Internet of Things Capability and Alliance PDF

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INTR
26,2
Internet of things
capability and alliance
Entrepreneurial orientation,
402 market orientation and product
Received 16 October 2014
and process innovation
Revised 9 November 2014
Accepted 15 November 2014 Xiaoyu Yu
School of Management, Shanghai University, Shanghai, China
Bang Nguyen
School of Management, East China University of Science and Technology,
Shanghai, China, and
Yi Chen
School of Management, Shanghai University, Shanghai, China
Abstract
Purpose – The purpose of this paper is to examine the role of capability and alliance arising from the
internet of things (IoT), specifically in the relationships between strategic orientations (entrepreneurial
and market foci) with product and process innovations. In addition, it investigates the direct
relationship between IoT capability and alliance. Improving these relationships assist in ensuring that
new knowledge from the IoT can be translated into tangible business innovations that contribute to
economic development.
Design/methodology/approach – Data from 207 new high-technology IoT ventures in China were
obtained after three-wave mailing (i.e. two reminders). Following a rigorous process to purify and validate
the measurement scale items, the study used structural equation modeling to test the conceptual model.
Findings – Findings demonstrate that an IoT capability only enhances product innovation, however,
with the addition and support from IoT alliance, both product and process innovation can be achieved
in new high-tech IoT ventures. This nuanced insight suggests that new high-tech IoT ventures should
focus on building their IoT capability, and at the same time, develop IoT alliances with value chain partners
in order to fully take advantage of IoT and gain a better position to formulate more novel offerings.
Originality/value – The study is first to contribute with a much needed framework of IoT and
entrepreneurship by examining the role of IoT capability further in the relationships between:
entrepreneurial orientation and market orientation with product and process innovations arising from
IoT; and the role of IoT alliance (interfirm relations, partnerships, etc.) on the relationship above.
Keywords Entrepreneurial orientation, Internet of things, Market orientation, Capability,
Product innovation, Process innovation
Paper type Research paper
1. Introduction
Considerable amount of research has been undertaken to understand the cognitive and
learning processes associated with strategic orientation and innovation (e.g. O’Connor,
1998; Smith and Tushman, 2005), as improving the understanding of such relationship
can assist in ensuring that organizational investment is translated into tangible
business innovations and practical solutions that lead to sustainable competitive
Internet Research
Vol. 26 No. 2, 2016
pp. 402-434 The research is supported by the Natural Science Foundation of China (Grant Nos 71472119,
© Emerald Group Publishing Limited
1066-2243
71102030), the Project of Philosophy and Social Science of Shanghai (2014BGL013), and the
DOI 10.1108/IntR-10-2014-0265 Project of “Social Development of Metropolis and Construction of Smart City” (085SHDX001).
advantage (e.g. Dyer and Singh, 1998; Hatch and Dyer, 2004). Much of the importance IoT capability
of the innovation concept stems from the outcomes that follow, including new product and alliance
creation ( Jiang et al., 2014; Veryzer, 1998), new-venture growth (Grønhaug and
Kaufmann, 1988; Li et al., 2014b; Shan et al., 2014), and process efficiency (Li and
Zhou, 2013; Li et al., 2014a; Verona, 1999; Zhou et al., 2014). For an entrepreneurial
firm, identifying and ensuring innovation is widely viewed as a crucial strategy – one
from which, in many cases, all else follows (Chen et al., 2006; Laursen and Salter, 403
2006). Thus, innovation has been the subject of much research in the field
of entrepreneurship.
With the rise of the internet of things (IoT), implications exist as to how innovation
can be most effectively induced. IoT has been proclaimed as essential for
organizational innovation, adaptation, and success in a changing environment
(Li et al., 2012; Yan and Wen, 2011; Xu, 2014), especially for firms with high amounts of
connectivity, network and data (Dlamini et al., 2009; Li et al., 2014a). With such
importance, it is surprising that few studies have examined the antecedents and
outcomes of the capabilities needed to adopt IoT in the organization and how these
relate to different forms of innovations, particularly from the perspective of the
entrepreneurial and market-oriented organization. Thus, to contribute with a much
needed framework of IoT and entrepreneurship, in the present study, we examine the
role of IoT capability further in the relationships between: entrepreneurial orientation
and market orientation with product and process innovations arising from IoT; and,
the role of IoT alliance (interfirm relations, partnerships, joint ventures, etc.) on the
relationship above.
The nature of alliances in the IoT context deserves greater attention for two primary
reasons. First, direct experience with IoT may contribute to interfirm relationships and
partnerships among IoT users (Steensma et al., 2000; Young-Ybarra and Wiersema,
1999), which can help the firms acquire and enhance knowledge and skills (Intel, 2014;
Kale and Singh, 1999; Walter et al., 2007). This experience in turn, will lead to more
relationship-oriented actions and decisions among the parties, and potentially to more
knowledge intensive and innovative outcomes (Heimeriks and Duysters, 2007; Baum
et al., 2000). Second, the interaction between IoT capability and IoT alliance is little
researched, and in itself, interesting due to the nature of networking at varying levels.
For example, with recognized and trusted technology ecosystems in an IoT alliance,
leading-edge solutions, faster time to market, design and development expertise can be
achieved (Bi et al., 2014; Xu and Viriyasitavat, 2014; Wang et al., 2013). In combination,
IoT capability and alliance are a vital engine for change, initiating the exploration of
new practices, strategies, and courses of action, as well as reinforcing continued use
and refinement of current ones (Sampson, 2007; Xu et al., 2014).
Scholars suggest that entrepreneurship represents the potential “engine of progress”
through which new products are created, new markets are entered, new technologies are
explored, and new businesses are built (e.g. Shane and Venkataraman, 2000). Lumpkin
and Dess (1996) suggest that to create an entrepreneurial organization, an entrepreneurial
orientation is vital, especially in the creation of new, innovative products (Wiklund and
Shepherd, 2005) and that resources from which the innovation arises from include the
knowledge from managers and employees. Such specific form of human capital offers an
inevitable resource for the organization’s research and development (R&D) (Wright et al.,
2001; Ranft and Lord, 2000). For example, the founders’ human capital is an essential
factor in the innovation process that will compensate for deficiencies of the physical
capital at the start-up stage (Kato et al., 2015). Dakhli and De Clercq (2004) find strong
INTR support for the positive relationship between human capital and innovation at the
26,2 societal level, and a number of arguments suggest a positive relationship between human
capital and its knowledge with success. Jantunen (2005) states that knowledge developed
inside an organization is a strategic asset, which helps the firm maintain its competitive
ability, and critical for many innovation activities. Thus, for a new venture in a turbulent
environment, competitive advantage depends both on being entrepreneurial in
404 identifying and acquiring new knowledge (Ireland et al., 2002; Tallman et al., 2004), as
well as on leveraging existing knowledge inside the organization (Oliver, 1997). The
entrepreneurial orientation is suitable for the study in both its attempt at optimizing
knowledge arising from IoT in order to develop innovation efficiently, and the lack of
empirical studies thereof. In the present study, we utilize the knowledge-based view to
examine new technology ventures’ entrepreneurial orientations, as they suffer from
liability newness and lack of adequate resources (Stinchcombe, 1965).
Furthermore, the market-based view (Kohli and Jaworski, 1990; Hunt and Morgan,
1995) states that firms’ market orientation and acquired possession of market
knowledge lead to certain firms outperforming others (Morgan et al., 2009; Olavarrieta
and Friedmann, 2008). We posit that the knowledge gained from IoT is a source of
unique market knowledge, and if used successfully, enables firms to outperform their
competition. While more and more researches are focussing on the relationship market
orientation and innovation (e.g. Atuahene-Gima, 1996; Hurley and Hult, 1998; Maatoofi
and Tajeddini, 2013; Dibrell et al., 2011), to date, existing research lacks an
understanding on the role of IoT capability and IoT alliance in the relationship between
strategic (entrepreneurship and market) orientation and product and process
innovation (Storey and Hughes, 2013; Alegre and Chiva, 2013) with even less
focussing on new technology ventures in emerging markets, such as China’s. To fill this
research gap, we develop a conceptual model to examine the mediating effect of IoT
capability between entrepreneurial orientation and market orientation with innovation.
Further, using resource dependence theory (Hillman et al., 2009; Pfeffer and Salancik,
1978), we investigate the role of IoT alliance on the relationship between strategic foci
and innovation, here in China’s new technology ventures.
The rest of our paper is structured as follows: we present our theoretical framing
based on our review of the literatures, and subsequently develop a set of hypotheses
and a corresponding conceptual model. Using a survey approach with Chinese new
high-tech IoT ventures, we then empirically test our hypotheses and present our
findings. Finally, we discuss our findings and our study’s implications for theory and
practice, highlighting important future research avenues.
2. Hypotheses development
2.1 Strategic focus and innovation elements: entrepreneurship and market
orientations
In the strategy literature, market orientation is considered a focal construct to enhance
innovation performance. To increase the possibility of innovation, firms must collect
market-based information and disseminate it throughout the organization (Atuahene-
Gima, 1996; Matsuno et al., 2002). Under the market orientation perspective, firms must
consider customer-, competitor-, and technology-related stimuli in order to enhance
innovation (Spanjol et al., 2012). A customer orientation refers to the ability to identify,
analyze, understand, and answer customers’ needs (Gatignon and Xuereb, 1997);
a competitor orientation is defined as the ability to identify, analyze, and respond to
competitors’ actions (Gatignon and Xuereb, 1997), and; technology orientation refers to
the firm’s ability to acquire a substantial technological background and knowledge IoT capability
base (Gatignon and Xuereb, 1997; Yadav et al., 2007). The market orientation pertains and alliance
to detecting and processing stimuli related to these three market elements with all three
orientations considered as vital to develop innovation (Zhou et al., 2005; Srinivasan,
2008; Spanjol et al., 2012). The literature is extensive on the relationship between
market orientation and innovation, and suggests both direct and mediated effects on
product innovation and process innovation. As noted by Spanjol et al. (2012) product 405
innovation outcomes are determined by the type of market stimuli that firms select and
attend to, as well as the interpretation frame of the firm, which determines how the
stimuli are processed. In turn, these influence the product innovation responses.
As the field of strategic management developed, some scholars have emphasized a shift
toward entrepreneurial processes, that is, the methods, practices, and decision-making
styles that managers use to act entrepreneurially. Lumpkin and Dess (1996) suggest that
these processes include experimenting with promising new technologies, being willing to
seize new product-market opportunities, and having a predisposition to undertake
risky ventures. They note five dimensions of entrepreneurial orientation, namely,
autonomy, innovativeness, risk taking, proactiveness, and competitive aggressiveness.
These are useful for characterizing and distinguishing key entrepreneurial processes, that
is, a firm’s entrepreneurial orientation (Lumpkin and Dess, 1996). In the following section,
we develop our hypotheses related to entrepreneurship and market orientation in the IoT
context, examining the evidence for the direct effects model first, followed by the indirect
effects model.
2.2 Entrepreneurial orientation and innovation

Entrepreneurial orientation is greatly influenced by the strategy-making process
literature (Covin and Slevin, 1989, 1991; Miller, 1983) and refers to the processes,
practices, and decision-making activities that lead to new entry. Specifically, it has
emerged from a strategic-choice perspective (Child, 1972), asserting that new-entry
opportunities can be successfully undertaken by purposeful enactment (Van de Ven
and Poole, 1995).
This purposeful enactment involves the key players’ intentions and actions in a
dynamic process aimed at new-venture creation. As noted by Lumpkin and Dess (1996),
the key dimensions that characterize an entrepreneurial orientation include a
propensity to act autonomously, a willingness to innovate and take risks, and a
tendency to be aggressive toward competitors and proactive relative to marketplace
opportunities. All of these factors may be present when a firm engages in new entry,
although successful new entry also may be achieved with only some of these factors.
That is, autonomy, innovativeness, risk taking, proactiveness, and competitive
aggressiveness and the extent to which each of these dimensions are useful for
predicting the nature and success of a new undertaking. They are dependent on both
internal factors, such as the organization structure and the characteristics of founders
or top managers, and external factors, such as the industry or business environment.
In a recent meta-analysis, Rauch et al. (2009) finds a positive correlation between
entrepreneurial orientation and business performance across 51 studies. They note that
firms may benefit from adopting an entrepreneurial orientation and such firms innovate
frequently while taking risks in their product-market strategies (Miller and Friesen, 1982)
since efforts to anticipate demand and aggressively position new product/service
offerings can often result in strong performance (Ireland et al., 2003). Thus, arguments
suggest that entrepreneurial orientation often leads to higher performance.
INTR However, the scale of the relationship seems to vary across studies (Rauch et al.,
26,2 2009). While some studies have found that businesses with a strong entrepreneurial
orientation perform much better than firms that do not adopt an entrepreneurial
orientation (e.g. Covin and Slevin, 1986; Hult et al., 2003; Lee et al., 2001; Wiklund and
Shepherd, 2003), other studies reported lower correlations between entrepreneurial
orientation and performance (e.g. Dimitratos et al., 2004; Lumpkin and Dess, 2001;
406 Zahra, 1991). Some were even unable to find a significant relationship between
entrepreneurial orientation and performance (George et al., 2001; Covin et al., 1994).
Thus, there is a considerable variation in the size of reported relationships between
entrepreneurial orientation and business performance (Rauch et al., 2009). Given the
lack of distinction in the innovation consequences measure, such the positive
correlation effect above might be different in the opposing effects of entrepreneurial
orientation on product vs process innovation.
Furthermore, because new high-tech IoT ventures in China habitually suffer from
the liability newness, limited resources, and lack of established relationships with
outside actors (Stinchcombe, 1965), they are devoting considerable time and energy to
build obtain process innovations to achieve improved efficiency (Tsui and Farh, 1997).
It is possible that an entrepreneurial orientation enhances product innovation more
than process innovation since a core component of the entrepreneurial orientation is
risk taking, which is critical to product innovation. Yet, at the same time, these
processes are also linked to process innovation. Based on the above discussion, we thus
expect the entrepreneurial orientation to enhance both product and process innovation
in the present context. Accordingly, we hypothesize that:
H1a. Entrepreneurial orientation is positively associated with process innovation, in
new high-tech IoT ventures.
H1b. Entrepreneurial orientation is positively associated with product innovation, in
2.3 Market orientation and innovation

Market orientation is considered a cultural foundation for the way an organization
acquires and utilizes market information (Kohli and Jaworski, 1990; Narver and Slater,
1990, 1998). Kohli and Jaworski (1990) describe the market orientation concept as a
process using market intelligence generation, dissemination, and a company’s response
to information. Varying dimensions of market orientations exist. For example, Narver
and Slater (1990) suggest three main dimensions of market orientation, namely,
customer and competitor orientation and inter-functional coordination, while Spanjol
et al. (2012) focusses on customer, competitor, and technology orientations.
While research on market orientation and innovation exists, there is still no
agreement about the relationship (Lukas and Ferrell, 2000). For example, on the one
hand, Deshpandé et al. (1993) finds that market orientation has a positive effect on
product innovation. On the other hand, Christensen and Bower (1996) show that
emphasizing on market orientation suppress the development of original new products.
Scholars note that with sporadic innovation, a focus on market orientation encourages
the development of product modifications for existing customer groups (e.g.
Christensen and Bower, 1996). Atuahene-Gima (1995) adds that market orientation’s
impact is greater on process rather than product innovations, however, consensus on
the issue does not exist. For example, Hurley and Hult (1998) find a positive effect of
market orientation on two types of innovations (i.e. product and process). Others argue
that adopting certain perspectives lead to different results and interpretations IoT capability
demonstrate different effects on innovation (Berchicci and Tucci, 2006). and alliance
Evidence suggests that a company’s market orientation facilitates the development
of more innovative, breakthrough products (Gatignon and Xuereb, 1997; Zhou et al.,
2005). High-technology firms spend significantly more on R&D (Miles, 2005), and this
investment explains innovations being more product based. Given the higher level of
required technology integration in these firms, the returns from investments are likely 407
to be greater by focussing on new products. That is, a focus on and investment in new
products can be a potent differentiator and thus expected to bring competitive
advantage (Nijssen et al., 2006). In addition, there is also the possibility that a market
orientation enables the organization to pick up information that induces a focus on the
processes leading to innovation. Thus, we posit that:
H2a. Market orientation is positively associated with product innovation, in new
high-tech IoT ventures.
H2b. Market orientation is positively associated with process innovation, in new
high-tech IoT ventures.
2.4 IoT capability and IoT alliance

Drawing from the literatures on dynamic capability, we develop the construct of IoT
capability. IoT capability refers to the firms’ ability to integrate firm resources and
skills arising from IoT to align with the firms’ strategic directions (Bierly and
Chakrabarti, 1996; Li et al., 2014a; Teece, 2007; Teece et al., 1997). For firms operating
with IoT, it is critical to identify environmental changes and respond to these
changes rapidly, so that they are able to commit resources and behaviors to new
innovations (Shan et al., 2014; Shimizu and Hitt, 2004). IoT capability implies that firms
make strategic decisions more efficiently; namely, by using IoT, these firms are
able to recognize new business opportunities, threat possibilities, and maintain
competitiveness. Consistent with previous strategy literature (Bierly and Chakrabarti,
1996; Banker et al., 2006; Teece, 2007; Xu, 2014), we thus refer to IoT capability as the
ability to acquire, integrate, and apply knowledge arising from IoT to commit resources
and behaviors to new innovations (e.g. Shimizu and Hitt, 2004) and in alignment with
its strategic directions and choice, thus enabling the IoT capabilities to be a source of
competitive advantage.
Parkhe (1991, 1993) suggests that a strategic alliance refers to “relatively enduring
interfirm cooperative arrangements,” which allow firms to serve their individual needs
by utilizing mutual resources. The literatures establish that alliance may be considered
as a particular form of knowledge sharing joint venture, which may be configured in
many different ways and associated with different kinds of behaviors (Alavi and
Leidner, 2001), thus, involving the allocation of resources to cultivate relationships with
partners (Tsang, 1998; Li and Atuahene-Gima, 2001). IoT alliance partners refer to
customers, suppliers (vertical), intermediaries, government, and competitors
(horizontal), all of which are important in IoT context.
Research shows that interfirm relations affect knowledge transfer and learning
(Hansen, 2002; Dhanaraj et al., 2004). Jansen et al. (2006) posit that connections appear to
be important antecedents of both product and process innovation. In transition
economies, researchers have argued the importance of alliance in firm success (Tsui
and Farh, 1997; Gao, 2006; Li and Zhang, 2007). For example, Tsui and Farh (1997)
demonstrate that in transition economies, managers of entrepreneurial firms are
INTR devoting considerable time and energy to build relationships with the local
26,2 government, in order to overcome their habitually suffering from the liability
newness, limited resources, and lack of established relationships with external actors
(Stinchcombe, 1965). It is suggested that such relationships can impose positive
attitudes toward their business and social affairs. Li and Atuahene-Gima (2001)
indicate that, in transition economies, these relationships with the government
408 represent a unique type of managerial ties, which are important to the firms’ success, as
it commits effort and resources into building them. Xin and Pearce (1996) point out that
these relationships can be substitutions for the insufficient formal infrastructure in
China’s transition economy, and is a type of alliance. Firms form these alliances obtain
access to scarce resources and information; they reduce uncertainty (Podolny and
Baron, 1997) and improve critical financial outcomes, such as firm performance (Peng
and Luo, 2000; Batjargal, 2003). In the new high-tech IoT industry in China, the
government provides support in resources, information, technology financing for firms,
through institutional devices and regulatory regimes (Li and Atuahene-Gima, 2002;
Luo, 2003), thus, with the combination of alliances and the use of IoT to connect with
important players, a powerful bond is provided toward deeper relationships, sharing,
and subsequently, innovation. As such, IoT capability and IoT alliance are part of a
firm’s knowledge acquisition efforts, representing the extent to which they can
acquire and disseminate knowledge, and which may lead to novel interpretations
and recombination of market knowledge and offerings, including product and
process innovations.
2.5 Indirect effects of strategic orientation and innovation

Firms with better IoT capability possess better access market information and use of
critical technology. These firms may benefit from such capabilities in a number of
areas, including being supplied with unique information, technology, and support,
further enhancing their IoT capability to proactively respond to environmental changes
(Tidd, 1995; Leiponen, 2006). However, the process of building such capability is also a
trial and error process, especially for those firms, which lack of established affiliations
or rich resources (Larson, 1991). Such trial and error process may be costly, but once
resolved, the knowledge arising from the process, can promote the firms’ ability to
proactively identify and evaluate useful information needed for innovations. In a
turbulent environment, such information supports the reallocation of resources at hand
for further innovative activities (Verbruggen and Logan, 2009). Therefore, IoT
knowledge and IoT capability provides essential information processing capabilities
for the market-oriented firm, its resource acquisition and integration, which in turn,
enhances innovation (Cai et al., 2013).
While empirical evidence suggests a positive relationship between alliance and firm
performance (Zhou et al., 2005), IoT capability amplifies a firm’s ability to reframe and
reinterpret current market information more specifically toward emerging
opportunities and solutions. In combination, they create novel offerings for firms
that would not necessarily have such ability and develop both product and process
innovations. That is, by reframing firms’ key capability, firms may display a higher
level of relationship-mindset and develop alliances that create new products and
subsequent innovation via both products and processes. Hence, by being proactive via
IoT alliance and IoT capability, firms are able to lead the industry and serve customers.
For example, in China, characterized by a transition economy’s under-developed
institutional framework, both local and central government control significant portions
of strategic resources to keep their influence of the market (Walder, 1995; Child et al., IoT capability
2003). Consequently, deep connections and alliance with the government, or those with and alliance
such connections, provide the best of means to obtaining financial resources,
information, approvals, licenses, and other resources that may be instrumental in
ensuring the success of an innovation strategy (Xin and Pearce, 1996; Li and Atuahene-
Gima, 2001). Based on the above, we therefore hypothesize the following:
H3a. IoT capability is positively associated with process and product innovation, in 409
H3b. IoT alliance is positively associated with process and product innovation, in
Better alliances provide firms not only with valuable sources of information and other
resources needed for innovations, but also – more importantly – governing mechanisms
to support and promote firm-specific capabilities. Since IoT capability serves as an
organizing principle for structuring and coordinating various resources and functional
units (Zander and Kogut, 1995), it plays a particularly important role in enhancing firms’
strategic orientation (Bierly and Chakrabarti, 1996). This is a particular challenge for
firms operating in China’s market-based economy (Oi, 1995; Yu et al., 2014). Thus, we
expect that IoT alliance affect innovation strategies through the enhancement of IoT
capability. These strategic capabilities, in turn, are based on firms’ resources and its
ability to transfer knowledge to firm-specific advantages, thus, enhancing firms to make
strategic choice efficiently and accurately (Bierly and Chakrabarti, 1996; Danneels, 2002).
IoT capability emphasizes rapid commitment of new resources to innovative activities in
response to changes. A number of key elements may be devised about IoT capability: it
broadens firms’ vision about acquired external resources and industrial developments
(Cohen and Levinthal, 1990); it promotes firms’ willingness to forgo existing investment
in exchange for future long-term development (Sanchez, 1995); and, It enhances the
breadth of knowledge, information, and resources to help firms identify market
opportunities, often beyond what would be apparent to them given their limited
pre-existing organizational stock (Gedajlovic et al., 2012).
We suggest that a high level of IoT capability in resource allocations and product
designs allows firms’ with the entrepreneurial orientation to adopt product and process
innovation strategies. This is possible through the absorption and application of new
internal resources, including human capital, which ultimately foster the stimulation of
capability-relationship building ideas (Cohen and Levinthal, 1990) and experimentation
with different product variations (Worren et al., 2002). As a consequence, we reason that
firms’ IoT capability, consisting of a breath of information combined with improved
integration and application of external resources (such as financial resources arising from
IoT alliance), increases the likelihood of an orientation toward experimentation and
discovery of novel market opportunities. These are typical characteristics of an
innovation strategy. Therefore, based on the above discussion, we hypothesize that:
H4a. IoT capability fully mediates the relationship between entrepreneurial
orientation and product and process innovation, in new high-tech IoT
ventures.
H4b. IoT alliance fully mediates the relationship between entrepreneurial
orientation and product and process innovation, in new high-tech IoT
ventures.
INTR Our framework suggests that the information processing characteristics associated
26,2 with IoT capability and alliance operate on input or stimuli into the innovation
processes, and that these stimuli are determined by a firm’s strategic focus on both
entrepreneurship and market orientations. The mere collection of internal and external
intelligence increases a firm’s ability to identify new opportunities and thus leads to
greater IoT capability and alliance.
410 When firms focus their attention on IoT capability, they are likely to develop an
enhanced ability to anticipate market actions and reactions (Day and Nedungadi, 1994).
Firms that can safeguard internal capability developments are able to actively obtain
intelligence by seeking out alliance building with those of its customers as well as rivals
(Porter, 1990). This is particularly true in new high-tech IoT ventures, where much
competitive development and R&D requires interfirm relations. While some new high-
tech IoT ventures are more able to gain from alliances than others, given the
coproduction nature of offerings and the need to test new services in the field,
developing new products and process requires that they are integrated into existing
systems across networks and alliances ( Johne and Storey, 1998). Such alliance
integrations require the need for a mature system with developed IoT capability. Thus,
increased IoT capability is likely to be positively associated with alliances. Thus, we
propose that:
H5. IoT capability is positively associated with IoT alliance, in new high-tech IoT
ventures.
With IoT, firms search for more and more information about technologies and markets.
Because of increasing opportunities to collect data (Peng and Luo, 2000), firms may
choose to identify and utilize further the market-based resources and capabilities. Thus,
to improve IoT capability via market channels and improve the search for external
resources, process innovation outcomes may be more relevant and important. We posit
that firms with a high level of IoT capability are more likely to develop a consummate
understanding of what resources they can access and of how they should allocate and
integrate those resources. Firms’ IoT capability aids in improving the innovation of
processes by utilizing existing resources, information, and knowledge, and
consequently achieve full potential of their key resources when IoT capability and
IoT alliance are used in combination (Barney, 1991). Zhou and Wu (2010) indicate that
IoT capability can help firms utilize acquired resources appropriately and efficiently,
demonstrating that by reconfiguring existing processes, firms may promote upgraded
products and services to serve existing markets in order to attain their short-term
performance objectives.
Although market-oriented firms engage in significant market information-searching
activities (Spanjol et al., 2011), they are also highly likely to pursue a differentiation
strategy (Frambach et al., 2003), which focusses a firm toward existing market
boundaries and definitions. That is, market-oriented firms seek differentiation by
aiming to identify points of differences within the narrow confines of the established
market (Spanjol et al., 2015). A me-too strategy (Lukas and Ferrell, 2000) focusses on
copying competing offerings and making them slightly better, and is thus unlikely to
enhance innovation in firms.
However, new high-tech IoT ventures accumulate in-depth knowledge about the
various technologies available in the market. IoT knowledge is associated with higher
levels of innovation because of the coproduction nature in alliance. With IoT capability
and alliance advancements, firms are likely to be more visible and a focus on market
knowledge, which coincides with higher levels of innovation. By definition, new high- IoT capability
tech IoT ventures are less constrained by existing product category and market and alliance
boundaries (Gatignon and Xuereb, 1997), and more open to novel interpretations and
solutions (Spanjol et al., 2012). Thus, a new high-tech IoT venture is likely to enhance
innovation through IoT capability and IoT alliance. Based on the above discussion
about the effects of IoT capability on IoT alliance, we therefore hypothesize that:
H6a. IoT alliance fully mediates the relationship between market orientation and 411
product and process innovation, in ventures.
H6b. IoT capability fully mediates the relationship between market orientation and
product and process innovation, in new high-tech IoT ventures.
2.6 Process innovation and product innovation

In developing innovations, resource constraints are among the most critical factors that
may influence new ventures’ competitive advantage (Stinchcombe, 1965). For those
new high-tech IoT ventures in China (Li and Atuahene-Gima, 2001), process innovation
is concerned with identifying new and more effective internal operations. By embracing
quality function deployment and business process reengineering (Cohen and Levin,
1989), new tools, devices, and knowledge in throughput technology are needed to
mediate between input and output, and help reduce production costs (Freeman, 1987).
Such cost reduction clearly helps the enhancing of the new high-tech IoT ventures’
competitive position, and may produce tangible benefits, such as new products, more
quickly. However, most new ventures in the IoT industry may lack internal motives to
innovate due to the inherent risk associated with innovation, and varying investment
restrictions. Under such circumstance, these ventures may focus solely on process
innovation to reduce production cost and materials consumption, as this presents
relatively lower risk and greater tangible results to management (Li et al., 2007). While
such process innovation is associated with cost reduction, its benefits may allow
ventures to utilize limited materials and resources to further their product innovation,
thereby achieving product differentiation (Du and Yong, 1998). Therefore,
we hypothesize that:
H7. Process innovation is positively associated with product innovation, in new
high-tech IoT ventures (Figure 1).
3. Methodology
3.1 Data and sample
Our sampling frame consisted of 207 new high-technology IoT ventures in China.
To target our sample, we utilized an IoT industry directory, entitled “Internet of Things
Buyers’ Guide in China” (http://rfiddaquan.rfidworld.com.cn/), from which we
randomly selected 500 new ventures (defined as eight years old or younger). The
selected ventures had to meet three fundamental criteria (Li and Atuahene-Gima, 2001):
its founding team must be composed of engineers or scientists; 30 percent or more of its
employees must be technical employees; and, it must spend three percent or more of
total sales on R&D. Ensuring that these criteria were met enabled us to target a sample
suitable for our study. As the IoT directory is maintained regularly by Ulink Media,
we were provided with updated e-mails and addresses, which we then used to contact
the companies.
INTR
26,2 Entrepreneurial Product
Orientation Innovation
IoT Capability
412
IoT Alliance
Market Process
Figure 1. Orientation Innovation
Conceptual model
We found that the managers of new high-tech IoT ventures were eager to learn more
about how to take advantage of the IoT development to conduct innovations toward
IoT business. Thus, we were able to invite many of the new ventures to participate.
As noted by Li and Warfield (2011), this unprecedented technology and business
trend – IoT – has brought enormous changes to global supply chain environments, and
firms facing the challenges may also derive great opportunities from the IoT revolution
(Mytelka, 2000). Given the environmental uncertainty and fierce competition, China’s
new high-tech IoT ventures, we were thus provided with a rich context to test the
antecedents and the underlying mechanism of innovations toward IoT development.
We developed the original questionnaire in English. Previously validated items and
constructs were utilized to ensure the validity of our measures (see below for more
details). With the assistance of two management scholars, competent in both languages
and with substantial research experience in the subject field in China, we were assisted
in the translation of the questionnaire into Chinese. We assured translation equivalence
by means of back-translation (Usunier, 2000) and paid special attention to detect any
significant misunderstandings caused by the translation. We were also careful to avoid
any cultural biases; hence prior to the execution of the main survey, we conducted a
pilot to ensure content and face validity. By interviewing 10 CEOs, conveniently
selected from ten ventures in the Guide, we were able to test our measurement. These
pilot interviews were not only aimed at getting answers the questionnaire items,
but also to provide feedback about the design and wording of the survey instrument.
We refined the questionnaire accordingly following the comments and suggestions.
We chose a key informant approach, given that the emphasis was on the CEO or
NPD team leader as the key representative figure of the venture (Kumar et al., 1993).
A structured questionnaire was mailed during September 2013 to the key respondent in
each venture, in which we used a stratified random sampling frame to target the 500
selected ventures. To reduce the potential for biases associated with the data collection
process (Miller et al., 1997), we restricted the recall time frame to three years. After a
three-wave mailing (i.e. two reminders), 207 (41.4 percent of 500) valid questionnaire
returns were obtained. Among the key informants, 66.7 percent were male, with 8.2,
63.3, and 28.5 percent having secondary education, bachelors, and postgraduate
(23.7 percent for masters and the rest for PhD) degrees, respectively. Of the responding
firms, 26.1 percent of the key informants were below 30 years of age, 55.6 percent were IoT capability
between 30 and 40 years, 14.0 percent were between 40 and 50 years, and the rest were and alliance
over 51 years. We consider the respondents to be representative in their competencies
and able to provide valid information for our study. A detailed sample profile is showed
as Table I.
3.2 Measures 413

Below we describe each of the constructs and their underlying items used in our
research. We utilized a seven-point Likert scale to measure all measures in order to
increase the findings’ reliability (see Table AI for a full list of items).
Entrepreneurial orientation. We used the seven-item scale, previously validated by
Miller (1983), to measure entrepreneurial orientation, capturing the firm’s innovation
(e.g. emphasis on long-term R&D), proactiveness (e.g. challenging rather than
responding to major competitors), and risk taking (e.g. rewarding risk taking).
Acknowledging the entrepreneurial orientation dimensionality debate (Lumpkin and
Dess, 2001), we factor-analyzed the items and found that all of them loaded above 0.60
on a single factor with an eigenvalue of 4.628. To assess the validity of this measure, we
examined its correlation with objective indicators of an entrepreneurial strategy. Our
entrepreneurial orientation measure was significantly correlated with the ventures’
exploratory innovation strategies (r ¼ 0.168, p o 0.05).
Characteristics of respondents and new firms Percentage
Gender
(1) Male 66.7
(2) Female 33.3
Position of respondent
(1) CEO 15.9
(2) Senior manager 49.3
(3) Business manager 3.9
(4) Department manager 28.5
(5) Else 2.4
Education level
(1) Secondary education 8.2
(2) Bachelor 63.3
(3) Master 23.7
(4) PhD 4.8
Venture age
(1) ⩽2 year 8.2
(2) 3-4 year 30.4
(3) 5-6 year 31.9
(4) 7-8 year 29.5
Venture size
(1) 1-20 8.3 Table I.
(2) 21-50 10.3 Profiles of
(3) 51-200 25.7 responding
(4) 201-500 28.5 organizations and
(5) ⩾501 27.2 respondents
INTR Market orientation. Items for measuring market orientation were adopted from Narver
26,2 and Slater (1990). This scale consists of items measuring the customer orientation (six
items), inter-functional coordination (five items), and competitor orientation (four items)
components of market orientation.
IoT capability. To measure the core capability arising from IoT, we measured four
items adapted from the technological competence measurement following Li et al.
414 (2005). To ensure the appropriateness to the present context, we replaced wordings like
“technologies” and “R&D” with “Internet of Things Technology.” A sample item
included: “My company uses sophisticated Internet of Things Technologies in new
product development.”
IoT alliances. We measured alliances with value chain partners via six items adapted
from the product development alliance measurement (Li and Atuahene-Gima, 2001).
These item measures assess the focal venture’s IoT cooperation with other companies.
A sample items included: “We introduced new Internet of Things technology jointly
with other companies.”
Process innovation. Following Zmud’s (1984) measurement of process innovation of
modern software practices, we measured process innovation in IoT industry using six
items. Process innovation concerns the identification of new and more effective internal
operations, and embraces quality function deployment and business process
reengineering (Cohen and Levin, 1989). Some researchers, such as Freeman (1987),
Young et al. (2001), and Li et al. (2007), have demonstrated that process innovation is
composed of “reduction in material inputs” and “savings on energy inputs.” Considering
these statements, we measured process innovation by asking the respondents to evaluate
the degree to which each practice was currently applied into the IoT practice.
Product innovation. We measured product innovation with four items drawn from
Li and Atuahene-Gima (2002), Miller (1987), and Zahra and Covin (1993). Respondents
were asked to compare their venture with its major competitors and subsequently
indicate the extent to which the venture engaged in developing and launching its own
new products. A sample item included: “We increased the rate of new product
introductions to the market via Internet of Things.”
4. Data analysis and results

4.1 Tests for unidimensionability of constructs
We carried out a rigorous process to purify and validate the measurement scale items,
following Gerbing and Anderson (1988) and Hair et al. (2006), which included a data
screening process, followed by exploratory factor analysis (EFA) and confirmatory factor
analysis (CFA) to assess the unidimensionality of each construct in the model (Gerbing
and Anderson, 1988). Our EFA for all the constructs resulted in an acceptable factor
solution with eigenvalues all greater than one. Merenda (1997) suggest that in the social
and behavioral sciences, a threshold factor loading of 0.30 is the minimum when deciding
to accept an item or variable as belonging to a factor component. Hair et al. (1998) note the
following factor loadings: greater than 0.30 are considered to meet the minimal level;
loadings of 0.40 are considered more important; and, if the loadings are 0.50 or greater,
they are considered practically significant. In Table II, we present the EFA results,
showing that all items have loadings greater than 0.5 on their factors, among which most
of the items have loadings greater than 0.7 on their factors, with no substantial cross-
loadings. Given that all the constructs are employed in an IoT context for the first time,
these are still within the acceptable range. Table II displays the EFA results.
Components
1 2 3 4 5 6 7 8 Explained variance (%)
Entrepreneurial orientation 1 0.073 0.755 0.037 0.196 0.243 0.114 0.079 0.146 11.524
Entrepreneurial orientation 2 0.054 0.795 0.109 0.123 −0.001 0.018 0.024 0.149
Entrepreneurial orientation 3 0.192 0.738 0.049 0.135 −0.017 0.131 0.165 0.153
Entrepreneurial orientation 4 0.162 0.745 0.165 0.228 0.196 0.172 0.120 0.119
Entrepreneurial orientation 5 0.179 0.707 0.119 0.121 0.275 0.055 0.252 −0.062
Entrepreneurial orientation 6 0.202 0.695 0.190 0.151 0.010 0.197 0.109 0.061
Entrepreneurial orientation 7 0.349 0.688 0.215 0.121 0.169 0.086 0.200 −0.044
Market orientation 1 0.856 0.169 0.030 0.120 0.178 0.063 0.040 −0.037 11.576
Market orientation 2 0.842 0.149 0.056 0.074 0.068 0.122 0.065 0.070
Market orientation 4 0.811 0.141 0.053 0.114 0.072 −0.008 0.181 0.225
Market orientation 5 0.703 0.110 −0.39 0.194 0.333 0.059 0.067 0.153
Market orientation 7 0.330 0.046 0.096 0.317 0.461 0.080 0.017 0.525 6.267
Market orientation 12 0.277 0.238 0.073 0.149 0.621 0.179 0.274 0.321 7.938
Market orientation 14 0.202 0.142 0.143 0.027 0.786 −0.116 0.210 0.160
IoT capability 1 0.164 0.073 0.126 0.278 0.218 0.005 0.719 0.091 6.670
IoT capability 2 0.006 0.192 0.120 0.051 0.162 0.169 0.766 0.110
IoT capability 3 0.172 0.160 0.103 0.226 0.010 0.139 0.710 0.062
IoT capability 4 0.126 0.258 0.082 0.141 0.015 0.199 0.690 0.133
IoT alliance 1 0.135 0.107 0.218 0.706 0.252 0.172 0.116 −0.011 8.909
IoT alliance 2 0.103 0.157 0.145 0.756 0.069 0.161 0.155 −0.047
IoT alliance 3 0.150 0.150 0.225 0.728 0.105 0.171 0.102 0.146
IoT alliance 4 0.075 0.223 0.067 0.675 0.148 0.189 0.168 0.153
(continued )
IoT capability
research variables
and alliance
Factor structure for

Table II.
415
26,2
416
INTR
Table II.
Components
1 2 3 4 5 6 7 8 Explained variance (%)
IoT alliance 5 0.134 0.239 0.086 0.596 0.056 0.082 0.155 0.261
IoT alliance 6 0.132 0.343 0.213 0.521 0.004 0.138 0.136 0.271
Process innovation 1 0.102 0.089 0.810 0.048 0.062 0.081 0.189 0.125 10.879
Process innovation 2 0.087 0.180 0.814 0.098 0.147 0.116 0.140 0.040
Process innovation 6 −0.024 0.105 0.753 0.208 0.193 0.096 −0.015 −0.013
Product innovation 1 0.072 0.142 0.243 0.283 0.069 0.763 0.175 0.019 6.942
Product innovation 2 0.077 0.353 0.219 0.249 0.065 0.711 0.120 −0.007
Product innovation 3 0.128 0.108 0.170 0.102 0.012 0.833 0.175 0.200
Product innovation 4 0.184 0.134 0.248 0.271 0.079 0.706 0.110 0.176
Notes: Extraction method: principal component analysis; rotation method: varimax with Kaiser normalization. Accumulate explained variance ¼ 70.706
percent; KMO ¼ 0.911; Bartlett χ2 ¼ 6,292.626 (Sig ¼ 0.000). Rotation converged in seven iterations
We employed structural equation modeling using AMOS 19.0 to assess the properties IoT capability
of our measurement scales. We first conducted a second-order CFA of the 15 market and alliance
orientation items, specifying market orientation as a second-order factor and the three
dimensions as first-order factors, with items of each loading onto the theorized
dimension, to examine the extent to which the three-dimensional conceptualization of
the market orientation construct fits the observed data. We then evaluated the model
fits using DELTA2 index (Bollen, 1989) and the comparative fit index (CFI) (Bentler, 417
1990), as suggested by Gerbing and Anderson (1992). This was followed by the Tucker-
Lewis index (TLI) (Tucker and Lewis, 1973) and the root mean square error of
approximation index (RMSEA) (Steiger and Lind, 1980), which we evaluated following
the suggestions of Hu and Bentler (1999) and Slater et al. (2006). Using these series of fit
indices, the CFA of market orientation resulted in DELTA2 (IFI) ¼ 0.957, CFI ¼ 0.957,
TLI ¼ 0.947, and RMSEA ¼ 0.072 ( χ2 ¼ 175.537, df ¼ 85, p ¼ 0.000). This model
displayed reasonably good fit to the data.
Next, further evidence for the theorized measurement relationships was obtained
from the results of a six-factor CFA where all items of the entrepreneurial orientation,
IoT capability, IoT alliance, process innovation, and product innovation constructs
were specified to load onto their respective factors and the 15 market orientation items
were first aggregated (averaged score of the average item scores of each dimension was
taken) and then integrated into the analysis as a single-indicant for the market
orientation factor. This model also displayed reasonably good fit to the observed data
( χ2(390) ¼ 1.863, p ¼ 0.000; IFI ¼ 0.913; CFI ¼ 0.912; TLI ¼ 0.901; RMSEA ¼ 0.065).
4.2 Measurement reliability

In order to assess the measures’ reliability, we calculated two indicators, namely:
coefficient α reliability; and, the composite reliability indices ( ρn), which was calculated
across all dimensions. First, we found that all coefficient α reliabilities exceeded the
accepted 0.7 threshold (Cronbach, 1951). Zumbo et al. (2007) suggest that the Conbach’s
α coefficient underestimates or overestimates the scale reliability. To complement the
results, we calculated composite reliability using Fornell and Larcker’s (1981)
procedures. Results showed that the composite reliabilities for the six scales ranged
from 0.8226 to 0.9143, higher than the minimum threshold of 0.7 (Hair et al., 2006).
4.3 Convergent and discriminant validity

To assess convergent validity, we used two methods. First, using the Fornell and
Larcker (1981) procedures, within the CFA setting, we calculated average variances
extracted (AVE). Results displayed in Table AI shows that the AVE for six scales are
greater than the minimum threshold of 0.5 recommended by Fornell and Larcker (1981).
Second, we observed that convergent validity was evident as the path coefficients from
latent constructs to their corresponding manifest indicators were statistically
significant (i.e. t W 2.0) (Anderson and Gerbing, 1988). All items loaded significantly
on their corresponding latent construct, with the lowest t-value at 9.342, providing
evidence of convergent validity.
To assess discriminant validity, we calculated the shared variance between pairs of
constructs and verified that it was lower than the AVE value for the individual
constructs (Fornell and Larcker, 1981). In all cases, the AVE values were higher than
the associated shared variance, thus supporting the discriminant validity of
the constructs.
INTR Taken together, these results indicate that the measurement model fits the data
26,2 adequately and possesses both convergent and discriminant validity. We provide
evidence to suggest that all constructs display adequate discriminant validity
( p o0.01). The purified scales exhibit good model fits, significant path coefficients and
satisfactory reliability and validity.
418 4.4 Common method variance

Following Podsakoff et al. (2003) and Zhang and Li (2010), we integrated both
procedural methods and statistical techniques to reduce the potential for common
method variance. By assuring the respondents that their answers were confidential and
that there were no right or wrong answers to the questions in the survey, we thus
reduced the respondents’ evaluation apprehension and “made them less likely to edit
their responses to be more socially desirable, lenient, acquiescent, and consistent with
how they think the researcher wants them to respond” (Podsakoff et al., 2003, p. 879).
We also ensured that all of the questions were presented in a consistent manner and
sequence in order to avoid common method bias (Podsakoff et al., 2003).
With statistical techniques, we used Harman’s single-factor test (Podsakoff and
Organ, 1986). As evidenced by the EFA for all of the multiple-item constructs, the
results were in the expected factor solution, which accounted for 70.706 percent of the
total variance, with the first factor only accounting for 11.576 percent. Because a single-
factor solution did not emerge and the first factor did not explain most of the variance,
common method bias was not a serious concern in this research.
5. Findings
5.1 Correlation analyses
Table III presents the means, standard deviations, and bivariate correlations for the
variables. In the following sections, we test our conceptual model and corresponding
hypotheses.
5.2 Structural equation modeling

We use AMOS 19.0 to test our conceptual model. Table IV displays the comparison of
model fit index between modified model (Model 1) and the conceptual model (Model 2)
with direct relationship between the independent variables (entrepreneurial orientation
and market orientation) and the outcome variables (process innovation and product
innovation). Figures 2 and 3 display the SEM results of these two models. The results
show a better fit between modified model (Model 1) and the data ( χ2(391) ¼ 1.857,
p ¼ 0.000; IFI ¼ 0.913; CFI ¼ 0.912; TLI ¼ 0.902; RMSEA ¼ 0.064). This suggests, as
Mean SD 1 2 3 4 5 6
EO 5.416 0.966 1.000

MO 5.863 0.746 0.552** 1.000
IoT capability 5.696 0.863 0.486** 0.476** 1.000
IoT alliance 5.830 0.751 0.549** 0.555** 0.508** 1.000
Table III. Process innovation 5.882 0.741 0.369** 0.377** 0.325** 0.440** 1.000
Descriptive statistics Product innovation 5.742 0.891 0.475** 0.437** 0.462** 0.580** 0.476** 1.000
and correlations Notes: SD, standard deviation. *,**Correlations are significant at 0.05 and 0.01 levels, respectively
matrix (one-tailed)
shown with the results presented in Figure 2 that most hypotheses are supported, with IoT capability
H3a, H4a, and H6b being partially supported. and alliance
In particular, the results show that entrepreneurial orientation has positive effects
on both IoT capability ( β ¼ 0.423, p o 0.001) and IoT alliance with value chain partners
( β ¼ 0.334, p o 0.001). In addition, market orientation is positively related to IoT
419
χ2 χ2/df IFI CFI TLI RMSEA
Table IV.
Modified model (Model 1) 725.955 1.857 0.913 0.912 0.902 0.064 Comparison between
Conceptual model (Model 2) 796.466 2.037 0.895 0.894 0.882 0.071 two models
Entrepreneurial Product
0.423*** 0.149*
0.334*** IoT Capability 0.433***
0.252** 0.237**
IoT Alliance
0.362*** 0.124
0.391*** 0.410***
Market
Orientation
Process
Innovation
Figure 2.
Structural model and
results
Notes: *p < 0.05; **p < 0.01; ***p < 0.001
0.120
Entrepreneurial 0.116 Product

0.404*** 0.158
0.316*** 0.369***
IoT Capability
0.260** 0.239**
IoT Alliance
0.372*** 0.056
0.380*** 0.247*
Market Process
0.221*
Figure 3.
–0.005
Conceptual model
and results
Notes: *p < 0.05; **p < 0.01; ***p < 0.001
INTR capability ( β ¼ 0.362, p o 0.001) and IoT alliance with value chain partners ( β ¼ 0.391,
26,2 p o 0.001). The results indicated that in the present context, neither entrepreneurial nor
market orientations have any significant direct effects on product and process
innovations, thereby H1a-H1b and H2a-H2b are not supported. We suspect these
results to be our unique focus on new high-tech IoT ventures.
Furthermore, IoT capability is found to have a significant positive impact on
420 product innovation only ( β ¼ 0.149, p o 0.05), thereby partially supporting H3a,
whereas IoT alliance with value chain partners has a significant and positive impact on
both product innovation ( β ¼ 0.433, p o 0.001) and process innovation ( β ¼ 0.410,
p o 0.001), thereby supporting H3b. Combining with the above results, we found that
IoT capability mediates the relationship between the entrepreneurial orientation and
the product innovation (but not process innovation) with IoT technologies of new high-
tech IoT ventures, thereby partially supporting H4a. Additionally, IoT alliance with
value chain partners mediates the relationship between the entrepreneurial orientation
and both the product innovation and the process innovation of new high-tech IoT
ventures, supporting H4b.
The results also shows that with IoT technologies, IoT alliance with value chain
partners mediates the relationship between the market orientation and both the
product innovation and the process innovation of new high-tech IoT ventures, thereby
supporting H6a. Further, with IoT technologies, IoT capability mediates the
relationship between the market orientation and the product innovation (but not
process innovation) with IoT technologies of new high-tech IoT ventures, thereby
partially supporting H6b.
We also found that a positive relationship between core IoT capability and IoT
alliance ( β ¼ 0.252, p o 0.001), thus, H5 is supported. As for the two outcome variables,
the results displayed that process innovation had a positive effect on product
innovation ( β ¼ 0.237, p o 0.01), thus supporting H7.
6. Discussion
While a strategic focus (entrepreneurial and market orientations) might lead to
innovation, it also enhances the ability to achieve innovation in different ways. For
example, firms may employ IoT to identify opportunities for improvement and novel
solutions. The entrepreneurial orientation generates increased human capital
information and views a changing situation as an opportunity (rather than as a
threat) while the market orientation enables greater integration from an outside-in
perspective. When they are combined, more internal human capital knowledge and
external market-based data fosters perceptions of controllability (White et al., 2003),
which may lead to a source of sustainable competitive advantage. Appraising a
changing market as an opportunity leads companies to respond to market changes
effectively. With IoT, great opportunities exist to acquire knowledge. In the present
study, we demonstrate that, in new high-tech IoT ventures, being IoT capable
and developing IoT alliance assist organizations to gain knowledge as key
deliverables, from collecting and disseminating information, to generate product and
process innovation.
6.1 Theoretical contributions

The conceptual model and empirical study suggest that by integrating and processing
entrepreneurial and market orientations, companies can enhance two types of
innovations both directly and indirectly through IoT capability and IoT alliance. IoT capability
Several contributions are made to the literatures. and alliance
First, in new high-tech IoT ventures, while fostering an entrepreneurial orientation
does not augment product or process innovation directly, we demonstrate that with the
integration IoT capability and IoT alliance, firms may be able to achieve greater
product innovation (but not process innovation) via their indirect effects. With market
orientation, the direct effects are also not supported, but with the integration of IoT 421
capability and IoT alliance, the indirect effects are clear, with market orientation
significantly affecting both product and process innovation. Our conceptual framework
thus adds new concepts (IoT capability and IoT alliance) and new relationships,
between both strategic orientations and innovations, in a disaggregated approach.
Second, while innovation is a multidimensional, second-order construct in the
literature, we posit that its composite nature might obscure the relationships between
various components. By taking a decomposed approach with two types of innovations,
this study answers recent calls to differentiate between components of innovations
with product and process innovations (Adner and Levinthal, 2001; Li et al., 2007),
thereby, contributing with a more nuanced view of innovation outcomes. In addition,
the evidence suggest that process innovation has a direct influence on product
innovation, revealing that the two forms of innovation must be separately measured,
with implications as to which one new high-tech IoT ventures should adopt in which
sequence. That is, focussing on process innovation may eventually lead to product
innovation due to the efficiency in production.
Third, this study contributes to the strategy and innovation literature by using data
from China and new high-tech IoT ventures. Most extant research on this subject
focusses on US firms or on firms from mutual market economies (Atuahene-Gima, 1996;
Verhees and Meulenberg, 2004). However, emerging countries can significantly differ in
identified mean levels of strategic orientations (Deshpandé and Farley, 2004) and in
their use of IoT. Our unique approach in identifying new ventures, which use IoT, for
our survey, adds new knowledge to the way in which these firms behave, thereby
contributing to the literature on IoT from the perspective of emerging economies.
Notably, the results demonstrate that the conceptual model provides predictive and
explanatory power for new high-tech IoT ventures in China. This finding is important
because with China’s economy in transition, the institutional infrastructures, customer
sophistication, and domestic-based supporting industries (Porter, 1990) are still
changing, and require time to be fully developed. During this early transitional stage,
China lacks specialized local factor pools, such as specialized skills, capital, and
infrastructures, to support its entrepreneurship development and to improve
innovative capabilities. In addition, China’s local companies lack in sophistication in
technologies, which discourage them from innovating or differentiating their products
and services. Combined with China’s large domestic market and the weak technological
capabilities, local players and rivalry have tended to focus on quantity rather than
innovation. Consequently, many local entrepreneurs in China focus on competing on
price/volume during this market transition stage. However, with IoT capability, these
new generation of companies might compete at a different level with a more nuanced,
strategic focus on IoT capability and alliance, perhaps even giving these firms the
ability to compete across borders into the world stage.
In summary, the contribution of the study lies in the integration of a comprehensive
framework of a strategic orientation to product and process innovation with IoT
capability and alliance. Firms that incorporate the framework might increase
INTR innovation outputs and become a competitive differentiator. The importance of an IoT
26,2 capability focus for new high-tech IoT ventures is particularly noteworthy in this
study. While an IoT capability only enhances product innovation, it additionally
supports IoT alliance, which in turn supports both product and process innovation in
new high-tech IoT ventures. This nuanced insight suggests that new high-tech IoT
ventures should focus on building their IoT capability, and at the same time, develop
422 IoT alliance in order to fully take advantage of IoT and gain a better position to
formulate more novel offerings.
6.2 Managerial implications

Our IoT capability concept provides managers operating in the new high-tech IoT
industry in China with the support of investing in core capabilities that can focus and
integrate IoT in their strategic decision orientation. Importantly, our conceptual model
is also more likely to provide useful guidance to managers. For example, while both the
entrepreneurial and market orientations may enhance innovation outcomes in general,
in the IoT context, such orientations alone are not enough; rather, the current model
indicates that developing IoT capability is must and should be utilized to enhance
alliances, which in turn, will have different relationships with innovation outcomes.
Specifically, with IoT alliances, both product and process innovations may be achieved.
This is an important finding, as it suggests that focussing on IoT capability is
sometimes not enough, but require an integrated network that includes players outside
of the organization to fully achieve IoTs potential. Thus, it is important to reinterpret
the markets and thereby identifying novel opportunities. Following competitors closely
might help firms to stay proactive and develop their networks. Thus, firms are well
advised to consider each component of various strategic orientations individually, here
in accordance with the entrepreneurial and market orientations, and evaluate the set of
core capabilities aligned with the various components to assess their
interdependencies, here in the context of IoT capability and IoT alliance.
6.3 Limitations and directions for future research

As with any research, we acknowledge some limitations, which should be considered
when the results are interpreted. First, our study focussed only on entrepreneurial and
market orientations. Future studies could usefully integrate other orientations into
future model building and validation. For example, many scholars stress the
importance of learning orientation to enhancing innovation capability (Damanpour,
1991). Learning orientation underpins firms’ internal self-renewal, and is an important
aspect of firms’ strategizing activities (Covin et al., 2006). Covin et al. (2006) reckon that
these strategic activities entail organizational learning – that is, how firms choose, learn
from, and refine or redefine their major business-related decisions and the patterns they
assume. All of which are critical to maximize the efficiency and effectiveness of
innovation activities (Mavondo et al., 2005).
Second, we noted that the study did not control for the ventures’ prior NPD
experience or innovative capability, which could influence the results. Research has
largely suggested the potential importance of prior NPD experiences (Barczak and
Wilemon, 2003) and NPD planning activity (Salomo et al., 2007) on firms’ innovative
capability and innovation activities. It is recommended that future research control for
the ventures’ prior NPD experience or innovative capability, to understand if these
variables have any effects on the results.
Third, our research setting in the new high-tech IoT industry in China may limit the IoT capability
generalizability to other markets and industries. Compared with their counterpart in and alliance
developed country, new high-tech IoT ventures in China habitually suffer from the
liability newness, limited resources, and lack of established relationships with outside
actors (Stinchcombe, 1965), thus they devote considerable more time and energy to
build obtain process innovations to achieve improved efficiency (Tsui and Farh, 1997).
Future research should cross-validate our findings to a broader array of contexts so 423
that generalizability can be ensured.
Finally, our study is a cross-sectional study, which may limit its predictive ability
and causality among the variables. Because of the magnitude of organizational change
involved, process innovation often takes a much longer time (Davenport, 2013). Future
studies should use a longitudinal study to improve our understanding of how the
relationships might evolve over time.
More research is encouraged in the areas of IoT to understand further its role in firm
performance. That is, a researching into the mixture of strategic management,
information technology, operations and marketing researches simultaneously can
provide greater understanding of effects of IoT. For example, future studies might
investigate more specifically how IoT can be decomposed further into various
dimensions and examine their effects on innovation and NPD outcomes. Such a
multidimensional concept of IoT might enable both a more specific measurement in
relation to efficiency and provide a more holistic view of IoT. In addition, considering
other outcomes such as internationalization performance and customer satisfaction
arising from IoT may assist firms in developing a more comprehensive framework and
identify their return on investment from IoT.
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Appendix IoT capability
and alliance
Items description summary Standardized loading t-value
Entrepreneurial orientation (CA ¼ 0.914; CR ¼ 0.9143; AVE ¼ 0.6044)

1. My company spends more time on long-term R&D (3+ years) 433
than on short-term R&D 0.927 13.811
2. My company is usually among the first in the industry to
introduce new products 0.792 11.836
3. My company rewards risk taking 0.960 12.629
4. My company shows a great deal of tolerance for high-risk
projects 1.000a
5. My company uses only “tried-and-true” procedures, systems,
and methods 0.812 13.272
6. My company challenges, rather than responds to, its major
competitors 0.846 12.642
7. My company takes bold, wide-ranging strategic actions rather
than minor changes in tactics 0.924 14.001
Market orientation (CA ¼ 0.934; CR ¼ 0.8379; AVE ¼ 0.6362)
Customer orientation 0.811 10.302
1. Focussing on commitment to customers
2. Creating value for customers
3. Understanding customer needs
4. Setting customer satisfaction objectives
5. Measuring customer satisfaction
6. After sales services
Inter-functional coordination 1.000a
7. Inter-functional customer calls
8. Information shared among functions
9. Gaining a functional integration in strategy
10. All functions contribute to customer value
11. Sharing resources across the whole firm
Competitor orientation 0.840 13.378
12. Salespersons sharing competitor information
13. Responding rapidly to competitors’ actions
14. Top managers discussing competitors’ strategies
15. Setting customer satisfaction objectives
Internet of things capability (CA ¼ 0.821; CR ¼ 0.8226; AVE ¼ 0.537)
1. My company uses sophisticated internet of things
technologies in new product development 0.886 9.491
2. Our new products are always at the site of the art of the
internet of things technology 0.982 9.342
3. My company has invested a large amount of sales into
a
internet of things 1.000
4. Our internet of things team is competent in innovative
development 0.975 9.388
Internet of things alliance (CA ¼ 0.867; CR ¼ 0.8682; AVE ¼ 0.5244)
1. Shared complementary internet of things technology with
other companies 0.848 11.020 Table AI.
Measurement items
and validity
(continued ) assessment
INTR Items description summary Standardized loading t-value
26,2
2. Introduced new internet of things technology jointly with
other companies 0.844 10.951
3. Promoted existing internet of things technology jointly with
other companies 1.000
4. Jointly distributed and provided new product support
434 services with other companies 0.878 11.103
5. Jointly designed and manufactured new internet of things
technology with other companies 0.687 9.415
6. Established agreement to protect internet of things
technology with other companies 0.759 10.118
Process innovation (CA ¼ 0.909; CR ¼ 0.9097; AVE ¼ 0.6272)
1. My company has reduced costs because of the internet of
things’ development 1.000a
2. My company has reduced costs because of structured design
toward internet of things’ practice 0.951 14.236
3. My company has reduced costs because of structured review
toward internet of things’ practice 0.995 12.808
4. My company has reduced costs because of internet of things’
chief practice team 0.979 13.286
5. My company has reduced costs because of internet of things’
configuration management 0.901 12.084
6. My company has reduced costs per unit because of internet of
things’ product line 0.807 11.715
Product innovation (CA ¼ 0.891; CR ¼ 0.8917; AVE ¼ 0.673)
1. Placed significant emphasis on new product development
through allocation of substantial internet of things resources 0.985 13.344
2. Developed a large variety of new products or made dramatic
changes in existing products via internet of things 0.975 12.896
3. Increased the rate of new product introductions to the market
via internet of things 0.960 12.919
4. Increased its overall commitment to develop and market new
products via internet of things 1.000a
Notes: CA, Cronbach’s α; CR, composite reliability; AVE, average variance extracted. Model fit:
χ2(390) ¼ 726.560, p ¼ 0.000; DELTA2 ¼ 0.913; CFI ¼ 0.912; TLI ¼ 0.901; RMSEA ¼ 0.065. aFixed
Table AI. factor loading
Corresponding author
Bang Nguyen can be contacted at: bang.london@gmail.com
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2.2 Entrepreneurial orientation and innovation

2.3 Market orientation and innovation

2.4 IoT capability and IoT alliance

2.5 Indirect effects of strategic orientation and innovation

2.6 Process innovation and product innovation

3.2 Measures 413

Characteristics of respondents and new firms Percentage

4. Data analysis and results

Factor structure for

4.2 Measurement reliability

4.3 Convergent and discriminant validity

418 4.4 Common method variance

5.2 Structural equation modeling

EO 5.416 0.966 1.000

0.334* IoT Capability 0.433*

Entrepreneurial 0.116 Product

6.1 Theoretical contributions

6.2 Managerial implications

6.3 Limitations and directions for future research

Items description summary Standardized loading t-value

Entrepreneurial orientation (CA ¼ 0.914; CR ¼ 0.9143; AVE ¼ 0.6044)

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