探討組織文化與知識創新模式對創新績效之影響

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(1)國立高雄大學經濟管理研究所碩士論文. 探討組織文化與知識創新模式對創新績效之影響 Examining the Impacts of Organizational Culture and Knowledge Creation Modes on Creation Performance. 研究生：蘇彬絜撰指導教授：吳建興博士. 中華民國九十六年七月.

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(3) 誌謝在這所學校整整待了六年，時光似乎還停留在抉擇選擇那一間研究所而在猶豫躊躇著，結果繞了一大圈，命中注定要與高大再續情緣，陪伴著我再度過二年的黃金歲月。感謝恩師吳建興老師，鼓勵我使用英文來完成論文，圓了似乎夢中才會發生的事，感激老師在學生破英文上的一點一滴的修改與討論。如同老師名言：「不管繳交多少英文補習費，還不如身體力行，直接以英文來寫作。」雖然，寫完論文的英文程度也沒有很好，不過，這讓我學習到「堅持，才有機會看到絢爛迷人的景致。」此外，老師對於論文觀念上的釐清，不斷在學生遲緩的大腦中持繼激盪著，兩年下來邏輯思考的嚴謹度有著明顯的提升。而且，老師不急不徐的處事態度，謙沖涵養的人格特質，總能考慮到學生處境。有著教授的大氣魄，也有著與學生站在同一陣線的親切感。感謝老師兩年的教誨，學生將不會辜負您的期望。同時，承蒙擔任學生口試委員的南台科技大學施武榮主任以及高雄大學張純端教授的寶貴建議和指正，論文得以更加完整的呈現，謹致以最深的謝意。同時也要感謝同窗打拼的好夥伴們。在論文嚴謹度方面，憲哥給予相當多的建議，也分享生活中的點點滴滴。感謝有著「性感」頭髮的啟銘，在研究方法上給我大力的協助，古道熱腸與無厘頭式的邏輯，使生活上充滿樂趣。常常語出驚人的小強，感謝帶領我進到網球領域中，以及「超級快烏龜」的聖凱，生活品味很有一套，以後希望有機會跟你學習。「任性而為」的昱欣，將棒球上複雜而有趣的策略運用不厭其煩的講解，會喜愛王建民不可諱言地是你的「傑作」。感謝國樂社的錦源，使得問卷得以順利發放。感謝梁大哥、夏大哥、鄭大哥、珮瑜姊，學長建成，同學瑞宏、君女、光原，學妹靜宜、雅芬、庭芳以及所上的同學與學弟妹們，在論文寫作上、課業上、生活上，曾經給予的幫助與砥礪，使得研究所除了論文寫作之外，兩年的回憶在生命軌跡中，仍留下數不清的動人扉頁。最後，感謝默默支持我的家人，不管遇到任何困難，總是無條件的「鼓勵」大放送。而國樂社也在這六年來從三人社團到全國比賽準特優的高檔表現，讓我帶著自豪、歡樂回憶離開了再也熟悉不過的社辦，不過，永遠會以曾經身為高大竹風弦語國樂社的社員為榮。也感謝霹靂布袋戲的一步蓮華、小莫、三口劍給我在論文寫作之餘歡樂的寄託與熱血情懷。凡此種種，一個階段的結束，代表另一階段的挑戰來臨，感謝協助我完成碩士論文的大家，一路上有你們，真好。蘇彬絜謹識于高大知識管理系統實驗室 2007 夏 I.

(4) 探討組織文化與知識創新模式對創新績效之影響. 指導教授：吳建興博士國立高雄大學資訊管理系. 學生：蘇彬絜國立高雄大學經濟管理所. 摘要近年來，隨著知識經濟時代的來臨，知識已經成為企業重要的資產，也因此使得知識管理系統的導入將是企業重要的課題之一。持續不斷的知識創新使企業維持競爭優勢，而知識創新模式幫助企業維持源源不絕的創新動力。欲成為一個創新卓越的組織，其所內涵的組織文化的特性與知識創新模式，是影響組織知識創新績效的一大因素。因此，在不同組織文化特質的企業中，將會傾向於使用適合的知識創新模式，以提高創新績效，此問題已成為知識管理重要的研究議題之一。因此，本研究的重點在於探討組織文化、知識創新模式、以及創新績效之間的關係。本研究採用實證研究法，以中華徵信所 2006 年出版的 5000 大企業名錄中， 1997 年至 2006 年向經濟部智慧財產局申請專利數大於 20 的製造業廠商，為主要抽樣對象，向管理部門的經理發出問卷 423 份，有效回收 153 份，回收率為 36.17%。資料分析技術使用結構方程模式與複迴歸分析以檢定所提出之假設。結果發現： (1) 組織文化顯著影響知識創新模式與創新績效；(2) 目標自由模式(完全自由的創新思考空間)與目標依賴(視企業執行創新的層級而定)對組織創新績效有正向影響；(3)目標導向(給定目標的創新方式)對組織創新有負向影響。因此，本研究建議企業應視自身所擁有的組織文化特質，透過使用適合的知識創新模式來提升創新績效。關鍵字：組織文化、知識創新模式、創新績效. II.

(5) Examining the Impacts of Organizational Culture and Knowledge Creation Modes on Creation Performance Advisor: Professor Chien-Hsing Wu Department of Information Management National University of Kaohsiung. Student: Ping-Chieh Su Institute of Economics and Management National University of Kaohsiung. ABSTRACT With the advent of knowledge economy, knowledge has become one of the most important assets for modern enterprises. Consequently, implementation of the knowledge management system is a key success to businesses. It is believed that a company who keeps up knowledge creation can continuously maintain competitive advantages. Therefore, adoption of knowledge creation modes would highly influence the ability of knowledge creation. To be a remarkable creative organization, it has been seen that the characteristics of organizational culture could have impact on knowledge creation modes and creation performance. However, the question of how a company considers the characteristics of organization culture in order to appropriately adopt knowledge creation modes becomes critical to creation performance. In consequence, this research conducted an empirical investigation for the causal relationships among organizational culture, knowledge creation modes, and creation performance. To derive the research findings, this study made use of questionnaire survey to collect data. The participants that this research focuses are companies having patents not less than 20 in the previous 10 years (1997-2006). There were 423 questionnaires sent to the participants who are mainly working in the managerial department manager. 153 questionnaires were returned, presenting a 36.17% valid returned rate. Structural equation modeling (SEM) and multiple regression analysis were employed to test these hypotheses. The data analysis results statistically confirmed that: (1) organizational culture shows significant impacts on both knowledge creation modes and creation III.

(6) performance, (2) both goal-free (thinking with full free) and goal-depended (depended on the level of creation implementation) creation modes have positive influence on creation performance, and (3) goal-driven (thinking within a defined goal) creation mode has a negative influence on creation performance. Therefore, the research finding suggests that an enterprise should be quite aware of their characteristics of organizational culture, and then adopt an appropriately knowledge creation modes to effectively improve the creation performance.. Keywords: organization culture, knowledge creation modes, creation performance. IV.

(7) TABLE OF CONTENTS ACKNOWLEDGEMENT (IN CHINESE)………………………………… ……..Ⅰ ABSTRACT (IN CHINESE) …………………………………………………….…..Ⅱ ABSTRCT……………………………………………………………………….…...Ⅲ TABLE OF CONTENTS...………………………………..…………………….…..Ⅴ LIST OF TABLES ………………………………………………………………... ...Ⅶ LIST OF FIGURES................................................................................................ ....Ⅸ CHAPTER 1 INTRODUCTION ………………………………………………… …1 1.1 Research Background and Motivation ………………………………..…………...2 1.2 Research Objective ……………………………………………………..…………7 1.3 Research Procedure ………………..………………………………...……….…....7 1.4 Thesis Overview……….……..………...………………………...………….……10 CHPTER 2 LITERATURE REVIEW………………….………………....…….… 11 2.1 Creation Performance……………………………………………………………..11 2.2 Organizational Culture ..………………………….………………..……………. 20 2.3 Fundamental of Innovation and Creation ………….……………………………..26 2.4 Knowledge Creation Modes……………………………………..………………..29 2.4.1 Goal-Free Creation Mode…………………………………………………….32 2.4.2 Goal-Driven Creation Mode ………………………………………………… 36 2.5 The Impact of Organizational Culture on Creation Performance …………….......41 CHAPTER 3 METHODOLOGY…………………………….………………….......43 3.1 Research Model…………………………………………………………………....43 3.2 Research Hypotheses……………………………………………………………....44 3.3 Sampling Plan………………….……………………………....………………......46 3.4 Questionnaire Design………….………………………….………….......…....….….46 3.5 Data Analysis Method………….…………………………….……..…….…...….…49 CHAPTER 4 DATA ANALYSIS AND RESULTS. …….......……………….….........50 4.1 Descriptive Statistics.…............................................................................................50 4.1.1 Response Rate ……………………………………………………………….50 4.1.2 Characteristics of Samples ….………..……………...…..……….………….51 4.2 Measurement Results for Relevant Research Variables …………...……………..54 4.2.1 Organizational Culture …..……………………………….…...……………..54 \. V.

(8) 4.2.2 Knowledge Creation Modes ……………………….…….………………….60 4.2.3 Creation Performance. .…………………………………….…….…………..64 4.2.4 Measurement Model …………………..………………………………...…..67 4.3 Structural Equation Modeling …...………………………………………….…….69 4.4 Regression Analysis …..………………………..……………..…………..……......72 4.4.1 The Effect of Organizational Culture on Creation Performance. .…………..73 4.4.2 The Effect of Knowledge Creation Modes on Creation Performance ............74 4.4.3 The Effect of Organizational Culture on Knowledge Creation Modes………75 4.5 Summaries of Hypotheses Testing……………...…… ……….………………….76 4.6 Discussions and Implications ..…………………..… ………...………………….78 4.6.1 Organizational Culture to Creation Performance… ..…………………..……78 4.6.2 Knowledge Creation Modes to Creation Performance……..…………..……79 4.6.3 Organizational Culture to Knowledge Creation Modes……..….…………....81 4.7 Differences of Sample Characteristics ………………………………….………...82 .. 4.7.1 Company Age…………………………………………………………..…….83 4.7.2 The Number of Employees………………………………………….…….… 84 4.7.3 Capital ………………………………………..………………...…………….84 Chapter 5 Conclusions ………………..…………………………..………….…...…86 5.1Research Conclusions…………………………………………..…………...…..…86 5.1.1 Organizational Culture .……………………………………………..……..…86 5.1.2 Knowledge Creation Modes ...……………………………………………. …87 5.2 Research Contribution ...……………………………………………………. ……88 5.3 Limitations and Future Study ...………………………………………. ………….90 REFERENCES………………………………………….……….…………………...91 APPENDIX: QUESTIONNAIRE (IN CHINESE)…………………..……..……..102. VI.

(9) LIST OF TABLES Table 2-1 Evaluation of Product Creation Performance…..………………………….18 Table 2-2 Evaluation of Manufacturing Creation Performance….…………………..19 Table 2-3 Evaluation of Management, Organizational, and Strategic Creation Performance ………………………..……………………………………….19 Table 2-4 Four Organizational Culture characteristics…………………………….....22 Table 2-5 Characteristics of Goal-free and Goal-driven Creation Mode…………..…39 Table 2-6 Impacts of Organizational Culture on Creation Performance……………..42 Table 4-1 Returned Questionnaire…………….…………………………………...…50 Table 4-2 Characteristics of the Sampled Firms …...……………….……...………...52 Table 4-3 Characteristics of the Respondents.…………………………………...…..53 Table 4-4 Factor Analysis and Reliability Test for Organizational Culture ………...55 Table 4-5 Model Fit of Organizational Culture………………………………....……57 Table 4-6 Scale Properties of Organizational Culture……………………….…….…59 Table 4-7 AVE of Measured Factors of Organizational Culture…………….…… ….59 Table 4-8 Factor Analysis and Reliability for Knowledge Creation Modes…………62 Table 4-9 Model Fit for Knowledge Creation Modes…………………………….….63 Table 4-10 Scale Properties for the Knowledge Creation Modes……………………63 Table 4-11 AVE of Measured Factors of Knowledge Creation Modes ………………64 Table 4-12 Factor Analysis and Reliability Test for Creation Performance…….……65 Table 4-13 Model Fit for the Creation Performance……………..………………… ..65 Table 4-14 Scale Properties for the Measurement Model of Creation Performance.. .66 Table 4-15 AVE of Measured Factors of Creation Performance…………….…….…67 Table 4-16 The Fit of the Research Model………………………………..………….68 Table 4-17 Scale Properties of the Research Model…………………………...……..68. VII.

(10) Table 4-18 AVE for Research Variables .……………………..…………….…...……69 Table 4-19 Model Fit for the Structure Equation Model ...………………………….. 69 Table 4-20 Summary of Hypotheses Tests ……………………….…………………. 73 Table 4-21 Effect of Organizational Culture on Creation Performance ..…..……..... 74 Table 4-22 Effect of Knowledge Creation Modes on Creation Performance .………75 Table 4-23 Effect of Organizational Culture on Knowledge Creation Modes ...……76 Table 4-24 A Summary of Hypotheses Testing .…………………………………….77 Table 4-25 ANOVA among Company Age.……………………………….…….….. 83 Table 4-26 ANOVA among Number of Employees ….…………………….…....…… 84 Table 4-27 ANOVA among Company Capital .……………………..…….….....….. 85. VIII.

(11) LIST OF FIGURES Figure 1-1 Research Procedure……………………...…………………………..………9 Figure 3-1 Conceptual Framework………………………………...…………………..44 Figure 4-1 Path Diagram of SEM Model…………………………...……………….....71. IX.

(12) Chapter 1 Introduction. With the advent of knowledge economy, it has been seen that the knowledge management (KM) related issues become one of the hot topics and are extensively brought onto the research platform. In consequence, globalization and the common practices of resource sharing, factors to the success of remarkable organizations depend not only on resource wealthy, cost advantage, and technology advancement, but also on the capabilities of creating, standardizing, acquiring, capturing, distributing, adopting, and evaluating organizational knowledge. Thus, the concepts of knowledge-based organizations emphasizing creativity, innovation, discovery and inventiveness are generally accepted. An effective reaction to the trend leads not only to changes in individuals and their behavior, but also to innovative changes in organization to ensure their existence (Read, 1996). Competence and knowledge creation are the critical determining factors for successfully maintaining competitive at the firm level (Cohen and Levinthal, 1990; Grant, 1996). Moreover, it also increases organizational creation performance as well as profit which stockholders care about most. Therefore, both knowledge creation and innovation performance issues in organizations have still been widely, continuously discussed for the modern enterprise management.. In general, there are two main facets for the KM research issues. One is management and organization, and another is knowledge technology. The former focuses on how to find management models or management strategies that can appropriately meet the development requirements of knowledge management system (KMS) and thereafter. 1.

(13) enhance the competition capability, such as knowledge creation, organization culture, and learning strategies. Based on the knowledge characteristics, the later aims mainly at how to employ information technology to develop KMS, such as knowledge capture technology and knowledge base development methodology. Ultimately, the goal for these two facets is to help an organization build a KMS as one of the most competitive strategies (Liebowitz and Suen, 2000; Zairi and Al-Mashari, 2005).. 1.1 Research Background and Motivation. Within the knowledge age, knowledge management, knowledge creation in particular, is one of the most important strategies that organizations have been trying to adopt to gain competitive capability. Therefore, labor, land, and capital are no longer the only factors that significantly affect performance. Knowledge creation is one the key elements that help differentiate from competitors. For the past decades, researchers and business management have contributed much effort on the exploration of KMS related solutions, such as what creation mode can lead to better performance? What characteristic of organization culture is best to help deliver KM programs? What is the causal relationship between knowledge creation modes and creation performance? How can information technology (IT) be used in helping knowledge creation, acquisition, and sharing? Findings depicted in literature help us better go into the KMS development looking at and searching for better solutions (Hellström and Jacob, 2003; Nonaka, 2004). However, from the stand viewpoint of KMS life cycle, it is found that there are six major stages that steering the knowledge management development (Yeh, 2004). They are 1) knowledge creation, 2) knowledge acquisition,. 2.

(14) 3) knowledge standardization, 4) knowledge storage/sharing, 5) knowledge adoption, and 6) knowledge evaluation. Generally, the life cycle helps direct an organization to better develop and implement a KMS, and accordingly makes an organization a knowledgeable body to better adjust itself with swift changes. Furthermore, it is well believed that the knowledge is the source of knowledge management program. Evidences depicted in literatures have also shown that knowledge creation is one of the keys to business competition (Drucker, 1986; Angle et al., 1989; Hill and Jones, 1998; Hage, 1999; Lin, 2001; Hellström and Jacob, 2003; Martins and Terblanche, 2003; Amabile, 2004; Zairi and Al-Mashari, 2005).. In general, there are four key elements for knowledge creation (4P): (1) product, (2) person, (3) process, and (4) press (Rhodes, 1961; Fellers and Bostrom, 1993; Nagasundaram and Bostrom, 1995; Satzinger et al., 1999). The product concerns mainly with the creative ideas, new design, new product, new strategy, or new plan. The person is viewed as the subject who participates directly or indirectly in the creative process and may be a person, group or organization (Raudsepp, 1983; Torrance, 1990). The process is a procedural or method which individuals and groups use to generate creative activities. In general, it is so-called “creative thinking” and main concerns are to explore the effective procedure in human generating creative activities (e.g. Gorden, 1961; Bono, 1992), to design the procedure and method of creative activities (e.g. Gorden, 1961; Isaksen and Treffinger, 1985; Bono, 1992), and to explore the effect of method on creative training (Necka, 1984; Gendrop, 1996; Titus, 2000). The press is the environmental factors in creativity activities, such as performance. evaluation,. competition,. organizational. culture,. group. norms,. organizational vision and goals, even space (e.g. Cumming and Oldham, 1997; Leonard and Swap, 1999). However, in order to clarify the difference between 3.

(15) creativity and innovation, Leonard and Swap (1999) suggested that creativity is a process which generate, develop and express possible, useful, novel idea, while innovation is the final outcome of creative process and is also a representation, expression, and interpretation of knowledge in the novel, related, valuable new product, process or service. In other words, creativity is idea generation and innovation has practical purpose or business value. Therefore, innovation is regarded as idea adoption or implementation. This is also supported by Sternberg and Lubart (1999) that creativity as the ability to generate work that is both novel (i.e. original, unexpected) and appropriate (i.e. useful, adaptive concerning task constraints). Innovation is about a process of developing and implementing a new idea. It is the generation, acceptance, and implementation of new ideas, processes, products, or services.. Knowledge creation is a concept with various meanings. Following the emphasis on knowledge management field, the term knowledge creation is usually found in recent literature. Basically, knowledge is an abstract concept. Organizational knowledge is diversities, and may exist in organizational management function and activities (Spender, 1996; Matusik and Hill, 1998). Therefore, this thesis regards that the final outcome of creativity or innovation is generally represented by the physical “product” or “service”; the final outcome of knowledge creation can be showed on not only the creative ideas or innovation performance, but also on the other 3P activities. For example, individuals and groups can improve their creativity to enhance the ability of innovation by learning the procedures or methods in a specific environment or culture. Consequently, this thesis regards knowledge creation as including creativity and innovation and the performance of knowledge creation also contain the outcomes of other 3P structures which are called “ learning outcome” except creative ideas and 4.

(16) innovation performance. In this thesis, therefore, we regard knowledge creation as the inclusion of creativity and innovation.. There are many factors that may influence the performance of knowledge creation, such as environment, incentives, information available. Consequently, many researchers have been devoting much effort onto the knowledge creation related issues to find more relevant solutions helping better creation performance. These can be on the facet of culture, facet of management, facet of creation mode, and facet of education and cognition. Among these factors, it is realized that the goal is one of the key elements while performing knowledge creation. In other words, whether or not a goal is defined may have potential impact on the final achievements. Eventually, the objective is to improve organizational performance by the enhancement of creation performance. Accordingly, this research project focuses on the study of causal relationship examination between knowledge creation modes and creation performance. This study considers two creation modes by Scriven (1977) and Patton (1987) goal-free and goal-driven. The goal-free mode asserts that creation should be carried out in a thinking space with full freedom while the goal-driven argues that the creation should be conducted under a predefined goal. However, since there is no evidence that can be relied on to appropriately category the knowledge creation modes. This study performed the factor analysis and obtained one more mode, goal-depended creation mode, which basically is to pursue that creation activities ban be performed according to the goal that is defined by a specific level of creation implementation.. In addition, literature has shown that organizational culture could have relationship to the performance of knowledge creation (Damanpour, 1991; Deshpandé et al., 1993; 5.

(17) Syrett and Lammiman, 1997; Tushman and O’Reilly, 1997; Chandler et al., 2000; Martins and Terblanche, 2003). In general, the nature of organizational culture tends to make regulative behaviors that individuals or groups should obey. In other words, it could form regulations and behaviors organization likes and accepts, such as organizational structure formulation, policy establishment, procedural control, and management practice. However, with respect to the impact of organizational culture on creation mode, there is no evidence so far indicating that who is the independent variable and who is the dependent. On the one hand, a specific characteristic of organizational culture could be formulating a creation method, and thereafter influence the creation performance. On the other hand, different creation modes could be supportive to form an innovative environment and consequently shape a distinctive organizational creative culture. Although many research have addressed theoretically the. relationship. between organizational. culture. and. creation. performance, and how organizational culture increases creation performance, it is less to use empirical research to examine their causal relationships. Therefore, this study also attempts to reveal the impact of organization culture on creation modes (goal-free, goal-driven and goal-depended). Styles of organizational culture are based on four characteristics by Quinn (1988), market, adhocracy, hierarchy, and clan. For the dependent variable (creation performance), this study considers creation for product, creation for manufacturing processes, and creation for management. The population is based on the industry with a characteristic of patents at least 20 in the previous 10 years (1997-2006).. 6.

(18) 1.2 Research Objective The research objectives that this study is include:. (1) To develop the scale of knowledge creation modes (2) To examine the impact of organizational culture on creation performance (3) To examine the impact of knowledge creation modes on creation performance (4) To examine the impact of organizational culture (particularly the knowledge value) on knowledge creation modes, and (5) To provide a managerial implications and suggestions with respect to the research findings for the aimed manufacturing industry.. 1.3 Research Procedure The research procedure is illustrated in Figure 1-1. It starts form confirming the research problem by literature review. It then goes through a certain amount of research papers and books that are highly connected to creation performance. The research scope as well as the research dimensions is determined after this. The research is then constructed the research framework where sampling plan and hypothesis definition are included. The data provided by participants are collected by a designed questionnaire. The research is proceeded with the pilot test in order to confirm the readability and understandability for the questionnaire. After an acceptable amount of data is collected, the research then moves to the phase of data analysis. The data analysis includes descriptive statistics, internal consistency. 7.

(19) reliability and characteristic of participants. In the process of exploring relations among each dimension, the statistical techniques including analysis of variance, regression analysis and path analysis are used to test the defined hypotheses. The outputs of the data analysis are the results of the hypothesis test and some observations. Finally, the research presents some discussions and draws managerial implications and suggestions.. 8.

(20) Confirming research problem. Reviewing literature and formulating research hypotheses. Deciding research dimensions and scopes, and constructing conceptual framework. Conducting empirical investigation. Analyzing preliminary data. Exploring relationships among dimensions. Concluding remarks and addressing suggestions. Figure 1-1: Research Procedure. 9.

(21) 1.4 Thesis Overview This thesis studies the knowledge management, knowledge creation modes, organizational culture, and creation performance. It presents a review of literature, research hypotheses, research methodology including research framework, sampling plan, and results of data analysis. The remaining part of this thesis is organized as follows. In chapter 2, a review of literature is described in detail and hypotheses formulated. This helps in developing the research framework. Chapter 3 presents the research methodology. The data analysis and research findings are provided in Chapter 4. Chapter 5 concludes this thesis where discussions, managerial implications, suggestions, and future research focuses are described.. 10.

(22) Chapter 2 Literature Review Following the research background and motivations, this research conducted a review of literature about creation performance, organizational culture, and knowledge creation modes in this chapter. First, the creation performance was reviewed, and then went through the organization culture. Second, the foundation of creation and innovation was described. The knowledge creation modes were presented, including goal-driven and goal-free creation mode. Finally, the impact of organizational culture on creation performance was addressed.. 2.1 Creation Performance. Performance evaluation becomes a critical issue while making this connection. Hellström and Jacob (2003) proposed that there is a difficulty to directly describe the connection between knowledge creation and value it can create, 2003 OECD (1999) proposed to use structural capital and human capital to evaluate the impact of knowledge creation program on intellectual capital (IC) which includes structural asset, human asset and customer asset. IC is a mix of items such as staff competencies, ability to exploit such competencies, customer relationships, ability to exploit such competencies, customer relationships, brand equity, goodwill and patents. A high IC score is very clearly a positive outcome of good knowledge creation practice.. James and Roffe (2000) defined evaluation is a process that professionals do all the time and in every discipline that compares the actual and real with the predicted or 11.

(23) promised and a process of judging that is applied to activities initiatives, people, program and results. The measurement criteria may be confusing when the basis for a judgment is not apparent, or is obscured (Hale, 1988). When neither the performance evaluator nor the client has the capability to capture sufficient information to make a balanced judgment, justification has to be provided by the evaluator for taking a different approach (James and Roffe, 2000). Besides, James and Roffe (2000) indicated goal-based training innovation is explicit training objectives which are specified during design and before delivery.. In the study of innovation evaluation, Olshavsky and Spreng (1996) indicated that when presented with an innovative concept, consumers first tend to sort the outcomes. In other words, on the one hand, an innovation may be rejected because consumers categorize it into an existing one that shows a negative implication. On the other hand, if consumers can not classify it, they will use a judgment process based on some evaluative criteria, such as forming expectations about the innovative concept, assessing satisfaction with an old product, and comparing the new and old products. Consequently, managers may have an opportunity to shape the judgment process by educating consumers about the appropriate evaluative criteria or by clearly communicating the product’s attributes, benefits and appropriate use.. The methods of evaluating knowledge assets have many in the literature, including intangible asset monitor (Sveiby, 1997), the balanced scorecard (Kaplan and Norton, 1992) and the Skandia value scheme (Edvinsson, 1997). The intangible asset monitor tends to regard people as the main carrier of knowledge outcomes and to see increased capabilities/competencies as a major intermediate goal in profit generation. Other measures take fixed IC outcomes of processes into accounts, such as growth, 12.

(24) renewal, stability and efficiency. The balanced scorecard focuses on customer learning and growth perspectives. These approaches may share a broad classification of human, customer and structural capital. Each approach, particularly the balanced scorecard, directly links these types of metrics to financial factors. The Skandia value scheme is a model for highlighting and describing the evolution of intellectual capital within Skandia. The model visualizes value components that make up intellectual capital as sell as the method of managing them and reporting on their development. Low (2000) developed a model for measuring critical categories for non-financial performance’, including of an index of a number of value drivers called value creation index (VCI), including innovation, quality, customer relations, management capabilities, alliances, technology, brand value, employee relations and environmental and community issues. In addition, this task of assessing results for the organization is usually in the form of return on investment (James and Roffe, 2000). Low (2000) indicated that VCI would enable manager to measure the impact of key intangible asset categories on a company’s market value.. It has been seen that creation performance is evaluated by many dimensions. This study based on literature summarizes the evaluation dimensions of creation performance: (1) product creation performance, (2) manufacturing creation performance, (3) management creation performance, (4) organization creation performance, and (5) strategy creation performance. For the product creation performance, Cooper (1985) examined the impact of the firm’s product innovation strategy on creation performance by using eight evaluation variables as: (1) ratio of new products on whole sales for the past five years, (2) proportion of successful product development in the past five years, (3) proportion of product development that either failed or quitted in the past five years, (4) proportion of product 13.

(25) development that reached goals in the past five years, (5) the importance of the innovation project to the sales and profits, (6) profits from new product development are more than investment, (7) the degree of success in comparison with the competitors, and (8) the success degree of the whole development project. Walker and Ruekert (1987) and Yeh (2005) adopted three variables to measure the technical performance for new product development: (1) effectiveness, including success probability and marketing growth rate in comparison with the competitors as well as the profile of market sharing, (2) efficiency, including profit and return on investment, and (3) adaptability, including success rate of marketing new products and sales proportion of new product in the past five years.. Cooper and Kleinschmidt (1987) employed two dimensions to measure product creation performance: (1) financial performance, including degree of achievement of new product profit goal and sale goal, degree of satisfaction on profits, duration of investment return, and profit rate and marketing power, and (2) impact on marketing, including variation of both domestic and foreign marketing share, variation of ratio of new product sales on whole sales, and the difference between net sales and expected sales. Barczak (1995) adopted four variables to evaluate product creation performance: (1) difference between net sales and expected sales, (2) difference between actual marketing share and expected marketing share, (3) profit rate of new product, and (4) degree of satisfaction on the whole new product development. To measure the degree of success achieved by the new product or service, Atuaheme-Gima (1996) proposed some variables: (1) market share, (2) sales, growth and profit objectives, (3) the degree to which the new product/service provided opportunities for cost efficiency, gave proprietary advantage to the firm, enhanced sales of other product/services, opened up new markets, and improved sales and 14.

(26) profitability of other products/service to the firm. Focusing on the marketing success, Souder and Song (1998) proposed six variables to evaluate creation performance: (1) market share, (2) duration of return, (3) profits, (4) customer satisfaction, (5) contribution to be a technology leader, and (6) contribution to be a domain leader. More recently, Lin (2001) indicated that there are six major variables that can be used to measure product innovation: (1) quality improvement of product, (2) creation of features, (3) efficiency of product commercialization, (4) market share, (5) profit rate of product, and (6) competition improvement of new product. Wu (2000) suggested that creation should have a significant impact on the whole enterprise and therefore should consider four dimensions: (1) creation for manufacturing processes, (2) creation for new products, (3) creation for organization, and (4) creation for strategy. Detail for the evaluation of product creation performance is listed in Table 2-1.. Manufacturing creation performance focuses mainly on monitoring the actual processes of a program, service, and product. Wheelwright (1978) proposed four criteria to evaluate process creation performance: (1) efficiency, including cost efficiency and capital efficiency, (2) flexibility, including product flexibility and output flexibility, (3) quality, including product quality, service quality, delivery speed, and repair quality, and (4) reliability, including the promised delivery due date, price, and product commitment. Schroeder et al. (1989) classified two categories to evaluate manufacturing performance: (1) business outcome, including profit, return on asset, growth, and market share (2) manufacturing outcome, including the rate of cost of sales to sales, unit manufacturing cost, consistent quality, service level, inventory turnover, unit employee sales and flexibility. Leong et al. (1990) also proposed five dimensions to evaluate manufacturing creation performance: (1) cost, including unit product cost, unit labor cost, unit material cost, total manufacturing 15.

(27) cost, inventory turnover, equipment usage rate, direct labor cost, indirect labor cost, (2) quality, including defect rate, product failure rate, design change frequency, supplies’ quality, (3) delivery due date, including delivery on time, inventory condition, delay delivery time (4) flexibility, including ability to response outcome change, ability to product specification change, ability to adjustment manufacturing technology in the change of commodity combination, ability to cope with machine stop, ability to adjustment of material delivery uncertainty, and (5) innovation, including the ability to new product introduction, and R&D expenditure. Vonderembse (1999) suggested five indexes for manufacturing process evaluation: (1) the proportion to commodity-reproducing cost, (2) unit manufacturing cost, (3) quality cost, (4) the proportion of manufacturing inventory, (5) the proportion of delivery commodity on time away from firms. Detail for the evaluation of manufacturing creation performance is listed in Table 2-2.. For the management innovation, the evaluation may contain its effect on managerial process, plan, flexibility, integration, communication and coordination, and employee cohesiveness (Walker and Ruekert, 1987). The effect of innovation of organization is a kind of creation performance for the whole organization. Venkatraman (1986) proposed three indexes to evaluate creation performance on organization: (1) financial performance: business’s economic goal and traditional evaluation method, containing the profit rate and earnings per share, (2) business performance: financial performance and operating performance which is non-financial performance, including market share, the new product introduction, product quality, and marketing efficiency, etc. (3) organizational efficiency: the most general definition of organizational performance, except for two former indexes, adding. the solution to. conflict in the process of achieving goals and the satisfaction with stakeholders’ goals. 16.

(28) Wu (2000) indicated that innovation of organization contain the ability and experience of doing with international sales, repair or service, establishing and improving international brand, and planning and managing international distribution. Strategic innovation included new product/service position, new usages and redistribution of value activities (Wu, 2000). Detail for this is listed in Table 2-3.. It has been seen that there are five dimensions (product creation performance, manufacturing. creation. performance,. management. creation. performance,. organization creation performance, and strategy creation performance) that play in the evaluation of creation performance. However, this study adopts three dimensions, product creation performance, manufacturing creation performance, and management creation performance, to measure creation performance. The reason is that the last two dimensions, organization creation performance, and strategy creation performance, are less studies and difficult to measure). In consequence, it is not appropriate to be adopted by this research. Therefore, three evaluation indexes for creation. performance. evaluation. include. product. creation. performance,. manufacturing creation performance, and management creation performance (Yeh, 2005).. 17.

(29) Table 2-1: Evaluation of Product Creation Performance Author. Evaluation Indicator - ratio of new products on whole sales in the past five years - proportion of successful product development in the past five years - proportion of product development that either failed or quitted in the past five years - proportion of product development that reached goals in the past five Cooper (1985) years -the importance of the innovation project to the sales and profits - profits from new product development are more than investment - the degree of success in comparison with the competitors - the success degree of the whole development project - effectiveness, including success probability and marketing growth rate in comparison with the competitors as well as the profile of market sharing Ruekert (1987) - efficiency, including profit and return on investment and Yeh (2005) - adaptability, including success rate of marketing new products and sales proportion of new product in the past five years - financial performance, including degree of achievement of new product profit goal and sale goal, degree of satisfaction on profits, duration of Cooper and investment return, and profit rate and marketing power, Kleinschmidt - impact on marketing, including variation of both domestic and foreign (1987) marketing share, variation of ratio of new product sales on whole sales, and the difference between net sales and expected sales - difference between net sales and expected sales - difference between actual marketing share and expected marketing share Barczak (1995) - profit rate of new product - degree of satisfaction on the whole new product development - market share - sales, growth and profit objectives Atuaheme-Gima - the degree to which the new product/service provided opportunities for (1996) cost efficiency, gave proprietary advantage to the firm, enhanced sales of other product/services, opened up new markets, and improved sales and profitability of other products/service to the firm - market share - duration of return Souder and Song - profits (1998) - customer satisfaction - contribution to be a technology leader - contribution to be a domain leader - creation for manufacturing processes - creation for new products Wu (2000) - creation for organization - creation for strategy - quality improvement of product - creation of features - efficiency of product commercialization Lin (2001) - market share - profit rate of product - competition improvement of new product Source: This study. 18.

(30) Table 2-2: Evaluation of Manufacturing Creation Performance Author Wheelwright (1978). Schroeder et al. (1989). Leong et al. (1990). Vonderembse (1999). Evaluation Indicator - efficiency, including cost efficiency and capital efficiency - flexibility, including product flexibility and output flexibility - quality, including product quality, service quality, delivery speed, and repair quality - reliability, including the promised delivery due date, price, and product commitment - business outcome, including profit, return on asset, growth, and market share - manufacturing outcome, including the rate of cost of sales to sales, unit manufacturing cost, consistent quality, service level, inventory turnover, unit employee sales and flexibility - cost, including unit product cost, unit labor cost, unit material cost, total manufacturing cost, inventory turnover, equipment usage rate, direct labor cost, indirect labor cost, - quality, including defect rate, product failure rate, design change frequency, supplies’ quality - delivery due date, including delivery on time, inventory condition, delay delivery time - flexibility, including ability to response outcome change, ability to product specification change, ability to adjustment manufacturing technology in the change of commodity combination, ability to cope with machine stop, ability to adjustment of material delivery uncertainty - innovation, including the ability to new product introduction, and R&D expenditure - the proportion to commodity-reproducing cost - unit manufacturing cost - quality cost - the proportion of manufacturing inventory - the proportion of delivery commodity on time away from firms. Source: This study. Table 2-3: Evaluation of Management, Organizational, and Strategic Creation Performance Dimensions. Author. Management Creation Performance. Venkatraman (1986). Organizational Creation Performance. Wu (2000). Strategic Creation Performance. Wu (2000). Evaluation Indicator - financial performance: business’s economic goal and traditional evaluation method, containing the profit rate and earnings per share - business performance: financial performance and operating performance which is non-financial performance, including market share, the new product introduction, product quality, and marketing efficiency, etc. - organizational efficiency: the most general definition of organizational performance, except for two former indexes, adding the solution to conflict in the process of achieving goals and the satisfaction with stakeholders’ goals - the ability and experience of doing with international sales, repair or service - establishing and improving international brand - planning and managing international distribution - new product/service position - new usages and redistribution of value activities. Source: This study. 19.

(31) 2.2 Organizational Culture. It is believed that cultures can highly affect what people do, and therefore organizational culture seems to be a critical factor in the success of any organization (Syrett and Lammiman, 1997; Tushman and O'Reilly, 1997). This implies that organizational culture can lead to successful organizations. Generally, culture is regarded as a common value in things or a familiar behavior that society members inherit (Wallance, 1970; Geertz, 1973; Smircich, 1983). By learning and socialization in which multi elements interact, a culture can be formed. Van Maanen and Schein (1979) defined the organizational culture as “a common value, belief, and perspective model that organization can share; its consequence becomes social regulations that may explicitly shape or control members’ behavior.” An organization can develop its own culture that contains assumptions, understanding for things, and implied rules that dominate the members’ behavior. By three different levels, Schein (1984) indicated that an organizational culture includes artifacts, values, and assumptions. Artifacts are substantial and are material elements of a cultural system, including system, technique, ritual, symbols, etc. Value is favorites that guide behavior and explain the background driven from company’s strategy, goals, and philosophy. Assumptions are invisible, the deepest belief, thought and feeling, taken for granted, and functions as the core culture elements. From a review of literature in organizational behavior, sociology, and anthropology, Deshpandé and Webster (1989) defined organizational culture as “the pattern of shared values and beliefs that help individuals understand organizational functioning and thus provide them with the norms of behavior in the organization”. The most commonly known definition is “the way we do things around here” (Lundy and. 20.

(32) Cowling, 1996). In other words, it is the commonly acceptable way in which things are done or problems should be understood in the organization. The components of routine behavior, norms, values, philosophy, rules of the game and feelings all form part of organizational culture (Hofstede et al., 1990; Smit and Cronje, 1992; Hellriegel et al., 1998). Sackmann (1992) mentioned that culture might be the “ideologies, a coherent set of beliefs or basic assumptions, a set of shared core values, important understandings, the collective will, and collective programming of the human mind.” Therefore, this study adopts the definition by Schein (1984) and DiBella (1996) that organizational culture is defined as the deeply values and beliefs shared by personnel in an organization. It can be observed first from the phenomena of an organization, second from the value driven by the organizational strategy, and third from the deepest belief, thought, and feeling. Regulations from these continuously dominate members’ behavior and attitude.. Regarding the characteristics of culture, Quinn (1988) proposed four culture characteristics, including market, adhocracy, hierarchy, and clan. The market culture underlines competitiveness and goal achievement (Cameron and Freeman, 1991). Transactions are governed by market mechanisms (Ouchi, 1980). The key measure of organizational effectiveness is productivity achieved through the market mechanisms. The adhocracy culture emphasizes values of entrepreneurship, creativity, and adaptability. Flexibility and tolerance are important beliefs and effectiveness is defined in terms of finding new markets and new directions for growth. The hierarchy culture emphasizes order, rules and regulations. The clan culture aims mainly at cohesiveness, participation, and teamwork. The commitment of organizational members is ensured through participation, and organizational cohesiveness and personal satisfaction are rated more highly than financial and market share objectives. 21.

(33) Quinn (1988) uses two dimensions to describe these characteristics. One is to describe the continuum from organic to mechanistic processes, that is, whether the organizational emphasis is more on flexibility, spontaneity, and individuality or on control, stability, and order. The other is to describe the relative organizational emphasis on internal maintenance (i.e. smooth activities, integration) or on external positioning (i.e. competition, environmental differentiation). By using Quinn(1988)’s organizational culture characteristics, Deshpandé et al. (1993) studied how these variables are coupled with culture, customer orientation, and innovations influence on Japanese firms’ performance. The organizational culture characteristics in this study are according to those by Quinn (1988), Cameron and Freeman (1991) , and Deshpandé (1999). By that, four characteristics, market culture, adhocracy culture, hierarchy culture and clan culture, are selected, showed in Table 2-4.. Table 2-4: Four Organizational Culture Characteristics Market Dominant Attributes. Leader Style. Bonding. Adhocracy. Hierarchy. Clan. - Competitiveness. - Entrepreneurship. - Order. - Cohesiveness. - Goal. - Creativity. - Rules and. - Participation. achievement. - Adaptability. regulations. - Teamwork. - Uniformity. - Sense of family. - Decisive. - Entrepreneur. - Coordinator. - Mentor. - Achievement-. - Innovator. - Administrator. - Facilitator. oriented. - Risk taker. - Parent-figure. - Goal orientation. - Entrepreneurship. - Rules. -Loyalty. - Production. - Flexibility. - Policies and. - Tradition. - Competition. - Risk. procedures. - Interpersonal cohesion. -Toward. Strategic Emphases. competitive. - Toward. - Toward stability. innovation. advantage and. - Growth. market. - New resources. -Toward. - Predictability. developing. - Smooth. human resources. operations. - Commitment - Morale. superiority Source: Quinn (1988), Cameron and Freeman (1991), and Deshpandé (1999). 22.

(34) Although there are four different characteristics of culture, it is noted that they are modal or dominant ones rather than mutually exclusive ones. This implies that employees view their organizations as having a mixture of these four characteristics of culture, but with emphasis on particular characteristics. However, over time, one characteristic of culture in an organization may be more significant than the others. For example, findings by Deshpandé et al. (1993) indicated that large Japanese firms were both highly clan and highly market, average in terms of hierarchy, but very low on elements of adhocracy culture. They also concluded in their research that business performance is ranked from highest to lowest according to characteristic of organizational culture as follows: market culture, adhocracy culture, hierarchical culture and clan culture. Furthermore, organizational cultures that are relatively open to the external environments of new ideas and customers (adhocracy and market cultures) perform better than those that are more closed and inward-looking (clan and hierarchy cultures). This implies that an adhocracy and market culture would lead mostly to new ideas generation to reply to the rapid changes from customers.. In an organization with a knowledge-sharing culture, knowledge accumulation can be possible and thereafter would be a stimulus of knowledge creation (Yeh, 2004). Kanter (1983) also indicated that organizational culture may support and impede innovation. On the one hand, the culture with features of integrative structures, emphasize diversity, multiple structural linkages inside and outside the organization, intersecting territories, collective pride and faith in people’s talents and collaboration and teamwork, it had positive support on creation performance. On the other hand, there were rules for stifling innovation, focusing on control of action, decisions, and information, hierarchical structures, and lack of supervisor support or encouragement. Angle (1989) indicated that organic organization enables greater organizational 23.

(35) innovation in environments of dynamic change. That is, organic organizational culture has positive relationship to creation performance. Also, a culture in support of creativity can encourage various innovative ways to represent problems and find solutions (Lock and Kirkpatrick, 1995).. Hauser (1998) developed a conceptual model for the innovation process, and suggested that organizational culture plays a key role in the innovation process. Performance is related positively to the extent of entrepreneurial and competitive cultures, and negatively to the extent of consensual and bureaucratic cultures. Moreover, Chandler et al. (2000) attempted to identify the managerial and human resource practices that are related to an organizational culture perceived as innovative, and found supervisory support and reward system support were positively related to an innovative culture. That is, organizational culture with characteristics of human recourse-oriented tends to improve creation performance on management. Mauriel et al. (2000) suggested that the frameworks have innovation at center stage when the organization promotes risk taking. Organizational culture appears to have an influence on the degree to which innovation are stimulated in an organization. Martins and Terblanche (2003) also suggested that a model, based on the open systems theory, can offer a holistic approach to determinants of organizational culture that influence innovation, especially on product, manufacturing, and management: (1) strategy: vision and mission, purposefulness (2) structure: flexibility, freedom (autonomy, empowerment, decision making), cooperative teams and group interaction (3) support mechanisms: reward and recognition, availability of resources (time, information technology creative people) (4) behavior that encourages innovation: mistake handling, idea generating, continuous learning culture, risk taking, competitiveness, support for change, conflict handling (5) communication: 24.

(36) open communication. Therefore, it is also important that organizational culture has to be considered when dealing with the impact of innovation type on creation performance.. Tushman and O’Reilly (1997) suggested that the basic elements of organizational culture influence innovation in two ways: the basic values and through socialization processes in organizations. In the former, the individuals will learn what behavior is acceptable and how activities should function. Norms development are allowed and shared by individuals. In accordance with norms that are shared, individuals will make assumptions about whether innovative behavior forms part of the way in which the organization operates (Louis, 1980; Chatman, 1991). In the later, assumptions and beliefs become enacted in established forms of behaviors and activities and are reflected as structures, policy, practices, management practices, and procedures. These structures then have an impact directly on creativity in the workplace, for example, by providing resource support to pursue the development of new ideas (Tesluk et al., 1997). In this way individuals in organizations come to perceive what is considered valuable and how they should act in the workplace. By this, the characteristics of organizational culture have influence on the employee’s creative behavior and organization’s creative policy and then show the creation performance on product, manufacturing, and management. Therefore, the first hypothesis is formed: H1: The organizational culture has significant influence on the creation performance.. 25.

(37) 2.3 Fundamental of Innovation and Creation Post-industrial enterprises today are knowledge-based organizations and their success and survival depend highly on creativity, innovation, discovery and inventiveness. Schumpeter (1942), an economist in Austria, first introduced the term “innovation”, and indicated that innovation comes from invention. This implies that innovation as a value-added activity deals mainly with the enhancement of existing works (e.g. product, process, service), particularly for business value. This concept has shown a consequent impact on how to deal with the innovation. Drucker (1986) indicated that innovation is a tool of value-addition for business. It is defined to be any activity that transfer changes into opportunities such as new business model or service. Souder (1987) also specified that innovation is a sort of idea, but with high risk, which may reside high potential in creating values. It embraces the formation and development of new ideas, new product development, new manufacturing processes, and new services (Urabe et al., 1988). By this, job opportunities and economy, and in consequence business profits can be enhanced accordingly.. Besides, innovation is a sort of new concept of modification or invention to fit to the current or potential needs (Frankle, 1990). By this amendment, the goal of commercialization of the product or services can be reached. West and Farr (1990) define innovation as follows: the intentional introduction and application within a role, group or organization of ideas, processes, products or procedures, new to the relevant unit of adoption, designed to significantly benefit the individual, the group, organization or wider society. Innovation is also a sort of adoption of new ideas or behavior which obviously is new to the organization, such as a system, a policy, an. 26.

(38) approach, a device, a process, a product or service (Damanpour, 1991). Brown (1992) indicated that the only way to create a competitive strength for an organization is innovation. It is basically a new product, method, or a type of system with potential to develop a new marketplace, to threaten competitors, or to change behavior of customers.. Innovation is often associated with change (Drucker, 1986). Innovation is regarded as something new which leads to change. Moreover, innovation is about a process that bringing any new idea into uses to solve problems. It is the generation, acceptance, and implementation of new ideas, processes, products, or services (Angle et al., 1989). However, change cannot always be regarded as innovation since it does not always involve new ideas or does not always lead to improvement in an organization (West and Farr, 1990). In other words, creativity is the production of novel and useful ideas in any domain but innovation is the successful implementation of creative ideas within an organization. Thus, no innovation is possible without the creative processes that mark the front end of the process: identifying important problems and opportunities, gathering information, generating new ideas, and exploring the validity of those ideas (Amabile, 2004).. Innovation is basically not only a change, but an integration of innovative elements (Drucker, 1993). These elements can be diverse needs of environment and manufacturing processes, changes of industries and market, changes of features of population, and changes of customers’ understanding of product and service. Therefore, the sources of innovation come mainly from the changing environment, industry structure, changes of internal manufacturing processes, and changes of understanding of product. 27.

(39) Inkpen (1996) mentioned that innovation is a sort of procedure that individual knowledge is fostered and internalized to be the fundamental of organizational knowledge. In order to greatly strengthen competition and increase profits, at the early stage the business usually aims at the development of new approach and new materials (Utterback, 1994). This results in the frequent changes of products. However, when entering to the middle stage, the manufacturing processes greatly change because of the change of customers’ needs. In the mature stage, finally, business may choose the fittest product field as their main development focus. Webster (1994) defined the innovation as a better and continuous way that helps enhance the capability of an organization to reach the goal. Innovation is a change of a process of distributional system to enter into new market; in other words, innovation may be regarded as a product, process, or system. However, innovation is never an idea, but has to be transformed into actions to create value.. Hill and Jones (1998) defined innovation for organizations as a new way of manufacturing, including new types of product, production management systems, development of organizational structure and strategies. By integrating definitions from literatures, Hage (1999) described innovation in a more precise way to be an adoption of a new concept or a new behavior, which could be a new product, a new service, a new technology, or a new management model. By surveying literature, Lin (2001) also described innovation from four different points of view: (1) technology revolution: different manufacturing process and equipments, (2) business: newness and novelty about market, technology, and manufacturing process for new products, (3) customer: better benefits, and (4) market: new market creation, in particular the enhancement of market sharing and sales. Martins (2000) indicated that innovation can be defined as the implementation of a new and possible problem-solving idea, 28.

(40) practice or material artifact (e.g. a product) which is regarded as new by the relevant unit of adoption and through which change is brought about.. By combining the concepts from Damanpour (1991) and Inkpen (1996), this research regards innovation as a part of organizational knowledge creation. It can be a process to improve and internalize individual and group knowledge which are the fundamentals of organizational knowledge. By externalizing knowledge, individual and group then apply new ideas or behavior to organizational product, process, approach, service, and system. By doing so, organizational performance and competition can be enhanced.. 2.4 Knowledge Creation Modes. It is believed that knowledge can help businesses maintain their competitive advantage in the developing-quickly market and intense competitive environment. Knowledge management is a significant mechanism to assist businesses in response quickly to the market (Hellström and Jacob, 2003). In general, knowledge management. has. seven. stages,. including knowledge creation, knowledge. standardization, knowledge acquisition, knowledge capture, knowledge distribution, knowledge adoption, and knowledge evaluation. Each stage is important when forming a knowledge management system is concerned. These stages then become the knowledge management system life cycle. In particular, knowledge creation is the key, as the knowledge source, to the knowledge management system success.. Knowledge creation basically is a process that produces new knowledge by. 29.

(41) integrating and cumulating the existing knowledge. Nonaka and Takuichi (1995) introduced a knowledge creation model. They indicated that organizational knowledge creation is derived by transformation between tacit knowledge and explicit knowledge. By doing so, tacit and explicit knowledge can be concurrently enhanced for both quantity and quality. Consequently, business should encourage knowledge creation by looking for incentives and enhance the level of knowledge adoption.. Knowledge creation is not only a process of knowledge stimulation, but a model of new behavior derivation that results from existing knowledge (Yeh, 2004). Therefore, knowledge creation is not only the changes of knowledge gradients, but the new activities and behaviors by combining the existing knowledge or learning new knowledge. For example, a person’s working habit is changed and may do more excises after reading some cases about over-working death. Knowledge creation may force an organization to change the way it runs their business and the way it introduces their products or services to their customers. Therefore, how to improve knowledge creation becomes an important issue for management. To do so, an organization should develop a mechanism by which valuable experiences and new knowledge can be accumulated and maintained.. The ways that knowledge is created vary in literature. According to Probst et al. (2000), Davenport and Prusak (1998), and Nonaka (1994), the main concerns to derive knowledge creation can be (1) to constitute a department, like research and development division, (2) to have a knowledge creation team in which background of team members are various to avoid blind spots, and (3) to create an threatening environment for members, so they can have ideas whenever possible. However, by 30.