Innovation Activity of Firms in the Philippines

Abstract

Set against a rapidly changing global environment, Philippine industries now, more than ever, are facing new demands that will require more innovation for firms to remain competitive across the global market. The PIDS Survey on Innovation Activities (PSIA) conducted among firms in food manufacturing, other manufacturing, ICT, and BPO suggests that in 2015, about 43% of establishments in the Philippines were innovation active. Strikingly, the BPO sector spends the most for innovation activities despite it being the least innovation active among the various sectors at a rate of just 30%. Intellectual property applications have been very low across all industries in all types of intellectual property following firms’ tendency to view their product innovations as trade secrets in order to maintain their competitive edge against rivals. Exploring further the conduct of knowledge management activities, we find that it is positively correlated with firm size. Moreover, larger firms tend to rely on internal sources for their information and innovation as is the case with the food processing and automotive sectors. Anchored from the results of a panel data model to explain innovative behaviour among 2015 PSIA firms that were also part of a pilot survey in 2009, the practice of knowledge management and firm size have both been found to be adequate determinants of innovation behaviour. Taking all these survey results into perspective, a national policy that veers away from a linear innovation model focusing only on R&D to one that is grounded on consultations with all stakeholders in the innovation ecosystem should be pursued. Enabling the business environment through stronger intellectual property rights can also encourage more firms to innovate especially among wary multinational companies.