An innovation diagnosis of the Prins Bernardhoeve and the Frisian Expo Centre

Building competitive advantage through innovations

Building competitive advantage through innovations

An innovation diagnosis of the Prins Bernardhoeve and the Frisian Expo Centre

Niels Dijkstra

Building competitive advantage through innovations

An innovation diagnosis of the Prins Bernardhoeve and the Frisian Expo Centre

Master Thesis

… to obtain a Master of Science degree at University of Groningen

Institution: University of Groningen, Faculty of Management and Organization, Master of Science in Business Administration on Strategy and Innovation

Author: Niels Dijkstra s1317601

E-mail: niels_schipborg@hotmail.com Course: Master Thesis

1

supervisor: Dr. T.J.B.M. Postma, associate professor of Strategic Management at the University of Groningen

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supervisor: Professor Dr. D. Jacobs, professor of Strategic Management at the University of Groningen

Company: Prins Bernardhoeve Zuidlaren and Frisian Expo Centre Leeuwarden

Date: June, 29th, 2004

Sustainable com- petitive advantage

Value creation

Innovation creation Value appropriation

Internal factors (Organization) External factors

(Environment)

Figure I Relations between concepts

Management summary

This master thesis provides insights in and recommendations how the Prins Bernhardhoeve and the Frisian Expo Centre can create and retain value by means of innovations in order to obtain sustainable competitive advantages.

The trade fair and exhibition industry has increasingly evolved into a medium for information and communication. Various developments are forcing the branch to change it ways. The key driver is not anymore the supply-side but instead the focus is shifted to the demand-side. Innovative concepts are needed to build reputation and obtain returning visitors and exhibitors. Therefore, the innovation ability of organizers is the key to survive in this increasingly competitive arena.

Within this arena, the Prins Bernardhoeve Zuidlaren and the Frisian Expo Centre Leeuwarden are struggling with declining trade fairs and exhibitions and increasing competition of government supported competitors. Also new competitor are entering the arena of trade fair and exhibitions and a shift is taking place from national trade fairs to regional trade fairs, which affects in particular the Prins Bernardhoeve its business.

The dilemma the management of the Prins Bernardhoeve and the Frisian Expo Centre faces is how to create new fair concepts or new exciting aspects within fair concepts which are needed to obtain returning visitors and exhibitors. In other words, the management is searching for an answer how to obtain sustainable competitive advantages with the purpose to stay in the market, enlarge market share and compete successfully with the main competitors. The research question derived from the management dilemma is…

… How can the Prins Bernardhoeve and the Frisian Expo Centre create and retain value by means of innovations in order to obtain sustainable competitive advantages?

To answer the above question a conceptual scheme is constructed (figure I), which suggests that sustainable competitive advantages can be obtained by means of innovation creation and value appropriation. The theory confirms the suggested relations in the conceptual scheme. Internal factors such as people, structure, resources, networking, culture, leadership and strategy affect the innovation creation process and can be managed by a trade fairs and exhibition organization. These factors can be used to analyse to what extent an organization is

innovative or not.

Internal factors affect the informal way of value appropriation as well. The extent to which a trade fairs and exhibition organization possesses (intangible) barriers, a policy of continuous service development and complementary assets influences the success of an innovation.

The degree to what external factors change, such as changes in industry characteristics, knowledge infrastructure and the macro environment do affect the internal factors and innovation creation of a trade fairs and exhibition organization.

Internal factors such as people or culture

have to adapt to the environment if

changes occur. Finally, it became clear

that external factors affect the formal way

of value appropriation as well. The above

mentioned relations are illustrated in

figure I and more extensive in figure 2.9.1.

The results, derived from in-dept interviews and secondary data analysis, presents internal and external factors as strengths, weaknesses, opportunities and treats of the Prins Bernardhoeve and the Frisian Expo Centre. These factors are used to provide an answer to the research question. The conclusions are provided below.

The sustainable competitive advantages of the PBH and the FEC are not obtained by means of innovation creation and value appropriation. The value of trade fairs and exhibitions has been decreased and, although marketing is the most important value creator of the PBH and FEC, this is probably caused by the fact that the PBH and the FEC have not developed really new trade fairs or exhibitions in the past three years. Only small stylistic innovations within existing fairs took place.

The internal factors affecting innovation creation of the PBH and the FEC caused the above relations. The PBH and the FEC have a fragile knowledge base and have no structure that supports innovation creation. As a result, employees are not sufficiently able to pick up environmental changes and translate these into innovations. In addition, the required entrepreneurial/ adaptive culture is missing ever since employees are focussed on how to organize an existing fair (processes) instead of a focus on changes in the environment.

This is caused by the fact that most project managers are young and inexperienced. Next, the management is not focussed at innovation creation, thus, resources, such as money, are not made available to transform ideas into innovations and a climate that encourages openness, creativeness and thinking beyond the norm is not created. Additionally, the management has not set and communicated a vision, goals and a strategy with respect to innovation creation, therefore, employees have no clue where the firm in heading too.

Besides, the PBH and the FEC have not the policy to co-operate with external stakeholders, such as exhibitors. However, the latest activity of the firm to use the World Trade Centre to enlarge their network and knowledge, will enhance the innovation creation of the firm.

Also the internal factors affect the value appropriation of the PBH and the FEC as well. Due to large dismissals in 2000 and 2004 the PBH and the FEC have lost significant tacit knowledge and the internal and external relationships based on trust have been weakened. Together with the failure of some fairs, the PBH and the FEC its reputation has become less strong. Furthermore, the management has no policy to enhance the informal way of value appropriation, because they are not aware that intangible barriers to imitation and continuous service development affect the value appropriation of the firm.

Though, the PBH and the FEC do have access to complementary assets, such as networks, marketing and reputation, which enables them to introduce innovations, successfully.

The external factors affect the innovation creation and the internal factors of the PBH and the FEC. The margins are under pressure due to local government support to competitors, internal rivalry, negotiation power of stakeholders and substitute products. Together with the lack of government support to enhance innovation creation, this affects the innovation creation of the PBH and the FEC, negatively. Next, other tendencies in the environment do not really affect the innovation creation of the PBH and the FEC, directly, but offer threats or opportunities for (none) innovative companies in the industry. These are depict in table 4.8.1 and discussed in section 5.2 recommendations.

Finally, the external factors affect the value appropriation of the PBH and the FEC as well.

Especially the weak appropriability regime (copyrights, trademarks) in the Netherlands affect the effectiveness to protect the innovations from imitation.

All together, the PBH and the FEC suffers from internal and external factors which affect the innovation creation and the value appropriation of the firm. Therefore they are not able to create value and obtain sustainable competitive advantages.

Section 5.2 provides recommendations

Preface

This paper has been written for the final thesis of the Master of Science in Business Administration, “Strategy and Innovation”. In this master thesis the innovation creation and value appropriation of the Prins Bernardhoeve and the Frisian Expo Centre have been analyzed in detail based on existing theories on the subject.

In March 2004 I started this master thesis by studying literature of innovation, value appropriation and strategy in the trade fair and exhibition industry. Subsequently, I built a model from which I could structure the theory and, after that, study the current situation at the PBH and FEC location. Especially, using the theory to establish the results and bring up points of improvement was a challenge I have very much enjoyed. This working method appeared to be very powerful as well. Also writing such a master thesis in English, which is not my mother tongue, is a lesson I will never forget.

The purpose to choose the subject of especially innovation creation in combination with the trade fair and exhibition industry was to give my personal contribution to a solution of the problems the Prins Bernardhoeve faces. Also my personal interest in trade fairs and exhibitions was a motivation to select the Prins Bernardhoeve and the Frisian Expo Centre.

I really hope that I have succeeded in highlighting the points of improvement for further strategy development.

Finally, many people have helped with the creation of this master thesis. Therefore, I like to use this section to show my gratitude. First, and foremost I like to thank Mr. De Jong, general manager of the Prins Bernardhoeve, Frisian Expo Centre and the World Trade Centre Leeuwarden for offering the opportunity to investigate his companies. Particularly, the trust he has given me in these turbulent times receives my deepest respect. Second, I am grateful to my supervisors, Dr. Postma and Professor Dr. Jacobs, who accompanied me with theories, insights and clear criticism. Also fellow students, as Simon Leijendekker and Joost Feenstra, were of great support with their view on writing a master thesis. And, last but certainly not least, I like to thank the various respondents, who were more than motivated to help me with information about the Prins Bernardhoeve and the Frisian Expo Centre and its’ surroundings.

Niels Dijkstra

July 2004

Table of contents

Chapter 1 Introduction

1.1 Management dilemma of the FEC and PBH 1.2 Objective and research question

1.3 Conceptual scheme 1.4 Scope of the Master Thesis 1.5 Research design

1.6 Organization Master Thesis Chapter 2 Theoretical background 2.1 Trade Fair and Exhibitions (T&E)

2.2 The concept of Sustainable Competitive Advantage 2.3 The concept of Value creation

2.4 The concept of Innovation creation

2.5 Internal factors affecting innovation creation 2.6 External factors affecting innovation creation 2.7 Value appropriation

2.8 Conclusions theoretical background

2.9 Conceptual scheme based on the theory background Chapter 3 Methodology

3.1 Research method

3.2 Methods of data gathering 3.3 Classifying the results Chapter 4 Results PBH and FEC 4.1 Company and product description

4.2 Sustainable competitive advantages of the PBH and FEC 4.3 Value creation of the PBH and FEC

4.4 Innovation creation of the PBH and FEC

4.5 Internal factors affecting innovation creation of the PBH and FEC 4.6 External factors affecting innovation creation of the PBH and FEC 4.7 Value appropriation of the PBH and FEC

4.8 SWOT matrix (summary)

4.9 Confrontation internal and external factors Chapter 5 Conclusions and recommendations 5.1 Conclusions

5.2 Recommendations

5.3 Limitations and suggestions for further research References

Appendices

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Chapter 1 Introduction

A trade fair or exhibition is the result of the interaction between exhibitor, visitor and organizer. The organizer brings the other two parties together and matches the information and communication needs of the visitor (buyer) with those of the exhibitor (seller).

Traditionally, the trade fair or exhibition has been a market place. In the post-war era the trade fair and exhibition industry has increasingly evolved into a medium for information and communication. Various developments, including the growth of digital communication, the growing pressure of companies to spend the money invested in trade fairs and exhibitions more effectively, the view that fairs titles are brands and the upcoming tendency of experience marketing in the trade fair and exhibition industry, are forcing the branch to change its way of working. The key driver is not anymore the supply-side but instead the focus is shifted to the demand-side. New fair concepts or new aspects within fair concepts are needed to build reputation and obtain returning visitors and exhibitors.

Therefore, the innovation ability of organizers is the key to survive in this increasingly competitive arena.

Within this arena, the Prins Bernardhoeve Zuidlaren (PBH) and the Frisian Expo Centre Leeuwarden (FEC) are struggling with declining trade fairs and exhibitions and increasing competition of government supported competitors. Also new competitors are entering the arena of trade fair and exhibitions, and a shift is taking place from national trade fairs to regional trade fairs, which affects in particular the PBH’s business.

The PBH, located between the cities Groningen and Assen, offers since its foundation in 1956, an accommodation for a diverse portfolio of events, trade fairs and exhibitions.

Annually, this complex hosts hundreds of thousands exhibitors and visitors at its 40,000 square metre accommodation. The FEC, located in Leeuwarden, founded in 1963 as an accommodation for a cattle market, developed itself as the trade fair and exhibition complex in the province of “Friesland”. Nowadays, it offers 25.000 square metre accommodating regional trade fairs and exhibitions, events and conferences & meetings.

This master thesis will provide insights in and recommendations how the Prins Bernhardhoeve and the Frisian Expo Centre can create and retain value by means of innovations in order to obtain sustainable competitive advantages. The sections below describe the dilemmas of the management of the PBH and FEC, which results in objectives and research questions. Based on the research questions and arguments a conceptual scheme is constructed to guide the research process. Finally, the scope, research design and organization of this very Master Thesis are presented.

1.1 Management dilemma of the FEC and PBH

As an answer to the above mentioned environmental developments, the PBH and the FEC decided to re-organize its businesses by means of merging the two separate organisations and to search for additional purposes of the PBH and FEC accommodation in order to meet customer demand. The dilemma which the management of the PBH and FEC faces is how to create new fair concepts or new aspects within fair concepts which are needed to obtain returning visitors and exhibitors. In other words, the management is searching for an answer how to obtain sustainable competitive advantages with the purpose to stay in the market, enlarge market share and compete successfully with the main competitors.

1.2 Objective and research question

From the above management dilemma objectives and research questions can be derived.

These are depicted below.

The objective of the research is:

• Providing insights in and recommendations on how the Prins Bernardhoeve and the

Frisian Expo Centre can create and retain value by means of innovations in order to

obtain sustainable competitive advantages.

Sustainable com- petitive advantage

Value creation

Innovation creation Value appropriation

Internal factors (Organization) External factors

(Environment)

Figure 1.3.1 Conceptual scheme Master Thesis

The research question derived from this objective is:

• How can the Prins Bernardhoeve and the Frisian Expo Centre create and retain value by means of innovations in order to obtain sustainable competitive advantages?

1.3 Conceptual scheme

The basic idea behind these research questions is to generate sustainable competitive advantages with the purpose to stay in the market, enlarge market share and compete successfully with the main competitors. Sustainable competitive advantage refers to the ability of a firm to outperform its industry, that is, to earn higher profits than the industry average (Besanko: 2000). To obtain competitive advantages, value should be created by the FEC and PBH. Value is the amount of buyers whom are willing to pay for what a firm provides them (Porter 1985). However, to obtain sustainable competitive advantages (SCAs) value should not only be created, but must be captured and protected by the firm as well. This means that value must be appropriated (retained) to create SCAs.

According to various authors, innovating is the most important way of creating value (Wijnberg: 2004, Johnson & Scholes: 2002, De Jong: 2003). Therefore it is interesting to see how firms can create innovations in order to create value and ultimately generate SCAs. Innovation is defined as “something new in the Trade Fair and Exhibition industry and often non-technical in nature which is valued as such by the branch organizations and visitors & exhibitors of Trade fairs and exhibitions” (Based on Wijnberg: 2004). Of course there are other ways of creating value, like imitating products or processes from the competitors, however, these methods are not included in this Master Thesis. All together, to create SCAs a firm has to create innovations. This process is illustrated in figure 1.3.1.

From this perspective an interesting question arises; what factors affect such innovation

creation? After all, innovations are not invented or created by themselves. Indeed, internal

and external factors affect innovation creation (Edgett: 1994, Brentani: 2001, De Jong et

al: 2003). Internal factors of a firm can be resources, culture, strategy, technology or for

instance the extent of absorptive capacity of the Trade Fair & Exhibition organization (from

now on referred as T&E organization). Furthermore, contextual (external) factors of a firm,

which are presented in the environment of the firm, can be factors set by the macro- and

task-environment.

Moreover, these internal and external factors affect value appropriation as well. Ever since value appropriation is the ability of innovators to capture and protect the value of their innovations for themselves (Mol, Wijnberg, and Carroll: 2003), firms use their resources and capabilities to capture and protect their created value from their competitors. In turn, competitors attempt in numerous ways to imitate these innovations and therefore external factors affect value appropriation as well.

To summarize, to obtain sustainable competitive advantage, value must be created by means of innovation creation. To optimally create innovations one should examine the most important internal and external factors which affect innovation creation to determine what factors can be improved or influenced. The same factors can be measured by examining the factors which affect value appropriation. Ultimately, insights and recommendation are provided of how firms (PBH and FEC) can create and appropriate value by means of innovations in order to build sustainable competitive advantage.

In Chapter 2 (section 2.9) the above conceptual scheme, based on the theoretical background, is developed in more detail.

1.4 Scope of the Master Thesis 1.4.1 Geographical boundaries

Some competitors of the PBH and FEC are outside the Northern part of The Netherlands, that is, the “RAI” in Amsterdam and the “Jaarbeurs” in Utrecht. Although these competitors are of significant importance, the focus of this Master Thesis is on the competitors in the provinces of Friesland, Groningen, Drenthe and Overijssel. Two reasons are therefore specified. First, according to the general manager

of the FEC and PBH competition with in particular the “Martin Plaza” and the “Evenementenhal Hardenberg” is emerging increasingly and besides that competition is shifting from national to regional level

.

1.4.2 Boundaries of business activities

The core business of the PBH and FEC is to organize trade fairs and exhibitions. Also, these firms organize events, like pop-concerts or sport events, and, finally, the PBH and the FEC also focus on renting their accommodation to third parties. The centre of attention in this Master Thesis is on the organization of the Trade Fairs and Exhibition, because competition in this area is most emerging

. To illustrate what kind of activities such an organization can have, a list is provided in appendix VI

1.4.3 Boundaries of customers

Because of the focus on trade fairs and exhibitions, the customers of the other activities of the PBH and FEC are not included. So, the focus is on trade fairs and exhibitions of the PBH and FEC and the related customers in the provinces of Friesland, Groningen, Drenthe and Overijssel.

1.5 Research design 1.5.1 Type of research

This research can be typified as strategic and is carried out to provide information for solving the problems or opportunities set by the management of the PBH and FEC. The outcome should provide information, which may guide the strategic management decisions of the general manager.

Because this research responds to the challenges the PBH and FEC have, applied scientific research is most suitable (Cooper and Schindler: 2003). The problem solving nature of applied scientific research means it is conducted to reveal answers to specific questions related to action, performance or policy needs. Applied scientific research involves

1 Personal communication with the general manager of the FEC, PBH and WTC: Mr. A.A. De Jong

2 Personal communication with an anonymous respondent

3 Personal communication with the general manager of the FEC, PBH and WTC: Mr. A.A. De Jong

knowledge for decision making purposes, empirical- and scientific standards to provide directions and the results can only be applied to the firm under discussion (‘t Hart: 1996).

1.5.2 Information collection

There is a range of methods of collecting information. First, to get more insights in the way of doing these analyses, literature is studied. Literature about strategy and innovation is used to gain a broader insight in this topic. All these different theories are used to give an answer to the research question, theoretically.

Second, there are numerous ways to find secondary data about this PBH, FEC, and its environment. Some sources are specific for the firm; others provide more general information, like the markets of the firm. Furthermore, primary data is collected through in-dept interviews with several employees of the firm. These primary and secondary data are combined to give an answer to the research question, empirically.

In Chapter 3, the discussion about the type of research, ways of information collection and the classification of the results will be continued.

1.6 Organization Master Thesis

The conceptual scheme (figure 1.3) is used to structure and relate the concepts

theoretically in chapter 2. In this chapter concepts are firstly highlighted from different

perspectives to be able to investigate the empirical situation at the PBH and FEC. The focal

point in this chapter is to provide insights into factors which affect the innovation creation

of a firm. Chapter 3, Methodology, provides insights in how the theory is used to

investigate the situation of the PBH and the FEC. Next, chapter 4 provides the results,

which give insights in the current situation of the PBH and the FEC and its environment

with respect to competitive advantages, value creation, value appropriation, innovation

creation and the internal and external factors which affect the latter two. Finally,

conclusions and recommendations, together with the limitations of the theory and the

results, are presented.

Chapter 2 Theoretical background

In this chapter the general research question is explained by concepts, constructs, and rigorous definitions. In this phase these components, or building blocks, are provided by the literature to understand, explain, discuss, and (re-) formulate the concepts, discussed in section 1.3. At the end of most sections, theoretical questions are formulated about the current situation of the PBH and FEC. These questions will be the input for chapter 4.

Finally, this chapter is structured according to the earlier discussed conceptual scheme, with the purpose of developing a more detailed one.

2.1 Trade Fair and Exhibitions (T&E) 2.1.1 Trade Fairs and Exhibitions

A trade fair is the highest possible concentration of supply and demand in the smallest possible space and the shortest time. The guidelines of the AUMA

define trade fairs and exhibitions as follows. Trade fairs are regularly occurring market events lasting a limited period of time. In Trade Fairs mainly branch-related visitors are addressed and a multitude of businesses exhibit the primary range of products from one or several industries and distribute them mainly as samples to professional and commercial buyers. The difference with Exhibitions can be found in the type of visitors, that is, exhibitions serve the general public as well. However, due to its similarity, Trade fairs and exhibitions will be researched as one phenomenon. Huynen (1973) discusses in his book “Trends in trade fairs” various definitions and concepts of what a Trade Fair and Exhibition are. One key aspect arises in almost every given definition, namely its nature of a periodically market place. Hence, trade fairs and exhibitions are as a periodically market place used by organizations as a marketing tool to sell or inform about their product to customers who can have business or have private oriented purposes.

2.1.2 Service goods

Trade fairs and exhibitions are products whose quality cannot be assessed before they are used and therefore these can be typified as services. A T&E organizations’ service provides a medium (Trade Fairs & Exhibitions) between the exhibitor and the visitor. Within that service Trade fairs and exhibitions fill in several functions, namely information-function, motivation-function, influence-function and sales-function (Wiegerink: 2002). Moreover, this medium can serve as a platform for technology-push, labour-policy, corporate identity or PR (Meffert: 1993).

Customers who have had a positive experience with a firms’ service will be unwilling to switch to their competitors if there is a chance that the competing firms will not do their job on an equal or high level. Once a firm’s reputation has been created, the firm will have an advantage competing for new customers, increasing the numbers of customers who have had success trials, and thus further strengthen its reputation (Besanko: 2000). The competitive advantage here is likely to be much more related to the extent to which customers value less tangible aspects such as reputation of a firm which organizes Trade fairs and exhibitions. This implies that competences and resources, to obtain sustainable competitive advantage, are often not tangible and thus non-technical in nature.

2.2 The concept of Sustainable Competitive Advantage

As appeared from the previous section competences and resources that create competitive advantages of T&E organizations are often intangible and thus non-technical in nature.

Competitive advantage occurs when a firm is implementing a value creating strategy which is not simultaneously being implemented by any current potential competitor (Barney; 1991). Value creating in this definition refers to above normal gain or growth in profits or sales revenue compared to competitors. According to Barney sustained competitive advantage is a competitive advantage with a very important addition, namely current and potential firms are unable to duplicate the benefits of the strategy. In other words, sustainable competitive advantage is the ability of a firm to outperform its

4 AUMA: German exhibition and trade fair council of private enterprise (www.auma.de)

industry, that is, to earn higher profits than the industry average (Besanko: 2000). This advantage is sustainable when it continues despite efforts by competitors or potential entrants to duplicate or neutralize it. So, a firm must create more value (explanation section 2.3) than competitors in order to achieve a competitive advantage. Of course the ability to create value depends on the resources controlled by the firm and competences which arise from using those resources. According to Besanko et al (2000), the relation between value creation and resources & competences implies that for a competitive advantage to be sustainable, the market must be characterized by constant asymmetries in terms of firms’ resources and competences.

This heterogeneity in resources and competences is the basis of an important framework in the field of strategy: the resource based theory of the firm. This theory stresses that value creation and thereby creation of sustainable competitive advantage is not possible when every firm has access to the same resources and competences. The VRIO framework is a good analytical tool which can help to organize thoughts and develop a supporting argument for why a resource or competence yields a competitive advantage (Barney:

2002). If resources or competences of a firm meet four requirements (value, rare, imitation and organizational), then these can be defined as “sustainable distinctive Competences” or so to say unique resources or competences of a firm. In the underneath table the appropriate criteria are specified. Furthermore, questions are provided which can be asked to determine the sustainability.

Criteria Questions to be asked

Valuable Does the resource or competence exploits opportunities and neutralizes threats?

Rare Is the resource or competence seldom and costly to produce?

Imitability Has the resource or competence a unique history, is it causally ambiguous, is it socially complex or expensive to imitate?

Organizational Is the resource or competence exploited by the firm?

Table 2.2.1 Set of criteria to determine if a competitive advantage is sustainable (Source Barney: 2002)

If the above questions can be positively answered, a competitive advantage, which is underpinned by these resources and competences, can be considered sustainable.

Furthermore, Barney (2002) distinguishes resources and competences into more types, namely:

• Weakness, the resource or competence does not meet any of the VRIO criteria;

• Strength, the resource or competence only meets the criteria valuable;

• Strength and distinctive competence, the resource or competence meets the criteria valuable and rare. This strength can be considered a first mover advantage;

• Strength and sustainable distinctive competence, the resource or competence meets the criteria valuable, rare, imitability and organizational.

Consequently, Trade Fair and Exhibition organizations must have resources and competences which are valuable, rare, imitability, and organizational to create a sustainable competitive advantage (sustainable distinctive competence). An interesting question with respect to the general research question is therefore:

• To what extent do the PBH and FEC have resources and competences which create a sustainable competitive advantage?

2.3 The concept of Value creation

The previous section shows that the ability of creating value is an important aspect to create a sustainable competitive advantage. Johnson & Scholes (2002) emphasize this in other words, namely “the long term success of strategies is determined by the extent to which they deliver best value in the eyes of the stakeholders”. In competitive terms,

“value is the amount buyers are willing to pay for what a firm provides them. Value is

measured by total revenue, a reflection of the price a firm’s product commands and the

units it can sell” (Porter 1985). These units are the numbers of visitors or exhibitors who

attend a fair and price refers to the entrance fee or the price paid per square metre. Value creation can be seen from several perceptions. These perceptions are described below.

2.3.1 Value system

In the above definition Johnson & Scholes mean value creating in terms of dividend and share-price-movement for shareholders and competitiveness in the marketplace. In competitive markets these two subjects are closely linked ever since the returns to stakeholders are driven by market success.

The value chain concept is a helpful tool to understand how and where value may be created in an organisation or its network. Or as Prahalad stated in his speech at the Innovation Lecture 2004; “the value chain represents the value creation process”. In this context a value chain can be described as the activities within and around an organisation which together create a product or a service (Johnson & Scholes: 2002). In figure 2.3.1.1 a general value system of T&E organizations is given.

In fact the above figure is a value system, because suppliers and buyers are included. The support activities include infrastructure, technical services, cleaning, general management, human resource management, procurement, purchase, facility services and finance.

Trade Fairs or Exhibitions come into being because of the combined play between exhibitors, visitors and its medium; T&E organizations (Wiegerink: 2002). Therefore, visitors only visit a Trade Fair or Exhibition if there are interesting exhibitors. In turn, Exhibitors only spent money on this medium if they expect attractive visitors to come. This implies that value is created ever since a “perfect” match is made between the visitor and exhibitor.

Other value creating activities depend on the hall (location), the quality of the organization process and the marketing activities a T&E organization has. The latter one includes network capabilities of the firm as well, because the extent of which a T&E organization can make use of its networks relates with the quantity and quality of the exhibitors and visitors it can offer.

Finally, value can be created through its suppliers. The interesting thing here is that the exhibitors are next to buyers, suppliers as well. Indeed, exhibitors offer, from the perspective of visitors, a wide range of products and services during the Trade Fair or Exhibition. For that reason exhibitors can be typified as suppliers of Trade fairs and Exhibitors. Other suppliers are firms who provide catering, electronics, transport, stand- material and/or consultants and offer therefore input for value creation as well.

2.3.2 Selection systems

Mol and Wijnberg (2003) approach value creation from another point of view. Of course they also agree that the concept of value plays an important role in creating sustainable competitive advantage. They argue that the value of a resource not only has a meaning in the lateral competitive process, but also needs to accommodate for competitive pressure along the vertical chain. Ever since the competition is between the same stages in the value system, success in this dimension is a requirement for increasing profits. Though,

Exhibitors

Visitors Support activities T&E

Operations T&E

Organization Halls, location

MKT & Sales Supply

Exhibitors Service firms

Buyers

Value creation

Match = Value creation

Figure 2.3.1.1 Value System of Trade Fair and Exhibition organizations

transactions take actually place in the vertical dimension, which means that profits and value are created in this dimension (Mol, Wijnberg, and Carroll: 2003).

To determine the value of a resource the concept of the selection systems can be used, wherein the selectors (decision makers) decide whether a firm takes part in the competitive process and which of the competing products or services has the highest score based on the set of criteria they think are relevant. This often subjective score is reflected in the price of a product or service (or resource). So, the selectors, which can be other T&E organizations (peer), branch organizations (expert), or visitors and exhibitors (market) decide what the value of product or service is. Visitors and exhibitors mostly decide whether they go to a Trade Fair or Exhibition. However, branch organizations can have that much influence on the selection process that visitors and exhibitors follow the advice of such an organization ever since branch organizations sometimes represent the exhibitors. Then it’s them who decide what is worth going.

To summarize, value is the amount buyers are willing to pay for what a firm provides them. Value is measured by total revenue, a reflection of the price a firm’s product commands and the units it can sell. Furthermore, value creation can be seen as a process within and between the stages of the vertical system. Furthermore and probably most important, value is created ever since a “perfect” match is made between the visitor and exhibitor. From the above discussion interesting questions with respect to the general research question rises, namely;

• Have the PBH and the FEC created value?

• Where is value created in the value system of the PBH and FEC?

• Based on what characteristics do selectors decide whether the PBH and FEC take part in the competitive process?

Finally, to create sustainable competitive advantage, value should not only be created but also captured in order to prevent profit erosion. Capturing value means that the price charged covers the full cost of production and return on investments, otherwise it is just an interesting idea and not sustainable. This phenomenon is termed value appropriation and will be discussed in section 2.7.

2.4 The concept of Innovation creation

Most managers express an enthusiastic belief in new ideas and claim to be committed to innovation. The truth is that managers viewing it as a high risk and a costly adventure, which promises uncertain returns on investments (Kuczmarski: 1996). As discussed, organizations often create value through resources and competences and thereby obtain sustainable competitive advantage. Innovation in these resources and competences is a way of creating value and, according to many authors, the most important way (Wijnberg:

2004). Therefore it is important to see how an organization can create innovations.

2.4.1 Definition of innovation

Due to the fact that innovations are an important tool to create value several opinions on

what an innovation means exist. A loose definition is provided by Crawford and di

Benedetto (2003). They consider an innovation to be the outcome of new things. West and

Farr (1990) define innovation as the intentional introduction and application within a role,

group, or organization of ideas, processes, products or procedures, new to the relevant

unit of adoption, designed to significantly benefit the individual, the group, organization or

wider society. Wijnberg (2004), however, provides a more overall definition and includes

in his definition the market because he states that an innovation has to be a solution for a

problem, a gap, in the market. According to the definition of Wijnberg “an innovation is

something new which is presented in such a way that the value will be determined by the

selectors”. Something new in this context means something new in the Trade Fair and

Exhibition industry. By including selectors in his definition he deals with customers and

gatekeepers as well. These gatekeepers are the branch organizations and customers

represent the visitors and exhibitors of Trade Fairs or Exhibitions.

Due to the fact that service firms are under discussion here, innovations are as mentioned before mostly non-technical in nature. This means that most resources are mostly intangible. Examples of intangible resources in the context of Trade fairs and exhibitions are reputation, image, identity, knowledge, social networks (relational capital), routines, structure or intellectual & human resources. Examples of tangible resources are a hall (location), facilities (restaurant, toilet), parking place and technological resources like systems and lightning. In line with Wijnberg (2004), innovations can be defined as follows; innovations in the Trade Fair and Exhibition industry are something new and often non-technical in nature which is valued as such by the branch organizations and visitors &

exhibitors of Trade fairs and exhibitions. In later sections these and more resources together with competences will be genuinely discussed with respect to innovation creation.

2.4.2 Importance of innovations

In the previous section Wijnberg (2004) describes an innovation as something new in the industry. Although something new is narrowed down to industry level, which means that the innovation could have been created somewhere else, it still implies that the innovation has no competitors and markets at birth. This, however, is not completely true. Only in the case of a pure invention there are no competitors and no markets in the beginning.

Commonly, innovations in services, processes, etc. are incremental and serve existing markets and compete with existing competitors. The question is when is an innovation important or so to say radical or incremental?

Several authors discuss this topic. Lovelock (1999) makes a distinction between less radical innovations and radical innovations in services, respectively. He divides new services in six categories:

• Style changes (e.g. a new colour for a cab);

• Improvements (change in the characteristics of an existing service);

• Extensions (an addition to an existing product line);

• New services (services that used to be provided by competitors);

• New businesses (new solutions to existing problems);

• Innovations (new services for the greater part undefined problems).

The difficulty with the above classification is the lack of measurability. After all, what is the difference between style changes and improvements? Both are changes in the characteristics of an existing service. Consequently, this classification can not be considered adequate to measure the importance of an innovation.

According to Wijnberg (2004) the importance of an innovation is to what extend changes occur in:

• The relative valuations of products satisfying the same set of preferences;

• The set of preferences;

• The composition of the set of selectors;

• The characteristics of the selection system itself.

In this “framework” an innovation can be considered more radical (important) when more changes occur in the above list. Although a lack of measurability still exists, the differences between the four criteria are rationally clear. A practical solution, though subjective, is scaling the criteria from 0 to 4. If an innovation meets all the criteria it can be considered radical or important and, in turn, if it does not meet one criterion it can be judged as unimportant. Although this method continues to be subjective, the measurability of it becomes easier.

Section 2.4.1 and 2.4.2 give an idea about how innovations within the Trade fair and

Exhibition industry can be defined as such and how existing innovations can be measured

to see whether an innovation is important or not. From the above discussion an interesting

question with respect to the general research question rises, namely:

• What are the innovations of the PBH and FEC and to what extent are they more radical?

2.4.3 Types of innovations

Reconsidering the literature various types of innovations occur. The reason behind it is the importance of it, because it is essential to know where one can innovate in such service oriented industries, like Trade fairs and exhibitions. Furthermore, analysing innovation types allows one to interpret innovation processes in the service sector.

Lovelock (Lovelock: 1999) distinguishes two types of innovations within the service industry. He makes a distinction between innovations in core products (services) and innovations in supplementary services. In his paper he stated that core product innovations are less frequent events then innovations among supplementary services.

A different classification of types is the one Wijnberg (Wijnberg: 2004) uses. Wijnberg distinguishes three types of innovations, product innovations, process innovations and stylistic innovations. Product (service) innovations are changes in the value of the product determined by the selectors. A process innovation does not directly influence a product however the value, again determined by the selectors, is changed by the renewal of the creation process of the product. Stylistic innovations are changes in the product that have no measurable technological effect, but do have a significant effect on the value of the product.

Wijnberg gives a broader classification of the different types of innovations. He covers non-product (service) related innovations as well, which Lovelock ignores, and is therefore more useful to classify all innovations that can occur in a T&E organization. (Other, more special, types of innovation are depicted in appendix X)

From the above clarification an interesting question with respect to the general research question rises, namely:

• To what extent do the PBH and FEC use these types of innovation?

2.4.4 Main sources of innovation (innovation patterns)

Sources of innovations are important ever since these indicate where a particularly firm has to focus on when it innovates. Van Ark et al (2003) introduces the SIID typology of service innovation to map the sources of innovations. Central variable in the SIID typology is the way in which suppliers of inputs, services of firms and clients interact. Each of the underneath 5 patterns are defined and display a different mix of linkages between these three types of actors.

• Supplier-dominated innovation. These innovations from external suppliers are distributed and implemented by industry users, who satisfy the needs of their clients. There is little room for firm to influence the suppliers’ innovations, however, the firm has to bring about some organizational changes in order to be able to use the innovation.

• Innovation within services. The actual innovation and implementation is initiated by and takes place in the service firm itself. Often innovation support is used to implement the innovation throughout the organization.

• Client-led innovation. The service firm innovates on the basis of specific needs that are articulated by its clients. The influence may come from segments of mass markets as well as from single clients.

• Innovation through services. The service firm influences the innovation process that takes place within a clients firm. These are especially knowledge intensive business services.

• Paradigmatic innovations. These are complex and all-encompassing innovations

that affect all actors in the value chain. In other words these are radical innovation

which changes all structures or routines in the value chain and competitive

environment.

As discussed in sections 2.1 the T&E organization industry is a service industry. According to Wijnberg, the consumer of services is by definition also a co-producer in the sense that his collaboration is necessary for the service to be produced. With respect to service innovations, the role of selectors depends on the characteristics of the selection system, in this case market selection. Expert selectors are neither involved in the production process, nor in the process of innovation and will therefore not create, but only determine value.

Furthermore, T&E organizations are responding to the explicitly expressed needs of the market (Van Ark: 2003, Wiegerink: 2002). Often the demands are expressed by segments of mass markets (visitors), but on the other hand the influence may come from a single client (exhibitors) as well. Therefore, the main source of innovation in the T&E organizations is client-led innovation, which means that exhibitors and visitors are drivers of innovations. At this point the role of the T&E organization is the one of developer and implementer of the innovation, whereas the clients’ role is, next to user, the one of initial motivator (Den Hertog: 2000).

From the above clarification an interesting question with respect to the general research question rises, namely:

•

Is the client the actual source of innovation within the PBH and FEC?

2.4.5 Factors affecting the innovation creation process

This sub-section provides the link between the concept of innovation creation and the factors affecting this process as described in section 1.3, conceptual scheme.

Innovation success, and thus innovation creation, is influenced by a large number of factors (De Brentani: 2001, Edgett: 1994, Jong et al: 2003). Several factors are controllable by the T&E organization (internal factors) and some are uncontrollable (external factors). Within that, some of the internal success factors of innovation creation directly influence the activities of the T&E organization, like people, structure, resources and networking and others tend to create an internal climate that indirectly influence the innovation creation process, like culture and leadership (De Jong et al: 2003).

Furthermore, external factors deal with industry (market) characteristics, the knowledge infrastructure and the Macro environment. The latter one can not be influenced by managers of T&E organizations. In the underneath sections the internal and external factors which can affect innovation creation are described.

2.5 Internal factors affecting innovation creation

The sections 2.4.5 already labeled some factors affecting the innovation creation of service firms in general. This section, however, provides more and deeper insights in what these phenomena actually mean for a T&E organization and how these affect innovation creation, internally. The purpose of this section is to analyze internal factors which can lead to the answer of how a T&E organization must act to create innovations, successfully.

Reviewing the literature about factors affecting innovation creation, marketing is often mentioned as a success factor (Edgett: 1994, Brentani: 2001). However, marketing is excluded from the underneath analysis ever since it influences the eventual success of an innovation and not the innovation creation process itself. It is a complementary asset and therefore a value appropriation mechanism (Teece: 1986, Mol and Wijnberg: 2003).

2.5.1 Internal factors affecting innovation creation, directly

Internal factors affecting innovation creation directly are most manageable of all and are directly related to the activities of the T&E organization. The Jong et al (2003) mentions four internal factors, which directly affect the activities of the innovation creation of a service firm. These factors are people, structure, resources and networks and are discussed below, respectively.

2.5.1.1 People (human resources)

People or human resources are the ones who have to come up with ideas, concepts, and specifications, and turn these in to successful innovations (Schneider & Bowen: 1984).

Brentani (2001) concludes that having highly trained employees who have personal

knowledge of the customer play an important role in the success of innovations. Edgett (1994) adds that employees must be able to timely foresee new possibilities and have thoroughly understanding of market potential. Furthermore, De Jong et al (2003) states that frontline-employees are important because of their knowledge of the customer which helps them to come up with new ideas of what the customers need. Moreover, front-line employees can help by defining the appropriate level of service customisation and user friendliness.

The latter three authors move towards of what Levinthal & Cohen (1990) term as the absorptive capacity of an organization. By this they mean the ability of a firm (individuals) to recognize the value of new, external information, assimilate it, and apply it to commercial ends. This ability is critical to a firms’ innovative capability. Fundamental in this is the logic that accumulated prior knowledge increases both the ability to put new knowledge into memory and the ability to remember and use it. To understand the source of a firms’ absorptive capacity one should focus on the communication between the external environment and the organization and its sub-units. This communication is dependent on gatekeepers who translate the knowledge from the outside to the inside of the firm. In case of T&E organizations, trade managers, the board of directors and the salespersons are the gatekeepers of the firm and play therefore an important role. These so called front-line employees must have sufficient knowledge of what is changing in the market place and subsequently they must have the ability to translate it to the organization in order to create new Trade fairs and exhibitions or processes.

In addition to these “knowledgeable” front-line employees, De Jong and Kerste (2002) bring up that some roles of employee(s) are also important to improve the innovation creation process. The most important one is the “product champion”, which is an informal person that pushes innovations beyond road blocks within the T&E organization. Moreover, sponsors, who are senior managers supporting the innovation, seem to be important as well.

People

• Front-line employees must have sufficient knowledge of what is changing in the market place (trends) and subsequently they must have the ability (competence) to translate it to the organization in order to create new Trade fairs and exhibitions or processes.

•

T&E organizations must have champions and sponsors to improve innovation creation.

From the above analyses interesting questions with respect to the general research question rises, namely:

• Do the PBH and FEC have employees who have sufficient knowledge (experience) and competences to pick up and translate “trends” into innovations?

• Do the PBH and FEC have employees who act as champions and sponsors of innovations?

2.5.1.2 Structure

Ever since T&E organizations are concerned, the “project organization” is the focal perspective in this section. Therefore, trade fairs and exhibitions are typified as periodically market places (section 2.1.1), which means that projects (fairs) come and go.

The difference with a traditional project organization is that T&E organizations are dealing with returning events. In appendix VII an example of an organizational structure of a traditional T&E organization is presented. In the underneath section important aspects of structure in relation to innovation creation are provided.

First, to improve the innovation creation process, rules and procedures must be set by the

management of the T&E organization ever since formalization directly adds to the

implementation speed of the innovation creation process (Fröhle et al: 2000). Moreover,

Edget (1994) emphasizes that a formal development process is necessary to successful

innovation creation. Therefore guidelines must be developed to encourage effectiveness

and efficiency. Nonetheless, Senge (1990) warns that creativity in people can be doomed

by forcing them to follow too many procedures and rules. All together, developing rules and procedures to guide the whole process can be considered as a success factor.

Second, according to De Jong et al (2003) task description and task rotation has a positive influence on innovation creation. Task description can be used to communicate what is expected from the employees, while job rotation enlarges the employees’ knowledge of the organization. The latter one is supportive because employees can put problems in a wider context. Furthermore, it enhances creative potential ever since the large understanding of the functions within the organization will enable them to come up with ideas not only applied to their own functional area, but more related to the organization as a whole.

Third, According to many authors (Fröhle: 2000, Birley et al: 2000) teams with various backgrounds have at the end more success and are more effective than homogeneous teams. Multifunctional teams have the ability to discuss new ideas, problems, etc. from diverse backgrounds (e.g. marketing, finance, HRM) and thereby creating new knowledge which enables them to see more opportunities and changes in the environment (section 2.5.1.1). This will positively influence the innovation creation process. Admitted, multifunctional teams need, just because of their diversity, more time to develop itself as a flexible and effective working team (Birley et al: 2000).

Fourth, in addition to multifunctional teams collaboration and knowledge sharing between these teams can affect innovation creation as well. As depicted in appendix VII a T&E organization has several teams focusing at different Trade Fairs and Exhibitions. All teams develop specific experiences and knowledge about organizing such events and can, by sharing their knowledge, enlarge the knowledge of the company as a whole. So, a T&E organization need to have a platform where employees from different functional areas or teams (dependent of the type of organization) can share experiences and knowledge.

Such a platform can occur in several forms, that is, databases, meetings with the purpose of sharing knowledge, etc. This phenomenon is termed as knowledge sharing.

Finally, to motivate employees to create innovations, reward systems can be of enormous assistance (de Jong et al: 2003). According to Van Dam & Marcus (1998) the relation between the performance of employee and a reward set by the firm can enhance efficiency and effectiveness of a firm. Important here is that the employee knows what is expected from him or her (task description) in relation to innovation creation. An example is that an employee will be rewarded (in terms of money or job promotion) in case an employee’s new Trade Fair concept becomes a success. Also rewards relating to knowledge sharing can enhance the co-operation, and thereby the innovation creation process, within and between multifunctional teams.

Structure

•

Rules and procedures must be set to speed up and focus the innovation creation process.

•

Task description and task rotation has a positive influence on innovation creation.

•

Multifunctional teams have more success and are more effective than homogeneous teams

•

T&E organization need to have a platform where employees can share experiences and knowledge.

•

Applied reward systems enhance innovation creation

From the above analyses an interesting question with respect to the general research question rises, namely:

• Do the PBH and FEC have rules & procedures, task descriptions & job rotation programmes, multifunctional teams, knowledge sharing platforms and reward systems that support innovation creation?

2.5.1.3 Resources

Simply said, a resource is anything of quality that is useful (Dollinger: 2003). These

resources are important for innovation creation as well (De Jong et al: 2003), because

these are the input to the innovation creation process. With respect to innovation creation,

resources do not have to be necessarily valuable, rare, imitable, or organizational (section

2.2) since innovation creation is in fact an activity that creates such resources (section

1.3).

Barney (1991) identifies 6 types of resources that include all assets, capabilities, organizational processes, firms’ attributes, information and knowledge of a firm. These types are physical, reputational, organizational, financial, intellectual & human and technological or the so called PROFIT factors. Because intellectual & human and organizational resources already were discussed in the previous section, only physical, reputational, financial, and technological resources will be discussed here.

According to Elfring (1997) time and money are required to carry out most innovations. In the idea-stage a lack of financial resources can de-motivate employees to generate and carry out ideas. Furthermore, financial resources are needed to hire for instance consultants who can structure or speed up the innovation creation process. Lastly, ever since innovations in the T&E industry are often intangible, financial institutions are hardly prepared to lend money against these intangible assets. Therefore, money is a vital resource to have to be able to create innovations.

Technology has a facilitating role with respect to service innovations (Den Hertog: 2000).

Information technology can help to speed up the innovation creation process by means of faster communication, knowledge sharing or CRM programmes, which allow firms to gain customer information. As a result information technology is an important resource to have in order to be able to create innovations.

Reputational resources are the perceptions that people in the firms’ environment have of the company. This reputation can be derived from the product’s quality, the management or from a company’s INNOVATIVENESS (Dollinger: 2003). The latter one implies that the ability of a firm to create innovations can generate a positive reputation. Reputation can then enhance innovation creation as well because it enables access to networks (discussed later) and makes it easier for firms to place new Trade Fairs and Exhibitions to the market (market lead-time). A clear argument is the value that can be created if a match is made between an exhibitor and a visitor, discussed in section 2.3.1. If a T&E organization has a reputation to provide interesting exhibitors, the visitors are more likely to come and vice versa.

Finally, physical resources are the tangible assets of a firm. These have, because of the intangible nature of innovations, a facilitating role.

If a T&E organization has the above mentioned resources, innovation creation will be positively affected (De Jong et al: 2003)

Resources

•

Physical

•

Reputational

• Organizational

• Financial

• Intellectual & Human

•

Technological

From the above analyses an interesting question with respect to the general research question rises, namely

:

• Do the PBH and FEC have the PROFIT resources?

2.5.1.4 Networking

Ever since Trade Fairs and Exhibitions are highly complex services, assembled by means of a network of companies (Go: 1999), like exhibitors, visitors or other suppliers, networks are of significant importance (Bossink: 2002). Innovating in networks means co-operation between companies to create innovations. The capability of organizations to co-innovate with other organizations can be of crucial importance in sustaining and strengthening competitive markets (Bossink: 2002). Co-innovations in new products and processes occur by sharing complementary resources, knowledge and competences. Networking can occur in several forms to create innovations. Therefore, the most important forms are discussed, underneath.

5 Note: organizational, human and intellectual resources have already been discussed and physical resources are of no

First, Kline & Rosenberg (1986) mention the interaction with clients as a success factor of the innovation creation process. The reason behind this is that this interaction provides information of what the client experiences as important. The same counts for the implementation process, where the client can provide the firm with feedback.

Consequently, it is vital for a T&E organization to interact with the client to identify the precise needs of the markets (Brentani: 2001).

Second, in section 2.5.1.1, people, the concept of absorptive capacity was introduced to stress that employees must be able to pick up opportunities in the market en turn them in to newly created or improved services. Therefore employees must have intensive contact with, suppliers, competitors or consultants in order to create an external focus, which ultimately enhance innovation creation.

Finally, reputation was mentioned in the previous sub-section as important to the success of innovation creation. Because Trade Fairs and Exhibitions are experience goods (Besanko: 2000), the value is difficult to judge. For that reason a T&E organization should have close contacts with its expert selectors since they give opinions about the value which, eventually, will influence the success of an innovation.

Networking

• Co-operation with other firms

• Interaction with clients

• Interaction with suppliers, competitors, consultants, etc.

•

Interaction with expert selectors (branch organizations)

From the above analyses an interesting question with respect to the general research question rises, namely:

• Do the PBH and FEC have the policy to co-operate with other firms, clients, suppliers, competitors and expert selectors?

2.5.2 Internal factors creating an innovative climate

Brouwer (1997) derived 10 factors from the literature that do not directly affect the innovation creation process, but tend to create an internal climate which is helpful to create innovations. De Jong et al (2003) categorized these ten factors into three, which are respectively culture & leadership, strategy and company characteristics. In the underneath sub-sections, factors such as culture & leadership and strategy are discussed in relation to innovation creation in a T&E organization, respectively.

2.5.2.1 Culture and leadership

Culture is the set of values, guiding beliefs, understandings, and ways of thinking that is shared by the members of a T&E organization and taught to new members as correct. It represents the unwritten, feeling part the firm (Daft: 2001).

Corporate culture should reinforce the strategy and structural design that the firm needs to be effective within its environment (Daft: 2001). Daniel (1990) classified culture into four types, namely entrepreneurial/ adaptability culture, mission culture, clan culture and bureaucratic culture (figure 2.5.2.1.1). He based this classification on two factors, that is, the extent to which the competitive environment requires flexibility or stability, and the extent to which the strategic focus and strength is internal versus external. Each of the four cultures can be successful, depending on the needs of the external environment and organizations’ strategic focus. According to Wiegerink (2002) the environment of a T&E organization requires flexibility ever since this environment is changing continuously.

Furthermore, as discussed in sub-section 2.5.1.1, employees of T&E organizations must have an external focus to obtain knowledge of what is changing in the market place. As a result T&E organizations must have an entrepreneurial/ adaptability culture to be effective.

Besides, according to Daft (2001) an entrepreneurial/ adaptability culture particularly

supports innovation, creativity and risk-taking, which underlines that this culture is most

appropriate for innovation creation.