Academic journal article International Journal of Business and Management Science

Organization and Growth of Firms: Validation of an Organizational Model through Survey Data

Academic journal article International Journal of Business and Management Science

Organization and Growth of Firms: Validation of an Organizational Model through Survey Data

Article excerpt


The impetus of this paper is to complement the analysis already taken place regarding the impact of organizational innovations (OIs) on management and economic growth as per Sanidas (2004, 2005, 2006) As we see in Appendix A, these innovations can take four different forms: "knowledge innovations" based on the process of wisdom (POW); "strategic innovations" based on the process of strategies (POS); "kinetic innovations" based on the process of movements (POM); and "contractual innovations" based on the process of contracts (POC). A combination of these four types of organizational innovations can be found in the just-in-time process (JIT), or vertical integration, and so on. In addition, Ols can be further distinguished from technical innovations (e.g. a new machine) and process innovations (Edquist and Hommen, 1999; Edquist, Hommen, and McKelvey, 2001). The main reference for the theoretical background of this typology of OIs is Sanidas (2006), whereas Sanidas (2005) provided ample evidence of the importance of OIs in economic growth. In Sanidas (2004) the PROBB model is extended to encompass individuals, nations and the contribution of entrepreneurs.

The theory of the firm is extended to encompass all types of opportunity costs and not just transaction costs. As a further extension to the transaction costs and capabilities development and as a synthesis of several related issues, the PROBB model introduced a complete system of 4 mutually exclusive and interdependent and negentropic processes that fully describe the contents of the "black box" of production. This box and its relation with transaction costs was the preoccupation of the Nobel Laureate Coase (1937, 1960 and 1992). In the PROBB model three more types of costs are included: strategic, kinetic, and knowledge costs. With these extensions of the theory of the firm, the classical production function can now incorporate the PROBB explicitly (and not only labour, capital, and technology).

The paper discusses methodology in details in the first place to proof the logical consistency of PROBB Model. The following section discusses the findings of the study obtained through statistical tools. A discussion and conclusion section follows to summarize the findings of the paper.


The aim in this paper is primarily to empirically check the validity of the PROBB model for its logical consistency. For this purpose we used some survey data and validated some hypothesis with appropriate statistical methods. Regarding the data issue, in Australia the marine industry is relatively important as a large proportion of inhabitants own a boat; thus this industry has firms in all stages of the value chain: production of boats, their service and maintenance, production of boat parts, marine insurance and so on.

The hypotheses have been tested are: (i) there is a significant interdependence between the various elements of the four PROBB; (ii) there are meaningful groups of PROBB elements that work together in a synergistic way; (iii) some key variables such as sales growth can be significantly correlated with individual PROBB variables. Overall we have attempted to make detailed classifications of the PROBB elements.

At this stage of research 80 firms have been surveyed so far on a face to face basis through interviews (an initial set of 10 firms were used to pre-test the level of understanding of each question) with top managers or owners of these firms. The questionnaire used has approximately 200 questions and is entirely based on the findings of Sanidas (2005, 2006) as described above. There are 5 major parts of this questionnaire: the first 4 parts are based on the 4 processes of the black box (PROBB) as shown in Appendix A and comprise 109 questions. The fifth part is a mixture of various types of questions ranging from economic variables to strategic variables and so on. Some variables of the fifth part "sales" and "product uniqueness" will be scrutinized subsequently. …

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