Technological Innovation Capabilities and Firm Performance

Technological innovation capability (TIC) is defined as a comprehensive set of characteristics of a firm that facilities and supports its technological innovation strategies. An audit to evaluate the TICs of a firm may trigger improvement in its future practices. Such an audit can be used by the firm for self assessment or third-party independent assessment to identify problems of its capability status. This paper attempts to develop such an auditing framework that can help to determine the subtle links between innovation capabilities and business performance; and to enable the auditor to determine whether good practice is in place. The seven TICs in this study include learning, R&D, resources allocation, manufacturing, marketing, organization and strategic planning capabilities. Empirical data was acquired through a survey study of 200 manufacturing firms in the Hong Kong/Pearl River Delta (HK/PRD) region. Structural equation modelling was employed to examine the relationships among TICs and various performance indicators: sales performance, innovation performance, product performance, and sales growth. The results revealed that different TICs have different impacts on different performance measures. Organization capability was found to have the most influential impact. Hong Kong manufacturers are now facing the challenge of high-mix-low-volume customer orders. In order to cope with this change, good capability in organizing different activities among various departments is critical to the success of a company. Keywords—Hong Kong/Pearl River Delta, Innovation audit, Manufacturing, Technological innovation capability Richard C.M. Yam* is Associate Professor in the Department of Manufacturing Engineering and Engineering Management, City University of Hong Kong. His current research interests are in the areas of product innovation and technology management. William Lo is a PhD graduate in Department of Manufacturing Engineering and Engineering Management, City University of Hong Kong. His current research interests are in the areas of technology management and advanced manufacturing practices in Hong Kong and Pearl River Delta region. Esther P.Y. Tang is Associate Professor in the Department of Management and Marketing, Hong Kong Polytechnic University. Her current research interest is in the area of marketing and manufacturing interface. Antonio, K.W. Lau is a former teaching staff of the Department of Manufacturing Engineering and Engineering Management at the City University of Hong Kong. His current research interests are in the areas of new product development and innovation management. *Corresponding author