the same than the tabulated one (5.93 against 5.99 at 2 degrees of freedom and 0.05
significance level) implying that the difference between the two categories with respect
to this question was statistically significant at 0.05 level.
Figure 5.6.22: Number of people employed over the last 4 years

(65%) employed maximal 20
people over the last 4 years.
From the interview, it was

possible to perceive that most
of these employed people have
master or doctor degree.
156
Figure 5.6.23: Number of people employed over the last 4 years X
Here it is possible to see that the

responses from VC-backed firms
are concentrated in “11-20”
employed people over the last 4
years, while those from Non-
supported firms are
concentrated in “1-10”. But when
the chi-square test was
results showed that there was no
statistically significant difference between the two categories of respondents because the
Figure 5.6.24: Current impact of innovation management on business success
This Figure indicates that 42% of

innovation management has a “high”
or “very high” impact on their
success.
For the other 46% of firms that

answered to this question, it was
noted that the strongest motive for the
responses “not so high”, “low” or
“very low” is that firms still are not doing an efficient innovation management. An
entrepreneur emphasized: “We are conscious that there is still much to do about
innovation management”.
157
Figure 5.6.25: Current impact of innovation management on business success X
This Figure reveals that

innovation management has a
major impact on VC-backed firms
success. While 62% of VC-
innovation management has a
“high” or “very high” impact on
their success, only 33% of Non-
same. In addition, 33% of Non-
supported firms answered that innovation management has a “low” impact on their
success, against 8% of VC-backed firms.
Figure 5.6.26: Future impact of innovation management on business success

of interviewed firms think that
innovation management will have a
very high impact in their success in
the future. In addition, putting the
responses together, all firms that
answered to this question said that
innovation management will have
at least a high impact in their
success in the future.
158
Figure 5.6.27: Future impact of innovation management on business success X

This Figure indicates that firms

can still improve their current
innovation performance in a
high degree. Around 68% of
they can still improve at least
quite a bit their innovation
management performance.
159

universe of interviewed companies.
In addition, it is possible to see that
a little bit more VC-backed firms
than Non-supported firms answered
that they can still improve very
much their innovation management
performance. But these are not
statistically significant differences because when the chi-square test was performed on
the findings the results showed that the calculated chi-square value was less than the
5.6.2 Market Orientation Performance
This variable includes items Q 5.1 – Q.5.7 from questionnaire (see Annex III). It is
important to say that these items correspond to subjective measurements relative to
major competitors.
Figure 5.6.30: Firm´s market share growth in primary market
This figure shows that a little bit

more than half of interviewed
firms answered that their growth
in market share was higher or
far higher than that of its major
competitors. Regarding to this
performance, one entrepreneur
argued: “Now it is easy to grow
160
more than our competitors because we are leaving “no market share”, so any
participation will be achieved tremendous growth in percentage terms.”
Figure 5.6.31: Firm´s market share growth in primary market X


their growth in market share was
higher or far higher than that of
its major competitors (69%
against 50%, respectively). In
addition, while 42% of Non-
“below” or “far below”, only
15% of VC-backed firms answered the same. But when the chi-square test was
Figure 5.6.32: Firm´s sales growth
This figure reveals almost the

same results showed in the Figure
5.6.30: a little bit more than half of
their growth in firm’s sales was
higher or far higher than that of its
major competitors.
161
Figure 5.6.33: Firm´s sales growth X Category of respondents

Non-supported firms than VC-
backed firms answered that their
growth in sales was below or far
below that of its major
competitors (42% against 15%,
respectively).

results showed that there was no
Figure 5.6.34: Firm´s success in achieving customer satisfaction
This figure shows that the

firms answered that their success
in achieving customer
satisfaction is higher or far higher
than that of its major
competitors. Among the reasons
cited by the entrepreneurs on
what makes the difference are:
personalized service and
customization, quality of service and technical solution.
162
Figure 5.6.35: Firm´s success in achieving customer satisfaction X

their success in achieving
customer satisfaction is higher or
far higher than that of its major
respectively).

results showed that there was no statistically significant difference between the two
Figure 5.6.36: Firm´s success in retaining current customers
This figure shows that the vast

firms answered that their success
in retaining customers is higher
or far higher than that of its
major competitors.
163
Figure 5.6.37: Firm´s success in retaining current customers X

companies. Another remark is
Figure 5.6.38: Firm´s success in attracting new customers

majority (82%) of firms are at
least on average regarding to
this question. In addition, half
that their success in attracting
new customers is higher or far
higher than that showed by its
major competitors.
An entrepreneur from one of

the two firms that answered “below” argued: “Depending on the niche market, there is a
strong interference of the company size in the process of attracting new customers”.
164
Figure 5.6.39: Firm´s success in attracting new customers X Category of respondents

Non-supported firms than VC-
their success in attracting new
customers is higher or far
higher than that of its major
respectively). But when the
chi-square test was performed
on the findings the results
showed that there was no
Figure 5.6.40: Firm´s success in building a positive image

firms are at least on average
regarding to this question. In
addition, 68% of interviewed
success in building a positive
image is higher or far higher
than that of its major
competitors.
Among the reasons mentioned by the interviewed entrepreneurs to be more successful

than the major competitors in building a positive image are: flag of innovation, product
165
expertise, national company and national product, sponsorship of major events in the
area.
For those firms that answered to be on the average, one entrepreneur argued: “The
problem is that our major competitors are already established in the market”.
Figure 5.6.41: Firm´s success in building a positive image X Category of respondents

companies. Another remark is
Figure 5.6.42: Time to market
According to Figure 5.6.42, the

firms are at least on average
regarding to time to market.
In addition, 57% of firms

answered that their “time to
market” is higher or far higher
than that showed by its major
competitors. One reason for this
166
is that their industrial competitors show little flexibility.
For the 18% of firms that show a time to market below the competitors, some reasons
were mentioned by the interviewed entrepreneurs: multinational competition, new team
and unstructured processes, lack of investment, difficulty of finding qualified staff and
solutions offered to the market more complex than that of competitors.
Figure 5.6.43: Time to market X Category of respondents
From this Figure it is possible to see

that both categories maintain the
companies.

show almost no difference between
them.
167
6. Main results
This section gives overview about the main results of the research with respect to each
variable of the study. It also highlights the main differences presented between VC-
backed firms and Non-supported firms. Additionally, it allows the identification of the
interviewed entrepreneurs and firms’ profiles.
6.1 Entrepreneurs’ profile
- 75% of the interviewed entrepreneurs are between 31 and 50 years old. A

curious aspect is that only VC-backed firms present entrepreneurs between 20
and 30 years old;
- The vast majority of entrepreneurs are man. From the 28 interviewed
entrepreneurs, just 2 were women. The 2 women entrepreneurs are from VC-
backed firms;
- 85% of entrepreneurs have Master or Doctor degree. Entrepreneurs from VC-
backed firms in general shown to have a slightly higher educational level. But
this is not a significant difference, as proved by chi-square test.
6.2 Firms’ profile

- 50% of firms have between 5 and 19 employees. The majority (82%) have no
more than 49 employees. VC-backed firms present in general less employees
than Non-supported firms;
- 75% of firms are at least 6 years in operation.
6.3.1 Innovation strategy

All interviewed firms have a clear vision for its future:
- 90% have their visions clearly linked to the innovation;
- 85% think that their vision is well understood by innovation partners;
- 64% think that their visions are well understood by customers and suppliers;
- 60% have its vision documented for all staff to see.
168
90% of interviewed firms have an innovation strategy:
- 89% said that their innovation strategy results from an analysis of potential
business opportunities activities;
- 89% said that their innovation strategy focuses on the development of their
innovation capabilities;
- 86% answered that their innovation strategy guides the improvement of your
current product/service or process development;
- 78% said that their innovation strategy guides their idea management;
- 71% answered that their innovation strategy sets the objectives for their project
management in each innovation project;
- 71% answered that their innovation strategy provides the basis for
organizational changes and business model development;
- 57% have innovation strategy as a guide for their innovation management
activities;
- 53% have their innovation strategy fully communicated to their staff;
- 50% have their innovation strategy fully understood by their staff;
- 43% have their innovation strategy fully implemented.
86% of interviewed firms answered that their innovation projects are aligned
with their innovation strategy:
- 43% present a balance between incremental and radical innovation projects;
- 39% have their innovation projects are balanced with respect to risk and return;
- 32% have their innovation projects balanced with respect to long and short-term
perspectives;
- 32% answered that their innovation projects are balanced between low and high
cost.
6.3.2 Organization and culture

- 89% of interviewed firms answered that their staff is open rather than skeptical
towards new ideas.
- 85% of interviewed firms answered that their staff is excited about innovation.
169
- 75% of interviewed firms answered that their staff is able to “sell” new ideas
internally.
- 71% of interviewed firms answered that their staff is imaginative.
- 64% of interviewed firms answered that its staff is able to think “out-of-the
box”.
- 32% of firms answered that their staff is not reluctant to try out new methods.
- 32% of respondents answered that their staff is focused on business impact.
- 90% of the entrepreneurs answered that their capacity for innovation is viewed
by customers to a high or very high degree.
- 78% of the entrepreneurs answered that their firm´s capacity for innovation is
viewed by them to a high or very high degree.
- 68% of interviewed firms answered that their capacity for innovation is viewed
by competitors to a high or very high degree.
- 64% of interviewed firms answered that their capacity for innovation is viewed
by suppliers to a high or very high degree.
- 46% of interviewed firms answered that partnerships support and enhance the
product/service development phase to a high or very high degree
- 29 % answered that partnerships support and enhance the launch phase to a high
or very high degree
- 28% answered that partnerships support and enhance the idea management
phase to a high or very high degree
- 64% have between 1 and 6 external partners participating regularly in their

innovation projects.
- The number of external partners that have cooperated in at least one innovation
project during the last 3 years is the same as the number of them that regularly
participate in innovation projects.
- Only 35% of interviewed firms have at least 50% of their staff working on
innovation projects in which external partners are involved.
170
6.3.3 Innovation life cycle management
- 64% of interviewed firms answered that their most profitable product/service

took less than 36 months from the development to getting on sale.
- Almost half of interviewed firms did not yet reach the breakeven point for their
most profitable product/service.
- 50% of interviewed firms have started at least 7 (seven) incremental innovation
- 45% of interviewed firms answered that at least 50% of their innovation projects
showed success within the last 4 years
- 60% of interviewed firms have started between 1 and 2 radical innovation
- Almost half of interviewed firms have none of their radical innovation projects
showing success within the last 4 years.
- 71% of interviewed firms assess new ideas by criteria derived from innovation
strategy.
- 68% of interviewed firms assess new ideas by an interdisciplinary team.
- 39% of interviewed firms assess new ideas by criteria tailored per project
defined in the early development phase.
- Only 28% of interviewed firms assess new ideas by a set of predefined criteria
applied to all innovation projects.
- 93% of interviewed firms regularly provide feedback to their product/service

development personnel on suggestions that they have given to them.
- 82% of interviewed firms regularly provide feedback to their marketing and
sales personnel on suggestions that they have given to them.
- 79% of interviewed firms regularly provide feedback to their direct customers
on suggestion that that they have given to them.
- 78% of interviewed firms regularly provide feedback to their marketing and
sales personnel on suggestions that they have given to them.
171
- 53% of interviewed firms regularly provide feedback to research institutes and
universities on suggestions that they have given to them.
- 39% of firms regularly provide feedback to their suppliers on suggestion that
that they have given to them.
- A large number of firms did not have any contact with experts on intellectual
property rights.
- 93% of interviewed firms have their development processes formalized or

successfully in place.
- Only 28% of firms have a formal system for generating and assessing ideas.
- 68% of firms had well defined targets for at least 50% of their innovation
projects launched during the past 3 years.
- 46% of interviewed firms answered that at least 50% of their innovation projects
launched during the past 3 years met launch-specific targets.
- Around 60% of firms analyze data and customer feedback at least once a month.
- Only 18% of interviewed firms have defined indicators to measure their
innovation activities.
6.3.4 Enabling factors for innovation management

All interviewed firms use incentives to stimulate innovation:
- 71% allow their staff to use company´s facilities for free to test and develop
their own ideas;
- 71% provide their staff with administrative support to get external fund;
- 57% give direct recognition to their staff;
- 46% award extra money;
- Only 4% offer an offer an innovation award.
- Half of interviewed firms have generated none or 1 patent within the last 5
years;
- 35% of interviewed firms had 100% of their generated patents within the last 5
years were turned into market success.
- 79% of interviewed firms have at least 50% of their innovation projects with
defined targets with respect to time, budget and quality;
172
- 73% have met the defined targets for at least 50% of their innovation projects.
- 71% of interviewed firms have universities or research institutes as innovation
partners.
- 75% of interviewed firms have some human resources policy to stimulate staff
qualification.
6.4 Market Orientation
6.4.1 Intelligence generation

- 78% of interviewed firms meet with customers at least once a year to find out what
products or services they will need in the future.
- 78% of interviewed firms poll end users at least once a year to assess the quality of
their product and services.
- 74% of interviewed firms answered that they are not slow to detect fundamental
shifts in their industry.
- 72% of interviewed firms answered that they are not slow to detect changes in
their customers’ product/service preferences.
- 72% of interviewed firms periodically review the likely effect of changes in their
business environment on customers.
- 68% of interviewed firms do a lot of in-house market research.
6.4.2 Intelligence dissemination
- 71% of interviewed firms answered that important information about their major
customers are disseminated through the whole business unit within a short period.
- 70% of interviewed firms answered that when one department finds out something
important about competitors, it is quickly to alert other departments.
- 68% of interviewed firms have interdepartmental meetings at least once a quarter
to discuss marketing trends and developments.
- 61% of interviewed firms share data on customer satisfaction at all level in the
business unit on a regular basis.
- 50% of interviewed firms answered that their marketing personnel spend time
discussing customers’ future needs with other functional departments.
173
6.4.2 Responsiveness
- 90% of firms answered that customer complaints do not fall on deaf ears.
- 82% of interviewed firms periodically review their product development efforts to
ensure that they are in line with what customers want.
- 82% of interviewed firms answered that their departments make concerted efforts to
do the changes that customers would like to see in a product or service.
- 72% of interviewed firms do periodical meetings to plan a response to changes taking
place in their business environment.
- 68% of interviewed firms have a good coordination between the activities of their
different departments.
- 61% of interviewed firms do not tend to ignore changes in their customers’
product/service needs.
- 46% of interviewed firms think they are able to implement a marketing plan in a
timely fashion.
- 43% of interviewed firms answered that it does not take them a long time to decide
how to respond to their competitor’s price changes.
- 32% of firms would implement a response immediately to a competitor´s intensive
campaign target at their customers.
6.5 Firm performance
6.5.1 Innovation Management Performance

- The interviewed firms’ income data for 2009 ranging from “none” to above
8000 thousand of Euros. The largest concentration of firms is in the range of
250-500 thousand of Euros.
- The interviewed firms’ income data for 2010 ranging from “less than 50” to
above 9000 thousand of Euros, a little bit higher than 2009. But the largest
concentration of responses, as in 2009, is in the range of 250-500 thousand of
Euros.
- 50% of interviewed firms have “none” or “less than 25%” of total income
coming from public research grants.
174
- 61% of interviewed firms did not have any contribution coming from exports to
their gross income.
- 35% of interviewed firms answered that 100% of their total income come from
innovations not older than 3 years.
- 25% of interviewed firms spent more than 100% of their total income on
innovation over the last 2 years.
- 35% of interviewed firms had no operational profit over the last 2 years.
- There is a predominance of product innovation impacting more firms´
operational profits.
- 43% of interviewed firms answered that any reduction in operational costs can
be attributed to processes innovation.
- 65% of firms employed maximal 20 people over the last 4 years.
- 42% of interviewed firms answered that innovation management has a “high” or
“very high” impact on their success.
- 79% of interviewed firms think that innovation management will have a very
high impact in their success in the future.
- 68% of interviewed firms answered that they can still improve at least quite a bit
their innovation management performance.
6.5.2 Market Orientation Performance

- 78% of interviewed firms answered that their success in retaining customers is
higher or far higher than that of its major competitors.
- 68% of interviewed firms answered that their success in achieving customer
satisfaction is higher or far higher than that of its major competitors.
- 68% of interviewed firms answered that their success in building a positive
image is higher or far higher than that of its major competitors.
- 57% of firms answered that their “time to market” is higher or far higher than
that showed by its major competitors.
- 54% of interviewed firms answered that their growth in market share was higher
or far higher than that of its major competitors.
175
- 50% of interviewed firms answered that their growth in firm’s sales was higher
or far higher than that of its major competitors.
- 50% half of interviewed firms answered that their success in attracting new
customers is higher or far higher than that showed by its major competitors .
6.6 Main differences between VC-backed and Non-supported firms
Table bellow summarizes the main differences found between the two categories
of firms. In order to simplify the presentation, those differences that were
profound or classified through chi-squares tests as statistically significant were
marked with the symbols ** or *, respectively.
Table 6.1 -Main differences found between VC-backed and Non-supported firms
VC- Non-
Variable Item backed supporte
firms d firms
Vision documented for all staff to see 73% 50%
Innovation strategy sets clear objectives for their
57% 73%
innovation management activities
Innovation Strategy
Innovation strategy provides the basis for

organizational changes and business model 71% 91%
development.
Innovation strategy is fully communicated to their staff. 50% 73%
Innovation strategy is fully understood by their staff. 43% 73%
Innovation strategy is fully implemented by their staff. 36% 64%
Innovation projects are balanced with respect to risk
47% 33%
and return
**Staff is able to think “out-of-the box” 60% 75%
Organization and culture
Staff is not reluctant to try out new methods 47% 17%

Staff is focused on business impact 40% 25%
Capacity for innovation is viewed by customers to a
47% 83%
very high degree
* Capacity for innovation is viewed by competitors to a
29% 75%
very high degree
Capacity for innovation is viewed by the entrepreneur
100% 58%
to a high or very high degree
At least 50% of the staff are currently working on
innovation projects in which external partners are 54% 25%
involved
176
Reached the breakeven point for their most profitable
36% 67%
product/service
Started at least 7 (seven) incremental innovation

60% 41%
projects in the last 4 years
Innovation life cycle management
Assessment of new ideas by an interdisciplinary team 86% 59%
Assessment of new ideas by a set of predefined criteria

21% 42%
applied to all innovation projects
Assessment of new ideas by criteria tailored per project

50% 33%
defined in the early development phase
**Provision of feedback to experts on intellectual

56% 30%
property rights
Existence of a formal system for generating and

42% 17%
assessing ideas
Well defined targets for at least 50% of their

92% 63%
innovation projects
Allow their staff to use company´s facilities for free to

69% 92%
Enabling factors for
test and develop their own ideas

management
innovation
* Met the defined targets for 100% of their innovation

0% 44%
projects.
*Partnership with universities or research institutes 61% 100%
*Meeting with customers to find out what products or

85% 58%
services they will need in the future
Intelligence
generation
Do a lot of in-house market research 92% 58%

*Slow to detect changes in their customers’
23% 75%
product/service preferences (strongly agree).
Slow to detect fundamental shifts in their industry
38% 67%
(strongly agree)
177
dissemination
Intelligence
Data on customer satisfaction are shared at all level in
77% 58%
the business unit on a regular basis
*It does not take them a long time to decide how to

42% 72%
respond to their competitor’s price changes
* Tendency to ignore changes in customers’
0% 17%
product/service needs
Periodically review their product development efforts
54% 92%
Responsiveness
to ensure that they are in line with what customers want

If a competitor were to launch an intensive campaign
target at their customers they would not implement a 23% 50%
response immediately
*The activities of the different departments are well
92% 52%
coordinated
*Able to implement a marketing plan in a timely
23% 93%
fashion
Do concerted efforts to do the changes that customers
54% 92%
would like to see in a product or service
Income data for 2010 less than 50 thousand of Euros 27% 0%

Innovation Management
100% of total income coming from innovations not

36% 54%
older than 3 years
Performance
Invested more than 100% of their total income on

50% 22%
innovation over the last 2 years
Had no operational profit over the last 2 years 70% 33%
*Growth driver with highest impact on profit growth External Organic
Innovation management has a “high” or “very high”
62% 33%
impact on their success
Growth in market share within the last year was higher
69% 50%
Market Orientation
or far higher than that of its major competitors

Performance
Growth in sales within the last year was below or far

42% 15%
below that of its major competitors
Success in achieving customer satisfaction is higher or
92% 58%
far higher than that of its major competitors
Success in attracting new customers is higher or far
46% 66%
higher than that of its major competitors
* The differences between the two categories with respect to this question were statistically significant at
0.05 level.
** The differences between the two categories with respect to this question were profound though not
statistically significant at 0.05 level.
178
7. Conclusions
This work aimed to contribute with the understanding about the level of Innovation
Management and Market Orientation in Brazilian technology-based MSMEs.
According to the methodology proposed this was a descriptive research. Which means
that it had as its fundamental goal the description of the characteristics of a given
population with no interference from the researcher, who only attempted to understand
the frequency with which the phenomena occur, without the commitment of explaining
the phenomena it describes (Vergara, 2002; Gil, 1991, 1997).
In this sense, the results indicated that the objectives of the research were achieved.
In order to reach the levels of usage of both Innovation Management and Market
Orientation practiced by Brazilian technology-based firms and the performance levels
attained by such firms, a field research was carried out in Brazil to collect primary data
through structured interviews.
Data were collected from firms located in five Brazilian States (covering the Southeast,
South and Northeast regions), namely: Rio de Janeiro, São Paulo, Minas Gerais, Recife
and Santa Catarina. Structured interviews were personally carried out with the
entrepreneurs form the target firms. For doing this, survey instruments were used. More
specifically, the IMP rove Assessment tool, developed by A.T. Kearney and supported
by the European Commission under the Europe INNOVA Initiative, was the basis to
gauge Innovation Management practices of firms. The MARKOR scale was the basis
applied to gauge Market Orientation information. Personal background information and
company information were also included.
The previous sample consisted of 30 Brazilian technology-based MSMEs, from which

15 VC-backed and 15 Non-supported firms. Contacts were made per email and phone
calls with all 30 firms. But because of the difficulties to get in contact with the
entrepreneurs from Non-supported firms, at the end, a total of 28 firms were personally
interviewed. Each interview had in average 2 hours and 30 minutes of duration.
179
After collecting data a quantitative analysis was carried out by using SPSS 17.0. At the
first level of quantitative data analysis, descriptive statistical procedures involving
cross-tabulations and frequencies distributions were used. At the second level of
analysis, chi-square tests to find out the association between category of respondents
and some variables were performed. In addition, in order to complement data and
exemplify some results, qualitative information was available in some cases.
In order to have a better understanding of the results, they were organized according to
the questionnaire sequence and the variables of the study. For each item from the
different variables a pie chart with the results of the total interviewed firms and a bar
chart with responses divided in the two categories of respondents (VC-backed firms and
Non-supported firms) were drawn.
At the end, an overview about the main results with respect to each variable of the study
was available. It was also possible to highlight the main differences presented between
VC-backed firms and Non-supported firms, emphasizing those differences that were
profound or classified through chi-squares tests as statistically significant.
Answers to the research questions
Having a further looking into the findings it was possible to make some considerations
answering to each research question:
Q1 – To what level is “Innovation Management” practiced by the firms?
In this study, entrepreneurs were asked to determine the level of their firms’ practices in
four components of innovation management including innovation strategy, organization
and culture, innovation life cycle management and enabling factors for innovation
management. On the whole, innovation management in Brazilian technology-based
firms has a colorful picture. There are positive activities that make clear points of the
picture, but there are still some disadvantages that need to be improved.
180
Q 1.1 – To what level is “Innovation Strategy” practiced by the firms?
Innovation strategy is strongly considered in Brazilian technology-based MSMEs. But

nevertheless there is a lack of implementation to be filled by these firms.
All interviewed firms have a clear vision to the future and their visions are clearly
linked to the innovation. In addition, the vast majority of them have their innovation
strategy focused on the development of their innovation capabilities. But, according to
the answers, these are still in the theoretical plan: a great number of firms did not
consider innovation strategy as a guide for their innovation management activities and
did not have their innovation strategy fully communicated, understood and implemented
by their staff.
Q 1.2 – To what level is “Organization and Culture” practiced by the firms?
In general, Brazilian technology-based firms are comprised of a staff excited about

innovation and opened towards new ideas. But the majority of them are not focused on
business impact.
Another point is regarding to support from partnerships: there is still low support
coming from partners to the Brazilian technology-based firms. And this support is
mainly in the product/service development phase. Brazilian technology-based firms
present a lack of support from partnerships in the idea management and launch phases
of their innovation projects.
Q 1.3 – To what level is “Innovation Life Cycle Management” practiced by the

firms?
Brazilian technology-based firms are practicing this component of Innovation

Management to a medium level.
Although most of them already have their product/service development phase under
control, it means formalized or successfully in place, their idea management phase
181
needs to be improved: only a few numbers of firms have a formal system for generating
and assessing ideas. In addition, just 18% of interviewed firms have defined indicators
to measure their innovation activities.
Regarding to the provision of feedback, most o Brazilian technology-based firms

regularly provide feedback to their product/service development and sales personnel and
to their direct customers on suggestions that they have given to them. But just half of
them regularly provide feedback to research institutes and universities, and a few
number regularly provide feedback to their suppliers. Additionally, a large number of
firms did not have any contact with experts on intellectual property rights.
Q 1.4 – To what level is “Enabling factors” practiced by the firms?
This is the component which is practiced to the highest level among the four dimensions
of Innovation Management by Brazilian technology-based firms.
All interviewed firms use incentives to stimulate innovation. Although just half of them
give direct recognition to their staff and award extra money and almost none of them
offer an innovation award, the majority of them allow their staff to use company´s
facilities for free to test and develop their own ideas or provide their staff with
administrative support to get external fund.
Besides, most of interviewed firms have at least 50% of their innovation projects with
defined targets with respect to time, budget and quality and have met the defined targets
for at least 50% of their innovation projects. Also, most of them have some human
resources policy to stimulate staff qualification and have universities or research
institutes as innovation partners.
Q2 - To what level is “Market Orientation” practiced by the firms?
Entrepreneurs were also asked to determine their level of firm’s practices in three
components of market orientation including intelligence generation, intelligence
182
dissemination and responsiveness. On the whole, market orientation in Brazilian
technology-based firms has been performed slightly well. But despite of this, it is still
possible to notice a lack of human resources, activities and skills regarding to the
marketing issues.
Brazilian technology-based firms are working in highly competitive environment and

they do market orientation activities day by day, but in fact they do not know
themselves how to explain or understand market orientation in a formal way.
Q 2.1 - To what level is “Intelligence generation” practiced by the firms?
Intelligence generation is well considered in Brazilian technology-based MSMEs and

has been performed slightly well with creating relationship with customers and
generating their business environment’s information.
Q 2.2 - To what level is “Intelligence dissemination” practiced by the firms?
The intelligence dissemination practices are not significantly considered by Brazilian

technology-based firms. This is the component of market orientation which is practiced
to the lowest level by them.
Most of dissemination activities were not implemented well, especially in terms of

customers and business environment’s information. They face problems with restricted
dissemination of information about customers and business environment. Besides, these
firms present weak ability of combination between separated parts.
Q 2.3 - To what level is “Responsiveness” practiced by the firms?
Responsiveness is the factor which is effectuated the best among three dimensions of
Market Orientation in Brazilian technology-based firms.
183
Although they still have to improve their ability to coordinate separated departments
and develop marketing activities, like ‘implement a marketing plan in a timely fashion’
and ‘give a immediately response to a competitor´s intensive campaign target at their
customers’, these firms are significantly good at exerting themselves to satisfy
customers. In the aspect of caring customers’ needs and complaints, Brazilian
technology-based firms have acted quite well.
Q3 - How is the performance of Brazilian technology-based firms?
Although the concept of business performance has a variety of meanings (e.g. short- or
long-term, financial or organizational benefits), in the literature it is broadly viewed
from two perspectives, those are subjective and objective method.
This study has adopted both the subjective and objective concepts in order to gauge
information about the performance of Brazilian technology-based firms. The objective
concept was explored in the dimension of “Innovation Management Success”. The
subjective concept was used taken into consideration the Market Orientation
performance of firms relative to their competitors.
Q 3.1 - How is the “Innovation Management performance” of these firms?
There is a predominance of product innovation impacting more Brazilian technology-

based firms´ operational profits.
With regards to the right key performance indicators to monitor and measure
innovativeness, Brazilian technology-based firms are performing moderately. For
example, 35% of them present 100% of their total income come from innovations not
older than 3 years and 25% spent more than 100% of their total income on innovation
over the last 2 years.
When it comes to the firm’s financial results, their performances are not so bad, but still
far from ideal: the largest concentration of firms’ income data for 2009 and 2010 is in
the range of 250-500 thousand of Euros; more than half of interviewed firms did not
184
have any contribution coming from exports to their gross income and 35% of them had
no operational profit over the last 2 years.
In general, Brazilian technology-based firms do not see a major impact of innovation

management in their current success. But the majority of them think that innovation
management will have a very high impact in their success in the future. In addition, a
great number of firms think that they can still improve at least quite a bit their
innovation management performance.
These results reveal that most of Brazilian technology-based firms are still in the phase
of heavy investments, some with no product in the market and trying to solve current
problems with limited financial and human resources.
Q 3.2 - How is the “Market Orientation performance” of these firms?
Brazilian technology-based firms are performing better than their major competitors in
retaining new customers, achieving customer satisfaction and building a positive image.
But when it comes to the questions related to growth in market share, growth in sales
and attracting new customers they are not so good.
These results mean that Brazilian-technology based firms are facing difficulties to enter
into the market. Once they reach a position into the market they can compete with some
advantage.
Q4 - Are there differences in the level of Innovation Management between VC-backed

VC-backed and Non-supported firms behave differently regarding to each dimension of

Innovation Management:
- Non-supported firms are better in the aspects related to the innovation strategy and
enabling factors for innovation management than VC-backed firms.
185
Regarding to the ‘Innovation strategy’, VC-backed firms are performing better just in
the aspect related to the documentation. When it comes to the aspects related to the
implementation of the Innovation Strategy, such as: ‘setting clear objectives for their
innovation management activities’;; ‘provide the basis for organizational changes and
business model development’ and ‘to be fully communicated, understood and
implemented by their staff’, Non-supported firms are performing better.
Regarding to the ‘Enabling factors’ the differences are even more significant: Non-
supported firms are performing better at all items in which the two groups showed some
difference between them. Especially in items: ‘met the defined targets for 100% of their
innovation projects’ and ‘partnership with universities or research institutes’, where the
differences are statistically significant.
-VC-backed firms are better in the aspects related to the innovation life cycle
management than Non-supported firms.
Regarding to the ‘Innovation life cycle management’, Non-supported firms are

performing better just in one item: reached the breakeven point for their most profitable
product/service. When it comes to the other aspects, such as: ‘provision of feedback to
experts on intellectual property rights’, ‘existence of a formal system for generating and
assessing ideas’, ‘assessment of new ideas by an interdisciplinary team’ and more, VC-
backed firms are performing better.
-Although none of the two groups have excelling in relation to ‘Organization and
culture’, it is important to emphasize that they presented significant differences between
them regarding this dimension: staff from Non-supported firms are more ‘able to think
“out-of-the box” and these firms have their ‘capacity for innovation viewed by
competitors and customer’ to a higher degree than VC-backed firms. On the other hand,
the staff from VC-backed firms are more ‘focused on business impact’ and the
entrepreneurs view their firms capacity for innovation to a higher degree than Non-
supported firms.
186
Q5 - Are there differences in the level of Market Orientation between VC-backed and
VC-backed and Non-supported firms also behave differently regarding to each

dimension of Market orientation:
-VC-backed firms are better in the aspects related to the intelligence generation and
intelligence dissemination than Non-supported firms.
The differences here are significant: VC-backed firms are performing better at all items
regarding to intelligence generation and dissemination in which the two groups showed
some difference between them. Especially in items: ‘meeting with customers to find out
what products or services they will need in the future’ and ‘we are not slow to detect
changes in our customers’ product/service preferences’, where the differences are
statistically significant.
- Non-supported firms are better in the aspects related to the responsiveness than VC-
backed firms.
This dimension of market orientation showed the biggest number of items with
statistically significant differences between the two groups of firms.
VC-backed firms are performing better just in the aspect related to the ‘coordination of
the different departments’, while Non-supported firms are better in the activities
regarding to the marketing issues and in the aspect of caring customers’ needs like ‘to
be able to implement a marketing plan in a timely fashion’ and ‘periodically review
their product development efforts to ensure that they are in line with what customers
want’, respectively.
Q6 – Are there distinction in Innovation Management performance between VC-backed

There are some items from Innovation Management performance where it is possible to
see clear differences between the two groups of firms:
187
Regarding to income data and profit, Non-supported firms are performing better. But
more VC-backed than Non-supported firms think that innovation management has a
“high” or “very high” impact on their current success.
The statistically significant difference here is about the growth driver with highest
impact on profit growth: VC-backed firms consider de external growth, while Non-
supported firms have the organic growth impacting more.
Q7 - Are there distinction in Market Orientation performance between VC-backed and

The two groups of firms also presented some differences related to Market Orientation
performance:
While Non-supported firms are performing better in the items related to the ‘growth in
sales’ and ‘success in attracting new customers’, VC-backed firms are better in
‘growth in market share’ and ‘success in achieving customer satisfaction’.
Final conclusions
As final conclusions, the research results have revealed that, in general, Brazilian
technology-based MSMEs are practicing each dimension of Innovation Management to
a different level, with the “Enabling factors for innovation management” practiced at
the highest level among all. Market Orientation has been practiced slightly well by these
firms, with de component “Responsiveness” effectuated as the best.
The main weaknesses showed by Brazilian technology-based firms can be addressed to

activities related to: implementation and idea management and launch phases, regarding
to Innovation Management; and dissemination and marketing issues, regarding to
Marketing Orientation. Comparing the two groups of firms, Non-supported firms are
performing better the dimensions Innovation strategy, Enabling factors and
Responsiveness, while VC-backed firms Innovation Life Cycle Management,
188
Intelligence generation and Intelligence dissemination. The results presented in the
performance of the two groups of firms reflect these differences.
At the end, this research not only confirms, from the point of view of Innovation
Management and Market Orientation, the assertions of Pavitt et al., 2005: “Despite the
different efforts started so far Brazilian technology-based MSMEs face difficulties of
implementation. These difficulties can be approached by the fact that, traditionally,
technological innovation appears to have been largely bypassed in defining the
management structures of high-technology companies. Most companies build their
structures around the traditional functions of finance, marketing, production, human
resources and R&D.”; but also reveals in detail the strengths and weaknesses of the
Brazilian technology-based firms. Thus the overall research was able to reach all the
expectations established as relevant to the study.
Recommendations for future work
As recommendations for future work of unfolding and deepening of the research results,
can be proposed:
- Analyze the difficulties regarding to the Innovation Management and Market

Orientation presented by the technology-based firms in the Brazilian context,
seeking its possible causes;
- Seek solutions to the weaknesses regarding to the Innovation Management and

Market Orientation practices presented by Brazilian technology-based firms;
- Broaden the research scope, addressing a larger number of Brazilian technology-

based firms and VC funds;
- Conduct the research focusing on firms in specific sectors.
189
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ANNEX I
PART 1 - PERSONAL BACKGROUND INFORMATION
1. Function in the company:
2. Your age
20-30 31-40 41-50 51-60 61 or above
3. Sex
Male Female
4. Education level
Secondary High school Bachelor’s Degree Master Degree Doctor Degree
PART 2 - COMPANY INFORMATION
1. Name of firm:
2. Address:
3. Tel:
4. Email:
5. Number of employees:
< 5 5-10 10 – 20
6. Years in business:
< 1 year 1 - 3 3 - 5 5 - 10 above 10 years
7. Years in operation
< 1 year 1 - 3 3 - 5 5 - 10 above 10 years
8. Type of ownership
Private enterprise Joint-venture Limited company

Joint- State-owned
197
PART 3 - INNOVATION MANAGEMENT
3.1 Innovation Strategy
Q 3.1.1 – Does your company have a clear vision for it’s future? (What it wants to
become?)
If yes, to what degree the following attributes apply?

(1= not applicable and 5= fully applicable)
- Documented for all staff to see
- Clearly linked to innovation
- Well understood by customers and suppliers
- Well understood by your innovation partners
Q 3.1.2 – Does your company have an innovation strategy?
If yes, to what degree the following attributes apply?

- It results from an analysis of potential business opportunities activities
- It sets clear objectives for your innovation management activities
- It guides your idea management
- It sets the objectives for your project management in each innovation project
- It guides the improvement of your current product/ service or process

development
- It provides the basis for organizational changes and business model development
- It focuses on the development of your innovation capabilities
Q 3.1.3 – To what degree is your innovation strategy communicated to, understood and
implemented through your company? (1= not at all and 5= fully)
198
- Communicated
- Fully understood
- Implemented
Q 3.1.4 – Does your company assess all innovation projects systematically?
If yes, your innovation project(s) are: (1= not applicable and 5= fully applicable)
- Alligned with your innovation strategy
- Balanced between incremental and radical innovation
- Balanced with respect to risk and return
- Balanced with respect to long-term and short-term perspectives
- Balanced between low and high cost
3.2 Innovation Organisation and Culture
Q 3.2.1 To what degree would you rate staff attitudes towards innovation?
- Excited/passionate about innovation
- Open rather than skeptical towards new ideas
- Able to think “out-of-the box”
- Imaginative
- Reluctant to try out new methods
- Able to “sell” ideas internally
- Focusing on business impact
199
Q3.2.2 To what degree do others view your capacity for innovation?
(1= very low and 5= very high)
- Your direct customers
- Your competitors
- Your suppliers
- Yourself
Q 3.2.3 To what degree do partnerships support and enhance each phase of the
innovation life cycle? (1= not at all and 5= to a very high degree)
- Idea management
- Product/service or process development
- Launch and continuous improvement
Q 3.2.4 How many external partners regularly participate in your innovation projects?
Q 3.2.5 How many of these have cooperated in at least one innovation project during
the last 3 years?
Q3.2.6 How many people currently work on innovation projects in which external
partners are involved?
3.3 Innovation Life cycle Processes
Q. 3.3.1 What is the length of time (in months) for your most profitable product/service
group from the beginning of the development (project authorization) until you take (or
envisage that you will take) your product/service off the market?
200
Q 3.3.2 How many months does it take for your most profitable product/service group
from the beginning of the development (project authorization) to getting new
product/service on sale?
Q 3.3.3 How many months did it take for your most profitable product/service group
from the project authorization to reach the breakeven point?
Q 3.3.4 How many incremental innovation projects to improve existing

products/services/processes/organizational or business models have you started in the
last 4 years?
- Product innovations
- Service innovations
- Process innovations
- Organisational innovations
- Business model innovations
Q.3.3.5 How many of these projects showed success (e.g. reached break even) within
the last 4 years?
201
Q 3.3.6 How many radical innovation projects to develop completely new
products/services/processes/organizational or business models have you started in the
last 4 years?
Q.3.3.7 How many of these projects showed success (e.g. reached break even) within
the last 4 years?
- Organizational innovations
Q.3.3.8 How do you assess new ideas and ways of developing business?
- Assessment by an interdisciplinary team
- A set of predefined criteria applied to all innovation projects (i.e., standards in place)
202
- Criteria tailored per project defined in the early development phase (i.e., no standards
in place)
- Criteria derived from innovation strategy
- Others, please specify
Q 3.3.9 How regularly do you provide feedback to the following groups on suggestions
that they have given to you? (1= not at all and 5= highly regularly)
- Suppliers
- Purchasing
- Direct customers
- Indirect customers
- Marketing and sales
- Production/service development
- Research institutes and universities
- Experts on intellectual property rights
- Network partners
Q 3.3.10 Do you have a formal system for generating and assessing ideas?
If yes, what percentage of the generated ideas are radical ideas and incremental ideas?
From these generated ideas, what percentage is taken to development stage?
Q 3.3.11 How formalized are your development processes (with clearly defined stages,
milestones, etc)? (1= not at all and 5=successfully in place)
203
Q 3.3.12 For innovation projects launched during the past 3 years, what percentage had
well defined targets (such as “volume of sales within a specific time frame”, “turnover
from theses sales”, “timing of first sales” etc.)?
What percentage of those projects met launch-specific targets?
Q 3.3.13 In the course of a year, how many times do you analyse customer data and
customer feedback?
Q 3.3.14 Have your company defined indicators to measure its innovation activities?
3.4 Enabling factors
Q 3.4.1 Does your company use incentives to stimulate innovation?
If yes, which of the following do you offer?
- Awarding extra money
- Giving them direct recognition
- A company innovation award
- Allowing them to use company’s facilities for free to test and develop their own
ideas
- Providing administrative support to get external (public) fund
204
Q 3.4.2 How many patents have your company generated within the last 5 years?
Q.3.4.3 How many of those patents were turned into market success?
Q.3.4.4 For innovation projects in the last 3 years, what percentage had targets defined
with respect to time, budget and quality?
Q 3.4.5 How many met these targets?
3.5 Innovation results
These information are closely related to the benchmarking process, please ensure that
data is as complete and accurate as possible. Please give the values for each year
individually.
Q 3.5.1 What is your income data (income from sales and other income streams) for the
last 2 years? Total income (in thousands of Euros)
- Contribution of public research grants to total income (%)
- Contribution of exports to gross income (%)
Q 3.5.2 What was the percentage from innovations that are not more than 3 years old?
Q 3.5.3 What were your company’s expenditures on innovation (including personnel

costs, equipment costs, outsourced services, etc.) over the last 2 years?
205
Q 3.5.4 What was your company’s operational profit data (EBIT) been over the last 2
years?
Q 3.5.5 From this, what is the percentage generated from innovation?
Q 3.5.6 How were last year’s operational profits gained from innovation projects
distributed across different types of innovation? (please distribute 100 percentage points
across de following innovation types)
Q 3.5.7 What percentage of reduction in operational costs can be attributed to processes

innovation?
Q 3.5.8 Which growth drivers had the highest impact on your profit growth over the last
4 years? (please distribute 100 percentage points across de following growth drivers)
- External growth (mergers and acquisitions)
- Internal, organic growth
- Compliance with new standards (legal, environmental, etc.)
Q 3.5.9 How many people did you employ over the last 4 years?
206
Q 3.5.10 What is the current and future impact of innovation management on your
business success? (1= very low and 5= very high)
- Current success
- Future success
Q 3.5.11 How much can you still improve your current innovation management
performance? (1= not at all and 5= very much)
207
ANNEX II
PART 4 - MARKET ORIENTATION
The following statements indicate the degree of market orientation in the activities
described. Please write a number to indicate your attitude on each statement:
(1) Strongly disagree – (5) Strongly agree
4.1 Intelligence generation
Q 4.1.1 We meet with customers at least once a year to find out what products or
services they will need in the future.
Q 4.1.2 We do a lot of in-house market research.
Q 4.1.3 We are slow to detect changes in our customers’ product/service preferences.
Q 4.1.4 We poll end users at least once a year to assess the quality of our products and
services.
Q 4.1.5 We are slow to detect fundamental shifts in our industry (for example,
competition, technology, regulation).
Q 4.1.6 We periodically review the likely effect of changes in our business environment
(for example, regulations) on customers.
208
4.2. Intelligence Dissemination
Q 4.2.1 We have interdepartmental meetings at least once a quarter to discuss marketing trends
and developments.
Q 4.2.2 Marketing personnel in our business spend time discussing customers’ future needs
with other functional departments.
Q 4.2.3 When something important happens to our major customer or market, the whole
business unit knows about it within a short period.
Q 4.2.4 Data on customer satisfaction are shared at all levels in the business unit on a regular
basis.
Q 4.2.5 When one department finds out something important about competitors, it is quickly to
alert other departments
4.3. Responsiveness
Q 4.3.1 It takes us a long time to decide how to respond to our competitor’s price changes.
Q 4.3.2 For one reason or another, we tend to ignore changes in our customers’ product or
service needs.
Q 4.3.3 We periodically review our product development efforts to ensure that they are in
line with what customers want.
Q 4.3.4 Our personnel get together periodically to plan a response to changes taking place in
our business environment.
209
Q 4.3.5 If a major competitor were to launch an intensive campaign targeted at our
customers, we would implement a response immediately
Q 4.3.6 The activities of the different departments in this business unit are well coordinated.
Q 4.3.7 Customer complaints fall on deaf ears in this business unit.
Q 4.3.8 Even if we came up with a great marketing plan, we probably would not be able to
implement it in a timely fashion.
Q 4.3.9 When we find that customers would like to see changes to a product or service, the
departments involved make concerted efforts to do so.
210
ANNEX III
PART 5 - BUSINESS PERFORMANCE
Overall performance of the firm for the past 12 months relative to major competitors
was: Far below (1) – Far higher (5)
Q 5.1 Firm’s market share growth in our primary market.
Q 5.2 Firm’s sales growth.
Q 5.3 Firm’s success in achieving customer satisfaction
Q 5.4 Firm’s success in retaining current customers
Q 5.5 Firm’s success in attracting new customers
Q 5.6 Firm’s success in building a positive image
Q 5.7 Time to market
211
Appendix A: Interviewed firms
- VC-backed firms
http://www.cvdentus.com.br/English/english.html and http://www.cvdvale.com.br/

Address: Estrada Principal do Torrão de ouro, 500 - Torrão de Ouro
São José dos Campos - SP – Brasil - 12229-390
Email: cvdvale@cvdvale.com.br ; Phone: +55 (12) 3944-1126
Date: 04.01.2011/ Time:09:00
http://www.daccordmusic.com/eng/site/company.php
Address: Rua D. Maria César, nº 170 - Sala 203ª Bairro do Recife,
Recife - PE – Brazil - 50030-140
Phone: +55 (81) 3224-4386
Date: 13.12.2010/ Time:18:00
http://www.rizoflora.com.br/
Address: Parque Tecnológico de Viçosa
Av. Oraida Mendes de Castro S/N Novo Silvestre
Viçosa/MG – Brazil - 36570-000
Email:contato@rizoflora.com.br; Phone: +55 (31) 3892-2581
Date:10.12.2010 / Time:14:00
http://www.subsin.com.br/english/index.html
Address: Av. João Luís Alves S/N Fortaleza São João – PIRF- Urca
Rio de Janeiro – RJ - 2291090
Email: subsin@subsin.com.br; Phone: +55 21 22758001
Date:21.12.2010 / Time:10:30
212
http://invitrocells.site.com.br/
Address: Av. José Candido Silveira, 2100 – Horto – Belo Horizonte-MG
Email: contato@invitrocells.com.br; Phone:+55 31 34861920
Date:22.12.2010 / Time:10:00
http://www.edgeit.com.br/index.php?w2l=EN_US
Address: Av.Paulista, 726 - conjunto 1707 - São Paulo - Brasil - 01310-910
Phone: +55 11 3254-7660
Date: 06.12.2010 / Time:19:00
Address: Av. José Cândido da Silveira, 2100 – Horto – Belo Horizonte – MG

Phone: +55 31 3486.1733
Date:15.12.2010 / Time:09:00
http://www.deprocer.com.br/
Address:Estrada Adhemar Bebiano, 1660, Del Castilho – Rio de Janeiro – RJ
Phone: +55 (21) 2467-3381
Date:05.01.2011 / Time:11:00
http://www.arvus.com.br
Address: R. Coronel Luiz Caldeira, 67 - 2. Andar- Bairro Itacorubi -Florianópolis-SC
Phone: +55 (48) 4009.2704
Date:14.12.2010 / Time:09:00
213
http://www.magnamed.com.br/INGindex.html
Address:Rua São Paulino, 221 Vila Mariana - São Paulo - SP - Brasil CEP:04019-040
Email: magnamed@magnamed.com.br; Phone +55(11) 5081-4115
Date:05.01.2011 / Time:18:00
http://www.celer.ind.br
Address: Rua Padre Eustáquio,1.133 - Carlos Prates - Belo Horizonte - MG
Phone +55 (31) 3413-0814
Date:06.01.2011 / Time:08:00
http://www.tmed.com.br/eng/
Address:Rua: Ricardo Hardman, 552 – Tamarineira - Recife - PE
Phone +55 (81) 3366-9100
Date:10.01.2011 / Time:18:00
http://www.biocancer.com.br/
Address: Av. Bernardo Monteiro, 918-Santa Efigênia- Belo Horizonte- MG
Phone +55 (31) 3224-2030
Date:12.01.2011 / Time:09:00
http://www.biologicus.com.br/
Address: Av. Prof Luiz Freire, 700 – Curado- Recife - PE, 50740-540
Phone +55 (81) 4141-4149
Date:13.01.2011 / Time:18:00
214
Usix (Ebix): http://www.ebix-la.com.br
Address: Rua São José, 40 - Ed. São José - Cobertura - Centro Rio de Janeiro - RJ -
Phone +55 (21) 3553.8749
Date:25.01.2011 / Time:10:00
- Non-supported firms
Ntime (Movile) http://www.comperantime.com

Address:Rua Lauro Muller, 116/ 704, Botafogo Rio de Janeiro - RJ
Phone +55 (21) 2158.6050
Date: 20.12.2010 / Time:15:00
http://www.pipeway.com and http://www.pipeway.com.br

Address:Praça Mario Nazaré, 40, São Cristóvão, Rio de Janeiro – RJ
Phone +55 (21) 3214-1600
Date:09.12.2010 / Time:10:30
http://www.fabricadigital.com.br
Address: Av, Nossa Sra de Copacabana, 895/1001 – Copacabana, Rio de janeiro – RJ
Phone: +55 (21) 2548-7877 Email: atendimento@fabricadigital.com.br
Date:21.12.2010 / Time:19:00
215
http://www.cleverpack.com.br/index.php?lang=en
Address:Rua Guilherme Maxwell, 547/406, Bonsucesso, Rio de Janeiro – RJ
Phone: +55 (21) 2573-6426
Date:06.12.2010 / Time:19:00
Bionix
http://www.bionix.com.br/
Address:Rua Lucidio Lago, 96/403, Meier – Rio de Janeiro – RJ
Phone:+55 (21) 9805 – 6510 E-mail: lee@bionix.com.br
Date:05.01.2011 / Time:08:00
http://www.kognitus.com.br
Address:Avenida Marechal Floriano, 38/ 901 Centro - Rio de Janeiro - RJ
Phone: 55 (21) 3553-5654 / 3553-4050
Date:17.01.2011 / Time:16:00
http://www.ativatec.com.br/
Address:Rua Dalcídio Jurandir, 255/ 313 -Barra da Tijuca – Rio de janeiro – RJ
Email: contato@ativatec.com.br; Phone: +55 (21) 3594-5979
Date:19.01.2011 / Time:18:00
http://www.bioaptus.com.br/
Address:Av Antonio Carlos, 6627-Inova/114 – Belo Horizonte – MG
Phone:+55 (31) 3409-6788
Date:21.01.2011 / Time:10:00
216
http://www.tecc2.com.br
Address:Avenida João Luis Alves, S/N - Forte São João - PIRF - Rio de Janeiro, RJ –
Phone: +55 21 2295-9179
Date: 18.01.2011 / Time:18:00
http://www.pam-membranas.com.br/
Address:Rua Paulo Emídio Barbosa sn, Parque Tecnológico do Rio de Janeiro, QD 6A,
Edificio MP, Módulo 1, Ilha do Fundão/Cidade Universitária - Rio de Janeiro/RJ
E-mail: pam@pam-membranas.com.br; Phone: 21-3733 1980
Date:18.01.2011 / Time:08:00
INOVAX
http://www.inovax.com.br/
Address:Av. Rio Branco, 4, 407/408 and 409 - Centro - Rio de Janeiro - RJ
Email: inovax@inovax.com.br; Phone: (21) 2103-5550
Date:13.01.2011 / Time:11:00
MILESTONE (Affero)
http://www.milestone-ti.com.br/
Address Rua Bambina, 25, Botafogo, Rio de Janeiro –RJ
Phone: +55 (21) 4063-9157
Date:20.01.2011 / Time:11:00
CORTEX INTELLIGENCE
http://www.cortex-intelligence.com/site/english/index.php
Address Rua da Assembléia, 10 – 3711/3712, Centro, Rio de Janeiro - RJ
E-mail: contato@cortex-intelligence.com; Phone: +55 (21) 32823180
Date:20.01.2011 / Time:18:00
217
Declaration of Academic Honesty
I hereby declare to have written this Master’s Thesis by my own, having used only the
listed resources and tools. It is well known to me that a false declaration is deemed to be
an offence against the examination regulations of the International SEPT Program and
the University of Leipzig.
Place, Date ___________________ Signature ___________________
218

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Innovation Management and Market Orientation in Brazilian

Master thesis for the attainment of the academic degree of

International SEPT Program, University of Leipzig

Written by: Fernanda Vilela Ferreira

Student’s ID No.: 2107504

First supervisor: Prof. Dr. Utz Dornberger

Second supervisor: Dr. Noor Un Nabi

Date of assignment of topic: 15th April 2011

Date of submission: 29th August 2011

1 Introduction ................................................................................................ 114

1.1 Context ............................................................................................................ 16

1.2 Justification ..................................................................................................... 17

1.3 Objectives ....................................................................................................... 19

1.4 Research questions .......................................................................................... 19

1.5 Relevance of the study ..................................................................................... 21

1.6 Limitation of the research ................................................................................ 21

2 Theoretical Framework .............................................................................. 22

2.1 Brazilian micro, small and medium-sized companies ....................................... 22

2.1.1 Brazilian technology-based MSMEs ................................................................ 24

2.2 Support for technology-based MSMEs ............................................................ 26

2.2.1 Venture Capital ............................................................................................... 26

2.2.2 Venture Capital in Brazil ................................................................................. 29

2.3 Innovation Management .................................................................................. 30

2.3.1 Technological Innovation: concepts ................................................................. 30

2.3.2 Innovation process ........................................................................................... 32

2.3.3 Managing Innovation ....................................................................................... 37

2.3.4 Measuring Innovation Management ................................................................. 38

2.4 Market Orientation .......................................................................................... 41

2.4.2 Measuring Market Orientation ......................................................................... 44

3.1 Research design ............................................................................................... 48

3.2 Variables of the study ...................................................................................... 49

3.3 Methods of data collection ............................................................................... 50

4 Field research ............................................................................................. 51

4.1 Areas of the study ............................................................................................ 51

4.2 Target group and research sample .................................................................... 52

4.3 Research partners ............................................................................................ 52

4.4 Established contact .......................................................................................... 53

4.5 Encountered problems ..................................................................................... 53

5 Data analysis .............................................................................................. 54

5.1 Introduction ..................................................................................................... 54

5.2 Personal background information .................................................................... 55

5.3 Company information ...................................................................................... 58

5.4 Innovation Management .................................................................................. 60

5.4.1 Innovation strategy .......................................................................................... 60

5.4.2 Organization and culture .................................................................................. 76

5.4.3 Innovation life cycle management ................................................................... 93

5.5 Market Orientation ........................................................................................ 126

5.5.1 Intelligence generation ................................................................................... 126

5.5.2 Intelligence dissemination ............................................................................. 132

5.5.3 Responsiveness.............................................................................................. 137

5.6 Firm performance .......................................................................................... 146

5.6.1 Innovation Management performance ............................................................ 146

5.6.2 Market Orientation performance .................................................................... 160

6 Main results ................................................................................................ 168

7 Conclusion ............................................................................................................ 179

Annex I ............................................................................................................ 197

Annex II .......................................................................................................... 208

Annex III ......................................................................................................... 211

Appendix A...................................................................................................... 212

Table 2.1: Examples of industrial firms’ classification according to their size.......... 22

Table 2.2: Base of definition IBGE/Sebrae …………………………………............ 23

Table 2.3: Examples of innovation studies…………………………………………. 36

Table 2.4: Scales measuring Market(ing) orientation ………………………….….. 44