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Relationships between Innovation Capabilities, Business Performance, Marketing Performance and Financial Performance: Product & Service Innovation, Process &Marketing Innovation

An introduction of a new or significantly improved good or service is defined as product innovation. (OECD, 2005). Products innovations can be achieved through utilize the new or existing knowledge or technologies. However, various factors such as advance technologies, customer needs change, short product life cycles and global competition increase may cause the product innovation is a difficult process. (OECD, 2005). Communication within the firm, between the firm and its customers and suppliers is an essential step to be successes in product innovation.
According to the study conducted by A.Oke, the success of product / service innovations can be achieved through the improvement of processes (Oke, 2007). In addition, marketing and product innovation are positively related. Both have effect on each other. For example, when the level of the marketing innovation is high, the level of the product / service innovation is also high. Firms will attempt to develop products in a shorter time or response quickly to the new product introduce by their competitors in order to overcome the competitive threat (OECD, 2005). This leads to competitive advantage increase. Firm financial performance can be improved through innovation such as the ability to response quickly to market forces, develop and launch new products with a lower lead times (OECD, 2005).We have found 20 articles related to process innovation. The implementation of a new or significantly improved production or delivery method such as changes in techniques, equipment or software is defined as process innovation. (Fagerberg et al., 2004). Process innovation take place when the unit cost of production decreased, quality increased or new product introduced (OECD Oslo Manual, 2005). Fagerberg et al. (2004) emphasized that cost-cutting nature due to the process innovation will have a positive effect on the growth of income and employment.
A significant change in product design, packaging, placement and promotion or pricing is defined as a marketing innovation (OECD, 2005). In order to increase the firm’s sales, marketing innovation will be implemented through fulfill the customer needs better, opening up new markets, or re-position a firm’s product on the market. Marketing innovations are strongly related to the four P’s of marketing, which are pricing strategies, product package design properties, product placement and promotion activities (Baldwin and Johnson, 1996). Clark (1999) offered expanded measurements of marketing performance, which include the financial aspect that is, profitability, salability, cash flow, and non-financial aspect that is, customer satisfaction, customer loyalty and brand equity. The “Innovation Strategy” has a significantly positive influence upon organizational marketing performance. Bonoma and Clark (1988) said that a financial performance is highly tied together with cash flow, market share, sales growth rate and profitability.

This post was written by , posted on November 7, 2013 Thursday at 3:33 pm