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| The Impact of Traceability Practices and Dynamic Capabilities on Firm Innovation Performance: A Case of Manufacturing Firms |
| Zhou Xiongyong1,Xu Zhiduan2 |
| (1. Antai College of Economics & Management, Shanghai Jiao Tong University, Shanghai 200030, China;2. School of Management, Xiamen University, Xiamen 361005, China) |
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Abstract Innovation is the key to a firm's long-term competitive advantage. At present, manufacturing firms pay too much attention to product innovation, while innovations of process and management are relatively lagging behind. With the increasing modernization of management technology, information management-related innovation needs to be further strengthened. In the era of Industry 4.0, manufacturing firms are using the latest digital technologies to drive innovation on all fronts. One of the most valuable ways in which digitalization empowers manufacturing firms is to facilitate the traceability of products and their key components/raw materials. Traceability practices not only achieve positive results in improving quality management and reducing the scale of recalls, but also help to innovate product development, optimize business processes and improve management models. But many manufacturers remain skeptical if traceability practices can improve innovation performance. Therefore, this study aims to examine whether and how traceability practices in manufacturing firms can improve innovation performance, and the research findings are conducive to the creation of the sustainable competitive advantages for firms.#br#Extant literature has focused on exploring consumers' traceability preferences and how to implement traceability systems, but little attention has been paid to the performance improvement after firms implement traceability practices, especially the relationship between traceability practices and innovation performance is rarely touched. Although scholars have repeatedly emphasized that product traceability is closely related to firm innovation, there is a lack of sufficient empirical evidence on the mechanisms through which traceability practices affect firms' innovation performance. Therefore, it is necessary to go into details of the relationship between the two. Dynamic capability theory suggests a new perspective in traceability practices for improving innovation performance. Since traceability practices are a form of organizational resource management, their potential innovation performance is most likely brought about by the enhancement of the dynamic capabilities of the organization. Therefore, in exploring the relationship between traceability practices and innovation performance, this study attempts to further analyze the mediating role of dynamic capabilities on the above relationship, which is important for uncovering the black box between traceability practices and performance improvement.#br#Drawing on dynamic capability theory, this study constructs a theoretical model of traceability practices and dynamic capability for innovation performance improvement in manufacturing firms. This paper first explores the direct effect of traceability practices on firm innovation performance improvement; then it empirically examines the indirect effect of dynamic capabilities on traceability practices and innovation performance, to further explain the impact mechanism of traceability performance formation. Using valid questionnaire data from 279 Chinese manufacturing firms in four traceability system demonstration regions, this paper verifies the hypothesis by defining variables and constructing the structural equation modeling method.#br#It is found that firstly traceability practices of manufacturing firms have significant positive effects on product innovation, process innovation, and management innovation; meanwhile, process innovationsignificantlyimproves when manufacturing firms implement traceability practices, followed by management innovation and, to a lesser extent, product innovation. Secondly traceability practices of manufacturing firms have a significant positive impact on dynamic capability improvement. Thirdly traceability practices are also mediated by dynamic capabilities in the process of promoting innovation performance improvement. Among them, dynamic capabilities have partial mediating effects on the impact of traceability practices on process innovation and management innovation, and full mediating effects on the impact of traceability practices on product innovation. #br#This study responds to the call for firm performance by bringing insight into the relationship between traceability practices and innovation performance, and revealing the pathways by which traceability practices affect different types of performance. Moreover, it introduces dynamic capability as a mediating variable to provide empirical evidence for the research on the traceability practices and firm innovation performance. Besides this study contributes to the functions and values of traceability by examining the impact mechanisms and processes of traceability practices on firms' innovation performance and provides empirical evidence from emerging markets to enrich and deepen traceability research. Finally, it provides innovative cases in the field of traceability technologies for digital manufacturing research under Industry 4.0 by validating the potential association of traceability practices with the innovation performance of manufacturing firms. There are theoretical guidance and managerial insights for manufacturing firms to fully understand the value of traceability practices and how dynamic capabilities play a necessary role in the process of traceability practice to advance innovation performance improvement.#br#
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Received: 06 January 2022
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