The effect of Hotel Absorptive Capacity on Service Innovation: Knowledge-based Technology as Catalyst

Abstract

The objective of this study is to provide the theoretical justification related to positive influences of knowledge-based technology (KBT) and hotel operational absorptive capacity (OAC) on service innovation. This study has reviewed related literature published between 1990 and 2018. The finding of this study proposes a theoretical model-knowledge-based technology (KBT) facilitates potential OAC process which enables a hotel to create stock of new knowledge to innovate, and realized OAC process enables a hotel to utilize stock of new knowledge to innovate. The proposed model contributes to an effective systemic operational knowledge to improve service innovation. Introduction The aim of this study is to improve performance of service innovation for 4-and-5-star hotels. Owing to the need to remedy the problem of Malaysian hotel market saturation due to oversupply of hotel rooms (Bavani, 2016 February 23), this study attempts to design an effective systemic operational knowledge for hoteliers and researchers to increase the feasibility to explore and apply new knowledge through hotels' capability of operational absorptive capacity (OAC) process and with the support of an effective knowledge-based technology (KBT) to create and deliver differentiated service innovation.

Full text

การประชุมวิชาการและนําเสนอผลงานวิจัยระดับชาติและนานาชาติ ครั้งที่ 10
"Global Goals, Local Actions: Looking Back and Moving Forward"
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The effect of Hotel Absorptive Capacity on Service Innovation: Knowledge-based
Technology as Catalyst
Poh Wai Choo
1
stevenchoo0611@yahoo.com.sg
Cheng Ling Tan
2
tanchengling@usm.my
1 ,2
Graduate School of Business, Universiti Sains Malaysia, 11800, Penang, Malaysia,
Abstract
The objective of this study is to provide the theoretical justification related to
positive influences of knowledge-based technology (KBT) and hotel operational absorptive
capacity (OAC) on service innovation. This study has reviewed related literature published
between 1990 and 2018. The finding of this study proposes a theoretical model --
knowledge-based technology (KBT) facilitates potential OAC process which enables a hotel
to create stock of new knowledge to innovate, and realized OAC process enables a hotel to
utilize stock of new knowledge to innovate. The proposed model contributes to an effective
systemic operational knowledge to improve service innovation.
Keywords: Innovation, Absorptive capacity, Technology
Introduction
The aim of this study is to improve performance of service innovation for 4-and-5-
star hotels. Owing to the need to remedy the problem of Malaysian hotel market saturation
due to over-supply of hotel rooms (Bavani, 2016 February 23), this study attempts to design
an effective systemic operational knowledge for hoteliers and researchers to increase the
feasibility to explore and apply new knowledge through hotels’ capability of operational
absorptive capacity (OAC) process and with the support of an effective knowledge-based
technology (KBT) to create and deliver differentiated service innovation.
Absorptive Capacity theory
Organisational absorptive capacity theory of this study assumes that, (1) absorbing
external new knowledge can help a hotel to become more innovative and flexible to
achieve a higher level of performance; (2) a hotel with a higher ability for absorbing new
knowledge will have a competitive advantage over hotels with lower abilities to absorb and
(3) a hotel requires an internal knowledge-based technology to enable it to efficiently

การประชุมวิชาการและนําเสนอผลงานวิจัยระดับชาติและนานาชาติ ครั้งที่ 10
"Global Goals, Local Actions: Looking Back and Moving Forward"
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absorb and apply external new knowledge (Choo & Tan, 2017; Mills, 2012; Zahra & George,
2002; Cohen & Levinthal, 1990).
Objectives
The main objective of this study is to design a theoretical framework that identifies
the significant influence of knowledge-based technology and operational absorptive capacity
on service innovation for 4-and-5-star hotels in Malaysia.
Research Scope
Based on the underlying organizational absorptive capacity theory and synthesized
literature review, the proposed theoretical framework for this study is shown in figure 1
Figure 1. Proposed research theoretical framework
Literature Review
Knowledge-Based Technology (KBT)
Effective use of knowledge-based technology (e.g. ICT -information and
communication technology) makes innovation development relatively easier and more cost-
effective (Salem, 2014). The effects derived from the use of knowledge-based technology
(e.g. ICT) (Salem, 2014) can be a source of improvement in operating efficiency and better
customer service levels (Sahadev & Islam, 2005). ICT can transform business processes and
facilitate creativity in making new products/services that are not operational and not
economically feasible without the use of ICT (Arvanities & Loukis, 2016). Knowledge-based
technology helps hospitality industry operators to keep up with the trends of customers,
monitor the actions of competitors and obtain feedback from users quickly, thereby, helping
them to seize opportunities for differentiated innovation (Arvanities & Loukis, 2016).

การประชุมวิชาการและนําเสนอผลงานวิจัยระดับชาติและนานาชาติ ครั้งที่ 10
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Potential operational absorptive capacity (POAC) process
To achieve success of “acquiring” and “assimilating” knowledge (POAC) from
external environment, a hotel requires Frontline managers’ experiences/cognition from
departments of hotel operations. Collective frontline managers’ experiences/ cognition
increase the capability of “acquisition” process to obtain valuable external knowledge/
intelligence. Collective operational departments should attempt to use “assimilation”
process to gauge the extent of acquiring reliable external knowledge to be well integrated
into existing internal knowledge-based environment (Setia & Patel, 2013).
Realized operational absorptive capacity (ROAC) process
ROAC capability refers to knowledge utilization through operation management (OM)
processes that “transform” and “apply” knowledge (Setia & Patel, 2013). The source of
performance improvement of a hotel is dependent on the capability to apply its knowledge
resources (intellectual asset) derived from POAC process in order to create and deliver
differentiated products and services which are responsive to its hotel guests’ needs and
complaints. The absorptive capacity theory of the organization assume that the major
source of competitiveness rest in the ROAC capability to apply knowledge and not in the
POAC capability to create new knowledge per se (Setia & Patel, 2013; Miles, 2012). No
organization can survive in the global competitive market in the long run unless the
knowledge it creates is applied in one way or the other (Nielsen, 2006).
Service Innovation
Service innovation is an execution of individual-level employee service innovation
behavior (ESIB) (e.g. frontline employees/managers) and collaborative teamwork between
and among individuals from frontline employees/ managers in same/different department (s)
of hotel operations in successful implementation of organisational-level new service
development (NSD). Combination of ESIB (Scott & Bruce, 1994) and NSD (Matear, Gray &
Garrett, 2004) is integrated execution of two-level service innovation (Hu, Horng & Sun,
2009).
Research Operation
Methodology
In designing the research propositions, this research has screened and synthesised a
total of 13 high-quality academic journal articles from 1990 to 2018. For reasons of
credibility and manageability, the samples are limited to A*, A and B (top three tiers) (ABDC,
2017). Group 1 comprises 3 academic journal article covering knowledge-based technology.

การประชุมวิชาการและนําเสนอผลงานวิจัยระดับชาติและนานาชาติ ครั้งที่ 10
"Global Goals, Local Actions: Looking Back and Moving Forward"
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Group 2 comprises 7 academic journal articles pertaining operational absorptive capacity and
group 3 comprises 3 academic journal articles related to service innovation.
Research Propositions
Knowledge-based technology (KBT) and potential operational absorptive capacity
(POAC)
Frontline managers who champion the knowledge-based technology (e.g. ICT-
information and communication technology) should attempt to increase the activities of
inter-departmental collaboration, communication and facilitate the flow of knowledge.
These knowledge-based technology (e.g. ICT) activities can create a higher competency of
technical and informative coordination on POAC. Knowledge-based technology (e.g. ICT) is
an enabler for collective frontline managers/ employees to “acquire” and “assimilate”
reliable knowledge from both internal and external hotel environment. Based on these
arguments, a research proposition is suggested:
P1: Knowledge-based technology (KBT) has a positive influence on potential
operational absorptive capacity (POAC).
Knowledge-Based Technology (KBT) and Realized Operational Absorptive Capacity
(ROAC)
Higher capability of knowledge-based technology (e.g. ICT- information and
communication technology) enhances frontline individuals (frontline managers/ employees)
operational coordination activities which are crucial in managing inter-departmental
competencies (Salem, 2014). Knowledge-based technology (e.g. ICT) capability within and
across departments of hotel operations enhances ROAC “transformation” and “application”
of newly integrated operational knowledge to innovate. Based on these arguments, a
research proposition is suggested
P2: Knowledge-based technology (KBT) has a positive influence on realized
operational absorptive capacity (ROAC).
Potential Operational Absorptive Capacity (POAC) and Realized Operational
Absorptive Capacity (ROAC).
Higher capacity of knowledge acquisition and assimilation (e.g. POAC) do not
necessarily imply more innovative hotels, unless this POAC positively influences ROAC. (Setia
& Patel, 2013). POAC capability is a process of “acquiring” and “assimilating” reliable
valuable stocks of external knowledge. ROAC capability is the next logical step to transform
existing operational knowledge that could not be assimilated (in POAC) (Zahra & George,

การประชุมวิชาการและนําเสนอผลงานวิจัยระดับชาติและนานาชาติ ครั้งที่ 10
"Global Goals, Local Actions: Looking Back and Moving Forward"
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2002). Thereafter, the applied new competency of transformed operational knowledge-
based resource (intellectual asset) is utilized for innovation. Based on these arguments, a
research proposition is suggested
P3: Potential operational absorptive capacity (POAC) has a positive influence on
realized operational absorptive capacity (ROAC).
Realized Operational Absorptive Capacity (ROAC) and Service Innovation (SI).
ROAC transformation represents an alternative process to POAC assimilation. The
ROAC facilitates a hotel’s innovation capacity through the application of integrated
specialised knowledge acquired from both internal and external hotel environment.
Therefore, service innovation can be considered as the output from the deployment
effectiveness of ROAC (Setia & Patel, 2013). Based on these arguments, a research
proposition is suggested
P4: Realized operational absorptive capacity (ROAC) has a positive influence on
service innovation (SI).
Potential Operational Absorptive Capacity (POAC) and Service innovation (SI).
With higher POAC, either frontline individuals or collective individuals from
departments of hotel operations can access and adopt diverse external knowledge. During
the process of POAC, reliable external new knowledge can fit well into existing knowledge
base as it has been slightly altered. The process of POAC triggers the generation of creative
ideas of individual-level employee service innovation behavior (ESIB) and organisation-level
new service development (NSD). These arguments lead to a research proposition:
P5: Potential operational absorptive capacity (POAC) has a positive influence on
service innovation (SI).
Realized Operational Absorptive Capacity (ROAC) as a Mediator.
According to the arguments for P2 and P4 as well as the assumptions from
absorptive capacity theory, ROAC is a primary source of improvement for innovation and
expected to mediate the relationship between knowledge-based technology and service
innovation (Choo, Tan, Fernando, 2018). ROAC is theoretically justified as a primary source of
organization performance (Kang & Lee, 2017; Petti & Zhang, 2016; Leal-Rodríguez, Ariza-
Montes, Roldán & Leal-Millán, 2014) for service innovation. These arguments lead to the
following research proposition:
P6: Realized operational absorptive capacity (ROAC) mediates knowledge-based
technology (KBT) and service innovation (SI).

การประชุมวิชาการและนําเสนอผลงานวิจัยระดับชาติและนานาชาติ ครั้งที่ 10
"Global Goals, Local Actions: Looking Back and Moving Forward"
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Conclusion
Continuously replenishing of outdated knowledge through the support of Potential
Operational Absorptive Capacity (POAC), Realized Operational Absorptive Capacity (ROAC)
and Knowledge-Based Technology (KBT) is to bring about improved differentiated service
innovation (SI). Thus, attracts more tourists and increases occupancy of 4-and-5- star hotels
in Malaysia.
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