Only 33.6% of PH firms are ‘innovation-active’, least innovation in agri sector – PIDS study

Only a third (33.6%) of Philippine firms are active in innovation. About a fifth (21.8%) are product innovators and a quarter (27.4%) are process innovators.

Among the sectors, information and communications technology (ICT) and agriculture consistently ranked highest and lowest in innovation, respectively.

This was disclosed by authors of the 2021 PIDS Survey of Innovation Activities, namely, Philippine Institute for Development Studies (PIDS) Senior Research Fellows Jose Ramon Albert, Francis Mark Quimba, and Ramonette Serafica, Supervising Research Specialists Jana Flor Vizmanos and Neil Irwin Moreno, and Research Analysts Abigail Andrada, Mika Muñoz, and Angelo Hernandez.

The third innovation survey of PIDS conducted with the help of the Philippine Statistics Authority, the study investigated the innovation practices of 11,500 firms across major sectors. Compared to previous surveys, the 2021 round had ten times more respondents and gathered information on the use of digital platforms by firms.

Albert, who presented the results at a PIDS public webinar, explained that the study assessed firms’ innovation based on their engagement and types of innovation pursued (product or process innovation). Considered innovation are new and significant improvements in the firms’ goods, services, production processes, marketing, or organizational methods that add value.

The survey found that only one in every four firms was aware of government innovation policies, of which only 13.6 percent availed of government assistance for their innovation activity.

Only a quarter of the innovation-active firms filed for intellectual property rights.

Both innovators and non-innovators rated cost factors as the innovation barrier with the highest importance, followed by knowledge and market factors.

The survey also revealed the firms’ preferred incentives. Micro, small, and medium enterprises (MSMEs), large firms, and industry and service sectors rated tax deductions or tax credits as a “highly important incentive”. In contrast, the services sector prefers “more training” while agriculture firms “highly prefer direct subsidies, training, and technical support”.

“Fostering innovation in Philippine business and industry is a challenge, given resource constraints, including requisite innovation mindsets and workforce skills, competing aims of public policy, and institutional issues,” Albert said.

To address the barriers to innovation and foster a healthy innovation ecosystem in the country, the authors recommend promoting digitalization in the government and private sector and developing a “robust monitoring and evaluation system to determine the effectiveness of the Philippine Innovation Act”.

It also highlighted the need for the government to remove “barriers and bottlenecks to innovative initiatives in regulatory frameworks”, provide support to innovators and enterprises, invest in technologies, infrastructure, and researchers, and execute reforms in the investment climate, trade, and education.