Improving large and established industrial organizations’ innovation capability through innovation barriers and innovation culture - A structural equation modeling approach

Abstract

Innovation is essential for large and established business organizations. To remain competitive in the ever-pacing rivalry, organizations must be capable of innovating, but also beyond the traditionally thought areas such as products. One key element to support continuous innovation and renewal is contributable to a specific form of organizational capability, innovation capability. However, given that only a handful of all Fortune 500 companies prevail compared to past 100 years, the findings suggests that many companies are underperforming in their innovation activity. As current literature has mainly focused on innovation enablers, this thesis aims to explore the effects of various barriers that inhibit, block, or delay innovation in one industrial organization. Based on the findings of the study, the thesis proposes a novel framework for future research purposes: organizational structures, leadership, culture, and people enable innovation structurally, but which still need specific managerial capabilities to overcome potential limiting factors. The thesis surveyed 192 organizational members within one established high-technology industrial organization across two hierarchical layers - managers with staff responsibilities and employees. Studying the structural relationship of innovation barriers and innovation capability provides managers theoretical understanding how to enhance organizations innovation capability by accounting the perceptions and experiences of its organizational members through barrier perspective. Factor Analysis was performed to reveal underlying latent barrier constructs. The results suggest that two major barrier constructs negatively affect innovation in the studied organization. For employees, barriers that related to organizational focus and management were found to carry a statistically significant and negative effect on innovation capability. Respectively managers with staff responsibilities perceived that resources, incentives, and current innovation process affect negatively innovation capability. The results suggest that managers of the studied organization may be limited due higher-order organizational constraints or managerial capabilities – and that employees expect different kind of management and leadership approach for innovation than it is for current. The findings of this study help to understand the nature of innovation barriers and innovation culture, and their influence mechanism on innovation capability. From theoretical perspective, the thesis confirmed the commonly found claim that innovation culture has positive effect on innovation capability, but the thesis further proposes that certain cultural traits might reduce the negative effect of barriers through moderating effect.