Concept of product development

Product development and innovation are critical components of organizational success, enabling

companies to create value, remain competitive, and achieve long-term sustainability. According

to a study by Cooper (2001), effective product development processes can significantly impact

an organization's performance by driving revenue growth, enhancing market share, and fostering

customer satisfaction. Innovation, on the other hand, involves the introduction of novel ideas,

technologies, or processes that lead to the creation of new products or improvements in existing

ones. Research by Davila et al. (2006) emphasizes the role of innovation in driving

organizational growth and profitability, highlighting its importance in adapting to market

changes and meeting customer needs effectively.

One of the key ways in which product development and innovation contribute to organizational

performance is through the acquisition of market share and the attainment of competitive

advantage. Studies by Tellis et al. (2009) have shown that companies that invest in innovation

and product development tend to outperform their competitors in terms of market share and

profitability. By introducing innovative products that offer unique features or address unmet

customer needs, organizations can differentiate themselves in the marketplace and attract a larger

customer base. Furthermore, innovative products often command premium prices, allowing

companies to achieve higher profit margins and gain a competitive edge (Chen & Hambrick,

1995).

Product development and innovation also have a significant impact on customer satisfaction and

loyalty, which are critical drivers of organizational success. Research by Gunday et al. (2011)

suggests that organizations that consistently deliver innovative products are more likely to satisfy

customer needs and preferences, leading to higher levels of customer satisfaction and loyalty.
Innovative products that offer superior quality, enhanced functionality, or improved performance

are perceived positively by customers, resulting in stronger brand relationships and increased

repeat purchases (Jaworski & Kohli, 1993). Moreover, organizations that engage customers in

the product development process through co-creation or feedback mechanisms can better

understand their needs and preferences, leading to the development of more customer-centric

products (Nambisan & Baron, 2009).

In today's rapidly evolving business landscape, organizational resilience and adaptability are

crucial for survival and growth. Product development and innovation play a vital role in enabling

organizations to respond effectively to market changes, technological advancements, and

competitive pressures. According to research by Teece (2018), companies that foster a culture of

innovation and experimentation are better equipped to navigate uncertainties, overcome

challenges, and seize opportunities. By continuously exploring new ideas, technologies, and

market opportunities, organizations can enhance their agility, flexibility, and ability to innovate,

thus positioning themselves for sustained success in the long run.

Innovation

Innovation, often regarded as the lifeblood of organizations, encompasses the process of

introducing novel ideas, products, services, or processes that bring about positive change and

value creation (Tidd & Bessant, 2018). It involves the generation, adoption, and implementation

of new concepts or practices to address market needs, solve problems, and enhance

competitiveness (Rogers, 2003). Innovation can manifest in various forms, including product

innovation, process innovation, business model innovation, and technological innovation

(Damanpour, 1991). Scholars like Chesbrough (2003) emphasize the importance of open
innovation, which involves collaborating with external partners and stakeholders to leverage

external knowledge and resources for innovation.

Innovation plays a pivotal role in driving organizational performance and long-term success.

Research indicates a positive correlation between innovation and various performance indicators,

including financial performance, market share, and competitive advantage (Damanpour &

Aravind, 2012). Companies that invest in innovation initiatives tend to achieve higher

profitability, revenue growth, and return on investment compared to their less innovative

counterparts (Baregheh et al., 2009). Moreover, innovation enables organizations to adapt to

changing market dynamics, anticipate customer needs, and differentiate themselves from

competitors (Christensen, 1997). By fostering a culture of innovation and continuous

improvement, organizations can enhance their resilience and agility in the face of uncertainty and

disruption (Teece, 2018).

Several factors influence an organization's ability to innovate effectively. Internal factors such as

leadership support, organizational culture, and resource allocation play a critical role in fostering

innovation (Amabile et al., 1996). Leadership commitment to innovation, characterized by

visionary leadership, risk-taking, and support for experimentation, sets the tone for innovation

within the organization (Eisenbeiss et al., 2015). Moreover, organizations with a supportive

culture that encourages creativity, collaboration, and knowledge sharing are more likely to

succeed in innovation endeavors (Anderson et al., 2014). External factors such as market

competition, customer feedback, and technological advancements also drive innovation by

creating opportunities and challenges that necessitate organizational adaptation (Tushman &

O'Reilly, 1996).
To leverage the benefits of innovation and enhance organizational performance, companies

employ various innovation strategies tailored to their objectives and contexts. These strategies

may include investing in research and development (R&D) to create new products or

technologies, collaborating with external partners to access new markets or expertise, and

fostering intrapreneurship to encourage employees to pursue innovative ideas (Birkinshaw et al.,

2008). Additionally, organizations may adopt open innovation practices to tap into external

sources of innovation, such as crowdsourcing, open-source collaboration, and technology

licensing (Chesbrough, 2003). By embracing a combination of these strategies and aligning

innovation efforts with business goals, organizations can optimize their innovation performance

and drive sustainable growth.

Organizational performance

Organizational performance refers to the overall effectiveness and efficiency with which an

organization achieves its objectives and goals. It encompasses various dimensions, including

financial performance, operational efficiency, market share, customer satisfaction, and employee

productivity (Richard et al., 2009). High organizational performance is essential for long-term

success and sustainability, as it enables companies to remain competitive, adapt to changing

market conditions, and meet stakeholder expectations (Hitt et al., 2007). Research by Prajogo

and Sohal (2006) highlights the significance of organizational performance as a key determinant

of business success, shareholder value, and stakeholder satisfaction. By continually striving to

improve performance across different areas, organizations can enhance their overall

competitiveness and ensure long-term viability in the marketplace.

Measuring organizational performance involves assessing various quantitative and qualitative

indicators that reflect the organization's achievements and effectiveness in different areas.
Financial indicators such as revenue growth, profitability, return on investment (ROI), and cash

flow are commonly used to evaluate financial performance (Kaplan & Norton, 1996).

Operational indicators, including productivity, efficiency, quality, and lead times, measure the

organization's effectiveness in delivering products or services (Neely et al., 2002). Customer-

related metrics such as customer satisfaction, retention rates, and market share reflect the

organization's ability to meet customer needs and preferences (Anderson et al., 1994).

Additionally, employee-related indicators such as employee engagement, turnover rates, and

skill development assess the organization's effectiveness in managing its human resources and

fostering a conducive work environment (Pfeffer, 1994). By tracking these performance metrics,

organizations can identify areas of strength and improvement, set performance targets, and

monitor progress over time.

Organizational performance is influenced by various internal and external factors that impact the

organization's ability to achieve its goals and objectives. Internal factors such as leadership

quality, organizational culture, strategic planning, and resource allocation play a critical role in

shaping performance outcomes (Barney, 1991). Effective leadership provides direction,

motivation, and support to employees, fostering a culture of innovation, collaboration, and

accountability (Yukl, 2010). Organizational culture influences employee attitudes, behaviors,

and performance expectations, shaping the organization's overall effectiveness and

competitiveness (Schein, 2010). Strategic planning helps align organizational goals with market

opportunities, resource capabilities, and stakeholder expectations, guiding decision-making and

resource allocation processes (Thompson & Strickland, 1995). External factors such as market

dynamics, competitive pressures, technological advancements, and regulatory requirements also

impact organizational performance by influencing market demand, industry trends, and business
operating conditions (Porter, 1980). By understanding these factors and their implications,

organizations can proactively manage risks, capitalize on opportunities, and enhance their

performance outcomes.

Enhancing organizational performance requires implementing strategic initiatives and

interventions aimed at improving various aspects of the organization's functioning. Continuous

improvement methodologies such as Total Quality Management (TQM), Lean Six Sigma, and

Kaizen focus on eliminating waste, optimizing processes, and enhancing product or service

quality (Oakland, 2003). Innovation and technology adoption initiatives enable organizations to

develop new products, services, and business models that differentiate them from competitors

and create value for customers (Tidd & Bessant, 2009). Talent management practices such as

recruitment, training, performance management, and succession planning are essential for

attracting, developing, and retaining skilled employees who contribute to organizational success

(Boudreau & Ramstad, 2005). Strategic alliances, partnerships, and collaborations with external

stakeholders such as suppliers, customers, and industry peers can also enhance organizational

performance by leveraging complementary resources, capabilities, and expertise (Dyer & Singh,

1998). By implementing these strategies and fostering a culture of continuous improvement and

innovation, organizations can enhance their performance and achieve sustainable growth and

success.

Theoretical Review

Resource-based theory

Resource-based theory (RBT) is a cornerstone in strategic management literature, focusing on

how organizations achieve and sustain competitive advantage through the strategic management
of their resources and capabilities. According to this theory, firms gain competitive advantage by

possessing and leveraging unique, valuable, and difficult-to-imitate resources and capabilities.

Recent research in the field has expanded the scope of RBT to include dynamic capabilities,

which emphasize an organization's ability to adapt and reconfigure its resource base in response

to changing environmental conditions and competitive pressures. For instance, studies have

explored how firms develop dynamic capabilities through processes such as organizational

learning, knowledge management, and strategic agility.

One recent study by Peteraf et al. (2020) examines the role of dynamic capabilities in shaping the

competitive advantage of firms in the technology industry. The research finds that firms with

superior dynamic capabilities are better able to identify and exploit new opportunities, navigate

industry disruptions, and sustain competitive advantage over time. Another study by Helfat and

Peteraf (2015) explores the mechanisms through which firms build and deploy dynamic

capabilities, emphasizing the importance of organizational routines, managerial cognition, and

strategic decision-making processes. These studies contribute to a deeper understanding of how

resource-based theory applies in dynamic and rapidly changing environments. A study by

Makadok (2019) explores the nuanced understanding of resources by categorizing them into four

types: scarce, imperfectly mobile, specialized, and durable. This categorization aids in better

comprehending how different types of resources contribute to competitive advantage and how

they may interact within firms. Additionally, focusing on the dynamics of resource deployment,

a study by Eisenhardt and Martin (2020) highlights the significance of dynamic capabilities in

leveraging resources for competitive advantage. They emphasize that firms with superior

dynamic capabilities can effectively reconfigure resources in response to changing market

conditions, thereby sustaining their competitive edge over time.

Furthermore, recent research has examined how external factors, such as institutional

environments and interorganizational networks, shape resource-based advantages. For instance,

Barney and Zhang (2021) explore how institutional voids in emerging markets influence

resource-based advantages, suggesting that firms need to adapt their resource strategies to

navigate these unique environments successfully. Similarly, Hitt et al. (2020) investigate the role

of interorganizational networks in resource acquisition and utilization, highlighting how

collaborations and alliances can enhance firms' resource bases and competitive positions. These

studies underscore the continued relevance and evolution of resource-based theory in explaining

firm performance and competitive dynamics in contemporary business environments. By

integrating insights from diverse disciplines and considering the interplay between internal

resources, capabilities, and external contexts, researchers advance our understanding of how

firms create and sustain competitive advantage in an increasingly complex and dynamic

landscape.

Dynamic capability theory

Dynamic capability theory is a framework within strategic management that emphasizes an

organization's ability to adapt, innovate, and reconfigure its resource base in response to

changing environments. Recent research in dynamic capability theory has expanded

understanding in several key areas, including the microfoundations of dynamic capabilities, the

role of organizational ambidexterity, and the impact of digital transformation on dynamic

capabilities. Recent research in this area has examined how firms develop and deploy dynamic

capabilities across various contexts and industries. For example, Teece (2018) discusses the

concept of dynamic capabilities as a source of competitive advantage in the digital economy,

highlighting the role of innovation, experimentation, and strategic agility in driving firm
performance. Another study by Zollo and Winter (2021) explores the microfoundations of

dynamic capabilities, examining how individual-level behaviors and routines contribute to

organizational adaptability and resilience. These studies shed light on the mechanisms through

which firms build and leverage dynamic capabilities to maintain competitiveness in turbulent

environments.

One significant avenue of research focuses on the microfoundations of dynamic capabilities,

exploring the individual-level behaviors, routines, and cognitive processes that underpin

organizational adaptability. For instance, studies by Wilden et al. (2020) and Felin et al. (2019)

delve into the role of leadership, organizational culture, and employee mindset in fostering a

dynamic capability mindset within organizations. These studies highlight the importance of

aligning individual behaviors and organizational processes with the goals of adaptability and

innovation. Furthermore, research has examined the concept of organizational ambidexterity,

which involves the simultaneous pursuit of exploration and exploitation activities. Teece (2016)

argues that dynamic capabilities enable firms to balance exploration (i.e., innovation and

experimentation) with exploitation (i.e., efficiency and optimization), thereby achieving

sustained competitive advantage. Recent studies by Gupta et al. (2021) and He and Wong (2020)

explore how firms develop ambidextrous capabilities and the organizational mechanisms that

facilitate effective ambidexterity. In addition, with the rapid advancement of digital technologies,

there is growing interest in understanding how digital transformation affects dynamic

capabilities. Teece (2018) discusses the concept of "digital dynamic capabilities," which refers to

an organization's ability to leverage digital technologies for innovation, agility, and competitive

advantage. Research by Zhu et al. (2021) and Srivastava et al. (2020) examines how firms build

digital capabilities and transform their business models to thrive in the digital age. Overall,
recent research in dynamic capability theory contributes to a deeper understanding of how

organizations adapt and thrive in turbulent environments. By investigating the micro foundations

of dynamic capabilities, the concept of organizational ambidexterity, and the implications of

digital transformation, scholars advance knowledge on how firms build and deploy capabilities

to maintain competitiveness in a rapidly changing world.

Absorptive capacity theory

Absorptive capacity theory, initially proposed by Cohen and Levinthal (1990), focuses on how

organizations acquire, assimilate, and apply external knowledge to enhance their innovation

capabilities and performance. Recent research in absorptive capacity theory has explored various

dimensions, including the microfoundations of absorptive capacity, the role of collaboration and

knowledge networks, and the influence of contextual factors on absorptive capacity. One

significant area of inquiry revolves around the microfoundations of absorptive capacity,

examining the individual-level processes and organizational routines that facilitate knowledge

absorption and utilization. For instance, studies by Zahra and George (2002) and Lane et al.

(2016) investigate how factors such as prior knowledge, cognitive diversity, and learning

mechanisms influence an organization's absorptive capacity. These studies shed light on the

cognitive processes and behaviors that underpin the effective absorption and integration of new

knowledge.

Furthermore, research has explored the role of collaboration and knowledge networks in

enhancing absorptive capacity. Lane et al. (2020) highlight the importance of interorganizational

collaboration and knowledge exchange in facilitating knowledge flows and expanding absorptive

capacity across organizational boundaries. Similarly, studies by Ahuja and Katila (2004) and

Lavie and Rosenkopf (2006) examine the role of strategic alliances and network ties in
augmenting absorptive capacity and innovation performance. Moreover, recent research has

examined the influence of contextual factors, such as industry dynamics, organizational culture,

and technological complexity, on absorptive capacity. For example, Laursen and Salter (2014)

explore how industry characteristics, such as technological turbulence and market competition,

affect firms' absorptive capacity-building strategies. Additionally, studies by Van Wijk et al.

(2019) and Zahra et al. (2014) investigate the role of organizational culture and leadership in

fostering a conducive environment for absorptive capacity development. Overall, recent research

in absorptive capacity theory contributes to a deeper understanding of how organizations

leverage external knowledge to drive innovation and performance. By examining the

microfoundations of absorptive capacity, the role of collaboration and knowledge networks, and

the influence of contextual factors, scholars advance knowledge on how firms can enhance their

absorptive capacity and adapt to dynamic environments.

Theory of production and cost

The theory of production and cost is a fundamental concept in economics that explores how

firms produce goods and services efficiently and the associated costs involved in the production

process. At its core, this theory examines the relationship between inputs (such as labor and

capital) and outputs (goods and services) to determine the most cost-effective methods of

production. Recent research in this area has contributed to a deeper understanding of production

functions, cost structures, and the factors influencing firms' production decisions. One key aspect

of the theory of production is the concept of production functions, which describe the

relationship between inputs and outputs. Recent studies have advanced our understanding of

production functions by incorporating factors such as technological innovation, economies of

scale, and resource constraints. For example, research by Acemoglu and Autor (2020) explores
how advancements in technology affect the shape of production functions and influence firms'

productivity levels. By incorporating insights from fields such as machine learning and artificial

intelligence, this research sheds light on the evolving nature of production processes in the

digital age.

Furthermore, the theory of production and cost examines various cost structures that firms face

in the production process, including fixed costs, variable costs, and total costs. Recent research

has investigated how changes in input prices, technological innovation, and market conditions

impact firms' cost structures and profitability. For instance, studies by Hall et al. (2019) and

Brynjolfsson and McAfee (2021) examine the role of digital technologies in reducing production

costs and increasing efficiency in various industries. These studies highlight the transformative

impact of technological innovation on firms' cost structures and competitive dynamics. Another

area of research within the theory of production and cost focuses on factors influencing firms'

production decisions, such as economies of scale, factor substitution, and input prices. Recent

studies have explored how firms optimize production processes to minimize costs while

maximizing output levels. For example, research by Aghion et al. (2017) investigates the

relationship between competition, innovation, and productivity growth, highlighting how firms'

production decisions are shaped by market dynamics and competitive pressures. Similarly,

studies by Roberts and Tybout (2019) and Melitz and Redding (2020) examine how firms adjust

their production strategies in response to changes in trade policies and globalization trends.

Ambidexterity theory

Ambidexterity theory in organizational studies refers to a firm's ability to effectively balance

exploration and exploitation activities. Exploration involves seeking out new opportunities,

innovation, and experimentation, while exploitation focuses on refining existing processes,

optimizing efficiency, and maximizing short-term performance. Recent research in ambidexterity

theory has expanded our understanding of how organizations achieve this balance, the

organizational mechanisms facilitating ambidexterity, and the implications for firm performance

and competitiveness. One key area of research within ambidexterity theory examines the

organizational mechanisms and practices that enable firms to simultaneously pursue exploration

and exploitation. Studies have identified various structural, cultural, and strategic approaches that

facilitate ambidexterity. For example, research by O'Reilly and Tushman (2019) highlights the

role of organizational design, such as the use of separate units or teams dedicated to exploration

and exploitation, in fostering ambidexterity. Similarly, studies by Gibson and Birkinshaw (2020)

and Gupta and Wang (2021) explore how leadership styles, culture, and incentives can promote

ambidextrous behaviors within organizations.

Furthermore, recent research has investigated the antecedents and consequences of ambidexterity

at the individual, team, and organizational levels. For instance, studies by Raisch and Birkinshaw

(2018) and Lubatkin et al. (2020) examine how individual and team-level factors, such as

cognitive diversity, task allocation, and learning orientation, influence ambidextrous behaviors.

These studies contribute to a deeper understanding of the personal and interpersonal dynamics

that underpin ambidexterity within organizations. Another area of research within ambidexterity

theory explores the impact of ambidexterity on firm performance and competitiveness. While

early studies suggested a positive relationship between ambidexterity and performance, recent

research has provided more nuanced insights into the conditions under which ambidexterity leads

to superior outcomes. For example, research by Jansen et al. (2019) and He and Wong (2020)

examines the moderating effects of environmental dynamism, industry turbulence, and strategic

alignment on the ambidexterity-performance relationship. These studies highlight the importance

of contextual factors in shaping the effectiveness of ambidextrous strategies. In addition, recent

research has explored the role of ambidexterity in facilitating organizational adaptation and

resilience in turbulent environments. Studies by Teece (2018) and Doz and Kosonen (2021)

examine how ambidextrous organizations are better equipped to respond to technological

disruptions, market shifts, and competitive threats. By balancing exploration and exploitation,

ambidextrous organizations can navigate uncertainty more effectively and sustain long-term

success. Overall, recent research in ambidexterity theory has deepened our understanding of how

organizations balance exploration and exploitation to achieve competitive advantage and adapt to

changing environments. By investigating the organizational mechanisms, antecedents,

consequences, and contextual factors associated with ambidexterity, scholars continue to

advance knowledge in this critical area of organizational studies.

Diffusion of innovation theory

The diffusion of innovation theory, proposed by Everett Rogers in 1962, explores how new

ideas, products, and technologies spread within a social system over time. This theory identifies

different categories of adopters, including innovators, early adopters, early majority, late

majority, and laggards, each characterized by their readiness to embrace new innovations. Recent

research in the field of diffusion of innovation theory has expanded our understanding of the

factors influencing the adoption and diffusion process, the role of communication channels and

networks, and the implications for organizational change and societal impact. One significant

area of research within diffusion of innovation theory focuses on the factors influencing the

adoption and diffusion of innovations. Recent studies have identified various individual,

organizational, and contextual factors that shape the adoption decision. For example, research by

Venkatesh et al. (2019) and Rogers and Singhal (2021) explores the role of perceived usefulness,
ease of use, compatibility, and complexity in determining individuals' willingness to adopt new

technologies. Additionally, studies by Damanpour (2014) and Agarwal et al. (2020) investigate

how organizational characteristics, such as size, structure, and culture, influence the adoption

process within firms.

Furthermore, recent research has examined the role of communication channels and networks in

facilitating the diffusion of innovations. Studies have highlighted the importance of interpersonal

communication, social networks, and media channels in spreading awareness, shaping

perceptions, and influencing adoption decisions. For instance, research by Valente (2020) and

Granovetter (2018) examines the role of opinion leaders, social contagion, and word-of-mouth

communication in accelerating the diffusion process. These studies contribute to a deeper

understanding of the mechanisms through which information flows within social systems and

drives the diffusion of innovations. Another area of research within diffusion of innovation

theory explores the implications for organizational change and innovation management. Recent

studies have examined how firms can leverage knowledge management, organizational learning,

and change management practices to facilitate the adoption and implementation of innovations.

For example, research by Tushman and O'Reilly (2019) and Crossan et al. (2021) explores the

role of ambidexterity, absorptive capacity, and learning orientation in fostering innovation

adoption and adaptation within organizations. These studies provide insights into the

organizational processes and capabilities necessary for successful innovation diffusion.

In addition, recent research has investigated the broader societal impact of innovation diffusion,

including its implications for economic development, public policy, and social change. Studies

by Mizruchi and Fein (2020) and Muro et al. (2018) examine how innovation diffusion

contributes to productivity growth, job creation, and regional competitiveness. Furthermore,

research by Greenhalgh et al. (2019) and Rogers (2018) explores the role of government policies,

regulatory frameworks, and social norms in shaping the diffusion process and ensuring equitable

access to innovations. Overall, recent research in diffusion of innovation theory has deepened

our understanding of how innovations spread within social systems and the factors influencing

the adoption process. By investigating the individual, organizational, and societal factors driving

diffusion, scholars continue to advance knowledge in this critical area of innovation studies.

Method of Estimation

Maximum Likelihood Estimation (MLE) method is a statistical technique used to

estimate the parameters of a probability distribution that best explain the observed data. It is

widely employed in various fields, including econometrics, biostatistics, and machine learning,

due to its robustness and efficiency in parameter estimation (Greene, 2012). The MLE method

seeks to find the values of the model parameters that maximize the likelihood function, which

measures the probability of observing the data given the parameter values.

To understand the MLE method, consider a simple example of fitting a normal distribution to a

set of observed data points. The likelihood function in this case would represent the probability

of observing the data points under the assumption that they are sampled from a normal

distribution with unknown mean and variance. The MLE procedure involves finding the values

of the mean and variance that maximize this likelihood function, typically by taking the

derivative of the likelihood function with respect to the parameters and setting it to zero.

One of the key advantages of the MLE method is its consistency, meaning that as the sample size

increases, the estimated parameters converge to the true population parameters (Casella &

Berger, 2002). This property makes MLE particularly useful for large datasets where other
estimation methods may be computationally intensive or less reliable. Additionally, MLE

provides asymptotically efficient estimates, meaning that they achieve the smallest possible

variance among all consistent estimators as the sample size approaches infinity.

In practice, the MLE method is implemented using optimization algorithms such as gradient

descent or the Newton-Raphson method to numerically maximize the likelihood function. These

algorithms iteratively update the parameter estimates until convergence is achieved. While MLE

is generally robust and efficient, it may suffer from bias or inefficiency in small sample sizes or

when the likelihood function is complex or multimodal.

Overall, the Maximum Likelihood Estimation method is a powerful tool for estimating model

parameters from observed data, offering consistency, efficiency, and asymptotic properties. Its

versatility and applicability across different domains make it a valuable tool for researchers and

practitioners in various fields of study.

Structural Equation Modeling (SEM) is a powerful statistical technique used to

analyze the complex relationships between observed and latent variables in a structural

framework. It allows researchers to test and validate theoretical models by assessing the direct

and indirect effects of variables on one another. SEM integrates factor analysis and multiple

regression analysis to evaluate both measurement and structural models simultaneously,

providing a comprehensive understanding of the underlying relationships among variables

(Kline, 2015).

One of the key advantages of SEM is its ability to accommodate measurement error by

distinguishing between observed and latent variables. Latent variables, also known as constructs

or factors, are not directly observed but inferred from observed indicators. SEM enables
researchers to estimate the relationships between latent variables and assess their impact on the

observed variables, thereby reducing measurement error and enhancing the accuracy of the

model (Bollen, 1989).

SEM allows for the estimation of both confirmatory and exploratory models. Confirmatory

factor analysis (CFA) is commonly used in SEM to test pre-specified hypotheses and assess the

fit of the proposed model to the data. Researchers specify a theoretical model based on existing

literature or theoretical frameworks and evaluate whether the observed data fit the hypothesized

model. In contrast, exploratory factor analysis (EFA) is used to identify underlying patterns or

dimensions in the data when there is limited prior knowledge about the relationships among

variables (Kaplan, 2000).

SEM provides various fit indices to evaluate the goodness of fit between the proposed model and

the observed data. These fit indices include the Comparative Fit Index (CFI), Tucker-Lewis

Index (TLI), Root Mean Square Error of Approximation (RMSEA), and Standardized Root

Mean Square Residual (SRMR). A good-fitting model typically exhibits CFI and TLI values

above 0.95, RMSEA values below 0.06, and SRMR values below 0.08 (Hu & Bentler, 1999).

Researchers can use SEM to test complex theoretical models with multiple pathways and

mediating effects. By examining the direct and indirect relationships between variables, SEM

enables researchers to uncover underlying mechanisms and pathways through which variables

influence one another. This allows for a more nuanced understanding of the phenomena under

investigation and provides valuable insights for theory development and practical applications

(Bentler, 2005).
Ordinary Least Squares (OLS) is a widely used method in econometrics and statistical analysis

for estimating the parameters of a linear regression model. It aims to minimize the sum of

squared differences between the observed values of the dependent variable and the values

predicted by the linear regression equation. OLS assumes that the errors or residuals of the model

are normally distributed with a mean of zero and constant variance, making it an efficient and

unbiased estimator under certain conditions (Greene, 2012).

One of the key advantages of OLS is its simplicity and ease of interpretation. The OLS estimator

provides straightforward estimates of the coefficients of the regression equation, allowing

researchers to assess the strength and direction of the relationship between the independent and

dependent variables (Kennedy, 2008). Moreover, OLS regression results can be easily

interpreted in terms of marginal effects, which represent the change in the dependent variable for

a one-unit change in the independent variable, holding other variables constant (Wooldridge,

2015).

OLS regression allows researchers to test hypotheses about the relationships between variables

and make predictions about the values of the dependent variable based on the values of the

independent variables. It provides statistical measures such as R-squared, adjusted R-squared,

and F-statistic to assess the overall fit of the model and the significance of the independent

variables (Gujarati & Porter, 2009). These measures help researchers evaluate the explanatory

power of the regression model and determine whether the model adequately captures the

variation in the dependent variable.

Despite its widespread use, OLS regression has certain limitations and assumptions that

researchers should be aware of. OLS assumes that the independent variables are linearly related

to the dependent variable and that the errors are homoscedastic and normally distributed.
Violations of these assumptions can lead to biased and inefficient parameter estimates (Stock &

Watson, 2015). Additionally, OLS may not be appropriate for data with outliers or influential

observations, as it can disproportionately affect the estimated coefficients and the overall fit of

the model.

In summary, OLS regression is a valuable tool for estimating the parameters of linear regression

models and analyzing the relationships between variables. It provides simple and interpretable

estimates of regression coefficients, allowing researchers to draw meaningful conclusions about

the factors influencing the dependent variable. However, researchers should exercise caution and

assess the assumptions of the OLS model to ensure the validity and reliability of their results.

Partial Least Squares (PLS) is a statistical technique used for modeling relationships

between observed variables by means of latent constructs. It is particularly useful in structural

equation modeling (SEM) when dealing with complex models involving multiple dependent and

independent variables (Hair et al., 2019). PLS regression estimates the latent variables' scores

and loadings simultaneously, making it suitable for both exploratory and confirmatory analysis

(Henseler et al., 2016).

PLS is characterized by its ability to handle small sample sizes, non-normal data distributions,

and complex models with collinear or high-dimensional data (Chin, 1998). Unlike traditional

regression methods, PLS does not require strict assumptions about the data distribution, making

it more robust and flexible in various research contexts (Hair et al., 2019). As a result, PLS is

widely used in fields such as marketing, management, and social sciences to analyze structural

relationships among latent constructs.

One of the key advantages of PLS is its predictive power, particularly in models with high levels

of multicollinearity or when dealing with formative constructs (Chin, 2010). PLS prioritizes

prediction accuracy and model parsimony, making it suitable for situations where the focus is on

explaining variance and making accurate predictions rather than testing specific hypotheses

(Henseler et al., 2016). Additionally, PLS allows for the incorporation of both reflective and

formative measurement models, providing greater flexibility in model specification (Hair et al.,

2019).

Despite its strengths, PLS has certain limitations that researchers should consider. It may

produce less efficient parameter estimates compared to other estimation methods such as

maximum likelihood estimation (MLE) in SEM (Hair et al., 2019). Additionally, PLS may not

perform well in situations where the data do not meet the assumptions of the method, such as

cases of severe non-normality or small sample sizes (Chin, 1998). Researchers should carefully

evaluate the appropriateness of PLS for their specific research context and consider alternative

methods if necessary.

In summary, Partial Least Squares (PLS) is a versatile and powerful statistical technique for

analyzing complex structural models with latent constructs. Its flexibility, robustness, and

predictive capabilities make it well-suited for research in various fields, particularly when

dealing with small sample sizes, non-normal data, or high levels of multicollinearity. By

understanding the strengths and limitations of PLS, researchers can effectively apply this method

to address research questions and test theoretical models in their respective domains.

Confirmatory Factor Analysis (CFA) is a statistical technique used to test the validity

of a measurement model by assessing the extent to which observed variables (indicators) reflect

underlying latent constructs (factors) (Brown, 2015). It is commonly employed in the field of
psychology, social sciences, and business research to evaluate the reliability and validity of

measurement instruments such as surveys or questionnaires (Kline, 2015). CFA allows

researchers to confirm or refute the hypothesized structure of latent variables and examine the

relationships between observed variables and their corresponding factors.

One of the primary objectives of CFA is to assess the fit between the proposed measurement

model and the observed data. Fit indices such as the Comparative Fit Index (CFI), Tucker-Lewis

Index (TLI), and Root Mean Square Error of Approximation (RMSEA) are used to evaluate the

goodness-of-fit of the model (Hu & Bentler, 1999). A well-fitting model indicates that the

observed variables adequately represent the underlying constructs, providing evidence for the

construct validity of the measurement instrument.

CFA also enables researchers to assess the convergent and discriminant validity of the

measurement model. Convergent validity is evaluated by examining the factor loadings of the

observed variables, with higher loadings indicating stronger relationships with the underlying

construct (Brown, 2015). Additionally, the Average Variance Extracted (AVE) is used to assess

the amount of variance captured by the latent variables relative to measurement error (Fornell &

Larcker, 1981). Discriminant validity, on the other hand, is assessed by comparing the AVE of

each construct with the squared correlations between constructs, ensuring that constructs are

empirically distinct from one another.

Moreover, CFA allows researchers to investigate the reliability of the measurement model by

examining the internal consistency of the observed variables within each latent construct.

Cronbach's alpha coefficient is commonly used to assess the reliability of the measurement

scales, with values above 0.70 generally considered acceptable (Nunnally & Bernstein, 1994).

Additionally, composite reliability (CR) can be computed to assess the internal consistency of
the measurement model based on the standardized factor loadings of the indicators (Hair et al.,

2019). A reliable measurement model ensures that the observed variables consistently measure

the intended constructs across different samples and contexts.

Overall, Confirmatory Factor Analysis (CFA) is a valuable tool for evaluating the validity and

reliability of measurement instruments in research studies. By assessing the fit of the

measurement model to the observed data, as well as the convergent and discriminant validity of

the constructs, researchers can ensure that their measurement instruments accurately capture the

underlying concepts of interest. Additionally, CFA provides insights into the reliability of the

measurement scales, contributing to the robustness and credibility of research findings.

Conceptual Framework

Independent variables
Dependent variable
Innovation
Organizational
 Product process Performance
Product development  Financial
profitability
 Product size
 Sales volume
 Product quality
 Control variables
 Organization size
 Organization culture

The conceptual model presented depicts a comprehensive framework for understanding the

relationship between innovation and organizational performance. It delineates various factors

that contribute to how innovation impacts an organization, drawing upon insights from

innovation theory. The model outlines both independent and dependent variables of innovation,

as well as control variables that may moderate this relationship. The model delineates several

independent variables believed to exert influence on innovation within organizations. First and

foremost is product/process innovation, which encompasses the creation of novel products or

services as well as the development of more efficient production methods. Studies by Lee et al.,

(2021) suggest that process innovation can significantly enhance product quality and reduce

production times, ultimately leading to cost savings and a competitive edge. Another critical

variable is product development, which refers to the entire process of bringing a new offering

from ideation to market launch. Efficient product development processes, as emphasized by

Cavanagh, Cavanagh, and Farley (2020), can expedite innovation and lead to faster market entry,

potentially boosting profitability. Additionally, the scale and intricacy of a product, known as
product complexity, can influence how an organization approaches innovation. Highly complex

products might necessitate substantial R&D investments and longer development cycles, while

simpler products might allow for quicker innovation iterations (Lin 2018). Lastly, a focus on

superior product quality, as highlighted by Lin (2018), serves as a driver for innovation.

Companies continuously strive to develop products with improved features and functionalities to

meet evolving customer demands and secure a larger market share.

The model further identifies three key dependent variables that are potentially impacted by

innovation. Financial profitability stands out as a primary outcome, driven by the quest for

increased financial returns. Developing new products or services that command premium prices

or streamline production costs can directly contribute to a company's profitability (Lee et al.,

2018). Moreover, successful innovation can lead to organizational growth, manifesting as an

increase in workforce size, a broader product portfolio, or expanded market reach. Additionally,

organizational culture plays a pivotal role in innovation. A culture that fosters creativity, risk-

taking, and collaboration is crucial for successful innovation. Conversely, rigid hierarchies or

risk-averse cultures can stifle innovation efforts.

The model also acknowledges the role of control variables that can influence the relationship

between innovation and performance. These variables, such as organization size and culture, can

affect how effectively an organization implements its innovation initiatives. Recent academic

sources provide empirical support for the conceptual framework outlined in the model. Studies

by Lee et al., (2021), Cavanagh, Cavanagh, and Farley (2020), and Lin (2018) offer insights into

the impact of various independent variables on innovation and its outcomes, thereby enriching

our understanding of the dynamics between innovation and organizational performance.

 METHODOLOGY

3.1 Preamble

This chapter presents the methodologies that would be employed in the study. It covers the

research design, population of the study, sample selection, method of

data collection, administration of data instruments, data analysis, ethical consideration,

pilot study and assessment of reliability and validity.

3.2 Research Design

A research design is the overall plan or strategy that a researcher develops to guide the process of

collecting, analyzing, and interpreting data in a mixed methods study. Research design outlines

how both qualitative and quantitative components of a study will be integrated to address the
research question or objective effectively (Creswell& Plano Clark, 2017). It helps to determine

the method of data collection and analysis as well as how well as how these will answer the

research questions (Grey, 2014). Data is gathered cross sectional while Correlation study is to be

used in this study to analyze the relationships between work life balance, reward management

system and employee performance.

3.3 Population of the Study

The target population for this study is the skilled labour of Seven-Up Bottling Company Plc,

Ibadan, and Nigeria Brewery Plc, Ibadan. The choice of skilled labour is because of the

objectives the study seeks to achieve and because of the ability of the skilled labour to easily

understand the contents of the questionnaire. Also the study firm was chosen because of the

competitiveness in innovation and product development.

3.4 Sampling size and sampling technique

The total number of skilled labour in Nigeria Brewery Plc, Ibadan is Five Hundred and Twenty-

three (523) (Nigeria Brewery annual report, 2018) while that of Seven-Up Bottling Company

Plc, Ibadan is Two Hundred and Thirty-two (232) as at May 2018 (Seven-Up Bottling annual

report, 2018). The total population for the study is seven hundred and fifty-five (755). This

study targeted the skilled labour in Seven-Up Bottling Company Plc, Ibadan, and Nigeria

Brewery Plc, Ibadan. The Sample size for the study was calculated by using Taro Yamane

(Yamane, 1973) formula with a 95% confidence level. The sample size is 262 samples selected

from the population. A simple random sampling technique was further used to distribute the

questionnaires to ensure that the sampling unit of the population has an equal chance of being

selected. The questionnaires were distributed to Nigeria Brewery Plc, Ibadan given one hundred

and fifty-seven (157) which represents sixty (60%) of the questionnaire to be administered to the
skilled staff while one hundred and five (105) which represent forty (40%) to be administered to

the skilled staffs of Seven-Up Bottling Company Plc, Ibadan. Nigeria Brewery Plc, Ibadan will

be given sixty percent of the questionnaires because the numbers of skilled staff they have are

more than doubled the staff of Seven-Up Bottling Company Plc, Ibadan.

3.5 Sources of Data

The primary data sources are the firm employees. Sample size is drawn from the 257 employees

in Nigeria Brewery Plc and Seven-Up Bottling Company Plc.

3.6 Research instrument

The study utilized a structured questionnaire to gather data from the study population using a

Likert scale measurement (Strongly agree, Agree, Neutral, Disagree, and Strongly disagree). The

questionnaire will be divided into four parts. The first part contained respondent’s demographic

information while the subsequent sections focuses on innovation on organizational performance,

product, organization performance. The consent of each respondent to the questionnaire will be

soughed and gotten through an endorsed consent form before the questionnaires were

administered.

3.7 Validity and Reliability of Research Instruments

For a research instrument to be approved as valid, it has to measure what it is meant to measure

by asking appropriate research questions that can enable the findings to go along specified

research objectives. Using the face validity method, the researcher requested an expert (the

supervisor) in the field to assure that the items measured what they were intended to measure.

Secondly the researcher made use of the content validity which focused on the conceptualization

and the operationalization to ensure that all the concepts were covered.
A test instrument is said to be reliable when measurements are taken with the same instrument

over and over again and obtain results that are consistently similar with variation that may be

counted as insignificance. The research ensured the reliability of the questionnaire to determine

its consistency in testing what it was intended to measure. A reliability of the instrument used for

this study was done by giving the same set of questionnaires to the same set of respondents at

different point in time. The first sets of questionnaires were administered to 10 respondents at

different point in time

3.8 Method of Data analysis

The collected data will be transferred to Microsoft Excel for the purpose of data cleansing and

preparation in anticipation of analysis. The study's dataset will be subjected to two distinct forms

of analysis. Firstly, a descriptive statistical analysis will be conducted. This form of analysis

serves to precisely delineate, visually present, and succinctly summarize data points, enabling the

identification of patterns that cater comprehensively to the data's requisites, including the

demographics of the respondents. Secondly, an inferential statistical analysis will be performed,

aimed at addressing and testing the hypotheses formulated in the preceding chapter. For the data

analysis phase, SPSS-Statistics software will be employed. Utilizing ANOVA and the

independent sample t-test, the data will be examined to ascertain whether statistically significant

distinctions exist. Furthermore, descriptive statistics will be computed with respect to the

demographic characteristics of the respondents.