The current issue and full text archive of this journal is available at

www.emeraldinsight.com/0263-5577.htm

CRM and
Customer relationship innovation
management and innovation capability
capability: an empirical study
111
Ru-Jen Lin
Graduate School of Business and Management, Received 7 May 2009
Lunghwa University of Science and Technology, Taoyuan, Revised 5 August 2009
Taiwan, Republic of China Accepted 11 August 2009

Rong-Huei Chen
Department of Business Administration,
Lunghwa University of Science and Technology, Taoyuan,
Taiwan, Republic of China, and
Kevin Kuan-Shun Chiu
Graduate School of Business and Management,
Lunghwa University of Science and Technology, Taoyuan,
Taiwan, Republic of China

Abstract
Purpose – The purpose of this paper is to investigate the effects of various dimensions of customer
relationship management (CRM) on innovation capabilities. Five dimensions of CRM (information
sharing, customer involvement, long-term partnership, joint problem-solving, and technology-based
CRM) and five aspects of innovation capability (product, process, administrative, marketing, and
service innovations) are identified. The one-to-one associations between the two constructs are
developed and verified.
Design/methodology/approach – Data from 107 Taiwanese computer manufacturers are
collected. Multiple regression analysis is employed to examine the effects of CRM on innovation
capabilities.
Findings – The following results are offered: computer manufacturers in Taiwan perform various
levels of CRM and, consequently, display different levels of effects on each of the five innovation
capabilities. Generally, firms are able to increase their innovation capability by ad hoc CRM; the
relationship between customer involvement and process innovation; customer involvement and
administrative innovation; and long-term partnership and marketing innovation are not significant;
and technology-based CRM has positive effects on all five types of innovation.
Practical implications – The findings suggest that not all CRM activities contribute to innovation
programs, which clearly indicates the need for applying other mechanisms, such as supplier
integration, to form a complete innovation program. Managers should align the development of their
supplier management and CRM practices with the desired innovation capability.
Originality/value – The one-to-one relationships between CRM practices and innovation capabilities
have not been properly examined. The findings suggest the need for more research in this area, and the
Industrial Management & Data
statistical results provide managers with useful guidelines for implementing appropriate CRM practices Systems
to develop specific innovation capabilities to respond to enhanced competitiveness. Vol. 110 No. 1, 2010
pp. 111-133
Keywords Customer relations, Customer service management, Innovation q Emerald Group Publishing Limited
0263-5577
Paper type Research paper DOI 10.1108/02635571011008434
IMDS 1. Introduction
110,1 In an era of rapidly changing technology and highly unpredictable markets,
manufacturers must enhance their innovation capabilities to satisfy market demands
and customer preferences in order to maintain a long-term competitive advantage
(Panayides, 2006). Tidd et al. (1997) indicated that manufacturers possessing higher
product and service innovation capabilities can earn twice the profits of those
112 manufacturers without innovation. Given this, effective development of innovation
capabilities to meet the demands of highly unpredictable competitive markets has
become an important issue for manufacturing firms (Shane and Ulrich, 2004).
Good customer relationship management (CRM) between manufacturing firms and
industrial customers not only retains customers but also encourages them to provide
important suggestions for improving products and service (Ramani and Kumar, 2008).
CRM helps firms refine their knowledge about customers’ tastes and preferences. The
effectiveness and efficiency of CRM are increasingly recognized as means for
developing innovation capability and providing a lasting competitive advantage
(Ramani and Kumar, 2008; Sahay and Ranjan, 2008). However, previous CRM studies
primarily focused on utilizing organizational structure and culture to increase
operational performance (Lagrosen, 2005; Sin et al., 2005). The relationship between
innovation capabilities and CRM has not been adequately studied. Therefore, the
objective of this study is to empirically verify the relationship between these two
important programs. Since both are multi-dimensional constructs, the one-to-one
associations between them are to be developed and tested. The following section
reviews the literature pertaining to the multi-dimensionality of innovation capability
and CRM. Accordingly, several research hypotheses are established to examine the
one-to-one relationships among the various dimensions of innovation capability and
CRM. We then present the research design, including the survey questionnaire,
samples, and measurement, followed by a discussion of the statistical results and
managerial implications.

2. Literature review
2.1 Customer relationship management
CRM refers to utilizing extensive strategies and engineering to find, obtain, and
cultivate advantaged customers, and hence maintain long-term partnerships (Sin et al.,
2005). Aggarwal (1997) and Claycomb et al. (1999) defined CRM as activities that
manufacturers practice for understanding customer demands and improving customer
satisfaction. The customer-centered approach is a critical success factor for businesses
(Joo, 2007) and guides organizations to focus on their customers (Ranjan and
Bhatnagar, 2008). A good CRM strategy can increase sales by improving relationships
with customers, thus enhancing customer loyalty (Huang and Lin, 2005).
Generally, there are two streams of CRM literature, the process of developing CRM
and the content of CRM. Reinartz et al. (2004) divided CRM process into initiation,
maintenance, and termination from the points of process view. In contrast, CRM
content is related to various activities to enhance customer relationships, For instance,
Sin et al. (2005) indicated that CRM involves activities that manufacturers practice to
satisfy customer needs, identify customer preferences, resolve customer complaints,
provide after-sale service, and establish long-term relationships with their customers.
In addition, McEvily and Marcus (2005) suggested that firms have to build mutual
trust, information sharing, and joint problem solving with their customers to acquire CRM and
competitive capabilities. Largrosen (2005) and Ritter and Walter (2003) stressed the innovation
importance of customer involvement in operations, while Chen and Paulraj (2004)
argued that communication and long-term relationships with customers are critical to capability
the development of supply chain management.
Researchers also classify various CRM mechanisms into internal and external
programs. Internal programs emphasize organization structure, culture, and 113
knowledge management, while external programs involve interaction with
customers (e.g. information sharing and customer involvement). This study focuses
on external-oriented CRM programs and the five most popular CRM activities are
included: information sharing, customer involvement, long-term partnership, joint
problem solving, and technology-based CRM:
(1) Information sharing. It refers to the sharing and exchange of essential and
exclusive information through interactive activities between manufacturers and
their customers (McEvily and Marcus, 2005; Mentzer et al., 2000). The
commonly shared information includes market demand, customer preferences,
sales promotion, and new product introduction (Mentzer et al., 2000).
(2) Customer involvement. It is related to customer participation in new product
development (NPD) activities, technical meetings, supply chain annual
conference, and market evaluation conferences. Customers normally provide
market trend/direction and technical support in the process, which should lead
to better understanding of future demands (Sin et al., 2005).
(3) Long-term partnership. It is a business relationship with trust and commitment
between two firms. Both firms must share similar goals and pursue mutual
profits on a reliable and dependable basis (Mohr and Spekman, 1994).
Numerous studies have proven that a long-term partnership entails high
degrees of commitment and mutual trust in which both parties are willing to
provide resources, in a fair and dependable manner, in order to maintain and
reach the goals of both parties (Handfield and Bechtel, 2002).
(4) Joint problem solving. It refers to collaboration between manufacturers and
customers in solving problems together and sharing responsibilities when they
encounter difficult or unexpected situations (McEvily and Marcus, 2005).
(5) Technology-based CRM. It involves manufacturers using computer technologies
to facilitate various CRM activities and actively offer technology assistance to
customers, including data storage, data mining, and CRM software systems (Sin
et al., 2005).

2.2 Innovation capability

Innovation is an idea, practice, or object that is perceived as new to an individual or
another unit of adoption (Fruhling and Siau, 2007; Hsu, 2006). Innovation capability
refers to the implementation or creation of technology as applied to systems, policies,
programs, products, processes, devices, or services that are new to an organization
(Chang and Lee, 2008; Damanpour and Evan, 1984). Innovation capability is also the
ability of firms to assimilate and utilize external information for transfer into new
knowledge (Cohen and Levinthal, 1990).
IMDS There are two key aspects of innovation: the degree of innovation and the scope of
110,1 innovation. The degree of innovation is differentiated into radical and incremental
innovation. Radical innovation is a dramatic breakthrough in a new product, new
market, or new technology (Green et al., 1995). Incremental innovation modifies current
products, services, or technology to improve and upgrade function and performance. In
contrast, innovation range refers to the assortment of innovative activities applied by a
114 manufacturer (O’Regan and Ghobadian, 2005). Green et al. (1995) also indicated that
innovation is a multi-dimensional concept where manufacturers focus on product,
process, and service to implement gradual modification (e.g. product line expansion,
current function, and minor adjustments in operation activities). Weerawardena (2003)
considered innovation to be modification of product, process, service, organizational
systems, and marketing systems in order to create customer value. The scope of
innovation capability consists of technical innovation and administrative innovation
(Damanpour, 1991). Technical innovations include products, marketing, services, and
the technology used to produce products, product sales, or render services directly
related to the basic work activity of an organization (Damanpour and Evan, 1984; Daft,
1982). Administrative innovation pertains to organizational structure and
administrative processes, indirectly related to the basic work activity of the
organization and is more directly related to its management (Damanpour and Evan,
1984).
This study examines the aspects of innovation scope emphasizing the five most
frequently studied innovation capabilities: product innovation, process innovation,
marketing innovation, service innovation, and administrative innovation:
(1) Product innovation. It is the development and introduction of a new product to
the market or the modification of existing products in terms of function, quality
consistency, or appearance (Liao et al., 2007).
(2) Process innovation. It involves creating and improving the method of
production, and the adoption of new elements (e.g. input materials, task
specifications, information flow, and equipment) to the firm’s production
process (Damanpour, 1996).
(3) Marketing innovation. It refers to market research, price-setting strategy,
market segmentation, advertising promotions, retailing channels, and
marketing information systems (Vorhies and Harker, 2000; Weerawardena,
2003).
(4) Service innovation. It refers to manufacturers’ engagement in various
innovation activities to enhance customer satisfaction, including after-sale
services, warranty policy, maintenance routines, and order placement systems
(Gopalakrishnan and Damanpour, 1997).
(5) Administrative innovation. It refers to changes in organizational structure or
administrative processes, such as the recruitment of personnel, the allocation of
resources, and the structuring of tasks, authority, and rewards (Damanpour,
1992; Gopalakrishnan and Damanpour, 1997).

2.3 The integration of CRM and innovation capability

Recently, the literature has begun to link the practice of CRM with the development of
innovation capability. Ramani and Kumar (2008) suggested that using CRM to engage
in creating, maintaining, and fostering useful customer relationships and keeping CRM and
long-term partnerships are important strategic elements for developing innovation
capability. Intensive interaction between manufacturers and customers encourage
innovation
customers to provide valuable suggestions for product development (Droge et al., capability
2004). Dow et al. (1999) demonstrated that customer-oriented manufacturers devote
efforts to strengthen CRM through customer participation at an early stage to provide
practical experience to facilitate NPD or modify existing products. Therefore, 115
manufacturers who receive important information from customers are able to increase
their innovation capability by meeting the needs of a targeted market (Ottum and
Moore, 1997; Souder et al., 1997). In summary, CRM has been known to have positive
effects on innovation capability although the alignment of these two programs is not
fully understood. The next section develops one-to-one associations among various
dimensions of these two concepts.

3. Research model and hypotheses

3.1 Information sharing and innovation capability
Several studies have confirmed the effect of information sharing on innovation
capability. For instance, Verhoef (2003) and Lagrosen (2005) found that manufacturers
can launch more new products and services into the marketplace by using information
from clients regarding market preferences, market demands, and market competition.
Ottum and Moore (1997) and Souder et al. (1997) also verified that using information
provided by clients facilitates the development of more diverse new products
and modifications to the functions of existing products to meet the needs of specific
target markets. Carr and Pearson (1999) pointed out that information sharing between
manufacturers and their clients about markets, designs, and processes enables
manufacturers to adopt technologies that can improve design and process innovative
capabilities. Overall, there are positive effects of information sharing on product and
process innovations.
Intra-organizational information exchange is important for the creation and
diffusion of innovations within complex multiunit organizations. Frequent and close
interactions allow actors to know each other, share important information, and create
common ideas. Hence, an actor that is central in a network of social interactions likely
has greater potential to integrate organizational resources (Tsai and Ghoshal, 1998).
Dean and Evan (1994) observed that sharing information about market competition,
sales promotion, market demand, and market preference enables manufacturers to
develop better innovative mechanisms in pricing, sales promotion, distribution, and
interaction marketing strategies. Therefore, information sharing has a positive effect
on marketing innovation. Lin and Germain (2004) found it is important that customers
are willing to provide feedback on their specific needs, such as after-sale services,
warranty systems, and claims handling procedures. Manufacturers can follow up on
the customers’ opinions and feedback to improve their customer service systems.
In other words, there is a positive effect of information sharing on service innovation.
Accordingly, the following research hypotheses are developed:
H1a. Information sharing has a positive impact on product innovation.
H1b. Information sharing has a positive impact on process innovation.
H1c. Information sharing has a positive impact on administrative innovation.
IMDS H1d. Information sharing has a positive impact on marketing innovation.
110,1 H1e. Information sharing has a positive impact on service innovation.

3.2 Customer involvement and innovation capability

Customer involvement during the NPD stage has been recognized as a key factor for
116 manufacturers to launch successful new products (Dow et al., 1999). Specifically, early
customer participation in NPD activities or manufacturing technical meetings
facilitates innovation capability to develop more differentiated products and services
for particular target markets (Lagrosen, 2005). In other words, customer involvement
has a positive effect on product innovation.
Customer involvement in the early stages of NPD activities, manufacturing
technical meetings, and market evaluation conferences can also encourage customers
to assist with the processes of NPD, and improvement of manufacturing techniques
and product designs to benefit the innovation process (Ritter and Walter, 2003).
Therefore, customer involvement has a positive effect on process innovation.
Slater and Narver (1995) proposed that manufacturers who promote CRM are more
capable of understanding and predicting future market changes through customer
participation. It is beneficial for manufacturers to set up mechanisms for production
capacity and internal management (e.g. capacity redeployment, eliminating process
difficulties, and adjustments in work shifts and reward systems) and to cooperate with
customers to implement innovative management methods. Therefore, customer
involvement has a positive effect on administrative innovation.
Dean and Evan (1994) suggested that manufacturers who are more
customer-oriented than their competitors allow customers to take part in market
evaluation conferences, pricing systems discussions, and promotion activities, as well
as forming retailing and marketing strategies. Consequently, customer involvement
has a positive effect on marketing innovation.
Ahire et al. (1996) and Lin and Germain (2004) indicated that if customers take part
in market evaluation conferences and review meetings, manufacturers are likely to
focus on customer needs by providing after-sale services, dealing with customer
complaints, and managing warranty and maintenance systems. Therefore, customer
involvement has a positive effect on service innovation and accordingly, we propose
the following hypotheses:
H2a. Customer involvement has a positive impact on product innovation.
H2b. Customer involvement has a positive impact on process innovation.
H2c. Customer involvement has a positive impact on administrative innovation.
H2d. Customer involvement has a positive impact on marketing innovation.
H2e. Customer involvement has a positive impact on service innovation.

3.3 Long-term partnerships and innovation capability

As manufacturers and customers both have the intention to maintain long-term
partnerships, they develop a significant degree of loyalty and reliability. Through
strategic alliances and joint ventures, manufacturers are more willing to invest in
specific equipment, increase capacity buffers, adjust work shifts, and adapt to highly
fluctuating market needs. Consequently, there is a higher likelihood of developing CRM and
innovative products (Jack and Raturi, 2002). In other words, long-term partnerships innovation
have positive effects on product and process innovations.
An organizational innovation process that includes the development of capability
complementary business and human resources is important in developing a
competitive advantage. Partnering firms not only adopt innovative approaches in
operations, but also embrace various changes in organizational culture, skill-sets, 117
infrastructure, and strategy to implement those new innovative approaches
(Maheshwari et al., 2006). Therefore, a long-term partnership has a positive effect on
administrative innovation.
Based on mutual trust and understanding, manufacturers are able to maintain close
partnerships with their customers and are more likely to precisely identify customer
demands and thus provide an acceptable pricing scheme, promotion activities, and
retailing and marketing strategies (Lin and Germain, 2004). Therefore, a long-term
partnership has a positive effect on marketing innovation.
Boon and Nyquist (1981) observed that service delivery typically involves a “high
contact partnership” between customers and firms. Therefore, a long-term partnership
promotes constant customer contact to ensure the understanding of customer needs,
which in turn stimulates service innovation (Zineldin, 1996). Accordingly, the following
hypotheses are developed:
H3a. Long-term partnership has a positive impact on product innovation.
H3b. Long-term partnership has a positive impact on process innovation.
H3c. Long-term partnership has a positive impact on administrative innovation.
H3d. Long-term partnership has a positive impact on marketing innovation.
H3e. Long-term partnership has a positive impact on service innovation.

3.4 Joint problem solving and innovation capability

Joint problem solving is considered as a key factor affecting the success of product and
market development. Ritter and Walter (2003) believed that it would be easier for
manufacturers to improve product quality and technical process ability when
customers voluntarily provide assistance to solve product design or technical process
problems. Joint problem solving influences innovation in that it generally introduces
ongoing improvements to existing products, processes, or services, and it exploits the
potential of established designs, processes, and markets (Huang and Chang, 2008).
As expected, manufacturers need to strengthen administrative procedures to facilitate
the process of joint problem solving.
According to Ahire et al. (1996) and Lin and Germain (2004), manufacturers
equipped with sound joint problem-solving mechanisms are in a better position to
provide after-sale services, resolve customer claims, and offer warranty and
maintenance services. The following hypotheses are therefore proposed:
H4a. Joint problem solving has a positive impact on product innovation.
H4b. Joint problem solving has a positive impact on process innovation.
H4c. Joint problem solving has a positive impact on administrative innovation.
IMDS H4d. Joint problem solving has a positive impact on marketing innovation.
110,1 H4e. Joint problem solving has a positive impact on service innovation.

3.5 Technology-based CRM and innovation capability

Several studies recognized the role of information systems and technology in
118 supporting process innovation (Tarafdar and Gordon, 2007; Khosrow-Pour, 2006).
Dyché (2001) suggested that manufacturers should apply information technology (IT),
such as online data analysis, data mining, customer information systems, and service
centers, to understand and communicate with their customers. As a result,
manufacturers are able to provide quick responses to customer requests for new
product innovation. Therefore, technology-based CRM promotes product innovation.
Dean and Evan (1994) proposed that manufacturers would respond to customer
demands and provide better customization if provided with accurate information from
their customers via technology-based CRM practices. Different marketing strategies
could then be developed for particular targeted customer groups. Thus,
technology-based CRM has a positive effect on marketing innovation.
Wei et al. (2009) found that developing IT systems with strong customer focus
improves service quality and customer satisfaction. Using data mining tools, some
organizations are able to exploit insights gained from their data warehouse to increase
sales and offer new and better products or services to customers (Hwang and Xu, 2008).
Technology-based CRM apparently enhances operational efficiency, increases
productivity and improves service quality (Groznik et al., 2008).
Ahire et al. (1996) and Lin and Germain (2004) suggested that manufacturers can
apply IT mechanisms to offer more efficient order placement management, follow-up
tracking systems, maintenance service, and after-sale warranty service. In short,
technology-based CRM has a positive effect on service innovation. Accordingly, the
following hypotheses are proposed:
H5a. Technology-based CRM has a positive impact on product innovation.
H5b. Technology-based CRM has a positive impact on process innovation.
H5c. Technology-based CRM has a positive impact on administrative innovation.
H5d. Technology-based CRM has a positive impact on marketing innovation.
H5e. Technology-based CRM has a positive impact on service innovation.
Figure 1 shows the conceptual model that illustrates the relationships between CRM
and innovation capability.

4. Research design methodology

4.1 Survey
We selected the computer industry in Taiwan to study the relationship between CRM
and innovation for two primary reasons: the significance of innovation and historically
close manufacturer-customer relationships. Taiwan is one of the major computer
producers in the world. The majority of computer manufacturers in Taiwan are
original equipment manufacturers (OEMs), and their clients are mostly large
multinational PC firms such as HP, IBM, NEC, Sony, Gateway, Dell, etc. Several studies
confirmed that both innovation capability and CRM practices are critical for Taiwan’s CRM and
computer manufacturers to develop and sustain their competitive advantage (Lin,
2004; Yang et al., 2007). To build long-term partnerships with customers, most OEM
innovation
firms pursue long-term contracts and engage in intensive information sharing to keep capability
pace with the dynamic market trends. For instance, manufacturers and their industrial
customers share information about future product features, monthly forecasting,
production plans, and sales promotion. Moreover, many computer firms have recently 119
implemented several advanced information technologies (e.g. ERP and CPFR) to
upgrade their value chain practices. In summary, the CRM-related practices and
innovative culture of the computer industry in Taiwan offer a proper platform to study
the relationship between CRM and innovation capability.
A survey questionnaire was sent to 471 computer manufacturers randomly selected
from the Directory of Top 5000 Enterprises in Taiwan, published by the China Credit
Report Company in 2003. In order to improve the response rate, follow-up phone calls
were made to those who did not return the survey within one month (Swink, 1999). As
a result, 117 questionnaires were returned, including ten invalid questionnaires,
yielding a sample size of 107 or a 22.7 percent usable response rate. Table I provides
descriptive statistics for those 107 companies. There are no significant differences
between respondents in the sample, or between early and late respondents in this study
(Armstrong and Overton, 1977; Swink, 1999). Furthermore, since all measures were
collected in the same survey instrument, the possibility of common method bias was
tested using Harman’s one-factor test. Common method variance does not appear to be
present (Teo and Liu, 2007). The questionnaire was pre-tested by two industry
managers to ensure survey content validity and the appropriateness of the
measurement scales. A copy of the questionnaire is presented in the Appendix.

4.2 Measures
The scales for both innovation capability and CRM were developed based on the
literature. For instance, the scales for product innovation and process innovation were
adopted from Damanpour (1992). The measurement of administrative innovation was
based on Elenkov and Manev (2005) and Weerarwardena (2003). Marketing innovation
was based on Ibarra (1993) and Hammer (2004). Finally, the service innovation scale
was developed by Mathe and Shapiro (1993). Tables II and III list all the measurement
items. A seven-point Likert scale (1 – “Not at All” and 7 – “Very Much”) was used to
assess the degree of implementation for all types of innovation capability.

CRM practices Innovation capabilities

• Information sharing • Product innovation

• Customer involvement
• Long-term partnership
• Joint problem-solving
• Technology-based CRM
• Process innovation
• Administrative innovation
• Marketing innovation Figure 1.
The conceptual
• Service innovation framework
IMDS
Item/range Frequency %
110,1
Sales (in million)
Less than $40 3 3
$41 , 60 12 11
$61 , 80 11 10
120 $81 , 100 26 24
Greater than $100 55 52
Total 107 100
Number of employees
Less than 50 6 6
51 , 100 8 7
101 , 200 18 17
201 , 300 22 21
Greater than 300 53 49
Total 107 100
Main products
Personal computers 21 19.6
Motherboards 20 18.7
Printed circuit boards 18 16.8
Semiconductors 16 15
Peripheral computer products 22 20.6
Others 10 9.3
Total 107 100
Table I.
Sample profiles Note: n ¼ 107

Similarly, a seven-point Likert scale (1 – “Strongly Disagree” and 7 – “Strongly

Agree”) was used to assess the degree of implementation of CRM. The
information-sharing variable was measured using five items suggested by McEvily
and Marcus (2005). Customer involvement was measured using the scale from
Lagrosen (2005). The long-term partnership scale was developed based on Werner et al.
(2004). The scale of joint problem solving is from McEvily and Marcus (2005), and
technology-based CRM was measured using the scale developed by Sin et al. (2005).

4.3 Statistical methods

There were two stages of statistical analysis. In the first stage, a factor analysis with
varimax rotation was applied to provide insight as to which dimensions of CRM
practices and innovation capabilities were captured. The second statistical technique
used was multiple regressions, which tested the relationships between CRM practices
and innovation capabilities.

5. Statistical results
5.1 Factor analysis
Table II presents the results of the factor analysis for CRM. The factor rotation yielded
five dimensions from 25 items. One item was removed from further analysis due to its
low factor loading (below 0.5). The accumulated explained variance was 81.21 percent.
Cronbach’s a values of the five dimensions were 0.9535, 0.9734, 0.9373, 0.9429, and
 Factor loading
CRM F1 F2 F3 F4 F5 CITC Cronbach’s a Factors

T1: call center 0.8671 0.0948 0.1351 0.1014 0.0991 0.8281 0.9535 Technology-based CRM
T2: sales force automation 0.9242 0.0070 0.0253 2 0.0504 20.0634 0.8801
T3: management information system 0.8958 2 0.0367 0.0243 0.0909 0.0299 0.8470
T4: CRM performance evaluation 0.9121 2 0.0073 0.0016 0.0348 20.0049 0.8699
T5: web-based customer 0.8998 0.0081 20.0396 0.1280 0.0183 0.8601
T6: data warehousing 0.8834 0.1061 0.1405 0.0219 20.0888 0.8449
I1: market information 2 0.0278 0.9371 0.0558 0.1160 0.0038 0.9005 0.9734 Information sharing
I2: product demands 0.0316 0.9441 20.0057 0.0147 0.0142 0.9160
I3: inventory information 0.0181 0.9721 20.0095 0.0040 0.0046 0.9572
I4: production plans 0.0838 0.9481 0.0571 2 0.1159 0.0425 0.9231
I5: warning the events 0.0582 0.9384 0.0099 2 0.0351 0.0863 0.9153
L1: commitment 0.0608 0.0872 0.8503 2 0.0077 0.0688 0.7751 0.9373 Long-term partnership
L2: trust 0.0230 2 0.0218 0.8985 2 0.0019 0.0402 0.8325
L3: customized products 0.0705 0.0075 0.8932 0.0365 20.0072 0.8401
L4: customer loyalty 0.0082 2 0.0480 0.9243 0.0621 0.0647 0.8826
L5: communication 0.0943 2 0.0465 0.8767 0.0792 0.0624 0.8296
C1: new product development 0.0583 0.0341 0.1491 0.8455 0.1498 0.7903 0.9429 Customer involvement
C2: reviewing meeting 0.0489 2 0.0497 0.0212 0.9245 20.0691 0.8672
C3: modifying products 0.0744 2 0.0074 20.0013 0.9428 0.0155 0.9027
C4: market evaluation 0.0606 0.0346 0.0552 0.8623 0.2239 0.8116
C5: processing technology 0.0626 2 0.0057 20.0285 0.9071 20.0104 0.8542
J1: overcome difficulties 2 0.0125 0.0226 0.0708 0.1326 0.8611 0.6994 0.8126 Joint problem solving
J2: jointly responsible 2 0.1204 2 0.0194 0.0837 0.1673 0.8322 0.6849 0.8126
J3: solving problems 0.1192 0.0606 20.0040 2 0.0818 0.8227 0.6062 0.8126
L6: relation development 2 0.0224 0.3417 0.3706 0.0835 0.4089
Eigenvalue 5.6488 4.5832 4.1616 3.7843 2.1257
Individual explained variance 22.60 18.33 16.65 15.14 8.50
Accumulated explained variance 22.60 40.93 57.57 72.71 81.21
Note: n ¼ 107
innovation
capability
CRM and

121

Factor analysis of CRM

Table II.
 122
110,1
IMDS

Table III.
Factor analysis of
innovation capability
Factor loading
Innovation capability F1 F2 F3 F4 F5 CITC Cronbach’s a Factors

PC1: process technology 0.6853 0.0688 0.3474 2 0.0035 0.1511 0.6031 0.8820 Process innovation
PC2: technology patents 0.7543 0.3246 0.1259 0.1289 0.0852 0.7454
PC3: CAD/CAM 0.7378 0.1950 0.1416 0.2929 2 0.0602 0.7164
PC4: real-time process 0.5881 0.3212 0.1105 0.3127 0.0408 0.6229
PC5: quality equipments 0.6850 0.3245 0.1315 0.0903 0.1094 0.6812
PC6: programmable 0.7752 0.1535 0.1765 0.2365 0.0805 0.7850
A1: reward systems 0.1551 0.7868 0.0223 0.1579 0.1733 0.7206 0.8786 Administrative Innovation
A2: work designs 0.3418 0.7459 2 0.0371 0.1640 0.2079 0.7513
A3: administration aiming 0.4222 0.6591 0.0392 0.1008 0.2289 0.6930
A4: reconstruction 0.2235 0.6786 0.3106 0.2295 2 0.0063 0.6720
A5: process re-engineering 0.1385 0.7833 0.2464 0.1184 0.1185 0.7147
PD1: new products 0.4628 2 0.0372 0.6609 2 0.0174 0.2508 0.6330 0.8127 Product innovation
PD2: product line 0.2606 0.0329 0.6052 0.2533 0.3312 0.6496
PD3: product patents 0.1912 0.1276 0.6097 0.2190 0.1855 0.5765
PD4: new market 0.0939 0.3754 0.6677 0.0958 0.1224 0.5709
PD5: customized products 0.1288 0.0827 0.7322 0.2233 2 0.0269 0.5743
M1: pricing methods 0.2526 0.1596 0.3118 0.6457 0.2732 0.7155 0.8414 Marketing innovation
M2: distributing methods 0.1451 0.2153 0.3064 0.6373 0.2950 0.7067
M3: promoting methods 0.2143 0.1641 0.1237 0.7886 0.1993 0.6644
M5: advanced CRM system 0.3092 0.4605 0.1669 0.5801 0.0361 0.6153
S1: innovative warranty 0.0324 0.3209 0.2692 2 0.0058 0.6876 0.5914 0.7808 Service innovation
S2: claim caring procedures 2 0.1936 0.0037 0.3270 0.2560 0.6561 0.5633
S3: before/after-sale service 0.2722 0.3312 0.0324 0.1249 0.7130 0.5861
S4: order management 0.1299 0.0278 0.0385 0.1965 0.7713 0.6011
M4: unfilled need markets 0.3916 0.3547 0.2855 0.3444 2 0.1256
Eigenvalue 9.7701 2.3197 1.8764 1.2704 1.1416
Individual explained variance 39.08 9.28 7.51 12.02 4.51
Accumulated explained variance 39.08 48.36 55.86 60.95 65.51
Note: n ¼ 107
0.8126, respectively. Therefore, the derived five dimensions of CRM possess CRM and
high-internal consistency reliability. The corrected item-total correlation (CITC) innovation
values were above 0.60 for those five CRM dimensions, indicating acceptable
convergent validity (Kerlinger, 1986; Hair et al., 1998). capability
Table III presents the results of the factor analysis for innovation capability. Five
factors were derived from 25 items (Kerlinger, 1986). The accumulated explained
variance was 65.51 percent. Cronbach’s a values of the five dimensions were 0.8820, 123
0.8786, 0.8127, 0.8414, and 0.7808, respectively. Therefore, the derived five innovation
capabilities possess highly internal consistency reliability. Moreover, the CITC values
are above 0.56 for the five dimensions of innovation capability and exhibit acceptable
convergent validity (Kerlinger, 1986; Hair et al., 1998).

5.2 Regression analysis

Table IV displays the correlation matrix of the independent variables CRM. There are
no significant correlations found among the five dimensions. In Table V, all VIF values
are less than ten. Therefore, there is no multicollinearity among the CRM dimensions
(Neter et al., 1989).
5.2.1 Information sharing and innovation capability. Information sharing has
positive and significant effects on product innovation (b ¼ 0.1846, p , 0.05), process
innovation (b ¼ 0.1737, p , 0.05), marketing innovation (b ¼ 0.2008, p , 0.05), and
service innovation, (b ¼ 0.1778, p , 0.05); thus H1a-H1e are supported. Information
sharing with customers improves the understanding of needs and trends in the market,
which in turn improves innovation capability. Information sharing is not significantly
related to administrative innovation (b ¼ 2 0.0751, p . 0.1); therefore, H1c is not
supported.
5.2.2 Customer involvement and innovation capability. Table V indicates that
customer involvement has a significant positive effect on product innovation
(b ¼ 0.1476, p , 0.05); and H2a is supported. Customer involvement aids the
manufacturer in developing new products for the market and speeding up the release
of new products. Customer involvement also has positive effects on marketing
innovation (b ¼ 0.1737, p , 0.05) and service innovation (b ¼ 0.1864, p , 0.05);
therefore, H2d and H2e are also supported.
However, customer involvement is not significantly related to process innovation
(b ¼ 0.0951, p . 0.1) nor to administrative innovation (b ¼ 0.0101, p . 0.1); therefore,
H2b and H2c are not supported. Process technology and internal administrative ability
(e.g. organization construction, standard operation procedures, assembling design, and

1 2 3 4 5

1. Technology-based CRM 1.000

2. Long-term partnership 0.0654 (0.5036) 1.000
3. Customer involvement 0.1287 (0.1865) 0.0023 (0.9809) 1.000
4. Information sharing 0.1114 (0.2544) 0.0016 (0.9869) 0.0882 (0.3666) 1.000 Table IV.
5. Joint problem-solving 0.0008 (0.9932) 0.0631 (0.5187) 0.1552 (0.1105) 0.1203 (0.2173) 1.000 Pearson correlation
matrix of the dimension
Note: n ¼ 107 of CRM
 124
110,1
IMDS

capability
Table V.
Regression analysis
of CRM and innovation
Innovation capability
Independent variables Product Process Administrative Marketing Service VIF

Control variables
Firm age 0.0012 (0.8916) 0.0169 (0.0527) 0.0093 (0.3539) 0.0112 (0.2619) 0.0165 (0.0627) 1.1382
Capital 5.1061 (0.7257) 2.4412 (0.0891) 2.5651 (0.1225) 2.9744 (0.0725) 6.8547 (0.6374) 1.5734
No. of employees 0.0000 (0.1290) 0.0000 (0.0605) 0.0000 (0.2554) 0.0000 (0.6213) 0.0000 (0.4298) 1.5393
CRM
Information sharing 0.1846 * (0.0183) 0.1737 * (0.0232) 20.0751 (0.3918) 0.2008 * (0.0228) 0.1778 * (0.0227) 1.1436
Customer involvement 0.1476 * (0.0480) 0.0951 (0.1907) 0.0101 (0.9037) 0.1737 * (0.0394) 0.1864 * (0.0129) 1.0685
Long-term partnership 0.1385 * (0.0483) 0.1526 * (0.0267) 20.0595 (0.4507) 0.0010 (0.9901) 0.0117 (0.8661) 1.0477
Joint problem solving 0.2603 * * (0.0044) 0.4703 * * (,0.0001) 0.3523 * * (0.0008) 0.0873 (0.3888) 0.2399 * * (0.0084) 1.4028
Technology-based CRM 0.1459 * (0.0491) 0.1481 * (0.0417) 0.2866 * * (0.0008) 0.2347 * * (0.0055) 0.2905 * * (0.0001) 1.0520
F-value 5.0200 * * 7.5600 * * 3.5500 * * 3.8100 * * 6.0200 * *
p-value , 0.0001 , 0.0001 0.0012 0.0006 ,0.0001
Adj-R 2 (percent) 23.28 33.12 16.14 17.52 27.48
Notes: Significant at: *p , 0.05 and * *p , 0.01, respectively; n ¼ 107
reward systems) are the important criteria for clients to select the OEM. Once selection CRM and
is over, customers switch their focus to quality and delivery performance and become innovation
less involved in manufacturing processes and administrative activities.
5.2.3 Long-term partnership and innovation capability. Table V shows that capability
long-term partnership has positive effects on product innovation (b ¼ 0.1385,
p , 0.05) and process innovation (b ¼ 0.1526, p , 0.05), supporting H3a and H3b.
When manufacturers and customers maintain a long-term partnership, they establish 125
loyalty and commitment to each other.
The relationships between long-term partnership and administrative innovation
(b ¼ 2 0.0595, p . 0.1), marketing innovation (b ¼ 0.0010, p . 0.1), and service
innovation (b ¼ 0.0117, p . 0.1) are not significant; thus H3c-H3e are not supported.
5.2.4 Joint problem solving and innovation capability. Joint problem solving has
positive effects on product innovation (b ¼ 0.2603, p , 0.01), process innovation
(b ¼ 0.4703, p , 0.01), administrative innovation (b ¼ 0.3523, p , 0.01), and service
innovation (b ¼ 0.2399, p , 0.01); therefore, H4a, H4b, H4c, and H4e are supported.
Joint problem solving is not significantly related to marketing innovation (Ô ¼ 0.0873,
p . 0.1); therefore, H4d is not supported. Manufacturers whose customers practice
joint problem solving enhance product, process, and service innovation capabilities.
In addition, manufactures and customers who work together to solve problems
encourage more management innovation activities.
5.2.5 Technology-based CRM and innovation capability. Technology-based CRM has
a positive effect on product innovation (b ¼ 0.1459, p , 0.05), H5a is supported.
Technology-based CRM has positive effects on marketing innovation (b ¼ 0.2347,
p , 0.01) and service innovation (b ¼ 0.2905, p , 0.01); therefore, H5b and H5c are
supported. Manufacturers who apply more advanced marketing information systems,
based on the data acquired from their customers, create more service innovations to
explore potential markets.
Technology-based CRM has significantly positive effects on process innovation
(b ¼ 0.1481, p , 0.05) and administrative innovation (b ¼ 0.2866, p , 0.01).
Manufacturers are able to utilize advanced IT to perform process innovation.

6. Conclusions
CRM is touted as an imperative strategy to improve a firm’s innovation capability
and to enhance a firm’s competitive advantage. Missing from the literature, however,
is the knowledge of how these two strategic components can be integrated. The
premise of this study is that both CRM and innovation capability are
multidimensional concepts; thus, managers must understand how various CRM
activities correspond to different dimensions of innovation capability. This study
investigates the effects of several CRM practices on five types of innovation
capability. The statistical results indicate that not all CRM activities contribute to all
innovation capabilities. Manufacturing firms must carefully align their CRM practices
with the specific types of innovation capability they desired to possess. The following
is a summary of specific findings.
First, technology-based CRM is the most effective mechanism for enhancing all five
types of innovative capability. The manufacturers in our sample appear to be able to
employee technology-based CRM mechanisms (e.g. ERP and CPFR) to effectively
engage in various innovative activities with customers. Both information sharing and
IMDS joint problem-solving practices also have positive influences on several innovative
110,1 capabilities. Nonetheless, long-term partnerships have significant effects on the
development of only two (product and process) out of five types of innovation
capability. Most of the respondents in this study are small and medium firms that do
not have substantial R&D budgets to engage in desired product and process
innovations. Consequently, those firms often seek to establish long-term partnerships
126 with the large international clients from whom they are able to obtain the necessary
resources and support for product and process innovations. This finding is consistent
with Lin’s (2004) observations. Extending from the statistical results, we propose the
following issues for future research.

(1) CRM should be integrated with innovation programs

Apparently, to attain the desired innovation capability, firms must look beyond
internal efforts and include collaborative activities with their customers. As supply
chain management continues to evolve with the aid of more advanced IT, the potential
influence of customer involvement on innovation capability could increase. The
alignment of those two programs is necessary and they should not be implemented
separately. In the past, there were many supply chain management studies on the
effect of supplier relationships on innovation (Geffen and Rothenberg, 2000; Petersen
et al., 2003; Yang et al., 2007). Future research should also incorporate the concept of
integrating CRM and innovation programs.

(2) The development of innovation capability must be a supply-chain-wide effort

Continuing with the previous point, it is obvious that manufacturers cannot develop the
desired level of innovation capability by themselves. Rather, it must be a
supply-chain-wide effort, including both customers and suppliers. Take NPD as an
example. Not only is customer involvement required, as suggested by our results, but
also the whole project must be the combined efforts of “communities of individuals
from engineering, marketing, and other functional areas across the supply chain of
OEM and its myriad subassembly and component suppliers” (Bechek and Brea, 2001).
Our study shows that CRM does not contribute to all types of innovation capability,
which clearly indicates the need for applying other mechanisms, such as supplier
integration, to form a complete innovation program. For instance, customer
involvement does not significantly contribute to process and administration
innovations. Perhaps, firms should rely on suppliers to develop these two particular
innovation capabilities.
Finally, the data used in this study were collected from computer manufacturers in
Taiwan. It is not known how the selection of other industries and geographical areas
would affect the findings. Since the nature of product lifecycle, competitive environment,
and industry structure could very well be influenced by country and industry, future
research should investigate the applicability of our findings to other industries and in
other geographical areas. Another limitation of this study is the focus on the alignment
of external CRM practices and innovation capability. The effect of internal CRM
mechanisms, such as organization and knowledge management, remain to be
investigated.
References CRM and
Aggarwal, S. (1997), “Flexibility management: the ultimate strategy”, Industrial Management, innovation
Vol. 39 No. 1, pp. 5-14.
capability
Ahire, S.L., Golhar, D.Y. and Waller, M.A. (1996), “Development and validation of TQM
implementation constructs”, Decision Sciences, Vol. 27 No. 1, pp. 23-56.
Armstrong, S.J. and Overton, T.S. (1977), “Estimating non-response bias in mail surveys”,
Journal of Marketing Research, Vol. 14 No. 3, pp. 396-402.
127
Bechek, B. and Brea, C. (2001), “Deciphering collaborative commerce”, The Journal of Business
Strategy, Vol. 22 No. 2, pp. 36-9.
Boon, B. and Nyquist, J.L. (1981), “Analysis the customer/firm communication component of the
service marketing mix”, AMA Proceedings of the Marketing of Services, Chicago, IL.
Carr, A.S. and Pearson, J.N. (1999), “Strategically managed buyer-supplier relationships and
performance outcomes”, Journal of Operations Management, Vol. 17 No. 5, pp. 497-519.
Chang, S. and Lee, M.S. (2008), “The linkage between knowledge accumulation capability
and organizational innovation”, Journal of Knowledge Management, Vol. 12 No. 1, pp. 3-20.
Chen, I.J. and Paulraj, A. (2004), “Understanding supply chain management: critical research and
a theoretical framework”, International Journal of Production Research, Vol. 42 No. 1,
pp. 131-63.
Claycomb, C., Droge, C. and Germain, R. (1999), “The effect of just-in-time with customers on
organizational design and performance”, International Journal of Logistics Management,
Vol. 10 No. 1, pp. 37-58.
Cohen, W.M. and Levinthal, D.A. (1990), “Absorptive capacity: a new perspective on learning and
innovation”, Administrative Science Quarterly, Vol. 35 No. 1, pp. 128-52.
Daft, R.L. (1982), “Bureaucratic versus nonbureaucratic structure and the process of innovation
and change”, in Bacharach, S.B. (Ed.), Research in the Sociology of Organizations, Vol. 1,
JAI Press, Greenwich, CT, pp. 129-66.
Damanpour, F. (1991), “Organizational innovation: a meta-analysis of effects of determinants and
moderators”, Academy of Management Journal, Vol. 34 No. 3, pp. 555-90.
Damanpour, F. (1992), “Organizational size and innovation”, Organization Studies, Vol. 13 No. 3,
pp. 375-402.
Damanpour, F. (1996), “Organizational complexity and innovation: developing and testing
multiple contingency models”, Management Science, Vol. 42 No. 5, pp. 693-716.
Damanpour, F. and Evan, W.E. (1984), “Organizational innovation and performance: the
problem of organizational lag”, Administrative Science Quarterly, Vol. 29 No. 3, pp. 392-409.
Dean, J.W. and Evan, J.R. (1994), Total Quality Management, Organization, and Strategy, West
Publishing, Minneapolis, MN.
Dow, D., Samson, D. and Ford, S. (1999), “Exploding the myth: do all quality management
practices contribute to superior quality performance?”, Production and Operations
Management, Vol. 8 No. 1, pp. 1-27.
Droge, C., Jayaram, J. and Vickery, S.K. (2004), “The effects of internal versus external integration
practices on time-based performance and overall firm performance”, Journal of Operations
Management, Vol. 22 No. 6, pp. 557-73.
Dyché, J. (2001), The CRM Handbook: A Business Guide to Customer Relationship Management,
Addison-Wesley, Upper Saddle River, NJ.
IMDS Elenkov, D.S. and Manev, I.M. (2005), “Top management leadership and influence on
innovation: the role of sociocultural context”, Journal of Management, Vol. 31 No. 3,
110,1 pp. 381-402.
Fruhling, A.L. and Siau, K. (2007), “Assessing organizational innovation capability and its effect
on e-commerce initiatives”, The Journal of Computer Information Systems, Vol. 48 No. 1,
pp. 133-45.
128 Geffen, C.A. and Rothenberg, S. (2000), “Suppliers and environmental innovation in the
automotive paint process”, International Journal of Operations & Production Management,
Vol. 20 No. 2, pp. 166-86.
Gopalakrishnan, S. and Damanpour, F. (1997), “A review of innovation research in economics,
sociology and technology management”, Omega, Vol. 25 No. 1, pp. 147-66.
Green, S.G., Gavin, M.B. and Aiman-Smuth, L. (1995), “Assessing a multidimensional measure of
radical technological innovation”, IEEE Transactions in Engineering Management, Vol. 42
No. 3, pp. 203-14.
Groznik, A., Kovacic, A. and Trkman, P. (2008), “The role of business renovation and information
in e-government”, The Journal of Computer Information Systems, Vol. 49 No. 1, pp. 81-9.
Hair, J.F., Anderson, R.E., Tatham, R.L. and Black, W.C. (1998), Multivariate Data Analysis,
Prentice-Hall, Upper Saddle River, NJ.
Hammer, M. (2004), “Deep change: how operational innovation can transform your company”,
Harvard Business Review, Vol. 82 No. 4, pp. 84-93.
Handfield, R.B. and Bechtel, C. (2002), “The role of trust and relationship structure in improving
supply chain responsiveness”, Industrial Marketing Management, Vol. 31 No. 4, pp. 367-82.
Hsu, L.L. (2006), “The impact of industrial characteristics and organizational climate on KMS
and BIP-Taiwan bioscience industry”, The Journal of Computer Information Systems,
Vol. 46 No. 4, pp. 8-17.
Huang, D.Y. and Lin, C.Y. (2005), “Customer-oriented financial service personalization”,
Industrial Management & Data systems, Vol. 105 No. 1, pp. 26-44.
Huang, H.C. and Chang, C.W. (2008), “Embedded ties and the acquisition of competitive
advantage”, Journal of Intellectual Capital, Vol. 9 No. 1, pp. 105-21.
Hwang, M.I. and Xu, H.J. (2008), “A structural model of data warehousing success”, The Journal
of Computer Information Systems, Vol. 49 No. 1, pp. 48-56.
Ibarra, H. (1993), “Network centrality, power, and innovation involvement: determinants of
technical and administrative roles”, Academy of Management Journal, Vol. 36 No. 3,
pp. 471-501.
Jack, E.P. and Raturi, A. (2002), “Sources of volume flexibility and their impact on performance”,
Journal of Operations Management, Vol. 20 No. 5, pp. 519-48.
Joo, J. (2007), “An empirical study on the relationship between customer value and repurchase
intention in Korean internet shopping malls”, The Journal of Computer Information
Systems, Vol. 48 No. 1, pp. 53-62.
Kerlinger, F.N. (1986), Foundations of Behavioral Research, Rinehart and Winston, New York, NY.
Khosrow-Pour, M. (2006), Cases on Information Technology and Business Process Reengineering,
Idea Group, Hershey, PA.
Lagrosen, S. (2005), “Customer involvement in new product development: a relationship
marketing perspective”, European Journal of Innovation Management, Vol. 8 No. 4,
pp. 424-36.
Liao, S.H., Fei, W.C. and Chen, C.C. (2007), “Knowledge sharing, absorptive capacity, and CRM and
innovation capability: an empirical study of Taiwan’s knowledge-intensive industries”,
Journal of Information Science, Vol. 33 No. 3, pp. 340-59. innovation
Lin, B.W. (2004), “Original equipment manufacturers (OEM) manufacturing strategy for network capability
innovation agility: the case of Taiwanese manufacturing networks”, International Journal
of Production Research, Vol. 24 No. 5, pp. 943-57.
Lin, X. and Germain, R. (2004), “Antecedents to customer involvement in product development”, 129
European Management Journal, Vol. 22 No. 2, pp. 244-55.
McEvily, B. and Marcus, A. (2005), “Embedded ties and the acquisition of competitive
capabilities”, Strategic Management Journal, Vol. 26 No. 11, pp. 1033-55.
Maheshwari, B., Kumar, V. and Kumar, U. (2006), “Optimizing success in supply chain
partnerships”, Journal of Enterprise Information Management, Vol. 19 No. 3, pp. 277-91.
Mathe, H. and Shapiro, R.D. (1993), Integrating Service Strategy in the Manufacturing Company,
Chapman & Hall, London.
Mentzer, J.T., Min, S. and Zacharia, Z.G. (2000), “The nature of inter-firm partnering in supply
chain management”, Journal of Retailing, Vol. 76 No. 4, pp. 549-68.
Mohr, J. and Spekman, R. (1994), “Characteristics of partnership success: partnership attributes,
communication behavior, and conflict resolution techniques”, Strategic Management
Journal, Vol. 15 No. 2, pp. 135-52.
Neter, J., Wasserman, W. and Kutner, M.H. (1989), Applied Linear Regression Models,
Richard D. Irwin, Homewood, IL.
O’Regan, N. and Ghobadian, A. (2005), “Strategic planning: a comparison of high and low
technology manufacturing firms”, Technovation, Vol. 25 No. 10, pp. 1107-17.
Ottum, B.D. and Moore, W.L. (1997), “The role of market information in new product
success/failure”, Journal of Product Innovation Management, Vol. 14 No. 4, pp. 258-73.
Panayides, P. (2006), “Enhancing innovation capability through relationship management and
implications for performance”, European Journal of Innovation Management, Vol. 9 No. 4,
pp. 466-83.
Petersen, K.J., Handfield, R.B. and Ragatz, G.L. (2003), “A model of supplier integration into new
product development”, The Journal of Product Innovation Management, Vol. 20 No. 4,
pp. 284-99.
Ramani, G. and Kumar, V. (2008), “Interaction orientation and firm performance”, Journal of
Marketing, Vol. 72 No. 1, pp. 27-45.
Ranjan, J. and Bhatnagar, V. (2008), “A holistic framework for mCRM-data mining perspective”,
Information Management & Computer Security, Vol. 17 No. 2, pp. 151-65.
Reinartz, W., Krafft, M. and Hoyer, W.D. (2004), “The customer relationship management
processes: its measurement and impact on performance”, Journal of Marketing Research,
Vol. 41 No. 3, pp. 293-305.
Ritter, T. and Walter, A. (2003), “Relationship-specific antecedents of customer involvement in
new product development”, International Journal of Technology Management, Vol. 26
Nos 5/6, pp. 482-501.
Sahay, B.S. and Ranjan, J. (2008), “Real time business intelligence in supply chain analytics”,
Information Management & Computer Security, Vol. 16 No. 1, pp. 28-48.
Shane, S.A. and Ulrich, K.T. (2004), “Technological innovation, product development, and
entrepreneurship in management science”, Management Science, Vol. 50 No. 2, pp. 133-44.
IMDS Sin, L.Y.M., Tse, A.C.B. and Yim, F.H.K. (2005), “CRM: conceptualization and scale
development”, European Journal of Marketing, Vol. 39 Nos 11/12, pp. 1264-90.
110,1 Slater, S.F. and Narver, J.C. (1995), “Market orientation and the learning organization”, Journal of
Marketing, Vol. 59 No. 3, pp. 63-74.
Souder, W.E., Buisson, D. and Garrett, T. (1997), “Success through customer driven new product
development: a comparison of US and New Zealand small entrepreneurial high technology
130 firms”, Journal of Product Innovation Management, Vol. 14 No. 6, pp. 459-72.
Swink, M. (1999), “Threats to new product manufacturability and the effects of development
team integration processes”, Journal of Operations Management, Vol. 17 No. 6, pp. 691-709.
Tarafdar, M. and Gordon, S.R. (2007), “Understanding the influence of information systems
competencies on process innovation: a resource-based view”, Journal of Strategic
Information Systems, Vol. 16 No. 4, pp. 353-92.
Teo, T.S.H. and Liu, J. (2007), “Consumer trust in e-commerce in the United States, Singapore and
China”, Omega, Vol. 35 No. 1, pp. 22-38.
Tidd, J., Bessant, J. and Pavitt, K. (1997), Managing Innovation: Integrating Technological,
Market and Organizational Change, Wiley, Chichester.
Tsai, W.P. and Ghoshal, S. (1998), “Social capital and value creation: the role of intrafirm
networks”, The Academy of Management Journal, Vol. 41 No. 4, pp. 464-76.
Verhoef, P.C. (2003), “Understanding the effect of customer retention and customer share
development”, Journal of Marketing, Vol. 67 No. 4, pp. 30-45.
Vorhies, D.W. and Harker, M. (2000), “The capabilities and performance advantages of
market-driven firms: an empirical investigation”, Australian Journal of Management,
Vol. 25 No. 2, pp. 145-71.
Weerawardena, J. (2003), “Exploring the role of market learning capability in competitive
strategy”, European Journal of Marketing, Vol. 37 Nos 3/4, pp. 407-30.
Wei, J., van der Ende, L. and Lin, B. (2009), “Customer-focused e-business model for the oil
industry”, The Journal of Computer Information Systems, Vol. 49 No. 3, pp. 11-21.
Werner, R., Manfred, K. and Hoyer, W.D. (2004), “The customer relationship management
process: its measurement and impact on performance”, Journal of Marketing Research,
Vol. 41 No. 3, pp. 294-305.
Yang, C.L., Lin, C.H. and Sheu, C. (2007), “Developing manufacturing flexibility through supply
chain activities: evidence from the motherboard industry”, Total Quality Management &
Business Excellence, Vol. 18 No. 9, pp. 957-72.
Zineldin, M. (1996), “Bank-corporate client ‘partnership’ relationship: benefits and life cycle”,
International Journal of Bank Marketing, Vol. 14 No. 3, pp. 14-22.

Appendix. Questionnaire items

Part A: basic data of firms
Firm age, assets, number of employees, annual sales, main products.

Part B: CRM (7-point, Likert scale)

1. Long-term partnership:
L1. Our company is committed to improving management of whatever customers suggest.
L2. Our customers are trusted and willing to provide suggestions for products and
services for our company.
 L3. Our company systematically provides customized products and services to our key CRM and
customers.
innovation
L4. Our company actively stresses customer loyalty or retention programs. capability
L5. Our company maintains interactive, two-way communication with customers.
L6. Our company cares about long-term development and successes with customers. 131
2. Information sharing:
I1. Our company shares market information with customers (promotion information and
competitive product information).
I2. Our company shares product demand information with customers.
I3. Our company shares inventory information with customers.
I4. Our company jointly makes production plans with customers.
I5. Our customers warn us of events that may affect supplying to us.
3. Customer involvement:
C1. Our key customers are involved in NPD activities with us.
C2. Our key customers are involved in periodically reviewing operations with us.
C3. Our key customers are involved with us in modifying products.
C4. Our key customers are involved with us regarding market evaluations.
C5. Our key customers are involved with us regarding processing technology.
4. Joint problem-solving:
J1. Our key customers work with us to overcome difficulties (inventory management,
delivery delay, and logistics management).
J2. Our company is jointly responsible with our key customers for getting things done.
J3. Our company works with our key customers to help solve each other’s problems
(funding, production, and management).
5. Technology-based CRM:
T1. Our company uses a call center or computer telephone integration to deal with
customer demands, complaints, and suggestions.
T2. Our company uses SFA to track sales processes, analyze customers’ trade-off
information, find problems, and assist with work arrangements and adjustments.
T3. Our company uses an MIS to collect customers’ trade-off information and to integrate
databases.
T4. Our company constructed an integrated CRM performance evaluation system.
T5. Our company establishes perfect web-based customer interaction.
IMDS T6. Our company uses data warehousing and data mining to save customers’ information
for identifying which of the potential customers are more valuable.
110,1
Part C: innovation capabilities (seven-point Likert scale)
1. Product innovation:
132 PD1. Our company launches new products.
PD2. Our company extends numbers of product lines.
PD3. Our company engages in NPD to obtain patents.
PD4. With NPD, our company enlarges new markets.
PD5. Our company launches customized products according to market demands.
2. Process innovation:
PC1. Our company imports new process technology.
PC2. Our company obtains process technology patents.
PC3. Our company adopts advanced CAD/CAM equipment.
PC4. Our company adopts advanced real-time process control technology.
PC5. Our company imports advanced automatic quality restriction equipment/software.
PC6. Our company imports advanced programmable equipment.
3. Administrative innovation:
A1. Our company adopts innovative reward systems.
A2. Our company adopts innovative work designs.
A3. Our company adopts innovative administration aiming at NPD.
A4. Our company engages in organizational reconstruction for pursuing operational
efficiency.
A5. Our company engages in business process re-engineering.
4. Marketing innovation:
M1. Our company leads innovative pricing methods in markets.
M2. Our company leads innovative distributing methods to markets.
M3. Our company leads innovative promoting methods to markets.
M4. Our company continually enlarges potential demand markets.
M5. Our company utilizes advanced CRM systems in markets.
5. Service innovation:
S1. Our company imports innovative warranty and maintenance systems for enhancing
customer satisfaction.
 S2. Our company imports innovative claim clearing procedures and methods for CRM and
enhancing customer satisfaction.
innovation
S3. Our company imports innovative before-sale or after-sale service methods for capability
enhancing customer satisfaction.
S4. Our company adopts innovative order management and follow-up systems.
133
Corresponding author
Rong-Huei Chen can be contacted at: ronghuei@mail.lhu.edu.tw

To purchase reprints of this article please e-mail: reprints@emeraldinsight.com

Or visit our web site for further details: www.emeraldinsight.com/reprints