Innovation Drivers in the Cypriot Food and Beverage Industry

Abstract

The Food and Beverage industry, a leading sector of the Cypriot manufacturing industry is under investigation in our study. The influence of innovation as a development vehicle is considered and factors affecting it have been investigated. In order to define and introduce these factors affecting innovation in the Cypriot manufacturing sector a nationwide survey is carried out. All five prefectures (Nicosia, Ammochostos, Limasol, Larnaca and Paphos) are covered and a sample of 5% of the whole Food and Beverage sector is surveyed. A closed questionnaire, made of five sections is used in order to collect information that will be used in a second stage in order to introduce the innovation factors affecting industrial development. The results illustrate the gradual adoption of a pro-innovation culture in the Cypriot Food and Beverage Industry. Among others it was shown, that companies that have proceeded with product innovation, process innovation and organizational innovation have experienced the impact of innovation on their organizational performance. BACKGROUND INFORMATION Innovation itself is very broad concept and, as a result, various classifications of innovation have been developed and applied in the literature. Most researchers have focused on technology-related innovations, such as the introduction of products that requirees radical changes in the production process. The concept of innovation however can be seen extending far beyond radical and technologybased product innovation. The European Union’s Green Paper on Innovation, suggests that there are three forms of innovation – Product, process and organization. Innovation Is a) The renewal and enlargement of the range of products and services and the associated markets b) The establishment of new methods of production, supply and distribution and c) The introduction of changes in management, work organization, and the working conditions and skills of the workforce. Organizational innovation deals with changes in marketing, purchases and sales, administration, management and staff policy. Organizational innovation has gained importance in all manufacturing sectors and especially in the Food and beverage sector through the implementation of ISO 9000 and other health safety and quality standards [1-3]. Innovative organizations embrace innovation by constantly introducing change. Innovations include: • New work structures (teams, networks, outsourcing, and creating value webs new work procedures) Address correspondence to this author at the European University Cyprus, 6, Diogenes Str., Engomi, 2404 Nicosia, Cyprus; Tel: +357 22 713 000; Fax: +357 22 664 531; E-mail: a.efstathiades@euc.ac.cy • Advanced technology, new manufacturing methods, information technology, quality management and process cycle time, human resource management strategies to ensure strategic fit with the business goals and inject flexibility (constant training, recruiting the best talent and rewarding employees, creating a work environment to spur innovation) • Encourage risk taking behaviours and valuing experimentation [4] Researchers and managers have tried various approaches to clarifying the relationship between organizational characteristics and the adoption of innovation in the face of multiple dimensions of innovation. Hitt et al. [5] combined the acquisition of process innovations with the adoption of product innovations and market innovations into a single variable termed external innovation. When using their approach they did not find significant relationship between firm size and the adoption of external innovation. Others [6] found a significant relationship between firm size and product innovation, and others [7] between firm size and process innovation. Terziovski [4] presenting the results of a major study commissioned by the Australian Manufacturing Council [8], mentions on the basis of a 1,300 response data base, that continues improvement and innovation management which have a positive impact on the business performance of individual firms. Francisco et al. [9] in their study regarding the possible relationship between perceptions of Quality and innovation environments at Bank branches (80 bank offices) presents the relationship between TQM approaches and Innovation. Customer orientation is found to be a stimulus for innovation in an organization, This provides a clear orientation to innovation, as it links innovation to customer needs, while continuous improvement promotes change, innovation and creativity, as it reflects on how the work is organized and 20 The Open Industrial and Manufacturing Engineering Journal, 2008, Volume 1 Efstathiades et al. managed. On the other hand customer orientation may prevent organizations from undertaking radical innovations while overemphasis on efficiency of continuous improvement may ultimately minimize and even remove availability of the resources required for innovation. Empowerment makes people feel that they have a certain degree of autonomy, which makes their work more innovating. Teamwork is one of the most effective communication channels, and communication is one of the main determinants for innovation within organizations. On the other hand the cultural trend to teamwork is detrimental to radical innovation and inventions. Tucker [10] put forward four essential principles of managing innovation in the new century which are connected to the comprehension of a company’s approach to innovation, the organized and systematic structure of innovation’s implementation, the level of entire organization involvement in the innovation process and the favourable climate for innovation inside a company. A framework proposed by Neely et al. [11] suggests that the firm’s capacity to innovate and innovation itself does not depend upon a company’s resources and internal environment, but also on external facilitating factors (business support agencies, public grants, active local business networks etc.) which tend to be different in different contexts. In detail the proposed framework is based on the following assumptions: 1. A firm possesses an inherent capacity to innovate, which is embedded in the firm’s culture, internal processes and capabilities to understand the external environment. 2. The capacity to innovate the firm affects the innovativeness of the firm in terms of product and process innovation, and as well as organizational innovation. 3. Even if a firm is highly innovative, it has to exploit its innovations in terms of outcomes – i.e. use them to reduce costs and/or to offer products or services to its customers. This is a condition to gain better business performance, such as market share and financial performance. The external contextual environment can influence both the firm’s capacity to innovate. On the other hand the following factors are identified as factors inhibiting innovation: • Innovation is poorly defined because customer requirements are not well understood and therefore the goals are not established properly. This is often because some organizations tend to be internally focused and innovating activity is weighted in terms of economic returns and shortterm goals such as profit improvement targets. • Culture is too inhibitive and as such does not foster innovation as an ongoing activity. Employees are not fully aware of the need to be proactive and innovate, and not necessarily encouraged and motivated to perform using their creative potential. There is lack of involvement, absence of team work, and the thinking that innovation is a management responsibility. • Organizational factors such as attitudes of doing more of the same, rewarding the status quo, poor resource allocation and utilization. Innovation has always been at the centrepiece of competitiveness. Competitiveness comes from innovative minds. The lesson is clear. To remain on top you have to produce the consumer products that people need. You have to find and convert new innovations into producible goods. You have to continously try to develop useful applications from what many would consider useless byproducts. A company embarks on innovation projects in order to improve its position in the competitive arena. The competitive success can be measured in terms of improvements in different business performances, such as R.O.I, market share and so on [12]. There are cases in which innovation does not lead to positive effects on business performance. It is not sufficient to introduce the innovation, but in order to gain better business performance, the innovation has to produce effective outcomes [13-14]. These can be obtained by leveraging technological innovation, information and communication technology, and organizational changes [15-16]. According to Efstathiades et al. [17] technology can only contribute to a competitive success if it is integrated into organizations’ business strategies and practices. A model proposed by Neely et al. [11] uses five constructs relating innovation performance and innovation practices as follows: business performance, outcomes of innovation, innovation, capacity to innovate and external contextual environment. The dimensions of company performance that can be influenced by the outcomes of innovation are: • Return on Investment • Market share • Competitive position versus direct competitors • Value to customers (the extend to which product and services are seen by customers as value for money)