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Effect of innovation in organizational profitability of the transportation industry

Effect of innovation in organizational profitability of the transportation industry

CHAPTER ONE

INTRODUCTION

1.1: Background of the Study

         Innovation is a crucial business consideration for today’s turbulent dynamic environment. For organization’s success, continuous innovation becomes requirement for all organizations. Innovation is a process of developing some principles for managing new product development. It is widely argued that innovation is the driving force of firm’s success and therefore may also be a key factor for sustaining the long-run growth of the entire economy. Thus the implementation of research and innovation policies is generally encouraged at national and international levels in order to enhance firm’s capabilities in innovating and adapting to a continuously changing environment.

          Innovation involves acting on the creative ideas to make some specific and tangible difference in the domain in which the innovation occurs (Davila et al, 2006). Innovation is defined as the successful implementation of creative ideas within an organization. Strategy is the direction and scope of an organization over the long term which achieves advantage in a changing environment through its configuration of resources and competences with the aim of fulfilling stakeholders’ expectations (Oke and Goffin, 2001).

Under modern business conditions, innovation activities are considered as the driving force behind business success and overall economic development. It is for this reason that the literature often highlights such activities as the ones leading to enterprise progress. Small and medium-sized enterprises give a strong boost to employment and economic growth precisely due to their innovation activities (Keizer et al., 2002). Accordingly, it is in the interest of both individual enterprises and the economy as a whole to create favourable conditions for the implementation of innovation activities.

One important point about innovation is that it is not costless: It requires the creation of tangible and intangible assets which increase production costs; from this perspective, innovating firms will not necessarily be more profitable, but they will be more likely to survive and grow. A second basic argument about innovation and firm performance is that the innovation of new or technically superior products creates temporary monopolies which improve the business performance of firms. However such temporary imperfect competition can clearly be exploited in at least two ways.

On the one hand, firms can raise prices on the basis of the performance improvements in the product, and this ‘imperfect competition’ advantage will lead to improved returns on sales or on assets. Alternatively, firms can hold prices down, leading to more or less sharp improvements in the price-quality ratio of the product, resulting in increasing sales and market shares: in this case profitability (however measured) may not improve via innovation, but innovation will improve the growth performance of the firm.

1.2: Statement of Problem

Over the last few years, the business environment, in Nigeria and elsewhere, has grown increasingly hostile and it can certainly be argued that the external environment may have a strong impact on organizational profitability. In this sense, an organization’s behaviour has become an increasingly important survival condition (bouchard and basso, 2011).

In today’s knowledge economy, investments in intellectual assets are considered more and more to be key strategic elements to maintain a business’ growth, profitability and competitiveness (Berry, 2000). For organizations in the transportation industry are operating in increasingly competitive market and innovation is often a condition for simple survival. The capability to innovate is ever more viewed as the single most vital factor in developing and supporting competitive advantage Innovation in the transportation sector aims at developing a change adept organization that anticipates, creates and responds effectively to change in the external and internal environments to increase profit potential. Some of the forces of change that have greatly influenced the transportation industry in Ebonyi State include intense competition, regulation and technological advancement. The problem facing this work is to identify the effect of innovation in organizational profitability in this tightly competitive environment.

1.3: Objective of the Study

The broad objective of this study is to examine the effect of innovation in organizational profitability in Ebonyi State Transport Corporation (EBOTRANS). The specific objectives of this study include:

1) To examine the degree of the relationship between innovation and profitability of (EBOTRANS).

2) To determine if technological advancement has an effect on the profitability of EBOTRANS.

3) To determine if intense competition will steam up innovation in EBOTRANS.

1.4: Research Questions

1) What is the degree of the relationship between innovation and profitability of EBOTRANS?

2) Does technological advancement has an effect on the profitability of EBOTRANS?

3)  Does intense competition steam up innovation in EBOTRANS?

1.5: Research Hypothesis

Hypothesis 1

H0: There is a negative relationship between innovation and profitability of EBOTRANS.

H1: There is a positive relationship between innovation and profitability of EBOTRANS

Hypothesis 2

H0: Technological advancement does not have an effect on the profitability of EBOTRANS.

H1: Technological advancement has an effect on the profitability of EBOTRANS.

Hypothesis 3

H0: Intense competition does not steam up innovation in EBOTRANS.

H1: Intense competition steam up innovation in EBOTRANS.

1.6: Significance of the Study

The study is beneficial for the following reasons: first, the outcome of this project will help transport and works ministry of Ebonyi State to understand the level of impact of innovation on the profitability of EBOTRANS.

Secondly, it will help to identify the critical factors that are essential to the achievement optimality in the transportation sector of the state.

Finally, it will be immerse benefit to researchers who will continue from where this project work stops at the end of chapter five.

1.7    Scope of the Study

This study covers the effect of innovation in organizational profitability of the transportation industry the study is located in Ebonyi State Transport Cooperation.

1.8    Limitation of Study

Despite the limited scope of this study certain constraints were encountered during the research of this project. Some of the constraints experienced by the researcher are given below:

  1. FINANCE: Owing to the financial difficulty prevalent in the country and its resultant prices of commodities, transportation fares, research materials etc. The researcher did not find it easy meeting all his financial obligations.
  2. INFORMATION CONSTRAINTS: there was difficulty when it care to obtaining necessary information relevant to this area of study from the transportation company. EBOTRANS found it difficult to reveal their internal operations. The primary information was collected through questionnaire administration and getting the published materials on this topic meant going from one library to other which was not easy.

Although these problems placed limitations on the study, but it did not prevent the researcher from carrying out a detailed and comprehensive research work on the subject matter, and great effort were made to ensure that adequate data was collected for the study.

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