Master Thesis for MSc IB&M

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Master Thesis for MSc IB&M

Technology Orientation and Firm Performance: Content Analysis of

Annual Reports of DAX Companies

University of Groningen

Faculty of Economics and Business

Supervisor

Dr. Christopher Schlägel

Second Assessor

Prof. Dr. Tilo Halaszovich

Submitted by

Edgar Findling

S3803279

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Abstract

Purpose: The current state of research on content analysis developed over the last years. A new

approach using computer-aided text analysis (CATA) offers several benefits over human coding. These benefits are for example increased validity compared to human coding because of the non-existing possible bias. Further, CATA is simply cheaper and much faster than human coding. Strategic orientations and their importance and impact are in the focus of management literature for a long time. Combing these two aspects and the fact that there is no dictionary for technology orientation yet, offers the opportunity to cover the following: (1) develop a dictionary for technology orientation, (2) identify the impact of technology orientation on firm performance, and (3) analyze the mediation of technology orientation and entrepreneurial orientation on firm performance.

Theory development: Firstly, the approach of CATA and its benefits are considered and

analyzed. Secondly, technology orientation and previous findings are described and set into relation with past findings about entrepreneurial orientation and its impact. Hypotheses are formulated that propose a positive influence of technology orientation on firm performance and a positive mediation effect of technology orientation and entrepreneurial orientation on firm performance.

Methodology: In order to reveal the outcomes, a data set of 89 DAX companies and in total

789 annual reports are analyzed by CATA. Afterwards, regression analyses are testing the significance and unique and common effects of technology orientation and entrepreneurial orientation. A commonality analysis is conducted.

Results: Technology orientation has no significant influence on firm performance but the

previously findings on the significance of entrepreneurial orientation on firm performance are proved. Further, technology orientation has just a small influence on entrepreneurial orientation and its impact on firm performance.

Discussion: Practical implications suggest the importance of support of management and that

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List of Tables

Table 1: Overview of technology orientation in the past ... 8

Table 2: Dictionary for technology orientation ... 21

Table 3: Variable descriptions ... 24

Table 4: Regression results ... 26

Table 5: Descriptive statistics and pairwise correlations ... 27

Table 6: Regression models Tobin's Q ... 28

Table 7: Regression model TO and EO ... 29

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List of Figures

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1. Introduction

In the last decades, technology developed rapidly and got more and more important for companies. Having a higher focus and being close to new technological conditions and developments led to more recognition in management academics (Al-Ansari et al., 2013). Innovation is highly related to technology and represents a key success factor for companies as technology leads to new products and markets and to improvement in processes (Chidamber and Kon, 1994). While the importance of technology increased, the research on different strategic orientations, such as technology orientation and entrepreneurial orientation, and firm performance went up as well (Jeong et al., 2006). This research does not have clear results and offers room for further investigation of strategic orientations in general and technology orientation in particular (Spanjol et al., 2012).

Technology orientation does not just take new technologies into account, it also seeks and leads to new products and new processes. Hence, technology orientation impacts firm performance (Martinez-Roman et al., 2011). Gatignon and Xuereb (1997) say about technology-oriented companies that they “can use its technical knowledge to build new technical solutions to answer and meet new needs of users”. Moreover, these companies have the ability and the will to acquire new technologies and use them in the development of new products.

So far, a positive effect of technology orientation on firm performance got examined (Gatignon and Xuereb, 1997). This observation is due to the ability of satisfying customer needs faster by adapting new processes and launching new products (Hamel and Prahalad, 1994). However, not much focus has yet been given to technology orientation and its influence on firm performance in the academic field (Voss and Voss, 2000).

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approach (Short et al., 2010). Facing the lack of dictionaries for some further strategic orientations, this master thesis focuses on the technology orientation in combination with the entrepreneurial orientation. The described gab offers the opportunity of investigating on the impact of technology as well as entrepreneurial orientation on performance of firms.

The approach of computer-aided text analysis offers multiple advantages compared to surveys, which are typically and commonly used to examine difficult-to-measure constructs (Belderbos et al., 2017). In contrast, the methodology of CATA provides the opportunity to analyze for instance the focus of firms and managers. By using CATA, it is possible to analyze huge data samples rapidly providing high reliability of the results (Short et al., 2010). The underlying master thesis contributes to further research on the approach of computer-aided text analysis as a tool for academic work. Further, this thesis investigates on the mediation of technology orientation and entrepreneurial orientation – that are based on CATA – and their impact on the performance of firms. Additionally, due to non-existence, the development of an inductive dictionary for technology orientation completes this work. The observation of technology orientation and entrepreneurial orientation is exciting in the field of strategic orientations and their context in terms of the interplay of newness, riskiness and of the possible advantages these bring together.

In order to be able to investigate on the impact of technology orientation and entrepreneurial orientation on the performance of firms, the content that has been analyzed via CATA for this master thesis consists of annual reports of 89 corporates listed on the German public stock market from 2009 until 2017. Corporates from all industries are represented in the data sample, with the exception of insurance companies, banks and some service providers that have no focus on technologies. The analyzation of shareholder letters has not been considered due to the difficult time frame following the world economic crisis in 2008/2009. Shareholder letters around 2009 were mainly used for the purpose to explain financial results and figures. Whereas, the entire annual report contains numerous actual activities and plans, which indicate the company’s strategic focus as well as orientation. This paper presents one option on how to create and develop a new dictionary for content analysis. Further, an inductive approach, close to the body of interest, has been used as it is very close to the used wording in annual reports.

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and common effects between the mediation of technology orientation and entrepreneurial orientation.

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2. Literature Review and Theoretical Background

2.1 Technology Orientation

The technology orientation refers to the willingness of a firm to launch and implement innovative technologies or products (Gatignon and Xuereb 1997). These firms dedicate a large part of their resources to the purpose of getting access to technologies, which can generate advantages while the possible benefits are strongly dependent on the industry. That is the case due to the different complexity levels within the adaptability along these processes and developments (Gao et al., 2007).

Furthermore, the technology orientation assumes that new innovations, technological solutions, products, services or production processes contribute significantly to customer benefits and the long-term success of companies (Gatignon and Xuereb, 1997). Therefore, product distinction from competition or financial advantages in production costs can be obtained through the creation and adoption of new technologies (Gatignon and Xuereb 1997). In times of disruptive business transformations, companies can only survive if they focus on investing in new technologies instead of creating products based on today's customer demands (Christensen and Bower 1996). Facing past and current researches, there are no articles that focus only on the technology-entrepreneurial orientation. There have been several studies on other combinations but no one has ever observed the connection and mediation between technology and entrepreneurial orientation yet (Hakala, 2011).

A strong focus on research and development is a characteristic of technology-oriented companies as well as their willingness and openness to new technological trends (Slater et al., 2007; Zhou et al. 2005). These companies force innovations on a moderate level (Quintana-Garcia and Benavides-Velasco, 2008).

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Hence, a positive influence of technology orientation on firm performance has been discovered (Gatignon and Xuereb, 1997).

The following table (Table 1) illustrates a few studies on technology orientation and how it got defined, measured and which are the main outcomes.

Table 1: Overview of technology orientation in the past

Study Definition Measure Main outcomes

Gatignon and Xuereb, 1997

Technology-oriented companies have the ability and will to acquire new technologies and use it in the development of new products. The company can use its technical knowledge to build new technical solutions to answer and meet new needs of users.

Surveys with

multiple-item scale, research and development expenditures

Demand uncertainty has a positive effect on firm

performance of

technology-oriented companies.

Hortinha et al., 2011 Technology-oriented companies are strongly R&D driven and sophisticated users of new technologies to develop new products. They are proactive in acquiring new technologies. Surveys with Likert-type scales from 1 to 7 (strongly agrees to strongly disagree) Strategic orientations do not have a direct influence on firm performance but they are necessary in combinations to improve firm performance. Al-Ansari et al., 2013

Technologically-oriented firms devote their resources to

acquiring new and advanced technologies and

developing new processes, products and services. Surveys with a scale from 1 to 7, research and development expenditures Technology orientation has an influence on firm performance because it has an effect on

behaviors and

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Cooper, 1985 degree to which the firm utilizes sophisticated and state-of-the-art development

technologies, is heavily R&D oriented, and develops high-technology, innovative,

technologically complex and high-risk products.

Percentage of company sales due to new products, success and failure rates of developed products and zero-to-ten scale for survey answers.

Technological

sophistication is important and has an influence on firm performance.

Gilaninia et al., 2013

Level that companies emphasize on product development by using technologies.

Questionnaire Technology orientation has a direct impact on firm performance.

Working definition:

The underlying thesis defines technology orientation as the ability and will to acquire and

access new technologies. Further, it is categorized by adapting and developing new processes and new products and being proactively involved into acquisition access of new technologies.

In literature, the strategic orientation is called technological or technology orientation. Here, the term technology orientation is used.

Examples for a New Process and New Product

The two following paragraphs describe examples of a new process and a new product related to technology orientation. The example for a new technological process is 3D printing and for a new technological product it is the electric car.

3D Printing

The three-dimensional printing (3D printing) is considered to be a new industrial revolution and is compared to customization and other manufacturing processes. With 3D printing, smaller customized quantities can be produced at low prices. It is increasingly used for prototyping and can be found across many different industries (Berman, 2012).

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2009). The use of 3D printing is simple and fast as you simply upload a file and then print or rather produce the appropriate shape. It is also referred to as "flexible factory in a box" (Alpern, 2010).

3D printing promotes outsourcing as well as sharing of designs, allowing them to be produced quickly and easily. Further, the process of 3D printing gives the opportunity to obtain easy testing of various products and therefore receive feedback from users (Berman, 2012). At the same time, 3D printing does not offer the usual advantages of economies to scale in mass production, as each manufactured item in the 3D printing process costs the same amount (Thilmany, 2009). The 3D printing as a new and revolutionary technology also offers the flexibility to produce spare parts quickly, cheaply and in small quantities (Bradshaw et al., 2010).

However, the new process of 3D printing is still in its development and for instance has to improve its accuracy before it can compete with industrial engineering processes (Ruff, 2011). 3D printing can become the just-in-time inventory management tool for various industries, as it was the kanban (Kietzmann et al., 2015).

If manufacturers should also become service providers, the technology of 3D printing can occupy the supplier market and thereby shape the repair and spare parts market. For this, the manufacturers have to force and promote 3D printing by providing the necessary files (Vargo and Lusch, 2004).

Electric Car

Due to the shortage of fossil fuels and the demand for reduced CO2 emissions, alternative drive systems were sought in the automotive industry. In this context, electro-mobility has become a key focus (Backhaus et al., 2011).

E-mobility and e-cars were put into the public spotlight after the launch of the first Tesla and its successes among several celebrities in 2016. (Matthies et al., 2010).

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For a long time, cars with electric engines were not in great demand since they were expensive, their range was very limited and it took quite a while to charge them. However, this has so far prevented consumers from buying such alternative vehicles, as they are the key drivers when it comes to the acceptance of new and alternative vehicles (Muratori et al., 2013).

Electric cars are putting a long-standing technology back into focus due to current circumstances in the environment and increasing awareness of sustainability. As a result of this stronger focus, related technologies have also been developed further and are converging as end products in the electric car.

2.2 Theory

Technology within a company is one of the most important resources. Barney (1992; 1995) defined that “valuable, rare, inimitable and non-substitutable resources” can have a positive influence on firm performance. Production processes use resources to create a more valuable outcome. Technology as a resource is part of the knowledge base within a company, which can lead to a competitive advantage (Hoskisson, 1999). This knowledge base is created by investments in research and development in related knowledge (Zhou and Li, 2010).

Within the company, on the one hand technology supports the development of new products and services. On the other hand, it can improve internal capabilities such as workflows because of better information flows and connections, access to data and more. This leads to more efficiency, new opportunities and increased overall performance (Shin, 2013). From a resource-based view, technology supports firm performance by many different activities, such as collecting external and internal information, distributing external and internal information, introducing new processes, adapting existing process to higher standards, launching new services and products as well as increase efficiency and create a competitive advantage.

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environmental conditions (Teece et al., 1997). Some firms see technology as the necessary resource for flexibility in product development and adjustment (Sanchez, 1995). As it takes effort and time to be technology-oriented, the market dynamism needs to be low in order to achieve a positive effect on firm performance (Kaya and Seyrek, 2015).

The implementation of new technologies can be resource intense and risky that is why support and commitment from decision makers is crucial (Henderson and Venkatraman, 1993). Further, in conjunction with this observation, companies which focus on technology orientation and aim to achieve technological leadership have a tendency of charging higher prices for their products and services than companies with a focus on market performance. This is usually due to higher investments into technology and research as well as in development in general (Rusetski et al., 2014). Hence, technology orientation impacts firm performance and depends on the environment a company is operating in, in order to see the effect it has. As long as this technology leadership gives a significant advantage over competitors, the impact is positive. On the other hand, if the advantage is not that big but, in comparison, managers invested a lot then the possibility of a negative impact on firm performance is quite high. Internal bias of decision-makers plays an important role taking into account the appropriate price for technology leadership. Strategic orientations influence charged prices as well as internal quality management capabilities (Jang et al. 2013). The interplay of technology and new product development reveals management issues and that the responsible managers have a difficult job by balancing input and output (Adis and Razli, 2009).

Technology supports many different processes, it is crucial within any successful company and is necessary for value-creating (Trainor et al., 2013). The combination of advanced technologies, fulfillment of customer needs, high interfunctional-coordination-level and the gain of a competitive advantage lead to better performance (Adis and Razli, 2009).

The clear benefit of computer-aided text analysis (CATA) is the large amount of data that can be analyzed within a short time period (Belderbos et al., 2017). As shown above in table 1, previous researchers measured technology orientation by surveys because the whole construct of this strategic orientation is difficult, especially when it is about the measurement.

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content analysis was carried out on several different official texts such as annual reports, which are the textual contents analyzed in this thesis. In the past, content analysis was performed by human coding, which is characterized by low pace and high costs. CATA presents the absolute opposite of these characteristics due to its speed and cost effectiveness (Neuendorff, 2002).

Taking into account that strategic orientations are difficult constructs to measure and that they rely on responses of managers, CATA serves academic research with a new approach that provides several benefits such as low cost, high speed and non-biased responses because of not asking specific questions to get the necessary data. Previous research on technology orientation used questionnaires, surveys and rating scale to measure this complex construct (Gatignon and Xuereb, 1997; Hortinha et al., 2011; Al-Ansari et al., 2013; Cooper, 1985; Gilaninia et al., 2013).

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2.3 Hypotheses Development and Investigated Models

A lot of research in management literature proved that technology orientation has a positive impact on firm performance. Additionally, it is confirmed that entrepreneurial orientation has a significantly positive impact on firm performance. The approach using CATA in order to measure strategic orientations has proven its legitimacy in research and offers with its benefits the possibility to put the spotlight on further research on technology orientation.

The author of this paper proposes the conceptual model in figure 1 that describes the impact of technology orientation (TO) and entrepreneurial orientation (EO) on firm performance.

Figure 1: Conceptual model

This is analyzed by the mediation of these two strategic orientations, which are the independent variables. Firm performance is the dependent variable. Hakala (2011) mentions that this interplay has not yet been analyzed, so this offers the opportunity of to find out how big the impact of technology and entrepreneurial orientation can be together as well as isolated. The firm performance is measured by Tobin’s Q.

Further, the mediation of the two independent variables, technology orientation and entrepreneurial orientation, can be analyzed by a commonality analysis. The commonality analysis reveals common and unique effects of the independent variables on the dependent variable (Mood, 1969).

Firm

Performance

EO

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The whole analysis delivers information on the research questions “Does technology orientation have a positive impact on firm performance?” and “Does firm performance increase if a company’s strategy focuses on both technology orientation and entrepreneurial orientation?”. Earlier studies have already proven the positive effect of entrepreneurial orientation on firm performance (Wiklund and Shepherd, 2003; Rauch et al., 2009).

So far, we know, first, that technology orientation has an influence on firm performance and second, that entrepreneurial orientation has a significantly positive effect on firm performance.

These two observations lead us to the following specified hypotheses:

Hypothesis 1: Technology orientation has a significant influence on firm performance.

Hypothesis 2: Technology orientation and entrepreneurial orientation combined have a stronger influence on firm performance than just entrepreneurial orientation.

Unique and Common Effects

Figure 2 illustrates the impact of strategic orientation on firm performance, in this case technology orientation and entrepreneurial orientation. This impact can be analyzed further in order to identify unique and common effects. The unique effect explains how much of the impact is due to a specific strategic orientation. The common effect explains how much of the impact on firm performance is due to the mediation of technology orientation and entrepreneurial orientation.

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Figure 2: Commonality analysis - model of unique and common effects

2.4 Related Strategic Orientations – Not Included in Analyses

Other important strategic orientations are market orientation and learning orientation. These are characterized as followed:

Creating added value for the customer and satisfying customer needs are at the forefront of market orientation (Jaworski and Kohli, 1993). With learning orientation, it is mainly about the ability of companies to learn and process adaptability, such as the modification of internal processes as a result of occurrences (Day, 1994). The market orientation is completely focused towards satisfying the needs of the target customers. Also, the learning orientation indirectly involves the customer as the learning processes of the companies play an important role and thus contribute to a better adaptation to the market conditions and to the creation of new products and processes. Learning orientation is characterized by the commitment to learn, the will to question and change the current conditions, the connection around a common vision of the future (Baker et al., 1997; Lumpkin and Dess, 1996) and internal knowledge exchange (Calantone et al., 2002). On the other hand, market orientation takes not only customer needs

Common Effect

Firm

Performance

Strategic

Orientation

(TO & EO)

Total

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into account but also the influence of environmental circumstances that can have an impact on customer preferences such as technologies (Diamantopoulos, 1993).

As this paper shows, technology orientation and entrepreneurial orientation both move in the direction of new innovative products and processes. Furthermore, they both promote the creation and access to new processes and technologies if necessary through risky investments as well as the usage and striving for innovations (Cooper 1984b, 1994; Kanter, 1988; Gatignon and Xuereb, 1997; Lumpkin and Dess, 2005).

Although market orientation also includes technology as an external influence, as it influences customer preferences, the factor technology should be seen from a different perspective than in technology orientation, where technology is perceived as the main component and not only as an external influencing factor. The same applies to learning orientation where, for example, internal processes can also be changed by technological influences, however, this would again be a reaction to influences and certainly not in the core of the consideration observed in this case.

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3. Methodology

This paper analyses the mediation of technology and entrepreneurial orientation based on firm performance. In order to measure the technology and entrepreneurial orientation, computer-aided text analysis (CATA) is applied. This study is built on a data sample with texts, since CATA offers the possibility to analyze large amounts of text very quickly. In this process, 789 annual reports from 89 companies between 2009 and 2017 were examined and first of all the data sample was determined. The collection of the associated companies has been done both through the database Orbis and via official websites of the German Stock Exchange. The examined annual reports were collected from the respective company websites. Afterwards, the collected annual reports (PDF files) were converted into normal text files (TXT files). Due to the fact that unnecessary characters such as arrows, squares etc. often occur during conversion, the text files need to be cleaned of these. The software CATScanner offers several functions, among others a cleaning function to remove unnecessary characters from text files. Furthermore, CATScanner is also used for computer-aided text analysis. Here the program scans the provided text files and counts the words given in the dictionary for the respective strategic orientations and also subdivided according to possible dimensions. Regarding entrepreneurial orientation, the dimensions got eliminated and summed up in one, so, it is better comparable and analyzable with technology orientation.

The database Orbis offers all necessary information for the observed companies such as firm size (assets), Tobin’s Q, firm age and research and development (R&D) intensity.

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After collecting the necessary data, a regression analysis with the statistical tool STATA is done. Further regression models are conducted to identify unique and common effects.

3.1 Data Collection and Sample

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3.2 Measures

Technology Orientation

In order to measure technology orientation with the computer-aided text analysis, a dictionary needed to be developed. For doing so, the inductive approach is used in this paper. Short et al. (2010) describe “a five-step process for an inductive approach to CATA content analysis”. To create the technology orientation dictionary required for this paper, these five steps are carried out.

Initially, some common and general words related to technology and their synonyms have been listed. Secondly, a definition of technology orientation was identified, which was used in earlier research as a means of working with it. This definition can be found above. As a third step, the 2009 to 2017 annual reports are reviewed. The years 2009, 2013 and 2017 are chosen because technologies are developing and, for example, the technological focus of companies in 2009 can be based on other technologies than 2013 or 2017. As far as the timeframe is concerned, it should be mentioned that 2009 was right after a truly difficult time for all companies, since after the global economic crisis, companies have dealt with their situation differently. In addition, in order to develop a suitable word list for technology orientation, the annual reports of companies from all sectors have been evaluated in terms of their terminology. This approach is used because the data sample consists of German publicly listed companies from the stock market, the DAX. The technologies used by the observed companies vary from industry to industry and therefore the aim of this paper is to capture all variations and be as close as possible to the body of interest and the body of text. For that reason, the annual reports of Volkswagen AG, Daimler AG, Adidas AG, Bilfinger SE, SAP SE, Wacker Neuson SE, Drägerwerk AG & CO. KGAA, Nemetschek SE, Leoni AG, BASF SE, Hugo Boss AG and Heidelberger Cement AG of the years 2009, 2013 and 2017 are observed more closely.

In the fourth step, the word list was analyzed in order to identify the best fitting words relating to the body of interest. This was done in iterative feedback sessions with additional people, such as the supervisor of this work. In this case, the fifth step is another iterative discussion on which words are related to the construct of interest. Different dimensions could not be identified here. After this process, the dictionary for technology orientation was created. Taking into account that German companies are often global market leaders, the developed dictionary for technology orientation is representative.

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Table 2: Dictionary for technology orientation

Content Analysis Words

SaaS technologies, Innovative field, Electric traction", Efficient vehicles, Innovative, environmentally-friendly technologies, Highly efficient combustion engines to alternative drives, Hybrids, Innovation, Technical

progress, Pioneering design, Design process, New technologies, Downsizing, Innovative lightweight, Ultra-compact components, Evolution, revolution, Electric drives, state-of-the-art production, engineering, new production facility, engineers, technical experts, competitive production, production flexibility, technical expertise, technical development, technical know-how, electric motor, biofuels, future technologies, key technologies, hybrid systems, electrification, electrification, e-mobility, reduce the fuel consumption, efficiency technology, efficiency innovations, driver assistance systems, technological development, high-tech specialists, cutting-edge technology for enhanced environmental protection, improving energy efficiency, lightweight construction, electric vehicles, renewable sources, electricity, technological feature, battery laboratory, technical center,

fuel-efficient, software, system, prototype, electronics and mechanics, R&D, Research and development, Cutting edge of environmental technology, Technology driven, Research laboratory, Robot, New materials, Development, Intelligent systems, Assistance systems, Revolutionize, Sensor technology, Active assistance system, Laser, Radar, State-of-the-art technology, Electronic driving, Technological strength, Electrifying, Innovative technology, Innovative, Technological leadership, Technological expertise, Innovative power, Intelligent innovations and technologies, Core

technologies, Electric traction, Start-ups, Artificial intelligence, New mobility services, Digital connectivity, Automated vehicles, Innovative capacity, Electric, Autonomous, Outstanding technology, Technical innovation, Pioneering truck technologies, Standardized architecture for electric and electronic systems, Pioneering technology, Electric

models, Driving transformation, Digital services, Self-driving, Electric intelligence, Battery-electric, Electric mobility, Connectivity solutions, Tech, Breakneck technological change, Technologically, Drive

autonomously, autonomous, New products, New models, Reinvention, Hybridization, Technical features, Groundbreaking technologies, Superior products, Groundbreaking Assistance systems, Digitalization, Digital technologies, Technology leadership, New production, Plug-in-hybrid, Battery-electric, Fuel-cell, Hydrogen, Innovation leadership, Lightweight design concepts, Driverless mobility, Redefining, New processes, New production technologies, Fuel-efficient, Innovative strength, Pioneering spirit, Sustainable mobility, Groundbreaking innovations, High-tech, Innovative engines, New sources of energy, Technology changeover, Hybrid technology, Hybrid component, Technically, New era of mobility,

E-motion, Battery-electric, Reinventing, Development, Inventions, Revolutionary solutions, Technology portfolio, Biotechnology, Intelligent solutions, Patent, Development of solutions, Innovative

strength, Nanotechnology, Research cooperation, Energy-efficient, Competence center, know-how, technical, developing solutions, product innovations, innovative production processes, research and innovation, e-learning, modern

technology, power plants, interconnected production, developing new methods, producing products from renewable materials, inventiveness, digital technology, data, modern analytics, predictive maintenance techniques, process data, platform solutions, online, internet, automated, technology partners, IT-structure, IT solution, Processing techniques, Innovative development, Online business, Digitally, E-commerce, Alternative

fuels, Modernization, Launched, Digitisation, Modern production, Industrialise, Online portal, Process improvements, New formulations, 4D, 3D printing, Game-changing, Digital production, Digital factory automation, Simulation

solutions, Virtual, Bio-based solutions, App, Smart manufacturing, Digital leadership, Digital capabilities, Game-changing technical innovations, Technological evolution, Cutting-edge design, E-shops, Technological innovation, Technology platform, 3-D printing, Digital social networks, Digital broadcast medium, IT landscape, Digital solutions, Technological challenges, Technological progress, Computer, Modernization and upgrading, Technical competence, Technical careers, Solar, New methods, Autonomous driving, Shared mobility, Intelligent energy, Data management solutions, Robotics, Automation engineering, Cloud based, Digitalizing, Electromobility, Alternative drive technologies, Technically sophisticated, Technological progress, Electrified drive systems, Electric car, Electric generator, Electric power, Electric vehicle, Lightweight material, Broadband access, Healthcare systems, Safety systems, Medical technology, Sustainable building, Green construction, Sustainable design, Multimedia, Technological trends, Information modeling, mobile solutions, computer-based methods, 3D software, Building technology, Virtual model, Digital workflow, Information processing, digital design, digitalized design, 5D, Digital work, Building Information Modelling, BIM, Intelligent solutions, cutting-edge solutions, SAP software, Software-related, Technology investments, Enterprise application software, Virtualization, In-memory, IT-led innovation, IT-activities, IT

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Entrepreneurial Orientation

Based on the study by Short et al. in 2010, this paper proceeds with the dictionary they developed in several steps. Short et al. (2010) identified five dimensions of entrepreneurial orientation: autonomy, competitive aggressiveness, innovativeness, proactivity and risk-taking. Entrepreneurial orientation is an important component of successful businesses (Covin and Slevin, 1991). Several researchers investigated the role of entrepreneurship and its impact on firm performance (Van de Ven and Poole, 1995; Lumpkin and Dess, 1996). Step by step, various dimensions were added to the entire construct of entrepreneurial orientation. Miller (1983) developed the three dimensions of innovativeness, risk-taking and proactiveness. Later in 1991, Covin and Slevin added two more dimensions to the construct of entrepreneurial orientation: autonomy and competitive aggressiveness. Here, the deductive technique was mainly used to create this dictionary according to the five dimensions. The dictionary for entrepreneurial orientation was created in a five-step process. In addition to the deductive technique, some words were identified and added through the five-step inductive process. For better comparison, these five dimensions are not analyzed separately but combined in one dictionary. Due to completeness, the five dimensions are visible in the table below.

The word list of the dictionary of entrepreneurial orientation can be found in table in the appendix.

Firm Performance

In this paper, the firm performance is analyzed with Tobin’s Q. It is a tool with which the firm

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3.3 Analytical Procedure

Regression Analysis

Once all the necessary data had been collected, a regression analysis was carried out with the help of STATA, to be more precise a panel regression.

First, the panel was set to company and year. Furthermore, the median was generated both for technology orientation and entrepreneurial orientation. In case a value for technology orientation or entrepreneurial orientation was missing in the dataset, it was replaced by this median value.

Afterwards, the log Tobin's Q and the lagged value of Tobin's Q had to be generated. Here, the lagged value is applied since it is expected that certain decisions, such as strategic decisions in our case, will only have an impact in the future and therefore will appear with a delay of one year (Belderbos et al., 2010; Hall and MacGarvie, 2010; Hall et al., 2005).

Following this, the hausman test was carried out. This test identified fixed effects for this data panel. The statistical model corresponds to the data.

Thereafter, the regression was performed including robust standard errors in order to achieve unbiased standard errors of the coefficients. The Tobin's Q is considered to be our dependent variable whereas technology orientation and entrepreneurial orientation both being the independent variables.

By including the lagged value for Tobin's Q, for the period from 2010 to 2017, the panel covers a constant total of 89 companies over this period, including information on R&D intensity, firm age, firm size and both technology orientation and entrepreneurial orientation. A total of 789 annual reports were used to determine the technology orientation and entrepreneurial orientation.

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Table 3: Variable descriptions

Variable Description

Tobin’s Q Firm’s ratio of market value to book value Technology Orientation (TO) Strategic orientation Entrepreneurial Orientation (EO) Strategic orientation

R&D Intensity Ratio of Firm’s R&D expenditures to its operational profit

Firm Size Firm’s total assets

Firm Age Firm Age in years since its setting up lagged Tobin’s Q One-year lagged value of Tobin’s Q

Commonality Analysis - Unique and Common Effects of Technology Orientation and Entrepreneurial Orientation on Firm Performance

Regarding the fact that the impact of technology orientation and entrepreneurial orientation is analyzed, a commonality analysis is executed. This commonality analysis reveals common and unique effects of the independent variables on the dependent variable (Mood, 1969). In this case, the commonality analysis investigates these effects of technology orientation and entrepreneurial orientation on Tobin’s Q as the firm performance.

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4. Results

After the data collection, the regression analyses were carried out in order to find out implications of the data.

The following tables show the results of the conducted analyses:

Table 4: Regression results

TobinsQ Coef. St.Err. t-value p-value [95% Conf Interval] Sig

TO -59.713 55.680 -1.07 0.292 -173.129 53.703

EO 117.126 55.886 2.10 0.044 3.290 230.962 **

RDIntensity -0.013 0.013 -0.98 0.335 -0.039 0.014

laglogTobinsQ 0.616 0.089 6.94 0.000 0.435 0.797 ***

Constant 0.822 0.313 2.63 0.013 0.185 1.459 **

Mean dependent var 1.164 SD dependent var 1.092

R-squared 0.251 Number of obs 254.000

F-test 14.391 Prob > F 0.000

Akaike crit. (AIC) 245.830 Bayesian crit. (BIC) 259.980

*** p<0.01, ** p<0.05, * p<0.1

The regression results from table 4 show the following:

The p-value can be read off at Prob > F and is 0. If the p-value is less than 0.05, the model has a significant explanatory quality and the regression is thus intact.

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When taking a look at technology orientation and entrepreneurial orientation, it can be concluded whether these two independent variables show a significant value and have an impact on Tobin’s Q, the dependent variable.

The entrepreneurial orientation has a p-value of 0.044, which is less than 0.005 and therefore significant. In turn, technology orientation has a p-value of 0.292, which is higher than 0.05 and has therefore no significant value. In conclusion, it can be said that entrepreneurial orientation has a significant influence on Tobin's Q, whereas technology orientation does not.

The descriptive statistics and pairwise correlations are shown in table 5.

Table 5: Descriptive statistics and pairwise correlations

Variables Mean Std.

Dev. Min Max (1) (2) (3) (4) (5) (6)

(1) Tobin’s Q 1.22 1.35 0.35 8.24 (2) logTobinsQ -.22 .84 -2.31 2.05 .79 (3) TO .05 .02 .02 .14 .02 .03 (4) EO .07 .02 .03 .13 .03 .06 .40 (5) R&D Intensity 4.41 7.13 0 51.29 .39 .32 .12 .05 (6) Firm Size 186 424 0.67 2830 .11 .10 .04 .16 .01 (7) Firm Age 73.55 54.19 7 196 .21 .11 -.23 -.19 -.01 .01 N = 89

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Table 6: Regression models Tobin's Q

Control Variable Model 1 Model 2 Model 3 Model 4 Model 5

R&D Intensity .00 .03 .03 .03* .00 Firm Size (.03) (.0 (.02) -.00* (.00) (.02) -.00 (.00) (.02) -.00 (.00) (.03) -.00* (.00) Firm Age .04** (.02) .05** (.02) .05** (.02) .11** (.04)

Years yes yes yes yes yes

EO -25.77 (55.37) (130.52)-130.54 (170.33)-169.35 TO 95.65 (74.50) (131.33)162.47 201.81 183.70 laggedTobin’sQ 1.35** (.66) 1.34** (.66) 1.33** (.64) _cons 1.78*** (.66) (1.38)-2.12 (1.30)-1.81 (1.39)-2.22 -6.82** (3.04) R² .21 .22 .21 .22 .08 F 6.05 5.15 5.68 5.64 5.74

Standard errors in parentheses

*_{p < 0.1,}**_{p < 0.05,}***_{p < 0.01}

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strategic orientation as well as the lagged Tobin’s Q, while Model 5 includes both strategic orientations as well but not the lagged value of Tobin’s Q. In comparison, all the different models show no significant changes from one to the other.

Afterwards, another regression needed to be conducted to get the necessary information about the unique and common effects of technology orientation and entrepreneurial orientation. The commonality analysis with firm performance as the dependent variable illustrates the following results (table 7):

The beta coefficient gives information about an increase or decrease of the dependent variable, in this case the firm performance measured by Tobin’s Q, by increasing one predictor while having the other predictors constant (Ray-Mukherjee et al., 2014). The results can be better interpreted with rs, the structure coefficient, because they are the bivariate correlations of a

predictor and the score of the predicted dependent variable (Ray-Mukherjee et al., 2014). Further, r2

s demonstrates the variance commonality of the predictor and the regression model.

These two correlation values of beta and structure are necessary to interpret properly the connection between the variables (Kraha et al., 2012). Nonetheless, these coefficients do not explain the unique effect and the common effect of the two predictors.

For this purpose, the commonality analysis is in charge because it allows to interpret the unique effects and the common effects (Ray-Mukherjee et al., 2014).

Table 7: Regression model TO and EO

b Beta r rs rs² Uniqu

e Com-mon CD:0 CD:1 DomGen Pratt RLW

TO 0.010 0.010 0.02 0.64 0.410 0.000 0 0.000 0.000 0.000 0.000 0.000

EO 0.026 0.026 0.03 0.96 0.922 0.001 0 0.001 0.001 0.001 0.001 0.001

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The correlation is quite small and that leads to a small explanation of the total variance (R2_). Technology orientation has a weak influence on firm performance while entrepreneurial orientation has a stronger influence though. The unique effect of technology orientation is just 7.8% while the unique effect of entrepreneurial orientation is 59%. Additionally, the common effect of both orientations altogether is 33.2% (table 8).

Table 8: Commonality analysis for firm performance

Commonality % Total R²

TO 0.000 0.078 0.000

EO 0.001 0.590 0.001

TO, EO 0.000 0.332 0.001

Total 0.001 1.000 NA

Literature states that technology orientation influences firm performance. Previous studies used mainly surveys with rated responses to measure technology orientation because of its complexity.

The CATA approach allowed to analyze a dataset consisting of 789 annual reports from 89 DAX companies. Further regression analyses revealed the influence of technology orientation on firm performance as well as the unique and common effects of technology orientation and entrepreneurial orientation.

In the context of the first hypothesis stating that technology orientation has a significant influence on firm performance, the regression analysis reveals that technology orientation has no significant influence on firm performance. Furthermore, technology orientation has just a unique effect of 7,8%, which shows its weak influence.

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5. Discussion

This thesis was conducted to analyze the impact of technology orientation and entrepreneurial orientation on firm performance in order to find out how these two strategic orientations interact. Furthermore, to tackle the questions regarding the impact and mediation of these two strategic orientations on firm performance, the creation of a dictionary for technology orientation was necessary. Otherwise the computer-aided text analysis could not have been done. For this purpose, 789 annual reports from 89 companies in the period from 2009 to 2017 have been analyzed.

A number of results relevant to theory and practice have been identified and are available for reporting. The following paragraphs give further and more precise details regarding implications for theory, practice and future research. Limitations are not disregarded and are reported as well.

5.1 Implication for Theory

This thesis contributes to the theory on several levels. Firstly, it illustrates a further application case of computer-aided text analysis (CATA) by using the CATScanner and its various tools, such as cleaning text files of unnecessary symbols or the computer-aided text analysis executing tool in order to identify the number of words.

Secondly, this paper provides a theoretical contribution to the created dictionary of technology orientation on which further adaptations and research can be based. The dictionary for technology orientation represents relevant related words from large and important companies across a wide range of industries, including global leaders.

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Fourthly, looking at previous research outcomes so far, the results of this thesis confirm the significant effect of entrepreneurial orientation on firm performance. This is clearly shown with the underlying data sample. Furthermore, the results show non-significance of technology orientation on firm performance and offer space for further investigation. Additionally, further investigation of possible dimensions of technology orientation can be carried out.

Moreover, the strategic orientation should have a fit with other factors like capabilities within a company if a competitive advantage is to achieve (Fainshmidt et al., 2019). Technology orientation need to be aligned with a company’s internal circumstances and possibilities. Acquiring new technologies need support from the management because it can be a time intense as well as costly undertaking to introduce the new technology. Further, the right employees with the willingness to adapt are crucial as well as their affinity to technologically related tasks (Karna et al., 2016). The strategic orientation sets the direction for a company and decides what kind of capabilities they focus on. Additionally, to the strategic orientation as a shaping tool to align company’s goals, the necessity of internal factors and capabilities need to be pointed out because they translate the goals and direction into a successful implementation (Fainshmidt et al., 2019). The availability and development of capabilities impacts not just firm performance but also firm size, as this can be interpreted as past success and growth. While measuring performance it is necessary to mention that objective measures lead to a weaker impact than performance indicators (Karna et al., 2016).

In conclusion, the strategic orientation and capabilities of companies create an important bundle which influences a firm’s position, direction and performance (Peteraf et al., 2013). Fainshmidt et al. (2019), points out that the capabilities as part of this bundle have a positive impact on firm performance. Being an important part of this bundle means that the necessary fit is present. Considering that the environments we are active in, are dynamic, changing and demanding. The importance of the strategic focus increases even further (Karna et al., 2016) but the right implementation needs attention as well (Augier and Teece, 2009).

5.2 Implication for Practice

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analyzed data sample consists of globally leading companies from different industries. It is also shown that entrepreneurial orientation correlates strongly with technology orientation even though technology orientation has no significant impact on firm performance.

In addition, the process of developing the dictionary of technology orientation and the different factors, which are taken into account such as the time period and the changes of technologies over the years, demonstrate that companies and their managers in the field of technologies are active and open-minded. Identifying possible technology trends in an early stage can be important for companies and their decision makers. Managers as decision makers in companies face regularly the problematic question, what should be the focus, the direction of the company because this determines where resources are located. This points out the importance of strategic orientations because they shape exactly these decisions and the influence what kind of capabilities are developed within the company (Fainshmidt et al., 2019). False decision in this process cannot just cost the manager’s job but also the future of the company. The decision regarding the strategic orientation of a company has always to consider its environment. Efficiency and effectivity are beneficial for companies in changing environment but in calm periods they offer the opportunity to prepare for changes (Stalk et al., 1992) and this can be addressed by strategic orientation.

5.3 Limitations and Future Research

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Additionally, limited knowledge of statistical models and tools may have led less excessive statistical analyses. Additionally, the validity can be grounded on an even stronger fundament when other examples support the proposed tests. Previous measures such surveys can be compared with the measure of content analysis. Further, specific parts next to shareholder letters (used in past research) can be analyzed in more detail to gather more detailed findings. In the underlying thesis, annual reports are used and represent the whole portfolio of a company with all possible information. Due to the broad field of analyzed information the findings can vary quite strong from findings of specific sections of the report.

In general, the approach of CATA to analyze large amounts of data quickly and cheap offers a lot of space for future research.

Nevertheless, the results of this thesis, including the development of the dictionary as well as the analyses, lead towards important and interesting future research.

This research project, its analyses and results direct to future research. As mentioned, technology develops with rapid pace and new technologies emerge or get to new popularity such as electric mobility and 3D printing during the last decade. This leads to the necessity of keeping the dictionary for technology up to date. This means that current technological developments need to be observed and evaluated. Further, the data sample consists just of German companies. Analyzing a data set from another country or companies, which are not the biggest in one specific country, and then the comparison of these results can be an interesting project for future research. Moreover, an analysis of the impact of strategic orientations with companies in other circumstances, e.g. from developing countries instead of industrialized countries, may be absolutely interesting. Due to the influence of environmental factors in such countries, a comparison of the outcome could tell us more about success factors on those countries under described circumstances. Specific industries or multiple countries should be considered in future research because as written above is the environment an important influencing factor of strategic orientations and their impact on firm performance (Fainshmidt et al., 2019).

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