Innovation Activities and the Business Performance of Small and Medium Manufacturing Companies - Moderating Effects of Organizational and Network Characteristics

Background/Objectives: Management innovation in manufacturing companies is becoming more and more important to secure competitiveness in rapidly changing technical environment and the diversifying expectations of customers. The purpose of this study is to empirically examine the relationship between management innovation and business performance, and especially, the moderating effect of organizational and network characteristics between them. Methods/ Statistical Analysis: This study established a research model through existing literature reviews and empirically verified the research model through a field survey. It explored the relationship between the 4 areas of management innovation-system, product, process, and human resource-and the 2 factors of business performance-customer satisfaction and financial performance. To determine the moderating effect of organizational characteristics which have over the influence of management innovation on business performance, the level of formalization, centralization, and networking characteristics was considered. For the data analysis, a multivariate analysis has been performed using a statistical analysis tool. Findings: Management innovation was shown to have a significant positive effect on management performance, while organizational characteristics and network characteristics had a moderating effect. The organization's formalization level especially had a significant moderating effect in the relationship of "system innovation and customer satisfaction", and "product, process innovation and financial performance", while the centralization level had a marginally moderating effect. Furthermore, the level of internal and external network of an organization had a moderating effect on system, process innovation and customer satisfaction performance. This study corresponds to previous research, which has found that management innovation has a positive effect on business performance. In addition to that, this study provides useful findings how each organizational characteristics have over the influence of each innovation activities on business performance. Application/Improvements: The findings of this study imply that when a company tries to induce management innovation, it should consider the organization and network characteristics to maximize the result of innovation. On the other hand, a company should try to set up the appropriate organizational and network environment prior to the management innovation.