factors affecting innovation capacity

WORLD ACADEMIC JOURNAL OF BUSINESS & APPLIED SCIENCES-MARCH-OCTOBER 2013 EDITION

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Factors Affecting Innovation Capacity in the Manufacturing

Industry in Nakuru County Kenya: a Case Study of

Buzeki Dairy Limited

Cyrus Muigai Kihara (Corresponding author), Anthony Juma Wagoki, Dr. Samuel Obino Mokaya & Bernard Komu Waweru

Jomo Kenyatta University of Agriculture and Technology P. O. Box 62000-00200, Nairobi

Kenya

Accepted 17 October 2013 Abstract The study sought to determine the factors that affect innovation capacity in the manufacturing industry in Nakuru County. The study adopted a case study research design covering a stratified sample of 140 respondents drawn from 230 employees of Buzeki Dairy Limited. Data was collected by use of questionnaires and was later analyzed using descriptive and inferential statistical analysis tools. According to the study findings, management style (93.1% , mean 3.13) was found to be the most important factor influencing innovation capacity with a strong positive Spearman correlation of 0.458; p-value < 0.01(0.000). The study recommends that, the directors, managers and supervisors in a manufacturing industry should enhance a flexible management style that is consultative, open to ideas and encourages and motivates employees. The research indicated that almost half of the employees were not frequently involved in decision making. Therefore the study recommends for more involvement of employees in decision making. Employees’ ideas or thoughts may be collected through suggestion boxes, questionnaires or through frequent meeting with all employees. Key words: Innovation capacity, management style, Top Management Teams 1. Introduction

Over the recent years the internationalization of products markets has contributed to intensified global competition, particularly from producers in the developing countries. This has been accelerated by global integration through technological advancement in information technology. To handle the challenges of this increasing international competition requires innovation in products, processes and the ways in which businesses organize and market their products. Innovation is increasingly acknowledged as having a significant contribution to organizational success, performance and survival. Damanpour (2009) suggests that innovation is often driven by pressure from the external environment, including factors such as competition, deregulation, isomorphism, resource scarcity, and customer demand, and that it is associated with adaptive behaviour that changes the organization in order to maintain or improve its performance.

International Journal of Business & Management October 2013 VOL.1, No,8

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Schumpeter (1934) suggested that Innovation is a central concept for economic growth and can be a source of sustainable competitive advantage to firms. The innovation imperative is very strong for firms in food processing sector, and plays a key role in sustaining and enhancing their competitiveness (Capitanio et al., 2010; Grunert et al., 1997; Rama & Von Tunzelmann, 2008). The ability to develop new ideas and innovations is one of the top priorities of organizations (Porter, 1999). The fast-paced technological advancement of the late 20th century and the opening of markets around the world through various trade agreements motivated companies to launch abundance of new products and services, in many cases exploiting the advancing technology. As a consequence, innovation became a crucial part of corporate strategy during this period as companies tried to remain competitive and not lose market shares to more innovative companies. To attain this level of competitiveness, companies require not only the technology, but also the management skills and corporate vision to implement the technology successfully (Blackwell & Eilon, 1991).

A firm's construction of sustainable competitive advantage critically depends on its capacity to innovate, that is its cumulative involvement in learning processes that go beyond the borders of R&D and in which organizational and managerial aspects play an essential role. It is important, therefore, to understand the complexities of innovation, the way in which it influences firms' economic and financial results and the mechanisms through which economic and social factors are involved in the whole process, as well as the intrinsic difficulties, risks and uncertainty involved in the management of innovation (Nayak & Ketteringham, 1986; Leifer et al., 2000). Because success can never be guaranteed, many organizations are naturally slow to manage an innovation because of the considerable investment involved. In view of the emerging challenges firms face, innovation has been seen as an increasingly critical factor in the competitiveness of firms; as a result, more detailed study on factors that encourage and limit innovative capacity of firms need to be carried out (Stieglitz & Heine, 2007). The study therefore sought to determine the factors that influence the innovativeness of the manufacturing industry in Nakuru County. The general objective of the study was to assess factors affecting innovation capacity in manufacturing industry in Nakuru County and the specific objective was to assess the influence of management style on innovation capacity in the manufacturing industry in Nakuru County: a case study of Buzeki Dairy Limited. 2. Literature Review

The study paid a special attention to the impacts of main organizational factor management style in the manufacturing industry in developing countries. Souitaris (2002) found that one of the main determinants of innovation in the literature was the organizational factor. Organizational capability is basically a matter of the internal side of a firm and it strongly determines a firm’s distinctive identity from the other firms (Kahn, 1990) and thus its ability to innovate. Culture as an organizational factor affects innovation capability, therefore, innovation is more likely to occur in an organization in which key organizational members are encouraged to be innovative and where innovative attempts are rewarded rather than punished (West & Anderson, 1996). The innovation culture is usually developed and supported by the management and the management style in an organization (Elenkov et al., 2005), hence the need to assess the influence of management style on innovation capacity.

Innovation is directly related to the Top Management Teams (TMTs) in an organization. Upper Echelon Theory states that TMTs exert a fundamental influence on strategic choice in their organizations, and, hence, in their results (Wiersema & Bantel, 1992; Finkelstein & Hambrick, 1990). In this theoretical framework, it is argued that the leaders' cognitive bases are the mental guidelines which support their decisions, and which consequently affect the results obtained by their companies (Pegels et al., 2000; Wiersema & Bantel, 1992; Smith et al., 1994; Kilduff et al., 2000; Knight et al., 1999).

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Although this individualist perspective of innovation has been criticized as overly narrow and simplistic (Van de Ven et al., 1989), the notion of entrepreneurs as agents of change has received wide acceptance among scholars (Kanter, 1984; Drucker, 1985). The entrepreneur’s styles of leadership and management have often been linked to specific organizational practice of innovation. Roberts et al. (1989) demonstrate that a long-term view towards new ideas and ventures supports the innovative culture. A centralized approach, on the other hand, has been shown to have a negative effect on innovation (Damanpour, 1991). According to Zhao (2005), innovation will flourish under an open style which encourages and rewards idea development. De Jong & Den Hartog (2007) summarizes that transformational, participative and employee-oriented managers are more likely to encourage employee innovativeness Knowledge and skills. Processes like the existence of consensus, communication or agreement-seeking may modify the direct relationship initially established between top management teams(TMTs) characteristics and organizational decisions or organizational results (Eisenhardt & Schoonhoven, 1990; Hambrick & D'Aveni, 1992). There is a wealth of empirical evidence which maintains that TMT diversity and high levels of education benefit the groups involved in complex decision making and a company's innovative performance may depend, overall, on the vision developed by its TMT (Bantel & Jackson, 1989; Bantel, 1993; Pegels et al., 2000; Wiersema & Bantel, 1992; Tihanyi et al., 2000).

In the study of company innovation, operationalized as innovative performance, the incidence of TMT decisions is especially relevant (Ireland et al., 2001). Innovation is an accumulative, collective and uncertain process, a fact that management directs, promotes and encourages (O'Sullivan, 2000). The preferences of its leaders can impose serious restrictions on a company's innovation, compromising its ability to identify and act on profitable opportunities (Penrose, 1959). 3. Methodology

The study adopted a case study research design to describe management style as a factor influencing innovation capacity in the manufacturing industry; Buzeki dairy Limited and establish causal relationship between independent variable; management style and dependent variable; innovation capacity as supported by Saunders et al., (2009).

The study covered a population of 230 employees of Buzeki Dairy Limited, that included managers, supervisors, technicians, sales and marketing representatives. A stratified random sampling technique was used to select the employees from various categories (departments) in Buzeki dairy Limited that was used for the study. In order to assess the views and opinions on the factor influencing innovation capacity at Buzeki dairy Limited a sample of 140 employees were selected out of a total population of 230 as guided by Krejcie and Morgan (1970).The sampling design used was appropriate for the study because every employee had equal chance of being interviewed or filling the questionnaire. It eliminated biasness. 4. Results and Analysis

From a total population of 230 employees of Buzeki Dairy Ltd, 140 were sampled using Krejcie and Morgan (1970). Out of 140 questionnaires, 101 were valid which translated to a response rate of 72%. The study sought to assess the influence of management style on innovation capacity in manufacturing industry in Nakuru County. The finding showed that 91.1% of respondents agreed that management was flexible and open to change and adoption. Consultation for new process or market was done per department and management was found to be flexible and encouraging new processes (mean 3.08, standard deviation of 0.578). The results also illustrated a high rate (93.1%) of the respondents who agreed that the organization departmental level encourages and motivates innovative ideas, this also attracted a high mean of 3.13 with dispersion of 0.577. 85.2% of the


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respondents agreed that there was an enabling management style for innovation with a mean of 2.96 and deviation of 0.582. Accordingly, 91.1% of the respondents also agreed that management style influences the ability of the organization to innovate with a mean of 3.05 and standard deviation of 0.517 (Table 4.1). These results imply that management style highly influences the innovation capacity of a manufacturing industry. This is consistent with Zhao (2005) who argued that innovation will flourish under an open style which encourages and rewards idea development. In addition De Jong and Den Hartog (2007) summarized that transformational, participative and employee-oriented managers are more likely to encourage employee innovativeness knowledge and skills. A centralized approach, on the other hand, has been shown to have a negative effect on innovation (Damanpour, 1991). Table 4.1 Management Style Descriptive Statistics

Further, the study tested a null hypothesis (H0) that there is no positive relationship between management

style and innovation capacity in manufacturing industry in Nakuru County. The results indicated that there was a strong positive relationship between management style and innovation capacity as shown in Table 4.2. This implies that the more flexible the management style, the more the capacity of a manufacturing industry to innovative. The relationship was significant at 0.01 confidence level with a Spearman correlation of 0.458; p-value < 0.01(0.000).Thus the null hypothesis (H0) that there was no positive relationship between management style and innovation capacity was rejected. This could imply that management style directly and positively influences the innovation capacity. These results are consistent with previous researches by Zhao (2005), which found that innovation flourishes under an open style which encourages and rewards idea development, and De Jong and Den Hartog (2007) who opined that transformational, participative and employee-oriented managers are more likely to encourage employee innovativeness knowledge and skills. Table 4. 2 Management Style Correlation Matrix

MS IC

Spearman's rho MS Correlation Coefficient 1.000 .458**

Sig. (2-tailed) . .000

N 101 101

N Mean Std. Deviation Agree Disagree

Management is flexible and open to change

101 3.08 0.578 91.1% 8.9%

Management consultation for new idea

101 3.08 0.578 91.1% 8.9%

Management encourages & motivate innovation

101 3.13 0.577 93.1% 6.9%

Management style of open and flexible enough

101 3.09 0.585 91.1% 8.9%

Management style is enabling for innovation

101 2.96 0.582 85.2% 14.8%

Management style influences innovation capacity

101 3.05 0.517 91.1% 8.9%

Valid n (listwise) 101


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IC Correlation Coefficient .458** 1.000

Sig. (2-tailed) .000 .

N 101 101

**. Correlation is significant at the 0.01 level (2-tailed).

MS: Management Style IC: Innovation Capacity 5. Conclusions The finding showed that 91.1% of respondents agreed that management was flexible and open to change and adoption. Consultation for new process or market was done per department and management was found to be flexible and encouraging new processes (mean 3.08, standard deviation of 0.578). The results also illustrated a high (93.1%) of the respondents who agreed that the organization departmental level encourages and motivates innovative ideas, this also attracted a high mean of 3.13 with dispersion of 0.577. 85.2% of the respondents agreed that there was an enabling management style for innovation with a mean of 2.96 and deviation of 0.582. Accordingly, 91.1% of the respondents also agreed that management style influences the ability of the organization to innovate with a mean of 3.05 and standard deviation of 0.517. The results indicated that there was a strong positive relationship between management style and innovation capacity as shown in Table 4.2. This implies that the more flexible the management style, the more the capacity of a manufacturing industry to innovative. The relationship was significant at 0.01 confidence level with a Spearman correlation of 0.458; p-value < 0.01(0.000).Thus the null hypothesis (H0) that there was no positive relationship between management style and innovation capacity was rejected. This could imply that management style directly and positively influences the innovation capacity. The study therefore concludes that management style influences innovative capacity of a firm. 6. Recommendations

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