Strategic Orientation and Product Innovation: Exploring a Decompositional Approach

Abstract

While a considerable body of research examines the strategic orientation-innovation relationship, findings in that literature have been mixed. This article calls attention to an under-investigated problem: the composite, multi-dimensional conceptualization and measurement of most strategic orientations, which likely contribute to the mixed findings in the literature. To address this issue, the researchers explore a decompositional approach to the strategic orientation-product innovation relationship. The authors utilize the stimulus-organism-response (S-O-R) framework to select, decompose, and recast a set of strategic orientation components previously identified to be essential to product innovation. To produce more nuanced insights, the authors also decompose product innovation outcomes into breakthrough vs. incremental. Furthermore, the sample is decomposed by product type to assess the generalizability of the conceptual model across manufactured goods vs. services firms. The authors test the conceptual model with a sample of 222 executives of services and manufacturing firms in Germany and Switzerland using Partial Least Squares (PLS). By decomposing the strategic orientation effects into direct, indirect, total, and specific components, the detailed empirical analysis yields several new insights. Overall, the results suggest that the relationship between strategic orientation and product innovation is more complex than previously identified in the literature. For example, the results demonstrate that technology orientation works to augment innovation differently in services vs. manufacturing firms. More specifically, technology orientation boosts only breakthrough innovation in manufacturing firms, and only indirectly by enhancing an organization’s openmindedness. In contrast, services firms extract additional benefits from a focus on technology directly (and for both incremental and breakthrough innovation) as well as indirectly by increasing openmindedness. The authors also identify complementary as well as suppressing effects on product innovation outcomes from different strategic orientation components. Based on the findings in this study, future research avenues are identified, and managers are advised to consider each component of alternative strategic orientations individually and evaluate the capabilities aligned with components to assess their interdependencies.

Keywords: innovation, new product development, strategic orientation, customer orientation, competitor orientation, technology orientation, services, manufacturing, partial least squares (PLS)

JEL Classification: C3, C31, C42, D21, L2, L6, L8, M3, O00