Toward The Organisational Innovation Study: A Critical Study of Previous Innovation Research

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1 論文 Toward The Organisational Innovation Study: A Critical Study of Previous Innovation Research 組織イノベーション研究に向けて 既存のイノベーション研究の批判的研究 寺本直城 Abstract NAOKI TERAMOTO The issue of innovation is increasingly important in organisation study as well as in business administration. This paper aims to argue the future direction and propose points of organisational innovation study for future discussion. In order to achieve this aim, this paper conducts mainly three things. First, this paper reviews the conception and definition on innovation in previous research. In this section the conception and the definition on innovation Schumpeter (1938) had discussed will be mainly reviewed. Second mission is to review a few categories of innovation in order to describe the process of innovation related with an organisation. Three categories of innovation, incremental and radical innovation, product and process innovation and innovation by market and by technical seeds will be reviewed. The innovation process with in an organisation is able to be described through these three categories of innovation. Thirdly, this paper analyses the previous representative research on innovation to argue the future direction of organisational innovation research. It is evident from the analysis that various researchers have tended to focus their studies and theories in this field on the topic of managing the process of innovation, rather than the issue of generating an innovative idea, which is the starting point of the innovation process. 和文要旨近年, イノベーションの問題は, 経営現場だけでなく経営組織研究においても非常に重要な課題となってきている 本稿の目的は, 既存のイノベーション理論を経営組織理論の観点から批判的に分析し, 組織イノベーション研究に向けて論点を整理することである この目的を達成する為に, 本稿では主に 3 点について明らかにする 第 1 に既存研究におけるイノベーションの概念及び定義をレビューする 第 2 にイノベーションのタイプについてレビューし, 組織におけるイノベーションプロセスの理論的フレームワークを明らかにする 第 3 に組織におけるイノベーションプロセスの理論的フレームワークを元に代表的なイノベーション研究を分析し, 組織イノベーション研究の今後の展開について議論する 分析の結果として, 多くの当該既存研究においてイノベーションプロセスの管理が中心的な論点となってきたことが明らかになった 他方で, イノベーティブなアイデアの創出やイノベーションプロセスの開始時のプロセスの解明が組織イノベーション研究の今後の展開の論点となるであると本稿は結論付ける 関東学園大学, 関東学園大学経済学紀要第 41 集 17

2 1 INTRODUCTION This paper aims to analyse the existing innovation research from the perspective of organisation studies and propose points for the future discussion of organisational innovation study. To achieve this aim, this study will review and analyse the previous innovation research critically. The topic of innovation has emerged, from a practical perspective as well as an academic one, as one of the most important and widely discussed themes in not only economics but also business administration because innovation can influence the various things related with the economic world and business environment. For example, according to Gerberg, Mowery and Nelson (2005), innovation is related with economic growth, catching-up, competitiveness, employment, science, technology and innovation policy (c.f., Verspagen, 2005; Fagerberg & Godinho, 2005; Cantwell, 2005; Pianta, 2005; Lundvall & Borrás, 2005). And Baregheh, Rowley and Sambrook (2009) analyse that innovation research have been conducted in the field of economy, business and management, marketing, technology, science and engineering, organisation study and innovation and entrepreneurship. The concept of innovation has been discussed in the field of economics as well as in the field of business administration. While the analysis of innovation in the field of economics has focused on the effects of innovation on economic growth, that in the field of business administration has led to a focus on the determinants of competitive advantages, organisational performance, as well as the success and long-term survival of an organisation. A lot of economists including Schumpeter who is one of the first researchers of innovation have assumed that innovation bring about economic growth (Schumpeter, 1934=1983; Verspagen, 2005). On the other hand, a lot of researchers have assumed that as innovation may provide some competitive advantages and power for organisations, it is generally associated with competitive advantages for an organisation. Dodgson, Gann and Phillips (2014) stated that innovation is an essential means by which organisations survive and thrive (Dodgson, Gann 関東学園大学, 関東学園大学経済学紀要第 41 集 18

3 and Phillips, 2014: 3). Zahra and Covin (1994) also suggest that innovation can be considered as the life blood of corporate survival and growth (Zahra & Covin, 1994: 183). This means that it is not an exaggeration to say that the survival of organisations depends on their capability to innovate their products, their processes of production and themselves. Innovation is indeed a critically important practical issue for organisations. With this focus, researchers of business administration and practitioners have attempted to clarify how companies promote innovation and develop innovative forms, among seeking other approaches, to win the competition against business rivals. This paper focuses on the relationship between organisation and innovation. In fact, thanks to a lot of outcomes of not only theoretical but also empirical studies on innovation, the varieties, natures and processes of innovation have been unveiled. On the other hand relationship between organisational theory and innovation has been discussed insufficiently. Thus it is unclear that how organisational theory can contribute to innovation research. The purpose of this study, therefore, is to seek the future direction of innovation research in organisation study (=organisational innovation study) through the review and analysis of prior research on innovation. 2. THE CONCEPT AND DEFINITION ON INNOVATION In the current climate, innovation is generally considered as a very important topic for various organisations and fields. The term innovation, however, is too difficult to understand for most individuals due to its ambiguous meaning. This ambiguity makes it difficult for academia and workplaces to reach a consensus about the meaning of the word. While the term innovation can mean a new idea or method that is being attempted for the first time, or the use of such ideas and methods, the fundamentals of innovation are the new combination (Neuer Kombinationen) of the social ingredients, such as materials, forces, technology and so on, within a new idea and method (Schumpeter, 1934=1983). Schumpeter (1934) states the conception of innovation is applicable to the following five 関東学園大学, 関東学園大学経済学紀要第 41 集 19

4 cases: The introduction of a new good, with which consumers are not yet familiar, or a new quality of an existent good; The introduction of a new method of production that has not yet been tested by experience in the concerning branch of manufacture, which does not need to be founded upon a scientifically new discovery and can take the form of a new, commercial way of handling a commodity; The opening of a new market that has not been previously entered by the particular branch of manufacture of the country in question, whether or not this market has exchanged goods before; The conquest of a new source of supply of raw materials or half-manufactured goods, again irrespective of whether this source already exists or requires development first; and The development of a new organisation in any industry, like the creation of a monopoloid position or the breaking up of a monopoloid position (Schumpeter. 1934=1983: 66). Schumpeter (1934) points out that innovation has a motive power on economic development. He calls this power gales of creative destruction that sweep away existing structures. Those who can combine factors of production and develop economic innovations are called entrepreneur[s]. The term entrepreneur not only applies to heads of firms or business managers, but also the middle or lower workers as far as they can succeed in implementing innovations (Schumpeter, 1934=1983: 76). Schumpeter (1934) states that individuals will be able to implement innovation in any aspect in society; however, he also emphasises that only those who can carry out the innovation are called entrepreneur[s]. According to the content of innovation, it can be found that entrepreneurs must come to fruition within their organisations and businesses. Innovation, therefore, can be one of the most important issues not only in 関東学園大学, 関東学園大学経済学紀要第 41 集 20

5 economics but also in business administration. A lot of researchers have attempted to define innovation. Definitions of innovation abound, each emphasizing a different aspect of the term (Grossan & Apaydin, 2010: 1154). According to Baregheh, Rowley and Sambrook (2009), innovation have been defined from 6 disciplines; economy, business and management, marketing, technology, science and engineering, organisation study and innovation and entrepreneurship. And the conception of innovation have been researched from 7 viewpoints; nature of innovation, type of innovation, aim of innovation, means of innovation, environment of innovation and stages of innovation. Although there are a lot of the viewpoints of innovation research and that is conducted from a few disciplines, the conception and definition of innovation have focus on change or transformation. And it has been assumed that the conception of innovation is associated with the development of economy and business very closely. Innovation can, therefore, be considered as a source of competitive advantage to organisations. 3. THE TYPES OF INNOVATION Innovation can be divided into different types depending on its degree and the contents. Traditionally, the conception of innovation has been categorised into two types: radical innovation and incremental innovation. According to Freeman and Soete (1997), this approach is based on Schumpeter s work and has been classified innovation according to how radical they are compared to current technology. In addition, these categories are also based on the factor of continuity. For example, the type of innovation that does not involve the continuous process of technology, organisations, materials and so on, is categorised as radical innovation while incremental innovation refers to the type of innovation that involves the continuous process, like a kaizen activity. Utterbank and Abernathy (1975) and Utterbank (1994) divided innovation into product innovation and process innovation (Utterbank & Abernathy, 1975: ; Utterbank, 関東学園大学, 関東学園大学経済学紀要第 41 集 21

6 1994). According to Fagerberg (2005), these categories is come from the major idea in economics which focus on (1) and (2) cases of innovation stated by Schumpeter (1934=1983). These categories were founded upon the progress of time. Utterbank (1994) clarified that all industries progress through the three stages of innovation: the fluid phase, the transitional phase and the specific phase. In the fluid phase, the degree of product innovation in an industry is highest during its formative years. On the other hand, the rate of process innovation is low because as the fluid phase can also be considered as the developing and designing stage of the product in organisations and industries, the process of production is flexible. The next stage of innovation is called the transitional phase. In this stage, the rate of product innovation decelerates while the rate of major process innovation accelerates. The product at this stage can be accepted in the market or even form into a dominant design. The product at this stage, furthermore, does not radically change but improves the quality and the function. For the product to achieve these results, the focus on innovation has to shift from product to process during this stage. The final stage of innovation is the specific phase. During this stage, the rates of both product and process innovation decelerate. Industries and organisations in this stage focus on cost, volume and capacity (Utterbank, 1994: xviii). In reference to the phenomenon of the focus of organisations on process innovation in the transitional and specific phases for the improvement of productivity, which renders it difficult to create new products or develop new technologies, Abernathy (1978) coined the term productivity dilemma. Another way to categorise innovation is by distinguishing among the causes of innovation. The two types of innovation based on cause are innovation by market and innovation by technical seeds. Innovation by market refers to the type of innovation that is carried out based on market needs, which is supported by Drucker s (1992) statement that the market is the most potent source of ideas for innovation (Drucker, 1992: 51). The other type of innovation based on cause, innovation by technical seeds, refers to innovation that is founded on techniques. Based on this viewpoint of the categories, the following point is added to the discussion about innovation: even if the market seeks something new, innovation can never be 関東学園大学, 関東学園大学経済学紀要第 41 集 22

7 achieved without the capability or the technology for it. As demonstrated above, there are many types of innovation under discussion nowadays, which proves innovation is attracted and important for academia and practitioners in the work site. 4. THE PROCESS OF INNOVATION WITHIN AN ORGANISATION Similar to the topic of the various types of innovation, which many researchers in economics and business administration have proposed, the topic of the process of innovation is important to the discussion. To clarify, analyses of the categories of innovation do not attempt to understand the ways through which one achieves innovation or the process of innovation. Fig. 1. The Process of Innovation within an Organisation Source: Takahashi (2003: 197). This figure is translated and revised by the author from original one. As invention and creativity are related to innovation, their relationship to innovation is especially important in understanding the process of innovation. Many researchers have 関東学園大学, 関東学園大学経済学紀要第 41 集 23

8 emphasised the difference between creativity and innovation. According to Anderson and Costa (2010), creativity is often used to refer to the initial phases of idea generation (or ideation ), whereas innovation refers to the entire process of idea generation and its subsequent implementation (Anderson & Costa, 2010: xxv). And a distinction between invention and innovation is also critically important. Innovation is the attempt to carry it out into practice while invention is the first occurrence of an idea for a new product or process. Fagerberg (2005) points out that invention and innovation are closely linked, but there is a considerable time lag between them in many cases. It can be pointed out that innovation and invention is a continuous process (Fegerberg, 2005: 4-5). The conception of creativity is similar to that of invention in the term of those meaning and the term that those are considered as the process of initial phase of innovation. There are, however, the difference between the conception of creativity and invention. Creativity is one of the attributes of organisational members of teams in organisation as Anderson and Costa (2010) points out, while invention is the phenomena that can be occurred anywhere as Fagerberg (2005) refers. According to Fergerberg (2005), inventions may be carried out anywhere, for instance not only in an organisation but also in universities or any other firms, while innovations occur mostly in organisations. An organisation has to combine several different types of knowledge, capabilities, skills and resources in order to be able to turn an invention into an innovation. That s why there is a considerable time lag between invention and innovation (Fergerberg, 2005: 5). That is, the process of innovation can include the phase of creativity that is established as the initial phase of the innovation process. All ideas generated in the phase of creativity, however, do not always lead to innovation, as not all of them are accepted in the market. Based on the types of innovation and the related conceptions of innovation discussed above, the process of innovation within an organisation is described in Figure 1. This figure, along with its numbers depicting the various stages in the process of innovation, will be used to analyse the existing literature on innovation in the next section. 関東学園大学, 関東学園大学経済学紀要第 41 集 24

9 5. ANALYSIS: INNOVATION RESEARCHES OF ORGANISATION STUDY Also in organisation studies, the theme of innovation has been heavily discussed. This section examines the various stages in the process of innovation that have been analysed in the existing literature on innovation in business administration. In Figure 1, (1) shows the stage of incremental innovation. The process of incremental innovation is described as a spiral and as feedback because it refers to the kind of innovation that has continuity of technology. A kaizen activity in a company is representative of incremental innovation. In fact, a substantial amount of organisation studies has analysed this stage in the process of innovation. Lam (2005) points out that innovation is associated with organisational learning that have focused on knowledge in organisation. For example, Nonaka and Takeuchi (1995) examined the creation of knowledge in organisations and emphasised that new knowledge can be created based on existing knowledge. The findings of Nonaka and Takeuchi (1995) can be considered as research on incremental innovation. Other research on knowledge management has similarly focused on incremental innovation. In Figure 1, (2) depicts the stage of the dilemma between creativity and productivity. Abernathy (1978) s concept of the productivity dilemma indeed focuses on the analysis of this stage. Moreover, Tushman and O Reilly (1997) further investigated the research on this dilemma. Their findings reveal that an innovation-oriented organisation should be an ambidextrous organisation. The ambidextrous organisation refers to an organisation that is able to not only deal with the daily routine work and seek the rationality behind it, but also seek creativity. The model of the ambidextrous organisation attempts to achieve productivity as well as creativity at the same time. A limitation to their findings is that the way through which one may form this model is either too difficult or left unclear in their works. An issue proposed for future discussion in innovation research in organisation studies may therefore be the ways through which one may develop an ambidextrous organisation. 関東学園大学, 関東学園大学経済学紀要第 41 集 25

10 The dilemma between creativity and productivity (2) seems to be very similar to the dilemma between radical and incremental innovations (3) in Figure 1. The problem in (2) likely caused the problem in (3). Christensen (1997) is one representative of the research that has focused on this dilemma. Many firms, especially the large ones, tend to investigate the process of incremental innovation by involving many other firms, which makes it difficult for them to achieve radical innovation and catch up to the radical innovations that are implemented by other organisations. In Figure 1, (4) is marked in the stage where the idea that is generated in the creativity and invention phases is accepted into the innovation process. Some researches on neo-institutionalism in organisation studies are relevant to the discussions of this stage in their use of the conceptions of legitimacy and the institutional entrepreneur (c.f., Schuman, 1995; Levy & Scully, 2007). The institutional entrepreneur has to acquire legitimacy to achieve institutional change. Although there are few studies that directly examine innovation in this field, there are many studies that focus on institutional change, which is a topic close to the conception of innovation. As part of the future direction of innovation research, the conception of legitimacy can be used to clarify how institutional entrepreneurs carry out innovations. In Figure 1, (5) indicates the phase of creativity during which the new idea is generated. As discussions of (4) are usually based on the assumption that the new ideas already exist or have already been generated, discussions of the ways through which one generates these ideas are (frequently) bypassed or neglected. As a result, an understanding of the phenomenon that the new idea generates may not be possible. A substantial amount of research in organisational behaviour has analysed this stage of the process of innovation by focusing on the individuals attributes and personalities. Traditionally, the research of organisational behaviour has applied statistics to the research methodology; this can be a problem. Schumpeter (1934) points out a static analysis can neither explain the occurrence of such productive revolution nor the phenomena which accompany them (Schumpeter, 1934=1983: 62-63). The future direction of the research in this field should therefore focus on the dynamic 関東学園大学, 関東学園大学経済学紀要第 41 集 26

11 process of generating new ideas in the creativity phase. In recent years, a few innovation-oriented companies have explored and applied the concept of play to create new ideas; for example, 20% time of google or 15% rule of 3M. Teramoto (2014) points out the importance of the analysis of such a play to understand the process of creating new ideas. As an analysis of this sort has not yet been initiated due to the lack of clarification on the research methodology, it may be beneficial to include this analysis in the future direction of innovation research. Lastly, (6) in Figure 1, depicts the process of radical innovation. For instance, Greenwood and Hinings (1997) analysed and attempted to understand radical organisational change from the viewpoints of neo institutionalism. This issue is often discussed with the dilemma between incremental innovation and radical innovation. As Tushman and O Reilly (1996) argue, an organisation needs to become ambidextrous in order to be more innovative. These research outcomes on radical innovation, however, are not enough to understand the process of innovation. If the limitations and the uncertainties in the studies of (1) to (5) could be corrected or clarified, (6) would also be understood. 6. TOWARDS THE ORGANISATIONAL INNOVATION STUDIES Through the analysis conducted in the previous chapters, especially the part of analysis, I have analysed the future direction of organisational innovation research through the figure of the process of innovation within organisation (figure. 1). As Lam (2005) points out, while innovation is treated as an output of certain structural features in the structural perspectives, some organisational researchers consider innovation as a process of bringing new, problem-solving ideas in use (Lam, 2005: 123). In addition, Lam (2005) also argue that the relationship between organisation and innovation is complex, dynamic, and multilevel (Lam, 2005: 138). From this perspective, it is critically important for understanding the role of cognition and organisational learning and dynamic aspect of innovation in order to understand the organisational innovation. 関東学園大学, 関東学園大学経済学紀要第 41 集 27

12 As the future direction of the organisational innovation research, this study sought the future direction of innovation research in organisation study. This study suggested three points as the future direction of innovation research in organisation study. The first point involved the clarification of how one may build an ambidextrous organisation that achieves productivity and creativity at the same time. The argument of Tushman and O Reilly (1997) is not enough to clarify the process of ideation in organisational innovation. The understanding and clarification of the process of generating new ideas during the creativity phase through an analysis of play in organisations can be one of the ways to understand the way to be an ambidextrous organisation. The second point involved the clarification of the process of accepting new ideas within organisations through an examination of the concepts of legitimacy and the institutional entrepreneur in neo-institutional organisation studies. The final point consisted of understanding and clarifying the dynamic aspect of innovation with in organisation. For instance, the discussion on organising (Weick, 1979; Weick, 1995) and strategizing (Whittington & Melin, 2003) is able to be one of the ways to understand the dynamic aspect of innovation with in organisation. These conceptions emphasize the on-going activities of organisation and strategy. Although this study proposes three issues in the study of innovation that require further research, it does not provide concrete research methodologies. This is the first limitation of this study. In future research, however, research methodologies would have to be considered with the points for future research provided by this study. Second limitation is that this study doesn t define organisational innovation so concretely. As Lam (2005) pointed out, the term organisational innovation is ambiguous and there is no consensus on organisational innovation. As the further research, especially in order to carry out the empirical organisational innovation study, the definition of organisational innovation has to be clarified and defined more clearly. 関東学園大学, 関東学園大学経済学紀要第 41 集 28

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