4.1.1 Knowledge in the food system

In a study of the Italian industry, Evangelista (1999) placed the food and drink industries in the investment intensive sector. The other sectors were:

     R&D/investment intensive;

     R&D (research and development) and D&E (design and
        engineering) innovators;

     technology users.

In his investment intensive sector, investment activities play an important role, while research, development, design and engineering play marginal roles. Process innovations are very common and innovation performance is linked to investment in technologically new machinery and equipment. Other processing industries, chemicals and sugar in the investment intensive sector and pharmaceuticals in the R&D / investment intensive sector had higher research, development, design and engineering activities. Pharmaceuticals had high R&D and D&E expenditures accompanied by medium or high levels of investment in machinery, innovation being clearly oriented towards the introduction of product innovations. Comparing companies in Europe in Table 4.2, this greater emphasis on process innovation in the food industry was clearly shown (Evangelista, 1999).


Table 4.2 Product and process innovations in European companies

Percentage of firms introducing   Product innovation Process innovation Product and process innovation Mechanical machinery 92.8 69.8 62.6 Chemicals 91.6 75.5 67.1 Food, drink & tobacco 70.3 93.6 63.9

Source: From Evangelista, 1999, by permission of Rinaldo Evangelista and Edward Elgar Publishing Ltd.


One recognises that food manufacturing is essentially a supplier-dominated industry with ingredients from the chemical industry and large food ingredients processors and equipment from mechanical/electrical manufacturers. Knowledge is bought in by food manufacturers from the suppliers, there is often less creation of knowledge than in the supplier industries (Hood et al., 1995). This knowledge generation and transfer is emphasised at the food congresses where a large number of suppliers not only exhibit their products and equipment but also give or sponsor many of the papers at the meeting. An interesting recent example demonstrating the limitations of product development when relying heavily on outside sources of technology was shown by Martinez and Burns (1999) when studying the Spanish food and drink industry. They found product technology was predominantly in-house generated, process technology combined internal development with external acquisition mainly from equipment suppliers. Purchase of equipment emerged as the main source of external technology acquisition as opposed to information gathering procedures. This reliance on externally generated technological developments had brought about low levels of technological independence in general and process technology in particular. The importance of in-house technological capabilities in product and process innovation, indicates the problems in product development a company and indeed an industry faces if it relies largely on external sources as opposed to internal developments. Is it time for food manufacturing to include more R&D and D&E in product development so as to produce a more sophisticated technological content in consumer food products? The food manufacturing industry is probably never going to be a high technological industry but there is a need for a different balance between R&D, D&E and capital investment in plant as these are joint determinants of the performance of companies. Wallace and Schroder (1997) made the following statement which the management of food industry development might ponder:

    Research and development in the food industry is a well-recognised case
    of market failure with its private costs and benefits differing from its social
    ones. The end result is an under-investment in R&D by private firms and
    attempts to justify government supporting it. The question is how to solve
    this dilemma. In the meantime, increasing masses of scientific and
    technical information and analysis are being super-imposed on a world
    wide background of rapid legal, political and social change.

Organisations can be grouped as functional, processed-based and societal knowledge-based. This means that a company can be based on functional departments such as marketing, production; or it can be an integrated technological entity; or lastly it can be a technological entity integrated into society. Is the food industry, which has been mainly functional, moving towards an integrated technological organisation with management based on societal knowledge? If so, the knowledge needed in the industry will have to increase exponentially.