1. WORLD ACADEMIC JOURNAL OF BUSINESS & APPLIED SCIENCES-MARCH-OCTOBER 2013 EDITION
International Journal of Business & Management
October 2013 VOL.1, No,8
Factors Affecting Innovation Capacity in the Manufacturing
Industry in Nakuru County Kenya: a Case Study of
Buzeki Dairy Limited
Cyrus Muigai Kihara (Corresponding author), Anthony Juma Wagoki, Dr. Samuel Obino Mokaya &
Bernard Komu Waweru
Jomo Kenyatta University of Agriculture and Technology
P. O. Box 62000-00200, Nairobi
Kenya
Accepted 17 October 2013
Abstract
The study sought to determine the factors that affect innovation capacity in the manufacturing industry in Nakuru
County. The study adopted a case study research design covering a stratified sample of 140 respondents drawn
from 230 employees of Buzeki Dairy Limited. Data was collected by use of questionnaires and was later
analyzed using descriptive and inferential statistical analysis tools. According to the study findings, management
style (93.1% , mean 3.13) was found to be the most important factor influencing innovation capacity with a
strong positive Spearman correlation of 0.458; p-value < 0.01(0.000). The study recommends that, the directors,
managers and supervisors in a manufacturing industry should enhance a flexible management style that is
consultative, open to ideas and encourages and motivates employees. The research indicated that almost half of
the employees were not frequently involved in decision making. Therefore the study recommends for more
involvement of employees in decision making. Employees’ ideas or thoughts may be collected through
suggestion boxes, questionnaires or through frequent meeting with all employees.
Key words: Innovation capacity, management style, Top Management Teams
1. Introduction
Over the recent years the internationalization of products markets has contributed to intensified global
competition, particularly from producers in the developing countries. This has been accelerated by global
integration through technological advancement in information technology. To handle the challenges of this
increasing international competition requires innovation in products, processes and the ways in which businesses
organize and market their products. Innovation is increasingly acknowledged as having a significant contribution
to organizational success, performance and survival. Damanpour (2009) suggests that innovation is often driven
by pressure from the external environment, including factors such as competition, deregulation, isomorphism,
resource scarcity, and customer demand, and that it is associated with adaptive behaviour that changes the
organization in order to maintain or improve its performance.
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Schumpeter (1934) suggested that Innovation is a central concept for economic growth and can be a source
of sustainable competitive advantage to firms. The innovation imperative is very strong for firms in food
processing sector, and plays a key role in sustaining and enhancing their competitiveness (Capitanio et al., 2010;
Grunert et al., 1997; Rama & Von Tunzelmann, 2008). The ability to develop new ideas and innovations is one of
the top priorities of organizations (Porter, 1999). The fast-paced technological advancement of the late 20th
century and the opening of markets around the world through various trade agreements motivated companies to
launch abundance of new products and services, in many cases exploiting the advancing technology. As a
consequence, innovation became a crucial part of corporate strategy during this period as companies tried to
remain competitive and not lose market shares to more innovative companies. To attain this level of
competitiveness, companies require not only the technology, but also the management skills and corporate vision
to implement the technology successfully (Blackwell & Eilon, 1991).
A firm's construction of sustainable competitive advantage critically depends on its capacity to innovate,
that is its cumulative involvement in learning processes that go beyond the borders of R&D and in which
organizational and managerial aspects play an essential role. It is important, therefore, to understand the
complexities of innovation, the way in which it influences firms' economic and financial results and the
mechanisms through which economic and social factors are involved in the whole process, as well as the
intrinsic difficulties, risks and uncertainty involved in the management of innovation (Nayak & Ketteringham,
1986; Leifer et al., 2000). Because success can never be guaranteed, many organizations are naturally slow to
manage an innovation because of the considerable investment involved. In view of the emerging challenges firms
face, innovation has been seen as an increasingly critical factor in the competitiveness of firms; as a result, more
detailed study on factors that encourage and limit innovative capacity of firms need to be carried out (Stieglitz &
Heine, 2007). The study therefore sought to determine the factors that influence the innovativeness of the
manufacturing industry in Nakuru County.
The general objective of the study was to assess factors affecting innovation capacity in manufacturing industry
in Nakuru County and the specific objective was to assess the influence of management style on innovation
capacity in the manufacturing industry in Nakuru County: a case study of Buzeki Dairy Limited.
2. Literature Review
The study paid a special attention to the impacts of main organizational factor management style in the
manufacturing industry in developing countries. Souitaris (2002) found that one of the main determinants of
innovation in the literature was the organizational factor. Organizational capability is basically a matter of the
internal side of a firm and it strongly determines a firm’s distinctive identity from the other firms (Kahn, 1990)
and thus its ability to innovate. Culture as an organizational factor affects innovation capability, therefore,
innovation is more likely to occur in an organization in which key organizational members are encouraged to be
innovative and where innovative attempts are rewarded rather than punished (West & Anderson, 1996). The
innovation culture is usually developed and supported by the management and the management style in an
organization (Elenkov et al., 2005), hence the need to assess the influence of management style on innovation
capacity.
Innovation is directly related to the Top Management Teams (TMTs) in an organization. Upper Echelon
Theory states that TMTs exert a fundamental influence on strategic choice in their organizations, and, hence, in
their results (Wiersema & Bantel, 1992; Finkelstein & Hambrick, 1990). In this theoretical framework, it is
argued that the leaders' cognitive bases are the mental guidelines which support their decisions, and which
consequently affect the results obtained by their companies (Pegels et al., 2000; Wiersema & Bantel, 1992;
Smith et al., 1994; Kilduff et al., 2000; Knight et al., 1999).
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Although this individualist perspective of innovation has been criticized as overly narrow and simplistic
(Van de Ven et al., 1989), the notion of entrepreneurs as agents of change has received wide acceptance among
scholars (Kanter, 1984; Drucker, 1985). The entrepreneur’s styles of leadership and management have often been
linked to specific organizational practice of innovation. Roberts et al. (1989) demonstrate that a long-term view
towards new ideas and ventures supports the innovative culture. A centralized approach, on the other hand, has
been shown to have a negative effect on innovation (Damanpour, 1991). According to Zhao (2005), innovation
will flourish under an open style which encourages and rewards idea development. De Jong & Den Hartog (2007)
summarizes that transformational, participative and employee-oriented managers are more likely to encourage
employee innovativeness Knowledge and skills.
Processes like the existence of consensus, communication or agreement-seeking may modify the direct
relationship initially established between top management teams(TMTs) characteristics and organizational
decisions or organizational results (Eisenhardt & Schoonhoven, 1990; Hambrick & D'Aveni, 1992). There is
a wealth of empirical evidence which maintains that TMT diversity and high levels of education benefit the
groups involved in complex decision making and a company's innovative performance may depend, overall, on
the vision developed by its TMT (Bantel & Jackson, 1989; Bantel, 1993; Pegels et al., 2000; Wiersema & Bantel,
1992; Tihanyi et al., 2000).
In the study of company innovation, operationalized as innovative performance, the incidence of TMT
decisions is especially relevant (Ireland et al., 2001). Innovation is an accumulative, collective and uncertain
process, a fact that management directs, promotes and encourages (O'Sullivan, 2000). The preferences of its
leaders can impose serious restrictions on a company's innovation, compromising its ability to identify and act on
profitable opportunities (Penrose, 1959).
3. Methodology
The study adopted a case study research design to describe management style as a factor influencing
innovation capacity in the manufacturing industry; Buzeki dairy Limited and establish causal relationship
between independent variable; management style and dependent variable; innovation capacity as supported by
Saunders et al., (2009).
The study covered a population of 230 employees of Buzeki Dairy Limited, that included managers,
supervisors, technicians, sales and marketing representatives.
A stratified random sampling technique was used to select the employees from various categories (departments)
in Buzeki dairy Limited that was used for the study. In order to assess the views and opinions on the factor
influencing innovation capacity at Buzeki dairy Limited a sample of 140 employees were selected out of a total
population of 230 as guided by Krejcie and Morgan (1970).The sampling design used was appropriate for the
study because every employee had equal chance of being interviewed or filling the questionnaire. It eliminated
biasness.
4. Results and Analysis
From a total population of 230 employees of Buzeki Dairy Ltd, 140 were sampled using Krejcie and
Morgan (1970). Out of 140 questionnaires, 101 were valid which translated to a response rate of 72%.
The study sought to assess the influence of management style on innovation capacity in manufacturing industry
in Nakuru County. The finding showed that 91.1% of respondents agreed that management was flexible and open
to change and adoption. Consultation for new process or market was done per department and management was
found to be flexible and encouraging new processes (mean 3.08, standard deviation of 0.578). The results also
illustrated a high rate (93.1%) of the respondents who agreed that the organization departmental level encourages
and motivates innovative ideas, this also attracted a high mean of 3.13 with dispersion of 0.577. 85.2% of the
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respondents agreed that there was an enabling management style for innovation with a mean of 2.96 and
deviation of 0.582. Accordingly, 91.1% of the respondents also agreed that management style influences the
ability of the organization to innovate with a mean of 3.05 and standard deviation of 0.517 (Table 4.1). These
results imply that management style highly influences the innovation capacity of a manufacturing industry. This
is consistent with Zhao (2005) who argued that innovation will flourish under an open style which encourages
and rewards idea development. In addition De Jong and Den Hartog (2007) summarized that transformational,
participative and employee-oriented managers are more likely to encourage employee innovativeness knowledge
and skills. A centralized approach, on the other hand, has been shown to have a negative effect on innovation
(Damanpour, 1991).
Table 4.1 Management Style Descriptive Statistics
N
Mean
Std. Deviation
Agree
Disagree
Management is flexible and open
to change
101
3.08
0.578
91.1%
8.9%
Management consultation for
new idea
101
3.08
0.578
91.1%
8.9%
Management encourages &
motivate innovation
101
3.13
0.577
93.1%
6.9%
Management style of open and
flexible enough
101
3.09
0.585
91.1%
8.9%
Management style is enabling for
innovation
101
2.96
0.582
85.2%
14.8%
Management style influences
innovation capacity
101
3.05
0.517
91.1%
8.9%
Valid n (listwise)
101
Further, the study tested a null hypothesis (H0) that there is no positive relationship between management
style and innovation capacity in manufacturing industry in Nakuru County.
The results indicated that there was a strong positive relationship between management style and innovation
capacity as shown in Table 4.2. This implies that the more flexible the management style, the more the capacity
of a manufacturing industry to innovative. The relationship was significant at 0.01 confidence level with a
Spearman correlation of 0.458; p-value < 0.01(0.000).Thus the null hypothesis (H0) that there was no positive
relationship between management style and innovation capacity was rejected. This could imply that management
style directly and positively influences the innovation capacity. These results are consistent with previous
researches by Zhao (2005), which found that innovation flourishes under an open style which encourages and
rewards idea development, and De Jong and Den Hartog (2007) who opined that transformational, participative
and employee-oriented managers are more likely to encourage employee innovativeness knowledge and skills.
Table 4. 2 Management Style Correlation Matrix
MS
Spearman's rho
MS
IC
Correlation Coefficient
1.000
.458**
Sig. (2-tailed)
.
.000
N
101
101
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Correlation Coefficient
.458**
1.000
Sig. (2-tailed)
.000
.
N
IC
101
101
**. Correlation is significant at the 0.01 level (2-tailed).
MS: Management Style
IC: Innovation Capacity
5. Conclusions
The finding showed that 91.1% of respondents agreed that management was flexible and open to change
and adoption. Consultation for new process or market was done per department and management was found to
be flexible and encouraging new processes (mean 3.08, standard deviation of 0.578). The results also illustrated a
high (93.1%) of the respondents who agreed that the organization departmental level encourages and motivates
innovative ideas, this also attracted a high mean of 3.13 with dispersion of 0.577. 85.2% of the respondents
agreed that there was an enabling management style for innovation with a mean of 2.96 and deviation of
0.582. Accordingly, 91.1% of the respondents also agreed that management style influences the ability of the
organization to innovate with a mean of 3.05 and standard deviation of 0.517.
The results indicated that there was a strong positive relationship between management style and innovation
capacity as shown in Table 4.2. This implies that the more flexible the management style, the more the capacity
of a manufacturing industry to innovative. The relationship was significant at 0.01 confidence level with a
Spearman correlation of 0.458; p-value < 0.01(0.000).Thus the null hypothesis (H0) that there was no positive
relationship between management style and innovation capacity was rejected. This could imply that management
style directly and positively influences the innovation capacity. The study therefore concludes that management
style influences innovative capacity of a firm.
6. Recommendations
The study recommends that manufacturing industry that needs to be innovative and compete well in the
market should focus more on organizational management style. The directors, managers and supervisors in a
manufacturing industry should enhance a flexible management style that is consultative, open to ideas,
encourage and motivates employees. Further, the study recommends for more involvement of employees in
decision making. Employees’ ideas or thoughts may be collected through suggestion boxes, questionnaires or
frequent meeting with all employees. This will make them own the organization and work towards achieving its
goal and objectives. Management style should be improved to enable an innovation culture in the organization.
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