The effect of firm strategic orientation and capability on new product performance in the Malaysian manufacturing industry

<p>Small and medium enterprises (SMEs) have played a very important role in fostering growth, employment and income in the national economy of Malaysia. SMEs in Malaysia are critical to the economic transformation as they form the key domestic source of growth and the bedrock of private sector activity. Moreover, SMEs are also important in stimulating innovation and act as stabilizers of growth during the economic slowdown. In order to accelerate the growth of SMEs, it is important to understand the forces that drive the performance of these firms. It is widely reported that only through innovation can SMEs become competitive in the global market and among their competitors.</p> <p>This thesis examines the relationship between the firm’s strategic orientations (<i>market orientation, entrepreneur orientation and technology orientation</i>) and their new product performance in the Malaysian manufacturing industry and how such a relationship is mediated by a firm’s capabilities (<i>marketing capabilities and technological capabilities</i>). This thesis also investigates how the relationships between a firm’s capabilities and its new product performance are moderated by the exploitation and exploration (or ambidexterity) of such capabilities (marketing and technological capabilities). This thesis aims to identify the differences in new product performance and their influencing factors between <i>Bumiputera</i> and non-<i>Bumiputera</i> firms.</p> <p>Based on the literature review and embedded in the Resource-based View (RBV) of the firm, a theoretical framework of new product performance was developed. A quantitative approach achieved the objectives and a survey technique was used to collect data from CEOs, Directors, Project Managers, Process Managers and Team Leaders of manufacturing SMEs in Malaysia. A total of 209 usable responses was received from a survey of 900 firms, and the proposed theoretical model was tested using analytical procedures, including confirmatory factor analysis and structural equation modelling (SEM). The effects, including direct, indirect, and total effects, among the factors, were calculated simultaneously, together with relationships between the observed variables and proposed factors. Hierarchical multiple regression was used to assess the effect of the moderating variable. A series of t-tests was used to examine the differences in product innovation between <i>Bumiputera</i> and non-<i>Bumiputera</i> firms.</p> <p>The empirical results demonstrate that a firm’s market orientation and technology orientation have a positive impact on new product performance. This research confirms that marketing capabilities do have a direct impact on new product performance. However, the effect of technological capabilities on new product performance is not significant, although positive.</p> <p>The findings presented in this thesis also highlight that marketing capabilities serve as an indirect-only mediator (full mediation) for the relationship between market orientation and new product performance. Apart from this, technology orientation is also mediated by marketing capabilities in a complementary mediating effect (partial mediation) on the relationship between technology orientation and new product performance.</p> <p>Another important finding of this research was that a moderation effect of the firm’s technological capabilities exploration was found in the relationships between a firm’s technological capabilities and its new product performance. There is also a moderation effect of marketing exploitation on the relationship between marketing capabilities and its new product performance in a significant, but negative way. One unanticipated finding was that the effect of entrepreneur orientation on new product performance was negative.</p> <p>In term of differences in product innovation between <i>Bumiputera</i> and non-<i>Bumiputera</i> firms, the t-test results revealed that only new product performance differs significantly between these two groups of firms.</p> <p>The findings presented here have implications for both theory and practice. Theoretically, this research extended a model of new product performance, on which can be beneficial to policymakers, managers and owners as a reference to the innovation policy and new product development. Practically, the results from this research can benefit SMEs in Malaysia, particularly, <i>Bumiputera</i> and non-<i>Bumiputera</i> manufacturing firms. A clear message for managers and owners is that they should focus on developing strong firm capabilities in order to achieve superior new product performance. The evidence from this research suggests that the level of firm capabilities is influenced by the three key resources of market orientation, entrepreneur orientation and technology orientation. </p>