Only a third of Philippine firms into innovation – study

MANILA, Philippines — Only a third of companies in the Philippines are active in innovation due to barriers and bottlenecks in regulatory frameworks, according to a study conducted by think tank Philippine Institute for Development Studies (PIDS)

Based on the 2021 PIDS Survey of Innovation Activities, only 33.6 percent of Philippine firms are active in innovation, of which about a fifth or 21.8 percent are product innovators and a quarter 27.4 percent are process innovators.

PIDS senior research fellows Jose Ramon Albert, Francis Mark Quimba and Ramonette Serafica, supervising research specialists Jana Flor Vizmanos and Neil Irwin Moreno as well as research analysts Abigail Andrada, Mika Muñoz and Angelo Hernandez said that information and communications technology (ICT) consistently ranked highest in innovation.

The third innovation survey of PIDS, which was conducted with the help of the Philippine Statistics Authority, investigated the innovation practices of 11,500 firms across major sectors.

Compared to previous surveys, the 2021 round had 10 times more respondents and gathered information on the use of digital platforms by firms.

Albert said the study assessed the firms’ innovation based on their engagement and types of innovation pursued (product or process innovation).

He said innovation includes 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.

According to the survey, only a quarter of the innovation-active firms in the country have 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 recommended 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 as well as execute reforms in the investment climate, trade and education.