The role of human capital and collaboration with academia for innovation in hospitality sector: the case of Mugla

© PASOS. Revista de Turismo y Patrimonio Cultural. ISSN 1695-7121 Vol. 10 Nº 2. Special Issue. Pp. 77-84. 2012 www.pasosonline.org The role of human capital and collaboration with academia for innovation in hospitality sector: the case of Mugla Ummuhan Gökovalı i Mehmet Avcı ii Muğla University (Turkey) i Mugla University Department of Economics, Kotekli, Mugla, Turkey, [email protected]. ii Mugla University Department of Economics, Kotekli, Mugla, Turkey, [email protected]. Abstract: The relevance of human capital and collaboration with academia for innovation in the hospitality sector has never been denied, but the empirical evidence for this link is inadequate as far as Turkey is concerned. This paper intends to contribute to the knowledge in this area by employing self generated survey data for the province of Mugla, which is one of the most attractive holiday destinations in Turkey. The aim of this paper is to investigate the effects of human capital and collaboration with academia on innovation performance of hospitality fi rms. The results of the survey data and empirical investigation of logit and probit econometric models indicate that these factors are indeed conducive factors for the innovation performance of hospitality fi rms. Keywords: Innovation in Tourism; Determinant factors of innovation; Human capital; Collaboration with academia. Título: El papel del capital humano y la colaboración con las universidades en la innovación del sector de hostelería: el caso de Mugla Resumen: La literatura no niega la relevancia del capital humano y la colaboración con las universidades en vistas a la innovación en el sector de hostelería, pero la evidencia empírica de este enlace es insufi ciente por lo que se refi ere a Turquía. Este trabajo pretende contribuir al conocimiento en esta área mediante el empleo de datos generados a través de una encuesta hecha en la provincia de Mugla, uno de los destinos turísticos más atractivos de Turquía. El objetivo de este trabajo es investigar los efectos del capital humano y la colaboración con instituciones académicas en el nivel de innovación de las empresas de hostelería. Los resultados de los datos del estudio y la investigación empírica de los modelos logit y probit econométricos indican que estos factores son realmente los que propician la innovación en las empresas de hostelería. Palabras clave: Innovación en turismo; Factores determinantes de la innovación; Capital humano; Colaboración con la academia. https://doi.org/10.25145/j.pasos.2012.10.029 78 PASOS. Revista de Turismo y Patrimonio Cultural, 10(2). Special Issue. 2012 The role of human capital and collaboration ... ISSN 1695-7121 Introduction As in manufacturing sectors, economic performance, survival and competitiveness of hospitality fi rms depend on their innovation capabilities and how quickly they adopt new technologies in their management and organizational structure, and in their accommodation and services facilities. The recognized importance of innovation led to the surge of research and this topic was investigated intensively from different perspectives. While, the vast majority of studies focus on manufacturing industries, there is small amount of research related to innovation in the service sector and even less in the hospitality sector. Although innovation in the hospitality sector lately attracts scholars in terms of the type of innovation, the determinant factors and the outcome effects of innovation, there are few studies that specifi cally take into account the investment into human capital and collaboration with the university as determinant factors of innovative activities of hospitality fi rms. These studies are limited around the world and very scarce in Turkey. As far as we know, there is no study which specifi cally deals with the relationship between innovation capabilities and investment into human capital and collaboration with the university of hospitality fi rms in Turkey. Given the lack of academic empirical research for the link between innovative behaviors and investment in to human capital and collaboration with the university of hospitality fi rms in Turkey, this paper intends to contribute to the knowledge in this area by employing self-generated survey data for the district of Mugla, which is the second largest tourist destination (both for national and international tourists) in Turkey. The main purpose of this study is to lay out innovative capabilities of hospitality sector in the district of Mugla and empirically compare and contrast similarities and differences among hospitality fi rms in terms of innovation capabilities and investment in to human capital and cooperation with the academia. For this purpose, the second section surveys the literature on the role of human capital and collaboration with academia for hospitality fi rms, while section three summarizes the main fi ndings of the questionnaire. Section four employs logit and probit econometrics models to determine the factors that affect innovation capabilities of hospitality fi rms. The last section is reserved for concluding remarks. Literature survey Innovation studies go back to Schumpeter’s (1934) analysis. Since then, both theoretical and empirical contributions have been done into innovation studies. Although Schumpeter’s analysis was mainly applied to the manufacturing sector, and innovation studies are still largely dominated by manufacturing both in terms of the theory and empirical analysis, innovation studies in the service sector have also been developed (among others see, Barras, 1986; Sundbo, 1997; Sirilli and Evangelista, 1998; Hughes and Wood, 2000; Drejer 2004; Tamura et al., 2005). Hence the innovation approach developed originally for the manufacturing sector can still be used to analyze services (Sundbo, 1997; Sirilli and Evangelista, 1998; Hughes and Wood, 2000). However, service and manufacturing fi rms differ from each other in terms of i-) the utilization of intellectual property rights and existence of research and development department (Sundbo, 1997, Tamura et al., 2005), ii-) the types of innovation (Sundbo, 1998), iii-) differences in responsiveness to markets, low technology content of the service (tourism) sector (Hjalager, 2002; Decelle, 2006) and iv-) non-existence of university-business collaborations in the service (tourism) sector (Hjalager, 2002). Innovation analysis in the tourism sector can be analyzed similarly to that of the service sector. There are several classifi cations of innovations in the tourism sector (for more detailed information see among others Decelle, 2006; Hjalager, 1997; 2002; Jacob and Groizard, 2007). Innovations in tourism can be behavioral and technological or a mixture of them. Weiermair (2006) distinguishes three factors behind the innovation in tourism. These are supply or supply-related determinants (for example new technologies requiring development of new skills, services or form of organizations in tourism such as the development of e-tourism, and e-marketing in tourism), demand drivers (social and economic factors such as fl exible working time, more income and increased value of holidays) and the level and pace of competition (globalization and deregulation increased competition and lead to process innovation) (p. 60). Hjalager (2010) distinguishes three theoretical schools in explaining the determinants and driving forces of innovation in tourism. The fi rst one is the Schumpeterian school where entrepreneurship is viewed as a driving force in innovation behavior. The second one is the technology-push/demand-pull Ummuhan Gökovalı and Mehmet Avcı ISSN 1695-7121 79 PASOS. Revista de Turismo y Patrimonio Cultural, 10(2). Special Issue. 2012 paradigm in which both concepts have some effects on the innovation performance of tourism fi rms. The third one is the Marshalian innovation systems or innovation cluster approach. However, Hjalager (2010) concludes that “there is a lack of comprehensive empirical evidence to document the nature of driving forces in innovation systems” (p. 5). There are a small number of studies which specifi cally dealt with the innovation in the hospitality sector. These studies are mostly concentrated on the type of innovation within the hospitality sector. In these studies process innovations are found to be more important than product innovations (Jacob et al., 2003; Blake et al., 2006; Jacob and Groizard, 2007). Product innovations are limited in the tourism sector because tourism mainly depends on the natural and manmade attractions of the destination, hence limiting the potential for product innovations (Keller, 2006). In terms of the technological area where technological innovations take place, the ICT area followed by environmental innovations and the security area constitute the largest part in the Latin American (Mexico and Dominican Republic) chain (Balearic) hotels (Jacob and Groizard, 2007). This picture is similar to those found for the Balearic Islands (Orfi la-Sintes et al., 2005) except that a more innovative behavior is found in kitchen and restaurant equipment after the ICT area. The use of technologies usually embodied in new machinery, equipment and software is the dominant innovation form in the hospitality sector in the Balearic Islands (Orfi laSintes et al., 2005). There are several factors that affect innovation behavior of hospitality fi rms, such as proximity and clustering, thus facilitating knowledge spillovers. Clustering with returns to scale factors can make a region competitive in terms of provision of well educated and trained personnel and infrastructure (Decelle, 2006). The other important factor is the utilization of information and communication technologies in tourism (Keller, 2006). Adaptation of information and communication technology and effi - cient usage of these technologies are very important factors for the development of the tourism sector as well as for the sustainability of medium and small sized fi rms. Some others investigated the effects of innovation on hotel performance and found a positive relationship (Blake et al., 2006; Orfi la-Sintes and Mattsson, 2009), while others investigated the determinant factors of innovation in the hospitality sector. The hotels which use professional management instruments and information technologies (Sundbo et al, 2007) and those which develop group and project management skills, and learning culture (Kumar et al., 2008) are more innovative compared to others. Moreover, hotels which belong to chain, under management contract and managed in lease properties are more innovative than hotels operating independently or managed by the owners (Orfi la-Sintes et al., 2005; Sundbo et al., 2007). Hotels are found to be more innovative as the tour operators’ importance in booking (Orfi la-Sintes et al., 2005; Sundbo et al., 2007) and the occupancy rate increase (Orfi laSintes et al., 2005). Further, more than half of noninnovating fi rms are contracted under a half-board regime, while the customers of 53.5% of innovators use full board or all-inclusive systems (Orfi la-Sintes et al., 2005). Firm size and innovation behavior are the other researched areas within innovation studies in the accommodation sector. Firms tend to be more innovative as their size and/or scale or range of activities increase (Hjalager, 2002; Jacob et al., 2003; Jacob and Groizard, 2007; Sundbo et al., 2007). 3 and 4-5 star hotels are found to be more innovative, and innovative behavior of 1 and 2 star hotels include the use of computer facilities and hardware (Orfi la-Sintes et al., 2005). The level of human capital and investment into human capital is another key element in innovation capabilities of fi rms. Employee training for the Taiwanese hotel industry (Chun-Yao et al, 2008) and for independent hotels in Germany (Ottenbacher et al., 2006) is found to be one of the important determinant factors for innovation. Firms’ age can be another important factor for the innovation performance of companies. However, its effect on innovation is ambiguous. While young fi rms are expected to be more innovative than their older counterparts due to less resistance to innovative ideas, one can also expect just the opposite relation between the fi rms’ age and innovative behavior. As fi rms’ age increases the innovation capabilities increase as well due to fi rms’ learning-by doing, an established name and reputation and continuous improvements in their facilities (Pires et al., 2008). Innovation In Hospitality Firms In Mugla District There is no available data concerning the innovative activities of hospitality fi rms for Turkey in 80 PASOS. Revista de Turismo y Patrimonio Cultural, 10(2). Special Issue. 2012 The role of human capital and collaboration ... ISSN 1695-7121 general and for Mugla in particular. In this study self-generated survey data is employed to investigate the role of human capital and collaboration with academia on innovation capabilities of hospitality fi rms. All hotels which have stars from 1 to 5 and holiday villages (fi rst and second class) around the Mugla district are the target population and the survey methodology is personnel interview at the hotels. The list of hotels was accessed from the tourism offi ce of the Mugla district. There are 331 hotels which are categorized by star including holiday villages. Of these 200 hotels were contacted and 137 of them participated in the interview and answered the questionnaire, which was previously tested using a pilot study and revised according to the feedback received. Table 1 presents the descriptive statistics of the questionnaire results. According to the survey results, 42.34% of hotels are innovative, whereas 57.66% of the hotels are not innovative2. Within the innovating fi rms, a higher percentage of fi rms hires a professional manager, have some kind of certifi cations (these certifi cations include HACCP, Environmental Management Standards, Service Compliance Certifi cate, and other certifi cations), and trained their employees. In terms of average employee, investment and occupancy rate, innovating fi rms outperform the non-innovating fi rms. Further, innovating fi rms collaborate with academia more frequently than non-innovating fi rms. Small-sized fi rms are dominant in the hospitality sector, followed by medium and big-sized fi rms. Most of the innovating fi rms are medium sized whereas most of the non-innovating fi rms are small-sized. According to the survey results, innovative activity seems to increase as fi rm size increases. As far as the age of the fi rm is concerned, survey results indicate that the average age of innovating fi rms is higher than that of non-innovating fi rms. Model and results Our model is estimated by logit and probit estimation methods. Our dependent variable takes the value of 1 if the fi rm innovates and 0 otherwise. Four sets of independent variables are of special interest to this study. These are collaboration with academia, fi rms’ size, fi rms’ capital and labor characteristics. Collaboration with academia takes the value 1 if the fi rm collaborates with the academia, zero otherwise. Size is measured by the number of employees following Sundbo et al. (2007). To allow the non-linear size effects we also include the size square in our estimation. Capital and labor characteristics include variables such as investment (the share of investment in income), professional management (dummy variable taking one if the hotel is managed by a professional manager and zero otherwise), yearly occupancy rate, non-certifi ed (dummy variable taking one if the hotel does not have any certifi cation and zero otherwise), training of employees (dummy variable taking one if training program is utilized Table 1. Questionnaire Results, Descriptive Statistics Innovating Firms (58 - % 42.34) NonInnovating Firms (79 - % 57.66) Number % Number % Professional Manager 54 93.10 6 7,60 Owner 46.90 7392,40 Owner of Certification 55 94.82 28 35,44 Training 55 94.82 16 20.25 Collaboration with academia 18 31.04 1 1.27 Firm Size Small (0-49 employee) 8 10.52 68 89.48 Medium (50-249) 42 79.25 11 20.75 Big (250 and more) 8 100 - - Total 58 42.34 79 57.66 Average Employee 147.01 30.50 Average Investment (Percentage Share in Annual Revenue) 21.69 13.26 Average Yearly Occupancy Rate 81.63 68.73 Average age 12.47 9.87 Ummuhan Gökovalı and Mehmet Avcı ISSN 1695-7121 81 PASOS. Revista de Turismo y Patrimonio Cultural, 10(2). Special Issue. 2012 and zero otherwise) and continuous variable of age of the fi rm. All variables are expected to have a positive impact on the probability of innovation of the fi rm, except for variables of non-certifi ed and age of the fi rm. The coeffi cient on non-certifi ed is expected to be negative indicating that if the fi rm does not have any kind of certifi cation, then its probability to innovate decreases. A priori, the effect of the age of the fi rm on innovation is not known as argued above. Table 2 presents the estimation results. Estimation results are consistent with the expectations and all coeffi cients are signifi cant at conventional levels. Wald tests indicate that both regressions are signifi cant as a whole and Pseudo R2 is respectively high indicating that our models have a good predictive power. We also performed a test to determine whether there is any misspecifi cation in our model and the Link test indicates that there is none. The estimation results indicate that as the fi rms’ investment and its capacity utilization increase, the probability of innovation increases as well. Firms who allocate budget to new investments (such as new technologies and equipment, or update old technologies and equipment) have higher probability to innovate. Further, as occupancy rate increases, the probability to innovate increases as well. This fi nding is similar to that of Orfi la-Sintes et al. (2005). Firms which hire a professional manager are more inclined to innovate. Professional management is very important in the introduction of innovation as suggested by our study and others (Sundbo et al. 2007; Kumar et al., 2008). If the fi rm does not have any certifi cation, its probability of innovating decreases compared to other fi rms which have any kind of certifi cation. Hotels with any certifi cations are more inclined to innovate since they have to invest and adopt new Figures in parenthesis are robust standard errors. *,**,*** refer signifi cance level at 10%, 5%, and 1% respectively. Table 2. Logit and Probit Estimation Results Variables Logit Coefficients Probit Coefficients Investment 0.68*** (0.21) 0.38*** (0.09) Occupancy Rate 0.83*** (0.21) 0.46*** (0.11) Non -Certified -9.61*** (2.25) -5.49*** (1.31) Number of Employees -0.15*** (0.05) -0.09*** (0.03) (Number of Employees)20.0003*** (0.0001) 0.0002*** (0.0001) Training 15.67*** (3.48) 9.04*** (2.09) Professional Management 11.85*** (2.79) 6.66*** (1.57) Collaboration with Academia 4.3*** (1.39) 2.34*** (0.79) The age of firm -0.58** (0.27) -0.29*** (0.09) Constant -82.18 (21.15) -45.71 (10.92) Number of Observations 134 134 Wald chi2(9) 23.65 31.2 Prob >chi 20.0049 0.0003 Pseudo R20.8984 0.8972 Link Test -0.007 -0.011 82 PASOS. Revista de Turismo y Patrimonio Cultural, 10(2). Special Issue. 2012 The role of human capital and collaboration ... ISSN 1695-7121 procedures and requirements and while doing this, their probability to innovate increases. In the literature that we were able to reach, we could not fi nd any study that specifi cally take certifi cation into account while investigating the innovative behaviors of the accommodation sector. So it is not possible to compare our results with any other study. The coeffi cient on training is positive and signifi - cant. Firms who trained their employees are more likely to innovate than others. Our fi nding is similar to that of Orfi la-Sintes and Mattson (2009) and Chun-Yao et al (2008). Collaboration with academia is found to have a positive impact on the innovation probabilities of fi rms. We could not compare our results with any other study since we could not fi nd any empirical investigation which specifi cally takes into account the effect of collaboration with academia on innovation performance of fi rms. We fi nd signifi cant coeffi cients on size and size squared. As size increases, the probability to innovate decreases; however, once the threshold is achieved then an increase in size increases the probability of innovation. The sign on coeffi cients on size square indicates that the probability to innovate increases once the economies of scale are achieved. There is an indication that economies of scale might exist in the accommodation sector. Our fi ndings indicate that there is a U-shape relationship between innovation probability and fi rm size. As far as we know there is no study in the tourism literature that specifi cally takes into account non-linearity in innovation with respect to size; hence we could not compare our results with any other study in the tourism literature. However, in other studies it is found that larger fi rms are more innovative than the small ones (Hjalager, 2002; Jacob et al., 2003; Jacob and Groizard, 2007; Sundbo et al., 2007). Our empirical fi ndings indicate that as fi rms get older, the probability to innovate decreases. This result is confi rmed by both models. This fi nding suggests that aged fi rms may show resistance to innovation or be unable to change their managerial positions or renew facilities according to a more demanding environment. More research is needed in this area. Concluding remarks This study investigated the role of human capital and collaboration with academia on innovation performance of hospitality fi rms by employing selfgenerated survey data obtained from the district of Mugla which is the second largest tourist attraction in Turkey. The econometric logit and probit model is estimated by utilizing the survey data. Estimation results indicate that besides conventional factors of innovation in the hospitality sector such as investment, management type and occupancy rate, human capital and collaboration with academia are important determinant factors of innovation performance of fi rms as well. With the increasing competition around the globe, innovation becomes the center of attention. Firms and enterprises should be aware of the potentials for innovation, such as new business models, additional investment for not only renewal of the existing equipment but also new equipment and installations. Weiermair (2006) claims that the challenge for the future in the tourism sector is “to provide increased value for money either through innovation-driven changes in production and marketing processes that reduce costs or product changes that offer more varied tourism experiences for quality conscious customers”. Innovation-oriented tourism policy is needed to have sustainable growth for the economy as a whole and for the tourism fi rms. These policies in the hospitality sector should aim to promote fi rst the quality of education. The problem in the tourism sector is that it usually attracts staff with little or no industry-relevant training with a high labor turnover at a low salaries and non-standard working conditions. There is not widespread dedicated career system in the traditional sense in the tourism sector (Hjalager, 2002). To overcome these problems, investment in human capital in the tourism sector is severely needed. As Blake et al. (2006) suggest, government policy for training can overcome the problem of underinvestment of human capital by businesses. Second, collaboration with academia should be promoted. Our empirical evidence supports the view that university-sector relation is important for innovation performance, and thus for the overall performance of fi rms in tourism. Sundbo et al. (2007) claim that larger fi rms are able to employ people with more education, thus increasing the possibility of innovation. They suggest that policy makers should give more importance to education and managerial professionalism in the tourism industry and promote the use of IT in the tourist industry. They claim that “destination building based on large-scale tourism fi rms may sustain innovative and thus competitive tourist destina- Ummuhan Gökovalı and Mehmet Avcı ISSN 1695-7121 83 PASOS. Revista de Turismo y Patrimonio Cultural, 10(2). Special Issue. 2012 tions.” (p. 104). Our fi ndings suggest that increasing innovative activity of fi rms can involve several policy actions. These are; i) investment in both human and physical capital, ii) promotion of collaboration with academia, professional management and ownership of certifi cation by fi rms, iii) taking measures to increase capacity utilization of fi rms and iv) promotion of larger fi rms so that economies of scale can be achieved. All these can be achieved by the stimulating, coordinating and promoting role of the state. References Barras, R. 1986 Towards a theory of innovation in services. Research Policy, 15(4): 161-173. Blake, A., Sinclair, M. T. and Soria, J. A. C. 2006 Tourism productivity: Evidence from the United Kingdom. Annals of Tourism Research, 33(4): 1099-1120. Chun-Yao, T., Hui-Yueh, K. and Shou-Shiung, C. 2008 Confi guration of innovation and performance in the service industry: Evidence from the Taiwanese hotel industry. The Service Industries Journal, 28(7): 1015-1028. Decelle , X. 2006 A dynamic conceptual approach to innovation in tourism. 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Tamura, S., Sheehan, J., Martinez, C. and Kergroach, S. 2005 Promoting innovation in services. In Enhancing the Performance of the Service Sector. OECD/RIETI, 133-177. Weiermair, K. 2006 Product improvement or innovation: What is the key to success in tourism? In Innovation and Growth in Tourism. OECD. Notes 1 There are 5 parts and 44 questions in the questionnaire. The fi rst part aimed to identify basic information about hotels. The second part was designed to address the list and description of novelties or improvements. The third part aimed to identify characterization of innovation activities. The fourth and fi fth part includes questions concerning human capital characteristics of fi rms and collaboration with academia. 2 Following the literature and defi nition of in-novation in service sector of OECD, we defi ned technological improvement and innovation and ask whether fi rm is engaged with any kind of these activities. If the answer is yes then we categorize these fi rms as innovating fi rms. Recibido: 15/02/2011 Reenviado: 30/09/2011 Aceptado: 31/10/2011 Sometido a evaluación por pares anónimos