Sustainable Futures 4 (2022) 100075

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Sustainable Futures
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Research paper

Is strategic orientation always beneficial? A meta-analysis of the

relationship between innovation and business sustainability: A dynamic
capabilities perspective from Malaysian insurance companies
Nagwan Abdulwahab AlQershi a, *, Roselina Binti Ahmad Saufi a, Sany Sanuri Mohd Mokhtar b,
Nik Maheran Nik Muhammad c, Mohd Nor Hakimin Bin Yusoff c
a
Malaysian Graduate School of Entrepreneurship and Business, University Malaysia Kelantan, Malaysia
b
College of Business, University Utara Malaysia, Malaysia
c
Faculty of Entrepreneurship & Business, University Malaysia Kelantan, Malaysia

A R T I C L E I N F O A B S T R A C T

Keywords: The current study fills existing gaps in theory and practice by investigating the nature of the relationship between
Business sustainability innovation dimensions and business sustainability in the insurance sector in Malaysia, and the moderating effects
Insurance companies of strategic orientation on this relationship. The data was collected from 116 samples. PLS-SEM was used to test
Innovation
the study’s hypotheses. The results shows that process and product innovation have a significant influence on
Strategic orientation
business sustainability, but not administrative innovation; strategic orientation moderates the relationship be­
tween process and product innovation and business sustainability, but not with administrative innovation. These
findings have important theoretical implications both for Malaysia and for countries with similar economies. The
study will serve as a reference point for such countries in trying to understand factors influencing business
sustainability.

1. Introduction found [6,7,8].

By thinking outside the box and discovering competitive ways to run
its business, an organization may succeed in strategically redefining it­
self and outperforming rivals and even larger firms [1,2]. The key to
success is not to play the game more effectively than rivals but to create
a different game altogether, as explained by Alqershi et al. [3]. In fact,
organizations that create new strategies to outperform rivals and enter
new markets frequently succeed by launching innovative business
models. Such organizations identify gaps in the industry and look for
ways to transform them into profit-producing markets by attracting new
customers (new who’s) through their preferences and trends, new
products and services (new what’s), or new promotion, generation or
ways of distribution (new how’s).
Despite the increasing interest over recent years in the way economic
growth is flourishing in developing countries, the majority of innovation
studies have been focused on their developed counterparts [4,5].
Nevertheless, on the basis of the literature reviewed, companies who are
aware of the growth dynamics at the base of the economic pyramid in
the emerging markets have considerable avenues wherein values can be
Although some studies consider innovation as the capability of the
firm to develop new value propositions by the launching of new prod­
ucts/services, or adopting novel practices of operations, technologies,
routines and market-oriented skills and knowledge (e.g. [9,10]), several
critical related questions have yet to be answered: “does innovation
influence business sustainability in a direct way?”, “is the impact of
innovation on business sustainability moderated by other variables?”,
and “what is the moderation mechanism?”.
In addition, competencies required of organizations for successful
product innovation include their ability to understand customer pref­
erences as well as their needs. Ravichandran [11] claimed that this will
help firms to assimilate and acquire outside knowledge, and to convert it
into improved or new products. According to Lopes et al. [12], innova­
tion is one essential of organizational competency, as up-and-coming
new products are growth engines and offer better profits, sales and
competitive strong points. Innovation can increase existing competition
and creation of a competitive edge. Munodawafa and Johl [13] pointed
out that in order for an innovative project to create competitive ad­
vantages, it must indicate effective and solid achievement of its business

* Corresponding author.
E-mail address: nagwan.ma@umk.edu.my (N.A. AlQershi).

https://doi.org/10.1016/j.sftr.2022.100075
Received 6 September 2021; Received in revised form 18 December 2021; Accepted 1 April 2022
Available online 25 April 2022
2666-1888/© 2022 Published by Elsevier Ltd. This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/).
N.A. AlQershi et al.
goals.
In another scenario, strategic orientation has become a necessary
requirement for organizations that strive to achieve high levels of per­
formance and sustainability, and the essence of management has
become the use of logic and scientific predictions instead of chaos;
strategic orientation is now seen as the key to the success of organiza­
tions, distinguishing them competitively and permeating all factors of
organizational success [14,15]. Strategic orientation thus represents an
intellectual approach characterized by modernity and leadership, the
ability to increase the competitive capabilities of the organization, and
to develop its performance and competitive strength [16].
In addition, the continuity, success and growth of contemporary
organizations requires them to develop their strategic orientation [17].
This helps to improve products to satisfy the needs, desires and tastes of
consumers, which is characterized by rapid change in our time. This
makes product development an important contribution to the survival,
growth and expansion of companies, increasing their ability to achieve
their goals. The term strategy means reading the future, providing or­
ganizations with future ideas, and generating the activities necessary to
achieve those ideas [18]. That is, strategy directs the organization in an
integrated way towards the future; it has thus become one of the
essential tasks of managers, dealing with a changing and risky future and
requiring them to make strategic decisions to ensure the future of the
organization by defining strategic orientation [19,20].
In addressing the research problem, this study proposes a new
framework to model Malaysian insurance companies’ business sustain­
ability, linking innovation to business sustainability. It also introduces
the moderating role of strategic orientation to the framework. Even in
the international literature on insurance companies’ business sustain­
ability, the moderating role of strategic orientation on the relationship
between independent variables and business sustainability is yet to be
investigated. The moderating role of strategic orientation means inno­
vation may influence business sustainability according to the level of
strategic orientation. Similarly, innovation and its impact on business
sustainability can be found more among firms with sound strategic
orientation. The moderating role of strategic orientation is justified by
previous studies. For instance, Cheng and Huizingh [21] recommended
that strategic orientation can be studied as a moderator in enhancing
sustainability. Strategic orientation is linked to vision and hence is an
important organizational resource. The literature to date has empha­
sized the relationship between strategic orientation and business sus­
tainability. However, the present study argues that it plays a more
important role, perhaps acting as a moderator between other indepen­
dent variables and their influence on business sustainability.
From the viewpoint of dynamic capabilities (DC), the market,
competitive environment, technological environment and cultural
context are in constant change, and firms that are not equipped with the
right capabilities to adapt to such changes are doomed to fail. The theory
of DC plays a key role in the organization and management of innovative
processes [22]. According to this theory, rare and valuable,
non-substitutable and inimitable resources have a significant role to play
as the basis for ongoing innovation processes [22]. Nevertheless, gath­
ering valuable resources alone cannot boost and maintain a competitive
advantage. This argument was supported by Capello and Faggian [23],
who revealed that innovation practices enhance organizational perfor­
mance via strategic orientation development.
Finally, this study attempts to make several significant contributions
to the field. First, by determining the moderating influence of strategic
orientation on the relationship between innovation and business sus­
tainability, our work provides a theoretical explanation of innovation’s
role throughout organizations. Second, it contributes to the dynamic
capabilities perspective (DCP) literature as it empirically examines the
innovation, strategic orientation and insurance company’s business
sustainability relationship. The findings are expected to provide insight
into innovation among insurance companies in Malaysia. Although
innovation is presently deemed as a tool to enhance business
2
Sustainable Futures 4 (2022) 100075
sustainability among business establishments worldwide, its influence
on Malaysian insurance companies has been virtually ignored to date.
This study reduces this gap in the literature. The framework of our work
situates it as a moderator between other independent variables and
business sustainability, promising to make a good contribution to
knowledge.
2. Literature Review and Hypothesis Development
2.1. Innovation and Business Sustainability
Several authors have provided different definitions of business sus­
tainability; for instance, Sambhanthan et al. [24] and Hofmann et al.
[25] considered several factors such as spatial, institutional-political,
economic, cultural and social in mainstream decision making and core
operational processes. Business sustainability was characterized by
Pojasek [26] as the ability of the firm to create long-term shareholder
value by embracing the opportunities and managing the risks that result
from an organization’s environmental, social and economic
responsibilities.
In another scenario, innovation goes beyond the traditional under­
standing of creativity in terms of product or technology as it concerns
the creation of values via a strategy that involves the entire organiza­
tional system [10]. In a related study, uncovering new market oppor­
tunities was explained as not necessarily involving a new
product/technology invention, but a new business model strategically
linking the value offerings to the optimum markets [27]. Anthony, [27]
added that when organizations operate based on their developed busi­
ness model, this provides a definition of customer value.
A number of scholars have studied the relationship between inno­
vation and firm business sustainability. For example, Lepeley et al. [28]
found that innovation is positively related with business sustainability.
Seebode et al. [29] demonstrated that innovation is significantly linked
with business sustainability. Other studies found a significant relation­
ship between innovation and business sustainability [30–32]. In addi­
tion, Salavou [33] examined product innovation as a determinant of
firm performance (with return on assets as proxy). However, other
studies that examined the organizational innovation-business sustain­
ability relationship indicated consistent results, as noted by Asadi et al.
[34].
Leach et al. [35] explored the relationship between innovation and
sustainability. They stressed that innovation can increase existing
competition and creation of a competitive edge. Alqershi et al. [3]
pointed out that in order for an innovative project to create competitive
advantages, it must indicate effective and solid achievement of its
business sustainability goals. Further, innovation involves all functional
and operational activities that assist in company profit and growth
ambitions, reduced product lifecycles and increased global competition,
it has become even more applicable due to the specific modern market
trends of hyper-competition, convergence and commoditization. These
modern trends have a hampering effect on markets, and as such, SI
becomes a process to overcome the negative effects associated with
these trends [36,37]. Franceschelli et al. [38] argued that innovation
Innovative is the best way to attain good levels of efficiency. innovation
is one essential of organizational competency, as up-and-coming new
services and products are growth incentive and provide better revenue
and unique competitive strong points.
As shown in Fig. 1, the main link in the study’s empirical model is
between innovation dimensions and business sustainability, a core in­
terest and an encouragement to innovation. Innovation in products,
processes and services was explained above as a key to success [39]. The
relationship between innovation and sustainability outcomes is espe­
cially significant in insurance organizations (e.g., [40,41]), although few
empirical studies have been undertaken in relation to large insurance
firms in Malaysia. From a marketing and competitive perspective, sur­
vival depends on improving a firm’s technology, building strong
N.A. AlQershi et al.
Fig. 1. Study Framework
relationships with customers and suppliers, and giving employees the
best training to achieve a good market share, place and profitability (e.
g., [42,43]).
Wu et al. [44] examined hypotheses and showed a significant rela­
tionship between innovation and sustainability in Chinese firms. Stubbs,
[45] showed a strong relationship between innovation and sustainabil­
ity in Australian firms. Given these findings, the current research hy­
pothesizes the effect of innovation as follows:
H1a. There is a significant relationship between process innovation and
insurance companies’ business sustainability in Malaysia.
H1b. There is a significant relationship between product innovation and
insurance companies’ business sustainability in Malaysia.
H1c. There is a significant relationship between administrative innovation
and insurance companies’ business sustainability in Malaysia.
2.2. The Moderating Role of Strategic Orientation
Voss and Voss [46] defined strategic orientation as a path that en­
ables senior management to coordinate the efforts of everyone in the
organization through a clear vision and the translation of the organi­
zation’s message and strategic goals into practical reality; this will direct
the organization’s response and adaptation to its environment, setting
the organization on the track right to achieve its strategic objectives. On
the other hand, the strategic orientation has been defined as the method
by which the strategic objectives will be derived and implemented,
seeking to maximize the positive elements of the operational efficiency
of the organization and at the same time reducing the elements with
negative and frustrating dimensions. That is, strategic orientation
should direct the strategic goals, directly serving to achieve them [47].
However, a higher level of performance and sustainability can only
be achieved when the organization generates goods/services that are
cheaper than those of its competitors [48]. Studies on business sus­
tainability [49,50,51] extended the view of value creation capabilities
and indicated that effective and sustainable performance is achieved via
superior organizational conditions and value creation capabilities. In
other words, high profitability is obtained by the firm through its
deployment and use of distinct, valuable and inimitable resources as
well as capabilities; externally, this can be considered as an outcome of
performance, and internally as the capabilities of the organization.
Additionally, for most organizations, any uniqueness accomplished is
presumably going to be brief [52]. Given the turbulence of aggressive
situations and the way that adversaries quickly endeavour to imper­
sonate their rivals’ advances, consistent development is pivotal to
business achievement [53,54].
Previous studies have investigated the strategic orientation and
sustainability performance relationship, for example, Tseng et al. [55].
The relationship was investigated by Van Lieshout et al. [56] in 12
3
Sustainable Futures 4 (2022) 100075
different multinational organizations in the Eurozone. The authors
contended that strategic orientation affects the ability of the firm to
achieve innovations and sustainable performance.
Lee et al. [57] proposed and tested an integrated model dedicated to
the drivers and outcomes of strategic orientation in SMEs, using a
quantitative approach and involving 374 Korean SMEs. The PLS-SEM
analysis findings indicated that strategic orientation positively influ­
enced performance. Jiang et al. [14] argued for and illustrated the
relationship between strategic orientation and innovative performance,
specifying boundary criteria and mechanisms in the relationship viewed
from a knowledge-based dynamic capability perspective. The authors
found strategic orientation to have positive effects on performance.
The major source of competitive advantage is innovation; when it is
shared for specific reasons, the recipient will appreciate its value,
context-specific insights, intuitions or hints that have been relayed by
the providers [58]. Since the development and implementation of
collaborative initiatives, the interactional dynamics entailed in inno­
vation have assisted in improving trust, mutual understanding and
cohesion. According to prior studies, with focusing on strategic orien­
tation, both parties will avoid making unreasonable demands and will
promote and maintain relationships via various activities (e.g. indi­
cating the same preferences, and expressions of good will and concern)
[59,60,61].
Finally, from a marketing and competitive perspective, survival de­
pends on improving a firm’s technology, and giving employees the best
training to achieve a good market share, place and profitability (e.g.,
[43]), and as shown in Fig. 2, the main link in the study’s empirical
model is between PRD. PRC and ADI and insurance companies BS, a core
interest and an encouragement to innovation [3]. Innovation in prod­
ucts, processes and administrative was explained above as a key to
success [62]. The relationship between innovation and BS outcomes is
especially significant in manufacturing organizations (e.g., [63]). El
Bilali, [64] examined hypotheses and showed a significant relationship
between innovation and BS. Hanaysha et al. [65] showed similar re­
lationships, although Darroch [66], Roper and Love [67] and Heunks
[68] found a negative effect between innovation and sustainable busi­
ness performance. Based on previous studies that found a significant
relationship between innovation dimensions and BS, and on studies that
found no significant relationship between them, the present study hy­
pothesizes as follows:
H2a. Strategic orientation moderates the relationship between process
innovation and insurance companies’ business sustainability in Malaysia.
H2b. Strategic orientation moderates the relationship between product
innovation and insurance companies’ business sustainability in Malaysia.
H2c. Strategic orientation moderates the relationship between adminis­
trative innovation and insurance companies’ business sustainability in
Malaysia.
N.A. AlQershi et al. Sustainable Futures 4 (2022) 100075

Fig. 2. Study Model

3. Methodology and data analysis 3.3. Data analysis technique

3.1. Research design and sample Many statistical methods can be employed to achieve accurate con­
clusions concerning variables. Our data was coded and analysed through
A cross-sectional and quantitative research approach was adopted by descriptive and inferential statistics, using PLS-SEM. For descriptive
this study to test the hypotheses. The study population comprised 31 analysis, frequency count and percentage were used to define the
Malaysian insurance companies: seventeen general insurers, nine life research data, as recommended by Sekaran and Bougie [75], while the
insurers, and five composite insurance companies [69]. Questionnaires, statistical tools of maximum, minimum, mean, standard deviation and
together with a covering letter, were distributed to all heads of depart­ variance were suitable for gauging the central tendency.
ment managers via postal mail; in addition, self-administration of the The next stage after data collection was data analysis. The procedure
questionnaire was adopted, where responses were scored on a numerical was carried out in three stages. First, the raw data collected from the
scale. field was screened and cleaned to ensure that it was suitable for the main
The present study adopted a random sampling method to select the analysis; this identified missing values and detected mistakes committed
31 firms, after which they were approached and the questionnaire by the respondents during data entry. This stage of the data analysis was
administered. The researcher established a rapport with important in­ performed with the help of SPSS software. Second, descriptive analysis
dividuals in the firm to clarify ambiguous questions, for a higher was carried out, also utilizing SPSS, in order to determine the charac­
response rate. Data collection was carried out over five months. teristics of the sample in terms of age, working experience, education
In adopting a quantitative study, the researcher made sure that data level, gender and number of employees, See Table 1. This was to ensure
could be translated into significant outcomes that are important for the that the researcher understood the demographic composition of the
development of the research, as explained by Nardi [70]. Research as­ sample, as recommended by Saunder et al. [76].
sistants helped to distribute and later to retrieve the questionnaires. The third phase of the analysis was conducted by PLS-SEM. Ringle
Because the heads of department were aware of the survey, a high rate of et al. [77] stated that this is a robust technique in multivariate data
response was expected. Of 153 questionnaires distributed, 124 were analysis, with the ability to estimate multiple dependence relationships
received, of which 8 were incomplete, making the total useable number simultaneously. Hair et al. [78] also maintained that PLS-SEM is the best
116. multivariate technique for testing construct validity and theoretical re­
lationships, because it examines two aspects of data analysis at the same
3.2. Measurement of Study time: it evaluates the measurement model, and the relationships be­
tween independent and dependent variables. In PLS-SEM, the technique
This study adopted simple random sampling to select the sample. A focuses on the main picture of the overall model and its explanatory
questionnaire earlier developed and tested by Sciarelli et al. [71] on ability. Researchers have used SEM in different ways. According to Hult
innovation was adopted. Business sustainability was measured following
the work of Yong et al. [72]. Strategic orientation was measured using
the instrument designed by Escribá-Esteve et al. [73]. All items were Table 1
anchored on a five-point Likert-type scale ranging from 5 (strongly Demographic Characteristics of the Respondents
agree) to 1 (strongly disagree). Age 1= less than 26 2
Interviews with experts were also conducted to validate the ques­
2= 26 to 30 years 26
tionnaire answers, revealing a content validity index above 0.80. The
3= 31 to 35 years 43
instrument’s reliability was further tested to determine whether it was 4= Above 35 45
internally consistent in measuring the study variables on the scales Working Experience 1= Less than 5 years 14
determined, as suggested by Fraenkel et al., [74]. Item-total reliability, 2= 5 to 10 years 67
3= 11 to 20 years 23
which refers to a measure of internal consistency, along with the co­
4= Above 20 years 12
efficients of Cronbach’s alpha, were calculated. The results for Cron­ Gender 1= Male 97
bach’s alpha coefficients (innovation, strategic orientation and business 2= Female 19
sustainability) all exceeded 0.70, indicating the reliability of the scales. Education 1= School certificate 0
2= Diploma 4
3= Degree 83
4= Postgraduate Degree 19
Others 0

4
N.A. AlQershi et al. Sustainable Futures 4 (2022) 100075

Table 2 4. Results
Descriptive statistics for latent variables
Descriptive Statistics 4.1. Mean and standard deviation
N Minimum Maximum Mean Std. Deviation
In this section, the statistical descriptions of the study constructs are
BS 116 1 5 2.9542 0.81276 presented in the form of values of mean, maximum and minimum and
IN 116 1 5 2.7625 0.87391
SO 116 1 5 3.0931 0.83728
standard deviation. The variables were measured on a five-point Likert
Valid N (listwise) 116 scale and the results are presented in Table 2.
The descriptive analysis indicates how respondents answered each
item of the questionnaire. The construct business sustainability (BS) has
Table 3 a mean value of 2.95, indicating that most of the respondents agree that
Fornell-Larcker Criterion business sustainability is not satisfactory. Innovation (IN) has a mean
BS IN SO
value of 2.76, that is, respondents agree that innovation among insur­
ance companies in Malaysia is not satisfactory. The strategic orientation
BS 0.748
(SO) mean value is 3.09, showing that the managers largely agreed.
IN 0.308 0.704
SO 0.512 0.270 0.719 Therefore, it could be inferred that all these managers are aware of the
importance of innovation, strategic orientation and business sustain­
ability as a fundamental responsibility.
et al. [79], the covariance based version (CB-SEM) had been the most
widely used, although the Partial Least Square (PLS-SEM) technique has
become very popular. 4.2. Discriminant validity
Having considered the different approaches, and the objectives of
this study, PLS-SEM was adopted as the method for data analysis. The Discriminant validity refers to the degree of distinctiveness of a
study model is still at the development stage, so this paper may be certain latent construct from other latent constructs [82]. Following the
considered as theory development and suitable for PLS-SEM analysis. recommendation of Fornell et al. [83], the present study assessed
The objective of the study emphasizes explaining the dependent vari­ discriminant validity using AVE (which should be 0.5 or over) by con­
able, business sustainability, again making PLS-SEM suitable. Finally, ducting a comparison between the latent constructs’ correlations and
the study aims to explain factors influencing business sustainability the AVE square root values (which should be more than the values of the
among the study population and how well individual factors perform in latent variables correlations). Another test used in establishing
the models, suitable for PLS-SEM [80,81]. discriminant validity was adopted from Henseler et al.’s [84] criterion,
which involved comparison of the indicator loadings in the
cross-loading table, with other reflective indicators. Table 3 and Table 4
indicate that Fornell’s criteria were met, so discriminant validity was

Table 4
Loadings, Composite Reliability and Average Variance Extracted
Constructs Items Loadings Cronbach’s Alpha rho_A Composite Reliability Average Variance Extracted (AVE)

BS1 0.769 0.806 0.885 0.841 0.573

BS2 0.835
BS3 0.812
BS4 0.902
BS5 0.764
BS6 0.706
BS7 0.847
BS8 0.694
BS9 0.874
BS10 0.728
BS11 0.860
BS12 0.705
BS13 0.884
SO1 0.873 0.811 0.847 0.801 0.531
SO2 0.932
SO3 0.877
SO4 0.790
SO5 0.819
SO6 0.846
SO7 0.794
SO8 0.893
SO9 0.710
SO10 0.746
SO11 0.810
IN1 0.904 0.870 0.931 0.836 0.579
IN2 0.863
IN3 0.911
IN4 0.586
IN5 0.674
IN6 0.816
IN7 0.845
IN8 0.700
IN9 0.599
IN10 0.804

5
N.A. AlQershi et al. Sustainable Futures 4 (2022) 100075

Table 5
Direct Relationship
Relationships Std. Beta Std. Error t-values p-values Confidence Intervals Decision

LLCI ULCI

PRC -> BS 0.309 0.068 3.613** 0.003 0.137 0.302 Supported

PRD -> BS 0.485 0.073 2.096* 0.004 0.126 0.248 Supported
ADM -> BS 0.159 0.091 0.651 0.395 0.051 0.328 Not supported

Table 6
Moderating Effects
Relationships Std. Beta Std. Error t-values p-values Confidence Intervals Decision

LLCI ULCI

SO*PRC -> BS 0.238 0.075 2.891* 0.004 0.084 0.423 Supported

SO*PRD -> BS 0.361 0.087 3.051** 0.002 0.033 0.308 Supported
SO*ADM -> BS 0.563 0.090 0.459 0.753 0.326 0.115 Not Supported

established.
4.3. Assessment measurement model
The measurement model is generally evaluated in order to establish
the reliability of the individual items in light of their internal consistency
reliability, convergent validity, content validity and discriminant val­
idity [78]. Additionally, aligned with the PLS- SEM model, composite
reliability was used rather than Cronbach’s alpha [79] due to the
robustness of the former. That is, composite reliability coefficient (CRC)
was used to ensure that the measures had internal reliability, as using
Cronbach’s alpha would risk the probability of over- or under-estimating
the reliability of the scales. The results of composite reliability are
presented in Table 4.
4.4. Assessment of significance of the structural model
Following the confirmation of the validity of the model, assessment
of the structural model began using a standard bootstrapping procedure,
with 500 bootstrapping samples and the 116 cases. This was used to test
the significance of the path coefficients based on the guidelines set up by
Hair et al. [85]. The full structural model assessment estimates are
tabulated in Table 5. To begin with, a significant innovation-business
sustainability relationship was proposed in Hypothesis 1a, and the re­
sults indicate a significant effect (β=0.309, t=3.613, p<0.003), which
means the hypothesis is supported. Moving on to H1b, a significant
relationship was predicted between product innovation and business
sustainability, and the result (β=0.485, t=2.096, p<0.004) also sup­
ported the prediction. Lastly, in H1c, administrative innovation was not
supported in its relationship with business sustainability (β= -0.159,
t=0.651, p<0.395) and thus H1c is rejected. In sum, process and product
innovation are significantly related with the business sustainability of
insurance firms in Malaysia.
4.5. Testing moderation effect
To reiterate the moderating hypothesis, it was proposed that stra­
tegic orientation has a moderating effect on the administrative, product
and process innovation-business sustainability relationship. As
Table 7
Effect Size (f2)
Constructs F-Values Effect Size
SO 0.013 None
IN 0.074 Small
expected, the results from Table 6 show that strategic orientation
significantly moderates the relationship between product and process
innovation with insurance companies business sustainability (β=0.238,
t=2.891, p<0.004) and (β=0.361, t=3.051, p<0.002) respectively, but
not administrative innovation (β= -0.563, t=0.459, p<0.753). From
Table 6 it is clear that the innovation and business sustainability rela­
tionship is enhanced through the introduction of the strategic orienta­
tion moderating effect.
4.6. Assessment of effect size (f2)
Effect size refers to the relative effect of a specific exogenous latent
variable on one or more endogenous latent variables through R2
changes. According to Henseler et al. [82], this is calculated by obtaining
the increase in the latent variable R2 value to which the path is related,
in relation to the proportion of unexplained variables in such variable.
The effect calculation was adopted from Cohen’s [86] study, which is
represented by the following equation:
R2 included − R2 Excluded
Effect size : f 2 =
1 − R2 included
According to Cohen [86], values of 0.02, 0.15 and 0.35 indicate
weak, moderate and strong effects respectively. The effective size values
of the structural model’s variables are presented in Table 7.
As indicated in Table 7, the effect sizes for the (SO 0.013), (IN 0.074),
and based on Cohen’s guidelines, the effect sizes of the eight exogenous
latent variables on the business sustainability of insurance companies
can be deemed as small, non-existent and large respectively.
5. Discussion
Strategic orientation is very important in companies and nationally,
creating new market places, increasing market share and organizational
growth; lack of imitations and the correct practice of strategic orienta­
tion can help companies to avoid rigid competition and enhance per­
formance. Strategic orientation initiatives are neatly linked with a firm’s
objectives, often as a response to competition and treated as a way of
gaining short- and long-term economic benefit. Thus, when strategic
orientation is compliant with the strategic decision-making process in
firms it can have deeper implications for performance. Nevertheless, the
conclusions that can be inferred from the present study are, first, two
dimensions of innovation found to significantly impact the business
sustainability of insurance companies, implying that firms should adopt
a more innovative perception in running business, and that managers as
well as policy makers should focus on promoting such innovation for
optimal performance of firms.
Secondly, the research examined and tested the moderating effect of
strategic orientation on the innovation-business sustainability

6
N.A. AlQershi et al.
relationship. Based on the findings, the stated relationship meets the
moderation criteria set out by Baron and Kenny [87].
Our work has several key messages. First, it explores how innovation
contributes to the achievement of business sustainability in insurance
companies in Malaysia, with respect to administrative innovation, pro­
cess innovation and product innovation as three important axes. This
study also provides empirical evidence that strategic orientation en­
courages insurance company’s competences, which in turn significantly
influences its sustainability. That is, we have endeavoured to answer the
study questions: do administrative, process and product innovation have
an effect on business sustainability? And does strategic orientation
moderate the relationship between administrative, process and product
innovation and business sustainability?
In this respect, the significance of the direct relationship of the
process and product innovation and business sustainability provides
support for H1a (β=0.309, t=3.613, p<0.003) and H1b (β=0.485,
t=2.096, p<0.004) respectively, and this is in line with previous studies
[88,89]; however, for H1c our study found that administrative innova­
tion and business sustainability were not significantly related in the
study population, so H1c is not supported (β= -0.159, t=0.651,
p<0.395). Our findings also reveal a significant impact of strategic
orientation on the relationship with process and product innovation but
not with administrative innovation, supporting H2a (β=0.238, t=2.891,
p<0.004) and H2b (β=0.361, t=3.051, p<0.002) but not H2c (β=
-0.563, t=0.459, p<0.753). That is, strategic orientation has no
moderating effect on the relationship between administrative innova­
tion and business sustainability, despite its influence on the association
of process and product innovation with business sustainability.
These results confirm that strategic orientation is one of the most
important topics in the field of strategic management. In this regard,
firms should extensive efforts have been made to explain the concept
that is still one of the most mysterious expressions used in the man­
agement literature, especially in relation to industries which are based
on advanced services. Moreover, the current fast-changing business
environment coupled with the knowledge-based economy has led en­
terprises to be faced with a more stringent competitive environment in
the pricing, innovation, quality, product knowledge and time duration
aspects. These factors have in fact directly will force insurance industries
to review their strategies for business survival.
This finding relates well to the dynamic capabilities perspective
(DCP) in that innovation is considered as an integrative capability,
enabling configuration of resources and stock and their deployment and
re-deployment to capture and leverage the opportunities in the market.
DC are the ability of an organization to intentionally adapt the organi­
zation’s resource base; Teece et al. [90] defined this as a company’s
ability to integrate, build and reconfigure internal and external com­
petencies to address rapidly changing environments. The resource-based
viewpoint emphasizes sustainable competitive advantage; on the other
hand, the vision of DC focuses on the issue of competitive survival in
response to the rapidly changing contemporary business conditions
[91].
DC theory is concerned with developing strategies for top manage­
ment of successful companies to adapt to the ever-changing business
environment, while maintaining minimum standards of ability to ensure
competitive survival [92]. For example, industries that have tradition­
ally relied on a specific insuring process cannot always change that
process at short notice when new technology arrives. When this hap­
pens, managers need to adapt their own actions to make the most of their
current resources while at the same time planning for future changes as
resources run low [93].
The new DC framework focuses on a company’s ability to rapidly
organize and reconfigure outsourced competencies; this is being applied
in top companies, while leveraging internal resources such as platforms,
know-how, user communities, and digital and social networks [94]. The
new framework takes into account the economics of digital information
and networks and the falling transaction costs of subscribing to the use
7
Sustainable Futures 4 (2022) 100075
of specialized services. According to Wang and Ahmed [95], however,
more research is needed to measure capabilities and apply ideas
appropriately to practical management situations.
DC are closely related to the concept of normal capabilities since
both represent organizational capabilities, but they are distinct in nature
[96]. The resource-based view and the DC view focus on two broad
categories of organizational capabilities that are essential to a com­
pany’s performance: the normal capabilities that require no command to
exploit existing strategic assets, and the higher-order DC that are
required to change the company’s resource base by integrating, build­
ing, and reconfiguring efficiencies [93].
DCP is integrated and based on the Schumpeterian perspective, as
explained by Teece [22] and supported by other authors like Obeidat
et al. [97] who provided evidence of strategic orientation’s facilitation of
collaboration with firms and the need for information on new and
substitutable situations that can positively influence the product/pro­
cess innovation. This confirms the existence of strategic orientation as a
moderator between innovation and business sustainability, supporting
hypotheses H2a, b and c proposed in this study.
In addition, it can be inferred that innovation impacts business sus­
tainability in an accumulated result that stems from positive and nega­
tive effects, as moderated by the factors making up the environment and
context. Therefore, despite the cumulative positive effect of innovation
on the business sustainability of insurance companies, the effect is
largely contextual.
Finally, based on the findings of this study, the strength of the as­
sociation between innovation and business sustainability is significant
with the inclusion of the moderation of strategic orientation. Here, a
partial moderation effect of strategic orientation was found on the
relationship between innovation and business sustainability. This
finding links well with the DCP, which postulates that innovation within
the firm is associated with the firm’s competitive position [22].
The results concerning the moderating influence represent the major
contribution of the current study, answering the research question of
whether strategic orientation moderates the relationship between
innovation and the business sustainability of Malaysian insurance
companies. The result is supported by DCP, in that organizations must
have strategic orientation through resources that are peculiar to them, a
subset of these leading to high performance. Again, in line with DCP, this
study concludes that innovation significantly influences business sus­
tainability through strategic orientation. The results suggest that stra­
tegic orientation is the hidden treasure of organizations through
innovation and business sustainability.
Finally, from the marketing perspective, marketing capabilities
imply the development and effectiveness of existing competitive ad­
vantages, supporting organizations’ possession of the market share by
building strong relationships with customers and exploring future op­
portunities. Alqershi et al. [3] argued that knowledge and resources are
the foundation of organizations’ activities to meet customers’ re­
quirements. Strategic orientation and innovation activities are the
leveraging point that exists in a competitive marketplace, and they
require constant communicating with customers to accomplish different
demands.
6. Implications
Together with the government, insurance company managers hold
responsibility for ensuring that organizations practise effective innova­
tion. With the assistance of government, owners should exert every
effort to be leaders in this matter. The study findings indicate the pres­
ence of a significant relationship between innovation and insurance
companies’ business sustainability. On the other hand, strategic orien­
tation was found to have a full moderating influence on two innovation
dimensions and, as such, managers have to concentrate on developing
strategic orientation by providing training. Understanding should be
achieved among managers on how to realize optimum business
N.A. AlQershi et al.
sustainability through innovation practices.
In addition, the present study was conducted with the aim of
providing insight into the reasons behind the low performance of
Malaysian insurance companies. Such low performance prevents the
businesses from adequately contributing to the GDP and employment
opportunities of the country. This economic issue is a crucial one that
the present study attempts to address.
A resolution of this issue is possible through improved insurance
company’s innovation and strategic orientation and, in turn, their pro­
vision of employment opportunities to unemployed youth. Hence, it is
significant to study how the low performance of this sector can be
improved. This study thus contributes by recommending solutions via
empirical findings to this issue.
The empirical findings of this study reveal that the entrepreneurial
orientation, comprising innovativeness significantly relates to the busi­
ness sustainability. This shows that insurance companies managers have
to be more focused on promoting innovative creativity and in building
customer relationships to enhance their performance. With regards to
policy makers, this study highlights the need for their assurance of
entrepreneurial orientation that could only lead to enhanced business
sustainability.
Finally, this study contributes in practice by outlying the implica­
tions for strategic orientation practices among insurance companies in
Malaysia. Evidence points to the fact that strategic orientation signifi­
cantly relates to the business sustainability of insurance companies.
Thus, insurance companies’ managers and leaders have to show greater
concern for strategic orientation in attempting to enhance business
sustainability. In line with this, policy makers should place more stress
on strategic orientation to resolve low performance among Malaysian
insurance companies.
7. Methodological contribution
The current study used a new tool of data analysis, SEM-PLS3, to
clarify the relationship between the research variables. SEM-PLS3
comprises new principal components and techniques, and therefore is
a new methodological contribution to previous studies of innovation
[98]; on strategic orientation, [33]; and business sustainability [99]
which used analytical tools such as SPSS. The use of SEM-PLS3
contributed to testing the robustness of the method of the model to
explore the integrative relationship of strategic orientation, innovation
and insurance companies’ business sustainability.
8. Limitations and future research
This research has some limitations that require further exploration of
the topic. First, it used a cross-sectional research design and, regardless
of the consistency of the results with the theoretical reasoning, this
approach bars the inference of causality from the hypothesized re­
lationships. Thus, future studies can address the issue by using longi­
tudinal designs and experimental approaches to infer the causal
relationships.
Second, the present study chose Malaysian insurance companies as
the study sample, as such establishments are characterized by innova­
tive tasks and intellectual property-based competition. Hence, the
innovation, strategic orientation and business sustainability relationship
may be more pronounced in this type of firm than in others. In this re­
gard, future studies can examine firms in a variety of industries and
contexts in order to extend and support the findings. Lastly, this study
contributes to the literature by examining the relationships among
innovation, strategic orientation and insurance companies’ business
sustainability, but it did not consider the role that contextual factors
play (e.g. strategic planning and strategic adoption). Future studies
could obtain further insights by examining the effects of these contextual
factors.
8
Sustainable Futures 4 (2022) 100075
9. Conclusion
This is a pioneering study investigating the effect of innovation on
the business sustainability of insurance companies, with strategic
orientation as the moderating variable. The findings are expected to
contribute to the innovation and strategic orientation literature in
Malaysia, as a developing nation. The study recommends that man­
agement, policy makers and Malaysian government review the relevant
innovation policies to enhance insurance companies’ business sustain­
ability nationally. The study is an extension of earlier work dedicated to
the topics of innovation and business sustainability of insurance com­
panies, as well as those that examined the moderating role of strategic
orientation. Based on the findings, strategic orientation does moderate
the innovation- business sustainability relationship.
The rationale is that in the current competitive and dynamic market
age, only the most innovative and fit establishments that strive to
enhance their business sustainability via the adoption of business pro­
cesses (innovation), hold the most promising future.
Finally, strategic orientation and innovation continue to convince
decision makers to focus on new and potential customers through
technologically developed products/services and using the most current
technologies. The findings of this study represent an important contri­
bution to the theory and practice of sustainability by insurance com­
panies in Malaysia. The recommendations, if implemented by the
Malaysian government, will go a long way to improving insurance
companies’ business sustainability and will contribute to the country’s
economic development.
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[84] J. Henseler, C.M. Ringle, M. Sarstedt, A new criterion for assessing discriminant Assistant Prof. Dr. Nagwan AlQershi is an assistant professor of strategic management and
validity in variance-based structural equation modelling, J. Acad. Mark. Sci. 43 (1) marketing. Currently, he is Senior Lecturer at the Faculty of Entrepreneurship & Business,
(2015) 115–135. (UMK). To date, he has published academic papers in Scopus-indexed journals. His
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global perspective. New Jersey. Pearson. Ed, 7, 816. CRM and performance in SMEs.
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Professor Dr. Roselina Binti Ahmad Saufi Dean of Malaysian Graduate School of Entre­
psychological research: Conceptual, strategic, and statistical considerations,
preneurship and Business, (UMK). She has successfully supervised more than 50 Doctoral
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and Masters Students in the areas of Entrepreneurship. Prof. Roselina Binti Ahmad Saufi
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has presented in various International conferences and has published in numerous articles,
companies integrate environmental sustainability, J. Bus. Ethics 95 (3) (2010)
among others in employee satisfaction and Business Excellence. She has several national
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and international publications to her credit. She is also actively involved in consultations
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on marketing and entrepreneurship to various organizations.
and environmental sustainability engagement: an application on technological
firms, J. Cleaner Prod. 171 (2018) 844–856.
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Strat. Manag. J. 18 (7) (1997) 509–533. ment and Senior Lecturer at the College of Business, (UUM). He has successfully supervised
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their indirect effect on competitive performance: findings from PLS-SEM and agement. Sany has presented in various International conferences and has published in
fsQCA, J. Bus. Res. (70) (2017) 1–16. numerous articles, among others in Total Quality Management and Business Excellence,
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performing projects: A dynamic capabilities approach, J. Bus. Res. 69 (9) (2016) Series. He is also actively involved in consultations on marketing and quality management
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also does consultancy and training work. She has given training and consultation in the
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area of financial planning, investment planning and tax planning to and provide consul­
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enhancement, customer service, and financial, tax and investment planning for corpora­
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capital on innovation via the mediating role of knowledge management: a Associate Professor Dr. Mohd Nor Hakimin Bin Yusoff is Dean of Faculty of Entrepre­
structural equation modelling approach, Int. J. Knowledge Manag. Stud. 8 (3-4) neurship & Business, (UMK). He has successfully supervised more than 20 Doctoral and
(2017) 273–298. Masters Students in the areas of Entrepreneurship. Prof. Hakimin has presented in various
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in the Malaysian electrical and electronics industry (Doctoral dissertation, Universiti employee satisfaction and Business Excellence. He has several national and international
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schools.

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