Research in Strategy, Innovation and Entrepreneurs

 Abstract

The aim of this research is to elucidate an understanding of the relationship between firm performance and innovation and entrepreneurship among high-technology Small and Medium Enterprises (SMEs) in the biotechnology industry. The basic premise of the research is that there is a nexus between strategy, innovation and entrepreneurship and firm performance of SMEs in the biotechnology industry. It rests on the assumption that although strategy,  innovation and entrepreneurship maybe have been widely studied as separate constructs, they are closely related and consequently also in terms of their contribution towards firm performance. By scrutinizing the similarities and differences between strategy, innovation and entrepreneurship constructs and their respective impacts on firm performance, this study will highlight and distinguish their respective or consequent impact on firm performance. It maintains that it is through a judicious management strategy, innovation and entrepreneurship that firms are able to achieve superior firm performance and sustainable competitive advantage.  The study also suggests that having a well defined strategy can synergize innovation and entrepreneurship.   

This study seeks to better understand the nexus between innovation and entrepreneurship constructs and their corresponding impact on firm performance. Based on the study of  SMEs in the high-tech biotechnology, a SEM model is built with a dependent variable measuring firm performance, and independent variables of innovation and entrepreneurship represented by the New Product Development and by the entrepreneurial orientation constructs.    

Chapter 1  Introduction

1.1.  Background

 Innovation is ‘A process through which economic or social value is extracted from knowledge through the generation, development, and implementation of ideas to produce new or improved products, processes and services                                                                                        (Conference Board of Canada)

 
“Entrepreneurship, in its narrowest sense, involves capturing ideas, converting them into products and, or services and then building a venture to take the product to market”                                                               
                                                                                                                           (Johnson, 2001 )

        The key elements of entrepreneurship include risk taking, proactivity, and   innovation  

                                                             (Miller, 1983)

 ‘Innovation is the specific tool of entrepreneurship by which entrepreneurs exploit change as an opportunity for a different business or service

                                     (Schumpeter, 1934)

    The EU Green Paper defines innovation as ‘the renewal and enlargement of the  range of product and services     and associated markets, the establishment of new methods of production, supply and distribution and the         introduction of changes in management, work organization, and working conditions and skills of the work             force’                                                                                                                      (EC 1995)

 
The various definitions serves to highlight the difficulties faced in to distinguishing between innovation and entrepreneurship and explains why they are largely studied separately. This study attempts to analyze the relationship between innovation and entrepreneurship through their impact on firm performance. The basic premise in the research is that both innovation and entrepreneurship are essential for superior and sustainable firm performance and that there is close nexus between innovation and entrepreneurship. Having a better understanding of the relationship between innovation and entrepreneurship can help firms better synergize and strategize their internal processes. It is through strategizing and exploiting the nexus between innovation and entrepreneurial orientation that firms can achieve superior sustainable competitive advantage.    

 

There are enormous risks associated with the high technology industry. It is inevitable that governments and high technology industries tend to focus on the R&D effort to be the first to achieve the scientific breakthroughs and the corresponding patent protection. Frequently top managers in high technology firms are also heavily biased towards technical disciplines such as science and engineering, Numerous reasons have been suggested as to why certain industries or high technology firms perform better than others. These reasons range from local environment or ‘clusters’, management of technology, comparative and competitive advantage, internal capabilities of the firm, collaboration, government policies or simply market imperfections. Despite the increase in investment in innovation capacity, many regions are learning the expensive lesson that innovation is a necessary but insufficient condition for regional economic growth and that the ‘commercializing activities of local entrepreneurs are necessary to convert a region’s innovation assets into long-term economic gain’ (SBA Office of Advocacy, 2005 #247) .  There is, however, consensus that entrepreneurial orientation and innovation plays a crucial role in generating and sustaining the growth of an industry or firm. Besides having the necessary knowledge and innovation capacities and capabilities for new product development and patents, parallel efforts in the entrepreneurial orientation not only help to mitigate the risks but enhance the chances of creating and sustaining competitive advantages. This study argues that success of high technology firms requires a balanced approach, where besides innovation capacity; emphasis must also be placed in entrepreneurial orientation. This dissertation therefore studies the nexus between entrepreneurial orientation and innovative intensity and their effects on success in high technology firms in Boston.

 1.2              Research Aim and Objectives

 
Separately studies have shown that entrepreneurship and innovation are critical to achieving and sustaining competitive advantage. They are widely acknowledged as a major engine of economic growth. Porter highlights that innovation, continuous improvement and change are the three cornerstones of global competition and that ‘innovation and entrepreneurship is at the heart of the national advantage’(Porter 1990). Entrepreneurial orientation drives decision-making and behavior toward creating new goods, new methods of production, new markets, or the new organization of an industry (Stevenson & Jarillo 1990).  It is plausible to argue that there is a nexus between innovation and entrepreneurship and their consequent effect on firm performance. 

 The overall aim of the present research is to gain an understanding of the relationship between firm performance and innovation and entrepreneurship nexus among technology-oriented biotechnology firms in Boston. This study taps on a wide range of studies on entrepreneurship and innovation at the firm levels to gain insights on the high technology industries in Boston.  The study will analyze and compare the causal relations between entrepreneurial orientation and innovation intensity on firm performance. Firstly, it will establish the various dimensions of the factors and empirically analyze their impact on firm performance. Secondly, case study analyses will then be carried out to identify any characteristics that may be unique to selected high technology industry, and their corresponding impact and outcomes. Where possible the results of the survey and case studies will be compared with each other to explore if there is any convergent validity. To achieve the aim, the research is mindful that the study of innovation and entrepreneurship involves an understanding of complex relationships, inter and intra-organisational and interpersonal ones, within the context of firm performance.

 
The study will specifically attempt to answer the following research questions:

 1) What are the dimensions of entrepreneurship and innovation and to what extent do they contribute to the high-tech biotechnology firm performance?

 2) What evidence is there of a nexus between the entrepreneurial orientation and innovation?

 3) What evidence is there that the nexus brings about superior firm performance?

 1.3 Research Setting

 The setting of the research is on the biotechnology firms within the context of the high-tech industries in Massachusetts. This section presents a background and the setting in which the present research is undertaken. The concepts of innovative intensity and entrepreneurial orientation and its implications for firm performance are presented. Since the research is conducted within the context of Massachusetts, a brief background is provided on its biotech industry.

 1.3.1 Innovation and Entrepreneurship    

 High technology industries are characterized by a great dependence on science and technology innovation that leads to new or improved products and services. They generally have a substantial economic impact, fueled both by large research and development spending, and a higher than industry average sales growth. For the purpose of this study the biotechnology sector which is envisaged to have substantial economic impacts on Massachusetts’s economy is selected.

 This study extends research on studies that explored the impact of entrepreneurial and innovation on high technology industry and organizations. It examines the determinants of innovation in Porter’s study on innovative capacities, Clayton Christensen’s disruptive innovation as well as several resource-based and new product development approaches. The focus of this study is at the firm levels. As noted, the industry of interest selected is high technology industries in Massachusetts. 

To explore and measure the effect of entrepreneurial orientation at the firm level the study taps into prior research of (Miller, 1983; Morris and Paul, 1987; Covin and Slevin, 1989; Davis, Morris and Allen, 1991), Lumpkin and Dess (1996)  and Lumpkin (1998) that identified a set of five distinct dimensions: product/service innovativeness, a tendency to support creativity and experimentation in introducing new products/services; process innovativeness, a willingness to support novelty and technological research in developing new processes; risk taking, a willingness to take bold actions with uncertain outcomes; proactiveness, a forward-looking perspective involving acting in anticipation of future demand or change; and competitive aggressiveness, a tendency to be forceful and combative in efforts to outperform industry rivals.

 To explore and measure the effects of innovative intensities at the firm level the study taps into prior research of Community Innovation Survey (Kleinknecht 1996; Crepon et al. 1998; Loof & Heshmati 2001; Mairesse & Mohnen 2001; Cooper & Kleinschmidt 1987; Johne & Snelson 1998) and the new product development studies (Cooper & Kleinschmidt 1987; (Montoya-Weiss & Calantone 1994) ; Johne & Snelson 1998;). Using data from the Community Innovation Survey of countries of the European Union studies have been able to analyze the causal relationship between innovation and firm performance. In addition, the studies have also suggested causal relationships between the general characteristics of firms, their environment and their innovative intensity.  The new product development studies, besides complementing areas covered by the Community Innovation Survey studies, provide greater resolution of firm characteristics and the internal firm processes.

1.3.2    Massachusetts  Biotechnology SMEs

There are over 400 biotechnology companies located in the state, of which 235 are developing therapeutic drugs. Roughly 42,917 biotechnology employees in Massachusetts are responsible for over $5 billion of in-state payroll. Biotech employment grew by 25.6 percent between 2001 and 2005, adding over 8,000 jobs.

Over the years, Massachusetts-based biopharmaceutical companies have already developed 50 large molecule drugs covering a range of illnesses, including areas such as cancer, infectious and neurological diseases. There are nearly 1,769 drugs being developed in Massachusetts, representing over 7 percent of the global drug pipeline. Massachusetts is home to the top five National Institutes of Health funded hospitals, including Beth Israel Deaconess Medical Center, Brigham and Women's Hospital, Children's Hospital Boston, Dana-Farber Cancer Institute, and Massachusetts General Hospital.

1.4 Relevance of Research

In terms of value creation, biotechnology has the potential to out performance other industries. This is good for innovators, good for countries, good for companies, and good for the people working for these companies. As countries have limited resources, they need to maximize the returns on every dollar spent. Establishing high technology enterprises is an expensive business. It requires extensive investments in basic research, specialized skills, sophisticated research and production facilities. Maintaining such industries requires long-term investments. Governments and corporations have become active participants in the development of biotechnology industries.  This raises a number of critical issues: How can countries determine an appropriate mix of strategies, factors and capabilities to support the growth of firms in such industries? 

             1.4.1    Policy Relevance           

            1.4.2    Industry Relevance

            1.4.3    Theoretical Relevance

 1.5              Methodology

 ata for the study will be obtained through a face-to-face questionnaire survey. The population of interest will be the relevant staff of the biotech firms in Massachusetts. The questionnaire is adapted from various studies including entrepreneurial orientations, Community of Innovation Survey (CIS-III) and relevant constructs from the new product development studies. 

 1.6      Organisation

The thesis structure will follow that suggested by Perry (1994), namely:

1.      Introduction

2.      Literature Review

3.      Methodology

4.      Data Analysis

5.      Conclusions and Implications

2.         Literature Review

 

 

2.1 Industry and Firm Performance – A Theoretical Review

 

According to Porter, globalization, technological change and comparable factor endowment have ‘nullified, or reduced, the importance of certain factors of production that once loomed large’(Porter 1990). Besides factor costs, he notes that ‘differences in national economic structures, values, culture, institutions, and histories contribute profoundly to competitive success’.

 

More recently, several resource-based theories have emerged to suggest an endogenous explanation for a firm’s performance.  These suggest that elements within the firm help explain such performance. The concept of ‘dynamic capabilities’ has received much attention. It suggest that ‘the competitive advantage of firms is seen as resting on distinctive processes (ways of coordinating and combining), shaped by the firm’s specific assets positions (such as the firm’s portfolio of difficult-to-trade knowledge assets and complementary assets), and the evolution path(s) it has adopted or inherited’ (Teece et al. 1997). The endogenous approach suggests that wealth creation depends largely on honing technological, organizational, and managerial processes inside the firm.  Christensen and Michael Overdorf suggest that any ‘inabilities’ to take advantage of opportunities may reside within the firms (Christensen & Overdorf 2000).

 

Seminal efforts in the 1970s ((Cooper 1979); (Myer et al. 1969); (Rothwell et al. 1974) have been conducted to identify critical factors that influence new product(innovation) success. The SAPPHO Project by Rothwell  et. al. compared 43 successful and failed endeavors in chemical and instrument companies and found 41 determinants, ranging from attention to market to senior leadership. A more recent investigation(Cooper & Kleinschmidt 1995) identified 48 drivers, such as research and development(R&D) budget and new product aimed at familiar markets, of which 26 drivers discriminated between solid and weak performers. Further refinements of the model in subsequent studies identified 13 drivers as listed in model below(Cooper & Kleinschmidt 2000).

Figure 1 : NPD Conceptual Model –  (Cooper & Kleinschmidt 2000)

 
 

 

The model postulates that new product success is determined by the competitive advantage of the new product, which in turn is affected by the innovation process (execution), the company internal environment and the marketplace opportunities(Cooper & Kleinschmidt 2000).

 Meta analysis by Montoya-Weiss and Calantone (1994) parsimoniously grouped the numerous and varied factors in NPD studies as strategic/organizational, NPD process and market environment. Subin Im et al. (2003) postulated that strategic/organizational drivers affect new product development (NPD) process which in turn influences the new product performance. Deriving a focused group of constructs, namely customer orientation, cross-functional integration, NPD team proficiency, NPD initiation and implementation, they were able to demonstrate the relationship between new product development and performance for Korean and Japanese firms. The model developed is illustrated below.

 

           
 

 


Figure 2 :Conceptual Framework Model -(Subin Im et al. 2003)

 

Khalil and Ezzat argue that ‘proper management of technology is what creates wealth’. They  advocate that ‘for developing countries to avoid being marginalized, they must formulate strong public policy, and  companies must improve the way they manage technology and innovation’(Khalil & Ezzat 2001). This approach emphasizes the importance of public policy in providing the necessary environment for growth and the need to strike an integrating balance between the economic, technology and trade systems. They add: ‘Effectively managing both the macro aspects and the micro aspects of these three system is essential for sustainable growth’(Khalil & Ezzat 2001).

 

David Yoffie suggests that while comparative and competitive advantages are important for national and industry performance, the dynamics of the global and national environment must be fully understood. This include factors like the ‘structure of global industry, level and style of government intervention, characteristics of leading firms and the inertia of history’(Yoffie 1993). Firms and governments must identify the nature of their competitiveness, be it comparative advantage, political, oligopolistic or regulated, and adapt to the shifting industry and political environments.

 

The entrepreneurship literature suggests that a set of organizational attitudes and behaviors characterizes entrepreneurial firms (Miller 1983a); (Stevenson & Jarillo 1990); (Covin & Slevin 1991.); (Covin & Miles 1999);(Lumpkin & Dess 1996); (Lyon et al. 2000); (Lee et al. 2001). Historically, the literature pointed to innovativeness, risk taking, and proactiveness ((Miller 1983a); (Morris & Paul 1987); (Covin & Slevin 1989); (Davis et al. (1991)) Subsequently Lumpkin (1996) included the dimensions of product/service and process innovativeness. Entrepreneurial orientation drives decision-making and behavior toward creating new goods, new methods of production, new markets, or the new organization of an industry (Stevenson & Jarillo 1990). As Lumpkin and Dess (1996: 136) observe, “…new entry explains what entrepreneurship consists of, and entrepreneurial orientation describes how new entry is undertaken.” Entrepreneurial orientation can this be defined as a firm-level predisposition to engage in behaviors that lead to change in the organization or marketplace.

 

   The literature suggests that industry or firm performance is dependent on a dynamic interplay between a diverse range of internal and external factors. Any studies on industry and the firm’s success should, therefore, consider the effects of these factors.  However, the common theme that runs through these theoretical frameworks is that firms must continue to adapt or innovate to sustain their competitive advantage. This underpins the importance of innovation for a country’s development.

 

2,2 Entrepreneurial Orientation and Firm Success

 

Past research have suggested that there is no characteristic, predisposition, or set of traits at the individual entrepreneur level of analysis that consistently "predicts" entrepreneurial activity. Miller argued that an entrepreneurial firm “engages in product-market innovation, undertakes somewhat risky ventures and is first to come up with ‘proactive’ innovations, beating competitors to the punch”; suggesting the dimensions of  innovativeness, risk-taking, and proactiveness, respectively(Miller 1983b). Lumpkin and Dess(1998) proposed two additional dimensions critical to the entrepreneurial orientation concept: competitive aggressiveness and autonomy. Collectively, these five dimensions—innovativeness, proactiveness, risk-taking, competitive aggressiveness, and autonomy—permeate the decision-making styles and practices of a firm’s members. Entrepreneurial orientation provides a strategic framework for researching the practices, processes and organizational mindset of firms engaged in managing firms and/or pursuing new ventures ((Lyon et al. 2000).

 

Autonomy refers to a willingness to act independently and be self directed in the pursuit of goals (Lumpkin & Dess 1996). It is envisaged that employees with high autonomy tend to have the drive to carry projects through to completion without relying on the support or approval of management.

Proactiveness refers to a forward-looking, opportunity-seeking perspective (Miller 1983a); (Venkataraman 1989). It suggests both vision and leadership in launching business ventures or developing new strategic initiatives since it implies an ability to anticipate changes in demand or other trends that indicate emerging opportunities. Risk Taking refers to making decisions and taking action under conditions of uncertainty ((Brockhaus 1980.).

Competitive Aggressiveness refers to the intensity of a firm’s efforts to compete with industry rivals (Lumpkin and Dess, 2001). It often involves a combative response or an offensive aimed at enhancing performance and/or improving market share (Venkatraman, 1989) with an overall objective of defending previous gains and maintaining a strong presence in the marketplace.

 

Figure 3: Conceptual model of the entrepreneurial orientation-performance relationship( Lumpkin & Dess, 1996)

 

Studies have found that several of these five components were significant predictors of sales growth and/or profitability. Proactiveness and risk taking were significant predictors of average annual sales growth, while innovation, autonomy and aggressiveness were significant predictors of both net worth and changes in net worth. Several measures of sales growth strategy were also significant predictors of firm performance.

 
2.3 Innovation

 The EU Green Paper defines innovation as ‘the renewal and enlargement of the range of product and services and associated markets, the establishment of new methods of production, supply and distribution and the introduction of changes in management, work organization, and working conditions and skills of the work force’(EC 1995).


Innovative intensity at the firm level is defined as the demonstrated commitment of innovation inputs and throughputs. It can be measured by the commitment to research and development (R&D) expenditure, Science and Engineering(S&E) expertise, collaboration with research institutions or other firms and the organization and processes supporting innovation.   

 The terms ‘innovative ability’, ‘innovative capability’, ‘innovative competence’ and ‘absorptive capacity’ are often used interchangeably and for the purpose of this study refers to innovative capacity. The concept of innovative capacity is the potential of a firm, region or nation to generate innovative output (Porter & Stern 2002).

The phenomena of innovation can be described using the terms innovation inputs, processes (innovation throughputs) and products (innovation outputs). Innovation inputs refer to resources that support innovative activities (for example, research, training and skilled workers). Innovation throughput refers to activities that support the innovation process (for example collaboration).  Innovation output refers to the outcome new products as a result of the innovation inputs, throughputs and activities within the firm.

 
2.4 Innovative and Performance

 
Innovation varies considerably across countries. In the past, the primary indicators for innovativeness were the expenditure on R&D and the number of employees dedicated to R&D. It was presumed that R&D expenditure will give rise to new knowledge and in turn lead to product innovation. Today, more sophisticated measures are used.  Thus, Porter and Stern have built an innovation index called ‘National innovation capacity’ (Porter & Stern 2002).  This measure combines factors derived from three major areas of research on innovation - ideas-driven endogenous growth theory (Romer, 1990), cluster-based theory (Porter, 1990) and the national system of innovation concept (Nelson, 1993). The index, based on macroeconomic and political variables, predicts the ‘economy's potential to produce a stream of commercially relevant innovation’ and explains differences in patenting rates among countries. Based on the ‘ideas-driven endogenous growth’ and ‘national innovation system’ models, Furman et al found that the stock of knowledge (GDP per capita or stock of patent), resources devoted to innovation (full time S&E personal or R&D expenditures), political institutions or policies (IP, openness of market) are important determinants of innovation. Based on cluster theory, they found that private R&D funding, R&D performed by universities and the linkages between institutions and industrial clusters central variables also affect the capacity to innovate(Furman et al. 2002). Their study suggests that Singapore is ranked 13 according to the national capacity index. A limitation of the national capacity index is that it does not directly measure economic output. The innovation output is based on international patenting that may not be translated into new a product.  A further limitation of the index is that it does not take into account the simultaneity effect of innovation inputs and throughputs.

 
While the macro level policies and institutions are essential for innovation, it is ultimately firms that introduce and commercialize innovations. Firms must develop an internal innovation capability to generate and develop novel ideas into innovative products or processes. It is the collective firms' innovation capability that will shape the overall country innovative performance. The introduction of the Community Innovation Survey (CIS) by the European Union in 1993 greatly facilitated the studying of relationships between innovation and firm performance.

 
Based on the new product development , (Subin Im et al. 2003) identified a limited but focused number of new product development factors to examine the success of new products or innovations. Customer orientation was determined as a sufficient representation of market orientation(Gatignon et al. 1997).  The significance of cross-functional integration to NPD is well documented (Song et al. 2000). Montoya- Weiss and Calantone have established the relationship  between NPD Team proficiency  and new product outcomes(Montoya-Weiss & Calantone 1994). Studies by Troy et al  and Zaltman et al, have achieved consensus on simplifying NPD process to initiation and implementation(Troy et al. 2001; Zaltman et al. 1973). The study was able to demonstrate significant relationships between these constructs and the success of new product development.

 

The construct of innovation intensity will thus be analysed base on adapted model depicted in figure 4 below. 

 
Figure 4 – Proposed Research Model for Innovation Intensity – Adapted from the CDM
(Crepon et al. 1998) and New Product(Subin Im et al. 2003) Research Model

*constructs from new product development

Chapter 3 Theoretical Framework and Research Model

 

3.1 Introduction

3.2 Theoretical Foundation

            3.2.1 New Product Development Theory

            3.2.2

            3.2.3

 

3.4 Summary of Research Model

           

The proposed framework for the testing of the various hypotheses will be based on the model at Figure 5. The model will attempted to analyse the effects of entrepreneurial orientation and innovation intensity on firm performance and includes constructs from entrepreneurial orientation studies community innovation survey studies and the new product development studies. The literature review identified that the various approaches complemented each other. While the community innovation survey’s strength lies in the aggregated dimensions (e.g. R&D, S&E personnel), the new product development approach provides better resolution on the internal processes of the firm (e.g., marketing, customer orientation and implementation process). The entrepreneurial orientation studies strengths lies in providing perspectives largely not addressed in the innovation studies. 


 

 

 

The study will test the relationship between, entrepreneurial, orientation, innovation intensity and firm performance. A two part questionnaire survey will administered to selected biotechnology companies located in Massachusetts. The survey will be administered in December 2008/January 2009

 

The questionnaire survey will be accompanied by in-depth interviews of four selected high technology firm case studies. The case studies will seek qualitative insights on the impact of the internal processes of the firms. The control variable of these case studies will be firm size and business type, that is, manufacturing or service.

 

3.3.1 Theoretical Assumptions or Limitations

 

TBA

 

The main limitation of the study is it limited external validity.  It is a single-country study and focus on the high technology sector.  Therefore the findings cannot be generalized to all industries or other countries.

 

 

3.3.2  Dimensions and Hypotheses

 

It can be posited that a firm’s entrepreneurial orientation will affect its performance. Using the five measures – autonomy, innovativeness, proactiveness, risk taking and competitive aggressiveness gives rise to the following five testable hypotheses that will be applied to the high technology industry:

 

 

Hypothesis 1:  The greater the proportion of a firm’s autonomy, the greater that firm’s potential for success.

 

Hypothesis 2: The greater the degree of proactiveness of a firm, the greater the firm’s potential for success.

 

Hypothesis 3: The greater the degree of risk taking by the firm, the greater its potential for success.

 

Hypothesis 4: The greater the degree of competitive aggressiveness of a firm, the greater that firm’s potential for success.

 

Hypothesis 5: The greater innovativeness of the firm, the greater the firm’s potential for success.

 

It can be posited that a firm’s innovation intensity through inputs and processes will affect its performance. Using the EU survey, innovation intensity can be operationalised using four measures – R&D expenditure, S&E personnel’s, inter-firm collaboration and collaboration with research institutions. This gives rise to the following four testable hypotheses that will be applied to the biotechnology industry:

           

            Hypothesis 6:  The greater the proportion of a firm’s total expenditure on R&D, the greater that firm’s performance.

 

            Hypothesis 7: The greater the proportion of Science and Engineering personnel employed by a firm, the greater that firm’s performance.

 

            Hypothesis 8: The greater the degree of collaborative intensity between firms, the greater the performance of those collaborating firms.

 

Hypothesis 9: The greater the degree of collaborative intensity with universities/research institutions by a firm, the greater that firm’s performance.

 

A major purpose of this study is the way in which industry performance of firms, with different internal characteristics and processes, varies according to the innovation intensity in those firms. Hypotheses 6 to 9 are based on constructs from the new product development literature.

 

            Hypothesis 10: The greater a firm’s customer orientation, the greater its performance.  

 

            Hypothesis 11 The better the firm’s NPD process( initiation and implementation), the greater its performance

 

Chapter 4  Methodology

 

4.1    Research Approach

 

TBA

 

4.2    Population of Interest

The populations of interest are biotechnology companies residing in Massachusetts. The four case studies companies will be selected based on their successful track record in new product development, industry market share, performance in the past three years and  size. Two of the companies will be biotechnology manufacturers while the other two will be in the biotechnology service industry.

 

 

4.3    Research Design

 

For the firm level analysis, a questionnaire survey with relevant constructs from the entrepreneurial orientation, EU Community Innovation Survey-III (CIS-III) and  new product development literature will be used to measure the relationship between entrepreneurial orientation,  innovation and firm performance.

 

The relevant constructs from the entrepreneurial orientation seeks to identify the perceived effects of autonomy, proactiveness, competitive aggressiveness, risk taking and innovativeness on firm performance

 

The relevant constructs from the Community Innovation Survey seeks to identify the overall demographics of the high technology industry. It includes R&D personnels; R&D expenditures; sources of information; technology transfer and acquisition; technical cooperation; government support and perception of factors promoting or hindering innovation..  A sampling of the potential measures and their characteristics is attached at Appendix A

 

4.3.1  Quantitative Survey

4.3.1.1  Operationalisation and Measurement

4.3.1.2 Data Collection

4.3.4  Statistical Analysis

 

4.4.1  Case Studies

     4.4.1.1 Case Selection

     4.4.1.2 Research

     4.4.1.3 Data Analysis

 

 

 

 

 

 

 

 

The new product development portion of the survey will explore the impact of customer orientation, NPD cross-functional integration, NPD team proficiency on NPD initiation and NPD implementation. In turn, the impact of NPD initiation and implementation on new product performance will be determined. A sample of the measures is at Appendix B.

 

To test the various hypotheses, the study will use the structural equation modeling method, and case studies analysis. Structural equation modeling (SEM) is the primary method used to analyze the data and to estimate the significance and strength of the relationships between the different elements in the model. Using Amos 5.0 (Arbuckle, 2003, Arbuckle and Wothke, 1999) or LISREL,  the study will follow the two-step analysis procedure recommended by Anderson and Gerbing (1988). In the first step, we validate the measurement models for each individual latent construct using confirmatory factor analysis (CFA). In the second step, we estimate the complete structural model. For both the CFA and SEM analyses, the goodness-of-fit parameters to be reported (RMSEA, SRMR, GFI, AGFI, NNFI, NFI, CFI, Delta2, and normed chi-square) reflect current standard practices in structural equation modeling (Hair et al., 1998, Hu and Bentler, 1998, Hu and Bentler, 1999, Kline, 1998, MacCallum and Austin, 2000, Schumacker and Lomax, 1996, Shook et al., 2004).

.

The method of analyzing the case studies is in line with the ‘pattern matching’ method suggested by (Campbell 1975) and (Yin 1994), where information from the four case studies shall be match with prior assumptions. In the context of the proposed study, the assumption is that innovation intensity in the high technology firms will positively impact on firm performance.

 

Based on the data collected the firm characteristics and performance in the biotechnology industry will be analyzed.

 

Chapter 5 Results and Analysis…………………………..

 

5.1  Introduction

5.2 Quantitative Survey

            5.2.1 Sample

            5.2.2 SEM Model

            5.2.3 Testing Hypotheses

5.2.4 Summary of Quantitative Analysis

 

 5.3 Case Studies

            5.3.1 Case Interviews

            5.3.2

            5.3.3

 

5.4    Conclusion

 

Chapter 6  Discussion and Conclusion

 

6.1  Introduction

6.2  Summary and Discussion of Findings and its Context

6.3  Implications of Research

6.4  Limitations of Research

6.5  Conclusion

 

           

 

3.5 Ethical Considerations

 

Permission will be obtained from the University’s Ethics Committee and each organization included in the survey prior to commencing the collection of the data. All data collected will be kept in a secured cupboard and password protected on the disk. Assess to the data will be limited to the researcher and the supervisor. 

 

 

 

 

3.7 Confidentiality and Intellectual Property

 

The questionnaire survey does include the entry of commercially sensitive information. Assurance will be given to all survey respondents that the data will only be used in a consolidated form and the individuals’ personal data will be held securely and not released to unauthorized parties.

 

4. Timetable

 

 

Questionnaire Design and Ethics Committee completed

Sep 2008 (2 months)

Test Survey

Nov 2008 (1 Month)

Conduct face to face interview

Dec 2008 (2 Months)

Data analysis

Mar 2009 (4 months)

Introduction completion

Apr 2009 (1 month)

Conclusion completion

May 2009 (1 month)

Final Draft completion

Jun 2009

 

 

 

 

References

Ali Kara, John E Spillan & Jr, O. W. D. Apr 2005, 'The Effect of a Market Orientation on Business Performance: A Study of Small-Sized Service Retailers Using Markor Scale', Journal of Small Business Management, vol. 43, no. 2, pp. 105-118.

Brockhaus, R. H. 1980., 'Risk taking propensity of entrepreneurs. .' Academy of Management Journal, vol. 23, p. 509–520.

Campbell, D. T. 1975, 'Degrees of freedom and the case study', Comparative Political Studies, vol. 8, no. 2, pp. 173-193.

Christensen, C. M. & Overdorf, M. 2000, 'Meeting the Challenge of Disruptive Change', Harvard Business Review, p. 69.

Cooper, R. G. 1979, 'The Dimensions of Industrial New Product Success', Journal of Marketing, vol. 43, no. 3, pp. 93-103.

Cooper, R. G. & Kleinschmidt, E. J. 1987, 'Success factors in product innovation', Industrial Marketing Management, vol. 16, no. 3, pp. 215-223.

Cooper, R. G. & Kleinschmidt, E. J. 1995, 'Benchmarking the Firm's Critical Success Factors in New Product Development', Journal of Product Innovation Management, vol. 12, no. 5, pp. 374-391.

Cooper, R. G. & Kleinschmidt, E. J. 2000, 'New Product Performance', Australian Journal of Management, vol. 25, no. 1, pp. 17-45.

Covin, J. G. & Miles, M. P. 1999, 'Corporate entrepreneurship and the pursuit of competitive advantage', Entrpreneurship Theory Practice, vol. 23, no. 3, pp. 47-64.

Covin, J. G. & Slevin, D. P. 1989, ' “Strategic management of small firms in hostile and benign environments,” .' Strategic Management Journal, vol. Vol 10, no. No 1, p. pp. 75–87.

Covin, J. G. & Slevin, D. P. 1991., 'A conceptual model of entrepreneurship as firm behavior', Entrepreneurship Theory Practice, vol. (Fall) . p. 7–25.

Crepon, B., Duguet & Mairesse, J. 1998, 'Research, Innovation and Productivity: An Econometric analysis at the firm level', NBER Working Paper  no. 6696.

Davis, D., Morris, M. & and Allen, J. (1991), '“Perceived environmental turbulence and its effect on selected entrepreneurship, marketing, and organizational characteristics in industrial firms,”', Journal of the Academy of Marketing Science, vol. Vol 19, no. No. 1,, p. pp. 43–51.

Dr. Andreas Respondek, L. M. 2002, 'Singapore: An Emerging Reginal Hub for Biomedical Sciences - Part I', Inside-Lifescience.

EC 1995, Green paper on innovation, Director-General XIII/D, European Commission, Brussels.

Furman, J. L., Porter, M. E. & Stern, S. 2002, 'The determinants of national innovative capacity', Research Policy, vol. 31, no. 6, pp. 899-933.

Gatignon, Hubert & Xuereb, J.-M. 1997, 'Strategic orientation of the Firm and New Product Performance', Journal of Marketing Research, vol. 34, pp. 77-90.

Gounaris, G. J. A. a. S. P. 1999, 'Marketing orientation and its determinants: an empirical analysis', European Journal of Marketing, vol. 33, no. 11/12, pp. pp. 1003-1037.

Han, J. K., Kim, N. & Srivatava, R. K. 1998, 'Market Orientation and Organisational Performance: Is Innovation a missing Link', Journal of Marketing, vol. 62, no. October, pp. 30-45.

Johne, A. & Snelson, P. 1998, 'Auditing product innovation activities in manufacturing firms', R&D Management, vol. 18, no. 3, pp. 227-233.

Khalil, T. M. & Ezzat, H. A. 2001, 'Emerging New Economy - Responsive Policies', in Global Forum on Management of Technology: Focus on Arab Region, Vienna.

Kleinknecht, A. 1996, Determinants of Innovation. The Message from New Indicators, St Martin's Press, New York.

Kohli, J. K. & Jaworski, B. J. (1990),, ' Market Orientation: The Construct,

Research Propositions, and Managerial Implications.' Journal of Marketing,

. vol. 54, no. (April),, pp. 1-18.

Kohli, J. K., Jaworski, B. J. & Kumar, A. 1993, 'MARKOR: A Measure of

Market Orientation,' Journal of Marketing Research,, vol. 30,, no. (Nov),, pp. 467-477.

Lee, C., Lee, K. & Pennings, J. M. 2001, ' Internal capabilities, external networks, and

performance: A study on technology-based ventures', Strategic Management Journal, vol. 22, no. 6/7, pp. 615-640.

Lim, S. N. 2002, 'Targeting investment and achieving success in Singapore

, Singapore Economic Development Board, Singapore', Solid State Technology, vol. April.

Loof, H. & Heshmati, A. 2001, 'On the Relationship between innovation and Performance: A Sensitive Analysis', SSE/SFI Working Paper Series in Economic and Finance, vol. 46.

Lumpkin, G. T. & Dess, G. G. 1996, 'Clarifying the entrepreneurial orientation construct and linking it to performance.' Academy of Management Review, vol. 21, p. 135–172.

Lyon, D. W., Lumpkin, G. T. & Dess, G. G. 2000, 'Enhancing Entrepreneurship orientation research: Operationalising and measuring a key strategic decision making process', Journal of Management, vol. 26, no. 5, pp. 1055-1085.

Mairesse, J. & Mohnen, P. 2001, 'To be or not to be Innovative: An Exercise in Measurement, STI Review. Special Issue on New Science and Technology Indicators,' OECD, vol. 27, pp. 103-129.

Miller, D. 1983a, 'The correlates of entrepreneurship in three types of firms.' Management Science, vol. 29, pp. 770-791.

Miller, D. 1983b, 'The correlates of entrepreneurship in three

types of firms', Management Science, vol. 29, p. 770–791.

Montoya-Weiss, M. M. & Calantone, R. 1994, 'Determinants of new product performance', Journal of Product Innovation Management, vol. 11, no. 5, pp. 397-417.

Morris, M. H. & Paul, G. W. 1987, ' “The relationship between entrepreneurship and marketing in established firms,”', Journal of Business Venturing, vol. Vol 2, no. No 3,, p. pp. 247–259.

Murrin, T. J. 1998, 'Tech 21 The Keystone Spirit; Putting Technology to Work', no. 21 January, p. 44.

Myer, Summer & Donald, G. M. 1969, Successful Industrial Innovations, National Science Foundation, Washington D. C.

Narver, J. C. & Slater, S. F. 1990, 'The effect of market orientation on business profitibility', Journal of Marketing, vol. 54, pp. 20-25.

Noble, C., Sinha, R. K. & A., K. 2002, 'Market Orientation and Alternative Strategic Orientation: A longitudinal Assessment of Performance Implications', Journal of Management, vol. 66, pp. 25-39.

Pelham, M. & Wilson, D. T. 1996, 'A Longitudinal Study of the Impact of Market Structure, Stratgey, and Market Orientation Culture on Dimensions of Small Firm Performance', Journal of the Academy of Marketing Science, vol. 24, no. 1, pp. 7-43.

Porter, M. E. 1990, The Competitive Advantage of Nations, The Macmillan Press Ltd, London.

Porter, M. E. & Stern, S. 2002, 'National Innovative Capacity', in Global Competitiveness Report 2001-2002, ed. K. Schwab, Oxford University Press, New York.

Rothwell, R., Freeman, C., Horsley, A., Jervis., V. T. P. & Robertson, A. 1974, 'SAPPHO Updated -  Project SAPPHO Phase II', Research Policy, vol. 3, pp. 259-291.

Slater, S. F. & Narver, J. C. 1994, 'Does Competitive Environment Moderate the Market Orientation-Performance Relationship', Journal of Marketing, vol. 58, pp. 46-55.

Song, X. M., Jinhong Xie & Dyer, B. 2000, 'Does Innovationess Moderate the Relationship between Cross-Functionl Integration and Product Perfomance', Journal of International Marketing, vol. 8, no. 4, pp. 61-89.

Stevenson, H. H. & Jarillo, J. C. 1990, 'A paradigm of entrepreneurship: Entrepreneurial Management.' Strategic Management Journal, vol. 11, . p. 17–27.

Subin Im, Heungsoo Park & Ha, Y.-W. 2003, 'Determinants of Korean and Japanese New Product Performance', Journal of International Marketing, vol. 22, no. 4, pp. 81-112.

Teece, D. J., Pisano, G. & Shuen, A. 1997, 'Dynamic Capabilities and Strategic Management', Strategic Management Journal, vol. 18, no. 7, pp. 509-533.

Troy, L. C., David, M. S. & Vararajan, P. R. 2001, 'Generating New Product Ideas:An Initial investigation of the Role of Market information andOrganisation Characteristics', Journal of the Academy of Marketing Science, vol. 29, no. 1, pp. 89-101.

Venkataraman 1989, 'Strategic Orientation ofBusiness Enterprises. The construct dimensionality and measurement', Management Science, vol. 35, pp. 942-962.

Yin, R. K. 1994, Case Study Research: Designs and Methods, Sage, Thousand Oaks.

Yoffie, D. B. 1993, Beyond Free Trade Firms, Governments, and Global Competition, Harvard Business School Press, Boston, MA.

Zaltman, G., Robert Duncan & Holbek, J. 1973, Innovations and Organisations, John Wiley & Sons, New York.


APPENDIX A

 Sampling of the type of data that will be collated by the Questionnaire Survey –

 

Adapted from Community Innovation Survey

Variable

Description

Scale

Operationalisation

 

Innovation Inputs

 

R&D

% R&D Expenditure

metric

 

S&E

%Science and Engineering

metric

 

Total Turnover

Total Turnover

metric

 

Capital Ex

Capital Expenditure

metric

 

Employee

Total Employee

metric

 

 

Innovation Processes

 

Nat Sub

Use of National Subsidies

ordinal

1 to 5 (1 as none,

5 as very high)

Cont inno

Continuous innovation

ordinal

1 to 5 (1 as none,

5 as very high)

Inno written

Written down innovation activities

ordinal

1 to 5 (1 as none,

5 as very high)

change

Change in organization structure in last 3 years

ordinal

1 to 5 (1 as none,

5 as very high)

customer

Systematic measure cust satisfaction

ordinal

1 to 5 (1 as none,

5 as very high)

Mkt research

Outsourced market research in last 3 yrs

ordinal

1 to 5 (1 as none,

5 as very high)

intermediate

Cust of intermediate organisation

ordinal

1 to 5 (1 as none,

5 as very high)

Product inno

Innovation goal is product innovation

ordinal

1 to 5 (1 as none,

5 as very high)

Process inno

Innovation goal is process innovation

ordinal

1 to 5 (1 as none,

5 as very high)

Co-op other firm

Co-operation with other companies

ordinal

1 to 5 (1 as none,

5 as very high)

Co-op Research Inst

Co-op with  research institute

ordinal

1 to 5 (1 as none,

5 as very high)

Co-op Edu Inst

Co-operation with education institute

ordinal

1 to 5 (1 as none,

5 as very high)

 

Innovation Outputs

 

Inno output

% new product in total turnover

metric

 

Patents

Number of Patent achieved

metric

 


 

 

Adapted from the Entrepreneurial Orientation Survey

 

 

Entrepreneurial Orientation

 

 

 

Proactiveness Items

 

 

 

1

In dealing with its competitors, my firm . . .

 

 

 

 

a. Typically responds to action which competitors initiate

 

1 2 3 4 5 6 7

 

Typically initiates actions which com

petitors then respond to

 

 

b. Is very seldom the first business to introduce new products/ser- vices, administrative techniques, operating

technologies, etc..

 

1 2 3 4 5 6 7

Isvery often the first business to introduce new products/services, administrative techniques, operating technologies, etc

2

In general, the top managers of my firm have . . .

 

 

 

 

a. A strong tendency to “follow the leader” in introducing new products or ideas

 

1 2 3 4 5 6 7

A strong tendency to be ahead of other competitors in introducing novel ideas or products

 

Competitive Aggressiveness Items

 

 

 

3

My firm is very aggressive and intensely competitive

 

1 2 3 4 5 6 7

My firm makes no special effort to take business from the competition

4

. In dealing with its competitors, my firm . . .

 

 

 

 

a.. Typically seeks to avoid competitive clashes, preferring a “live-and-let-live” posture

 

1 2 3 4 5 6 7

Typically  “undo-the-competitors” posture adopts a very competitive

 

Risk Taking

 

 

5

In general, the top managers of my firm favor….

 

 

 

a. A strong emphasis on the marketing of tried and true products and services

1 2 3 4 5 6 7

A strong emphasis on R&D, technological leadership and innovation

 

b. Low-risk projects with normal and certain rates of return

1 2 3 4 5 6 7

High-risk projects with changes of very high returns

 

c. A cautious, ‘wait and see’ posture in order to minimize the probability of making costly decisions when faced with uncertainty

1 2 3 4 5 6 7

A bold and aggressive posture in order to maximize the probability of exploiting potential when faced with uncertainty

 

Innovativeness

 

 

6

How many new lines of products or services has your firm marketed in the last 5 years

 

 

 

a. No new lines of products or services

1 2 3 4 5 6 7

Many new lines of product and services

 

b. Changes in product or service lines has been mostly of a minor nature

1 2 3 4 5 6 7

Changes in product or service lines has usually been quite dramatic

 

Autonomy

 

 

 

Our Firm….

 

 

 

All ideas will have to go through the hierarchy of the organisation

1 2 3 4 5 6 7

Make it possible for people working on an innovation to make decisions outside the traditional hierarchy of the organization

 

No support structure outside the formal processes

1 2 3 4 5 6 7

Create support for an innovation among employees before formal approval of the innovation by senior managers

 

 


 

 

 

 

Sampling of the type of data that will be collated by the Questionnaire Survey –Adopted from New Product Development study of (Subin Im et al. 2003)

 

S/N

Items

Scale

Operationalisation

Items for Customer Orientation cronbach α (0.85/0.79)

1

We regularly monitored changes in the market trends and characteristics

ordinal

1 to 5 (1 as none,

5 as very high)

2

We regularly conducted market research to keep track of market potential and customer preference

ordinal

1 to 5 (1 as none,

5 as very high)

3

We always listen to the opinion of customers

ordinal

1 to 5 (1 as none,

5 as very high)

4

We used customer information to improve quality of product and services

ordinal

1 to 5 (1 as none,

5 as very high)

5

We used information from market research in managing product and services

ordinal

1 to 5 (1 as none,

5 as very high)

Items for Cross Functional Integration cronbach α (0.83/0.80)

1

Integration and comms between R&D and manufacturing was efficient in the NPD

ordinal

1 to 5 (1 as none,

5 as very high)

2

Integration and comms between marketing and R&D was efficient

ordinal

1 to 5 (1 as none,

5 as very high)

3

Integration and comms between marketing and manufacturing was efficient

ordinal

1 to 5 (1 as none,

5 as very high)

Items for NPD Team Proficiency cronbach α (0.86/0.80)

1

Our new product development was efficient

ordinal

1 to 5 (1 as none,

5 as very high)

2

We had accurate forecasts for market demand

ordinal

1 to 5 (1 as none,

5 as very high)

3

Our predictions about customer needs were accurate

ordinal

1 to 5 (1 as none,

5 as very high)

4

Our knowledge of the market was accurate

ordinal

1 to 5 (1 as none,

5 as very high)

5

Our technical skill fit the needs of the product

ordinal

1 to 5 (1 as none,

5 as very high)

Items for Initiation Process cronbach α (074/0.66)

1

A systematic idea screening procedure was used

ordinal

1 to 5 (1 as none,

5 as very high)

2

We used an elaborate product development procedure

ordinal

1 to 5 (1 as none,

5 as very high)

3

We performed market research regarding potential consumers in order to test the product concept

ordinal

1 to 5 (1 as none,

5 as very high)

4

We conducted business analysis (e.g demand forecast) for the new product concept

ordinal

1 to 5 (1 as none,

5 as very high)

5

We performed a prototype or sample test in-house

Ordinal

1 to 5 (1 as none,

5 as very high)

6.

We performed a prototype or sample test with  customers

Ordinal

1 to 5 (1 as none,

5 as very high)

 

 

 

 

Items for Implementation Process cronbach α (0.74/0.71)

1

Customers were asked to participate in in-use testing to find out problems

ordinal

1 to 5 (1 as none,

5 as very high)

2

We performed test marketing with customers before launching products in the national mkt

ordinal

1 to 5 (1 as none,

5 as very high)

3

We collected response on products from distribution channelmembers(e.g dealers)

ordinal

1 to 5 (1 as none,

5 as very high)

4

We systematically analysed the results from test marketing

ordinal

1 to 5 (1 as none,

5 as very high)

5

We launched new products under a documented plan in detail

ordinal

1 to 5 (1 as none,

5 as very high)

6

We conducted a product test with consumers before launch

ordinal

1 to 5 (1 as none,

5 as very high)

7

We made strong promotion efforts for new product launch through advertising and sale production

ordinal

1 to 5 (1 as none,

5 as very high)

Items for New Product Performance cronbach α (0.93/0.87)

1

Sales volume relative to competitors

ordinal

1 to 5 (1 as none,

5 as very high)

2

Sales volume relative to original objectives

ordinal

1 to 5 (1 as none,

5 as very high)

3

Profitability to competitors

ordinal

1 to 5 (1 as none,

5 as very high)

4

Profitability relative to original objectives

ordinal

1 to 5 (1 as none,

5 as very high)

5

Market share relative to competitors

ordinal

1 to 5 (1 as none,

5 as very high)

Items for Competitive Industry cronbach α (0.81/0.78)

1

Customers were loyal to competitors products in the market

ordinal

1 to 5 (1 as none,

5 as very high)

2

Market share of major competitor was very high

ordinal

1 to 5 (1 as none,

5 as very high)

3

Extremely aggressive promotion competition took place among major competitors

ordinal

1 to 5 (1 as none,

5 as very high)

4

Price competition was intense

 

1 to 5 (1 as none,

5 as very high)

5

Major competitors have strong distribution systems

ordinal

1 to 5 (1 as none,

5 as very high)

6

There existed strong competitive product with high quality

ordinal

1 to 5 (1 as none,

5 as very high)

7

There existed one or two strong competitors in the market

ordinal

1 to 5 (1 as none,

5 as very high)

Item for Number of New Product Launched

1

How many new products/services have your firm launched in the last 12 months

Metric

 

 

 


Appendix B

Biotechnology Firms in Massachusetts

 

TBA