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5INTEGRAL INDEX OF INNOVATIONS OF A CONSTRUCTION FIRM AS THE FACTOR OF
ITS INCREASED COMPETITIVENESS
Anna O. Mikhailova
St. Petersburg State University of Architecture and Civil Engineering, Russia E-mail: [email protected]
Aleksander A. Skidan
St. Petersburg State University of Architecture and Civil Engineering, Russia E-mail: [email protected]
Abstract. The paper is devoted to the development of integral index of innovation, which can be used in investment and construction. The research includes the analysis of innovation in construction in Russia, and also a multi-factor assessment of indicators of innovation of a construction firm. The proposed approach to assessment of companies' innovation was successfully tested on a number of construction firms.
Keywords: innovation, innovation activity, integral index, competitiveness, innovative development of construction. JEL codes: O32, L26, C13
For citation: Mikhailova, A. O., & Skidan, A. A. (2021). INTEGRAL INDEX OF INNOVATIONS OF A CONSTRUCTION FIRM AS THE FACTOR OF ITS INCREASED COMPETITIVENESS. JOURNAL OF REGIONAL AND INTERNATIONAL COMPETITIVENESS, 2(1), 55-63. Retrieved from http://jraic.com/index.php/tor/article/view/19
Introduction
Today, one of the key elements of the national innovation system is construction firms. It is necessary to consider their impact when forming technology strategies and prioritizing the areas where available resources will be focused. That is why it is important to take into account their innovation and to approach its assessment reasonably. The increase in innovation directly affects the innovation attractiveness of construction firms, increasing their competitiveness in the market. At the same time, the economic and technological development of the country arguably depends on the aggregate index of innovation of the construction market entities, increasing the competitiveness of the Russian economy in the world markets.
The assessment of innovation performance includes both the analysis of the organization's activities and the analysis of the effectiveness of innovation management. The problem is that the investment analysis methods are not enough for assessment. Since innovation projects are more long-term, expensive, and risky than investment projects, their effectiveness can be assessed by selecting optimal financing schemes, as well as assessing technological and strategic effectiveness of innovation in a firm, region, or country as a whole.
The assessment of innovation effectiveness in construction firms should become more informative, therefore, it requires a new methodology. Another relevant issue is increasing innovation sustainability of Russian regions or knowledge-intensive areas by increasing the competitiveness of individual firms in the region. This increase, in turn, contributes to a better overall competitiveness in the market. The sustainability should also increase due to the rapid response to internal and external challenges through the use of scientific advances.
Sources and methods
We used expert survey and correlation analysis to conduct the research and form the integral index. The research subjects are the assessment of efficiency of innovation in the investment and construction areas as well as the indicators used in calculation. The research focuses on the process of calculating the integral index of innovation in construction firms.
Analysis of innovation in Russia
In the current social and economic conditions, innovation is becoming increasingly relevant in Russia. Innovation can be understood as both new developments and technologies as well as related concepts.
Modern construction firms have to meet the internal and external demands to their activity in a highly competitive environment. Innovation contributes to the gradual transformation of this activity to meet the current demands (Nikiforova, 2014). Today, the technological and technical development of companies is uneven. All economy sectors without exception are lagging behind the demand for innovative development (Simionova, Simionov, 2018).
The data of the Federal State Statistics Service shows that innovation in Russia reached its peak in 2011, after which it declined gradually until 2014, when the share of organizations engaged in innovation reached 9.9%. In 2017, the innovation increased by 0.1% compared to the previous year. This could have happened due to a 9% increase in investment in 2017 compared to the previous year (Skidan, 2019).
Next, we analyzed the dynamics of development of advanced manufacturing technologies across all design and engineering technologies in investment and construction in Russia.
500 450 400 350 300 250 200 150 100 50 0 19
99 2004 2009 2014 2019
Figure 1. Dynamics of development of advanced manufacturing technologies in engineering and design
Source: composed by the authors
The available data leads to a conclusion that the dynamics of the developed advanced technologies in the investment and construction is growing. One can also see a jump in the number of technologies. The chart shows a sharp drop in the number of technologies developed every 4 years. This is the period of time required for an innovation to be actively used and give a certain result in any industry. The development of advanced technologies in the investment and construction sector reached its peak in 2014, when the number of technologies under development reached the 445 mark.
Also, according to the chart, there was a 19% drop relative to the previous year. It could have happened because of the pressure on foreign policy and foreign economic factors. Currently, there is a 4% increase in the development process compared to 2016.
The next step was to examine the relationship between the number of advanced technologies developed and the number of advanced engineering and design technologies in use in Russia.
The chart shows that the highest use of innovation occurs in 2010, followed by a sharp drop of 27% in 2011. At the moment, it keeps growing since 2014. The use of advanced technologies is increasing each year by 2% compared to the previous year.
Data on the number of advanced technologies developed and in use are presented in Table 1.
The data presented was used in a correlation analysis. The calculation of Pearson's correlation factor showed that the number of advanced technologies developed and the number of advanced technologies in use have an average negative correlation (r = - 0.41), which means that when the development of advanced technologies increases, their use decreases, and vice versa.
60 000 50 000 40 000 30 000 20 000 10 000 0 19
99 2003 2007 2011 2015
Figure 2. Dynamics of advanced manufacturing technologies used in engineering and design
Source: composed by the authors
Also, note that the correlation factor is considered to be significant and has a medium correlation dependence, since a small amount of data is analyzed.
Table 1 - Analysis of advanced manufacturing technologies in the investment and construction sector
Year Number of developments Growth rate Number in use Growth rate
2000 165 - 28888 -
2005 138 -27 43273 28888
2006 148 10 50653 7380
2007 177 29 54044 3391
2008 173 -4 47116 -6928
2009 196 23 54539 7423
2010 216 20 56130 1591
2011 316 100 41422 -14708
2012 305 -11 39664 -1758
2013 426 121 38735 -929
2014 445 19 38598 -137
Source: composed by the authors
The analysis of innovation shows several factors which hinder innovation development of the Russian economy, including insufficient protection of the legal ownership of the results of innovation (Skidan, 2019).
Also, the factors that hinder innovative development include an insufficient number of qualified specialists for the effective use of the results of intellectual activity in commercial and scientific organizations (Larkina, 2016).
At the same time, based on the above, it can be argued that there is also a problem of determining the impact of innovation on the organizational activities of construction firms. For further analysis, it is necessary to conduct a regional analysis of innovation activity in Russia.
Innovation in the north-western federal district of Russia
Over the past few years much attention has been paid to the regional aspect of innovation in Russia, since it is the regions that are the subjects of economic growth. The place is important because the development and implementation of innovations takes place exactly in the region with its own formed scientific potential that
affects innovation (Lastochkina, 2018).
Statistical research is usually based on the following factors, which determine the position of the region in the overall innovation rating:
- availability of research centers, various universities, academic campuses, etc.;
- special economic zones, innovation clusters, and high-tech military and nuclear industries in the region.
Let us observe the innovation of the North-Western Federal District. The North-Western Federal District includes ten subjects of Russia: The Republic of Karelia and the Komi Republic, Arkhangelsk, Vologda, Kaliningrad, Leningrad, Murmansk, Novgorod, and Pskov regions, as well as St. Petersburg (Lastochkina, 2018). Table 2 shows the innovation performance in the Federal District in 2019.
Table 2 - Indicators of innovation in NWFD
Region 1* 2* 3* 4*
Komi Republic 2.3 2390 853.5 49
Arkhangelsk region 0.5 1577 1513 59
Vologda region 4.3 411.9 578.4 114
Kaliningrad region 0.2 1293 1066 72
Leningrad region 2.3 964.9 123.5 17
Novgorod region 3.0 6335 12639 140
Pskov region 1.2 2405 1239 50
St. Petersburg 8.7 1695 1816 38
The Republic of Karelia 0.3 430.5 203.2 40
Murmansk region 1.5 114471 67845 2072
Source: composed by the authors
Where: 1* is the volume of innovative goods, works, and services (%); 2* is the internal R&D costs (million rubles); 3* is the cost of technological innovations (million rubles); 4* is the number of patents for utility models and inventions.
The above data confirm the fact that the volume of innovative products and services produced is still at a low level, with a regional division into leading and lagging subjects of the NWFD. In 2019, St. Petersburg had the highest indicator at 8.7%. In the Republic of Karelia, Arkhangelsk, and Kaliningrad regions, this indicator did not exceed 1% (Lastochkina, 2018).
Based on the costs of research, we can conclude that the innovation in Russian companies decreased by 2% annually during the analyzed period. The same trend is observed in the North-Western Federal District by an average of 3%, and in St. Petersburg by 4.1%.
In general, summing up the analyzed indicators of innovation in the North-Western Federal District, in can be argued that there is a negative trend, as most indicators have decreased since 2010, when the region's innovation was at its peak.
The analysis shows that the subjects of the North-Western Federal District have a developed innovation infrastructure, there are research parks, technology centers, business accelerators. Also, the North-Western Federal District has taken measures at the administrative level aimed at developing innovation further.
However, one cannot claim that there is sufficient innovation of construction firms in NWFD. According to the Federal State Statistics Service, only about 8.5% of innovative goods and services come from construction firms in the North-Western Federal District.
Existing methods of assessing innovation
Most of the approaches to assessing the innovation in firms were reflected in the works of: Bogomolova (2014), Guseva (2004), Glagoleva (2013), Razdolskaya (2011), Serebryakova (2013), Syroizhko (2014) etc.
Two main approaches are commonly accepted in the scientific literature: collection and study of statistical characteristics and the use of calculated indicators. However, a simple indicator that reflects the innovation activity of an organization can be expressed both in physical (absolute and relative) terms, and in monetary terms (Syroizhko, 2014).
When studying the existing methods of assessing innovation activity, the Russian researchers usually pay attention to the Form of Federal State Statistical Observation No. 4-innovation "Information on the innovation of an organization" (Lastochkina, 2018). According to this Form, the innovation of an organization is assessed by three fundamental indicators:
• the presence of the completed innovations;
• share of the organization's involvement in the development of these innovations;
• identifying the main reasons why innovation did not take place.
The works of P. P. Nuretdinov and G. I. Gumerov reflect a similar method of assessing innovation. The proposed method consists in comparing the results of innovation by the study periods. Among the analyzed indicators one can single out survey costs, production of new types of products, acquisition of patents and licenses.
On the contrary, a number of other works do not assess the frequency and effectiveness of innovation, paying attention only to the available resources of the organization. Many methodological approaches to assessing innovation are difficult to apply in practice and therefore unattractive for modern organizations (Bogomolova, 2014).
Nevertheless, the analysis of existing approaches to the problem of assessment and research of innovation makes it possible to talk about the versatility of the studied characteristic and the importance of modeling its indicator, which is integral, describes all aspects of the problem being solved, and is accessible for understanding and use in the analysis (Syroizhko, 2014).
The use of multifactor assessment in the indicator formation
To form an integral index of innovation in a construction firm, first of all, it was necessary to form a multi-factor assessment of the construction firm in order to select indicators that make calculation possible.
For example, one of such indicators may be the increment of innovation cost at each stage of the manufacture of construction products, as, for example, in the works of Sood and Tellis (2009). Based on the study, it can be concluded that the increase of innovation cost is affected to a greater extent by the innovation development phase. Thus, in order to attract more market attention, companies should advertise their research and development as much as possible (Bogomolova, 2014). However, this condition does not apply to construction firms, because in construction, successful marketing of innovative processes and products does not properly affect the competitiveness of the construction firm and its products.
The work of O.N. Selyutina also presents factors that can limit the production of construction firms, including: competition from other construction firms, high cost of materials, structures, etc. (Selyugina, 2014).
Further, let us consider the results of Choi and Ko (2010). In their work, they proposed to assess the effectiveness of investments at the research and development stages, and their impact on innovation, using 4 groups of innovation metrics. As part of our research, these metrics were supplemented with factors applicable to the assessment of innovation in the investment and construction sector (Figure 3) (Shcherbina, Guzhva, Skidan, 2020).
Thus, we have identified the following key factors that contribute to the effectiveness of innovation in a construction firm:
• focus on technological and organizational innovation;
• company size and competitiveness;
• the key role of management in implementing innovative solutions;
• the volume of total investments in the company's operations (both current and capital), which can also be influenced by competitiveness and government support;
• qualified staff and employee training;
• inter-company cooperation.
The revealed indicators allow for a multi-factor assessment of innovative activity in a construction firm. Additional factors are fully able to reflect the innovative employment of an economic entity.
Figure 3. Augmented factors influencing the innovation of a construction firm
Source: Shcherbina, Guzhva, Skidan, 2020
Formation of an integral index
The next stage in the formation of an integral index of innovation was the selection of key performance factors. These factors were selected according to the following criteria:
• availability of source data;
• the openness and applicability of the indicator in the scientific literature;
• compliance with the factors affecting innovation.
Among the available indicators, four of them were selected as key, including focus on technological and organizational innovation, organization size, share of R&D costs in total volume, and staff qualification.
The selected indicators were standardized with an expert survey. 21 independent experts took part in the survey. The factors are evaluated on a ten-point scale of influence on the innovation in a construction firm.
Next, we checked the consistency of expert opinions for each factor using the concordance coefficient, which displays the consistency of expert opinions.
The coefficient is calculated according to Formula 1:
12xS
W= 2/3 1 (1)
m2(n3-n)
Where: S is the sum of squares of rank differences, m is the number of experts, n is the number of factors.
12x964,29 W= —2 3 =44% 212(43-4)
44% of experts agree, hence these expert assessments can be used.
Since the experts' opinions are consistent, then the median method is used to select the distribution of
the shares of factors that affect innovation. Based on expert assessment, the shares of the integral index are distributed as follows: focus on technological innovation is estimated at 0.28, competitiveness and personnel skills are estimated at 0.2, and total investment in R&D is estimated at 0.32.
The performance factors and the methodology for calculating them are presented in the following table.
Table 3 - Key indicators in indicator calculation
Factors Calculation method
Focus on technological and organizational innovation I1=En +£m +£k, where n, m, k are the number of patents and other intangible assets held by the organization
Company size and competitiveness I2=£AR+S, where S is gross profit of the organization, AR is the difference between other income and expenses of the organization
Qualified staff and employee training I3 = Rs / P, where Rs is the number of ITR employees trained and educated in the current year; P is the average number of employees for the reporting year
Total investment in the company s operations I4= £A / R, where A is the amount of intangible assets of the organization;
R is the revenue of the construction company for services in the reporting year
Source: composed by the authors
Taking into account the analysis, we propose to calculate the integral index of innovation in a construction firm according to the following formula:
where, x1, x3, x3, x4 are the shares in the integral indices I1, I2, I3, I4, respectively. When applying the developed algorithm to calculate the developed indicator, there is a uniform evaluation of the obtained values. In modern social and economic conditions, we suggest gradation of the indicator values. It is considered satisfactory if the value is within 1. If the calculated indicator is within 0.6 to 0.9, then it can be thought as the average innovation of a construction firm.
The applicability of this indicator of innovation under current conditions was tested on five different organizations of the construction sector of the North-Western Federal District. The results of the calculation of the integral index are presented in the table.
Table 4 - Results of calculation of the innovation indicator for construction firms
Name Value
Transbaltstroi 0.58
EvroTransStroi 1.17
Etalon LenSpetsSMU 1.12
Kompaniya Ust-Luga 0.98
Rif 0.96
Source: composed by the authors
The study showed that EvroTransStroi is the most active in innovation, compared to other organizations of different size. It can be concluded that ETS is more attractive for additional investments from private investors. Also, this organization is more adapted to the transition to an innovative way of developing the economy of Russia. It can also be argued that the size of an organization and its competitiveness do not significantly affect innovation.
Conclusion
As a result of the study, it was concluded that an increase in the indicator of innovation in construction firms can positively affect their competitiveness in the market, which in turn will favorably affect the overall state of the country's economy.
At the same time, there are currently no universal methodologies for assessing innovation in Russia. Under given conditions, as a result of the study, we have developed and proposed a methodology for assessing innovation and proved its applicability. This methodology is recommended for further analysis of other construction firms in the North-Western Federal District, as well as for the analysis of innovation in the investment and construction sector.
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© Anna O. Mikhailova, Aleksander A. Skidan, 2021
Received 11.02.2021
Accepted 11.03.2021
