Organizational and Environmental Factors as Moderators of the Relationship Between Multidimensional Innovation and Performance

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    Copyright eContent Management Pty Ltd. Innovation: Management, policy & practice(2013) 15(2): 224244.

    In a global economy, it is not sufficient to

    participate in highly competitive markets,achieve restructuring, follow low-cost strategies,or create products and processes that exceed tech-nological barriers. Success requires a greater com-petence, in the form of innovation. Aragn andSnchez (2005) conclude that the most profitableand productive type of organization is one thattakes a proactive stance in its behavior and inte-grates groups oriented toward product, process,and marketing forms of innovation. Thus, the

    adoption of innovation as a proactive strategy pres-ents a response to changes in the sector, technology,competition, demands, the market resource avail-ability, or executive initiatives, all with the ultimategoal of differentiating the firm from the others andimprovising its business performance (Jensen, Vanden Bosch, & Volberda, 2006).

    In recent years, research on innovation hasincreased, and it has become a basic requirementfor enterprises. The most relevant literature on

    organizational innovation entails the relationshipbetween innovation and business performance

    (Damanpour & Evan, 1984; Damanpour, Walker,

    & Avellaneda, 2009; Li & Atuahene-Gima,2001). Some studies reveal a positive relation-ship and suggest empirical generalizations, yetexceptions exist that find no relationship or evena negative one. The diversity in the results maystem from heterogeneous methods, measures, andpopulations, as well as the variety of firm charac-teristics, strategies, sectors of activity, competitivestructures, contexts, socioeconomic environ-ments, and so on.

    On the one hand, researchers have exploredvarious perspectives to understand the nature ofinnovation. Today, multidimensional approacheschallenge one-dimensional methods, with theproposition that each type of innovation exhibits itsown characteristics. Typologies of innovation havebeen proposed since the 1970s (Zaltman, Duncan,& Holbek, 1973). The distinction between prod-uct and process innovation has prompted vaststudy; other investigations incorporate technologi-

    cal and administrative innovations (managementand organization). For example, Maravelakis,

    Organizational and environmental factors as moderators of the

    relationship between multidimensional innovation and performance

    EVELYNGARCA-ZAMORA, SCARGONZLEZ-BENITOANDPABLOA MUOZ-GALLEGO

    Department of Administration and Business Economics, University of Salamanca,Salamanca, Spain

    Abstract: Primary objectives: This article provides empirical evidence regarding the moderating role oforganizational and environmental factors in the relationship between innovation and business performance. Researchdesign and methods:Specifically, it analyses the relationship between different types of innovation and performance andestablishes two blocks of hypotheses regarding the possible moderating effects of business factors (e.g., firm size with regardto structure, market orientation with respect to the organizational culture), and the business environment, relative to thesector and competition. The empirical analysis includes 440 Spanish companies and encompasses four sectors of activity:Industry, construction, agriculture, and services. Results and conclusions:Marketing, management, and product innova-tion actions provide the best performance for companies. Such results are moderated by organizational and environmental

    factors. The role of market orientation and environmental dynamism are specially significant on relationship. Originality/

    value:Previous literature on moderates of the innovationperformance relationship is limited. This research contributeon several aspects: (1) Determine the size and market orientation act as moderators of the relationship; (2) differenti-ate whether the individual moderators differently affect any particular act of innovation (management, organization,marketing, product or production processes); (3) distinguish between various types of business performance indicators and

    grouping them according to their effectiveness, efficiency or adaptability.

    Keywords: multidimensional innovation, business performance, moderating effects, size, market orientation,environmental dynamism, competitive intensity

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    eContent Management Pty Ltd Moderators of the relationship between innovation and performance

    encompasses four sectors of activity: industry,construction, agriculture, and services.

    The next section presents the theoretical frame-work and a review of literature about innovationadoptions, results, and determinants. After the

    presentation of the empirical data derivation, thisarticle continues with its interpretation, followedby some conclusions and implications of this study.

    THEORETICALFRAMEWORKANDHYPOTHESES

    Relationship between innovation andbusiness performanceInnovation leads to change. Innovative companiesmust adjust their intrinsic and extrinsic functionsto respond to the demands of the environmentand thus maintain and improve business perfor-mance. Companies struggling to maintain aninnovative advantage perceive and attract newopportunities that might grant them efficiencyand effectiveness. Nevertheless, innovation alwaysinvolves risk and success is never assured.

    A positive and significant causal relationshipbetween innovation and performance has beenwidely demonstrated, from Schumpeter (1934)and his theory of dynamic economies to Zaltmanet al. (1973) to more recent studies (Alpay,

    Bodur, Ylmaz, & Bykbalc, 2012; Bhaskaran,2006; Damanpour et al., 2009; Han, Kim, &Srivastava, 1998; Lin & Chen, 2007; Liu & Wu,2011; Mavondo, Chimhanzi, & Stewart, 2005).

    Different types of innovation can generate dif-ferent results (Damanpour et al., 2009). The man-agement and organizational innovation improvesshort-term profitability when it is about continuousinnovation within the organization, generatingbetter profitability because the whole organiza-

    tion gets involved in a changing environment andconstant improvement to achieve greater efficiency.Furthermore, matters relating to commercial inno-vation, both in marketing and product, open newmarkets and product consumption promoting animprovement in the market share and sales growth.Market innovation opens new ways of serving mar-kets and allows generating more appropriate offers.The technological innovation in products or pro-cesses creates competitiveness and market value to

    add value to organization in their role in the com-petitive market (Lin & Chen, 2007).

    Bilalis, Antoniadis, Jones, and Moustakis (2006)measure organizational innovation according tothree areas: product, process, and administration.Lin and Chen (2007) add innovation and strategicmarketing to the list.

    On the other hand, empirical studies of orga-nizational and environmental characteristics andtheir moderating roles in the relationship betweeninnovation and performance produce inconclu-sive results. Although some certain business andenvironmental circumstances apply more gener-ally, evidence regarding the moderating effectsremains limited. An analysis of the moderatorsof the relationship might reveal where to directeffort and resources to implement multidimen-sional innovation appropriately; it also can detailthe phenomena that enhance or condition thoseinfluential moderators.

    This complexity when approaching innova-tion and its consequences underlies the aim ofthis study: to measure the relationship betweeninnovation and business performance by addingorganizational and environmental moderatingfactors that may interact in innovation imple-mentations. Accordingly, this study offers fourmain contributions. First, innovation comprises

    five types: management, organization, marketing,product, and productive processes. Thus, it is pos-sible to estimate innovation relationships from amultidimensional perspective. Second, organi-zational performance differentiates indicators ofeffectiveness, efficiency, and adaptability (Walker& Ruekert, 1987), as well as financial and opera-tional indicators (Venkatraman & Ramanujam,1986). Evaluations of the consequences of inno-vation and the moderating effects of the envi-

    ronment thus can reflect short-, medium-, andlong-term perspectives. Third, the moderatorsentail two types: the organizational factors suchas size and market orientation and the environ-mental factors that originate from environmentaldynamism, including the degree of volatility indemand, competitive rivalry, new product intro-duction, technological and process changes, andso on. A more specific factor also focuses on com-petitive intensity. Fourth, the empirical analysis

    includes 440 Spanish companies (190 large, 250small- to medium-sized enterprises, SMEs) and

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    Evelyn Garca-Zamora, scar Gnzalez-Benito and Pablo A Muoz-Gallego eContent Management Pty Ltd

    market orientation as a moderator because: (1) Itis a cultural trait widely studied since the early1990s; (2) it captures and measures the readi-ness of the company toward customer satisfac-tion is a necessary condition for the long-term

    profitability; and (3) much of the innovationefforts aim to provide greater value to the targetconsumers. Therefore, market orientation help