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Searching for Dependencies between Business Strategies and Innovation

Outputs in Manufacturing: An Analysis Based on CIS

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 sustainability

Article
Searching for Dependencies between Business Strategies and
Innovation Outputs in Manufacturing: An Analysis Based
on CIS
Sylwia Pangsy-Kania 1 , Anna Golejewska 1 , Katarzyna Wierzbicka 2 and Magdalena Mosionek-Schweda 1, *

1 Faculty of Economics, University of Gdansk, 81-824 Sopot, Poland; [email protected] (S.P.-K.);

[email protected] (A.G.)
2 Faculty of Economics and Finance, University of Bialystok, 15-082 Bialystok, Poland;
[email protected]
* Correspondence: [email protected]

Abstract: A modern enterprise can use changes in its environment as an opportunity to create new
products and services, constituting a competitive advantage. This ability is in turn determined by
its adopted business strategy. The aim of this study is an attempt to find the relationship between
business strategies used in industrial enterprises and their effects in the form of various types of
innovations. Our research covered innovative manufacturing companies from selected EU member
states and Turkey. Two research hypotheses were formulated: H1: The importance of business
strategies to innovative companies is different between countries. H2: The clusters identified are
not homogeneous in terms of the innovation outputs achieved by the companies. Our analyses are
based on data derived from the CIS 2018 for the period of 2016–2018. To verify these hypotheses,
statistical methods were used, including a cluster analysis. The results of the analysis indicate that
the manufacturing companies in the surveyed countries apply various combinations of business
strategies, which may translate into results in terms of innovation. Business process innovations are
dominated by new or improved methods for producing goods or providing services.

Keywords: innovation; open innovation; innovation activity; business strategies; strategic

Citation: Pangsy-Kania, S.; innovations; manufacturing; cluster analysis
Golejewska, A.; Wierzbicka, K.;
Mosionek-Schweda, M. Searching for
Dependencies between Business
Strategies and Innovation Outputs in
1. Introduction
Manufacturing: An Analysis Based
on CIS. Sustainability 2023, 15, 7428. An important factor in maintaining a competitive advantage and efficiency in a
https://doi.org/10.3390/su15097428 knowledge-based economy is the ability to introduce innovations constantly. Consid-
ering the idea of sustainable development which has been discussed globally, nowadays
Academic Editor: Paulo Afonso
innovations must have at least a neutral impact on the environment and society. The ability
Received: 31 March 2023 to create innovation is in turn determined by the business strategy adopted by an enter-
Revised: 24 April 2023 prise. Such a strategy, involving long-term planning and actions aimed at development,
Accepted: 27 April 2023 is primarily oriented towards the introduction of innovations that enable the dynamic
Published: 30 April 2023 development of a company.
The innovative process in enterprises is characterized by specific features. Regardless
of the adopted innovation implementation model, it is required to acquire skills and
establish relationships with the environment [1]. An innovative enterprise as a learning
Copyright: © 2023 by the authors.
organization, i.e., reacting to changes in its environment, can achieve business goals,
Licensee MDPI, Basel, Switzerland.
including, for example, changes in its market position as well as increases in profit or the
This article is an open access article
company’s value [2]. A modern enterprise can use these changes as an opportunity to
distributed under the terms and
create new products and/or services which constitute a competitive advantage. The term
conditions of the Creative Commons
“an innovative enterprise” refers to a company that has introduced at least one product or
Attribution (CC BY) license (https://
creativecommons.org/licenses/by/
process innovation in an analyzed period, i.e., a new or significantly improved product or
4.0/).
process for the surveyed enterprise. Such innovative companies are characterized by their

Sustainability 2023, 15, 7428. https://doi.org/10.3390/su15097428 https://www.mdpi.com/journal/sustainability

Sustainability 2023, 15, 7428 2 of 13

ability to search for new ideas, solutions, concepts, etc., and to implement them through
economic activity. The activity and level of innovation of enterprises depend on their
adopted business strategy. Our paper reveals the relationship between business strategies
used by innovative industrial enterprises and the innovations generated by them. It aims
to determine which strategies create which types of innovation. Our research may be
the first step in an attempt to explain the dependencies between business strategies and
innovation outputs. Thus, it can be considered as a starting point to fill the research gap in
the literature on this subject.
Our analysis is based on data derived from the CIS 2018 [3]. Two research hypotheses
result directly from the aim of the study:

Hypothesis 1: The importance of business strategies to innovative firms is different between countries.

Hypothesis 2: The clusters identified are not homogeneous in terms of the innovation outputs
achieved by the companies.

Innovativeness allows companies to improve their competitive position in the market.

Various business strategies implemented by companies, depending on their needs and mar-
ket perspectives, could result in different types of innovation, as the effect of innovativeness.
Most often this comprises innovation in products and in processes.

2. Literature Review
2.1. Innovation Typology and Innovation Activity
While considering the search for relationships between business strategies and the
results of innovation in production, it should be emphasized that currently all economic
processes show a strong relationship with new technologies and innovations. One can even
say that they are interdependent. In addition, we must find an answer to the frequently
asked question: what kind of innovation or technology should be used in an enterprise’s
economic and social life in order to generate an appropriate rate of return?
Definitions of innovation can be found in the works by [4–13]. Some authors claim that
innovation is the creation of a new idea and its implementation in a new product, process, or
service, which may result in the dynamic growth of the national economy and employment
rates, as well as the creation of pure profit for the innovative business enterprise [14]. In
general, the concept of “innovation” is quite a complex and multifaceted subject in research,
but there is still no definition of innovation that has been generally accepted in science [15].
There are several main ways to analyze this term. Schumpeter, who may be called the
father of the theory of innovation in the economy generally, considered innovations as
technological changes of an economic nature, as the use of newly formed associations of
productive forces to solve business problems [16]. According to Twiss, innovation is a
process that contains science, technology, economics, and management, as it is working
out a new way to conduct an enterprise and extends from the appearance of the idea to its
commercialization in terms of production, exchange, and consumption [17].
Innovation, as a process, is long and cumulative way of performing a lot of organiza-
tional steps, starting from the phase of generating a new idea to its implementation phase.
Through the implementation process, a new idea is developed and commercialized into a
new marketable product or a new process with a subsequent cost reduction and increased
productivity [14].
There are many discussions and concerns on how innovation should be measured at
each stage. Some authors, such the authors of [18,19], suggest measuring new and improved
products as the output of innovation, which is considered new product development.
West et al. [20] and Akgün et al. [21] propose measuring improvements in processes
and methods, while Czarnitzki and Kraft [22] propose measuring the market success of
innovation, suggesting the “ratio of innovative product sold in the market to total sales”.
Considering market aspects, Elenkov and Manev [19] discuss indicators of the success of
Sustainability 2023, 15, 7428 3 of 13

new products on the market and indicate that the rate of success of new products on the
market may be very vulnerable and never reach 100%.
Some authors refer to patent applications for innovation [23,24]; however, Makri and
Scandura [25] suggest measuring the importance of patents in terms of patent citations.
It is also worth mentioning the works by [26–31] which develop the concept of output
performance, including financial, temporal, market, and product-related factors.
Innovativeness is the condition of having a competitive advantage. However, with
a broader perception of innovation, we can see that the combination of knowledge is
essential for the creation of new products, ideas, and technologies [32–36]. The process of
commercializing innovation has been categorized by [37] and includes idea generation,
initial application, feasibility determination, and implications. Another important aspect of
organizational innovation is that it should be adapted to both the needs of the organization
and the market.
As global competition rises and product life cycles shorten, the pressure to innovate
is growing. Achieving low costs together with high quality is no longer a guarantee for
success and earning a lot of money [38]. Most innovation projects fail systematically due to
being managed as raw technology projects. The internal and centralized approach to R&D
is becoming obsolete in most organizations. More open forms of innovation are required in
which internal and external ideas are leveraged across the organization [39].
Currently, there has been a focus on organizational resources and capabilities as the
main sources of competitive advantage. In the past, companies developed strategies to
minimize product costs by optimally combining land, labor, and capital. In the second part
of the 20th century, a fourth dimension, knowledge, was added to these three economic
inputs. All scientific, technological, organizational, financial, and commercial steps which
lead to, or are intended to lead to, the implementation of innovations are defined as
innovation activities [40].

2.2. Oslo Manual and CIS 2018—How Should Innovation Activity Be Measured?
The fourth edition of the Oslo Manual is an international source strongly committed to
creating a database supporting innovation investments. The 2018 edition of the Oslo Man-
ual includes enhanced guidance to reflect changing user interests and accumulated practical
experience. The manual measures scientific, technological, and innovation activities. Better
measurements of innovation as well as its impact on economic growth and sustainable
competitive advantage are key to coordinating innovation policies across countries [40].
The choice of countries analyzed in our paper was determined by the availability of data in
the Community Innovation Survey (CIS) 2018 [3].
The CIS is the reference survey on innovation in enterprises. It has been the reference
for information on business innovation in the EU since 1992. After the fourth revision of
the Oslo Manual in 2018, the CIS underwent a substantial change. (Revision efforts were
directed to improve the quality of the CIS data as well as to increase the efficiency of data
production; to take account of major aspects of the revision of the Oslo Manual; to increase
policy relevance of the CIS informative content; and to increase the usability of the statistical
outputs of the survey [41]). The CIS 2018 was carried out in the following countries: EU
member states, Norway, Iceland, Switzerland, Turkey, Serbia, Macedonia, and Montenegro,
but data for the last three countries are not disseminated in Eurobase. An innovation for
CIS data collection means a new or improved product or process (or a combination thereof)
that differs significantly from the entity’s previous products or processes and that has been
made available to potential users (as a product) or brought into use by the entity (as a
process) [3]. The CIS is designed to provide information on the innovativeness of business
economy sectors. It analyzes innovation outcomes which depend on enterprises’ business
strategies. Innovation activity is measured by inputs and outputs.
 2.3. Business Strategy and Innovation—Input and Output towards Creating Sustainable
Competitive Advantage
Strategy is a key element in a company’s long-term competitive advantage. Andrews
Sustainability 2023, 15, 7428 4 of 13
[42] was one of the first theorists who showed the differences between a business strategy
and a corporate strategy, stressing that a strategy should be seen as a conscientious plan
to align the enterprise with opportunities and threats posed by its environment. Business
2.3. Business Strategy and Innovation—Input and Output towards Creating Sustainable
strategy
Competitive is aAdvantage
wide and diverse field. It can be traditional or innovative [43]. It is the out-
come of decisions with respect to an enterprise’s environment, structure, and processes
Strategy is a key element in a company’s long-term competitive advantage. An-
[44].
drews While there
[42] was one are
of athelotfirst
of papers
theoristsconcerning
who showed thetherelationship betweena innovation
differences between business and
strategy
strategy in andefforts to create
a corporate a sustainable
strategy, stressingcompetitive
that a strategy advantage
should be[45–50],
seen as athere are still few
conscien-
works exploring how enterprises with different strategic orientations
tious plan to align the enterprise with opportunities and threats posed by its environment. create product and
process
Businessinnovation
strategy is a[45,51]
wide and or diverse
how firms field.with
It candifferent strategic
be traditional orientations
or innovative [43].manage
It is in-
the outcome
novative of decisions
practices [52]. Thewithstudy
respectoftoZahra
an enterprise’s
and Covin environment,
[53] emphasizesstructure,
theand pro-
importance of
cesses [44]. While there are a lot of papers concerning the relationship
companies’ performance. Ritter and Gemünden [54] draw attention to technological and between innovation
and strategy in efforts to create a sustainable competitive advantage [45–50], there are still
network competence in innovation. Considering business models, business strategies, and
few works exploring how enterprises with different strategic orientations create product
innovation, Teece [55] concludes that a business strategy is a narrower concept than a
and process innovation [45,51] or how firms with different strategic orientations manage
business
innovative model. This
practices means
[52]. that an
The study analysis
of Zahra andofCovin
the link
[53] between
emphasizes a strategy and business
the importance
model is needed to protect a sustainable competitive advantage.
of companies’ performance. Ritter and Gemünden [54] draw attention to technological Most often, non-innova-
tive
and enterprises do not make
network competence significant
in innovation. changes inbusiness
Considering the businessmodels, model [56].strate-
business Badiru [57]
analyzes
gies, and innovation and innovative
innovation, Teece [55] concludes activity
that ainbusiness
the form of a chosen
strategy strategy
is a narrower as strategies
concept
than
for a businessallocating,
managing, model. This means
and that an analysis
synchronizing of the link between
the organization’s a strategy tools,
technological and man-
business model is needed to protect a sustainable competitive
power resources, and work processes to achieve a given result in an efficient and targeted advantage. Most often,
non-innovative enterprises do not make significant changes in the business model [56].
manner.
Badiru [57] analyzes innovation and innovative activity in the form of a chosen strategy
As for innovation activity in manufacturing, inputs are related to a favorable innova-
as strategies for managing, allocating, and synchronizing the organization’s technological
tion
tools,environment and outputs
manpower resources, and workare defined
processesas to the results.
achieve a givenTheresult
results
in anmean innovation.
efficient and In
our work, a
targeted manner. strategy is the input, and innovation is the output (Figure 1). The input for
innovation activity inactivity
As for innovation manufacturing is the innovation
in manufacturing, strategy,
inputs are related to aand the output
favorable inno- is the
product and process
vation environment andinnovation—as
outputs are defined the effect
as the of one of
results. Theten innovation
results strategies [3,40]:
mean innovation.
In our work,
improving a strategy
existing goods is theorinput, and(1),
services innovation
introducingis theentirely
output (Figure
new goods 1). The orinput
services (2),
for innovation
reaching out toactivity in manufacturing
new customer groups (3), is the innovation strategy,
customer-specific and the (4),
solutions output is the strat-
low-price
product
egies (5),and process innovation—as
high-quality strategies (6), thea effect
broadofrange
one ofof ten innovation
goods strategies
and services [3,40]:
(7), key goods
improving existing goods or services (1), introducing entirely new goods or services (2),
and services (8), satisfying established customer groups (9), standardized goods or ser-
reaching out to new customer groups (3), customer-specific solutions (4), low-price strate-
vices (10).
gies (5), high-quality strategies (6), a broad range of goods and services (7), key goods and
services (8), satisfying established customer groups (9), standardized goods or services (10).

Figure 1. Innovation activity in manufacturing—from strategy to innovation. Source: own elaboration

based on [3].
Figure 1. Innovation activity in manufacturing—from strategy to innovation. Source: own elabora-
Our paper
tion based on [3].considers an innovation strategy as a type of business strategy. An innova-
tion strategy concerns innovative processes inside and outside the entity. The separation
of this strategy is important for all possible levels of the enterprise strategy. At the com-
Sustainability 2023, 15, 7428 5 of 13

pany level, the innovation strategy concerns the decisions about setting out the strategic
orientation of the entity and determining its development policy [58]. Innovations are often
considered not only as a type of strategy, but also as the most important element of the
strategy of all enterprises, regardless of the scale and scope of their operations.
The input business strategy is given by the enterprise’s evaluation of its cost of
production compared to that of its competitors. However, innovation also requires a
human resource strategy, financial strategy, etc. [59]. Nowadays, all economic processes
are closely related to innovations, and a new breed of innovation—open innovation—has
become a managerial imperative. Open innovations may allow for the creation not only of
new products and processes, but also of new complementary links in the value chain [43].
Open innovation is a collaborative model that enhances innovation. Considering that
the innovation ecosystem is characterized by numerous interactions between its various
components, it should be emphasized that the innovation input has a significant and
positive impact on countries’ innovation output [60]. Researchers who focus on innovation
ecosystems and sustainability point out that participating in an innovation ecosystem
brings benefits to the entities involved [61]. Including R&D and innovation activities
is particularly important for small- and medium-sized enterprises, as these strategies
are crucial for increasing the company’s productivity, competitiveness, and ultimately
survival [62].
The multifaceted nature and complexity of innovativeness and innovative activity
as a result of many social, economic, and spatial processes and phenomena mean that
research in terms of the importance of innovation for the development of enterprises is a
complex problem. Among theoreticians and practitioners dealing with this subject, there
is an agreement that innovation cannot be measured with one or more indicators, thus
the important research problem is the selection of methods and measures for assessing
innovation. This applies to both analyses on a global scale and analyses limited by territory,
e.g., to the area of the European Union. Moreover, as the authors of this study wish to
point out, the measurement and evaluation of the operation of innovative strategies are an
extremely difficult process to grasp and study. Additionally, it is presumed that, according
to the authors’ best knowledge, the process of the impact of innovative strategies on the
activities of enterprises has not been examined before.

3. Materials and Methods

The aim of this analysis was to find and compare the role of business strategies used
by innovative companies in manufacturing in selected countries, i.e., the EU member states
and Turkey. The choice of countries was determined by the availability of data in the CIS
2018. The first and only survey in which the importance of 10 business strategies to the
economic performance of enterprises was examined. These 10 business strategies have
been already mentioned in the previous section. Although CIS 2018 covers more countries,
information on the importance of the strategies was only available for 22 of them.
Data used for our research are based on the 3-year reference period of 2016–2018.
An enterprise is considered as innovative if during the reference period it successfully
introduced a product or process innovation, had ongoing innovation activities, abandoned
innovation activities, had completed but not yet introduced the innovation, or was engaged
in in-house R&D or R&D contracted out. CIS 2018 includes the most recent changes
recommended by the latest Oslo Manual 4th Edition which redefined the concept of
innovation by distinguishing between only two types of innovation: ‘product’ and ‘business
process’ (formerly split into process, organizational, and marketing innovations) [40].
Initially, an attempt was made to analyze strategies in individual industries, including
industries with different innovation intensities. Unfortunately, due to the significant lack of
data, this was abandoned.
Two research hypotheses were formulated:

Hypothesis 1: The importance of business strategies to innovative firms is different between countries.
 Hypothesis 1: The importance of business strategies to innovative firms is different between coun-
tries.

Hypothesis 2: The clusters identified are not homogeneous in terms of the innovation outputs
Sustainability 2023, 15, 7428 achieved by the companies. 6 of 13

To verify the hypotheses, statistical methods were applied, including Ward’s cluster
Hypothesis 2: The clusters identified are not homogeneous in terms of the innovation outputs
analysis.
achieved by the companies.
4. Results
To verify the hypotheses, statistical methods were applied, including Ward’s clus-
Companies may compete in different ways, i.e., focusing on price or quality, shaping
ter analysis.
the market, reacting to competition, getting involved in high-risk and high-reward activ-
4. Results
ities versus low-risk activities, entering new or remaining with old stable partnerships
Companies
implementing new may or compete in different
modernized ways, models,
business i.e., focusing on price
focusing onor quality,product
a single shaping market
the market, reacting to competition, getting involved in high-risk
or serving multiple markets simultaneously. The strategies used or their combination and high-reward activ- de-
ities versus low-risk activities, entering new or remaining with old stable partnerships,
termine the quantity, type, and quality of innovations generated in a company. Regarding
implementing new or modernized business models, focusing on a single product market,
the latter, multiple
or serving for example,
markets firms that serve multiple
simultaneously. markets
The strategies usedare morecombination
or their likely to have de- greater
opportunities and needs
termine the quantity, type, andforquality
innovations than those
of innovations that serve
generated a singleRegarding
in a company. product market
Focusing on example,
the latter, for quality should develop
firms that new-to-market
serve multiple marketsproduct
are moreinnovations,
likely to haveetc. [40].
greater
The results
opportunities andofneeds
the analysis show that
for innovations thanthe high
those importance
that of selected
serve a single productbusiness
market. strate-
Focusing
gies differson quality
across should
countries develop new-to-market
(Figure 2). It appears product
thatinnovations, etc. [40]. strategies for
the most important
The results of the analysis show that the high importance
innovation activity in manufacturing and its revenues are those focused of selected businesson strate-
improving
gies differs across countries (Figure 2). It appears that the most important
existing goods or services, attaining high-quality goods or services, and satisfying estab- strategies for
innovation activity in manufacturing and its revenues are those focused on improving
lished customer groups. An outlier in most cases is Denmark. Considering the average
existing goods or services, attaining high-quality goods or services, and satisfying estab-
percentage
lished customer of the companies
groups. for in
An outlier which
most the casesimportance
is Denmark.ofConsidering
these strategies was high, we
the average
percentage of the companies for which the importance of these strategies was high, we incrementa
may suppose that innovative manufacturing enterprises are rather focused on may
innovations, which confirms
suppose that innovative the trends
manufacturing observed
enterprises in the
are rather literature
focused [63]. Quality-focused
on incremental inno-
firms are
vations, moreconfirms
which likely to thedevelop new-to-market
trends observed product
in the literature innovations
[63]. [40]. The
Quality-focused firmsleast im-
are more likely to develop new-to-market product innovations [40]. The
portant for innovation activity were business strategies focused on low-cost, standardized least important for
innovation
key goodsactivity
and/orwere business
services thatstrategies focusedemphasis
put a greater on low-cost,onstandardized
highly efficient key goods
processes. A
and/or services that put a greater emphasis on highly efficient processes.
large variation in the responses was registered for strategies focused on incremental and A large variation
in the responses was registered for strategies focused on incremental and radical product
radical product innovations and established customer groups.
innovations and established customer groups.
100

80

60

40

20

median
-20 25%-75%
1 2 3 4 5 6 7 8 9 10 non-outliers

Figure 2. High importance of selected business strategies in manufacturing (innovative enterprises).

1,2, . . . ., 10: for description of strategies, see data and methodology sections. Source: own elaboration based
on [3].

The analysis of the CIS 2018 results shows that business process innovations represent
most of the outputs of innovation activities (58% for innovation core activities and 55%
Sustainability 2023, 15, 7428 7 of 13

for manufacturing). Business process innovations were dominated by new or improved

methods for producing goods or providing services (66% of enterprises introduced process
innovations); new methods of organizing work responsibility, decision making, or human
resource management (50%); and new or improved methods for information processing
or communication (50%). The lowest was the share of companies that had made changes
in logistics (less than 30%). Product innovations were mostly new to these companies.
New or significantly improved products that were new to the market were generated
by one third of the innovative enterprises that had introduced at least one new or sig-
nificantly improved product in manufacturing. Unfortunately, the lack of differentiation
between new and improved products did not allow us to conduct an analysis of radical
and incremental innovations.
According to the definition adopted in the CIS 2018, a company recognized as inno-
vative did not have to introduce any innovation between 2016 and 2018. It was sufficient
that it had incurred expenditures or conducted in-house research and development or
contracted out. It means that the results of implemented business strategies and thus the
innovative activities may appear with a delay and some of the outputs are not included in
the current survey.
The analysis of the importance of individual strategies in innovative industrial compa-
nies shows significant variation in the countries studied, which may be conditioned in part
by the different structure of their manufacturing, the degree of technological advancement
of the sectors, the innovation policy implemented, etc. Unfortunately, given the data on
the role of strategies for one period for a small number of countries, it is not possible to
confirm or exclude their impact on the type and volume of innovations generated. We can
only look for dependencies.
Table 1 presents a comparison of countries with the highest and the lowest ratings of
importance for the selected strategies to the economic performance of innovating enter-
prises in manufacturing. For comparative purposes, manufacturing was compared with
business sectors/innovation core activities (NACE Rev. 2 sections and divisions B-C-D-E-46-H-
J-K-71-72-73). The results of the analysis conducted from this perspective indicate that the
importance of the strategy in the countries analyzed remains similar in the business sector
and in manufacturing. Completely different group compositions occurred only for strate-
gies focused on a broad range of goods and services ranked as being of high or medium
importance. This may be determined by the share of services in the production structure
of selected countries. Regarding the group of countries that ranked strategies focused on
improving existing goods or services as being of high and medium importance, one expects
that they would emphasize the greater importance of incremental innovations focused on
product performance [64]. In the case of strategies focused on introducing entirely new
goods or services that are rather radical or even disruptive, more risky innovations can
be expected. Firms focused on reaching new customer groups may introduce radical and
innovative business models. Firms focused on customer-specific solutions will probably
generate product performance innovations, and firms looking for production efficiency
will likely implement strategies focused on low-price business strategies. New-to-market
products are seen as the result of a strategy focused on quality. We may expect to see
them in countries for which such strategies are important. Companies that focus on key
goods and services are probably implementing incremental changes in existing goods
and services rather than radical changes in the form of new products. Ranking a strategy
focused on satisfying established customer groups as highly important may suggest inno-
vations in the field of experience (service, channel, customer engagement, [64]). However,
the final outputs of innovation may depend on the mix of business strategies employed
by enterprises.
Sustainability 2023, 15, 7428 8 of 13

Table 1. Five countries with the highest and the lowest importance of selected strategies to the
economic performance of enterprises (in descending order).

Business Sectors Manufacturing

Strategy Average Importance High Average Importance Low Average Importance High Average Importance Low
and Medium and None and Medium and None
Malta, Portugal, Denmark, Czechia, Greece, Portugal, Denmark, France
Focus on improving existing
Slovakia, Cyprus, Bulgaria, Estonia, Malta, Cyprus, Czechia, Bulgaria,
goods or services
Greece France Romania Estonia
Portugal, Slovenia, Germany, Sweden, Slovenia, Turkey, Sweden. Germany,
Focus on introducing entirely
Turkey, Malta, Czechia, Estonia Portugal, Poland, Czechia, Spain,
new goods or services
Poland Spain Cyprus France
Turkey, Poland, Denmark, Italy Turkey, Poland Italy, Denmark
Focus on reaching out to new
Portugal, Slovenia, Sweden, Germany, Portugal, Lithuania, Sweden, Germany,
customer groups
Greece France Cyprus Bulgaria
Turkey, Slovenia Denmark, Czechia, Slovenia Turkey, Denmark, Bulgaria,
Focus on customer
Greece, Portugal, Bulgaria, Sweden, Portugal, Estonia, Czechia, Sweden,
specific solution
Germany, France Greece Romania
Turkey, Poland,
Sweden, Estonia Turkey, Poland, Sweden, Estonia,
France,
Focus on low-price Germany, Czechia, Romania, Cyprus, Germany, Czechia,
Luxembourg,
Slovakia Luxembourg Spain
Slovenia
Denmark, Bulgaria,
Portugal, Cyprus, Cyprus, Slovenia, Denmark, Bulgaria,
Czechia,
Focus on high quality Greece, Slovenia, Portugal, Greece, France, Romania,
Luxembourg,
Poland Poland Spain
Spain
Bulgaria, Czechia, Sweden, Czechia, Turkey, Portugal, Sweden, Czechia,
Focus on a broad range
Denmark, Germany, Slovakia, Bulgaria, Lithuania, Luxembourg, Slovakia, Bulgaria
of goods and services
Estonia France Latvia France
France,
Turkey, Hungary, Czechia, France, Turkey, Croatia,
Focus on key goods Luxembourg,
Croatia, Romania, Portugal, Slovenia, Cyprus, Hungary,
and services Sweden, Czechia,
Cyprus Luxembourg Romania
Portugal
Cyprus, Portugal, Denmark, Bulgaria Cyprus, Portugal, Denmark, Bulgaria,
Focus on satisfying
Poland, Greece, Spain, Germany, Poland, Greece, Spain, Germany,
established customer groups
Turkey Czechia Slovenia France
Turkey, Latvia, France, Sweden, Turkey, Latvia, France, Germany,
Focus on standardized
Poland, Croatia, Greece, Germany, Poland, Estonia, Sweden, Greece,
goods or services
Estonia Luxembourg Croatia Luxembourg
Source: own elaboration based on [3].

The next step was the cluster analysis, carried out using hierarchical clustering via
Ward’s method. The aim of this analysis was to identify country profiles based on the
innovation strategies used by their companies. Ward’s method is considered very effective
for creating homogeneous clusters [65]. Clusters are combined so that the within-group
variance is as small as possible. The countries are clustered according to the high importance
of the 10 aforementioned CIS 2018 business strategies for innovative enterprises active in
manufacturing (Figure 1). As a result, 22 countries are divided into four groups (Figure 3).
Italy is omitted due to numerous data gaps. The largest group consists of 11 countries while
the least numerous group includes one country, i.e., Denmark, which could in principle be
treated as an outlier. The differences among groups were analyzed using the mean values
of the variables (Figure 4).
The first group consists of one country, Denmark, which is characterized by the highest
percentage of innovative firms in manufacturing, indicating it highly valued strategies
focused on low prices and high quality and least valued strategies introducing entirely
new goods or services. The second cluster comprises three countries, Cyprus, Slovenia,
and Turkey, with the highest percentage of companies assigning high importance to all
of the strategies apart from the strategy focused on low price and on key goods and
services. Cyprus turned out to be the country with the highest share of enterprises that
introduced business process and product innovations not only in its cluster, but also among
all countries which participated in the CIS. The lowest scores in the group were achieved by
Turkey. The most numerous cluster consisted of eleven countries with a medium percentage
of firms assigning high importance to all of the selected strategies. This cluster could be
divided into two sub-clusters. The first one comprises Estonia, Latvia, Poland, Greece,
Sustainability 2023, 15, 7428 9 of 13

Portugal, and Luxembourg, the second one includes Croatia, Hungary, Malta, Slovakia,
and Romania. In the first sub-cluster, the highest shares of enterprises that introduced
both product and process innovations were recorded in Estonia and Greece, and the lowest
were recorded in Poland. Among the countries from the second sub-cluster, the leader
was Croatia. The lowest shares were recorded for Romania. The last cluster comprises
Bulgaria, Czechia, Germany, Spain, France, Lithuania, and Sweden. These are countries
where the lowest percentage of innovative enterprises in manufacturing reported assigning
high importance to all of the selected strategies in terms of their economic
Sustainability 2023, 15, x FOR PEER REVIEW
performance.
9 of 14
Despite
Sustainability 2023, 15, x FOR PEER REVIEW the low-rated importance of the selected strategies for economic
9 of 14 performance, it
is in this group of countries that high shares of firms that have introduced both types of
innovation were
countries while therecorded. The exceptions
least numerous group includeswereone Bulgaria
country,and
i.e.,Spain. In the
Denmark, example of this
which
group
countries of countries,
while the least it may
numerous be presumed
group that
includes one innovation
country, i.e., outputs
Denmark,
could in principle be treated as an outlier. The differences among groups were analyzed are
whichinfluenced more by
could
usinginthe
principle
innovation mean be treated
potential
values as an
than
of the byoutlier. The differences
the implemented
variables (Figure 4). among groups
strategies. Forwere analyzed
comparison, Figure 5 shows
using the mean values of the variables (Figure 4).
the full group of the countries for which the innovation data were available.
Bulgaria
Bulgaria
Spain
Spain
Lithuania
Lithuania
Czechia
Czechia
Sweden
Sweden
France
France
Germany
Germany
Denmark
Denmark
Estonia
Estonia
Latvia
Latvia
Poland
Poland
Greece
Greece
Portugal
Portugal
Luxembourg
Luxembourg
Croatia
Croatia
Hungary
Hungary
Malta
Malta
Slovakia
Slovakia
Romania
Romania
Cyprus
Cyprus
Slovenia
Slovenia
Turkey
Turkey
0

50

100

150

200

250

300
0

50

100

150

200

250

300

bonding distance
bonding distance
Figure
Figure3. Dendrogramme, Ward’s Ward’s
3. Dendrogramme, method, and Euclidean
method, anddistance. Source:
Euclidean own elaboration
distance. Source: based
own elaboration based
onFigure
[3]. 3. Dendrogramme, Ward’s method, and Euclidean distance. Source: own elaboration based
on
on [3].
[3].

1
100 1
10 80100 2
10 60 80 2
40 60
9 3
20 40
9 3
0 20

8 0 4

8 4 cluster 1
cluster 2
7 5 clustercluster
3 1
clustercluster
4 2
7 6 5 cluster 3
Figure 4. Four clusters and importance
cluster 4
6 of selected business strategies. Source: own elaboration
based on [3].
Figure 4. Four clusters and importance of selected business strategies. Source: own elaboration
Figure 4. Four clusters and importance of selected business strategies. Source: own elaboration based
Theonfirst
based [3].group consists of one country, Denmark, which is characterized by the high-
on [3].
est percentage of innovative firms in manufacturing, indicating it highly valued strategies
focused onfirst
The low group
prices consists
and highofquality and least
one country, valued strategies
Denmark, introducing entirely
which is characterized by the high-
new goods or services.
est percentage The second
of innovative firmscluster comprises three
in manufacturing, countries,
indicating Cyprus,valued
it highly Slovenia,
strategies
and Turkey,
focused onwith
lowthe highest
prices andpercentage of companies
high quality and leastassigning high importance
valued strategies to all ofentirely
introducing
the strategies
new goods apart from theThe
or services. strategy
secondfocused on comprises
cluster low price and on key
three goods and
countries, services.
Cyprus, Slovenia,
and Turkey, with the highest percentage of companies assigning high importance to all of
the strategies apart from the strategy focused on low price and on key goods and services.
 ing high importance to all of the selected strategies in terms of their economic perfor-
mance. Despite the low-rated importance of the selected strategies for economic perfor-
mance, it is in this group of countries that high shares of firms that have introduced both
types of innovation were recorded. The exceptions were Bulgaria and Spain. In the exam-
ple of this group of countries, it may be presumed that innovation outputs are influenced
Sustainability 2023, 15, 7428 10 of 13
more by innovation potential than by the implemented strategies. For comparison, Figure
5 shows the full group of the countries for which the innovation data were available.

70
60
50
40
30
20
10
0
Czechia

France

Poland
Ireland
Greece
Spain

Italy

Luxembourg
Hungary

Sweden
Belgium
Bulgaria

Denmark

Estonia

Croatia

Latvia
Lithuania

Malta
Netherlands
Austria

Portugal
Romania
Slovenia
Slovakia
Cyprus

Finland

Iceland
Norway

Turkey
Switzerland
Germany

business process innovation

new or improved methods for producing goods or providing services
product innovation

Figure 5. Percentage of innovative firms in manufacturing that have introduced product and/or pro-
Figure 5. Percentage of innovative firms in manufacturing that have introduced product and/or
cess innovations, 2016–2018. Source: own elaboration based on [3].
process innovations, 2016–2018. Source: own elaboration based on [3].

Among business Amongprocess innovations,

business process changes in production
innovations, changes inmethods are the
production most are the most
methods
common. In only two countries
common. (Germany
In only two countriesand(Germany
Cyprus) was and the percentage
Cyprus) was theofpercentage
firms that of firms that
had introduced new
had or improved
introduced newmethods for producing
or improved methods for goods or services
producing goodsnotorthe highestnot the highest
services
among the business
amongprocess innovations.
the business processIninnovations.
Germany, more companiesmore
In Germany, werecompanies
focused onwere focused
organizing work responsibility,
on organizing workdecision making,
responsibility, human
decision resources
making, management,
human and
resources management, and
methods for information processing or communication. In the case of Cyprus, these
methods for information processing or communication. In the case of Cyprus, these were
innovations inwere
logistics, information
innovations processing,
in logistics, or communication.
information processing,Apart from Cyprus, Apart from
or communication.
companies located in Greece,
Cyprus, companiesCroatia, and
located inItaly declared
Greece, Croatia,they
andhad most
Italy frequently
declared they imple-
had most frequently
mented innovations in logistics.
implemented Greece, in logistics.
innovations turn, was Greece,
the country where
in turn, wasbusiness process
the country where business
innovations ofprocess innovations
all types of all types most
were implemented were implemented
frequently. New mostorfrequently. New
significantly im-or significantly
improved
proved products that were products
new to that were new
the market weretointroduced
the marketmorewerefrequently
introduced by more
enter-frequently by
enterprises
prises from France, fromAustria,
Belgium, France,Finland,
Belgium,andAustria,
Norway.Finland, and Norway.

5. Conclusions
Companies seek to improve their competitive position in the market. They can achieve
this in different ways. One of them is to innovate, which is especially important in the era of
the knowledge economy. Their efforts can target different types of innovation, depending
on their needs and market perspectives. Various business strategies implemented by
companies and combinations of them may serve this purpose.
Considering innovation activity in the manufacturing sector, inputs are related to
a favorable innovation environment and outputs are defined as the results. Innovative
activity is influenced by open innovation. In manufacturing, the input means the innovation
strategy, and the output means product and process innovations—as the effect of one
of 10 innovation strategies. The purpose of searching for the relationship between the
innovation strategy and product or process innovations, as an output in production, is
to create a sustainable competitive advantage in enterprises. The reference survey on
innovation in enterprises is the Community Innovation Survey [3].
The results of the analysis carried out confirmed that the importance of individual
business strategies used in innovative enterprises in manufacturing differs in individual
countries. It may be noted that the most important strategies for innovation activity and its
revenues are those focused on improving existing goods or services, attaining high-quality
goods or services, and satisfying established customer groups. This may suggest that
enterprises are focused rather on incremental innovations. This is confirmed by the data
on the effects of innovative activity, according to which most product innovations are new
for the company and not for the market. In terms of business process innovations, in turn,
Sustainability 2023, 15, 7428 11 of 13

innovations in the production and service provision processes are dominant. As a result
of the cluster analysis used, groups of countries with a similar importance of individual
strategies were identified. Denmark turned out to be the definite outlier. Despite common
features, the identified clusters are not homogeneous in terms of the achieved innovation
outputs. The effects of the strategy were determined by many factors, including those
within it, i.e., the combination of strategies, period of application, or type of industry, as
well as outside it, i.e., the broadly understood innovation environment.
Unfortunately, the data on which the analysis is based cover only one period, which is
a significant limitation for making inferences. Due to numerous data gaps, it was also not
possible to analyze the significance of individual strategies for innovation outputs at the
industry level. The authors are aware that inferring the effects of innovation based solely
on business strategies, or their combination, is not fully justified. However, it is treated as a
starting point for subsequent analyses which would also consider other determinants of
innovation. The level and type of innovation generated within the identified clusters is not
homogeneous. It may be influenced by other factors already mentioned, such as production
structure, country-specific features, the level of human capital, R&D expenditures, or the
quality of the innovative environment. As there have not been previous studies on our
exact topic, we are unable to compare the results of our analysis to the results of previous
studies, which can also be considered as a significant limitation. The consideration of all
determinants over a longer period would undoubtedly improve the quality of our analysis.
The authors are aware of this paper’s limitations; therefore, they treat this analysis as a
kind of starting point for further, more detailed research.

Author Contributions: Conceptualization, S.P.-K., A.G., K.W. and M.M.-S.; methodology, S.P.-K.,
A.G., K.W. and M.M.-S.; formal analysis, S.P.-K., A.G., K.W. and M.M.-S.; investigation, S.P.-K., A.G.,
K.W. and M.M.-S.; resources, S.P.-K., A.G., K.W. and M.M.-S.; writing—original draft preparation,
S.P.-K., A.G., K.W. and M.M.-S.; writing—review and editing, S.P.-K., A.G., K.W. and M.M.-S.;
visualization. All authors have read and agreed to the published version of the manuscript.
Funding: This research received no external funding.
Institutional Review Board Statement: Not applicable.
Informed Consent Statement: Not applicable.
Data Availability Statement: Not applicable.
Conflicts of Interest: The authors of this research declare no conflict of interest.

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