Management Science Letters (Sep 2020)
Measurement of natural environment strategy to create an innovation and competitive advantage
Abstract
In the last decade, the natural environment has become increasingly concerned. The issue of natural damage is an obstacle for oil palm industry, although knowledge of the natural environment is possessed by the palm oil industry, which is currently unknown what motivates the palm oil industry to care about the natural environment. This paper aims to measure the model of the natural environ-ment strategy to create innovation and competitive advantage in the palm oil industry using Structural Equation Modeling (SEM) methods. The model adopts a Resource-Based View (RBV) approach to identify competitive strengths. The RBV theory represents that organizations with the right resources coupled with the right management skills and abilities will develop competitive strength and organizational performance. The results produced by AMOS graphics version 23, SEM statistical software, confirm the adequacy of the model for companies engaged in the palm oil industry. The questionnaire was distributed to palm oil industries in Riau Province, Indonesia with a sample size of 115 respondents. Natural environment strategy was found to be a better predictor of innovation and competitive advantage than any external resources. The results of the study show that there was a gap where previous research tends to get a competitive advantage from increasing innovation. However, the findings of this paper have two explanations, first is the core of the resource-based view is that companies that are aware of the natural environment will get a sustainable competitive advantage. Second, innovation cannot be an important resource for creating a competitive advantage. Innovation will be created in the palm oil industry in Riau Province if the company wants to improve business processes and implement good corporate governance through investment in information and communication technology. The most potential benefit from the findings of this study is the strategic planning of the palm oil industry, to generate innovation and competitive advantage from awareness of the natural environment.
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