Associate Professor Natcha Thawesaengskulthai, Industrial Engineering Department, Faculty of Engineering, Chulalongkorn University, Thailand

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1 Factors Affecting the Innovation Capacity of Thai Textile and Clothing Industries in Thailand Charttirot Karaveg Chulalongkorn University, Thailand Abstract The purpose of this research is to study the factors affecting the innovation capacity of Thai textile industries. The data was collected by 113 entrepreneurs with structured questionnaire. The data analysis was carried out by the structural equation modeling (SEM). The research results revealed that the Thai textile industries were mostly the small and medium sized enterprises (SMEs) in the middlestream industry which have low rate of R&D investment and have limited number of skilled labor in science and technology. Hence most new productsare more towards incremwntal innovation. The factors directively affected and had the positive values towards the innovation capacity included 1) internal factors witch are knowledge management, absorptive capacity, and product development as well as 2) external factors which included innovation sources, innovation types, innovation system actors, and innovation supports. Keywords-component; Innovation Capacity, Textile and Clothing, New Product Developmant, Knowledge Management, Innovation System I. INTRODUCTION The Thai textile and clothing industries were mostly the small and medium sized enterprises (SMEs). In Total there were 10% of main Thai textile and clothes entrepreneurs, approximately [1]. Currently, textile and clothing industries encounter the lack of competitive advantages because the labors lack of quality development, several textile manufacturers do not develop the hi-technological machines and production technologies. Therefore, Thai government and groups of textile industry enterprises change their competitive strategies from OEM that emphasizing on cost leadership strategy into the differentiation strategy by creating innovations which have more values added in order to be able to reach the sustainable competition under the Creative Textiles concept. Innovation capacity has recently been raised with various views which caused confusion rather than clarity. We developed the criterias from both technological and managerial perspectives to better understand innovation capacity in four main areas for the first time. There is also an focus on the factors affecting the innovation capacity. The data analysis was carried out by the structural equation modeling (SEM) which suggests that the involved should support the Associate Professor Natcha Thawesaengskulthai, Industrial Engineering Department, Faculty of Engineering, Chulalongkorn University, Thailand Professor Emeritus Achara Chandrachai, Chulalongkorn University, Thailand. various uses of innovation types through the innovation system II. CONCEPTUAL FRAMEWORK This research was about the study of innovation capacity of the textile industries 1) innovation capacity in terms of research and development in the product developments context, 2) technological innovation capacity in terms of production and process, 3) environmental innovation capacity 4) managerial innovation competency A. innovation capacity The innovation capacity is regarded as the crucial characteristic of the entrepreneurs for discovering the marketing requirements [2], until becoming the competitive compettitove advantage[3], accelerate the attraction to use another kinds of innovation [4], being the the assurance of the sustainability and growth of SMEs [5]. The previous researches were developed the tools for evaluating the innovation capacity in technological terms which tended to focus on R&D and product development by various indexes from the mathematic and statistic techniques [6-8]. Whereas the research of relationship between the technological innovation capacity and other variables, it was found that there were the study of marketing and strategies together with the organization administration [9-11]. 3,The objective study can be divided into the application of innovation to develop the production process and the study of human resources to develop the learning process and knowledge base creation. According to the managerial innovation capacity, it was favored to study the three main variables which included the research and development, the increase of productivity and effectiveness, and organizational administration [2,5,12-15]. Jianhong [16] proposed the different issues in a type of policies and environments influenced by the policies. Moreover, there was the evaluation of innovation capacity by using the competency of organizations to be the criteria of consideration, such as marketing mix, turnover, growth rate, and competitive advantage and so on. [4, 17, 18]. This evaluation was about the marketing measurement from the perception of consumers requirement and creative ideas in applying knowledges both from internal and external 37

2 organizations altogether to consider the opportunities and application of using innovation in the future [2]. In addition, the organizational innovation capacity measurement as the criteria for evaluating the innovation capacity in terms of product innovations [19] are divided by degree of newness: 1) radical innovation and 2) incremental innovation [20]. Innovation capacity according to the innovation types is product and process innovation which evaluating from the numbers of new products and new processes. The study was observing the influences of absorptive capacity and the variables were caused by the research and development application [21]. Perdomoortiz et al [22] suggested that when the Total Quality Management (TQM) was used to consider the innovation evaluation, the process should be divided into 3 aspects; 1) intangible assets, such as budgets, numbers of members in the work group, 2) intangible assets, such as human resources administration, resources in the organization, numbers of increased knowledge, and 3) cooperative strategies. Furthermore, there was the study of environmental innovation capacity that was in accordance with the world trends [23] together with the studying from the external factors which included the research and development investment, personnel quality, free trade, and the investment of environments protection activities [24]. Hence, the innovation capacity can be defined as the ability to transform knowledge and technology into innovation, enable an organizations to be professional on R&D and product developments, increase the efficiency of production processes and environment conservations, and have potentials on innovation management to be superiors above the competitors. These originate the competitive capacity for all organizational, regional, and global levels in order to make the huge business benefits and sustainable growth for the organizations.. B. factors Affecting innovation capacity Innovation is considered as the complex process made a result by both internal and external factors of the organizations [3, 25, 26]. According to the study of factors affecting the innovation capacity, it could be divided into the external factors which included support of external organizations, interactions with customers, suppliers, and competitors [18],and the internal factors which included the ability to support the innovation [21, 26], development of products [13], resources in the organinzations, i.e. persons, materials, and finances [27], strategies plan in the organizations [14, 17], and knowledges managgement in the oranizations. This is because the organization which has the collection and intergretion of knowledges would have the unique aspects difficult to recompesce which help increase the potentials and innovation capacity sustainably [23]. Moreover, there was the study of innovation sources as internal factors which could be divided into the innovation from the innovation system and from business operation [3]. Xibao [26] divided the innovation sources into 3 main sources which included the knowledges within the organizations, the innovation from other institutes or organizations within the country, and technology purchase from foreign countries. It revealed that the knowledges used Identify applicable sponsor/s sponsor/s here. (sponsors) here. (sponsors) IRACST- International Journal of Research in Management & Technology (IJRMT), ISSN: with maximum efficiency included the collection of knowledges both internal and external organizations at the same time. This was because buying the technologies from foreign countries only could not increase the innovation capacity but it had to be done together with the research and development investment to create the abilities of receiving the innovation for reducing the gap between the givers and receivers of innovation. This is in accordance with the research of Hu [28] which indicated that the external knowledges and distribution channels of innovation helped create the innovation competency especially the tacit knowledge, evaluation of innovation capacity, research and development. For the numbers of patents, they could not be regarded as the good indicator when comparing with the numbers of know-how in this group of industry which the characteristics were in accordance with the states of textile and clothing industries in Thailand. Based on the provious research, we select the factors affecting the innovation competency for internal factors which included the knowledge management, absorptive capacity, and product development. Whereas the external factors included the study of innovation sources, innovation types according to the life cycle of business., innovation system actors, and innovation supports C. Textile and clothing industries in Thailand Thai textile and clothing industries consist of several sub-industries covered the production from upstream industries, middlestream industries, to the downstream industries consisting of fiber industries, spinning industries, weaving and knitting industries, dying industries, printing industries, and garment industries. The crucial exporting market of Thailand is ASEAN, secondly is America, and Europe, respectively. The famous exports are clothes whereas the import of textiles and clothes in Thailand has been adjusted increasingly because of importing the home textile from China the most, secondly, ASEAN, the products imported much include fiber and thread, respectively. For extension of industries, it has been extended continuously since The textiles and clothes products were considered as the export products which reached the 4 th level of the country. However, in 2010 the level was dropped till the 18 th level. This was because the flood crisis and the world economic crisis. The EU which is the main export market of was during the slow condition, and the variation of cotton fiber price, entrepreneurs therefore material order and export value were decreased. In addition, it was caused by the labor problems. The textile industries lack the skilled labors, also the problems of minimum wages adjustment. In 2013, it may have the change of employment rate and the proportion of small and medium sizes of entrepreneurs. Currently, the textile industry entrepreneurs are mostly the SMEs. The investment on technological development is still only a little, the machines are out of date and depend on foreign technologies and materials, lack of the human resources in terms of science, technology and design, lack of marketing development, and products research [28]. Moreover, the textile industries still encounter the internal problem which becomes 38

3 the barrier of developments which include the old system of B. Causal model administration, lack of integration of innovation development The analysis in this part aimed to study which factors are field, use the low level technologies, lack of the connection the causes which made the innovation capacity differently among networks, and the shorter life cycles products[29]. Thai according to the conceptual framework of Causal Model of textile and clothing industries should be adjusted the strategies innovation capacity as shown in figure 1 according to such in five aspects including the skills development through the local labors, punctual product delivery system, development of conceptual framework model which included the causal natural fabrics and fibers which are the main materials. Also factors which affected the innovation capacity of the this is in accordance with the environmental trends to entrepreneurs in the textile industries which were the responsible for several duties and properties, development of exogeneous variable for 2 factors, i.e., internal factors of brand names which reflect the Thai being and cooperation variables (in) and the external factors of variables(ex). between private sectors and academic organizations [1]. At the Moreover, the internal variables which were the dependent present, the strategies are being operated in three ways variables included the innovation capacity (innocap). including changing from the Original Equipment Manufacturer (OEM) to become the Original Brand Manufacturer (OBM), TABLE I. THE INDEXES OF EVALUATION increase the Thai clothes value by the technology of Latent variable Observed variable Macroencapsulation, and production of textile friendly with the in internal factors KM Knowledge management environments according to the International Trade Law and the AC Absorptive Capacity() regulations of products related to the environments. III. RESEARCH METHODOLOGY Questionnaire survey is conducted in this study by asking the entrepreneurs whose name lists were appeared in the Thailand Textile Institute, Thai Textile Manufacturing Association, and National Innovation Office. The numbers of factories for textile industries in Thailand are 4,760. The sample was done by Multi-Stage Random Sampling technique which controlled the variables of firm size. The sample were divided into two groups 1) the small and medium size entrepreneurs (300 companies), and 2) the large size firm (100 companies). Moreover, accidental sampling method was used for the entrepreneurs participating in the seminar held by the Textile Industries Development Institute during September, The 120 questionnaires were returned. When the questionnaires were validated for the studied variables, 113 questionnaires were usable (28.25%) from 400 distributed questionnaires for data analy. The questionnaire was validated for the content validity by two experts. Reliability in each question item of all 113 questionnaires was found between.781 and.955. Overall questionnaire reliability was at.972. IV. RESEARCH RESULTS A. The characteristic of entrepreneurs Most of the sample group had the experiences in the textile and clothing industries long before starting their own business (31%) and working years in the current organizations (32%), the enterprises age was between years (24.1%), the weaving industry considered as the middlestream industry (25.7%), the numbers of employees isless than 100 persons (32.4%) with the skilled labor-chief (27%), with the registration capitals 1-4 million bath (11.5%),and the circulation less than 50 million baht or (27.4%) which not high numbers because the state of textile industries at the present time in Thailand are the SMEs. Most of the factories did not allocate budgets to do the research and development (26.5%),and had the low investment to increase the production efficiency per the circulation (24.9%) NPD Product development ex external factors SOURCE Innovation source TYPE Innovation type ACTORS Innovation system actors SUPPORT Innovation support innocap innovation capacity RND innovation capacity in terms of research and development in the product developments context PROCESS ENV MNG technological innovation capacity in terms of production and process environmental innovation capacity managerial innovation competency According to the Table II and Figure 1, it indicated that the causal relationship model of innovation capacity of the entrepreneurs in the textile industries were concordant with the empirical data. It can be considered by the Chi-Square ( 2 χ /df = 1.29, p = 0.11) which had the probability more than.05. It suggested that there was no rejection of the main assumption that the Assumption Model according to the developed model was concordant with the empirical data. The goodness of fit index: GFI = 0.93, the adjusted goodness of fit index: GFI = 0.87) which the value was nearly 1 and the root mean aqure residual: RMR = 0.11, as well as the root mean aqure error of approximation: RMSEA = which the value was nearly 0 which the value was not more than 2.000, the graph line in the plot would be steep than the transverse. According to the validity of the observed variables, it was found that the variables had the maximum validity on the innovation (TYPE) which had the validity equal to 0.70, the secondary was the knowledge management )KM), and absorptive capacity(ac) of innovation which had the equal validity at 0.69, respectively. Whereas the variable which had the minimum validity was the innovation system actors which had the validity equal to

4 TABLE II. PARAMETER AND VALIDITY OF CAUSAL MODEL Measurement model Matrix LX KM in AC NPD ex SOURCE TYPE ACTORS SUPPORT Matrix LY RND innocap PROCESS ENV MNG SEM in->innocap (0.17) 1.11 out->innocap (0.18) 3.30 a. *p<.05, constrained parameter The coefficient of determination (R-square) of innovation capacity was equal to 0.62, which indicated that the variables in the model could explain the research productivity variables for 62%. When considered the innovation capacity variables, it was influenced by the direct effect of external factors for The result suggested that using the various types of innovation in the organizations, have strong connection with innovation system actors, and accepted the government would increase the innovation capacity of entrepreneurs in the textile industries. Moreover, the innovation capacity was influenced directly by the internal factors for suggested that knowledge management,absorbtive capacity and product development in the organization enhance innovation capacity of the entrepreneurs in the textile industries. TABLE III. CASUAL MODEL innocap TE IE DE Internal factors (0.19) - (0.19) external factors (0.21) - (0.21) χ =48.84,df = 38, P = 0.11, GFI = 0.93, AGFI = 0.87, RMR = 0.11, RMSEA = variables KM AC NPD SOUR CE TYPE ACTO RS validity SUPP RND PROC ENV MNG ORT ESS R-SQUARE 0.62 Correlation matrix innocap in ex innocap 1.00 in ex a. p<.05 Figure 1. Casual Model of the innovation capacity V. CONCLUSION AND IMPLICATION Most entrepreneurs in the textile and clothing industries had long experienced in the textiles and clothes industries before starting the business and working in the current organizations. The majority of textile and clothing industries in Thailand are midstream manufacturing. The numbers of employees and labor-chiefs, registration capital, and circulation were not risen at a high level. This is because the state of textile industries in Thailand currently was occupied by the small and medium size entrepreneurs of 90%. They had limited budgets to conduct the research and development and thus the innovation idea was depended on the external innovations. In addition, the investment on increasing the efficiency of production per circulation was low because of the lack of technological and mechanical investment and development, as well as potential personnel in terms of science and technology, products research and development, machines, adding values to the products, design development, marketing research, and research for domestic materials selfdevelopment within the country. The innovation capacity of entrepreneurs in the textile and clothing industry of Thailand was positively influenced by both internal and external factors. This reflects the support of innovation capacity that the involved should support the various uses of innovation types through the influential persons in the innovation system. The connection between the private section and external innovation sources, such as research institutes, university, supply chain is a crucial factor for developing the innovation capacity. It will originate the conveying of technology and distribution of innovation in order to create the competency of sustainable competition. The government takes the important roles for supporting the research funds, infrastructure, resources, marketing and knowledge channels through the entrepreneurs. Additionally, the entrepreneurs should enhance the internal innovation capacity by using the knowledge management, product development process, and create the ability to absorb knowledge by investing in research and development to build the innovations within their own organizations. 40

5 TABLE IIIof innovation capacity Correlation matrix KM AC NPD Source Type Actors Support RnD Tech Env Mng KM AC NPD Source Type Actors Support RnD Tech Env Mng Mean S.D Bartlett's Test of Sphericity = df = 55 P =.000 Kaiser-Meyer-Olkin Measure of Sampling Adequacy =.833 The study of innovation competency and related factors would help impulse the entrepreneurs to originate selfdevelopment in several aspects effectively by considering the factors affecting the innovation capacity to be the main. Additionally, this would be the beneficial information used for considering the policies related to innovations for the involved organizations in order to propose the guidelines for stipulating the formats and strategies to increase the innovation capacity of the country for supporting the competitive advantages and sustainable growth in the future. REFERENCES [1] K. Watchravesringkan, et al., "The competitive position of Thailand s apparel industry Challenges and opportunities for globalization," Journal of Fashion Marketing and Management, vol. 14 pp , [2] W. Shan and Q. Zhang, "Extension theory and its application in evaluation of independent innovation capability," Kybernetes, vol. 38, pp , [3] R. C. M. Yam, et al., "Analysis of sources of innovation, technological innovation capabilities, and performance: An empirical study of Hong Kong manufacturing industries," Research Policy, vol. 40, pp , [4] S.-H. Liao, et al., "Imbalance Between Market Orientation and Innovation Capability: An Empirical Study on Taiwan," IEEE, [5] G. Jun-guang, et al., "A Study on Chinese Listed Companies Based on Evaluation of Independent Innovation Capability," International Conference on Management Science & Engineering (16th), [6] T. Heng, "The Empirical Analysis of enterprise Scientific and Technological Innovation Capability," Energy Procedia, vol. 5, pp , [7] Q. Li, et al., "An Evaluation Method on Technological Innovation Capability of Software Companies Using AHP and GRA," pp , [8] R.-Y. JIA, et al., "EVALUATION OF TECHNOLOGICAL INNOVATION CAPABILITY OF SMALL AND MEDIUM INDUSTRIAL ENTERPRISES IN HEBEI PROVINCE," Proceedings of the Ninth International Conference on Machine Learning and Cybernetics, [9] L. Yilin, et al., "Modeling Technological Innovation Capability as an Engine of Growth: Evidence from China s SMEs," IEEE, [10] F. Kong, et al., "Study on the evaluation of technological innovation capability under uncertainty," IEEE, [11] J. C. Guan, et al., "A study of the relationship between competitiveness and technological innovation capability based on DEA models," European Journal of Operational Research, vol. 170, pp , [12] Z. Lei, "The Study on Evaluation Method for Independent Innovation Capability of Equipment Manufacturing Enterprises in China," 2010 Second International Conference on Communication Systems, Networks and Applications, [13] L. Qiang and C. Ye-wei, "The effects of Innovation Capability on New Product Development Performance: the evidence of Zhejiang Province SMEs," IEEE, [14] L. Chen and Q. Xu, "The Mechanism of Innovation Capability Leveraging via Strategy in SMEs," IEEE, [15] H.-C. Lee and V.-W. Liu, "Impacts of Organizational Innovation Capability and Leadership Styles on Innovation Performance for Electronics Information Industry in Taiwan," IEEE, [16] H. Jianhong and L. Hua, "Research on Innovation Capabilities Evaluation for Chinese Enterprise Based on Bayesian Network<Research on Innovation Capabilities valuation.pdf>," IEEE, [17] G. Leskovar-Spacapan and M. Bastic, "Differences in organizations innovation capability in transition economy: Internal aspect of the organizations strategic orientation," Technovation, vol. 27, pp , [18] C. Tiejun and C. Jin, "Determinants of Innovation Capability in Small and Medium Enterprises: an Empirical Analysis from China," IEEE., [19] M. Delgado-Verde, et al., "Organizational knowledge assets and innovation capability: Evidence from Spanish manufacturing firms," Journal of Intellectual Capital, vol. 12, pp. 5-19, [20] B. Menguc and S. Auh, "Development and return on execution of product innovation capabilities: The role of organizational structure," Industrial Marketing Management, vol. 39, pp , [21] L. Andrawina, et al., "Absorptive Capacity Moderates the Relationship between Knowledge Sharing Capability and Innovation Capability," IEEE, [22] J. Perdomo-Ortiz, et al., "Total quality management as a forerunner of business innovation capability," Technovation, vol. 26, pp ,

6 [23] Y. Lin, et al., "Positioning strategic competitiveness of green business innovation capabilities using hybrid method," Expert Systems with Applications vol. 38, pp , [24] H. Zhen, "Research on the Evaluation of China's Provincial Eco- Innovation Capability," Energy Procedia, vol. 5, pp , [25] J. A. Martínez-Román, et al., "Analysis of innovation in SMEs using an innovative capability-based non-linear model: A study in the province of Seville (Spain)," Technovation, vol. 31, pp , [26] X. Li, "Sources of External Technology, Absorptive Capacity, and Innovation Capability in Chinese State-Owned High-Tech Enterprises," World Development, vol. 39, pp , [27] H. Wu and H. Zhang, "Research on Innovation Capability Based on System Dynamics Model," pp , [28] National Metal and Materials Technology Center, "Materials technology to develop a fashion cluster.," National Science and Technology Development Agency, Bnagkok2007. [29] J. Chen and Y. Li, "Research and development of an integrated platform oriented to the textile enterprises " IEEE, IRACST- International Journal of Research in Management & Technology (IJRMT), ISSN: AUTHORS PROFILE Charttirot Karaveg, PhD Candidate, Chulalongkorn University, Bangkok, Thailand. charttirot@swu.ac.th Assistant ProfessorNatcha Thawesaengskulthai,PhD, Industrial Engineering Department, Faculty of Engineering, Chulalongkorn University, Bangkok, Thailand. Natcha.t@Chula.ac.th Professor Emeritus Achara Chandrachai, PhD, Chulalongkorn University, Bangkok, Thailand. Chandrachai@Yahoo.com 42

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