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An empirical investigation on big data analytics (BDA) and innovation

performance

Conference Paper · September 2019

DOI: 10.1145/3361785.3361803

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 An Empirical Investigation on Big Data Analytics (BDA)
and Innovation Performance
Ahad Zareravasan Amir Ashrafi
Masaryk University, Brno, Czech Republic Allameh Tabataba’i’ University, Tehran, Iran
+420770152863 +989398394859
[email protected] [email protected]

ABSTRACT measuring performance and establishing competitive advantages”

Nowadays, big data analytics (BDA) have widely used in our [5]. In the simplest sense, BDA uses highly powerful analytical
business environment as an undeniable function for firms to not techniques and tools on the large sizes of datasets in order for
only survive in turbulence but also have the opportunity to be discovering hidden patterns and presenting up to date insights,
ahead of their major competitors. One of the promising aspects of which finally leads firms to create competitive value [6]. This
BDA relates to its influence on innovation performance. In line, research topic is of great interest to the business community.
the present study proposed a conceptual model in order to Therefore, previous studies have mentioned BDA as the next
investigate the relationship between BDA use and innovation frontier for innovation [7].
performance by considering the role of dynamic capability (DC) Despite the novelty of BDA as a field, several academics have
theory. In this research, we consider firm agility in terms of DC highly focused on the need to explore how and in which way
theory and decompose it into three main factors contacting BDA applications can be a valuable resource for companies to
sensing agility, decision making agility, and acting agility. The achieve competitive advantage [8-10]. Moreover, based on the
research model and required data were analyzed using Partial promise of 5–6% higher productivity and profitability, BDA has
Least Squares (PLS)/Structured Equation Modelling (SEM). The received significant attention on the corporate agenda in recent
outcome of this study indicates that firms would be able to years [11]. In regard, leading companies such as IBM have made
increase their innovation performance from a DC theory. This heavy investments in building a powerful platform for BDA to
study also shows that BDA use has a positive influence on sensing gain new business insights [12]. In general, past studies have
agility of firms. mentioned the different added value of BDA such as decision
quality [13], organizational performance [14, 15], supply chain
CCS Concepts performance [16], agility [17], and value creation [10].
• Information systems➝Information systems Nevertheless, some key promise of BDA, such as innovation
applications➝Enterprise information systems➝Enterprise performance remains somehow unexplored, and fewer attempts
applications have been made to explore this issue [18]. Therefore, the related
studies on BDA and its added value need further investigation
Keywords [19].
Big Data Analytics (BDA), Dynamic Capabilities (DC), Agility,
Innovation performance. In this regard, the present study is an effort toward this research
direction and aims at exploring the fact that how BDA improve
1. INTRODUCTION firm innovation performance. Specifically, our research model
In today‟s volatile business environment, firms are struggling with seeks to address the following research question:
a huge amount of data that needs to be traced, stored and explored
in order to be effectively and efficiently used to create sustainable RQ. Regarding dynamic capabilities perspective, how does BDA
value [1]. So, it is not a far-fetched issue that firms need to contribute to innovation performance?
develop a data-oriented management system to not only manage To answer the above questions, we propose a conceptual model
this amount of mind-boggling data but also help them to gain based on dynamic capabilities (DCs) theory as one of the most
competitive advantage far ahead of their competitors [2-4]. To promising and overarching themes in explaining how BDA
handle, the term Big Data Analytics (BDA) coined as “a holistic contributes to innovation performance. We also follow this
approach to manage, process and analyze the ‘5 Vs’ data-related direction to find out the extent to which data-driven culture and
dimensions (i.e., volume, variety, velocity, veracity, and value) in organizational learning moderate the putative link. In here, we use
order to create actionable insights for sustained value delivery, a survey study from 185 companies using Partial Least Squares
Permission to make digital or hard copies of all or part of this work for (PLS)/Structured Equation Modelling (SEM), and focus on a wide
personal or classroom use is granted without fee provided that copies are section of industries to validate the model.
not made or distributed for profit or commercial advantage and that
copies bear this notice and the full citation on the first page. Copyrights The rest of the paper is organized as follows. We first present
for components of this work owned by others than ACM must be theoretical background by explaining BDA and value creation and
honored. Abstracting with credit is permitted. To copy otherwise, or introducing DC theory in the context of our model. We then
republish, to post on servers or to redistribute to lists, requires prior propose conceptual model and related hypotheses in Section 3.
specific permission and/or a fee. Request permissions from Section 4 is dedicated to presenting the methodology used in the
[email protected]. paper. The results are presented in Section 5. Thereafter, we
ICBIM 2019, September 12–14, 2019, Paris, France present discussion, and future research directions.
© 2019 Association for Computing Machinery.
ACM ISBN 978-1-4503-7232-9/19/09…$15.00
DOI: http://doi.org/10.1145/3361785.3361803

97
2. THEORETICAL BACKGROUND investigate the relationship between BDA and innovation
performance.
2.1. BDA and value creation Sensing agility means scanning all business events that might
Chen et., [8] defined BDA as “technologies (e.g., database and have a significant influence on competitive performance [27].
data mining tools) and techniques (e.g., analytical methods) that a This task is defined as the ability to focus and pursue
company can employ to analyze large-scale, complex data for opportunities in the business environment by gathering different
various applications intended to augment firm performance information about customer needs, competitor moves, or anything
across various dimensions”. This concept is coined from the need special happens in the marketplace.
to handle massive, complex, and real-time streaming data that
require sophisticated management, analytical, and processing Decision-making agility refers to the activities that intend to
techniques to extract invaluable business insights. Through BDA, interpret the captured events, define opportunities and threats, and
a firm not only would be able to monitor the products/services in decide one this basis to maximize the profit and minimize the
the marketplace but also understand its business environment; risks [27].
therefore, fuel competitive advantages [20]. The link between
Acting agility refers to all actions that the firm decides to take
BDA and value creation has been widely discussed in past studies
based on an action plan [27].
[21]. For instance, Popovič, Hackney, Tassabehji, and Castelli [22]
intended to investigate the impact of BDA on operations 3. RESEARCH MODEL
management in the manufacturing sector, using a comparative In the proposed research model, we intend to analyze the role of
case study of three manufacturing companies with varying levels DC theory on the relationship between BDA and innovation
of BDA usage. They found that BDA capability facilitated better performance. In this line, we define firm agility as a dynamic
utilization of BDA in manufacturing decision making, and thus capability and decompose it into sensing, decision-making, and
enhanced high-value business performance. Akter et al., [11] acting elements. We further use data-driven culture and
proposed a conceptual model about the relationship between BDA organizational learning as moderators to find out how these
capability and firm performance based on resource-based theory factors might have influence one the link between BDA and
and the entanglement view of socio-materialism. Their findings innovation performance. The conceptual model is presented in Fig.
approved the premise that BDA capabilities can lead firms to 1.
reach higher performance. Torres et al., [9] drew a model based
on DC theory in order to explore how BDA capabilities influence Regarding the expanding volume, variety, and velocity of the data,
functional and firm performance. The outcome of this research firms are continually trying to gather required insights and
showed that sensing and seizing components of DC theory along identifying trends that they did not know before [5]. In line, using
with business process capabilities mediate the link between BDA BDA enables firms to not only analyze all the business data
and firm performance. Recently, Ghasemaghaei [6] has also through embedded techniques but also to make a better
confirmed the influence of BDA use on value creation through understanding of the business environment [29, 30]. Akter et al.,
empirically validated research. The outcome of this study suggests [11] believed that data analysis provides a chance for a firm to
that firm structural readiness and psychological readiness can gain enough insights from the environment and sense all market
indirectly, through big data analytics use enhance firm value changes. Chen et al., [8] and Wamba et al., [14] also stated that
creation. the use of BDA helps firms to make sense of vast amounts of data,
generate critical insight and reconfigure their strategies based on
2.2. Dynamic capabilities (DCs) view trends that are detected in the competitive environment. Besides,
The term DCs refers to “the ability to integrate, build, and Ghasemaghaei et al., [17] approved this idea that BDA use can
reconfigure internal and external competencies to address rapidly- enable firms to quickly sense and interpret business challenges
changing environments” [23, p. 517]. This theory is regarded as a and opportunities. Based on the above arguments, we believe that
higher-level routine that is used to adapt operational routines and using BDA within the firm will have a positive influence on
capabilities to develop new value-creating strategies [24]. While sensing agility. Thus, we hypothesize that:
BDA can prepare a context to reach a competitive advantage, the
need to focus on the required resources is of high importance [19]. H1. BDA use positively impacts sensing agility.
The concept of DC theory highlights this issue by modifying the Accessing the required data about the different aspects of the
resources to adapt to the changing environment to preserve the business environment will help the decision makers to decide
firm‟s competitive advantage [25]. In the literature, several studies based on „what they know‟ instead of „what they think‟ [31]
have been done to explore the component of DC theory. For which finally leads to achieving a better competitive position by
instance, Pavlou and El Sawy [26] proposed a framework in order taking more timely and effective business decisions [32]. Also,
to establish a measurement model for DC theory by introducing Brynjolfsson and McAfee [33] found that firms that apply
four main components, including sensing, learning, integrating, sophisticated analytical tools are not only able to collect the
and coordinating capability. Due to the growing need to make required amount of data but also are in better shape to make a
sound decisions quickly, firm agility is considered as a critical timely decision. Put simply, drawing insight from the huge
type of DC required for superior performance [27]. Teece, Peteraf, amount of data generated of different sources help both firms and
and Leih [28] defined agility as the “capacity of an organization to decision makers to gain suitable understanding about what is
efficiently and effectively redeploy/redirect its resources to value going on within the market and on this basis take an apt decision
creating and value protecting (and capturing) higher yield in the shortest possible time. Hence, we propose:
activities as internal and external circumstances warrant.” Park et
al., [27] defined firm agility as three key dimensions, namely H2. Sensing agility positively impacts decision making agility.
sensing, decision-making, and acting agility. We believe that this Applying an appropriate action plan based on the data achieved
view about firm agility would be useful for our purpose in order to from the business environment, help firm to remove obstacles as

98
well as bring shared belief within the firm to take action based on composite reliability, factor loading, and AVE values (see Table 1)
a sole strategic plan [9]. Due to the constantly growing are all above the threshold values.
competition in the business environment, fast decision making
Table 1. Reliability of constructs
based on the insights achieved from BDA shed light on the way Composite Cronbach‟s
firms should step in [10, 16], help them to follow the action plan Constructs AVE
Reliability Alpha
very quickly, therefore, take a better position than the other rivals
BDA Use 0.72 0.87 0.85
within the market [22, 34]. In this line, we believe that firms‟
ability to make fast decisions can lead to very quick act. So, we Sensing agility 0.71 0.98 0.96
propose: Decision making agility 0.53 0.83 0.82
H3. Decision-making agility positively impacts acting agility. Acting agility 0.69 0.93 0.90
Innovation performance 0.67 0.89 0.84
Acting agility refers to all actions that the firm decides to take
based on an action plan [27]. The acting task includes new
competitive actions such as introducing new products/services and
Discriminant validity indicates the extent to which measures of
new pricing models to the market and changing policies with
different constructs are distinct from each other. In order to test
strategic partners and major customers [27]. Organizations can
discriminant validity, the Heterotrait-Monotrait (HTMT) ratio of
also change extant business processes with different procedures
correlations has been applied here. The HTMT should be
and resources, or they can redesign organizational structure. On
significantly smaller than one (ideally < 0.85) in order to
this basis, we believe that the speed in acting required things
distinguish between two factors [36, 37]. In our case, HTMT
based on the action plan will have a positive and significant effect
ratios for each pair are < 0.85, hence indicating all constructs are
on innovation performance. In line, we suggest that:
explicitly independent of each other and that the criterion for
H4. Acting agility positively impacts innovation performance. discriminant validity has been met.
The research conceptual model is depicted in the Figure 1.
Given an adequate measurement model, our hypotheses can be
tested by examining the structural model. We applied the SEM
procedure based on SmartPLS (v. 3.2.7) to analyze the coefficient
of determination (R2) and path coefficients (see Table 2).
According to the R2 coefficients, the modelled constructs explain
a moderate amount of 34% variance of innovation performance,
which lies at satisfactory levels above 0.26 (R2 small = 0.02; R2
Figure 1. Conceptual model medium = 0.13; R2 large = 0.26) [38]. On the other hand, a
considerable portion of the unexplained variances indicates that
other factors beyond the scope of the proposed conceptual model
4. METHOD could improve explanations of dependent variables.
The survey has been used in this research for data gathering
purpose. Our questionnaire used a five-point Likert scale to Table 2. Summary of the PLS results
measure the constructs for all survey items. To assess content Dependent Path p-
Independent Hypothesis Result R2
variable coefficientvalue
validity, seven CIOs and five CEOs with at an academic degree
and more than eight years of working experience reviewed the Sensing
BDA Use H1 0.38 0.000 Supported 0.31
agility
questionnaire items and structure. Their comments on the clarity
and length of some items were applied in the revised version of Decision
Sensing
the questionnaire. The research objects in this study were making H2 0.41 0.000 Supported 0.33
agility
agility
companies from a wide range of industries in Iran. The
respondents were CIOs, or product/marketing managers while Decision
Acting
making H3 0.47 0.000 Supported 0.41
they are the most informed roles who have solid information on agility
agility
our questionnaire items. We sent 493 questionnaires to sample
Acting Innovation
companies from June to May 2019; 185 valid and 13 invalid H4 0.51 0.000 Supported 0.46
agility performance
questionnaires were returned, entailing an effective response rate
of 37.5%.

5. RESULTS 6. DISCUSSION AND CONCLUSION

This study employed the PLS technique and SmartPLS (v. 3.2.7) The purpose of this study is to investigate the influence of BDA
software for data analysis. SmartPLS supports two levels of use on innovation performance through firm agility. The empirical
assessments: (a) the measurement model (e.g., item reliability, results demonstrate that using BDA will have an increasing effect
convergent and discriminant validities) and (b) the structural on the firm‟s agility, including sensing, decision making, and
model assessment (e.g., path coefficients and R2 values in the acting, which finally results in higher performance in terms of
model). At first, to assure constructs‟ internal consistency, innovation. The outcome of this study has several contributions to
Cronbach‟s alpha and composite reliability indicators should be the body of knowledge.
between 0.7 and 0.9 [35]; for convergent validity, average To the best of our knowledge, this study is the first research which
variance extracted (AVE) values should be at least 0.50, which theoretically argued about the relationship between BDA use and
means that each construct explains more than 50% of the variance innovation performance from DC theory. The present study
of its indicators. The factor loadings of all measurement items extended the literature by using firm agility construct with three
should also be above 0.70 [35]. The resulting Cronbach‟s alpha, main components, including sensing, Decision making and acting
agility as dynamic capability and their roles on increasing

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