Academic journal article Academy of Strategic Management Journal

The Influence of Strategic Orientation, Organizational Innovation Capabilities and Strategic Planning on the Performance of Technology-Based Firms

Academic journal article Academy of Strategic Management Journal

The Influence of Strategic Orientation, Organizational Innovation Capabilities and Strategic Planning on the Performance of Technology-Based Firms

Article excerpt

INTRODUCTION

Firm performance is one of the biggest concerns in the strategic management literature (Venkatraman & Ramanujam, 1986; Sosiawani et al., 2015). In the context of Small and Medium Enterprises (SMEs), much research has been conducted to identify antecedents of SMEs with good business performance so that such companies can perform better. Freel (2000), Verhees & Meulenberg (2004) and Westerberg & Vincent (2008) claim that SMEs will achieve improved performance if they are more intensive in presenting innovative activities, because the implementation of innovation is able to provide clear direction and become a source of competitive advantage (Kiiyuru, 2015). The ability of SMEs to behave in an innovative way will help them to survive in the competitive business environment (Johnson et al., 1997) and even achieve superior performance (Hurley & Hult, 1998).

Several previous studies have confirmed the importance of strategic orientation as a factor contributing to company performance (Hakala, 2011), even at the level of SMEs (Deshpande et al., 2012; M'zungu et al., 2017). Therefore companies will show different levels of applying such orientation (Eitrem & Oberg, 2018). At the academic level, the concept of strategic orientation is used intensively in the fields of strategy, entrepreneurship and marketing (Grawe et al., 2009). Nzewi et al. (2017) emphasize that companies that implement strategic planning correctly will be able to face the challenges of changes in the external environment. The ability to conduct strategic planning is also considered capable of influencing company performance, including family businesses (Donkor & Karkam-Kwarteng, 2017).

Drawing upon these conditions, the research attempts to analyze the three antecedents as proxies in predicting the performance of SMEs. The selection of SMEs for the study sample is based on their dominance in the absorption of Indonesian workers, employing 97.22% of the workforce and contributing 57.12% to total GDP. Indonesia is also experiencing a digital transformation of the economy, as reflected by the growth of internet users and data from the Ministry of Communications and Informatics in 2015, which show that the valuation of the digital economy reached USD 3.56 billion and grew to USD 4.89 billion in the following years. As the main stakeholders managing the national economy, the government is preparing several sets of policies to accelerate the digital economy, such as the "Thousand Technopreneur" program (Agustine & Oktarinda, 2016). These empirical facts indicate the government's commitment to Indonesia's readiness to connect to the globalized economy. Therefore, the contribution of this study will provide empirical evidence for the influence of strategic orientation on SMEs, a field which is still dominated by the large-scale company context (Gray & Lawless, 2000) in Indonesia as a developing country (Suklev & Debarliev, 2012).

LITERATURE REVIEW AND HYPOTHESIS DEVELOPMENT

Strategic Orientation and Firm Performance

Strategic orientation is an option that can create capabilities dynamically in a constantly changing business environment and enable companies to respond quickly to these changes (AlBarghouthi, 2014). Morgan & Strong (2003) state that strategic orientation refers to how a company responds to factors in the business environment. Therefore, such orientation is often portrayed as a predictor of high performing firms which have a competitive advantage (Baker & Sinkula, 2009; Kaya & Seyrek, 2005). Consequently, firms that adopt a strategic orientation will be able to predict the potential for external changes in the business environment and adapt to them.

Gatignon & Xuereb (1997) emphasize that start-up orientation can encourage corporate behavior to be more oriented towards creating competitiveness. This is because such strategic orientation will guide the company's strategy formulation (Noble et al. …

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