capturing of economic rents created by innovation in the hungarian agri‐food smes józsef tóth...

Capturing of economic rents created by innovation in the Hungarian agri food SMEs‐

József Tóth

Corvinus University of Budapest

József Tóth 119-04-23

MAKE 2015 KONFERENCIA

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MotivationTheoretical considerations

HypothesesData & Methodology

ResultsDiscussion and conclusions

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• Value creation– economic action: benefit > cost– economic action prevented: cost > benefits– economic agents’ actions and reactions

• Value creation is not the ultimate goal of firms– increased appropriation of the created value– created values: trade-, technological-, organisational-,

relational and branding rents (Kaplinsky, 2000)– rents are getting eroded by competition



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• Why SMEs?– EU: 260 thousand SMEs, 2,6 million employees - 64%, VA -

52% (Eurostat, 2010)– they face global challenges in all fields of value creation– continuous pressure strives them in their value creation

activities



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• How SMEs create business value?– food SMEs in squeezing situation – new business

solutions (new combination of factors –Schumpeter)

– innovation: open way– innovation with their network partners instead of

in-house R&D– intense info- and knowledge exchange



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• Rent can be something which is owned by the entrepreneur and generates additional income– natural resources– can be created by innovation

• Value (rent) creation is always the result of some kind of innovative solution



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• Value is captured partly by the firms (producer surplus), partly by the consumers (consumer surplus)

• Our main concern here is the producer surplus



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• “value creation – value capturing” dichotomy = the relationship between the result of innovation and the firm’s value appropriation

• Innovation as value creation – performance as value capturing

• Rents are distributed through the chain– rents should be protected from competition– gradually disappears – due to the schumpeterian

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Innovation in open way among SMEs:•Behavioural aspect of innovation activity: open communication with business partners leads to knowledge sharing with these partners•They do it because they perceive that the outcome from performing that behaviour is positive, therefore they will have a positive attitude toward performing that behaviour.



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• Research questions:– Does knowledge sharing lead to success in

innovation and performance?– What are the influencing factors of rent

capturing?



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• H1: Reciprocity in Knowledge Sharing (RKS) positively influences all type of innovation which in turn helps in increasing performance (measured in competitiveness)

• H2: Firm-specific attributes (size, absorptive capabilities) as well as openness characters (RKS, willingness to cooperate and openness to trade) contribute positively to value appropriation



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• Survey (2014), 302 SMEs, Hungary {agricultural producers (100), food processors (101) and retailers (101)}

• Closed questions in the questionnaire, 5 point Liekert scale evaluation

• Electronic data collection



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• Empirical strategy:– Structural Equation Modeling (SEM) for testing

behavioural assumptions– ordered probit

• requires the researcher to make a specific distributional assumption

– semi-nonparametric approach of Gallant and Nychka (1987)• nests the ordered probit model and relaxes the distributional

assumption in that model• model specification criteria

– log likelihood is improved relative to the ordered probit model, and– the likelihood-ratio test rejects the ordered probit model



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• Empirical strategy (cont’d):– factor analysis for identifying producer- and consumer

type of rents– OLS regression for determining the effects of influencing

factors on producer- and consumer surplus



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DescriptivesVariable N Mean SD Min MaxTotal turnover (in increasing categories) of the enterprise in 2013 290 5,75 1,41 1 7How many % of employees speak at least one foreign language?1 257 1,97 0,79 1 3How many % of employees are able to use computer?2 260 2,89 1,08 1 4Absorptive capacity3 265 2,43 0,87 1 4Trust in chain partners4 282 2,56 0,74 1 4,5Openness to international trade5 298 1,79 0,37 1 2Do you buy regularly directly from abroad? (1=yes 2=no) 297 1,80 0,40 1 2Do you sell directly abroad? (1=yes 2=no) 291 1,79 0,41 1 2Future goals: importance of cooperation with our most important buyer 247 3,27 0,90 1 5How much do you trust in your suppliers 280 2,59 0,76 1 5How much do you trust in your buyers 278 2,54 0,77 1 5How much do you trust in your competitors 274 1,97 0,70 1 4

[1] 1=0 - 10%; 2=10 - 30%; 3=above 30%[2] 1=0 - 10%; 2=10 - 30%; 3=30 - 50%; 4= above 50%[3] Mean of “How many % of employees speak at least one foreign language?” and “How many % of employees are able to use computer?”[4] Mean of “How much do you trust in your suppliers” and “How much do you trust in your buyers”[5] Mean of „Do you buy regularly directly from abroad?” and „Do you sell directly abroad?”


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Descriptives – cont’d

Reciprocity in knowledge sharing: COMPETITORS 167 2,56 0,72 1 5Reciprocity in knowledge sharing: SUPPLIERS and BUYERS 164 3,71 0,73 1 5When did you change last time your technology in your most important activity? 234 2,71 0,97 1 4When did you change last time your product? 6 226 1,72 1,16 1 4When di you change last time your organisation? 6 231 3,30 0,95 1 4When did you change last time your market relations? 6 230 1,97 1,24 1 4Capturing: new business partner connections were created 192 2,13 0,93 1 5Capturing: market share has increased 191 2,20 0,92 1 5Capturing: turnover has increased 189 2,67 1,02 1 5Capturing: profitability has increased 189 3,54 0,77 1 5Capturing: productivity has increased 189 3,42 0,83 1 5Capturing: competitiveness has increased 189 3,52 0,76 1 5Capturing: costs have decreased 188 3,01 0,83 1 5

[1] 1=within 1 year; 2=within 2-3years; 3=within 4-5 years; 4=more than 5 years


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Theoretical behavioural model


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The behavioural model in the reality


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Fit statistics

Likelihood ratio Information criteria

chi2_ms(7) (model vs. saturated) 9,437 AIC (Akaike's information

criterion) 3291,822

p > chi2 0,223 BIC (Bayesian information

criterion) 3361,929 chi2_bs(15) (baseline vs.

saturated) 288,958

p > chi2 0 Baseline comparison CFI (Comparative fit index) 0,991Population error TLI (Tucker-Lewis index) 0,981 RMSEA 0,038 lower bound 0 Size of residuals

upper bound 0,092 CD (Coefficient of

determination - like R2) 0,136 pclose (probability RMSEA <=

0,05) 0,577


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Capturing the value created by innovation


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Factor loadings of producer- and consumer surplus

Variable Producer surplusConsumer

surplus UniquenessNew partners 0,7132 0,4899Increased market share 0,7858 0,3814Increased turnover 0,8022 0,3526Increased profitability 0,8769 0,2277Increased productivity 0,9140 0,1644Increased competitiveness 0,7719 0,3853Decreased costs 0,6629 0,5605


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Determinants of producer- and consumer surplus


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• reciprocity of knowledge sharing with chain partners leads to earlier introduction of new solutions in two fields: in product- and market innovation

• market innovation is influenced by three other endogenous variables and has got significant positive direct effect on competitiveness

• ccompetitiveness has got significant increasing feedback effect on reciprocity of knowledge sharing with chain partners

• managerial experiences may help in increasing competitiveness and decreasing production cost

• bigger size (measured in turnover) might be disadvantageous in almost all type of rent capturing



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• absorptive capacity ambiguously affect value appropriation• trust in chain partners and interestingly trust in competitors

(in some cases) positively influences this process• RKS with chain partners plays very positive and highly

significant role in value capturing• willingness to cooperate plays mainly positive role albeit not

in all cases• SMEs need to share the value which was created during the

innovation process with their clients• the surplus which appears in different form of rent will be

earned partly by producers and partly by consumers



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• H1: Reciprocity in Knowledge Sharing (RKS) positively influences all type of innovation which in turn helps in increasing competitiveness – mainly supported

• H2: Firm-specific attributes (size, absorptive capabilities) as well as openness characters (RKS, willingness to cooperate and openness to trade contribute positively to value appropriation – partly supported



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Thank you for your attention!

[email protected]

Acknowledgement: Research was supported by the Hungarian Scientific Research Fund (OTKA, K 84327) ‘Integration of small farms into the modern food chain’



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capturing of economic rents created by innovation in the hungarian agri‐food smes józsef tóth...

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