The automotive sector is particularly interesting for innovation scholars: economists and commentators write cyclically the obituary of the industry at each economic downturn. However, the industry and its player, like the mythological Phoenix that never dies and arises from its ashes, each time show renewed capacity to react to the crisis, through a mix of adaptation and innovation. To investigate these broad issues we were lucky enough and could directly observe a sort of natural experiment, this consisting in the major crisis that affected Fiat Auto and its main suppliers at the beginning of the 21st century. In this case, despite the heavy crisis of Fiat, small and medium suppliers showed an impressive ability to positively react to such a negative event. We are interested in understanding what’s behind this reaction. More specifically, this paper aims to understand the relationship between a big shock in the demand of small suppliers and 1) the innovative capacity internal to the firm; 2) firm strategies. In particular, much industrial economics finds in demand shock an incentives for corporate diversification. These contributions are however confined to large firms and very few studies tackle this problem for SMEs. Moreover, very often innovation scholars investigated how crises and periods of downturns affected innovative investments. To the best of our knowledge however, there are no analyses focusing on the other direction of this relations, i.e. the way in which past innovative investments allow firms to counterbalance negative market scenarios. We believe that in an age of global productive and financial crisis, to know whether firms with higher innovative capacity are also more stable in the face of market downturns, has major policy and managerial implications.
REACTION TO DEMAND SHOCK IN SMALL FIRMS: INNOVATION AND MARKET EXPLORATION IN THE CASE OF AUTOMOTIVE SUPPLIERS IN PIEDMONT
FASSIO, CLAUDIO;PATRUCCO, Pier Paolo
2013-01-01
Abstract
The automotive sector is particularly interesting for innovation scholars: economists and commentators write cyclically the obituary of the industry at each economic downturn. However, the industry and its player, like the mythological Phoenix that never dies and arises from its ashes, each time show renewed capacity to react to the crisis, through a mix of adaptation and innovation. To investigate these broad issues we were lucky enough and could directly observe a sort of natural experiment, this consisting in the major crisis that affected Fiat Auto and its main suppliers at the beginning of the 21st century. In this case, despite the heavy crisis of Fiat, small and medium suppliers showed an impressive ability to positively react to such a negative event. We are interested in understanding what’s behind this reaction. More specifically, this paper aims to understand the relationship between a big shock in the demand of small suppliers and 1) the innovative capacity internal to the firm; 2) firm strategies. In particular, much industrial economics finds in demand shock an incentives for corporate diversification. These contributions are however confined to large firms and very few studies tackle this problem for SMEs. Moreover, very often innovation scholars investigated how crises and periods of downturns affected innovative investments. To the best of our knowledge however, there are no analyses focusing on the other direction of this relations, i.e. the way in which past innovative investments allow firms to counterbalance negative market scenarios. We believe that in an age of global productive and financial crisis, to know whether firms with higher innovative capacity are also more stable in the face of market downturns, has major policy and managerial implications.
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