EFFECT OF SHIPPING KNOWLEDGE AND ABSORPTIVE CAPACITY ON SHIPPING COMPANY S LOGISTIC VALUE AND ORGANISATIONAL INNOVATION

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1 EFFECT OF SHIPPING KNOWLEDGE AND ABSORPTIVE CAPACITY ON SHIPPING COMPANY S LOGISTIC VALUE AND ORGANISATIONAL INNOVATION ABSTRACT ANJITHA MARIYA JOSEPH 1 JAYESH SHARAF 2 1 & 2 School of Business Studies, Christ University, Bengaluru Purpose The purpose of this paper is to examine what types of shipping knowledge are crucial in order for shipping companies to survive in dynamic business environment, and to investigate how the shipping knowledge affects the company s performance (i.e. organizational innovation and logistics value). This paper also diagnoses the moderating effect of absorptive capacity on the relationship between the shipping knowledge and its effectiveness. Design/methodology/approach Based on the literature, a theoretical framework and relevant hypotheses are established so as to show associated relationships between shipping knowledge, absorptive capacity, and organizational innovation and logistics value. Data are collected for an empirical analysis and a moderated correlation and regression analysis is conducted to test the hypotheses. Findings- Logistics Value and Organisation Innovation have no significant correlation with shipping knowledge when not moderated with absorptive capacity Shipping Knowledge when moderated with Absorptive Capacity has a highly significant correlation with both Logistics value and Organisational Innovation. Practical implications enhancement in a company s and its employee s knowledge of shipping relevant to the trade will have a positive effect on the Organisation s Innovativeness and Logistics Value, provided that equal level of effort is put in enhancing the organisation s overall ability to learn or apply new knowledge in improving efficiency of day to day operations. Keywords Shipping logistics, Transportation management, Shipping Knowledge Introduction As business environment in the shipping industry gets more complex and dynamic and competition becomes more intense, managers of shipping companies have realized that the traditional business practices focusing on low price and short-term based financial profit no longer guarantee their sustainable competitive advantages; they still face the need to complete a great many strategic tasks so as to successfully respond to these volatile business requirements and improve their competitiveness. For instance, maximizing logistics value by reducing business costs and lead time, and improving service flexibility, responsiveness and reliability would be one of the most significant demands on today s shipping companies (Lee and Song, 2010). In addition, organizational innovation in shipping companies has also been cited as a significant strategic alternative in order to help shipping companies effectively cope with these volatile business environments, because organizational innovation of logistics operators, including shipping companies, enables them to develop new, unique and differentiated services, and thus allows them to improve non-imitable and sustainable competitive advantages accordingly (Chapman et al., 2003; Grawe, 2009; Greve, 2009). Therefore, maximizing the logistics value and realizing an organizational innovation would be one of the key organizational objectives that shipping companies should achieve in order to satisfy their customers, be well admin@icmrr.org

2 integrated into the global logistics chain system, and realize long-term based strategic competitiveness. Literature Review Previous studies in maritime and logistics management have stressed that as a way of achieving the aforementioned strategic goals that knowledge resource has a positive impact on the improvement of the logistical performance and organizational innovation of logistics operators (AutryandGriffis,2008;Christensenetal.,2005;Esper et al., 2007; Panayides 2007; Peters et al., 2011; Tazdanparast et al., 2010). The existing literature has not, however, addressed the following points. First, although the previous contentions have pointed out the importance of knowledge resource in maritime logistics, they have not specifically examined the types of shipping knowledge that are useful for shipping operation and services. Second, there have been few attempts to empirically examine the effectiveness of shipping knowledge in improving shipping logistics value and organizational innovation with a quantitative and deductive research methodology. Finally, researchers have largely overlooked the role of organizational learning capability being internally embedded in employees in absorbing and best applying the shipping knowledge, although that capacity is quite significant in facilitating the effectiveness of knowledge on the organizational performance (Cohen and Levinthal, 1990; Lane et al., 2001; Tsai, 2001; Fernhaber and Patel, 2012). Research Methodology Having recognized the aforementioned research gap, this study aims to identify the types of shipping knowledge, and from there will look to empirically examine how this shipping knowledge may help shipping companies to improve shipping logistics value and innovation throughout the application of the shipping knowledge. The moderating role of internal learning capability, i.e. absorptive capacity, in facilitating the effective application of the shipping knowledge will also be examined. This paper consists of the following contents. First, a literature review introduces the concept of knowledge resource and its strategic significance in the current shipping business environment from a strategic management perspective. The literature review will give the theoretical basis from which to identify the types of shipping knowledge and their impact on the improvement of shipping logistics value and organizational innovation. The concept of an absorptive capacity is also introduced, and its moderating role in facilitating the positive relationship between knowledge resource and organizational performance will be examined. A conceptual framework and the relevant hypotheses which show the aforementioned theoretical relationship are then developed. Finally, the empirical analysis and discussions are presented in the last section. Hypothesis H0a. The level of knowledge a shipping company possesses will have a positive effect on its organizational innovation. H0b. The level of knowledge a shipping company possesses will have a positive effect on its logistics value. H1a. The level of knowledge along with the absorptive capacity of a shipping company will together have a positive effect on its organizational innovation i.e. the relationship between shipping knowledge and organizational innovation of a shipping company will be moderated by absorptive capacity: admin@icmrr.org

3 H1b. The level of knowledge along with the absorptive capacity of a shipping company will together have a positive effect on its logistics value i.e. the relationship between shipping knowledge and logistics value of a shipping company will be moderated by absorptive capacity: Data analysis Descriptive statistics Shipping Knowledge Knowledge and Absorption Logistics Value Organisation Innovation Mean Standard Error Median Standard Deviation Sample Variance Skewness Range Minimum Maximum Sum Count Correlation Shipping Knowledge Knowledge and Absorption Logistics Value * Organisation Innovation * Findings This study examines the effectiveness of shipping knowledge in facilitating the improvement of organizational innovation and logistics value, and the moderating role of absorptive capacity in further promoting the positive impact of shipping knowledge on organizational innovation and logistics value. Correlation tests show that Logistics Value and Organisation Innovation have no significant correlation with shipping knowledge when not moderated with absorptive capacity. On the other hand, Shipping Knowledge when moderated with Absorptive Capacity shows a highly significant correlation with both logistics value and Organisational Innovation. Thus, the Statistical Results of Correlation and Regression analysis disapprove both our null hypothesis and strengthen the argument for both alternate hypotheses. H0a: The study observed that Shipping Knowledge independently does not have a positive effect on Organisational innovation and hence H0a is rejected. H0b: The study observed that Shipping Knowledge independently does not have a positive effect on Logistics Value and hence H0b is rejected admin@icmrr.org

4 H1a. The study observed that Shipping Knowledge when moderated with the absorptive capacity of a shipping company together had a positive effect on its Logistics Value and hence H1a is accepted. H1a. The study observed that Shipping Knowledge when moderated with the absorptive capacity of a shipping company together had a positive effect on its Logistics Value and hence H1a is accepted. This finding ensures that shipping knowledge helps shipping companies to improve organizational performance in terms of reducing business costs and time and enhancing service flexibility, responsiveness and reliability, as well as realizing organizational innovations in services, operational skills and markets. But the findings also imply that a higher level of shipping knowledge per se may not be sufficient to maximize the logistics value, but rather advocates organizational capability to best utilize and apply the knowledge so as to leverage the knowledge-related advantages. Conclusion The study concludes that enhancement in a company s and its employee s knowledge of shipping relevant to the trade will have a positive effect on the Organisation s Innovativeness and Logistics Value, provided that equal level of effort is put in enhancing the organisation s overall ability to learn or apply new knowledge in improving efficiency of day to day operations. The internal learning capability can be developed by training and educating employees about how to recognize valuable knowledge to their companies, and how to better utilize and assimilate the acquired knowledge. Adopting new information technology or information systems would also be significant in developing this internal learning capability, because they may enable employees to efficiently spread and exchange the knowledge between the employees. Although this paper addresses an important strategic consideration relating to the relationship between shipping knowledge and the improvement of organizational performance of shipping companies, it does not discuss how the companies can acquire those significant knowledge resources. The way to effectively acquire the shipping knowledge may be critical for successful application of knowledge management strategy, and thus this issue should be examined further in future research agendas. Reference Autry, C.W. and Griffis, S.E. (2008), Supply chain capital: the impact of structural and relational linkages on firm execution and innovation, Journal of Business Logistics, Vol. 29 No. 1, pp Chapman, R.L., Soosay, C. and Kandampully, J. (2003), Innovation in logistics services and the new business model, International Journal of Physical Distribution and Logistics Management, Vol. 33 No. 7, pp Esper, T.L., Fugate, B.S. and Davis-Sramek, B. (2007), Logistics learning capability: sustaining the competitive advantage gained through logistics leverage, Journal of Business Logistics, Vol. 28 No. 2, pp Naim, M.M., Potter, A.T., Mason, R.J. and Bateman, N. (2006), The role of transport flexibility in logistics provision, International Journal of Logistics Management, Vol. 17 No. 3, pp admin@icmrr.org

5 Logistics Value Absorptive Capacity Shipping Knowledge Panayides, P. and Song, D.-W. (2008), Evaluating the integration of seaport container terminals insupplychains, International Journal of Physical Distribution and Logistics Management, Vol. 38 No. 7, pp Zhao, M., Droge, C. and Stank, T.P. (2001), The effects of logistics capabilities on firm performance: customer-focused versus information-focused capabilities, Journal of Business Logistics, Vol. 22 No. 2, pp Appendix Table Showing the Responses received from 3 Companies to the Questionnaire Variable Question Company A Company B Company C General information of shipping industry Useful information about customer demands on shipping services Useful information about strategy and behavior of competitors Useful information about operational skills, planning and information technology in shipping operations Useful information about organizational administrative skills of managing employees Marketing related knowledge on price, promotion, customer relationship management etc. Our company can understand new knowledge well Our company is less repulsed by new knowledge Our company distributes new knowledge to employees rapidly and efficiently Our company proactively applies new knowledge to our work Our company trains employees well when applying new knowledge Our company invests a lot of money to R&D expenditure Business cost of our company is low Our company provides speedy services Our company provides services on time Our company provides customized services responding to various customer demands admin@icmrr.org

6 Organizational Innovation Our company flexible respond to unexpected circumstances or volatile customer needs Our company provides accurate and reliable information to our customers Our company provides safe services by minimizing loss or damage of cargoes Our company introduces new services with a novel ship design Our company adopts a new business mix, e.g. new routes and/or new cargoes Our company expands to new technology scopes by way of business diversification or by entering into new public/private sectors Our company adopts new technology Our company utilize new operational skills or tools Our company applies new operational models admin@icmrr.org