Literature Review
Organizational culture serves as a pivotal driver for implementing organizational change (Aluko, 2003). While not all organizational changes involve innovation, Alvesson (2002) asserts that change itself is inherent in all such transformations. Despite this, there has been limited research exploring the correlation between innovation and organizational culture, with few empirical studies investigating the impact of organizational culture on innovation (Martin, 2001).
The literature review in this study delves into the following discussions:
- Concept of Organizational Culture
- Concept of Organizational Innovation
- Relationship between Organizational Culture and Innovation
Seven dimensions of organizational culture have been identified through the resemblance of OCP dimensions to cultural knowledge types outlined by Silverthorne (2005). Utilizing the Organizational Culture Profile (OCP) instrument, these dimensions include stability, innovativeness, respect for people, attention to detail, outcome orientation, aggressiveness, and team orientation. Notably, these culture dimensions bear similarity to the practice dimension of Hofstede, Neuijen, Ohay, and Sanders (1990), derived from an international sample of firms. Authors over the years, such as Pavitt (2003) and Denison (1990), have generated various cultural dimensions. However, it remains crucial to establish cultural dimensions that play a role in characterizing organizational cultures (Zammuto & Krakower, 1991).
Concept of Organizational Culture
The term “culture” has traditionally been associated with distant and exotic places, rites, myths, foreign practices, and languages. Researchers observe that organizational members engage in traditions, rites, and societal practices that contribute to the passing along of stories and myths. Additionally, informal practices involving arcane jargon either foster or hinder an organization’s management goals (Denison, 1980). In organizational behavior literature, researchers have provided various definitions of organizational culture. For instance, Kilmann (1985) defines it as “shared philosophies, ideologies, values, assumptions, beliefs, expectations, attitudes, and norms” crucial for keeping an organization together. Deal (1986) considers organizational culture a human invention, playing a significant role in fostering solidarity, productivity, and commitment. Deal & Kennedy (1982) describe it as a shared value or belief system interacting with people, control systems, and organizational structures to produce behavioral values and norms. Collins and Porras (1991) define organizational culture as a pattern of shared beliefs and values that aids in understanding the organization’s function, providing behavioral norms and values.
Hofstede et al. (1990) emphasize the influence of national and regional culture groups on organizational behavior. In Hofstede’s study, more than 100,000 IBM employees worldwide were examined to identify cultural aspects influencing business behavior. Hofstede identified five cultural dimensions: uncertainty avoidance, power distance, masculinity vs. femininity, and individualism vs. collectivism. Power distance indicates the extent to which a society expects differences in power levels. Uncertainty avoidance relates to the society’s expectations regarding risk and uncertainty. Individualism vs. collectivism considers whether people act for themselves or as members of an organization. Masculinity vs. femininity explores traditionally male or female norms and values, such as assertiveness, competitiveness, ambition, material possession, and wealth accumulation.
Concept of Organizational Innovation
A comprehensive exploration of the literature on innovation reveals that while certain topics enjoy consensus among scholars and researchers, innovation has not received proportional attention. Nevertheless, innovation is recognized as a strategic option for enhancing organizational effectiveness and competitiveness (O’Reilly and Tushman, 2004; Michie, 2002). It serves as a catalyst for competitive advantages on both national and global scales, offering unique services and products and establishing formidable entry barriers to foster tough innovation development. Furthermore, innovation shapes new norms and values, rewriting the rules of competitive play. In the face of high competition and market turbulence in globalization, the development of new products has become a crucial indicator for corporate success (Michie, 2002; Denison, Haaland, and Goelzer, 2003). Corporations that fail to innovate in products and technologies risk losing competitiveness and the ability to achieve sustained success in the current global market (O’Reilly and Tushman, 2002). Nacinovic (2009) emphasizes that innovation consistently brings highly competitive benefits to any organization. However, researchers lack a general consensus on the definition of innovation and establishing effective measures for innovation within an organization remains a challenge (Jung, Wu, and Chow, 2008).
Concept of Innovation
West and Farr (1990) define innovation as the intentional introduction and application within a group, role, or organization of notions, processes, procedures, or products that are new to the relevant unit of adoption. This intentional introduction is designed to provide advantages to individuals, groups of people, companies/organizations, or society as a whole. Innovation can be understood as the implementation of new ideas, and material artifacts, such as products or practices, playing a crucial role in bringing about positive change in a business or society (Martins, 2000). Linder, Jarvenpaa, and Davenport (2003) emphasize that innovation involves the presentation and implementation of new notions, contributing to the creation of norms and values.
Relationship between Organizational Culture and Innovation
Lee and Yu’s (2004) research findings support the notion that organizational cultures focusing on innovation significantly contribute to the growth, progress, and success of organizations or companies. High-tech manufacturing firms, in particular, benefit greatly from innovation, enhancing their Return on Assets (ROA). Hospitals, however, tend to pay less attention to innovation due to the unique characteristics of the hospital industry. Consequently, innovation has been incorporated into organizational culture components to aid corporations in improving their growth and performance. Hurley and Hult (1998) argue that organizational cultures encompass not only learning and market orientations but also distinguish between innovation and marketing orientations to develop an effective model. To be highly innovative, an organization must not only be creative but also successfully implement creative ideas. Due to this distinction, the values, norms, and behaviors that promote the production of creative ideas within a company may differ from those fostering the implementation of creative ideas (Flynn & Chatman, 2001). Therefore, it is argued that aspects of culture may differ. Many values and behaviors promoting creative ideas are represented within the Denison Model’s Involvement and Adaptability traits, including risk-taking, collecting ideas from different points of view, collaboration/teamwork, and a sense of ownership. High-involvement cultures, which score high in autonomy and freedom, play a significant role in generating ideas. These cultures use teams cooperatively, emphasizing mutual accountability and employee integration, crucial for promoting responsibility and idea sharing, and fostering innovation and creativity (Denison, 1996). Similarly, Adaptability is crucial for innovation and creativity, with customer and market-oriented approaches creating diverse networks of ideas. Employers are encouraged to take calculated risks and engage in direct communication with consumers to develop creative responses to customer needs (Denison, 1996). Leaders promoting creativity in their organizations must develop and support a culture high in involvement and adaptability. Kotter and Heskett (1992) found that organizations with adaptive values were strongly associated with superior performance over a long period compared to short-term performance, a finding supported by Collins and Porras (1994) in their research on financially successful organizations. Denison and Mishra (1995) provided a thorough comparison of external adaptation internal integration and stability and flexibility, dimensions of the Denison model discussed above. Finally, Saffold’s (1988) discussion on “strong” culture, adaptability, and a sense of commitment and mission aligns with Kotter and Heskett’s discussion on adaptable culture. These early findings highlight that organizational performance and innovation are significantly impacted by organizational culture, especially when aspects are strong and relevant to the industry, as the environment plays a crucial role.
A study conducted by Tellis, Prabhu, and Chandy (2009) involved analyzing 759 firms from major economies worldwide. They identified capital, government, labor, and culture as crucial drivers of innovation. Culture emerged as the strongest driver for radical innovation across nations. Additionally, the authors emphasized the significance of corporate culture as a key driver of innovation globally. Felisberto (2008) posited that competition significantly influences innovation management, as managers seek superior options for existing methods and procedures. The general growth of competition has created a dynamic and chaotic global landscape, compelling organizations to innovate to remain relevant in a highly competitive market (Drechsler, 2011).
Chesbrough (2003) observed that a doubtful cultural environment facilitates the innovation process. Industry leaders, especially in adopting radical innovation, aim to dominate local and global markets, enhancing the international competitiveness of domestic economies amidst intense globalization pressure. The ability of firms to build and sustain competitive advantages strategically hinges on their attitude towards handling changes in the organizational environment with innovation. This demonstrates how they showcase innovative behavior. In a dynamic environment, innovation serves as a means to adapt to and overcome organizational weaknesses while adding value to an organization’s services and products. A review of literature on the impact of organizational culture on innovation suggests that successful organizations possess the capacity to integrate innovation into the management process. Organizational culture, both in general and specifically, plays a crucial role in supporting and encouraging organizational innovation.
In a turbulent economic environment, innovation emerges as a significant strategic driver to secure knowledge assets, explore new opportunities, and gain advantages in the highly competitive economic world. Innovative companies are considered more flexible in dealing with change and are quick to respond to opportunities. Therefore, innovation is deemed highly significant for an organization’s success. However, achieving innovation is not possible without an encouraging organizational culture. Such a culture significantly influences innovation by creating, supporting, and implementing ideas that encourage innovation to address problems and find solutions.
Frequently Asked Questions About Organizational Culture and Innovation (A Literature Review)
What does the literature reveal about the relationship between organizational culture and innovation?
The literature underscores the significant impact of organizational culture on innovation. Successful organizations demonstrate the ability to integrate innovation into their management processes, with both general and specific organizational cultures playing pivotal roles in supporting and encouraging innovation.
How does competition influence innovation management according to the reviewed studies?
According to Felisberto (2008), competition exerts a substantial influence on innovation management. Managers, in the face of competition, actively seek superior options for existing methods and procedures. The growing competition globally has created a dynamic and chaotic landscape, compelling organizations to innovate for competitiveness.
What drivers were identified for innovation in the study conducted by Tellis, Prabhu, and Chandy (2009)?
Tellis, Prabhu, and Chandy (2009) identified capital, government, labor, and culture as important drivers of innovation. Notably, culture emerged as the strongest driver for radical innovation across nations, emphasizing its critical role in fostering innovative practices.
How does organizational culture affect the innovation process in dynamic environments?
In dynamic environments, organizational culture plays a crucial role as a means to adapt to and overcome organizational weaknesses while adding value to an organization’s services and products. The ability to embrace change and showcase innovative behavior is essential for building and sustaining competitive advantages.
Why is innovation considered a significant strategic driver in a turbulent economic environment?
In a turbulent economic environment, innovation is seen as a crucial strategic driver to secure knowledge assets, explore new opportunities, and gain advantages in a highly competitive economic world. Innovative companies are viewed as more flexible in dealing with change and quick to respond to opportunities, contributing to overall organizational success.
Can an organization achieve innovation without an encouraging organizational culture?
Achieving innovation is challenging without an encouraging organizational culture. The literature suggests that organizational culture significantly influences innovation by creating, supporting, and implementing ideas that encourage innovation to address problems and find solutions.
How do industry leaders use innovation to navigate globalization pressures?
Industry leaders, especially when adopting radical innovation, aim to dominate local and global markets. Innovation becomes a key strategy to enhance the international competitiveness of domestic economies in the face of intense globalization pressures.
Why is corporate culture emphasized as a key driver of innovation globally?
Corporate culture is considered a significant driver of innovation globally because it sets the tone for fostering innovative practices within firms worldwide. A positive corporate culture encourages the development, support, and implementation of innovative ideas, contributing to overall organizational success.
What role does a doubtful cultural environment play in the innovation process?
A doubtful cultural environment, as observed by Chesbrough (2003), opens doors to the innovation process. It encourages industry leaders to adopt radical innovation, enabling them to control local and global markets and enhance their international competitiveness amid the challenges of globalization.
What is the significance of organizational culture in absorbing innovation into management processes?
Successful organizations possess the capacity to absorb innovation into their management processes. Both general organizational culture and specific cultural aspects play crucial roles in supporting and encouraging organizational innovation, reflecting the organization’s ability to adapt to and thrive in a rapidly changing environment.