THE MODERATING EFFECT OF ENVIRONMENTAL DYNAMISM IN THE RELATIONSHIP BETWEEN INNOVATION CAPABILITY AND PERFORMANCE OF MANUFACTURING FIRMS IN NAIROBI CITY COUNTY, KENYA
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Jun 17, 2023
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Abstract
The manufacturing sector is well known for its significance in upholding the economic prosperity of many nations. However, the manufacturing sector’s contribution to the gross domestic product has been consistently falling across the last few years, giving rise to fears of a premature de-industrialization phenomenon in Kenya. A growing research literature posits that the innovation capability can be considered a theoretical answer to the question of how organizations in various industries are able to achieve and sustain superior performance in turbulent environments. However, scholars still lack a complete understanding of the specific innovation capability that sustain superior firm performance over time in the dynamic environment. The purpose of this study was to examine the moderating effect of environmental dynamism in the relationship between innovation capability and performance of manufacturing firms in Nairobi City County, Kenya. The study employed the correlational, cross-sectional survey research design. The proportionate stratified random sampling technique was used to select a sample size of 228 manufacturing firms from a target population of 526 manufacturing firms in Nairobi City County, Kenya. The Pearson’s product moment correlation analysis results indicated that product innovation capability, process innovation capability, marketing innovation capability and technological innovation capability had positive and significant relationship with performance of manufacturing firms in Nairobi City County, Kenya. The standard multiple regression results showed that product innovation capability, process innovation capability, marketing innovation capability and technological innovation capability had a positive and significant effect on performance of manufacturing firms in Nairobi City County, Kenya. The moderated multiple regression results showed that environmental dynamism had a significant moderating effect on the relationship between innovation capability and performance of manufacturing firms in Nairobi City County, Kenya. The study recommended that it is imperative for the managers to implement innovation capability and strategically manage the environmental dynamism to foster the performance of manufacturing firms. Policy makers should consider initiating policy review to encourage stakeholders to implement innovation capability and strategically manage the environmental dynamism to foster the performance of manufacturing firms. The study pointed to several intriguing paths for future research.
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References
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Barrios, A., Camacho, S., & Estrada-Mejia, C. (2023). From service to social innovation with a service-dominant logic approach. Journal of Services Marketing, 37(2), 201-215.
Chaudhuri, R., Chatterjee, S., Vrontis, P. D., & Vicentini, F. (2023). Effects of human capital on entrepreneurial ecosystems in the emerging economy: The mediating role of digital knowledge and innovative capability from India perspective. Journal of Intellectual Capital, 24(1), 283-305.
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Kiiru, D. K., Mukulu, E., & Ngatia, P. (2023). Innovativeness and Performance: Evidence from Kenyan SMEs. European Journal of Business and Management Research, 8(2), 113-119.
Kijkasiwat, P., & Phuensane, P. (2020). Innovation and firm performance: The moderating and mediating roles of firm size and small and medium enterprise finance. Journal of Risk and Financial Management, 13(5), 97.
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Kamboj, S., & Sharma, M. (2023). Social media adoption behaviour: Consumer innovativeness and participation intention. International Journal of Consumer Studies, 47(2), 523-544.
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Mitariani, N., Yasa, N., Giantari, I., & Setiawan, P. (2023). Improving export performance trough innovation capability during COVID-19 pandemic: The mediation role of aesthetic-utilitarian value and positional advantage. Uncertain Supply Chain Management, 11(1), 361-374.
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Wijaya, N., & Rahmayanti, P. (2023). The role of innovation capability in mediation of COVID-19 risk perception and entrepreneurship orientation to business performance. Uncertain Supply Chain Management, 11(1), 227-236.
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Agyapong, A., Mensah, H. K., & Akomea, S. Y. (2021). Innovation-performance relationship: The moderating role of market dynamism. Small Enterprise Research, 28(3), 350-372.
Alvarez, S., Newman, A. B., Barney, J., & Plomaritis, A. (2023). Creating stakeholder legitimacy in the eyes of stakeholders: The case of Havana’s paladares. Entrepreneurship Theory and Practice, 47(1), 17-65.
Awoleye, O. M., Ilori, O. M., & Oyebisi, T. O. (2020). Sources of innovation capability and performance of ICT agglomerated MSMEs in Nigeria. International Journal of Innovation Management, 24(04), 2050032.
Ayinaddis, S. G. (2023). The effect of innovation orientation on firm performance: Evidence from micro and small manufacturing firms in selected towns of Awi Zone, Ethiopia. Journal of Innovation and Entrepreneurship, 12(1), 26-45.
Bange, T. (2022). Innovation Capability and performance of Fintech firms in Nairobi (Masters research project, University of Nairobi).
Barrios, A., Camacho, S., & Estrada-Mejia, C. (2023). From service to social innovation with a service-dominant logic approach. Journal of Services Marketing, 37(2), 201-215.
Chaudhuri, R., Chatterjee, S., Vrontis, P. D., & Vicentini, F. (2023). Effects of human capital on entrepreneurial ecosystems in the emerging economy: The mediating role of digital knowledge and innovative capability from India perspective. Journal of Intellectual Capital, 24(1), 283-305.
Chatterjee, S., Chaudhuri, R., Vrontis, D., & Thrassou, A. (2023). Revisiting the resource-based view (RBV) theory: From cross-functional Capability perspective in post COVID-19 period. Journal of Strategic Marketing, 1-16.
Chi, N. T. K. (2021). Innovation capability: the impact of e-CRM and COVID-19 risk perception. Technology in Society, 67, 101725.
Christa, U., & Kristinae, V. (2021). The effect of product innovation on business performance during COVID 19 pandemic. Uncertain Supply Chain Management, 9(1), 151-158.
Deng, Q., & Noorliza, K. (2023). Integration, resilience, and innovation capability enhance LSPs’ operational performance. Sustainability, 15(2), 1019-1027.
Dwikat, S. Y., Arshad, D., & Mohd Shariff, M. N. (2022). The influence of systematic strategic planning and strategic business innovation on the sustainable performance of manufacturing SMEs: The case of Palestine. Sustainability, 14(20), 13388.
Dwivedi, A., & Pawsey, N. (2023). Examining the drivers of marketing innovation in SMEs. Journal of Business Research, 155, 113409.
Fan, M., Huang, W., & Xiong, S. (2023). How enterprise interactions in innovation networks affect technological innovation performance: The role of technological innovation capacity and absorptive capacity. Plos one, 18(3), e0282540.
Fang, M., Liu, F., Xiao, S., & Park, K. (2023). Hedging the bet on digital transformation in strategic supply chain management: A theoretical integration and an empirical test. International Journal of Physical Distribution & Logistics Management.
Ferreira, J., Coelho, A., & Moutinho, L. (2020). Dynamic Capability, creativity and innovation capability and their impact on competitive advantage and firm performance: The moderating role of entrepreneurial orientation. Technovation, 92, 102061.
Goni, J. I. C., & Van Looy, A. (2022). Process innovation capability in less-structured business processes: a systematic literature review. Business Process Management Journal, (ahead-of-print).
Gui, L., Lei, H., & Le, P. B. (2021). Determinants of radical and incremental innovation: The influence of transformational leadership, knowledge sharing, and knowledge-centered culture. European Journal of Innovation Management, 54, 414-438. doi.org/10.1108/EJIM-12-2020-0478
Gumulya, D., Purba, J. T., Hariandja, E. S., & Pramono, R. (2023). Cultural product design as a key strategy for innovation capability development: Evidence from Indonesian creative social enterprises. Archives of Design Research, 36(1), 21-40.
Helmefalk, M., Palmquist, A., & Rosenlund, J. (2023). Understanding the mechanisms of household and stakeholder engagement in a recycling ecosystem: The SDL perspective. Waste Management, 160, 1-11.
Henao-García, E. A., & Cardona Montoya, R. A. (2023). Fostering technological innovation through management and marketing innovation. The human and non-technological linkage. European Journal of Innovation Management, 26(1), 183-206.
Ireri, D. K., Wasike, S., & Mungai, C. (2020). Innovative strategies and organizational performance: A case of Telkom Kenya Limited. International Journal of Research in Engineering, 10(10), October 2020, 20-26.
Issak, A. I. S., & Odollo, L. (2023). Innovation practices and performance of Islamic banks in Nairobi-Kenya. Journal of Business and Strategic Management, 8(1), 52-76.
Jusufi, G., Ukaj, F., & Ajdarpašić, S. (2020). The effect of product innovation on the export performance of Kosovo SMEs. Management: Journal of Contemporary Management Issues, 25(2), 215-234.
Kamalrulzaman, N. I., Ahmad, A., Ariff, A. M., & Muda, M. S. (2021). Innovation Capability and performance of Malaysian agricultural SMEs: The moderating role of strategic alliance. International Journal of Business and Society, 22(2), 675-695.
Kanyi, E. G., & Kihara, A. (2022). Influence of innovation strategies on performance of internet service provider companies in Nairobi Kenya. Journal of Business and Strategic Management, 7(3), 1-29.
Kiiru, D. K., Mukulu, E., & Ngatia, P. (2023). Innovativeness and Performance: Evidence from Kenyan SMEs. European Journal of Business and Management Research, 8(2), 113-119.
Kijkasiwat, P., & Phuensane, P. (2020). Innovation and firm performance: The moderating and mediating roles of firm size and small and medium enterprise finance. Journal of Risk and Financial Management, 13(5), 97.
Kim, K. (2021). The interplay between the social and economic human resource management systems on innovation capability and performance. International Journal of Innovation Management, 25(07), 2150074.
Kamboj, S., & Sharma, M. (2023). Social media adoption behaviour: Consumer innovativeness and participation intention. International Journal of Consumer Studies, 47(2), 523-544.
Kamin, Y. B. (2021). Integrating innovation diffusion theory with technology acceptance model: Supporting students’ attitude towards using a massive open online course (MOOCs) system. Interactive Learning Environments, 29(8), 1380- 1392.
Larios-Francia, R. P., & Ferasso, M. (2023). The relationship between innovation and performance in MSMEs: The case of the Wearing Apparel Sector in emerging countries. Journal of Open Innovation: Technology, Market, and Complexity, 100018.
Lathong, L., Phong, B. L., & Saeheng, P. (2021). Transformational leadership, knowledge sharing and innovation capability: An empirical study from Lao Firms. Journal of International Business Management, 4(9), 1–10. doi.org/10.37227/ jibm-2021-08-1154
Latip, M., Sharkawi, I., & Mohamed, Z. (2021). The impact of innovation attributes and the mediating effect of environmental attitudes towards environmental management practices among SMEs. International Social Science Journal, 71(239-240), 91-108.
Le, P. B. (2021). Determinants of frugal innovation for firms in emerging markets: the roles of leadership, knowledge sharing and collaborative culture. International Journal of Emerging Markets, (ahead-of-print).
Li, H., Lu, Z., & Yin, Q. (2023). The development of Fintech and SME innovation: Empirical evidence from China. Sustainability, 15(3), 2541.
Li, J., Li, Y., Song, H., & Fan, C. (2021). Sustainable value creation from a capability perspective: How to achieve sustainable product design. Journal of Cleaner Production, 312, 127552.
Lusch, R. F., Vargo, S. L., & O’brien, M. (2007). Competing through service: Insights from service-dominant logic. Journal of retailing, 83(1), 5-18.
Martins, A. (2023). Dynamic Capability and SME performance in the COVID-19 era: the moderating effect of digitalization. Asia-Pacific Journal of Business Administration, 15(2), 188-202.
Mitariani, N., Yasa, N., Giantari, I., & Setiawan, P. (2023). Improving export performance trough innovation capability during COVID-19 pandemic: The mediation role of aesthetic-utilitarian value and positional advantage. Uncertain Supply Chain Management, 11(1), 361-374.
Mohamed, S. (2021). Catalyzing and implementing innovation strategies in the information technology industry workforce (Doctoral dissertation, Walden University).
Mugambi, L. M., & Kinyua, G. M. (2020). Role of innovation capability on firm performance in the context of commercial banks in Nairobi City County, Kenya. International Journal of Current Aspects in Finance, Banking and Accounting, 2(3), 14-23.
Mung’ora, M. N. (2020). Innovative strategies and the performance of savings and credit cooperatives in Nyeri County, Kenya (Masters research project, Kenyatta University).
Mungai, E., & Ndiritu, S. W. (2023). Peeling the Onion! What are the drivers and barriers of cleaner production? A case of the Kenyan manufacturing SMEs. Journal of Cleaner Production, 383, 135436.
Muthoka, R. K. (2022). Strategic alliance and performance of small and medium enterprises in manufacturing sector in Nairobi City County, Kenya (Doctoral thesis, kenyatta university).
Muthoka, R., Kilika, J., & Muathe, S. (2021). Strategic alliance among small and medium enterprises: Firm based motive in the manufacturing sector in Kenya. International Journal of Economic, Commerce and Management, 9(11), 334-359.
Navarro, S., Andreu, L., & Cervera, A. (2014). Value co-creation among hotels and disabled customers: An exploratory study. Journal of business research, 67(5), 813-818.
Oketch, F. (2023). Successful innovation strategies of Ugandan small and medium enterprises (Doctoral dissertation, Walden University).
Park, S., Yu, H., Menassa, C. C., & Kamat, V. R. (2023). A comprehensive evaluation of factors influencing acceptance of robotic assistants in field construction work. Journal of Management in Engineering, 39(3), 04023010.
Poi, G., & Lebura, S. (2022). Revitalizing strategic agility in a turbulent environment: A conceptual discourse. International Journal of Scientific Research and Management, 10(01), 2844-2851.
Prahalad, C. K. (2004). The blinders of dominant logic. Long range planning, 37(2), 171-179.
Ramaj, V., Cucovic, A., & Jusufi, G. (2022). Innovation as a success key for manufacturing SMEs: Empirical insights from Kosovo. Economic Studies, 31(4), 113-127.
Rogers, E. M. (1995). Diffiision of innovations. The Free Press, New York.
Rumanti, A. A., Rizana, A. F., Septiningrum, L., Reynaldo, R., & Isnaini, M. M. R. (2022). Innovation capability and open innovation for small and medium enterprises (SMEs) performance: Response in dealing with the COVID-19 pandemic. Sustainability, 14(10), 5874.
Solem, B. A. A., Fredriksen, J. I., & Sørebø, Ø. (2023). Dynamic Capability in the realisation of omnichannel retailing. International Journal of Retail & Distribution Management, 51(1), 21-38.
Strobl, A., Kallmuenzer, A., & Peters, M. (2023). Entrepreneurial leadership in Austrian family SMEs: A configurational approach. International Small Business Journal, 41(2), 152-180.
Teece, D. J. (2023). The evolution of the dynamic Capability framework. Artificiality and sustainability in entrepreneurship, 113.
Telagawathi, N., Yasa, N., Giantari, I., & Ekawati, N. (2022). The role of innovation strategies in mediating covid-19 perceptions and entrepreneurship orientation on Endek weaving craft business performance. Uncertain Supply Chain Management, 10(3), 913-922.
Thoumrungroje, A., & Racela, O. C. (2022). Innovation and performance implications of customer-orientation across different business strategy types. Journal of Open Innovation: Technology, Market, and Complexity, 8(4), 178-189.
Tu, W., Zhang, L., Sun, D., & Mao, W. (2023). Evaluating high-tech industries' technological innovation capability and spatial pattern evolution characteristics: Evidence from China. Journal of Innovation & Knowledge, 8(1), 100287.
Vargo, S. L., & Lusch, R. F. (2004). Evolving to a new dominant logic for marketing. Journal of marketing, 68(1), 1-17.
Verma, S., & Chaurasia, S. (2019). Understanding the determinants of big data analytics adoption. Information Resources Management Journal (IRMJ), 32(3), 1-26.
Vrontis, D., El Chaarani, H., El Abiad, Z., El Nemar, S., & Yassine Haddad, A. (2022). Managerial innovative Capability, competitive advantage and performance of healthcare sector during Covid-19 pandemic period. foresight, 24(3/4), 504-526.
Weidner, N., Som, O., & Horvat, D. (2023). An integrated conceptual framework for analysing heterogeneous configurations of absorptive capacity in manufacturing firms with the DUI innovation mode. Technovation, 121, 102635.
Were, J. N. (2021). Innovation capability strategy and firm performance in the furniture manufacturing sector in Kenya. Journal of Economics, Business, & Accountancy Ventura, 24(2), 233-245.
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