From Approaching to Challenging the Forerunners : A Study of Innovation Capability Building in Brazilian Firms

Abstract: Innovation capability refers to the ability to continuously innovate. Firms have recognized this ability as the most critical source of innovation performance, firm performance, and sustained competitiveness. In emerging economies, innovation capability is also noted as a significant source of economic development, which can lead to improvements in education, health, and democracy.  It is not easy to build innovation capabilities in emerging economies. Unlike firms in developed economies, emerging economy firms (EEFs) lack resources, competencies, and capabilities. They depend on international clusters of innovative suppliers, as critical resources are not readily available within the firm or with other domestic partners. EEFs also face low-quality education, weak institutions, and financial constraints.  Although innovation capability building has attracted the interest of scholars over the last decades, the possibilities for developing better explanations of the concept are far from exhausted. The literature in this field still lacks consistency, a comprehensive viewpoint, and efficient operationalization. Moreover, economic slowdowns in several emerging economies reinforce the need to better understand how EEFs build innovation capability.  For this purpose, the case study method was applied in the research papers to investigate firms from Brazil, a recognized emerging economy in Latin America. The research included 13 case studies based on 47 interviews and numerous secondary sources. In addition, different levels of analysis, ranging from project to firm to ecosystem, helped to complement and enrich the findings and conclusions.  The research shows that EEFs build innovation capability by first learning and accumulating technological capabilities to approach the forerunners. Once the technological gap has been reduced, EEFs continue building their innovation capabilities by sensing the environment, seizing windows of opportunity, reconfiguring existing technological capabilities, managing suppliers and complementors, strategically aligning the technology upgrading, and providing continuous learning to keep their workforce prepared. At this later stage, the goal is to seize opportunities that help EEFs challenge or even overtake the forerunners. Finally, it is especially noteworthy that learning is present throughout the entire process.