A STUDY OF TECHNOLOGICAL INNOVATIONS IN THE INFORMATION AND COMMUNICATIONS TECHNOLOGY INDUSTRY IN...

A STUDY OF TECHNOLOGICAL INNOVATIONS IN THE A STUDY OF TECHNOLOGICAL INNOVATIONS IN THE INFORMATION AND COMMUNICATIONS TECHNOLOGY INFORMATION AND COMMUNICATIONS TECHNOLOGY

INDUSTRY IN NIGERIAINDUSTRY IN NIGERIA

Helen Olubunmi Sekola ADEREMIHelen Olubunmi Sekola ADEREMI

Supervisor: Prof. T. O. Oyebisi, Supervisor: Prof. T. O. Oyebisi, Director, Technology Planning and Development Unit, Obafemi Director, Technology Planning and Development Unit, Obafemi

Awolowo University, NigeriaAwolowo University, Nigeria

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A STUDY OF TECHNOLOGICAL INNOVATIONS IN THE ICT INDUSTRY IN NIGERIA

Helen Aderemi

CHAPTER ONE: BACKGROUND Information and Communications Technology (ICT) has proved to

be a catalyst to fundamental changes in the world’s economies and societies

“ICT” creates more avenues to earn income, allows access to useful

information, enhances the world of work and makes the world a global village.

“…“…the minimum composition of an ICT infrastructure that the minimum composition of an ICT infrastructure that would bring about social and industrial development would bring about social and industrial development includeinclude: a functional telecommunications network with voice, data : a functional telecommunications network with voice, data and video transmission to enable an information base that is and video transmission to enable an information base that is adequately networked; adequately networked; local production of ICT equipment and local production of ICT equipment and materialsmaterials; a pool of human resources with capacity in ; a pool of human resources with capacity in telecommunications..” (Oyeyinka, 2007)telecommunications..” (Oyeyinka, 2007)

Competing for the future is not necessarily based on products and

services but on the underlying capabilities that make the products and services possible (Hamel and Prahalad, 1994).

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STATEMENT OF THE PROBLEM

Though ICT is known to be a major contributor to social-economic and industrial development. Diffusion of ICT in the country is hampered by:

Infrastructural Challenge Capabilities challenge Participation mainly as consumers High level of importation with low technology

transfer High cost of ICTs

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STATEMENT OF THE PROBLEM 2 In the organisational context, innovation is linked to

performance and growth through improvements in efficiency, productivity, quality, competitive positioning, market share

Thus, we have a need for:

The acquisition and utilization of new knowledge and a level of skills that could lead to product and process innovations

Competitive positioning and market share in ICT products and processes

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STATEMENT OF THE PROBLEM 3 Considering the dynamism of ICT in developed economies and with

the rate of technical obsolescence much faster with ICT compared with the natural technologies such as steel, textiles and petrochemicals.

Africa, especially Nigeria considered to be the giant of Africa could

face the difficulty of sourcing for parts, components and peripherals, unless they begin to accumulate the capacity for component manufacture.

Aside, the challenge of infrastructure, innovation, capacities and capabilities, the level of interrelationships b/w firms in the sector is not known and where known is not strong enough to lead to distinctive synergetic competitiveness in any area of expertise.

In addition, level of contributions from government agencies and Industrial Development Centres (IDCs) towards learning and acquisition of skills in the Sector is uncertain and not measurable. Public institutions relevant to ICT are isolated from the needs of firms in the industry.

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Helen Aderemi

RESEARCH QUESTIONS What are the capabilities (potentials, competence and

facilities) available in the industry

Are there any technological innovations (product and process) that have emanated over time from the operations of the firms?

What factors determine and influence the available capabilities and technologies?

How does the innovativeness of the industry impact on its performance?

What impact has government policies and other external factors had on technological capabilities and innovativeness in the firms?

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OBJECTIVES Identify the technological innovations in selected ICT firms

in Nigeria within the last five (5 years).

Examine factors affecting technological innovations in the industry.

Determine the impact of product, process and organisation innovations on the performance of the firms.

Identify institutional supports received by the ICT firms and their significance to the innovativeness of the firms.

Develop appropriate strategies to enhance technological capabilities and innovation in the sector.

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Helen Aderemi

SIGNIFICANCE OF THE STUDY Need to give attention to ICT production technology and diffusion

as the engine of socio-economic and industrial development

The study will provide information on product, process and organisation innovations in the ICT industry

The findings of the study will reveal factors impeding on product and process innovations and strategies to enhance technological capabilities and innovations in the sector.

The outcome of the study will strengthen the capacity of research institutes, government agencies and relevant organisations to provide appropriate intervention for the ICT industry

The study may engender positive reactions from firms in the industry in a bid to become competitive and gain market share from involvement in product, process and organisation innovations.

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CHAPTER TWO: LITERATURE REVIEW Technological innovations and industrial development The concept of micro and small-scale firms Information and Communications Technologies (ICTs)

around the world (statistics – www.itu.int) The concept of Innovation The ICT sector in Nigeria Innovation and the ICT industry The OSLO manual Measuring innovations in developing countries Technological innovations and its promotion Concept of technical change Technology innovation activities and strategies Roles of government in technology innovations

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CHAPTER THREE: METHODOLOGY The Oslo manual, which contains guidelines

for collecting and interpreting technological innovation data, is employed for this study.

Due to the peculiar nature of innovation in developing economies where dissemination mechanisms and incremental innovations account for most of the innovations that occur, the proposal for an annex to the oslo manual as a guide for innovation surveys in less developed countries is also adopted.

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Conceptual Framework Technological Innovation

Mainly product and process

However because of the criticism that the technological view on innovation does not fully capture and ignore important elements of innovative activities of firms, e.g. adopting new and re-organising existing business routines, external relations and marketing w/c essentially are xteristic in developing economies; the broader concept of innovation w/c includes non-technological innovation i.e organisation and marketing is introduced. (Infact Tobias Schmidt and Christian Rammer, 2007 described them as bedfellows – inseparable)

And of course the OECD and Eurostat have in 2005 adopted this view by introducing organisational and marketing innovation into the guidelines for collecting and interpreting innovation data (“Oslo-Manual”)

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Area of Study (denoted by red spots)

Kano, Port-Harcourt, Lagos, and the Federal Capital Territory - Abuja.

These cities were selected based on their predominant commercial activities and their age-long existence where most of the ICT firms prefer to be based coupled with the proximity of Lagos and Rivers to sea ports. Furthermore, Lagos house the popular otigba cluster which is believed to be representative of ICT developments rapidly taking place in other cities of Nigeria and even in Africa.

Nigeria is longitude 8º00´ East of Greenwich and latitude 10º00´ North of the Equator. Estimated population is about 140 million.

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Sample Population The sample population was taken

from the major 5,000 companies in Nigeria published in the 2007/08 Goldstar Directories of which 21% (1066) were found to be ICT firms having a range of 10 – 300 employees.

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Composition of the Nigerian ICT FirmsNature of ICT Business No. of

Companies Computer software development 75 Computer systems engineering and systems support services

109

Internet service providers 51 Internet design & engineering services 32 Computer (hardware & peripherals) Assembly 1 Computer (hardware) manufacturing 1 Computer (hardware, peripherals & consumables) sales & services

289

Computer (information technology) consultancy & solutions provision

87

Computer (printer) toner remanufacturing & recycling 2 Computer education and training services 63 Telecommunication engineering & consultancy services 43 Telecommunication equipment & systems sales and service

80

Telephone (fixed wireless/mobile) service providers 14 Telephone (mobile) & accessories sales & repairs 42 Telephone (pre-paid cards) operations 18 Telephone (wired/fibre-optic) service providers 2 Television (cable) re-broadcasting services 3 Office automation, business machines & equipment sales and services

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Satellite (VSAT) communication engineering services 44 Satellite (VSAT) communication equipment 30 Telecommunication (non-telephony) service provides 5 Telecommunication consulting services 3 TOTAL 1066

Compiled from Major 5,000 Companies in Nigeria, Goldstar Directories 2007/08

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Sample Size and Sampling Technique A sample size calculator software by Raosoft, Inc © 2004, which

is based on the normal distribution statistical method given by

x = Z(c/100)2r(100-r)

n = N x/((N-1)E2

+ x)

E = Sqrt[(N - n)x/n(N-1)]

where n is the sample size, E is the margin of error, N is the population size, r is the fraction of responses of interest, and Z(c/100) is the critical value for the confidence level c; was used to select 275 ICT companies in Nigeria situated in Lagos, Kano, Abuja and Port-harcourt; with 5% margin of error, 95% confidence level, population size of 1066 firms and a response distribution of 60%. A purposive sampling technique would be used to select the firms in the states.

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Study Variables and Measurement

The study variables and measurements shall include:

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Identification of Major innovations btw 2003 and 2007

Product innovation (introduction of a good or service that is new or significantly improved with respect to its characteristics or intended uses. This includes significant improvements in technical specifications, components and materials, incorporated software, user friendliness or other functional characteristics)

Process innovation: implementation of a new or significantly improved production or delivery method. This includes significant changes in techniques, equipment and/or software.

Marketing innovation: implementation of a new marketing method involving significant changes in product design or packaging, product placement, product promotion or pricing.

Organisational innovation: implementation of a new organisational method in the firm’s business practices, workplace organisation or external relations.

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Enterprise innovation and grading

Scale for Grading Enterprise’s Innovations Low (Degree of Novelty) High Degree of Novelty Clever Gimmick Science-

intensive a) Fundamentally new to the world 4 5 b)Similar innovations adopted in other industries (new to the firm)

3 4

c)Similar innovations adopted in enterprise’s own industry, but its innovations differ in identifiable ways from other Enterprise’ innovations

3 4

d)Same or very similar innovations adopted by competitors

2 3

1. Major innovations (products, processes, marketing and organization)

e)No major innovations at all 0 0 Yes 1 3 2.Incremental

innovations No 0 0

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Measurement of Innovative Index

Two proxies will be used, based on the work of Romijn and Albaladejo (2004). The first proxy measure, called ‘innovation index 1 (II -1), will be based on the presence or absence of ‘major’ innovations during the three years preceding the study.

The second proxy, ‘innovation index 2 (II-2), which is more complex, will capture the incidence of major innovations, and also an assessment of their originality and technological complexity. It will also include a rating for the importance of ‘incremental’ innovations

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Measurement of innovation activities (a) Innovation activities for product and process innovations

Intramural (in-house) R&D Acquisition of R&D (extramural R&D) Acquisition of other external knowledge: Acquisition of rights to use

patents and non-patented inventions, trademarks, know-how and other types of knowledge from other enterprises and institutions such as universities and government research institutions, other than R&D.

Acquisition of machinery, equipment and other capital goods Other preparations for product and process innovations: e.g. design,

planning and testing for new products (goods and services), production processes, and delivery methods that are not already included in R&D

Market preparations for product innovations Training: Training (including external training) linked to the

development of product or process innovations and their implementation.

Measured under two scale items: YES (successful, ongoing, abandoned) and NO

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Factors influencing innovation and Measurements Knowledge factors: • Innovation potential (R&D, design, etc.) insufficient • Qualified personnel: Within the enterprise / In the labour market • Information on technology / markets • Deficiencies in the availability of external services • Difficulty in finding co-operation partners for: Product or process development / Marketing partnerships • Organisational rigidities within the enterprise: Attitude of personnel/ managers towards change,

Managerial structure of enterprise • Inability to devote staff to innovation activity due to production requirements Institutional factors: • Lack of infrastructure • Weakness of property rights • Legislation, regulations, standards, taxation Cost factors: • Excessive perceived risks • Cost too high • Lack of funds within the enterprise • Lack of finance from sources outside the enterprise: Venture capital / Public sources of funding Market factors: • Uncertain demand for innovative goods or services • Potential market dominated by established enterprises Other reasons for not innovating: • No need to innovate due to earlier innovations • No need because of lack of demand for innovations

All measured on a four scale item of degree of importance which include High, Medium, Low and Factor not experienced

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Helen Aderemi

Objectives and effects of innovation Competition, demand and markets Replace products being phased out Increase range of goods and services Develop environment-friendly products Increase or maintain market share Enter new markets Increase visibility or exposure for products Reduced time to respond to customer needs Production and delivery Improve quality of goods and service Improve flexibility of production or service provision Increase capacity of production or service provision Reduce unit labour costs Reduce consumption of materials and energy Reduce product design costs Achieve industry technical standards Reduce production lead times Reduce operating costs for service provision Increase efficiency or speed of supplying and/or delivering goods or Improve IT capabilities Workplace organisation Improve communication and interaction among different business activities Increase sharing or transferring of knowledge with other organisations Increase the ability to adapt to different client demands Develop stronger relationships with customers Improve working conditions Reduce environmental impacts or improve health and safety Meet regulatory requirements

All measured on a four scale item of degree of importance which include High, Medium, Low and Factor not experienced

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Linkages and information sources The innovative activities of a firm partly

depend on the variety and structure of its links to sources of information, knowledge, technologies, practices, and human and financial resources. Each linkage connects the innovating firm to other actors in the innovation system: government laboratories, universities, policy departments, regulators, competitors, suppliers, and customers.

This innovation survey will obtain information on the prevalence and importance of different types of linkages, plus the factors that influence the use of specific linkages.

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Linkages & Information sources 2External linkages: (a) Open information sources (b) Acquisition of knowledge and technology (c) Innovation co-operation

Sources for transfers of knowledge and technology Internal sources within the enterprise: *R&D, *Production, *Marketing,

*Distribution Other enterprises within the enterprise group External market and commercial sources: *Competitors, *Other

enterprises in the industry,*Clients or customers, *Consultants/consultancy firms,*Suppliers, *Commercial laboratories,

Public sector sources: *Universities and other higher education institutions, *Government/public, research institutes, *Private non profit research institutes, *Specialised public innovation support

General information sources: Patent disclosures / Professional conferences, meetings, literature and journals / Fairs and exhibitions /Professional associations, trade unions / Other local associations / Informal contacts or networks / Standards or standardisation agencies / Public regulations (i.e.environment, security)

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Impact and outcome of innovation on Performance

To evaluate the impact of innovations on business performance based on annual profit, the following model is considered as relevant:

Performance of ICT firms will be measured in terms of profitability in the last accounting year. Mathematically, this will be expressed as:

Q0 = f(Xi) Where: i = 1,2,3………………………………….,10 for ICT firms Q0 = Performance (Measured in terms of profitability) X1 = age of the enterprise (based on year of establishment) X2 = staff strength (total number of employees) X3 = educational qualifications X4 = working experience measured in years X5 = investment in research and development (measured in Naira

investment) X6 = investment in training (measured in Naira investment) X7 = product innovation (Dummy: Yes = 1, No = 0) X8 = process innovation (Dummy: Yes = 1, No = 0) X9 = Organisational innovation (Dummy: Yes = 1, No = 0) X10 = Marketing innovation (Dummy: Yes = 1, No = 0)

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Research Instruments and Data collection Data will be obtained through primary and secondary

sources

Primary sources will be through the use of structured questionnaire and interview mainly from ICT firms involved in production, engineering, maintenance and sales of television, telephones, global system for mobile communications (GSM), computer (notebooks, laptops and desktops) hardware and software and its accessories such as power pact, unlimited power supply (UPS), printer, storage devices, modems, satellites, VSAT and servers.

Secondary data sources includes from reports, journals, internet, government publications and newspapers

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Design of QuestionnaireA structured questionnaire would be designed having six sections. Questions in section A would identify firm’s nature of business and

profile. Section B would assess the skill(s) training and development of

respondents; Questions in Section C would verify the licensing and linkages that exist

in the firms; Section D would collate the types of innovation and innovation activities

within the study period. Section E would post questions on reasons for innovating Questions in Section F would elicit from respondents sources of

information for innovation. Section G would measure the impact of innovation on firm’s performance Section H would elicit information on obstacles to innovation in the firms Section I would post questions on R&D and Patents Section J would post questions on the use of ICT Section K will address government support and policy for the ICT industry

in Nigeria.

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Validity of Research Instruments The pilot test would be conducted in

Ibadan, Oyo state with about 10 firms.

The comments, suggestions and corrections made by the respondents would be implemented to improve the quality of the instrument.

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Data processing and Analysis Data gathered would be sorted, coded and analyzed

using the Statistical Package for Social Science (SPSS) and Microsoft Excel.

Percentages, mean and cross tabulations will be used to describe the observations.

In measuring the determinants of innovative capability, cross tabulation and spearman correlation will be used

Cross tabulations and correlation analysis will also be used to measure the impact of linkages and interaction and its impact on innovative capability of the enterprises.

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THANK THANK YOUYOU

A STUDY OF TECHNOLOGICAL INNOVATIONS IN THE INFORMATION AND COMMUNICATIONS TECHNOLOGY INDUSTRY IN...

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