How economic crisis is affecting firms? Building resilience capacity through innovation

Fernandes, Silvia Brito; Liebenstein, Anton

http://hdl.handle.net/10400.1/2841

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Authors

Fernandes, Silvia Brito

Liebenstein, Anton

Abstract(s)

More than ever firms will be required to develop strategies for coping with future shocks and stresses to our economic and social infrastructures. They will need to build the so called resilience capacity, which is an umbrella term for the planning and design strategies that help firms to develop the necessary capacity to meet challenges. The present paper, based on an assessment of works that explore recent European reports on innovation performance, discusses some underling effects of the economic crisis. This discussion reveals the main differentiating impacts of a major downturn on innovation behavior. Some of the conclusions acknowledge that firms will have to find new ways to reduce their risk-averse dependency and become more flexible. To become more resilient, firms will need to adopt planning and design strategies that allow them to develop the capacities to better respond and adapt to the emerging economic and social stresses. Developing these capacities will involve firms in a complex web of planning and development decisions that, in combination, must be designed to transform our current economic systems into much more flexible and dynamic ones. Small and medium enterprises are more exposed to high competitive pressures. Thus, they have to search for new business opportunities. The choice of sectors and the design of public procurement policies can provide new opportunities and it is very likely that those that manage to capture them will be the winners. With the polarization of innovation and knowledge creation across Europe, a few countries are responsible for the bulk of innovation and knowledge production. The technology gap provides a fundamental potentiality for lagging behind countries to catch-up. However, there is a general fragility as major effects of the crisis have shown. Therefore, a more articulated policy needs to be put in practice as suggested and more attention should be given to investment in knowledge diffusion and absorption depending on the specific national context. The fact that some structural characteristics of the national innovation system explain persistency of innovation in response to major exogenous shocks sheds some light on the behavior of firms during crisis. This represents a step forward in terms of understanding the mechanisms underlying the relationship between macro and micro-determinants of innovation.