NEW VENTURES' TIES WITH SERVICE INTERMEDIARIES
AND SERVICE INNOVATION: THEIR RELATIONSHIP AND
THE INFLUENCE OF POTENTIAL ABSORPTIVE CAPACITY
AND REALIZED ABSORPTIVE CAPACITY
A study among financial service firms in the Netherlands.Author: Willem Alexander Victor Hibbeln Student number: 10661115
Date of submission: 29 January 2015 Study qualification: Master of Science in Business Administration - Strategy Track Institution: University of Amsterdam First supervisor: Dr. A.S. Alexiev
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Abstract
This study examined the relationship between new ventures’ ties with service intermediaries and service innovation, in the context of the Dutch financial service sector. In addition, this research examined the mediating effect of new ventures’ ties with service intermediaries between the indirect relationship of potential absorptive capacity (PAC) and service innovation. It was hypothesized that new ventures will not search for new knowledge, and establish ties with service intermediaries, until their acquisition and assimilation, PAC, is sufficient to recognize the need for new knowledge. Furthermore, this study examined the moderating effect of realized absorptive capacity (RAC) on the relationship between new ventures’ ties with service intermediaries and service innovation. It was hypothesized that new ventures will be able to be innovative when their transformation and exploitation, RAC, is sufficient to combine the new external knowledge and existing knowledge of the firm. Based on data from an internet-mediated questionnaire and semi-structured interviews, support was found for the relationship between new ventures’ ties with service intermediaries and service innovation. In addition, support has been found for the mediating effect of new ventures’ ties with service intermediaries between the indirect relationship of potential absorptive capacity (PAC) and service innovation. Furthermore, support has been found for the moderating effect of realized absorptive capacity (RAC) on the relationship between new ventures’ ties with service intermediaries and service innovation. The results of this study provide theoretical and practical contributions to the fields of new ventures, ties, service intermediaries, service innovation, PAC, RAC, as well as avenues for future research.
Keywords: new ventures, ties, service intermediaries, service innovation, potential absorptive capacity (PAC), realized absorptive capacity (RAC)
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Table of Contents
1. Introduction ... 5
1.2 Research gap and research question... 6
1.3 Theoretical and practical relevance... 8
1.4 Brief outline of the research ... 9
2. Literature review ... 9
2.1 Innovation ... 9
2.2 New ventures’ ties with service intermediaries ... 13
2.3 Absorptive Capacity ... 16
2.3.1 Potential absorptive capacity (PAC) ... 18
2.3.2 Realized absorptive capacity (RAC) ... 18
2.4 Absorptive capacity and new ventures’ ties with service intermediaries ... 19
3. Theoretical framework ... 20
3.1 New ventures’ ties with service intermediaries and service innovation ... 20
3.2 New ventures' ties with service intermediaries as mediator ... 21
3.3 Realized absorptive capacity (RAC) as moderator ... 22
4. Empirical Research ... 23
4.1 Methods ... 23
4.1.1 Research design ... 24
4.1.2 Research context ... 25
4.1.3 Sample and data collection ... 28
4.2 Measures ... 30 4.2.1 Dependent variable ... 30 4.2.2 Mediator ... 31 4.2.3 Moderator ... 32 4.2.4 Independent variable ... 33 4.2.5 Control variables ... 34 5. Results ... 34
5.1 Results of quantitative analysis ... 34
5.1.1 Reliability analysis ... 35 5.1.2 Descriptive statistics ... 39 5.1.3 Correlation analysis ... 40 5.1.4 Normality analysis ... 44 5.1.5 Regression analysis ... 46 5.1.6 ANOVA analysis ... 55
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5.2 Results of the qualitative analysis ... 58
5.2.1 PAC ... 58
5.2.2 New ventures’ ties with service intermediaries ... 59
5.2.3 RAC ... 60 5.2.4 Service Innovation ... 61 6. Discussion ... 63 6.1 Additional findings ... 67 6.2 Theoretical Implications ... 68 6.3 Practical implications ... 70
6.4 Limitations and avenues for future research ... 71
7. Conclusion ... 73 8. References ... 75 9. Appendices ... 79 9.1 Appendix A ... 79 9.2 Appendix B ... 82 9.3 Appendix C ... 93
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1. Introduction
Firms need to develop new products or services to compete in the always changing dynamic market (Brown & Eisenhardt, 1995). Firms need to have an innovative state of mind to see chances in the environment. Unfortunately, this is a problem for new ventures. In the world today, most of the markets for products and services are dominated by big companies. New ventures find it harder and harder to enter and compete in markets and are more likely to be shut down than experienced firms. The concept of ‘liability of newness’ is used to describe the phenomenon that newer firms fail more often than more experienced firms. Stinchcombe (1965) was one of the first who addressed this problem. The meaning of liability of newness is that newer firms fail more often because they have limited resources, and do not have established ties with the external environment (Stinchcombe, 1965). Therefore, new ventures receive less
external knowledge, which limits their ability to innovate.
The importance of external knowledge has been highlighted by many authors (Katila & Ahuja, 2002; Rosenkopf & Nerkar, 2001; Zhang & Li, 2010; Cassiman & Veugelers, 2006; Rigby & Zook, 2002). External knowledge is critical to the innovation process (Rigby & Zook, 2002). Firms cannot solely rely on internal knowledge for their innovation (Cassiman & Veugelers, 2006). They also need knowledge beyond their boundaries to be innovative. This underlines the importance for firms to gain ties with the external environment. These ties can help firms to gain more knowledge (Baum et al., 2000; Stuart, 2000; Larrañeta et al., 2012; Zhang & Li, 2010; Wolpert, 2002), and this new knowledge can contribute to innovation (Wolpert, 2002; Zhang & Li, 2010). In this research, ties between service intermediaries and new ventures will be examined. Service intermediaries are for example, consulting and ICT firms, which can help new ventures to gain access to external knowledge (Wolpert, 2002; Zhang & Li, 2010).
Absorptive capacity plays a crucial role in a firms’ search for external knowledge and the integration of external knowledge (Fosfuri & Tribo, 2008; Lane & Lubatkin, 1998; Zahra
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& George, 2002; Lane et al., 2006; Lane & Lubatkin, 1998). Absorptive capacity is defined as:
‘a set of organization routiness and strategic processes by which firms acquire, assimitlate, transform, and exploit knowledge, for purpose of value creation’ (Zahra & George, 2002:
p.198). A distinction can be made between potential absorptive capacity (PAC) and realized absorptive capacity (RAC) (Zahra & George, 2002). Potential abospritve capacity has to do with a firms’ knowledge search and realized absorptive capacity with a firms’ knowledge integration (Fosfuri & Tribo, 2008; Zahra & George, 2002).
1.2 Research gap and research question
Prior Research has shown that external knowledge integration stimulates innovation (Cassiman & Veugelers, 2006; Rigby & Zook, 2002). In addition, it has shown that ties with service intermediaries contribute to external knowledge and therefore stimulate innovation (Wolpert, 2002; Zhang & Li, 2010). It has also been highlighted that absorptive capacity plays a crucial role in the external knowledge search (PAC) and external knowledge integration (RAC) (Cohen & Levinthal, 1990; Fosfuri & Tribo, 2008; Lane & Lubatkin, 1998; Zahra & George, 2002). Unfortunately, whether and how knowledge search (PAC) and knowledge integration (RAC) influence the establishing of new ventures’ ties with service intermediaries has not been examined. New ventures in the financial service sector need ties with service intermediaries to receive external knowledge. This external knowledge can contribute to service innovation. Therefore, it is important to investigate the influence of both PAC and RAC on the establishing of new ventures’ ties with service intermediaries.
In addition to the investigation of both PAC and RAC on the establishing of new ventures’ ties with service intermediaries, more research needs to be done to determine whether and how knowledge search (PAC) and knowledge integration (RAC), influence the relationship between new ventures’ ties with service intermediaries and service innovation. The received external knowledge from service intermediaries needs to be transformed, by the new venture,
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to contribute to service innovation. Research needs to be done to determine whether PAC and RAC influence the transformation of external knowledge, received from service intermediaries, into internal knowledge. Therefore, it is important to examine the influence of both PAC and RAC on the relationship between new ventures’ ties with service intermediaries and innovation. Another research gap of this thesis is its research context. Absorptive capacity (PAC and RAC) tends to be examined in knowledge intensive business sectors such as pharmacy, biotechnology, information technology and R&D (Lyles & Salk, 1996; Fosfuri & Tribo, 2008; Lane & Lubatkin, 1998). Firms in these sectors are all knowledge intensive, such as financial firms. However, the influence of absorptive capacity (PAC and RAC) in the financial service sector has not been examined extensively. This is despite the fact that the financial service sector is a rapidly developing industry where a lot has happened in recent years. For instance, the financial crisis. Due to the financial crisis, a lot of new ventures in the financial service sector find it hard to stay in the market. There is a lack of confidence in financial service firms. Customers feel betrayed, and are therefore more careful when investing. In addition, the AFM (Dutch Financial Markets Authority) introduced multiple new rules after the crisis, to regulate the financial service sector (AFM, 2014). The lack of investments by customers, and the forced changes by the AFM, has led to many firms in the financial service sector ceasing operations. It is important to examine how new ventures can overcome the high rate of attrition in the financial service sector. Therefore, more research needs to be done to determine the relationship between new ventures’ ties with service intermediaries, service innovation, and absorptive capacity (PAC and RAC), in the Dutch financial service sector. Consequentially the research questions is: ‘What is the influence of both PAC and RAC on the establishing of new ventures’
ties and on the relationship between new ventures’ ties with service intermediaries and service innovation, in the Dutch financial service sector?’
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- To what degree are new ventures’ ties with service intermediaries related to service innovation?
- To what degree does PAC influence the relationship between new ventures’ ties with service intermediaries and service innovation?
- To what degree does RAC influence the relationship between new ventures’ ties with service intermediaries and service innovation?
1.3 Theoretical and practical relevance
In multiple knowledge intensive business sectors it has been found that external knowledge, received from service intermediaries, had a positive influence on a firms’ innovation (Katila & Ahuja, 2002; Rosenkopf & Nerkar, 2001; Zhang & Li, 2010; Cassiman & Veugelers, 2006; Rigby & Zook, 2002). However, it is premature to assume that this is also the case for new ventures in the financial service sector. Therefore, the relation between new ventures’ ties with service intermediaries and new ventures’ innovation has to be examined for the financial service sector. In addition, this study extends the existing research on external knowledge and its influence on innovation by highlighting the role of absorptive capacity. A distinction can be made between PAC and RAC. PAC tends to influence the establishing of new ventures’ ties with service intermediaries and RAC tends to influence the relationship between new ventures’ ties with service intermediaries and service innovation. By testing the influence of both PAC and RAC on a new ventures knowledge search and integration, this study will make contributions to the existing literature.
The answer to the research question is important for all new ventures in the Dutch financial service sector. This because new ventures in the financial service sector need external knowledge to overcome the liability of newness and be innovative (Stinchcombe, 1965; Katila & Ahuja, 2002; Rosenkopf & Nerkar, 2001; Zhang & Li, 2010; Cassiman & Veugelers, 2006; Rigby & Zook, 2002). Absorptive capacity, PAC and RAC, tends to influence this external
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knowledge search and integration (Cohen & Levinthal, 1990; Fosfuri & Tribo, 2008; Lane & Lubatkin, 1998; Zahra & George, 2002). Therefore, new ventures must be aware of PAC and RAC to successfully search and integrate external knowledge.
1.4 Brief outline of the research
To examine the research questions, the thesis has been structured as follows. In chapter two, the literature review about (service) innovation, new ventures’ ties with service intermediaries, and absorptive capacity will be highlighted. In chapter three, the theoretical framework will be explained, which will lead to multiple hypotheses. In chapter four, the research methodology and measurements will be highlighted. In chapter five the data of the internet-mediated questionnaires and semi-structured interviews will be analyzed. In chapter 6, practical implications, theoretical implications, and avenues for future research are highlighted. Lastly, in chapter 7, the conclusions of this research will be elucidated.
2. Literature review
The literature review starts with the elaboration of the (service) innovation concept, followed by the explanation of the influence of ties on service innovation, and a description about absorptive capacity.
2.1 Innovation
In recent years, a lot has happened regarding innovation in the financial service sector. Due to deregulation and innovations in the sector, such as derivatives, investors were able to transfer risk more effective (Dudley & Hubbard, 2004). But during and after the financial crisis, these deregulation and innovations received a lot of criticism. It is suggested that deregulation and these innovations contributed to the financial crisis (Kregel, 2008). Therefore, governments and supervisory agencies introduced new regulation rules after the financial crisis. For example, the AFM introduced a prohibition of commissions on complex financial products (AFM, 2014). This, and other regulatory rules, has caused the business models of financial service firms to
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change, and has forced financial service firms to compete on the quality of services. Due to these new regulatory rules, firms find it harder to focus on innovation, because they first have to meet the new rules. This is unfortunate, because firms in the financial service sector which are able to integrate innovation as a central part of their organization, are six times more likely to meet their objectives (Dias et al., 2013). For example, banks who offered mobile banking were able to extend their client base (Calisir & Gumussoy, 2008). Firms in the financial service sector need to integrate innovation as an integral part of their organization. Firms need to innovate if they want to compete in the new dynamic environment created after the crisis. This is especially applicable to new ventures, because they have to overcome the liability of newness (Stinchombe, 1965).
Innovation in an organizational context can be defined as the creation of new ideas to improve or renew the business concepts (Damanpour, 1996; Plessis, 2007). A distinction can be made between different types of innovation, product innovation, process innovation, service innovation, etc. Unfortunately, most research has focused on product - rather than service innovation, despite the fact that countries’ GDP depends more and more on services (Nijssen et al., 2006). Aside from the fact that services have themselves become more important, the financial sector is almost wholly service-based. Therefore, service innovation has been chosen as dependent variable.
Services can be distinguished because of their co-production between service provider and customer, uniqueness, intangibility, and perishability (Berry et al., 2006; Nijssen et al., 2006). According to Den Hertog (2011), a distinction can be made between six different dimensions of service innovations: new service concepts/formulas, new customer interaction forms, new business partners and value systems, new revenue models, new organizational delivery systems, and new technological delivery systems.
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Figure 1. Six dimensional
model of service innovation (Den Hertog, et al., 2010)
- The first dimension, new service concepts/formulas, relates to the intangibility of services. It entails new ideas on how to solve customer problems or customer needs (Den Hertog, 2000; Den Hertog et al., 2010; Miles, 2008). Important to note is that a new service concept/formula is a combination, or configuration, of existing services (Den Hertog et al., 2010). It does not have to be a totally new concept, which has never been implemented before (Den Hertog, 2000). According to Den Hertog (2010), an example of a new service concept/formula is a telecom provider, which offers package deals of their different services (telephone, internet, and TV). - The second dimension, new customer interaction forms, can be defined as an innovation in the service design or/and interaction between customer and client (Den Hertog, 2000; Den Hertog et al., 2010; Miles, 2008). For example, by introducing a greater amount of self-service for customers.
- The third dimension, new business partners and value systems, can be defined as an innovation, which is established by including actors in co-producing a service (Den Hertog,
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2010). According to Den Hertog (2010), an example is the combination iStore with the iPhone. This shows how important the combination of networks and platforms are for the successfulness of a service innovation.
- The fourth dimension, new revenue models, can be defined as an innovation, which entails changes in the manner in which revenue is generated. This dimension highlights how important it is to distribute cost and revenues in an appropriate way (Den Hertog, 2010).
- The fifth dimension, new organizational delivery systems, can be defined as an innovation in the way the service providers execute their jobs. Therefore, service workers are able to do their job more effectively (Den Hertog, 2000; Den Hertog, 2010; Miles, 2008). For example, a new operating system implemented by the service provider, which allows employees to work faster. - The sixth dimension, new technological delivery systems, can be used to enable, process and deliver a service innovation (Den Hertog, 2000; Den Hertog, 2010; Miles, 2008). An example is TNT’s track and trace system, which allows clients to follow their package. Although a distinction can be made between the six dimensions, service innovation often involves a combination of several different dimensions. The characteristics of a service innovation may be subject to one dominant dimension, but this will probably mean a change in one of the other dimensions, to make the service innovation a successful one (Den Hertog, 2000; Den Hertog, 2010; Miles, 2008).
A distinction can be made between five types of external knowledge sources which contribute to service innovation: supplier dominated innovation, innovation within services,
client-led innovation, innovation through services and paradigmatic innovation (Den Hertog,
2000). Supplier dominated innovations tend to happen in small service firms such as barbers, catering and bicycle repair stores. These firms do not depend on technological innovations, their competitive advantage has more to do with skills. Therefore, these innovations are rather incremental by nature (Den Hertog, 2000; Miles, 2008). Innovation within services are service
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innovations created and implemented inside the service firm (Den Hertog, 2000). For example, a new service delivery system. Client-led innovations are innovations initiated by the customer. The service firm is responding to the needs of its customers, a demand driven innovation (Den Hertog, 2000). Innovation through services are innovations that occur organically in the business-to-business service industry. The service firm supports its clients’ innovation process by providing knowledge and resources. For example, consulting companies (Den Hertog, 2000). Paradigmatic innovations are innovations that involve all actors in the value chain; suppliers, clients and the service firm. All these actors interact with each other to develop a service innovation. Paradigmatic innovation can involve technological revolutions and may be used when radical changes in the current practices are needed (Den Hertog, 2000). These different types show that firms can receive external knowledge from multiple sources.
In the following chapter, the importance of ties with service intermediaries for innovation will be discussed.
2.2 New ventures’ ties with service intermediaries
Firms cannot solely rely on internal knowledge for their innovation, they also need knowledge from beyond their boundaries to be innovative (Cassiman & Veugelers, 2006). The presence of ties with the environment can contribute to knowledge beyond the boundaries of a firm, also called external knowledge (Rigby & Zook, 2002). Unfortunately, new ventures are limited in their external knowledge search scope, because they suffer from the liability of newness (Stinchcombe, 1965). In addition, the costs which are related to the search for new external knowledge are high for new ventures, because they lack available resources (Zhang & Li, 2010). Due to ties with service intermediaries, new ventures can reduce the search cost for external knowledge and overcome the liability of newness (Zhang & Li, 2010).
Service intermediaries are knowledge intensive business services (KIBS) which offer supporting activities to other organizations (Den Hertog, 2000; Miles et al., 1995; Wolpert,
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2002; Zhang & Li, 2010). Service intermediaries (KIBS) are private companies, which consist of professional knowledge and supply products and services which are knowledge-based (Den Hertog, 2000; Miles et al., 1995).
According to Den Hertog (2000), a distinction can be made between the function of a service intermediary. A service intermediary can be a facilitator -, carrier -, or source of
innovation. A facilitator of innovation is a service intermediary, which support a client in its
innovation process. Important to note is that the innovation was not developed by the service intermediary (Den Hertog, 2000). For example, a consultant that helps a customer to introduce a distribution center. A carrier of innovation is a service intermediary that plays a role in moving an existing innovation from an organization or industry to the customers’ firm. It is important to note that the innovation was not developed by the service intermediary (Den Hertog, 2000). For example, an IT consultant that helps the customer to implement a new innovative ERP system. A source of innovation is a service intermediary that plays an important role in the developing of an innovation for a customer’ firm. Generally, this will happen in close contact with the customer (Den Hertog, 2000). For example, an advertising company that develops a new campaign for a customer.
Service intermediaries typically sit at the intersection of many organizations and industries (Wolpert, 2002; Zhang & Li, 2010). Due to their position, service intermediaries interact with a large variety of organizations. As a result, the knowledge of service intermediaries is very broad (Wolpert, 2002; Zhang & Li, 2010). If new ventures develop ties with service intermediaries, it will broaden the external search scope of the venture, since it becomes indirectly tied to multiple other firms (Wolpert, 2002; Zhang & Li, 2010). Due to this broadened external search scope, new ventures will be able to receive more new external knowledge. This new knowledge can contribute to innovation (Wolpert, 2002; Zhang & Li,
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2010). This is the reason that new ventures’ ties with service intermediaries are important for (service) innovation (Wolpert, 2002; Zhang & Li, 2010).
A distinction can be made between different types of service intermediaries (Den Hertog, 2000). Some examples are, facility management -, labor recruitment -, accounting -, and management consultancy firms. As mentioned before, this research will be conducted in the financial services sector. Service providers in the financial service sector tend to establish more ties with ICT companies, compared to the past (CBS, 2013).This is due to the fact that their new service products are being sold through the internet (Delta Lloyd, 2013; PWC, 2013; Capgemini, 2013). Financial service providers’ products have to be available online in order to reach customers. Den Hertog (2000) and Zhang & Li (2010) also stressed the importance of establishing ties with ICT firms. These ties also explicitly contribute to a firms’ service innovation (Den Hertog, 2000). Therefore, new ventures’ ties with ICT firms will be examined in this research.
According to Zhang & Li’s (2010) research in a Chinese technological cluster, ties with law and accountancy firms contributed to a firms’ product innovation. For instance, law firms learn about best practices and innovating ideas from competing and aligned firms (Zhang & Li, 2010). They can share this knowledge with new ventures, which can contribute to a new ventures’ innovation. Zhang & Li (2010) used Silicon Valley as an example for how these types of service intermediaries contribute to a firms’ innovation. But the high technology sector has certain characteristics that may not be applicable to all other sector specifics. Therefore, more research needs to be done whether law and accountancy firms contribute to new ventures’ innovation in a different sector, the Dutch financial service sector. This will be examined in this research.
Management consultancy firms also tend to contribute to a firms’ innovation, because they extend a new ventures’ knowledge base (Bessant & Rush, 1995; Kubr, 2002). This due to
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the fact that management consultancy firms transfer knowledge and resources to a clients’ firm (Kubr, 2002). Financial service firms tend to use management consultancy firms to get access to more knowledge (Delta Lloyd, 2013; PWC, 2013). Therefore, new ventures’ ties with management consultancies will be examined in this research as well.
External knowledge search and integration is influenced by a firms’ absorptive capacity (Cohen & Levinthal, 1990; Fosfuri & Tribo, 2008; Zahra & George, 2002). Therefore, this concept will be discussed in the next chapter.
2.3 Absorptive Capacity
As mentioned before, firms need external knowledge to be innovative (Cassiman & Veugelers, 2006). However, firms must be able to search and integrate this external knowledge, otherwise it will not lead to innovation (Cohen & Levinthal, 1990; Fosfuri & Tribo, 2008; Zahra & George, 2002). The search for external knowledge, and the integration of external knowledge, has to do with firms’ absorptive capacity (Fosfuri & Tribo, 2008; Lane & Lubatkin, 1998; Zahra & George, 2002; Lane et al., 2006; Lane & Lubatkin, 1998). The paper ‘Absorptive Capacity:
A New Perspective on Learning and Innovation’, written by Cohen and Levinthal (1990), is
generally known as the first article to outline absorptive capacity. Absorptive capacity is defined as: ‘the ability to recognize the value of new, external information, assimilate it, and apply it to
commercial ends’ (Cohen & Levinthal, 1990, p.128). Since Cohen & Levinthal’s publication,
authors have applied and extended the three underlying dimension of absorptive capacity, the ability to recognize -, assimilate -, and apply external knowledge (Fosfuri & Tribo, 2008; Lane & Lubatkin, 1998; Zahra & George, 2002; Lane et al., 2006; Lane & Lubatkin, 1998). The dimensions need to be separated because they describe different processes inside the organization (Lane et al., 2006). The ability to recognize the value of new external knowledge depends on firms’ relative absorptive capacity / prior knowledge (Lane et al., 2006; Lane & Lubatkin, 1998). Relative absorptive capacity is: ‘the ability of firms to learn from other firms,
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is jointly determined by the relative characters of the student firm and the teacher firm’ (Lane
& Lubatkin, 1998: p.462). In short, Lane & Lubatkin (1998) reason that the relationship between student firms, in this case new ventures, and teacher firms, in this case service intermediaries, is determined by the similarity of knowledge bases and norms. Those similar knowledge bases and norms determine if a new venture is able to do something with the new available knowledge received from the service intermediaries (Lane & Lubatkin, 1998). The ability of a firm to assimilate the external knowledge depends on a firm’s flexibility, creativity and adaptability (Lane et al., 2006; Lyles & Salk, 1996). This contributes to the openness of a firm towards external knowledge. Aside from these criteria, a firm can adapt the external knowledge when explicit goals, business plans, and the division of labor between a firm and service intermediaries, are pre-arranged. Training by the service intermediaries can also help firms to adapt better to the new available knowledge (Lyles & Salk, 1996). The ability of a firm to apply the external knowledge depends on its strategy and training competence (Lane et al., 2006; Lane et al., 2001). If a firm is not able to build an appropriate strategy to match the environmental needs, and when a firm lacks the ability to spread the new knowledge gained from service intermediaries throughout the firm, it is lost (Lane et al., 2001).
However, in this research the following definition of absorptive capacity will be used:
‘absorptive capacity is a set of orangization routiness and strategic processes by which firms acquire, assimilate, transform, and exploit knowledge, for purpose of value creation’ (Zahra &
George, 2002: p.198). This definition describes four capabilities, which represent the four dimensions of absorptive capacity. The acquisition and assimilation dimensions belong to
potential absorptive capacity (PAC) and the transformation and exploitation dimensions belong
to realized absorptive capacity (RAC) (Fosfuri & Tribo, 2008; Zahra & George, 2002). Despite the fact that the recognision, assimilation, and application dimensions of Cohen & Levinthal (1990) and Lane et al. (2006), closely relate to the acquisition, assimilation, transformation, and
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exploitation dimensions of Zahra & George (2002), in this research the dimensions of Zahra & George will be used. These dimension are used because it makes it possible to split absorptive capacity into two subsets, PAC and RAC. Both PAC and RAC tend to influence a firms’ knowledge search and integration in a completely different way. The difference between potential and realized is an essential one for pinpointing the succes factors and the difference between new ventures and existing businesses. Therefore, the definition of Zahra & George (2002) has been chosen.
In the following chapter the two subsets of absorptive capacity, PAC and RAC, will be clarified in more detail.
2.3.1 Potential absorptive capacity (PAC)
The acquisition and assimilation dimensions can be related to PAC, as mentioned above. The acquisition dimension can be described as a firms’ capability to identify usefull external knowledge from the total knowledge available in the environment (Fosfuri & Tribo, 2008; Zahra & George, 2002). The assimilation dimension can be described as a firms’ ability to processes external knowledge gained from the environment and turn these into routines (Fosfuri & Tribo, 2008; Zahra & George, 2002). These definitions lead to the conclusion that PAC acts at the boundary of the firm with the environment (Fosfuri & Tribo, 2008). When PAC is well managed, firms will be able to get more access to external knowledge (Fosfuri & Tribo, 2008).
2.3.2 Realized absorptive capacity (RAC)
The transformation and exploitation dimensions can be related to RAC, as mentioned above. The transformation dimension can be described as a firm’s ability to relate the acquired and assimilated new knowledge with the exisiting knowledge of the firm (Fosfuri & Tribo, 2008; Zahra & George, 2002). The exploitation dimension can be described as firms’ ability to transform the combined new and existing knowledge of the firm into a competetive advantage (Fosfuri & Tribo, 2008; Zahra & George, 2002). From these definitions, it can be concluded
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that RAC works inside the firm (Fosfuri & Tribo, 2008). When RAC is well managed, firms will be able to transform acquired and assimilated knowledge (PAC) into competitive advantage (Fosfuri & Tribo, 2008).
It is important to note that PAC and RAC have separate but complementary roles (Fosfuri & Tribo, 2008; Zahra & George, 2002). If the new venture is not able to acquire or assimilate the external knowledge, it will also not contribute to its RAC. New ventures cannot transform external knowledge before it is assimilated. Therefore, a high PAC does not automatically lead to a high RAC (Fosfuri & Tribo, 2008; Zahra & George, 2002).
In the following chapter, the link between absorptive capacity, new ventures’ ties with service intermediaries, and service innovation will be made.
2.4 Absorptive capacity and new ventures’ ties with service intermediaries
Ties can help firms to get access to more knowledge (Baum et al., 2000; Stuart, 2000; Larrañeta et al., 2012; Zhang & Li, 2010). This new knowledge can contribute to innovation (Zhang & Li, 2010). Therefore, it is important for new ventures to establish ties with the environment. Ties contribute to the search scope of new ventures. Therefore, new ventures get access to more available resources (Zhang & Li, 2010). There are two important things to note. First, firms will not search for novel knowledge until a certain threshold of relevant knowledge, prior related knowledge, has been reached, which stimulates this knowledge search (Cohen & Levinthal, 1990; Lane & Lubatkin, 1998; Shenkar & Li, 1999). In other words, new ventures will not establish ties with service intermediaries until their absorptive capacity is sufficient to recognize the need for new knowledge. More research needs to be done to determine whether and how PAC influences the establishing of new ventures’ ties. Second, firms often do not understand new available knowledge due to a lack of ability to integrate this new knowledge (Lane & Lubatkin, 1998; Cohen & Levinthal, 1990). Therefore, they may miss the usefulness of this new available knowledge and the new knowledge will not lead to innovation (Larrañeta et al.,
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2012). In other words, it may happen that new ventures will not understand the new knowledge received from service intermediaries, because they lack the ability to integrate that new external knowledge. In this case, the external knowledge will not lead to innovation. More research needs to be done to determine whether and how RAC influences the relationship between new ventures’ ties with service intermediaries and innovation.
3. Theoretical framework
In this chapter the theoretical framework and related hypothesis will be highlighted. An overview of all the hypotheses is stated in figure 2.
Figure 2. Conceptual model
H3
H2
3.1 New ventures’ ties with service intermediaries and service innovation
Research has shown that firms cannot solely rely on internal knowledge for innovation (Cassiman & Veugelers, 2006). Therefore, firms have to establish ties with the external environment (Rigby & Zook, 2002). Unfortunately, new ventures are limited in their external knowledge search scope, because they suffer from the liability of newness (Stinchcombe, 1965). New ventures can overcome the liability of newness by establishing ties with service intermediaries (Zhang & Li, 2010). Service intermediaries sit at the interaction of many organizations and industries, therefore their knowledgebase is very broad (Wolpert, 2002; Zhang & Li, 2010). When new ventures are able to establish ties with those service intermediaries they will be able to broaden their external search scope, which will contribute to innovation (Wolpert, 2002; Zhang & Li, 2010).
Service innovation Potential absorptive
Capacity
Ties between new ventures and service intermediaries
Realized absorptive Capacity
H1 H2
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The relationship between new ventures’ ties with service intermediaries and product innovation has been empirically tested by Zhang & Li (2010) in a technology cluster in China. The results of their empirical study showed that there is a positive relationship between new ventures’ ties with service intermediaries and product innovation. This research will examine the relationship between new ventures’ ties with service intermediaries and service innovation, in the Dutch financial service sector. Although the type of innovation and sector differs from Zhang & Li’s (2010) research, a similar positive relationship is expected. The positive relationship between a firm’s ties with service intermediaries (KIBS) and service innovation has been supported by Den Hertog (2000). Therefore, it seems reasonable to suggest that new ventures’ ties with service intermediaries is also positively related to service innovation.
Hypothesis 1: New ventures’ ties with service intermediaries is positively related to service innovation.
Taking previous literature into account, this hypothesis is extreme likely to be true. But this hypothesis must be confirmed in order to prove the other hypotheses.
3.2 New ventures' ties with service intermediaries as mediator
Research has shown that firms have to establish ties with the environment to get access to external knowledge, which can contribute to innovation (Cassiman & Veugelers, 2006; Den Hertog, 2000; Rigby & Zook, 2002; Wolpert, 2002; Zhang & Li, 2010). It is important to note that firms will not search for novel knowledge until a certain threshold of relevant knowledge, prior related knowledge, has been reached which stimulates this knowledge search (Cohen & Levinthal, 1990; Lane & Lubatkin, 1998; Shenkar & Li, 1999). In other words, new ventures will not establish ties with service intermediaries, until their absorptive capacity is sufficient to recognize the need for new knowledge. As mentioned before, a distinction can be made between potential absorptive capacity (PAC) and realized absorptive capacity (RAC) (Zahra & George,
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2002). PAC has to do with a firms’ knowledge search and RAC with a firms’ knowledge integration (Fosfuri & Tribo, 2008; Zahra & George, 2002). Therefore, a new venture’s PAC determines its ability to search for new knowledge.
As highlighted in the previous chapters, the acquisition and assimilation dimensions determines a firms’ PAC (Zahra & George, 2002). New ventures will not search for new knowledge until their acquisition and assimilation, PAC, is sufficient to recognize the need for new knowledge (Lane & Lubatkin, 1998; Zahra & George, 2002). Therefore, it seems reasonable to suggest that PAC has an effect on the establishing of new ventures’ ties with service intermediaries. Consequentially, it can be stated that new ventures’ ties with service intermediaries is a mediating variable. This is due to the fact that PAC indirectly determines new ventures’ service innovation, through its influence on the establishing of ties with service intermediaries. Therefore, it seems reasonable to suggest that new ventures’ ties with service intermediaries fully mediates the indirect relationship between PAC and service innovation.
Hypothesis 2: New ventures’ ties with service intermediaries fully mediates the indirect relationship between potential absorptive capacity (PAC) and service innovation.
3.3 Realized absorptive capacity (RAC) as moderator
Research has shown that ties with service intermediaries extend the knowledgebase of new ventures; this will increase a new ventures’ ability to innovate (Den Hertog, 2000; Wolpert, 2002; Zhang & Li, 2010). It is important to note that a new venture must be able to integrate the external knowledge received from service intermediaries (Cohen & Levinthal, 1990; Lane & Lubatkin, 1998). Otherwise the knowledge, received from service intermediaries, will not increase a new ventures’ innovation (Larrañeta et al., 2012). Absorptive capacity determines a firm’s ability to integrate external knowledge (Cohen & Levinthal, 1990; Fosfuri & Tribo, 2008; Zahra & George, 2002). A distinction can be made between potential absorptive capacity (PAC) and realized absorptive capacity (RAC) (Zahra & George, 2002). PAC has to do with a
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firms’ knowledge search and RAC with a firms’ knowledge integration (Fosfuri & Tribo, 2008; Zahra & George, 2002). Therefore, a new venture’s RAC determines a new venture’s ability to integrate knowledge.
As highlighted in the previous chapters, the transformation and exploitation dimensions determines a new venture’s RAC (Zahra & George, 2002). New ventures will be able to be innovative when their transformation and exploitation, RAC, is sufficient to combine the new external knowledge and existing knowledge of the firm (Fosfuri & Tribo, 2008; Zahra & George, 2002). If the new venture is not able to transform or exploit the new available knowledge, it may miss the usefulness of this new available knowledge. In that case the new available knowledge will not lead to innovation. Therefore, it seems reasonable to suggest that RAC has a moderating effect on the relationship between new ventures’ ties and service intermediaries and service innovation.
Hypothesis 3: Realized absorptive capacity (RAC) will have a moderating effect on the relationship between new ventures’ ties with service intermediaries and service innovation.
RAC will reinforce the relationship between new ventures’ ties with service intermediaries and service innovation. This due to the fact that RAC will positively influence a new ventures’ ability to integrate external knowledge.
4. Empirical Research
This thesis will examine the hypotheses during empirical research. In the following chapters the research methods and measures will be described.
4.1 Methods
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4.1.1 Research design
A distinction can be made between quantitative and qualitative research (Saunders & Lewis, 2012). Quantitative research can be used to test and analyze data and qualitative research can be used to explore and expand constructs (Saunders & Lewis, 2012). Qualitative data analysis is most useful with nascent theory and quantitative data analysis is most useful with mature theory (Edmondson & McManus, 2007). The research conducted in this thesis is more in between nascent and mature theory. Edmondson & McManus (2007) qualify this as intermediate theory. The nascent part of this research is the influence of PAC and RAC on the relationship between new ventures’ ties with service intermediaries. This specific relationship has never been examined. Furthermore, the research context of this thesis, the Dutch financial service sector, has not been examined extensively. The mature part is the analysis of the relationship between new ventures’ ties with service intermediaries and service innovation. This relationship has been examined in many articles, for instance by (Den Hertog, 2000; Wolpert, 2002; Zhang & Li, 2010). In addition, the underlying constructs, ties with service intermediaries and service innovation, are concepts which are extensively discussed (Baum et al., 2000; Stuart, 2000; Larrañeta et al., 2012; Zhang & Li, 2010; Wolpert, 2002). According to Edmondson & McManus (2007), to analyze intermediate theory, both qualitative and quantitative research methods has to be used, this is called a hybrid approach, see figure 3.
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At first, quantitative research will be used to examine the relationships between the six different dimensions of service innovation, ties, and absorptive capacity (PAC and RAC). The hypotheses of the quantitative part of this thesis have been formulated from desk research about service innovation (Den Hertog, 2000; Miles, 2008; Nijssen et al., 2006), ties (Katila & Ahuja, 2002; Rosenkopf & Nerkar, 2001; Cassiman & Veugelers, 2006; Rigby & Zook, 2002; Wolpert, 2002; Zhang & Li, 2010), and absorptive capacity (Cohen & Levinthal, 1990; Fosfuri & Tribo, 2008; Lane et al., 2006; Lane & Lubatkin, 1998; Zahra & George, 2002; Baum et al., 2000; Stuart, 2000; Larrañeta et al., 2012). Therefore, the research is deductive in nature, because existing theory is used to create the hypotheses (Saunders & Lewis, 2012). The hypotheses will test the relationships between the dependent, mediator, moderator and independent variables using an internet-mediated questionnaire. The quantitative data, obtained from the questionnaire, has been examined using various statistical analyses.
After analyzing the quantitative data of this research, qualitative methods will be used to examine the relationship between new ventures’ ties with service intermediaries, service innovation, and absorptive capacity in more detail. This is in order to get extensive insights into why new ventures establish ties with service intermediaries; how these ties arise; whether these ties contribute to new ventures their service; the influence of PAC on the establishing of ties with service intermediaries; the influence of RAC on the relationship between new ventures’ ties with service intermediaries and service innovation.
4.1.2 Research context
To find answers to the research questions and underlying hypotheses, a hybrid study among new ventures in the Dutch financial service sector will be performed. The Dutch financial service sector contributes to 8.6 percent of the Dutch Gross Domestic Product (GDP). Therefore, the financial sector is one of the most important industries of the Netherlands (CBS StatLine, 2013). But due to the financial crisis, there is a lack of confidence in financial service
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firms. Customers feel betrayed and are careful when investing. To gain customer’s confidence financial service firms have to build a customer oriented approach (AFM, 2014; JT in bedrijf, 2011; Van der Leer, 2014). To this end, the AFM has introduced a prohibition of commissions on complex financial products. Consequently, the business models of financial service firms have changed, and financial service firms are forced to compete on the quality of services. In addition, customers are confronted with advisory costs and therefore will be more critical about the prices and added value of financial service firms (AFM, 2014). Due to the lack of investments by customers and the forced changes by the AFM, many firms in the financial service sector have ceased operations. This is supported by figure 4 and figure 5. These figures show that there are at least twice as many firms ceasing operations per month as there are new startups per month. This negative ratio suggests that firms, in the Dutch financial services sector, find it hard to stay in the market. Therefore, it is important to examine how new ventures can overcome this high rate of attrition.
Figure 4. Number of new ventures in the Dutch financial service sector 2013 (Ondernemersplein, 2013)
0 50 100 150 200 250 300 350 400 450
May June July August September October November
Number of new ventures in the Dutch financial service sector, 2013
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Figure 5. Number of firms ceasing operations in the Dutch financial service sector, 2013 (Ondernemersplein,
2013)
Besides the fact that it is important to examine how new ventures can overcome the high rate of attrition in the Dutch financial service sector, this sector has been chosen because the relationship between new ventures’ ties with service intermediaries and service innovation, can be more easily examined in knowledge intensive business sectors (Zhang & Li, 2010). The following service intermediaries have been chosen as subjects: ICT -, law -, accounting - and management consulting firms. These service intermediaries have been chosen because they are highlighted as important contributors to new ventures’ novel knowledge (Den Hertog, 2000; Kubr, 2002; Zhang & Li, 2010). Managers of new ventures will be asked to indicate the extent to which their startup has had close relationships with these service intermediaries. In addition, to examine the relationship between new ventures and service intermediaries in more detail, interviews among founders, partners, and managers, of new ventures and service intermediaries, are held.
Furthermore, this sector has been chosen because absorptive capacity (PAC and RAC) tends to be examined in sectors such as pharmacy, biotechnology, information technology and R&D (Lyles & Salk, 1996; Fosfuri & Tribo, 2008; Lane & Lubatkin, 1998). Firms in these sectors are all knowledge intensive, such as financial firms. However, the influence of
0 200 400 600 800 1000 1200
May June July August September October November
Number of firms ceasing operations in the Dutch financial service sector, 2013
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absorptive capacity (PAC and RAC) in the financial service sector has not been examined extensively. Therefore, more research needs to be done to determine the influence of new ventures’ ties with service intermediaries, service innovation, and absorptive capacity (PAC and RAC), in the Dutch financial service sector.
In summary, the aim of this research is three folded. First, the relationship between new ventures’ ties with service intermediaries and service innovation, will be examined. Second, the mediating effect of new ventures’ ties with service intermediaries on the indirect relationship between PAC and service innovation, will be investigated. Third, the influence of RAC on the relationship between new ventures’ ties with service intermediaries and service innovation will be studied. Therefore, this study will show the extent to which new ventures’ ties with service intermediaries contribute to new ventures’ service innovation, in the Dutch financial service sector. Furthermore, this study will show the extent to which new ventures, in the Dutch financial service sector, use their absorptive capacity to establish ties with service intermediaries and integrate external knowledge.
4.1.3 Sample and data collection
For the quantitative part of this research, a questionnaire was held among new ventures. This questionnaire examines the relationship between new ventures innovativeness, absorptive capacity, and service intermediaries. New ventures were selected based on their newness to the financial service sector. Firms of 10 years or younger were taken into account. Respondents were selected through a software tool made by Bureau van Dijk called ‘Reach’ (Bureau van Dijk, 2014). This tool made it easier to collect information about new ventures in the financial service sector. At first, new ventures in the financial service sector of Amsterdam were examined. Unfortunately, only 40 new ventures in the entire population of 180 were found suitable. It was decided to extended the population and examine new ventures in the Dutch financial service sector as a whole. Thanks to the Reach’s database, 161 suitable new ventures
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among the population of 804 were found appropriate. The new ventures’ websites were used to check whether the new ventures are active in the Dutch financial service sector, and are 10 years or younger. Unfortunately, most of the 804 companies in the database were older than 10 years, or the firms were not active in the Dutch financial service sector.
Preferably the founder, CEO, or top manager of the ventures, was asked to fill in the questionnaire. It was assumed that they have the most complete knowledge to what extent their ties with service intermediaries contribute to service innovation, how they have established those ties, and integrated external knowledge. However, a pre-test among middle and top management of some of the firms, indicated that middle managers were capable enough to fill in the questionnaire. The results revealed that the opinions of middle managers and top managers did not differ that much. Besides the fact that middle managers are capable enough to fill in the questionnaire, founders, CEOs, top managers, and other so called ‘corporate elites’, are less likely to fill in the questionnaire (Bednar & Westphal, 2006; Cycyota & Harrison, 2006). This is for example, due to the fact that ‘corporate elites’ lack sufficient time, and are sometimes restricted, when filling in questionnaires (Bednar & Westphal, 2006). Therefore, the response rate of ‘corporate elites’ is quite low. Furthermore, the response rate of employees and managers, in comparison to the ‘corporate elite’, is much higher (Cycyota & Harrison, 2006). Therefore, it was decided to allow middle managers to fill in the questionnaire as well.
The respondents were asked to fill in an internet-mediated questionnaire, using Qualtrics.com, which consisted of 11 questions. It would take approximately 10 minutes to fill in the questionnaire. To ensure the questionnaire was clear for respondents, a pre-test was carried out among 6 industry experts. Based on their feedback, a few of the questions have been altered, see appendix A. The first email to respondents was carried out on 08-05-2014. To increase the response rate, the new ventures were first contacted by phone to clarify the research object and to convince them to participate in this research. In the end, the questionnaire has
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been sent to 161 new ventures and 35 of the selected new ventures filled in the questionnaire. Unfortunately, one respondent gave the same answer to all of the questions. It was decided to delete his response. Consequently, the sample size dropped from N = 35 to N = 34. Therefore, the response rate for this research is 21.12 percent.
For the qualitative part of this research, three interviews with founders/managers of new ventures and three interviews with partners/managers of service intermediaries, active in the Dutch financial service sector, were held. The companies, which were interviewed can be found in figure 6. The goal of the interviews was to examine the relationship between new ventures’ ties with service intermediaries, service innovation, and absorptive capacity, in more detail. The interviews took between 30 and 45 minutes and had four key subjects: PAC, new ventures’ ties with service intermediaries, RAC, and service innovation. In Appendix B, the questions of the semi-structured interviews and interview transcripts can be found.
Figure 6: Interviewed companies
4.2 Measures
In this chapter the research measures for the quantitative part of the analysis will be explained. All the questionnaire items were derived from existing literature. The item means of each construct were combined to create the different variables.
4.2.1 Dependent variable
Service innovation is the dependent variable in this research. According to Den Hertog (2010), a distinction can be made between six different dimensions of service innovations: new service
concepts/formulas (3 items; α = 0.76), new customer interaction forms (3 items; α = 0.71) , new business partners and value systems (2 items; α = 0.68), new revenue models (2 items; α =
New venture Companies expertise Interviewee(s)
Anonymous Asset management Founder / CEO & CFO / CTO
Knab Bank Sales manager
Service intermediary Companies expertise Interviewee
Virtual Affairs ICT consulting Software solution architect JBR Management consulting / Corporate finance Partner
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0.72), new organizational delivery systems (2 items; α = 0.32), and new technological delivery
systems (2 items; α = 0.84). In this research there has been chosen to examine all six different
service innovation dimensions independently. This due to the fact that focusing on one type of service innovation could cause biased results.
The items of the six different service innovation dimensions were assessed by Janssen (2015), his structure entails 14 statements. Items were rated on a scale ranging from 1 (strongly disagree) to 7 (strongly agree). An example of an item is: ‘Our organization developed new
(service) experiences or solutions for customers’. Table 1 contains the descriptions of the items
used for the service innovation dimensions.
Table 1. Dependent variable – service innovation, six different dimensions
4.2.2 Mediator
The items for new ventures’ ties with service intermediaries were adapted from those used by Zhang & Li (2010) and Luo (2003) (4 items; α = 0.65). Items were rated on a scale ranging from 1 (very little/low) to 7 (very extensive/high). Table 2 contains the descriptions of the items used for the mediator. New ventures’ ties with service intermediaries is the mediator in this research. According to Wolpert (2002) and Zhang & Li (2010), it is important for new ventures’ to establish ties with service intermediaries, because it will broaden the external search scope of the venture, a company becomes indirectly tied to multiple other firms. Due to this broadened external search scope, new ventures will be able to receive more new external knowledge.
Dimension Item
Our organization developed new (service) experiences or solutions for customers. We combined existing services into a new formula.
We developed a new way of creating value for ourselves and our customers. Our organization developed new channels for communicating with her customers. The way we have contact with our customers is renewed.
We delegated certain tasks from our firm to our customers. The role of external parties in producing our services is renewed. We involved new partners in the delivery of our services.
By introducing new services we changed the way we generate revenues. The way we get paid (financial construction) is altered.
We changed our organisation in order to produce our new services. Our production of new services requires new skills from our employees. Technology plays an important role in the renewed production of our services. We renewed our service offerings by new or different use of ICTs.
New technological delivery systems New service concepts/formulas
New customer interaction forms
New business partners and value systems
New revenue models
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Table 2. Mediator - new ventures’ ties with service intermediaries
In this research the same items as Zhang and Li (2010) have been used except for the item talent search firms. This item has been replaced by management consultancy firms, due to a fact that Zhang & Li (2010) did not find support for the assumption that ties with talent search firms contributed to product innovation. In addition, management consultancy firms tend to contribute to a firms’ innovation, because they extend a new ventures’ knowledge base (Bessant & Rush, 1995; Kubr, 2002). Therefore, new ventures’ ties with management consultancies has been examined in this research instead of talent search firms.
4.2.3 Moderator
Realized absorptive capacity (RAC) consist of 12 items (α = 0.76). The questionnaire was assessed by Jansen et al. (2005). Although RAC has two underlying dimensions, which can be analyzed separately, it was decided to examine RAC as a whole.
The items for the moderator RAC were rated on a scale ranging from 1 (strongly disagree) to 7 (strongly agree). An example of an item is: ‘Our unit quickly recognizes the
usefulness of new external knowledge to existing knowledge’. Table 3 contains the descriptions
of the items used for the moderator.
Variable Item
Please indicate the extent to which your venture had close relationships with the following: ICT firms
Accounting firms Law firms
Management consultancy firms New ventures' ties with service intermediaries
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Table 3. Moderator - realized absorptive capacity
The items with an asterisk are counter indicative, in order to test whether the respondent is just mindlessly providing the same answers to all questions. Therefore, the responses to the reverse coded items need to be adjusted in SPSS: 1=5, 2=4, 3=3, 4=2, and 5=1.
4.2.4 Independent variable
Potential absorptive capacity (PAC) consists of 9 items (α = 0.66). The questionnaire is similar to the one that was used by Jansen et al. (2005). Although PAC has two underlying dimensions, which can be analyzed separately, it was decided to examine PAC as a whole.
The items for the independent variable PAC were rated on a scale ranging from 1 (strongly disagree) to 7 (strongly agree). An example of an item is ‘Employees of our unit regularly visit other branches’. Table 4 contains the descriptions of the items used for the independent variable.
Table 4. Independent variable - potential absorptive capacity
Variable Item
Our firm regularly considers the consequences of changing market demands in terms of new services.
Employees record and store newly acquired knowledge for future reference. Our firm quickly recognizes the usefulness of new external knowledge to existing knowledge.
Employees hardly share practical experiences. *
The opportunities of new external knowledge are hard to understand for our firm. * Our firm periodically meets to discuss consequences of market trends and new service development.
It is clearly known how activities within our firm should be performed. Client complaints fall on deaf ears in our firm. *
Our firm has a clear division of roles and responsibilities. We constantly consider how to better exploit knowledge. Our firm has difficulty implementing new services. * Employees have a common language regarding our services. Realized absorptive capacity (PAC)
Variable Item
Our firm has frequent interactions with external sources to acquire new knowledge. Employees of our firm regularly visit other firms
We collect industry information through informal means (e.g. lunch with industry friends) There is hardly any contact between employees with different disciplines. *
Our firm periodically organizes special meetings with external sources (e.g. customers, industry experts) to acquire new knowledge.
Employees regularly approach third parties such as ICT specialists, lawyers, accountants, or management consultants.
We are slow to recognize shifts in our market (e.g. competition, regulation, demography). * New opportunities to serve our clients are quickly understood.
We quickly analyze and interpret changing market demands. Potential absorptive capacity (PAC)
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The items with an asterisk are counter indicative, in order to test whether the respondent is just mindlessly providing the same answers to all questions. Therefore, the responses to the reverse coded items need to be adjusted in SPSS: 1=5, 2=4, 3=3, 4=2, and 5=1.
4.2.5 Control variables
In this research the control variables will make sure that the dependent variable is determined by the mediator, moderator, and independent variables alone, which increases the research’s reliability and validity (Saunders et al., 2009). The control variables for this research are: new
ventures size, new ventures age, venture origin, R&D contracts, and R&D collaborations
(Fosfuri & Tribo, 2008; Li & Atuahene-Gima, 2002; Luo, 2003; Zhang & Li, 2010). New
venture size is assessed by the number of full time employees in 2014. New venture age is
concluded from the number of years since a company’s founding. Venture origin is taken to mean by whom the firm has been established (0 = entrepreneur; 1 = other firm). By R&D
contracts the extent to which the new ventures has acquired external R&D (0 = yes; 1 = no) is
meant. R&D collaborations is the extent to which the new venture had signed an R&D cooperation agreement with another firm or institution (0 = yes; 1 = no). Table 5 contains the descriptions of the items used for the control variables.
Table 5. Control variables
5. Results
In this chapter the results of both the quantitative and qualitative analyses will be discussed.
5.1 Results of quantitative analysis
In this chapter the result of the quantitative analyses will be described. At first, the reliability analysis for the different variables will be conducted. The Cronbach’s alpha is examined for the
Control variable Item
New ventures size How many people work at your firm?
New venture age In what year was the firm you work for established? Venture origin By whom is the firm you work for established? R&D contracts Did your firm ever acquire external R&D?
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six different dimension of the dependent variable service innovation (Janssen et al., 2015), the moderator realized absorptive capacity (Jansen et al., 2005), the mediator new ventures’ ties
with service intermediaries (Zhang & Li 2010; Luo 2003), and the independent variable potential absorptive capacity (Jansen et al., 2005). In addition, a factor analysis has been
conducted to examine which items could be combined.
Secondly, an overview of the descriptive statistics is highlighted. In this chapter the most important descriptive statistics will be given. In appendix C, some additional descriptive statistics are reported.
After the descriptive statistics the correlation analysis will be presented. This analysis will give an overview of the correlation between the dependent -, moderating -, mediating -, independent -, and control variables. In addition, this chapter will highlight the mean, standard deviation, minimum, and maximum, for each of these variables.
The normality analysis will be conducted after the descriptive statistics. This chapter will examine the skewness and kurtosis of the dependent -, moderating -, mediating -, and independent variables, in order to examine if the variables are normally distributed.
The fifth paragraph contains a regression analyses, done in order to test the hypotheses. The process regression analysis by Hayes (2008) will be used in this research. This method has been chosen because it allows for testing moderation and mediation at the same time. In this research, Hayes (2008) model number 14 has been used to examine the hypotheses.
The last paragraph of the results chapter contains an ANOVA analysis. This was done to examine the significant difference between the means of the variables’ subgroups.
5.1.1 Reliability analysis
In this chapter the reliability results of the six different dimension of the dependent variable
service innovation (Janssen et al., 2015), the moderator realized absorptive capacity (Jansen et
