INFLUENCE OF KNOWLEDGE-BASED RESOURCE VARIETY AND PROCESS FLEXIBILITY ON PRODUCT INNOVATION: EMPIRICAL EVIDENCE FROM NORTH AMERICAN AND EUROPEAN MANUFACTURERS

This research asserts that the operations-based capabilities of process flexibility and product innovation result from the leveraging of competitive strengths on multiple and diverse knowledge-based resources, the set of which we call “K-B resource variety.” K-B resource variety is operationalized as manufacturers’ intellectual capital. Intellectual capital is comprised of 1) structural capital (e.g., codified knowledge in state-of-the-art manufacturing processes and superior information systems ) and human capital (e.g., tacit and explicit knowledge manifest through the technical skill levels of the workforce and relative organizational learning capabilities). A recursive latent variable model is presented and tested relating K-B resource variety directly to process innovation and indirectly through process flexibility capabilities. In addition to assessing an operationalization of the K-B resource variety construct using confirmatory factor analysis, a multigroup analysis using the structural equation methodology was conducted to test the invariance of the research model and parameter estimates across two geographic operating regions: North America and Europe. Results from this research confirm the hypothesized positive impact of K-B resource variety on process flexibility and product innovation across both regions. Of theoretical interest are empirical findings that the parameter estimates indicating the influence of K-B resource variety on process innovation is invariant across firms within these regions. In contrast, the impact of process flexibility on product innovation was also positive as hypothesized, but was not invariant for firms between these regions. Our findings have important managerial implications for the development and management of a portfolio of knowledge-based resources for improving the effectiveness of product innovation processes . We believe that our results are especially meaningful for firms competing in clockspeed industries, where process flexibility and product innovation are frequently order-winning capabilities. For these firms in clockspeed sectors , we posit for future research that leveraging the promise of K-B resource variety becomes especially critical.