Asian Journal of Business Management 3(4): 287-293, 2011
ISSN:2041-8752
© Maxwell Scientific Organization, 2011
Submitted: August 08, 2011
Accepted: October 07, 2011
Published: November 15, 2011
Link between Product Innovation and Non-Technological:
Organization Performance
Adil Sohail, M. Suleman Sabir and Arshad Zaheer
Department of Management Sciences, Iqra University Islamabad Campus, Pakistan
Abstract: This study aims to provide a link between Product Innovation (PI) and Non-Technological
Innovation (NTI) in innovation process. It also give the effect of PI and NTI on organization performance. The
paper gives empirical evidence of theoretical hypothesis on a sample size of 40 firms from the manufacturing
sector of Pakistan. Data was analyzed through different statistical tools. The study concluded that there is a link
between PI and NTI in the organization. Findings also indicates that PI and NTI has also effect on organization
performance. These findings are only guaranteed only to the small and medium size of organizations. Pakistan
is also a developing country. Use of modern technology in PI and NTI will also effects the results in developed
countries. Findings of this study are help full to the manufacturing industry of Pakistan and other developing
countries. This paper also shows the practical implication of innovation and its sub categories on the
performance of the organization.
Key words: Marketing innovation, non-technological innovation, organizational innovation, organization
performance, product innovation
John, 2011).
In this study we will study the link between PI
(Product Innovation) and NTI (Non-technological
Innovation). Small numbers of studies are there on
technological innovation, NTI, Product, and Process
Innovation. While our approach is that, we will relate
comparatively, a general variable (NTI) with a specific
variable (product Innovation). This work is in line with
Mothe who, in 2010 showed the relationship of
technological and NTI and recommended some future
studies in this area. I selected this topic to show the
relationship between PI and NTI empirically. So, from
this line of research the question is to see the relationship
of non-technological strategies on PI and vise versa.
(Caroline et al., 2010)
As innovation is the most important factor, to be
considered for the organization, economies and at the
government level. Linking PI to NTI will give another
direction for researchers and strategist and will increase
the body of knowledge in this area. For strategist, because
they can formulate strategies and their effect on Product.
Our study is also beneficial for those organization which
have low budget for their R & D departments. This study
provide justification to critically examine their marketing
and organization strategies to further innovate their
products. As Pakistan is also an developing country,
where small amount has been used on R & D every year,
in most organization. Than Innovation (2005) has also
been ignored because of many reasons. This study also
helpful for entrepreneurs in Pakistan to learn more about
innovation and will enhance the body of knowledge about
innovation with reference to Pakistan.
INTRODUCTION
Innovation provides an opportunity to businesses to
lower their cost in the shape of Process innovation and to
introduce new products with different verities in shape of
PI (Innovation, 2005). Then marketing innovation leads
the business towards new ways of marketing like product
placement, pricing, promotion etc. Organizational
innovation has also important in which new business
practices, internal and external relations of Business has
been analyzed and implemented (Tobias and Christian,
2007). Innovation has a relation with the productivity and
per capita of the organization and economy (Someshwar
et al., 2001).
Technological change has also transformed the
quality of life all over the world. However there is no
comprehensive policy prevails in Pakistan to foster the
innovation in public and private sector of Pakistan. On 29
April 2009 a meeting was held between Ministry of
Finance-Pakistan and USAID in which 12 pillars are
defined for innovation Ecosystem. The meeting found that
the things which are done in Pakistan are the piece meal
and limited in scope. After this meeting Pakistan
Innovation Board was establish first time in Pakistan to
address the Innovation Issue (CSF, 2009). Well planned
initiatives are needed to foster innovation in Pakistan
which should have the goal to, enhance R and D for
innovation, create job opportunities and wealth creation in
Pakistan, to create national image of innovation, and to
utilize innovation for the betterment of the people of
Pakistan. At present Pakistan is facing capacity limitation
to carry out innovation at par with the Globe. (Qasim and
Corresponding Author: M. Suleman Sabir, Department of Management Sciences, Iqra University Islamabad Campus, Pakistan
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major type of non-technological innovation are the
organizational and managerial innovation. These two type
of innovation are purely excluded from technological
innovation. (OSLO, 1997).
Changes in the product placement, pricing, design,
promotion and packaging to better address the demands of
costumer with an objective of maximization of profit.
Product design here refers to the change in size,
appearance or in form. It doesn’t include the change in the
features of the Product (OECD, 2005). Marketing
innovation has three dimensions which are price strength,
product strategy and promotion strategy. Product strategy
refers to the appearance and forms of product. It doesn’t
include the features changes in the product. However,
price strategy includes the decisions regarding prices and
promotion includes the placement of product etc. (Rust et
al., 2004). Business which are not market orientation and
does not focuses on marketing innovation cannot achieve
the competitive advantage in the market. Hence marketing
innovation provides the businesses an opportunity to get
competitive advantage. (Stanley and John, 1999).
Organizational innovation can be differentiated from other
activities. It includes the implementation of organization
methods in business practice workplace organizations or
external relations that are not previously implemented by
the organization. These methods allows the organization
to achieve its strategic goals. (OECD, 2005).
Organizational innovation from the cognitive perspective
shifts in organization structure and system for the purpose
of organization learning and knowledge creation. (Alice,
2004). Managers should be trained to manage the
innovation. Managers from all department should know
how to create optimal level of organizational innovation
to achieve the organizational strategic objectives. (Bruce,
2001). Organizational Innovation management programs
is able to practically help the organization to facilitate the
implementation and provides a series of tools for
manufacturing organization to know their status in
managerial practices (Wong and Chin, 2007).
PI and development are critical in organization for
their existence and competitiveness. PI can seriously
derive the performance of the organization and enables
the organization to better utilize the available resources to
contribute towards the market share of the organization
(Chux, 2010). To build and sustain the competitiveness in
the industry, PI strategy must be aligned with leadership
and investment strategy. First-entered product in respect
of innovation has very immediate and long term effect on
the yield of the company. So organization must focus on
innovation, even though organization may loose
temporarily but firm will enjoy long term gains
(Wooseong and Mitzi, 2008). PI will increase the sales of
the firms and ultimately there is a increase in the
productivity in the economy. This effect will also boost
LITERATURE REVIEW
Innovation has been defined in OSLO Manual, 3rd
Edition as introduction of new Product (goods and
services), a new marketing plan, a new process, or a new
organizational method for business practice relating to
internal or external relations of business. Innovation could
be distinguished into four types, Product, Process,
Organizational and Marketing Innovation. (OECD, 2005).
Innovation has not an universal definition. Different
authors defined innovation differently. However, a
Table 1 for innovation, which is helpful to understand this
concept (Jarunee, 2004).
Innovation is the deliberate effort to bring into
existence, a new way or some thing new which have its
value/utility and can be repeated and sustained. It always
focuses on practicability, i.e. making a new tools,
products, or process. Which are beneficial for the human
being and allows human being to achieve goals, which
were not achievable previously. (Jim, 1999).
Here we will define PI. Product Innovation involves
the conceptualization, commercialization, development,
design and validation of new product which provide
higher value/utility to all the stakeholders of that product.
It is a basic approach of creating competitive advantage in
the global business environment (Rainey, 2005). PI is
defined by different scholars differently. Product is the
development of a new product or any variation in the
existing design of the Product, use of any new raw
material for its production, addition of any other feature
and components in the existing product is called Product
Innovation. In other words thing which is new for
business product is consider as product innovation.
(Innovation, 2005). Product Innovation effects every part
of the organization. Strategic planning, sales costumers,
shareholders, finance department, purchase department
and operation department all are effected by Product
Innovation. (Rakesh et al., 2006).
Differentiating the innovation on the basis of
technology leads towards two types of innovation.
Technological innovation and non-technological
innovation. While Technological Innovation is
characterized by new technical knowledge of production,
new products (goods and services (and use of new
material in production. However, NTI not includes the
change in technology. It includes new business methods,
new organization concepts, or other non technological
ways of achieving business objectives (Tobias and
Christian, 2007). Flikkema et al. (2007) further
distinguished technological innovation from nontechnological innovation. New marketing techniques,
modification in the organization management and changes
in organization structures are categorized in nontechnological innovation. (Flikkema et al., 2007). The
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marketing strategies are the part of change process.
Managers should pay close attention to innovate market
strategies continuously to gain competitive advantage.
(Liqin et al., (2010).
Defining the organization performance may vary
from organization to organization or industry to industry.
But there are some universal rules which can lead an
organization towards success. These are organizations
having financial outcome, satisfied customers, satisfied
employees, high levels of individual initiative,
productivity, and innovation. Organizations which have
achieved high performance-including mission, vision,
aligned performance measurement and reward systems,
and strong leadership. (Epstein, 2004). According to
André (2008) High Management Quality, Openness
coupled with Action Orientations, Long Term
Commitment, Focus on Continuous Improvement and
Renewal, High Workforce Quality, are the factors which
contributes toward high performance organizations.
up the employment of the country. His will also triggers
the development of the organizations indirectly.
(Demetris, 2011).
At Macro level PI is also an important driver of
exports of the country. Policy makers are considering PI
as an important factor for increase in exports. (Bruno and
Ester, 2007). PI is also dependent on the infrastructure of
that geographical area. It is also dependent on the
historical R&D, industrial services and other export
services (Maryann and Richard, 1994). Market leaders are
normally very aggressive for PI and those who are
targeting market Niche are very flexible about PI.
Companies who are quick to response for innovation, only
those can survive in the market (Yen, 2009). Competitive
firms never compete with their compete with the
traditional ways of marketing and organization
techniques. These firms always offer innovative products
to their costumers. (Sabai et al., 2010). To increase the
performance of the firms, management have to focus for
achieving of product and process innovation (Ilker and
Birdogan, 2011). In developing countries the success rate
of completely new products in less than the developed
countries. So the countries are building innovation in their
products to bring gradual change in the minds of the
costumer. (Mahesh and James, 2008).
Marketing and organizational innovation effects the
performance of the organization in terms of sales and cost
reduction. It also effects the profit margin of the firm.
(Tobias and Christian, 2007). During the past two decades
number of products were failed to compete in the markets
due to less marketing innovation techniques. There is a
simultaneous need of NTI with PI. Owing to other
traditional innovation techniques, marketing innovation
have proved to be vital enough for small and medium
organizations (Vlachaki, 2009-2010). Highly creative and
new marketing campaigns are helpful to gain marketing
share. As technology evolve the globalize new marketing
techniques are also necessary for brand loyalty. (CMO,
2009). Progress in the technological innovation will also
require greater efforts to bridge the difference in
organization structures and business methods. This will
effect the organization learning and knowledge
management which is ultimately beneficial for the
organizations (Alice, 2004).
Organizational innovation and marketing are the parts
of NTI (OECD, 2005). To increase the production
efficiency and quality related practices firms focus on
organizational development and innovation. Its aggregate
effect is on the increase in the performance of the
organization. (Surendra and Wulong, 2004). Individual
characteristics like task perception, demographic
backgrounds and working environment are the factors
which contributes towards are organizational innovation
(year) in the firms. (Karin et al., 2011). Innovative
Hypothesis:
H1: There is a significant relationship between PI and
NTI.
H2: The higher a organization’s PI, the higher its
performance.
H3: The higher a organization’s NTI, the higher its
performance.
MATERIALS AND METHODS
Model: This model is basically the recommendation of a
previous study which was conducted in 2010 by Caroline
Mothe. This study provides the link between PI and NTI.
In addition to this study also provide the effect of PI and
NTI on organization performance. In the second stage of
the study we took PI and NTI as a Independent variable
and Organization performance as a dependent variable.
Data and empirical methodology: Data was collected
from a manufacturing firms in Pakistan through a
questionnaire. The questionnaire was developed to prove
the link between PI and NTI, and their effect on
organization performance. A sample of of 50 employees
were selected from the manufacturing industry in
Pakistan. Out of these 50 questionnaire we received 35
questionnaires back.
The 12 items of questionnaire measuring link
between PI and NTI and their effect on organization
performance were subject to a principal components
analysis. The reliability coefficients, means, and standard
deviations, among the study variables are contained in
Table 2.
As shown in Table 1, the internal reliabilities of
scales were between 0.814, 0.714 and 0.511 which is
clearly acceptable. Whereas standard deviations of the
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Table 1: Description of main variable
Variable
PI
Non-technology innovation
Organization performance
Mean
4.09
3.83
3.56
SD
0.787
0.80
1.05
Reliability
0.814
0.741
0.511
Table 2: Correlations
Avg.
PIPearson correlation
Sig. (2-tailed)
N
Avg. NTI
Pearson correlation
Sig. (2-tailed)
N
Avg. OP
Pearson correlation
Sig. (2-tailed)
N
**: Correlation is significant at the 0.01 level (2-tailed).
Avg. PI
1
40
0.766**
0.000
40
0.771**
0.000
40
Table 3:Regression result between pi, non technology innovation and
organization performance
Significance
Independent variable
Standard $
PI
0.563
0.001
Non technology
0.271
0.091
R
0.790
R2
0.624
Adjusted R2
0.604
F-value
30.74
Avg. NTI
Avg. OP
1
40
0.702**
0.000
40
1
40
All types of innovation is dependent on human
capital of that organization. So, the marketing staff which
will bring feedback to the production department is
creating a bridge between marketing and PI. Further price
is placed in the jurisdiction of NTI which is the single
biggest constraint while developing a product. (Mahesh
and James, 2008). When we see the PI and marketing
relationship, which gives us the view that PI will give new
challenges to Marketing department, Marketing
department needs to innovate itself for better promotion
of the new product. This also show link of product and
Market innovation. (Patrick, 2003). When there was any
PI in the organization it also demands some new
marketing efforts which are better then the existing
efforts. So PI leads to the marketing innovation.
Organization innovation is also perquisite for
technological innovation. If organization factors, (values,
interests and capacity of learning of the workforce)
changes then this will directly effect the management and
hiring of the production department. These findings also
authenticating the link between NTI (organization
innovation) and PI. (Alice, 2004). All above studies
support H1 of this study, hence we will accept H1.
Organizational innovation is the only factor which
contributes to higher total factor productivity. PI will only
provide maximum benefit, if it is performed with the
combination of organizational innovation. The linkage of
both will give maximum results. (Michael et al., 2010).
Organizations some times innovate their selves and focus
on product oriented organization structures, which lead
toward the improved in products. Implementing Just-intime and supply chain management are the part of
organizational innovation. Which actually smooth’s and
facilitates the PI process. (Armbruster et al., 2008).
Organization structure and its environment both
transforms NTI which leads toward increase in innovation
in the organization. Innovation has also positive effect on
organization performance. (Leslie et al., 2005). These
studies support H2 of this study, hence we will accept H2.
variables were either close to or exceeded 1.0, indicating
that the study variables were discriminatory.
Table 2 illustrates the correlations among the
subscales obtained using Pearson correlation to determine
whether the subscales were independent measure of the
same concept. Correlation between NTI and organization
performance is 0.771**, correlation between PI and
Organization performance is 0.702** and correlation
between NTI and PI is 0.766** (p<0.01). The results have
demonstrated acceptable level of correlations.
Multiple regression analysis was carried out to test
the hypotheses that comprised the direct and moderating
effects of PI and NTI. Tables present the results of the
analyses. As noted in Table 3, Step 1 was found to be
significant (p<0.01). Hence the direct effects of the
predictors significantly explained 62 and 60% of the
variability in PI and NTI (Table 3).
DISCUSSION
Organizational and Marketing are two main parts of
NTI (OECD, 2005). Owing to the importance of R & D
department non-technological activities are also essential
for innovation process. When a product is introduced in
the market is is the marketing department which will give
feed back from the costumers. After that the organization
will enhance the product attributes according to the
demand of Market. Here, marketing activities indirectly
effects the product development. (Caroline et al., 2010).
The core of the organizational innovation is to innovate
the product which can better satisfy the needs of the
costumer. (Ruth, 2008).
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Asian J. Bus. Manage., 3(4): 287-293, 2011
RECOMMENDATION
Collection and use of new market information assists
to trigger up marketing innovation in the firm, which has
also an ultimate effect on the performance of the firm in
them market. (Sabri et al., 2004). PI can act as mediating
role between organization support on organization
performance. Managers must select and pursue PI as
primary strategic goal to achieve high performance of the
organization. (Bostjan and Otmar, 2004). Organization
designs have high impact on the firms ability to explore
and exploit new products and resources. New resources
and products has positive effect of firm’s financial
performance and on overall performance as well.
(Michael et al., 2006). Employee training, motivation and
process control have a positive effect on technological
innovation. PI is the dimension of technological
innovation. So the technological innovation has a positive
effect on performance of the organization (Yuan et al.,
2006). Policies and practices in the workplace are
dimensions of NTI. This has a positive effect on the
performance of the organization. (Frank, 2011).
Organization innovation significantly effects the
performance of the firms. More specifically organization
innovation is the key factor to accelerates financial
performance and market innovation. On the other hand
market innovation also boost up the performance of the
organization. So NTI has multiple effects on organization
performance. (Li-an, 2011). As different studies provided
references that NTI has a positive effect on organization
performance hence we will accept H3 of the study.
The data was collected and tested for the small and
medium size organization of the industry so, this model is
not applicable for the large organization in the sector.
Pakistan is a developing country, organization are not so
developed that they are following all the factors of high
organization performance so these findings may vary
from industry to industry because there may be chance
that in some industries only PI has importance and vise
versa. Results of the research from developed countries
may vary from these results. Future research could be
conducted to analyze the impact on NTI on process
innovation. Further research also can be conducted on the
impact of NTI on organization performance.
ACKNOWLEDGMENT
First of all we would like to say thanks to Allah who
made all things possible. Then we would like to
acknowledge and extend our heartfelt gratitude to Dr.
Arshad Zaheer from Iqra University for his vital
encouragement and support and to Dr. Kashif ur Rehman
for the constant reminders and to all other faculty
members and Staff from Iqra University - Islamabad. We
are also thank full to Mr. Abdul Waheed Burdi and Miss
Amtul Tanoli who assist us in the collection of data for
this study and to my friend Mr. Narmeen Rizwan for his
constant reminders and much needed motivation and
finally our family members that have encouraged, support
and assist us in completing this Study.
CONCLUSION
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This research was conducted to investigate the
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Findings of this study strongly highlighted the importance
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