Assessing the relationship between firm resources and product innovation performance
- 1. Business Process Management Journal Emerald Article: Assessing the relationship between firm resources and product innovation performance: A resource-based view Lily Julienti Abu Bakar, Hartini Ahmad Article information: To cite this document: Lily Julienti Abu Bakar, Hartini Ahmad, (2010),"Assessing the relationship between firm resources and product innovation performance: A resource-based view", Business Process Management Journal, Vol. 16 Iss: 3 pp. 420 - 435 Permanent link to this document: http://dx.doi.org/10.1108/14637151011049430 Downloaded on: 07-12-2012 References: This document contains references to 79 other documents To copy this document: permissions@emeraldinsight.com This document has been downloaded 1938 times since 2010. * Access to this document was granted through an Emerald subscription provided by UNIVERSITY OF THE ARTS LONDON For Authors: If you would like to write for this, or any other Emerald publication, then please use our Emerald for Authors service. Information about how to choose which publication to write for and submission guidelines are available for all. Please visit www.emeraldinsight.com/authors for more information. About Emerald www.emeraldinsight.com With over forty years' experience, Emerald Group Publishing is a leading independent publisher of global research with impact in business, society, public policy and education. In total, Emerald publishes over 275 journals and more than 130 book series, as well as an extensive range of online products and services. Emerald is both COUNTER 3 and TRANSFER compliant. The organization is a partner of the Committee on Publication Ethics (COPE) and also works with Portico and the LOCKSS initiative for digital archive preservation. *Related content and download information correct at time of download.
- 2. The current issue and full text archive of this journal is available at www.emeraldinsight.com/1463-7154.htm BPMJ 16,3 Assessing the relationship between firm resources and product innovation performance 420 A resource-based view Lily Julienti Abu Bakar and Hartini Ahmad College of Business, Universiti Utara Malaysia, Sintok, Malaysia Abstract Purpose – This paper seeks an answer to the question about which of a firm’s resources contributes most to product innovation performance (PIP). The paper aims to adopt the resource-based view (RBV) and consider both tangible and intangible assets. Design/methodology/approach – A mail administrated survey was distributed to a randomly selected list of 700 small and medium enterprises (SMEs) in Malaysia. The response rate was 20.1 percent and the usable response rate was 15.4 percent which is favorable for this type of research. As comparable to other SME studies and particularly in Malaysia, this relatively low-response rate is not surprising for mail administrated questionnaire. Findings – The findings indicate that, in the Malaysian context, intangible resources are the main drivers of PIP. This is keeping with the expectations of the RBV. Research limitations/implications – Establishing a cooperative relationship with the Small and Medium Size Industries Development Corporation of Malaysia plays a significant role in helping us to garner a larger than expected response rate among the SMEs. Alliances such as this may help researchers improve survey response rates among smaller manufacturers. Originality/value – This paper is unique in that it is the first paper to address the relationship between firm resources and PIP among Malaysian companies. While the paper is primarily descriptive in nature, it does provide some evidence that can be used in the development and testing of hypotheses concerning the relationship between PIP and firm’s resources. Keywords Product innovation, Organizational performance, Manufacturing, Resource management, Malaysia Paper type Research paper 1. Introduction Previous literature suggests that not all resources are equally important to determine firm success and performance. Findings show that intangible resources are important determinants for firm’s success. Such assets that are scarce, specialized and difficult to trade, imitate, or appropriate are viewed as intangible (Barney, 2001; Conner, 2002; Ray, et al., 2004). This paper focuses on the firm’s resources as determinants for product innovation success. The failure or the success of the product innovation will be identified through the product innovation performance (PIP) indicators. Business Process Management PIP has been defined as the economic financial and non-financial outcomes of Journal the firm’s product innovation efforts (Cooper, 1984; Cooper and Kleinschmidt, 1987; Vol. 16 No. 3, 2010 pp. 420-435 Gemunden and Heydebreck, 1992; Hise and O’Neal, 1990; Hollenstein, 1996) which q Emerald Group Publishing Limited is new or significantly improved in it technical specifications, components and 1463-7154 DOI 10.1108/14637151011049430 material, incorporated software, user friendliness or other functional characteristics
- 3. (OECD, 2005). The relationship between a firm’s resources and PIP is less documented. Firm resources Yet, there has been significant interest in product innovativeness in Malaysia in recent and product years. Even so, the innovativeness of a new product and innovation capability is important to present opportunities for Malaysia manufacturing firm in terms of growth innovation and expansion into new areas as well as to allow them to gain competitive advantage. 2. Firm’s resources 421 Through the empirical exploration, firm’s resources have been classified into six strategic resources that are: (1) physical; (2) reputational; (3) organizational; (4) financial; (5) human intellectual; and (6) technological (Amit and Schoemaker, 1993; Barney, 1991; Puente and Rabbino, 2003). Entrepreneurial orientation (EO) has been considered as human intellectual resources since manufacturing firms that are entrepreneurial in nature also strive to gain competitive advantage and adopt both technological and non-technological innovation (Weerawardena and Coote, 2001). Fitriah and Wafa (2006), in their recent research, found that Malaysian manufacturing firms have a high inclination towards the business orientations whereby EO and innovative capability affects innovation. In addition, previous literature stated that soft factors such as employee involvement, management commitment, customer focus, entrepreneurial characteristics, organizational context and the external environment are strategic factors that influence firms effectiveness (Dollinger, 1999; Hashim, 1999; Kao, 1989; Tracy, 1992; Zimmerer and Scarborough, 1998). Resources can be defined as the productive assets of firms, the means through which activities are accomplished (Mathews, 2006). In the same manner, it also has been defined as stocks of available factors (knowledge, physical assets, human capital, and other tangible and intangible) that are owned or controlled by the firm, which are converted into final products or services efficiently and effectively (Amit and Schoemaker, 1993; Capron and Hulland, 1999). Although small and medium enterprises (SMEs) have limited resources, some of them are unique and are well-positioned compared to their competitors to create value products for consumers and also provide the greatest potential for wealth creation and redistribution (Day and Wensley, 1988). Generally, resources can be categorized as tangible and intangible entities. These entities are all the object of entrepreneurial attention that can be acquired and take their place as assets on the company’s balance sheet (Mathews, 2006). Tangible resources include capital, access to capital and location such as location of the buildings, warehouse and other facilities. Intangible resources consist of knowledge, skills and reputation and EO such as proactiveness, innovativeness and risk-seeking ability (Runyan et al., 2006). Even though it is much easier to protect tangible resources and property such as physical and financial assets in a more concrete form compared to intangibles where many factors could make them flow out of the company, intangible
- 4. BPMJ assets are contributing more than tangible assets in creating value (Apintalisayon, 16,3 2008). The first published papers in entrepreneurship identifies resources in the context of resource-based view (RBV) (Greene and Brown, 1997) that are human, social, physical, organizational and financial resources. Technological resources have been identified in subsequent research as an important dimension for national economic development 422 efforts (Venkataraman, 2004). Resources may be acquired in a simple state and combined together by the firm in distinctive combinations that are certainly not easily traded (Mathews, 2006). The recombination of resources, activities and linking routines within the firm is the implementation of the strategic choice and it leads to a new set of activities, new sources of revenue and a new business model for the firm (Mathews, 2006). The previous listed activities can be categorized as innovation. Even though a company may be working on an innovation, this does not necessarily mean that a successful product will result (Aboulnasr et al., 2008). Innovation is a driver of competitive advantage with a combination of resources that creates higher-order competencies that can be referred as capabilities. Organizational capabilities has been defined as a firm’s collective physical facilities, skills of employees and firm capacity to deploy its assets, tangible or intangible to perform a task or activity to improve performance (Amit and Schoemaker, 1993; Chandler, 1990, O’Regan et al., 2006; Teece et al., 1997). RBV theoretically predicts intangible resources as the important factors for firm success (Amit and Schoemaker, 1993; Barney, 1991; Conner, 2002; Hall, 1993; Michalisin et al., 1997). For all these reasons, intangibles are able to support a greater level and breadth of activity than are tangible resources. More recent research has shifted attention from tangible to intangible resources as it may be more important from a strategic point of view, since they bring together more frequently the requirements necessary for producing sustainable advantage: to be valuable, rare and difficult to imitate and replace by competitors (Barney, 1991; Hitt et al., 2001). This paper focuses on six types of intangible resources namely physical, financial, human/intellectual, organizational, reputational and technological resources. 3. RBV: key predictor for firm’s resources and PIP Penrose (1959) is identified as one of the earliest major contributors to the theoretical underpinnings of the RBV (Kor and Mahoney, 2000; Rugman and Verbeke, 2002). The heterogeneity approach posits that a firm does not achieve competitiveness because their resources but because of its competence in making better use of it resources whereby the productive services of resources must be discovered over time as entrepreneurs interact with its resources and make subjective decision about resource allocation, deployment and maintenance (Penrose, 1959). The study stressed that the firm is made up of a group of resources not a single unit resource. This is in common with core competencies concept in RBV of competition that explain a firm’s success based on its competencies (Ritter and Gemunden, 2004). Bain (1959) type industrial organization theory also supported the heterogeneity of firm resources especially in the form of legally protected assets such as patents, which are unique to individual firms. In addition, the theory concentrates on examining the effects of concentration, firm size and entry barriers as the determinants of firms success
- 5. (Feinberg, 2007). A firm’s entrepreneurial growth process involves two forms of Firm resources heterogeneity: and product (1) Resource heterogeneity. Firms differ from one another in their resources that innovation influences strategy and helps explain sustained profitability differences among firms. (2) Resources productive services heterogeneity. Firms with similar bundles of resources significantly differ in their entrepreneurial productivity (Barney, 423 1991; Penrose, 1959). The RBV highlights the firm as a unique collection of resources (Barney, 1986, 1991; Wernerfelt, 1984), but the theory emphasizes that not all these resources possess the potential to provide the firm with a sustained competitive advantage (Clulow, 2007). Previous literature on RBV frequently focused on resources as a stable concept that can be identified at a point in time and will endure over time (Dunford et al., 2003). When referring to the RBV, most researchers focus in strategic context, presenting resources and capabilities as essential to gain a sustained competitive advantage and superior performance (Ferreira and Azevedo, 2007). Superior performance is usually based on developing a competitively distinct set of resources heterogeneity and strategic deployment and a capable workforce in a well-conceived strategy to sustained superior returns (Fahy, 2000; Collis and Montgomery, 1994). Indeed, strategists who embrace the RBV also point out that competitive advantage comes from aligning skills, strategic deployment, capable workforce with organizational systems, structures, and processes that achieve capabilities at the organizational level (Salaman et al., 2005). On the other hand, firms with bundles of resources that are valuable, rare, inimitable and non-substitutable can implement value creating strategies not easily duplicated by other firms (Barney, 1991). However, it is quite difficult to find a resource which satisfies the Barney’s entire VRIN criterion except for a monopolistic type of company. Table I highlights the historical view of the underpinning theory and it contribution to RBV. The information contained within this table has been taken from Foss et al. (2006) and Galbreath (2004). Integration between the three theories (Schumpeterian, Penroses and RBV) initiates the importance of firm’s internal resources as firm’s capabilities subject to their uniqueness and their ability to create competitive advantage to the firm. Product innovation would be source of competitive advantage and also as a determinant of firm’s success. Its performance indicates portion of overall firm’s performance based on the effective use of firm’s resources. In this case, Malaysian SMEs which are known to have a scarcity of resources need to have entrepreneurial capabilities that are valuable, rare, inimitable and non-substitutable which suit the RBV theory. 4. Product innovation performance PIP has been defined as the economic financial and non-financial outcomes of the firm’s product innovation efforts (Cooper, 1984; Cooper and Kleinschmidt, 1987; Gemunden and Heydebreck, 1992; Hise and O’Neal, 1990; Hollenstein, 1996). On the other hand, the relationship between SME’s resources and PIP has been less documented. Yet, there has been significant interest in product innovativeness in Malaysia in recent years. Even so, the innovativeness of a new product and business innovation capability is
- 6. BPMJ Authors Contribution to RBV 16,3 Nelson and Winter (1982) Technological innovation and “creative destruction” basis of and Schumpeter (1934, 1942) competitive advantage Managerial action and entrepreneurialism influence firm success rather than market power or industry structure 424 Firm view as bundle of resources and hierarchies of activities governed by routines and rules Penrose (1959) Firm as bundle of resources Firm’s growth is based on the effective use of resources and limited by managerial resources Entrepreneurship exercised by team, emphasizes alertness as well as judgment Services rather than resources are stressed Barney (1991), Rumelt (1987) Suggests that to be sources of competitive advantage, resources must and Wernerfelt (1984) be valuable, rare, inimitable and non-substitutable Individual resources as unit of analysis Focuses on state (equilibrium) where firms earned sustained Table I. competitive advantage The historical view of the A strategic resource to one firm is also a strategic resource to another underpinning theory and firm. Usually, no distinction between resources and their services its contribution to RBV and entrepreneurship Sources: Foss et al. (2006); Galbreath (2004) important to present opportunities for businesses in terms of growth and expansion into new areas as well as to allow businesses to gain competitive advantage. An effective performance measurement system ought to cover more than just financial measures (O’Regan and Ghobadian, 2004). Financial measures mostly reflect the firm’s emphasis on achieving quantifiable performance objective such as profitability, sales, asset, etc. (Heidt, 2008). Recently, researchers introduced several non-financial determinants of PIP and the relative positioning of the firms against the leading competitor (Alegre et al., 2006; Ulusoy and Yegenoglu, 2005). This type of measurement is becoming popular to overcome the limitation of the financial measurement such as, high probability of low-response rate due to reluctance to share confidential data. For example, non-financial performance scale constructed. in French biotechnology firms (Alegre et al., 2006), focusing on two different dimensions: efficacy and efficiency, whereby both dimension reflects the degree of success of an innovation and the effort carried out to achieve that degree of success (Griffin, 1997; OECD-EUROSTAT, 1997; OECD, 2005; Valle and Avella, 2003; Wheelwright and Clark, 1992; Zhan and Doll, 2001). PIP shows up the efficiency and effectiveness of implementation of product ideas whereby it can be determined objectively (analyze in detail) and subjectively (implemented in innovation surveys) by the cost and time of the innovation project (Alegre et al., 2006). The efficiency and effectiveness of implementation have been broken down into resource management (workflow and financial resources) and organizations business practices (business planning process and roles and responsibilities) (Ryan, 2005). Similarly, Wernerfelt (1984) refers that the term of resources frequently limited to those attributes that enhance efficiency and competitiveness. Whereas, Ulusoy and Yegenoglu (2005) identified that the determinants of competitiveness in their study of Turkish manufacturing industries are product quality performance, delivery lead time and product cost (the most important
- 7. determinants for manufacturing sectors: food processing, textiles, metal and chemical Firm resources industries). The chemical industry appears to be the leading sector with their performance in and product new product development. Measurement scale of product performance in terms of its innovation, marketability, innovation supply chain and other determinants has been developed by several authors (Table II). These measurement scales mostly focused on non-financial measurement to identify product performance. However, in particular, RBV studies performance can be classified 425 into financial (accounting-based measurement such as cash in hand/at bank, profitability, sales growth, etc.) and non-financial (market share, new product introduction, product quality, marketing effectiveness or manufacturing value-added) (Kapelko, 2006). Profitability and sales growth is the most common measurement of performance (Doyle, 1994; Kasim et al., 1989). It was also argued that there are four resources and capabilities affecting firm’s new product performance in foreign markets, i.e. market orientation, host country knowledge, absorptive capacity and product innovation, thus it shows that product innovation has a direct impact on new product performance whereby its influence has been moderated by market and technology turbulence in the host country market (Murray and Chao, 2005). Previous literatures on resource-based tradition also suggested that intrinsic attributes of resources and capabilities can slow innovation, and it is not clear when this effect outweighs the benefits of inimitability. 5. Research methodology This section elaborates the method of data collection for the present research together with its justifications. Questionnaire development and mail survey The procedure was based upon accepted methods of scale development for a business research (Cooper and Schindler, 2003). The construct domain for the present study was Authors Measurement scale of PIP Heidt (2008) Changes in new product introduction, technical and technological aspects, market response, product quality, product introduction/ development time, profitability and market share Alegre et al. (2006) Replacement of products, extension of product range, development of new product, market share evolution, opening new markets, project development time, number of innovation project, cost per innovation project and global satisfaction degree Ulusoy and Yegenoglu (2005) Brand product, after sales service, certified product, ease of use, appearance, short delivery period, product quality performance, production cost and customer-focused product O’Regan and Ghobadian (2004) Advertise/promote the product or service, deliver a broad product range, distribute products broadly, respond to swings in volume, make rapid design changes, compete on price, deliver products quickly, deliver products on time, involvement of top management, involvement of line managers, flexibility to adapt to unanticipated changes, provide after sales service, provide high-performance Table II. products and offer consistent quality Measurement scale of PIP
- 8. BPMJ derived from two main sources which are the literature and experts recommendations. 16,3 Those questionnaires were self-developed questionnaires and were posted to the respondents. The main reason for choosing mail survey despite of other types of research surveys were due to sensitive questions such as company profits, sales, and number of employees that were requested in the survey. In addition, this type of survey provides a 426 wider geographical coverage at a lower cost. However, it is expected that this method yield a lower rate of response. Learning from previous experience, it was relatively difficult to get in touch with the technology entrepreneur in person because they are usually very busy. Thus, by using mail survey it enables the individuals to evaluate and comprehend the questionnaire and response to it in the comfort of their office. As mentioned earlier that this type of survey usually yields a lower response rate, however, it allows the individual to spend their available free time to answer the survey without any external pressure. Besides that, they were given the required flexibility to respond to the questionnaire at any designated time or setting, which indirectly allows them to provide a more accurate response. Mail survey usually allows anonymity of the respondents as long as the information given is kept confidential and used only for the purpose of the research. Anonymity of the respondents and the accuracy of the responses could not be assured if the survey were done through face-to-face interview session (Cooper and Schindler, 2003). Respondents The sampling frame for this study is the SME Directory – Bank Negara Malaysia (2007) SME Info Portal, provided by United Nations Development Programmes (2007). SMEs were chosen as they tend to be more vulnerable to internal and external environmental forces with larger firms in aspects such as access to resources, financial capital, entrepreneurial traits, etc. This directory contains the list of 15,150 SMEs in Malaysia (as at 28 December 2007) which have been listed by state and organized in alphabetical order, divided by seven business sectors including the list of 5,819 manufacturing (including agro-based) SMEs in Malaysia. Out of that, 700 individuals were selected randomly to take a survey. They were including the business owners who work in various sizes of manufacturing firms, which comprises 12 industrial. The list is accurate since it was regularly up to date, included the elements that belongs to target population and there is no duplication of elements. The present study tested the measurement scale by focusing on multi-industry in manufacturing sector. This seems to be appropriate sector for the following reasons: . manufacturing SME mostly involved in innovation activities; . it has experienced manufacturing technology upgrade and an increasing level of product innovation in recent years; and . it is adequately large to meet sample size requirement sectors. Every firm in the database has had equal chance to be selected based on a systematic random sampling. A self-addressed returned envelope is attached along with the questionnaire. A number of 141 responses were received. Out of that, they were 29 firms with no innovation activities and another four were returned unanswered due to change of address.
- 9. Firms with no innovation have been detected from the filter question provided in the Firm resources questionnaire. and product 6. Results and discussion innovation Frequency analyses were obtained for all the firms’ data and classification variables. The summary of the analysis are shown in Table III. In the survey, PIP was measured using ten items with two dimensions (financial and 427 non-financial) which has been adapted and modified from previous research (use five-point Likert scale, ranging from 1 – very low achievement to 5 – very high achievement). A reliability analysis of the ten items was undertaken and found to be reliable. Cronbach’s alpha coefficients of 0.889 emerge for the non-financial variables and 0.715 for financial variables. This showed that, there is average to high achievements in PIP, as in the descriptive statistics shown in Table IV. No. Profile of respondents Valid percent 1 Firm’s age 0-5 years (young) 17.6 6-10 years (intermediate) 18.5 More than ten years (old/established) 63.94 2 Company size in terms of annual sales turnover Small 56.5 Medium 43.5 3 Company size in terms of full time employees Small 55.15 Medium 41.85 4 Industry types Electrical and electronic 23.1 Engineering support industry 3.7 Machine and equipment 6.5 Food and beverage 28.7 Petrochemical and polymer 6.5 Rubber products 7.4 Textiles and apparel 4.6 Transport and equipment 2.8 Basic metal product 4.6 Life science industry 4.6 Wood based 6.5 Others 0.9 5 Firms with R&D department 55.6 6 Firms with no R&D department 44.4 Table III. 7 Firms with product innovation expertise 75.0 Summary of frequency 8 Firms with no product innovation expertise. 25.0 distributions n Minimum Maximum Mean SD PIP non-financial 108 1 5 3.45 0.854 Table IV. PIP financial 108 1 5 3.57 0.783 Descriptive statistics Valid n (listwise) 108 for PIP
- 10. BPMJ Firm’s resources variables were measured using 22 items in six dimensions: physical, 16,3 financial, human intellectual, organizational, reputational and technological (using five-point Likert scale, ranging from 1 – comparatively very low impact on PIP to 5 – comparatively very high impact on PIP). A reliability analysis of the six dimensions was undertaken and found to be reliable as in Table V. Overall, as stated in Table VI, firm’s resources given average to high impact on 428 firm’s PIP, whereby buildings give the lowest impact and product reputation shows the highest impact on PIP compared to other factors. This research wishes to summarize the structure of a set of variables. With that, an exploratory factor analysis has been used. An examination of correlation matrix for both PIP and firm’s resources has exceeded 0.3, and so the matrix is suitable for factoring. Table VII shows that the Bartlett’s test of sphericity are significant and the Kaiser-Meyer-Olkin (KMO) measure of sampling adequacy are far greater than 0.6. Cronbach’s alpha based on Dimensions Cronbach’s alpha standardized items No. of items Physical 0.827 0.821 4 Financial 0.842 0.841 3 Entrepreneurial 0.878 0.878 6 Table V. Reputational 0.875 0.876 3 Reliability analysis Organizational 0.817 0.818 3 for firm’s resources Technological 0.847 0.848 3 Firm’s resources n Minimum Maximum Mean SD Buildings 108 1 5 3.18 1.142 Location of buildings 108 1 5 3.26 1.147 Physical structure 108 1 5 3.30 1.146 Machineries 108 1 5 3.82 1.003 Financial capital 108 1 5 3.68 1.214 Financial investment 108 1 5 3.44 1.202 Cash from operation 108 1 5 3.66 0.997 EO-innovativeness1 108 1 5 3.75 1.086 EO-innovativeness2 108 1 5 3.90 1.012 EO-proactiveness1 108 1 5 3.77 1.189 EO-proactiveness2 108 1 5 3.84 1.104 EO-risk seeking1 108 1 5 3.47 0.971 EO-risk seeking2 108 1 5 3.32 1.057 Company’s reputation 108 1 5 3.87 0.928 Customer service reputation 108 1 5 3.86 0.952 Product reputation 108 1 5 3.93 0.983 Organizational structure 108 1 5 3.55 0.970 Organizational culture 108 1 5 3.67 0.995 Organizational policies 108 1 5 3.60 1.032 Held in secret technology 108 1 5 3.68 1.075 Table VI. New/improved product design 108 1 5 3.55 1.179 Descriptive Statistics Unique technological know-how 108 1 5 3.88 1.021 for Firm’s Resources Valid n (listwise) 108
- 11. Table VIII displays the communality of the items and items regarding “success in Firm resources gaining market share” (PIP) and “machineries” (firm resource) have the lowest and product communalities (Table IX). In reference to the eigenvalues, no factors to be extracted from the PIP items since all innovation of the eigenvalues are lower than 1. The previous factors which represent financial and non-financial indicators for PIP suggested to be named “firm’s product innovation performance”. However, five factors to be extracted from the firm resources items 429 because they have eigenvalues greater than 1. If five factors were extracted, then the 66 per cent of the variance would be explained. The rotated factor matrix shows that technological and organizational resources fall under one factor. Technological resources in this research considered to be more on in-house technology (product design, held in secret technology and unique technological know-how) rather than external technology outside the company. It is not surprising if technological resources have been categorized as organizational resources. From the result, these paper suggestions for the names of the factors are: (1) reputational; (2) organizational; (3) human intellectual; (4) physical; and (5) financial. Meanwhile, both screen plots which displays the eigenvalues for each factor suggests that there is one predominant factor for both PIP and firm’s resources. Overall, the assessment of factor analysis in this study proposed that the scales are existent and valid in Malaysia context. The above findings are also in line with the RBV point of view Test PIP Firm’s resources KMO measure of sampling adequacy 0.907 0.840 Bartlett’s test of sphericity Approx. x 2 601.053 1,720.786 df 45 0.231 Table VII. Sig. 0.000 0.000 KMO and Bartlett’s test Initial Extraction Regularly of change of PI 0.565 0.477 New product introduction 0.552 0.472 PI technically superior 0.673 0.649 Technological b/through 0.555 0.457 Market response 0.584 0.554 quality 0.660 0.649 PI introduction time 0.505 0.539 Profitability 0.611 0.626 Table VIII. Success in gaining market share 0.350 0.358 Communalities Improved sales growth 0.513 0.454 of PIP items
- 12. BPMJ Initial Extraction 16,3 Buildings 0.743 0.713 Location of buildings 0.771 0.804 Physical structure 0.759 0.786 Machineries 0.500 0.324 430 Financial capital 0.806 0.939 Financial invesment 0.723 0.650 Cash from operation 0.558 0.473 EO-innovativeness1 0.686 0.702 EO-innovativeness2 0.703 0.687 EO-proactiveness1 0.733 0.599 EO-proactiveness2 0.769 0.731 EO-risk seeking1 0.734 0.709 EO-risk seeking2 0.615 0.520 Company’s reputation 0.769 0.707 Customer service reputation 0.779 0.606 Product reputation 0.755 0.642 Organizational structure 0.710 0.620 Organizational culture 0.665 0.617 Organizational policies 0.639 0.612 Table IX. Held in secret technology 0.716 0.746 Communalities of firm’s New/improved product design 0.685 0.663 resources items Unique technology know-how 0.679 0.585 that focuses on intangible resources as the main drivers for firm’s performance which comprise the element of product innovation as one the performance indicators. Firm’s performance can be measured by looking at the differences between firm’s profitability and the average profitability of the industry (Villalonga, 2004). The present paper focuses on firm’s specific performance that is PIP. Malaysian manufacturing firms have been found gained high profitability from its product innovation. It can be concluded that their achievement in innovation are relatively higher especially through its intangible resources, the product reputation. Intangible resources such as product reputation are difficult to acquire and develop or replicate by others. Product reputation that mixes up with innovation activities will create excellent PIP as reputation lies in customer’s mind. Good reputation creates opportunities for Malaysian manufacturing companies to be more innovative. The performance of product innovation in Malaysian manufacturing companies can be identified through the positive market response and the improvement in the product design itself. Most 63.9 per cent of the companies in this study are more than ten years since incorporation. Established company is well known in their reputation and also having opportunities gaining more loans and financial assistance for their product innovation. Out of 141, 29 were non-innovative firms. The reason why there are non-innovative are because of the financial constraint and lack of technology. This is quite similar with finding by Kaufmann and Todtling (2002) who discovered that besides confronted with financial constraints, SMEs also having manpower bottlenecks in terms of few of qualified personell in product innovation. Among of all resources including product reputation, organizational, technological and human/intellectual, building alone seems to be given lowest impact on firms PIP.
- 13. However, the strategic location of the building with a proper warehouse, attractive Firm resources showrooms, etc. will affect the performance of product innovation. The location of the and product building is very important to ensure there are adequate supply of labour and raw materials for production process as resources are the ultimate tools that used by the innovation firms to improve profitability, productivity and innovation (Montana and Charnov, 2000). In addition, a manufacturing firm must consider proximity to suppliers and customers, as well as local taxes and regulations. This kind of proximity is very practical 431 for ease of communication among the previous-listed parties. Good communication among the parties will create good reputation especially for the manufacturing firms which offers products or services. As mentioned before, product reputation will then be the starting point for the firm to add more values to the product in order to create customer awareness and maintaining networking with its suppliers, financial institutions, government and other related parties. Conclusions and limitations It can be concluded that the PIP can be viewed as one of firm’s specific performance of the product innovation such as changes in new product introduction, technical and technological aspects, market response, product quality, product introduction/ development time, profitability and market share. The study support RBV point of view which stated intangible resources, particularly “product reputation” as the main indicators for PIP. Product reputation considered to be unique since it was difficult to acquire and replicate by others. Furthermore, reputation is something that lies in customer minds which are abstract and differentiate one firm with other firms. Established firms with larger size having opportunities in gaining product reputation compared to younger firm as there are ease of getting financial assistance and mostly having qualified personnel in product innovation and research and developments (R&Ds). Several limitations of this research should be mentioned. First, the study is mainly restricted to the context of study; therefore, it will be problematic to generalize its findings to other sectors. Also, as the ground of this study in PIP is quite new, the data must be interpreted cautiously. The study also constrained by the relatively small data due to the constraint of time. Finally, exploring firm’s resources with PIP in entrepreneurial context in manufacturing firms is a very challenging task especially in getting questionnaire responses from the firm owner. Future research are encourage using qualitative methods focusing in one industrial sector/case study to a better understanding of the nature of product innovation and firm resources. References Aboulnasr, K., Narasimhan, O., Blair, E. and Chandy, R. (2008), “Competitive response to radical product innovations”, Journal of Marketing, Vol. 72, pp. 94-110. Alegre, J., Lapiedra, R. and Chiva, R. (2006), “A measurement scale for product innovation performance”, European Journal of Innovation Management, Vol. 9 No. 4, pp. 333-46. Amit, R. and Schoemaker, P. (1993), “Strategic assets and organizational rent”, Strategic Management Journal, Vol. 14 No. 1, pp. 33-46. Apintalisayon (2008), “Tangible versus intangible assets”, available at: http://apintalisayon. wordpress.com/2008/12/14/d11-tangible-versus-intangible-assets/ (accessed 29 March 2009). Bain, J.S. (1959), Industrial Organization, Wiley, New York, NY.
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