RADBOUD UNIVERSITY NIJMEGEN

Master Thesis 2012 Faculty of Business Administration & Center for Innovation Studies

The Technology Organization Discord

Technological innovation and organizational innovation reviewed: The influence of temporal sequence on organizational efficiency

by Gaston P.A.A. Plantaz

Name: Student number: Date: Supervisor: Co-reader:

Gaston P.A.A. Plantaz 4082788 5-3-2013 Dr. P.M.M. Vaessen Dr. P.E.M. Ligthart

Preface
This master thesis is written in the context of completing my Masters degree in Business Administration. The choice for the topic was easily made because I have always been very interested in innovation. The innovation topic is very suitable for the specialization of my master, which is Strategy. In my opinion, innovation is the most important way for organizations to make a difference and to ensure their competitive advantage. Therefore, it is really important that research focuses on innovation and the way this concept exactly works. In this specific research the emphasis lays on determining the optimal configuration of technological innovations and organizational innovations with regards to better organizational efficiency. Though the whole process took more time than was expected, this made sure that I really learned a lot the past year, not only about the specific subject but also about how to manage a project like this. Although I am very proud on this final product I definitely can say that it is not about the destination but all about the journey. On this journey I was accompanied and helped by the following people. Without them I definitely would not have been able to finish this research project and therefore I would really like to thank them. First of all, I want to thank Peter Vaessen for his excellent supervision during the whole period of time of writing this thesis. His insights surely have proven to be very worth full and helped me to finish this study. In this context, also Paul Ligthart cannot be forgotten, as my second examiner he also made useful suggestions for the improvement of this thesis. In addition, I would also like to thank my parents, for their great advices, but more for their unconditional support and love during my whole study. Finally, special thanks go to my girlfriend Manja who has been an amazing support and partner the last year. Thank you all!

Gaston Plantaz

Abstract
Purpose This research seeks to explore the effects of temporal sequential configurations of organizational and technological innovations on the process efficiency of manufacturing firms. Design/methodology/approach The effects of the organizational innovation first and the technological innovation first perspective on organizational process efficiency were examined by the use of a quantitative analysis of the EMS-2009 survey. Findings The results of this study revealed that when examining the process efficiency of manufacturing firms no significant evidence was found in support of any general temporal sequential configurations of organizational and technological innovations. So in contrast to what the literature review suggested no strong effects were found. However additional analyses revealed that the timeframe in which both types of innovations are introduced seems to have effect on some of the efficiency indicators. Research limitations/implications Given the fact that the interrelatedness between different types of innovations is a complex process analysis of this subject on business level is difficult. Future research on project level should be examined. Practical implications This research proved that the configuration of innovation efforts is a complex process and that organizations should take this into consideration. Originality/value This thesis examines the temporal sequential configuration of organizational and technological innovations by performing quantitative research. The quantitative analysis of this subject with the use of a large survey like the EMS is new within innovation research. Keywords Innovation, organizational innovations, technological innovations,

manufacturing firms. Paper type Master thesis for gaining the title of Msc.in business administration

Content

1. Introduction .................................................................................................................. 7 1.1. General introduction ....................................................................................................... 7 1.2. Structure of the research ................................................................................................ 9 1.3. Problem statement ......................................................................................................... 9 1.3.1. Research problem .................................................................................................. 10 1.3.2. Research questions ................................................................................................ 11 2. Theoretical framework & Conceptual model ............................................................... 12 2.1. Technological innovation & performance ..................................................................... 12 2.2. Organizational innovation & performance ................................................................... 14 2.3. Interrelatedness technological and organizational innovations ................................... 16 2.4. Sequence of occurrence ................................................................................................ 19 2.4.1. Organizational innovation first............................................................................... 20 2.4.2. Technological innovation first ................................................................................ 22 2.5 Conceptual model .......................................................................................................... 24 3. Research Methodology............................................................................................... 25 3.1. Research type and design.............................................................................................. 25 3.2. Measurement of concepts ............................................................................................ 26 3.3. Control variables ........................................................................................................... 27 3.3.1. Organizational size ................................................................................................. 27 3.3.2. Type of manufacturing subsector .......................................................................... 28 3.3.3. Product & production characteristics .................................................................... 28 3.3.4. Research & Development....................................................................................... 30 3.3.5. Product Innovation ................................................................................................. 30

3.3.6. Absolute number of technological and organizational innovations ...................... 31 3.3.7. Production lead time .............................................................................................. 31 3.3.8. Sales growth ........................................................................................................... 31 3.4 Operationalization .......................................................................................................... 31 3.5. Methods of analysis ...................................................................................................... 36 3.6 Conceptual model .......................................................................................................... 38 4. Analysis & results ...................................................................................................... 38 4.1. Descriptive analysis ....................................................................................................... 39 4.1.1. EMS-2009 and participating countries ................................................................... 39 4.1.2. Organizational performance .................................................................................. 40 4.1.3. Technological Process Innovations ........................................................................ 41 4.1.4. Organizational Innovations .................................................................................... 42 4.1.3. Sequential analysis ................................................................................................. 43 4.1.4. Descriptive analysis metric and non-metric variables ........................................... 45 4.1.5. Correlational analysis ............................................................................................. 45 4.2. Regression analysis........................................................................................................ 47 4.3.1. Production Lead Time (PLT) ................................................................................... 49 4.3.2. Manufacturing Lead Time (MLT) ............................................................................ 50 4.3.3. Rework/Scrap rate (Scrap) ..................................................................................... 51 4.3.4. Capital Utilization (CU) ........................................................................................... 51 4.3.5. Labour Productivity (LP) ......................................................................................... 52 4.3.6. Hypotheses ............................................................................................................. 53 5. Discussion & Conclusion ............................................................................................. 58 5.1. Temporal sequential innovation configurations ........................................................... 58 5.2. Limitations and suggestions for further research ......................................................... 62 References ...................................................................................................................... 65 5

Appendices ..................................................................................................................... 69 Appendix 1 ..................................................................................................................... 70 1.1 General Information EMS-2009 ..................................................................................... 70 1.2 EMS Survey ..................................................................................................................... 71 Appendix 2: Analyses of EMS-2009 data .......................................................................... 72 2.1. Reliability analysis Technological Innovations .............................................................. 72 2.2. Reliability analysis Organizational Innovations ............................................................. 73 2.3. Number of innovations introduced ............................................................................... 74 2.4. Descriptives metric variables ........................................................................................ 75 2.5. Descriptives non-metric variables ................................................................................. 77 2.6. Regression Analyses ................................................................................................. 78 2.6.1. Analysis A - Production Lead Time (PLT) .................................................................... 78 2.6.2. Analysis B - Manufacturing Lead Time (MLT) ............................................................. 86 2.6.3. Analysis C Rework/Scrap rate (Scrap) ..................................................................... 94 2.6.4. Analysis D Capital Utilization (CU) ......................................................................... 101 2.6.5. Analysis E Labour Productivity (Value added per employee) ............................... 109

1. Introduction
1.1. General introduction
Modern organizations are operating in an increasingly complex and dynamic environment. Due to environmental factors like globalization and fast moving technological development firms face increased competition. Besides that manufacturing organizations are confronted with the upcoming problems of scarce resources which force them to increase the efficiency of their production processes. In this respect innovation enables organizations to increase efficiency with regard to the use of raw materials and energy. Given the previous mentioned developments and environmental factors the need for organizations to innovate is essential for their growth and survival in the short and long term. Organizations have to develop and implement new innovations in order to become more sustainable and profitable. Therefore the study of innovation hardly needs justification as scholars, policy makers, business executives, and public administrators maintain that innovation is a primary source of economic growth, industrial change, competitive advantage, and public service (Borins, 1998; Boyne et al., 2006; Christensen et al., 2004; Tidd et al., 2001; Damanpour, Walker & Avellaneda, 2009, p. 1). Since researchers like Schumpeter (1934, 1939, 1942) made the first notions to the concept of innovation, this topic has received a lot of attention by numerous academics. The traditional concept of innovation in firms distinguishes product and process innovations. Since both are typically associated with the development or application of new technologies, these innovations are often called technological innovations. (Schmidt & Rammer, 2007, p. 0). This traditional perspective has caused that traditional research about innovation focussed on the innovation of technology which focussed on the internal development of specific technologies or acquiring those externally to improve the production process or in order to develop new products. Technical innovations are perceived here as a means of changing and improving the performance of the technical system of an organization (Damanpour & Evan, 1984, p. 394). With improving the performance of an organization it is meant to increase efficiency within the production processes, increase the quality of the products and reduce labour costs. Examples of such technological innovations could be; the use of: state-of-the-art robots, computers, software programs and other high tech machinery within the production process. It is a well-known 7

fact that these types of innovations are occurring in almost all manufacturing industries worldwide since the start of the industrial revolution. While technological innovations have proven their worth organizations can cope with environmental changes and uncertainties not only by applying- new technology, but also by successfully integrating technical or administrative changes into their organizational structure that improve the level of achievement of their goals (Rosner, 1968; Damanpour & Evan, 1984, p. 393). This concept of organizational innovation refers to the nontechnological innovations that contribute to the firms performance by for example changing the organizational structure. The upcoming phenomenon of the multidivisional form can be seen as a good example of an organizational innovation. Armour and Teece (1978) found that the adaption of a major administrative innovation (the multidivisional structure) in petroleum firms increased the rate of return of owners equity (Damanpour & Evan, 1984, p. 395). Non-technological innovations have proved to be of great influence in the success of multiple organizations. Therefore it can be stated that these organizational innovations which take place in the social system of an organization, are also important precedents for organizational success and performance. Although a huge base of scientific articles have stressed the importance of both technical and organizational innovations, a simultaneously examination of these concepts has been ignored for a long time. However there is a shift towards a more integrative perspective of these forms of innovations. This combinative or integrative view offers that innovation types are complementary and influence organizational outcome jointly (Damanpour, 2012, p.26). Yet there remain some important questions about how to use these two distinct but simultaneously interrelated forms of innovation in order to gain maximum performance results. This paradox is referred to as the Technology -Organization Discord. This paradox points to the indistinctness about what the actual relation is between the diverse ways an organization can innovate on the one hand and organizational performance on the other hand. Traditional research suggests that organizations start with technological innovations and then out necessity make organizational adjustments (Ettlie, 2000; Damanpour & Evan, 1984). Yet there is an upcoming number of researches who investigate this relation the other way around, where organizational innovations are seen as predecessors or even necessities for the successful implementation of technological innovations. This thesis will 8

try whether these temporal sequential configurations are significant indicators for organizational efficiency, and if so which specific sequence is preferred. Further it is important to look to certain factors that also could have an influence on the way organizations try to increase their performance by introducing new innovations. These conditional factors could for example be the size of the firm and the specific industry the firm is operating in. This research will try to answer all these questions by the use of quantitative research of the data retrieved from the European Manufacturing Survey 2009, which encompasses data from manufacturing firms from nine European countries with more than 10 employees.

1.2. Structure of the research

This thesis starts with the problem statement and the corresponding research goal followed by the presentation of the research questions. The following chapter discusses the existing theories and findings of previous research conducted about this topic. This theoretical review led to the conceptual model used within this research. From the results of this theoretical framework a set of hypotheses is established. Chapter three provides the research methodology and provide further information about the used EMS-survey and corresponding variables. Chapter four presents and discuss the results of the quantitative descriptive and explanatory analyses. Subsequently these results are used to test all hypotheses. The fifth chapter provides an overall conclusion and elaborates on the theoretical and practical relevance, the limitations of this research and provides suggestions for further research.

1.3. Problem statement

To describe the aim of this research a clear general problem statement was defined. This problem statement contains the overall goal of this research, specific research questions and the theoretical and practical relevance. The conceptual model used was developed by the hand of the main theories with regard to this subject. From this conceptual model and the research questions two hypotheses are drawn which are tested by quantitative analysis. The results led to conclusions about this topic and in that way contribute to the existing literature about this topic. 9

1.3.1 . Research problem The goal of this research is to make a valid contribution to the existing literature about innovations. Theory development and empirical studies of innovation types have thus far focused on their antecedents; namely, environmental and organizational conditions that enhance or hamper the process of generation or adoption of each type (Jansen et al., 2006; Kimberly and Evanisko, 1981; Tornatzky and Fleischer, 1990; Damanpour, Walker & Avellaneda, 2009, p.2). However, research about the relation between the interrelatedness of different types of innovations on the one hand and business efficiency on the other hand has received considerably less attention. Existing literature describes the role and importance of both technological developments and organizational concepts regarding their influence on performance. Yet, important information about how to integrate the use of both types of innovations and especially in which temporal sequence and at which specific conditions is a topic that deserves more attention in the field of innovation research. Organizations can benefit from a better understanding of the interrelatedness of different innovations. A deeper understanding helps them to adjust their innovations strategy in such a way it contributes best to its goals. The temporal sequence of different innovations is not a totally new concept within business literature. Previous research suggests different sequential configurations which can be categorized as the technological innovations first and the organizational innovation first perspectives. In that respect the aim of this research was to make a review of the existing literate about the Technology-Organization Discord and use these perspectives to explore which specific temporal sequential configuration of innovations will contribute best to the firms performance. Because performance is a broadly defined concept this research specifically focusses on the optimal configuration of innovation efforts in order to increase efficiency within the production processes of manufacturing firms. Concerning the differences in characteristics between technological and organizational innovations but also between different firms in which they are incorporated this research will treat different control variables which may have an alternate effect on organizational efficiency. These control variables are: organizational size, type of industry sector, research & development, product innovations, specific production characteristics that may have an influence and the absolute number of technological and organizational innovations implemented and finally the sales growth of an organization. 10

1.3.2. Research questions

Main research question: What is the influence of the different temporal sequential configurations of technological and organizational innovations on the organizational process efficiency of manufacturing firms? Sub research questions: - What is the effect of the organizational innovation first strategy on the organizational efficiency of manufacturing firms?

- What is the effect of the technological innovation first strategy on the organizational efficiency of manufacturing firms? Additional analysis question: - What is the influence of the timeframe in which organizational and technological innovations are jointly implemented?

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2. Theoretical framework & Conceptual model

In this chapter the theoretical background underlying this research is presented. To start this literature review this chapter first elaborates on the concepts of technological and organizational innovations were the focus lays on their independent influence on organizational performance. The second part will focus on the interrelatedness and alignment of these different types of innovation. In this part the existing literature about the influence of both innovations have on each other will be discussed. Consequently the different forms of sequence will be presented. These sequences contain the Organizational Innovation First and the Technological Innovation First perspectives.

2.1. Technological innovation & performance

In the introduction of this thesis the concept of technological innovations has been shortly explained. In this part the relation between technological innovations and organizational performance/efficiency is further elaborated on. Technological innovations can be defined as the implementation or adoption of technologically new or significantly improved production or delivery methods, which may involve changes in equipment, production organisation or a combination of these (Oslo Manual, 2005). Sanidas (2005, p. 4) provides a more practical definition by defining technological innovations as those innovations that refer to embodied technology such as new machines, products, and equipment in contrast to organizational innovations that refer to disembodied technology such as unpatented know-how, property rights, management, and organization. Damanpour (2012) states that because these technological innovations have proven to enhance performance they are till this moment the most widely used innovations. Among economist and policy makers, investments in advanced technologies have attracted a great deal of attention, owning to a widespread view that technological change is the major driving force behind long-term economic growth (e.g. Fagerberg, 1994; Tassey, 2007; Vaessen et al., 2012). This technological determinism emanates from the performance boost resulting from new technology like electrical equipment and electric power generation in the beginning of the last century (Fagerberg, 1994) and new information and communication technologies at the end of the last century (Vaessen et al., 2012). The way in which technological innovations

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can contribute to the performance of an organization can be explained by the so called rational perspective. Damanpour (2012) explains that technological innovations contribute to the economy of the organization by using the following chain of events: R&D investment development of new technology introduction of new products or services performance outcome, which is referred to as the technology push model1. Yet technological innovations do not only contribute to new products but also within the production process they can enhance organizational performance in the form of higher production efficiency. Maybe the most famous technological process innovation is the invention of the assembly line by Henry Ford2 which had a major effect on labour productivity and quality of the T-Ford automobile at that time. In figure 1 the different ways an organization can innovate are clearly displayed.

Figure 1: A stylised representation of the Innovation-performance linkages (Retrieved from Evangelista & Vezzani, 2010, pp.1255)

As mentioned earlier this research focuses on process innovations. As suggested by the model of Evangelista & Vezzani (2010) the performance outcomes measured within this research are indicators of efficiency and productivity. When comparing the use of technological with the use of non-technological innovations it becomes clear that technological innovations have been preferred for a long time.
1

The conceptual framework of innovation in organizations can also be explained by the market pull model which suggests the important influence of the marketplace. For a more detailed explanation of this model see Von Hippel (1978). 2 Actually the assembly line was invented by Ransom E. Olds, some even say it was actually invented in slaughterhouses.

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Bacharach and French (1980) found that over a ten-year period the average number of technical innovations proposed in city governments was nearly three times the average number of administrative innovations3 (Damanpour & Evan, 1984, p. 394). The question is why do a majority of organizations put so much emphasis on these technological developments? Technical innovations [] are perceived to influence performance more readily than administrative innovations (Damanpour & Evan, 1984, p. 405). Not only the business performance effects are accounted for this dominance of technological- over nontechnological innovations. Technical innovations are more observable, have higher trialability, and are perceived to be relatively more advantageous than administrative innovations, while administrative innovations are perceived to be more complex than technical innovations to implement (Damanpour, 1983, p. 45-47; Damanpour & Evan, 1984, p. 394). Further the findings from Baldwin, Diverty & Sabourin (1995) substantiated the relation between the use of (new) technology and organizational performance. Because the relation between innovation and organizational performance is the essence of this research we will use the following definition for organizational performance, from a systems perspective, performance is the ability of an organization to cope with all four systematic processes (inputs, outputs, transformations, and feedback effects) relative to its goalseeking behaviour (Evan, 1976; Damanpour & Evan, 1984, p. 395). Because this definition still encompasses a wide range of performance indicators this research will solely focus on the efficiency indicators specified for the manufacturing industry.

2.2. Organizational innovation & performance

In the previous paragraph technological innovations and their relation to organizational performance was discussed. The reasons that explain why these technological innovations have gained a favoured position over organizational innovations were portrayed. However the technological view on innovation has been criticised for not fully capturing innovation in services and for ignoring important elements of innovative activities of firms, e.g. adopting new and re-organise existing business routines, external relations and marketing (Schmidt & Rammer, 2007 pp. 0). Organizational innovations have gained much more attention since these missing aspects have become more important over the years. This tendency can be
3

Administrative innovations refer to organizational innovations or non-technological innovations

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observed in the way innovation is studied. For example the Oslo Manual (2005) started to refer to organizational innovation and marketing innovation next to technological innovation. Because many researchers use this manual the importance to view innovation within an organizational context is increasingly recognized in business literature. Because organizational innovation encompasses multiple possible organizational changes it is important to define it in a clear way. An organizational innovation is defi ned as the implementation of an internally generated or a borrowed idea whether pertaining to a product, device, system, process, policy, program, or service that was new to the organization at the time of adoption (Thompson, 1965; Zaltman, Duncan, and Holbek, 1973; Damanpour & Evan, 1984, p. 393). Yet this definition encompasses a wide range of innovations. Damanpour & Evan (1984, p. 394) give the following examples: An administrative innovation can be the implementation of a new way to recruit personnel, allocate resources, and structure tasks, authority, and rewards (Evan, 1966). It comprises innovations in organizational structure and in the management of people (Knight, 1967). All these specific innovations which stand apart from pure technological changes contribute to a firms performance in a lot of ways. For instance, from the perspective of institution building, an administrative innovation resulting in a new structural form is probably a more important innovation than a major technical innovation because it is essential to both effective organizational performance and institutional problem solving (Schulman, 1969 ; Damanpour & Evan, 1984, p. 406). Especially nowadays, because large organizations not solely focus on one core activity and therefore corporate more intensely with competitors, suppliers and customers, organizational innovations become essential in good business strategies. The resources required, in terms of knowledge, skills, money and market experience, mean that significant innovations are synonymous with organizations (Trott, 2012, p. 10). Yet the problem with organizational innovations is that their effect on organizational performance is hard to measure, especially within the short term. Damanpour and Evan (1984, p. 406) state that organizational innovations might even have a greater impact on organizational performance in the long term then technical innovations do. And although the effects on performance are hard to measure organizational innovations have some attributes that make then more desirable than technological ones. Compared to technological innovation, managerial innovations are more adaptable (can be more easily refined, elaborated, and modified), have lower initial costs (require fewer financial resources 15

to be introduced), and are cognitively less complex (are easier to understand by users) (Damanpour & Aravind, 2011; Wolfe, 1994; Damanpour, 2012, p.11). These insights provide logical explanations that describe that organizational innovation can positively contribute to organizational performance. This positive effect can be explained by a rational perspective for example tested in the study of Evangelista and Vezzani (2010) which shows that the adoption of new managerial practices has a positive effect on sales growth. Also the findings of Birkinshaw and Mol (2009) which show that managerial innovations have a positive effect on productivity indicate the importance and opportunities of these specific nontechnological innovations. While technological innovations take place in the technical system of an organization administrative innovations are defined as those that occur in the social system of an organization (Damanpour & Evan, 1984; pp 394). The social system refers to the relationships among people who interact to accomplish a particular goal or task (Cummings and Srivastva, 1977). It also includes those rules, roles, procedures, and structures that are related to the communication and exchange among people and between the environment and people (Cummings and Srivastva, 1977; Damanpour & Evan, 1984, p. 394). To provide organizations with a more deeply understanding of the use of different innovation strategies it is important to encompass both technological and organizational innovations in a simultaneous examination. In the following paragraphs the interrelatedness of both types of innovations is discussed followed by a more detailed explanation of the different possible temporal sequential configurations.

2.3. Interrelatedness technological and organizational innovations

In the previous paragraphs we discussed the independent role of technological and organizational innovations. It is explained that each type of innovation can have a significant effect on organizational performance. While these different types of innovations have a distinct character, they are in many aspects interrelated. In the alignment perspective it is assumed that different types of innovation should be aligned in order to achieve maximum business performance. Existing studies, although with different approaches and data, seem to indicate that technological and non-technological innovations are complements rather than substitutes (Evangelista & Vezzani, 2010, p. 1255). Organizations need to find strategies 16

that encompass the use of both organizational and technological innovations in order to successfully increase performance. The critical aspects of aligning the investments in technical aspects and investments in the manufacturing infrastructure such as planning, control, quality assurance and organizational policies is described by multiple conceptual studies (Meredith, 1987c,d; Ettlie, 1988, Zuboff, 1988; Parthasarthy and Sehti, 1992; Twigg et al., 1992;Boyer et al., 1997). While these articles stress the importance and the opportunities of a combined use of technological and non-technological innovations, organizations still do not take this to a full advantage. The reason for this tendency could be that the alignment of these concepts is a difficult process because the interaction effects of diverse innovations differ. So there might be some combinations that enhance performance but also negative effects by this interaction could be possible. For example, technological process innovations are expected to have a direct effect on profit margins in the short term. Schmidt & Rammer (2007 pp. 0) state: What is more, the highest innovation effects on profit margins are to be found for firms introducing technological innovations without nontechnological ones, indicating that comprehensive innovation activities involving both types are likely to raise costs stronger than returns. Yet these findings portray the effect on specific performance indicators within the short term. On the other side many studies (Hollenstein, 2003; OECD, 2008; Tether and Tajar, 2008, Brynjolfsson and Hitt, 2000; Bresnahan et al., 2002; Gera and Gu, 2004) provide results that do confirm the positive effect of complex innovations strategies on organizational performance. For that reason it is important to understand how these different innovations interrelate, and how they should be aligned in order to achieve better performance/efficiency. First, this alignment can be described by the socio-technical systems theory. This theory describes the importance for organizations to achieve a high standard of technical performance on the one hand and on the other hand high quality in the employees work lives. By the interaction of technological and social aspects business performance can be enhanced or decreased. When organizations solely focus on the independent development of both aspects an organization increasingly faces unpredictable relations which may negatively affect performance. Because technological and organizational innovations are the means which change or improve the overall performance of the respectively technical- and social system of an organization their alignment is a complex process, yet remain essential for achieving 17

higher efficiency. Herbst (1974) describes from a socio-technical systems theory point of view: From a theoretical standpoint, the sociotechnical systems framework emphasizes the role of both technical and social systems operating jointly for the effective operation of an organization, and its suggested that concentration on either the technical or the social system without due regard to the other would result in low organizational performance and growth. Damanpour & Evan (1984, p. 407) add to this by stating A balanced implementation of administrative and technical innovations would help to maintain the equilibrium between the social and technical systems, which in turn would lead to high performance. The idea of a social technical system stems from about half a century ago (Trist et al., 1963) were it was used to describe the influence new technologies had on jobs and the new organizational forms that had to be developed in order to effectively use these systems and simultaneously offer employees a quality job. While some argue that this perspective is dated, the new technological developments in the last years have disrupted the way employees work. For example, the new communication technologies but also other technological developments like for example new ICT related innovations in the manufacturing industry caused an irrevocable change in organizational structures and the organization of work which for example can be seen in the growth of team work and task integration. The idea is that all these new technologies only can be used to their full potential when they are accompanied by the right organizational adjustments. For example when an organization purchases a new production machine which makes the tasks for employees easier and more monotonous and at the same time invest in the recruitment of highly educated personnel it is clear that these independent investments are not consistent in reaching the same goal. But when the same organization for example invests in better work rotation in order to keep the work for its employees divers and in that way the employees stay motivated and train the employees for using the new technologies these organizational adjustments enhance the utilization of the new machine. Besides this socio-technical perspective the alignment of technological and organizational innovations can be described by the productivity paradox (Solow, 1987). This paradox refers to the discrepancy in the investments made in new technologies and the productivity level of the whole economy. It states that technological innovations do not automatically increase productivity. It describes that in order to gain performance growth technological 18

innovations should be aligned by organizational innovations in order to increase efficiency levels. The relation between those two distinct forms of innovation is of complementary nature, and adopting both forms will lead to the highest returns (Armbruster et al., 2006; Arnal et al,.2001; Evangalista and Vezzani, 2010). Brynjolfsson & Hitt (1998) describe that these technological innovations have proven to be an essential component of a broader system of organizational changes which do increase productivity. They found a consistent positive relationship between the use of technology and a set of work practices that include for example the use of self-directed work teams, greater levels of individual decision authority increased investments in training and screening for education and incentive systems that reward and encourage high team performance (Brynjolfsson & Hitt, 1998, p. 53). Conclusion can be drawn that a technological innovation necessarily needs organizational changes to become successful. It has to be acknowledged that these organizational changes often need a substantial period of time and financial investments in order to be established. However there are contrasting views about whether they have to be developed or introduced before the new technologies are implemented or that they have to be subsequently developed. Given the importance for organizations to find the best efficiency enhancing innovation strategy this research will test which temporal sequential configuration provides the best results for different efficiency indicators. In the following paragraphs the Organizational Innovation First and the Technological Innovation First perspectives are elaborated on.

2.4. Sequence of occurrence

In the previous paragraph it is explained how technological and organizational innovations interrelate with each other, and that this alignment can result in higher performance levels. Within the literature a clear distinction can be made between on the one hand articles describing the organizational innovation first perspective and on the hand some of them also point to the possible positive effects of the technological innovation first perspective. In the following paragraphs both perspectives are elaborated on in closer detail.

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2.4.1. Organizational innovation first Although the importance of organizational innovations has been proven, the use of organizational innovations for preparing organizations that face the implementation of new technologies should gain more attention. Therefore it is of great importance to further investigate the role of organizational innovations as driver for the implementation and success of technological innovations. Earlier research describes the effect of product and process innovations on non-technological innovation activities, but did not investigate the opposite direction (Schmidt & Rammer, 2007 pp. 32). The organizational perspective argues that rather than the adoption of technology, organizational change is fundamental to the process of innovation and growth (Van de Ven et al., 1999; Vaessen et al., 2012). There are some arguments that support this view. First we can refer to the role of organizational innovations as a trigger or even a necessity for the development or acquiring of new technologies. Damanpour & Evan (1984) find in their study of libraries that organizations who implement a higher rate of administrative innovations end up with a higher number of technological innovations in the subsequent period. These results can be explained as follows. Because the technical system is generated and controlled by the social system, changes in the social system might be assumed to have a stronger impact on the changes in the technical system, rather than vice-versa. Moreover, changes in the social system might have a greater impact on the total system and prepare it for the introduction of suitable technical changes (Damanpour & Evan, 1984, p. 397). So in this case organizational innovations which are for example new organizational structures or organizational learning stimulate the successful introduction of new technological changes. Other authors like Edquist, Hommen, and McKelvey (2001), Williamson (1975) and Sanidas (2005) also stress the importance of non-technological innovations for a successful implementation of technological innovations. An alternative but much less recognized view suggests that managerial innovations are essential for creating a culture or climate of creativity, learning, and change and thus serve as a precondition for introducing technological innovations (Lam, 2005) (Damanpour, 2012, p.24). Georgantzas & Shapiro (1993) argue in their paper that firms with a large number of organizational innovations create a better view on which new technologies to use, and how to implement them. Firms have to use organizational innovations to their full potential in order to create a situation or culture in which they 20

eventually contribute to new technological changes but also their independent possible effects on performance within the social system. Damanpour and Evan (1984, 2012, pp.2526) relied on a socio-technical perspective and related the introduction of managerial and technical innovations as a means of introducing change in the organizations social and technical systems, respectively. Their findings explained that managerial innovations trigger the introduction of technical innovations more than the other way around. Further it can be argued that organizational innovations should precede technological ones because they have an important role in the success of new technology. Damanpour & Evan state If the social system is not prepared, it cannot adjust to the demands created by the technical system; therefore, the required match between the two systems for high performance of the organization will not be achieved (Damanpour & Evan, 1984, p. 396). Burns, Acar & Datta, (2010) provide a framework that could be used to describe the influence of this specific temporal sequence. In their exploration of entrepreneurial knowledge transfers they mentioned two distinct approaches: learning-before-doing and learning-by-doing in which learning could be seen as an organizational innovation and the implementation of new technologies as the doing aspect. While their research focused on the transfer and the sharing of organizational knowledge for entrepreneurial product development (EPD) their framework could be applicable to process innovations as well. For process innovations organizational learning is essential. In support of the organizational first perspective they mention the concept of acquisitive learning, which is the acquiring and internalizing of external knowledge outside the boundaries (Burns, Acar & Datta, 2010, p. 271). This type of organizational learning suggests that organizations should focus on a priori conceptual knowledge. In their article Burns, Acar & Datta further elaborate on the importance of the locus of learning and shared knowledge. Organizations can choose to experiment before doing, in which it is assumed, the more the better. By an early involvement of for example functional groups or external partners organizations create a better understanding on how to guide the implementation of a new technology. Learning before doing creates better knowledge and better knowledge transfer which is essential for maximizing the efficiency results of new technologies. Besides when organizations follow a learning-before-doing approach they are able to learn more and better when they have to adjust for example organizational routines or structures after the technology is 21

implemented. An a priori explanation is that learning-before-doing renders the recipient more capable of learning from experience; in addition, by increasing the credibility of the knowledge source, it enables smooth knowledge transfer to other recipients in an entrepreneurial firm (Churchman, 1968, Nass , 1994, Burns, Acar & Datta, 2010). From these findings it can be concluded that the organizational innovation first perspective offers many logical opportunities for organizations to enhance their performance. However not much quantitative analysis is performed within this field. Further they elaborate on diverse performance indicators and also on product development instead of process innovations. For that reason the following hypothesis was made. Hypothesis 1: Generally speaking, manufacturing firms that let organizational innovations precede technological innovations will have higher organizational efficiency then organizations that followed the technological innovation first perspective.

2.4.2. Technological innovation first In contrast to the organizational first perspective the technological innovation first perspective describes new technological development as the driving force for organizational changes. In this perspective technological innovations precedes organizational innovations. Damanpour & Evan (1984; pp 396) state: It is often said that organizations introduce technical changes, and then out necessity, proceed to make alterations in the social system; that is, the joint optimization of the social and technical systems is often reached by rearranging the social system around the technical system.. In the management literature this perspective is referred to as technological determinism. This perspective emanates from the idea that new technological developments like for example the invention of the assembly line lead to non-technological changes like new organizational structures. This dominant view of technological innovations is underpinned by a quote of Ettlie (2000) Technology is the force that shapes, irrevocably, the way we work . To make this technological determinism more applicable to this research the following quotes are used. Innovation management literature suggests that direct economic success of product and process innovation (such as sales with new products and cost reductions resulting from new 22

processes) not only depends upon the product and process innovation itself, but also on accompanying adjustment in the organisation of a firm and - with respect to product innovation - in adjustments in marketing methods (Schmidt & Rammer, 2007, p. 30). This quote refers to the idea that organizations use organizational innovations to increase the chance of success of their technological product and process innovations. These organizational innovations like for example a new organizational structure, rewarding systems, HRM and marketing innovations increase the sales for new products and can lead to cost reductions in the production process. This idea is supported by the findings of Schmidt and Rammer (2007, p.32) which suggest that firms have an incentive to undertake non-technological innovation activities if they introduce technological innovations. However this does not automatically imply that in time these technological innovations precede organizational ones. However this specific sequential configuration can be described by the concept of learningby-doing (Acar & Datta, 2010). This idea suggest that an organization could choose to learn from experience, and adjust the organization were needed after the introduction of the technology. The authors refer to this idea as experimental learning, which is the result of active experimentation by members who acquire new knowledge distinctive to the organization (Acar & Datta, 2010, p. 271). Multiple articles emphasize on a shift from learning-before-doing towards learning-by-doing in EPD (entrepreneurial product

development) processes (e.g. Spencer, 1996; Thomke and Reinertsen, 1998; Thomke, 2001; von Hippel and Tyre, 1995; Terwiesch and Bhn, 2001). However it is not clear if this is also the case for process innovations, and subsequently what the influence of learning-by-doing could be. However there is an on-going controversy in the research literature on the optimal timing of knowledge transfer (Acar & Datta, 2010, p. 274). This learning by doing is especially preferred when organizations lack theoretical and practical knowledge about the production modalities (Pissano, 1996). This implies that when organizations do not have the right competencies or knowledge available, or in any other way have to quickly introduce new technologies they could benefit from the technological innovation first perspective. Further it could also be reasoned that for some technological innovations no organizational adjustment have to be implemented beforehand, because organizational adjustment can easily be made afterwards. 23

From the viewpoint of the technological perspective the following hypothesis can be formulated. Hypothesis 2: Generally speaking, manufacturing firms that let technological innovations precede organizational innovations will have higher organizational efficiency then organizations that followed the organizational innovation first perspective.

2.5. Conceptual model

In the previous paragraphs the different existing theories about the TechnologyOrganization-Discord are described. The examination of different academically writings led to two hypotheses. All hypotheses can be placed within the conceptual framework that is central in this research. At first we have the dependent variable which is organizational efficiency. This variable is measured by five dependent variables (see chapter 3 Table 1). The independent variable in this research is the sequence of occurrence which encompasses the technological innovations (TI) and organizational innovations (OI). The sequence of these innovations is provided by the differences in year of implementation and is transferred into a dichotomous variable. From the literature it is expected that the relations between the sequence of occurrence is moderated by other variables which are, organizational size, type of manufacturing subsector, production characteristics (Product development, Production & Assembly, Batch Size, Product Complexity), Research & Development and Product Innovation and Sales growth. In the figure 2 the conceptual model of this research is displayed with the corresponding hypotheses.

Technological Innovation First

H1
Organizational process efficiency

Organizational Innovation First

H2

Figure 2: Conceptual Model

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3. Research Methodology
In this chapter the research methodology is described. In order to examine the relation between different sequences of innovations and organizational efficiency, quantitative research will be used. In order to correctly execute this research first the specific type of research will be described accompanied by a description of the used European Manufacturing Survey 2009 (EMS-2009). Further the research design will be presented in which the scope and focus of this research will be treated. Subsequently the variables which are used in this research and their specific indicators within the EMS-dataset will be presented. Finally this chapter will present the specific statistical methods that will be used to test the hypotheses.

3.1. Research type and design

To test the specific hypotheses of this research quantitative research will be used. The data which is used comes from the European Manufacturing Survey (EMS) from the year 2009. This survey is directed by the German Fraunhofer Institute for Systems and Innovation Research (ISI)4. In collaboration with other European research institutes their main goal is to perform research about innovation within manufacturing firms across Europe. The goal of the EMS is to collect empirical data for research purposes. By statistical analysis of the retrieved data researchers can contribute to a better understanding of the different efforts industrial companies make to modernize their production and business processes. The EMS database holds data from manufacturing firms from the countries: Austria, Croatia, Denmark, Finland, France, Germany, the Netherlands, Slovenia, Spain and Switzerland. These firms are all manufacturing firms but may differ in the specific industry they are active in. All respondents in this survey are the owners of company managers of organizations with at least 10 employees at the moment of questioning. The survey however contains many variables which do not contribute in this specific research. Therefore a specific selection of variables is made and used in the analysis. The dataset used for this research contains a total

I like to express my gratitude to all the partners of the EMS-network for providing the data needed for this research. See http://www.european-manufacturing-survey.eu. or appendix 1 for more information

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of 3204 completed questionnaires. The EMS dataset provides a very comprehensive and correct measurement of the used concepts and further its entails a high internal validity. As mentioned above, this research will use quantitative analysing methods. In research three types of design are differentiated: exploratory, descriptive and explanatory research. (Churchill et al., 2010) Because this research tests existing theories by an examination of data we perform explanatory research. Explanatory research is very useful for testing the hypotheses that are derived from the theories presented in chapter two. By quantitative research these hypotheses can be validated or rejected and in that way contribute to the existing knowledge about the use of technological and non-technological in manufacturing firms in order to increase performance.

3.2. Measurement of concepts

As discussed in chapter two the main concepts which will be measured are the sequence of occurrence of two distinct forms of innovation namely, technological process innovations and organizational innovation. The dependent variable in this research is organizational process efficiency, measured by five indicators: production lead time (PLT), manufacturing lead time (MLT), rework/scrap rate (Scrap), capital utilization (CU) and labour productivity (LP). Besides testing the direct relations between these variables it will be controlled by different control variables, namely; size of organization, type of manufacturing subsector, production characteristics, research & development, product innovation and the absolute number of innovations. Further for the analysis of MLT the variable PLT is used as additional variable and for CU and LP sales growth is added to the standard model. Although these concepts are already discussed it is of great importance to make them measurable. Because this research will use an existing dataset, the operationalization of these concepts is performed by the partners of the European Manufacturing Survey and is displayed in the following paragraphs. In chapter two the difference between technological and non-technological has been discussed. Besides that the difference between Process and Product innovations has been explained. The European Manufacturing Survey contains questions about both technological process and product innovations, organizational innovations and product-service innovations. However the focus in this research is a closer examination of technological and 26

non-technological process innovations. The variables technological innovation (TI) and organizational innovations (OI) therefore only represent technological process innovations and organizational innovations. (See figure 3)

Figure 3: Focus research: Process innovations:

3.3. Control variables

Within this part the different control variables which could be of influence within this research are treated. These are in following order: organizational size, type of manufacturing subsector, product and production characteristics, research & development, product innovation, the absolute number of technological and organizational innovations, production lead time (for model MLT) and sales growth (for models CU & LP) . These control variables are used because they are expected to have an influence on the process efficiency indicators within this research. Controlling the relationship between temporal sequential configuration and these efficiency indicators by these variables make the findings within this research more powerful. 3.3.1. Organizational size The role of organizational size is a widely discussed topic within management literature. Many researchers have argued that organizational size facilitates innovation (Aiken and Hage 1971; Ettlie, Bridges and OKeefe 1984; Kimberly and Evanisho 1981; Damanpour 1992). And that organizational size is a determinant of the innovative activity of an organization (Anderson & King, 1993). There are many reasons to offer that larger organizations follow a different innovation strategy than smaller organizations. These reasons are for example that large organizations have more complex and diverse facilities that aid a higher rate of adoption (Nord and Tucker, 1987) [] tolerate potential loss from unsuccessful innovations 27

more easily [] and employ more professional and skilled workers (Damanpour, 1992). Others state the opposite (Hage 1980; Utterback, 1974). They argue that large organizations due to their inflexibility and lower ability to adapt and improve do nt innovate as well as smaller organizations. They further argue that the implementation and acceptance is easier in smaller organizations. According to Trott (2012, pg. 103) it can be stated that Size is a proxy variable for more meaning full dimensions such as economic and organizational resources, including number of employees and scale of operation. The variable organizational size is therefore expected to influence the process efficiency of manufacturing firms and for that reason was used as control variable. 3.3.2. Type of manufacturing subsector This research focusses on the manufacturing industry within eight countries. The manufacturing industry is an enormous industry which encompasses many different types of organizations. Because organizations within the manufacturing industry vary in many ways a closer examination of manufacturing subsectors is needed. It is expected that by using this variable within this research model a visible difference between different sectors can be made. For example the materials, production techniques and machinery used by manufacturers of clothing are hardly to compare with those of firms active in high-tech production in for example industries like aircraft engineering. For that reason the variable manufacturing sector was used as a control variable. 3.3.3. Product & production characteristics In the previous paragraphs it is described how organizational size and specific sectors could have an influence on organizational efficiency. However there are more factors that could have a significant influence on the main relation. An organization can be grouped according to a main product group. Because there is a large range of different products within the manufacturing industry but also within different subsectors many different firms exists. These industries can be discriminated by many different production aspects. Within this paragraph the influence of product development, production & assembly, batch size and product complexity are described.

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3.3.3.1. Product development An organization has to adjust its product development strategy according to the specifics of the product and its organizational capabilities. For example some manufacturers of very basic and simple products, like for example manufacturers of paperclips do not have to develop their product regularly. In the other way manufacturers in for example the car industry, have to develop their products according to the specific wishes of the customer and new regulations. Between those extremes there are other ways in which a firm can organize its product development. Organizations that take an active role in product development and therefore often have to rearrange the production process rely on other organizational resources then organizations that do not need this type of innovation. Therefore it is very plausible product development also has an effect on the efficiency indicators and therefore it was used as control variable.

3.3.3.2. Production & Assembly According to the product and the wishes from the customer the way an organization produces its products and assembles them differs. For example, the firm producing paperclips can produce a certain stock of its product. For organizations that totally customize their product, or produce a product that is not possible to keep in stock the production and assembly starts when an order is placed. For this reason it is expected that this variable is influencing the process efficiency of manufacturing firms.

3.3.3.3. Batch size Batch size can be seen as a characteristic of the product because of the simple reason that mass production products differs much from those produced in small batch production. Within firms who focus on mass production, we could think of assembly line work, have totally different efficiency rates than firms that produce single often customized products Therefore it is logical that batch size was used as control variable.

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3.3.3.4. Product complexity The topic of high versus low complex products has been explained in the previous three paragraphs in the form of product development, assembly and batch size. However these characteristics mostly explain the alignment of the production process according to the wishes of the customer, the features of the product itself are also important. For very complex and specific products different results for the efficiency indicators are expected than for simple products. Therefore product complexity is used as control variable explaining process efficiency. 3.3.4. Research & Development. When talking about innovation, many often refer to Research & Development. According to many studies R&D is a necessity or at least an important precedent of new innovations, on both technological & non-technological side. Especially in the case of product innovation R&D plays an essential role. In the case of this specific research it could be possible that R&D efforts are very closely related to new process innovations, which could have a strong influence on the process efficiency. Therefore it is importance to use the R&D variable within the regression models as control variable. 3.3.5. Product Innovation While this research focusses on process innovations it is important to not neglect the influence of product innovations. For various researches it can be stated that process innovations have a proven positive influence on labour productivity. Yet, many researches support the interdependency of process and product innovations. (Martinez-Ros, 2000; Kim & Mauborgne, 2004). Process innovations are focussed on increasing efficiency in the way employees work. Although when process efficiency is measured it is important to not oversee the influence of product innovation, also referred to as the effectiveness element. For example, when Apple introduced a new type of smartphone (IPhone), the total amount of turnover increased very fast. This led to a large increase in turnover per employee, but doesnt necessarily mean that efficiency was the cause for this steep increase in labour productivity. For this reason, when analysing process efficiency it is important to control for the percentage the sales of these new products had on the total amount of turnover.

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3.3.6. Absolute number of technological and organizational innovations Within this research it is important to take the absolute number of innovations into account. When calculating whether a firm followed a specific sequence, the average year of implementation is used. However this could lead to wrong conclusions because the efficiency indicators might be stronger affected by the number of implemented innovations. Therefore it is important to control our main relations for the absolute number of innovations, respectively on the technological and organizational side. 3.3.7. Production lead time Because of the fact that the production lead time is an important part of the manufacturing lead time (delivery time) it is important to use the variable PLT an additional control variable in the regression model which analyses the manufacturing lead time. 3.3.8. Sales growth In the calculation of capital utilization and labour productivity the total amount of sales is an important predictor. For that reason it is important for those efficiency indicators that are subject to the total amount of sales the variable sales growth is used as an additional control variable.

3.4 Operationalization
In this paragraph the operationalization of this research will be presented. As said earlier, the operationalization of the measured concepts is performed by the Fraunhofer Institute from Germany in cooperation with other research Institutes from the participating countries. The dataset of the EMS offers a wide range of variables which can be used to test the hypotheses. Because this research is focussed on the sequence of different types of innovation and the effect those configuration have on organizational efficiency it is important to use a significant number of efficiency indicators. First we present the indicators that measure economic efficiency, which are Production Lead Time (PLT), Manufacturing Lead Time (MLT), Capital Utilization (CU), inadequately used resources as indicated by the scrap rate (Scrap) and labour productivity (LP) measured by the

31

value added per employee. These indicators represent the process efficiency of manufacturing firms within this research. In order to measure these concepts the following variables will be used (see table 1).
Organizational efficiency
Production efficiency indicators Production Lead Time (PLT) Manufacturing Lead Time (MLT) Scrap rate (Scrap) Average production time Time from order to ready for shipping (delivery time) Average percentage of products that have to be scrapped or removed after quality control Capital Utilization Labour Productivity Degree of capacity utilization Value added per employee Measured in % of total capacity (metric) Measured in thousands of Euros (metric) Table 1: Organizational efficiency indicators within EMS dataset. Measured in hours (metric) Measured in hours (metric) Measured in % of total production (metric)

Indicators

Measurement

The explanatory variables of this research are the concept s of technological innovations (TI) and organizational innovations (OI). These concepts will be used to determine the sequence of innovation and are measured in the following way. (see table 2 for TI and table 3 for OI)

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Technological Process Innovations concepts

Integration of automation

Indicators
Digital product development Industrial robots/ handling systems Process integrated quality control systems Radio Frequency Identification (RFID) Warehouse management systems (WMS) Use of Laser Dry operations Rapid prototyping/ Rapid tooling Bio-/ gene technological processes / catalysts Processing of new materials Digital exchange production planning with supply change management systems of suppliers/customers Manufacturing Execution Systems (MES) Virtual Reality of 3D-simulation for product design

Measurement
Nominal variables (Y/N) With starting year (Interval variable)

Processing and production techniques

Nominal variables (Y/N) With starting year (Interval variable)

Digital factory / IT networks

Nominal variables (Y/N) With starting year (Interval variable)

Calculated variables
Technological Innovation Absolute number of above mentioned Metric variable technological innovations adopted Average year of implementation - Average year of implementation of all Metric variable variables above Table 2: Operationalization Technological Innovations (For more detailed information about the specific questions used see appendix 1.2) -

By examining the number of positive answers on the specific technological innovation questions the number of technological innovations can be measured. The average year of implementation will be used to determine the sequence of occurrence of the different types of innovations. To determine the concept of organizational innovations the following concepts will be used (see table 3)

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Organizational Innovation Concepts

Organization of work

Indicators
Autonomous production task groups Integration of Tasks (integration, planning, executing and control) Temporary cross-functional teams Client/product specific production units Internal Zero-buffer-principle (Kanban) Total Cost of Ownership (TCO) Quality circles Knowledge Matrix Quality management on basis of ISO9000 series Collective regulations for flexibility work Rewarding systems with bonuses for team performance Financial participation for employee groups ERA (Einheitlicher Entgeltrahmentarif)(only used in German Survey)

Measurement
Nominal variables (Y/N) With starting year (Interval variable) Nominal variables (Y/N) With starting year (Interval variable)

Organization of production

Standards and audits

Nominal variables (Y/N) With starting year (Interval variable) Nominal variables (Y/N) With starting year (Interval variable)

Work hours & rewarding systems

Calculated variables
Technological Innovation Absolute number of above mentioned Metric variable organizational innovations adopted Average year of implementation - Average year of implementation of all Interval variable Organizational Innovation Concepts Table 3: Operationalization Organizational innovations (For more information about the specific questions used see appendix 2 & 3) -

By examining the number of positive answers on the specific organizational innovation questions the rate of organizational innovations can be calculated. The average year of implementation will be used to determine the sequence of occurrence of the different types of innovations. By extracting the average year of introduction organizational innovations from the average year of introduction organizational innovations a metric variable is 34

calculated. This metric variable is subsequently recoded into a dichotomous variable in which the value 1 represents the organizational innovation first perspective and the value 0 represent the technological innovation first perspective.5 This research further uses different control variables. These are: organizational size, Type of manufacturing subsector, Production characteristics, Research & Development, Product Innovations, the absolute numbers of respectively technological and organization innovations, production lead time and sales growth. These different conditional variables will be measured by using the following variables (see Table 4).

Control Variables
Organizational Size Manufacturing subsector

Indicators
Number of employees in 2008 Measured by eight sectors Food, Beverages and Tobacco Textiles, Leather, Paper and Board Construction and Furniture Chemistry (energy & non-energy) Metals and Metal products Machinery and Equipment Electronics Transport Equipment

Measurement
Metric variable Categorical variable (nominal variable)

Production characteristics Product development Production & Assembly Batch size Product complexity Research & Development Product Innovation Product development in descending order of customer involvement Production & Assembly in descending order of customer involvement Batch size in order of unit uniqueness Product complexity Percentage of R&D workers Introduction of new products Share of turnover generated by new products Nominal variable 4 categories Nominal variable 4 categories Nominal variable 4 categories Nominal variable 4 categories % of total employees (metric) Y/N (nominal variable) % of turnover (metric variable)

Al data representing a perfectly simultaneous implementation are listed as missing

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Absolute number of Innovations

Absolute number of technological innovations Absolute number of organizational innovations Average production time Growth in sales from 20062008

Metric variables

Production Lead Time Sales growth

Metric variables measured in hours. Measured in percentages

Table 4: Control variables (For more information about the specific questions used see appendix 2 & 3)

3.5. Methods of analysis

In order to start the quantitative analysis all used variables were examined by the use of descriptive analysis. By providing detailed information about the variables and the use of different tables and graphs they can be tested for their usability, reliability and validity. Also the results can tell us more about the dataset and its possible opportunities and limitations. After performing descriptive analysis, multiple regression analysis will be performed. Given the measurement levels of the different variables multiple regression analysis will provide the best information about the relations in the conceptual model. In order to make all calculations necessary the computer program SPSS 17.0 will be used. Within this research the variables and relations displayed in table 5 will be tested.

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Dependent variables
production time (PT) Manufacturing Lead Time (MLT) Scrap rate (Scrap) Capital Utilization (CU) labour productivity (LP)

Control variables
Size Manufacturing subsector Product development Production/assembly Batch size Product complexity Research & Development Product innovation Number of implemented TI Number of implemented OI Interaction (TI x OI) Production lead time Sales growth 2006-2008 + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + +

Explanative variables
Organizational Innovation First Hypothesis 1 Technological Innovation First Hypothesis 2 Table 5: Model of analysis with expected results + + + + + + + + + +

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3.6 Conceptual model

As earlier described this research will test conceptual model that is depicted in figure 2. In the figure here under (see Figure 4) the same conceptual model is depicted with the accompanying operationalization and control variables.

Organizational Innovations First

Average year of introduction TI Average year of introduction OI >0

H1

Organizational Efficiency
Production-efficiency indicators: - PT, - MLT, - SCRAP, - CU - LP

Technological Innovations First

Average year of introduction TI Average year of introduction OI <0

H2

Control variables
Organizational size Manufacturing Sub-Sectors Research & Development Product innovation Production characteristics Product Development Production & Assembly Batch Size Product complexity Absolute number of Technological innovations Absolute number of Organizational innovations Production lead time (extra control variable for MLT) Sales growth 2006-2008 (extra control variable for CU & LP)

Figure 4: Operationalization conceptual model

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4. Analysis & results

In this chapter the analysis and results of this research are presented. First it starts with the descriptive analysis which provides a clear overview of the used dataset. These descriptives present the variables and discuss their usability within the conceptual model by the use of multiple tables and graphs. Further the reliability of the measured constructs was tested. Hair (2005, pp. 3) refers to reliability as the extent to which a variable or set of variables is consistent in what it is intended to measure. The variables used within this research are grouped under the constructs of organizational process efficiency, sequence of occurrence and the different control variables. We will start this paragraph by describing the general EMS-2009 dataset followed by a description of the dependent variables. Subsequently the independent and control variables will be further elaborated on. To conclude this descriptive analysis the results from the correlational analysis are presented. In the second part of this chapter the analysis of the conceptual model will be performed. By the use of multiple regression analysis the hypotheses within the model are tested. These analyses will be supported by clarifying tables. Further, additional analysis was executed; the results from additional models will also be presented and discussed.

4.1. Descriptive analysis

In this paragraph the results from descriptive analysis are presented and discussed in order to describe and test the variables extracted from the EMS dataset 2009. First, some general information about the dataset of this research will be provided. 4.1.1. EMS-2009 and participating countries First figure 5 presents the frequencies of performed interviews within the different countries where the interviews of the EMS were held. In total the used dataset contains the surveys of 3204 organizations from eight different European countries. Most respondents were organizations within Germany with 1484 completed questionnaires (46,3%) and Switzerland with 678 completed questionnaires (21,2%) the other 1042 questionnaires were quite evenly distributed between the other six countries as can be seen in the following bar chart.

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Frequency of completed questionaires among participating countries

1600 1400 1200 1000 800 600 400 200 0

Figure 5: Absolute number of EMS respondents according to country

4.1.2. Organizational performance In the table below, general descriptive findings are presented for all organizational efficiency indicators.

Production efficiency indicators Whole dataset

Production Lead Time (PLT) Manufacturing Lead Time (MLT) Rework/Scrap rate (Scrap) Capital Utilization (CU) Labour productivity (LP)

Frequency
2846 2920 2871 2344 2322

Mean
33,159 40,33 3,141 86,6404 102,0512

Standard deviation
202,4129 67,970 5,7658 14,92081 77,78138

Table 6: Descriptives organizational efficiency indicators

Given these findings the following conclusions about the dataset can be made. First the average production lead time is 33,16 work days (265,3 hours). Given the relatively high standard deviation it can be assumed that the products made by the different organizations differ substantially because the production lead times vary between 0 and 10.000 workdays. Concerning the Manufacturing lead time (MLT) it can be derived from the descriptive analysis that the mean time required to manufacture an item (including time for preparation, queue, inspections etc.) is 40,33 calendar days with a standard deviation of 67,97 calendar days, which depicts the wide range between the production time of the 40

product which is assumed to be correlating with the batch size and complexity. The average percentage of products that are accounted as scrap or rework is 3,14 % with an standard deviation of 5,77%. Concerning the Capital Utilization (CU) it can be stated that within the dataset the mean percentage of CU is 86,64 which implies that on average 86,64% of the companys assets are used. The standard deviation if CU is 14,92%. The mean added value of an employee among the different organizations was 102,05 thousand Euros with an SD of 77,78. The minimum of this variable was -291,67 which displays that there are organizations with negative labour productivity results among the respondents. 4.1.3. Technological Process Innovations In the following bar chart an overall view of all possible technological innovations is displayed. In this chart the percentage of each specific technological innovation is displayed.

Technological Innovations introduced

50,00% 45,00% 40,00% 35,00% 30,00% 25,00% 20,00% 15,00% 10,00% 5,00% 0,00%

Figure 6: Frequencies of Technological Innovations

As can be seen in the bar chart the technologies that are related to Digital product development (Computer Aided Design & Computed Aided Manufacturing) are the most implemented technological innovations. On the other hand Radio Frequency Identification

% of organizations

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and Bio- /gene technological processes (+ use of catalysts) are by far the least introduced technological innovations within this dataset. Because these different types of technological innovations are recoded into one variable/construct for technological innovations it is important to test whether these indicators combined are a reliable measure of the concept of technological innovation. To test this Cronbachs Alpa () is used. Hair (2005, pp. 102) states that the values of 0.60 to 0.70 are the lower limit of acceptability. The Cronbachs alfa for the construct of technological innovations is 0,6856 which implies that all indicators used taken together are above the prescribed border of 0,60. The Cronbachs alfa of this construct can be increased to 0,687 by removing the variable application of bio-/gene-technology. Because this is a very small increase all the predefined variables are used in our analysis of technological innovations. Finally, the descriptive analysis provides some other important results. The average number of used technological innovations is 2,60 (from a total of 13 predefined innovations) .This implies that of all thirteen measured indicators on average manufacturing organization used between 2 and 3 innovations with a standard deviation of 2,27 (See Appendix 2.3.2) for a visual representation of the frequency table of the total of technological innovations introduced. 4.1.4. Organizational Innovations Within the used dataset the percentages of the different used organizational indicators reveal that Quality management on basis of ISO-9000 series (63,2%), autonomous production task groups (60,7%) are the most frequently used organizational innovations. On the other hand Total Cost of Ownership is the least often introduced organizational innovation (18,3%). A visual representation of these findings is presented in figure 7.

See Appendix 2.1 for SPSS output

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Organizational Innovations
70,00% % of organizations
7

60,00% 50,00% 40,00% 30,00% 20,00% 10,00% 0,00%

Figure 7: Frequencies Organizational innovations

These 13 indicators are combined to one specific variable. Cronbachs alfa is used to test if these indicators are representative measured for the construct organizational innovations. The Cronbachs alfa for the construct of organizational innovations is 0.720 7 which implies that all indicators used taken together are above prescribed border of 0,60 and therefore are a reliable representation of organizational innovations. By deleting Collective regulations for flexible work arrangement the Cronbachs alfa can be increased to 0,729. Although this is a minor increase of we stick to the predefined 13 indicators. When looking towards the number of implemented organizational innovations (see Appendix 2.3.2 for visual representation) the following conclusions can be made. On average a higher number of organizational innovations are implemented within an organization then technological innovations. On average an organization implements 4,7 organizational innovations (from the preselected 13 innovations) with a standard deviation of 2,77. 4.1.3. Sequential analysis Within this paragraph the whole dataset will be analysed by the different possible innovations strategies. Of course the different ways an organization can innovate is divided

See Appendix 2.2 for SPSS output

43

into technological processes innovations and organizational innovations. Both constructs are measured by 13 indicators as was earlier explained. Yet with these indicators there are multiple ways an organization can choose to innovate. First are there the organizations that dont use any of the technological and organizational innovations, tho se that either only use technological on the one hand or organizational innovations on the other hand and those firms that use both organizational and technological innovations. In table 8 it can be seen that a large majority of respondents both introduced technological and organizational innovations (75%). While on the one hand the percentage of organizations that only used organizational innovations is (21%) on the other hand the number of firms that only introduced technological innovations (2%) or even did not even introduced any process innovation is small (3%).

Innovation Configurations
80,00% 70,00% 60,00% 50,00% 40,00% 30,00% 20,00% 10,00% 0,00% No Only Only Both Innovations Technological Organizational technological N=31 Innovations Innovations and N=21 N=239 organizational innovations N=868 Figure 8: Frequencies of Innovation configurations % of organizations
8

And when those firms that combine the use of organizational and technological innovations are examined more closely it is found that within the EMS-2009 dataset a majority of the organizations follow an organizational innovation first strategy (66%) as is displayed by the following graph (see figure 98). These findings are in line with the organizational innovation first perspective, and shows that organizations on average let organizational adjustment

Given the fact that the number of introduced organizational innovations is higher that the absolute number of technological innovations additional analyses were executed in which the average year of implementation was compared for only those firms that implemented 3 organizational innovations and 3 technological innovations. The results from this additional analysis were in also in line with the OI first perspective.

44

precede technological ones. From the 868 organizations 861 completed the questions about the years of implementation.
100 90 80 Percentage innovations 70 60 50 40 30 20 10 0 1950 1953 1956 1959 1962 1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 Average year of introduction Technological Innovations Organizational Innovations Figure 9: Sequence of occurrence (cumulative frequencies)

4.1.4. Descriptive analysis metric and non-metric variables Additional descriptive analysis was executed for the metric and non-metric variables. In Appendix 2.4 the results for the metric variables are summarized. Because of high values for skewness and kurtosis the variables: Production Lead Time, Manufacturing Lead Time (Delivery time), Rework/Scrap, Number of employees 2008 , Research & Development, Share of turnover new products and Sales growth were Log transferred. they had to be log transferred. For more detailed about the log transformations information see appendix 2.4. For the frequencies concerning the non-metric variables see appendix 2.5. 4.1.5. Correlational analysis By the use of correlation analysis of the control variables it was examined whether there are signs of interdependency between some of these variables. This is important for the reason that it is highly desirable that they all explain a specific part of the variance within the dependent variables. Because of the large number of variables present only the correlations above the border of 0,4 are presented within the following table.

45

Independent variables control variables Manufacturing subsector 1. Metal 2. Textile 3. Construction 4. Chemistry 5. Machinery 6. Electronics 7. Transport 8. Organizational size (# of employees 2008) 9. Share employees R&D 10. Share turnover new products Product development 11. Customer unique 12. Semi Unique 13. Standard program 14. No product development at site Production/Assembly 15. Make to order 16. Assemble to order 17. Make to stock 18. No production/assembly at site Batch size 19. Single unit batch 20. Small/Medium batch 21. Large batch Product complexity 22. Simple products 23. Medium complex products 24. Complex products 25. Absolute number of TI introduced 26. Absolute number of OI introduced 27. Production Lead Time (PLT) 28. Sales growth 2006-2008 in %
Table 7: Correlational analysis control variables

Sig. correlates > 0,4 or < -,04 with variable number Not present Not present Not present Not present Not present Not present Not present Not present Not present Not present 12.(-.,620**) 11.(-,620**) Not present Not present 16.(-,566**), 17.(-,600**) 15.(-,566**) 15.(-,600**) Not present 20.(-,639**) 21.(-,517**) 20.(-,517**) 23.(-,498**) 22.(-,498), 24.(-,643**), 23.(-,643**) 26.(,556**), 25.(,556**) Not present Not present

As can be seen within table 7 some variables correlate significantly with each other above the critical boundary of 0,4. Based on these correlation results, size of the categories and explanative power the reference categories for the regression analysis are determined. These reference categories are indicated with the colour red. Within the analyses of the regression results it will be checked whether all tolerance and VIF scores are within the critical boundaries (see appendices 2.6.1 2.6.5). 46

4.2. Regression analysis.

In the previous paragraphs a clear overview about the EMS dataset and the used variables was made. The conclusions were that the data revealed that a majority of organizations let organizational innovations precede technological ones. However this research focuses on the question which temporal sequence is better from the viewpoint of organizational process efficiency. Therefore further analysis is needed. Within this paragraph the results from multiple regression analysis is used to check which temporal sequence of innovation types is more effective for gaining better organizational efficiency, which is measured by five indicators; Production Lead time (PLT), Manufacturing Lead Time (MLT), Rework/Scrap Rate (Scrap), Capital Utilization (CU) and Labour Productivity (LP). Because these variables were not all normally distributed some of them were log transferred in order to make regression analysis possible. For each of them multiple regression analysis was conducted and in the following table the main results of this analysis are presented in order present and discuss the findings for all separate efficiency indicators. Subsequently the findings from these predefined models led to the need for additional analysis. Therefore next to the main regression models additional models were tested. First the organizational innovation first and the technological innovation first perspective were tested within a one year and within half a year timeframe. Finally the joint implementation of TI and OI within different timeframes, without regard to a certain temporal sequence was examined (for an overview of all models per efficiency indicator see appendix 2.6.1 2.6.5). The results of these additional analyses9 are also discussed in the following paragraphs. Finally the overall conclusions of all models are used to give a substantiated answer to the hypotheses.

Important to mention is the fact that because of the analysis of the hypothesis took place on business level (with average years of introduction) instead of on a project level. Therefore it was expected that there was error because the data also encompasses innovations that do not have a mutual relation with each other. For that reason analysis on the business level is expected to provide a weaker reflection than results on project level would provide. For that reason a minimum confidence level of 90% was used to signal significant effects.

47

(log) Manufacturing Lead Time )delivery(MLT)

(log) Production lead lead time

Control Variables Manufacturing subsector (reference: Metal) Food Textile Construction Chemistry Machinery Electronics Transport (log) Organizational Size (log)Research & Development (log) Share of turnover New products Product development (reference: no product development at site) Customer unique Semi unique Standard program Production/Assembly (reference: Make to order) Assemble to order Make to stock No production/assembly at site Batch size (reference: Small/Medium Batch) Single unit production Large batch Product complexity (reference: medium complex products) Simple products Complex products Number of technological innovations introduced Number of organizational innovations introduced (log) Production Lead Time (PLT) (log) Sales growth 2006-2008 (%) Explanatory variables Organizational Innovation First Technological Innovation First Model statistics F value R square Adj. R. Square N

-,123*** -,025 -,122*** -,165*** ,170*** -,117** -,026 ,107** ,037 -,012

,036 ,022 ,067** -,025 ,126*** ,058 ,037 -,025 -,032 ,029

-,073 -,017 ,096* -,012 -,044 -,038 ,015 ,058 -,015 ,022

-,105* -,067 -,010 -,106 ,173** ,062 -,019 ,102 -,070 ,034

-,039 -,037 -,053

-,046 ,003 -,114**

-,100 -,086 -,107

,217 ,217 ,110

-,078* -,026 N.A.

-,108*** -,238*** N.A.

-,047 -,131

-,027 -,102* N.A

,186*** -,146***

,087*** -,086**

-,008 -,051

,139** -,019

-,101** ,175*** -,012 -,041

,020 ,090*** ,042 -,037 ,540***

-,006 ,077 -,037 -,072

-,027 ,045 -,071 ,044 ,102

,018 -,018 12,722*** ,398 ,367 446

-,013 ,013 42,039*** ,698 ,682 442

-,047 ,047 1,285 ,064 ,014 435

,005 -,005 4,144*** ,230 ,174 344

*= Significant at 90%, **= significant at 95%, ***= significant at 99%. Table 8: Results multiple regression analysis - main model

48

(log) Labour productivity (LP)

Capital Utilisation (CU)

(log) Scrap rate (Scrap)

,048 -,022 -,059 ,078 ,012 -,017 -,030 ,125* ,080 ,012

-,069 ,018 ,003

-,082 ,162** N.A.

,043 ,061

,008 ,147** -,026 ,034 ,135** -,059 ,059 2,243*** ,139 ,077 343

4.3.1. Production Lead Time (PLT) The first efficiency indicator is the production lead time (PLT). The summarization of this regression model is as follows [F=12,722, p<0,01]. The adjusted R square of this model is 0,373 which implies that 37,3 % of the variance in the dependent variable can be described by the independent variables presented in this model. By looking towards the beta coefficients conclusions can be drawn about the way each independent variable influences the Production Lead Time. First the analysis was performed with the metric variable (average year of introduction TI average year of introduction OI) to see whether a linear relation was present10. This was not the case, so therefore the main analysis was executed with the dichotomous variables representing the organizational innovation first and technological innovation first perspectives and were derived from the previous described metric variable. As can be seen in table 7 no significant Beta values were found (TIF=,018 & OIF= -0,18). As explained in appendix 2.6.1. this could imply two things. 1) there is no effect of temporal sequence of OI & TI on PLT 2) there is a significant effect of the temporal sequence of innovations however only when they are implemented within a short timeframe (within one year or within 0,5 year). From these additional analyses it became clear that only technological innovation first ( 1 year) provided a significant negative beta (-,057*). Although the beta for organizational innovation first ( 1 year) was not significant it provided a positive beta value (,018). From these results it could be concluded that the positive effect of the technological innovation first perspective is valid when it occurs within a timeframe of maximal 1 year, however only with a confidence level of 90% which is not very high. Because the timeframe seemed to have an influence on PLT additional analysis was carried out to see whether instead of a temporal sequence this timeframe has an effect on the PLT. From these analyses is became clear that a joint implementation of OI and TI within a one year timeframe resulted in a significant beta (-,075*). When this analysis was executed for a 0,5 year timeframe it resulted in a higher significant beta of (-,101***).

10

Models with metric variable were also tested with polynomial terms. These results are not presented within this research. *= significant at 90% , **= significant at 95%, ***= significant at 99%

49

The results showed that concerning the production lead time the temporal sequence of technological and organizational was only significant at a 90% confidence level for the TI first perspective when occurring within a small timeframe (1 year). Therefore it is very doubtful that the temporal sequential configuration is important for achieving lower production lead times. However the additional analyses revealed an interesting finding. It seemed that instead of a specific temporal sequence the timeframe in which they are jointly introduced has an effect on PLT. From the additional models it seems that the smaller this timeframe is the lower the PLT will be, which can be viewed as a positive sign of process efficiency. 4.3.2. Manufacturing Lead Time (MLT) The summarization of the regression model for the Manufacturing Lead Time is as follows [F=42,039, p<0,01]. The adjusted R square of this model is 0,698 which implies that 69,8% of the variance in the dependent variable Manufacturing Lead Time can be described by the independent variables presented in this regression model. Just like was the case with the analysis of production lead time the metric variable (average year of introduction TI average year of introduction OI) was not significant. Therefore this model was carried out with the dichotomous variables OI first and TI first. When examining the beta coefficients it was found that both temporal sequences were not significant at any reasonable confidence level. As explained in appendix 2.6.2. this could imply two things 1) there is no effect of temporal sequence of OI & TI on MLT 2) there is a significant effect of the temporal sequence of innovations however only when they are implemented within a short timeframe ( 1 year and 0,5 year). These additional analyses which examined both perspectives within a one year timeframe did not revealed any significant beta values. From these results it could be concluded that the temporal sequence of innovations has no effect on the manufacturing lead time of manufacturing firms. Given the results from the additional analyses for production lead time the influence of the specific timeframes was also conducted for manufacturing lead time. However in these additional models no significant findings were revealed substantiating the effect of a short time span. However it is important to note that production lead time was added as an additional control variable in all MLT models. This additional variable was highly significant as expected (=,540***). Given the fact that PLT is an important aspect of the manufacturing 50

lead time the results found for PLT have possibly an indirect effect in the MLT of manufacturing firms but this was not confirmed by the findings. When all findings were taken into consideration it had to be concluded that no evidence for any influence of temporal sequence of OI and TI on manufacturing lead time was found. 4.3.3. Rework/Scrap rate (Scrap) After examining the regression analysis of the model representing the efficiency indicator Rework/Scrap rate it had to be concluded that this model had significant explanatory power. The summarization of this model is as follows [F=1,185 P>0,10] which correspondents with a low adjusted R square of 0,014, which implies that this model only can explain 1,4% of the variance in the variable Rework/Scrap rate. Further no significant beta coefficients are found. It can be noted that the beta values for OI first are negative and for TI first positive, which might point to positive efficiency effects of the OI first perspective, however these findings are not significant and are therefore very doubtful. Also the model with the metric variable sequence of innovation was not significant when placed into this model as independent variable. Based on these findings we can conclude that the used models are not useable to explain the variance in the dependent variable rework/scrap rate. This automatically implies that the sequential configuration of innovations types does not influence the scrap rate of manufacturing firms. Also the additional analyses testing both sequential configurations within small timeframes and the general joint implementation within small timespans did not resulted in a significant improvement of the model or any significant betas for the independent variables. (see appendix 2.6.3 for all models). 4.3.4. Capital Utilization (CU) The regression model of the dependent variable capital utilization can be presented as follows [F=4,144; p<0,01] with an adjusted R square of ,174. This value refers to the fact that 17,4% of the variance of the dependent variable Capital Utilization (CU) can be explained by this model. When testing the metric variable (average year of introduction TI average year of introduction OI) it was not significant, indicating that there is no linear relation. Therefore this model was carried out with the dichotomous variables OI first and TI first which also better represent the hypotheses of this research. When examining the beta coefficients it was found that both temporal sequences were not significant at any reasonable confidence 51

level, besides the corresponding beta values are very low (,005 & -,005). As explained in appendix 2.6.4. this could imply two things 1) there is no effect of temporal sequence of OI & TI on PLT, or 2) there is a significant effect of the temporal sequence of innovations however only when they are implemented within a short timeframe ( 1 year or 0,5 year). The results of these additional analyses which examined both perspectives within a one year timeframe did revealed a significant beta value (-,091**) for the TI first perspective (1 year). From these results it could be concluded that the TI first perspective results in a lower capital utilization than when occurring in a longer timeframe (>1 year =0,55) this negative beta within the one year timeframe is a negative sign of efficiency. In combination with the non-significant beta values for OI first 1 year (-,039) and OI first > 1 year (,032) this indicates that a small timeframe in which TI and OI are implemented seems to have negative effects for capital utilization. Given these results additional analyses were conducted in which specific small timeframes were tested. These findings revealed that when OI and TI are jointly implemented within one year this resulted in a significant beta of (-,106**) and when occurring within a 0,5 year timeframe (-,109**). These findings substantiate the earlier thoughts that when both TI and OI are jointly introduced within a small timeframe this results in significant lower degree of capital utilization. So in contrast to the positive efficiency effects on production lead time, a joint implementation within small timeframes results in negative efficiency effects for capital utilization. 4.3.5. Labour Productivity (LP) In the regression analysis with the dependent variable Value Added per employee the following results were found. [F= 2,126; p<0,01] which implied that this model has a good overall fit. The adjusted R square of this model is ,070 which means that 7% of the variance in value added per employee can be explained by the independent variables within the model, which is reasonable because the labour productivity can be influence by many other factors. In first instance the model was tested with the metric variable sequence of innovation (average year of introduction TI average year of introduction OI). This resulted

52

in a significant beta11 in favour of the technological innovation first perspective. To check this finding additional regression analyses were executed in which the sequence of occurrence as categorical variable was tested by the use of two dummy variables representing both OI first and TI first. When examining the beta coefficients it was found that both temporal sequences were not significant at any reasonable confidence level. As explained in appendix 2.6.5. this could mean two things 1) there is no effect of temporal sequence of OI & TI on labour productivity 2) there is a significant effect of the temporal sequence of innovations however only when they are implemented within a short timeframe ( one year or 0,5 year). From these additional analyses it became clear that only organizational innovation first ( 1 year) provided a significant positive beta (,114**) in contrast to the negative beta (-,116**) for the OI first (> 1 year) variable. Although the beta for TI first ( 1 year) was not significant it also provided a positive beta value (,051). From these results it could be concluded that the positive effect of the organizational innovation first perspective is only valid when it occurs within a timeframe of maximal 1 year. These findings are in contrast to the earlier findings from the analysis with the metric variable sequence of innovation Because the timeframe seemed to have an influence on labour productivity additional analysis was carried out to see whether instead of a temporal sequence this timeframe has an effect on the labour productivity. From these analyses is became clear that a joint implementation of OI and TI within a one year timeframe resulted in a significant positive beta (,128**). When this analysis was executed for a 0,5 year timeframe it resulted in a stronger significant beta of (-,101***). From the additional models it seems that the smaller this timeframe is the higher the labour productivity will be. 4.3.6. Hypotheses The results which are described in the previous paragraphs are used to answer the hypotheses of this research. This research started with describing the independent effect of both technological and organizational innovations and subsequently how these two distinct
11

In this case the independent metric variable sequence of occurrence was significant at the 95% confidence level. This implies that there is a linear relation found with a negative beta coefficient of (-,120). This implies that the technological innovation first perspective results in higher value added per employee. The conclusion even encompasses the idea that the longer the time technological innovations precede organizational innovations the higher the value added per employee would be and subsequently the longer organizational innovations precede technological ones the lower the labour productivity

53

forms of innovations interrelate with each other. Subsequently it was described in which specific temporal configurations these innovations could be introduced. This led to a detailed description of the organizational innovation first and the technological innovation first perspectives. The literature review made clear that there is stronger evidence in support of the organizational innovation first perspective regarding its influence on organizational process efficiency. This led to the following hypothesis Hypothesis 1: Generally speaking, manufacturing firms that let organizational innovations precede technological innovations will have higher organizational efficiency then organizations that followed the technological innovation first perspective. As described in the literature review much is written about the importance of the organizational first perspective. By letting organizational innovations proceed technological ones organizations should be possible to gain higher performance which in this research was measured by process efficiency. By the use of all tested models the following conclusions can be made in order to give a substantiated answer to this hypothesis. When examining this perspective by the use of multiple regression analysis no strong evidence was found in support of the idea that organizational innovations should precede technological ones in order to gain higher efficiency within the production processes of manufacturing firms. In all regression analyses no significant proof of a positive effect on any of the efficiency indicators by the general temporal sequence in which organizational innovations precede technological ones was found. For that reason no support of these the theory was found within the specific context of this research. In the additional analyses in which the organizational innovation first perspective was limited to a timeframe of maximal one year it was found that the organizational innovation first perspective was valid for efficiency gains concerning the labour productivity. It was found that when organizations implement organizational innovations and within a following period of one year introduced technological innovations this resulted into a higher added value per employee. Yet, these findings remain questionable given the fact that the regression analysis of the metric variable sequence of innovation resulted in an opposite view which is in favour of the technological innovation first perspective. So while from the 54

descriptive analyses it became clear that a majority of the manufacturing firms within the dataset followed this organizational innovation first perspective no strong evidence for positive effects on process efficiency was found. In conclusion it can be stated that although the theory review offered many logical reasons for the positive effects of the organizational innovations first perspective, the hypothesis in support of this literature has to be rejected. Besides the organizational innovation first perspective the other hypothesis focussed on its counterpart, the technological innovation first perspective, which was tested by the following hypothesis. Hypothesis 2: Generally speaking, manufacturing firms that let technological innovations precede organizational innovations will have higher organizational efficiency then organizations that followed the organizational innovations first perspective. In the literature the concept of technological determinism is widely discussed. Organizations that focus on technological innovations subsequently followed by organizational changes could achieve higher process efficiency. By the use of all tested models the following conclusions can be made in order to give a substantiated answer to this hypothesis representing the technological innovation first perspective. When examining this perspective by the use of multiple regression analysis no strong evidence was found in support of the idea that technological innovations should precede organizational ones in order to gain higher efficiency within the production processes of manufacturing firms. In all regression analyses no significant proof was found in support of a positive effect of this perspective on any of the efficiency indicators. In the additional analyses in which the technological innovation first perspective was limited to a timeframe of maximal one year it was found that this specific temporal sequence was valid for production lead time & capital utilization. It was found that when organizations implement organizational innovations and within a subsequent period of one year introduced technological innovations this resulted in a lower production lead time, which is a positive indication of process efficiency. Further a significant effect on capital utilization was found. However in contrast to production lead time this effect was negative since a lower rate of capital utilization is a negative sign of organizational efficiency. Given 55

these contrasting findings it is not possible to state that the technological innovation first perspective within a one year timeframe is positive from the viewpoint of process efficiency. And in comparison to the previous described organizational innovation first perspective no evidence is found that the technological innovation first perspective if more desirable within the context of this research. In conclusion it can be stated that although the theory review offered logical grounds for the positive effects of the organizational innovations first perspective, the hypothesis in support of this literature has to be rejected in this case. Additional hypothesis: Generally speaking, organization that jointly introduce

technological and organization innovations within a one year timeframe will have higher process efficiency than

organizations who jointly introduce these innovations within a larger timeframe. In the models representing both the technological innovation first and organizational innovations first perspective no strong evidence was found in support of efficiency effects of a specific temporal sequential configuration. However the results from these analyses opened the door to the idea that instead of a specific sequence the time span in which technological and organizational innovations were introduced was a significant indicator for process efficiency. Although this was not the main subject of this thesis these results are important to mention, especially with regard to suggestions for further research. In the two additional models the joint implementation of technological and organizational was tested within a respectively one year and half a year timeframe. From the results of these regression models (see models 8 & 9 in appendices 2.6.1.- 2.6.5 ) it became clear that a small timeframe resulted in significantly higher efficiency for the indicators production lead time and capital utilization. Given the fact that PLT plays an important role in the manufacturing lead time here also possible positive effects can be argued (not significantly supported by the regression models). Yet, not only positive effects of this small timeframe were found. Concerning the capital utilization it seemed that a joint implementation within a small timeframe resulted in a lower capital utilization which is an indication of lower process efficiency. However the findings suggest that the time frame in which both types of innovations are implemented effects the efficiency indicators more significantly that the 56

specific temporal sequence which is an interesting finding. However it is important that more research is performed to substantiate these findings and answer the question why this time span is of importance. Logical reasons could be that organizations who introduce technological and organizational innovations in a longer timeframe are the organizations who manage the configuration by themselves while the organizations implementing them within a smaller timeframe are those that used external expertise. However this has to be tested in additional research by investigating the role of corporation with external organizations. On the other hand the role of these external parties could also be the reason why no strong evidence was found in favour of one of the temporal sequential configurations. Because the role of these external partners is not reflected within the used dataset, because this data assumed that all innovations are executed by the firms themselves. This is not realistically because with the implementation of for example new computer- and software systems firms often use external organizations, like for example consultant companies or the suppliers of the systems. However based on the results of the tested models it can be concluded that there is some weak evidence in support of this additional hypothesis.

57

5. Discussion & Conclusion

In the previous chapter the results of the quantitative analysis of the EMS dataset were presented. Within this chapter these findings are used to discuss the central problem statement within this research and subsequently answer the main research questions. The conceptual model which guided the corresponding hypotheses will be discussed and conclusions are drawn. Finally the limitations of this research are discussed and suggestions for further research will be provided. 5.1. Temporal sequential innovation configurations The literature study revealed that innovation research has gained much ground in business literature over the last decade. A huge base of literature describes the innovations that have changed the way we practice business these days from multiple perspectives. Traditional research focussed on technological innovations. This technological determinism points to the importance of new technologies and explains the mechanisms on how new inventions contributed to organizational performance in the past. On the other side the research about organizational or non-technological innovations has been ignored for a long time. However this concept gained increasingly well-deserved attention in the last decades. With a fast growing body of literature the focus shifts to research about the interrelatedness and alignment of these distinct concepts, since they should be viewed as complements instead of substitutes. This research contributes to the contemporary literature within this new territory. The goal was to examine how different temporal sequential configurations of technological and organizational innovations influenced the process efficiency of firms within the manufacturing industry. It tried to expose the mechanisms that could explain the effect of the alignment of organizational and technological innovations by the use of the quantitative analysis of the European Manufacturing Survey 2009, which encompassed data from manufacturing firms in multiple European countries. In the literature review it was found that the organizational perspective is logically explaining the role of organizational innovations as a trigger for effective technological innovations. Further the social-technical theory describes the importance of organizational innovations for the success of the subsequently implemented new technologies. Further 58

from the perspective of organizational learning and knowledge transfer it became clear that the organizational first perspective strongly relates to the concept of acquisitive learning, which can be explained as a learning-before-doing approach. By creating a strong knowledge base and good knowledge transfer organizations can more effectively introduce new technological changes, and it further also contributes to the effective implementation of additional organizational changes after the introduction of the a new technology. On contrary, literature revealed some logical explanations in favour of the technological innovation first perspective. Based on the theories of technological determinism it could be argued that new technological developments are the driving force of new organizational changes. In some cases it would be more effective to implement organizational adjustments only after a new technology is introduced. When examining this idea from the perspective of organizational learning and knowledge transfer it could be related to the concept of experimental learning (experimenting within the production environment). By the use of a learning-by-doing approach organizations focus on developing their procedural knowledge (Burns, Acar & Datta, 2010, p. 272) and in that way enhance organizational performance. This specific approach is especially useful when organizations lack theoretical and practical knowledge about the specific technologies. In the analysis of the EMS-2009 dataset described in the previous chapter the effect of these temporal sequences of innovation on five distinct indicators of process efficiency was examined. These indicators are the Production Lead Time (PLT), Manufacturing Lead Time (MLT), Rework/Scrap rate (Scrap), Capital Utilization (CU) and Labour Productivity (LP). When examining the general organizational innovation first perspective no significant effect was found. When examining this specific sequential configuration within a one year timeframe only a positive effect on labour productivity was found. Taken all results in consideration it has to be concluded that there is no strong evidence found that substantiate the theories that describe the importance to let organizational innovations precede technological ones. While the descriptive sequential analysis in chapter 4 revealed that within the dataset most organizations follow this organizational innovation first perspective, the results of the regression analysis imply that this innovation strategy has no significant effect on the process efficiency of these firms. This is an interesting finding

59

because it suggests that these organizations should possibly reconsider their innovations strategies in order to achieve better results. In the examination of the general technological innovations first perspective also no significant effects on any of the efficiency indicators were found. This implies that there is no significant evidence that by introducing technological innovations before organizational ones a higher efficiency can be gained. However when this specific sequential configuration was examined within a one year timeframe it became clear that there was a prevalent effect on the production lead time. It seemed that when this configuration was occurring within this short time span, production lead time was decreased. Further a negative efficiency effect on the capital utilization was witnessed which implies that in comparison to the positive effect on production lead time the capital utilization was lower within this specific temporal sequence. So when taking all these findings into consideration it can be stated that no strong unambiguous evidence was found in support of the literature describing the possible effects on process efficiency. The temporal sequential configuration of innovation efforts did not prove to be of significant influence on the efficiency of manufacturing firms. However additional analyses revealed that the timespan in which these innovations take place resulted in more significant results. However this additional finding did not substantiated one specific sequential innovation strategy. Yet, when taken this sequence out of consideration it was found that on the one hand this specific timespan proved to have a significantly positive effect on production lead time and labour productivity and a negative effect on capital utilization. However this timespan was not part of the basic research model and therefore the conclusions remain questionable, mainly because the role external organizations play in the implementation of innovations was not examined. The goal of this research was to gain a better understanding of the sequential configurations of both technological and organizational innovations. Therefore the following research question was formulated: What is the influence of the different temporal sequential configurations of technological and organizational innovations on the organizational efficiency of manufacturing firms?

60

When combining the findings from the literature review and the results from the descriptive analysis and multiple regression analysis it became clear that in comparison to the theory which describe possible performance effects for both the organizational innovation first and the technological innovation first perspectives it became clear that these effects were not significantly unambiguously supported within the EMS-2009 data. Yet it can be stated that this research revealed that there are strong opinions about how organizations should configure their innovation efforts. However the mechanisms that explain how specific sequences can positively or negatively contribute to organizational efficiency are very complex, and simply cannot be described by one general success formula. This research showed that a majority of organizational firms follow the organizational innovation first strategy, although this did not resulted in efficiency effects within the specific indicators measured. Further it was found that organizations that pursue an innovation strategy in which technological innovation precedes organizational adjustment also did not have unambiguous effects on these indicators. The dynamics of specific technological and organizational innovations is a complex web of many different relations which clearly cannot be described by one dominant view or theory. So may some combinations of innovations possibly benefit from the technological innovation first perspective, while others perhaps benefit from the technological innovation first perspective. Besides it is very likely that the specific context in which innovations are implemented is of great importance, especially the knowledge present within manufacturing firms. And even within the different perspectives multiple ways of configuration are possible, which was proved by the examination of both perspectives within different timeframes. Given these facts it is impossible to state that one specific theory is favoured in explaining the alignment of technological and non-technological innovations. And even from the results of this research an actual effect of temporal sequence on process efficiency has not been proved. The number of new technological and organizational inventions is growing quickly and therefore an increasing number of new combinations and configurations become possible. Because it is of great importance that organizations find those combinations that contribute to performance indicators and avoid those that could negatively affect organizational success further research is very necessary. It is clear that this topic deserves much more attention and especially the quantitative analysis is important to 61

investigate how organizations could benefit from an alignment of different innovations. A better understanding of the mechanisms underlying this alignment between technological and organizational innovations will eventually provide specific best practices for organizations in the future.

5.2. Limitations and suggestions for further research

Within this research the Technological-Organization Discords has been explained by the review of existing literature and new quantitative research. Although this research tried to encompass all existing perspectives and correctly examine the statistical data of the EMS2009 dataset some limitations have to be admitted. In the literature review it became clear that although the concept of innovation is a hot topic within business literature the last decades the total base of academically works about the interrelatedness of organizational and technological innovations is not that extensive as for many other subjects. Many articles stress the importance of specific innovations, describe the different state-of-the-arts innovations of the last century and highlight the possible benefits they have to offer, not that much is written about the strategic choices an organization has to make concerning the introduction and implementation of these innovations. For that reason the hypothesis present within this research a derived from existing theories which have not been subject to many quantitative analyses before, and especially within the specific context of process innovations within manufacturing firms. This has to be taken into mind when conclusions are drawn based on these hypotheses. Although some interesting results were found it is still hard to explain how technological and organizational innovations interrelate with each other. Therefore further research is needed in order to examine how different specific innovations interrelate with each other and how specific temporal sequential configuration can positively or negatively affect process efficiency or business performance in general. Because this research was carried out on business level a lot of so-called error was present. In order to gain a better understanding of the alignment of specific innovations it is important to execute additional research on a project level, where more focus is placed on the specific context in which these innovations are implemented. Further limitations can be found in the operationalization of concepts. Within this research a predefined set of indicators was used to measure the different concepts. Yet both concepts 62

of technological and organizational innovation encompass a much wider variety of specific innovations that might provide other results. Therefore the generalisation of results is only possible to a certain extend. In future research is would therefore be very interesting to focus on the alignment of specific organizational and technological innovations. Concluding there are some limitations of the EMS-2009 dataset. Although this dataset is very substantial and encompasses many organizations within different European countries there are some points that need to be addresses. First the response rate of the EMS survey is quite low which may lead to sampling bias. Further the EMS-data only contains information about organizations within the manufacturing industry, which affect the generalizability of the findings over other industries. At least some questions were only present in the German surveys which make the findings less generalizable over the other countries. Given the previous mentioned limitations and the findings of this research some general suggestions for further research can be addressed. This research has focussed on the temporal sequence of both technological and organizational innovations. From the results is became clear that no strong evidence was found in favour of a specific temporal sequential configuration. Yet additional analyses revealed that the timeframe in which both types of innovations are configured could be a significant indicator of process efficiency. Given these findings and their discrepancy with existing theories it is important that a closer examination on the interplay between specific innovations should be the subject of future research. It is important to check how specific technological innovations interrelate with specific organizational ones, in different organizational contexts. In that way it becomes possible to find specific combinations that might significantly improve process efficiency and possible find combinations that have negative effect on some performance indicators. Further an important additional control variable would be the influence of external organizations within the implementation process. Also would it be interesting to place this research in the context of another industry. While in the manufacturing industries technologies take a different role then within service organizations it is important to examine with temporal sequence will enhance business performance for organizations operating in different types of industries. And finally this research focussed on process efficiency indicators. Therefore it would be interesting to see if 63

other results are found when examining other indicators of performance like form example: differentiation indicators or employee satisfaction.

64

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68

Appendices

69

Appendix 1 1.1 General Information EMS-2009

European Manufacturing Survey Partners 2009

Weblink: http://www.european-manufacturing-survey.eu

Partners: Germany: Fraunhofer Institute System and Innovation Research Austria: Division Technology Policy; ARC Systems Research France: BETA, Universit Louis Pasteur Strasbourg Switzerland: Institut fr Betriebs- und Regionalkonomie, Hochschule fr Wirtschaft, Luzern Sabanci University Istanbul, Turkey; Croatia: Economic Faculty, University of Zagreb Netherlands: Nijmegen School of Management, Radboud University Nijmegen Slovenia: Faculty of Mechanical Engineering, University of Maribor; Spain: Department of Business Administration and Product Design, University of Girona Turkey: Competitiveness Center, Sabanci University Istanbul And sponsor of NL-EMS, Rabobank

70

1.2 EMS Survey

71

Appendix 2: Analyses of EMS-2009 data

2.1 Reliability analysis Technological Innovations

72

2.2

Reliability analysis Organizational Innovations

73

2.3 Number of innovations introduced

2.3.1 Number of technological innovations introduced

Number of used technological Innovations

% of organizations 25,00% 20,00% 15,00% 10,00% 5,00% 0,00%

Total number of innovations introduced

2.3.2 Number of organizational innovations introduced

Number of used organizational innovations

16,00% 14,00% 12,00% 10,00% 8,00% 6,00% 4,00% 2,00% 0,00% % of organizations

Total number of innovations introducedl

74

2.4

Descriptives metric variables

Descriptive Statistics N Statistic Minimum Statistic ,00 ,00 -41,00000 ,0 0 ,0 10,00 -291,67 10 0 0 -99,88899 Maximum Statistic 13,00 13,00 48,33333 10000,0 900 70,0 150,00 1085,07 44000 90 100 26566,66667 Mean Statistic 2,5947 4,7071 2,5689559 33,159 40,33 3,141 86,6404 102,0512 226,45 4,80 17,18 31,2818926 Std. Deviation Statistic 2,26755 2,76590 7,15090870 202,4129 67,970 5,7658 14,92081 77,78138 1326,149 7,180 16,565 5,01428019E2 Skewness Statistic 1,016 ,404 ,991 42,821 4,305 5,999 -,801 4,095 20,857 3,804 2,163 52,576 Std. Error ,045 ,070 ,083 ,046 ,045 ,046 ,051 ,051 ,043 ,045 ,058 ,046 Kurtosis Statistic 1,105 -,350 7,367 2075,380 27,905 50,497 2,825 32,672 544,104 24,128 5,780 2783,044 Std. Error ,090 ,139 ,166 ,092 ,091 ,091 ,101 ,102 ,086 ,090 ,117 ,092

number of technologies used in your factory number of organisational concepts used in your factory Av Year Implementation TI - Av Year Implementation OI Production lead time (main product) [work days at 8 hours] Delivery time (main product) [calendar days] Rework/ scrap (main product) [%] Degree of capacity utilisation 2008 [%] Value added (turnover - input per employee [Thsd. Euros]) Number of employees in 2008 Share of personnel: Research and development [%] Share of turnover generated by new products [% - only innovators] Sales growth 2006-2008 in % Valid N (listwise)

2961 1236 861 2846 2920 2871 2344 2322 3204 2926 1758 2822 313

Above the general descriptives of the metric variables within this research are presented. These findings are important in order to check whether the distributions of the selected variables are subject to skweness and kurtosis. Within the orange rectangles the variables that have a certain amount of skewness and kurtosis are depicted. Within this research the borders of -1 and 1 for skewness are used to see whether the variable is normally distributed. This is not the case for some of the variables. In order to solve the main problems of skewness the variables: Production Lead Time, Manufacturing Lead Time (Delivery time), Rework/Scrap, Number of employees 2008 , Research & Development, Share of turnover new products and Sales growth were Lo g transferred. While the variable Labour Productivity (Value added) also depicts a high skewness the log transformation did not led to the desired normality of the distribution. Therefore the variable Value added is not log transferred. Further the variable sequence of occurrence (ave. yr. implementation TI- ave. yr. implementation OI) is dummified and therefore no log transformation is needed. Because production lead time, delivery time, rework/scrap and R&D have values of 0 the number 1 is added to each value. From these numbers the log value is calculated.

75

Syntax Log transformations

COMPUTE LOG1=LN(V19A+1). VARIABLE LABELS LOG1 'Log Production Lead Time (ln+1)'. EXECUTE. COMPUTE LOG2=LN(V19B+1). VARIABLE LABELS LOG2 'Log Delivery Time (ln+1)'. EXECUTE. COMPUTE LOG3=LN(V19D+1). VARIABLE LABELS LOG3 'Log Rework/Scrap (ln+1)'. EXECUTE. COMPUTE LOG5=LN(V21B1). VARIABLE LABELS LOG5 'Log Number of employees 2008'. EXECUTE. COMPUTE LOG6=LN(V16B1+1). VARIABLE LABELS LOG6 'Log Share of personal R&D (ln+1)'. EXECUTE. COMPUTE LOG7=LN(v06b+1). VARIABLE LABELS LOG7 'Log Share of turnover new products (ln+1)'. EXECUTE. COMPUTE LOG10=LN(RCV3+100). VARIABLE LABELS LOG10 'Log sales growth 2006-2008 (ln+100)'. EXECUTE.

Results log transformations

Descriptive Statistics N Statistic Log production lead time (ln+1) Log Delivery Time (ln +1) Log Rework/Scrap (ln+1) Log Number of employees 2008 Log Share of personal R&D (ln +1) Log Share of turnover new products (ln+1) Log sales growth 2006-2008 (ln+100) Valid N (listwise) 2846 2920 2871 3204 2926 1758 1320 Maximu Minimum m Statistic ,00000 ,00000 ,00000 ,00000 ,00000 Statistic 9,21044 6,80351 4,26268 4,51086 4,61512 Mean Statistic 2,4265481 2,9158996 1,0340570 4,3008869 1,2261432 2,5414908 4,7655485 Std. Deviation Statistic 1,36741593 1,27296763 ,78121109 1,11896291 1,02613136 ,88275403 ,32967057 Skewness Statistic ,351 ,129 ,889 1,162 ,246 -,287 -4,838 Std. Error ,046 ,045 ,046 ,043 ,045 ,058 ,046 Kurtosis Statistic -,215 -,447 ,791 2,279 -,928 ,083 164,672 Std. Error ,092 ,091 ,091 ,086 ,090 ,117 ,092

2,30259 10,69194

2822 -2,19817 10,19117

76

2.5

Descriptives non-metric variables

Valid (%)

Dependent variables
Control Variables Industry Food, Beverages & Tobacco Textiles, Leather, Paper and Board Construction, Furniture, Publishing & Recycling Chemistry (energy and non-energy) Metals and Metal products (reference group) Machinery and Equipment Electrical and Optical equipment Transport equipment Production characteristics Products development Customer unique specification Standard program from which customer specific options are realized Standard program from which customer can select No product development within site (reference group) Missing Production/Assembly Initiated upon receipt of customer order (make to order) (reference group) Final assembly executed upon receipt of customer order (assemble to order) To stock (make to stock) No production/assembly at site Missing Batch size Single unit production/ small batch (up to 20 pcs per month) Small/Medium batch (20-1.000 pieces per month) (reference group) Large batch (more than 1.000 pieces per month Missing Product complexity Simple products Products with medium complexity (reference group) Complex products Missing Organisational Innovation first Technological Innovations first Organization Innovation first 1 year Organization Innovation first > 1 year Technological Innovation first 1 year Technological Innovation first > 1 year Joint implementation OI & TI 1 year Joint implementation OI & TI 0,5 year

8,2 8,9 13,8 13,1 21,2 17,2 14,6 3,1

45,7 27,2 12,4 7,2 7,4 66,9 10,5 12,5 2,4 7,6 21,7 45,4 15,6 17,3 18,9 46,2 27,5 7,5 66,0 34,0 1,9 15,3 2,1 6,8 4,8 2,5

77

2.6 Regression Analyses

2.6.1. Analysis A - Production Lead Time (PLT)

Multiple regression Organizational innovation first SPSS SYNTAX

REGRESSION /MISSING LISTWISE /STATISTICS COEFF OUTS R ANOVA COLLIN TOL /CRITERIA=PIN(.05) POUT(.10) /NOORIGIN /DEPENDENT LOG1 /METHOD=ENTER food textiles construction chemicals machinery electronics transport LOG5 LOG6 LOG7 v18f1 v18f2 v18f3 v18g2 v18g3 v1 8g4 v18h1 v18h3 v18i1 v18i3 TI_n OI_n OI_FIRST /SCATTERPLOT=(*ZRESID ,*ZPRED) /RESIDUALS HIST(ZRESID) NORM(ZRESID).

Model Summaryb Model 1 R ,631a R Square ,398 Adjusted R Square ,367 Std. Error of the Estimate 1,08811591

ANOVAb Model 1 Regression Residual Total Sum of Squares 331,373 500,830 832,203 df 22 423 445 Mean Square 15,062 1,184 F 12,722 Sig. ,000a

Residuals Statisticsa Minimum Predicted Value Residual Std. Predicted Value Std. Residual a. Dependent Variable: Log production lead time (ln+1) ,5465584 -3,34531116 -2,363 -3,074 Maximum 4,5310497 2,99341345 2,255 2,751 Mean 2,5855378 ,00000000 ,000 ,000 Std. Deviation ,86293541 1,06087774 1,000 ,975 N 446 446 446 446

Table set A1: General SPSS Output model with OI first * SPSS output for TI first is the same since they correlate perfectly with each other

Coefficientsa Standardized Coefficients Beta t 5,853 -,123 -,025 -,122 -,165 ,170 -,117 -,026 ,107 ,037 -,012 -,039 -,037 -,053 -,078 -,026 ,186 -,146 -,101 ,175 -,012 -,041 ,018 -2,749 -,598 -2,687 -3,284 3,080 -2,183 -,588 2,094 ,847 -,308 -,404 -,384 -,724 -1,855 -,576 4,109 -3,114 -2,359 3,954 -,240 -,827 ,456 Sig. ,000 ,006 ,550 ,007 ,001 ,002 ,030 ,557 ,037 ,398 ,758 ,687 ,701 ,470 ,064 ,565 ,000 ,002 ,019 ,000 ,811 ,409 ,649 ,714 ,783 ,688 ,566 ,469 ,498 ,724 ,547 ,730 ,872 ,152 ,152 ,261 ,800 ,685 ,693 ,644 ,771 ,725 ,545 ,584 ,947 1,401 1,277 1,454 1,766 2,131 2,008 1,382 1,827 1,370 1,147 6,601 6,570 3,828 1,251 1,461 1,443 1,552 1,297 1,380 1,835 1,713 1,055

Unstandardized Coefficients Model 1 (Constant) food textiles construction chemicals machinery electronics transport Log Number of employees 2008 Log Share of personal R&D (ln +1) Log Share of turnover new products (ln+1) Product development: according to customers specificati Product development: basic programme with alternative Product development: standard programme Production: assemble to order Production: make to stock (MTS) Batch size: single unit production Batch size: large batch/lot Product complexity: simple products Product complexity: complex products number of technologies used in your factory number of organisational concepts used in your factory Organizational Innovation First B 2,218 -,810 -,164 -,566 -,629 ,530 -,422 -,165 ,119 ,057 -,018 -,107 -,104 -,203 -,303 -,107 ,606 -,524 -,381 ,489 -,007 -,022 ,051 Std. Error ,379 ,295 ,275 ,210 ,192 ,172 ,193 ,280 ,057 ,067 ,059 ,266 ,271 ,280 ,163 ,185 ,147 ,168 ,161 ,124 ,031 ,026 ,111

Collinearity Statistics Tolerance VIF

a. Dependent Variable: Log production lead time (ln+1)

Table A2: Coefficients model with OI first * SPSS output for TI first is the same since they correlate perfectly with each other, only the Beta of TI first is (-,018).

79

Figures A1: SPSS output figures model OI first * SPSS output for TI first is the same since they correlate perfectly with each other

80

Results Multiple Regression analysis Production Lead Time (Table A3)

Control Variables
Manufacturing subsector (reference: Metal) Food Textiles Construction Chemistry Machinery Electronics Transport (log) Organizational Size (number of employees 2008) (log) Research & Development (% of personal R&D) (log) Share of turnover New products Product development (reference: no product development at site) Customer unique Semi unique Standard program Production/Assembly (reference: make to order) Assemble to order Make to stock No production/assembly at site Batch size (reference: Small/Medium Batch) Single unit production Large batch Product complexity (reference: medium complex products) Simple products Complex products Number of technological innovations introduced Number of organizational innovations introduced

Basic Model Model 1

-,139*** -,084** -,118*** -,155*** ,177*** -,108** -,029 ,117*** ,059 -,023

Central Analysis OI first TI first Model 2 Model 3

-,123*** -,025 -,122*** -,165*** ,170*** -,117** -,026 ,107** ,037 -,012 -,123*** -,025 -,122*** -,165*** ,170*** -,117** -,026 ,107** ,037 -,012

Analysis OI first 1 year >1 year Model 4 Model 5

-,123*** -,046 -,126*** -,163*** ,169*** -,119** -,032 ,102** ,042 -,016 -,122*** -,046 -,126*** -,171*** ,163*** -,126** -,032 ,105** ,044 -,015

Analysis TI first 1 year >1 year Model 6 Model 7

-,115** -,049 -,126*** -,170*** ,162*** -,125** -,030 ,105** ,047 -,015 -,121*** -,046 -,124*** -,164*** ,169*** -,119** -,030 ,102** ,044 -,015

Joint Implementation 1 year 0,5 year Model 8 Model 9

-,116*** -,049 -,130*** -,166*** ,164*** -,123** -,033 ,104** ,044 -,017 -,115*** -,044 -,131*** -,172*** ,162*** -,120** -,027 ,098* ,043 -,017

,000 -,010 -,008

-,039 -,037 -,053

-,039 -,037 -,053

-,041 -,031 -,050

-,035 -,026 -,047

-,041 -,031 -,048

-,047 -,040 -,054

-,036 -,022 -,045

-,021 -,014 -,035

-,090** -,026 -,026

-,078* -,026 N.A.

-,078* -,026 N.A.

-,082* -,032 N.A.

-,080* -,031 N.A.

-,081* -,031 N.A.

-,081* -,028 N.A.

-,084** -,039 N.A.

-,081* -,034 N.A.

,175*** -,108***

,186*** -,146***

,186*** -,146***

,174*** -,135***

,175*** -,142***

,179*** -,142***

,177*** -,136***

,176*** -,139***

,176*** -,144***

-,104*** ,188*** -,024 -,056

-,101** ,175*** -,012 -,041 ,018

-,101** ,175*** -,012 -,041

-,104** ,180*** -,014 -,036

-,107** ,179*** -,012 -,041

-,108** ,177*** -,009 -,042

-,108** ,176*** -,013 -,038

-,101** ,183*** -,012 -,039

-,101** ,179*** -,008 -,033

Explanatory variables
Organizational Innovation First Technological Innovation First Organizational Innovation First ( 1 Year) Organizational Innovation First (> 1 year)1 Technological Innovation First (max 1year before TI)1 Technological Innovation First ( > 1year before TI)1 Joint implementation 1 year Joint implementation 0,5 year
1

-,018 -,041 ,041 -,057* -,016 -,075* -,101*** 16,484*** ,397 ,373 574 12,722*** ,398 ,367 446 12,722*** ,398 ,367 446 12,709*** ,396 ,365 449 12,708*** ,396 ,365 449 12,787*** ,398 ,367 449 12,637*** ,395 ,364 449 12,912*** ,400 ,369 449 13,154*** ,405 ,374 449

Model statistics
F value R square Adj. R. Square N

*= Significant at 90%, **= significant at 95%, ***= significant at 99%. = Significance level is divided by factor 2 given the hypothesis made (one-tailed)

81

Assumptions
Assumption 1: Multicollinearity When executing regression analysis it is important that there is no strong correlation between two or more independent variables. When there is a strong correlation this is referred to as multicollinearity. By the use of the tolerance levels (table a2) and VIF score the model can be tested for correlations. As can be seen all tolerance levels are above the critical boundary of 0,1 and all VIF scores are below the critical boundary of 10. Therefore it can be concluded that the correlation between independent variables is within the reasonable boundaries. Assumption 2: Linearity The relationship between the dependent variable and independent variables should be linear. This assumption is checked by the use of the scatterplot (see figure set A1) the dots seem to form a bit of a certain pattern: All values are spread around the horizontal 0 line however some of them seems to group a little bit in the centre. Based on this scatterplot it can be assumed that the assumption of linearity is met. Assumption 3: Constant variance Hair et al. (2005: 171) refer to homoscedasticy as a constant range of the error terms of an independent variable. This assumption of equal errors is critical for a proper regression analysis. It can be concluded that the data is homoscedastic because in the scatterplot (figure set A1) there is no clear pattern in the residuals (f.e. a triangle). Therefore it can be assumed that the assumption of equal error is met. Assumption 4: Independence of the Error Terms The assumption of independence of the Errors Terms is important because it tests whether each predicted value is independent (the predicted value is not related to any other prediction (Hair et al., 2005: 207). This assumption can be checked by the residuals statistics tables, in were the values for Standardized Predicted Value are important. Because of the standardization the mean has to be 0 and std. deviation has to be 1, which is indeed the case (table set A1). Thus it can be concluded that the errors do not correlate with the independent variables and therefore do not influence the regression model in a significant way.

82

Assumption 5: Normality of the Error term distribution This assumption tests whether the errors are normally distributed. By looking to the histogram with a normal curve of the standardized residuals of all variables and the normal probability plot it is possible to check whether this assumption is met. As we can see in the figure set A1 the errors are quite normal distributed although there are some outliers. The normal P-P plots show that all the dots lay on or around the diagonal line (normal probability plot) which is another sign that the assumption of the normality of the error term distribution is met.

Results
Overall model fit For the overall model fit we can look to the F-tests (table set A1) which reveals an F-value of 12,722 for both models (model 2 & 3) with both a significance level of (,000). Therefore it can be assumed that the model has a good overall fit. The adjusted R square tells us something about the significance of the model. In the case of the full models we witness an adjusted R of 0,367 for both the model with OI first and the model of Ti first (See table A3). So the total model including all control variables and independent variable explains 36,7% of the variance in the dependent variable Production Time. Interpretation of regression analysis results The results in the coefficient tables (model 2 & 3, table A3) suggest that the independent variables namely Organizational I nnovations First and Technological Innovation First are both not significant. This implies that both perspectives are not confirmed by the results found this analysis. So when examining the temporal sequence of technological and organizational innovations no clear effect on production leas time was found. This non significance of both the TI first and the OI perspective this could mean two things; 1) there is no significant effect of temporal sequence of innovations, or 2) there is a significant effect of the temporal sequence of innovations however only when they are implemented within a short timeframe (within one year or within 0,5 year). By executing additional analysis this second possibility was examined (see next paragraph).
2

83

Additional analysis
Additional hypothesis - The OI first perspective is valid when occurring within a one year timeframe (model 4 & 5). In model 4 the results of the regression analysis with the variable Organizational Innovation precedes Technological Innovat ion 1 year show that there is no significant beta for this specific temporal sequence within a one year timeframe. However the negative beta of (-0,41) implies that when organizational innovations precede technological innovations with a maximum of one year this results in a lower production time. By examining the organizational innovations preceding technological ones more than one year a non-significant positive beta is found (,041*) which suggest that the OI first perspective in this specific case is only preferred when it occurs within a one year timeframe. However the results are non-significant and therefore no strong conclusions can be made. Additional hypothesis - The TI first perspective is valid when occurring within a one year timeframe (model 6 & 7). In the second case (model 6) the regression analysis depicts the influence of the variable Technological Innovation precedes Organizational Innovation 1 year which represents the technological innovation first perspective within a short timeframe. In table A3 we see the results of these additional analyses. As can be seen in the results also a negative beta is found (-,057) which is significant at a 90% confidence level. This implies that in general when technological innovations precede organizational ones with a maximum of one year a shorter production lead time was achieved. Model 9 which represents the technological innovation first perspective > 1 year provides a nonsignificant beta of (-0,16). Both negative betas for OI and TI within a one year timeframe are indicating that the timeframe is possible more important than the sequence itself. For that reason an additional hypothesis was tested. Additional hypothesis Decreasing the timeframe in which technological and organizational innovations are implemented will enhance efficiency (model 8 & 9). First model 4 examines the effect of production time when technological and organizational innovations are implemented within a one year timeframe and subsequently model 5 test the same effect within a 0,5 year timeframe. =The results showed that the variable simultaneous implementation 1 year resulted in a beta of (-,075) with a significance level of 0,051. Therefore it can be stated with a confidence level of 90% that organizations who implement technological and organizational innovations within a one year timeframe will have a lower production time that organizations that implement the two types of innovations in a broader timeframe. Model 9 examines whether a simultaneous implementation within a 0,5 year timeframe provided other results. As can be seen in table A3 the variable simultaneous implementation 0,5 year

84

resulted in a beta of (-,101) which is significant at a 99% confidence level. This implies that the shorter the timeframe in which organizational and technological innovations are jointly introduced the stronger the effect on production lead time is.

Conclusions
When examining the temporal sequence of organizational and technological innovations no evidence is found that organizations that follow the organizational innovation first perspective will have a shorter production lead time than organizations that follow the technological innovation first perspective. Therefore no evidence is found in support of the idea that a specific temporal sequence of organizational and technological innovations has an effect on the production lead time of manufacturing firms. When examining these perspectives within a short timeframe of maximal one year weak evidence was found that when technological innovations precede organizational ones with a maximum of one year this results in slightly lower production lead times. However this evidence is not strong and the examination of the organizational innovation first perspective within a short timeframe (max 1 year) also suggest positive efficiency effects. By testing this timeframe in general it seems that instead of a specific sequence between both types of innovations the timeframe in which they are jointly implemented is more important in achieving higher efficiency of the production lead time.

85

2.6.2. Analysis B - Manufacturing Lead Time (MLT)

Multiple regression Technological innovation first SPSS SYNTAX

REGRESSION /MISSING LISTWISE /STATISTICS COEFF OUTS R ANOVA COLLIN TOL /CRITERIA=PIN(.05) POUT(.10) /NOORIGIN /DEPENDENT LOG2 /METHOD=ENTER food textiles construction chemicals machinery electronics transport LOG5 LOG6 LOG7 v18f1 v18f2 v18f3 v18g2 v18g3 v1 8g4 v18h1 v18h3 v18i1 v18i3 TI_n OI_n LOG1 OI_FIRST /SCATTERPLOT=(*ZRESID ,*ZPRED) /RESIDUALS HIST(ZRESID) NORM(ZRESID).

Model Summaryb Model 1 R ,836a R Square ,698 Adjusted R Square ,682 ANOVAb Model 1 Regression Residual Total Sum of Squares 535,439 231,476 766,915 df 23 418 441 Mean Square 23,280 ,554 F 42,039 Sig. ,000a Std. Error of the Estimate ,74415762

Residuals Statisticsa Minimum Predicted Value Residual Std. Predicted Value Std. Residual ,4999679 -2,58815289 -2,325 -3,478 Maximum 5,5866055 2,90857077 2,292 3,909 Mean 3,0613834 ,00000000 ,000 ,000 Std. Deviation 1,10188307 ,72449231 1,000 ,974 N 442 442 442 442

Table set B1: General SPSS Output model with OI first * SPSS output for TI first is the same since they correlate perfectly with each other

86

Coefficients Unstandardized Coefficients Model 1 (Constant) food textiles construction chemicals machinery electronics transport Log Number of employees 2008 Log Share of personal R&D (ln +1) Log Share of turnover new products (ln+1) Product development: according to customers specificati Product development: basic programme with alternative Product development: standard programme Production: assemble to order Production: make to stock (MTS) Batch size: single unit production Batch size: large batch/lot Product complexity: simple products Product complexity: complex products number of technologies used in your factory number of organisational concepts used in your factory Log production lead time (ln+1) Organizational Innovation First
a. Dependent Variable: Log Delivery Time (ln +1)

Standardized Coefficients Beta ,272 ,204 ,188 ,146 ,133 ,119 ,133 ,201 ,040 ,047 ,040 ,185 ,189 ,197 ,114 ,127 ,103 ,117 ,111 ,086 ,021 ,018 ,034 ,076 ,036 ,022 ,067 -,025 ,126 ,058 ,037 -,025 -,032 ,029 -,046 ,003 -,114 -,108 -,238 ,087 -,086 ,020 ,090 ,042 -,037 ,540 -,013 t 6,816 1,122 ,738 2,047 -,691 3,172 1,510 1,166 -,673 -1,017 1,015 -,651 ,043 -2,117 -3,563 -7,308 2,645 -2,535 ,666 2,809 1,152 -1,037 15,518 -,461 Sig. ,000 ,262 ,461 ,041 ,490 ,002 ,132 ,244 ,501 ,310 ,311 ,515 ,966 ,035 ,000 ,000 ,008 ,012 ,506 ,005 ,250 ,300 ,000 ,645

Collinearity Statistics Tolerance VIF

B 1,855 ,229 ,139 ,298 -,092 ,378 ,201 ,234 -,027 -,047 ,041 -,121 ,008 -,417 -,406 -,929 ,272 -,297 ,074 ,243 ,025 -,019 ,521 -,035

Std. Error

,694 ,780 ,673 ,554 ,459 ,492 ,721 ,535 ,728 ,873 ,148 ,148 ,251 ,789 ,680 ,666 ,627 ,765 ,699 ,545 ,580 ,597 ,951

1,440 1,283 1,486 1,803 2,181 2,034 1,387 1,870 1,373 1,146 6,773 6,775 3,992 1,267 1,470 1,501 1,596 1,307 1,430 1,836 1,723 1,675 1,051

Table B2: Coefficients model with OI first * SPSS output for TI first is the same since they correlate perfectly with each other, only the Beta of TI first is (,013).

87

Figures B1: SPSS output figures model OI first * SPSS output for TI first is the same since they correlate perfectly with each other

88

Results Multiple Regression analysis Manufacturing Lead Time (Table B3)

Control Variables
Manufacturing subsector (reference: Metal) Food Textiles Construction Chemistry Machinery Electronics Transport (log) Organizational Size (number of employees 2008) (log) Research & Development (% of personal R&D) (log) Share of turnover New products Product development (reference: no product development at site) Customer unique Semi unique Standard program Production/Assembly (reference: make to order) Assemble to order Make to stock No production/assembly at site Batch size (reference: Small/Medium Batch) Single unit production Large batch Product complexity (reference: medium complex products) Simple products Complex products Number of technological innovations introduced Number of organizational innovations introduced (log) Production lead time

Basic Model Model 1

-,068** ,008 ,048* -,014 ,133*** ,053 ,031 -,025 -,035 ,036

Central Analysis OI First TI First Model 2 Model 3

,036 ,022 ,067** -,025 ,126*** ,058 ,037 -,025 -,032 ,029 ,036 ,022 ,067** -,025 ,126*** ,058 ,037 -,025 -,032 ,029

Analysis OI first 1 year >1 year Model 4 Model 5

,023 ,017 ,064** -,028 ,124*** ,053 ,034 -,023 -,034 ,025 ,024 ,018 ,065** -,029 ,123*** ,053 ,034 -,023 -,033 ,025

Analysis TI first 1 year >1 year Model 6 Model 7

,019 ,021 ,068** -,025 ,127*** ,057 ,034 -,025 -,036 ,026 ,023 ,018 ,065** -,031 ,122*** ,052 ,034 -,023 -,033 ,026

Joint Implementation 1 year 0,5 year Model 8 Model 9

,023 ,018 ,066** -,029 ,123*** ,053 ,035 -,023 -,034 ,026 ,026 ,018 ,063* -,032 ,122*** ,053 ,036 -,024 -,034 ,025

-,007 ,041 -,079*

-,046 ,003 -,114**

-,046 ,003 -,114**

-,041 ,004 -,111**

-,042 ,002 -,112**

-,046 -,005 -,117**

-,041 ,003 -,112**

-,044 ,000 -,114**

-,035 ,009 -,106**

-,102*** -,209*** -,022

-,108*** -,238*** N.A.

-,108*** -,238*** N.A.

-,107*** -,234*** N.A.

-,106*** -,232*** N.A.

-,106*** -,229*** N.A.

-,106*** -,232*** N.A.

-,105*** -,230*** N.A.

-,106*** -,234*** N.A.

,072** -,037

,087*** -,086**

,087*** -,086**

,083** -,090***

,084** -,092***

,081** -,087***

,084** -,092***

,084** -,091***

,084*** -,094***

-,020 ,081*** ,003 -,018 ,559***

,020 ,090*** ,042 -,037 ,540*** -,013

,020 ,090*** ,042 -,037 ,540***

,014 ,093*** ,041 -,031 ,538***

,012 ,091*** ,042 -,032 ,539***

,013 ,089*** ,039 -,030 ,543***

,012 ,091*** ,042 -,033 ,540***

,011 ,089*** ,041 -,032 ,541***

,014 ,092*** ,043 -,030 ,535***

Explanatory variables
Organizational Innovation First Technological Innovation First Simultaneous implementation 1 year Simultaneous implementation 0,5 year Organizational Innovation First (max 1 year before OI) Organizational Innovation First ( > 1 year before OI) Technological Innovation First (max 1year before TI) Technological Innovation First ( > 1year before TI) ,013 -,018 ,002 ,046**1 -,011 ,011 -,032 55,281*** ,700 ,688 568 42,039*** ,698 ,682 442 42,039*** ,698 ,682 442 42,104*** ,697 ,680 445 42,043*** ,697 ,680 445 42,455*** ,699 ,682 445 42,065*** ,697 ,680 445 42,064*** ,697 ,680 445 42,230*** ,698 ,681 445

Model statistics
F value R square Adj. R. Square N

*= Significant at 90%, **= significant at 95%, ***= significant at 99%. 1 = Significance level is divided by factor 2 given the hypothesis made (one-tailed)

89

Assumptions
Assumption 1: Multicollinearity When executing regression analysis it is important that there is no strong correlation between two or more independent variables. When there is a strong correlation this is referred to as multicollinearity. By the use of the tolerance levels (table B2) and VIF score the model can be tested for correlations. As can be seen all tolerance levels are above the critical boundary of 0,1 and all VIF scores are below the critical boundary of 10. Therefore it can be concluded that the correlation between independent variables is within the reasonable boundaries. Assumption 2: Linearity The relationship between the dependent variable and independent variables should be linear. This assumption is checked by the use of the scatterplot (see figure set B1) the dots seem to form a bit of a certain pattern: All values are spread around the horizontal 0 line however some of them seems to group a little bit around the 0-line. Based on the scatterplot it can be assumed that the assumption of linearity is met. Assumption 3: Constant variance Hair et al. (2005: 171) refer to homoscedasticy as a constant range of the error terms of an independent variable. This assumption of equal errors is critical for a proper regression analysis. It can be concluded that the data is homoscedastic because in the scatterplot (figure set B1) there is no clear pattern in the residuals (f.e. a triangle). Therefore it can be assumed that the assumption of equal error is met. Assumption 4: Independence of the Error Terms The assumption of independence of the Errors Terms is important because it tests whether each predicted value is independent (the predicted value is not related to any other prediction (Hair et al., 2005: 207). This assumption can be checked by the residuals statistics tables, in were the values for Standardized Predicted Value are important. Because of the standardization the mean has to be 0 and std. deviation has to be 1, which is indeed the case (table set B1). Thus it can be concluded that the errors do not correlate with the independent variables and therefore do not influence the regression model in a significant way.

90

Assumption 5: Normality of the Error term distribution This assumption tests whether the errors are normally distributed. By looking to the histogram with a normal curve of the standardized residuals of all variables and the normal probability plot it is possible to check whether this assumption is met. As we can see in the figure set B1 the errors are quite normal distributed although there are some outliers. The normal P-P plots show that all the dots lay on or around the diagonal line (normal probability plot) which is another sign that the assumption of the normality of the error term distribution is met.

Results
Overall model fit For the overall model fit we can look to the F-tests (table set B1) which reveals an F-value of 42,039 for both models (model 2 & 3) with both a significance of ,000. Therefore it can be assumed that the model has a good overall fit and has a relatively strong explanatory power. The adjusted R square tells us something about the significance of the model. In the case of the full models we witness an adjusted R of 0,682 for both the model with OI first and the model of TI first (See table B3 model 2 & 3). So the total model including all control variables and independent variable explains 68,2% of the variance in the dependent variable Manufacturing Lead Time. Interpretation regression analysis results The results in the coefficient tables (model 2 & 3) suggest that the independent variables namely Organizational Innovations First and Technological Innovation First and are both not significant. This implies that both perspectives are not confirmed by the results found this analysis. So when examining the temporal sequence of technological and organizational innovations no clear effect on manufacturing lead time is found. This non significance of both the TI first and the OI perspective this could mean two things; 1) there is no significant effect of temporal sequence of innovations, or 2) there is a significant effect of the temporal sequence of innovations however only when they are implemented within a short timeframe (within one year). By executing additional analysis this second possibility was examined (see next paragraph).
2

91

Additional analysis Additional hypothesis - The OI first perspective is valid when occurring within a one year timeframe (model 4 & 5). In model 4 the results of the regression analysis with the variable Organizational Innovation precedes Technological Innovat ion 1 year show that there is no significant beta for this specific temporal sequence within a one year timeframe. There is no significant evidence of any effect on manufacturing lead time by introducing organizational innovations maximal one year before technological ones. However when comparing the betas of the OI first perspective within one year (model 4) with the OI first perspective longer than one year (model 5) it can be stated that model 4 proves a negative beta (-,018) and model 5 a more neutral beta (-,002). Yet both betas are not significant but it might indicate that when the OI first perspective is occurring within a shorter timeframe a positive effect on manufacturing lead time can be witnessed. Additional hypothesis - The TI first perspective is valid when occurring within a one year timeframe (model 6 & 7). Model 6 & 7 test the technological innovation first perspective within the one year timeframe compared to the longer than one year timeframe. As indicated by the results of model 6 there is a significant beta for this specific temporal sequence within a one year timeframe. However the positive beta of (0,46) implies that when technological innovations precede organizational innovations with a maximum of one year this results in a longer manufacturing lead time. By examining the technological innovations preceding the organizational innovations more than one year a non-significant negative beta is found (-,011) which suggest that the TI first perspective is not preferred when it occurs within a one year timeframe. However the question remains what should organizations do in order to achieve positive effects for the manufacturing lead time. Therefore some additional analyses were performed to further investigate the effect of a shorter timeframe in which technological and organizational innovations are implemented. Additional hypothesis Decreasing the timeframe in which technological and organizational innovations are implemented will enhance efficiency (model 8 & 9). The results of model 8 showed that the variable joint implementation 1 year resulted in a non-significant beta of (,011). Model 9 examines whether a simultaneous implementation within a 0,5 year timeframe provided other results. As can be seen in table A.5 the variable simultaneous implementation 0,5 year resulted in a beta of (-,032) which is also not significant at a reasonable confidence level. This implies that there is no evidence found that the general timeframe in which organizational and technological innovations precede each other has an effect on manufacturing lead time.

92

Conclusions
When examining the temporal sequence of organizational and technological innovations no evidence is found that organizations that follow the organizational innovation first perspective will have a shorter production time than organizations that follow the technological innovation first perspective. Only evidence is found that when technological innovations precede organizational ones within a one year timeframe this will lead to a longer manufacturing lead time for manufacturing firms. However, the non-significant negative betas for the models representing the OI first perspective are in favour of the Organizational innovation first perspective. However these findings are not strong and therefore remain questionable. As expected is manufacturing lead time highly dependent on the Production Lead time of a firm ( = ,540***). Given the findings in the regression analysis of production lead time (PLT) in the previous analysis it can be stated that those findings are also indirectly applicable to the Manufacturing Lead Time, although no evidence fort his idea is found in the regression model.

93

2.6.3. Analysis C Rework/Scrap rate (Scrap)

Multiple regression Organizational innovation first SYNTAX

REGRESSION /MISSING LISTWISE /STATISTICS COEFF OUTS R ANOVA COLLIN TOL /CRITERIA=PIN(.05) POUT(.10) /NOORIGIN /DEPENDENT LOG3 /METHOD=ENTER food textiles construction chemicals machinery electronics transport LOG5 LOG6 LOG7 v18f1 v18f2 v18f3 v18g2 v18g3 v1 8g4 v18h1 v18h3 v18i1 v18i3 TI_n OI_n OI_FIRST /SCATTERPLOT=(*ZRESID ,*ZPRED) /RESIDUALS HIST(ZRESID) NORM(ZRESID).

Model Summaryb Model 1 R ,253a R Square ,064 Adjusted R Square ,014 Std. Error of the Estimate ,74631220

ANOVAb Model 1 Regression Residual Total Sum of Squares 15,740 229,477 245,217 df 22 412 434 Mean Square ,715 ,557 F 1,285 Sig. ,176a

Residuals Statisticsa Minimum Predicted Value Residual Std. Predicted Value Std. Residual ,4408555 -1,31044626 -3,303 -1,756 Maximum 1,5359244 2,72629356 2,447 3,653 Mean 1,0699734 ,00000000 ,000 ,000 Std. Deviation ,19044037 ,72715046 1,000 ,974 N 435 435 435 435

a. Dependent Variable: Log Rework/Scrap (ln+1)

Table set C1: General SPSS Output model with OI first * SPSS output for TI first is the same since they correlate perfectly with each other

94

Coefficients Unstandardized Coefficients Model 1 (Constant) food textiles construction chemicals machinery electronics transport Log Number of employees 2008 Log Share of personal R&D (ln +1) Log Share of turnover new products (ln+1) Product development: according to customers specificati Product development: basic programme with alternative Product development: standard programme Production: assemble to order Production: make to stock (MTS) Batch size: single unit production Batch size: large batch/lot Product complexity: simple products Product complexity: complex products number of technologies used in your factory number of organisational concepts used in your factory Organizational Innovation First a. Dependent Variable: Log Rework/Scrap (ln+1) B 1,299 -,268 -,060 ,242 -,025 -,076 -,077 ,050 ,035 -,013 ,018 -,150 -,132 -,225 -,101 -,291 -,014 -,099 -,013 ,118 -,013 -,021 -,075 Std. Error ,259 ,206 ,193 ,145 ,132 ,120 ,134 ,192 ,040 ,047 ,040 ,178 ,181 ,190 ,114 ,127 ,103 ,115 ,111 ,086 ,022 ,018 ,077

Standardized Coefficients Beta t 5,012 -,073 -,017 ,096 -,012 -,044 -,038 ,015 ,058 -,015 ,022 -,100 -,086 -,107 -,047 -,131 -,008 -,051 -,006 ,077 -,037 -,072 -,047 -1,298 -,309 1,668 -,190 -,632 -,572 ,259 ,891 -,272 ,441 -,842 -,732 -1,185 -,882 -2,288 -,135 -,862 -,117 1,371 -,569 -1,145 -,967 Sig. ,000 ,195 ,758 ,096 ,850 ,528 ,567 ,796 ,374 ,786 ,660 ,400 ,465 ,237 ,378 ,023 ,892 ,389 ,907 ,171 ,570 ,253 ,334

Collinearity Statistics Tolerance VIF

,721 ,784 ,684 ,565 ,469 ,509 ,722 ,535 ,746 ,882 ,162 ,166 ,279 ,805 ,693 ,703 ,649 ,778 ,727 ,530 ,581 ,949

1,386 1,275 1,462 1,770 2,134 1,963 1,385 1,870 1,341 1,134 6,166 6,036 3,585 1,242 1,442 1,422 1,540 1,286 1,376 1,888 1,721 1,054

Table C2: Coefficients model with OI first * SPSS output for TI first is the same since they correlate perfectly with each other, only the Beta of TI first is (,047).

95

Figures C1: SPSS output figures model OI first * SPSS output for TI first is the same since they correlate perfectly with each other

96

Results Multiple Regression analysis Rework/Scrap rate (Table C3)

Basic Model Control Variables Manufacturing subsector (reference: Metal) Food Textiles Construction Chemistry Machinery Electronics Transport (log) Organizational Size (number of employees 2008) (log) Research & Development (% of personal R&D) (log) Share of turnover New products Product development (reference: no product development at site) Customer unique Semi unique Standard program Production/Assembly (reference: make to order) Assemble to order Make to stock No production/assembly at site Batch size (reference: Small/Medium Batch) Single unit production Large batch Product complexity (reference: medium complex products) Simple products Complex products Number of technological innovations introduced Number of organizational innovations introduced Model 1 Central Analysis OI First TI First Model 2 Model 3 Analysis OI first 1 year >1 year Model 4 Model 5 Analysis TI first 1 year >1 year Model 6 Model 7 Joint Implementation 1 year 0,5 year Model 8 Model 9

-,099** -,042 ,079 -,019 -,060 -,035 ,037 ,036 -,009 ,036

-,073 -,017 ,096* -,012 -,044 -,038 ,015 ,058 -,015 ,022

-,073 -,017 ,096* -,012 -,044 -,038 ,015 ,058 -,015 ,022

-,081 -,031 ,093 -,013 -,045 -,043 ,010 ,059 -,015 ,022

-,079 -,030 ,096* -,018 -,048 -,046 ,013 ,059 -,012 ,023

-,085 -,027 ,099* -,016 -,043 -,043 ,013 ,059 -,014 ,023

-,077 -,030 ,096* -,015 -,046 -,043 ,013 ,058 -,012 ,023

-,076 -,031 ,094 -,019 -,050 -,047 ,012 ,060 -,012 ,023

-,076 -,029 ,094 -,021 -,050 -,046 ,014 ,057 -,012 ,023

-,158 -,150 -,159**

-,100 -,086 -,107

-,100 -,086 -,107

-,091 -,072 -,098

-,094 -,080 -,101

-,096 -,084 -,105

-,099 -,083 -,103

-,091 -,074 -,098

-,086 -,072 -,095

-,062 -,082* -,037

-,047 -,131

-,047 -,131

-,047 -,136

-,045 -,127** N.A.

-,045 -,125** N.A.

-,045 -,128** N.A.

-,046 -,132** N.A.

-,044 -,129** N.A.

-,009 -,088*

-,008 -,051

-,008 -,051

-,016 -,050

-,013 -,056

-,015 -,053

-,012 -,053

-,013 -,056

-,013 -,058

-,025 ,100** ,020 -,101*

-,006 ,077 -,037 -,072

-,006 ,077 -,037 -,072

-,008 ,086 -,035 -,065

-,014 ,079 -,033 -,069

,014 ,079*** -,036 -,067

-,013 ,079 -,034 -,069

-,011 ,083 -,033 -,069

-,012 ,081 -,031 -,067

Explanatory variables Organizational Innovation First Technological Innovation First Simultaneous implementation 1 year Simultaneous implementation 0,5 year Organizational Innovation First (max 1 year before OI) Organizational Innovation First ( > 1 year before OI) Technological Innovation First (max 1year before TI) Technological Innovation First ( > 1year before TI) Model statistics F value R square Adj. R. Square N

-,047 ,047 -,065 -,002 ,044 ,029 -,033 -,036 2,003*** ,075 ,038 565 1,285 ,064 ,014 435 1,285 ,064 ,014 435 1,340 ,066 ,017 438 1,252 ,062 ,013 438 1,293 ,064 ,015 438 1,269 ,063 ,013 438 1,274 ,063 ,014 438 1,279 ,064 ,014 438

*= Significant at 90%, **= significant at 95%, ***= significant at 99%. 1 = Significance level is divided by factor 2 given the hypothesis made (one-tailed)

97

Assumptions
Assumption 1: Multicollinearity When executing regression analysis it is important that there is no strong correlation between two or more independent variables. When there is a strong correlation this is referred to as multicollinearity. By the use of the tolerance levels (table C2) and VIF score the model can be tested for correlations. As can be seen all tolerance levels are above the critical boundary of 0,1 and all VIF scores are below the critical boundary of 10. Therefore it can be concluded that the correlation between independent variables is within the reasonable boundaries. Assumption 2: Linearity The relationship between the dependent variable and independent variables should be linear. This assumption is checked by the use of the scatterplot (see figure set C1). In this plot the dots seem to form a bit of a certain pattern: they seems to group a in the right side of the centre. Based on this scatterplot it can be assumed that there might be some problems with the linearity, however taken everything in consideration it is assumed that the assumption of linearity is met. Assumption 3: Constant variance Hair et al. (2005: 171) refer to homoscedasticy as a constant range of the error terms of an independent variable. This assumption of equal errors is critical for a proper regression analysis. It can be concluded that the data is homoscedastic because in the scatterplot (figure set C1) there is no specific pattern in the residuals (f.e. a triangle). Therefore it can be assumed that the assumption of equal error is met. Assumption 4: Independence of the Error Terms The assumption of independence of the Errors Terms is important because it tests whether each predicted value is independent (the predicted value is not related to any other prediction (Hair et al., 2005: 207). This assumption can be checked by the residuals statistics tables, in were the values for Standardized Predicted Value are important. Because of the standardization the mean has to be 0 and std. deviation has to be 1, which is indeed the case (table set A1). Thus it can be concluded that the errors do not correlate with the independent variables and therefore do not influence the regression model in a significant way.

98

Assumption 5: Normality of the Error term distribution This assumption tests whether the errors are normally distributed. By looking to the histogram with a normal curve of the standardized residuals of all variables and the normal probability plot it is possible to check whether this assumption is met. As we can see in the figure set C1 the distribution of errors provides some doubt about the normality of the distribution. Yet, the normal P-P plots show that all the dots lay on or around the diagonal line (normal probability plot) which is a sign that the assumption of the normality of the error term distribution is met.

Results
Overall model fit For the overall model fit we can look to the results of the F-test (table C3) which reveals an F-value of 1,258 for both models (model 2 & 3) which are both not significant within the predefined confidence levels. Therefore it can be assumed that the model has no good overall fit and has very low explanatory power. The adjusted R square substantiates this finding. In the case of the full models we witness an adjusted R of 0,064 for both the model with OI first and the model of TI first (See table C3 model 2&3). So the total model including all control variables and independent variable explains 6,4% of the variance in the dependent variable Manufacturing Lead Time. Given the number of independent variables it has to be concluded that this model is not preferred for describing the rework/scrap rate of manufacturing firms. Interpretation regression analysis results The results in the coefficient tables (table C3: model 2 & 3) suggest that the independent variables namely Organizational Innovations First and Technological I nnovation First and are both not significant. This implies that both perspectives are not confirmed by the results found this analysis . So when examining the temporal sequence of technological and organizational innovations no clear effect on Rework/Scrap rate is found. Yet OI first seems to have a positive effect on the scrap rate (= -,047) while the TI first perspective has leads to a higher scrap rate (= ,047), however both are not significant at the predefined confidence levels. This non significance of both the TI first and the OI perspective this could mean two things; 1) there is no significant effect of temporal sequence of innovations or 2) there is a significant effect of the temporal sequence of innovations however only when they are implemented within a short timeframe (within one year). By executing additional analysis this second possibility was examined.
2

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Additional hypothesis - The OI first perspective is valid when occurring within a one year timeframe (model 4 & 5). In model 4 the results of the regression analysis with the variable Organizational Innovation precedes Technological Innovation 1 year show th at there is no significant beta for this specific temporal sequence within a one year timeframe. There is no significant evidence of any effect on the rework/scrap rate by introducing organizational innovations maximal one year before technological ones. Yet in line with model 2 a negative beta was found (-,065). Additional hypothesis - The TI first perspective is valid when occurring within a one year timeframe (model 6 & 7). Model 6 & 7 test the technological innovation first perspective within the one year timeframe compared to the longer than one year timeframe. As indicated by the results of model 6 there is no significant beta for this specific temporal sequence within a one year timeframe. Yet in line with model 3 a positive beta was found (,044). Additional hypothesis Decreasing the timeframe in which technological and organizational innovations are implemented will enhance efficiency (model 8 & 9). The results of model 8 showed that the variable joint implementation 1 year resulted in a non-significant beta of (,033). Model 9 examines whether a simultaneous implementation within a 0,5 year timeframe provided other results. As can be seen in table A.5 the variable simultaneous implementation 0,5 year resulted in a nonsignificant beta of (-,036). This implies that there is no clear evidence found that the general timeframe in which organizational and technological innovations precede each other has an effect on the rework/scrap rate of manufacturing firms.

Conclusions
When examining the temporal sequence of organizational and technological innovations no significant evidence is found that organizations that follow the organizational innovation first perspective will have a lower Rework/Scrap rate than organizations that follow the technological innovation first perspective. Yet the negatives Betas associated with OI first in contrast to the positive betas of TI first seem to indicate that the OI first perspective should result in lower scrap rates however no strong evidence was found. Further the additional analysis did not reveal any interesting new findings.

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2.6.4. Analysis D Capital Utilization (CU)

Rework/Scrap Organizational Innovation first perspective

SYNTAX REGRESSION /MISSING LISTWISE /STATISTICS COEFF OUTS R ANOVA COLLIN TOL /CRITERIA=PIN(.05) POUT(.10) /NOORIGIN /DEPENDENT V21G /METHOD=ENTER food textiles construction chemicals machinery electronics transport LOG5 LOG6 LOG7 v18f1 v18f2 v18f3 v18g2 v18g3 v1 8g4 v18h1 v18h3 v18i1 v18i3 TI_n OI_n LOG10 OI_FIRST /SCATTERPLOT=(*ZRESID ,*ZPRED) /RESIDUALS HIST(ZRESID) NORM(ZRESID). .
Model Summary Model 1 R ,479a R Square ,230
b

Adjusted R Square ,174 ANOVAb

Std. Error of the Estimate 12,18798

Model 1 Regression Residual Total

Sum of Squares 14159,947 47534,956 61694,904

df 23 320 343

Mean Square 615,650 148,547

F 4,144

Sig. ,000a

Residuals Statisticsa Minimum Predicted Value Residual Std. Predicted Value Std. Residual 73,3790 -48,19347 -2,460 -3,954 Maximum 104,6226 50,74474 2,402 4,164 Mean 89,1872 ,00000 ,000 ,000 Std. Deviation 6,42516 11,77225 1,000 ,966 N 344 344 344 344

Table set D1: General SPSS Output model with OI first * SPSS output for TI first is the same since they correlate perfectly with each other

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Coefficients Unstandardized Coefficients Model 1 (Constant) food textiles construction chemicals machinery electronics transport Log Number of employees 2008 Log Share of personal R&D (ln +1) Log Share of turnover new products (ln+1) Product development: according to customers specificati Product development: basic programme with alternative Product development: standard programme Production: assemble to order Production: make to stock (MTS) Batch size: single unit production Batch size: large batch/lot Product complexity: simple products Product complexity: complex products number of technologies used in your factory number of organisational concepts used in your factory Log sales growth 2006-2008 (ln+100) Organizational Innovation First a. Dependent Variable: Degree of capacity utilisation 2008 [%] B 49,359 -6,885 -4,417 -,437 -3,925 5,279 2,232 -1,249 1,234 -1,083 ,482 5,844 5,938 4,254 -1,051 -4,232 4,336 -,687 -,980 1,245 -,440 ,234 5,825 ,144 Std. Error 16,029 4,064 3,691 2,627 2,425 2,191 2,496 3,783 ,791 ,882 ,749 4,098 4,173 4,437 2,141 2,519 1,867 2,398 2,053 1,601 ,408 ,341 3,052 1,436

Standardized Coefficients Beta t 3,079 -,105 -,067 -,010 -,106 ,173 ,062 -,019 ,102 -,070 ,034 ,217 ,217 ,110 -,027 -,102 ,139 -,019 -,027 ,045 -,071 ,044 ,102 ,005 -1,694 -1,197 -,166 -1,619 2,409 ,894 -,330 1,561 -1,228 ,644 1,426 1,423 ,959 -,491 -1,680 2,322 -,286 -,477 ,778 -1,078 ,688 1,909 ,100 Sig. ,002 ,091 ,232 ,868 ,107 ,017 ,372 ,741 ,119 ,220 ,520 ,155 ,156 ,338 ,624 ,094 ,021 ,775 ,633 ,437 ,282 ,492 ,057 ,920

Collinearity Statistics Tolerance VIF

,627 ,760 ,668 ,563 ,466 ,509 ,724 ,565 ,737 ,881 ,104 ,103 ,183 ,813 ,648 ,671 ,576 ,774 ,708 ,560 ,592 ,842 ,929

1,595 1,316 1,497 1,775 2,148 1,966 1,382 1,769 1,356 1,135 9,629 9,666 5,474 1,229 1,542 1,490 1,735 1,291 1,412 1,787 1,689 1,187 1,077

Table D2: Coefficients model with OI first * SPSS output for TI first is the same since they correlate perfectly with each other, only the Beta of TI first is (-,005).

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Figures D1: SPSS output figures model OI first * SPSS output for TI first is the same since they correlate perfectly with each other

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Results Multiple Regression analysis Capital Utilization (Table D3).

Basic Model Model 1
-,108** -,019 ,017 -,095* ,191*** ,074 -,003 ,094* -,075 ,056

Control Variables
Manufacturing subsector (reference: Metal) Food Textiles Construction Chemistry Machinery Electronics Transport (log) Organizational Size (number of employees 2008) (log) Research & Development (% of personal R&D) (log) Share of turnover New products Product development (reference: no product development at site) Customer unique Semi unique Standard program Production/Assembly (reference: make to order) Assemble to order Make to stock No production/assembly at site Batch size (reference: Small/Medium Batch) Single unit production Large batch Product complexity (reference: medium complex products) Simple products Complex products Number of technological innovations introduced Number of organizational innovations introduced (log) Sales Growth 2006-2008 (%)

Central Analysis OI First TI First Model 2 Model 3

-,105* -,067 -,010 -,106 ,173** ,062 -,019 ,102 -,070 ,034 -,105* -,067 -,010 -,106 ,173** ,062 -,019 ,102 -,070 ,034

Analysis OI first 1 year >1 year Model 4 Model 5

-,115** -,075** -,008 -,099* ,180*** ,067 -,018 ,099 -,074 ,033 -,114* -,074 -,009 -,106* ,172** ,060 -,018 ,102 -,071 ,033

Analysis TI first 1 year >1 year Model 6 Model 7

-,106* -,081 ,099* -,110* ,162** ,055 -,016 ,109* -,063 ,037 -,112* -,078 -,007 -,094 ,182** ,070 -,018 ,100 -,069 ,037

Joint Implementation 1 year 0,5 year Model 8 Model 9

-,105* -,077 -,015 -,105* ,172** ,062 -,016 ,105 -,070 ,033 -,109* -,073 -,016 -,108* ,168** ,064 -,009 ,096 -,073 ,032

,165 ,173 ,042

,217 ,217 ,110

,217 ,217 ,110

,220 ,224 ,115

,221 ,223 ,116

,195 ,203 ,102

,202 ,206 ,102

,206 ,219 ,109

,228 ,228 ,120

-,025 -,085 ,009

-,027 -,102* N.A

-,027 -,102* N.A

-,027 -,103* N.A

-,024 -,101* N.A

-,024 -,104* N.A.

-,030 -,100* N.A.

-,028 -,113* N.A.

-,025 -,104* N.A.

,117** -,032

,139** -,019

,139** -,019

,135* -,016

,138** -,021

,145** -,022

,139** -,010

,139** -,020

,136** -,024

-,016 ,032 ,000 ,022 ,126***

-,027 ,045 -,071 ,044 ,102

-,027 ,045 -,071 ,044 ,102

-,026 ,050 -,072 ,052 ,103**

-,029 ,049 -,068 ,047 ,105**

-,029 ,047 -,063 ,041 ,115**

-,029 ,044 -,073 ,051 ,104**

-,018 ,054 -,069 ,046 ,110**

-,022 ,046 -,066 ,056 ,101*

Explanatory variables
Organizational Innovation First Technological Innovation First Organizational Innovation First (max 1 year before OI) Organizational Innovation First ( > 1 year before OI) Technological Innovation First (max 1year before TI) Technological Innovation First ( > 1year before TI) Simultaneous implementation 1 year Simultaneous implementation 0,5 year ,005 -,005 -,039 ,032 -,091** ,055 -,106** -,109** 5,379*** ,226 ,184 447 4,144*** ,230 ,174 344 4,144*** ,230 ,174 344 4,318*** ,235 ,181 347 4,306*** ,235 ,180 347 4,472*** ,242 ,188 347 4,353*** ,237 ,182 347 4,542*** ,244 ,191 347 4,560*** ,245 ,191 347

Model statistics
F value R square Adj. R. Square N

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Assumptions
Assumption 1: Multicollinearity When executing regression analysis it is important that there is no strong correlation between two or more independent variables. When there is a strong correlation this is referred to as multicollinearity. By the use of the tolerance levels (table D2) and VIF score the model can be tested for correlations. As can be seen all tolerance levels are above the critical boundary of 0,1 and all VIF scores are below the critical boundary of 10. Therefore it can be concluded that the correlation between independent variables is within the reasonable boundaries. Assumption 2: Linearity The relationship between the dependent variable and independent variables should be linear. This assumption is checked by the use of the scatterplot (see figure set D1) the dots seem to form a bit of a certain pattern: All values are spread around the horizontal 0 line however them seems to group around this line. Based on this scatterplot it can be assumed that the assumption of linearity is met. Assumption 3: Constant variance Hair et al. (2005: 171) refer to homoscedasticy as a constant range of the error terms of an independent variable. This assumption of equal errors is critical for a proper regression analysis. It can be concluded that the data is homoscedastic because in the scatterplot (figureset D1) there is no clear pattern in the residuals (f.e. a triangle). Therefore it can be assumed that the assumption of equal error is met. Assumption 4: Independence of the Error Terms The assumption of independence of the Errors Terms is important because it tests whether each predicted value is independent (the predicted value is not related to any other prediction (Hair et al., 2005: 207). This assumption can be checked by the residuals statistics tables, in were the values for Standardized Predicted Value are important. Because of the standardization the mean has to be 0 and std. deviation has to be 1, which is indeed the case (table set D1). Thus it can be concluded that the errors do not correlate with the independent variables and therefore do not influence the regression model in a significant way.

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Assumption 5: Normality of the Error term distribution This assumption tests whether the errors are normally distributed. By looking to the histogram with a normal curve of the standardized residuals of all variables and the normal probability plot it is possible to check whether this assumption is met. As we can see in the figure set D1 the errors are quite normal distributed although there are some outliers. The normal P-P plots show that all the dots lay on or around the diagonal line (normal probability plot) which is another sign that the assumption of the normality of the error term distribution is met.

Results
Overall model fit For the overall model fit we can look to the F-tests (table D3) which reveals an F-value of 4,144 for both models (model 2 & 3) with both a significance level of (,000). Therefore it can be assumed that the model has a good overall fit. The adjusted R square tells us something about the significance of the model. In the case of the full models we witness an adjusted R square of 0,174 for both the model with OI first and the model of Ti first (See table D3). So the total model including all control variables and independent variable explains 17,4% of the variance in the dependent variable capital utilization. Interpretation of regression analysis results The results in the coefficient tables (model 2 & 3, table A3) suggest that the independent variables namely Organizational Innovations First and Technological Innovation First are both not significant and they depict a very low beta value ((-),005). This implies that both perspectives are not confirmed by the results found within analysis. So when examining the temporal sequence of technological and organizational innovations no clear effect on capital utilization time was found. This non significance of both the TI first and the OI perspective this could mean two things, 1) there is no significant effect of temporal sequence of innovations, or 2) there is a significant effect of the temporal sequence of innovations however only when they are implemented within a short timeframe (within one year or within 0,5 year). By executing additional analysis this second possibility was examined (see next paragraph).

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Additional analysis
Additional hypothesis - The OI first perspective is valid when occurring within a one year timeframe (model 4 & 5). In model 4 the results of the regression analysis with the variable Organizational Innovation precedes Technological Innovat ion 1 year show that there is no significant beta for this specific temporal sequence within a one year timeframe. However the negative beta of -0,41 implies that when organizational innovations precede technological innovations with a maximum of one year this results in a lower capital utilization, which is a negative sign of organizational efficiency. By examining the organizational innovations preceding technological ones more than one year (model5) a non-significant positive beta is found (0,32) which suggest that the OI first perspective in this specific case is only preferred when it occurs outside the one year timeframe. However the results are non-significant and therefore no strong conclusions can be made. Additional hypothesis - The TI first perspective is valid when occurring within a one year timeframe (model 6 & 7). In the second case (model 6) the regression analysis depicts the influence of the variable Technological Innovation precedes Organizational Innovation 1 year which represents the technological innovation first perspective within a short timeframe. In table D3 we see the results of these additional analyses. As can be seen in the results also a negative beta is found (-,091) which is significant at a 95% confidence level. This implies that in general when technological innovations precede organizational ones with a maximum of one year a lower capital utilization was achieved. Model 9 which represents the technological innovation first perspective > 1 year provides a nonsignificant beta of (0,55). Both negative betas for OI and TI within a one year timeframe are indicating that the timeframe is possible more important than the sequence itself. For that reason an additional hypothesis was tested. Additional hypothesis Decreasing the timeframe in which technological and organizational innovations are implemented will enhance efficiency. First model 8 examines the effect of production time when technological and organizational innovations are implemented within a one year timeframe and subsequently model 9 test the same effect within a 0,5 year timeframe. The results revealed that the variable simultaneous implementation 1 year resulted in a beta of (-,106**) which is significant at an 95% confidence level. Therefore it can be stated that organizations who implement technological and organizational innovations within a one year timeframe will have lower capital utilization then organizations that implement the two types of innovations in a broader timeframe. Model 5 examines whether a simultaneous implementation within a 0,5 year timeframe provided other results. As can be seen in table D3 model 9 the variable simultaneous implementation 0,5 year

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resulted in a beta of (-,109) which is significant at a 99% confidence level. This implies that the shorter the timeframe in which organizational and technological innovations are jointly introduced the stronger the negative efficiency effect on capital utilization is.

Conclusions
When examining the temporal sequence of organizational and technological innovations no evidence is found that organizations that follow the organizational innovation first perspective will have a higher capital utilization then organizations that follow the technological innovation first perspective. Therefore no evidence is found in support of the idea that a specific temporal sequence of organizational and technological innovations has an effect on the capital utilization of manufacturing firms. When examining these perspectives within a short timeframe of maximal one year weak evidence was found that when technological innovations precede organizational ones with a maximum of one year this results in slightly lower capital utilization. However this evidence is not strong and the examination of the organizational innovation first perspective within a short timeframe (max 1 year) also suggest negative efficiency effects. By testing this timeframe in general it seems that instead of a specific sequence between both types of innovations the timeframe in which they are jointly implemented is more important in achieving higher capital utilization. In contrast to for example production lead time here a short timeframe results in negative effects for process efficiency.

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2.6.5. Analysis E Labour Productivity (Value added per employee)

Labour productivity Organizational Innovation first perspective SPSS SYNTAX

REGRESSION /MISSING LISTWISE /STATISTICS COEFF OUTS R ANOVA COLLIN TOL /CRITERIA=PIN(.05) POUT(.10) /NOORIGIN /DEPENDENT V21AV /METHOD=ENTER food textiles construction chemicals machinery electronics transport LOG5 LOG6 LOG7 v18f1 v18f2 v18f3 v18g2 v18g3 v1 8g4 v18h1 v18h3 v18i1 v18i3 TI_n OI_n LOG10 OI_FIRST /SCATTERPLOT=(*ZRESID ,*ZPRED) /RESIDUALS HIST(ZRESID) NORM(ZRESID).

Model Summaryb Model 1 R ,365a R Square ,133 Adjusted R Square ,070 ANOVAb Model 1 Regression Residual Total Sum of Squares 177740,144 1159673,963 1337414,107 df 23 319 342 Mean Square 7727,832 3635,342 F 2,126 Sig. ,002a Std. Error of the Estimate 60,29379

Residuals Statisticsa Minimum Predicted Value Residual Std. Predicted Value Std. Residual 53,3172 -107,13383 -2,316 -1,777 Maximum 206,7881 302,42139 4,417 5,016 Mean 106,1042 ,00000 ,000 ,000 Std. Deviation 22,79711 58,23109 1,000 ,966 N 343 343 343 343

a. Dependent Variable: Value added (turnover - input per employee [Thsd. Euros])

Table set E1: General SPSS Output model with OI first * SPSS output for TI first is the same since they correlate perfectly with each other

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Coefficients Standardized Coefficients Beta t -,913 ,057 -,011 -,057 ,083 ,006 -,011 -,032 ,127 ,070 ,011 -,058 ,025 ,007 -,083 ,156 ,039 ,062 -,002 ,147 -,032 ,028 ,125 -,054 ,878 -,184 -,898 1,185 ,082 -,155 -,508 1,746 1,174 ,203 -,395 ,170 ,062 -1,438 2,409 ,609 ,912 -,035 2,344 -,452 ,399 2,232 -1,005 Sig. ,362 ,381 ,854 ,370 ,237 ,934 ,877 ,612 ,082 ,241 ,839 ,693 ,865 ,950 ,151 ,017 ,543 ,363 ,972 ,020 ,651 ,690 ,026 ,316 ,637 ,750 ,677 ,561 ,464 ,510 ,666 ,513 ,754 ,891 ,127 ,130 ,232 ,808 ,646 ,650 ,591 ,774 ,693 ,555 ,543 ,865 ,924 1,571 1,333 1,476 1,784 2,156 1,960 1,502 1,949 1,327 1,123 7,870 7,715 4,306 1,238 1,548 1,540 1,691 1,292 1,444 1,803 1,843 1,156 1,082

Unstandardized Coefficients Model 1 (Constant) food textiles construction chemicals machinery electronics transport Log Number of employees 2008 Log Share of personal R&D (ln +1) Log Share of turnover new products (ln+1) Product development: according to customers specificati Product development: basic programme with alternative Product development: standard programme Production: assemble to order Production: make to stock (MTS) Batch size: single unit production Batch size: large batch/lot Product complexity: simple products Product complexity: complex products number of technologies used in your factory number of organisational concepts used in your factory Log sales growth 2006-2008 (ln+100) Organizational Innovation First B -44,863 18,107 -3,192 -11,592 14,485 ,901 -1,922 -9,089 7,059 5,152 ,751 -7,261 3,136 1,239 -15,151 29,467 5,722 10,521 -,351 18,696 -,923 ,684 20,838 -7,095 Std. Error 49,115 20,622 17,321 12,906 12,221 10,946 12,422 17,891 4,042 4,389 3,693 18,361 18,398 19,824 10,533 12,233 9,394 11,538 10,161 7,977 2,041 1,714 9,335 7,061

Collinearity Statistics Tolerance VIF

a. Dependent Variable: Value added (turnover - input per employee [Thsd. Euros])

Table E2: Coefficients model with OI first * SPSS output for TI first is the same since they correlate perfectly with each other, only the Beta of TI first is (,054).

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Figures E1: SPSS output figures model OI first * SPSS output for TI first is the same since they correlate perfectly with each other

111

Results Multiple Regression analysis Production Lead Time/Value added (Table E3)

Control Variables
Manufacturing subsector (reference: Metal) Food Textiles Construction Chemistry Machinery Electronics Transport (log) Organizational Size (number of employees 2008) (log) Research & Development (% of personal R&D) (log) Share of turnover New products Product development (reference: no product development at site) Customer unique Semi unique Standard program Production/Assembly (reference: make to order) Assemble to order Make to stock No production/assembly at site Batch size (reference: Small/Medium Batch) Single unit production Large batch Product complexity (reference: medium complex products) Simple products Complex products Number of technological innovations introduced Number of organizational innovations introduced (log) Sales Growth 2006-2008 (%)

Basic Model Model 1

,098* -,015 -,008 ,054 ,025 -,026 -,046 ,169*** ,085* ,041

Central Analysis OI First TI First Model 2 Model 3

,057 -,011 -,057 ,083 ,006 -,011 -,032 ,127* ,070 ,011 ,057 -,011 -,057 ,083 ,006 -,011 -,032 ,127* ,070 ,011

Analysis OI first 1 year >1 year Model 4 Model 5

,082 -,010 -,054 ,065 ,000 -,030 -,025 ,127* ,086 ,021 ,081 -,007 -,049 ,093 ,012 -,001 -,027 ,123* ,073 ,019

Analysis TI first 1 year >1 year Model 6 Model 7

,078 ,004 -,052 ,085 ,011 -,009 -,023 ,119 ,069 ,015 ,083 -,003 -,056 ,079 ,004 -,012 -,028 ,128* ,074 ,017

Joint Implementation 1 year 0,5 year Model 8 Model 9

,076 ,004 -,045 ,086 ,011 -,012 -,020 ,114 ,069 ,018 ,073 -,003 -,044 ,086 ,011 -,018 -,029 ,131* ,076 ,021

-,050 -,044 -,091

-,058 ,025 ,007

-,058 ,025 ,007

-,073 ,010 ,008

-,072 ,015 ,005

-,044 ,042 ,020

-,060 ,029 ,009

-,044 ,034 ,023

-,071 ,021 ,001

-,048 ,128** ,012

-,083 ,156**

-,083 ,156**

-,075 ,163**

-,086 ,152**

-,081 ,151**

-,083 ,146**

-,076 ,164**

-,081 ,157**

,013 ,060

,039 ,062

,039 ,062

,058 ,051

,052 ,073

,041 ,058

,044 ,059

,048 ,059

,044 ,064

-,048 ,084 -,048 -,005 ,120**

-,002 ,147** -,032 ,028 ,125**

-,002 ,147** -,032 ,028 ,125**

,003 ,134** -,006 ,010 ,140**

,002 ,140** -,031 ,025 ,119**

,010 ,147** -,026 ,020 ,124**

,009 ,146** -,025 ,016 ,126**

-,004 ,139** -,020 ,020 ,124**

-,002 ,152** -,027 ,006 ,135**

Explanatory variables
Organizational Innovation First Technological Innovation First Organizational Innovation First (max 1 year before OI) Organizational Innovation First ( > 1 year before OI) Technological Innovation First (max 1year before TI) Technological Innovation First ( > 1year before TI) Simultaneous implementation 1 year Simultaneous implementation 0,5 year -,054 ,054 ,114** -,116** ,051 ,024 ,128** ,141*** 2,090*** ,101 ,053 451 2,126*** ,133 ,070 343 2,243*** ,139 ,077 343 2,330*** ,143 ,081 346 2,357*** ,144 ,083 346 2,164*** ,134 ,072 346 2,128*** ,132 ,070 346 2,411*** ,147 ,086 346 2,485*** ,151 ,090 346

Model statistics
F value R square Adj. R. Square N

*= Significant at 90%, **= significant at 95%, ***= significant at 99%. 1 = Significance level is divided by factor 2 given the hypothesis made (one-tailed)

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Assumptions
Assumption 1: Multicollinearity When executing regression analysis it is important that there is no strong correlation between two or more independent variables. When there is a strong correlation this is referred to as multicollinearity. By the use of the tolerance levels (table E2) and VIF score the model can be tested for correlations. As can be seen all tolerance levels are above the critical boundary of 0,1 and all VIF scores are below the critical boundary of 10. Therefore it can be concluded that the correlation between independent variables is within the reasonable boundaries. Assumption 2: Linearity The relationship between the dependent variable and independent variables should be linear. This assumption is checked by the use of the scatterplot (see figure set E1) the dots seem to form a bit of a certain pattern: Most values seems to group a in the centre. However there is an indication of problems with linearity this model is used for further analysis. Assumption 3: Constant variance Hair et al. (2005: 171) refer to homoscedasticy as a constant range of the error terms of an independent variable. This assumption of equal errors is critical for a proper regression analysis. Although the values are concentrating around one specific point It can be concluded that the data is homoscedastic because in the scatterplot (figure set E1) there is no clear pattern in the residuals (f.e. a triangle). Therefore it can be assumed that the assumption of equal error is met. Assumption 4: Independence of the Error Terms The assumption of independence of the Errors Terms is important because it tests whether each predicted value is independent (the predicted value is not related to any other prediction (Hair et al., 2005: 207). This assumption can be checked by the residuals statistics tables, in were the values for Standardized Predicted Value are important. Because of the standardization the mean has to be 0 and std. deviation has to be 1, which is indeed the case (table set E1). Thus it can be concluded that the errors do not correlate with the independent variables and therefore do not influence the regression model in a significant way.

113

Assumption 5: Normality of the Error term distribution This assumption tests whether the errors are normally distributed. By looking to the histogram with a normal curve of the standardized residuals of all variables and the normal probability plot it is possible to check whether this assumption is met. As we can see in the figure set E1 the errors are quite normal distributed although there is some skewness to the right. The normal P-P plots show that not all the dots lay perfectly on the diagonal line (normal probability plot) which is another sign that there might be some problems with this assumption. Yet, the problems are within acceptable boundaries.

Results
Overall model fit For the overall model fit we can look to the F-tests (table set E1) which reveals an F-value of 2,126 for both models (model 2 & 3) with both a significance of ,002 .Therefore it can be assumed that the model has a good overall fit but has no strong explanatory power. The adjusted R square tells us something about the significance of the model. In the case of the full models we witness an adjusted R of 0,070 for both the model with OI first and the model of TI first (See table E3 model 2 & 3). So the total model including all control variables and independent variable explains 7,0% of the variance in the dependent variable Labour productivity. Yet this was expected because labour productivity is depending on multiple other fa ctors. Therefore the strength of this model is acceptable for the role it plays within this research.
2

Interpretation of Regression results

The results in the coefficient tables (model 2 & 3) suggest that the independent variables namely Organizational Innovations First and Technological Innovation First and are both not significant. This implies that both perspectives are not confirmed by the results found this analysis. So when examining the temporal sequence of technological and organizational innovations no clear effect on labour productivity is found. This non significance of both the TI first and the OI perspective this could mean two things; 1) there is no significant effect of temporal sequence of innovations or 2) there is a significant effect of the temporal sequence of innovations however only when they are implemented within a short timeframe (within one year). By executing additional analysis this second possibility was examined.

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Additional hypothesis - The OI first perspective is valid when occurring within a one year timeframe (model 4 & 5). In model 4 the results of the regression analysis with the variable Organizational Innovation precedes Technological Innovation 1 year show that there is a significant beta for this specific temporal sequence within a one year timeframe ( = ,114). So there is significant evidence of an effect on labour productivity by introducing organizational innovations maximal one year before technological ones. When comparing the betas of the OI first perspective within one year (model 4) with the OI first perspective longer than one year (model 5) it can be stated that model 4 provides a significant positive beta (,114) and model 5 a significant negative beta (-,116). Both betas are significant and indicate that when the OI first perspective is occurring within a shorter timeframe a positive effect on labour productivity can be witnessed compared to a negative effect when organization innovations precede technological ones more than one year. Additional hypothesis - The TI first perspective is valid when occurring within a one year timeframe (model 6 & 7). Model 6 & 7 test the technological innovation first perspective within the one year timeframe compared to the longer than one year timeframe. As indicated by the results of model 6 no significant beta for this specific temporal sequence within a one year timeframe is found. However the positive beta of (0,51) implies that when technological innovations precede organizational innovations with a maximum of one year this results in a higher labour productivity. By examining the technological innovations preceding the organizational innovations more than one year a non-significant positive beta is found (,024). However the question remains what should organizations do in order to achieve positive effects for their labour productivity. Therefore some additional analyses were performed to further investigate the effect of a shorter timeframe in which technological and organizational innovations are implemented. Additional hypothesis Decreasing the timeframe in which technological and organizational innovations are implemented will enhance efficiency. The results of model 8 showed that the variable joint implementation 1 year resulted in a significant beta of (,128). Model 9 examines whether a simultaneous implementation within a 0,5 year timeframe provided other results. As can be seen in table E5 the variable simultaneous implementation 0,5 year resulted in a significant beta of (,141). This implies that there is evidence found that the general timeframe in which organizational and technological innovations precede each other has an effect on labour productivity. The findings indicate that the smaller this timeframe is the higher labour productivity will be.

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Conclusions
When examining the temporal sequence of organizational and technological innovations no evidence is found that organizations that follow the organizational innovation first perspective will have a shorter production time than organizations that follow the technological innovation first perspective. Only evidence is found that when organizational innovations precede technological ones within a one year timeframe this will lead to a higher labour productivity for manufacturing firms. However the nonsignificant betas for the models representing the TI first perspective are in favour of the Technological Innovation first perspective. However these findings are not strong and therefore remain questionable. Further the additional analyses revealed that the timeframe in which organizational and technological innovations are jointly implemented is a significant indicator for higher labour productivity.

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