The effect of dynamic capabilities on operational-level innovation – Empirical study in magazine publishing industry

This master’s thesis aims to examine the relationship between dynamic capabilities and operational-level innovations. In addition, measures for the concept of dynamic capabilities are developed. The study was executed in the magazine publishing industry which is considered favourable for examining dynamic capabilities, since the sector is characterized by rapid change. As a basis for the study and the measure development, a literary review was conducted. Data for the empirical section was gathered by a survey targeted to chief-editors of Finnish consumer magazines. The relationship between dynamic capabilities and innovation was examined by multiple linear regression. The results indicate that dynamic capabilities have effect on the emergence of radical innovations. Environmental dynamism’s effect on radical innovations was not detected. Also, dynamic capabilities’ effect on innovation was not greater in turbulent operating environment.

Music digitalization and its effects on the Finnish music industry stakeholders

For the past two decades the music digitalization has been considered the most significant phenomenon in the music industry as the physical sales have been decreasing rapidly. The advancement of the digital technology and the internet have facilitated the digitalization in the music industry and affected all stages of the music value chain, namely music creation, distribution and consumption. The newly created consumer culture has led to the establishment of novel business models such as music subscriptions and à-la-carte downloads websites and live streaming. The dynamic digital environment has presented the music industry stakeholders with the challenge to adapt to the requirements of the constantly changing modern consumers’ needs and demands. The purpose of this study was to identify how music digitalization can influence change in the Finnish music industry value chain; i.e. how digitalization affects the music industry stakeholders, their functions and inter-relatedness and how the stakeholders are able to react to the changes in the industry. The study was conducted as a qualitative research based entirely on primary data in the form of semi-structured interviews with experts from different units of the Finnish music industry value chain. Since the study offers assessment of diverse viewpoints on the value chain, it further provides an integrated picture of the Finnish music industry current situation and its competitive environment. The results suggest that the music industry is currently in a turbulent stage of experimentation with new business models and digital innovations. However, at this point it is impossible to determine which business model will be approved by the consumers in the longer run. Nevertheless, the study confirmed the claim that consumption of music in its digital form is to become dominant over the traditional physical copies sales in the nearest future. As a result the music industry is becoming more user-oriented; that is the focus is shifting from music production towards artist branding and management and visibility to the audience. Furthermore, the music industry is undergoing the process of integration with other industries such as media, social networks, internet services providers and mobile phone manufacturers in order to better fulfill the consumers’ needs. The previously underrated live music and merchandising are also increasing their significance for the revenues in the stagnant music markets. Therefore, the music industry is developing at present towards becoming an integrated entertainment industry deeply penetrating every point of modern people’s leisure activities.

Assessing the Environmental Value of Water Treatment Solutions in the Mining Industry

Environmental accountability has become a major source of competitive advantage for industrial companies, because customers consider it as relevant buying criterion. However, in order to leverage their environmental responsibility, industrial suppliers have to be able to demonstrate the environmental value of their products and services, which is also the aim of Kemira, a global water chemistry company considered in this study. The aim of this thesis is to develop a tool which Kemira can use to assess the environmental value of their solutions for the customer companies in mining industry. This study answers to questions on what kinds of methods to assess environmental impacts exist, and what kind of tool could be used to assess the environmental value of Kemira’s water treatment solutions. The environmental impacts of mining activities vary greatly between different mines. Generally the major impacts include the water related issues and wastes. Energy consumption is also a significant environmental aspect. Water related issues include water consumption and impacts in water quality. There are several methods to assess environmental impacts, for example life cycle assessment, eco-efficiency tools, footprint calculations and process simulation. In addition the corresponding financial value may be estimated utilizing monetary assessment methods. Some of the industrial companies considered in the analysis of industry best practices use environmental and sustainability assessments. Based on the theoretical research and conducted interviews, an Excel based tool utilizing reference data on previous customer cases and customer specific test results was considered to be most suitable to assess the environmental value of Kemira’s solutions. The tool can be used to demonstrate the functionality of Kemira’s solutions in customers’ processes, their impacts in other process parameters and their environmental and financial aspects. In the future, the tool may be applied to fit also Kemira’s other segments, not only mining industry.

Subjectivity in the valuation : Case study on the Finnish biotechnology industry

The thesis combines valuation and behavioral economics literature, which is not common among the Finnish management accounting research. Furthermore, the valuation is studied in biotechnology context and those type of studies are rather rare as well. The thesis studies the valuation in the Finnish biotechnology industry. The concepts of behavioral finance are employed in the empirical part of the study to explore decision-makers’ behavior in valuation processes. The main interest of this study is to explore how subjectivity of a decision-maker affects the valuation in the biotechnology industry. The valuation is studied from two perspectives. First, what is the best valuation model for biotechnology companies suggested by the valuation literature? Second, how the valuation in biotechnology industry is done in practice and how the decision-makers subjectivity affects the valuation? The literature review aims at seeking the best valuation model. The real options were found to be the most suitable valuation model for biotechnology companies, especially in the early stages of product development. The real option’s ability to take the value of the inherent options into account results in theoretically most correct valuations. The only disadvantage is the model’s complexity when compared to other models, such as discounted cash flow models. The empirical part of the study consists of a case study, which examines the valuation practices of the Finnish biotechnology companies. When it comes to the valuation models used in practice, it was found that the companies were using rather simple valuation models, which was due to two reasons. First, the interviewees did not believe in the valuation models and second, they were familiar neither with the most sophisticated models nor with all the theoretical aspects of the models they were using. The material for the study was collected with theme interviews. Four CEO’s of highly successful Finnish biotechnology companies. Strong signs of the decision-makers’ subjectivity in valuation were observed. Most obvious were the signs of framing. Furthermore, herding, excessive optimism, and overconfidence were present. All the behavioral concepts observed most likely have a severe effect on the valuation. As a result, the valuation can easily become overly optimistic, which leads to overvalued investments and to continuation of already unprofitable projects. Framing had the strongest evidence. If the product being valued is framed successfully, the risk of overvaluation is high, thus a strong belief can justify almost any value.

Strategic outsourcing of R&D: The location-specific advantages of India to the pharmaceutical industry

Companies are increasingly under pressure to be more efficient both in terms of costs and overall performance and thus, they seek new ways to develop their products and innovate. For pharmaceutical industry it can take several decades to launch a new drug to the markets. Since pharmaceutical industry is one of the most research-intensive industries, is outsourcing one way to enhance the R&D processes of such companies. It is said that outsourcing to offshore locations is vastly more challenging and complicated than any other exporting activity or inter-company relationship that has evoked a lot of discussion. By outsourcing strategically, companies must also thoroughly focus on transaction costs and core competences. Today, the suppliers are looked for beyond national boundaries and furthermore, the location of the outsourcing activity must also be thoroughly considered. Consequently, the purpose of this study is to analyze what is known of strategic outsourcing of pharmaceutical R&D to India. In order to meet the purpose of the study, this study tries to answer three sub-questions set to it: first, what is strategic outsourcing, second, why pharmaceutical companies utilize strategic outsourcing of R&D and last, why pharmaceutical companies select India as the location for outsourcing their R&D. The study is a qualitative study. The purpose of the study was approached by a literature review with systematic elements and sub-questions were analyzed through different relevant theories, such as theory of transaction costs, core competences and location advantages. Applicable academic journal articles were comprehensively included in the study. The data was collected from electronic journal article databases using key words and almost only peer-reviewed, as new as possible articles were included. Also both the reference list of the included articles and article recommendations from professionals generated more articles for inclusion. The data was analyzed through thematization that resulted in themes that illuminate the purpose of the study and sub-questions. As an outcome of the analysis, each of the theory chapters in the study represents one sub-question. The literature used in this study revealed that strategic outsourcing of R&D is increasingly used in pharmaceutical industry and the major motives to practice it has to do with lowering costs, accessing skilled labor, resources and knowledge and enhancing their quality while speeding up the introduction of new drugs. Mainly for the above-mentioned motives India is frequently chosen as the target location for pharma outsourcers. Still, the literature is somewhat incomplete in this complex phenomenon and more research is needed.

Translational research : pharmaceutical industry view

Translationaalinen lääketutkimus ja -kehitys.

Observations of Industry Momentum Effect in European Equity Indices

This thesis examines the existence and nature of momentum effect in European equity indices. A set of predefined indicators is used to compose momentum portfolios and different holding periods are used to test the strategies over variable time periods as well as under different economical conditions. The data consists of daily closing prices of STOXX Europe 600 index and its 18 super sector indices. Over the study period we follow the performances of a long position in the Winner portfolio, a position in the market neutral zero-cost portfolio and also a position in the risk-controlled zero-cost portfolio. The investment ratio of the risk-controlled zero-cost portfolio is negatively correlated with the realized market volatility. The results show that momentum effect is present in European industries and is most prominent in the short-term. Indicators that are based on short-term performance tend predict the over- and underperformers for the 1-month holding period more reliably than any other indicator/holding period combination. The examination of the strategies under different economical conditions shows that the market neutral approach can create significant returns in times of recession but in times of economic boom the long position in Winner portfolio outperforms the market neutral portfolio by an extensive margin.

Analysis of value drivers behind CRM adoption projects in financial services industry

This research is focused on deriving framework for the value thought for from the Customer Relationship Management system adopted by an enterprise operating in the financial services industry. It will analyze existing academic work to derive a conceptual value model, while applying secondary industry specific case studies provided by the CRM vendors to check the validity and commonality of these drivers. Furthermore this work locates the variances and correlation between value thought for from CRM system, scope of enterprise operations and size of the enterprise.

Developing customer need based services in personal security service industry

The purpose of this thesis is to examine how services can be developed and how the voice of the customer can be incorporated to the strategic planning of services. Furthermore, the objective is to investigate the methods of customer need analysis and service bundling. The data is collected from secondary and primary sources by reviewing the existing academic literature and by conducting in-depth interviews and surveys. The main findings of this research indicate that the service development in personal security service industry should be conducted through a formalized process and the process should begin with setting the strategic objectives. Moreover, the voice of the customer should be incorporated into all stages of the development process, especially into the front-end of the process. Furthermore, the information on customer needs should be gathered in a manner tailored for the purposes of service development.

The demand for global student talent: Capitalizing on the value of university-industry collaboration

The university sector in Europe has invested money and effort into the internationalization of higher education. The benefits of internationalizing higher education are fuelled by changing global values, choices and practices. However, arguments that serve the internationalization of higher education tend to stress either local organizational or individual interests; seldom do they emphasize the societal benefits. This dissertation investigates how collaboration between university and industry facilitates a shift in thinking about attracting and retaining global student talent, in terms of co-creating solutions to benefit the development of our knowledge society. The macro-structures of the higher education sector have the tendency to overemphasize quantitative goals to improve performance verifiability. Recruitment of international student talent is thereby turned into a mere supply issue. A mind shift is needed to rethink the efficacy of the higher education sector with regard to retaining foreign student talent as a means of contributing to society’s stock of knowledge and through that to economic growth. This thesis argues that academic as well as industrial understanding of the value of university-industry collaboration might then move beyond the current narrow expectations and perceptions of the university’s contribution to society’s innovation systems. This mind shift is needed to encourage and generate creative opportunities for university-industry partnerships to develop sustainable solutions for successful recruitment of foreign student talent, and thereby to maximize the wealth-creating potential of global student talent recruitment. This thesis demonstrates through the use of interpretive and participatory methods, how it is possible to reveal new and important insights into university-industry partnering for enhancing attraction and retention of global student talent. It accomplishes this by expressly pointing out the central role of human collaborative experiencing and learning. The narratives presented take the reader into a Finnish and Dutch universityindustry partnering environment to reflect on the relationship between the local universities of technology and their operational surroundings, a relationship that is set in a context of local and global entanglements and challenges.

Organisational learning and knowledge acquisition. A case study of internationalising manufacturers of wood-based prefabricated buildings

The study investigates organisational learning and knowledge acquisition of wood-based prefabricated building manufacturers. This certain group of case companies was chosen, because their management and their employees generally have a strong manufacturing and engineering background, while the housing sector is characterised by national norms, regulations, as well as local building styles. Considering this setting, it was investigated, how the case companies develop organisational learning capabilities, acquire and transfer knowledge for their internationalisation. The theoretical framework of this study constitutes the knowledge-based conceptualisation of internationalisation, which combines the traditional internationalisation process, as well as the international new venture perspective based on their commonalities in the knowledge-based view of the firm. Different theories of internationalisation, including the network-perspective, were outlined and a framework on organisational learning and knowledge acquisition was established. The empirical research followed a qualitative approach, deploying a multiple-case study with five case companies from Austria, Finland and Germany. In the study, the development of the wood-based prefabricated building industry and of the case companies are described, and the motives, facilitators and challenges for foreign expansion, as well as the companies’ internationalisation approaches are compared. Different methods of how companies facilitate the knowledge-exchange or learn about new markets are also outlined. Experience, market knowledge and personal contacts are considered essential for the internationalisation process. The major finding of the study is that it is not necessary to acquire the market knowledge internally in a slow process as proposed by the Uppsala model. In four cases companies engaged knowledge in symbiotic relations with local business partners. Thereby, the building manufacturers contribute their design and production capabilities, and in return, their local partners provide them with knowledge about the market and local regulations; while they manage the sales and construction operations. Thus, the study provides strong evidence for the propositions of network perspective. One case company developed the knowledge internally in a gradual process: it entered the market sequentially with several business lines, showing an increasing level of complexity. In both of the observed strategies, single-loop and double-loop learning processes occurred.

Applications of augmented reality for sales in apparel industry in Russia

The sustainable growth of video interactivity technologies on different platforms in the lasts years opens good prospects for augmented reality technology adoption on different markets. In the end of 2011 there was an improvement in technology which allows building the 3D model of human body. Such an improvement could be used in apparel industry. The main goal of the study is to understand the level of acceptance of augmented reality as a technology on the Russian apparel market. For a more accurate investigation, a new model accounting for augmented reality characteristics, as well as for similarities and differences between online and offline customer behavior in apparel industry, was developed. As a result of the survey, the weights of different purchase intention factors for Russian consumer were found, and the information about Russian consumers’ preferences towards the augmented reality features in apparel market, especially in fitting time, real-time interaction and fitting quality peculiarities, was presented.

Determinants of credit risk in secured loans – Evidence from the auto loan industry

The purpose of this study is to examine attributes which have explanation power to the probability of default or serious overdue in secured auto loans. Another goal is to find out differences between defaulted loans and loans which have had payment difficulties but survived without defaulting. 19 independent variables used in this study reflect information available at the time of credit decision. These variables were tested with logistic regression and backward elimination procedure. The data includes 8931 auto loans from a Finnish finance company. 1118 of the contracts were taken by company customers and 7813 by private customers. 130 of the loans defaulted and 584 had serious payment problems but did not default. The maturities of those loans were from one month to 60 months and they have ended during year 2011. The LTV (loan-to-value) variable was ranked as the most significant explainer because of its strong positive relationship with probability of payment difficulties. Another important explainer in this study was the credit rating variable which got a negative relationship with payment problems. Also maturity and car age performed well having both a positive relationship with the probability of payment problems. When compared default and serious overdue situations, the most significant differences were found in the roles of LTV, Maturity and Gender variables.

Entrepreneurship, Service Innovation, International Expansion and Performance in SMEs: Empirical Evidence from Finnish ICT Industry

The thesis aims to clarify the mixed results of prior literature regarding the performance impacts of entrepreneurship and human capital through service innovation and international expansion. The thesis examines the factors affecting degree of internationalization (DOI) and performance in ICT SMEs. These factors are entrepreneurial orientation (EO), human capital and service innovation (SI). The data was collected via questionnaire from Finnish ICT SMEs. The results suggest that EO consist of three dimensions that have different impact in DOI and SI. Also DOI has inverted U-shaped relationship with international performance, whereas DOI-profitability relationship is linear. The results of the study suggest that SMEs should not blindly increase their DOI, and that strategic focus is important.