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KNOWLEDGE CREATION, TRANSFER AND PRODUCT INNOVATION IN AGRO-ALLIED FOOD COMPANIES IN ONDO STATE, NIGERIA

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CHAPTER ONE

INTRODUCTION

  • Background to the Study

Historically, the growth in agricultural output has been a key element in the successful transformation of most economies that have seen sustained increases in their per capita incomes (Soderborm & Teal, 2002). For instance Malaysia and Thailand became two of the most affluent societies in the world through the execution of sound innovation strategies clearly devised to produce high-quality and highly-creative agro products (Kolo & Ibrahim, 2002) Similarly, middle income countries like Hong Kong, South Korea, Singapore, the Philippines, India, Mexico and Brazil have embraced boosting productivity schemes as an integral part of their national planning and today they have made significant-in-roads into the world agro allied markets (Anyawu, n.d.).

During the first decade after independence, the Nigerian economy could reasonably be described as an agricultural economy because agriculture served as the engine of growth of the overall economy (Ogen, 2013:231-234). From the standpoint of occupational distribution and contribution to the GDP, agriculture was the leading sector. During this period Nigeria was the world’s second largest producer of cocoa, largest exporter of palm kernel and largest producer and exporter of palm oil. Nigeria was also a leading exporter of other major commodities such as cotton, groundnut, rubber and hides and skins (Alkali:15-16).

The agricultural sector contributed over 60% of the GDP in the 1960s despite the reliance of Nigerian peasant farmers on traditional tools and indigenous farming methods, these farmers produced 70% of Nigeria’s exports and 95% of its food needs (Lawal, 2017:195).  However, the agricultural sector suffered neglect during the hey-days of the oil boom in the 1970s. Ever since then Nigeria has been witnessing extreme poverty and the insufficiency of basic food items. Historically, the roots of the crisis in the Nigerian economy lie in the neglect of agriculture and the increased dependence on a mono-cultural economy based on oil. The agricultural sector now accounts for less than 5% of Nigeria’s GDP (Olagbaju & Falola, 2016:263) leaving the agricultural sector as one of the untapped potentials of the Nigerian economy.

In 2010, the Central Bank of Nigeria released a report showing that Nigeria has the third largest Gross Domestic Topic (GDP) behind South Africa and Algeria in Africa. Also, in the race towards the fulfilment of her aspiration of becoming one of the top 20 economies in the world by 2020, Nigeria attained a giant feat on October 20, 2016 when the International Monetary Fund announced her as Africa’s biggest economy (ThisDaylive.com, 2016). As good as this may sound, it only implies that Nigeria has great economic potentials because ironically, she is still one of the poorest countries in the world ranking 41st in terms of GDP and 161st in terms of GDP per capita and currently eighth in the world in terms of population (Radwan & Pellegrini 2010). In spite of its huge potentials, including human and natural resources, Nigeria has experienced a prolonged period of economic stagnation, rising poverty levels and degradation of public institutions and infrastructure in the last decades owing to the redundant state of innovation mostly in its agro allied sector (Radwan & Pellegrini 2010). Popularly called the giant of Africa, Nigeria’s enormous potentials can only be realized when she makes the transition to a new economy based on knowledge, agricultural productivity, and innovation (Bartkus, 2010). This is largely because knowledge has always been central to development, and its creation and further transfer would only help to achieve this great vision. The fact that the number of agro allied food companies and the number of people employed by them is increasing worldwide emphasize the great potentials of this sector. This is also affirmed by the fact that the pace and size of investments to countries outside the developed world are expanding especially in the field of food production (Bartkus, 2010).

Ilori et al (2002), an agricultural economy is superior to other types because it serves as a major consumer of raw materials and energy, provides the basis for the food and other agricultural products, produces the products for the wholesale and retail trade, produces raw material for the various sectors of the economy and provides a major market for the finance and service industries. In fact, agro allied industries generate wealth to the society by providing jobs and generating a flow of currency among companies and individuals. Unfortunately, the Nigeria agro-allied food companies have been described as a “sleeping giant” in terms of service delivery and capacity to satisfy the needs of her clients (Kolo & Ibrahim, 2010). There is a consensus among academic researchers and professionals that the Nigeria agro allied food companies are slow to innovation (Odediran, 2012) and lack the capacity to deliver. The agro allied food sector in Nigeria has been noted to demonstrate weakness in its contribution to national economy. This weakness is evident in less than 10% contribution of manufacturing to the gross domestic product (GDP); very low value of manufactured export which is less than 1% of total export; and low level of employment in the industry, among others. The result is that the sector is characterized by high production cost, low value added, grossly underutilized capacity, low level of foreign investment in agro allied food companies, high import content of industrial output, poor maintenance culture, and weak linkage capabilities. It has wrong investment decision-making, and inability to adapt foreign technology to suit local needs for sustainable development (Ajakaiye & Akinbinu, 2000). These problems have been blamed on faulty process of technology (knowledge) acquisition which in turn is responsible for the dearth in innovation and the inability of agro allied companies to retain path finding staff that have been well trained. These high profile employees usually leave the companies with vital technical knowledge that is crucial to the performance of the companies either when they retire or disengage from the services of the organization. Invariably, reducing poverty, improving nutrition and general well-being of the population would imply improving the creativity of the agro allied companies and this hinges critically on innovative performance. With the present dwindling oil price in the global market and federal government ban on importation of several agro allied food products, food companies are set to be the new source of revenue and growth for Nigeria economy.

Since time immemorial, organized business has sought a competitive advantage that would allow it to serve customers as efficiently as possible, maximize profits and develop loyal customers. How and where companies search for the knowledge to fuel their innovation processes has been a focus of extensive research over the past decade. Innovation theory has progressed through linear models, where knowledge was pushed, or pulled into the market place, to collaboration and open innovation theory, where knowledge flows between collaborating organizations. These key developments in innovation theory have an important element in common, they all hinge on the flow of and management of knowledge. Collaboration between companies constitutes planned knowledge spillovers or exchanges, as firms work together at particular stages in the production chain. This collaboration may be either vertical, that is with suppliers, or intermediaries (e.g. agro allied companies and wholesalers of products), or horizontal, with other agro allied food companies that may be potential competitors (e.g. engagement in common product wide marketing campaigns). Traditionally, cultures that knew more than others were better able to adapt to their environments, survive, and thrive. In the olden days, knowledge was spread through the most serendipitous ways from migratory movements which equally involve cuneiform writings to religious pilgrimages, from wars to intertribal marriages and, thus, knowledge is transferred from one to the other across continents. Nowadays, the Internet has become the primary mode of knowledge dissemination—almost the entire collection of human history and knowledge is available at the snap of a finger and at little cost through the World Wide Web. Knowledge is becoming truly global, accessible, and democratic. The impacts of this paradigm shift are all around us. Countries such as the Republic of Korea, India, and the United States of America that can harness the power of new technologies nurture a cadre of knowledge workers that can push the productivity and innovation frontiers. Others that fail to do so remain mired in poverty (Radwan & Pellegrini 2010).

Innovation is therefore the effective harnessing of new ideas to create new or improved goods and services, and this often forms the basis of a company’s competitive edge. Organizations that often view knowledge as their product adopt the transfer of such product (newly discovered knowledge) as a business strategy as other competing industries will view them as leading in discovering creative ideas. Such organizations pursue the discovery of new ideas seriously because they consider knowledge to have significant positive impact on their productivity and that their willingness to transfer such idea is key to their ability to compete and grow. The benefits of knowledge transfer between industry partners cannot be overemphasized. Knowledge transfer allows industry partners to voice their challenges, opportunities, and growth focuses in order to allow the entire sector to prosper. It doesn’t imply that businesses should open their entire playbook to their industry; there might be competitors listening after all to exploit such opportunities. The importance is in strengthening other players in the supply chain. If you can help other partners build a stronger supply chain to compete on an international scale, the industry will benefit directly. Likewise, the industry would be getting knowledge and feedback from all available relevant sources, as well as pull insight from other industries as well. It has been discovered that higher innovation capacity is linked to higher perceived profitability and business growth; more intensive collaboration with other organizations along the supply chain results in higher innovation capacity as it promotes trust and knowledge sharing.

Knowledge creation and knowledge transfer are tightly connected into practice. ”Successful organizational synthesis of knowledge requires discovering knowledge as it emerges in practice” (Brown & Duguid 1998 p. 100). The result of knowledge creation and transfer is measurable, and it results in organizational functioning, like profit, improved efficiency, product innovations, human capital and product- or process-oriented results. It is commonly said that knowledge is power. In organizations, this expression has become even more relevant than other social settings. Knowledge is a major factor that differentiates successful organizations from the unsuccessful ones (businesses, not-for-profit, and public enterprises).

According to Nonaka & Tekuechi (1995), Contemporary knowledge comes in the dimensions of explicit and tacit knowledge. Explicit knowledge is the type of knowledge that can be verbally explained, codified or written down in specified documents, while tacit knowledge as an intangible knowledge is intuitive and difficult to express and practice.

The latter comes from the individual’s mind and is based on life experiences, reading, learning, environment, beliefs, and other background characteristics. When different types of knowledge are understood, it becomes important to examine how knowledge is managed. Knowledge management is defined by Stuhlman (2012) as a conscious, hopefully consistent, strategy implementation to gather, store and retrieve knowledge and then help distribute the information to those who need it in a timely manner. It entails knowledge creation, internalization, use and transfer. It is the activity for obtaining, sustaining and growing intellectual capital in organizations (Marr & Schiuma, 2001). In the 21st century organization, knowledge management is considered essential for growth and productivity. Several studies have considered the transfer of knowledge within and between organizations and their employees but not much research has emphasized the success of such transfers (knowledge) and the possible role of key organizational factors, especially in agro allied food industry in a developing sub-Saharan African country.

Knowledge transfer has always been an important process of knowledge management as organizations tend to keep new discoveries from other companies in order to gain a competitive edge over other parallel organizations but knowledge transfer makes it possible to connect to cyclic time concepts in a way that both competing organizations can benefit from. It is not easy, yet important to collect experiences and cultivate intuitions faced in daily routines at work place in a way that does not increase work load or lead to overemphasized control and then transfer such knowledge to a competitor. But the gain in transferring knowledge has been seen to be far more than what was given away in the knowledge transferred.

In reality, knowledge is created in the organization by socialization as a result of communication and interactions such as discussions, sharing experience, simulation, practice observation and other social contacts that could exist among members of an organization. Knowledge could also be created in an organization by externalization which is a process that converts tacit knowledge to explicit knowledge in the shapes of concept, metaphors, hypothesis, description and models. This process occurs when a firm formally articulates its internal rules of functioning or when it establishes its goals explicitly (Martín de Castro, 2007). The third process of creating knowledge in an organization is by combination through a process that creates a new explicit knowledge from an old existing explicit knowledge whereby existing explicit knowledge is merged, categorized, reclassified and synthesized to create new explicit knowledge. Knowledge could equally be created by the process of internalization which is achieved through changing explicit knowledge into tacit knowledge through a process in which abstract ideas change into concrete ones and they are finally absorbed as an integral value. All these mode of knowledge creation could exist in an organization either singularly or in combinations, however the mode it is exhibited, it is paramount to make use of the created knowledge to improve the product and service that such organization is into and to a large extent transferred to other organization to help improve the standard and quality of products that are released into the Nigeria consumer market.

Research and development of new technologies, products and processes requires an enormous amount of knowledge, given the limitations of human cognition, it is nearly if not impossible for any one individual to be an expert in all fields of knowledge, Even within one field, it is unlikely that one can keep ahead of all new developments so the transfer of knowledge between companies for the purpose of knowledge creation, expansion and development is key. Schwartz (2004) indicated that if firms are observant and are able to leverage research and development (R&D) and convert more meaningful arbitrary occurrences into opportunities, they may change an economy and the world at large. Firms need to apply thinking strategies to their surroundings, to increase collaborations and knowledge transfer while ensuring that sufficient mutual benefits can be derived. Only firms that are able to protect, redeploy, build, buy, combine or recombine their knowledge assets, and then deploy them according to rapidly changing circumstances and client needs, stand to survive and become innovative.

According to Grant (2002), a fundamental assumption of the knowledge-based view of the firm is that knowledge has market value and is one of the most productive resources for organizations. In addition, knowledge is subject to economies of scale (i.e. initial creation costs are higher than replication costs) and is a necessary resource for the production of goods and services for the marketplace (Grant, 2002). The central importance of knowledge to the production and the creation of value is an important area of study for researchers. Knowledge has emerged as the most strategically significant resource of an organization and its management is key to innovation. There has been very little transfer of research knowledge due to the inherent barriers in its creation, diffusion, adoption and utilization by practitioners. By enhancing the industry orientation of knowledge transfer and adopting systematic processes of review and dissemination, early adopters of research findings can experiment and learn to apply theoretical knowledge, which, when supported by other external mechanisms (institutional, communication with other companies), of human resource management, information technology and knowledge management (KM), can minimize or eliminate knowledge transfer gaps, leading to improved competitiveness and performance of the firm. (Gera, 2012).  In  order to maximize the benefit of knowledge transfer between firms, a   collaborative  plan  could be  implemented  through  encouraging  the interactions of organizations,  government, and industry  partners linkage  as  a means of supporting  the  growth of  a  mutually-supportive  relationship in the local economy (Lungkana Worasinchai et al., 2002).

An innovation is the implementation of a new or significantly improved product (good or service), or process, a new marketing method, or a new organisational method in business practices, workplace organisation or external relations. According to literature “open innovation” has further emphasized the importance of inter-organizational relationships in the innovation process. Organizations increasingly rely on external sources of innovation via inter-organizational network relationships (Perkmann & Walsh, 2007). According  to Chesbrough (2003), “the  role of internal Research and Development is to  identify,  understand, select from,  and connect to the wealth of available external knowledge, and to fill in  the missing  pieces of knowledge that are not being  externally  developed.”  Bercovitz &Feldman (2007) argue that the collaboration between firms is a unique mechanism for “cross-boundary learning”. On the other hand, government plays an important role in facilitating the relationship between competing organizations by offering collaborative incentives and infrastructures. Nohria and Garcia-Pont (1991) have posited that through alliances, a firm can  gain access to desired strategic  capabilities through knowledge  transfer by linking  to a partner  with  complementary  resources and knowledge,  or by  pooling  its internal resources with a partner possessing  similar capabilities. Harryson et al. (2008) further add that such alliances create synergies between resources and knowledge that enhance or reshape competition within the market.

According to Radwan &Pellegrini (2010), Nigeria’s innovation system is not as well developed as those of other African comparator countries. The country needs to strengthen the collaboration between its universities and the private sector. Higher education institutions have few formal linkages to industry, and as a result tend to continue teaching outdated materials and producing graduates who are ill-equipped for the working environment. In the 21st century era of the knowledge economy, the state of the art in many disciplines changes at a much faster pace than it did even a decade or two ago. This is especially true in ICT. It is reported that many of Nigeria’s universities are still teaching computer languages that are completely obsolete, like FORTRAN and COBOL.

Radwan &Pellegrini (2010) further stressed that the first step toward adopting an innovation culture is to adopt existing technologies and adapt them to the local situation. As demand exceeds the supply of skilled human resources, and labor rates in Asian economies edge upward, Nigeria has the potential to absorb existing technologies and production systems, especially in the services industries. Nigeria’s production systems are far from efficient and there are great potential gains to be achieved simply by moving toward more modern and efficient production techniques.

Inter-industry collaboration is recognized as a critical form of learning  alliance  and as an  essential instrument to gain speed  and flexibility  in knowledge transfer  while reducing  costs  in R&D  and operation but it seems that the gap between competing industries is wide that the industry barely know when there is a research or break through in new processes or products conducted in a particular organization, especially in this part of the world where there is a big enmity between organizations that are into similar products having little or no relationship with each other within the context of research and development. It is against this background that this explores knowledge creation, transfer and its influence on product innovation in agro allied food industry in Ondo state Nigeria.

  • Statement of the Problem

It is common knowledge that Agro-Allied food industries have not been coming up with innovative products in the last several years. It is generally accepted that the innovative activities of an organization depends strongly on the ability of the organization to create and to transfer knowledge. Added to these is the advantage of more intensive collaboration with other organizations along the supply chain results in higher innovation capacity so as to promote trust and improve the industry’s productivity at large. Several reasons are responsible for these including the way knowledge is managed in the organization and between organizations in the industry as well as the gap which exits between organizations preventing a healthy cross-fertilization of ideas. This study therefore seeks to find out the degree to which knowledge creation and transfer influence product innovation in agro allied food industries in Ondo State Nigeria.

  1.3     Objective of the Study

The main objective of the study is to examine knowledge creation, transfer and product innovation in agro allied food companies in Ondo State Nigeria. The specific objectives are to:

  1. find out the level of product innovation in agro allied food industry;
  2. find out the level of knowledge creation in agro allied food industry;
  3. examine the degree of knowledge transfer in agro allied food industry;
  4. identify the sources from which knowledge is transferred in agro allied food industries;
  5. determine the relationship between knowledge creation and product innovation in agro allied food industry;
  6. determine the influence of knowledge transfer on product innovation in agro allied food industry;
  7. determine the joint influence of knowledge creation and transfer on product innovation in agro allied food industry and
  8. find out challenges faced by agro allied food industry in acquiring knowledge and its transfer for product innovation.

1.4       Research Question

  1. What is the level of product innovation in agro allied food industry?
  2. What is the level of knowledge creation in agro allied food industry?
  3. What is the degree of knowledge transfer in agro allied food industry?
  4. What are the sources from which knowledge is transferred to agro allied food industry?
  5. What are the challenges faced by agro allied food industry in acquiring knowledge for product innovation?

1.5       Hypotheses

The hypotheses was tested at 0.05 level of significance.

Ho1. There is no significant relationship between knowledge creation and product innovation in agro allied food industry.

Ho2. There is no significant relationship between knowledge transfer and product innovation in agro allied food industry

Ho3. There is no joint influence of knowledge creation, knowledge transfer on product innovation in agro allied food industry

1.6       Scope of the Study

Staff of the Administration, marketing, sales, research and development as well as production departments formed the respondents for this study. This is because these are the departments mostly involved in innovation. Staff of finance and human resource were therefore excluded. Also, this study focused on agro-allied food companies as an as

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