As healthcare industry is on the crossroads-experiencing gamut of innovations to make treatment options efficient and cost effective, technology is playing an important role enabling knowledge management and resource allocation. Our study focuses on the innovation process through which customer acquisition and retention influences firm innovativeness in healthcare industry and develops a model of customer acquisition and retention orientation – resource and knowledge diversity – performance relationship. In this paper, we studied the role of two enabling constructs namely, customer acquisition and retention on firm innovativeness to determine the relevance of these efforts for incorporation into the proposed healthcare model (CARMS Model). With primary data collected from 267 strategic business units (hospitals) from India, authors demonstrate that a firm's focus on customer acquisition enhances its innovation performance. However, the same is partially proven in the case of customer retention. These effects are stimulated by diversity in customer knowledge and the firm's resource exploration. Overall, the effect of a firm's strategic focus on acquiring new customers and/or retaining existing customers (customer acquisition and retention orientations) on innovation performance is evaluated.
TopIntroduction
Sophistication in healthcare services is not uniform across the globe. Countries where healthcare budget is limited (by the government) and where the private sector has not evolved much; may not have the infrastructure and capability to meet the healthcare needs of their population (e.g., third world nations). Further, diverse customer knowledge; socio-economic conditions and resource disparity leads to situations where despite the ability to pay patients may not be able to access quality healthcare.
In countries such as India, the extent of health care service has improved significantly in the past two decades (Pan and Zinkhan, 2006). The emergence of newer models of healthcare delivery in the form of specialty clinics and diagnostic chains and emerging medical tourism (Prabhu et al., 2005) have further revolutionised healthcare delivery in the country. It has now created competition between medical institutions to gain the competitive advantage. However, right market orientation of these service firms (medical institutions and hospitals) is imperative to gain competitive advantage (Verma and Rajagopal, 2013). It is also important to understand that innovation is critical to maintain long-term competitive advantage in a progressively service-based economy (Lusch et al., 2007).
Research suggest that the orientation a firm takes towards creating and maintaining customer relationship management has the potential to significantly impact overall firm performance (Kumar et al., 2006; Morgan and Hunt, 1994). On the contrary some research (e.g., Gomez et al., 2004; Pan and Zinkhan, 2006) suggest that firms’ customer orientation tends to impact profitability without addressing the potential role played by innovation. Hence, based on previous research gaps (Atuahene-Gima, 2005; Slater and Narver, 1998) our current research tends to investigate the role of customer focused orientation (acquisition and retention) in the overall innovation process. Previous researchers (Tushman and Nadler, 1978) argue there are two basic customer engagement orientations or processes relevant to service industry these are, customer acquisition and customer retention (Lewis, 2006; Reinartz et al., 2004). Given this, the focus of this research is to investigate how firms’ customer acquisition and retention orientations differentially affect firm innovativeness in the context of Indian medical institutions.
In the paper, we uncovered the mechanisms by which firms’ acquisition and retention orientations affect innovation performance by applying market driven – customer orientation framework (Tushman and Nadler, 1978) and investigated the relationship between the orientation efforts and the antecedents of firm innovativeness. The focus of this current research is to investigate how firms’ customer acquisition and retention orientation effect firm innovativeness in the presence of diverse customer knowledge and sustainable resource exploration.