Why the Concept of Private Demand for Innovations Should Be Understand: The case of ex-YU countries

Abstract

This paper aims to provide a comparative analysis of private demand for innovation in the context of the ex-YU countries such as Slovenia, Croatia, Serbia and Macedonia from 2011 to 2016. One key variable for the importance of demand for innovation is the buyer sophistication. This signals the ability of buyers to select products and services based on performance rather than price and to bear the cost of products at the beginning of the life cycle. The companies that face a sophisticated domestic market are likely to sell high quality products and a close proximity to such consumers should to enables the company to better understand the needs and desires of the customers and how they perceive the value of the product. For cultural or historical reasons, buyers may be more demanding in some countries than in others. Hence, оur start point is that “higher degrees of buyer sophistication can to explain higher shares of innovative sales” (Hollanders and Es-Sadki, 2017, p. 42) and opposite “lower shares of innovative sales could to explain lower degrees of buyer sophistication” in the above countries. Thus, our analysis relies on two key indicators, the “buyer sophistication” and the “sales of new-to-market and new-to-firm product innovations”, which are including, the first in the Global Competitiveness Report and the second, in the European Innovation Scoreboard. Looking at the results, it can be noted that Serbia has a big gap between the two indicators, so the extent of buyer sophistication is lower from the extent of innovative sales. Аs business leaders make a subjective assessment of the GCR’s indicator Buyer sophistication, it can be assumed that Serbian business leaders assess the sophistication of domestic customers much lower than it is. This example is somewhat similar to the Slovenian business leaders. These two countries achieve the same level of sales of innovative products, while Macedonia and Croatia are in the same group and have lower sales of innovative products. This finding calls for demand-oriented policies which would have to influence the innovation culture in the market, making buyers more risk taking, aware of innovations and empower them to buy and use them.