Financial Reporting as a Source of Innovation-Relevant Competitive Intelligence

Round 1

Reviewer 1 Report

    Dear authors, thank You for such an interesting material for publishing in so famous journal JOItmC. 

   The article entitled "Financial reporting as a source of innovation-relevant competitive intelligence" is well structured and logically proved. Five contemporary case examples illustrate the specific features of the approach being suggested in the article. The examples relate to the following financial reporting features for intangible assets:

  1) Accounting for research and development (R&D) activities (Smiths Group plc and Philips AG cases);

  2) Expenditure on software development (Aspen Technology Inc. and Blackbaud Inc. examples);

  3) The impairment testing process (Novartis and Adidas examples as well as the Samsung’s annual report being under consideration);

  4) Business Combinations (AstraZenca and Pfizer examples);

  5) Goodwill Impairment (Vodafone Group plc and Pearson plc cases).

   Undoubtedly, the decision makers should take into account that the financial report provides significant information about relevant commercial innovations.

   It's worth agreeing with the conclusion that a new dimension to literature could be found at the intersection of competitive intelligence and innovation in such a way as the authors suggest by investigating the impact of financial reporting system to innovation-relevant competitive intelligence.

   However there is a small gap regarding the description of scientific methods being used in investigation of the new dimension of the strategic competitiveness.

   The authors have already added in reference list very useful report by Benjamin Gilad readable via the following link: https://hbr.org/2015/05/competitive-intelligence-shouldnt-just-be-about-your-competitors

   So we could pay more attention to this article, especially such aspects as the difference between management and military (government) definitions of the competitive intelligence.

    Thus, the authors could consider the deep reasons of the significance of the managerial approach to this issue. The systematic approach should be the theoretical fundamentals of developing a special definition of the innovation-relevant competitive intelligence from the wholistic point of view instead of aiming just to destroy the competitor. A proposed new wholistic position could be treated as innovative definition of competitive intelligence which develops the approach already known as blue ocean strategy (Carton, Guillaume "How Assemblages Change When Theories Become Performative: The case of the Blue Ocean Strategy". doi:10.1177/0170840619897197). Probably authors could find interesting the article "Economics of Digital Ecosystems" (J. Open Innov. Technol. Mark. Complex. 2020, 6(4),24; https://doi.org/10.3390/joitmc6040124).

    The article has scientific significance for Economics and could be accepted with some minor changes (also placing the reference' numbers in order of appearance).

Author Response

Dear Reviewer,

Thank you so much for both your encouraging comments and your deeply appreciated suggestions for improving our work.  Our team is sincerely grateful for your insights and suggestions and we have built our revision work around the expert guidance which you have offered.  

With reference to the specific points which you raised please note the following:  

Pay more attention to the Benjamin Gilad article: 

This is a very important suggestion and the Gilad article is indeed a rich source of ideas in the context of our work  - and one which we had not fully utilized.  

In Section 2-1 we now state:

Gilad [15] (p.1) suggests that “[s]imply and clearly put, competitive intelligence is a perspective on changing market conditions. This means identifying risks and opportunities early enough to allow the company to adapt its strategy or in extreme cases, change it.”. He suggests that that definition of competitive intelligence “forcefully delineates it from all other information, data, and research services”. Crucially, [15] (p. 1) suggests that  “information alone is not a perspective on change — information does not automatically lead to insight”—although, as the author emphasizes—this point is not always well understood by companies and executives. [15] also highlights the needs for an integrated organizational approach towards generating and analyzing competitive intelligence. 

Furthermore, in the conclusion we make the observation that: 

However, future research and practical work at the intersection of financial reporting and competitive intelligence needs to take cognizance of the potential for information overload. On this point it is worth nothing the observation [15] (p. 1) that “[i]n recent years with the big data craze, collecting digital data has replaced strategic intelligence”. Nonetheless, [15] (p.1) firms “waste millions on massive databases or research projects that don’t yield useful insight” and tend to push consideration of competitive intelligence to the “tactical product level, missing out on the true value of competitive intelligence as a purveyor of strategic change”. Consequently, the challenge for professions in the field is to avoid contributing to the proliferation of data at the organizational level and to focus on competitive intelligence which makes a real contribution to consideration of strategic change.   

We also make use of Gilad's insights in explanding our work to incorporate your second suggestion also.  

Focus on the wholistic view rather than just on destroying the competition

Again, this is insight is of cruicial importance and the references and ideas you provided with respect to this point have been enourmously helpful - thank you.  We now include the following in the conclusion:

Future work in the field also needs to take cognizance of alternative conceptualizations of business strategy.  For example, Carton [38] (p. 4) explains that blue ocean strategy “aims at breaking with the logic of the competitive strategy” so that “boundaries and industry structures are not given and can be reconstructed based on the actions and beliefs of industry players”. Our work shows that intelligence derived from the financial reporting can support the development of blue ocean strategy analytical frameworks and tools such as the Value Curve which “aims to represent a company’s relative performance within a given industry”.  In this sense, we believe that financial reporting can make an important contribution as a source of innovation-relevant competitive intelligence within both blue ocean strategic frameworks as well as more traditional strategic paradigms.

Equally well, financial reporting has the potential to contribute from a strategic intelligence perspective in the context of the emerging “digital economy of ecosystems” [39] (p.1) in which “competition is eliminated, and organizations form unions and alliances in order to work together and cooperate to reach a set goal”. Given the growing importance of digital ecosystems in contemporary business and societal contexts, the role of accounting systems as a source of business intelligence within such ecosystems is likely to become a dominant theme in the development of research at the interface of financial reporting and strategy.  In this sense, our work shows that financial reporting also has the potential to contribute valuable intelligence in the context of strategic environments focused on cooperation as well as competition.

The role of financial reporting in the context of industries and settings where cooperation is a fundamental requirement  is likely to become more important given the recent proliferation of such ecosystems (both digital and otherwise)  [39]. For example, Gilad [15] (p. 1) observes that “popular literature is filled with definitions and images of competitive intelligence taken from the realm of the government and the military” so that the field becomes focused “on competitors (“the enemy” in military parlance) instead of the market as a whole — the entire competitive arena”. Taken in conjunction with concepts of blue ocean strategy [38] and alliances [39], the message for the researchers and practitioners at the interface of financial reporting and competitive intelligence is clear:  work in this field needs to be fully cognizant of opportunities for financial reporting to contribute in a variety of non-traditional business strategies and within a wide range of organizational and industrial structures. 

 Description of the scientific methods used

We have now included a new sub-section (2-4) which focuses upon this issue:

2.4. Methodological framework

      Scholars in the fields of both accounting and innovation can draw upon decades of inightful research findings in order to develop new insights and paradigms. However, research at the interface of accounting and innovation is still a developing field with little in the way of extant literature.  Prior literature in the innovation field [19] (p. 8) notes that “[w]hen a scientific field still needs more exploration and interpretation and is still little explored, with a substantial shortage of preliminary research on it, exploratory case studies are recommended”. Case studies are a highly effective research methodology [20-24] and we build on prior insights in order to present what we term ‘contemporary case examples’ in order to illuminate the core ideas underlying our arguments. These contemporary case examples provide important ‘real world’ illustrations which demonstrate—in both conceptual and practical terms—how finanial reporting can make an important contribution across diverse industries as a source of innovation relevant competitive intelligence. 

 

We trust that our revised work fully incorporates your excellent and sincerely appreciated comments and suggestions.  Your overall assessment of the potential of our work has been a source of great encouragement to us.

 

Thank you once again.

Best wishes

Author team

 

 

 

 

 

 

Reviewer 2 Report

The paper is not a scientific article.

The research problem and the gap in the nkonwledge is not identified.There is no state of the art in financial intelligence and their links woth competitive intelligence. There is no a clear objective and a methodology and techniques are not applied for its resolution.

The article is a text where personal ideas are proposed, which are accompanied by examples as the only way to demonstrate, without any foundation in the literature or in their own research.

An example of the methodological deficiencies of the paper, among others: it indicates as objective to demonstrate the core premise

• Consequently, we demonstrate that financial reporting has significant—albeit frequently untapped—potential as a generator of competitive intelligence with respect to firm-level and industry-level trends in innovation.
• While our core premise: that a firm’s financial reporting system has significant po-tential as a source of competitive intelligence in innovation contexts

 

Author Response

Dear Reviewer,

Thank you for taking the time to read our article. We appreciate your insightful comments.  

In particular, we note your criticism that our article is not a 'scientific article'.  Whilst we disagree, we belive that our article nees to provide more background in terms of our methodological approach.  To this end, we have added a new sub-section as follows:

"2.4. Methodological framework

      Scholars in the fields of both accounting and innovation can draw upon decades of inightful research findings in order to develop new insights and paradigms. However, research at the interface of accounting and innovation is still a developing field with little in the way of extant literature.  Prior literature in the innovation field [19] (p. 8) notes that “[w]hen a scientific field still needs more exploration and interpretation and is still little explored, with a substantial shortage of preliminary research on it, exploratory case studies are recommended”. Case studies are a highly effective research methodology [20-24] and we build on prior insights in order to present what we term ‘contemporary case examples’ in order to illuminate the core ideas underlying our arguments. These contemporary case examples provide important ‘real world’ illustrations which demonstrate—in both conceptual and practical terms—how finanial reporting can make an important contribution across diverse industries as a source of innovation relevant competitive intelligence. 

We trust that this additional sub-section will help to alleviate your main concerns with respect to our work.  

In addition, we have clarified our objective more clearly in light of your comments.  

Thank you once again for your insights with respect to our work.

Best wishes

Author team

 

 

 

 

Reviewer 3 Report

I consider that the idea is interesting and worth doing research. The research topic is well explained as concerns its necessity and it fills a gap in the existing literature.
I consider that the paper is well organized and presents a reasonable knowledge of the literature.
The strength of the article is its originality.
The conclusions are presented clearly. The paper makes a useful contribution to the literature and practice.
The authors needs to overview the methodological framework because it has to be valid for the research topic and has to be better explained.

Author Response

Dear Reviewer,

Thank you so much for your very positive comments about our work.  Our entire team is very grateful for your expert insights and analysis.  

We have noted, in particular, your observation that: "The authors needs to overview the methodological framework because it has to be valid for the research topic and has to be better explained."

We agree fully with your observation here and we are very grateful for this comment.  Based upon your comment, we have introduced a new sub-section in our work (2.4) which explains our methodological framework as follows: 

2.4. Methodological framework

      Scholars in the fields of both accounting and innovation can draw upon decades of inightful research findings in order to develop new insights and paradigms. However, research at the interface of accounting and innovation is still a developing field with little in the way of extant literature.  Prior literature in the innovation field [19] (p. 8) notes that “[w]hen a scientific field still needs more exploration and interpretation and is still little explored, with a substantial shortage of preliminary research on it, exploratory case studies are recommended”. Case studies are a highly effective research methodology [20-24] and we build on prior insights in order to present what we term ‘contemporary case examples’ in order to illuminate the core ideas underlying our arguments. These contemporary case examples provide important ‘real world’ illustrations which demonstrate—in both conceptual and practical terms—how finanial reporting can make an important contribution across diverse industries as a source of innovation relevant competitive intelligence. 

We trust that this sub-section fully addresses your very insightful and helpful comment. 

Thank you once again for your important contribution to our work,

Best wishes

Author team 

 

Round 2

Reviewer 2 Report

The article has improved considerably with the incorporation of the new paragraphs, especially in the references on innovation, the explanation and justification of the chosen methodology and the proposed conclusions. The article has acquired greater scientific soundness that the previous version did not have, but not enough to be published in a Q1 SJCR.

However, the research contributions regarding financial accounting and competitive intelligence should be contextualized with greater comprehensiveness and precision. The state of the art is still very insufficient.

The authors write: “Although the accounting function in organizations is not commonly associated with innovation [6,7], Ries [7] has identified the potential of contemporary accounting systems to contribute to corporate innovation processes”. Are these statements from the years 1996 and 2011 still right actually? I suggest a deeper review of the academic literature, by example:

• Basu, 2014, How Can Accounting Researchers Become More Innovative? Accounting Horizons, Vol. 26, No. 4.
• Ngwakwe, C.C. Dilemmas in accounting research and implication for management. Corporate Ownership and ControlVolume 11, Issue 4 Continued 1, 1 June 2014, Pages 214-222
• Innovation in accounting thought and practice – an introduction(Editorial). Accounting HistoryVolume 20, Issue 3, 12 August 2015, Pages 247-249

Regarding the contribution of financial studies to competitive intelligence, the authors have not taken into account that there is a long-established sub-discipline: Competitive Financial Intelligence. They must contextualize their research within this discipline, and not limit to indicate that they present a new proposal, ignoring the existing literature and a long tradition of practitioners. I recommend, also, to review the Journal of Intelligence Studies in Business.

It is also necessary to show the difference of the article's proposal with respect to another classic field of Intelligence Studies: Financial Intelligence, on which there is a wide literature.

The findings in the state of the art should also help to improve the selected methodology (which should have interviews with experts and practitioners), the design of the research and the conclusions.

Author Response

1. The article has improved considerably with the incorporation of the new paragraphs, especially in the references on innovation, the explanation and justification of the chosen methodology and the proposed conclusions. The article has acquired greater scientific soundness that the previous version did not have, but not enough to be published in a Q1 SJCR.

Thank you for your encouraging comment with reference to the improvements in our paper. 

2. However, the research contributions regarding financial accounting and competitive intelligence should be contextualized with greater comprehensiveness and precision. The state of the art is still very insufficient.

We have incorporated your suggestions as discussed below. 

3. The authors write: “Although the accounting function in organizations is not commonly associated with innovation [6,7], Ries [7] has identified the potential of contemporary accounting systems to contribute to corporate innovation processes”. Are these statements from the years 1996 and 2011 still right actually?

Yes, we believe that these statements are correct.  We have added some more up to date references in section 1 as follows:

“Although the accounting function in organizations is not commonly associated with innovation [6-11], Ries [7] has identified the potential of contemporary accounting systems to contribute to corporate innovation processes.”

4. I suggest a deeper review of the academic literature, by example:

• Basu, 2014, How Can Accounting Researchers Become More Innovative? Accounting Horizons, Vol. 26, No. 4.
• Ngwakwe, C.C. Dilemmas in accounting research and implication for management. Corporate Ownership and Control Volume 11, Issue 4 Continued 1, 1 June 2014, Pages 214-222
• Innovation in accounting thought and practice – an introduction(Editorial). Accounting History Volume 20, Issue 3, 12 August 2015, Pages 247-249

 

Yes, we agree and we have added the following text in section 2.2

“Prior work in accounting calls for accounting researchers to contribute more to other disciplines [8,31,32] and to become “more innovative” [8](p.851).  Building on these calls, the present work extends the long-established field of financial intelligence [9,33] and competitive financial intelligence [9,33-35] by focusing on the ways in which financial reporting systems can contribute to the development of innovation-relevant competitive intelligence.”

5. Regarding the contribution of financial studies to competitive intelligence, the authors have not taken into account that there is a long-established sub-discipline: Competitive Financial Intelligence. They must contextualize their research within this discipline, and not limit to indicate that they present a new proposal, ignoring the existing literature and a long tradition of practitioners. I recommend, also, to review the Journal of Intelligence Studies in Business.

Please see our response to point 4 above.

6. It is also necessary to show the difference of the article's proposal with respect to another classic field of Intelligence Studies: Financial Intelligence, on which there is a wide literature.

Please see our response to point 4 above.

 

7. The findings in the state of the art should also help to improve the selected methodology (which should have interviews with experts and practitioners), the design of the research and the conclusions.

We stand over our case-study methodology.  However, we have explained in our conclusion that future work can draw on other qualitative methodologies including interviews with experts and practitioners

“From a methodological standpoint, we encourage additional qualitative work incorporating case-studies as well as interviews with experts and practitioners [33]. Quantitative work utilizing statistical analysis and econometric modelling [11,22] can also make an important contribution to the field.” 

 

We are grateful for your insights which have helped to substantially improve our paper. 

Round 3

Reviewer 2 Report

I encourage the authors to continue their research in one of the less developed areas of Competitive Intelligence: Competitive Financial Intelligence.

Author Response

Dear Reviewer

I encourage the authors to continue their research in one of the less developed areas of Competitive Intelligence: Competitive Financial Intelligence.

Response: We have addressed this point in the previous round.  Our focus is on innovation-relevant competitive intelligence and we have remained faithful to that perspective.  

Thank you