Developing a Valid and Reliable Measure of Product Innovativeness for Entrepreneurship Research Author Ganbaatar, Batkhuyag Published 2018-09 Thesis Type Thesis (PhD Doctorate) School Dept of Marketing DOI https://doi.org/10.25904/1912/1587 Copyright Statement The author owns the copyright in this thesis, unless stated otherwise. Downloaded from http://hdl.handle.net/10072/382675 Griffith Research Online https://research-repository.griffith.edu.au Griffith Business School Submitted in fulfilment of the requirements of the degree of Doctor of Philosophy by Batkhuyag Ganbaatar (BSc, MBA) Developing a Valid and Reliable Measure of Product Innovativeness for Entrepreneurship Research Professor Evan Douglas Dr Julienne Senyard Dr Owen Wright September 2018 " 0).&&#%-)#--"#,0)+%-)'2+&2&)/0# (,).&'- (%"-,-,!,('0")",,")0('-"-+.'(#(!) &)/(,.**)+- i %"! ,)() -"!+-,-$).+(2,#('2&# #,).--)(0).&&#%-)-% -"#, )**)+-.(#-2 -) 1*+,, '2 *,- !+-#-. 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Therefore, being innovative is key for any business, because it provides competitive advantages, enables product differentiation, reduces production costs, improves dynamic capabilities, and strengthens absorptive capacities. Moreover, innovation is vital if entrepreneurial new and small firms are to survive and to compete with larger and established firms. Consequently, there is great academic and practical interest in defining and measuring innovation. However, to date, measures of innovation have lacked reliability and consistency across products, across industries, and across time. In this thesis, a new way of measuring innovativeness through a direct and objective assessment of product innovation is proposed that can be applied to any product in any market. It is especially useful for entrepreneurial new and small firms, because most current measures of product innovativeness have been developed in the context of larger firms and do not apply well to new and small businesses that do not have an explicit R&D department or budget, and few if any patent applications in the early stages of their existence. In any case, firm-level measures tend to focus on antecedent and consequential measures that do not correlate well with innovativeness at the product level, which is of prime importance to entrepreneurs and their investors. Some measures do focus on the product level, but these tend to be subjective (reliant on opinions); may be simplistically categorical (e.g. radical vs. incremental); and may be ordinal (e.g. Likert scales) rather than cardinal objective measures. To rectify these measurement, reliability, and consistency problems, an authentic measure of product innovativeness is developed that is direct (i.e. measured at the product level); assesses observable innovations in the product (i.e. output driven); objective (i.e. vi independent of manager or customer opinion); contemporaneous (i.e. reflective of the specific timing of the innovation) and results in a continuous cardinal measure that can indicate absolute values of product innovativeness. This new measure ensures validity, as it focuses directly on the product’s innovations, and consistency across observations, as it systematically measures observable novel aspects of the product, such that the measure can be verified externally by a third party. For researchers, this new measure will facilitate reliable inter-firm comparisons and enable longitudinal studies of product innovativeness, its causal antecedents, and its consequences. The new measure will also prove useful for entrepreneurs and their investors, as it will provide more reliable and comparative information on the innovativeness of new products relative to others. It is equally applicable to product innovation by larger firms, and in that context could be tested for efficacy against the established measures. The new measure of product innovativeness integrates multiple gradations of both technical novelty and market novelty using complex algorithms that nonetheless reduce to a simple spreadsheet calculation (or an “app”) that computes the “compound product innovativeness score” effortlessly. Application of the new measure is demonstrated, both cross-sectional and longitudinal studies, in the context of the U.S. smartphone industry. Keywords: Technical novelty; Market novelty; Product innovation, Product newness; Innovativeness measures; vii '5 5'3 53' 3' 9 ; : :8 ; <> < ?8 = A= > 9:9 ? 9<; @ 9>@ 9?A :89 Thesis: Developing a Valid and Reliable Measure of Product Innovativeness for Entrepreneurship Research 3''' 5'3 53' 9 9 ; 1.1 Introduction; 1.2 Research Background= 1.3 Problem Statement? 1.4 Research Question and Sub-Questions98 1.5 Context of the Study99 1.6 Research Approach9: 1.7 Significances and Implications of the Study9; 1.8 Definitions of Key Terms9= 1.9 The Structure of the Thesis (roadmap)9? 1.10 Conclusion9A : :8 2.1 Introduction:8 2.2 Innovation and Entrepreneurship:9 Innovation and Economic Growth (Macro Level Impacts):: Innovation as a Process/Outcome (Micro Level):; 2.3 Innovation Measurement:< 2.4 Product Innovation Measurements;8 2.4.1 Firm-level product innovation measurement;9 2.4.1.1 Input measurements;: 2.4.1.2 Process measurements;< Thesis: Developing a Valid and Reliable Measure of Product Innovativeness for Entrepreneurship Research '5 2.4.1.3 Output measurements;> 2.4.2 Product-level product innovation measurement;@ 2.5 Research Gaps<: 2.6 Research Question Formulation<; 2.7 Research Objectives<< 2.8 Conclusion of Chapter 2.<= ; <> 3.1 Introduction<> 3.2 Research Paradigm<? 3.3 Research Methodology=; 3.3.1 Formative and Objective Scale Development Methodology=< 3.3.2 Longitudinal research methodology=@ 3.4 Research Methods>8 3.4.1 Target population>8 3.4.2 Sampling Frame (Listing of the products)>8 3.4.3 Data-Collection Method>< 3.4.4 Data type>= 3.4.5 Sampling Method>= 3.4.6 Sample Size>= 3.5 Analysing methods>? 3.5.1 Product innovativeness measurement - CPIS>? 3.5.2 Descriptive analysis in longitudinal research>? 3.5.3 Causal analysis in longitudinal research>@ 3.6 Conclusion of Chapter 3>A Thesis: Developing a Valid and Reliable Measure of Product Innovativeness for Entrepreneurship Research 5 < ?8 4.1 Introduction?8 4.2 Reflective and Formative Measurement Models?9 4.3 Choosing an Effective Design for the New Measurement?= 4.4 Properties of the New Measure of Product Innovativeness?A 4.4.1 Directness of the Innovativeness Measure?A 4.4.2 Objectiveness of the Innovativeness Measure@8 4.4.3 Contemporaneousness of the Innovativeness Measure@9 4.4.4 Cardinality of the Innovativeness Measure@: 4.4.5 Universality of the Innovativeness Measure@< 4.4.6 Multidimensionality of the Innovativeness Measure@= 4.5 Theoretical Propositions for a New Measure of Innovativeness@= 4.5.1 Technical Novelty Dimension@? 4.5.2 Market Novelty DimensionA9 4.6 Conclusion of Chapter 4A< = A= 5.1 IntroductionA= 5.2 The Innovativeness MatrixA> 5.3 Two-stage Transformation Method for Product InnovativenessA@ 5.3.1 Technical Novelty ScoreA@ 5.3.2 Market Novelty Values98< 5.3.3 The Compound Product Innovativeness Score98? 5.3.4 Parameters of the functions98? 5.4 An Illustrative Example of Technical Novelty