CHAPTER 2 LITERATURE REVIEW
2.8 Relationship among Variables
developing innovation strategies for product and process innovations. Knowledge management contributes to innovation performance when a simultaneous approach of soft human resource management practices and hard IT practices are implemented.
Buenechea-Elberdin (2018) wrote an article “ Knowledge management strategies, intellectual capital, and innovation performance: a comparison between high – and low tech firms” . The study demonstrates the outstanding role or renewal capital as the intellectual capital component; it provides a conceptual analysis of the connection between knowledge management strategies and intellectual capital, and it highlights the necessity of considering the technological level of a firm as the contingency variable affecting the intellectual component. Wang (2011) wrote an article “Linking properties of knowledge with innovation performance: the moderate role of absorptive capacity”.
The results show that only a few knowledge properties have negative effects on innovation performance; most knowledge properties have a positive effect on innovation. The relationship between properties of knowledge and innovation performance is more outstanding when the firm has higher absorptive capacity. The properties of knowledge and absorptive capacity are two inseparable determinants for innovation performance. Han (2018) wrote an article “ The relationship between knowledge sharing capability and innovation performance within industrial clusters” . The study showed that significant relationships were found between knowledge sharing and innovation performance. Three key characteristics of dynamic capabilities were knowledge acquisition capability, knowledge integration capability, and knowledge creative capability. Dynamic capabilities played a mediating role in this relationship and trust was a significant moderator. Liao (2010) wrote an article “ Relationship between knowledge acquisition, absorptive capacity and innovation capability: an empirical study on Taiwan’s financial and manufacturing industries” . The findings from the study show that absorptive capacity is a mediator between knowledge acquisition and innovation capability. Knowledge acquisition has a positive effect on absorptive capacity.
Figure 2.2 Knowledge Management Affects Innovation Capability
With regard to the relationship of variables, there are supportive research studies, for example that of Hsien (2010) studied knowledge needs, absorptive capacity and innovation capability are related” . The study apply the conceptual models of Laudon (2002), Beesley (2008), and Marquardt (2002) were used, i.e. knowledge seeking, knowledge creation, knowledge storage, knowledge transfer, and knowledge application. Innovation capability is defined proficiency, capability, and the potential to achieve innovation in the future Cristina (2004), M. Saunila (2014), Aryanto (2015).
These which can be used to identify research hypothesis one, namely, knowledge management has a direct positive effect on innovation capability.
2. Knowledge management has an effect on innovation performance.
Figure 2.3 Knowledge Management has an effect on Innovation Performance.
Knowledge utilization Knowledge sharing Knowledge creation
Knowledge utilization Knowledge sharing Knowledge creation
Knowledge management
Innovation capabilities Collaboration with external
parties
Research and development
Knowledge management
Innovation performance
Quality of innovation
Quantity of innovation
Knowledge management has a direct and positive influence on innovation performance according to research study conducted by Mardani (2018) studied the relationship between knowledge management and innovation performance. The results show that knowledge creation has more significant effects on innovation speed, innovation quality, and innovation quantity, whereas innovation quality, knowledge creation, and knowledge integration has more significant effects on performance.
Therefore, knowledge management contributes to higher innovation, effectiveness, efficiency, and profitability. According to Urgal (2013) wrote an article knowledge resources and innovation performance. The results indicate that knowledge resources have a direct positive effect on innovation performance as knowledge is needed for research and development. According to Lundvall (2007) wrote an article “Knowledge management and innovation performance” . The study results show that learning organizations have a positive impact on dynamic performance and there are lessons as obstacles that become learning.According to Alegre (2011) wrote an article
“Knowledge management and innovation performance in a high-tech SMEs industry”.
The study found that knowledge management was positively related to innovation performance. Based on such relationships, hypothesis two is identified as follows:
knowledge management has a direct positive influence on innovation performance.
3.Transformational leadership has an effect on innovation capability
Individualized consideration Idealized influence
Intellectual stimulation Inspiration motivation
Innovation capabilities Collaboration with external
parties
Research and development
Transformational leadership
Figure 2.4 Transformational Leadership has an Effect on Innovation Capability.
Transformational leadership has a direct positive influence on innovation capability according to the following research study García‐Morales (2008) wrote an article “ The effects of transformational leadership on organizational performance through knowledge and innovation” . Transformational leaders possess outstanding characteristics such as inspiration, intellectual stimulation, and decision-making. Some leaders have good communication skills and build trust, knowledge sharing, and possess knowledge management. Further, absorptive capacity depends mainly on prior knowledge, i.e. knowledge that may be useful. The leader’s perception of knowledge facilitates the future exploitation of knowledge to improve basic skills and absorptive capacity in the organization. Transformational leadership influences absorptive capacity. Leadership enables improvement of individual absorption, the design of an organizational structure to fit the organization’s characteristics, increased investment in research and development, and intense effort to strengthen organizational absorptive capacity. Knowledge slack is positively associated with absorptive capacity.
Transformational leadership guides and motivates the common vision of the organization. Transformational leaders enable the search for new opportunities and the creation of common vision according to Rangus (2017) wrote an article “The impact of leadership influence tactics and employee openness toward others on innovation performance: Leadership influence tactics and employee openness” . The results from the study reveal that leadership has an influence on tactics and employee openness toward others regarding innovation performance at the individual and team levels.According to Schweitzer (2014) wrote an article “ Leadership and innovation capability development in strategic alliances” the study confirms the positive relationship between transformational leadership and the development of innovation and operational capabilities. Moreover, transformational leadership is not only associated with operational capability development but contributes to the development of innovation capabilities.According to Malik (2017) wrote an article “ Influence of transformational leadership components on job satisfaction and organizational commitment” . The findings from the study reveal that the transformational leadership components, i.e. idealized influence, inspiration motivation, intellectual stimulation,
and individualized consideration, have a significant influence with respect to job satisfaction along with the organizational commitment of employees. Senior management needs to focus on the core components of transformational leadership while designing policies for strategic implementation.According to Safaa (2016) wrote an article “ Head nurses’ transformational leadership, collaboration and its relation to staff nurses’ work engagement” . The study revealed a high level of acceptance of transformational leadership while the level of collaboration was moderate. A significant positive relation was found among head nurses’ total transformational leadership style, individualized consideration, intellectual stimulation, and their collaboration relationships. Head nurses’ total transformational leadership style, idealized influence, and intellectual stimulation had a significant positive relation with staff nurses’
strength, dedication, and total work engagement. Based on the research studies, hypothesis three was determined: transformational leadership has a direct positive influence on innovation capability.
4. Human capital affects innovation capability.
Figure 2.5 Human Capital affects Innovation Capability.
Human capital has a direct positive influence on innovation capability according to the following research study. Cabrilo (2014) study “ Human capital gaps for effective innovation strategies in the knowledge era”. The results show that the biggest gaps are related to crucial human capital value drivers for the innovation process, such
capability Knowledge
Collaboration with external parties
Research and development
Human capital
Innovation capabilities
as innovativeness, education, knowledge sharing, and social skills.According to Maurer (2011) wrote an article “ The value of intra-organizational social capital” . The study finds that knowledge transfer is a significant mediator between organization members’
intra-organizational social capital and organizational performance outcomes of growth and innovation performance. According to Mahsud (2011) wrote an article “ Human capital, efficiency and innovative adaptation as strategic determinants of firm performance” . The study examined the extent to which a firm’s long-term financial performance depends on three performance determinants: human capital, efficiency, and innovation adaptation. The results indicated that the effects of human capital on long-term financial performance were partially mediated by efficiency and innovation adaptation.According to Vogel (2013) wrote an article “ The two faces of R&D and human capital”. The study found that human capital had a positive and significant direct effect on productivity growth. Importance should be given to educational attainment and R&D expenditures, which will increase productivity growth. Based on the research studies, hypothesis four was determined: human capital has a positive direct influence on innovation capability.
5. Innovation capability has an effect on innovation performance.
Figure 2.6 Innovation Capability has an effect on Innovation Performance.
Innovation capabilities
Innovation performance Collaboration with external
parties
Research and
development Quality of
innovation
Quantity of innovation
Anzola-Román (2018) , researchers study “ Organizational innovation, internal R&D and externally sourced innovation: effects on technological innovation outcomes” . The results confirm the existence of the positive effects of internal R&D and externally sourced innovation practices.According to Faisal (2016), in a study on thinking management, the practice of thinking, and collaboration and learning, the results were seen to be able to predict the integration of innovation capability dimensions in stimulating innovation in an organization. According to Belderbos (2016), direct university collaboration is more beneficial for firms with relatively high scientific absorptive capacity, while only mediating variables are associated with greater innovative performance for firms with relatively low scientific absorptive capacity. These findings are suggestive of the importance of a fit between the nature of a firm’s R&D organization and its strategy to access scientific knowledge. According to Yanadori (2013) wrote an article “ Creating incentives for innovation, the relationship between pay dispersion in R&D groups and firm innovation performance”.
The results show that pay dispersion in R&D groups is negatively related to firm innovation and this negative relationship is alleviated in firms with greater financial slack.According to Fındık (2015) wrote an article “The impact of external collaboration on firm innovation performance: evidence from Turkey” . The study aimed to understand how collaboration influences the innovation performance of firms, where a new indicator was introduced that is simply based on the perception of firms regarding the impact of innovation. Factor analysis has two basic impacts of innovation: product and process that have impacts on innovation. Firms engaged in external collaboration during the innovation process see better improvement in their products and markets.
External collaboration improves the production process of firms, Ryzhkova (2015) wrote an article “ Online collaboration with customers drives innovation performance”.
The study confirms the significance of information and communication technology- supported collaboration with customers for a firm’s innovation performance.
Interacting with customers using online methods has a positive effect on companies’
innovation output.According to Belderbos (2016) found that direct university collaboration is more beneficial for firms with relatively high scientific absorptive capacity, while only mediating variables are associated with greater innovative performance for firms with relatively low scientific absorptive capacity. The findings
are suggestive of the importance of a fit between the nature of a firm’s R&D organization and its strategy to access scientific knowledge.
6. Knowledge management has an effect on innovation performance, whereas innovation capability variables are mediators.
Figure 2.7 Knowledge Management has an effect on Innovation Performance, whereas Innovation Capability is a Mediator.
Knowledge management has an effect on innovation performance with the support of the following research study : Zhou (2020) there is a positive correlation between each level of knowledge management. The positive correlation between knowledge acquisition and knowledge sharing is the strongest. The enterprise knowledge management model has a positive impact on promoting organizational innovation capability and industrial development. According to Chootongchai (2015)
Knowledge utilization Knowledge sharing Knowledge creation
Knowledge
management Innovation
capabilities
Innovation performance
Collaboration with external parties
Research and development
Quality of innovation
Quantity of innovation
wrote an article “ Design and development of SECI to enhance thinking and innovation capabilities for higher education learners”. According to Chimtongdee (2014) wrote an article “ A causal model of teacher’s innovative ability with creative thinking as the mediator” . It was found that the teacher’s innovative ability had an indirect effect on innovative motivation and innovative knowledge through creative thinking with the statistical significance level of 0.05. Innovative motivation had the most significant overall effect on innovative ability at a statistical level of 0.05.
7. Transformational leadership has an effect on innovation performance and innovation capability is a mediator.
Figure 2.8 Transformational Leadership has an effect on Innovation Performance with Innovation Capability being a Mediator.
Individualized consideration Idealized influence
Intellectual stimulation Inspiration motivation
Innovation capabilities Collaboration with external
parties
Research and development
Transformational leadership
Innovation performance
Quality of innovation
Quantity of innovation
Transformational leadership has an effect on innovation performance with innovation capability as a mediator. A supportive research study is as follows: Aseidu (2020), where transformational leadership significantly predicts knowledge management capabilities and organizational learning also has a positive effect on innovation performance. In the work of Noruzy (2012), transformational leadership was seen to directly influence organizational learning and knowledge management.
Organizational learning directly and positively influenced the knowledge management of manufacturing firms. Transformational leadership positively influenced the organizational innovation and organizational performance of manufacturing firms.
Organizational learning and knowledge management directly influenced organizational innovation. Further, in the work of Selalak (2016), the perception of transformational leadership influences creativity, creativity has a positive influence on innovative operational effectiveness, and the perception of transformational leadership has a positive influence on innovative operational effectiveness.
8. Human capital has an effect on innovation performance and innovation capability is a mediator.
capability Knowledge
Innovation capabilities
Innovation performance
Collaboration with external parties
Research and development
Quality of innovation
Quantity of innovation Human
capital
Figure 2.9 Human Capital has an effect on Innovation Performance and Innovation Capability is a Mediator.
Human capital has an effect on innovation performance while innovation capability is a mediator. In an article by Soo (2016), it was indicated that human capital is positively related to absorptive capacity, and that social capital-enhancing HR affects absorptive capacity through egalitarian HR practices. Organizational capital-enhancing HR practices contribute to absorptive capacity through effective information systems.
The various intellectual capital-enhancing HR practices affect innovation performance through their impact on the firm’s absorptive capacity.Sriviboon (2020), The impact of strategic human resource on the innovation performance of pharmacy companies in Thailand: mediating role of innovation capabilities. Strategic human resource practices such as HR expansion, presentation administration, and prize administration have positive connections with innovation performance. The innovation capabilities also increase the link among the strategic human resource practices. According to Sun (2020), found that Learning capability partially mediates the impact of human capital and social capital on innovation performance.