| Innovation has long been established as a key source of firm growth.In today's high velocity and hypercompetitive market environment,the need to innovate and stay competitive is even more compelling.However,the nature and process of firm innovation is still not fully comprehended.Nine out of ten new businesses usually fail mostly because there is no market for the products and services they build.Innovation was previously mainly considered as the process of transforming ideas to new product and service.However,innovation is increasingly being seen as more than just about products and services creation.While the generation of new products and services through technological innovation is important,the generation of customers for the products and services through market innovation,and the development of the processes for delivering the products and services through management innovation are important as well.The existing literature on firm innovation focus mostly on technological innovation.This dissertation is pioneering in investigating the nature and effect of market,technology,and management innovations on firm growth.The main research content of this dissertation are(1)identification of firm growth measures,(2)the general effect of innovation on firm growth,(3)the effect of market,technology,and management innovations on firm growth and the interrelationships between market,technology,and management innovations,and(4)the management of firm innovation,focusing on the process of transforming an idea to a new business.The research content(1),(2),and(3)are empirical.We use econometrics tools and SAS(Statistical Analysis System)program to analyze our data and validate our hypothesis.For research content(4),we use literature review and theoretical research.The theories and conclusions developed in research content(1),(2),and(3)form the based theories for content(4)research.We begin our research work by reviewing the existing literature on innovation as a source of firm growth.We found that the notion of innovation as a source of firm growth is well established in the literature right from the pioneering work by Schumpeter on the theory of creative destruction and Penrose on the theory of firm growth.We also found that the general concession in the literature is that innovation positively affects firm growth.To establish the foundation for investigating the effect of market,technology,and management innovations on firm growth,we reviewed literature on the measurement of firm growth and innovation activities.We found the literature on firm growth measurement is very fragmented with some researchers advocating a unidimensional measurement of firm growth and other researchers a multi-dimensional approach.In this dissertation,we use exploratory factor analysis to identify firm growth measures.With these firm growth measures,we are able to construct mathematical models and test our hypothesis on the effect of innovation on firm growth.In order to develop a more profound model of firm innovation management,we reviewed existing literature on firm innovation management models and processes.With our knowledge of market,technology,and management innovations,and building on the existing models of firm innovation management,put forward a new model of firm innovation management that incorporate all three dimensions of market,technology,and management innovations.Following the literature review,we collected data for empirical analysis of firm growth measures and hypothesis testing on the general effect of innovation and the effect of market,technology,and management innovation on firm growth.We collect data on firm accounting fundamentals using COMPUSTAT database access through the Wharton Research Data Services WRDS.The data is on 116 publicly listed firms.The data is collected on nine variables of interest namely sales revenue,operating expenses,number of employees,book value,market value,working capital,R&D investment,capital investment,and advertisement investment tracked over 13 years(2000 to 2012)period generating a balanced panel dataset.In our investigation of firm growth measures using the data collected,we developed an exploratory factory analysis model incorporating our nine variables of interest.We also perform Bartlett and KMO tests on our dataset to ensure that our dataset is suitable for exploratory factor analysis.Our model analysis reveals three underlying theoretical growth measures that represent the nine empirical growth measures captured by our nine variables of interest.This theoretical growth measures represents growth in firm's operational activities,growth in firm's financial activities and growth in firm's capabilities.In our research on the general effect of innovation on firm growth,we build and analyze a panel data Autoregression Distributed Lag ARDL model of firm growth.Empirically,we validate the hypothesis that innovation has a significant effect on firm growth.In our investigation of the nature and effect of market,technology,and management innovations,we decoupled firm's capabilities into technology capabilities measures as a stock of R&D investment,market capabilities measure as stock of advertisement investment,management capabilities measures as stock of capital asset investment.We assume changes in firm capabilities as proxy for firm innovations.That is changes in firm market capabilities as a proxy for firm market innovation,changes in firm technology capabilities as a proxy for firm technology innovation,changes in firm management capabilities as a proxy for firm management innovations.We formulate the hypothesis that market,technology,and management innovations has an effect on firm growth.We validate our hypothesis using a panel vector auto-regression PVAR model on dynamic panel data.Our PVAR model also enables us to uncover the independencies between market,technology,and management innovations.In our pioneering work on the research of multidimensional approach to innovation management we seek to develop our model on sound theoretical foundations of dynamic capabilities and core-competence.Dynamic capabilities and corecompetence are natural evolution of the theories of Resource Based View RBV of the firm.RBV theory asserts that competitive advantage comes from the possession of valuable,rare,in-imitable,and non-substitutable VRIN resources.Dynamic capabilities takes RBV further by advocating that a firm needs to able to adapt and re-configure its VRIN resources in order to maintain its competitive advantage in a changing market environment.Our approach to innovation management rest on three foundation capabilities namely market,technology,and management capabilities that respectively drive market,technology,and management innovations.Market,technology,and management capabilities generates synergies within and across each other during innovation.These three capabilities also generate a unique configuration of the firm known as the core-competence of the firm.We refer to these capabilities and core-competence of the firm as the synergic innovation capabilities model of the firm.The synergic innovation capabilities model asserts that firms are able to gain competitive advantage by shifting their core-competence and aligning with better market opportunities or shifting their market position and aligning with their core-competence.Shifting of core-competence is archived through changes in capabilities by means of innovation.Obtaining competitive advantage through innovation gives rises to the innovation based view IBV of the firm.In the IBV,firms gain competitive advantage by continuously engaging in market,technology,management innovations shifting their core-competence and staying align with changing market environment.During this continuous innovation process,firms benefit from synergies within and across market,technology,and management capabilities that inter-play and re-enforce each other.This enhances the core-competence of the innovating firm thereby making it resistance to erosion from competition.Building on the synergic innovation capabilities model we propose synergic innovation management(SIM)model comprising four main activities sets namely strategy and financing,market development,technology development,and management development with internal learning feedback loops within each activities set and across the activities sets.The SIM model also incorporates the concepts of incremental innovation through iteration as proposed by the lean startup methodology.In this dissertation,innovation is more than the process of ideas to product launch.Innovations is the transformation of an idea to a sustainable business and the SIM model is used throughout the various phases of this transformation namely initial idea generation,business case formulation,value-customer mapping,business model construction,and business model launching.We refer to the process of transforming ideas to new business as business innovation.The synergic innovation capabilities,synergic innovation management models,and the new business creation process constitute tools for firm innovation management.These tools can assist a firm in resolving the problem of market technology mismatch and pre-maturing business scaling.The result of this research work has given rise to the following conclusions.(1)On the research on firm growth measures,we conclude through exploratory factor analysis that there are three underlying firm growth measures(namely operations,financials,and capabilities)that represent the nine general used firm growth measures(sales revenue,operating expenses,number of employees,book value,market value,working capital,R&D investment,capital investment,and advertisement investment).These three firm growth measures can be used in constructing firm growth models for investing the effects of innovation on firm growth.(2)On the investigation of coexistence of market,technology,and management capabilities,co-integration test shows that market,technology,and management innovation are co-integrated and coevolve together overtime.This finding is in support of our view that firms needs to simultaneously engage in market,technology,and management innovations.(3)On the research on the effect of innovation on firm growth,we empirically validate the hypothesis that innovation has a significant effect on firm growth.This is in support of the theoretical notion that innovation is a source of firm growth.(4)On the research on the nature of and effect of market,technology,and management innovations on firm growth.We conclude technology innovation and management innovation have a significant effect on firm operations growth.The effect of market innovations on firm growth is indirect and is mediated by technology innovation and management innovation.(5)Given our knowledge of market,technology,and management innovations,we propose the Synergic Innovation Capabilities Model,the Synergic Innovation Management Model,and the New Business Creation Process as our contribution to the tools and methodology for management firm innovations.The work of this dissertation help us demystified,to some extent,the art and science of firm innovations management.Particularly,our work on firm growth measures creates a foundation for further research in firm growth measures and the effect of innovations on firm growth.Our view of innovation as a multidimensional process with the aim to transform an idea to sustainable business,although nonconventional,will certainly spur further exploration of this aspect of firm innovation. |
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