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TECHNOLOGICAL INNOVATIONS AND ITS IMPACT ON ORGANIZATIONAL PERFORMANCE

Dr. Nathaniel C. Ozigbo Department Of Business Administration University Of Abuja Abuja Nigeria E-mail: Franklin_consult@yahoo.com

Abstract

In the organizational context, innovation is linked to changes in efficiency, productivity, quality, competitive positioning and market share. This study seeks to illustrate a comprehensive approach to managing technological innovation in Nigerian organizations with respect to its contribution to organizational performance. The firmbased survey approach was adopted as the standard method of collecting direct information on innovation. The survey approach was adopted in order to achieve more generalizability and additional richness. The scope of the study was limited to manufacturing and service industries in Nigeria. Discriminant analysis using stepwise variable selection method was carried out to determine if statistical differences exist between the average score of manufacturing and service industries within Nigerian organizations. The hypotheses were tested using regression analysis and other statistical techniques. In order to test the hypothesis, a Wilcoxom signed ranks tests was carried out. This test is a non-parametric alternative and did not require normality in the data. As indicated in the study, the data collected from the survey was subjected to both quantitative and qualitative analysis. The result from the study was evidenced of the fact that the perceived organizational culture had an impact on the employees performance in the organization in terms of innovation. This shows that culture is an important aspect in developing, and encouraging innovative ability amongst the employees. The study concluded that the perceived organizational culture had a strong influence on the behaviour of the employees in terms of creativity and innovation. These cultural perception either facilitate or inhibit the promotion of innovative ideas, processes and practices.

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KEY WORDS CA CP CV DA DE EG EG EI FP FBS ISE IP MC OP OS OC POC PI TC TP RI RA SI Comparative Analysis Cultural perception Construct Validity Discriminant Analysis Dynamic Environment Economic Growth Expanding Globalization Economic Innovation Firm Performance Firm based Survey Innovative Supportive Environment Innovative people Mutually Exclusive Organizational Performance Organizational Structure Organizational Capability Perceived Organizational Culture Process Innovative Technological Innovative Technological Product Radical Innovation Regression Analysis Systematic Innovation

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Introduction Recent developments in the global organization have created a highly complex, turbulent and uncertain market environment. To survive in such a hyper-competitive market, organizations need to develop flexibility in the organizational structure, operations, strategy development and innovation systems. Flexibility is defined as ability of organization to meet an increasing variety of customer expectations while keeping costs, delays, organizations disruptions and performance losses at or near zero (Zhang et al 2002). In such a dynamic environment, organizations that are able to continually build new strategic assets faster, cheaper and more flexible than those of their competitors will create long-term competitive advantage. In this process, core technological innovations have a pivotal role to play. It is important to note that economic models and theories postulated in the past have attempted to predict the future of nations and markets. Therefore, any discussion on the economic future of the organizations or countries should hinge on innovation. The place of innovation in economic growth has been well established. Michie et al (2003) indicated that innovative economics have experienced sustained growth and have led the economics of the world, while competition has intensified with expanding globalization. In an organization, innovation begins with someone being smart enough to sense a new need and to improvise or create new methods,, processes and sources to meet that need. This take place only in a fertile environment that enables an innovator to act on breakthrough ideas. Higgin (1996) posited innovation in the form of equation:

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I Where I C OC

= = = =

c + oc innovation creativity Organizational culture

Drucker (1998) has gone further and postulated that systematic innovation consists of a purposeful and organized search for changes, that such changes might offer economic and social innovation. Successful innovators look for change. The change provides the opportunity to create something different and new. Freel (2003) stresses that the key components to creating an innovation supportive environment are relentless pursuit of performance, an outward looking focus, creating cross functional teams and learning by doing rather than thinking. The main objective of this study is to explore the types of innovations that are predominant in Nigerian organizations, and to investigate the impact of these innovations on different dimensions of firm performance. Research Questions From the above discussion, the following research questions are provided to guide the study; What types of innovations are predominant in Nigerian organizations? How do these innovations impact on firms performance?

Hypothesis We form our hypotheses from the research questions as follows:


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1.

Ho: (Null hypothesis): Nigerian organizations does not tend to focus on product innovation than process innovation. HA: (Alternative): Nigerian organizations tend to focus more on product innovation than process innovations.

2.

Ho: (Null hypothesis): Nigerian organization do not tend to focus on incremental innovation than radical innovations. HA (Alternative): Nigerian organizations tend to focus on incremental innovation than radical innovations.

Scope of the Study The scope of the study was limited to manufacturing and servicing industries. A survey approach was adopted in order to achieve more generalizability and additional richness. We divided the study into three phases: Phase One: Exploratory Study Initially, a literature search was conducted followed by interviews. The data gathered from the literature search and interviews were analyzed and a revised version of the problem listed and a questionnaire were developed. Phase Two: Survey, Construct Validity and Data Analysis In this phase, a questionnaire survey was used. The data were quantitative and qualitative in nature. The hypotheses were tested using regression analysis. For testing the construct validity of the questionnaire, principal component factor analysis along with varimax rotation was performed.

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Phase Three: Computation of Discriminant Functions Discriminant analysis using stepwise variable selection method was carried out to determine if statistical differences exist between the average score of manufacturing and service sectors within the Nigerian organizations. Limitations Despite the contribution to the literature, this study lacked depth in sampling. The sampling size for the study was limited in number because of the time constraint and limited resources required. In addition, some respondents during interviews remained skeptical of their responses. To combat this problem, the researcher reassured respondents that all responses will remain anonymous. Review of Related Literature In the organizational context, innovation is linked to changes in efficiency, productivity, quality, competitive positioning, market share. All organizations can innovate including for example hospitals, universities and local government. Some will flourish under its influence, others will die. So as innovation typically changes value, innovation also have a negative or destructive effect as new developments clear away or change old organizational forms and practices. Organizations that do not compensate effectively for innovative forces may be destroyed by those that do. Hence, managing an organization typically involves risk. A key challenge in management is maintaining a balance between the current processes and business model. Innovation has been studied in a variety of contexts, including in relation to technology, commerce, social systems, economic development and policy construction.
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There are, therefore, naturally a wide range of approaches to conceptualizing innovations in the scholarly literature. A convenient definition of innovation from an organizational perspective is given by Popadiuk et al (2006) as: Innovation generally understood as the successful introduction of a new thing or method, is an embodiment, combination or synthesis of knowledge in original relevant, valued, new products, processes or service

Schumpeter (1934) defined economic innovation as: The introduction of a new good, that is one with which consumers are not yet familiar or of a new quality of a good. The introduction of a new method of production, which need by no means be founded upon a discovery scientifically new and can also exist in a new way of handling a commodity. The opening of a new market, that is a market into which the particular branch of manufacture of the country in question has not previously entered. The conquest of a new source of supply of raw materials. The carrying out of the new organization of any industry.

Schumpeters focus on innovation is reflected in Neo-Schumpeterian economics developed by such scholars as Christopehr freeman (1982) and Giovanni Dosi (1982). Freeman Chris (1982) emphasizes that innovation require only three things:

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A recognized need Competent people with relevant technology Financial support

Davila et al (2006) noted that: Companies cannot grow through cost reduction and reengineering alone innovation is the key element in providing aggressive top-line growth and for increasing bottom-line growth and for increasing bottom-line results.

In general, business organization spend a significant amount of their turnover on innovation, such as making changes to their established products, processes and services. Fundamentally, there are two different types of measure for innovation, namely: The organizational level The political level The measure of innovation at the organizational level relates to individuals, teamlevel assessments, private companies from the smallest to the largest. Measures of innovation for organizations can be conducted through surveys, workshops, consultants or internal bench-marking. There is no established way to measure organizational innovation. Most cases, corporate measurements are structured around balanced score-cards which cover several aspects of innovation, such as business measures related to finances, innovation process efficiency, employees contribution and motivation as well as benefits for customers.

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For political level, measures of innovation are more focusing on a country or region competitive advantage through innovation. In this context, organizational capabilities can be evaluated through various evaluation frameworks for quality management. The OECD Oslo Manual (1997) suggests standard guidelines on measuring technological products and process innovation. Some people consider the Oslo manual complementary to Frascati manual of 1963. The new Oslo manual of 2005 takes a wider perspective to innovation and includes marketing and organizational innovation. These standards are used in the European community innovation surveys. Over the years, research has been conducted to illustrate the importance of innovation in the management of affairs of business organizations. Numerous studies in the management literature such as Davies et al (2003) outlined strategies on how important leaders are to the innovative process. It is important to note that leaders are the backbone of implementing innovation in companies. It is worth noting that many companies today are increasingly investing in innovation because of its overall impact on performance and daily processes to employees function. Innovation typically requires persistent teamwork focused on gradual improvement in delivery value to the company. Thompson (1965) defined innovation as the implementation of new ideas, processes, product or services. To foster innovation in any company, it is important to attract and recruit people who are innovative. Companies need to develop techniques and instruments to identify innovative people and employ them.

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So far, our systematic review consist of technological product and process innovations. Of the two, products innovations were the most often studied by authors. Indeed, 37 percent of the articles included in this review focused exclusively on this type of innovation and 43 percent examined both product and processes innovation. It is worth noting that a relatively insignificant proportion (1%) of the articles considered only process innovation. Furthermore, 13 percent of the articles studied innovation via patent data without specifying if these data represented products or process innovations, while 6 percent of the studies did not specify the type of innovation they examined. They generally appear in descriptive studies where the conceptual definition of innovation conformed to that of the Oslo manual. The study by Linder et al (2003), conducted with forty managers revealed that these mangers had the same attitude with respect to process innovations. The majority of executives in the study indicated that they thought primarily about new products when considering innovation and much less often about proceses. Other studies by Breschi et al (1997) found that product and process innovations are interdependent and closely linked, that neglecting process innovations could weaken a firms capacity to develop new products and undermine the innovation process entirely. Though, it is true that a close link exists between product and process innovations, several studies, Freel (2003) Archibugi et al (2001) have shown that product and process innovations follow different processes and do not necessarily have the same determinants. While using the same data base, Michie and Sheekan (2003) found that the determinants of innovation and their

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effects positive or negative differ according to whether one considers only the product innovations, the process innovations or both. The examination of the articles have shown that innovation was measured in various ways. Inovation measurement used to be a thorny task for researchers, Archibrugi and Pianti (1996) noted that innovation is a complex, diversified activity with many interacting components. Traditionally, innovation has often been measured by using two indirect indicators, Research and Development (R & D) and patent data. Research and Development data is used less and less in research as an innovation indicator. As for patent data, it measures inventions rather than innovations (Flor and Oltra, 2004). As innovation is the translation of an invention into a marketable new or improved product or process, measuring it by using patent data risks to over-estimate the innovation output by including in the measurement those inventions that have not been transformed into marketable products or process. Given that all innovations are not necessarily patented, patent data is a distorted measurement of innovation. These limitations have not however prevented patent data from being used in various studies. As a result of the shortcoming of measuring innovation indirectly, direct indicators was developed; namely: Innovation count Firm based surveys. The innovation count consists of collecting information on innovation from various sources such as new product/process announcements, specialized journals, data1695

base etc. it is considered to be an object approach since it concentrates on innovation themselves. The second measurement consists of surveys carried out with companies. The approach is qualified as a subject approach since information on the innovation comes from firms through surveys and/or interviews. The firm based survey approach is becoming the standard method of collecting direct information on innovation. It is worth noting that these direct measures of innovation (innovation count and firm-based surveys) also have some disadvantages. The innovation count approach tend in practive to favour radical innovations over incremental one (OECD, 1997) and product over process innovations (Flor and Oltra 2004). This approach naturally excludes unsuccessful innovations, thereby preventing any comparative analysis of success or failure. As for firm-based surveys, one of the significance and the representatives of the results depend widely on the answer rates (Archibuje and Sarill 2001). Another shortcoming is related to the fact that these surveys are based on the methodological guidelines of the Oslo manual which measures newness by asking questions such as, Do your business unit introduce onto the market any new or significantly improved products. Innovation as review is a very complex process which is propelled by numerous factors. Our systematic review has confirmed this complexity by assessing the main internal and contextual variables which influence the innovative capacity of the firms. Methodology The participants in this study were employees of enterpises in the manufacturing and service industry respectively. Of the 120 respondents interviewed, twenty were
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managers and supervisors and the remaining 100 respondents were key staff employees active in the innovative process. The selection process for the study was specifically designed for employees that were actively in the innovative process of their various enterprises and have had some experience in their field. The researchers selection process for the enterprise in this study was based on convenience and as such was not randomly selected. The key staff employees were grouped by seniority with the respective enterprise. All the respondents that were interviewed have been with the enterprise for at least three years. Twenty managers interviewed were evenly split, 10 men and 10 women, while the hundred employees were 60 male and 40 women. The research design for this study was a combination of survey questions in the form of interviews administered to 120 respondents. The researcher for the purpose of this study used this method to specifically ascertain the true views of all respondents. The major threat encountered while the interviews were administered was the hesitancy the respondents to specific questions about their managers. For fear they may lose their job, some gave favourable responses to the questions. Although, the researcher began the interview by informing the various respondents that their responses would be kept confidential, some remained skeptical of the total respondents interviewed. Five percent were observed as skeptical. In order to minimize the overall threats to the validity of the study, the researcher passed out surveys and then followed up with an interview. In the questionnaire, the Likert scale was used and open-ended questions were avoided as there were difficulties in measurement. The questions were mutually exclusive. The questionnaire validity was divided into four parts; face validity, criterion validity, content
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validity and construct validity. In construct validity, an eigen value greater than one rule was employed, while a loading factor 0.30 was suggested as sufficient. Findings The study found out that the style of leadership in each firm tend to motivate its team be effective and efficient. The managers/leaders in some of the firms studied were highly visible and uses chain of command to get the job done. The managers were always looking for ideas that move the organization to reach the enterprises vision. In all the firms studied, innovation was implemented differently. Table 1 below indicate the age distribution of the sampled size utilized in the study. Table 1: Age Distribution Age (Year) 20 25 25 30 30 35 35 40 30 45 45 50 50 and above Total Source: Survey data Number of Frequency 11 23 26 28 18 9 5 120 Percentage 9.17 19.16 21.67 23.33 15.60 7.50 4.17 100

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Table 2 below shows the result on the regression analysis on the impact on innovation type on firm performance. Variable Profit Market share Employment Product Quality R2 0.016 0.037 0.015 0.025 Adjusted R2 -0.043 -0.023 -0.054 -0.046 F-ratio 0.35 0.48 0.14 0.33 Sig. 0.75 0.54 0.85 0.72

Source: Survey Result The result of the regression analysis shown above to test whether or not these improvements were associated with the types of innovation undertaken by the firms yielded interesting results. The result shows that to a good extent that innovation, particularly of the incremental nature really matter for product quality. The result of regression with the degree of novelty of the innovation led us to accept the Null hypothesis with a 90 percent level of confidence. The result indicates that the pursuit of incremental over radical innovations in the firm has a significant impact on their product quality. Table 3 below indicate the result of the Wilcoxom test on the difference between the different innovation types.

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Statistics

Process/Product

Product Radical Incremental

Process Radical Incremental

Z Sig N

-1.59 0.001 56

-3.46 0.001 34

-4.52 0.001 30

Source: Survey Result The hypothesis deal with the impact of innovation on firm performance. Four proxies were used to capture firm performance and the information on the size and age of the sampled size as contained in table 1. It is important to note that the result suggested that the firms may not selectively concentrate on either of product or process innovations. They seem to be more inclined towards innovations of incremental nature, be it product or process related. Conclusion This study examined organizational culture conditions under which innovation thrives. Innovation was posited to be a consequence of perceived organizational culture that supports the conception of novel ideas, and assist accentuate the levels of innovation. The result from his study were evidence of the fact that the perceived organizational culture has an impact on the employees performance in the organization in terms of innovation. It also provided evidence to show that culture is an important aspect in developing, encouraging innovative ability amongst the employees. The perceived congeniality in the working environment, supported by the team and managers

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encouragement to an acceptance of an idea enhances ones mental freedom for taking bold new steps. Moreover, evidence from the study indicates that the perceived organizational culture has a strong influence on the behavior of the employees in terms of creativity and innovation. These cultural perception either facilitate or inhibit the promotion of innovative ideas, processes and practices. Notwithstanding, the result of this study hold important implications for managers and policy-makers. The study shows that the firms should focus more on incremental product and process innovation. Incremental innovations was found to be very important for Nigerian organizations and it is a significant predictor of product quality. In addition, the result of the study pointed that a focus on the firms existing core market through an understanding of the need of customers and the ability to continuously improve products/processes to meet customers need are very important. Future studies may take cognizance of the result of this study. Methodologically, this study has shown that a more detailed taxonomy of innovation is likely to yield more meaningful empirical results. Suggestion for Further Study The findings from the study in the area of culture, environmental pressures and factors contributing in the usage of various categories of application software provide several study opportunities for future research. The results of this study suggest that it might be useful to develop a number of comprehensive models. Therefore, future

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research can extend this study to include additional factors, such as organizational maturity, information system to test a variety of such factors. Future studies are recommended to utilize more rigorous methodologies that employ longitudinal approaches and non-linear relationships with a broader sample and number of variables, a more generalized model can be developed.

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Popadiuk, S. and Choo, C. W. (2006) Innovation and knowledge creation. How are these concepts related? International Journal of Information Management Vol. 26, Nos 302312. Schumpeter J. (1934) The Theory of Economic Development, Cambridge M. A, Harvard University Press. Thompson, V. A. (1965) Bureaucracy and Innovation, Administrative Sciences Quarters, Vol. 10, No. 1 pp 1-20. Zhang O. Vouderembse, M. A and Lim J. S. (2002) A Dichotomy of Competency and Capability, International Production Research Vol. 40, No. 3, pp 531-583.

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