1. INTRODUCTION
The food industry is of great importance for the Dutch economy because it generates more than 20 percent of the total added value of the industry, that is more than five percent of the total added value of the Dutch economy (2CBS Statline, 2016; Van der Wiel & Wijnstok, 2016). Murdoch and Miele (1999) separate the food industry into two main systems of production: on one hand, standardized, specialized production processes responding to economic standards of efficiency and competitiveness; on the other hand, localized, specialized production processes focused on environmental, nutritional, taste or health qualities. Among both systems of production are manufacturers of traditional food (traditional food firms). Traditional food firms produce food or beverage products of which (1) the key production steps are performed in a certain area at national, regional or local level, (2) which are authentic in their recipe origin of raw material, and/or production process, (3) which are commercially available for 50 years and (4) which are part of the gastronomic heritage (Gellynck and Kühne, 2008). In the Dutch northern provinces there are many traditional food firms that produce well known products in this region and possibly in other regions of the Netherlands. They are all considered as a Small to Medium Sized Enterprise (SME), because they employ fewer than 250 persons and their annual turnover is not exceeding 50 million euro (Commission Recommendation 2003/361/EC). One would recognize the type of product from the name of the company and many cases it is still a family business. Examples of products are cake, cheese, mustard, liquor, soup, and sausage among others, and consuming some of these products have become a tradition in the region but also in other regions in the Netherlands. There is a chance that some of these companies are still only producing the same traditional product and only innovated the production process, others possibly still practice the same method for over a hundred years. Maybe there are also companies that are making other products using the same production process. So it is feasible that these companies improved their companies still and through the years. Earle (1997) states that in the food industry the ultimate innovation is a new product or service. But could this also be the case for these traditional food firms?
The Dutch food industry is the leader of R&D expenditures in the EU and has a relatively high R&D intensity compared to the other countries in the EU (FNLI, 2015; Van der Wiel & Wijnstok, 2016). However, Avermaete (2002) argues that R&D expenditures, patent data and statistical data are highly limited and are not a proper way to measure the innovativeness of
food firms. Still he recognizes that all types of innovation are applicable in these firms. Baregheh et al. (2014) even states that innovation is one of the most important factors in the competitiveness of food firms. However, traditional food products cannot be changed too much in their production process, raw materials or recipe (Kühne et al., 2010). Therefore, traditional food firms have to consider a large amount of customer’ acceptance in the innovation of their products, and consumer led product development can be applied to a lesser extent than in regular food firms (Costa and Jongen, 2006; Kühne et al., 2010). With these restrictions it should be even harder for traditional food firms to find ways to innovate compared to regular food firms which do not have these restrictions in such strength. But it is possible that these traditional food firms have developed new products or penetrated new markets. What if they innovate their production process aligned with these new products, does this then create a risk for the traditional product that they produce?
Innovation in food firms partly depends on how they make use of internal resources such as qualified staff, experience of the manager, openness towards new ideas, or investment in know-how, and external resources through reliance on services, communication and collaboration with the customers, suppliers, similar firms and other firms inside the supply chain (Avermaete et al, 2004; Gellynck et al. 2011). ICT supports the access to and use of internal and external resources that is needed to innovate (Dyerson et al., 2013). ICT in SMEs primarily enhances cost reduction and efficiency improvements, but it can also support other innovation types, for instance enhancing new markets through website development, or creating an elaborate platform for customers. (Higón, 2012). So how does ICT support the innovation at traditional food firms?
To some extent researchers recently have grasped the importance of innovation in food firms and these studies show how these firms innovate in different parts of the business (Avermaete et al., 2004; Baregheh et al., 2009; Enzing et al., 2011). To a very small extent studies are in reference to innovation in traditional food firms (Gellynck and Kühne, 2008;2010; Kühne et al. 2010). The specific interest of the business as a traditional food firm and their innovation activities results in the first research question: How do traditional food firms innovate?
Besides, the adoption of ICT has only been researched to a small extent in SMEs in general, and to a very small extent in relation to innovation (Àntlova, 2009; Schubert et al. 2007). However, the adoption of ICT in the support of innovation in traditional food firms has not been researched yet. The specific interest of the innovation activities and the adoption of ICT for the
support of innovation results in the second research question: How does ICT influence innovation of these firms and what are the considerations in the adoption of ICT?
The relevance to answer this question lies in the small extent of research that has been conducted in Dutch traditional food firms concerning innovation and ICT in general and supporting innovation. Therefore this paper tries to identify if there are similarities and differences in their approach.
2. LITERATURE REVIEW
First this literature review gives an understanding of innovation. In the first paragraph the terminology of innovation will be described, and thereafter it is determined how food firms can innovate by using internal and external resources. The second paragraph describes how food firms can use ICT to support the use of internal and external resources in relation to innovation.
2.1 Innovation in (traditional) food firms
Innovation is, as Baregheh et al. (2009) state, “the multi-stage process whereby organizations transform ideas into new/improved products, service or processes, in order to advance, compete and differentiate themselves successfully in their marketplace”. The taxonomy by Francis and Bessant (2005) constitutes this “multi-stage process” more specific, structured and this foundation to research innovation. It suggests that innovation includes product innovation, process innovation, position innovation and paradigm innovation. This model can be applied to both high-tech and low-tech organizations and such could be the basis for future food sector wide studies (Baregheh et al. 2012). Product innovation involves changes in the products which an organization offers, process innovation involves changes in the way products are created and delivered, position innovation involves changes in the context in which products are introduced and paradigm innovation involves the changes in the underlying mental models which frame what the organization does (Francis and Bessant, 2005). Research shows that in food firms there is a positive relationship between engagements with the four types of innovation, where
implementation of one type of innovation leads to another type of innovation (Baregheh et al., 2012;2014). So it should be considered that there is interdependency between the innovation types, which causes that product innovation for one might be considered as a position innovation for another, and therefore innovation types should not be studied or adopted in isolation from one another (Baregheh et al. 2012).
Innovation closely linked with product, process and position innovation is often the most important for the competitiveness of food firms (Grunert et al. 1997). The same goes for traditional food firms, which is confirmed by a study of Kühne et al. (2010). They found that innovation in product quality, packaging and marketing were commonly mentioned and appreciated by the sector and customers. However, because of the limited consumer acceptance of innovations of traditional food products, these innovations should not change the sensory properties of the products (Kühne et al. 2010). Therefore, according to Gellynck and Kühne (2008) it is not frequently observed that traditional food firms innovate their product composition and process, and innovations such as improvement of packaging, size, quality, convenience, new markets and marketing exist more often.
Determinants of the innovativeness of traditional food firms are first the internal resources as entrepreneurial characteristics, skills of the workforce, openness towards new ideas and investment in know-how, and second external resources like reliance on services, communication and sources of information like or collaboration with suppliers, similar firms and other organizations (Avermaete, 2004). The entrepreneurial characteristics depends on age, education and firm experience, skills of the workforce relies on technical staff, and investment in know-how depends on training and marketing costs (Avermaete, 2004). It has also been argued that firm size has a positive relationship to innovation (Hussin et al. 2002). Innovative traditional food firms should use their internal and external network to get access to knowledge, but they often lack trust, skill or financial and physical resources to exchange information (Gellynck and Kühne, 2010). And, whilst information is the source of knowledge, without information there will be no source of innovativeness. Explicit knowledge can be transferred and stored with the use of ICT, but tacit knowledge is hard to store and is in traditional food firms mostly transferred from generation to generation (Avermaete, 2002).
Barriers to innovate in traditional food firms are labor shortages and the lack of methods, skills, understanding of benefits, and financial resources (Gellynck and Kühne, 2010; Lee et al. 2010). Another important barrier mentioned in the literature is the lack of information. Here, ICT can support innovation by creating linkages between internal activities, improving coordination of these activities through new information flows, and external activities by facilitating integration with customers and suppliers (Barba-Sànchez et al. 2007).
For traditional food firms this means that if they want to become more innovative they need to put more effort into the usage of internal resources, but also strengthen the collaboration with supply chain partners (Avermaete et al. 2004; Gellynck et al. 2011). Collaboration is based on integrated activities, such as sharing of information, knowledge, profits , risks and benefits, but it can fail due the lack of trust in the supply chain or not understanding the benefits of collaboration (Gellynck and Kühne, 2008). Innovation in food firms takes place within a specific environment and this environment is different for every regular food firm, where sectoral characteristics influence the innovativeness of these firms (De Jong and Marsili, 2006; Forsman, 2011). Gellynck and Kühne (2008) describe the collaboration in traditional food chains as informal, based on long-term (social) relationships and where the exchange of information and knowledge through the chain contributes to the competitive advantage. So maybe traditional food firms do take advantage of these external sources or maybe they are still bounded to their internal resources and information.
2.2 ICT in SMEs
ICTs are organized communication networks and data resources that collect transform and disseminate information within and among other organizations (Ongori and Migoro, 2009). Because information is the source of knowledge, and knowledge is the source of innovation, ICT is a ‘tool’ to support innovation. According to Huiban and Bouhsina (1998) technological change is necessary to manage the introduced multi-stage process of innovation. In other terms, ICT has the potential to support internal and external information, communication and collaboration to improve innovation in for example efficiency, quality, growth, administration, managing external relationships, cooperation, communication, diffusion of knowledge, and to increase the access to markets and the speed of response and transactions both business to business and business to customer (Barba-Sánchez et al., 2007; Dyerson et al., 2013; Ongori & Migoro, 2010).
This is possible through software and applications like data storage technologies, e-mail, e-commerce, ERP, EDI, internet, intranet, order processing, website, wireless access and video tracking (Arendt, 2008; Antlová, 2009; Dyerson et al., 2013; Ashrafi and Murtaza, 2008). ICT must be complementary exploited along other business processes, because ICT is not a strategic source itself (Barba-Sànchez et al. 2007; Barney, 1991).
The impact of ICT on innovation depends, according to Higón (2012) on the strategy of the firm, so if the improvement of efficiency is of greatest importance, ICT applications such as ERP or intranet should be chosen. Research by Dyerson et al. (2013) has shown that the most common ICT adopted by SMEs are a website, e-mail, internet and intranet. Furthermore they argue that ICT is mostly used for improving productivity and operational efficiency, keeping up with competitors, improving customer service, to share information with suppliers, information gathering, and very few invest in ICT because of external pressure. However in contrast what is described, they claim that ICT does not always improve the collaboration with other firms. Most of the SMEs they researched used ICT consultants for advice in adoption of ICT.
Harindranath et al (2008) found that in traditional sectors such as food, ICT were driven by needs of regulatory compliance instead of understanding its innovative capacity. The way ICT is adopted depends on training and experience of the managers, if they are forced by suppliers, the financial situation or the size of the organization (Antlová, 2009). If staff and management are more skilled in ICT they are found to be more innovative (Schubert et al. 2007).
Forcing the use of ICT is one of the main reasons of failure of implementation (Barba-Sánchez et al., 2007). Other barriers to adopt ICT are among others the lack of financial resources, the lack of knowledge and skills, the lack of security and trust in ICT, the lack of available information about relevant technologies, ignorance of ICT benefits and the resistance to change (Antlová, 2009; Ashrafi and Murtaza, 2009; Ongori and Migoro, 2010). Furthermore, Antlová (2009) claims that SMEs often tend to use ICT as a tool for data processing, not for sharing knowledge or strategic advantage
2.3 Conclusion
As described, traditional food firms need of internal and external resources of knowledge to be innovative. Also, to innovate, traditional food firms need access to internal and external knowledge by storing, sharing and using information. ICT is the perfect ‘tool’ for the use of information and knowledge to support product, process, position and/or paradigm innovation. Furthermore when traditional food firms innovate they have to consider a certain amount of customer’ acceptance. At last, the adoption of ICT for innovation of traditional food firms depends on firm specific characteristics that constitute motivations and barriers, the so called considerations. All parts of the described process are influenced by the firms specific environment. On forehand in figure 1, partly derived from frameworks on innovation at food firms of Avermaete (2002) and Grunert et al. (1997), we illustrated the position of ICT in the innovation of traditional food firms process. The terms inside the model are not comprehensive, for instance financial resources are internal resources also and these could possibly influence ICT adoption as well as innovation.