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Int. Journal of Business Science and Applied Management, Volume 16, Issue 3, 2021
The Impact of Innovation Competitive Advantage on
Product Quality for Sustainable Growth among SMEs: An
Empirical Analysis
Danjuma Tali Nimfa
Department of Business Administration, Faculty of Management Sciences, University of Jos.
PMB 2084 Jos, Plateau State, Nigeria
Tel: +2348038518078
Email: nimfad@unijos.edu.ng
Md Uzir Hossain Uzir
Department of Marketing, Putra Business School (AACSB Accredited), Universiti Putra Malaysia
(UPM)
43400, Serdang Selangor, Malaysia
Tel: +60147206638
Email: hossainuzir@gmail.com
Livinus Nkuri Maimako
Putra Business School (AACSB Accredited), Universiti Putra Malaysia (UPM)
43400, Serdang Selangor, Malaysia
Tel: +2347039666698
Email: mrmaimakolivinus@gmail.com
Bilal Eneizan
Department of Marketing, Faculty of Business, Jadara University
Irbid, Jadara, Jordan
Tel: +962796302311
Email: bilalmomane@gmail.com
Ahmad Shaharudin Abdul Latiff
Putra Business School (AACSB Accredited), Universiti Putra Malaysia (UPM)
43400, Serdang Selangor, Malaysia
Tel: +60192100100
Email: shaharudin@putrabs.edu.my
Sazali Abdul Wahab
Putra Business School (AACSB Accredited), Universiti Putra Malaysia (UPM)
43400, Serdang Selangor, Malaysia
Tel: +60163317100
Email: sazali@putrabs.edu.my
Abstract
Supported by the dynamic capabilities theory of the firm, this study considered innovation competitive
advantage, product quality, and technology adoption as the core dynamic capabilities of manufacturing
SMEs. The purpose of this study was to investigate the impact of two components of innovation
competitive advantage, that is, customer preference and strategic business model, on product quality for
sustainable growth among SMEs. It also examined the mediating effect of technology adoption on the
relationship between innovation competitive advantage and product quality. Survey data was collected
from 245 manufacturing SMEs in Nigeria and analysed using partial least squares structural equation
modelling. The results revealed that customer preference does not directly affect product quality;
however, technology adoption mediates the relationship between customer preference and product
quality. The strategic business model was found to have a significant positive effect on product quality,
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40
and this relationship was mediated by technology adoption as well. This research recommends that
manufacturing SME managers recognise that improving product quality through innovation
competitive advantage strategies and technology adoption is advantageous for the sustainable growth of
SMEs.
Keywords: Innovation competitive advantage, Product quality, Customer preference, Strategic business
model
Danjuma Tali Nimfa, Md Uzir Hossain Uzir, Livinus Nkuri Maimako, Bilal Eneizan, Ahmad
Shaharudin Abdul Latiff and Sazali Abdul Wahab
41
1. INTRODUCTION
Maintaining product quality in a changing marketplace has become increasingly strenuous for
manufacturers. This growing challenge has made it a requirement for owner managers worldwide to
persistently improve their quality performance (Teh et al., 2015). Often, it leaves them with no choice
other than leveraging innovation competitive advantage to offer attractive product quality to customers.
Innovation competitive advantage can be described as an enterprise’s capability to productively create
new competitive advantage through the discovery of new and better approaches and the introduction of
these approaches to the marketplace (Nimfa et al., 2020; Porter, 1990). In fact, under prevailing
dynamic conditions, quality efficiency, innovation, and new product development constitute critical
elements of competitive advantage (Li et al., 2009; Subramanian et al., 2019). For instance, Piveteau
and Smagghue (2019) found that organisations add products to their export portfolio when their quality
increases and their costs decline. As quality has shifted to five distinct paradigms (i.e. transcendent,
product-based, user-based, manufacturing-based, and value-based) (Sebastianelli, & Tamimi, 2002),
quality improvements cannot be made solely via minor modifications to standard product processes. On
the contrary, leveraging product quality for competitive advantage entails substantial changes to
manufacturing patterns, customer preferences, and strategic business models, especially among small
and medium-sized enterprises (SMEs) whose sustainable growth requires urgent attention. Scholarship
efforts have thus been made to understand the significant impact of product quality on the competitive
advantage and sustainable growth of SMEs (Vermeulen, & Witjes, 2016).
In this regard, innovation has a positive effect on product quality and leads to a continuum of
sustainable and strategic growth. Innovation incorporates as well as addresses numerous key elements
of product quality, such as: the general life phase of services and products; management systems and
their integration; business models; supply chain management; and the development and implementation
of competitive methods (Sukitsch et al., 2015). Daidj (2014) noted that technological innovation can
dramatically change the marketplace, transform favourable areas for nations, and reap competitive
rewards for firms. Likewise, Chen and Gayle (2019) argued that firms’ sharing of technology can
emphatically influence their product quality. Consequently, innovation competitive advantage allows
enterprises to build their business strategy, process, partnerships, and quality around a sustainable
growth model (Dirsehan, 2015; Sheng et al., 2013). In particular, it has a diverse effect on the
operations of SMEs and, more broadly, the constantly shifting international SME market (Nimfa, &
Gajere, 2017).
Previous studies have focused on the links between knowledge transfer and innovation
competitive advantage (Sheng et al., 2013; Whalen, & Han, 2017) and organisational cultures,
innovation competitive advantage and the sustainable growth of SMEs (Nimfa et al., 2020).
The first gap in prior research revealed that more research is needed to increase understanding of
innovation competitive advantage benefit, which can help improve policy for SMEs' long-term
business growth (Dirsehan, 2015; Conto et al., 2016; AlQershi et al., 2021) because each company's
goal in today's competitive marketplace is to outperform the competition and gain new customers
(Hana, 2013). Hence, innovation is regarded as a major driver of economic growth and competitiveness
(Terziovski, 2010; Khurana et al., 2021; Brancati et al., 2021). Based on the foregoing, SMEs can
promote product quality as a customer-focused initiative by assessing the importance of innovation
competitive advantage factors such as customer preferences and strategic business model capabilities.
The second research gap in prior studies shows that, despite the potential impact of innovation
competitive advantage on product quality, the relationship between innovation competitive advantage
and product quality has not received much attention, creating a gap in the extant literature between
customer preference, strategic business model and product quality (Sheng et al, 2013, Dirsehan, 2015;
Whalen, & Han, 2017; Nimfa et al., 2020). Most notably, there is a lack of a broader understanding of
the real impact of innovation competitive advantage on product quality for sustainable growth in the
context of SMEs.
The third research gap in past studies illustrates the paucity of empirical study on the mediating
effect of technology adoption between customer preference and strategic business model on product
quality for sustainable growth among SMEs. Thus, technological strategy can be self-contained,
promote business learning and communication, be a more assertive product and process innovation, or
be a preferable alternative to technology advancement (Martnez-Román, & Romero, 2017; Camisón, &
Villar-López, 2014; Mothe et al. 2015).
Fourth, another main issue is that a number of factors (e.g. novel products, product tastes, product
innovative thinking, and customer switching inclination) have made it challenging for SMEs to build
better product quality. Additionally, the impacts of the innovation competitive advantage variable on
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product quality for sustainable growth among small and medium-sized enterprises has not been
empirically tested and is as yet understudied.
There is thus a critical need for empirical research on innovation competitive advantage and
product quality among manufacturing SMEs, specifically in developing economies.
Therefore, the current study investigated the impact of two components of innovation competitive
advantage (customer preference and strategic business model) on product quality for sustainable
growth among manufacturing SMEs in Nigeria. This study also investigated the mediating role of
technology adoption in the relationship between the components of innovation competitive advantage
and product quality in the SME context.
2. LITERATURE REVIEW
2.1 Product Quality
To ensure that products receive constant market attention from users, quality sustainability must
be at the centre stage of a manufacturing SME. Quality is regarded as the fundamental and significant
source of an organisation’s customer satisfaction, customer loyalty, and profitability (Atiyah, 2016).
Sebastianelli and Tamimi (2002) pointed out that the user ‐ based definition of quality involves
aesthetics and perceived quality while the product‐based definition of quality relates to performance
and features. Alternatively, Fields et al. (2014) proposed a manufacturing-based definition of quality,
which emphasises processes that create a product or service that conforms to specifications. Such
quality increases customers’ preference and continued patronage, which leads to product quality
sustainability in SMEs (Jain et al., 2020). SMEs often play a key role - as innovators who inspire
customers' perceptions of product quality (Dhewanto et al., 2020). Accordingly, they have emerged as
top performers on the basis of product quality, packaging, and innovative capabilities (Scheers, &
Mmatli, 2019). However, their product lines are not unique when they manufacture goods that are
inherently similar to those of competing brands. Therefore, to stimulate their sustainable growth, SMEs
have to lead the dynamic marketplace by continuing to focus on product quality to satisfy customers.
2.2 Customer Preference
SMEs, particularly manufacturing SMEs, are transactional businesses in a highly competitive,
complex, and fast-changing business environment which depends on customers’ preferences (Sathya,
& Indirajith, 2018; Sirgy et al., 1997). Therefore, SMEs are charged with the responsibility of
considering customer preference a priority, as this represents a significant competitive advantage for
firms. Customer preference is regarded as a customer’s manifestation of wants in terms of product
characteristics and prospective product opportunities; it is therefore a requisite consideration in the
creation of design concepts (Cao et al., 2010; Cao et al., 2011). To illustrate, Zanini et al. (2019)
showed that shopping streets are more attuned to customer preferences, despite the larger satisfaction
created by shopping malls. Household size and gender are, meanwhile, socioeconomic variables that
have the strongest effects on consumer preference (Bovea et al., 2018; Jamal, & Goode, 2001). Since
consumers frequently buy goods at face value without utilising them first, a product’s physical
appearance is another important variable that influences customer preference in terms of how
customers perceive the quality of a product (Mugge et al., 2018).
2.3 Strategic Business Model
To ensure long-term competitiveness, companies need to develop the capability to research, plan,
and build new business areas (Dobni, 2010; Heger, & Rohrbeck, 2012; Morecroft, 2015). Towards this
end, a business model is a description of an organisation and how it functions in attaining its goals,
such as profitability, growth, and social impact (Betz, 2018; Massa et al., 2017). It has proven to be a
necessary instrument to bring new technologies and ideas to the market and serves as a driver of
innovation to unlock technological potential (Geelhoed, 2017; Pucihar et al., 2019; Teece, 2010).
Haaker et al. (2017) recognised robustness as the capability of a business model to stay viable and
workable in a changing business environment. Consistent with this notion, a strategic business model
indicates that strategic thinking has to be constantly reinforced in the creation and growth of an
organisation’s business activities. The strategic ability to move into new business models quickly and
successfully is an important source of competitive advantage and leverage that enhances the
sustainability performance of organisations, including SMEs (Betz, 2016; Bouwman et al., 2018;
Geissdoerfer et al., 2018b; Gordijn et al., 2005). Therefore, the strategic business model as a key
element of innovation competitive advantage has become notable in business sustainability research.
Danjuma Tali Nimfa, Md Uzir Hossain Uzir, Livinus Nkuri Maimako, Bilal Eneizan, Ahmad
Shaharudin Abdul Latiff and Sazali Abdul Wahab
43
2.4 Technology Adoption
Organisations are currently undergoing major transformations in response to megatrends taking
place worldwide, which necessitate the development of smart, digital, and virtual capabilities (Sola et
al., 2015). Essentially, no SMEs would function without the availability and adoption of technology.
Warner and Wäger (2019) explained that digital transformation is the ongoing process of using new
digital technologies in everyday organisational life, which recognises agility as the core mechanism for
the strategic renewal of an organisation’s business model, collaborative approach, and eventually
culture. Technology has thus been central in this transformation and has made service innovations
technically workable and economically viable (Hsu et al., 2019; Nag & De, 2020). Technological
innovation capabilities (TICs) are important for SMEs to obtain core competencies and to upgrade their
competitive advantages (Rahim, & Zainuddin, 2019). In fact, a survey of Chinese high-technology
companies revealed that cost leadership, customer orientation, and creative marketing promote better
product innovation performance in environments with high dysfunctional competition (Liu, &
Atuahene-Gima, 2018). As such, SME innovators need to understand adoption patterns to customise
their products and to predict the performance of their innovations in the marketplace (Oke et al., 2014).
2.5 Dynamic Capabilities Theory
The dynamic capabilities theory of the firm is a theoretical framework that explains how firms
differ and compete, taking into account that firms have to evolve and reconfigure their operations to
remain competitive (Heaton et al., 2019; Mikalef et al., 2016). This theory has been defined as a firm’s
formation of capacities, possession of opportunities, and avoidance of threats while simultaneously
preserving its competitive advantage through the improvement, combination, protection, or
rearrangement of its tangible and intangible assets (Bagheri et al., 2019; Faghih et al., 2018). The
dynamic capabilities theory has advanced the understanding of innovation by building on resource-
creation processes that firms use to create new resources and regenerate existing resources in line with
changes in the environment (Bownam, & Ambrosini, 2003; Fallon-Byrne & Harney, 2017; Teece et al.,
1997). Fainshmidt et al. (2019) and Nimfa et al. (2019) realised that the relationship between dynamic
capabilities and competitive advantage is contingent upon the strategic fit between organisational and
environmental factors, contributing to a more rigorous and configurational dynamic capabilities view.
In this study, dynamic capability explains the relationship of innovation competitive advantage’s two
components (customer preference and strategic business model) with product quality, while technology
adoption is considered a core dynamic capability needed by SMEs to sustain growth in the competitive
manufacturing sector. Thus, based on this view, SMEs have to keep abreast of the capabilities of their
innovation competitive advantage to ensure that their product quality meets customer preferences and
represents a strategic business model that is not replicable by competitors. This will allow SMEs to
lead the market and enjoy more sustainable growth.
3. HYPOTHESES DEVELOPMENT AND CONCEPTUAL FRAMEWORK
3.1 Customer Preference and Technology Adoption for Sustainable Growth among SMEs
The relationship that exists between customer preference and technology adoption has recently
attracted empirical attention, as inconsistencies in customer preference appear to influence technology
changes in an organisation (Tripsas, 2008). Srivastava and Barnir (2016) found that a significant
association exists between customer-firm interaction (CFI) and numerous individual, firm, and
environmental factors, supporting the notion that in entrepreneurial and small firms, CFI is used
strategically to support market position. In a similar vein, previous scholars have highlighted the role of
customer dynamics and customer experience in applying innovative smart technologies in a retail
setting (Foroudi et al., 2018). Further, empirical evidence indicates that despite the rise in online
banking, retail banking customers continue to focus on face-to-face interaction (Durkin et al., 2003).
There is also a need for insight into customers’ cross-technology use, such as their alternating
preference for interactive social networks, online business knowledge, and reliable chain-based
payment methods (Connell et al., 2019; Piehler et al., 2019).
Hollebeek et al. (2019) proposed the development of technology-specific user segmentation as a
requirement to leverage firms’ evolving technological capabilities. While many customers use core
technology (e.g. electronic fund transfer at the point-of-purchase), technologies that are non-core or
more peripheral to the market offering (e.g. gamification-based promotions) see varying adoption
levels across customer segments, including in terms of demographics, psychographics, or brand- or
marketing-related preferences (Hollebeek et al., 2018; Weiger et al., 2019). For instance, the
expectations of customers and hotel owners were found to be a continuum of network preferences in
terms of the provision of hotel services (Liu, & Hung, 2020). Similarly, customers open to the use of
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integrated home technologies have been revealed to take advantage of their ability to delegate
interaction with technology and, since they are humanising technology, they want technology to meet
social roles and expectations (Letheren et al., 2019).
Thus, a satisfactory touch/technology balance is needed in SMEs’ technology adoption in
emerging disruptive conditions to maximise cumers’ well-being from using brand- or firm-related
innovations (Robertson et al., 2019). However, the discussion above illustrates how the relationship
between customer preference and technology adoption remains unresolved. Therefore, it was
hypothesised that:
H1: Customer preference has a significant positive effect on technology adoption for sustainable
growth among SMEs.
3.2 Customer Preference and Product Quality for Sustainable Growth among SMEs
Evidence from previous research shows that a product differentiation strategy predicts product
quality (Prajogo, 2007). Similarly, product appearances that score high on natural, low on novelty, and
neutral on compression trigger the most positive ease of use perceptions (Mugge et al., 2018). Also,
Sun et al. (2018) discovered a significant positive relationship between the intention to purchase and
the purchase of recycled products, while Razak et al. (2016) found that product quality improvement
and competitive prices increase customer satisfaction. Consistent with these findings, Anojan and
Subaskaran (2015) found that consumer preference significantly affects buying behaviour. At the early
stage of product concept generation, customer preference has a direct impact on the number of iterative
designs, scheme evaluations, and cost (Cao et al., 2015).
Sathya and Indirajith (2018) posited that leaders of manufacturing organisations know the
importance of having accessible, timely, accurate, and consistent information to establish, nurture, and
manage customer relationships. Hong et al. (2018) noted that consumers’ negative perceptions of
online reviews decrease their online purchase intentions and vice versa. Liu et al. (2014) further
revealed that customer perceptions of corporate responsibility enhance customers’ brand preference.
Another study by Chen et al. (2006) found that three forms of a firm’s intellectual capital (human
capital, systemic capital, and relational capital) have significant positive correlations with product
design success. Vinokurova (2019) stated that firms adjust to customer preferences to deliver product
quality. Understanding and incorporating customer preferences in product design is therefore important
to improve product quality for SMEs’ sustainable growth. However, the relationship between customer
preference and product quality has remained understudied, particularly in the manufacturing SME
context. Therefore, we hypothesised that:
H2: Customer preference has a significant positive effect on product quality for sustainable
growth amongst SMEs.
3.3 Strategic Business Model and Technology Adoption for Sustainable Growth among
SMEs
Evidence from previous research indicates multiple attempts to analyse the relationship between
the strategic business model and technology adoption. In particular, Leandros and Papadopoulou
(2020), Singh and Gaur (2018), Antikainen and Valkokari (2016), and Pires and Aisbett (2003)
established that organisations have historically been urged to implement information communication
technology (ICT) to facilitate the pursuit of innovative business models. Yet simply entering business-
to-business e-commerce that requires new business strategies to be implemented is inadequate
(Centobelli et al., 2020; Massa et al., 2017). Kihara et al. (2016) found that during the strategy
implementation process, there is a strong positive relationship between commitment to technology
requirements and the success of manufacturing SMEs. Likewise, Zarah and Covin (1993) found that
technology policy choices vary widely among organisations with different business strategies, and that
business strategy influences the strength of the relationship between company success and specific
technology policies (Boons, & Lüdeke-Freund, 2013; Rizos et al., 2016; Ünal et al., 2019). Pires and
Aisbett (2003) agreed that any technology adoption has to be determined within the individual firm
context. Nevertheless, existing research fails to sufficiently recognise the relationship between the
strategic business model and technology adoption among manufacturing SMEs. Consequently, based
on the above discussion, it was hypothesised that:
H3: The strategic business model has a significant positive effect on technology adoption for
sustainable growth among SMEs.
Danjuma Tali Nimfa, Md Uzir Hossain Uzir, Livinus Nkuri Maimako, Bilal Eneizan, Ahmad
Shaharudin Abdul Latiff and Sazali Abdul Wahab
45
3.4 Strategic Business Model and Product Quality for Sustainable Growth among SMEs
The customer is central to an organisation and assessing customer satisfaction is a vital element in
any strategy for business performance improvement; this makes customer satisfaction a driver of
survival, competitiveness, and growth (Hoe, & Mansori, 2018). Kutscha (2016) revealed that market
turbulence significantly predicts business model transformations in small firms, while technological
turbulence does so for SMEs. Given the growing competition in the modern business environment,
there is an increasing trend to launch new products or to improve the quality of end products to attract
more consumers (Chakraborty et al., 2018; Geissdoerfer et al., 2018a). A study by Teece (2010)
investigated business models, business strategy and innovation. The author noted that the essence of a
business model is its definition of how the business delivers value to customers, entices customers to
pay for value, and converts those payments into profit. Ammar and Chereau (2018) found that the
strategy-business model innovation alignment is contingent on the level of fit between strategic profile
attributes and ideal profile attributes. Kim et al. (2018) argued that the efficiency of small business
owners increases as functional integration increases, satisfying utilitarian motivations. The authors,
however, noted that a platform with greater integration that has a social presence in satisfying hedonic
motivations improves the efficiency of all small businesses. Hence, it can be deduced from empirical
findings that the relationship between a strategic business model and product quality has ambiguities. It
was thus hypothesised that:
H4: The strategic business model has a significant positive effect on product quality for
sustainable growth among SMEs.
3.5 Technology Adoption and Product Quality for Sustainable Growth among SMEs
The usage of technologies by small businesses, especially the usage of information
communication technology (ICT), has steadily grown in recent times (Mazzarol & Reboud, 2020).
Extant research has proposed that SMEs embrace information technology (IT) for many purposes
originating from internal and external stress that directly or indirectly affects them (Nguyen, 2009).
Chege and Wang (2020) found that technological innovation influences environmentally friendly
practices that have a positive effect on a company's performance. Neirotti et al. (2020) implied that the
integration of information technology (IT) is linked to the strategic ability of SMEs, independent of
access to infrastructural resources. Also, scholars have argued that IT planning capabilities have a
positive effect on the development of IT-based technologies and IT investment choices. Hagspiel et al.
(2020) found that innovation not only due to technological advances but also due to market scarcity can
be advantageous for the company. Consumer volatility and supply chains have adverse effects on
information technology capabilities (Neirotti et al., 2020). Thus, the role of value chains in new
technology adoption appears to be negligible (Burkitbayeva et al., 2019; Janssen, & Swinnen, 2019;
Kuijpers, & Swinnen, 2016). Further, the utilisation of technology and value creation in hospitality
organisations were found to be not significantly associated (Collins & Reutzel, 2017; Nimfa et al.,
2019). The discussion above suggests inconclusive findings on the relationship between technology
adoption and product quality. Therefore, the following hypothesis was formulated:
H5: Technology adoption has a significant positive effect on product quality for sustainable
growth among SMEs.
3.6 Technology Adoption as a Mediator
Technology adoption by individuals and organisations, since the early days of computing, has
been a subject of research interest and efforts to date have generally resulted in inconclusive findings
(Moore, 1991). Factors such as ease of use, time management, consumer attention, and technology
acceptance have been found to affect technology adoption at all levels (Eze et al., 2019; Regenfelder, &
Slowak, 2011; Slowak, 2008). Naicker and Van Der Merwe (2018) further showed that perceived user-
friendliness, perceived efficiency, perceived difficulty, and perceived costs are key factors in overall
technology adoption, while perceived risk is a key factor specifically in mobile technology adoption.
Also, Hsu et al. (2019) showed that access to technological innovation promotes operation innovation
in the context of social technology.
In addition, information technology has been used by scholars to determine the potential of an
enterprise to leverage its technological assets (Kim et al., 2018; Mikalef et al., 2016; Wang et al.,
2019). Fawcett et al. (2011) found that information technology investments make their biggest
contribution by creating a diverse capacity for supply chain collaboration. Awa et al. (2017) reported
that the associations between technology adoption and the factors of technology, organisation, climate,
and research have been statistically validated, although some have negative coefficients. Oke et al.
(2014), meanwhile, pointed out that both perceptions of technology and technology adoption have a
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46
significant economic impact. This is because when technology advances, operational performance
improves, resulting in significant changes and organisational growth (Davis et al., 1989; Gardner, &
Amoroso, 2004; Lin, & Chang, 2011; Museli, & Navimipour, 2018). Moreover, Bagheri et al. (2019)
found that technology innovation significantly mediates the influence of internationalisation on the
efficiency of firms, especially among SMEs with moderate rates of innovation. The dynamic capacity
perspective allows us to understand the link between technology adoption, innovation competitive
advantage, and product quality among SMEs, as they are excellent capabilities for business enterprises;
however, scholars have ignored the prospective role of technology adoption in a changing business
landscape (Rojas et al., 2017; Teece, 2012; Wenzel et al., 2020). Thus, the dynamic capabilities theory
extends the conventional knowledge of technology adoption by providing novel insight into the actual
role of technology adoption in the influence of innovation competitive advantage components of
(customer preference and strategic business model) on product quality. Overall, SMEs that strategically
shape, change, and upgrade their business models and meet customer preferences through technology
adoption would have sound values (Achtenhagen et al., 2013; Maier et al., 2013) and would inevitably
experience sustainable growth in terms of product quality. Based on this discussion, the following
hypotheses were developed:
H6: Technology adoption positively and significantly mediates the effect of customer preference
on product quality for sustainable growth among SMEs.
H7: Technology adoption positively and significantly mediates the effect of the strategic business
model on product quality for sustainable growth among SMEs.
Figure 1 shows the conceptual framework of this study that was derived from the theoretical
foundations discussed earlier.
Figure 1: Conceptual Framework
4. RESEARCH METHOD
To assess the influence of the two components of innovation competitive advantage (customer
preference and strategic business model) on product quality for SMEs’ sustainable growth, a
quantitative approach was employed.
4.1 Sampling
The research sample was drawn from SMEs in Nigeria. SMEs engaged in manufactured goods
trading and licensed as contractors/suppliers of major manufacturing companies were chosen, in line
with the study’s scope. Selected SMEs were classified by firm size based on the SME definition in the
Nigerian context, where firms with one to nine employees are considered ‘micro’, firms with 10 to 49
employees are considered ‘small’ and firms with 50 to 199 employees are considered ‘medium’
(NBS/SMEDAN, 2017).
The Nigerian SME corporate database reported that 2825 SMEs in the federal capital territory of
Abuja and 1574 SMEs in Jos met the study criteria, bringing the total population surveyed to 4399
Danjuma Tali Nimfa, Md Uzir Hossain Uzir, Livinus Nkuri Maimako, Bilal Eneizan, Ahmad
Shaharudin Abdul Latiff and Sazali Abdul Wahab
47
SMEs. As per Krejcie and Morgan’s (1970) sample size recommendation, 354 SMEs were randomly
selected from the population for questionnaire administration. The questionnaires were answered by
owner-managers or company managers where there were no owner-managers available. Face-to-face,
drop-off, and email methods were employed to distribute the questionnaire, culminating in 315
returned copies. Of these, only 245 questionnaires were complete, yielding a response rate of 69
percent. The collected data was subsequently cleaned and analysed using Partial Least Squares
Structural Equation Modelling (PLS-SEM) with the aid of SmartPLS 3.0 software.
4.2. Measures
All the questionnaire items in this study were chosen from extant measures of the constructs which
had proven reliabilities and validities. Innovation competitive advantage was measured using its
components: customer preference and strategic business model. Customer preference was measured
with three items adapted from Sirgy et al. (1997) and Jamal and Goode (2001), just as strategic
business model was measured with three items based on previous literature (Bouwman et al., 2018;
Pucihar et al., 2019; Teece, 2010). Four items measured product quality as per Parasuraman and
Grewal’s work (2000), while technology adoption was measured using four items employed in several
earlier studies (Davis et al., 1989; Gardner & Amoroso, 2004; Lin & Chang, 2011; Maier et al., 2013;
Moore & Benbasat, 1991; Premkumar & Roberts, 1999; Teo et al., 2007; Venkatesh et al., 2003). All
constructs were measured on a five-point Likert type ranging from ‘1= Totally Disagree’ to ‘5= Totally
Agree’.
5. RESULTS
5.1 Demographic Profile
Table 1 shows the demographic profile of the study participants, i.e. owner-managers or company
managers of manufacturing SMEs. A majority of the respondents were from small SMEs (59.2%),
while 28.2 percent were from micro-sized SMEs and 12.7 percent were from medium-sized SMEs. In
terms of age, most SME managers appeared to be from the younger generation, with more than 80
percent aged between 24 and 39 years old. The gender of the respondents was also equally distributed
between males and females. The educational qualification results of the respondents showed that a
majority of almost 62 percent held Master’s degrees, while 20 percent held Bachelor’s degrees and
18.4 percent had doctorate degrees. The mean values for all items ranged between 3.64 and 4.02. Thus,
respondents generally agreed with the questionnaire items.
Table 1: Demographic Profile
Item
Category
Frequency
Percentage (%)
Gender
Male
123
50.2
Female
122
49.8
Total
245
100
Age
18-23
29
11.8
24-29
65
26.5
30-35
59
24.1
36-39
78
31.8
40 and above
14
5.7
Total
245
100
Education
Bachelor
49
20.0
Masters
151
61.6
Ph.D
45
18.4
Total
245
100
Size
Micro
69
28.2
Small
145
59.2
Medium
31
12.7
Total
245
100
5.2. Common Method Variance (CMV)
Common method variance (CMV) is the threat of biased outcomes in data analysis. This research
utilised Harman’s single-factor test (Bell, 2019; Podsakoff, & Organ, 1986) to diagnose the data for
CMV. The results of the principal component factor analysis showed that the highest value of a single
factor explained 45.11 percent of the total variance, which is less than the threshold of 50 percent
(Doty, & Astakhova, 2020; Kumar, 2012; Uzir et al., 2020). Hence, bias from common method
variance was deemed non-existent in this study and was not a major concern.
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48
5.3 Measurement Model Assessment
To perform PLS-SEM analysis, the measurement model was first assessed to ensure the validity
and reliability of the study model. The model's convergent validity and reliability were analysed
through evaluating the factor loadings, Cronbach’s alpha (CA), Average Variance Extracted (AVE) and
Composite Reliability (CR). Table 2 illustrates the measurement model: the factor loadings satisfy the
recommended value above 0.6 (Hair et al., 2019; Hair et al., 2014). The CA met the recommended
value higher than 0.70, the value range from 0.71 to 0.84. The AVE value of four variables were within
the range 0.638 and 0.767, which fulfilled the recommended value above 0.50. The CR ranging from
0.841 to 0.908 also fulfilled the criteria as it was above the minimum recommended value of 0.70 (Hair
et al., 2019).
To examine the multicollinearity, this study applied the outer variance inflation factor (VIF)
criterion (Kock 2015; Jony, & Serradell-López, 2021). A study will have multicollinearity allied issues
when the outer variance inflation factor (VIF) values are more than 10 (Shieh, 2010). Accordingly, the
findings of this present study indicated that all the VIF values mentioned were in line with the
recommended values, which range 1.486 to 2.437 (Hair et al., 2017, Hair et al., 2019) This result
indicates that all items had VIF values below 3.33, which proved the non-existence of multicollinearity
issues in this study (Hair et al., 2017; Howard, & Nitzl, 2020).
Table 2: Reliability and Convergent Validity Results
Items
Loadings
Cronbach’s Alpha
CR
AVE
CP1
0.84
0.84
0.908
0.767
CP2
0.87
CP3
0.90
SBM1
0.83
0.71
0.841
0.638
SBM2
0.80
SBM3
0.76
TA1
0.76
0.81
0.878
0.644
TA22
0.81
TA33
0.83
TA4
0.78
PQ1
0.75
0.83
0.891
0.673
PQ2
0.83
PQ3
0.88
PQ4
0.79
Table 3: Discriminant Validity through Heterotrait-Monotrait (HTMT)
Customer
Preference
Strategic
Business Model
Technology
Adoption
Product
Quality
Customer Preference
Strategic Business Model
0.643
Technology Adoption
0.665
0.708
Product quality
0.576
0.687
0.786
The discriminant validity for the model was assessed using the heterotrait-monotrait (HTMT) ratio
of correlations, which should be less than 0.85 (Henseler et al., 2015; Voorshees et al., 2016). Based on
Table 3, the study constructs met the discriminant validity criteria as well.
Danjuma Tali Nimfa, Md Uzir Hossain Uzir, Livinus Nkuri Maimako, Bilal Eneizan, Ahmad
Shaharudin Abdul Latiff and Sazali Abdul Wahab
49
5.4. Structural Model Assessment
Table 4 shows the results for the path coefficient analysis of the direct hypotheses (H1 to H5).
Customer preference and strategic business model were found to positively and significantly impact
technology adoption (β=0.370, p=0.000; β=0.358, p=0.000). Likewise, strategic business model and
technology adoption also had significant positive effects on product quality (β=0.0.219, p=0.012;
β=0.0.468, p=0.000). However, the effect of customer preference on product quality was found to be
not significant (β=0.119, p=0.092), possibly due to the high costs associated with product quality (Uzir
et al., 2020). Customers are generally price sensitive, leading companies to develop products as per the
demand of customers to survive in the market. Therefore, customer preference does not need to be
emphasised differently.
Overall, all the direct hypotheses were supported with the exception of Hypothesis 2.
Table 4: Path Coefficient Analysis Results
Hypothesis
Relationship
Std.
Beta
SE
T-Value
P
Values
H1
Customer Preference → Technology Adoption
0.370
0.076
4.882
0.000
H2
Customer Preference → Product quality
0.119
0.070
1.690
0.092
H3
Strategic Business Model → Technology Adoption
0.358
0.068
5.283
0.000
H4
Strategic Business Model → Product quality
0.219
0.087
2.517
0.012
H5
Technology Adoption → Product Quality
0.468
0.085
5.513
0.000
The study model displayed satisfactory coefficients of determination (R2), where 48 percent of
product quality and 40 percent of technology adoption was explained by their respective predictors
(Table 5). Next, in terms of effect size, Table 6 shows that customer preference had a negligible effect
on product quality but had a medium effect on technology adoption. Meanwhile, the strategic business
model had a small effect on product quality and a medium effect on technology adoption. Finally,
technology adoption had a medium effect on product quality. However, Chin et al. (2003) explained
that a small effect size does not always reflect the insignificance of the construct, especially when the
beta coefficient result is substantial. Thus, all the predictor variables in this study had meaningful
effects on product quality and technology adoption. The final step in the structural model assessment
was the test for predictive relevance (Q2), the results of which are shown in Table 7. According to Hair
et al. (2017), a value of 0.02 shows small relevance, 0.15 shows medium relevance and 0.35 shows
large relevance for endogenous constructs. Based on this guideline, this study’s endogenous variables,
product quality and technology adoption exhibited medium predictive relevance values in the model.
Table 5: Coefficient of Determination (R2) Results
R Square
R Square Adjusted
PQ
0.480
0.474
TA
0.400
0.395
Note: PQ is product quality; TA is technology adoption
Table 6: Effect Size (f
2
) Results
PQ
TA
CP
0.017
(No effect)
0.170
(Medium)
SBM
0.059
(Small)
0.159
(Medium)
TA
0.253
(Medium)
Note: PQ is product quality; TA is technology adoption; CP is customer preference; SBM is strategic business
model
Int. Journal of Business Science and Applied Management / Business-and-Management.org
50
Table 7: Predictive Relevance (Q
2
) Results
SSO
SSE
Q² (=1-SSE/SSO)
CP
735.000
735.000
PQ
980.000
672.646
0.314
SBM
735.000
735.000
TA
980.000
731.328
0.254
Note: PQ is product quality; TA is technology adoption; CP is customer preference; SBM is strategic business
model.
5.5. Mediation Effect Assessment
The mediating effect of technology adoption on the relationship between innovation advantage
(customer preference and strategic business model) and product quality was analysed using the
Preacher and Hayes (2008) bootstrapping method. The analysis results, shown in Table 8, indicate that
technology adoption significantly mediates the influence of customer preference and strategic business
model on product quality, thus supporting Hypothesis 6 and Hypothesis 7. In addition, the mediation
effect was evident because the 95 percent confidence intervals did not straddle a zero between the
lower and upper intervals (Preacher & Hayes, 2008).
Table 8: Mediation Analysis Results
Direct
Effect
Indirect
Effect
Total Effect
VAF
Mediation
6. Customer Preference→Technology
Adoption → Product Quality
0.119
0.173
0.292
59.2%
Partial
mediation
7. Strategic Business
Model→Technology Adoption →
Product Quality
0.219
0.168
0.387
43.4%
Partial
Mediation
As a supplementary step, the indirect effect of the mediation was calculated using the Variance
Accounted For (VAF) value, presented in Table 8. According to Hair et al. (2016), a score between 20
percent and 80 percent indicates partial mediation, while a score above 80 percent indicates full
mediation. The results show that at 59.2 percent and 43.4 percent, technology adoption partially
mediated the relationship between innovation competitive advantage (customer preference and strategic
business model) and product quality.
6. DISCUSSION
This study has provided valuable insights into product quality for sustainable growth among
manufacturing SMEs in Nigeria. The findings showed that customer preference and the strategic
business model have a positive and significant impact on technology adoption and the strategic
business model, and technology adoption also has a positive and significant effect on product quality.
Additionally, technology adoption mediates both relationships between customer preference and
product quality, as well as the strategic business model and product quality.
The study findings were assessed in several ways: First, the results demonstrate the importance of
innovation competitive advantage in the context of customer preference and strategic business model
for product quality in the SME sector. Specifically, this implies that a strategic business model has a
direct and indirect impact on product quality, while customer preference has an indirect impact on
product quality through technology adoption. These results are consistent with the view that enterprise
actions on technology initiative vary considerably due to the different state-of-the-art strategic business
models and that the business strategy reflects the strength of the relationship between business growth
and technology adoption (Betz, 2016, 2018; Zarah, & Covin, 1993; Rizos et al., 2016; Ünal et al.,
2019).
Customers are the basis of any business organisation that seeks to meet their demand in a
profitable way. Therefore, business success and expansion depend on customer satisfaction, which in
turn leads to sustainable growth. Thus, Drucker (1973) argued that satisfying the consumers or users is
the mission and purpose of every business. More so, a firm can earn more revenue as well make more
profit, since customer preference is an important factor. Identifying customer preference is a key
success element in developing the product/service. Once determined, a firm may develop and
manufacture a product in accordance with the customer's choice, which will help retain existing
customers and attract new customers. Likewise, technology adoption is important to SMEs in order to
Danjuma Tali Nimfa, Md Uzir Hossain Uzir, Livinus Nkuri Maimako, Bilal Eneizan, Ahmad
Shaharudin Abdul Latiff and Sazali Abdul Wahab
51
reach the customers and read their inner stimuluses. Also, technological advancements can help to
produce the right product and service that customers want. Therefore, technological innovation in
product quality meets the customers' demand for better offers than from other competitors. Thus,
technology adoption mediates the relationship between customer preference and product quality. In
view of the importance of identifying customer preferences and offering innovative products according
to their choice, SMEs should focus on assessing customer preferences and developing the right
innovation and time-demand product with the help of state-of-the-art technology. This effort will
increase the customer base, market share and future profit for the sustainable growth of the enterprise.
Secondly, success for small and medium enterprises also depends on the strategic business model
that the firm promotes and with which it competes with its competitors. A strategic business defines the
business objectives, accomplishes its operations, designs the tactics, involves an innovative and
creative plan for developing innovative products. Product-oriented firms may produce a customer-
oriented product once the strategic business model permits or predicts. A business model can design the
customers'-demand product and maintains its quality if the firm adopts new technology in the
production system. Therefore, technology adoption and innovation strengthen the relationship between
the strategic business model and product quality in the sustainable growth among SMEs. This is in
tandem with the previous related studies like (Whalen, & Han 2017; Bos‐Brouwers, 2010) who argued
that greater insight into the innovative features of SMEs and an evaluation of sustainable innovation
initiatives offer opportunities to enhance sustainable quality product/service growth. However, this
study’s outcome did not agree with the view of (Baierle et al., 2020) that most innovative ideas have a
low influence on building a competitive advantage for manufacturing SMEs. The empirical evidence of
this study also supports the dynamic capabilities theory, positing innovation competitive advantage as a
core capability essential for SMEs’ success (Bleady et al., 2018; Nimfa et al., 2020).
Olovsson and Lundstom (2010) indicated that all entrepreneurs have the skills to build diverse
capacities in the process of sensing, seizing and redesigning opportunities. In addition, the authors
asserted that three main factors, i.e. maintaining a sustained long-term vision, focusing on customer
needs, and using skills and resources wisely, make SME innovators successful and help them maintain
sustainable growth and efficiency. The findings of this study are consistent with Nimfa et al.’s (2020)
findings that innovation competitive advantage has a significant positive impact on the sustainable
growth of SMEs. This study’s findings also have implications for managers or owners of
manufacturing SMEs. SME managers are encouraged to develop strategic business models as a way of
strengthening their innovation competitive advantage. Additionally, they should improve technology
adoption within their firms to increase product quality for sustainable growth.
7. CONTRIBUTIONS/IMPLICATIONS
This study makes a number of valuable theoretical contributions to the existing body of literary
knowledge on dynamic capabilities theory (Tecee 1997; Teece, 2012). It has empirically confirmed the
link between the innovation competitive advantage components of customer preference and strategic
business models and product quality. Also, it contributed to the existing body of knowledge by
confirming that technology adoption explains the indirect impact of innovation competitive advantage
(customer preference and strategic business model) on product quality in sustaining the growth of
SMEs, which has not been investigated in prior studies. In addition, this study extends the perspective
of the dynamic capabilities theory (DCT) to understand the direct and indirect effects of innovation
competitive advantage on product quality through technology adoption among SMEs. It also
contributes to the strategic management literature by examining the unresolved issue concerning the
relationship between innovation competitive advantage and product quality for sustainable growth
among SMEs.
This research also has implications for SME owners and policymakers. The findings suggest that
SMEs that manage product quality using a greater level of innovation competitive advantage via their
strategic business model are more capable of achieving sustainable growth. This is because SMEs that
are strengthened by their innovation competitive advantage are more likely to improve and maintain
product quality, which engenders customer satisfaction. In addition, with the implementation of
technology adoption, customers do not just experience more satisfaction but also greater preference for
the product over a longer period of time. The study also suggests that policymakers and SME owners
should encourage technology adoption through well-designed and well-articulated approaches to
leverage their customer preference and strategic business model as a dynamic capacity to improve
product quality for sustainable SME growth.
Int. Journal of Business Science and Applied Management / Business-and-Management.org
52
8. CONCLUSIONS
This study has found that the first component of innovation competitive advantage, customer
preference, does not have a significant effect on product quality; however, it has a significant positive
effect on technology adoption. The second component of innovation competitive advantage, the
strategic business model, exhibits a significant positive effect on both product quality and technology
adoption. Also, technology adoption was revealed to have a significant positive effect on product
quality. Further, customer preference and the strategic business model were shown to have indirect
effects on product quality through the mediation of technology adoption. In summary, customer
preference only affects product quality when mediated by technology adoption, whereas strategic
business model has both direct and mediated effects on product quality. This research has thus
discovered that positive links do exist between innovation competitive advantage and product quality
for sustainable growth among SMEs. It therefore acknowledges that innovation competitive advantage
is, in fact, an excellent strategy that can be employed by managers of manufacturing SMEs to improve
product quality for sustainable growth.
9. LIMITATIONS AND FUTURE DIRECTIONS
This research investigated only SMEs, which points to methodological limitations in terms of the
generalisability of the results. As the study was conducted on manufacturing SMEs in the Nigerian
context, other types of SMEs, such as service-based SMEs and micro enterprises, should be examined
in future studies. Upcoming studies should also use better sampling techniques and sample sizes to
broaden generalisability, since the current study was limited to specific geographical areas in Nigeria.
Another limitation of the study is the cross-sectional nature of the survey, which does not permit for
assessment of causes and effects that change with time. The analysis also focused largely on the self-
report of SME managers to measure SME practices, which may not reflect the actual practices of the
firm. As such, future studies may consider including more diversified stakeholders of SMEs as
respondents to procure a better understanding of their operations. Additionally, this research only
studied one mediating variable, technology adoption, which provides opportunities to integrate more
mediating variables in future studies on innovation and product quality. Innovation competitive
advantage itself can be explored more as an intervening or mediating variable in upcoming research.
Finally, as this study was conducted in a developing country, the research model could be extended to
both second and first world countries to test its applicability.
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Appendix: Questionnaire on Innovation Competitive Advantage and Product Quality for
Sustainable Growth amongst SMEs
A. General Information:
a. SMEs size: i. Micro [ ] ii. Small [ ] iii. Medium [ ]
b. Age: 18-23 [ ] ii. 24-29 [ ] iii. 30-35 [ ] iv. 36-40 [ ] v. 41- 45 [ ] vi. 46-50 [ ] vii. 51 and above
[ ]
c. Gender: i. Male [ ] ii. Female [ ]
d. Educational Qualification: i. Bachelor/HND [ ] ii. Master [ ] iii. PhD/M.Phi. [ ] iv. Diploma/
National Diploma (ND) [ ] v. SSCE/FSLC [ ]
B. Innovation Competitive Advantage and Product Quality
Please indicate your degree of agreement with the following statements related to innovation
competitive advantage and Product Quality for sustainable growth amongst SMEs through the Likert-
type scale below and tick the appropriate number accordingly (1 = Totally disagree, 5 = Totally agree)
Construct
Items
1
2
3
4
5
Product quality
1. The materials used by the brand are natural/genuine
2. The materials used by the brand are natural/genuine
3. The products of the brand are reliable
4. The brand offers products with excellent features
Innovation
competitive
advantage
Customer Preference
1
2
3
4
5
1. Our customers preferred the new innovative brand ideas.
2. Our customers prefer appealing nature of our new product brand
3. Our customers prefer the new innovative culture
Strategic Business Model
1
2
3
4
5
1. Our enterprise gives attention to customer needs different from traditional
customer needs
2. Our enterprise has value creation for increasing technology development.
3. Our enterprise aims to create multiple innovations annually.
Technology
Adoption
1. Technology will enable accomplish tasks more quickly.
1
2
3
4
5
2. Technology will improve the quality of the work.
3. Adoption of technology is consistent with our organisation’s values and
beliefs.
4. Technology will provide timely information for decision-making