The Impact Of Business Environment On Innovation Strategy Selection And Performance:An Insight From Least Developed Economies Perspective

As a result of globalization,intensive competition,ever shortening product life cycle and the advancement in production and delivery technology,the sustainable profitability and performance of manufacturing firms has become dependent on continuous innovation.Innovation not only helps manufacturing firms to create high customer value that has an effect on their performance but also plays a potential role in the macroeconomic development and social well-being of nations.This is the primary reason for innovation to be the central agenda of governments' development policies and the focus of academic research.As a result,existing research findings indicated that manufacturing firms operating in different socio-economic and socio-cultural conditions have different propensity towards innovation activity and benefit differently out of it.Regardless of the massive research work in innovation management theory,however,existing literature have some gaps worthy of consideration.First,most of the research work to date has mainly focused on the developed economies and reputable corporations in the Westerner business environment,thus,only limited consideration is given to the impact of the business environment of developing and least developed economies on the long and short term strategic decisions of manufacturing firms.In addition to that,the transferability of the existing findings from the developed economies to the least developed business environment is still questionable.Second,even though the impact of both internal and external business environments on the short-and long-term strategic orientation and performance of firms were subject of extensive investigation,current models fall to consider both environments simultaneously in s single model.Initiated by the need of creating better understanding about the extent of the impact of the internal and external business environment on the strategy selection and performance,the research aims to attain three main objectives.First,it will help to have better insight about the impact of the current business environment set up in Ethiopia on the decision making process of the manufacturing firms operating within it.Second,through the creation of better understanding of the extent of each business environment determinants,it will contribute and support to the economic agenda of the nation.Third,it will lay foundation for future chain of research works that aim the development of competence and boosting the performance of the manufacturing firms in the nation.The research will provide an opportunity to develop new insight into the innovation activities and the influence of different business environment factors from the developing economies perspective.It further will help to have better understanding about the implication of the interplay among business environment,organizational learning orientation and innovation strategy on the innovation performance of manufacturing firms in the country.Ethiopia with its record economic development in the last two decades has been considered to be one of the ten fastest growing economies in the world.Based on the evaluation result of the nation's comparative advantage,the national government is preferentially focusing on the export led textile and leather product manufacturing firms to support and further its ambitious economic development plans.The focus on the textile and leather product manufacturing firms is believed to have three interrelated economic roles for the nation;(1)it will be stepping stone to create a link between agriculture and industry,(2)it will create a massive employment opportunity which in turn is believed to influence the wealth distribution,and(3)will help in solving the hard currency problem of the nation though export.Drawing on a survey data from 542 top and middle level management members currently working in 127 large and medium manufacturing firms in Ethiopia,the research has tested 14 hypotheses using structural equation modeling(SEM)by deploying Amos version 22.The analysis result indicated that the six business environment determinants considered for the study(organizational climate,human resource competence,business strategy,legal and political,national culture and collaborative networking)significant impact on the learning orientation of the surveyed firms.In addition,the result shows that through their influence on the learning orientation of the firms,the business environment determinants significantly influence the innovation strategy selection and innovation performance of the firms.The research also examines if there is sector-type and ownership structure based different on the level of interaction among the constructs of the study.With that regard,the result suggests that while sector type makes no difference,the ownership structure has a slight influence on the interrelationship among the constructs of interest.In summary,the result of the analysis has shown four significant findings that will have important implication to the innovation management theory,the management of the firms and the policy making body of the nation.First,the consideration of both the internal and local external business environments in the single model simultaneously will create a holistic understanding that enable the management of the firms to make resource related decisions.Second,the result gives an important clue about the question “when to use what strategy?” in that regard,on its general base,the result indicates that the more a firm is committed to learning and open itself to accommodate changes,the better for them to deploy the technology-pushed innovation strategy.Third,the result of the analysis provides significant supportive evidence that the internal success of the innovation process of the firms has an important influence on the commercialization of innovative products.Finally,the result shows that in the current business environment set up of Ethiopia,it seems that the business firms and the government are operating across purposes and need to have more work from the government side.