essay the effects of innovation on firm performances in industry 4 0

Title: The effect of innovation types on firm performance in industry 4.0: Abstract: In this era of Industry 4.0, this study addresses the dearth of research on what enables firms’ perfo

MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS HO CHI MINH CITY

COLLEGE OF BUSINESS FACULTY OF ADMINISTRATION

Course code: 23C1MAN50214901

A Interactions among the innovation types 12

b.Impacts of innovation on firm performance 12

2.4.Hypotheses development 14

CHAPTER 03: RESEARCH METHODS 16

3.1.Data and sample 16

3.2.Measurement scale 16

REFERENCES 17

Title: The effect of innovation types on firm performance in industry 4.0:

Abstract:

In this era of Industry 4.0, this study addresses the dearth of research on what enables firms’ performance We investigate how I4.0 shapes the effects of firm investments over time and whether the effects of people and equipment depend on innovative management approaches A longitudinal multi-sector study is conducted of 157 export-oriented, manufacturing frims in a European Union member state (Slovenia) over a 14-year period (in total, consisting of 1791 total observations) The findings suggest that firms which invest more in technology complement these costs by making investments in people, which over time leads to a higher firm performance The I4.0 phase

moderates this mediated relationship in that firms more advanced with respect to engaging in I4.0 tend to lower their human resources costs despite investing in technology while still showing a superior firm performance This indicates the substitution effect of technology vis-à-vis human resources By doing this research, we will contribute in advancing the stream of research focused on internal factors and processes specifically related to firm investments and management processesf, thereby lead to the outcomes of new technology use and capitalization The findings highlight the link between I4.0 and technology management, and innovation, and complements the existing research on the link between management innovation and performance by contextualizing it within I4.0’s new technology and socio-economic changes

CHAPTER 01: INTRODUCTION

1.1.Research background and state of the problem

Nowadays, one of the major challenges that the world economy faces is the decline in labor productivity growth, therefore leave a negative impact on economic growth period after the global financial crisis for 2008 Efforts of countries in the world to deal with these issues so far seem to be temporary; hence it would not solve the problems thoroughly

Meanwhile, innovativeness is one of the fundamental instruments of growth strategies to enter new markets, to increase the existing market share and to provide the company with a competitive edge Motivated by the increasing competition in global markets, companies have started to grasp the importance of innovation, since swiftly changing technologies and severe global competition rapidly erode the value added of existing products and services Thus, innovations constitute as indispensable component of the corporate strategies for several reasons such as to apply more productive manufacturing processes, to perform better in the market, to seek positive reputation in customers’ perception and as a result to gain sustainable competitive advantage

This study explores the effects of innovation in general on firm performance, including micro, small and medium enterprises The purpose of this study is as follows Firstly, the study attempts to to fill this research gap by investigating the effect of four innovation types (product, process, marketing and organizational innovation) have significantly predicted firm performance of different firm size Moreover, these innovation activities create value and competitive advantages for successful organizations; therefore, understanding the organization’s overall innovation is the first and foremost to understand the role of innovation on firm performance

1.2.Research objectives

The objective of this research is to explore two parts: the impacts of innovation on the different aspect of innovation performance, then their effects to firm performance (production, market, and financial performance) Besides, innovation can play a significant role in enhancing economic growth and has the potential to bring about change and create opportunities for every business A supportive environment in terms of resources and information in the industry 4.0 provides an opportunity for both large-sized firms and small and medium enterprises (SMEs) in Eastern Europe and Central Asia to use innovative technology to improve firm performance (Andries and Faems 2013)

In the digital era, access to technological innovation is generally found globally, including in European and Asian countries Technological adoption is mainly found in Eastern European SMEs rather than in Central Asian countries where the average number of employees hired in Central Asia firms is lower (Damaskopoulos and Evgeniou 2003; Purcanea et al 2013)

1.3.Subject and scope of research

This study uses primary data from questionnaire survey The questionnaire involves four parts including general information, innovation activities; innovative performance, and firm

performance The subject of this research is firms in supporting industries of mechanics, electronics, motorbike and automobile These firms are in a list of companies (known as The Excellent

Vietnamese Companies in Northern and Central Vietnam) established by JETRO and VCCI There are 150 firms in this list Out of the 150 questionnaires sent out, 118 were valid, accounting for 78,7% of the true response rate

comprehensive innovation-performance analysis based on empirical data, which not only revealed the positive effects of innovation types on firm performance but also yielded a path of relations among these variables using structural equation modeling approach Besides, the second potential contribution of this study relates to highlighting the link between I4.0 and technology management, and innovation Thirdly, this study concerns complementing the existing research on the link

between management innovation and performance (cf.,Cerne et al.,2015; Walker et al., 2011, 2015) Furthermore, we attempt to complement the existing research in the context of both I4.0 and

management innovation Finally, we aimi to make an overarching empirical contribution to all the above-mentioned research lines by conducting longitudinal multi-source and multi-sector analysis

1.6.Research structure

After the chapter 01: INTRODUCTION is mentioned, we will explore the next two sections of the study, which explains the development of research hypotheses and the third section sets out

the research methodogy and the data analysis method, followed by an account of the empirical findings

CHAPTER 02: LITERATURE REVIEW AND HYPOTHESIS DEVELOPMENT 2.1.Definitions

Innovations (in business) means novelty, new things being done, or old things being done in new ways to increase the performance in terms of sales, profitability and market shares in

organization (Zwingina & Opusunju, 2017) According to the Oslo Manual (OECD, 2005), an innovation comprises the elements of creativity and is defined as the implementation of a new or significantly improved product (good or service), or process, a new marketing method, or a new organizational method in business practices, workplace organization or external relations To Hodgetts and Kuratko (2004), innovation is the creation of new wealth or the alteration and

enhancement of existing resources to create new wealth Innovation is also seen as a process of idea creation, developing an invention and ultimately introducing a new product, process or service to the market (Thornhill, 2006)

The second definition is small and medium enterprises (also abbreviated as SMEs) Apparently, there is no standard to precisely define SMEs, as the SME definition varies across countries depending on the specific criteria used As far as I’m concerned, European Union (EU) uses SMEs as the firms having less than 250 employees (OECD 2017) while SMEs in Central Asia are different in terms of size of fixed assets and the number of employees is less than 200 (OECD 2018) For instance, hair and beauty salons, dental practices, medical centres, and so on

Innovation is classified into four types The first type is product innovation According to the OECD’s Oslo Manual (OECD, 2005), product innovation can broadly have defined as the

introduction of new or significantly improved or modified existing product concerning its

characteristics, capabilities, user-friendliness, and components including improvements in technical specification and materials or other functional characteristics by a firm Further, it remains one of the firms’ major roots of competitive advantage (Rosli & Sidek, 2013)

Secondly, the second type considered in this study was process innovation Process innovation refers to the improvement in the production process, delivery method or supporting activities which includes significant changes in techniques and equipment including bringing significant improvement in the equipment, technology and software of the production or delivery method business (OECD, 2005)

The next type is the marketing innovation, refers to the implementation of a new marketing method involving significant changes in product design or packaging, product placement, product promotion or pricing In other ways, it is the implementation of a new marketing concept or method that differs significantly from the enterprise’s existing marketing methods and which has not been used before (OECD, 2005)

The last type is organizational innovation It refers to the application of the new organizational method in the firm’s business practices such as knowledge management, new

management approach, business reengineering, workplace organization or external relations that has not been previously used by the firm (OECD, 2005)

Adapted from Oduro, S (2019) Impact of Innovation Types on SMEs’ Performance in the Cape Coast Metropolis of Ghana Journal of Entrepreneurship and Innovation in Emerging Economies, 5(2), 110-127 https://doi.org/10.1177/2393957519857251

2.2.Prior relevant studies:

a.Innovation Capabilities, Innovation Types, and Firm Performance: Evidence From the Banking Sector of Ghana

This study aims the objective is assessing the effect of innovation capability and innovation types on performance of banks in Ghana

The survey design was used with a semi-structured questionnaire as the primary data collection instrument The study sampled 500 respondents comprising bank employees and

customers of the major commercial banks operating in the Kumasi metropolitan area in Ghana The research sample were selected randomly from 10 bank branches of the major banks operating in Ghana Forty respondents were selected from each of the 10 bank branches randomly bringing the total number of respondents to 400 Additionally, 10 employees each were selected randomly from the 10 bank branches making the total number of bank employees 100 respondents

Figure 2.2.1 Conceptual model and hypotheses of the study

b.Innovation and Firm Performance: The Moderating and Mediating Roles of Firm Size and Small and Medium Enterprise Finance (J Risk Financial Manag 2020, 13, 97)

This study aims to contribute to the debate about whether the size of a firm affects the performance of innovative SMEs by further exploring the moderating effect of firm size and its impact on the relationship between innnovation and the firm performance of SMEs Moreover, it examines the moderating effect of firm size on the relationship between innovation and firm

performance of small and medium enterprises in 29 countries in Eastern European and Central Asia Lastly, it also investigates whether the impact of innovation in products and processes on firm performance is affected by financial capital

The data used in this study is from the Business Environment and Enterprise Performance Survey (BEEPS), which provides cross-country firm-level data for Easter Europe and Central Asian

countries collected in a 2013 survey The findings of this study contribute to prior research focusing on a single-country level

Figure 2.2.2.Research model and hypotheses

c.Management innovation as an enabler of firm performance in the context of Industry 4.0: a longitudinal multi-source, multi-sector analysis (M ČERNE ET AL.)

This study addresses the dearth of research on what enables firms’ performance in the

context of Industry 4.0 Furthermore, this paper holistically examines the black box of the interplay among within-firm relationships of technology and people investments with managerial innovations predicting performance in the I4.0 context

The dataset includes export-oriented firms from various sectors over 14 years, combining primary and secondary data from multiple sources Specifically, a longitudinal multi-sector study of 157 firms from a European Union member state (Slovenia) Eventually, this study brings about some theoretical contributions like advancing the stream of research considering internal factors and processes (cf., Moeuf et al, 2018; Muller et al., 2018), specifically those related to firm investments and management processes (cf., Olsen & Tomlin, 2020; Schneider, 2018) that help to capitalise on new technology Secondly, it may be seen as contributing by corroborating research on the link between I4.0 technology management and innovation Or some practical implications lke offering important implications for firms and managerial practices

Figure 2.2.3 Research model with hypotheses

d.The effect of innovation orientation on firm performance: evidence from micro and small manufacturing firms in selected towns of Awi Zone, Ethiopia

This study attempts to fill the research gap that none of the studies have a depth exploration about the effect of innovation, particularly, product, process, marketing, and organizational

innovation on micro and small manufacturing firm’s performance in Ethiopia in general and Awi Zone in particular Therefore, it explores whether the four innovation types have significantly predicted firm performance of micro and small manufacturing firms in Awi Zone using descriptive and explanatory research designs

The data were drawn from a sample of 247 manufacturing firms using cross-sectional primary data collected from wood and metal manufacturing firms Overall, the regression results revealed a strong relationship between the dependent and independent variables.

Figure 2.2.4.Conceptual framework of the study

e.The effects of innovation on firm performance of supporting industries in Hanoi – Vietnam

The objective of this research is to explore two parts: the impacts of innovation on the different aspect of innovation performance, then their effects to firm performance (production, market and financial performance)

The data used in this study consists of 4 parts including general information, innovation activities, innovative performance and firm performance These firms are in a list of companies (knowns as The Excellent Vietnamese Companies in Northern and Central Vietnam) established by JETRO and VCCI, consisting of 150 firms in the list The findings indicated that there are positive effects of process, marketing, and organizational innovations on firm performance in supporting firms

Figure 2.2.5.Conceptual framework of innovation and firm performance (authors)

f.Synergy effects of innovation on firm performance (R.Lee et al.)

This study investigates the synergy effects among four different types of innovation

activities-product, process, marketing, and organizational innovation on firm performance The data collected from 856 firms drawn from the Korean Innovation Survey (KIS) in 2014, which is the translated version of the Community Innovation Survey (CIS) based on the Oslo Manual (OECD, 2005) The findings shows that the subsequent innovation types and innovativeness levels depend on which strategic orientation is pursued by a firm Additionally, the research proves the effect of process innovation activity in increasing the levels of radical product innovation and firm

performance