This section provides a review of the literature on organization contexts relationship with innovation, and knowledge sharing and innovation. Three hypotheses are formulated for this section as follow:
Hypothesis 1: Organization contexts have an effect on innovation.
Hypothesis 2: Knowledge sharing has an effect on innovation.
Hypothesis 3: Knowledge sharing has a mediating effect on the relationship between organization contexts and innovation.
Knowledge Sharing and Innovation
Innovation is commonly defined as the introduction of newness into an organization. It is generally conceived to include the adoption, generation, development, and implementation of new ideas or behavior (Damanpour, 1991; Damanpour & Gopalakrishan, 2001). Various authors propounded that innovation success depends on organization’s ability to capitalize on the knowledge available in the organization and the expertise possessed by its staff. In contrast, other authors contended that knowledge should be managed in order to foster innovation. For example, Gloet and Terzioski (2004) and Leiponen (2006) argued that innovation depends heavily on organization’s capability to effectively manage knowledge.
Authors like Bhirud, Rodrigues, and Desai (2005) maintained that knowledge sharing is the antecedent of innovation and that KM and innovation are linked to innovation by knowledge sharing (see figure 2.6). Knowledge sharing is considered as the antecedent of innovation.
Calhoghirou, Kastelli and Tsakanikas (2004) sustained that the organization’s internal capability and openness towards knowledge sharing are essential to its innovative performance. Similarly,
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Darroch and McNaughton (2002) added that by encouraging employees to contribute knowledge within groups, organizations are more likely to generate new ideas and develop new business opportunities, thus facilitating innovation activities. Much of the KM literature attributes organization innovation success to effective knowledge sharing.
Knowledge sharing and innovation seemed to share similar characteristics with regard to human behavior, and organization issues. Both knowledge sharing and innovation necessitate special behavioral support from employees such as individual motivation and interaction.
Nacinovic, Galetic, and Cavlec (2009) posited that innovation greatly depends upon motivated employees that take initiatives and are creative in their work. Similarly, Yoo and Torrey in Bock, Zmud, Kim and Lee (2005) pointed that knowledge sharing behaviors are likely to be influenced by personal motivations. In addition, knowledge sharing and innovation depend on individuals’
interaction. Wong et al. (2009) stated that the sharing of knowledge implies interactions between individuals with agreed and acceptable behavior. Likewise Axtell et al. (2000) defined innovation as the process where the implementation of ideas requires the involvement of others.
Furthermore, various authors maintained that factors affecting knowledge sharing can be classified into individual and organizational factors (e.g. Connelly & Kelloway, 2003; Lin, 2007b). Likewise there seems to be a common agreement among researchers that individual factors and organizational factors have an impact on innovation (e.g. Jaskyte, 2011). Similar to knowledge sharing, information technology, top management support, organization culture, and organization structure have also been found to have an impact on innovation.
Researchers and scholars have theoretically and empirically emphasized the importance of knowledge sharing in enhancing innovation (e.g. Darroch & Mc Naughton, 2002, Calhogirou et al., 2004; Liao, 2006; Lin, 2007b; Zhi-hong, Li-bo & Shu, 2008). The majority of empirical studies have showed that knowledge sharing is essential in fostering innovation activities, and ensuring organization innovation capability and performance. For example, Kim and Kim (2000) surveyed 150 professional employees in six business corporations in South Korea, and found a significant positive relationship between knowledge sharing and organizational innovation.
Similarly, Liao (2006) used a sample of 271 from computer manufacturing in Taiwan found that employees’ knowledge sharing behavior is positively related to firm innovation. In addition,
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Lin’s (2007b) research results which also revealed that employees’ willingness to share knowledge is significantly related to firm innovation capability.
Similarly, Zhi-hong et al. (2008) used a sample of 115 Chinese firms to explore the relationship between knowledge sharing and absorptive capacity on innovation capability and find that knowledge sharing within firms has a positive influence on innovation. Kamasak and Bulutlar (2010) examined two knowledge sharing forms such as knowledge collecting and donating on innovation by surveying 246 middle and top-level managers in Turkey and found that knowledge sharing particularly knowledge collecting had a significant influence on all types of innovations. Lastly, Thompson and Heron’s (2006) research suggest that knowledge sharing behaviors among R&D employees are positively associated with innovative performance. Their study are supported by Sáenz et al. (2009) and Carmelo-Ordaz et al.’s (2011) studies which also reported a positive relationship between knowledge sharing and innovation performance.
Knowledge sharing types, particularly tacit knowledge sharing has been claimed to be crucial for innovation success. Cavusgil, Calantone, and Zhao (2003) surveyed various US manufacturer and service firms to analyze the effect of tacit knowledge sharing on firm innovation capability. Blumm’s case studies cited in Seidler- de Alwis and Hartmann (2008) revealed that tacit knowledge sharing sped up the innovation process that led to innovation success. In the same line of thinking, Nonaka and Takeuchi (1995) suggested that achieving a high level of shared tacit knowledge plays a crucial role in achieving sustainable innovation.
Furthermore, they explained that an organization can increase innovation by turning tacit knowledge into explicit knowledge through externalization and sharing it with others. On the bases of Nonaka (1995), it can be assumed that both the sharing of explicit knowledge and tacit knowledge are essential in fostering innovation.
Figure 2.5 The link between KM and innovation. Adapted from “Knowledge sharing practices in KM: A case study in Indian software subsidiary” by S. Bhirud, L. Rodrigues, & P. Desai, 2005, Journal of Knowledge Management Practice. Available at: http://www.tlainc.com/articl103.htm
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Information Technology, Knowledge Sharing and Innovation
Recent studies have showed that information technology practices, infrastructure and capability can be an important mean for innovation. For example, Chen and Tsou (2007) through a survey of 558 financial firms located in Taiwan showed that components of information technology adoption such as information technology infrastructure had a positive effect on process and product innovation. Using a sample of 87 people working in 18 different sectors in Instanbul, Zehir et al. (2008) analyzed the impact of information technology and organization learning on firm performance and innovation and showed from correlations and multiple regression analyses that information technology had a positive and significant effect on firm innovation.
Rhodes et al. (2008) examined the relationship between organizational factors, knowledge transfer, innovation capability and organizational performance by surveying 223Taiwanese high-tech industry companies. The authors found that information high-technology capability was positively and significantly associated with organization innovation. Gloet and Terziovski (2004) indicated that the success of innovation performance, which includes new process, product and service, depends highly on the integration of KM processes with soft HRM activities and hard information technology activities. Sáenz et al.’s (2009) study results showed that information technology, employees and processes had a positive effect on knowledge sharing effectiveness.
Subsequently, the knowledge sharing was found to have a positive effect on enhancing innovation capability.
Information technology influence on innovation can be understood from three perspectives.
First, information technology contributes to the integration of knowledge or even to the stimulation of new knowledge (Davenport & Prusak, 1998). Second, information technology increases the speed on the availability of information, which in turn enhances innovations (Johanssen et al., 2001). Finally, information technology facilitates innovation as it allows individuals to be connected through its infrastructure which allows the sharing of knowledge across the organization and reuse of knowledge in the creation of new goods and services (Nerkar & Paruchuri, 2005). From the literature review, knowledge sharing is vital for innovation, thus it can be assumed that information technology that facilitate knowledge sharing may have a positive impact on innovation.
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Top Management Support, Knowledge Sharing and Innovation
Various studies have indicated that top management support can either have a positive or negative impact on innovation. Page (1993)’s study indicated that one out of every four innovators qualify top management support as a prerequisite for success. Atuahene-Gima (1996) used a survey 600 Australian firms to compare innovation activities between manufacturing and services firms, and found that the most important factors affecting new service performance seemed to be the extent of the firm’s focus on innovation activities in human resource strategy, teamwork and management support. Likewise, Gupta and Wilemon’ (1996) survey results of 120 technical directors from technology-based companies reported that senior management support to various technical activities was one of the key factors in successful innovation. Carbonell and Rodriguez-Escudero (2009)’s study findings of 183 new product projects indicated that top management support had a positive effect on innovation speed under conditions of high technology novelty and high technological turbulence.
In contrast, Kanter in McLean (2005) listed 10 “Rules for stifling innovation” that included lack of management support or encouragement. Similarly, an empirical study Lansisalmi et al.
(2004) surveyed 750 employees in 40 small and middle-sized industrial enterprises focused on six types of barriers of innovation among which non-supportive managerial behavior. Similarly, Taminiau, Smit, and de Lange (2009) based on in- depth interview with 29 consultants in the Netherlands found that lack of management support represented a major barrier for innovation.
Their research indicated that consultants stated that they were not supposed to invent or come up with something new and that top management was mainly concerned with the revenues. As one interviewee noted (p.50):
‘…one expects the consultant to be an expert in the service it offers, not to invent something new.
Ideas are worked out if it fits the main street and if it provides revenues’.
The findings also suggested that top management failed to provide the necessary financial resources and this resulted in a situation where the consultants had to elaborate their innovative ideas in their own time, with no support from colleagues or without access to the relevant network.
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Various authors agreed that top management plays an important role in providing appropriate leadership and nurturing a supportive organization culture. For example, Axtell et al.
(2000) study findings implied that in order to get ideas implemented there needs to be a supportive group and organization environment that included participation in decision-making and management support. McGourty et al. (1996) used a sample 14 US companies to develop a model of innovation based on both theory and research which provided a framework for facilitating innovative activities within organizations. The research concluded that an organization's culture can be modified to encourage innovative behaviors through specific management practices. Zhuang et al.’s (1999) study of 199 managers of various organizations revealed that while most organizations have realized the importance of innovation and were prepared to mobilize their managers to be involved in innovation projects, many of them have not yet been able to create an innovation culture and devise suitable policies to encourage innovation positively within the wider context of their organizations.
Authors have indicated that management support for innovation goes beyond providing resources, attracting employees’ participation and nurturing a supportive environment. Top management support for knowledge sharing is found to be equally vital for innovation success.
Aulawi et al. (2009) claimed that the development of innovation capability of an individual through the development of knowledge sharing behavior necessitates adequate support from the management of the company. Ahmed, Kwang, Kok, and Loh (2002, p.69) further added that successful knowledge management companies depend on their leaders’ efforts in nurturing organizational culture and climate that continually promote learning and innovation through knowledge sharing. In addition, Lin (2007c) maintained that top management facilitation of knowledge sharing is fundamental to enable an organization with superior competence in knowledge sharing to succeed in innovation performance.
Organization Culture, Knowledge Sharing and Innovation
Various researches indicated a positive association between organization culture and innovation. For example, Lee, Tan, and Chiu (2008) conducted an empirical study on organization culture and organization learning impact on innovation performance by surveying
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seven Taiwan high tech industries. The findings indicated that organization culture is positively and significantly related with innovation.
Furthermore, the results suggested that organization culture types have different levels of influence on innovation. Jaskyte and Dressler (2005) study findings indicated that strongly shared culture may not be appropriate for fostering innovation. These authors also concluded the higher the cultural consensus on values such as stability, security, low level of conflict, predictability, rule orientation, team orientating, working in collaboration with others, the less innovative the organization may be. Analyzing a sample of 68 Croatian firms, Nacinovic, Galetic, and Cavlec (2009) concluded that corporate culture can support innovation through values and norms that can be shape with certain features of rewards systems. Yang and Hsu (2010) explored the relationship between organizational process alignment, culture and innovation by collecting surveys from 175 high-tech firms in Taiwan and found that organization culture had a positive impact on innovation. An empirical study conducted by Valencia, Valle, and Jimenez (2010) indicated that organization culture can enhance or inhibit innovation.
According to the literature there is some broad agreement on the types or norms of organization culture needed to improve organization innovation. By conducting an interpretive study to compare differences in culture between high-innovative and low-innovative companies, Jassawalla and Sashittal (2002) identified several features of highly innovation-supportive cultures which included favoring collaboration, creativity, and risk-taking. Similarly, Kanter in McLean (2005, p.32) suggested that innovation is most likely to occur in organizations that emphasize collaboration and teamwork. An empirical study conducted by Hurley and Hult (1998) showed that from a survey of 9648 employees of a large US government R & D unit , a supportive and collaborative culture had a positive influence on organization innovation.
Citing from previous, Hurley and Hult (1998) further explained that support and collaboration reduces fear and increases openness and therefore increases new ideas and risk taking that lead to successful innovation. Anantatmula (2008) advanced that promoting innovation using the KM process requires collaborative culture and participation in decision-making. Mian, Takala, and Kekale (2008) explained that organization culture can establish the effectiveness of knowledge sharing practices which may lead to innovation.
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Organization Structure, Knowledge Sharing and Innovation
Organization structure may facilitate innovation by fostering a working environment that encourages interaction among employees. Organization structure may also influence innovation by promoting communication across departments and informal meetings. For example Robbins (2003) highlighted four factors that have an effect on innovation and indicated that an organic organization structure and good communication between departments can enable innovation. In addition the structure of an organization may promote innovation through its decision-making process and knowledge sharing.
For example, an organization structure that supports employees’ participation in the decision making process is claimed to be conducive to innovative approaches to problem solving.
Studies conducted by (Axtell et al., 2000; West & Anderson, 1996) suggested that employee participation in the decision making process can enhance innovation. According to Islam, Ahmad and Mahtab (2010) the greater the flexibility in organization structure is, the lower the obstacles in communication flow in the organization are. Moreover, these authors stressed that as rules and regulations are secondary in such a structure, employees are more enable to use their area of expertise to quickly address a crisis and to freely share knowledge among them to eradicate the crisis as soon as possible.
Several studies have shown how certain organizational structures facilitate the creation of new products and processes, especially in relation to fast changing environments. For example, Cho’s (1996) case study of a Korean firm, Samsung, to identify the characteristics of the organizational innovations in the era of globalization; investigate the consequences of the organizational innovations and analyze the problems the company face in implementing them;
and finally determine the remedies for overcoming those problems. The study revealed that the organization strived to implement innovation in three ways: 1). Operating teams; 2) networking;
and 3) flattening of hierarchy. The author concluded that a “clustered web” organizational structure is desirable for innovation. Similarly, Ozsomer et al. (1997) study showed that a flexible organization structure had both a direct and indirect effect on innovation and concluded that adopting a flexible organization structure is the prerequisite to innovation.
Analyzing the effect of organization structure on innovation in a retail chain, Chang and Harrington (1998) explained that in a centralized structure, the organization headquarter is the
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sole source of new ideas while in a decentralized structure store managers have the freedom to adopt their own ideas and disseminate innovations. The authors concluded that a centralized organization structure is more suitable when innovation opportunities are moderate whereas a decentralized structure is desirable when such opportunities are rich. In contrast, Mian, Takala &
Kekale (2008) suggest that rigid, formal and command and control structures may promote functional efficiency at the detriment of collaborative and innovative activities. Chen and Tsou’s (2007) study of 558 Taiwanese financial firms show that organization structure had a positive effect on innovation. Miller and Toulouse (1986) and Wissema et al. (1980) quoted in Cosh et al.
(2005) maintained that innovation requires organization flexibility to facilitate the coordination between the departments within the innovative firm, and to manage change, foster new ideas and effectively commercialize them.
Cosh, Fu, and Hughes’s (2005) survey of 465 innovative British small and medium enterprises (SMEs) showed that the innovative efficiency of these organizations was positively affected by the flexibility of the organizational structure. A flexible organization structure has also been claimed to encourage knowledge sharing and consequently provide an adequate environment for the creation of new ideas. Seidler-de Alwis and Hartmann (2004) explained that organization structure characteristics that include openness and information management where people are not inhibited in sharing knowledge, and do not fear that sharing knowledge will cost them their jobs affect the innovation capability of organization.
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CHAPTER III. METHODOLOGY
This chapter introduces the research design and methodology. It highlights the theory that supports the research and presents the research hypotheses derived from the research questions.
It also provides a detailed description of the research questionnaire, research procedure as well as the approach for validation of the measurement instrument. Furthermore, it describes different constructs used and their associated reliability estimates, showing that they meet the requirements for academic research.