Stakeholder influence on organizational innovativeness
by
Arno van der Heide
University of Groningen
Faculty of Management and Organization
Msc Business Administration
Strategy & Innovation
ABSTRACT
This research investigates the influence that stakeholders have on the innovation capacity of firms. The research is focused on the influences of customers, government bodies, employees and lenders of credit on innovation types, innovation impact and the strength of influence. The concepts that are found are tested in the restaurant industry. Government bodies are identified as the local and national government and the health inspection, employees are kitchen staff, servants and cashiers, lenders of credit are shareholders, banks and investors. Innovation capacity is investigated by the impact that innovations have and the identification of product, process or transaction innovation. The innovation impact is determined by identifying the innovations as radical or incremental. Interaction between stakeholders and firms is done by consulting stakeholders, informing them or by co-creation. Stakeholder salience is the presence of power, legitimacy and urgency and determines the amount of influence. As it turns out, customers have the strongest influence and a large contribution to innovation and employees contribute to product and process innovations. Shareholders and kitchen staff initiate most radical innovations, where servants, sales staff and the VWA initiate most incremental innovations. Lenders of credit influence companies by having power and personnel possess legitimacy.
Keywords: Innovation capacity, stakeholders, salience, interaction, restaurant industry
Abbreviations
TABLE OF CONTENTS
CHAPTER 1. INTRODUCTION 5
1.1 Problem Definition 5
1.2 Thesis Outline 6
CHAPTER 2. THEORETICAL FRAMEWORK 7
2.1 Innovation capacity 7
2.1.1 Innovation types 7
2.1.2 Innovation impact 8
2.2 Stakeholders 8
2.2.1 Stakeholder roles and influences 8
2.2.2 Stakeholders contribution 10
2.3 Stakeholder Salience 13
2.4 Interaction between Managers and Stakeholders 14
2.5 Conceptual Model 15
2.6 Empirical Context: The Restaurant Industry 16
2.6.1 Innovation in the restaurant industry 16
2.6.2 Radical versus incremental 17
2.6.3 Restaurant stakeholders 17
CHAPTER 3. RESEARCH METHODS 19
3.1 Operationalization 19
3.2 Validity 20
3.3 Gathering Data 20
3.4 Analyzing Data 22
CHAPTER 4. RESULTS AND ANALYSIS 24
4.1 The Six Restaurants 24
4.1.1 ‘t Koetshuis 24
4.1.2 De Oude Stoep 25
4.1.3 Humphrey’s 27
4.1.4 The Gold Club 28
4.1.5 Monte Giove 29 4.1.6 Yankee Doodle 31 4.2 Innovation Capacity 32 4.3 impact of Innovations 34 4.4 Stakeholder Salience 34 CHAPTER 5. CONCLUSION 36
5.2 Stakeholder Salience 37
5.3 Discussion 38
REFERENCES 40
CHAPTER 1. INTRODUCTION
This research attempts to clarify how groups or individuals in the firm's environment affect a company's innovativeness. These groups and individuals will be defined as stakeholders in this thesis. There are different forms of influence coming from various parties in the company environment that can result in changes in companies. What these influences are and to which extent they can affect companies will be the most important outcomes of this research. Another outcome is the way in which these groups and individuals interact with the firms and the difference in influences coming from different ways of interacting. To find these answers this research will identify which groups and individuals are influential in innovation. A selection of groups and people that affect companies is made to find how they influence the firm’s innovativeness. Secondly, the research will explore the extent to which they influence innovation.
1.1 Problem Definition
Not much is known about how groups and individuals inside and outside the firm can affect the company and especially the innovation capabilities that these firms have. Because this relation will be explored, the research question is: How do stakeholders influence the innovation capacity of restaurants? The relation that is investigated can be visualised as follows:
FIGURE 1
Relationship between Stakeholders and Innovation Capacity
To discover which factors influence innovation, how they influence innovation and to which extent groups and individuals can affect the firm, information from scientific research found in articles is used to make concepts. This makes it possible to investigate the relationship between stakeholders, interaction and innovation in firms, as well as the extent to which the stakeholders can affect firms. The restaurant industry is chosen for closer examination of influence in innovativeness. Six cases in the restaurant industry will be examined to find similarities and differences in their management’s perspectives on how they are influenced and to which extent. The research results in information for this specific industry, which may be similar to firms in other industries.
The reason for investigating the relation between capacity and stakeholders is that little is known about which stakeholders are responsible for which innovations. Inside and around companies there are many groups and individuals that have some sort of interest in the company and all exert an influence. Firms can use this information in their advantage by turning it into opportunities. The
Stakeholder contribution
influences coming from the company’s internal and external environment can open doors to novel ideas and innovations that enhance their competitive advantage. For finding these influences it is also important to determine the extent to which stakeholders affect firms. Some stakeholder are likely to be more interesting to a firm and therefore exert more influence over a firm than others.
1.2 Thesis Outline
CHAPTER 2. THEORETICAL FRAMEWORK
To answer the research question, the terms ‘innovation capacity’, ‘stakeholders’ and ‘influence’ must be conceptualized. This chapter discusses relevant information from scientific research and articles. Innovation capacity will be divided into three types and into two levels of impact that may be influenced by stakeholders. Four stakeholder groups are chosen that have an influence and the way in which they may be influential is described. The extent to which these stakeholders may be influential depends on the interpretation of managers on how important each stakeholder is. This importance of stakeholders to managers is described in this chapter as well.
2.1 Innovation Capacity
Factors like globalization, changes in resources and the transition to a knowledge based economy force firms to renew and adapt to the environment. Firms must remain innovative to keep from losing from their competition. This research defines innovations as services, processes and products that are new or existing, or combined ideas that have additional characteristics in functionality that add value. Jacobs (2007) defines innovation as something new with an added value. To find how innovation capacity is influenced, the definition for innovation needs to be divided into innovation types that can be found in firms.
The innovation capacity of a firm is the extent to which it can produce innovations. Suarez-Villa (1990) describes innovation capacity as the level of, and the potential for innovation. Finding the level of innovation helps understanding changes in competitiveness and technology in any industry, as well as innovative activity changes over time and the relationship with major drivers of novel ideas, which can be factors like rules or suggestions. Describing innovation capacity can be done by looking at the amount of innovations in an industry or firm. This research focuses on the amount of innovations and its impact, therefore a division of innovation types will be made and also the levels of impact of innovations are described. The next sections describe how innovation can be divided into three different types and two different levels of impact.
2.1.1 Innovation types
transaction innovation, which are innovations in transaction methods, marketing, publicity or sales, for example novelties in advertising, payment facilities, sales methods, publicity and other forms of attracting customers. These innovations are focused on the external environment, being the customers.
2.1.2 Innovation impact
Garcia and Calantone (2002) make a distinction between radical and incremental innovations, they define radical innovations as “products at the early stages of diffusion and adoption”, and incremental innovations as “products in advanced stages of the life cycle”. Innovation is not always a completely new product, it can also be incremental (Garcia & Calantone, 2002). In other words, when a renewal is an improvement of an existing product or service it is called an incremental innovation. These incremental innovations are effective over a relatively shorter period since radical innovations increase the competitive advantage . This effect may result in a firm’s preference of radical innovation rather than incremental innovation. Incremental innovations however can extend the profitable period of a radical innovation and strengthen the current range of products and services by adding value. Looking at the definition of innovation capacity, the extent to which a firm can produce innovations can be determined by identifying the type and the impact of innovations that occur in these firms.
Three forms of innovation have now been described, as well as the impact that they can have. With these distinctions, we can take a look at the influences that can ‘trigger’ these forms and levels of impact of innovation. Are influences of groups or persons with a stake in the company responsible for specific forms of innovation? Or are some of these influences more likely to affect the impact of the innovation? To find these answers, it has to become clear which groups and persons can influence companies.
2.2 Stakeholders
Interacting with stakeholders allows firms to detect risks and opportunities. Stakeholders can influence the innovation capacity of firms as they can come up with new ideas, and they can have an influence on the selection of these ideas. Stakeholders all have some form of interest and input in the company and some may have opposing interest. This section discusses the roles and influences of stakeholders.
2.2.1 Stakeholder roles and influences
outcome. Companies may have an interest in certain input of stakeholder groups, and stakeholders also may have interests (stakes) in the company. Carroll (1989) describes stakes as rights, ownership or legal title to the company’s assets or property.
The interests or stakes of the stakeholder are very different. Each stakeholder has a certain demand from the company and wishes and personal interests that may not agree with the company’s wishes. In this research, four stakeholder groups are investigated, being consumers, lenders of credit, the government and employees. Consumers are chosen because they represent the market, these stakeholders might have a great level of influence. Lenders of credit are expected to be of great importance for facilitating financial means. The government might be listened to because they set the rules, but we don’t know how great their influence is. A similar statement can be made for shareholders, which are likely to have an influence. The influence that they have depends on their input, interests and their importance from a management’s perspective. The input that these stakeholder groups can have are the following:
Consumers. This group forms the market for the company’s products. When companies find out what
the demands are, they can innovate and create new product or service life cycles and secure continuity.
Lenders of credit (e.g. banks, shareholders). This group provides the funds in the organization. The government. These stakeholders can stimulate innovation by encouraging possibilities by
regulation, law and possibly funds.
Employees. This group may be important to innovation as it can bring creativity for new innovative
ideas and implement them.
TABLE 1
Contributions, Inducements and Interests of Stakeholders Contributions Inducements Interest
Consumers Turnover Goods / Services Good, affordable products / services
Government Subsidies Obligations, taxes Obligation to national system
Employees Work Salary Income, continuation
Lenders of credit Capital Dividend Maximum profit
These stakeholders can all influence firms in their own way. What these influences can be is described in the following section.
2.2.2 Stakeholders contribution
Each stakeholder has a way of influencing innovation and an interest or motivation. These influences can contribute to, or hamper, the innovation capacity of a company. The input for innovation might be valuable to the company when they think of the contribution as important. On the other hand, the limitations that the input can bring along may be a motivation for the firm not to involve the stakeholder for this input. When balancing the valuable input and detrimental limitations that it may bring, the importance of the influence might become higher or lower. The following section describes how the stakeholder groups can contribute to the innovation capacity of firms.
Consumers. These stakeholders have knowledge of the market which is valuable information to
can be very important for the development in a firm, and consumers are key to innovation, this may lead to a great influence allowed by the firm’s management.
The government. According to Allen, Utterback, Sirbu, Ashford and Hollomon (1977), innovation
can be influenced by the government in financing, collection of resources and technology and in market conditions. Governments can control inputs and the direction of technological change by changing the industrial environment. The government’s interest is fulfilling national demands, creating a cutting edge in technology, create more work and strengthen the competitive position of the country. Governments can initiate technological change, or sustain or regulate change towards the direction the government would like it to go (Allen et al., 1977). Limitations that can result from governmental influence are rules and barriers (e.g. for safety and protection of the natural environment). Governments can change available resources, like information, financial and human resources, and allocate them (Allen et al., 1977). Based on the article of Allen et al. (1977), the government’s key input can be considered stimulation of innovation. Important stakes are the development of new technologies and products. With this they, for example, try to stimulate the national level of knowledge to get a competitive advantage on other countries. Mansfield (1995) researched funding in innovation in which was found that the government interests in development resulted in financial input in R&D, stimulating innovativeness. On the other hand regulation can be a limitation to the process. Opinions on procedures of the government can differ from those of the firm, which can result in changing or even cancelling projects since government regulations are binding.
Employees. Thornhill (2005) in his research for knowledge in companies concludes that firm-level
Stewart, 1996). The costs of human resources are a force to decrease the influence of employees through implementation (Archibugi et al., 1995).
Lenders of credit. These stakeholders could be essential to the innovativeness for bringing funds for
innovative opportunities. Their ownership of shares in the company provides the innovation process with financial resources, but this ownership also gives this stakeholder group a right to object when they do not agree with aspects of the process. They have the power to intervene, with their influence they can stop or slow down the process. Unfortunately, the intentions of the owner are not always the same intentions as the managements intentions. The agency theory (Berle & Means, 1932) states that management (agents) is difficult to monitor since they have more expertise than the owners (principals). Lenders of credit may be focused on short term profits where the management might be building in continuity; the innovation type can depend on this focus. The following table (table 2) shows stakeholder input, their interests or stake and possible limitations.
TABLE 2
Innovation Input, Interests and Limitations
Input to innovation Interest Optional limitations
Consumers Market knowledge Fulfil personal demand Risk of offending, disappointing
when option unrealistic
Co-creation Distinct input for demand
Government Development in technology Try to fulfil national demand Rules and regulation
Change in tax contributions
Subsidies
Changes in regulation
Employees Know-how Acknowledgement Disturbing hierarchy
Implementation of ideas Perform function Technical limits
Lenders of Funds Profitability Cost reduction
Credit
2.3 Stakeholder Salience
Knowing what the contributions and interests of stakeholders may be, we can determine what the effects and influences of specific contributions of stakeholders are and to which sort of innovation the specific influences of stakeholders may lead. Different stakeholders may have different strengths of influence on innovation. The strength of influence that a stakeholder has on innovation depends on how much attention a stakeholder is given by the firm. Mitchell, Agle and Wood (1997:854) define salience as “the degree to which managers give priority to competing stakeholder claims”. In their salience model they describe stakeholder attributes from a manager’s perspective. Power is described as a relationship between social actors in which one actor can make another actor do things they would not normally do. Schaefer (in Maignan, Ferrel & Ferrel, 2005) defines power as the ability to exercise ones will over others. Legitimacy is the perception or assumption that an actor’s actions are desirable and appropriate and within systems of norms, values and beliefs. Urgency is defined by the degree to which stakeholder claims call for attention (Mitchell et al, 1997). Figure 2 shows the classes in which Mitchell et al (1997) divide stakeholders.
FIGURE 2
Salience Model by Mitchell et al., 1997
Mitchell et al (1997) label the classes indicated with the numbers one, two and three in figure 2 as latent as they are identified by possessing only one of the attributes. They argue how managers are not likely to give much attention to latent stakeholders, possessing only power, legitimacy or urgency. Expectant stakeholders each possess two of the attributes and definitive stakeholders possess all three. Dormant stakeholders (1)
These stakeholders have the attribute of power and they can use it to impose their will. They do not have a legitimate relationship or urgency in claim.
Discretionary stakeholders (2)
Demanding stakeholders (3)
These stakeholders have no power or legitimacy, they are known as “mosquitoes buzzing in the ears” of managers. They have only the attribute of urgency but no power to exercise their claim and no legitimate relationship with the firm.
Dominant stakeholders (4)
These stakeholders are powerful and legitimate and they are assured to have an influence. They are described as dominant because they have legitimate claims and they have the power to act out these claims. Examples are owners, creditors, investors and community leaders.
Dangerous stakeholders (5)
These stakeholders are characterized as coercive and violent because of their possession of power and urgency. This combination, without legitimacy relating them to the firm, they are considered to be “dangerous” to the firm. Examples of coercive ways of bringing the claims of these stakeholders to attention are strikes, sabotage and terrorism.
Dependent stakeholders (6)
These stakeholders have urgent legitimate claims but are depending upon others for the necessary power to carry out their will. They include local residents and the natural environment and need power of other stakeholders or the management to satisfy their claims.
Definitive stakeholders (7)
These are powerful and legitimate stakeholders that become urgent, when they feel that their interests are not being served. Powerful and legitimate stakeholders with an urgent claim lead to priority from managers.
Mitchell et al. (1997) describe how they expect the stakeholders’ level of influence to be from the management’s perspective. Using the salience model, we can identify stakeholder types in degrees of influence as seen from management perspective and describe that degree of influence in a firm’s conduct of business. Salience describes the extent to which stakeholders are noticed. The more a stakeholder represents different characteristics, the more interesting it is to the company and the more it will be noticed. The question now is, which stakeholders are salient and because of this have a stronger influence in the firm’s conduct of business? Also, which stakeholder influence result in renewal of products, services, processes or transaction methods? Are there specific stakeholder groups responsible for specific innovations? This research will investigate these relations between stakeholders and innovations, as well as the strength of the influence that firms experience.
2.4 Interaction between Managers and Stakeholders
exchange of information. Van Nistelrooij (2008) defines these three ways of interaction as informing, consulting and co-creating.
1. Informing
The information flows from management to the stakeholders, the manager gives information without searching for reactions of recipients of the information.
2. Consulting
The manager clarifies the goal of the interaction and searches for reactions of recipients of the information. This means that the information flows from the stakeholders towards the management. 3. Co-creating
The manager explains the goals, procedures and the dialogue framework. The goal of this interaction form is the exchange of perceptions en converging information. Information in co-creating flows two-ways, from the manager to the stakeholders and the other way around.
Literature has described how innovation capacity, the relationship between managers and stakeholders and the strength of the influence. The next step is to test the concepts that literature provides on the chosen industry for this research.
2.5 Conceptual Model
This study tries to understand the relationship between stakeholders and the innovation capacity and to determine the influences of these stakeholders. The term innovation capacity can be seen as the amount and impact of innovations in a firm or industry. Stakeholders are groups or individuals, in this case employees, customers, the government and lenders of credit that have different roles and contributions in relationship to the firm, in which these stakeholders can hamper or contribute to the innovation capacity of the firm. The relationship between stakeholders and innovation capacity is interaction. The stakeholders interact with the firms and with this they influence the firm’s conduct of business. The influence that stakeholders can have depends on the salience attributed to them by managers; the more salience attributes stakeholders are perceived to own, the more influential their roles and contributions are to the firms innovation capacity. The conceptual model as proposed through the literature study is as follows (figure 3):
The next step is to test the concepts in the restaurant industry. The question is, do these concepts apply to this industry? The next section seeks to answer this question by bringing the concepts to practice.
2.6 Empirical Context: the Restaurant Industry
This section discusses how the concepts explained can be used in the restaurant industry. Basically, a restaurant is an establishment where meals are served to customers. By the end of 2009 the Netherlands had 10,847 restaurants (Research of Bedrijfschap Horeca & Catering, 2010). Some noticeable differences can be seen in the restaurant industry. The most apparent changes are easier ways of making reservations, for example using websites. Innovation in this industry occurs by renewing products and processes in order to become more efficient and to gain competitive advantage. This chapter tests the concepts in practice.
2.6.1 Innovation in the restaurant industry
Restaurants can innovate on different levels, as described in section 2.1, on product, process, and transaction level.
Product innovations. Changes in products can be changes in composition, ingredients or preparation
of the product. Other possible innovation types are process and transaction innovations. To find out what these innovation types exist of, a display of activities would be useful, leaving out the possibility of reservation. The sequence of activities in a restaurant typically are as described in figure 4. This figure shows that there are processes in ordering, serving and the final transaction. The model does not show the processes around these activities, such as the ordering of ingredients and the planning of personnel. Taking these into account, the following two types of innovations are possible:
Process innovations. These innovations are changes within the production process. The processes in
restaurants can be (Dorr, 2002):
Purchasing of ingredients. An example of this activity is purchasing new ingredients or choosing other suppliers.
Ordering. Drinks can, in some restaurants, be ordered using text messaging on telephone. This is a form of process innovation in ordering.
Preparation. An example for process innovations in preparation is using other instruments, like the grill instead of frying.
Delivery of the meals. Faster delivery because of younger servants is an example of a process innovation in meal delivery.
FIGURE 4
Sequence Diagram of Restaurant Activities
Transaction innovations. Transaction innovations are new methods of making reservations, paying
for the products delivered and promotion of the restaurant and its products. In the restaurant industry these activities are in payments for products and services, reservations and advertising and promoting.
2.6.2 Radical versus incremental
Applying the distinction between radical and incremental innovation can be for instance a completely new item on the menu, that is new to the restaurant and new to the customers. This can be seen as a radical innovation. An improvement in a menu item is often only new to the customer and can be seen as an incremental innovation. When an innovation is merely an improvement, it will be called an incremental innovation, and when the product is new to the firm and clientele, it will be called a radical innovation.
2.6.3 Restaurant stakeholders
This study focuses on the influence of employees, consumers, the government and lenders of credit on the innovative strength of restaurants. This section describes the composition of the stakeholder groups.
Employees. This stakeholder group exists of people that are hired by the restaurant under a contract of
employment to perform work on a regular basis at the employer’s behest. The composition of restaurant staff is kitchen staff (cooks, kitchen cleaning), serving staff: (servants, hosts), and cashiers (transaction facilitation).
Consumers. This group exists of everyone who consumes the restaurant’s products and completes the
transaction by paying for it.
The government. This stakeholder group sends an authorized inspector of state supervision on public
regulations concerning opening hours, use of tobacco, licenses and such; the Voedsel en Waren Autoriteit (VWA) is the Dutch food and vendibles authorities concerned with supervision of hygiene, public health and alcohol sales.
Lenders of credit. These stakeholders provide the firm with capital. Firms need capital to survive and
grow and is therefore of great importance. This stakeholder group exists of shareholders and banks or investors.
Consistent with the conceptual model and the situation in the restaurant industry, the following two sub questions are formed:
1. How does the influence of employees, customers, government and lenders of credit affect innovations and innovation impact?
2. What is the salience of these stakeholders and how does this affect the influence that they have on innovation types and impact?
CHAPTER 3. RESEARCH METHODS
This chapter describes the research methods that are used. The operationalization discusses which research methods are appropriate for this study and how the concepts are measured in the restaurant industry. Also validity is discussed to explain how the results are reliable and fitting for the research. After the operationalization and validity the next section explains how data is gathered and analyzed.
3.1 Operationalization
According to Yin (2009) “how” and “why” questions are likely to result in case studies because these questions deal with operational links needing to be traced over time rather than mere frequencies or incidence. He defines case studies as empirical enquiries that investigate a contemporary phenomenon within its real life context, when boundaries are not clearly evident (Yin, 2009). Five components of research design are especially important in case studies: the question, the propositions, the units of analysis, the logic linking the data to the propositions and the criteria for interpreting the results (Yin, 2009). In this research the question is a “how” question. Propositions are not clearly stated but there are certain expectations and the units of analysis are firms, in these cases restaurants. The logic linking to the data earlier in the literature review have resulted in a conceptual model. This model shows the concepts and the relations that are investigated in this research. Also, it has led to the list of questions as can be found in Appendix 1. For every stakeholder group (kitchen staff, serving staff, cashiers, customers, the local government, the national government, the VWA, shareholders and banks and investors) research is done to find whether they help initiate product, process or transaction innovations and what the levels of impact of these innovations are. The salience of the stakeholders will be measured by the presence of salience characteristics in the three forms of interaction that may occur between management of restaurants and the stakeholder groups. To measure the type of innovation that is initiated by the influence of stakeholders, the management of restaurants is asked how many product, process and transaction innovations have been implemented as a result of interaction with every stakeholder group. The answer categories are closed and categorized in an ordinal Likert scale. It may be difficult for the managers to remember every innovation that was implemented. If there were no innovations or only one, the manager is likely to remember. If there were more innovations, but the management does not recall the exact amount, an answer with a range of innovations in numbers is available. Innovativeness in products will be measured by the introduction of new products. The number of new product introductions indicates the amount of innovations that have been successfully implemented last year.
incremental innovations can be found by subtracting the number of radical innovations from the total number of innovations.
The following issue is the salience of stakeholders. To find this information, the management is asked how much power, legitimacy and urgency they allocate to interaction between them and their stakeholders. Since there are three possible forms of interaction, there are three questions each focussing on an interaction form. Informing is interaction where information flows from the stakeholder to the management, in consulting the information mainly moves in the opposite direction. With co-creation is meant the interaction in which information flows in both directions. Power is described as a relationship between social actors in which one actor can make another actor do things they would not normally do, or as the ability to exercise ones will over others. Legitimacy is the perception or assumption that an actor’s actions are desirable and appropriate and within systems of norms, values and beliefs. Legitimacy is defined as socially accepted and expected structures that help define whose claims really count. Urgency is defined by the degree to which stakeholder claims call for attention. To measure the characteristics of salience, every characteristic is measured by its own feature. Power is measured by asking whether or not managers feel obliged to inform, consult or co-create, legitimacy is measured by asking whether or not management feels that the stakeholder is the right person to inform, consult or cooperate with, and for urgency, management is asked whether or not they feel the urge to perform these types of interaction. There is the possibility to choose more than one characteristic in every question.In case three participants or more indicate power, legitimacy or urgency, the attribute is accepted in this research.
3.2 Validity
Yin (2009) states that validity is needed to test the quality of the research design. Construct validity is the establishing of correct operational measures for the concepts, which can be increased with multiple sources of evidence and using key informants. In this research multiple sources are used to gather data such as scientific articles and expert interviews which give the research a high reliability and construct validity. Another type of validity mentioned by Yin (2009) is external validity. This external validity is described as the establishment of the domain to which a study’s results can be generalized. Findings should be tested through replications such as other cases. Yin (2009) says that after replication the results may be accepted for a much larger number of similar cases. This research tests the concepts on multiple cases increasing the external validity.
3.3 Gathering Data
relations between specific stakeholders and specific innovation types are asked. In qualitative methodologies, the interview is the primary data collection technique (Cooper & Schindler, 2008:170). Sometimes it can be useful to use deliberate preparation of the participant, called pretasking. By doing so, the participant will be able to give more detailed data. A detailed explanation of key terms and information were prepared.
Six restaurants participate in the case study, in which every restaurant has one respondent. ‘’t Koetshuis’ is a restaurant in Groningen, with four employees, managed by Hans Koetsier. ‘De Oude Stoep’ is a restaurant in Oost-Vlieland with six employees, managed by Chanel Smit. ‘Humphrey’s’ in Groningen is a larger restaurant with twelve employees, and is managed by Dick Middendorp. The ‘Gold Club’ is a restaurant in Assen with eleven employees, managed by Koos Meins. ‘Monte Giove’ is a restaurant at Norg with eight employees, managed by John Jodieh, and ‘Yankee Doodle’ in Heerenveen is the largest participant in the research, with fourteen employees, managed by Geert-Jan Wierda. These restaurants are comparable because their production processes are similar in many ways, they all have to purchase similar materials, process them into similar products and offer these products in an equal fashion to the customer. The possibilities for innovations are mostly the same for products, processes and transaction methods, marketing and sales are much alike as well. Possible interactions between every restaurant and their stakeholders are most likely to be the types informing, consulting and co-creation, so that their opinions about salience in interaction have a good basis for comparison. The perspectives and interests of restaurant managers have many similarities but the strategies are not all the same, which is not expected to be of influence in innovation, interaction or the importance of stakeholders. That the firm’s environment and the national culture are the same is important because this means that the ways of interacting and the status of stakeholders is about the same for all participants. The following table (table 3) gives a more detailed description of the participating restaurants.
Table 3
Characteristics of Case Restaurants
Restaurant 't Koetshuis Monte Giove De Oude Stoep Yankee Doodle Humphrey's Gold Club Location Groningen Norg Oost-Vlieland Drachten Groningen Assen
Contact Mr. B. Koetsier Mr. J. Jodieh Ms. C. Smit Mr. G. J. Wierda Mr. D. Middendorp Mr. K. Meins
Products, Menu items Menu items Menu items Menu items, Menu items Menu items
services entertainment
Strategy Quality Quality Quality Price Price Quality
Target group Groningen Locals, Tourists Netherlands, Groningen area Locals,
3.4 Analyzing Data
CHAPTER 4. RESULTS AND ANALYSIS
The following sections describe the results of the cases about the innovation capacity and the salience attributed to stakeholders.
4.1 The Six Restaurants
For every of these restaurants the case results are explained and each case description results in a tabel that portrays the key characteristics of this research.
4.1.1 ‘t Koetshuis
experiences power from servants because they are the direct link with the customers. Table 4 shows the results in influence and salience for ‘’t Koetshuis’ from which becomes clear that employees affect every type of innovation and that they play quite a large role in this restaurant.
TABLE 4
Case Results for ‘t Koetshuis
't Koetshuis Kitchen Servants Sales Customers National Local VWA Banks/inv
government government
Product innovations: 6-20 2-5 2-5
Process innovations: 2-5 2-5 1
Transaction innovations: 1 1 1
Radical product innovations: 5 1 0
Radical process innovations: 0 2 0
Radical trans innovations: 0 1 0
Salience in informing: Power x x x x Legitimacy x x x x Urgency x x Salience in consulting: Power x x x x Legitimacy x x x x Urgency x x Salience in co-creation: Power x x x x x Legitimacy x x x x Urgency x 4.1.2 De Oude Stoep
influenced by customers, kitchen staff and the VWA also have some influence; the kitchen staff are free to suggest menu items and the VWA sometimes suggest small corrections leading to changes in the menu items. Occasionally influence of servants leads to novel ideas in the restaurant. In processes these servants are most influential, their ideas lead to some innovations. Occasionally the ideas of customers and sales staff lead to innovation as well. The sales staff is active in marketing and publicity to present the restaurant to tourists. Flyers and promotion material is distributed on the ferry and in hotels. ‘De Oude Stoep’ does not innovate very much but the innovations that are implemented in products, processes and transaction methods, about two-third are radical. The management is consistent in its perspective on salience. Its staff and customers are believed to possess legitimacy and the government, lenders of credit and customers are perceived to have power. This means that ‘De Oude Stoep’ is influenced to the highest extent by customers, possessing two salience attributes. Table 5 shows the results in influence and salience for De Oude Stoep. For the initiation of every innovation type other stakeholders are mostly responsible. Kitchen staff, customers, the VWA and servants affect the impact of the innovations most. Looking at salience, customers are most influential and none of the stakeholders are considered to possess urgency by the management.
TABLE 5
Case Results for De Oude Stoep
De Oude Stoep Kitchen Servants Sales Customers National Local VWA Banks/inv
government government
Product innovations: 2-5 1 6-20 2-5
Process innovations: 2-5 1 1
Transaction innovations: 2-5
Radical product innovations: 2 0 2 0
Radical process innovations: 2 0 0
Radical trans innovations: 2
4.1.3 Humphrey’s
TABLE 6
Case Results for Humphrey’s
Humphrey's Kitchen Servants Sales Customers National Local VWA Shareholders Banks/inv
government government
Product innovations: 1 1 1 2-5
Process innovations: 6-20 6-20 2-5
Transaction innovations: 2-5
Radical product innovations: 0 1 0 5
Radical process innovations: 0 0 2
Radical trans innovations: 2
Salience in informing: Power x x x x x x Legitimacy x x x x Urgency Salience in consulting: Power x x x x x x Legitimacy x x x x Urgency Salience in co-creation: Power x x x x x x Legitimacy x x x x Urgency
4.1.4 The Gold Club
organizers as guests and profiling as the ‘place to be’ during the events. Shareholders and sales staff are the most important initiators for these innovations, but also ideas of customers have an influence, as well as a small influence of kitchen staff. The management considers its kitchen staff to be most influential, they believe this group to possess power and legitimacy. The other employee groups and customers possess legitimacy and the national and local government, as well as lenders of credit, all possess power. The exception is the VWA, who is believed to possess urgency in informing because their claims are important to customer health, they possess power in consulting because their ideas can be demands and they possess legitimacy in co-creation because they are considered to have the right and position to be an equal partner in co-operation in the products that are offered. Table 7 shows the results in influence and salience for the Gold Club. The results tell us that kitchen staff affect innovation most and that shareholders are influential in radical innovations and that customers have less affect on the restaurant management compared to the previous cases because they posses only legitimacy in informing.
TABLE 7
Case Results for the Gold Club
Gold Club Kitchen Servants Sales Customers National Local VWA Shareholders Banks/inv
government government
Product innovations: 6-20 6-20 2-5 2-5
Process innovations: 2-5 2-5
Transaction innovations: 1 2-5 2-5 2-5
Radical product innovations: 5 2 0 3
Radical process innovations: 0 1
Radical trans innovations: 0 2 2 3
Salience in informing: Power x x x x x Legitimacy x x x x Urgency x Salience in consulting: Power x x x x x x Legitimacy x x x x Urgency Salience in co-creation: Power x x x x x Legitimacy x x x x x Urgency 4.1.5 Monte Giove
TABLE 8
Case Results for Monte Giove
Monte Giove Kitchen Servants Sales Customers National Local VWA Banks/inv
government government
Product innovations: 2-5 1 2-5
Process innovations: 2-5 6-20 2-5 1
Transaction innovations: 2-5 1
Radical product innovations: 0 0 2
Radical process innovations: 0 5 2 0
Radical trans innovations: 0 1
Salience in informing: Power x x x x x Legitimacy x x x x x Urgency Salience in consulting: Power x x x x x Legitimacy x x x x Urgency Salience in co-creation: Power x x x x x Legitimacy x x x x Urgency 4.1.6 Yankee Doodle
Yankee Doodle is a restaurant in Heerenveen and manager Geert-Jan Wierda is relatively new to restaurant management. He became manager of this restaurant a year ago. Because of a car accident he had to leave the decisions in the restaurant to floor managers and managers of other establishments. Because he is relatively new and because of his short absence he does not yet know the firm as well as he wants. Interaction with outside stakeholders is mostly done by floor management and he is still learning about his employees. He stimulates contributions from his staff by encouraging them to share ideas and opinions.
works with part-time servants and flexible personnel. Not many process innovations have taken place in the restaurant. The innovations that did take place were initiated by customers, the VWA and shareholders. Marketing and sales are very important to the restaurant since they focus on new customers every time, or repeat visits. Many marketing actions are used to promote their products and services. The sales staff and shareholders are responsible for promotion in gazettes, on the website and on regional television in the north of the Netherlands. Shareholders, similar to the customers, have power and legitimacy. For shareholders this is the case because of their ownership, but since they also have a lot of knowledge of the industry and of catering, the also posses legitimacy according to the management. The VWA is seen as having power for imposing their will, and urgency because their findings may contribute to safety and well-being of staff and customers. All staff are seen as legitimate and the government, banks and investors all possess power according to the management. Table 9 shows the results in influence and salience for Yankee Doodle. As it turns out, shareholders affect the product, process and radical innovativeness in this restaurants.
TABLE 9
Case Results for Yankee Doodle
Yankee Doodle Kitchen Servants Sales Customers National Local VWA Shareholders Banks/inv
government government
Product innovations: 2-5 2-5 2-5 6-20
Process innovations: 2-5 2-5 2-5
Transaction innovations: 6-20 2-5
Radical product innovations: 3 2 1 10
Radical process innovations: 0 0 2
Radical trans innovations: 3 2
Salience in informing: Power x x x x x x Legitimacy x x x x x Urgency x Salience in consulting: Power x x x x x x Legitimacy x x x x x Urgency x Salience in co-creation: Power x x x x x x Legitimacy x x x x x Urgency x 4.2 Innovation Capacity
innovations. Influence of employees leads to many radical innovations and customers have most influence in incremental innovations. In restaurant ‘De Oude Stoep’ there is more variety in stakeholder influence. Customers, kitchen staff and the VWA affect product innovations, servants affect process innovations most and the sales staff has most influence in transaction innovations. This means that employees are also important for innovation in this restaurant, but that there is also a contribution from the customers and the VWA. These kitchen staff and customers also have a great influence in radical, servants and sales staff are contributors to respectively incremental process and transaction innovation. Restaurant ‘Humphrey’s’ is strongly affected by the shareholders, they are almost the only stakeholders that have an influence on changes in products, the staff contribute to innovations in processes and transactions. At the ‘Gold Club’ many changes in the products that are offered come from ideas of customers and employees. Also shareholders play a role in the innovativeness of the restaurant. Another restaurant with shareholders is ‘Yankee Doodle’, and this restaurant is also affected in innovation by this stakeholder group. In this restaurant they are important for changes in the products and much of these innovations are radical. ‘Monte Giove’ relies mostly on the influence of its employees and customers for innovations in the restaurant.
product and process innovativeness however are affected a little. Shareholders influence restaurants in every innovation type. Dealing with shareholders leads to quite some product innovations, and an smaller amount of renewals in processes and transaction methods. The stakeholder group of banks and investors does not affect any innovation type by interacting with restaurants.
In the smallest restaurants of these cases the product innovation is much lower. A great difference can be seen for the national government, the innovativeness concerning products at the three smallest restaurants of this case research does not change at all. The same can be said for shareholders, where none of the innovations induced by stakeholder interaction are created. In process innovation, the largest restaurants are much more influenced by kitchen staff. The serving staff have a great influence on process renewals in the smallest restaurant. These smallest restaurants of the cases are more influenced by serving staff than the largest three restaurants. One explanation given by a restaurant manager is the presence of flexible personnel in large restaurants. In transaction innovation, the government, the VWA and banks and investors have no impact. Especially the sales staff and shareholders influence transaction innovation. A small influence comes from kitchen staff, servants and customers. Shareholder interaction results in quite a few innovations as well.
4.3 Impact of Innovations
The cases indicate that the largest share of radical product innovation comes from shareholders and that almost half of the innovations from kitchen staff interaction are radical. Also sales staff and customers account for quite a large share of radical innovations. Interaction with servants leads to a smaller share and none of the innovations caused by interaction with the national government and the VWA are radical, they are all incremental. Only three groups invoke radical transaction innovation: sales staff, customers and shareholders. Shareholders are the largest contributors to radical innovation followed by customers and sales staff. Innovations resulting from interacting with the national government and the VWA all result fully in incremental innovations. Servants and shareholders have the greatest influences in radical innovation. Interaction with kitchen staff, sales staff, the local government and the VWA results in incremental innovations. The few transaction innovations resulting from interacting with kitchen and sales staff are all incremental. The transaction innovations that are invoked by interacting with sales staff and customers are about the same as average, but the share of radical innovations invoked by shareholder interaction is large.
4.4 Stakeholder Salience
consulting. The management of the ‘Gold Club’ consider their kitchen staff to be their most influential stakeholder. Perceived as powerful and legitimate, the kitchen staff is a dominant stakeholder. The VWA has different influences in interaction types at the ‘Gold Club’. In informing management considers them to possess urgency, in consulting they are perceived as powerful and in co-creation they are seen as legitimate. Restaurant ‘Monte Giove’ considers banks and investors to be powerful and legitimate in informing. Restaurant ‘Yankee Doodle’ perceives two other stakeholders to be expectant besides customers. The VWA is seen as a dangerous stakeholder and shareholders are considered to be dominant stakeholders.
In informing, kitchen staff, servants, sales staff and consumers are all attributed legitimacy. The governments, shareholders and banks and investors are all attributed power. By far, most of the participants agree that the VWA possesses power, and most managers attribute power to consumers. Customers turn out to be the only stakeholder group possessing two salience characteristics. Legitimacy in consulting is attributed to kitchen staff, servants, sales staff and customers. Power in consulting is attributed to all government bodies, shareholders and banks and investors, and by most participants to customers. This means that customers are the only stakeholder group in consulting with two salience characteristics, where all the others have one. The outcome of salience in co-creating is not very different. The participants in the case study agree that kitchen and sales staff, servants and customers have legitimacy, and that the government bodies, shareholders, banks and investors all possess power. Also in co-creating, customers are attributed power by most participants. Customers are the only stakeholder group possessing two salience characteristics.
There are many similarities in salience attributed to stakeholders in informing, consulting and co-creating. Kitchen staff, servants and sales staff all possess legitimacy, they are all latent stakeholders for possessing one salience attribute. They are discretionary stakeholders and they can not influence the restaurant directly because they have no power and urgent claims. Customers possess power and legitimacy. Because of this, customers are the only expectant stakeholders of this research. They are dominant stakeholders because they are powerful and legitimate. The other stakeholder groups, the national government, the local government, the VWA, shareholders and banks and investors are all latent stakeholders. They possess power and are therefore dormant stakeholders, they can use their powerful positions to impose their will.
CHAPTER 5. CONCLUSION
The research question intended to answer how stakeholders influence a restaurant’s innovation capacity. After finding and applying the concepts, relations and gathering data, the research question can be answered.
5.1 Stakeholder Influence in Innovation Capacity
First, the influence of stakeholders in the innovation capacity of restaurants is determined by answering the first sub question: How does influence of employees, customers, government and lenders of credit affect innovations and innovation impact? Overall in these cases, kitchen staff, customers and shareholders help generate most innovations, but the amount of innovations that they help generate differ for each innovation type. Product innovations are mostly caused by interacting with kitchen staff, customers and shareholders. For process innovations, the most valuable stakeholders that are responsible by interacting with them are kitchen staff and servants. Transaction innovations are often the result of interaction with sales staff, customers and shareholders. It appears that interaction with the national and the local government do not often lead to innovation. It also appears that the restaurants that have shareholders are greatly influenced by these stakeholders. Restaurants that do not have shareholders are more affected by its staff and its customers. The research shows that banks and investors do not have a share in the innovation capacity of restaurants at all. The largest share of the innovations found is incremental. Most radical product innovations are the result of interacting with kitchen staff, sales staff, customers and shareholders, involving servants mostly leads to incremental innovation. So even though shareholders are not responsible for helping to find many new product innovations, most of these innovations are radical. In process innovation, more than half of the innovations are radical. This is not the case for servants and customers, which have a relatively high share in radical innovation but still most innovations are incremental. Innovations in marketing and sales are mostly created with the help of shareholders, customers and sales staff. Most of these innovations are developed with the help of shareholders, of which only a small share is incremental, but also the help of customers and sales staff leads to about half radical innovations.
Employees were expected to contribute to product and process innovation because of their firm knowledge. This has been confirmed by the cases in which employees are often contributors to product and process renewals and sometimes also in innovations in sales and marketing. Lenders of credit were expected to play a role in innovation capacity because their funds are used and they might want to be insured that they eventually have their investments returned to them. As it turns out, banks and investors have no, or hardly any influence in innovation capacity. For shareholders this is different, they play a large role in the innovation capacity of the firms in which they are present. Table 10 shows an oversight of the concluding case results for stakeholder influence in product, process and transaction innovations and the influence in radical and incremental innovations. It shows the importance of staff, consumers and shareholders. On the other hand it also shows that the government and banks and investors are not influential in innovation capacity in these cases.
TABLE 10
Conclusion of Stakeholder Influence in Innovation Capacity
Stakeholder influence Kitchen Servants Sales Consumers National Local VWA Shareholders Banks/
government government investors
Product innovations + - - + - - - + -
Process innovations + + - +/- - - - +/- -
Transaction innovations - - + +/- - - - +/- -
Radical product innovations + - - + +
Radical process innovations - + - - +
Radical transaction innov. + + +
Incremental product innov. - + + - + + -
Incremental process innov. + - + + + + -
Incremental transaction innov. - - -
5.2 Stakeholder Salience
stakeholders to have the same salience in every interaction type. None of the stakeholders have urgency, staff have legitimacy and government and lenders of credit possess power.
TABLE 11
Conclusion of Stakeholder Salience in interaction
Kitchen Servants Sales Consumers National Local VWA Shareholders Banks/
government government investors
Salience in informing: Power X X X X X X Legitimacy X X X X Urgency Salience in consulting: Power X X X X X X Legitimacy X X X X Urgency Salience in co-creation: Power X X X X X X Legitimacy X X X X Urgency 5.3 Discussion
The conclusion of this research is the description of how stakeholders influence a restaurant’s innovative capacity. So do stakeholders with more salience lead to more innovation? I do believe that there is a relation, but that it is difficult to determine from this research. It may depend on the degree of the attributes, which the salience model does not measure. For example, shareholders have power, just as other lenders of credit and the government do, but restaurant managers may feel that shareholders have more power than the others, and therefore have more influence. Then, is there a relation between salience and innovation impact? In these cases there is no relation. There are no similarities between radical and incremental innovations amongst stakeholders with one salience attribute. Also customers, the most influential stakeholder group with power and legitimacy, have a small share of radical product innovations but a large share in radical transaction innovations.
Another question is whether the results of this research would be similar in other industries. The restaurant industry was chosen because of its visible processes and products so that changes in innovation capacity would be easier to detect. The concept is similar to other industries, where the need to be creative and to keep up with the market is the same. As long as the firms in the industry are flexible in its innovation policies and as long as the company culture is open for change, I believe that similar data will be found. When it comes to salience I believe that personnel are often seen as legitimate, that customers are overall seen as most important and they should be most influential. Also it was no surprise that most people think of government bodies and credit lenders as powerful.
though they would have different products, services and innovations. In transaction this might be slightly the case since different prices and promotional activities are used, but it is unlikely that the amount, the type and the impact of innovations differ since they target groups all exist of the same culture. Since most of the participant have menu items as products, they all try to satisfy the same group of people. Therefore the amount, impact and type of innovations are comparable.
For future research an analysis of the extent to which stakeholders can possess power, legitimacy or urgency may be relevant. Possibly there are different levels of power, legitimacy or urgency, for example, maybe lenders of credit are believed to be more powerful than the government. Are stakeholders possessing any salience attribute as influential as stakeholders with any other attribute? When there are contradicting claims this could be the argument for the final decision. Another recommendation is to follow firms over a greater period of time to keep up with their innovative behaviour. Also, a survey with a large sample size can be used for significance in statistics for innovation capacity and salience. This way the statistics become more reliable and firms are likely to be more specific about their innovations. Furthermore it might be interesting to investigate the influence that other stakeholders like suppliers and interest groups have on innovation capacity.
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