Innovation and the Sustainable Competitive Advantage of Young Firms: A Strategy Implementation Approach

Abstract

This study examines the impact of innovation at the strategy level on innovation at the process and system levels, which are considered to be forms of function-level innovation, based on the strategy implantation approach. The study also reveals the effect of process and system innovation on the sustainable competitive advantage (SCA) of young firms in Vietnam. The research used primary data from a survey of 289 young firms’ leaders in Vietnam. PLS-SEM using SmartPLS software was employed to assess the ability of the measurement model and structural model to test hypotheses. The findings indicated that the four hypotheses about the effects of strategy innovation on process and system innovation and the effects of process and system innovation on the SCA of young firms in Vietnam were all confirmed. These crucial results fill the research gap of innovation in young firms, especially the gap in the context of developing countries. The current study addresses an important implication for the use of innovation practices in young firms to sustain the firm’s SCA. Accordingly, young firms are able to significantly strengthen their sustainable competitive advantage through innovation practices at both strategy and function levels.