Theoretical basis

Literature review on innovation capabilities

Nowadays, firms face stiff competition. The need to be flexible and quickly respond to changes requires them to diversify and transform themselves. In this regard, innovation allows firms to add value to their services, products, or processes in order to differentiate in the market and achieve a competitive advantage. According to ^{Chen and Cates (2018)}, the innovation capacity is a vital element for the competitiveness of organizations. In other words, "the more innovative a firm is, the more dynamic capabilities it possesses and the more likely it is to have superior performance" (^{Zhang & Merchant, 2020}, p. 2). Therefore, a firm's ability to innovate is a critical success factor for its growth and performance (^{AlNuaimi & Khan, 2019}).

In fact, in his five-forces framework, Porter makes it very clear that a fundamental aspect to define a firm's strategy is "to identify those strategic innovations that would most improve the industry's -and its own- profitability" (^{Porter, 1985}, p. 7). Nonetheless, some characteristICS prior to innovation, as well as a firm's own competencies and skills, allow them to be innovative. An innovation capability (IC) can be understood as the result of a nonlinear and cumulative learning process that is difficult to transfer (^{OECD & Eurostat, 2007}).

Moreover, since innovation leads organizations to achieve a competitive advantage through investment in different resources and research and development (R&D) projects, ICS enable firms to have higher profits and returns on investment, as well as a greater positioning in the market (^{Macias et al., 2018}). The R&D globalization phenomenon has actually been increasingly used to improve firms' ICS, increase their foreign market share, attract talents, and reduce R&D costs (^{Fan et al., 2019}).

Other authors define ICS as a "comprehensive set of characteristics of a firm that facilities and supports its technological innovation strategies" (^{Burgelman et al., 2008}, p. 1). For this reason, an IC "accumulates as a result of the various internal and external inputs" (^{Romijn & Albaladejo, 2002}, p. 1056). From the resource-based view (RBV), those internal inputs are made up of the firm's human capital, which is understood as the employees' knowledge, skills, and internal efforts to improve firms' technology and technological tools. This translates into resources that are valuable, rare, inimitable, or inherent in the organization and essential to achieve a superior performance over competitors (^{Zhang & Merchant, 2020}).

According to ^{García-Osorio et al. (2014)}, ICS can be defined as a set of characteristics or competencies that, when managed correctly, allow firms to have a good competitive performance. Thus, ICS enable organizations, through the improvement of their daily skills, to foster dynamic and absorptive capabilities to achieve better financial results (^{Felício et al, 2019}).

Consequently, in order to provide an in-depth analysis of ICS, these concepts should be defined, or the metrics that have been proposed to assess them must be addressed. Regarding the latter, studies into ICS have applied different metrics to quantify the level of accumulation of capabilities with respect to an ideal or reference value (^{Robledo et al., 2010}), and most authors usually follow the metrics proposed by ^{Yam et al. (2004)}. However, there are other metrics that are also often used, such as the Capability Maturity Model (CMM) adapted by the Business Process Management (BPM) discipline and introduced by ^{Wang et al. (2008)}.

Table 1 provides a list of ICS along with their definition, based on the models proposed by each author. We may assert that all the proposed models are closely related and that the differences among them are few. For instance, they all include R&D, marketing, strategic planning, and resource allocation capabilities. It should be noted that the learning capability is one of the most important because knowledge absorption and accumulation is materialized in the different activities carried out by organizations (^{OECD & Eurostat, 2007}). In addition, knowledge as a basis for change in companies allows firms to act effectively in order to obtain results in a rapidly changing environment (^{Gutierrez, 2019}).

Table 1 Definition of the various innovation capabilities and relationship between the different proposed models. 

Source: authors.

Based on the above, firms should incorporate these ICS into their daily activities and adopt them as a routine so that they can grow and strengthen their IC to achieve consistent innovative results (^{Essmann & Preez, 2009}). Considering that ICS represent a key learning capability that is built from firms' R&D activities and innovative experiences (^{Lopez-Mielgo et al., 2012}), it is important to recognize that the more difficult it is to understand knowledge, the more likely it is that a firm's R&D result will become a private asset with a greater indirect effect (^{Kim & Park, 2019}). However, the R&D capability remains one of the scantest because it "tends to be concentrated in relatively few entities, particularly in the Business enterprise sector" (^{OECD, 2015}, p. 180).

In this same vein, it is relevant to indicate that absorption capacity turns out to be a vital component so that the organization can continue to build on the knowledge of the company and continue to nurture this component, strengthening not only its internal but also external capacity (^{Monferrer et al., 2013}). On the other hand, being able to increase the level of absorption capacity would allow improving a firm's innovation capacity and knowledge, therefore translating absorption, as indicated by ^{Urgal et al. (2011)}, into a moderate factor between the capacity for innovation and the sustainability of the organization, because if firms manage to develop the ability to use and combine their resources in a source of innovation for their products, processes or services, they can improve not only their performance but also develop a sustainable competitive advantage.

In conclusion, besides requiring a certain degree specific skills by firms, an IC also depends on some characteristics of the territory and economic sectors. This is why "the notion that regional factors can influence the innovative capacity of firms has led to increasing interest in analyzing innovation at the regional level" (^{OECD & Eurostat, 2007}, p. 39). Based on this, the purpose of this study is to analyze the variables that lead to the identification and incorporation of ICS in ICT firms, applying these variables to the specific case of the city of Medellín, considering that Colombia has been implementing strategies to strengthen such capabilities. For instance, the most representative endeavor was the creation of the Ministry of Science, Technology, and Innovation (Minciencias, in Spanish) (^{Congreso de Colombia, 2019}), which used to be an administrative department. One goal of this entity is to bridge the gaps between the different regions and economic sectors in terms of science, technology, and innovation capabilities through the design of public policies. Furthermore, Medellín is currently recognized as the epicenter of the Fourth Industrial Revolution in Latin America.

Overall context of the information and communications technology sector

The adoption of ids is regarded as an important factor in the market's innovation strategy. According to a report by the World Bank, "Latin America and the Caribbean has lower rates of digital technology adoption than similar countries in the Organization for Economic Co-operation and Development (OECD), providing ample space to increase productivity" (^{The World Bank, 2018}). The digital economy is gaining momentum, and ICTS are getting exponentially involved in every economic sector. In 2016, the global digital economy was worth USD 11.5 trillion, i.e., 15.5% of the world's GDP. This figure is expected to reach 25% in less than a decade (^{The World Bank, 2019}).

As specified in Law 1341 of 2009 (or the ICT Law), in Colombia, the Ministry of Information and Communications Technologies (MinTic, in Spanish) is responsible for designing, adopting, and promoting policies, plans, programs, and projects targeted at the ICT sector (^{MinTic, 2018}). This entity works in coordination with the country's Superintendence of Industry and Commerce, the Ministry of Industry, Commerce, and Tourism, and the Communications Regulation Commission to promote economic development in terms of new technologies and also increase the participation of actors interested in competing in the context of technological innovation and the digital economy.

A census carried out by the Mimic, partnering with the Colombian Software and IT Industry Association (Fedesoft, in Spanish) and the National Training Service (SENA, in Spanish), revealed that approximately 4,016 firms in Colombia performed telecommunications and software development activities in 2014. The majority of these firms are located in the central region of the country, especially in the department of Antioquia, with most of them (80%) headquartered in the city of Medellín. Their most representative activity is software development (29.7%), which is worth cop 989,768,275,000. However, the most offered service is data center management (^{SENA et al, 2015}), as observed in table 2.

Most ICT firms in Colombia are small, since only 280 report sales of over cop 3 billion annually. This is also evidenced in their number of employees, considering that more than 60% of these firms have less than 10 employees and only 293 have more than 50 employees, according to ^{Carrillo et al. (2016)}, as observed in figure 1.

Source: authors, with information from ^{Carrillo et al. (2016)}.

Figure 1 Share of ICT firms in Colombia by number of employees.  

Furthermore, Antioquia's broadband penetration rate was 16.85 and 17.17% in the second and third quarters of 2018, respectively, while Medellín reached 22.86 and 23.59% in the same timeframe. These figures, compared to those of Bogotá (22.43 and 22.75%, respectively), reflect Medellín's increased coverage and penetration. It should be noted that revenue from telecommunications services amounted to cop 4.23 trillion in the third quarter of 2018 (^{Mintic, 2019}). Additionally, the Latin American Development Bank conducted a study into broadband expansion in Latin America, where Medellin ranked first in terms of infrastructure within Colombia and 22nd in Latin America (^{Deloitte, 2017}).

Finally, the existence of cloud services and contents, as well as of Industry 4.0 technologies (e.g., artificial intelligence, BigData, blockchain, internet of things, machine learning, and process automation), has increased the demand for Internet access and created the need for more and more users to be connected. This, in turn, has led to a greater dynamics and more investment in the ICT sector (^{CRC, 2017}). As for Medellín, the center for the Fourth Industrial Revolution, according to the World Economic Forum, the evolution of these technologies represents an opportunity to present, to all firms, "different alternatives for digital transformation that allow them to enter the future with a clear competitive advantage" (^{Ruta N, 2019}).

Innovation capabilities in the ICT sector and innovation indicators for Medellin, Colombia

In the ICT world, ICS should not only be considered a strategic option but also elements that are embedded and constantly executed in organizations. People's strength and skills make a big difference for firms to define their competitive advantage because IC is widespread and accessible to every organization (^{Hari et al., 2014}). A clear example of the importance of ICS is the case of firms such as Motorola, Nokia, and Blackberry. Some of their products became obsolete because their innovation strategy could not anticipate the rapid technological changes that were coming. Therefore, organizations must create strong management processes to maintain a competitive advantage and constantly foresee emerging technologies (^{Hari et al., 2014}).

Since Colombia is a developing country, building or strengthening IC in its production sector could be even more complex, since new firms often enter the industries with a delay. Moreover, it is clear that every innovation demands openness, willingness to take risks, and trust, and this latter is only built after a long relationship (^{Román et al., 2013}). This situation is decisive in Medellín as emerging ICT firms arrive to the market with a disadvantage in terms of integration. This is reflected in the time they take to start competing with their products or services (compared to firms in the same sector worldwide), which hinders their innovative activity. Hence, it is an observable fact that organizations that cannot maintain satisfactory IC levels over time show a weak performance in terms of competitiveness and financial results (^{Zollo & Raffa, 1988}). However, "in the last two decades, a group of studies has been emphasizing that the information technologies (ITS) present a 'window of opportunities' for latecomer countries to catch-up by developing indigenous software industries" (^{Rousseva, 2008}, p. 1008). Software production and development could be understood as an innovation activity, since it requires developing new products, which is why firms must possess ICS (^{Rousseva, 2008}).

Within the framework of Colombia's public policy, the ICT industry has been strategically selected to project itself as a "world-class sector" with important challenges regarding competitiveness and increased sales and exports in the long term (^{Villalba et al., 2016}). According to the ^{Albis et al. (2017)}, 140 firms developed innovations in the 20142015 period, for a total of 445 innovations, a very small number considering that this sector is made up of around 4,016 firms.

Moreover, the Technological Development and Innovation Survey (EDIT, in Spanish) iv to vii and the Technological Development and Innovation Service Survey (EDIT-S, in Spanish) ii to v, conducted by the National Bureau of Statistics (DANE, in Spanish), reported that only 77 firms (out of 249) considered it important to have an R&D department as a source of innovation (OCYT, 2017). Regarding external relationships, such as strategic alliances, the survey revealed that during the 2014-2015 period only 110 firms in the sector worked in cooperation with other stakeholders to carry out innovation-related activities. Additionally, as stated by the OCYT (2017), the number of graduates in this area of knowledge from public and private institutions in Medellín was 1,675 in 2015, while in Bogotá this figure reached 4,604 graduates.

The aforementioned can be considered a flaw given that building strategic alliances allows firms to be more innovative, since they could acquire different types of knowledge through their interaction (^{Calderón, 2010}). This is also possible through knowledge transfer, a tool that enhances a firm's learning capability, which, according to ^{AlNuaimi and Khan (2019}), can be understood as a strategy for organizations to improve their IC and, therefore, drive sales growth (^{Villalba et al, 2016}). Likewise, despite the recent growing application of concepts and methodologies related to innovation management at the organizational, sectoral, and regional levels in Colombia (^{Tarapuez et al., 2016}), investment by companies in innovation or R&D is complex because generally its returns are not immediately reflected (^{García-Manjón & Romero-Merino, 2010}).

Given its constant evolution, the ICT sector must develop fast and agile strategies in terms of innovation because "the consequences of the technological changes drastically and directly impact the Information Communication and Technology (ICT) domain more fiercely than any other sector" (^{Hari et al, 2014}, p. 442). Consequently, firms in the ICT sector must integrate their ICS with the information technology capability (ITC), which refers to a firm's ability to use its own technological resources (^{Guisao et al., 2017}). This capability is characteristic of the dynamics in information technology (IT) business development. However, innovation development is not possible without strongly established capabilities, of which organizational and managerial capabilities tend to fail the most: management structures and styles are not conducive. Most of the failures are caused by poor planning and management strategies, rather than the lack of resources or poor technological choices (^{Finquelievich, 2010}).

After analyzing the situation of the Colombian ICT sector, its increased technological complexity can be determined by the following three main factors (^{Rohrbeck, 2010}):

In conclusion, despite the positive role that governments can play by designing strategies that allow knowledge accumulation in the region and that can be used by organizations (^{Fan, 2006}), the factors mentioned above have an influential position. Consequently, these factors must be considered so that strategies can be adequately incorporated in order to strengthen the competitiveness of the ICT industry. Other authors consider open innovation (OI) to be a key strategy for firms to develop ICS because it is "a knowledge management strategy [...] that aims at the efficient and effective creation of knowledge from different intra-and inter-organizational sources, as well as at augmenting learning capacity" (^{Adamides & Karacapilidis, 2020}, p. 3).

Besides, according to ^{Capaldo et al. (2003)}, firms in the ICT sector should maintain a constant dynamic capability to cope with extremely rapid changes that require an innovative technological and management response and, as a result, successfully adapt to the environment.

Methodology (systematic literature review)

Under the SLR method, a literature search in scientific databases is performed to gather the existing information on a particular topic (^{Manterola et al, 2013}). It is an observational and retrospective research design that synthesizes the results of multiple primary studies based on evidence, given its rigorous methodology, and identifies relevant works to answer specific questions (^{Beltrán, 2005}). Added to this, the content analysis method was used for the selection and identification of variables. The steps that we followed to conduct the SLR are described below.

Definition of the search strategy

Based on the research criteria, and keeping in mind the information required, we defined a search strategy that would allow us to obtain the most accurate results (^{Barderas et al., 2009}). Subsequently, we selected the databases relevant to our research topic and formulated the search equations using specific keywords aimed at answering and solving the research problem. Additionally, we included papers from other sources that we considered could contain important information for the SLR. Table 3 shows the results of this process.

Study selection

After the database search, we selected the papers that were more likely to respond to our research problem based on the information they contained, mainly their results (^{Moncada-Hernández, 2014}). For such selection, we considered the following criteria:

We reviewed 70 papers published in 40 indexed journals; 30 of these were excluded because they did not meet the specified criteria. In the end, we selected a total of 40 papers, 35 of which were published in indexed journals.

Data collection

After searching and compiling the papers, we proceeded to analyze their content and identify the variables to be studied. To process the data, we created a database in Excel considering two types of data that we will refer to as "variables." Each variable is detailed below.

Paper characterization variables

For the variable "year of publication," 2019 was found to be the year that most appeared (18%) in the selected papers published between 2010 and 2020, followed by 2016, 2014 and 2018 (13% and 10%, respectively), 2020 and 2017 (8% each), 2010, 2011, 2012 and 2013 (7% each), and 2015 (5%).

With respect to the variable "journal name," we did not observe a representative trend regarding their selection. However, the Journal of Business Research, Journal of Cleaner Production, R&D Management, and the Venezuelan Management Journal reported the most appearances (2 each one).

As for the variable "area of knowledge," the business, administration and accounting area was that with the highest percentage of papers published in related journals (77%). The other areas are included in the remaining 23%, as shown in table 4.

For the variable "methodological design," questionnaire-based survey was the most widely implemented technique (52%), followed by literature review (18%), interview (10%), analysis of state sources (5%), and the remaining seven methods, which together accounted for 15%. Regarding the variable "data analysis method," structural equation modelling was the most widely used (36%), followed by the binomial logistic regression model (14%), comparative analysis of multiple cases (11%), econometric studies and open coding (7% each), and the ten remaining analysis methods, which together accounted for 25%.

With respect to "population under analysis," firms in the ICT sector were the most common study population (37%), followed by companies from other sectors and countries (18% each), small and medium-sized enterprises (12%), cities and start-ups (5%), retailers (3%), and university institutions (2%).

Regarding the variable "resource-based view," 45% of the studies consider such framework to be key for IC development. In addition, in 70% of the selected papers, firms' IC development is regarded as important to promote and strengthen competitiveness.

As mentioned above, the relational variables for the identification and incorporation of ICS were classified into the following three main groups, which address a specific need in IC development:

The information obtained from the analysis for each group is detailed below for each group and presented in a tabulated way organized in 3 columns. The first columns indicate the name of the variable. The second column shows how many times the variable was used; it is an interesting criterion because it indicates the number of studies in which the A variable has been taken into account as an object or focus of study and this may indicate a trend towards the analysis of capabilities or the sector from this aspect or as a new source of knowledge development. The third column indicates the percentage corresponding to the repetition of each variable.