Assessing the relationship between firm resources and product innovation performance
Business Process Management JournalEmerald Article: Assessing the relationship between firm resources andproduct innovation performance: A resource-based viewLily Julienti Abu Bakar, Hartini AhmadArticle information:To cite this document: Lily Julienti Abu Bakar, Hartini Ahmad, (2010),"Assessing the relationship between firm resources andproduct innovation performance: A resource-based view", Business Process Management Journal, Vol. 16 Iss: 3 pp. 420 - 435Permanent link to this document:http://dx.doi.org/10.1108/14637151011049430Downloaded on: 07-12-2012References: This document contains references to 79 other documentsTo copy this document: firstname.lastname@example.orgThis document has been downloaded 1938 times since 2010. *Access to this document was granted through an Emerald subscription provided by UNIVERSITY OF THE ARTS LONDONFor Authors:If you would like to write for this, or any other Emerald publication, then please use our Emerald for Authors service.Information about how to choose which publication to write for and submission guidelines are available for all. Please visitwww.emeraldinsight.com/authors for more information.About Emerald www.emeraldinsight.comWith over forty years experience, Emerald Group Publishing is a leading independent publisher of global research with impact inbusiness, society, public policy and education. In total, Emerald publishes over 275 journals and more than 130 book series, aswell as an extensive range of online products and services. Emerald is both COUNTER 3 and TRANSFER compliant. The organization isa partner of the Committee on Publication Ethics (COPE) and also works with Portico and the LOCKSS initiative for digital archivepreservation. *Related content and download information correct at time of download.
The current issue and full text archive of this journal is available at www.emeraldinsight.com/1463-7154.htmBPMJ16,3 Assessing the relationship between ﬁrm resources and product innovation performance420 A resource-based view Lily Julienti Abu Bakar and Hartini Ahmad College of Business, Universiti Utara Malaysia, Sintok, Malaysia Abstract Purpose – This paper seeks an answer to the question about which of a ﬁrm’s resources contributes most to product innovation performance (PIP). The paper aims to adopt the resource-based view (RBV) and consider both tangible and intangible assets. Design/methodology/approach – A mail administrated survey was distributed to a randomly selected list of 700 small and medium enterprises (SMEs) in Malaysia. The response rate was 20.1 percent and the usable response rate was 15.4 percent which is favorable for this type of research. As comparable to other SME studies and particularly in Malaysia, this relatively low-response rate is not surprising for mail administrated questionnaire. Findings – The ﬁndings indicate that, in the Malaysian context, intangible resources are the main drivers of PIP. This is keeping with the expectations of the RBV. Research limitations/implications – Establishing a cooperative relationship with the Small and Medium Size Industries Development Corporation of Malaysia plays a signiﬁcant role in helping us to garner a larger than expected response rate among the SMEs. Alliances such as this may help researchers improve survey response rates among smaller manufacturers. Originality/value – This paper is unique in that it is the ﬁrst paper to address the relationship between ﬁrm resources and PIP among Malaysian companies. While the paper is primarily descriptive in nature, it does provide some evidence that can be used in the development and testing of hypotheses concerning the relationship between PIP and ﬁrm’s resources. Keywords Product innovation, Organizational performance, Manufacturing, Resource management, Malaysia Paper type Research paper 1. Introduction Previous literature suggests that not all resources are equally important to determine ﬁrm success and performance. Findings show that intangible resources are important determinants for ﬁrm’s success. Such assets that are scarce, specialized and difﬁcult to trade, imitate, or appropriate are viewed as intangible (Barney, 2001; Conner, 2002; Ray, et al., 2004). This paper focuses on the ﬁrm’s resources as determinants for product innovation success. The failure or the success of the product innovation will be identiﬁed through the product innovation performance (PIP) indicators.Business Process Management PIP has been deﬁned as the economic ﬁnancial and non-ﬁnancial outcomes ofJournal the ﬁrm’s product innovation efforts (Cooper, 1984; Cooper and Kleinschmidt, 1987;Vol. 16 No. 3, 2010pp. 420-435 Gemunden and Heydebreck, 1992; Hise and O’Neal, 1990; Hollenstein, 1996) whichq Emerald Group Publishing Limited is new or signiﬁcantly improved in it technical speciﬁcations, components and1463-7154DOI 10.1108/14637151011049430 material, incorporated software, user friendliness or other functional characteristics
(OECD, 2005). The relationship between a ﬁrm’s resources and PIP is less documented. Firm resourcesYet, there has been signiﬁcant interest in product innovativeness in Malaysia in recent and productyears. Even so, the innovativeness of a new product and innovation capability isimportant to present opportunities for Malaysia manufacturing ﬁrm in terms of growth innovationand expansion into new areas as well as to allow them to gain competitive advantage.2. Firm’s resources 421Through the empirical exploration, ﬁrm’s resources have been classiﬁed into sixstrategic resources that are: (1) physical; (2) reputational; (3) organizational; (4) ﬁnancial; (5) human intellectual; and (6) technological (Amit and Schoemaker, 1993; Barney, 1991; Puente and Rabbino, 2003).Entrepreneurial orientation (EO) has been considered as human intellectual resourcessince manufacturing ﬁrms that are entrepreneurial in nature also strive to gaincompetitive advantage and adopt both technological and non-technological innovation(Weerawardena and Coote, 2001). Fitriah and Wafa (2006), in their recent research, foundthat Malaysian manufacturing ﬁrms have a high inclination towards the businessorientations whereby EO and innovative capability affects innovation. In addition,previous literature stated that soft factors such as employee involvement, managementcommitment, customer focus, entrepreneurial characteristics, organizational contextand the external environment are strategic factors that inﬂuence ﬁrms effectiveness(Dollinger, 1999; Hashim, 1999; Kao, 1989; Tracy, 1992; Zimmerer and Scarborough,1998). Resources can be deﬁned as the productive assets of ﬁrms, the means through whichactivities are accomplished (Mathews, 2006). In the same manner, it also has beendeﬁned as stocks of available factors (knowledge, physical assets, human capital, andother tangible and intangible) that are owned or controlled by the ﬁrm, which areconverted into ﬁnal products or services efﬁciently and effectively (Amit andSchoemaker, 1993; Capron and Hulland, 1999). Although small and medium enterprises(SMEs) have limited resources, some of them are unique and are well-positionedcompared to their competitors to create value products for consumers and also providethe greatest potential for wealth creation and redistribution (Day and Wensley, 1988). Generally, resources can be categorized as tangible and intangible entities. Theseentities are all the object of entrepreneurial attention that can be acquired and take theirplace as assets on the company’s balance sheet (Mathews, 2006). Tangible resourcesinclude capital, access to capital and location such as location of the buildings,warehouse and other facilities. Intangible resources consist of knowledge, skills andreputation and EO such as proactiveness, innovativeness and risk-seeking ability(Runyan et al., 2006). Even though it is much easier to protect tangible resources andproperty such as physical and ﬁnancial assets in a more concrete form compared tointangibles where many factors could make them ﬂow out of the company, intangible
BPMJ assets are contributing more than tangible assets in creating value (Apintalisayon,16,3 2008). The ﬁrst published papers in entrepreneurship identiﬁes resources in the context of resource-based view (RBV) (Greene and Brown, 1997) that are human, social, physical, organizational and ﬁnancial resources. Technological resources have been identiﬁed in subsequent research as an important dimension for national economic development422 efforts (Venkataraman, 2004). Resources may be acquired in a simple state and combined together by the ﬁrm in distinctive combinations that are certainly not easily traded (Mathews, 2006). The recombination of resources, activities and linking routines within the ﬁrm is the implementation of the strategic choice and it leads to a new set of activities, new sources of revenue and a new business model for the ﬁrm (Mathews, 2006). The previous listed activities can be categorized as innovation. Even though a company may be working on an innovation, this does not necessarily mean that a successful product will result (Aboulnasr et al., 2008). Innovation is a driver of competitive advantage with a combination of resources that creates higher-order competencies that can be referred as capabilities. Organizational capabilities has been deﬁned as a ﬁrm’s collective physical facilities, skills of employees and ﬁrm capacity to deploy its assets, tangible or intangible to perform a task or activity to improve performance (Amit and Schoemaker, 1993; Chandler, 1990, O’Regan et al., 2006; Teece et al., 1997). RBV theoretically predicts intangible resources as the important factors for ﬁrm success (Amit and Schoemaker, 1993; Barney, 1991; Conner, 2002; Hall, 1993; Michalisin et al., 1997). For all these reasons, intangibles are able to support a greater level and breadth of activity than are tangible resources. More recent research has shifted attention from tangible to intangible resources as it may be more important from a strategic point of view, since they bring together more frequently the requirements necessary for producing sustainable advantage: to be valuable, rare and difﬁcult to imitate and replace by competitors (Barney, 1991; Hitt et al., 2001). This paper focuses on six types of intangible resources namely physical, ﬁnancial, human/intellectual, organizational, reputational and technological resources. 3. RBV: key predictor for ﬁrm’s resources and PIP Penrose (1959) is identiﬁed as one of the earliest major contributors to the theoretical underpinnings of the RBV (Kor and Mahoney, 2000; Rugman and Verbeke, 2002). The heterogeneity approach posits that a ﬁrm does not achieve competitiveness because their resources but because of its competence in making better use of it resources whereby the productive services of resources must be discovered over time as entrepreneurs interact with its resources and make subjective decision about resource allocation, deployment and maintenance (Penrose, 1959). The study stressed that the ﬁrm is made up of a group of resources not a single unit resource. This is in common with core competencies concept in RBV of competition that explain a ﬁrm’s success based on its competencies (Ritter and Gemunden, 2004). Bain (1959) type industrial organization theory also supported the heterogeneity of ﬁrm resources especially in the form of legally protected assets such as patents, which are unique to individual ﬁrms. In addition, the theory concentrates on examining the effects of concentration, ﬁrm size and entry barriers as the determinants of ﬁrms success
(Feinberg, 2007). A ﬁrm’s entrepreneurial growth process involves two forms of Firm resourcesheterogeneity: and product (1) Resource heterogeneity. Firms differ from one another in their resources that innovation inﬂuences strategy and helps explain sustained proﬁtability differences among ﬁrms. (2) Resources productive services heterogeneity. Firms with similar bundles of resources signiﬁcantly differ in their entrepreneurial productivity (Barney, 423 1991; Penrose, 1959).The RBV highlights the ﬁrm as a unique collection of resources (Barney, 1986, 1991;Wernerfelt, 1984), but the theory emphasizes that not all these resources possess thepotential to provide the ﬁrm with a sustained competitive advantage (Clulow, 2007).Previous literature on RBV frequently focused on resources as a stable concept that canbe identiﬁed at a point in time and will endure over time (Dunford et al., 2003). Whenreferring to the RBV, most researchers focus in strategic context, presenting resourcesand capabilities as essential to gain a sustained competitive advantage and superiorperformance (Ferreira and Azevedo, 2007). Superior performance is usually based on developing a competitively distinct set ofresources heterogeneity and strategic deployment and a capable workforce in awell-conceived strategy to sustained superior returns (Fahy, 2000; Collis and Montgomery,1994). Indeed, strategists who embrace the RBV also point out that competitive advantagecomes from aligning skills, strategic deployment, capable workforce with organizationalsystems, structures, and processes that achieve capabilities at the organizational level(Salaman et al., 2005). On the other hand, ﬁrms with bundles of resources that are valuable,rare, inimitable and non-substitutable can implement value creating strategies not easilyduplicated by other ﬁrms (Barney, 1991). However, it is quite difﬁcult to ﬁnd a resourcewhich satisﬁes the Barney’s entire VRIN criterion except for a monopolistic type ofcompany. Table I highlights the historical view of the underpinning theory and it contributionto RBV. The information contained within this table has been taken from Foss et al.(2006) and Galbreath (2004). Integration between the three theories (Schumpeterian, Penroses and RBV) initiatesthe importance of ﬁrm’s internal resources as ﬁrm’s capabilities subject to theiruniqueness and their ability to create competitive advantage to the ﬁrm. Productinnovation would be source of competitive advantage and also as a determinant of ﬁrm’ssuccess. Its performance indicates portion of overall ﬁrm’s performance based on theeffective use of ﬁrm’s resources. In this case, Malaysian SMEs which are known to have ascarcity of resources need to have entrepreneurial capabilities that are valuable, rare,inimitable and non-substitutable which suit the RBV theory.4. Product innovation performancePIP has been deﬁned as the economic ﬁnancial and non-ﬁnancial outcomes of the ﬁrm’sproduct innovation efforts (Cooper, 1984; Cooper and Kleinschmidt, 1987; Gemundenand Heydebreck, 1992; Hise and O’Neal, 1990; Hollenstein, 1996). On the other hand, therelationship between SME’s resources and PIP has been less documented. Yet, therehas been signiﬁcant interest in product innovativeness in Malaysia in recent years.Even so, the innovativeness of a new product and business innovation capability is
BPMJ Authors Contribution to RBV16,3 Nelson and Winter (1982) Technological innovation and “creative destruction” basis of and Schumpeter (1934, 1942) competitive advantage Managerial action and entrepreneurialism inﬂuence ﬁrm success rather than market power or industry structure424 Firm view as bundle of resources and hierarchies of activities governed by routines and rules Penrose (1959) Firm as bundle of resources Firm’s growth is based on the effective use of resources and limited by managerial resources Entrepreneurship exercised by team, emphasizes alertness as well as judgment Services rather than resources are stressed Barney (1991), Rumelt (1987) Suggests that to be sources of competitive advantage, resources must and Wernerfelt (1984) be valuable, rare, inimitable and non-substitutable Individual resources as unit of analysis Focuses on state (equilibrium) where ﬁrms earned sustainedTable I. competitive advantageThe historical view of the A strategic resource to one ﬁrm is also a strategic resource to anotherunderpinning theory and ﬁrm. Usually, no distinction between resources and their servicesits contribution to RBVand entrepreneurship Sources: Foss et al. (2006); Galbreath (2004) important to present opportunities for businesses in terms of growth and expansion into new areas as well as to allow businesses to gain competitive advantage. An effective performance measurement system ought to cover more than just ﬁnancial measures (O’Regan and Ghobadian, 2004). Financial measures mostly reﬂect the ﬁrm’s emphasis on achieving quantiﬁable performance objective such as proﬁtability, sales, asset, etc. (Heidt, 2008). Recently, researchers introduced several non-ﬁnancial determinants of PIP and the relative positioning of the ﬁrms against the leading competitor (Alegre et al., 2006; Ulusoy and Yegenoglu, 2005). This type of measurement is becoming popular to overcome the limitation of the ﬁnancial measurement such as, high probability of low-response rate due to reluctance to share conﬁdential data. For example, non-ﬁnancial performance scale constructed. in French biotechnology ﬁrms (Alegre et al., 2006), focusing on two different dimensions: efﬁcacy and efﬁciency, whereby both dimension reﬂects the degree of success of an innovation and the effort carried out to achieve that degree of success (Grifﬁn, 1997; OECD-EUROSTAT, 1997; OECD, 2005; Valle and Avella, 2003; Wheelwright and Clark, 1992; Zhan and Doll, 2001). PIP shows up the efﬁciency and effectiveness of implementation of product ideas whereby it can be determined objectively (analyze in detail) and subjectively (implemented in innovation surveys) by the cost and time of the innovation project (Alegre et al., 2006). The efﬁciency and effectiveness of implementation have been broken down into resource management (workﬂow and ﬁnancial resources) and organizations business practices (business planning process and roles and responsibilities) (Ryan, 2005). Similarly, Wernerfelt (1984) refers that the term of resources frequently limited to those attributes that enhance efﬁciency and competitiveness. Whereas, Ulusoy and Yegenoglu (2005) identiﬁed that the determinants of competitiveness in their study of Turkish manufacturing industries are product quality performance, delivery lead time and product cost (the most important
determinants for manufacturing sectors: food processing, textiles, metal and chemical Firm resourcesindustries). The chemical industry appears to be the leading sector with their performance in and productnew product development. Measurement scale of product performance in terms of its innovation, marketability, innovationsupply chain and other determinants has been developed by several authors (Table II).These measurement scales mostly focused on non-ﬁnancial measurement to identifyproduct performance. However, in particular, RBV studies performance can be classiﬁed 425into ﬁnancial (accounting-based measurement such as cash in hand/at bank, proﬁtability,sales growth, etc.) and non-ﬁnancial (market share, new product introduction, productquality, marketing effectiveness or manufacturing value-added) (Kapelko, 2006).Proﬁtability and sales growth is the most common measurement of performance(Doyle, 1994; Kasim et al., 1989). It was also argued that there are four resources and capabilities affecting ﬁrm’s newproduct performance in foreign markets, i.e. market orientation, host country knowledge,absorptive capacity and product innovation, thus it shows that product innovation has adirect impact on new product performance whereby its inﬂuence has been moderated bymarket and technology turbulence in the host country market (Murray and Chao, 2005).Previous literatures on resource-based tradition also suggested that intrinsic attributes ofresources and capabilities can slow innovation, and it is not clear when this effectoutweighs the beneﬁts of inimitability.5. Research methodologyThis section elaborates the method of data collection for the present research togetherwith its justiﬁcations.Questionnaire development and mail surveyThe procedure was based upon accepted methods of scale development for a businessresearch (Cooper and Schindler, 2003). The construct domain for the present study wasAuthors Measurement scale of PIPHeidt (2008) Changes in new product introduction, technical and technological aspects, market response, product quality, product introduction/ development time, proﬁtability and market shareAlegre et al. (2006) Replacement of products, extension of product range, development of new product, market share evolution, opening new markets, project development time, number of innovation project, cost per innovation project and global satisfaction degreeUlusoy and Yegenoglu (2005) Brand product, after sales service, certiﬁed product, ease of use, appearance, short delivery period, product quality performance, production cost and customer-focused productO’Regan and Ghobadian (2004) Advertise/promote the product or service, deliver a broad product range, distribute products broadly, respond to swings in volume, make rapid design changes, compete on price, deliver products quickly, deliver products on time, involvement of top management, involvement of line managers, ﬂexibility to adapt to unanticipated changes, provide after sales service, provide high-performance Table II. products and offer consistent quality Measurement scale of PIP
BPMJ derived from two main sources which are the literature and experts recommendations.16,3 Those questionnaires were self-developed questionnaires and were posted to the respondents. The main reason for choosing mail survey despite of other types of research surveys were due to sensitive questions such as company proﬁts, sales, and number of employees that were requested in the survey. In addition, this type of survey provides a426 wider geographical coverage at a lower cost. However, it is expected that this method yield a lower rate of response. Learning from previous experience, it was relatively difﬁcult to get in touch with the technology entrepreneur in person because they are usually very busy. Thus, by using mail survey it enables the individuals to evaluate and comprehend the questionnaire and response to it in the comfort of their ofﬁce. As mentioned earlier that this type of survey usually yields a lower response rate, however, it allows the individual to spend their available free time to answer the survey without any external pressure. Besides that, they were given the required ﬂexibility to respond to the questionnaire at any designated time or setting, which indirectly allows them to provide a more accurate response. Mail survey usually allows anonymity of the respondents as long as the information given is kept conﬁdential and used only for the purpose of the research. Anonymity of the respondents and the accuracy of the responses could not be assured if the survey were done through face-to-face interview session (Cooper and Schindler, 2003). Respondents The sampling frame for this study is the SME Directory – Bank Negara Malaysia (2007) SME Info Portal, provided by United Nations Development Programmes (2007). SMEs were chosen as they tend to be more vulnerable to internal and external environmental forces with larger ﬁrms in aspects such as access to resources, ﬁnancial capital, entrepreneurial traits, etc. This directory contains the list of 15,150 SMEs in Malaysia (as at 28 December 2007) which have been listed by state and organized in alphabetical order, divided by seven business sectors including the list of 5,819 manufacturing (including agro-based) SMEs in Malaysia. Out of that, 700 individuals were selected randomly to take a survey. They were including the business owners who work in various sizes of manufacturing ﬁrms, which comprises 12 industrial. The list is accurate since it was regularly up to date, included the elements that belongs to target population and there is no duplication of elements. The present study tested the measurement scale by focusing on multi-industry in manufacturing sector. This seems to be appropriate sector for the following reasons: . manufacturing SME mostly involved in innovation activities; . it has experienced manufacturing technology upgrade and an increasing level of product innovation in recent years; and . it is adequately large to meet sample size requirement sectors. Every ﬁrm in the database has had equal chance to be selected based on a systematic random sampling. A self-addressed returned envelope is attached along with the questionnaire. A number of 141 responses were received. Out of that, they were 29 ﬁrms with no innovation activities and another four were returned unanswered due to change of address.
Firms with no innovation have been detected from the ﬁlter question provided in the Firm resourcesquestionnaire. and product6. Results and discussion innovationFrequency analyses were obtained for all the ﬁrms’ data and classiﬁcation variables.The summary of the analysis are shown in Table III. In the survey, PIP was measured using ten items with two dimensions (ﬁnancial and 427non-ﬁnancial) which has been adapted and modiﬁed from previous research (useﬁve-point Likert scale, ranging from 1 – very low achievement to 5 – very highachievement). A reliability analysis of the ten items was undertaken and found to bereliable. Cronbach’s alpha coefﬁcients of 0.889 emerge for the non-ﬁnancial variablesand 0.715 for ﬁnancial variables. This showed that, there is average to highachievements in PIP, as in the descriptive statistics shown in Table IV.No. Proﬁle of respondents Valid percent1 Firm’s age 0-5 years (young) 17.6 6-10 years (intermediate) 18.5 More than ten years (old/established) 63.942 Company size in terms of annual sales turnover Small 56.5 Medium 43.53 Company size in terms of full time employees Small 55.15 Medium 41.854 Industry types Electrical and electronic 23.1 Engineering support industry 3.7 Machine and equipment 6.5 Food and beverage 28.7 Petrochemical and polymer 6.5 Rubber products 7.4 Textiles and apparel 4.6 Transport and equipment 2.8 Basic metal product 4.6 Life science industry 4.6 Wood based 6.5 Others 0.95 Firms with R&D department 55.66 Firms with no R&D department 44.4 Table III.7 Firms with product innovation expertise 75.0 Summary of frequency8 Firms with no product innovation expertise. 25.0 distributions n Minimum Maximum Mean SDPIP non-ﬁnancial 108 1 5 3.45 0.854 Table IV.PIP ﬁnancial 108 1 5 3.57 0.783 Descriptive statisticsValid n (listwise) 108 for PIP
BPMJ Firm’s resources variables were measured using 22 items in six dimensions: physical,16,3 ﬁnancial, human intellectual, organizational, reputational and technological (using ﬁve-point Likert scale, ranging from 1 – comparatively very low impact on PIP to 5 – comparatively very high impact on PIP). A reliability analysis of the six dimensions was undertaken and found to be reliable as in Table V. Overall, as stated in Table VI, ﬁrm’s resources given average to high impact on428 ﬁrm’s PIP, whereby buildings give the lowest impact and product reputation shows the highest impact on PIP compared to other factors. This research wishes to summarize the structure of a set of variables. With that, an exploratory factor analysis has been used. An examination of correlation matrix for both PIP and ﬁrm’s resources has exceeded 0.3, and so the matrix is suitable for factoring. Table VII shows that the Bartlett’s test of sphericity are signiﬁcant and the Kaiser-Meyer-Olkin (KMO) measure of sampling adequacy are far greater than 0.6. Cronbach’s alpha based on Dimensions Cronbach’s alpha standardized items No. of items Physical 0.827 0.821 4 Financial 0.842 0.841 3 Entrepreneurial 0.878 0.878 6Table V. Reputational 0.875 0.876 3Reliability analysis Organizational 0.817 0.818 3for ﬁrm’s resources Technological 0.847 0.848 3 Firm’s resources n Minimum Maximum Mean SD Buildings 108 1 5 3.18 1.142 Location of buildings 108 1 5 3.26 1.147 Physical structure 108 1 5 3.30 1.146 Machineries 108 1 5 3.82 1.003 Financial capital 108 1 5 3.68 1.214 Financial investment 108 1 5 3.44 1.202 Cash from operation 108 1 5 3.66 0.997 EO-innovativeness1 108 1 5 3.75 1.086 EO-innovativeness2 108 1 5 3.90 1.012 EO-proactiveness1 108 1 5 3.77 1.189 EO-proactiveness2 108 1 5 3.84 1.104 EO-risk seeking1 108 1 5 3.47 0.971 EO-risk seeking2 108 1 5 3.32 1.057 Company’s reputation 108 1 5 3.87 0.928 Customer service reputation 108 1 5 3.86 0.952 Product reputation 108 1 5 3.93 0.983 Organizational structure 108 1 5 3.55 0.970 Organizational culture 108 1 5 3.67 0.995 Organizational policies 108 1 5 3.60 1.032 Held in secret technology 108 1 5 3.68 1.075Table VI. New/improved product design 108 1 5 3.55 1.179Descriptive Statistics Unique technological know-how 108 1 5 3.88 1.021for Firm’s Resources Valid n (listwise) 108
Table VIII displays the communality of the items and items regarding “success in Firm resourcesgaining market share” (PIP) and “machineries” (ﬁrm resource) have the lowest and productcommunalities (Table IX). In reference to the eigenvalues, no factors to be extracted from the PIP items since all innovationof the eigenvalues are lower than 1. The previous factors which represent ﬁnancial andnon-ﬁnancial indicators for PIP suggested to be named “ﬁrm’s product innovationperformance”. However, ﬁve factors to be extracted from the ﬁrm resources items 429because they have eigenvalues greater than 1. If ﬁve factors were extracted, then the66 per cent of the variance would be explained. The rotated factor matrix shows thattechnological and organizational resources fall under one factor. Technologicalresources in this research considered to be more on in-house technology (product design,held in secret technology and unique technological know-how) rather than externaltechnology outside the company. It is not surprising if technological resources have beencategorized as organizational resources. From the result, these paper suggestions for thenames of the factors are: (1) reputational; (2) organizational; (3) human intellectual; (4) physical; and (5) ﬁnancial.Meanwhile, both screen plots which displays the eigenvalues for each factor suggeststhat there is one predominant factor for both PIP and ﬁrm’s resources. Overall, theassessment of factor analysis in this study proposed that the scales are existent andvalid in Malaysia context. The above ﬁndings are also in line with the RBV point of viewTest PIP Firm’s resourcesKMO measure of sampling adequacy 0.907 0.840Bartlett’s test of sphericity Approx. x 2 601.053 1,720.786 df 45 0.231 Table VII. Sig. 0.000 0.000 KMO and Bartlett’s test Initial ExtractionRegularly of change of PI 0.565 0.477New product introduction 0.552 0.472PI technically superior 0.673 0.649Technological b/through 0.555 0.457Market response 0.584 0.554quality 0.660 0.649PI introduction time 0.505 0.539Proﬁtability 0.611 0.626 Table VIII.Success in gaining market share 0.350 0.358 CommunalitiesImproved sales growth 0.513 0.454 of PIP items
BPMJ Initial Extraction16,3 Buildings 0.743 0.713 Location of buildings 0.771 0.804 Physical structure 0.759 0.786 Machineries 0.500 0.324430 Financial capital 0.806 0.939 Financial invesment 0.723 0.650 Cash from operation 0.558 0.473 EO-innovativeness1 0.686 0.702 EO-innovativeness2 0.703 0.687 EO-proactiveness1 0.733 0.599 EO-proactiveness2 0.769 0.731 EO-risk seeking1 0.734 0.709 EO-risk seeking2 0.615 0.520 Company’s reputation 0.769 0.707 Customer service reputation 0.779 0.606 Product reputation 0.755 0.642 Organizational structure 0.710 0.620 Organizational culture 0.665 0.617 Organizational policies 0.639 0.612Table IX. Held in secret technology 0.716 0.746Communalities of ﬁrm’s New/improved product design 0.685 0.663resources items Unique technology know-how 0.679 0.585 that focuses on intangible resources as the main drivers for ﬁrm’s performance which comprise the element of product innovation as one the performance indicators. Firm’s performance can be measured by looking at the differences between ﬁrm’s proﬁtability and the average proﬁtability of the industry (Villalonga, 2004). The present paper focuses on ﬁrm’s speciﬁc performance that is PIP. Malaysian manufacturing ﬁrms have been found gained high proﬁtability from its product innovation. It can be concluded that their achievement in innovation are relatively higher especially through its intangible resources, the product reputation. Intangible resources such as product reputation are difﬁcult to acquire and develop or replicate by others. Product reputation that mixes up with innovation activities will create excellent PIP as reputation lies in customer’s mind. Good reputation creates opportunities for Malaysian manufacturing companies to be more innovative. The performance of product innovation in Malaysian manufacturing companies can be identiﬁed through the positive market response and the improvement in the product design itself. Most 63.9 per cent of the companies in this study are more than ten years since incorporation. Established company is well known in their reputation and also having opportunities gaining more loans and ﬁnancial assistance for their product innovation. Out of 141, 29 were non-innovative ﬁrms. The reason why there are non-innovative are because of the ﬁnancial constraint and lack of technology. This is quite similar with ﬁnding by Kaufmann and Todtling (2002) who discovered that besides confronted with ﬁnancial constraints, SMEs also having manpower bottlenecks in terms of few of qualiﬁed personell in product innovation. Among of all resources including product reputation, organizational, technological and human/intellectual, building alone seems to be given lowest impact on ﬁrms PIP.
However, the strategic location of the building with a proper warehouse, attractive Firm resourcesshowrooms, etc. will affect the performance of product innovation. The location of the and productbuilding is very important to ensure there are adequate supply of labour and rawmaterials for production process as resources are the ultimate tools that used by the innovationﬁrms to improve proﬁtability, productivity and innovation (Montana and Charnov,2000). In addition, a manufacturing ﬁrm must consider proximity to suppliers andcustomers, as well as local taxes and regulations. This kind of proximity is very practical 431for ease of communication among the previous-listed parties. Good communicationamong the parties will create good reputation especially for the manufacturing ﬁrmswhich offers products or services. As mentioned before, product reputation will then bethe starting point for the ﬁrm to add more values to the product in order to createcustomer awareness and maintaining networking with its suppliers, ﬁnancialinstitutions, government and other related parties.Conclusions and limitationsIt can be concluded that the PIP can be viewed as one of ﬁrm’s speciﬁc performanceof the product innovation such as changes in new product introduction, technicaland technological aspects, market response, product quality, product introduction/development time, proﬁtability and market share. The study support RBV point of viewwhich stated intangible resources, particularly “product reputation” as the mainindicators for PIP. Product reputation considered to be unique since it was difﬁcult toacquire and replicate by others. Furthermore, reputation is something that lies in customerminds which are abstract and differentiate one ﬁrm with other ﬁrms. Established ﬁrmswith larger size having opportunities in gaining product reputation compared to youngerﬁrm as there are ease of getting ﬁnancial assistance and mostly having qualiﬁed personnelin product innovation and research and developments (R&Ds). Several limitations of this research should be mentioned. First, the study is mainlyrestricted to the context of study; therefore, it will be problematic to generalize itsﬁndings to other sectors. Also, as the ground of this study in PIP is quite new, the datamust be interpreted cautiously. The study also constrained by the relatively small datadue to the constraint of time. Finally, exploring ﬁrm’s resources with PIP inentrepreneurial context in manufacturing ﬁrms is a very challenging task especially ingetting questionnaire responses from the ﬁrm owner. Future research are encourageusing qualitative methods focusing in one industrial sector/case study to a betterunderstanding of the nature of product innovation and ﬁrm resources.ReferencesAboulnasr, K., Narasimhan, O., Blair, E. and Chandy, R. (2008), “Competitive response to radical product innovations”, Journal of Marketing, Vol. 72, pp. 94-110.Alegre, J., Lapiedra, R. and Chiva, R. (2006), “A measurement scale for product innovation performance”, European Journal of Innovation Management, Vol. 9 No. 4, pp. 333-46.Amit, R. and Schoemaker, P. (1993), “Strategic assets and organizational rent”, Strategic Management Journal, Vol. 14 No. 1, pp. 33-46.Apintalisayon (2008), “Tangible versus intangible assets”, available at: http://apintalisayon. wordpress.com/2008/12/14/d11-tangible-versus-intangible-assets/ (accessed 29 March 2009).Bain, J.S. (1959), Industrial Organization, Wiley, New York, NY.
BPMJ Bank Negara Malaysia (2007), in Bank Negara Malaysia (Ed.), SME Info Portal, United Nations Development Programmes, Bank Negara Malaysia, Kuala Lumpur.16,3 Barney, J.B. (1986), “Strategic factor markets: expectation, luck and business strategy”, Management Science, Vol. 32 No. 10, pp. 1231-41. Barney, J.B. (1991), “Firm resources and sustained competitive advantage”, Journal of Management, Vol. 17 No. 1, pp. 99-120.432 Barney, J.B. (2001), “Resource-based theories of competitive advantage: a ten year retrospective on the resource-based view”, Journal of Management, Vol. 27 No. 6, pp. 643-50 (special issue). Capron, L. and Hulland, J. (1999), “Redeployment of brands, sales forces and general marketing management expertise following horizontal acquisitions: a resource based view”, Journal of Marketing, Vol. 63 No. 4, pp. 41-54. Chandler, A.D. (1990), Scale and Scope: The Dynamics of Industrial Capitalism, Belknap Press, Cambridge, MA. Clulow, V. (2007), “The resource based-view and value: the customer-based view of the ﬁrm”, Journal of European Industrial Training, Vol. 31 No. 1, pp. 19-35. Collis, D. and Montgomery, C. (1994), “Competing on resources: strategy in the 1990s”, Harvard Business Review, Vol. 7-8, pp. 118-28. Conner, T. (2002), “The resource-based view of strategy and its value to practicing managers”, Strategic Change, Vol. 11, pp. 307-16. Cooper, D.R. and Schindler, P.S. (2003), Business Research Methods, McGraw-Hill, New York, NY. Cooper, R.G. (1984), “The strategy-performance link in product innovation”, R&D Management, Vol. 14 No. 4, pp. 247-67. Cooper, R.G. and Kleinschmidt, E.J. (1987), “Success factors in product innovation”, Industrial Marketing Management, Vol. 16 No. 3, pp. 215-23. Day, G.S. and Wensley, R. (1988), “Assessing advantage: a framework for diagnosing competitive superiority”, Journal of Marketing, Vol. 52, pp. 1-20. Dollinger, M.J. (1999), Entrepreneurship: Strategies and Resources, Prentice-Hall, Upper Saddle River, NJ. Doyle, P. (1994), “Setting business objectives and measuring performance”, European Management Journal, Vol. 12 No. 2, pp. 123-32. Dunford, B.B., Snell, S.A. and Wright, P.M. (2003), Human Resources and The Resource Based View of the Firm, School of Industrial and Labour Relations, Center for Advanced of Human Resource Studies, Cornell University, Ithaca, NY, pp. 1-35. Fahy, J. (2000), “The resource-based view of the ﬁrm: some stumbling-blocks on the road to understanding sustainable competitive advantage”, Journal of European Industrial Training, Vol. 24 Nos 2/3/4, pp. 94-104. Feinberg, R.M. (2007), “Determinants of small-ﬁrm entry in US manufacturing”, paper presented at the 6th Annual International Industrial Organization Conference, Industrial Organization Society, Marymount University, Washington, DC. Ferreira, J. and Azevedo, S. (2007), “Entrepreneurial orientation as a main resource and capability on small ﬁrm’s growth”, Munich Personal RePEc Archive, Vol. 5682, pp. 1-20. Fitriah, I. and Wafa, S.A.W.S.K. (2006), “Innovation antecedents in Malaysia manufacturing small and medium enterprises”, paper presented at the IBBC 2006. Foss, N.J., Kor, Y.Y., Klein, P.G. and Mahoney, J.T. (2006), “Entrepreneurship, subjectivism, and the resource-based view: towards a new synthesis”, Strategic Entrepreneurship Journal, Vol. 2, pp. 73-94.
Galbreath, J.T. (2004), Determinants of Firm Success: A Resource-based Analysis, Curtin Firm resources University of Technology, Curtin. and productGemunden, H.G. and Heydebreck, P. (1992), “Technological interweavement: a means of achieving innovation success”, R&D Management, Vol. 22 No. 4, pp. 359-76. innovationGreene, P.G. and Brown, T.E. (1997), “Resource needs and the dynamic capitalism typology”, Journal of Business Venturing, Vol. 12, pp. 161-73.Grifﬁn, A. (1997), “PDMA research on new product development practices: updating trends and 433 benchmarking best practices”, Journal of Product Innovation Management, Vol. 14 No. 6, pp. 429-59.Hall, R. (1993), “A framework linking intangible resources and capabilities to sustainable competitive advantage”, Strategic Management Journal, Vol. 14 No. 8, pp. 607-18.Hashim, M.K. (1999), “SMEs in Malaysia: past, present and future”, Malaysian Management Review, Vol. 35.Heidt, T.V.D. (2008), Developing and Testing Model of Cooperative Interorganizational Relationships (IORS) in Product Innovation in an Australian Manufacturing Context: A Multi-stakeholder Perspective, Sourthern Cross University, Lismore.Hise, R.T. and O’Neal, L. (1990), “Marketing/R&D interaction in new product development implications for new product success rates”, Journal of Product Innovation Management, Vol. 7 No. 2, pp. 142-55.Hitt, M.A., Ireland, R.D., Camp, S.M. and Sexton, D.L. (2001), “Strategic entrepreneurship: entrepreneurial strategies for wealth creation”, Strategic Management Journal, Vol. 22 No. 6, pp. 479-92.Hollenstein, H. (1996), “A composite indicator of a ﬁrm’s innovativeness: an analytical analysis based on survey data for Swiss manufacturing”, Research Policy, Vol. 25, pp. 633-45.Kao, J. (1989), Entrepreneurship, Creativity and Organization: Text, Cases and Reading, Prentice-Hall, Upper Saddle River, NJ.Kapelko, M. (2006), “Evaluating efﬁciency in the framework of resource-based view of the ﬁrm: evidence from Polish and Spanish textile and clothing industry”, Bellaterra, No. 1, pp. 1-56.Kasim, N.A.A., Minai, B. and Chun, L.S. (1989), “Performance measures in Malaysia – the state of the art”, Malaysian Management Review, Vol. 24, pp. 3-9.Kaufmann, A. and Todtling, F. (2002), “How effective is innovation support for SMEs? An analysis of the region of upper Austria”, Technovation, Vol. 22 No. 3, pp. 147-59.Kor, Y.Y. and Mahoney, J.T. (2000), “Penrose’s resource-based approach: the process and product of research creativity”, Journal of Management Studies, Vol. 37, pp. 109-39.Mathews, J.A. (2006), “Resource and activities are two sides of the same coin: duality of the activities and resource-based views of strategic management”, paper presented at the Conference on Strategic Management, Copenhagen.Michalisin, M.D., Smith, R.D. and Kline, D.M. (1997), “In search of strategic assets”, The International Journal of Organizational Analysis, Vol. 5, pp. 360-87.Montana, P.J. and Charnov, B.H. (2000), Management, 3rd ed., Barron’s Educational Series, Hauppauge, NY.Murray, J.Y. and Chao, M.C.H. (2005), “Market orientation, product innovation, and new product performance in foreign markets”, 2005 AIB Proceedings on Local Roots, Global Links, Social Science Research Network.Nelson, R.R. and Winter, S.G. (1982), An Evolutionary Theory of Economic Change, Harvard University Press, Cambridge, MA.
BPMJ OECD (2005), Oslo Manual, OECD, Paris, available at: www.oecd.org/dataoecd/35/61/2367580.pdf16,3 OECD-EUROSTAT (1997), “The measurement of scientiﬁc and technological activities”, Proposed Guidelines for Collecting and Interpreting Technological Data, OECD, Paris. O’Regan, N. and Ghobadian, A. (2004), “The importance of capabilities for strategic direction and performance”, Management Decision, Vol. 42 No. 2, pp. 292-312. O’Regan, N., Ghobadian, A. and Sims, M. (2006), “Fast tracking innovation in manufacturing434 SMEs”, Technovation, Vol. 26, pp. 251-61. Penrose, E.T. (1959), The Theory of the Growth of the Firm, Wiley, New York, NY. Puente, L.M. and Rabbino, H. (2003), “Creating value with strategic resources”, available at: www. iseesystems.com/community/connector/Zine/SeptOct03/luz.html (accessed 9 June 2009). Ray, G., Barney, J.B. and Muhanna, W.A. (2004), “Capabilities, business processes and competitive advantage: choosing the dependent variable in empirical test of resource-based view”, Strategic Management Journal, Vol. 25, pp. 23-37. Ritter, T. and Gemunden, H.G. (2004), “The impact of company’s business strategy on its technological competence, network competence and innovation success”, Journal of Business Research, Vol. 57, pp. 548-56. Rugman, A.M. and Verbeke, A. (2002), “Edith Penrose’s contribution to the resource-based view of strategic management”, Strategic Management Journal, Vol. 23, pp. 769-80. Rumelt, R.P. (1987), “Theory, strategy and entrepreneurship”, in Teece, D. (Ed.), The Competitive Challenge, Ballinger Press, Cambridge, MA, pp. 137-58. Runyan, R., Huddleston, P. and Swinney, J. (2006), “Enrepreneurial orientation and social capital as small ﬁrm strategies: a study of gender differences from a resource-based view”, Entrepreneurship Management, Vol. 2, pp. 455-77. Ryan, A. (2005), Innovation Performance, Managed Innovation, Sydney, pp. 1-3. Salaman, G., Storey, J. and Billsberry, J. (Eds) (2005), Strategic Human Resource Management: Theory and Practice, Sage, London. Schumpeter, J.A. (1934), The Theory of Economic Development, Harvard University Press, Cambridge, MA. Schumpeter, J.A. (1942), Capitalism, Socialism and Democracy, Harper, New York, NY. Teece, D.J., Pisano, G. and Shuen, A. (1997), “Dynamic capabilities and strategic management”, Strategic Management Journal, Vol. 18 No. 7, pp. 509-33. Tracy, K.B. (1992), “Effects of need for achievement, task motivation, goal setting and planning on the performance of the entrepreneurial ﬁrm”, PhD dissertation, University of Maryland, College Park, MD. Ulusoy, G. and Yegenoglu, H. (2005), Innovation Performance and Competitive Strategies in the Turkish Manufacturing Industry, Sabanci University, Istanbul, pp. 1-11. United Nations Development Programmes (2007), Malaysia Small and Medium Enterprises (Report), United Nations Development Programme, Kuala Lumpur. Valle, S. and Avella, L. (2003), “Cross-functionality and leadership of the new product development teams”, European Journal of Innovation Management, Vol. 6 No. 1, pp. 32-47. Venkataraman, S. (2004), “Regional transformation through technological entrepreneurship”, Journal of Business Venturing, Vol. 19 No. 1, pp. 153-67. Villalonga, B. (2004), “Intangible resources, Tobin’s q, and sustanability of performance differences”, Journal of Economic Behavior & Organization, Vol. 54 Nos 205-230, p. 207.
Weerawardena, J. and Coote, L. (2001), “An empirical investigation into entrepreneurship and Firm resources organizational innovation-based competitive strategy”, Journal of Research in Marketing & Entrepreneurship, Vol. 3 No. 1, pp. 51-70. and productWernerfelt, B. (1984), “A resource-based view of the ﬁrm”, Strategic Management Journal, Vol. 5, innovation pp. 171-80.Wheelwright, S.C. and Clark, K.B. (1992), Revolutionizing Product Development – Quantum Leaps in Speed, Efﬁciency, and Quality, The Free Press, New York, NY. 435Zhan, Q. and Doll, W.J. (2001), “The fuzzy front end and success of new product development causal model”, European Journal of Innovation Management, Vol. 4 No. 2, pp. 95-112.Zimmerer, T.W. and Scarborough, N.M. (Eds) (1998), Essentials of Entrepreneurship and Small Business Management, 2nd ed., Prentice-Hall, Upper Saddle River, NJ.Further readingAbdullah, M.M., Uli, J. and Tari, J.J. (2008), “The inﬂuence of soft factors on quality improvement and performance: perceptions from managers”, The TQM Journal, Vol. 20 No. 5, pp. 436-52.Castelli, C. (2007), “SMEs in Malaysia: leading in mobility”, available at: http://store.ovum.com/ cu.asp (accessed 4 May 2009).Hashim, M.K. and Ahmad, S.A. (2008), “Internationalization of Malaysian SME’s inﬂuencing factors, sources of information and options”, paper presented at the 2008 International Council for Small Business World Conference, Halifax.Hill, C.W.L. and Deeds, D.L. (1996), “The importance of industry structure for the determination of ﬁrm proﬁtability: a neo-Austrian perspective”, Journal of Management Studies, Vol. 33, pp. 429-51.Holt, D. (2007), “Health and safety in SMEs”, Management Today, Vol. 6, pp. 1-7.Hurmelinna-Laukkanen, P. and Puumalainen, K. (1997), “Formation of the appropriability regime: strategic and practical considerations”, Innovation: Management, Policy, & Practice.Corresponding authorLily Julienti Abu Bakar can be contacted at: email@example.comTo purchase reprints of this article please e-mail: firstname.lastname@example.orgOr visit our web site for further details: www.emeraldinsight.com/reprints