EDITORIAL
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Editorial
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ust before the start of the new academic year, we are again proud to present a high-quality issue of Creativity and Innovation Management to you. We have five inspiring manuscripts in this September issue, a book review by Pier Abetti, and a report of the 2nd Creativity and Innovation Community Meeting by Gerard Puccio and his team from Buffalo State’s International Center of Studies in Creativity. A truly inspiring event and a great opportunity to meet, network, join efforts, and discuss the journal and the challenges it faces! Also this issue includes a Call for Papers from Todd Lubart, from the Université Paris Descartes, for a CIM special on Creativity and New Technologies. Todd will guest-edit this special with Sylvie Courcelle Labrousse from Orange Labs. Contributions for this special include examples and reflections on creative idea generation using information technology; ways in which standard creative thinking techniques may be transformed and enhanced through technology; comparative analyses of tools for divergent and convergent thinking (software, user interfaces, electronic brainstorming programs, electronic whiteboards, multimedia tools for idea expression, etc.); and examples and case studies of use of technology in phases of the creative problem solving process. Please refer to the full Call for Papers in this issue or on the journal’s website: www.blackwellpublishing.com/caim. We look forward to your contributions to this special! Todd Lubart has also volunteered to host the 3rd CIM community meeting in Paris in early July 2010! In 2009 three other Creativity and Innovation events in Europe will be opportunities to meet members of the CIM community: the EIASM International Product Development Management Conference on 7–9 June 2009 in Enschede, the hometown of your CIM editors; The World Marketing Congress 2009 in Oslo with a special CIM track (see calls for both events in this issue and on our website), and ECCI XI (see http://www.eaci.net). We start this issue with a contribution from editorial board member Cameron Ford who, together with Mark P. Sharfman and James W. Dean, addresses factors associated with creative strategic decisions. The paper presents a preliminary field study of factors suggested by © 2008 The Authors Journal compilation © 2008 Blackwell Publishing
previous strategy process and micro-strategy research that may lead to, and result from, creative strategic decisions. From a longitudinal field study of 52 strategic decisions two straightforward findings are produced: strategic managers tended to make creative choices in response to uncertain and competitive circumstances, and creativity improved the realized effectiveness of strategic choices. The next contribution, by Sören Salomo, Jan Brinckmann and Katrin Talke, is titled ‘Functional Management Competence and Growth of Young Technology-Based Firms’. Here, the authors develop a model of functional (marketing, technological and financial) management competences for young technologicalbased ventures, develop a measurement model and provide an initial test of the relationships of the distinct competence domains on development speed of young ventures. The third article, co-authored by BuffaloKey Noter Michael Mumford and first author Jay Caughron, addresses the effects of using formal planning techniques on creative problem solving. In his plenary speech at the CIM community meeting, Michael held the audience captive with his very inspiring presentation. In this paper research is presented from which it appears that the application of key strategies for working through the planning process can promote creative problem solving at the individual level and thus is likely to ultimately impact innovation at the organizational level. In this issue’s fourth contribution, Mark Reuvers, Marloes van Engen, Claartje Vinkenburg and Elisabeth Wilson-Evered explore the relevance of gender differences in transformational leadership and innovative work behaviour, using a dataset of 335 respondents from four Australian hospitals. Rudolph Koch and Karl-Heinz Leitner studied the functions, impacts and dynamics of self-organization in the fuzzy front end of innovation, using empirical evidence from the Austrian semiconductor industry. They adopted a complexity science perspective which stresses that self-organization and emergence are key elements of the new product development process. An earlier version of this paper was presented at the 2007 IPDMC conference, hosted in Porto by Antonio Fernandez.
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Wishing you a good reading of this issue, we end this editorial as usual by looking ahead to the next issue, which will include a special on Creativity and (open) Innovation in Management and Governance featuring contributions from researchers from our own School of Management Studies at the University of Twente, celebrating its 40th anniversary in November 2008. The December issue will also
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include a note from Henry Chesbrough and Wim Vanhaverbeke who will be Key Note speakers at the Lustrum Event in Twente. June 2008 Petra de Weerd-Nederhof Olaf Fisscher Klaasjan Visscher
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Factors Associated with Creative Strategic Decisions Cameron M. Ford, Mark P. Sharfman and James W. Dean The study and practice of business strategy is fundamentally based on employing creative solutions to differentiate a firm from its competitors. Theories used to describe the causes and consequences of strategic differentiation tend to focus on organization-level characteristics such as resources, capabilities and structures. However, less is known about day-to-day processes and practices whereby strategic managers develop create solutions necessary to establish strategic differentiation. This paper presents a preliminary field study of factors suggested by previous strategy process and micro-strategy research that may lead to, and result from, creative strategic decisions. Findings produced by a longitudinal field study of 52 strategic decisions reveal that creative strategic choices arise in response to managers’ perceptions of uncertainty and competition. The findings also suggest that creativity may improve the ultimate effectiveness of strategic choices by 5–10 per cent.
Introduction
S
trategy research offers few models that describe activities or dynamic processes that contribute to the development of competitive advantage and superior performance. Put simply, there is abundant evidence describing what firms should do to succeed but less understanding of how strategic managers can accomplish those ends. Recognizing this limitation, Michael Porter (1991) argued that strategy researchers need to focus more effort on developing a ‘dynamic theory of strategy’ that provides longitudinal descriptions of the processes through which competitive positions are created. This admonition has been addressed recently by two emerging research perspectives. The first perspective describes dynamic resources that allow firms to create, alter and renew key resources and capabilities in response to changing environments (Helfat & Peteraf, 2003; Winter, 2003). The second perspective describes micro-strategy, those processes and practices which constitute the day-to-day activities of organizational life and which relate to strategic outcomes (Gerry, Melin & Whittington, 2003; Felin & Foss, 2006). Advocates of this view argue that accelerating change in business environments coupled with increasing flexibility with respect to resource © 2008 The Authors Journal compilation © 2008 Blackwell Publishing
configuration requires a greater understanding of how strategic actors interpret situations and formulate responses. This focus on micro, rather than macro (organization level), phenomena is an important supplement to traditional approaches to strategic analysis that emphasize organizational resources, capabilities and environments (e.g., the resource-based view – Barney, 2001). Popular accounts describing successful strategy formulation often note the important role played by creative strategic explorations. These accounts often attribute firm success to a historical pattern of creative choices, or a single transformational choice, that elevates a firm above its rivals. Porter (1991) noted that ‘Numerous case studies illustrate vividly that highly successful firms often arise out of creative acts where there were few initial strengths’ (p. 105). Although the connection is seldom made explicit in the strategy literature, descriptions of strategic differentiation and competitive advantage implicitly assume that firm-level capabilities emerge from individual and team-level creative strategic choices. In the long run, creative choices can produce novel configurations of value-adding activities that serve as the source of a firm’s competitive advantage (Porter, 1991; Winter, 2003; Alvarez & Barney, 2006). This suggests that the ability
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to conceive and implement creative strategic choices is a critical micro-strategy process underlying the viability of firms (Eisenhardt & Brown, 1998; Gerry, Melin & Whittington, 2003). Langley et al. (1995) offer perhaps the most forceful argument for considering the creativity of strategic choices by noting that business strategy typically involves extended periods of routine activity that are transformed by occasional flashes of creative insight. Based on this reasoning, they criticized prior theorizing in the strategy literature by raising the question, ‘How, then, can the adjective “strategic” possibly be applied to any theory of decision making that does not take account of such insights?’ (p. 268). The previous arguments suggest that one critical challenge in understanding microstrategy is to understand how initial conditions and decision processes influence the creativity of strategic choices, and how creativity impacts the ultimate success of strategic actions. In this article, we present a preliminary attempt at such a study. We begin by describing how top-level managers’ interpretations and decision processes affect the creativity of their strategic choices, and how creativity may enhance the ultimate effectiveness of those choices. We derive propositions from this discussion that we then subject to empirical scrutiny utilizing data from a longitudinal field study of 52 strategic choices. The article concludes by discussing the implications of the empirical findings developed by this study.
Theoretical Background This study examines intentional decision processes thought to instigate creative strategic choices, as well as post-choice consequences reflecting the impact of novel strategic acts on targeted strategic domains. The micro-strategy processes we emphasize can be classified simply with an input-process-outcome logic that highlights the importance of interpretations of strategic circumstances, formulation of strategic choices, and eventual results attributed to these choices.
Interpretations of Strategic Circumstances The key to the interpretation phase of decision making is coming to agreement about the nature of the problem or decision at hand (Dutton & Jackson, 1987). At its core, the underlying dynamic is one of uncertainty reduction. Uncertainty is a key characteristic that has been recognized as an important influence to all organizing activities (Weick,
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Sutcliffe & Obstfeld, 2005). Contributions to the organizational creativity literature have emphasized the central importance of sensemaking (i.e., uncertainty reduction) processes that enable individuals to take creative action in the face of considerable uncertainty (Ford, 1996; Drazin, Glynn & Kazanjian, 1999). Empirical strategy process research has demonstrated that top management interpretations of uncertain issues are an important influence on strategic choices and outcomes (Dean & Sharfman, 1993). Similarly, recent entrepreneurship literature has framed the creation of new ventures as a process whereby individual entrepreneurs address uncertainty with action (McMullen & Shepherd, 2006). Overall, uncertainty spurs sensemaking processes that motivate search and consideration of creative strategic actions (Gioia & Chittipeddi, 1991; Weick, Sutcliffe & Obstfeld, 2005). Based on this convergence between proposals in the creativity and strategy research literatures, we propose the following relationship. Proposition 1: The creativity of strategic choices will be positively associated with interpretations of environmental uncertainty related to a decision. However, the interpretation of strategic domains takes place in context, not in a vacuum. The primary determinant of the strategic context is the competition that a particular firm faces (Porter, 1991). The need for a firm to consider creative strategic choices increases under conditions of organizational stress that highlight inadequacies inherent in current strategies (Greve, 2003). Therefore, firms in competitive industries where new strategies are being offered by new entrants and current competitors are especially likely to recognize the need for creative actions (Porter, 1996). Barnett and Hansen (1996) introduced the metaphor of the Red Queen to describe the relationship between competitive environments and creative strategic action. The metaphor refers to Lewis Carroll’s Through the Looking Glass, where Alice notices that she appears to be stationary even though she is running a race. The Red Queen’s response is that Alice must be from a slow world since in a fast world one must run just to stay still. Applied to business strategy, this metaphor suggests that strategic managers facing issues that highlight competitive pressures are likely to find current routines unsatisfactory, and search for improvements that enhance performance. Thus, escalating competition promotes creative strategic responses by providing information to strategic decision makers regarding the adequacy of current configurations of resources, skills and assets. Greve and © 2008 The Authors Journal compilation © 2008 Blackwell Publishing
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Taylor’s (2000) study of the radio industry presents evidence that innovations cause competitive pressures that can serve as a ‘catalyst’ for a wide array of creative initiatives within an industry that may be completely unrelated to the instigating innovation. Creativity research examining the influence of competition is scant. However, one study by Shalley and Oldham (1997) found that, in general, individuals produced solutions with higher creativity when they were told that their performance would be judged against a normative sample (i.e., solutions generated by individuals who participated in a similar study). They explained this finding by suggesting that information regarding personal competence derived from competition with others enhances intrinsic motivation to pursue creative options. Based on these findings from both the strategy and creativity literatures, we offer the following prediction. Proposition 2: The creativity of choices will be positively associated with interpretations of strong competition related to the issues addressed by a decision.
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to revisiting prior conclusions regarding problem definitions, critical assumptions, and the like. Alexander (1979) argued that ‘low closure’ between problem definition and alternative generation processes was especially critical to creativity in organizations. Encouraging recursive linkages between sensemaking and alternative generation promotes reframing and the discovery of novel problem attributes that can activate additional search behaviour (Alexander, 1979). Further, processes whereby individuals present creative proposals to collectives and collectives offer help to individuals has been described as a critical recursive process linking individual and team-level creative action (Hargadon & Bechky, 2006). Therefore, we offer the following prediction regarding the influence of creative decision processes on the creativity of strategic choices. Proposition 3: The creativity of strategic choices will be positively associated with creative decision processes (i.e., proposing novel alternatives, utilizing recursive processes, etc.).
Formulation of Creative Strategic Decisions
Consequences Associated with Creative Strategic Decisions
Strategic decision makers often face an implicit choice between maintaining current routines versus adopting new, creative options (cf. Ford, 1996). At this fork in the road, decision makers often shun new initiatives because they require forfeiting sunk costs invested in prior initiatives and making new investments to enact a novel approach (Staw, 1976). This preference for continuity has been verified by empirical research that reveals the extent to which strategic decision makers favour organizational routines as choices (e.g., Nutt, 1984). Despite this rather disheartening evidence, several processes have been associated with creative strategic choices. Creative decision processes are unlikely to progress in the straightforward manner suggested by stage models of decision making (Ford, 1996). Instead, creative decision processes are better characterized as promoting ‘expeditions’ (cf. Dougherty, 1992) wherein decision makers explore possible options and return from their adventures to discuss their feasibility. Two types of decision processes key the success of these expeditions. The first is generating multiple alternative solutions. The ability to generate alternative solutions has long been regarded as the fundamental process underlying creative productivity (Ford, 1996), and has even been offered as a definition of creativity. A second process thought to promote creativity occurs when decision makers remain open
Many positive consequences have been associated with creative strategic choice. For example, creativity has been associated with product and process innovation (Dougherty & Heller, 1994), organizational learning (Levinthal & March, 1993), strategic differentiation (Porter, 1996), and sustainable competitive advantage (Baden-Fuller & Stopford, 1992). As micro-process theorists argue, these associations are likely to be especially strong in rapidly evolving strategic environments (Gerry, Melin & Whittington, 2003). However, most of the literature extolling the virtues of organizational creativity describes how broad organizational characteristics or processes affect aggregate creative productivity. For instance, Eisenhardt and Brown (1998) describe how institutionalizing deadlines for creative outcomes, a process they call ‘time pacing’, establishes an organizational environment that enables corporate innovation. Similarly, Sutton and Hargadon’s (1996) study of brainstorming at IDEO, a leading product development company, showed that systematically employing brainstorming facilitated the creativity of IDEO’s proposals. Studies such as these identify important practices that, on the whole, can improve an organization’s creative productivity. Unfortunately, their focus on aggregated patterns of activity and outcomes makes it difficult to attribute specific events to specific consequences. This makes strict demonstrations of
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causality difficult. To overcome this limitation, we believe it is important to examine specific events (i.e., decisions) to see how the creativity of discrete strategic choices affects outcomes directly attributable to those choices. Following this reasoning, we argue that creativity enhances the effectiveness of discrete strategic choices by allowing decision makers to adapt their solutions more effectively to unique characteristics of specific problems. Routine ‘off the shelf’ solutions (cf. Nutt, 1984) can be likened to buying clothes off the rack, whereas creative solutions provide an improved fit that can only be accomplished by custom tailoring. Thus, creativity facilitates adaptation to specific strategic challenges that can be described at the level of discrete choices. This is consistent with a microstrategy approach of focusing on strategic episodes as a key unit of analysis associated with understanding activities that create strategic differentiation (Hendry & Seidl, 2003). Although we argue that the creativity of strategic choices is positively related to decision effectiveness irrespective of other factors, there are obviously other factors that contribute to decision effectiveness. For example, environmental events outside the control of managers have long been noted as an influence on the success of strategic decisions (Pfeffer & Salancik, 1978). The emergence of contingencies such as these will typically be independent from decision processes or choice characteristics. Thus, to control for this alternative explanation for decision effectiveness, we assessed the construct environmental favourability, defined as the extent to which environmental conditions subsequent to a decision favour the choice that was made. Another frequently noted influence on decision effectiveness is the quality of decision implementation, defined as the competence with which steps are taken to execute the strategic decision (Dean & Sharfman, 1996). Implementation is likely to be an important contributor to success for any type of choice (Nutt, 1993; Langley et al., 1995). Therefore, it could also serve as a potent alternative explanation for decision effectiveness in this study. Consequently, we assessed the quality of decision implementation in an effort to control for this influence. Finally, because one of the defining attributes of creativity is value, which may be almost synonymous with effectiveness in this task domain (Ford & Gioia, 2000; Ford & Sullivan, 2004), we were concerned that any empirical relationship we discovered between creativity measured during our first wave of data collection (T1) and effectiveness measured approximately one year later (T2) could
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be spurious. In other words, a positive finding might simply indicate that decision makers were good forecasters; the choices they expected to be effective were, in fact, more effective in the long run. To control for this potential alternative explanation, we asked decision makers at T1 to describe their expectations regarding the likely effectiveness of their recent choices. Without these three controls, we could not rule out several potential alternative explanations for decision success suggested by previous studies. In summary, we have predicted that the creativity of strategic decisions will enhance their ultimate effectiveness as a result of better addressing idiosyncratic circumstances and challenges addressed by the choice. Additionally, we control for the potential influence of environmental favourability, quality of implementation and prior expectations of effectiveness. Proposition 4: The creativity of strategic decisions will be positively associated with the effectiveness of those decisions.
Methodology In order to examine these proposed empirical relationships, we established several methodological features. First, we employed a field of study of real strategic decisions because laboratory studies are ill-suited to assessing the impact of strategic decision making processes on consequential strategic choices, and the relationship between choice characteristics and effectiveness. Second, the study used a relatively large sample of firms and decisions to produce meaningful statistical analyses. Third, the study design was longitudinal in order to provide enough time for the effects of choices to be observed and to increase confidence in the casual interpretation of the findings. We have incorporated these features into our study.
Research Sites We selected firms for the study from manufacturing industries such as electronic, steel, apparel, footwear, paint and coatings, and chemicals, as defined by four-digit Standard Industrial Classification (SIC) codes. Published databases, including Standard & Poor’s Directory, were used to identify firms in each industry. We contacted the top manager of each business first by letter, then by telephone, and later in person to secure participation. A total of 24 firms in 16 industries participated. Participating firms had annual sales ranging from $1.5 million to over $3 billion and © 2008 The Authors Journal compilation © 2008 Blackwell Publishing
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numbers of employees ranging from 50 to 6,600.
Unit of Analysis Our unit of analysis is the strategic decision or strategic episode, consistent with a microstrategy perspective (Hendry & Seidl, 2003). We selected the decisions to study in each firm according to the following criteria. First, the decisions had to be defined by the firm as strategic (i.e., as determining the overall direction of the firm). Second, decisions had to be sufficiently recent that the firm as yet knew little or nothing about their effectiveness but would see clear outcomes within one or two years. Strategic decisions have been described as committing substantial resources, setting precedents, and creating waves of lesser decisions; as illstructured, non-routine and complex; and as substantial, unusual and all-pervading (Dean & Sharfman, 1996). Although researchers have not reached consensus as to what constitutes a strategic decision, managers participating in our study had no trouble identifying them.
Data Collection All the data were collected in two waves of structured interviews with high-level managers who were actively involved in making the decisions studied. Among our respondents, 24 per cent were at the highest level in their organizations (e.g., presidents), 34 per cent were one level from the top (e.g., vice presidents), 25 per cent were two levels from the top (e.g., directors), and the remaining 17 per cent were three or more levels from the top. In the first wave of interviews, we collected data on uncertainty, competitiveness, creative decision processes, expected effectiveness and the creativity of each strategic choice. We also created frameworks for subsequent measurement of environmental favourability, quality of implementation and decision effectiveness (see below). Data on these three later variables were collected in the second wave. Following the advice of Huber and Power (1985) and Golden (1992), we tried to reduce any potential error from the use of retrospective reports. As Huber and Power (1985) found that moderate amounts of elapsed time do not affect the stability of retrospective reports, and Golden (1992) found that retrospective accounts collected after two years are often incorrect, we conducted the first wave of interviews as soon as possible after each decision was made. The second wave was conducted one to two years later, after sufficient time had elapsed to allow assessment of the decisions’ effectiveness. © 2008 The Authors Journal compilation © 2008 Blackwell Publishing
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Also based on the suggestions of Huber and Power (1985) and Golden (1992), we interviewed the persons who were most knowledgeable and deeply involved in each decision. We also attempted – still following the suggestions of these authors – to minimize the effect of any particular perspective through triangulation. Consequently, we interviewed an average of 3.4 people per decision in the first wave and 2.5 in the second wave (the decrease in the second wave is the result of people transferring, leaving their company, etc.). Finally, we tried to motivate participants to provide valid information (Golden, 1992) by guaranteeing them confidentiality and by providing them with information comparing them to other organizations, information that would be meaningless in the absence of accurate data. We collected data on 61 decisions, with each company providing data on between one and three decisions. To increase the validity of the results, we have included in the analysis only those decisions for which we had at least two informants for both waves of data collection. This exclusion reduced the final sample of decisions to 52.
Measures All of the measures used in this study are included in the Appendix. We assessed Uncertainty via a set of forced choice scale items we designed to reflect the key elements of the construct. These included the decision makers’ need for information, the extent to which means/ends relationships were clear, the complexity and predictability of the situation, and the familiarity of the problem being addressed. We measured the perceived level of Competition by presenting managers with two scales asking how tough it was to compete in their industry and how hard it was to be profitable. Sharfman and Dean (1991) showed that such measures were positively associated with archival measures of competitive pressure. We created our measure of the use of Creative Decision Processes by combining the values on four scales we selected to investigate the key elements of creative decision making. These elements include alternative generation, the use of novel ideas, reconsideration of previously covered ground and rethinking earlier positions (cf. Alexander, 1979; Dougherty, 1992). We define creativity in this study as an ‘organization-specific, subjective judgment of the novelty and value of a strategic choice’ (cf. Ford, 1996). Thus, to measure the Creativity of each decision we asked managers to report the
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degree of creativity they saw as well as the extent to which the action was in some way novel for the firm. These measures are consistent with our conceptual definition of creativity as an organization-specific, subjective judgment of the novelty and value of a strategic choice. We measured Environmental Favourability separately for each decision using information from managers, rather than archival sources, because the range of issues that influenced the success of decisions was vast, differed greatly from decision to decision even within a firm, and was often unavailable in published sources. We measured environmental favourability as follows: during the first round of interviews, we asked informants to suggest environmental factors that would influence the effectiveness of the strategic decision in question. We then asked them to identify the best and worst (realistically) possible values of each environmental factor for the next one- to twoyear period. For example, if the factor were aggregate demand for the industry’s products, the best (worst) outcome might be a sales increase (decrease) of 10 per cent. We then asked the informants to allocate 100 points among the factors according to their relative importance to the decision’s success. We averaged these weights across respondents to construct the overall favourability score. In the second wave of interviews, we asked informants on each team what had happened with each of the environmental factors (those identified by informants on their teams) in the time since the decision had been made. Informants made these evaluations using sevenpoint response scales anchored by the best and worst values we took from the first interviews. We calculated Environmental Favourability scores for each individual as follows: n
∑ ((W ∑ W ) × E ), i
i
j
i =1
where Wi = the total weight given to the ith environmental factor, Ej = favourability of the ith environmental factor, and n = the number of different environmental issues mentioned by all informants from a team in the first interview. We then averaged individual scores to form decision-level scores. To create the Quality of Implementation scores, we asked informants during the first interview to identify issues that would be important in implementing the strategic decision. All issues mentioned by informants on a given team were included in the questionnaire we used for that team in the second wave. We asked two questions using seven-point scales for each issue. The first asked how well the issue had been addressed during implementa-
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tion (quality, Q); the second asked how important the issue had been for the success of the decision (importance, I) (we held the latter question until the second interview because we believed that managers would be unable to estimate a priori the importance of various implementation issues). We used these questions to create an index of implementation quality weighted by importance, which we divided by seven to create a range consistent with the other scales. We averaged these scores across informants to attain a score for the decision as a whole. The formula for implementation quality for each informant was: n
∑ ((Q × I ) 7 ) n, i
i
i =1
where Qi = the quality of implementation for the ith issue, Ii = the importance of the ith issue, and n = the total number of implementation issues mentioned by all informants on a team during the first wave of interviews. The Decision Effectiveness measure was similar in construction to the measure of environmental favourability. The use of multiple informants guaranteed that we would not be accepting one person’s idiosyncratic view of the success of a strategic decision. During the first interview, we asked informants to identify objectives for the strategic decision and to allocate 100 points among these objectives to represent their relative importance. This process guarded against the potential tendency of decision makers to identify objectives and their relative importance post hoc in a way that would put the decision in the best light possible. We also asked informants to specify complete success and complete failure for each objective, with answers that we would use as scale anchors in the second interview (see Appendix). Thus, the informants established the range of effectiveness–ineffectiveness for each objective before the decision makers knew what the actual outcomes of the decisions would be. In the second interview, the total list of objectives generated by a team in the first interview was presented to informants, who we asked to assign a number between ‘1’ (complete success) and ‘7’ (complete failure) to measure the extent to which each objective had been attained. The formula for calculating effectiveness was: n
⎛⎛ ∑ ⎜⎝ ⎜⎝ Wi i =1
n
⎞
⎞
∑ W ⎟⎠ × O ⎟⎠ , i
i
i =1
where Wi = the total weight for the ith objective, Oi = the degree of attainment of the ith objective, and n = the total number of different objectives mentioned by all informants on a team during the first interview. The score for © 2008 The Authors Journal compilation © 2008 Blackwell Publishing
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Table 1. Descriptive Statistics and Reliability Indicators Variable
Mean
s.d.
Reliability Indicators Inter-item Correlation
Competitiveness Uncertainty Creative Process Creativity of Choice Environmental Favourability Quality of Implementation Expected Effectiveness Decision Effectiveness
5.11 4.00 3.65 4.61 4.54 3.84 5.77 4.32
0.94 0.74 0.86 1.11 1.39 1.24 0.79 1.69
Alpha
0.60** 0.67 0.65 0.38**
IRR 0.80 0.84 0.85 0.63 0.70 0.90 0.87 0.88
** p < 0.01.
each decision was the average score across informants. Finally, given that the majority of the data for the study comes from closed-choice interview items, we tried to minimize common method bias. First, the items used in this analysis were distributed throughout a rather lengthy interview schedule. Second, several different types of items were used, including anchored Likert scales, agree/disagree scales, and pre-post items. Third, we reversed scale anchors in some places to reduce and compensate for the development of response patterns. Also, because much of our data is selfreported and subject to potential bias, it was important that we estimate how consistent our measures were. To this end we calculated (where appropriate) both an internal consistency/reliability statistic for each scale (Cronbach’s alpha) and inter-rater reliability scores. As we show in Table 1, both the Cronbach alphas and the inter-rater reliability scores for all the measures reached conventional levels.
Results We report the means, standard deviations, inter-rater reliabilities and internalconsistency reliabilities for each measure in Table 1. To assess the degree of agreement among the responses to a given question made by several respondents regarding a particular decision, we calculated the level of inter-rater reliability (James, Demaree & Wolf, 1984). We assessed the internal-consistency reliability of each measurement scale with coefficient alpha for scales with three or more items. We present correlation coefficients for those scales with © 2008 The Authors Journal compilation © 2008 Blackwell Publishing
only two items. We measured expected effectiveness with a single-item scale thus allowing only a test of the inter-rater reliability of this indicator. The inter-rater reliability calculations indicate a high degree of agreement among respondents’ reports regarding the activities that lead to particular strategic choices. Some scales exhibit only moderate internal consistency reliability. However, this is common for measures of complex organizational phenomena (Nunnally, 1978) and all scores exceed current conventions. Furthermore, alpha represents a lower bound to the reliability of a scale and is, therefore, a conservative estimate of a measure’s reliability (Carmines & Zeller, 1979). The inter-item correlation between the two items measuring creativity of choice is 0.38. To make this result easier to interpret, we calculated the hypothetical reliability of this measure if it had included four items with identical interitem correlations (Carmines & Zeller, 1979). Holding the average correlations among items constant while increasing the number of items to four would have resulted in an alpha coefficient of approximately 0.70 implying a level of reliability which would meet current standards. We calculated measurement scales by taking the average of the scale items after the data was aggregated by decision. This resulted in one value for each measure for each decision based on a scale of 1 to 7. We report the correlation coefficients among the measures in Table 2. The correlation coefficients do not seem to indicate any obvious risk of collinearity problems. We used ordinary least squares regression to test the first three hypotheses. This analysis used strategic decision makers’ interpretations
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Table 2. Correlations among Variables in the Study Variable 1. 2. 3. 4. 5. 6. 7. 8.
Competitiveness Uncertainty Creative Process Creativity of Choice Environmental Favourability Quality of Implementation Expected Effectiveness Decision Effectiveness
2
3
4
5
6
7
8
-0.02
-0.02 0.25
0.40** 0.29* -0.08
-0.16 -0.18 0.06 0.03
0.17 -0.12 0.11 -0.12 0.30*
0.25 -0.03 -0.02 0.42** 0.39** 0.22
0.08 0.01 -0.08 0.22 0.54** 0.58** 0.40**
n = 52 decisions. * p < 0.05. ** p < 0.01.
Table 3. Multiple Regression Results for Causes of Creative Strategic Choices DF Regression Residual
Variable Constant Competitiveness Uncertainty Creative Process
Sum of Squares
3 48 F = 5.97
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17.04 45.65 p < 0.01
5.68 0.95 R2 = 0.27
B
SE B
t
p
0.85 0.48 0.51 -0.19
1.15 0.15 0.19 0.16
0.74 3.27 2.67 -1.19
0.47 <0.01 0.01 0.24
of uncertainty, competitiveness and their utilization of creative decision processes as independent variables, and a consensual assessment (cf. Amabile, 1982) of the creativity of each strategic choice as the dependent variable. We report the results of this regression in Table 3. The regression produced a significant overall result (F = 5.97, p < 0.01) that explained 27 per cent of the variance in the creativity of strategic choices. The degree of uncertainty regarding the problems and outcomes related to each choice, and the salience of competitive pressures addressed by each choice both had a significant effect on the creativity of strategic choices. These results provide support for Hypotheses 1 and 2. Hypothesis 3 was not supported. Creative decision processes were not significantly related to creative strategic choices. We tested Hypothesis 4 by employing hierarchical regression. This analysis employed the
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expected effectiveness and creativity measures collected during the first wave of data collection, and the environmental favourability, quality of implementation and choice effectiveness measures collected during the second wave. We report these results in Table 4. In the first step we entered the three control variables, environmental favourability, quality of implementation and expected effectiveness. This regression was statistically significant (F = 16.28, p < 0.01) and explained 50 per cent of the variance in strategic choice effectiveness. Environmental favourability and quality of implementation were both strongly associated with choice effectiveness. However, decision makers’ prior expectations regarding the effectiveness of their choices were not significantly related to effectiveness measured one to two years later. In the second step we entered the three control variables and the measure of creativity. This regression was statistically © 2008 The Authors Journal compilation © 2008 Blackwell Publishing
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Table 4. Hierarchical Regression Results for Consequences of Creative Strategic Choices Model 1 (Strategic Choice Effectiveness as Dependent Variable) DF Regression Residual
Sum of Squares
3 48 F = 16.28
Variable Constant Environmental Favourability Quality of Implementation Expected Effectiveness (T1)
Mean Square
73.41 72.13 p < 0.01
24.47 1.50 R2 = 0.50
B
SE B
t
p
-2.02 0.41 0.60 0.38
1.29 0.14 0.15 0.24
-1.57 2.94 4.10 1.60
0.12 <0.01 <0.01 0.12
Model 2 (Strategic Choice Effectiveness as Dependent Variable) DF Regression Residual
Sum of Squares
4 47 F = 14.44
Variable Constant Environmental Favourability Quality of Implementation Expected Effectiveness (T1) Creativity of Strategic Choice
Mean Square
80.25 65.29 p < 0.01
20.06 1.39 R2 = 0.55
B
SE B
t
p
-2.63 0.44 0.66 0.11 0.38
1.27 0.13 0.14 0.26 0.17
-2.07 3.29 4.63 0.44 2.22
0.04 <0.01 <0.01 0.66 0.03
Additional variance explained by adding creativity of strategic choice to the regression function is 4.7% (F change = 4.93, p = 0.03).
significant (F = 14.44, p < 0.01) and explained 55 per cent of the variance in strategic choice effectiveness. The extra 5 per cent of variance explained by the addition of creativity to the model at step two was statistically significant (p = 0.03). This result, indicating that strategic decision makers’ assessments of the creativity of their choices explained approximately 5 per cent of the effectiveness attributed to those choices one to two years later, supports Hypothesis 4. Because some of the scales exhibit moderate internal consistency reliability, we undertook additional analyses to examine the potential impact this circumstance had on our overall findings. Specifically, we used the estimates of internal consistency reliability and inter-rater © 2008 The Authors Journal compilation © 2008 Blackwell Publishing
reliability to compute a correction for attenuation (Carmines & Zeller, 1979) for the correlations reported in Table 2, and then recomputed our regression results based on these corrections. One can interpret this procedure as an estimate of the relationships among variables if one source of error variance (either internal consistency or inter-rater reliability) could be eliminated. We used the results created by eliminating error related to internal consistency to recalculate the regression described in Table 3. Correcting for this source of attenuation produced a dramatic improvement in the explanatory power of the model. This is perhaps not surprising since three of the four scales in this analysis displayed only moderate reliabilities. The revised regression was
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statistically significant (F = 50.30, p < 0.01) and explained 76 per cent of the variance in strategic choice creativity. We ran the same correction procedure using the inter-rater reliability estimates. In this analysis, the revised regression was statistically significant (F = 14.04, p < 0.01) and explained 47 per cent of the variance in strategic decision makers’ creativity assessments. These same two procedures were employed to recalculate the regression results produced by the models we presented in Table 4. Correcting the creativity measure based on its internal consistency reliability (the form of the other four measures in this analysis did not permit testing of internal consistency) produced a final model that was statistically significant (F = 19.65, p < 0.01) and explained 63 per cent of the variance in choice effectiveness. Adding creativity in the second step of this analysis allowed the model to explain an additional 12 per cent of the variance in choice effectiveness. Correcting all of the measures based on the estimates on inter-rater reliability produced a final model that was statistically significant (F = 44.13, p < 0.01) and explained 79 per cent of the variance in choice effectiveness. Adding creativity in the second step of this analysis also allowed the model to explain an additional 12 per cent of the variance in choice effectiveness. Overall, these additional analyses suggest that the variables employed in this study are important contributors to the creativity and effectiveness of strategic choices. They also suggest that the contribution of creativity to the ultimate effectiveness of the strategic choices included in this study is probably best thought of as ranging between a lower boundary of 5 per cent and an upper boundary of 12 per cent.
Discussion This study presents two straightforward findings: strategic managers tended to make creative choices in response to uncertain and competitive circumstances, and creativity improved the realized effectiveness of strategic choices. The first finding lends credence to the old adage ‘Necessity is the mother of invention’ in the domain of strategic decision making. Alternatively, one might interpret this finding as suggesting that strategic environments characterized by high levels of competitiveness and uncertainty are more receptive to creative choices. Further research will be necessary to discover the relative roles played by strategic decision makers who introduce creative variations, and stakeholders that ultimately adopt (or reject) creative alternatives.
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It is also interesting to note the finding that creative decision processes were not significantly related to creative choices. The weak impact of developing and considering many different alternatives, and utilizing recursive processes is hard to account for. One could speculate that the lack of legitimacy typically associated with novel alternatives (Dougherty & Heller, 1994) is a particularly substantial liability in the context of strategic decisions. If this is the case, increasing the number of options under consideration and reconsidering previously established decision premises might actually undermine the potential of the most creative options under consideration. This negative relationship actually surfaced in the analyses that corrected for attenuation – creative decision processes were significantly and negatively related to the creativity of strategic choices in both analyses. If this speculation has merit, it suggests that creative strategic options may require legitimizing efforts before being justified on strategic grounds, similar to findings on successful entrepreneurial choice presented by Delmar and Shane (2004). Clearly, this issue has important practical implications and deserves future empirical investigation. Finally, the finding that the creativity of choices facilitated the achievement of intended strategic outcomes is particularly noteworthy. Given the longitudinal design of this study, we are confident in asserting that creativity caused choices to be more effective in the long run. This supports Mosakowski’s (1998) proposal that a behavioural propensity for creativity is a primary entrepreneurial resource that enhances a firm’s ability to establish sustainable competitive advantage. This finding also supports a dynamic capabilities view of strategy because it provides theoretical arguments and empirical support linking micro-level behaviours to strategic outcomes. Establishing such linkages is an essential challenge to improving the explanatory power of strategy theories (Helfat & Peteraf, 2003; Winter, 2003). Improving our understanding of microstrategy processes can strengthen and add theoretical substance to strategy models by providing underlying rationales or missing process mechanisms.
Limitations of the Study This initial effort to study micro-strategy processes linking strategy formulation, creativity and effectiveness has several important limitations. One limitation of the study is that three variables displayed only moderate internal consistency. The measures of uncertainty, creative process and choice creativity all pro© 2008 The Authors Journal compilation © 2008 Blackwell Publishing
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duced alpha estimates ranging between 0.65 and 0.70. Although values reached conventional levels, they are lower than we would prefer. We attribute this result to the complexities inherent in these variables and time constraints that prevented us from utilizing a larger number of scale items to measure each variable. Although this limitation does not suggest any obvious alternative explanations for our findings, it does limit our ability to assess accurately the strength of the relationships among the variables in the study. We attempted to compensate for this limitation by conducting regression analyses that were corrected for attenuation. The results of these tests make us optimistic that the relationships we describe in this study are substantial, but future studies should seek to develop more robust measures that shed more light on the relative impact of the factors examined in this study. To some extent, the methodological safeguards included in this study limit our ability to assess the relative impacts of strategic decision processes, the environment and implementation on decision effectiveness. The informants described their decision-making methods when they had no knowledge of the outcomes of the decisions they described. Although they identified, provided anchors for, and weighted environmental factors with no knowledge of outcomes, they reported on their favourableness after outcomes were known. And although they identified implementation factors with no knowledge of outcomes, they provided both weights and evaluations after outcomes were known. Thus, the possibility exists that relationships are artificially inflated for the environment and implementation, but not for interpretations, decision processes or creativity. Another potential limitation of the study is that we used perceptual measures for many variables, effectiveness in particular. An alternative explanation for our results is that managers have an implicit theory of successful decision making similar to ours and that their perceptions of effectiveness were driven more by their memory of the process than by the actual evidence of success. The force of this alternative explanation is diminished considerably by a number of factors, however. First, the delay between waves of data collection would tend to dull the informants’ memories of the process by the time the effectiveness data were collected. Second, informants were not asked for their general impressions of decision effectiveness, but rather for factual information (e.g., What is your market share?) corresponding to criteria established at the time the decision was made. Third, the use of © 2008 The Authors Journal compilation © 2008 Blackwell Publishing
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multiple informants for each decision and the high inter-rater reliabilities for all variables make it less likely that individual perceptions are a major source of error in the data. Another potential concern in the use of perceptual measures is the possibility of other response biases (‘halo’ effects, etc.). As we described above, we constructed the measures in such a way as to limit the likelihood of such biases. One might also suggest the possibility of mono-method bias and an effect such bias had on our results. While we collected the data in the same interviews, the longitudinal nature of the study, the use of different forms of questions and the use of multiple informants should diminish any effect that a single data collection process might invoke. Finally, these results were produced in the context of manufacturing firms. Consequently, generalizations of these results to other strategic settings, such as service-based industries, should be done with appropriate caution.
Conclusion To the best of our knowledge, this is the first empirical study to examine antecedents and consequences associated with the creativity of strategic action. Discovering that creative choices emerged in response to competition and uncertainty, and that creativity enhanced the effectiveness of strategic initiatives, suggests that creativity plays an important role in fostering strategic differentiation. We hope this study motivates further consideration of the role that creativity might play in microstrategy or dynamic capability descriptions of day-to-day strategic activity.
References Alexander, E.R. (1979) The Design of Alternatives in Organizational Contexts: A Pilot Study. Administrative Science Quarterly, 24, 382–403. Alvarez, S.A. and Barney, J.B. (2006) Discovery and Creation: Alternative Theories of Entrepreneurial Action. Fisher College of Business Working Paper No. 2006-01-005 [WWW document]. URL http:// ssrn.com/abstract=900200. Amabile, T.M. (1982) Social Psychology of Creativity: A Consensual Assessment Technique. Journal of Personality and Social Psychology, 43, 997–1013. Baden-Fuller, C. and Stopford, J.M. (1992) Rejuvenating the Mature Business: The Competitive Challenge. Routledge, New York. Barnett, W.P. and Hansen, M.T. (1996) The Red Queen in Organizational Evolution. Strategic Management Journal, 17, 139–57. Barney, J.B. (2001) Is the Resource Based View a Useful Perspective for Strategic Management Research? Yes. Academy of Management Review, 26,41–56.
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Carmines, E.G. and Zeller, R.A. (1979) Reliability and Validity Assessment. Sage Publications, Newbury Park, CA. Dean, J.W. and Sharfman, M.P. (1993) Procedural Rationality in the Strategic Decision Making Process. Journal of Management Studies, 30, 607–30. Dean, J.W. and Sharfman, M.P. (1996) Does Decision Making Matter: A Study of Strategic Decision Making Effectiveness. Academy of Management Journal, 39, 368–96. Delmar, F. and Shane, S. (2004) Legitimating First: Organizing Activities and the Survival of New Ventures. Journal of Business Venturing, 19, 385– 410. Dougherty, D. (1992) Interpretive Barriers to Successful Product Innovation in Large Firms. Organization Science, 3, 179–202. Dougherty, D. and Heller, T. (1994) The Illegitimacy of Successful Product Innovations in Established Firms. Organization Science, 5, 200–18. Drazin, R., Glynn, M.A. and Kazanjian, R.K. (1999) Multilevel Theorizing about Creativity in Organizations: A Sensemaking Perspective. Academy of Management Review, 24, 286–307. Dutton, J.E. and Jackson, S.E. (1987) Categorizing Strategic Issues: Links to Organizational Actions. Academy of Management Review, 12, 76–90. Eisenhardt, K.M. and Brown, S.L. (1998) Time Pacing: Competing in Markets That Won’t Stand Still. Harvard Business Review, March–April, 59–69. Felin, T. and Foss, N.J. (2006) Individuals and Organizations: Further Thoughts on a Microfoundations Project. In Ketchen, D. and Bergh, D. (eds.), Research Methodology in Strategy and Management, 3, 253–88. Ford, C.M. (1996) A Theory of Individual Creative Action in Multiple Social Domains. Academy of Management Review, 21, 1112–42. Ford, C.M. and Gioia, D.A. (2000) Factors Influencing Creativity in the Domain of Managerial Decision Making. Journal of Management, 26, 705–32. Ford, C. and Sullivan, D.M. (2004) A Time for Everything: How the Timing of Novel Contributions Influences Project Team Outcomes. Journal of Organizational Behavior, 25, 279–92. Gerry, J., Melin, L. and Whittington, R. (2003) Micro Strategy and Strategizing: Towards an Activitybased View. Journal of Management Studies, 40, 3–22. Gioia, D.A. and Chittipeddi, K. (1991) Sensemaking and Sensegiving in Strategic Change Initiation. Strategic Management Journal, 12, 433–48. Golden, B.R. (1992) The Past is the Past – Or is It? The Use of Retrospective Accounts as Indicators of Past Strategy. Academy of Management Journal, 35, 848–60. Greve, H.R. (2003) A Behavioral Theory of R&D Expenditures and Innovations: Evidence from Shipbuilding. Academy of Management Journal, 46, 685–702. Greve, H.R. and Taylor, A. (2000) Innovations as Catalysts for Organizational Change: Shifts in Organizational Cognition and Search. Administrative Science Quarterly, 45, 54–80. Hargadon, A.B. and Bechky, B.A. (2006) When Collection of Creatives Become Creative Collectives:
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A Field Study of Problem Solving at Work. Organization Science, 17, 484–500. Helfat, C.E. and Peteraf, M.A. (2003) The Dynamic Resource-Based View. Strategic Management Journal, 24, 997–1010. Hendry, J. and Seidl, D. (2003). The Structure and Significance of Strategic Episodes: Social Systems Theory and the Routine Practices of Strategic Change. Journal of Management Studies, 40, 175– 96. Huber, G.P. and Power, D.J. (1985) Retrospective Reports of Strategic Level Managers: Guidelines for Increasing their Accuracy. Strategic Management Journal, 6, 171–80. James, L.R., Demaree, R.G. and Wolf, G. (1984) Estimating within Group Interrater Reliability with and without Response Bias. Journal of Applied Psychology, 69, 85–98. Langley, A., Mintzberg, H., Pitcher, P., Posada. E. and Saint-Macary, J. (1995) Decision Making. Organization Sceince, 6, 260–79. Levinthal, D.A. and March, J.G. (1993) The Myopia of Learning. Strategic Management Journal, 14, 95–112. McMullen, J.S. and Shepherd, D.A. (2006) Entrepreneurial Action and the Role of Uncertainty in the Theory of the Entrepreneur. Academy of Management Review, 31, 132–52. Mosakowski, E. (1998) Entrepreneurial Resources, Organizational Choices and Competitive Outcomes. Organizational Science, 9, 625–43. Nunnally, J. (1978) Psychometric Theory. McGrawHill, New York. Nutt, P.C. (1984) Types of Organizational Decision Processes. Administrative Science Quarterly, 29, 414–50. Nutt, P.C. (1993) The Formulation Processes and Tactics Used in Organizational Decision Making. Organization Science, 4, 226–51. Pfeffer, J. and Salancik, G.R. (1978) The External Control of Organizations: A Resource Dependence Perspective. Harper & Row, New York. Porter, M.E. (1991) Towards a Dynamic Theory of Strategy. Strategic Management Journal, 12, 95–117. Porter, M.E. (1996) What is Strategy? Harvard Business Review, November–December, 61–78. Shalley, C.E. and Oldham, G.R. (1997) Competition and Creative Performance: Effects of Competitor Presence and Visibility. Creativity Research Journal, 10, 337–45. Sharfman, M.P. and Dean, J.W. (1991) Conceptualizing and Measuring the Organizational Environment: A Multidimensional Approach. Journal of Management, 17, 681–700. Staw, B.M. (1976) Knee-Deep in the Big Muddy: A Study of Escalating Commitment to a Chosen Course of Action. Organizational Behavior and Human Performance, 16, 27–44. Sutton, R.I. and Hargadon, A. (1996) Brainstorming Groups in Context: Effectiveness in a Product Design Firm. Administrative Science Quarterly, 41, 685–718. Weick, K.E., Sutcliffe, K.M. and Obstfeld, D. (2005) Organizing and the Process of Sensemaking. Organization Science, 16, 409–21. Winter, S. (2003) Understanding Dynamic Capabilities. Strategic Management Journal, 24, 991–95. © 2008 The Authors Journal compilation © 2008 Blackwell Publishing
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Cameron M. Ford (
[email protected]) is an Associate Professor of Entrepreneurship and the Founding Director of the UCF Center for Entrepreneurship and Innovation at the University of Central Florida. His scholarly interests focus on creativity and entrepreneurship by describing how novel ideas evolve, gain legitimacy and attract resources during the new venture emergence process. Cameron’s research has appeared in over 60 academic papers including publications in journals such as the Academy of Management Review, Journal of Management, Journal of Organizational Behavior, Journal of Applied Behavioral Science and IEEE Transactions on Engineering Management. He has also published numerous book chapters related to creativity and entrepreneurship, co-edited the book Creative Action in Organizations, and serves on the editorial boards of Journal of Creative Behavior and Creativity and Innovation Management. He earned his PhD in Business Administration from Penn State University. Mark P. Sharfman is a Professor of Strategic Management at the University of Oklahoma. Professor Sharfman’s research addresses the firm’s relationship with the business environment; specifically, how the business environment affects the firm, how the firm affects the natural environment, and how firms manage the social issues they face in the business environment. Professor Sharfman has published his research
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in several outlets, including Academy of Management Journal, Academy of Management Review, Business and Society, Business Horizons, Decision Sciences, Journal of Applied Behavioral Sciences, Journal of Industrial Ecology, Journal of Management, Journal of Management Studies and Strategic Management Journal. In 2003 Professor Sharfman received the university-wide Merrick Foundation Teaching Award. He earned his PhD from the University of Arizona. James W. Dean is senior associate dean of academic affairs, a management professor and a Sarah Graham Kenan Distinguished Scholar at the University of North Carolina. Leadership, organizational change, strategic decision making, international management and organizational performance improvement are the focus of his research, teaching and consulting. Dr Dean has participated in research, teaching and/or consulting projects with many companies, including ALCOA, Boeing, DuPont, ExxonMobil, GE, Honeywell, Kaiser Permanente and St. Laurie Ltd. He served as program director of the National Science Foundation research program, Transformations to Quality Organizations, which was jointly sponsored by the government and the private sector. He served as an examiner for the Malcolm Baldrige National Quality Award for six years. He earned his PhD and MS from Carnegie Mellon University and his BA from The Catholic University.
Appendix Measures of Uncertainty, Competitiveness, Creative Processes, Creativity of Strategic Choice, Environmental Favourability, Quality of Implementation, Expected Effectiveness and Strategic Decision Effectiveness
Uncertainty 1. To what extent was this problem similar to others you have dealt with in the past? Not at all Moderately Very similar different different 1------------2-----------3------------4------------5------------6------------7 2. How difficult was it to predict the outcomes of the various courses of action you considered in making this decision? Not at all Moderately Very difficult difficult difficult 1------------2-----------3------------4------------5------------6------------7 © 2008 The Authors Journal compilation © 2008 Blackwell Publishing
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3. At the time the decision was finally made, how would you describe your need for additional information? Had all relevant information
Needed a great deal more information 1------------2-----------3------------4------------5------------6------------7
4. As you were making this decision how confident were you that you were making the best choice? Not at all Moderately Very confident confident confident 1------------2-----------3------------4------------5------------6------------7 5. How complex were the issues involved in this decision? Very Moderately Very simple complex complex 1------------2-----------3------------4------------5------------6------------7 6. How difficult is it to understand what is going on in your industry (e.g. market patterns, competition, new technologies, new products, etc.)? Not at all Moderately Very difficult difficult difficult 1------------2-----------3------------4------------5------------6------------7
Competitiveness 1. How difficult is it for firms in this industry to be profitable? Not at all Moderately Very difficult difficult difficult 1------------2-----------3------------4------------5------------6------------7 2. How tough is the competition in your industry? Not at all Moderately Very tough tough tough 1------------2-----------3------------4------------5------------6------------7
Creative Process 1. How many alternatives did you seriously consider as a group before making a decision? 1------------2-----------3------------4------------5------------6------------7 2. How often were novel or unusual ideas presented during the discussion? Never Occasionally Very often 1------------2-----------3------------4------------5------------6------------7 3. To what extent did the group reconsider any choices made during the process? Never Occasionally Very often 1------------2-----------3------------4------------5------------6------------7 4. How often did individuals in the group change their minds during the process? Never Occasionally Very often 1------------2-----------3------------4------------5------------6------------7
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Creativity of Strategic Choice 1. How creative do you think this solution was? Not at all Moderately Completely creative creative creative 1------------2-----------3------------4------------5------------6------------7 2. To what extent was this a new or unusual action for your firm? Not at all Somewhat Completely 1------------2-----------3------------4------------5------------6------------7
Environmental Favourability 1. Using the scale, please describe what has happened with (each environmental factor) in the first period since the decision was made (1 = worst possible outcome [as specified in first meeting], 7 = best possible outcome [as described in first interview]).
Quality of Implementation 1. How well has (each implementation task) been done? (1 = very poorly, 7 = very well) 2. How important has (each implementation task) been for this decision? (1 = not at all important, 7 = very important)
Expected Effectiveness 1. While it is probably too early to say, how successful do you think this decision is likely to be? Very Moderately Very successful successful successful 1------------2-----------3------------4------------5------------6------------7
Strategic Decision Effectiveness ‘During the first set of interviews, I was told about a variety of objectives that the company was trying to accomplish with this decision. For each of these objectives I need to get an idea of the degree to which the company was successful in attaining it. Please look at the range of success and failure and tell me what happened.’ (1 = Complete failure [as specified in the first interview], 7 = complete success [as specified in the first interview]).
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Functional Management Competence and Growth of Young Technology-Based Firms Sören Salomo, Jan Brinckmann and Katrin Talke Acknowledging an increased research interest into the success factors for young technologybased firms in the last decade, the present study serves two main purposes. First, we aim at developing a comprehensive concept of functional management competence in young technology-based firms. Functional management competence covers the understanding of and proficiency in managing specific functional tasks (Katz, 1974). As we focus on young technology-based firms, it is suggested that marketing, financial and technology management tasks are at the core of functional management competence. Second, we aim at delineating and validating an appropriate measurement model for functional management competence. In order to test the model’s nomological validity, we investigate the impact of functional management competence on firm growth. Therefore, building on established firm development approaches, we propose a phase model for the development of young technology-based firms. Our study builds upon data from 212 young technology-based firms in the field of microtechnology, nanotechnology, electronics, optics and lasers. We use formative measurement models to establish valid and reliable constructs and a path model based on partial least squares modelling to investigate the performance effects. The results suggest that functional management competences generally are significant drivers of firm development speed. In particular, technology and marketing management competences are shown to impact development speed. While technology management competence is positively driving development speed, the marketing management competence impact on speed is mediated by competitive advantage of the new products developed by young technology-based firms. Financial management competence has no significant link to firm development speed.
Relevance of Functional Management Competence
A
n established field of research in innovation management deals with the impact of cross-functional teams and cross-functional co-operation in innovation projects (Song, Thieme & Xie, 1998; Salomo & Cratzius, 2005). Sound empirical evidence supports the notion that cross-functional teams improve new product development performance (e.g., Olson et al., 2001). As young technology-based firms compare well with new product development teams in established firms, both from the perspective of the relevant team size and with respect to the innovation task, these findings from the innovation management literature suggest that investigating the effects of functional management competences on young
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technology-based firms’ development speed is a relevant research issue. Several studies dealing with the management of young technology-based firms investigate factors influencing their development and success (e.g., Yli-Renko, Autio & Sapienza, 2001; Saemundsson, 2005). However, few studies have focused on the functional competences critical for managing a young technology-based firm (Doutriaux & Simyar, 1992; Tzokas, Carter & Kyriazopoulos, 2001; Kakati, 2003). Building on these insights on the relevance of management competencies, we suggest that functional management competence is an important antecedent of firm development and ultimately the success of young technology-based firms. In order to empirically test this suggestion, a sound concept of functional management competence is needed © 2008 The Authors Journal compilation © 2008 Blackwell Publishing
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for the entrepreneurial context. Hence, we systematically develop the functional management competence concept for young technology-based firms, building upon different streams of literature. First, we review ability-oriented concepts of the entrepreneurship literature to develop an understanding of the present state of research. Second, we relate the insight to management competence, as discussed in the general management literature, which allows us to develop a comprehensive concept of general management competence. Third, in order to adjust our concept to the specifics of young technology-based firms, we delineate competence requirements from the entrepreneurship literature. The resulting functional management competence construct will be integrated into a broader research design, relating functional management competence to the growth of young technology-based firms. We discuss several firm development models from the entrepreneurship literature, illustrating how management competence can drive firm growth. Building also on previous empirical evidence that indicates a significant effect of management competence on firm growth and success (Lorange & Roos, 1990; Herron, 1994; Walter, Gemünden & Auer, 2003), we suggest a positive relationship between functional management competence and the growth of young technology-based firms. Then, we investigate this relationship in our empirical study. As we can expect positive effects, this investigation will serve as a test of the nomological validity of the concept of functional management competence. Consequently, we intend to contribute to the extant literature mainly in two ways. First, we develop a comprehensive concept of functional management competence. Previously used scales will systematically be integrated, not least to structure extant research in this area. Second, we perform a test of nomological validity of our new concept by investigating the relationship between functional management competence and the growth of young technology-based firms. Thus, we offer research and practice a measurement model, which can be used to systematically evaluate an antecedent to the development of young technology-based firms.
Firm Development and Development Speed Firm development has been an important issue in innovation and entrepreneurship research. A variety of different theoretical models has been used to characterize and explain firm develop© 2008 The Authors Journal compilation © 2008 Blackwell Publishing
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ment. A review of the organization growth literature presented by Lechler and Artmann (2005) together with similar types of studies (Stanworth & Curran, 1976; O’Farrell & Hitchens, 1988; Merz, Weber & Laetz, 1994) result in mainly four different theoretical approaches to model firm development: 1. 2. 3. 4.
Industrial economics approach. Population ecology approach. Phase or stage gate models. The residual group of alternative approaches.
The latter group applies, for example, mathematical models from chaos theory to firm development (e.g., Aislabie, 1992). We follow the assessment by Lechler and Artmann (2005) that phase models emerging from organizational and managerial theories seem to be the ‘most recognized theory explaining the growth of new ventures’ (Lechler & Artmann, 2005, p. 228) and, while recognizing their inherent limitations, are widely employed to study firm growth and development. Hence, we will focus on this approach when developing our conceptualization of firm development and development speed. A large variety of phase-related models exist, which intend to illustrate the growth of young technology-based firms. An overview of different development models is provided by, among others, Rüggeberg (1997), Meier (1998) and Klocke (2004). A common criticism relates to theoretical modelling and especially the distinction between discrete phases. In particular, the different models proposed vary with respect to the linearity and order of the development process, the model comprehensiveness in terms of reflected domains, and origins and causes of the change in development characteristics. While most models build upon typical activities bundled into discrete life cycle phases from, for example, ‘initiation’, ‘early growth’, ‘late growth’, ‘maturity’ to ‘decline’, we intend to follow growth models that build upon task-related development stages. Such models have been proposed by Galbraith (1982), Kazanjian (1988) and, most notably, by Klocke (2004). Galbraith (1982) develops a model to capture the development of high-technology ventures based on theoretical discussions and practical experience. He describes how functions are typically added as the venture evolves. Parallel to the functional development, central elements of the organization develop. These central elements include task, people, rewards, processes, structure and leadership. In addition to this model, Kazanjian (1988) distinguishes four development stages that young technology-based firms traverse.
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Table 1. Comparison of New Venture Growth Models (adapted from Brinckmann, 2006) Galbraith (1982) Process characteristics
Comprehensiveness of modelling
Causes of firm development Applied methods
Reference Assumptions
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Klocke (2004)
5 stages (2 sub-stages in first stage) Prime tasks, type of people needed, offered rewards, processes, structure, leadership style Primary task, task completion and shift of focus Theoretical, qualitative
4 stages
5 stages 3 ‘marker events’
Focus on technology, market and financial activities as well as organizational characteristics
Focus on technology and market-related activities
Primary task, task completion and shift of focus Theoretical, qualitative (2 firms), quantitative (105 firms)
High-technology – Predicable growth pattern – Stages – Linearity of development – Single product base – Very high growth assumption
Technology-based – Predicable growth pattern – Stages – Linearity of development – Demand conditions are not limiting – Single product base – High growth assumption
Primary task, task completion and shift of focus Theoretical, qualitative (18 firms), quantitative (42 firms) Nano-technology – Predicable growth pattern – Stages – Linearity of development – Single product base – Moderate growth assumption
His model categorizes the development with regard to primary tasks and organizational issues: conception and development, commercialization, growth and stability. The model proposed by Klocke (2004) delineates firm development for innovative ventures in the nanotechnology field. It has its theoretical foundations in the organizational learning theory (March, 1991). Klocke fundamentally distinguishes two sequential activity domains of exploration and exploitation. Exploration activities concern the discovery and acquisition of new knowledge, while exploitation activities relate to the application of the internalized knowledge in order to benefit from it. As Klocke intends to describe firm development in the nanotechnology industry, he identifies marketing and technology development activities as being most relevant to this type of firm. Hence, activities forming the exploration and exploitation stages are rooted in these two functional domains. Table 1 provides a comparison of these three development models.
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Kazanjian (1988)
The model of firm development used here, intends to integrate elements from the three models described above. Basically, we follow the Klocke model and distinguish between exploration and exploitation activities both in the marketing and in the technology domain of new ventures. However, the Klocke model is modified in two directions. First, we add a third task-related perspective, following the idea of Kazanjian (1988), and include financial management activities in our development model. Second, we relax the rigid condition proposed by Klocke, that firms follow a development path along specific combinations of activities in the functional domains. Hence, we allow for potentially more realistic individual development paths, characterized by varying combinations of marketing, technology and financial management activities. Figure 1 shows our proposed threedimensional development model of young technology-based firms. This model will later serve as a basis for determining development speed of these ventures. © 2008 The Authors Journal compilation © 2008 Blackwell Publishing
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Technology Management
189
Marketing Management
Financial Management
•Concept-related R&D •Realization of the technological concept
•(almost) none
•very limited capital base from own savings, family & friends •Estimation of capital needs
Phase 1
•Improvement of prototype •Set-up of industrial production
•Getting to know first customers •Sales are minor and happen rather randomly
•Info.-search about ext. funding sources and demands •Presentation at pot. financiers
Phase 2
Financial base
Production base
•Establishment of investorrelations and cooperation
Customer base •Securing staged financial investments •Improvement of investor relationships/ cooperation
•Focus on fundamentally new technologies
•Focus on fundamentally new markets
•Growth of own cash-flow •New rounds of financing
Phase 5
•Satisfying existing customers, reputation/brand building •Deepening customer relationships enable tailored solutions
Phase 4
•Improvement of basic technologies to maintain tech. leadership •Maybe introduction of new product lines
Exploitation stage
•Focus on sales •Systematic increase/development of customer base
Phase 3
•Technologies are maintained •Minor tech. modifications and adoption to customer needs
Exploration stage
Phase 0
•Focus on R&D •Development of product idea
Figure 1. Three-dimensional Development Model of Young Technology-based Firms
Management Competences A review of the innovation and entrepreneurship literature that puts a focus on characteristics of the entrepreneur or the entrepreneurial team shows that most studies follow one of two different research streams: (a) ‘character-trait’ research or (b) ‘competence’ research. Character-trait research seeks to identify certain attributes such as ‘risktaking propensity’, ‘locus of control’, or ‘need for achievement’, which are hypothesized to influence a firm’s success. While empirical evidence seems to support a positive performance impact of high ‘need for achievement’ in combination with a moderate ‘aspiration for power’ (Roberts, 1991; Driessen & Zwart, 1999), overall, the results are rather contradictory (Begely & Boyd, 1987; Herron, 1994). Not only does character-trait research exhibit various methodological problems and offer only limited explanatory power, but also its use for management practice is questionable, as traits are long-lasting attributes, which are difficult to assess and hard to influence. Competence research takes a broader perspective © 2008 The Authors Journal compilation © 2008 Blackwell Publishing
focusing on the competencies of the individuals in the entrepreneurial process. Competence in this respect can be defined as the degree of fit between the demands of the task and the existing ability. In light of this definition, management competence can be understood as the potential to successfully manage a firm. Traits form part of the competence space, but have to be supplemented by other dimensions such as skills and knowledge which can be assessed and influenced (Man, Lau & Chan, 2002). As this approach seems more appealing both for academia and management practice, our concept will be built on the latter perspective. A review of prominent management theories implies the relevance of management competencies for firm success. The resource dependency perspective identifies (top) management competencies as a major restrictive factor for firm growth and success (Penrose, 1959). Both success and growth rates depend on the ability of management to maintain an adequate competence portfolio which evolves along the changing requirements of their firms. From this perspective, management
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competence is not viewed as a static resource, but rather as a varying critical input for firm performance. According to the resourcedbased view, management competence is also a resource relevant for competitive advantage. Management competence supports competitive advantage as it mainly fulfils the requirements of being valuable, rare, imperfectly imitable, and substitutable (Barney, 1991). From the behaviourist point of view, management competence is an antecedent as well as a result of behaviour. In this light, characteristics of the managing team lead to activities and processes which impact on the success of the firm (Bygrave & Hofer, 1991). While all these approaches discuss the performance effect of management competence in general, very few studies deal with the issue of accurate and thorough conceptualization and measurement of this concept (Herron, 1994). However, a validated measurement approach is the basis for testing the relationship between management competence and firm growth and success. This study aims at introducing a measurement model based on a careful review of existing measurement concepts. Therefore, we review concepts of the ability-oriented literature of entrepreneurship research and more general concepts of management competence from the general management literature. In order to adjust our concept to the specifics of young technology-based firms, we then deduce competence requirements indicated by the entrepreneurship literature. The ability-oriented literature of entrepreneurship research argues that the overall competence of a management team includes several competence domains (Chandler & Jansen, 1992; Chandler & Hanks, 1994; Herron, 1994; Man, Lau & Chan, 2002). However, there is no common understanding concerning the content of these competence domains (Salomo & Brinckmann, 2005). In general, three basic competence categories can be identified, which reflect entrepreneurial, social and functional competencies (Chandler & Jansen, 1992; Herron, 1994; Man, Lau & Chan, 2002). These categories allow a basic understanding of competencies critical for young firms. Nevertheless, several limitations must be considered: (1) the concepts seem to have been created in a rather ad-hoc fashion, and the sources are barely documented; (2) the content is often not precisely explained; (3) the concepts are largely not comprehensive; (4) discriminant validity often seems questionable, thorough tests are missing. The management literature has a long tradition of competence-related constructs that outline job requirements for managers. Basically, these concepts differentiate between
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functional and non- or extra-functional competencies (Dahrendorf, 1956; Katz, 1974). Functional competencies relate to a functional or task-specific area. According to Katz (1974), they include the individual ‘understanding of, and proficiency in a specific kind of activity’ (Katz, 1974, p. 91). This encompasses proficiency both in technical tasks and in other functional areas which might be relevant to the individual work environment. Non-functional competencies are not task-related, but can be applied to different tasks and functional contexts (Klein & Körzel, 1993; Gerig, 1998). Entrepreneurship research defines an entrepreneur as a person who perceives an opportunity and creates an organization to pursue this opportunity (Bygrave & Hofer, 1991). Such an ‘opportunity’ is often accompanied by the introduction of new means/ends combinations to the market (Schumpeter, 1912; Miller, 1983; Covin & Slevin, 1991; Lumpkin & Dess, 1996; Hauschildt & Salomo, 2007). Hence, innovative abilities are suggested to determine another critical competency of an entrepreneurial team (Bygrave & Hofer, 1991; SadlerSmith et al., 2003). These concepts add a specific perspective to the function-related competence domains indicated by the management literature. Critical competencies of young technology-based firms must reflect the specific contingencies – i.e., innovative task – under which their management teams operate (Hinterhuber & Friedrich, 2002). While these three streams of literature all structure critical competences along task- and non-task-related competences, we will focus on task-related competences. This provides an opportunity to study a group of competences specifically relevant under the contingencies of innovative ventures. Generally, functional or task-related competencies may include a wide range of competencies, all dependent on the strategy and business model of individual companies (Meier, 1998). Following the value chain structure suggested by Porter (2002), functional domains of firms can be separated into primary activities, such as procurement, production and marketing, and secondary tasks, such as technology development or human resources. Task-related management competencies of young innovative firms could be structured along these functional domains of a firm. However, it would exceed the scope of this work to develop a competency construct covering all different core and support activities. Further, the relevance of the different functional tasks is likely to vary depending on the business models, industry, size of the company, or strategic goals. Hence, we will put a focus on the three core functional com© 2008 The Authors Journal compilation © 2008 Blackwell Publishing
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© 2008 The Authors Journal compilation © 2008 Blackwell Publishing
Strive for technological competitiveness • Norm./Strat. Technology Management • Tech.-Analysis • Internal Tech. Development • Ext. Tech . Acquision • Tech. Protection • Tech. Utilization • Tech. Controlling Strive for market competitiveness • Norm./Strat. Marketing Management • Market-Analysis • Transaktionmarketing • Relationshipmarketing Operative-Level
Technology Market Finances
Technology-Management Marketing-Management Financial-Management
Strive for financial Competitiveness: • Norm./Strat. Financial Management • Financing • Liquidity Management • Accounting Normative / Strategic-Level
A large body of literature on market orientation has shown that market-oriented conduct generally has a positive impact on market success (Narver & Slater, 1990; Day, 1992; Jaworski & Kohli, 1993, Hinterhuber & Matzler, 2004). Evidence also indicates that the ability to adapt to the market requirements the firm is confronted with is relevant in the context of highly innovative new product development (Salomo, 2003). Hence, as we are interested in young technology-based firms challenged by an innovative task and striving for success, marketing management competencies are a relevant task-related domain of functional management competence (Meier,
Focus
Marketing Management Competence
Table 2. Sub-domains of Relevant Functional Competences in Young Technology-based Firms
petencies in marketing management, financial management and technology management. It is suggested that each of these three competence dimensions is formed by different sub-domains, which can be separated into a normative/strategic level and an operational level. Table 2 outlines the different competence sub-domains for each functional area and level. The focus on marketing, technology and financial management competences is mainly guided by our interest in identifying competences relevant for the development of young technology-based firms. These firms typically intend to gain a competitive edge by being a technology leader in their respective (niche) areas. Hence, technology management is a competence most relevant to this type of firm. Additionally, the product offerings of these firms are typically new to their markets. Meeting the marketing challenges, stemming both from the lack of established market relations and the inherent market uncertainties of product innovation, constitutes another critical issue. Hence, marketing management competence is a necessary complement to technology management. Finally, integrating financial management competence into our model of critical task-related competences is rooted in the observation that financial resources are an important antecedent to the other two functional tasks (Walker, 1978). Financial management competence complements our model as it highlights the importance of achieving and controlling sufficient financial resources necessary for pursuing the critical technology and marketing tasks of young technology-based firms. Additionally, this model of three critical task-related competences map well with our suggested development model, which is also based on task-related functional activities in the marketing, technology and financial domain.
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1998). Apart from the literature on market orientation, marketing management competence is also an issue in management research (Shipley et al., 1998; Prasad, Ramamurthy & Naidu, 2001, Moorman & Slotegraaf, 1999; Fahy et al., 2000; Conant, Mokwa & Varadarajan, 1990). However, these concepts are rarely developed around relevant marketing tasks, but mainly focus on output measures such as ‘market share’ (Moorman & Slotegraaf, 1999) or individual input measures such as ‘advertising intensity’ (Kotabe, Srinivasan & Aulakh, 2002). In order to conceptualize marketing management competence, we chose to refer to abilities requisite for performing the central marketing activities (Shipley et al., 1998): strategic marketing, marketing research, transaction marketing and relationship marketing. Overall, we suggest firms experience a faster development speed when marketing management competences are strong. H1: Marketing management competence will increase the development speed of young technology-based firms.
Technology Management Competence We propose technology management competence as the second functional competence relevant for young technology-based firms. Contrary to marketing management competence, this competence is not necessarily universally relevant. However, as we focus on young technology-based firms, competence in this domain becomes critical. The intensive use of product and process technology is a core issue of these companies. It is important to note that such technology management competence does not reflect the degree to which these companies are proficient in a specific technology (Walsh & Linton, 2002). We define technology management as a competence to perform the management tasks critical to this specific domain. In contrast to the marketing domain, the area of technology management does not have a comprehensive and empirically validated approach like market orientation, which allows identifying critical management tasks. Hence, in order to identify the relevant sub-domains of technology management, we analysed technology management textbooks and suggested curricula (e.g. Tschirky & Koruna, 1998; Bullinger, 2002; Hauschildt & Salomo, 2007). In defining critical tasks in the technology management area, we contribute to the literature by advancing the development of ‘technology orientation’, as a concept analogue to the well-established ‘market orientation’ concept. It is suggested that technology management competence
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includes the basic activities of developing, protecting and using technology as well as controlling technology-oriented processes. H2: Technology management competence will increase the development speed of young technology-based firms.
Financial Management Competence A young innovative firm can only operate if it is capable of acquiring resources and of utilizing these resources effectively and efficiently. Young technology-based firms demand augmented financial investment to finance the intensive technological efforts that precede first sales. We refer to the ability to manage the acquisition of these resources and the observance of their economic use as financial management competence. Various theoretical and empirical findings could show that financial management is essential for a young firm’s success (see Brinckmann 2006 for an overview). The provision of capital can be understood as a selective system (Baum & Silverman, 2004). The companies which have the ability to obtain sufficient funding will outgrow those which need to make detouring projects in order to finance their intended projects or which have to rely on bootstrap R&D (Davidson III & Dutia, 1991; Winborg & Landström, 2000). Next, the companies which are able to secure sufficient liquidity considering negative scenarios and unexpected ‘kinks’ will prevail over less knowledgeable competitors (Tushman & Rosenkopf, 1992). In order to determine and steer the efficient use of financial resources, it is essential to be able to interpret financial measures (McMahon, 2001). Acknowledging the importance of financial necessities and the formation of respective goals reflects financial acumen. After all, every business has to fulfil accounting and taxrelated requirements from the first day of existence as demanded by legal standards. These considerations lead us to the proposition that financial management skills are instrumental, especially for the successful development of a new technology-based venture. H3: Financial competence will increase the development speed of young technologybased firms.
Research Method The primary intention of this research is to develop a validated measurement approach to our proposed functional management competence construct. We follow established proce© 2008 The Authors Journal compilation © 2008 Blackwell Publishing
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dures of validating our formative constructs, which include development of adequate weights based on a partial least squares (PLS) approach. In order to test nomological validity, we relate all our constructs to a performance measure suitable for young technology-based firms: development speed. We expect the management competence domains to individually exhibit a positive impact on the development speed of young technology-based firms.
Data Collection and Sample Members of the executive team of young hightechnology companies were contacted by phone in order to motivate these companies to participate in our study. Companies were selected from industry registers or from the participants at specific industry fairs. Companies qualified to participate in our research when they met the following criteria: (1) The company had to develop and produce high technology products (no trading businesses). (2) The age of the corporation had to be less than 15 years. (3) The company had to be lead by at least two persons. Companies willing to participate in our study received a questionnaire, which was followed up by several reminding phone calls. Out of the 600 companies contacted, 212 completed the questionnaire, resulting in a very satisfactory response rate of about 30 per cent. Sample companies were drawn from the following industries: micro (38), nano (28), medical (17), biotechnology (18), electronics (58), instrument development (22) and laser and optics (26). The data assessed in this study represent the self-evaluations of an actively participating management team member about his or her team. Reference is made to the initial phase of the new ventures. In order to ensure that all ventures started at a similar level, participants were asked to specify their activities in the marketing and the technological field, according to the model developed by Klocke (2004). Only those companies which started with exploration activities were included in the study. A total of 187 out of the 212 companies met this criterion. These firms commenced with R&D, prototype development and market research and had no production or consumer base established.
Measurement and Scale Development Measures for each sub-domain of our functional management competence construct were developed by using multiple items and © 2008 The Authors Journal compilation © 2008 Blackwell Publishing
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Likert-type scales (1 = strongly disagree to 5 = strongly agree). Where possible, we used items and scales previously developed and tested. Formal pre-tests were conducted to determine the clarity of the scale items used in the constructs and to obtain preliminary data on the hypotheses. In the pre-tests, ten respondents completed the questionnaire and were involved in follow-up interviews. Their comments and suggestions were incorporated by removing ambiguities and other sources of confusion. See the Appendix for a list of items and references to previous literature, which has either proposed specific items or suggested a conceptual basis for our items. As a dependent variable we use development speed of young technology-based firms. Drawing on our conceptual model for firm development, our respondents were asked to select the group of main activities in the three functional domains ‘technology management’, ‘marketing management’, and ‘financial management’ performed at firm start-up (t0) and currently (t1). Following our conceptual stage model of firm development we can then calculate a function-specific development speed:
cF ( t0 , t1) =
Fst ( t1 ) − Fst ( t0 ) , t1 − t0
with F = technology, marketing or financial management, and development stage st = 0, 1, . . . , 5. Hence, development speed is modelled as the time needed by a firm to move through the different stages of functional activities, from exploration activities to exploitation in each functional management domain. Overall development speed is captured as a latent formative construct composed of the three function-specific development speeds.
Results Measurement Model Because of the nature of our constructs, we develop the task-related competencies as formative constructs (Eggert & Fassott, 2003; Jarvis, MacKenzie & Podsakoff, 2003). The different indicators constitute the latent variable. Accordingly, we attribute functional competence if the indicators signal strength in different areas of the functional domain. Competencies can generally be investigated at the individual level, the team level or the organizational level. Because a vast majority of start-up firms are founded by teams, we choose to focus our analyses on the team level (Müller, 2003). However, we expect that most of our results can also be transferred to the individual level.
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strategy
.20
analyses
.19
int. procurement.
tech. complexitiy
.31**
.18
n.s.
tech. comp.
.20
.23**
ext. procurement.
speed
.19 protection int. use.
.19
R2 = .12 -.11*
.16
.23** ext. use.
.24 strategy
mark. comp.
.21 analyses
.23 transact.
competitive adv.
.17* .21
n.s.
fin. comp.
.24 relation..
ext. coop. .21 strategy
.26 financing
.25 liquidity
.25
.20 performance
ext. coop.
Figure 2. Main Effects Model of Functional Competences and Development Speed (* p ⱕ 0.05, ** p ⱕ 0.01)
In stage one, we performed a test for the measurement attributes of our constructs. We followed the suggestions by Diamantopoulos and Winklhofer (2001) for formative scale development and testing. To test for multicollinearity, we assessed the variance inflation factors (max. VIF 2.3, well below the critical level of 10) and Belsley’s condition-index (max. CI 12.1, well below the critical level of 30) (Belsley, 1991; Hair et al., 1998). Additionally, the weights of the different items on the constructs were checked to test for validity of the items. In order to further validate our constructs, objective data (number of team members with functional industry experience) was used to evaluate the overall self-evaluation of competence in the functional fields. Significant correlation coefficients signal additional support for the validity of the measures (Pearson’s coefficients were between 0.24 and 0.36 with a significance level of 0.0001). Overall, we are able to confirm the measurement model of our proposed functional management competence construct.
Main Effects Model In order to simultaneously validate our constructs and present an initial test of nomological validity, we performed a structural equation model using a PLS approach. This approach allows (a) the development of our
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multi-level formative constructs, and (b) the testing for nomological validity by assessing direct and mediated performance effects of our competence constructs in the structural equations model. Figure 2 presents the results of the structural equations model. All constructs have a positive related indicator–construct relationship. The functional competencies are formed as being second-order formative constructs of the respective sub-constructs. Bootstrap procedures are applied to evaluate the robustness of the model results. As the PLS method does not rely on distribution assumptions, bootstrapping allows us to calculate the levels of significance for the path coefficients as well as the indicator weights (Efron & Gong, 1983). Significant relationships (*p ⱕ 0.05, **p ⱕ 0.01) are highlighted as bold path coefficients. Overall, our model explains 12 per cent of the variance of young technology-based firms’ development speed. Considering that we only include three different management competences as predictors of development speed and, hence, only test a partial model, this can be considered quite satisfactory. At the time of founding, the functional competencies show varying impact on firm development speed. Technology management competence proves to be positively related to development speed. The direct effect of marketing management competence is negative and, thus, contrary to the hypothesized effect. The suggested posi© 2008 The Authors Journal compilation © 2008 Blackwell Publishing
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tive relationship of financial management competence and development speed is also not supported by our data. As our results only support hypothesis 2 for our direct speed relationships, we add mediated performance relationships to the initial model. One may expect that technology and marketing management competence impact development speed via specific intermediate outcome measures. Management teams of young technology-based firms, which are characterized by a strong technology management competence, may put much more effort into technology development. A strong competence base in this particular functional area will complement a more thorough analysis of potential technological opportunities, more intensive procurement of technologies and extensive use of developed technological solutions. This may increase the technological complexity of developed new products. We use a measure presented and validated by Gemünden, Salomo and Hölzle (2007) for ‘technological complexity’, which consists of three items (new technological principle, quantum leap in performance, and squeezing out of existing technology). As complexity increases, firms need to cope with stronger uncertainties, and multiple technology development barriers, potentially reducing development speed. Thus, increased technology management competence may show a direct positive effect and a mediated negative effect on development speed. While we are able to confirm the positive relationship of technology complexity and related management competence, complexity is not significantly related to speed. Hence, our suggested mediated speed effect of technology management competence is not supported by our data. A second mediated relationship is suggested for the marketing management competence. Teams with a higher level of marketing management competence, may be more aware of important and potentially latent market needs and may position their new products better in relation to competitive offerings. Marketing management competence will then lead to new products with a stronger competitive advantage, which is measured by three items suggested by Gemünden, Salomo and Hölzle (2007): ‘creates totally new customer benefit’, ‘attracting many new customers’, ‘offering unique competitive advantages’. Product offerings with a stronger competitive advantage can be expected to sell more easily in the market and, hence, allow firms to develop faster. In other words, the relationship of marketing management and development speed may be mediated by competitive advantage of the new products developed. © 2008 The Authors Journal compilation © 2008 Blackwell Publishing
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This suggested mediated effect is strongly supported by our data.
Discussion This research offers several contributions to the entrepreneurship research. First, we develop a model of functional management competence for young technological-based ventures drawing on the competence and general management literatures. Second, we develop a measurement model to assess the task-related functional competence of the management team of young high technologybased firms. Third, we provide an initial test of the relationships of the distinct competence domains on development speed of young ventures. Development speed as a performance measure is based on an activity focused development model of young technology-based firms. Our results suggest that technology management competence is a significant driver of young technology-based firms’ development speed. Young technology-based firms with a management team very competent in technology management in the early stages of the firm’s development will move faster through different development stages. These firms enter earlier into exploitation activities not only related to their technology but also with respect to marketing and financial management activities. The development speed relationship of marketing management competence seems to be somehow more complex. Increased levels of this competence domain result in product offerings that are superior to competitor offerings. Hence, they improve the firms’ ability to develop faster. On the other hand, management teams with a strong marketing management competence at early development stages may engage in extensive market-related activities. They do not rely on an initial understanding of their target market or their positioning, but enter into comprehensive market analysis activities and strategic as well as operational market preparations. At earlier stages, the intensity of such advanced marketing management activities may reach beyond the optimal level – especially as young technology-based firms typically create a competitive advantage through their technological advancement, which is addressed at an already sufficiently understood (niche) market. Contrary to our expectations, financial management competence at the beginning of new venture development is not related to development speed. This result is surprising, as financial resource restrictions, which are potentially
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caused by the limited experience of the management team with financial management, should imply growth restrictions. There is good reason to suggest that abilities in the acquisition of funds and the securing of liquidity are essential for growth. However, this result may be explained through some inherent limitations of our study. As only commercially active firms were evaluated, this study can only determine development implications for the surviving firms, while the unfortunate ventures, which ceased to exist, and their reasons for failure remain undocumented. If financial management competence, at least in the early stages, is a precondition for survival, no firms with non-sufficient financial management competence will be included in the sample. Another explanation may emerge from the fact that we only assess competence levels at the beginning of firm development. Measures taken by firms to improve competence levels during the course of firm development are not included in our model. Financial management is one of the competences, which is readily available through accounting firms and other consulting outlets or even through venture capitalists. External acquisition of this competence is a well-accepted practice and may help firms to compensate for a specific competence deficit. Such undetected mechanisms may reduce our potential to find significant speed effects of financial management competence. Another limitation of our study concerns the assessment of the independent variables, measuring team level constructs by only one team member. While the field characteristics and the intended sample size have urged us to employ this design, the potential bias should be limited. Several studies investigating entrepreneurial team level indicators have not found any fundamental difference between multiplerespondent assessments (Chandler & Jansen, 1992; Chandler & Hanks, 1994; Müller, 2003). Hence, using a single source for our variables still provides a reasonably realistic picture of the management competence and development speed of young technology-based firms.
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Miller, D. (1983) The Correlates of Entrepreneurship in Three Types of Firms. Management Science, 29, 770–91. Miller, D. (1987) Strategy Making and Structure. Academy of Management Journal, 30, 7–32. Moorman, C. and Slotegraaf, R.J. (1999) The Contingency Value of Complementary Capabilities in Product Development. Journal of Marketing Research, 36, 239–57. Müller, T.A. (2003) Kunden- und Wettbewerbsorientierung neugegründeter Softwareunternehmen: eine empirische Untersuchung von Teamgründungen. Gabler, Wiesbaden. Narver, J.C. and Slater, S.F. (1990) The Effect of a Market Orientation on Business Profitability. Journal of Marketing, 54, 20–35. O’Farrell, P.N. and Hitchens, D.W.N. (1988) Alternative Theories of Small-firm Growth: A Critical Review. Environment and Planning, 20, 1365–83. Olson, E.M., Walker, Jr. O.C., Ruekert, R.W. and Bonner, J.M. (2001) Patterns of Cooperation during New Product Development among Marketing, Operations, and R&D: Implications for Project Performance. Journal of Product Innovation Management, 18, 258–71. Penrose, E.T. (1959) The Theory of the Growth of the Firm. Wiley, New York. Porter, M.E. (2002) Wettbewerbsstrategie: Methoden zur Analyse von Branchen und Konkurrenten. Campus, Frankfurt/Main and New York. Prasad, V.K., Ramamurthy, K. and Naidu, G.M. (2001) The Influence of Internet-marketing Integration on Marketing Competencies and Export Performance. Journal of International Marketing, 9, 82–111. Roberts, E.B. (1991) Entrepreneurs in High Technology: Lessons from MIT and Beyond. Oxford University Press, Oxford. Rüggeberg, H. (1997) Strategisches Markteintrittsverhalten junger Technologieunternehmen: Erfolgsfaktoren der Vermarktung von Produktinnovationen. Deutscher Universitäts Verlag, Berlin. Sadler-Smith, E., Hampson, Y., Chaston, I. and Badger, B. (2003) Managerial Behaviour, Entrepreneurial Style, and Small Firm Performance. Journal of Small Business Management, 41, 47–67. Saemundsson, R.J. (2005) On the Interaction between the Growth Process and the Development of Technical Knowledge in Young Technology-based Firms. Technovation, 25, 223–35. Salomo, S. (2003) Konzept und Messung des Innovationsgrades – Ergebnisse einer empirischen Studie zu innovativen Entwicklungsvorhaben. In Schwaiger, M. and Harhoff, D. (eds.), Empirie und Betriebswirtschaft, Entwicklungen und Perspektiven, Schäffer-Poeschel Verlag, Stuttgart, pp. 399–427. Salomo, S. and Brinckmann, J. (2005) Managementkompetenz in jungen Unternehmen. In
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Gemünden, H.G., Müller, T.A. and Salomo, S. (eds.), Erfolgsfaktoren des Entrepreneurship. Theoretische Ansätze und empirische Befunde. Gabler, Wiesbaden. Salomo, S. and Cratzius, M. (2005) Integration von Marketing und Fertigung als Erfolgsfaktoren der Neuproduktentwicklung: Die moderierende Wirkung des Innovationsgrades. Zeitschrift für Betriebswirtschaft (ZfB), 75, 71–95. Schumpeter, J. (1912) Theorie der wirtschaftlichen Entwicklung. Leipzig: Duncker & Humblot. Shipley, D., Hooley, G., Cox, T. and Fonfara, K. (1998) The Effects of Privatization on Marketing Capability and Activity in Poland. International Journal of Research in Marketing, 15, 367–81. Song, X.M., Thieme, R.J. and Xie, J. (1998) The Impact of Cross-functional Joint Involvement across Product Development Stages: An Exploratory Study. Journal of Product Innovation Management, 15, 289–303. Stanworth, M.J.K. and Curran, J. (1976) Growth and the Small Firm – An Alternative View. Journal of Management Studies, 13, 95–110. Tschirky, H. and Koruna, S. (1998) TechnologieManagement: Idee und Praxis. Verlag Industrielle Organisation, Zürich. Tushman, M.L. and Rosenkopf, L. (1992) Organizational Determinants of Technological Change: Toward a Sociology of Technological Evolution. Research in Organizational Behaviour, 14, 311–47. Tzokas, N., Carter, S. and Kyriazopoulos, P. (2001) Marketing and Entrepreneurial Orientation in Small Firms. Enterprise and Innovation Management Studies, 2, 19–33. Walker, E.W. (1978) Financial Management of the Small Firm. Prentice-Hall, Englewood Cliffs, NJ. Walsh, S. and Linton, J.D. (2002) The Measurement of Technical Competencies. Journal of High Technology Management Research, 13, 63–86. Walter, A., Gemünden, H.G. and Auer, M. (2003) Unternehmerische Aktivitäten im Technologietransfer. Zeitschrift für Betriebswirtschaft, 73, 679– 704. Winborg, J. and Landström, H. (2000) Financial Bootstrapping in Small Businesses: Examining Small Business Managers’ Resource Acquisition Behaviours. Journal of Business Venturing, 16, 235– 54. Woodside, A.G., Sullivan, D.P. and Trappey, R.J.I. (1999) Assessing Relationships among Strategic Types, Distinctive Marketing Competencies, and Organizational Performance, Journal of Business Research, 45, 135–46. Yli-Renko, H., Autio, E. and Sapienza, H.J. (2001) Social Capital, Knowledge Acquisition, and Knowledge Exploitation in Young Technologybased Firms. Strategic Management Journal, 587– 613.
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Dr Sören Salomo (
[email protected]) is professor of innovation management at the Center for Technology, Economics and Management at Danish Technical University, Copenhagen. He holds a Diploma and a Doctorate in business administration from Kiel University. His research interests include corporate innovation management from a resource-based perspective with special focus on process and organizational system mechanisms for supporting radical innovation. He also addresses research questions in the field of innovation marketing. His work has been published in Journal of Engineering and Technology Management, Creativity and Innovation Management, Journal of Product Innovation Management as well as other noted refereed journals, and, together with Gemünden and Hölzle he won the 2007 Tudor Rickards Best Paper award. Dr Jan Brinckmann is Assistant Professor and Program Director of the Entrepreneurship Program at Loyola University Chicago. Previously, he taught at Cornell University and Technical University of Berlin and researched at Case Western Reserve University and Stanford University. He holds a PhD from Technical Univeristy of Berlin. Dr Katrin Talke is Assistant Professor of Marketing and Innovation Management at the Delft University of Technology in The Netherlands. She received her Master Degree from the Freie University Berlin in Germany and her PhD in Marketing and Innovation Management from the Technical University of Berlin in Germany. She has received two Awards of Excellence for her Doctoral Thesis. Her research interests focus on innovation marketing. She is addressing questions surrounding the new product launch, the design of new products, the fuzzy front end of the innovation process and the corporate mindset of innovating firms. On these topics she has published several articles in journals such as the Journal of Product Innovation Management, the Journal of Engineering and Technology Management, and Creativity and Innovation Management.
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Appendix: Constructs, Items and References Functional Management Competences Technology Management Competence Strategic Technology Management Competence Importance of technology The executive team attributes the management highest priority to technology management Technological background The executive team has a profound technological understanding Technological strategy focus The executive team is following a clear technology-strategy Technological development The executive team selects primarily customer orders, which imply a technological advancement Technology Analysis Competence Analysis of tech. competition The executive team analyses the firm’s competitive standing with regard to technology Analysis of tech. needs The executive team analyses the future technological requirements of its customers Tech. opportunity and threat The executive team has the ability to identification identify opportunities and threats in the technological field Technology Development Competence Precise definition of product The characteristics of the products, characteristics, time and which are developed, the budget definition time-table and the budgets are precisely defined Synchronisation of product and The executive team has experience in production development synchronizing product and production development Knowledge about management The executive team has knowledge of complex projects about managing complex projects Technology Acquisition Competence Knowledge of customer The executive team is able to involve integration the customer closely in the development efforts Workforce education The executive team is facilitating the technological formation of its employees Cooperation with institutions The executive team pursues co-operations with scientific institutions in order to obtain technological know-how Knowledge transfer The executive team is able to transfer technological knowledge into the company
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Gemünden and Heydebreck (1995) Kenneth, Fineman and Ruhnke (1999) Gemünden and Heydebreck (1995) Kenneth, Fineman and Ruhnke (1999)
Cooper, Edgett and Kleinschmidt (2002) Cooper, Edgett and Kleinschmidt (2002)
Kenneth, Fineman and Ruhnke (1999) Gemünden, Ritter and Heydebreck (1996) Gemünden, Ritter and Heydebreck (1996)
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Appendix: continued Functional Management Competences Technology Protection Competence Competitive protection The executive team is able to protect the technological know-how against competition Tech. employee tying The executive team is applying measures, to tie employees with special technological acumen to the company Employee knowledge-sharing The executive team knows instruments to facilitate technological knowledge sharing of its employees Technology Utilization Competence Joint use The executive team has experience in the joint use of technologies (e.g., joint ventures, alliances) External use The executive team has experience with commercial use of its own technological know-how (e.g., licensing, sale of technologies, sale of R&D capacity) Own production The executive team is able to optimally apply its technological know-how with regard to the development of own offerings Technology Controlling Competence Evaluation of tech. dev. process The executive team is regularly monitoring the technological development process according to the technological advance, the budget, and the fulfilment of the chronological plan Continuous improvement The executive team intends continuously to improve the technological development process Marketing Management Competence Strategic Marketing Competence Importance of marketing The executive team attributes the highest priority to technology management Positioning The executive team has the ability to clearly position its offering in the market Strategy to overcome entry barriers Precise target market
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The executive team knows how to overcome market entrance barriers The executive team is able to precisely define the target market
Kenneth, Fineman and Ruhnke (1999)
Badawy (1998); Huang, Soutar and Brown (2002)
Badawy (1998)
Miller (1987); Kenneth, Fineman and Ruhnke (1999)
Kenneth, Fineman and Ruhnke (1999)
Meier (1998)
Conant, Mokwa and Varadarajan (1990); Woodside, Sullivan and Trappey (1999) Rüggeberg, H. (1997) Meier (1998)
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Appendix: continued Functional Management Competences Holistic marketing approach
Market Analysis Competence Customer need analysis
The executive team has the ability to develop a comprehensive marketing concept
Meier (1998); Woodside, Sullivan and Trappey (1999)
The executive team is able to evaluate the requirements and wishes of the customers
Meier (1998), Woodside, Sullivan and Trappey (1999); Fahy et al. (2000) Miller (1987); Gemünden and Melheritz (1998); Meier (1998) Woodside, Sullivan and Trappey (1999); Fahy et al. (2000); Sadler-Smith et al. (2003)
Analysis of market potential
The executive team has the ability to assess the market and sales potential of the markets accurately
Analysis of competitor’s strength/weakness
The executive team knows the strength and weakness of the competition in great detail
Transactional Marketing Competence Create attractive offerings for The executive team is experienced in the customer (4Ps) creating an attractive offering for the customer by drawing on product, price, etc. Communication of value The executive team is able to present proposition the differentiation of the offerings with regard to the competitive landscape Flexibility to respond to The executive team can adapt well to customer wants the specific customer requirements Knowledge of sales channels The executive team is experienced in working with direct and indirect sales channels Relational Marketing Competence Presentation of a professional The executive team is able to present corporate image a professional corporate identity of the company Early customer contact
Judgement of customer typology Adoption to different customer-types
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The executive team knows about the importance of early customer contacts The executive team has experience to determine which customers are valuable for the company The executive team has a special ability to adapt to different types of customers
Meier (1998); Woodside, Sullivan and Trappey (1999) Meier (1998)
Homburg (2000) Meier (1998)
Droge, Shawnee and Markland (1994); Woodside, Sullivan and Trappey (1999) Hartmann, Ritter and Gemünden (2004) Hartmann, Ritter and Gemünden (2004) Homburg (2000)
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Appendix: continued Functional Management Competences Financial Management Competence Strategic Financial Competence Importance of financials The executive team attributes the highest priority to financial management Strategic financial goals The executive team has defined its financial goals clearly Financing Competences Know-how of bank funding The executive team has very much knowledge about public venture funding (institutions, amounts, conditions, deadlines, etc.). Assessment of financial needs The executive team has very much knowledge about conditions and requirements of bank financing. Know-how of public funding The executive team is evaluating precisely, how much capital is needed. Liquidity Management Competence Liquidity incorporates neg. Negative scenarios have been scenario considered in liquidity planning Procedures for short-term The executive team knows measures, liquidity assurance to confront liquidity constraints in the short term Liquidity evaluation of customers Know-how of payment morals of industry Accounting Competence Evaluation of profitability
Know-how of financial indicators
Business success controlling
Know-how in taxation issues
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The executive team is evaluating the credit history when selecting customers The executive team is familiar with the payment customs of the industry The executive team is evaluating economic measures of investments systematically (e.g. amortization, net present value, internal rate of return, return on investment) The executive team has abilities to interpret profitability measures (EBITDA, Net profit, return on sales, return on capital, etc.) The executive team is controlling the financial success of the venture regularly The executive team has a fundamental understanding of the tax system
Maisberger (1998)
Winborg and Landström (2000) Maisberger (1998)
Davidson III and Dutia (1991) Hauschildt, J. Rösler and Gemünden (1984); Davidson III and Dutia (1991) Winborg and Landström (2000) Winborg and Landström (2000)
Davidson III and Dutia (1991)
Davidson III and Dutia (1991)
Davidson III and Dutia (1991)
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Project Planning: The Effects of Using Formal Planning Techniques on Creative Problem-Solving Jay J. Caughron and Michael D. Mumford Two lines of research have emerged in the study of planning techniques. The psychological approach emphasizes the cognitive processes that underlie planning while project management researchers have focused on applications of planning in organizational settings. The purpose of this study is to examine how the use of formal planning techniques influences planners’ creative problem-solving. Specifically, three planning techniques, Gantt charts, casebased planning and critical path analysis, were examined. We attempted to ascertain the impact of using these techniques on a planner’s ability to develop innovative solutions. It was found that participants demonstrated higher levels of creativity when they were encouraged to consider events that could jeopardize successful goal attainment rather than using cases from memory and planning specific tasks to be done.
Introduction
I
n their review of creative cognition models, Mumford and colleagues found that most models of creativity incorporated some form of planning, usually in the form of implementation planning (Mumford et al., 1991). Individuals who engage in creative problemsolving in real-world settings must anticipate the potential outcomes, both positive and negative, of pursing innovative solutions. There is reason to believe that planning not only contributes to the implementation of innovative ideas, but also influences the creative problem-solving process at much earlier stages. Much of planning research has been conducted in the field of psychology (Mumford, Schultz & Osburn, 2002). This line of research has focused on cognitive aspects of planning, such as how individuals recognize problems, formulate initial plans, refine their plans, and eventually implement those plans. From this perspective, planning is often defined as a mental simulation of future actions used to organize effort towards goal attainment (Mumford, Schultz & Osburn, 2002, Osburn & Mumford, 2006; e.g., Berger, Karol & Jordan, 1989; Simons & Galotti, 1992; Patalano & Seifert, 1997). Several cognitive processes were
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identified by Mumford, Schultz and Van Doorn (2001) through a review of scholarly literature on cognition in planning (e.g., environmental monitoring, goal identification, plan refinement, plan re-evaluation and forecasting). Research on planning has also been conducted by scholars studying project management. This line of research defines planning as those activities which are oriented towards the identification of goals, forecasting future elements associated with the pursuit of those goals, and the creation of strategies and policies that will enhance the organization’s ability to meet its goals (Cleland & King, 1975). Stated another way, planning is the process of preparing for the commitment of resources and the co-ordination of human activities, such that an organizational goal may be met bearing in mind time and resource constraints (Moder, Phillips & Davis, 1983). Given this definition, less emphasis is placed on the cognitive aspects of planning and more on examining interdependencies among tasks and the work groups that must perform them. As such, this line of research emphasizes specific planning techniques that are used by project managers on a regular basis. Both lines of research offer value to planning research, and it is our hope that this study will begin to bridge the gap that © 2008 The Authors Journal compilation © 2008 Blackwell Publishing
USING FORMAL PLANNING TECHNIQUES ON CREATIVE PROBLEM-SOLVING
exists between these two bodies of work by examining the influence of commonly used planning techniques on the creative problemsolving process.
Planning Techniques Gantt Chart Technique One planning technique that has recently enjoyed a resurgence is the Gantt chart. This technique was pioneered by Henry Gantt and was designed to aid in scheduling complex, interdependent tasks (Gantt, 1903; Wilson, 2003; Herrmann, 2005). In practical terms, the use of Gantt charts involves a planner (or planners) breaking down a project into its component tasks and mapping those tasks onto a time chart. This chart includes information about the anticipated time needed to complete the task and indicates who is responsible for completing the task (Cleland & King, 1975; Moder, Phillips & Davis, 1983; Wilson, 2003).
Critical Path Analysis Two network-oriented methods were developed after the Second World War. The critical path method (CPM) was developed by Du Pont and the project evaluation and review technique (PERT) was developed by the US Navy (Cleland & King, 1975; Moder, Phillips & Davis, 1983). These two methods evolved out of the Gantt chart method and involve managers creating a complex network of tasks rather than mapping them on a restrictive and bulky chart. Arranging tasks into networks makes interdependencies among tasks more easily visible and allows managers to identify events or sequences of events that can threaten the successful completion of a project. This series of events is called the ‘critical path’ of a project. Although definitions of a project’s critical path may vary to some degree, there is general agreement that a critical path is that series of events that threatens timely and efficient goal attainment and thus requires the attention of plan managers (Cleland & King, 1975; Moder, Phillips & Davis, 1983). The significance of identifying a project’s critical path lies in the fact that it allows planners to reallocate resources and attention to ensure timely project completion.
Case-Based Planning In contrast to critical path analysis, case-based knowledge and case-based planning has received a great deal of attention in the psychological literature (e.g., Hammond, 1990; © 2008 The Authors Journal compilation © 2008 Blackwell Publishing
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Kolodner, 1992, 1997; Seifert et al. 1994). Casebased planning, as described by Hammond (1990), suggests that planning is a task that is reliant on memory. Case-based planning attempts to leverage the experience of a planner such that past successes can be emulated and past failures can be avoided. In articulating the concept of case-based planning, Hammond suggests that a planner will retrieve a past scenario from memory in which a similar goal was pursued, and modify the path used in that scenario to fit the current situation. It should be noted that other project planning techniques, such as Scrum and Dependency Structure Matrix analysis (DSM), do exist (Rising & Janoff, 2000; Yassine & Braha, 2003). The scope of this effort, however, was limited to planning techniques that have been widely used, continue to be widely used, and have firmly established methodologies. Techniques such as Scrum and DSM have shown promise for promoting efficient project management and are becoming increasingly common in project management practice and literature. It would be useful to include these and other emerging techniques in future studies of this nature.
Influences of Planning Creative Problem-Solving Creative work occurs when an individual engages in tasks that are complex, ill-defined and require the generation of a novel, useful solution (Mumford & Gustafson, 1988; Besemer & O’Quin, 1999). Clearly, developing a plan in order to manage the implementation of this solution is one component of this generation process. Accordingly, products created in response to ill-defined, complex problems can be assessed with regard to their quality or utility in the present circumstance, their relative novelty or originality, and the level of sophistication or elegance demonstrated with regard to the problem (Besemer & O’Quin, 1999). The relationship between creative problemsolving and planning has started to receive more attention over the last decade (e.g., Avlonitis, Kouremenos & Tzokas, 1994; Castrogiovani, 1996; O’Connor, 1998; Osburn & Mumford, 2006). These investigations suggest that planning facilitates creativity by allowing for the refinement and adjustment of initial plans. Additionally, planning can facilitate innovative and efficient problem-solving through the identification of critical resources
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(Nohari & Gulati, 1996), the organization of ideas as they are developed (Cardinal, 2001), and the acquisition of skills and social support (Jelinek & Schoonhoven, 1990; Dougherty & Hardy, 1996; Thamhain, 2003). With regard to the use of Gantt charts, the evidence gathered thus far suggests that this technique is primarily useful as a communication and coordination device (Cleland & King, 1975; Moder, Phillips & Davis, 1983). The creation of a Gantt chart emphasizes practical, implementation oriented activities. Thus, when planners create a Gantt chart, the focus is on day-to-day tasks that need to be accomplished in order to complete a project, resulting in a process that is forward focused only to the extent that these tasks are all accounted for in the plan. Additionally, Gantt chart creation, while it does facilitate the online adjustment of a plan, it does not specifically encourage the planner to anticipate dynamic changes in the environment that may arise during plan implementation (Cleland & King, 1975; Moder, Phillips & Davis, 1983; Wilson, 2003). Thus, the use of Gantt charts is not expected to facilitate creative problem-solving. H1: Participants who use Gantt charts will not show higher levels of creativity than participants who were not instructed to use a planning technique. Similarly, case-based planning is a technique that is rooted in the recall and reuse of old solutions in new situations. Due to the dynamic nature of most organizational settings, plans developed in this manner may fail to account for the contingencies and restrictions present in the current (or near future) environment. The contextually bound nature of creating plans based on past cases is expected to limit the planner’s ability to anticipate emergent problems or opportunities that may arise. In fact, the use of cases when planning may actually induce blind-spots. That is, if the context of the cases applied during planning is significantly different from the current context, the planner may fail to anticipate emergent problems or opportunities (Schwenk, 1989; Vantanian, Martindale & Kwiatkowski, 2003). Additionally, the reuse of old plans may induce satisficing on the part of the planner. That is, once a case is found that appears to map onto the current set of circumstances, the planner is likely to apply it without much further thought. Thus, the use of case-based planning techniques may not enhance the performance of organizational planners. H2: Participants who use case-based planning will not show higher levels of crea-
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tivity than participants who were not instructed to use a planning technique. Conversely, critical path analysis is a more future-oriented technique that encourages planners to consider potential problems and respond to them in advance. The emphasis placed on future errors during the planning process should facilitate the consideration of alternative methods for accomplishing goals. Additionally, critical path analysis emphasizes focusing attention on the current set of circumstances and problematic circumstances that may emerge as the plan is implemented. This forecasting process is likely to induce more active analysis as potential problems are identified. For instance, planners may revise their plan or develop back-up plans in order to contend with potential problems (Cleland & King, 1975; Moder, Phillips & Davis, 1983). This process is expected to encourage planners to consider a wide range of alternatives and possibilities . For this reason, the use of critical path analysis is expected to enhance the performance of organizational planners. H3: Participants who use critical path analysis will generate more creative solutions than participants who do not use this planning technique.
Implementation Intentions Plan development is influenced by implementation intentions (Gollwitzer & Schaal, 1998). Thus, the impact of implementation intentions was considered in the present study. An implementation mindset occurs when an individual shifts attention away from analyzing the feasibility of a plan (the hallmark of a deliberative mindset), towards the practical issues of how, when and where a plan must be implemented in order to attain a goal. Thus, implementation intentions are the result of adopting an implementation mindset towards a plan or problem (Koole & Spijker, 2000). Although it might be expected that shifting away from the analysis of goal-relevant information towards the implementation of a plan of action might result in higher levels of optimistic bias, Koole and Spijker (2000) found the opposite. They induced implementation intentions by asking undergraduate participants to not only write an essay but to formulate a plan as to when and where they would write it. When compared to a comparison group, in which participants were only asked to write the essay, they found that participants with implementation intentions were more accurate in their forecasts than those without implementation intentions. It would appear that inducing implementation intentions © 2008 The Authors Journal compilation © 2008 Blackwell Publishing
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may encourage cognitive engagement as the planner anticipates positive outcomes. Alternatively, a planner that expects negative outcomes to result from addressing a problem is not likely to develop the intention to implement a plan. Thus, the final hypothesis suggests that implementation intentions will facilitate planning and thus creativity. H4: Participants with implementation intentions will generate more creative solutions than participants without implementation intentions.
Method Sample The sample consisted of 219 undergraduate students drawn from an introductory psychology course at a large university in the United States. The study was announced via a website posting describing the study as a leadership problem-solving study. Four hours of research credit in their psychology courses was awarded for participation. Of the sample of 219, 93 were male, 125 were female, and one person did not disclose their gender. The mean age of the participants was 19 years. The mean reported ACT score was 25. Although the use of undergraduate participants has been criticized by some (e.g. Sears, 1986), it is important to note that although ‘convenience sampling’ has some limitations (to be noted more completely in the discussion), the focus of the current investigation is the relationship between the cognitive processes involved in planning and creative problem-solving, thus the emphasis is on establishing causality and establishing internal validity. It is likely that the effects seen here with undergraduates may actually be weaker than the effects that would be found with an adult population. Lastly, it is important to bear in mind that external validity is best established through replication and that using a convenience sample to facilitate the critical examination of hypotheses is a valid reason to use an undergraduate population (Kam, Wilking & Zechmeister, 2007). Furthermore, given that the focus of the current investigation is on the cognitive processes involved in planning and creative problem-solving, processes which are not directly tied to social, or self-image, domains which have been shown to change with age (Wintre, North & Sugar, 2001), concerns about external validity should be minor in comparison with concerns for maintaining internal validity and critically examining the hypothesized relationships. Lastly, the use of covariate control measures © 2008 The Authors Journal compilation © 2008 Blackwell Publishing
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allows researchers to statistically control for variability resulting from non-random sampling. This procedure has been used in the current study.
General Procedures Upon arriving at the study location, participants read and signed an informed consent form. The study was conducted in a single four-hour session divided into two blocks. The first block was one hour long and involved a proctor guiding the participants through a series of timed individual difference measures. The second block was scheduled for three hours. During this time, the participants completed the remainder of the study materials at their own pace. During the training phase of the experiment, participants received instructions about applying case-based planning, Gantt charts and/or critical path analysis. These techniques were practised on three scenarios describing public policy problems, such as cleaning up graffiti or reducing crime. During the experimental task phase, participants applied these techniques on three scenarios describing educational problems, such as rebuilding a school or promoting community involvement in schools. These scenarios were summaries based on descriptions of real-life events and have been used previously by Dailey and Mumford (2006). This task was chosen for three reasons. First, it has been shown to be engaging to undergraduate students. Second, these scenarios provided two different domains, namely public policy and education. Using different domains for the training task and the problem-solving task allows researchers to determine whether the transfer of training has occurred from one domain to another (Scott, Lonergan & Mumford, 2005). Third, these scenarios lent themselves to the development of unique solutions by the participants. After reading each education-based scenario, and before generating their solutions, participants completed a series of worksheets. These worksheets manipulated implementation intentions and allowed participants to practise the training techniques they had learned in the self-paced training packets. The participants were instructed to create their own unique plan based on information in the scenario. These responses were then content coded by raters in a graduate psychology program for their quality, originality and elegance (Besemer & O’Quin, 1999).
Individual Difference Measures Measures were administered in order to control for the role of individual differences
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upon the variables of interest. Participants’ personality was measured using Goldberg’s (1992) Adjective Checklist. This measure assesses an individual’s personality along the Big Five dimensions of personality. Participants are asked to indicate on a 9point Likert scale the extent to which adjectives such as extraverted, nervous, shy and active accurately describe them. The adjectives measure neuroticism, extraversion, openness-to-experience, conscientiousness and agreeableness. The Seeing Deficiencies test was also administered. This measure was drawn from Berger, Guildford and Christensen (1957) and presents a series of plan descriptions to participants. The participants are told that each plan is deficient in some manner and their task is to find the deficiency in the plan. Construct validity evidence for this test can be found in Berger, Guildford and Christensen (1957). This measure yielded a coefficient alpha of 0.59 in the study sample, which is adequate for research purposes.
training packet that they completed before moving on to the problem-solving task. Case-Based Planning Training In the case-based planning condition, two core elements were emphasized: recall and reuse of prior experiences. In this condition, participants were instructed to consider the scenario they had just read and to think back to past events. They were told that using effective solutions from past events is an effective way to develop solutions to current problems. Participants were then given examples of high quality and low quality case-based planning statements and instructed to write two of their own case-based planning statements that related to the scenario they had just read. The participants then either moved on to training in one or both of the other training techniques or they read two more public policy scenarios and practised using case-based planning on them. Gantt Chart Training
Experimental Manipulations Implementation Intentions Implementation intentions have been successfully induced in prior work by asking participants to list potential positive outcomes of implementing a plan (Dailey & Mumford, 2006). Accordingly, participants in the implementation intentions condition were instructed to list five positive potential outcomes from addressing the problem described in each scenario. Participants in the no implementation intentions condition were instructed to list five potential negative outcomes.
Training The training manipulation involved eight different conditions: a comparison condition (CC) in which no training in planning techniques was given, a case-based planning training condition (CBP), a Gantt chart training condition (GC), a critical path analysis training condition (CPA), a case-based planning with Gantt chart training condition (CBP+GC), a case-based planning with critical path analysis training condition (CBP+CPA), a Gantt chart training with critical path analysis training condition (GC+CPA), and a condition in which the participants received training in all three planning techniques (CBP+GC+CPA). In all of the conditions in which training was administered, the participants received a self-paced
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The self-paced packet that trained participants regarding the construction of Gantt charts explained that Gantt charts are tools used to schedule tasks on a project which resemble a timeline. The participants were told that Gantt charts help planners determine how many tasks must be completed, what interdependencies exist between the tasks, and how to order tasks in an efficient manner. Participants then practised creating Gantt charts or were trained in the final planning technique. Critical Path Analysis Training One of the primary purposes of using the critical path analysis technique is to anticipate delays or problems and then make adjustments so that those problems or delays may be obviated. This training module asked participants to identify events that could jeopardize the progress of their plan. These events were called ‘derailing events’. In this way, they could avoid these problems and thus reach the desired goal. The participants were then given examples of high quality and low quality derailment event statements and given an opportunity to practise writing their own. Comparison Condition In the comparison condition, participants received no training. In this condition the participants only received the education-based scenarios. They read each scenario, completed the implementation intentions worksheet, © 2008 The Authors Journal compilation © 2008 Blackwell Publishing
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Table 1. Multivariate Analysis of Covariance Results for Creativity Variable Covariates Seeing Deficiencies Openness to Experience Main Effects Training Condition Implementation Intentions Interactions Training Condition ¥ Implementation Intentions
F
df
p
h2
3.70 3.38
3, 199 3, 199
0.013 0.019
0.053 0.048
3.44 1.96
7, 201 3, 199
0.002 0.212
0.107 0.029
1.96
7, 201
0.062
0.064
Note: F = F ratio; df = degrees of freedom; p = significance level using Roy’s Largest Root; h2 = effect size.
made estimations about resource requirements, and then developed their own solution to the problem.
Dependent Variables Creative Problem-Solving The participants created solutions to the education-based scenarios. These solutions were evaluated by three expert judges for three characteristics: quality, originality and elegance (Besemer & O’Quin, 1999). These judges were psychology graduate students who had attended ten hours of rater training. During the training sessions, they were given definitions of quality, originality and elegance. Additionally, they were shown example responses drawn from the participant responses which demonstrated high, medium and low levels of quality, originality and elegance. The judges then practised rating actual participant responses. Inter-rater reliabilities were calculated after the judges completed rating all participant responses. The inter-rater agreement coefficient for quality was 0.86, for originality was 0.84, and for elegance was 080. Additionally, as expected, ratings of these three constructs were positively correlated (rqual-orig = 0.72; rqual-eleg = 0.85; rorig-eleg = 0.77).
Results In order to test the hypotheses, a multivariate analysis of covariance (MANCOVA) was used. This technique allows for the detection of significant main effects and significant interactions while statistically controlling variance due to extraneous psychological variables. Table 1 presents the results from the multivariate analysis of covariance for the three creative © 2008 The Authors Journal compilation © 2008 Blackwell Publishing
problem-solving dependent variables. The openness to new experiences subscale of Goldberg’s (1992) Adjective Checklist, F(3, 199) = 3.38; p = 0.019, and the Seeing Deficiencies Test (Berger, Guildford & Christensen, 1957), F(3, 199) = 3.70; p = 0.013, were retained as covariates at the p ⱕ 0.05 level. Age, gender and the major area of study were also examined as covariates but did not reach statistical significance and thus were not examined further. The two independent variables were implementation intentions and training condition. As shown, the omnibus MANCOVA revealed a significant main effect for training condition, F(7, 201) = 3.44; p = 0.002. Creative Problem-Solving Implementation intentions showed no main effect with regard to the creative problemsolving dependent variables in the omnibus test. A univariate analysis of variance was conducted in order to test the main effect of training condition. Planned comparisons appropriate to each hypothesis were also conducted. Table 2 presents the ANOVA results for quality, originality and elegance. Marginally significant effects were found for the effect of training condition on quality of the participants’ proposed plans, F(7, 211) = 1.77, p ⱕ 0.10, and for the effect of training on the elegance of the participants’ proposed plans, F(7, 211) = 2.01, p ⱕ 0.10. A significant effect was detected for the originality of participants’ plans, F(7, 211) = 2.60, p ⱕ 0.05. The MANCOVA analysis allowed for the detection of omnibus differences between conditions, thus planned comparisons were conducted to detect significant differences as conditions were compared in a pair-wise fashion. As shown in Table 3 (and graphically in Figure 1), the plans produced by participants using critical path analysis alone were
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Table 2. Analysis of Variance Results for Quality, Originality and Elegance Variable
Main Effects Training Condition
Quality
Originality
Elegance
F
df
p
F
df
p
F
df
p
1.77
7, 211
0.096
2.60
7, 211
0.014
2.01
7, 211
0.056
Note: F = F ratio; df = degrees of freedom; p = significance level.
Table 3. Mean Ratings for Participants’ Final Plans Showing the Main Effect of Training Condition Training Condition
CC CBP GC CPA CPB+GC CPB+CPA CBP+GC+CPA GC+CPA
Quality
Originality
Elegance
M
SD
M
SD
M
SD
2.05* 2.23† 2.19* 2.57 2.21† 2.19* 2.09* 2.48
0.63 0.70 0.79 0.81 0.69 0.67 0.67 0.75
2.51* 2.60* 2.42** 2.99 2.57* 2.37** 2.29** 2.68
0.72 0.52 0.70 0.84 0.64 0.68 0.54 0.84
2.20** 2.31** 2.28* 2.68 2.30* 2.19* 2.25** 2.44
0.51 0.54 0.60 0.74 0.59 0.60 0.52 0.60
Note: ** denotes significant items at the p < 0.01 level; * denotes significant items at the p < 0.05 level; † denotes marginally significant items at the p < 0.10 level; all items compared to the CPA condition.
found to have significantly higher levels of quality, originality and elegance than the other training conditions. There was one exception to this trend; specifically the use of a Gantt chart plus critical path analysis. This group was not found to be significantly different from the critical path analysis only group in quality, originality or elegance (MCPA-Qual = 2.57, SDCPA-Qual = 0.81 vs. MGC+CPA-Qual = 2.48, SDGC+CPA-Qual = 0.75; MCPA-Orig = 2.99, SDCPA-Orig = 0.85 vs. MGC+CPA-Orig = 2.68, SDGC+CPA-Orig = 0.85; MCPA-Eleg = 2.68, SDCPA-Eleg = 0.74 vs. MGC+CPA-Eleg = 2.44, SDGC+CPA-Eleg = 0.60), although the means were still lower. Taken together these findings support hypotheses 1, 2 and 3. These findings also suggest that participants who use critical path analysis create problem solutions of higher quality, originality and elegance when compared with the comparison condition. It is likely that considering critical problems that could jeopardize successful plan execution encourages planners to consider alternative methods and prepare workarounds for potential problems that may arise. These findings also suggest that combining the use of
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critical path analysis with other techniques may diminish some of the beneficial effects of the critical path analysis technique.
Implementation Intentions In addition to the main effect for the training conditions, a marginally significant interaction was obtained between implementation intentions and training condition for the problemsolving dependent variable of originality, F (7, 201) = 1.96, p = 0.062. The estimated marginal means for each cell were examined using the LSD test for significant differences (Table 4). These planned comparisons revealed that participants who used critical path analysis paired with positive implementation intentions were significantly more creative than participants in all other conditions, including the critical path analysis paired with negative implementation intentions group (MCPA+ = 1.15, SDCPA+ = 1.12 vs. MCPA- = 0.282, SDCPA- = 1.49). This pattern of findings demonstrates that negative implementation intentions can interfere with the © 2008 The Authors Journal compilation © 2008 Blackwell Publishing
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Figure 1. Mean Problem-Solving Ratings of Participants’ Final Plans beneficial effects of using critical path analysis and offers partial support for the fourth hypothesis.
Discussion Before turning to conclusions and implications, a few limitations of this study should be noted. First, it should be noted that this study was conducted in a laboratory setting. This approach allows researchers to exert the requisite control necessary to isolate the key variables of interest. However, an experimental paradigm does limit the generalizability of any findings to other populations and settings. Specifically, using participants who are older and have accumulated more experience, as well as expertise within a given field, may yield different results. Specifically, the use of undergraduates may limit the generalizability of findings due to the fact that they presumably have less experience in engaging in planning processes and have fewer cases stored in memory to draw upon as they engage in planning. Second, the training manipulation used in this study was not comprehensive instruction about the application of the three planning techniques. Rather, participants were only instructed in the use of the core elements of the techniques. Furthermore, the training participants received was a short-term, selfpaced instructional packet. Interventions of this kind have been shown to be effective in prior studies of creative problem-solving © 2008 The Authors Journal compilation © 2008 Blackwell Publishing
(Clapham, 1997). However, it is possible that stronger effects could be found if a different instructional technique were used. Nevertheless, with this relatively minimal instruction in the application of these techniques, effects were observed. Even bearing these limitations in mind, the results obtained in this study have some noteworthy theoretical implications as well as practical applications. Although training was given in only core elements of each of the planning techniques, a clear pattern emerged with regard to the effect of planning training on creative problem-solving. It appears that recalling and reusing past experiences as a basis for creating a solution to an existing problem – a core element of case-based planning – promotes the use of inferior creative problem-solving strategies. Similarly, the application of Gantt chart techniques did not produce solutions that were of particularly high quality, originality or elegance relative to the conditions in which no specific planning techniques were applied. On the other hand, problem solutions generated by the application of the critical path analysis technique showed a different pattern of results. The consideration of potential problems that could result in plan failure, an important element of critical path analysis, consistently showed higher levels of quality, originality and elegance when compared with plans developed by participants who were not instructed to use a particular planning technique. Additionally, this pattern of results held
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1.97 2.32 2.05 2.21 2.16 2.15 2.12 2.40
M 0.60 0.57 0.59 0.65 0.55 0.76 0.74 0.96
SD 2.13 2.14 2.33 2.94 2.26 2.24 2.06 2.56
M 0.66 0.82 0.95 0.81 0.80 0.58 0.62 0.49
SD 2.53 2.64 2.34 2.58 2.72 2.39 2.53 2.77
M 0.73* 0.38* 0.63* 0.70* 0.47* 0.54* 0.52* 0.97*
SD
2.50 2.56 2.50 3.39 2.43 2.36 2.05 2.59
M
SD 0.73* 0.64* 0.77* 0.80 0.75* 0.82* 0.45* 0.73*
Neg
Neg
Pos
Implementation Intentions
Implementation Intentions Pos
Originality
Quality
Note: * denotes significant differences at the p < 0.05 level compared to the positive implementation + CPA condition.
CC CBP GC CPA CPB+GC CPB+CPA CBP+GC+CPA GC+CPA
Training Condition
2.17 2.36 2.17 2.36 2.30 2.19 2.35 2.41
M
Elegance
Neg
0.47 0.39 0.52 0.51 0.47 0.67 0.51 0.75
SD
2.23 2.26 2.39 3.01 2.31 2.19 2.14 2.46
M
Pos
Implementation Intentions
Table 4. Mean Ratings of Participants’ Final Plans Showing the Interaction between Training Condition and Implementation Intentions
0.56 0.67 0.66 0.81 0.70 0.53 0.53 0.44
SD
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when comparing the critical path analysis group with the other training groups. It appears that the use of the critical path analysis technique promotes the use of superior cognitive strategies when engaging in a problem-solving task, such as developing a plan. Given that participants who used Gantt charts and case-based planning generated plans that were not significantly different from those who did not use a specific planning technique, we can conclude that these techniques do not seem to hinder creative problemsolving. However, it does appear that these techniques do interfere with the positive effects resulting from considering potential problems that could derail the successful implementation of the plan, as shown by the fact that those who used critical path analysis alone produced plans of higher quality, originality and elegance than those who combined critical path analysis with another planning technique. One interpretation of these findings is that the effectiveness of the critical path analysis technique lies in the fact that it is an inherently future-oriented approach that emphasizes anticipating tasks and their interdependencies (Raz, Barnes & Dvir, 2004). However, the creation of Gantt charts is also inherently future-oriented, and this technique failed to demonstrate the same effect on creative problem-solving. Thus, an interpretation of these findings suggests that the key mechanism underlying the effectiveness of this approach may be that it encourages people to think about future failures (Cleland & King, 1975; Moder, Phillips & Davis, 1983). Hence, anticipation of the ways in which a plan may go wrong helps individuals engage in the problem-solving process as they develop plans. However, the effectiveness of this technique appears to be moderated by the planner’s implementation mindset. These findings suggest that the positive effects of critical path analysis are diminished when the planner anticipates negative outcomes from implementing the plan rather than positive ones. An additional implication of these findings pertains to the likely effectiveness of forwarddirected problem-solving techniques (e.g., brainstorming) versus backward-directed problem-solving (e.g., knowledge reuse). Given that critical path analysis is the most forward-focused technique examined in the current study and case-based reasoning was the most backward-focused technique examined, it would appear that forward-focused problem-solving techniques promote higher levels of performance when compared with backward-focused techniques. Much research concerning backward-focused techniques, © 2008 The Authors Journal compilation © 2008 Blackwell Publishing
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such as case-based reasoning, suggests that it can be very effective in problem-solving. Bearing in mind the limitations mentioned earlier, it is interesting that this finding was not replicated here. It is likely that a key component of backward-looking techniques, specifically, the existence of multiple relevant and applicable cases, may be of particular importance when using backward-focused techniques. Future studies could examine this possibility, especially using this paradigm with older participants who may have more relevant cases to draw from. Taken together, these findings suggest that individuals who engage in planning can benefit organizations by developing more innovative solutions, given that they spend time considering potential problems that can arise during plan implementation while maintaining a focus on positive outcomes that should result from plan implementation. These finding are in line with other findings at the organizational level which support the use of planning as a means of enhancing organizational performance (Schwenk & Shrader, 1993; Miller & Cardinal, 1994; Castrogiovani, 1996). In fact, given the finding that the induction of positive implementation intentions (i.e., prompting the participants to consider positive outcomes that may result from addressing a given problem) produced higher levels of originality when paired with critical path analysis training suggests that maintaining a forward-looking perspective is beneficial especially when outcomes are framed positively and process variables are attended to in such a way as to anticipate and mitigate problems. Lastly, organizational constraints should also be considered in light of the current research. In many organizational settings, individuals often have little control over which type of planning techniques can be used, due to the availability of software packages or organizational familiarity or preference for using a given technique. The findings here suggest that organizations would be well advised to consider not only the benefits of using certain planning and problem-solving techniques, but that they should also consider the potential negative effects of various types of techniques. Specifically, these findings demonstrate that pairing critical path analysis with other planning techniques resulted in lower levels of creativity than the use of critical path analysis alone. Thus, in organizational innovation efforts, the pros and cons of using a given planning technique must be considered and procedures put in place that will make up for deficiencies in planning and problem-solving that may result from the use of a given technique.
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Planning techniques have developed out of a need for control and management of largescale projects. However, there are theoretical, as well as practical, reasons to consider the influences of structured planning techniques on an individual’s cognitive processing. As our ability to maintain real-time records and manage large volumes of data increases, and as the need for innovative solutions to realworld problems becomes more commonplace, it is essential to identify planning techniques that facilitate innovation, and, at the very least, recognize those that hinder innovation. It appears that the application of key strategies for working through the planning process can promote creative problem-solving at the individual level and thus are likely to ultimately impact innovation at the organizational level. Therefore, further investigations that aim to bridge our understanding of the psychological planning perspective and practical project planning research should prove useful.
References Avlonitis, G.J., Kouremenos, A. and Tzokas, N. (1994) Assessing the Innovativeness of Organizations and Its Antecedents: Project Innovstrat. European Journal of Marketing, 28, 5–28. Berger, C.R., Guildford, J.P. and Christensen, P.R. (1957) A Factor Analytic Study of Planning Abilities. Psychological Monographs, 71, 1–29. Berger, C.R., Karol, S.H. and Jordan, J.M. (1989) When a Lot of Knowledge Is a Dangerous Thing: The Debilitating Effects of Plan Complexity on Verbal Fluency. Human Communication Research, 16, 91–119. Besemer, S.P. and O’Quin, K. (1999) Confirming the Three-Factor Creative Product Analysis Matrix Model in an American Sample. Creativity Research Journal, 12, 287–96. Cardinal, L.B. (2001) Technological Innovation in the Pharmaceutical Industry: The Use of Organizational Control on Managing Research and Development. Organizational Science, 12, 19–37. Castrogiovani, G.J. (1996) Pre-start-up Planning and the Survival of New Small Businesses: Theoretical Linkages. Journal of Management, 22, 801–22. Clapham, M.M. (1997) Ideational Skills Training: A Key Element in Creativity Training Programs. Creativity Research Journal, 10, 33–44. Cleland, D.I. and King, W.R. (1975) Systems Analysis and Project Management, 2nd edn. McGraw-Hill Book Company, New York. Dailey, L. and Mumford, M.D. (2006) Evaluative Aspects of Creative Thought: Errors in Appraising the Implications of New Ideas. Creativity Research Journal, 18, 367–84. Dougherty, D. and Hardy, B.F. (1996) Sustained Innovation Production in Large Mature Organizations: Overcoming Organizational Problems. Academy of Management Journal, 39, 826–51. Gantt, H.L. (1903) A Graphical Daily Balance in Manufacture. ASME Transactions, 24, 1322–36.
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Goldberg, L.R. (1992) The Development of Markers for the Big-Five Structure. Psychological Assessments, 4, 26–42. Gollwitzer, P.M. and Schaal, B. (1998) Metacognition in Action: The Importance of Implementation Intentions. Personality and Social Psychology Review, 2, 124–36. Hammond, K. (1990) Case-Based Planning: A Framework for Planning from Experience. Cognitive Science, 14, 385–443. Herrmann, J.W. (2005) A History of Decision-Making Tools for Production Scheduling. Multidisciplinary Conference on Scheduling: Theory and Applications, New York. Jelinek, M. and Schoonhoven, C.B. (1990) The Innovation Marathon: Lessons Learned from High Technology Firms. Blackwell, Oxford. Kam, C.D., Wilking, J.R. and Zechmeister, E.J. (2007) Beyond the ‘Narrow Data Base’: Another Convenience Sample for Experimental Research. Political Behavior, 29, 415–40. Kolodner, J.L. (1992) An Introduction to CaseBased Reasoning. Artificial Intelligence Review, 6, 3–34. Kolodner, J.L. (1997) Educational Implications of Analogy: A View from Case-Based Reasoning. American Psychologise, 52, 57–66. Koole, S. and Spijker, M. (2000) Overcoming the Planning Fallacy through Willpower: Effects of Implementation Intentions on Actual and Predicted Task-Completion Times. European Journal of Social Psychology, 30, 873–88. Miller, C.C. and Cardinal, L.B. (1994) Strategic Planning and Firm Performance: A Synthesis of More than Two Decades of Research. The Academy of Management Journal, 37, 1649–65. Moder, J.J., Phillips, C.R. and Davis, E.W. (1983) Project Management with CPM, PERT, and Precedence Diagraming, 3rd edn. Van Nostrand Reinhold Company, New York. Mumford, M.D. and Gustafson, S.B. (1988) Creativity Syndrome: Integration, Application, and Innovation. Psychology Bulletin, 1, 27–43. Mumford, M.D., Mobley, M.I., Uhlman, C.E., Reiter-Palmon, R. and Doares, L.M. (1991) Process Analytic Models of Creative Capacities. Creativity Research Journal, 4, 91–122. Mumford, M.D., Schultz, R.A. and Van Doorn, J.R. (2001) Performance in Planning: Processes, Requirements, and Errors. Review of General Psychology, 5, 213–40. Mumford, M.D., Schultz, R.A. and Osburn, H.K. (2002) Planning in Organizations: Performance as a Multi-Level Phenomenon. In Yammarino, F.J. and Dansereau, F. (eds.), Research in Multi-Level Issues: The Many Faces of Multi-Level Issues. Elsevier, Oxford, pp. 3–63. Nohari, K. and Gulati, D. (1996) Is Slack Good or Bad for Innovation? Academy of Management Journal, 39, 799–825. O’Connor, G.C. (1998) Market Learning and Radical Innovation: A Cross Case Comparison of Eight Radical Innovation Projects. Journal of Product Innovation Management, 15, 151– 66. Osburn, H.K. and Mumford, M.D. (2006) Creativity and Planning: Training Interventions to Develop © 2008 The Authors Journal compilation © 2008 Blackwell Publishing
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Creative Problem-Solving Skills. Creativity Research Journal, 18, 173–90. Patalano, A.L. and Seifert, C.M. (1997) Opportunistic Planning: Being Reminded of Pending Goals. Cognitive Psychology, 34, 1–36. Raz, T., Barnes, R. and Dvir, D. (2004) A Critical Look at Critical Chain Project Management. Project Management Journal, 34, 24–32. Rising, L. and Janoff, N.S. (2000) The Scrum Software Development Process for Small Teams. IEEE Software, 17, 26–32. Schwenk, C.R. (1989) Linking Cognitive, Organizational and Political Factors in Explaining Strategic Change. Journal of Management Studies, 26, 177–87. Schwenk, C.R. and Shrader, C.B. (1993) Effects of Formal Strategic Planning on Financial Performance in Small Firms: A Meta-Analysis. Entrepreneurship, Theory and Practice, 17, 53–64. Scott, G.M., Lonergan, D.C. and Mumford, M.D. (2005) Conceptual Combination: Alternative Knowledge Structures, Alternative Heuristics. Creativity Research Journal, 17, 121–48. Sears, D.O. (1986) College Sophomores in the Laboratory: Influences of a Narrow Data Base on Social Psychology’s View of Human Nature. Journal of Personality and Social Psychology, 51, 515–30. Seifert, C.M., Hammond, K.J., Johnson, H.M., Converse, T.M., McDougal, T.F. and Vanderstoep, S.W. (1994) Case-Based Learning: Predictive Features in Indexing. Machine Learning, 16, 37–56. Simons, D.J. and Galotti, K.M. (1992) Everyday Planning: An Analysis of Daily Time Management. Bulletin of the Psychonometric Society, 30, 61–4. Thamhain, H.J. (2003) Managing Innovative R&D Teams. R&D Management, 44, 297–322. Vantanian, O., Martindale, C. and Kwiatkowski, J. (2003) Creativity and Inductive Reasoning: The Relations between Divergent Thinking and Performance on Wason’s 2-4-6 Task. Quarterly Journal of Experimental Psychology: Human Experimental Psychology, 56A, 641–55.
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Wilson, J.M. (2003) Gantt Charts: A Centenary Appreciation. European Journal of Operational Research, 149, 430–37. Wintre, M., North, C. and Sugar, L. (2001) Psychologists’ Response to Criticisms about Research Based on Undergraduate Participants: A Developmental Perspective. Canadian Psychology/ Psychologie canadienne, 42, 216–25. Yassine, A. and Braha, D. (2003) Complex Concurrent Engineering and the Design Structure Matrix Method. Concurrent Engineering, 11, 165– 76.
Jay J. Caughron (jcaughron@psychology. ou.edu) is a PhD candidate studying Industrial and Organizational Psychology at the University of Oklahoma. Jay studies the management of creativity and innovation as well as the cognitive process of sensemaking in ambiguous situations. Jay is also involved with developing ethical decision-making measures and ethics training programs for graduate students. Michael D. Mumford (mmumford@ ou.edu) is a professor of psychology at the University of Oklahoma where he is the Director of the Center for Applied Social Research. Dr. Mumford is currently working to identify and measure the cognitive processes involved in creative cognition. He also investigates cognitive strategies that can improve ethical decisionmaking when applied to working through ethical problems. Dr. Mumford has also done extensive work on leadership and planning. He is a fellow of the American Psychological Association and the American Psychological Society.
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The Dynamics and Functions of Self-Organization in the Fuzzy Front End: Empirical Evidence from the Austrian Semiconductor Industry Rudolph Koch and Karl-Heinz Leitner This paper studies the functions, impacts and dynamics of self-organization in the fuzzy front end of innovation. Based on a case study approach, the new product development processes of five Austrian semiconductor companies are analysed. We adopt a complexity science perspective which stresses that self-organization and emergence are key elements of the new product development process. We found that self-organization mechanisms occur in two ways. First, self-organizational activities support formal and top-down managed new product development processes. In this way, they contribute to the acceleration and adaptation of the new product development process and are also a way to overcome bureaucratic structures. Second, we found evidence for the existence of purely emergent bottom-up processes in many cases. In this context, employees intrinsically and without any explicit order or strategy took initiatives to innovate. Such activities run in parallel to or precede formal new product development processes and employees deliberately bypass and even ignore formal processes such as financial incentive systems, suggestion schemes and patenting rules in order to promote their ideas. These activities are often secret until they are mature enough to be presented to the management, when they are then, if evaluated positively, incorporated as official projects in the new product development process.
Introduction
F
or the management of innovation, various models and approaches have been suggested in the literature. Several approaches, such as the innovation funnel (Wheelwright & Clark, 1992) or stage-gate model (Cooper, 1990), which became widely diffused in many industries (Griffin, 1997; Cooper, Edgett & Kleinschmidt, 2001), manage innovation by structuring, planning and ordering the innovation process. These models rely heavily on planning, anticipation and control. Brown and Eisenhardt (1995), for instance, have categorized such models as ‘rational plan’, where deliberate planning and action are the main focus of innovation management. Empirical studies, though, show that, first, innovations do not follow these rather simplistic models since, for instance, decisions are not always taken at stage-meetings in the case of an implemented stage-gate process (Christiansen & Varnes,
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2007), and second, that innovations often emerge outside the strategically defined core areas, teams or formal processes (Kanter, 1988; Christensen, 1997; Robinson & Stern, 1997). Moreover, some authors (e.g., Brown & Eisenhardt, 1997) have stressed, too, that such models lose effectiveness in an increasingly complex organizational and competitive environment. Some researchers have taken a critical view on existing innovation processes or new product development (NPD) and argue against a too strongly structured, planned and ordered innovation process, particularly for managing radical innovations. Such studies, for instance, have been carried out in line with organizational theories (Perrow, 1986; Amabile, 1997) or sociological theories (Akrich, Callon & Latour, 2002), criticizing traditional linear models for not supporting learning and creative problemsolving and for being instead means of control through standardization. Thus, authors claim © 2008 The Authors Journal compilation © 2008 Blackwell Publishing
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that innovation requires not only a sequence of planned actions but also some level of disorder, emergence, improvisation and self-directed teams (Nonaka, 1991; Miner, Bassoff & Moorman, 2001). Within this stream of literature, more recently, some scholars have incorporated findings from complexity science to explain the dynamics of organizational change and new product development. A complexity science perspective on NPD regards organizations as complex systems and stresses that selforganization and emergence are important elements for developing new products, refuting the assumptions of classical management approaches. Brown and Eisenhardt (1997), Dooley (2002), Gomes and Cunha (2003) and McCarthy et al. (2006) have studied the NPD process by incorporating findings from complexity science. Such a perspective is also taken within our research, but we, however, focus on the fuzzy front end of innovation, investigating NPD projects of five Austrian companies in the semiconductor industry. We contribute to this stream of literature by empirically exploring the role of selforganization outside formal NPD processes. We are particularly interested in the interaction and dynamics between self-organized and explicit management processes as well as in investigating the rationales and motivations of employees to self-organize, questions for which there remains limited empirical evidence (Augsdorfer, 2005). The paper is organized as follows. First, we present the theoretical framework for our study which rests on findings from complexity science. Then the study design is described, and finally our empirical findings and their implications are presented.
Theoretical Background The phenomenon of self-organization has been studied within the management literature but mainly in the field of organization studies, for instance, for the formation and management of teams (e.g., Barker, 1993), the establishment of self-managed work teams associated with the human relations school (e.g., Cummings, 1978) or the role of informal organizations and networks (e.g., Crozier, 1964; Krackhardt and Hanson, 1993). More recently, though, within the management literature in general and the innovation literature in particular, some authors have referred to complexity science in order to study informal mechanisms of NPD processes, often focusing on phenomena such as self-organization, emergence and nonlinearity (e.g., Stacey, 1996; Anderson, 1999). © 2008 The Authors Journal compilation © 2008 Blackwell Publishing
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This literature stream is thus in contrast to the mainstream literature which aims to formalize and control the NPD process. What is complexity science? Complexity science deals with the dynamics and evolution of complex systems as found in physics, biology, society or the economy. Funnels in tornadoes, flocks of birds and schools of fish are all examples of orderly behaviour in systems that are neither hierarchically planned nor centrally controlled. No single or commonly agreed complexity theory yet exists. However, the complex adaptive systems (CAS) model (Holland, 1995; Kauffman, 1995) has attracted attention, particularly when applied to explaining the behaviour of human and economic systems. CAS consist of a large number of agents – these can be cells, organisms, populations, organizations, departments, teams or individual researchers – acting and interacting in a non-linear manner according to their local principles or behavioural rules (Holland, 1995). Agents are linked to other agents, communicating and exchanging information and resources. Although these agents behave according to simple behavioural routines at the individual level, they exhibit complex patterns of behaviour at the aggregate level. The properties of self-organization and emergence, non-linear relations between agents, and the existence of feedback loops amplifying the effects of individual behaviours are all important features of complex systems. Self-organization means that new structures, patterns or properties emerge spontaneously without being externally imposed on the system. Dooley (2002, p. 5020) defines self-organization as follows: ‘we refer to a system as self-organizing if it undergoes a process . . . whereby new emergent structures, patterns, and properties arise without being externally imposed on the system. Not controlled by a central, hierarchical commandand-control center, self-organization is usually distributed throughout the system’. Emergence can be defined as a process whereby novel and coherent structures, patterns or properties arise on the global level out of the local interactions of the agents (Goldstein, 1999, p. 49). While authors in the complexity research stream such as Stacey (1996) or Anderson and McMillan (2003) explicitly distinguish between self-organization and self-management, in the organizational literature these terms, together with related concepts such as self-autonomous, self-regulated or empowered teams, are often used synonymously (Ashmos & Nathan, 2002). Usually, these self-managed teams have some leeway in decision taking and the definition of goals are explicitly regarded as a form of mana-
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gerial control with established reporting and reward structures. In contrast, complexity researchers stress that self-organization is a fluid process with informal, temporary, spontaneous teams where it is the participants who decide who takes part, and not the managers as in the case of self-managing teams (Stacey, 1996). A few authors have explicitly adopted a complexity science perspective or referred to it when explaining innovation processes and conceptualizing NPD models. Stacey (1996) claimed that managers who innovate mostly rely on self-organizing political and learning processes to produce an emerging, but unpredictable future. Brown and Eisenhardt (1997) studied the innovation processes in the computer industry with its high demand for continuous change and innovation. Their study is influenced by complexity science and the idea that organizational structures and processes are ‘neither so structured that change cannot occur nor so unstructured as chaos ensues’. Based on six case studies, they found that successful firms combined limited structure (e.g., with respect to responsibility) with extensive interaction and freedom to create improvisation with current projects. They call these structures and processes ‘semistructure’, which, according to them, is a balanced state between order and disorder, proposing that the NPD process of successful firms is neither too structured nor to loosely organized. Similarly, Gomes and Cunha (2003, p. 182) proposed an NPD model termed the ‘improvisational model’, which refers to the temporal convergence of planning and execution, with action viewed as improvised when it ‘constitutes a deliberate, real-time response to a problem or opportunity’. Innovation processes are hence characterized by complexity and emergence requiring partially disordered processes. The challenge for management is to somehow use disorder productively, hence to overcome the constraints of traditional linear and sequential innovation models such as Cooper’s (1990) prominent stage-gate model. However, Cunha and Gomes do not provide empirical data and examples for illustrating their model in more detail. McCarthy et al. (2006) perceive NPD as a complex adaptive system of decisions. They present some propositions on how decisionmaking is influenced by non-linearity, selforganization and emergence. They argue that the decisions taken by the NPD team are affected by the decision rules. Based on case study research, McCarthy et al. (2006) reported, for instance, that in one case a significant product idea emerged during intensive interaction at a social event, where a spontane-
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ously formed group was able to co-operate and solve problems beyond usual bureaucratic constraints. They referred also to a case where a radical new innovation emerged just because the project team disregarded the process rules and procedures, a finding which is in line with Olin and Wickenberg’s (2001) observations on rule-breaking. Although only a few scholars have adopted a complexity science perspective, some common features and elements of a complexity-based NPD model can be identified which also serves as a framework for our study. First, in highly dynamic environments, self-organization amongst different agents is crucial for producing innovative outputs. The configuration of project teams, consisting of researchers from different disciplines, departments and fields is, in part, a self-organizing process. Selforganization is an important factor in the search phase and leads to strong teams with the ability to overcome internal organizational barriers. Even though the classical organizational and innovation literature has investigated the role of informal organization, self-managed teams and product champions in association with bottom-up innovations (e.g., Schön, 1963; Howell & Boies, 2004), the complexity science perspective highlights in particular the formation of self-organized NPD teams. These teams emerge without any explicit management order as a key and regular feature of complex systems and not as a rare, extraordinary event. Moreover, characterizing an NPD activity as bottom-up does not necessarily mean that it is self-organized, too, because it may also be managed as in the case of, for example, organizing creativity workshops or the implementation of ideas from suggestion schemes. Second, self-organization and emergence depend on rich interaction between agents. The quality of dialogue, communication, collaboration and argumentation in R&D and NPD settings is a key enabler of self-initiated learning processes. Thus, for self-organization and emergence to occur, the necessary framework conditions must exist; the primary function of management is to provide them, and hence excessive attempts at standardization and control can be counterproductive. Based on this framework of the NPD process we aim to study the types, functions and processes of self-organization in the fuzzy front end of innovation. We are interested in the motivations and mechanisms for self-organizational activities, the interaction between different organizational members and its interaction with formal NPD processes. We focus on the phenomenon of selforganization and do not deal in more detail © 2008 The Authors Journal compilation © 2008 Blackwell Publishing
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Idea generation
Coalition building and networking
• Employees intrinsically look for opportunities to innovate
• Employees interact with others to gain attention and support for their idea
• Employees take initiative to pursue their own ideas
• Employees with different functions and from different departments form coalitions or informal teams to pursue the idea
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Persuasion of key actors
Prototyping
• Idea becomes more and more concrete • Finally, employees start with the informal implementation of the idea (simulation, prototyping etc.)
Reaction after top-management decision
• At a certain level, official resources are required for further implementation
• Top management accepts idea becomes official idea project
• Employees try to persuade top management from their idea to get official support
• Top management refuses idea will either be idea canceled also by team or pursued as secret and inofficial project
Figure 1. The Evolution of a Self-Organized Innovation
with other features of complex systems such as non-linearity.
Methods The NPD practices of five Austrian companies in the semiconductor industry were examined in order to study the types, impacts and functions of self-organization. We have chosen this industry with its high dynamics, velocity and demand for continuous innovation, as we expected that self-organization was crucial to compete successfully. The enterprises analysed were Austrian companies as well as Austrian subsidiaries of international firms. The companies were Supertec with nearly 1,000 employees, Chipcom employing about 1,500 employees, Microwaver with approximately 2,500 employees, Silicius engaging around 700 people, and finally NewCo, a start-up company with 120 employees. The number of employees refers only to the Austrian subsidiaries.1 We have chosen a case-study approach as an appropriate methodology in order to study in-depth the dynamics of self-organizational innovation activities. The case study combined multiple data collection methods and included semi-structured interviews, which lasted between 40 and 90 minutes and were conducted in a narrative way, i.e., personal and subjective impressions were gathered and relevant artefacts (e.g., mission statements, arrangement of offices) observed. The interviewees were the five heads of the R&D departments of each firm as well as employees of the R&D department. Based on the interviews with the R&D directors, two to three NPD teams were selected in each company for further investigation of initiatives, in which 1
For reasons of confidentiality, the real names of the companies have been made anonymous.
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self-organizing activities played a significant role in the NPD process. Two developers from each team were interviewed subsequently to investigate the role, effects and motivation for self-organizational activities from the employees’; point of view. In total, 12 NPD teams with 24 people were interviewed. These interviews were conducted with a semi-structured questionnaire covering a set of common questions and some specific questions for the R&D directors as well as the team members. Asking management and employees nearly the same questions contrasted their different perceptions of the activities and organizational processes. Each examined self-organizing activity was seen as separate case and considered as relevant for further observation. Based on these settings, the collected cases were analysed in an iterative process. This was done mainly by combining within-case analysis and cross-case analysis. Hence, first of all the typical patterns and characteristics of each case were analysed, then, in the cross-case analysis, these findings were compared with findings from the other cases. Therefore, we were looking for similarities as well as significant differences between the cases. Identified similarities confirmed our assumptions and fostered validity; differences, however, offered the possibility to verify our research questions, further explore the case to reveal inconsistencies, and finally generate new insights. Based on these analysis methods we also inducted our process model for a purely self-organized NPD process (see Figure 1).
Findings Our investigation revealed evidence that selforganizing dynamics strongly influence the fuzzy front end of innovation in the semiconductor industry. We identified two different patterns of self-organizational activities: first, self-organization performs a significant role in
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interaction with the formally managed NPD process; and second, many innovations in the semiconductor industry have their origin in a purely self-organized process. We will start by illustrating the latter, the evolution of a bottom-up NPD process, which is the focus of this paper.
problems and issues and can therefore help immediately’. This is exactly the phase when the subjective intuitions, ideas and hunches of individuals are tapped and their tacit knowledge is converted into explicit knowledge (e.g., Nonaka & Takeuchi, 1986; Stacey, 1996).
The Evolution of a Self-Organized NPD Process
Coalition Building and Networking
Based on the case studies, we inducted a general process model of the dynamics of selforganization in the innovation process. This general process model integrates patterns and similarities found in nearly all examined cases to one coherent construct. Thus, the empirical evidence of our case studies revealed that a purely self-organized NPD process can be divided into five phases (see Figure 1). Yet, it should be made clear that this is a linear illustration of the general process and in some cases phases may overlap, run in parallel or can be repeated. Idea Generation A self-organized bottom-up innovation starts when some individuals, without any explicit order from an outside source (e.g., top management), search for opportunities to innovate. The self-organizing activity is mainly driven by intrinsically motivated employees. Although the sources for these opportunities vary (e.g., inputs from customers, external partners, internal colleagues), our research has shown that the informal interactions in the shadow organization and personal networks play a very important role. Thereby, employees interact with each other in a casual way, often outside official working hours (e.g., during breaks, lunch, spare time) and at locations other than their official offices. During these informal interactions within their networks, they also exchange their problems, insights, approaches and single ideas which often sparks an intensive and dialectic discussion about these issues and thus leads to the emergence of novel ideas or solutions, for example for technical problems or new customer needs. Nearly all interviewees stated that these interactions were the main source and departure point. One R&D employee of Chipcom described the situation very well: ‘The informal communication is so important, because you just feel the mood and you know exactly what it is about. You just grab things, consciously and also unconsciously, even though you are often not the direct addressee of the information. But you just pick it up and process it. Thus you know the
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After the idea has become more concrete, the inventors try to draw the attention of other individuals to their idea to get support for further pursuit. Thus, the inventors specifically try to attract those people who are considered important for the implementation. However, not only people with the appropriate know-how are considered important, also those with power or the right networks and contacts are seen as relevant enablers for the innovation. This phase is again dominated mainly by bottom-up mechanisms within the personal networks often spreading their vibes throughout several levels of the hierarchy and thus attracting people with different functions and often from different departments. In this manner, more and more people who are convinced of the idea and realize the need for action are attracted, although the idea or invention is still not an official project. This process finally leads to the building of coalitions, clusters or even teams around that idea and to the persuading of and negotiating with others to support that idea and to potentially crystallize it into an innovation. This stage is also self-organizing in the sense that it is informal and not centrally organized or planned (Stacey, 1996). In this context, it must be mentioned that already in this early stage the R&D director often gets informed about the intentions of the engineers. Since he knows both the market and customer requirements as well as the technical aspects, he usually enjoys a very high reputation and confidence in the view of the engineers. Therefore the R&D director acts as a first filter and assessor and also helps to develop the idea in the right direction. As one engineer of Silicius stated: ‘The R&D director is the heart of the whole development, since he knows the market and the customers. He is the one who dictates the direction for the new product’.
Prototyping Once coalitions or informal self-organized teams have been formed, they start with the first steps of the implementation of the poten© 2008 The Authors Journal compilation © 2008 Blackwell Publishing
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tial innovation: this realization mainly takes places unofficially and beside the normal work. Because the inventors operate outside the formal structures – more or less secretly – and thus without any official support from the management, they depend mainly on the support of their colleagues to be able to work on their innovations. This support primarily contains the access to valuable resources such as infrastructure (e.g., production machines, simulation tools) or the supply of materials (e.g., wafers), which is normally restricted. However, as one employee of Supertec noted: ‘with the right connections and networks, the access to these important resources can easily be granted in an unofficial way.’ The same employee mentioned, furthermore, that good relationships enabled him in the past to get free access to the production machine and wafer materials, which is normally highly restricted, and hence allowed him to produce some prototypes. Usually, when following the official protocol, it takes a couple of weeks and a lot of formalism to get a slot with a production machine to produce and test a new prototype. Yet, together with the responsible persons from the production department, the developers used the machine late at night when the factory was closed, to produce some new prototypes. Furthermore, the employees of Supertec also confirmed that many colleagues concealed the unofficial operations of the inventors. In addition, these colleagues have even taken over the officially assigned tasks for the inventors, so that they were able to work on their own secret project. Although all examined companies show strong efforts to identify informal activities and make them official as early as possible, we got the impression that the inventors – most of the time with the knowledge of their R&D director – nevertheless often worked as long as possible secretly and unofficially on their own innovations. The major reasons why they work ‘underground’ are summarized in Table 1. In this context, we were also able to illustrate the role of financial incentives systems and patents which too deliver reasons for keeping NPD activities secret. All companies examined offered a bonus for inventions or patents, which means that the employees get a considerable amount of money if they make an invention or file a patent. In many cases, though, inventors abandon these bonuses as they prefer to pursue their intentions secretly. With respect to patents, the case studies also revealed that they were not welcomed by certain inventors either, as companies often file them only to thwart competitors but without any real intention to further pursue the invention. Thus, filing a patent may be © 2008 The Authors Journal compilation © 2008 Blackwell Publishing
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associated with the risk that the innovation may not be developed for strategic reasons. So far, the case studies have revealed that intrinsic motivations were the prime force for selforganized innovation activities. As already mentioned above, the R&D directors most of the time knew about the intentions of their engineers, supported these and gave them the leeway to work on their plans until they could present a reasonable outcome. Persuasion of Key Actors While at the early stages informal implementations are mostly possible with very few problems, they become more and more difficult with the further advancement of the project, until a certain point is reached, where organizational support and formal structures are required for further effective implementation. At this point, the inventors, mostly with the support of the R&D managers, present their innovation to the top management and try to persuade them that their innovation should become an official project and thus get organizational resources. To present a more effective case, the innovators often not only try to mobilize key actors (e.g., product or marketing management) for their lobbying activities, but also try to influence the top management by providing biased or filtered information. As one developer of Chipcom stated: ‘By giving the top management the “right” information, you can control and influence them very well’. This means that the innovators try to push through their interests with manipulation. In this context, it has also been observed that sometimes the formal innovation strategies or processes are being manipulated and therefore threatened if the employees behave opportunistically and thus want to enforce their own interests. As one developer said: ‘Sometimes we sabotage the formal innovation strategies and plans to push through our interests’. These circumstances reveal that also conventional formal innovation processes and strategies are threatened by a principal-agent dilemma if the interests of the employees are not aligned with those of the company or management. Reaction after Top-Management Decision After the top management has been informed about the self-organized innovation, the new innovation is discussed within the management. Generally, the less this innovation fits into the strategy, the harder it is for it to be accepted. Usually, various evaluation methods (e.g., market studies or feasibility tests) are
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Table 1. Reasons for Self-Organizationally Driven NPD Activities Reason of employees for self-organized NPD activities
Description
To avoid ideas being killed by presenting unfinished work
Innovators are afraid that the top management or other employees will interfere too much and thus the risk arises that their initiatives will be killed. The R&D director of Chipcom described this with the slogan ‘Never show fools unfinished work’. Formal procedures and requirements (meetings, presentations, reporting, etc.) are seen as constraining and time consuming, which prevent people from pursuing their new ideas within the official procedure. Innovators are afraid that ideas outside the strategy or core business will be refused by the management, since these ideas probably will not fit into the company’s existing roadmap. In many cases the top management acts according to the slogan ‘never change a running system’ expressing that it is satisfied with the current products or processes and therefore does not want to take additional risks. For these reasons the inventors try to bring their innovations to a mature stage and show concrete results before approaching the top management. Employees working in secrecy within their informal network often feel more comfortable and are not as afraid of potential failures or flops. In some cases employees are not allowed to engage in fields outside their official task and therefore work secretly on their own ideas. Innovators are afraid that they would have to relinquish their ideas to other developers or departments. Innovators hence try to protect their ‘babies’ by a secret implementation.
To bypass time-consuming and cumbersome formalism
Innovation is outside the roadmap
To realize ideas in a situation where top management is satisfied with the current technology and/or products
No fear of failure within the personal network Not allowed to engage in other fields Fear of relinquishing ideas to others
applied to decide about the further process. If the project is accepted, the informal team then becomes an official project team and will be incorporated into the organizational structure. The former informal process is now being managed as an official and formal innovation project with all appropriate procedures (such as milestones, reports, etc.). A refusal of the project can lead to the frustration of the inventors and very often these aspects are a further reason why employees try to work a long time secretly on their ideas. However, even if projects were declined, some inventors stated that they continued working on the innovation behind the management’s back, but very often with the awareness of the R&D director. The previous characterization of the mechanisms reveals evidence that the entire early phase of an NPD may emerge without any
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control instance, just by the internal selforganizing dynamics and interactions of employees who form an innovation team. However, we also found some differences between the companies. Supertec, Chipcom, Microwaver and NewCo have a formally wellstructured and standardized stage-gate NPD process. Silicius, in contrast, has a very tightly structured formal development process since it wants to closely organize and control all stages of the NPD process. Self-organizing activities of employees – also outside their assigned focus fields – are very appreciated at Supertec, Chipcom and Microwaver. At NewCo, the start-up company, they are seen as a very important component of the development process and are therefore a major part of the company’s values and culture. At Silicius, in contrast, self-organizing activities are also much appreciated, but only within the © 2008 The Authors Journal compilation © 2008 Blackwell Publishing
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assigned focus fields, since Silicius is, first, afraid of potentially losing control over the process and, second, wants its employees to invest all their energy in their assigned tasks. Apart from these purely bottom-up processes, self-organization also plays an important role within the formal NPD process, which is described next.
Self-Organizational Activities Facilitating the Formal NPD Process Self-organizing mechanisms affect official topdown imposed innovation processes in various ways. Nearly all of the characteristics and activities described above in the process of a pure bottom-up innovation also appear in different ways in official top-down imposed and organized innovation processes. Since these behaviours often improve the formal innovation process, they are at least tolerated and often even desired by the management. As most of these self-organizing activities were already described in the above illustrated process of a bottom-up innovation, only some key characteristics in the formal innovation process are described in the following. The respondents argued that self-organizing had become evident when rules, structures, procedures, etc., of the formal NPD process were changed according to their interests, or, in some cases, simply ignored. In that sense, selforganization allows NPD teams to define and adopt their own rules as already proposed by McCarthy et al. (2006). This happens mostly when rules are perceived as complicated, impractical or bureaucratic. Hence, selforganization acts to overcome formal organizational barriers. Despite the fact that all companies examined had a standardized, well-structured stage-gate NPD process, we observed that, particularly in the early phase, loose structures and little formalization dominated the innovation process, even at Silicius with its very tightly structured stage-gate process. In this context, it also became evident that certain entities in the hierarchy were deliberately bypassed or that certain actions which are formally not allowed were bridged via the personal network. The possible impacts of these rule breakings have already been studied and pointed out by Olin and Wickenberg (2001). We observed, too, that formal procedures were considered as second choice when the informal failed to work. As one developer at Supertec stated: ‘If I don’t get it by the informal way then I use the formal procedures or sometimes contact my manager to get it through the official way’. The R&D employees interviewed claimed that self-organizational activities were neces© 2008 The Authors Journal compilation © 2008 Blackwell Publishing
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sary in those situations where the organized process left leeway for action and creative problem solving. Thereby, employees often adapt the official rules and procedures according to their own practices, methods or tools to better execute the top-down imposed NPD process. In addition, employees said that they often left their formal position to fulfil tasks for which they were not officially designated. These examples illustrate again how informal self-organization and formal procedures coexist to produce innovative outcomes. They also reveal that the top-management sees these informal and self-organized activities as a very important component and also complement in the innovation process, although they are still not acknowledged in the company’s formal NPD process.
Discussion and Conclusion The models and notions of complexity science have gained attention within the innovation literature in the last few years to explain the development and diffusion of innovations. In this context, Tsoukas (1998) points out that the main contribution of such an approach is that a socially constructed analogy can spur the understanding and thinking about organizations, and could shift the attention to previously unsuspected, or only peripherally relevant phenomena of an object. The current study is an exploratory investigation about the types of self-organizing activities in NPD processes and its motivations and therefore enlarges the currently limited empirical findings in this field. The process of a self-organized NPD activity as described here covers the phase which some authors have defined as the fuzzy front end. Smith and Reinertsen (1991), for instance, have considered the earliest stage of the NPD process prior to the first official group meeting as fuzzy front end. Reid and de Brentani (2004) have argued that, in the case of radical innovations, it is, in particular, individuals who develop new ideas by understanding emerging patterns in the environment, ‘with little or no direction from the organization’. We have found that the self-organized innovation activities were highly important for the innovation output of all semiconductor firms studied, either as purely self-organized early NPD activity or to modify, bypass or complement the formal NPD process. The activities we have observed were not the result of planned creativity workshops, regular scanning activities, an R&D strategy or any other formal innovation management actions usually
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organized by the management to foster the NPD process. Although the companies were not able to measure precisely the impact and relative share of self-organizational activities in parallel to the formal activities or the number of purely self-organized innovations, they were considered as a major element of innovation activities and crucial for achieving performance. According to respondents, up to one-third of all formal NPD projects which successfully ended up in a new product launched on a market had their roots in selforganizational activities outside the formal process. Our findings are hence in line with those of Augsdorfer (2005), who studied the role of bootlegging in NPD. Augsdorfer stresses that many innovations have their origins in the corporate underground, which is seemingly valuable for the firm, too. However, unlike our study, Augsdorfer (2005) focused on the strategic fit of bottom-up innovation activities without investigating the process, interactions and motivations behind such activities. Moreover, the literature on bootlegging mostly does not investigate the interaction of informal and formal activities and hence corresponds only to the purely selforganized NPD process. Studying self-organized NPD initiatives based on our process model revealed that, while in the beginning these activities were kept secret, they became increasingly integrated with the formal NPD process later on. We also found that middle managers, i.e., the R&D directors, were nearly always aware of these activities, endured them and often even supported them. Thus, they play a very crucial role in this context, since on the one hand, they often realize the future success of the potential innovation and try to promote it, and on the other, they also have to represent the interests of the company. Therefore they have to balance carefully these two different interests. Moreover, with their strategic and market knowledge, they are, from the viewpoint of the subordinate developers, a good filter for bottom-up initiatives, a fact which has been stressed in the corporate venture literature (e.g., Burgelman, 1983). R&D managers were aware of and tolerant of the selforganizational activities, partly supported them and thereby deliberately managed the NPD process by synchronizing formal and informal processes. Thus, managers performed some kind of loose-tight control, tight in the sense of formally controlling the innovation process, loose in the sense of tolerating self-organized activities. The implication for management in general is to accept the hidden life of organizations in order to facilitate innovation.
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The findings of our study are also related to the notion of skunk work (e.g., Kanter, 1988), which is often mentioned as a possibility to facilitate the innovativeness of organizations. However, while skunk work is usually deliberately managed and supported by management, self-organizational activities are often performed in the corporate underground without any managerial intention. Our research is related to the concept of product champions (e.g., Rothwell, 1994), as the organizational members associated with self-organized innovation activities have features of champions. The literature on champions mainly stresses their role to overcoming organizational barriers, linking R&D and marketing by informal contacts or their power function to support innovations. Accordingly, self-organized early NPD activities as found here correspond to the bottom-up emergent view of championing as identified by Day (1994). However, the question on whether champions’; activities are more formal or informal is not always thoroughly investigated in the product champion literature. Moreover, champions are not always explicitly associated with the very early phases (e.g., Reid & de Brentani, 2004), but are regarded as supportive after the idea generation phase. Yet, some authors (e.g., Cooper, 2006) propose the careful selection of product champions by the management which is in stark contrast to a complexity science perspective on selforganized activities. We have found evidence that formal systems such as stage-gate systems, financial incentive systems or patenting policies were bypassed or even ignored by the teams in order to push their ideas and projects. Our findings are hence in line with some literature stressing that intrinsic motivation is the prime driving force for creative and innovative work and that formal systems may be counterproductive and have unintended effects, and are thus often ignored or bypassed by organizational members (e.g., Katz & Allen, 1982; Osterloh & Frey, 2000). When interpreting the results of this study, one must consider some limitations. We have studied innovation in the semiconductor industry and thus generalizations have to be made with caution. We have not examined in more detail the conditions and organizational factors such as leadership style, extent of hierarchy or culture which facilitate or harm self-organizational activities, which is addressed in another work (Koch, 2007). Moreover, we have not studied the co-evolution of the organizations in relation to their environment consisting of other complex systems, e.g., their competitors, © 2008 The Authors Journal compilation © 2008 Blackwell Publishing
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which would require a longitudinal study setting. Finally, we have not investigated the outcome of different NPD projects (e.g., are self-organized new products more innovative or more successful?). These are interesting questions for future research.
Acknowledgements We would like to thank Michael Barber, Helmut Friedrichsmeier, Josef Fröhlich and Ian McCarthy for their helpful comments on earlier versions of this paper, and we are grateful for the constructive and helpful suggestions from an anonymous reviewer.
References Akrich, M., Callon, M. and Latour, B. (2002) The Key to Success in Innovation. Part I: The Key to Interessement. International Journal of Innovation Management, 6, 187–206. Amabile, T.M. (1997) Motivating Creativity in Organizations: On Doing What You Love and Loving What You Do. California Management Review, 40, 39–58. Anderson, C. and McMillan, E. (2003) Of Ants and Men: Self-Organized Teams in Human and Insect Organizations. Emergence, 5, 29–41. Anderson, P. (1999) Complexity Theory and Organization Science. Organization Science, 10, 216– 23. Ashmos, D.P. and Nathan, M.L. (2002) Team SenseMaking: A Mental Model for Navigating Unchartered Territories. Journal of Managerial Issues, 14, 198–217. Augsdorfer, P. (2005) Bootlegging and Path Dependency. Research Policy, 34, 1–11. Barker, J.R. (1993) Tightening the Iron Cage: Concertive Control in Self-Managing Teams. Administrative Science Quarterly, 38, 408–37. Brown, S.L. and Eisenhardt, K.M. (1995) Product Development: Past Research, Present Findings and Future Research. Academy of Management Review, 20, 343–79. Brown, S.L. and Eisenhardt, K.M. (1997) The Art of Continuous Change: Linking Complexity Theory and Time-Paced Evolution in Relentlessly Shifting Organizations. Administrative Science Quarterly, 42, 1–34. Burgelman, R.A. (1983) A Process Model of Internal Corporate Venturing in the Diversified Major Firm. Administrative Science Quarterly, 28, 223– 44. Christensen, C.M. (1997) The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail. Harvard Business Press, Boston. Christiansen, J.K. and Varnes, C.J. (2007) Making Decisions on Innovation: Meetings or Networks? Creativity and Innovation Management, 16, 282–98. Cooper, R. (1990) Stage Gate Systems: A New Tool for Managing New Products. Business Horizons, 33, 44–53. © 2008 The Authors Journal compilation © 2008 Blackwell Publishing
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Cooper, R. (2006) The Seven Principles of the Latest Stage-Gate® Method Add up to a Streamlined, New-Product Idea-to-Launch Process. Product Development Institute, March/ April. Cooper, R., Edgett, S. and Kleinschmidt, E. (2001) Portfolio Management for New Product Development: Results of an Industry Practices Study. R&D Management, 31, 361–80. Crozier, M. (1964) The Bureaucratic Phenomenon. University of Chicago Press, Chicago. Cummings, T. (1978) Self-Regulating Work Groups: A Socio-Technical Synthesis. Academy of Management Review, 3, 625–34. Day, D.L. (1994) Raising Radicals: Different Processes for Championing Innovative Corporate Ventures. Organization Science, 5, 148–72. Dooley, K. (2002) Organizational Complexity. In Warner, M. (ed.), International Encyclopedia of Business and Management. Thompson Learning, London, pp. 5013–22. Goldstein, J. (1999) Emergence as a Construct: History and Issues. Emergence: Complexity and Organization, 1, 49–72. Gomes, J.F.S. and Cunha, M.P. (2003) Order and Disorder in Product Innovation Models. Creativity and Innovation Management, 12, 174– 87. Griffin, A. (1997) PDMA Research on New Product Development Practices: Updating Trends and Benchmarking Best Practices. Journal of Product Innovation Management, 14, 429–58. Holland, J. (1995) Hidden Order: How Adaptation Builds Complexity. Addison-Wesley, Reading, MA. Howell, J.M. and Boies, K. (2004) Champions of Technological Innovation: The Influence of Contextual Knowledge, Role Orientation, Idea Generation and Idea Promotion on Champion Emergence. Leadership Quarterly, 15, 123–43. Kanter, R.M. (1988) When a Thousand Flowers Bloom: Structural, Collective and Social Conditions for Innovation in Organizations. Research in Organizational Behavior, 10, 169–211. Katz, R. and Allen, T.J. (1982) Investigating the Not Invented Here (NIH) Syndrome: A Look at the Performance, Tenure, and Communication Patterns of 50 R&D Project Groups. R&D Management, 12, 7–19. Kauffman, S. (1995) At Home in the Universe. Oxford University Press, Oxford. Koch, R. (2007) Wirkung, Funktion und Determination von Selbstorganisation im Innovationsprozess. PhD thesis, Vienna University of Economics and Business Administration, Vienna. Krackhardt, D. and Hanson, J.R. (1993) Informal Networks: The Company Behind the Chart. Harvard Business Review, 71, 104–11. McCarthy, I.P., Tsinopoulos, C., Allen, P. and RoseAnderssen, C. (2006) New Product Development as a Complex Adaptive System of Decisions. Journal of Product Innovation Management, 23, 437– 56. Miner, A.S., Bassoff, P. and Moorman, C. (2001) Organizational Improvisation and Learning: A Field Study. Administrative Science Quarterly, 46, 304–37.
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Nonaka, I. (1991) The Knowledge-Creating Company. Harvard Business Review, 69, 96– 104. Nonaka, I. and Takeuchi, H. (1986) The New Product Development Game. Harvard Business Review, 64, 137–46. Olin, T. and Wickenberg, J. (2001) Rule Breaking in New Product Development – Crime or Necessity? Creativity and Innovation Management, 10, 15–25. Osterloh, M. and Frey, B. (2000) Motivation, Knowledge Transfer, and Organizational Forms. Organization Science, 11, 538–50. Perrow, C. (1986) Complex Organizations, 3rd edn. Random House, New York. Reid, S. and de Brentani, U. (2004) The Fuzzy Front End of New Product Development for Discontinuous Innovations: A Theoretical Model. Journal of Product Innovation Management, 21, 170– 84. Robinson, S. and Stern, B. (1997) Corporate Creativity: How Innovation and Improvement Actually Happen. Berrett-Koehler, San Francisco, CA. Rothwell, R. (1994) Towards the Fifth-Generation Innovation Process. International Marketing Review, 11, 7–31. Schön, D.A. (1963) Champions for Radical New Inventions. Harvard Business Review, 41, 77–86. Smith, P.G. and Reinertsen, D.G. (1991) Developing Products in Half the Time. Van Nostrand Reinhold, New York. Stacey, R.D. (1996) Strategic Management and Organisational Dynamics, 2nd edn. Pitman, London.
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Tsoukas, H. (1998) Chaos, Complexity, and Organization Theory. Organization, 5, 291–313. Wheelwright, S.C. and Clark, K.B. (1992) Revolutionizing Product Development: Quantum Leaps in Speed, Efficiency, and Quality. The Free Press, New York.
Rudolph Koch studied Business Administration at Vienna University of Economics and Business Administration and got a PhD Scholarship from the Austrian Research Centers. His research is empirically focused and deals with the role of self-organization in new product development processes. Karl-Heinz Leitner is Senior Researcher in the Department of Technology Policy at the Austrian Research Centers. He received his PhD in Economics and Social Sciences from Vienna University, was Visiting Research Scholar at Copenhagen Business School and teaches at the Technical University of Vienna. His main research interests cover innovation processes in companies, strategic management, research policy, technology transfer and the valuation of intellectual capital. He has published in R&D Management, Management Accounting Research and Research Evaluation.
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Transformational Leadership and Innovative Work Behaviour: Exploring the Relevance of Gender Differences Mark Reuvers, Marloes L. van Engen, Claartje J. Vinkenburg and Elisabeth Wilson-Evered The importance of innovation within organizations has been demonstrated on numerous occasions, which has subsequently led to the identification of effective leadership as a potential catalyst. Accordingly, empirical findings have repeatedly demonstrated a positive relationship between transformational leadership and work unit effectiveness measures. This study explores the relationship between transformational leadership and employee innovative work behaviour, additionally examining the moderating effect of gender of the manager and gender of the employee. Data were gathered within four Australian hospitals, generating a dataset of 335 respondents. The findings revealed a positive and significant relationship between transformational leadership and innovative work behaviour. Furthermore, gender of the manager moderated the latter relationship, indicating that employees report more innovative behaviour when the transformational leadership is displayed by male in comparison with female managers, confirming our gender bias hypothesis. No significant effect was found for the threeway interaction of transformational leadership, gender of the manager, and gender of the employee. Implications and directions for future research are discussed.
Introduction
T
he current globalized economic environment is becoming increasingly dynamic and competitive. New technologies, fast changing organizational models and a customers’ ever increasing access to information and suppliers place a premium on time-to-market, product diversity and cost/quality ratios (Yukl, 2002; Jung, Chow & Wu, 2003). These realities of the marketplace force organizations to increase their flexibility, responsiveness and efficiency, amounting to the necessity for continuous innovation of products and internal processes (Dorenbosch, van Engen & Verhagen, 2005). A plethora of academics and scholars have claimed that the potential to develop and foster innovation within employees is a crucial driving force behind organizational performance and sustained competitive advantage (Drazin & Schoonhoven, 1996; Oldham & Cummings, 1996; Axtell et al., 2000; Dess & © 2008 The Authors Journal compilation © 2008 Blackwell Publishing
Pickens, 2000). Hospitals, being the research setting of this study, accordingly stand to gain from innovative employees, as performance is reflected in extensive social and economic repercussions. More specifically, hospitals are confronted with the challenge of delivering ever more reliable patient care, quicker treatment response, and increased quality of medical care (Australian Institute of Health and Welfare, 2006a). This paper will focus on the role of employees within the innovation process. Accordingly, a distinction has to be made as creativity denotes the formation of novel ideas, and innovation the actual translation to practical use (Mumford & Gustafson, 1988). Innovative work behaviour, a term endorsed by various authors, encompasses both the creativity and innovation aspects, and will accordingly be used as such (Scott & Bruce, 1994; Janssen, 2000, 2002). As innovation has been linked to performance, scholars from a wide variety of
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disciplines have attempted to understand the factors that shape innovation. Specifically, a review by Mumford et al. (2002) mentions a broad range of factors including strategy, structure, climate practices, group interactions and individual performance capabilities. More recently, various authors have specifically emphasized the impact of leadership on creative efforts and innovation (Mumford et al., 2002; Jung, Chow & Wu, 2003; Mumford & Licuanan, 2004). Leadership may be a key factor in stimulating health care workers towards more innovative work behaviour (Malone, 2004; Wilson-Evered, Härtel & Neale, 2004) and will therefore be the focus of this research. Within the strand of research concerned with the relationship between leadership and the innovation process, transformational leadership is especially interesting, as theory suggests that transformational leaders can enhance innovative work behaviour (Bass & Avolio, 1990; Sosik, Avolio & Kahai, 1997). Bass (1985) defined a transformational leader as one who motivates followers to do more than they are originally expected to do. Despite theoretical reasoning, little empirical evidence exists to confirm the relationship as stated above, inspiring the need for further investigation. Drawing on various studies that revealed a positive relationship between transformational leadership and organizational outcomes, including innovation, and in conjunction with the meta-analytic review by Lowe, Kroeck and Sivasubramaniam (1996), this study assumes that the theorized relationship can be empirically confirmed. Labour participation statistics reveal a consistent increase in the occupation of managerial and leadership functions by women. Consequently, Carless (1998) suggests that organizations are called on to re-analyse and expand their perceptions of what constitutes effective leadership as it relates to role expectations, gender and stereotyping. Gender or sex differences in leadership have been analysed extensively with a focus on transformational leadership in contemporary literature, revealing the potential existence of differences in effectiveness measures (Oakley, 2000; Eagly & Johannesen-Schmidt, 2001; Eagly, Johannesen-Schmidt & van Engen, 2003). The notion of innovative capabilities as the springboard for competitive advantage, in conjunction with the latter, raises an important question. Specifically, we ask whether the motivational influence of transformational leadership on innovative work behaviour is susceptible to the gender of the manager. This study examined whether the influence of transformational leadership on innovative work behaviour is either more gender specific
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or androgynous. Gender of the manager and employee are examined as a moderator. In sum, the research question for this study is: What is the relationship between transformational leadership and innovative work behaviour, and how is this relationship moderated by gender of the manager and gender of the employee?
Theoretical Framework Innovative Work Behaviour The challenge for companies is to bring to the market a stream of new and improved, addedvalue products and services that enable an organization to achieve higher margins and, in turn, the profits necessary to re-invest. Innovation is viewed as a crucial catalyst for effective competitive behaviour in a global environment, a vision endorsed by governments and organizations alike. Likewise, agreement exists about the notion that innovation is rooted in the contributions of flexible and open-minded individuals (Woodman, Sawyer & Griffin, 1993; Yukl, 2002). However, less agreement exists about an authoritative definition of the construct, which is demonstrated in the paper by Dackert, Lööv and Mårtensson (2004). In line with the purpose of this paper, the definition by West and Farr (1990, p. 9) was found to be the most elaborate and is adopted as such. Their definition of innovative work behaviour reads: ‘the intentional introduction and application within a role, group or organization of ideas, processes, products or procedures’. Janssen (2000, p. 288) adds that ‘this definition restricts innovative behaviour to intentional efforts to provide beneficially novel outcomes’. In reviewing the literature concerned with innovation, it is apparent that innovation is a multifaceted and intricate process. Within this process, creativity is often jointly mentioned along with innovation, yet their interdependency remains unclear. Creativity is commonly seen as the formation of ideas and innovation as their implementation (Mumford & Gustafson, 1988). Various authors have, however, stressed the idea that innovation encompasses both the generation and implementation of ideas (Van de Ven, 1986; Axtell et al., 2000; Unsworth, Brown & McGuire, 2000). In line with the view of Scott and Bruce (1994), this paper assumes innovative work behaviour to be a multi-stage process, covering both the creativity and implementation components. Innovative work behaviour is conceived here according to the works of Scott and Bruce (1994) and Janssen (2000). Innovative work behaviour consists of three interrelated behav© 2008 The Authors Journal compilation © 2008 Blackwell Publishing
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ioural tasks, which, according to Scott and Bruce (1994), are non-sequential and may be engaged in separately. Janssen (2000), furthermore, mentions that innovative work behaviour concerns extra-role behaviour which is not formally recognized by reward systems. The three tasks are idea generation, idea promotion and idea realization. Idea generation relates to the formulation of new ideas of any sort, which are beneficial to organizational conduct (Woodman, Sawyer & Griffin, 1993). Novel ideas within an organizational context emerge from work-related problems which is a fourth task of innovative work behaviour, recognized by Dorenbosch, van Engen and Verhagen (2005). As this paper regards problem recognition as integral to idea generation, it will not be considered as a separate task of innovative work behaviour. Idea promotion is the task in which an employee engages when he or she has generated an idea. The individual employee requires a basis or foundation to be able to capitalize on this idea, which requires finding sponsors and allies with the necessary influence and authority (Kanter, 1983, 1988). The innovation process is completed by the realization of the initial idea. As stated by Kanter (1988, p. 191), this latter task represents the production of ‘a prototype or model of the innovation . . . that can be touched or experienced, that can now be diffused, mass-produced, turned to productive use, or institutionalized’. The three tasks of innovative work behaviour arguably constitute extra-role behaviour in most jobs. Previous research has linked transformational leadership to extra-role behaviour facets (Podsakoff et al., 1990; Podsakoff, MacKenzie & Bommer, 1996). The latter raises the potentiality of a positive relationship between innovative work behaviour and transformational leadership.
Leadership Introduced Leadership has been studied in various ways, depending on the researchers’ methodological preferences and definition of leadership (Chen, 2002). In recent years, numerous academic researchers have tried to streamline and integrate these various approaches, using the theory formulated by Bass (1985, 1996) in which two forms of leadership were identified: transformational and transactional leadership (Podsakoff et al., 1990; Conger et al., 1997; Hinkin & Tracey, 1999; Banerji & Krishnan, 2000; De Groot, Kiker & Cross, 2000; Yukl, 2002). Transactional leadership must be defined in order to fully understand the ways in which transformational leaders influence followers. Transactional leadership is exemplified by an exchange process where emphasis is put © 2008 The Authors Journal compilation © 2008 Blackwell Publishing
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on the behaviours and attitudes which mediate the quality of exchange between the leader and followers (Bass, 1985; Yukl, 2002). Burns (1978) and Bass (1985) differ in their views on the exclusiveness of transactional leadership. Bass (1985) stresses the idea that transformational and transactional leadership styles are distinct but not mutually exclusive processes, and in fact are combined within effective leadership, whereas Burns (1978) recognizes the two concepts as contrasting. According to Bass (1985, 1990) and Yukl (2002), transactional leadership is demonstrated by three types of behaviour: contingent reward: rewards for satisfying performance; active management by exception: monitoring and correcting behaviour; and passive management by exception: intervention when standards are not met.
Transformational Leadership Transformational leadership can be seen as an expansion or extension of transactional behaviour, and is defined in terms of the leader’s effect on followers (Felfe, Tartler & Liepmann, 2004). Followers feel admiration, loyalty, trust and respect towards their leader. A transformational leader is able to influence followers by connecting their self-concept to the mission of the organization or group and by addressing and modifying their values and selfesteem (Kark, Shamir & Chen, 2003). As a result followers’ behaviour will become selfexpressive and followers will express a greater willingness to contribute to group objectives. Furthermore, transformational leaders influence followers by shifting goals away from personal interest towards self-actualization and the greater good, and followers are motivated by the fear of disappointing the leader (Chen, 2002; Yukl, 2002). Bass (1985, 1990) developed a model which attempted to conceptualize transactional and transformational leadership consisting of seven dimensions (Bass, 1985; Avolio, Bass & Jung, 1999). The seven factor conceptualization was translated into an instrument that purports to measure the components of both transactional and transformational leadership. This instrument, called the Multifactor Leadership Questionnaire (MLQ), was developed by these authors. Transformational leadership is measured by four dimensions: idealized influence, intellectual stimulation, individualized consideration and inspirational motivation (Bass & Avolio, 1994). The original conceptualization of the theory (Bass, 1985) included the first three dimensions, and the fourth dimension was added in Bass (1990). Idealized influence is defined as the capability to act as a role model whereby the leader
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becomes admired, respected and trusted. Trust is earned by the willingness to take personal risks and the consistency in deciding and behaving. Idealized influence is divided into behavioural idealized influence and attributional idealized influence (Bass & Avolio, 1994). Intellectual stimulation thrives within a supportive climate where creativity and innovation are crucial for the leader’s ability to arouse within followers an awareness of problems and recognition of their own beliefs and values (Bass & Avolio, 1994). Furthermore, followers are stimulated to question decisions and tackle challenging tasks by reframing problems (Bass, 1990; Felfe & Goihl, 2002; Felfe, Tartler & Liepmann, 2004). Individualized consideration is a trait whereby the leader gives personal attention to his followers, taking into consideration their differences. The leader is continuously involved in a process of coaching and feedback linking the followers’ needs to the organization’s mission, providing opportunities for self-actualization and personal growth (Bass, 1985, 1990; Felfe & Goihl, 2002; Felfe, Tartler & Liepmann, 2004). Inspirational motivation pertains to the ability of the transformational leader to create an inspiring, motivating, convincing and attractive future vision. By the use of symbols and the display of optimism and power, leaders are able to encourage followers’ belief in their ability to perform (Bass, 1990; Bass & Avolio, 1994). This study used the four dimensions of transformational leadership. This approach allowed for the identification of the separate contributions to innovative work behaviour by the various dimensions, as well as a better understanding of the impact of the entire construct.
Transformational Leadership and Innovative Work Behaviour Few empirical studies exist that have demonstrated the specific relationship between transformational leadership and innovative work behaviour (Janssen, 2002). However, the extant literature has demonstrated various attempts at identifying the process by which transformational leaders potentially enhance innovative work behaviour (Bass & Avolio, 1990; Sosik, Avolio & Kahai, 1997; Mumford et al., 2002). A number of reasons are proposed to support the assumption that transformational leadership positively influences innovative work behaviour. Transformational leadership goes beyond transactional leadership by engaging followers’ personal value systems,
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thereby encouraging them to go beyond the regular exchange of conventional agreements for expected performance (Hater & Bass, 1988; Bass & Avolio, 1990). The leader stimulates followers to do more than is expected by intrinsically motivating them. Hater and Bass (1988), Bass and Avolio (1990) and Bass (1990) note that the transformational leader is able to induce followers, by means of intellectual stimulation, to re-evaluate potential problems and their work environment from which innovative ideas can grow. By using inspirational motivation, a transformational leader is able to induce within followers a belief in their ability to perform. It is likely that employees who are aware and confident of their ability to successfully implement their competencies, are prone to exhibit innovative work behaviour. As a transformational leader highlights individual qualities of followers, thereby emphasizing the diversity in talent, it is plausible that individualized consideration instigates innovative work behaviour. An abundance of empirical studies has found a positive relationship between transformational leadership and work unit effectiveness measures (Lowe, Kroeck & Sivasubramaniam, 1996; Sosik et al., 1998; Judge & Piccolo, 2004). Innovativeness was incorporated in many of these studies as a component of effectiveness, empirically endorsing that the relationship between transformational leadership and innovative work behaviour is primarily of an indirect nature. A study by Sosik et al. (1998) used the number of creative ideas generated as a component of effectiveness. Results indicated a positive relationship between transformational leadership and creativity in a computer-mediated brainstorming exercise. Research by Sosik (1997) and Sosik, Kahai and Avolio (1998) yielded similar results. Both studies used creativity as the effectiveness criteria. In a series of studies by Wilson-Evered and colleagues, transformational leadership was linked with innovative work climate and behaviours in health care teams (WilsonEvered, Härtel & Neale, 2001, 2004). In sum, from the literature reviewed thus far, only two studies have successfully and specifically linked transformational leadership to innovative work behaviour: Janssen (2002) and Wilson-Evered and colleagues (WilsonEvered, Härtel & Neale, 2001, 2004; WilsonEvered, Dall & Neale, 2001). In Janssen’s work, data were collected by means of questionnaires among 170 employees of an energy supplier in the Netherlands. By means of hierarchical regression analysis, this study found the relationship to be positive and highly significant. The relationship between innovative work behaviour and transactional leadership © 2008 The Authors Journal compilation © 2008 Blackwell Publishing
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was also tested, but no significant results were produced. More indirect evidence for the posited relationship is provided in a study by Jung, Chow and Wu (2003). Their study examined the relationship between transformational leadership and organizational innovation in 32 Taiwanese companies in the electronics industry. Analysis yielded a direct and positive link between transformational leadership and organizational innovation. The authors suggest that a leader who alters and influences the work environment and organizational culture is able to affect both organizational members’ work attitudes and motivation, which in turn affects their collective organizational achievement. Finally, Wilson-Evered and colleagues’ work on health care teams found a positive relationship between transformational leadership and climate for innovation as well as a link between transformational leadership and morale and morale and implemented innovations (Wilson-Evered, Härtel & Neale, 2001, 2004; Wilson-Evered, Dall & Neale, 2001). In light of the relationship which this study attempts to reaffirm, it is noteworthy that a number of studies were unable to produce supportive results. Kahai, Sosik and Avolio (2003) conducted a study which concluded that there was no significant difference in the number of creative ideas produced when either transformational or transactional leadership was employed. A study by Jaskyte (2004) yielded non-significant correlations between transformational leadership and organizational innovativeness. Notably, the results from the latter mentioned studies merely provide indirect evidence for the lack of a relationship between transformational leadership and innovative work behaviour. Though research evidence is equivocal, as evidenced through the previously reviewed studies, this study conforms to the theorized relationship that transformational leadership positively influences followers’ innovative work behaviour (Hater & Bass, 1988; Bass & Avolio, 1990). The purpose of this study is to supply conclusive and specific empirical evidence of the latter mentioned relationship which leads to the following hypothesis: Hypothesis 1. Transformational leadership is positively related to innovative work behaviour.
The Moderating Effect of Gender of the Manager Carless (1998) mentions that, according to the gender-centred perspective, individual attributes such as traits, cognitions and attitudes vary according to the gender of the indi© 2008 The Authors Journal compilation © 2008 Blackwell Publishing
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vidual. This approach suggests that women will develop a more feminine style of leadership, whereas men are prone to develop a more masculine style of leadership. The styles inhibit such characteristics as caring and nurturance or dominance and task orientation, respectively. Correspondingly, the social-role theory proposes that leaders will behave in accordance with societal expectations about their gender role. Women, in this respect, would be more prone to use transformational aspects of leadership (e.g. individualized consideration and intellectual stimulation; Eagly & Johannesen-Schmidt, 2001). The strand of empirical research regarding gender differences within transformational leadership is historically typified by a lack of consensus, yielding mixed findings within empirical research (Eagly & Johannesen-Schmidt, 2001; Eagly, 2003; Vecchio, 2003). A meta-analysis conducted by Eagly and Johnson (1990) confirmed both the existence and absence of gender differences in leadership styles. Within organizational studies, no differences were found between women and men in interpersonally oriented and task oriented leadership styles. Within laboratory experiments and assessment studies, the latter mentioned leadership styles appeared gender stereotypic to some extent. Furthermore, in accordance with gender stereotypic expectations, women were prone to adopt a more democratic or participative style of leadership than men. Conceptually, democratic leadership resembles transformational leadership (van Engen, van der Leeden & Willemsen, 2001). Meta-analytic research by Eagly, JohannesenSchmidt and van Engen (2003) did confirm the existence of gender differences within leadership styles. Results support the line of reasoning that female leaders are more transformational than their male counterparts, specifically indicating that women were superior on all transformational dimensions. Effect sizes for all observed differences were small, but stronger for the subscale of transformational leadership that is most congruent with the female gender role, namely, individualized consideration. Meta-analytic research by van Engen and Willemsen (2004) yielded similar results by demonstrating that women are more prone to use transformational leadership than men. Although meta-analytical research has revealed that women are more likely to adopt a transformational leadership style than men, caution is advised in judging their respective effectiveness. A meta-analytical study by Eagly, Karau and Makhijani (1995), examining leadership effectiveness, found that aggregated results, including all organizational and
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laboratory studies, yielded equal effectiveness measures for both women and men. The same study did, however, conclude that within roles defined in more masculine or less masculine terms, men and women were more effective respectively. In other words, gender differences in leaders’ effectiveness were significantly correlated with the congeniality of the respective roles. A previously conducted meta-analysis by Eagly, Makhijani and Klonsky (1992) yielded similar results in that women were devalued relative to their male counterparts when leaders occupied male-dominated roles or exhibited masculinetype leadership behaviours. A literature review yielded no empirical studies which specifically investigated the impact of contextual gender-typing on leader effectiveness. However, findings of the two latter mentioned meta-analyses suggest that in contexts in which leaders are ‘out of role’, effectiveness can be reduced (van Engen, 2001). With respect to the present research, determining whether hospitals constitute a male or female typed setting is requisite, as this establishes whether male or female managers occupy ‘out of role’ leadership positions, and from that inferences about respective effectiveness can be made. Medical workforce demographics reflect a paradox within hospitals. Gender ratios in absolute numbers within first world hospital workforces are dominantly in favour of women, which in turn may be seen as a proxy of the gendered nature of these hospitals (Degeling et al., 2000; Grant, Robinson & Muir, 2004). However, an in-depth analysis of the vertical distribution of men and women within hospital workforces suggests otherwise. Statistics indicate that women are predominantly employed as nurses in hospitals, amounting to more than 90 per cent of total nurse populations in Canada, the United States and the United Kingdom (Evans, 1997). A briefing paper by Zurn et al. (2002) for the World Health Organization remarks that women still tend to concentrate in lowerstatus health occupations, and constitute a visible minority among highly trained professionals and managers. The latter is reinforced by an article by Hassell (2003) which indicates that although pharmacy is a female dominated profession within hospitals in the United Kingdom, women comprise only 6 per cent of senior grades in comparison to 23 per cent for men. As such it may be argued that hospitals are in fact male gendered through the dominant positioning of men. When specifying for the Australian healthcare sector, a similar picture prevails. In 2005, Australia’s healthcare workforce totalled approximately 462,000
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FTEs, encompassing 75 per cent women (Australian Institute of Health and Welfare, 2006a). An analysis of the distribution of men and women in the Australian healthcare workforce provides a further incentive to believe that overall gender ratios must not be seen as a proxy of the gendered nature of a hospital. The presence of women in healthcare workforces is most profoundly visible in lower status occupations, such as nursing, where women account for 90 per cent of a total of 305,400 nurses. Various authors remark, however, that within nursing, patriarchal gender relations play a significant role in situating a minority of men in positions of power and status (Evans, 1997; Kleinman, 2004). The proportion of women in higher status occupations is significantly lower, which is visible in health professions such as medical specialist and general practitioner where the proportion of female occupants is 28 and 42 per cent, respectively (Australian Institute of Health and Welfare, 2006b). The latter depiction of hospital workforces suggests that despite a majority of women, a masculine typed setting prevails. This paper will argue that the male gendered setting, as depicted by the patriarchal nature of hospital workforces, allows for more effective leadership by men. Innovative work behaviour acts as the criterion of leadership effectiveness, which is considered valid, as innovation has been used in various metaanalyses as a criterion of leadership effectiveness (Lowe, Kroeck & Sivasubramaniam, 1996; Judge & Piccolo, 2004). The meta-analyses by Eagly, Makhijani and Klonsky (1992) and Eagly, Karau and Makhijani (1995) did not specify for transformational leadership. This paper assumes that such a specification would yield similar results, as transformational leadership can be seen as an androgynous form of leadership, thus not yielding an advantage to either men or women with respect to the form of leadership (van Engen, 2001; Manning 2002). Differences in leadership effectiveness are deemed to stem from the interaction between gender of the manager and the gender typing of the context. In other words, the hospital setting is considered incongruent for female managers, and congenial to male managers. As such, in this particular hospital setting it is assumed that gender of the manager will moderate in the relationship between transformational leadership and innovative work behaviour. Hypothesis 2: The effect of transformational leadership on innovative work behaviour is stronger for male managers, than for female managers. © 2008 The Authors Journal compilation © 2008 Blackwell Publishing
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The Moderating Effect of Gender of the Manager and Gender of the Employee Combined Empirical research on the determinants of the performance of leader–subordinate work pairs is abundant and diverse. However, specific research dealing with the impact of demographic similarity of superior–subordinate dyads on the relationship between transformational leadership and performance outcomes, such as innovative work behaviour, requires more attention. The ‘similarity attraction paradigm’ by Byrne (1971) according to Varma and Stroh (2001), which states that individuals are inclined to like others who are similar to them more than they like individuals who are different, is a possible perspective for addressing this issue. A study by Tsui and O’Reilly (1989), in accordance with this perspective, concluded that increased dissimilarity in superior–subordinate demographic characteristics was related to decreased effectiveness according to the superior’s perspective. Similarly, results from a study by Varma and Stroh (2001) revealed that male and female superiors exhibit a positive bias towards subordinates of the same gender, with a similar impact on performance appraisals. Milliken and Martins (1996) indicate that there is a tendency by supervisors to view dissimilar subordinates less positively, which is evident in lower performance ratings. In accordance with the latter, we expect an interaction effect of gender of the manager and gender of the employee, indicating that subordinates are prone to exhibit greater levels of innovative work behaviour when their leader is of the same gender rather than of the opposite gender. Hypothesis 3: Subordinates whose leader is the same gender will exhibit more innovative work behaviour than subordinates whose leader is of the opposite gender.
Method Research Setting, Participants and Procedures This research paper was written as part of a three-year research project on diversity in health care teams, funded by the Australian Research Council (ARC, 2004–06). The dataset for this study was compiled from a sample of 335 participants dispersed over four hospitals in Australia. Participants belonging to 41 multidisciplinary teams completed the ‘team member survey’. Criteria for including a team in the study were: teams that were identified as teams that met regularly and were interdepen© 2008 The Authors Journal compilation © 2008 Blackwell Publishing
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dent, and were known by others as a team and named as a team in the organizational structure. Furthermore, additional criteria for selection of teams were that teams needed to include at least three different functional groups (e.g., nurse, medical doctor, psychologist, allied health professional, consultant, etc.) and an agreed team leader could be identified. Four respondents were initially eliminated from the analysis, as one or more of the independent variables were missing. Females represented 77.9 per cent of the sample. Most respondents’ highest educational level was reflected by a Bachelors degree, and 81.5 per cent of the sample was comprised of Bachelors and Postgraduate degrees combined. A second dataset, for the analysis of hypotheses 2 and 3, required the elimination of a further 164 respondents, leaving a dataset of 171 respondents, dispersed over 36 teams. The reason for the elimination of the high number of respondents was twofold. In some teams, team members did not agree on who the official leader of the team was (we included the item ‘In your opinion, who is the official leader of this team (please provide position/job title only, e.g., Consultant, Nurse Unit Manager)?’. In those cases, we selected the leader that was appointed by most team members as the team leader (which resulted in a removal of 60 respondents). Furthermore, we eliminated 104 respondents from the analysis, as the response for ‘sex of the manager’ was left blank. Females represented 76.6 per cent of the remaining sample. Most respondents’ highest educational level was a Bachelors degree, and 76.1 per cent of the sample was comprised of Bachelors and Postgraduate degrees combined. Thus, the characteristics of the respondents from the second dataset are consistent with those in the larger dataset.
Measures Transformational leadership was measured using the Multifactor Leadership Questionnaire (MLQ) (Bass & Avolio, 1994). The four theoretically distinctive behavioural components of transformational leadership were measured by 20 items rated on a five-point Likert scale, with possible answers ranging from ‘1 = strongly disagree’ to ‘5 = strongly agree’. When all 20 items were included in a Principal Components Analysis (PCA) with Varimax rotation, the projected factor structure representing four dimensions was not achieved. Consequently separate factor analyses were employed for each theorized component of transformational leadership in order to determine whether the theorized items for each component loaded adequately. Under the given analytical circumstances, Inspirational motivation (4 items) and
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Table 1. Mean, Standard Deviation and Cronbach’s Alpha for Transformational Leadership & Dimensions Thereof, and Innovation n Items (1) 4 Innovationa (2) 20 Transformational leadershipa Dimensions of TF Leadershipa Intellectual (3) 4 Stimulation Inspirational (4) 4 Motivation Individualized (5) 4 Consideration Idealized Influence (6) 4
Mean (Stddev)
a
(1)
3.37 (0.76) 3.43 (0.66)
0.86 0.94
0.48**
3.27 (0.78)
0.81
0.43**
0.86**
3.66 (0.73)
0.82
0.44**
0.86**
0.66**
3.19 (0.82)
0.72
0.38**
0.85**
0.73**
0.61**
3.50 (0.77)
0.83
0.43**
0.94**
0.73**
0.80**
(2)
(3)
(4)
(5)
0.71**
** Correlation is significant at the 0.01 level (2-tailed). a Values range from 1 (strongly disagree) to 5 (strongly agree). N = 335.
Intellectual stimulation (4 items) matched the theoretical factor structure of the MLQ with reliability coefficients of 0.82 and 0.81, respectively. Individual consideration (4 items) contained one item which decreased the internal consistency. Idealized influence (8 items) contained two items which marginally decreased the internal consistency. However, because of sampling adequacy, it was decided to retain all items in the scales. The scales for transformational leadership presented within the MLQ guide the structure of the scales in our analysis, notwithstanding the lack of evidence for the theorized factor structure within this research. This stance is taken because a reconceptualization of the factor structure of the MLQ would seriously hamper the interpretability and validity of the construct transformational leadership. Innovative work behaviour was measured using four items from the Aston Team Performance Inventory, which was designed by West, Markiewicz and Dawson (2005). The four items measured individual perceptions of team innovation on a 5-point Likert scale, and were rated ranging from ‘1 = strongly disagree’ to ‘5 = strongly agree’. For the fouritem scale, a reliability coefficient (Cronbach’s alpha) of 0.86 was obtained.
Statistical Properties of the Questionnaire Scales Missing values on items of the innovation and transformational leadership scales were
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replaced by regression estimates with added random value, using Student’s t variates as residuals (Little & Rubin, 1990). The criterion variables used for the regression procedure are: (a) scores on items of the same scale, and (b) variables describing background information of the respondent (age, gender and educational level). Table 1 presents the means, standard deviations and internal consistency statistics of all instruments used, as well as the correlations between all scales.
Statistical Analysis The present study uses data which is presumed to have nested sources of variability, hierarchically placed on three levels. Most variables were measured at the employee level (Level-1), including gender of the employee, and employee ratings of the manager’s transformational leadership and innovative work behaviour. At the team level (Level-2), gender of the manager was measured. All of the teams belong to one of four hospitals (Level-3). In short, this means that Level-1 data (individual perceptions) is nested within Level-2 entities (teams), and in turn Level-2 entities are nested within Level-3 entities (hospitals). According to Snijders and Bosker (1999), a common procedure in social research is to aggregate the micro-level data to the macro-level, which is normally done by working with the averages of each macro-unit. However, aggregation is not an adequate method when analysing data with nested sources of variability. Snijders and © 2008 The Authors Journal compilation © 2008 Blackwell Publishing
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Bosker (1999) formulated four potential errors. The first potential error is shift of meaning, as no distinction is made between macro and micro units. In our study we are interested in innovative work behaviour of employees and not in team innovation, for instance. The second error with aggregation is the ecological fallacy, because the relationship between two variables (e.g., transformational leadership and innovative work behaviour) may be negative at the individual level but positive at the aggregate level (or vice versa). Thirdly, neglect of the original data structure may obscure underlying relations, for example obscuring the relationship of other (control) variables at the individual or team level. A last objection against aggregation is, ‘that it prevents from examining potential cross-level interaction effects of a specified micro-level variable with an as yet unspecified macro-level variable’ (Snijders & Bosker, 1999), in our case the possible interaction effects between gender of the employee and gender of the leader. Multi-level analysis introduces a Multilevel Random Coefficients Model (MRCM) which fits an integral model to all Level-1 data, simultaneously incorporating variables measured at higher levels, thereby using a maximum of information. In MRCM terms, the procedure involves modelling within-participant variance at Level-1, and between-participant variance at Level-2. In this sense, multi-level models allow for regression coefficients from one level of analysis to be modelled at another level. Furthermore, MRCM includes a fixed and random effect for each variable, as well as covariances between all random effects. Ordinary least squares (OLS) regression analysis, on the other hand, does not include random error terms and correlations between error terms. Theoretically, multi-level models embrace separate models for each separate data level. Within this study a distinction can be made between a Level-1 model at the respondent level, a Level-2 model at the team level, and a Level-3 model at the hospital level.
Results To begin with, two base models were estimated, a two-level intercept-only model and a three-level intercept-only model, in order to find out which of the two models fit the data better. Results readily indicate that the threelevel intercept-only model yielded no significant improvement in model fit (c2 = 0.348, ns) in comparison to the two-level intercept-only model. Thus, the two-level intercept-only model is the better baseline model for the variable innovative work behaviour, and will © 2008 The Authors Journal compilation © 2008 Blackwell Publishing
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subsequently be used as the baseline model. The intra-class correlation of the two-level intercept-only model is 0.201, which signifies that 20 per cent of the total variance in employees’ innovative work behaviour is variance between higher level units (teams). Column 1 in Table 2 presents the results of the base model.
Transformational Leadership A MRCM with innovative work behaviour as dependent variable and perceived transformational leadership as predictor was used to test Hypothesis 1. The results in column 2 of Table 2 show that employees exhibit a higher level of innovative work behaviour when subjected to higher levels of transformational leadership. This effect is significant (t = 8.37, p < 0.001), and thus Hypothesis 1 is accepted.
Gender of the Manager, and Gender of the Employee It is predicted that the effect of transformational leadership on innovative work behaviour is stronger for male managers than for female managers. Furthermore, it is predicted that subordinates in same-gender superior– subordinate dyads will exhibit superior levels of innovative work behaviour. To test Hypotheses 2 and 3, two MRCMs were estimated. Table 3 displays the results for the two models. The first column presents the results for the effects of transformational leadership and gender of the manager on innovative work behaviour.1 The second column presents the results for the effects of transformational leadership, gender of the manager, and gender of the employee on innovative work behaviour. In both models, the effect of transformational leadership is significant. Results indicate that gender of the manager has no significant direct effect on innovative work behaviour (t = -0.54, ns.). In accordance with expectations, the interaction effect between transformational leadership and gender of the manager proved significant (t = 2.48, p < 0.05). Inspection of the regression model suggests that transformational leadership by male managers induces a slightly higher level of innovative work behaviour in employees in comparison to female managers. Results are in accordance with the theoretical reasoning of this study, thereby confirming Hypothesis 2. Results also indicate that neither gender of the manager, nor gender of the employee 1
The deviance of the model including only transformational leadership, acting as the comparative model, was 316,522.
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Table 2. Two-Level Intercept-Only Model, and Estimated Innovative Work Behaviour by Perceived Transformational Leadership Parameters
Estimate (Standard Error) Intercept-Only
Fixed Parameters: – constant Employee variables (Level-1): – transformational leadershipa
3.292 (0.068)
Leadership
3.340 (0.052) 0.544 (0.065)***
Variance Components: Team variance (Level-2): – intercept – transformational leadership/intercept – transformational leadership Employee variance (Level-1): – residual – 2 log likelihood (deviance)
0.118 (0.042)
0.469 (0.039) 738.382
0.055 (0.024) -0.023 (0.020) 0.033 (0.032) 0.374 (0.032) 657.469***
* p < 0.10, ** p < 0.01, *** p < 0.001. a Transformational leadership is centered around the mean. The degrees of freedom for the chi-square test is the number if extra parameter estimates in every column. There are k = 40 teams and N = 335 respondents.
(within the same model) have a significant direct effect on innovative work behaviour. Note that the significant interaction effect between transformational leadership and gender of the manager has disappeared (t = 0.08, ns.) within the model, including gender of the employee. No significant effect was found for the three-way interaction of transformational leadership, gender of the manager, and gender of the employee (t = -0.48, ns.),2 thereby disconfirming Hypothesis 3.
Components of Transformational Leadership Next, we examined the various components of transformational leadership (idealized influence, individual consideration, intellectual stimulation and inspirational motivation). Table 4 presents the results for the estimations of innovative work behaviour. The effect of the components of transformational leadership on innovative work behaviour proved positive and significant for all four components. Analysis of the interaction effects between the components of transformational leadership and gender of the manager yielded significant results for idealized influence (t = 2.82, p < 0.01) 2
The deviance for model (1.4) has not significantly changed in comparison to the deviance of model (1.3).
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and individualized consideration (t = 2.45, p < 0.05).3 In other words, the results indicate that the majority of the variation in innovative work behaviour, due to the interaction effect between transformational leadership and gender of the manager, is explained by idealized influence and individualized consideration. More specifically, the results suggest that idealized influence and individualized consideration by male managers induces a slightly higher level of innovative work behaviour in employees in comparison to female managers. As such, in accordance with the theoretical reasoning in this paper, further partial confirmation of Hypothesis 2 is observed.
Discussion The purpose of this research was to establish the relationship between transformational leadership and innovative work behaviour. The provision of beneficial services to patients with respect to medicine and health care is the primary responsibility of hospitals, as extensive social and economic repercussions are implied (Australian Institute of Health and 3
The deviances for the m estimating innovative work behaviour by the components of transformational leadership and sex of the manager were all insignificant. © 2008 The Authors Journal compilation © 2008 Blackwell Publishing
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Table 3. Estimated Innovative Work Behaviour by Perceived Transformational Leadership, Sex of the Employee and Sex of the Manager Parameters
Estimate Innovation (Standard Error) Leadership & Sex Leadership & Sex of the of the Manager Manager and Employee
Fixed Parameters: – constant Team variables (Level-2): – sex of managera Employee variables (Level-1): – transformational leadershipb – sex of employeea Cross-level interactions: – transformational leadership ¥ sex of manager – sex of manager ¥ sex of employee – transformational leadership ¥ sex of manager ¥ sex of employee Variance Components: Team variance (Level-2): – intercept – transformational leadership/intercept – transformational leadership – sex of employee/intercept – transformational leadership ¥ sex of employee – sex of employee Employee variance (Level-1): – residual – 2 log likelihood (deviance)
3.384 (0.088)
3.408 (0.121)
-0.065 (0.120)
-0.002 (0.263)
0.747 (0.094)***
-0.342 (0.138)*
0.037 (0.027) 0.000 (0.000) 0.000 (0.000)
0.344 (0.041) 316.388
0.897 (0.151)*** -0.034 (0.160) 0.051 (0.679) -0.098 (0.297) -0.339 (0.696)
0.024 0.0 0.0 -0.021 0.074 0.000
(0.051) (0.000) (0.000) (0.062) (0.098) (0.000)
0.325 (0.040) 311.139
* p < 0.05, ** p < 0.01, *** p < 0.001. a Sex is dummy coded, 0 for men and 1 for women. b Transformational leadership is centered around the mean.
Welfare, 2006a). Workplace innovation encourages the advancement of medical care in hospitals, which underlines the importance of transformational leadership, as it is hypothesized that more transformational leadership corresponds with greater amounts of innovative work behaviour (Hypothesis 1). The latter relationship was subsequently specified by including the moderating effect of gender of the manager and gender of the employee. This study expected the relationship between transformational leadership and innovative work behaviour to be stronger for male managers than for female managers (Hypothesis 2). With respect to manager–employee dyads, we expected that employees in same-gender dyads would exhibit more innovative work behaviour (Hypothesis 3). Solid evidence was found for the relationship between transformational leadership and innovative work © 2008 The Authors Journal compilation © 2008 Blackwell Publishing
behaviour, enduring when specifying for the various components of transformational leadership (idealized influence, intellectual stimulation, individualized consideration and inspirational motivation). Results are congruent with the theoretical perspective of Bass and Avolio (1990), and empirical findings by Janssen (2002), Wilson-Evered, Härtel and Neale (2001, 2004) and Wilson-Evered, Dall and Neale (2001). In short, we theorized that differences in the relationship between transformational leadership and innovative work behaviour, with respect to the gender of the manager, stem from the gendered nature of the context. Conceivably, hospitals constitute a masculine typed setting, specifically in terms of leadership. Taking this contention allowed us to make inferences congruent with the findings of meta-analyses by Eagly, Makhijani and
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(0.032) (0.000) (0.000) (0.000) (0.000)
0.372 (0.045) 328.761
0.050 0.000 0.000 0.000 0.000
0.000 (0.000)
(0.031) (0.000) (0.014) (0.000) (0.007)
-0.161 (0.112)
0.000 (0.000)
0.043 0.000 0.005 0.000 -0.006
-0.189 (0.067)**
0.514 (0.073)***
-0.065 (0.129)
-0.047 (0.127) 0.350 (0.056)***
3.368 (0.094)
Intellectual Stimulation
(0.030) (0.000) (0.027) (0.000) (0.000)
0.377 (0.047) 335.602
0.000 (0.000)
0.040 0.000 0.015 0.000 0.000
-0.324 (0.132)*
0.537 (0.087)***
-0.056 (0.126)
3.375 (0.092)
Individualized Consideration
Estimate Innovation (Standard Error)
3.373 (0.094)
Idealized Influence
* p < 0.05, ** p < 0.01, *** p < 0.001. a Sex is dummy coded, 0 for men and 1 for women. b Components of transformational leadership are centered around the mean.
Variance Components: Team variance (Level-2): – intercept – TFL subscale/intercept – TFL subscale – sex of manager ¥ TFL subscale/intercept – TFL subscale/sex of manager ¥ transformational leadership – sex of manager ¥ TFL subscale Employee variance (Level-1): – residual – 2 log likelihood (deviance)
Fixed Parameters: – constant Team variables (Level-2): – sex of managera Employee variables (Level-1): – transformational leadershipb Cross-level interactions: – transformational leadership ¥ sex of manager
Parameters
Table 4. Estimated Innovative Work Behaviour by Perceived Transformational Leadership, and Sex of the Manager
(0.026) (0.000) (0.034) (0.000) (0.000)
0.386 (0.047) 335.914
0.000 (0.000)
0.028 0.000 0.019 0.000 0.000
-0.265 (0.149)
0.621 (0.104)***
-0.082 (0.120)
3.403 (0.087)
Inspirational Motivation
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Klonsky (1992) and Eagly, Karau and Makhijani (1995), that male managers are more effective in inducing innovative work behaviour when using transformational leadership. The interaction effect of gender of the manager and transformational leadership was moderately significant and in the predicted direction; that is, male managers exhibiting transformational leadership induce more innovative work behaviour in subordinates than female managers. Caution is advised about generalizing the results, as the deviance was not significantly different from the model including only transformational leadership. With more statistical power, better results could potentially be achieved. The current lack of power can be attributed to the small sample size. Despite a small deviance, results are in accordance with the theoretical reasoning behind Hypothesis 2. A potential explanation for the latter result is twofold. Either transformational leadership by male managers is more effective within the research setting, or employees exhibited a negative bias towards female managers in evaluations of transformational leadership, even if they exhibited the same behaviour as male managers. In both cases, demonstrated gender differences might be attributed to the gendered nature of the context. As no concrete inferences can be made about the influence of context, future research should incorporate a measurement of the gendered context, and attempt a comparison between feminine and masculine contexts. Such an approach would aid in determining whether differences in induced innovative work behaviour between male and female managers exhibiting transformational leadership can be attributed to the leadership style, or the gendered nature of the context as hypothesized. Further specification of which of the dimensions of transformational leadership is responsible for the interaction effect of leadership style and leader gender on innovative work behaviour showed that, specifically, idealized influence and individualized consideration generated gender contrast effects. Results suggest that male managers who express compassion, trust and confidence towards the individual, and exhibit great commitment and persistence in pursuing objectives, are more effective in eliciting innovative work behaviour in followers in comparison to female managers. With respect to individualized consideration, it is possible that the respondents exhibited counter-stereotypical behaviour, which leads to a polarized evaluation in the opposite direction of the gender stereotype (Vonk & Ellemers, 1993). This situation would imply that female managers are expected to demonstrate stereotypical female leadership traits, whereas male © 2008 The Authors Journal compilation © 2008 Blackwell Publishing
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managers are overtly commended for exhibiting such traits. A study by van Engen (2001) obtained comparable results, by demonstrating that feminine male managers were evaluated most favourably on ratings of subordinate satisfaction with the manager. The disappearance of the significant interaction effect between transformational leadership and gender of the manager in the model including gender of the employee can possibly be attributed to an over-fitting of the model. This study is congruent with the similarity attraction paradigm (Byrne, 1971), that a manager exhibiting transformational leadership will be more proficient in stimulating innovative work behaviour in employees of the same gender. The three-way interaction effect of transformational leadership, gender of the manager and gender of the employee on innovative work behaviour was not significant. As such, the similarity attraction paradigm, with respect to innovative work behaviour induced by superiors in superior–subordinate dyads, was unverified. Comparable findings stem from a study conducted by Komives (1991) which examined the relationship of same- and cross-gender work pairs to staff performance and supervisor leadership in resident hall units. Measures of supervisory leadership, job satisfaction and motivation to extra effort revealed no significant differences for male and female assistants, regardless of the gender of the supervisor. Arguably, the absence of gender differences stems from the fact that perceptions of team innovative work behaviour were used, instead of evaluations of individual behaviour. Future research should incorporate objective individual measurements of innovative work behaviour.
Limitations Although this study has found encouraging results, it is important to recognize that the current findings have several limitations. A general limitation of the type of data gathering employed is its cross-sectional nature, which raises the question whether the correlations found truly reflect the assumed causal relationship between transformational leadership and innovative work behaviour. Janssen (2002) indicated that the approachability of the manager is an important mediating factor between transformational leadership and innovative work behaviour. Approachability of the manager can be regarded as interwoven with organizational support for innovation, as vertical knowledge sharing is essential for successful implementation of innovative ideas by employees (Damanpour, 1991). It is therefore possible that innovative employees share more
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ideas with the manager within an environment supportive of innovation, subsequently causing the employee to identify the manager as more transformational. This paper argues, however, that such an inverse relationship between transformational leadership and innovative work behaviour is highly unlikely as the positive impact of transformational leadership on effectiveness has been demonstrated both theoretically and empirically on numerous occasions (Hater & Bass, 1988; Lowe, Kroeck & Sivasubramaniam, 1996; Sosik et al., 1998). Longitudinal studies may aid in verifying the causal nature of the relationship between transformational leadership and innovative work behaviour. Another issue related to the causal direction of transformational leadership and innovation is how transformational leadership may lead employees to become more innovative. Transformational leadership may, for instance, have an impact on climate, group interactions and individual performance abilities (Mumford et al., 2002) that may mediate the relationship between transformational leadership and innovation. Future research that examines mediating variables may shed a light on how transformational leadership may shape innovative work behaviour. The nature of self-report studies must also be addressed, as the possibility exists of common method variance. Common method variance refers to that instance where multiple measures come from the same source, which contaminates both measures with the presence of defects in the source (Podsakoff et al., 2003). A tendency towards increased correlations between constructs can be attributed to a positive view of the manager which propagates to analogous evaluations of separate concepts, or a general inclination towards consistent answering. However, in observing the modest correlation between transformational leadership and innovative work behaviour (r = 0.48), the chance of common method bias is regarded as less likely. The latter takes into account that the existence of common method variance would go hand in hand with a high correlation between transformational leadership and innovative work behaviour. Finally, although our sample consisted of a considerable sample of 335 respondents from 40 multidisciplinary teams, the results concerning the effect of gender of the manager and gender of the employee should be interpreted with caution as these were based on a much smaller sample of 171 respondents in 36 teams. Various conceptual and procedural concerns have been raised regarding the MLQ, such as high inter-correlations among the
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various dimensions, potentially hampering its construct validity (Yukl, 1999). A number of authors have demonstrated ambiguity concerning the number of behavioural components of transformational leadership, a notion reflected by the factor structure identified within this study (Bycio, Hackett & Allen, 1995; Tracey & Hinkin, 1998; Avolio, Bass & Jung, 1999). It is possible that the latter has influenced the analyses within this study of the relationship between the four theorized components of transformational leadership and innovative work behaviour. Future research should further investigate the construct validity of transformational leadership, as it embraces direct consequences for effective leadership training. A distinction between the various behavioural components is only useful when employees can perceive this distinction in practice. The measure for innovative work behaviour might be prone to social desirability bias, as individual perceptions of team innovative work behaviour were used. It is possible that employees responded with high scores on the items of innovative work behaviour, irrespective of actual perspectives as they are unclear about their own contribution, or because they want to present themselves positively. In order to reaffirm and refine the promising findings of this study, future research should incorporate objective measures of innovative work behaviour.
Practical Implications and Conclusion Several practical implications are evident from the findings of this study. The findings of this study have demonstrated the importance of transformational leadership for innovative work behaviour. Hospitals that want to capitalize on the innovative capabilities of employees must ensure that team leaders and individuals in key leadership positions not only possess transformational leadership behaviours, but explicitly demonstrate them as well. Recruitment and development practices should therefore incorporate a means to control for the presence and actual use of such behaviours, which could subsequently yield an environment in which innovative work behaviour can thrive, thereby aiding the advancement of medical care. The results of this study reiterate that hospitals should capitalize on the transformational leadership capabilities of both male and female managers. The findings do suggest, however, that female managers are unable to exploit and benefit from the empirically demonstrated greater © 2008 The Authors Journal compilation © 2008 Blackwell Publishing
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likelihood of adopting a transformational leadership style within a hospital setting, with respect to perceived innovative work behaviour in followers (van Engen, van der Leeden & Willemsen, 2001; Eagly, Johannesen-Schmidt & van Engen, 2003). The absence of a significant three-way interaction effect between transformational leadership, gender of the manager and gender of the employee suggests that the composition of a functional team in a hospital is not a determinant of team innovative work behaviour. The concluding message of this research is that investment in, and nurturance of transformational leadership creates an environment in which innovation can thrive to the benefit of patients and medical care alike.
Acknowledgements This research was made possible by the Australian Research Council (ARC), Discovery Grant (2004–2007) DP0450503 awarded to Wilson-Evered, Härtel, van Engen, West & Powell, and by a travel bursary to van Engen from Tilburg University.
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Snijders, T.A. & Bosker, R.J. (1999) Multilevel Analysis: An Introduction to Basic and Advanced Multilevel Modeling. Sage Publications, London. Sosik, J.J. (1997) Effects of Transformational Leadership and Anonymity on Idea Generation in Computer-Mediated Groups. Group & Organization Management, 22, 460–87. Sosik, J.J., Avolio, B.J. & Kahai, S.S. (1997) Effects of Leadership Style and Anonymity on Group Potency and Effectiveness in a Group Decision Support System Environment. Journal of Applied Psychology, 82, 89–103. Sosik, J.J., Avolio, B.J., Kahai, S.S. & Jung, D.I. (1998) Computer-Supported Work Group Potency and Effectiveness: The Role of Transformational Leadership, Anonymity, and Task Interdependence. Computers in Human Behavior, 14, 491–511. Sosik, J.J., Kahai, S.S. & Avolio, B.J. (1998) Transformational Leadership and Dimensions of Group Creativity: Motivating Idea Generation in Computer-Mediated Groups. Creativity Research Journal, 11, 111–21. Tracey, J.B. & Hinkin, T.R. (1998) Transformational Leadership or Effective Managerial Practices? Group & Organization Management, 3, 220–36. Tsui, A.S. & O’Reilly, C.A. (1989) Beyond Simple Demographic Effects: The Importance of Relational Demography in Superior-Subordinate Dyads. Academy of Management Journal, 32, 402–23. Unsworth, L., Brown, H. & McGuire, L. (2000) Employee Innovation: The Roles of Idea Generation and Idea Implementation. In Proceedings of the Annual Conference of the Society for Industrial and Organizational Psychology, New Orleans. Van de Ven, A.H. (1986) Central Problems in the Management of Innovation. Management Science, 32, 590–607. van Engen, M.L. (2001) Gender and Leadership: A Contextual Perspective. Doctoral dissertation, Tilburg University, Tilburg, the Netherlands. van Engen, M.L., Van der Leeden, R. & Willemsen, T.M. (2001) Gender, Context and Leadership Styles: A Field Study. Journal of Occupational and Organizational Psychology, 74, 581–98. van Engen, M.L. & Willemsen, T.M. (2004) Sex and Leadership Styles: A Meta-analysis of Tesearch Published in the 1990s. Psychological Reports, 94, 3–18.
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Mark Reuvers holds a Master Degree in Human Resource Studies from Tilburg University, The Netherlands and in Culture Organization & Management from the Vrije Universiteit in Amsterdam, The Netherlands. He is interested in international management and innovation. Marloes van Engen is assistant professor at the Department of Human Resource Studies, Faculty of Social and Behavioral Sciences at Tilburg University where she lectures in Diversity in Organizations. She studied social psychology with a minor in the psychology of culture and religion at the Radboud University in Nijmegen. She lectured in Communication Sciences before she moved to Tilburg University. Her research interests are gender in organizations, gender and careers, work-family issues in organizations, diversity in teams and organizations and the management of diversity in organizations. Claartje Vinkenburg is associate professor of organizational behaviour and development and programme director for the International Business Administration BSc programme at the Vrije Universiteit Amsterdam (VU). She studied social psychology at the University of Groningen, before becoming management consultant and adjunct lecturer at Northwestern University (USA). As managing director of the Amsterdam Centre for Career Research, Vinkenburg’s work focuses on gender, leadership and career advancement, including the effects of motherhood ideology on women’s career patterns and outcomes. Elisabeth Wilson-Evered is Senior Lecturer at the School of Psychology, Psychiatry and Psychological Medicine, Faculty of Medicine, Nursing and Health Sciences at Monash University, Melbourne, Australia. Before becoming a full-time academic she undertook a number of major organizational projects focusing on leadership capability, leadership development, culture and climate change, values-based change, mergers and acquisitions and Enterprise Resource Planning (ERP) implementation. She is a qualified and registered project manager and leading organizational change initiatives has been a key focus of her work.
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Conference Report Summary of the Second Creativity and Innovation Management Community Meeting, 28–30 May 2008, Buffalo State College, USA Seventeen years ago Tudor Rickards and Susan Moger of the Manchester Business School launched an ambitious project – the introduction of a new academic journal in the field of creativity studies. But this would be no stodgy academic journal strictly dedicated to theory and research, rather, given the applied nature of creativity, this journal would focus on the relevance and applicability of creativity to innovation and organizational practices. This journal is called Creativity and Innovation Management (CIM). Not being satisfied with increases in paper submissions, citations to papers published in the CIM, and manuscript rejection rates, all evidence of the success of this journal, the new team of editors decided to hold a community meeting in Oxford, England, in the spring of 2005. The explicit intent of this two-day meeting was to begin to build a community of scholars who were interested in creativity and innovation management, a rare goal for academic journals. Building on the positive momentum of the first community meeting, the editors decided to hold a second meeting. The purpose of this brief report is to provide a summary of the Second Creativity and Innovation Management Community Meeting held at Buffalo State College, and co-hosted with the faculty of the International Center for Studies in Creativity, from 28 to 30 May 2008.
Conference Theme: Integrating Inquiry and Action The expressed aim of the CIM journal is to ‘bridge the gap between theory and practice of organizing imagination and innovation’. The journal focuses on facilitating creative potential that can be transformed into innovative business development. With these aims in mind it was decided to design the programme and framework of the second community meeting around a theme that reflected the journal’s concern for both theory and practice. © 2008 The Author Journal compilation © 2008 Blackwell Publishing
The theme selected for the meeting was ‘Integrating Inquiry and Action’. This theme fostered an explicit goal for the meeting, namely to facilitate an exchange between scholars and practitioners. The entire approach to the meeting was influenced by the adoption of the ‘Integrating Inquiry and Action’ theme. For instance, keynote speakers were invited from both academe and industry and the call for papers sought presentations based on research as well as practice.
Keynote Speakers The backbone to the conference programme was a set of six invited keynote speeches. Professor Tudor Rickards of the Manchester Business School conducted the first keynote speech, delivered during the opening banquet. In his speech, Professor Rickards explored past attempts to understand creativity, current models, theories and programmes, and finally, future issues and considerations. Five keynote speeches were delivered over the course of the two full conference days. Again, these invited speakers represented both universities and businesses. There were three scholarly thought leaders: Ming-Huei Chen of the Chung Hsing University in Taiwan, Todd Lubart from the University in Paris, and Michael Mumford of the University of Oklahoma. Reviewing these speeches in order of the conference programme, Professor Lubart’s keynote address explored creativity across cultures. In his speech Professor Lubart eloquently described three crucial ways in which culture shapes creativity: (1) the domain of creativity (i.e., where you find creativity); (2) the nature of creativity (i.e., the kind of creativity); and (3) the amount of creativity (i.e., the degree to which culture nurtures individual creativity). Dr Ming-Huei Chen described approaches to creativity and innovation in Eastern cultures. This speech specifically examined the important role social networks play in facilitating creative thinking among members of project teams. Professor Michael Mumford delivered the final academic keynote speech. In this keynote address, Professor Mumford examined the role leadership plays in bringing about creativity and innovation in organizations.
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According to Mumford, some of the most crucial actions leaders can take include: defining a viable mission, developing the organization’s absorptive capacity, bringing the right people together, and ensuring efficient planning and implementation. The two invited business leaders were Dr Casimer DeCusatis, a Distinguished Engineer from the IBM Corporation, and Miriam Kelley, the Vice President for Design from FisherPrice Toys. Dr DeCusatis reported on an innovation study conducted within IBM and in particular highlighted distinctions among different innovation teams. His paper appears in the June issue of this year’s CIM journal. Miriam Kelley’s speech examined the many strategies Fisher-Price Toys has adopted to facilitate fresh ideas and innovation, such as benchmarking organizations outside of the toy industry, creating an executive position focused strictly on innovation, and introducing deliberate creative processes.
Concurrent Paper Presentations Stimulation and dialogue were further advanced by 35 concurrent session presentations. The number of sessions makes it impossible to review and describe each session. The papers were organized into themes with two paper presentations per session. Some of the themes were as follows: Creativity and mediation, Creativity in organizations, Current and ongoing developments in creative problem solving, Developing creativity assessment tools, Applications of creative problem solving, Climate and environment, Styles of creativity, and Definitions of innovation. To ensure an
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exchange between the speakers and the audience, graduate students and alumni of Buffalo State College moderated each concurrent session. All concurrent session papers appear in the conference proceedings. Additionally, several keynote speakers provided papers that appear in the proceedings, including the opening keynote speech by Professor Rickards. The best academic papers will be published in a special issue of Creativity and Innovation Management in 2009, while the best papers focused on applied work will be nominated for publication in Visions, a magazine published by the Product Development and Management Association.
Conclusion and the Next CIM Community Meeting The 2nd CIM Community Meeting brought together 173 academics and practitioners from 18 different countries. Discussions were lively, exchanges were energetic, keynote sessions were stimulating and the conference goal of fostering an exchange between theory and practice was achieved. Participants’ reaction to the conference, as assessed through a postconference survey, was extremely positive. Building on the positive energy created during the 2nd Community Meeting, a third meeting is now being planned for July 2010 in Paris, France. Professor Todd Lubart will be taking the lead in organizing the 2010 CIM conference. Gerard J. Puccio Chair & Professor Buffalo State College, International Center for Studies in Creativity
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Book Review Rothschild, William E. (2007) The Secret of GE’s Success, McGraw-Hill, New York. 293 pp, price $27.95, ISBN 13-978-07-147593-8.
Politics is the art of the possible Otto Bismarck, 18671 This book stands out from the plethora of GE books, articles and cases for several reasons. (1) The author worked 28 years for GE, starting in 1955 as a trainee in finance and employee relations, and ending as GE’s top strategist in 1984, when he was replaced by an old friend of Welch, who was gradually removing the old guard who had served under his predecessor, Jones. (2) Since he left GE, the author has led his own consulting firm, and has been watching GE’s evolution under Welch and under Immelt very carefully, and now runs a website for ‘GE Watchers’ and ‘GE Bloggers’. (3) The book is written in a simple, conversational style that makes easy reading in the office, at home, on airplanes, etc. It is structured in short chapters and sections (some only 50–60 words long) with bold headings which allow the reader to resume reading where one left off after an interruption. (4) Each chapter is previewed by approximately ten ‘Highlights’ that stimulate the reader’s interest, and concludes with a few ‘Takeaways’. These are real gems, because they summarize the ‘lessons learned’, many the hard way, by GE and make ‘recommendations’ on how to apply these lessons to the business management activities of the readers, many of whom work for, or consult with, large and medium companies. (5) The structure of each chapter is original. Each chapter analyses GE’s successes and failures according to five factors: Leadership, Adaptability, Talent, Influence, Networks, which can be summarized by the acronym LATIN (no relationship implied between the GE and Roman empires!). In turn, these five factors are displayed according to a magic circle, where each 1
This quotation has also been attributed to Niccolò Machiavelli, c. 1500.
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factor is reinforced by the preceding one, and reinforces the following one. By comparing these circles from one chapter to the next, it is easy to follow the major changes in GE’s evolution, with time and with CEOs. (6) The history of GE is related at the ‘political’ level, following the style and realistic analysis and evaluation of Machiavelli. The historical facts and their positive or negative results are described, showing what worked and what did not, without references to ethics or, in modern terms, to ‘corporate social responsibility’. GE is presented as it was, not as it should have been. Therefore, Edison’s advocacy of AC for electrocution to discredit Westinghouse, the international electric lamp cartel of the 1920s and the price-fixing scandal of the 1950s are not condemned. While some readers may object, this approach makes the book more focused. The book is divided into four parts. • Part I: ‘Live Better Electrically’: GE’s First Stage, 1879 to 1939, Edison-Swope/Young • Part II: Diversification and Decentralization: GE’s Second Stage, 1940 to 1970, Wilson/ Borch • Part III: Portfolio Leadership: GE’s Third Stage, 1971 to 2001, Borch/Welch • Part IV: ‘Back to the Future’: GE’s Fourth Stage, 2001 to the Present,2 Immelt. This division into four parts is different from the more obvious and common structure found in the literature: (1) Before Welch; (2) Welch; (3) After Welch. Part III binds together three famous CEOs: Borch, Jones and Welch, but note that Jones, the most admired CEO during his tenure, is not listed in the heading, while Borch is listed twice (Part II and Part III). One reason for this apparent underestimation of Jones and also of Welch, may be that the author was one of GE’s strategists under these three CEOs and wants to emphasize the continuity of GE’s strategy. In fact, the author 2
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claims that Welch’s well-known ‘three circle concept’ was not original, but derived from what Welch learned under Borch and Jones. It also appears that the author has an ambivalent attitude towards Welch’s contributions and his significance for GE’s history. One simple way to resolve this impasse is to compare GE’s success under Jones and Welch. The author does not define ‘success’ either qualitatively or quantitatively, and the book includes minimal financials. However, in today’s business world, financial success is the most important component. While the growth rates in sales, net earnings and productivity under Jones and Welch are comparable, there is a major difference in the growth of GE’s stock price and market value. Under Jones, GE’s market value increased only 1.3 per cent per year, slower than the S&P 500 index (2.1 per cent). Under Welch, market value increased at the rate of 20.4 per cent per year, 56 per cent faster than the S&P index. This growth rate is truly exceptional for a 120-year-old mature company, and is therefore the main reason behind Welch’s unique success on Wall Street and in the popular press. Part IV ‘Back to the Future’ is a discussion of GE under Immelt (2001 to 2006). There is an analysis of the challenges faced by Immelt when he took over in 2001: the legacy of Welch, the post-9/11 financial crisis, organic growth versus acquisitions, back to technology, ecoimagination and, of course, portfolio management. It appears that the author is unsure of Immelt, praising many of his initiatives, but questioning whether they will achieve the expected results, in financial and non-financial terms. The author ends this part with a ‘declaration of faith’.
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In short, I am not convinced that Immelt and his team will be able to grow GE organically at unprecedented rates by innovation and globalization or that they will continue to have the strong, deep, talented bench that they have had in the past. However, I continue to be a strong fan of this remarkable company, and I hope that my concerns will be unfounded and that Immelt and his team will continue to grow the company and adapt to both external and internal changes, as his predecessors were so successful in doing. Unfortunately, GE stock does not go up because of faith, but rather according to the market’s expectations of GE’s future concrete business and financial successes. In my opinion, some major problems of the Immelt era deserve a more in-depth analysis than has been done in Part IV. In the meantime, The Secret of GE’s Success stands out from other management books as recommended reading for executives, managers, students and the general public, but in particular for two classes of readers: 1. GE veterans and long-time stockholders who need to understand the reasons for GE’s past success. 2. The new generation of educated business persons, present and potential GE stockholders who want to learn from the history of GE, the world’s most admired company, and adapt the lessons learned to improve the success of their businesses and personal careers. Pier A. Abetti Rensselaer Polytechnic Institute
© 2008 The Author Journal compilation © 2008 Blackwell Publishing
