The role of different innovation management modes on organisational financial performance in South Africa

Abstract

The study investigated the role of innovation management modes on organisationorganisational financial performance in South Africa. to examine what the relationship is with organisational financial performance. Although research has been conducted on the innovative strategy in South Africa none has been identified that seeks to establish the link to organisational financial performance. Innovativeness and an adapted innovation management mode questionnaire taken from Bisbe and Malagueno's (2009), was administered to 73 companies listed on the Johannesburg Stock Exchange. These 73 companies were selected because they were registered and they confirmed to be innovating companies. A poor response rate of 18% was obtained due to changes in the willingness of respondents from when the database was compiled to the date of the actual research. The Cronbach alpha coefficient analysis was conducted to ascertain the reliability of the measurement tool in relation to the small sample size obtained. The innovativeness tool proved to be reliable with a Cronbach alpha coefficient of 0.845. Some of the innovation management mode tool items were coded and reversed and upon applying the Cronbach alpha coefficient, the tool was found not to be reliable when all 25 items were analysed. Reliability was obtained for three out of the six subsections when analysed separately. These subsections were used for Spearman rho correlation analyses, together with descriptive statistics for all items in the tool, in order to test innovativeness in organisations; relationship of innovativeness and IMM; and lastly the relationship between IMM and organisational financial performance; for the sample being observed. Shareholder wealth creation (SWC) was used as a tool for organisational financial performance measurement, together with other more common measures for profitability, leverage, growth and survival. A positive relationship between financial performance and innovativeness in the sample confirmed that innovation is a source of increased financial performance in organisations. No conclusive relationship could be ascertained between organisational financial performance using SWC, leverage, return on assets and survival. However the positive relationship found between growth and IMM in the sample, suggests that IMM may have a role to play in a growing organisation. The prevalence of systematic IMM in the sample and the high organisational financial performance of some of the companies using this mode could be due to the use of the contingency innovation management. Limitations were identified in the study, which included the small sample size obtained and suggestions to improve on the implementation of the empirical research. Areas of further study include improving implementation and opening it up to a wider population group to ascertain whether the results found in this research are representative for South African companies.