INNOVATION AND ORGANIZATIONAL RESILIENCE IN SELECTED MANUFACTURING FIRMS IN ENUGU STATE NIGERIA.

ABSTRACT

The study investigated the relationship between innovation and organizational resilience in selected manufacturing firms in Enugu state, Nigeria. The study aimed to achieve the following specific objectives: to determine the extent to which process innovation affect organizational response; to ascertain the effect of product innovation on business vulnerability; to determine the  nature  of  the    relationship between  service  innovation  and  adaptive  capacity;  and  to ascertain the extent of the relationship between radical innovation and organizational recovery. The  study  was conducted using  the  survey  design.  The  population of  the  study  was 1400 employees from Nigeria Breweries Limited, Innoson Technical and Industrial Company Limited, Juhel Nigeria Limited. A sample of 302 respondents was drawn from the population using Stat Trek’s planning wizard tool. The sources of data were both primary and secondary. The primary data were collected through questionnaire and interview schedule while secondary data were sourced  from  relevant  journals,  textbooks  and  internet  materials.  Questionnaire  as  the instrument  for  data  collection  was  designed  on  a  five-point  likert  scale  according  to  the objectives of the study. Content validity was used to ensure that the variables were adequately covered. The reliability of the instrument was done through the use of pilot study yielding a reliability index of 0.89 which indicated a high degree of items consistency. Regression analysis was used to test hypotheses one and two while Pearson Product Moment Correlation was used was used to test hypothesis three and four. The study found that process innovation affects organizational response to a great extent; product innovation significantly reduces business vulnerability; there existed a positive relationship between service innovation and adaptive capacity; there  is  a  significant relationship between radical innovation and  organizational recovery. The study concluded that when innovative activities are encouraged in organizations, it enhances the resilient stance and capacities of the organization. Based on the findings of the study, it was recommended that organizations through institutionalized policies can effectively manage their innovative tendencies and activities;  organizations should create an enabling environment which encourages employee creativity and innovative capacities.

CHAPTER ONE

INTRODUCTION

1.1  Background of the Study

In modern times where uncertainty is the order of the day, there are issues confronting the society and businesses existing in the society, and organizations that are proactive and innovative and takes the right decision  could be the organization that survives in this dynamic and ever changing business environment.

Innovation play a key role for the survival of firms; innovation “strikes not at the margins of the profits and the outputs of the existing firms  but  at  their  foundations and their  very lives” (Schumpeter, 1942: 84). More recently this view has been stated by Baumol (2002): “…under capitalism, innovative activity…becomes mandatory, a life-and-death matter for the firm and innovation has replaced price as the name of the game in a number of important industries” (Baumol, 2002: 1). Innovation matters for all different types of firms, new as well as established firms. As Schumpeter emphasises, innovation is a powerful vehicle for new firms to successfully enter the market and undermine the established firms. As well, established organizations need innovating to maintain their competitive position in the face of new and emerging or ‘disruptive’ technologies (Christensen, 1997).

Innovation is a driver of economic growth. It is linked to increased welfare, the creation of new type of jobs and the destruction of old ones. For firms, innovation is important for a number of reasons including survival, growth and shareholder return (Banbury and Mitchel, 1995). In a recent book, Baumol noted that “virtually all of the economic growth that has occurred since the eighteenth century is ultimately attributable to innovation. The Economist Intelligence Unit undertook a survey in 2007 which noted that long-run economic growth depends on the creation and fostering of an environment that encourages innovation. It is argued that countries that generate innovation, create new technologies and encourage adoption of these new technologies grow faster than those that do not. Innovation Nation (2006) states that innovation is essential to the  UK’s  future  economic  prosperity and  quality  of  life.  To  raise  productivity,  meet  the challenges of Globalization and to live within environmental and demographic limits, the UK must excel at all types of innovation. There are a number of surveys that have recently been published which confirm the importance of innovation. For example, respondents to the Boston

Consulting  Group  for  their  report  “Innovation  2010  –  A  Return  to  Prominence  and  the Emergence of New World Order” ranked innovation as a strategic priority with 26% citing it as a top  priority and  a  further  45%  ranking  it  as a  top three  priority.  Research undertaken by McKinsey during 2010 supports this with their survey reporting that “84 percent of executives say innovation is extremely or very important to their companies’ growth strategy.”

To be resilient, organizations rely on strong leadership, their awareness and understanding of their operating environment, their ability to manage vulnerabilities and their ability to adapt in response to rapid change. Alastir (2010) asserts that as our society becomes more complex and independent, we are becoming more vulnerable to disruptive events from threats and hazard.

He further contends that the aim of building resilience is to remove or reduce the exposure of organizations to threats and hazards by developing protective measures which aim to reduce the likelihood and consequences of a disruptive event, by preventing when possible, responding effectively and efficiently when an event occurs, and by recovering as quickly and completely as possible. Seville et al. (2008) discuss organizational resilience as an organization’s “… ability to survive,  and  potentially  even  thrive,  in  times  of  crisis”.  Organizational  resilience  is  a continuously moving target which contributes to performance during business-as-usual and crisis situations (Mitroff, 2005). It requires organizations to adapt and to be highly reliable (Weick and Sutcliffe, 2007), and enables them to manage disruptive challenges (Durodie, 2003).

In the past two decades, attention of business managers and scholars have continued to shift towards the importance of innovation in building organizational resilience. Innovation is one of the instruments that leverages a firm upon entering new and existing market, and provide the company with a competitive edge. Innovation opens new ground and opportunities in both local and international markets by offering new products and ideas to both local and foreign markets. As businesses operate over a period of time, they face different kinds of challenges in the environment; some of these challenges if an organization is not resilient could bring about the end of these organizations.

Plessis (2007) delineates innovation as a formation of new knowledge which helps the new business return, which has purpose to make organization internal business process and structure more sophisticated and produce the market acceptable product and services. The survival of an organization is to great deal associated with how resilient an organization can be to withstand these various challenges.

In some cases people interchangeably use innovation and creativity without knowing the big difference between the two. Though innovation involves creativity Amabile et al(1996), it takes a lot more than creativity to bring about organizational innovation. Innovation is viewed by some professions as the introduction of a new good, to others it is the introduction of a new method of production while some consider it as creation or opening of new markets.

In today’s highly competitive and sensitive business environment, with the consistent and persistent change in customer taste and desires, and with firms struggling to remain in relevant positions in the industry, ideas are no longer centered on cost reduction and mass production with companies paying more attention to customer needs. Innovation has become a vital instrument for top firms to build competitive advantage above those that are less innovative. Current research has shown that companies that are usually market leaders are companies who have innovative competencies and use such competencies to satisfy variety of customers with different needs, thereby eliminating the chance of customers switching brands, while attracting competitor’s  brands.  Companies  cannot  survive  through  cost  reduction  and  reengineering alone… innovation is the key element in organizational resilience and for increasing bottom – line results (Davila, Epstein and  Shelton2006). Organizations have  identified the  numerous advantages presented by innovation and have sought to explore it in every possible way, either to improve quality or create new market or sometimes in attempt to reduce labor cost.(Davila et al,

2006).

1.2  Statement of the Problem

Resilience is a crucial characteristic in Nigerian unpredictable business environment. Trees can only survive storms if they can bend in the wind (Feather2011). The natural world’s proclivity towards flexibility is also rewarded in humans, as resilient individuals can achieve greater level of success, in some cases after hundreds of attempts. At its core, resilience is the spark of determination that empowers us to get up and try again, no matter the circumstances.We have seen time and again that the most successful businesses are resilient enough to bounce back from any crisis. Many organizations have failed to recognize the importance of investing in innovative venturesand putting in place resilient plans that will help themrespond to unforeseen changes, and this has led to low profitability, poor return on investment and eventual death.

In this light, this study seeks to explore the relationship between innovation and organizational resilience within the Nigerian work environment with a study of some selected manufacturing firms in Enugu state, Nigeria. This is necessary given the need for building resilience to Nigerian organizations in the face of the numerous threats to their survival.

1.3  Objectives of the Study

The  primary  objective  of  this  study  is  to  empirically  establish  the  relationship  between innovation and organizational resilience in the Nigerian business environment with a study of some selected manufacturing firms in Enugu state, Nigeria. However, the specific objectives include to:

1.  Determine the extent to which process innovation affects organizational response.

2.  Determinethe effect ofproduct innovation on business vulnerability.

3.  Ascertain the nature of the relationship between service innovation and adaptive capacity.

4.  Ascertain the extent of the relationship between radical innovation and organizational recovery.

1.4  Research Questions

1.  To what extent does process innovation affect organizational response?

2.  To what extent does product innovation affectbusiness vulnerability?

3.  What is the nature of the relationship between service innovation and adaptive capacity?

4.  What  is the extent of the relationship between radical innovation and organizational recovery?

1.5 Research Hypotheses

The following hypotheses are formulated for this study:.

(1)Process innovation affects organizational response to a great extent. (2)Product innovation significantly reduces businessvulnerability.

(3) There is apositive relationship between service innovation and adaptive capacity.

(4) There isa significant relationship between radical innovation and organizational recovery.

1.6 Significance of the Study

Today’s business environment poses great challenge to managers who have to consistently deal with customers changing taste and preference and also cope with innovative pressure from competitors. With resilience being the focal point innovation is a sure to be a rescue to managers. This work high lights the importance of innovation and its role in helping the organization withstand environmental pressures and challenges by being resilient. Innovation is one area where organizations have failed to explore in their bid to remain relevant and competitive in the industry. This work will open the eyes of managers and scholars to the numerous advantages of innovation in every organization.

This work goes on to show scholars how effective innovation can be in competition and proves that innovative organizations especially in the manufacturing industry are always ahead in terms of customer satisfaction and retention thereby positioning themselves to be more resilient than those that are not innovative. The result will add to the body of existing knowledge in the field as not much is recorded about this in literatures especially in the developing countries like Nigeria.

This work is also significant in the sense that it tries to localize innovation in the South – East geo political zone of Nigeria and puts into consideration challenges and strengths peculiar to the zone.

1.7 Scope of the study.

The work examined the impact of innovation on organizational resilience. The content of the study examined the impact of innovation from four dimensions namely; process innovation, product   innovation,   service   innovation   and   radical   innovation:   on   four   measures   of organizational  resilience  namely;  response,  business  vulnerability,  adaptive  capacity  and recovery. The  study was carried out  in  some  selected  manufacturing  firms  in  EnuguState, Nigeria:Nigeria Breweries Limited, Innoson Technical and Industrial Company Limited and Juhel Nigeria Limited. The study covered a time range from August 2013 to September 2015.

1.8 Limitations of the study.

There is dearth of literature and research on organizational resilience and organizational innovation particularly in the Nigerian context. Most of the available literature is by foreigners on foreign companies, whose setting and environment in no way depicts what obtains in the Nigerian environment. In addition the population is a hard one to reach giving its elite nature.

This work was also limited by sample size, sector covered and the geographical spread. The entire population was not studied, thus giving room for the possibility of errors in sampling sizing. In addition, the study did not include entire manufacturing industry but was restricted to some selected sector of the industry, it was also limited by geographical spread as only the South

– East region of Nigeria was studied. A further limiting factor in this study was the prospect of unexpected or extraneous events occurring at the time of the study which may have affected the obtained response. Inability to access some required offices was also a problem. The researcher had no control over these events.

These limiting factors are expected to affect the generalization made in this study. Nevertheless the knowledge to be gained on the impact of innovation on organizational resilience makes the study worthwhile.

1.9 Operational Definition of Terms

Adaptive capacity

Adaptive capacity is an aspect of resilience that reflects learning, flexibility to experiment and adopt novel solutions, and the development of generalized responses to broad classes of challenges.

Competitive Advantage

It is an advantage over competitors gained by offering customers greater value, either by means of lower prices or by providing greater benefit and service that justifies higher prices.

Creativity

It is a mental process that results in the production of ideas and concepts that are appropriate, useful and actionable.

Innovation

Making changes to something established by introducingsomething new that adds value to the customer.

Invention

Invention means creating something new that has never existed before.

Organizational Resilience

Resilience  is  the  organizational  capability  to  anticipate  key  events  from  emerging  trends, constantly adapt to change, and rapidly bounce back from disaster

Process innovation

It is viewed as a creation of new process or improvement to an existing process.

Product Innovation

Is defined as the development and commercialization of new product to create value and meet the needs of the external user.

Radical innovation

A  radical  innovation  is  a  product,  service  and  process  with  entirely  new  and  unique improvement in existing features which in turn improves the value and cost of performance

Recovery

Recovery means the ability to regain a degree of normality after crises or an event.

Response

Response means the ability to mobilize quickly in the face of crises.

Service Innovation

Service innovation is about making changes to products that cannot be touched or seen (i.e., intangible products). Services are often associated with work, play, and recreation.

Vulnerability

This refers to the inability to withstand the effects of a hostile environment. Vulnerability is a concept that links the relationship that people have with their environment to social forces and institutions and the culture values that sustain and contest them.

1.10    Profile of the Selected Manufacturing Companies In Enugu State i. Juhel Nigeria Limited Emene, Enugu State Nigeria

JUHEL NIGERIA LIMITED is located at Emene in Enugu, capital of Enugu State, Nigeria. It is a 100% indigenous company incorporated in 1987 with RC No. 104.648 as a wholesale Pharmaceutical Company. In answer to calls for local provision of cost-effective generic

products to fill the gap left by Multinational companies operating in the country; the founder, Dr. Ifeanyi Okoye, mni, with a focused vision, ventured into production and the factory was commissioned in 1989 as the first pharmaceutical tablet manufacturing company in old Anambra state.

Today, by the grace of God, and due diligence, innovation, dedication, commitment to excellence of staff and management, and support from numerous customers nationwide, the company is ranked as one of the fastest growing pharmaceutical manufacturing companies in Nigeria.

The brand and product range have since grown in strength and include virtually all therapeutic classes, such as, Antibiotics and Anti-infective, Cardiovascular, Anti-diabetics, Anti-malarial,

Cough and Cold, Vitamins and Minerals, Anxiolytics, Antihistamines, Analgesics, Antacids and

Anti-flatulent, and recently, bottled mineral water Ivy Table Water.

Juhel Nigeria Ltd strong management team comprises of accomplished professionals who excelled in both their academic and professional career. The team leader is Dr. Ifeanyi Okoye, Managing Director and Chief Executive Officer, a Ph.D holder in Pharmaceutical technology, a member of national institute, mni, and a fellow of the Pharmaceutical Society of Nigeria, FPSN.

ii. Nigerian Breweries Plc Ngwo, Enugu State, Nigeria

Nigeria Breweries Plc, the pioneer and largest brewing company in Nigeria was incorporated in

1946. In June 1949, the company recorded a landmark when the first bottle of STAR lager bear rolled off its Lagos Brewery bottling lines. This first brewery in Lagos has undergone several optimization processes and as today boasts the most modern brew house in the country.

In 1957, the company commissioned its second brewery in Aba. Kaduna Brewery was commissioned in 1963 while Ibadan Brewery came on stream in 1982. In 1993, the company acquired its fifth brewery in Enugu. In October 2003, a sixth brewery sited at Ameke, in Enugu state was commissioned and christened Ama Brewery, the biggest and most modern brewery in Nigeria.

In  October  2011,  Nigeria  Breweries  acquired  majority  equity  interests  in  Sona  Systems Associates Business Management Limited, (Sona Systems) and Life Breweries Limited from Heineken N.V. This followed Heineken’s acquisition of controlling interests in five breweries in Nigeria from Sona Group in January 2011.

Sona System’s two breweries in Ota and Kaduna, and Life Breweries in Onitsha have now become part of Nigeria Breweries Plc, together with three brands: Goldberg lager, Malta Gold and Life Continental lager.

Thus,  from  humble  beginning  in  1946,  the  Nigeria  Breweries  has  now  eight  operational breweries from which its high quality products is distributed to all parts of Nigeria, in addition to the ultra modern malting plant in Aba and Kaduna.

Nigeria Breweries Plc, Enugu State Branch (Ama Brewery) is located at Amaeke Ngwo near 9th

Mile Corner in Enugu State. It is the sixth branch of Nigeria Brewery Plc in Nigeria and it was commissioned in the year 2003. The site covers a total area of approximately 100 hectares. Ama

Brewery is designed with the best cutting edge technology and world-class standard processes. The company has a production capacity of 3 million hectoliters per annum.

Nigeria Breweries Plc has a rich portfolio of high quality brands: Star Lager Beer, the first in its portfolio, was launched in 1949, this was followed by Gulder lager beer in 1970, Maltina, the nourishing malt drink was introduced in 1976, followed by Legend Extra Stout in 1992. Amstel Malta was launced in 1994 while Heineken lager beer was relaunched into the Nigerian market in 1998. Maltina sip-it packaged in tetrapaks was launched in 2005, while Fayrouz was launched in 2006. In 2007, the company introduced Star, Heineken and Amstel Malta in Cans. In 2011, the company sold a total of 29 stock keeping Units (SKU’s) including Gulder Can, Legend Can, Heineken Magnum, Maltina Can, Fayrouz Cans, Fayrouz P.E.T, Climax Energy drink as well as Goldberg lager, Malta Gold and Life Continental lager which became part of the family in October 2011.

The  company  is  made  up  of  several  departments  which  are  controlled  by  the  heads  of departments (HODs) who in turn are summarily headed by brewery manager. He oversees the general activities of the company.

iii. Innoson Group of Companies Emene, Enugu State, Nigeria

Innoson Group of companies which recently added Innoson Vehicle Manufacturing Company to its group to handle optimization design and assembly of Vehicles specially designed for Nigeria and the sub-region roads at affordable prices originally started as a trading outfit in 1976.

The  company  later  expanded  into  manufacturing  of  Plastic  Chairs,  Tables,  Trays,  Plates, Spoons,    Cups,    Jerry    Cans    of    different    sizes    and    many    other    allied    products. Since inception, this company has been the biggest plastic manufacturer in Nigeria. It produces the highest quality range of the plastic products of international standard and has a production capacity of over 10,000 pieces of chairs and tables per day. Due to the rapid demand of these products, the company’s twelve production lines of injection moulds have been increased.

The group has over six hundred indigenous employees and few expatriate staff on its payroll with an annual turnover of 3.6 billion naira. The product range includes Innoson Chairs, Tables, Jerry Cans, Drums, Melamine Table Wears, Household Plastic, Plastic Toys, Ammeter Box and Accessories, Plastic Models, PVC Hose, Dutsbin, Pallet, Water Tank, Foam Products Plastic

Roof Ceilings, Motor Cycles, Motor Cycles

Plastic Parts, Motorcycle Helmets, Vehicles and Tyres. Etc. Its Head Office/Factory situated at Plot W/L Industrial Layout Emene, Enugu State, Nigeria.

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