Impact of Value Innovation on Firm Performance: Comparison
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The notion of value innovation aims to provide a leap in value for both customers and firms by enabling business differentiation, reducing competition relevance, and creating uncontested market space. Organizations are becoming more innovative in their competition strategies, increasing the need for breakthrough innovation that imposes business differentiation, provides unprecedented value to customers, and creates intangible resources (competitive advantage) in order to achieve long-term superior performance and sustainable growth.

  • value innovation
  • superior performance
  • sustainable growth
  • customer satisfaction
  • customer loyalty

1. Introduction

In today’s highly competitive business environment, maintaining a firm’s success and survival has become a challenging task. Organizations are striving to satisfy the changing needs and rising expectations of customers. Accelerating innovation is increasingly important to the success and survival of businesses [1,2][1][2]. However, innovation per se has diverged into a wide range of domains and perspectives, making it more complicated for firms to identify their suitable paths to sustainable growth and survival. In general, innovation can take the form of a new product, service, technology, method of production, market, or management system [3,4][3][4]. So far, the key to a firm’s success has been its strategic thinking and management capabilities in extracting value from new business opportunities and, as a result, making a significant change in the market, technology, and operation [5].
Organizations must promptly deliver the appropriate number of services and products to clients in order to effectively meet their changing needs [3]. Innovation is vital not only for a company’s survival and growth but also for the nation and region’s economic growth and progress [6]. According to Schumpeter [7] and Schumpeter [8], “innovation leads to the development and growth of the economy, and eventually to prosperity and wealth”. As a result, with certain substantial sectoral and regional advancements, innovation is becoming a primary priority [9].
According to this viewpoint, organizations are becoming more innovative in their competition strategies, increasing the need for breakthrough innovation that imposes business differentiation, provides unprecedented value to customers, and creates intangible resources (competitive advantage) in order to achieve long-term superior performance and sustainable growth. According to [10], “the logic of value innovation focuses on creating new uncontested market space for both customers and firms by enabling business differentiation, making the competition irrelevant, and creating new uncontested market space” [11]. Value innovation assists firms in breaking out of the value-cost tradeoff of fierce competition by focusing on making the competition irrelevant through providing a quantum leap in value, rather than scattering their resources and capabilities in attempts to beat the existing competition [12]. As a disruptive innovation, value innovation may occur with or without technological breakthroughs as it aims to effectively utilize the technological and managerial opportunities to link innovation to value, create new demands, and change the market to render the competition irrelevant [11,13][11][13]. In this context, this study considers value innovation is considered here as a strategy that embraces the activities of the entire system of a company to achieve a quantum leap in value for buyers, as well as profitable growth and a competitive advantage for companies [14].

2. Value Innovation

The notion of value innovation aims to provide a leap in value for both customers and firms by enabling business differentiation, reducing competition relevance, and creating uncontested market space [11]. Kim and Mauborgne [12] considered value the key driver of any innovation success. Without value, innovation appears to be technology-driven, market pioneering, or futuristic, shooting beyond customers’ considerations and willingness to pay. From this perspective, Kim and Mauborgne [12] addressed value innovation as the result of a combination of eliminating, reducing, enhancing, and newly creating key elements of products or services. The term value innovation has been correlated with various perspectives and linked with several analytical tools to assist firms in creating breakthroughs as a strategic move. For instance, Mohanty [29][15], Mele [30][16], Mele et al. [31][17], and Kachouie et al. [32][18] viewed value innovation from a firm’s perspective as involving resource integration and the development of superior competency, whereas Setijono [33][19] described value innovation with regards to the creation of value for stakeholders. In that study, value innovation was described as having a disruptive-attractive quality, providing a firm with a total solution, extraordinary experiences, and cost reductions through product, service, and delivery platforms [33,34][19][20]. Agnihotri [14], Rabino et al. [35][21], Chang [36][22], and Kim and Mauborgne [37][23] considered value innovation a business strategy that should embrace the activities of the entire system of a firm in order to attain a leap in value for customers and a competitive advantage and profitable growth for the firm. In addition, Matthyssens et al. [38][24], Lindgreen et al. [39][25], Rønning et al. [40][26], Faghat et al. [41][27], and Matthyssens [42][28] examined value innovation from a strategic innovation perspective as the reconceptualization of a business model or industry, the redefinition of a business, or the re-designing of value conceptions or delivery modes, with the ultimate aim of creating new and superior customer value. Prior studies identified four key drivers of value innovation, namely, culture, processes, people, and resources [43,44][29][30]. Mohanty [29][15] emphasized the achievement of breakpoints in relation to value innovation logic by examining nine elements: “robustness, price, lead time, flexibility, process design, reliability, product design, service empathy, and information system”. Simon and Luc [45][31] examined the impact of systems integration on innovation and customer satisfaction. Moreover, Christa et al. [46][32] investigated the role of value innovation capabilities in improving company performance in the banking service sector with the influence of the external factors of market orientation and social capital. They concluded that innovation is only partially linked to customer satisfaction, but this result was due to the innovation dimensions (process innovation, organization innovation, and marketing innovation) that they used, which were weakly interlinked to customer satisfaction.

3. The Resources-Based View (RBV)

The RBV of a firm is a dominant theory in strategic management, explaining the concepts of resources management, competitive advantage, and the superior performance of a firm [26,27,47,48,49][33][34][35][36][37]. The attraction to the RBV comes from the concept of difficult-to-imitate attributes of firms’ resources as a source of superior performance and a sustainable competitive advantage [48,50,51][36][38][39]. Barney [21][40] specified four main attributes required for a firm’s resources to gain a sustainable competitive advantage: valuable, imperfectly substitutable, rare, and imperfectly imitable. In this context, prior studies have highlighted intangible resources and capabilities as the key resources for conferring a sustainable competitive advantage that is reflected in superior performance for the firm [18,21,22,25,27,47,52,53,54,55,56][34][35][40][41][42][43][44][45][46][47][48]. Moreover, Fahy [54][46] emphasized the need for intangible resources to drive robust value creation compared to duplicative efforts to gain a sustained competitive advantage. Wang and Lo [26][33] and Clulow et al. [27][34] discussed value creation with regards to the customer-focused perspective, explaining the role of a firm’s key intangible resources in creating customer value, thereby enhancing customer satisfaction and loyalty and driving customer-related performance. Furthermore, Khan et al. [57][49] empirically highlighted the significant role of intangible resources and capabilities in enhancing a sustainable competitive advantage and a firm’s performance.

4. Customer Satisfaction

Customer satisfaction has been considered one of the most effective dimensions for superior performance, competitive advantage, and the long-term success of a firm [26,27,58,59,60][33][34][50][51][52]. The RBV literature highlights the notion of superior customer-focused performance, which is achieved through a set of interlinked business processes and the coordination of strategic resources with the goal of satisfying customer needs [26][33]. Moreover, innovation scholars [61,62,63,64][53][54][55][56] have indicated that innovation is a strong driver of customer satisfaction and firm performance, particularly in service industries. Bellingkrodt and Wallenburg [64][56] emphasized innovation’s key role in increasing the value of delivered services, leading to higher customer satisfaction and loyalty, either by offering new services or enhancing existing services. Customer satisfaction is a strong predictor for behavioral variables in the telecommunications industry, such as re-purchase intentions, word-of-mouth recommendation, and loyalty [20,65][57][58]. Prior studies have also highlighted the importance of customer satisfaction factors for mobile service providers to maintain or improve their market share, customer retention, and profitability [19,20,60,65,66,67,68,69][52][57][58][59][60][61][62][63].

5. Customer Loyalty

Understanding customers and establishing long-term profitable relationships is essential for a firm to enhance sustainability and profitability. RBV and innovation literature emphasize customers’ loyalty (brand loyalty) as an intangible valuable resource and a key factor for a firm’s sustainable competitive advantage and superior performance [20,26,65,66,68,69,70,71,72][33][57][58][60][62][63][64][65][66]. Diaw and Asare [68][62] showed a positive relationship between innovation, customer satisfaction, and customer retention in the telecommunications industry. According to Lin and Wang [65][58], attaining new customers is considerably more expensive than retaining existing customers, which can render many customer relationships unprofitable in the early years. From this perspective, retaining customers through building customer loyalty has become a financial imperative for many companies aiming to win a market share and develop a sustainable competitive advantage [68,69][62][63].

6. Company’s Performance

The company’s performance refers to the efficiency and effectiveness with which a company can utilize its resources in generating economic outcomes [6]. Asikhia [73][67] described the measurement of a company’s performance based on the company’s economic (e.g., profits, sales, return on investment) and strategic (e.g., market share, brand awareness) objectives achieved in the marketplace. Chaudhry et al. [69][63] emphasized the high importance of innovation capabilities in improving a firm’s performance by converting innovative ideas into economic value and profit. Furthermore, Baia et al. [50][38] highlighted the significance of resources and the rareness of the capabilities of a firm to the creation of a competitive advantage, and thus superior performance. Prior studies [2,3,6,74,75][2][3][6][68][69] have confirmed the significant positive effect of innovation on companies’ performance, particularly in telecommunications industries.

7. Sustainable Growth

Corporate sustainability is meant to “meet the needs of a firm’s direct and indirect stakeholders, such as shareholders, employees, clients, pressure groups, communities, etc., without compromising its ability to meet the needs of future stakeholders as well” [76][70]. According to Holliday [77][71], sustainable growth generates business value for both customers and shareholders as it seeks to make more customers by developing markets that promote and sustain economic prosperity. According to Kim [78][72], the sustainable growth of a firm is attained by value creation, which depends ultimately upon the evolution of customer needs. In contrast, the power has shifted from companies to customers due to the Internet revolution.

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