Factor affecting innovativeness of small and medium enterprises in the five southern border provinces

- Factor affecting innovativeness of small and medium enterprises in the fi ve southern border provinces.
- This study tested a model of factors affecting the innovativeness of small and medium enterprises (SMEs) in the five southern border provinces using structural equation modeling.
- Data on innovativeness and its hypothesized antecedents were collected using questionnaires that were mailed to a study sample of 283 entrepreneurs in SMEs in the five southern border provinces.
- Networking and risk-taking showed indirect effects on innovativeness with path coef fi cients of 0.63 and 0.48, respectively.
- The research results can be used to set the guidelines for entrepreneurs to build innovativeness in their enterprises by creating a learning culture/behavior in the organization, building proactiveness, creating a business network with government and the private sector, as well as having courage to take risks when there is an opportunity..
- SMEs are a key element of the economy, accounting for 99 percent of all businesses.
- Causes are: 1) an increase in the re- quirements and complexities of trade agreements at all businesses levels.
- SMEs in the fi ve southern border provinces have an average growth rate of 1.6 percent, while SMEs in other provinces in southern Thailand have a 2.1 percent growth rate.
- Furthermore, po- litical instability and the insurgency in the three southern border provinces of Thailand and in the outskirt districts of Songkhla from 2005 to the present is a big barrier to eco- nomic growth, preventing market expansion and job cre- ation by entrepreneurs.
- The consequences of this affect market development for SMEs, especially in the food and beverages group.
- Consequently, the food and beverages group received special focus in the action plan to promote SMEs in 2012 e 2016 (Small and Medium Enterprises Agency, 2013).
- SMEs in the food and beverages group need to have appropriate methods and to implement new innovations to drive their business growth and survival, as well as to increase their competitive advantage..
- Two main char- acteristicsdentrepreneurship and innovativenessdare needed in the entrepreneurs.
- the ability of the organization or company to undertake the development of innovations including process innova- tion, product innovation, or innovative ideas in organiza- tion, etc.
- Vuttiwong (2009) reported that innovativeness is very important in sustain- ing the competitive advantage of the enterprises listed on the stock exchange.
- However, the previous studies emphasized big organizations that are different from the SMEs, especially the SMEs in the fi ve southern border provinces, where some provinces have been affected by the insurgency.
- The objective of this study was to test a model of the factors affecting the innovativeness of SMEs in the fi ve southern border provinces.
- The model was built using the results obtained from a previous qualitative study in the area (Phuangrod, 2015), combined with those from a literature review.
- The research conclusions will help to support the development of innovativeness of SMEs in the fi ve southern border provinces..
- This study refers to the meaning of innovativeness de fi ned by Wang and Ahmed (2004) d innovativeness is an organization's overall innovative capability of the organi- zation to present or introduce the new products to the market by combining strategic orientation with innovative behavior and process.
- The results showed that the innova- tiveness of the SMEs consisted of fi ve important keys fac- torsdrisk-taking, networking, market orientation, proactiveness, and learning orientation.
- The willingness to take risk in the business leads to learning orientation and proactiveness.
- Market orientation results in proactiveness in the business and learning orientation (Phuangrod, 2015).
- The results from previous study found that the application of marketing orientation by an entrepreneur results in trying to adapt the business oper- ations in accordance with the needs of the consumers in order to meet market demand (Phuangrod, 2015).
- Networking helps to drive busi- ness growth and survival in the southern border provinces experiencing the insurgency and allows SMEs access to funding and other support from the government..
- Govern- ment networks play important roles including: 1) providing useful information and programs to develop and increase entrepreneurial knowledge, 2) providing new market channels for product distribution, and 3) support- ing the company in taking care of the security issue in the southern border provinces, fi nding the funding sources, and building partnerships between government and pri- vate business sectors (Phuangrod, 2015).
- Risk-taking positively in fl uences innovativeness..
- Risk-taking is a willingness of the entrepreneur, who operates the business in a way that challenges the entre- preneur's knowledge and ability, to take business risks including a fi nancial loss, among others.
- Several re- searchers determined that risk-taking is one of the entre- preneurial characteristics having a positive correlation with innovativeness (Hult, Hurley, &.
- Previous study also found that risk-taking leads to the development of new products, production systems, and new sale channels for the company.
- This is the major factor driving business survival and business growth in the area.
- Proactiveness is a business operation that seeks for new ways or new opportunity in order to improve or develop the business by making a difference for the products or services, and a commitment to become a leader in the market.
- Several researchers reported that proactiveness is one of the entrepreneurial characteristics which has a positive correlation with innovativeness (Hult et al., 2004;.
- In the current study, this variable was measured by two observed variables: 1) make a difference for the market, and 2) market leadership..
- Learning orientation positively in- fl uences innovativeness..
- An entrepreneur who wants to meet the needs of the customer must work to make a difference in their products and services in order to meet the requirements of the market that have never been ful fi lled before.
- Market orientation positively in fl uences learning orientation..
- Risk-taking Market.
- Networking positively in fl uences risk- taking..
- Receiving support from both government/enterprises and the private sector helps to increase the con fi dence of the entrepreneur encouraging risk-taking in business in- vestment to further develop the business (Grinstein, 2008)..
- Risk-taking positively in fl uences learning orientation..
- An entrepreneur, who has courage to make a decision, do new things, and embrace failure in the business would try to learn in order to use the knowledge to support his decision-making and reduce the risks that may occur from such decisions (Ma'atoo fi &.
- Previous study found that risk-taking relates to learning orientation.
- This courage drives learning which can be used to support the decision-making in the business operation such as an idea to proceed with the preserved fruit business allowed the entrepreneurs to learn by observing the customers, local wisdom, and their past business experience (Phuangrod, 2015)..
- Risk-taking positively in fl uences proactiveness..
- The courage to do new things allows the entrepreneurs to seek for new opportunities in the business.
- The entre- preneur will always ask themselves questions about how to come up with things that are different from their com- petitors in order to become a leader in the market both inside and outside their business regions (Nasution, Mavondo, Matanda, &.
- SMEs in the fi ve southern border provinces.
- The list of the population was collected from the database of the Department of Business Development, Ministry of Com- merce, and the data in the Enterprises' Registration of Community Development in the fi ve southern border provinces.
- The fi nal ques- tionnaire contained: 1) questions to test the 3 observed variables of the risk-taking, namely, courage in trial and error (4 questions), courage in doing new things (4 ques- tions), embracing failure (4 questions).
- and 6) questions to test the observed variables of innovativeness of the orga- nization consisting of the 5 aspects of: products, processes, marketing, strategies, and behaviors (4 questions for each aspect)..
- The method requires multi- variate normality of the data.
- The distribution of the data in this study conformed to this requirement.
- Goodness of fi t of the models to the data was assessed using c 2 statistics and fi t indices as suggested by Hu and Bentler (1999), that is the root mean square error of approximation (RMSEA) and its 90% con fi dence interval, the standardized root mean square residual (SRMR), the.
- Values of the CFI and TLI close to 0.95 and an SRMR less than 0.08 re fl ect a good fi t of a model to the data (Hu &.
- Furthermore, 74.6 percent of the respondents were owners of enterprises with 13.1 percent being executive managers or presidents.
- Of the sampled organizations, 96 percent had less than 50 employees..
- The measurement model tested consisted of six latent variables of the study.
- market orientation ” and “ learning orientation.
- The testing of the resultant measurement model with fi ve latent variables (Model 3, Table 1 and Figure 2) showed that the model fi tted well to the data (RMSEA ¼ 0.065, NNFI and CFI >.
- In the 5-factor model (Figure 2), the standardized factor loading for all latent variables ranged between 0.59 and 0.85.
- The correlation of each latent variable ranged between 0.43 and 0.80 indicating divergent validity or the conceptual difference between each of the fi ve latent variables.
- The relationship among the latent variables of the hy- pothesized model (Model 3 in Table 1) is shown in Figure 1 and the measurement model is shown in Figure 2.
- Therefore, Model 3 was modi fi ed after examination of the modi fi cation index with consideration of the theoret- ical possibility for adding suggested paths.
- Brown and Butler (1993) and Aldrich and Zimmer (1986) reported that networking of the organization allows the organization to potentially move forward very quickly.
- Networking is the key mechanism to access external information and resources, enabling the organization to do business very proactively in order to make a difference in the market and become a market leader.
- The fi nal model (Model 4) exhibited a fi t to the data (Table 1) with an RMSEA greater than 0.05 but less than 0.08, with the 90% CI of the RMSEA having a lower limit of 0.05 and a higher limit less than 0.08, the NNFI and CFI being greater than 0.95, and the SRMR less than 0.08.
- The latent variables in the model accounted for 71 percent of the variability in innovative- ness.
- Networking and risk-taking did not have direct effects on innovative- ness.
- The risk-taking showed direct effects on learning orientation and proactiveness, which in turns in fl uenced innovative- ness.
- Networking had an indirect effect on the innovativeness by its relation with the risk-taking and proactiveness.
- However, consid- ering all the effects (both direct and indirect) on innovativeness, innovativeness was highly in fl uenced by proactiveness and networking followed by risk-taking and learning orientation..
- The study found that the factors affecting the innova- tiveness of the SMEs in the fi ve southern border provinces.
- Proactiveness, which involves making a difference in the market and the intention to be a market leader by adding value to the existing business as well as improving or modifying of existing business, is performed in order to meet customer demand (Miller &.
- The fi nding that networking in fl uences risk-taking was consistent with the results of qualitative research which showed that the support from the government/enterprise and private sec- tors including building business con fi dence, increasing the business's development potential, adding product value, and providing useful business information, build the con- fi dence of the SMEs.
- It also builds courage in the SMEs' to take risks in order to turn a business crisis into an oppor- tunity, to try new things, and to accept that negative results may occur.
- Risk-taking Courage in trial and error.
- Learning orientation.
- The figure does not show relationship lines between each variable in order to reduce the complexity of the graphic.
- Risk-taking does not have direct effects on innovative- ness but has indirect effects due to its relations with pro- activeness and learning orientation.
- (2010) which showed that courage in risk-taking by the entrepreneur is positively correlated with the entrepreneurs' enthusiasm for learning.
- The qualitative study found that courage in risk-taking of the entrepreneurs builds the entrepreneurs' passion for learning by observing and collecting data from the customer, customer inquiries, and using local wisdom and past business experience, to help their business operation..
- The risk-taking also has direct effects on the proactiveness.
- The entrepreneurs in SMEs in the fi ve southern border provinces should create new organizational environments and cultures that help to develop innovativeness for their organization including: 1) SMEs should emphasize learning by informing everyone in the organization about the importance of learning and providing support to em- ployees in time, funding, and the opportunity to learn.
- in the market Market leadership Government.
- Risk-taking.
- Figure 3 Structural equation modeling of the factors affecting innovativeness.
- The researchers wish to express special thanks to the Of fi ce of the Higher Education Commission, Thailand for supporting a funding grant under the Program for Strategic Scholarships Fellowship Frontier Research Networks (spe- ci fi c to the southern region)..
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