How does innovativeness yield superior firm performance? : The role of marketing effectiveness
Güven Alpay
Professor of Management, Boğaziçi University, Faculty of Economics and Administrative Sciences, Department of Management, İstanbul, Turkey
Muzaffer Bodur
Professor of Marketing, Boğaziçi University, Faculty of Economics and Administrative Sciences, Department of Management, İstanbul, Turkey
Cengiz Yılmaz
Boğaziçi University, Faculty of Economics and Administrative Sciences, Department of Management, İstanbul; Middle East Technical University, Faculty of Economics and Administrative Sciences, Department of Business Administration, Ankara, Turkey
Pınar Büyükbalcı
Research Assistant, Yıldız Technical University, Faculty of Economics and Administrative Sciences, Department of Business Administration, İstanbul, Turkey
PP: 107 - 128
Abstract
This paper examines role of marketing effectiveness in the relationship between innovativeness dimensions (e.g. product, market, process, strategic, and behavioral innovativeness) and firm performance. Data were collected via structured questionnaires from 112 firms operating in Turkey and analyzed through hierarchical regression analysis. Findings indicate that different dimensions of innovativeness have different effects on marketing effectiveness and firm performance. The results also support the mediating role of marketing effectiveness in the relationship between firm performance and product and strategic innovativeness dimensions. In addition, several firm characteristics (e.g. firm size, share of foreign capital) are shown to moderate the effects of innovativeness dimensions on marketing effectiveness and overall firm performance.
Keywords
Product innovativeness, process innovativeness, behavioral innovativeness, strategic innovativeness, marketing effectiveness
Article Text
Increasing complexity and dynamism in environmental conditions and customer demand have long been forcing business firms to discover new ways of doing business by means of new tools and perspectives. This new structuring in the business world has been discussed in the management literature mostly in terms of such concepts as 'innovation' and 'innovativeness' (e.g., Adams, Bessant & Phelps 2006). Due to profound changes in the competitive environment, which lead the emergence of new organizational forms, institutional relationships, and value-creating opportunities (Hamel 1998), 'innovativeness' has become a core talent for firms to differentiate themselves (Vila & Kuster 2007).
Recent attempts to explain the processes through which a firm's capacity to innovate leads to competitive success focus on impacts of different and specific forms of innovations such as strategic innovations (Hamel, 1998), product innovations (Calantone, Chan & Cui 2006), and process innovations (Phillips et.al. 2006). Most works in this area link forms of innovativeness and their effectiveness to various aspects of internal organizational characteristics and external environmental factors (Gupta, Raj & Wilemoon 1986; Teece & Pisano 1994). In this vein, Hjalager's (2010) recent study puts forth an extensive literature review and highlights some important variables and dimensions by focusing on the field of services innovation. In her comprehensive work, she addresses major forms of innovation - product, process, managerial, marketing, and institutional - and takes attention to the fact that there is still need for studies revealing the level of innovative activities and their impacts. Particularly relevant in this context is the marketing function and marketing performances of a firm. Prior research has consistently revealed, for instance, that a firm's level of market orientation relates strongly and positively to its innovative capacity or innovativeness (Lin, Peng & Kao 2008; Keskin 2006). Much research also establishes a solid link between firm performance and several specific forms of innovations (Damanpour, Szabat & Evan 1989; Neely et al. 2001).
Accordingly, the present study attempts to discover the nature of the sequence of relationships between five dimensions of innovativeness, marketing effectiveness, and organizational performance. The central thesis of the hypothesized model is that marketing effectiveness mediates, fully or partially, the specific effects of each innovativeness dimension, namely, product innovativeness, process innovativeness, market innovativeness, behavioral innovativeness, and strategic innovativeness, on firm performance. In addition, several firm characteristics are theorized to moderate these relationships. The hypothesized relationships are subjected empirical testing using a sample of domestic and multinational firms operating in Turkey.
Conceptual framework and model development
Background
Organizational innovation is the adoption of a new idea - that is related to a device, system, process, policy, programme, product or service - by an organization (Damanpour et al. 1989; Bigoness & Perreault 1981). The concept may also involve recombination of old ideas, schemes that challenge the present order, new formulas, or unique approaches (Van de Ven 1986; Baregheh, Rowley & Sambrook 2009).
Most often, the conceptual framework for organizational innovation intertwines with the issue of organization-wide 'change.' According to Damanpour and Evan (1984), innovations are responses to environmental change or means of bringing about change in an organization. Handy (1999) supports this view by stating that innovation is a part of organizational change which requires integrated marketing, production, corporate planning, organization, and finance activities. Similarly, Daft's (2008) 'horizontal linkage model' of the innovation process states that research, manufacturing, and sales and marketing departments within an organization must simultaneously contribute to new products and technologies in an integrated manner. These views obviously stem from the concept of 'innovativeness,' which embodies the 'organization's proclivity towards innovation' (Salavou 2004) and which is a general concept of organizational capability (Neely et al., 2001; Tajeddini, Trueman & Larsen 2006).
Prior research has conceptualized organizational innovativeness either as a global, unidimensional construct (Girardi, Soutar & Ward 2005) or as a construct consisting of several specific dimensions (Damanpour 1991). The multidimensional approach to studying innovativeness by focusing on the antecedents and consequences of its several components is especially important. As Cooper (1998) states, for instance, the unidimensional conceptualization of innovativeness allows little or no comparison of findings across studies. The unidimensional conceptualization is the main reason for inconsistent empirical findings in prior research and also frequently criticized for being too narrowly limited to product innovations only (Salavou 2004). Cooper (1998) further states that a firm's propensity to adopt innovations may be influenced by its various characteristics and that the unidimensional perspective is simply too narrow to capture all.
Accordingly, based on an extensive review of prior research, Salavou (2004) proposes a framework whereby innovativeness has three main dimensions; namely, technology-related, behavior-related, and product-related. Salavou's (2004) rather comprehensive approach also supports the notion that each dimension of innovativeness, while being closely related and intertwined, may open new avenues for further research to clarify the several distinct processes that lead to innovative outcomes in organizations. To further clarify this conceptual aspect, a cross-section of recent empirical studies is summarized in Table 1. Additional to these studies, Harmancıoğlu, Droge and Calantone (2009) put the issue in a theoretical framework and conclude that 'customer vs. firm perspective' should be the focus point while studying the nature of innovativeness. Here, customer perspective focuses on the degree to which new products are perceived as different and as requiring major changes in customer's thinking, attitudes and behaviors. Firm perspective, on the other hand, focuses on technological advances and improvements in skills, levels of market understanding, processing abilities, and systems throughout the organization.
Conceptual model
This study adopts the firm perspective and a multidimensional conceptualization of organizational innovativeness. Following prior research (e.g. Wang & Ahmed 2004), we use five separate innovativeness dimensions as drivers of organizational performance. The specific dimensions of innovativeness studied include: (1) Product Innovativeness, 'the novelty and meaningfulness of new products introduced to the market in a timely fashion,' (2) Market Innovativeness, 'the newness of approaches that companies adopt to enter and exploit the targeted market,' (3) Process Innovativeness, 'the introduction of new production methods, management approaches, and technology for the improvement of production and management processes,' (4) Behavioral Innovativeness, 'an organization's behavioral proclivity or willingness to change', (5) Strategic Innovativeness, 'an organization's ability to manage ambitious organizational objectives in order to stretch or leverage resources creatively' (Wang & Ahmed 2004: 304-306). As hypothesized in Figure 1, each innovativeness dimension has independent effects on overall firm performance. The main premise of the proposed model is that each dimension of innovativeness may influence firm performance through changing internal processes, impacts of marketing actions, or both. Accordingly, marketing effectiveness acts as a mediator of the relationships between innovativeness dimensions and overall firm performance. Due to lack of prior evidence and theoretical development, however, the specific nature of this mediating role (e.g., whether it is a partial or full mediation and how this role differs across dimensions of innovativeness) remains as an exploratory research issue. Further, we also investigate the moderating effects of four firm characteristics, namely, industry, firm age, firm size, and proportion of foreign capital, on the relationships of interest.
Hypotheses
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