Development of technological capability by Cuban hospitality organizations

ARTICLE IN PRESS

International Journal of Hospitality Management 27 (2008) 12–22 www.elsevier.com/locate/ijhosman

Development of technological capability by Cuban hospitality organizations Uma Kumar, Vinod Kumar, Danuta de Grosbois Eric Sprott School of Business, Carleton University, 1125 Colonel By Drive, Ottawa, Ontario, Canada K1S 5B6

Abstract This study investigates the key elements that affect the ability of hospitality organizations to cultivate technological capability through innovation. The focus of analysis is not on the institutional context, but on the hotel and tourist companies. A theoretical framework that links the type of innovation undertaken by the firm, the firm’s managerial capabilities, learning culture, organizational structure, systems and procedures, technological absorptive capacity and level of government support with the level of technological capability is presented and tested empirically based on the data on innovation projects from 62 Cuban hospitality companies. Analysis of the data confirmed hypotheses that group management skills, project management skills, learning culture, and government support are significantly related to the development of technological capability in these companies. r 2007 Elsevier Ltd. All rights reserved. Keywords: Technological capability; Innovation; Tourism; Cuba

1. Introduction Innovation and technological capability of a firm are widely recognized as critical factors contributing to the firm’s performance, competitive advantage and sustained commercial success in the market and, therefore, they have been extensively investigated from different perspectives for a long time now. However, the vast majority of innovation studies focus solely on technological innovation in the context of manufacturing industries, despite the fact that the impact of innovation and technology on firm performance is expected to rapidly increase in all service industries, and in hospitality industry in particular (Sirilli and Evangelista, 1998). The growing importance of innovation in hospitality industry mainly stems from the recent growth of demand and competitiveness in this sector, and from the rapid advances in the technologies available for hospitality organizations. Survival and success of hospitality companies highly depends on their ability to quickly provide the required amount of services and products that can satisfy Corresponding author. Tel.: +1 613 520 6601; fax: +1 613 520 4427.

E-mail address: [email protected] (U. Kumar). 0278-4319/$ - see front matter r 2007 Elsevier Ltd. All rights reserved. doi:10.1016/j.ijhm.2007.06.002

customers’ changing needs in an effective way, to adequately react to competitors’ innovations, to take advantage of the new technological developments available in the marketplace, and to guarantee high quality and safety. As a result, in order to be competitive and meet these requirements, companies operating in the hospitality sector need to become more innovative and increase their technological capabilities (Hjalager, 2002; Rodriguez and Burguet, 2003). Development of the technological base in hospitality organizations is especially critical for some of the developing countries, including China, Mexico, and the countries of the Caribbean region. These countries have recently became very popular tourist destinations and are extremely dependent on the hospitality industry, since it is often the only sector of their economies which is not experiencing stagnation. This trend is especially visible in the countries of the Caribbean region, which have a higher proportion of total employment and gross domestic product derived from hospitality than any other region in the world (Clancy, 2002; CTO, 2004; Harrison et al., 2003). This high dependency on tourism sector makes is critical for these countries to foster development of their tourism base through innovation and building of technological capabilities.

ARTICLE IN PRESS U. Kumar et al. / International Journal of Hospitality Management 27 (2008) 12–22

Although there are a number of recent studies investigating innovation in the hospitality industry (e.g., Fache´, 2000; Hallenga-Brink and Brezet, 2005; Hjalager, 2002, 2005; Mattsson et al., 2005), the existing literature is still in a relatively early development phase and does not address the issue of technological capability development through innovation, despite its importance and need for a better understanding of this process in hospitality context. The objective of this paper is, therefore, to provide a framework explaining how hospitality companies can build their technological capabilities and identifying factors that influence the effectiveness of this process. The proposed framework is tested in the context of the Cuban hospitality sector. Although it can be argued that the traditional concepts of competitive advantage or commercial success are different in the context of a communist country such as Cuba, none-the-less there are several reasons why it is believed that Cuba offers appropriate setting for the testing of the conceptual model proposed in this study. First of all, although there is no competition internally in Cuba in the same sense as it is in Western countries, the Cuban hospitality industry has to compete with other destinations in Caribbean and in the world to attract international tourists. Therefore, especially the hospitality sector in Cuba is forced to recognize and follow certain market rules if it wants to successfully compete for international tourists. It means that despite the political and economic systems in Cuba, the Cuban hospitality industry faces the same need to be able to provide high quality services and products that will satisfy the customers, to be competitive and to take advantage of new technological developments available for hospitality organizations. Cuba offers a good setting for investigation of innovation and technological capability in hospitality sector also because Cuban government is strongly promoting and facilitating investment in innovation in hospitality sector. Innovation is an important part of Cuba’s general policy to develop tourism and hospitality industry (Klinghoffer, 1998). In order to support and enhance the organization and management of scientific and innovative activity in Cuban hospitality industry and to promote development of innovative enterprises, the government agencies support and facilitate designing and developing more efficient marketing of the hospitality services and products, increasing and diversifying hospitality products and making them more competitive, remodeling and increasing room capacity, increasing the hospitality system’s economic efficiency, implementing computer and communications systems, and incorporating more foreign capital into the sector. As a result, Cuban hospitality organizations are investing significantly in innovations, due to both the government policy fostering innovation, and because of strong competition from other Caribbean destination (Cervin´o and Cubillo, 2005; De Holan and Phillips, 1997; Yaw, 2005). Given these characteristics of Cuba, it is strongly believed that the hospitality industry in this

13

country is an example of an industry that is strongly motivated to innovate because of the competition it faces and, therefore, represents valid settings for testing of the proposed model. The applicability of all the variables to the Cuban context will be discussed in the following section, in order to enable proper interpretation of the results. 2. Technological capability and innovation in hospitality Commonly defined as the firm’s ability to make effective use of technological knowledge, technological capability is the primary attribute of human and institutional capital and inheres not in the knowledge that is possessed but in the use of that knowledge and in the proficiency of its use in production, investment, and innovation (Westphal et al., 1985). Technological capability encompasses the firm’s ability to identify its technological needs and to select the technology to fulfill the needs; operate, maintain, modify and improve the selected technology; and promote technical learning (Kumar et al., 1999). It can therefore be viewed as both the process of accumulating technical knowledge and the process of ongoing organizational learning (Kumar et al., 1999; Leonard-Barton, 1995; Rosenberg and Firschtak, 1985). Conceptualizations and typologies of technological capability existing in the literature are mostly developed from the manufacturing perspective (Kumar et al., 1999; Lall, 1982; Madanmohan et al., 2004; Westphal et al., 1985). In order to investigate technological capability in the hospitality context, this paper builds on classification proposed by Kumar et al. (1999) and distinguishes among investment capabilities, operational capabilities and dynamic learning capabilities. Investment capabilities are defined as the skills and information needed to identify feasible investment projects, locate and purchase suitable technologies, and select the technologies. Operational capability generally consists of the skills and information needed to operate, maintain, repair and adapt the technology for increased production and efficiency, i.e., the know-how. Finally, dynamic learning capability consists of the skills and information needed to generate dynamic technical and organizational changes and to manage these changes. Dynamic capability enables the users of technology to replicate and alter the technical system and to create new products, new processes, new design, and even new technologies, i.e., to be innovative (Kumar et al., 1999). The major mechanisms of building technological capability of a firm is innovation. In general, innovation is defined as the adoption of an idea or behavior that is new to the adopting organization (Rogers, 2003). The innovation can be a new product, a new service, a new technology, a new way of doing things, or a new market. Consequently, innovation is related to change, which can be either radical or incremental (Harkema, 2003). By improving technological capabilities of a firm, innovation provides the firm not

ARTICLE IN PRESS U. Kumar et al. / International Journal of Hospitality Management 27 (2008) 12–22

14

only with the immediate results in terms of a new service, product or process, but also in terms of the increased longterm knowledge base of the firm, that in turn can be a source of further innovations, performance improvements and competitive advantage. In the context of hospitality industry innovations as mostly related to implementation of new or significantly improved services, new service production or delivery methods, and management innovations in terms of new job profiles or new organizational structures. The existing literature identifies the following characteristics of services that play important role in innovation in hospitality industry (Gallouj and Winstein, 1997; Orfila-Sintes et al., 2005): close interaction between production and consumption process, intangibility and growing information content in the provision of services and importance of human factor. Despite its unquestionable value, the existing research on innovation in hospitality context does not sufficiently explain the process of technological capability development through innovation. 3. The proposed model A model of the relationship between innovation and technological capability is proposed based on the review of the technology management and innovation literature. The model developed for this study postulates that innovation contributes to improved technological capability which leads to improved economic performance and is presented in Fig. 1. It further indicates that the extent to which technological capability is enhanced through innovation activity of a company depends upon company’s managerial capabilities, learning culture, organizational structure,

systems and procedures in place, technological absorptive capacity, government support, and the technological complexity of the innovation.

3.1. Managerial capabilities Successful technological innovation and improvement of technological capability depend on critical managerial capabilities (Floyd and Wooldridge, 1997; Leonard-Barton, 1995; Rosenbloom, 2000). Jayawardena (2000) and Jayawardena and Haywood (2003) presented the managerial attributes that are prerequisites for success in international hotel management. They pointed out that international hotel managers have to be able to quickly analyze, understand and accept attitudes and aspirations, beliefs and behavior, and culture and customs of the host community. The managers should also have the following attributes: qualification, skills and knowledge of areas such as technical and operational management, human resource management, finance and marketing; action learned experience, efficiency, dedication, and creativity; management ability, leadership qualities and ambition to succeed; adaptability (ability to learn quickly from customers, superiors, colleagues, subordinates and others in different countries); sociability (ability to establish useful international contacts), and mobility. Based on the review of existing literature, four groups of managerial capabilities were identified and are considered in the proposed model as important factors affecting the relationship between innovation and technological capability: leadership and employee support; knowledge and technical expertise; group management skills; and project management skills.

Managerial Capability Leadership and employee support Absorptive Capacity

Knowledge and technical expertise I n n o v a t i o n

Group management skills Project management skills Investment Capability

Operational Capability

Dynamic Learning Capability

Technological Capabilities

Organizational Elements Learning culture

Systems and procedures

Government Support

Organizational structure

Fig. 1. Conceptual model.

P e r f o r m a n c e

ARTICLE IN PRESS U. Kumar et al. / International Journal of Hospitality Management 27 (2008) 12–22

Although general manager of a hotel has power to make simple decisions, for any new proposals or to bring in any new ideas they have to submit the proposal to their headquarters, e.g., a hotel corresponding to Cubanacan chain of hotels will submit the proposal to Cubanacan headquarters. This proposal will be analyzed further and then submitted to Ministry of Toursim. A specialist in the Ministry on that particular type of project will make the final decision. The managerial capabilities are very relevant in case of Cuban hospitality industry. In case of joint ventures, hotels are managed by a foreign manager and a Cuban manager. The managers who were interviewed were all Cuban managers. One of the reasons for government allowing joint ventures is to bring in new approaches of marketing and customer satisfaction. In these cases, the main role of the foreign manager would be to help the Cuban part with theses new approaches, which obviously are rather new in a Cuban business way of thinking. Further, the joint ventures are restricted to hotels and tourist places. Tourist companies as such are not managed by any foreign company; they are administrated by MINTUR (Ministry of Tourism) which is a government organization. This is true that lack of motivation may be there to some extent among employees. A doorman because of the tips seems to be making more money but according to the system in Cuba, all the tips collected by different employees are to be deposited at a central place and then these are distributed to all the employees including managers. There is a possibility that an employee may not declare all the tips he/she received and may be getting some advantage. On the other hand, the motivation for a general manager who is not in direct contact with customers is mostly based on moral recognition as well as being given the opportunity of spending some vacation time with his family in one of the company resorts or having a company car as his own transportation. Having access to a car and being able to take it to home is a big motivation in a country like Cuba. Senior managers may also be able to get a laptop and a cell phone to take home. A point to note here is that, in general, Cubans are not allowed to rent a room in a hotel or go to a restaurant. The following hypotheses are advanced: Hypothesis 1. Higher levels of leadership and employee support competencies increase the firm’s ability to develop technological capability through innovation. Hypothesis 2. Higher levels of managerial knowledge and technical expertise increase the firm’s ability to develop technological capability through innovation. Hypothesis 3. Higher levels of group management skills increase the firm’s ability to develop technological capability through innovation.

15

Hypothesis 4. Higher levels of project management skills increase the firm’s ability to develop technological capability through innovation. 3.2. Learning culture The accumulation of knowledge, skills and technological capabilities depends on systematic investment in continuous organizational learning (Lei, 1997). Organizational learning is more than the learning of individuals within the organization. It includes learning among individuals and groups, and learning that becomes embedded in the organization in terms of systems, structures, strategy, and procedures. Learning mechanisms include in-house training programs, learning-by-doing, strong networking with local suppliers, clients, other firms, industry networks, research institutes, government, universities, financial institutions, and local or foreign consultants. As noted by Cusumano and Elenkov (1994), learning processes within the firm facilitate the acquisitions of technology capability by the firm. It comes from establishing appropriate organizational routines, accumulating specialized industrial skills, and acquiring the ability to learn selectively. Thus, the firm must have the ability to promote learning culture within the organization to augment its technological capability (Fiol and Lyles, 1985; Kumar et al., 1999; Levinson and Asahi, 1997; Westphal et al., 1985). Fostering learning culture is very important for hospitality organizations in Cuba. The success of innovation processes in the Cuban hospitality sector highly depends on the availability of human capital that is capable to diffuse and innovate. Therefore, the development of human resources and promotion of learning culture is a crucial part of the tourism development strategy in Cuba. The Cuban tourist system has several educational centers to develop workers for this sector. In order to guarantee the training and upgrading of the sector’s personnel, with a focus on assuring professionalism, quality and efficient services, in 1994 all the educational centers were consolidated into a network known as the National System for Professional Tourism Training (FORMATUR). In 2002, the FORMATUR consisted of 22 teaching centers throughout national territory, from which 16,000 workers graduate annually in diverse fields of concentration. A certificate issued by a government recognized school or institution should be presented in the Human Resources office by the employee in order to get a position in the sector. Undeniably in some cases positions in the industry are assigned to people based on their political connections and how reliable they are from the Ministry point of view. In such cases, the employee could be sent to an intensive training course; either at the school or at the work place to make sure he/she has the minimum skills required for the job. A number of managers and employees are also sent to different kinds of training. An example can be that in a Jamaican all inclusive hotel chain, Sandals Resorts International, which operates in joint venture with

ARTICLE IN PRESS 16

U. Kumar et al. / International Journal of Hospitality Management 27 (2008) 12–22

Cubanacan company, a number of Cuban employees who work in direct contact with the customers, as well as heads of the different departments have been sent to Jamaica for special training in some customer service areas. Knowledge acquisition is a good motivational factor for employees. First of all it means personal development, as well as a possibility of upper mobility in their career path. This could mean getting a position managing an area with more incentives, such as driving a company car. The learning culture is receiving much attention both from the managers of Cuban hospitality organizations and from the Ministry of Tourism because it can play an important role in promoting development of technological capability through innovation. Therefore, it is hypothesized that: Hypothesis 5. Higher level of firm’s learning culture is positively related to the firm’s technological capability. 3.3. Organizational structure Organizational structure is the way firms organize their activities, the number of hierarchical levels, and the complexity of communication channels and flows. Shenhar and Adler (1996) pointed out that the structure of the organization has a great impact on its ability to meet new challenges in technological development and project management. A firm’s current knowledge base cannot be separated from how it is currently organized (Kogut and Zander, 1992). The existing organizational structure influences how a firm processes knowledge. All firms depend on smooth information flow between individuals, groups, departments, and functions. Thus, in order to improve the process of developing its technological capability through innovation, the firm must develop an appropriate organizational structure that facilitates effective communication flows across different departments and groups (Kumar et al., 1999; Spinks and Wells, 1995). Cuban hospitality industry is very specific in a sense that the organizations are very closely interconnected and have the same owner—the Ministry which represents the government. In this situation, the concept of organization structure promoting smooth communication flows and information sharing among employees takes on a different meaning than in Western companies. Information sharing within the organization and between different organizations is seen as an opportunity to improve the technological capability and competitiveness of the hospitality industry as a whole. Any information gained from foreign partners or other Cuban hotels would be used as an experience or a milestone to correct possible managerial mistakes and bring the hotel to a better position in reference to its competitors. Still, if hospitality organizations implement organizational structure that facilitates communication flows across different departments; with different organizations within the ministry; with different organizations outside the ministry; between different layers of manage-

ment, it can be expected that it will lead to improved technological capability of the given organization and the industry as a whole. Therefore it is hypothesized: Hypothesis 6. Higher flexibility of organizational structure increases the firm’s ability to develop technological capability through innovation. 3.4. Systems and procedures According to Shenhar and Adler (1996), procedures and systems are the organizational routines and criteria guiding the way in which the firm is making decisions and disseminating information. Decision-making procedures and systems involve planning (i.e. recruiting practices, and rewards), control (personnel performance criteria) and problem solving. Information dissemination procedures and systems govern the flow of technical and business information. The difference between good and badly designed procedures influences greatly the ability of the organization to develop and exploit technology (Dodgson, 1993; Hedlund, 1994; Shenhar and Adler, 1996). Policies and procedures that allow to work efficiently; information systems that make it easy for employees to share information; recruiting practices which enable attracting the best talent; and reward systems which recognize the contribution made by employees are important facilitators of the process of building technological capability through innovation. Thus, it is hypothesized that: Hypothesis 7. Higher flexibility of systems and procedures increases the firm’s ability to develop technological capability through innovation. 3.5. Technological absorptive capacity Cohen and Levinthal (1990) introduced the technological absorptive capacity construct as the firm’s ability to recognize the value of new information, assimilate it, and apply it to commercial ends. Most publications (LeonardBarton, 1995), in following Cohen and Levinthal (1990), have considered the level of prior related knowledge as the determinant of a firm’s technological absorptive capacity. As noted by Cohen and Levinthal (1990), technological absorptive capacity requires learning capability and problem-solving skills. Learning capability is the capacity to assimilate existing knowledge (for imitation), whereas problem-solving skills represent a capacity to create new knowledge (for innovation). As noted by Levinson and Asahi (1997), studies of successful innovation indicate that in organizations where technical foundations are present, the ability to build on those foundations and commercialize research exists. Technological absorptive capacity is the foundation for technical learning within an organization, as well as organizational and interorganizational learning in general (Levinson and Asahi, 1997). The existing level of firm’s technological absorptive capacity determines the

ARTICLE IN PRESS U. Kumar et al. / International Journal of Hospitality Management 27 (2008) 12–22

extent to which the firm can actively increase its technological capability or create a distinctive set of technological capabilities (Cohen and Levinthal, 1990). Therefore, it is hypothesized: Hypothesis 8. A positive relationship exists between the firm’s technological absorptive capacity and its ability to increase technological capability through innovation. 3.6. Government support Governments could play a positive role in the cultivation of technological capabilities of local firms through various policy instruments and initiatives (Madu, 1989). Possible actions include raising R&D spending, upgrading the country’s science and technology infrastructure, changing laws, procedures and organizational cultures that interfere with the innovation processes, setting incentive schemes, providing expertise, assisting in the development of human resources (McDavid and Ramajeesingh, 2003) and therefore it is hypothesized: Hypothesis 9. Government support is positively related to the firm’s ability to develop its technological capability through innovation. 3.7. Technological complexity of innovation Complexity of innovation project is defined as ‘‘the nature, quantity and magnitude of organizational subtask interactions posed by the project’’ (Tatikonda and Rosenthal, 2000). It can have an impact on organization’s ability to increase technological capability through this innovation. Several studies have empirically investigated relationships between aspects of project complexity and project outcomes. It is also recognized that the more complex innovation, the more organization can learn from it. Therefore, it is hypothesized: Hypothesis 10. The level of technological complexity of innovation is positively related to the firm’s ability to develop its technological capability through innovation. 4. Study methods and sample description This research was sponsored by Canadian International Development Agency and was approved by Ministry of Tourism Industry in Cuba. Professors from Havana University and Havana Tourism School helped in interviews and collection of data. Based on the information obtained from the contacts at Tourism School and Havana University, a list of about 100 tourist organizations was made. Based on the availability of the managers and translators, 62 organizations were contacted. Initially, questionnaire was pretested on two organizations and based on the feedback received the questionnaire was revised.

17

This study is based on information obtained from 62 tourism organizations operating in Cuba that were involved in innovation projects. Both quantitative and qualitative data on the innovation projects were collected through a combination of personal interviews and a selfadministered questionnaire. During the interviews, managers were asked to reflect upon the most recent innovation project with which they were personally involved and to answer the questions based on these projects. At the end of the interview session, respondents were then requested to fill in a structured questionnaire. Respondents were senior executives such as general managers, directors, and production managers who were involved in the innovation project. The data analysis technique employed is multiple regression analysis. Also, the qualitative responses are used to provide context for the statistical results obtained. The sample consisted of hotels (61.9%), restaurants (21.4%), and other companies (16.7%), including travel agencies, transportation companies, tourist stores, and promotion and advertising agencies. It is important to clarify that although advertising is not allowed in Cuba and there is hardly any tourist promotional activity within the country, but there still existing advertising agencies. One example is Publicitur owned by the Ministry. All advertising activities, including pamphlets, brochures for the hotels and tourists are undertaken in this organization. These are not for Cubans, as they are not allowed to stay in hotels or go to restaurants, but for advertisement in foreign countries and for tourists who are visiting Cuba. The average age of the companies in the sample was 26.28 years and it ranged from 1 to 95 years. Over a half of the companies was operating for less than 10 years, 20% between 10 and 30 years, and remaining 30% above 40 years. Number of employees ranged from 6 to 3000, however, only one hotel had 3000 employees, and without taking it into account, the range of the number of employees was from 6 to760 with the average number of 186.59 employees per company. The workers in the company who graduated at superior level represented on the average 30.58% of the total number of employees, while the technicians represented on the average 42.96% of the total number of employees. The companies were undertaking different types of innovation processes. The most popular and frequently carried innovations were service/product quality improvement and new service/product development (81% of companies in the sample were frequently involved in product quality improvement and 52.4% in new product development). This finding is consistent with the current trend in Cuban hospitality industry to improve quality: ‘‘at this moment, the majority of the hospitality companies in the country are implementing the so called ‘Program de Perfeccionamiento Empresarial—an Enterprise Optimization Program’. This is a Program adopted in the Fifth Congress of the Cuban Communist Party in October 1997, and enacted as a Law Decree No. 187 in 1998. So, from this perspective, we could say that the great majority of Cuban

ARTICLE IN PRESS 18

U. Kumar et al. / International Journal of Hospitality Management 27 (2008) 12–22

hospitality corporations are under a quality improvement program, and therefore, undertaken some type of innovation process’’ (anonymous reviewer). However, at the same time, several types of innovation were not developed frequently: only 23.8% of companies frequently carried new process design and developing new markets, and even less, 21.4%, investigated new markets. It is noticeable that although companies recognized need for innovation, they were focusing on the most traditional innovations: quality and new product. Some of the examples of the investigated innovation projects include among others: implementation of software to control automatically inventories of a hotel, introduction of ISO 9000 for quality control, installation of system to connect two hotels, redesign of communication system, transforming simple dancing room to a cabaret place, introduction of electronic screen to advertise the bar, new elevator, new management style, new bar in the lobby of the restaurant, installation of intranet, introduction of souvenir sale to the hotel, introduction of computerized system to control the switching on and off of lights, and activated magnetic card to connect electricity in the room, setting of a cost efficient heating system, new telephone system, and a new check in software system and new electronic system to improve the security system in hotels. The innovation projects investigated in this study were undertaken for a variety of reasons. Most of them were at the same time triggered by several reasons; all of them considered equally important. The two most important were to improve quality (55.6% of companies ranked it as one of the most important reasons) and to increase efficiency (45% of companies ranked it as one of the most important reasons). Other popular reasons were to improve competitive position on the market (quoted by 28.6% of companies as one of the most important reasons) and to reduce costs (quoted by 27.8% of companies as one of the most important reasons). On the other hand, increasing capacity, increasing profits, and increasing market share were not considered as important by most of the companies as quality and efficiency improvement. In majority (78.4%) of the investigated projects, the technology involved was between 1 and 5 years old, although there were also projects involving technologies even 10, 15 or 40 year old. Over half (58.5%) of the companies agreed or strongly agreed that the technology involved was easy to use. Also, 58.5% of the companies agreed or strongly agreed that the technology was easy to understand. Despite the fact that in many cases the technology was easy to use and understand, still 65% of the companies agreed or strongly agreed that new technology knowledge was needed to implement the technology. During their execution, the investigated projects faced several obstacles. The most serious were financial and cash flow problems, faced by 43.9% of companies, problems with decision making process (faced by 39% of companies), and policies and strategies problems (faced by 36.6%

of companies). Less frequent, but still faced by quite a few companies, problems included: cultural issues (a serious inhibitor for 29.2% of companies) and ineffective training (faced by 14.6% of companies). 5. Study results In order to investigate the process of building technological capability through innovation, the regression analysis was done, with technological capability as dependent variable and following independent variables: leadership and employee support, knowledge and technical expertise, group management skills, project management skills, learning culture, organizational structure, systems and procedures, technological absorptive capacity, government support, and technological complexity of innovation. Detailed descriptions of the variables and their measures are given in Table 1. For multi-item scales a simple average of the items was used as the scale measure. In order to check the internal reliability of multi-item variables, Cronbach alpha was computed for these variables. Its values ranged from 0.71 to 0.91 (see Table 2), which is considered satisfactory. Before running the regression analysis, the independent variables were tested for multicollinearity and variance inflation factors were calculated for all of them (see Table 2). None of the factors exceeded the cut-off value of 10 (Stevens, 2002). So all of the variables were considered as potential variables explaining the variance in technological capability and included in the analysis. The backward elimination of variables has then been performed to determine which variables should be included in the regression model in order to explain variance in technological capability. This procedure starts with a regression model that includes all the potential independent variables and then the variables that add no important information are removed one after one (Stevens, 2002). The final model obtained through backward elimination included 4 out of 10 independent variables: group management skills, project management skills, and learning culture and government support. The regression results indicate that the four variables together explain 81% of the variation in technological capability (R2 ¼ 0.815) and the model is statistically significant at the 0.000 level (F-test). The results of the regression analysis are presented in Table 3 and are discussed by proposition. Discussion of the qualitative responses obtained is incorporated in the discussion since they help to better explain the statistical results. The regression results show that two out of the four managerial skills included in the analysis are significant for the building of technological capability through innovation: group management skills and project management skills. Positive coefficient before group management skills confirms hypothesized positive relationship between this variable and technology capability. The innovation project’s manager’s ability to foster group work, communication and interaction, creates opportunities for individual

ARTICLE IN PRESS U. Kumar et al. / International Journal of Hospitality Management 27 (2008) 12–22

19

Table 1 Description of dependent and independent variables Variable description Dependent variable Technological capability

Independent variables Leadership and employee support

    

Mastery of technology in terms of operating and maintaining the technology. Maintaining product quality and product safety. Developing new products or processes. Codeveloping service and production process with the technology supplier. Repairing when breakdown occurs.

   

Fostering productive work environment. Fostering learning and development of individuals. Helping the employees to adapt to uncertain environment. Communicating effectively with all employees.

Group management skills

 Building multidisciplinary groups.  Mobilizing the efforts of the group.  Assisting in problem-solving.

Knowledge and technical expertise

    

Understanding by the manager the technology and trends in his area of responsibility. Knowing the detailed rules and regulations relevant to the innovation project. Having systems perspective in manager’s area of work. Participating effectively in the search for integrate solutions and technological innovations. Having technical credibility with scientists and engineers.

Project management skills

   

Managing cooperation among and across the various functions involved in the innovation project. Scheduling the tasks. Delegating the tasks effectively. Analyzing progress at each phase of the project with the group.

Learning culture

   

Availability of training when it is needed to improve skills and knowledge. Employees feeling that acquiring knowledge and skills is an essential part of their job. Managers and supervisors encouraged to attend advance orientation or training programs. Managers encouraged to search and establish collaboration with external organizations.

Systems and procedures

    

Policies and procedures that allow to work efficiently. The organization communicate to all employees at all levels about new changes. Information systems make it easy for employees to share information. Recruiting practices enable attracting the best talent. Reward systems recognize the contribution made by employees.

Organizational structure

    

The organizational structure that facilitates communication flows across different departments. With different organizations within the ministry. With different organizations outside the ministry. Between different layers of management. Allows to make decision autonomously.

Technological absorptive capacity

 Natural logarithm of the ratio of graduates over technicians.

Government role

 Government support in resource allocation.

Technological complexity of innovation

    

The technology related to the innovation project was easy to use. Easy to understand. The problems with the technology related to the innovation project were easily identified at initial phase. New technology knowledge was needed to implement the technology. The employees were totally involved in this innovation project.

Note: For multiple-item variables, each of the items was measured on a five-point Likert scale and the averages of the ratings were used as the variable measure.

and organizational learning from innovation and thus enables and improves building of technological capability through innovation. However, at the same time a

negative coefficient in front of project management skills is surprising and contradicts the stated hypothesis. Further investigation into the context of the research can

ARTICLE IN PRESS U. Kumar et al. / International Journal of Hospitality Management 27 (2008) 12–22

20

Table 2 Internal reliability and collinearity of the variables Variable

Cronbach alpha

VIF

Technological capability (seven items) Technological absorptive capacity Technological complexity of innovation Systems and procedures (five items) Organizational structure (five items) Government support Learning culture M3 (group) M2 (knowledge) M1 (leadership) M4 (project management)

0.8837 NAb 0.7071 0.8061 0.8544 NAc 0.7055 0.8477 0.8989 0.9080 0.8975

NAa 1.432 2.642 2.143 4.519 2.386 2.621 7.756 5.048 6.159 4.181

a

Dependent variable. Variable consisting of a single measure. c Variable consisting of a single measure. b

Table 3 Results of the regression analysis Independent variables

(b)

S.E. (b)

t-Value

Significance

Constant Group management Learning culture Resource allocation Project management skills

0.569 0.948 0.443 0.294 0.595

0.628 0.242 0.175 0.086 0.251

0.907 3.922 2.532 3.425 2.374

0.377 0.001 0.021 0.003 0.030

R2 ¼ 0.815, F ¼ 18.721, and significance ¼ 0.000.

give some explanation of this relationship. The innovation projects considered by the companies participating in the study were mostly low scale and low-tech activities undertaken by a team of committed employees. The project management skills of the managers focus on procedures, control, proper scheduling of the tasks, and monitoring of the progress at each phase of the project. They are recognized in the literature as an important factor for the project success, but do not foster building of the technological capability. Further, if they are not applied properly and if they are too strict, they become an obstacle in learning and in development of technological capabilities. Findings from this study are also supported by the analysis made by Dey (2002). He identified and investigated problems with project planning and management in the Caribbean such as frequent schedule changes, tight schedules, poor project definition, not enough care given to communication, quality, and risk assessment. These problems can lead to the negative relationship between project management skills and technological capability. Another explanation can be related to findings made by Smith (1997) who indicated that in projects which are unique, off the shelf processes and procedures generally do not exist and the traditional focus on the mechanics of project execution can interfere with team work and learning. He also pointed out that tight schedules with

critical deliverables create added uncertainty. Another result from the regression analysis is that leadership and employee support as well as knowledge and technical expertise were not significant. The reasons can be that the projects have been conducted more as a group undertaking, characterized by high group member involvement and commitment and therefore leadership and employee support by the managers did not make a significant difference (the employee commitment was already there: 73.1% of companies agreed that during the execution of the project the employees were totally involved in the project). As for knowledge and technical expertise of manager, it seems that they did not play an important role due to the nature of the projects, which were mostly very low-tech undertakings and there was rarely need for high level of knowledge and expertise. According to the surveyed companies, innovation projects did not involve very difficult or complex technology. By over the half of the respondents the technology was considered easy to use and understand. Over 50% of the companies also agreed that the problems of innovation projects were easily identified at initial phase. Hypothesis stating positive relationship between learning culture and technological capability has been confirmed, but organizational structure, systems and procedures, did not turn out to be significant. The result regarding the learning culture is not surprising: learning culture was defined as the organizational activities focusing on fostering learning processes (availability of training, encouraging employees to participate in trainings, encouraging of collaboration with universities, etc.) and from the definition itself it is strongly related to learning and improving technological capability of organization during innovation project. However, it was not expected that organizational structure, systems and procedures would not play a significant role. This finding can be explained by referring to the nature of the investigated innovation projects and to the way of measuring the variables. The projects investigated were usually small-scale changes executed by teams consisting of existing employees of the company. Organizational structure facilitating the communication flow across different departments, different layers of management and with ministry did not play significant role in the execution of these projects, because these communication flows were not needed and project teams did not use them excessively. Qualitative data indicate that informal communication played much more important role during the project execution. As for organizational systems and procedures, again it turned out not to be a significant variable, since the projects under consideration were not very structured and companies often did not use information systems to share information or communicate goals. Technological absorptive capacity, measured as the natural logarithm of the ratio of graduates over technicians, turned out not to be significantly related to firm’s ability to cultivate technological capability. This finding can be explained through the qualitative information

ARTICLE IN PRESS U. Kumar et al. / International Journal of Hospitality Management 27 (2008) 12–22

provided by the respondents, who often reported that the technology involved in the project was very simple and therefore the availability of engineers and technical personnel was not an important consideration. Hypothesis stating positive relationship between government support and technological capability has been confirmed. The independent variable measured the government support regarding allocation of resources. The result obtained is reasonable and was expected, given the political situation of Cuba and the very important role of the government in providing the funding and resources for innovation projects. As a result of the innovation project approval and funding procedure, receiving the government support enhances the company’s opportunity to learn from innovation and to increase its technological capability. Also, the government’s expertise and experience helps the company build its knowledge base and technological capability. Technological complexity of the innovation turned out not to be significant for firm’s ability to develop technological capability through innovation. As with technological absorptive capacity, this result is related to the fact that the innovations undertaken by the companies included in the study involved mostly simple technologies. 6. Conclusion The study investigated relationship between innovation and technological capability in Cuban tourism companies. Analysis of the data from the surveys confirmed hypotheses that the following factors: group management skills, project management skills, learning culture, and government support in resource allocation are significantly related to the cultivation of technological capability through innovation by a company. The results of the study can be useful for both academics and practitioners. For academics, the developed framework helps to better understand relationship between innovation and technological capability and also to verify what the factors that affect this relationship are. For practitioners, on the other hand, the study provides insights into the process of developing technological capability through innovation, and identifies important managerial and organizational factors that can lead to better cultivation of technological capability. The main recommendation for hospitality organizations interested in developing their technological capability through innovation is to focus on supporting the learning culture. Learning processes including availability of training, encouraging employees to participate in trainings, and encouraging of collaboration with universities have a positive impact on the benefits from innovation in terms of technological capability improvement. The second way of building technological capability during an innovation project is through managers who have strong group management skills. These two findings support a view that technological capability improvement depends to high degree on the commitment and involvement of employees which can be fostered either by managers who can motivate

21

their subordinates or through intensive trainings and collaboration. The important role of people in the context of technological capability development in hospitality industry is consistent with earlier findings in service sectors indicating that human factor plays important role in securing success of these organizations. Two main areas for future research are recommended. First of all, the study was focused on explaining the process of achieving high technological capability, not on company’s economic performance. The study would therefore benefit from detailed analysis of relationship between technological capability and performance. Secondly, a study of a larger sample of companies could be conducted in order to include in the analysis greater number of independent variables that can possibly be related to technological capability. Despite some certain limitations, the study has identified several areas where managers can take actions to improve the benefits from innovation activities of their company.

Acknowledgments Authors would like to acknowledge the support of Ministry of Tourism in Cuba and the funding obtained for this project from the Canadian International Development Agency. Also, we would like to thank the anonymous reviewers for the useful information and comments.

References Cervin´o, J., Cubillo, J., 2005. Hotel and tourism development in Cuba: opportunities, management, challenges, and future trends. Cornell Hotel and Restaurant Administration Quarterly 46 (2), 223–246. Clancy, M., 2002. The globalization of sex tourism and Cuba: A commodity chains approach. Studies in Comparative International Development 36 (4), 63–88. Cohen, W., Levinthal, D., 1990. Absorptive capacity: a new perspective on learning and innovation. Administrative Science Quarterly 35 (1), 128–152. CTO, 2004. Caribbean Tourism Statistical Report 2002–2003. Caribbean Tourism Organization. Barbados. Cusumano, M., Elenkov, D., 1994. Linking international technology transfer with strategy and management: a literature commentary. Research Policy 23, 195–215. De Holan, P., Phillips, N., 1997. Sun, sand, and hard currency: tourism in Cuba. Annals of Tourism Research 24 (4), 777–795. Dey, P., 2002. Benchmarking project management practices of Caribbean organizations using analytic hierarchy process. Benchmarking: An International Journal 9 (4), 326–356. Dodgson, M., 1993. Organizational learning: a review of some literatures. Organization Studies 14 (3), 375–394. Fache´, W., 2000. Methodologies for innovation and improvement of services in tourism. Managing Service Quality 10 (6), 356–366. Fiol, C., Lyles, M., 1985. Organizational learning. Academy of Management Review 10, 803–813. Floyd, S., Wooldridge, B., 1997. Middle management’s strategic influence and organizational performance. Journal of Management Studies 34 (3), 465–485. Gallouj, F., Winstein, O., 1997. Innovation in services. Research Policy 26, 537–556.

ARTICLE IN PRESS 22

U. Kumar et al. / International Journal of Hospitality Management 27 (2008) 12–22

Hallenga-Brink, S., Brezet, J., 2005. The sustainable innovation design diamond for micro-sized enterprises in tourism. Journal of Cleaner Production 13, 141–149. Harkema, S., 2003. A complex adaptive perspective on learning within innovation projects. The Learning Organization: An International Journal 10 (6), 340–346. Harrison, L., Jayawardena, C., Clayton, A., 2003. Sustainable tourism development in the Caribbean: practical challenges. International Journal of Contemporary Hospitality Management 15 (5), 294–298. Hedlund, G., 1994. A model of knowledge management and the N-form corporation. Strategic Management Journal 15, 73–90. Hjalager, A., 2002. Repairing innovation defectiveness in tourism. Tourism Management 23, 465–474. Hjalager, A., 2005. Innovation in tourism from a welfare state perspective. Scandinavian Journal of Hospitality and Tourism 5 (1), 46–62. Jayawardena, C., 2000. International hotel manager. International Journal of Contemporary Hospitality Management 12 (1), 67–69. Jayawardena, C., Haywood, K., 2003. International hotel managers and key Caribbean challenges. International Journal of Contemporary Hospitality Management 15 (3), 195–198. Klinghoffer, A., 1998. High fidelity: Getting attuned to Cuba’s new market beat. Management Decision 36 (3), 175–179. Kogut, B., Zander, U., 1992. Knowledge of the firm, integration capabilities, and the replication of technology. Organizational Science 3, 383–397. Kumar, V., Kumar, U., Persaud, A., 1999. Building technological capability through importing technology: the case of Indonesian manufacturing industry. Journal of Technology Transfer 24, 81–96. Lall, S., 1982. Developing Countries as Exporters of Technology: A First Look at the Indian Experience. Macmillan, London. Lei, D., 1997. Competence-building, technology fusion and competitive advantage: the key roles of organizational learning and strategic alliances. International Journal of Technology Management 14, 208–221. Leonard-Barton, D., 1995. Wellsprings of Knowledge: Building and Sustaining the Sources of Innovation. Harvard Business School Press, Boston. Levinson, N., Asahi, M., 1997. Cross-national alliances and international learning. IEEE Engineering Management Review 25, 32–41. Madanmohan, T.R., Kumar, U., Kumar, V., 2004. Import-led technological capability: a comparative analysis of Indian and Indonesian manufacturing firms. Technovation 24, 979–993.

Madu, C., 1989. Transferring technology to developing countries: critical factors for success. Long Range Planning 22 (4), 115–124. Mattsson, J., Sundbo, J., Fussing-Jensen, C., 2005. Innovation systems in tourism: the roles of attractors and scene-takers. Industry and Innovation 12 (3), 357–381. McDavid, H., Ramajeesingh, D., 2003. The state and tourism: a Caribbean perspective. International Journal of Contemporary Hospitality Management 15 (3), 180–183. Orfila-Sintes, F., Crespı´ -Cladera, R., Martı´ nez-Ros, E., 2005. Innovation activity in the hotel industry: evidence from Balearic islands. Tourism Management 26, 851–865. Rodrigues, J., Burguet, G., 2003. El Turismo, la Ciencia y la Innovacion Tecnologica. Mundo Turistico 2, 2–4. Rogers, E., 2003. Diffusion of Innovation. Free Press, New York. Rosenberg, N., Firschtak, C. (Eds.), 1985. International Technology Transfer: Concepts, Measures and Comparisons. Praeger, New York. Rosenbloom, R., 2000. Leadership, capabilities, and technological change: the transformation of NCR in the electronic era. Strategic Management Journal 21, 1083–1103. Shenhar, A., Adler, P., 1996. The technological base of the company. In: Gaynor, G. (Ed.), Handbook of Technology Management. McGrawHill, New York, pp. 4.1–4.17. Sirilli, G., Evangelista, R., 1998. Technological innovation in services and manufacturing: results from Italian surveys. Research Policy 27, 881–899. Smith, M., 1997. Are traditional management tools sufficient for diverse teams? Team Performance Management 3 (1), 3–11. Spinks, N., Wells, B., 1995. Communicating with groups: prompt, purposeful, productive team meetings. Executive Development 8 (5), 13–19. Stevens, J., 2002. Applied Multivariate Statistics for the Social Sciences. Lawrence Erlbaum Associates, New Jersey. Tatikonda, M., Rosenthal, S., 2000. Technology novelty, project complexity, and product development project execution success: a deeper look at task uncertainty in product innovation. IEEE Transactions on Engineering Management 47 (1), 74–87. Westphal, L., Kim, L., Dahlman, C., 1985. Reflections on the Republic of Korea’s acquisition of technological capability. In: Rosenberg, N., Firschtak, C. (Eds.), International Technology Transfer: Concepts, Measures and Comparisons. Praeger, New York, pp. 167–221. Yaw, F., 2005. Cleaner technologies for sustainable tourism: Caribbean case studies. Journal of Cleaner Production 13, 117–134.