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Learning, Innovation and Competitive Advantage in Not-for-Profit Aged Care Marketing: A Conceptual Model and Research Propositions

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Learning, Innovation and Competitive Advantage in Not-for-Profit Aged Care Marketing: A Conceptual Model and Research Propositions
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  Learning, Innovationand Competitive Advantagein Not-for-Profit Aged Care Marketing:A Conceptual Modeland Research Propositions Jay WeerawardenaGillian Sullivan-Mort ABSTRACT. The rapid expansion and the increased commercializationof the elderly consumers market have forced not-for-profit organizations(NFPs)toadoptacompetitivepostureintheiroperationsandtopursuein-novative ways of delivering superior aged care to the target market. Thispaper attempts to model the antecedents of innovation-based competitivestrategy in NFPs. Premised on the capability-based model of sustainedcompetitive advantage and incorporating the emerging concept of socialentrepreneurship, it is argued that entrepreneurial NFP organizations, intheirmissiontocreatesocialvaluetomultiplestakeholders,buildandnur-turedistinctivelearningcapabilitiesthatenablethemtoformulateinnova-tive strategies for superior aged care delivery. Key theoretical constructswithin the model are explored and research propositions are presented. [Article copies available for a fee from The Haworth Document Delivery Ser-vice: 1-800-342-9678. E-mail address: <getinfo@haworthpressinc.com>Website:<http://www.HaworthPress.com>©2001byTheHaworthPress,Inc. All rights reserved.] JayWeerawardena,PhD,isLecturer,atTheGraduateSchoolofManagement,Uni-versity of Queensland, St. Lucia, Qld 4072, Australia (E-mail: j.weerawardena@gsm.uq.edu.au).Gillian Sullivan-Mort, PhD, is Lecturer, at The Graduate School of Management,University of Queensland, St. Lucia, Qld 4072, Australia (E-mail: g.mort@gsm.uq.edu.au).Journal of Nonprofit & Public Sector Marketing, Vol. 9(3) 2001   2001 by The Haworth Press, Inc. All rights reserved.  53  KEYWORDS. Socialentrepreneurship,distinctivecapabilities,innova-tion, competitive advantage  INTRODUCTION  Not for profit organizations (NFPs) in the aged care sector face twoimportant environmental changes that increase the pressure for effec-tiveness and efficiency: the general ageing of population and the “rein-ventinggovernment”initiatives.Theincreasingageingpopulationwiththe accompanying need to increase the volume of services provided iscoupled with the changing character of the aged population, reflectingthe diversity of needs from the active senior, to the “growing depen-dence” of the frail aged segments. Similarly “reinventing govern-ment”initiativeshavecombinedtoproduceasocialandeconomicenvi-ronment that fosters customer rather than client perspectives and userpays rather than a blanket welfare provision orientation. These initia-tives are reflected in the increased outsourcing of government servicesprovidingampleopportunitiestoagedcareserviceprovidersforexpan-sionandgrowthoftheiroperations.Boththesechanges,particularlytherapidly increasing aged care market comprising consumers who typi-cally have high discretionary incomes have attracted commercial agedcare service providers to the market.Within the increasingly complex internal and external environmentNFPsareforcedtodevelopmorecompleteunderstandingoftheirtargetmarket and develop innovative strategies to deliver superior aged careservices to achieve competitive advantage. Although the literature onNFPs and the aged care marketing has increased in volume over the lastfew decades, the literature examining not for profit value creating strat-egies has been limited and fragmented. Particularly, the role of innova-tion in gaining sustained competitive advantage (SCA) in NFPs hasbeen limited. This paper attempts to model the antecedents of not forprofit innovation-based competitive strategy. Premised on the capabil-ity-based model of   SCA  and incorporating the emerging concept of so-cialentrepreneurship,wepresentaframeworkthatexaminestheroleof learning capabilities in the innovation-based competitive strategy inNFPs. Essentially we argue that increased commercialization of agedcaremarkethasforcedNFPstopursuecompetitivestrategiestosurviveand grow in the market. These strategies come into conflict with theirsocial mission. However, using the emerging concept of social entre-preneurship we suggest a compromise in that social entrepreneurial 54 JOURNAL OF NONPROFIT & PUBLIC SECTOR MARKETING  NFPspursuecompetitivestrategiesandgaincompetitiveadvantagebutallsuchstrategiesareaimedatcreatingsuperiorsocialvalueandnotsu-perior profits as suggested in business strategy research. We suggestthat social entrepreneurship and learning capabilities comprise keycomponents of a theoretical model that examines the role of innovationin gaining SCA in NFPs.Ourpaperproceedsasfollows.First,weexaminetheliteratureonthestrategy formation activity in not for profit organizations. Second, thetheory of sustained competitive advantage is explored, specifically ex-amining the role of innovation in gaining sustained competitive advan-tage in NFPs. Third; we discuss the importance of learning processes inorganizational innovation. Fourth, we present a theoretical framework describing the key theoretical constructs of the model and the system of relationships.Simultaneously,theresearchpropositionsemergingthroughthe model are presented. Next, issues relating to operationalising themodel are discussed. We conclude by discussing the implications of ourconceptual model for NFP competitive strategy theory and practice. STRATEGY FORMATION CHARACTERISTICSOF NOT-FOR-PROFIT ORGANIZATIONS The need to examine the NFP competitive strategy is justified bytheir unique operational characteristics (Parker, 1998). NFPs basicallydifferfromcommercialorganizationsintermsoftheirmissionthatistoprovide some form of human service activity that primarily impacts onthequalityoflifeofthetargetmarket.TheNFPsarefacedwithmultipleservice objectives and are required to develop programs to satisfy thevarious needs of multiple sponsors. In responding to a large mix of stakeholders that may include government, clients, members, sponsors,donors, employees and special interest groups, NFPs face a problem of balancing financial and operational objectives. Similar to their com-mercial counterparts they must intensely compete with other NFPs andcommercialorganizationsformarketopportunitiesandfundingforvar-ious aged-care projects. The growing senior citizens market has at-tracted a large number of private sector aged-care providers to theindustry. These environmental changes which reflects a rising tide of commercialization of the aged care market have forced NFPs to pursueinnovativestrategiestodeliversuperioragedcareproductsandservicestotheirtargetmarket.InterestinglyNFPsoverthelastfewdecadeshavemoved from their traditional role of “donor-funded aged care service  Jay Weerawardena and Gillian Sullivan-Mort 55  provider” towards a competitive posture (Dees, 1998; Wallace, 1999).An increasing number of NFPs are raising funds through auxiliary com-mercial enterprises. More dramatically, a number of NFPs are beginningtocommercializethecoreprogramsthroughwhichtheyaccomplishtheirmissions.Theyarelookingforwaystomaketheseprograms rely less ondonations and grants and more on fees and contracts. As observed by(Dees, 1998a, p. 56),. . . NFPs are searching for the holy grail of financial sustainability.They view earned-income generating activities as more reliablefunding sources than donations and grants. Many of them nowconsider extensive dependency on donors as a sign of weaknessand vulnerability. Self-funding is the new mantra.On the other hand NFPs must work with other NFPs and commercialaged-care providers in the industry for matters of common interest thatmayrangefromlobbyingonanimportantissueintheindustrytostrate-gic alliances with other NFPs for superior aged-care delivery.The foregoing suggests the need to investigate into the factors lead-ingtoSCAinNFPs.AlsoitsuggeststhatanymodelthatexaminesNFPcompetitive advantage process must take cognizance of the unique op-erational characteristics of NFPs. However, the extant NFP strategy lit-erature is limited and fragmented (e.g., McGinnis & Vallopra, 1999;Parker, 1998; Wiesendanger, 1994; McLean, 1990; Joyce et al., 1985;Robinette, 1985) reflecting the need for a theoretical framework thatwill guide future research in NFP competitive strategy. THE THEORY OF SUSTAINED COMPETITIVE ADVANTAGE AND INNOVATION  The literature on competitive advantage has primarily evolved in thecontextofcommercialorganizations.Competitiveadvantageisdefinedas the ability of a business to derive abnormal profits in a competitiveindustry based on a value-creating strategy not simultaneously imple-mented by any current or future competitor (Aharoni, 1993; Porter,1985). This competitive advantage is sustainable when the advantageresists erosion by competitors who are unable to duplicate the benefitsof the strategy (Barney, 1991). For the purpose of this study, we defineSCA in NFP organizations, as a superior market position that capturesthe provision of superior customer and social value and/or the achieve- 56 JOURNAL OF NONPROFIT & PUBLIC SECTOR MARKETING  ment of lower costs, which resists imitation and which results in a mar-ket share dominance and industry leadership position.Firms create competitive advantage by conceiving new ways to con-duct activities of the value-chain for delivering superior customervalue, which is an act of innovation (Porter, 1985). This suggests,firstly, that innovation and the competitive advantage process are inter-connected. Secondly, innovation can occur in any value-creating activ-ity of the organization. Thirdly, all types of innovations can lead toSCA. Recent research suggests that innovation leads to SCA (AMC,1995;Hyvarinen,1990;Lengnick-Hall,1992).Interestingly,incontrasttotheliteratureoncommercialfirminnovation,whichisbiasedtotech-nological innovation, NFP innovation literature is dominated bynon-technological innovation (e.g., Jacobson, 1999; Osborne, 1998;Shin & McClomb, 1998; Jones & Eadie, 1994). Most of the literature isofprescriptivenature(e.g.,Enteen,2000;Gryskiewicz,2000;Wynesetal., 1999) and the role of organizational innovation in gaining  SCA  inNFPs has not been investigated. Recent research confirms that firms ingeneralpursuebothtechnologicalandnon-technologicalinnovationsandboth types of innovations lead to SCA (AMC, 1995; Weerawardena,1999).Inthispaper,weconceptualizeorganizationalinnovation broadlyincorporating both technological and non-technological innovations. CAPABILITY-BASED THEORY OF SUSTAINED COMPETITIVE ADVANTAGE During the last few decades there have been several theoretical mod-els of SCA that suggest alternative paths to competitive advantage. Thecapability-based model of SCA (Hayes et al., 1996; Prahalad & Hamel,1990; Grant, 1991) that has gained prominence in the competitive strat-egy literature over the last decade, suggests that (a) organizations pos-sessing distinctive capabilities gain SCA, (b) distinctive capabilities donot merely accrue to the organization but are built and nurtured by thestrategic leadership of the organization, and (c) sustainability of the ad-vantage depends on competitors’ inability to duplicate the capabilitieson which advantage has been founded. The capability-based model,compared to the environmental model (Bain, 1956; Porter, 1985) andthe resource-based model (Barney, 1991; Dierickx & Cool, 1989) pro-vides a more satisfactory explanation of the value-creation process andservice delivery by assigning a prominent role to the strategic leader-ship of the organization (Mahoney, 1995; Lado et al., 1992). Recent  Jay Weerawardena and Gillian Sullivan-Mort 57 
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