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Industrial innovative capacity; a review

The economic development of the developed countries of the world has been led by continuous technological inventions. But for countries like Bangladesh, invention is not the appropriate tool rather should go for innovation of technology. Developing indigenous capability to produce new technologies overnight is too optimistic for Bangladesh; hence proper adaptation, utilization and optimization of the available technologies should be the strategy for development. This is what innovation is all about. Surge in the economic growth of Bangladesh is highly dependent on the industrialization and effective industrialization relies on appropriate innovation. This innovative capacity of the industries will be the key factor for Bangladesh in the next decade for effective economic growth. This issue of BTT introduces Innovative Capacity and illustrates how it can be determined for our industrial sector.


Drivers for national prosperity has been changing over the time. Natural resources, population growth, industrialization,geography, climate, and military all have been playing significant role in the past; but their relative importance have been shifting frequently.

Today, more importance has been given to the coherence and quality of policies and the development of supporting institutions; policy for innovation and institutes that support innovation.

Innovation is and will be in the next decade the most important modern engines of productivity and growth excellence of a country. That is, innovation in the industries, innovation by the researchers, developers, creative thinkers, enlightened politicians, managers and clusters.

Innovation is termed as the most effective mechanism for the technological and economic development of the developing countries. The capacity to innovate is termed as the innovative capacity of an industry. The more the innovative capacity the more the opportunities for business rise. Innovative capacity is a parameter used by economists to compare countries in terms of their capacity to innovate new technology.

0255At the national level the National innovative capacity is the potential of a country (both as a political and economic entity) to produce and commercialize a flow of innovative technology at a given point of time. As such, national innovative capacity depends on an interrelated set of fundamental investments, policies, and resource commitments that determine the extent and success of innovative effort in a country over the long term.[1]

This national innovative capacity can be analyzed to determine a firm level capacity that is the industrial innovative capacity.

Industrial innovative capacity will lead to find the answer ‘why some firms are more innovative than others?’ Al though this is really a complex thing to understand or determine, still it clearly demonstrates a picture of the industries on their capacity for innovation. Theories of firms, literature on organization studies and the economic geography; all have a great influence in determining the innovative capacity of industries. [2]

National Innovative Capacity & Bangladesh

Info-graphics: The complex indicators used to make the ICI ranking; Source: Innovation for Development Report, 2010-2011 (http://www.innovationfordevelopmentreport.org/papers/101_LopezClaros_Mata.pdf)

In the Innovation for development report 2010-2011 made by EBS Business School, Germany a new index was introduced named Innovation Capacity Index (ICI) which isa methodological tool that examines a broad array of factors, policies, and institutions that have a bearing on strengthening innovation in a large number of countries.[3][4] Innovation Capacity Index, in particular features a tool for assessing the extent to which countries have succeeded in developing a climate that will nourish the potential for innovation.

Countries are grouped into categories and ranked according to scores obtained in the Innovation Capacity Index (ICI). The complex indicators considered in making the ICI are

♦ Human Capital, training and Social Inclusion

♦ Institutional Environment

♦ Regulatory & Legal Framework

♦ Research & development

♦ Usage of ICT

These factors used for the construction of the ICI is believed to affect the capacity of innovation of a country. A large number of factors which are grouped under the above five categories to make the complex indicators of innovation was used to rank 131 countries.


In this study Bangladesh is grouped with the low income countries’ (according to the World Bank classification, 2011 for GNI<$976) with countries like Cambodia, Ethiopia, Ghana, Haiti, Kenya, Madagascar, Malawi, Mali, Mozambique,, Republic of Nepal, Senegal, Tanzania, Uganda and Zambia. Among the listed 15 countries Bangladesh lies on rank 11 with an ICI score of 38.6.

But as Bangladesh is no longer a low income country with a GNI per capita $1080 , should be considered in the list of lower middle income countries (GNI $976-$3855). With the same ICI score the following is a ranking of countries of our interest made from the original study. Another study with the all the 131 countries also depicts a laggard position of Bangladesh in terms of innovative capacity.

For the sake of stress-free comparison the following list is made from the original study (with original ranking) showing countries industrially important to Bangladesh.

025689From the table it is clear that Bangladesh lies behind all the countries who are the industrial competitors including Turkey, China, Indonesia, Philippines, Vietnam, India and Pakistan.

Following is another chart constructed to facilitate the comparison of the Asian countries with Bangladesh in terms of their position according to six major factors influencing innovation capacity. From this analysis a clear view can be depicted about the relative positions of the countries in terms of good governance, education, ease of doing business, R&D infrastructure, no. and quality of patents and trademarks and the extent of ICT usage. All these indicators are believed to have a significant contribution towards developing an environment for better innovation.

023699Among the emerging Asian industrial powers Bangladesh looks to have a better governance and education than only Pakistan. In terms of ease of starting a new business Bangladesh is a better place than Vietnam but worse than other Asian countries. But they are quite close in terms of opportunities of doing business and rightly so as the Asian market is a golden track for investment for the western countries. In terms of R&D infrastructure Bangladesh is poised at a good position only behind China. But this is only because of the continuous R&D investments in the agricultural sector of the country. Performance of the Asian countries in terms of the Patents and Trademarks are very poor when compared to the developed countries and Bangladesh have very little contribution towards innovation from indigenous patents, copyrights or trademarks. Bangladesh also lags behind in terms of the ICT usage compared to the Asian countries.

This indicators can act as the primary indications on what factors to improve to create an environment friendly for innovation. Still question lies on the extent of impact of the mentioned factors on the innovative capacity of a nation but it is fairly acceptable that the development of this factors as a whole will contribute towards making an innovation prone industrial sector.

Industrial Innovative Capacity

The concept of the national innovation capacity is analyzed to determine innovation capacity at the firm level, which is the industrial innovative capacity. This is important to come to a conclusion about industrial organizations on why some firms or industries are more innovative than others? That is, what it takes for an industry to outplay other competitive industries in terms of innovation.

Every industrial organization is endowed with a set of resources, but to be innovative, management must enact the right organizational culture, develop and optimize the resources and capabilities constantly and harness links with external environment for new ideas.A similar definition of Industrial Innovative Capacity is given by a Cambridge Professor as followed.

‘Innovative capacity of a firm isits internal potential to generate new ideas, identify new market opportunities and implement marketable innovations byleveraging on existing resources and capabilities.’ [2]

02From the above discussion a conceptual model can be designed on what the generic factors that enables a firm to be more innovative.

Here, Culture corresponds to the extent to which a firm support innovations. This indicator can be measured by items including strategy, leadership and support, company style, risk-taking, measurement systems and incentives systems.

Resources relate to four categories, financial, intellectual, human and physical. The questions probed for the extent to which there is sufficient resources in place to support innovation initiatives. Competence relates to the range of capabilities within a firm that support innovation. This construct is measured by six items including new idea generation, project management,market knowledge, technical knowledge, experimentation and problem solving skills.

05588Networking is measured by six items representing customers, suppliers, competitors, importing know-how, knowledge institution and information search. This construct relates to the extent to which a firm makes use of networking for innovations.

An innovative capacity portfolio of the industries under study can be constructed from the analysis of the above mentioned indicators to statistically show the industrial innovative capacity through Standard Deviation, correlation and co-efficient measuring tools.

What to Innovate?

As an innovation friendly atmosphere is developed in the industries, the next question arises on what to innovate? As a developing country with no sources of indigenous technology resources, people think innovation as an overwhelming task concerned with bringing in new technologies from abroad.  But there are other ways and other things to innovate which are totally out of concern of the industry owners.

As the OECD, defines innovation as “the implementation of a new or significantly improved product (good or service),or process, a new marketing method, or a new organizational method in business practices, workplace organization or external relations”. [5]

Innovation thus refers to go faster, further, deeper and cheaper in any trade of business. And it may be achieved by means of optimizing, capitalizing, maximizing or minimizing any of the production factors or resources instead of only looking for breakthrough technologies. This is what makes innovation a tool for all rather than only for the rich.

For a country like Bangladesh breakthrough in technological aspect is too optimistic. But there are other tools to be innovative in.

Process innovation, product innovation, manufacturing innovation, R&D innovation, market innovation are the other branches of innovation apart from technological innovation. Gaining and retaining industrial brand recognition, reaffirming market position, introducing new products and services or new features in the product and services, making more people aware of products and services and raising global market profile; these all are termed as innovations and work towards gaining competitive edge in the market.


Industrial development of developing countries will heavily rely on the extent and pattern of innovation in the next decade or so. The national innovation capacity index provides a clear comparison of the innovative capacity of the global players.

Bangladesh is only at 110th rank among the 131 and 7th among the 8 major textile and RMG producing countries. As textile and RMG are the prime industrial sector for Bangladesh, a comprehensive study on the industrial innovative capacity of this sector is a call of time. This theories and reviews will be greatly helpful for determining the innovative capacity of the textile and apparel sector of Bangladesh. The application of the industrial innovative capacity can be immensely important as in the investment decisions, project management, policy formation, sectoral roadmap formation and most importantly to design an effective mechanism for technology transfer for the sustainable growth and retention of the industries.


[1]  M. E. Porter and S. Stern, “Understanding the Drivers of National Innovative Capacity,” MIT Sloan School of Management, Massachhussets.

[2]  J. Hill and A. Neely, “Innovative Capacity of Firms: on why some firms are more innovative than others?,” in 7th International Annual EurOMA Conference, Ghent, Belgium, 2000.

[3]  A. López-Claros, “The Innovation for Development,” EBS Business School, Germany, 2010-2011.

[4]  A. López-Claros and Y. N. Mata, “Policies and Institutions Underpinning Country Innovation: Results from the Innovation Capacity Index,” EFD, Global Consulting Network, 2010-2011.

[5]  “Guideline for collecting and interpreting innovation data,” Joint Publication: OECD and the statistical office of the European Communities, Oslo, 2005.

If anyone has any feedback or input regarding the published news, please contact: info@textiletoday.com.bd

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