Beyond the ‘Creation’ Side of Innovation: Outcomes of Innovative Capability Building in Latecomer Process-intensive Industries: Evidence from Brazil’s Pulp and Paper
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Despite the proliferation of studies on the creation of firms’ capabilities (learning) and on the nature of capabilities (as sources of firms’ competitive advantage), especially from the early 1990s, there have been only a few studies addressing some of the ‘outcomes’ of learning and capabilities for the improvement in firms’ performance. Additionally, even in terms of capability studies, especially in the context of emerging economies, at both macro-level most of them, with a few exceptions, have focused on innovative capability in firms and industries that are based on ‘high-tech’ and ‘assembled products’ firms and industries. These are deemed as only possible route for developing countries to achieve international industrial leadership. And most of these studies focus on capabilities that permit firms to move towards and/or catch up with the production and/or innovation frontier led by incumbent firms in early industrialised countries. Thus we know very little about capability building beyond catching-up and their implications for performance improvement. This paper examines processes of firm-level capability accumulation in the pulp and paper industries, across policy regimes in Brazil, during the 1950-2006 period. It goes further to examine the extent to which the accumulation of technological capability has improved indicators of technical (including environmental) to economic indicators. The study found a positive association (not causality) between efforts on innovative capability building and improvement on different types of process and environment performance indicators in the researched pulp and paper firms. Improvements on these indicators were associated with innovation efforts to achieve operational, market and economic performance improvement. The evidence shows that environment performance improvement was associated with innovative capability building. As a result, the findings show that the paths by which latecomers firms can achieve international leadership in process intensive (and natural resources related industries) by building innovative capability beyond catching-up to overtake early innovators. On the basis of the building of such innovative capabilities, firms can improve operational and environment performance indicators. Thus, it is not possible to design corporate strategies and government policies for operational and, mainly, environment performance improvement without understanding and tackling the issue of firm-level innovative capability building, especially the nature, direction and rate of innovative capability building within firms. Otherwise, issues like ‘corporate social responsibility’ and ‘environmental sustainability’ risk being confined to opportunistic rhetoric.