An e-transition model towards value co-creation for innovation in SMEs: A capability-based perspective

Traditionally, firms have focused on 'product-centric business models', putting products at the forefront of their innovation processes. Potential value is created and delivered solely through internal capabilities and processes, while the customers are just receivers of such value creation. However, this process of value creation may cause product failures as customer needs are not focused on. As a result, firms have shifted to customer-centric business models that focus on aligning customer value with firm value. Social media can act as an enabling platform that allows firms, especially SMEs, to interact and exchange value in the drive for innovation in a cost-effective manner. This transition from a product-centric to a customer-centric approach using social media is termed as an 'e-transition model'. SMEs can use social media to share information, create conversations, build communities and relationships with customers more quickly, and involve customers in co-creation activities for innovation. Furthermore, there is a need for SMEs to develop key firm-level capabilities to support such a process to successfully implement an e-transition model. Given that SMEs have limited resources, it is often difficult for SMEs to prioritise the types of capabilities to be developed first. Although current studies highlight different capabilities to support value co-creation, current marketing literature lacks an integrated framework that highlights the key capabilities to facilitate such a process. Specifically, the theoretical and empirical understandings on the extent to which SMEs need to efficiently utilise available resources, reconfigure internal competences and integrate external competences to support an e-transition model towards value co-creation is still limited. By drawing on S-D logic and dynamic capability approaches, this research aims to address this gap by focusing on the development of an integrated framework that conceptualises key firm-level capabilities, specifically organisational culture, organisational structure and e-marketing capabilities, to support an e-transition model towards value co-creation for innovation in SMEs. The research focuses on four types of value co-creation, namely co-ideation, co-production, co-process, and co-experience, representing all the stages in the innovation funnel. A mixed method approach is adopted to generate exploratory insights into an e-transition model from a capability perspective and empirically test the structural relationships between the key capabilities and value co-creation in order to develop the required framework. First, the qualitative research aims to understand the role of social media and to identify the key firm-level capabilities required to support an e-transition model using framework analysis. By conducting 28 semi-structured interviews with managers, employees and customers of 8 SMEs, the qualitative findings reveal that only organisational adaptive capability, e-marketing capability and organisational structure capability are considered key firm-level capabilities, while other capabilities are additional capabilities that can be developed to support different aspects of value co-creation for innovation. The identified key capabilities are then tested in the quantitative study. To obtain the data, online survey is responded by managers and employees of SMEs, providing the response rate of 29.6%. PLS-SEM is used to understand both direct (organisational adaptive and e-marketing capabilities) and indirect (organisational structure capabilities) relationships of the key capabilities on value co-creation for innovation. Finally, the research develops an e-transition capabilities model based on the qualitative and quantitative findings in order to guide SMEs to successfully implement an e-transitition model towards value co-creation for innovation. The research extends current theory on technology- enabled value co-creation and innovation by highlighting four types of value co-creation in relation to innovation and how each process can be facilitated by different social media and firm-level capabilities, especially in the context of SMEs.