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related innovation to human capital management practices. To no great surprise, innovative firms
(those that had introduced a new product or process in the last five years), were also those that
scored highly on questions that measured their ability to manage highly skilled human resources.
New and Unique to the Market
In the process of carrying out this research, a new issue arose. Firms are described as being
innovative if they have developed a technologically new product or process. The Oslo Manual
defines an innovative firms as one that has introduced a product or process innovation is new to the
firm in the past three years. But for reasons outlined below (and confirmed during focus group testing
of the BC questionnaire), this definition was changed to innovation was new to the market for the past
five years. Oslo Manual type surveys in Europe suggest that approximately half of European firms
Innovation and the Management of Human Resources
CPROST Report #00-03 3
are innovative. This result, on the surface, appears to be the same as the CPROST results, however
the CPROST survey changes two component variables of the construct “innovation”.
The first change, extending the period for product introduction from three years to five years, lowers
one of the entry requirements for innovation. Except in certain, highly competitive industrial sectors
(like computers and software) product life cycles are not usually three years or less. In most
manufacturing industries, as well as in most services, product life cycles are at least three years, and
sometimes much longer. For example, by using a three year product life cycle, Boeing Aerospace
(or Airbus Industrie, for that matter), would only be considered innovative for about three years of any
given decade, given their approximately ten year product development cycles. Many other
industries, from consumer electronics to automobiles, are similar. This classification issue is
ameliorated in the case of large firms by having multiple product lines, and staggering product life
cycles : small and medium size firms with single product lines are unable to do this. This result is
shown in the Canadian 1993 Survey of Innovation in Manufacturing Enterprises (Baldwin & Da Pont,
1996). For the period 1989-1992, 50% of larger firms were considered innovative, compared to only
30% of small firms (less than 100 employees). Assuming a five-year development cycle, the
CPROST method considers as many as 75% to 80% of firms to be potentially innovative.
On the other hand, the second CPROST change within the construct “innovation” moves the entry
requirement in the opposite direction. To most practitioners, that is, people in the working world,
developing and selling new products, and competing with one another, innovation has quite a specific
meaning. “New” is not equivalent to “innovative.” Anyone can introduce a product they have not sold
before or a production process they have not used before, particularly after a competitor has taken
the risks and proven the new technology. Innovation to these people implies a large element of risktaking,
of putting the company on the line to become a market leader, rather than follow ing simply for
the sake of survival. To be innovative, a product should have no equivalent competition at the time it
is introduced, therefore new to the market This is a customer-based definition of innovation, and it is
the purchasing habits of customers that determine whether an innovation is successful or not. Using
Schumpeterian arguments, market instability and consequently growth comes about with changes to
the productive process, and the producer drives this process of innovation. Nevertheless, it is
incumbent on the consumer to accept the new product, and by purchasing it, to encourage and
reward the innovator. It is the first new product in the market that introduces the instability that
causes growth, subsequent entries by competitors attempt to restore the stability of the market and
eliminate the possibility of growth until the next innovation comes along. Consequently, new to the
firm should not be considered the entry point for innovation, indeed, most of the time, it is exactly the
opposite, restoring the stability to an economy destabilised by innovators.
Survey Results
The results below summarize the responses to questions on the innovation surveys that refer to
personnel practices within the firms, and which if answered positively, would be indicative of good
personnel management within the firm.
Innovation and the Management of Human Resources
CPROST Report #00-03 4
Training programs
Innovative firms are more likely to have some type
of training programs than non-innovative firms:
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