The Fateful Triangle

This paper explores the triangle of relationships among product, process and organizational innovation, examining the complementarities and substitutions between these forms of innovation. Drawing upon two large samples of French and UK manufacturing firms, its major objective is to investigate if firms can find a beneficial interplay between forms of innovation. We estimate a performance equation to study the complementarities-in-performance, using supermodularity theory. The results of the tests of unconditional complementarities in pairwise relations between forms do not generally provide conclusive results. We then implement a new testing procedure based on conditional tests – a pairwise relation conditional on the presence/absence of the third form – which shows that the efficient strategies of innovation combinations are not the same for all the firms. They depend on the national context as well as on the firm size and the firm capabilities, and give credit to the contingency hypothesis. The main combinations are the “technological strategy” (product-process innovations) and the “structure oriented strategy” (organization-product), and in no case the combination of the three strategies at the same time, which is presumably too costly or difficult