PROACTIVENESS, INNOVATIVENESS AND FIRM PERFORMANCE: THE MEDIATING ROLE OF ORGANIZATIONAL CAPABILITY.

Author:Bature, Samson Waibe
Position::Report
 
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INTRODUCTION

Proactiveness and innovativeness are often associated with Small and Medium Enterprises (SMEs) than large enterprises (Zacca & Dayan, 2018). This is usually demonstrated in their quest to scout for market opportunities and utilize local raw materials to produce unique goods and services that meet broad market needs or demands. However, SMEs are often confronted with challenges of rapid change in market needs due to advancement in technology (Uchegbulam et al., 2015). This has attracted numerous scholarly interests and volumes of studies have been conducted. Proactiveness refers to the actions of any business enterprises that are market opportunity-seeking and forward-looking market demands/needs with the aim of designing befitting products or services mix to serve the market better, influence or shape the business environment ahead of competitors (Lumpkin & Dess, 1996). Given the definition of proactiveness, it seems to be the basics upon which innovative attitude lean on (Tang et al., 2014). On the part of innovativeness, Covin & Miller (2014) describe it as the preparedness of business organizations to come up with new ideas in terms of processes/procedures or products in the marketplace. In other words, Lomberg et al. (2017) refer to innovativeness as the propensity of business enterprises to inculcate the spirit of generating creative ideas or processes to introduce new products or services through experiment or feasibility study.

Proactiveness and innovativeness are critical strategic postures for firms to thrive in fast changing and competitive market environments (Covin & Miller, 2014; Covin & Wales, 2012). No wonder these strategic postures have attracted some scholarly interests and often recognized amongst the good predictors of high levels of firm performance. For instance, (Adams et al., 2017; Ambad & Wahab, 2013; Amin, 2015; Lomberg et al., 2017; Tang et al., 2014; Uddin et al., 2014) studied the relationship between proactiveness and firm performance. Whereas, the impact of innovativeness on firm performance has been examined in many studies (e.g., Acar & Ozsahin, 2018; Handrich et al., 2015; Kam-Sing, 2014; Mamun et al., 2017). Extant literature reveals that majority of prior studies have established existence of positive and significant relationship between proactiveness and firm performance, as well as between innovativeness and firm performance. However, any attempt to explain how and why these relationships exist, is yet to be expatiated in the literature. Thus, the thrust of the present study is to add to the stock of existing knowledge by providing possible answer to the questions of how and why proactiveness and innovativeness significantly impacted firm performance.

Wiklund & Shepherd (2005) argue that an in-depth understanding of the tie between any strategic postures and firm performance may be explained by factors that are internal to the organization. In the same vein, Blesa & Ripolles (2003) and Uchegbulam et al. (2015) posit that relationships between strategic orientations and performance largely depend on the firm's capability to quickly respond to dynamics of market needs. Hence, this suggests that for better explanation of how and why proactiveness and innovativeness impacted firm performance, organizational capability may play significant role. Therefore, to fill this research gap, the present study undertakes to evaluate the mediating role of organizational capability in the relationship among proactiveness, innovativeness and SME performance in the manufacturing sector in north-central Nigeria.

Based on the research gap to be addressed in the current study, it offers a suitable process for integrating organization's strategies, resources, and capabilities that may warrant firms to further improve their ability to respond quickly to changes in market needs or create new market by being first to introduce products. In doing so, it might subsequently lead to superior levels of performance in the marketplace. This presumption is in consonance with the tenets of dynamic capability theory of the firm in dynamic and competitive business environment (Teece, 2007: 1997). DCV theory postulates that in dynamic and competitive business settings, superior firm performance is a consequence of the firm's ability to build, integrate, and reconfigure strategies, resources, and existing capabilities to create new and dynamic capabilities to address market problems. It is pertinent to observe that majority of studies that used the theory of dynamic capability have been conducted within the context of American, European or Asian countries (Li & Liu, 2014). Therefore, adopting this theory in Nigeria, a developing economy in Africa might provide wider insights about the effectiveness of integrating or reconfiguring variables such as proactiveness, innovativeness, and organizational capability for higher levels of firm performance in a single research model.

The remaining part of the study is designed as follows: First, it looks at theoretical background in terms of extant literature on proactiveness, innovativeness, organizational capability and firm performance, underpinning theory, as well as develops hypotheses. The next section dwells on the research methods employed for this empirical work, Thereafter, the paper reports, discusses the findings and highlights implications of the study. Last but not the least, the paper draws conclusion, identifies limitations, and offers suggestions for further research.

THEORETICAL BACKGROUND AND HYPOTHESES

Firm Performance

Firm performance is viewed as the total wellbeing of business entity in terms of results measurable against resources committed to achieve predetermined goals or objectives (Agwu, 2018). One of the major issues that preoccupy the minds of most business owners and/or managers is their firm performance in the marketplace (Tseng et al., 2013). Thus, firm performance has been regarded as a primary dependent variable in the field of strategic management (Gupta & Wales, 2017). This is so because, the core aim of strategic management revolves around the provision of answers to the ultimate question of why some business firms outperform others despite they all operate in and face the same business environmental challenges. Generally, the concept of firm performance is multifaceted in nature and has attracted attention of researchers with multifarious views as to the most appropriate approach to measuring firm performance (Gupta & Wales, 2017).

However, it is imperative to state that firm performance is the outcome of befitting integration, reconfiguration and building strategies, resources, and capabilities to respond as fast as possible and promptly to changes in or even influence the business environment by being first to introduce new value to the marketplace (Eisenhardt & Martin, 2000; Teece et al., 1997). Therefore, building on the dynamic capability perspective, business enterprises must seek to integrate, reconfigure, and build a perfect match of strategies, resources, and capabilities to achieve excellent performance in competitive business environment. Hence, evaluating the integrated effects of proactiveness, innovativeness, and organizational capability on SME performance would provide much clearer empirical evidence in support of dynamic capability theory and may serve as a source of competitive advantage to SMEs in the manufacturing industry in developing economies like Nigeria.

Proactiveness and Organizational Capability

According to Lumpkin & Dess (1996), proactive entrepreneurial activity refers to the firms' timely response to market needs or demands, as well as generating market opportunities. A formidable proactive strategic posture provides enterprises with capability to anticipate changes that may occur in the business environment or even exert influence on the business environment to their advantage (Lumpkin & Dess, 2001). Similarly, Blesa & Ripolles (2003) opined that strong proactive thinking is most likely to provide business enterprises with diverse capabilities to predict the needs of customers as well as reactions of competitors in the marketplace. On the other hand, organizational capability entails the capacity of business establishments to scout, combine, and execute different set of resources with the main aim of delivering sound performance to the marketplace (Ho et al., 2016). Also, Uddin et al. (2014) revealed that outstanding business performance in the marketplace to a large extent is dependent on the firms' capabilities to address the issues of uncertainties linked with fluctuations in customers' taste. Thus, this signifies that capabilities are a major source of distinction among firms in terms of high or low performance, superior or inferior performance, excellent or poor performance.

Even though there is dearth of empirical evidence on the relationship between proactiveness and organizational capability, Rua et al. (2018) posit that firms with high responsive ability consider proactiveness to be a core input. Such firms remain committed to take first mover advantage by engaging in forward-looking as well as opportunity-seeking activities (Anderson et al., 2015; Tang et al., 2014). Thus, they are likely to generate robust knowledge about market trends and predict market preferences (Hao & Song, 2016). By so doing, it improves firms' capabilities to align or integrate the right kind of resources to deliver value that best suit such market preferences. Proactive firms also focus on developing capabilities that influence policy makers and shape the market to their own advantage in terms of market share or market position (Tang et al., 2014). Further, proactive activities enable firms...

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