Academic journal article Journal of Business and Entrepreneurship

Measurement of Organizational Innovation: A Process Approach

Academic journal article Journal of Business and Entrepreneurship

Measurement of Organizational Innovation: A Process Approach

Article excerpt

ABSTRACT

The use of innovation process measures are examined as a valuable alternative, or addition, to traditional innovation output measures in this study of organizational entrepreneurship in 82 small businesses. A multi-measurement approach (i.e., overall innovation activity and participation) across a three step process (i.e., ideas discussed, proposed and products introduced) is taken in studying organizational innovation. Tests of the measures indicate their usefulness in providing new information about the innovation process and the roles of strategic, administrative and operative employees.

INTRODUCTION

The American economy is becoming more competitive as a result of rapid technological change, customers demanding more of products, and growth in the number of domestic and foreign competitors. A key to profitability, growth, and survival in such an environment is the continuous creation of new products and processes. Clearly, innovation must be accepted as a way of organizational life. This is particularly true for small businesses that lack the wherewithal of large organizations to exist for periods of time without responding to the everchanging marketplace.

According to Van de Ven and Poole (1990, p. 317): "The process of innovation consists of motivating and coordinating people to develop and implement new ideas by engaging in transactions (or relationships) with others and making the adaptations needed to achieve desired outcomes within changing institutional and organizational contexts." Chaganti and Chaganti (1983) and Varadarajan (1986) found that innovation is a key factor in small firm profitability and long-term growth and survival. It is critical, therefore, that small business managers and academicians come to understand which organizational characteristics, personal behaviors or firm policies affect innovation.

The research reported in this paper responds to calls (Baldridge & Burnham, 1975; Low & MacMillan, 1988; Wortman, 1987) for the development and testing of innovation process variables within organizations that may enable future researchers to identify more precisely what factors influence organizational innovation, or what Kanter (1983) calls organizational entrepreneurship. Once appropriate variables and interrelationships are identified, an overall model of organizational entrepreneurship can be developed and used to evaluate the innovative potential of small businesses and serve as a guide for managers to use in improving the innovative process in their organizations.

PREVIOUS INNOVATION MEASUREMENT

Previous research has focused on the impact of successful outcomes of innovation and relied on measures available in secondary sources. Various operationalizations of the success of organizational entrepreneurship (e.g., ROI, net income, sales, short-term profits of the specific project, and market share) have been examined (Miller & Camp, 1985; Miller, Wilson, & Adams, 1986; Zahra, 1986). There are at least two shortcomings to a view of entrepreneurship from final outcomes: it is too narrow and it may be misleading. It is too narrow because, by examining only final outcomes of innovaitons, this research may miss a more fundamentally important function of organizational entrepreneurship - facilitating adaptability that enhances survival for an organization. Ideas that do not reach the market may have a significant impact on the ability of an organization to adapt and ultimately survive. Organizational learning, motivation of employees to pursue future ventures despite failure, and knowledge that may lead to new ideas are possible positive outcomes that would not be assessed by final outcome measures alone. Outcome measurements may be misleading by either indicating an organization is adaptable when it is not, or not adaptable when it is. Given that inertia has been suggested to be a major factor in the failure of organizations to adapt and survive (Hannan & Freeman, 1984), just the fact that a new product has been introduced does not necessarily mean the organization has developed the capacity to adapt (Reimann & Wiener, 1988). …

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