The Impact of Product Innovation on Organizational Success or Failure in Organizations in Nigeria
Chapter One
Preamble of the Study
Innovation is considered an aspect of human development for its relationship with the species evolution by the search for ways to accomplish tasks, solve problems and meet needs. The interest in the study of innovation has been intensified since it was observed its importance for the creation and maintenance of businesses (Fagerberg, Mowery & Nelson, 2004). Thus, innovation is an inductive element for obtaining profit and market positioning. The innovation-profit relation is discussed from the propositions of Schumpeter (1942) focusing an innovative individual as an economic agent.
Thus, economic development depends on the profit that rewards and encourages the entrepreneur to seek innovation (Santos, Zawislak, Franzoni, & Vieira, 2015), and therefore, it is related to business performance and development (Szmrecsányi, 2006). Still, the results of some researches about the relationship between innovation and financial performance of companies continue generating conflicting results (Terra, Barbosa & Bouzada, 2015).
Chapter Two
LITERATURE REVIEW
INNOVATION AND BUSINESS PERFORMANCE
If innovation is considered a business driver from its creativity (Oliveira, Laranja, Lahorgue, & Born, 2016) and transformation foundations, to the point of being considered as an engine of economic growth (Schumpeter, 1942), then, it must be considered as a favoring aspect of resilience. Among the advantages that innovation is seen as creative, there are: the temporary monopoly of the invention and pioneering and the economic development generated by the followers´ run in an attempt to imitate the pioneering inventor by the search for new inventions.
The idea of economic development is based on three grounds: entrepreneurship, credit and the combinations that trigger changes in the economic activity, which is based on business competition.
Innovation in its various dimensions converges to a common point, the competitive advantage. The Organization Economic Co-Operation and Development [OECD) (2005), through the Oslo Manual, defines regarding the novelty degree, supported by Tidd, Bessant and Pavitt (2008). In this classification two classic definitions are presented: incremental innovation, when there are improvements or continuous changes in character of products and / or processes; and radical innovation, when it radically causes changes in the product or process.
Following this classification line, Henderson and Clark (2001) proposed the existence of intermediate levels between the incremental and radical innovations and suggest two additional types: the architectural, characterized by the reconfiguration of processes and the redesign of the structure, keeping the dominant design concepts intact; and the modular, when there is an introduction of design concepts and components to the architecture of a technology with no changes in the original architecture.
Still, regarding the categorization of innovation, the Oslo Manual (OECD, 2005), presents four categories: product – good or new or significantly improved service; process: a new or improved method of production or distribution; marketing – new marketing method with modifications on products or packaging, positioning, promotion or pricing; and organizational – new methods in business practices, organization or management of its relationships.
As regarding access, two discussions are exponents: the first is ambidexterity, proposed by March (1991).
According to him, access to technology is given in two ways: exploitation – expansion of domestic capacity, from the use and improvement of existing resources and internal processes; and exploration – the process of exploring new markets, new technologies and new products and the pursuit of discovery via R & D.
Corroborating this thought, O’Reilly and Tushman (1994) emphasize the importance of these concepts and highlight that successful organizations structure exploitation and exploration sectors, separately. The second discussion is the proposal of Chesbrough (2003) about open innovation. The author proposes the existence of an open flow of ideas and resources and the movement of knowledge on the border between the company and the market, where the company can use external ideas, combine them with internal ideas, innovate and take the advantage from the exploration of capabilities.
The opposite concept proposed by Chesbrough, Vanhaverbeke and West (2006) is the closed innovation, defined by him as a restricted process to the company’s ability itself to capture, enhance, and develop innovation, using only one input, the R & D, and an output, the market.
Regarding the confrontation of uncertainty environments and technological or economic discontinuity, innovation is also indicated as an aspect able to help equip the ability of companies at this stage.
Authors such as Anderson and Tushman (1990) and Jensen (1982) define technological discontinuity as rupture or “disruptive” innovation, in their opinion, in the technological environment moments of stillness occur, in which companies that come out ahead in product development, create technologies and capabilities considered superior, they get profit from pioneering.
However, in their opinion, discontinuity clashes that alter these periods occur, caused by the followers´ pursuit to replace the dominant project. Christensen and Overdorf (2000) say that disruptive innovation favors the market destroying process and also the dominant companies creatively and generates a constant innovation-refresh cycle.
As for the innovation performance, in this paper, we chose to specifically highlight the financial performance, discussion in which Geroski et al. (1993) argue that some aspects need to be analyzed, among them, the relationship: Profit, production and marketing, and the earnings – spending relationship with R & D. These authors emphasize the need to observe the correlation between production and profitability of innovation, in other words, the performance differences between innovative and non-innovative enterprises. This analysis is important because it considers the direct association between innovation and two essential aspects: the first, superior performance (better results) and the generation of advantage in the market; and second, the change or improvement process of the company´s internal capacities (Geroski et al., 1993).
Other discussions on innovation performance are found in the literature. Boone (2000) points out that there is pressure on companies to innovate and generate returns, Brito, Brito and Morganti (2009) emphasize the difficulty to measure innovation and to establish a direct relation with performance. Dosi (1998) highlight the existence of performance differences among companies with different levels of access to technology. Baily and Chakrabarty (1985) corroborate this discussion and point out that these imbalances result from differences in costs and innovation production.
Chapter Three
METHOD
The method used was a descriptive study that represents a kind of research, usually used to describe socioeconomic, financial and technical phenomena. The sample is classified as non-probabilistic sampling for convenience, made up of 10 companies divided into 2 groups. Group 1 consists of 5 successful Nigerian companies. Therefore, the second group consists of 5 unsuccessful companies.
Chapter Four
RESULTS AND DISCUSSIONS
The first analysis step is the calculation of the indicators: EBITDA, ROE and ROA of the 4 selected fiscal years, as shown in Table 1.
Chapter Five
CONCLUSIONS
This paper aims to analyze comparatively innovative and non-innovative enterprises, assuming the existence of a higher resilience level in innovative companies, comparatively analyzing the Nigerian companies divided into two groups, innovative and non- innovative companies. The results obtained from the analysis of EBITDA, ROE and ROA indexes are an indicative of higher performance of the innovative companies compared with the non-innovative companies.
Even though I considered the limitations of this paper by aspects such as: sample size, limited to 10 companies; differences between companies compared to each other, being big companies, time of existence and maturity in the market; the analysis period, limited to 4 fiscal years; and indexes analyzed, limited to 3, I considered that the study presents evidence that merit further development, given the superiority of innovative companies, which may represent an important reflex to increase investment in innovation by enterprises, governments encouraging innovation and the consolidation of innovation as a promotion aspect of business and economy development. I recommend the expansion and intensification of this kind of studies with the inclusion of other analytical elements, sectors, company categories and indicators in order to strengthen positively the arguments and assumptions of innovation as an enlargement factor and performance support.
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