Relationship Between Learning Orientation

Published Date: 02 Nov 2017

CHAPTER 2

LITERATURE REVIEW

Eshlaghy and Maatofi (2011) researched the relationship between learning orientation, innovation and performance of small-sized business firms in Iran. A sample of 82 small-sized firms were investigated. The different of learning orientation factors: commitment to learning, open-mindedness, and shared vision were measured, while three factors of performance were measured by profitability, sale, and return on investment (ROI). The results found that commitment to learning, open-mindedness, and shared vision has a positive and significant impact on innovation. Innovation has a positive effect on profitability, sale, and return on investment (ROI) of firms. However, commitment to learning has a positive and significant impact related to profitability, sale, and ROI. In addtion, the results were indicative of significantly positive relationships between open-mindedness and profitability, sale, and ROI, and also shared vision has a positive and significant impact related to profitability, sale, and ROI.

Salim and Sulaiman (2011) investigated the effect of organizational learning, innovation and performance of SMEs in Malaysia. A sample of 320 SME firms operating in the ICT industry were investigated. Empirical results indicated that organizational learning has a positive and significant impact related to organizational innovation. Organizational innovation has a positive and significant impact related to organizational performance. The researchers indicated that the importance of organizational learning to innovation attempts to deeply understand its environments, which includes the customers, competitors, and emerging technology. Innovation also involves the desire to adopt new ideas. This means that a positive learning climate is valuable for firms that seek to outperform its competitors through various innovation processes. In addition, performance is a central concern to all firms, understanding the relationship between performance and innovation may help firms develop better competitive strategies.

Eris and Ozmen (2012) examined the effect of market orientation, learning orientation and innovativeness on firm performance. Data was collected from 102 owners or CEOs or directors or managers from Small-Medium-Large logistic firms in Turkey. The results found that market orientation has a positive and significant impact on learning orientation. Learning orientation has a positive and significant impact on innovativeness, and while innovativeness has a positive and significant impact on firm performance. In addition, learning orientation acts as mediator in market orientation’s impact on innovativeness. Innovativeness acts as mediator in learning orientation’s impact on performance. Therefore, learning orientation and innovativeness act as a mediator in market orientation’s impact on firm performance.

Suliyanto and Rahab (2012) studied the role of market orientation and learning orientation in improving innovativeness and performance of SMEs in Indonesia. Data was collected from 150 small medium enterprises in Indonesia. The results revealed that market orientation has a positive and significant influence on learning orientation, innovativeness, and business performance. Learning orientation has a positive and significant influence on innovativeness, and while innovativeness has a positive and significant influence on business performance. However, learning orientation has no significant influence on business performance.

Table 2.3

Summary of Literature concerning Learning Organization, Organizational Innovativeness, and Organizational Performance

Author/Year

Respondents

Independent Variables

Dependent Variables

Mediator/Moderator

Findings

Calantone, Cavusgil, and Zhao. (2002)

187 vice presidents from manufacturing and service SMEs in the United State

-Learning orientation

-Firm performance:

-Firm innovativeness

-Organization age (moderator)

-LO -> Firm innovativeness (+/S)

-LO -> Firm performance (+/S)

-Firm innovativeness -> Firm performance (+/S)

-LO->Organization age ->Firm innovativess (+/S)

-LO-> Organization age ->Firm performance (+/S)

Hult, Hurley, and Knight (2004)

181 marketing managers from industrial-based SMEs in the United State.

-Learning orientation

-Market orientation

-Entrepreneurial orientation

-Business performance

-Innovativeness

-MO, LO, EO -> Innovativness (+/S)

-Innovativeness -> BP (+/S)

-MO -> BP (+/S)

-LO -> BP (+/NS)

-EO -> BP (+/S)

Lee and Tsai (2005)

100 manufacturing and service Small-Medium-Large firms in Taiwan

-Learning orientation

-Market orientation

-Business performance

-Innovativeness

-Business operation mode (moderator)

-Business operation mode -> Innovativeness (+/S)

-MO, LO -> Innovativeness (+/S)

-MO, LO - >Business operation mode -> Innovativeness (+/S)

-LO -> Innovativeness -> BP (+/S)

-Innovativeness -> BP (+/S)

-MO, LO -> BP (+/S)

-MO, LO, Business operation mode -> Innovativeness -> BP (+/S)

Note. (+)=Positive; S=Significant; NS= No Significant; LO=Learning Orientation; EO= Entrepreneurial orientation; MO=Market Orientation; BP=Business performance.

Table 2.3 (Continued)

Summary of Literature concerning Learning Organization, Organizational Innovativeness, and Organizational Performance

Author/Year

Respondents

Independent Variables

Dependent Variables

Mediator/Moderator

Findings

Keskin (2006)

157 managers from SMEs in Turkey

-Learning orientation

-Market orientation

-Firm performnace

-Firm innovativeness

-LO -> Firm innovativeness (+/S)

-MO -> Firm innovativeness (+/NS)

- MO -> Firm performance (+/NS)

-Firm innovativeness -> Firm performance (+/S)

-MO ->LO -> Firm innovativeness (+/S)

-MO -> LO (+/S)

Lin (2006)

246 SME business organizations in Taiwan

-Organizational learning culture

-Structural organicity

-Organizational effectiveness

-Organizational innovativeness

-Absorptive capacity

-Organizational learning culture -> OI, Absorptive capacity (+/S)

-SO -> OI (+/S)

-OI -> OE (+/S)

-Absorptive capacity -> OI, OE (+/S)

Jimenez-Jimenez, Valle and Hernandez-Espallardo (2008)

744 CEOs from manufacturing and service Small-Medium-Large firms in Spain.

-Organizational learning

-Market orientation

-Performance

-Innovation

-Innovation ->Performance (+/S)

-MO -> Innovation (+/S)

-OL -> Innovation (+/S)

-MO -> Performance (-/NS)

-OL->Performance (+/S)

Lin, Peng, and Kao (2008)

333 managers from SMEs in Taiwan.

-Learning orientation

-Entrepreneurial orientation

-Market orientation

-Business performance:

-Innovativeness

-EO -> MO (+/NS)

-MO -> LO (+/S)

-EO -> LO (+/NS)

-LO -> Innovativeness (+/S)

-Innovativeness -> BP (+/S)

-MO ->LO -> Innovativeness (+/S)

-EO ->LO -> Innovativeness (+/NS)

Note. (+)=Positive; (-)=Negative; S=Significant; NS= No Significant; LO=Learning Orientation; EO= Entrepreneurial orientation; MO=Market Orientation; SC= Structural organicity; OI=Organizational Innovativeness; OE= Organizational effectiveness; OL=Organizational Learning.

Table 2.3 (Continued)

Summary of Literature concerning Learning Organization, Organizational Innovativeness, and Organizational Performance

Author/Year

Respondents

Independent Variables

Dependent Variables

Mediator/Moderator

Findings

Ussahawanitchakit (2008)

115 top business executives of accounting firms in Thailand

-Commitment to learning

Shared vision

-Open-mindedness

-Intra-organizational knowledge sharing

-Firm efficiency

-Innovation orientation

-Commitment to learning -> Innovation (-/NS)

-Shared vision, open-mindedness, and intra-organizational knowledge sharing -> innovation orientation (+/S)

-Innovation -> Firm efficiency (+/S)

- Commitment to learning, shared vision, and open-mindedness -> Firm efficiency (+/NS)

-Intra-organizational knowledge sharing -> Firm efficiency (+/S)

Dhamadasa (2009)

222 manufacturing comprised of family and non-family SMEs in Australia

Commitment to learning

Shared vision

Networking

-Performance:

-Innovation

-Commitment to learning -> Innovation (+/NS)

-Shared vision -> Innovation (+/NS)

-Networking -> Innovation (+/S)

-Commitment to learning -> Performance (+/NS)

-Shared vision -> Performance (+/S)

-Networking -> Performance(+/NS)

-Innovation -> Performance (+/S)

-Commitment to learning ->Innovation -> Performance (+/NS)

-Share vision ->Innovation-> Performance (+/NS)

-Networking ->Innovation-> Performance (+/S)

Note. (+)=Positive; (-)=Negative; S=Significant; NS= No Significant.

Table 2.3 (Continued)

Summary of Literature concerning Learning Organization, Organizational Innovativeness, and Organizational Performance

Author/Year

Respondents

Independent Variables

Dependent Variables

Mediator/Moderator

Findings

Rhee, Park, and Lee (2010)

333 CEOs or senior managers of SMEs in Korea

-Market orientation

-Entrepreneurial orientation

-Learning orientation

-Performance

-Innovativeness

-MO -> LO (+/S)

-EO -> LO (+/S)

-LO -> Innovativeness (+/S)

-LO -> Performance (+/S)

-MO->LO->Innovativeness (+/S)

-EO->LO-> Innovativeness (+/S)

Eshlaghy and Maatofi (2011)

82 Small-Sized business firms in Iran

-Commitment to learning

-Open-mndedness

-Shared vision

Performance:

-Profitability

-Sale

-Return on investment

-Innovation

-Commitment to learning -> Innovation (+/S)

-Open-mindedness -> Innovation (+/S)

-Shared vision -> Innovation (+/S)

-Innovation -> Profitability (+/S)

-Innovation -> Sale (+/S)

-Innovation -> ROI (+/S)

-Commitment to learning -> Profitability, Sale, and ROI (+/S)

-Open-mindedness -> Profitability, Sale, and ROI (+/S)

-Shared vision -> Profitability, Sale, and ROI (+/S)

Salim and Sulaiman (2011)

320 SMEs in Malaysia

-Organizational learning

-Organizational performance

-Organizational innovation

-OL -> OI (+/S)

-OI -> OP (+/S)

Note. (+)=Positive; S=Significant; LO=Learning Orientation; MO=Market Orientation; EO= Entrepreneurial orientation; ROI=Return on Investment; OP= Organizational Performance; OL=Organizational Learning.

Table 2.3 (Continued)

Summary of Literature concerning Learning Organization, Organizational Innovativeness, and Organizational Performance

Author/Year

Respondents

Independent Variables

Dependent Variables

Mediator/Moderator

Findings

Eris and Ozmen (2012)

102 owners or CEOs or directors or managers from Small-Medium-Large logistic firms in Turkey.

-Learning orientation

-Market orientation

-Firm performance

-Innovativeness

-MO->LO->Innovativeness->Firm performance (+/S)

-MO -> LO (+/S)

-LO -> Innovativeness (+/S)

-Innovativeness -> Firm performance (+/S)

-MO -> LO -> Innovativeness (+/S)

-LO -> Innovativeness -> Firm performance (+/S)

Suliyanto and Rahab (2012)

150 SMEs in Indonesia

-Learning orientation

-Market orientation

-Business performance

-Innovativeness

-MO -> LO (+/S)

-MO -> Innovativeness (+/S)

-LO -> Innovativeness (+/S)

-MO -> BP (+/S)

-LO -> BP (+/NS)

-Innovativeness -> BP (+/S)

Note. (+)=Positive; S=Significant; NS= No Significant; LO=Learning Orientation; MO=Market Orientation; BP=Business Performance.

As summarized in Table 2.3, the majority of studies found the direct effects of learning orientation or organizational learning have a positive and significant impact on organizational innovativeness or innovation (Calantone et al., 2002; Hult et al., 2004; Lee & Tsai, 2005; Keskin, 2006; Lin, 2006; Jimenez-Jimenez et al., 2008; Lin et al., 2008; Rhee et al., 2010; Salim & Sulaiman, 2011; Eris & Ozmen, 2012; Suliyanto & Rahab, 2012). There are three studies that have tested the different dimensions of the learning orientation: commitment to learning, shared vision, open-mindedness, and intra-organizational knowledge sharing (Ussahawanitchakit, 2008); commitment to learning, shared vision, and networking (Dhamadasa, 2009); commitment to learning, open-mindedness, and shared vision (Eshlaghy & Maatofi, 2011) on innovation. However, there is no study that has investigated the direct effect of the seven dimensions of the learning organization: continuous learning, inquiry and dialogue, team learning, embedded system, empowerment, system connection, and strategic leadership on organizational innovativeness in SMEs. Thus, they need to be investigated in my model.

Furthermore, the majority of studies suggested the intervening position of innovativeness in their research framework but no empirical mediating test was conducted (Calantone et al., 2002; Hult et al., 2004; Keskin, 2006; Lin, 2006; Jimenez-Jimenez et al., 2008; Lin et al., 2008; Ussahawanitchakit, 2008; Rhee et al., 2010; Eshlaghy & Maatofi, 2011; Salim & Sulaiman, 2011; Suliyanto & Rahab, 2012). One study measured innovation, using a mediating test between the different dimensions of the learning and performance in SMEs (Dhamadasa, 2009). Two studies measured innovativeness , using a mediating test between the overall of learning and performance (Lee & Tsai, 2005; Eris & Ozmen, 2012). This study will investigate mediating test results, which have been lacking in previous studies in SMEs.

2.11 The Underpinning Theory

2.11.1 Resource-Based View of the Firm

The advent of the Resource-Based View of the Firm (RBV) (Barney, 1991; Penrose, 1959; Wernerfelt, 1984) has become one of the most influential and cited theories in strategic management research. It has moved to a more internal focus. It aspires to explain the internal sources of a firm’s sustained competitive advantage. RBV is an important in the strategic management literature explains firm performance (Penrose, 1959). The major domains for RBV suggested that firms should look inward to their resources. The term "resources" here refers to any type of tangible or intangible asset possessed and considered by the firm as strength (Wernerfelt, 1984). Barney (1991) specifically explicated how firm resources contribute to the sustained competitive advantage of the firm. He suggested that resources that are valuable, rare, inimitable and hard to replace with equivalent substitutes can be considered as potential sources of competitive advantage. These features limit the mobility of resources among firms and thus heterogeneity can be long lasting. Thus, by effectively integrating different resources within an organization, the firm is expected to find ultimate configurations that become sources of sustained competitive advantage and gain a competitive edge. However, Helfat and Peteraf (2003) defined resources as "an asset or input to production (tangible or intangible) that an organization owns, controls, or has access to on a semi-permanent basis", whereas an organizational capability is defined as "the ability of an organization to perform a coordinated set of tasks, utilizing organizational resources, for the purpose of achieving a particular end result’ (p.999).

Resource and capability are key concepts in strategic management literature. There are different views on these two concepts. Some researchers tend to view resources broadly as anything valuable for firm performance (Barney, 1991; Peteraf, 1993). Other researchers delineate resources and capabilities. These resources can include physical capital resources, human capital resources, and organizational resources such as capabilities, processes, culture, firm attributes, information, or knowledge, etc. (Barney, 1991). The capabilities of the firm contribute to attaining a sustainable competitive advantage and profitability (Day, 1994; Amit & Shoemaker, 1993). Day (1994) has defined capability as a "complex bundles of skills and accumulated knowledge, exercised through organizational processes that enable firms to coordinate activities and make use of their assets." Identification of capabilities is challenging because they are often deeply embedded in the processes of the firm. An important part of capabilities are the tacit knowledge that comes from employee experience, technical knowledge, and the training they receive to upgrade their skills. A capability that is relatively easy to identify is the knowledge stored in the repository of the firm – the formal procedures established within the organization to solve problems. As Amit and Shoemaker (1993) have defined that there are two key features that distinguish a capability from a resource. First, a capability is firm specific since it is embedded in the organization and its processes, while an ordinary resource is not (Makadok, 2001). This firm-specific character of capabilities implies that if an organization is completely dissolved, then its capabilities would also disappear, while in contrast, its resources could survive in the hands of a new owner. The second feature that distinguishes a capability from a resource is that the primary purpose of a capability is to enhance the effectiveness and productivity of resources that a firm possesses in order to accomplish its targets, acting as ‘intermediate goods’. In the causation chain of value creation, resources are viewed as the source of capabilities, and the latter is closer to the ultimate goals such as firm performance or value creation (Amit & Shoemaker, 1993; Grant, 1991).

Learning helps firms to generate new knowledge, combine existing knowledge and skills, and adapt to changing market conditions. Knowledge is also a central issue in several other research traditions that stress on the importance of both organizational learning and the transfer and diffusion of innovative capabilities within the firm (Boisot, 1995; Grant, 1996; Huber, 1991; Levitt & March, 1988).

Research evidence on learning also relates to innovation (Argyris & Schon, 1978; Stata, 1989; Greve, 2005). Different learning styles and innovation activities have different impacts on organizational operations, and through the adoption of new innovations, organizations attempt to reduce production cost, to increase efficiency, and to improve performance (Damanpour, 1991; McKee, 1992). Argyris and Schon (1978) suggested that learning would enhance the innovative capacity of an organization. Stata (1989) regards innovation as a result of individual and learning and as the only source of lasting competitive advantage in a knowledge-intensive industry. In addition, Greve (2005) described how organizations can learn from the innovations made or adopted by other organizations. He presented a framework for inter-organizational learning that allows the study of how learning is affected by the characteristics of the origin and destination organizations, as well as their relationships. The findings of these studies reveal that learning and innovation are related.

Based on the resource-based view, learning and innovation are considered as the capabilities of the firms that are used as the basis for competitive advantage which can lead firms to superior performance. Given that the resource-based view addresses the resources and capabilities of the firm as an underlying factor of performance, the resource-based view was found to be a suitable theory to explain the research framework in the relationship between learning organization, organizational innovativeness and organizational performance.

2.12 Chapter Summary

In this chapter, various relevant literatures have been reviewed for the conceptualization of the research framework. Along with the intended research objectives, three major areas have been considered: the learning organization, organizational innovativeness and organizational performance underpinning theory with the resource-based view of the firm. Regarding the learning organization-related literature, the following topics have been reviewed: (1) conceptualization of learning organization; (2) definitions and levels of learning organization process; and (3) review of the learning organization literature, focusing on the seven imperative actions of the Dimensions of the Learning Organization Questionnaire (DLOQ) and organizational performance. Topics reviewed for discussion of the organizational innovativeness and organizational performance included the following: (1) conceptualization of organizational innovativeness; (2) conceptualization of organizational performance; and (3) review of literature concerning the learning organization, organizational innovativeness and organizational performance in small enterprises, small and medium enterprises, and small-medium-large enterprises. Finally, the underpinning theory, resource-based view of the firm is used to support the entire research framework that promotes superior performance in firms.