Innovation and Factors Affecting It within Organizations
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Effective performance of organizations to a large extent depends on the set of external and internal factors (Zahra & Hansen, 2000). This is especially true in today’s global market due to the shift towards globalization processes (Zahra & Hansen, 2000). With the growing number of organizations worldwide, it is imperative that management within organizations undergoes different available methods in order to achieve and sustain a competitive advantage in the market (Jones, 2010). This improves organizations’ performance in the long run, as well as at the same time provides them with access to scarce resources that they need (Jones, 2010).
Modern global market companies all over the world compete in targeting the same groups of consumers from all over the world, using the same limited resources. Therefore, it is crucial for companies to find a sustainable competitive advantage that will allow them remaining strong and vibrant. One of the main roads leading to a sustainable competitive advantage that will increase efficiency and effectiveness is innovation. Organizations that are able to create a team of innovators will have the opportunity to change the playing field, where they can be leaders in their industry and defeat their competitors, especially, if they work on the disruptive innovation.
The complexity, richness and dynamism of the environment that organizations operate in bring a lot of uncertainties that threaten organizations’ effective performance (Jones, 2010). Consequently, a lot of up-to-date organizations are focused on collaboration both within the organization itself, as well as with external parties (LaFasto & Larson, 2001; Tirupati, 2008). Collaboration takes place between organization’s suppliers and distributors. In addition, a lot of companies cooperate while competing for the same scarce resources (Tirupati, 2008). The purposes of these collaborations include improvement of organization’s performance, efficiency, and efficacy, while at the same time reduction of the organizations’ dependence on others in supplying resources they need to produce products or provide services (Tirupati, 2008).
Engagement of organizations into collaboration develops a strong pressure on organizations about ways of integration of innovative approaches into the business model (Zahra & Hansen, 2000). As a result, organizations start looking for innovative methods, such as making use of technological advancement, in their complex value adding process (Zahra & Hansen, 2000). This research paper discusses both innovation and different factors that influence innovation, as well as was of applying innovative approaches to attain organizational success. Specifically, this paper has reviewed how innovation affects organizational success, and whether organizations should pursue innovative approaches in every situation.
Innovation can be defined as “the process by which organizations use their skills and resources to develop new goods and services, or to develop new production and operating systems so they can enhance their response to the wants of their customers” (Jones, 2010, p. 363). Another approach in defining innovation lays in the successful integration of creative ideas into the business model of organizations (Damanpour, 1988). Innovation is mainly used improve the position of the organization at the global market (Damanpour, 1988). Innovation can be considered as part of the transformation process within the organization. In some cases, innovation is one of the most vital changes organizations go through, because of the positive results produced from its implementation (Damanpour, 1988).
According to D’Aveni (1994), innovation can be divided into two types. The first type of innovation is known as quantum innovation. Quantum innovation can be defined as new products or services resulted from key changes in the environment. Some might even call it a breakthrough in how organizations do business (D’Aveni, 1994). Therefore, innovation is not a process that companies and organization are involved into on a regular daily basis. However, with the rapid technological development, innovations at organizations are becoming more frequent (D’Aveni, 1994). Apple’s iTunes and iPod are a perfect example of how innovation has changed an industry worldwide (Jones, 2010).
The second type of innovation is incremental innovation which can be defined as small improvements in the organizations’ products and operating systems (D’Aveni, 1994). Incremental change is based on the organizations’ strategies to continually improve products and services, such as Total Quality Management. All this is done in an effort to improve the product performance over time (D’Aveni, 1994). A perfect example of incremental innovation is how Boeing improved its design on the Boeing 737 to reduce the fuel consumption by 2%, and as a result, airlines are saving one hundred and twenty five thousand dollars each year (Choi, 2011).
In order to recognize the most efficient way of integrating innovation into its business model, organizations need to understand different factors that influence innovation (Friedrich, Mumford, Vessey, Beeler, & Eubanks, 2010). Research has identified several factors that influence innovation. However, three most vital factors are leadership styles within the organization, organizational culture and technological changes (Friedrich et al., 2010).
The first factor that organizations should take into account during implementation of the innovation strategies is the leadership style that they use to drive the organization (Friedrich et al., 2010). Research has proven that an integrated leadership style that opens lines of message between diverse levels of executives and employees will lead to a better flow of ideas, and eventually, produce more innovation (Friedrich et al., 2010).
The second factor that influences innovation within organizations is corporate culture (Friedrich et al., 2010). Corporate culture can be defined as the set of beliefs and norms that employees share within the organization (Gordon &Ditomaso, 1992). Corporate culture outlines behavior of individuals within organizations, their actions, performance of tasks they are required to do. Innovation is intertwined with corporate culture and is crucial for a business to be in a position to compete with others. Therefore, innovation needs to be embedded in all core values of the organization’s culture, in order to drive employee creativity, and, finally, lead to innovation (Noe, Hollenbeck, Gerhart ,& Wright, 2009; Whitley, 2000).
Organizations are always in search of new methods or strategies to implement, in order to achieve higher performance levels (Salomo, Talke, &Strecker, 2008). Over years, innovation has played a crucial role in improving performance of organizations. This is clear in what organizations around the globe innovation is at the forefront of reasons of their success (Salomo et al., 2008). For example, Google was able to come up with innovative formulas to organize the world’s information, giving them an advantage for several years over their competitors (Jones, 2010). Another example is how Research in Motion was able to connect individuals to their emails at all times by using their push email function (Jones, 2010).
Organizations will be able to improve their performance over the long run, when they implement innovative processes (Hull, 2004). One of the best ways to start the innovation process is through engagement in some alliances (Kale & Singh, 2009). This will help organization remain specialized, while at the same time make use of skills provided by other parties. By doing so, corporations will be able to open the door to new innovative ideas because of the increased efficiency, new resources and access to new markets that the alliance will bring to corporations (Kale & Singh, 2009). According to Kale and Singh (2009), a recent study by partner alliances find that 80% of the fortune 1000 CEOs attributes 26% of their company’s revenues to strategic alliances.
The future success of organizations depends on their ability to create new lucrative opportunities from joining other organizations in creating innovation and achieving common goals (Kale & Singh, 2009). Moreover, organizations must understand how to manage multiple alliances at the same time, in addition to having plans set to enhance the innovation process. By doing so, organizations will be able to respond to the emerging competition, the high rate of technological change, and discontinuities found within most industries (Kale & Singh, 2009).
Innovation is generally associated with change, and change is mostly tied with difficulties (Evamgelista, &Mastrostefano, 2006). One of the obvious problems found in innovation is the uncertainty associated with research and development (Evamgelista, &Mastrostefano, 2006). It is extremely difficult for organizations, especially those undergoing difficult financial times, to spend a large amount of their financial resources on the uncertain projects (Evamgelista, &Mastrostefano, 2006). Recent estimates show that only 12-20 % of investments made in research and development turn out to be profitable (Jones, 2010). This can be explained by the fact that some of the innovative products appear to be inefficient or simply not demanded by consumers. Another problem with innovation is that sometimes it is easy to replicate, which opens the door for competitors to provide the same product (Damanpour, 1988).
Even though governments provide innovators with exclusive privileges in using their innovative products for a number of years, evidence shows that many organizations are demanding longer periods of time (Jones, 2010). Organizations are justifying this request by the considerable increase in the cost of research and development in recent years (Jones, 2010). Copyrights, patents and trademarks are some examples of how the government provides exclusivity for organizations. Therefore, organizations need to have a clear plan set on how they intend to use these rights to maximize their profits during Top management in organizations needs to be highly adaptive to the number of changes that are likely that to take place as a result of the development associated with innovation (Chalhoub, 2010). In most cases, this will mean that the organization will have to embrace an organic structure that will help them in overcoming rapid changes in their business model (Chalhoub, 2010). Also, employees will need to be highly skilled and trained, in order to be able to quickly shift and adjust to what’s required of them as employees. Consequently, product adds in value, leading to customer’s satisfaction and a sustainable competitive advantage (Chalhoub, 2010).
Hypothesis of the Research
Based on the theoretical and empirical framework of the research on innovation and factors that affect innovation process in the companies, the first testable hypothesis in the given study is about the relationship between innovations and the leadership style, corporate culture, and technological changes.
H1: There is no relationship between leadership styles within the organization, organizational culture, and technological changes, and innovation.
Another hypothesis to be tested in the research is about direction of capsulation of the leadership style, corporate culture within the organization and technological enhancement on the innovation process applied in the company.
H2: If the leadership style and culture is adopted by an organization in addition to the finding needed technology, then innovation in this organization will improve.
The data used in this paper was collected from both secondary and primary sources of information. The primary sources of data included online survey based on the developed questionnaire (Appendix 1). The questionnaires were distributed through an online company. The survey was placed in by survey head online company which was to oversee the whole exercise of data collection. In order to qualify as a respondent in this survey, one had to undergo some screening with an aim of ensuring appropriate sample selection. In order to be qualified as a respondent, an individual was supposed to have some knowledge The online survey questionnaire contained a total of 18 questions which were subdivided in three sections, including individual and firm level characteristics of respondents, leadership style adopted in the organization, corporate culture and technologies assessment, and finally level of the company’s involvement in the innovation process. 50 participants participated in this survey. The secondary data on the topic of the study was collected from previous work done by different scholars about innovations and factors that affect in among companies in Saudi Arabia (Ochsenwald, 1981; Straub, Loch & Hill, 2001; Al-Gahtani, 2003; Kalliny & Houseman, 2007). The main sources of this data were scholarly journals, case studies, academic books among others.