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PRODUCT INNOVATION
STRATEGIES AND COST EFFECTIVENESS ON PURCHASING ENVIRONMENT
CHAPTER ONE
INTRODUCTION
Background of the study
A right innovation strategy can help firms to overcome the problems they encounter concern- ing striving for a sustainable competitive advantage (Kuratko, et al., 2005). The
firm’s innovation process is guided by an explicit or implicit
innovation strategy, which provides direction toward specific resources, and help focus the efforts of the entire organization on common innovation
goals (Oke, 2007). In this paper, we analyze empirically the relationship
between firms’ choice of innovation strategy and their performance. According to Schumpeter, firms
have
an option to choose an innovation
strategy
involving
product,
process, market or organizational innovation1.
This can be termed as “simple” innovation
strategy, because firms decide to engage in only one type of innovation. Recent evidence, however, shows that a good portion of innovative firms chooses to combine various types of innovation at the same time, i.e. “complex” innovation strategy (Tavassoli and Karlsson,
2015). Considering both simple and complex innovation strategies, this implies that, in total,
firms can choose between sixteen different innovation strategies2. However, both theoretical
and
empirical studies have devoted minor
attention to other innovation strategies than those related to technological innovation (Haned, Mothe & Nguyen-Thi, 2014; Oh, Cho &
Kim, 2014). This is clearly a serious limitation, because the co-existence and co-evolution of different types of innovation is important for firm performance (Damanpour & Aravind,
2012). Since productivity
gains are related to production efficiency and factor saving, it is
argued that an analysis of the effects of innovation on productivity that focuses exclusively on
product innovation is indeed
too restrictive (Polder
et al, 2010).
1.2 Statement of the problem
Expanding the scope of analysis of innovation strategies beyond the field of technological innovation is crucial. This will provide a much richer understanding
of firms’ choices of innovation strategies as well as of the effects of different simple
and complex innovation strategies on firm performance (Le Bas, Mothe &
Nguyen-Thi, 2015). More complex innovation strategies are more demanding in terms of firm capabilities and we argue that firms that are capable of implementing
complex innovation strategies also will achieve a better performance3 (Gera & Gu, 2004).
1.3 Objectives
of the study
1. To
understand the impact of product innovation strategies on cost effectiveness on
purchasing environment
2. To
understand the relationship between product innovation strategies and cost
effectiveness on purchasing environment
1.4 Research
questions
1. What is the
impact of product innovation strategies on cost effectiveness on purchasing
environment
2. What is the
relationship between product innovation strategies and cost effectiveness on purchasing
environment
1.5 Research
hypothesis
H0: There is
no relationship between product innovation strategies and cost effectiveness on
purchasing environment
H1: There is a
relationship between product innovation strategies and cost effectiveness on purchasing
environment
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