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The Effect of Service Innovation Orientation and Open Innovation on Innovation Performance of Medium and Small Private Hospitals in India

The Effect of Service Innovation Orientation and Open Innovation on Innovation Performance of... Previous studies have established the relationship between service innovation orientation, open innovation and innovation performance in context of manufacturing firms. However, studies explore service innovation orientation, open innovation and innovation performance in context of medium and small private hospitals are scarce. The main objective of the study is to investigate the relationship between service innovation orientation, open innovation and innovation performance in medium and small private hospitals in India. A quantitative study using cross-sectional survey method was performed and the data were collected from 173 medium and small private hospitals in three northern states in India using purposive sampling. The findings suggest that there is a positive relationship between service innovation orientation and open innovation. It also shows that there is a positive relationship between open innovation and innovation performance. The findings also reveal that open innovation mediates the relationship between service innovation orientation and innovation performance. The study contributes to the understanding of health practitioners and policymakers about the usefulness of service innovation and open innovation to improve the innovation performance of medium and small private hospitals. Keywords India, innovation, mediation, medium and small, organizational performance, private hospitals the treating doctor (Kate, 2013), services provided by Introduction medium and small private hospitals are not as good as ser- World Health Organization (WHO, 2017) stated that around vices provided by large private hospitals. Nevertheless, 80% of the total population of India prefers treatment in researchers suggest that there are lots of improvements private hospitals, which shows that on average US$ 75 per needed for medium and small hospitals in terms of service capita health expenditure comes from the people’s own quality, technology, medical staff and equipment (Bhate- pocket. India comes under the low middle-income group of Deosthali et al., 2011). nations however it is the sixth biggest out of pocket health Deloitte (2012), recommended that to improve and enhance spender. The private health sector is booming in India the performance of hospitals innovation is the only way out, (Yadavar, 2018) and in private health sector, private hospi- due to which people will get quality services. Researchers tals is the largest segment providing services to the people. (Mazumdar-Shaw, 2018; Nanath, 2011) argued that medium These private hospitals comprise of large hospitals and and small private hospitals in India are involved in innovation medium and small hospitals. About 80% of the total health- however their innovation performance is low. The low innova- care services are provided by the medium and small private tion performance in medium and small private hospitals is due hospitals (Kate, 2013), and around 70% of India’s popula- tion receive healthcare services from medium and small Saudi Electronic University, Riyadh, Kingdom of Saudi Arabia private hospitals (Ahmed et al., 2018). Universiti Sains Malaysia, Penang, Malaysia Despite providing services to 70% of population, ques- Corresponding Author: tions arise on the performance of medium and small private Mohammad Jamal Khan, Department of Public Health, College of Health hospitals. Though, people prefer getting treatment from Sciences, Saudi Electronic University, Riyadh 4249, Kingdom of Saudi medium and small hospitals due to low treatment cost, easy Arabia. access, quick response to an emergency, and personal care of Emails: moha.khan@seu.edu.sa; Jamal.phd.usm@gmail.com Creative Commons CC BY: This article is distributed under the terms of the Creative Commons Attribution 4.0 License (https://creativecommons.org/licenses/by/4.0/) which permits any use, reproduction and distribution of the work without further permission provided the original work is attributed as specified on the SAGE and Open Access pages (https://us.sagepub.com/en-us/nam/open-access-at-sage). 2 SAGE Open to insufficient technological knowledge, poor relationship strategic management and economics, innovation has become between staff, inadequacy of learning, less focus on internal the most important and a broad topic to be addressed (Hauser and external collaboration with patients, competitors, and sup- et al., 2006). In the previous literature of innovation, empha- pliers, and unskilled manpower (Pachouri & Sharma, 2016; sis is given to innovation and organizational performance Robinson, 2017; Sharma, 2017). Hence, innovation practices (Damanpour & Evan, 1984; Miles & Snow, 1992). Most of can provide assistance to medium and small private hospitals the firms innovate at different levels such as products, ser- to overcome the challenges they face in providing quality ser- vices, processes, business models, and distribution channels. vices. As such, the healthcare delivery system in India should For a firm to ensure long-term survival, growth and takeover take this matter seriously to put more focus on innovation of new markets innovation is important (Hauser et al., 2006). among medium and small private hospitals. Innovation has become an important part for every orga- The available literature shows that large and small firms in nizations. But Tushman (1997) stated that it is not necessary different parts of the world have improved their overall perfor- that only innovation will lead organizations to long term suc- mance by adopting innovation practices (Anser et al., 2020; cess. Further, he claims that for long term success organiza- Bianchi et al., 2010; Colombo et al., 2014; Hochleitner et al., tions need to focus on the innovation orientation. Therefore, 2017; Hung & Chou, 2013; Kanwal & Awan, 2021; Laforet & for the continuous innovation capabilities innovation orien- Tann, 2006; Lichtenthaler, 2008). Innovation practices include tation is necessary which improves the performance both the adoption of new technological knowledge, market knowl- internally and externally of the organization (Ionescu & edge and business models which result in new products, ser- Ionescu, 2015). Chuang and Lin (2017), emphasize that vices, improved products or services, or more value for money organizations need to put more focus in determining and for consumers. Plenty of literature available in relation to addressing the preferences of customers and this could be innovation practices in manufacturing as well as service firms performed through service innovation orientation. As in the (Ahuja & Katila, 2001; Ancarani et al., 2016; Awan, Nauman definition of service innovation orientation serve as intro- et al., 2021; Cheng et al., 2021; Damanpour & Evan, 1984; duction of service for the development or improvement in Länsisalmi et al., 2006; Terziovski, 2010; Thakur et al., 2012; the existing service which meets customers’ present and Tsai & Wang, 2008; Wang et al., 2015). However, literature future requirements for the improvement of business perfor- explores innovation performance in relation to medium and mance (Chuang & Lin, 2017). Table 1 listed some of the small private hospitals is scarce. On the basis of thorough lit- important studies explained innovation orientation. erature review and the statements of researchers (Ahmad, Service orientation emphasizes more on determining and 2019; Bawaskar & Bawaskar, 2012; Bhate-Deosthali et al., addressing customer preferences rather than emphasizing on 2011) it can be wisely concluded that despite providing ser- other concerns. Service innovation is a new service and new vices to large section of population in India, medium and small invention which has not been introduce to the present market private hospitals received little attention from the scholars. As (Chuang & Lin, 2017; Prahalad & Ramaswamy, 2004). a result, very little is known about how the medium and small Several researchers provide various aspects of service inno- private hospital sector functions and what more could be done vation such as new service to the world and the company, to improve the overall performance of medium and small pri- enhancement of actual service, and modification in delivery vate hospitals (Chattopadhyay, 2013; Muraleedharan, 1999). and service process (Avlonitis et al., 2001). Therefore, this research work seeks answers to the following In the past studies researchers found that innovation ori- research questions: entation has been empirically related with innovation perfor- mance (Dobni, 2010; Grawe et al., 2009; Siguaw et al., 2006). Researchers found that the concept of service orienta- 1. Does service innovation orientation has an impact on tion is useful for firms in solving customers’ problems until open innovation in medium and small private they feel satisfied and their findings reveal that innovation hospitals? orientation influence performance of organizations (O’Cass 2. Does open innovation has an impact on innovation & Ngo, 2012; O’Cass & Sok, 2013). In healthcare industry, performance of medium and small private hospitals? service innovation orientation plays a significant role. A 3. Does open innovation mediate the relationship study has enclose the link with innovation orientation and between service innovation orientation and innova- performance (McDermott et al., 1993) and found that inno- tion performance in medium and small private vation orientation is a vital link to improve the performance hospitals? of hospitals. Also, innovation orientation has a positive rela- tionship with the financial performance of hospitals. Literature Review Service Innovation Orientation Open Innovation In several disciplines such as organizational behavior, mar- Ever since the concept of open innovation was introduce by keting, operational management, technology management, Chesbrough (2003) it has been growing undoubtedly. He Khan et al. 3 Table 1. Innovation Orientation Explained in Previous Studies. Authors Innovation orientation Manu (1992) Innovation orientation is a multi-component construct which explains the onset of new product or service, research and development process in the organization and enter in the new market area. Berthon et al. (1999) Innovation orientation is the tool for those organizations who believe in allocating their resources to inventing new products or perfecting existing products. This form of innovation orientation includes both the approaches of innovation orientation that is, innovation capacity and openness to innovation. Siguaw et al. (2006) The construct of innovation orientation is the philosophy of knowledge leaning, strategic directions and cross functional beliefs of the organization that direct and guide all the strategies and actions including those associated with formal and informal process, behavior and skills to advance innovative thinking and facilitate development, implementation and evaluation of innovation. Sonmez Cakir and Adiguzel (2019) Innovation orientation is a philosophy that facilitate openness to new ideas and reflect organization’s readiness to adopt the changes by using new resources, skills, technologies and administrative systems. Scuotto et al. (2019) The function of innovation orientation is to generate new ideas. Innovation orientation grows on outside-in approach which explores ways and methods to draw innovation from outside of the organization by interacting with customers, suppliers, and universities. Stock and Zacharias (2011) Organizations with high innovation orientation supplement responsible units with sufficient resources, strengthen information flow and focus on effective decision making process. This approach develop efficiency in innovation process. Jafari et al. (2022) Firms with innovation orientation develops competence in allocation of critical resources to responsible units. These organizations, run on dynamic capabilities, believe that innovation orientation has a capability to anticipate the market dynamism and disruptions and accordingly develop the strategy to navigate market dynamism. The dynamic capability of an organization can be strengthen by integrating innovation orientation with critical resource allocation competence. introduces open innovation as “the use of purposive inflows challenges and enhanced performance. Innovation is a two- and outflows of knowledge to accelerate internal innovation way flow of knowledge which helps firms environment to be and to expand the markets for external use of innovation” flexible (Hochleitner et al., 2017). Therefore, it can be said (Chesbrough et al., 2006). In the competitive environment that open innovation is a very useful concept which increases the word innovation has been recognized as an important the performance of organization. part and one of the key sources for business and manufac- turing firms (McDermott & Prajogo, 2012). Over the past Innovation Performance several years, the term innovation is the fastest growing segment in the economic world. In simple words, the term At present, the business environment is effective and chang- innovation means something new or improved such as new ing extremely. To compete and continue in business, it methods of marketing, new process and new practices become important for a manufacturing organization to intro- which has not been introduced before (Verbano & Crema, duce innovative product continuously (McDermott & 2016). It is the formation and ratification of new ideas and Prajogo, 2012). The concept of innovation is the creation process. it is an on-going process learning, searching and and adoption of ideas which are new to the world exploring which conclude in new ideas, practices, and new (Gopalakrishnan & Damanpour, 1997). The indicators of forms (Marques, 2014). innovation performance in small and medium firms are use Most of the studies on open innovation focused on large of technology for development, emphasizing knowledge firms and it results shows that it is profitable in enhancing per- building, focus on the core competence and develop culture formance (Awan, Arnold et al., 2021; Bianchi et al., 2010; in the organization (Johannessen et al., 1997). Some impor- Laursen & Salter, 2006; Spithoven et al., 2013; van de Vrande tant basic sources for a firm to innovate and improve perfor- et al., 2009; Weng & Huang, 2017). Open innovation is used mance are the process needs, innovation orientation, by many large firms and the results were successful but same industry and market structure, demographics, changes in concept of open innovation is less attracted to smaller firms perception, and technology (Johannessen et al., 1997). because of such characteristics like culture and strategy Innovation performance is a multidimensional construct (Colombo et al., 2014). However, Gassmann et al. (2010) which includes monetary and practical measures. Monetary identified that concept of open innovation is favorable for measures include sales expansion, credit, capacity, and cost firms like large, medium and small in terms of overcoming productivity. Whereas, practical measures include customer 4 SAGE Open Figure 1. Research framework. satisfaction, customer loyalty, employee satisfaction through closely related to organizational innovation. In their studies, teamwork, openness toward customer needs, product qual- several researchers have emphasized the importance of ori- ity and service quality (Johannessen et al., 1999). However, entation to enhancing innovation (Damanpour, 1991; Verbano and Crema (2016) argued that innovation perfor- Deshpande et al., 1997; Khan et al., 2020; Verona, 1999). mance of small firms should be measured on improved com- Findings of their studies reveal that there is a positive rela- petence, improved main product/service, and improved tionship between orientation and innovation. From the above effectiveness of product/service and should not be measured mentioned studies it can be hypothesized that: on monetary measures. Therefore, this study used innova- tion performance as uni-dimension. H1: Service innovation orientation has a significant and Tidd and Bessant (2020) have posited that the organiza- positive influence on open innovation. tion innovation performance depends not only on the techni- cal resources but also on the ways how these resources are Relationship Between Open Innovation and managed and organized. The organizational structure, rou- Innovation Performance tines, incentive system, managerial tools and creativity must also be managed in the organizations (Johannessen et al., The open innovation has become a major strategic decision for 1997). The performance is the foremost tool of “the potential firms toward the performance (Chesbrough, 2006). Although, for future successful implementation of actions to reach the major question is that how innovation performance is objectives and targets” (Lebas, 1995). Objectives are setting affected by the open innovation. However, some studies have goals, time frames and detailed means to achieve targets empirically investigated the positive effect of open innovation (Awan, 2019; Moreira et al., 2017). The organization which on innovation performance. continuously look for achievements are very innovative Caloghirou et al. (2004) have argued that openness to about their quality and quantity of ideas. Though, the quality external sources of knowledge not only enhanced a firm’s and quantity of ideas are two independent parameters, but research and development competency, but also had a posi- when combined they form the definition of innovative per- tive effect on its innovation performance. van de Vrande formance (Halim et al., 2014). See Figure 1 for the frame- et al. (2009), investigate the effect of open innovation on the work of the research study. small and medium enterprises. Findings of the study reveal that small and medium firms are engaged in many open inno- vation practices. However, the study finds no major differ- Relationship Between Service Innovation ence between manufacturing and service industries toward Orientation and Open Innovation adoption of open innovation. But medium sized firms are on “Service innovation orientation represents a service orienta- average in adopting open innovation, whereas small sized tion for developing new solutions or improving existing ser- firms are still not involved in the activity of open innovation. vices that meet customers’ current and future requirements to Previous studies (Awan et al., 2019; Damanpour & Evan, improve business performance” (Chuang & Lin, 2017). It is 1984; Lopez et al., 2005; Rosenbusch et al., 2011), indicates a part of innovation where it helps the organization to meet that firm’s with open innovation activity respond faster to the customers’ requirements which lead to performance. environmental pressures, and therefore they have superior Studies have shown that innovation orientation has a signifi- performance and also report that innovation has a positive cant positive relationship with innovation (Chatterji & effect on SMEs performance. As the above studies have Fabrizio, 2014; Schweisfurth & Raasch, 2015; Von Hippel, found a positive relationship between open innovation and 2006). Chatterji and Fabrizio (2014) investigated on how innovation performance. Therefore, on this basis it can be innovation orientation influences firm innovation capability. hypothesized that: They found that innovation significantly improved generat- ing, accepting and implementing of new ideas, processes, H2: Open innovation has a significant and positive influ- products or services. Therefore, innovation orientation is ence on innovation performance. Khan et al. 5 Uttarakhand, and Delhi. Informed consent was obtained on Open Innovation Mediates the Relationship data collection from the representatives of the hospitals, who Between Service Innovation Orientation and were the respondents of the study. In total 186 medium and Innovation Performance small private hospitals responded to the study survey and Previous studies have adopted market orientation, learning after thorough scrutiny of the returned questionnaires 173 orientation and strategic orientation in the context of innova- were used for data analysis. Harman’s single factor test was tion, and their findings reveal that they have a significant performed to identify the common method bias in the survey positive relationship with performance (Agarwal et al., 2003; data. The test result found that 44.60% of total variance was Chatterji & Fabrizio, 2014; Ripolles Meliá et al., 2010; explained by the first factor which was below than the limit Simpson et al., 2006). Researchers have defined that service of 50% of the total variance. innovation orientation has a relationship with innovation In estimating the sample size of a study performed with (Chatterji & Fabrizio, 2014; Hidalgo & D’Alvano, 2014; structural equation modeling, Chin (2010) explained that Ionescu & Ionescu, 2015; Siguaw et al., 2006; Von Hippel, sample size should be equal or larger than 10 times of 2006). Studies in the context of hospitals have also found a number of structural paths pointing to an endogenous vari- positive relationship between innovation orientation and per- able. Further, according to Reinartz et al. (2009) the sam- formance (Awan, 2021; Dobrzykowski et al., 2015; ple size of 100 is adequate for a study performed with Länsisalmi et al., 2006; Lonial et al., 2008). From the above- partial least square-structural equational modeling (PLS- mentioned studies, it can be hypothesized that: SEM). Therefore, the sample size of 173 was sufficient to perform PLS-SEM analysis H3: Open innovation mediates the relationship between ser- vice innovation orientation and innovation performance. Measurements The survey instrument was developed using well established Methods scales and items were adapted from the previous studies (Chuang & Lin, 2017; Prajogo & McDermott, 2011; Verbano Data Collection Procedure and Sampling & Crema, 2016). For service innovation orientation and open A cross sectional study was performed and the survey innovation, items were measured on a seven-point Liker method was used to collect the data. The unit of analysis of scale that ranged from (1) strongly disagree to (7) strongly the study was organization, that is, medium and small pri- agree. Innovation performance was measured on a five-point vate hospital and the respondent of the survey was owner/ Likert scale as Podsakoff et al. (2012) suggested that elimi- doctor of the hospital. Due to unavailability of sampling nating common scale properties will reduce common method frame, purposive sampling was used to select the hospitals bias. The variable service innovation orientation has four and respondents were requested to voluntarily participate in items adapted from Chuang and Lin (2017), open innovation the survey. According to Sekaran and Bougie (2016), “pur- has six items adapted from Prajogo and McDermott (2011) posive sampling is confined to specific types of people who and three items for innovation performance were adapted can provide the desired information, either because they are from Verbano and Crema (2016) the only ones who have it or conform to some criteria set by the researcher.” Results As no official document or list was available, google search was performed for the location and contact numbers The respondents of the study were doctors/owners for all 173 of medium and small private hospitals in major cities of medium and small private hospitals. Male respondents were Uttar Pradesh and Uttarakhand and in Delhi by using key- slightly higher (57.2%) than the female respondents. The age words like small hospitals in Lucknow, medium and small group of majority of the respondents (41.6%) was 25 to hospitals in Bareilly, small and medium hospitals in 35 years. In total 67.7% hospitals were individually owned Dehradun, small hospitals in Delhi and so on so forth. Phone by the doctors. Table 2 explains the profile of surveyed hos- calls were made on the numbers obtained from the google pitals and the respondents. search and hospitals were requested to provide email or cell phone number of the doctor responsible for the administra- Descriptive Statistics of the Latent Variables tion of the hospital. Electronic survey questionnaire was for- warded to those doctors with a request to take part in study The mean values of the study variables were varied from survey. The inclusion criterion was hospitals with less than maximum 6.051 to minimum 5.679 on 7-point Likert scale. 100 beds as Kate (2013) identified those hospitals as small The dependent variable of the study model, that is, innova- and medium which have less than 100 beds. The data were tion performance was measured on 5-point Likert scale and collected from the medium and small private hospitals in the mean value was 4.466. Table 3 shows the results of three states of north India which were Uttar Pradesh, descriptive analysis of the study variables. 6 SAGE Open Table 2. Socio-demographic Profile of the Respondents (N = 173). Variable Category Frequency Percent Profile of doctor Gender Male 99 57.2 Female 74 42.8 Age group 25–35 72 41.6 36–45 55 31.8 46–55 33 19.1 56–65 13 7.5 Specialization General practitioner 64 37.0 General surgeon 23 13.3 Gynecologist and obstetrician 49 28.3 Orthopedician 18 10.4 Other 19 11.0 Length of service 0–5 years 78 45.1 6–10 years 49 28.3 11–20 years 28 16.2 21 years and more 18 10.4 Profile of hospital Ownership Individually owned 117 67.6 Partnership 56 32.4 Number of employees 1–10 32 18.5 11–25 99 57.2 26–50 23 13.3 51 and more 19 11.0 Type of facility Basic services 64 37 Specialty services 109 63 Establishment (in years) Median 11 Location Uttar Pradesh 102 59.0 Delhi 53 30.6 Uttarakhand 18 10.4 0.85 (see Table 5). Therefore, the discriminant validity of the Assessment of Measurement Model study model was established. Factor loading, composite reliability (CR) and average vari- ance extracted (AVE) were checked to establish the conver- Assessment of Structural Model gent validity of the research model. The cut-off value of In PLS-SEM, the goodness of the structural model should be factor loading, CR and AVE were 0.708, 0.70, and 0.50 established by significance of path coefficient (β-value) and respectively as recommended by Hair et al. (2021). Table 3 the coefficient of variance (R ) (Hair et al., 2011). According shows mean, standard deviation and factor loadings of all the to Cohen (1988), R value between .02 and .12 is considered items as well as AVE and CR of latent variables. The factor weak, between .13 and .25 moderate and .26 and above sub- loadings of two items SIO4 (0.598) and OI1 (0.695) were stantial. The R values of open innovation and innovation below the recommended value of 0.708. However, the items performance were moderate (.235) and substantial (.297) were not deleted from the analysis as AVEs of the latent vari- respectively which means the 23.5% of the total variance of ables of these items were above the recommend value of open innovation was explained by the service innovation ori- 0.50. Table 4 details measurement model as well as mean and entation. Similarly, 29.7% of the total variance of innovation standard deviation of study variables. performance was explained by the open innovation. To establish the discriminant validity of the research The significance level of path coefficient explains the model Heterotrait–Monotrait (HTMT) ratio was used. Recent hypothesized relationship between variables (Hair et al., research recommend use of Heterotrait–Monotrait (HTMT) 2021). Therefore, boot strapping analysis with re-sampling over Fornell–Larcker method to check discriminant validity of 1,000 was run to obtain the significance level of path coef- as HTMT consider more powerful criterion (Henseler et al., ficients of the structural model. The boot strapping analysis 2016). The study preferred use of stricter cut-off value of found that service innovation orientation has a positive and 0.85 of HTMT and found that all HTMT values were below Khan et al. 7 Table 3. Descriptive Statistics of the Latent Variables. improvement of innovation orientation such as service inno- vation orientation, orientation capability and organizational Study variables Mean Standard deviation innovation. Service innovation orientation in organizations Service innovation orientation 6.051 0.807 is understood as beliefs and attitude toward developing inno- Open innovation 5.679 0.871 vative solutions to existing problems and further improving Innovation performance 4.466 0.514 services to the customers and fulfilling their current and future needs that ultimately improve the organizational per- formance (Chuang & Lin, 2017). Service innovation orienta- significant effect on open innovation, that is, H1 as β = .485, tion emphasizes more on needs of customers rather than p < .01. Open Innovation has significant positive influence other aspect of organizational process. However, open inno- on innovation performance, that is, H2 as β = .545, p < .01. vation mainly focuses on willful exchange of knowledge The analysis results also show that open innovation mediates with external partners to speed up the internal innovation and the relationship between service innovation orientation and expand the market of the organization to use external innova- innovation performance, that is, H3 as β = .264 and confi- tion at fullest (Chesbrough et al., 2006). There is two way dence interval lower limit = 0.194 and upper limit = 0.315. exchange of knowledge in open innovation. In outside-in Table 6 shows the results of boot strapping. Figure 2 shows flow of knowledge, organization utilize the external knowl- the significance level of hypothesized relationships. edge shared by the partners as input for the innovation pro- cess whereas, in inside-out flow of knowledge, organization shares its unused or underutilized knowledge to partner orga- Discussion nizations so that they can use it in their innovation process (Chesbrough, 2017). The finding of this study suggests that The main goal of the research study was to investigate the organization should further enhance the creative skills of effect of service innovation orientation on open innovation employees to solve the issues of customers and provide and innovation performance in context of medium and small improved services by exposing them to open innovation. private hospitals. Further, available literature lack in studies Knowledge exchange occurs in open innovation will further tested the mediating effect of open innovation. Therefore, enhance the knowledge of employees and strengthen the ser- present study is an attempt to bridge the gap in literature by vice innovation orientation in the organization. investigating the direct and the mediating effect of variables The data analysis results also find that open innovation used the research framework. Thorough literature review has significant and positive influence on innovation perfor- reveals that previous studies have tested the effect of service mance of medium and small private hospitals with β = .545 innovation on innovation performance (Dobrzykowski et al., and p-value = .000 (H2 supported). This finding of the study 2015; Länsisalmi et al., 2006) however, studies investigated is also consistent with previous studies which argued that the mediating effect of open innovation in context of medium one of the crucial sources to support innovation performance and small private hospitals is scarce. Literature review also is external knowledge resources (Parida et al., 2012). Open reveals that due attention is required from the researchers on innovation develops capability among organizations to con- medium and small private hospitals in India as these hospitals nect and collaborate with outside partners as well as com- provide services to the 70% population of the country. petitors and helps organizations to obtain new technology However, very few studies were conducted focusing on inno- and knowledge and improve, enhance, and achieve innova- vation performance of this category of hospitals. Therefore, tion performance. this study empirically tested an innovation model by combin- Lastly, data analysis results found that open innovation has ing the factors as service innovation orientation and open mediating effect between service innovation orientation and innovation and their effect on innovation performance. The innovation performance (β = .145, p-value = .000) which findings of this study will enlighten the policy developers and means H3 was also supported. This finding is similar with the the hospital managers about the importance of innovation findings of previous studies as innovation orientation or stra- strategies and how innovation performance can be improved tegic orientation has positive influence on service orientation by using service innovation orientation and open innovation (inward/outward innovation activities) and innovation perfor- in context of medium and small private hospitals. mance (Chatterji & Fabrizio, 2014; Hidalgo & D’Alvano, The data analysis findings revealed that H1 was supported 2014; Von Hippel, 2006). Service innovation orientation (β = .485, p-value = .000) as service innovation orientation enhances current services by developing new solutions which has significant and positive influence on open innovation. ultimately improves the innovation performance of the orga- This result was consistent with the previous research studies nization and meet current and future needs of the customers. (Chatterji & Fabrizio, 2014; Franke & Shah, 2003; Service innovation orientation emphasizes more on custom- Schweisfurth & Raasch, 2015) in which it was argued that ers’ preferences than other aspects of the organization. innovation in the form of open, inward or outward leads to 8 SAGE Open Table 4. The Results of Measurement Model and Descriptive Analysis. Factor Construct/Item Mean SD Loading AVE CR Service innovation orientation (SIO) 0.871 0.632 1. My hospital develops new service for our patients need. 6.2 0.992 0.899 2. My hospital extends the firm’s services range 5.79 1.015 0.795 3. My hospital improves existing service quality. 6.11 1.042 0.854 4. My hospital improves services flexibility. 6.11 0.955 0.598 Open innovation (OI) 0.678 0.926 1. My hospital frequently refines the provision of existing services 5.67 0.896 0.695 2. My hospital regularly implements small adaptations to existing services. 5.82 1.016 0.828 3. My hospital introduces the improved version of the existing services in the local market. 5.56 1.053 0.898 4. My hospital improves the provision efficiency of services 5.78 0.868 0.832 5. My hospital increases economies of scales in existing markets 5.69 1.273 0.873 6. My hospital expands services for existing clients 5.55 1.222 0.801 Innovation performance (IP) 0.742 0.896 1. My hospital has generated innovations that have improved our competence on the main 4.47 0.501 0.82 services 2. My hospital has generated innovations that have improved the main service we offer 4.46 0.66 0.864 3. My hospital has generated innovations that have improved the effectiveness of our services 4.47 0.624 0.898 Note. AVE = average variance extracted; CR = composite reliability; SD = standard deviation. Table 5. Discriminant Validity (HTMT.85 Criterion) of revealed that open innovation has significant positive Measurement Model. effect on innovation performance of medium and small private hospitals. Therefore, it is utmost importance for the 1 2 3 hospitals to take service innovation orientation into con- 1 Innovation performance sideration while adopting open innovation toward the 2 Open innovation 0.618 enhancement of innovation performance of medium and 3 Service innovation orientation 0.363 0.481 small private hospitals. The RQ3 was, does open innova- tion mediate the relationship between service innovation orientation and innovation performance in medium and Conclusion and Limitations small private hospitals? Study found that open innovation As per the conceptualized research model of this study, inno- mediates the relationship between service innovation ori- vation performance of medium and small private hospitals is entation and innovation performance. positively influenced by the service innovation orientation In conclusion, the findings of the study enrich the existing and open innovation. Studies on open innovation have taken literature related to the subject. Although, the process of place in both manufacturing and service sector. However, open innovation in medium and small private hospitals needs studies focusing on medium and small private hospitals of to be thoroughly understood, this study will help medium India are scarce. Therefore, the current research should focus and small private hospitals to understand the role of service on medium and small private hospitals rather than large pri- innovation orientation and open innovation on enhanced vate hospitals. For that reason, the authors’ interest lies on innovation performance. This study also contributes toward the area of open innovation and medium and small private improved understanding of policy maker and healthcare hospitals that have minimal research. managers on service innovation orientation, open innovation The scope of the study encompasses the investigation and innovation performance. into the relationship of variables such as service innova- Although, this study is a sincere attempt to understand tion orientation as the factor that has influence on open the innovation process in medium and small private hospi- innovation and its relationship to innovation performance. tals, study has few limitations. This study used non-proba- The study identified three research question to answer. bility purposive sampling to collect the data due to the RQ1 Does service innovation orientation has an impact on unavailability of the sample frame. Therefore, the generaliz- open innovation in medium and small private hospitals? ability of the study findings is limited. Second, the sample The study found that service innovation orientation has a size of 173 could be considered as modest, however, the positive effect on open innovation. RQ2 Does open inno- sample size appeared to be adequate for the study frame- vation has an impact on innovation performance of medium work when examined on G*power in a priori power analysis and small private hospitals? The findings of the study (Faul et al., 2007). Khan et al. 9 Table 6. Results of Structural Model Analysis. Hypothesis Relationship Std. Beta Std. Err. t-Value p-Value Decision H1 SIO à OI 0.485 0.035 13.711 .000 Supported H2 OIàIP 0.545 0.043 12.861 .000 Supported H3 SIOàOIàIP 0.145 0.039 3.725 .000 Supported Note. SIO = service innovation orientation; OI = open innovation; IP = innovation performance. Figure 2. PLS output of structural model. Acknowledgments References Authors thank study respondents for proving the responses on sur- Agarwal, S., Krishna Erramilli, M., & Dev, C. S. (2003). Market vey questionnaire. orientation and performance in service firms: Role of innova- tion. Journal of Services Marketing, 17, 68–82. Ahmad, S. (2019). Innovation performance of small and medium Declaration of Conflicting Interests private hospitals: Roles of open and closed innovation The author(s) declared no potential conflicts of interest with respect [Unpublished doctoral dissertation]. Universiti Sains Malaysia. to the research, authorship, and/or publication of this article. Ahmed, S., Halim, H. A., & Ahmad, N. H. (2018). Open and closed innovation and enhanced performance of SME hospitals—A Funding conceptual model. Business Perspectives and Research, 6(1), The author(s) disclosed receipt of the following financial support 1–12. for the research, authorship, and/or publication of this article: The Ahuja, G., & Katila, R. (2001). Technological acquisitions and research study did not receive any funding from any source. the innovation performance of acquiring firms: A longitudinal study. Strategic Management Journal, 22(3), 197–220. Ancarani, A., Di Mauro, C., Gitto, S., Mancuso, P., & Ayach, A. Ethical Approval (2016). Technology acquisition and efficiency in Dubai hos- An ethics statement (including the committee approval number) for pitals. Technological Forecasting and Social Change, 113, animal and human studies. If this is not applicable, please state this 475–485. instead. As the study was designed as cross sectional survey study, Anser, M. K., Khan, M. A., Awan, U., Batool, R., Zaman, K., no ethical approval was obtained. Informed consent was taken from Imran, M., Indrianti, Y., Khan, A., & Bakar, Z. A. (2020). 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The Effect of Service Innovation Orientation and Open Innovation on Innovation Performance of Medium and Small Private Hospitals in India

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© The Author(s) 2022
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2158-2440
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10.1177/21582440221116110
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Abstract

Previous studies have established the relationship between service innovation orientation, open innovation and innovation performance in context of manufacturing firms. However, studies explore service innovation orientation, open innovation and innovation performance in context of medium and small private hospitals are scarce. The main objective of the study is to investigate the relationship between service innovation orientation, open innovation and innovation performance in medium and small private hospitals in India. A quantitative study using cross-sectional survey method was performed and the data were collected from 173 medium and small private hospitals in three northern states in India using purposive sampling. The findings suggest that there is a positive relationship between service innovation orientation and open innovation. It also shows that there is a positive relationship between open innovation and innovation performance. The findings also reveal that open innovation mediates the relationship between service innovation orientation and innovation performance. The study contributes to the understanding of health practitioners and policymakers about the usefulness of service innovation and open innovation to improve the innovation performance of medium and small private hospitals. Keywords India, innovation, mediation, medium and small, organizational performance, private hospitals the treating doctor (Kate, 2013), services provided by Introduction medium and small private hospitals are not as good as ser- World Health Organization (WHO, 2017) stated that around vices provided by large private hospitals. Nevertheless, 80% of the total population of India prefers treatment in researchers suggest that there are lots of improvements private hospitals, which shows that on average US$ 75 per needed for medium and small hospitals in terms of service capita health expenditure comes from the people’s own quality, technology, medical staff and equipment (Bhate- pocket. India comes under the low middle-income group of Deosthali et al., 2011). nations however it is the sixth biggest out of pocket health Deloitte (2012), recommended that to improve and enhance spender. The private health sector is booming in India the performance of hospitals innovation is the only way out, (Yadavar, 2018) and in private health sector, private hospi- due to which people will get quality services. Researchers tals is the largest segment providing services to the people. (Mazumdar-Shaw, 2018; Nanath, 2011) argued that medium These private hospitals comprise of large hospitals and and small private hospitals in India are involved in innovation medium and small hospitals. About 80% of the total health- however their innovation performance is low. The low innova- care services are provided by the medium and small private tion performance in medium and small private hospitals is due hospitals (Kate, 2013), and around 70% of India’s popula- tion receive healthcare services from medium and small Saudi Electronic University, Riyadh, Kingdom of Saudi Arabia private hospitals (Ahmed et al., 2018). Universiti Sains Malaysia, Penang, Malaysia Despite providing services to 70% of population, ques- Corresponding Author: tions arise on the performance of medium and small private Mohammad Jamal Khan, Department of Public Health, College of Health hospitals. Though, people prefer getting treatment from Sciences, Saudi Electronic University, Riyadh 4249, Kingdom of Saudi medium and small hospitals due to low treatment cost, easy Arabia. access, quick response to an emergency, and personal care of Emails: moha.khan@seu.edu.sa; Jamal.phd.usm@gmail.com Creative Commons CC BY: This article is distributed under the terms of the Creative Commons Attribution 4.0 License (https://creativecommons.org/licenses/by/4.0/) which permits any use, reproduction and distribution of the work without further permission provided the original work is attributed as specified on the SAGE and Open Access pages (https://us.sagepub.com/en-us/nam/open-access-at-sage). 2 SAGE Open to insufficient technological knowledge, poor relationship strategic management and economics, innovation has become between staff, inadequacy of learning, less focus on internal the most important and a broad topic to be addressed (Hauser and external collaboration with patients, competitors, and sup- et al., 2006). In the previous literature of innovation, empha- pliers, and unskilled manpower (Pachouri & Sharma, 2016; sis is given to innovation and organizational performance Robinson, 2017; Sharma, 2017). Hence, innovation practices (Damanpour & Evan, 1984; Miles & Snow, 1992). Most of can provide assistance to medium and small private hospitals the firms innovate at different levels such as products, ser- to overcome the challenges they face in providing quality ser- vices, processes, business models, and distribution channels. vices. As such, the healthcare delivery system in India should For a firm to ensure long-term survival, growth and takeover take this matter seriously to put more focus on innovation of new markets innovation is important (Hauser et al., 2006). among medium and small private hospitals. Innovation has become an important part for every orga- The available literature shows that large and small firms in nizations. But Tushman (1997) stated that it is not necessary different parts of the world have improved their overall perfor- that only innovation will lead organizations to long term suc- mance by adopting innovation practices (Anser et al., 2020; cess. Further, he claims that for long term success organiza- Bianchi et al., 2010; Colombo et al., 2014; Hochleitner et al., tions need to focus on the innovation orientation. Therefore, 2017; Hung & Chou, 2013; Kanwal & Awan, 2021; Laforet & for the continuous innovation capabilities innovation orien- Tann, 2006; Lichtenthaler, 2008). Innovation practices include tation is necessary which improves the performance both the adoption of new technological knowledge, market knowl- internally and externally of the organization (Ionescu & edge and business models which result in new products, ser- Ionescu, 2015). Chuang and Lin (2017), emphasize that vices, improved products or services, or more value for money organizations need to put more focus in determining and for consumers. Plenty of literature available in relation to addressing the preferences of customers and this could be innovation practices in manufacturing as well as service firms performed through service innovation orientation. As in the (Ahuja & Katila, 2001; Ancarani et al., 2016; Awan, Nauman definition of service innovation orientation serve as intro- et al., 2021; Cheng et al., 2021; Damanpour & Evan, 1984; duction of service for the development or improvement in Länsisalmi et al., 2006; Terziovski, 2010; Thakur et al., 2012; the existing service which meets customers’ present and Tsai & Wang, 2008; Wang et al., 2015). However, literature future requirements for the improvement of business perfor- explores innovation performance in relation to medium and mance (Chuang & Lin, 2017). Table 1 listed some of the small private hospitals is scarce. On the basis of thorough lit- important studies explained innovation orientation. erature review and the statements of researchers (Ahmad, Service orientation emphasizes more on determining and 2019; Bawaskar & Bawaskar, 2012; Bhate-Deosthali et al., addressing customer preferences rather than emphasizing on 2011) it can be wisely concluded that despite providing ser- other concerns. Service innovation is a new service and new vices to large section of population in India, medium and small invention which has not been introduce to the present market private hospitals received little attention from the scholars. As (Chuang & Lin, 2017; Prahalad & Ramaswamy, 2004). a result, very little is known about how the medium and small Several researchers provide various aspects of service inno- private hospital sector functions and what more could be done vation such as new service to the world and the company, to improve the overall performance of medium and small pri- enhancement of actual service, and modification in delivery vate hospitals (Chattopadhyay, 2013; Muraleedharan, 1999). and service process (Avlonitis et al., 2001). Therefore, this research work seeks answers to the following In the past studies researchers found that innovation ori- research questions: entation has been empirically related with innovation perfor- mance (Dobni, 2010; Grawe et al., 2009; Siguaw et al., 2006). Researchers found that the concept of service orienta- 1. Does service innovation orientation has an impact on tion is useful for firms in solving customers’ problems until open innovation in medium and small private they feel satisfied and their findings reveal that innovation hospitals? orientation influence performance of organizations (O’Cass 2. Does open innovation has an impact on innovation & Ngo, 2012; O’Cass & Sok, 2013). In healthcare industry, performance of medium and small private hospitals? service innovation orientation plays a significant role. A 3. Does open innovation mediate the relationship study has enclose the link with innovation orientation and between service innovation orientation and innova- performance (McDermott et al., 1993) and found that inno- tion performance in medium and small private vation orientation is a vital link to improve the performance hospitals? of hospitals. Also, innovation orientation has a positive rela- tionship with the financial performance of hospitals. Literature Review Service Innovation Orientation Open Innovation In several disciplines such as organizational behavior, mar- Ever since the concept of open innovation was introduce by keting, operational management, technology management, Chesbrough (2003) it has been growing undoubtedly. He Khan et al. 3 Table 1. Innovation Orientation Explained in Previous Studies. Authors Innovation orientation Manu (1992) Innovation orientation is a multi-component construct which explains the onset of new product or service, research and development process in the organization and enter in the new market area. Berthon et al. (1999) Innovation orientation is the tool for those organizations who believe in allocating their resources to inventing new products or perfecting existing products. This form of innovation orientation includes both the approaches of innovation orientation that is, innovation capacity and openness to innovation. Siguaw et al. (2006) The construct of innovation orientation is the philosophy of knowledge leaning, strategic directions and cross functional beliefs of the organization that direct and guide all the strategies and actions including those associated with formal and informal process, behavior and skills to advance innovative thinking and facilitate development, implementation and evaluation of innovation. Sonmez Cakir and Adiguzel (2019) Innovation orientation is a philosophy that facilitate openness to new ideas and reflect organization’s readiness to adopt the changes by using new resources, skills, technologies and administrative systems. Scuotto et al. (2019) The function of innovation orientation is to generate new ideas. Innovation orientation grows on outside-in approach which explores ways and methods to draw innovation from outside of the organization by interacting with customers, suppliers, and universities. Stock and Zacharias (2011) Organizations with high innovation orientation supplement responsible units with sufficient resources, strengthen information flow and focus on effective decision making process. This approach develop efficiency in innovation process. Jafari et al. (2022) Firms with innovation orientation develops competence in allocation of critical resources to responsible units. These organizations, run on dynamic capabilities, believe that innovation orientation has a capability to anticipate the market dynamism and disruptions and accordingly develop the strategy to navigate market dynamism. The dynamic capability of an organization can be strengthen by integrating innovation orientation with critical resource allocation competence. introduces open innovation as “the use of purposive inflows challenges and enhanced performance. Innovation is a two- and outflows of knowledge to accelerate internal innovation way flow of knowledge which helps firms environment to be and to expand the markets for external use of innovation” flexible (Hochleitner et al., 2017). Therefore, it can be said (Chesbrough et al., 2006). In the competitive environment that open innovation is a very useful concept which increases the word innovation has been recognized as an important the performance of organization. part and one of the key sources for business and manufac- turing firms (McDermott & Prajogo, 2012). Over the past Innovation Performance several years, the term innovation is the fastest growing segment in the economic world. In simple words, the term At present, the business environment is effective and chang- innovation means something new or improved such as new ing extremely. To compete and continue in business, it methods of marketing, new process and new practices become important for a manufacturing organization to intro- which has not been introduced before (Verbano & Crema, duce innovative product continuously (McDermott & 2016). It is the formation and ratification of new ideas and Prajogo, 2012). The concept of innovation is the creation process. it is an on-going process learning, searching and and adoption of ideas which are new to the world exploring which conclude in new ideas, practices, and new (Gopalakrishnan & Damanpour, 1997). The indicators of forms (Marques, 2014). innovation performance in small and medium firms are use Most of the studies on open innovation focused on large of technology for development, emphasizing knowledge firms and it results shows that it is profitable in enhancing per- building, focus on the core competence and develop culture formance (Awan, Arnold et al., 2021; Bianchi et al., 2010; in the organization (Johannessen et al., 1997). Some impor- Laursen & Salter, 2006; Spithoven et al., 2013; van de Vrande tant basic sources for a firm to innovate and improve perfor- et al., 2009; Weng & Huang, 2017). Open innovation is used mance are the process needs, innovation orientation, by many large firms and the results were successful but same industry and market structure, demographics, changes in concept of open innovation is less attracted to smaller firms perception, and technology (Johannessen et al., 1997). because of such characteristics like culture and strategy Innovation performance is a multidimensional construct (Colombo et al., 2014). However, Gassmann et al. (2010) which includes monetary and practical measures. Monetary identified that concept of open innovation is favorable for measures include sales expansion, credit, capacity, and cost firms like large, medium and small in terms of overcoming productivity. Whereas, practical measures include customer 4 SAGE Open Figure 1. Research framework. satisfaction, customer loyalty, employee satisfaction through closely related to organizational innovation. In their studies, teamwork, openness toward customer needs, product qual- several researchers have emphasized the importance of ori- ity and service quality (Johannessen et al., 1999). However, entation to enhancing innovation (Damanpour, 1991; Verbano and Crema (2016) argued that innovation perfor- Deshpande et al., 1997; Khan et al., 2020; Verona, 1999). mance of small firms should be measured on improved com- Findings of their studies reveal that there is a positive rela- petence, improved main product/service, and improved tionship between orientation and innovation. From the above effectiveness of product/service and should not be measured mentioned studies it can be hypothesized that: on monetary measures. Therefore, this study used innova- tion performance as uni-dimension. H1: Service innovation orientation has a significant and Tidd and Bessant (2020) have posited that the organiza- positive influence on open innovation. tion innovation performance depends not only on the techni- cal resources but also on the ways how these resources are Relationship Between Open Innovation and managed and organized. The organizational structure, rou- Innovation Performance tines, incentive system, managerial tools and creativity must also be managed in the organizations (Johannessen et al., The open innovation has become a major strategic decision for 1997). The performance is the foremost tool of “the potential firms toward the performance (Chesbrough, 2006). Although, for future successful implementation of actions to reach the major question is that how innovation performance is objectives and targets” (Lebas, 1995). Objectives are setting affected by the open innovation. However, some studies have goals, time frames and detailed means to achieve targets empirically investigated the positive effect of open innovation (Awan, 2019; Moreira et al., 2017). The organization which on innovation performance. continuously look for achievements are very innovative Caloghirou et al. (2004) have argued that openness to about their quality and quantity of ideas. Though, the quality external sources of knowledge not only enhanced a firm’s and quantity of ideas are two independent parameters, but research and development competency, but also had a posi- when combined they form the definition of innovative per- tive effect on its innovation performance. van de Vrande formance (Halim et al., 2014). See Figure 1 for the frame- et al. (2009), investigate the effect of open innovation on the work of the research study. small and medium enterprises. Findings of the study reveal that small and medium firms are engaged in many open inno- vation practices. However, the study finds no major differ- Relationship Between Service Innovation ence between manufacturing and service industries toward Orientation and Open Innovation adoption of open innovation. But medium sized firms are on “Service innovation orientation represents a service orienta- average in adopting open innovation, whereas small sized tion for developing new solutions or improving existing ser- firms are still not involved in the activity of open innovation. vices that meet customers’ current and future requirements to Previous studies (Awan et al., 2019; Damanpour & Evan, improve business performance” (Chuang & Lin, 2017). It is 1984; Lopez et al., 2005; Rosenbusch et al., 2011), indicates a part of innovation where it helps the organization to meet that firm’s with open innovation activity respond faster to the customers’ requirements which lead to performance. environmental pressures, and therefore they have superior Studies have shown that innovation orientation has a signifi- performance and also report that innovation has a positive cant positive relationship with innovation (Chatterji & effect on SMEs performance. As the above studies have Fabrizio, 2014; Schweisfurth & Raasch, 2015; Von Hippel, found a positive relationship between open innovation and 2006). Chatterji and Fabrizio (2014) investigated on how innovation performance. Therefore, on this basis it can be innovation orientation influences firm innovation capability. hypothesized that: They found that innovation significantly improved generat- ing, accepting and implementing of new ideas, processes, H2: Open innovation has a significant and positive influ- products or services. Therefore, innovation orientation is ence on innovation performance. Khan et al. 5 Uttarakhand, and Delhi. Informed consent was obtained on Open Innovation Mediates the Relationship data collection from the representatives of the hospitals, who Between Service Innovation Orientation and were the respondents of the study. In total 186 medium and Innovation Performance small private hospitals responded to the study survey and Previous studies have adopted market orientation, learning after thorough scrutiny of the returned questionnaires 173 orientation and strategic orientation in the context of innova- were used for data analysis. Harman’s single factor test was tion, and their findings reveal that they have a significant performed to identify the common method bias in the survey positive relationship with performance (Agarwal et al., 2003; data. The test result found that 44.60% of total variance was Chatterji & Fabrizio, 2014; Ripolles Meliá et al., 2010; explained by the first factor which was below than the limit Simpson et al., 2006). Researchers have defined that service of 50% of the total variance. innovation orientation has a relationship with innovation In estimating the sample size of a study performed with (Chatterji & Fabrizio, 2014; Hidalgo & D’Alvano, 2014; structural equation modeling, Chin (2010) explained that Ionescu & Ionescu, 2015; Siguaw et al., 2006; Von Hippel, sample size should be equal or larger than 10 times of 2006). Studies in the context of hospitals have also found a number of structural paths pointing to an endogenous vari- positive relationship between innovation orientation and per- able. Further, according to Reinartz et al. (2009) the sam- formance (Awan, 2021; Dobrzykowski et al., 2015; ple size of 100 is adequate for a study performed with Länsisalmi et al., 2006; Lonial et al., 2008). From the above- partial least square-structural equational modeling (PLS- mentioned studies, it can be hypothesized that: SEM). Therefore, the sample size of 173 was sufficient to perform PLS-SEM analysis H3: Open innovation mediates the relationship between ser- vice innovation orientation and innovation performance. Measurements The survey instrument was developed using well established Methods scales and items were adapted from the previous studies (Chuang & Lin, 2017; Prajogo & McDermott, 2011; Verbano Data Collection Procedure and Sampling & Crema, 2016). For service innovation orientation and open A cross sectional study was performed and the survey innovation, items were measured on a seven-point Liker method was used to collect the data. The unit of analysis of scale that ranged from (1) strongly disagree to (7) strongly the study was organization, that is, medium and small pri- agree. Innovation performance was measured on a five-point vate hospital and the respondent of the survey was owner/ Likert scale as Podsakoff et al. (2012) suggested that elimi- doctor of the hospital. Due to unavailability of sampling nating common scale properties will reduce common method frame, purposive sampling was used to select the hospitals bias. The variable service innovation orientation has four and respondents were requested to voluntarily participate in items adapted from Chuang and Lin (2017), open innovation the survey. According to Sekaran and Bougie (2016), “pur- has six items adapted from Prajogo and McDermott (2011) posive sampling is confined to specific types of people who and three items for innovation performance were adapted can provide the desired information, either because they are from Verbano and Crema (2016) the only ones who have it or conform to some criteria set by the researcher.” Results As no official document or list was available, google search was performed for the location and contact numbers The respondents of the study were doctors/owners for all 173 of medium and small private hospitals in major cities of medium and small private hospitals. Male respondents were Uttar Pradesh and Uttarakhand and in Delhi by using key- slightly higher (57.2%) than the female respondents. The age words like small hospitals in Lucknow, medium and small group of majority of the respondents (41.6%) was 25 to hospitals in Bareilly, small and medium hospitals in 35 years. In total 67.7% hospitals were individually owned Dehradun, small hospitals in Delhi and so on so forth. Phone by the doctors. Table 2 explains the profile of surveyed hos- calls were made on the numbers obtained from the google pitals and the respondents. search and hospitals were requested to provide email or cell phone number of the doctor responsible for the administra- Descriptive Statistics of the Latent Variables tion of the hospital. Electronic survey questionnaire was for- warded to those doctors with a request to take part in study The mean values of the study variables were varied from survey. The inclusion criterion was hospitals with less than maximum 6.051 to minimum 5.679 on 7-point Likert scale. 100 beds as Kate (2013) identified those hospitals as small The dependent variable of the study model, that is, innova- and medium which have less than 100 beds. The data were tion performance was measured on 5-point Likert scale and collected from the medium and small private hospitals in the mean value was 4.466. Table 3 shows the results of three states of north India which were Uttar Pradesh, descriptive analysis of the study variables. 6 SAGE Open Table 2. Socio-demographic Profile of the Respondents (N = 173). Variable Category Frequency Percent Profile of doctor Gender Male 99 57.2 Female 74 42.8 Age group 25–35 72 41.6 36–45 55 31.8 46–55 33 19.1 56–65 13 7.5 Specialization General practitioner 64 37.0 General surgeon 23 13.3 Gynecologist and obstetrician 49 28.3 Orthopedician 18 10.4 Other 19 11.0 Length of service 0–5 years 78 45.1 6–10 years 49 28.3 11–20 years 28 16.2 21 years and more 18 10.4 Profile of hospital Ownership Individually owned 117 67.6 Partnership 56 32.4 Number of employees 1–10 32 18.5 11–25 99 57.2 26–50 23 13.3 51 and more 19 11.0 Type of facility Basic services 64 37 Specialty services 109 63 Establishment (in years) Median 11 Location Uttar Pradesh 102 59.0 Delhi 53 30.6 Uttarakhand 18 10.4 0.85 (see Table 5). Therefore, the discriminant validity of the Assessment of Measurement Model study model was established. Factor loading, composite reliability (CR) and average vari- ance extracted (AVE) were checked to establish the conver- Assessment of Structural Model gent validity of the research model. The cut-off value of In PLS-SEM, the goodness of the structural model should be factor loading, CR and AVE were 0.708, 0.70, and 0.50 established by significance of path coefficient (β-value) and respectively as recommended by Hair et al. (2021). Table 3 the coefficient of variance (R ) (Hair et al., 2011). According shows mean, standard deviation and factor loadings of all the to Cohen (1988), R value between .02 and .12 is considered items as well as AVE and CR of latent variables. The factor weak, between .13 and .25 moderate and .26 and above sub- loadings of two items SIO4 (0.598) and OI1 (0.695) were stantial. The R values of open innovation and innovation below the recommended value of 0.708. However, the items performance were moderate (.235) and substantial (.297) were not deleted from the analysis as AVEs of the latent vari- respectively which means the 23.5% of the total variance of ables of these items were above the recommend value of open innovation was explained by the service innovation ori- 0.50. Table 4 details measurement model as well as mean and entation. Similarly, 29.7% of the total variance of innovation standard deviation of study variables. performance was explained by the open innovation. To establish the discriminant validity of the research The significance level of path coefficient explains the model Heterotrait–Monotrait (HTMT) ratio was used. Recent hypothesized relationship between variables (Hair et al., research recommend use of Heterotrait–Monotrait (HTMT) 2021). Therefore, boot strapping analysis with re-sampling over Fornell–Larcker method to check discriminant validity of 1,000 was run to obtain the significance level of path coef- as HTMT consider more powerful criterion (Henseler et al., ficients of the structural model. The boot strapping analysis 2016). The study preferred use of stricter cut-off value of found that service innovation orientation has a positive and 0.85 of HTMT and found that all HTMT values were below Khan et al. 7 Table 3. Descriptive Statistics of the Latent Variables. improvement of innovation orientation such as service inno- vation orientation, orientation capability and organizational Study variables Mean Standard deviation innovation. Service innovation orientation in organizations Service innovation orientation 6.051 0.807 is understood as beliefs and attitude toward developing inno- Open innovation 5.679 0.871 vative solutions to existing problems and further improving Innovation performance 4.466 0.514 services to the customers and fulfilling their current and future needs that ultimately improve the organizational per- formance (Chuang & Lin, 2017). Service innovation orienta- significant effect on open innovation, that is, H1 as β = .485, tion emphasizes more on needs of customers rather than p < .01. Open Innovation has significant positive influence other aspect of organizational process. However, open inno- on innovation performance, that is, H2 as β = .545, p < .01. vation mainly focuses on willful exchange of knowledge The analysis results also show that open innovation mediates with external partners to speed up the internal innovation and the relationship between service innovation orientation and expand the market of the organization to use external innova- innovation performance, that is, H3 as β = .264 and confi- tion at fullest (Chesbrough et al., 2006). There is two way dence interval lower limit = 0.194 and upper limit = 0.315. exchange of knowledge in open innovation. In outside-in Table 6 shows the results of boot strapping. Figure 2 shows flow of knowledge, organization utilize the external knowl- the significance level of hypothesized relationships. edge shared by the partners as input for the innovation pro- cess whereas, in inside-out flow of knowledge, organization shares its unused or underutilized knowledge to partner orga- Discussion nizations so that they can use it in their innovation process (Chesbrough, 2017). The finding of this study suggests that The main goal of the research study was to investigate the organization should further enhance the creative skills of effect of service innovation orientation on open innovation employees to solve the issues of customers and provide and innovation performance in context of medium and small improved services by exposing them to open innovation. private hospitals. Further, available literature lack in studies Knowledge exchange occurs in open innovation will further tested the mediating effect of open innovation. Therefore, enhance the knowledge of employees and strengthen the ser- present study is an attempt to bridge the gap in literature by vice innovation orientation in the organization. investigating the direct and the mediating effect of variables The data analysis results also find that open innovation used the research framework. Thorough literature review has significant and positive influence on innovation perfor- reveals that previous studies have tested the effect of service mance of medium and small private hospitals with β = .545 innovation on innovation performance (Dobrzykowski et al., and p-value = .000 (H2 supported). This finding of the study 2015; Länsisalmi et al., 2006) however, studies investigated is also consistent with previous studies which argued that the mediating effect of open innovation in context of medium one of the crucial sources to support innovation performance and small private hospitals is scarce. Literature review also is external knowledge resources (Parida et al., 2012). Open reveals that due attention is required from the researchers on innovation develops capability among organizations to con- medium and small private hospitals in India as these hospitals nect and collaborate with outside partners as well as com- provide services to the 70% population of the country. petitors and helps organizations to obtain new technology However, very few studies were conducted focusing on inno- and knowledge and improve, enhance, and achieve innova- vation performance of this category of hospitals. Therefore, tion performance. this study empirically tested an innovation model by combin- Lastly, data analysis results found that open innovation has ing the factors as service innovation orientation and open mediating effect between service innovation orientation and innovation and their effect on innovation performance. The innovation performance (β = .145, p-value = .000) which findings of this study will enlighten the policy developers and means H3 was also supported. This finding is similar with the the hospital managers about the importance of innovation findings of previous studies as innovation orientation or stra- strategies and how innovation performance can be improved tegic orientation has positive influence on service orientation by using service innovation orientation and open innovation (inward/outward innovation activities) and innovation perfor- in context of medium and small private hospitals. mance (Chatterji & Fabrizio, 2014; Hidalgo & D’Alvano, The data analysis findings revealed that H1 was supported 2014; Von Hippel, 2006). Service innovation orientation (β = .485, p-value = .000) as service innovation orientation enhances current services by developing new solutions which has significant and positive influence on open innovation. ultimately improves the innovation performance of the orga- This result was consistent with the previous research studies nization and meet current and future needs of the customers. (Chatterji & Fabrizio, 2014; Franke & Shah, 2003; Service innovation orientation emphasizes more on custom- Schweisfurth & Raasch, 2015) in which it was argued that ers’ preferences than other aspects of the organization. innovation in the form of open, inward or outward leads to 8 SAGE Open Table 4. The Results of Measurement Model and Descriptive Analysis. Factor Construct/Item Mean SD Loading AVE CR Service innovation orientation (SIO) 0.871 0.632 1. My hospital develops new service for our patients need. 6.2 0.992 0.899 2. My hospital extends the firm’s services range 5.79 1.015 0.795 3. My hospital improves existing service quality. 6.11 1.042 0.854 4. My hospital improves services flexibility. 6.11 0.955 0.598 Open innovation (OI) 0.678 0.926 1. My hospital frequently refines the provision of existing services 5.67 0.896 0.695 2. My hospital regularly implements small adaptations to existing services. 5.82 1.016 0.828 3. My hospital introduces the improved version of the existing services in the local market. 5.56 1.053 0.898 4. My hospital improves the provision efficiency of services 5.78 0.868 0.832 5. My hospital increases economies of scales in existing markets 5.69 1.273 0.873 6. My hospital expands services for existing clients 5.55 1.222 0.801 Innovation performance (IP) 0.742 0.896 1. My hospital has generated innovations that have improved our competence on the main 4.47 0.501 0.82 services 2. My hospital has generated innovations that have improved the main service we offer 4.46 0.66 0.864 3. My hospital has generated innovations that have improved the effectiveness of our services 4.47 0.624 0.898 Note. AVE = average variance extracted; CR = composite reliability; SD = standard deviation. Table 5. Discriminant Validity (HTMT.85 Criterion) of revealed that open innovation has significant positive Measurement Model. effect on innovation performance of medium and small private hospitals. Therefore, it is utmost importance for the 1 2 3 hospitals to take service innovation orientation into con- 1 Innovation performance sideration while adopting open innovation toward the 2 Open innovation 0.618 enhancement of innovation performance of medium and 3 Service innovation orientation 0.363 0.481 small private hospitals. The RQ3 was, does open innova- tion mediate the relationship between service innovation orientation and innovation performance in medium and Conclusion and Limitations small private hospitals? Study found that open innovation As per the conceptualized research model of this study, inno- mediates the relationship between service innovation ori- vation performance of medium and small private hospitals is entation and innovation performance. positively influenced by the service innovation orientation In conclusion, the findings of the study enrich the existing and open innovation. Studies on open innovation have taken literature related to the subject. Although, the process of place in both manufacturing and service sector. However, open innovation in medium and small private hospitals needs studies focusing on medium and small private hospitals of to be thoroughly understood, this study will help medium India are scarce. Therefore, the current research should focus and small private hospitals to understand the role of service on medium and small private hospitals rather than large pri- innovation orientation and open innovation on enhanced vate hospitals. For that reason, the authors’ interest lies on innovation performance. This study also contributes toward the area of open innovation and medium and small private improved understanding of policy maker and healthcare hospitals that have minimal research. managers on service innovation orientation, open innovation The scope of the study encompasses the investigation and innovation performance. into the relationship of variables such as service innova- Although, this study is a sincere attempt to understand tion orientation as the factor that has influence on open the innovation process in medium and small private hospi- innovation and its relationship to innovation performance. tals, study has few limitations. This study used non-proba- The study identified three research question to answer. bility purposive sampling to collect the data due to the RQ1 Does service innovation orientation has an impact on unavailability of the sample frame. Therefore, the generaliz- open innovation in medium and small private hospitals? ability of the study findings is limited. Second, the sample The study found that service innovation orientation has a size of 173 could be considered as modest, however, the positive effect on open innovation. RQ2 Does open inno- sample size appeared to be adequate for the study frame- vation has an impact on innovation performance of medium work when examined on G*power in a priori power analysis and small private hospitals? The findings of the study (Faul et al., 2007). Khan et al. 9 Table 6. Results of Structural Model Analysis. Hypothesis Relationship Std. Beta Std. Err. t-Value p-Value Decision H1 SIO à OI 0.485 0.035 13.711 .000 Supported H2 OIàIP 0.545 0.043 12.861 .000 Supported H3 SIOàOIàIP 0.145 0.039 3.725 .000 Supported Note. SIO = service innovation orientation; OI = open innovation; IP = innovation performance. Figure 2. PLS output of structural model. 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Journal

SAGE OpenSAGE

Published: Aug 4, 2022

Keywords: India; innovation; mediation; medium and small; organizational performance; private hospitals

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