INTERNAL AND EXTERNAL FACTORSINFLUENCING GREEN INNOVATIVENESSAMONG CONTRACTORS IN MALAYSIAbyMUHAMMAD FIKRI BIN HASMORIThesis submitted in fulfilment of therequirements for the degree ofDoctor of PhilosophyFebruary 2016

ACKNOWLEDGEMENTI would like to express my special appreciation and thanks to my supervisor!lias Said, you have been fantastic mentor for me. I would like to thank you forencouraging my research and for allowing me to grow as a researcher. Your adviceon both research as well as on my career have been priceless.A special thanks to my family. Words cannot express how grateful Iam tomy mother, father, mother-in law, father-in law for all the sacrifices that you'vemade on my behalf. Your prayer for me was what sustained me thus far. I would alsolike to thank all my friends who supported me in writing, and push me to strivetowards my goal.At the end, I would like to express appreciation to my beloved wife, DurraAfifah Binti Fazilah Shuhaimi who spent sleepless nights taking care of our son, AliWafiq and was always my support in the moments when there was no one to answermy queries. Last but not least, I would like to thank my brothers and sister forsupporting me spiritually throughout writing this thesis and my life in general. MayAllah grant us Jannah.ii

TABLE OF CONTENTSPageACKNOWLEDGEMENT. iiTABLE OF CONTENTS . iiiLIST OF TABLES.xLIST OF FIGURES . xiiiABSTRAK. xivABSTRACT . xviCHAPTER 1 -INTRODUCTION . 11.1Background .11.2The Malaysian Scenario.71.3Problem Statement .101.4Research Objectives. l41.5Scope ofResearch .141.6Significance of the Study .16I.7Organization of the thesis .18CHAPTER 2 - THE CONCEPT OF CONSTRUCTION FIRMS AND GREENINNOVATIONS . 192.1Introduction .192.2Overview of the Construction lndustry.202.2.1Malaysia as the Study Setting .22lll

2.2.2 Economical Perspectives .242.2.3Malaysia Construction Industry in General .252.2.4The Construction Activity .272.2.5Contractor's Scope of work and Need for innovativeness .332.2.6Green Building.352.3. Concept of Organization and Firm .372.42.5Innovativeness.382.4.1The Need for Innovative Contractor .412.4.2Firm Green Innovativeness .422.4.3Clarifying the concept of "green innovation".512.4.4Dimensions of Firm Green Innovativeness .542.4.5Green Product Innovativeness .562.4.6Process Innovativeness .,.582.4.7Managerial Innovativeness .592.4.8Technology Innovativeness .60Summary .66CHAPTER 3- MEASURING FIRM INNOVATIVENESS . 673.1Measuring Firm Innovativeness.673.1.1Self-Evaluation .693.1.2Intellectual Property.703.1.3Research and Development Funding .713.1.4 Number of New Products Introduced .723.1.53.2Current Technology .72Factors Influencing Firm Green Innovativeness .733.2.1Firm Internal Factors . 75IV

3.2.2 External Factors .853.2.3 Relationship between Firm Internal Factors and Firm GreenInnovativeness . 893.2.4Relationship between Firm External Factors and FirmInnovativeness .973.2.5 Firm Characteristics .993.2.6 Relationship between Firm Characteristics and Firm GreenInnovativeness .993.3Theoretical Framework . IOO3.4Hypothesis Development . ! 0 I3.5Summary . l02CHAPTER 4- RESEARCH METHODOLOGY . 1044.1Introduction . l044.2Research Design. I 044.2.1Sampling procedure .1 054.2.2Data Collection Procedure . ! 094.3Response Rate . ll24.4Questionnaire Design . 1134.54.4.1Measurement and Operationalization of Variables .1154.4.2Firm Structure . l204.4.3Firm environmental culture .1224.4.4Firm environmental capability. l234.4.5External Factors . 1244.4.6Firm Green Innovativeness .126Pilot Study. l29v

4.5.1 Validating of Research Instruments. l294.5.2 Analysis of Reliability of Instruments . 1324.64.7Statistical Analyses .1334.6.1Data Preparation and Screening. l344.6.2Measuring Firm Green innovativeness .1354.6.3Factor Analysis . 1354.6.4Reliability Analysis .1364.6.5Correlation Analysis .1374.6.6Test of Underlying Assumption of Multivariate Analysis .1374.6.7Standard Multiple Regression. 138Summary .139CHAPTER 5- RESULT AND DATA ANALYSIS . 1405.lIntroduction .1405.2Profile of Respondents . 1405.3Profile of Firms .1415.4Factor Analysis for Firm Internal and External Factors .1435.4.1FirmStructure . l455.4.2Firm Environmental Culture . l475.4.3 Firm Environmental Capability .1495.4.4 Firm External Factors . 1515.4.5 Firm green innovativeness .1535.4.6Summary of Factor Analyses. l555.5Revised Conceptual Framework . l565.6Extent of Innovativeness among Building contractors in Malaysia(Objective No. I) .158VI

5.7Relationship between Firm Internal, External Factors and FirmInnovativeness.1625.7.1Correlation (Objectives 2, & 3) . 1625.7.2 Firm Structure and Firm innovativeness (Objective 2) .1635.7.3Firm Environmental Culture and Firm Green Innovativeness(Objective 2) .1645.7.4Firm environmental capability and Firm Green Innovativeness(Objective 2) .1665.7.5Firm's External Factors and Firm Green Innovativeness (Objective3) .1685.7.65.8Summary of Correlation Analysis .171Hypothesis Testing (Objectives 2 & 3).1725.8.1Multiple Regressions . 1735.8.2Firm Structure and Firm Green Innovativeness (Objective 2) . 1745.8.3Firm Environmental Culture and Firm Green Innovativeness(Objective 2) . 1755.8.4Firm Environmental Capability and Firm Green Innovativeness(Objective 2) .1775.95.8.5Firm External Factors and Firm Green Innovativeness (Objective 3)1795.8.6Summary of Hypotheses Testing Result. l80Summary .183CHAPTER 6 -DISCUSSIONS AND ANALYSIS OF FINDINGS . 1846.1Introduction .1856.2Extent of Green Innovativeness among Building contractors in Malaysia(Objective 1) .187Vll

6.3Factors Influencing Green Innovativeness of Malaysian Building contractors(Objective 2 and Objective 3). I 896.3.1Firm Structure . l896.3.2Firm environmental culture (Adhocracy culture and marketorientation- Objective 2 and Objective 3). 1916.3.3Firm Environmental Capability (Transformational Leadership andFirm Learning-Objective 2 and Objective 3).1926.3.4External Factors (Government Intervention, EnvironmentalUncertainty and Competition) . 1936.4Summary .195CHAPTER 7- CONCLUSIONS & RECOMMENDATIONS . 1967.1Implication of the Study. l967.2Contributions of the Study .1977.3Limitation of the Study and Suggestion for Future Research .1997.4Conclusions.201REFERENCES . 203APPENDICES . 229Appendix A: QuestionnaireAppendix B: SPSS OutputsBl: Demographic Profile of respondentsB2: Profiles of firmsB3: Factor AnalysisB4: Pearson Correlations and Reliability Test8

B5: Multiple Regression9

LIST OF TABLESPageTable 2.1Number and value of Projects Awarded by Status ofContractors as of June 201229Table 2.2Number and Value of Projects Undertaken by MalaysianContractors in Global Market by Year of ProjectAwarded33Table 2.3Different Dimensions of Innovativeness in Literature59Table 2.4List of Criteria in Management Innovation60Table 2.5List of Criteria in Process Innovation60Table 2.6List of Criteria in Product Innovation61Table 2.7List of Criteria in Technological Innovation61Table 4.1Distribution of Building Contractors in PeninsularMalaysia97Table 4.2Population and Recommended Sample Size for thePresent Research98Table 4.3Summary of Questionnaire Distribution100Table 4.4Summary of Variables and Measurement oflnstruments109Table 4.5Summary of the Comments Provided by Expert forContent Validity118Table 4.6Reliability Level of Instruments during Pilot Study121Table 5.1Demographic Profile of Respondents132Table 5.2Demographic Profile of Firms133Table 5.3Result ofKMO and Bartlett's Test137Table 5.4Firm Structure: Rotated Factors, Item loading andReliability137Table 5.5Result KMO and Bartlett's Test: Firm environmentalculture139Table 5.6Firm Environmental Culture: Rotated Factors, ItemLoading and Reliability13910

Table5.7Result ofKMO and Bartlett's Test: Firm EnvironmentalCapability140Table 5.8Firm Environmental Capability: Rotated Factors, ItemLoading and Reliability140Table 5.9Result ofKMO and Bartlett's Test: Firm ExternalFactors142Table 5.10Firm External Factors: Rotated Factors, Item Loadingand Reliability142Table 5.11Result ofKMO and Bartlett's Test: Firm GreenInnovativeness144Table 5.12Firm Green Innovativeness: Rotated Factors, ItemLoading and Reliability144Table 5.13Summary of Factor Analysis145Table 5.14Extent of Green Innovativeness among Buildingcontractors in Malaysia149Table 5.15Extent of Green Product Innovativeness among BuildingContractors in Malaysia150Table 5.16Extent of Green Process Innovativeness AmongBuilding Contractors in Malaysia150Table 5.17Extent of Management Innovativeness Among BuildingContractors in Malaysia151Table 5.18Extent of Technological Innovativeness AmongBuilding Contractors in Malaysia151Table 5.19Correlation Between Firm Structure and Firm GreenInnovativeness154Table 5.20Correlation Between Firm Environmental Culture andFirm Green Innovativeness156Table 5.21Correlation Between Firm Environmental Capability andFirm Green Innovativeness158Table 5.22Correlation Between External Factors and Firm GreenInnovativeness160Table 5.23Result of Multiple Regression for Firm Structure andFirm Green Innovativeness165Table 5.24Result of Multiple Regression for Firm EnvironmentalCulture and Firm Green Innovativeness166Table 5.25Result of Multiple Regression for Firm EnvironmentalCapability and Firm Green Innovativeness16811

Table 5.26Result of Multiple Regression for Firm External Factorsand Firm Green Innovativeness170Table 5.27Summary of Hypothesis Testing Result172Table 5.28Summary of Descriptive Statistics for Dependent andIndependent variables173Xll

LIST OF FIGURESPageFigure 2.1Four Primary Aspects in Green Innovation60Figure 3.1Proposed Conceptual Framework for Factors thatInfluence Green Innovativeness among MalaysianBuilding Contractors91Figure 4.1Dependent and Independent Variables Construct105Figure 4.2Dimensions of Firm Structure Construct105Figure 4.3Dimensions of Firm Environmental Culture Construct106Figure 4.4Dimensions of Firm Environmental Capability107Figure 4.5Dimensions of External Construct108Figure 4.6Dimensions of Firm Green Innovativeness Construct108Figure 5.1Revised Conceptual Framework Resulting from FactorAnalysis14713

FAKTOR DALAMAN DAN LUARAN YANG MEMPENGARUHIPENGUKURAN INOVASI HIJAU DI KALANGAN KONTRAKTOR DIMALAYSIAABSTRAKKajian lepas telah membuktikan inovasi adalah kunci utama kepada kejayaansesebuah syarikat. Tetapi, sangat sedikit k!\iian tentang inovasi hijau yang dilakukandalam konteks kontraktor binaan di Malaysia. Objektif umum kajian ini adalah untukmenaksir takat daya inovatif hijau di kalangan kontraktor di Malaysia, serta untukmeneliti faktor dalaman dan luaran yang mempengaruhi daya inovatif hijau mereka.Kontraktor telah distratifikasi mengikut negeri. Pensampelan rawak mudah berkadartelah digunakan untuk memilih firma-firma kontraktor bangunan. Responden bagikajian ini adalah kontraktor bangunan yang berdaftar dengan Badan PembangunanIndustri Pembinaan (CIDB) di dua belas (12) buah negeri di Semenanjung Malaysia.Buku panduan CIDB, yang diterbitkan dalam bulan Disember, tahun 2012 telahdigunakan untuk mendapatkan populasi bagi kajian ini. Sejumlah 500 borang, yangmengandungi soal selidik kendiri berstruktur telah dikirim kepada responden.Sejumlah 293 borang soal selidik yang lengkap diisi dan berguna telah dikembalikan,menghasilkan kadar respons 58.6 peratus. Untuk mencapai objektif pertama kajianini, skor min bagi daya inovatif hijau firma telah dihitung menggunakan statistikperihalan. Tafsiran skala Likert telah diguna pakai dan lima kategori pengamalinovasi yang diubah suai daripada kajian lepas telah digunakan untuk mentafsirkandaya inovasi hijau skor min yang diperoleh daripada statistik perihalan. Analisisfaktor eksploratori dilakukan ke atas faktor dalaman dan luaran firma dan dayainovatif hijau. Seterusnya, korelasi Pearson dan regresi berganda lazim telah14

digunakan untuk meneliti perhubungan di antara faktor dalaman, luaran firma dandaya inovatif kalangan kontraktor bangunan di Malaysia. Hasil analisis korelasimenunjukkan bahawa daya inovatif hijau dikalangan kontraktor bangunan diMalaysia mempunyai hubungan yang positif dan kuat dengan budaya alam sekitar,keupayaan alam sekitar, dan faktor luaran firma. Sementara itu hubungannya nanalisisregresijugamenunjukkan bahawa budaya alam sekitar firma memberi kesan yang tertinggiterhadap daya inovatif hijau dikalangan kontraktor bangunan, diikuti oleh keupayaanalam sekitar, dan faktor luaran. Sebaliknya, struktur firma tidak mempunyai kesanyang signifikan terhadap daya inovatif hijau. Pada keseluruhannya dapatan kajian inikonsisten dengan dapatan oleh kajian-kajian lalu. Kajian ini mungkin bergunakepada semua pemegang kepentingan dalam industri pembinaan. Takrif dayainovatif hijau yang dikemukakan dalam kajian ini akan membantu usaha untukmemahamidengan lebih baik konsep inovasi hijau dalam konteksindustripembinaan. Selain itu, kajian ini telah memberi penjelasan yang lebih jelas tentangtakat daya inovatif hijau, selain tentang faktor-faktor dalaman dan luaran yang harusditumpukan bagi mempertingkatkan daya inovatif hijau dalam industri pembinaan diMalaysia.XV

INTERNAL AND EXTERNAL FACTORS INFLUENCING GREENINNOVATIVENESS AMONG CONTRACTORS IN MALAYSIAABSTRACTPrevious researchers have proven that innovation is the key success factor forany firm. Unfortunately, only a few researches on green innovation have been donein the Malaysian contractors' context. The general objectives of this study were toassess the extent of green innovativeness among contractors in Malaysia, and toexamine the internal and external factors that influence their green innovativeness.Contractors were stratified according to states. A Proportionate simple randomsampling was used to select building contractors firms. Respondent for this studywerebuildingcontractors thatregistered withtheConstruction IndustryDevelopment Board (CIDB) in the twelve (12) states of peninsular Malaysia. TheCIDB directory published in Dec 2012 was used to obtain the population for thisstudy. A total of 500 structured, self-administered questionnaires were sent torespondents and 293 duly completed and useful questionnaires were returned,yielding 58.6 per cent response rate. To achieve the first objective of this study, themean score for firm green innovativeness was computed using descriptive statistics.Likert scale interpretation was adopted and the five innovation adopters categoriesadapted from the literature were used to interpret the green innovativeness meanscore obtained from descriptive statistics. Exploratory factor analyses wereperformed on firm internal, external factors, and firm green innovativeness. Inaddition, Pearson correlation and standard multiple regression were performed toexaminetherelationshipsbetweeninternal, externalfactors,andgreeninnovativeness among building contractors in Malaysia. The results of correlationxvi

analyses show that green innovativeness of building contractors in Malaysia has apositive and strong relationship with firm environmental culture, environmentalcapability, and external factor. Meanwhile, its relationship with firm structure is justmoderate.The results of regression analyses also show that firm environmentalculture has the highest significant impact on green innovativeness among building·contractors, followed by environmental capability and external factors. On the otherhand, firm structure has no significant impact on green innovativeness. Overall, thefindings of this study are consistent with that of previous studies. This study may beuseful to all the stakeholders in the construction industry. The green innovativenessdefinition provided in this study will help in better understanding of the concept ofgreen innovation in the context of the construction industry. Additionally, this studyhas shed more light on the extent of green innovativeness, as well as the internal andexternal factors that should be focused to enhance green innovativeness in Malaysianconstruction industry.xvii

CHAPTER!INTRODUCTION1.1 BackgroundThis study attempts to answer two research questions: What is the degree of greeninnovativeness among contractors in Malaysia; and what are the elements thatengender the contractors towards green innovation among contractors in Malaysia?Jain et al., (2010) in their study found different meanings to the term innovativeness.Firm innovativeness is characterized as the inclination or limit of a firm to embraceinnovative building items, development strategies, or techniques, or ideas, andbusiness frameworks that are new to the firm and/or the development business. Thedesign is for expanding benefits, as well as to address the issues of the clients or endclients, mulling over supportability and nature.Jain et al., (2010) further claimed that innovativeness has been perceived as a keyachievement component, not just for the general execution and development of firms,but also for their survival in an aggressive business. In the worldwide coliseum,innovativeness has been depicted as the answer for the difficulties confronting theconstruction industry universally. Morad (2010) believed that in order to achieveenvironmental and economic sustainability, there must be a pressing need to addressthese difficulties resulting from the business market dynamics due to the currentglobal economic crisis. Perhaps, problems like the low quality of products,relinquished activities, absence of focus by clients, and incapable and wastefulconstruction delivery systems are becoming prevalent in many developed and

undeveloped nations. Therefore, some countries have initiated innovative productsand processes in the provision of construction process.Therehave beensignificantresearchinterestsamongscholarsin the firminnovativeness across various fields such as sociology, economics, marketing, andmanagement, as well as industries such as manufacturing and construction (Knowleset al., 2008; Jain, et al., 2010). Advancement in this field of research has culminatedinto substantial number of research interests that focus on measuring innovativeness(e.g., Vazquez et al., 2001; Artz et al., 2003; Shook & Ganus, 2004), dimension ofinnovativeness (e.g., Hovgaar & Hansen, 2004; Wang & Ahmed 2004), andassessing factors that stimulate firm innovativeness (e.g., Nystrom, 2002; Sandvik &Sandvik, 2003; Theoharakis & Hooley, 2008; Tuominen, Rajalab & Moller, 2004;).The study of green innovation is somewhat in contrast to the conventional innovationand product development research and is relatively new to the scholarly world. Thedominant part of the early studies on green innovation primarily focussed theemergenceofgreendevelopment, and the relationship between the performance of green developmentand budgetary execution (e.g Beise & Rennings, 2005; Rennings & Rammer, 2009;Noci & Verganti, 1999; Foster & Green, 2000; Huang & Wu, 2010; Chen, 2011).However, as of late the scholars seems to broaden their scientific inquiry beyond ionsofenvironmentalinnovations, especially in the resources effectiveness enclosure and energy.According to Chen et al., (2006) green innovations have turned into one of the vitalstrategicdevicesPreviously,to achievecompaniessustainabledevelopmenthad often perceived2amongas put assets in

environmental activities. However, Porter and van der Linde (1995) found that strictecological regulations and prominent environmentalism have changed the aggressiveprinciples in practices. Green innovation identifies green items and procedures,incorporates innovation in technology in energy saving, contamination aversion,waste reusing, corporate environmental management and design (Chen et al., 2006).According to past empirical evidences (Porter, 1981; Porter & van der Linde, 1995;Chen et al., 2006), in order to be competitive in industry, most firms eagerly reshapesand strategizes their execution of green advancement enthusiastically. Therefore, thefocused principles are on the green innovations and competition relationship due tothe belief that green innovation and competition can enhance the value of products,and in many ways the cost of investments on environmental can be leveraged. Porterand van der Linde (1995) suggested that green innovations ensure the successfulnessof firms, enhance corporate outlook, and creating a win-win solution in mostcontention among economic and environmental problems.Constructions industry represents a significant portion of national trade. It is the mostdynamic services sectors, with a growing exports rate despite a downturn on theworld economy. It provides facilities to all end user and producers. Buildingcontractors play a vital role in delivering a successful completion of a project. afteragriculture,manufacturing and services. It is essential for a client to select competent contractorto increase the chances of meeting the client's requirement. Due to short life cycle ofproducts and fast-changing technology in green, firms must always stay competitive,strengthen and maintain their

Innovativeness.162 5.7.1 Correlation (Objectives 2, &3 . kajian ini adalah kontraktor bangunan yang berdaftar dengan Badan Pembangunan Industri Pembinaan (CIDB) di dua belas (12) buah negeri di Semenanjung Ma