RESEARCH METHODOLOGY
4.4 Measurement and Operational Definition
4.4.2 Factors affecting Innovation Competency (Independent Variables) According to the research framework, there are 4 independent variables
139 Table 4.6 (Continued)
Dimensions Operational Terms Scholars
(Value creation)
- Overall satisfaction with innovation
- Cost control of innovation project compared to innovation outcome
- Students’ academic achievement
- Overall satisfaction of the school' s stakeholders - Ratio between
innovational outcome and resource utilization
Sbragia (1984) Sbragia (1984)
Sbragia (1984)
4.4.2 Factors affecting Innovation Competency (Independent Variables)
organizational resources cannot make an organization innovatively competent. The organization must also have efficient resource management (such as resource allocation and strategic planning for resource utilization) for the transformation of resources into output or innovation. In order to continually create innovation and be considered an innovatively competent organization, the organization must have competency in resource management and transformation to innovative outputs. At the same time, the organization must be able to respond to its environment efficiently, adapting parts of the organization as needed. In summary, organizations having innovation competency have the supporting factors of organizational resources, managerial competency, transformation-based competency and responsiveness to organizational environment. These factors are relative and correlate to innovation competency as shown in the research framework in Chapter 3.
4.4.2.1 Managerial Competency
According to the competency-based view, Escrig-Tena and Bou-Llusar, (2005) described an organization’s competency from the perspective of quality management. One dimension of organizational competency is the management model relating to vision creation and good leadership. The literature review revealed that organizational innovation is affected by transformational leadership. Fairholm (2004) defined the term leadership as the action performed by a leader or the work of a leader. In other words, transformational leadership is the process of building trust, motivation and inspiration to promote change by the organization’s personnel. (Al- Husseini and Elbeltagi, 2012) In addition, leadership and management are connected.
Fairholm (2004) offered a classification of five leadership perspectives. Two of these involve scientific management (focusing on strategic planning) and excellence management (focusing on internal processes of development and improvement, and management of personnel participation in developing the organization’s action plan).
Lado et al. (1992) developed the competency-based model that explained that managerial competency and strategic processes are part of organizational competency and are important in producing competitive advantage. Management is the process of organizing staff and other resources to complete organizational tasks. It involves routine tasks derived from setting objectives, motivating effort, coordinating activities, and shaping decisions. (Birkinshaw and Goddard, 2009) Management is
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comprised of the following major components: 1) management is the process of continuous activities, 2) it involves the pursuit of the organization’s goals, and 3) it relies on personnel and resources to achieve those goals.
As mentioned above, managerial competency involves strategic planning, decision making, and some actions of the top management. Leadership is considered to be part of the decision-making process and innovation promotion in the organization. Similarly, there are many researchers identifying the relationship between human resources management and organizational innovation. Accordingly, major elements of managerial competency are organizational strategy, top management support, leadership, and human resources practices.
1) Strategy
Strategy is the main element which helps an organization to achieve its goals. As a result, the organization’s strategies relate to the allocation of its resources (Smith, 2007), establishment of action plans and approaches concerning the management or conversion of organizational resources. Oliver (2001) developed the following definition of strategy from various scholars:
(1) Strategy is a defined plan, approach or pattern of action to reach the organization’s goals.
(2) Strategy can be either a plan or an action to bring about effort in the accomplishment of the organization‘s objectives.
(3) Strategy is unity of commitment and activities designed to apply the core competency of an organization to create competitive advantage.
(4) Business strategy is the process of using competitive strategy in resource allocation for achieving the organization’s objectives.
According to the concept of Stewart and Fenn (2006), strategy is a factor determining long-term goals and objectives of the organization by initiating patterns of action and activity, including designing and planning the allocation of organizational resources to achieve the organization’s objectives. Additionally, focusing on customers is important for building the innovative strategies of the organization. Similarly, Chen and Yuan (2007) stated that organizational strategy results in organizational innovation. It is the development of personnel knowledge and
abilities as well as organizational resource management for better quality. Therefore, when innovation is the organization’s goal, its strategies should focus on activities or plans relating to the allocation and management of organizational resources necessary for obtaining organizational innovation. In addition, Lattuch et al (2013) suggested that focusing on customers and marketing, as well as technology, will result in the establishment of innovation strategies within the organization. The organization should create strategies for developing resources based on the resource-based view, which proposes that an organization consists of all assets, such as technology, skill, knowledge and capability of the organization. In conclusion, organizational strategies supporting innovation should emphasize marketing and the organization’s customers.
In addition, the strategies should support the development of organizational resources and, at the same time, create a clear innovative direction and goal the organization.
2) Top Management Support
Top management support means that the organization’s top- level executives provide support to develop internal processes and new products. (de Brentani and Kleinschmidt, 2004) Without support from top management, it is difficult to allocate resources in order to develop innovation and achieve success.
Hoonsopon and Ruenrom (2012) suggested that top management support has a positive impact on innovation development. They added the following descriptions of top management support affecting innovation as follows:
(1) Providing resource support necessary to the development of innovation
(2) Providing ongoing advice for the innovation or new product development
(3) Encouraging personnel to express constructive ideas for new innovations.
3) Leadership
Leadership is the process of inspiring and motivating others to work hard. Dixon (2008) stated that leadership is the process of encouraging groups within an organization to perform their duties according to the requirements of the organization. In terms of education management, leadership involves both general and instructional management. Patterson (2011) found that activities relating to leadership
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are significant for building an atmosphere that promotes innovation within the organization. Transformational leadership is accepted as the model of leadership that supports organizational innovation. It affects the skills available for potential innovation opportunities in the dynamic condition of the organizational environment.
Transformational leadership supports innovative creation through innovative inspiration, knowledge enhancement and creativity of personnel (Nusair, Ababneh and Bae, 2012). Al-Husseini and Elbeltagi, 2012 quoted in Avolio and Bass, 2002, considered that transformational leadership has the following 4 dimensions as follows:
(1) Charismatic behavior reflecting a willingness to take risks, high morality and ethics, and avoidance of the abuse of power
(2) Using inspirational motivation to encourage personnel or followers to commit to the organization and its benefits through effective teamwork
(3) Stimulating and promoting employees’ knowledge and wisdom regarding trying and developing new approaches
(4) Consideration of the individual because each person is different and has specific needs, so that leaders should treat individuals according to their needs, including personal commendation.
In addition, Podsakoff et al. (1996) applied and categorized the leadership approach into five models. This approach is used by Aragon-Correa et al.
(2007) for measuring the leadership factors supporting organizational innovation. The five-factor model of leadership supporting organizational innovation is as follows:
(1) Leaders support and create a process that represents their efforts to seek new approaches or methods for an organization
(2) Leaders attempt to develop clear direction in the long term rather than in the short term
(3) Leaders act to support motivation, and coach others rather than commanding or controlling them
(4) Leaders use processes of leading rather than following (5) Leaders use processes that support coordination between staff members
4) Human Resource Management Practices
Wichitchanya and Durongwatana (2012) concluded that human resources management involves policies, practices, and processes influencing personnel behavior and attitudes. This includes the process of attracting and retaining employees and ensuring that their performance helps the organization achieve its goals. In addition, Tornatzky and Fleischer (1990) suggested that innovation is the outcome of quality human resources. Chieh-Yu (2007) also stated that the higher the quality of human resources, the higher the innovative capability of the organization will be.
Cavagnoli (2011) concluded that rewarding and training are factors of human resources practices that support innovation. Rewarding plays an important role in building motivation for developing innovation. Ling and Nasurdin (2010) stated that training and development can support product, process and managerial innovations while personnel performance evaluation has a positive impact on managerial innovation within the organization. Similarly, elements of human resource management, such as training and development, compensation, performance evaluation, and recruitment are considered to have positive relationships to organizational innovation. (Daniel and Sanz-Valle, 2005; Shipton, Fay, Patterson and Birdi, 2005) found that excellent human resources management such as recruitment, selection, induction, appraisal, training and development is a factor predicting organizational innovation. This corresponds to the study of Wichitchanya and Durongwatana (2012), stating that recruitment, selection, staffing, training, appraisal and compensation affect organizational innovation.
Gupta and Singhal (1993) concluded that human resources are an important factor in organizational innovation. Consequently, an organization should select appropriate personnel for positions and responsibilities. The organization should have performance evaluation systems associated with innovation, reward systems for motivating personnel, and personnel development systems for career progress, assisting staff to develop greater knowledge and education. Shipton, Fay, Patterson and Birdi (2005) suggested that human resources management that supports innovation engages in the training and development of all employees in the organization. Moreover, there should be surveys about the areas in which personnel
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need training and development. Agarwala (2003) defined the terms employee acquisition (recruitment), selection, reward system, training and development, compensation and incentives, performance appraisal, and professional development as follows:
(1) Employee acquisition is the method of attracting competent personnel to the organization by selecting and recruiting people who fit the organization’s culture.
(2) Reward systems include cash rewards and non- monetary rewards. They must correspond to the performance of employees and provide both organizational and staff recognition of achievements of skilled employees.
(3) Training must be provided systematically. Areas and topics where staff require further training should be surveyed. The training must be appropriate to the tasks of personnel. The organization must support personnel in reaching training outcomes for more efficient operations.
(4) Rewards for performance must be specified clearly.
Appraisals should be conducted at an individual level, a team level, and an organizational level. It must be transparent and accountable. The criteria for the performance appraisal must use empirical and numerical methods.
(5) Professional development can be provided in the form of counselling, coaching and advising.
4.4.2.2 Organizational Resources
Laforet (2009) suggested that innovation competency depends on appropriate and sufficient resources. Organizational resources refer to physical capital and the skills or abilities of personnel. The literature review in Chapter 3 found that organizational resources can be divided into tangible resources (financial and physical resources) and intangible resources (qualified human resources and the organization’s knowledge).
1) Tangible Resources
Tangible Resources refer to financial resources and physical resources. Prastcos, et al (2002) wrote that financial resources refer to an amount of working capital from internal and external sources which is sufficient to complete any
operations of the organization. Thus, the organization must manage such resources efficiently and mobilize financial resources from internal and external sources (Sanchez, 2004). Physical resources refer to workplace, materials, equipment, tools, and facilities (Chester, 1972: 149).
2) Intangible Resources
Intangible Resources refer to the organization’s knowledge, experience, and the skills of personnel in creating new concepts (Díaz-García, González-Moreno and Sáez-Martínez, 2013). New concepts include the creation of new things and innovations as well. Therefore, intangible resources can be divided into human resources and the organization’s knowledge and are described as follows:
3) Human Resources
Tornatzky and Fleischer (1990) suggested that organizational innovations are the outcome of high quality, committed personnel, resulting in benefit to the organization (Dost et al, 2012). Similarly, Chieh-Yu (2007) concludes that qualified and creative personnel are a factor affecting organizational innovation. The quality of human resources can be measured by employees’ knowledge, abilities and skills relating to innovation. Quality can be measured by the instrument of Chieh-Yu (2007) as follows: 1) employees are fast learners, 2) employees can perform their duties and complete tasks by themselves, including solving problems, 3) employees share knowledge with each other, and 4) personnel present new concepts to the organization. Regarding the measuring of employees’ commitment, Kimbel (2002) notes the following; 1) employees are confident and accept the organization’s goals, 2) employees are dedicated and put forth effort to perform tasks for benefit of the organization, and 3) employees wish to retain employment in the organization.
4) Organization’s Knowledge
Beatty (2003) stated that there are 4 types of knowledge, which are know-what, know-why, know-how and know-who. Know-how is highly significant to the organization. It represents skills and abilities that affect the performance and presentation of new products or innovations. As discussed by Bollinger and Smith (2001), innovation depends on efficient management of the organization’s knowledge. In addition, Chew (2008) stated that good knowledge of
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the organization influencing innovations must be knowledge relating to the development of organizational innovation.
Darroch (2005) stated that an organization having efficient knowledge management will be more innovative than other organizations. Accessible knowledge will make organizational operations and decision-making more efficient.
New knowledge acquisition and knowledge dissemination in the organization influences organizational innovation as well. McAdam (2000) identified that new knowledge acquisition promotes innovation development in an organization.
Innovation grows when organizational knowledge is shared among employees. At the same time, the organization must create new knowledge in order to support and enhance innovative potential (Braganza, Edwards and Lambert, 1999).
Delgado-Verde, Martín and Navas-López (2011) proposed that employee knowledge is important to business activities. Employment or unemployment may depend on employees using their knowledge for the benefit of the organization.
As a result, beneficial knowledge must correspond to organizational strategies for enhancing the development of new products or services (Chew, 2008).
4.4.2.3 Transformation-based Competency
According to the literature review, transformation-based competency refers to the organization’s capability of transforming assets such as organizational resources into innovation for the benefit of business operations. To have transformation-based competency, the organization must have good organizational culture, structure, organizational learning, and research and development. These elements are described as follows:
1) Organizational Culture
Organizational culture is defined as the values, beliefs and attitudes of an organization’s personnel which are accepted as normal practice for performing duties (Janićijević, 2012). Naranjo et al. (2010) observed that one organizational culture that influences organizational innovation is adhocracy culture, which consists of flexibility of operation, freedom of operation, and risk-taking. A risk-taking culture encourages acceptance of new ideas and promotes activities relying on initiative and self-reliance, including effective communication, which supports organizational innovation (Tabor, 2007). However, Tipu, Ryan and Fantazy
(2012) identified the cultures supporting innovation as information sharing and teamwork culture. Cultures like risk-taking, participation, creativity, and joint responsibility for organizational tasks are all factors supporting organizational innovation. (Kenny and Reedy, 2006) Conceicao et al. (2002) stated that organizations incorporating a customer- and marketing-oriented culture will better understand the needs of its consumers, allowing more successful creation and marketing of innovations. Petraite et al. (2012) stated that the organizational culture supporting innovation is one of flexibility of operation, cooperative teamwork, acceptance of new ideas, creativity, and a climate supporting new ideas and methods.
2) Organizational Learning
Lin (2007b) stated that knowledge sharing among employees can enhance the capability of the organization in terms of innovation development. To consider whether an organization has knowledge sharing, here must be a process of disseminating obtained knowledge from individual to individual within the organization. Aragon-Correa et al. (2007) defined organizational learning as the collective capability of the organization based on experience, knowledge, understanding, and new knowledge acquisition. Organizational learning also refers to the process of sharing useful knowledge among employees. Organizational learning can be measured and observed as follows:
(1) The organization continually promotes the acquisition of new useful information.
(2) Members of the organization gain new knowledge and acquire new skills and abilities.
(3) The organization improves and develops in positive directions due to acquisition of new knowledge.
(4) The organization is a learning organization.
3) Research and Development
Bai and Li, (2011) explained that investment in research and development positively influences both current and future organizational innovation.
Research and development is considered to be the first step of the innovation process (Love and Roper, 1999). Similarly, Cassiman and Veugelers (2006) confirmed that research and development are elements of innovation activities. If organizations want
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to improve their innovative ability, they need to invest in research and development in order to acquire new information relating to organizational innovation. Additionally, Gallie and Legros (2012) confirmed that research and development involves the process of training personnel, enhancing the quality of human capital, ultimately leading to innovative competence of the organization.
Díaz-García et al. (2013) suggested that a research and development team should consist of personnel with a variety of knowledge and abilities. This variety of knowledge and abilities within a research and development team influences the development of radical innovation. Chiesa and Masella (1996) suggested that the efficiency of research and development can be measured and observed from the success of the organization’s works (improved internal processes and the organization’s products) and from efficient use of resources (time and investment spent on research and development). Besides, effective research and development is represented as a proportion of expenditures and time spent on research of organization which includes the proportion of the number of researches per the organization’s personnel (Mairesse and Mohnen, 2005).
4) Organization Structure
Organizational Structure is considered to be organizational characteristics that influence innovation. One of these characteristics that support innovation competency is a flexible structure in which autonomy is granted to all departments of an organization. (Martins and Terblanche, 2003). Similarly, Zdunczyk and Blenkinsopp (2007) identified that a flat, decentralized, flexible structure assists an organization to develop innovations successfully. Decentralization can be described as the allocation of responsibility to any section of the organization (Mulligan, 2001) or delegation of decision-making authority to all levels of the organization. Subramaniam and Mia (2001) concluded that a decentralized structure grants decision-making authority to managers and other persons responsible for tasks and matters relating to the responsibility of that department manager.
Flexibility refers to the ability to adapt quickly to new situations and changing environments (Sopelana, Kunc and Hernáez, 2014). Fioretti (2012) concluded that the organization with high flexibility consists of sections that are able to adapt themselves variously based on requirements and changes of environment.
In addition, Zdunczyk and Blenkinsopp (2007) stated that the organization with a flat structure allows personnel to interact directly and quickly.
Such a flat structure allows the organization to adapt quickly due to efficient communication and a short line of command. Efficient communication also has a positive impact on organizational innovation (Damapour, 1991).
4.4.2.4 Organizational Environment
Organizational environment refers to markets, customers, technological changes, competition, business growth, and profit margin (Laforet, 2011). Peroni et al (2012) defined the term competition as the number of organizations existing in the same market, resulting in more alternatives offered to customers. As stated by Zdunczyk and Blenkinsopp (2007), the external environment influences organizational innovation, particularly when that environment is uncertain and turbulent. Much research has shown relationships between organizational environment and innovation.
Zhu and Weyant (2003) stated that the organization tends to perform activities relating to innovation when it recognizes the uncertainty of external resources and environment. Characteristics of an uncertain organizational environment are complexity, instability, and unpredictability (Freel, 2005). This is similar to Bstieler and Gross, (2003), who suggest that unpredictability and instability of markets and technological development are characteristics of organizational environment uncertainty. Lynn and Akgun (1998) identified technological change as one of uncertainties of organizational environment.
Scupola (2003) stated that, apart from pressure from the external environment such as competition, there is also the role of government support that influences organizational decision-making in initiating innovation activities. Chieh- Yu (2007) commented that governmental support is an external factor influencing innovation and that such support can be measured and observed from financial support or rewards provided by the governmental sector. Scupola (2003) and Chieh- Yu (2007) identified that governmental support and regulation, such as campaigns and rewards, have a positive influence on organizational innovation. In addition, Leitner, Wehrmeyer and France (2010) found that governmental regulation, competition, and technological changes are significant drivers for organizational innovation.