Rethinking Firms' Governance and Structure to Enhance Competitiveness

Innovation is the drive behind national competitiveness. Successful innovation is not just the result of technological inventions, but is also heavily dependent on “social innovation”: changing a firm’s structure, its management procedures and the organisation of work so that the firm can better leverage its technological knowledge. The ERIM research centre INSCOPE is devoted to the study of social innovation and provides valuable inputs to firms, industry associations, and the government.

“We should invest in human capital (social innovation) rather than just in technology.”
- Lodewijk Asscher, deputy prime minister of the Netherlands and minister for social affairs and employment9

Innovation has been consistently identified as a key factor necessary to improve competitive position, and, traditionally, investments have been focused on technological development. Technology, however, may also threaten social stability if not properly managed. The increasing reliability and use of robots in industrial processes, for instance, could prompt firms to invest exclusively in technological innovation and favor the use of automated machines over employment.10 The question is whether exclusive emphasis on technological innovation constitutes a winning stratagem in the long run.

This important issue was addressed thanks to knowledge generated at INSCOPE, which developed several tools to evaluate the impact of different forms of innovation on performance. One of these tools, the Erasmus Competition and Innovation Monitor, revealed that social innovation plays a major role in leveraging firms’ assets, and thus, on performance. INSCOPE research shows that probabilities of economic success are highest when 75% of financial resources are allocated to social innovation and the remaining 25% to R&D, illustrating a direct effect of investment in social innovation on business performances.

Apart from a useful instrument for firms to prioritize investments, the Erasmus Competition and Innovation Monitor highlights the potential of employees’ continued education in a firm’s performance, which gives firms an incentive toward valorization of human capital and ensures the government the importance of mitigating the threat of technology on social cohesion. INSCOPE research was valuable for the Dutch government when it sought advice on how to proceed with investments in R&D. The Erasmus Competition and Innovation Monitor helped identify successful firms that could provide feedback to lawmakers looking for better information when making crucial and sensitive decisions that would affect millions of Dutch citizens. This tool also demonstrates that adequate investment in social innovation results in higher chances to create new jobs that benefit society at large.

Firms’ and government actions to improve competitiveness must be paralleled by reliable international benchmarking to monitor progress toward increasing the country’s position in the world. While praising strengths, benchmarking also highlights critical areas that demand immediate attention by both private enterprises and the government. In this context, INSCOPE partnered with the Dutch Ministry of Economic Affairs and the World Monetary Fund (WMF) to collect data and analyse the Netherlands’ competitive position in the international theater. The effort led to official communications from the Ministry to the Chamber with suggestions for lawmakers to address the issues that emerged in the analysis.11

Benchmarking is also instrumental in evaluating large firms’ contribution to a country’s global position. INSCOPE contributed to a study to determine the strategic value of the Port of Rotterdam and its impact on the Netherlands’ international competitiveness. The report revealed that strategic importance contributes even more than the economic one to the essential contribution of the Port of Rotterdam to the competitiveness of Dutch firms.




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Source: ERIM Self Assessment Report 2010 – 2015, January 2017