In this chapter, it gives plenty of relevant literatures to provide a theoretical foundation for the conceptual model of this research. Theories regarding trust, organizational learning, successful factors towards innovation, innovation, and business performance are mentioned.
Trust Concept and Definition of Trust
Trust is viewed as a necessary concept for organization nowadays (Zaheer, McEvily, &
Perrone, 1998). Nowadays, agreements and relationships among employees, employers and customers have changed dramatically. It is essential for organization to consider the relationships between them and their employees. Besides, it is also important for organization to consider how to be more competitive through the way how their employees work together.
Trust plays an important role in running a business by creating an environment that organizations utilize the minimum resources to increase possibilities of common benefits for members in the organizations (Panayides & Venus Lun, 2009). Moorman, Deshpande, and Zaltman (1993) defined it as a willingness that you depend on an exchange partner who has high confidence in your mind. Trust is the decision which is willing to depend on a partner with the expectation that the partner will act as the common agreement both sides made (Currall & Inkpen, 2002). Trust is without the monitor or the control, awillingness of a party to be vulnerable to the actions of another party based on the expectation that the party will do the particular behavior (Hosmer, 1995; Mayer, Davis, & Schoorman, 1995). Trust is defined as positive expectations to another person’s behavior (Lewicki, McAllister, & Bies, 1998).
Shockley-Zalabak et al. (2003) stated that trust is the positive expectations that others’
actions were based on experiences, roles, interdependencies and relationships. Table 2.1 shows the definitions of organizational trust in different views. In this research, it adopts the definition of Shckley-Zalabak’s definition to test o trust in this framework.
10 Table12.1
Different Definitions of Trust
Author Journal Definition (trust)
Christine Moorman, Rohit on an exchange partner who has high confidence in your mind.
Currall, S.C., Inkpen, A.C. Journal of international business studies, 33-3 (2002), 479-495.
Trust is the decision which is willing to depend on a partner with the expectation that the partner will act as the common agreement both sides made.
Hosmer, L. T. Academy of Management
Review, 20 (1995), 379-40.
Trust is without the monitor or the control, a willingness of a party to be vulnerable to the actions of another party based on the expectation that the party will do the particular behavior.
Trust is defined as positive expectations to another
Trust would influence innovation (Hurley & Hult, 1998). For making organizations’
innovation more successful, it is important organizations should have the higher level of trust (Tsai & Ghoshal, 1998). Landry, Amara, and Lamari (2002) mentioned that in order to facilitate innovation, trust can contribute more than other variables. Knack and Keefer (1997) indicated that Lower trust would have a bad impact on innovation, because it may decrease innovation. Trust not only facilitates innovations but also facilitates the capabilities of innovation in the organization (Panayides & Venus Lun, 2009). Trust is regarded as a cornerstone in the organizations. It is the first step for organizations to thrive and survive in
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knowledge based economy. Without trust, stakeholders can’t believe what other said.
Organizations which are going to invent some competitive products or services need a lot of information to diagnose the comprehensive and complex market. To create and develop more valuable products or services in the competitive market, they must search and collect the information carefully. For investing the resource and time in innovation, it is necessary for stakeholders to make sure everything is true and useful. However, they would doubt the information which was told by those who they don’t believe. In order to filter and examine the validity, organizations spend resources to investigate it. That would increase risks of losing invisible opportunity to get ahead in the competitive market. Therefore, it is so important to keep trust in the organizations for innovation. As Panayides and Venus Lun (2009) states that trust would help organizations facilitate their capabilities for innovation.
Without trust, members in organization would stay at their traditional comfort zones and refuse to accept their new roles and responsibility (Fawcett, Magnan, & Williams, 2004).
In order to measure organizational trust, Shockley-Zalabak, Ellis, and Cesaria (2003) built a trust model to examine the importance of organizational trust and provide a tool to measure trust in organizations (see figure 2.1). This research adopts its’ measurable way. The model was composed of five dimensions: (1) competence in the organizations and the competence for leaderships in the organizations, (2) openness and honesty, including sincere communication (3) concern for employees from their supervisor, (4) reliability, including the consistent words and actions, and (5) identification which means how organizational members manage their thoughts to organizations.
Hypothesis 1: Trust has no effect on innovation in the ICT industry.
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Organizational Learning Concept and Definition of Organizational Learning
The researches of organizational learning have become more and more important in recent years. As Prahalad and Hamel (1990) stated that organizational learning is an essential element for organizations to be successful in the market. In order to get sustainable competitive advantages and improve business performance, organizational learning is essential (Brockman & Morgan, 2003; Dodgson, 1993b). It can help organizations become more flexible and faster to respond to the dynamics in this complex world (Day, 1994).Organizational learning was defined as through the mutual experiences of people in the same organization, organization develops new knowledge and visions, and it has the potential to affect behaviors and enhance the organizational capability (Huber, 1991; Slater & Narver, 1995). Dodgson (1993b) described it as a way organizations build, supplement and organize knowledge and routines from organizations’ activities and cultures, and use organizational members’ abilities to adapt the environment and develop new things to make organization become more efficient. In this research, it adopts the definition of Huber (1991).
Concern for Employees
Openness and Honesty
Identification
Reliability
Competence
Trust
Perceived Effectiveness
Job Satisfaction
Figure 2.1 The Model of Trust. Adapted from Adapt from “Measuring organizational trust:
Cross-cultural survey and index,” by P. Shockley-Zalabak, K. Ellis, & R. Cesaria, 2003, IABC Research Foundation, p.8. Copyright 2014 by International Association of Business Communicators.
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The Importance of Organizational Learning
Organizational learning is an important issue for organizations which desire to succeed in the knowledge based economy. Through organizational learning, organizations can absorb knowledge with independence and keep its advantages. On the other hand, organizational learning makes organizations be energetic to respond the challenges.
According to Dodgson (1993a), organizational learning has a positive relationship with high level of trust. High level of organizational trust can enhance the effectiveness of organization and facilitate the continuing relationship in the organization (Dodgson, 1993a). Through trust, members in the same organizations have positive and continuous relationships increasing the willingness of learning. Besides, Abrams, Cross, Lesser, and Levin (2003) stated that trust can increase the exchange of knowledge, which means members exchange their knowledge with less cost, and increase the extent that they can absorb and understand. Trust makes members are willing to teach useful knowledge to other members (Renzl, 2008). In another word, trust makes members in the organizations willing to share and teach their useful knowledge to other members with less cost. That makes trust can be one of good ways to predict the successful performance (Currall & Inkpen, 2002).
Trust is one of effective element to persuade members to change their views. If trust develop in the organization, it may expect that organizational members will be more willing to share their knowledge to their partners and feel less fear of opportunistic behaviors from other members (Oxley & Sampson, 2004). It makes trust become so important to organizational learning. Whether trust has a relationship to organizational learning will be measured in this research.
Organizations in the new competitive environment see themselves as learning organizations, pursuing the objectives of continuous improvement in their knowledge assets (Bontis, 1999). Organizational learning is regarded as an essential element for developing new products or services when the new technologies or industries show in the market.It is an important issue for organizations to keep its’ competitive advantages nowadays (Brockman &
Morgan, 2003; Dodgson, 1993b). For organizations, it is so necessary that never giving up learning in the competitive market. Organizations which are still learning from external environment can avoid eliminating from the market. For the process of innovation, organizational learning is an essential part (Meeus, Oerlemans, & Hage, 2001). Learning plays a key role in making organizations to be more flexible and faster in the innovation
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process (Brown & Eisenhardt, 1995b). Follow this logic; it is obviously that innovation results from organizational learning (Hurley & Hult, 1998).
In order to evaluate organizational learning in the ICT industry, this research decides to adopt the measurable way which was built by Jerez-Gomez, Céspedes-Lorente, and Valle-Cabrera (2005). They divided organizational learning into four parts. These parts are:
(1) managerial commitment; (2) systems perspective; (3) openness & experimentation; and (4) transfer & integrate. Those are represented in figure 2.2 of this section.
Hypothesis 2: Trust has no effect on organizational learning in the ICT industry.
Hypothesis 3: Organizational learning has no effect on innovation in the ICT industry.
Organizational learning
Managerial commitment
Systems perspective
Openness &
experimentation
Transfer & integrate
Figure 2.2 The Model of Organizational Learning. Adapted from “Organizational learning capability: a proposal of measurement,” by P. Jerez-Gomez, J. Céspedes-Lorente, & R.
Valle-Cabrera, 2005, Journal of Business Research, 58(6), p.722. Copyright 2014 by Elsevier B.V.
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Successful Factors towards Innovation
Organizations with innovational capacities can respond to difficulties immediately and get better new products and market opportunities than those organizations with non- innovational capacity (Brown & Eisenhardt, 1995b; Miles & Snow, 2003). Innovational capabilities are regarded as an important element for organizations to achieve strategic competitive advantages (Sher & Yang, 2005). However, what are the successful factors for organizations having better innovational capacities? There are many arguments about what factors will affect innovation capacities successfully. Some studies consider a certain groups of factors are very important, and on the other hand, some studies don’t consider those factors are important, because they consider other factors are more important to have better innovational capacities (Jerez-Gomez et al., 2005). That makes innovation looks like a mystery.
Based on the research conducted by Panne et., al (2003), there are originally four important factors that help organizations consider their innovational capacities. These factors are: (1) firm-related (organization-related) factors; (2) project-related factors; (3) product-related factors; and (4) market-related factors. Those are represented in figure 2.3 of this section. It is clearly that those four factors affect different two areas of innovational capacities which are technological area and commercial area. In the end, it affects the outcomes, which are the successful products (or services) in the organizations. In this research, the product dimension is combines with the market dimension. On the other hand, the fifth and sixth factor, human-related factors and demographic factors which are seen as important successful factors to increase innovational capabilities (Shih & Gutierrez, 2011;
Shih & Tseng, 2009), were also added in this research to see the importance of human capital and demographic capital. In sum, the successful factors towards innovation in this research are demographic factors, organization-related factors, project-related factors, human-related factors and market-related factors. Those are represented in figure 2.3 and 2.4 of this section.
Hypothesis 4: Successful factors towards innovation have no effect on innovation in the ICT industry.
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Firm-related factors
Project-related factors
Product-related factors
Market-related factors Technological
Viability
Commercial Viability Successful
Product
Figure12.3 The model of successful factors towards innovation. Adapt from “Success and Failure of Innovation: A Literature Review,” by G. Van der Panne, C. Van Beers, & A. Kleinknecht, 2003, International Journal of Innovation Management, 7(3), p.4. Copyright 2014 by World Scientific Publishing Co.
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Innovation Concept and Definition of Innovation
Lots of scholars try to catch the definitions of innovation. Thompson (1965) defines innovation as the generation, acceptance, and implementation of new ideas, processes, products, or services. Innovation is the successful implementation of creative ideas within an organization (Amabile, Conti, Coon, Lazenby, & Herron, 1996). Innovation is the adoption of a new idea and behavior (Jiménez-Jiménez & Sanz-Valle, 2011; Zaltman et al., 1973).
Innovation is changing the product or process radically or incrementally; besides, it also changes the value of it (Sher & Yang, 2005). Tables 2.2 showed the different definitions of organizational innovation. In this research, it defines innovation as the adoption of a new idea and behavior.
Figure22.4 The model of successful factors towards innovation (II). Adapted from
“Measuringthe process innovation competenc of casa pella company in nicaragua,” by C. P.
Shih & J. Gutierrez, 2011, Unpublished master’s thesis, National Taiwan Normal University.
Copyright 2014 by National Taiwan Normal University.
18 Table 2.2
The Different Definitions of Innovation
Author Journal Definition
Thompson, Victor A. Administrative science quarterly (1965), 1-20.
Innovation as the generation, acceptance, and implementation of new ideas, processes, products, or services. Innovation is the successful implementation of creative ideas
Innovation is the adoption of a new idea and behavior.
Zaltman, G., Duncan, R., Holbek, J.
Wiley, New York. 1973.
Sher, P.J., Yang, P.Y. Technovation, 25 (2005), 33–43.
Innovation is changing the product or process radically or incrementally, besides, it also change the value of it
The Importance of Innovation
Researches show that innovation can not only make organizations have a lot of valuable, rare and special products and services, but also guide organizations to get a great of profit (Barney, 1991; Zahra, Ireland, & Hitt, 2000). Innovation frequently links to high financial performance (Calantone et al., 2002; Deshpandé & Farley, 2004). It looks innovation can help organizations develop newer, better and more valuable products or services than organizations’ competitors. Innovation helps organizations enhance its’ positive competitive advantages, and can become the competitive advantages of organizations (Hult & Ketchen, 2001). As Hult, Hurley, and Knight (2004) stated that by innovation, managers can figure out the way to solve business problems and challenges, which means innovation helps
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organizations succeed in the complex and tough world. According to above statements, It is observantly that innovation can help organizations thrive and survive in the competitive market.
Innovation is a source of sustainable competitive advantage in the organizations and it is important for organizations to increase economic growth (Tushman, Anderson, & O’Reilly, 1997). Even scholars use different tools and ways to measure innovation, and most of them contain process innovation, organizational innovation and technological innovation (Shih &
Tseng, 2009). Progress innovation is defined as putting new elements into operation of products or service in organizations, and then it can help the organizations produce better products or make better service (Damanpour & Gopalakrishnan, 2001). Usually, it contains a wide view from finding a potential problem, developing the solutions, commercializing the products or services, spreading its’ information, implementation and consequences (Shih &
Gutierrez, 2011). As the general definition of organizational innovation, It is internally creating new device, new system, new process, new service, new policy or new program for organizations to adopt the external environment (Damanpour, 1991). Technological innovation is regarded as using technology or market knowledge to create something new to the customers, and it may be new products or new services (Afuah, 2003).
Hypothesis 5: Innovation has no effect on business performance in the ICT industry.
Business Performance
Business performance is that organizations use its' own standard to measure the whole outcome of the previous goals it made (Emden et al., 2005). To measure the business performance in the ICT industry, this research adopts the model which was built by Emden et al. (2005). The model separated business performance into three parts: partnership performance, market performance and financial performance. Partnership performance is the behavior what organizations’ alliances do in order to achieve the common goal. It includes the relationship with organizations’ alliances, the strength of the relationship, stabilities with alliances and the sustainability of organizations’ alliances. Market performance means how success organizations’ products or services are in the existing market and the customers thought about organizations in the future. It is comprised of market development, market share and the development of products. Financial performance is how
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well the resources were utilized and commercial plan was made succeed in the market. It contains four parts: profitability, return on investment, cash flow and cost control.
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