The forth industrial revolution and the impact of innovation on firm performance, a case study of appota

THE FORTH INDUSTRIAL REVOLUTION AND THE IMPACT OF INNOVATION ON FIRM  
PERFORMANCE, A CASE STUDY OF APPOTA  
1
2
Tran Minh Thu * -Phan Thi Tho**  
ABSTRACT: Innovation in the mobile phone industry is by far the most important factor to ensure the  
business success since it steers the firm into improvement and triggers customers’ curiosity. The aim of this  
research is to discover the relationships between innovation i.e. function, design and customer satisfaction  
in this company. To have a quantitative observation, questionnaires were designed and sent to customer of  
Appota. The data attained from the surveys is analyzed by SPSS statistical package program. Analysis results  
showed that the customer’s satisfaction regarding design and function does not depend on the gender, it  
is affected by the age. Therefore, company should look for targeted customers’ group and focusing on their  
demand when it comes to innovation changes.  
Keywords: Innovation, Appota, function, design, age, gender, customer satisfaction, 4th industrial revolution  
1. INTRODUCTION  
According to a market research conducted byAppota, which is a gaming company, in 2017 (APPOTA,  
2017), smartphone penetration in urban areas has risen from 20% in 2013 to 72% in 2016, which means  
a 350% increase in three years. This may be considered a booming in smartphone usage. In addition,  
the number of smartphone brands is added every year, including several big companies, such as Apple,  
Samsung, and Google. In 2017, there are approximately 20 brands, if not included unnamed phones from  
unknown manufacturers. The abundance of smartphone brand leads to the need to investigate the purchase  
behavior of customers, in order for a brand to gain advantages over others. As stated in a book (Kemp et  
al., 2003), firm performance is largely linked with innovation, this performance also includes the terms  
customer satisfaction, which will be the main focus of this research. Customers are being seen as the  
source of a company’s profitability (Hogan et al., 2002). This leads to an emphasis on the customer in the  
development strategy of all operating companies. Along with brand loyalty, customer satisfaction is of great  
importance to estimate a company’s success. Hence, enhancing customer satisfaction is a great challenge  
for the smartphone industry in the recent decade. This factor, which is used to estimate how much a product  
or service pleases its customers, is a crucial part of repurchase intent (Nemati, Khan and Iftikhar, 2010).  
In another research by Anderson, Fornell, and Lehmann (1994), the results also showed that customer  
satisfaction has a positive effect on market share and profitability. Creativity means making new product  
while innovation means that creative product results in financial benefits. Innovation means to create a new  
product or make and implement a new process; the main purpose of innovation is to gain the sustainable  
competitive edge or improve the efficiency of the organization and to get customer satisfaction (Leonard‐  
Barton, 1992). Its main objective is to raise the efficiency and competitiveness of the company. This factor  
*
Foreign Trade University, 91 Chua Lang, Dong Da, Hanoi.  
University of Science and Technology Hanoi, 18 Hoang Quoc Viet, Hanoi  
**  
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leads to the level of satisfaction in the buyers (Han et al., 1998), especially in the smartphone market,  
where each new product should be distinctive from other rivals in order to gain attraction from customers.  
Customer satisfaction may be defined as the degree to which the product buyers are satisfied with the product  
performance and their expectations are met. According to Oliver, Rust and Varki (1997), “satisfaction of the  
customer in general words means customer response to the condition of fulfillment, and customer decision  
of the statement of fulfillment”. The customer satisfaction is the source of customer loyalty, as Mittal et al.  
(1998) described that the customer satisfaction accounts for customer loyalty. Therefore, any organizations  
paying less attention to customer satisfaction will be out of the market. Since Vietnam is experiencing a rapid  
growth in the number of smartphone owners, the smartphone industry is in need of research indicating the  
factors affecting customers’ purchasing power, especially for the young generations. However, the number  
of works related to this interest is limited or undisclosed because they are mainly under the ownership of  
smartphone companies. Thus, this research provides an insight into the impact of smartphone innovation to  
customer satisfaction in Vietnam, using data collected through a survey. It establishes a relationship between  
product innovation and customer satisfaction in terms of smartphone manufacturing, pointing out to which  
extent a buyer is willing to pay for new smartphones thanks to the innovations in their design and function.  
In addition, the relationship is compared between male and female customers, as well as among different  
age groups. The information presented in this research is expected to help to reaffirm the strategy being  
used by global smartphone manufacturers, proving the accuracy and potential of the innovationsatisfaction  
relationship, as well as apply that strategy appropriately to Vietnam’s condition.  
2. LITERATURE REVIEW  
2.1 Innovation  
Despite going through a long period of study, there is an absence of a unified global common explanation  
for the term of Innovation (Lesakova et al., 2017). In general, innovation is considered the core of an organization  
(Akram et al., 2017) determining its success and achievements. Whenever companies fail or refuse innovating,  
they will soon disappear from the market. Moreover, innovation also brings and maintain several more benefits to  
firms over their rivals (Atalay et al., 2013). According to De Meyer and Garg (2005), innovation is characterized  
as a monetarily and socially effective presentation of another way or another fusion of existing methods in  
transforming materials to an outcome that result in changes in the value and price relationship offered to the  
clients. Another statement from Therrien et al. (2011) claimed that innovation represents a procedure identified  
with changes in capacities and forms whereby business is attempting to secure and expand upon their unique  
mechanical capability. In company level, innovation is the ability to adapt creativity to create a product evolution  
and generate novel goods and services (Rubera and Kirca, 2012). Innovation could be illustrated as products  
development, process advancements, development in business strategy, management structure, brand, marketing  
tactic, administration frameworks, client administration, and experience (Davila et al., 2013). In the Oslo Manual  
(OECD, 2005), innovation is classified into four categories which are product innovation, process innovation,  
marketing innovation and organizational innovation. This study will take into account only the product innovation  
which includes the presentation of products which is recently developed or remarkably enhanced (OECD, 2005)  
regarding to their functions and designs.  
2.2 Firm performance  
Firm performance is specified as a multidimensional notion (Atalay et al., 2013) which is a measure of  
the success of a company (Yeung et al., 2003). Additionally, it contains three success indicators: financial  
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performance, operational performance and the quality of products (Lakhal et al., 2006). The performance of  
an organization could be evaluated by two main methods which are objective and subjective measurements  
(Atalay et al., 2013). In this study, the subjective method was employed to survey the customers’satisfaction  
of recent smartphones’ innovations and subsequently determine the innovation–satisfaction relationship.  
3. METHODOLOGY AND FINDING  
The objective of this research is to establish a reliable relationship between 2 types of product  
innovation of smartphones (design and function) and satisfaction of customers. In doing so, a questionnaire  
was developed consisting 2 questions and 19 statements. The 2 questions were about the gender and age  
of the respondents. Regarding the statements, the first one asks whether the respondent agree or disagree  
that he/she satisfies with the recent innovation in design and function of smartphones, which acts as the  
dependent variable in the regression model. The rest were 9 statements each about Design innovations and  
Function innovations, all of which represent the independent variables. It is also of note that for each type  
of innovation, 2 to 3 negative and positive statements were proposed for each specific innovation items (the  
screen for Design, GPS for Function, etc.). The reason for that was to eliminate acquiescence bias, which is  
the tendency of respondents to agree with the statements of a questionnaire regardless of their content (Hinz  
et al., 2007). For the aforementioned statements, a 5-point Likert scale from Strongly Disagree to Strongly  
Agree was utilized to scale the responses to the questionnaire. The questionnaire was used for surveying  
by generating a google form and distributing it through social media to collect responses from netizens.  
The collected data was used for statistical analysis, which consisted of 4 main stages. The first stage was  
the reliability test and the factor analysis of the questionnaire. Then, the relationship between product  
innovation and customer’s satisfaction was derived using multiple regression analysis. In the last 2 stages,  
the satisfaction of innovation was compared between genders and different age groups.  
4.RESULT AND DISCUSSION  
4.1 Reliability test and factor analysis  
Cronbach’s Alpha is the test for internal consistency of a set of items, which are the statements in this  
research, and it is also regarded as a test for scale’s reliability (Bruin, 2006). For all items, a value higher  
than 0.6 is considered acceptable, while for each individual item, their Corrected Item-Total Correlation  
must be higher than 0.3 to be retained. The full result of the reliability test is listed in APPENDIX A and key  
features are summarized in Table 1. From the table, it is obvious that all items of Design and the variable  
itself satisfied the above conditions and were hence kept for further analysis. On the other hand, even  
though the Cronbach’s alpha of Function variable was higher than 0.6, the Corrected Item-Total Correlation  
values of statement 2 and 6 (denoted as FQ2 and FQ6) were lower than 0.3 and therefore must be deleted.  
The reliability test was then rerun for modified Function’s items and summarized in Function (new) column  
of Table 1. The revised items all had Corrected ItemTotal Correlation higher than 0.3 and the Cronbach’s  
alpha for Function increased to 0.864.  
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Table 1: Result of reliability test for Design and Function variables.  
598  
Design  
Cronbach’s Corrected Item Cronbach’s  
Alpha if Item Item-Total Alpha if  
Item Deleted Correlation  
Function (old)  
Corrected  
Item-Total  
Function (new)  
Item Cronbach’s Corrected  
Alpha if Item Item-Total  
Item  
Deleted  
Correlation  
Deleted  
Correlation  
(1)  
(2)  
(3)  
(4)  
(5)  
(6)  
(7)  
(8)  
(9)  
DQ1  
DQ2  
DQ3  
DQ4  
DQ5  
DQ6  
DQ7  
DQ8  
DQ9  
0.873  
0.894  
0.900  
0.883  
0.880  
0.888  
0.871  
0.878  
0.870  
0.78  
0.49  
0.44  
0.64  
0.69  
0.58  
0.79  
0.70  
0.80  
FQ1 0.794  
FQ2 0.839  
FQ3 0.815  
FQ4 0.802  
FQ5 0.795  
FQ6 0.844  
FQ7 0.793  
FQ8 0.805  
FQ9 0.822  
0.69  
0.28  
0.53  
0.65  
0.68  
0.216  
0.70  
0.61  
0.46  
FQ1 0.823  
FQ3 0.862  
FQ4 0.853  
FQ5 0.834  
FQ7 0.825  
FQ8 0.837  
FQ9 0.861  
0.78  
0.50  
0.58  
0.71  
0.77  
0.69  
0.43  
Cronbach’s Alpha = 0.894  
Cronbach’s Alpha = 0.831  
Cronbach’s Alpha = 0.864  
After the reliability test and the revision of Function’s items, factor analysis (Exploratory Factor  
Analysis or EFA) was carried out on each variable to regroup the items. The result is given in detail in  
APPENDIX B and summarized in Table 2. From the table, the Design variable was divided into 2 groups  
named DS1 and DS2 and for Function they were FC1 and FC2. In the end, from the initial 2 variables, the  
items were regrouped into 4 news variables that could affect the satisfaction. The new variables with their  
corresponding items are included in Table 3.  
Table 2: Result of EFA  
Rotated Component Matrixa Component  
1
2
3
4
DQ2  
DQ5  
DQ6  
DQ1  
DQ9  
DQ7  
DQ3  
DQ8  
DQ4  
0.814  
0.778  
0.771  
0.731  
0.727  
0.579  
FQ4  
FQ8  
FQ1  
FQ6  
FQ9  
FQ5  
FQ3  
0.867  
0.864  
0.845  
0.752  
0.85  
0.773  
0.726  
0.808  
0.76  
0.582  
DS2  
DS1  
FC1  
FC2  
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Table 3: New variables after regrouping.  
599  
Group Item  
Description  
1.The super large touch screen introduced in the first Samsung Galaxy Note would be very  
satisfying to type and read on.  
DQ2  
2. The large screen of new generation smartphones makes them hard to hold or keep in your  
pocket, and making it prone to robbery  
DQ5  
5. A stylus pen like the S-pen of Galaxy Note 5 provide a satisfying writing and drawing  
experience.  
DS1  
DQ6  
DQ1 6. Full aluminium body gives a luxury feeling when holding a smartphone  
DQ9 7. 2-sided glass body makes a phone more charming than an aluminium body  
DQ7 9. The thinner and lighter body of new generation smartphones are more convenient to hold and use.  
3. When large screen smartphone appears on advertisements, it made you immediately want to  
own one  
DQ3  
4. iPhone 8 makes a high impression a truly wireless device, free from charging cables and  
headphone cords, freeing you from tangled cables  
DS2  
DQ8  
8. Replacing most physical buttons with digital button on smartphones makes them more  
comfortable and easier to use  
DQ4  
1. Water resistance, which was first introduced in Xperia (Sony), was one of the most important  
features ever appeared in a smartphone. You will never have to worry if you dropped your phone  
into water  
FQ4  
6. You were super amazed when Apple introduced multi-point touchscreen smartphone. Once  
you had a smartphone with touchscreen, you were very satisfied and never switch back to  
physical keyboard phones  
4. Touch ID allow users of the phone to unlock their iPhone quickly and confirm purchases from  
the iTunes and Appstore with ease. Super convenient!  
8. Thank to free Global Positioning System (GPS) on smartphones, you can travel without  
getting lost and use helpful applications like Grabtaxi, Uber, etc...  
3. Since water resisting appeared on smartphones, you would not buy one without that feature  
FQ8  
FQ1  
FC1  
FC2  
FQ6  
FQ9  
FQ5  
FQ3  
5. Fingerprints can be lifted from anywhere and that makes it easier for hackers to get into  
someone’s phone. Plus, you cannot change them once they are stolen.  
9. GPS drained your battery too fast you rarely use it  
4.2. The correlation between product innovation and customer’s satisfaction.  
4.2.1 Pearson correlation coefficient  
Pearson correlation coefficient is the measure of the correlation between two variables X and Y. It has  
a value between +1 and −1, where 1 is total positive correlation, 0 is no correlation, and −1 is total negative  
correlation. The Pearson correlation result is summarized in Table 4.  
Table 4: Pearson Coefficient of variables  
Correlations  
S
DS1  
DS2  
FC1  
FC2  
.813**  
.664**  
.767**  
.636**  
S
Pearson Correlation  
Sig. (2-tailed)  
N
Pearson Correlation  
Sig. (2-tailed)  
N
Pearson Correlation  
Sig. (2-tailed)  
Pearson Correlation  
Sig. (2-tailed)  
Pearson Correlation  
Sig. (2-tailed)  
1
.000  
85  
1
.000  
85  
.651**  
.000  
85  
.000  
85  
.000  
85  
.571**  
.000  
85  
.495**  
.000  
.562**  
.000  
1
85  
.813**  
.000  
85  
.818**  
.000  
85  
DS1  
85  
.664**  
.000  
.767**  
.000  
.636**  
.000  
.651**  
.000  
1
.587**  
.000  
1
DS2  
FC1  
FC2  
.818**  
.000  
.587**  
.000  
.495**  
.000  
.571**  
.000  
.562**  
.000  
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The Pearson correlation coefficients range from 0.495 to 0.813 in the data sample with a note that all  
of the correlations are positive. In addition, 100% of significant tests prove the existence of relationships  
between the factors in overall. As such, the data are totally fit with linear models.  
4.2.2 Multiple regression analysis.  
Multiple regression model determines the relationship between a dependent variable, which is the  
satisfaction of customers (S), and independent variables (DS1, DS2, FC1, and FC3). Adjusted R Square  
equals 0.727 indicates that 72.7% of the variances in term of the customer’s satisfaction. The F value  
is 57.071 at 95 % confidence level with sig value equal 0,000. The Durbin Watson Test is a measure of  
autocorrelation, also called serial correlation, in residuals from regression analysis. In this test, Durbin  
Watson statistic is 1.959. it means that models are not violated when using multiple linear regression.  
The maximum value of VIF (Variance Inflation Factor), 3.58, explains no multicollinearity between the  
independent variables, hence, the model is acceptable.  
Table 5: Result of multiple linear regression model  
Model  
Unstandardized  
Coefficients  
Standardized  
Coefficients  
t
Sig.  
Collinearity Statistics  
VIF  
B
Tolerance  
Std. Error  
Beta  
1
(Constant) .645  
.195  
.090  
3.314  
3.788  
.001  
DS1  
DS2  
FC1  
FC2  
.341  
.151  
.162  
.195  
.408  
.000  
.028  
.030  
.009  
.279  
.549  
.316  
.626  
3.580  
1.820  
3.170  
1.597  
.067  
.074  
.073  
.172  
.224  
.192  
2.239  
2.205  
2.673  
R Square = 0.740; Adjusted R Square = 0.727; Sig = 0,000 Finally, the research found out the Linear  
multiple regression of the relationship between customer’s satisfaction and four factors of innovation of  
Design and Function of Smartphone as followed:  
S=0.645 + 0.341*DS1 + 0.151*DS1 + 0.162*FC1 + 0.195*FC2.  
Where:  
• S: customer’s satisfaction.  
• DS1: group1 of phone design innovations.  
• DS2: group2 of phone design innovations.  
• FC1: group1 of phone function innovations.  
• FC2: group 2 of phone function innovations.  
4.3 Comparison of the relationship between satisfaction and product innovation between genders and age groups.  
4.3.1 The difference between genders  
The ANOVA and Levene test’s result comparing the satisfaction to smartphone’s innovations between  
male and female respondents is presented in Table 6. The sig. value of Levene test was 0.801 (>0.05) at  
95% confidence level indicating that the variances of males and females’ satisfaction were not significantly  
different. Moreover, the sig. value ofANOVAtest was higher than 0.05 at 0.737, which could be understood  
that the mean satisfaction of two sexes were not significantly different either. Nevertheless, the mean  
satisfactions were around 3.33.4, i.e. the satisfaction of customer only was merely the neutral and the  
customers do not really satisfy with these innovations of smartphones.  
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Table 6: The difference between genders  
601  
Sig  
N
Mean  
Levene ANOVA  
Male  
42  
43  
85  
3.3095  
3.3721  
3.3412  
.801  
.737  
Female  
Total  
4.3.2 The difference between age groups.  
Unlike genders, the means and variances of different age groups showed a clear difference, as evidenced  
by the sig. values of both Levene and ANOVA test (see Table 7). Therefore, Duncan analysis was carried  
out to determine which age groups had similar responses. The result shows that the groups who are younger  
than 30 shared a similar neutral satisfaction (around 3.4), whereas those who are older than 30 expressed  
slightly negative satisfaction toward smartphones’ innovations. However, since the sample populations of  
different age groups were not comparable (64 responses from the 18-23 age group compared to only 3 from  
over 30 respondent), hence, more responses from each age groups should be collected in the future.  
Table 7: The difference between age groups.  
Sig  
Duncan  
Subset for alpha = 0.05  
Age  
N
Mean  
Levene  
0.100  
ANOVA  
1
2
<18  
5
3.4000  
3.3906  
3.3846  
2.0000  
3.3412  
0.050  
3.400  
3.391  
3.385  
18-23  
23-30  
30-40  
Total  
64  
13  
3
2.000  
1.000  
85  
.975  
4.4. Proposal to smartphone companies  
The research result shows that most customers are neutral with the innovations of smartphones and  
there is no difference in satisfaction between the sexes. The age groups, on the other hand, showed a  
significant difference among them and should be the main focus of companies’ innovation plan. For the  
purpose of proposing solutions, the satisfaction scores of the groups according to four product innovation  
variables are summarized in Table 8.  
Table 8: The satisfaction of age groups to 4 innovative variable  
Age  
<18  
satisfaction  
3.40  
DS1  
3.20  
3.41  
3.36  
DS2  
2.93  
2.89  
3.10  
FC1  
3.40  
3.40  
3.63  
FC2  
3.53  
2.89  
3.00  
18-23  
23-30  
3.39  
3.38  
30-40  
2.00  
2.17  
2.00  
2.08  
2.11  
From this, there are two proposals to the companies:  
• The 30 - 40 age group: this group of customers is critical, all of these new and improved innovations  
are not satisfy them. Therefore, the company needs time to improve their own lines, or can introduce new  
products specifically for this group.  
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• Younger than 30 age groups: people in this group like these innovations about the function than  
that of design. The highest mean level of satisfaction only reached 3.63 that means the acceptable level.  
Therefore, the company should have the new innovations to satisfy the market.  
5. CONCLUSION  
This study gave a description of the relationship between customer’s satisfaction and the innovations  
of Smartphone under a linear multiple regression of four factors about Design and Function. The data are  
collected through a number of questionnaires answering by various of people in different age groups. After  
analyzing the data, it can be noted that the customer’s satisfaction does not depend on the gender, it is  
affected by the age. To be more specific, the younger people, less than 30 years old, prefer these innovations  
of Smartphone than the older people. However, the customers’satisfaction level is only in neutral level, not  
really high. Therefore, the company should conduct the new strategies to respond the demand of customers,  
especially suitable for different age groups to achieve the increase in sales.  
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