Strategic Innovation and Competitive Advantage of Manufacturing SMEs: The Mediating Role of Human Capital
Abstract
Purpose: The purpose of this paper is to examine the mediating effect of human capital on the relation between the strategic innovation and competitive advantage of SMEs in Yemen.
Methodology/Approach: The PLS-SEM analysis is performed to test the hypotheses by using data collected from 238 SMEs in Yemen. The results support the hypotheses.
Findings: The results of the PLS-SEM analysis are as follows: strategic innovation had a significant effects on SMEs’ competitive advantage; also human capital had a significant effects on SMEs’ competitive advantage; human capital mediated the effect of strategic innovation on competitive advantage; and strategic innovation had a positive and significant effect on human capital.
Research Limitation/Implication: The population of the study was limited to manufacturing SMEs, so the results cannot be generalized to other types of industry such as services, whose structure and vision differ from those of manufacturing companies.
Originality/Value of paper: The paper is one of the first to highlight human capital as a mediator between strategic innovation and competitive advantage of manufacturing SMEs in Yemen and the Middle East, describing a single study applied in the context of a developing country.Full text article
References
Abd Aziz, N.N. and Samad, S., 2016. Innovation and competitive advantage: Moderating effects of firm age in foods manufacturing SMEs in Malaysia. Procedia Economics and Finance [e-journal], 35, pp.256-266. doi: 10.1016/S2212-5671(16)00032-0.
Acemoglu, D. and Linn, J., 2004. Market size in innovation: theory and evidence from the pharmaceutical industry. The Quarterly journal of economics [e-journal], 119(3), pp.1049-1090. doi: 10.1162/0033553041502144.
Afuah, A., 2009. Strategic innovation: new game strategies for competitive advantage. Routledge.
Ahmed, F.U. and Brennan, L., 2019. The impact of Founder’s human capital on firms’ extent of early internationalisation: Evidence from a least-developed country. Asia Pacific Journal of Management [e-journal], 36(3), pp.615-659. doi: 10.1007/s10490-019-09646-4.
AlQershi, N.A., 2020. Strategic thinking, strategic planning, strategic innovation and the performance of SMEs: The mediating role of human capital. Management Science Letters [e-journal], 11(1), pp.1003-1012. doi: 10.5267/j.msl.2020.9.042.
AlQershi, N.A, Abas, Z.B. and Mokhtar, S.S.M., 2018. Strategic innovation as driver for SME performance in Yemen. Journal of Technology and Operations Management [e-journal], 13(1), pp. 30-41. doi: 10.32890/jtom2018.13.1.9420.
AlQershi, N.A, Abas, Z.B. and Mokhtar, S.S.M., 2019a. Prospecting for structure capital: Proactive strategic innovation and the performance of manufacturing SMEs in Yemen. International Journal of Entrepreneurship, 23(3), pp.1-19.
AlQershi, N.A, Abas, Z.B. and Mokhtar, S.S.M., 2019b. The Mediating Effect of Human Capital on the Relationship between Strategic Innovation and the Performance of Manufacturing SMEs in Yemen. Organizations and Markets in Emerging Economies [e-journal], 10(1), pp.57-77. doi: 10.15388/omee.2019.10.00003.
AlQershi, N.A, Abas, Z.B. and Mokhtar, S.S.M., 2019c. Investment in the Hidden Wealth of Intellectual Capital and Its Effect on Competitive Advantage. Anwesh, 4(1), pp.17-22.
AlQershi, N.A, Abas, Z.B and Mokhtar, S.S.M., 2020a. Investigating the Influence of Intellectual Capital Dimensions Practices On SMEs Performance. Academy of Entrepreneurship Journal, 26 (2) pp.1-7.
AlQershi, N.A, Abas, Z.B and Mokhtar, S.S.M., 2020b. The intervening effect of structural capital on the relationship between strategic innovation and manufacturing SMEs’ performance in Yemen. Management Science Letters [e-journal], 11(1), pp.21-30. doi: 10.5267/j.msl.2020.8.034.
Anderson, P. and Tushman, M.L. eds., 2004. Managing strategic innovation and change: A collection of readings. 2nd Edition. Oxford University Press.
Barney, J.B., 1991. Firm resources and sustained competitive advantage. Journal of management, 17(1), pp.99-120.
Barney, J.B., 2001. Resource-based theories of competitive advantage: A ten-year retrospective on the resource-based view. Journal of management [e-journal], 27(6), pp.643-650. doi: 10.1177/014920630102700602.
Bontis, N., 1998. Intellectual capital: an exploratory study that develops measures and models. Management decision [e-journal], 36(2), pp.63-76. doi: 10.1108/00251749810204142.
Chowhan, J., 2016. Unpacking the black box: understanding the relationship between strategy, HRM practices, innovation and organizational performance. Human Resource Management Journal [e-journal], 26(2), pp.112-133. doi: 10.1111/1748-8583.12097.
Davey, K.S. and Sanders, T.J., 2012. Serial strategic innovation and sustainable competitive advantage: A longitudinal case study. Journal of Case Research in Business and Economics, 4, pp.1-20.
Delery, J.E. and Roumpi, D., 2017. Strategic human resource management, human capital and competitive advantage: is the field going in circles? Human Resource Management Journal [e-journal], 27(1), pp.1-21. doi: 10.1111/1748-8583.12137.
Derrick, P. and Soren, K., 2007. A framework for strategic innovation. Managing Principals, InnovationPoint LLC.
Dogan, E., 2017. A strategic approach to innovation. Journal of Management, Marketing and Logistics [e-journal], 4(3), pp.290-300. doi: 10.17261/Pressacademia.2017.49.
Drejer, A., 2006. Strategic innovation: a new perspective on strategic management. Handbook of business strategy [e-journal], 7(1), pp.143-147. doi: 10.1108/10775730610618756.
Dyer, J.H. and Singh, H., 1998. The relational view: Cooperative strategy and sources of inter organisational competitive advantage. Academy of management review [e-journal], 23(4), pp.660-679. doi: 10.2307/259056.
Edeh, J.N., Obodoechi, D.N. and Ramos-Hidalgo, E., 2020. Effects of innovation strategies on export performance: New empirical evidence from developing market firms. Technological Forecasting and Social Change [e-journal], 158, p.120167. doi: 10.1016/j.techfore.2020.120167.
Eniola, A.A. and Ektebang, H., 2014. SME firms performance in Nigeria: Competitive advantage and its impact. International Journal of Research Studies in Management [e-journal], 3(2), pp.75-86. doi: 10.5861/ijrsm.2014.854.
Fowler Jr., F.J., 2013. Survey research methods. 5th Edition. SAGE publications.
Genc, E., Dayan, M. and Genc, O.F., 2019. The impact of SME internationalization on innovation: The mediating role of market and entrepreneurial orientation. Industrial Marketing Management [e-journal], 82, pp.253-264. doi: 10.1016/j.indmarman.2019.01.008.
Giachetti, C. and Lanzolla, G., 2016. Product Technology imitation over the product Diffusion cycle: Which Companies and product innovations do competitors imitate more quickly? Long Range Planning [e-journal], 49(2), pp.250-264. doi: 10.1016/j.lrp.2015.05.001.
Hair Jr., J.F., Anderson, R.E., Babin, B.J. and Black, W.C., 2010. Multivariate data analysis: A global perspective. 7th Edition. Upper Saddle River: Pearson Education.
Hair Jr., J.F., Sarstedt, M., Ringle, C.M. and Gudergan, S.P., 2017. Advanced issues in partial least squares structural equation modelling. SAGE publications.
Herrera, M.E.B., 2015. Creating competitive advantage by institutionalizing corporate social innovation. Journal of Business Research [e-journal], 68(7), pp.1468-1474. doi: 10.1016/j.jbusres.2015.01.036.
Hinterhuber, A. and Liozu, S.M., 2014. Is innovation in pricing your next source of competitive advantage? Business Horizons [e-journal], 57(3), pp.413-423. doi: 10.1016/j.bushor.2014.01.002.
Hitt, M.A., Bierman, L., Shimizu, K. and Kochhar, R., 2001. Direct and moderating effects of human capital on strategy and performance in professional service firms: A resource-based perspective. Academy of Management journal [e-journal], 44(1), pp.13-28. doi: 10.5465/3069334.
Hjalager, A.M., 2018. Strategic innovation in tourism business. In: L. Moutinho and A. Vargas-sánchez, eds. 2018. Strategic management in tourism. CABI. Chapter 7. doi: 10.1079/9781786390240.0102.
Hsu, B.X. and Chen, Y.M., 2019. Industrial policy, social capital, human capital, and firm-level competitive advantage. International Entrepreneurship and Management Journal [e-journal], 15(3), pp.883-903. doi: 10.1007/s11365-019-00584-7.
Huo, B., Ye, Y., Zhao, X. and Shou, Y., 2016. The impact of human capital on supply chain integration and competitive performance. International Journal of Production Economics [e-journal], 178, pp.132-143. doi: 10.1016/j.ijpe.2016.05.009.
Jin, Y., Hopkins, M.M. and Wittmer, J.L., 2010. Linking human capital to competitive advantages: Flexibility in a manufacturing firm's supply chain. Human Resource Management [e-journal], 49(5), pp.939-963. doi: 10.1002/hrm.20385.
Johnson, M.W. and Lafley, A.G., 2010. Seizing the white space: Business model innovation for growth and renewal. Harvard Business Press.
Kahn, K.B., 2018. Understanding innovation. Business Horizons [e-journal], 61(3), pp.453-460. doi: 10.1016/j.bushor.2018.01.011.
Kamukama, N. and Sulait, T., 2017. Intellectual capital and competitive advantage in Uganda’s microfinance industry. African Journal of Economic and Management Studies [e-journal], 8(4), pp.498-514. doi: 10.1108/AJEMS-02-2017-0021.
Kianto, A., Sáenz, J. and Aramburu, N., 2017. Knowledge-based human resource management practices, intellectual capital and innovation. Journal of Business Research [e-journal], 81, pp.11-20. doi: 10.1016/j.jbusres.2017.07.018.
Kodama, M., 2018. Sustainable growth through strategic innovation: Driving congruence in capabilities. Edward Elgar Publishing.
Kotabe, M. and Kothari, T., 2016. Emerging market multinational companies’ evolutionary paths to building a competitive advantage from emerging markets to developed countries. Journal of World Business [e-journal], 51(5), pp.729-743. doi: 10.1016/j.jwb.2016.07.010.
Krejcie, R.V. and Morgan, D.W., 1970. Determining sample size for research activities. Educational and psychological measurement, 30(3), pp.607-610.
Lee, V.H., Foo, A.T.L., Leong, L.Y. and Ooi, K.B., 2016. Can competitive advantage be achieved through knowledge management? A case study on SMEs. Expert Systems with Applications [e-journal], 65, pp.136-151. doi: 10.1016/j.eswa.2016.08.042.
Lilly, L. and Juma, D., 2014. Influence of strategic innovation on performance of commercial banks in Kenya: The case of Kenya Commercial Bank in Nairobi County. European Journal of Business Management, 2(1), pp.336-341.
Lin, Y.H. and Chen, Y.S., 2017. Determinants of green competitive advantage: the roles of green knowledge sharing, green dynamic capabilities, and green service innovation. Quality & Quantity [e-journal], 51(4), pp.1663-1685. doi: 10.1007/s11135-016-0358-6.
Liu, W. and Atuahene-Gima, K., 2018. Enhancing product innovation performance in a dysfunctional competitive environment: The roles of competitive strategies and market-based assets. Industrial Marketing Management [e-journal], 73, pp.7-20. doi: 10.1016/j.indmarman.2018.01.006.
Lynn, G.S. and Kalay, F., 2015. Vision and Its Impact on Team Success. Journal of Business Economics and Finance [e-journal], 4(4), pp.744-768. doi: 10.17261/Pressacademia.2015414540.
Ma, Y., Hou, G. and Xin, B., 2017. Green process innovation and innovation benefit: The mediating effect of firm image. Sustainability [e-journal], 9(10), p.1778. doi: 10.3390/su9101778.
Markides, C., 1997. Strategic innovation. Sloan management review, 38, pp.9-24.
MYIT-Matrade, 2017. Directory. Small and Medium Enterprises. MYIT- Yemen.
Mytelka, L.K. and Smith, K., 2002. Policy learning and innovation theory: an interactive and co-evolving process. Research policy [e-journal], 31(7-8), pp.1467-1479. doi: 10.1016/S0048-7333(02)00076-8.
Pallant, J. 2013. SPSS survival manual. McGraw-Hill Education.
Popa, S., Soto-Acosta, P. and Martinez-Conesa, I., 2017. Antecedents, moderators, and outcomes of innovation climate and open innovation: An empirical study in SMEs. Technological Forecasting and Social Change [e-journal], 118, pp.134-142. doi: 10.1016/j.techfore.2017.02.014.
Porter, M.E., 1985. Competitive Advantage. New York: Free Press New York.
Quaye, D. and Mensah, I., 2019. Marketing innovation and sustainable competitive advantage of manufacturing SMEs in Ghana. Management Decision [e-journal], 57(67), pp.1535-1553. doi: 10.1108/MD-08-2017-0784.
Rajapathirana, R.J. and Hui, Y., 2018. Relationship between innovation capability, innovation type and firm performance. Journal of Innovation & Knowledge [e-journal], 3(1), pp.44-55. doi: 10.1016/j.jik.2017.06.002.
Ramezan, M., 2011. Intellectual capital and organizational organic structure in knowledge society: How are these concepts related? International Journal of Information Management [e-journal], 31(1), pp.88-95. doi: 10.1016/j.ijinfomgt.2010.10.004.
Roos, G. and Roos, J., 1997. Measuring your company's intellectual performance. Long range planning [e-journal], 30(3), pp.413-426. doi: 10.1016/S0024-6301(97)90260-0.
Sabahi, S. and Parast, M.M., 2020. Firm innovation and supply chain resilience: A dynamic capability perspective. International Journal of Logistics Research and Applications [e-journal], 23(3), pp.254-269. doi: 10.1080/13675567.2019.1683522.
Schlegelmilch, B.B., Diamantopoulos, A. and Kreuz, P., 2003. Strategic innovation: the construct, its drivers and its strategic outcomes. Journal of strategic marketing [e-journal], 11(2), pp.117-132. doi: 10.1080/0965254032000102948.
Sharabati, A.A.A., Jawad, S.N. and Bontis, N., 2010. Intellectual capital and business performance in the pharmaceutical sector of Jordan. Management decision [e-journal], 48(1), pp.105-131. doi: 10.1108/00251741011014481.
Sharma, A., 2005. Managing human resource capability of sustainable competitive advantage. Education and Training [e-journal], 47(8/9), pp.645-666. doi: 10.1108/00400910510633161.
Simpson, M., Taylor, N. and Barker, K., 2004. Environmental responsibility in SMEs: does it deliver competitive advantage? Business strategy and the environment [e-journal], 13(3), pp.156-171. doi: 10.1002/bse.398.
Sisodia, R., Wolfe, D. and Sheth, J.N., 2003. Firms of endearment: How world-class companies profit from passion and purpose. Pearson Prentice Hall.
Sky-News, 2012. Yemen: Combating unemployment through small projects. [video online]. Available at: < https://www.youtube.com/watch?v=ZW7KWVEdQOY /2012 > [Accessed 29 October 2020].
Soosay, C., Nunes, B., Bennett, D.J., Sohal, A., Jabar, J. and Winroth, M., 2016. Strategies for sustaining manufacturing competitiveness: comparative case studies in Australia and Sweden. Journal of Manufacturing Technology Management [e-journal], 27(1), pp.6-37. doi: 10.1108/JMTM-04-2014-0043.
Spring, M., Hughes, A., Mason, K. and McCaffrey, P., 2017. Creating the competitive edge: A new relationship between operations management and industrial policy. Journal of Operations Management [e-journal], 49-51, pp.6-19. doi: 10.1016/j.jom.2016.12.003.
Stajkovic, A.D. and Sergent, K., 2019. Cognitive Automation and Organizational Psychology: Priming Goals as a New Source of Competitive Advantage. Routledge.
The global innovation index (GII), 2014. Stronger Innovation Linkages for Global. [pdf] Fontainebleau, Ithaca, and Geneva: orld Intellectual Property Organization (WIPO) and in New Delhi, India, by the Confederation of Indian Industry (CII). Available at: < https://www.globalinnovationindex.org/userfiles/file/reportpdf/GII-2014-v5.pdf > [Accessed 04 November 2020].
The global innovation index, (GII) 2015. Stronger Innovation Linkages for Global. [pdf] Fontainebleau, Ithaca, and Geneva: orld Intellectual Property Organization (WIPO) and in New Delhi, India, by the Confederation of Indian Industry (CII). Available at: < https://ec.europa.eu/futurium/en/system/files/ged/22globalinnovationindex-wipo_gii_2015.pdf > [Accessed 04 November 2020].
The global innovation index, (GII) 2016. Stronger Innovation Linkages for Global. [pdf] Fontainebleau, Ithaca, and Geneva: orld Intellectual Property Organization (WIPO) and in New Delhi, India, by the Confederation of Indian Industry (CII). Available at: < https://www.wipo.int/edocs/pubdocs/en/wipo_pub_gii_2016.pdf > [Accessed 04 November 2020].
The global innovation index, (GII) 2017. Stronger Innovation Linkages for Global. [pdf] Fontainebleau, Ithaca, and Geneva: orld Intellectual Property Organization (WIPO) and in New Delhi, India, by the Confederation of Indian Industry (CII). Available at: < https://www.wipo.int/edocs/pubdocs/en/wipo_pub_gii_2017.pdf > [Accessed 04 November 2020].
Verbano, C. and Crema, M., 2016. Linking technology innovation strategy, intellectual capital and technology innovation performance in manufacturing SMEs. Technology analysis & strategic management [e-journal], 28(5), pp.524-540. doi: 10.1080/09537325.2015.1117066.
Vidotto, J.D.F., Ferenhof, H.A., Selig, P.M. and Bastos, R.C., 2017. A human capital measurement scale. Journal of Intellectual Capital [e-journal], 18(2), pp.316-329. doi: 10.1108/JIC-08-2016-0085.
Yang, X., 2014. Different choice of strategic innovation among companies in China market. Journal of Science and Technology Policy Management [e-journal], 5(2), pp.106-121. doi: 10.1108/JSTPM-02-2014-0006.
Yaseen, S.G., Dajani, D. and Hasan, Y., 2016. The impact of intellectual capital on the competitive advantage: Applied study in Jordanian telecommunication companies. Computers in Human Behavior [e-journal], 62, pp.168-175. doi: 10.1016/j.chb.2016.03.075.
Zerenler, M., Hasiloglu, S.B. and Sezgin, M., 2008. Intellectual capital and innovation performance: empirical evidence in the Turkish automotive supplier. Journal of technology management & innovation [e-journal], 3(4), pp.31-40. doi: 10.4067/S0718-27242008000200003.
Authors
Copyright (c) 2020 Nagwan Abdulwahab AlQershi, Mohd Lizam Bin Mohd Diah, Aryani Binti Ahmed Latiffi, Wan Nurul Karimah Wan Ahmad
This work is licensed under a Creative Commons Attribution 4.0 International License.
This is an open access journal which means that all content is freely available without charge to the user or his/her institution. Users are allowed to read, download, copy, distribute, print, search, or link to the full texts of the articles in this journal without asking prior permission from the publisher or the author. This is in accordance with the BOAI definition of open access. This journal is licensed under a Creative Commons Attribution 4.0 License - http://creativecommons.org/licenses/by/4.0.
Authors who publish with the Quality Innovation Prosperity agree to the following terms:
- Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution License that allows others to share the work with an acknowledgement of the work's authorship and initial publication in this journal.
- Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the journal's published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgement of its initial publication in this journal.
- Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) prior to and during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work.