The influence of innovation on
Performance in the Dutch music
festival industry
A study in the field of festival management: the influence of innovation on
performance in the Dutch music festival industry, and the moderating effect of
dependency on stakeholders on this relationship.
Master Thesis
By
Gijs T. Seubers
University of Groningen Faculty of Economics and Business MSc BA – Strategic Innovation Management
June 2014
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Acknowledgements
After finishing my master thesis the realization has come upon me that this is, hopefully, the end to four years of intensive studying. I feel honored that I am in the position to have made it this far and hope that this thesis will successfully end what has been four years of learning and self actualization. For the thesis itself, I was lucky to have been chosen for a topic that
matches my personal interests, which together with the learning curve of writing a thesis made it a difficult but memorable experience. Firstly, I want to thank my family, friends and my girlfriend for their endless moral support and their endless reminders that I always have to try my hardest in order to succeed. I could not have done it without you. Furthermore, I want to thank my supervisor Rene van der Eijk, for having the patience to explain things at 8.30 in the morning, and for providing the guidance and feedback necessary to deliver this end
product. My thanks also goes out to Killian McCarthy, for sitting in during meetings with four Dutch people and still managing to provide useful feedback and suggestions for the
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Abstract and Key Words
This research examines the connection between innovation, divided into innovative orientation and service innovation capability, and performance in the Dutch music festival industry. Furthermore, the influence of five important stakeholders on this connection is investigated in order to establish the influence of stakeholder dependency in this industry. Empirically, the relationships are tested and a positive relationship between service
innovation capability and performance can be documented. These results suggest that even though innovation increases performance in the music festival industry, the characteristics of the industry undermine the necessity for an innovative orientation within the company. Further, the lack of moderation from the dependency on stakeholders suggest that their influence on innovation within this specific industry is minimal.
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Executive Summary
The goal of this research is to examine the relationship between innovation related variables and performance in the Dutch music festival industry. Additionally, the moderating effect of stakeholder dependency on this relationship is tested in order to definitely establish the influence of stakeholder dependency on innovation in the festival industry.
For the first time in several years the festival industry is facing difficulties. Increasing competition and reduced government support provide a turbulent environment for festivals managers to operate in.
Innovation is a topic which has been studied thoroughly over the years and the positive effects on business performance are widely established. In this research, innovation is divided in an innovative orientation and the capability to innovate a service offering. The characteristics of the festival industry provide a strong base to employ innovative activities that could enhance performance. Besides this, the dependency for resources on a variety of stakeholders might influence this relationships due to the different interests of different stakeholders.
The relationships to be measured in this research are between the two independent variables innovative orientation and service innovation capability and the dependent variable
performance. Furthermore, the moderating effect of five identified stakeholders, minor sponsors, major sponsors, local government, government and paying customers, is tested in order to assess its influence on the proposed relationship between innovation and
performance. In order to test these relationships a survey was distributed among festival managers and organizers within the Dutch music festival industry.
A factor analysis, reliability analysis, correlations test and a regression analysis were performed in order to come up with the empirical results required to test the relationships proposed in this research. The results reveal that the only significant relationship was a positive relationship between service innovation capability and performance. This highlights the importance for innovation, however it also provides valuable insights into the perhaps reduced necessity of an innovative orientation in an industry such as the festival industry. Furthermore, the influence of stakeholders on innovation within this industry can be considered minimal following the results of previous research and this research.
The positive relationship between service innovation capability provides highly wanted empirical evidence between service innovation and performance. Furthermore, the rejected hypothesis concerning innovative orientation provides food for thought for practitioners as well as for theoreticians regarding the necessity of an innovative orientation in industries such as the festival industry. Lastly, the influence of stakeholder dependency on innovation can definitely be considered minimal in connection to innovation for festival organizers and theoreticians.
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Table of Contents
Abstract and Key Words ……….. 3
Executive Summary……….. 4
1. Introduction ………. 6
1.1 Research question and objective ……… 7
1.2 Scope of the research ………. 8
1.3 Reading Guide ……… 8
2. Literature Review ………..………….. 9
2.1 Music Festivals ………... 9
2.2 Festival Industry Characteristics ………. 9
2.3 Innovative Orientation ……….. ……… 11
2.4 Service Innovation Capability ……….. 12
2.5 Stakeholder dependency ……… 13
2.6 Conclusion Literature Review……… 14
3. Research Model and Hypotheses ……… 16
3.1 Innovative Orientation ……….. 16
3.2 Service Innovation Capability ………...17
3.3 Stakeholder Dependency ……….. 17
3.4 Performance ………. 18
4. Methodology ………... 19
4.1 Research Strategy ………. 19
4.2 Data Collection ………. 19
4.3 Development of the Questionnaire ………... 20
4.4 Sample ……….. 20
4.5 Pilot study ……… 20
4.6 Independent Variables ……….. 21
4.7 Moderating Variable ………. 22
4.8 Measurement of Independent and Moderating Variables………. 22
4.9 Dependent Variable ……….. 23 4.10 Control Variables ……… 24 4.11 Data Analysis ………... 27 4.12 Factor Analysis ……… 28 4.13 Quality Criteria ……… 28 5. Results ………. 29 5.1 Respondents ………. 29 5.2 Descriptive Statistics ……… 29 5.3 Reliability Test ………. 30 5.4 Correlations ……….. 31 5.5 Regression Analysis ………. 34 6. Discussion ………... 37 6.1 Control Variables ………. 38
6.2 Innovation and Performance ……… 38
6.3 The Moderating Effect of Stakeholder Dependency ……… 39
7. Conclusion ……….. 41
7.1 Research Question ……… 41
7.2 Theoretical and Practical Implications ………. 42
7.3 Future Research Directions and Limitations ……… 43
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1. Introduction
Where the business world was previously dominated by the manufacturing of tangible products, and innovation was considered as building a better mousetrap, the current business world is considerably different. Companies, governments, and universities worldwide have recently awakened to the realization that services dominate global economies and economic growth (Bitner et al., 2008). Yet, in practice, innovation in services is less disciplined and creative than in the manufacturing and technology sectors (Chesbrough, 2005). This even though innovation in services have led to the greatest level of growth and dynamism over the past several years in terms of economic activity (de Brentani, 2001). According to Oke (2007), service sectors are transport, government, education, health care, social and personal services, retail and wholesale, hotels and restaurants, telecommunications and financial sectors. In this description of service sectors, the cultural industry seems to be missing. The cultural industry is a distinctive industry due to the fact that its relevance is not only
economical, but also cultural. The distinction is that the primary economic value of the goods/services delivered in this industry is derived from their cultural value (O’Connor, 2000). Music Festivals are a part of this cultural industry and will be the industry in which this research will take place, and therefore will be further elaborated on.
Music festivals once were a way for a whole generation to express their selves and to show to the world that they were different and wanted change. The first music festival in the world, Woodstock in August 1969, is perhaps the most exemplary example of this need for
expression. One year after Woodstock, the first music festival came to The Netherlands, and since then The Netherlands has developed into being one of the leading festival markets in Europe in both density and age (Kruijver, 2009). Festivals in general and music festival in particular obtain growing recognition for enhancing a region’s image and appeal, improving recreational opportunities, contributing to local and regional economies and enhancing local pride and culture (Frey, 1994).
However, the Dutch music festival industry is currently facing difficulties with intensifying competition and a turbulent environment that causes severe difficulties for festival and event managers. The current turbulent environment as previously mentioned, exists of several components that are all troublesome for the Dutch music festival industry. Firstly, due to the financial crisis that has been going on the previous years, consumers are facing reduced purchasing power. Considering the fact that music festival tickets are a luxury good the declining consumers’ purchasing power highly influences the demand. Besides this, potential sponsors are also dealing with the consequences of the worsened financial situation, which affects their sponsoring budgets and thus the sponsoring income of music festivals. Besides this, the Dutch government has announced an annual decrease of 200 million euro in the budget for culture, which entails 20% of the total, being a structural process until 2015 (OSCW, 2009)
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This will be done by empirically measuring the effects of innovative orientation and service innovation capability on the market performance of Dutch music festivals. Furthermore, the effect of stakeholder dependency on these respective relationships will be tested in order to give weight to the turbulent environment in which Dutch music festivals operate. The necessity of innovation based research in the festival industry is illustrated by the literature review consisting of 423 research articles of Getz (2010), in which innovation is not even addressed as one of the research streams in the festival literature.
1.1 Research question and objective
This paper will investigate the influence of innovative orientation and service innovation capability on the market performance of festivals, and the influence that stakeholder dependency has on these relationships. Therefore, this research contributes to the existing body of literature because research on the link between innovation and performance in this field is lacking, and the moderating role of stakeholder dependency is yet to be investigated. Furthermore, this research will provide interesting implications for researchers who aim to further increase the music festival literature stream by providing insights in the importance of innovation and the dependence on stakeholders. Besides this, this research will strengthen the service innovation literature by empirically testing the service innovation capability construct in an industry that has distinctive characteristics. The Netherlands will serve as a focal
country for this study. The Netherlands is the home of a relatively large amount of festivals of which many are recurring of nature, which makes it highly suitable as a focal country. The main research question that this research will aim to answer and will provide a framework for this study is;
“What is the influence of service innovation capability and innovative orientation on market performance in the music festival industry, and what is the influence of stakeholder
dependency on these respective relationships?
In order to answer the main research question, sub questions are devised to provide a more clear image and better understanding of the industry and the variables that are researched; 1. How can music festivals be defined?
2. How can innovative orientation be defined? 3. How can service innovation capability be defined?
4. Who are the most important stakeholders in the festival industry?
5. What are the important and distinctive characteristics of the festival industry? 6. How to measure the influence of innovation on performance?
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1.2 Scope of the research
This research focuses on two innovation related variables, namely the innovative orientation and the service innovation capability of the festivals. The reason that only these two variables are investigated is because when they are combined the orientation and capability to innovate grasp the essence of innovation, namely the willingness and ability to innovate. Furthermore, the number of stakeholders is restricted to governments, sponsors and customers because these are seen as the most important stakeholders when looking at sources of revenue for music festivals (Andersson & Getz, 2008). Furthermore, only Dutch music festivals are used for this study, which entails no sport, art or other cultural events.
1.3 Reading Guide
Now I will outline the remainder of this research. Firstly, a literature review will be done in which the topics under investigation are outlined and defined. From this literature review hypotheses will be devised and a conceptual model will be created in order to clearly illustrate the relationships which will be investigated. After the literature review, a methodology
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2. Literature Review
Considering the previously mentioned research questions and preliminary sub-questions, there are a range of elements that need to be defined and require a thorough literary basis in order to be able to work with these terms and fully grasp the meaning. The elements that will be discussed in this section are; music festivals, innovation, service innovation, sponsorship, the financial crisis and the entertainment industry. By utilizing literature to define and elaborate on these elements I will provide a better understanding of these concepts and the
interpretation that will be used in my research. 2.1 Music Festivals
Historically, music festivals were seen as a way for individuals to express their rebellion against their dominant parent culture (Bennet, 2001). Festivals provided a way for groups to gain control of cultural space, challenge dominant ideologies and move specific issues to the center, particularly when the event was organized around a culture or identity that is
marginalized in dominant culture (Jackson 1992; Kates & Belk, 2001). However, Koranteng (2004) states that music festivals have developed from hippy gatherings to mega events in the recent years. Nonetheless, Leenders et al. (2010) still state that they have an enormous impact on the economic, so-cultural and political aspect of a government/city.
In recent research, the definition of Kruijver (2009) is often applied concerning music festivals. His definition states that a music festival is “a usually open to the public, with an entrance fee, musical event presented under one umbrella, where several (minimum of two) musical performances are given by various artists at indoor and/or outdoor locations that are linked within walking distance from each other”. However, in this research I will use the definition of Hofman (2013), with alterations concerning the recurring character and concerning the ticket requirement suggested by Noordman (2004). Thus, the definition applied in this research is the following: “A music festival is a recurring, usually open to the public musical event under one umbrella, where several (minimum of two) musical
performances are given by various artists at indoor and/or outdoor locations that are linked or within walking distance from each other”.
2.2 Festival Industry Characteristics
Music festivals are a part of the cultural industry. Cultural industries are currently rising which is partly facilitated by the rise of leisure and entertainment in advanced industrialized economies (Aoyama, 2007). The distinction between cultural industries and creative
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Gursoy (2006) suggests that entertainment opportunities, increased arousal, heightened involvement, fantasy fulfillment and escapism are all critical factors for a satisfying festival and Frey and Busenhart (1996) strongly contribute the performance of a festival to its
uniqueness, which provides strong opportunities for innovativeness to influence performance. Kozak (2013) states that festivals are a part of an area’s experience economy. An experience occurs when a customer has any sensation or acquires knowledge from some level of
interaction with the context created by a service provider (Pullman and Gross, 2004). Meyer and Schwager (2007) suggest that the quality of customers’ experience should be the first concern of a company. The rise of the experience economy is strongly related to the hierarchy of psychological needs depicted by Maslow (1970). With time and money available to a lot more people, experiences allow people to fulfill self-actualization needs (Sundbo, 2009). Due to the creation of an experience, festival managers should strongly monitor the variety of the festival (Pegg & Patterson, 2010). Pine and Gilmore (2011) stress that managers should add diversity to their program, in order to present a novel and appealing event that persuades the customer to pay for the experience all over again. This is due to the fact that a memorable experience creates a competitive advantage (Pine & Gilmore, 1999). The innovativeness of a festival could strongly determine the quality of the experience presented to the customers, and therefore innovation could have an even stronger relationship to performance.
Even though festivals are considered as one of the fastest growing types of tourism attractions (Thrane, 2002), Leenders et al. (2005) suggest that the music festival market is becoming saturated, at least in the Netherlands, as competition intensifies. In the same research he suggests that growth in the festival market is not obvious anymore and the problems of competition will become visible in the near future. Getz (1991) named a variety of reasons that can possibly explain the growth of festivals, such as fund-raising or private profit.
Furthermore, increased income and increased time and interest for leisure are also a reason for the growth of festivals. The intensifying competition in the festival industry provide a ground for festivals to improve their performance by being innovative and distinguishing themselves from their competitors.
The last significant aspect about the festival industry that I will discuss is the strong influence of stakeholders. Many festivals are created by not-for-profit organizations and government agencies tied to cultural and social policy fields as well as strategic place marketing, tourism and economic development (Getz et al., 2010). Stakeholders are defined by Freeman (1984) as “any group or individual who can affect of is affected by the achievement of the firm’s objectives.” Due to the strong influence of stakeholders such as sponsors, the government and the consumers in the festival industry stakeholders are a force to consider for festival
managers. During this research the moderating role of the dependency on stakeholders will be researched and thus the stakeholders for the festival industry will be elaborated on further during the research model
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2.3 Innovative Orientation
Innovation is a topic which is currently considered to be essential in the modern business world. According to Schumpeter (1934), who is considered to be the pioneer of the innovation literature, innovation concerns new products, new services, new markets, new technologies, new processes or new organizations. In the same work by Schumpeter (1934), he defined innovation as: “the development and implementation of a new or improved product, service, technology, work process or market condition, in the intention to gain competitive
advantages. In addition, Rao et al. (2001) argue that innovation can take the form of organizational and marketing changes which expands the demands for products.The importance of innovation has been recognized by managers for a long period of time now (Drucker, 1985). Furthermore, Boone (2001) states that intensifying competition increases the incentive for companies to innovate. Considering the intensifying competition in the Dutch music festival market, this is an interesting statement which presumes that the Dutch music festival market could strongly benefit from innovating.
The first variable of which the influence on market performance will be tested is the innovative orientation of companies. The definition used in this researched is suggested by Dobni (2010) and states that innovative orientation includes the intention to be innovative, the infrastructure to support innovation, operational level behaviors necessary to influence a market/value orientation and the environment to support the implementation of innovation. This definition is used because it provides a comprehensive image of all the factors that are required to create a climate necessary for effective innovation. Research on a company’s innovative orientation, which is interchangeably used with a company’s innovation culture, is quite extensive. Hurley and Hult (1998) mention that culture is a complex system of beliefs that affect the organizational behavior. For the festival industry, considering the previously mentioned characteristics an innovative orientation would be essential in order to create the required innovations to remain competitive. Angel (2006) states that even though an
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2.4 Service Innovation Capability
Services represent a growing percentage of the GDPs of countries around the world (Bitner et al., 2008), and they constitute a major part of total economic activity and employment in most western economies (de Jong & Vermeulen, 2003). And as a result, the topic of service
innovation has attracted the attention of scholars and practitioners (Alam, 2006). Topics under discussion are e.g. new service development (Bitran and Pedrosa, 2008 & Jiménez-Zarco et al., 2006), service failure (Tax and Brown, 1998 & Dong et al., 2008), service delivery innovation (Cadwallader et al., 2010 & Ramdas et al., 2012), and customer experiences (Meyer and Schwager, 2007 & Rawson et al., 2013). Another aspect of service innovation that has been researched extensively is the distinction between product and service
innovation. Research suggests that the perishability, heterogeneity, inseperability and intangibility are the factors that distinguish services from products, and thus are factors that should be taken into account for service innovations (Lievens & Moenaert, 2000). In order to fully grasp the distinctive nature of service innovation, I will define it separately from regular innovation. The definition utilized in this research is: “A service innovation is a new service experience or service solution that consists of one of the following dimensions: new service concept, new customer interaction, new value system/business partners, new revenue model, new organizational or technological service delivery system.” (Den Hertog et al., 2010) The reason for utilizing this definition as opposed to several others is that even though in the service innovation literature, service innovation and new service development are used interchangeably (Menor et al., 2002), creating a new service is not the only option in service innovation (Berry and Lampo (2000) and specifically in the festival industry the other aspects of service innovation are highly important as well.
The extensive body of literature on service innovation provides a strong theoretical base for this research. Service innovations is considered to be essential given the complex conditions in the business environments as well as the high consumer expectations regarding the variety, quality and quantification of services (Jimenez-Zarco et al., 2006). The positive influence of service innovations on all kinds of factors is widely proven, service innovation is known to positively influence the company’s perceived image (Avlonitis et al., 2001), innovation related performance and customer related performance (Ngo & Cass, 2012), the continuous development of innovations as a response to a changing environment (which is essential in the festival industry) (Olsson et al., 2010), higher levels of productivity and economic growth (Cainelli et al., 2004), the creation of customer value (Woodruff, 1997) and the generation of new revenue streams (Oke, 2007). Flint and Mentzer (2000) suggests that when market environments change, as is currently going on in the festival industry, the components of customer value are likely to change. These changing market environments stress the importance for innovation (Grawe, 2009). Furthermore, due to capabilities of modern technologies, and the rapid changing needs and demands, service providers have to respond almost instantaneous and change their service offering, which makes service innovation more and more complex (Bouwman et al., 2008). However, this does entail that if a firm is able to successfully innovate their service offering this has a high potential of leading to a
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2.5 Stakeholder dependency
The dependency of festivals on a variety of stakeholders will function as a moderating
variable in this research. Stakeholders have been defined in several ways over the years due to its differing nature per industry or even per company. An example of a clear cut definition which grasps the essence of stakeholders is the definition by Alkhafaji (1989) who states that stakeholders are groups to whom the corporation is responsible. The most widely recognized definition of stakeholders is the definition by Freeman and Reed (1983) who suggested that a stakeholder in an organization is (by definition) any group or individual who can affect or is affected by the achievement of the organization’s objectives. Furthermore, in later research Frooman (1999) states that dependency is a state in which a company relies on the actions of a stakeholder to achieve particular outcomes. However, for this research the focus will be on resource dependency of festivals on certain stakeholders, in which a different definition is more suitable. Pfeffer and Salancik define stakeholder dependency as “an interorganizational relationship where one party has a high need and another has control over the resources”. This definition will be utilized in this research due to its resource-oriented nature. This matches the situation in the festival industry where stakeholders fulfill an important role in providing resources, mainly financial resources. Mitchell et al. (1997) stated that stakeholder theory had then not yet attained full theoretical status, however over the years the body of research on stakeholders and stakeholder dependency has grown strongly. Where in the same research Mitchell et al. attempted to provide a typology for stakeholders, and make
propositions concerning their salience to managers of the firm, the research body has become increasingly detailed over the years. Stakeholders are researched to influence highly
significant matters such as organizational survival (Pajunen, 2006), and corporate strategies (Rodgers and Gago, 2004; Frooman, 1999). However, the influence of stakeholders does not stop there, stakeholders are even researched to influence matters such as environmental performance (Kassinis and Vafeas, 2006), mission statements (Hassink et al., 2008) and board of directors compositions (Wang and Dewhirst, 1992). When it comes to research concerning stakeholders in the festival industry the body of research is somewhat limited. However, Andersson and Getz have researched a variety of matters concerning stakeholders in the festival industry. They have researched the roles of stakeholders (Getz et al., 2006), stakeholder management strategies of festivals (Andersson and Getz., 2008), explored the relationships and dependency (Getz and Andersson, 2010) and the resource dependency of festivals (Andersson and Getz., 2007). Later research by Kozak (2013) identified the most important sources of income for festival as public funds, private funds, sponsoring and
income from audience. In this research, the five stakeholders described in the research of Getz et al.(2007), namely local government, government, paying customers, minor sponsors and major sponsors, will function as the main stakeholders due to their high importance when it comes to resources, which is the main dependency under investigation in this research.
Noordman (2013) attempted to establish a relationship between dependency on the previously mentioned stakeholders of Getz et al. (2007) and behavioral innovation and process
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The lack of research on stakeholders and stakeholder dependency in the festival industry and the outcomes of Noordman (2014) his research urge for additional research on this matter in order to establish the role stakeholder dependency related to innovation and performance of festivals.
2.6 Conclusion Literature Review
The literature discussed above provides a strong theoretical base for the hypotheses presented in the next section of this research. This literature review will be concluded by an overview of all the relevant definitions of concepts utilized in this research. Table 1 provides an overview of relevant concepts and the definitions used in this specific research.
Concepts Definitions
Cultural industry ‘those activities which deal primarily in symbolic goods – goods whose primary economic value is derived from their cultural value.’ O’Connor (2011)
Experience ‘when a customer has any sensation or acquires knowledge from some level of interaction with the context created by a service provider’ Pullman and Gross (2004)
Music festival ‘A music festival is a recurring, usually open to the public musical event under one
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Stakeholders ‘any group or individual who can affect of is affected by the achievement of the firm’s objectives.’ Freeman (1984)
Innovative orientation ‘innovative orientation includes the intention to be innovative, the infrastructure to support innovation, operational level behaviors necessary to influence a market/value orientation and the environment to support the implementation of innovation’
Dobni (2010)
Service innovation ‘A service innovation is a new service
experience or service solution that consists of one of the following dimensions: new service concept, new customer interaction, new value system/business partners, new revenue model, new organizational or technological service delivery system
(Den Hertog et al., 2010)
Stakeholder dependency ‘an inter-organizational relationship where one party has a high need and another has control over the resources’
Pfeffer and Salancik (1978)
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3. Research Model and Hypotheses
Utilizing the information presented previously regarding the distinctive characteristics of the festival industry and music festivals in general, a framework will be developed depicting the expected relationships between the two independent variables, innovative orientation and service innovation capability, and the dependent variable market performance. Furthermore, the expected moderating effect of stakeholder dependency will be depicted in this research model. In the next section of the report the variables in the research model will be defined and the expected relationships will be grounded theoretically which will lead to the hypotheses for this research. The conceptual model utilized in this research will be the following.
Figure 1. Conceptual Model
The expected relationships can be drawn from the presented conceptual model of this
research. Service innovation capability and innovative orientation are hypothesized to have a positive relationship with the performance of festivals. Furthermore, these relationships are hypothesized to be moderated by the dependency on a variety of stakeholders. Now each variable will be discussed and the arguments that lead to the expected relationships will be presented.
3.1 Innovative Orientation
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Important characteristics of the festival industry that could influence the relationship between innovative orientation and performance are the uniqueness, flexibility (Getz, 1989; 1991), entertainment opportunities, heightened involvement, fantasy fulfillment (Gursoy, 2006). Furthermore, festivals create an experience for a customer (Kozak, 2013) in which the variety is highly important (Pegg and Patterson, 2010). All these characteristics are closely linked to innovation and provide opportunities for festivals mangers to increase the performance of their festival by innovating. Besides this, Boone (2001) states that the incentives to innovate increase when competition intensifies. Considering that the competition in the Dutch music festival industry is intensifying (Leenders, 2005) provides another argument that an innovative orientation would increase the performance of music festivals. The extensive literature on the subject of innovative orientation and the specific festival industry characteristics provide a strong base for the hypothesized positive relationship between innovative orientation and performance in the festival industry.
H1: The innovative orientation of an organization is positively related to the market performance of music festivals.
3.2 Service Innovation Capability
Where innovation orientation functions as an enabler of innovation within a company, the service innovation capability is concerned with effectiveness of the actual innovation process within a company. However, when it comes to the relationship between these respective variables the arguments in favor of a positive relationship are mostly similar. This is due to the fact that both of these variables lead to the same outcome, namely innovation
performance. Therefore, considering previous research that confirms the positive effect of service innovation on performance (Ngo & Cass, 2012) and the previously mentioned industry characteristics that create opportunities for innovation to strongly enhance performance, the expected relationship between service innovation capability and performance is as following.
H2: The service innovation capability of an organization is positively related to the market performance of music festivals.
3.3 Stakeholder Dependency
Stakeholder dependency is the moderating variable of this research. The focus is mainly on financial dependency of festivals on five separate stakeholders: local authorities, government grants, minor sponsors, major sponsors and paying customers. As stated in the expected relationships between innovative orientation and service innovation capability, innovation is highly important in the festival industry and strongly influences the consumers perception of a festival. Furthermore, innovation is also important to major and minor sponsors, who sponsor festivals in order to promote the company’s brand or image (Daellenbach et al., 2006).
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The essence of this reasoning is the distinction between resources coming from consumers directly, from consumers indirectly in the case of sponsoring, or from authorities who have alternating motives from economic motives. This leads to the following set of hypotheses. H3a: The relationship between innovative orientation and market performance is positively influenced by dependency on minor sponsors.
H3b: The relationship between innovative orientation and market performance is positively influenced by dependency on major sponsors.
H3c: The relationship between innovative orientation and market performance is negatively influenced by dependency on local authorities.
H3d: The relationship between innovative orientation and market performance is negatively influenced by dependency on government grants.
H3e: The relationship between innovative orientation and market performance is positively influenced by dependency on paying customers
H4a:The relationship between service innovation capability and market performance is positively influenced by dependency on minor sponsors.
H4b:The relationship between service innovation capability and market performance is positively influenced by dependency on major sponsors.
H4c:The relationship between service innovation capability and market performance is negatively influenced by dependency on local authorities.
H4d: The relationship between service innovation capability and market performance is negatively influenced by dependency on government grants.
H4e: The relationship between service innovation capability and market performance is positively influenced by dependency on paying customers.
3.4 Performance
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4. Methodology 4.1 Research Strategy
The empirical objective of this research is to measure the connection between the independent variables innovative orientation and service innovation capability and the dependent variable performance, with the moderating effect of stakeholder dependency in the Dutch music festival industry. As mentioned previously, the research question guiding this research is: what is the influence of service innovation capability and innovative orientation on market performance in the music festival industry, and what is the influence of stakeholder
dependency on these respective relationships? Because of the large body of research available regarding the topics of innovation and stakeholder dependency, a quantitative approach is selected in order to be able to statistically test the relationships presented in the research question. Qualitative research facilitates the interpretation of large amounts of data (Patton, 1980) which makes it the most suitable research method for this research.
4.2 Data Collection
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4.3 Development of the Questionnaire
As mentioned previously the questionnaire was developed in cooperation with three fellow students researching the same overarching topic: the Dutch music festival industry. The questionnaire consists of three parts. The first part of the questionnaire concerns general information about the festival such as the location of the festival. In the second part of the questionnaire questions were asked regarding the control variables utilized in this research, and regarding the dependent variable performance. Lastly, every student implemented their own third part where questions concerning their respective independent and/or moderating variables were asked. For this specific research, these were questions regarding innovative orientation, service innovation capability and stakeholder dependency of the respective respondents.
4.4 Sample
In order to make a selection of festivals in the Dutch music festival industry that are suitable for this research several criteria had to be assessed per festival before they could be included in the total sample. Firstly, in order to be in line with the provided definition of a music festival, there should be musical performances by artists with additional activities taking place to distinguish it from a concert. Furthermore, the duration of the festival should be at least one day. Lastly, in order for organizers/managers to be able to assess their own innovativeness and stakeholder dependency, the festival had to exists for more than one edition. All the festivals in the list met these criteria. Within the festivals that were selected a high variability between the festivals existed when it came to factors such as age, audience scope, location and duration in order to provide an encompassing sample. A total of 560 questionnaires were distributed.
4.5 Pilot study
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Table two provides an overview of the respective interviews, where and with who they were held and what the result of the interview was.
Festival Interview Procedure
Interviewee Result
Paradigm Face to face interview in Paradigm office
Piter Tromp (CEO)
Provided useful insights in the festival industry and
alterations to the survey text Welcome to the village Feedback on the
online survey through e-mail Bianca Pander (Business leader) Provided advice regarding mandatory answering of
questions and the business types to be included
Flinke Pinke Face to face interview in Flinke Pinke office
Sikko Cazemier (Festival
Organizer)
First check of the interview text provided alterations, and gained insights into the procedure of organizing a festival and staying profitable Noorderzon Interview through
telephone after having sent the survey
Mark Hospes (General Coordinator)
Insights into a festival that organizers more than music and stated that some questions were too general to answer
Table 2. Overview of pilot study interviews results 4.6 Independent Variables
In order to come up with relevant variables for this research an extensive literature review was held which lead to the independent variables presented previously in this research.
Innovative orientation was assessed using Hurley and Hult’s (1998) five-item scale. Managers/organizers of festivals were asked to rate the innovative orientation of their respective festival on a 7-point scale ranging from 1, completely disagree, to 7, completely agree.
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4.7 Moderating Variable
The moderating variable utilized in this research is stakeholder dependency. This variable is measured using Andersson and Getz’s (2008) five-item scale which assesses the dependence of the respective festivals on five separate stakeholders. Managers/organizers of festivals were asked to rate their dependence on each respective stakeholder on a 7-point scale, ranging from 1, You can do without them, to 7, You have no alternative then to work with them. These measurement items will each separately represent a moderating variable which will be tested for the relationships between the independent variables, innovative orientation and service innovation capability, and the dependent variable performance.
4.8 Measurement of Independent and Moderating Variables
The measurement items utilized to measure the independent variables and the moderating variable are depicted in table three and four.
Innovative Orientation Answering Possibilities Technical Innovation, based on research results, is
readily accepted.
7 point scale: 1 = completely disagree, 7 = completely agree
Management actively seeks new innovative ideas. 7 point scale: 1 = completely disagree, 7 = completely agree
Innovation is readily accepted in program/project management.
7 point scale: 1 = completely disagree, 7 = completely agree
People are penalized for new ideas that don’t work. (R)
7 point scale: 1 = completely disagree, 7 = completely agree
Innovation is perceived as too risky and is being resisted. (R)
7 point scale: 1 = completely disagree, 7 = completely agree
Service Innovation Capability
Innovation is readily accepted in program/project management.
7 point scale: 1 = ompletely disagree, 7 = completely agree
Our firm’s top management gives special emphasis to service innovation.
7 point scale: 1 = completely disagree, 7 = completely agree
Our firm constantly seeks new ways to better our customer service.
7 point scale: 1 = completely disagree, 7 = completely agree
Our firm is able to change/modify our current service approaches to meet special requirements from customers
7 point scale: 1 = completely disagree, 7 = completely agree
Compared to our competition, our firm is able to come up with new service offerings,
7 point scale: 1 = completely disagree, 7 = completely agree
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Stakeholder Dependence Answering Possibilities
On our local authority 7 point scale: 1 = you can do without them, 7 = you have no alternative but to work with them
On government agencies that give us grants 7 point scale: 1 = you can do without them, 7 = you have no alternative but to work with them
On our major corporate sponsors 7 point scale: 1 = you can do without them, 7 = you have no alternative but to work with them
On our small corporate sponsors 7 point scale: 1 = you can do without them, 7 = you have no alternative but to work with them
On paying customers 7 point scale: 1 = you can do without them, 7 = you have no alternative but to work with them
Table 4. Measurement items for moderating variable 4.9 Dependent Variable
The dependent variable utilized in this research is the performance of the music festivals. Objectively assessing performance in this industry is somewhat of a difficult matter due to the differing objectives of festivals. The measurement utilized is a ratio of the actual number of visitors during the most recent edition of a festival and the maximum number of visitors possible during the festival. By utilizing this performance measure, the goal differences between for-profit and not-for-profit festivals is being taken into account. Furthermore, this performance measure is backed by Biaett (2007) who states that customer attendance at a festival can be seen as an important measure of a festival’s success or failure. The
measurement items for the dependent variable performance are depicted in table five. Performance
What is the maximum number of visitors?
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4.10 Control Variables
The control variables utilized in this research will be the age of the festival, the size of the festival and the aim of the festival (profit or non-profit).These variables all have a possible influence on the results of this research and therefore should be controlled for in order to do probable research. The selection of these control variables was based on previous research in the festival industry (Leenders et al., 2005; Noordman, 2014; Andersson and Getz, 2008; Rolfe, 1992). For the age of the festival, logic explains that older festivals have had the chance to gain more experience regarding innovation which entails that age should be controlled for. Besides this, Andersson and Getz (2008) state that younger events are often more flexible, and could find efficient and effective new ways of organizing an event. Age will be measured by the number of editions a festival has had.Furthermore, Noordman (2014) states that size is strongly related to the innovativeness of an event due to its influence on success and Andersson and Getz (2008) highlight the threat for smaller events of increasing density in population and their weaker ties to stakeholders, which are both also possibly related to innovation. The second control variable, size, will be measured by the amount of employees involved in organizing the festival, and the budget of a festival (Jaeger and Mykletun, 2009). Lastly, this research controls for the aim for profit of an event. Andersson and Getz (2008) state that for-profit festivals must be more customer and marketing oriented than not-for-profit events, which as (Noordman 2014) describes leads to a stronger focus on innovation in for-profit festivals than in not-for-profit festivals. Table six shows the
measurement items for the control variables.
Age How many editions were held of your
festival?
Size What is the budget of your festival? How many people are working for the festival over the year? (Volunteers and employees combined)
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Variables Author Definition Operationalization Type Scale Innovative Orientation Hurley and Hult (1998) innovative orientation includes the intention to be innovative, the infrastructure to support innovation, operational level behaviors necessary to influence a market/value orientation and the environment to support the implementation of innovation An innovative orientation positively influences performance Independent Ordinal Service Innovation Capability Grawe et al., (2009) A service innovation is a new service experience or service solution that consists of one of the following dimensions: new service concept, new customer interaction, new value system/business partners, new revenue model, new organizational or technological service delivery system Service innovation capability positively influences performance Independent Ordinal Dependence on Government Getz, Anders son and Larson (2007) Dependence on local government that play a central role in making it possible to arrange the festival, among other
things because they issue
the necessary permits.
26 Dependence on Sponsors Getz, Anders son and Larson (2007) Dependence on sponsors that contribute various kinds of resources in
exchange for using the
festival as a marketing tool.
Festivals that show a dependence on sponsors positively moderate the relationship between innovation and performance Moderator Ordinal Dependence on customer attendance Getz, Anders son and Larson (2007) Dependence on customers that are the most important
stakeholder, if the festival is going to
have any chance of surviving in the long term.
Festivals that show a dependence on customer attendance positively moderate the relationship between innovation and performance Moderator Ordinal Size Jaeger and Myklet un (2009)
Indicators for size are event’s budget and their potential for staffing
Festivals with higher budget and larger staff are more innovative than smaller festivals Control Nominal Age Leende rs et al., (2005) Number of editions of a festival
Older festivals have more experience with innovation Control Nominal Aim for profit Getz (2005) Commercially motivated events, which are events constructed so that the organizers
can make a profit.
Commercial events have more incentive to innovate
Control Ordinal
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4.11 Data Analysis
The data analysis which is performed after the data collection procedure is done by utilizing the statistical program SPSS 20. In order to retrieve evidence for the measures discriminant validity, the items for the measures of service innovation capability and innovative orientation were submitted to a principal components analysis with oblique rotation. This is in order to ensure that the independent variables measure the same construct. Besides this, descriptive statistics for the sample utilized in this study are presented (means, minimum and maximum, standard deviation) in order to gain a better understanding of the sample and how
representative it is for the whole festival industry. Furthermore, a reliability analysis is done in order to assess the reliability of the constructs whose influence on the dependent variable performance are tested. Additionally, the hypotheses were tested by conducting a hierarchical multiple regression analysis to detect independent and interactive effects of innovative
orientation and service innovation capability on performance. To facilitate interpretation and minimize problems of multicollinearity, standardized independent predictors were used. This analysis is done to expose the relationships between the proposed variables.
4.12 Factor Analysis
In order to assess whether measurement items utilized for measuring the independent variables innovative orientation and service innovation capability indeed measure the same construct, a principal component analysis was conducted and a varimax rotation according to the Kaiser method (Kaiser, 1958). Table eight and nine, presented below, illustrate that most of the factors indeed measure the same construct, which is a desirable result. However, for the independent variable innovative orientation, the rotated component matrix suggests that measurement item four measures a different component then the other four measurement items of this variable. The reliability analysis and the correlation matrix will help further investigate whether this measurement item should be excluded from the analysis in order to have the best results. Besides this, measurement item five has a similar score for component one as for component two, however this research will follow Hurley and Hult (1998) and include this measurement item in this research. The outcome of this factor analysis allows for a regression analysis with the five measurement items proposed by Grawe et al. (2009) for service innovation capability. However, additional statistical tests have to show whether the five measurement items proposed by Hurley and Hult (1998) to measure innovative
orientation will be used or if measurement item four will be deleted in order to improve the results. Component 1 Component 2 Innovorient_1 .710 .001 Innovorient_2 .776 -.109 Innovorient_3 .681 .373 Innovorient_4 -.122 .897 Innovorient_5 .557 .595
28 Component 1 ServInnovCapab_1 .820 ServInnovCapab_2 .771 ServInnovCapab_3 .723 ServInnovCapab_4 .693 ServInnovCapab_5 .619
Table 9. Component matrix service innovation capability
4.13 Quality Criteria
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5. Results
In this section the results of the statistical analysis will be presented. Firstly, the response rate for the data collection will be calculated and elaborated on. Then, the descriptive statistics of the measurement model will be presented in order to provide an insight in the dataset utilized for the statistical analysis. Additionally, following from the results of the previously presented factor analysis, the reliability will be discussed by presenting the Cronbach’s alpha statistics for the variables. Besides that, a correlation matrix will be presented to measure how well the variables are related. Lastly, all the previously mentioned statistics will be taken into account and a regression analysis will be performed in order to test the hypotheses presented earlier in this report.
5.1 Respondents
During the data collection procedure a total of 560 questionnaires were distributed to managers or organizers of Dutch music festivals. After several rounds of e-mail reminders and telephone calls, a total of 99 questionnaires were able to be utilized for the statistical analysis of this research. This entails a response rate of 19.18%. There are several reasons that explain this low response rate. Firstly, there are several festival organizers that organize more than one festival and filled in the questionnaire for only one of their festivals. Furthermore, the contacting took place in the period just before the festival season, which is one of the busiest periods for festival organizers, which possibly reduced the response rate due to time constraints. Furthermore, besides providing the insights from the results of the researches there were no rewards for filling in the questionnaire. Lastly, contacting through social media might entail that the questionnaire did not reach the intended receiver and was thus not filled in.
5.2 Descriptive Statistics
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Table ten provides an overview of the descriptive statistics of the sample tested in this research.
Item Outcomes minimum-maximum
Mean Standard deviation
Respondents 99
Maximum Visitors 100-500,000 13691.01 54029.13
Age of the festival 2-150 14 17.72
Employees total 2-2000 128.05 240.34 Commercial yes/no 1= yes 2 = no 20.2% yes 79.8% no 1,8 .40 Budget 750-165000 138864.12 263176
Table 10. Descriptive statistics 5.3 Reliability Test
In order to assess the reliability of the constructs that measure the independent variables innovative orientation and service innovation capability a reliability analysis was conducted in which the Cronbach’s alpha was calculated for both independent variables. Nunnaly et al., (1967) argue that 0.6 is a minimal threshold for a construct to be reliable. Even though, as can be seen in table 11, the Cronbach’s alpha is just 0.01 below this threshold, table 12 suggests that the reliability could be strongly improved if measurement item four is deleted. This result is in line with the outcome of the factor analysis presented earlier and therefore provides another argument for the deletion of measurement item four during the regression analysis. For service innovation capability the Cronbach’s alpha is .778 which is well above the acceptable threshold for reliability, as can be seen in table 13.
Cronbach's Alpha
N of Items ,599 5
31 Item-Total Statistics Scale Mean if Item Deleted Scale Variance if Item Deleted Corrected Item-Total Correlation Cronbach's Alpha if Item Deleted InnovOrient _1 23,4141 6,837 ,361 ,548 InnovOrient _2 22,8990 8,051 ,346 ,550 InnovOrient _3 22,9798 7,551 ,509 ,474 InnovOrient _4 22,9899 8,745 ,134 ,664 InnovOrient _5 22,7071 7,495 ,521 ,468
Table 12. Cronbach’s Alpha innovative orientation if item deleted
Cronbach's Alpha
N of Items ,778 5
Table 13. Cronbach’s Alpha service innovation capability 5.4 Correlations
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correlate significantly to the independent or dependent variables. The two independent variables, innovative orientation and service innovation capability, do significantly correlate. The latter independent variable is the only variable in the research that significantly correlates to the dependent variable performance.
Correlation matrix measurement items innovative orientation
1 2 3 4 5 1. InnovOrient_1 1 2. InnovOrient_2 .339** 1 3. InnovOrient_3 .371** .306** 1 4. InnovOrient_4 .048 -.059 .138 1 5. InnovOrient_5 .226* .351** .489** .287** 1 **p < 0,01 *p < 0,05
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Correlations matrix all variables
1 2 3 4 5 6 7 8 9 10 12 11 1.Age of the festival 1
2.Employees total .232* 1
3. Budget .252* .550** 1 4.Aimfor profit -.077 -.255* -.074 1
5.Innovative orientation -.085 .024 -.179 -.087 1
6.Service innovation capability -.164 .046 -.160 -.197 .621** 1
7.Dependency on local government -.076 .184 .055 -.020 -.064 -.046 1
8.Dependency on government -.119 -.111 -.123 .188 .119 -.008 .378** 1
9. Dependency on paying customers -.061 .160 -.026 -.186 -.029 -.052 .054 -.146 1
10.Dependency on minor sponsors -.024 .054 .047 .268** .082 .140 .068 .093 -.113 1
11.Dependency on major sponsors -.036 .066 .086. .241* .092 .052 .034 .137 -.003 .765** 1
12.Performance .068 .158 .061 -.266 .000 .244* -.090 -.056 -.025 -.137 -.085 1 **p < 0,01 *p < 0,05
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5.5 Regression Analysis
In this section of the report the hypotheses presented in the research section will be statistically tested. Firstly, the expected positive relationship between the independent variables innovative orientation and service innovation capability and the dependent variable performance will be tested. Besides this, these moderating effect of the dependency on the five most important stakeholders on these relationships will be tested. This is done utilizing hierarchical regression method. A few remarks have to be made concerning the procedure of the regression analysis. Firstly, in order to facilitate interpretation and minimize problems of multicollinearity, standardized variables were utilized during the regression analysis.
Furthermore, it is important to note that for the independent variable innovative orientation, measurement item four was deleted following from the results of the factor analysis,
reliability test and the correlation matrix. In order to assess whether the multicollinearity between the independent variables would be problematic for this research a various inflation factor test was conducted for the regression model presented below. The two independent variables innovative orientation and service innovation capability had respective VIF scores of 1.902 and 1.945, as is depicted in table 16. These levels are well under the acceptable threshold of 10 (O’brien, 2007), which entails that none of the independent variables had to be deleted. Lastly it should be remarked that none of the other variables in the research model showed problems with the collinearity worth noting. Table 17 provides an overview of the respective models that came out of the regression analyses that were performed in order to test the hypotheses. Model one, two and three represent the individually ran models of
respectively the control variables, innovative orientation and service innovation capability. For the third and the fourth model, the independent variables were separately tested together with the control variables. The sixth model tested both the independent variables together with the control variables. Finally, model seven is the final model of this research which includes all control variables, independent variables and interaction terms. The results of the regression analysis as illustrated in table 17 provide interesting as well as surprising results. The relationship between service innovation capability and performance is the only significant relationship in the analysis, with .076 in the final model at <.01 significance. The other
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Tolerance VIF
Innovative orientation .526 1.902
Service innovation capability .514 1.945
Table 16. Collinearity statistics independent variables
Results of Regression Analyses for Festival Performance as Dependent Variable
Variables Model 1 Model 2 Model 3 Model 4 Model 5 Model 6 Model 7 Age of the festival .000 .000 -.001 .000 .000 Employees Total .000 .000 .000 .000 .000 Budget of the festival .001 .001 .001 .001 -.001 Aim for profit -.145 -.146 -.120 -.120 -.128 Innovative orientation .001 .012 -.041 -.039 Service innovation capability .049* .055* .81** .076* InnovOrientxLocGov .076 InnovOrientxGov -.018 InnovOrientxPayCust -.010 InnovOrientxMinSpons .029 InnovOrientxMajSpons -.014 ServInnovCapabxLocGov -.032 ServInnovCapabxGov .032 ServInnovCapabxPayCust -.010 ServInnovCapabxMinSpons .024 ServInnovCapabxMajSpons .034 R2 .080 .000 .059 .083 .143 .163 .220 Adjusted R2 .33 -.010 .050 .024 .088 .097 .034 N 99 99 99 99 99 99 99 a
Standardized regression coefficients are re-ported **p < 0,01 *p < 0,05
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Hypothesis Accepted / Rejected
H1: Positive effect of innovative orientation on performance
Rejected
H2: Positive effect of service innovation capability on performance
Accepted H3a: Positive moderating effect of
dependency on minor sponsors on H1
Rejected H3b: Positive moderating effect of
dependency on major sponsors on H1
Rejected H3c: Negative moderating effect of
dependency on local government on H1
Rejected H3d: Negative moderating effect of
dependency on government on H1
Rejected H3e: Positive moderating effect of
dependency on paying customers on H1
Rejected
H4a: Positive moderating effect of dependency on minor sponsors on H1
Rejected H4b: Positive moderating effect of
dependency on major sponsors on H2
Rejected H4c: Negative moderating effect of
dependency on local government on H2
Rejected H4d: Negative moderating effect of
dependency on government on H2
Rejected H4e: Positive moderating effect of
dependency on paying customers on H2
Rejected
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6. Discussion
In this section of the report the previously presented results will be interpreted in order to give meaning to the statistical analysis. Interpreting the results correctly and contemplating the possible reasons for the results facilitates the answering of the research question during the final concluding chapter of this research. The discussion section will be split up into three parts. First, results regarding the control variables aim for profit, age of the festival and size of the festival (budget and employees) will be discussed and important or surprising results will be highlighted. Additionally the two independent variables, innovative orientation and service innovation capability, and their influence on performance will be assessed by interpreting the results of the regression analysis. The results will not only be interpreted but a possible explanation will be provided for why the results regarding innovation are the way they are. Lastly, the moderating influence of stakeholder dependency on the previously mentioned relationships will be discussed.
6.1 Control Variables
The control variables utilized in this research are age of the festival, size of the festival
(budget and employees) and the aim for profit of a festival. The regression analysis shows that none of these moderators have a significant positive influence on performance. This entails that the age, size or aim for profit of a festival does not significantly improve performance in the Dutch music festival industry. These results are somewhat surprising considering that an older festival has more experience in organizing a festival and logically could be able to use this experience to their advantage in order to perform better. Another surprising result is that the aim for profit of a festival is not significantly related to the performance of a festival, which means that whether a festival has an aim for profit or not does not influence the performance of a festival, which can be seen as very surprising. A possible explanation for these results is the performance measure used in this research, namely the ratio between the amount of visitors in the most recent edition and the maximum amount of visitors. As Kruijver (2009) stated in his research, the Netherlands has developed into one of the leading festival markets in Europe when it comes to density. This suggests that the festivals in the Dutch festival industry have a relatively high amount of visitors all over, and the results of the control variables on performance could be different when a measure such as net profit would be used. Furthermore, it has to be noted that ticket prices are not taken into account in this research. This entails that the performance of a sold out festival with free entrance, might be lower than the performance of a festival which has sold 90 per cent of their tickets for a considerable entrance fee. Measuring the influence of these control variables on performance was not the goal of this research, however it is important to take these results into
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6.2 Innovation and Performance
Innovation in the festival industry is a topic which has already gained some research attention over the years (Schmetjen, 2012; Getz, 2002; Carlsen et al., 2010; Larsen, 2009; Lunshu 2002). However, the relationship between innovation and performance in the festival industry was yet to be empirically established, which was one of the goals of this research. The results of the regression analysis show that service innovation capability has a significant positive relationship with performance in the Dutch music festival industry. Besides this, the results show that innovative orientation does not have a significant positive relationship with performance.
The establishment of a positive relationship between service innovation capability is an essential finding which confirms the thought that, even in a distinctive industry such as the festival industry, the capability to innovate your service offering as a festival can positively influence your performance. This is essential due to the stated need for empirical evidence for the effect of service innovation capability on performance (Grawe et al., 2009) and the
distinctiveness of the industry adds to the importance of these results. Even though research suggests that the impact of innovation on performance is context dependent to a large extent (Rosenbusch et al., 2011), the findings concerning service innovation capability are in line with previous innovation research in different industries, in which this positive relationship was already established (Jansen et al., 2006; Verhees and Meulenberg, 2004) and consistent with research regarding the relationship between innovation and performance in a variety of service firms (Elche and Gonzalez, 2008). Furthermore, in the research of Noordman (2014) it was already stated that innovation plays an important part in the success of an event, which is confirmed by this result. The changing market environment within the Dutch festival industry possibly add to the importance of innovation as well. As Leenders et al. (2005) stated the market environment for festivals is undergoing changes and considering the research of Grawe et al. (2009) who stated that when market environments change, customer value components are likely to change, and service innovation are a good strategy to anticipate future customer needs and offer superior value to the customers, innovation might very well have gained importance over the years. All in all, even though the impact of innovation on performance is contingent and empirical evidence of the impact of service innovation on performance was lacking, a positive relationship has been established between service
innovation capability and performance in the Dutch music festival industry. The implications of this result will be discussed in the concluding section of this research.
