International Journal of Economic Perspectives, 2017 ...

International Journal of Economic Perspectives, 2017, Volume 11, Issue 3, 277-286. Impact of Information Technology on the Innovation Processes: Evidence from Firms in Kosovo Emin NEZIRAJ University of Pristina, Pristina, 1000, Pec, 0037745840777, Kosovo. Email: [email protected].

Afërdita Berisha SHAQIR* University of Pristina, Pristina, 1000, Pec, 0037745840777, Kosovo. Email: [email protected].

ABSTRACT The main objective of the research study is to recognize the level of use of the new technology, respectively the new information technology in producing and service industry in Kosova. On the way to meet the main objective of the study are also subjectivities, the level of placed market technological innovation, and the level of innovation activities which are business performance and equal proportion when it comes to product innovation technology between businesses which produce the software and which do not produce software. The objectives extracted from empirical data of Statistical Agency Kosova and authors own research, through quantitative deductive approach which was used to test H0 H1 on following statistical test: S test by correlation analyses. The results of this study show us that information technology influences in innovation process with p=0.67. Results of the study show that in Kosovo it has been implemented new information technologies into their respective business systems during the past 10 years, which has had major business results. More research issues should be done in future regarding this problem. Respective institutions of public and private sector must undertake more professional activities to bring up new policy for promotion of the new information technologies on businesses. JEL Classifications: D24; O3. Keywords: Information Technology; Innovation Technology; Management Information Systems; Business. *Corresponding author. 1.

INTRODUCTION

In recent years on the global economy is undergoing fundamental changes as a result of the rapid development of information technology and its use is also very fast1.Innovation caused by information technology is the driving force of economic development for each country and each company. Doing business on a constant innovation should lead to changes in the business process and ultimately increase efficiency in the production and service units. Kosovo as a state is trying to follow the trends of western markets even though the state on this issue is a lot less favorable compared to the markets of developed countries. Any serious company within its business sector (financial, IT and others) has a sector for research and development. The world economy has changed due to the greater development of information technology and enterprises are forced to survive in a modern global market economy characterized by the competition, the short life cycle of products and diversity of products. Many enterprises have difficulty in understanding the new information cause of their poor concept of investment, especially in information technology and modern management2. However, having a research and development sector and requires certain cost which further burdens the company, especially if it’s a small company and if its struggles in the market for competitiveness. Innovations in startups operating in the market of Kosovo were mostly in companies that are incurred with the mediation of investment of foreign capital and are generally largely or wholly owned by foreigners. It must be admitted that a small number of domestic companies have developed an information system of innovation.

1

Berisha-Shaqiri, A., Miftari, I., Berisha-Namani, M., 2012 PG 56

International Journal of Economic Perspectives ISSN 1307-1637 © International Economic Society http://www.econ-society.org

277

International Journal of Economic Perspectives, 2017, Volume 11, Issue 3, 277-286. Innovation activities caused by information technology in modern business conditions are considered a key driver of business success, as well as overall economic development. Therefore, in literature there are often highlights as a factor that leads to progress of the company. MBE’s are a very significant driver of employment and economic growth, precisely due to their innovation activities. The main objective of this study was to show that in the line with the development of information technology there is a growing need for innovation process that include education and training of employees, that will apply these new information technologies, improve and use them for new business opportunities and possibilities. The study will show the need for new information technology in companies. Regarding the last sentence this study will help as argument for business association and other relative institution in Kosovo their policy to focus on advanced use of new information technology as tool for competitive avenge on the Kosovo Companies. 2. LITERATURE REVIEW 2.1 Innovation Influence on ICT companies Using information and communication technology (ICT) contributes significantly to the growth and development since it arises productivity and work efficiency by enabling creativity and stimulate innovation. Competitiveness is a multi-dimensional category that is seen as a part of the national economy or global action, but also at the business of the company. Thus, competitiveness can be viewed on the micro and macro level. OECD defines competitiveness as an advantage or disadvantage of the national economy in selling products in the international market. The competitiveness can be defined as the basis that determines the success or failure of the company. Enterprises are required to improve business processes to stay competitive in today’s market. During the last 1015 years, companies have been forced to improve their business processes, because we as clients are demanding better services and products. Companies in Kosovo do not have special developed innovations that bring them in a competitive position. This reason is justified by the fact that innovation is an expensive process for which it's necessary to separate significant financial resources. It also determines the suitability of the company's activities that contribute to its performance, such as innovation, coherence, organizational culture or good implementation. Competitive strategy is to search for a favorable competitive position within the industry, the basic environment in which competition occurs. Competitive strategy is focused on establishing a profitable and sustainable position despite forces that determine industry competition. At the macro level, the competitiveness of the country is seen through its economic growth, political and social stability and the total number of successful companies that have the possibility of gross national income3 . Looking at the micro level, the competitiveness is represented by the problem of the company and includes all factors that help the company to improve its financial performance of the business in the short term and also increase the company's value in the long run. The company will be competitive if the level of its cost is equal to or less than the level of competition on the assumption of achieving equal levels of income, and also if company keeps costs to a competitor level, but with the realization of much higher revenues. Competition can be considered from several levels. As stated earlier there is country's competitiveness as well as the competitiveness of companies, and included also competitiveness of the region. Therefore it can be said that one of the forms of geographical economic coverage measures competitiveness. Observing was done at the regional level including various regions and comparison of the geographical, economic and social opportunities in the region. At micro level competitiveness is viewed from the perspective of industry, which means that business processes, market position and financial performance among companies are observed4 An innovator as the first in the market achieves a privileged status in bargaining with suppliers who often give him the exclusive right to purchase raw materials or equipment. The innovator can benefit from privileged access to specific markets through exclusive long-term contracts with distributors. They can also develop an extensive network of co-operation where they involve various partners; suppliers, distributors, and customers and thereby 3

Metod Černetič, Olga Dečman Dobrnjić Information Technology and Changes of Management Informatologia 40, 2007, 1,pg32 4 Ibid International Journal of Economic Perspectives ISSN 1307-1637 © International Economic Society http://www.econ-society.org

278

International Journal of Economic Perspectives, 2017, Volume 11, Issue 3, 277-286. create barriers to the imitation of their products, preventing imitators’ access to technological know-how and complementary assets. Technique and technology are comprehensible outside social changes of the modern world. When distributors have limited capacity for transport, storage or sale of products based on the already achieved level of customer loyalty, they draw more attention to developed and established brands and allow them the most favorable marketing position. In order to gain even access to the market, imitator must accept worse conditions set by the distributor, and therefore often face higher distribution costs than those of the innovator. The time required to complete the process of imitation is very important variable, emphasizing that more time is needed for rivals imitation of new technologies, the greater the ability of innovators to introduce more valuable improvements, remaining both a technological leader5 . Thus The innovator will also have more time to consolidate its position in the market, which allows him to put his technological standards, win a significant share of the market and extend its exclusive cooperating network of partners: suppliers, distributors, and customers. When patenting innovation, innovator gets time to consolidate its market leadership. By means of patent control, it can limit the use of certain technologies. Despite the aforementioned difficulties of undertaking strategies to imitate, there are several benefits that arise from the strategy of "another move". Innovators vulnerability that prevents him from fully enjoying the benefits of the situation, " the first move", is associated with its inertia, which can occur for various reasons. Impersonator can benefit from structural inertia innovators based at the fact that inventor is not able to fully understand market demand and overrelying on their particular experience and on those technologies that have been successful in the past6 . Technological progress is truly cumulative nature in a manner that possibility in the near future depends largely on previously accumulated knowledge. However, it is important that companies other than their own development follow the technological advances of competitors, thus avoiding obsolescence and deviance in research and development. The innovator can delay the introduction of innovation in order not to "eat" its existing products, or to avoid a loss in the amount of investment on its current technological solutions. To delay the introduction of innovation the problem of organizational flexibility can have a great affect; application of new technologies requires significant changes in organizational structure, business culture or in structure of decision-making at the company. In fact innovator strongly risks showing out to the market a new product, which is often not developed to the highest possible level, or it is produced by using technology. 2.2 Enterprises and Their Innovation Activities Based to A. Jaklič, J.P. Damijan, M. Rojec, A. Kunčič and other authors regarding innovation from theoretical point of view we can say that innovation cooperation’s are, on the one side transaction of costs/ internationalization perspective (lowering and/or sharing the costs of R&D activities, new space-shrinking technologies, harmonization of regulations, liberalization) and, on the other side organizational capability and technology-based overview of the company (enhancing the value of the company).7 Innovation activities in modern business conditions are considered a driver key of business success, as well as the overall economy. Small and medium enterprises are very significant driver of employment and economic growth, precisely due to their innovation activities. A discussion on innovation involves new or improved offerings (product or service) that are brought to the market, and which bring increased value through improved quality or lower prices respectively to the customer8. Data from 1970’s onwards show that MBE’s can significantly contribute to innovation and economic growth. Therefore, for the interest of the company itself, as well as entire economy they create favorable conditions for the implementation of innovative activities. One of the problems faced by transition economies in terms of innovation is a problem of copying measures to stimulate innovation from developed countries without taking into account local specifics. Among the most important aspects of success of small businesses is clearly an innovation as an example of the rapid growth of companies that have started a business as MBE’s, e.g. Starbucks, Apple Computer, Dell, etc. The above mentioned companies are able to capitalize on closeness held by consumers and the flexibility by which 5Cozzarin

B.P., (2006), Are world-first innovations conditional on economic performance?, Tehnovation, article in press

Drucker P.F., (1998), The Discipline of Innovation, Harvard Business Review On Point Edition, Product no. 3480 7 Andreja Jaklič, Jože P. Damijan, Matija Rojec & Aljaž Kunčič (2014) Relevance of innovation cooperation for firms’ innovation activity: the case of Slovenia, Economic Research-Ekonomska Istraživanja, 27:1, p.646. 8 M.U.Maravi,D. Križaj M.Lesjak (2015), Innovation in Slovenian Tourism organizations’ , Tourism and Hospitality Management, Vol. 21, No. 1, p.52 6


279

International Journal of Economic Perspectives, 2017, Volume 11, Issue 3, 277-286. they prepare to meet the rapidly changing demands of consumers. At the same time, listed companies gain a valuable competitive advantage. The problem of maintaining these skills may help explain why a large percentage of those businesses fail. Some characteristics of small businesses suggest need for increased responsiveness to changing needs of environment. As previously stated, the closeness between the owners and small business customers can contribute stimulus for innovation for easy ways through which owners can identify unmet consumer's needs9 (Huergo, 2006). Less bureaucracy and more clan structure, that all small businesses have in common, can improve trust within the organization, communication, and cooperative competence, thus this fact greatly contributes to innovation within small businesses. Also, the owners have more operational knowledge which combined with a thorough knowledge of their own consumers can and must be transformed into innovative solutions.10 Most studies following such approach have reported the existence of a positive relationship between innovation technology and productivity in business as the entrepreneurship objective11. Often innovation is translated or replaced with the concept of research and development. Despite all the similarities, this view is too narrow, especially if we look at smaller companies or companies operating in the field and companies for whom we do not seem to work intensively on research and development. In addition, product development in MBE’s are often closely intertwined with the business as a whole and consequently less formalized organizational conditions within the business (for example a small or medium enterprise that does not separate or official sector research and development12) (Brčić, 2002). The small and medium-sized enterprises when it comes to innovation have two options. The first option is independence of innovation through its own research and development function, while another option is to apply one or several practice management innovations including the stand out: human resource management, teamwork, search for external sources and cooperation. These practices are not the only ones that exist so far, for example, there is a positive effect of authorizing employees to the innovation potential of MBEs. The problem for financing research and development is particularly acute for small and medium-sized enterprises because they typically do not have the base with a large number of successfully completed research projects that their creditors served as a guarantee of return on invested funds. Accordingly, it has been shown that corporate borrowing also can very negatively affect the innovation. Likewise, the costs of innovation are a much greater barrier to small compared to medium-sized businesses13 (Brčić, 2002). Small and medium-sized businesses operate through a simple communication, relatively informal way of decisionmaking and greater flexibility, which at the first glance gives an advantage over large companies when it comes to rapid innovation. Surprisingly, research has shown that with increase in size of the company can likely make innovation (Baković, T., Ledić-Purić, D. 2011; ). Now it is much clear that MBE’s are not just small version of large companies, but for them to apply its own laws, and not only that they lack financial and human resources that large enterprises have in sufficient quantities but also their management structure and often rewarding is completely different. However, the comparison between sectors showed that there is a tendency to innovate in small and medium enterprises on one side and large enterprises on the other side are very different from sector to sector. Accordingly, large companies gain a competitive innovating advantage in areas such as: development of instruments, motor vehicle industry, and airline industry while in other sectors (agriculture, industry, footwear, and clothing, etc.) small and medium-size enterprises achieve higher degree of innovation. Although large companies are more active in university-based researches, smaller companies are able to use university-based associations to strengthen its internal sector for research and development as well as this has led to a higher level of large companies.

Huergo E., (2006), The role of technological management as a source of innovation: Evidence from Spanish manufacturing firms, Research Policy, No. 35 10 Horvat, Đ., Perkov, D., Trojak, N. (2012), Strategijsko upravljanje i konkuretnost u novoj ekonomiji, Zagreb: Edukator 11 Nebojša Stojčić and Iraj Hashi Firm Productivity and Type of Innovation: Evidence from the Community Innovation Survey 6 Croatian Economic Survey : Vol. 16 : No. 2 : December 2014 : pp. 121-146 12 Brčić, R. (2002). Organizacijska kultura u funkciji djelotvornosti upravne organizacije. Ekonomski pregled, 53 13 Ibid 9


280

International Journal of Economic Perspectives, 2017, Volume 11, Issue 3, 277-286. One of innovation aspects for research is the one towards which the examination was done for the impact of regional dispersion for enterprise innovation potential. With the expansion of business areas, it's easier to come up with ideas that enhance the ability of innovation and introduce structural reforms and favorable environment for innovation. Small and medium-sized enterprises, which are stated, are determined by two essential characteristics. First, the extent of engagement for external resources to MBE’s is much higher compared to large enterprises. Second a strong emphasis on the development of external relations with arguments in MBE’s than for large enterprises, because small and medium-sized enterprises have limited internal skills and resources. One of the basic concepts related to the cooperation of MBE’s in regard to innovation applies to strategic alliances, which are defined as administrative cooperation between different companies in different ways. This cooperation includes contractual and cooperative relations between the companies, including joint ventures, licensed agreements, agreements relating to the exchange of information, sharing of minority share ownership and the joint research as well as development programs with a broad range of partners, including customers, suppliers and competitors from other countries. All this enables enterprises to design corporate strategies in a global context, offers a complete line of products and provides comprehensive services to clients from all over the world. The companies that are located on strategic alliances are effective in minimizing costs, strengthening technology partner and cooperative relations on the areas of research as well as development. The innovation key of MBE’s is at the access of knowledge created outside the company where we have universities and large organizations in the first place14. However, MBE’s are particularly vulnerable at the impact of "geographical spillover" effect. Such knowledge is an output from resources such as investors, informed customers, providers of specialized business services (design, marketing, etc.). The knowledge and innovation key sources of input claim only the companies, customers, suppliers, competitors, conferences, universities, government, consultants, scientific journals, and professionals. The best innovation results are achieved by businesses that sustain their own research and development or by the claims and have strong links with external sources of knowledge15 . However when it comes to the point when companies which replace an internal research and development with management practices innovation, respective research has shown that optimal combination of present human resources management and teamwork, and again this combination must be supported by external expertise. Moreover, companies that combine specific tools for managing innovation supported by external knowledge generated identical innovation performance as well as those that have invested in their own research and development program. Small and medium enterprises are increasingly facing with the shortening life cycle of products and the need for a constant supply of the market with new products in order to remain competitive16 . The result is a speed that is critical for the relevance of the strategy and operations of MBE’s. Just because of the extreme complexity of the factors that influence innovation, MBE’s must appropriately manage limited financial and managerial resources to stay competitive. Authors Alloc and Kessler (2006), tried to answer the following research question: "What critical factors differentiate fast innovators compared to their slower copies within MBE’s?", had to analyze the factors that are important in the implementation of innovation in small and medium companies17 . 3.

DATA , METHODOLOGY AND RESULTS

In this study was used the quantitative research method with deductive approach. So the idea of comparing companies in the field of software industry (SI) and the production as well as services (PS) in terms of data describing of innovation capacity for enterprises occurred because of the assumption that companies in the field of software industry are innovative compared to companies that are not on software industry. Having this in mind, the intention for statistical research in this part of the study is to confirm or deny starting hypothesis of this study:

Kotler P., Keller K. L. (2012). Marketing management, Fourteenth Edition, Pearson education Limited, Harlow, England communications, Johannesburg 15 Vujević K., Balen M. (2006.): „Pokazatelji uspješnosti poslovanja poduzeća pomorskoga prometa“, Pomorstvo, Scientific Journal of Maritime Research, Vol.20., No.2. 16 Klarin K., Klasić K. (2009.): „Informacijski sustavi- načela i praksa“, Zagreb: Visoka škola za informacijske tehnologije 17 Ahmed, A., Islam, S., Uddin, K., (2010), Steps of business process reengineering; Hypothetical application to RMG business, Department of Accounting & Information systems, Faculty of Business Studies, University of Dhaka, Bangladesh, 14


281

International Journal of Economic Perspectives, 2017, Volume 11, Issue 3, 277-286. H1 In Kosova is still low level of investment and is high new information for technology, H2 The investments in innovation technology increased innovation effects in Kosova Enterprises. To test this hypothesis we used the following statistical tests: 1) Student's t-test; 2) The Spearman correlation coefficient. Table 1. Markets that have placed technological innovation in the field of production and services as well as software industry Business Activity SI

PS

Kosovo (%)

Europe (%)

World (%)

Yes

8. 4

14,6

18

No I do not know Yes

19,2

44,2

37,3

72,4

41,2

44,7

0,3

2,2

0

No I do not know

36,3

66,5

68,2

63,4

31,3

31,8

Modality

Source: Adapted from www.oecdraportof question regarding the placed technological innovation data from year 2015 and Statistical online data from ASK 2015.

As we can see the table 1 show us that in the Kosovo are a low level of technological placed on the market with comparison with firms in the Europe and World. Table 2. Testing the equality of proportion when it comes to product innovation between companies in the field of PPH and SI

Source: Adapt from www.oecdraportof question regarding the placed technological innovation data from year 2015 and Statistical online data from ASK 2015. According to the table we can conclude that in Kosovo there is a low level of investment in information technology.


282

International Journal of Economic Perspectives, 2017, Volume 11, Issue 3, 277-286. Table 3. Testing the differences in the participation of some innovative activities in the field of PS and field SI Innovative activities is a business entity performed in An average of the period 2010-2016 participation SI PS Education and training for innovative activities 13,2 49 Other 30 52,1 Acquisition of machinery, equipment, and software 33,7 75,4

Rang of-of use SI PS 1 2 2 6 3

1

The introduction of innovations to the market Internal research and development (R & D) Shopping other forms of knowledge All forms of design

40,6 45 56,4

45,8 49 14,1

4 5 6

5 3 8

25,9

48,1

7

4

External research and development (R & D)

43

25,9

8

7

H0 rejected rejected not rejected rejected rejected rejected not

In the field of software industry, the strongest influence on innovation enterprises had innovations at the education and training for innovative activities while at least one significant impact had external research and development services. In the area of food production and processing, companies are usually performing innovation activities relating to the purchase of machinery, equipment and software, at least in the area of purchasing are the other forms of knowledge. In a more detailed analysis of the differences in participation of certain types of innovation activities in the monitored fields of activities one can see that company is not dependent on the area of activity at the same extent pursued with purchase of machinery, equipment and software and all forms of design. Statistically, significant differences exist in the prevalence of other innovative activities. The data presented at Table 3 show that performance of innovation activities have been intensified in the software industry. Table 4. Expenditure on innovation activities at the enterprises in the field of PS and SI (In 000 euro) Internal research and development External research and development Acquisition of machinery, Adoption of external Total expenditure for innovation

Area SI PS SI PS SI PS SI PS SI PS

N 83 395 83 395 83 395 83 395 83 395

Mean 7986,69 928,26 2181,65 701,14 3293,20 31866,00 1164,17 163,31 14625,70 33658,71

Stv 19964,050 3116,898 5567,066 2522,446 9172,251 104407,175 2642,574 1455,418 23086,449 104991,602

Source: Adapted from www.oecdraportof question regarding the placed technological innovation data from year 2015 and Statistical online data from ASK 2015.

As shown in results at the table 4. Companies in Kosovo have investment in innovation activities in both fields PS and SI. The amount of investment in internal research and development is approximately 928.2600 by MBE by PS fields. As we can see the SI MBE is less increased in internal research and development. The same picture of results we have also for another mentioned category in table as external research and development, adoption of external knowledge. The results on the following table show the effects of innovation through the companies that produce software as well as the ones that do not produce software. The results will be expressed in modality of the percentage at respective categories as mentioned below. The characteristics of the results is that respective companies that produce software are more efficient in the category of innovation rather than those who do not produce, however also companies that do not produce respective software have significance of innovation category since that also they use some respective innovation technology. For more information see the results at the table below.


283

International Journal of Economic Perspectives, 2017, Volume 11, Issue 3, 277-286. Table 5. The significance of the effects of technological innovation between companies in the field of SI and PS EFFECTS OF INNOVATION

Large

Increasing the range of products and services

SI PS Replaced outdated products or processes SI PS Insight into new markets and increase market share SI PS Improving the quality of products and services SI PS Increasing flexibility of production or service SI PS The increase in production capacity / volume of SI PS services Reducing labor costs per unit of product SI PS Reducing the cost of materials and energy per unit of SI PS product Reducing environmental impact SI Ps Improving the health and safety of employees SI PS

36.3 31.1 37.8 21.4 48.9 16.8 70.9 38.5 64.3 21.3 42.0 26.8 41.0 20.5 20.1 16.1 4.4 21.5 8.3 20.5

Modality (%) Medium Small ignore 30.2 19.4 4.4 16.8 12.3 20.8 0 6.5 9.5 19.5 20.0 16.7 15.0 12.4 19.2 16.1 5.4 26.3 31.9 14.8 5.9 28.0 40.5 12.0 28.2 31.4 42.4 37.4 26.1 28.0 17.8 39.1 15.0 34.0 26.2 27.6 19.1 36.0 10.9 39.6

5.4 18.1 15.4 24.4 12.7 34.4 11.3 16.0 11.3 25.3 11.8 28.8 24.9 31.1 49.8 28.2 63.9 31.8 57.8 27.0

As shown in the results at table 5, we can conclude that the companies which are producing or service the software have much more increase in the producing by using the same innovative product than companies which are not using new innovation product by software. Also, we can see that the SI companies replaced outdate products, made new insight of their own products, improving high quality, increasing flexibility much more then PS. So finally we can conclude that regarding the results we have large effects of innovation in two different fields, but the SI has bigger business intensity than PS. The high importance of effects related to the processes is observed in both sectors. However, the software industry has significant effects relating to the increase of flexibility of product and services that are mainly the results of innovation processes, while companies in the field of food production and processing marked an increase in the range of product or service as the most important effect, which is mainly a consequence of product innovation. Therefore if we can compare the results form table 4 and 5 we can conlude that PS made much more investment at the information technology but the output of SI are much higher than PS. According to last paragraphs we have paradox on the human resouces of SI that is much more proffesional than PS. However, from the results we can test the work hypothesis on this study that are H1 In Kosova is still low level of investement is high new information for technology , H2 The investments in innovation technology increased innovation effects in Kosova Enterprises. Both of these hypothesis are approved as present results. 4. CONCLUSION Countries in the world are moving from industrial economy to knowledge economy, and the rise of the country is dependent on the ability to create, accumulate and disseminate knowledge. The MBE’s are representing a major part of economy, for every single country. The importance of this segment of economy calls for examination of these companies. As one of the most important aspects of performance of MBE’s and their innovation, research, and innovation activities as well as their effects are of vital importance. The ultimate goal of innovation is to improve the businesses. Although many studies have dealt with innovation on MBE’s, analyzing the effects of innovation activities has been neglected. This is the theme that this article seeks to contribute to the existing literature. Kosovo is crying out for innovation. Well, a good example of the application of innovation in enterprises is certainly that Slovenia is the first country from South East Europe which entered the European Union. Also, International Journal of Economic Perspectives ISSN 1307-1637 © International Economic Society http://www.econ-society.org

284

International Journal of Economic Perspectives, 2017, Volume 11, Issue 3, 277-286. positive trends are recorded in Bulgaria, Romania & Croatia. Somehow more difficult is situation in Kosovo and neighboring countries where the economy is still in a transitional phase and this will further delay the process of healing. What is clear is that without innovation is not possible in a long term and in a short term to be competitive in the market and make good business decisions, and thus we cannot increase employment and achieve economic growth. The countries of SEE should have a sharp sense of special measures which will help companies in their business systems to practice the research and development. States must oblige the private companies through tax exemption and enable subsidies. The SEE countries must be seen this as a long-term investment. This article explores which factors are crucial for innovation. Factors that we observed are classical factors such as ownership structure and highly educated employees but these are the factors that should reflect the skills and orientation of the company, such as market orientation, and the introduction of strategic, management and marketing changes. The market in which company operates can also have an impact on innovation and innovation effects, but this was included in the analysis. As the effects of innovation were the market share, improvement of product quality reduces material costs per unit of product, as well as improving the environmental safety and health aspects and compliance with legal regulations and standards. It is important to emphasize that the most significant predictor of positive innovation effects of market orientation index whose components are customer orientation, competitor orientation, and inter functional coordination. Therefore, we can conclude that those companies that have a strong market orientation also have much better effects of innovation activities. The share of highly educated employees is also showing a significant variable. With the increased number of highly educated employees can be positively associated only with increase in quality, and negatively with reduced costs, environmental impacts and regulation compliance. Given previous research (most don't expressly include MBE’s), this unexpected result can be explained partly by the fact that MBE’s really different from the large, partly specifics transitional environment in which the research was conducted. Interestingly, strategic and management changes have not significantly affected the effects of innovation. One explanation is that these changes take time to keep and produce good results. Thus it is expected that in the next CIS research will be not possible to link strategic and management changes and the effects of innovation. As for the ownership structure, we found that in most cases it does not matter. In situations where the ownership structure is significant, there is only the state and foreign ownership. In this study were two authors Emin Neziraj as first main author and Aferdita Berisha Shaqiri as correspondent author and second author. Aferdita Berisha Shaqiri worked on concept of the study and gave advice at work; Emin Neziraj was dealing with data and analysis as well as their interpretation. After accepting the first comment for recommendation for the study on 22.06.2017 from Editorial board, both authors are contributing in each point of comments and views. The authors do not have competing interest regarding with article REFERENCES Ahmed, A., Islam, S., Uddin, K., (2010), Steps of business process reengineering; Hypothetical application to RMG business, Department of Accounting & Information systems, Faculty of Business Studies, University of Dhaka, Bangladesh, Andreja Jaklič, Jože P. Damijan, Matija Rojec & Aljaž Kunčič (2014) Relevance of innovation cooperation for firms’ innovation activity: the case of Slovenia, Economic Research-Ekonomska Istraživanja, 27:1, 645-661, DOI: 10.1080/1331677X.2014.975513 Baković, T., Ledić-Purić, D. (2011). Uloga inovacija u poslovanju malih i srednjih poduzeća. Poslovna izvrsnost, 5,(1) Berisha-Shaqiri, A., Miftari, I., Berisha-Namani, M. (2012)I Information Technology and Digitalization of the Kosovo Economy Market and Competition, Bogdanović, M. : 2003.Dijagnosticiranje organizacijske klime, Ekonomski pregled, 54, (9- 10) Brčić, R. (2002). Organizacijska kultura u funkciji djelotvornosti upravne organizacije. Ekonomski pregled, 53


285

International Journal of Economic Perspectives, 2017, Volume 11, Issue 3, 277-286. Cozzarin B.P., 2006), Are world-first innovations conditional on economic performance?, Tehnovation, article in press Drucker P.F., (1998), The Discipline of Innovation, Harvard Business Review On Point Edition, Product no. 3480 Grbac, B. (2010), Marketinške paradigme - stvaranje i razmjena vrijednosti , Rijaka: Ekonomski fakultet u Rijeci Horvat, Đ., Perkov, D., Trojak, N. (2012), Strategijsko upravljanje i konkuretnost u novoj ekonomiji, Zagreb: Edukator Huergo E., (2006), The role of technological management as a source of innovation: Evidence from Spanish manufacturing firms, Research Policy, No. 35 Klarin K., Klasić K. (2009.): „Informacijski sustavi- načela i praksa“, Zagreb: Visoka škola za informacijske tehnologije Kotler P., Keller K. L. (2012). Marketing management, Fourteenth Edition, Pearson education Limited, Harlow, England communications, Johannesburg M.U.Maravi,D. Križaj M.Lesjak (2015), Innovation in Slovenian Tourism organizations’ , Tourism and Hospitality Management, Vol. 21, No. 1, pp. 51-62, Metod Černetič, Olga Dečman Dobrnjić Information Technology and Changes of Management Informatologia 40, 2007, 1, 32–38 Nebojša Stojčić and Iraj Hashi Firm Productivity and Type of Innovation: Evidence from the Community Innovation Survey 6 Croatian Economic Survey : Vol. 16 : No. 2 : December 2014 : pp. 121-146 Vujević K., Balen M. (2006.): „Pokazatelji uspješnosti poslovanja poduzeća pomorskoga prometa“, Pomorstvo, Scientific Journal of Maritime Research, Vol.20., No.2.


286