Projects

Role and Value of Innovation

The Role and Value of Innovation in the Pulp and Paper Industry

Research Theme: Enterprise Effectiveness

Project Objective Statement: To identify some key components of innovation in the pulp and paper industry, broad facilitators and hindrances to innovation, and impact of innovation on productivity.

Project summary:
Against the backdrop of global overcapacity and rapidly changing international markets, the US pulp and paper industry has been undergoing a fundamental transformation. Motivated by observations from the industry and some preliminary investigations conducted by the co-PIs, our goals are to identify some of the key components of innovation in the pulp and paper industry, the specific types of innovations that contribute most to overall productivity growth, the broad facilitators and hindrances to innovation and the impact of innovation on firms' overall productivity and growth. We hope to deliver an important message: companies that underestimate the significance of innovation and do not actively engage in this process are likely to lose their competitive advantage in the longer-run.

The research methodology will involve using firm-level data available from Compustat and Thompsons Financial, as well as compiling selected information and data from industry trade publications, case studies and other publicly available sources which we detail later in the proposal. Upon completion of data collection, we will use regression analysis to assess, for example, (1) the impact of specific types of innovations on firms' overall productivity gains and (2) the impact of innovation on productivity and growth after controlling for M&As. The former will shed light on which types of innovations provide the biggest bang to firms' overall productivity growth. The latter, for example, will shed light on the relative contributions of innovations and M&As to productivity gains and firm profitability. These results and insights would be of value to managers in their decisions regarding innovations and M&A strategies.

The anticipated outputs of this project include research reports detailing the objectives and drivers of innovation in the pulp and paper industry; firm-specific characteristics and other factors that facilitate or impede these strategies and their successful implementation; an estimate of the impact of innovation of firms' productivity and growth; identification of the types of innovations that contribute the most to productivity gains and an evaluation of their respective contributions; educational materials describing the methodology and results that will be of use in the classroom, as well as for training in the industry; and the training of one graduate student who will become knowledgeable about the pulp and paper industry.

Planned Duration: 2 years; started in Spring 2004