Organizational innovation, technological innovation, and export performance: The effects of innovation radicalness and extensiveness

TL;DR: In this article, the authors focus on the relevance of different types of innovation for firms' export performance and show that organizational innovation enhances export performance both directly and indirectly by sustaining technological innovation.

About: This article is published in International Business Review.The article was published on 2017-04-01 and is currently open access. It has received 307 citations till now. The article focuses on the topics: Innovation management & Export performance.

Summary

Performance: The Effects of Innovation Radicalness and Extensiveness 1 Introduction

• Response variables represent the organizational or managerial actions in response to contingency factors.
• Specifically, the authors argue that when studying the innovation-performance relationship it is important to consider both technological and organizational innovations together.
• This study contributes to the international business and innovation literature by showing the different effects of both technological and organizational innovation on export performance.

2 Theoretical background and hypothesis development

• Innovation is a multifaceted construct that encompasses the generation, development, and implementation of an idea or behavior that is new to the adopting organization (Damanpour, 1996) .
• The technological-organizational typology 2 is popular among management researchers and refers to a general distinction between the firm's technological and administrative systems, in which the former mainly produces changes in the firm's operating system and the latter mainly influences its management systems (Damanpour & Aravind, 2011) .
• Another established important distinction in terms of innovation typologies is the degree of innovation radicalness.
• In the remainder of this section the authors will focus on formulating hypotheses on the relationships between different types of innovation and export performance.

2.1 Organizational innovation and technological innovation

• According to socio-technical system theory, any change in an organization's technological system requires changes in the administrative system to adjust to the demands created by the technological system.
• In their study of libraries, Damanpour and Evan (1984) highlighted the need to train the staff in the cataloguing department and to devise new procedures for cataloguing library materials (as organizational innovation) to facilitate the digitalization of a card catalogue system (as technological innovation).
• In other words, high levels of organizational memory, i.e., "repository for collective insights contained within policies, procedures, routines, and rules" (Day, 1994, p. 44 ) can inhibit a firm creativity (Moorman & Miner, 1997) .
• Furthermore, Sainio, Ritala, and Hurmelinna-Laukkanen (2012) and Teece (2010) argue that radical technological innovation demands new business models to support the exploitation and application of those innovations.
• Damanpour and Evan (1984) suggest that adopting organizational innovation results in a high extent of technological innovation.

2.2 Innovation and export performance

• A review of empirical studies between 1984 and 2003 has shown that innovation is positively associated with firm performance (Walker, 2004) .
• Firms adopt innovations to gain first or early mover advantages that will lead to superior performance (Damanpour, et al., 2009) or to eliminate a performance gap caused by uncertainties in the external environment (Damanpour & Evan, 1984) .
• Changes and uncertainty in the firm's environment motivate organizations to seek strategic changes (Lawrence & Lorsch, 1967) , and innovation is a way of creating such change to ensure adaptive behavior (Damanpour, et al., 2009) .
• Scholars argue that innovations are growth strategy instruments for firms that seek to enter new markets, and they lead to an increase in the existing market share (Gunday, et al., 2011; C. H. Wang, et al., 2008) .
• The latter is very important because rapid changes in technologies and increasing competition in global markets erode the value added by existing products and services (Gunday, et al., 2011) .

2.2.1 Different innovation typologies and export performance

• A balanced portfolio of both technological and organizational innovations is necessary to cope with changes and uncertainties in the environment and to fully realize the positive effects of innovation on performance (Damanpour & Aravind, 2011; Damanpour, et al., 2009) .
• Barney (1991) maintains that rare, valuable, non-substitutable and inimitable resources and capabilities are strategically relevant and can create differentiation and produce a competitive advantage for the firm.
• Adopting organizational innovation results in changes in strategy, structure, and administrative procedures that improve, inter alia, the organization's climate, communication, personnel policies, teamwork, information sharing, and coordination and cooperation mechanisms (Damanpour & Aravind, 2011; Gunday, et al., 2011) , all of which can enhance a firm's performance.
• Scholars have proposed that radical innovations are developed in firms that have experimental cultures, entrepreneurial climates, and strong technical competencies (Damanpour & Wischnevsky, 2006) , which are often found in dynamic and competitive environments (Miller & Friesen, 1982) .
• Following the reasoning above, the authors hypothesize the following: H 3 : The (a) radicalness and (b) extensiveness of technological innovation adopted for the development of a foreign market are positively associated with firm export performance.

2.2.2 The mediating role of technological innovation

• Thus, the introduction of new technologies, new products and new processes is the result of technological innovation efforts (Hall & Mairesse, 1995; Kafouros, et al., 2008; Zahra & Covin, 1995) enabled by organizational innovations.
• The effect of organizational innovation on export performance is therefore mediated by which technological innovations are enabled to respond to rapid changes and heterogeneity in technologies and markets.
• Thus, the authors propose the following hypothesis: H 4 : The (a) radicalness and (b) extensiveness of technological innovation adopted for the development of a foreign market mediate the relationship between organizational innovation and firm export performance.

3.1 Data profile and research setting

• The authors study sample consisted of 573 Swedish companies in the forestry, fishing, food product, beverage, garment, and furniture industries that satisfied the following criteria: (1) they had exported products for at least three years; and (2) they had exported to at least two foreign markets.
• The sample was selected randomly from a population of 963 companies using a stratified sampling method.
• The industries chosen are also well suited for the purpose of this study because a clear trend towards more international activities has been observed, particularly via exporting and particularly in the chosen industries in Sweden over the past decade (Statistics Sweden, 2012) .
• Moreover, these industries contribute a significant share of total manufacturing exports and a high share of employment and have a proven ability to innovate, giving them a vital role particularly in the developed economies of Western countries (Hirsch-Kreinsen, 2008) .
• Hirsch-Kreinsen's (2008) study of these industries suggests the presence of three typical innovation strategies: product innovation, production process innovation, and marketing innovation.

3.2 Data collection procedure

• The data collection was conducted through TNS SIFO, a recognized marketing research agency in Sweden, from February to April 2012.
• The effective responses corresponded with 218 export ventures in 26 countries .
• In terms of statistical remedies, the authors conducted Harmen's one-factor model test (Podsakoff, et al., 2003) , in which a worse fit for the one-factor model would suggest that CMV did not pose a serious problem.

3.3.1 Organizational and technological innovation

• Previous research on innovation has often relied on secondary data (e.g., patents) or other proxy measures (e.g., R&D intensity) to operationalize innovation (Archibugi & Planta, 1996; Nam, et al., 2014) .
• In the present study, the scales used to measure organizational and technological innovation were based on those developed by Weerawardena (2003a Weerawardena ( , 2003b)) .
• The authors conceptualized the organizational innovation construct as a reflective construct (O'Cass & Weerawardena, 2009) , comprising managerial and marketing dimensions that are manifestations of the overall construct (Jarvis, et al., 2003) .
• This method enabled us to utilize primary sources of data related to innovation within firms and explore their actual innovation activities.

3.3.2 Export performance

• There are no definite and unambiguous guidelines for how to measure a firm's export performance (Brouthers, et al., 2009) .
• Therefore, export performance in this study was measured using six items within two dimensions: financial performance and strategic effectiveness (Evans & Mavondo, 2002; Evans, et al., 2008) .
• Regarding financial performance, the respondents were asked to indicate the degree to which several financial indicators had changed over the last three-year period in the foreign market on a seven-point scale.
• The authors chose a three-year time frame to increase their confidence in the quality and reliability of the data provided by the respondents (Papadopoulos & Martín Martín, 2010) .
• The authors measured strategic effectiveness via two indicators, i.e., achievement of strategic objectives and satisfaction with overall performance (Evans & Mavondo, 2002; Evans, et al., 2008) (Table 1 ).

3.3.3 Control variables

• The authors used the natural logarithm of the number of full-time employees as a proxy for firm size, which is the most common measure of size in innovation and export research (Contractor, et al., 2005) ; they entered this proxy and industry type as control variables in the model.
• Alvarez and Robertson (2004) found that firms that export to developing countries are more likely to have R&D units and to invest in product design, whereas firms that export to developed countries are more likely to invest in new products and production processes.
• All the constructs met the suggested minimum 5 value for composite reliability (Hair Jr., et al., 2010) .
• The authors assessed the individual items' reliabilities by examining the standardized loadings of items on their corresponding constructs.

4 Research findings

• The authors controlled for firm size, industry type, host countries' R&D expenditures (percentage of GDP), the firm's extent of development, and market differences.
• All the indices indicated that the hypothesized model had adequate fit with the data .
• Regarding the control variables, firm size positively and significantly (β = 0.09, p < 0.05) influences firm export performance.
• Indicated that only technological innovation extensiveness, and not radicalness, is significantly related to export performance (β = 0.16, p < 0.05).
• The authors found that there is a substantial reduction in the path coefficient (from 0.35 to 0.20) and the t-value (from 7 to 3) for the direct link between organizational innovation and export performance after entering the mediator.

5 Discussion and concluding remarks

• At a general level, the results of this study show that adopting innovations for the development of a foreign market is beneficial to export performance.
• Their key findings contribute to previous research not only by highlighting the importance of adopting technological-organizational innovations (Damanpour & Aravind, 2011; Damanpour, et al., 2009) , but also by explicitly rendering the effects in terms of specific technological innovation outputs: innovation radicalness and extensiveness.
• In other words, this finding supports the argument that coping with changes and uncertainties in the environment and attaining superior performance require the introduction of both technological and organizational innovations (Damanpour, 2010; Damanpour & Evan, 1984) and sheds new light on the relationship between organizational and technological innovation in relation to export performance.
• This finding also suggests that it is more difficult for a firm to overcome market uncertainty related to new market entry with a strategy based on radical innovation, which is also highly uncertain in nature (Chang, et al., 2012; Droge, et al., 2008; Junkunc, 2007; O'Connor & Veryzer, 2001).
• The challenges related to expansion into foreign markets can be compensated by a firm's greater ability to differentiate itself through a series of incremental innovation efforts.

5.1 Limitations and directions for further research

• This study provided some insights into innovation and export performance research; however, there were several limitations to the approach used.
• Second, combining the objective measures of export performance with the subjective measures used in the current study may provide a more comprehensive picture of export performance.
• Third, the crosssectional method applied in this study could not capture the dynamic aspects of strategy formulation in international markets and the causality among constructs.
• An especially important consideration is the empirical possibility that adopting technological innovations leads to organizational innovatio ns.

Figures

Table 1. Items, reliability, and average variance extracted

Table 1. Items, reliability, and average variance extracted

Figure 1. The Conceptual Model

Frequently asked questions

Q1. What are the contributions mentioned in the paper "Article title: organizational innovation, technological innovation, and export performance: the effects of innovation radicalness and extensiveness" ?

This study focuses on the relevance of different types of innovation for firms ’ export performance. Moreover, by fine-graining their analysis of the mediating role of technological innovation, according to its radicalness and extensiveness, for organizational innovation, the authors show how the latter enhances both the radicalness and extensiveness of technological innovation although, notably, only extensiveness is actually beneficial for export performance. This study helps alleviate the scarcity of research examining the links among different types of innovation in relation to export performance and contributes to international business and marketing literature by generating new evidence regarding the mechanisms through which organizational and technological innovations may improve export performance. 

Q2. What future works have the authors mentioned in the paper "Article title: organizational innovation, technological innovation, and export performance: the effects of innovation radicalness and extensiveness" ?

Although these scales have advantages ( e. g., multidimensionality, capturing direct innovation activities fitting the sample of the study ), future studies could perhaps apply more comprehensive measures of both technological and organizational innovations. Future studies should address the relationships proposed in the hypothesized model using longitudinal data to overcome such limitations and allow for more accurate evaluation of causality in the relationships among organizational innovation, technological innovation, and firm export performance. An especially important consideration is the empirical possibility that adopting technological innovations leads to organizational innovations. Previous research states that organizational innovations precede technological innovations ; however, longitudinal research on this issue is still necessary and constitutes a fruitful direction for further research built on their findings. 

Q3. what is the main antecedent of the adoption of innovations?

Damanpour et al. (2009) argue that pressures from the external environment, such as competition, isomorphism, and customer demand, are some of the main antecedents of the adoption of innovations to ensure a firm’s adaptive behavior to maintain or improve its performance. 

Q4. Why is Sweden well suited to this subject?

Sweden is well suited to the subject because it is a developed country with a very small domestic market and because its economy is extremely dependent on exporting to international markets. 

Q5. According to the World Bank, what percentage of Sweden’s GDP comes from the export of goods?

According to the World Bank’s (2014) national accounts data, approximately 50% of Sweden’s GDP comes from the export of goods and services to international markets. 

Q6. What is the common measure of size in innovation and export research?

The authors used the natural logarithm of the number of full-time employees as a proxy for firm size, which is the most common measure of size in innovation and export research (Contractor, et al., 2005); the authors entered this proxy and industry type as control variables in the model. 

Q7. What is the significance of the path coefficient between the radicalness of technological innovation and firm export performance?

the extent of the host country’s development has a positive and significant influence (β = 0.11, p < 0.05) on the extent of the radicalness of technological innovation. 

Q8. how does the effect of technological innovation on export performance?

The effect of organizational innovation on export performance is therefore mediated by which technological innovations are enabled to respond to rapid changes and heterogeneity in technologies and markets. 

Q9. What is the effect of technological innovation on export performance?

The influence of technological innovation on export performance is a result of the competitive advantages that firms obtain via new technologies, more efficient production techniques, and the new products and processes that result from these innovations (Hall & Mairesse, 1995; Kafouros, et al., 2008; Zahra & Covin, 1995). 

Q10. What is the path coefficient between radicalness of technological innovation and export performance?

The path coefficient between the extensiveness of technological innovation andexport performance is positive and significant (β = 0.16, p < 0.05) (supporting H3b), whereas, surprisingly, the path coefficient between the radicalness of technological innovation andexport performance is not statistically significant. 

Q11. What is the path coefficient between organizational innovation and firm export performance?

The positive and significant path coefficient (β = 0.20, p < 0.05) between organizational innovation and firm export performance confirms H2.