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Proceeding - Kuala Lumpur International Business, Economics and Law Conference 4 (KLIBEL4) 
Vol. 1. 31 May – 1 June 2014. Hotel Putra, Kuala Lumpur, Malaysia. ISBN 978-967-11350-3-7 
CORPORATE INNOVATION AND ORGANIZATIONAL PERFORMANCE: 
 
THE CASE OF SOMALIA TELECOMMUNICATION INDUSTRY 
Mohamed Abdiaziz Sidow-Graduate Student 
Graduate School of Management 
International Islamic University Malaysia (IIUM) 
Kuala Lumpur, Malaysia 
E-Mail: mohamedsidow01@gmail.com- Tell: 00601123594828 
Ali Yassin sheikh Ali-PhD Candidate 
Business administration department 
College of Business studies 
Sudan University of Science and Technology 
Sudan, Khartoum 
E-mail: profali@hotmail.com 
ABSTRACT 
Telecommunication industry in Somalia is unique since there has been no central government 
from 1990, after the dictatorial regime was defeated, but despite the anarchy that followed, the 
telecoms sector has developed more. It is highly competitive with at eight mobile networks, which 
also provide fixed-line and Internet services. Telecommunication industry provide innovation 
products and application, the most well known innovation is mobile money transfer which had 
different brand names such EVC ( Electronic Voucher Card), a mobile application technology for 
money transfer, SAHAL and E-Maal. Beside the technological innovation, they developed highly 
flexible Administration which can work in hostile environment like Somalia. 
The current study investigates the corporate innovation and organizational performance in 
telecommunication industry in Somalia, by using cross sectional survey approach, the data was 
collected from 180 employees from telecommunication companies in Mogadishu in south, 
Boasaso in West and Hargeysa in North. The data was collected in January 2014 and was 
analyzed using SPSS version 16.0. The findings indicated that technological innovation (=.261, 
t=2.569, p=.011), Administrative innovation (=.369, t=4.252, p.001) and Strategic Innovation 
((=.173, t=2.028, p.005) had statistically significant and positive effect on organizational 
performance. Therefore, it is necessary for telecommunication companies to consider these factors 
in order to maintain their performance in future. 
Keywords: Administrative innovation, technological innovative, strategic innovative, 
organizational performance
Proceeding - Kuala Lumpur International Business, Economics and Law Conference 4 (KLIBEL4) 
Vol. 1. 31 May – 1 June 2014. Hotel Putra, Kuala Lumpur, Malaysia. ISBN 978-967-11350-3-7 
1. INTRODUCTION 
Today, organizations are facing challenges toward how they success. Organization’s success not 
only depends on what organizations currently providing but also depends on how the 
organizations can make change to improve whatever they are providing. All improvements or 
changes are under what we call organizational innovation. The term innovation comes from Latin 
word “innovare” which means “to make something new” (Tid, Bessant et al 2001). Innovation 
seems nowadays one of the most important issues that all organizations are giving special 
attention. Many studies are relating the increase effort of firms Research and Development may 
enable the increase of innovation which in turn increasing market share of the organization ((e.g., 
Freeman and Soete, 1997).) 
Today’s world, organizational innovation has different meaning to different people or different 
organization. Different organizations focus on different types of organizational innovation. 
Organizational innovation can be product improvement, new production method, new market, 
new source of supply or new forms of organization. Generally, organizational innovation is related 
to competitive advantage of the organization, firm performance, sales growth and success or 
failure of the organization. 
On the other hand, the topic of firm performance is greatly discussed. The way we define firm 
performance depend on the type of the organization whether its production company or service 
company. Performance measurement plays a key role in developing, implementing and monitoring 
a strategic plan. It enables managers to evaluate whether organizational objectives have been 
achieved, and is further used to develop and compensate managers. It helps managers monitor 
whether the company is moving in the direction they want it to go (Teeratansirikool.L, Siengthai. 
S, Badir.Y, 2013). 
Therefore, this paper attempts to understand different categories of organizational innovation such 
as technical innovation, administrative innovation and strategic innovation. Also, it attempts to 
provide how they relate organizational performance. As mentioned earlier, all organizations do not 
perceive the same meaning and the same importance organizational innovation. Therefore, this 
paper focuses how telecommunication industries perceive organizational innovation and how the 
performance of telecommunication industries and organizational innovation can be related. This 
paper specially focuses those telecommunication companies who are located in Mogadishu- 
Somali. 
 
2. LITERATURE REVIEW 
2.1Corporate Innovation 
Different researchers are trying to understand the phenomenal of organizational innovation. There 
is no consensus definition of the term “organizational innovation” and different authors using their 
own approach (Lam, 2005). The term innovation means coming up novel idea or new idea. 
According to Linder et al (2003) define innovation as “implementing new ideas that create value”. 
Innovation is what most organizations depends on in today’s business world (Kenter 1999). 
Organizational innovation related to develop new product and new process. Process innovation 
can be the form of material substitution or changing the way of manufacturing with the purpose of 
cost reduction or quality improvement. On the other hand, product innovation can be the form of 
changing the product size or shape, it can be the way of introducing new product or improving
Proceeding - Kuala Lumpur International Business, Economics and Law Conference 4 (KLIBEL4) 
Vol. 1. 31 May – 1 June 2014. Hotel Putra, Kuala Lumpur, Malaysia. ISBN 978-967-11350-3-7 
existing one. Martinez-Rose (1999), found that product innovation and process innovation are 
interrelated. 
Factors that drive organizational innovation are internal and external factors. Internal factors can 
be motivation, technical background, working experience and innovative ideas of entrepreneurs. 
On the other hand, external factors of innovation includes: customer requirements, information 
given by the supplier, market opportunity, availability and accessibility of institutional support, 
economic incentives, competition and etc. However both internal and external are required (K. N. 
Krishnaswamy et al, 2010). 
Organizational innovation can be cattegoriesed into three main categories, i.e technological 
innovation, administrative innovation and strategic innovation. 
 
2.2: Organizational performance 
Firm Performance is a topic often discussed but rarely defined. One research paper urge that 
Scholars in the field of performance measurement tend to use the term business performance 
measurement (BPM) systems without explaining exactly what they mean by it. This lack of clarity 
creates confusion and comparability issues, and makes it difficult for researchers to build on one 
on each other’s work (Franco-Santos et el 2007) 
However one of the most attractive viable definition of firm performance or organizational 
performance the researcher found is that “Organizational performance is a measure of how 
efficiently and effectively managers use available resources to satisfy customers and achieve 
organizational goals. Organizational performance increases in direct proportion to increases in 
efficiency and effectiveness (Mulcahy.A, , Burns.U, )”. Firm performance related to the way that 
organization manage it activities by following its objectives and keeping its goals. 
Firm performance is not limited to one level of the organization, it looks the business as a whole, 
and it involves assessing the overall business performance, it’s also determines how the business 
can better reach its goals. Managing firm performance requires the placing strategic and 
operational objectives. Thus Firm performance can be said to be how effectively and efficiently 
the organization done and fulfilled its tasks in order to achieve its objectives and then gain the 
organizations goal. Some researchers urge that appropriate performance measures are supposed to 
permit organizations to direct their actions towards attaining their strategic objectives (Arthur.S, 
Abanis.T, Eliab.B,  Sumil.N, 2013). 
Performance measurement refers to the use of a multi-dimensional set of performance measures 
which include both financial and non-financial measures; it also includes internal and external 
measures of performance and it often includes both measures which quantify what has been 
achieved as well as measures which are used to help predict the future. Performance measurement 
cannot be done in isolation. Financial performance is generally defined as the use of outcome-based 
financial indicators that are assumed to reflect the fulfillment of the economic goals of the 
firm (Abdirizak I  Ali-Yasin.S, 2013) 
Non-financial performance measures are often used for performance evaluation. They are 
especially relevant if the available financial performance measures not completely reflect the 
manager’s contribution to the firm’s total value (Christian, 2001). An increasing number of 
companies are adopting measuring customer loyalty, employee satisfaction, and other 
performance areas that are not financial and will ultimately affect profitability.
Proceeding - Kuala Lumpur International Business, Economics and Law Conference 4 (KLIBEL4) 
Vol. 1. 31 May – 1 June 2014. Hotel Putra, Kuala Lumpur, Malaysia. ISBN 978-967-11350-3-7 
 
3. RESEARCH FRAMEWORK AND HYPOTHESIS DEVELOPMENT 
The conceptual arguments of previous research converge on the idea that firms benefit from 
highlighting newness, responsiveness, and a degree of boldness. Extensive discussion of the 
arguments can be found in Lumpkin and Dess (1996). Indeed, the suggestion was the bases for the 
interest in studying the current research which investigates the relationship between corporate 
innovation and organizational performance. 
The study examines the impact of corporate innovation element as independent variable consisting 
of three constructs (technical, administrative and strategic innovation) on organizational 
performance with two construct financial performance and non-financial performance as the 
dependent variable (See Figure 1).
Proceeding - Kuala Lumpur International Business, Economics and Law Conference 4 (KLIBEL4) 
Vol. 1. 31 May – 1 June 2014. Hotel Putra, Kuala Lumpur, Malaysia. ISBN 978-967-11350-3-7 
 
3.1 Technological innovation 
Many researchers of innovation focused technological innovation (Freeman  Soete 
2000).Technological innovation became one of the most important factors of all the different sizes 
of the organizations are concerned. So, in order the organization stay in the market place they have 
to adopt the rapid change of the technologies. Technological innovation by definition means, the 
adoption of new ideas which appropriate to the new product or service, and introduction new 
element to organization’s production process or service operation (Subramanian Nilakanta, 
1996). 
Technological innovation is important factor which defines how the organization has competitive 
advantage, its effectiveness and its overall success. On the other hand, technological innovation 
seems to have an impact on work productivity, competitive environment, competitive advantage 
and overall performance of the organization. Technological innovation is something which is 
unavoidable if the organization wants to stay at the market or enter new market and if they want to 
gain competitive advantage (Becheikh et al 2006). 
According to Daneels and Kleinschmidt (2001), in the context of product development argued 
that, new product development consists of the combination of technology and market. They 
further argued that, when a firm undertaking new product development they should have 
technology which is enabling to them to develop new product and serve their customers. 
Technological innovation for product or process contributes to cost reduction, quality 
improvement, suitable change in product size which fits customer demand, raw material 
substitution and new product (K. N. Krishnaswamy et el 2010) thus. 
H1: Technological innovation has positive influence on organizational performance 
3.2 Administration innovation 
Administrative innovation is one of the innovations and it’s related to the establishment of a new 
organizational design that supports better the creation, production and delivery of products and 
service. 
Administrative innovations are commence in the administrative core and tend to be implemented 
from the top down. They pertain to organizational structure, administrative systems, and human 
resources (Damanpour, Szabat, and Evan 1989). Administrative innovations involve procedures, 
rules, roles, and structures that are related to the communication and exchanges among employees, 
and they are more directly related to organizational management rather than directly to work 
activities (Jaskyte, 2011). 
Administrative innovation is related to the formation of a new or existing organizational design 
that supports better the creation, production and delivery of products and services. Example of 
administrative innovation is management by objectives, six-sigma processes, job rotation, staff 
incentive systems, and telecommuting, from this discussion we assume that. 
H2: Administrative innovation has positive influence on organizational performance
Proceeding - Kuala Lumpur International Business, Economics and Law Conference 4 (KLIBEL4) 
Vol. 1. 31 May – 1 June 2014. Hotel Putra, Kuala Lumpur, Malaysia. ISBN 978-967-11350-3-7 
 
3.3 Strategic innovation 
The strategic innovation is a central concern of firms; managers are faced with the challenge of 
mobilizing the innovative potential of all sorts of employees. As these employees have a capital of 
tacit knowledge (Polanyi, 1966) about the production process, the work organization and the 
product design, mobilizing this knowledge can result in workplace Strategic innovations with high 
returns on investments (Getz  Robinson, 2003). HR managers therefore face the challenge of 
creating a work environment in which employees can develop and exploit their innovative 
potential. According to a recent meta-analysis (Hammond et al., 2011), job characteristics are of 
central importance for employee innovativeness. 
Therefore the view of strategic innovation as a process of improvement which may reside in the 
form of a problem solving activity a new method where same studies cited (Pavitt, 1984), 
regarding it as a process involving commercial use a new business. However the concept of 
Strategic innovation combining these in an integrated process of incremental improvement and 
turning into commercial use is developed by scholars as cited (Strecker, 2007). The other concept 
of strategic innovation, used by (Strecker, 2007) is somewhat broader, this is because the concept 
is concerned with implementation of new technologies and new processes although not necessary 
both together in all cases. Another term of strategic innovation used in this study will follow the 
concept that is a process of transforming the telecommunication frontier into the commercialized 
product/process where strategic innovation in a competitive market thus: 
H3: Administrative innovation has positive influence on organizational performance 
4. METHODOLOGY 
4.1: Research Design and Sampling procedure 
This study employed a survey method for data collection because it’s a popular and common 
strategy in business research, because it allows for the collection of large amount of data from 
sizable population in a highly economical way. The main purpose of this study was to explain the 
relationship between two variables, corporate innovation dimensions and organizational 
performance dimensions. 
The study employed cross sectional survey approach since it’s the dominant method in business 
research and the questionnaire survey approach sounds most appropriate means to collect data 
from the telecommunication industry in Somalia 
A total of 200 questionnaires were distributed to respondents through personal administered 
questionnaire. While total of 180 usable questionnaires were collected. The overall response rate 
was 90%. 
4.2: Measurement of variables 
4.2.1: Administrative innovation 
Administrative innovation is used as independent variable of the study. According to Subramanian 
and Nilikanta (1996), they define administrative innovation as a process of developing new 
management system, new administrative process and staff development programs. In this study,
Proceeding - Kuala Lumpur International Business, Economics and Law Conference 4 (KLIBEL4) 
Vol. 1. 31 May – 1 June 2014. Hotel Putra, Kuala Lumpur, Malaysia. ISBN 978-967-11350-3-7 
five point liker scales is used in order to evaluate how industrial telecommunication promote work 
redesign and work system, skill enhancement, management system and change incentives. 
 
4.2.2: Technical innovation 
Technical innovation is an independent variable of the study. Technical innovation can be defined 
as an adoption of new ideas with the purpose of developing new products or services, and new 
ways of developing organization’s production process or service operations (Subramanian  
Nilakanta, 1996). Five point of likert scale was used in order to evaluate the degree to which 
telecommunication industry apply new procedures and process within the organization in order to 
influence the speed and flexibility of the production and the quality of production. 
4.2.3: Innovation strategy 
Innovation strategy is the independent variable of the study. Innovation strategy means setting 
formal plan and establishing organization’s long-term strategy in order to achieve organization’s 
goals and objectives. 
4.2.4: Business Performance 
Business performance is dependent variable of the study. It can be defined as the result of business 
activities, business process and business practice. Five point likert of scale was developed to 
assess the level or degree of financial performance of the firm including sales growth of the firm, 
its profitability and market share of the firm. 
4.3: Reliability Test 
A reliability test was conducted to assess the internal consist of the items by using Cronbachs 
alpha. A variable is reliable and internally consistent when the alpha is .70 and above (Hair, Black, 
Babin,  Anderson, 2010). 
All the Cronbachs alpha scores for the variables were greater than .60. The highest alpha was 
obtained by Strategic innovation (=.846), organizational performance was the afterward variable 
showing (=.773), Technological innovation and administrative innovation attained the same 
alpha at (=.735) being the lowest alpha score among variables. 
Table 1: Reliability test 
Variable No. items Cronbach Alpha 
Technological Innovation 5 .735 
Administrative Innovation 6 .735 
Strategic Innovation 9 .846 
Organizational performance 6 .773 
4.4: Data Analysis techniques 
To analyze the data and test the hypotheses, several statistical tools were employed. Statistical 
Package for Social Science (SPSS) Version 16.0 was used with the following techniques: 
Cronbach alpha for consistence and reliability of the measurement, descriptive analysis to test the 
characteristics of the respondents, correlation to test the relationships between variable and 
multiple regression to analyze the hypothesis.
Proceeding - Kuala Lumpur International Business, Economics and Law Conference 4 (KLIBEL4) 
Vol. 1. 31 May – 1 June 2014. Hotel Putra, Kuala Lumpur, Malaysia. ISBN 978-967-11350-3-7 
 
5. DATA ANALYSIS AND RESULT 
5.1: Profile of the respondents 
 
As table 2 shows, the male participants is domain in telecommunication industry as usual, male 
are approximately 87% while female respondents are 12%, majority of the respondents are 
married 71% and 29% are single. According educational background the bachelor holders are the 
majority, the degree of three to four years, second was undergraduate Diploma while 28% are 
post-graduate holder with masters and PhD. 
34% of respondents had experience of six to ten years, 47% had less experience between one to 
five years while 19% had experience more than ten years. According to company size majority 
telecommunication companies rate medium size with 50 to 249 employees, 52% rate that, second 
size was large which had more than 250 employees and it was 36%, while small enterprises was 
the third option of respondents, 12% of respondents said their company are small with one to forty 
nine employees. 
Table2: Characteristics of the Respondents 
Characteristics Classification Frequency Percentage 
Gender 
Male 156 86.7 
Female 24 13.3 
Age 
25-35 61 33.9 
36-45 77 42.8 
46-Above 42 23.3 
Marital Status 
Single 53 29.4 
Married 127 70.6 
Educational Background 
Diploma 36 20.0 
Bachelor 116 64.4 
Post-graduate degree 28 15.6 
Experience 
1-5 Years 84 46.7 
6-10 Years 62 34.4 
11-Above years 34 18.9 
Company Size 
Small (1-49 
Employees) 
22 12.2 
Medium (50-249 
employees) 
93 51.7 
Large (250+ 
Employees) 
65 36.1
Proceeding - Kuala Lumpur International Business, Economics and Law Conference 4 (KLIBEL4) 
Vol. 1. 31 May – 1 June 2014. Hotel Putra, Kuala Lumpur, Malaysia. ISBN 978-967-11350-3-7 
	 
5.2: Descriptive and Correlation Analysis 
Descriptive statistics was used to investigate the range of possible values, means and standard 
deviation of the variables in this study and are presented in Table 3 below. The respondents 
surveyed score above the overall mean, the most score was organizational performance 
(Mean=3.86, SD=1.18) they agreed the performance measurement, second was strategic 
innovation items (Mean=3.85, SD=1.20); third scored mean value of 3.82 and stander deviation of 
1.14 it was Technological innovation items and fourth and final dimension scored (Mean=3.80, 
SD=1.11) and it was Administrative innovation. 
Bivariate correlation was conducted to examine the interrelationships between corporate 
innovation and organizational performance. As shown in table (3), the dependent variable in this 
study (organizational performance) is considerably and positively correlated with three 
independent variables, namely Technological innovation (r=.688, p=.000), Administrative 
Innovation (r=.678, p=.000) and Strategic Innovation (r=.628, p=.000)., Moreover, there were 
significant correlations among the independent variables. For instance, Technological Innovation 
was substantially and highly correlated with Administrative Innovation (r=.793, p=.000), and 
Strategic Innovation (r=.783, p=.000). Whereas this Strategic Innovation had also moderate 
relationship with Administrative Innovation (r=.267, p=. 000). 
Table 3: correlation between corporate innovation and organizational performance 
Variable Mean Std. 
Deviation 
1 2 3 4 
Technological 
Innovation 
3.82 1.14 1 
Administrative 
Innovation 
3.80 1.11 .793 1 
Strategic 
Innovation 
3.85 1.20 .783 .689 1 
organizational 
performance 
3.86 1.18 .688 .678 .628 1 
5.3: Hypothesis Test 
Table 4 shows the results of the hierarchic regression equation testing the influence of the 
corporate innovativeness on the organizational performance. The result indicates that the three 
variables cumulatively explained 54% of the observed variation in organizational performance. 
The result indicated that technological, Administrative, and Strategic innovation flow significantly 
influenced organizational performance. The regression coefficient in the table 4 indicated that 
among these independent variables, Administrative innovation was the most important influencing 
on the organizational performance ( = .369), followed Technological innovation ( = .261) then 
Strategic innovation ( = .173). However the three independent variables have positive significant 
effect on organizational performance therefore we accept all hypotheses (H1, H2 and H3). The 
rigorousness of multicollinearity measured with variance inflation factor (VIF) values that ranged 
between 1 to 1.734. indicated no multicollinearity between independent variables (Gujarati, 1995; 
Albayrak, 2008)
Proceeding - Kuala Lumpur International Business, Economics and Law Conference 4 (KLIBEL4) 
Vol. 1. 31 May – 1 June 2014. Hotel Putra, Kuala Lumpur, Malaysia. ISBN 978-967-11350-3-7 

 
Table 4: corporate innovativeness on the organizational Performance 
Predictors  T Sig Collinearity statistics 
Tolerance VIF 
Technological innovation .261 2.569 .011 .780 1.283 
Administration innovation .369 4.252 .000 .867 1.153 
Strategic innovation .173 2.028 .044 .837 1.195 
R=.612, R2= .375, R2 adjusted= .355, p005. 
6: DISCUSSION AND CONCLUSION 
The main objective of the study was to investigate the relationship between corporate innovation 
and organizational performance in telecommunication industry in Somali; data was collected from 
180 respondents from the main telecommunication companies in Mogadishu in January 2014, the 
study developed three hypotheses to test the effect of corporate innovation dimensions on 
organizational performance. 
As shown in table 4 above the findings from hierarchical regression between corporate innovation 
dimensions (Technology, Administrative and strategic innovation) and organizational 
performance. The corporate innovation dimension cumulatively contributed 37% of the variance 
in organizational performance; the table further illustrated positive and significance relationship 
with three dimensions of corporate innovation (IV) and organizational performance. 
The findings of this study confirms that there is positive and significant relationship between 
corporate innovation and organizational performance, then three hypothesis of this study was 
accepted, These findings are consistent with the literature on innovation and firm performance 
(Abdi, a. m.,  Ali, A. Y. S. ,2013. Therrien et al., 2011; Gunday et al., 2011). 
These findings have some implications for managers. Since the Telecommunication industry are 
among the most competitive sectors of the world economy and Sub-Saharan African context it 
can be derived from this study that firms should put special emphasis on Administrative, strategic 
and technological innovations, as these types of innovation are found to be important instruments 
for achieving sustainable performance. 
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Proceeding - Kuala Lumpur International Business, Economics and Law Conference 4 (KLIBEL4) 
Vol. 1. 31 May – 1 June 2014. Hotel Putra, Kuala Lumpur, Malaysia. ISBN 978-967-11350-3-7 
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  • 1. Proceeding - Kuala Lumpur International Business, Economics and Law Conference 4 (KLIBEL4) Vol. 1. 31 May – 1 June 2014. Hotel Putra, Kuala Lumpur, Malaysia. ISBN 978-967-11350-3-7 CORPORATE INNOVATION AND ORGANIZATIONAL PERFORMANCE: THE CASE OF SOMALIA TELECOMMUNICATION INDUSTRY Mohamed Abdiaziz Sidow-Graduate Student Graduate School of Management International Islamic University Malaysia (IIUM) Kuala Lumpur, Malaysia E-Mail: mohamedsidow01@gmail.com- Tell: 00601123594828 Ali Yassin sheikh Ali-PhD Candidate Business administration department College of Business studies Sudan University of Science and Technology Sudan, Khartoum E-mail: profali@hotmail.com ABSTRACT Telecommunication industry in Somalia is unique since there has been no central government from 1990, after the dictatorial regime was defeated, but despite the anarchy that followed, the telecoms sector has developed more. It is highly competitive with at eight mobile networks, which also provide fixed-line and Internet services. Telecommunication industry provide innovation products and application, the most well known innovation is mobile money transfer which had different brand names such EVC ( Electronic Voucher Card), a mobile application technology for money transfer, SAHAL and E-Maal. Beside the technological innovation, they developed highly flexible Administration which can work in hostile environment like Somalia. The current study investigates the corporate innovation and organizational performance in telecommunication industry in Somalia, by using cross sectional survey approach, the data was collected from 180 employees from telecommunication companies in Mogadishu in south, Boasaso in West and Hargeysa in North. The data was collected in January 2014 and was analyzed using SPSS version 16.0. The findings indicated that technological innovation (=.261, t=2.569, p=.011), Administrative innovation (=.369, t=4.252, p.001) and Strategic Innovation ((=.173, t=2.028, p.005) had statistically significant and positive effect on organizational performance. Therefore, it is necessary for telecommunication companies to consider these factors in order to maintain their performance in future. Keywords: Administrative innovation, technological innovative, strategic innovative, organizational performance
  • 2. Proceeding - Kuala Lumpur International Business, Economics and Law Conference 4 (KLIBEL4) Vol. 1. 31 May – 1 June 2014. Hotel Putra, Kuala Lumpur, Malaysia. ISBN 978-967-11350-3-7 1. INTRODUCTION Today, organizations are facing challenges toward how they success. Organization’s success not only depends on what organizations currently providing but also depends on how the organizations can make change to improve whatever they are providing. All improvements or changes are under what we call organizational innovation. The term innovation comes from Latin word “innovare” which means “to make something new” (Tid, Bessant et al 2001). Innovation seems nowadays one of the most important issues that all organizations are giving special attention. Many studies are relating the increase effort of firms Research and Development may enable the increase of innovation which in turn increasing market share of the organization ((e.g., Freeman and Soete, 1997).) Today’s world, organizational innovation has different meaning to different people or different organization. Different organizations focus on different types of organizational innovation. Organizational innovation can be product improvement, new production method, new market, new source of supply or new forms of organization. Generally, organizational innovation is related to competitive advantage of the organization, firm performance, sales growth and success or failure of the organization. On the other hand, the topic of firm performance is greatly discussed. The way we define firm performance depend on the type of the organization whether its production company or service company. Performance measurement plays a key role in developing, implementing and monitoring a strategic plan. It enables managers to evaluate whether organizational objectives have been achieved, and is further used to develop and compensate managers. It helps managers monitor whether the company is moving in the direction they want it to go (Teeratansirikool.L, Siengthai. S, Badir.Y, 2013). Therefore, this paper attempts to understand different categories of organizational innovation such as technical innovation, administrative innovation and strategic innovation. Also, it attempts to provide how they relate organizational performance. As mentioned earlier, all organizations do not perceive the same meaning and the same importance organizational innovation. Therefore, this paper focuses how telecommunication industries perceive organizational innovation and how the performance of telecommunication industries and organizational innovation can be related. This paper specially focuses those telecommunication companies who are located in Mogadishu- Somali. 2. LITERATURE REVIEW 2.1Corporate Innovation Different researchers are trying to understand the phenomenal of organizational innovation. There is no consensus definition of the term “organizational innovation” and different authors using their own approach (Lam, 2005). The term innovation means coming up novel idea or new idea. According to Linder et al (2003) define innovation as “implementing new ideas that create value”. Innovation is what most organizations depends on in today’s business world (Kenter 1999). Organizational innovation related to develop new product and new process. Process innovation can be the form of material substitution or changing the way of manufacturing with the purpose of cost reduction or quality improvement. On the other hand, product innovation can be the form of changing the product size or shape, it can be the way of introducing new product or improving
  • 3. Proceeding - Kuala Lumpur International Business, Economics and Law Conference 4 (KLIBEL4) Vol. 1. 31 May – 1 June 2014. Hotel Putra, Kuala Lumpur, Malaysia. ISBN 978-967-11350-3-7 existing one. Martinez-Rose (1999), found that product innovation and process innovation are interrelated. Factors that drive organizational innovation are internal and external factors. Internal factors can be motivation, technical background, working experience and innovative ideas of entrepreneurs. On the other hand, external factors of innovation includes: customer requirements, information given by the supplier, market opportunity, availability and accessibility of institutional support, economic incentives, competition and etc. However both internal and external are required (K. N. Krishnaswamy et al, 2010). Organizational innovation can be cattegoriesed into three main categories, i.e technological innovation, administrative innovation and strategic innovation. 2.2: Organizational performance Firm Performance is a topic often discussed but rarely defined. One research paper urge that Scholars in the field of performance measurement tend to use the term business performance measurement (BPM) systems without explaining exactly what they mean by it. This lack of clarity creates confusion and comparability issues, and makes it difficult for researchers to build on one on each other’s work (Franco-Santos et el 2007) However one of the most attractive viable definition of firm performance or organizational performance the researcher found is that “Organizational performance is a measure of how efficiently and effectively managers use available resources to satisfy customers and achieve organizational goals. Organizational performance increases in direct proportion to increases in efficiency and effectiveness (Mulcahy.A, , Burns.U, )”. Firm performance related to the way that organization manage it activities by following its objectives and keeping its goals. Firm performance is not limited to one level of the organization, it looks the business as a whole, and it involves assessing the overall business performance, it’s also determines how the business can better reach its goals. Managing firm performance requires the placing strategic and operational objectives. Thus Firm performance can be said to be how effectively and efficiently the organization done and fulfilled its tasks in order to achieve its objectives and then gain the organizations goal. Some researchers urge that appropriate performance measures are supposed to permit organizations to direct their actions towards attaining their strategic objectives (Arthur.S, Abanis.T, Eliab.B, Sumil.N, 2013). Performance measurement refers to the use of a multi-dimensional set of performance measures which include both financial and non-financial measures; it also includes internal and external measures of performance and it often includes both measures which quantify what has been achieved as well as measures which are used to help predict the future. Performance measurement cannot be done in isolation. Financial performance is generally defined as the use of outcome-based financial indicators that are assumed to reflect the fulfillment of the economic goals of the firm (Abdirizak I Ali-Yasin.S, 2013) Non-financial performance measures are often used for performance evaluation. They are especially relevant if the available financial performance measures not completely reflect the manager’s contribution to the firm’s total value (Christian, 2001). An increasing number of companies are adopting measuring customer loyalty, employee satisfaction, and other performance areas that are not financial and will ultimately affect profitability.
  • 4. Proceeding - Kuala Lumpur International Business, Economics and Law Conference 4 (KLIBEL4) Vol. 1. 31 May – 1 June 2014. Hotel Putra, Kuala Lumpur, Malaysia. ISBN 978-967-11350-3-7 3. RESEARCH FRAMEWORK AND HYPOTHESIS DEVELOPMENT The conceptual arguments of previous research converge on the idea that firms benefit from highlighting newness, responsiveness, and a degree of boldness. Extensive discussion of the arguments can be found in Lumpkin and Dess (1996). Indeed, the suggestion was the bases for the interest in studying the current research which investigates the relationship between corporate innovation and organizational performance. The study examines the impact of corporate innovation element as independent variable consisting of three constructs (technical, administrative and strategic innovation) on organizational performance with two construct financial performance and non-financial performance as the dependent variable (See Figure 1).
  • 5. Proceeding - Kuala Lumpur International Business, Economics and Law Conference 4 (KLIBEL4) Vol. 1. 31 May – 1 June 2014. Hotel Putra, Kuala Lumpur, Malaysia. ISBN 978-967-11350-3-7 3.1 Technological innovation Many researchers of innovation focused technological innovation (Freeman Soete 2000).Technological innovation became one of the most important factors of all the different sizes of the organizations are concerned. So, in order the organization stay in the market place they have to adopt the rapid change of the technologies. Technological innovation by definition means, the adoption of new ideas which appropriate to the new product or service, and introduction new element to organization’s production process or service operation (Subramanian Nilakanta, 1996). Technological innovation is important factor which defines how the organization has competitive advantage, its effectiveness and its overall success. On the other hand, technological innovation seems to have an impact on work productivity, competitive environment, competitive advantage and overall performance of the organization. Technological innovation is something which is unavoidable if the organization wants to stay at the market or enter new market and if they want to gain competitive advantage (Becheikh et al 2006). According to Daneels and Kleinschmidt (2001), in the context of product development argued that, new product development consists of the combination of technology and market. They further argued that, when a firm undertaking new product development they should have technology which is enabling to them to develop new product and serve their customers. Technological innovation for product or process contributes to cost reduction, quality improvement, suitable change in product size which fits customer demand, raw material substitution and new product (K. N. Krishnaswamy et el 2010) thus. H1: Technological innovation has positive influence on organizational performance 3.2 Administration innovation Administrative innovation is one of the innovations and it’s related to the establishment of a new organizational design that supports better the creation, production and delivery of products and service. Administrative innovations are commence in the administrative core and tend to be implemented from the top down. They pertain to organizational structure, administrative systems, and human resources (Damanpour, Szabat, and Evan 1989). Administrative innovations involve procedures, rules, roles, and structures that are related to the communication and exchanges among employees, and they are more directly related to organizational management rather than directly to work activities (Jaskyte, 2011). Administrative innovation is related to the formation of a new or existing organizational design that supports better the creation, production and delivery of products and services. Example of administrative innovation is management by objectives, six-sigma processes, job rotation, staff incentive systems, and telecommuting, from this discussion we assume that. H2: Administrative innovation has positive influence on organizational performance
  • 6. Proceeding - Kuala Lumpur International Business, Economics and Law Conference 4 (KLIBEL4) Vol. 1. 31 May – 1 June 2014. Hotel Putra, Kuala Lumpur, Malaysia. ISBN 978-967-11350-3-7 3.3 Strategic innovation The strategic innovation is a central concern of firms; managers are faced with the challenge of mobilizing the innovative potential of all sorts of employees. As these employees have a capital of tacit knowledge (Polanyi, 1966) about the production process, the work organization and the product design, mobilizing this knowledge can result in workplace Strategic innovations with high returns on investments (Getz Robinson, 2003). HR managers therefore face the challenge of creating a work environment in which employees can develop and exploit their innovative potential. According to a recent meta-analysis (Hammond et al., 2011), job characteristics are of central importance for employee innovativeness. Therefore the view of strategic innovation as a process of improvement which may reside in the form of a problem solving activity a new method where same studies cited (Pavitt, 1984), regarding it as a process involving commercial use a new business. However the concept of Strategic innovation combining these in an integrated process of incremental improvement and turning into commercial use is developed by scholars as cited (Strecker, 2007). The other concept of strategic innovation, used by (Strecker, 2007) is somewhat broader, this is because the concept is concerned with implementation of new technologies and new processes although not necessary both together in all cases. Another term of strategic innovation used in this study will follow the concept that is a process of transforming the telecommunication frontier into the commercialized product/process where strategic innovation in a competitive market thus: H3: Administrative innovation has positive influence on organizational performance 4. METHODOLOGY 4.1: Research Design and Sampling procedure This study employed a survey method for data collection because it’s a popular and common strategy in business research, because it allows for the collection of large amount of data from sizable population in a highly economical way. The main purpose of this study was to explain the relationship between two variables, corporate innovation dimensions and organizational performance dimensions. The study employed cross sectional survey approach since it’s the dominant method in business research and the questionnaire survey approach sounds most appropriate means to collect data from the telecommunication industry in Somalia A total of 200 questionnaires were distributed to respondents through personal administered questionnaire. While total of 180 usable questionnaires were collected. The overall response rate was 90%. 4.2: Measurement of variables 4.2.1: Administrative innovation Administrative innovation is used as independent variable of the study. According to Subramanian and Nilikanta (1996), they define administrative innovation as a process of developing new management system, new administrative process and staff development programs. In this study,
  • 7. Proceeding - Kuala Lumpur International Business, Economics and Law Conference 4 (KLIBEL4) Vol. 1. 31 May – 1 June 2014. Hotel Putra, Kuala Lumpur, Malaysia. ISBN 978-967-11350-3-7 five point liker scales is used in order to evaluate how industrial telecommunication promote work redesign and work system, skill enhancement, management system and change incentives. 4.2.2: Technical innovation Technical innovation is an independent variable of the study. Technical innovation can be defined as an adoption of new ideas with the purpose of developing new products or services, and new ways of developing organization’s production process or service operations (Subramanian Nilakanta, 1996). Five point of likert scale was used in order to evaluate the degree to which telecommunication industry apply new procedures and process within the organization in order to influence the speed and flexibility of the production and the quality of production. 4.2.3: Innovation strategy Innovation strategy is the independent variable of the study. Innovation strategy means setting formal plan and establishing organization’s long-term strategy in order to achieve organization’s goals and objectives. 4.2.4: Business Performance Business performance is dependent variable of the study. It can be defined as the result of business activities, business process and business practice. Five point likert of scale was developed to assess the level or degree of financial performance of the firm including sales growth of the firm, its profitability and market share of the firm. 4.3: Reliability Test A reliability test was conducted to assess the internal consist of the items by using Cronbachs alpha. A variable is reliable and internally consistent when the alpha is .70 and above (Hair, Black, Babin, Anderson, 2010). All the Cronbachs alpha scores for the variables were greater than .60. The highest alpha was obtained by Strategic innovation (=.846), organizational performance was the afterward variable showing (=.773), Technological innovation and administrative innovation attained the same alpha at (=.735) being the lowest alpha score among variables. Table 1: Reliability test Variable No. items Cronbach Alpha Technological Innovation 5 .735 Administrative Innovation 6 .735 Strategic Innovation 9 .846 Organizational performance 6 .773 4.4: Data Analysis techniques To analyze the data and test the hypotheses, several statistical tools were employed. Statistical Package for Social Science (SPSS) Version 16.0 was used with the following techniques: Cronbach alpha for consistence and reliability of the measurement, descriptive analysis to test the characteristics of the respondents, correlation to test the relationships between variable and multiple regression to analyze the hypothesis.
  • 8. Proceeding - Kuala Lumpur International Business, Economics and Law Conference 4 (KLIBEL4) Vol. 1. 31 May – 1 June 2014. Hotel Putra, Kuala Lumpur, Malaysia. ISBN 978-967-11350-3-7 5. DATA ANALYSIS AND RESULT 5.1: Profile of the respondents As table 2 shows, the male participants is domain in telecommunication industry as usual, male are approximately 87% while female respondents are 12%, majority of the respondents are married 71% and 29% are single. According educational background the bachelor holders are the majority, the degree of three to four years, second was undergraduate Diploma while 28% are post-graduate holder with masters and PhD. 34% of respondents had experience of six to ten years, 47% had less experience between one to five years while 19% had experience more than ten years. According to company size majority telecommunication companies rate medium size with 50 to 249 employees, 52% rate that, second size was large which had more than 250 employees and it was 36%, while small enterprises was the third option of respondents, 12% of respondents said their company are small with one to forty nine employees. Table2: Characteristics of the Respondents Characteristics Classification Frequency Percentage Gender Male 156 86.7 Female 24 13.3 Age 25-35 61 33.9 36-45 77 42.8 46-Above 42 23.3 Marital Status Single 53 29.4 Married 127 70.6 Educational Background Diploma 36 20.0 Bachelor 116 64.4 Post-graduate degree 28 15.6 Experience 1-5 Years 84 46.7 6-10 Years 62 34.4 11-Above years 34 18.9 Company Size Small (1-49 Employees) 22 12.2 Medium (50-249 employees) 93 51.7 Large (250+ Employees) 65 36.1
  • 9. Proceeding - Kuala Lumpur International Business, Economics and Law Conference 4 (KLIBEL4) Vol. 1. 31 May – 1 June 2014. Hotel Putra, Kuala Lumpur, Malaysia. ISBN 978-967-11350-3-7 5.2: Descriptive and Correlation Analysis Descriptive statistics was used to investigate the range of possible values, means and standard deviation of the variables in this study and are presented in Table 3 below. The respondents surveyed score above the overall mean, the most score was organizational performance (Mean=3.86, SD=1.18) they agreed the performance measurement, second was strategic innovation items (Mean=3.85, SD=1.20); third scored mean value of 3.82 and stander deviation of 1.14 it was Technological innovation items and fourth and final dimension scored (Mean=3.80, SD=1.11) and it was Administrative innovation. Bivariate correlation was conducted to examine the interrelationships between corporate innovation and organizational performance. As shown in table (3), the dependent variable in this study (organizational performance) is considerably and positively correlated with three independent variables, namely Technological innovation (r=.688, p=.000), Administrative Innovation (r=.678, p=.000) and Strategic Innovation (r=.628, p=.000)., Moreover, there were significant correlations among the independent variables. For instance, Technological Innovation was substantially and highly correlated with Administrative Innovation (r=.793, p=.000), and Strategic Innovation (r=.783, p=.000). Whereas this Strategic Innovation had also moderate relationship with Administrative Innovation (r=.267, p=. 000). Table 3: correlation between corporate innovation and organizational performance Variable Mean Std. Deviation 1 2 3 4 Technological Innovation 3.82 1.14 1 Administrative Innovation 3.80 1.11 .793 1 Strategic Innovation 3.85 1.20 .783 .689 1 organizational performance 3.86 1.18 .688 .678 .628 1 5.3: Hypothesis Test Table 4 shows the results of the hierarchic regression equation testing the influence of the corporate innovativeness on the organizational performance. The result indicates that the three variables cumulatively explained 54% of the observed variation in organizational performance. The result indicated that technological, Administrative, and Strategic innovation flow significantly influenced organizational performance. The regression coefficient in the table 4 indicated that among these independent variables, Administrative innovation was the most important influencing on the organizational performance ( = .369), followed Technological innovation ( = .261) then Strategic innovation ( = .173). However the three independent variables have positive significant effect on organizational performance therefore we accept all hypotheses (H1, H2 and H3). The rigorousness of multicollinearity measured with variance inflation factor (VIF) values that ranged between 1 to 1.734. indicated no multicollinearity between independent variables (Gujarati, 1995; Albayrak, 2008)
  • 10. Proceeding - Kuala Lumpur International Business, Economics and Law Conference 4 (KLIBEL4) Vol. 1. 31 May – 1 June 2014. Hotel Putra, Kuala Lumpur, Malaysia. ISBN 978-967-11350-3-7 Table 4: corporate innovativeness on the organizational Performance Predictors T Sig Collinearity statistics Tolerance VIF Technological innovation .261 2.569 .011 .780 1.283 Administration innovation .369 4.252 .000 .867 1.153 Strategic innovation .173 2.028 .044 .837 1.195 R=.612, R2= .375, R2 adjusted= .355, p005. 6: DISCUSSION AND CONCLUSION The main objective of the study was to investigate the relationship between corporate innovation and organizational performance in telecommunication industry in Somali; data was collected from 180 respondents from the main telecommunication companies in Mogadishu in January 2014, the study developed three hypotheses to test the effect of corporate innovation dimensions on organizational performance. As shown in table 4 above the findings from hierarchical regression between corporate innovation dimensions (Technology, Administrative and strategic innovation) and organizational performance. The corporate innovation dimension cumulatively contributed 37% of the variance in organizational performance; the table further illustrated positive and significance relationship with three dimensions of corporate innovation (IV) and organizational performance. The findings of this study confirms that there is positive and significant relationship between corporate innovation and organizational performance, then three hypothesis of this study was accepted, These findings are consistent with the literature on innovation and firm performance (Abdi, a. m., Ali, A. Y. S. ,2013. Therrien et al., 2011; Gunday et al., 2011). These findings have some implications for managers. Since the Telecommunication industry are among the most competitive sectors of the world economy and Sub-Saharan African context it can be derived from this study that firms should put special emphasis on Administrative, strategic and technological innovations, as these types of innovation are found to be important instruments for achieving sustainable performance. REFERENCE Abdi, a. m., Ali, A. Y. S. (2013). Innovation and business performance in telecommunication industry in Sub-Saharan African context: case of Somalia. Asian journal of management sciences education, 2(4). Albayrak, A. S. (2008), Weighted Regression Analysis and an Application as an Alternative for Least Squares Technique in the Presence of Unstable Variance Afyon Kocatepe University Journal of Faculty of Economic and Administrative Sciences X(II): 111-134. Arthur.S, Abanis.T, Eliab.B, Sumil.N. (2013). Financial Performance in the Selected
  • 11. Proceeding - Kuala Lumpur International Business, Economics and Law Conference 4 (KLIBEL4) Vol. 1. 31 May – 1 June 2014. Hotel Putra, Kuala Lumpur, Malaysia. ISBN 978-967-11350-3-7 Bala Subrahmanya, M., Mathirajan, M., Krishnaswamy, K. (2010, January). Importance of Technological growth: evidence from India. United Nation University , 2010/03 Christian, H. (2001). Balancing Financial and Non-Financial. unpublished. Microfinance Institutions in Uganda. International Journal of Engineering Research Technology (IJERT),ISSN: 2278-0181,Vol. 2 Issue 2 , 4-8. Becheikh, N., R. Landry, and N. Amara (2006). ‘Lessons from Innovation Empirical Studies in the Manufacturing Sector: A Systematic Review of the Literature from 1993–2003’. Technovation, 26 (5/6): 644–64. Danneels, E., and E. J. Kleinschmidt (2001). ‘Product Innovativeness from the Firm’s Perspective: Its Dimensions and their Relation with Project Selection and Performance’. The Journal of Product Innovation Management, 18: 357–73 Damanpour, Fariborz, Kathryn A. Szabat, and William M. Evan. 1989. The Rela-tionship between Types of Innovation and Organizational Performance. Journal of Management Studies26(6): 587– 602. Franco-Santos, M., Kennerley, M., Micheli, P., Martinez, V., Mason, S., Marr, B., ... Neely. (2007). Towards a definition of a business performance measurement system. International Journal of Operations Production Management,27(8) , 784-801.. Freeman, C., Soete, L., 2000. The Economics of Industrial Innovation. Continuum, London. Freeman, C., and L. Soete (1997). The Economics of Industrial Innovation, Third Edition. London: Pinter. Jaskyte, K. (2011, January | February). Predictors of Administrative and Technological Innovations in Nonprofi t Organizations. Public Administration Review , pp. 77-86. Kanter, R.M., (1999), ‘From spare change to real change: The social sector as Beta site for business innovation’, Harvard Business Review, Vol. 77 No.3, pp. 122-132. Lam, A., 2005. Organizational innovation. In: Fagerberg, J., Mowery, D.C., Nelson, R.R. (Eds.), The Oxford Handbook of Innovation. Oxford University Press, Oxford, pp. 115–147. Linder, J.C., Jarvenpaa, S., and Davenport, T.H., (2003), Towards an innovation sourcing strategy, MIT Sloan Management Review, Vol. 44 No. 4, p. 43(7) Lumpkin, G. T., Dess, G. G. (1996). Clarifying the entrepreneurial orientation construct and linking it to performance. Academy of Management Review, 21(1), 135−172. Martinez-Ros, E. (1999). ‘Explaining the Decisions to Carry out Product and Process Innovations: The Spanish Case’. The Journal of High Technology Management Research, 10 (2): 223–42.
  • 12. Proceeding - Kuala Lumpur International Business, Economics and Law Conference 4 (KLIBEL4) Vol. 1. 31 May – 1 June 2014. Hotel Putra, Kuala Lumpur, Malaysia. ISBN 978-967-11350-3-7 Mulcahy.A, , Burns.U, . (n.d.). http://highered.mcgraw-hill.com/. Retrieved from http://highered.mcgraw-hill.com/. Tidd, J., Bessant, J. Pavitt, K. (2001). Managing innovation: Integrated technological, marketand organisational change. New York: John Wiley Sons Ltd. Teeratansirikool.L, Siengthai. S, Badir.Y. (2013). Competitive strategies and firm performance: the mediating role of performance measurement. International Journal of Productivity and Performance Management Vol. 62 No. 2, , 168-184 Getz, I., Robinson, A. G. (2003). Innovate or Die: Is that a Fact? Creativity and Innovation Management, 12(3), 130–136. doi:10.1111/1467-8691.00276. Gunday, Gurhan, et al. Effects of innovation types on firm performance.International Journal of Production Economics 133.2 (2011): 662-676. Gujarati, D.N. (1995), Basic Econometrics (Third Edition), McGraw-Hill, New Jersey Hammond, M. M., Neff, N. L., Farr, J. L., Schwall, A. R., Zhao, X. (2011). Predictors of individual-level innovation at work: A meta-analysis. Psychology of Aesthetics, Creativity, and the Arts, 5(1), 90–105. doi:10.1037/a0018556.. Hair J. F., Black W. C., Babin B. J. Anderson R. E. (2010). Multivariate data analysis (7th ed.). New Jersey: Pearson Prentice Hall. Subramanian, A. Nilakanta. S. (1996). Organizational Innovativeness: Exploring the Relationship between Organizational Determinants of Innovation, Types ofInnovations, and Measures of Organizational Performance. International Journal of Management Science, 24(6), 631-647. Pavitt, K. (1984). Sectoral patterns of technical change: towards a taxonomy and a theory. Research Policy, 13 (6), 343-373 Polanyi, M. (1966). The Tacit Dimension. New York: Anchor Day Books. Probst, T. M., Stewart, S. M., Gruys, M. L., Tierney, B. W. (2007). Productivity, counterproductivity and creativity: The ups and downs of job insecurity. Journal of Occupational and Organizational Psychology, 80(3), 479–497. Strecker, N. (2007). Innovation Strategy and Firm Performance An empirical study of publicly listed firms. Therrien, P., Doloreux, D. and Chamberlin, T., (2011), Innovation novelty and (commercial) performance in the service sector: A Canadian firm level analysis, Technovation, (31), pp.655- 665.