Dynamic capability development, innovation and competitive strategy in project oriented service firms

Salunke, Sandeep Shivanand (2010). Dynamic capability development, innovation and competitive strategy in project oriented service firms PhD Thesis, UQ Business School, The University of Queensland.

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Author Salunke, Sandeep Shivanand
Thesis Title Dynamic capability development, innovation and competitive strategy in project oriented service firms
School, Centre or Institute UQ Business School
Institution The University of Queensland
Publication date 2010-03
Thesis type PhD Thesis
Supervisor Dr Jay Weerawardena
Prof Janet McColl-Kennedy
Total pages 295
Total colour pages 4
Total black and white pages 291
Subjects 15 Commerce, Management, Tourism and Services
Abstract/Summary Innovation has long been considered the cornerstone of firm competitive strategy. The view that firms use innovation to create value and outperform competitors not only applies to manufacturing firms, but also to service firms. Despite the recent shift in marketing literature from goods-centered logic to service-centered logic, the process by which service firms use innovation to compete in the marketplace has received limited attention. Existing research on service innovation draws on the manufacturing literature, which is considered inadequate to capture the unique characteristics of the service innovation-based competitive strategy process. The absence of a well-developed body of knowledge on service innovation and innovation-based competitive strategy in service firms has implications for both theory and practice. With the growing importance of the services sector to the economy, government policy planners expect service firms to play a greater role in creating economic value. However, their efforts are hindered by the lack of a well-founded body of knowledge on firm-level innovation in the services sector. This study is motivated by the inadequacies of prior research in the area of innovation-based service firm competitive strategy. The extensive review of literature undertaken suggested that research into factors driving innovation-based competitive strategy in service firms is limited. It highlighted the absence of a well-founded conceptualisation of service innovation as well as the current debate on whether service innovation-based competitive advantages can be sustained, which remains inconclusive. Overall, the literature review highlighted the need for a conceptual model of service innovation-based competitive strategy that can be successfully operationalised to describe the innovation-based competitive strategy process in service firms. It was observed that the dynamic capability-based view of competitive strategy provides a sound theoretical foundation to examine the antecedent factors driving service innovation-based competitive strategy process. These gaps in the literature led to the formulation of the research problem: what is the role of dynamic capabilities in innovation and sustained competitive advantage of service firms? Addressing the research problem cited above, this study examines the role of dynamic capabilities in service innovation and sustained competitive advantage. The dynamic capability-based view assigns a proactive and dominant role to the strategic leadership of the firm in gaining and sustaining competitive advantage. Although the dynamic capabilities-based view has been widely adopted in competitive strategy research, it still lacks a strong empirical base, which is manifested by the absence of measures for key theoretical constructs. Consequently, there exists a need to validate the conceptualisation of dynamic capabilities to explain the sustained competitive advantage process in the firm. Similarly, the review of the service innovation literature revealed the lack of a valid and reliable measure that captures the value-creation activities of the service firm. The dynamic capability-based model of service firm competitive strategy developed for this study theorises that service firms using innovation as a primary competitive strategy, accumulate knowledge using dynamic capabilities, and use this knowledge to create value via innovation. This knowledge-based approach views service innovation as an outcome of the firm’s learning process in which new knowledge acquired by the service firm is integrated into its service offerings. The model proposed that these dynamic capabilities are built by entrepreneurial key decision-makers of service firms. It was theorised that service firms build dynamic capabilities in episodic learning, relational learning, client-focussed learning and combinative capability that drive service innovation and sustained competitive advantage. The theoretical model is first refined based on in-depth case interviews with 13 senior executives of service firms. The model is then tested using a sample of 192 service firms located in Australia and was estimated using structural equation modelling. The sampled service firms use projects to deliver services and work in close collaboration with their clients, thereby reflecting the ‘co-creation’ aspect unique to services. The project-oriented context therefore provides an appropriate setting for the study. Survey research using key respondent reports were used to test the proposed model. The data analysis, in general, provides support for the proposed theoretical constructs and the key theoretical relationships hypothesised in the model. First, the results suggest that service entrepreneurship is positively linked to dynamic capabilities. Second, these dynamic capabilities are positively related to service innovation. Third, service innovation has a positive relationship with sustained competitive advantage. The final model derived through model re-specification does not support three relationships that were initially hypothesised. However, the final model suggested three alternative paths, highlighting novel theoretical relationships. Overall, it suggests that the dynamic capabilities of episodic learning, relational learning and client-focussed learning are positively related to service innovation through the dynamic combinative capability construct. This means the new knowledge acquired by the project oriented service firm has to be combined with existing resources to create innovative offerings. This is a novel and meaningful finding of this research. The research makes several contributions to theory. First, it provides empirical support to the dynamic capabilities-based view of competitive strategy by developing new measures for the dynamic capability constructs and testing their antecedents and consequences. Second, it operationalises entrepreneurship as distinct in the services context. Third, it develops a new measure for service innovation. Overall, the research contributes to the theories of entrepreneurship, services marketing, innovation-based competitive strategy and the dynamic capabilities view. The findings have important implications for public policy formulation and managerial practice. The study validates firm-level evidence on service innovation, thereby providing valuable inputs to formulate service firm-focussed innovation policy. This is especially relevant in the Australian context where firm-level evidence is limited. The findings provide a feasible path to service firm managers adopting innovation to outperform competitors, in that they must build and nurture a set of strategic capabilities. To do so, they must adopt an entrepreneurial posture displaying innovativeness, proactiveness, risk taking and adaptiveness in their strategic decision-making. These attributes constitute the nature of service entrepreneurship, which is the primary driver of the dynamic capability building process and resultant innovation-based sustained competitive advantage in service firms.
Keyword Service-firm competitive strategy
Dynamic capabilities
Service innovation
Service entrepreneurship
Additional Notes The following pages have to be printed in colour: - pages 286-288 of 295 pages - page 295 of 295 pages. The following pages have to printed in landscape: - pages 67-68 of 295 pages - page 173 of 295 pages - pages 232-244 of 295 pages - pages 251-254 of 295 pages - pages 256-265 of 295 pages

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Created: Wed, 05 May 2010, 10:42:57 EST by Mr Sandeep Salunke on behalf of Library - Information Access Service