Informal thinkering - how is it important?

This paper examines innovation processes or technical change-generation pro cesses at the firm level. It emphasizes the notion that the element of tech nical and technological change that is a determinant of productivity growth is strongly induced by internal factors related to the firm's behavior, vi a investment in R&D but also, and importantly, on the basis of "informal th inkering" within plants. This research is unique in that it seeks first, to examine the pattern of t echnical change and its ensuing productivity growth, and second, to make a comparison between an industrialized and an industrializing country. This c omparison is conducted by empirically comparing mills in the pulp and paper manufacturing sector in two countries: Canada and India. The overall analy sis is based on direct observations at the mill level, face-to-face intervi ews and on analysis of mill documentary records. This paper highlights the importance of managing change as a continuous pro cess. The introduction of intermittent, "step-jump" technical changes contr ibuted little to explain the differences in performance between the mills. Much more important are (i) the continuing sequences of smaller investments in technical change, often linked to the larger step-jumps, and (ii) the e xistence of steady streams of changes and improvements that are unrecorded as capital expenditure. (C) 1998 Elsevier Science Ltd. All rights reserved.