Revealing Employees´ Knowledge Contribution in the Process of Innovation: The case of Latvia and Estonia

Abstract

Today, there is a highly competitive environment because of globalization. Hence, firms are required to be continuously innovative in order to succeed in national as well as international markets. Moreover, they are forced to find additional sources of competitive advantage. Knowledge creation and its application into new products, processes and services seems to be crucial during the process of innovation creation. For this purpose, firms can use their own (internal) knowledge or they can find external knowledge sources, for example through research and development processes. At the same time, firms' employees, as one of the holders of firm knowledge, as well as the creators of new knowledge, represent key players in above-mentioned innovation and knowledge-creation processes. In this paper, we analyzed the role of different groups of firms' employees with an emphasis on their knowledge and experience (professionals with extensive theoretical and technical knowledge; technicians with mechanical or technical knowledge; employees with university degree knowledge) in the processes of innovation creation. For this purpose, we focus on the firms in Latvia and Estonia from Central and Eastern Europe (CEE), which are often referred to as lagging countries, primarily behind Western European countries. This is mainly due to the lower levels of trust, poorer infrastructure availability and a lack of social capital. The paper employs partial least square structural equation modelling (PLS-SEM) analysis and the latest edition of the data from the World Bank Enterprise Survey 2019. This paper contributes to the current level of knowledge by revealing the role of different types of employee knowledge in the process of firm's innovations. Moreover, it allows us to propose some specific practical implications for firms.