See discussions, stats, and author profiles for this publication at: https://www.researchgate.

net/publication/323689156

Strategy formulation process and innovation performance nexus

Article  in  International Journal for Quality Research · March 2018

DOI: 10.18421/IJQR12.01-09

CITATIONS READS

3 6,601

3 authors:

Chijioke E Nwachukwu Helena Chládková

Universidad de las Americas Puebla Mendel University in Brno
27 PUBLICATIONS   36 CITATIONS    48 PUBLICATIONS   111 CITATIONS   

SEE PROFILE SEE PROFILE

Olaunji Fadeyi
Anchor University Lagos, Nigeria
21 PUBLICATIONS   21 CITATIONS   

SEE PROFILE

Some of the authors of this publication are also working on these related projects:

I am currently working on a research paper title customer focused mission statement component and customer statisfaction View project

Strategy implementation drivers and strategic performance View project

All content following this page was uploaded by Chijioke E Nwachukwu on 11 March 2018.

The user has requested enhancement of the downloaded file.

 International Journal for Quality Research 12(1) 147–164
ISSN 1800-6450

Chijioke Nwachukwu 1
Helena Chladkova STRATEGY FORMULATION PROCESS AND
Olatunji Fadeyi INNOVATION PERFORMANCE NEXUS

Abstract: The purpose of this study is to examine the link

Article info: between strategy formulation process and innovation
Received 01.11.2017 performance indicators in microfinance banks in Nigeria
Accepted 19.01.2017 (MFBs). 100 employees of leading microfinance banks were
randomly selected for this study. 80 questionnaires were
UDC – 659.127.6 returned but only 76 were found usable for the analysis.
DOI – 10.18421/IJQR12.01-09
Regression analysis technique was used in examining the
nature of the relationships of the variables and for hypotheses
testing. The authors used exploratory factor analysis and
Cronbach’s alpha to test for the validity and reliability of the
questionnaires. The results show that strategy formulation
process has a positive effect on process innovation
performance, product innovation performance and marketing
innovation performance. Thus, all the three hypotheses tested
were supported. The authors, therefore, concludes that a
systematic strategy formulation process is necessary for firms
to achieve and sustain process innovation performance,
product innovation performance and marketing innovation
performance. This study proposed suggestion for further
studies.
Keywords: Customer satisfaction, strategy formulation,
Customer loyalty, innovation performance

1. Introduction 1 limited resources has made it important for

firms to constantly make strategic decisions
Strategic management research focuses on that will help them achieve and sustain
creating and sustaining superior competitive advantage. David, (2011)
performance. A well-articulated strategy is pointed out that strategy formulation
extremely important for firms to achieve decisions commit an organisation to specific
competitive advantage. There is a growing resources, products, technologies and
interest in the study of the relationship markets over an extended period of time.
between innovation and strategic Strategy formulation process enables a firm
management. Recently, innovation has to match internal resources with
become one of the promising areas of study opportunities and risks in its external
in terms of explaining competitive environment. Furthermore, environmental
differences between firms. The problem of dynamism and competitiveness pose a
serious challenge for managers responsible
for formulating strategies in firms. Studies
1
Corresponding author: Chijioke Nwachukwu focusing on developing integrative
email: cesogwa@yahoo.com frameworks of strategy-making processes

147
are well documented in the literature productivity, as performance measures in
(Andrews 1971; Rumelt, 1984; Mintzberg, studies of international knowledge spill
1987; Chandler 1962; Porter, 1996). Many overs (Branstetter, 2006; MacGarvie, 2006;
authors have examined the connection Salomon & Shaver, 2005), strategic human
between the dimensions of strategy resource management relationship with
formulation and performance; mission innovation performance (Laursen & Foss,
(Gharleghi, et al., 2011; Desmidt, et al., 2003; Zehir et al, 2016). Very few studies
2011; Bartkus & Glassman, 2008), vision have examined the connection between
(Mutetei et al., 2016; Kantabutra & Avery, strategy formulation process and innovation
2011; Odita & Bello, 2015; Abu Bakar & performance. Some authors have explored
Zainol 2015); environmental scanning management practices in microfinance banks
(Odongo et al., 2016; Sandada, 2014; in the Nigerian context. For instance,
Kumar, 2015; Aremu & Oyinloye, 2014). veritable tool for reducing poverty and
Microfinance banks (MFBs) supports unemployment in developing economies
economic growth and development in (Onoyere, 2014); assessment of MFBs using
Nigeria. Individuals and small business in European foundation for quality
Nigeria benefit from microcredit made management excellence model (EFQM)
available by MFBs. Akangbe et al. (2012), (Nwachukwu et al., 2017b); MFBs and
notes that financial empowerment of rural development of small and medium
areas is important for achieving sustainable enterprises (SMEs) (Suberu et al., 2011);
economic growth and development. financial inclusion and the growth of MFBs
Arguably, large numbers of business in (Nwankwo & Ogbodo, 2017); human
Nigeria are small and medium enterprises resource practices and employee satisfaction
(SMEs). MFBs provide services to these (Nwachukwu & Chladkova, 2017).
small businesses to support their growth. To However, no study though has examined the
remain competitive, MFBs must articulate subject in the Nigeria context. In the light of
mission, long term objectives and evaluate these arguments, this study attempt to
their strength, weakness, opportunities, and contribute to a better understanding in this
the threats in the dynamic and challenging area of research by introducing innovation
Nigerian business environment. Nwachukwu performance as a measure of performance.
et al. (2017a), suggest that managers of The aim of this study is to expand the current
MFBs should implement policies that literature base on the strategy formulation
enhance performance and create value for process and innovation performance nexus in
various stakeholders. Developing effective MFBs in Nigeria. In specific terms, this
strategies can make MFBs achieve study evaluates the relationship between
sustainable innovation performance. Odongo strategy formulation and product, process
et al. (2016) suggest that other variables and marketing dimensions of innovation
associated with the strategy formulation and performance in microfinance banks in
performance relationship should be Nigeria.
examined in future studies. The authors
contend that the relationship between 2. Review of literature
strategic formulation and performance is
complex and needs to be examined by 2.1. Theoretical framework
considering all possible related performance
variables or factors. Mataradzija et al. (2013) In the light of Resource-Based Theory
assert that innovation drives firm (RBT), successful strategy formulation
development and competitiveness in today’s process can deliver superior innovation
knowledge-driven economy. Recent studies performance. Prior studies have used RBT in
use innovation performance, rather than explaining the competitive value of

148 C. Nwachukwu, H. Chladkova, O. Fadeyi

innovation strategies in relation to business resources are important factors of
performance (Terziovski, 2010; Cheng et al., organisational strategy and performance
2014; Wang, 2014). The theory focuses on (Barney, 1991). Santos & Brito (2012) assert
firm internal resources, and capabilities, to that stakeholder theory offers a
explain the profit and value of the comprehensive approach to measuring
organisation (Wernerfelt, 1984; Barney, performance which helps to differentiate
1991; Grant, 1991; Peteraf, 1993). The RBT between performance antecedents and
of the firm states that differences in outcomes. Freeman (1984) defined
performance happen when a firm possess stakeholder as any individual or group that
valuable resources that others do not have may affect the achievement of the
(Wernerfelt, 1984). With the development of organisation goals or that is affected by the
the RBT in strategic management (Barney, process of searching for these objectives.
1991; Wernerfelt, 1984), the focus is on According to Evan and Freeman (1993), the
identifying valuable resources that can help purpose of a firm is to serve as a vehicle to
firms to achieve sustainable competitive coordinate the interests of the stakeholders.
advantage and superior financial returns. A Firms develop effective strategies to improve
bundle of well-managed resources, give their innovation performance and thus meet
firms the potential to create economic value. and exceed the expectations of various
Firm resources such as assets, capabilities, stakeholders.
firm attributes, information, organisational
processes, knowledge, etc. which a firm 2.2. Strategy formulation process
controls enables the firm to develop and
execute strategies that improve its operations Strategy formulation process involves the
(Barney, 1991). Dynamic capability is a firm collection of data and continuous exchange
capacity to renew its competences to cope of information. The most difficult part of
with changing business environment (Teece strategy formulation process is the creation
et al., 1997). Wilden et al. (2013) assert that of a strategic identity and the execution of
firms should align internal structures with strategic analysis. Formulating effective
their capabilities and the external strategy is key to improving firm
environment. A firm is able to sense, seize performance. According to Pearce II and
and shape opportunities by building dynamic Robinson (2011) strategy formulation guides
capability, develop and reconfigure its executive in defining the business their firm
resource base (Teece, 2007; Helfat 2007) in is in, the ends it seeks, and the means it will
developing and delivering new products and use to accomplish those ends. Firms develop
services. Authors, use resource-based theory strategies to address issues that relates to
(RBT) as theoretical lens to explore the link delivering quality products and services.
between strategy formulation process and Arguably, it is important for firms to
firm innovation performance instead of effectively use their resources and
general firm performance. In terms of technology to deliver innovative products
performance, the effective use of resources and services to their customers as this will
during strategy formulation may increase the enable them to achieve and sustain
firm’s capacity to create new products, competitive advantage. Van Gelderen et al.
services, process and expand both existing (2000) contend that strategy formulation
and new markets. This could lead to increase process and strategic plan are both important
in sales volume and thus contribute to for firms to achieve competitive advantage.
performance by helping the firm to Strategy formulation involves reviewing key
appropriate value linked to competitive objectives and strategies of the organisation,
advantage from innovative activities. identifying available alternatives, evaluating
Therefore, both internal and external the alternatives and deciding on the most

149
appropriate alternative (Wheelen & Hunger, performance of medium-sized enterprises in
2008). Authors contend that strategy Nakuru Town using strategy formulation as
formulation is the responsibilities of one of the indicators of strategic planning.
employees at the corporate, business and the The results show a weak positive
functional levels of management in an relationship between strategy formulation
organisation. In their study of microfinance and firm performance. They add that strategy
institutions (MFIs) in Nairobi Kenya, formulation significantly influence the
Odongo et al. (2016) found a positive performance of medium size enterprises.
correlation between strategy formulation Evidence from the literature suggests that
phase and performance of MFIs. Similarly, strategy formulation exerts influence on firm
Woldie et al. ( 2012) argue that an effective performance.
strategy formulation mechanism could
enhance performance. Arguably, strategy 2.3. The concept of innovation
formulation is important for firms to achieve
superior performance and remain The last ten years have witnessed rapid
competitive. Thus, a systematic strategy social, political and technological change.
formulation process can enable firms During this period, different authors have
develop strategies that are aligned to their attempted to define the concept of
goals and aspirations. The strategy innovation. Innovation is the implementation
formulation process and strategic plan are of a new or significantly improved product
necessary for firms to achieve competitive (goods or services), or a process, a new
advantage. Grant (1991) propose a resource- marketing method, or a new organisational
based approach to strategy formulation method in business practices, workplace
which involves firm's identifying and organisation or external relations (OECD,
understanding their internal resources, 2005). According to Pitelis (2009),
capabilities, strengths and weaknesses innovation is a persuasive way firm create
relative to that of their competitors. Thus, value and competitive advantage. Robert &
strategies are formulated to achieve and Tucker (2008) contends that innovation
sustain competitive advantage. Arguably the involves generating ideas and bringing them
strategy formulated based on firm's internal to life. Technological facilities, trained
resources and capabilities can enhance firm's workforce and management support for
profitability. Katsvamutima and Jeevananda innovation are important drivers of
(2014), examined the relationship between innovative activities. Innovation is a
strategy formulation and implementation in comprehensive approach to renewing and
Zimbabwe’s food manufacturing industry. enlarging firm’s range of products, services
The results show that strategy formulation and markets by adopting new methods or
and implementation enhances profitability, modifying existing methods. It involves a
efficiency and is a source of competitive radical change in terms of speeding up idea
advantage in dynamic environments. In the generation, and developing new products,
same spirit, Aremu and Oyinloye (2014), services and industrial processes. Williams
using t-test and multiple regression (1999) focuses on the characteristics of
techniques investigated the relationship innovation that contribute positively to the
between strategic management and firms’ creation of new products, systems or
performance in Nigerian banking industry. processes. Some authors argue that
The results show a positive correlation innovation is an output of learning and
between strategy formulation and knowledge creation processes that are
organisational performance. In the same important for firms to sustain competitive
direction, Auka and Langat (2016), study the advantage in the current era of globalisation
effect of strategic planning on the (e.g. Dohse, 2007; Asheim & Coenen, 2005;

150 C. Nwachukwu, H. Chladkova, O. Fadeyi

Tödtling & Trippl, 2005; Waxell & that of competitors (Mehrdad, et al., 2011).
Malmberg, 2007). The rate at which firms Kok and Beimans (2009) argue that product
develop new products, services have an innovation is necessary for creating superior
impact on firm performance and long-term customer values and supports the overall
survival (Banbury & Mitchell, 1995; firm performance. Process innovation is an
Damanpour, 1991). Introducing new important source of competitive and strategic
products, services and processes, can make advantages for firms because they are often
firms more efficient and adapt to changing hidden. Process innovation are internally
market demands. Product innovation refers within organisations which make them
to what is produced, delivered, and difficult to be imitated by competitors
consumed. On the other hand, process (Maine et al., 2012). Prajogo (2016)
innovation focus on how it is produced, contends that firm that focus on process
delivered and consumed (Bessant and Tidd innovations may not be aggressive in
2007; Trott 2012). Prajogo (2016) argues developing new products to the markets,
that product and process innovation relates rather they may compete in established
to the specific organisation strategy that (mature) markets where the primary focus of
firms adapt to respond to market demand and the strategies is to make and deliver products
opportunities by leveraging on (which could be similar to competitors) to
organisational capability and competence. customers in higher values, such as faster,
Managers are faced with making strategic more flexible or cheaper (Klingenberg et al.,
choices between using new knowledge or 2013). Furthermore, firms can use process
technology to develop new products or innovations (in the form of new process
pursuing higher return by using more technology) as strategic tactics to increase
efficient production system. This problem entry barriers for competitors; hence,
emanates from the choice between product protecting the firms' markets advantage
and process innovation which is due to the (Porter, 1985). Firms can use marketing
competitive environment where firms innovation to meet customer needs, develop
operate (Filipini & Martini, 2010). Product new markets, or position a firm’s product in
innovation has received attention more than the market, with the aim of improving the
other dimensions of innovation in the firm’s competitive advantage. Zuńiga-
literature because it is considered as more Collazos and Castillo-Palacio (2016) suggest
visible to customers and has a potential of that innovative marketing strategies can
creating new markets, especially in improve customer satisfaction and the image
manufacturing sectors. Arguably, product of company´s products and services.
innovation offers customers with a lot of Arguably, firms can use marketing
values in term of its newness and novelty innovation activities to satisfy new, existing
among other benefits. New products could markets (customers) and to enhance the
increase sales because they have a better image of company´s products and services.
performance (e.g.reliability or durability), The activities of firms and the industry they
better features (e.g.integrated facilities), operate in determine their level of
others (including esthetic) compared to the engagement in marketing innovation.
existing products offered by competitors in Arguably, firms in the service sector are
the market (Xin et al., 2010). Product more likely to engage in marketing
innovation gives firms competitive innovation than those in the manufacturing.
advantage because customers can see the Wang (2015) pointed out that three main
values relatively clear which could streams of marketing innovation studies are
encourage them to buy a product. Firms are found in the literature. The first stream
required to develop strategies that discusses marketing innovation as a source
differentiate its products and process, from of competitive advantages. The second

151
focussed on the relationships between According to OECD (2005), marketing
marketing innovations and the other innovations include changes in product
innovation dimensions. The third stream design and packaging, promotion and
tries to give insights on the characteristics of placement and in methods for pricing goods
firms that use marketing innovations. and services.
Marketing insight (Linoff, 2004; Roberts &
Eisenhardt, 2003) and marketing imagination 2.4. Strategy formulation process and
(Andrews & Smith, 1996) are two important innovation performance
antecedents that enable a firm effectively
develop, foster and implement marketing Prior studies on the interrelationship between
innovation. These internal antecedents are strategy process (Formulation and
difficult for firms to change because they are implementation) and product innovation
highly embedded in the firm, requiring performance show a significant positive
substantial effort and time to modify. correlation between the two variables (See
Altering marketing insight and marketing e.g, Ulwick, 2005; Acar & Acar, 2012). In
imagination may require the firm to change the same direction, Zhang et al. (2009) found
its corporate structure, top management, or that both the formulation and
mix of corporate capital. Authors argue that implementation processes through their
innovation is extremely necessary to influence on type of information needed, the
improve performance in a highly dynamic source of information and the interplay
and competitive business environment. among difference pieces of information are
Firms require innovation strategies to cope positively correlated to innovation
with changing customers demand and performance of organisations. A well
expectations. Namusonge (2016) examine formulated and implemented strategy
the role of innovation on the performance of facilitates information flow and reduces the
firms quoted on the Nigerian Stock cost of new product development. Arguably,
Exchange. The results indicate that a well-articulated strategy can contribute to
innovation has a negative relationship with innovation performance by increasing the
both returns on assets and returns on equity. rate of new product development and
The development and implementation of increase customer satisfaction. In the study
new ideas that have a commercial potential of the impact of national culture on the
influence organisational performance product innovation performance in Ethiopian
positively (Laursen & Salter, 2006). Firms manufacturing firms. Beyene et al. (2016)
invest a lot of money to product and process found that formulation and implementation
innovation which has a positive contribution process of innovation strategy are positively
on organisational performance (Kumar & Nti correlated to the project and commercial
1998; Stocka et al., 2001). Different authors performance of the innovation process.
conceptualise product innovation According to Lendel and Varmus (2011),
performance in various ways. Zakic et al. Innovation strategies give guide on how to
(2008), for instance, posit that product improve the innovative potential of the firm.
innovation performance is the market Previous studies suggest that innovation
success of newly introduced products. strategy has an impact on firm innovation
Menguc and Auh (2010) argue that performance indicators (e.g., Kalay & Lynn,
innovation performance measures the level 2015; Bessant & Tidd, 2007; Verhees &
of customer satisfaction and overall project Meulenberg, 2004). Thus, innovation
performance of the innovation process. Thus, performance can be understood as the ability
marketing innovation focus on adopting new to transform innovation inputs into outputs
marketing methods and effective use of which result to innovation market success.
marketing resources and capabilities. Innovation performance is mostly evaluated

152 C. Nwachukwu, H. Chladkova, O. Fadeyi

on the basis of user perception (Bessant & 2.5. Conceptual model
Tidd, 2007). In the light of limited literature
on the subject, authors propose that firm The model in Figure 1, represents the
strategy formulation process will be proposed model for the measurement of
positively related to innovation performance relationships between the innovation
dimensions (product, process and performance dimensions (product, process
marketing). and marketing innovation performance) and
strategy formulation process.

Figure 1. Strategy Formulation Process-Innovation Performance link model

2.6. Hypotheses 3.1. Research questions

H1: Strategy formulation process is 1) Is strategy formulation process

positively related to process innovation positively related to process
performance. innovation performance?
H2: Strategy formulation process is 2) What is the relationship between
positively associated with product strategy formulation process and
innovation performance. product innovation performance?
H3: Strategy formulation process is 3) Is there a positive relationship
positively related to marketing between strategy formulation
innovation performance. process and marketing innovation
performance?
3. Methods
3.2. Instrument
The authors used a survey and correlational
research approach in this study. We Innovation performance is measured as a
conducted validity and reliability tests on multidimensional construct. The variables
measures adapted from literature. were subjectively evaluated by authors. For
product innovation performance, authors
measure the optimum value created in terms
of new materials, new components, new

153
technologies, and new features which are analysis and drawing conclusions. Out of the
embedded in the new products. We used two 80 questionnaires that were returned only 76
items to assess product innovation were found usable for the analysis. The
performance. Process innovation MFBs were selected based on their financial
performance measures positive contributions performance.
in terms of the degree of improvements in
reliability and efficiency in the service 3.4. Statistical analysis
process, use of information to optimise
decision-making process and the use of SPSS 17 (statistical package for the social
advanced technologies to support firm sciences software) statistical software is
strategy. Three items were used to assess employed in the analyses conducted.
process innovation performance. For Regression and Pearson correlation matrix
marketing innovation performance, authors could reveal the strength of association and
measure the market success of a new product relationship among the variables. Regression
related to its effect on the level of customer analyses technique was used in examining
loyalty and customer satisfaction. Five items the nature of the relationships of particular
were used to assess marketing innovation variables and for hypotheses testing. KMO
performance. For strategy formulation and Bartlett's test and Cronbach’s alpha were
process, the European foundation for quality used for testing the validity and reliability of
management (EFQM) excellence model self- the constructs.
assessment questionnaire was adapted and
modified to suit the purpose of this study. 4. Results
We used four items to assess strategy
formulation process. Five points Likert scale The author conducted an exploratory factor
ranging from 1 "strongly disagree" to 5 analysis (EFA) using principal component
"strongly agree" was used to collect data for analysis with varimax rotation to see if the
all the variables. observed variables loaded together as
expected, were adequately correlated, and
3.3. Sample and procedure met criteria of reliability. Kaiser-Meyer-
Olkin and Bartlett’s tests are widely used in
A web-based survey was combined with making decision about the sample adequacy.
sending emails to individuals to participate Thus, that is the reason why these two tests
in the study. Andrews et al. (2003) argue that were used in this study. The KMO and
web-based surveys are better than to email Bartlett's test of sampling adequacy was
surveys, but when combined with email is a significant (KMO; 0.802) and the
good means for inviting individuals to communalities for each variable were high.
participate in web-based surveys. The This means that the chosen variables were
esurvey creator software was used to collect adequately correlated for a factor analysis.
data from respondents between January 2017 Hair et al. (2010) suggest that factor loadings
and April 2017. 100 employees of leading of at least 0.5 is considered adequate. We
microfinance banks were randomly selected dropped questions 3 and 5 in strategy
for this study. 80 questionnaires were formulation measurement because of low
returned accounting for 80% response rate. factor loading. Other variables are
A response rate of 50% is adequate for data distributed under the proposed factor
analysis and drawing conclusions (Mugenda structure. The final four factor model is
& Mugenda, 2009; Bryman & Bell, 2015). presented in Table 1 below.
Our response rate of 80% is well above the
recommended rate, thus adequate for data

154 C. Nwachukwu, H. Chladkova, O. Fadeyi

Table 1. Factor analysis
Factor Loading
Constructs Items 1 2 3 4
Strategic Formulation STFOR1 .640
STFOR2 .710
STFOR4 .722
STFOR6 .630
Process Innovation
PROINNO1 .687
Performance
PROINNO2 .687
PROINNO3 .611
Product Innovation
PRODINNO1 .724
Performance

PRODINNO2 .538

Marketing Innovation
MKTINNO1 .869
Performance
MKTINNO2 .856
MKTINNO3 .647
MKTINNO4 .770
MKTINNO5 .791
Eigen Values 5.932 2.272 1.445 1.085
Variance explained % 37.077 14.199 9.029 6.779
Source: authors own study
Notes: (i) Principal Component Analysis with Varimax Rotation
(ii) KMO =0.802, Bartlett Test; p<0.001
(iii) Total Variance Explained (%); 67.08

This model had a total variance explained of were above 0.70. strategy formulation (.687)
67.08%, with all extracted factors having and product innovation performance (.677)
eigenvalues above 1.0. The Cronbach’s are very close to the acceptable limit of 0.70.
alphas for the extracted factors are shown in The overall alpha for the 13 items is 0.853.
table 2 below. The alphas for process This show that factors are reliable and
innovation performance (.705) and internally consistent (Field, 2009).
marketing innovation performance (.922)

Table 2. Reliability test

Constructs 1 2 3 4
Strategy formulation .687
Process innovation Performance .705
Product innovation performance .677
Marketing innovation performance .922
Note: Cronbach’s alpha= 0.853 for all the 13 items.
Source: authors own study.

155
Durbin-Watson tests results are presented in range (1 less than or equal to 3)
table 3. The results show that the Durbin - recommended by Field (2009). This means
Watson values fall within the acceptable that there is no autocorrelation in the model.

Table 3. Durbin-Watson tests

Strategy formulation
Process innovation Performance 2.058
Product innovation Performance 2.323
Marketing innovation performance 2.159
Innovation Performance 2.216
Source: authors own study

Table 4. Strategy formulation and Innovation performance regression results

Model R R2 Adjusted R2 Std.Error of the F Sig.
Estimate
1 .431a .186 .174 .50429 16.424 .000a
Source: authors own study

The regression result of the model measured as a unidimensional construct. The

combining all three dimensions of model is statistically significant at 5%
innovation performance as a single because the p-value of .000a is less than the
performance indicator is presented in tables significance level of 0.05 (r = .431 at p-value
4. The R2 = .186 show that strategy < .05). Strategy formulation process has
formulation process account for 18.6% positive effect on innovation performance.
variation in innovation performance when

Table 5. Descriptive and regression results

Mean SD β p-value R2
Strategy formulation 4.2568 .53681

Process innovation Performance 4.2838 .53687 .505* .000* .225

Product innovation performance 4.2973 .52289 .395* .000* .156

Marketing innovation
3.6351 .95909 .376* .000* .141
performance
* p < 0.05. Source: author own study.
a.Predictors: (Constant), strategyformulation
b. Dependent Variables: process innovation performance, product innovation performance,
marketing innovation performance

The results presented in table 5, R2 = (.225) performance. Regression analysis was used
indicate that strategy formulation process to test the three hypotheses in this study. The
accounts for 22.5% of the variation in results show that strategy formulation
process innovation performance. Strategy process has a positive effect on process
formulation process R2 = (.156) account for innovation performance (β= 0.505 at p <
15.6% of the variation in product innovation 0.05). This finding support H1, that strategy
performance. Similarly, strategy formulation formulation is positively related to process
process R2 = (.141) account 14,1% of the innovation performance. In the same
variation in marketing innovation direction, strategy formulation process has a

156 C. Nwachukwu, H. Chladkova, O. Fadeyi

positive effect on product innovation (internet banking, electronic payments) is
performance (β= 0.395 at p < 0.05). This becoming a differentiating factor for banks
finding support H2, strategy formulation globally. Similarly, in formulating strategy,
process is positively associated with product MFBs develop strategies that create
performance innovation. Similarly, the result optimum value by producing products and
indicates that strategy formulation process services that meet the expectations of
has a positive effect on marketing innovation various stakeholders. To achieve product
performance. This finding support H3, performance innovation, firms must
strategy formulation process is positively continuously use new materials, new
related to marketing innovation performance. components, new technologies and new
features in developing new products.
5. Discussion Furthermore, achieving and sustaining
customer loyalty and customer satisfaction
This study examined the link between should be considered at the strategy
strategy formulation process and innovation formulation stage. A firm strategy should be
performance. All the three hypotheses are aligned to marketing innovation performance
statistically significant at 5% level of by ensuring that new product meet
significance. We conclude with 95% customers’ expectations. Providing easy to
confidence that strategy formulation process use, assessable and convenient
has explanatory power on product, process products/services through marketing
and marketing innovation performances. innovation could improve customer loyalty
This results is consistent with the findings of and satisfaction. A strategy formulation
(Ulwick, 2005; Acar & Acar, 2012) strategy process that supports innovative marketing
process (formulation and implementation) strategies can create competitive advantage
and product innovation performance shows a for firms by enhancing customer satisfaction
significant positive correlation between the and the image of company´s products and
two variables. Similarly, this result is in services. Customer loyalty and customer
consonance with the work of Zhang et al. satisfaction are extremely important for firm
(2009) that both the formulation and survival and growth. Authors infer from the
implementation processes are positively results of this study that MFBs in Nigeria
correlated to innovation performance of adopt a systematic strategy formulation
organisations. The results show that strategy process that is aligned with innovation
formulation process has the strongest effect performance indicators (process, product and
on process innovation. The results show that marketing). The study suggests that there is a
strategy formulation process is a good link between strategy formulation process
predictor of innovation performance. MFBs and innovation performance dimensions
strategic formulation process is linked to the (process, products and marketing).
improvements of reliability and efficiency in
the service process. At the strategy 6. Conclusions
formulation stage firms should take into
consideration how the product/service will In this dynamic and complex business
be developed, delivered and used. In the environment, firms that want to deliver
service industry, especially banking sector superior innovation performance (process,
technology play a very important role in the product and marketing) must adopt a
innovation process. The strategy formulation systematic approach to strategy formulation.
process of MFBs is designed to use Firms must have the capability to
advanced technologies in sharing coordinates and manage complexities during
information to optimise decision-making the process of formulating their strategies.
process. Thus, online banking services Firms need to develop strategies to achieve

157
and sustain competitive advantage. A policymakers, business executives, and
strategy that supports and promotes managers develop a systematic strategy
innovation is necessary for survival of firms. formulation process that links strategies to
The strategy formulation process is an innovation performance. The insight from
important phase in the strategic management this study can also help managers formulate
process. Formulating effective strategy can strategies that are aligned to firm's
make firms to achieve innovation innovation performance. The empirical
performance. A well-articulated strategy results suggest that managers and executives
enables firms to deliver business value. should give attention to strategy formulation
Strategy formulation process involves the process, if firms are to achieve superior
use of environmental scans and market innovation performance. This study is
analyses to identify problems based on core relevant for making strategic decisions in
business goals. Firms should focus on MFBs, other companies and public sector in
strategy formulation process to improve their Nigeria and other countries.
innovation performance. The strategy
development process should link the 6.2. Limitations and future research
organisation's mission and business goals to
innovation performance. The results show The limitations of this study are identified so
that strategy formulation process has a that the findings can be interpreted correctly
positive effect on innovation performance within the context of the study. The
dimensions (process, product and limitation of the study covers areas such as
marketing). The authors, therefore, sample and data. This study used a sample of
concludes that a systematic strategy 76 employees from selected microfinance
formulation process is necessary for firms to banks in Nigeria for the analysis conducted.
achieve and sustain process innovation Thus, one reason the researcher may not be
performance, product innovation able to generalise the results to all the MFBs
performance and marketing innovation within the country. This study used cross
performance. sectional data, care should be taken when
reporting cause and effect between variables
6.1. Study contribution in cross sectional studies. Despite the
limitation described above, the applicability
This study contributes to the industry and to of this study adds to the literature as it relates
the field of strategy and innovation to the strategy process and innovation
management by providing a better performance research from both theoretical
understanding of how strategy formulation and practical point of view. The authors
process affect innovation performance believe that these results provide interesting
indicators (process, product and marketing). basis for further debate and empirical study.
Through the theoretical lens of the resource- This study could be further developed by
based theory, this study underscores the including more dimensions of innovation
importance of strategy formulation process performance like organisational innovation
in enhancing innovation performance. This performance, service innovation
study adds to the limited research on strategy performance among others. Environmental
and innovation performance relationship dynamism and competitiveness can be
especially in the emerging markets, by introduced as moderating variables in the
exploring the link between strategy relationship between strategy formulation
formulation process and innovation process and innovation performance.
performance indicators. To the best of the Longitudinal study could improve the
authors knowledge, this is the first of such finding of the study by capturing changes in
attempt. This study will enable strategy formulation process and innovation

158 C. Nwachukwu, H. Chladkova, O. Fadeyi

performance overtime. The sample size manufacturing and oil and gas in Nigeria and
could also be increased as this could give a other countries.
better representation of MFBs in Nigeria. Acknowledgements: The article received
Further study could be extended to other support from the Internal Grant Agency of
sectors of the economy like insurance, FBE MENDELU (2018).

References:
Abu Bakar, L., & Zainol, F.A. (2015). Vision, innovation, proactiveness, risk taking and SMEs
performance: A proposed hypothetical relationship in Nigeria. International Journal of
Academic Research in Economics and Management Sciences, 4(1), 45-53.
Acar, A. Z., & Acar, P. (2012). The effects of organizational culture and innovativeness on
business performance in healthcare industry. Procedia-Social and Behavioral Sciences, 58,
683-692.
Andrews, K. R. (1971). The Concept of Corporate Strategy. Homewood, IL: Dow Jones-
Irwin.
Andrews, D., Nonnecke, B., & Preece, J. (2003). Electronic survey methodology: A case study
in reaching hard to involve Internet Users. International Journal of Human-Computer
Interaction, 16(2), 185-210.
Andrews, J., & Smith, D. C. (1996). In Search of the Marketing Imagination: Factors Affecting
the Creativity of Marketing Programs for Mature Markets. Journal of Marketing Research,
33(2), 174-187.
Aremu, M. A., & Oyinloye, O. O. (2014). Relationship between strategic management and
firms’ performance in nigerian banking industry. Kuwait Chapter of Arabian Journal of
Business and Management Review, 4(3), 28-41.
Asheim, B. T., & Coenen, L. (2005). Knowledge bases and regional innovation systems:
comparing Nordic clusters. Research Policy, 34(8), 1173-1190.
Auka, D. O., & Langat, J. C. (2016). Effects of Strategic Planning on Performance of Medium
Sized Enterprises in Nakuru Town. International Review of Management and Business
Research, 5(1), 188-203.
Banbury, C. M. & Mitchell, W. (1995). The effect of introduction important incremental
innovations on market share and business survival. Strategic Management Journal, 19
(Special Issue), 42-55.
Barney, J. (1991). Firm resources and sustained competitive advantage. Journal of
Management, 17(1), 99-120.
Bartkus, B. R., & Glassman, M. (2008). Do Firms Practice what they preach? The
Relationship between Mission Statements and Stakeholder Management. Journal of Business
Ethics, 83(2), 207-216.
Bessant, J., & Tidd, J. (2007). Innovation and entrepreneurship. West Sussex, England: John
Wiley.
Beyene, K.T., Sheng, S. C., & Wu, W.W. (2016). Linking National Culture and Product
Innovation Performance: what really influences the interplay, strategy formulation or
implementation effectiveness? International Journal of Business and Management, 11(2),
184-196.

159
Branstetter, L. (2006). Is foreign direct investment a channel of knowledge spillovers?
Evidence from Japan's FDI in the United States. Journal of International Economics, 68(2),
325-344.
Bryman, A., & Bell, E. (2015). Business research methods. USA: Oxford University Press.
Chandler, A. D. (1962). Strategy and Structure: Chapters in the History of the American
Industrial Enterprise. Cambridge, MA: MIT Press.
Cheng, C. C. J., Yang, C. l., & Sheu, C. (2014). The link between eco-innovation and business
performance: a Taiwanese industry context. Journal of Cleaner Production, 64, 81-90.
Damanpour, F. (1991). Organizational innovation: A meta-analysis of effects of determinants
and moderators. Academy of Management Journal, 34, 555-590.
David, F. (2011). Strategic Management: Concepts and Cases 13th ed. Essex: Pearson
Education Limited.
Desmidt, S., Prinzie, A., & Decramer, A. (2011). Looking for the Value of Mission
Statements: A Meta-analysis of 20 Years of Research. Management Decision, 49(3), 468-
483.
Dohse, D. (2007). Cluster-based technology policy - the German experience. Industry and
Innovation, 14(1), 69-94.
EFQM: Home. EFQM [online]. (2012). Retrieved from http://www.efqm.org/en/
Evan, W. M., & Freeman, R. E. (1993). A stakeholder theory of the modern corporation:
Katian capitalism. In Donaldson, T., & Werhane, P. H. (Eds.) Ethical issues in business.
(166-71). Englewood Cliffs, NJ: Prentice-Hall.
Field, A. (2009). Discovering statistics using SPSS. 3rd ed. London: Sage publication Ltd.
Filipini, R., & Martini, G. (2010). Strategic choice between process and product innovation
under different competitive regimes. International Game Theory Review, 12, 139-159.
Freeman, R.E (1984). Strategic management a stakeholder approach. Pitman.
Gharieghi E., Nikbakht, F., & Bahar, G. (2011). A survey of relationship between the
characteristics of mission statement and organizational performance. Research Journal of
Business Management, 5(3), 117-124.
Grant, R. M (1991). The resource-based theory of competitive advantage: Implications for
strategy formulation. California Management Review, 23, 291-374.
Hair, J., Black, W., Babin, B., & Anderson, R. (2010). Multivariate data analysis 7th ed.
Englewood Cliffs: Prentice Hall.
Helfat, C. (2007). Relational capabilities: drivers and implications. In C. E. Helfat, S.
Finkelstein, W. Mitchell, M. Peteraf, H. Singh, D. J. Teece, S. G. Winter (Eds.), Dynamic
capabilities: strategic change in organisations. Blackwell, Oxford, UK.
Kalay, F., & Lynn, G. S. (2015). The impact of strategic innovation management practices on
firm innovation performance. Research Journal of Business and Management, 2(3), 412-
429.
Kantabutra, S., & Avery, G. C. (2011). Sustainable leadership at Siam Cement Group. Journal
of Business Strategy, 32(4), 32-41.
Katsvamutima, E., & Jeevananda. S. (2014). Strategy Formulation and Implementation in
Zimbabwe’s Food Manufacturing Industry. International Journal of Science and Research,
3(5), 849- 855.

160 C. Nwachukwu, H. Chladkova, O. Fadeyi

Klingenberg, B., Timberlake, R., Geurts, T. G., & Brown, R. J. (2013). The relationship of
operational innovation and financial performance: a critical perspective. International
Journal of Production Economics, 142, 317-323.
Kok, R. A. & Biemans, W. G. (2009). Creating a market-oriented product innovation process:
a contingency approach. Technovation, 29(8), 517-526.
Kumar, P. (2015). Correlation between Strategic Planning and Firm Performance. International
Journal of Management & Business studies, 5(2), 64-75.
Kumar, R., & Nti, K. O. (1998). Differential learning and interaction in alliance dynamics: A
process and outcome discrepancy model. Organization Science, 356-367.
Laursen, K., & Foss, N. J. (2003). New human resource management practices,
complementarities and the impact on innovation performance. Cambridge Journal of
economics, 27(2), 243-263.
Laursen, K., & Salter, A. (2006). Open for Innovation: The role of openness in explaining
innovation performance among UK manufacturing firms. Strategic Management Journal,
27, 131-150.
Lendel, V., & Varmus, M. (2011). Creation and implementation of the ınnovation strategy in
the enterprise. Economics and Management, 16, 819-826.
Linoff, G. S. (2004). Survival Data Mining for Customer Insight. Amesbury, MA: Data
Miners, 1-10.
MacGarvie, M. (2006). Do firms learn from international trade? Review of Economics and
Statistics, 88, 46-60.
Maine, E., Lubik, S., & Garnsey, E. (2012). Process-based vs product-based innovation: value
creation by nanotech ventures. Technovation, 32, 179-192.
Mataradzija, A., Rovcanin, A., & Mataradzija, A. (2013). Inovation and innovative
performance in the European Union. Paper presented at international conference in Zadar,
Crotia, 19-21 June.
Mehrdad, M., Sadati, A., Delavari, H., Mohsen, M., & Ramin, M. (2011). Entrepreneurial
Orientation and Innovation Performance: the mediating role of knowledge. Knowledge
Management, 3(4), 310-316.
Menguc, B., & Auh, S. (2010). Development and return on execution of product innovation
capabilities: The role of organizational structure. Industrial Marketing Management, 39(5),
820-831.
Mintzberg, H. (1987). Crafting strategy. Harvard Business Review, 65, 66-75.
Mugenda, O. M., & Mugenda, A. G. (2009). Research methods: Quantitative and Qualitative
approaches. Nairobi: ACTS.
Mutetei, T. M., Waiganjo, E., & Mukulu, E. (2016). Impact of shared vision on firm
performance of mobile telephone service providers in kenya. International Journal of
Science and Engineering Invention, 2(4), 6-13.
Namusonge, G. S., Muturi, W., & Olaniran, O. (2016). The role of innovation on performance
of firms on Nigerian stock Exchange. European Journal of Research and Reflection in
Management Sciences, 4(1), 40-50.
Nwachukwu, C., & Chladkova, H. (2017). Human resource management practices and
employee satisfaction in microfinance banks in Nigeria. Trends Economics and
Management, 28(1), 23-35.

161
Nwachukwu, C., Chladkova, H., Zufan, P., & Olatunji, F. (2017a). Visionary Leadership and
Its Relationship to Corporate Social Performance. Imperial Journal of Interdisciplinary
Research, 3(4), 1302-1311.
Nwachukwu, C., Chladkova, H. & Zufan, P (2017b). Empirical Assessment of Microfinance
Banks using the EFQM excellence Model. International Journal for Quality Research,
11(2), 279-294.
Nwankwo, F. O., & Ogbodo, O. C. (2017). Financial inclusion and the growth of micro finance
banks in Nigeria. Socialscientia Journal of the Social Sciences and Humanities, 2(2), 9-18.
Odita, A.O., & Bello, A. (2015). Strategic Intent and Organizational Performance: A Study of
Banks in Asaba, Delta State Nigeria. Information and Knowledge Management, 5(4), 60-71.
Odongo, A. A., Anyango, W., & Rotich, G. (2016). Role of strategic planning on the
performance of microfinance institutions in Kenya: a case of microfinance institutions in
Nairobi. The Strategic Journal of Business and change Management, 3 ( 3), 154-178.
OECD and Eurostat (2005). Oslo Manual-Third Edition: Guidelines for Collecting and
Interpreting Innovation Data, Paris.
Onoyere, I. A. (2014). An Investigation of Activities of Microfinance Banks as a Veritable
Tool for reducing Poverty and Unemployment in Developing Economies: The evidence from
Nigeria. Mediterranean Journal of Social Sciences, 5(6), 99-107.
Pearce II, J. A., & Robinson Jr R. B. (2011). Strategic management: formulation,
implementation, and control. 12th ed. Boston, MA: McGraw-Hill Irwin.
Peteraf, M. A. (1993). The cornerstones of competitive advantage: A resource-based view.
Strategic Management Journal, 14(3), 179-191.
Pitelis, C. N. (2009). The co-evolution of organizational value capture, value creation and
sustainable advantage. Org Stud, 30(10), 1115-1139.
Porter, M. (1985). Technology and competitive advantage. Journal of Business Strategy, 5, 60-
78.
Porter, M. E. (1996). What is strategy? Harvard Business Review, 61-78.
Prajogo, D. I. (2016). The strategic fit between innovation strategies and business environment
in delivering business performance. International Journal of Production Economics, 171,
241-249.
Roberts, P. W., & Eisenhardt, K. M. (2003). Austrian insights on strategic organization: from
market insights to implications for firms. Strategic Organization, 1(3), 345-352.
Robert, B., & Tucker (2008). Driving Growth through Innovation: how leading firms are
transforming their futures. 2nd ed. US: Berrette-Koehler Publishers.
Salomon, R. M., & Shaver, M. J. (2005). Learning by exporting: New insights from examining
firm innovation. Journal of Economics & Management Strategy, 14, 431–460.
Sandada, M. (2014). Mission and vision, environmental scanning and formality of strategic
planning as predictors of the performance of small and medium enterprises (SMEs) in the
gauteng province of South Africa, ECOFORUM, 3(2), 59-67.
Santo, J. B., & Brito, L.A. (2012). Toward a subjective measurement model for firm
performance. Brazilian Administrative Review, 9(6), 95- 17.
Stocka, G. N., Greis, N. P., & Fischer, W. A. (2001). Absorptive capacity and new product
development. The Journal of High Technology Management Research, 12(1), 77-91.

162 C. Nwachukwu, H. Chladkova, O. Fadeyi

Suberu, O. J., Aremu, O. S., & Popoola, E. G. (2011). The impact of microfinance institutions
on the development of small scale enterprises in Nigeria. Journal of Research in
International Business Management, 1(8), 251-257.
Teece D. J, Pisano, G., & Shuen, A. (1997). Dynamic capabilities and strategic management.
Strategic Management Journal, 18, 509-533.
Teece, D. J. (2007). Explicating dynamic capabilities: the nature and micro-foundations of
(sustainable) enterprsie performance. Strategic Management Journal, 28(13), 1319-1350.
Terziovski, M. (2010). Innovation practice and its performance implications in small and
medium enterprises (SMEs) in the manufacturing sector: a resource-based view. Strategic
Management Journal, 31, 892-902.
Tödtling, F., & Trippl, M. (2005). One size fits all? Towards a differentiated regional
innovation policy approach. Research Policy, 34(8), 1203-1219.
Trott, P. (2012). Innovation management and new product development, 5th ed. Essex,
England: Pearson Education.
Ulwick, A. W. (2005). Business strategy formulation: Theory, process and the intellectual
Revolution.
Van Gelderen, M., Frese, M. & Thurik, R. (2000). Strategies, uncertainty and performance of
small business startups. Small Business Economics, 15, 165-181.
Verhees, F. J. H. M., & Meulenberg, M. T. G. (2004). Market orientation, innovativeness,
product innovation, and performance in small firms. Journal of Small Business Management,
42(2), 134-154.
Wang, C. H. (2014). A longitudinal study of innovation competence and quality management
on firm performance. Innovation: Management, Policy & Practice, 16, 392-403.
Wang, S. (2015). What motivates marketing innovation and whether marketing innovation
varies across industry sectors (Postdoctoral thesis, Telfer School of Management, University
of Ottawa). Retrieved from https://www.ruor.uottawa.ca/bitstream/10393/33008/
1/Wang_Shu_2015_Thesis.pdf
Waxell, A., & Malmberg, A. (2007). What is global and what is local in knowledge-generating
interaction? The case of the biotech cluster in Uppsala, Sweden. Entrepreneurship &
Regional Development, 19(2), 137-159.
Wernerfelt, B. (1984). A resource-based view of the firm. Strategic Management Journal, 5,
171-180.
Wheelen, T. L., & Hunger, J. D. (2008). Strategic Management and Business Policy, 11th ed.
Upper Saddle River, NJ: Pearson Prentice Hall.
Wilden, R., Gudergan S. P., Nielsen B. B., & Lings, I. (2013). Dynamic capabilities and
performance: strategy, structure and environment. Long Range Plan, 46, 72-96.
Williams, A. (1999). Creativity, Invention and Innovation. Sydney: Allen & Unwin, 15(10),
10.
Woldie, A., Mwita, I., & Saidimu, J. (2012). Challenges of microfinance accessibility by
SMEs in Tanzania. Thunderbird International Business Review, 54(4), 567-579.
Xin, J. Y., Yeung, A. C. L., & Cheng, T. C. E. (2010). First to market: is technological
innovation in new product development profitable in healthcare industries? International
Journal of Production Economics, 127, 129-135.

163
 Zakić, N., Jovanović, A., & Stamatović, M. (2008). External and internal factors affecting the
product and business process innovation. Facta universitatis-series: Economics and
Organization, 5(1), 17-29.
Zehir, C., Üzmez, A., & Yıldız, H. (2016). The effect of SHRM Practices on innovation
performance: The mediating role of global capabilities. 12th International Strategic
Management Conference, ISMC 2016, 28-30 October 2016, Antalya, Turkey. Procedia -
Social and Behavioral Sciences, 235, 797-806.
Zhang, J., Hoenig, S., Di Benedetto, A., Lancioni, R. A., & Phatak, A. (2009). What
contributes to the enhanced use of customer, competition and technology knowledge for
product innovation performance? A survey of multinational industrial companies’
subsidiaries operating in China. Industrial Marketing Management, 38(2), 207-218.
Zuńiga-Collazos, A., & Castillo-Palacio, M. (2016). Impact of image and satisfaction on
marketing innovation. Journal of Technology Management & Innovation, 11(2), 70-75.

Chijioke Nwachukwu Helena Chladkova Olatunji Fadeyi

Mendel University in Brno, Mendel University in Brno, Covenant University Ota,
Faculty of Business and Faculty of Business and Faculty of Business
Economics Economics Administration
Zemedelska 1, Zemedelska 1, Ogun State
61300, Brno 61300, Brno Nigeria
Czech Republic Czech Republic fadeyiolatunji@yahoo.com
cesogwa@yahoo.com chlad@mendelu.cz

164 C. Nwachukwu, H. Chladkova, O. Fadeyi

View publication stats