Chapter 1:

1.1

Introduction

Background
In the history of human development, 21st century is marked for the knowledge based

economy where knowledge is considered as the prima factor in production function.

Innovations in various fields of science have changed the people way of life across the globe.
Biotechnology is one of the potential technologies that could influence global economy and
living standard in under developed countries. Various remarkable biotechnological
innovations have already been developed and serving the mankind through agricultural
productivity improvement, health improvement, ecological sustainability. Due to their scale
intensive ability are being developed in the twenty first century and globe is now benefiting
with the waves of Biotechnological innovations in agriculture, health, environment, climate
change, renewable energy and so on. There is a need for efficient innovation management
practices to create wealth from the Biotechnological breakthroughs.
Technological innovations are crucial for any nations economic development and
destined to decrease human drudgery with efficient tools and techniques. Every sector of our
economy witnessed remarkable contributions from technological applications. The growth of
the world gross domestic product (GDP) is directly related to the number of technological
breakthroughs in the world. World GDP in 5000 BC was only 0.51 Billion but it reaches up to
41016.69 Billion in 2000 AD (De Long, 1998). Though the technological innovations
initially nurtured and developed in Agriculture sector, in later part they were rapidly spread in
to manufacturing and service sectors. Due to the decline in the development of innovations,
agriculture sector has lost its competitive advantage in global economy.

Biotechnology had already proved its prominence in world economy, as shown in

figure no. 1.1, by generating $288.7 billion in 2014 and projected to grow at an annual rate of
9% during the five years to $444.9 billion in 2019 (IBIS World Industry Report, 2014).
Biotechnology industry had also shown its impact in India by increasing its revenues from
$282 million in the year 2002-2003 to $3.87 billion in 2013-2014 fiscal years (ABLEBiospectrum, 2014). Indian Biotech industry contributions to Indian GDP were gradually
increased from 0.08% in 2002-2003 to 0.23% in 2012-2013. Though the share of Biotech
industry in Indian GDP composition is lower than 1%, it is worthwhile to recognize the space
for market expansion by increasing Biotech industry size.
Genetic engineering and r-DNA technologies applications in pharmaceutical and
agriculture sectors have opened new horizons in Indian economy. The growth rate of
biotechnology industry is quite accelerated in recent years due to the expansion of
pharmaceutical biotechnology. Agriculture sector is still struggling to exploit the potential
benefits of biotechnology. Though the government of India is extending its support through
policy reforms and funding for research in agriculture biotechnology, there are very few
substantial technological innovation developed in the country. This type of contradictory
phenomenon has questioned the innovative ability of agriculture biotechnology and
demanding in depth research on innovations management practices implementing in this
sector for strategic research planning.

Figure No. 1.1 Biotechnology Industry Growth in India

(in Crores)
30000

25165
23524
20441
20000
17249
14199
15000
12137
10272
8541
10000
6521
4745
5000 3475
1830
25000

1.2

Research Rationale
Indian biotechnology industry witnessed significant variations in growth rates across

various sectors during last decade (see figure no. 1.2). It has reported 90% growth rate during
2003-2004, but afterwards there was sharp decline in growth rate during 2004 2010. It is
observed that there was good recovery in biotechnology industry growth rate from 16.98% to
21.48% during 2010-2011. But the industry is failed to sustain that growth and reported sharp
decline in consecutive years and reached all time lowest growth rate 6.97% during 2013-14
fiscal year.

Figure No. 1.2 Growth Rate of Indian Biotechnology Industry

89.89%

37.42%
36.54%
30.97%
21.48%
20.26%
18.50%
18.15%
16.98%
15.08%
6.97%

Government is extending its support in terms of policies and funding to boost up

biotechnology growth in India with 100% foreign equity investment initiative in
manufacturing of all drugs except recombinant DNA products and cell targeted therapies,
Single window processing mechanism for all biotech projects involving FDI (Foreign
Direct Investment) of US$22 million or more under the Foreign Investment Implement
Authority (FIIA) with its Fast Track Committee (FTC) existing in Department of
Biotechnology, Depreciation allowance on plant & machinery rose from 25 to 40%, Customs
duty exemption on goods imported in certain cases for R&D, Customs & excise duty
exemption to recognized Scientific & Industrial Research Organizations (SIRO), 150%
weighted tax deduction on R&D expenditure, 3 years excise duty waiver on patented
products, 100% rebate on own R&D expenditure, 125% rebate if research is contracted in
public funded R&D institutions, Joint R&D projects are provided with special fiscal benefits
etc. and in terms of creating and practicing strong intellectual property protection
4

environment in India with the enactment of Indian Copyright Act, 1957, The Patent Act,
1970, Indian Patents and Design Act, 1972, The Trademarks Act, 1999, Biotechnology Patent
Facilitating Cell (BPFC), Foundation of Biotechnology Awareness and Education (FBAE),
National Research Development Corporation (NRDC), etc.
Even with all these support and protective actions, Indian Biotechnology industry has
reported only 6.97% growth rate in last fiscal year. In case of biotechnology industry, all the
organisations are broadly grouped into five biotechnology sectors, as mentioned in ABLEBiospectrum Survey, namely Bio-Pharma, Bio-Industrial, Bio-Informatics, Bio-Agri and BioServices. Among these sectors, Bio-Agri sector is became more vulnerable to the prevailing
business stagnation in the industry and reported ever lowest growth rate, i.e. 4.2%, in recent
fiscal year (see figure no. 1.3). One major possible reason could be the maturation process of
industry, as it clearly enchanted by Prof. Schumpeter in his book on Business Life Cycles
that any industry would follow the growth pattern with initiation, growth, maturation and
declining stages which are sequential and successive with one another. He also highlighted
the concept of Creative Destruction and how it has been attributed to the growth of an
industry. Another possible reason could be the lack of conducive environment for further
development of innovations. In either case, it is clearly advocated that further development in
the industry is entirely depend on occurrence of innovations. At initiation and growth stages
of industry, innovations could happen more frequently but in mature stage it is very difficult
to promote innovation and it requires deliberate actions to manipulate and redeployment of
all available resources.
In micro economic perspective, Innovative ability of the industry is the sum of the
innovative ability of the individual organisations working in different sectors. In this context
organisations have to cope with challenges and opportunities with skilful blending of scared

resources to be around in present and future market conditions. Concurrent developments in

scientific fields and societal structure challenge the existence of organisations in business
environment as a viable actor. In todays turbulent environment organisations need to
continuously renew the products they offered and the process they followed and delivery
mechanism they used to become competitive and to improve organisation value (John
Bessant 2003). Research on innovative firms clearly reports that there is no one best way or
approach or methods for innovation management.

Figure No. 1.3 Sector wise Biotechnology Growth Rate in India (in %)
120

100
Bio-informatics
80
83.3 81.2

Bio-industrial

Bio-agri

Bio-service

60
63.6
54.8
40
Bio-pharma
20

29.8

29.5
24.2

28

23

5.2

4.2

Among the technologies in agricultural biotechnology, Genetic Reengineering

Technology, Marker Assisted Transformation Technology, Tissue Culture Technology and
Fermentation Technology are the major technologies. Tissue Culture Technology has paved
the way for commercial micro-propagation of certain plants like Banana, Teak, etc. Present
study focuses on the Plant Tissue Culture Innovation to explore the role of innovation
management in firms competitive advantage in plant tissue culture industry.

1.3

Research question and Objectives

At the outset organisations are investing their valuable resources on various innovative

projects for the development of new products and processes through which they can sustain
in changing environment. The reason behind the initiation of innovative project could be
backed with philanthropic approach or capitalistic approach, but in either way innovation
development process is common. All the organisations are attempting to develop innovations
in one way or other but all of these innovations are not transferring to the end users. If
transferred all of these are not adapted by the end users, hence these innovations are failed to
meet their objectivity. In this context the present research study is initiated to answer
following questions.
In an industry like micro-propagation where oligopoly competition is prevails how
could only few companies successfully leveraging competitive advantage over several
similar companies that deals with the same product innovation, i.e. tissue culture
banana plantlets?
Objectives of the study:
To direct this research study in searching of answers to above questions we have
formulated following objectives such as:
7

1. To study the nature and scope of the innovation management phenomenon in dynamic
capability perspective
2. To develop a conceptual model that explain the achievement of competitive advantage
mediated by higher order dynamic capabilities like innovation management capability
3. To study the relationship between higher order dynamic capability like innovation
management capability and firms first order capabilities in commercial micro
propagation industry.

1.4

Theoretical Frame Work

Competitive Advantage is the ability of the firm in offering its products or services at

more competitive terms than its competitors to maximize its revenues and to withstand in the
industry as a competent business firm. The roots of competitive advantage concept are traced
back to the classical economic theory of comparative advantage proposed by David Ricardo
in 18th century. The Competitive Advantage theory is proposed by Michael Porter in 1985
and explained the firms and nations superior performance over other firms or nations on
international trade. He applied value chain strategy to explain the concept of competitive
advantage, in his views A firm is profitable if the value it commands exceeds the costs
involved in creating the product. Creating value for buyers that exceeds the cost of doing so
is the goal of any generic strategy. Value, instead of cost, must be used in analyzing
competitive position ... (Porter, 2004). Over the period of time research on competitive
advantage proceeds across five perspectives such as five forces analysis frame work for
industrial competition, the value chain approach, the resource based approach, core
competencies and dynamic capability. The detailed discussion on each perspective is
presented in the literature review chapter.
The Dynamic Capability perspective is gained interests of research community all
over the world and found as more comprehensive theory in explaining the phenomenon of
8

competitive advantage. Dynamic capabilities derived from the wisdom of earlier work on
distinctive competence (Selznick, 2011), core capability and rigidity (Leonard-Barton, 1992),
organisational routine (Nelson & Winter, 2009), combinative capability (Kogut & Zander,
1992), architectural knowledge (Henderson & Clark, 1990), core competence (Prahalad &
Hamel, 1990), and architectural competence (Henderson & Cockburn, 1994). However, the
dynamic capability discipline is emerged mainly to overcome the criticism of the static nature
of the organisational routines that are conceptualised in the resource based approach and
facilitate the convergence of the organisational core competencies with the repository of the
resources (Eisenhardt & Martin, 2000; Helfat et al., 2009).
Dynamic capabilities defined as the firms abilities to integrate, build, and
reconfigure internal and external competences to address rapidly changing environments
(Teece et al., 1997). Eisenhardt and Martin (2000) defined dynamic capabilities as the firms
processes that use resources specifically the processes to integrate, reconfigure, gain and
release resources to match and even create market change, and the organizational and
strategic routines by which firms achieve new resources and configurations as markets
emerge, collide, split, evolve, and die.
Dynamic capabilities are inherently linked to the market and its dynamics. Eisenhardt
and Martin (2000) consider that dynamic capabilities exhibit different features in two types
of markets: (i) in moderately dynamic markets where changes occur frequently but follow
predictable and linear paths, industry structures are relatively stable. Accordingly, firms rely
heavily on existing rules, methods, process designs and knowledge and activities typically
follow a problem-solving approach (Fredrickson 1984). (ii) In high-velocity markets, changes
are nonlinear and less predictable, industry structures are ambiguous and shifting, market

boundaries are blurred. Thus, firms dynamic capabilities focus is on rapidly creating and
situation specific new knowledge.
Eisenhardt and Martin (2000) argued that dynamic capabilities are identifiable across
firms with their demonstrable nature of commonalities in key features, idiosyncrasy in
details. Firms capabilities can be characterised as dynamic capabilities, only when they are
unique and idiosyncratic processes that learnt from path-dependent histories of individual
firms (Teece et al., 1997). In the literature dynamic capabilities are characterized as the
complex routines that are emerged from the path dependent processes (Zollo & Winter,
2002a). Some dynamic capabilities are acts as a foundation to other capabilities and need to
be learnt first.
Any organisation can evolve dynamic capabilities through its unique path that shaped
with strong learning mechanism. The processes of repetition of certain practices accelerate
the evolution of dynamic capabilities in organisations (Argote, 2000). Simple losses (Sitkin,
1992), organisational crises (Kim, 1998), and critical experiences (Hayward, 2002) can also
induce evolution of dynamic capabilities more rapidly in organisations. In this connection,
the dynamic resource based view considers the dynamic capabilities as the source of
competitive advantage for any firm in the context of socio-technological change (Teece et al.,
1997).
Wang and Ahmed (2007) identified three higher order dynamic capabilities, namely
absorptive capability, adaptive capability and innovation management capability as the core
components of dynamic capabilities.

Parida (2008) considered to include networking

capability in should be a part of higher order dynamic capability constructs. Two other higher
order capabilities: sensing and integrative capabilities were found in the literature (Morgan et
al., 2009). In their attempt to review the dynamic capabilities literature, Eisenhardt and
10

Martin (2000) identified seven major first order dynamic capabilities, namely product
development

capabilities, replication

capabilities,

resources

allocation

capabilities,

coevolving capabilities, knowledge generation capabilities, alliance and acquisition

capabilities and exit and jettison capabilities. Several researchers have also developed
constructs to explore six major higher order dynamic capabilities such as sensing, absorptive,
adaptive, innovative, networking and integrative capabilities. Papadopoulos and Karagouni
(2007) stated that innovation management capability have to be developed and deployed as
higher order dynamic capability.
Innovation management capability as a new field of study is attracting interest of
several scholars (Forsman, 2011). Innovation management capability is defined as a
comprehensive set of characteristics of a firm that facilities and supports its strategies in
innovation development and in appropriating the benefits/returns of innovation for
sustainable competitive advantage (Burgelman et. al., 2004). Therefore it involves multidimensional, complex, interactive innovation activities with resource re-deployment in order
to gain competitive advantage (Wang et al., 2008; Chiesa et al., 1996). In this context,
innovation management capability is understood as it built upon the firms capabilities like
technological learning and development capabilities, operational capabilities, transaction
capabilities and management capabilities. Organisations always strive to integrate these
capabilities to promote innovation for achieving competitive advantage in the market.
Badawy (2011) described that the importance of the successful innovation management is to
focus on the innovation process, the technology development and the utilization of
technology in both business and industry.
Innovation management capability helps the organisation to choose right technologies
and to strategically use of such technologies (Rush et al., 2007); to develop new products,

11

services, techniques and methods (Afuah, 2002; Zhou & Wu, 2010). Innovation management
capability can be achieved by changing the production function to internalise the new
knowledge to produce technological change and, consequently, new processes and products
through effective learning processes (Lall, 1992). These learning processes involve
acquisition, imitation, adaptation, modification and/or the development of a new set of
knowledge and technical systems for internal use. As a result of this process new goods and
services should be produced with high technical standards.
Yam et al. (2004 & 2005) described that technological innovation capability
constitutes seven component capabilities namely 1. Learning capability is the capacity to
identify, assimilate, and exploit existing knowledge and competence essential for a firms
competitive success. 2. R&D capability refers to a firms ability to integrate R&D strategy,
project implementation, product portfolio management and R&D expenditure. 3. Resource
allocation capability is the firms ability to mobilize and expand its technological, human and
financial resources in the innovation process. 4. Manufacturing capability refers to the ability
to transform R&D results into products, which meet market needs, in accordance with design
request and can also be manufactured in batches. 5. Marketing capability indicates the
capacity to publicize and sell the products on the basis of understanding consumers current
and future needs, customers access approaches, and competitors knowledge. 6. Organizing
capability is the capacity to constitute a well-established organizational structure, cultivate
organizational culture, coordinate the work of all activities towards shared objectives, and
influence the speed of innovational processes through the infrastructure it creates for
developmental projects. 7. Strategic planning capability is the capacity to identify internal
strengths and weaknesses and external opportunities and threats, adopt different types of
strategies that can adapt to environment changes for the excelling in the highly competitive
environment.
12

In this study we are proposing Innovation Management Capability as a higher order

integration capability which could determine and regulate multiple capabilities as discussed
by Fuchs, Mifflin, Miller & Whitney (2000). Organisations with innovation capability can
demonstrate ability to integrate key capabilities and resources of their firm to successfully
stimulate innovation. The present study explores the organisation capabilities that build firms
innovation management capability in micro propagation industry.

Conceptual Model:
An overview of the conceptual framework of this study is depicted in Figure 1.3. It
can be seen that the present study examines the impact of organisational first order
capabilities on innovation Management capability (one of the second order dynamic
capabilities) and ultimately, on firm performance. As argued above, the relationship between
organisational first order capabilities and innovation management capability vary from one
firm to another based on organisation resource base. Further details of the conceptual
framework with selective firm first order capabilities and their relevant hypothesized
relationships are discussed in the literature review chapter.

Figure No. 1.4 Conceptual Model of the Study

13

1.5

Thesis Contributions
The present study has several theoretical contributions. This study advances the

knowledge on firm first order capabilities like marketing capability, human resource
management capability, investment capability, production capability, absorptive capability
and collaboration capability in building higher order dynamic capability, i.e. innovation
management capability of the firm. The research approach of the study not only links firm
resources and capabilities to higher order innovative capability but also adds to the extant
approach of analysing the efficiency of the firm capabilities. A major theoretical contribution
14

of this study is the recognition that while firms dynamic capabilities are sets of
interdependent organisational capabilities, certain capabilities are more salient in enhancing
innovative capabilities and they are part of internal as well as external capabilities mobilised
through networks of relationships.
This study also makes a significant contribution to building theoretical knowledge of
the role of human resource management capability in enabling innovative capabilities of the
firms by developing and empirically testing a new construct for the assessment of human
resource quality and human resource strategies of the organisation.
Research on innovation management capability based on specific organisational
capabilities can help managers to make better informed decisions concerning the allocation of
scarce resources and investment in key aspects of the business. Since capability development
can have a direct impact on innovation and technological advantages elapse rapidly, the
research framework can guide managers to more effectively develop organisational
capabilities in the firm as well as through external network relationships. Moreover, this
network perspective of developing organisational capabilities provides the potential for firms
to leverage valuable resources through network relationships. This is not only effective in
terms of resource investment but also responsive to competitive and market demands. For
example, firms may form strategic alliances to combine complementary capabilities to
enhance their competitiveness and take advantage of market demands.
In particular, small firms can use the research framework to develop relevant
organisational capabilities that exploit both network relationships and aspects of technology
to enhance innovation as well as to compete with large firms. Also, small firms constrained
by small scale operations would be able to compete more effectively by applying relevant
organisational capabilities. Managers can benefit from the empirical findings regarding the
15

strategic aspect of technology management. The evidence from this study strengthens the
critical role of organisational capabilities play in strategic management and organisational
behaviour as regards innovation capability development and learning orientation.

1.6

Thesis Structure
Chapter one provides an overview of theoretical underpinnings of this research,

literature gaps, its objectives and conceptual model, contribution and methodology of the
research. Chapter Two focuses on theories and extant empirical studies about organisational
capabilities and innovation management capability in order to review and define specific gaps
and hypotheses for the research. This includes definition of all variables of interest in the
conceptual model and prior empirical findings. Chapter three details the research context,
research design and research instrument. This chapter explains measurement scales and items
of the conceptual model, and the development of the research questionnaire. Chapter four
provides historical background of the evolution of the plant tissue culture technology and its
industrialisation. It reflects the growth and present status of micro propagation industry in the
country. Chapter five focuses on the data analysis, which includes explanation statistical
techniques and generation of statistical measures for the data. This chapter applies statistical
techniques to explain unidimensionality and convergent validity of the constructs for the
results of the study. Chapter Six discusses the main research findings, results as regards
theoretical, managerial and research implications. Finally, concludes by highlighting research
contribution to theory and practice, research limitations and future research agenda.

Chapter 2:

Literature Review
16

In this chapter literature on various theoretical frameworks relevant to innovation

management capability is reviewed and presented in seven sections. The first section
introduces the innovation and highlights its significance. The second section deals with the
innovation and its relation with competitive advantage. The third section describes the
evolution of dynamic capabilities. The fourth section review the major dynamic capabilities
required for the achievement of competitive advantage. The fifth section explains the notion
of innovation management capability and discussed various capabilities involved in building
the innovation management ability of the business organisation. Finally the sixth section
summarises the literature and the conceptual framework used in this study.

2.1

Introduction to Innovation
Innovation is a key factor for economic growth and an essential element of industrial

competitiveness. Innovation literature originates from various disciplines such as social

sciences, psychology, management and economics and altogether applicable to a wide range
of industry sectors and markets. The literature on innovation includes a broad set of
definitions on innovation. Wolfe (1994) states that innovation literature is a fragmented
corpus, and scholars from diverse disciplinary backgrounds adopt a variety of ontological and
epistemological positions to investigate, analyze and report on a phenomenon that is complex
and multidimensional. A lack of agreement on a single definition of the term innovation is
commonly noted by several researchers in the literature ( Yamin & Mavondo, 2015). Damanpour
and Gopalakrishnan (1998) have also noted that different definitions of innovation tend to
overlap and depend on an organisations environment. Literature on product development,
process development, service development, and business development is considered to deal
with key areas of innovation.

17

Although there have been a high number of studies related to innovation in last few
decades, still there is no specific prescription for successful innovation (Rothwell, 1992). On
the macro level, innovation has been identified as a cause of economic wealth (OECD, 2001).
Meanwhile, it is considered as a continuum for the establishment of new or incremental
change of products and/or processes leading to higher competitiveness in a micro level or at
the firm level (Stock et al., 2002). This embraces inter and intra firm relationships across
organisational boundaries to stimulate performance, build up competitive advantage, and
enable market flexibility (Akamavi, 2005). Innovation is also instrumental in achieving the
shortening of product life cycles for firms, and taking advantage of new opportunities
(Barkema et al., 2002). The extent of innovation can range from incremental to radical. The
former appears only at a micro level and results either in minor marketing or technological
discontinuity (Porter, 1990). However, the latter has major marketing and technological
discontinuity effects at both macro and micro levels (Garcia & Calantone, 2002).
In management context, many scholars have defined the term innovation from
various perspectives. Rogers (2004) defines innovation as any idea or practice or object that
is perceived to be new by an individual or other units of adoption consisting of certain
technical knowledge about how things can be done better than the existing state of the art. In
other words, innovation is related to the adoption of new products and/or processes to
increase competitiveness and overall profitability (Tyler, 2001). Menrad (2004) similarly
viewed innovation as a complex phenomenon related to production, diffusion and translation
of scientific or technical knowledge to new or modified products/services including new
production or processing techniques. Francis and Bessant (2005) add that innovation is not
only about the changes or so-called new things based on individual perception, but it is also
linked to achieving a better market position, a new way to introduce a product in a new
context, or a business model or a new method to find new challenges and opportunities which
18

are related to market exploitation. In line with the study of Porter (1990), innovation is
considered as a new approach to doing things commercially.
Lundvall (2010) further interprets innovation as an on-going process leading to four
different outcomes including new products, new techniques, new forms of organisation and
new markets. It is derived from the interrelationship between product, process and
organisational innovativeness and market identification. Product innovativeness is defined as
activities leading to any product, service or idea that is recognised by someone as new based
upon individual perception (Danneels & Kleinschmidtb 2001). Meanwhile, process
innovativeness could be the adaptation of an existing production system, which can be either
steadily or radically achieved. The implementation of a new production technology, for
example, is a result of process innovativeness (Utterback 1971). Organisational
innovativeness involves changes in workplace organisation such as marketing, purchasing,
sales administration, management and staff policy (Clarysse & Bruneel, 2007). The
penetration of new market segments and the exploitation of new territorial markets within an
existing market sector is an output of market identification.
In short, innovation is basically identified as the main factor that boosts the
competitiveness and economic growth of all industries. The definitions of innovations are
scattered and varied, depending on different ontological and epistemological positions. In the
view of management studies, innovation is considered as something new to an individual,
mostly defined in the form of products or processes leading to an increase of firms
competiveness. In a broader context, innovation is regarded as an on-going process leading to
the development of new processes, products, organisation and new markets.

19

2.2

Innovation Management as a source of Competitive Advantage

As mentioned earlier, innovation was being perceived as an axil for effective

performance in various firms and industries, and particularly builds strong foundations for the
firms competitive advantage (Zahra et al., 2000). Kanter (1999) states that Winning in
business today demands innovation. Companies that innovate reap all the benefits of a first
mover. At the firm-level, innovation embraces successful implementation of creative ideas
and commercial exploitation of such ideas (Erdil et al., 2004). R&D expenditures and patents
counts are two of the most common measures of firm innovativeness (Greve, 2003). Shefer
and Frenkel (2005), for instance, state that it is mandatory for firms to consistently invest in
R&D, either in-house or through outsourcing, in order to be innovative.
These measurements are, nonetheless, considered as an imperfect measure of
innovation performance in some innovation studies, since some companies may not conduct
formal R&D activities and record new innovations via the patenting process (Bougrain &
Haudeville, 2002). Rather than conducting formal experimental R&D, SMEs are often prone
to rely upon the use of known scientific principles that they adapt to produce new innovations
on an informal basis (Avermaete et al., 2003). On the other hand, a broad range of innovation
indicators, such as number of new innovations and revenue attributed to new innovations, has
become more and more important in capturing the level of innovation performance of a firm
in recent innovation studies, whereby an innovative firm is assumed to develop more new
innovations (i.e. new products and/or new processes) than a non-innovative firm (Wan et al.
2005). It is worth noting that firms tend to develop new innovations based upon the influence
of factors such as changes in demand and competition in the market, improvement of
production quality and delivery time, organisational change, and regulatory requirements
(OECD 2005).

20

The common inputs which stimulate innovations in firms are research and
development (R&D), normally represented by an expenditure towards R&D activities and/or
degree of R&D orientation, funding, equipment (i.e. use of equipment related to innovation
projects), and human resources (i.e. level of commitment from employees) (Greve, 2003).
Brewin et al. (2009) have mentioned that it is in-house R&D particularly that has a direct
positive impact on innovation performance of firms, based on the empirical evidence from
more than 100 Canadian food processing firms. Meanwhile, Sawyerr et al. (2003) and
Temtime (2004) have added that firms, especially SMEs, must make effective use of market
scanning or external sources of knowledge as an innovation input to become successful in the
development of new innovations.
It should be highlighted that R&D is no longer the sole means for explaining
innovation processes (Raymond & St-Pierre 2010), since it often only reflects the innovation
capacity of large enterprises which are mostly R&D intensive sectors (Narula, 2004). Cebon,
Newton and Nobel (1999) and Dodgson and Hinze (2000) found that high levels of R&D
intensity may not necessarily indicate good innovation practice; this may simply complicate
the innovation process. Equally significantly, other innovation inputs such as the
development of marketing methods and organisational strategies, market identification, and
acquisition of external knowledge have been found to play an equally important role in firm
innovativeness, especially for SMEs since most of them are low to medium technology firms,
where innovation is often driven by non R&D based activities (Santamaria et al., 2009).
On the other hand, the innovation outputs or business performance that result from
innovations are commonly measured by a firms turnover, impacts of innovation towards
competition and demand in market (i.e. increase of market share), production (i.e. improved
quality of goods and services, increase of production volume), and organisation (i.e.

21

improved communication and interaction among different business activities) (OECD, 2005).
Firms that deal with uncertain business environment, through the development of innovation,
outperform those firms that neglect to the innovation development (Garg et al., 2003).
Thornhill (2006) statistically confirms this notion when he finds a positive linkage between
innovation and firm performance, measured by revenue growth using the case of 845
Canadian manufacturing firms. Likewise, Gunday et al. (2011) identified the same
association between different types of innovations by using a different measure of firm
performance consist of marketing, production and financing performances in a study on 184
production organisations in Turkey. These factors, whether innovation inputs or innovation
outputs, are linked and are involved in the management of innovation knowledge.
In the literature, several reasons are being claimed to failure of the organisations due
to inefficient innovation management practices in terms of managerial incompetence,
organisational inertia, and insufficient technological intelligence (Iansiti, 2000). Utterback
and Suarez (1993) have mentioned that understanding technological trends at the sector level
is considered important to firms since the successful firm adapts its innovation strategy to the
phase of the sectoral product cycle and the temporal dynamics of technological production in
specific industries. Other authors emphasize the essential ability of companies to tackle the
change induced from innovations (Thomke & Kuemmerle, 2000) or highlighted the human
resource importance and organisational routines to facilitate such change initiatives for
organisational benefit (Nelson & Winter, 2009). Brown and Eisenhardt (1998) similarly
underlined that, since innovation is not a straightforward process or mechanically-driven,
firms have to adapt and evolve with shifting competition and varying climate. Drucker (1994)
argues that innovation management knowledge is the only way to convert change into
opportunities. Firms which possess a higher level of innovation management capability tend
to have a higher chance of becoming successful in their businesses compared to their less
22

innovative peers, as they are more capable of dealing with the complexity of innovation
process (Tidd et al., 1997).
These various views show that our understanding of innovation management has a
strong linkage with firms competitive advantage and highlight the innovation management
capability which builds on the other dynamic capabilities like R&D capability, organisational
strategic capability, human resource management capability, investment capability, resource
allocation capability, production capability, etc. The more elaborate discussion on firm
dynamic capabilities is presented in the next section.

2.3.

Dynamic Capability
In literature, several researchers expressed concerns about the competition in business

environment and its effect on firms competitive advantage. Hallegren et al. (2011) suggested
that to secure competitive advantage, which is being nullified due to intense competition,
firms must deploy all kinds of capabilities to develop and dynamic capability at all levels and
tackle such turbulent situations. Firms demonstrate first-order dynamic capabilities through
the changes in organizational processes to deal with demand volatility, but the second-order
dynamic capabilities are demonstrated to quickly reconfigure the resource base, to change the
nature of activities or to abort the implementation of current strategies (Harrigan, 1985).
Similar views are also given by Kazozcu (2011) that in turbulent environments, firms need to
develop a unique set of resources to build competitive advantage. This unique set of resources
is built into skills and capabilities which are referred to as core competences. However in the
changing nature of the environment, these core competences cannot remain static and
necessitates continuous renovation. The ability to upgrade and reinvent these core
competencies dynamically brings strategic flexibility in organisations.

23

The concept of capabilities is not new as it was first proposed by Penrose (1959),
who suggested that resources are comprised of a bundle of potential services. While these
resources are available to all firms, the capability to assemble, integrate, and deploy them
effectively is heterogeneously distributed in industry (Schendel, 1994). Poulis and Jackson
(2007) argue that the nature and creation of dynamic capabilities not only depend on the
idiosyncratic characteristics of the frim, but also on external complexity in business
environment. Companies could use these dynamic capabilities as weapons in the war against
uncertainty and complexity of external environment. Zelbst et al. (2010) contended that
adoption of market orientation combined with JIT, TQM, and agile manufacturing programs
leads to organizational capabilities of relatively low cost operation, relatively high quality
product and service production, and relatively rapid response to changes in customer needs
and demand. Thus, dynamic capabilities reflect organisational ability in achieving
competitive advantage in given path dependencies and market positions (Leonard-Barton,
1992).
Dynamic capabilities are a set of unique and recognizable processes in organisations
such as product development, strategic decision making, networking, etc. and are neither
vague nor tautological. Fan et al. (2009) summarized the aspects of dynamic capabilities as
the competencies that allow a firm to quickly reconfigure its organizational structure and
routines in response to new opportunities. They discussed the dynamic capabilities that are
related with cost reduction, outsourcing, knowledge networking and knowledge
management. Tony Davila et al. (2012) classified dynamic capability in to Financial
Management Capability, Product Development Capability, Human Resource Management
Capability, Strategic Planning Capability, Sales and Marketing Capability, Partnership
Management Capability. Ho et al. (2011) examined the influence of technological
capabilities and design capabilities on technology commercialization and observed that both
24

technological and design capabilities are shown positive influence on technology

commercialization.
2.3.1

The evolution of the dynamic capabilities concept

The dynamic capability concept is founded theoretically in Resource Based View and

Evolutionary Theory with its emphasis on routines and processes (Helfat and Peteraf 2009).
These two foundations are discussed in the next sections before elaborating on capabilities
and dynamic capability as an emerging theory.
i.

The Resource Based View

Penrose (1959) in a significant departure from the neoclassical economics of the time

proposed that the configuration of the resources possessed by a firm was the key source of
competitive advantage in relation to firm growth: if we want to explain why different firms
see the same environment differently, why some grow and some do not.then we must take
the resources approach (Penrose, 1959). Economic theory at that time held that firms were
largely homogenous entities operating in markets in search of equilibrium. Economic theory
did not generally consider the differences which existed between firms nor did it attempt to
include the actions of individual managers or entrepreneurs in its theories. Helfat and Peteraf
(2009) argue that it is an understatement to say that economic theory underplays the role of
the manager; in fact, the strategic manager simply does not exist in any recognizable form.
Penrose proposed that it was the manner in which firms utilised their resources and
the services which that use could deliver which was paramount, rather than the simple
existence or otherwise of the resources themselves. She defined resources to include both the
physical resources available to a firm and the human resources employed and available to the
firm. Penrose also found that there was an interrelation between the physical and human
25

resources which influenced the productive services which might be possible. Clearly, the
physical resources present shape the services which management might be capable of
delivering. However, Penrose (1959) also held that the experience of management will
affect the productive services that all its other resources are capable of rendering.
This recognition of the critical role of management pervades Penroses work and is
central to the theory developed. Penrose also found that the image which the firms managers
held of their own firm and the environment in which the firm operated was a critical issue in
relation to the decisions which those managers would take. Wernerfelt (1984) seemed to
synthesize Penrose (1959) and Porters (1990) contributions when he argues for examining
firms from a resource perspective rather than a product perspective. Building on this concept
Barney (2001) proposed four indicators in relation to resources (value, rareness, imitability
and substitutability) which are all required if a resource is to deliver a sustained competitive
advantage to a firm.
In his thesis, Barney (2001) defined valuable resources as enabling a firm to
conceive or implement strategies that improve its efficiencies and effectiveness. Resources
are considered to be rare in the sense that they are not widely available. Barney struggles to
define the level of rarity which is necessary for sustainable competitive advantage. It is
possible that rarity becomes less significant if one accepts Penroses proposition that it is the
way in which the resources are used which is paramount as each firm has the propensity to
use a similar resource differently. Barneys final two requirements in relation to resources of
imperfectly imitability and substitutability are related. If the resource which is valuable and
rare can be imitated by competing firms then sustained competitive advantage is not possible.
Similarly, if the resources or the results of the application of the resources can be achieved

26

through the application of different but strategically equivalent resources, then the
competitive advantage cannot be sustained.
Peteraf (1993) proposes a four factor resource based view model for sustained
competitive advantage which develops Barneys (2001) four criteria. Peteraf concurs that
resources must be heterogeneous if they are to be of value in sustaining competitive
advantage. The second factor relates to ex-post limits to competition (Peteraf, 1993). This
factor includes two of Barneys requirements relating to imitability and substitutability.
Clearly, if a competing firm can substitute an alternative resource for the same result, any
competitive advantage will be short lived. However, imitability is more difficult as the basis
of the advantage may not be clear or well understood (even by the firm possessing it). The
third factor relates to the mobility of the resource. Where the resource is imperfectly mobile,
then there is a greater opportunity for sustaining the competitive advantage. A particular case
of immobility relates to resources which have a greater value when used together. The fourth
and final factor is that of ex-ante limits to competition (Peteraf, 1993). This proposes that
there must have been limited competition for the position now occupied by the firm. If
competition had not been limited, then no sustained competitive advantage could have ensued
as any potential gain would have been competed away. Like Barney, Peteraf finds that all four
factors are required for sustained competitive advantage and that the four factors may in fact
be related.
Barney (1991) posits that the context of the firm both in terms of its market
positioning and its historical context are critical factors. Resources which are valuable in one
context may have no value in another. The same resource in two different firms could have
significantly different potential as a result of the historical decisions previously taken in each
firm and the understanding which might then exist in relation to the resources possible uses

27

and related outcomes. Like Penrose, Barney appreciates that for it is managers that are able
to understand and describe the economic performance and potential of a firms endowments.
Without such managerial analysis, sustained competitive advantage is not likely (Barney,
1991).
ii.

Organisational Routines
In general discussion we all understand the exercise of these skills as routines which

have been learned and which may have been improved with practice. More complex
decisions can also be the subject of routine behaviour. Many organisations will have an
emergency procedure which is to be followed in the event of a fire. Such a procedure will
require the evacuation of a building and some basis for ensuring that all employees are
accounted for. Simultaneously, such a procedure might also involve notifying the emergency
services and might also involve a trained team of employees tackling the fire in the first
instance. Such procedures are often practiced so that if the event actually occurs, the
responses and decisions made by individuals will be coherent and safe. This is the essence of
a routine.
The literature describes routines in two different ways: as behavioural or cognitive
regularities. Behavioural regularities propose routines as recurrent interaction patterns
(Becker, 2004). These patterns occur in the interaction between a number of actors rather than
the actions of one person. To clarify this point, (Dosi et al., 2000) propose reserving the term
skill to the individual level and routines to the organisational level. Viewing routines as
cognitive regularities would define routines as rules which suggest how to react to or deal
with specific situations. Examples could include standard operating procedures, rules of
thumb and programs.

28

Following Winter (2003) routines are defined as behaviour that is learned, highly
patterned, repetitious, or quasi- repetitious, founded in part in tacit knowledge and the
specificity of objectives. Nelson and Winter (2009) stated that well defined routines
structure a large part of organisational functioning at any particular time. Routines develop
over time and are based on the history of the organisation (Teece et al., 1997) and also the
experience of the individuals involved (Helfat & Peteraf, 2003). A central premise of the
resource based view is that the resources available to firms are heterogeneous in nature
(Barney, 1991). The routines of a firm are a resource and play a critical role in the services
which the configuration of resources in any firm can produce. The incremental and context
specific adjustment of a firms routines is a key source of resource heterogeneity (Helfat &
Peteraf, 2003).
Routines allow an organisation to store knowledge. Nelson and Winter (2009) propose
that the routinisation of activity in an organisation constitutes the most important form of
storage of the organisations specific operational knowledge. Basically, we claim that
organisations remember by doing Hilliard and Jacobson (2011) describe the essence of
evolutionary theory as the firm is a repository of knowledge, that this knowledge resides in
the organisational capabilities of the firm and that these organizational capabilities then
determine the firms performance. Nelson and Winter (2009) discuss how individuals in
organisations respond to the messages they receive, based on their knowledge of the
organisation and its requirements rather than being based on the content of the specific
message received.
Routines also provide stability and control to organisations. Routines define expected
and effectively accepted actions and behaviours in an organisation. Barnards (1938)
description of a zone of indifference which resides in each individual within which orders

29

are acceptable without conscious questions of their authority echoes the truce described by
Nelson and Winter. Kogut and Zander (1992) concur stating that it is the stability in the
relationships between capabilities and social knowledge of how the firm operates that
generates the characteristics of inertia in a firms capabilities. Routines, therefore, allow the
organisation to function in a controlled and stable manner, all other things being equal.
All other things do not remain equal indefinitely. The environment in which any firm
exists changes over time and may change frequently. As routines are context specific and
objective specific, a changing environment may mean that once appropriate routines become
obsolete. Negative feedback mechanisms within the routine can be ignored leading to inertia
(Becker, 2004). Routines are capable of being changed in response to experience and
feedback. This change can be incremental or more fundamental depending on the significance
of the changes experienced.
iii. Capabilities
All organisations have capabilities. Citing the example of the airline industry (Dosi et
al., 2000) describe the ability of an airline to process passengers in a generally uneventful
manner from check-in, to boarding, through the flight and safely to the destination. A more in
depth view of the delivery of this service reveals a series of organisational routines which
have worked in a harmony of sorts to deliver a maintained aircraft to a specific gate on time,
with an appropriately trained crew to operate it, with fuel for the journey and food for the
passengers etc. In this sense it is easy to understand routines as being building blocks of
capabilities (Dosi et al., 2008). Dosi et al. (2000) attempted to distinguish between routines
and capabilities by attributing no presumption regarding evident purpose to routines. This
is completely at variance to the definition subsequently used by Winter (2003) and discussed
above which firmly places routines in context with a specificity of objectives (Winter
30

2003). The attempted distinction in Dosi et al. (2000) is unnecessary if one considers routines
as elements of the construction of capabilities.
Helfat and Peteraf (2003) define organisational capabilities as the ability of an
organisation to perform a set of coordinated tasks, utilizing organizational resources, for the
purpose of achieving a particular end result. This focus on a defined result is generally
accepted in the literature (Dosi et al., 2008). Helfat and Peteraf (2003) also place their
definition clearly in the context of organisational resources as defined above. Dosi et al
(2008) describe capabilities as not being things but ways of doing and use the analogy of
fuzzy algorithms to express a lack of certainty about how they may operate. There is a
sense of collective knowledge at play. In a much earlier work, Richardson (1972) referred to
capabilities as appropriate skills, knowledge and competence at the level of the
organisation.
Winter (2003) proposes that there are different levels of capability. He defines zero
level capabilities as the capabilities which allow a firm to function, delivering a consistent
rate and quality of production in a market place where the volume and nature of demand is
static. Where an organisation changes the product or service being offered, or changes the
process by which it is created or changes or adds to the locations where the product or service
is offered, then a higher form of organisational capability has been invoked. This distinction
is useful as it highlights that all capabilities are not equal, and some capabilities may be
completely inadequate in the face of an environment which is changing.
A distinction can be drawn between technological and organisational capabilities
(Dosi et al., 2008). Technological capabilities refer to capabilities which deal with the
physical elements of an organisations resources. They suggest routines for how to handle
such issues and might relate generally, for example, to capabilities in relation to the operation
31

of printing machinery, the control of utilities supply to a factory etc. Organisational

capabilities relate more to the coordination and social interactions within the organisation and
relate more to human relations than the physical resources. There is an overlap between these
capabilities as the particular manner in which a physical process may operate might be
affected by the human relations context. Equally, the extent of the physical resources
available and their condition might influence the interaction taking place. The real value in
the distinction is that it is conceivable that very similar technological capabilities could be
present in different firms and in quite different contexts, whereas the organisational
capabilities are more likely to be heterogeneous among firms as the context and history of
each firm will be different.
Bender (2008) introduces an additional typology in describing transformational
capabilities as the enduring ability of an organisation to transform available general
knowledge into plant, firm or task specific knowledge and competence" and configurational
capabilities as "enduring ability to synthesise novelty by creating new configurations of
knowledge, artefacts and actors". Transformational capabilities have a close relationship to
the concept of absorptive capacity (Cohen & Levinthal, 1990) which deals with an
organisations ability to assimilate knowledge into to its routines, processes and capabilities.
This typology is supported by Levinthal and March (1993) who describe the need to have
capabilities which both explore (pursue new knowledge) and exploit (using and developing
things which are already known). While it is difficult to be prescriptive in relation to a
balance between the transformational and configurational efforts, a successful firm will
require a balance of both (Bender, 2008).
Helfat and Peteraf (2003) also found that capabilities are subject to lifecycles in a
broadly similar way to product or market lifecycles in the marketing literature. This

32

capability lifecycle concept is a useful tool to bring the concepts of resources, path
dependency, routines and capabilities together. The founding stage of the lifecycle requires an
organised team with a specific objective which entails the creation of a new capability. The
experiences and abilities which the members bring to the team coupled with any other
existing resources bring a history and path dependence to the team at its birth. The
development stage is where the team is learning and developing its capability in the light of
experience. As the capability development stabilises it enters the maturity stage of the
lifecycle where the capability can become more embedded in the organisation through use.
Like routines, the exercise of the capability has an impact on how well it is maintained. Once
a capability is in maturity, it may be threatened with obsolescence or indeed opportunities for
growth or change in some way (Helfat & Peteraf, 2003). The model proposes that such
impacts can lead to one of six possible outcomes: retirement (where the capability is
withdrawn by the firm), retrenchment (a decline in the level of the capability), renewal
(where the firm searches for and develops new alternatives), replication (where the capability
is reproduced in another geographic market), redeployment (where the capability is used in a
different but related product market) and finally, recombination (where the capability is
combined with another capability or set of capabilities) (Helfat & Peteraf, 2003).
iv.

Dynamic capabilities
Teece, Pisano and Shuen (1997) developed an additional perspective on the resource

based view by considering how firms sustain competitive advantage in the face of
environmental change, and particularly in environments of considerable change. Teece et al.
(1997) stated that a firm must be dynamic, described as the capacity to renew competences
so as to achieve congruence with the changing business environment and that it must have
capabilities, described as the role of strategic management in appropriately adapting,

33

integrating and reconfiguring internal and external organisational skills, resources, and
functional competences to match the requirements of a changing environment if it is to
sustain competitive advantage. Eisenhardt and Martin (2000) found that dynamic
capabilities thus are the organisational and strategic routines by which firms achieve new
resource configuration as markets emerge, collide, split, evolve and die. These authors argue
that as such routines are idiosyncratic to firms but could result in similar outcomes, they
cannot therefore be the source of sustained competitive advantage. Eisenhardt and Martin
found that the processes and routines which would underpin the capability were more in the
nature of best practice than a source of sustained competitive advantage.
Newey and Zahra (2009) held that there was a difference between operating
capabilities and dynamic capabilities but that a relationship between them exists. Clearly,
dynamic capabilities are likely to change the operating capabilities in organisations as they
develop. However, Newey and Zahra (2009) held that operating capabilities also affect
dynamic capabilities by influencing the knowledge that is available for the latter to undertake
future reconfigurations of the former. Zahra, Sapienza and Davissson (2006) concur with
both the distinction between operational (termed substantive) capabilities and dynamic
capabilities and the view that a co-relationship exists between them. Zahra et al. held that this
relationship is moderated by organisational knowledge.
Ambrosini, Bowman and Collier (2009) propose three levels of dynamic capabilities
which are related to firm managers perceptions of the level of environmental change or
dynamism. Incremental dynamic capabilities relate to the incremental changes associated
with continuous improvement processes in firms where the environment is effectively stable.
Renewing dynamic capabilities relate to a more radical level of change in a substantially
more dynamic environment. Regenerative dynamic capabilities are considered necessary in

34

environments which are perceived as turbulent by the firms managers and are the dynamic
capability by which the existing dynamic capabilities are changed. If the existing dynamic
capabilities are not appropriate to the new environment, then Ambrosini et al. argue that the
firm in question may fail. The distinctions in the forms of dynamic capability proposed are
useful in that they suggest that not all dynamic capabilities are equal. Echoing the Winters
(2003) consideration of zero and first order capabilities, Ambrosini et al.s (2009)
contribution allows a consideration of dynamic capabilities which are appropriate in more or
less dynamic environments.
2.4

Classification of Dynamic capabilities

Wang and Ahmed (2007) identified three higher order dynamic capabilities, namely

absorptive capability, adaptive capability and innovation management capability as the core
components of dynamic capability of the firm. Parida et al. (2009) suggested that networking
capability should be a part of higher order dynamic capability constructs. Two other higher
order capabilities: sensing and integrative capabilities were found in the literature (Jusoh &
Parnell, 2008; Morgan et al., 2009). In their attempt to review the dynamic capabilities
literature, Eisenhardt (2000) identified seven major component dynamic capabilities, namely
product development capabilities, replication capabilities, resources allocation capabilities,
coevolving capabilities, knowledge generation capabilities, alliance and acquisition
capabilities and exit and jettison capabilities. Many researchers developed constructs to
explore six major dynamic capabilities such as sensing, absorptive, adaptive, innovative,
networking and integrative capabilities.
Isabel Prieto et al. (2009) measured dynamic capabilities as a multi-dimensional
construct that built on the processes and knowledge associated in the product development.
He et al. (2006) proposed six first order dynamic capabilities viz. customer value creation,
35

technology system, structure system, institutional system, isolation mechanism and drive for
change. A number of authors have discussed operations capabilities, technological
capabilities and marketing capabilities as key factors for achieving superior innovative
performance (Dutta et al., 1999; Kotabe et al., 2002; Krasnikov & Jayachandran, 2008; Wu,
2013; Zhou and Wu, 2010). The firm capabilities that founded the dynamic capability vary
from one industry to another and one firm to anointer based on the firms resource base. The
higher order dynamic capabilities of the firm majorly build upon firms capabilities like R&D
capability, production capability, marketing capability, etc. The following part of the section
discusses innovation management capability of the tissue culture production firms in
competitive market conditions.
Marketing Capability:
Marketing capability indicates the firms capacity to popularise and market the
products with clear understanding on present and future needs of the consumers, approaches
to consumer interactions, knowledge on competitors strategies and approaches. Marketing
capabilities are defined as the integrative processes designed to apply collective knowledge,
skills and resources of the firm to market-related needs of the business, enabling the business
to add value to its goods and services, adapt to market conditions, take advantage of market
opportunities and meet competitive threats (Vorhies, 1998). Based on the resource based
view and capacity based view of the firm (Peteraf, 1993; Teece et al., 1997), marketing
researchers stated that marketing of resources and capabilities can contribute to the creation
of a competitive advantage because they may be rare, difficult to achieve, difficult to
duplicate and their value can be appropriated by the organization. the ability to gather,
disseminate and use market information is a key to the organizational performance and
growth (Jaworski & Kohli, 1993).

36

Human Resource Retention Capability:

Human resources are the flesh and backbone of any organization. Hence, maintaining
and retaining employees is crucial for effective performance of any organisation. In order to
retain talent pool, various strategies are being implemented in both global and domestic
organisation regardless of size of the firms. Retaining the desirable employees is beneficial
to an organization in gaining competitive advantage that cannot be substituted by other
competitors in terms of producing high morale and satisfied co-workers who will provide
better customer service and enhanced productivity, which subsequently resulting in sales
generating,

customer

satisfaction,

smooth

management

succession

and

improved

organizational learning (Heathfield, 2005). But retaining competent employees more

important than recruiting new employees, several employers are underestimated the costs
associated with turnover of efficient and key employees (Ahlrichs, 2000). Turnover costs
can be incurred with issues such as reference checks, security clearance, temporary worker
costs, relocation costs, formal training costs and induction expenses (Roodt & Kotze, 2005).
Other invincible costs and hidden costs such as missed deadlines, loss of organizational
knowledge, lower morale, and clients negative perception of company image may also take
place.
This is why retaining top talent has become a primary concern for many organizations
today. Managers have to exert a lot of effort in ensuring the employees turnover are always
low, as they are gaining increasing awareness of which employees are critical to organization
since their values to the organization are not easily replicated (Stovel et al., 2002). Several
studies are conducted to know how to seal the turnover of key employees who possessed
specific skill and can perform effectively, since the event of skilled employee turnover could
lead to low organisational productivity in any industry (Rappaport et al., 2003).

37

With the realisation of the essence of the employee retention, managers need to
consider their employees views on job and satisfaction, working conditions, interpersonal
relations with superiors and peers to ensure maintenance and to retain talent pool in
organisations. Further to this organisations are also need to maintain good customer relation
due the cohesiveness between employee satisfaction and consumer satisfaction in
organisational context (Jolliffe & Farnsworth, 2003).
Right Sizing capability:
The thrust to enhance the productivity has been high in all these efforts. As a
consequence, companies had to find ways to rationalize their manpower to improve
productivity and cut their costs quickly. Managers frequently found no options but to reduce
the unsuitable and surplus manpower though it had been an emotionally painful process for
managers and employees both. Moreover Burack, E and Singh, R (1995) reveals that
government is yet to announce an official Exit Policy. Government supported exit policy of
manpower reduction by golden handshakes which were quite successful in government as
well as private sectors. Rightsizing implies the organisation ability in determining and
maintaining right size of the employment in organisation in order to achieve efficiency and
competitive advantage. Implicitly in concept of rightsizing it is assumed that the company
being downsized is essentially over-staffed and that performance levels can be maintained or
even improved by reducing the number of the employees. The terms rightsizing is often
synonymously used as a euphemism for downsizing. Rightsizing is also commonly called as
reorganizing, re-engineering, restructuring, or downsizing.
In literature, researchers had described rightsizing from three different perspectives:
First, as a way of responding quickly to bad economic conditions which led to more
workload, market stagnation and job security issues (Bennett, 1991; Baumohl, 1993);
38

Second, as a part of their revamping and restructuring business operations strategy even
active and effective organizations proactively rightsized the workforce to achieve competitive
advantage (Feldman & Leana, 2002); Third, as response to external influences (Schuler &
Jackson,1987) like laws of land, government regulations, economic slowdown, competition,
etc. and as a means to survive their business operation in changing business environment.
Investment Capability:
Several scholars emphasized the relationship between investment and success of the
organisations in achieving competitive edge in changing market conditions (Higgins, 1995).
Traditionally, only the investment in R&D activities was being perceived as the key factor for
innovation development. However, good number of research studies found that merely
providing heavy investment on R&D activities cannot sustain innovation performance and
firms competitiveness (Yam et al., 2004; Guan & Ma, 2003; Souitaris, 2002; Romijin &
Albaladelo, 2002). In this context Investment capability is described as the skills and
information needed to identify feasible investment projects; prepare, locate and purchase
technologies; staff, design and manage construction; commissioning and start-up.
Lall (1992), viewed investment capability as skills needed to identify, obtain
technology for design, construction and commission of new products/ facilities, determining
capital requirement of the project, the appropriateness of the scale, technology and selected
equipment. The spending that a firms incurred on different innovation activities shows its
commitment toward the generation of knowledge that needed for the innovation
development. In literature the several research studies found positive relation between firms
investment in technological innovation and firm performance. It is highlighted in these
studies that investment enables firm to achieve greater capability to meet the demands of its
changing domestic and international market (Zahra & George, 2002), thus give firm a good
39

performance. It also enables firm to exploit the intangible technological assets, which can be
beneficial to the learning process (Xie, 2004).
Production Capability:
In literature production capability is defined as the firms ability to integrate, build
and reconfigure internal and external production competences to address rapidly changing
environments. Organisations are persistently strived to master their firm-specific production
prowess which prevent competitors to spread in to their markets. Often, the efficiency of
production capability is measured through firms ability to transform such production
capabilities into a source of competitive advantage (Reichstein & Salter, 2006).
In this context, production capability is referred to as the skills and knowledge
required for the operation of the production facilities. Production capability was considered
under process, product and industrial engineering functions like debugging and calibration of
new equipment, replacing original equipment parts, quality control, reproduction of fixed
specifications and designs, accreditation and certification of product quality, design and
introduction of new products in-house, operation of inventory control system, scheduling
production, and monitoring of productivity. High levels of production capability can
promote firms to pursue large-scale production through rigorous production process and
production cost and high quality of products (Krasnikov & Jayachandran, 2008) and
outperform their competitors. Several studies measured the production capability of firm
through the ratio of production cost to total sales (Nair & Filer, 2003).
Absorptive capacity:
Absorptive capability is the ability to recognize the value of new information,
assimilate it, and apply it to commercial ends (Cohen & Levinthal, 1990). A particular
40

characteristic of absorptive capacity is the path dependence nature; it induces through

generation of new knowledge. Firms accrued knowledge permits the assimilation and
exploitation of new knowledge (Cohen & Levinthal, 1990). Firms that possess valuable
knowledge of certain technologies absorb inputs in order to generate outputs in terms of new
ideas and products (Tsai, 2001). Lack of this capability is a major barrier to transfer
knowledge across subsidiaries and units of a company or among collaborative firms
(Szulanski, 1996).
Absorptive capability is a crucial component of firms dynamic capability, it helps the
firm to integrate, build and transform internal and external competencies to business
processes to adapt or to create structural changes in markets (Eisenhardt & Martin, 2000).
Absorptive capability supports the functioning of operational and other component dynamic
capabilities and it reflects the level of dynamic capability of the firm. It is cited in the
literature that the organisation exhibits the Absorptive capability the higher it demonstrates
the dynamic capability (Woiceshyn & Daellenbach, 2005; Wang & Ahmed, 2007).
Leadership Capability:
Leadership capability is emerging as a preferred model on the basis of the role of the
leader plays in promoting both personal and organizational change, in particular the role they
have in supporting staff to meet and exceed expectations about performance (Callan et al.,
2007). In literature, several research studies concluded that leadership can significantly
influences the performance of the organisations (Vance & Larson, 2002). In literature, several
studies suggested that leadership capability can be measured through the skills, emotional
intelligence, strategic planning ability, co-ordination, influencing, directing, controlling, etc.
abilities of leaders in the organisation (Suri Babu et al., 2008). Leadership capability is
important because the success of an organization as a whole depends not on the performance
41

of some remarkable individuals, but on the collective contribution of all members (Jacobs,
1987).
It is evident that the leadership capability exists at both individual and collective level
in organisation. However, traditionally it has presumed a top-down influence for leadership
where the leader is the primary originator and conductor of leadership (Pearce and Conger,
2003; Conger and Riggio, 2012). Leadership is also viewed as a property of the whole
organization (OConnor and Quinn, 2004) where collective leadership qualities are
embedded in the organizations systems and structure (Pasternacket al., 2001). Pasternacket
al. (2001) shared a view that leadership must not be a solo act performed by a charismatic
chief executive officer and argued that leadership can be seen as an institutional capacity
and a strategic asset.
The leadership capability at organizational level implies that organizational structure
is often intertwined with leadership processes in organizational systems. Organizational
structure represents dynamic patterns relationship between organizational members.
Organizational leadership capability can be viewed as an emergent state or embedded
capacity of the organization which evolves throughout the life of an organization.
Leadership capabilities are seen as critical to delivering organizational results by ORegan
and Ghobadian (2004) and they say that as leaders, Chief Executives face an increasingly
dynamic, complex and unpredictable environment, technological change, globalization, and
changing competitive approaches that impact the overall performance. For organizations to
remain competitive, they must maximize the leadership capabilities within the organization.
But the core part of leadership is associated with leaders skills, knowledge, experience,
education, attitude, concern to supports followers, concern for organisation development and
commitment to pursue organisational objectives as priority beside self-goals (Higgs, 2003).

42

Collaboration Capability:
In literature, few research studies found positive relationship between firms strategic
alliances and firm performance (Shan et al., 1994). In contrast this, Deeds and Hill (1996)
found negative relationship between alliances and firm performance in case of new and high
technology ventures due to diminishing of marginal returns with increase in number of
alliances. It also observed that one of the reasons for an inverted U-shaped relationship in
collaborating firms is that formation of the most productive alliances at first and subsequent
weaker alliance formation in later period and led to the networking overload (Zahra et al.,
2000). Transaction costs among the collaborating firms rises as firms enter more alliances and
beyond certain point possible gains from the addition of new alliance outweighed by the
associated transaction costs (Jones and Hill, 1988).
In literature this capability studied by assessing inflection points of firm at which any
further collaboration with other firm can show negative effect on overall performance of the
firm. Hence, such inflection point represents the maximum level of firms productive
alliancing capability; several studies measured the organisational collaboration capabilities by
calculating those inflection points (Godfrey and Hill, 1995). Browning et al. (1995) studied
the negative effects of coordination in SEMA TECH consortium and found that high level
of confusion and ambiguity about roles and responsibilities are attributed to the negative
effects observed in the study. Anand and Khanna (2000) and Lambe et al. (2002) found the
positive effect of alliance experience on firm performance. They argued that firms with
considerable alliance experience know how to deal with the interpersonal relations at the
interorganizational level. It involves tacit knowledge and develops over time.
Skilful managers are capable to establish effective communication and to stimulate
joint sense making (Luo, 2007). Furthermore, appropriate and timely sharing of information
43

acts as a bonding mechanism which facilitates the realization of mutual benefits by reducing
misunderstandings (Sarkar et al., 2001) resolving disputes, aligning perceptions and
expectations (Aulakh et al., 1996; Luo, 2001), and specifying clear roles (Sivadas & Dwyer,
2000). Hence, monitoring based on interpersonal interactions will help to build trust (Aulakh
et al., 1996). Finally, a firms partner identity propensity contributes to the extent to which it
can attract partners with congruent organizational cultures and capabilities that reduces
relational risk (Das & Teng, 2001a). Without this ability, the firm may choose a socially
incompatible partner, which hinders a harmonious alliance relationship and negatively
influences collaborative effectiveness because incompatible partners face higher levels of
stress when they attempt to blend their values, norms, capabilities, and organizational cultures
(Das & Teng, 2001b; Sarkar et al., 2001). These differences hinder role socialization (Smith
& Barclay, 1997), which makes it more difficult in turn for the interfacing managers to work
together (Sarkar et al., 2001).
Deeds and Hill (1996) hypothesized that the firms collaborations shows influence on
firms innovative potential. But he could not find any support for this hypothesis in his
studies. This finding led to the postulation of another hypothesis that firms tend to undermine
their innovative potentials once they exceed a certain number of alliances. It led to the further
grounding for the existence of trade-offs between cooperation and innovative potential.
However, there is no strong empirical evidence observed to support that collaborations
improves firms innovativeness (de Man & Duysters, 2005). This stream of literature argues
that cooperation may be enhancing innovativeness up to a point but this effect can be
reversed as firms engage in an increasing number of cooperative agreements (Deeds & Hill,
1996; Deeds, 2001). This negative effect sets in as engaging in an increasing number of
cooperative agreements puts strains on firms capabilities to coordinate an increasing number
of such agreements (Gulati & Singh, 1998).
44

Contrary to above expectations, another stream of this literature argues that

engagement in an increasing number of cooperative agreements allows firms to accumulate
experience over time in the management and coordination of cooperative agreements (Zollo
et al., 2002b; Lazaric & Marengo, 2000). At the same time firms with a longer experience in
cooperation have greater innovative potentials than firms with less experience in cooperation
(Hoang & Rothaermel, 2005). It suggests that firms become better in managing their
collaboration and overcome coordination failures by continuous learning over time. Recent
research also found that specific mechanisms that built through accumulated experiences to
manage agreements accelerated the returns of alliances (Heimeriks & Duysters, 2007).
Therefore, it is suggested to assess firms alliance management capability by the number of
alliances which are being productively managed in a simultaneous fashion.

2.6

Innovation Management Capability

Innovation is the major source for competitive advantage and superior performance of

any business organisation (Hult et al., 2004). According to Keizer et al. (2002) innovation
enables the small and medium sized enterprises (SMEs) to contribute to the vital economic
performance of any industry. In order to survive increasing competition, organisations must
effectively leverage their all capabilities for innovation management (Vertinsky, 2003).
Developing and deploying innovation management capability have to be implemented as a
higher order dynamic capability of organisation (Papadopoulos and Karagouni, 2007). Firms
by deploying their capabilities and resources for the development of dynamic capability can
sustain a competitive advantage (Teece, 2009). Fan (2006) argued that just by improving their
internal competency in doing R&D does not result in building higher-order capabilities, firms
need to leverage internal and external resources with continuous learning to build such higher
order dynamic capabilities.

45

Innovation management capability as a new field of study is attracting interest of several

scholars (Forsman, 2011). Innovation management capability is defined as a comprehensive
set of characteristics of a firm that facilities and supports its strategies in innovation
development and in appropriating the benefits/returns of innovation for sustainable
competitive advantage (Burgelman et. al., 2004). Therefore it involves multi-dimensional,
complex, interactive innovation activities with resource re-deployment in order to gain
competitive advantage (Wang et al., 2008; Chiesa et al., 1996). In literature several scholar
quoted innovation management as a higher order dynamic capability (Perdomo-Ortiz et. al.,
2006) i.e. a learned and stable pattern of collective activity through which the organization
systematically generates and modifies its operating routines and capabilities in pursuit of
improved effectiveness (Zollo & Winter, 2002a). According to Dodgson and Bessant (1996),
innovation management capability is the key feature of firms which enable them to define
and develop competences to create competitive advantage. Vertinsky (2003) concluded that
intensifying innovation efforts that expand firms product offering or market reach and/or
increased the emphasis placed on innovation and in-house R&D facilitated the development
of radical products.
In this context, innovation management capability is understood as it built upon the
firms capabilities like technological learning and development capabilities, operational
capabilities, transaction capabilities and management capabilities. Organisations always
strive to integrate these capabilities to promote innovation for achieving competitive
advantage in the market. Badawy (2011) described that the importance of the successful
innovation management is to focus on the innovation process, the technology development
and the utilization of technology in both business and industry.

46

Innovation management capability helps the organisation to choose right technologies

and to strategically use of such technologies (Rush et al., 2007); to develop new products,
services, techniques and methods (Afuah, 2002; Zhou & Wu, 2010). Innovation management
capability can be achieved by changing the production function to internalise the new
knowledge to produce technological change and, consequently, new processes and products
through effective learning processes (Lall, 1992). These learning processes involve
acquisition, imitation, adaptation, modification and/or the development of a new set of
knowledge and technical systems for internal use. As a result of this process new goods and
services should be produced with high technical standards.
Yam et al. (2004) described that technological innovation capability constitutes
seven component capabilities namely 1. Learning capability is the capacity to identify,
assimilate, and exploit existing knowledge and competence essential for a firms competitive
success. 2. R&D capability refers to a firms ability to integrate R&D strategy, project
implementation, product portfolio management and R&D expenditure. 3. Resource allocation
capability is the firms ability to mobilize and expand its technological, human and financial
resources in the innovation process. 4. Manufacturing capability refers to the ability to
transform R&D results into products, which meet market needs, in accordance with design
request and can also be manufactured in batches. 5. Marketing capability indicates the
capacity to publicize and sell the products on the basis of understanding consumers current
and future needs, customers access approaches, and competitors knowledge. 6. Organizing
capability is the capacity to constitute a well-established organizational structure, cultivate
organizational culture, coordinate the work of all activities towards shared objectives, and
influence the speed of innovational processes through the infrastructure it creates for
developmental projects. 7. Strategic planning capability is the capacity to identify internal
strengths and weaknesses and external opportunities and threats, adopt different types of
47

strategies that can adapt to environment changes for the excelling in the highly competitive
environment.
Firms competitive edge changes with shifts in exogenous factors: acquisitions and
collaborations and endogenous factors: R&D expenditure and manpower (Sher & Yang,
2005). It is being considered R&D spending as one of the most important factors for new
product development (Sanuri Mohd Mokhtar, 2013) even though number of organizations
preferred to outsource their R&D functions (Calantone & Stanko, 2007; Chiesa and Toletti,
2004). However, Agndal and Nordin (2009) argue that if R&D activities are outsourced then
the deep knowledge about the product may be lost. The dynamic nature markets rendered
each firm to engage in continuous or periodic innovation development and reorientation
(Tamayo-Torres et al., 2010).

2.7

Summary
Business organisations are increasingly under pressure to sustain their competitive

advantage in present rapid technological changes, globalised markets, and blurring of

industry boundaries particularly through proliferation of open networks and new
technologies. Since innovation can be crucial for the growth and success of a firm (Andrews
& Smith, 1996; Sethi et al., 2001), studies of innovation have taken many different research
directions in numerous management fields (see Hoffman et al., 1998). Wolfe (1994)
described innovation literature as a fragmented corpus and scholars from diverse
backgrounds adopt different ontological and epistemological positions to investigate and
report innovation phenomenon which is very complex and multidimensional. Drucker (1994)
argues that innovation management knowledge is the only way to convert change into
opportunities. Firms which possess a higher level of innovation management capability tend
to have a higher chance of becoming successful in their businesses compared to their peers,
48

as they are more capable of dealing with the complexity of innovation process (Tidd et al.,
1997).
Systematic literature review was undertaken in order to develop conceptual
framework and achieve research aim and objectives. As noted before, this study draws on
four main theories (resource-based view, organisational routines view, organisational
capabilities view and dynamic capabilities view) for examining the impact of organisational
first order capabilities on higher order innovation management capability. The resource-based
theory of the firm underpins the notion of capabilities for a firms innovative functions. The
resource-based theory focuses on a bundle of resources and capabilities that are
heterogeneous, scarce, durable, not easily traded and difficult to imitate as sources for the
development of sustainable competitive advantage (Penrose, 1959; Wernerfelt, 1984; Barney,
1991; Peteraf, 1993, Eng & Okten, 2011). Possessing diversified resources cannot guarantee
the competitive advantage and it requires skilful actions which uses and blend the resource
base of the organisations. Nelson and Winter used the term Organisational Routines to refer
such skilful activities needed for the effective utilization of organisational resource to develop
competitive advantage. Organisational routines are regular and predictable patterns of activity
which are made up of a sequence of coordinated actions by individuals. Routines develop
over time and are based on the history of the organisation (Teece et al., 1997, Nelson &
Winter, 2009) and also the experience of the individuals involved (Levinthal & March, 1993,
Helfat & Peteraf, 2003). The routines of a firm are a resource and play a critical role in the
services which the configuration of resources in any firm can produce. The incremental and
context specific adjustment of a firms routines is a key source of resource heterogeneity
(Helfat & Peteraf, 2003). According to Hilliard (2004), routines allow an organisation to store
knowledge. Nelson & Winter (2009) propose that the routinisation of activity in an

49

organisation constitutes the most important form of storage of the organisations specific
operational knowledge.
The environment in which any firm exists changes over time and may change
frequently. As routines are context specific and objective specific, a changing environment
may mean that once appropriate routines become obsolete. Helfat and Peteraf (2003) define
organisational capabilities as the ability of an organisation to perform a set of coordinated
tasks, utilising organisational resources, for the purpose of achieving a particular end result.
This focus on a defined result is generally accepted in the literature (Winter, 2003, Dosi et al.,
2008). Helfat and Peteraf (2003) also found that capabilities are subject to lifecycles in a
broadly similar way to product or market lifecycles in the marketing literature. This
capability lifecycle concept is a useful tool to bring the concepts of resources, path
dependency, routines and capabilities together to develop new perspective competitive
advantage, i.e. dynamic capabilities of the organisations.
Dynamic capabilities are a set of unique and recognizable processes in organisations
such as product development, strategic decision making, networking, etc. and are neither
vague nor tautological. Fan et al. (2009) summarized the aspects of dynamic capabilities as
the competencies that allow a firm to quickly reconfigure its organizational structure and
routines in response to new opportunities. They discussed the dynamic capabilities that are
related with cost reduction, outsourcing, knowledge networking and knowledge
management. Tony Davila et al. (2012) classified dynamic capability in to Financial
Management Capability, Product Development Capability, Human Resource Management
Capability, Strategic Planning Capability, Sales and Marketing Capability, Partnership
Management Capability. Ho et al. (2011) examined the influence of technological
capabilities and design capabilities on technology commercialization and observed that both

50

technological and design capabilities are shown positive influence on technology

commercialization.
It is found that, dynamic capabilities are also context specific and vary across the
industry. Based on the resources and capabilities, firms build different dynamic capabilities to
sustain their business in changing conditions. Wang and Ahmed (2007) identified three higher
order dynamic capabilities, namely absorptive capability, adaptive capability and innovation
management capability as the core components of dynamic capabilities.

Parida (2008)

considered to include networking capability in should be a part of higher order dynamic

capability constructs. Two other higher order capabilities: sensing and integrative capabilities
were found in the literature (Morgan et al., 2009). In their attempt to review the dynamic
capabilities literature, Eisenhardt and Martin (2000) identified seven major first order
dynamic capabilities, namely product development capabilities, replication capabilities,
resources allocation capabilities, coevolving capabilities, knowledge generation capabilities,
alliance and acquisition capabilities and exit and jettison capabilities. Several researchers
have also developed constructs to explore six major higher order dynamic capabilities such as
sensing, absorptive, adaptive, innovative, networking and integrative capabilities.
Papadopoulos and Karagouni (2007) stated that innovation management capability have to be
developed and deployed as higher order dynamic capability.
Innovation management capability is a source of competitiveness for any firm.
Innovation Management is a higher order dynamic capability (Perdomo-Ortiz et. al., 2006),
i.e. a learned and stable pattern of collective activity through which the organization
systematically generates and modifies its operating routines and capabilities in pursuit of
improved effectiveness (Zollo & Winter, 2002b). According to Dodgson and Bessant
(1996), innovation management capability is the key feature of firms which enable them to

51

define and develop competences to create competitive advantage. In order to sustain the
intense competition organizations have to effectively leverage their capabilities for
innovation (Vertinsky, 2003). Indeed, only firms which are able to deploy their resources and
capabilities upon the dynamic capabilities framework can create and sustain a competitive
advantage (Teece, 2009).
Innovation management capability has been defined as a comprehensive set of
characteristics of a firm that facilities and supports its strategies in innovation development
and in appropriating the benefits of such innovation for attaining competitive advantage in
the market (Burgelman et. al., 2004). The innovation management capability is understood as
both the technological learning process which translates resources into the technology and
operations capabilities which appropriates the returns of innovation, as well as the managerial
and transactional routines represented by the management and transaction capabilities.
Badawy (2010) described the importance of the successful innovation management is to
focus on the innovation process, the technology development and the utilization of
technology in both business and industry.
In this study we are proposing Innovation Management Capability as a higher order
integration capability which could determine and regulate multiple capabilities as discussed
by Fuchs, Mifflin, Miller and Whitney (2000). Organisations with innovation capability can
demonstrate ability to integrate key capabilities and resources of their firm to successfully
stimulate innovation. The present study explores the organisation capabilities that build firms
innovation management capability in micro propagation industry.

52

Chapter 3:

Methodology

This chapter explain the methodological aspects used for this study to examine the
research problem mentioned in introductory chapter of this study. Since there is no single
general theory that is universally accepted for describing innovation management at firm
level, the subject which deals with innovation and its dynamics become more and more
complex. Though this is not new to management research and writers, Easterby-Smith et al.
(2012) suggested that mixing of research methods can be a way out to study the phenomenon
which are not standardised and studied well. The combination of quantitative (such as a
survey) and qualitative (e.g. case study) methods are suggested in literature to approach less
explored research problems. In some cases, researchers preferred to use qualitative methods
to explore the phenomenon and later tested the relationship with quantitative techniques.
Since the variables considered in this study are measurable and longitudinal in nature, we
used quantitative research strategy to explain the relationship among proposed variables.

3.1

The Research Model

The aim of the survey is to investigate the way technological innovation is managed

in Andhra Pradesh small and medium sized tissue culture enterprises and in particular the role
of the firm first order capabilities like marketing capability, rightsizing capability, investment
capability, production capability, absorptive capability, leadership capability, collaboration
capability and human resource retention capability in building higher order capabilities like
innovation management capability.

An attempt is therefore made to evaluate various

influences of core capabilities on innovation management capability of the firms.

53

3.2

The sample
The present research study is based on the survey of commercial plant tissue culture

production firms in Andhra Pradesh state in India. A lot of thought and consideration was
given to the selection of the size range of the firms to be included in the survey. Andhra
Pradesh is one of the largest tissue culture plantlets producing states in India. It is the second
largest tissue culture plantlets producing state in the country after the Maharastra state. There
are about 25-30 tissue culture firms in the state with overall installed capacity ranges between
60-82 million plantlets per annum and producing 17-20 million plantlets per year. Among all
the tissueculture production units in Andhra Pradesh, only 16 firms were certified by the
Department of Biotechnology (DBT), Govt. of India under the National Certification System
for Tissue Culture Raised Plants (NCS-TCP) as recognized tissue culture production units.
A sample selection criterion is prepared for the selection of the study sample and the
following aspects are included in the sample criteria: sample units must
1. Be pure business firm and their business activities solely depend on the innovation
(product) being developed in the firm
2. Not be younger than three years since the commercialisation of their innovation (since
their entry in the market)
3. Have more than 1 million plantlets installed capacity
With the help of the above sample criteria we have selected 11 units out of 16 recognised
units as the study sample based on the purposive sample selection methodology. The list of
sample units is presented in the following table 3.1.

54

Table 3.1 List of Sample Units of the study

Installed
Tissue Culture Units

Year of

S. No.

Capacity(Million
(TCU)

establishment
)

1.
MicrosunBioplants (India) Pvt. Ltd., Secunderabad

2009

10

Agri Vitro Technologies, Secunderabad

2002

18

Vitroplant, Hyderabad

2008

Sai Lara Biotechnologies, Hyderabad

2007

Brooks private limited

2006

Ace Agro Technologies, Secunderabad

2002

Turlapati Biotech Pvt. Ltd., Secunderabad

1996

2008

Kisan Biotech

2006

Shiva Shakti Biotech

1998

Phytica Biotech

2002

2.
3.
4.
5.
6.
7.
8.

Sri Venkateshwara Agro Technologies, Ranga Reddy

District

9.
10.
11.

3.3

The Questionnaire
According to the conceptual framework of the study, structured questionnaire is
constructed with the help of related academic experts and mangers to gather data on
55

various aspects of innovation management in the micro-propagation firms. Later, a pilot

study is conducted in three firms to test the questionnaire in terms of its objectivity and
validity. Questionnaire is updated by considering the observations of pilot study and
views of experts in the field. This process helps us in terms improving the content validity
and reliability of the questionnaire.
We adopted direct interview method to gather primary data in view of very low
responses observed in the studies which were resorted to Email survey and postal surveys.
Due to the scattered geographical locations of the sample units, it took us seven months
from June to December 2014 to gather the required primary data. During the interview
sessions, data is sought form the senior managers.
Broadly there are three sections in the questionnaire:
Section 1

aimed to gather background information of the firm characteristics like size,

age, workforce, production, revenue, expenditure, etc.

Section 2

aimed to gather information on organisational linkages, marketing and

investment methods.

Section 3

aimed to gather the information on characteristics of owner or manager of the

firm in terms of educational level, business experience and attitude towards
organisations strategies.

During data collection good care is taken to gather data on every aspect mentioned in the
questionnaire. Repeated visits were made to gather data which was missed during first phase
of data collection.

56

3.4

Survey Hypotheses

In view of the research problem of the study and objectives conceived to address the research
problem, various hypotheses are framed to test the relationship among the factors that
determine the innovation management in micro propagation industry. Following table No.3.2
Table No 3. 2 Hypothesises of the study
S. No.
1.

Hypothesis
H1: There is a relationship between Innovation management capability and Marketing
capability of the firm (0)

2.

H2: There is a relationship between Innovation management capability and

Rightsizing capability of the firm (0)

3.

H3: There is a relationship between Innovation management capability and

Investment capability of the firm (0)

4.

H4: There is a relationship between Innovation management capability and

Production capability of the firm (0)

5.

H5: There is a relationship between Innovation management capability and

Absorptive capability of the firm(0)

6.

H6: There is a relationship between Innovation management capability and

Leadership capability of the firm (0)

7.

H7: There is a relationship between Innovation management capability and

Collaboration capability of the firm (0)

8.

H8: There is a relationship between Innovation management capability and Human

Resource Retention capability of the firm (0)

57

3.5

Main Variables and their Operationalization

a. Innovation management capability:
It refers to the managerial efficiency in terms of planning for the required resources,
technologies, alliances, human resources, finance, etc. for doing business, mobilizing
the resources and finance for the production and commercialization of innovation, and
marketing of products through remunerative channels. In literature it is suggested that
innovation management capability can be measure in two ways either by measuring
the factors that contributed for the building of innovation management capability or
by the results/output of the innovation management capability such as revenues,
methods, products, etc. (Mani, 2005). In this study we measured the innovation
management capability in through the results of the capability, i.e. with revenues
earned form the commercialization of the innovation. We used sale price of the
product as a proxy o normalize the differences in annual revenues of the firm and to
have parity among the firms. Following formula is developed to measure the above
said ability where the value of average of annual in revenues is divided with the value
of average of annual sale price. The product of the formula is further interpreted that
the higher the value of the constant the higher the Capability of the organisation

average of annual revenues

Innovation
management

_________________________________________________

capability

average of annual sale price

b. Marketing Capability:

58

It is noted that, marketing scholars may choose different indicators to measure

marketing capabilities based on their different purposes. These indictors or
dimensions of marketing capabilities are related to the resource deployment and focus
on the functional-level capabilities (Conant et al., 1990; Hooley et al., 2005). In
addition, marketing capability plays an irreplaceable role in delivering commodity
value and creating competitive advantage. In assessing how the marketing affects the
performance, the measurement of marketing capability becomes a key problem. In
recent empirical studies, marketing scholars mainly focus on the functional level
marketing capabilities (Ripolls et al., 2012; Theodosiou et al., 2012). These
capabilities are related to marketing functions or marketing processes within the firm
(Hooley et al., 2005). This study also focuses on the functional level of marketing
capabilities.
Based on the previous literatures, nine dimensions, channel management,
marketing communication, selling, brand management, new product development,
pricing, marketing information management, marketing planning and marketing
implementation, were always used to analyze and measure marketing capability.
Channel management can help firms to build and sustain good channel relationships
(Mariadoss et al., 2011). Since the Indian micro propagation industry is oligopolistic
environment, marketing channel becomes one of the most important factors which
determine the marketing performance of the firm. In this vein following formula is
developed to measure the Marketing Capability of the firm where the average of
annual revenues is divided by the average of annual number of marketing channels
opted by the firm. It is interpreted that the higher the value of the constant indicates
the higher capability of marketing efforts in the organization.

59

average of annual revenues

Marketing
Capability

____________________________________________
average of annual number of marketing channels
opted in the firm

c. Rightsizing Capability:
In literature it is revealed that the rightsizing could be measured in two ways,
objective and perceptual measures, depending on weather the level of rightsizing or
rightsizing strategies is the object of the measure. Measuring the extent of rightsizing
strategies uses perceptual measure, whereas the level of rightsizing uses objective
measure. Researchers measured the extent of rightsizing strategies through Likertstyle questions (Mishra & Mishra, 1994; Farrell & Movondo, 2005), however, in
many research studies rightsizing has been operationalised as a change in organisation
employees number between selected periods of times (Freeman & Cameron, 1993;
Bethel & Liebeskind, 1993; Mentzer, 1996; Cascio et al., 1997; Filatotchev et al.,
2000). In this study, an attempt is made to bring convergence between both
approaches by considering the impact of changes in workforce size on revenues of the
organisation.
Appropriate number of human resources across the all functional and staff
departments is imperative for achieving competitive advantage in the market. We
measured the rightsizing capability of the firm in two stages. At first,
interdepartmental workforce change variability index is derived from the following
formula where the annual summative change of workforce size at each department is
divided by the number of departments whose workforce size is changed in that year.
In second stage, the workforce change variability efficiency index is further used to
divide the income index that derived after normalizing the firm average annual
60

income with average annual sale price of the product. The resulted constant would be
interpreted as the higher the value higher the Rightsizing Capability of the firm.

average of annual summative change of workforce at each

department

Stage
1:

______________________________________________________

Rightsizing
number or department with changed workforce in the year

Capability
Stage

(average annual income/average annual sale price)

2:

______________________________
Average of stage 1 value

d. Investment Capability:
Researchers have rigorously attempted to find an optimal measure for
investment capability, one way to measure investment capability is by calculating the
output-to-capital ratio (OCR). Brainard and Tobin (1968) and Tobin (1969) developed
Tobins Q for this purpose and it has been the most widely used measure of
investment capability. However, there is an ongoing discussion on how to optimally
measure investment capability and numerous authors have tried to develop the
technique originating from Tobin's Q. Marginal q, originally developed by Mueller
and Reardon (1993), is an attempt to refine Tobins Q and is used in a small but
growing number of studies. Howe and Vogt (1996), Ogawa and Kitasaka (1999) and
Erickson and Whited (2006) among others explore and compare different versions of
Tobins Q and related measures in their studies. Lu et al. (2008) used profitability as a
measure of investment efficiency of Chinas industrial firms.
In this study, we used Vieregger, C. H. (2013) framework to measure the
investment capability by directly examining the cash flows and capital expenditures at
61

the segment level, each segment is classified as being either a subsidized segment or a
transferring segment. When the segments cash flow is less than the capital
expenditure investment within the segment, it is classified as a subsidized segment.
These segments require cross-subsidizations from the firm to fund their capital
investment needs. On the other hand, when the segments cash flow exceeds that of its
capital expenditures, it is a transferring segment. These segments generate free cash
flow that is transferred back to the firm. M. Ye (2009) and Guedj, I. et al. (2009)
developed similar constructs to measure the investment capability. For this study,
following formula is developed to measure the Investment Capability where the sum
of all categorical expenditure efficiency (see below explanation) is divided with the
number of incurred expenditure categories.

Investment
Capability

Sum of all categorical expenditure efficiency

Number of expenditure categories

Inter categorical expenditure efficiency:

Organizations incurred wide range of expenditures during their business
activities. The measurement of inter departmental expenditure ratio enables the
assessors to evaluate the effect of expenditure incurred in particular department on
firms revenues. Appropriate organizational expenditure profile is imperative for the
achievement of competitive advantage in the market. Following formula is developed
to measure the inter categorical/departmental expenditure efficiency where average of
annual revenues is divided with the average of annual expenditure on (particular)
department/category

Inter categorical

average of annual revenues

62

Expenditure efficiency
__________________________________
(for example R&D
average of annual expenditure on R&D
expenditure)

e. Production Capability:
From a microeconomic point of view, perfectly efficient firms minimize unit
costs by building efficient production capabilities. In literature it is found that, many
research studies productivity and production efficiencies are used as proxies to
estimate the firm production capability.

Lovell (1993) defines the production

efficiency as the ratio of inputs to its inputs. Cooper et al. (2000) and Bunse et al.
(2011) included technology efficiency, in addition to output to input ratio, to measure
production capability. In this study we adapted the frame work suggested by Bunse et
al. (2011) and measured the production capability as a ratio of production efficiency
and technological efficiency. Production efficiency is calculated by dividing average
of annual production with the average of the annual percentage of installed capacity
utilized for production. Technological efficiency is calculated as ratio of average
annual production time per batch of products to average of annual production stages
per batch of products. Following formula is designed to measure the production
capability

Production

(Average of annual production/average of annual % of

Capability

installed capacity utilized for production)

____________________________________________
(Average of annual production time per batch of
products/Average annual production stages per batch of
63

products)
f. Absorptive Capability:
Majority of the studies tried to measure absorptive capacity of several firms
with proxy indicators like R&D expenditure (Cohen & Levinthal, 1990), strength of
R&D department, no. of Ph. D.s working in the R&D department, no. of R&D
departments working on fundamental research (Veugelers, 1997) and no. of scientific
publications (Cockburn & Henderson, 1998). In literature there are other studies
which measured firms absorptive capacity through perceptive instruments/models.
Wong et al. (1999) have used perceptive measures which intend to evaluate firm
capabilities like knowledge acquisition, knowledge assimilation and knowledge
exploitation. In this study we adapted the measures proposed by Teo, et al. (2003) and
used events of technology upgrade and relative production efficiency as proxies to
measure absorptive capability. Following formula is developed to measure the
efficiency of organizations absorptive capacity where the Production Capability of
organization is divided with the average of in annual technological up-gradation
events.

Production Capability
Organization
___________________________________________
absorptive capacity
efficiency

average of the in annual technological up-gradation

events

g. Leadership Capability:
In their studies, Miner (1960) and Nash (1966) used personal characteristics like
education, experience, expertise, etc. to measure to leader ship capability and explain
the leadership patterns in organisations. The pattern of leadership includes risk
64

handling abilities, communication ability, confidence, persuasive nature, independent

nature energy, etc. of leaders. Mahoney, Jerdee, and Nash (1960) measured leadership
capability of 468 leaders across several organisations in Minnesota through their
interest in working culture, business environment and aspiration for higher levels in
organisations. Ghiselli (1971) studied leadership capability through series of tests for
intelligence, supervisory ability, self-assurance, decisiveness, self-actualization, and
motivation to achieve. Coleman (2007) and Gutek et al. (1991) found that leadership
capability is in significant relationship with related experience, education, gender and
attitude of managers.
As mentioned in the Babajide (2000) and Akintayo (2012) studies which
referred managerial efficiency as a function of leadership style, experience,
educational qualifications and work environment of the manager, We developed
following framework to measure the leadership capability of the innovation leaders in
the company.

1= Graduate
a. Weightage of Educational
2= Post Graduate
qualifications
3= Above
Leadership
Capability

b. Weightage of subject
studied

2= Life Science
1= Others

(LC= a X b X c X d)
c. Weightage of experience

. Years of experience

d. Weightage of expertise

2= Related experience

subject

1= non-related experience

65

h. Collaboration Capability:
Across the extant literature, it is agreed that collaborative capability is
absolutely essential for entities involved in inter-organizational collaboration and for
those that desire the incorporation of a collaborative culture for the long term (Weber
et al., 2007; Thomas et al., 2006). However, the methods used to assess the
collaborative capability are greatly varied in literature. In this study, we adapted
framework presented by Weber et al. (2007) in measuring collaboration capability of
the firm. Following parameters are selected for the assessment of firms collaboration
capability with other organisations.
a. Weightage for the practice 2=presence of collaboration
of collaborations
b. Weightage for the
Collaboration Capability

1= No Collaborations
No. of collaborating firms

collaborating firms
1= for single purpose

(CC= a X b X c)

c. Weightage for the forms of 2= for double purposes

collaborations

3= for triple purposes

4= for more purposes

i. Human Resource Retention Capability:

It is noted in the literature that employee turnover and employee retention are
inseparable concepts and most of the researchers used the rate of employee turnover
as a indirect proxy to measure organisation retention capability (Chugthai & Zaar,
2006 and Buck & Watson, 2002). Cinches (2012), measured employee retention
capability with multi-dimensional construct by considering the employee job
satisfaction, organizational human resource policies, organizational culture, working
conditions as the determinants of employee retention. In this study as suggested in the
James & Mathew (2012), employee retention capability is measured through the
66

organizational strategies that are implemented to control the employee turnover and
retain the key employees in the organisation. It is interpreted that the higher the
number of strategies implemented in the organisation, the higher the capability of the
firm in retaining all of its key employees who are crucial for effective functioning of
the organization.

3.6

Statistical Methods
In this study, quantitative approach is used to analyse the primary data that collected

through interviews during the visit to sample units. Since the size of the sample considered
for this study is very small, i. e. 11, it is decided to use non-parametric methods to explore the
relationship among different variable through univariate and bivariate techniques. To improve
the accuracy of the data analysis, we used STATA 12.0 version of statistical package is used.
All the statistical assumptions pertaining to the use of such techniques are also tested.
Statistical Assumptions:
Various statistical assumptions about the primary data are tested to determine the type
of statistical techniques needed for the analysis.
Normality:
It is very important assumption which needs to be determined prior to the deployment
of techniques. Most of the statistical procedures like t-test, regression and ANOVA, etc.
assumed that the sample is drawn from the normally distributed population; it is prerequisite
to test the normality of the any sample to validate the results obtained from statistical
techniques. There are three common ways to assess the normality of the sample viz. graphical
67

method, numerical method and formal normality test. Due to its wide coverage in literature,
we decided to use formal normality test to assess the normality of the sample data of the
present study. Among the majorly used formal normality tests like Shapiro-Wilk test (SW),
Kolmogorov-Smirnov test (KS), Lilliefors (LF) and Anderson-Darling test (AD), ShapiroWilk (SW) test found as efficient normality test with small sample sizes (Razali et al., 2011).
In this study, we also used the Shapiro-Wilk test to test normality of the data of each variable
and the results presented in Figure no. 3.1. In this test, null hypothesis implies that the sample
data is drawn from normally distributed population, therefore the statically significance
relationship observed with variables could reject the null hypothesis.
Figure No. 3.1 Shapiro-Wilk test output

. swilk ime mc rc ic pc ac lc cc hrrc

Shapiro-Wilk W test for normal data
Variable

Obs

ime
mc
rc
ic
pc
ac
lc
cc
hrrc

11
11
11
11
11
11
11
11
11

0.80746
0.80821
0.88453
0.55668
0.81930
0.71430
0.83303
0.98277
0.97064

3.117
3.105
1.870
7.178
2.926
4.626
2.703
0.279
0.475

z
2.264
2.255
1.181
4.331
2.123
3.189
1.950
-2.046
-1.242

Prob>z
0.01179
0.01207
0.11873
0.00001
0.01688
0.00071
0.02559
0.97961
0.89287

Homoscedasticity:
It represents the homogeneity of the data by being all independent variables exhibit
equal level of variance across the regression line with dependent variable. Any unequal
variance observed among the predictor variables considered as heteroscedastic nature of the
data and it need to be homogenised to validate the results of statistical techniques like
regression, ANOVA, etc. In view of the robustness against outliers and small samples, this
study, we used Whites test and Breusch-Pagan test for testing the homoscedasticity of the
68

study data. In these tests, null hypothesis implies that the variance of residuals is
homogeneous. Therefore, if there is significant p-value observed of the test tends to reject the
null hypothesis.

Figure No. 3.2 Whites Test output

. estat imtest
Cameron & Trivedi's decomposition of IM-test

Source

chi2

df

Heteroskedasticity
Skewness
Kurtosis

11.00
3.12
1.41

10
8
1

0.3575
0.9269
0.2357

Total

15.52

19

0.6889

Figure No. 3.3 Breusch-Pagan Test output

. estat hettest mc rc ic pc ac lc cc hrrc

Breusch-Pagan / Cook-Weisberg test for heteroskedasticity
Ho: Constant variance
Variables: mc rc ic pc ac lc cc hrrc
chi2(8)
=
Prob > chi2 =

4.13
0.8448

Linearity:

69

The linear relationship between variables is prerequisite for any bivariate and
multivariate statistical procedures. Without a linear relationship between variables, we could
not confer the casual relationship represented by regression as valid. Hence in this study,
linear relationship between dependent variable and each predictor variables is tested through
the examination of augmented component-plus-residual plots. Following are the scatter plots
of predictor variables of the study viz. marketing capability (mc), rightsizing capability (rc),
production capability (pc), absorption capability (ac), leadership capability (lc), collaboration
capability (cc) and human resource retention capability (hrrc).
Figure No. 3.4 Component-Plus-Residual Plots

(MC)

(RC)

-.0 4

A u g m e n te d c o m p o n e n t p l u s r e s id u a l
-.0 3
-.0 2
-.0 1

Rightsizing Capability

A u g m e n te d c o m p o n e n t p lu s re s id u a l
.0 5
.1
.1 5
.2
.2 5

Marketing Capability

10

mc

15

rc

Production Capability

(IC)

(PC)

15

.0 1

A u g m e n te d co m p o n e n t p lu s re sid u a l
.0 2
.0 3
.0 4
.0 5

A ug m en te d com p on en t plus residua l

.0 2
.0 4
.0 6
.0 8

Investment Capability

10

.2

0.6

.4
ic

10
.8

20
pc

Absorption Capability

Leadership Capability

(AC)

(LC)

70

30

40

A u g m e n te d c o m p o n e n t p lu s re s id u a l
.0 0 5
.0 1
.0 1 5
.0 2
.0 2 5

A u g m e n te d c o m p o n e n t p lu s r e s id u a l
- .0 1
0
.0 1
.0 2

- .0 2
0

50

100
ac

0150

5200

10
lc

(CC)

Capability (HRRC)

20

- .1 8

-.0 2

A u g m e n te d c o m p o n e n t p lu s r e s id u a l
- .1 6
- .1 4
- .1 2

Human Resource Retention

A u g m e n te d c o m p o n e n t p lu s r e s id u a l
-.0 1
0
.0 1
.0 2

Collaboraton Capability

15

4
cc

1 6

1.5 8

2
hrrc

2.5

Testing of statistical assumption of the data revealed that though the data is
representing homogeneity at overall level, the normality and linearity assumption are not met
by all the predictor variables. In view of the small sample size and partial agreement with
statistical assumptions, it is decided to follow non-parametric and semi-parametric methods
for statistical analysis of the data.
3.8

Other Sources of the Data

In order to get supplementary information on policies and constraints of the micro-

propagation industry and the process of innovation management system in the industry,
several interviews were conducted with industry experts. Current status and trends of tissue
culture industry in India is also collected from the 16 th conference of FAO Biotechnology
Forum on "Learning from the past: Successes and failures with agricultural biotechnologies
in developing countries over the last 20 years", held on 8 June to 8 July 2009.
3.9

Ethical Considerations and Confidentiality

71

The purpose and the nature of the survey and interview are thoroughly explained to
the respondents and the information is sought with consent of the respondents. The concerns
and confidentiality of the information is duly assured to the respondents. Based on the
requests of the respondents, efforts are taken to maintain the anonymity of the data given by
respondents.

Chapter 4:

Status of the micro-propagation industry

4.1. Historical Overview on Plant Tissue Culture Technology

4.1.1 Early efforts (1902-1939)
The earliest attempt to study the plant cellular growth was made in 1756 by HenriLouis Duhamel du Monceau with his pioneering studies on wound healing in plants. He
observed spontaneous callus formation in decorticated regions of elm plants. His contribution
to the plant science is considered as the foreword for the plant tissue culture (Razdan, 2003).
The notion of toptipotency is implicitly expressed in the cell theory by Schwann in 1839
that each living cell of a multi-cellular organism should be capable of independent
development if provided with the proper external conditions (White, 1951). Callus
formation on wounds of several plants are observed and pictured by Treccul in 1853 and
established the fact that callus could also formed from plant raw materials like medullary
rays, phloem, cambium, youngest xylem, etc. In 1878, Vochting observed the polarity in the
72

growth of plant fragments and suggested that the morphogenetic ability of the tissue is not
change with contact of other tissues due to strict hereditary mechanisms lies in the tissues.
Later, in 1884, Weisner proposed a general plant theory that attributed to the
proposition of the existence of organogenesis factors in fragments as in polar manner.
Rechinger in 1893 studied the "minimum limits" for organogenesis in fragments that are
collected from various parts of the plant. In these experiments plant fragments are place in
moistened sand without any nutrient supplements. He concluded that fragments which are
thicker than 1.5 mm showed further growth and the fragments thinner than 1.5 mm showed
no growth. Later, Morgan in 1901 theoretically coined the term totipotent to describe the
individual cells ability to grown as whole organism (Krikorian & Berquam, 2012). In 1902,
Haberlandt conceptualized the culturing of isolated plant cells on artificial medium in in-vitro
conditions. He believed that the unlimited fragmentation of tissues could not influence the
organogenesis of isolated tissue in terms of its minimum divisible limits as studied by
Rechinger. With all his efforts he only succeeded to maintain the culture for few weeks as
callus and failed to induce organogenesis to become full plants.
In early period of twentieth century scientists focus is shifted to the culturing of
meristematic tissues present in root tips. In these years partial success is obtained in 1922 by
Robbins and Kotte. During 1934, White succeeded to obtain potentially indefinite culture
from isolated tomato roots (White, 1951). As stated by White (1951), two difficulties
hampered the development of a successful method for culturing excised plant material
between 1902 and 1934: (a) the problem of choosing the right plant material, and (b) the
formulation of a satisfactory nutrient medium. With the introduction of root tips as a
satisfactory experimental material, the crucial problem became largely on of organic
nutrition. Whites early success with tomato roots can be attributed to his discovery of the

73

importance of the B vitamins, plus the fact that indefinite growth was achieved without the
addition of any cell division factor to the liquid medium.
Snow (1935) and Went and Thimann (1937) independently identified the hormonal
activity of Indole Acetic Acid (IAA). During 1939, Gautheret successfully maintained carrot
cultures for a long period of time by adding Indole Acetic Acid (IAA) to the growth medium.
As stated by White (1942) The goal at that time was to demonstrate the potentially unlimited
growth of a given culture, by repeated subcultures, with the formation of undifferentiated
callus. The workers were fascinated by the apparent immortality of their cultures and devoted
much effort to determining the nutritional requirement for sustained growth.

4.1.2 Basic Studies on nutritional requirements and morphogenesis

processes (1940 1978)
During 1941, Van Overbeek along with his colleagues cultured embryos of Datura
plants on a medium that enriched with natural plant extract from coconut milk. The research
studies conducted by Caplin and Steward (1948) and Steward and Caplin (1951, 1952) the
nutritional value of coconut milk is further improvised with the addition of 2,4-D. as stated
by White (1951) Although it was first thought that a single substance, termed the coconut
milk factor, was involved as growth stimulant, several constituents were later found
responsible for its activity. Stewards group at Cornell University made numerous
contributions in technique, nutrition, quantitative analysis of culture growth, and
morphogenesis.
During 1955-59, discovery of cytokinins took place by Skoog at University of
Wisconsin from degraded DNA preparations. Later it was hypothesized by Skoog and Miller
74

that shoot and root initiation in cultured callus can be regulated by varying the ratio of auxin
and cytokinin in the medium. In 1953, Muir developed a technique to culture single isolated.
According to him the single cells which were placed on squares of filter paper whose lower
surface of the paper was placed in contact with an actively growing nurse culture. This
paper-raft nurse technique provided the isolated cells not only with nutrients from the
medium via the older culture, but also with growth factors synthesized by the nurse tissue.
In 1960, Bergmann developed the agar-plating method by separating a single cell fraction
through filtration, mixing the cells with warm agar, and then planting the cells as a thin layer
in a Petri dish. Later, with their experiments, Vasil and Hildebrandt in 1965 demonstrated
the totipotency concept that a single isolated cell can divide and ultimately give rise to a
whole plant.
By the late 1970s it became evident that plant tissue culture technology beginning to
make significant contributions to agriculture and industry (Murashige, 1978; Zenk, 1978). In
agriculture, the major areas are haploid breeding, clonal propagation, mutant cultures,
pathogen free plants, production of secondary products, and genetic engineering. In addition,
the cryopreservation of plant tissue cultures and the establishment of invitro gene banks have
attracted considerable interest. The in-vitro clonal propagation is being considered as the
greatest success ad it has revitalized the orchid industry. According to Murashige (1977)
estimates, about 600 ornamental species have been cloned. Efforts are also placed to clone
forest trees, fruit trees, oil bearing plants, vegetables, and numerous agronomic crop plants.
During 1982 nearly 100 firms are engaged in the commercial propagation of ornamental and
fruit plants (Loo, 1982).
Tissue culture technology plays crucial role in plant pathology by developing number f
pathogen-free plants (Murashige, 1978). Industrial applications of suspension cultures

75

resulted with synthesis of useful compounds in significant amounts for the betterment of
mankind. These secondary products of industrial interest include antimicrobial compounds,
antitumor alkaloids, food flavors, sweeteners, vitamins, insecticides, and enzymes. A major
problem has been the genetic instability of the cultures, as well as engineering problems
associated with this technique. Nevertheless, progress has been made at the industrial level,
especially by the Japanese (Misawa, 1977; 1980). The chronology of key improvements in
tissue culture technology development is presented in the following table.

Table: 4.1 Evolution of Tissue Culture Industry

Year

Achievements

1839

Schwann expressed the view that each living cell of a multi-cellular organism should be

capable of independent development if provided with the proper external conditions

1901

Morgan coined the term Totipotency, which refers the ability of the single cell to

transformed, provided with adequate nutrition and environment, as whole plant

1902
Haberlandt proposed concept of in vitro cell culture

1904
Hannig cultured embryos from several cruciferous species

1922
Kolte and Robbins successfully cultured root and stem tips respectively

1926

Went discovered first plant growth hormone Indole acetic acid

76


1934

White introduced vitamin B as growth supplement in tissue culture media for tomato root

tip

1939
Gautheret, White and Nobecourt established endless proliferation of callus cultures

1941
Overbeek was first to add coconut milk for cell division in Datura

1946
Ball raised whole plants of Lupinus by shoot tip culture

1954
Muir was first to break callus tissues into single cells

1955
Skoog and Miller discovered kinetin as cell division hormone

1957
Skoog and Miller gave concept of hormonal control (auxin: cytokinin) of organ formation

1959

Reinert and Steward regenerated embryos from callus clumps and cell suspension of carrot

(Daucuscarota)

1960
Cocking was first to isolate protoplast by enzymatic degradation of cell wall

1960
Bergmann filtered cell suspension and isolated single cells by plating

1960
Kanta and Maheshwari developed test tube fertilization technique

1962

Murashige and Skoog developed MS medium with higher salt concentration

77


1964

Guha and Maheshwari produced first haploid plants from pollen grains of Datura (Anther

culture)

1966
Steward demonstrated totipotency by regenerating carrot plants from single cells of tomato

1970
Power et al. successfully achieved protoplast fusion

1971
Takebe et al.regenerated first plants from protoplasts

1972
Carlson produced first interspecific hybrid of Nicotianatabacum by protoplast fusion

1974
Reinhardintroduced biotransformation in plant tissue cultures

1977

Chilton et al. successfully integrated Ti plasmid DNA from Agrobacterium tumefaciens in

plants

1978
Melchers et al. carried out somatic hybridization of tomato and potato resulting in pomato

1981
Larkin and Scowcroft introduced the term somaclonal variation

1983
Pelletier et al.conductedintergeneric cytoplasmic hybridization in Radish and Grape

1984
Horshet al. developed transgenic tobacco by transformation with Agrobacterium

1987

Klienet al. developed biolistic gene transfer method for plant transformation

78


2005
Rice genome sequenced under International Rice Genome Sequencing Project

In India, the work of tissue culture started in the Department of Botany, Delhi
University, Delhi under the leadership of late Professor P. Maheswari. Most of his work
involved experimental embryology in which he attempted in vitro culture of reproductive
organs of flowering plants. Professor S. C. Maheswari in association with late Professor Sipra
Guha Mukherjee and through their pioneering experiments obtained androgenic haploids
from another culture of Daturainnoxia. This breakthrough proved highly useful in developing
new varieties in many crop plants.
The other significant contributions included endosperm culture, in vitro fertilization,
embryo rescue and few others. A strong group of experimental embryology and plant tissue
culture was thus formed which include late Professor B. M. Johri, Professor H. Y. Mohan
Ram, Professor S. C. Maheswari, Professor N. S. Rangaswamy and Professor S. S. Bhojwani.
Professor H. C. Arya after his return from Wisconsin, USA (where worked with
Professor A. C. Hildebrandt) started investigating host-parasite relationship in vitro with
special reference to green-ear disease of Bajra caused by Sclerosporagraminicola. Professor
Arya with M. M. Tiwari, for the first time in 1969 reported establishment of dual as well as
axenic culture of obligate parasite Sclerosporagraminicola. He established a very strong
school of tissue culture research both at Rajasthan University, Jaipur and Jodhpur University,
Jodhpur in Rajasthan. It is because of his vision and efforts that plant biotechnology activity
took early leads in this state.

79

Tissue culture technique, which started as an academic exercise, passed through

rigorous tests in different discipline of plant science and has emerged as a strong
biotechnology. There are many commercial applications benefiting mankind. It has to be
taken with the cautious note that this technique is not a universal panacea. It can simply
augment the efforts being made by scientists to solve some of the most serious problems in
plant science. The future promises more rapid development in this area and a quiet revolution
is in offing.

4.2.

Plant tissue culture industry at global level:

The science and technology of plant cell and tissue culture development over the last

25 years have had a profound effect on plant science related industries. Research efforts
have increased drastically worldwide in recent year including the efforts in the developing
nations such as India. It is now possible to regenerate plants from cultured cell, tissues and
organs in almost every plant species. One of the primary forces in the transformation of plant
tissue culture from an art to an industrial technology is micropropagation which exploits the
fundamental property of plant cells for rapid multiplication of elite genotypes on a large scale
in a comparatively short time.
The large scale commercial propagation of plat material based on plat tissue culture
was pioneered in the USA with micro-propagation of orchids in 1970s. Since then there has
been tremendous expansion at global level in terms of the no. of production firms as well as
the no. of plants produced during 1985-1990. Worldwide commercial production of
tissueculture plants has increased by 50 percent during 1986 to 1993. Prakash (1999) had
estimated production of only ornamental plants at 130 million units per annum. However, the
total worldwide production was estimated at 663 million plats in 1993 and 800 million in
1997. Thereafter, the importance of plant production has dramatically increased through the
80

demand for genetically engineered plants with unique characteristics for which in vitro
technique were/are applied as a vital intermediate production step. Currently, the plant tissue
culture represents a billion dollar industry with five hundred million to one billion plats
annually produced (see table 4.2).
There are 212 million plantlets are being produced per year in Western Europe from
248 commercial plant tissue culture units. However, only 37 firms are capable to produce
million or above plantlets per year. Among the 67 commercial firms which produce 62
million plats annually in Netherlands, five firms are capable to produce more than 5 million
annual production, 6 firms are able to produce between 1 and 5 million plants per annum, 4
firms produce 0.5 to 1.0 million plants per year, 10 firms produce 0.1 to 0.5 million plants
annually and 42 units produce 10,000 to 100,000 plants per year. In Germany, of a total of 21
units, 4 have production capacity of 1-5 million plats per year, one has capacity of 0.5
million, six are with 0.1-0.5 million and ten with 10,000 100,000 plants per year. Globally,
biotechnology business is contributing to 150 billion US dollars, in this nearly 50-60%
comprises from agri-business sectors. It is estimated that micropropagation industry is
contributing to 10%, 15 billion USDs, of the global biotechnology business.
Micropropagation industry is expanding with 15% annual growth rate at world level. The
chronological production of tissue culture plantlets across the globe is presented in the
following table (Prakash, J. 2006).

81

Table 4.2 Growth of Micropropagation Industry at global level

No. of plants produced
S. No.
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.

Year
worldwide (in millions)
1986
130
1987
180
1988
240
1989
300
1990
390
1991
513
1992
562
1993
663
1994
680
1995
722
1996
783
1997
800
1998
822
1999
865
2000
900
2001
815
2002
865
2003
922
Source: Prakash, J. 2006

4.3 Plant tissue culture industry in India:

India enjoys a unique position and offers many advantages with its diverse landscapes
spread across different agro-climatic zones, good solar radiation throughout the year and
availability of skilled manpower with low cost. All these encourage the global leaders to
establish several micropropagation industries.
Current status:
As compared to the west, in India, micropropagation industry has started late by 10
years and expanded exponentially from 1987-1993. The facilities created are at par with those
82

available in leading countries such as Netherlands and USA. The first Indian commercial
plant tissue culture unit was setup in 1987-88 by A. V. Thomas and co. in Cochin Export
Processing Zone with a 5 million capacity. Since then, there has been a vertical expansion in
the number of units as well as production capacity per annum with about 50 industrial units
having been setup or in the pipeline with annual production capacity reaching 200 million
plants. In 1994, there were about 21 commercial plant propagation units in production with a
targeted annual production capacity of 80 million plants. All these units have not attained
their targeted production capacity. Another 30 units were setup resulting into a total of 210
million installed capacities in 1996.
However, the history of commercialization in India is a story of Rise and Fall and
Rise Again. It was observed that only 50% of installed capacity is achieved during 19861989 and this was declined to 20% in 1991 and it became worse during 1996 with only 7%
installed capacity utilisation. There was 50% decrease in production growth rate from 1991 to
1994 and but in1998 there was a negative growth rate that shows rapid decline in production.
However, the trend reversed in 1999 and in 2001 and a production level of 1996 was
achieved, and since then there has been an increase in number of units produced per year.
Since 1999 to now, nearly 35% growth rate is observed in annual tissue culture plantlets in
the country. This was realised with the better capacity utilization in 2002 and subsequent
utilisation of additional facilities increases the total installed capacity to 300 million plantlets
per annum. The growth of plant tissue culture industry in Indian is illustrated in the following
table no. 4.3.
Table 4.3 Growth of Micropropagation Industry national level
S. No.
1.

Year

No. of plants produced (in millions)

1986

00.50
83

2.

1987

02.50

3.

1988

03.75

4.

1989

05.00

5.

1990

07.50

6.

1991

10.00

7.

1992

12.00

8.

1993

13.00

9.

1994

15.00

10.

1995

18.50

11.

1996

22.00

12.

1997

18.50

13.

1998

15.00

14.

1999

20.00

15.

2000

25.00

16.

2001

22.00

17.

2002

30.00

18.

2003

50.00

Source: Sunil D Purohit (2013)

The potential for the domestic market is enormous and by conservative estimates it is
expected to be 15 billion US dollar in India with an annual growth rate of 15 percent. Tissue
culture units in India have capacity ranging between 1-5 million and above plants per annum
with an aggregate production capacity of over 200 million plantlets per yearin 2003 (Purohit
S. D., 2013). No. of units and their production across the states in 2003 are presented the
following table no. 4.4.
Table 4.4

Regional distribution of Commercial Micropropagation units in India

Annual production

S. No.

State

No. of units
capacity (in million)
84

1
2
3
4
5
6
7
8
9
10

Maharashtra
Karnataka
Tamil Nadu
Kerala
Uttar Pradesh
Haryana
Gujarat
Andhra Pradesh
Delhi
West Bengal

21
11
4
4
3
3
11
16
4
9

45.00
30.00
26.25
26.00
25.00
13.25
13.25
10.00
06.25
05.00

11

Himachal Pradesh

05.00

12

Punjab

01.70

Total

70

206.70

Source: Sunil D Purohit (2013)

Most of these tissue culture units are located in Maharashtra, Andhra Pradesh,
Karnataka and Kerala. Currently, the focus of the companies is mainly in the floriculture.
However, micropropagation in banana and sugarcane is also gaining popularity. These units
are currently producing fruit crops, forest trees, ornamentals, vegetables and plantation crops.
An analysis of plants micropropagated by Indian industry shows that ornamental plants are
(6.0-7.0 millions) are the major items being produced, in line with the international trend,
followed by tree species (1.0-2.0 million), fruit species (0.5-1.0 million) and other plants such
as spices, aromatics, exotic vegetables, etc. (less than 0.5 million).
Micropropagation has been carried out in several crops at ICAR institutes and
organisations which include potato, sweet potato, yams, garlic, lemon, banana, pineapple,
ginger, small cardamom, turmeric, black pepper and several medicinal and aromatic plants.
Coffee, tea, pepper, cocoa, mango and citrus varieties with diseases-free planting material
have also been produced. Banana, papaya, coconut, small cardamom, oil palm, ornamental
plants have been multiplied on a commercial scale by private seed companies.
85

4.4

Role of Research and Development Initiatives in Promotion of Micro

Propagation Industry in India.

Clonal propagation via tissue culture, i.e. micropropagation, as a concept was first
presented to the scientific community in 1965 by Morel and Martin. The necessary tools that
made micropropagation a possibility, such as the development of media and an understanding
of growth regulators, have been available only since the late 1950s, and it was not until the
early 1960s that a generalized culture medium was established. The history of tissue culture
can be gleaned from the introductions to classic papers in this area by joseph Arditti, A. D.
Krikorian, Peter Carlson, Robera Smith and J. H. Gould. The actual established of
commercial micropropagation as an industry became a reality during the 1970s and 1980s.
Thus, the micropropagation industry is only 20-30 years old, and retrospectives on
commercial micropropagation are few and far between.
Keeping this in view, biotechnology was identified as major priority area in the
nation. Government of India established national board of biotechnology in 1982; later, it
was elevated as Department of Biotechnology (DBT), under the ministry of science and
technology, in 1986, in recognition of the need for a focal point in the administrative structure
of the federal government of India. Since then, several well defined programmes of national
and commercial priorities in the area of micropropagation began in various government
research institutes/universities, and private sector organizations.
Micro propagation industry was recognised as a priority area by the government of
India. During last 15 years the ministry of Science and Technology has sponsored 150
projects for R&D and field demonstration in nearly 80 different universities/research
institutes. With this strong support from the Ministry of Science and Technology and
favourable policies of the Ministry of Commerce and Industries and Ministry of
86

Agriculture encouraged entrepreneurship in the country and led to the establishment of more
than fifty commercial tissue culture laboratories during 1987-1995.
Since 1987, Department of Biotechnology has supported a number of R&D projects on 20
tree species, 9 horticulture species, 11 desert and arid zone species and 5 temperate and
Himalayan tree species. Some of the horticulture and plantation crops on which research was
conducted were mango, citrus, banana, tea, coffee, rubber, cashew and spices such as
cardamom, black pepper, ginger, turmeric, etc. Government of India has setup a National
Facility for Virus Diagnosis and Quality control of tissue culture plants at New Delhi with
five satellite centers to facilitate further commercialization of tissue culture technology in
order to cater the needs of tissue culture industry.
The research on these have led to the development of blueprints for the commercial
exploitation of 11 forest tree species, 3 horticulture/floriculture species and 7 plantation
crops. Besides these, micropropagation protocols for several new crops species were
developed at M. S. Swaminathan Research Foundation, Chennai, National Research Spices,
Regional Research Laboratories and at the universities of Jodhpur, Udaipur, Delhi, Pune,
Hyderabad, Bangalore and a few others, under the R&D programmes supported by
Department of Biotechnology, University Grants Commission, Indian Council of Agricultural
Research, Department of Science and Technology and the State Governments Science and
Technology programmes.
Tissue culture pilot plants (TCPPs) facilities were also set-up for large scale
multiplication at two places National Chemical Laboratory, Pune and The Energy Research
Institute, Delhi and 3 hardening units were setup for the plants to be grown under greenhouse
conditions. The TCPPs have successfully completed their targets for production.
Approximately, 4 million plantlets were field planted over an area of 3,500 Ha. To facilitate
87

effective transfer of technologies, the existing infrastructure and expertise of the TCPPs at
TERI and NCL, Pune have been strengthened and upgraded as Micropropagation Technology
Parks. These serve as effective platforms to transform prove technologies: to act as a
technology resource centre to the upcoming and the established tissue units: and training
centers to demonstrate the technology of production and performance of in vitro raised plants
of forestry and horticulture species. The technology park at Pune has transferred the teak
technology to a foreign industry.
Tissue culture cardamom production plan was undertaken for the demonstration and
maintenance of high yielding tissue culture cardamom plants in the planters field on about
100 Ha. area in Kerala, Karnataka and Tamil Nadu. Various growth parameters of the tissue
culture plants were recorded to evaluate their performance and yields with respect to seedling
grown population. Training programmes for project staff and planters were organized on
various aspects of plant protection technology and for the improvement of demonstration
crops.
Success in the tissue culture cardamom production plan led to evaluation being taken
up on the performance of large cardamom on planters field over an area of 70 Ha. in Sikkim
and Darjeeling. Six thousand buds were multiplied in 4 commercial tissue firms. Tissue
culture vanilla production plan has been undertaken and large scale field trials over an area of
150 Ha. in Kerala, Karnataka and Tamil Nadu have been taken up recently. Field planting of
38 Ha.has already been completed. The performance of the field planted material is closely
being monitored.
Field demonstrations too were conducted for Dalbergiasissoo, Axadiracticaindica,
Acacia catechu, Gingko Biloba, Araucaria sps. Taxusbaccata, Quercussps., Salix sps.,
Ashokatre,

Malacalma

bamboo,

Oxycantherrasps.,
88

Casurinaequistifolia,

bananas,

strawberries and vanilla. Our researchers are credited with other important breakthrough in
the world in plant tissue culture such as perfection of anther and ovule culture, differentiation
of embryos from nuclear tissue, test tube fertilization, haploid embryo differentiation in
anthers, organ formation from endosperm, induction of in vitro flowering in bamboos and
production of somatic embryos in 15-20 year old woody legumes. Several efforts are initiated
by the government and private sector to make use of potential commercial benefits of plant
tissue culture in present century.

Chapter 5: Analysis
This chapter gives a detailed note on analysis methods and analysis procedure used in
this study. The descriptive analysis and its interpretations are presented in the section 5.1.1 to
describe the factors related to operational and strategic activities of the firm. Testing of
hypotheses is presented in the 5.2 and multiple regression analysis is presented invsection
5.3.
5.1. ANALYSIS OF SURVEY DATA
5. 1. 1 Descriptive data
The manpower size is greatly varies across the sample units and as illustrated in Table
No. 5.1 below 73% of the firms are operating with thirty or less employees.
Table No. 5. 1 Size of firms (Number of employees)
Size

Less than 15

15-30
89

31-50

50 above

No. of firms

36.36

36.36

9.1

18.18

Majority (54%) of the sample plant tissue culture units are with the age group of 10
years or less and only 18% of the sample is older than 15 years. The distribution of sample
units based on the age of the firm is presented in the Table No. 5.2

Table No. 5.2 Age distribution of the firms

Age

Less than 10

10-15

More than 15

No. of firms

54.54

27.27

18.19

As illustrated in the Table No. 5.3, most (55%) of the sample firms are small range
production units with less than five million plantlets annual production capacity. Whereas,
36% of the sample is medium range production units with the installed capacity of 5-10
million plantlets per annum.
Table No. 5.3 Installed Capacity distribution of the firms
Installed capacity

Less than 5

5-10

More than 10

(in millions)
No. of firms

90

54.54

36.36

9.1

Average annual production of the sample firm is presented in the Table No. 5.4 below.
Among the sample units, 64% of the samples average annual production ranges between 1130 lacks plantlets per annum.

Table No. 5.4 Average Annual Production of the firms

Average annual
production

Less than 10

11-30

More than 30

No. of firms

18.18

63.64

18.18

(in lacks)

As mentioned in the table 5.5 average annual sales of the major share (64%) of the
sample are ranges between 10-30 lacks and the sample units whose average annual sales is
more than 30 lacks are comprises 18% of the sample.
Table No. 5.5 Average Annual sales of the firms
Average annual
sales

Less than 10

10-30

More than 30

(in lacks)
No. of firms

91

18.18

63.64

18.18

The average annual revenues of the sample firms are presented in the following Table
No. 5.6. Among the sample firms, 73% of the sample reported its average annual revenues
ranges between 100 to 300 lacks. Only 9% of the firms average annual revenues exceed 300
lacks. On the other hand 18% of the firms reported average annual revenues lower than 100
lacks.
Table No. 5.6 Average Annual revenues of the firms
Average annual
revenues

Less than 100

100-300

More than 300

No. of firms

18.18

72.72

9.1

(in lacks)

During the last six years 45% of the sample firms reported more than 10% of annual
percentage growth rate (APGR) in work force size where as 18% of the sample firms
reported less than 5% APGR in workforce. It is also noted form the Table No. 5.7, substantial
portion of sample (37%) is reported up to 5-10% of APGR.
Table No. 5.7 Annual Percentage growth of workforce of the sample firms
Annual percentage
Less than 5%
growth of workforce
92

5% - 10%

More than 10 %

No. of firms

18.18

36.36

45.45

It is evident from the Table No. 5.8 that 45% of the sample firms are used 50-80% of
their installed capacity on average. Only 18% of the sample firms are underutilized their
installed capacity lower than 50%.
Table No. 5.8 Installed capacity utilization of the firms
Average of Installed

50% Less than 50%

capacity utilization

More than 80 %
80%

No. of firms

18.18

45.45

36.36

The average of the workforce across each department is represented in the Table No.
5.9. All the sample firms employed less than five persons in R&D and Administration
departments. About 91% of the firms employed more than five persons in production and
82% of the sample firms employed more than five persons in marketing department.
Table No. 5.9 average workforce in various departments
No. of firms with
R&D

Production

Administration

Marketing

11

11

(100%)

(9%)
6

(100%)

(18%)
9

average workforce
Less than 5
5-15

0
(55%)
4

More than 15

(82%)
0

(36%)
Note: Figures in the parenthesis represent the percentage in total sample

93

It is noted the from the Table No. 5.10 that 64% of the sample firms are incurred less
than one lack rupees on average on R&D activities, but only 9% of the sample firms allocated
more than five lack rupees on R&D on average. Regarding the expenditure on raw material
procurement, on average, 82% of the sample firms incurred more than fifteen lacks. Majority
of the sample firms (73%) are incurred, on average, more than fifteen lack rupees on salaries.
Regarding the expenditure on maintenance, on average, 82% of the sample firms incurred
more than 15 lack rupees. Expenditure on marketing is significantly varies across the firms,
on average, 55% of the firms incurred 1-5 lack rupees and only 9% of the firms incurred less
than one lack rupees.
Table No. 5.10 Average expenditure on various activities
No. of firms with

Raw
R&D

average expenditure

Salaries

Maintenance

Marketing

material
7

< 1 lacks

2
0

(64%)
3
1-5 lacks

(27%)
1

(9%)

(18%)

(9%)
2

(18%)
6

(9%)
1

(55%)
1

(9%)

(9%)

6-10 lacks
11-15 lacks
>15 lacks

(18%)
8

(82%)

(73%)

(82%)

(18%)

As stated in the Table No. 5.11, most of the sample firms (91%), on average, earned
more than five lack rupees income and significant sample (55%) earned more than fifty lack
rupees on average.
Table No. 5.11Average Income of the sample firms

94

Average Income
Less than 5

5-50

More than 50

No. of firms

36

55

(in lacks)

Most of the firms (73%) of the firms observed more than two technology Upgradation
events in their life history and as represented in table 5. 12, 27% of the firms observed more
than four technology Upgradation events.
Table No. 5.12 Technology Upgradation events in firms history
No. of technology
Less than 2

2-4

More than 4

No. of firms

73

27

Upgradation events

5.2.

Testing of Hypotheses:
This section of the chapter explains the testing of the hypotheses that are presented in

the table no. 6.1 of the chapter 6. The summary of hypothesis testing is presented in the Table
No. 5.13
H10:

There is no relationship between Innovation Management Capability and Marketing

Capability of the firms (=0)

95

H1a:

There is relationship between Innovation Management Capability and Marketing

Capability of the firms (0)
To test the hypothesis H1a, Spearman Correlation Coefficient between Innovation

Management capability (IMC) and Marketing Capability (MC) is calculated

Figure No. 5.1 Spearman Hypothesis test output for Innovation Management
capability and Marketing Capability
. spearman ime mc, stats(rho p) star(0.05)
Number of obs =
Spearman's rho =

11
0.9364

Test of Ho: ime and mc are independent

Prob > |t| =
0.0000

It is observed that there is a very strong correlation between innovation management

and marketing capabilities and it is highly significant at 0.0000 levels. Therefore the null
hypothesis, i.e. there is no relation between IMC and MC (=0), is failed to be true and hence
the alternative hypothesis H1a (0) is accepted.
------------------------------------------------------------------------------------------------------*Note: Correlation is considered to be very low if it is less than 0.10, low between 0.10 and
0.29, moderate between 0.3 to 0.60, and high over 0.60 (Bryman and Cramer, 1990).
H20:

There is no relationship between Innovation Management Capability and Rightsizing

Capability (=0)

H2a:

There is relationship between Innovation Management Capability and Rightsizing

Capability (0)

To test the hypothesis H2a Spearman correlation coefficient between Innovation Management
Capability (IMC) and Rightsizing Capability (RC) is calculated
96

Figure No. 5.2 Spearman Hypothesis test output for Innovation Management
capability and Rightsizing Capability

. spearman ime rc, stats(rho p) star(0.05)

Number of obs =
Spearman's rho =

11
-0.1364

Test of Ho: ime and rc are independent

Prob > |t| =
0.6893

It is observed that there is a low negative correlation between innovation management

and Staffing Capabilities and it is not significant at 0.05 level therefore it failed to disprove
the null hypothesis (=0), i.e. there is no relationship between IMC and SC, and hence H2a is
rejected (0).

H30:

There is no relationship between Innovation Management Capability and Investment

capability (=0)

H3a:

There is relationship between Innovation Management Capability and Investment

capability (0)
To test the hypothesis H3a Spearman correlation coefficient between Innovation

Management Capability (IMC) and Investment capability (IC) is calculated

Figure No. 5.3 Spearman Hypothesis test output for Innovation Management
capability and Investment Capability
97

. spearman ime ic, stats(rho p) star(0.05)

Number of obs =
Spearman's rho =

11
0.9000

Test of Ho: ime and ic are independent

Prob > |t| =
0.0002

It is observed that there is a high correlation between innovation management and

investment capability and it is significant at 0.0002 level therefore the null hypothesis, i.e.
there is no relationship between IMC and IC(=0), is failed to be true and hence H3 a (0) is
accepted.

H40:

There is no relationship between Innovation Management Capability and Production

Capability (=0).

H4a:

There is relationship between Innovation Management Capability and Production

Capability (0).
To test the hypothesis H4a Spearman correlation coefficient between Innovation

Management Capability (IMC) and Production Capability (PC) is calculated

Figure No. 5.4 Spearman Hypothesis test output for Innovation Management
capability and Production Capability
98

. spearman ime pc, stats(rho p) star(0.05)

Number of obs =
Spearman's rho =

11
0.9091

Test of Ho: ime and pc are independent

Prob > |t| =
0.0001

It is observed that there is a high correlation between innovation management

capability and production capability and it is significant at 0.0001 level therefore the null
hypothesis, i.e. there is no relationship between IMC and PC (=0), is failed to be true and
hence H4a (0) is accepted.

H50:

There is no relationship between Innovation Management Capability and Absorptive

Capability (=0).

H5a:

There is relationship between Innovation Management Capability and Absorptive

Capability (0).
To test the hypothesis H5a Spearman correlation coefficient between Innovation

Management Capability (IMC) and Absorptive Capability (AC) is calculated

Figure No. 5.5 Spearman Hypothesis test output for Innovation Management
capability and Absorptive Capability
99

. spearman ime ac, stats(rho p) star(0.05)

Number of obs =
Spearman's rho =

11
0.8727

Test of Ho: ime and ac are independent

Prob > |t| =
0.0005

It is observed that there is a high correlation between innovation management and

absorptive capability and it is significant at 0.0001 level therefore the null hypothesis, i.e.
there is no relationship between IMC and AC (=0), is failed to be true and hence H5a (0)
is accepted.
H60:

There is no relationship between Innovation Management Capability and Leadership

Capability (=0).

H6a:

There is relationship between Innovation Management Capability and Leadership

Capability (0).
To test the hypothesis H6a Spearman correlation coefficient between Innovation

Management Capability (IMC) and Leadership Capability (LC) is calculated

Figure No. 5.6 Spearman Hypothesis test output for Innovation Management
capability and Leadership Capability

100

. spearman ime lc, stats(rho p) star(0.05)

Number of obs =
Spearman's rho =

11
0.8690

Test of Ho: ime and lc are independent

Prob > |t| =
0.0005
It is observed that there is a high correlation between innovation management and
weightage of innovation championing person and it is significant at 0.0005 level therefore the
null hypothesis, i.e. there is no relationship between IMC and LC (=0), is failed to be true
and hence H6a (0) is accepted.

H70:

There is no relationship between Innovation Management Capability and

Collaboration Capability (=0)

H7a:

There is relationship between Innovation Management Capability and Collaboration

Capability (0).
To test the hypothesis H7a Spearman correlation coefficient between Innovation

Management Capability (IMC) and Collaboration Capability (CC) is calculated

Figure No. 5.7 Spearman Hypothesis test output for Innovation Management
capability and Collaboration Capability

101

. spearman ime cc, stats(rho p) star(0.05)

Number of obs =
Spearman's rho =

11
0.3049

Test of Ho: ime and cc are independent

Prob > |t| =
0.3619

It is observed that there is a negative moderate correlation between Innovation

Management and Collaboration Capabilities and it is not significant at 0.05 level therefore the
null hypothesis, i.e. there is no relationship between IMC and CC (=0), is proved to be true
and hence H7a (0) is rejected.

H80:

There is no relationship between Innovation Management Capability and the Human

Resource Retention Capability (=0)

H8a:

There is relationship between Innovation Management Capability and the Human

Resource Retention Capability (0)
To test the hypothesis H8a Spearman correlation coefficient between Innovation

Management Capability (IMC) and the Human Resource Retention Capability (HRRC)
Figure No. 5.8 Spearman Hypothesis test output for Innovation Management
capability and Human Resource Retention Capability

102

. spearman ime hrrc, stats(rho p) star(0.05)

Number of obs =
Spearman's rho =

11
0.2238

Test of Ho: ime and hrrc are independent

Prob > |t| =
0.5082
It is observed that there is a negative moderate correlation between innovation
management and the human resource retention capabilities and it is not significant at 0.05
level therefore the null hypothesis, i.e. there is no relationship between IMC and HRRC
(=0), is proved to be true and hence H1i (0) is rejected.

Table No. 5.13 Summary of the Hypothesis Testing

Hypothesis
H1a:

Accepted

There is relationship between Innovation Management

Capability and Marketing Capability of the firms

H2a:

Rejected

There is relationship between Innovation Management

Capability and Rightsizing Capability

103

H3a:

There is relationship between Innovation Management

Capability and Investment capability

H4a:

There is relationship between Innovation Management

Capability and Production Capability

H5a:

There is relationship between Innovation Management

Capability and Absorptive Capability

H6a:

There is relationship between Innovation Management

Capability and Leadership Capability

H7a:

There is relationship between Innovation Management

Capability and Collaboration Capability

H8a:

There is relationship between Innovation Management

Capability and the Human Resource Retention Capability

5.3. Multiple Regression Analysis
An investigation of the relative impact of several independent variables on Innovation
Management Capability as the dependent variable is made through multiple regression
analysis. The regression model includes the independent variables viz., Marketing Capability,
Rightsizing Capability, Production Capability, Leadership Capability, Collaboration
Capability and the Human Resource Retention Capabilities of the sample firms. Table No. 5.
14 below indicate the dependent and independent variables used in multiple regression
analysis.

Table No. 5.14 Variable used in the multiple regression analysis

Acronym of the
S. No.

Dependent variable

Independent variable
variable
104

1.

Innovation
IMC
Management Capability

2.
Marketing Capability

MC

Rightsizing Capability

SC

Production Capability

PC

Leadership Capability

LC

3.
4.
5.
6.

Collaboration
CC

7.

Capability
Human Resource
HRRC
Retention Capability

The results of the regression analysis are presented in the figure 5.9. Out of the six
independent variables, only one variable, i.e. Marketing Efficiency, is proved as good
predictor of the Innovation Management Capability (IMC). All the six predictor variables are
represented in the following table no 5.15 in order of importance in explaining the variance of
IMC.

Figure 5.9 Multiple Regression Analysis output

105

. rreg ime mc rc pc lc cc hrrc, gen(wt)

Huber
Biweight
Biweight
Biweight

iteration
iteration
iteration
iteration

1:
2:
3:
4:

maximum
maximum
maximum
maximum

difference
difference
difference
difference

in
in
in
in

weights
weights
weights
weights

Robust regression

=
=
=
=

.03212584
.1541808
.01823393
.00332227
Number of obs =
10
F( 6,
3) = 271.15
Prob > F
= 0.0003

ime

Coef.

mc
rc
pc
lc
cc
hrrc
_cons

.0232387
.0000886
.0032708
.0014642
.0030138
-.0060293
-.021703

Std. Err.
.0030324
.0015094
.0011708
.0025399
.0034972
.006082
.015625

t
7.66
0.06
2.79
0.58
0.86
-0.99
-1.39

P>|t|
0.005
0.957
0.068
0.605
0.452
0.395
0.259

[95% Conf. Interval]

.0135881
-.004715
-.0004551
-.0066189
-.0081157
-.025385
-.0714286

.0328893
.0048922
.0069968
.0095474
.0141433
.0133265
.0280226

Table No. 5.15 Multiple Regression Analysis Results

Standardized Regression
Variable

Significance

Marketing Capability (MC)

Coefficient
0.0232387

0.005*

Production Capability (PC)

0.0032708

0.068

-0.0060293

0.395

0.0030138

0.452

Human Resource Retention

Capability (HRRC)
Collaboration Capability (CC)

106

Leadership Capability (LC)

0.0014642

0.605

Rightsizing Capability (SC)

0.0000886

0.957

* Significant at 0.05 level

It is evident from the table 5.15 that the most of the variable are non-significantly
predicting the variance of the response variable. Small sample size could be the reason for
this non-significance observed in the predictor variables.

Summary:
In this chapter the data is analysed with both descriptive and statistical techniques.
Simple percentage method is used to explain the characteristics of the sample firms such as
size, age, installed capacity, annual production, annual sales, annual revenues, workforce
growth rate, installed capacity utilization, expenditure, income and technology upgradations.
It is found that 73% of the sample firms are operating with less than thirty employees. The
average age of the sample firms is very low, it is found that 54% of the sample firms are
established with in the last ten years period. Majority of the sample firms are medium scaled
units with five million or less installed only capacity. Majority of the firms, i.e. 82% of the
sample, average annual production and sale is higher than the ten lack plantlets. It is found
that the 82% of the sample firms average annual revenue is higher than one crore rupees. On
average, 82% of the sample firms reported 5% growth rate in their workforce. About 63% of
the sample firms used less than 80% of their installed capacity.
It is interested to note that, the average no. of employees working in R&D department
is not exceeds five person in any given year of their age. On average it is observed that, 91%
of the sample firms employed more than five persons in production activity and 82% of the
sample firms employed more than five persons for marketing activity. It also found that 64%
107

of the sample firms incurred less than one lack rupees as average expenditure on R&D
activities, but 82% of the sample firms incurred more than one lack rupees as average
expenditure on marketing activities. It is noted that 55% of the sample firms reported more
than fifty lacks as annual average income and only 9% of the sample firms reported less than
one lack rupees as annual average income. There are up to four events of technology
upgradation in the 73% of the sample firms and the rest of the sample reported more than
four events where technology upgradation took place.
The hypotheses postulated for this study are tested with the help of the Pearsons
Correlation Coefficient and found that out of the eight hypotheses proposed for the study five
are proved as valid hypothesis and the analysis is failed to prove three hypotheses. The results
of the analysis proved that the hypothesized relationship of variables viz., Marketing
Capability, Investment Capability, Production Capability, Absorptive Capability and
Leadership Capability with Innovation Management Capability of the sample firms is
significantly true in the population. The analysis of the data failed to prove the hypothesized
relationship of variables such as Rightsizing Capability, Collaboration Capability and Human
Resource Retention Capability with Innovation Management Capability of the sample firms.
In addition to the Pearson Correlation analysis, a multiple regression analysis is
executed to know the relative impact of various variables on Innovation Management
Capability of the sample organisations. A regression model which includes Marketing
Capability,

Rightsizing

Capability,

Production

Capability,

Leadership

Capability,

Collaboration Capability and Human Resource Retention Capabilities as independent

variables and Innovation Management Capability of the sample firms as dependent variable is
modelled to identify the factors that influence the Innovation Management Capability of the
sample organisations.

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The results of the multiple regression analysis revealed that among the predictor
variables the variable named Marketing Capability is found as good predictor of the
Innovation Management Capability of the sample firms. It is observed that a unit change in
Marketing Capability causes 0.27 unit change in the Innovation Management Capability of
the sample firms. It indicates importance of the marketing strategies, channels, methods, etc.
in sustain the competitive advantage in oligopoly industries like micro propagation industry.
Since the all the regression assumptions are satisfied by the data, it is believed that the small
sample size may constrain the other predicted variable to show significant influence on the
dependent variable.

Chapter 6:

Discussion and Conclusion

6. 1 Introduction
The complex nature of innovation made the innovation management phenomenon
less understood, even in mature industries, in spite of several researchers contributions
during recent decades. In this stand, several researchers argued that the innovation
management practices or strategies of small and emerging industries are different from
mature and structured industries. With general introduction about concepts and theories of
innovation, a systemic literature review is attempted to review present and previous studies to
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find evidence that management of innovation is indeed a higher order dynamic capability of
the organisation. The reported evidences in the literature are then discussed to explore the
research gaps. Several hypotheses are framed based on the research gaps identified in the
literature and reported in chapter 3 and the results of these hypotheses testing are presented in
the chapter 5. In literature review, a theoretical framework is developed based on the dynamic
capability perspectives to provide context for unified treatment of hypotheses. In this
framework an attempt is made to illustrate that all these factors which are noted in each
hypothesis are in inter relationship with each other.
The methodology used for the design, implementation and testing of hypotheses is
presented in detail and discussed in in the chapter 3. In section 6.2 of this chapter, all results
of this study are discussed individually and evaluated against the evidences reported in the
literature. Section 6.3 highlighted the important implications of this study to the theory and
practice, while limitations of the present research study are presented in section 6.4. Finally
Section 7.5 provided needful suggestions for further research to further explore the
innovation management phenomenon.

6.2

Discussion of the Results

It was confirmed that the marketing capability of the enterprises (Hypothesis H1a)

have very strong positive and statistically significant correlation with the innovation
management capability of those enterprises. Marketing capability indicates the firms
capacity in popularising and marketing the products with in-depth knowledge on current and
future needs of the consumers. Dutta, Narasimhan and Rajiv (2005) found that the marketing
capabilities can contribute to the creation of dynamic innovation management capability
which in turn contributes for the achievement of competitive advantage. They also noted that
these marketing capabilities are difficult to achieve and duplicate by other competitors in the
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market. The value of these marketing capabilities is firm specific and can be maximised by
the efficient operational management practices. In fact, organisational performance in
competitive markets is depends on firms capacity to gather, analyse and use of market-based
information for their strategic decisions (Jaworski & Kohli, 1993; Slater & Narver, 2000).
The present study shows that there is an insignificantly low negative relationship
between Rightsizing Capability (H2a) and innovation management of the organisation. It is
highlighted the fact that the change in the size of the workforce at interdepartmental level
could not affect the innovation management capability of the organisation. Yu and Park
(2006) in their study proved that innovation management capability acts as a mediating factor
that accelerate the positive effect of rightsizing on financial performance and employee
productivity of Korean firms. However, several research studies disproved the notion of
getting positive rents from the resizing process. Cascio and Young (2003) study on
performance of financial innovations of the U.S. corporations revealed that the performance
of financial innovations of the stable organisation is higher than the organisations which were
frequently resizes their organizational manpower. Another research study on American
enterprises (Krishnan & Park, 1998; Morris et al., 2000) also proved that resizing showed no
impact on the performance of financial innovations of several industries. Mentzer (1996)
found that the innovative performance of Canadian firms was not related to their resizing
initiatives. Similar results are also found in the De Meuse et al. (2004) study where the
performance of financial innovations of resized companies is not differed with the nondownsized firms.
In this study, we found that the Investment Capability (H3a) has a strong positive
correlation with innovation management capability of the firm. It supports the findings of the
Higgins (1995) and Porter (2000) conclusion that the investment capability of the firms

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determines the organisations success and competitiveness under the moderating influence of
innovation management capability. Traditionally, only the investment in R&D activities was
being perceived as the key factor for innovation development. However, good number of
research studies found that merely providing heavy investment on R&D activities cannot
sustain innovation performance and firms competitiveness (Yam et al., 2004; Guan & Ma,
2003; Souitaris, 2002; Romijin & Albaladelo, 2002). The positive association between
organisations investment in technological innovation development and innovative
performance of the firm has also been supported by conclusion of Zahara and George (2002)
research study which states that investment capability enables the firm to achieve greater
innovation capability to meet the demands of its changing domestic and international market
and thus enhances the organisational performance. It also enables firm to exploit the
intangible technological assets, which can be beneficial to the learning process in innovation
management process (Xie, 2004).
The relationship between Production Capability and Innovation Management
Capability of the firm (H4a) found as very strong and positive correlation and highlighted the
fact that production efficiency of tissue culture units plays a key role in meeting the customer
demands. Reichstein and Salter (2006) found that firms production capability enhances its
innovation management capability and accelerates the process of competitive advantage. The
present result is also supported the findings of Krasnikov and Jayachandran (2008) study
where they found that firms with long experience can build strong production capability to up
large-scale production by making more rigorous production processes with low production
cost. As stated by the Ju et al. (2013) superior production capability enable the firms to
outperform their competitors by offering quality products to the customers at competitive
prices.

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In this study, it is proved that (H5a), there is a strong positive correlation between
innovation management capability and absorptive capability of the firm. Newey and Zahra
(2009) stated that firms absorptive capability is a core competency that supports the
functioning of operational and innovation management capabilities of any firm. Wang and
Ahmed (2007) noted that the higher the firm exhibits absorption capabilities the higher it
builds innovation management capabilities. The present result is inclined towards the Zahra
& George(2002) argument that absorptive capacity is often reflected in the firms
innovativeness and its ability to exploit new knowledge for outperform its competitors in the
market. Tsai (2001) conclude that lack of absorptive capability is a major barrier to transfer
key knowledge in to the organisation and affects the innovation management capability.
It is proved that, the leadership capability (H6a) of the firm is in strong positive
correlation with the innovation management of the firm. Ghobadian and O'Regan (2006) says
that as leaders and executives face very dynamic and unpredictable environment due to the
factors that impact firm overall performance viz. socio-technological changes and
globalisation of business and globalization. The organisations which maximize leadership
capabilities remain in competitive in meeting their customer needs. The present result
supported the Vance and Larson (2002) conclusion that derived from the literature review on
leadership capabilities that leadership can have major influence on the innovation
performance and outcome in organisations. In another study, Sookaneknun &
Ussahawanitchakit (2012) stated that leadership capability is the most important indicator of
the firms innovation management capability to convert resource in to products by
coordinating organizational capacities and networks. Callan et al. (2007) found that
leadership capability has significant role in enabling subordinates to meet and exceed
performance expectations in innovation development in the organisation.

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In this study, in contrary to the hypothesized relationship, we found that there is low
negative and insignificant correlation between innovation management capability and
collaboration capability (H7a). In literature, there has been lot of studies that explored the
positive relationship of collaboration capability with innovation management capability but
very few studies has reported neutral or negative relationship. Deeds and Hill (1996)
identified negative relationship between firm collaboration capability and innovation
management capability for high technology ventures, they says that the new technology
ventures performance could decline if their collaboration networks exceeds the maximum
limit which after firms are not capable to manage their alliances. It also observed that one of
the reasons for an inverted U-shaped relationship in collaborating firms is that formation of
the most productive alliances at first and subsequent weaker alliance formation in later period
and led to the networking overload (Zahra et al., 2000). Transaction costs among the
collaborating firms rises as firms enter more alliances and beyond certain point possible gains
from the addition of new alliance outweighed by the associated transaction costs (Jones and
Hill, 1988). Browning et al. (1995) studied the negative effects of coordination in SEMA
TECH consortium and found that high level of confusion and ambiguity about roles and
responsibilities are attributed to the negative effects observed in the study. Anand and
Khanna (2000) and Hoang and Rothaermel (2010) found the positive effect of alliance
experience on firm performance. They argued that firms with considerable alliance
experience know how to deal with the interpersonal relations at the interorganizational level.
It involves tacit knowledge and develops over time.
In this study, the relationship between human resource retention capability (H1h) and
innovation management capability found as weak positive and insignificant correlation. In
literature it is observed that there are dual opinions on the impact of human resources
retention capability on innovation management capability of the organisation. The positive
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consequences of employee retention on firm innovation management capability have been

supported with mediation effects of low turnover rates (Kacmar et al., 2006), cost
effectiveness (Alexander et al., 1994) and productivity (C. Brown & Medoff, 1978). In
contrast to this McElroy et al. (2001) found strong negative relationship between voluntary
turnover and organizational innovative performance. The present study result also supports
the Sacco and Schmitt (2005) findings that observed a weak negative relationship between
turnover and innovative performance of the organisation. Alternatively, Abelson and
Baysinger (1984) suggested that a limited and selective turnover can reduce organisational
stagnation helps in improving innovation management capabilities. Similarly, limited
turnover may also contribute to the development of employee heterogeneity and there by
prohibit emergence of groupthink (Schneider et al., 1995). Further to this, new recruits can
bring new networks that contribute for enhancement of innovative performance of firms.
In this study, a multiple linear regression analysis is also carried out to estimate the
influence of the selected firm capabilities on innovation management capabilities. In this
regression analysis Marketing Capability, Rightsizing Capability, Production Capability,
Leadership Capability, Collaboration Capability and the Human Resource Retention
Capability are used as independent variables to estimate the variability in dependent variable,
i.e. Innovation Management Capability. It is found that, among the firms capabilities,
marketing capability is significantly influences the innovation management capability of the
firm. Form the regression results presented in the table 6.15, it is inferred that one unit rise in
the marketing capability predicts 0.27 units rise in innovation management capability.
Though the strength of the relationship is low it is highly significant. All the remaining
capabilities are found as non predictors with very weak influence on innovation management
capability of the firms.

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6.3

Implications for the Theory:

Prior research on organisational capabilities has generally focused more on validating

the relative impact of organisational capabilities on firm performance, than the potential
mediating and moderating relationship of Innovation Management Capability. This study
provides new insight into the significance of organisational capabilities for the relationship
between organisational capabilities and innovation management capability. This study adds to
the small number of empirical studies that show the relative impact of organisational
capabilities on firm performance by identifying the significance of individual organisational
capabilities for innovation. In particular, the findings of this study show marketing capability,
investment capability, production capability, absorptive capability and leadership capability
have a strong relationship with innovation management capabilities. While prior research
suggests the interdependence of Rightsizing Capability, collaborative capability and human
resource retention capability with innovation management capability, this study revealed
insignificant relationship. This dynamic capability perspective provides a more complete
picture the way firms access, develop and deploy capabilities in the business environment.
Despite numerous empirical studies purported the significance and relevance of
innovation management for competitive advantage, the role of organisational capabilities in
the relationship between higher orders capabilities and firm performance remains under
explored. This study adds the extant empirical studies that have noted the importance of
resources and first order capabilities for developing dynamic capabilities and for achieving
continuous innovation. As indicated in the results, marketing capability has a positive effect
on the innovation management capability. The extent of the presence of marketing
capabilities in a firm influences the development and application of innovation management
capability.

116

As an integrated model of innovation management capability to enhance firm

performance to achieve competitive advantage, this study advances new insight into
organisational capabilities as regard the significance of dynamic capability. The results
indicate that the organisational capabilities not only have differential strengths but also better
leveraged in building innovation management capability. The extant literature on innovation
management capability has omitted leadership capability, Rightsizing Capability and human
resource retaining capability as key capabilities of enhancing innovation management
capability. The extant literature on conceptualisation of innovation management capability
requires competencies and resources for the development of dynamic capabilities. Thus, by
empirically examining the roles of organisational capabilities on the innovation management
capability, this study demonstrates that organisational capabilities significantly related with
the innovation management capability of the firms.
This study contributes to the dynamic capability theory on several fronts. First, this
study conceptualises that capability development for responding to changes in the
environment includes a firms external resources through connected relationships. By
addressing the inherent limitation of resource-based view that focuses mainly on single firms
and internal resources respectively, this study meets this challenge and presents a new
perspective of the role of firm core capabilities in building higher order capabilities
particularly innovation management capability.
Second, the finding of a significant correlation between firm core capabilities like
marketing capability, investment capability, production capability, absorptive capability and
leadership capability resonates with research that suggests an inter-connected nature of firms
first and second ordered capabilities. Third, this study contributes to knowledge of dynamic
capabilities development. In finding a relevant impact of the firms resource base on the

117

relationship between firm core capabilities and higher order capability like innovation
management capability. This study reveals important organisational factors. Fourth, this study
contributes to further understanding of a firms innovation management capability by
examining deeper relationship of innovation management capability with firm core
capabilities like marketing capability, right sizing capability, investment capability,
production capability, absorptive capability, leadership capability, collaboration capability
and human resource retention capability. As such, this study suggests that a firm must exploit
resources and capabilities and cultivate some level of learning system to build innovation
management capability.
Fifth, the study contributes to data and method in the innovation literature in terms of
testing and validating a new construct of innovation management capability. Following the
procedures of variable measurements, this study uses mathematical equations to derive
measuring units. This broad perspective reinforces that resource linkages permeate across
functional units, and simultaneously lead to a better development and integration of firm core
capabilities. The core capabilities measures fill a gap in the extant literature on the role of
core capabilities in firms business. Nonetheless, further research should replicate and validate
the present construct to ensure it elicits the effects of core capabilities on firm innovation
management capability especially distinguishing different product-markets and industry
sectors.
Implications for practice:
Todays business environment is characterised by competitive markets and requires
efficient managers with strong innovation management capability to sustain changing market
and technological forces. This study shows that a dynamic capability perspective of
innovation management capability that relevant for managers to develop and strengthen
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innovative capabilities of the firm. In a network view, managers evaluation of firm core
capabilities spans organisational boundaries and opens up new opportunities for integrating
external capabilities through inter firm collaboration and relationship development. In order
to enhance innovative capabilities, firms can nurture and develop specific core capabilities
such as marketing capability, investment capability, production capability, absorptive
capability and leadership capability.
Managers have to realize the importance of innovation management capability for
organisational growth and survival in highly competitive environment. This is necessary
because managers have a tendency to implement old strategies, that have contributed for the
success in past, by anticipating similar past success even for future course of actions. Top
managers overcome this general inertia and make use the creativity and potential of
employees by their sustained efforts to direct all these organisational and personnel effort in
innovation management process. Success in innovation development and management
requires the coordination among influential factors and investment in suitable resource
combinations. Innovation management capability cannot be developed easily and it takes
considerable time, right resources and right organisational efforts. Since the manage plays
central role in innovation process in small firms, empowering managers is the first step in any
innovation process. This should be accompanied with the professional development of other
staff members.
The oligopoly nature of micro propagation industry in India requires effective
marketing skills in managers of tissue culture production units to retain and gain more market
for their products. Managers have to be selective in investing on various activities like R&D,
Production, Marketing, Logistics, etc. and rationalise their investment based on the predicted
changes in demand and competition. Since there are few companies operating in the industry,

119

managers should thrive to build strong production capabilities in the firm and outperform
their competitors by producing the products with minimum production cost. Finally Sound
leadership qualities in managers would complement the firm capabilities and resulted with
effective organisational performance than their competitors.

6.4

Limitations of the Study:

As with every research, the scope and objectives of this study give rise to several

limitations. The first is concerned with trade-off decisions in the conceptualisation of the
constructs in the study. Drawing on theory, the literature and the results of the data analysis,
this study examined eight specific organisational capabilities validated in a small number of
empirical studies. This precluded other potentially relevant firm capabilities (e.g., branding)
and higher-level integrative marketing capabilities such as customer relationship
management.
While the study controlled for several factors in the data analysis, the focus of this
study on firm core capabilities exclude other organisational capabilities. Moreover, external
factors may explain innovation management capabilities such as government initiatives and
assistance could influence the extent of a firms innovation management capability. Although
one of the main contributions of this study is the analysis of direct relationship between firm
core capabilities and higher level capabilities like innovation management capability, there
also moderators and/or mediators for the relationship between firms core capabilities and
innovation management capabilities. For example, learning capability has been shown to be a
significant moderator of firm performance especially in the context of inter-firm
relationships.

120

Secondly, the data of the study influenced the research design and analytical
techniques used in the data analysis. The primary use of quantitative techniques in the data
analysis served the purpose of examining the hypothesized relationships. However,
quantitative results may mask underlying reasons or explanations for understanding the
relationship between marketing capabilities and innovative capabilities.
Thirdly, theoretical positioning of the study confines insights into certain aspects of
enhancing innovation management capability through firm core capabilities. The focus of
firm core capabilities on interdependent and collective individual capabilities does not
address how firms should deploy and integrate higher-order capabilities.

6.5

Future Research
The above main limitations present future research avenues. Further research could

conceptualise firm core capabilities as a higher-order integrative capabilities that include

other strategic capabilities such as customer relationship management. On the same note,
future research could explore and examine the innovation management capability construct to
focus on gaining deeper insights into process innovation than outcomes based on incremental
and radical innovations. Although the sample of data is reasonably diverse, future research
may examine large number of sample to provide more detailed analysis of firm level
dynamics in the industry. This might give a different set of results or alter the proposed
framework. By replicating the studys framework to other sectors, future research would
improve the measures of the study and enhance validity of the framework. In addition, further
research could collect qualitative data and develop case studies to gain deep insights into
innovation management capability development. This includes the potential of analysing
changes in innovation management capabilities over time using longitudinal data. Future
researchers should develop and analyse a firms network perspective based on multiple
121

parties using fine-grained measures to advance dynamic capabilities view and resource-based
view beyond a single firm and internal resources of the firm respectively.
Beyond further research avenues based on the limitations, the present study suggests
three important new areas for further research. First, additional research is required to explore
the strong mediating effect of learning capability on the relationship between firm core
capabilities and innovation management capability. A useful starting point of focus for such
research is the role of technology in enhancing new product development capabilities. This
might illuminate how technology coalesce and/or facilitate new product development
capability through stages of new product development. Thus, future research may provide
insights that enable managers to better leverage specific technologies to enhance innovation
management capabilities for the purpose of innovation development.
Second, while the results indicate that marketing capabilities demonstrate relatively
high impact on innovation management capability, further research needs to expand to
conceptualise the marketing capability as a higher level capability of the firm.

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