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EDITORIAL 1 Editorial O ne of the main challenges for Creativity and Innovation Management is the exploration of new...

Author: Petra de Weerd-Nederhof and Olaf Fisscher (Editors)

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EDITORIAL

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Editorial

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ne of the main challenges for Creativity and Innovation Management is the exploration of new ways of stimulating, organizing and managing creativity and innovation. Innovating creativity and innovation management is not at all self-evident in innovative environments. Sometimes there even seems to exist a culture dominated by conservatism and noncommitment with respect to searching for and experimenting with new patterns of behaviour, interaction and co-operation. The not-invented-here syndrome is of course well known. It has its impact for the content of new findings, but it is maybe even more applicable to the renewal of processes of organizing and managing innovation. In this issue the first three contributions essentially stress the need for and potential of openness towards the environment in order to explore and exploit the resources and capabilities which are available from outside. They in fact join in with the plea for what is now called ‘open innovation’. Open innovation changes the locus of responsibility and the purpose of innovation, resulting in new ways of initiating and organizing innovation activities, as stated in the Call for Papers for R&D Management on opening-up the innovation process published in our December 2003 issue. The first article in this issue, written by Oliver Gassmann and Berislav Gaso, addresses external knowledge sourcing and attraction of outside-in innovations via socalled listening posts. Listening posts are defined as ‘peripheral elements of a decentralized R&D configuration with a specific strategic mission and sophisticated mechanisms for knowledge sourcing’. The authors have identified three different organizational concepts (in practice listening-post configurations will be hybrid) based on their empirical findings from an extensive research project: trend scouts, technology outposts and matchmakers. Norhayati Zakaria, Andrea Amelinckx and David Wilemon in the second contribution in this issue focus on global virtual teams. One of the questions they address is ‘how do organizations develop a knowledge sharing culture to promote effective organizational learning among culturallydiverse team members?’. Amongst their © Blackwell Publishing Ltd, 2004. 9600 Garsington Road, Oxford OX4 2DQ and 350 Main St, Malden, MA 02148, USA.

findings the authors conclude that virtual teams must be committed to developing new patterns of knowledge sharing, communication and social exchange in a computermediated team environment. In terms of our introductory remarks above, this conclusion illustrates very well the need for innovating the organization and management of innovation towards openness. The same can be said for the third contribution, by Udo Staber. His article deals with the issue of networking beyond the boundaries of the project organization. For project-based organizations it is important to integrate different knowledge bases, including individuals who are located outside organizational boundaries without a formal relationship with the organization, but are socially connected to project workers. The first research question concerns the pattern of social relations that project workers maintain outside the organization as sources of new knowledge. In order to answer his research questions, Staber collected data on the social networks of workers in 17 project-based Internet firms in Southern Germany. The findings are consistent with the social-embeddedness view of close social relations providing an important source of continuity in markets where intermittent projects are common. The next contribution is written by Claudine Soosay and Paul Hyland. They examine and compare factors that are driving innovation, enabling continuous improvement and building capabilities to engender an innovative culture in ten distribution centres in Australia and Singapore. The drivers of innovation they find are grouped into three; push factors causing innovation, such as competition and employee orientation; pull factors, i.e. innovating to achieve for example customer orientation or a leading edge in industry; and factors internal and external to the organization. In the fifth contribution to this issue PingKit Lam and Kwai-Sang Chin deal with project factors influencing conflict intensity and handling styles in collaborative new product development. Research findings based on survey data collected from 193 suppliers provide a clear insight into conflict intensity and suppliers’ adoption of conflict-handling styles for new product development projects

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CREATIVITY AND INNOVATION MANAGEMENT

of various characteristics, enabling better planning for conflict management and helping to improve new product development performance. The final contribution in this issue, written by Jan Kratzer, Robert Leenders and Jo van Engelen, concerns creative performance and communication in innovation teams. Communication is crucial in innovation teams, affecting a whole variety of factors that determine the creative performance of innovation teams. The frequency of communication, the centralization of communication and the formation of sub-groups are related to the creative performance of innovation teams. The authors’ findings are based on data from team members of innovation teams in 11 Dutch companies. In conclusion, the six contributions in this issue reflect some important current issues from both the theory and practice of creativity and innovation management. The practical side is accentuated in most of the articles as far as the findings are based on empirical research and as far as the managerial implications are part of the conclusions and discussions sections. We hope you will enjoy reading this first issue of 2004 and that it will challenge your creative, innovative and open mind towards new practices in creativity and innovation management. For us, as editors, this year brings a new challenge in strengthening

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the journal as well as the Creativity and Innovation Management Community, consisting of our readers, contributors and editorial board. Activities in the near future where we will be looking for both current and new members of the community are, among others, two coinciding events in June: the EIASM International Product Development Conference (Dublin) and the Fifth Conference on Creative Thinking followed by the annual Edward de Bono Seminar (Malta). Please visit our website for links to the events, as well as to the Call for Papers included at the end of this issue for a Special Issue on Organising for Innovation, in cooperation with the Intermational Network on Innovation Research. We aim to be in touch with you through ways other than through the journal, and will keep you informed in these pages. During the course of this year we will also start up the book reviews section again, including fulllength reviews of the International Handbook of Innovation (ed. L. Shavinina, 2003) and Open Innovation (H. Chesbrough, 2003). We are glad that founding editor Tudor Rickards has committed to contribute regularly to this and we welcome any suggestions from you of interesting books to discuss in these pages. Olaf Fisscher and Petra de Weerd Enschede January 2004

© Blackwell Publishing Ltd, 2004

LISTENING POSTS IN DECENTRALIZED FIRMS

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Insourcing Creativity with Listening Posts in Decentralized Firms Oliver Gassmann and Berislav Gaso Technological listening posts as a means of technological knowledge sourcing were observed to be a widespread empirical phenomenon in centres of technological excellence and innovation clusters. Our research is based on 55 semi-structured interviews with 12 technologyintensive companies and 6 benchmarking-workshops on external knowledge sourcing with 11 companies. We reveal three archetypes of listening posts: trend scout, technology outpost and matchmaker. We describe their respective mission, organizational structure and critical success factors. Each type is illustrated with case studies.

Introduction

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n the last few decades, tremendous changes have taken place in the industrialized world, which strongly influence the management of R&D. In general, seven trends have been transforming industry over the past few decades:

1. In order to fulfill customers’ desires for more variety and individualization, companies are faced with dramatically increasing product complexity, as various features and functions now have to be integrated into their products. Technology fusion fosters this trend because innovations now cross industry boundaries. Hence, not only product architectures but also product development processes are highly interrelated and complex. 2. Even though complexity drives R&D expenditures to enormous heights, there is a increasing pressure on top management to reduce R&D budgets in times of market recession. 3. Additionally, the stress of competitiveness calls for shorter time to market and reduced innovation cycles. 4. On the other hand, the impact of new technologies, especially in the fields of software and information technology, opens up new and promising possibilities for companies. These new technologies allow companies to develop products utilizing concurrent processes worldwide with a tremendous amount of available information. Nowadays, information technology acts as an © Blackwell Publishing Ltd, 2004. 9600 Garsington Road, Oxford OX4 2DQ and 350 Main St, Malden, MA 02148, USA.

enabler for decentralized knowledge sourcing, simulation and ubiquitous communication through increased information richness and social presence. 5. Increasing globalization and worldwide competition as a result of significant political changes, accompanied by worldwide and open markets, are forcing companies to rethink and act as global players. 6. The high level of technological and competitive uncertainty makes it difficult for companies to determine the real value of new scientific knowledge in todays competitive market place. Therefore companies must protect their intellectual property by sourcing scientific knowledge early. 7. Additionally, intellectual resource immobility, which is characterized through the fact that only a few ‘star’ researchers are making the majority of commercially exploitable discoveries, and many of these stars are working in universities, forces companies to gain access to such valuable external intellectual sources (Liebeskind et al., 1996). These megatrends are forcing companies towards adopting a knowledge-broker philosophy. Knowledge creation and basic research is being partially re-delegated to academic institutions and to highly specialized agents (e.g. university science parks and incubators). External knowledge sourcing and the attraction of bringing in outside-in innovations instead of reinventing the wheel are becoming the guiding principles.

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Approximately 75% of worldwide business R&D is conducted within transnational companies (Dunning, 1993). The OECD (2001) reports that the R&D activities of transnational companies represent a large and increasingly growing share of overall R&D activities, which increased from US$22.5 billion in 1991 to US$36.1 billion in 1998. R&D by foreignowned companies as a share of total business R&D in specific countries ranged from 14 per cent in Finland to approximately 65 per cent in Ireland. The larger OECD countries reported the following shares: USA, 16 per cent (1998); Germany, 17 per cent (1995); France, 18 per cent (1998); Italy, 23 per cent (1992); UK, 32 per cent (1999); and Canada, 37 per cent (1998). Research in R&D management has so far resulted in a better understanding of the determinants in international R&D, and many R&D organizations are being transformed in order to meet the upcoming challenges. Recent research has focused on the existence and effects of external technological knowledge sourcing from transnational companies’ host countries to the investing transnational corporation. Technological listening posts as a means for technological knowledge sourcing were seen to be a widespread empirical phenomenon in centres of technological excellence and innovation clusters. According to Porter (1990, 2001), we define clusters as regional concentrations and networks of companies, specialized suppliers, service providers, firms in related industries and associated institutions (i.e. universities, standards agencies and trade associations) that compete partially in the market place but also cooperate in pre-competitive fields. Silicon Valley in the United States is perhaps the bestknown example of a cluster, but there are many other examples, such as wireless technologies in Finland, chemical technologies in Basel, biotechnology in Boston and materials science in central Germany. The regional character of tacit knowledge makes presence in and access to these innovation clusters so important for leading companies since only ideas, knowledge and technology that are not widely available via the Internet and modern information technologies can provide sustainable competitive advantage. In the 1990s, several companies thus tried to establish listening posts in order to access a tremendous amount of embedded (tacit) technical knowledge that could have a significant impact on the business processes of their company. For instance, BMW established several listening posts in the United States and in Japan. They gained successfully momentum in terms of several new innovations that are

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currently differentiating factors for this car manufacturer and originally stem from those listening post activities. The establishment of listening posts and the management of an efficient flow of knowledge from innovation clusters towards R&D units can thus open new and promising opportunities for companies. We define a listening post (LP) as a peripheral element of a decentralized R&D configuration with a specific strategic mission and sophisticated mechanisms for knowledge sourcing. Nevertheless, all organizational units, such as purchasing and local sales, have the potential to be the eyes and ears of a company; the listening function is not necessary restricted to R&D outposts.

State-of-the-Art in Research There is a diverse body of literature on the topic of external knowledge sourcing by R&D organizations. We identified two literature streams. First, literature in the area of international R&D and second research that focuses on knowledge as the most important strategic resource of the firm (Table 1). The continuous trend towards internationalization of industrial R&D over the past decades has inter alia been elucidated as the attempt of technology-intensive transnational companies to seek market closeness and exploit resources in regional centres of technological excellence, that is, regions characterized by a high rate of new technology output, in order to compete in today’s global market place (Cantwell, 1995; Dunning and Narula, 1995; Hakanson, 1992; Kuemmerle, 1997; Patel and Vega, 1999; Pearce and Singh, 1992a, 1992b). In addition, the ability to generate entirely new technologies and products from foreign locations, and the growing need to monitor new technological developments have fostered this trend. Many companies now realize that the basis for their competitive advantage is their knowledge base, while innovation is of prime importance for the sustainability for these advantages (Johannessen, Olsen and Olausen, 1999). Nonaka and Takeuchi (1995) and Leonard-Barton (1995) argue that knowledge is a productive source for innovation and economic growth. Technology knowledgecreation processes are increasingly sophisticated, broad and expensive and the ‘ability of a firm to recognize the value of new, external information, assimilate it, and apply it to commercial ends is critical to its innovative capabilities’ (Cohen and Levinthal, 1990, p. 128) since many organizations lack the ability to listen to their external world and



efficiently process the signals received (Allen, 1977). Recent literature shows strong evidence of technology sourcing as a motive for foreign direct investments. For instance, Kuemmerle (1997, 1999) distinguishes between ‘homebase-exploiting’ and ‘home-base-augmenting’ foreign direct investments. The former is undertaken to support manufacturing facilities in foreign countries or adapt standard products to the demand there, while the latter is foreign direct investment undertaken to access and tap unique knowledge and resources from regional knowledge-intensive centres of excellence. Patel and Vega (1999) push this conceptual model further and suggest a ‘revealed technological advantage’ index with four categories of international technological activity. Almeida’s (1996) investigation of patent citations confirms the widely-held belief that foreign firms make more use of sector-specific knowledge than do domestic. He concludes that Korean and European multinationals source knowledge from US firms in order to upgrade their technological abilities in areas they are weak in. One way that many companies have exploited tacit and embedded knowledge from regional centres of excellence while reducing the need for huge financial investments is to launch technological listening posts (Patel and Vega, 1999; Weil, 2000; von Zedtwitz and Gassmann, 2002). From a historical perspective, listening posts began as a typical Japanese phenomenon of the early 1980s, when the Japanese Ministry of Economy, Trade and Industry (METI) had a very poor incentive system for fundamental research. Instead, METI nurtured a national push of fast-follower and imitation strategies, which were accompanied by efficient productdevelopment methodologies such as systems engineering, kaizen, quality circles and rapid prototyping. They also tried to tap and source knowledge about basic and applied research offshore. Several Japanese companies launched technological listening posts in centres of excellence, first in the United States and England and later on in other foreign countries. Despite a number of different typologies of international R&D and considerable academic research on the topic of knowledge sourcing a comprehensive description of listening posts as peripheral elements of transnational R&D configurations is still missing. Since listening posts gain increasing importance for large technology-intensive companies, their establishment and strategic mission deserves more attention. Moreover, there is little differentiation between various types of listening posts and their roles.


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Our knowledge about critical success factors of listening posts is also very limited. Thus, research that contributes to a deeper understanding of the different facets and types of listening posts and their success factors would offer new insights into this particular field of international R&D research. This article aims to contribute to this held of research.

Research Methodology and Data Sample Previous research on the management of transnational R&D (290 interviews with companies with more than 1000 R&D locations) stimulated the topic of listening posts (see Gassmann, 1997; Gassmann and von Zedtwitz, 1998, 1999; von Zedtwitz and Gassmann, 2002). Since our research focused on listening posts, their strategic missions and mechanisms for external technological knowledge sourcing, we applied a case-based research design (Yin, 1988) and chose the listening post as the unit of analysis. In order to determine how listening posts were integrated and managed within the wider R&D organization, we developed a semi-structured interview guideline focusing on functional and hierarchical linkages, the role of regional embeddedness, establishment and ramp-up of listening posts and the management of such outposts. We conducted 55 semi-structured interviews with 12 technology-intensive companies, which have their home base in Germany and Switzerland. Additionally, we conducted six benchmarking workshops on external knowledge sourcing with 11 companies. Our interviewees were R&D directors and senior R&D managers. In some companies we were able to participate in workshops and R&D project meetings. Combined with internal documentation on R&D organization, presentations by R&D personnel as well as memos from R&D managers, these data helped us to determine the reasons and patterns for how companies tap tacit and embedded knowledge from regional centres of excellence. Finally, we reported our findings to the interviewed companies and sought their feedback to correct erroneous interpretation and classification.

Organizational Concepts for Listening Posts Based on our interviews on external technological knowledge sourcing with listening

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Table 1. Literature streams in international R&D and knowledge management International R&D Research Focus

Authors

Taxonomies and organizational trends

Bartlett and Goshal (1990), Behrmann and Fischer (1980), Chiesa (1996), Cordell (1973), De Meyer (1993), Gassmann and von Zedtwitz (1999), Gerybadze and Reger (1999), Grandstrand et al. (1993), Hakanson (1990), Hewitt (1980), Kuemmerle (1997, 1999), Niosi and Godin (1999), Patel and Vega (1999), Pearce and Singh (1992a, 1992b), Pearson et al. (1993), Ronstadt (1977, 1984), von Zedtwitz and Gassmann (2002), Zander (1999)

Location Decision in international R&D

Gassmann and von Zedtwitz (1998), Grandstrand et al. (1993), Hakanson (1992), Hakanson and Zander (1988), Patel and Vega (1999) Pearson et al. (1993), Wortmann (1990)

Mangerial Aspects in international R&D

Asakawa (1996), Asakawa (2001), Brockhoff and Schmaul (1996), De Meyer and Mizushima (1989), Grandstrand et al. (1992), Perino and Tipping (1989), Rubenstein (1989) Knowledge Management

Research Focus

Authors

Absorptive Capacity and the Knowledge-based view of the Firm

Cohen and Levinthal (1990), Conner and Prahalad (1996), Grant and Baden-Fuller (1995), Kogut and Zander (1992), Kogut and Zander (1996)

Knowledge Creation and Innovation

Johannessen et al. (1999), Kusunoki, Nonaka and Nagata (1998), Nonaka (1994), Nonaka and Takeuchi (1995), Pitt and Clark (1999), von Krogh et al. (2000)

Knowledge Sourcing and Transfer

Almeida (1996), Birkinshaw and Fey (2001), Ensign (2000), Kanter (1988), Liebeskind et al. (1996), Wathne, Roos and von Krogh (1996)

Environmental scanning

Aguilar (1967), Ansoff (1975), Ashton and Klavans (1997), Gerybadze (1994), Ghoshal and Westley (1991), Hambrick (1982), Sheen (1992)

posts we identified the trend scout, technology outpost, and matchmaker as different organization forms. We have classified these three different archetypes according to the type of processed knowledge, and the alignment of the listening post (Figure 1). The alignment of the listening post describes either the access to direct knowledge sources or the use of indirect knowledge intermediaries. The access to direct knowledge sources refers to the first-hand, personal process of gaining information on and knowledge of changes in the technical environment (Aguilar, 1967; Ghoshal and Westley, 1991;

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Hambrick, 1982; Sheen, 1992). This occurs on a daily basis through scouts reading newspapers and journals, attending conferences, fairs, seminars, venture capital events or talking with friends, suppliers, customers and competitors. Indirect knowledge intermediaries intend to source unique knowledge assets through either the exchange of information on a market basis, or the establishment of relationships with specific partner firms or specialized agents, i.e. the listening post acts as a broker among experts from his own (often central) R&D and specific partner firms. The establish-



some examples of those companies that are implementing each particular mode of listening-post activity.

Type of Processed Knowledge Technological Knowledge

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Technology outpost

Trend Scout Trends & Application Knowledge

Matchmaker

Trend scout

Alignment of Direct Knowledge Sources

Indirect Knowledge Listening Post Intermediaries

Figure 1. Three archetypes of listening posts

ment of such relationships can include consortia of competitors (Chiesa and Manzini, 1998; Hagedorn, 1993), partnerships with suppliers and/or customers (Hakanson and Johanson, 1992; von Hippel, 1988), university collaborations (Bailetti and Callahan, 1992), and co-developments, joint ventures and alliances (Hamel, 1991; Kogut, 1988; LeonardBarton, 1995; Mowery et al., 1996). These partnerships are usually characterized by an intensive period of interaction over time and a high degree of mutual learning (Hamel, 1991). The type of processed knowledge can be distinguished in trend & application knowledge as well as technological knowledge. On the one hand, trend knowledge refers to both macro- and microtrends. Macrotrends are significant, market-place shaping trends, that take time to evolve and have the potential to dramatically affect the way consumers live and work, as well as their relationships and decisions. Microtrends are specific trends which range from what is ‘hot’ and what is ‘not’ in lifestyle, culture, and attitudes, to shopping habits, brand and media preferences, and online and offline activities. On the other hand, application knowledge entails information about future products, i.e. applications which are deployable through the migration and/or recombination of existing technologies. Technological knowledge in this context enfolds certain classes of complex and sophisticated tacit knowledge. This knowledge is usually unique and therefore hard to imitate; it is often embedded within centres of excellence. Each of these listening posts has a specific mission and a sophisticated mechanism for knowledge sourcing and therefore needs a different set of capabilities. The next sections briefly describe the three archetypes, and


Trend scouts focus on technological megatrends, new application areas and future potential, triggered by a changing society. Trend scouts are located mostly in trendy locations, lead markets or innovation clusters. They often take over remote business development functions. Their mission is to gather and transfer trend and application knowledge from centres of excellence, lead users or other stakeholders to the company home-base R&D. Trend scouts exhibit a small degree of regional embeddedness; resource allocation and coordination takes place centrally and job rotation programmes with the home-base R&D are often used to transfer tacit knowledge efficiently. While the advantage of this configuration is the low investment for a steady presence and the high sensitivity to local markets, barriers to integration in local communities and NIH-syndromes at the homebase R&D constitute major weaknesses. A good example of a trend scout is the BMW Palo Alto Technology Office (PAYTO) in Silicon Valley. It was founded in 1998 and is staffed with 16 employees. Its mission is to be permanently on the look-out for new trends, highly specialized and unique technical knowledge and technologies, and to seek and establish contacts with potential external partners. The combination of advanced technologies with product visions, market research, prototypes and customer responses often produces breakthrough innovations. At PAYTO, teams of three people have 90 days to identify, explore and develop new projects. The teams are often cross-functional, so that every project has the perspective of a marketer, an engineer and a scientist. If the team determines that the technology has a chance, the engineers begin to create a component and later on a prototype and test it in the interior of a production car. If the technology survives the rigorous testing procedure it goes to Munich and is showed to BMW’s senior management. As a recent innovative example, the new BMW car control mechanism in their 7 Series – iDrive – marks BMW’s entry into the era of intelligent cockpits by combining the overall control of more than 700 functions within one system with brilliant simplicity. When visionary customers began complaining that the dashboard was taking away their attention from the road, marketers, engineers and

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Table 2. Profile of a trend scout Mission: To gather and transfer trends and tacit knowledge from centres of excellence, lead users or other stakeholders to the company home-base R&D centre Configuration: Small degree of regional embeddedness Central co-ordination and control over resource allocation Job-rotation programmes Strengths: Low investment for a steady presence in the target area High sensitivity to local markets and trends

Weaknesses: Hard to integrate in local communities if not regionally embedded NIH-syndrome, home R&D centre is reluctant to accept ‘new’ ideas from outside, even though they themselves set up the listening post.

Examples: BMW’s Palo Alto Technology Office, BMW’s Designworks in Los Angeles, Daimler Chrysler’s listening posts in Tokyo and Daimler Chrysler’s research and technology centre in Palo Alto.

designers started thinking about a possible redesign and reduction of all the numerous knobs on the dashboard. BMW’s Innovation Strategy Board relied on PAYTO, which delivered after 90 days a first draft of iDrive. In addition to suggesting a new technology, PAYTO found a small software company (Immersion) that could provide the technology, evaluated it, and showed it to BMW’s senior management. Munich engineers continued to work with Immersion staffers on the iDrive device and eventually, the new iDrive hit the street in a Z9 study vehicle at the 1999 Frankfurt Motor Show. BMW licensed the technology from Immersion and partnered Immersion with Japanese electronics component supplier Alps Electric to develop iDrive. Finally, iDrive showed up in the newly launched 7 Series sedan.

Technology Outposts Technology outposts focus on specialized technological knowledge. Typically, their location is determined by technological excellence of an academic institution (i.e. MIT, Boston) or accumulation of academic and company high-tech players in innovative regions. In some cases excellent infrastructure has been the industrial attractor of such players (i.e. CERN, Geneva). A technology outpost’s

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mission is to gather sophisticated technological knowledge and transfer technologies from centres of technological excellence to the home-base R&D. Outposts usually exhibit both a high degree of regional embeddedness in the particular scientific community and a high degree of independence and autonomy towards the central R&D. While they usually have top management commitment, they can often become ‘engineer playgrounds’. For instance, Hitachi installed technology outposts in Dublin (Ireland) and Cambridge (UK) in 1988 to participate in the fundamental (and to some extent applied) research of leading universities. The Hitachi Cambridge Laboratory (HCL) focused on research in future ‘revolutionary’ innovative semiconductor devices which could open and lead the main world industry into the twenty-first century. Research on quantum devices is vigorously pursued, especially involving challenges such as use of the quantum ‘particle’ nature of electrons, as well as ultra-high speed transmission of signals by using the probabilistic transmission of ‘quantum wave function’. Hitachi’s Dublin Laboratory (HDL) was established within the campus of Trinity College Dublin, in the building of Innovation Centre – TCD-industry collaborative incubation centre – researching advanced computing, especially ultra-parallel computing, and advanced recognition, including opto-



neural networking. Both laboratories put great importance on the collaboration with universities, especially with on-site ones. HCL has been collaborating with the Microelectronics Research Centre of the Cavendish Laboratory, Cambridge University, while HDL has been extending partnerships with Trinity College Dublin, Imperial College London and Oxford University. A good example of the synergy between Hitachi’s Cambridge Laboratory (HCL) and Cambridge University was the discovery of the ‘Femto-Second Ultra-Fast Quantum Device’ in 1995. Femto-second ultra-fast quantum device is the challenge of using the ‘wave’ nature of an electron, to achieve future ultra-fast switching devices for both high-end telecommunication and ultra-fast computing in the twenty-first century – an integrated information network age. This challenge requires extremely demanding and disciplined patience in accumulation of repetitive experimentation using extremely accurately controlled laser systems. In August of 1995, Hitachi HCL team, however, succeeded in creating and demonstrating the coherent ‘Femtosecond’ pulses, by the innovative scheme named ‘Coherent Destruction’ and ‘Coherent Construction’. After this success, the European government, invited the HCL team to participate in the ESPRIT network named ‘Phantoms’ for future mutual research communication.

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Matchmaker Matchmakers have pure diplomatic functions and act as ambassadors of a company. Their processes and skills are similar to external political institutions (i.e. Swisshouse in Boston). Core competences of these matchmakers are the initiation, leverage and establishment of contracts and cooperations. They exhibit a high degree of regional embeddedness, are often organized autonomously and posses a huge informal network. Daimler Chrysler’s listening post in Moscow is such a matchmaker. Its mission is the establishment of links between the central research centre of the company, with 90% of the researchers located mainly in Germany, and Russian scientists (particularly in the field of algorithms and material sciences). The German ministry of economics and labour set up in close collaboration with the German chamber of industry and commerce (DIHK), the Fraunhofer-Gesellschaft (FhG) and the German Federation of Industrial Cooperative Research Associations (AiF) 18 matchmakers in 18 different worldwide innovation clusters. These offshore contact offices offer German small and medium-sized enterprises important support in international activities, since SME’s often do not lack competencies; rather they lack capacities for maintaining listening

Table 3. Profile of a technology outpost Mission: To gather sophisticated technological knowledge and transfer technologies from centres of excellence to the homebase R&D centre. Configuration: High degree of regional embeddedness in the scientific community High degree of independence Strengths: High top management commitment Adaptation to local markets Exploitation of local resources

Weaknesses: Can often become ‘engineer playgrounds’ Central directives from the home-base R&D centre can suppress creativity and flexibility NIH-syndrome

Examples: Hitachi in Dublin and Cambridge, Daimler Chrysler’s joint research lab in Shanghai and research centre in Bangalore, BMW’s Car IT in Munich, BASF’s biotech outposts close to Boston, Schering’s outpost in Tokyo.


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1981 and comprises 30 employees today. Beneath the gathering of trends and application knowledge, mainly Japanese employees act as door openers towards the Japanese scientific community and competing as well as non-competing companies, with the aim of tapping tacit and embedded knowledge. 2. BMW’s Designworks in Los Angeles was founded in 1972 and acquired in 1995. Today, 70 employees are working in this trend scout on the gathering of future trends and development of new car designs. 3. BMW’s Palo Alto Technology Office, another trend scout in the Californian Innovation Triangle, was found in 1998 and employs a constant 16 staff members, who are primarily concentrating on six strategic topics: ‘human-machine interfaces’ for handling technology more simply; ‘mechatronics’, for integrating sensor, actuator technology and electronics; ‘information, communication, and entertainment’ issues in automobiles; ‘driver assistance’, through telematics, for example ‘B2X’ for new portals and new opportunities for business communication; ‘materials and production’, e.g. form-memory alloys. 4. BMW’s Car IT, a technology outpost in Munich, was founded in 2002 and has 15 employees, who are working in close relationships with suppliers and local universities and research centres on the definition and implementation of soft-ware systems and applications for the automotive industry.

posts abroad. Matchmakers Suggest cooperation partners for research and development, they advise co-operations with foreign research institutes, organize seminars and experience exchanges as well as meeting of entrepreneurs, R&D directors and scientists from the area of applied research. Matchmakers analyse the research landscape in the host country, locking for new technological developments. With their activities and services, matchmakers, which are mainly citizens of the home country with a deep technological understanding and huge informal network, aim to open up foreign innovation sources and match foreign R&D-partners with German SMEs. The best way to achieve this is through constant contact to German small and mediumsized companies that try to exploit a foreign market.

Hybrid Listening Post Configurations A company does typically not have only one type of listening post. Instead there is a variety of combinations possible, depending on the strategic orientation and particular mission of each listening post. A good example is BMW, which has a rather large centralized R&D in Munich. Central FIZ (Forschungs- und Innovationszentrum) has become well-known because of its open and process-oriented architecture, which allows external suppliers to work directly within R&D. In order to overcome ethnocentric centralization and enrich external input, BMW has started to establish all three types of listening posts (Figure 2). BMW has launched the following listening post activities:

In additionally, the innovation management department at BMW started an Internet interface for the attraction of outside-in innovations called Virtual Innovation Agency (VIA). This can be understood as a non-institutionalized e-listening post aiming to source technological knowledge from outside the company. Thereby VIA has both a passive and active

1. BMW’s Technology Office in Tokyo, which operates as a matchmaker, was founded in

Trend Scout

16 Silicon Valley: Palo Alto Technology Office (PAYTO)

Japan: BMW Technology Office

R&D Centre Munich 6000

30 Matchmaker

70

Los Angeles: Designworks

Trend Scout

(Corporate R&D sites or 100% subsidiaries with headcounts)

15 Munich: BMW Car IT Technology Outpost

Figure 2. BMW’s listening post network

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Table 4. Profile of a Matchmaker Mission: To act as a mediator towards leading regional technology suppliers, research institutions and future relevant partners through the establishment of multidimensional relationships within the regional scientific community. Configuration: High degree of regional embeddedness Often autonomously organized Huge informal network Strengths: Access to new and/or complementary areas of knowledge Enables sharing of costs and risk Often breakthrough and radical innovations

Weaknesses: Often no ownership and control over the knowledge asset in question Knowledge losses through externalization NIH-syndrome

Examples: Technology scouts of the German ministry of economics, Daimler Chrysler’s listening post in Moscow, BMW’s Technology Office in Tokyo, Siemens in Bejing

strategic alignment. The passive alignment refers to attracting outside-in innovations, whereas the active characteristic supports the external search for suitable innovation suppliers. Through this Internet portal, BMW is seeking for development of new relationships with any potential external innovators: individuals, small companies, and large companies from other business centres and research centres. Those who have developed an idea that could increase BMW’s competitive advantage can go to the website, where the company promises to support them and maintain the confidentiality of their idea (http://zulieferer.bmw.de/en/via/). If BMW is interested in implementing the idea, it provides personal contacts in the appropriate special departments and reimburses the innovator for his idea. BMW institutionalized filters and selfassessment procedures to help select innovative solutions which were best suited to go through the VIA. This way, the novelty, technical feasibility and economic viability of the idea can be assessed effectively and quickly. VIA associates, acting as the first filter, assess the survivor ideas, register them and report their findings to the appropriate centre of competence, which then analyses the idea and the associates’ reports. If the centre of competence thinks the idea has merit, a contract is signed to begin a market assessment.


Managerial Implications and Conclusions This paper has indicated the existence of three different types of listening posts: trend scout, technology outpost and matchmaker. Each of these archetypes has a specific mission and a highly sophisticated mechanism for knowledge sourcing and therefore needs a different set of capabilities. Despite its recent emergence, the diversity of conceptualizations, methodological approaches and research settings on external knowledge sourcing neglects the development of a comprehensive understanding of the problem in the context of listening posts. A better understanding of these mechanisms is needed, since the establishment of listening posts can open new and promising opportunities for companies. Much of the success of a listening post depends on a clearly thought through mandate for such a centre, and the appropriate managerial culture ‘back home’ to such an listening post optimally use, and be responsive to the signals emanating from it. Home management must be clear on what is required from such an listening post, and personnel at the home centre must also be apprised of the importance of supporting and ‘listening to’ such an outpost. It is not by chance that the Not-InventedHere-syndrome is mentioned as a potential weakness for listening-posts. It may be alleviated or exacerbated depending upon which of

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the different listening-post models is adopted, though our interviews indicate that the intensity of NIH and the prevailing reluctance to act upon the results of listening posts is strongly influenced by their operational involvement in R&D activities. Managerial implications have to impact the listening post and the interaction to the home base in order to increase effectiveness. • Much depends on the knowledge-sharing culture of the home-base organization. The home management team must prepared to be open (on an ongoing basis) and share information with their listening post staff. Mutual understanding is crucial. • The company should be clear on what technologies it is seeking (focus). All too often there is no clear policy on these questions, and the company addresses them at the last minute in response to an initiative raised from the listening post. Reasons are often indicated by reactive, short-term management. • Job rotation programmes between the listening post and operational units increase mutual understanding and help building up redundant knowledge. Allen’s (1977) early statement that ‘the best way to transfer technical information is to move a human carrier’ is more valid than ever. An assignment of maximum three years seems to be practical in several firms. • Involvement in direct development projects enlarges the acceptance of a listening post since the value of the contribution is recognized. Especially in the ramp-up phase, a part-time direct involvement in important projects increases internal recognition (e.g. Schindler’s outpost in Shanghai, 1999). • It is important to consider who the listening post reports to and what communication channels it uses. The best medium seems to be face-to-face briefings and not fire-andforget written newsletters. • It is not uncommon to find situations where, if the competitive intelligence unit reports things already known to the management, they will be regarded as unnecessary, since they are merely confirming what management instinctively already knew, whereas, if they report something previously unknown to the senior management, they are liable not to be believed or listened to. This paradox of ‘shoot the messenger’ is often mentioned by CI professionals. • Other issues deal with how the listening post is integrated with whatever the mother organization is probably doing in any case in that part of the world or market. There will typically be a number of different sources of information and these need to be

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integrated. A listening post makes use of the company’s marketing people – those who are ‘out there’ making ‘primary’ contact with customers etc. or direct the mother company’s Business Development personnel to act, or merely recommend action, or report on possible courses of action. Another perspective is that of the technology involved; for example, is the company seeking more immediate and tactical inputs for development or longer-term inputs at the research level. Note that R&D is not a homogeneous activity – just as research has a different dynamic from development – depending on the company, industry, technology or stage in product life-cycles. Listening posts need to be managed dynamically: what is appropriate when setting up a listening post is not applicable once the listening-post personnel are an integral part of their surroundings. It is necessary or wise to rotate people, while retaining a core of those who develop relational and social expertise in particular geographical locations and markets. If the work of an listening post becomes routinized, people may no longer notice the signals they are supposed to be looking out for. Future research is needed to confirm these findings on a wider basis. This includes the efficient and effective management of strategic listening posts, especially regarding their flow of knowledge, performance measurement and relationships with regional institutions and local knowledge pools (regional embeddedness). Future research should try to overcome existing limitations and deliver an enfolding concept and framework for understanding knowledge-sourcing mechanisms.

References Aguilar, F. (1967) Scanning the Business Environment. Macmillan, New York. Allen, T.J. (1977) Managing the Flow of Technology – Technology Transfer and the Dissemination of Technological Information within R&D Organizations. MIT Press, Cambridge. Almeida, P. (1996) Knowledge Sourcing by Foreign Multinationals: Patent Citation Analysis in the US Semiconductor Industry. Strategic Management Journal, 17, 155–65. Ansoff, H.I. (1975) Managing strategic surprise by response to weak signals. California Management Review, 18(2), 21–33. Ashton, W.B. and Klavans, R.A. (1997) Keeping abreast of Science and Technology. Battele Press, Columbus. Asakawa, K. (1996) External-internal linkages and overseas autonomy-control tension: the management dilemma of the Japanese R&D in Europe. IEEE Transactions on Engineering Management, 43(1), 24–32.



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Gerybadze, A. and Reger, G. (1999) Globalization of R&D: recent changes in the management of innovation in transnational corporations. Research Policy, 28, 251–74. Ghoshal, S. and Westley, D.E. (1991) Organizing competitor analysis systems. Strategic Management Journal, 12(1), 17–31. Grandstrand, O., Bohlin, E., Oskarsson, C. and Sjoberg, N. (1992) External technology acquisition in large multi-technology corporations. R&D Management, 22(2), 111–33. Granstrand, O., Hakanson, L. and Sjölander, S. (1993) Internationalization of R&D – a survey of some recent research. Research Policy, 22, 413–30. Grant, R.M. and Baden-Fuller, C. (1995) A knowledge-based theory of inter-firm collaboration. Academy of Management Journal, 17–21. Hagedoorn, J. (1993) Understanding the rationale of strategic technology partnering: interorganizational modes of cooperation and sectoral differences. Strategic Management Journal, 14(5), 371–385. Hakanson, L. and Zander, U. (1988) International Management of R&D: The Swedish Experience. R&D Management, 18(3), 217–26. Hakanson, L. (1990) International Decentralization of R&D – The Organizational Challenges. In Bartlett, C.A., Doz, Y. and Hedlund, G. (eds.), Managing the Global Firm. Routledge, London. Hakanson, L. (1992) Locational Determinants of Foreign R&D in Swedish Multinationals. In Granstrand, O., Hakanson, L., Sjölander, S. (eds.), Technology Management and International Business: Internationalization of R&D and Technology. John Wiley and Sons, Chichester. Hakansson, H. and Johansson, J. (1992) A Model of Industrial Networks. Industrial Networks: A New View of Reality. Routledge, London. Hambrick, D.C. (1982) Environmental scanning and organizational strategy. Strategic Management Journal, 3, 159–73. Hamel, G. (1991) Competition for competence and inter-partner learning within international strategic alliances. Strategic Management Journal, 12, 83–104. Haour, G. (1992) Stretching the knowledge base of the enterprise through contract research. R&D Management, 22(2), 177–82. Hewitt, G. (1980) Research and Development performed abroad by US manufacturing multinationals. Kyklos, 33, 308–26. Johannessen, J.A., Olsen, B. and Olaisen, J. (1999) Aspects of Innovation Theory Based on Knowledge Management. International Journal of Information Management, 19, 121–39. Kanter, R.M. (1988) When a Thousand Flowers Bloom: Structural, Collective, and Social Conditions for Innovation in Organizations. Research in Organizational Behaviour, 10. Kogut, B. (1988) Joint ventures: theoretical and empirical perspectives. Strategic Management Journal, 9(4), 319–332. Kogut, B. and Zander, U. (1992) Knowledge of the firm, combinative capabilities, and the replication of technology. Organization Science, 3(3), 383–97. Kogut, B. and Zander, U. (1996) What firms do? Coordination, identity, and learning. Organization Science, 7(5), 502–18.

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von Krogh, G., Ichijo, K. and Nonaka, I. (2000) Enabling Knowledge Creation: How to Unlock the Mystery of Tacit Knowledge and Release the Power of Innovation. Oxford University Press, New York and Oxford. Kuemmerle, W. (1997) Building Effective R&D Capabilities Abroad. Harvard Business Review, 3/4, 61–70. Kuemmerle, W. (1999) Foreign Direct Investment in Industrial Research in the Pharmaceutical and Electronics Industries – Results from a Survey of Multinational Firms. Research Policy, 28, 179–93. Kusonoki, K., Nonaka, I. and Nagata, A. (1998) Organizational Capabilities in Product Development of Japanese Firms: A Conceptual Framework and Empirical Findings. Organization Science, 9(6), 699–718. Leonard-Barton, D. (1995) Wellsprings of Knowledge – Building and Sustaining the Sources of Innovation. Harvard Business School Press, Boston, MA. Liebeskind, J.P., Oliver, A.L., Zucker, L. and Brewer, M. (1996) Social Networks, Learning, and Flexibility: Sourcing Scientific Knowledge in New Biotechnology Firms. Organization Science, 7(4), 428–43. Mowery, D.C., Oxley, J.E. and Silverman, B.S. (1996) Strategic alliances and interfirm knowledge transfer. Strategic Management Journal, 17 (Winter special issue), 77–92. Niosi, J. and Godin, B. (1999) Canadian R&D abroad management practices. Research Policy, 28, 215– 30. Nonaka, I. (1994) A Dynamic Theory of Organizational Knowledge Creation. Organization Science, 5(1), 14–37. Nonaka, I. and Takeuchi, H. (1995) The KnowledgeCreating Company. How Japanese Companies Create the Dynamics of Innovation. Oxford University Press, Oxford. OECD (2001) Measuring Globalisation: The Role of Multinationals in OECD Economies. OECD, Paris. Patel, P. and Vega, M. (1999) Patterns of Internationalisation of Corporate Technology: Location vs. Home Country Advantages. Research Policy, 28, 145–55. Pearce, R.D. and Singh, S. (1992a) Globalizing Research and Development. St. Martin’s Press, New York. Pearce, R.D. and Singh, S. (1992b) The Internationalisation of Research and Development by Multinational Enterprises: A firm-level Analysis of Determinants. Macmillan, London. Pearson, A., Brockhoff, K. and von Boehmer, A. (1993) Decision parameters in global R&D management. R&D Management, 23(3), 249–62. Perrino, A.C. and Tipping, J.W. (1989) Global Management of technology. Research Technology Management, 32(3), 12–19. Pitt, M. and Clarke, K. (1999) Competing on Competence: A Knowledge Perspective on the Management of Strategic Innovation. Technology Analysis & Strategic Management, 11(3), 301–13. Porter, M.E. (1990) The Competitive Advantage of Nations. The Free Press, New York. Porter, M.E. (2001) Innovation: Location Matters. Sloan Management Review, 42(4), 28–36. Ronstadt, R.C. (1977) Research and development abroad by US multinationals. Praeger, New York.

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Ronstadt, R.C. (1984) R&D Abroad by US Multinationals. In Stobaugh, R. and Wells Jr. (eds.), Technology Crossing Borders. Harvard Business School Press, Boston. Rubenstein, A.H. (1989) Managing Technology in the decentralized firm. Wiley, New York. Sheen, M.R. (1992) Barriers to scientific and technical knowledge acquisition in industrial R&D. R&D Management, 22(2), 135–45. von Hippel, E. (1988) The Source of Innovation. Oxford University Press, New York. von Zedtwitz, M. and Gassmann, O. (2002) Market versus Technology Drive in R&D Internationalization: Four Different Patterns of Managing Research and Development. Research Policy, 31, 569–88. Wathne, K., Roos, J. and von Krogh, G. (1996) Towards a Theory of Knowledge Transfer in a Cooperative Context. In von Krogh, G. and Roos, J. (eds.), Managing Knowledge – Perspectives on cooperation and competition. Sage Publications, London. Weil, T. (2000) Why and How European Companies Reach Out to Silicon Valley. Institut francais des relations internationales, Paris. Wortmann, M. (1990) Multinationals and the Internationalization of R&D: New Developments in German Companies. Research Policy, 19, 175–83. Yin, R.K. (1988) Case Study Research: Design and Methods. Newbury Park, London. Zander, I. (1999) How do you mean ‘global’? An empirical investigation of innovation networks in the multinational corporation. Research Policy, 28, 195–213.

Oliver Gassmann (Dufourstrasse 45a, 9000 St Gallen, Switzerland, Email Oliver. [email protected] ) is Professor of Technology Management at the University of St. Gallen and Director at the Institute of Technology Management. After his PhD in 1996 he worked for Schindler Corporation headquartered in Ebikon/Switzerland. From 1998–2002 he has been Vice President Technology Management responsible for Corporate Research worldwide. In addition he is a member of several boards, i.e. Board for Science and Research of Economiesuisse, Editorial Board of R&D Management. He has published six books as author, co-author and editor, and over 90 publications in the area of technology and innovation management. Berislav Gaso studied mechanical engineering with a strong emphasis on systems engineering and manufacturing at the Technical University of Munich and at the Massachusetts Institute of Technology in Cambridge. He has been a doctoral candidate and research associate at University of St. Gallen’s Institute of Technology Management (ITEM) and is currently a Visiting Fellow at Harvard Business School. His research focuses on early innovation phases and external knowledge sourcing.


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Working Together Apart? Building a Knowledge-Sharing Culture for Global Virtual Teams Norhayati Zakaria, Andrea Amelinckx and David Wilemon A new impetus for greater knowledge-sharing among team members needs to be emphasized due to the emergence of a significant new form of working known as ‘global virtual teams’. As information and communication technologies permeate every aspect of organizational life and impact the way teams communicate, work and structure relationships, global virtual teams require innovative communication and learning capabilities for different team members to effectively work together across cultural, organizational and geographical boundaries. Whereas information technology-facilitated communication processes rely on technologically advanced systems to succeed, the ability to create a knowledge-sharing culture within a global virtual team rests on the existence (and maintenance) of intra-team respect, mutual trust, reciprocity and positive individual and group relationships. Thus, some of the inherent questions we address in our paper are: (1) what are the cross-cultural challenges faced by global virtual teams?; (2) how do organizations develop a knowledge sharing culture to promote effective organizational learning among culturally-diverse team members? and; (3) what are some of the practices that can help maximize the performance of global virtual teams? We conclude by examining ways that global virtual teams can be more effectively managed in order to reach their potential in this new interconnected world and put forward suggestions for further research.

Introduction

T

he rise of global virtual teams is a phenomenon of globalization. At the same time, new information and communication technologies play an ever-increasing role in all aspects of global business relations, but are particularly important in the emergence of new global organizational work structures and virtual work environments. Information and communication technologies have been viewed as an indispensable tool for multinational corporations that choose to move beyond the geographic constraints of face-toface employee interactions and endeavour to build a virtual workplace and/or use virtual teams as a new component of a generally traditional work structure. Whereas information and communication technologies are essential in the communication and knowledge-sharing processes for geographically dispersed employees, computer-facilitated communication © Blackwell Publishing Ltd, 2004. 9600 Garsington Road, Oxford OX4 2DQ and 350 Main St, Malden, MA 02148, USA.

technologies are only as effective as those using them. Even though information and communication technologies impact knowledge sharing, team coherence and performance, it is the human component in the virtual environment and the interactive relational bonds that facilitate or hinder the development of a shared knowledge culture and organizational learning. In a virtual computer-mediated communication environment, global virtual teams rely on information and communication technology usage to facilitate knowledge exchange, transfer and sharing. Nonetheless, creating a knowledge-based environment requires more than information and communication technology; it requires other crucial elements such as intra-team trust and intra-team relational bonds, leadership, intercultural communication competence, and cross-cultural training that foster a collaborative interactive permissive space (albeit a virtual one) where global

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virtual team members are actively encouraged to engage in a regular and frequent reciprocal cross-cultural exchange of ideas and the creation of new team-created solutions. Hinds and Weisband (2003) advances the idea of developing a shared understanding in virtual teams through similar perspectives and background, and shared experiences. The concept of shared understanding is defined as ‘a collective way of organizing relevant knowledge’ (Hinds and Weisband, 2003, p. 21), which can influence the ability of teams to co-ordinate work and perform well. Knowledge management is often seen as a process by which information is captured, organized, stored, retrieved and transmitted. Knowledge, thus described, is nearly a tangible passive fixed unit that is unrelated to the social and human locale from which it arose (Thomas, Kellogg & Erickson, 2001). Knowledge is shaped, evaluated, discarded or embraced by humans who do so based, among other things, upon their social and cultural assumptions. A rank ordering of knowledge (from most to least important) occurs after such knowledge is filtered through cultural lenses, whether we are aware of such filters or not. Factual knowledge may not be as objective as we might assume and the transmission of such knowledge, both in the process by which it is conveyed, as well as the information itself, cannot be deemed culture-free. Additionally, global virtual teams’ creative and problem-solving capabilities emerge from their culturally mediated knowledge structure and shared knowledge base. Although research has focused on how the lack of physical presence as well as the cross-cultural nature of such a team provides many challenges as mentioned above, yet, what has not been explored is that the knowledge that is generated is itself culturally constructed, defined and constrained by the global virtual team members. Hence, we propose that new patterns of communication and social exchange can emerge in a computer-mediated team environment that influences this cultural learning process. Likewise, the quality and depth of intra-team member relationships impacts the creation and maintenance of a shared knowledge base. This paper examines the following issues: (1) what are the cross-cultural challenges faced by global virtual teams?; (2) how do organizations develop a knowledge sharing culture to promote effective organizational learning among culturally-diverse team members? and; (3) what are some of the practices that can help maximize the performance of global virtual teams? In doing so, we will consider how global virtual teams can be more effec-

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tively managed in order to reach their potential in this new interconnected world, and base our conclusions on carefully considered observations of literature, theory and practice.

What and Why Global Virtual Teams? How do we conceptualize ‘global virtual teams?’ First, let us examine the term ‘virtual teams.’ According to Cohen and Gibson (2003), the conception of virtual team often induces a problematic use. Apparently people casually use the term by applying it to a wide variety of social and organizational phenomena, which can be correctly, described either as a virtual new product development team or an engineering web-based learning network. Yet, we need to look deeper. We need to be able to identify and differentiate similar types of team such as global teams, transnational teams or multicultural teams. Cohen and Gibson suggest three main attributes for virtual teams – (1) it is a functioning team – interdependent in task management, having shared responsibility for outcomes, and collectively managing relationships across organizational boundaries, that (2) team members are geographically dispersed, and (3) they rely on technology-mediated communications rather than face-to-face interaction to accomplish tasks. In essence, team members are not collocated and definitely use technology-mediated communication such as information and communication technologies. It is imperative, however, to consider that using technology does not merely render a team as a virtual team because collocated teams frequently rely on technological support. What is more paramount is the degree of reliance on electronic communication that increases the ‘virtuality’, as virtual teams have no option as to whether or not to use it, since they depend on virtuality. Virtual teams have no historical work background, and seldom meet face-to-face; in fact, team members may not even have the opportunity to do so. How about global teams? According to Wheatley and Wilemon (1999), global teams are defined as a team that is comprised of individuals located in many different countries or geographic areas, and team members differ in their functionality, which adds complexity to group dynamics. The main idea behind this concept is that people are both geographically dispersed and functionally diverse. Conversely, traditional teams are people that work collaboratively but usually are located in one location and may or may not be functionally



different. In global virtual teams, the barriers can be larger because of national differences. Teams of people from Malaysia, Canada, the USA, Britain, Germany, Japan, and France are more socially, culturally and linguistically complex than teams of people from New York, Nebraska, Massachusetts and California. In our paper, we use the term ‘global virtual teams’, which adds a more intricate phenomenon, but not a strangely different concept from both the meaning of virtual and global teams. Here, not only team members differ in the degree of virtuality, but also in terms of their national and cultural backgrounds. As such, a virtual team is considered global when backgrounds are culturally diverse, and members are able to think and work with the diversity of the global environment (DeSanctis & Poole, 1997; Jackson, Aiken, Vanjani & Hasan, 1995). Concisely, global virtual teams are not only separated by time and space, but differ in national, cultural and linguistic attributes, and use information and communication technologies as their primary means of communication and work structure. In short, global virtual teams most distinctive feature lies in the context, defined as ‘a way of life and work in a specific geographical area with its own set of business conditions, cultural assumptions, and unique history’ (Gluesing et al., 2003). Why global virtual teams? Lipnack and Stamps (1997) considered virtual teams as a new form of ‘working together apart’. Global virtual teams are becoming the prevalent form of work for many multinational corporations. As reported by the Gartner Group survey (Biggs, 2000), it was estimated that 60 per cent of the professional and management tasks at Global 2000 companies would be done via virtual teams by 2004. On the other spectrum, it was also reported that, 50 per cent of virtual teams would fail to meet either strategic or operational objectives due to the inability to manage the distributed workforce implementation risks. Hence, global virtual teams require innovative communication and learning capabilities among different team members across organizational and geographical boundaries. As a result, the intra-team social interactions and work processes cannot be compared to conventional team structures or treated as such by team managers. We need to see them as unique entities to better understand the processes of creating and maintaining effective virtual teams. The potential advantages of global virtual teams are that they can create culturally synergistic solutions, enhance creativity and cohesiveness among team members, promote a greater acceptance of new ideas and, hence,


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PEOPLE ∑ Culture ∑ Language ∑ IT proficiency

IT ∑ Accessibility, reliability and compatibility ∑ Appropriate technology use

Figure 1. Key Issues in Implementing Global Virtual Teams Source: Dube and Pare, 2001.

provide a competitive advantage for multinational companies. Though global virtual team diversity offers potential richness, it also presents major challenges. In fact, findings from Dube and Pare (2001) suggest that global virtual teams face more challenges than localized virtual teams. The possible disadvantages are that they tend to have more timeconsuming decision-making processes and when miscommunication and misunderstandings occur, stress and conflicts among team members are heightened and less easily dispelled. Dube and Pare provide two key issues (illustrated in Figure 1) to implement global virtual teams. We will provide a detail discussion centered on both key issues in the following sections.

Culture and Knowledge-Sharing Base Management practitioners have often undervalued the profound influence of culture on knowledge conceptualization and transfer. Knowledge sharing is often facilitated by communication that involves the exchange of meaning. The process of communicating is dynamic, multifaceted and complex. Cultural conditioning affects the evaluation of experience as well as the means by which information and knowledge is conveyed and learned. Another salient concern is that the transmission of information does not necessarily ensure learning. Typically we view the transmission of information from sender to receiver as a one-way process where the active participant is the sender while the receiver remains an inactive recipient. When miscommunication occurs, particularly in a cross-cultural setting, it is due to the sender’s inability and/or refusal to shape the information in a culturally appropriate and understandable form for the receiver. However, in reality, the sender and receiver should be seen as both active participants engaged in knowledge

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transfer and culturally mediated discourse. The ability to communicate effectively in a cross-cultural setting resides in the abilities of all participants to successfully decode and encode messages so that they are understood within the others’ cultural contexts. The ability to learn is often facilitated by transmitting information via multiple dimensions (visual cues, voice modulations, oral and written means using examples, metaphors and in certain contexts, allegorical storytelling). In cross-cultural settings, however, the use of the above communication techniques may not resonate with those who do not share the same culture cues. In addition, many of the above dimensions are unavailable to those working in a virtual environment. Moreover, in computer-mediated environments, the means by which information is transferred is flattened, less dynamic and thus may become less salient, possibly less easy to grasp, retain and learn. Qureshi and Zigurs (2001) suggest that the greater the degree of virtualization, the more people need to manage the relationships, share knowledge and expertise, and co-ordinate joint activities in completely new ways. In addition, those working in virtual team settings need to enrich their computer-facilitated communication processes through the use of multiple communication channels, media and feedback mechanisms. An understanding of how national as well as organizational culture influence team dynamics is crucial to developing a successful knowledge-sharing base and culture for global virtual teams. The following discussions provide some issues facing these two cultural influences.

National Cultural Effects on Global Virtual Teams Intra-team Dynamics Individuals from different cultures vary in terms of their group behaviours and communications styles (Gudykunst, 1997). Edward Hall’s contextual theory (1976) posits that in order to understand the communication and behavioural priorities of those from a particular culture, one must understand the context in which they occur. Certain cultures can be seen as ‘high context’ relying heavily upon the external environment for behavioural cues where people value subtle and indirect communication styles, while other cultures could be perceived as ‘low context’ where the communication put less emphasis on non-verbal or behavioural cues, hence communication tends to be more direct, with an avoidance of ambiguity.

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Global virtual team members from a high context culture (Hall, 1976) may be less direct in their communication styles and use more formality in initial contact as the relational environment is unclear. On the other hand, those from low-context cultures may be direct, less formal and perceived as discourteous from high-context group members. Incidents of intra-group conflict may lessen in frequency and degree when there is a clear understanding among group members of their own and each other’s cultural antecedents, particularly those that could exacerbate disagreement and misunderstanding. Hofstede’s four cultural dimensions framework (1980) (power distance, uncertainty avoidance, individualism versus collectivism, and career success versus quality of life (originally labeled masculinity versus femininity) inform both global virtual team dynamics and can provide useful insight into how a shared knowledge culture can be constructed. Global virtual team members whose cultures value collectivism may appreciate working within a team setting and emphasize relationship building but may experience feelings of isolation since team members are geographically separated and may work without frequent group input. For those from cultures that place a high value on individual effort, members from collectivist cultures may seem overly needy and demanding; conversely, individualist colleagues may be perceived as cold and not true team players by collectivist members. One synergistic solution is to create a collaborative interactive virtual space (such as a chat room) where team members are actively encouraged to engage in a regular and frequent reciprocal cross-cultural exchange of ideas. This may help to overcome feelings of isolation experienced by collectivist team members and provide a framework for constructive dialogue that fosters relationship building/maintenance in individualist taskoriented members. Another concern is that members from cultures that rank low on uncertainty avoidance may feel anxious working within a new, unfamiliar, technologically challenging virtual environment unless clear procedures and rules are established and implemented from the onset. Such rules, however, could result in a backlash from those who rank low on uncertainty avoidance, as they might be perceived as stifling creativity. Again, the use of regular frequent reciprocal sharing between colleagues may lessen anxiety by fostering consistent stable communication channels that are predictable and reliable.



Organizational Culture Effects on Global Virtual Teams Apart from national culture, organizational culture has a strong affect on management systems. Organizational culture is embedded in the national cultures in which an organization operates. Although both cultures play different roles, each influences the way things operate in multinational corporations. Thus, both factors need to be considered, especially in the context of global virtual teams using information and communication technologies. One must recognize the complexity, range and distinctiveness of corporate cultures. By definition, organizational or corporate culture includes the values and beliefs expressed in artefacts, symbols and practices as well as organizational language, traditions, myths, rituals, and stories. As Schein (1999) views it, ‘it is the way we do things around here. In essence, corporate culture is the learned, shared, and tacit assumptions such as values, beliefs, and assumptions’ (1999, p. 48). Hence, organizational impact varies greatly on information and communication technology usage by global teams – it may act as a barrier or restraint to information and communications technology usage or provide the necessary support in regards to technology, infrastructure and organizational culture, to actively foster it. During the team formation period, team members should become both aware and accepting of cultural difference and develop trusting intra-team relationships based on collaboratively negotiated communication protocols. While the establishment of trustbased intra-team relations can foster dialogue, debate, knowledge-sharing and group-mediated solutions, it can also lead to disagreements. How virtual teams manage internal conflict is a crucial factor to their success (Montoya-Weiss, Massey & Song, 2001). The possibility of the global virtual teams creating and sustaining a knowledge-sharing culture will be jeopardized if initial conflict situations are not constructively resolved to membership satisfaction. Organizational management, team leader(s), and members should work on developing consensus-building processes that are responsive to diverse conflict situations and negotiable to change.

Information and Communication Technology as a Facilitating Tool for Knowledge Sharing Technology is simply a tool that needs human operations. No matter how sophisticated the


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technology can be, the implementation of technology has the potential to fail if insufficient considerations are given from the user perspectives. In information and communication technology-mediated environments where geographically dispersed and culturally diverse members electronically converse in English, the language used by members may further obscure intended meaning and hamper knowledge management when members assume that terms and slang in one English-language culture have identical meanings in another English language environment. It is interesting to note, however, that one recent study found that English language usage may modulate individualist/collectivist tendencies in certain group situations and indicated that language played a significant role in individuals’ cultural orientations (Ayyash-Abdo, 2001). Another area of potential conflict in information technology-mediated communication is the language itself. For global virtual teams whose team language is English, studies have observed and confirmed that native and non-native English speakers exhibit culturebased differences in discourse preferences and formats (Ulijn et al., 2000). Individual team members need to be cognizant of English language variation in intra-team electronic communication, particularly in regards to tone, style, formality, salutations and closings, and aware that substantial sociolinguistic and grammatical variations exist within the global English-speaking community and will impact intra-team communications. Yet English language variance within the English-language global business community has generally been downplayed and its implications for virtual teams, unexamined (Bloch & Starks, 1999). English language competency as an unvarying uniform entity does not and cannot exist, as the English language, now a global business language, has become more diverse and less standardized. Team members’ cultural differences in work emphasis, deadline adherence, project management style all need to be made transparent to the team and a synergistic team approach to each concern be mediated and agreed upon early in the team formation process. If such cultural differences are not clearly understood, information and communication technology usage could promote an escalation of conflict rather than promote a shared-knowledge culture and learning environment. The degree of technological sophistication among global virtual team members may not be an accurate predictor of its effectiveness. Duarte and Snyder (1999) emphasized that

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technology is only one of the critical factors for virtual teams’ success. Moreover, virtual teams and their leaders seldom claim technology as a primary reason for success or failure (Nunamaker et al., 1997). As Potter and Balthazard observed, ‘[t]he effects of communication technology and its usage may be quite secondary to those that result from how the virtual group or team interacts’ (Potter & Balthazard, 2002, p. 2). For example, Morris, Marshall & Rainier (2002) found that while user satisfaction and trust were positively related to a virtual team’s job satisfaction, system use did not play a significant role. While information technology-facilitated communication processes rely on technologically advanced systems to succeed, the ability to create a knowledge-sharing culture within a global virtual team rests on the existence (and maintenance) of intra-team respect, mutual trust, reciprocity and positive individual and group relationships. Emphasis on the human and social components of global virtual teams does not simultaneously minimize the central role of technology in the process. The use of electronic communication technology has the capacity to reduce or overcome certain cultural challenges within global teams as information and communication technologies facilitate intra-team interaction by introducing a shared framework and virtual work setting. In that light, the role of information and communication technologies is regarded as a functional tool that facilitates the cross-cultural collaboration and communication. Information and communication technologies can provide a common medium for work and shared meaning.

Human Challenges of Virtual Team Membership Understanding human challenges of virtual team membership in order to create a knowledge-sharing culture and capabilities provide numerous key implications for multinational corporations. What needs to be clearly emphasized and articulated here is the fact that teamwork is a culturally and linguistically bounded concept. Teamwork conceptualizations vary across cultures and organizations and how teams are perceived will differ based on the organizational and national cultural attributes of its members (Gibson & ZellmerBruhn, 2001). In global virtual teams, all members will not share the same perceptions. Members from different cultures will, in all probability, describe a team’s objectives, membership criteria and activities in very different terms. Hence, in global virtual teams, one

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HUMAN CHALLENGES ∑ ∑ ∑ ∑ ∑

Creating effective team leadership Managing conflict and global virtual teams dynamics Developing trust and relationships Understanding cross-cultural differences Developing intercultural communication competence

Figure 2. Human Challenges in Implementing Global Virtual Teams must assume that different members will have different understandings of the concept of teamwork (Gibson & Zellmer-Bruhn, 2001). The following sub-sections summarized in Figure 2 highlight the key challenges facing multinational organizations that increasingly employ global virtual teams.

Creating Effective Team Leadership As mentioned above, a synergistic team approach to cultural difference needs to be mediated and agreed upon early in the team formation process (Adler, 2002). However, a synergistic team-management approach does not create itself but must be actively developed and maintained by team leadership in agreement with team members, and such leadership must be designated and also addressed at the formation stage. Whether a global virtual team has one or more team leaders – such role differentiation must exist. Recent research on teamwork across cultures has found cross-cultural variance in defining and understanding team membership and team leader roles (Pillai & Meindl, 1998), team goal-setting (Earley & Erez, 1987), and social loafing and conflict (Earley, 1994; Montoya-Weiss, Massey & Song, 2001). Given that there will be an initial divergence in teamwork conceptualization among group members, the manager should provide active leadership in explicitly creating a shared conceptualization of team meaning, focus and function rather than assuming an implicit mutual understanding of the term. To begin this discussion, we must first ask, ‘what is leadership?’. Cultures vary in their understandings of and their expectations for authority roles. In designating a leader or leaders, it is important for both the organization and the team to understand that the meaning of ‘leadership’ depends on national



and organizational cultural orientations and will differ for individual team members based on their cultural background. Ascertaining effective modes of leadership for the global team involves having a firm understanding of the cultural preconceptions of effective leadership for each member since leader prototypes are culturally-determined and followers tend to use these implicit prototypes when evaluating leadership behaviour. In determining an effective leadership style or styles for a culturally diverse team, one might consider the various ways that leaders can influence followers: a directive mode of influence (ranging from directive to participatory), a transactional mode of influence (rewards) or transformational influence. Cross-cultural research on leadership emphasizes that different cultural groups generally have different leadership constructs and expectations (House et al., 2002). For instance, in a collectivist culture like Malaysia where social harmony and hierarchical differences are valued, effective leadership is expected to be autocratic yet compassionate rather than participatory (Kennedy, 2002). Similarly, Turkish culture has been described as being high on the collectivism and power distance value dimensions and Turkish organizations are distinguished by centralized decisionmaking, strong directive leadership and limited delegation (Pasa, 2000; Ronen, 1986). Team members from individualist cultures that place a higher priority on individual initiative and achievement tend to be more motivated by transactional leadership styles, motivated through contingent reward-based exchanges while team members from collectivist cultures tend to be more responsive to directive leadership and have a stronger attachment to their organization, subordinate individual goals to group goals and be concerned with maintaining group unity. However, while different culture groups tend to have preferred leadership style expectations, certain attributes of transformation leadership may be universally endorsed (Den Hartog et al., 1999), in that collectivists and individualists may both respond favourably to transformational leaders who motivate followers’ higher performance levels by inspiring subordinates, are considerate of individual and group developmental needs and lead the organization towards a higher collective purpose or vision. Team leaders play a crucial role in effective global virtual team management and in creating a knowledge-sharing environment. The leader(s) co-ordinate activities/tasks, motivate team members, monitor and/or facilitate collaboration and address/resolve


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conflict. Team leadership must involve effective cross-cultural communication and understanding, ensure that there is a collective sense of belonging, and that team values, task assignment and plans are shared. Team leaders need to build intra-team participation, ensure that all ideas are heard, and monitor participation rates.

Managing Conflict and Global Virtual Team Dynamics In information and communication technologies-mediated environments, addressing conflict situations and even detecting the existence of conflict, is not always straightforward. For example, in one hand, avoidance behaviour may indicate conflict in certain cultures. On the other hand, confrontational behaviour can lead to conflict in other cultures. Global virtual teams need to anticipate potential areas of conflict in the formation stage and develop norms/rules around conflict resolution. While all cultures have strategies to prevent or minimize conflict situations, the ways that societies perceive and address conflict reflect profound cultural difference. Team members from low-context cultures are more apt to separate issues from people, while those members from high-context cultures are less likely to separate people from issues and take personal affront to disagreement (perceived as conflict). The consequence for the global virtual team is that members from low-context cultures are more apt to perceive disagreements as an integral part of knowledge sharing – not only acceptable but a positive attribute that encourages creative discourse while those high-context members could perceive open disagreement and confrontation as highly insulting, and causing both parties to lose face. Conflict or dispute resolution varies than between cultures since conflict is at a very basic level viewed very differently based on the cultural context. Cultural difference may also impact the resolution process with team members from low-context cultures responding in a direct, confrontational way and expecting quick resolution. On the contrary, high-context members may respond to conflict in an evasive and non-confrontational manner, leading to an indirect, inactive approach to resolution. Global virtual teams need to be aware of such differences and create protocols that effectively respond conflict or pre-conflict situations. Unacknowledged conflict, particularly in information and communication technology-mediated work environments where non-response is not necessarily seen as an indication of conflict has the capacity to

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diminish intra-team trust and negatively impact team cohesion.

Developing Trust and Relationships For global virtual teams, being both heterogeneous cultural entities and geographically dispersed virtual entities, the risk of potential misunderstandings and mistrust is heightened. Certain researchers contend that trust is facilitated, even for virtual teams, by initial face-to-face interactions (Maznevski & Chudoba, 2000). While face-to-face interactions have the capacity to facilitate trust when people relate well to each other and ‘click’, it may not further trust or team grounding when individual members do not have a shared or common understanding of each other and/or of the nature of the team itself. As Roberts observed, ‘[t]he development of trust, whether on a local or international basis, requires more than face-to-face contact or its technological and spatially indifferent substitute videoconferencing ellipses [T]rust depends on the sharing of a set of socially embedded values, cultural institutions and expectations’ (Roberts, 2000, p. 6). In order for global virtual teams to be effective, intra-group trust must exist (Jarvenpaa & Leidner, 1998). However, initial relationship building between global or cross-cultural members face more challenges, as does the establishment of intra-team trust. Jarvenpaa, Knoll, and Leidner (1998) posit that virtual teams have no time to gradually develop trust and therefore require a high degree of ‘swift trust’ to be demonstrated by enthusiastic and proactive team members’ behaviours. Lipnack and Stamps (1997) contend that ‘[I]n the networks and virtual teams of the information age, trust is a “need to have” quality in productive relationships’ (Lipnack & Stamps, 1997, p. 225). Trust between group members as well as trust between the team and the organization is equally important. The ability to collaborate depends heavily upon trust as open reciprocity and sharing of information and knowledge will not freely occur without it (Scott, 2000). Global virtual team members are often brought together to work on a common task with specialized skills and competencies. Members essentially work virtually with little or no face-to-face contact and focus on a finite lifespan or a temporal basis. This implies a limited history of working together as well as less potential of working together in the future. As such, swift trust needs to be imported, rather than developed. According to Meyerson, Weick and Kramer (1996), swift trust is a form of trust that is created in tem-

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porary system, a system that demonstrates behaviour that presupposes trust. Hence, ‘sources of trust like familiarity, shared experience, reciprocal disclosure, threats and deterrents, fulfilled promises, and demonstrations of non-exploitation of vulnerability – are not obvious is such system’ (Meyerson, Weick & Kramer, 1996, p. 167). Under extreme job deadline constraints, trust is formed without any relationship building. Thus, how do cross-cultural members form swift trust? Jarvenpaa and Leidner (1998) suggested that the virtual members would then import the expectations of trust from other settings that they are familiar with. In such a case, stereotypical impressions of others are formed based on the initial use of category driven information processing. It is important to note, however, that this technique may be problematic for a culturallydiverse virtual team, if individual team members’ cultural stereotypes are flawed, biased or incomplete. Once communication is developed between members, trust could be maintained by actions that are highly dynamic, proactive, and enthusiastic. Again, such active communication must be premised on accurate cultural knowledge to be effective. Therefore, swift trust is made possible because when teams work in a temporal and virtual environment, they bring their competence and expertise to meet the goals set. According to Johnson and Cullen (2002), the formation of cross-cultural trust includes a reciprocal element in it and falls under two behavioural categories. First, credibility where one party (focal) believes that the other party (referent) has capabilities, competence, expertise and resources to make a successful exchange that meets outcome expectations. Focal also believes that referent will act in a reliable and predictable manner to meet the expectations. All these behaviours certainly have a cultural root to it – a work expectation of a person in culture A is different from expectations of a person in culture B. This is where the challenge of importing the swift trust exists in global virtual teams with crosscultural differences. The second category is benevolence – beliefs about the emotional aspects of the referent’s behaviour like positive intention to exchange (McAllister, 1995). Such beliefs include a referent’s good will and that the referent will not jeopardize the exchange outcome, and will in fact support enhanced outcomes in the exchange. This will also result in some challenges because swift trust is less focused on interpersonal relationships, but places greater stress on initial broad social structures, rather than action. Therefore for swift trust to be



imported successfully, team members need to maintain the high level of actions, regardless of their cultural preferences or differences. As suggested by Kirkman et al. ‘levels of trust based on performance compensate for lack of social interaction’ (2002, p. 70).

Understanding Cross-Cultural Differences Information and communication technologies-mediated virtual work environments can foster interdependence between less and more powerful team members and promote equality of participation (Strauss, 1997), reduce organizational hierarchy (Kock, 2000), and generally enhance member participation in virtual meetings compared to face-to-face meetings (Bikson, 1996; Sheffield & Gallupe, 1994; Slater & Anderson, 1994; Williams & Wilson, 1997). Global virtual teams that exclusively use information and communication technologies exclude social or physical presence and rely on a depersonalized form of communication between team members (Ketrow, 1999). Intuitively, one may argue that this hinders the creation of a knowledgesharing culture, yet over time, the exclusion of social and physical presence can foster positive intra-team coalitions and strengthen working relationships that would be less likely to thrive in a more traditional team framework. The absence of non-verbal cues may pose certain initial difficulties for some whose culture relies on body language, gestures, facial expressions and proximity (Farmer & Hyatt, 1994). For example, in high-context cultures, people in general value subtle and indirect speech when communicating. Visual cues such as a nod, smile, posture, voice and eye contact provide important indications and meanings to establish certain understanding of what is communicated by another person. Without these cues, it may be initially difficult for people to carry out tasks as complex as making decisions to as basic as communicating. ‘Low social presence generally is unsatisfying and leaves people in some situations, such as those involving conflict, unable to resolve differences effectively or meet their goals’ (Ketrow, 1999, p. 272). From another perspective, the challenge for high-context people is the difficulty in establishing trust and relationships with the diverse team members because they do not have sufficient verbal cues. As Rosa and Mazur (1979) concluded; ‘when a group is composed of strangers, they very quickly make use of whatever limited status cues are immediately at hand, even such subtle signs as eye contact and speaking order’. Thus the impact of


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information and communication technologies can be exacerbated by the lack of both elements. For global team members from cultures that value directness and informality, information and communication technology usage can promote dialogue since it already fits within their own cultural framework. The absence of physical cues may actually promote understanding when intra-team trust has developed, as they will not be faced with potentially confusing dissonant cultural signals from culturally-diverse team members.

Developing Intercultural Communication Competence Before a global virtual team ever exists, steps have been taken by the organization to create it, team members have been tentatively chosen (usually based on their professional and technical competencies), and provisional team task/project assignments made. What may or may not have been considered at any early point in the process is whether individual team members have had any prior experience working across borders (virtually or otherwise), whether members have any crosscultural competency, or whether selected members are even willing to gain such competency. Such oversights may lead to serious problems later on after the team has organized and begins to work on its assigned project. Who is selected for the team may be as important as what technical expertise they bring to the group. This issue gains greater importance and consequence the greater the cultural difference between members. In selecting team members, consideration should include determining whether an individual has the characteristics to work cross-culturally and/or indicates a willingness to gain such skills, since one needs high personal motivation to communicate effectively in a cross-cultural setting, find commonalities and establish a common reality – despite cultural differences. As a result, global virtual team group members need to possess both appropriate information technology and intercultural communication competence in order to be effective (Zakaria, 2000). Hence, it is crucial for global virtual teams to inculcate global communication skills that enable them to collaborate, address conflict, sustain intra-team relations and create an effective knowledgesharing culture. Although communication is not the only factor that influences collaboration, it is seen as a prerequisite for effective team collaboration (Schrage, 1990). The preparation of global team members, individually and collectively, to effectively communicate

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cross-culturally is a prerequisite to successful collaboration and is as important as the team’s technological competency and skill. As Gudykunst and Ting Toomey (1988) alleged, when one has an ability to interact across different cultural contexts and become aware of one’s own and other cultural conditioning, one is known as having the intercultural communication competence. Additionally, to gain this competency a global team, individually and collectively, must develop a global mindset. Having a global mindset means global teams are openminded, embed appropriate behaviours, and are sensitive to the divergences they encounter during the communication and collaboration processes; it is the foundation for creating and sustaining a knowledge-sharing culture. Thus, cross-cultural training for global virtual team members, individually and as a group, is critical. This training helps people recognize, adapt and adjust to culturally diverse work environments and develop a global mindset. In regards to global teams, cross-cultural training also addresses and educates members about the cultural differences that they face through electronic communication and how to overcome barriers to knowledge sharing. Training should make clear to the team that cross-cultural communication (electronic or otherwise) does not require a total transformation of behaviour to suit cultural differences but does demand an ability to work within a culturally diverse framework. Although using information and communication technologies can reduce certain cross-cultural barriers, team members need cross-cultural training to gain the desired cognitive, affective and behavioural competencies (Chen & Starosta, 2000). These competencies respectively mean that people need to understand and recognize cultural differences; feel comfortable with various cultures; and thus act accordingly to suit cultural differences. Furthermore, Wiseman and Koester (1993) conceptualized this competence as culturespecific understanding of other, culturegeneral understanding, and positive regard of other.

Lessons Learned In essence, the questions of how managers can help with the establishment and maintenance of virtual teams and how they can facilitate the virtual team process need to be adequately addressed. As noted, building a knowledgesharing community remains more challenging for global virtual teams than face-to-face

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teams due in part to the nature of intra-team relationships, which are often viewed by members as more task-focused rather than relational, particularly outside the work environment. Informal environments where there is a spontaneous sharing of non-work information remains less common and more stilted. As Thomas, Kellogg and Erickson (2001) observe, expressive communication is an important support to instrumental communication and also enhances human capital. Unlike face-to-face work environments where non-work information is shared and informal relationship-building occurs naturally, spontaneous expressive communication is less common in computer-mediated environments. Successful global virtual teams develop their own dynamics and shared culture and more actively focus on relationship building and trust establishment (Maznevski & Chudoba, 2000). Face-to-face meetings between members at the global virtual team formation process may foster stronger relationships between group members that are geographically dispersed. Understanding how information and communication technology usage impacts virtual teams’ social context and performance remains critical. One recent study that compared conventional team and virtual team performance found that on all outcome measures, virtual teams were not as successful as face-to-face teams (Potter & Balthazard, 2002). Similarly, Gallupe et al. (1994) showed that without anonymity, parallel input and brainstorming memory input, electronic groups performed more poorly than non-electronic groups. Despite the ease of communication with information and communication technologies, studies have shown that teams that wholly rely on virtual communication, replacing all face-to-face communication, report less satisfaction with group interaction (Warekentin, Sayeed, & Hightower, 1997). Research on both virtual teams and global teams indicates that team members face very different challenges from their counterparts in traditional teams. They are more likely to experience information overload, social isolation and uneven power distributions – domination of certain group members over others – within the team (Rogers & Albritton, 1995). Seemingly, this last observation challenges the notion that information and communication technology usage actually diminishes reliance upon organizational hierarchy and levels power-distance relations between members. However, it may indicate that the authority of traditional roles and power relations diminish but that power dynamics between



members of virtual teams continue to exist and influence group structure. How intragroup power dynamics develop and how they impact team cohesion, knowledge-sharing capabilities/motivations and work effectiveness may depend on whether the team member or members exerting control are recognized by the team as in a legitimate leadership position within the team. At times, the emergence of leaders is ambiguous in the electronic communication setting when formal leadership roles have not been specifically designated. In certain global virtual team situations, leaders can be team members or more frequently, tend to be managers outside of the global team. As noted earlier, leaders need to be open to change, expressively supportive of the global team, capable of fostering a shared learning environment and most of all encourage team members to actively engage in a knowledgesharing culture. Leaders are facilitators, as well as intermediaries in the event people face difficulties in sending and receiving the intended messages across the borders. Since information and communication technologies eliminate the verbal and social cues that are prerequisite to certain cultures, leaders must help team members build and maintain trust, ease the transition process, select and use appropriate electronic communication and collaboration technologies, and coach and manage performance without the traditional forms of feedback (Duarte & Snyder, 1999). As a summary for practical suggestions, Table 1 highlights the need for numerous knowledge, skills and abilities in order for global virtual teams to work effectively in a virtual environment as emphasized by Blackburn, Furst and Rosen (2003).

Implications and Conclusions Information and communication technologies are not just simple tools, they need to be integrated and aligned with team design, behaviour and the processes of collaboration and communication. Notwithstanding, it is more often than not the human component in the virtual environment and the interactive relational bonds that facilitate or hinder the development of a shared knowledge base and organizational learning. Similarly, the quality and depth of intra-team member relationships also impacts the creation and maintenance of a shared knowledge base. Group collaboration is a complex matter, with or without electronic technology and the diverse nature of global teams accentuates the issue of cultural difference. Global virtual


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teams must be committed to developing new patterns of knowledge sharing, communication and social exchange in a computermediated team environment. Creating effective global teams is a daunting task for any organization, particularly when such teams inherently tend to have more time-consuming decision-making processes and when miscommunication and misunderstandings occur, stress and conflicts among team members are heightened and less easily dispelled. New patterns of communication and social exchange can, however, emerge in a computermediated team environment and can influence the global virtual team learning process in positive ways. As we have previous noted, the potential advantages of global teams are that they can create culturally synergistic solutions, enhance creativity and cohesiveness among team members, promote a greater acceptance of new ideas and, hence, provide a competitive advantage for the multinational corporations. As we look to the future of global virtual team-usage in international organizational structures, we predict a greater reliance upon and utilization of global virtual teams. While global virtual teams are often formed now to meet specific short-term project-based needs and are primarily seen as temporary work units that can be disbanded if ineffective, such perceptions of global virtual work teams have begun to change as virtual team-usage has expanded. In the near future, global virtual teams may become ongoing structures rather than short-term project-specific entities and as such, will become an integral and common component of the global work environment. When global virtual teams begin to be viewed as more permanent organizational units, organizational commitment to their success should deepen, increasing both resource allocation and positively impacting their information communication technology-mediated shared knowledge environment.

Future Research Directions While research is clearly accelerating on global virtual teams, more research is needed as organizations are increasingly using this new organizational approach to accomplish important tasks. Based on our review of the literature and our work reported in this paper, we suggest several areas that can benefit from additional research. First, more research is needed on how, if at all, team members from different cultures benefit from ‘feelings of inclusion’ and team membership. Do team members from different cultures experience

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Table 1. Building a Winning Virtual Team: Types of Knowledge, Skills and Abilities (KSAs) At individual level

Description

At team level

Description

1. Self management

• Become one’s own coach and leader. • Set personal agendas. • Motivated to take appropriate action. • Behave proactively and manage themselves.

1. Establish team’s goals

• Clearly establish goals and define team’s roles. • Preliminary face-to-face meeting & series of teambuilding exercises. • Reach consensus around goals and roles.

2. Communication

• Select appropriate transmission medium. • Learn to interpret the signals sent by team members. • Clarify misunderstanding by overcoming language and cultural barriers.

2. Establish team’s norms

• Develop a code of conduct and a set of norms. • Use specific modes of communication and acceptable response times. • Document archiving in shared space. • Establish task priorities.

3. Cultural sensitivity & awareness

• Cognitively understand the myriad differences. • Perceptively aware of the team members’ cultural values, and patterns. • Ability to identify and recognize potential cultural conflicts.

3. Team problem solving & conflict management

• Ability to solve complex problems by bargaining, and negotiating. • Develop creative mechanism by combining computer technology and videoconferencing. • Develop early warning systems to alert potential conflict.

4. Trust

• Develop trust based on perceived similarities, responsiveness and dependability. • Understand worthiness is assessed based on behaviours and not merely good intentions.

4. Team learning

• Learn from each other. • Build on each other’s work. • Create a safe, secure team environment. • Encourage easy collaboration. • Create a ‘community of practice’.

5. Comfort with technology

• Competent and confident to use information and communication technologies. • Openness to learn new technologies. • Changed mindset for use of technology to collaborate in new ways.

5. Balancing relationship & task team

• Take opportunities to build social ties. • Share learning experiences. • Get together and reconnect in space as much as possible.

Source: Blackburn, Furst and Rosen, 2003.

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these constructs differently? If so, how important are inclusion and membership in facilitating effective team performance? Can information and communication technologies facilitate the process of achieving a sense of belonging? Second, while we have examined the issue of trust in this paper, we posit that trust and its consequences remains a fruitful area for further inquiry. For example, what role, if any, can information and communication technologies play in facilitating the development of trust? How important is trust within a global virtual team? What hinders the development of trusting relationships within global virtual teams? What alternative methods can be used to accelerate the development of trust among virtual team members? What are the connections, if any, between trust levels within global virtual teams and team performance? How can trusting relationships be developed with key stakeholders of global virtual teams? Third, we recommend that future research be undertaken on global virtual team leadership. One area where new research initiatives might be fruitful is focusing on how global virtual team leaders (and team members) exercise power and influence within a virtual teamwork environment. For example, are some powers and influence sources more helpful than others in leading a global virtual team? How do team members from different cultures respond to the exercise of interpersonal power and influence? Our fourth recommended area of inquiry entails research on how conflicts and disagreements are handled in global virtual teams. We posit that this research domain could have many useful benefits – particularly in terms of guidelines on how to manage highly complex global projects administered in a virtual mode. In a similar vein, we know far too little about the process of negotiations within and between global virtual teams and their major stakeholders/sponsors. Finally, we suggest that additional research is needed on how to assess the performance of global virtual teams. We recommend that global virtual team task issues as well as team satisfaction measures be comprehensively identified and examined. Global virtual teams present an exciting area for future research. There are many unanswered questions regarding the management of global virtual team. We believe that research that focuses on the problems and challenges encountered in these special teams will help these teams achieve higher performance levels and will result in more satisfying experiences for those who participate in them.


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References Adler, N. (2002) International Dimensions of Organizational Behavior, 4th edn. South-Western College Publishing, Cincinnatti. Ayyash-Abdo (2001) Individualism and Collectivism: The Case of Lebanon. Social Behavior and Personality, 29(5), 503–18. Bikson, T.K. (1996) Groupware at the World Bank. In Ciborra, C.U. (ed.), Groupware and Teamwork: Invisible Aid or Technical Hindrance? John Wiley, Chichester, pp. 145–83. Biggs, M. (2000) Enterprise toolbox: Assessing risks today will leave corporate leaders well prepared for the future of work. InfoWorld, 22(39), 100–1. Blackburn, R., Furst, S. and Rosen, B. (2003) Building a Winning Virtual Team. In Cohun, C.B. and Cohen, S.G. (eds.), Virtual Teams that Work: Creating Conditions for Virtual Teams effectiveness, pp. 95–120. Bloch, B. and Starks, D. (1999) The Many Faces of English: Intra-language Variation and its Implications for International Business. Corporate Communications, 4, 80–8. Chen, G.M. and Starosta, W.J. (2000) Intercultural Sensitivity. In Samovar, L.A. and Porter, R.E. (eds.), Intercultural Communication: A Reader. Wadsworth, Belmont, CA. Cohen, S.G. and Gibson, C.B. (Eds.) (2003) Virtual Teams that Work: Creating Conditions for Virtual Team Effectiveness. Jossey Bass, San Francisco, CA. Den Hartog, D.N., House, R.J., Hanges, P.J., RuizQuintanilla, S.A., Dorfman, P.W., Field, R.H.G. et al (all co-authors of the GLOBE research project from 61 countries) (1999) Culture specific and cross-culturally generalizable implicit leadership theories: Are attributes of charismatic/transformational leadership universally endorsed? Leadership Quarterly, 10(2), 219–56. DeSanctis, G. and Poole, M.S. (1997) Capturing the Complexity in Advanced Technology Use: Adaptive Structuration Theory. Organization Science, 5, 121–47. Dube, L. and Pare, G. (2001) Global virtual teams. CACM, 44, 71–3. Duarte, D.L. and Snyder, N.T. (1999) Mastering Virtual Teams: Strategies, Tools, and Techniques that Succeed. Jossey-Bass, San Francisco. Earley, P.C. (1994) Self or Group? Cultural Effects of Training on Self-efficiency and Performance. Administrative Science Quarterly, 39, 89–117. Earley, P.C. and Erez, M. (1987) Comparative Analysis of Goal-setting Strategies Across Cultures. Journal of Applied Psychology, 72, 658–65. Farmer, S.M. and Hyatt, C.W. (1994) Effects of Task Language Demands and Task Complexity on Computer-mediated Work Groups. Small Group Research, 25, 331–66. Gallupe, R.B., Cooper, W.H., Grise, M. and Bastianutti, L. (1994) Blocking Electronic Brainstorms. Journal of Applied Psychology, 79(1), 77–86. Gibson, C.B. and Zellmer-Bruhm, M.E. (2001) Metaphors and Meaning: An Intercultural Analysis of the Concept of Teamwork. Administrative Science Quarterly, 46, 274–303.

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Gluesing, J.C., Alcordo, T.C., Baba, M.L., Britt, D., Wagner, K.H., McKether, W., Monplaisir, L., Ratner, H.H. and Riopelle, K. (2003) The Development of Global Virtual Teams. In Gibson, C.B. and Cohen, S.G. (eds.), Virtual Teams that Work: Creating Conditions for Virtual Teams effectiveness, Jossey-Bass, San Francisco, pp. 95–120. Gudykunst, W.B. (1997) Cultural variability in communication. Communication Research, 24(4), 327–48. Gudykunst, W.B. and Ting-Toomey, S. (1988) Culture and Interpersonal Communication. Sage, Newbury Park, CA. Hall, E.T. (1976) Beyond Culture. Anchor Books/Doubleday, Garden City, NJ. Hinds, P.J. and Weisband, S.P. (2003) Knowledge Sharing and Shared Understanding in Virtual Teams. In Gibson, C.B. and Cohen, S.G. (eds.), Virtual Teams that Work: Creating Conditions for Virtual Teams Effectiveness, Jossey-Bass, San Francisco, pp. 21–36. Hofstede, G. (1980) Culture’s consequences. Sage, Beverly Hills, CA. House, R., Javidan, M., Hanges, P. and Dorfman, P. (2002) Understanding cultures and implicit leadership theories across the globe: an introduction to project GLOBE, Journal of World Business, 39, 3–10. Jackson, N.F., Aiken, M.W., Vanjani, M.B. and Hasan, B.S. (1995) Support Group Decisions via Computer Systems. Quality Progress, 28, 75–8. Jarvenpaa, S.L., Knoll, K. and Leidner, D. (1998) Is Anybody Out There? Antecedents of Trust in Global Teams. Journal of Management Information Systems, 14(4), 29–64. Jarvenpaa, S.L. and Leidner, D. (1998) Communication and trust in global virtual teams, JCMC, 3(4), http://jcmc.huji.ac.il/vol13/issue4/jarvenpaa. html, accessed 23 July 2003. Johnson, J.L. and Cullen, J.B. (2002) Trust in CrossCultural Relationships. In Cannon, M.J. and Newman, K.L. (eds.), The Blackwell Handbook of Cross-Cultural Management. Blackwell Publishing, Malden, MA. Kennedy, J.C. (2002) Leadership in Malaysia: traditional values, international outlook. Academy of Management Executive, 16(3), 15–26. Ketrow, S.M. (1999) Nonverbal Aspects of Group Communication. In Frey, L.R., Gouran, D.S. and Poole, M.S. (eds.), The Handbook of Group Communication Theory and Research. Sage, Thousand Oaks, CA. Kock, N. (2000) Benefits for Virtual Organizations from Distributed Groups. Association for Computing Machinery, Communications of the ACM, 43, 107–12. Kirkman, B.L., Rosen, B., Gibson, C.B., Tesluk, P.E. and McPherson, S.O. (2002) Five challenges to virtual team success: Lessons from Sabre, Inc. Academy of Management Executive, 16(3), 67–79. Lipnack, J. and Stamps (1997) J. Virtual Teams – Reaching Across Space, Time and Organizations with Technology. John Wiley and Sons, New York. Maznevski, M.L. and Chudoba, K.M. (2000) Bridging Space Over Time: Global Virtual-team Dynamics and Effectiveness. Organizational Science, 11, 473–492.

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McAllister, D.J. (1995) Affect and cognition based trust as foundations for interpersonal cooperation in organizations. Academy of Management Journal, 38, 24–59. Meyerson, D., Weick, K.E. and Kramer, R.M. (1996) Swift trust and temporary groups. In Kramer, R.M. and Tyler, T.R. (eds.), Trust in Organizations: Frontiers of Theory and Research, Sage Publications, London, pp. 166–95. Montoya-Weiss, M., Massey, A.P. and Song, M. (2001) Getting it Together: Temporal Coordination and Conflict Management in Global Virtual Teams. Academy of Management Journal, 44, 1251–62. Morris, S., Marshall, T. and Rainer, R. Jr. (2002) Impact of user satisfaction and trust on virtual team members. Information Resources Management Journal, 15(2), 22–31. Nunamaker Jr., J.F., O.Briggs, B.O., Romano Jr., N. and Mittleman, D. (1997) The Virtual Office Workspace: Group Systems Web and Case Studies. In Coleman, D. (ed.), Groupware: Collaboration Strategies for Corporate LANs and Intranets. Prentice Hall, Upper Saddle River, NJ. Pasa, S.F. (2000) Leadership influence in a high power distance and collectivist culture Leadership and Organization Development Journal, 8(21), 414–26. Pillai, R. and Meindl, J.R. (1998) Context and charisma: A ‘Meso’ level examination of the relationship of organic structure, collectivism, and crisis to charismatic leadership. Journal of Management, 24, 643–71. Potter, R.E. and Balthazard, P.A. (2002) Understanding Human Interactions and Performance in the Virtual Team. Journal of Information Technology Theory and Application, 4, 1–23. Qureshi, S. and Zigurs, I. (2001) Paradoxes and prerogatives in global virtual collaboration. CACM, 44, 85–8. Roberts, J. (2000) From Know-how to Show-how? Questioning the Role of Information and Communication Technologies in Knowledge Transfer. Technology Analysis and Strategic Management, 4, 429–43. Rogers, E. and Albritton, M.M. (1995) Interactive Communication Technologies in Business Organizations, Journal of Business Communication, 32(2), 177. Ronen, S. (1986) Comparative and Multinational Management. John Wiley and Sons, New York. Rosa, E. and Mazur, A. (1979) Incipient Status in Small Groups. Social Forces, 58, 18–37. Schein, E.H. (1999) The Corporate Culture Survival Guide: Sense and Nonsense about Cultural Change. Jossey-Bass, San Francisco. Scott, J.E. (2000) Facilitating Interorganizational Learning with Information Technology. Journal of Management Information Systems, 2, 81–113. Schrage, M. (1990) Shared Minds. Random House, New York, NY. Sheffield, J. and Gallupe, R.B. (1994) Using electronic meeting technology to support economy policy development in New Zealand: short term results. Journal of Management Information Systems, 10, 97–116.



Slater, J.S. and Anderson, E. (1996) Communication Convergence in Electronically Supported Discussions: Adaptation of Kincaid’s Convergence Model. Telematics and Informatics, 11, 111–25. Strauss, S.G. (1997) Technology, Group Process and Group Outcomes: Testing the Connection in Computer-mediated and Face-to-face Groups. Human Computer Interaction, 12, 227–66. Thomas, J.C., Kellogg, W.A. and Erickson, T. (2001) The Knowledge Management Problem: Human and Social Factors in Knowledge Management. IBM Systems Journal, 40(4), 863–84. Ulijn, J., O’Hair, D., Weggeman, M., Ledlow, G. and Hall, H.T. (2000) Innovation, Corporate Strategy, and Cultural Context: What is the Mission for International Business Communication? The Journal of Business Communication, 37,293–316. Warekentin, M.E., Sayeed, L. and Hightower, R. (1997) Virtual Teams Versus Face-to-face Teams: An Exploratory Study of a Web-based Conference System. Decision Sciences, 28(4), 975–96. Wheatley, K.K. and Wilemon, D. (1999) Global Innovation Teams: A Requirement for the New Millennium. Proceedings of the Portland International Conference on the Management of Engineering and Technology Management (PICMET). Williams, S.R. and Wilson, R.L. (1997) Group Support Systems, Power, and Influence in an Organization: A Field Study. Decision Sciences, 28(4), 911–37. Wiseman, R.L. and Koester, J. (1993) Intercultural Communication Competence. Sage, Newbury, CA.


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Zakaria, N. (2000) The Effects of Cross-cultural Training in the Process of Acculturation of the Global Workforce. International Journal of Manpower, 21(6), 492–510.

Norhayati Zakaria (Email: nzakar01@syr. edu) is a lecturer at Faculty of International Studies at University Utara Malaysia and currently pursuing her PhD in Information Transfer at Syracuse University, USA. Her research interests are in areas such as global virtual teams, international management, intercultural and cross-cultural communication and global IT management. Andrea Amelinckx (Faculty of Management, University of Lethbridge, 4401 University Drive, Lethbridge, Alberta, Canada, T1K 3M4. Email: andrea. [email protected]) is the Director of the International Management Program, Faculty of Management, University of Lethbridge. Her research and teaching interests include cross-cultural management practices and diversity in employment relations. David Wilemon (Email: dwilemon@som. syr.edu) is the Snyder Professor of Innovation Management at the School of Management at Syracuse University, USA. His field of expertise is new product development, innovation management and highperforming project teams.

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Networking Beyond Organizational Boundaries: The Case of Project Organizations Udo Staber Project organizations operate in environments where innovation depends significantly on the ability to integrate different but interrelated knowledge bases. These knowledge bases include individuals who are located outside organizational boundaries and have no formal relationship with the organization, but are connected socially to project workers. Organizational researchers have generally recognized the importance of external social relations for knowledge search. However there is some debate on the question of whether social networks are more useful for innovation if they provide social cohesion through close interaction or access to diverse and novel sources of knowledge through more distant relationships. This study explores the configuration of project workers’ external social networks and their effects on innovative behaviour, using data on the network ties of workers in 17 project organizations in the new-media industry. The findings are more consistent with the social embeddedness view of close social relations providing an important source of continuity in markets where intermittent projects are common. Project workers embedded in cohesive work-related social structures outside the organization tend to be more innovative in their project work than workers lacking such networks.

Introduction

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roject-based organizations belong to the growing number of organizations for which new knowledge creation is critical. They operate in highly volatile environments, where innovation depends significantly on the ability to integrate different but interrelated knowledge bases, co-ordinate knowledge processes that are difficult to specify in advance and meet deadlines that may shift over time with changing needs and resource constraints. Conventional organizational forms designed to absorb external uncertainty or to protect the organization from uncertainty are not likely to ensure survival in such environments. In response to these challenges, recent thinking on project-based and other knowledge-intensive organizations has emphasized the dynamic interdependencies of tasks and workers (Ekstedt et al., 1999). In a situation where tasks cannot normally be decomposed in detail and known ex ante, collective knowledge constitutes the core competencies of organizations. The typical project organization

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is seen as an organizing process, rather than a rationally structured organization, and the ambiguities associated with evolving organizing processes are accepted as givens, rather than as something to be defined away. Building and nurturing social relationships for knowledge creation and transfer are an important aspect of organizing processes. Much previous writing on the relational character of project work has focused on interactions among project workers within the context of the organization, and has paid little attention to the embeddedness of project workers in social relationships that extend beyond organizational boundaries. The primary concern of researchers has been with internal organizational relationships, emphasizing co-ordination and knowledge sharing, rather than the search for new knowledge. The general neglect of external relationships may seem surprising, because project organizations are normally thought of as organizations with open boundaries, in which questions of the location and import of new knowledge are central (Cross, Yan and Louis, 2000). Permeable boundaries are considered necessary for

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creating novel combinations of knowledge from the distinct competencies of project workers and the individuals with whom they interact (Breu & Hemingway, 2002). The evidence from previous research leaves three important questions unanswered. First, what is the pattern of social relations that project workers maintain outside the organization as sources of new knowledge? Second, how do these social relations affect innovative behaviour at the workplace? Third, to what extent do internal organizational processes moderate the effect of workers’ external social relations? These questions are examined using data on the immediate network ties of workers in 17 German new-media project organizations. The dynamic nature of tasks, actors and interdependencies in new-media industries makes these organizations an ideal site for exploring the role of external social networks in project-based enterprises. The complexity of project organizations as project networks makes them a particularly rich context for theory building on this subject.

Theoretical Background The Project Organization as a Project Network Project organizations are an increasingly relevant unit of economic and social action in areas of production and exchange where tasks are complex and interdependent, outcomes are uncertain, and tasks must be completed under severe time constraints (Hobday, 2000). They typically operate in highly uncertain environments, where it is often not even clear what product the firm will be producing in the near future. Such environments are found in film, high-fashion clothing, multi-media and other industries where work is often organized on the basis of individuals moving as subcontractors among different firms and projects. Extreme levels of uncertainty mean that project organizations need to adopt structures and processes that challenge some of the basic assumptions and rationales of conventional organizations concerning knowledge acquisition and processing (Lundin & Söderholm, 1995). Although projects often entail high-risk and high-stake outcomes, they are executed without the regulative, administrative and normative structures and institutional safeguards one normally finds in hierarchical organizations. Timing is essential: combining resources and competencies ‘just in time’, meeting deadlines and terminating activities and relationships (Lindkvist, Söderlund &


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Tell, 1998). Project success normally depends on the existence of an elaborate body of collective knowledge, bringing together the skills of specialists, but there is often not sufficient time to clarify their competencies and to evaluate their performance in consideration for further collaboration. Professional boundaries between specialized workers do exist, and may be used as distinct frames of reference, but they are not fixed in the way that bureaucratic organizations demarcate formal positions (Girard & Stark, 2001). There is also little time to engage in the usual forms of confidence-building activities that contribute to stable task relations. The formal and rulebased activities associated with goal setting, decision-making, learning and so forth that one normally finds in hierarchical organizations tend to be impractical in project organizations. The project organization is best thought of as a project network. Projects are normally produced through a dynamic network of transactions involving specialized firms, subcontractors and freelancers (Jones, 1996). A typical project network of a web-designer firm, such as those which are the subject of this study, would include a venture capitalist brought in by the client, a network security firm, a web developer offering server space, a representative of the client firm and a subcontractor to the client providing technical advice. Transactions may occur along three key dimensions at once, each creating different contexts for the actors involved: capital flows, product flows and knowledge flows. Furthermore, the network is often very short-lived, involving exchange constructed around the specific requirements of a given product or service and lasting no more than a few weeks, as in the film industry (Sydow & Staber, 2002). Given these constraints, the challenge for the project organization is to build a broad and dynamic knowledge base and to create a climate and structure supportive of learning and innovative behaviour, where virtually every unit is engaged in boundary-spanning and innovation. For project workers, the challenge is to organize their boundary-spanning activities so that they contribute to learning new skills and opportunities. To the extent that project workers operate under serious time constraints, deal with non-routine tasks and interact with a dynamic set of colleagues and other people providing various kinds of inputs, they face more serious challenges and risks than people working in more conventional jobs and organizations. Just as project organizations rely on project networks for flexible access to critical resources, project workers need to

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build personal networks to create their own learning community within which they obtain new knowledge. In an environment where technical skills depreciate quickly and employment security is precarious, project workers are concerned about maintaining access to information about the most current skills and the market for their services. Much of this information lies outside the boundaries of their employing organization. Surveys of workers in the new-media sector have shown the importance of social connections with persons beyond the group of immediate colleagues as a source of information about new skills, task requirements and career opportunities (Braczyk, Fuchs & Wolf, 1999). Embeddedness in a learning community helps to reduce the uncertainties involved in solving emergent problems concerning skill requirements and resource needs (Starkey, Barnatt & Tempest, 2000). Accordingly, project workers spend much of their time nurturing their relations with people who are not connected directly to their firm. The question is, how cohesive should these ties be, and what are their consequences for innovative behaviour in the workplace?

Two Views on Social Network Cohesiveness The literatures on innovation, learning and creativity have in common a concern for the social processes connecting individuals. Innovation is seen as an outcome of the embeddedness of individuals in social structures, but the mechanisms and processes by which social embeddedness leads to innovative behaviour are often not clear. Innovation is embedded in ongoing social relations that may facilitate or derail the necessary exchanges. There are opposing views on the effects of social embeddedness for innovation (Gargiulo & Benassi, 2000). One view stresses the positive effect of social integration on cooperative exchange (Coleman, 1988). The members of a closely knit network, so the argument goes, can trust each other to honour obligations, which diminishes behavioural uncertainty, reduces opportunistic tendencies and enhances their ability to co-operate in future exchanges. Reciprocity is seen as the key mechanism by which social relationships are turned into productive assets that can be used for a variety of purposes, including gaining access to new information. A cohesive network conveys a normative order within which the actor can experiment with new strategies and fail without risking social expulsion. Cohesive social relations may also facilitate learning and innovation by speeding-up information processing. By con-

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trast, a diverse and fragmented network exposes the actor to conflicting preferences and expectations, which makes it more difficult to change course and innovate. The social cohesiveness view may explain the innovativeness of workers in project enterprises where the pursuit of individual goals requires the active co-operation of other players and where creative specialists come together, often at very short notice and without a guarantee that the project will come to fruition (Huxham & Vangen, 2000). In projects, everyone acts as a boundary spanner, risking role conflict due to inconsistent and changing task expectations and experiencing a high degree of uncertainty and stress. And when projects take place in a fluid and intensely competitive environment, where the actors are essentially ‘nomadic’, a sense of continuity may be the key to sharing new knowledge (Starkey, Barnatt & Tempest, 2000; Sydow & Staber, 2002). Once useful personal connections exist, they can be drawn upon to minimize the uncertainties involved in solving emergent problems and reducing the risk of one-time transactions in key resource areas. Not all of these relationships may be active at any given time, but may be maintained as a latent reservoir of resources to be utilized when needed. Latent networks help to reunite actors and reassign resources in the face of changing demands. Close social relations may, therefore, constitute an important source of continuity in markets where the active cooperation of other players is required, but there is uncertainty about whether such cooperation will be forthcoming (DeFillippi & Arthur, 1998; Starkey, Barnatt & Tempest, 2000). These arguments suggest the following hypothesis: H1a: Cohesive external social networks will have an enabling effect on project workers’ innovative behaviour. The alternative hypothesis is suggested by a view of social relations that stresses the diversity of information and the brokerage opportunities created by the absence of connections between separate segments in a social network. In contrast to more ego-centred social network approaches, Burt (1992) argues that it is more informative analytically to focus on the pattern of relationships among the persons to whom ego is tied. A ‘structural hole’ exists between two alters, if they are not connected to each other but share a tie with a common third party (ego). According to Burt, actors who are located in structural holes between clusters of alters have better access to information and enjoy comparative advantages in negotiating relationships, which



allows them to know about more opportunities. Actors with a contact network rich in structural holes monitor information more effectively than it can be monitored bureaucratically, and they move information faster and to more people than they can accomplish through formal channels and rules. Structural holes often imply weak connections among the actors in a network. While structural holes offer new information opportunities, weak ties are likely to connect individuals with access to different information (Granovetter, 1985). Because weak ties involve lower levels of emotional intensity, they are less contingent on similarity between actors. As a consequence, weak ties tend to connect individuals with varying interests and different perspectives. They also provide access to a wider array of people, who themselves are connected to individuals likely to provide new and different resources. Information flowing in weakly connected networks tends to be less redundant and thus of greater value to individuals seeking new information. Evidence in favour of this argument comes, for example, from research on information flows and innovation in regional business clusters (Galaskiewicz & Zaheer, 1999; McEvily & Zaheer, 1999). A related perspective of project workers treats them as entrepreneurial actors pursuing clearly economic goals in comparatively open labour markets, where mobility across firms and market segments is not suppressed by rigid cultural attributions (Lash & Urry, 1994). As entrepreneurs, they view their career opportunities from a calculative-rational perspective, make decisions based on their assessment of relative risks and opportunities, and seek advice from whoever might be willing to provide it. Information is seen as a commodity and networks as the market place in which information is traded. From this perspective, project workers build social networks pragmatically, selecting and discarding members based on their perceived pecuniary contributions and changing career needs. They will, therefore, prefer to maintain weak ties and to interact less frequently with persons in their networks. Both the structural hole and entrepreneurial perspectives see network cohesion as an obstacle to learning new competencies, and to innovating. Given task uncertainty, an individual project worker with more weak ties is seen as having more efficient access to non-redundant information about new skill requirements, may think in a broader context and may thus pursue previously unexplored directions more effectively. One would, therefore, expect that loosely coupled networks with many structural holes facilitate innova-


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tion in project work. This reasoning suggests the following hypothesis: H1b: Cohesive external social networks will have a stifling effect on project workers’ innovative behaviour.

Knowledge Transfer and Social Integration in the Organization Even where opportunities for knowledge exchange exist and these opportunities are perceived as valuable, project workers need to be able to assimilate new knowledge. Individuals cannot learn and innovate without the capacity to replicate and transfer new knowledge, and learning requires a minimum degree of co-operation and collaboration among colleagues in an organization (Ancona & Caldwell, 1992; Hansen, 1999). Not considering the influence of internal organizational processes is likely to give an incomplete picture of the contingencies involved in innovation. Research on work teams shows the performance implications of process variables, such as interpersonal conflict resolution, communication and decision-making procedures, that explain the importance of integrating diverse views and experiences (Cohen & Bailey, 1997). Processes of social integration seem particularly relevant for understanding innovative behaviour in project-based organizations, given their concern for absorbing externally generated knowledge. Organizational social integration is a multidimensional phenomenon that reflects ‘the attraction to the group, satisfaction with other members of the group, and social interaction among group members’ (O’Reilly, Caldwell & Barnett, 1989, p. 22) and includes social processes such as co-operation and information sharing. Organizations can benefit from internal social integration in a number of ways, including lower communication and coordination costs, which is particularly important in highly volatile environments. Members of socially integrated organizations find it easier to communicate, make difficult decisions more quickly and exhibit greater efficiency in the coordination of tasks (Smith et al., 1994). The importance of social integration for innovative behaviour is shown in research on new product development in project teams (Brown & Eisenhardt, 1995). Successful project teams exhibit the characteristics of social integration: intensive communication, mutual assistance and shared decision-making. Shared visions and joint purposes support the flow of information and facilitate the interpretation of information (Tsai & Ghoshal, 1998).

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And trust helps to reduce opportunistic tendencies and supports the creation of codes necessary for mutual understanding of newly acquired information (Cohen & Bailey, 1997). One would thus expect that social integration in project organizations facilitates innovative behaviour, independent of the influence of workers’ external social relationships. H2: A high level of organizational social integration encourages innovative behaviour. In addition to having an independent effect on innovative behaviour, organizational social integration may also moderate the influence of workers’ external relations. Project workers may be able to access novel information through their external networks, but not be able to translate this information into innovative behaviour, if they do not co-operate with their colleagues in the organization. Tsai (2001), for example, found that business units benefitted from their network position more if they had sufficient capacity to absorb and transfer network-generated knowledge. To the extent that the social integration of project workers in the organization helps them to assimilate and transfer new knowledge, it may enhance the advantages from being embedded in external social structures. Organizational social integration may thus act as a moderating variable, in addition to having an independent influence on innovation. The following hypothesis will be tested: H3: A high level of organizational social integration enhances the influence of cohesive external networks on innovative behaviour.

Research Design Research Site and Data Collection These arguments were tested with data collected on the social networks of workers in project-based Internet consulting firms. Twenty-five Internet consulting firms, founded between 1993 and 1998, were selected randomly from the yellow pages of six medium-sized cities and their catchment areas in southern Germany.1 The managers of 17 firms agreed to participate in this study, which was explained to them as a study of communication in knowledge-intensive industries. The managers were interviewed in sessions lasting between one and two-and-a-half hours to obtain information about the activities of their firms, the characteristics of project tasks and the role of project workers’ social networks in project work. They described their firms as typical of others in this industry, with diverse product portfolios that include pro-

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ducing websites for clients both in the private and public domain, e-commerce consulting, graphic design, educational software consulting and advertising consulting. Most firms employed specialists in various fields, including information technology, programming, interactive design and marketing/advertising. At the time of data collection in 2001, the sampled firms had a workforce of between three and seven regular employees (subject to social insurance coverage), which is consistent with the results of other surveys in the newmedia sector in southern Germany (Fuchs & Wolf, 1999) and elsewhere (Braczyk, Fuchs & Wolf, 1999). A standardized and pre-tested (with two web designers) questionnaire was used to collect information on the characteristics of project workers and their personal networks. After one follow-up request, the total number of returned and usable questionnaires, with no missing values on the critical variables, was 92. This represents a response rate of 90 per cent for project workers in the 17 sampled organizations. Typical for workers in the newmedia industries, the sampled workers were relatively young (mean age = 29 years) and well-educated (about three-quarters of them had a university degree at the Master’s level). Because most of the firms were still in the infancy stage at the time of the survey (mean organization age = 5 years), the workers had limited work experience with them (mean tenure = 4 years). The centrepiece of the questionnaire was a question designed to identify work-related contacts to persons who had never been employed by the organization. The question was not intended to elicit only strong and homogeneous ties, but to offer the possibility, after persons had been named, of asking further questions that would assess various dimensions of network structure. Respondents were invited to list the names or initials of as many people as they wished (on average, they listed five people), and were then asked to provide information on the personal characteristics of their contacts, including their age and occupation, and how long they had known the respondent.

Variable Measurement Innovative behaviour in the workplace was measured with a set of three indicators, adapted from Scott and Bruce’s (1994) scale: ‘Please indicate how often you transform innovative ideas into useful applications’, ‘introduce innovative ideas into the work environment’ and ‘evaluate the utility of inno-



vative ideas’. Because the items were highly correlated and factor analysis showed that they could be viewed as a single item, the items were transformed into a composite variable based on the average score (Cronbach’s alpha = 0.81). In the literature on social networks, cohesiveness is usually measured by a number of indicators that reflect the emotional intensity, strength, and duration of connections among all members of the network (Marsden, 1990; Marsden & Campbell, 1984). For the present study, data were available for three dimensions of cohesiveness: frequency of interaction, multiplexity and network density. The first two variables measure the closeness of dyadic relations between the focal person and each of his/her contacts, whereas density measures the strength of relations among the focal person’s alters. The frequency of communication was used as a measure of interaction frequency (Marsden, 1990) and asked respondents to indicate ‘how often during an average week do you talk to this [named contact] person about work-related matters?’. For each respondent, the scores were averaged across all network contacts. An indicator of network multiplexity was constructed from the number of types of relationships the respondent had with each contact person. Using items from Ibarra (1995), respondents were asked to indicate whether they considered their contact person someone ‘with whom you have informal and personal relations, such as having dinner together and visiting him/her at home’, ‘you go to for professional advice on a work-related problem or decision you need to make’, ‘whose support and co-operation you enlist to accomplish your work goals’, and/or ‘you feel contributes much to your professional growth and career development’. Multiplexity ranges from 1 (only one type of relationship) to 4 (all four types of relationships). For each respondent, the scores were averaged across all network contacts. The third network cohesiveness variable, network density, is intended to measure the homogeneity of information to which respondents have access through their networks. When network contacts know each other well, they will operate in similar economic and social circles, have access to similar information and know of similar opportunities. The survey question, which asked project workers to list their important contacts, requested them to report the degree to which they thought their alters knew each other, distinguishing between strangers, acquaintances and friends. Because the observed variance was mostly at the extremes of the distribution, network


35

density was defined as the proportion of ties among alters that were between friends or acquaintances. The unit of analysis for the examination of network structure is thus at the level of individual project workers. The networks varied along all three dimensions investigated. They also varied independently of the organizations in which the workers were employed, suggesting that colleagues in the same organization were embedded in structurally different external networks. Organizational social integration was also measured at the individual level, using three items. Using seven-point Likert-type scales adapted from Ancona (1990), respondents were asked to indicate ‘how much team spirit you feel is in this organization’, ‘how easy is it in this organization to define common work goals’, and ‘how easy is it in this organization to adhere to common schedules’. Because these integration measures were highly correlated, they were averaged into an overall indicator of organizational social integration, as perceived by the individual respondent (Cronbach’s alpha = 0.83). Two control variables were considered in this study as well: organization age (in years since founding) and the worker’s length of employment in the organization (in years). Older organizations with workers who have spent more time together will have accumulated more experience with collaboration and joint learning, which may facilitate innovative behaviour. Both control variables were measured at the individual level.

Empirical Findings The theoretical arguments concerning the relationship between the social ties of project workers and their innovative behaviour were tested with hierarchical multiple regression procedures and estimated the additional variance explained by groups of variables. In step 1, the control variables were entered, in step 2, the network cohesiveness variables were added. The organizational integration variable was added in step three and in the final step, the interaction terms were added, to test the moderating effect of organizational social integration. I used the increments in R-square to assess the explanatory contribution of blocks of variables. Multi-collinearity does not appear to have affected the precision of the regression estimates. A rule of thumb is that multi-collinearity is an issue when a predictor has a square-root of the variance inflation factor (VIF) less than 2.0 (Fox, 1991). None of the regression coefficients in the

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Table 1. Results of hierarchical regression analysesa Variables Control variables Organization age Worker tenure in organization External network cohesiveness Interaction frequency Multiplexity Density Organizational integration Moderating effects of integration Interaction x integration Multiplexity x integration Density x integration

Entry b

Final b

0.32* 0.14

0.27* 0.12

0.41* 0.09 3.20* 1.05*

0.26* 0.08 2.47* 1.17*

0.11 0.04 0.78*

0.11 0.04 0.78*

DR2

DF

Adj. R2

0.12

3.02*

0.09

0.38

20.86*

0.47

0.13 0.04

32.05* 2.86*

0.60 0.64

a Regression coefficients shown are from the model at the step indicated (entry b) and from the final model (final b). * p < 0.05.

final model have a square-root VIF greater than 2.0. Table 1 shows the results of the hierarchical regression analyses for each independent variable, estimated in the first and final step. The results suggest that cohesive social ties to sources of knowledge outside the boundaries of the project organization support workers’ innovative behaviour. The coefficients for interaction frequency and network density are positive and statistically significant. The coefficient for multiplexity is also positive, but does not differ significantly from zero. The increment to R2 with the inclusion of the network variables is high and significant (0.38, p < 0.05). The adjusted R-square statistic is high, indicating that the observed network characteristics have considerable explanatory power in accounting for innovative behavior. These estimates support H1a. The estimated effect of organizational social integration is consistent with the argument that co-operative exchange among project workers in their respective organizations supports innovative behaviour. Adding this variable to the model has considerable explanatory power, showing a DR2 of 0.13 (p < 0.05). This result supports H2. H3 postulates that organizational social integration enhances the benefits workers derive from their external ties, as estimated in the previous step of the regression analysis. To explore this possibility, multiplicative interaction terms were constructed for each of the network variables.2 Adding the interaction terms as a group improves significantly the fit of the model. The positive sign of the coeffi-

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cients indicates that organizational social integration enhances the beneficial effects of external cohesive ties. But of the three network variables, only density shows a strong and significant influence, thus providing partial support for H3. For ease of presentation, Figure 1 shows a graphical interpretation of this interaction effect, using one standard deviation above and below the mean of the interaction term. The plot shows that the advantages of having a dense network of contacts to persons outside the organization are greater if the organization is internally integrated. In sum, the estimated coefficients are generally consistent with the social cohesiveness perspective, as measured by interaction frequency and network density. At least in this sample, project workers seek the support of familiar others on whom they can rely in the highlyuncertain context of project work. Social closeness to persons who can offer valuable resources and interact with each other seems to matter for innovative behaviour more than maintaining weak ties to dispersed persons. The importance of maintaining social ties to discussion partners outside the boundaries of the organization was also evident from information obtained in interviews with the managers of the sampled organizations. The networks that they described as critical to the survival of the firm were, in the first instance, interpersonal networks and not formal, interorganizational connections. They all agreed on the importance of maintaining external social relations, but differed in their perspective on the precise role that these relations should play. Some argued in favour of



37

High integration high

Innovative behaviour

Low integration

low low

high Network density

Figure 1. Network density, organizational social integration and innovative behaviour connecting their employees with creative personnel in a multitude of different organizations, stressing the importance of having diversity in knowledge structures. Others understood the importance of maintaining close and long-term social relationships in an industry as volatile and risky as new media, without necessarily downplaying the significance of having access to diverse knowledge. Most managers spoke of ambiguity, uncertainty and risk as ‘normal’ aspects of their business which, they argued, makes coordination of people and tasks difficult. They all acknowledged that, because their employees were essentially knowledge workers, they were of greatest value to the organization. Therefore, human-resource systems had to be developed around them and a formal and stifling structure of authority had to be avoided as much as possible. While they agreed that co-ordination in new-media firms cannot normally be engineered and centrally controlled, they differed with respect to the particular approaches they chose to achieve co-ordination. Some of the managers suggested that co-ordination was best left to the project workers themselves who, they thought, were knowledgeable enough to ‘figure out for themselves what works’. Others referred explicitly to the advantages of letting employees import the necessary knowledge from outside the organization. Their professed way of ‘managing’ communication and co-ordination requirements was to encourage informal contact and open feedback among the employees and with contacts outside the organization. One manager suggested that ‘I know how useful these old-boy


networks can be when it comes to keeping in touch with the newest developments in our field. So I expect that my employees attend workshops, seminars, trade fairs, and the like, and I give them the time to do so whenever possible’. Another manager commented on the role of friendships outside the firm, pointing out that, ‘if you want to hire someone who has a good professional reputation, you are looking to people who know that person well. These friendships are a good source of information for us, because in this business you need people who get along well’. ‘Personal friendships are nice for creative guys like we have around here’, another manager said, ‘but you can’t let these get out of hand, if you want to keep them in one place’. In sum, the managers interviewed in this sample understood the importance of external social relationships, but no consistent pattern of ‘managing’ these relationships was apparent. None of the managers could propose a clear solution to the basic organizational dilemma they all face in the new-media industries: how to reconcile the use of freelance and short-term workers, in order to maximize flexibility, with the need to restrict ‘footloose’ employees from carrying information about proprietary innovations to potentially competing firms. The contribution of project workers’ embeddedness in external social structures to innovation further highlights this dilemma, but does not solve it.

Discussion and Conclusion Researchers in the area of organizational innovation now take as axiomatic the proposition

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that learning is a process of social construction. Knowledge creation occurs in the context of a community of actors with access to relevant resources. Especially in high-risk industries, such as the new-media industries, where flexibility is required, work is organized around projects, and workers come together on a task-by-task basis, the importance of extending knowledge search beyond the organization’s boundaries seems obvious. There is substantial evidence that in such industries the need for highly skilled and creative labour encourages the development of learning communities as a basis for innovation. But there is some debate concerning the structure of relationships in learning communities that is most conducive to innovation. The precise effect of workers’ embeddedness in external social structures is ambiguous and can be interpreted from different perspectives. The data available for this study are more consistent with the social cohesiveness view, emphasizing the benefits of long-term and close relationships, than with the structural hole and entrepreneurial perspectives, focusing more on knowledge diversity and flexibility. The data suggest that social processes of interpersonal familiarity and support can be most critical in situations where interpersonal connections are used as a means of identifying new knowledge. In project-based organizations, external social networks are important not only as sources and channels of taskrelated information, but also of social identity and continuity. Most of the respondents in the present study had known their contacts longer than the project enterprise had been in business, and many of the persons in their networks knew each other as friends or acquaintances. The findings from this sample contradict the structural hole and entrepreneurial argument that close and stable social ties can lead to cognitive lock-in and hamper innovation. While external relations are a critical aspect of the knowledge base of project organizations, internal organizational processes are important for integrating knowledge flows so that learning and innovation can take place. It is interesting to note that, while project workers’ external networks varied structurally, internally the workers were embedded in organizational relationships on which they held similar views. An analysis-of-variance test performed on the organizational social integration indicator showed that there was significantly greater variability in the respondents’ ratings between organizations than within organizations (p < 0.05), suggesting homogeneity in the perceptions of sampled project workers with respect to the level of

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social integration in their respective organizations. This high degree of perceptual agreement suggests that project workers may live in two, not necessarily connected, worlds: an external network of relations through which they generate new knowledge and an internal organizational community through which they convert knowledge into innovative behaviour, depending on the level of social integration. But the social integration of project workers within their organizational context is inherently problematic. The high levels of labour mobility in the volatile new-media industries are a potential source of organizational instability. As employers loosen the bonds of employment, in order to adjust quickly to changing market conditions, workforce expectations may change, resulting in less loyalty to any one employer. Thus, it is not sufficient for the firm to support workers’ external social networks in the hope of gathering new knowledge. Organizational structures must be created to integrate the knowledge gained through these networks into the firm’s internal social fabric. What the appropriate structures might look like is not clear because of the inherent contradictions and contingencies involved. The aim of project-based organizing is mostly to provide efficient solutions to the problem of flexible allocation of productive resources. But the inherently transient and episodic character of project activities can also limit efficiency when some degree of organizational stability is called for. Productive flexibility does not necessarily coincide with social flexibility. Productive efficiency demands the reduction of waste and adjustment of task interdependencies. Social efficiency, by contrast, requires that project workers understand and support each other’s competencies and motives, and this may require some degree of redundancy and stability in task and social relationships. How these competing requirements are played out in a given situation may vary with contingency factors, such as task uncertainty, knowledge tacitness and the normative expectations in a particular organizational context. Project-based organizations may be unique in that they operate under highly uncertain and volatile conditions, and it may be in these circumstances where networks conveying normative expectations and social identity may be most important. But a growing number of organizations operate in environments where external knowledge search and organizational co-ordination are critical. Cohesive social relationships may be a general precondition for organizational adaptability and innovation in these environments, by sup-



porting a consistent set of expectations for individuals whose position in the organization is constantly at risk. Under conditions of high uncertainty, reliability is a sought-after characteristic and workers will seek security from connections built on familiarity and particularism. The main value of close social relations with others outside the organization may lie in their conveying social identity to support a work environment within which individuals can take risks and experiment with exploration-type knowledge. In that respect, social cohesiveness may be useful for any organization valuing change and innovation. The limitations of examining the complex dynamics of projects and project organizations with a small and not necessarily representative sample are obvious. Because I studied one type of organization in one industry, I could not control for the influence of task contingencies and other contextual conditions. Also, in the context of dynamic project organizations, it is virtually impossible to study a complete network and all relationships potentially useful to innovation. Lastly, the available data are cross-sectional and thus not suitable for examining the causal relationships involved. Organizational social integration, for example, may not only enhance the benefits of external social ties for innovation. It may also motivate workers to explore new network possibilities for external knowledge search. Further research should also explore the mechanisms and processes by which individual innovative behaviours translate into innovation at the organizational level. Innovative behaviour of individual workers does not automatically turn into organizational innovation. This is because of the likely variation across organization members in terms of their inclination to share knowledge with their colleagues, help others to learn from knowledge and provide useful feedback, and a whole range of other individual-level variables reflecting differences in personality, problem-solving approaches and so forth. For innovation to be possible at the organizational level, there must be a capability to combine the different information and experiences of individuals (Nonaka & Takeuchi, 1995). The variables used in the present study to measure organizational social integration do not necessarily capture fully the ‘absorptive capacity’ of an organization (Cohen & Levinthal, 1990). Notwithstanding these deficiencies, this study suggests that the relevant social community of project organizations extends beyond formal organizational boundaries and includes persons who provide important information and advice. Social ties in this community have a continuing presence that may


39

be activated as the need arises. In this sense, project organizations are part of a larger project network that may have a distinct social fabric of identity and mutual obligations. Although the members of project networks may have no formal connection to the project organization and may not be bound by organizational rules and obligations, they contribute indirectly to the success of the enterprise, depending on the social capital inherent in network relations. Implicit in the concept of social capital is the idea that it can serve as a basis for distinctive competence and competitive advantage, if the structural and cognitive attributes of social relations are valuable, distinct, and difficult to imitate (Tsai & Ghoshal, 1998). To the extent that project workers’ external social ties have these characteristics, they reinforce the existing firmspecific learning and innovation capabilities, and thus constitute an important strategic resource for the organization.

Notes 1 No claims can be made that yellow-pages listings provide a complete sampling frame for case selection. No other reliable listings of firms in this industry exist, which is typical for emerging industries in a sector that includes no single technology or market. Thus, the representativeness of the sampled firms cannot be assessed systematically. 2 To minimize distortion in estimating interaction effects due to high correlations between the product term and its component terms, I followed standard procedures and mean-centred the component variables (Cronbach, 1987).

Acknowledgement I am grateful to P. Preisendörfer, J. Sydow and an anonymous reviewer for their helpful comments on an earlier version of this paper.

References Ancona, D. (1990) Outward bound: Strategies for team survival in an organization. Academy of Management Journal, 33, 334–65. Ancona, D. and Caldwell, D. (1992) Bridging the boundary: External activity and performance in organizational teams. Administrative Science Quarterly, 37, 634–65. Braczyk, H., Fuchs, G., and Wolf, H. (eds.) (1999) Multimedia and Regional Economic Restructing. Routledge, London. Breu, K. and Hemingway, C. (2002) Collaborative processes and knowledge creation in communities-of-practice. Creativity and Innovation Management, 11, 147–53.

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Brown, S. and Eisenhardt, K. (1995) Product development: Past research, present findings, and future directions. Academy of Management Review, 20, 343–78. Burt, R. (1992) Structural Holes: The Social Structure of Competition. Harvard University Press, Cambridge. Cohen, S. and Bailey, D. (1997) What makes teams work: Group effectiveness research from the shop floor to the executive suite. Journal of Management, 23, 239–90. Cohen, W. and Levinthal, D. (1990) Absorptive capacity: A new perspective on learning and innovation. Administrative Science Quarterly, 35, 128–52. Coleman, J. (1988) Social capital in the creation of human capital. American Journal of Sociology, 94, 95–120. Cronbach, L. (1987) Statistical tests for moderator variables: Flaws in analyses recently proposed. Psychological Bulletin, 102, 414–17. Cross, R., Yan, A. and Louis, M. (2000) Boundary activities in ‘boundaryless’ organizations: A case study of a transformation to a team-based structure. Human Relations, 53, 841–68. DeFillippi, R. and Arthur, M. (1998) Paradox in project-based enterprise: The case of film making. California Management Review, 40, 125–39. Ekstedt, E., Lundin, R., Söderholm, A., and Wirdenius, H. (1999) Neo-industrial Organising: Renewal by Action and Knowledge Formation in a Projectintensive Economy. Routledge, London. Fox, J. (1991) Regression Diagnostics. Sage Publications, Newbury Park. Fuchs, G. and Wolf, H. (1999) Zweite Umfrage zu Multimedia-Unternehmen in Baden-Württemberg. Working paper no. 141, Center of Technology Assessment in Baden-Württemberg, Stuttgart. Galaskiewicz, J. and Zaheer, A. (1999) Networks of competitive advantage. In Andrews, S. and Knoke, D. (eds.), Research in the Sociology of Organizations. Stamford, JAI Press, pp. 237–61. Gargiulo, M. and Benassi, M. (2000) Trapped in your own net? Network cohesion, structural holes, and the adaptation of social capital. Organization Science, 11, 183–96. Girard, M. and Stark, D. (2001) Distributed intelligence and the organization of diversity in new media projects, Paper presented at the international workshop on spatial and social dynamics of project-organisation, Bonn. Granovetter, M. (1985) Economic action and social structure: The problem of embeddedness. American Journal of Sociology, 91, 481–510. Hansen, M. (1999) The search-transfer problem: The role of weak ties in sharing knowledge across organization subunits. Administrative Science Quarterly, 44, 82–111. Hobday, M. (2000) The project-based organisation: an ideal for managing complex products and systems? Research Policy, 29, 871–93. Huxham, C. and Vangen, S. (2000) Ambiguity, complexity and dynamics in the membership of collaboration. Human Relations, 53, 771–806. Ibarra, H. (1995) Race, opportunity, and diversity of social circles in managerial networks. Academy of Management Journal, 38, 673–703.

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Jones, C. (1996) Careers in project networks: The case of the film industry. In Arthur, M. and Rousseau, D. (eds.), The Boundaryless Career. Oxford University Press, New York, pp. 58–75. Lash, C. and Urry, J. (1994) Economies of sign and space. Sage, London. Lindkvist, L., Söderlund, J. and Tell, F. (1998) Managing product development projects: On the significance of fountains and deadlines. Organization Studies, 19, 931–51. Lundin, R. and Söderholm, A. (1995) A theory of the temporary organization. Scandinavian Journal of Management, 11, 437–55. Marsden, P. (1990) Network data and measurement. Annual Review of Sociology, 16, 435–63. Marsden, P. and Campbell, K. (1984) Measuring tie strength. Social Forces, 63, 482–501. McEvily, B. and Zaheer, A. (1999) Bridging ties: A source of firm heterogeneity in compettive capabilities. Strategic Management Journal, 20, 1133–56. Nonaka, I. and Takeuchi, H. (1995) The Knowledge Creating Company. Oxford University Press, New York. O’Reilly, C., Caldwell, D., and Barnett, W. (1989) Work group demography, social integration, and turnover. Administrative Science Quarterly, 34, 21–37. Scott, S. and Bruce, R. (1994) Determinants of innovative behavior: A path model of individual innovation in the workplace. Academy of Management Journal, 37, 580–607. Smith, K., Smith, K., Olian, J., Sims, H., O’Bannon, D., and Scully, J. (1994) Top management team demography and process: The role of social integration and communication. Administrative Science Quarterly, 39, 412–438. Starkey, K., Barnatt, C., and Tempest, S. (2000) Beyond networks and hierarchies: Latent organizations in the U.K. television industry. Organization Science, 11, 299–305. Sydow, J. and Staber, U. (2002) The institutional embeddedness of project networks: The case of content production in German television. Regional Studies, 36, 215–27. Tsai, W. (2001) Knowledge transfer in intraorganizational networks: Effects of network position and absorptive capacity on business unit innovation and performance. Academy of Management Journal, 44, 996–1004. Tsai, W. and Ghoshal, S. (1998) Social capital and value creation: The role of intrafirm networks. Academy of Management Journal, 41, 464–76.

Udo Staber ([email protected]) received his Ph.D. at Cornell University. He taught at Cornell University, Pennsylvania State University, University of Mannheim, University of New Brunswick, University of Augsburg, and is currently Professor of Organization Studies at the Stuttgart Institute of Management and Technology. His research interests are in the area of organization theory, social and interfirm networks, and regional studies.


DRIVING INNOVATION IN LOGISTICS

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Driving Innovation in Logistics: Case Studies in Distribution Centres Claudine A. Soosay and Paul W. Hyland The concept of innovation is valued in most organizations to create and sustain competitive advantage. Firms need to innovate in order to stay ahead in the market. Businesses are experiencing the internationalization of technology-driven competition, globalization of manufacturing, shorter product life-cycles, increasingly sophisticated customers needs and a greater integration of technologies (Shepherd & Ahmed, 2000). These challenges have compelled organizations to develop innovative strategies, products and processes. One area that is increasingly seeking ways of adding value through innovation is the logistics function. This paper examines and compares factors that are driving innovation in Australia and Singapore in distribution centres part of the logistics function that has been slow in the past to innovate.

Introduction

F

irms need to innovate quickly before their competitors just to stay ahead. Producing the same things more efficiently alone is no longer sufficient. Strategies and programmes that have worked in the past may not be relevant today. Innovation can be the differentiating factor in sustaining an organization’s long-term competitiveness because it allows for quantum leaps in capacity and value-added growth. At present, markets are experiencing the internationalization of technology-driven competition, globalization of manufacturing due to faster tran sitional flows of materials and money, compression of product life cycles, need for greater integration of technologies and increasingly sophisticated customers (Shepherd & Ahmed, 2000). These challenges have inevitably resulted in many organizations turning to innovative measures and strategies. This paper examines the drivers of innovation in the logistics function with particular emphasis on distribution centres. Specifically this research seeks to identify the drivers that are operating in distribution centres and to determine if these drivers are internal or external. As businesses seek to find more ways to innovate, the emphasis has moved from the production function to other links in the supply chain. Using a series of case studies this research attempts to identify if and how drivers of innovation vary and if there are © Blackwell Publishing Ltd, 2004. 9600 Garsington Road, Oxford OX4 2DQ and 350 Main St, Malden, MA 02148, USA.

any differences between the drivers of innovation in Australian and Singaporean distribution centres.

Innovation Organizations competing in dynamic markets with rapidly changing technology should attempt to counter the risk of being overtaken by competitors, or underestimating any potential challenges they face. For them to be successful, they may need to innovate (Johne, 1999). Innovation is considered a fundamental component of entrepreneurship and a key element of business prosperity (Nonaka & Takeuchi, 1995). This is becoming even more evident as developed economies move into a post-capitalist, knowledge-based society (Drucker, 1992). There is continuous change in the state of knowledge, as well as the exponential advancements in technology, consumer demands and global competition (Johannessen, Olsen & Lumpkin, 2001). The combination of a strong market presence, compelling product offerings and the ability to attract, retain and harness the energy of the best and brightest employees will enable companies to sustain profit margins, sales growth and market valuations. Innovation in products, processes and organizations is required to make the difference (Brafman & Folmer, 1998).

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D’Aveni (1994) argues we are moving into a knowledge-based society with firms facing hyper-competition. This will require organizations to focus on being innovative in the ways they use knowledge to sustain competitiveness. Virtually all businesses talk about innovation and its importance. The reality is that innovation is inevitably linked to risk and requires some form of investment and commitment. Innovation is the engine of change; and in a vast dynamic environment, resistance to change is deleterious to organizations. Despite their apparent prominence or the immensity of their resources, organizations cannot safeguard themselves from change. Although they face risk and uncertainty, change creates opportunity; and the major source of change is innovation (Ahmed, 1998).

Drivers of Innovation What drives a particular enterprise to innovate and the innovation strategy it chooses sets the scene for assessing the capabilities that are needed. Ulrich (2002) sees three premises associated with innovation: innovation matters to the enterprise; innovation is multifaceted, and innovation is a culture, not an event, and that there are six characteristic stages; idea generation, impact, incubation, investment, integration and improvement. The multi-faceted nature of innovation leads to the notion that there may be people, technology or innovation system drivers that are blended in different ways in different enterprises. The enterprise’s external environment drives innovation. Thomas (1993) in a study of industrial policies in ten nations concluded that a very demanding environment can be conducive to innovation. Afuah (1998) argues that factor conditions such as natural resources, skilled labour, capital, universities and private research laboratories, which are a supply of scientific, technological and market knowledge can be sources of local advantage. Supported by such a platform of excellence, new ideas can be nurtured into products and services. The nature of the local demand for products and services reflect the local firm’s ability to innovate, and some studies of regional clusters have shown a common pattern of smaller innovative firms clustering around a larger client with extended market reach. Customer needs, preferences and expectations should be broadly articulated to organizations and manufacturers to provide some focus for them in their innovative thinking. In addition, suppliers too, can be critical in generating new product or service ideas, and supporting them through subsequent

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development and commercialization. Local rivalry can improve the ability of firms to innovate. Firms may pick up knowledge from each other, and build on it to improve and survive leading to more innovative ideas. Lastly, government policies in most countries assist organizations to innovate through funding, assistance, consultancy and other policies. Organizations once they recognize the need to innovate can determine whether they must embark upon radical or incremental innovation such as continuous improvement (CI). However there is a not a simple decision loop that allows managers to select the area in need of innovation and then determine what type of innovation best suits the organization. Rather innovation is a complex process that is impacted upon by many different variables. In recognizing the need to innovate managers are responding to the variables that drive innovation. In the CIMA project (see Boer et al. 2001) several levers that drive innovation particularly in new product development were identified from an extensive review of the literature. These generic drivers of innovation are found both within and outside organizations and can lead to both radical and incremental innovation. Internal and external drivers can either push or pull innovation in particular directions. The key drivers of innovation identified in the CIMA literature that impact on innovation in service areas such as logistics and distribution can be categorized into six main areas. The first category consists of the available knowledge and information. In most organizations people acquire and generate new knowledge internally and once it has been acquired there is a push to utilize this new knowledge in innovative ways. While knowledge and information is generated internally it is often based on information acquired from customers, suppliers and competitors. A common way of acquiring information on competitors is to recruit competitors’ staff. According to Leonard-Barton (1992), Garvin (1993) and others including Miner and Mezias (1996) employees also try to assimilate the knowledge they have acquired externally from customers and suppliers into the organization and apply it to improve organizational functions. Once this information or knowledge has been transferred into an organization Garvin (1993) argues there is incentives to further distribute the knowledge throughout the organization. This internal distribution once again pushes further innovation. This use and interpretation of knowledge does not occur in isolation rather the knowledge is often used according to Senge (1990) and



Garvin (1993) to achieve strategic goals and objectives. The strategic goals and objectives not only set the scene for innovation but they should be and internal driver that pulls innovation in a direction that seeks to achieve organisational performance goals. Performance measure is another category of driver that can both push and pull innovation in an organisation. Performance measurement can be used as Leonard-Barton (1992), and Goh and Richards (1997) argue monitor improvements and if they are underachieving the expected performance outcomes drive further innovative approaches to improving performance. A key performance measure from both and external and internal standpoint is the organizations financial position. To maintain profitability a firm may have to opt for radical innovations that drive down costs and improve profits, this may be in response to internal stakeholders or external shareholders. Internally performance measures linked to reward and recognition systems can be used by managers to ensure that innovation is pulled towards achieving outcomes linked to strategic goals and objectives. If this is to be achieved in an effective way then it needs to be linked to a third category of driver, human resource management (HRM) systems. HRM systems drive the distribution and acquisition of knowledge, through the structuring of work teams, human resource development and recruitment they bring new people and new ideas into the organization. HRM policy also affects the employee orientation, for example does the reward structure reward individuals or teams, a HRM system based on teams that rewards individuals would lead to a dysfunctional situation. The HRM system should also be used to motivate and encourage new ideas and the acquisition of knowledge. This acquisition of knowledge in the form of human capital according to Leonard-Barton (1992) and Crossan, Lane and White (1999) provides the organization with a creative capacity that encourages and drives innovation. However, for human capital to be applied effectively it needs to do so within organizational structures. These organizational structures are yet a further category of driver of innovation. Internal structures such as temporary teams and cross-functional team can accelerate the distribution of knowledge in an organization. As Dodgson (1993) and Crossan, Lane and White (1999) argue, organizational structures enhancing learning and connect the organization to its goals and processes. The organizational structure provides both a framework for innovation and drives innovation when it facilitates learning that leads to improvements in process, products and prac-


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tices. Cooper et al. (1999) and Weerd-Nederhof et al. (2002) put forward a further category of procedures and protocols important in driving innovation, project planning and control. Project planning and control at the operational level sets the direction of a project and drives any innovation in that direction. The sixth category, technology, is often regarded as the key to rather than a driver of, innovation. Technologies such as information and communication technologies (ICT) can drive innovation by enhancing communication, collecting and collating information and according to Crossan, Lane and White (1999), improving co-operation. So internally technologies such as ICT pull innovation; other technologies external to the organization can push innovation. When a competitor adopts a new technology such as enterprise resource planning (ERP) to improve their quality, speed and efficiency of delivery, this may force an organization to buy a similar solution or it may make the organization look at its process and procedures, and drive improvements and innovations that enable the organization to compete. Technology can also be introduced as an innovation in response to customers’ demands. Also, as organizations scan the technology available, they can develop new and innovative ways of modifying their existing technologies to perform additional functions. In this way external technologies are both a source of innovation and a driver of innovation. In summary, there are generic groupings of factors that drive innovation, and these factors can either be external (for example customers and competitors) or internal (for example employees and stakeholders) to the organization as shown in Figure 1. In addition, these drivers can push innovation (for example new employees ‘knowledge and competitors’ aggressive positioning) or in some cases pull innovation (customer’s requirements and changed performance requirements) in a particular way or direction. The drivers do not operate in isolation, rather their impact relies on both the environmental and operational settings of the organization.

Importance of the Service Sector Services make an increasing contribution to the economic growth of many developed and developing countries and account for about 60–70 per cent of GDP. Growth and innovation is therefore crucial to economic performance (Pilat, 2000). The drivers for innovation in services may be similar to these of manufacturing, but the roles are different. Not all drivers found

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PUSH FACTORS (causing innovation)

INTERNAL (to organization)

EXTERNAL (to organization)

PULL FACTORS (innovate to achieve)

Figure 1. Drivers of Innovation

in manufacturing will be evident in the service sector. For example product-family strategies were identified in Boer et al.’s (2001) work, but it is unlikely that distribution centres will produce new products. Similarly, IT was viewed as a driver in manufacturing, but it could also be used as an inhibitor and control function in logistics. Innovation and technological change is partly the result of R&D and is more dependent on technology, while organizational change and human capital are essential for innovation in the service sector (Pilat, 2000). Empirical research by the OECD (1997) shows that services contain some of the best-paid and most high-skilled jobs in the economy, although there are many low-skilled jobs (Pilat, 2000). This implies that there is a need for highly proficient and qualified personnel in contributing to the service economy.

Case-Study Methodology The research reported here used a number of in-depth, exploratory case studies to adapt the CIMA model (see Boer et al., 2001) to the management of innovation in logistics. The data collection for these case studies involved a series of 23 interviews with managers, and visits to observe the operations of the distribution centres. This is an iterative process of data collection. The managers were asked what the most important factors were that caused the organization to constantly improve or innovate. They were then asked to rank the importance of the factors that were put forward. The study was exploratory in nature as there has been no reported empirical research conducted on continuous improvement and learning in distribution centres. According to Yin (1994), the research must identify some sit-

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uations in which all research strategies might be relevant. The ‘how’ and ‘what’ questions are asked about a contemporary set of events over which the investigator has little or no control. This study, investigated ‘how’ learning and continuous improvements occur in logistics firms and ‘what’ factors affect it. As the study seeks to address research questions this suggests the adoption of an exploratory approach (Yin, 1994, p. 21). Yin (1994) also notes that exploratory studies are primarily useful for the generation of hypotheses centred on the phenomena under investigation. It was also anticipated that the research would result in the emergence of further theory and hypotheses to guide future research in the area. The aim of this research was to identify the drivers of innovation that are present in distribution centres that would enable incremental innovation and build capabilities to engender an innovative culture. The source of drivers was also identified and the direction (either push or pull) was also ascertained in this research. The identification of innovation drivers is essentially exploratory, in the sense that the main objective is to refine a research idea to facilitate further research (Kervin, 1992). To this end, the information gathering stage can be viewed as a preliminary investigation, identified by Emory and Cooper (1991) as a core method of conducting such research. Although it is common for exploratory research to rely on expert opinions and focus groups at the initial stages, this was not done in the present case. The justification for the adoption of the exploratory approach for this particular study lies in the nature of the subject area, and the set of interacting variables that influence innovation. Given that the research question is focused essentially on what drives innovation in logistics, it is con-



gruent with Yin’s (1994) argument that such research, when requiring no control over behavioural events, should be carried out with case studies. The qualitative approach and exploratory nature of the research question influenced the data-collection method. Research conducted within the qualitative paradigm is characterized by its commitment to collecting data from the context in which social phenomena naturally occur and to generating an understanding that is grounded in the perspectives of research participants (Bryman, 1988; Lofland, 1971; Marshall and Rossman, 1995; Miles and Huberman, 1984). Consequently, the data was collected from participants in their working environment using semi-structured interviews. This method allowed the capture of data rich in detail about the research problem; and gave the researchers the flexibility to explore additional issues raised by participants. This study used purposive sampling. Purposive or theoretical sampling was used as it offers researchers a degree of control rather than being at the mercy of any selection bias inherent in pre-existing groups (Mays and Pope, 1995). This was then followed by a crosssite analysis. The cross-site analysis consisted of the analysis of each single question such that the results obtained from the interviews of each of the organizations can be compared and contrasted. By adopting this method, a general level of congruency or dissent toward each of the learning behaviours was established. Ten firms were selected and interviewed. Firms A–E were distribution centres located in Australia, whilst firms F–J were distribution centres located in Singapore. The interviewees in all organizations confirmed analyses derived from the data. This provides a reasonable degree of internal validity. However, the external validity of the findings is relatively low since only ten organizations were studied. Limiting the number of case studies to ten was more than offset by the ability to conduct the case research in greater depth and the ability to use additional methods. A review of the rigour in methodology shows that although all the methods have certain limitations, their degree of validity and reliability is such that, taken together, it should be possible to build a credible picture of how distribution centres learn through continuous improvement.

Results The responses obtained from managers were very similar and tended to focus on certain themes. The factors they saw as important can


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be placed into seven groups: competition; employee orientation; customer orientation; shareholder orientation; financial reasons; to attain a leading edge in industry; and operational performance. Competition referred to the aggressive nature of the logistics industry; where there were rival firms operating and striving for market share this is an external driver that aligns with the acquisition and generation of knowledge and information. Organizations need to acquire information about their competitors and use this externally sourced information to drive innovation so that they can compete and survive. Employee orientation referred to the individuals in the firm who were highly spirited and motivated, constantly seeking ways to improve; consequently driving the organization to improve and innovate. Employee orientation is a function of the internal human-resource management system, as it is important to recruit highly motivated and creative em ployees and to have an organizational orientation that encourages and allows them to be innovative. Shareholder orientation referred to the fact that the firm wanted to give better returns and value to its owners who invested in it. The shareholder view of the business is part of the performance measurement driver and is an external driver of innovation. Financial reasons were another factor, whereby the firm wanted to either reduce costs, or ultimately increase its profits. Financial reasons are an internal performance measurement driver as the organizations focus on reducing costs and finding ways such as technology to reduce costs in innovative ways. The final two factors, seeking to become an industry leader and operational performance are both performance measurement factors. In seeking to be an industry leader, organizations measure their success or performance against competitors and find innovative ways to become the best in the business. From an internal point of view to become an industry leader firms must have highly effective and often innovative internal operational systems. Additionally, all managers gave more than one factor that caused their firms to embark on innovative strategies. In order to assist the analysis, they were asked to rank the drivers by importance. The following figure depicts the managers’ responses to the factors driving innovation in the selected firms interviewed. Figure 2 shows the frequency of their responses according to the seven main factors.

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8 7 6 N f o i 5 r 4 o m 3 f s 2 1

most important

2nd most important

Shareholder orientation

Competition

Operational Performance

To have a leading edge in industry

Employee orientation

Customer orientation

Financial Reasons

0

3rd most important

Figure 2. Drivers of Innovation in Firms and their Importance

Financial Reasons Three firms interviewed rated financial driver as most important (Firms, C, G and H). The managers interviewed stated that they either wanted to lower operating costs or gain higher profits in the long run, as a result of innovating. All managers stated that cost is a crucial factor in any organization. Firms innovate to improve cost efficiency. To manage and maintain a reasonable margin with the operations of the firm, the three managers in Firm C saw the importance of having the right systems and processes in place. They stated that then only, can there be profits and growth accruing to the firm. These cost savings can then be passed on to customers in terms of lower prices. The logistics and warehouse manager at Firm G argued that operating with low costs was also another strategy for the basis of competition, as firms strive to stay costcompetitive. It provided a sound and prudent business practice. The production manager added that they wanted to reap the financial benefits of streamlining processes, reducing labour and unit costs. According to the literature, service firms innovate because they want to improve the cost efficiency (Hauknes, 1999). Hauknes wrote that firms reduce cost in line with better quality products and services as empirically proven in the changes in nature and structure of competition in the service sector (Hauknes, 1999).

Competition The next factor is competition. None of the managers rated this as the most important factor driving their firms to innovate.

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However, it was second most important in four firms. Many of the managers understood that the logistics industry is a highly competitive one, with firms moving in and out of the industry all the time. They indicated the need to keep up with competitors, and especially the big players in this market. The general manager in Firm D felt that with a high number of new entrants constantly in the market, they have to be price competitive to retain their customers. Firm A managers expressed a concern that the industry is very competitive with new technology arising all the time such as e-commerce. The general manager stated: Firms in the supply chain compete on this basis using web-based orders and communication via the internet. It is a growing trend and has gained popularity in logistics firms. Many Distribution Centres are automating as well, using technology such as barcoding, radio-frequency communication and automated systems. We need to overcome competition and to keep up with rival firms. I feel that innovating is a means of sustaining competitive advantage.

Leading Edge in Industry In relation to the point of competition, some firms also strive to achieve a leading edge in the logistics industry. Firms want to innovate so as to be leaders and capture a larger market share in logistics services. Two firms interviewed (Firms A and I) chose this as their most important factor for innovating. The managers stated that competitive advantage was the basis for superior performance. Understanding and attaining competitive advantage



was of paramount importance to management and employees, who bore the ultimate responsibility for a firm’s long-term survival and success.

Customer Orientation Customer orientation had been selected the most number of times as causes of innovation. Two firms (Firms E and J) found it the most important factor to innovate, whilst four firms rated it as second important. When asked to comment on this aspect, the logistics manager of Firm J said: I believe customer satisfaction lies at the heart of all endeavours of organisations. Customers are the most important factor for any business. They are the ones that ultimately dictate the operations of businesses. In this regard, everything that we do or plan here should be for the customers and their satisfaction. These firms allowed customer issues to be reflected in the internal management structures and processes of their firm. They conducted regular analysis on their customers – how the customers perceived the delivery of services relative to expectations, sales, profit and their satisfaction levels. The logistics manager at Firm F explained that the firm conducted analyses in detail – by area, time-series and product group. They used data on customer satisfaction to implement marketing strategies and operations. The firms looked upon innovation as a means to achieve customer satisfaction. They could build customer loyalty by delivering superior value, which was also an underlying source of competitive advantage. The general manager of Firm E felt that by increasing customer satisfaction and customer retention, it could indirectly lead to improved profits, positive word-of-mouth, and lower marketing costs. However, he mentioned that for successful customer satisfaction, the firm needed a fully committed, well-trained and involved workforce. Howells (2000) also supported this view and claimed that customers and competition are the main driving forces for innovation in service industries.

Employee Orientation The managers of Firms D and F ranked employee orientation as the most important driving force of innovation in their Distribution Centres. Employee orientation refers to the mindset that the people in the firm possess. They chose to innovate because the employees were motivated, trained or enthu-


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siastic about continuously improving. The general manager of Firm D considered the employees to be the ‘heart of the company’. He reported: I have a very motivated bunch of employees, of whom I am very confident in. They see their work as always challenging, and in keeping the work more viable for further improvement. This is evident when they are given some form of ownership and authority in their jobs (empowerment) – They respond more quickly to customer service requests, act to rectify complaints and even more engaged in service encounters. The evident success of empowerment at Firm D was possible with appropriate management style and employee participation. Once empowered, employees were given the discretion, autonomy, power and control, they developed the motivational aspect and took the initiative to improve. They were the ones who drove the firm to innovate. The managers in Firm F had a slightly different view than those of Firm D. The human resource manager asserted that employees were the most important asset of the firm. The recruitment process, employee development and organizational expectations affected the drive to innovate. It was important to recruit the right people or to train existing people. In addition, the operations manager added that culture also played a role in influencing the aptitude to innovate. Emphasis was put on interrelationships, requiring a shared understanding of the direction and values needed for effective business performance. Employee motivation to innovate could only be steered by strategic direction from management in Firm F. It was felt that the employees from these two firms were indoctrinated on the holistic meaning of innovation. There was freedom from traditional hierarchical structures in the management of innovation. It was apparent that creativity, team working, communication, empowerment, project management, opportunities to learn, change and leadership were evident in the firms that caused them to innovate. All these points are in line with the literature. Brafman and Folmer (1998) wrote that as the organization embraces the culture of innovation, employees display zealous efforts, motivation and are willing to take risks. Similarly, Quinn (1985) wrote that individuals needed to possess certain characteristics and factors, affecting their mindset in being motivated, trained or enthusiastic about continuously improving.

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Shareholder Orientation

more Australian firms that had a higher total response to customer orientation for innovating. There was one firm in each country with response to employee orientation and having a leading edge. The figure also shows that there were more Australian firms in total that considered financial drivers for innovating than Singaporean firms. The figure also depicts more Singaporean firms than Australian firms that focused on operational performance.

Another driver for innovation is the focus on shareholders. The general manager in Firm H was the only one to mention this commitment to their investors. It was ranked third in importance among other factors. He stated: We want to achieve a stock price appreciation as a result of innovating. We intend to launch a steady stream of competitive new successful services in the operations by innovating. With this success, the company can yield increased quarterly dividends and attract new investors. So the shareholders can enjoy consistent financial rewards. Also from this, our stock price can appreciate or increase. This will benefit them and increase their confidence.

Conclusion It is found that all the distribution centres embarked on innovative strategies. Each firm had its own drivers or needs to improve. These factors can be grouped as push factors or pull factors. The push factors are the drivers or causes, initiating a realization or a response. The pull factors are actually the desired end outputs that the firm wishes to achieve out of innovative efforts. These factors can also be grouped according to internal or external conditions of the firm. The external conditions refer mainly to the environment or industry that they are operating in. The internal conditions relate to the people, systems, processes and strategies within the organization. They can be illustrated in the following figure.

Operational Performance Operational performance was a factor where firms wanted to attain quality, speed and efficiency of the services provided. Four firms indicated this as a driver to improve, however only Firm B regarded this as most important. The managers viewed innovation as a means to be more efficient and provide high levels of service to customers. Figure 3 shows the drivers of innovation in firms between the two countries. There were

To have leading edge in industry 4

3

Competition

Customer orientation 2

1

0

Operational performance

Employee orientation

Financial motive Australian firms

Shareholder orientation Singaporean firms

Figure 3. Drivers of Innovation between Australia and Singapore

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PUSH FACTORS (causing innovation) Employee orientation ∑ Competition ∑

INTERNAL (to organization) ∑ ∑ ∑ ∑ ∑

EXTERNAL (to organization) ∑

Employee orientation Shareholder orientation Financial reason Quality, speed, efficiency Leading edge in industry

∑

Customer orientation Competition

PULL FACTORS (innovate to achieve) ∑ ∑ ∑ ∑ ∑

Customer orientation Shareholder orientation Financial reason Quality, speed, efficiency Leading edge in industry

Figure 4. Drivers of Innovation Grouped into Push, Pull, Internal and External Factors

From this, it can be deduced that the firms embarked on innovation projects as a result of a combination of internal and external drivers to improve their position in the business market. They proactively or reactively embarked on innovative strategies as can be seen from their main drivers for innovation. Upon further analysis of the overall drivers of innovation, there were more pull factors than push factors in both the Australian and Singaporean firms. However, the Australian firms pursued innovation mainly for external reasons. The drivers for Singaporean firms tended to be more internal to the organization. It appears that the human resource management systems in Singaporean firms and their organization structures are designed to drive and support innovation. This is not surprising in Singapore given its position and reliance on logistics industries. Also, given its size and location Singapore must be globally competitive so it is not surprising they drive innovation internally. From an Australian perspective financial measures still are the major motivators for change and it is to be expected that in distribution centres financial performance is an important driver of innovation. It was surprising that shareholder value was not seen as driver for Australian firms. This research has shown that cultural factors do not play a significant role driving innovation, from the interviews it was apparent that managers are looking for ways to compete and succeed in a global market and while there may be cultural differences at a micro-level these are not substantial. From the researchers’ point of view, as one of the researchers has worked and lived in both Singapore and Australia the lack of


difference was surprising from the cultural perspective. The respondents stated that the most important drivers for change or innovation were financial pressures, customer focus and increasing global competition as shown in the graphs. This is in line with the literature (Roberts, 1991; Shanklin and Ryans, 1984) stating that businesses, in order to innovate, must evolve primarily from an inward orientation keeping in mind their resources, capabilities and competencies, towards an outward orientation where the firms devotes attention to the needs of customers and the aggressive market place. From the wider perspective of logistics rather than simply the distribution function, it can be seen that financial measures will continue to be very important drivers of innovation. While within countries such as Australia and Singapore competition and staying ahead of the opposition is currently an important driver, its importance will only increase in the future. As global trade becomes more competitive and emerging low-cost economies such as China and India widen their market penetration, existing operations will have to become more innovative rather than less if they are going to survive and compete. At present, existing business are under pressure from their customers to delivery quality service, in a timely manner, at the right price, while this customer orientation has driven innovation – as customers become more demanding logistics services providers will have to continue to respond to these pressures. Rather than competing for customers’ business firms will need to seek innovative organizational structures and collaborative

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arrangements that make it difficult for competitors to steal their customers. This research has not addressed the role of collaboration in enhancing and driving innovation and this is one area that needs further substantial research. Firms with similar functions in the same industrial sector servicing similar customers have similar drivers of innovation even when they are operating in different countries with seemingly different cultures.

References Afuah, A. (1998) Innovation Management: Strategies, Implementation and Profit. Oxford University Press, New York. Ahmed, P.K. (1998) Culture and Climate for Innovation. European Journal of Innovation Management, 1(1), 30–43. Boer, H., Caffyn, S., Corso, M., Coughlan, P., Gieskes, J., Magnusson, M, Pavesi, S. and Ronchi, S. (2001) Knowledge and Continuous Innovation: The CIMA Methodology. International Journal of Operations and Production Management, 21(4), 490–504. Brafman, S. and Folmer, K. (1998) Innovation must be rooted in Culture of Workplace. Washington Business Journal 5 (Oct). In Depth: Human Resources Quarterly. Available from http:// washington.bcentral.com/washington/stories/ 1998/10/05/focus7.html, (Accessed 4 May 2001). Bryman, A. (1988) Doing Research in Organisations. Routledge, London. Cooper, R., Charlton, J., Roberts, C., Whitelock, J. and Souder, W. (1999) New Product Development: Leadership and Learning. A Comparison of UK and US High-Technology Companies. International Journal of Continuous Engineering Education and Life-Long Learning, 9(1), 88–114. Crossan, M.W., Lane, H.W. and White, R.E. (1999) An Organisational Learning Framework. From Intuition to Institution. Academy of Management Review, 24(3), 522–37. D’Aveni, R. (1994) Hypercompetition: The dynamics of strategic manoeuvring. Basic Books, New York. Dodgson, S. (1993) Organisational Learning. A Review of some Literatures Organization Studies, 14(3), 375–94. Drucker, P.F. (1992) Managing for the Future. Butterworth-Heinemann, Oxford. Emory, C. and Cooper, D. (1991) Business Research Methods. Richard D. Irwin, Homewood, IL. Garvin, D.A. (1993) Building A Learning Organisation. Harvard Business Review, July–August, 78–91. Goh, S. and Richards, G. (1997) Benchmarking the Learning Capability of Organisations. European Management Journal, 15(5), 575–83. Hauknes, J. (1996) Innovation in the Service Economy. Studies in Technology, Innovation and Economic Policy (STEP Group) Report. December, Oslo.

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Howells, J. (2000) The Nature of Innovation in Services. OECD Innovation and Productivity in Services Workshop, Oct/Nov, Sydney, Australia. Johannessen, J.A., Olsen, B. and Lumpkin, G.T. (2001) Innovation as Newness: What is New, How New, and New to Whom? European Journal of Innovation Management, 4(1), 20–31. Johne, A. (1999) Successful Market Innovation. European Journal of Innovation Management, 2(1), 6–11. Kervin, J.B. (1992) Methods for Business Research. Harper Collins, New York. Leonard-Barton, D. (1992) The Factory as a Learning Laboratory. Sloan Management Review, Fall, 23–37. Lofland, J. (1971) Analysing Social Settings: A Guide to Qualitative Observation and Analysis, Wordsworth, Belmont, CA. Marshall, C. and Rossman, G.B. (1995) Designing Qualitative Research, 2nd edition. Sage, Thousand Oaks, CA. Mays, N. and Pope, C. (1995) Rigour in Qualitative Research. British Medical Journal, 3(11), 109– 112. Miles, M.B. and Huberman, A.M. (1984) Qualitative Data Analysis. A Sourcebook of New Methods, Sage, Thousand Oaks, CA. Miner, A.S. and Mezias, S.J. (1996) Ugly Duckling No More Pasts and Futures of Organisational Learning Research. Organization Science, 7(1), 88–100. Mitchell, J.C. (1983) Case and Situation Analysis. Sociological Review, 31(3), 186–211. Nonaka, I. and Takeuchi, H. (1995) The KnowledgeCreating Company: How Japanese Companies Create the Dynamics of Innovation. Oxford University Press, New York. OECD (1997) Information Technology Outlook. OECD, Paris. Pilat, D. (2000) Innovation and Productivity in Services: State of the Art. OECD/Australia Workshop on Innovation and Productivity in Services, Sydney, Australia, 1–2 November. Quinn, J.B. (1985) Managing Innovation: Controlled Chaos. Harvard Business Review, May, 73–84. Robson, C. (1993) Real World Research – A Resource for Social Scientists and Practitioner-Researchers. Blackwell Publishers, Oxford. Senge, P.M. (1990) The Fifth Discipline. Mastering the Five Practices of the Learning Organization. Doubleday, New York. Shanklin, W. and Ryans, J. (1984) Organising for High-Tech Marketing. Harvard Business Review, Nov/Dec, 164–71. Shepherd, C. and Ahmed, P.K. (2000) From Product Innovation to Solutions Innovation: A New Paradigm for Competitive Advantage. European Journal of Innovation Management, 3(2), 100–6. Thomas, L.G. (1993) Implicit Industrial Policy: The Triumph of Britain and the failure of France in Global Pharmaceuticals. Working Paper School of Business, Emory University. Ulrich, D. (2002) An Innovation Protocol. In Hesselbein, F., Goldsmith, M. and Somerville, I. (eds.), Leading for Innovation and Organizing for Results. pp. 215–24. Jossey-Bass, San Francisco.



Weerd-Nederhof, P.C. de, Pacitti, B.J., Gomes, J.F. da Silva and Pearson, A.W. (2002) Tools for Improvement of Organizational Learning Processes in Innovation. Journal of Workplace Learning, 14(8), 320–331. Yin, R.K. (1994) Case study research – Design and methods, applied Social Research Methods. Series 5, 2nd edition. Sage, Newbury Park, CA.


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Claudine Soosay (Australian Expert Group in Industry Studies (AEGIS), City Research Centre, University of Western Sydney, Australia, Email [email protected]) is a Post-doctoral researcher at the Australian Expert Group in Industry Studies, City Research Centre, University of Western Sydney, Australia. Paul Hyland (Professor of Management, Faculty of Business and Law Central Queensland University, Email p.hyland @cqu.edu.au) is Associate Professor of Management in the Faculty of Business and Law at Central Queensland University.

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Project Factors Influencing Conflict Intensity and Handling Styles in Collaborative NPD Ping-Kit Lam and Kwai-Sang Chin Conflict and conflict management are critical research issues in client-supplier collaborative new product development (NPD). A recent study found that conflict intensity and conflicthandling styles affect collaborative NPD performance. In this paper, we explore the relationships of four NPD project factors, namely product technical complexity, product certainty, task interdependence and the relative power of supplier, to conflict intensity and suppliers’ adoption of integrating and dominating conflict-handling styles. Research findings based on survey data collected from 193 suppliers provide a clear insight into the conflict intensity and suppliers’ adoption of conflict-handling styles for NPD projects of various characteristics, which enables better planning for conflict management and helps improve NPD performance.

Introduction

K

ezsbom (1992) stated that conflict is inevitable in a project involving multidisciplinary working parties. New product development (NPD) is a complex process, and its success relies on the integrated crossfunctional input and effective co-ordination and co-operation among different functional areas (Xie, Song and Stringfellow, 1998). Conflict is thus a natural phenomenon in NPD. Several researchers have studied conflict within an organization, and confirmed the fact that conflict and conflict management have significant relationships with NPD performance (Gobeli, Koening and Bechinger, 1998; Xie, Song and Stringfellow, 1998). Client-supplier collaboration in NPD is the strategy pursued by a growing number of manufacturing firms. A client, sometimes called a buyer, is a party which provides product specifications to a manufacturing firm for production. A supplier is a manufacturing firm responsible for producing products for a client, based on the product specifications provided. The success of client-supplier collaboration depends on how well the relationship is managed. Conflict and conflict management, although proved at an intra-organizational level (within an organization) to be important to NPD, is still not well researched in client-

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supplier collaboration. Lam and Chin (forthcoming) extended the conflict research in NPD from an intra-organizational to interorganizational level (between organizations). They studied conflict and its management in client-supplier collaborative NPD, and found that conflict intensity and conflict handling styles affect NPD performance. This paper tries to enrich the conflict research in clientsupplier collaborative NPD by empirically exploring the relationships of four NPD project factors, namely product technical complexity, product certainty, task interdependence and the relative power of supplier, to conflict intensity and suppliers’ adoption of integrating and dominating conflict handling styles. Identification of these relationships could provide a clear insight into the conflict intensity and suppliers’ adoption of conflict handling styles for NPD projects of various characteristics, which enables better planning for conflict management and helps improve NPD performance.

Literature Review Client-Supplier Collaborative NPD NPD has been recognized as the key to corporate prosperity (Cooper, 1998; Craig & Hart,

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CONFLICT INTENSITY AND HANDLING STYLES IN NPD

1992; Primo and Amundson, 2002). The importance of NPD has attracted researchers from various fields to study the elements and practices of NPD success (Craig & Hart, 1992). In recent years, client-supplier collaboration has been recognized as an important strategy of NPD. In response to today’s rigorous competition, rapid technological change and shortened product life-cycle, an increasing number of manufacturing firms adopt a strategy that focuses on their core competencies and outsources the non-core activities to their suppliers (Krause, Handfield and Scannell, 1998). Reductions of development time and costs, and an improvement of product quality are the common benefits of client-supplier collaboration (Ragatz, Handfield and Scannell, 2002). In the past decade, researchers have studied various aspects of the management of clientsupplier collaboration for improving NPD performance. Hartley, Zirger and Kamath (1997) examined the relationship between client-supplier interface and development delay. Bidault, Despres and Butler (1998) identified the drivers of co-operation between clients and suppliers. Araujo, Dubois and Gadde (1999) studied the management of client-supplier relationship from the perspective of resource interface. Wynstra and Pierick (2000) proposed using a portfolio approach to managing supplier involvement. Primo and Amundson (2002) investigated the effect of supplier involvement on NPD performance. Sobrero and Roberts (2002) explored the role of contractual and organizational arrangements in client-supplier collaborative NPD. These studies show the significance of collaboration management to NPD success. A new research area in the management of clientsupplier collaborative NPD was explored by Lam and Chin (forthcoming) who studied conflict and its management from suppliers’ perspective. It was stated that as clients and suppliers are dependent on each other for NPD success, the differences in culture, belief, role and objective between the two parties could inevitably lead to conflicts throughout the collaboration. Conflict and conflict management were found to be critical in clientsupplier collaborative NPD.

Conflict Management in NPD The importance of conflict and its management to organizational performance has widely been recognized (Brown, 1983; Pondy, 1967; Rahim, 2001). Authors in organizational research have reported the effect of conflict on organizational performance in different ways. Some claimed that conflict could be detrimen-


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tal to organizational performance (McDonald, 1972; Neuhauser, 1988). Some asserted that conflict could be beneficial (Cosier and Dalton, 1990). Others, however, stated that too much or too little conflict leads to bad performance, and that a moderate intensity of conflict brings about the best performance (Brown, 1983; Rahim and Bonoma, 1979). The contradictory findings imply that the effect of conflict on performance is different in different contexts. In the field of NPD, several researchers have studied conflict within a product development team and among departments. Gobeli, Koenig and Bechinger (1998) found a negative relationship between conflict intensity within a project team and NPD performance. Xie, Song and Stringfellow (1998), however, stated that moderate intensity of conflict among departments leads to the highest NPD performance. In a study about conflict in client-supplier collaboration (Lam and Chin, forthcoming), conflict intensity was found negatively related to product quality, meeting of target product delivery schedule and development costs. Lam and Chin agreed with Rahim’s (2001) assertion that conflict has both functional and dysfunctional outcomes. Rahim (2001) stated that the functional outcomes include stimulating innovation and creativity, and better decision-making, whereas dissatisfaction, mistrust, damaged commitment and relationship are the common dysfunctional outcomes. Lam and Chin argued that in clientsupplier collaborative NPD, collaborating parties are more concerned about trust, commitment and keeping a good relationship, than innovation and creativity. In addition, high conflict intensity requires substantial efforts and time for conflict resolution, which may increase development time and costs. Product quality may also be sacrificed when a short time to market is being pursued. As the dysfunctional effects outweigh the functional effects, high intensity of conflict is generally detrimental to client-supplier collaborative NPD. Apart from conflict intensity, the ways of managing conflict also have impact on NPD performance. A sustainable amount of conflict, if managed properly, could minimize the dysfunctional outcomes and enhance the functional outcomes, which in turn leads to better NPD performance. Conflict-handling styles, approaches of managing conflict, are other critical issues in conflict research. Researchers (Blake and Mouton, 1964; Rahim and Bonoma, 1979; Thomas, 1990) have classified conflicthandling styles in a similar manner. One of the widely accepted classifications was developed by Rahim and Bonoma (1979), who identified five conflict-handling styles, namely integrat-

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ing, avoiding, obliging, dominating and compromising. Rahim and Bonoma’s classification model has two dimensions. The first dimension is ‘concern for self’, which explains the extent to which a party attempts to satisfy its own concern (Rahim and Bonoma, 1979). The second dimension is ‘concern for others’, which explains the extent to which a party attempts to satisfy the concern of other party (Rahim and Bonoma, 1979). We are more concerned with the dimension of ‘concern for others’ as it shows the co-operativeness of a party in conflict resolution. Many studies have shown that co-operative styles are more effective than non-co-operative styles (Rahim, 2001). As collaborating parties generally try to satisfy their concerns, because conflicting issues usually affect their benefits, we focus our study on two styles: integrating and dominating. Both styles are prone to make efforts to address their own concerns, but they have different levels of co-operativeness. Integrating is a co-operative approach, whereas dominating is a competitive approach. Integrating involves collaboration between the parties, i.e., openness, exchange of information, and examination of differences to reach a solution acceptable to both parties (Rahim, 2001). Dominating, however, has been identified as a winlose orientation, or with forcing behaviour to win one’s position. ‘A dominating or competing person goes all out to win his or her objective and, as a result, often ignores the needs and expectations of the other party’ (Rahim, 2001). In the field of NPD, several researchers have studied the effects of integrating and dominating conflict handling styles on performance. Gobeli, Koenig and Bechinger (1998) studied conflict within a new product development team. They found that integrating is the effective approach to handle conflict, whereas dominating is the ineffective approach. Chan (1989) studied inter-group conflict in R&D departments. It was found that integrating has a positive impact on performance, and dominating has a negative impact. Another study about conflict among departments in Hong Kong, however, presented a different finding (Xie, Song and Stringfellow, 1998). Integrating and dominating conflict-handling styles were found to have no relationship with NPD performance. In client-supplier collaborative NPD, Lam and Chin (2003) found that integrating is the effective approach, and dominating is the ineffective approach. It was argued that as common goal and mutual benefit are the emphases of collaborative NPD, integrating is effective because it strives for the best solution that

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satisfies the concerns of both parties. Dominating, however, is ineffective, because its win-lose orientation undermines the foundation of the collaboration which is to pursue mutual benefit. It was suggested that suppliers should always adopt integrating rather than dominating in the handling of conflict. In this paper, we discuss the factors influencing conflict intensity and suppliers’ adoption of integrating and dominating conflict-handling styles.

Hypothesis Development The Relationships Between Four NPD Project Factors and Conflict Intensity Many researchers, in various fields, have found a negative relationship between conflict intensity and organizational performance (Barker, Tjosvold and Andrews, 1988; Gobeli, Koenig and Bechinger, 1998; McDonald, 1972; Neuhauser, 1988). In client-supplier collaborative NPD, high conflict intensity is also associated with low NPD performance (Lam and Chin, forthcoming). To have better planning for conflict management, we need an understanding of the conflict intensity for NPD projects of various characteristics. Based on the literature in the areas of conflict management, NPD, and client-supplier collaboration, and under the review of 11 manufacturing experts, we identify four project factors which may influence conflict intensity, as well as suppliers’ adoption of conflict-handling styles. The relationships between the project factors and conflict intensity are discussed as follows: Product Technical Complexity The first factor is product technical complexity. Suppliers’ roles range from producing a simple part to a complex product. Development of a complex product necessitates a long and complex interaction process between clients and suppliers for decision-making and problem solving. The intensive interactions naturally bring about more chances of conflict (Jehn, 1995). Ragatz, Handfield and Peterson (2002) stated that utilizing the knowledge of suppliers is one of the reasons for collaboration. In the development of a complex product, clients generally have less technological capability as they rely on suppliers to develop products. While conflicts are induced easily when collaborating parties perceive differences (Chan, 1989; Oh and Sharpe, 1995; Rahim, 2001), the differences in technical background and belief between clients and sup-



pliers could also lead to conflicts. Thus, we believe there is a positive association between product technical complexity and conflict intensity. Product Certainty The second factor that may influence conflict intensity is product certainty, which is defined as the extent to which the expected outcome of a product is certain when NPD begins. In the collaboration, clients provide product specifications, which range from a simple concept to detailed engineering descriptions to suppliers at the beginning of NPD (Fleischer and Liker, 1997). Product certainty is low when clients provide specifications that involve only a simple product concept, while the certainty is high when detailed specifications are provided to suppliers. We expect a negative relationship between product certainty and conflict intensity. Based on the specifications provided by clients, suppliers may need to develop detailed specifications and seek confirmation from clients, who may not always be satisfied with the way design requirements are fulfilled. Low product certainty thus necessitates an intensive interaction process between clients and suppliers, which induces more conflicts (Putnam and Poole, 1987). Besides, low product certainty implies that there are more chances of the misinterpretation of product requirements by suppliers. The discrepancy in the understanding of product requirements can also cause severe conflicts at the later stages of NPD. Task Interdependence The third factor is task interdependence. Task interdependence is defined similarly to that proposed by Jehn (1995) as the extent to which a working party relies on one another to perform and complete their tasks. High task interdependence implies the need for intensive interactions, as the design decision of one party could influence the other’s design activities. It was stated by Jehn (1995), who studied conflict within a project team, that task interdependence increases the amount of interactions among members, therefore creating more chances of conflict. Xie, Song and Stringfellow (1998) asserted that conflict occurs because of the interdependence between parties. Wilmot and Hocker (2001) also argued that interdependence makes decisions very complex, which brings about more conflicts. Thus we believe a positive association exists between task interdependence and conflict intensity.


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The Relative Power of Supplier The fourth factor is the relative power of supplier. Relative power is defined as the capabilities to influence the other party’s decision variables (Lin and Germain, 1998). The importance of power balance to collaboration has been recognized (Apfelbaum, 1974; Gray, 1989). When the power between collaborating parties is not balanced, they tend to struggle over power, leading to thwarting, interference and conflict (Wilmot and Hocker, 2001). Kamath and Liker (1994) argued that suppliers have generally less influence on design decisions, which implies an imbalance of power in the collaborative relationship. As a disparity of power causes conflicts, we expect a negative association between the relative power of supplier and conflict intensity. Based on the above arguments, we hypothesize the following: H1a: Product technical complexity is positively related to conflict intensity H1b: Product certainty is negatively related to conflict intensity H1c: Task interdependence is positively related to conflict intensity H1d: The relative power of supplier is negatively related to conflict intensity

The Relationships of Four NPD Project Factors to Integrating and Dominating Conflict-Handling Styles Conflict-handling styles are important elements of conflict management. Lam and Chin (2003) stated that suppliers should always adopt integrating rather than dominating styles for effective conflict resolution. The literature review, however, reveals that the relationships between project factors and conflict-handling styles have attracted very little attention. In this section, we try to explore the relationships of the four NPD project factors to suppliers’ adoption of integrating and dominating conflict handling styles. Product Technical Complexity Complex products are usually assigned to suppliers with strong development capabilities (Fleischer and Liker, 1997). When a conflict about the technical aspect of a product occurs, suppliers may dominate in the conflict resolution because clients usually have limited knowledge about technical issues. Therefore, we expect a positive relationship between product technical complexity and a dominating conflict-handling style. Furthermore, suppliers tend to adopt an integrating style less

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frequently when product technical complexity is high, as suppliers do not rely on clients’ limited role in providing information to solve design problems. Thus, product technical complexity should relate negatively to integrating conflict-handling style.

Dwyer and Walker (1981) stated that when a party has more power, they tend to dominate in the bargaining. High-power suppliers are prone to adopt a dominating style, in order to maximize their benefits. Based on the above arguments, we hypothesize:

Product Certainty

H2a: Product technical complexity is negatively related to an integrating conflict-handling style H2b: Product technical complexity is positively related to a dominating conflict-handling style H2c: Product certainty is positively related to an integrating conflict-handling style H2d: Product certainty is negatively related to a dominating conflict-handling style H2e: Task interdependence is positively related to an integrating conflict-handling style H2f: Task interdependence is negatively related to a dominating conflict-handling style H2g: The relative power of supplier is positively related to an integrating conflict-handling style H2h: The relative power of supplier is positively related to a dominating conflict-handling style

As hypothesized previously, we believe that a positive relationship exists between product certainty and conflict intensity. High product certainty should be associated with low conflict intensity. When conflict intensity is low, suppliers may not dominate in conflict resolution. Instead, they are willing to spend time and effort to adopt an integrating style by exchanging information and examining differences in order to reach a solution that satisfies both parties. Thus, we expect product certainty to be associated positively with the integrating style, but negatively with the dominating style. Task Interdependence Task interdependence may also influence the adoption of both integrating and dominating conflict-handling styles. High task interdependence implies that clients and suppliers rely heavily on each other to complete their tasks. As the decision made by one party could affect the other, frequent information exchange and joint decision-making are indispensable. Both parties are thus willing to adopt an integrating style in order to find a mutually satisfying solution. Moreover, in a project of high task interdependence, suppliers tend to avoid adopting a dominating style, because a forced decision may adversely affect clients’ tasks, and in turn client satisfaction. Therefore, we expect task interdependence to associate positively with an integrating style, but negatively with a dominating style. The Relative Power of Suppliers Wilmot and Hocker (2001) stressed the importance of the power balance to effective collaboration. As stated previously, suppliers generally have less influence on the design decision, and there is an imbalance of power in the collaborative relationship. When suppliers have high power, they are more likely to adopt an integrating style, out of a sense of fairness. Hence, we expect a positive association between the relative power of supplier, and an integrating conflict-handling style. Moreover, we also expect a positive relationship between the relative power of supplier and a dominating conflict-handling style.

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Research Methodology Sample and Response Rate The sample frame of the survey is based on the manufacturing firms listed in the Directory of Hong Kong Industries (2002–03) published by the Hong Kong Productivity Council. A total of 1,403 manufacturing firms (mainly in the industries of electronic and electrical products, toys, machinery, and watches and clocks) were sent a questionnaire to seek their participation. After the initial mailing and follow-ups through a reminder (75 questionnaires were not sent successfully), 245 questionnaires were returned, forming a response rate of 18.4 per cent. The data analysis finally included 193 questionnaires. A total of 52 questionnaires were discarded, for the following reasons: (1) the firm does not develop new products; (2) the firm does not collaborate with clients; (3) the respondent is not involved in NPD; (4) too many missing data. Constructs regarding the NPD project factors were subjected to an independent-samples t-test to ensure that no significant difference existed between the data returned before and after the follow-up (Lambert and Harrington, 1990). The results show no significant differences between the two sets of data, indicating no non-response bias.

Measures The measures were preliminarily developed based on the previous studies on conflict man-



agement, NPD and client-supplier collaboration. Interviews were conducted with 11 manufacturing experts and one statistical consultant to improve the questionnaire design and refine the measures adopted. The questionnaire was then pre-tested by a group of 45 industrial people. The participants were all working in the manufacturing firms, and they generally had positive comments on the questionnaire. Conflict intensity was defined similarly to that proposed by Jehn (1995) as the amount of disagreements among working parties about the tasks being performed, including differences in viewpoints, ideas and opinions. The measure for conflict intensity was adapted from Barker, Tjosvold and Andrews (1988). Based on the comments of the experts, three items related to conflict areas were added to measure conflict intensity. The measures for integrating and dominating conflict-handling styles were adapted from Rahim (1983) and from Dyer and Song (1998), and the measure for product technical complexity was adapted from McCabe (1987). However, as no relevant measures for product certainty were found, we developed one measurement item, which was regarded as appropriate by the manufacturing experts. The measures for task interdependence and relative power were adapted from Barclay (1991) and from Lin and Germain (1998) respectively. All the constructs were measured using a seven-point Likert scale. Cronbach’s coefficient alpha (a) was calculated to assess the reliability of the measures. Table 1 shows that conflict intensity, integrating and dominating conflict-handling styles have the satisfactory alpha values of 0.73, 0.80 and 0.69 respectively. These values are all higher than 0.6, which is the acceptable value suggested by Malhotra (1999) and by Murphy and Davidshofer (2001). As shown in Table 2, relative power (a = 0.55) and task interdependence (a = 0.50) have low Cronbach’s alpha values. These values are acceptable because of the small number of items (2) used (Carmines & Zeller, 1979; McDougall and Robinson, 1990). Factor analysis, a powerful method of construct validation (Carmines & Zeller, 1979; Kerlinger & Lee, 2000), was employed to assess the validity of the constructs. For better interpretability of the analysis results, the resulting factors were rotated using the varimax transformation and only factor loadings of 0.4 or above are listed (Malhotra, 1999). The results of the factor analysis shown in Table 1 and Table 2 support the validity of the constructs.


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Results and Discussion The Relationships Between the Four NPD Project Factors and Conflict Intensity A one-tailed pearson product-moment correlation was employed to test the hypotheses. Table 3 shows the results of the hypothesis testing about the relationships between the four NPD project factors and conflict intensity. It shows that only product certainty is significantly associated with conflict intensity. When product requirements and detailed engineering descriptions are certain at the beginning of NPD, clients and suppliers can discuss the design early, to minimize the chances of problem identification and conflict at the later stages of NPD. Conflict intensity is therefore lower for high product certainty. However, no significant relationships were found between conflict intensity and the three NPD project factors: product technical complexity, task interdependence and the relative power of supplier. We try to present explanations for these unexpected results. First, in complex product developments, clients generally have less influence on detailed design as they rely on suppliers’ development capabilities and knowledge to develop products, whereas suppliers take a more active and dominant role in the problem-solving process. Clients tend to go along with suppliers as long as design requirements can be fulfilled, which may reduce the need for frequent interactions between the two parties. Therefore, product technical complexity is not significantly associated with conflict intensity. Second, although high task interdependence requires intensive interactions between clients and suppliers, it could promote mutual understanding. When both parties rely on each other to complete their tasks, frequent information exchange and communication can minimize misunderstanding between the two parties, and in turn reduce design problems and conflicts. Moreover, task interdependence provides an incentive for collaboration (Walton and Dutton, 1969). Clients and suppliers with high task interdependence are likely to recognize the importance of collaboration. The orientation of a long-term relationship could reduce conflicts. The influence of intensive interactions on conflict intensity may be depressed by the effects of mutual understanding and the orientation of a long-term collaboration. Therefore the results reveal that task interdependence is not significantly associated with conflict intensity. Third, the pursuit of a longterm relationship may explain the insignificant association between the relative power of supplier and conflict intensity. The importance

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Table 1. Reliability and factor analyses of conflict intensity, integrating and dominating conflicthandling styles constructs Variable

Factor Loading Factor 1

Conflict Intensity (Cronbach’s coefficient alpha = 0.73) How often do the following situations happen between your company and the client? (1 = never, 7 = very frequently) 1. Different views on the design problems 2. Disagreement about the way to achieve the design goal 3. Expression of different opinions 4. Disagreement over quality of the product 5. Disagreement over time 6. Disagreement over cost Integrating conflict-handling style (Cronbach’s coefficient alpha = 0.80) When there are conflicts between your company and the client, your company . . . (1 = strongly disagree, 7 = strongly agree) 1. encourages the client to express its feelings and views 2. tries to bring all issues into the open discussion in order to resolve them in the best way 3. exchanges complete and accurate information with the client to help solve problems Dominating conflict-handling style (Cronbach’s coefficient alpha = 0.69) When there are conflicts between your company and the client, your company . . . (1 = strongly disagree, 7 = strongly agree) 1. insists on the initial viewpoint 2. treats conflict as a win-lose competition, and tries to win the competition 3. uses power to win the argument

of a long-term relationship to client-supplier collaboration has been recognized (Quelin, 2000). Low-power suppliers may not disagree fiercely to gain short-term benefits. Rather, they would try to satisfy clients for a longterm collaboration as long as their immediate benefits are not detrimentally affected. Conflict intensity, therefore, does not have a significant relationship with the relative power of supplier. The finding about the relationship between product certainty and conflict intensity has important implications. Most importantly, in the development project of low product certainty, suppliers and clients should devote

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Factor 2

Factor 3

0.799 0.761 0.594 0.593 0.588 0.558

0.870 0.848 0.799

0.762 0.750 0.718

their efforts to conflict management as conflict would be intensive. We also suggest that client and suppliers should develop detailed product requirements and design specifications at the beginning of NPD so that design problems and conflicts at later stages can be reduced.

The Relationships of the Four NPD Project Factors to Integrating and Dominating Conflict-Handling Styles Table 4 shows the results of the hypothesis testing about the relationships of the four NPD project factors to integrating and dominating



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Table 2. Reliability and factor analyses of project factors constructs Variable

Factor Loading Factor 1

The relative power of supplier (Cronbach’s coefficient alpha = 0.55) (1 = strongly disagree, 7 = strongly agree) 1. Your company has more influence on design decisions than the client 2. Your company has more bargaining power than the client

Factor 2

0.826 0.826

Task Interdependence (Cronbach’s coefficient alpha = 0.50) (1 = strongly disagree, 7 = strongly agree) 1. Your company works closely with the client because both companies need information from the other to complete the tasks 2. Your company interacts with many people from the client for completing the tasks

0.840

0.805

Note: Constructs of product’s technical complexity and product certainty are not included in the factor analysis because of the use of a single measurement item. The measurement items for the two constructs: Product technical complexity: Please rate the technical complexity of the new product. (1 = very simple, 7 = very complex) Product certainty: Your company receives detailed product requirements from the client when the NPD begins. (1 = strongly disagree, 7 = strongly agree)

Table 3. Testing results of the hypotheses H1a–H1d Hypothesis

Correlation

H1a: Product technical complexity is positively related to the conflict intensity H1b: Product certainty is negatively related to the conflict intensity H1c: Task interdependence is positively related to the conflict intensity H1d: The relative power of supplier is negatively related to the conflict intensity

Conclusion

-0.009

Not supported

-0.198** -0.051

Supported Not supported

-0.080

Not supported

** p < 0.01.

conflict-handling styles. It shows that product certainty, task interdependence and the relative power of supplier have significant relationships with an integrating style conflicthandling style. Suppliers are more likely to adopt an integrating style to handle conflicts when they are clear about the product requirements at the early stage of NPD. Moreover, high task interdependence between clients and suppliers necessitates frequent adoption of an integrating style for the successful completion of both parties’ tasks. Suppliers with high power are also more willing to adopt an integrating style to resolve conflicts collabora-


tively with their clients. Against our expectation, product technical complexity is not significantly related to integrating. This could be explained by suppliers’ pursuit of client satisfaction. Although suppliers do not rely much on clients for solving design problems, they may take a collaborative attitude for client satisfaction by adopting an integrating style to resolve conflicts. Thus, product technical complexity is not negatively associated with the adoption of an integrating style. As adopting an integrating style demands more effort and time, we suggest that suppliers as well as clients should plan and allocate sufficient

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Table 4. Testing results of the hypotheses H2a–H2h Hypothesis

Correlation

H2a: Product technical complexity is negatively related to an -0.012 integrating conflict handling style H2b: Product technical complexity is positively related to a 0.133* dominating conflict handling style H2c: Product certainty is positively related to an integrating conflict 0.252** handling style H2d: Product certainty is negatively related to a dominating conflict -0.087 handling style H2e: Task interdependence is positively related to an integrating conflict 0.328** handling style H2f: Task interdependence is negatively related to a dominating conflict -0.102 handling style H2g: The relative power of supplier is positively related to an integrating 0.136* conflict handling style H2h: The relative power of supplier is positively related to a dominating 0.119* conflict handling style

Conclusion Not supported Supported Supported Not supported Supported Not supported Supported Supported

** p < 0.01, * p < 0.05

resources to effectively resolve conflicts when product certainty or task interdependence is high, or when suppliers have high power. The results also show that product technical complexity and the relative power of supplier are positively associated with the adoption of a dominating conflict-handling style. In the development of complex products, suppliers generally have more capabilities and know-how than clients. They are more likely to dominate in conflict resolution, as clients generally have less ability to solve technical problems. Moreover, those suppliers with high power are prone to adopt dominating in conflict resolution to protect and maximize their benefits. Dominating conflicthandling style, however, is not significantly correlated with product certainty and task interdependence. This may suggest that suppliers are always unwilling to reduce the use of a dominating style in order to resolve conflicts. In the collaboration, the decisions made in conflict resolution could affect both clients and suppliers’ benefits. There is no denying the fact that dominating is a means for suppliers to protect their interest.

Conclusion and Future Work This paper empirically studies the relationships of the four NPD project factors to conflict intensity and suppliers’ adoption of integrating and dominating conflict-handling

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styles. The results indicate that product certainty is negatively related to conflict intensity. We also found that product certainty, task interdependence and the relative power of supplier have significant relationships with integrating. Dominating conflict-handling style, however, relates significantly only with product technical complexity and the relative power of supplier. The findings give a picture of conflict intensity and suppliers’ adoption of conflict-handling styles for NPD projects of various characteristics, thereby facilitating conflict management. The findings that high product certainty is associated with low conflict intensity and the frequent adoption of an integrating conflicthandling style have practical implications for future researches. Previous study showed that avoiding high intensity of conflict, and adopting an integrating style could lead to better NPD performance (Lam and Chin, forthcoming). Based on the findings, we believe that developing clear and detailed product requirements and design specifications at the early stages of NPD could help improve NPD performance. Future researches should focus on developing a framework or tool for clients and suppliers to systematically design products at the beginning of NPD. Moreover, since our study focuses on the NPD project factors, further studies should be conducted to investigate the influence of such other factors as culture on conflict intensity and the adoption of conflict-handling styles.



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Ragatz, G.L., Handfield, R.B. and Peterson, K.J. (2002) Benefits associated with supplier integration into new product development under conditions of technology uncertainty. Journal of Business Research, 55, 389–400. Rahim, M.A. (1983) A measure of styles of handling interpersonal conflict. Academy of Management Journal, 26(2), 368–76. Rahim, M.A. (2001) Managing Conflict in Organizations, 3rd ed., Quorum, Westport. Rahim, M.A. and Bonoma, T.W. (1979) Managing organizational conflict: a model for diagnosis and intervention. Psychological Reports, 44, 1323–44. Sobrero, M. and Roberts, E.B. (2002) Strategic management of supplier-manufacturer relations in new product development. Research Policy, 31, 159–82. Thomas, K.W. (1990) Conflict and conflict management. In Dunnette, M.D. and Hough, L.M. (eds.), Handbook of Industrial and Organizational Psychology. Consulting Psychologists Press, California, pp. 651–717. Walton, R.E. and Dutton, J.M. (1969) The management of interdepartmental conflict: a model and review. Administrative Science Quarterly, 14, December, 73–84. Wilmot, W.W. and Hocker, J.L. (2001) Interpersonal Conflict. McGraw-Hill, New York. Wynstra, F. and Pierick, E.T. (2000) Managing supplier involvement in new product development: a portfolio approach. European Journal of Purchasing & Supply Management, 6, 49–57.

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Xie, J., Song, X.M. and Stringfellow, A. (1998) Interfunctional conflict, conflict resolution, styles, and new product success: a four-culture comparison. Management Science, 44(12), 193–206.

Ping-Kit Lam is a PhD candidate in the Department of Manufacturing Engineering & Engineering Management, City University of Hong Kong. His Doctoral research is in conflict management for client-supplier collaborative new product development. K.S. Chin ([email protected]) is an Associate Professor in the Department of Manufacturing Engineering and Engineering Management, City University of Hong Kong. Dr Chin has more than ten years of experience in the manufacturing industry. He is a fellow of the Hong Kong Society for Quality and Hong Kong Quality Management Association, and senior member of Institute of Industrial Engineers (IIE), American Society for Quality (ASQ) and Society of Manufacturing Engineers (SME), USA. Dr Chin has published over 100 international-refereed journal and conference papers in the field of engineering management. His current research interests are Web-based global product development, and Artificial Intelligence technologies in engineering management.


STIMULATING THE POTENTIAL

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Stimulating the Potential: Creative Performance and Communication in Innovation Teams Jan Kratzer, Roger Th. A. J. Leenders and Jo M. L. van Engelen Creativity is essential to successful new product development efforts. Teams constitute the organizing principle in most modern innovation activities. Although creativity research has revealed many factors influencing individual creativity, little is known about how team-level creativity is determined. Since the creative innovation task requires teams to combine and integrate input from multiple team members, the team’s communication pattern is an important determinant of team creativity. Based on a sample of 44 NPD teams in eleven companies, this study examines the effects of team-member communication on team creativity. It is found that both interaction frequency and subgroup-formation of communication have a negative relationship to team creativity. Theoretical and practical implications are discussed, and further research is indicated.

Introduction

E

very organization, regardless of size, profit motive or industry experiences regular pressures to renew, expand or modify its product or service offerings. A key source of innovation activities for all firms is the creative performance of the people they employ (Cummings & Oldham, 1997). Many innovation projects start with only a vague idea of what the final product will be like; the more innovative the project, the more vague the starting point tends to be. Subsequently organizing in the future must take the creative performance seriously (Montuori & Purser, 2000). Perhaps the ‘creating-creative’ organization of the future is the one that will integrate and move beyond the promises of the models of the ‘new’ organizations for the third millennium such as the ‘learning organization’ (Senge, 1990), the ‘knowledge generating company’ (Nonaka & Takeuchi, 1995) or the ‘Network-organization’ (Stevens, 1999). Innovation activities are typically executed in a project-management approach, and the organizational nucleus is the innovation team (Van Engelen, Kiewiet & Terlouw, 2001). Nowadays, 80 per cent of companies with more than 100 employees use a team-based © Blackwell Publishing Ltd, 2004. 9600 Garsington Road, Oxford OX4 2DQ and 350 Main St, Malden, MA 02148, USA.

approach (Cohen & Bailey, 1997). The same holds when looking at companies conducting innovative efforts. According to Griffin (1997) almost all companies who execute research and innovation activities successfully use teamwork. Despite the large literature on the functioning of teams, knowledge on the functioning of innovation teams remains limited. Besides this, although research has provided cues about what makes individuals more or less creatively performing, knowledge about the conditions that enhance or obstruct innovation teams creative performance is scant. Innovation teams may exhibit creative performance by developing new knowledge, advancing technologies or making process improvements that change or improve a firm’s products or services. However, this creative performance does not happen automatically. Firms and their managers have to ensure that their employees will make creative contributions. First, they have to hire people with the potential for a high creative performance, and then, the more difficult challenge, they must manage their employees’ in teams in order to bring out this potential for a high creative performance (Nijstad, 2000).

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Since the core product of innovation activities is knowledge, and this new knowledge can only be created through interaction between specialists with varying backgrounds of expertise, the cement of innovation activities is communication. According to White (1992) communication is the ‘nervous system’ that makes organizations and organizational units cohere, permits their members to coordinate all work efforts and creates the social environment that may stimulate the creative performance of the employees. In fact, team members often simply have no choice but to communicate. So, effective communication might serve to create an atmosphere for innovation teams in which their creative performance can be successfully exploited. But, what does ‘effective communication’ mean? In this paper we examine this by studying the structural patterns of communication within innovation teams, and relate this to their creative performance. Our analysis focuses on the team level: we consider the communication patterns at the team level and show how this affects the creative performance of the innovation team. In this study, communication refers to the discussion, development or evaluation of new ideas or approaches to technical problems, technical or scientific help or advice and/or the distribution of scientific or technical information. In the literature, this kind of communication has been labelled problem-solving communication and has been shown to be the predominant type of communication in innovation teams (e.g. Kratzer, 2001). In the next section we develop hypotheses about the relationships between several structural patterns of communication and the creative performance of innovation teams. Thereafter the methodological design of the paper is described. Lastly, the results are presented and the conclusions drawn from these results are discussed.

Communicational Impact on the Creative Performance of Innovation Teams: Theoretical Aspects In the wide range of literature it is stated that communication aids in the dissemination of knowledge and ideas, through communication new knowledge and insights can be produced, and communication is essential to the timely availability of information required by the innovation team members. Because of its obvious advantages, the frequency of communication has become the first and foremost explanatory variable of all aspects of team performance in the literature (for an overview see Kratzer, 2001).

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The Frequency of Communication Communication is essential to innovation teams: without it, no team could perform in any way, so a certain minimum frequency of communication is necessary. Besides the obvious positive aspects of a frequent communication, as mentioned above, the literature has also argued against the positive effects of team communication on the creative performance of teams. As research shows, high levels of communicational frequency can create mutual production blocking (e.g. Diehl & Stroebe, 1987; Muller, 1999) can limit the cognitive capacity (Nijstad, 2000) and might lead to free-riding, a tendency of group members to let others be creative (Diehl & Stroebe, 1987). High levels of frequency can lower group standards (e.g. Nicholas, 1994; Paulus & Dzindolet, 1993; West & Farr, 1992) because the critical evaluation of assumption among team members is less thorough. As Nyström (1979) and Amabile and Conti (1999) suggest, if the frequency of work-related communication reaches a certain level, the mutual influence becomes so high that it deteriorates the work environment for creative performance up to the situation in which ‘groupthink’ (Janis, 1972) emerges. In sum, as the frequency of communication exceeds a necessary quantity, it is expected to negatively affect the creative performance of innovation teams. H1: The more frequent the communication, the lower the creative performance of innovation teams.

The Centralization of Communication Most research on communication has regarded the frequency of communication as the key variable in theorizing, and other structural features have often been neglected. Another important characteristic of communication is the degree to which the communication is centralized (e.g. Czepiel, 1974; Rogers, 1974). Centralized communication is seen as one of the important ways to co-ordinate work-teams (Mintzberg, 1979). Organizational scholars concur in concluding that centralization in decision-making inhibits the creative performance. In innovation teams in which certain individuals dominate the problem-solving process, this can have negative effects on both the dominators and the dominees. Dominators are prone to information overload, whereas dominees do not receive, or receive too late, the information necessary for their part of the product development task. Team creative performance critically depends on getting a wide range of information, on keeping up with inno-



vation and on staying in the know. So, for each team member it is equally important to be provided with sufficient information. As research shows, centralized communication flows limit this provision for a number of people and reduces the creative potential of teams (e.g. Fleming & Koppelman, 1996; Hennessey & Amabile, 1990). H2: The more centralized the communication, the lower the creative performance of innovation teams.

The Sub-group Formation of Communication Like individuals, teams process information: they encode store, and retrieve it (Brauner & Scholl, 2000). However, if an innovation team is split into sub-groups, the flow of information will be far from being sufficient, because communicational barriers between subgroups prevent this (e.g. Allen, 1984; Triandis, 1960). Sub-groups tend to generate their local orientation and coding schemes. For those who share this common intra-group language, communication can be remarkably efficient. Not only can large amounts of information be transmitted with relatively few specialized symbols, but also through systematic selection and encoding rules, misinterpretations between team members are minimized (e.g. Allen, 1984; Triandis, 1960). If team members do not share a common coding scheme and technical language, their communication will be less efficient and more costly (e.g. Dearborn & Simon, 1958; Wilensky, 1967). This lack of linguistic commonality can be described as communication impedance. The greater the mismatch in language and cognitive orientation, the greater the difficulties of communicating, and correspondingly the less encouraging is communication for a high creative performance. H3: The more communication occurs within sub-groups, the lower the creative performance of innovation teams.

Method Study Design, Procedure and Participants The data consist of 243 team members in 44 innovation teams, gathered in eleven Dutch companies that are conducting innovation activities. All eleven companies are engaged in production and innovation of digital products. The data were collected using questionnaires distributed and filled out during team meetings. The response rate was very high, at 95 per cent, as a result of this method.


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Analysis The research look in the creative performance of innovation teams. In innovative settings where the object of creative performance is complex and requires skills from multiple bases of expertise, it is difficult to separate individual- from team-level contributions. The present article follows the suggestion of Drazin, Glynn and Kazanjian (1999) and assumes individuals to act homogeneously within the teams as they engage in creative behaviour. In other words, it is assumed there is no need to incorporate individual-level variables, such as gender, functional background, education and tenure into our analysis of team-level creative performance. Therefore the analyses are limited to incorporating team-level aggregates into our analysis. In order to statistically justify this aggregation, a one-way analysis of variance was conducted to determine if there was greater variability between teams than within teams on team creative-performance ratings. The analysis of variance supported the appropriateness of the aggregation. Prior to aggregating team members’ evaluations, inter-rater agreement on the team’s creative performance was calculated by averaging the inter-rater reliability (IRR) score suggested by James, Demaree and Wolf (1984). The IRR was 0.76, justifying the use of the arithmetic mean as a team score. In order to test the hypotheses, multiple regression analyses were conducted. The suitability of the regression analyses was examined testing for multicollinearity by checking the VIF (variable inflation factor) and CI (condition index) and for the distribution of residuals. These examinations did not reveal any violation for conducting a multiple regression. Due to the small sample size, which limits the statistical power, effects mentioned in the text and tables, which are significant at 0.10 level, are referred to as ‘statistically significant’.

Creative Performance Measuring creative performance is notoriously difficult. In the majority of studies, creative performance is measured in either of two ways. First, by the performance of (groups of) individuals on standardized creative-performance tests, or second, by measures that entail the rating of actual products in response to open-ended instructions. In the current case, however, neither of these methods can be applied. Since the task of a innovation team is complicated and multifaceted, it is not clear what kind of standardized system could be

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used, or what outputs can be rated to score the team’s creative performance. There are only very few studies executed so far in an innovation context and none of them on the level of teams measuring the creative performance. According to the underlying meaning of the variable ‘creative performance’ and several pre-tests of the following and other operationalizations, we measured this variable by asking the team members to rate the teams’ creative accomplishment – in the sense of generating new ideas, methods, approaches, inventions, or applications – on a 7-point scale (from ‘not at all’ to ‘highly’). For all 44 teams, we collected these ratings, and averaged the scores per team as the measure of creative performance. This measure and operationalization of creative performance was taken from the questionnaire used to collect the data reported by Cohen (Cohen & Cohen, 1991; Cohen & Zhou, 1991), Shenhav (1992), and Zuckerman (Gabbay & Zuckerman, 1998; Reagans & Zuckerman, 2001), and has been validated in the literature. This enables our research to be interpreted in the context of previous work. The measure for creative performance thus derives from the assessment by its members; in this sense, it is a quasi self-report measure. Self-report measures are often criticized, mainly through the argument that some people are unable to report their performance accurately, due to reasons of poor introspection (Locke, Latham and Erez, 1988). It was possible for us to test the quality of these selfreports since team manager data were available for 20 of the teams. For these teams we compared the manager ratings with those of the team members. The average teammanager’s rating of the creative performance of their teams was 4.82 on a 7-point scale (from ‘not at all’ to ‘highly’); slightly higher than the rating given by the team members (4.67). A paired-samples t-test of the difference between the two samples (team members versus team managers) showed no statistically significant difference between the two ratings (t = 1.26, p < 0.22). In order to investigate whether there were certain teams in which the difference between manager and team member ratings was large, we calculated the absolute deviations between the scores of the team members and the team managers; the absolute deviations vary between 0 and 1.20, with a mean of 0.49. In sum, the rating by the team members themselves scarcely differs from the outsider’s rating provided by the team managers. The rating of creative performance by the team members themselves, therefore, appears a valid procedure in our sample.

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Frequency of Communication Communication in this study refers to the overall communication, including computermediated communication. Team-level frequency of communication was determined by the density of the communication network. Density describes the overall level of interaction reported by the team members. It is analogous to the mean number of ties per team member and varies between 0 (no communication in the team) and 1 (everyone communicates with everyone, at least once a day). It is similar to the measure of density suggested by Wasserman and Faust (1994).

Centralization of Communication A centralization measure reflects the extent to which interactions are concentrated in one or a small number of team members rather than distributed equally among all members. Network centralization is analogous to the variance in network ties per group member; when the variance is high, some members have proportionately more ties and are therefore more central in the communication network than are other team members. As a measure, we thus used the variance of the number of others a team member communicates with, as proposed by Snijders (1981).

Sub-group Formation of Communication The sub-group formation of communication refers to the number of cliques within the team. A clique is defined as a group of at least three team members in which everyone communicates with everyone else at least once daily. The degree of sub-group formation increases with the number of such cliques. The concept of cliques was developed by Luce and Perry (1949) and Harary, Norman and Cartwright (1965).

Control Variables There are numerous other characteristics of the team and its context that have been or may be shown to influence the creative performance of innovation teams. While it is not possible to include all these variables in this study, for two variables is controlled that have been suggested to affect the creative performance of teams. Team Age It is often argued that the creative performance of teams decreases with their age. For instance,



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Lovelace (1986) contends that the creative performance of research scientists decreases with the time they are part of a group. The main argument is that with team age, problem solving and cognitive processes become more established, reinforced and habitual through uncertainty reduction by team members. Since it is not the age of the team per se, but the time its current members have been part of the team, team tenure was measured as the number of years that team members had been member of the team. Phase of Innovation Process This variable is introduced to control for environmental factors that might be differently affecting the creative performance, because innovation process itself implies distinguishable work-related situations. Generally, the innovation process captures a duality of ‘getting ideas’ followed by ‘getting ideas into action’ (Rickards, 1991). Accordingly, in the present study two main phases of innovation activities are distinguished: the conceptualization phase and the commercialization phase. This variable is included as dummy with conceptualization phase = 0 and commercialization phase = 1. Table 1 shows the descriptive statistics about all variables included in this study.

Results The following tables illustrate the empirical results. Table 2 shows the correlation coefficients between creative performance, communication and the two added control factors, team tenure and the phase of the innovation process.

As the correlation coefficients indicate, there is a negative relationship between the frequency of communication (-0.57), communication centralization (-0.42) and sub-group formation (-0.44) and the creative performance of innovation teams. Another result is that team tenure relates in a statistically significant manner to creative performance, but also to centralization and sub-group formation. This indicates that the longer the team member have been together the higher the centralization and sub-group formation of communication in the team. As the analyses in Table 3 and 4 show the frequency of communication and subgroup formation of communication have a negative statistically significant relation to creative performance. Also, team tenure relates statistically significant to creative performance in a negative way mirroring the results of the correlation analysis. The base model including the two control variables explains 23 per cent of variance. This explained variance increases to 47 per cent when the variables capturing the communication are included in the regression analysis.

Discussion The results presented in Table 4 confirm 1 and 3. The first result implies that a high frequency of communication (more than a necessary minimum) tends to decrease the creative performance of innovation teams. As the study by Leenders et al. (2002) shows this minimum is around communicating one to three times the week. Also, the formation of sub-groups appears detrimental to the creative performance. This may well be due to the generation of sub-group-specific coding schemes

Table 1. Descriptive statistics about variable in the study Variables

Dependent variable Creative performance Communication Frequency Centralization Sub-group formation Control variables Team tenure Phase of innovation process


Minimum

Maximum

Mean

Std. Deviation

N

3.67

6.40

4.64

0,67

44

0 0 0

0.90 10.00 10

0.29 0.20 1.18

0.25 0.25 1.86

44 44 44

1 0

5.43 1

1.94 0.39

1.10 0.49

44 44

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Table 2. Bivariate correlations for creative performance, communication, team tenure and phases of innovation process Variables Creative performance Frequency Centralization Subgroup formation Team tenure Phase of innovation process

1

2

3

4

5

6

– -0.57* -0.42* -0.44* -0.47* -0.10

– 0.39* 0.37* 0.28* 0.10

– 0.29* 0.27* 0.11

– 0.15 0.13

– 0.11

–

* Significance at 0.1

Table 3. Regression analysis for creative performance: base model Variables Constant Team tenure Phase of innovation process

B

sd

Sig, T

5.65 -0.32 -0.29

0.35 0.08 0.19

0.000* 0.000* 0.128

B

sd

Sig, T

5.68 -0.97 -0.03 -0.08 -0.21 -0.13

0.30 0.34 0.01 0.04 0.07 0.17

0.000* 0.007* 0.394 0.087* 0.006* 0.408

Adjusted R2 = 0.23 * Significance at 0.1

Table 4. Regression analysis for hypotheses 1, 2 and 3 Variables Constant Frequency Centralization Subgroup formation Team tenure Phase of innovation process Adjusted R2 = 0.47 * Significance at 0.1

and languages that distort the vital information processing within the whole team. Another important result is that the tenure of the team increases both the centralization and the formation of sub-groups in innovation teams. This effect occurs even independently of the phase of the innovation process. In other words, as time passes and team members stay members of the same team, communication tends to become increasingly centralized around one or two members. Moreover, such teams tend to split up into sub-groups with communication occurring within sub-groups, rather than between them. A fourth result that

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should be mentioned is that the centralization of communication does not affect the creative performance in a statistical significant manner. In managerial terms to achieve a high level of creative performance among the team members, it is best to keep the frequency of communication to a low level. In practical terms, that might mean holding as few meetings and discussions as necessary during the process of work or not placing all involved team members at the same room or floor, avoiding highly frequent contacts. Another method described in the literature is to organize communication more through computer-



driven communication. As it has been found in the scientific literature (e.g. Kratzer, 2001) this method tends to reduce the overall level of communication in innovation teams. Perhaps even more important, team leaders should prevent the formation of sub-groups before they are visible. That can be done by changing work-related dependence relations between team members. The creation of interdependencies between members of different backgrounds or functionalities contradicts the appearance of sub-groups and prevent communication to break up into separate pockets of communication. Sub-group formation can also be affected by the choice of the team members (for more detail see Leenders et al., 2002). Another result of the study is that the formation of sub-groups increases with the age of the team. Accordingly, when regularly adding or replacing some employees between teams, the development of sub-groups can be minimized to a certain degree. Subsequently, this should also reduce the tendency of communication to become highly centralized in teams. All in all, the results indicate how important the communication in innovation teams is to their creative functioning. Managers, therefore, should be aware of this and make the management of communication one of their major managerial duties. The proper management of communication in innovation teams is important due to its influence on the creative performance. Communication is the basic lubricant that transports the resources necessary to be creatively performing, in the form of information to the team members. In this study it was found that communication explains a large part of the variance of creative performance. Following the theoretical discussion, communication seems to affect a whole variety of factors that determine the creative performance of innovation teams. Very frequent communication may mould the environment in such a way that mutual production blocking occurs or the mutual influence restricts the individual attempts to be creatively performing. The formation of sub-groups might generate sub-group-specific coding schemes or interpretations, with the result that the information processing is hindered. Both the frequency and sub-group formation of communication relate negatively to the creative performance of innovation teams. The current study is one of the first attempts to investigate the creative performance of teams by looking at the communication of the whole team and not by focusing on individual variables. In this sense this study can be characterized as exploratory. Future research may attempt to include both team-level and individual variables into the


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analyses. Second, all factors are measures of a single moment in time. In future research longitudinal investigations are desirable. Both were beyond the scope of the current study. Finally it can be stated that communication is indeed the essence of social systems (Katz and Kahn, 1966).

References Allen, T.J. (1984) Managing the flow of technology: Technology transfer and the dissemination of technological information within the R&D organization. MIT Press, Cambridge, MA. Amabile, T.M. and Conti, R. (1999) Changes in the work environment for creativity during downsizing. Academy of Management Journal, 42, 630– 40. Brauner, E. and Scholl, W. (2000) The Information Processing Approach as a Perspective for Group Research. Group Processes and Intergroup Relations, 3, 115–22. Cohen, S.G. and Bailey, D.E. (1997) What makes teams work: Group effectiveness research from the shop floor to the executive suite. Journal of Management, 23, 239–90. Cohen, B.P. and Cohen, E.G. (1991) From groupwork among children to innovation teams. Advances in Group Processes, 8, 235–51. Cohen, B.P. and Zhou, X. (1991) Status processes in enduring work groups. American Sociological Review, 56, 179–88. Cummings, A. and Oldham, G.R. (1997) Enhancing creativity: Managing Work Contexts For The High Potential Employee. California Management Review, 40, 2337–45. Czepiel, J.A. (1974) Word of mouth processes in the diffusion of a major technological innovation. Journal of Marketing Research, 11, 172–80. Dearborn, R. and Simon, H. (1958) Selective perceptions in executive. Sociometry, 21, 140–4. Diehl, M. and Stroebe, W. (1987) Productivity loss in brainstorming groups: Toward the solution of a riddle. Journal of Personality and Social Psychology, 53, 497–509. Drazin, R., Glynn, M.A. and Kazanjian, R.K. (1999) Multilevel theorizing about creativity in organizations: a sensemaking perspective. Academy of Management Review, 24, 286–307. Fleming, Q.W. and Koppelman, J.M. (1996) Integrated project innovation teams: another fad . . . or a permanent change. International Journal of Project Management, 14, 163–8. Gabbay, S.M. and Zuckerman, E.W. (1998) Social capital and opportunity in corporate R&D: the contingent effect of contact density and mobility expectations. Social Science Research, 27, 189–217. Griffin, A. (1997) Drivers of NPD Success: The 1997 PDMA Report. University of Illinois. Harary, F., Norman, R.Z. and Cartwright, D. (1965) Structural Models: An Introduction to the Theory of Directed Graphs. Wiley, New York. Hennessey, B.A. and Amabile, T.M. (1990) The Conditions of Creativity. In M.A. West and J.L. Farr

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(eds.), Innovation and Creativity at Work. Wiley, Chichester, pp. 11–38. James, L.R., Demaree, R.G. and Wolf, G. (1984) Estimating Within-Group Interrater Reliability With and Without Response Bias. Journal of Applied Psychology, 69, 85–98. Janis, I.L. (1972) Groupthink. Houghton Mifflin, Boston. Katz, D. and Kahn, R. (1966) The Social Psychology of Organizations. Wiley, New York. Kratzer, J. (2001) Communication and Performance: An empirical study in innovation teams. Thesis Publishers, Amsterdam. Leenders, R.Th.A.J., Kratzer, J., Hollander, J. and Van Engelen, J.M.L. (2002) Managing Product Development Teams Effectively. In P. Belliveau, A. Griffin, S. Somermeyer (eds.), The PDMA Toolbook for New Product Development. Wiley, New York, pp. 141–63. Locke, E.A., Latham, G.P. and Erez, M. (1988) The Determinants of Goal Commitment. Academy of Management Review, 13, 23–39. Lovelace, R.F. (1986) Stimulating Creativity Through Managerial Interventions. R&D Management, 16, 161–74. Luce, R.D., Perry, A.D. (1949) A method of matrix analysis of group structure. Psychometrica, 14, 95–116. Mintzberg, H. (1979) The Structuring of Organizations: a Synthesis of the Research. Prentice-Hall, Englewood – Cliffs, New Jersey. Montuori, A. and Purser, R. (2000) Social Creativity. Volumes 1 and 2. Hampton Press, Cresskill, NJ. Muller, P.C. (1999) Team-Based Conceptualization of New Products. PhD, University of Groningen. Nicholas, J.M. (1994) Concurrent Engineering: Overcoming Obstacles to Teamwork. Production and Inventory Management Journal, 35, 234–46. Nijstad, B.A. (2000) How the Group Affects the Mind. Thesis Publishers, Amsterdam. Nonaka, I. and Takeuchi, H. (1995) The Knowledge Creating Company. Oxford University Press, Oxford. Nyström, H. (1979) Creativity and Innovation. Wiley, New York. Paulus, P.B. and Dzindolet, M.T. (1993) Social influence processes in group brainstorming. Journal of Personality and Social Psychology, 64, 575–86. Reagans, R. and Zuckerman, E. (2001) Networks, diversity, and productivity: the social capital of corporate R&D teams. Organization Science, 12, 502–17. Rickards, T. (1991) Innovation and creativity: woods, trees and pathways. R&D Management, 21, 101–12. Rogers, D.L. (1974) Sociometric analysis of interorganizational relations: application of theory and measurement. Rural Sociology, 39, 487–503. Senge, P. (1990) The fifth discipline: The art and practice of the learning organization. Doubleday, New York. Shenhav, Y.A. (1992) Expected managerial careers with growing and declining R&D establishments. Work and Occupations, 18, 46–71. Snijders, T. (1981) The degree of variance: An index of graph heterogeneity. Social Networks, 3, 163–74.

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Stevens, F. (1999) Leren excelleren. Samsom, Alphen a.d. Rijn. Triandis, H. (1960) Cognitive Similarity and Communication in a Dyad. Human Relations, 13, 175–83. Van Engelen, J.M.L., Kiewiet, D.J. and Terlouw, P. (2001) Improving Performance of Product Development Teams Through Managing Polarity. International Studies of Management and Organization, 31, 46–63. Wasserman, S. and Faust, K. (1994) Social Network Analysis. Cambridge University Press, Cambridge. West, M.A. and Farr, J.L. (1992) Innovation and Creativity at Work. John Wiley & Sons, New York. White, H.C. (1992) Identity and control: A structural theory of social action. Princeton University Press, Princeton NJ. Wilensky, H. (1967) Organizational intelligence. Basic Books, New York.

Dr. Jan Kratzer (University of Groningen, Faculty of Management and Organization, P.O. Box 800, 9700 AV Goningen, The Netherlands. Email: [email protected]) is Assistant Professor at the Faculty for Management and Organization at the University of Groningen, The Netherlands. He received his Master’s degree in Business Science and Sociology at the University of Leipzig, Germany and then conducted 4 years of research in R&D departments in the Netherlands. This research resulted in his Ph.D. from the University of Groningen on Communication and Performance in Innovation Teams. Currently, his main research interests concern human factors and human networks in product development processes especially regarding developments in virtual teams. Dr. Roger Th.A.J. Leenders is Associate Professor of Business Development at the Faculty of Management and Organization, University of Groningen, The Netherlands. He holds an M.Sc. in Econometrics and a Ph.D. in Social Sciences. His current research focuses on the positive and negative effects of social networks on organizations in general, and innovation activity in particular. He is mainly interested in how social networks assist or obstruct the performance of innovation teams and their members. He has authored one book, Structure and Influence (Thela Thesis, 1995) and edited two books (with S.M. Gabbay): Corporate Social Capital and Liability (Kluwer Academic Publishers, 1999) and Social Capital of Organizations (JAI Press, 2001). His work has appeared in Social Networks, Journal of Mathematical Sociology, Research in the Sociology of Organizations, Journal of Product Innovation Management, and in several books.



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Prof. Dr. Ir. Jo M.L. van Engelen studied Physics and Mathematics at Eindhoven University of Technology as well as Management and Organization at Twente University, The Netherlands. He received his Ph.D. from Twente University on Information Technology in Marketing Management. He has three-years experience as a management consultant and six years experience at Océ (Copying and Printing) in several management functions. Currently, he is Professor of Business Development and Business Research Methods at the University of Groningen, The Netherlands, and consultant and board member for several leading companies in the Netherlands.


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