INCREMENTAL INNOVATION AND RADICAL INNOVATION: THE IMPACTS OF HUMAN, STRUCTURAL, SOCIAL, AND RELATIONAL CAPITAL ELEMENTS By Jung Young Lee A DISSERTATION Submitted to Michigan State University in partial fulfillment of the requirements for the degree of DOCTOR OF PHILOSOPHY Operations and Sourcing Management 2011 ABSTRACT INCREMENTAL INNOVATION AND RADICAL INNOVATION: THE IMPACTS OF HUMAN, STRUCTURAL, SOCIAL, AND RELATIONAL CAPITAL ELEMENTS By Jung Young Lee Intellectual capital collectively refers to knowledge resources stored in various forms within organizations. Since intangible resources, instead of tangible resources, actually contribute to generating a competitive advantage, the recognition of the importance of intellectual capital has been growing. Nevertheless, organizations and researchers experience difficulties in identifying and managing intellectual capital to increase the performance of different types of innovation projects. Responding to these challenges, this dissertation first theoretically elaborates four key dimensions of intellectual capital, including human capital, structural capital, social capital and relational capital. Second, based on this framework, key elements of intellectual capital are identified. Third, using survey data from manufacturing companies in the U.S., this dissertation empirically examines how intellectual capital elements influence the performance of incremental innovation projects and radical innovation projects differently. The results suggest that social capital and relational capital elements should be carefully managed in response to different types of innovation projects. Copyright by Jung Young Lee 2011 ACKNOWLEDGMENTS This dissertation would not have come into existence without the generous support and encouragement of many people. First, I would like to express my profound gratitude to my advisor, Dr. Morgan Swink, who gave me the opportunity to start my doctoral journey at Michigan State University and has always encouraged me to be a good researcher. His rigorous supervision and insight improved the quality of my dissertation and other projects significantly. The last four years working with him and learning from him truly blessed my Ph.D. life. I am also heartily thankful to my committee members. Dr. Roger Calantone has taught me how to view and evaluate my approach to solve research problems more critically. His endlessly energetic research activities always inspired me. Dr. Gary Ragatz provided me with helpful suggestions on preliminary research design and survey instrument. Dr. Sriram Narayanan’s thoughtful criticism and attention to details contributed to the strength of this dissertation from top to bottom. Dr. David Closs reminded me of the importance of translating academic implications to managerial implications. Having this committee for my dissertation was a great privilege. It is difficult to overstate my gratitude to many outstanding professors at MSU for showing me how to think as a researcher and how to teach students as a mentor: Dr. Ram Narasimhan, Dr. Srinivas Talluri, Dr.Carol Prahinski, and Dr.Steven Melnyk. I am indebted to many dearest friends for providing a warm environment to endure all the hard moments in the journey of getting a Ph.D. degree: Rebecca Flyod, Ravi Srinivasan, Jieun iv Lee, Linlin Chai, Billur Akdeniz, Bob Viswanathan, Matthias Spitzmueller, Delvon Parker, Jeannette Mena, and Evelyne Vanpoucke. Finally, I want to dedicate this dissertation to my parents, Jong Yang Lee and Suk Hee Yoon, my younger brother, Chan Young Lee, and my soul mate, Da Woon Jung for their support and understanding during the long years of my doctoral studies. v TABLE OF CONTETS LIST OF TABLES ....................................................................................................................... viii LIST OF FIGURES ........................................................................................................................ x 1 INTRODUCTION .................................................................................................................. 1 1.1 Research Background ....................................................................................................... 1 1.2 Research Objectives ......................................................................................................... 4 1.3 Research Contributions .................................................................................................... 5 1.4 Research Overview .......................................................................................................... 7 2 LITERATURE REVIEW ....................................................................................................... 8 2.1 Intellectual capital ............................................................................................................ 8 2.1.1 Human Capital ........................................................................................................ 13 2.1.2 Structural Capital .................................................................................................... 13 2.1.3 Social Capital .......................................................................................................... 14 2.1.4 Relational Capital.................................................................................................... 15 2.2 The nature of innovation ................................................................................................ 16 2.2.1 Incremental Innovation ........................................................................................... 17 2.2.2 Radical Innovation .................................................................................................. 18 3 THEORY DEVELOPMENT ................................................................................................ 21 3.1 Effects of Human Capital Elements on Innovation Performances ................................. 23 3.2 Effects of Structural Capital Elements on Innovation Performances ............................. 27 3.3 Effects of Social Capital Elements on Innovation Performances .................................. 32 3.4 Effects on Relational Capital Elements on Innovation Performances ........................... 34 3.5 Interactions among Intellectual Capital Elements .......................................................... 39 3.5.1 Interaction between Human Capital and Social Capital Elements ......................... 39 3.5.2 Interaction between Structural Capital and Social Capital Elements ..................... 41 4 METHOD ............................................................................................................................. 43 4.1 Data Collection ............................................................................................................... 43 4.2 Sample ............................................................................................................................ 45 4.3 Nonresponse bias............................................................................................................ 47 4.4 Measurement Instrument ................................................................................................ 49 4.4.1 Construction ............................................................................................................ 49 4.4.2 Measurement Items ................................................................................................. 50 4.5 Scale Reliability and Validity ........................................................................................ 54 vi 4.5.1 Construct Reliability and Validity .......................................................................... 54 4.5.2 Common Method Bias ............................................................................................ 62 5 ANALYSES AND RESULTS .............................................................................................. 64 5.1 Analyses ......................................................................................................................... 64 5.2 Results ............................................................................................................................ 70 5.2.1 Time Performance ................................................................................................... 70 5.2.2 Cost Performance .................................................................................................... 91 6 DISCUSSION ..................................................................................................................... 109 6.1 Theoretical Implications ............................................................................................... 110 6.1.1 Empirical Verification of Intellectual Capital Elements ....................................... 110 6.1.2 Examination of Project Radicalness as a Moderator ............................................ 112 6.1.3 Inconsistent results with different outcome variables and different moderators .. 118 6.1.4 Interactions among intellectual capital elements .................................................. 120 6.2 Managerial Implications ............................................................................................... 121 7 LIMITATIONS AND FUTURE RESEARCH DIRECTION ............................................ 125 APPENDIX: Executive Summary .............................................................................................