The influence of performance targets on the development of innovative capabilities

Abstract

The major contribution of the report is the exploration of how customer and competitor orientation of performance targets influence the development of explorative and exploitative capabilities in South Africa in the context of the telecoms sector. The study utilises a qualitative approach and the data was gathered through semi-structured interviews from two telecoms companies, one in the private and the other in the public sector. The study found that customer oriented performance targets have a positive impact on the development of explorative capabilities and that customer oriented performance targets have a positive impact on the development of exploitative capabilities, therefore by implication market oriented performance targets have a positive impact on the development of innovative capabilities. Furthermore, the study found entrepreneurial orientation to have a significant moderating effect on the relationship between market oriented performance targets and the development of innovative capabilities. Lastly, the results of this study find that the design and structure of the performance targets is critical for there to be positive outcomes from the targets. The results also provide strong support for practicing managers to start experimenting with customer and competitor-oriented performance targets based on their requirements to develop either exploitative or explorative capabilities.