Actors affecting Process innovation - Research in power generation companies of Vietnam

Phan (2015), ... The overview results are summarized in Table 2.2. Therefore, through the literature review on process innovation, the research often focuses only on the factors that influence process innovation. Factors that attract the attention of researchers are knowledge, leadership, R&D investment, cost leadership, innovative investment strategies, absorption capacity, financial resources,... However, these studies do not or do not really care about the theoretical basis when considering factors and relationships with the process innovation, regardless of the three important theories, such as Upper Echelons Theory (Hambrick and Mason, 1984; Ireland et al., 2003), a Knowledge-based Theory of the Firm (Grant, 1996; Nahapiet and Ghoshal, 1998; Subramaniam and Youndt, 2005; Nguyen et al., 2016; Nguyen and Vu, 2013); and Organizational Learning Theory (Zahra and George, 2002; Cohen and Levinthal, 1990; March 1991). 2.6. Research gap Based on the review of previous studies, the author found that most studies are still unclear which theory has been applied when considering the factors and the relationship with process innovation. Only some studies, such as Li et al. (2007), Hilman and Kaliappen (2014) and Phan (2015), based on the theoretical basis. Theories applied in process innovation research are Resource- based view (specified as human and financial resources), theory based on behavior (specified as customer-focused behavior; the support of the leader, ..) and theory based on strategic management (specified as leadership strategy, innovation investment strategy, ..). Therefore, previous studies do not or do not really care about the theoretical basis when considering factors and relationships with the process innovation, regardless of the three important theories, such as Upper Echelons Theory (specified as Entrepreneurial leadership style), a Knowledge-based Theory of the Firm (specified as intellectual capital); and Organizational Learning Theory (specified as absorbtive capacity). Although it retains a central position in the main theories of innovation, there are few studies that examine the factors that provide inducements for process innovation at the firm level (Reichstein và Salter, 2006; Becheikh và cộng sự, 2006). In Vietnam, according to the author's understanding, only Phan (2015) has studied the process innovation at a software enterprise so it is difficult to generalize for all situations. Conducting empirical studies in other businesses, in other contexts. Through documentary research and in-depth interviews, in the past few years, the results of power generation enterprises in the process innovation were modest because they did not focus on the important factors affecting to process innovation and firm performance. In this context, enterprises need a reliable guiding model that helps them 7 focus their innovation efforts on a small number of important factors, well- controlled to have a high efficiency. Therefore, the main objective of this research is to develop the theoretical model based on the Upper echelons theory (specified as Entrepreneurial leadership style), a Knowledge-based Theory of the Firm (specified as intellectual capital); and Organizational Learning Theory (specified as absorbtive capacity), affecting the process innovation and firm performance of power generation enterprises. 2.7. Theoretical frameworks 2.7.1 Upper echelons theory Upper echelons theory believes that the results of a firm depend on the characteristics and behavior of top management teams. Senior leaders have a significant influence on process innovation and firm performance through the allocation of resources, creating a system of policies and mechanisms in the enterprises. Since the beginning of the 21st century, leadership research has focused on a new leadership style, namely entrepreneurial leadership style (Mishra and Misra, 2017). Entrepreneurial leadership style is expressed through the willingness to take risks and have a long-term vision instead of focusing on short-term results, so they are willing to invest resources in the process innovation activities, their passion for work always help them to lead in discovering and recognizing the value of new information, exploiting market opportunities before competitors. Therefore, Entrepreneurial leadership styles are creative and able to innovate (Ranjan, 2018). Research by Zmud (1984), Phan (2015) shows that positive attitude, the support of senior leaders is very important for successful process innovation. 2.7.2 Knowledge-based Theory of the Firm A knowledge-based theory of the firm said that organizational knowledge is the most important strategic resource of an enterprise and its process innovation potential depends on its knowledge resources. Knowledge is also increasingly playing a particularly important role in process innovation (Grant, 1996; Subramaniam and Youndt, 2005). Many studies show that knowledge is the key to innovation (Nonaka and Takeuchi, 1995; Jensen et al., 2007). Intellectual capital is the sum of the intellectual assets of a firm and the most important contribution to improving the competitive position of this firm through creating value for entities (Marr and Schiuma, 2001; Subramaniam and Youndt, 2005). Intellectual capital is often divided into human capital, structural capital and social capital based on the knowledge contained therein (Edvinsson and Malone, 1997; Meritum, 2002). In this study, the thesis will estimate the impact of human capital and social capital to innovation process and firm performance. 8 2.7.3 Organizational learning theory Organizational learning theory argues that the process innovation capabilities of a firm depends on the way it receives and processes information. Today, process innovation is becoming more complex, leading just one technology field is no longer enough. Research on process innovation based on the theory of organization in recent years shows that "Absorptive capacity" is one of the important factors affecting the process innovation (Murovec and Prodan, 2009; Tsai. , 2001b). Absorbing capacity helps the firm absorb and apply effectively knowledge from the outside. Absorbing capacity demonstrates the link between the organization's internal capacity and external information and opportunities to implement process innovation. Based on the work of Cohen and Levinthal (1989, 1990), researchers have shown that Absorption affects innovation (Tsai, 2001b), business performance, knowledge transfer within the organization. (Gupta and Govindarajan, 2000; Szulanski, 1996) 2.8 Research models and hypotheses 2.8.1 Proposed research models 9 Figue 2.3 Research models 2.8.2 Hypotheses H1a: Entrepreneurial leadership style has a positive impact on process innovation H1b: Entrepreneurial leadership style has a positive impact on Firm Performance H2: Entrepreneurial leadership style has a positive impact on Absorbtive Capacity H3: Entrepreneurial leadership style has a positive impact on human capital H4: Entrepreneurial leadership style has a positive impact on social capital H5: Absorbtive Capacity has a positive impact on process innovation H6a: Human capital has a positive impact on process innovation H7b(+) H7a(+) H1b (+) H1a (+) H4(+) Firm Performance Process innovation H3(+) H5(+) Entrepreneurial Leadership Absorbtive Capacity Acquisition Assimilation Transformation Exploitation H2(+) H6a(+) H6b(+) Firm’s Size Type of ownwership Firm’s Age Sector H8(+) Human Capital Social Capital 10 H6: Human capital has a positive impact on firm performance H7a: Social capital has a positive impact on process innovation H7b: Social capital has a positive impact on firm performance H8: Process innovation has a positive impact on firm performance Control variables : Firm’s Size, Type of ownwership,, Firm’s Age, Sector CHAPTER 3: RESEARCH METHOD 3.1 Research process Step 1: Identify research issues and research gaps Step 2: Theoretical framework and the initial scales Step 3: Preliminary quantitative research Step 4: Official Quantitative research Step 5: Complete the report 3.2 The process of building the questionnaire and the scales 3.2.1 The process of building the questionnaire 3.2.2 Scales 3.2.2.1 Scale of independent variables (i) Entrepreneurial Leadership: The scale of Entrepreneurial Leadership is built on the research of Renko et al. (2013). (ii) Human Capital: The scale of Human Capital is built on the research of Subramaniam and Youndt (2005). (iii) Social Capital: The scale of Social Capital is built on the research of Subramaniam and Youndt (2005). (iv) Absorbtive Capacity: The scale of Absorbtive Capacity is built on the research of Flatten et al. (2011). 3.2.2.2 Scale of intermediate variable The scale of process innovation is built on the research of Wang and Ahmed (2004) and Gurhan Gunday et al. (2011). 3.2.2.3 Scale of dependent variable The scale of firm performance is built on the research Lopez-Nicolas and Merono- Cerdan (2011). Control variables: 11 - Firm’s size: Firm’s size is divided into 02 groups, less than 30MW (small capacity) and 30MW or more (medium and large capacity). - Type of ownwership: Type of ownwership is divided into 02 groups, the state holds less than 50% of charter capital and the state holds 50% or more of charter capital. - Firm’s age: Firm’s age is divided into 02 groups, less than 5 years and 5 years or more. - Sector: Sector is divided into 02 groups, thermal power enterprise and hydropower enterprise. 3.3 Research sample 3.1 Overall research sample: Vietnamese enterprises operating in the field of the power generation with 357 enterprises managing 451 power plants. 3.2 Select the research sample: Survey all 357 enterprises 3.4 Qualitative research 3.4.1 Objectives of the qualitative research: 3.4.2. Method of conducting in-depth interviews 3.4.2.1. In-depth interviews The research interviewed 12 people: 03 people were members of the Board of Directors; 07 people are manager/deputy manager of technical department, manager/deputy manager of power plants and 02 people are experts, having extensive experience in training, teaching and researching in the field of electricity production. 3.4.2.2. Data collection and analysis The content of the interviews is rewritten, stored and encrypted in computers. Based on the content of the interview, the author analyzed to draw conclusions based on the similarities of the interviewees with similar views. The results are compared with the initial theoretical model to determine the formal model for quantitative research. 3.4.3 Results of qualitative research: Through in-depth interviews with members of the Board of Directors, the manager/ deputy manager of the technical department, the manager/deputy manager of the power generation plant, the independent variables were screened and tested relationships with process innovation, all factors that consider appropriateness and impact on process innovation. 3.4.4 Coding the scales After qualitative research, the author has adjusted the scales compared to the original scales to suit the research context. 12 3.5 Quantitative research 3.5.1. Preliminary quantitative research 3.5.1.1. Objectives and methods of preliminary quantitative research - Objectives of preliminary quantitative research: Preliminary quantitative research aimed at assessing the reliability of the scales and eliminating inappropriate observable variables. - Methods of preliminary quantitative research: Survey of 100 enterprises producing electricity by convenient sampling method. 3.5.1.2. Result of preliminary quantitative research From the scales that has been adjusted through qualitative research, the author conducted a preliminary survey on a sample of 100 enterprises to assess the reliability of the scales through Cronbach’s Alpha and factor discovery analysis. 3.5.2. Official Quantitative research 3.5.2.1. Objectives of the official quantitative research Reassessing the reliability of the scales by Cronbach’s Alpha reliability coefficient, Confirmation factor analysis (CFA), Analysis of linear structure model (SEM) to test research hypotheses and assess the level influence of independent variables, control variables to process innovation. 3.5.2.2. Methods of the official quantitative research CHAPTER 4: RESEARCH RESULTS 4.1 Research context 4.2 Evaluation of scales 4.2.1 Quality testing of scales for constituent factors Results of assessing the reliability of scales using Cronbach's Alpha show that all scales of variables in the research model ensure reliability when the Cronbach's Alpha values exceed the common threshold of 0.7. (Appendix 4) and may be used in subsequent analyzes. 4.2.2 Evaluation of scales through affirmative factor analysis (CFA) Based on the evaluation results of the scales with the official research sample, it shows that the scales of all factors has reached the required reliability. 13 4.3 Descriptive statistical analysis 4.3.1 Test for Normal distribution 4.3.2 Descriptive statistics on research samples Table 4.1 Characteristics of research samples Frequency Percent (%) Type of ownwership Enterprises with the state holds 50% or more of charter capital 55 19.7 Enterprises with the state holds less than 50% of charter capital 224 80.3 Total 279 100.0 Firm’s Size less than 30MW 162 58.1 30MW or more 117 41.9 Total 279 100.0 Firm’s Age less than 5 years 59 21.1 5 years or more. 220 78.9 Total 279 100.0 Sector Thermal power enterprise 25 9.0 Hydropower enterprise 254 91.0 Total 279 100.0 Board of Directors 104 37.3 14 Position Manager/ deputy manager of the technical department, the manager/deputy manager of the power generation plant 175 62.7 Total 279 100.0 Source: Data analysis of the author 4.3.3 Current situation on the assessment of power generation enterprises on the process innovation and the factors in the model 4.3.3.1 Evaluation of enterprises on process innovation Survey results show that the average evaluation score of "process innovation" of enterprises is higher than the average level of 3,613, with a standard deviation of 0.736 The activities of process innovation have not really taken place strongly, enterprises have not been actively implement process innovation and have not considered process innovation as a strategic activity of their business. This is reflected in the low evaluation in terms of improvement to reduce labor costs and reduce raw material consumption, which is related to investment in new machinery, equipment and technology. 4.3.3.2 Evaluation of enterprises on entrepreneurial leadership style The survey results show that the average evaluation score of "entrepreneurial leadership" of enterprises is relatively good at 3,913 with a standard deviation of 0.761. Entrepreneurial leadership style in the power generation enterprises is currently highly appreciated, however, is underestimated in terms of long-term vision for business development, resulting in influencing process innovation. 4.3.3.3 Evaluation of enterprises on human capital Survey results show that the average evaluation score of "Human capital" of enterprises is quite high, at 4,030 with a standard deviation of 0,757. Therefore, the knowledge, skills and qualifications of human resources in power generation enterprises are currently evaluated very well. 4.3.3.4 Evaluation of enterprises on Social capital The survey results show that the average evaluation score of "Social capital" of enterprises is of 3,564, higher than the average level with a standard deviation of 0,878. Therefore, the social capital, especially the relationship with customers, suppliers, and partners, has not been taken seriously by electricity generation enterprises, this will negatively affect the process innovation of enteprises. 15 4.3.3.5 Evaluation of enterprises on Absorbtive Capacity For the factor of "Absorbing capacity", it is evaluated at 3,773 which higher than average, with a standard deviation of 0,795. Thus, the capacity to absorb new knowledge has not been taken seriously and actively by the electricity generation enterprises to improve the absorption capacity. The aspect of applying new knowledge is not highly evaluated will negatively affect process innovation of enterprises. 4.3.3.6 Evaluation of enterprises on firm performance The survey results show that the average score for evaluation of "firm performance" of enterprises is 3.774 on average, with a standard deviation of 0,752. Thus, the firm performance of electricity generation enterprises are currently not highly evaluated, which shows that the process innovation in power generation enterprises is not really effective. 4.4 Evaluation of correlation coefficient According to the correlation coefficient test results through the correlation coefficient matrix in Table 4.8, the correlation coefficients between the variables within the allowed range. Therefore, we can conclude that these variables are eligible for SEM analysis. 4.5 Results of model testing and research hypothesis 4.5.1 Results of model testing and research hypothesis Analysis results using the specific linear structure model are as follows: Chi – square/df = 2.172 0.85, TLI= 0,881> 0.85, IFI =0.891> 0.85, RMSEA = 0.065 < 0.08 (figue 4.1). So that, the model gains compatibility with actual research data. 16 Figue 4.1 SEM analysis results Table 4.8 Regression coefficients of relationships in the model Relationship between variables Beta standardized S.E. C.R. p-value LD ---> HT .960 .092 13.616 < 0.001 LD ---> QH .861 .093 11.188 < 0.001 .365 .175 .269 .861 Organisational Performance Process innovation .842 .679 Entrepreneurial Leadership Absorbtive Capacity Acquisition Assimilation Transformation Exploitation .96 .497 Human Capital Social Capital Chi-square/df = 2.172 CFI=.890; TLI=.881; IFI=.891 RMSEA=.065 Notes: Supported Not supported 17 HT ---> DM .679 .066 6.506 < 0.001 QH ---> DM .269 .071 2.613 0.009 LD ---> NL .842 .08 10.801 < 0.001 DM ---> KQ .365 .127 3.76 < 0.001 QH ---> KQ .175 .09 1.757 0.079 NL ---> KQ .497 .081 6.477 < 0.001 Source: Data analysis of the author with the support of AMOS software The results of estimating the regression coefficients of the relationships in the model are presented in Table 4.8, this result shows that all relationships are statistically significant (p-value <0.1). Specifically: - Results of testing the impact of factors on process innovation: The process innovation is directly influenced by two factors: (1) Absorbtive capacity and (2) Social capital. According to the analysis result in table 4.6, Absorbtive capacity positively affects process innovation with p value less than 0.001, Social capital positively affects process innovation with p value of 0.009. The Absorbtive capacity has the biggest impact with the standard coefficient is 0.699 and Social capital has a lower impact relationship with the standard coefficient is 0.269. Therefore, by analyzing experimental data, the hypotheses H5 and H7a are accepted; meanwhile, unlike the author's expectations, the hypotheses H1a and H6a have been rejected. - Results of testing the impact of factors on firm performance: The firm performance is directly affected by three factors: (1) process innovation, (2) Social capital and (3) Human capital. According to the analysis result in table 4.6, all three factors have a positive influence on the firm performance with p-value of less than 0.001 with two factors: Human capital and process innovation, and p- value is less than 0.1 with the Social Capital factor. In particular, Human Capital has the biggest impact with a standard coefficient of 0.497, followed by process innovation with a standard coefficient of 0.365 and the lowest impact is Social capital with standard coefficient of 0.175. Therefore, by analyzing experimental data, the hypotheses H6b, H7b and H8 are accepted; meanwhile, unlike the author's expectations, the H1b hypothesis was rejected. 4.5.2 Bootstrap test results The results show that the bias of the Beta coefficients from the original sample and the average of the Beta coefficients from bootstrap analysis is very small, showing 18 that in practice it is possible to see that the estimated sample estimates can be extrapolated to the population as a whole. Therefore, it can be concluded that the estimation model is solid and reliable. 4.5.3 Assess the impact of factors on process innovation In the research model, the process innovation is directly affected by Absorption Capacity and Social Capital, but the process innovation is also indirectly influenced by other factors. To assess the impact of factors on process innovation, the author uses direct, indirect and aggregate impact factors to evaluate. The results show that the biggest impact on process innovation is entrepreneurial leadership style (λ = 0.884), followed by absorbtive capacity (λ = 0.679) and finally the Social capital (λ = 0.269). The results also show that the biggest impact on the firm performance is the entrepreneurial leadership style (λ = 0.892), followed by Human Capital (λ = 0.497), process innovation (λ = 0.365), Social capital (λ = 0.273) and finally “Absorbtive Capacity” (λ = 0.248). 4.6 Examining the difference of control variables to process innovation Table 4.11 Regression coefficients of relationships in the model have control variables Relationship between variables The coefficient is not standardized Standardized coefficient S.E. C.R. P LD ---> HT 1.260 .959 .093 13.572 <0.001 LD ---> QH 1.040 .868 .093 11.189 <0.001 HT ---> DM .417 .653 .068 6.128 <0.001 QH ---> DM .204 .292 .074 2.742 .006 LD ---> NL .861 .836 .080 10.708 <0.001 Quymo ---> DM .067 .060 .065 1.037 .300 Loaihinh ---> DM -.008 -.007 .073 -.116 .908 Thoigian ---> DM .002 .002 .050 .047 .962 Linhvuc ---> DM .001 .000 .069 .010 .992 DM ---> KQ .391 .311 .125 3.128 .002 QH ---> KQ .247 .281 .095 2.599 .009 NL ---> KQ .465 .454 .078 5.981 <0.001 Source: Data analysis of the author with the support of AMOS software 19 The testing results show that there is no difference in process innovation innovation related to the characteristics of the enterprise such as firm’s size, Type of ownwership, Firm’s age and Sector CHAPTER 5: COMMENT ON RESULTS AND RECOMMENDATIONS 5.1 Summary of research results Table 5.1 Summary of research results Hypotheses Results Entrepreneurial leadership style has a positive impact on process innovation Does not accept Entrepreneurial leadership style has a positive impact on Firm Performance Does not accept Entrepreneurial leadership style has a positive impact on Absorbtive Capacity Accept Entrepreneurial leadership style has a positive impact on human capital Accept Entrepreneurial leadership style has a positive impact on social capital Accept Absorbtive Capacity has a positive impact on process innovation Accept Human capital has a positive impact on process innovation Does not accept Human capital has a positive impact on firm performance Accept Social capital has a positive impact on process innovation Accept Social capital has a positive impact on firm performance Accept Process innovation has a positive impact on firm performance Accept 5.2 Comments on research results 5.2.1 Comment on the research results of the relationship between Entrepreneurial leadership style and Absorbtive Capacity Entrepreneurial leadership style have a positive effect on absorbtive capacity, which is consistent with the results of qualitative and hypotheses research. This result is similar to the results of previous studies on the role of senior leadership (Amitay et al., 2005; Sun and Anderson, 2012; Flatten et al, 2015; Vera and Crossan, 2004; Ferreras Méndez et al., 2018) 20 5.2.2 Comment on the research results of the relationship between Entrepreneurial leadership style and Human Capital Entrepreneurial leadership have a positive impact on Human Capital, whic