An analysis of technological innovation in gaining competitive advantages-case of chinese textile industry

 

 

 

 

Table of Contents

1.0 Research rationale 3
2.0 Aims and objectives 5
2.1 Research Aims 5
2.2 Research objectives 5
Literature review 6
1.0 Theoretical framework of innovation 6
2.0 Innovation and competitive advantage 8
3.0 Innovation and successful performance 9
Research methodology 11
1.0 Introduction 11
2.0 Research types 11
Reference 15

An analysis of technological innovation in gaining competitive advantages

1.0 Research rationale

In the contemporary business world, the fierce competitive and rapid development of the technology serves as the basic characteristic of world market. (Hill, 2008; Morrison, 2008) It has been acknowledged by many that in order for the business to survive and prosper within the competitive world market, technology and innovation are imperative for enhancing a business’s competitive success. (Allen, 2000; Burgelman et al,

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2008; Roberts et al, 1989) Therefore, in order for business to survive under the current economic condition with fierce global competition, it is critical for firms to be technologically innovative.

It has been noted that for many contemporary firms, technological advantage and organizational innovation are essential parts of competitive strategy. (Hill, 2008; Rhodes and Wield, 1994) Due to the current global recession, most of firms today face tough competitive challenge. It is noted by Hill (2008) that firms dependent on highly sophisticated technologies and engaged in multinational competitions are particularly vulnerable, because they need to be continually modifying their product portfolio to allow them to conduct their business. It is argued by Morrison (2008) and Christensen et al (2004) that innovation is the main enabling force that could translate business into profitable commercial ventures in the contemporary market. Moreover, effective development of the technology could enhance the translation process and provides the business with great competitive advantages in market competition and business success.#p#分頁標題#e#

There are a wide range of studies and work on the topic of technological innovation in many disciplines, for instance studies have been carried out to focus on the understanding of innovation process (Allen, 2000; Lauenroth, 1989; Scheel, 2002). However the academic researchers tend to pay more attention to high-tech-industry and the emerging industrial regions rather than the traditional industry and underdeveloped areas. With respect to China, since the launch of its ‘open door’ policy in 1979, it has emerged as a rapidly growing market in recent decades with huge potential for consumer goods from both internal and external consumers (i.e. the world market). (Basu, 2007; Rinaldi-Larrib et al, 2009). Internal processes have been acknowledged by Tidd et al. (1997) as a major factor in the success of innovation strategies. Teece and Pisano (1994) introduced a dynamic element into analysis of innovation strategy with their finding that technological capabilities internal to the firm have to be linked to external market opportunities in often rapidly changing environmental conditions. Gao (2003) identified three categories of factors affecting TI capability in China’s enterprises, including characteristics of R&D activities, characteristics of organization and of environment.

China has been developing incredibly well in the last two decades economically. According to Gao (2007), Chinese GDP grew 10.7% to 2.7 trillion U.S. dollars in 2006, surpassing the projected target of 8%. Meanwhile, the consumer price index increased 1.5%, approximately 0.3% points lower than 2005 (Gao, 2007) According to the World Bank (2009), although the world market has been suffering from the financial meltdown since the 2008 US sub-prime collapsed, the Chinese economy proved to be one of least influenced by the financial turmoil in comparison to the most first world countries, even within the current tough situation, China’s GDP increase by 7.9% in the second quarter of 2009, exceeded IMF analysts' consensus estimates. It is noted that the Chinese economy is going to be among the first countries going to lead the world out the recession. (The World Bank, 2009). These significant figures again showed the huge potential and attractiveness of the China market.

With such incredible economic development, traditional industries such as textiles still play a crucial part in the whole economic development of China. Technological innovation within the traditional industries is also imperative and indeed crucial for the success of the any business that attempts to survive in a competitive market. It is noted by Rinaldi-Larrib et al (2009) that effective integration of sustainable technological innovation for any business would substantially enhance the business success within the competitive market.

2.0 Aims and objectives
2.1 Research Aims
This paper is going to provide an exploration study of how technological innovation could be used for the Chinese textile firms to acquire competitive advantages, which will be studied through analyzing a wide range of existing academic literatures and examining a case study.#p#分頁標題#e#

2.2 Research objectives
First of all, with aim of studying technological innovation within the textile industry in China, it is critical to have a sound theoretical understanding of the innovation field, therefore first of objective of this paper would need to review the relevant literature, in particular the literature on technological innovation.

Secondly, to examine the current textile industry in China as related to technological innovation, to determine the current application of technological innovation within the industry, thus to be able to provide a fundamental environmental background for the latter study.

Thirdly, as the implementation of an effective technological innovation system would lead to business success, it is therefore imperative to explore the management perceptively of the technological system, thus to encourage long term business success.
Literature review

1.0 Theoretical framework of innovation

The importance of innovation has been seen by many to be served as fundamental instrument to any firm to gain and maintain competitive advantages. (Christensen et al, 2004; Cottam et al, 2001)

In spite of vast amount of existing literatures related to the topic of innovation, there is no universal agreement on what exact the innovation means. According to Assink (2006), innovation tends to be associated with new methods of doing things, such as new process, new ideas and new improvements. This therefore suggests it’s main concept is about difference, or ‘change’ in another word. (Cottam et al, 2001) Although, according to Christensen et al (2004), innovation has to be disruptive to quality. This is because disruptive innovation allows a whole new population of consumers access to a product or services that was difficult to access to, which could require substantial amount of financial resources or skills for instance. (Christensen et al, 2004) With disruptive innovation, firms would have characteristics of smaller markets with lower gross margins at the initial business stage. However, Christensen et al (2001) also indicate firms would gain encouraging results in the long run through the development of the business. This therefore means that, objective of innovation is long term business improvement, although it may require investment in the short term with smaller gross margins.

Alternatively, it has been argued by many researchers that innovation could only qualify if it is measurable. (Aranda and Molina-Fernandez, 2002; Ulhoi, 2004) This is because as the nature of the innovation tends to have

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a certain impact on the existing business’s products or operation processes, measurable results thus tend to be monitored. Base on this concept, it could be said that innovation suggests ‘new’ aspects of change. On the other hand however, Ulhoi (2004) argues that because of the ‘new’ perspective of innovation, firms would tend to have it ‘closed’ to keep it secrets from competing in the market. On the other hand however, Ulhoi (2003) acknowledges innovation could be open and available to all as a means of challenging even more growth and ingenuity.

The concepts discussed above have provided an overview of the innovation theory, they did not however look into the issue of close relationship with business. To overcome the issues, Conway and Steward (2009) suggest that innovation could be seen from the organizational level, because it is a key functional activity within any organization, for instance, product innovation is thought of as a routine operation like any other that organizations perform. However, Shan and Zhang (2009) indicate that innovation is a key survival strategy for organizations because it enables more rapid adaptation to turbulent environments. Innovation therefore becomes a primary indicator of an organization’s ability to adapt to its environment (Cottam et al, 2001). This could be reflected by the evidence shown in recent decades, such as technological and scientific advancement, particularly in information and communication that affect every aspect of people’s lives, such as the application of the knowledge management system in many industries.

Despite all the different ideas suggested by various the authors above, most researchers seem to believe that innovation overall tends to lead to new ways of doing things and to new solutions to the problem. This therefore reflects the importance of innovation as it encourages improvement. For example, innovative business model within Zara has led the company to be one of best fast-fashion retailers in the Europe. Conversely, Shan and Zhang (2009) argue that not all technological innovation could be useful for all countries, because the emerging world requires more social and organizational innovation. Furthermore, Zelbst et al (2010) added that if technical innovation runs far ahead of complementary social and organizational innovation, its use in practice can be either dysfunctional or negligible. This therefore suggests that although innovation could suggest different way’s of doing business, it must be integrated properly with effective management for the best results. Cottam et al (2001) claim that any innovation could worthless if no one understands it or being able to manage it. This therefore suggest that effective integration of the technological innovation requires effective management with sound understanding of innovation.

2.0 Innovation and competitive advantage
While innovation leads to changes as mentioned earlier, it is noted that innovation is result of pressures of competition. (Cottam et al, 2001) In the context of the process of innovation, there are two main categories of. First of all, some think of innovation as a rational, intentional, sequential managerial process. (Rigby, 2003) This reflects the rational behaviour assumption of classical and neoclassical economics that tends to be linked to organizational strategic choice and planning. For instance, in the effect of the financial crisis, many firms innovate in direct, purposeful and intentional response by minimizing all the spending through cost cutting in reducing personnel number. Surely, in order to gain competitive position in the future global market, it is critical for firms to be able to respond to the environmental change (e.g. financial crisis), but also to predict shifts or changes in consumer preferences or demand trends. This is because having the capability of foreseen the market trend through analysis of histories data for instance, would encourage better preparation for tackling any surprise may rise in the market. Therefore, innovation in terms of knowledge could enable the firms to acquire such critical information #p#分頁標題#e#

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through the application of the scientific method, such as using information technology (Microsoft Access and Excel) to analyze previous market demand data and to forecast for the future.

Then again, it is noted that some understand innovation to be a social, political and behavioral process, reflecting the position of evolutionary economics. (Assink, 2006; Conway and Steward; 2009) This is because innovation is fundamentally a social process that supports good, such as new ideas tend to be created through people interaction with each other, and in order to apply the new ideas, decision must be taken (behavioral) by relevant authorities or system such as voting (political). As an alternative to the rational thinking, it proposes the idea for attaining desired behaviors requires share organizational visions and cultures, thus everyone could be onboard for changes for instance. (Conway and Steward, 2009).

Given that innovation proposes ‘new’ to a business, and effective innovation with integration of sound management would have positive impact on the long term business development. It seems reasonable to conclude that innovation is an important part of creative management for businesses, it serves as a critical driver for firms to improve through changes and thus to gain and maintain competitive advantages in the market.

3.0 Innovation and successful performance

As mentioned earlier innovation has been claimed only to be qualify if they are measurable. (Aranda and Molina-Fernandez, 2002; Ulhoi, 2004) Although innovation in general is associated with changes and being ‘new’, but McGrath et al (1996) point out that being new or being different does not mean being successful and desired. Therefore, the research does not only attempt to analyze the innovation concept, but more importantly to investigate the way to use innovation for gaining and maintaining competitive advantages.

Based on recent studies, technology advancement has been related to successful innovation and business performance. (Conway and Steward, 2009; Hill, 2008) However, a study by Gloet and Terziovski (2004) points out that there are certain trade-offs between technological innovation and performance. This is because for instance, if a firm invests heavily on product R&D would allow the firm to enter a new market sector and to grow in the long run. However acquiring initial investment resources would mean it may smaller gross margin and limits short-run profitability. This therefore means that what is good for innovation might not be good for performance and vice versa.#p#分頁標題#e#

In the context of the organizational performance, most of the existing studies tend to measure it the financial terms. This could be explained by the fact that most commercial business place strong emphasise on financial

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performance as the main indicator of business success, and because financial measurements tend to be the most easily quantifiable industrial parameters. (Mahoney, 1990)
 
Research methodology

1.0 Introduction

Since issues in the “technological innovation” are subject to rapid changes, research plays a vital role in this area, especially when taking into consideration that innovation evolve constantly.

Therefore, first of all it is essential to give a definition of term “research”. According to Johnson (1994) research is “a focused and systematic enquiry that goes beyond generally available knowledge to acquire specialised and detailed information, providing a basis for analysis and elucidatory comment on the topic of enquiry”.

The main aim of the research is conducting investigation of how technological innovation could be used to gain and maintain competitive advantages.

Research can be conducted in a number of different ways; since each research type offers its own advantages and disadvantages the differing research types are used for various reasons. These differing types will be discussed throughout this chapter.

2.0 Research types

Research is based on data i.e., information. Generally it is possible to distinguish between two different types of sources: primary and secondary data sources. (Hamid, 2008; Silverman, 2000) Primary data are original data collected by the researcher for the research problem at hand, whereas secondary data are “data that have been previously collected for a project other then the one at hand”. (Zikmund 1997, p.728)
Primary data reflects immediate events, because they are immediate record of the sources, they provide research with benefits of originality, fresh and just for the purpose. (Silverman, 2000) However, Fisher (2007) also argues that primary data collection could provide research difficulties, such as time consuming, difficult collection process and sometimes even money consuming, for instance, making trip to a particular firm to make an interview or sending out questionnaires. Due to the limitation of the timeframe and the geographic restriction, it is not possible to make some interviews to collect information directly from the companies located in China. Thus, primary research method such as questionnaire could be utilized to gather primary data.#p#分頁標題#e#

On the other hand, Fisher (2007) states tessay writing http://www.ukassignment.org/daixieEssay/hat secondary data is about collecting and recording data or materials that have been collected and for another purpose, such as conducing information from a book. Such data collection offers benefit of being less time consuming and much easier to collect compared to primary data collection.

However, beneath these advantages one always has to bear in mind that ‘secondary data have been collected for purposes other than the problem at hand’. (Silverman 2000, p.100) Therefore, one should be aware of potential limitations of secondary data. The main disadvantage is that the available data might be obsolescent, which impacts negatively on the relevance and usefulness. (Saunders et al, 2008) Furthermore, there might be some differences in classification or measurement or even a lack of accuracy.

Hence, in the case that secondary data is used it is necessary to assess data reliability and suitability. Quee (1999, p.98) suggests doing that by asking the following questions:
1. WHO collected the data?
2. WHY were the data collected?
3. HOW were the data collected?
4. WHAT types of data were presented?
5. WHEN were the data collected?
6. ARE the data consistent with those obtained from other sources?

In order to obtain the appropriate and reliable secondary source or data, it is suggested by Malhotra and Birks (2000) that, there are two main sources of secondary data can be obtained for research purpose, which are illustrated in table below: internal data and external data.

Table 1: A classification of secondary data

Source: Malhotra and Birks 2000, p.104

Both internal and external data would offer read-to-use data for researcher, and would therefore help research in terms of speed in accessing to required information. In many conducted studies internal data, like an organisation’s intranet or databases, present a good starting point for the search of information. For instance, internal data related to company marketing strategy could be obtained from the company websites, and would also be obtained from author’s personal network (to gather information such as company brochure or marketing report). It should be noted here that personal network could also work as great access for primary research. Since this project will use one focused case study to support the main objectives of the project, both company websites and author’s personal network connect will provide great gateway for information gathering.

For the reason that project will place strong emphasise on investigating the theoretical background of innovation, external source of secondary data play vital role here. Author is able to get access to various literatures as external resources, such as published academic books from both university library and the public library; electronic database that offer academic research papers and also internet which act as portal for a range of literatures.#p#分頁標題#e#

To conclude the implementation of secondary research can be considered as suitable for addressing the general issues and questions that underpin the research for this particular study. And, the implementation of primary research could be used as appropriate method for investigating the research topic in deeper scopes.

 
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