Redefining organizational innovation: Towards theoretical advancements

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Abstract

This paper is a first attempt to redefine innovation in the context of organization. An analysis of a sample of previous studies indicates that most of the earlier researchers committed content fallacy and contextual fallacy, by equating adoption with innovation and employing innovation merely as a cover term for adoption. In this attempt, a new definition for innovation is constructed, distinct from adoption, and a set of propositions are developed which could effectively guide the development of new theories. Finally, a metric for innovation is proposed in order to examine innovation simplistically, with potentials for producing robust data.

Introduction

The unprecedented economic growth of a country can be primarily attributed to innovations. Today, the increasing complexities, resource scarcity and rising customer expectations have left organizations with a single choice: innovating, i.e., creation of technological and managerial innovations. While technological innovations are essential for the fundamental growth of a firm, the accompaniment of managerial innovations is critical for the successful management of technological innovations, and for influencing and transacting with the external environment Snow & Hrebiniak 1980, Thomas 1995.

Research on innovation began to proliferate during early 1960s and continues to advance. The focus of innovation research, like any other specialized field of management research, during the 60s and 70s was on conceptualization and theory building. These studies were more of a descriptive nature, analyzing the association between various contextual factors and characteristics of organization. Studies, which emerged during the 80s and 90s, broadened the theory of innovation and offered prescriptions towards designing innovative organizations. The ever increasing importance given to the field of `Innovation' is quite evident in the recent special issue on this topic by Academy of Management Journal (Oct, 1996), and regular publications in other journals and popular magazines. Further, Kelly & Kranzberg's (1978), review of over 4,000 items in the literature on technological innovation alone, two decades ago, emphasizes how the Organizational Science literature is saddled with a surfeit of innovation studies. Innovation researchers examining organizational strategies in the context of innovation, and strategic management scholars analyzing innovation in the strategic management perspective are ever increasing. There exist two dominant reasons why researching innovation from different perspectives is still exciting for the academia and business—(a) identifying normative solutions to develop appropriate structures and systems, for effectively organizing technological innovations, and effective utilization of human resources through creation/adoption and adaptation of managerial innovations; (b) gaining competitive advantage through production of technological innovations. Thus, management of innovations in organizational setting has become a focal issue for researchers, policy makers and practitioners. Therefore, the concern is how to create innovations and/or design innovative organizations.

Innovation has been studied in depth by researchers belonging to various disciplines, such as psychology, sociology, economics, anthropology and organization theory. Past researchers, though with different objectives, analyzed and offered several insights into the complex and dynamic nature of innovation. These studies conducted in different organizational settings—manufacturing and voluntary organizations, R&D laboratories, hospitals, schools and libraries at individual, group and organizational levels, varying in nature—descriptive/normative, with cross-sectional or longitudinal approaches, have broadly enriched the literature. Inspite of the richness of the studies, there appears to be a general lack of conceptual clarity, eventually precluding a definition and a measure for organizational innovation. What plagued the development of the theory and measure is the usage of the two terms “innovation” and “adoption” interchangeably and equating adoptions with innovations. This article, while not developing any new theory, points out how misconceptualization of innovation deluded the conduct of future research. In doing this, the paper attempts to answer the following questions:

  • 1.

    How can organizational innovation be defined?

  • 2.

    What are the individual and organizational characteristics that facilitate innovation creation and how are they different from those facilitating innovation adoption?

  • 3.

    How can organizational innovation be measured?

In other words, this article attempts to distinguish adoption and innovation as two different concepts, and provide prescriptions for measuring innovation as different from adoption. As a first step, a sample of 60 empirical studies conducted by researchers since 1961 is presented (Table 1). Also discussed are articles that aided theory development. While this paper does not span the entire gamut of issues involved in understanding innovation, it focuses only on the issues that foiled the attempts to build a unique theory.

Studies on innovation can be classified, on the basis of their objectives and focus into two major models: Normative and Descriptive. Normative models are prescriptive in nature, specifying how, and under what conditions can organizations be more innovative. Some of the normative studies, based on empirical evidence (Table 1) have provided guidelines for designing innovative organizations and creating innovations. Theoretical studies, normative in nature, have also enriched innovation literature, by offering directions and insights into design and development of innovative organizations (e.g., Galbraith 1982, Drucker 1985, Drucker 1986, Quinn 1985, Kanter 1982, Kanter 1984, Kanter 1989). Research on innovation, pertaining to the descriptive kind is overwhelmingly large. The descriptive models summarize the characteristics observed in organizations, for instance, the relationships between innovation and the organizational structure, the processes and the other correlates. However, the results are non-cumulative, because of the “instability” (Downs & Mohr, 1976) in the findings. Certain details about this “instability” are discussed later. The studies may not be strictly classified as normative and descriptive, as possible overlap may exist in some, if not in all cases.

The studies on innovation can be broadly classified under (i) Innovation adoption (ii) Innovation characteristics (iii) Characteristics of Innovative organizations (iv) Correlates/ determinants of innovation (v) Innovation sources (vi) Innovation process and (vii) Innovation typology.

Research in innovation adoption/diffusion gained much recognition with the seminal work of Rogers (1962). Nevertheless, adoption/diffusion research has rich traditions in various fields such as, sociology, anthropology, geography, economics, advertising and market research, and communication studies. Studies on adoption are abundant. Over thirty-nine years of diffusion research in various fields have produced more than 3,000 publications on the diffusions of innovations (Rogers & Kim, 1984). Further, theoretical works on the nature of innovation and its relation to the adoption of new products have also been reported Midgley & Dowling 1978, Hirschman 1980, Mudd 1990.

A number of theoretical and empirical analyses treat adoption as a process, where the probability of diffusion is determined by the characteristics of innovation and the communication opportunities. Thus, diffusion channels through which information and data would flow efficiently to the adopters were identified. However, the studies on adoption predominantly focused on the rate and process of diffusion. The characteristics of individual adopters and adopting organizations, and the role of the opinion leaders in innovation diffusion were also the foci of the previous studies. Further research can identify the differences between the content of the actual innovation and the innovation adopted, examine the transmission errors, and draw comparisons across different industry settings.

Innovation characteristics research describes the relationship between the attributes of an innovation and the adoption or implementation of that innovation (Tornatzky & Klein, 1982). Variables like compatibility, relative advantage, complexity, trialability were identified as some of the characteristics of an innovation, enabling the adopter to be decisive Wilson 1966, Myers & Marquis 1969, Rogers & Shoemaker 1971, Zaltman et al. 1973. Investigations into the innovation characteristics pertained to mostly individual and organizational levels. Based on adoptions and the rate of adoption, individuals and organizations were labeled on a continuum along the temporal dimension as early adopters, through laggards. As a result, consumer researchers and marketing specialists identified the individual's characteristics that facilitate and inhibit the buying behavior Midgley & Dowling 1978, Hirschman 1980. These studies attempted to identify the attributes of innovation that are largely accepted by individuals and organizations.

Innovative organizations are characterized by `organic' (Burns & Stalker, 1961) structural properties when they operate in a dynamic, complex environment. While their operating environment is less dynamic and less complex, they are characterized by `mechanistic' structure. Previous research has also substantially investigated how certain cultural and climatic dimensions such as risk-taking, entrepreneurial style, top management support, autonomy, reward system, to name a few, foster creation of innovations. Following are some of the variables that are considered as the necessary constituents and key ingredients of an innovative organization:

  • Sensitivity: The ability of an organization to search, predict, anticipate problems and opportunities and formulate strategic responses to adapt to the environmental changes Aguilar 1967, Mirvis & Berg 1977, Miller & Friesen 1984, Singh, House & Tucker 1986.

  • Learning: The faculty that enables an organization to assimilate significant knowledge from its environment, experience and history to facilitate change Cyert & March 1963, March & Olsen 1975, Argyris & Schon 1978, Shrivastava 1983, Cohen & Levinthal 1990.

  • Problem-solving Skills: The capacity to produce adaptive responses which are apt but unusual and the degree of difference that a proposal exhibits from comparable responses to the problem for the furtherance of organizational goals Pelz 1983, Utterback 1971, Roberts & Fusfeld 1987, Cohen & Levinthal 1990.

  • Experimentation: This refers to the extent to which new potential ideas are tested in the organization Quinn 1979, Malidique 1980, Peters & Waterman 1982, Burgelman 1984, Pinchot 1985, Kanter 1989, Roberts 1989.

  • Communication: The ability of the organization to collect, and disseminate the collected and experimented information to the relevant organizational units (e.g., Utterback 1971, Keegan 1974, Goldhar et al. 1976, Tushman 1977, Gobeli & Rudelius 1987).

  • Risk-readiness: The willingness of an organization to invest in new products/processes under conditions of uncertainty, not because of compulsions of survival, but on account of its pursuit of excellence Drucker 1985, Khan & Manopichetwattana 1989, Gobeli & Rudelius 1987.

  • Absorption: The ability of the organization to contain disruptions, caused out of experimentation, change and innovation (e.g., Kanter 1983, Rogers & Kim 1984, Amburgey, Kelly & Barnett 1990).

  • Slack: The pool of resources in an organization that is in excess of the minimum necessary to produce a given level of organizational output (e.g., Cyert & March 1963, Zaltman et al. 1973, March 1981, Nohria & Gulati 1996).

  • Cosmopolitanism: The stream of research relating cosmopolitanism and innovativeness usually find a positive relationship between them (Rogers, 1962), and this is mostly so with the medical social system concerning adoption of innovations (e.g., Kimberly 1978, Kimberly & Evansiko 1981, Robertson & Wind 1983).

A measure constructed on these variables could be a diagnostic tool to assess the degree of innovativeness of an organization. In employing this measure, organizations can be rated on a continuum of innovativeness, low through high, and organizational typologies could be arrived at. Specific actions leading to the achievement of high innovativeness could also be devised. Thus, an organization could be evaluated and rated as highly innovative or moderately innovative or less or non-innovative, not on the basis of the number/rate of innovations or adoptions, as was done earlier, but wholesomely on its abilities and attributes, albeit the fact that innovative organizations also adopt innovations. Research on the aforesaid variables and practice utilizing this method can produce a theory of innovativeness, different from innovation and adoption, since, not all innovative organizations create innovations and not all organizations creating innovations are innovative. Innovativeness, like effectiveness, is the ability and the characteristic nature of organizations.

Previous studies on innovation identified sources of innovation as both internal and external to the firm Utterback 1971, Drucker 1985, Von Hippel 1988. In this, new knowledge, process needs, users, industry and market structure, were identified as some of the sources for innovation. Identification of sources validated the process models of innovation creation — “technology-push” and “market-pull” (Rothwell, 1977).

Utterback (1971) found that sources outside the laboratory were most useful in generating new ideas and sources inside the laboratory were most helpful in providing problem-solving and implementation assistance. Thus, the studies pertaining to innovation sources also tacitly focused on the innovation process. However, the research on communication, which emphasized the potential need for extra-organizational Keegan 1974, Baldridge & Burnham 1975, intra-organizational Becker & Stafford 1967, Lawrence & Lorsch 1967 and intra-laboratory communication Goldhar et al. 1976, Tushman 1977, Gobeli & Rudelius 1987, contributed to the knowledge of the sources of innovation.

One of the major works reported on innovation process, is the study conducted by Van De Ven et al., (1989). This study included a wide variety of innovations (concerning technology, product, process and administration), from different perspectives (individual, group, organizational, industrial and national), and in different settings (private and public sector and non-profit organizations). The study is useful in understanding how and why innovations develop over time from concept to implemented realities, which process leads to successful and unsuccessful outcomes, and to what extent can knowledge about innovation processes be generalized from one situation to another.

Earlier studies on the process of innovation adoption focused on two levels — individual and organizational. In this, there are more similarities than differences between the stages of adoption process at the individual and organizational levels: both the individualand organization undergo various stages: awareness, evaluation, trial, adoption. However, the type of innovation is likely to differentiate between the adoptions at individual and organizational levels. Researchers focusing on innovation processes Normann 1971, Utterback 1971, examined the competitive strategies of the firms across stages (Utterback & Abernathy, 1975), and the factors affecting innovation time-period (Gee, 1978). In studying innovation, researchers have also emphasized the need for different types of organizational climate at different stages of the innovation process Evan & Black 1967, Rowe & Boise 1974.

Researchers have also extended studies by focusing on innovation typology Knight 1967, Daft & Becker 1978, Damanpour & Evan 1984, Dewar & Dutton 1986. Innovations were broadly classified as technical (new technologies, products and services) and administrative (new procedures, policies and organizational forms). However, Van De Ven et al., (1989), borrowing Leavitt's (1964) idea that most innovations involve new technical and administrative components, assert that such a distinction could result in a fragmented classification of the innovation process. While this assumption is true, the direction of implication varies. More discussion concerning the typology is dealt with later in the paper.

Studies on the relationship between various organizational factors and innovation (e.g., Becker & Stafford 1967, Sapolsky 1967, Hage & Aiken 1967, Paolillo & Brown 1978), investigated how these factors aid or inhibit organizational innovation. Organizational size, measured in terms of the organization's manpower, is seen as one of the determinants of organizational innovation. However, innovation researchers till date, examining the relationship between organizational size and innovation have yielded contradictory results. Some studies found that smaller firms are more innovative (e.g., Paolillo & Brown 1978, Rothwell 1976), while others (e.g., Baldridge & Burnham 1975, Moch & Morse 1977, Kimberly & Evansiko 1981) deduced the opposite. There are also a few other studies which indicate a possible relationship between organizational innovation and size Mansfield 1966, Myers & Marquis 1969. Similarly, there has been a lack of agreement among researchers on the relationship between the age of the organization and innovation. For example, while the findings of Khan & Manopichetwattana (1989), indicate that innovative firms were younger, Kim's (1980), study did not find any concrete relationship between the age and organizational innovation. In this regard, Van De Ven et al., (1989), based on past literature, discuss the `liabilities of newness and smallness' (Stinchcombe, 1965) where new and small firms find it difficult to enter into a new domain, with the problems of raising capital and competing with larger organizations. However, Van De Ven et al., (1989)(: 223), also discusses the issue of why small firms are more innovative than large ones. The typical answer is, small firms are more flexible and quick to adapt to changing environmental opportunities and threats, than larger organizations which experience inertia due to their `liabilities of aging and bigness' (Stinchcombe, 1965). These contradictory and non-cumulative findings indicate the need to concentrate less on such contextual factors and instead focus more on internal mechanisms and external factors influencing creation and adoption of innovations.

Methods of organizational innovation can be viewed atleast under two different criteria like any other organizational phenomenon. They are one, levels of analysis, which includes the individual, the group and the organization as three different levels, and two, measurement.

In studies analyzing at the individual level, the objective was to investigate the relationship between innovation and some characteristics — creativity Pelz & Andrews 1966, Ginn 1986, Amabile 1988, personality characteristics like, innovative orientation, clarity (Keller & Holland, 1978), value, self interest (Hage & Aiken, 1967), demographic variables like age Stahl & Steger 1977, Keller & Holland 1978 and education (Stahl & Steger, 1977). Kirton (1976), developed a measure based on a theory which identifies two different personalities of individuals- innovators and adapters. Much work has been done on the characteristics of individuals such as, willingness, commitment and enterprise to produce innovations (e.g., Kanter 1989, Janowiak 1976, Burgelman 1984, Karlsson 1986, Peters & Waterman 1982). Studies of this nature enabled the organizations to utilize proven sophisticated methods of recruiting and effective management and utilization of human resources.

One of the major studies that attempted to quantify and classify the individual characteristics in relation to successful and unsuccessful innovations is “Project SAPPHO” (Rothwell et al., 1974). The study identified the role of key managers and technologists and addressed them as “technical innovators”, “business innovators”, “product champions”, and “chief executive” on the basis of their functions. The roles of the enterprising individuals addressed as “entrepreneurs” Quinn 1979, Malidique 1980, Lehr 1988, Roberts 1989 and “intrapreneurs” Pinchot 1985, Duncan, Ginter, Rucks & Jacobs 1989, Twiss & Goodridge 1989, in the creation of innovation were analyzed in detail.

Studies centered at the group level investigated certain aspects like problem solving (e.g., Osborn 1957, Maier & Hoffman 1960, Pelz & Andrews 1966, Hoffman 1965, Hoffman 1979), communication, learning and group cohesion (Cohen, Whitmyre & Funk, 1960) in relation to innovation. Meadows' (1980) study investigated organizational structure and its association with the innovativeness of the group's task. Operationalizing Burns and Stalker's (1961) concept of organicity, Meadows suggested its usefulness to small work groups. The studies at the group level demonstrated how groups can collectively achieve better results compared to individuals working alone in an organizational setting, and provided prescriptions for conducting small group activities (Butler, 1981).

Research at the organizational level mostly produced normative findings. This offered directions for the design of structure, which would facilitate creation and incorporation of innovations and adoptions, which in turn fit appropriately with the external environment. Similarly, several process mechanisms matching the structure, and conducive to innovation creation and adoption were suggested. However, practitioners, due to inadequate directions, experience a great deal of problems in redesigning the structure and process mechanisms alternatively, to innovate and adopt. Research at the organizational level, also produced several technology strategies contingent upon the contextual factors and the operating industry. Research also led to the identification of firm typologies and the variables that discriminate the clusters.

In studying innovation, researchers employed a wide variety of methods, as studies on innovation are not restricted to one single discipline. As seen from Table 1 innovation researchers designed a wide variety of questionnaires (Kirton 1976, Siegel & Kaemmerer 1978, Khandwalla 1985, Van De Ven et al. 1989 etc.), focusing on various aspects and concentrating on different units and levels of analyses.

Researchers used both structured and unstructured interviews to uncover information about innovation, innovation process and characteristics of the organization. Interviews have also been used as a corroborative technique, along with questionnaires Lawrence & Lorsch 1967, Daft & Becker 1978, Kim & Kim 1985. Studies have also employed case-study methods to examine innovation process/stages (Normann, 1971), and for cross-country comparisons (Quinn, 1985), concerning innovation. Longitudinal assessment of innovation and its processes also utilized case studies (Van De Ven et al., 1989). Innovation researchers have also used archival records, to obtain data about innovation Kimberly 1981, Ettlie 1983, Damanpour & Evan 1984, new product/process developments, technologies Cusumano 1988, Baba 1989, and related aspects like, R&D intensity, market share etc.

Scholars have used a number of publications (Stahl & Steger, 1977), expert's/stakeholders opinion (Quinn, 1985), professional's ratings (Paolillo & Brown, 1978), peer nominations/ sociometry choice (Keller & Holland, 1978), number of suggestions submitted and number of suggestions adopted within a period of time (Pizam, 1974), innovation index (Kanter, 1988), patent data and the economic value of innovations (Thompson, 1965) as a measure of innovation. Others have counted the number of innovations Hage & Aiken 1970, Miller 1971 as a measure of organizational innovation. Thompson (1965), suggests organizational properties as a surrogate measure of organizational innovation.

Thus, while the methods of innovation discussed evince the opulence and diversity of innovation, the complexities embedded in the innovation are implied as well.

Section snippets

Conceptualizing and measuring organizational innovation

The avowal by Downs & Mohr (1976), that the findings of innovation research are “non-cumulative”, “unstable” and “variant” was however, based on the central theme of the studies, that is, adoption. Further attempts by Damanpour 1991, Damanpour 1992, to test and refute their theory, albeit it contributed towards general theory development in certain ways, fell into the same trap. Consequently, the theory failed to advance conceptualization and thereby a measure.

The major problem that concerns

Content fallacy and contextual fallacy

Organizational innovation can be constructed as “the actualization of the creation of a new product, process, method or service by an organization, through concerted and committed efforts of its members, and by other resources, exhibiting a perceptual departure from its antecedent and demonstrating one or more utility values”. This definition reveals the content of the innovation, that is, the inherent characteristics of an innovation, which include newness — not seen or known before,

A metric for innovation

Measuring innovation should be a four fold activity: the major criteria to determine the innovation should be, one, the typology, two, the degree of departure from its preceding product, process or service, three, the extent of usefulness as perceived and measured by the users, and four, the volume of profits generated.

In measuring innovation, researchers should account for the innovation typology and keep aside the debate on such distinction causing fragmentary classification. For example,

Conclusions

This paper attempted, through an analysis of previous research, to present an agenda for further research to develop an “original innovation” theory distinct from a “derivative or adoption” theory. Although tremendous efforts have been invested in uncovering the complexities embedded in innovation and adoption, no labor was devoted consciously to construct distinct theories. Instead, innovation and adoption were equated, and employed analogously. Innovation was used as a cover term by many

Acknowledgements

I am grateful to Prof. D. Nagabrahmam, the Director, and the T. A. Pai Management Institute for the support to this study. I also express my gratitude to Dr. S. V. Udaykumar, Patil Balachandra and Dr. B. L. Maheshwari for their comments on an earlier version of this paper. Thanks are due to Mr. Mohammed Sattar and Ms. Madhavi Latha for their secretarial assistance.

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