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Corporate entrepreneurship and innovation part 2: a role- and process-based approach Elizabeth Shaw
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Brunel University, Uxbridge, UK
Andrew O’Loughlin Lincoln University, Canterbury, New Zealand, and
Elspeth McFadzean Henley Management College, Henley-on-Thames, UK Abstract Purpose – To extend the discussion held in part 1, and develop a two-tier fifth-generation model of corporate entrepreneurship and innovation. Design/methodology/approach – The components that have been synthesized from a review of the literature in Part 1 are extended using evidence from the literature. These components are used to construct a two-tier model of corporate entrepreneurship and innovation; a macro model which presents the high-level environmental drivers of innovation and a micro model that discusses the contextual factors that underpin the corporate entrepreneurship and innovation process. Findings – From the analysis conducted in part 1 it is evident that there is a strong relationship between the role of the corporate entrepreneur and the innovation process. It is suggested that by separating the corporate entrepreneur from the innovation process previous models have been overly reductionist in their construction, and their utility has, as a consequence, been severely constrained. The study therefore combines the role and activities of the entrepreneur with the innovation process into a unified framework. In doing so the paper develops a two-tier fifth-generation model of corporate entrepreneurship and innovation. The final sections of the paper present the model’s implications for management and suggestions for further research. Originality/value – This paper fulfils an identified gap in the literature, namely the development of a new holistic model of corporate entrepreneurship and innovation, which illustrates the environmental and contextual relationships between the corporate entrepreneur and the innovation process. Keywords Entrepreneurs, Innovation, Communication processes, Visual perception, Social psychology Paper type Conceptual paper
Introduction As illustrated in part 1, earlier frameworks have tended to focus on either entrepreneurship or innovation as independent processes, thereby limiting their application and utility (Baum et al., 2001; Chesbrough, 2003; Cunningham and Lischeron, 1991; Dooley and O’Sullivan, 2001; Jin, 2000). The model presented here conforms with Rothwell’s (1992) fifth-generation model development, illustrating the links between the two concepts and highlights the different elements of corporate entrepreneurship that influence the innovation capability of an organization. The paper briefly reviews the concept of corporate entrepreneurial innovation (CEI) and culminates in the development of the corporate entrepreneurship and innovation
European Journal of Innovation Management Vol. 8 No. 4, 2005 pp. 393-408 q Emerald Group Publishing Limited 1460-1060 DOI 10.1108/14601060510627786
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model, which is presented in two stages; the macro and micro views, and then concludes by presenting implications for researchers and managers. Corporate entrepreneurial innovation In part 1, the relationship between corporate entrepreneurship and innovation (CE&I) was clearly established, and a new definition was constructed linking the two components together: Corporate entrepreneurship can be defined as the effort of promoting innovation in an uncertain environment. Innovation is the process that provides added value and novelty to the organization and its suppliers and customers through the development of new procedures, solutions, products and services as well as new methods of commercialization. Within this process the principal roles of the corporate entrepreneur are to challenge bureaucracy, to assess new opportunities, to align and exploit resources and to move the innovation process forward. The corporate entrepreneur’s management of the innovation process will lead to greater benefits for the organization.
In the following sections a new model of CE&I is constructed which complies with Rothwell’s (1992) fifth-generation model construction namely that the model includes strategic integration with suppliers and strong links with customers; co-development with stakeholders; emphasis on corporate flexibility and development speed; use of computer-aided systems and manufacturing; collaborative research and marketing arrangements; increased focus on quality; with innovation placed at leading edge of corporate strategy. Development of a new model of corporate entrepreneurship and innovation A multilevel framework has been adopted. First, a macro-model of corporate entrepreneurship and innovation is developed and explained, and then the micro-model of corporate entrepreneurship and innovation is presented, which synthesizes the key factors and aligning themes from the literature. The macro-model of entrepreneurship and innovation The macro-model focuses on the context of corporate entrepreneurship and innovation, and concentrates on the environmental drivers of innovation; society’s needs and new technological advances, as well as the frequency and rate of innovation development. These are described in more detail below and illustrated in Figure 1. Drivers of innovation. Innovation is the response to environmental challenges or future opportunities (Hitt et al., 1997; Li and Atuahene-Gima, 2001). It invariably needs a purpose and, therefore, the introduction and identification of a new consumer need or the development of additional technology within the market place usually initiates the process. This is more commonly identified as the push-pull process (Tidd et al., 2001). Consequently, the key precipitating environmental factors for innovation are uncertainty, risk and change (Amit et al., 1993; Braganza and Ward, 2001). Consumers perceive a new that which leads towards innovation (Rothwell, 1992). Factors that provide the stimulus for the new needs of the organizations, society and the market place, include unexpected events, alterations in demographics or changes in industry structure, and consumer need recognition (Koontz and Weihrich, 1990). This emphasizes the market-pull aspect of the model (Rothwell, 1992).
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Figure 1. The macro-model of corporate entrepreneurship and innovation
New technology also impacts innovation (Roberts, 1988). This emphasizes the technological-push characteristics of the model (Rothwell, 1992). The interplay of technology and need, in turn, influences the market place. New technology has the potential to alter industry structure (Porter, 1998) thereby changing the marketplace and hence influencing consumer needs. Recognition and exploitation of the competitive significance of technological change is important, as this can also change the rules and parameters under which organizations operate (Dooley and O’Sullivan, 2001; Means and Faulkner, 2000; Porter, 1998; Roberts, 1988). Opportunity recognition is, in essence, the development of the idea that the corporate entrepreneur seeks to manage and exploit. Innovation process. Innovation is conceptualized by using Roger’s (1995) six-stage innovation model. In the discovery phase the emphasis is on finding an idea that stimulates opportunity finding (Roberts, 1988). There are two distinct stages; opportunity recognition and researching and evaluating the identified opportunity. The application phase is where the development of the idea takes place. Adoption and diffusion of the new product, process or service includes the commercialization and output stages of innovation. During this phase, the output can be defined as either a successful and profitable product launch or an unsuccessful launch, which is a loss maker. These innovation phases will be discussed in more detail in the micro level model, which focuses on supporting roles and processes.
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Relationships between factors. Innovation leads to both new market and new technological knowledge, which is fed-back to assist with new innovations (Afuah, 2003). This is a continual cycle and may be either radical or purely incremental. Rapid development. Rapid development is concerned with the amount of time it takes for an innovation to evolve from the idea stage to a commercialized product. Rapid innovation development is due to the increased pace of change within the marketplace (Means and Faulkner, 2000; Rigby and Zook, 2002), the high rates and discontinuities of technological change, as well as the orientation of the organization and the individual(s) involved in the innovation process (Dooley and O’Sullivan, 2001; Rothwell, 1994; Schaffer and Paul-Chowdhury, 2002). Technology tends to evolve in cycles with each stage associated with varying degrees of innovation development (Freeman, 1982). For example, the early stage is associated with rapid and frequent development, which slows down to a more regulated pace as the technology matures (Roberts, 1988). The micro-model of corporate entrepreneurship and innovation The micro-model highlights the important factors that underpin the corporate entrepreneurship and innovation processes. These are detailed under five basic categories; inputs, entrepreneurial catalytic transformation, outputs, contextual factors, and relationships between the different elements. Innovation activity is often perceived as an unpredictable, illogical process (Blanchard, 1999). As a consequence, innovating can be difficult and it is therefore important to proactively manage the innovation process. The micro model illustrates how innovation can be effectively managed in an environment of high risk and uncertainty. Inputs. Evidence from the literature suggests that creativity is fundamental in configuring the innovation process (Amabile, 1996a; Couger, 1995). In other words, creativity assists in the emergence of new and novel ideas that will initiate and support the innovation process. It provides the originality of thought based on a platform of existing knowledge and motivation (Amabile, 1996b). Existing knowledge is important because, in order to be creative, innovators must go beyond the established status quo. It is also suggested that knowledge can, and will be packaged and repackaged as different things (Felton and Finnie, 2003). By changing the relationships between different elements of information, new and novel ideas can be developed (McFadzean, 1999; Nagasundaram and Bostrom, 1995). Sternberg et al., 1997, p. 13) note that: “The years that it takes to build up the necessary knowledge to make a major creative contribution. . .is not spent on passive learning, but rather in constant experimentation, revising, discarding, playing and pulling one’s hair out.” In fact, may innovators have only been successful because of their patience and desire to succeed (Amabile, 1996b). For example, Thomas Edison learned 1800 ways on how not to build a light bulb before he was finally successful (Harrington et al., 1998) (Figure 2). Entrepreneurial catalytic transformation: the entrepreneurial lens The catalytic transformation phase or entrepreneurial lens incorporates the reconfiguration events that are performed to take the creative ideas forward. Central to this aspect of the model is the corporate entrepreneur who permits certain processes and information to pass through the entrepreneurial lens while blocking
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Figure 2. The micro-model of corporate entrepreneurship and innovation
others. To ensure success, the corporate entrepreneur must proactively manage the innovation process, rather than passively allowing all ideas and concepts to pass through. Recognition of opportunity. There is considerable disagreement over how corporate entrepreneurs recognize opportunities. Ardichvili and Cardozo (2000) found that corporate entrepreneurs discover or recognise opportunities as they occur, rather than purposefully searching for them. Ronstadt (1988, p. 34) calls this the corridor principal: The act of starting a new venture moves an entrepreneur down a venture corridor that allows him or her to see intersecting corridors, leading to a new venture opportunity.
Although Ronstadt is largely referring to the development of new businesses this also applies to corporate entrepreneurs, who can use their first innovation to spark off further ideas. Yu (2001) and (Shane, 2000) suggest that, although entrepreneurial activity might not be deliberate, opportunity recognition is clearly determined by entrepreneurial alertness and intuition. Here, the corporate entrepreneur is able to recognise an opportunity that has previously been overlooked (Kirzner, 1973). However, Kaish and Gilad (1991, p. 59) dispute this and claim that: Entrepreneurs do seem to expose themselves to more information and their alertness takes them to less obvious places. . .the volume of search is significantly larger for entrepreneurs. . .and more off-hours time is spent searching for information.
This clearly fits with the entrepreneurial lens acting as a filter, rather than corporate entrepreneurs engaging solely in a push-pull process.
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Other prerequisites for opportunity recognition include a wide social network and prior knowledge of markets and consumer problems (Ardichvili and Cardozo, 2000). Opportunity recognition serves to connect the idea to the evaluation phase (O’Connor and Rice, 2001), with entrepreneurial orientation providing the lens to examine the components for reconfiguration and commercialization based on the perceived opportunities. Vision is also important as this provides a context for subsequent guiding actions (Langfield-Smith, 1992). The corporate entrepreneur has the ability and experience to see the path between the current state of affairs and the proposed reality and, through the lens, is able to translate this into a vision, which conveys the rationale and potential for exploiting an opportunity and investing in an idea (Afuah, 2003). Appropriation of opportunity. The appropriation of the opportunity is based on Giddens’ (1984) structuration theory. This theory suggests that rather than seeing human action take place solely within the context of the constraints of social structure, it should be seen as a duality; that is, action and structure being seen as two aspects of the same whole (Walsham, 2002). Giddens (1984, p. 377) defines structure as, “Rules and resources, recursively implicated in the reproduction of social systems. Structure exists only as memory traces, the organic basis of human knowledgeability, and as instantiated in action.” In other words, the rules of behavior and the ability to deploy resources exist in the human mind itself rather than as outside constraints (Jones, 1998; Walsham, 2002). Thus, the appropriation of opportunities is not automatically determined by technology design or consumer needs. Rather, corporate entrepreneurs may relate the structures and resources to other structures, constrain or interpret the structures in a creative way or directly use the structures as they see them. For example, the Internet was constructed by relating two different structures, the telephone and the computer, to form a new method of communication (McFadzean et al., 1998). It should be noted that this assessment is the process where this section of the Entrepreneurial Lens allows various ideas to pass through, while others are trapped or discarded. In addition, it is here that ideas are focused towards specific organizational objectives or corridors (Roberts, 1988; Ronstadt, 1988). Consequently, not all ideas are appropriated because they may not be suitable for the present opportunity and strategic orientation of the organization. Some ideas will therefore pass through to implementation and commercialization, while others will remain within the entrepreneurial lens. Those ideas and concepts that remain within the lens wait for innovation-readiness, when a potential opportunity to be exploited by the corporate entrepreneur presents itself. At that time these ideas will be re-assessed and may be utilized or discarded depending on whether they are in-line with the organizational strategy (O’Loughlin and McFadzean, 1999). More importantly, the lens acts as a focal point, performing a convergent activity, drawing together the inputs for sense making. It is the catalyst for creative transformation, with sense making through decomposition of the inputs and their subsequent reconfiguration as business opportunities (Amit et al., 1993). Exploitation of opportunity. This forms part of the innovation development phase that is uncertain, ambiguous and risky (Nicholson et al., 1998). These factors have been noted as preconditions for both corporate entrepreneurship and innovation (Knight, 1921; Zahra, 1991). As already noted the corporate entrepreneur thrives under these
conditions. During this process, framing of the strategic opportunity through creative opportunism is being conducted to transform ideas and opportunities into commercialised outputs. This is supported by Rickards (1999) who sees opportunity exploitation as a process of innovation combined with maximised cost advantage, which is in turn held to be intrinsically linked to the rational, humanistic and creative behavior of the corporate entrepreneur. It is this unique combination of characteristics that gives corporate entrepreneurs their distinctive advantage (Rickards and Jones, 1991). Marketing and interest arousal. Innovation functionality is held by Klein and Sorra (1996) to exist on a continuum, which extends from application avoidance through to committed use. It is therefore crucial that the corporate entrepreneur prepares the marketplace for the introduction of any new innovation, by raising interest and awareness concerning its intended application (Tidd et al., 2001). The role the corporate entrepreneur plays in marketing has also been highlighted by Drucker (1955, p. 53) who states, “Because it is its purpose to create a customer, any business enterprise has two – only these two – basic functions: marketing and innovation. They are the entrepreneurial functions.” The principle problem for corporate entrepreneurs is that a precise definition of entrepreneurial marketing remains elusive, and has tended to be combined with strategic activity (Lawrence and Thomas, 1971; Mintzberg, 1994; Thomas and Gardner, 1985). Simmons (1986) goes on to point out that marketing’s relationship with innovation and its importance to the corporate entrepreneur has often been overlooked, and in so doing its affiliation with strategy overstated. This is important because it is the corporate entrepreneur that is often seen as the catalyst in bringing all three components into a unified framework (Day, 1994; Doyle, 1994; Kotler, 1991). The key to marketing is communication (Doyle, 1994), while the key to innovation is implementation (Rickards, 1999), and the key to strategy is integration (Mintzberg, 1994). The question is why is this important to the corporate entrepreneur? Traditionally organizations placed products and production at the centre of the organization, and in doing so focussed on the development of corporate strategies (Kotler, 1991; Levitt, 1960). A traditional focus, however, misses one of the cornerstones of entrepreneurial activity within organizations, which is where the market and consumer are placed firmly at the core of innovation development and exploitation. The micro-model suggests that it is the market place and the needs of the consumer, as well as technological changes, which help to trigger innovation, and not solely the strategic direction of the organization, which although important is not the principal guiding agent of change. Implementation of opportunities. Innovation implementation is the attainment of committed use of the innovation (Klein and Sorra, 1996). The activities detailed within the model lead towards implementation and enable creative transformation, the formation of value-added outputs (Bird and Jelinek, 1988), and the commercialization of opportunities (Drucker, 1985). A trial implementation period can be adopted as a transitory phase where user awareness, the ability to utilize the innovation and the user’s decision to adopt the innovation can be addressed (Tidd et al., 2001). Continued use of the innovation should eventually lead to full implementation (Klein and Sorra, 1996; Utterback, 1971).
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Social interaction. Social interaction is an important aspect of the entrepreneurial process as it creates a condition for the effective exchange of information and resources (Anderson and Jack, 2002), which in turn reduces uncertainty. This should have both an internal and an external focus (Roberts, 1988). Making contacts is an essential part of social interaction, providing access to a rich source of privileged information, opportunities and resources (Anderson and Jack, 2002). Briggs and Nunamaker (1996) also highlight the need for information access and suggest that communication and deliberation are central tenets and must be considered a core part of the process. Communication is paramount in the articulation of any vision of a potential innovation, and should be used to elicit and garner support from the rest of the organization (Afuah, 2003). The consequent deliberations are important for the development of intentions and action towards this vision and also assist with the cross-fertilisation of ideas (Briggs and Nunamaker, 1996; O’Connor and Rice, 2001). Resource configuration. The resource component is equally important and includes elements, such as, individuals, funds, available time and materials, as required (Batten, 2002). The corporate entrepreneur ensures the assessment of resources as well as their allocation and the activation of employees Furthermore, as the corporate entrepreneur progresses through any project, they can also be seen to align and acquire more resources (Afuah, 2003), as well as to monitor and configure their application (Rickards, 1999). To ensure maximization of any resource strategy the corporate entrepreneur seeks to team up with, block and activate the resource configuration framework for the project in hand (Iansiti, 1993; Levitt, 1983). In doing so this enables the corporate entrepreneur to maintain a first to market advantage over competitors (Afuah, 2003). Stimulation of change. Within this process the inputs are subjected to constant change, with the entrepreneurial lens acting as the catalytic medium stimulating this transformation process. Entrepreneurial orientation involves various behaviors including, for example, proclivity for pro-action and determination (Mintzberg et al., 1998). There are usually many barriers and difficulties involved in getting an idea to market, and the corporate entrepreneur has a crucial role to play in acting as an idea champion (Afuah, 2003; Roberts and Fusfeld, 1981), mobilising support ensuring acceptance and willingness to adopt change which is used to ensure the idea moves forward and norms are challenged (Roberts, 1988). Process facilitation is needed to manage and monitor the transformation phase ensuring optimization (Tidd et al., 2001). The key issue to note here is that entrepreneurial orientation is a major catalyst in stimulating change. Outputs From the entrepreneurial catalytic transformation process emerges success value (Amabile, 1996b) or failure value (Wetlaufer, 1997), both of which will lead to new learning on how to improve future entrepreneurial activity (Ireland et al., 2001). Success and failure. Entrepreneurship is held to promote wealth creation through innovation (Drucker, 1985; Ireland et al., 2001), and manifests itself through the development of new markets for differentiated or improved products and new applications, value creation, growth and organizational renewal (Aldred and Unsworth, 1999; Zahra, 1991). These are deemed to be desirable outcomes and can be classified as successes.
Successful innovation is due in part to the combined creative endeavor of many individuals (Couger, 1995; Tidd et al., 2001). It is therefore important to have responsibilities allocated for the management of the various innovation phases (Dooley and O’Sullivan, 2001). This highlights the significance of individuals in the process, yet it must be noted that in order to be classified as a success any innovation must be both useful and appropriate (Amabile, 1996b). It is important to note that the focus on newness must be tied in with value otherwise the idea is regarded as unnecessary (Wetlaufer, 1997). Failure is deemed to have occurred where the idea is superfluous to requirements, inappropriate, falls short of either an anticipated aspiration or an unanticipated but useful outcome, and leads to an innovation that is dysfunctional (McGrath, 1999; Rogers, 1995). Learning. The final step in the innovation process is a reflective review which attempts to capture knowledge from the experience, through various forms of learning (Tidd et al., 2001). The results of the innovation process, whether success, indirect or unintended consequences (O’Loughlin, 2001) or failure, should form the basis for further learning, leading to improved knowledge (McGrath, 1999; Schaffer and Paul-Chowdhury, 2002) and in some cases resulting in re-innovation (Rothwell and Gardiner, 1989). Contextual factors: organizational support The contextual factors focus on the internal organizational support structure. It is important to note that entrepreneurial context is bound up with the organizational support structure, which provides the flexible conditions conducive for innovation. Innovation is held to evolve from the organization’s own activities (Gatignon and Xuereb, 1997). For example, an innovative and entrepreneurial climate is one where new ideas are encouraged and explored (Baden-Fuller and Stopford, 1992; Blanchard, 1999; Fitz-enz, 1997), through supportive senior management (Wetlaufer, 1997). Karagozoglu (1988) found that managers’ attitudes were crucial in fostering an innovative environment, and this can affect an employee’s level of commitment. A more recent study by Waters (2000) confirmed this, citing commitment as being positively correlated with innovation. The strategic position of the organization tends to act as a guide in the selection of ideas, and in turn ensures alignment with the organization’s strategy (Sundbo, 1999). The suggestion here is that innovative and entrepreneurial organizations need to remain highly flexible in order to deal with innovation and entrepreneurial activity (Stevenson and Gumpert, 1985). Relationships between factors In considering organizational behavior theory, Honig (2001) found a relationship between learning and entrepreneurial activity. Learning and innovation are iterative processes and therefore consideration of feedback for learning within the model is important (Garnsey and Wright, 1990; Gopinath and Sawyer, 1999; McFadzean et al., 1996). Throughout the process new insights are gained which may mean that previous stages are revisited (Roberts, 1988). Feedback has long been regarded as beneficial for assisting in improving future behavior (McFadzean, 1996). The innovation output is monitored and the information obtained from this monitoring is fed-back (O’Loughlin and McFadzean, 1999), and placed in a repository providing inspiration for subsequent
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ideas (O’Loughlin, 2001). As a consequence everything is, therefore, built on a foundation of prior innovation (Ardichvili and Cardozo, 2000; Drucker, 1985; Yu, 2001). Implications and future research Implications for managers At the micro-level, this paper has focused on the various activities and the different individuals required to move innovation forward. It should be noted that the micro-level model should not be viewed as a simple linear process. This is because although the stages are shown as separate elements in the framework, they are much more likely to be combined, overlapped or missed out depending on the situation and the prior knowledge of those involved (Rogers, 1995). Organizations are consistently striving to innovate for a variety of reasons and the corporate entrepreneurship and innovation model has highlighted some key challenges for practicing managers engaged in this process. In particular, it gives managers insights into introducing innovation within their organizations and accelerating the development of innovative performance in their staff. Organizations comprise of clusters of interdependent individuals (Nicholson et al., 1998), one of the implications for practitioners is the emphasis on the varying roles within the process. No one individual has the experience and necessary competencies to facilitate all the phases (Nunamaker et al., 1997). The model suggests that organizations need to recognize these differentiated roles (Roberts, 1988; Roberts and Fusfeld, 1981); the creative thinker, the corporate entrepreneur and the manager. In addition, organizations need to consider the necessity of employing and investing in each type of individual, as well as reflecting on what proportion of the organization these roles should be represented as, in order to successfully innovate. The creative thinker is imperative for idea generation, while the vital role of the corporate entrepreneur is highlighted with their orientation towards idea development and commercialization in-line with opportunities, and managers are necessary for creating an environment that encourages entrepreneurship and innovation (Hornsby et al., 2002) as well as monitoring the outcome of the innovation process. In addition to the focus on the type of individual, corporate entrepreneurial activity requires the introduction and maintenance of a flexible approach developing a culture where a questioning attitude is de rigueur and experimentation is prevalent (Markides, 1998). As McFadzean and O’Loughlin (2000) point out, in business it is not sufficient for models to remain purely theoretical and they must therefore add value to the management function. Consequently, the presented model provides a frame of reference and template for action, both in terms of its stages, as well as its vertical and horizontal phases and integrating qualities. Haapasalo and Kess (2001, p. 110) suggest that: “The concept of a systematic approach is rarely clearly understood or defined in business management.” Consequently, the model has been designed to provide creative thinkers, corporate entrepreneurs and managers alike with a detailed checklist for monitoring innovative and entrepreneurial activity (Buggie, 2001), and establishing where support might be required in the wider project framework, as well as setting out next steps and stages. In addition, the model also has the ability to act as an aide memoir by acting as a codified guide for the corporate entrepreneur (Cross and Baird, 2000; Eppler and Sukowski, 2000).
Implications for further research The models developed above present a number of consequences and directions for further research. For example, clarifying the management roles for each stage may be beneficial to organizations. While a great deal is known about the creative thinker, as well as the corporate entrepreneur and the manager, closer scrutiny is needed regarding their roles in each stage and the extent to which they are involved in the different processes (Jackson and Rodkey, 1994; Kirton, 1994, 2003). It would also be useful to examine the methods used by individual corporate entrepreneurs to facilitate these stages. For example, it would be beneficial to understand how they cope with emotional factors, such as motivation and drive, how they manage and communicate with others during the process and how they effectively transfer outcomes to the facilitator of the next phase. The use of language through storytelling can direct action through the expression of experience resulting in new modes of behavior (Denning, 2004; Jabri and Pounder, 2001). With the focus on inter-phase communication between the various roles, the consideration of the organization as a collective entity, together with its external collaborations, would be beneficial. For instance, an analysis of the use of technology in information exchange would be valuable (Rothwell, 1994), as would the examination of teamwork and the extent to which collaboration helps diversity and creativity (Rigby and Zook, 2002). Finally, it is well documented that different organizations possess different levels of creativity and innovative ability (Afuah, 2003; Amabile, 1996a; Gundry and Prather, 1994; Hoegl and Gemuenden, 2001; McFadzean et al., 1996; O’Loughlin, 2001). Creativity and innovation can clearly be taught through the management of various processes and functions (McFadzean, 1996, 1998; McFadzean and O’Loughlin, 2000). A question that remains unanswered, however, is whether employee exposure to the model might also assist in improving levels of creativity and innovation within organizations, through a more structured, intrapreneurial approach. This seems to be a very rich area requiring both longitudinal and experimental study. Summary This article presents a theoretical framework and related variables linking entrepreneurial orientation to innovation. It focuses on examining how an entrepreneurial orientation within the corporate arena can facilitate the innovation capability of an organization. The relationship and the interdependencies between corporate entrepreneurship and innovation have been examined and captured with the development of two new conceptual frameworks – a macro-level and a micro-level model – which explicitly link these two concepts. The model is a multi-stage, multi-individual, complex process (Roberts, 1988), which helps to provide the insight for altering the organizational dynamics. It indicates that an entrepreneurial philosophy, which stimulates change, and the provision of a supportive environment, is most likely to foster innovation. Miller (1983) notes that entrepreneurial organizations are often the most proactive when it comes to innovation, which in turn provides the potential for competitive advantage. As this is purely a conceptual paper the model needs to be tested and evaluated. Future application of empirical methodologies, such as the use of longitudinal research, will lead to further improvement in the understanding of the corporate entrepreneurship and innovation relationship, which is needed to further assist in
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advancing the field of study. From a practical perspective, the model also gives managers further insight into how to introduce entrepreneurial activity into their organizations and the management of innovation. There is also an issue of model sequencing, and whether corporate entrepreneurs follow a set pattern for the exploitation of innovation, or whether the sequence might differ every time (Rickards, 1999). Longitudinal research needs to be conducted to establish whether such sequencing is correct, and if not what exclusions or inclusions are necessary to make the model more robust. In addition, the question of whether the sequencing holds true for both corporate entrepreneurs and new venture entrepreneurs clearly requires further investigation. References Afuah, A. (2003), Innovation Management, Open University Press, New York, NY. Aldred, C. and Unsworth, E. (1999), “Lloyds history intertwined with America’s”, Business Insurance, Vol. 33 No. 52, pp. 17-19. Amabile, T.M. (1996a), Creativity in Context, Westview Press, Boulder, CO. Amabile, T.M. (1996b), Creativity and Innovation in Organizations, Harvard Business School Case, Cambridge, MA,, pp. 1-15. Amit, R., Glosten, L. and Muller, E. (1993), “Challenges to theory development in entrepreneurship research”, Journal of Management Studies, Vol. 30 No. 5, pp. 815-34. Anderson, A.R. and Jack, S.L. (2002), “The articulation of social capital in entrepreneurial networks: a glue or a lubricant?”, Entrepreneurship and Regional Development, Vol. 14 No. 2, pp. 193-210. Ardichvili, A. and Cardozo, R.N. (2000), “A model of the entrepreneurial opportunity recognition process”, Journal of Enterprising Culture, Vol. 8 No. 2, pp. 103-19. Baden-Fuller, C. and Stopford, J.M. (1992), Rejuvenating the Mature Business: The Competitive Challenge, Routledge, London. Batten, F. (2002), “Out of the blue and into the black”, Harvard Business Review, Vol. 80 No. 4, pp. 112-9. Baum, J.R., Locke, E.A. and Smith, K.G. (2001), “A multidimensional model of venture growth”, Academy of Management Journal, Vol. 44 No. 2, pp. 292-303. Bird, A.M. and Jelinek, M. (1988), “The operation of entrepreneurial intentions”, Entrepreneurship: Theory & Practice, Vol. 13 No. 2, pp. 21-9. Blanchard, K. (1999), “Innovation creation: six business strategies that build breakthrough thinking”, Journal for Quality and Participation, Vol. 22 No. 6, pp. 30-2. Braganza, A. and Ward, J. (2001), “Implementing strategic innovation: supporting people over the design and implementation boundary”, Strategic Change, Vol. 10 No. 2, pp. 103-13. Briggs, R.O. and Nunamaker, J.F. (1996), “Team theory of group productivity and its application to development and testing of group support systems”, Working Paper WPS-96-1, CMI Working Paper Series, University of Arizona, Tucson, AZ. Buggie, F. (2001), “The four phases of innovation”, Journal of Business Strategy, Vol. 22 No. 5, pp. 36-42. Chesbrough, H.W. (2003), “The era of open innovation”, Sloan Management Review, Vol. 44 No. 3, pp. 35-41. Couger, J.D. (1995), Creative Problem Solving and Opportunity Finding, Boyd & Fraser Publishing Co., Danvers, MA.
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McFadzean, E.S. (1999), “Creativity in MS/OR: choosing the appropriate technique”, Interfaces, Vol. 29 No. 5, pp. 110-22. McFadzean, E.S. and O’Loughlin, A. (2000), “Five strategies for improving group effectiveness”, Strategic Change, Vol. 9 No. 2, pp. 103-14. McFadzean, E.S., Somersall, L. and Coker, A. (1998), “Creative problem solving using unrelated stimuli”, Journal of General Management, Vol. 24 No. 2, pp. 36-50. McFadzean, E.S., Briggs, R., Bulcock, D. and Berry, N. (1996), “Creativity in organizations: people-based solutions”, Working Paper HWP 9624, Working Paper Series, Henley Management College, Henley-on-Thames. McGrath, R.G. (1999), “Falling forward: real options reasoning and entrepreneurial failure”, Academy of Management Review, Vol. 24 No. 1, pp. 13-30. Markides, C. (1998), “Strategic innovation in established companies”, Sloan Management Review, Vol. 39 No. 3, pp. 31-42. Means, G.E. and Faulkner, M. (2000), “Strategic innovation in the new economy”, Journal of Business Strategy, Vol. 21 No. 1, pp. 25-9. Miller, D. (1983), “The correlates of entrepreneurship in three types of firms”, Management Science, Vol. 29 No. 7, pp. 770-91. Mintzberg, H. (1994), The Rise and Fall of Strategic Planning, Prentice-Hall, Englewood Cliffs, NJ. Mintzberg, H., Lampel, J. and Ahlstrand, B. (1998), Strategy Safari: A Guided Tour through the Wilds of Strategic Management, Prentice-Hall, Hemel Hempsead. Nagasundaram, M. and Bostrom, R.P. (1995), “The structuring of creative processes using GSS: a framework for research”, Journal of Management Information Systems, Vol. 11 No. 3, pp. 87-114. Nicholson, N., Schuler, R., Van De Ven, A.H., Cooper, C.L. and Argyris, C. (Eds) (1998), The Blackwell Encyclopedic Dictionary of Organizational Behavior, Blackwell, Malden, MA. Nunamaker, J.F., Briggs, R.O., Mittleman, D.D., Vogel, D.R. and Balthazard, P.A. (1997), “Lessons from a dozen years of group support systems research: a discussion of lab and field findings”, Journal of Management Information Systems, Vol. 13 No. 3, pp. 163-207. O’Connor, G.C. and Rice, M.P. (2001), “Opportunity recognition and breakthrough innovation in large established firms”, California Management Review, Vol. 43 No. 2, pp. 95-116. O’Loughlin, A.M. (2001), “An investigation into the role of the facilitator and the processes that they use to support problem solving in teams”, doctoral dissertation, Henley Management College/Brunel University, Henley-on-Thames. O’Loughlin, A.M. and McFadzean, E. (1999), “Toward a holistic theory of strategic problem solving”, Team Performance Management, Vol. 5 No. 3, pp. 103-20. Porter, M.E. (1998), Competitive Advantage: Creating and Sustaining Superior Performance, Free Press, New York, NY. Rickards, T. (1999), Creativity and the Management of Change, Blackwell Publishers, Oxford. Rickards, T. and Jones, L.J. (1991), “Towards the identification of situational barriers to creative behaviors: the development of a self-report inventory”, Creativity Research Journal, Vol. 4 No. 4, pp. 303-15. Rigby, D. and Zook, C. (2002), “Open-market innovation”, Harvard Business Review, Vol. 80 No. 10, pp. 80-9. Roberts, E.B. (1988), “Managing invention and innovation”, Research Technology Management, Vol. 31 No. 1, pp. 11-29.
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Roberts, E.B. and Fusfeld, A.R. (1981), “Staffing the innovative technology-based organization”, Sloan Management Review, Vol. 22 No. 3, pp. 19-34. Rogers, E.M. (1995), Diffusion of Innovation, Free Press, New York, NY. Ronstadt, R. (1988), “The corridor principle”, Journal of Business Venturing, Vol. 3 No. 1, pp. 31-40. Rothwell, R. (1992), “Developments towards the fifth-generation model of innovation”, Technology Analysis and Strategic Management, Vol. 4 No. 1, pp. 73-6. Rothwell, R. (1994), “Towards the fifth-generation innovation process”, International Marketing Review, Vol. 11 No. 1, pp. 7-31. Rothwell, R. and Gardiner, P. (1989), “The strategic management of re-innovation”, R&D Management, Vol. 19 No. 2, pp. 147-61. Schaffer, R.H. and Paul-Chowdhury, C.M. (2002), “Implementation: there’s more to innovation than great ideas”, Ivey Business Journal, November/December, pp. 1-6. Shane, S. (2000), “Prior knowledge and the discovery of entrepreneurial opportunities”, Organization Science, Vol. 11 No. 4, pp. 448-69. Simmons, K. (1986), “Marketing as innovation: the eighth paradigm”, Journal of Management Studies, Vol. 23 No. 5, pp. 479-99. Sternberg, R.J., O’Hara, L.A. and Lubart, T.I. (1997), “Creativity as investment”, California Management Review, Vol. 40 No. 1, pp. 8-21. Stevenson, H.H. and Gumpert, D.E. (1985), “The heart of entrepreneurship”, Harvard Business Review, Vol. 63 No. 2, pp. 85-94. Sundbo, J. (1999), “Empowerment of employees in small and medium-sized service firms”, Employee Relations, Vol. 21 No. 2, pp. 105-27. Thomas, H. and Gardner, D. (1985), Strategic Marketing Management, Wiley, New York, NY. Tidd, J., Bessant, J. and Pavitt, K. (2001), Managing Innovation: Integrating Technological Market and Organizational Change, 2nd ed., John Wiley & Sons, Chichester. Utterback, J.M. (1971), “The process of technological innovation within the firm”, Academy of Management Journal, Vol. 14 No. 1, pp. 75-88. Walsham, G. (2002), “Cross-cultural software production and use: a structurational analysis”, MIS Quarterly, Vol. 26 No. 4, pp. 359-80. Waters, J.A. (2000), “Achieving innovation or the holy grail? Managing knowledge or managing commitment?”, International Journal of Technology Management, Vol. 20 Nos 5-8, pp. 819-38. Wetlaufer, S. (1997), “What’s stifling the creativity at CoolBurst?”, Harvard Business Review, Vol. 75 No. 5, pp. 36-51. Yu, T.F.-L. (2001), “Entrepreneurial alertness and discovery”, Review of Austrian Economics, Vol. 14 No. 1, pp. 47-63. Zahra, S.A. (1991), “Predictors and financial outcomes of corporate entrepreneurship: an exploratory study”, Journal of Business Venturing, Vol. 6 No. 4, pp. 256-85. Further reading Chung, L.H. and Gibbons, P.T. (1997), “Corporate entrepreneurship: the roles of ideology and social capital”, Group & Organization Management, Vol. 22 No. 1, pp. 10-30.
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The role of mental models in innovative teams
Mental models in innovative teams
Graydon Davison and Deborah Blackman College of Law and Business, School of Management, University of Western Sydney, Penrith South, Australia
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Abstract Purpose – This paper aims to explore the role of mental models in knowledge development in order to demonstrate how the type and strength of the mental models held by a team contribute to its success in general and to innovation in particular. Design/methodology/approach – Two cases are analysed (a successful and an unsuccessful team) which were developed via observation and interviews. The mental models in each case were analysed to map them to the success or otherwise of the teams. Findings – The first case demonstrates that mental models in a multidisciplinary team can provide opportunity for a shared generation of knowledge for process innovation while open to external influence. The second case demonstrates that, where there are strongly shared mental models that prevent the team from constructing an accurate picture of their present by closing out external influences and pre-selecting desired knowledge, opportunities for innovation are shut down. Practical implications – Where mental models provide a sharing framework without closing out the networks and systems that sustain them, they can foster and support innovation. Managing team openness becomes a priority for supporting innovation. Team leaders will need to consider what types of mental models are developing and foster a focus on innovative outcomes and not processes. A concentration on understanding the current context via challenging given assumptions is recommended. Originality/value – The paper offers clear, practical examples of the results of teams being encouraged to utilise open and closed systems of mental models. Keywords Process planning, Innovation, Team working, Medical facilities Paper type Case study
Introduction Knowledge has been cited for some time as a major source of competitive advantage (de Geus, 1997; Drucker, 1964). More recently, the focus has been upon using knowledge to promote and support innovation within both teams and companies (Newell at al., 2002). According to London Innovation (2003) “Innovation is the successful exploitation of new ideas and is a vital ingredient for competitiveness, productivity and social gain within businesses and organisations”. This definition is important, as it indicates that not only must there be a creation of new knowledge, but that such knowledge must be shared and implemented in some way that occurs via social interactions (Chanal, 2004). Innovation is increasingly discussed as one of the desired outputs of knowledge, whilst the need to manage workers in order to develop the learning needed to promote knowledge and innovation is also identified (Swan et al., 2002). The argument is that by managing the learning and knowledge creation processes carefully and developing an innovative culture optimal innovation can be achieved. This indicates that the development of knowledge will be vital for the success of innovative teams. This paper will explore one aspect of knowledge
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development, that of the sharing and development of new ideas. The paper aims to add to the debate on the behaviour related aspects of innovativeness identified as being currently under-researched (Salavou, 2004). Initially the role of mental models in knowledge development will be discussed, in order to show how the type and strength of the mental models held by the team might be a strong contributor to the team’s success in general and to innovation in particular. Subsequently both a successful and an unsuccessful team will be investigated, in order to analyse what is needed for mental models to be useful, rather than inhibiting, to the innovation process. Innovation, knowledge and mental models Although the focus of innovation is, historically, economic (Nystro¨m, 1980; Scherer, 1984), the source is social (Zaltman et al., 1973; Burns and Stalker, 1979). Processes of socialisation are noted as sources of knowledge (Nonaka and Kono, 1998), with socially and contextually produced knowledge being a source of innovation (Swan et al., 1999). Zaltman et al. (1973, p. 14) state that, “ the distinguishing characteristic of an innovation is that instead of being an external object, it is the perception of a social unit that decides its newness”, before offering a definition of innovation as “. . . any idea, practice, or product that is perceived as new by the potential unit of adoption” (Zaltman et al., 1973, p. 50). This concept of collective perception links innovation, knowledge and mental models in teams. Nonaka and Konno (1998) describe socially based knowledge generation and note that participation in a social situation defines what is knowledge and what is information. Knowledge is described as useful only at a specific time and place if it is to be of value. Knowledge that is separated from its situation becomes information, to be communicated between situations. Mental models are a means by which organisations and individuals create and share meaning, thereby enabling a common understanding and the development of knowledge (Hill and Levenhagen, 1995; Flood, 1999; Pruzan, 2001). Shared mental models, where there is a common understanding by the individuals within an organisation, provide frameworks of value and belief systems which act as the basis for analysis of any new ideas, concepts, policies and cultural developments being considered by a team (Caldwell et al., 2002; Swaab et al., 2002). It is argued that shared mental models have an advantage for a group of individuals, as they provide both an element of predictability which facilitates communication (Wetzel and Buch, 2000; Dickson et al., 2001) and a link between collectives and individuals, thus acting as a context for the interpretation and understanding of new information (Doyle Conner et al., 1994; Dixon, 2000). Such shared understandings support learning and act as a framework for all new knowledge development. Shared mental models will, therefore, be of great importance as they provide the structure which will affect the scope, the type and the acceptance of information that can be assimilated and interpreted by the team, thereby acting as the delimiters of new knowledge within and between teams. Why this is so can be understood when analysing Figure 1. For any new learning to occur, individuals need to be aware of any stimulus generating a perception of difference between mental models (Klimecki and Lassleben, 1999). This process is demonstrated in Figure 1 and it can be seen that new information will only be addressed in any meaningful way if a difference between the currently held mental model and the newly perceived apparent reality occurs. Once an individual perceives a difference, he/she will rationalise it and, if accepted, this new stimulus will
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Figure 1. Team mental model development
be internalised and the individual mental model will be adjusted, reflecting the new information and developing it into knowledge. At this stage the individual shares, through the process of team communication, his/her new understanding, leading to a construction of new knowledge. As a consequence of the communication, some of the differences can be rationalised and assimilated into the collective mental model. This adjusted team mental model now acts as the framework for mutual reference and new knowledge development. If this new mental model supports innovative knowledge development then the team can be creative. However, if, for any reason, the mental model does not support innovative knowledge development, it is likely that the team will not achieve innovation in its outputs. What can also be seen here is that the perceived difference may be derived from differences between the mental models of individuals within a team, which will in themselves act as triggers for considering and discussing information. For example, where individuals have differing understandings of the same event, discussions about the event may trigger the process in Figure 1 and act as a communicating medium to make sense of the variations in information apparently present. What is of significance in the paper is that Figure 1 assumes an open process of information acquisition and knowledge development, whereby all new differences are both recognised and accepted by the team members. However, this is very unlikely, since either the individuals or the team may reject certain ideas. This view of a mental model as a framework for new knowledge means that it could, potentially, act as a closing mechanism. Blackman (2001) and Coopey (1996) have demonstrated that, through dominant logic and coalitions, new knowledge creation can become self-referential in nature, leading to only those ideas related to the current mental model being acceptable to the system for consideration. The stronger the mental model, the greater the influence it has upon the state of openness of the system. In extreme cases, the flow of knowledge acquisition can be completely turned around with only ideas which have been actively sought out by members of the system being recognised and encouraged (Blackman, 2001). Should this occur, there would be serious changes to
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the flows seen in Figure 1. What can be inferred from this is that once team mental models are in place the stronger they are and the more likely it is that they will become self-referential and close down the system, thus becoming even stronger. The system becomes increasingly predictable, ultimately reducing opportunities for flexibility and adaptability to new ideas (Hill and Levenhagen, 1995). If the shared frameworks themselves become the problem then the ensuing, reduced, levels of flexibility will shape collective learning and any effective development of knowledge, not only within teams but also throughout the organisation as a whole. The two case studies were analysed in order to establish what strong mental models were in place and to determine what impact these mental models had upon the knowledge development of the teams. Such an analysis would, it was postulated, enable the researchers to identify the role of mental models in the development and support of innovative practices in teams. Methodology This paper is based upon in-depth case studies undertaken upon two teams. Semi-structured interviews and observations were undertaken in both organisations and the resulting qualitative data was analysed for themes and ideas. The need for in depth study was identified because of the exploratory and explanatory nature of the research in both cases, seeking to explain phenomena and develop an understanding of underlying reasons. In the second case, there was also an intention to build new theory as a result of the analysis. In both cases, teams were interviewed both individually and in groups in order to facilitate observation of the interaction between team members during explanations, providing as rich a set of descriptions as possible. The first case is of a multidisciplinary team in palliative care. This team is, typically, diverse in its makeup, containing disciplines representing medicine, nursing, social work, physiotherapy, spiritual care and grief counselling. Patients and patient-based carers also become members of the team. The case was chosen because of its history of successful, ongoing innovation, affecting both the design and the implementation of the care. The second case analyses a team that was involved in developing, launching and running a new part of a business. It began as an integrated team within the company, but was then relocated to another building about five miles away. This team was chosen because it was an unsuccessful subset of a previously successful company. The new project it was designed to implement began as a radical innovation for the company, but failed very badly. The qualitative case study was developed not only using in depth semi-structured interviews, but also company text-based sources. Nine decision makers were identified as key in the project: The Managing Director, two Directors each responsible for an area of the business (one of whom was responsible for the project team), the Project Manager, the Financial Controller, the Spanish Project Manager, the Costings Manager and the Operational Manager. Of these the first three were still employed by the company and were willing to be interviewed. The remainder were all traced and interviewed, with the exception of the accountant who still found the events and resulting ill feeling too upsetting to discuss. The interview data was coded in NVIVO and thematic and axial coding was used to identify the mental models of the teams and then compare them to those identified in case 1.
Case 1: Mental models in multidisciplinary palliative care teams The contemporary palliative care environment is one of “active and compassionate care primarily directed toward improving the quality of life for people who are dying, and toward supporting patients and families as they incur multiple losses” (McDonald and Krauser, 1996, p. 2). This environment is attended by a number of professions including nursing, medicine, pharmacology, physiotherapy, occupational therapy, social work, pastoral care, grief counselling and administration. This is a manifold environment where people are the centre, not diseases, where care results from the understanding of the causes of suffering (Barbato, 1999) and where multi-profession teams work collegeately, so that the primary issue becomes and remains patient comfort (Meyers, 1997). The quality of life for people at the end of their lives is an issue of relief of distress, whether the cause is physical, emotional or spiritual; known or unknown (McDonald and Krauser, 1996; Witt Sherman, 1999). Uncertainty pervades the palliative care environment. The trajectory of a disease that brings a patient and patient based carers to palliative care is uncertain (Henkelman and Dalinis, 1998a; Rose, 1999). Symptoms, for example pain, are not necessarily linked to obvious causes (Rose, 1995; Lewis et al., 1997). Reactions of patients and patient based carers to the end of life process are considered variable (Henkelman and Dalinis, 1998a; Pierce, 1999). Membership of the group of patient-based carers can change during the end of life process. The reactions of palliative care professionals to the situations that they encounter during the end of life process of those in their care can vary (McDonald and Krauser, 1996; Henkelman and Dalinis, 1998a). The required level of extension of the palliative care service to individuals and groups who accompany the patient is uncertain (Lewis et al., 1997). In addition, the range of palliation requirements that occur, and are driven, at the conscious and unconscious levels and the depth of experience at each level varies from patient to patient (Kearney, 1992). According to Lazarus and Folkman (1984) uncertainty, as it is considered in the social sciences, can be said to fall into two categories, event-based and temporally-based; uncertainty about what will happen and what the results will be and uncertainty about when it will happen and how long it will take. Both types of uncertainty are capable of generating confusion and helplessness, particularly in cases of physical illness and disability. Uncertainty is also capable of immobilising anticipatory coping and, therefore, the necessary decision making for dealing with the uncertainty being faced. The persistence of uncertainty is noted in the constant changing of patients’ situations, each of which is considered unique and requires constant re-assessment. Changes in a patient’s end of life situation can occur as a result of a change in any of the elements of the patient’s life (Henkelman and Dalinis, 1998b). Changes occur at multiple levels, sometimes in parallel, sometimes without obvious causes, sometimes without notice, sometimes without clear causal linkages between change and effect, sometimes consciously on the part of the patient or patient-based carers and sometimes not. This highlights the ability of a patient’s situation to mediate that patient’s care. Locating the majority source of uncertainty with the patient means also that the patient becomes the major informant of situational change (Henkelman and Dalinis, 1998b). This makes palliative care professionals dependent on each patient’s ability to explain what is changing, when and at what level and requires that the professionals be able to enable and understand that explanation. The use of multidisciplinary teams
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is a response to the levels of uncertainty noted above and to the range of palliation requirements that could be necessary for any given patient (McDonald and Krauser, 1996; Meyers, 1997). While the use of a multidisciplinary care delivery model is not unusual in healthcare generally and the use of multidisciplinary or multi-functional teams is not unusual outside of healthcare, the dynamics of uncertainty in the palliative care environment create a level of complexity in team operation. The usefulness of multidisciplinary operations in palliative care is the opportunity it provides for teams and members to mobilise and learn from each other’s skills and experiences in patient care (Witt Sherman, 1999). A key shared mental model in the case 1 team is the need to deal with persistent uncertainty, knowing that uncertainty in patients’ situations means uncertainty in efforts to provide care and a preparedness to change care management as necessary. Existence of this commonly-held mental model is evidenced at interview, with comments from different disciplines, with regard to patients: These people, each day things change as their illness goes onwards and therefore they always have changing needs (Doctor).
Another doctor, relating the process of first meeting patients at admission to the palliative care organisation, noted the following considerations: . . .are they the sort of person that can cope with what’s happening to them? Do they need more support than another person? Are they an outgoing person or a withdrawn person? . . . You try and build rapport, to try and get information. It needs honesty, it needs trust and therefore that’s what we build. Of course you pick up the other things, is this person going to be a good patient? Is it going to be easy to look after them or are they going to need prompting? Will we need to recheck again and again, “are you sure you’ve got no pain?” . . . Some people will be straight out and tell you everything while others will be reticent. You need to pick that up, because that will change your management from one patient to another. Emotional, whether they’re terrified, how they’re handling it (Nurse). Their adjustment to their illness and how they perceive they are, and the whole process of it. And what, the kind of things they talk about, whether they talk about death and dying or whether they’re still talking about treatment. What kind of phase they’re in emotionally and psychologically (Social Worker).
Each patient is different and care requires different management from patient to patient. This overriding mental model drives several others to enable care delivery to operate successfully; respect between the disciplines for the skills contained within them; informal communications which are frequently more relevant, temporally, than formal communications; and all members of disciplines observe and report on behalf of other disciplines. Respect was an issue that was related to the credibility of information exchanged between the disciplines. This was particularly in evidence when team members were discussing the use of informal communications to report observed changes, or impending changes, in patient situations without waiting for formal multidisciplinary team meetings. Respect was referred to as an enabler of inter-team relationships, as in the following examples:
If something’s not communicated then that’s usually where our problems begin. But, I mean, one of the good things about this team is positive atmosphere and the relationships. You know, there’s little communication breakdowns here and there once in a while, from my experience, and, but it’s not a great thing, you get over it and move on. I think “cause there is that respect, you know, it’s not a personal affront to anybody, it’s just that you recognise that it’s just a communication breakdown” (Physiotherapist).
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I’m new to the team here and I think that more than anywhere else I’ve been before that everyone respects each other a lot more, and each other’s opinion. Like, quite often, in regard to a patient someone will come up and say “what do you think about this patient?”, or you’ve gone, you know, “I’m having trouble with this person, what do you think is the best way to approach it?”. And I think there’s a lot more respect than there is in say other areas of the health system (Doctor).
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Informal communications are used constantly, as referred to in the quotes from the interview above. However, particular references were made to the value of communicating informally: I think communication’s easier here. More readily available, we don’t have to chase people around the hospital and find them, to communicate with them (Clinical Nurse Educator). Yeah, I mean formally it’s in the nursing and medical admission that you ask the patient what their expectation of the admission is. But I think, probably even in an ad hoc manner, the allied health staff would also do that. You know, you gauge from the patient, and very much its patient focused and patient led, what the care should be. Very much so (Clinical Nurse Educator).
The temporality of informal communications was evidenced in the following statement: There’d not be a day when you didn’t talk to other members of the multidisciplinary team about most patients. You’d be saying, what’s happening with this patient? You know, this is something that’s come up as a highlighter for me, you know, and we discuss possible solutions or ideas around issues. You know, no one person really makes decisions on, you know, their bit of information that they’ve found and this is the solution for it. We all kind of rely on each other for opinions and, you know, ideas of how to then move forward with the information that we’ve all gathered individually (Social Worker).
With regard to all members of disciplines represented in the team observing on behalf of the team, the following is an interesting example from a nurse: Yeah, I mean I think there are no interdisciplinary boundaries, per se, here. I think nobody’s going to get annoyed if a physio comes to a doctor and says “this patient needs more pain relief”. Or if an occupational therapist comes to a social worker and says “this patient’s having problems with their family”. You know, it’s that interlinking and the blending of the roles that hopefully creates a better care model for the patient.
This statement was made with the spoken agreement of the team. These mental models appear to set and maintain an environment for the open exchange of information that is capable of generating collectively held knowledge. This seems to encourage and enable contributory membership of the team. According to Mintzberg (1989), “Sophisticated innovation requires a very different configuration, one that is able to fuse experts drawn from different disciplines into smoothly functioning ad hoc project teams”. Innovative organisations are found in
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complex, relatively dynamic environments where the requirement is for flexibility in structure so that different forms of expertise can be drawn together quickly in order to address problems and situations directly. These organisations employ people with high levels of knowledge and skills and use them as a foundation for the ongoing development of knowledge and skills relevant to the work. This use of multidisciplinary teams in the complex, dynamic environment of palliative care, where it is common to quickly deploy mixed groups of professionals in response to particular situations, is reminiscent of Mintzberg’s (1989) description of an innovative organisation. Crossan et al. (1993) link diversity in teams to individual and collective learning in organisations, where groups need shared meanings to be generated from joint efforts. The basis for the generation of learning as described by these authors, is the diversity of schemas, the belief systems that guide actions, available within the team for use in interpreting the environment and integrating individual interpretations. Crossan et al. (1993) note that an individual’s potential for interpretation is founded on the complexity of the concepts and relationships that generated the individual’s schemas. Higher levels of complexity offer higher potential for interpretation. It is apparent that team members in case 1 share strongly held mental models. The first of these is that uncertainty accompanies people in their end of life process in palliative care and all efforts to deliver care must recognise this. Uncertainty here does not drive a search for certainty, for simplicity or for predictability; it drives a constant and collective search to understand what is happening “now” in the patient’s situation. To this end, respect is offered and received as an enabler of credible contribution, leading to the sharing of ideas and information, within the team, across teams and within the disciplines, that are contextually based and aimed at contemporaneous outputs. Overlying all of this is a shared understanding about what palliative care is about, what it encompasses and how it should be approached. The word “approached” is important here as there is not a shared understanding of how each situation is to be undertaken, the outputs may change each time to suit the situation. What is shared is the focus upon an output that will suit each specific patient; team members focus on why the team matters to those served by them and make their decisions based upon this concept. Almost as important as the shared mental model of what is palliative care, is a strongly shared mental model of what it is not; it is not about illness or about symptoms, it is about people. The importance of the mental models being focused upon the outputs of care, not the processual inputs, is vital here as it provides the team with opportunities for shared generation of knowledge for process innovation, while remaining open to external influences. The models enable an analysis of the current context in an environment pervaded by uncertainty, continuous change and the need to make sense of events for participants. Case 2: Mental models at a flight brokerage Historically, the company where case 2 is located had been run as an aircraft seat brokerage. The company worked in three capacities; operating call centres for airlines enabling their reservations and bookings systems; brokering airline seats on flights that were not selling to other clients; sourcing tickets for groups, etc. case 2 had a history of innovative behaviour, frequently developing new products within the framework of its industry. Theirs was a relatively stable business (after a history of
some problems) and it was decided to develop a new dimension to the business; chartering an aircraft and developing their own airline. This was an expensive, risky and very complex venture that, if it succeeded, would lead to enormous company growth, but failure could bring the whole company down. To undertake such a project fitted with the profile of the company, in that there had been a history of taking considerable risks with highly entrepreneurial and innovative aspects to them (Fuller et al., 2002) A team was set up for this developmental project and an aircraft was chartered for 18 months. However, the venture was unsuccessful and the airline had to close after 12 months. An analysis of the mental models in place within the company at the time explains some aspects of the failure, giving some insights into the knowledge development problems encountered by the team. Analysis revealed that there were several very strongly shared mental models held within the company. The first mental model in place was a “Fantasy view of the aviation industry at the time. With hindsight, the directors felt that their picture of the industry at the time was totally at odds with the reality. However, this model was so strong that it overrode compelling evidence from a respected source, a previous Financial Director with the company, that the project would not work. The idea of running an airline had always been very attractive, so the group wanted to believe it was the correct time to do it: I thought it was a nice idea we’d always dreamt about the idea of having our own aeroplane since Paul started the company and it seemed that this was the realisation of that dream to some extent (Company Director).
This led to a rejection of ideas that did not fit this fantasy view. They felt they could reject these ideas, as they had expertise above those commenting upon their industry. A similar reaction was noted by Marks and Spencer who rejected analysts’ comments prior to their serious problems in 1999 (Mellahi et al., 2002). The second, even more strongly shared mental model was that all charter airlines make money in the summer, providing that the aircraft are full: . . . the idea was that, let’s say whatever you made in summer one you might lose in winter one, but then you’ve got summer two, so as long as you always come out on a summer at the end of your commitment on your whatever it is you’re buying, you should be ahead (Project Manager).
The aircraft charter had been contracted for two summers and one winter and, therefore, the project had to work. It was described as “Everyone knows that two summers and a winter has to make money”. This absolute certainty led to evidence of monetary losses being ignored and refuted since they had to be making money because “Everyone knows . . . ”. A third mental model was present that had a history from previous problems within the company history; “Betting the Company” worked. The founding directors confirmed that one of their basic rules was not to bet the company. However, whenever they had done so there was a history of its being a success story. This had tended to encourage further innovative behaviours, both products brought to the market and methods of implementing the products, via encouraging an entrepreneurial culture within the company. Employees were encouraged to run with new ideas; enabling the Project Manager to manage the new project as he saw fit was part and parcel of the company ethos. Thus, the picture held was one of breaking the rule successfully, so to do it again did not seem such a gamble; especially as the
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plan “could not fail”. Despite its being stated by all team members that they thought the risk was very high, the history of betting the company enabled them to reject differences that signalled that this time it might not work. The team was further able to ignore the financial evidence of failure as it developed because of two other mental models that were in place. The airline business has a very positive cash flow, as revenue is incoming at the time of ticket purchase and the majority of expenses occur later when the aircraft actually flies. As a result the company had never had so much money in the bank, leading to a belief that they had to be making money: All they saw was this enormous amount of money in the bank and they were having great fun on treasury and doing all sorts of things (Project Administrator).
Subsequently, the figures showed that the cash flow was substantial (which was unusual for a small company and was, consequently, misleading) but the profit and loss was, undoubtedly, a loss. At the same time as having more money than ever, there was also prejudice regarding the accountant, who was seen as unreliable and over-controlling. He was generally pessimistic and so was seen as rather a “wet blanket”. Moreover, he had a history of errors, which meant it was easy to doubt him. He did not have strong verbal skills and so tended to be bypassed in discussions. All members of the senior team assumed he was mistaken so that: When there were errors they were [the accountant] – everyone was rude to him for a while, condemning the man; aviation is quirky but he was right (Director).
So strong was this view of the financial controller that one of the directors was given the task of “finding out where he has gone wrong”. It was outlined earlier that the strength of the mental models is of importance here, as the stronger the model held, the more of a filtration device it could become, distorting the new ideas entering the system. It might have been expected that, as evidence emerged that challenged the mental models, the team would, unwillingly but inevitably, have accepted some of this new information and developed a new set of knowledge with which to frame the world. However, an important development occurred during the project. The team, which had previously been sharing space within a part of the company \building, had been relocated to a building on their own. This led to a “them and us” feeling between the team and the remainder of the company: Strong boundary around the team increasing in strength rejecting any challenge. Got stronger as the project grew – resisted outsiders (Director).
Although the company mental models began to be amended, those of the team did not develop in the same way. The team mental models were amended to believe that “they”, the company, were wrong and out to get the team and that the team must defend itself and the company views. Thus, team mental models became still stronger and rejected any ideas that did not fit with team worldviews. During interviewing two years later, team members still believed that the project had made money and that “they” (the directors) had misrepresented the figures in some way. As a result, it can be seen that too strongly shared mental models can prevent the team from constructing an accurate picture of the present by closing out external influences and selecting desired or acceptable knowledge only. The team had no realistic picture of the context and situation that they were in.
Discussion What is of interest is why the different cases were not both successful as both had strongly shared mental models and only in case 2 does this appear to be a problem. The analysis needs to address whether the mental models are closing the system, or not and why this occurs in one case and not the other. It was stated earlier that an initial difference must be perceived to trigger the mental model change process for there to be learning and change. It became clear that in case 2, differences were being ignored and/or actively rejected, whereas in case 1 the mental models actively encouraged the recognition and assimilation of differences. One difference between the cases was identified as the focus of the mental models and what was, in fact, shared and what was not. The mental models in case 1 were concerned with what the team was for, not about how they acted, whereas the mental models in case 2 considered the actual project, how it should be undertaken and the identity of the team, not as to who they were for others, but as to how they were seen by themselves. The focus of case 1’s mental models was upon understanding how to accommodate changes, whereas case 2 was about maintaining the accepted norms. Case 2 had become self-referential, whilst case 1 had not. The fundamental differences were that those in case 1 did not have to share beliefs about process, or even care; what they had to share was an identity of their patient and what mattered for the patient. In case 2 the team members were expected to share and believe all aspects of the project or they were no longer “accepted”. This lack of openness to challenge led to an increased closure to ideas and changes and, ultimately, led to the failure of the project. Again, the question has to be why was one so different from the other in the way the innovative team developed. The commonalities in both cases are strongly held mental models, collective decision making and common goals in the teams. Apart from these commonalities, the second issue that seems to differentiate the cases is time. In case 1 the acknowledgment of pervading uncertainty and the concentration on the patient’s situation as the basis for care means that “now” is the focus; contextually based contemporaneous outputs are necessary. Thus, knowledge is accepted as being partial, incomplete and continually evolving. This leads to an openness of the system being maintained, as change to the mental models is an accepted part of the team behaviours, in order to continually update the processes in place. In case 2, time played a different role, actually a number of roles. Firstly, the temporal difference between revenue raising and expenditures enabled a disoriented picture of cash flow to be created. Secondly, a relatively long period of time, 18 months, was set for the indication of success in the new venture. Thirdly, the company had survived over a period of time by breaking fundamental rules established at its beginning by directors, setting the pattern of success by defiance. This led to a different view of knowledge within the company; instead of being evolving, it became more of a series of steps. In the case of the new project, this was a new step and the team froze into this perspective. Because the focus became about implementing the project itself, rather than about developing new ideas and evolving their view of the world, the closure set in and then got stronger. There are important lessons to be learnt for innovation. That the system must remain open becomes a given; how this can be achieved by actively harnessing mental models in order to promote learning and knowledge becomes the important question. From the preliminary analysis above the aspects of knowledge and time have become of primary importance. Mental models not only create knowledge via the information
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processing systems, but they also create an understanding of what knowledge is. Thus, for there to be innovation the mental models must be developing both knowledge and innovation as this will then give a shared understanding of purpose. If there is to be ongoing challenge and a focus upon the “now” the shared notion of knowledge needs to be pragmatic and evolving, so that knowledge development is seen in terms of processes and innovation, not in terms of facts or truths to be found. In case 1, the team is not seeking a right answer it is seeking the appropriate answer for “now”. In case 2, it was believed there was a “right” way and this was developed over time. Thus the mental models of knowledge and its role in innovation need to be actively managed. Such a conclusion stresses that the links between knowledge management debates and innovation are correct. However, most of the debates stress the need for new knowledge creation, with the systems that are encouraged within companies being more likely to develop mental models as in case 2 rather than case 1, because the focus tends to be upon sharing the actual knowledge between individuals, rather than using different knowledge sets to develop a shared understanding of a situation within a context. Case 1 exemplifies how, despite all team members having different knowledge sets and not necessarily agreeing with the knowledge held by others, team goals can be achieved, as the focus is upon what is best for a particular patient at a particular time in a particular context, not upon a macro answer to all problems. Conclusion The literature on innovation offers the concept of the socially based generation of ideas from something perceived as new to the innovators but there is an assumed openness of the team knowledge generation system enabling ongoing learning. The contribution of this paper is that it demonstrates that there is a need to identify how the mental models are affecting the team’s perception of itself. Where mental models provide a sharing framework without closing out the networks and systems that sustain new knowledge development, they can foster and support innovation in teams by an accurate analysis of the real time context of their application, so that “new” is a synthesis based in the needs and circumstances of “now”. If the mental models begin to focus upon maintaining the team as a steady state (in terms of process and identity) rather than the team’s reason for existence in the broader context, then the chances of ongoing innovation will diminish. Thus, managing team openness becomes a priority, and this can be achieved via developing alternative perspectives of knowledge creation. The synthesis of knowledge needs to be considered as a dynamic process producing contextual relevance. Each person in a team will combine unique experiences, perspectives and requirements with a selection of available information to synthesis knowledge in a given context. These alternative perspectives need to be actively encouraged and supported by ongoing recognition of the importance of difference, rather than allowing the team members’ ideas to converge. This paper also argues that contemporaneous context is key. The case 1 team innovated successfully because they were able to focus on the “here and now” and maintain the reality of the current period in their view. The case 2 team failed because their view had become fixed on a point in the future. The team then chose to avoid contemporaneous issues because, in their mental models, they were not relevant to that
chosen future. Knowledge needs to be considered as a continuously changing set of understandings, that do not, in themselves have to be shared. Each person’s different knowledge can be used to create an understanding of the here and now at all times. Without this current context, stagnation is likely to develop and innovation will be suppressed. By ensuring that the shared mental models of what knowledge is, how it is created and of innovation itself reflect the importance of time it is probable that teams can remain innovative over a longer period of time.
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Customer involvement in new product development A relationship marketing perspective
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Stefan Lagrosen Centre for Industrial Competitiveness, Va¨xjo¨ University, Va¨xjo¨, Sweden Abstract Purpose – The purpose of the paper is to create an increased understanding of new product development processes concerning customer involvement. A relationship marketing perspective has provided the theoretical basis, allowing a new perspective. Design/methodology/approach – A qualitative, multiple case study, based on in-depth interviews in three small companies and three large, multinational enterprises has been carried out. Findings – The findings indicate the value of cross-functional teams and customer involvement. The use of formal methods for customer involvement, however, is found to be limited. Some creative ways of using cross-functional teams in small companies are described. Research limitations/implications – A framework for customer involvement in new product development, based on the levels of relationships, is proposed. This framework conceptualises the customer-involvement options identified in earlier research, based on the levels of relationship as defined in relationship marketing theory. Practical implications – The framework gives directions how product development in various levels of relations could be handled. The paper also gives examples of how to organise cross-functional teams. Originality/value – The framework developed in the paper is useful for the theoretical conceptualisation of the area. In addition, it provides a structured base for future studies. Keywords Product development, Customer satisfaction, Relationship marketing, Innovation, Team working Paper type Research paper
European Journal of Innovation Management Vol. 8 No. 4, 2005 pp. 424-436 q Emerald Group Publishing Limited 1460-1060 DOI 10.1108/14601060510627803
Introduction and purpose The success of an industrial company is dependent on its ability to develop new products. Through innovation and the introduction of new products, new markets and growth possibilities can be created. Increasing international competition accentuates the importance of the new product development process being secure and accurate. Increasingly, companies realise that customer satisfaction is vital for success. In order to meet the needs of the customers, companies require technical competence, integration competence and market/business knowledge competence (Shepherd and Ahmed, 2000). Market competence requires understanding the customers’ needs and wants (Lagrosen, 2001). The essential questions are: which product factors lead to customer satisfaction and which lead to dissatisfaction? Customers that are satisfied are generally loyal and provide a basis for sustainable cash (Matzler et al., 1996). Despite the efforts of companies, many new product development projects fail and result in products that do not meet the expectations of customers (Matzler and Hinterhuber, 1998). Successful new product development requires in-depth understanding of the customers, their situation, their needs and their wants
(Ka¨rka¨inen et al., 2001; Lagrosen, 2001). This requires active interaction with the customers. Consequently, it is valuable to study if, to what extent and how companies involve their customers in their new product development process and what results this involvement yields. The purpose of this study has been to create an increased understanding of new product development processes concerning customer involvement. Specifically, the aim has been to discover which phases of the process the customers are involved in and in what way they are involved. The product development processes have been seen from a relationship marketing perspective. So as to have an increased focus, we have decided to limit the study to industrial manufacturing companies. Further, we have excluded companies that manufacture consumer goods (B to C) since involving individual consumers is a different process from involving industrial customers (Hanna et al., 1995) and we wanted to concentrate on new product development processes in industrial relations. New product development in industrial firms – a cross-functional process New product development requires cross-functional collaboration involving the marketing, design and production functions (Mello, 2001). In business product development the majority of the product development processes are handled by cross-functional teams and this constitutes a significant difference from consumer products where specialised product management/development groups are more common (Hanna et al., 1995). This could be due to the generally more complex nature of business products (Hanna et al., 1995). Effective cross-functional collaboration lowers costs and reduces product defects, which means that products can be offered at a lower price with higher quality (Schilling and Hill, 1998; Valle and Avella, 2003). Although cross-functional teams bring huge benefits, the process of building effective teams is difficult due to cultural and organisational barriers (Condit, 1994). Effective new product development teams might even need more expertise than can be found inside the company. Hence, there may be value in involving representatives from external organisations, notably consultants and customers, in such teams (Howley, 2002; Pitta et al., 1996). Relationship marketing – the case for involving customers An important trend in recent marketing thought is the evolution from a rather limited focus on transactions to a focus on the relationships that companies have with their customers and other actors (Bruhn, 2003; Gummesson, 1999). Research has indicated that well-managed relations can moderate the effects of inadequate product performance (Priluck, 2003). Product development management involving customers is related to the companies’ customer relationship management processes (Tollin, 2002). New product development involves primarily the dyad of supplier and customer but for industrial companies an equally important relationship is often that to the customer’s customer (Gummesson, 1999). Developing products according to the customers’ needs and wants has long been promoted. However, relationship marketing goes beyond the distanced relation based on quantitative market research and upholds the interaction between the parties of the relation as the most important source for market knowledge (Gummesson, 1999). This implies that product development should be seen as an interactive process involving both suppliers and customers. Products carry a multitude of meanings that are individually perceived (Martin, 1998). These
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meanings can only be thoroughly discovered in active relations. The relations between suppliers and customers consist of the three crucial aspects of activity links, resource ties and actor bonds (Ford et al., 1998). The level of closeness between these aspects gives rise to three different levels of relationships (Ford et al., 1998): (1) Transactional relationships, involving no integration between supplier and customer and the supplier’s offering is undifferentiated from that of others. (2) Facilitative relationships, in which the customer also wishes to acquire relatively undifferentiated products at lowest cost but both parties are willing to invest in activity links and resource ties to increase the cost benefits of the relationship. These may include order-processing, EDI-links and logistics arrangements. (3) Integrative relationships, wherein the customer expects benefits beyond those of lower costs and extending to the revenue benefits of enhanced performance of its own offering. In these relationships, the supplier frequently has a representative on site, working with the customer’s development staff with the aim of having his products designed into the customer’s product. The relationship often has an impact on innovation and development of new products. It may even be argued that the content of the relationship determines what will be produced rather than the other way around (Ford et al., 1998). Hanna et al. (1995) have shown that customers are the most frequent source of new product ideas for business products. Neale and Corkindale (1998) argue that for new technology products, co-development is the best option. This implies that the technology originator and the customer be intimately involved in integrated or joint product development projects, both contributing their respective expertise (Neale and Corkindale, 1998). Having close relations with too many customers is, however, neither viable nor desirable (Ford et al., 1998). A solution to this problem might be to develop close relations with a few partner customers that participate actively in the new product development process whereas the other customers merely serve as sources for supporting information through market research etc. (McElroy, 1995). Further, establishing new product development collaboration with customers may be even more difficult than establishing effective internal cross-functional teams. Tollin (2002) has found that customer integration in the product development process is related to general business strategy and that customisation can act as a barrier to such integration. There is also research evidence that confirms the value of involving the customers in new product development. In a exhaustive study Gruner and Homberg (2000) have shown that customer interaction in new product development has a positive impact on new product success. Closeness to customers was also ranked by Hanna et al. (1995) as one of the most important factors for new product development success in business markets. Understanding customers is usually regarded as being crucial for successful new product development (Lagrosen, 2001). However, mere understanding is often not sufficient. The customer has to be activated. Von Hippel (2001) even argues that by using user toolkits for innovation companies can abandon their efforts to understand customers’ needs and outsource need-related innovation tasks to their users. Methods for customer involvement Customer involvement occurs in different phases of the new product development process. Some customers are only involved in the initial stages of the process; others in
the final stages and others interact continuously with the provider during the entire course of development. Comparing different methods for involvement requires a framework to which the methods can be related. Kaulio (1998) proposes a framework based on two dimensions: (1) The longitudinal dimension, which includes the points of interaction between customers and the design process. (2) The lateral dimension, which captures the depth of customer involvement in the design process. This dimension is divided into three different categories: . design for, where the products are designed based on customer research but the customer is not further involved; . design with denotes an approach which, in addition to the above, also includes displays of different concepts for the customer to react upon; and . design by signifies an approach where customers are actively involved and partake in the product design. In an alternative framework Nijssen and Lieshout (1995) categorise the most popular tools for new product development according to their purpose in four groups as follows: (1) Idea generation, including creative tools such as brainstorming, synectics and morphological analysis and non-creative tools such as focus groups, surveys, observation, Delphi method, scenario, expert opinion and product life cycle. (2) Product optimisation, including conjoint analysis, quality function deployment, concept testing, prototype testing and pilot plant/in-home use test. (3) Marketing mix optimisation, including simulated test marketing, mini-market, limited prediction, including computer prediction models, diffusion models, and economic models such as ROI/BE- analysis and pay-back time. (4) Prediction, including computer prediction models, diffusion models, and economic models, such as ROI/BE – analysis and pay-back time. Of the above tools, the customer is actively involved primarily in the product optimisation tools although some customer influence is included in all tools. Particularly, the tool of quality function deployment is designed to integrate customer views in the product development process and has attracted immense interest (Bergquist and Abeysekera, 1996; Chan and Wu, 2002; Christiano et al., 2000; Matzler and Hinterhuber, 1998). Although many formal tools for product development have been designed, the awareness and usage of them is generally surprisingly infrequent (Hanna et al., 1995; Nijssen and Lieshout, 1995). Nonetheless, Nijssen and Lieshout (1995) have found that use of formal tools is correlated with higher profitability. Methodology As the aim was to achieve a profound understanding of the new product development process, we decided to use qualitative methods in the form of multiple case studies. This method does not allow traditional statistical generalisation but analytical generalisation may be possible when multiple cases support the same theory (Yin,
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1989). Small companies use marketing differently due to their limited resources (Gilmore et al., 2001). This should have implications for their involvement of customers in the product development process. For this reason, we chose to study small as well as large companies. Three small, local companies and three large, multinational enterprises were included. The companies are presented in Table I. The small companies are all located in Sweden. BT industries AB has its head office in Sweden. The interviews were carried out with representatives of the Swedish subsidiaries of Bosch Rexroth AG and Hilti Corp. For an explorative purpose aimed towards understanding, in-depth interviews are suitable as methods for data collection (Patton, 1990). The author trained students to perform in-depth interviews. The author and some students carried out interviews with managers responsible for product development and some of their subordinates. Depending on the access and the size of the company, between two and five interviews were carried out at each company, giving a total of 23 interviews. The data from the interviews was analysed by the author using techniques inspired by the constant comparative method of the grounded theory approach (Glaser, 1992; Glaser and Strauss, 1967; Strauss and Corbin, 1990). It should be noted that in its overall scope, the study is not based on the grounded theory methodology. Rather, it is deductive in its character and based on the theoretical framework presented above. However, we have found it useful to utilise the constant comparative method when analysing qualitative interviews also in this more deductive kind of studies. In practice, this means that we analysed the transcripts from the interviews phrase by phrase. The phrases were coded into concepts that, at every stage, were compared with the previous concepts. In this way, the concepts were grouped together forming certain categories or themes, which are presented below.
Name
Founded
Bosch 1945, (acquired by the Rexroth AG Bosch group in 2001)
Table I. The companies included in the study
Products
26,000 Present in more than 80 Hydraulic, pneumatic, countries. Head office in electric, electronic or Germany mechanical drive, control and linear motion solutions Construction tools 14,000 Present in 120 countries. Head office in Liechtenstein Lift-trucks 8,000 Has global presence
Hilti Corp.
1941
BT Industries AB Wexio¨disk AB
1946
Lammhults Mo¨bel AB Fresh AB
1946
Dish-washing machines for commercial catering kitchens Office furniture
1969
Ventilation products
1972
Empl. Comments
190 Market leader in Scandinavia. Some global exports 90 Mainly domestic activity 65 Exports ca. 50 per cent of production. Has won awards for human resource management
Findings The analysis of the data gave rise to five categories or themes that capture the structure of the interview material. The structure of the new product development process Here we found a clear difference in that the new product development processes of the three large companies are much more specified and structured. They consist of certain specific phases. In general, three distinct major stages can be identified. Within these stages, the companies have a slightly differing structure as is shown in Table II. The structure in the large companies is generally clearly specified and routines are documented. The structure of the projects, who should participate and who should be in charge is detailed in manuals. Often certain specific forms are used in different phases of the project. For instance, Bosch Rexroth AG uses a market requirements form so as to document new ideas from the customers in a more organised manner. Some differences in the structure of the processes exist. For instance, Hilti Corp. pays substantial attention to the maintenance phase. Maintenance is included in the price of their product and it is a major aim to handle this in a professional way. The maintenance process is also a valuable source for feedback regarding the products. Thus, this phase contributes input to the product idea stage forming a loop somewhat resembling the famous Shewhart or PDCA-cycle proposed by Deming (2000, 1986). For the small companies, the new product development process is a great deal less structured. The above stages are included in some form but there is no written structure of the process and no manuals exist that specify the procedures.
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Organisation of new product development teams All the three large companies use cross-functional teams in their new product development process. The teams consist of people from different departments or functions in the company. Usually representatives from the marketing, sales, production and design functions are involved. Lammhults Mo¨bel AB also uses specific teams. Since furniture is a particularly design-sensitive product, the designer is a crucial member of the team. The other members are the marketing manager, the product manager, a product engineer and a CAD-operator. Fresh AB is, in its general structure, organised into cross-functional, self managed teams with responsibility for specific market segments. These teams are customer focused and the new product development, taking place within these teams, ensures frequent contact with customers as well as with different functions in the company. In Wexio¨disk, the
Phase
BT Industries AB
Bosch Rexroth AG
Hilti Corp.
1. Idea stage
Market proposals Idea study Pre-study product development Pre-production Production Sales
Idea generation Idea management
Product idea stage
2. Development stage 3. Launch stage
Development Testing Production Sales
Research Development Testing Production Sales Maintenance
Table II. The stages in the new product development process in the large companies
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development is carried out by engineers. Specific teams are not formed although the product engineers interact with people from the other functions during the process. Involvement of customers The levels to which the customers are involved vary between the companies. In this aspect, there does not seem to be any relation to the size of the company. The company with least customer involvement is Wexio¨disk. Their products are developed by their engineers with very little or no contact with customers. They have great confidence in their engineers and trust them to provide the best developments. The input that they use is usually from the sales staff. Lammhults Mo¨bel, in contrast, interact fairly closely with their customers all along the development process. Although they have a pre-designed range, the furniture is usually made to order and they are thus designed specifically for the individual customer. This requires substantial interaction. Sometimes, it merely involves modifications of existing products regarding colour, form, size etc. However, two to three times a year, completely new products are developed for specific customers. In these cases, the customer is involved all along the process and particularly in the design phase. Frequently, the customer has its own designer or interior architect and the interaction mainly involves this person. The product development begins with the development of drawings. Sometimes, the customer provides a sketch of their view of the product. In other cases the design is a matter for discussion between the customer and the company’s designers and CAD-technicians. From the drawings that they develop together, one or often several full-scale models are produced. In the other four companies, the involvement of customers is mainly confined to the initial stages of the development process. After the initial phase, the customer is usually not involved until the prototype stage and after this stage, the development again takes place without much customer involvement. The product development process at Hilti often begins from complaints or suggestions for improvement from customers. These may regard efficiency features of the products as well as ergonomic aspects. The sales staff collect viewpoints from carpenters, builders and engineers out on the building sites and bring them to the product managers. Based on these viewpoints, the company’s engineers develop new products and improvements in the existing range. The customers are also addressed when prototypes have been produced and they are asked to judge the prototypes on factors such as efficiency, ergonomics and safety. BT industries use reference groups including customers in order to raise information about possible developments of their products. In the early stages, representatives from the company also travel to their main European customers to discuss the suggestions that have arisen from the reference group. In addition, exhibitions and demo-centres (where customers can test-drive the lift trucks) are used in order to obtain customer input. At Bosch Rexroth, they use their market requirement form in order to collect and document information from customers in a well-structured manner. The form is used to transfer information from the customers, via sales representatives and product managers, to the development teams. The development of new products at Fresh usually begins with the customers being invited for discussions regarding potential improvements and innovations. Then the internal product development group takes over and continues to work without
customer contact until a prototype is constructed. At this stage the customers are contacted again and are asked to give their viewpoints of the prototype. In order to facilitate the judging of the prototypes’ features, a test office has been built. In this office, the performance of the new ventilation products can be illustrated with the use of smoke and light. This makes a detailed discussion of different features of the prototype possible.
Customer involvement
431 Reasons for not involving customers further The representatives from Wexio¨disk argue that the reason for their limited involvement of customers is that they aim at being innovative. They claim that customers normally just compare the current products on offer from the different suppliers. Building the development on such information will only lead to incremental changes while they want to be truly innovative. Further, they reason that their customers often lack the competence for suggesting valuable developments. Since operating dishwashing machines is not regarded as a very glamorous job, it does not attract highly educated people. According to the company, this makes it less relevant to utilise customer input in the product development process. The other companies justify their levels of customer involvement by the need to weigh up the benefits against the costs. Customer involvement entails considerable costs both directly and indirectly in the form of the time. It may be particularly difficult for the customers to justify spending time and money to facilitate the development process of their suppliers. Methods for involving customers The use of formal tools for customer involvement is mainly found in the large companies. The only formal tool that is used by the small companies is prototype testing (Ulrich and Eppinger, 2000). The large companies also use this method. Additionally, Bosch Rexroth uses FMEA (Bergman and Klefsjo¨, 1994) and the market requirements form mentioned above. BT Industries uses focus group interviews (Seymour, 1988; Threlfall, 1999), reference groups (involving customers) and QFD while Hilti utilises Beta testing (Kaulio, 1998) involving lead users. Several companies, notably Lammhults Mo¨bel, also mention that CAD is a crucial tool for their product development. Fresh AB actively employs customer visits in which entire teams of employees, including those responsible for new product development, travel to the customers and visit their facilities. The personal relationship between the employees that is developed in this manner is fruitful for new product development as well as for providing adequate service to the customers. Further, several of the companies bring up the value of exhibitions for their interaction with customers regarding new product development. Reasons for not using additional methods for customer involvement The main reason referred to for not using additional tools for customer involvement is the cost factor. Both direct costs and the indirect cost in the form of time are pointed out. The number of customers is also cited as a problem. Interestingly, some companies claim that they have too few customers for formal tools to be appropriate whereas other companies allege that they have too many customers for formal tools to be feasible.
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Discussion While it is obvious that the larger companies involve their customers in a much more formalised manner, this does not necessarily mean that they are more deeply involved. However, formalised procedures probably reduce the risk that the customers’ viewpoints are neglected. Cross-functional development teams bring substantial advantages (Schilling and Hill, 1998; Valle and Avella, 2003) and they are used by the large companies. On the other hand, the example of Lammhults Mo¨bel shows that also small companies can benefit from the active employment of cross-functional development teams. The constant utilisation of customer focused, self-managed teams that has been worked out by Fresh AB is another creative example of organising for customer and cross-functional involvement. The level of customer involvement was found to vary. Earlier research shows that customer involvement increases the likelihood of new product success. In line with the reasoning of the companies this must be weighed against the costs in time and money that customer involvement brings. For the sellers, a fairly high level of interaction is almost certainly worthwhile in most relations. The main problem should be to make the customers realise the value of participating as noted by McElroy (1995). The solution may be to develop close relationships (integrative relationships in Fords et al. (1998) terminology) with some partner companies and conduct the new product development within these relationships as he suggests (McElroy, 1995). Wexio¨disk argued that customer involvement hampers innovation. This may be reasonable in some cases but presumably rather rarely. Product development ranges from incremental improvements to existing products to fundamentally new products (Ulrich and Eppinger, 2000). Only in the latter case could it be reasonable to exclude customers from the development process for this reason. In addition, it is only suitable to conduct parts of the early stages without customer interaction. In later stages, the customers must be involved in order to ensure that the product is marketable. The study supports the earlier research that shows that the use of formal methods for customer involvement is rather infrequent (Hanna et al., 1995; Nijssen and Lieshout, 1995). Also in this case costs in time and money must be weighed against the benefits. Nonetheless, earlier studies have shown the value of using formal methods (e.g. Nijssen and Lieshout, 1995). The motivation that they have too few or too many customers is unreasonable. It rather indicates that the managers’ knowledge of the available methods is rather limited. Probably, ignorance of the possibilities is the real reasons for not using the methods. Creative new approaches to customer interaction such as the whole team customer visits of Fresh AB and their organisation into self-managed teams could also be particularly valuable. A relationship marketing framework for customer involvement It is obvious that the involvement of the customers in product development is dependent on the relations. The relationship marketing theory recommends that relationships be consciously managed (Gummesson, 1999). This does not mean having close relations with all customers. Ford et al. (1998) suggest the concept of customer and supplier portfolios. The concept implies that the relationships should be properly structured and handled, some being close and others being more distant depending on
the circumstances. This will influence the way new product development should be conducted. The findings of this study, have shown different levels of customer involvement under different circumstances. Combining this with the theoretical framework, particularly the three levels of relationships presented in the section on relationship marketing above, we have developed the framework for handling new product development that is outlined in Table III. Of the companies included in this study, it seems that Wexio¨disk mainly has transactional relationships whereas the other five companies have several facilitative relationships and Hilti appears to have some integrative relations. Normally, it should be recommended to have greater integration than Wexio¨disk has and some of the other companies might also benefit from developing some closer relationships. Generally, the companies use the methods less than we have recommended. As noted above this may be due to ignorance of the full value of the methods.
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Managerial implications The study has shown that cross-functional teams are common in new product development. Since this is an explorative study, we have not tried to measure the effects of the different initiatives. However, earlier research has indicated the benefits of such teams (Schilling and Hill, 1998; Valle and Avella, 2003). Thus, the recommendation for managers is to utilise cross-functional teams. The study has shown that even small companies can use cross-functional teams successfully. Structuring the company into customer focused self-managed teams in accordance with Fresh AB is another interesting option. Organising the teams around the designer like Lammhults Mo¨bel is an alternative and equally interesting choice. In integrative relationships (Ford et al., 1998) it should be possible to involve representatives from the customer firm in the teams. In managing their relations, managers should benefit from adopting the portfolio approach recommended by Ford et al. (1998) and typically develop some close relationships with key customers and suppliers. The framework presented in the previous section (Table III) could hopefully give some directions as to the handling of new product development in different levels of relations and which methods are suitable to use. From a general point of view, most companies could probably benefit from using more methods than they currently do.
Level of relationship
Longitudinal customer involvement
Transactional Only in the early phases Facilitative Integrative
In the early phases, in the testing phase and occasionally in the other phases In all phases
Lateral customer involvement Design for the customer Design with the customer Design by the customer
Suitable methods Surveys, focus group interviews, observation QFD, Delphi method, conjoint analysis, prototype testing, beta testing, team customer visits Integrated product development teams including representatives of both the supplier and the customer
Table III. A proposed framework for customer involvement in different levels of relationship
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Conclusions and suggestions for further research The study has shown that the product development process is more structured in the larger companies where it consists of specific stages. The findings also indicate the value of cross-functional teams. Ideally, customers should be involved in the teams. This requires a close relation between supplier and customers, integrative relationships. Such relations can only be developed with a few essential customers. We have proposed that the relationship with the customers be classified and handled in a portfolio approach. Further, we have suggested a framework for managing customer involvement in new product development in different levels of relations. In accordance with earlier research, this study has indicated that the use of formal methods for customer involvement is relatively limited. Since previous research has shown the value of the methods, the use of them should be encouraged. The reasons for not using the formal methods and for not interacting more closely with customers were claimed to be either cost and time or a wish to be innovative. While the cost and time factor is a sensible reason which needs to be taken into account, innovative product development will still require customer interaction except possibly in some early idea stages. In further research, it would be interesting to try to probe even deeper into why companies fail to use the methods that are available. We have proposed that this is partly due to ignorance. Revealing whether this is really the case and what other reasons might exist, requires in-depth qualitative studies including participant observation and/or action research (Gummesson, 1991). We have proposed a framework for customer involvement in different levels of relationships. An interesting continuation would be to test with quantitative studies to what extent the framework corresponds to the actual practice and if there is a relation between the practice and performance measures such as new product success, profitability etc. References Bergman, B. and Klefsjo¨, B. (1994), Quality from Customer Needs to Customer Satisfaction, McGraw-Hill, London. Bergquist, K. and Abeysekera, J. (1996), “Quality function deployment (QFD) – a means for developing usable products”, International Journal of Industrial Ergonomics, Vol. 18 No. 2, pp. 269-75. Bruhn, M. (2003), Relationship Marketing, Management of Customer Relationships, Prentice-Hall/FT, Harlow. Chan, L-K. and Wu, M-L. (2002), “Quality function deployment: a literature review”, European Journal of Operational Research, Vol. 14 No. 3, pp. 463-97. Christiano, J.J., Liker, J.K. and White, C.C. (2000), “Customer-driven product development through quality function deployment in the US and Japan”, Journal of Product Innovation Management, Vol. 17 No. 2, pp. 286-308. Condit, P.M. (1994), “Focusing on the customer: how Boeing does it”, Research Technology Management, Vol. 37 No. 1, pp. 33-8. Deming, W.E. (1986), Out of the Crisis, Cambridge University Press, Cambridge. Deming, W.E. (2000), The New Economics for Industry, Goverment, Education, MIT Press, Cambridge, MA. Ford, D., Gadde, L-E., Ha˚kansson, H., Lundgren, A., Snehota, I., Turnbull, P. and Wilson, D. (1998), Managing Business Relationships, Wiley, Chichester.
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Market orientation and innovation: an inter-relationship analysis Joaquı´n Aldas-Manzano, Ine´s Ku¨ster and Natalia Vila
Market orientation and innovation 437
Department of Marketing, Facultad de Economı´a, University of Valencia, Valencia, Spain Abstract Purpose – Market orientation analyses have focused on two broad-ranging approaches: the behavioural and the philosophical. The concepts of innovation and market orientation are gaining ground steadily in the context of an increasingly competitive and highly volatile environment, subject to the pressures of rapid-changing customer needs and desires. This premise underlies the general aim of this study, which is to determine to what extent companies operating in the same sector and with similar market orientation are similarly concerned about innovation. Design/methodology/approach – The population for this study comprises the leading 465 textile companies operating in Spain, listed in the ARDAN database. Data were gathered from in-depth personalised interviews with 17 company directors operating within the textile sector. In order to verify the hypotheses, groups with similar market orientation were identified using a combination of two techniques: multidimensional scaling analysis; and cluster analysis. After this, ANOVA was used to characterise each group. Findings – This study of the textile sector, and more specifically of its leading companies, enables one to conclude that market orientation and innovation are not isolated fields. First, four groups of firms which differ significantly in their commitment to market orientation have been found. Second, although a direct relationship between market orientation and innovation could not be statistically proved, some tools and policies considered in the innovation scale are more heavily used by the firms more orientated to the market. Third, in the context of the traditional debate in the literature about the market orientation-performance relationship, the results of this study support a positive relationship between these two concepts. Research limitations/implications – The limitation of the sample size should lead one to treat the final results with caution. Originality/value – The concepts of innovation and market orientation are gaining ground steadily in the context of an increasingly competitive and highly volatile environment, subject to the pressures of rapidly-changing customer needs and desires. In this sense, through this paper companies can observe how these two concepts are related in a particular industry and obtain some interesting implications. Keywords Market orientation, Innovation, Textile industry Paper type Research paper
Introduction In the related literature, market orientation analyses have focused on two broad-ranging approaches: the behavioural approach and the philosophical one. The concepts of innovation and market orientation are gaining ground steadily in the The present paper has been financed by the Project CTIDA 2002/156, Oficina de Ciencia y Tecnologı´a (Generalitat Valenciana).
European Journal of Innovation Management Vol. 8 No. 4, 2005 pp. 437-452 q Emerald Group Publishing Limited 1460-1060 DOI 10.1108/14601060510627812
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context of an increasingly competitive and highly volatile environment, subject to the pressures of rapidly-changing customer needs and desires. This premise underlies the general aim of this study, which is to determine to what extent companies operating in the same sector and with a similar degree of market orientation are similarly concerned about innovation. The ultimate purpose of this paper is to analyse and compare the relationship between the diverse concepts of market orientation and innovation and outline how they are used. To this end, empirical research was undertaken within the textile sector. This particular sector was chosen because of its competitive positioning and importance in Spain and its varying degree of involvement in market orientation and innovation. Market orientation and innovation Market orientation has been under constant research focus for the past decade. Among the many contributions, the important work of Kohli and Jaworski (1990) and Narver and Slater (1990) are of acknowledged importance. An overview of the related literature on market orientation and subsequent reflections serve as the starting point for the present study. The work of Kohli and Jaworski (1990) is founded on the three basic pillars of marketing (customer focus, marketing co-ordination and profitability). Market orientation is defined as a whole comprising three basic activities: (1) corporate market information gathering on customers and other exogenous factors; (2) the dissemination of this market information throughout the company; and (3) the design and implementation of a response to this information. Narver and Slater’s (1990) work stresses that market orientation is an organisational culture made up of three behavioural components: customer orientation, competitor orientation and inter-functional co-ordination. These authors subsequently emphasise that these components should include the generation and dissemination of market information and management’s response to this information. Thus, it can be seen that the approaches of Kohli and Jaworski (1990) and of Narver and Slater (1990) are complementary and not mutually exclusive. Pearson (1993, p. 242) states that “orientation is a question of degree – the degree to which functional orientation dominates a company’s thought process and consequently the way decisions are taken and people go about their work”. The inference from this idea is that market orientation simply deals with ways of thinking and acting, but it needs careful and more detailed analysis. One approach is concerned with culture, corporate philosophy and attitude. Tuominen and Mo¨ller (1996), Tuominen et al. (1997) and Varela et al. (1998) make a distinction between market orientation as a philosophy and as an organisational culture. However, Varela et al. (1996) compartmentalise the term as culture when defining these perspectives. Similarly, Varela et al. (1998) point out that these are essentially two coincidental perspectives, whose aim is to highlight the benefits obtained by customers. Secondly, the strategic or behavioural approach, which characterises the work of Tuominen and Mo¨ller (1996) and Tuominen et al. (1997), must also be referred to. From this approach, market orientation has a two-fold purpose: the processing of market information and the inter-functional co-ordination of market information. The
complementary nature of this behavioural approach and the previous philosophical approach has been frequently defended, since ways of thinking (the philosophical approach) condition and delimit ways of acting (the behavioural approach) and vice versa. In addition to these two approaches, some academics consider market orientation as a resource and/or a capacity of the company to provide a sustainable competitive advantage (Day, 1994; Hunt and Morgan, 1995; Varela et al., 1998; Vila and Ku¨ster, 1998). Therefore, it is feasible to consider market orientation from the perspective of the Theory of Resources and Capacities. Thus, Martı´n Armario (1995) shows empirically that such a theory is able to account for corporate competitivity by envisaging market orientation as an internal factor within the company and thus explain the nature of its competitiveness. Together with the concept of market orientation, the concept of innovation is a further cornerstone in modern marketing strategy. As pointed out by Guijarro (2001), during the past decade Spanish companies and institutions have become aware of the increasingly important role played by technological innovations in increasing company productivity and stimulating economic activity in general. This is reflected in the constant rise in human resources and financial budgets dedicated to research and development and the parallel injection of funds into theoretical and applied research at academic institutions. This is true both for the private and state sectors. However, there are two different but related factors outlined in the relevant literature when defining a company as innovative. The first considers innovation as a technology, strategy or management tool used by the company for the first time, whether used previously by other companies or not, or as a redesigning of or significant improvement in a process (Nord and Tucker, 1987; Tornatzky and Fleischer, 1990). From such a perspective, an innovation entails aspects concerning its diffusion among nations, industries and companies (Haiyang and Kwaku, 2001), and is considered as forming part of the traditional theory of innovation diffusion (Prescott and Slyke, 1997). The second factor defines innovation as a new product created by the company specifically for the market. This comprises the commercialisation of an invention, where invention is seen as an act of creativity (Myers and Marquis, 1969). Reference is made to the influence that company structure, staff and processes exercise on the development and commercialisation of new products (Haiyang and Kwaku, 2001). It is also possible to extend the concept of innovation in product manufacture and commercialisation, and distinguish between two further levels of innovation: (1) the project level, which examines all the processes needed to conceive, design, produce and distribute a product for the market (Myers and Marquis, 1969; Haiyang and Kwaku, 2001); and (2) the company level or strategic unit, which looks at product innovations in terms of the company’s competitive strategy (Haiyang and Kwaku, 2001). Hypotheses As Lukas and Ferrell (2000) point out, both marketing and innovation are stimuli to economic growth and a contributor to competitive advantage is gaining ground? So, there is a shift of interest towards determining whether market orientation boosts or restricts innovation. Traditionally, market orientation literature has identified positive relationships between market orientation and innovation-related aspects. Kohli and Jaworski (1990),
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Deshpande´ et al. (1993) and Slater and Narver (1994a, b) suggest that market-oriented behaviour results in a higher degree of innovation and, therefore, of success in the commercialisation of new products. Atuahene-Gima (1995) goes further and analyses the impact of market orientation on the profit margins of new products. Apart from exerting a positive influence on the development of new products, market orientation enhances the profitability of new products. In a later study, Atuahene-Gima (1996) shows that market orientation has a decisive impact on the profitability of product and service innovations. Hurley and Hult (1998) recommend the inclusion of innovation in the concept of market orientation. Along with Jaworski and Kohli (1993), they point out that market orientation has to do implicitly with new and different action plans in order to respond to market conditions. Similarly, Santos and Va´zquez (1997) have verified empirically that market-oriented high-technology companies obtain significantly better results in innovations. They have higher success and lower failure rates for commercialised innovations. Han et al. (1998) and Lado et al. (1998) obtain similar results. Han et al. (1998) conclude that both global market orientation and its different components have a positive and significant effect on technological and administrative innovations. In turn, these innovations affect company profitability positively. Lado et al. (1998) show empirically that the level of market orientation has a positive effect on innovation in the financial sector they analyse. They also observe that the greater a company’s market orientation, the higher the ratio of new products compared to its competitors. However, they add that although no direct effect on the profitability of innovations is observed, the company receives more media impact because of its degree of involvement in product innovation. A more recent study by Lukas and Ferrell (2000) analyses the relationship between market orientation and one of the components of innovation: product innovation. The study concentrates on American industry and shows how product innovation varies proportionally with the company’s involvement in market orientation. They observe how: . customer orientation increases the commercialisation of new products; . competitor orientation reduces the launching of extensions to product and new product lines; and . inter-functional co-ordination increases the commercialisation of extensions to product lines. Table I shows some of the studies that point to a positive relationship between market orientation and innovation. In conclusion, and based on Lado and Maydeu-Olivares’s (2001) recent study, market orientation influences and precedes innovation, with the corollary that companies who are more market-oriented show a greater innovative flair. Furthermore,
Table I. Market orientation and innovation
Effects
Authors
New products
Atuahene-Gima (1995, 1996); Lukas and Ferrell (2000) Santos and Va´zquez (1997); Han et al. (1998); Hurley and Hult (1998); Lado et al. (1998)
Innovations
this study has been undertaken within an international context, by verifying the relationship of both constructs in the markets of the European Union and the USA. The authors conclude that the size and efficacy of innovative practice within companies can be reinforced by applying market orientation principles. In view of the above considerations, the following hypothesis has been formulated:
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H1. Companies with higher degrees of market orientation, will innovate significantly more.
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The market orientation of a company has also been linked to corporate results. Several studies confirm that companies with a similar market orientation obtain similar financial results. It is fair to assume that the ultimate aim of business executives is to increase profits. Companies seek to achieve such an objective insofar as their market orientation strategies allow them to do so. It was outlined above how market orientation can increase customer satisfaction, and thus ensure customer loyalty. Reichheld (1993, p. 64) establishes that “. . . when a company is consistently able to offer better value and achieve customer loyalty, market share and turnover increase and costs for attracting and serving customers decrease.” Consequently, theorists have found it difficult to show that market orientation is the most promising alternative open to companies. However, some differences in the results arising from the studies on the subject should be pointed out, due to the diversity of measurement tools in company results. Although there is a recognised need to measure business success by means of multi-dimensional techniques, Diamantopoulos and Hart (1993), Pelham (1993) and Raju et al. (1995) consider that few research projects have attempted to use more than one objective measurement. They add that measurement checks on company performance are inconclusive and suggest that the choice of one technique as opposed to another limits the interpretation arising from the research. Meehan (1996) supports this idea and writes off previous studies as inconclusive, unclear and unreliable. On this, Pelham (1993) suggests that the diversity of results obtained in research projects may be due to differences in the samples used, as well as to differences in the tools applied to measure market orientation and company results. In this sense, Llonch and Walin˜o (1996) utilize both subjective and objective measurement techniques. Table II demonstrates that alternative performance measures have been used in the literature to analyse the market orientation-performance relationship. Based on the above, the possible influence of market orientation on company results leads to the following hypothesis. H2. Companies with higher degrees of market orientation will significantly improve their performance.
Objectives and methodology The main aim of the present study is to relate a company’s market orientation within the textile sector to its degree of involvement in innovation and to other factors such as performance. Firstly, it should be determined to what extent companies with a similar market orientation innovate to the same degree and, secondly, to what extent companies with a similar market orientation achieve similar levels of performance.
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Table II. Alternative performance measures
Effects
Authors
General performance
Narver and Slater (1990); Slater and Narver (1994a); Despande´ et al. (1993); Jaworski and Kohli (1993); Diamantopoulos and Hart (1993); Jaworski and Kohli (1993); Raju et al. (1995); Rivera (1995a, b); Gounaris and Avlonitis (1996); Pelham and Wilson (1996) Narver and Slater (1990); Narver et al. (1991); Avlonitis et al. (1992); Greenley (1995); Slater and Narver (1996)
Profitability Profitability on investment Sales growth New products Innovations Competitive advantages:
Atuahene-Gima (1995, 1996) Santos and Va´zquez (1997), Han et al. (1998); Hurley and Hult (1998); Lado et al. (1998) Webster (1991); Day (1990); Narver and Slater (1990; 1994a, b); Pelham (1993); Deshpande´ et al. (1993)
Sample and measurement scales The population for this study comprises the leading 465 textile companies operating in Spain, listed in the ARDAN database. This sector was chosen because of its interesting profile. The textile sector is subject to strong pressures within a fast-changing business environment due to two groups of factors: market volatility and strong competition world-wide. Manufacturers are bound to consider carefully when and how to innovate (Au and Yu, 2002). Such (2001) observes that the textile industry has historically exerted a strong influence on other sectors such as the machinery or paper industries. Such effects have diminished over the past few decades in favour of emerging logistics and advanced tertiary activities. In Spain, the textile industry is a traditional, heavily diversified sector. It has low rates of growth in demand and is technologically non-intensive. However, some product ranges are heavily demanded (sports footwear and technical garments). In those products technological and differential factors (design, quality, designer fame) have become extremely important. Data was gathered from in-depth personalised interviews with 17 company directors operating within the textile sector. In spite of this we are aware of the limitation of the sample size, and as such interpret the final results with caution. First, as shown in Table III, the behavioural dimension of market orientation was measured using the MKTOR scale developed by Narver and Slater (1990). This is a widely-used seven-point Likert type scale comprising 16 items. The attitude side of market orientation was measured with a six-item scale based on Llonch (2000) (two items) and Dawes et al. (1998) (four items). Secondly, innovation was measured including a series of items based on a scale proposed for other sectors by authors such as Henard and Szymanski (2001). The authors synthesise the construct of innovation by using 24 items, distributed in four sub-scales: innovation in products, innovation in processes, innovation in strategy and innovation as a whole. These four sub-scales are taken as predictors of the success/failure of a new product. The development of this scale was carried out after extensive scrutiny of the works of these two authors. Also various studies were consulted to outline a set of universal innovation indicators across different sectors. After consulting some of the sector managers, only those indicators seen as relevant were maintained. It was significant that the company directors interviewed were especially interested in differentiating between Internet and digital technology- related
Scale
Authors
Market orientation behaviour (MKTOR) (16 items)
Narver and Slater (1990)
Items
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16.
Market orientation attitude (6 items)
Llonch (1993) (2 items) and Dawes et al. (1998) (4 items)
1. 2. 3. 4. 5. 6.
Electronic innovation (13 items)
Based on in-depth interviews with general directors
1. 2. 3. 4. 5. 6. 7. 8. 9. 10.
11. 12. 13.
Customer orientation: Customer commitment Create customer value Understand customer needs Customer satisfaction objectives Measure customer satisfaction After-sales services Competitor orientation: Salespeople share competitor information Respond rapidly to competitors’ actions Competitors’ market share information Analysis of competitors’ strategy Analysis of target opportunities Inter-functional coordination: Diverse departments have contacts with clients Follow managerial guidelines Information shared among functions All functions contribute to customer value Share resources other SBU
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Importance to analysis of customer needs Commitment to response to customer needs Clients and products’ profitability control Long perspective Competitors’ information commitment Importance to after-sales Degree in which my company (%): Uses e-mail with clients and suppliers Has a web page Uses the intranet Uses mailing lists Has access to mailing lists Takes part in chats Takes part in news groups Uses mobile telephones as e-mail terminals Has electronic diaries Uses self-management mechanisms (automatic e-mail reply in the absence of staff, etc.) Uses gateways for fax through the internet Uses voice synthesis/recognition systems Uses video conferences (continued)
Table III. Constructs measurement scales
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Scale
Authors
Products, process and strategies innovation (10 items)
Henard and Szymanski (2001)
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Items 1. 2. 3. 4. 5. 6.
7. 8. 9. 10. Performance (4 items)
Table III.
Llonch and Walin˜o (1996)
1. 2. 3. 4.
Launching of high-tech brands Use of up-to-date, cutting edge machinery Flexible production systems adapted to a changing environment Use of revolutionary raw materials Novel staff training/remuneration methods (i.e. online training) Innovative communication campaigns (advertising, public relations, special offers etc.) Novel distribution systems (for example, online sales) Attendance at top-ranking, prestigious trade fairs Permanent diversification of product range (extensive product range) Modern stock control and order systems Profitability against invested capital The margin achieved for each unit sold Rate of sales growth during the past three years Achievement of objectives set
innovations (measured by 13 items) and innovations related to products, processes and strategies (measured by ten items). Table III also summarizes the final 23 items used in the present study. Thirdly, company performance was measured by means of multi-dimensional methodology according to Llonch and Walin˜o (1996). Following them, four items were used to measure performance: the ratios of profitability to investment, profit margins to sales, increase in turnover and global results. The first two refer to financial results, the third to operational results and the fourth to company efficacy. As shown in Table IV, the scales used have sufficient built-in psychometric properties which were verified by applying the criteria of various authors (Deng and Dart, 1994; Llonch and Walin˜o, 1996; among others). The three scales have Cronbach’s alpha values higher than the 0.6 recommended by Nunnally (1967) attesting to their reliability. The correlations among pairs of items on the same scale were satisfactory and significant for p , 0.05, underlining its convergent validity. As for divergent validity, the insignificant correlation between the scale and other elements led us to reject the correlation hypothesis. Finally, the predictive validity was assessed by analysing the correlation between the market orientation and innovation scales with performance. Both correlation coefficients are significant ( p , 0.05) confirming predictive validity. As stated before, all these results must be considered under the sample size limitation.
Scales
Reliability
Validity
Market orientation
a ¼ 0.8389 Std a ¼ 0.8696
Convergent validity: Correlations among items with p , 0.05 Divergent validity: Correlation: innovation with p . 0.05 Predictive validity: Correlation: performance p , 0.05 Convergent validity: Correlations among items with p , 0.05 Divergent validity: Correlation: market orientation with p . 0.05 Predictive validity: Correlation: performance p , 0.05 Convergent validity: Correlations among items with p , 0.05
Innovation
a ¼ 0.7032 Std a ¼ 0.7045
Performance
a ¼ 0.7452 Std a ¼ 0.7369
Results In order to verify the first hypothesis, groups with similar market orientation were identified using a combination of two techniques: (1) multidimensional scaling analysis (MDS); and (2) cluster analysis. MDS highlights graphically each competitor’s position while cluster analysis identifies to which group it belongs. Thus, companies close to each other on the map are seen as homogeneous and are included in the same group. This combination of techniques is used not to substitute but to complement each other. The preference for MDS as opposed to other spatial representation techniques is due to its greater reductive capacity, allowing all the information to be presented on a bi-dimensional map. Secondly, the indices resulting from this technique, allow an approximation of the goodness of fit for the interviewees’ perceptions shown geometrically on the map (Olivia et al., 1987; Hodgkinson et al., 1996). Lastly, the successive adoption of spatial and group representation techniques, pioneered by Breiger et al. (1975), has been carried out by applying jointly MDS and cluster scale analysis. In this way, we have followed DeSarbo both in company based competitive analyses (DeSarbo et al., 1991), and in product based analyses (Arabie et al., 1987). By using variables put forward by Narver and Slater (1990), the empirical research allows us to draw up a perceptual map focusing on market orientation within companies. On this map, six clusters were identified according to stop criteria (Hair et al., 1998) and the subsequent application of Ward’s and K-Media methods. The results are shown in Table V and VI respectively. After applying successively a hierarchical and a non-hierarchical cluster analysis, it was concluded that the six-group solution seemed the most adequate for the following reasons: (1) The dendrogram breaks up abruptly. (2) Interpretable results are obtained. (3) Intra-group variability is less than 40 per cent, or alternatively, explained variance is greater than 60 per cent.
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Table IV. Scales and scale reliability
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(4) The increase in explained variance by the addition of a further group would be less than 5 per cent. (5) The solution of the hierarchical Ward method is the same as the non-hierarchical K-media method, since in both cases companies 5 and 9 come out as outliers or isolated competitors. (6) The obtained groups differ significantly from one another as regards the grouping variables used (K-media method).
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On the map (Figure 1) the 17 companies featured in the study can be seen. Companies close to each other on the map, have comparable market orientation attitudes and behaviour positions. This map also shows two outliers defining two independent clusters: cluster 5 (made up exclusively of company 5) and cluster 1 (made up exclusively of company 9). Their atypical behaviour when compared to competitors has led to their exclusion from subsequent analyses. Thus, two of the clusters identified correspond to groups whose behaviour and attitude towards market orientation exclude them from the standards represented by the other companies. The four remaining clusters obtain high mean scores in their market orientation (. 4 in a seven-degree scale). In spite of this and according to Table VII, they also show significant differences in their market orientation degree taking the construct as a whole (F ¼ 9.68; p , 0.01), considering its behavioural dimension (F ¼ 6.85; p , 0.01) and also taking into account its attitudinal approach (F ¼ 3.56; p , 0.1). Cluster 2 (11.8 per cent of the sample) is the least market orientated group of textile manufacturers. Cluster 4 (29.4 per cent) is more market orientated than cluster 2, but has comparatively lower market orientation scores than clusters 3 and 6. We name this the “Less market orientated cluster”. The next cluster with a higher market orientation degree is cluster 3 (35.3 per cent), and we name this the “More market orientation
Number of clusters
Table V. Number of groups retained following hierarchical cluster analysis: Ward method
Table VI. Results of six groups in the non-hierarchical cluster analysis: K-media method
6 5 4 3 2 1
Intra-group variance d 2
% intra-group variance % d 2
6.695 9.004 13.061 21.969 33.975 59.017
11.34 15.25 22.13 37.22 57.56 100
Explained intra-group variance if a further group is added Dd 2 ¼ d 2 t 2 d 2 tþ 1 3.91 7.62 15.08 20.34 42.44
Notes: % d 2 explained ¼ 88.65 . 60 per cent; Dd 2 ¼ 3.91 , 5 per cent
Axes
F ratio
Sig. level
Axis X Axis Y
24.787 8.900
0.000 0.001
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Figure 1. Classification of companies according to their degree of market orientation
Construct Market orientation (behavioural dimension) Market orientation (attitude dimension) Market orientation (global construct)
2 4.1 5.2 4.6
Cluster/mean 3 4 5.6 5.9 5.7
4.9 4.9 4.9
6 5.9 5.8 5.9
F 6.85 * * 3.56 * 9.68 * *
Notes: * *p , 0.01; *p , 0.1
cluster”. Finally, cluster 6 (11.8 per cent) has been named the “Most market orientation cluster”. In a second analysis, in order to verify the first and second hypotheses, we measured the difference between the four groups, first, for the innovation items and secondly for the results items. The idea was to see whether companies in the same group and with similar market orientation, innovate and obtain results to the same extent. Table VIII allows us to accept H2, given that the clusters differ significantly in their performances (F ¼ 3.05; p , 0.1). More specifically, the “least” market-orientated cluster, also shows the least performance scores while companies in the “most” market orientated cluster get the best business results. The two other clusters are congruently ranked with H2.
Table VII. Market orientation clusters characterization
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Regarding H1, Table VIII leads us to reject the direct effect of market orientation on the electronic innovation degree (F ¼ 0.37; p . 0.1) and on the product, process and strategy innovation degree (F ¼ 0.96; p . 0.1). To try to explain this relationship initially rejected, a second analysis was developed in order to check if market orientation could be influencing some particular aspects of innovation. An ANOVA was developed taking the individual items of the innovation scale as a dependent variable and the cluster belonging? as a factor. Table IX shows that two items of the electronic innovation scale and four of the product, process and strategy innovation scale are significantly different for the four clusters. The “least” and the “less” market orientated clusters, congruently with H1, use the six innovation tools considered less intensively (e.g. flexible production systems, novel staff training methods, modern stock control) than the “more” and the “most” market orientation clusters. In sum, although H1 is rejected, some results point out some signs of a possible relationship between market orientation and innovation. Perhaps alternative innovation scales or greater sample sizes could consolidate this tendency in future research. Conclusions This study of the textile sector, and more specifically of its leading companies, enables to conclude that market orientation and innovation are not isolated fields. Such a conclusion can be summarised in three ways. First, as suggested by Narver and Slater (1990), four groups of firms which differ significantly in their commitment to market orientation have been found. This result is
Table VIII. Influence of market orientation on innovation and performance
Construct
2 Least
Cluster/mean 3 4 More Less
6 Most
F
Electronic innovation Product, process and strategic innovation Performance
23.1 2.7 2.9
38.5 3.4 3.3
34.6 3.5 4.1
0.37ns 0.96ns 3.05 *
Notes: * *p , 0.01; *p , 0.1;
ns
not significant
Constructs/subconstructs
Table IX. Market orientation and innovation tools and policies
2
Electronic innovation Electronic diaries Self-management mechanisms Product, process and strategic innovation Flexible production systems adapted to a changing environment Novel staff training/remuneration methods Attendance at top-ranking, prestigious trade fairs Modern stock control and order systems Notes: * *p , 0.01; *p , 0.1;
ns
30.8 3.3 3.2
not significant
Cluster/mean 3 4
6
F ns
23.1 0.0 0.0 2.7 3.0
38.5 66.7 50.0 3.4 4.3
30.8 0.0 0.0 3.3 3.0
34.6 50.0 0.0 3.5 4.5
0.37 10.1 * * 3.6 * 0.96ns 15.6 * *
2.0 2.5 2.5
3.5 4.6 3.8
3.2 3.8 3.2
4.0 3.5 4.0
3.2 * 3.3 * 3.2 *
true considering market orientation both as a whole construct and considering its two dimensions: attitudinal and behavioural market orientation. Secondly, although a direct relationship between market orientation and innovation could not be statistically proved, some tools and policies considered in the innovation scale are more heavily used by the firms more orientated to the market. This could mean that market orientation is not always synonymous with innovation but encourage further research. Third, in the context of the traditional debate in the literature about the market orientation-performance relationship, the results of this study support a positive relationship between these two concepts. Managerial implications According to Santos and Va´zquez (1997), proactive firms (clearly innovative and with the desire to identify new business opportunities) are those with a higher level of market orientation. However, this relationship should be carefully considered by textile managers. Only top managerial decisions related to innovation tools and policies show a direct relationship between innovation and market orientation. One explanation could be that the textile sector is concerned with innovation; most of the companies have computers, e-mail or new products. In this sense, some innovation variables are used by all kinds of enterprises; so there are no significant differences between some innovation variables and market orientation. More technological and innovative advances must be considered by top managers in order to be more market-orientated. At the same time, externally orientated cultures (e.g. market orientated firms) are related to better performance. This means that managers do not have to be worried about their investments to get market orientation because these investments represent future success. In spite of our findings managers should not forget a variety of factors that we have not addressed in the present study. In this sense, the importance of environmental variables (competitive intensity, market turbulence, demand uncertainty, among others) could moderate the market orientation-innovation-performance relationships. Study limitations and further research The guidelines, as well as the conclusions commented on, need to be qualified in the light of the following considerations. First, the results and conclusions of this study should be read in the context of the limited sample size. Results may not be generalized to the textile sector but they are probably useful as a qualified exploratory approach to analyse the relationship among the constructs considered. Secondly, since this study is based on the subjective judgement of the perceptions of company directors, the measurement of the degree of market orientation and innovation commitment is subject to various cognitive biases. Future market orientation and innovation positioning studies should use external and, perhaps, more objective sources of judgement. In order to avoid halo effects of variance, it might be worthwhile to gather information on market orientation from customers, and compare these results with the companies’ competitive strategies. Moreover, other measurement scales for both market orientation and innovation could be incorporated and the publication of secondary sources could be especially useful in defining groups by means of more objective data.
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Finally, the extension of this research to other sectors might provide further useful insights into the relationship between market orientation and innovation. A comparative study of other mature sectors such as car manufacturing, the footwear or food industries, could show the results obtained in the textile sector in a wider, clearer perspective. Other possible lines of research might concentrate profitably on more innovative sectors, such as, for example, that of medical technology.
450 References Arabie, P., Carroll, J.D. and Desarbo, W. (1987), Three-way Multidimensional Scaling and Related Techniques, Sage Publications, London. Atuahene-Gima, K. (1995), “An exploratory analysis of the impact of market orientation on new product performance: a contingency approach”, Journal of Product Innovation Management, Vol. 12 No. 4, pp. 275-93. Atuahene-Gima, K. (1996), “Market orientation and innovation”, Journal of Business Research, Vol. 35 No. 2, pp. 93-103. Au, K. and Yu, H. (2002), “Developing synergistic and complementary effects in textiles and clothing (T&C) supply for Greater China”, Journal of Fashion Marketing Management, Vol. 6 No. 2, pp. 177-94. Avlonitis, G.J., Kouremenos, A. and Gounaris, S.P. (1992), “Company performance: does marketing orientation matter?”, Proceedings of the 21st EMAC Conference, Aarhus, Denmark, 26-29 May, pp. 83-95. Breiger, R., Boorman, S. and Arabie, P. (1975), “An algorithm for clustering relational data with applications to social network analysis and comparison with multidimensional scaling”, Journal of Mathematical Psychology, Vol. 12 No. 3, pp. 328-83. Dawes, J., Faulkner, M. and Sharp, B. (1998), “Business orientation scales: development and psychometric assessment”, Proceedings of the 27th EMAC Conference, Stockholm, May, Track 5, pp. 461-77. Day, G.S. (1994), “The capabilities of market-driven organizations”, Journal of Marketing, Vol. 58 No. 4, pp. 37-52. Deng, S. and Dart, J. (1994), “Measuring market orientation: a multi-factor, multi-item approach”, Journal of Marketing Management, Vol. 10 No. 8, pp. 725-42. Desarbo, W., Jedidi, K., Cool, K. and Schendel, D. (1991), “Simultaneous multidimensional unfolding and cluster analysis: an analysis of strategic groups”, Marketing Letters, Vol. 2 No. 1, pp. 129-46. Deshpande´, R., Farley, J.U. and Webster, F.E. (1993), “Corporate culture, customer orientation, and innovations in Japanese firms: a quadrad analysis”, Journal of Marketing, Vol. 57 No. 1, pp. 23-37. Diamantopoulos, A. and Hart, S. (1993), “Linking market orientation and company performance: preliminary evidence on Kohli and Jaworski’s framework”, Journal of Strategic Marketing, Vol. 1 No. 1, pp. 93-121. Gounaris, S.P. and Avlonitis, G.J. (1996), “Marketing orientation: a powerful, competitive edge for industrial marketers”, Proceedings of the 25th EMAC Conference, Budapest, 14-17 May, pp. 491-509. Greenley, G.E. (1995), “Forms of market orientation in UK companies”, Journal of Management Studies, Vol. 32 No. 1, pp. 47-66. Guijarro, J.M. (2001), “Gestio´n de la innovacio´n en las empresas industriales de la Comunidad Valenciana”, in BBVA (Ed.), Construccio´n de una Tipologı´a, Comunidad Valenciana, Servicios de Estudios BBVA, Madrid. Hair, J., Anderson, R., Tatham, R. and Black, W. (1998), Multivariate Data Analysis with Readings, Prentice-Hall, Englewood Cliffs, NJ.
Haiyang, L. and Kwaku, A. (2001), “Product innovation strategy and the performance of new technology ventures in China”, Academy of Management Journal, Vol. 44 No. 6, pp. 1123-34. Han, J.K., Kim, N. and Sirvastava, R.K. (1998), “Market orientation and organizational performance: is innovation a missing link?”, Journal of Marketing, Vol. 62 No. 4, pp. 30-45. Henard, D. and Szymanski, D. (2001), “Why some new products are more successful than others”, Journal of Marketing Research, Vol. 38 No. 3, pp. 362-75. Hodgkinson, G.P., Tomes, A. and Padmore, J. (1996), “Using consumer perceptions for the cognitive analysis of corporate-level competitive structures”, Journal of Strategic Marketing, Vol. 4 No. 1, pp. 1-21. Hunt, S.D. and Morgan, R.M. (1995), “The comparative advantage theory of competition”, Journal of Marketing, Vol. 59 No. 2, pp. 1-15. Hurley, R.F. and Hult, T.M. (1998), “Innovation, market orientation, and organizational learning: an integration and empirical examination”, Journal of Marketing, Vol. 62 No. 3, pp. 42-54. Jaworski, B.J. and Kohli, A.K. (1993), “Market orientation: antecedents and consequences”, Journal of Marketing, Vol. 57 No. 3, pp. 53-70. Kohli, A.K. and Jaworski, B.J. (1990), “Market orientation: the construct, research propositions, and managerial implications”, Journal of Marketing, Vol. 54 No. 2, pp. 1-18. Lado, N. and Maydeo-Olivares, A. (2001), “Exploring the link between market orientation and innovation in the European and US insurance markets”, International Marketing Review, Vol. 18 No. 2, pp. 130-45. Lado, N., Martinez, M.A. and Maydeu-Olivares, A. (1998), “Market orientation and innovation in services enterprises: some empirical results from the insurance business”, Proceedings of the IFSAM World Congress, Alcala de Henares, July. Llonch, J. (2000), “Orientacio´n al mercado y competitividad de la empresa”, paper presented at the EADA Gestio´n (Gestio´n 2000), Barcelona. Llonch, J. and Walin˜o, S. (1996), “Efectos de la orientacio´n al mercado en los resultados de la empresa”, ESIC Market, Vol. 91 No. 1, pp. 9-39. Lukas, B.A. and Ferrell, O.C. (2000), “The effect of market orientation on product innovation”, Journal of the Academy of Marketing Science, Vol. 28 No. 2, pp. 239-47. Martı´n Armario, E. (1995), “Rentabilidad y orientacio´n al mercado, curso de verano sobre la orientacio´n empresarial al mercado”, Universidad Jaume I, Castello´n, Septiembre. Meehan, S.A. (1996), “Doctoral research: what do we really know about market orientation?”, Business Strategy Review, Vol. 7 No. 1, pp. 47-50. Myers, S. and Marquis, D. (1969), “Successful industrial innovations”, NSF report N. 69-17, National Science Foundation, Washington, DC. Narver, J.C. and Slater, S.F. (1990), “The effect of a market orientation on business profitability”, Journal of Marketing, Vol. 54 No. 4, pp. 20-35. Narver, J.C., Slater, S.F. and Park, S.Y. (1991), “The market orientation-profitability linkage: are there environmental moderators?”, Proceedings of the American Marketing Association Summer Educators Conference, Chicago, IL, pp. 96-7. Nord, W. and Tucker, S. (1987), Implementing Routine and Radical Innovations, Lexington Books, Lexington, MA. Nunnally, J.C. (1967), Psychometric Theory, McGraw-Hill, New York, NY. Olivia, T.A., Day, D. and Desarbo, W.S. (1987), “Selecting competitive tactics: try a strategy map”, Sloan Management Review, Vol. 28 No. 3, pp. 5-15. Pearson, G.J. (1993), “Business orientation: cliche or substance?”, Journal of Marketing Management, Vol. 9 No. 3, pp. 233-43.
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Pelham, A.M. (1993), “Mediating and moderating influences on the relationship between marketing orientation and performance”, doctoral dissertation, The Pennsylvania State University, Philadelphia, PA. Pelham, A.M. and Wilson, D.T. (1996), “A longitudinal study of the impact of market structure, firm structure and market orientation culture on dimensions of small-firm perfomance”, Journal of the Academy of Marketing Science, Vol. 24 No. 1, pp. 27-43. Prescott, M. and Slycke, C. (1997), “Understanding the internet as an innovation”, Industrial Management & Data Systems, Vol. 97 No. 3, pp. 119-24. Raju, P.S., Lonial, S.C. and Gupta, Y.P. (1995), “Market orientation and performance in the hospital industry”, Journal of Health Care Marketing, Vol. 15 No. 4, pp. 34-41. Reichheld, F.F. (1993), “Loyalty-based management”, Harvard Business Review, Vol. 71 No. 2, pp. 64-73. Rivera, J. (1995a), “The market orientation: competitive organizational strategy”, Documento de Trabajo 95-60, Universidad Carlos III de Madrid, Madrid. Rivera, J. (1995b), “La orientacio´n al mercado como estrategia competitiva, curso de verano sobre la orientacio´n empresarial al mercado”, Universidad Jaume I, Castello´n, Septiembre. Santos, M.L. and Vazquez, R. (1997), “La estrategia marketing como instrumento competitivo en las empresas de alta tecnologı´a”, Revista Asturiana de Economı´a, 9 September, pp. 1-29. Slater, S.F. and Narver, J.C. (1994a), “Does competitive environment moderate the market orientation - performance relationship?”, Journal of Marketing, Vol. 58 No. 1, pp. 46-55. Slater, S.F. and Narver, J.C. (1994b), “Market orientation, customer value, and superior performance”, Business Horizons, Vol. 37 No. 2, pp. 22-8. Slater, S.F. and Narver, J.C. (1996), “Competitive strategy in the market-focused business”, Journal of Market Focused Management, Vol. 1 No. 2, pp. 159-74. Such, J. (2001), “La industria en la comunidad Valenciana”, in BBVA (Ed.), Serie de Estudios Regionales 2001, Comunidad Valenciana, Servicios de Estudios BBVA, Madrid. Tornatzky, L. and Fleischer, M. (1990), The Process of Technological Innovation, Lexington Books, Lexington, NY. Tuominen, M. and Mo¨ller, K. (1996), “Market orientation: a state of the art review”, Proceedings of the 25th EMAC Conference, Budapest, May, pp. 1161-81. Tuominen, M., Mo¨ller, K. and Rajala, A. (1997), “Marketing capability: a nexus of learning-based resources and a prerequisite for market orientation”, Proceedings of the 26th EMAC Conference, Warwick, May, pp. 1220-40. Varela, J.A., Gutie´rrez, A. and Anto´n, C. (1998), “La cultura de orientacio´n al mercado y otros antecedentes seleccionados del rendimiento empresarial. Un contraste de metodologı´as”, Proceedings of the X Encuentro de Profesores Universitarios de Marketing, Santander, September, pp. 135-39. Varela, J.A., Calvo, A.R., Magallaes, E. and Carvalho, J.M. (1996), “Perspectivas sobre el constructo orientacio´n al mercado. Ana´lisis empı´rico de sus relaciones”, Proceedings of the X Congreso Nacional AEDEM, Granada, June, pp. 115-28. Vila, N. and Ku¨ster, I. (1998), “Recursos y capacidades y posicionamiento producto-mercado: su relacio´n con el rendimiento y la rivalidad empresarial”, Proceedings of the X Encuentro de Profesores Universitarios de Marketing, Santander, September, pp. 337-42. Webster, C. (1991), “A note on cultural consistency within the service firm: the effects of employee on attitudes toward marketing culture”, Journal of the Academy of Marketing Science, Vol. 19 No. 4, pp. 341-6. Further reading Jaworski, B.J. and Kohli, A.K. (1996), “Market orientation: review, refinement and roadmap”, Journal of Market Focused Management, Vol. 1 No. 2, pp. 119-35.
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Status, role and satisfaction among development engineers
Development engineers
Barbara Bigliardi and Alberto Petroni Dipartimento di Ingegneria Industriale, Universita` degli Studi di Parma, Parma, Italy, and
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Alberto Ivo Dormio Dipartimento di Economia e Tecnologia, Universita` di San Marino, Repubblica di San Marino Abstract Purpose – To identify the problematic areas relating to the current managerial practices in motivating engineers and evaluating their relative contribution to the overall level of engineers’ satisfaction. Design/methodology/approach – Based on a conceptual model, an empirical study was conducted within 11 organizations operating in the food machinery industry in Italy. A survey was carried out on 376 development engineers staffed in these companies and a statistical analysis was conducted on the data collected in order to refine and operationalize the conceptual model proposed and to investigate the relative effects of the various factors considered. Findings – From the statistical analysis it emerged that job satisfaction can be split into three dimensions and that it is impacted by five factors related to managerial policies, perception of engineers’ status and job-related motivational mechanisms. Practical implications – The analysis clearly suggests that engineers in industry are generally dissatisfied and largely demotivated. It also emphasizes the importance of sound managerial practices that enables the organization to establish appropriate reward systems, to understand engineers’ expectations as technical professionals and to provide them with task-related motivational tools fostering challenge and flexibility. Originality/value – It addresses an explanation of engineers’ satisfaction based on a theoretical framework, striving to identify key motivational stimuli effective with engineers. Keywords General management, Food manufacturing equipment, Human resource management, Job satisfaction Paper type Research paper
Introduction Engineering managers are increasingly facing problems in motivating engineers as a result of changes in economic, social and technological conditions. A vast body of research has demonstrated that engineers’ dissatisfaction is mounting in industry and, consequently, has focussed attention on the identification of more appropriate motivational systems (Amar, 2004; Debackere et al., 1997). It is thus not surprising to learn that at least half of the engineers that are trained for responsible positions in industry have no intention of remaining in such roles for more than four or five years (Johnson and Sargeant, 1998). The lack of appropriate motivations has resulted in a higher rate of turnover among the engineers than among non-professionals. Several reasons have been put forward in literature. McGovern (1995) points out that employers are generally more concerned with having a steady turnover of staff, for which they saw a number of advantages, than with the development of policies
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which would enable them to retain scientists and engineers. These employers have, instead, developed a dual labour market approach that is contingent on the turnover of existing staff. This consisted of a general inclination to exploit the benefits of the prevailing labour market conditions while simultaneously engaging in a policy that allowed them to selectively retain certain key human resources (Hiltrop, 1999). Another reason is to be traced back to the managerial failures to satisfy engineers’ orientations and expectations to be treated as professionals. Technical professionals need special treatment irrespective of traditional management and control approaches. Accordingly, various approaches to managing technical professionals have been proposed. The most famous (and perhaps the most controversial) is the so-called “dual ladder system” (Allen and Katz, 1986; Hesketh et al., 1992). As pinpointed by Allen and Katz (1992), the shortcomings of the dual ladder system can be traced back to: . the fact that technical and managerial careers have a different attractiveness for organization members; . the fact that even when technical positions are put on the same level as managerial positions in terms of prestige, salary and status, the former lacks the vital ingredient of power; and . the generalized practice whereby technical promotions sometimes tend to become a “loyalty” prize instead of true career advancement. A third rationale for engineers’ dissatisfaction is to be related to the misutilization of technical professionals whose skills and competences are reported to be widely underexploited (Badawy, 1978). These facts have caused considerable tensions and strains in the engineer-management relationship. This calls for changes in engineering management styles to maintain motivation and productivity (Day and Allen, 2004). The motivational methods, as ranked by Kuby (1993) in order of increasing probable success, are: . motivation by development; . motivation by objectives; . motivation by intrinsic-need satisfaction; and . motivation by management. There are differences in the most appropriate ways to satisfy engineers’ expectations. Thus, managers may find that a combination of methods best suits their needs. In other words, management should develop different motivational patterns to fit different employees’ requirements at different levels of the organization. The present study is aimed at investigating both positive and negative stimuli to maximize the motivation and potential satisfaction for typical engineers. By understanding the relative strength of various motives it is possible to identify key motivational stimuli effective with engineers (Appelbaum et al., 1998). More specifically the purpose of this article is: . to systematically identify the problematic factors relating to the current managerial practices in motivating engineers; and
.
to evaluate their relative contribution to the overall level of engineers’ satisfaction.
Development engineers
Finally, the paper discusses some implications and suggests guidelines to management for better motivation and utilization of engineering manpower. Conceptual model Based on the above discussion, a conceptual model, on which this research is based, has been formulated. The motivational factors relating to the managerial practices having an impact on engineers’ satisfaction are visualized in Figure 1 as comprising the managerial policies and supervisory practices, the appropriate managerial perception of engineers’ status and role within the organization, and the job-related motivational mechanisms. Management systems and supervisory practices do not generally reflect an adequate understanding of engineers’ expectations and as such are perceived as a first problem area. One example refers to the managerial practice of supervising engineers by administrative managers. Another source of problems relates to criteria used for promotion and career advancement. So far, particular attention has been given to the problem of potential mismatch between R&D staff career orientations and available career opportunities (McCormick, 1995). In the study by Hesketh et al. (1992), satisfaction was related to the perceived fit between career path preferences and perceived career path opportunities among senior engineer managers and trainee engineers. Senior respondents’ actual career paths (managerial, technical, or those waiting for promotion into either path) were not well matched to their preferences, with those in paths that were less well matched being less satisfied. Another source of tension and potential conflict between management and technical professionals is the management’s perception of engineers, and more specifically its failure to differentiate between knowledge and non-knowledge employees (Howard, 1983). Managerial practices relating to this aspect include the inappropriate use of traditional techniques of work organization and bureaucratic controls, and of authority
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Figure 1. The conceptual research model
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systems. Thus, management’s understated perception of engineers emerges from the failures to differentiating between engineers as knowledge employees and other non-knowledge employees. These practices are dysfunctional to lead to the erosion of the engineers’ sense of professionalism. Also, in this area the important theme of the engineers’ transition into management can be located (Roberts and Biddle, 1994). This transition is described as difficult both for those who make it and for those who do not (McGovern, 1995). The perceptions of engineers as managers derive from the way the company defines the profession by qualifications required and the boundary established between them and other technical employees (Canainn, 1995). The dynamics of the transition into management has been approached under different perspectives. Howard (1983) has studied the basic characteristics that are required for a successful later transition of engineers into management. A primary characteristic are administrative skills, consisting especially of the dimensions of planning and organizing, and decision-making. Interpersonal skills are equally important; these include such things as face-to-face leadership, oral communications skills, and making a forceful and likeable personal impact. Intellectual ability is also critical, and research has shown that both verbal and quantitative skills relate to success. Finally, motivation for advancement is a strong determinant of later progress; those who want to succeed are much more likely to do so. In managerial skills, on the average, engineers come up a little short compared to other majors. Munson and Posner (1979) have investigated the differences in personal value orientations between engineers and management engineers. Personal values demonstrated significant discriminative and predictive validity in distinguishing management engineers from non-management engineers. The results of the study suggest that information about personal values might play some role in organizational decisions regarding job placement, promotion, formation of special groups, and in the design of employee motivation and incentive programs. A third leverage to increase engineers’ motivational potential is through the task itself. The managerial failures with this respect are evident: there are, as stated above, clear indications that engineers are in general underemployed and misutilized. It would be expected that all these three areas have an impact on engineers’ satisfaction. Job satisfaction has many dimensions that can range from career satisfaction, to organizational commitment and job involvement (Orpen, 1997). All these three aspect will be investigated in more details later on. Based on this conceptual model, an empirical study was conducted within 11 organizations operating in the food machinery industry in order to: refine and operationalize the conceptual model, and investigate the relative effects of the various factors considered on job satisfaction of development engineers. The rationale behind the choice of this specific industry has to be traced back to three main aspects. First, the relative importance of these manufacturers for the regional economy of the Emilia-Romagna district, with a record of over 1,700 million US dollars for the Italian trade balance. The most important reason is, anyhow, the increasing managerial concern for the retention of engineers in technical engineering departments. This industry has in fact demonstrated high rates of turnover in the past as for development engineers and designers. Furthermore, the area investigated is particularly interesting since it has been prompting a continuous re-shaping of the
technical skills and competencies required to engineers. This is mainly driven by the technological evolution that the industry has undergone and which may be ascribed to the computer-induced change of the way industrial designers work, through the adoption of new techniques (CAD/CAM, rapid prototyping and machining tools). Research design and measures The first stage was the operationalization of the attributes. As alluded to previously, a close review of the literature resulted in the identification of general themes. Additionally, and of more value in identifying specific elements relating to the managerial practices in the issues investigated, there was a trawl through a number of business and technical journals (over a five-year period) chasing articles on engineers’ motivation and abstracting all references to the elements of the model of Figure 1. Interviews with six plant directors were also conducted to provide face validity and assure accuracy and completeness of data. The results of this process were edited for overlaps and repetitions to produce a final list of 27 attributes, that is reported in the Appendix. Data collection Data for the study were obtained from 11 companies: five large divisions of a worldwide engineering Group active in the design, production and marketing of machines and complete lines for the food and tobacco industry, and a host of smaller firms manufacturing bottling equipment and food processing machinery. A profile of the 11 organizations represented in the group of respondents is reported in Table I. The sample was randomly selected from professionals including development engineers, designers and implementers. The respondents came from a variety of organizational units: manufacturing departments, R&D and engineering groups. Questionnaires were distributed to each participant by organization’s internal mail. Participation was voluntary and each participant was assured confidentiality. A cover letter from the management of the respective organization was attached to the questionnaire. Through the procedure described above, 642 professionals were asked to participate in the study. Of these, 66 currently hold a managerial position and were thus excluded. A total of 376 of them returned a complete and usable questionnaire for a satisfactory response rate of 58 percent. The demographic characteristics of the sample are reported in Table II. Of respondents, 21 percent hold a functional technical position without project (either temporary or stable) responsibilities. The remaining respondents hold a position along the technical ladder and are steadily assigned to a project team. A total of 44 percent of the respondents describe their current job as pertaining mainly to strict product design activities (i.e. design and prototyping), 44 percent state that his/her job is related to engineering and implementation aspects, 10 percent mainly act as the interface between and in support of either manufacturing or commercial departments, while the remaining has been categorized as “other”. Performance measures Job satisfaction is very rarely assessed on a single item but on a number of measures. Therefore, in addition to the elements of the research framework mentioned above, the
Development engineers
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A11
A10
A9
A8
A7
A4 A5 A6
A3
A2
Rows distribution systems; electronic in-line feeders; · electronic high speed horizontal pillow-pack machines; · robotic handling and collating units; · feeders for continuous and intermittent motion cart Turnkey plants for drink in any style container (glass, PET, cans) Machines for food processing, preserving, packaging and packing Machinery for weighing, packaging and packing Turnkey projects for industrial bakeries Rinsers; unscramblers; fillers; complete traditional bottling lines; complete aseptic filling lines Carton fillers; confectionery-packaging machines; horizontal pillow-pack wrappers Yeast-packaging lines; various wrappers and overwrappers; labeling machines Horizontal pouch machines and pouch-cartoning systems Automatic can pressure/leak-testing machines; high speed checkweighers or aerosol lines gassing room to fill inflammable propellant gas Bagging machines for liquids, powders and granular products
A1
Table I. Profile of the sample firms
Product category
30
80
56 8
75
59
112.500
15
75 80 70
60 218.750 50
97
75
65.625
Over 350
95
98.8
187.500
78.125
Percentage of export/turnover (%)
15
185
45
Over 1,500
600
Up to 500 900 240
402
1,400
446
Employees
4
39
10
N/A
131
N/A. 211 60
76
250
90
Employees staffed in engineering/design departments
458
Firm
Turnover (US$ million)
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respondents were asked to rate the level of agreement with 13 statements, on five-point Likert scales. These 13 measures of job satisfaction can be shown to be captured by three underlying dimensions or factors (Table III) which simplifies the interpretation of the results. To this purpose factor analysis provided a three-factor solution (principal component with varimax rotation) that was based on eigenvalues . 1 and accounted for 63.6 percent of the variance. The dimensions identified have labelled as: “career satisfaction”, “job involvement” and “organizational commitment”. As far as career satisfaction is concerned, satisfaction with the promotion rate, pay level, status achieved and progress in achieving career goals were included into the measure. Career satisfaction was measured by a five-item scale developed by Greenhaus et al. (1990) and reported in the Appendix. Responses to the items were averaged to create a career satisfaction score (a ¼ 0.93). Job involvement refers to the degree to which an employee identifies with his/her present job and the extent to which the job situation is central to the employee’s self-identity (Igbaria et al., 1999). This construct was measured by items investigating
Gender Male (%) Female (%)
96 4
Education Some graduate school (%) Graduate degree (%) Age (in years) Organizational tenure (in years)
59 18 34.6 11.5
Factors
% of variancea
Career satisfaction a ¼ 0.93c
40.6
Job involvement a ¼ 0.80
14.7
Organizational commitment a ¼ 0.70
8.3
SD ¼ 10.7 SD ¼ 6.65
Factor components Success achieved in career Progress in achieving career goals Satisfaction with rate of promotion Satisfaction with the pay level Satisfaction with the status achieved Personal goals achieved through the job Overlapping between personal life interests and job interests Sense of professional pride Willingness to put an effort beyond that required Loyalty to organization Overlapping between the organization’s and personal values Pride to belong to the organisation Agreement with the organisation’s practices and policies
Development engineers
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Table II. Demographic characteristics of the sample
Loadb 0.90 0.86 0.84 0.63 0.63 0.80 0.77 0.68 0.75 0.61 0.60 0.41 0.41
Notes: a Variance explained for each factor. Total variance explained: 63.6 percent, Kaiser-Meyer-Olkin ¼ 0.854; b Loading of variable on each factor; c Reliability coefficient for each factor
Table III. Performance factors
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the personal goals achieved through the job, the level of overlapping between personal life interests and job interests and the sense of professional pride. Frone et al. (1995) measurement was used to assess job involvement. The scale (Appendix) consists of five statements, each of which is followed by a five-point disagree/agree response scale. Responses to the items were averaged to produce a total job involvement score (a ¼ 0.80). Finally, organizational commitment can be defined as the employee’s identification with a particular organization and his/her desire to maintain membership in the organization. Aspects such as the willingness to put an effort beyond that required, loyalty to the organization, the level of overlapping between the organization’s and the respondent’s values, the pride to belong to the organization and the agreement with the organization’s practices and policies were included. These five items, reported in the Appendix, were averaged to obtain an overall index of organizational commitment (a ¼ 0.70). Results After identifying the performance factors and their relative importance in the organizations considered, the second aim of the research was to conceptualize and identify the underlying elements that critically impact on satisfaction. Factor analysis was used to accomplish this (principal components with varimax rotation with a number of factors based on eigenvalues . 1). Factor analysis produced five factors that accounted for the 66.3 percent of the variance (Table IV). These factors have been labelled as (in decreasing order of importance): (1) Inadequate reward system; (2) Inadequate understanding of engineers’ expectations; (3) Failure to differentiate between professionals and other workers; (4) Lack of task-intrinsic motivation; and (5) Inadequate managerial competence and knowledge. The factor solution is considered to be robust since the factors are easily interpretable from their components and Cronbach alphas confirmed their reliability (all factors have alphas $ 0.50). As for the research model of Figure 1, the five factors have been grouped into three meta-factors, that are purely nominal in that they logically aggregate conceptually complementary factors. In other words, the three meta-factors are only “labels” of similar factors and do not represent constructs or variables resulting from the statistical analysis. As an example, we logically combined the two factors “Inadequate reward system” and “Inadequate understanding of engineers’ expectations” since they could be considered as two facets of a unique organizational attribute labelled as “Managerial policies and supervisory criteria”. Similarly, the third factor (Failure to differentiate between professionals and other workers) was coupled to “Inadequate managerial competence and knowledge” for the sake of brevity and sound reasoning into the meta-factor labelled as “Perception of engineer’s status and role”. This features in fact, refers to the way management understands the differences in work orientations, need systems and career objectives of different groups of workers, and to the training of engineers for careers in management. Finally, “Lack of task-intrinsic motivation” is
Factors Inadequate reward system a ¼ 0.81
Inadequate understanding of expectations a ¼ 0.73
Failure to differentiate between professionals and other workers a ¼ 0.65
% of variance 23.4
15.9
11.5
Lack of task-intrinsic motivation a ¼ 0.59
8.6
Inadequate managerial competence and knowledge a ¼ 0.50
6.9
Factor components Mismatch between opportunities granted to managerial and technical roles Excessive association of incentives to hierarchical advancement Excessively structured and formalised reward systems are not effective Mechanisms are excessively focused on rewarding compliance rather than achievement Low emphasis on status rewards Superior authority by non-professionals Vague criteria for promotion and advancement Vague criteria for productivity evaluation Vague definition of job description Low effort to develop subordinates’ skills and potential Vague criteria for effectiveness evaluation Bureaucratic controls Authority systems Excessive focus on organisational efficiency Low salary differential Low challenge Low ingenuity Low creativity Low flexibility Low discretion Low professional achievement Underemployment of individual skills Low perceived fitting of individual contribution into the global picture Inequality of technical to managerial competency Lack of managerial training for technical professionals Lack of identification of the managerial potential in technical professionals Automatic advancement to managerial position
Load
Development engineers
0.91 0.85 0.80
461
0.73 0.68 0.91 0.81 0.76 0.67 0.58 0.55 0.80 0.74 0.67 0.61 0.75 0.75 0.70 0.65 0.63 0.53 0.53 0.50 0.80 0.71 0.68 0.68
a standalone concept that can be referred to a generic “Job-related motivational mechanisms” organizational attribute. It deploys work design based on challenge, professional achievement, ingenuity, imagination and flexibility. The next step was to investigate the linkages between the five factors and the three dimensions of performance. Multiple regression analysis was conducted with the latter ones as independent variables. As for the dependent variables, since the objective was to link managerial failures to dissatisfaction, the value complementing to five of the scores given to each of the performance items (since all judgements were on five-point
Table IV. Factor components and loadings
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Likert scales) were used. Table V reports the results. All equations are highly significant. As a further check, correlation analysis was also conducted and produced similar results. These results are discussed in the following. The impact of an inadequate reward system on dis/satisfaction Inadequacy of the reward system is strongly associated to career dissatisfaction (with the highest regression coefficients of the whole data group), and to a lower extent to organizational commitment. No significant statistical correlation was established between this factor and job involvement. There are a number of problematic areas relating to the adoption of the wrong reward system. One of these is that the rewards for the technical and the managerial career have never been equally attractive. Despite strong recognition of the importance of technical excellence in organizations, the managerial career path is perceived as providing the major opportunity for promotion (Goldberg and Shenav, 1984). These findings confirm the results of prior studies (Amar, 2004; King, 1997) that pinpointed the need to improve the mix of managerial and technical skills in organizations via better job evaluation systems, the use of skills and abilities, job design, and incentive payment for keeping up technical skills. A second important point is that tension between managers and technical professionals is caused by the excessive use of incentives that are almost totally associated with hierarchical advancement. Third, development engineers seem to rely upon their supervisors for recognition rather than upon the organization itself, with very poor trust in the structural solutions designed to offer opportunities for professional and financial advancement. Fourth, current reward systems for engineers are also inadequate due to they are generally tend to privilege achievement rather than compliance with the management wishes. Last, the analysis has confirmed that engineers do partially complain for the lack of emphasis on status rewards. The work role considered appropriate to an occupational
Dependent variables/independent variables Inadequate reward system Inadequate understanding of expectations Failure to differentiate between professionals and other workers Lack of task-intrinsic motivation Inadequate managerial competence and knowledge No. of factors in equation Adjusted R 2 F-value (equation) * * * Table V. Regression coefficients
Organizational commitment 0.11 *a 0.12 * 0.14 * * 0.11 * * 0.19 * 5/5 0.33 8.3
Career satisfaction 0.30 * 0.26 * * 0.21 * – – 3/5 0.48 19.9
Job involvement – – 0.11 * 0.25 * * 0.23 * 3/5 0.35 13.1
Notes: a Regression coefficients (standardized betas); * significance at the 0.1 level; * * significance at the 0.01 level; * * *Significant at 0.001 for all three equations
group is determined by its status in the organization. Status depends on how group members are perceived. Hence, being staffed in technical development departments is probably not so prestigious as working in manufacturing and/or commercial departments.
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The impact of an inadequate understanding of engineers’ expectations on dis/satisfaction Inadequacy in understanding engineers’ expectations is strongly associated to career dissatisfaction (with the second highest regression coefficients), and to a lower extent to organizational commitment. In this case too, no significant statistical correlation was established between this factor and job involvement. One can, thus, affirm that management systems do not reflect a sound understanding of engineers’ expectations as professionals. Superior authority exercised by a non-knowledge worker is likely to cause resentment, as it breaches engineer’s professional pride. A second problematic area relates to the criteria used for promotion and career advancement that tend to be too general and vague. Standards of job description and advancement are generally put forward by management in a fuzzy and unclear fashion. Thus, if an employee’s development is raised by management to a critical criterion of performance evaluation and effectiveness assessment, engineers’ concern and dissatisfaction increase. Tension also stems from the fact that firms still put emphasis on measuring engineers’ productivity in a traditional way. One major complain is for the low effort made by engineering managers to look for new techniques and modified measures in order to appropriately associate creativity to the traditional measures of productivity. Demotivation may largely hinge upon perceiving the difficulty to measure individual’s achievement. In this sense, turning to the analysis and development of the individual skills and competencies is much more felt as equitable and appropriate. This calls for a shift from productivity evaluation to effectiveness appraisal. But again, the research has confirmed that low effort is spent by managers to communicate unequivocally what criteria would be used.
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The impact of the failure to differentiate between professionals and other workers on dis/satisfaction The failure to differentiate between professionals and other workers is associated with all three measures of dissatisfaction. One of the major tensions in the engineer-management relationship arises from the use of outdated and old-fashion management practices, originally conceived mainly for shop-floor workers. Examples of these practices include excessively bureaucratic controls and authority systems and disproportionate focus on organizational efficiency. In addition a small salary differential between knowledge and non-knowledge employees (especially those skilled workers that are not perceived as “professionals” by the engineer) lends further support to the inadequacy of management methods (Smith and Rupp, 2003). The importance of salary-related incentives for engineers is in that money represents the tangible evidence of how they rate in the organization. Engineers are particularly sensitive to what they perceive as “unfair” and tend to reject rewards based on any other basis but recognizable professional achievement. Thus, a small salary
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differential with other non-knowledge workers causes a breach of the engineer’s sense of self-esteem and professional pride. The impact of lack of task-intrinsic motivation on dis/satisfaction Failure to provide task-related motivational potential is strongly related to job involvement, only weakly associated with organizational commitment and has no impact on career dis/satisfaction. Updating motivation is primarily intrinsic, but it is constrained (encouraged and/or inhibited) by situational and job-related factors. The task itself is in fact the primary source of motivation, since it provides the necessary excitement to the individual. Engineering managers can leverage the engineer’s motivational potential by providing adequate elements of challenge, ingenuity, creativity, flexibility and professional achievement. The research has also lent further support to the fact that one of the largest managerial failing is the improper utilization of engineers. There is also evidence of the vast underemployment of engineers in terms of management assignments requiring fewer qualifications than those available. Another important point is that disillusionment arises when engineers perceive their contribution to the overall company activities as highly parcelled. The impact of an inadequate managerial competence and knowledge on dis/satisfaction These points relate to the dissatisfaction for many engineers who demand that managers be as competent in their field as the professionals are in technical aspects. In fact, one of the leading factor in motivating engineers is the engineering manager, simply because he or she is the linking pin between management, on the one hand, and engineers on the other hand. However, because of their inadequate preparation for careers in management, many competent engineers may become incompetent managers. This problem is accrued by the fact that, as seen above, technical professionals seem to resent being supervised by someone who has not a technical background. However, there is large evidence suggesting that engineers are generally ill-equipped for managerial careers. This factor has a strong influence on job involvement and has also a valuable impact on organizational commitment. No statistically significant correlation with career satisfaction has been established. As for the managerial failures, current practices of promoting technologists to managerial positions are poor and inadequate and cause a drop in the engineers’ sense of professionalism. In particular, the aspects that deserve deeper attention are those of the lack of managerial training for technical professionals, the poor effort spent in identifying the managerial potential in engineers and the failure of excessively structured and automatic mechanisms to have “the right people at the right place”. In short, these failures call for a deeper exploration and understanding of the theme of engineers’ transition into management. Managerial implications Management systems and supervisory practices Knowledge workers are a special kind of asset because they gain in value with time, especially when improvements and developments are made. Company policy and reward system must, thus, reinforce and support these learning behaviours and professional enrichment programs.
As far as the company policy is concerned, the future of the knowledge organization is dependent on establishing sound recruiting, career planning and placement policies. In particular, there is a need for improved management understanding of the concept of career planning for professional enrichment and growth of engineers. Research on career planning shows that diversity is a critical ingredient in ensuring a beneficial and fulfilling career, especially for older professionals. However, most companies do not provide the necessary chances and incentive for diversity. In short, there is strong evidence suggesting that pushing technical personnel in their late thirties and early forties into new fields will enlarge their interests on and off the job, and will have a significant impact on motivation and satisfaction. From the standpoint of nourishing engineers’ vitality and motivation, several strategies can be pursued. These include continuing education, retraining, sabbatical leaves, rotation programs, job transfers, and redesign (Cheng and Ho, 2001). For the effective implementation of these strategies, however, management must show its total commitment to continued learning throughout life as a compelling instrument. Incidentally, It is noteworthy here that these mechanisms are particularly important for motivation and technical vitality of older engineers, as they can become bored with the same work after some years. Placement is another key area because placement of knowledge workers is the route to their productivity. Not only do opportunities have to be provided to people capable of coping with them and of transforming them into results, but technical professionals must also be placed where their skills can be productive. Designing appropriate placement policies for engineers is thus a vital concern for personnel managers. Reward systems emphasizing such factors as status, advancement to managerial positions, and authority and influence within the company structure are those most appropriate for engineers. The engineer’s status, influence, satisfaction, and productivity are in turn greatly favoured by opportunities for participation and involvement in managerial and technical decision-making. A special theme is then that related to salary. In view of the importance to engineers of salary and economic incentives, as discussed above, a sound scheme is a necessity. Salary ranges for various engineering classifications should be specifically made clear, with recognition for personal development efforts. Management’s perception of engineers’ status and role expectations Technical professionals are more productive when they feel they are a nontrivial part of the company and that the organization cares about them as individuals. As discussed above a major antecedent of disillusionment and disappointment for engineers is that current management practices and policies do not contemplate adequate understanding of their needs and expectations as professionals. Responsibility, achievement, and contribution are very important elements of motivational mechanisms for engineers. Engineering managers, should, therefore, put more emphasis on these elements driving their attention toward maximising the engineer’s contribution. This fact has obviously great implications for evaluation criteria that should be more based on judging engineers strictly on the basis of compliance, competence and quality of work. These criteria should include not only performance goals (cost, product features, and efficiency), but also personal and subordinates’ development efforts. This would encourage managers to help
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subordinates develop their skills and potential, and thus enhance subordinates’ satisfaction and motivation. Management methods and practices has also shown a significant need to be designed for better understanding the differences in work orientations and expectations between engineers, as knowledge workers, and other technical skilled workers. For instance, engineers should be granted the chance to analyze, evaluate, and critic their own performance. Perhaps the most important principle is to enable the knowledge workers to do what they are being paid for. Not to be able to do what one is being paid for infallibly quenches whatever motivation there is. Another mechanism that has considerable effect on engineers’ motivation is the powerful communication content of incentives. In general terms, the message embodied into an incentive will prevail any time formal verbal communications and the implications of an incentive are conflicting. That is, concrete management initiatives are more powerful than words. Open communications, integrity, and positive reinforcement of company and professional values are certainly key elements of an effective motivation. Another major source of conflict is represented by the low degree of managerial competence of engineering managers with a technical background. This suggests at least three possible remedies. A first principle of general validity is that the malpractice of promoting the most technically competent to an administrative position simply for their technical abilities should be abandoned. Engineering managers should be technically competent to obtain the respect of their subordinates, aspiring to supervisory assignments, and be trained to smooth the transition from “technical competence” to “management capability”. Second, more effective selection procedures must be identified and used to identify those promising candidates who are likely to have the right individual profile (orientation to manage, power and interpersonal empathy) for a managerial position. In addition to proper identification of managerial potential and sound selection, a change in the current educational continuing system of industrial engineers is called for. The present system fails to develop engineers’ managerial skills (as decision-makers). There are evidences of “in-house” programs being undertaken by several companies worldwide, offering training and coaching activities to bridge the gap from engineering to management. Job-related motivational mechanisms One important principle is here that engineering managers should keep in mind that the design of the task environment has huge impacts on learning, growth and motivation. Employees can find creative solutions only when they truly enjoy their work. Managers can also fit the job to the employee’s motivational needs by modifying the work situation or organization or by changing their own leadership styles. More than mere positive thinking or generalized confidence in the employee, expectations should be goals tailored to the individual’s capabilities. A powerful motivational mechanism is, thus, through job redesign. Work satisfaction is gradually changing its meaning. The significance of meaningful work for engineers is changing due to modifications in cultural and social values. Meaningful work is not only puzzling out a technical challenge. Accordingly, jobs need to be redesigned in order to include ingredients of challenge, achievement, and conveying the feeling that the job would
make a positive contribution to the overall company mission. In short, the concept of job enrichment is quite relevant here and should be used by engineering managers to enhance the motivational potential and productivity of engineers. Conclusions Motivating technical employees who are typically bright and independent-minded can appear uniquely difficult to those attempting to lead them without understanding their needs. Both classical and modern theories of worker motivation assert that motivation stems from the nature of the work and not its peripheral benefits, and, consequently, managers should recognize and maximize motivational circumstances. Managers cannot directly control the staff’s motivation, but they can indirectly influence factors related to its absence or presence. Trust, communication, and listening are essential in managing engineers and can provide the climate for motivated staff. Creating the right internal environment and using it to motivate individual workers is the key to achieving organizational excellence and making a quality product. Managers can optimize engineers’ energy by adapting the environment to the job at hand. Steps can be taken to help managers create a work environment that fosters individual motivation. These steps include a set of coordinated actions that leverage on different elements. First, better monitoring and receptivity of new ideas, less concern with personal “fitness” for an organizational pattern, and a reasonable degree of freedom and autonomy are some positive ingredients of a creative organizational climate. Second, more decentralized and less formal structures providing opportunities for communication, interaction, and participation are to be implemented. The system of two-career ladders – one for managers and the other for top-level specialists or professionals – has worked satisfactorily up to a certain level. However, there are indications that there will be a change in the natural career progression in the near future. The rising educational level of the workforce, the onset of lean, knowledge-driven companies that are competence-based, and doubts about the effectiveness of the classical manager are responsible for this. Third, technical employees such as engineers desire opportunities to work with freedom within specified responsibilities and to be recognized for their achievements. References Allen, T.J. and Katz, R. (1986), “The dual ladder: motivational solution or managerial delusion?”, R&D Management, Vol. 16 No. 2, pp. 185-97. Allen, T.J. and Katz, R. (1992), “Age, education and technical ladder”, IEEE Transactions on Engineering Management, Vol. 39 No. 3, pp. 237-45. Amar, A.D. (2004), “Motivating knowledge workers to innovate: a model integrating motivation dynamics and antecedents”, European Journal of Innovation Management, Vol. 7 No. 2, pp. 89-101. Appelbaum, S.H., St-Pierre, N. and Glavas, W. (1998), “Strategic organizational change: the role of leadership, learning, motivation and productivity”, Management Decision, Vol. 36 No. 5, pp. 289-301. Badawy, M.K. (1978), “One more time: how to motivate your engineers”, IEEE Transactions on Engineering Management, Vol. 25 No. 2, pp. 37-42. Canainn, A.O. (1995), “Herr Ingenieur or the grease-monkey? How the managerial prospects of engineers are perceived”, Human Resource Management Journal, Vol. 5 No. 4, pp. 74-92.
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Cheng, E.W.L. and Ho, D.C.K. (2001), “The influence of job and career attitudes on learning motivation and transfer”, Career Development International, Vol. 6 No. 1, pp. 20-8. Day, R. and Allen, T.D. (2004), “The relationship between career motivation and self-efficacy with prote´ge´ career success”, Journal of Vocational Behaviour, Vol. 64 No. 2, pp. 72-91. Debackere, K., Buyens, D. and Vandenbossche, T. (1997), “Strategic career development for R&D professionals: lessons from field research”, Technovation, Vol. 17 No. 2, pp. 53-62. Frone, M.R., Russell, M. and Cooper, M.L. (1995), “Job stressors, job involvement and employee health: a test of identity theory”, Journal of Occupational and Organizational Psychology, Vol. 68 No. 1, pp. 1-11. Goldberg, A.I. and Shenav, Y.A. (1984), “R&D career paths: their relation to work goals and productivity”, IEEE Transactions on Engineering Management, Vol. 31 No. 2, pp. 111-17. Greenhaus, J.H., Parasuraman, S. and Wormley, W.M. (1990), “Race effects on organizational experience, job performance evaluation, and career outcomes”, Academy of Management Journal, Vol. 33 No. 1, pp. 64-96. Hesketh, B., Gardner, D. and Lissner, D. (1992), “Technical and managerial career paths: an unresolved dilemma”, International Journal of Career Management, Vol. 4 No. 3, pp. 9-16. Hiltrop, J.M. (1999), “The quest for the best: human resource practices to attract and retain talent”, European Management Journal, Vol. 17 No. 4, pp. 422-30. Howard, A. (1983), “Can engineers succeed in general management? Enhancing engineering careers by fulfilling individual and organizational goals”, IEEE, New York, NY, pp. 76-80. Igbaria, M., Kassicieh, S.K. and Silver, M. (1999), “Career orientations and career success among research, and development and engineering professionals”, Journal of Engineering and Technology Management, Vol. 16 No. 1, pp. 29-54. Johnson, D. and Sargeant, A. (1998), “Motives for transition: an exploratory study of engineering managers”, Human Resource Management Journal, Vol. 8 No. 3, pp. 41-53. King, A. (1997), “The crescendo effect in career motivation”, Career Development International, Vol. 2 No. 6, pp. 293-301. Kuby, T.E. (1993), “Motivate your engineers”, Chemical Engineering, Vol. 100 No. 5, pp. 137-8. McCormick, K. (1995), “Career paths, technological obsolescence and skill formation: R&D staff in Britain and Japan”, R&D Management, Vol. 25 No. 2, pp. 197-211. McGovern, P. (1995), “To retain or not to retain? Multinational firms and technical labour”, Human Resource Management Journal, Vol. 5 No. 4, pp. 7-23. Munson, J.M. and Posner, B.Z. (1979), “The values of engineers and managing engineers”, IEEE Transactions on Engineering Management, Vol. 26 No. 4, pp. 94-100. Orpen, C. (1997), “The effects of formal mentoring on employee work motivation, organizational commitment and job performance”, The Learning Organization: An International Journal, Vol. 4 No. 2, pp. 53-60. Roberts, K. and Biddle, J. (1994), “The transition into management by scientists and engineers: a misallocation or efficient use of human resources?”, Human Resource Management, Vol. 33 No. 4, pp. 561-79. Smith, A.D. and Rupp, W.T. (2003), “Knowledge workers: exploring the link among performance rating, pay and motivational aspects”, Journal of Knowledge Management, Vol. 7 No. 1, pp. 107-24.
Further reading Allen, T.J. and Katz, R. (1995), “The project-oriented engineer: a dilemma for human resource management”, R&D Management, Vol. 25 No. 2, pp. 129-40.
Appendix. Sample of survey items Please see Figure A1.
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Figure A1.
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Figure A1.
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The validation of a use innovativeness scale
Use innovativeness scale
Antonia Girardi Murdoch Business School, Murdoch University, Perth, Australia
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Geoffrey N. Soutar Graduate School of Management, University of Western Australia, Perth, Australia, and
Steven Ward Murdoch Business School, Murdoch University, Murdoch, Perth, Australia Abstract Purpose – To validate a measure of use innovativeness, or how existing products are used in a novel and innovative manner. The measure has practical significance for innovation research as it consists of only nine items as opposed to the original 44. The use innovativeness measure derived from research predicts acceptance of new technology (in this case computer technology) and could be adapted to other fields of innovation research. Design/methodology/approach – A survey was conducted and structural equation modelling techniques were used to analyse the data. Findings – Evidence for a unidimensional measure of use innovativeness is provided by structural equation modelling. The nine-item measure has fewer items than the original 44-item measure developed by Price and Ridgway and consists of the items of multiple use and creative reuse. The measure was found to be positively correlated with innovativeness and opinion leadership and the acceptance of new information technology. The construct of use innovativeness is thus a practical measurement for use in innovation research. Research limitations/implications – Some limitations regarding the nature of the sample are discussed. Implications for future research in the diffusion of innovations are also addressed. Originality/value – The only paper which validates a measure of use innovativeness, so that it has practical and theoretical use in innovation practice and research. Keywords Mathematical modelling, Factor analysis, Measurement Paper type Research paper
Introduction It has been estimated that two-thirds of products fail at average cost of around $US15 million a product. However, as Steenkamp et al. (1999) noted, many major companies, such as Gillette and Hewlett-Packard, rely on new products for profits and growth. Obtaining acceptance for new products is a vital, but extremely risky process, which means a good understanding of consumers’ acceptance of new product and services, which has been linked to a personality trait termed innovativeness (Foxall, 1995; Goldsmith, 1990; Midgley and Dowling, 1978; Venkatraman and Price, 1990), is crucially important.
European Journal of Innovation Management Vol. 8 No. 4, 2005 pp. 471-481 q Emerald Group Publishing Limited 1460-1060 DOI 10.1108/14601060510627830
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Use innovativeness is a related construct that focuses on the ways products or services are used. Consequently, use innovativeness can apply as much to old products and services as to new ones (Price and Ridgway, 1983). A consumer can be use innovative if, for example, they use an old product in a new or novel way (e.g. they might use baking soda to remove carpet stains). Alternatively, a consumer might use new products for old activities (e.g. a consumer could use a computer to keep financial records that were previously kept manually). Like innovativeness, use innovativeness has been suggested to be a personality trait. Price and Ridgway (1983) suggested that use innovativeness had six aspects, which they termed creativity-curiosity, risk preferences, voluntary simplicity, creative re-use and multiple use potential. They found these factors were good predictors of students’ innovative use of handheld calculators. Price and Ridgway (1983) argued that use innovativeness was an important predictor of the chances of extending product lifecycles, furthering the product life cycle’s growth phase and improving new product acceptance. While conceptually appealing, the usefulness of Price and Rideway’s measure is questionable, especially as they reported low alpha reliabilities and factor loadings in some cases. The measure may also encompass a number of constructs, such as creativity, which are often treated as separate measures (Hirschman, 1980). There is clearly a need for a further examination of the use innovation construct and the present study, discussed in subsequent sections, was undertaken for this purpose. The present study The data were obtained from a larger study of people’s computer ownership and use and were collected in a major OECD country by a commercial market research organisation using random telephone interviews on weekends in March, 2002. A total of 302 responses were obtained, providing a response rate of 17 per cent. The final sample was evenly split on gender and included mainly people working in administrative white collar occupations (48 per cent). One-third had a university qualification and a similar proportion (32 per cent) had incomes between $40,000 and $60,000. Price and Ridgeway’s (1983) 44-item measure, which includes five sub-scales, was collected as part of the survey and its examination is discussed in subsequent sections. Data analysis and results Structural equational modelling techniques were used to analyse the data. The data were screened using the SPSS program (Version 11). A listwise deletion of missing cases was used and outliers were examined to ensure extreme values did not influence the results. The assumptions of normality, linearity and homoskedasticity were assessed by examining skewness and kurtosis values and scatter plot diagrams (Tabachnick and Fidell, 1989). The PRELIS 2 program was used to prepare the input matrices for the development of the measurement models. The input matrices were the polychoric correlation matrix and the asymptotic covariance matrix (which is used for non-normal variables). The weighted least squares estimation method was used, as it is
more robust to deviations from normality than the maximum likelihood alternative. The process by which the data was analysed is presented in Table I. One-factor congeneric models were estimated first using the LISREL 8 (Jo¨reskog and Sorbom, 1993) program to examine the measurement properties of the latent variables of interest. A one-factor congeneric model is “the simplest form of a measurement model and represents the regression of a set of observed indicator variables on a single latent variable” (Holmes-Smith and Rowe, 1994, p. 6). Such models provide a realistic interpretation of the data by considering the varying degrees to which each item contributes to the overall measure and, thereby; provide a quasi-test of validity. For a model to fit, individual items must all measure a “composite variable” of the same kind, and, therefore, they must be valid measures of the single latent trait (Holmes-Smith and Rowe, 1994). The fit of such a model to observed data can be examined in a number of ways (Byrne, 1998). Although the most commonly suggested fit statistic in structural equation modelling is the chi-square (x2) statistic (with a non-significant chi-square indicating a good fit of the model to the data), the adequacy of this statistic is unknown (Hu et al., 1992). For instance, the failure to obtain a non-significant chi-square may reflect a poorly specified model, the power of the test or a failure to satisfy assumptions underlying the statistical test (Marsh, 1994). In an effort to overcome these limitations, other fit statistics are also used. These include the standardised root mean square residual (SRMR) and the root mean square error of approximation (RMSEA). The SRMR is a standardised summary of the average of residual variances and covariances, with values of 0.05 and below generally being suggested as evidence of a good fit (Byrne, 1989), although Kline (1998) has suggested that a value of less than 0.10 is acceptable. The RMSEA statistic provides an estimate of how well the model with the parameter values derived from the sample could be expected to fit the population covariance matrix (Browne and Cudeck, 1993). Values of less than 0.05 indicate a good fit, while values up to 0.08 indicate reasonable fit and values between 0.08 and 0.10 indicate mediocre fit. These statistics were all used in the present study. Confirmatory factor analysis (CFA) was used to examine the discriminant validity of the latent variables by testing competing factor structures. As part of the analysis, the fit of a series of hierarchical nested models was compared for relative goodness-of-fit (Byrne, 1998), beginning with the null model, which assumes each item loads onto a separate latent variable. The next model assumed that all items loaded onto a single factor. The last model assumed items loaded onto their respective latent Procedure
Rationale
One-factor congeneric models
Examination of measurement properties of the existing use innovativeness scale Scale reliability Examination of independence of the measurement scales
Reliability analysis Confirmatory factor analysis
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Table I. Data analysis process
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variables. The improvement in fit was indicated by the change in the chi-square, relative to the change in the number of degrees of freedom. Once baseline models were identified, and measures validated, reliability was assessed through Cronbach’s alpha (Cronbach, 1951).
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Results for the measurement models Prior to running the analyses, the existing scales were examined for possible redundant items. Across all of the scales, items relating to home or home-making were removed because of cross loadings with the voluntary simplicity scale that taps into home-making tasks[1]. Additionally, items that tapped into other elements, such as curiosity and intellect[2], were also removed as these were considered to be compounded questions. Finally, based on modification indices, items for which error variances were high and factor loadings were low were removed. The measurement properties and the model fit of the subsequent one-factor congeneric models are shown in Table II. The fit indices suggested that the sub-scales fitted the data reasonably well, pointing to the validity of each in terms of measuring what they purport to measure (Nunnally and Bernstein, 1994). The results also suggest the factor structures of the scales are good indicators of the extent to which observed indicators measure the same thing (the latent variable in this case). The scale reliabilities were, however, of concern, suggesting further investigation was needed. The next step in establishing the sub-scales used confirmatory factor analysis to establish their discriminant validity. Table III contains the fit statistics of the nested models reflecting the different factor structures suggested earlier. The results of the first set of confirmatory factor analyses suggest the four-factor model had a superior fit to the one, two, three and five factor models. This can be seen in the significant decrease in chi-square for the four-factor model in comparison to the other estimated nested models and the non-significant change in the chi-square statistic between the four and five-factor model. Supplementary analyses The four factor solution, while having the best overall fit, suggested that three of the measures of use innovativeness (creativity/curiosity, risk preferences, and voluntary simplicity) were separate, independent constructs, while the measures of multiple use and creative use overlap to measure a construct conceptually equivalent to use
Scale Table II. One-factor congeneric models – fit statistics (n ¼ 302)
Creative curiosity (8 items) Risk references (5 items) Voluntary simplicity (4 items) Creative reuse (8 items) Multiple use potential (6 items)
x2 (df) 55.95 11.75 1.10 82.22 145.52
(20) (5) (2) (20) (9)
Fit statistics RMSEA 0.08 0.07 0.001 0.10 0.22
SRMR
Alpha reliability
0.06 0.04 0.02 0.08 0.10
0.20 0.49 0.57 0.83 0.70
Competing model a
Null model One-factor modelb Two-factor modelc Three-factor modeld Four-factor modele Five-factor modelf
x2(df) 2,227.23 (66) 1,843.39 (434) 1,746 (433) 1,560.89 (431) 1,494.04 (428) 1,499.76 (424)
Goodness of fit measures Sig Dx 2 RMSEA NA 0.00 0.00 0.00 0.00 NS
NA 0.10 0.10 0.09 0.09 0.09
SRMR NA 0.09 0.09 0.09 0.09 0.09
Notes: aNull model: all items represent different latent variables; bOne-factor model: all items represent a single latent variable; cTwo-factor model: items relating to creative/curiosity and voluntary simplicity representing one latent variable and items relating to risk preferences, creative reuse and multiple use potential representing one latent variable; dThree-factor model: items relating to creative/curiosity representing one latent variable, items relating to voluntary simplicity representing one latent variable and items relating to risk preferences, creative reuse and use potential representing one latent variable; eFour-factor model: items relating to creative/curiosity representing one latent variable, items relating to voluntary simplicity representing one latent variable; items relating to risk preferences representing one latent variable and items relating to creative reuse and multiple use potential representing one latent variable. In terms of convergent validity this result suggests that use innovativeness seems to be measured by creative reuse and multiple uses potential. In terms of divergent validity it seems that the measures of voluntary simplicity, creativity/curiosity and risk potential do not measure use innovativeness. The chi-square and fit statistics in Table II suggested that this model was initially the best solution; fFive-factor model: items relating to creative/curiosity representing one latent variable, items relating to voluntary simplicity representing one latent variable; items relating to risk preferences representing one latent variable, items relating to creative reuse representing one latent variable and items relating to multiple use potential representing one latent variable
innovativeness. The low alpha reliabilities of the first three measures also means there was some cause for concern about the basic measurement properties of these measures. Conceptually, it seemed that the overlap of multiple use potential and creative reuse are a measure of use innovativeness, while the other addressed with the four factor solution though is whether use innovativeness is best measured by both creative reuse and multiple use potential, as either one factor, or as two separate factors. It was thus decided that a further investigation of the creative re-use and multiple use scales was needed. A further confirmatory factor analysis was undertaken. The results (shown in Table IV) suggested a one-factor model that combined the two scales was a better fit to the data as the x 2 statistic did not change significantly (Kline, 1998), supporting a one-factor solution. Given that there is no efficacy in choosing a two-factor model to represent multiple use and creative re-use, further investigation of the one-factor model was undertaken. First, any non-significant factor loadings were identified and the item removed in the interests of parsimony. Items with correlated error variances were also examined to determine, whether on inspection the items were measuring similar properties. As the result of such a process the following items were removed from the final measurement model; “I save broken appliances because I might fix them one day” (cr2), “I enjoy thinking of new ways to use old things around the house”(cr3), “I find myself saving
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Table III. CFA results – factorial independence of the use innovativeness construct
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packages on products to use in different ways” (cr4), “I take great pleasure in adapting products to new uses that the manufacturer never intended” (cr8), which had a correlated error variance with m1 “I do not enjoy using a product unless I can use it to its fullest capacity”. Cr2 and cr3, were probably measures of a tendency to recycle rather, than use products in an innovative way, modifition indices also showed a correlated error variance with these two variables. Cr8, seemed to be a very similar measure to m1, therefore was best removed from the model. The last variable removed was m4, “A product’s value is directly related to the ways it can be used”, because it had a non-significant loading after these changes had been made. Finally, because of changes in the modification indexes, a correlated error variance between cr6, “Even if I don’t have the right tool for the job, I can usually improvise” and m2, “I use products in more ways than most people”, was included in the model. There may well have been a similar response style in answering these two questions, that is, improvisation and use innovativeness may be correlated personality traits. The overall process improved the model fit was from the one-factor model with no modifications as can be seen in the Table V, to one with an acceptable model fit (chi square ¼ 37.14, df ¼ 26, p , 0.05). The normalised chi-square of around one, also suggested that this was a parsimonious solution. Construct validity In order to further validate the measure of use innovativeness, further tests of construct validity were undertaken. The measure of use innovativeness, orientation should be moderately positively correlated with innovativeness (showing convergent and
Competing model a
Null model One-factor modelb Two-factor modelc Table IV. CFA results of the creative reuse and multiple use sub-scales
984.73 (91) 412.13 (77) 1,746 (433)
NA 0.00 0.10
SRMR
NA 0.12 0.12
NA 0.09 0.09
Notes: aNull model: all items represent different latent variables; bOne-factor model: all items represent a single latent variable; cTwo-factor model: items relating to creative/curiosity and voluntary simplicity representing one latent variable and items relating to risk preferences, creative reuse and multiple use potential representing one latent variable
Competing model Table V. Further CFA of the creative reuse and multiple use sub-scales
Goodness-of-fit measures Sig Dx 2 RMSEA
x 2(df)
One-factor model One-factor model removal of the following items cr2, 3, 4, 8, m4 One-factor model with cr6 and m2 error covariances correlated
x2(df)
Goodness-of-fit measures Sig x2 RMSEA SRMR AGFI
NNFI
CFI
412.13 (77) 55.00 (27)
0.00 0.00
0.12 0.06
0.09 0.05
0.78 0.93
0.60 0.92
0.67 0.94
37.14 (26)
0.07
0.04
0.04
0.95
0.96
0.97
divergent validity) and opinion leadership. Use innovativeness should also be positively linked to the overall acceptance of new technology which shows predictive validity. In order assess innovativeness, or an overall favourable attitude towards innovations, unidimensional domain specific innovativeness measure was used. This measure has six items that were summed to form a composite score. This measure had a mean of 13.13 and a standard deviation of 5.50, Conbrach’s alpha being 0.87. Two related domain specific measurements suggested by Flynn et al. (1996) were used to measure opinion leadership and opinion seeking. A composite score was calculated for each construct. The first dimension which measured opinion leadership consisted of three items; “My opinion on information technology seems to count with a lot of people”, “People that I know pick something in information technology based on my advice” and “I often influence people s opinions about information technology”. The alpha reliability for this opinion leadership was 0.89, the mean of this measure was 6.57 and the standard deviation was 12.5. The second dimension measured being influenced by opinion leaders, or opinion followership. This measure consisted of the following items; “When I consider buying anything in information technology, I always ask for advice”, “I usually ask other people what type of information technology I should buy” and “I feel more comfortable buying something in information technology when I have gotten advice”. The measurement of opinion followership had an alpha reliability of 0.87, a mean of 12.0 and a standard deviation of 2.84. Behavioural innovativeness consisted of a Rasch score of ownership of computer hardware items (see Ward and Soutar, 1997 for further details). A higher Rasch score indicating a greater acceptance of computer technology, based on the ownership of computer hardware. Table VI showed that the construct of use innovativeness was as expected, moderately correlated with innovativeness (Pearson correlation coefficient ¼ 0.37, p , 0.01), opinion leadership (Pearson correlation coefficient ¼ 0.37, p , 0.01), providing further evidence of construct validity. Although, the correlations are not high, less than 0.7, which was evidence of discriminant validity. Further proof of discriminant validity is shown by the non-significant correlation of use innovativeness and opinion followership. There was some support for predictive validity. Use Innovativeness was moderately correlated with behavioural innovativeness (Pearson correlation coefficient ¼ 0.26, p , 0.01).
Use innovativeness scale 477
Use Opinion Opinion Behavioural innovativeness Innovativeness leadership follower innovativeness Use innovativeness Innovativeness Opinion leadership Opinion follower Behavioural innovativeness
1.0 0.37 * 0.37 * 2 0.05 0.26 *
0.37 * 1.0 0.73 * 2 0.31 * 0.41 *
0.37 * 0.73 * 1.0 2 0.35 * 0.34 *
2 0.05 2 0.31 * 2 0.35 * 1.0 2 0.10
0.26 * 0.41 * 0.34 * 2 0.10 1.0
Table VI. Correlations between constructs
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Discussion and conclusions The results showed support for a uni-dimensional measure of use innovativeness. In terms of parsimony the analysis suggests that only nine items are required to measure this construct, much less than the original 44 items as suggest by Price and Ridgway (1983). Evidence for convergent and divergent validity was found for the final measure. In the four-factor solution, items of multiple use potential and creative-reuse loads onto one factor, which is seemed to encompass the measure of use innovativeness. The other items loaded onto other independent constructs or measures of risk preferences, creativity/curiosity and voluntary simplicity. Further evidence of convergent validity was found in subsequent analysis of one versus two factor model of use innovativeness. Given the non-significant change in chi-square, a one-factor solution of the nine items seemed appropriate, the final measure also had an acceptable alpha reliability of 0.79. Conceptually, the new measure makes sense, in that use innovativeness seems to be the sum of the actions of creative reuse and multiple uses of existing products. The measure of use innovativeness, was found to be moderated correlated with the related constructs of innovativeness and opinion leadership, and predicts somewhat the acceptance of new computer technology. There is thus further evidence for the construct and predictive validity of the construct. The measure is of practical relevance to managers and researchers interested in the acceptance of innovations. First, it is a simple measure of nine items that can easily be employed to collect information about a market segment’s degree of use innovativeness, and hence possible acceptance of new technology. Second, the measure of use innovativeness gives the manager a greater understanding of a different personality trait that is important in the diffusion of innovations. Third, both managers and researchers can be confident that they are using a reliable and valid measure of use innovativeness, given the results of this research. Implications of the research findings are tempered somewhat by the nature of the sample collected, which can be seen to have a middle class, white collar bias. Although it could be argued that this was an appropriate sample for the nature of this study, that of acceptance of new computer technology. Further research is thus required to replicate these findings in different countries and with much more broader samples for different products and services. Notes 1. Such items included I like to build things for my home; I like to improvise when I cook; I often buy a food item for a particular recipe but end up using it for something else. 2. Examples of the items removed include: curiosity is one of the permanent and certain characteristics of a vigorous intellect. References Browne, M.W. and Cudeck, R. (1993), “Alternative ways of assessing model fit”, in Bollen, K.A. (Ed.), Structural Equations with Latent Variables, Wiley, New York, NY. Byrne, B.M. (1989), A Primer of LISREL, Springer-Verlag, New York, NY.
Byrne, B. (1998), Structural Equation Modeling with LISREL, PRELIS and SIMPLIS: Basic Concepts, Applications and Programming, Lawrence Erlbaum Associates, Hillsdale, NJ. Cronbach, L.J. (1951), “Coefficient alpha and the internal structure of tests”, Psychometrika, Vol. 16 No. 3, pp. 297-334. Flynn, L.R., Goldsmith, R.E. and Eastman, J.K. (1996), “Opinion leaders and opinion seekers: two new measurement scales”, Journal of the Academy of Marketing Science, Vol. 24 No. 2, pp. 137-47. Foxall, G.R. (1995), “Cognitive styles of consumer initiators”, Technovation, Vol. 15 No. 5, pp. 269-88. Goldsmith, R.E. (1990), “The validity of a scale to measure global innovativeness”, The Journal of Applied Business Research, Vol. 7 No. 2, pp. 89-97. Hirschman, E.C. (1980), “Innovativeness, novelty seeking and consumer creativity”, Journal of Consumer Research, Vol. 7 No. 3, pp. 283-95. Holmes-Smith, P. and Rowe, K. (1994), “The development and use of congeneric measurement models in school effectiveness research: improving the reliability and validity of composite and latent variables for fitting multilevel and structural equation models”, paper presented at the International Congress for School Effectiveness and Improvement, Melbourne. Hu, L., Bentler, P.M. and Kano, Y. (1992), “Can test statistics in covariance structure analysis be trusted?”, Psychological Bulletin, Vol. 112 No. 2, pp. 351-62. Joreskog, K.G. and Sorbom, D. (1993), LISREL 8: Structural Equation Modelling with the SIMPLIS Command Language, Scientific Software International, Chicago, IL. Kline, R.B. (1998), Principles and Practice of Structural Equation Modeling, Guildford Press, New York, NY. Marsh, H.W. (1994), “Confirmatory factor analysis models of factorial invariance: a multifaceted approach”, Structural Equation Modelling, Vol. 1 No. 1, pp. 5-34. Midgley, D.F. and Dowling, G.R. (1978), “Innovativeness: the concept and its measurement”, Journal of Consumer Research, Vol. 4 No. 4, pp. 229-42. Nunnally, C.J. and Bernstein, H.I. (1994), Psychometric Theory, McGraw-Hill, New York, NY. Price, L. and Ridgway, N.M. (1983), “Development of scale to measure use innovativeness”, in Bagozzi, R. and Trybout, A. (Eds), Advances in Consumer Research, Association for Consumer Research, Ann-Arbor, MI, pp. 681-2. Steenkamp, J., Hostede, F. and Wedel, M. (1999), “A cross-national investigation into the individual and national cultural antecedents of consumer innovativeness”, Journal of Marketing, Vol. 63 No. 2, pp. 55-69. Tabachnik, B.G. and Fidell, L.S. (1989), Using Multivariate Statistics, Harper & Row, New York, NY. Venkatraman, M.P. and Price, L. (1990), “Differentiating between cognitive and sensory innovativeness”, Journal of Business Research, Vol. 20 No. 4, pp. 293-315. Ward, S. and Soutar, G. (1997), “Consumer acquisition patterns for durable goods and financial assets: a rasch analysis”, Applied Economics, Vol. 29 No. 5, pp. 903-11.
Use innovativeness scale 479
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Appendix 1
Scale item
480
Table AI. Original items of the measure of use innovativeness
1. Knowing how a product works offers almost as much pleasure as knowing that the product works very well 2. I’m very creative when using products 3. I’m very interested in appearance of products and what makes them tick 4. As a child, I really enjoyed taking things apart and putting them back together again 5. As long as a product works well, I don’t really care how it works 6. Curiosity is one of the permanent and certain aspects of intellect 7. I am very curious about how things work 8. I like to build things for my home 9. If I can’t figure out how something works, I would rather tinker with it than ask for help 10. I never take anything apart because I know I’ll never be able to put it back together again 11. I like to fix things around the house 12. I have got instruction in self-reliance skills 13. I would rather fix something myself than take it to someone to fix 1. When I try to do projects on my own, I’m afraid I will make a worse mess of them than if I had just left them alone 2. I always follow the manufacturer’s warning against removing the back-plates on products 3. When I try and to do projects on my own, without exact directions, they usually work out really well 4. I find very little instruction is needed to use a product similar to the one with which I’m already familiar 5. I’m afraid to buy a product I don’t know how to use 6. I am uncomfortable working on projects different from the types to which I am accustomed to 7. I always follow the manufacturer’s warnings on how to use a product 8. If a product comes in an assembled or unassembled form, I always buy the assembled form, even though it costs more 9. I like to improvise when I cook 1. I like to make furniture or clothing for myself and my family 2. I often buy clothing at second-hand shops 3. I often make gifts rather than buy them 4. When building something, it is better to use things already in the house than to buy materials 5. I often buy items such as furniture at garage sales 1. I save broken appliances because I might fix them someday (cr1) 2. I save broken appliances because I might be able to use the parts from them (cr2) 3. I enjoy thinking of new ways to use old things around the house (cr3) 4. I find myself saving packaging on products to use in other ways (cr4) 5. When I build something, I can often make do with things I already have around the house (cr5)
Scale Creativity/curiosity
Risk preferences
Voluntary simplicity
Creative reuse
(continued)
Scale item 6. Even if I don’t have the right tool for the job, I can usually improvise (cr6) 7. I never throw something away that I might use later (cr7) 8. I take great pleasure in adapting products for new uses that the manufacturer never intended (cr8) 9. In general, I would rather alter an old product to work in a new situation than purchase a new product specifically for that purpose (cr9) 10. After the useful life of a product, I can often think of ways to use its parts for other purposes (cr10) 1. I do not enjoy a product unless I can use it to its fullest capacity (m1) 2. I use products in more ways than most people (m2) 3. I often buy a food item for a particular recipe but end up using it for something else (m3) 4. A product’s value is directly related to the ways it can be used (m4) 5. It’s always impossible to improve on a project by adding new features (m5) 6. After purchase of a product, I try to keep track of new accessories that come out in the market (m6) 7. I enjoy expanding and adding on to projects in which that I’m involved on a continuing basis (m7)
Scale
Use innovativeness scale 481
Multiple use potential
Table AI.
Appendix 2
Scale item 1. Even if I don’t have the right tool for the job, I can usually improvise (cr6) 2. I never throw something away that I might use later (cr7) 3. In general, I would rather alter an old product to work in a new situation than purchase a new product specifically for that purpose (cr9) 4. After the useful life of a product, I can often think of ways to use its parts for other purposes (cr10) 5. I do not enjoy a product unless I can use it to its fullest capacity (m1) 6. I use products in more ways than most people (m2) 7. It’s always impossible to improve on a project by adding new features (m5) 8. After purchase of a product, I try to keep track of new accessories that come out in the market (m6) 9. I enjoy expanding and adding on to projects in which I’m involved on a continuing basis (m7)
Previous scale Creative reuse
Multiple use potential
Table AII. Final scale items for the multiple use and creative reuse combined scale
