Innovation in the German Real Estate Industry: The Role of Firm Innovativeness, External Environment, and Industry Structure

In the real estate industry, regulatory interventions increased after the subprime crisis 2007/2008 and were followed by a regulatory shock and, in parts, a restructuring of the industry. In addition, the digitalization has entered industries. New opportunities arise, (production and business) processes transform and the value creation shifts from production to service to software. In the large body of innovation research manufacturing industries and product innovations have been in the focus ever since. Non-manufacturing organizations such as in the real estate industry and transforming manufacturing industries with blurring boundaries fueled by the digital age are currently under-researched. This paper investigates the relationship between firm innovativeness, an organization’s overall potential to innovate, and its innovation output while considering the influential organization’s context. It sheds light on the impact of the external environment and the regulatory interventions that shape the industry structure. To address the heterogeneous subsectors of the real estate industry and to ensure comparability among them, we develop and empirically test a universally applicable measurement model of firm innovativeness that comprehensively captures all relevant aspects on a higher level of abstraction. Furthermore, we have purposely incorporated measures that rely on the respondent’s perception because perception determines reality. Variance-based structural equation modeling (PLS-SEM) is used to analyze the dyadic design of our study including a sample comprised of 241 individuals, i.e., top-level executives and their employees from 76 organizations of the German real estate industry. Results prove validity of the newly developed measure for firm innovativeness and show that environmental heterogeneity moderates the flow from firm innovativeness to new product and service introductions. Highly competitive environments negatively influence the introduction of new products and services directly, and environmental dynamism does not have an impact (for now). Contrary to the expectation, high levels of regulation prove to facilitate organizations to introduce new products and services as well as new internal processes.