Journal of technology management & innovation
versión ISSN 0718-2724
Journal of Technology Management & Innovation vol.7 no.2 Santiago jul. 2012
J.Technol. Manag. Innov. 2012,Volume 7, Issue 2
Challenges and Outcome of Innovative Behavior: A Qualitative Study of Tourism Related Entrepreneurs
Azmil Munif Mohd Bukhari1, Mohd Faiz Hilmi2
The tourism industry is currently Malaysia’s third most important industry in terms of foreign exchange earnings after the manufacturing and palm oil sectors. Its contribution to GDP growth is about 7.2%, suggesting that the industry is still in its infancy and therefore offers much scope for future growth. Furthermore tourism industry has been recognized as important economic activities especially during the current economic crisis. Malaysian government announced as part of the Mini Budget tabled in parliament on 10th March 2009 that RM200 million will be allocated to various tourism related programs. However, tourism industry is in a downward spiral due to various reasons such as global economic crisis and strong competition from other countries. Innovative efforts are necessary to further promote this industry so as to reap the full benefits and potential of this sector, besides giving it a competitive edge against its competitors like Thailand, Hong Kong and Singapore. Emphasis should be given to the development of competitive tourism products or services to enhance foreign exchange earnings and savings. Innovative approach such as creativity is the key element for success. This paper attempts to synthesize the scope and role of innovation in the determination of effectiveness of tourism related entrepreneurs. Furthermore, this paper proposed that strategic innovativeness and behavioral innovativeness enhance performance of entrepreneurs.
This paper presents the findings of the first phase of a larger research project on innovativeness of tourism related entrepreneurs. This initial phase involves an exploratory study into the innovative behavior of 23 tourism related entrepreneurs based in the island of Langkawi. Based on in depth semi-structured interview, the participant discussed their business challenges and innovative behavior that they adopted in responding to those challenges. This research contributes to the understanding of innovative behavior of tourism entrepreneurs. Participants in this research have provided some practical benefits by exploring their innovative behaviors as responses to their business challenges. However, given that the sample for this study is small, further research into this area is highly recommended.
Keywords: innovative behavior; innovativeness; langkawi; tourism
Tourism is an important contributor to Malaysian economy. It is the largest component within the service sector which in turn the largest contributor to Malaysia’s gross domestic product (GDP) (10th Malaysia Plan 2011-2015, 2010). On the basis of its contribution to the economy, tourism has been included as one of the agenda in the National Key Economic Areas. The tourism industries employ 1.7 million workers (16% of total employment) in 2008. From 2006 to 2009, revenue from the tourism industry increased 67.1% to RM53.4 billion and tourist arrivals increased 43.6% to 23.6 million.
Despite these achievements, several issues need to be addressed, including the need to develop vibrant and iconic tourism products, improve maintenance of existing tourism sites and adopting focused tourism promotions. During the 10th Malaysia Plan period, the target is to improve Malaysia’s position to be within the top 10 in terms of global tourism receipts and increase the sector’s contribution by 2.1 times, contributing RM115 billion in receipts and providing 2 million jobs in the industry in 2015.
To achieve the 2015 target, the focus will be on attracting a larger share of high spend travelers and capturing a higher share of high growth segments, particularly from Russia, In- dia, China and Middle East, in addition to increasing the number of tourist arrivals. The strategies to achieve the targets are as follows:
1. Promoting differentiated strategies;
2. Improving tourism products through the creation of focused tourism clusters (Langkawi (the Geopark and Pulau Payar Marine Park), Pulau Pinang (Georgetown UNESCO World Heritage Sites), Sabah (Sipadan Island and Kinabalu Park UNESCO World Heritage Sites) and Sarawak (Sarawak Cultural Village and Gunung Mulu National Park UNESCO World Heritage Sites));
3. Develop new iconic tourism products through the private sector and public-private partnership;
4. Improve maintenance of tourist sites;
5. Realign promotional and advertising activities and physical presence of Tourism Malaysia offices overseas; and
6. Introduce certification of tourism products and activities. Apart from all the strategies listed above, innovativeness remains one of the important factors in enhancing tourism enterprises eventhough innovation is always forgotten low technology industry (Hirsch-Kreinsen, 2008). Datuk Mirza Mohammad Taiyab urged tour agents “to get innova- tive and creative” (“Rm40bil Targeted from Local Tourism: Tour Agents Told to Get Innovative and Creative to Woo the Public,” 2010). Furthermore, Datuk Seri Ng Yen Yen,Tourism Minister, told the tourism industry to be “more innovative and creative in exploiting and capitalizing on product” (“Be More Innovative and Creative, Tourism Players Told,” 2010). Therefore there is a need for a research looking at innovativeness of tourism based enterprises. Moreover, there is a lack of study on innovation focusing on firms in developing countries (Zawislak & Marins, 2007).
Incorporating the scenarios of tourism industry and the important of innovation agenda, the objectives of this study are 1) to review research on innovation in tourism, 2) to identify any gaps in innovation within the tourism industry, and 3) to put forward propositions related to innovativeness and performance in tourism.
In this context, this paper is an attempt to elaborate on the initial findings that emerged from the pilot interviews.
Tourism is the largest component within the service sector (which in turn the largest contributor to Malaysia’s gross domestic product). On the basis of its contribution to the economy, tourism has been included as one of the agenda in the National Key Economic Areas (10th Malaysia Plan 2011- 2015, 2010). The tourism industries employ 1.7 million workers (16% of total employment) in 2008. From 2006 to 2009, revenue from the tourism industry increased 67.1% to RM53.4 billion and tourist arrivals increased 43.6% to 23.6 million. The tourism industry is currently Malaysia’s third most important industry in terms of foreign exchange earnings after the manufacturing and palm oil sectors. Its contribution to GDP growth is about 7.2%, suggesting that the industry is still in its infancy and therefore offers much scope for future growth. Furthermore tourism industry has been recognized as important economic activities especially during the current economic crisis. Malaysian government announced as part of the Mini Budget tabled in parliament on 10th March 2009 that RM200 million will be allocated to various tourism related programs.
Tourism industry is in a downward spiral due to various reasons such as global economic crisis strong competition from other countries. Innovative efforts are necessary to further promote this industry to reap the full benefits and potential of this sector, giving it a competitive edge against its competitors like Thailand, Hong Kong and Singapore.
Emphasis should be given to the development of competitive tourism products or services to enhance foreign exchange earnings and savings. Innovative approach such as creativity is the key element for success. This paper attempts to synthesize the scope and role of innovation in the determination of effectiveness of tourism related entrepreneurs.
During the 10th Malaysia Plan period, the target is to improve Malaysia’s position to be within the top 10 in terms of global tourism receipts, to increase the sector’s contribution by 2.1 times, contributing RM115 billion in receipts and to provides 2 million jobs in the industry in 2015.To achieve the 2015 target, the focus will be on attracting a larger share of high spend travelers, capturing a higher share of high growth segments, particularly from Russia, India, China and Middle East and increasing the number of overall tourist arrivals.
Dynamic competitive environment and advancement of technology has lead to a constant changes in market and consumer preferences in the tourism industry (Hall & Williams, 2008).There is no exception for the Malaysian tourism industry. For example, the tourism in the island of Langkawi has seen its ups and downs. During booming economy, stable oil prices and no infectious diseases, Langkawi received a high tourist arrival. But during a gloomy economy, skyrocketing oil prices and maybe outbreak of diseases, tourism entrepreneurs in Langkawi were badly affected when the tourist arrival drops. The worst hit moment for Langkawi was when a few years ago, the previous Prime Minister of Malaysia gave directive preventing government agency to conduct meetings, trainings or activities outside of their own district. Langkawi, usually the preferred location for meetings and training were deserted.
Recently, Langkawi was awarded as one of the top ten island destination by the National Geographic Channel in February 2011 (“Top 10 Beaches,” 2011).The award is definitely a good springboard fort Langkawi but more need to be done for Langkawi to achieve and maintain sustainable competitive advantages. One of the must have strategy is innovation.
According to Hjalager (2010, p. 1), “tourism has been a phenomenon characterized by immense innovativeness.” Innovation challenges differ from firm to firm. Therefore, scrutinizing the implicit and explicit business activities within a firm is essential in understanding how innovation actually takes place (Davey, Brennan, Meenan, & McAdam, 2011). Incorporating the scenarios of tourism industry and the important of innovation agenda, the objectives of this study is to identify challenges and its corresponding innovative responses within the tourism industry in Langkawi.
Innovation in Tourism
Innovation has been given many definitions. Datuk Mohamad Zabidi Zainal (Ketua Pengarah MAMPU) defined innovation as “creative ideas that leads to an increase of quality and productivity of service delivery” (“Inovasi Sektor Awam Melestari Perkhidmatan Kelas Pertama,” 2011). Hall and Williams (2008) identified four distinctive features of tourism innovation. The features are (1) coterminality of service production and consumption, (2) information intensity and information technology (IT), (3) quality enhancement and human resources, and (4) organizational factors. Mean-while, Hjalager (2002) presented example of innovations in tourism. She divided the innovations into four types, regular, niche, revolutionary and architectural. The examples for each type of innovations are listed in Table 1.
Innovativeness is the ability to create something new or bring about sound renewals and changes, acting in a way that utilizes this ability. In addition to that, innovativeness has been defined is many ways. One of them is as “an organization’s overall innovative capability of introducing new product to the market, or opening up new markets, through combining strategic orientation with innovative behavior and process” (Wang & Ahmed, 2004). Another definition is as a firm’s capacity to engage in innovation (Hult, Hurley, & GA, 2004). A much more comprehensive definition is as capabilities of introducing new product to the market, or opening up new markets through combining strategic orientation with innovative behavior and process. New products, new services, opening new markets, new sources of supply, and new ways of management practice (Hashim, Mahajar, & Ahmad, 2003).
Table 1. Innovations in Tourism. Adopted from Hjalager (2002).
One of the prominent researchers on innovation in tourism is Anne-Mette Hjalager. She has conducted and published more than 100 researches on this topic. She defined and described innovation in tourism. She also postulated that “Innovativeness in tourism is more likely if welfare-based sectors are well connected with other sectors.” (A. Hjalager, 2006). In 2009 she published a case study on cultural tourism event focusing on innovation system (A. Hjalager, 2009a). Another research that she published in 2009 explored the relationship between innovation and developments in medicines on tourism (A. Hjalager, 2009b). Her recent articles listed 10 ways and approaches for research on tourism innovation (A.-M. Hjalager, 2010). She also summarized ten gaps in tourism innovation research:
1. Innovation process
2. Driving forces
3. Barriers to tourism innovation
4. Innovation and economic performance
6. Diffusion of innovation
7.The role of entrepreneurship
8. Policy studies and evaluations
9. Academia and innovation
10. Developing tourism innovation theories
Innovation and tourism has been investigated from various perspectives.The intensity of innovation in tourism has been confirmed. There is also constant renewal of knowledge bases and their role in the definition of new uses of innovation and knowledge (Aldebert, Dang, & Longhi, 2010). By leveraging virtual communities, tourism firm might be able to build strong customer relationships (Baglieri & Consoli, 2009). There is a substantial separation between tourism policy and innovation policy might be due to lack of recognition of tourism in innovation policy. One reason for such perspective is the perception that tourism industry is not innovative (Hall, 2009). Even though the formation of clusters can be a great opportunity for collaboration, involvement in government initiatives, successful business operations and sector management, consideration should be given to the process rather than to the outcomes (Novelli, Schmitz, & Spencer, 2006).
The development of the Internet has dramatically changed the market conditions for tourism organizations. Information and Communication Technologies ( ICTs) evolve rapidly providing new tools for tourism marketing and management (Buhalis & Law, 2008). One way to use ICTs is as a means of improving knowledge and skills. Since there is a limited professional development for owner of small tourism operation, ICT can increase professionalism and innovation in the tourism industry through education (Holden, Foley, Lynch, & Hussey, 2010). Many tourism firms did not make any effort to utilize the attractor or collaborate with other firms even though collaboration among individual entrepreneurs and organizations are crucial in the innovation system (Mattsson, Sundbo, & Fussing-Jensen, 2005). Based on an investigation of the influences of entrepreneurial attitude on innovativeness and performance of tourism enterprises in Norway, there is a positive connection between entrepreneurial attitude and innovation in nature-based, tourism micro-enterprises (Nybakk & Hansen, 2008). Qualitative single case-study method has been used to studied how existing resources can be configured to create innovative products and to understand how a winter resort succeed in tourism industry
(Paget, Dimanche, & Mounet, 2010). Size, professionalism, entrepreneurship, varied innovation networks and supportive innovation systems are important determinants of innovation (Sundbo, Orfila-Sintes, & Sørensen, 2007). Knowing the factors of innovation potential of tourism firms, destinations or tourism clusters or an entire tourism sub branch will enable the firms to predict future areas of change in tourism production, product development and marketing (Weiermair, 2006).
Empirical verification of an innovation behavior model in the hotel industry that reveals four types of innovation such as management, external communication, service scope and back-office (Orfila-Sintes & Mattsson, 2009). Framework and rationale for service innovation policies has been proposed stating that specific service characteristics and specific service innovation needs may require specific solutions (Rubalcaba, 2006).Typology of innovation output has been recommended which comprises drivers of innovation, innovation outputs, and their connections with business performance (Sipe & Testa, 2009). Summary of reviewed articles are presented in table 2.
This study used semi-structured interviews to collect data whereby founder-owners or representatives were asked to recall and discuss the challenging events they had experienced in managing their business that had affected their business negatively. Each participant also explained their responses to the challenges. A total of 23 entrepreneurs were interviewed between June 2011 and August 2011. They were selected from Langkawi Travel & Tours Database. Table 3 summarizes the characteristics of the participants. Each interview lasted between 1½ to 3 hours and these were then transcribed, coded and analyzed to derive key themes and innovative behaviors.
Result and Discussion
This study identified challenges faced and responses to the challenges by entrepreneurs in Langkawi.The aim was to discover innovation or innovative behavior of the entrepreneurs. A total of ten categories of challenges have been identified. Under each category, challenges and the responses to the challenges were analyzed, as presented in Table 4.
First major challenge extracted from the interviews includes stiff competition in a crowded marketplace. Entrepreneurs responded to such challenge by operating outside normal hours such as extended opening hours until midnight and also open for business seven days a week. Hall and Williams (2008, p.18) has also mentioned that “Competition is one of the driving forces of innovation generally as well as in tourism.” Entrepreneur D (the owner of tour operator) reported that his company responded to competition by offering extra service not offered by competitors. He mentioned, “Tourist can make payment payment via credit card for their convenience. We have special arrangement with bank to get the swipe machine. The rest of the tour operators in Pantai Cenang only deal with cash. We are the only tour operator in Pantai Cenang that has this facility.”
Second challenge is categorized as marketing. Entrepreneurs in Langkawi find it difficult to reach to potential customers, especially foreigners. Entrepreneurs responded to this challenge in various means such as establishing an online presence, provide online payment facility, create and maintain blogs and collaborate on entry package via a traveler’s card. Entrepreneur W pioneered a traveler’s card program called Passport Langkawi. The card cost RM50 and covers a single entry to six attractions in Langkawi. However the card is only available for purchase outside Langkawi, at travel fairs throughout Malaysia.
The third category of major challenge is related to price or cost of doing business. Two main challenges are tax imposed on sales of tickets and the fact that local tourist spend less as compared to foreign tourist. Entrepreneurs responded to these challenges by offering a tiered ticket price, standard price ticket for foreigner and a cheaper price ticket for Malaysian. Several entrepreneurs resorted to increasing price of entry tickets to offset the higher cost of doing business. Entrepreneur I mentioned his respond to this change,
We need to increase the tickets price in line with the higher government tax imposed and at the same time we need to add value to justify the ticket price.
Fourth category of challenges faced by entrepreneurs is due to business structure. Langkawi as a place of attraction is heavily influence by tour operators and taxi drivers.Tour operators and taxi drivers will only take tourist to the attraction that pays commissions. On one hand, attractions that don’t give commission are boycotted. On the other hand, attraction that give commission are actually increasing their cost of doing business which eventually transfer to back to tourist by means of more expensive products and services. Another issue related to business structure is the misaligned business practices such as opening hours. A major attraction and small shops surrounding it are dependent on each other. But they failed to align their business hours. Major reason for such misalignment mentioned by entrepreneur F is due to different ownership of the attraction and the complex that houses the small shops. Entrepreneur F has initiated the request to get both the attraction and the complex to be under the same ownership.
The fifth category is related to communication. Not all foreign tourists speak English. Langkawi is a major destination for non English speaking tourist from Middle East, Japan and Europe. It is difficult to find local who can speak Arabic, Japanese, Finnish, Russian and several other European languages. To overcome this challenge, several entrepreneurs decided to use sign language and pictures to communicate.
There are five other categories of challenges extracted from the interviews with entrepreneurs in Langkawi. These five categories of challenges and its corresponding responses are however less prominent based on the analysis of the interviews. The challenges are categorized as employee/staff, illegal operators, weather, environment and location.
Implication and Conclusion
This study reveals similarities between the innovative behavior exhibit by entrepreneurs in Langkawi with the examples of innovation in tourism reported by Hjalager (2002). Example of such similarities are introducing nature trails, geological/forest park, consolidate major attraction and surrounding shops under same ownership or management (architectural innovations); established presence online, online booking, online payment facility, 24/7 email reservation system (revolutionary innovations); introducing Passport Langkawi discount card, collaborate (travel & tours, hotels, rental cars) in having a combined online presence, booking, payment facilities (niche innovations); and operate outside normal hours, tiered ticket price (regular innovations). This research has contributed to the development of a survey instrument of a larger quantitative study looking at the relationship of innovative behavior and performance of entrepreneurs. Further study in this area is highly recommended especially since the sample size of this study is small.
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Received March 29, 2012 / Accepted June 16, 2012