RELATIONSHIP BETWEEN INNOVATION AND PERFORMANCE: IMPACT OF COMPETITIVE INTENSITY AND ORGANIZATIONAL SLACK

MARÍN-IDÁRRAGA, DIEGO ARMANDO; CUARTAS-MARÍN, JUAN CARLOS

doi:10.1590/S0034-759020190203

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ARTICLES • Rev. adm. empres. 59 (2) • Mar-Apr 2019 • https://doi.org/10.1590/S0034-759020190203 copy

RELATIONSHIP BETWEEN INNOVATION AND PERFORMANCE: IMPACT OF COMPETITIVE INTENSITY AND ORGANIZATIONAL SLACK

Authorship SCIMAGO INSTITUTIONS RANKINGS

ABSTRACT

Innovation is a key factor in organizational performance. Although there are references from strategic theory to understand the relationships between these two variables, there are still many gaps that need to be filled. Thus, more empirical validation is necessary. This study aimed to verify how the relationship between innovation and performance is affected by the presence of precursor variables such as competitive intensity and organizational slack. This study involved conducting explanatory and cross-sectional investigations by applying structural equation modeling to a sample of small and medium-sized enterprises in Bogotá, Colombia. The results make a relevant contribution to the literature on strategic management by showing that competitive intensity and organizational slack induce innovation and positively impact performance.

KEYWORDS
Innovation; performance; competitive intensity; slack; Cladea 2017

	Standardized loading	t-value	Reliability
Performance			α = 0.83 SCR = 0.83 AVE = 0.55
How was the overall profitability of the company?	0.77	^_a _a Fixed parameters
How were the results of the company in relation to its closest competition?	0.73	13.71^* * p < .05
How was the scope of the sales goals?	0.76	14.25^* * p < .05
How was the operating profit (earnings before interest and taxes [EBIT])?	0.71	13.33^* * p < .05

Innovation			α = 0.86 SCR = 0.86 AVE = 0.60
To what extent does the company implement improvements to existing products?	0.72	^_a _a Fixed parameters
To what extent does the company implement improvements to existing production processes?	0.75	13.81^* * p < .05
To what extent does the company develop new products?	0.83	15.03^* * p < .05
To what extent does the company develop new processes?	0.80	14.62^* * p < .05

Slack			α = 0.83 SCR = 0.83 AVE = 0.63
To what extent does the company commit resources that can be used quickly to finance strategic initiatives?	0.82	^_a _a Fixed parameters
To what extent is the company able to obtain resources in the short run without affecting long-term initiative financing?	0.79	15.59^* * p < .05
How is the degree of resources at the discretion of the administration to finance new strategic initiatives?	0.76	15.15^* * p < .05

Competitive intensity			α = 0.74 SCR = 0.74 AVE = 0.49
To what extent is price competition a hallmark of the company's market?	0.64	^_a _a Fixed parameters
How is the impact of competition in the sector in which the company operates?	0.72	9.84^* * p < .05
To what extent do people talk about a new competitive movement almost every day?	0.73	9.85^* * p < .05

	Mean	SD	1	2	3	4
Performance	4.95	0.93	0.74
Innovation	4.71	1.26	0.36^ p < .01. Values of the main diagonal (in italics) correspond to the square root of the average variance extracted.	0.77
Slack	4.23	1.28	0.48^ p < .01. Values of the main diagonal (in italics) correspond to the square root of the average variance extracted.	0.44^ p < .01. Values of the main diagonal (in italics) correspond to the square root of the average variance extracted.	0.79
Competitive intensity	4.16	1.36	0.11^* * p <.05	0.32^ p < .01. Values of the main diagonal (in italics) correspond to the square root of the average variance extracted.	0.25^ p < .01. Values of the main diagonal (in italics) correspond to the square root of the average variance extracted.	0.70

Concept	%
Sector
Industrial (163)	41
Trade (86)	21
Services (152)	38
Size (Number of employees)
From 11 to 50	66.6
From 51 to 100	15.7
From 101 to 150	7.5
From 151 to 200	10.2
Existence (Years of operation)
Between 1 and 10	44.4
Between 11 and 20	26.2
Between 21 and 30	16.7
More than 31	12.7

Path		Direct effect	t value	Hypoth.	Supported
Singular model
a	Innovation 🡢 Performance	0.42	6.86^* * p < .05
First-order model
B	Competitive intensity 🡢 Innovation	0.28	4.58^* * p < .05	H1	Yes
C	Slack 🡢 Innovation	0.50	8.16^* * p < .05	H2	Yes
Second-order model
D	Innovation 🡢 Performance	0.44	7.15^* * p < .05	H3	Yes

Fundação Getulio Vargas, Escola de Administração de Empresas de S.Paulo Av 9 de Julho, 2029, 01313-902 S. Paulo - SP Brasil, Tel.: (55 11) 3799-7999, Fax: (55 11) 3799-7871 - São Paulo - SP - Brazil
E-mail: rae@fgv.br

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[1] diego.marin@utadeo.edu.co

Scope:	Bogotá D.C.
Length:	12 months
Elements:	Small and medium-sized enterprises of Bogotá
Sampling units:	CIIU Rev. 3.1 A.C. - 2 digits
Sampling frame:	BPR Benchmark Database™
Respondents:	Strategic-apex executives and middle-line managers