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Editorial
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n this third issue of this volume of Creativity and Innovation Management, a special section deals with ‘Creative Leadership’, a theme that is just as relevant as it is difficult to understand and exploit. It urgently needs more in-depth understanding, which is why it is a recurring theme in Creativity and Innovation Management. Tudor Rickards and Susan Moger’s overview article on the theme published in our March 2006 issue is already the most downloaded CIM article from Blackwell’s Synergy! In the current issue, our two guest editors, Tudor Rickards (Manchester Business School) and Gian Casimir (University of Newcastle), brought together another four interesting articles that contribute to this understanding, and to the challenge of further exploring this interesting field of knowledge and application. In addition to these four articles, another six articles within the broad scope of our journal complete this issue.
Creative Leadership Creative leadership attracts a great deal of attention from the public and private sectors, which is not surprising given that creativity is one of the cornerstones of competitive advantage. Although there are numerous perspectives on what creativity actually comprises, organizations seem to believe that they would benefit from their employees being more creative. The relationship between leadership and creativity is thus an important one for organizations who wish to outperform their rivals. We seem to be considerably far from a rigorous understanding of creativity and it remains an under-researched topic. We are also a long way from understanding how leadership affects creativity. The special section on leadership and creativity has been instructive in that it has revealed fascinating findings from different cultures regarding different aspects of the leadership-creativity connection. These findings will undoubtedly be of interest to both practitioners and applied researchers in the fields of creativity and leadership. For this issue, not by our original intentions, several contributions came from empirical work in Australasia. This may be taken as a limiting factor regarding extrapolation of results more © 2007 The Authors Journal compilation © 2007 Blackwell Publishing
widely. It may be pointed out, however, that the researchers draw on the more widelypublicized Western corpus of work on creativity and leadership. Torrance taught us many years ago, cultural differences will be revealed in studies of creativity which nevertheless are much needed in order for researchers to propose more universalistic features. More recent cross-cultural studies of leadership seem to be arriving at a similar conclusion. Karen Wang and Gian Casimir take the view that a leader plays a crucial role in cultivating an environment that facilitates the creativity of subordinates, and that the process is intimately reliant on the extent to which the leader both trusts subordinates and values formalization. This conforms to a view of a creative leader as one who helps in the emergence of a positive (creative) climate, and liberates the creativity of others. Ming-Huei Chen has been exploring the dynamics of technological innovation. She offers evidence from Taiwan that entrepreneurs who are risk-taking, proactive and innovative can stimulate the creativity of their team members in generating intellectual capital. Her work invites us to explore the relationships between a risk-taking and visionary leadership style, the creativity manifest in the team, and the innovative products generated. Chen’s work has similarities to the study reported by Arménio Rego et al., in which emotional intelligence is found to be associated with the assessed creativity of team leaders and of their teams. The implication is that emotionally intelligent leaders are creative leaders, and that such creative leaders act in ways which support the creative outputs of their teams. Fangqi Xu and Tudor Rickards make a claim for a fundamental role of creativity in the emerging globalizing workplace. They take a historical perspective, and suggest that a fusion of Eastern and Western knowledge (Toyotaoism) is a harbinger of more widespread practices of creative management. The paper has preferred the term creative management, to illustrate a historical depth to classical management theorizing of the firm.
Towards a Theorizing of Creative Leadership We note, however, the following reservation. We found examples of work on creativity with
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some leadership elements, and work on leadership with creativity elements. It became easy to slip into an assumption that we were exploring a coherent, conjoined (or synthesized) unitary construct. Closer inspection of these studies reveals how far we still have to go to obtain a more rigorous understanding of how creativity and leadership are intertwined. The studies in the special section provide encouragement for further studies in this neglected area. However, these studies leave us with clear evidence that better theorizing of creative leadership is as necessary as it has been neglected. The special section makes a promising step towards this desired goal. For more on this topic please keep an eye on the OnlineEarly section of the Creativity and Innovation Management Blackwell Synergy page! An article on Project Leadership in R&D, to be published in CIM 16.4 will be available for downloading soon.
Additional Papers The first additional article, written by Birgitta Sandberg, contributes to the conceptual discussion on enthusiasm, which will be of interest to those studying the role of feelings in organizational settings. The purpose of the article is to analyse how enthusiasm is created and sustained in the process of radical innovation. Based on their analysis of five development processes of a particular radical innovation, the authors identified several inhibitors of enthusiasm. Amongst them are gaps in commitment, engagement and trust. ‘Managing uncertainty in innovation: the applicability of both real options and path dependency theory’ is the title of the contribution by William Johnson. The value of both real options reasoning and path dependency is explored by utilizing empirical data from case studies of R&D practices at three biopharmaceutical companies. As part of the result the authors conclude that there is merit in both approaches, depending on the level of uncertainty. The next article, ‘Making decisions on innovation: meetings or networks?’, is written by John Christiansen and Claus Varnes, guest editors of the special in our recent June issue. In this article, a network process perspective on the management of innovation is derived as an alternative to the normative linear view on evaluation, selection, and control of the various activities through gate and portfolio management. Through the analysis of two cases, this article demonstrates how project managers work to successfully establish stable networks.
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Such networks require little intervention for decision makers, where approvals are sought rather than decisions made. In their review article, Hannele Huhtala and Marjo-Riita Parzefall, under the title ‘A review on employee wellbeing and innovativeness: an opportunity for a mutual benefit’, develop a framework to advance theoretical understanding of the relationship between job-related demands and resources, employee wellbeing and innovativeness. They highlight the importance of promoting employee wellbeing and innovativeness. Amongst other factors, it is suggested that burnout can be seen as an inhibitor of innovativeness, and work engagement as an antecedent to employee innovativeness. A likewise interesting and practically relevant theme regards ‘Assessing job candidates’ creativity: propositions and future research directions’, explored by Anna Malakate, Constantine Andriopoulos and Manto Gotsi. In their article the authors review quite extensively the existing literature in this field. They argue that the creative potential of job candidates can be evaluated against four key dimensions: the creative individual, the creative product, the creative process and the creative environment. Evaluating the candidates, in terms of these dimensions, several methods and techniques are available and mentioned by the authors, amongst them the ‘critical incident technique’ according to Flanagan. The issue is concluded with a contribution from Francis Bidault, José de La Torre, Casimir de Rham and Michelle Sisto. This is concerned with understanding and identifying factors that affect the willingness of business executives to rely on trust as a governance mechanism in the context of partnerships. The authors present the results of a large-scale survey-based research. Amongst other factors they found ‘nationality’ as one of the most important determinants of the willingness to rely on trust. We are sure that the briefly highlighted ten contributions make up a very interesting and varied content for this third issue of the year. On the one hand it is focussed on the theme of creative leadership, on the other hand it concerns quite a broad spectrum of topics in our field of creativity and innovation management. Nearly all of the articles reflect empirical research efforts of the authors themselves, and in two cases the emphasis is on a review of the existing literature in the specific area concerned. At the very back of this issue we repeat our Call for Papers for the Buffalo Event in May 2008, hosted by Gerard Puccio and his team, and a new call for a special on © 2007 The Authors Journal compilation © 2007 Blackwell Publishing
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TRIZ, to be guest edited by our editorial board member Martin Moehrle. We look forward to many reactions on both calls. Also, we look forward to three important events in the area of Creativity and Innovation Management in September: the 10th EACI conference in Copenhagen (www.eaci.net), the international CINet conference in Gothenburg (www.continuous-innovation.net) and the PDMA Research Forum (www.pdma.org). At the PDMA Research Forum there
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will be a session dedicated to Creativity and Innovation Management, and your CIM editors were invited by the organizers to chair that session. We will report about this, of course, in our December editorial! All the best and a good reading of this issue! July 2007 Tudor Rickards Gian Casimir Olaf Fisscher
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Creative Management: A Predicted Development from Research into Creativity and Management Fangqi Xu and Tudor Rickards A proposal is made for the establishment of a conceptual domain of Creative Management by fusion of two related bodies of knowledge, that of management studies and creativity. Through an examination of examples from around the world, we show how Creative Management is appearing in embryonic form as a global possibility, emerging from and enriching the predominantly American contributions of earlier stages. We suggest that such a development will take management studies forward from its historical trajectory, through the global convergence of organizational theories and practices. The proposed synthesis of creativity and management indicates the possibilities of a new stage in management incorporating humanistic, socio-technical and knowledge management components. Collectively, the conceptual shift is towards what we have labelled Toyotaoism, in acknowledgement of practices and theorizing developed from the integration of Western and Eastern belief systems and theories in action.
Introduction
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ased on studies in various international locations, we suggest that current understanding of organizational effectiveness is limited by historical assumptions and models. Recent decades have seen various attempts to demonstrate a crisis, calling for a rethinking of organizational theory (see, e.g., Alversson & Wilmott, 1996; Clegg, Hardy & Nord, 1996, 2006; Burrell, 1997). The various critical voices concerning a crisis in organizational theory include reference to an absence of ‘some model of humanity’ (Collins, 2000) required to permit an explanation of the sociological and contextual elements (Smelser, 1994). While there are those who would retain the essential elements of organizational theory based primarily on measurable and structural elements (e.g., Donaldson, 1988, 1996), the debate persists, while research accommodates conflicting belief systems or paradigms (Burrell & Morgan, 1979; Pfeffer, 1993). Creativity has been offered as a concept with potential in this debate. Specifically, the movement was accelerated by management consultants such as Tom Peters (1988, 1992) who justified the need for creative destruction,
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invoking the radical economist Schumpeter (1934). Support for a creativity imperative for organizational success can be found in the innovation school of writers such as Kanter (1985, 1989). Critical theorists, in contrast, challenge the corpus of dominant management theory, remaining suspicious of the notion of creativity as part of a rhetoric of ‘fads and buzzwords’ (Collins, 2000). In an examination of creativity within business school courses, Rickards (1999) suggested that the major modules of the international MBA degree concealed creativity, which was a kind of sleeping giant within decision making, strategy, marketing, innovation, leadership and management of change electives, and largely unnecessary within a business degree grounded primarily on neo-classical economics. A review of a decade of contributions to Creativity and Innovation Management led to the proposal that much remains to be done to research relationships between innovation, creativity and knowledge management (Rickards & Moger, 2006). We have extended the scope of that review in this paper. We survey the practices associated with so-called creative organizations around the world, paying particular attention © 2007 The Authors Journal compilation © 2007 Blackwell Publishing
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to European and Asian materials, and seeking to compare them with the more widelyreported American companies and theorizing. Overall, we arrive at the proposition that creativity has yet to gain acceptance as being relevant for organizational theorizing. The implication is that creativity and management studies remain domains which have failed to become harmonized to mutual benefit. The merging of Western and Eastern concepts suggests an emerging conceptual shift, which we have labelled Toyotaoism.
Approach Considerable difficulties were encountered in examining a voluminous literature within which terms such as creativity and creative management were left undefined. To arrive at some common platform of understanding (Rickards, 1999; Rickards & Clark, 2005), we will offer a set of features from which we derive a provisional definition of creativity, creative management and Toyotaoism. These remain open to subsequent debate and reformulation. Before providing the definitions, we reflect on the epistemological issues involved. We then outline the survey.
Epistemological Issues Creativity is a construct that has invited many definitions. The multiplicity of definitions has been assumed by some researchers to be a consequence of a lack of understanding of some identifiable and universal construct. Other theorists have suggested that the construct has been studied from multiple perspectives or paradigms, or that there are various constructs sharing a portmanteau or all-embracing term. These views have also been taken to suggest alternative belief systems, leading to different linguistic and conceptual treatments of creativity. We accept the absence of a universally accepted definition of creativity, grounded in a universally accepted theoretical position. Nor do we believe in the possibility of such a definition that will unequivocally frame the essential features of creativity. In this sense we espouse what Grint (1997) terms a nonessentialist understanding of reality. We offer a definition which accords with an interpretivist epistemological stance. This conceives of meaning as a matter of sense-making, open to revision consequential on explorations and refinements through practical experiences and conceptual proposals within a community of practitioners and theory builders. Such an approach is consistent with that proposed by researchers such as Drazin, Glynn and Kazan© 2007 The Authors Journal compilation © 2007 Blackwell Publishing
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jian (1999). Its viability ultimately stands or falls in its acceptance by those who are engaged in managing, understanding and reconceptualizing organizations.
Creativity Drawing on Amabile (1983), Rickards (1999), Rickards and Moger (1999) and Sternberg (1999) we offer a provisional characterization of creativity as the process through which individuals and groups arrive at ideas that are new and valued to those individuals, groups and others within their wider communities of practice.
Creative Management Creative management is the study and practice of management, drawing on the theories of creative processes and their application at individual, group, organizational and cultural levels. When capitalized, we are applying the term ‘Creative Management’ in a formal sense to distinguish a fifth stage in the practice of management, emerging from the historical theories and practices of management from earlier stages. When uncapitalized, the term is used in a less formal sense to refer to a management style which will become associated with the emerging fifth stage of management. Further work will help in its characterization, as suggested in Rickards and Moger (2006).
Toyotaoism This is a neologism. The concept was introduced and has recently attracted discussion in internet discussion postings (Rickards, 2007). The term acknowledges the origins of Creative Management as a shift away from the Fordist philosophy and industrial methods of the early 20th century, towards a more creative and humanist culture and emerging from procedures pioneered at companies such as Toyota. It implies a fusion of Western and Eastern methods to incorporate into organizations a more Eastern philosophy of harmony and respect – for the environment, customers and employees.
The Survey We have undertaken a study in which we explore the diffusion of ideas in management thought and practice. To achieve this we have conducted a historical study of creativity for
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Table 1. Five Stages of Management Theory Stage 1: 19th–20th Century Rational Management (USA Fordist and Tayloristic contributions provide Production line efficiencies) Stage 2: Early 20th Century Incremental innovations (Japanese Total Quality approaches with structural sub-groupings provide further efficiency gains) Stage 3: Mid-20th Century Humanistic experiments (European and American efforts to achieve individualized motivation within organizations and for welfare of employees) Stage 4: Late 20th Century Organizational Creativity (Institutional efforts to achieve more creative organizational practices and results). Stage 5: 21st Century Creative Management (Globalized efforts achieve better diffused and integrated knowledge transfer of creative theories and practices) Creative Management is emerging currently from the processes of Stage 4, and offers focus for revitalizing management theory and practice. Imitation and adoption through mimesis of the practices associated with successful companies will accelerate the transition to Stage 5
its significance for management studies (and by implication the significance of management studies for creativity). We took as another assumption that creativity studies have developed into what some scholars have called a domain. This is a term that has much in common with the notion of a paradigm or body of knowledge. Within that domain, we consider the dominant innovating forces have come from the United States. The evidence may be found in the origins of the most cited theories, and scholars and scholarly sources. Management studies can point to a more differentiated set of influences, although the Western (and American) models are again prominent. We determined to explore beyond the dominant paradigm, to test any emerging ideas in the context of globalization, and knowledge transfer processes. To achieve this, we looked for patterns of thought in other contexts. We concentrated on the domains of creativity and management in Asia (specifically in Japan and China) and Europe (the United Kingdom and Western Europe, particularly Scandinavia). In order to reduce the scale of search, we further focused our attention on the archives within the leading networks of creativity practitioners in Europe and Asia, drawing on publications and conference proceedings. We relied on the sub-set of materials within these sources to provide understanding of the culturally dominant beliefs about management and organizational theories. In this way we hoped to achieve a triangulation of cultural beliefs.
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To achieve some simplification, we have assembled the materials identified to indicate the evolution of four major shifts in management, thinking, and proposed a fifth, emerging stage of Creative Management.
Management Theory: A Historical Overview Our survey suggested that management theorizing has progressed through four stages which are partly overlapping in time. Furthermore, we show how the stages have indicated attempts to overcome perceived weaknesses of management theory applied in practice, achieving some gains in creativity, and point to a fifth stage, that of Creative Management. Our intention in this paper is to begin to sketch out the kinds of practices and theoretical principles that would repay subsequent examination in the proposed new domain of creative management. To add concreteness to the discussion, we have selected exemplary organizations to study more deeply the range of practices associated with contemporary creative companies and provide indications for future theorizing and creative practices. The five stages are shown in Table 1.
Stage 1: The Fordist Revolution Although the Industrial Revolution came about first in Britain, America’s achievements have superseded all others in fields such as the © 2007 The Authors Journal compilation © 2007 Blackwell Publishing
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establishment and operation of enterprise, employee productivity and cost control, the influence of human relations, investment and collection of capital. For want of space, we restrict our outline of historical trends to those widely accepted in scholarly summaries. They reflect the perspective provided in curricula to be found in today’s international business schools, often taking their lead from the most prominent American establishments. The emerging giant companies of the late 19th century in America had retained problems of workers’ performance which always underachieved plans and expectations. In the early 20th century, Frederick Taylor (1911) established rationality and organization as theoretical concepts, offering significant applications such as payment of a piece rate, and more structured managerial processes. These ideas founded the scientific management movement which was to become dominant in the history of management for the following century. The subdivision and standardization of work were promoted through the spread of scientific management. Also, they were related to the birth of the Ford system of production lines which represented a new manufacturing approach on a large scale. However, although scientific management certainly made the relationship clear between the wage system and workplace productivity, it was to become criticized on humanistic grounds. Employees were treated simply as replaceable parts of a great machine. In Modern Times, Charlie Chaplin provides a powerful artistic representation of the oppressive nature of the new industrial factory culture. The unresolved ‘people’ issues led to the so-called Hawthorne Experiments, conducted by a team led by Elton Mayo of Harvard Business School. The work in the Hawthorne factory of Western Electric took place from 1927 to 1932 (Mayo, 1933). The purpose of such experiments was to verify the relationship between workplace productivity and work environment. The researchers concluded that human relations played a significant part in workplace productivity. Controversy surrounds the findings, but there is little doubt that the work was to lead later to the rise of a human relations school, as research into management extended its sphere to include humanistic considerations. However, these were the decades in which productivity was closely connected with the theories of economic production, and which derived their models on assumptions of orderly economic conditions of full information availability, which is a requisite assumption for the actualization of laws of supply and demand. © 2007 The Authors Journal compilation © 2007 Blackwell Publishing
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Frederick Taylor may be seen as the initiator of the scientific method of management. Henry Ford applied the principles on a large scale. A third American, Alfred P. Sloan organized the work in General Motors (GM) in a way which transformed earlier, fragmented approaches, into a coherent organizational form (Drucker, 1964; Sloan, 1990). The changes became a motive power that pushed GM into becoming the most successful and largest motor company in the world. Thanks to Sloan, the theory of organization acquired a rich empirical illustration that became a significant part of management research.
Stage 2: The Quality Movement After the Second World War, with the participation of GHQ (General Headquarters of the Supreme Commander for the Allied Powers), Japanese industrial groups introduced the theory and technique of quality control from the United States. Such practices were recognized as relatable to Japanese culture in the form of TQC (Total Quality Control) and they made a huge contribution supporting Japanese products in the global marketplace (Goto, 1999). It is often reported that TQC had its origins in the United States, failed to take off there, and only succeeded after it had been proven a success in Japan, and was then re-imported (Walton, 1989). Less celebrated has been the import into the United States and then to other Western cultures of Japanese practices such as the Toyota production system associated with just-in-time manufacturing (Baranson, 1981; Pascale & Athos, 1982). We will suggest that the related application known as The Cell System within the Toyota approach has significance as a bridge between earlier Fordist approaches and more creative management approaches.
Stage 3: Humanistic Developments Efforts to harness human talent into organizational life led to the development of the so-called socio-technical theorists. The field can be traced to the work of Kurt Lewin (1951), an undoubted pioneer of social psychology, and of the action research approach (Susman & Evered, 1978). This methodology encourages participation of employees in the design and modification of change processes. In Europe, the approach was particularly appreciated in the social culture of Scandinavian countries, where an important early case came out of the Volvo organization. The Volvo experiment discarded the Fordist car production line in favour of more auto-
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nomous teams. However, the experiment was eventually suspended. Gains in personal satisfaction for team members were not shown to be accompanied by productivity gains over the conventional car production line. This became a critical incident in the Western appraisal of alternative systems to Fordist production lines. However, the rejection of a single and preliminary empirical trial by an organization is insufficient grounds for rejecting a more general conceptual belief in the social and economic benefits that could emerge from worker empowerment. Elsewhere in Europe, the socio-technical approach was developed by the Tavistock Institute in the 1940s. The foundations to the Tavistock work have recently been summarized in Trist, Emery and Murray (1997) as a pioneering approach for relating social theory and practice. Among its first major projects was the work within the Glazier Metal Company (Jacques, 1951), and within coal mining (Trist & Bamforth, 1951). Early conceptual contributions included development of Social Field Theory (Lewin, 1947, 1951), defence processes of denial in social systems (Jacques, 1953), and self-regulatory processes within work groups (Trist & Bamforth, 1951). Another important construct is that known as joint optimization of systems. Since its origins, the socio-technical approach has diffused across the world, re-emerging in culturally adapted forms. It has been related to the work of various influential American groups developing action research and organizational development programmes, such as the National Training Laboratory (Benne et al., 1975). Recent claims for socio-technical structures permitting improved organizational performance can be found in Ketchum and Trist (1992). The team-based systems were re-introduced to the United States by Toyota in the 1980s, which led to the joint GM/Toyota operation NUMMI (Levine, 2005). Many of the behavioural elements in the approach can be traced to principles to be found in the Tavistock School of social theorizing. Socio-technical principles have been also been tested within business school action research projects. At Manchester Business School, Professor Enid Mumford developed a close relationship with the Tavistock Institute, and became interested in its socio-technical approach to work organization. She later became a council member of the Institute, adopting their principles, subsequently producing ETHICS – a method for designing computer-based information systems involving, and attending to the basic needs of, users.
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Stage 4: Late 20th Century Organizational Experiments In the 1990s, a wide range of new theoretical concepts on management emerged. They included re-engineering, core competence, corporate visioning, benchmarking, outsourcing, added-value creation, and the learning organization (Hammer & Champy, 1993; Hamel & Prahalad, 1994; Senge et al., 1994; Collins & Porras, 1995; DHB, 1995, 1996). The systems have been criticized as lacking convincing theoretical bases, and even the empirical claims require more rigorous investigations. The critiques have taken various forms. Social scientists have attacked the fundamentals of applied management theory as instruments for preserving the power differentials within organizations (Reed, 1996). Critical theorists have taken a similar stance, proposing that Total Quality Management (TQM), Business Process Re-engineering (BPR) and downsizing all typify management fads (Collins, 2000). Michael Porter published a series of books on competition and strategy (Porter, 1976, 1980, 1983), stimulating extensive research on competitive strategy internationally. Porter’s theory is particularly influential in management research. Numerous illustrations may be cited including the establishing of the World Competitiveness Center of IMD and the publishing of its comprehensive annual report (World Competitiveness Yearbook) since 1989. The Graduate School of International Corporate Strategy (ICS) of Hitotsubashi University, Japan, is named after Professor Porter. However, there have been various criticisms of the grounding of Porter’s work as a result of which there is still lively scholarly controversy and challenge (Brandenburger & Nalebuff, 1995; Coyne & Subramaniam, 1996). One promising approach arising from Japanese theorizing is that of knowledge creation and management pioneered by Professor Ikujiro Nonaka of ICS, Hitotsubashi University. This has been described (Xu & Kunifuji, 2002) as a theory about organizational knowledge creation in Japanese enterprises. It includes one management model (middle up-down management), two key words (tacit knowledge and explicit knowledge), three concepts (Ba, knowledge capital, intelligent leadership) and four change processes (socialization, externalization, combination and internalization). As with earlier models, knowledge management concepts have been taken up into the global community of management theorists. Broadly speaking, the shift of emphasis in organizational theorizing was from attention © 2007 The Authors Journal compilation © 2007 Blackwell Publishing
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to material relations, such as products, quality and cost, to include humanistic elements (Xu, 2005). It is this change that has incorporated concepts of knowledge creation.
Summary of the Four Stages and Harbingers of a Proposed Fifth Stage Our sketch captures the complex ebb and flow of dominant ideas over time and space. The ‘big idea’ of rational management was embodied in the Fordist production lines, which became transferred to great effect into Japanese practices. The more disregarded ideas of incremental improvements required the wellknown pattern of diffusion from the USA to Japan, and then back to the United States via Japanese production systems (e.g., Toyota). The humanistic ideas tested in Scandinavia and elsewhere in Europe had limited organizational success in changing the mid-20th century, despite subsequent promising evidence in the design of new production facilities, following socio-technical systems principles. As the industrial world encountered the information age, theorizing became sensitized to the potential significance of knowledge transfer as essential for innovation and change, and the ‘big idea’ with diffusion from Japan to wider international acceptance. We regard these patterns of change as more complex than a progression from one stage to another more advanced one. Rather, we detect linear and iterative (or recursive) changes, in theorizing and industrial management practices. Yet, it is possible to disembed the dominant ideas, and for the purposes of analysis, consider them as temporal epochs or stages. In this sense we have constructed four stages through which management thinking and practices have passed, and a further stage we believe is in its latency.
Trends within Creativity Research How has creativity research developed over the periods of the four great management epochs? Within the various research traditions, there has been a relatively minor attention to creativity as a general phenomenon, and even less as a component of managerial processes. However, there have been potentially relevant ideas developed, for example in the field of psychology, in an attempt to explain the mechanisms of individual discovery (Kohler, 1925; Wertheimer, 1945; Koestler, 1964) and philosophic deliberations (Bergson, 1907; Poincaré, 1908). Some researchers have regarded Francis Galton’s research on genius and heredity as © 2007 The Authors Journal compilation © 2007 Blackwell Publishing
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pioneering modern creativity research (Dacey & Lennon, 1998). Arguably, Galton was the first researcher to apply the Baconian method of empirical observation in the service of theory building. His studies confirmed the earlier renaissance view that creativity is a matter of inheritance. Even earlier theories assumed creativity as a ‘gift from above’ (Dacey, 1999). Dacey suggested that modern creativity research has developed across a range of disciplines as ‘psychological and contextual influences received more recognition’ (Dacey, 1999, p. 321).
Creativity in Business The history of creativity research in business goes back to the 1930s in America. It began in product development and advertising, and explored aspects of people and organization within the development of management. Later, other fields related to management identified the significance of creativity. For example, idea creation, product development, design innovation, acquisition of knowledge capital, enforcement of spin-off, marketing development, cost control, human resource development, and competition have acknowledged potential for creativity and its stimulation (Arnold, 1954; Gordon, 1956; Ichikawa, 1960; Onda & Nomura, 1964). Courses such as ‘Creativity of Product Development’, and ‘Creativity in Marketing’ had been taught at universities or colleges for many years, and in increasing numbers since the 1970s (Xu, McDonnell & Nash, 2005).
European and Asian Contributions The growth of interest in industrial creativity spread into Europe from its American origins, into international conferences as well as scholarly and professional publications under activities such as the European Creativity and Innovation Association. Torrance (1959) was one of the pioneers in identifying that creativity occurs across all cultures, although with specific cultural contexts (Torrance, 1977; Raina, 1993). He was particularly concerned to dispel a myth that creativity resided in Western cultures, and could not be found in other cultural environments. His work suggested that the perception arose because of failure of Western researchers to see the significance of a more Eastern creativity, which more attended to the holism of the world, and was less directly concerned with immediate and direct interventions. The viewpoint aligned with confusion in American business circles at Japan’s competitive economic growth rates (and of the other
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Asian ‘Tiger’ economies) in the late 20th century. It presumed that Japan and other Asian cultures would be unable to compete with the Western cultures at creating new technology and growth. Furthermore, the Eastern countries were assumed to be resistant to ideas from outside their boundaries. When such economic growth appeared, it became necessary to explain it in terms of ‘copycat’ strategies of simple importation of ideas. However, closer examination reveals the whole concept to be over-simplistic. Eastern cultures may appear to resist new concepts, although there is evidence to the contrary. A recent review (Economist Review, 2003) argued of Japan’s development over two centuries that: Japan has shown clearly that you do not have to embrace ‘western’ culture in order to modernise your economy and prosper. From the very beginning, Japan set out to have one without the other, an approach encapsulated by the saying ‘Japanese spirit, western things’. In Europe, research on creativity and innovation in business followed the rise in interest in the United States. The journal Creativity and Innovation Management was founded in 1992 and was followed by the formation of The European Association of Creativity and Innovation (EACI) in 1994, with its regular international conferences and proceedings. A similar growth of interest can be found in Asia. Toyo University, for example, founded a programme ‘Creative Business’ in 2002. The programme offers twelve courses including ‘Theory of Creativity’, ‘Theory of Creativity Development’, and ‘Creative Thinking Techniques’. In China, the Department of Business Administration, Jiangsu Polytechnic University, founded the Institute for Creative Management and offered five courses for third-year students in 2005. They are ‘Creative Studies’, ‘Creative Management’, ‘Creative Thinking Techniques’, ‘Creative Education’ and ‘Creative Project’. To sum up, creativity research has extended beyond the framework of psychology and has become thoroughly interdisciplinary. Throughout the Stage 1 period of rational management, creativity was largely ignored in industry. Within the efforts of the theorists of Stage 2, the possibility of structures for stimulating creativity emerged as a big idea. Controversy was to persist about the validity of such techniques (Rickards, 1973, 1999; Stein, 1974). This played a modest role in Stage 2 theorizing of Total Quality systems. The humanistic psychologists such as Maslow and Rogers, and the socio-technical systems figures including those from the
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Tavistock Institute had some influence on the quality of working life movement, and recognized the significance of a humanistic climate which was identified with a creative climate (e.g., Ekvall, Arvonen & WaldenstronLindblad, 1983, Ekvall, 1987 and Ekvall & Arvonen, 1991, 1994, at FARET, Stockholm). Thus creativity was of interest within Stage 3. Organizational impacts of creativity initiatives remained relatively unreported outside specialized groups such as were found in technological research departments. Stage 4 saw more advocates of a creative approach, but the most damaging critiques were to come from Western academics who saw no theoretical grounding, beyond self-interested ‘consultant speak’ and corporate rhetoric. However, in Stage 4, a small fraction of companies from the most global, to small start-ups, were acknowledged as doing something special and creative, in achieving unexpectedly innovative results. Yet, even Stage 4 companies appear to be isolated, and the basis of their creative success little understood. This is why we argue for a further revolution towards a global creative management culture. Stage 5 companies will be characterized by actions which thoroughly reflect the principles of creative management.
Principles of Creative Management in a Future Stage 5 In our vision of Stage 5, as-yet unrecognized principles of creative management will be revealed and tested through practice. However, there are themes which we believe can already be identified in the various cultures in which we examined creativity in its teaching, theorizing and applications. We select three dominant and universal themes. They remain ‘theories in good currency’ but open to testing, refinement and even rejection. We offer them as indicative of themes and starting points for developments in the theory and practice of creative management. • The universality principle: Creativity is an inherent potential of all human beings. This appears to be contested by theories concentrating exclusively on extraordinary creative talents in arts, science and even in business. However, the universality principle is more widely accepted in the educational domain, where intelligence is regarded as a universal, although some people display evidence of having superior levels of intelligence than others. • The developmental principle: Potential creativity will become actual creativity © 2007 The Authors Journal compilation © 2007 Blackwell Publishing
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under suitable developmental conditions. Conversely, actual creativity will decline if the person is restricted in opportunities to display his/her creativity. • The environmental principle: Environmental features will influence the development and manifestation of creativity (the developmental principle). Research will increasingly shed light on the mechanisms through which contextual features limit or enhance creativity. There is gathering consensus that creativity is supported through features encouraging ‘ownership’, participation and enhanced sense of well-being through self-actualization (Maslow, 1959; Amabile, 1983).
Case Examples We can explore the processes and consequences of creative management through considering these three principles. For example, if a manager introduced the first principle, he/she will consider every employee as an ‘owner’ of creativity. This is accepted as a desirable principle, although in practice the intention often stops at the level of rhetoric. (For a critical theory perspective of the rhetoric of empowerment, see Collins, 2000.) So far, a few managers consider every employee as a talented person. But for today’s business, if a manager is unable to harness everyone’s creativity he/she would not be successful in his/ her business. In contrast, creative companies are treasuring their employees. Among Asian examples we can cite the Japanese company Canon applying creativity criteria in their annual promotion processes (Nonaka & Takeuchi, 1995). Other companies include the Chinese appliance manufacturer Haier, which openly solicits applications for every administrative post within the company. In Europe, companies from many countries following the first principle have reported their successes within the EACI bi-annual conferences. From Holland, The Directorate of Public Works and Water Management (Rijkwaterstaat) set up a way of generating ideas not just from its employees but from citizens and social organizations (Kune, 1997). Scandinavian examples would include Nokia, Ericsson, SAS, Astra-Xeneca (Styhre & Sundgren, 2005). Rickards and co-workers have compiled numerous examples from large and small companies in the United Kingdom (Rickards, 1985, 1990, 1999; Rickards et al., 1997; Rickards & Moger, 1999). The introduction of the second principle, seeks positively to develop employee creativity. This may include a variety of initiatives from outside and inside the © 2007 The Authors Journal compilation © 2007 Blackwell Publishing
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organization. In one Asian study the former included training, suggestion systems, group activities and special project teams. The latter included OJT (on-the-job training) selfeducation and self-enlightenment, and particularly frequent mentions in reports of success in Japanese industry. If a manager introduced the third principle, the manager would make effort to put the environment in good order, in order to make the best use of employees’ creativity. This accords with one widely-cited contextual model of creativity, the 4P model. This situates creativity in a constructive psychological climate, or Press, within which the Person, and Process interact to generate creative Products (Rhodes, 1961, 1987; Sternberg, 1988).
Outcomes (Products) of Creative Management In our emerging understanding of creative management, we take a wider definition of the creative products deriving from creative management than is at present customary. The approach extends the principle advocated by Don MacKinnon (1962) many years ago, who urged researchers into creativity to ground their studies in evidence of the creative product. The creative manager re-invents his or her corporate self and the organization. That is why we propose to treat creative companies and creative managers as products and outcomes of creative management. In making this claim, we acknowledge that the precise specification of a creative company and manager will require further clarification. At present we wish to borrow the methodology proposed by Amabile (1983), and begin with the ratings of corporations by domain experts – that is to say leaders in, and commentators on, economically successful corporations. We have chosen reports where the awards have incorporated innovation and change into their economic judgements. We will illustrate our analysis with Asian and European examples, as these have received less attention internationally than American ones. However, our intention is to relate the findings to the better-known international studies.
The Canon Example In Japan, the most-widely respected annual ‘league table’ of innovative success is provided by Nikkei (Nihon Keizai Shinbun, the most respected newspaper on the economy and management). Nikkei chooses the top 500
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companies every year. Canon was chosen number one by Nikkei in 2004 and 2005. Western publications have also identified Canon as a highly creative company and written case studies on its creative processes. What makes Canon such an international exemplar for a creative company? Our analysis anticipates that a creative company would be led by a creative manager. Our study of Canon confirms this. Mr Fujio Mitarai is the chairman of Canon and also the chairman of Nippon Keidanren (Japan Business Federation). It is well documented that he sees things in an imaginative way that goes beyond the conventional wisdom. For example, the life-time employment system in Japan has recently been widely criticized as a cause of economic decline. Asserting that life-time employment is the source of Japanese companies’ competitiveness, he suggests that the company has about 80,000 patents because its employees are never dominated by concerns about their employment. Rather than reject the life-time employment principle, he reformed the opportunities for creativity within it. He forsook the seniority system which was the traditional Japanese management approach, and introduced efficiency-based payment, as well as other ‘best-practice’ personnel structures providing promotion opportunities for all employees on ability and performance. One major management system has contributed to widespread operational improvements at Canon. This is the production design known as the cell production system, which for us illustrates Stage 4 company practices. To understand the innovation, we have to trace its associations with the Toyota production system of Stage 2. The cell system can be traced to the earlier work on the Toyota production system, attributed to senior Toyota executive Taiichi Ono. This in turn had emerged from the Fordist model. Ono had recognized the weaknesses in the Ford production lines, such as the inability of workers to react to immediate production errors or other unplanned production inefficiencies. The Toyota system made a fundamental advance: whereas the Fordist production line controlled the workers (as parodied by Chaplin in Modern Times), the workers controlled the production line in the Toyota system, including the right and obligation to halt a line to remedy problems. The three vital elements (just-in-time, kanban and kaizen) are recognizable design innovations within the Toyota system. The system has made its greatest impact in the automotive industry. Attempts to introduce it more generally failed, for example, in industrial manufacturing and electronics.
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Hitoshi Yamada had been directly mentored by Taiichi Ono at Toyota and published The Encyclopedia of the Toyota System (1988). Later he founded the PEC Industrial Education Center, and reshaped the Toyota system into the Cell system. His revolutionary insight can be found in the attention paid to assembling autonomous groups or teams of workers into cells, with ‘ownership’ for direct intervention in production actions. The employee’s satisfaction in direct participation (e.g., in creating machine settings) permits individual involvement. It provides a new source of justification for the theoretical principles developed by the socio-technical work after Emery and Trist (1967). In a recent symposium on a new Japanese strategy for growth, Yukio Shohtoku, advisor and former chairman of Matsushita, reported that following introduction of the cell production system, his company’s 104 factories had decreased unfinished goods by increasing the productivity of each person by 90 percent; and had decreased equipment investment by nearly 70 percent. To illustrate environmental benefits of the cell system, he also cited a reduction in consumption of electricity by nearly 60 percent in its DVD factory.
The Honda Example Honda, a popular Japanese motor maker both in North America and in China, has also always been widely recognized as a creative company. Soichiro Honda, the founder of Honda Motor, liked to say that for success it was necessary to be an insatiable challenger of established beliefs. Richard Pascale presented the company to illustrate how organizational success may be attributed to creativity and innovation, in this instance flowing from the values of the corporate founder (Pascale & Athos, 1982). Focusing on Honda’s entry into the American market, he disputed earlier reporting which attributed the firm’s success to investment and production factors such as economies of scale from their buoyant home market. Pascale considered the success was due to emergent strategy, demonstrating a culture of flexibility, imagination and organizational learning. The original intention was to conquer American markets with large motor cycles. The plan was rapidly revised, on evidence that Americans were showing great and unprompted interest in the scooter-type vehicles used by the expeditionary team. This was to result in the successful design and launch of the Supercub vehicle. © 2007 The Authors Journal compilation © 2007 Blackwell Publishing
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Our studies confirmed Honda’s continued achievements, including nomination for excellence (Nikkei ratings) in 2004 and 2005. Deeper investigation revealed how Honda had developed from the entrepreneurial leadership of Soichiro Honda, who was the founder and president for 27 years until his retirement in 1973. Ever since that time, the corporate culture has developed in a manner that has emphasized collective or group cohesion. Even the president wears a uniform in common with all employees.
The Haier Example CEO of Haier, Mr Zhang Ruimin, over 20 years has transformed a small and failing company making refrigerators into the third largest electric household appliance maker in the world. In 1984 Haier was a small factory. Today, the company is acknowledged as the nation’s most valuable brand, valued at 70.2 billion yuan (US$8.7 billion) in 2005. Its industrial products are exported to just under 100 countries and are manufactured in China and in over 20 production locations around the world including the United States. The ailing refrigerator company now is the leading producer of refrigerators world-wide. In order to stimulate everyone’s creativity, an attractive incentive system is in place. The incentive system includes wages, promotion bonus and stock options. Additionally there has been deliberate and significant transference of authority to younger managers, as well as heads of department and vice presidents. Except for the president, every administrative post is chosen by election. Once a post is filled, the winner has tremendous power and responsibility, providing a workplace which enables employees to display their creative talents. Haier encourages everyone to develop his/ her creativity as a matter of corporate strategy. Wherever possible, individual recognition is given to individual creativity. If someone can be identified with an invention or solved a production problem, there are bonus awards, and the inventor may even be acknowledged in the name of the product. Various tools or goods of this sort can be found (e.g., the Xiao-Ling Spanner, and the Yun-Yan Mirror). Through such attention to developing employees’ creativity, a creative climate has also been achieved, helping make Haier one of the most successful IT companies in China.
Implications Our model of creative management implies that creative companies are the products of © 2007 The Authors Journal compilation © 2007 Blackwell Publishing
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creative managers. We take this as a duality, in the sense that the so-called creative company has resulted from the efforts of creative managers. This approach focuses on the particular mode of creative production that is studied at the level of the organization, and compared with that found in other organizations. It is the methodology followed, for example, by Jim Collins, in his celebrated studies of great companies and great managers (Collins & Porras, 1995). A major conclusion was that success was associated with the orientation and vision of the corporate founders. In a subsequent study, Collins identified the successors in such companies as fifth-level leaders, whose brilliance was not driven through self-interest. Our analysis indicates how the development of a domain of concept of creative management might draw on two presently loosely coupled bodies of knowledge, namely management studies and creativity. Each has accumulated a wealth of ideas, theories and expositional materials. Rickards and Moger (2006) concluded that the major themes associated with creativity (such as leadership, innovation and management) remain in need of further integration for advancing theory and practice. In this paper, we offer a step toward such an integration, identifying management as the critical theme and critical conceptual domain in that integration. In so doing, we recognize that further analysis is required to address the role of creative managers at individual, group, organizational and cultural levels. This work will be supported by the pioneering efforts of scholars such as Csikszentmihalyi (1988) and Magyari-Beck (1993) who showed how knowledge at the individual level of creativity might be extended into higher-order social systems. Drazin, Glynn and Kazanjian (1999) suggested that multi-level theorizing about creativity in organizations would benefit from a sense-making perspective. Woodman, Sawyer and Griffin (1993) also proposed a conceptual framework at the organizational level. At the level of the team, there has been a growth of interest in the creative manager as team leader or facilitator. This school of thought tends to espouse the notion that the team leader addresses the creative climate of project teams (Rickards & Moger, 1999). In this journal, Puccio et al. (2006) built on the pioneering contributions from the Parnes/Osborn tradition at Buffalo, New York (Osborn, 1953; Parnes, 1994). Kratzer, Leenders and van Engelen (2006) also proposed links between team factors and creative performance. The implications of the proposals have to be assessed against criteria of timeliness, robustness and feasibility of implications. Our
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historical survey indicates how the lack of resolution of issues concerning creativity in organizations is increasingly significant as environmental turbulence and globalization become dominant. This lack of progress suggests that a new direction is timely. Its robustness has been tested by examining studies from several international regions. The proposed synthesis of creativity and management seems to hold across wide cultural, geographic and economic domains. The feasibility of contributing to a ‘tipping point’ and subsequent re-direction of theoretical understanding and practice of a more creative approach remains problematic. The business environment is changing rapidly with advances in information technology. Therefore, the research of management also has to change accordingly. In particular, the union and crossing among established bodies of knowledge becomes more important. Indeed, new studies such as Information Engineering, Financial Engineering and Tourist Economics all were born from such intellectual hybridization. This encourages us to propose Creative Management as a new applied domain of theory-grounded practice. Since creative studies and management are subjects which have a long history, their evolutionary hybrid Creative Management may come to maturity very rapidly (this would conform to theorists of discontinuous change and punctuated equilibria). We would hope that our paper plays a role in accelerating such changes within academic and institutional communities of practice.
References The authors reviewed articles in several languages. The majority of articles were studied either in Japanese or English as indicated below. Alversson, M. and Wilmott, H. (1996) Making Sense of Management. Sage, London. Amabile, T.M. (1983) The Social Psychology of Creativity. Springer Verlag, New York. Arnold, J.E. (ed.) (1954) Creative Seminar Notes. Massachusetts Institute of Technology, Creative Engineering Laboratory, Cambridge, MA. Baranson, J. (1981) The Japanese Challenge to U.S. Industry. Lexington Books, Lanham, MD. Benne, K.D., Bradford, L.P., Gibb, J.R. and Lippett, R.O. (1975) The Laboratory Method of Changing and Learning: Theory and Application. Science and Behaviour Books Inc., Palo Alto, CA. Bergson, H. (1907/1911) (Translated into English by Arthur Mitchel), L’evolution créatrice. Henry Holt & Co, New York. Brandenburger, A.M. and Nalebuff, B.J. (1995) The Right Game: Use Game Theory to Shape Strategy. Harvard Business Review, Jul–Aug, 57–71.
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Burrell, G. (1977) Pandemonium. Sage, London. Burrell, G. and Morgan, G. (1979) Sociological Paradigms and Organisational Analysis: Elements of the Sociology of Corporate Life. Heinemann, London. Clegg, S., Hardy, C. and Nord, W.R. (eds.) (1996) Handbook of Organization Studies. Sage, London. Clegg, S., Hardy, C., Lawrence, T. and Nord, W.R. (eds.) (2006) Handbook of Organization Studies, 2nd edn. Sage, London. Collins, D. (2000) Management Fads and Buzzwords: Critical-Practical Perspectives. Routledge, London. Collins, J.C. and Porras, J.I. (1995) Built to Last. Wharton School Publishing, Philadephia, PA. Coyne, K.P. and Subramaniam, S. (1996) Bringing Discipline to Strategy. The McKinsey Quarterly, No. 4, pp. 29–38. Csikszentmihalyi, M. (1988) Society, Culture, and Person: A Systems View of Creativity. In Sternberg, R.J. (ed.), The Nature of Creativity. Cambridge University Press, Cambridge, MA. Dacey, J. (1999) Concepts of Creativity: A History. In Runco, M.A. and Pritzker, S.R. (eds.), Encyclopedia of Creativity. Academic Press, San Diego, CA, pp. 310–22. Dacey, J. and Lennon, K. (1998) Understanding Creativity: The Interplay of Biological, Psychological and Social Factors. Jossey-Bass, San Francisco, CA. Diamond Harvard Business (DHB) (1995) The Theory and Practice of Benchmarking. Diamond, Tokyo (in Japanese). Diamond Harvard Business (DHB) (1996) The Practice and Organizational Evolution of Out Sourcing. Diamond, Tokyo (in Japanese). Donaldson, L. (1988) In Successful Defense of Contingency Theory: A Routing of the Critics. Organization Studies, 9, 28–32. Donaldson, L. (1996) For Positivist Organization Theory. Sage, London. Drazin, R., Glynn, M.A. and Kazanjian, R.K. (1999) Multilevel Theorizing about Creativity in Organizations: A Sense-Making Perspective. Academy of Management Review, 24, 286–308. Drucker, P. (1964) Alfred P. Sloan’s Role. Fortune, July. Economist Review (2003) 150 Years after Commodore Perry: Japanese Spirit, Western Things, Economist Review, 10 July. Ekvall, G. (1987) The Climate Metaphor in Organization Theory. In Bass, B.M. and Drenth, P.J.D. with Weissenberg, P. (eds.), Advances in Organizational Psychology: An International Review. Sage, Beverly Hills, CA, pp. 177–90. Ekvall, G. and Arvonen, J. (1991) Change-Centred Leadership: An Extension of the TwoDimensional Model. Scandinavian Journal of Management, 7, 17–26. Ekvall, G. and Arvonen, J. (1994) Leadership Profiles, Situation and Effectiveness. Creativity and Innovation Management, 3, 139–61. Ekvall, G., Arvonen, J. and Waldenstron-Lindblad, I. (1983) Creative Organisational Climate. Construction and Validation of a Measuring Instrument. FaRadet, Report No. 2, The Swedish Council for Management and Work Issues, Stockholm. Emery, F.E. and Trist, E.L. (1967) The Next Thirty Years: Concepts, Methods, and Anticipations. Human Relations, 20, 199–237. © 2007 The Authors Journal compilation © 2007 Blackwell Publishing
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Gordon, W.J.J. (1956) Operational Approach to Creativity. Harvard Business Review, 34, 41– 51. Goto, T. (1999) The Origin of Management. JPC, Tokyo (in Japanese). Grint, K. (1997) Leadership: Classic, Contemporary and Critical Approaches. Oxford University Press, Oxford. Hamel, G. and Prahalad, C.K. (1994) Competing for the Future. Harvard Business School Press, Watertown, MA. Hammer, M. and Champy, J. (1993) Reengineering the Corporation. HarperCollins, New York. Ichikawa, K. (1960) The Method of Creative Research. Sanwa Shobo, Kyoto (in Japanese). Jacques, E. (1951) The Changing Culture of a Factory. Tavistock Publications, London. Jacques, E. (1953) On the Dynamics of Social Structure. Human Relations, 6, 3–24. Kanter, R.M. (1985) The Change Masters: Corporate Entrepreneurs at Work. Counterpoint (Unwin) Paperbacks, London. Kanter, R.M. (1989) When Giants Learn to Dance: Mastering the Challenges of Strategy, Management, and Careers in the 1990s. Simon & Schuster, Englewood Cliffs, NJ. Ketchum, L.D. and Trist, E. (1992) All Teams Are Not Created Equal: How Employee Empowerment Really Works. Newbury Park, Sage. Koestler, A. (1964) The Art of Creation. Macmillan, New York. Kohler, W. (1925) The Mentality of Apes. Routledge & Kegan Paul, London. Kratzer, J., Leenders, R. and van Engelen, J. (2006) Team Polarity and Creative Performance in Innovation Teams. Creativity and Innovation Management, 15, 96–104. Kune, H. (1997) Rijkswaterstaat: Innovative ambitions. In Rickards, T., Moger, S., Tassoul, M., van de Kimmenade, I. and van den Beuken, J. (eds.), Creativity and Innovation: Impact. Maastrict: EACI, pp. 89–96. Levine, D. (2005) Reinventing the workplace [WWW document]. URL http://www.nummi.com/ co_info.html [accessed on 27 March 2006]. Lewin, K. (1947) Group Decision and Social Change. In Newcombe, T.M. and Hartley, E.L. (eds.), Readings in Social Psychology. Holt, Reinhart and Winston, New York. Lewin, K. (1947/1951) Field Theory in Social Science. Tavistock, London. MacKinnon, D.W. (1962) The Personality Correlates of Creativity: A Study of American Architects. Proceedings of the Fourteenth Congress on Applied Psychology, 2, 11–39. Magyari-Beck, I. (1993) Creatology: A Potential Paradigm for an Emerging Discipline. In Isaksen, S.G., Murdock, M.C., Firestein, R.L. and Treffinger, D.J. (eds.), Understanding and Recognizing Creativity: The Emergence of a Discipline. Ablex, Norwood, NJ, pp. 48–82. Maslow, A.H. (1959) Creativity in Self-Actualizing People. In Anderson, H.A. (ed.), Creativity and its Cultivation. Harper, New York, pp. 83–95. Mayo, E. (1933) The Human Problems of an Industrial Civilization. Harvard University Press, Cambridge, MA. © 2007 The Authors Journal compilation © 2007 Blackwell Publishing
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Nonaka, I. and Takeuchi, H. (1995) The KnowledgeCreating Company. Oxford University Press, New York. Onda, A. and Nomura, K. (1964) The Development of Creativity. Blue Backs, Tokyo (in Japanese). Osborn, A. (1953) Applied Imagination. Scribner’s, New York. Parnes, S.J. (1994) ‘CPS – How it Developed, Where we Stand, and How it Proceeds. In Geschka, H., Moger, S. and Rickards, T. (eds.), Creativity and Innovation – The Power of Synergy. Geschka & Partner Unternehmensberatung, Darmstadt. Pascale, R.T. and Athos, A.G. (1982) The Art of Japanese Management. Warner Books, New York. Peters, T. (1988) Thriving on Chaos: Handbook for a Management Revolution. Macmillan, London. Peters, T. (1992) Liberation Management: Necessary Disorganization for the Nanosecond Nineties. Macmillan, London. Pfeffer, J. (1993) Barriers to the Advance of Organizational Science: Paradigm Development as a Dependent Variable. Academy of Management Review, 18, 599–620. Poincaré, H. (1908) Science et Méthode. Flammarion, Paris. Porter, M.E. (1976) Interbrand Choice, Strategy and Bilateral Market Power. Harvard University Press, Cambridge, MA. Porter, M.E. (1980) Competitive Strategy. The Free Press, New York. Porter, M.E. (1983) Cases in Competitive Strategy. The Free Press, New York. Puccio, G., Firestien, R., Coyle, C. and Masucci, C. (2006) A Review of the Effectiveness of Creativity Problem-Solving Training: A Focus on Workplace Issues. Creativity and Innovation Management, 15, 19–33. Raina, M.K. (1993) Ethnocentric Confines in Creativity Research. In Isaksen, S.G., Murdock, M.C., Firestein, R.L. and Treffinger, D.J. (eds.), Understanding and Recognizing Creativity: The Emergence of a Discipline. Ablex, Norwood, NJ, pp. 435–53. Reed, M. (1996) Organizational Theorizing: A Historically Contested Domain. In Clegg, S., Hardy, C. and Nord, W.R. (eds.), Handbook of Organization Studies. Sage, London, pp. 31–56. Rhodes, J.M. (1961) An Analysis of Creativity. Phi Delta Kappa, April, 305–11. Rhodes, J.M. (1987) An Analysis of Creativity. In Isaksen, S.G. (ed.) Frontiers of Creativity Research: Beyond the Basics. Bearly, Buffalo, NY, pp. 216–22. Rickards, T. (1973) Brainstorming in an R&D Environment. R&D Management, 3, 137–44. Rickards, T. (1985) Stimulating Innovation. Francis Pinter Press, London. Rickards, T. (1990) Creativity and Problem-Solving at Work. Gower, Farnborough. Rickards, T. (1999) Creativity and the management of change. Blackwells, Oxford. Rickards, T. (2007) Will Toyotaoism replace Fordism? http://leaderswedeserve.wordpress.com/ 2007/01/05/will-toyotaoism-replace-fordism/ Rickards, T. and Clark, M.C. (2005) Dilemmas of Leadership. Routledge, Oxford.
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Rickards, T. and Moger, S.T. (1999) Handbook for Creative Team Leaders. Aldershot, Hants, Gower. Rickards, T. and Moger, S. (2006) Creative Leaders: A Decade of Contributions from Creativity and Innovation Management Journal. Creativity and Innovation Management, 15, 4–18. Rickards, T., Moger, S., Tassoul, M., van de Kimmenade, I. and Van den Beuken, J. (eds.) (1997) Creativity and Innovation: Impact. EACI, Maastricht. Schumpeter, J.A. (1934) The Theory of Economic Development. Harvard University Press, Cambridge, MA (English trans.). Senge, P.M., Kleiner, A., Roberts, C., Ross, R. and Smith, B. (1994) The Fifth Discipline Fieldbook. Currency, New York. Sloan, A.P. (1990) My Years with General Motors (Reissue edition). Currency, New York. Smelser, S.J. (1994) Sociological Theories. International Social Science Journal, 139, 1–14. Stein, M.I. (1974) Stimulating Creativity. Academic Press, New York. Sternberg, R.J. (ed.) (1988) The Nature of Creativity. Cambridge University Press, Cambridge. Sternberg, R.J. (ed.) (1999) Handbook of Creativity. Cambridge University Press, Cambridge. Styhre, A. and Sundgren, M. (2005) Managing Creativity in Organizations. Palgrave, London. Susman, G.T. and Evered, R.D. (1978) An Assessment of the Scientific Merits of Action Research. Administrative Science Quarterly, 23, 582–603. Taylor, F.W. (1911) The Principles of Scientific Management. Harper Bros, New York. Torrance, E.P. (1959), Explorations in Creative Thinking in the Early School Years. Bureau of Educational Research, University of Minnesota, Minneapolis. Torrance, E.P. (1977) Discovery and Nurturance of Giftedness in the Culturally Different. Council on Exceptional Children, Reston, VA. Trist, E.L. and Bamforth, K.W. (1951) Some Social and Psychological Consequences of the Long Wall Method of Coal Getting: An Examination of the Psychological Situation and Defenses of the Work Group in Relation to the Social Structure and Technical Content of the Work System. Human Relations, IV, 3–38.
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Trist, E.L., Emery, F. and Murray, H. (eds.) (1997) The Social Engagement of Social Science. A Tavistock Anthology, Vol. 111. University of Pennsylvania Press, Philadelphia, PA. Walton, M. (1989) The Deming Management Method. Mercury Business Books, London. Wertheimer, M. (1945) Productive Thinking. Harper, New York. Woodman, R.W., Sawyer, J.E. and Griffin, R.W. (1993) Toward a Theory of Organizational Creativity. Academy of Management Review, 18, 293–321. Xu, F. (2005) A Proposal for Establishment of Creative Management. The Journal of Japan Creativity Society, 9, 111–23 (in Japanese). Xu, F. and Kunifuji, S. (2002) Study Based on Nonaka Theory of Organizational Knowledge Creation (Parts 1 and 2). Proceedings of the 24th Annual Conference of Japan Creativity Society, pp. 23–32 (in Japanese). Xu, F., McDonnell, G. and Nash, W.R. (2005) A Survey of Creativity Courses at Universities in Principal Countries. Journal of Creative Behavior, 39, 75–88. Yamada, H. (1988) The Encyclopedia of the Toyota System. Nikkan Kogyo Shinbun, Tokyo.
Tudor Rickards (
[email protected]. uk) is Professor of Creativity and Organisational Change, at the Manchester Business School, University of Manchester, UK. He was co-founder of CIM, and of The European Association for Creativity and Innovation. He has published numerous books and academic articles on creativity, innovation and related subjects. Dr. Fangqi Xu is professor of the Department of Business Administration and director of the Institute for Creative Management of Jiangsu Polytechnic University, China.
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How Attitudes of Leaders May Enhance Organizational Creativity: Evidence from a Chinese Study Karen Yuan Wang and Gian Casimir It has been argued that a key factor in the development of competitive advantage is the provision of an environment that encourages employees to be creative. Leaders play a crucial role in cultivating an environment that encourages subordinates to be creative. Based on a survey of 219 managers in privately owned enterprises in China, this study investigates how trust in subordinates in terms of their reliability and their loyalty to the leader is related to leaders encouraging subordinates to be creative. The findings reveal positive relationships between these two types of trust in subordinates and leaders encouraging subordinates to be creative. The findings also reveal that attitude to formalization moderated the relationship between trust in subordinates and encouraging them to be creative.
Introduction
T
he ability to develop and implement innovation is essential in today’s competitive business environment (Lapierre & Giroux, 2003). Innovation is often conceived as beginning with the generation of new ideas, and the direction of creative ideas and innovative practices are critical aspects of effective transformational leadership. It has been argued that a key factor in the development of competitive advantage is the provision of an environment that encourages employees to be creative. Factors such as formalization and centralization influence the level of creativity and innovation in organizations. This has been recognized since the pioneering work on structural factors by Pugh et al. (1963). Although relatively little scholarly attention has been devoted to the effects of leadership on creativity in organizations, there is evidence that the leader’s attitude towards change is a fundamental determinant of creativity in the workplace (Lapierre & Giroux, 2003). There is a need, however, for more research on the relationship between the work environment created by leaders and the creativity of subordinates (Lapierre & Giroux, 2003). Leaders play a crucial role in cultivating an environment that facilitates the creativity of © 2007 The Authors Journal compilation © 2007 Blackwell Publishing
subordinates (Kohli & Jaworski, 1990). Furthermore, the extent to which leaders encourage their subordinates to be creative may be determined partly by the extent to which they trust their subordinates and by their attitude to formalization. This paper contributes to the literature by providing an examination of the relationship between the leader’s trust in subordinates, attitude to formalization, and encouragement of subordinates to be creative.
Theory and Hypotheses Trust in Subordinates and Encouraging Subordinates to Be Creative Creativity, as a critical phase of innovation, has been studied from multiple perspectives. Creative performance refers to products, ideas, etc., produced at the individual level, whereas innovation refers to the successful implementation of these products and ideas at the organizational level (Oldham & Cummings, 1996). The focus of this paper is creativity, which is a psycho-social process, rather than innovation per se. Leadership practices influence the work environment and have a major impact on creativity within business organizations. For instance, in a study on Taiwanese wire and cable organizations, leadership style (i.e.,
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inspiration and charisma) was found to have a positive relationship with the innovation ability (i.e., administrative capacity and technological capacity) of the organizations (Lee & Chang, 2006). Furthermore, the creativity of subordinates is facilitated by leaders who encourage them to question the status quo, practise participative management, and have an open attitude to risk-taking (DiLielleo & Houghton, 2006). A creative work environment can be developed by decentralizing decision-making powers and by providing employees with autonomy (Geber, Boerner & Lanwehr, 2003). The creativity of employees depends partly on their leaders encouraging them to be creative as well as on the use of suggestion systems and job-design principles that encourage employees to be creative. Nevertheless, the effectiveness of these methods in fostering creativity depends largely on the attitudes of the leaders to these methods. The principal factor that nurtures creativity in organizations is arguably the leader encouraging their subordinates to be creative (Amabile et al., 1996; Gómez & Rosen, 2001). The attitude of the leader towards change fundamentally influences creativity in the workplace (Lapierre & Giroux, 2003). Although employees may have the ability to initiate new projects and generate new ideas, leaders need to encourage them to be creative by providing them with opportunities for participation and the freedom to propose new ideas and initiate new activities. In other words, employees must perceive that their ideas are welcomed, valued and will be adopted by their leaders (Searle & Ball, 2003). The successful transfer of power and authority to lower organizational levels for involvement of creativity may depend largely on leaders’ trust in their subordinates (Manz & Sims, 1993; Lee & Choi, 2003). Leaders need to trust their subordinates in order to fully utilize the talent and knowledge of subordinates (Whitener, Brodt & Korsgaard, 1998). Leader Member Exchange (LMX) theory recognizes the linkage between leaders’ trust in subordinates and the subsequent empowerment of subordinates. LMX theory proposes that only those subordinates who are trusted will be considered to be part of the leader’s in-group by the leader and will have a highquality exchange with the leader, whereas those who are considered as out-group members will not win the leader’s trust (Dansereau, Graen & Haga, 1975). Highquality exchanges with subordinates imply that the leader gives subordinates preferential treatment such as increased information as well as increased latitude and discretion to do
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their jobs (Gómez & Rosen, 2001). Furthermore, it seems reasonable that the more the leader trusts subordinates, the more likely it is that the leader will encourage the subordinates to initiate new projects and ideas. In other words, the likelihood of leaders encouraging subordinates to engage in creative activities is likely to depend on whether or not they regard the subordinates as trustworthy. Delegation has both advantages and disadvantages for the leader. On the one hand, delegation can yield positive outcomes in terms of productivity and innovation. On the other hand, delegation allows subordinates greater freedom to behave opportunistically (Whitener, Brodt and Korsgaard, 1998). Leaders therefore face the risk of substantial costs if subordinates do not meet their explicit and implicit obligations. Given these possibilities, leaders tend to determine whether or not subordinates are trustworthy enough to be given the freedom to take initiative without abusing it. Leaders are more likely to be willing to take the risks associated with delegating important tasks to subordinates and providing subordinates with autonomy when they perceive their subordinates as trustworthy (Rempel, Holmes & Zanna, 1985; Whitener, Brodt & Korsgaard, 1998). In this paper, trust in subordinates is regarded as comprising two dimensions: reliability and loyalty. A leader’s trust in the reliability of subordinates refers to the leader’s belief that subordinates can be relied on to act in ways that are consistent and predictable. A leader’s trust in subordinates’ loyalty refers to the leader’s belief in subordinates’ benevolence, integrity, allegiance and commitment to the leader based on the past behaviour of subordinates. A leader’s trust in subordinates’ loyalty stems from attributions about subordinates’ intentions and motives (Kelley, 1979). Subordinates who are loyal and committed to their leaders have no intention to harm their leaders, and will not do so even when such opportunities arise. Leaders develop trust in subordinates’ reliability through a calculative process that involves an assessment of subordinates’ personalities and capabilities. Based on previous experiences with a subordinate, the leader determines the reliability (i.e., stability and consistency) of the subordinate (Rempel, Holmes & Zanna, 1985; Adler & Market, 2001). Leaders are likely to encourage a subordinate to participate in creative activities when in previous encounters the subordinate has acted in a consistently trustworthy manner. Creativity implies change, and change may elicit negative reactions from those involved in the change process. Promoting creativity © 2007 The Authors Journal compilation © 2007 Blackwell Publishing
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readily leads to a change in the status quo. Consequently, leaders may feel insecure about their power over their subordinates, particularly if it is the subordinates who are driving the change process. However, if leaders believe that their subordinates are concerned about and loyal to them (i.e., they share affective ties), they will develop trust in the loyalty of subordinates (Clark & Waddell, 1985; McAllister, 1995) and thus will be likely to encourage subordinates to initiate new ideas and/or to bring forth suggestions for change. Based on the preceding discussion, the following two hypotheses are proposed: Hypothesis 1a: Trust in subordinates’ reliability will be positively correlated to leaders’ encouraging subordinates to be creative. Hypothesis 1b: Trust in subordinates’ loyalty will be positively correlated to leaders’ encouraging subordinates to be creative.
The Moderating Effects of Attitude to Formalization Formalization refers to the use of formal rules, policies and procedures for the purpose of controlling and co-ordinating work processes (Ford & Slocum, 1977; Bodewes, 2002). One of the objectives of formalization is to ensure that members of the organization work in ways that are consistent with the organization’s mission and strategic direction (Caruana, Morris & Vella, 1998). Leaders who value high levels of formalization believe that the best way to maximize productivity is to establish clear work rules, expectations and standards for subordinates (Caruana, Morris & Vella, 1998; Lee & Choi, 2003). The presence of explicit rules, policies and procedures (i.e., formalization) has been found to decrease role ambiguity and role conflict (Michaels et al., 1988). With regard to the effects of formalization, it is important to consider both the level of documented policies and procedures and the extent to which these policies and procedures are adhered to by members of the organization (Walsh & Dewar, 1987). This two-dimensional perspective of formalization is better for explaining relationships between formalization and creativity than only considering the extent to which policies and procedures are documented (Bodewes, 2002). Furthermore, the position taken in this paper is that, when considering the leader’s effect on the work environment, it is useful to consider the leader’s penchant for formalization as it influences © 2007 The Authors Journal compilation © 2007 Blackwell Publishing
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the extent to which the leader forces subordinates to comply with the organization’s formal policies and procedures. Although organizational innovativeness has received attention from researchers for many years, there remains controversy regarding how situational control impacts upon innovativeness. On the one hand, it has been claimed that the greater the situation control, the more innovativeness (Fiol, 1996) in that situational control allows organizations to systematically capture creativity to improve quality and procure competitive advantage (Basadur, 1992). On the other hand, it has been argued that an increase in situational control reduces innovativeness (Geber, Boerner & Lanwehr, 2003) in that creativity requires a flexible workplace where rules and regulations are not strongly emphasized (Lee & Choi, 2003). One possible explanation for the discrepant findings regarding the relationship between formalization and innovativeness is that leaders differ in the extent to which they value formalization, which influences the impact that formalization has on innovativeness. Creativity requires a flexible workplace in which rules and regulations are not strongly emphasized (Lee & Choi, 2003). For example, a leader who highly values formalization will arguably be more likely to force subordinates to work ‘by the book’ than will a leader who places little value on formalization. It is plausible that the less a leader values formalization the more likely it is that the leader’s subordinates will be encouraged to be creative. Low formalization permits openness and variation which facilitates the development of new ideas and activities (Lee & Choi, 2003). The less a leader values formalization, the more likely it is that the leader will tolerate and/or encourage subordinates to initiate ideas that are outside the formal rules, policies and expectations (Wang, 2003). A leader who places little value on formalization can be regarded as effectively reducing the level of formalization to which subordinates are subjected. Although the likelihood of a leader encouraging subordinates to be creative is greater with increasing levels of trust, trust in subordinates will not necessarily result in the leader encouraging subordinates to be creative. Specifically, a leader who has a high amount of trust in a particular subordinate but also highly values formalization could be reluctant to encourage the subordinate to be creative because of the belief that adhering to formal rules and policies is important and that subordinates should behave as expected. Based on the preceding discussion, the following
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Trust in Subordinates’ Reliability
Encouraging Subordinates to be Creative
Attitude to Formalization
Trust in Subordinates’ Loyalty
Figure 1. Model of the Hypothesized Moderated Relationships
hypotheses are proposed and are presented in Figure 1: Hypothesis 2a: The relationship between a leader’s trust in subordinates’ reliability and creativity encouragement will be moderated by the value the leader places on formalization. Specifically, the correlation between trust in subordinates’ reliability and creativity encouragement will decrease the more the leader values formalization. Hypothesis 2b: The relationship between a leader’s trust in subordinates’ loyalty and creativity encouragement will be moderated by the value the leader places on formalization. Specifically, the correlation between trust in subordinates’ loyalty and creativity encouragement will decrease the more the leader values formalization.
Method Sample and Procedure A total of 219 leaders were selected from 31 privately owned enterprises in Northern and Southern China: six in Beijing, five in Hebei province, and twenty in Guangdong province. These enterprises were in a variety of industries including textiles, real estate, equipment manufacturing, electronic product manufacturing and selling, and information services to business and consumers. Table 1 shows the demographic characteristics of the sample. The majority of the sample was male and under 40 years of age. Most of the participants had college education, and were front-line or middle managers with less than ten years of managerial experi-
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ence. The profile of the sample reflects, to some extent, the short history of privately owned enterprises in China, which only started in the early 1980s when their status was legitimized. The questionnaire was first translated into Mandarin from an English version. Back and forward translations were then used to ensure the Mandarin version of the questionnaire was equivalent in meaning to the English version. All of the questionnaires were distributed and collected through personnel within the organizations. Participants completed the questionnaires individually at their workplace. Participants were promised anonymity and confidentiality in order to minimize social desirability effects. The response rate was 80 percent.
Measures Trust in the reliability and loyalty of subordinates was measured using items from Rempel et al.’s (1985) trust scale. The perspective of the items was changed, however, from peer– interpersonal relationships to the leader’s perspective. Formalization was measured using Robertson and Hoffman’s (2000) scale, which measures the importance that leaders place on rules and regulations as a means to control subordinates. Creativity encouragement was measured with two items from Hemphill and Coons’ (1957) scale, which measures the extent to which a manager encourages subordinates to initiate new ideas and practices. A seven-point Likert scale (i.e., strongly agree to strongly disagree) was used with all of the items. The four scales are presented in Appendix A. © 2007 The Authors Journal compilation © 2007 Blackwell Publishing
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Table 2. Results of Principal Components Analysis with Varimax Rotation on the Four Scalesa Item
Component 1
Loyalty1 Loyalty2 Loyalty3 Loyalty4 Formalization1 Formalization2 Formalization3 Reliability1 Reliability2 Reliability3 Creativity Encouragement1 Creativity Encouragement2 a
2
3
4
0.80 0.79 0.81 0.52 0.82 0.77 0.67 0.60 0.69 0.48 0.71 0.76
Loadings < 0.50 are not shown.
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Mgt. position
Mgt. year
Education
Age
Male 136 (61.8%) 20–30 89 (40.5%) Elementary school 4 (4.8%) Under 2 years 61 (27.7%) Top management 19 (8.6%)
Female 83 (37.7%) 31–39 92 (41.8%) Jr. high or high school 29 (13.2%) 2–5 years 72 (32.7%) Senior leaders 36 (16.4%)
Results
Gender
Table 1. Demographic Characteristics for Leaders in POEs in China
Variable
40–49 31 (14.1%) Undergraduate or college 165 (75%) 5–10 years 54 (24.5%) Middle leaders 89 (40.5%)
50 or Over 7 (3.2%) Postgraduate 25 (11.4%) 11–20 years; over 20 years 21 (9.5%); 11 (5.0%) First-line leaders 75 (34%)
HOW LEADERS’ ATTITUDES MAY ENHANCE ORGANIZATIONAL CREATIVITY
The results are presented in two sections. The first section contains the findings from principal components analyses that were used to check the measurement model. The second section contains the findings from analyses that were conducted to test the hypotheses. Principal components analyses and internal reliability analyses were conducted using SPSS. The measurement model was assessed using a single principal components analysis on all of the items in the questionnaire. The setting used in this analysis was a fourcomponent extraction with a Varimax rotation. The four-component option was used as there are four constructs measured in the questionnaire: the two trust-in-follower scales (i.e., reliability and loyalty), formalization, and creativity encouragement. An item was regarded as having a weak loading and removed from its scale if it loaded less than 0.70 on the principal component for the scale. Table 2 contains the loadings of those items that loaded satisfactorily according to the principal components analysis. As shown in Table 2, the first component comprises only items for loyalty, the second component comprises only formalization items, the third component comprises only reliability items, and the fourth component comprises only creativity encouragement items. Overall scores were computed for each
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Table 3. Means (s.d.) and Correlation Coefficientsa for the Measured Variables
1. 2. 3. 4. 5. 6.
Ageb Educationc Formalization Trust in reliability Trust in loyalty Creativity encouragement
Mean (s.d.)
1
2
3
4
5
1.80 (0.80) 2.98 (0.50) 5.54 (1.28) 5.21 (1.05) 4.93 (1.18) 5.34 (1.20)
0.03 0.04 0.10 0.10 0.08
0.01 0.05 0.05 0.01
0.37** 0.39*** 0.39**
0.62** 0.31**
0.24**
** p < 0.01, *** p < 0.001 (two-tailed). Age was coded as 1 = 20–29; 2 = 30–39; 3 = 40–49; 4 = 50 or over. c Education level was coded as 1 = primary school; 2 = secondary school; 3 = bachelor’ degree; and 4 = postgraduate degree. a
b
of the four constructs by averaging the scores for the items of the construct that are shown in Table 2. The Cronbach’s internal reliability coefficients for the trust scales are as follows: reliability, a = 0.63; loyalty, a = 0.78; and formalization, a = 0.70. According to Hair et al. (1998), a Cronbach’s a larger than 0.6 is acceptable. The three scales therefore have acceptable internal reliability. The internal reliability coefficient for the creativity encouragement was not calculated given that this scale has only two items. Given that all of the data were obtained from the same source (i.e., leaders) using the same method, it is arguable that the covariance between the constructs is due to single-source common method bias. To address this issue, a single-component test was conducted on all of the items shown in Table 2. The results from this analysis revealed that the first component accounted for 21.5% of the total variance in the items, which indicates that common source/ method variance does not explain the majority of the covariance between the items. Table 3 contains the means and standard deviations for each of the four variables as well as their intercorrelations. The findings show that both types of trust in subordinates have significant positive correlations with creativity encouragement thereby supporting Hypotheses 1a and 1b. A multiple linear regression analysis revealed that when both types of trust are used to predict creativity encouragement, only loyalty is a significant predictor. The hypotheses that formalization would moderate the relationship between trust in subordinates and encouraging subbordinates to be creative were tested using the productterm procedure in hierarchical regression analyses. This procedure involves first standardizing the independent variables and then
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creating a third variable, which is obtained by multiplying the scores from the two independent variables (i.e., formalization and trust) (Jaccard, Turrisi & Wan, 1990), to represent the interaction between the two independent variables. A separate hierarchical regression analysis was conducted for each type of trust.
Trust in Reliability The results of the hierarchical regression analysis shown in Table 4 reveal that formalization moderates the relationship between trust in reliability and creativity encouragement. To more closely examine the moderation effect, formalization was split into three groups (i.e., low, n = 73; medium, n = 64; and high, n = 82), using the 33rd and 67th percentiles as cut-off points, and the correlation between trust in subordinates’ reliability and creativity encouragement was then calculated for each of the three groups. These correlation analyses revealed that the correlation between trust in reliability and creativity encouragement was significant for the low formalization group (i.e., r = 0.35, p = 0.001) but was not significant for the medium and high formalization groups (r = –0.06, p > 0.05 and r = 0.05, p > 0.05, respectively). These findings support Hypothesis 2a.
Trust in Loyalty The results of the hierarchical regression analysis shown in Table 4 reveal that formalization moderates the relationship between trust in loyalty and encouraging subordinates to be creative. The correlation analyses revealed that the relationship between trust in loyalty and creativity encouragement was significant for the low formalization group (i.e., © 2007 The Authors Journal compilation © 2007 Blackwell Publishing
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Table 4. Hierarchical Regression Results Predictors
R-sq
Reliability and formalization Reliability, formalization and RxF Loyalty and formalization Loyalty, formalization and LxF
0.16 0.18 0.15 0.17
DR-sq
F(DR-sq)
0.02
4.20*
0.02
3.9*
* p < 0.05.
r = 0.40, p < 0.001) but was not significant for the medium and high formalization groups (r = 0.14, p > 0.05 and r = 0.02, p > 0.05, respectively). Hypothesis 2b is thus supported.
Discussion This study contributes to the creativity literature by exploring the role of leader’s trust in subordinates with respect to encouraging subordinates to be creative. Furthermore, this study provides an examination of the moderating effects of the value a leader places on formalization on the relationship between trust in subordinates and encouraging subordinates to be creative.
Theoretical Implications Much of an organization’s innovation orientation lies within its leadership. Leaders are well poised to increase follower creativity (Glynn, 1996) because subordinates could respond favourably to the influence of leadership by subsequently exhibiting greater creativity (Shin & Zhou, 2003). Our findings illustrate that trust in the reliability and loyalty of subordinates is related to the likelihood of a leader encouraging subordinates to be creative. First, the findings of our study indicate that there is a positive relationship between leaders encouraging subordinates to be creative and leaders’ trust in the reliability and loyalty of subordinates. In other words, the more that a subordinate is perceived by the leader as reliable and loyal to the leader, the more likely it is that the subordinate will be encouraged to be creative. This finding supports the argument that leaders face risks when allowing subordinates to be creative because allowing subordinates greater freedom can facilitate them behaving opportunistically (Whitener, Brodt & Korsgaard, 1998) and exposes leaders to the risk that subordinates may not meet their explicit and implicit obligations. Trust in subordinates arguably alleviates leaders’ concerns about such risks. © 2007 The Authors Journal compilation © 2007 Blackwell Publishing
The findings support previous arguments (e.g., Manz & Sims, 1993; Lee & Choi, 2003) that transferring power to lower organizational levels to facilitate creativity depends on the leaders’ trust in subordinates. Importantly, the current findings extend the application of LMX theory by showing that trust in subordinates is correlated positively to encouraging subordinates to undertake creativity-related activities such as initiating new activities. The value that leaders place on formalization negatively moderated the relationship between trust in subordinates and encouraging them to be creative. Specifically, the results showed that the relationship between leaders’ trust in subordinates and encouraging subordinates to be creative was significant only amongst leaders who placed a relatively low value on formalization. The moderation finding can be used to infer that leaders who place a high value on formalization will not encourage subordinates to be creative regardless of whether or not they trust their subordinates. The reason for this may be that the leaders’ preference for controlling subordinates, via policies and procedures, overrides their concerns about subordinates being creative. Additionally, it is plausible that leaders who value formalization are less inclined to be of a creative mindset and subsequently would be unlikely to encourage creativity amongst subordinates even if they trust their subordinates. These finding indirectly support the proposition that organizational innovation is influenced by leadership style. Organizations vary in terms of the emphasis placed on formalization as do leaders in the same organization. Effective creativity management requires a balance between control and flexibility with regard to employee activities. In previous studies, situational control has been argued to be necessary for effectively capturing new ideas and for constraining the development of new ideas. The paradox with systematic situational control is that excessive control can inhibit creativity whilst insufficient control can result in a chaotic workplace.
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Practical Implications Leaders in privately owned Chinese organizations face high levels of competition. Compared with large state-owned enterprises, these leaders receive less support from various levels of government in terms of resources and favourable policies. Consequently, most privately owned Chinese organizations have to make every effort to compete in niche markets. The leaders in these enterprises need creative ideas to improve operational processes, products and the marketing of products. Our findings suggest that leaders in privately owned enterprises in China link trust in subordinates to encouraging subordinates to be creative. The findings can be used to infer that these leaders believe that subordinates should act consistently and be loyal to them before they will encourage their subordinates to engage in creative activities. Furthermore, the findings indicate that the attitude of Chinese leaders toward formalization has a negative moderating effect on their willingness to encourage subordinates to undertake activities that enhance creativity. This suggests that Chinese leaders who are strongly influenced by a hierarchy-oriented culture may benefit from the establishment of a managerial system that provides sufficient autonomy for employees to be creative. The major contribution of this study to practitioners is that it addressed aspects of the mindset of leaders that influence the creation of a creative workplace. Although it is difficult to alter perceptions of the trustworthiness of subordinates, the findings from this study show that the leader’s attitude to formalization has considerable influence on the encouragement of subordinates to be creative. This finding has practical implications in that organizations that wish to increase the creativity/ innovation of their employees need to perhaps first address the attitudes of its leaders to formalization. It can be inferred from the findings that an organization in which leaders do not place great value on formalization is likely to be more creative than one in which leaders revere formalization.
Limitations and Future Research The research sheds light on the relationship between leaders’ trust in subordinates, leaders’ attitudes to formalization, and leaders encouraging their subordinates to be creative using a sample of leaders from privately owned organizations in China. However, certain limitations need to be mentioned. First, the study examined only the moderating effect
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of leaders’ attitudes to formalization on the relationship between trust in subordinates and encouraging subordinates to be creative, and did not include a range of variables that may influence attitudes to formalization and encouraging subordinates to be creative. For instance, networking within organizations, organizational culture and collaboration may affect leaders’ attitudes toward formalization and the extent to which they encourage their subordinates to be creative. Another potential limitation of this study may lie with the scales that were used in the survey. All of these scales are based on Western cultural assumptions about trust and creativity encouragement. The interpretation of these dimensions, however, could be different in China and a modified instrument may be more suitable to the Chinese context. Additionally, the reliability and validity of the scales used is another potential limitation as these scales were modified versions of existing scales. Moreover, responses to the items used in the scales are arguably susceptible to social desirability bias, especially for leaders who believe that it is socially desirable to trust subordinates, to value formalization and/or to encourage subordinates to be creative. The cross-sectional design used in this study also limits the validity of any conclusions that can be drawn from the findings. Specifically, the design used does not allow for cause–effect analyses to be conducted. Additionally, all of the data were obtained from a single source at the same time and location. A consequence of this aspect of the research design is that the correlations between the constructs could have been affected by common method variance. The use of a sample of leaders from privately owned organizations in China is a limitation of the study in that the generalizability of the findings is questionable. It might be the case that factors such as organizational culture, especially those that are authoritarian and highly formalized (e.g., state-owned organizations in China), may override the effects of trust in subordinates and attitudes to formalization. The generalizability of the findings to a non-Chinese environment is also questionable as the nature of the leader–subordinate relationship varies across cultures and may affect the way in which leaders interact with their subordinates, particularly in terms of allowing subordinates the liberty to be creative in their work. A further potential limitation of this study is that it did not consider contextual factors, such as the type of work that subordinates perform, that may influence the hypothesized relationships. Specifically, it is arguably the case that subordinates who engage in process© 2007 The Authors Journal compilation © 2007 Blackwell Publishing
HOW LEADERS’ ATTITUDES MAY ENHANCE ORGANIZATIONAL CREATIVITY
oriented work such as that commonly found in manufacturing firms are less likely to be encouraged by their leaders to be creative than subordinates whose work requires innovation (e.g., sales), regardless of the leaders’ trust in subordinates or the leaders’ attitudes to formalization. The results of the study suggest avenues for future research on employee creativity. One important avenue is to expand research into comparative studies of facilitation of employee creativity in different types of organizations. It might be the case that leaders in knowledgebased organizations are more likely to trust subordinates and encourage them to be creative than are leaders in manufacturing organizations due to the more dynamic nature of the industries (e.g., IT) in which knowledgebased organizations operate. There is also a need for research to examine the effects of other potential moderators (e.g., propensity for risk-taking) of the relationship between trust in subordinates and encouraging subordinates to be creative, in order to obtain a more comprehensive understanding of factors that influence leaders encouraging their subordinates to be creative. This study aimed to develop a better understanding of the process of creativity from a leadership perspective. Although much research remains to be done, the study makes a contribution to the relevant issues by providing empirical evidence, which supports previous environmental support theories of organizational innovativeness. The findings lay the groundwork for future research to determine whether these relationships hold in various other organizational contexts.
References Adler, P. and Market, S. (2001) Hierarchy and Trust: The Knowledge Economy and the Future of Capitalism. Organization Science, 12, 215–34. Amabile, T., Conti, R., Coon, H., Lazenby, J. and Herron, M. (1996) Assessing the Work Environment for Creativity. Academy of Management Journal, 39, 1154–84. Basadur, M. (1992) Managing Creativity: A Japanese Model. Academy of Management Executive, 6, 29–40. Bodewes, W. (2002) Formalization and Innovation Revisited. European Journal of Innovation Management, 5, 214–23. Caruana, A., Morris, M. and Vella, A. (1998) The Effect of Centralization and Formalization on Entrepreneurship in Export Firms. Journal of Small Business Management, 36, 16–29. Clark, M. and Waddell, B. (1985) Perceptions of Exploitation in Communal and Exchange Relationships. Journal of Personality and Social Psychology, 2, 403–18. © 2007 The Authors Journal compilation © 2007 Blackwell Publishing
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Michaels, R., Cron, W., Dubinsky, A. and Joachimstahler, E. (1988) Influence of Formalization on Organizational Commitment. Journal of Marketing Research, 25, 376–92. Oldham, G. and Cummings, A. (1996) Employee Creativity: Personal and Contextual Factors at Work. Academy of Management Journal, 39, 607–34. Pugh, D., Hickson, D., Hinings, C., MacDonald, K., Turner, C. and Lupton, T. (1963) A Conceptual Scheme for Organizational Analysis. Administrative Science Quarterly, 8, 289–315. Rempel, J., Holmes, J. and Zanna, M. (1985) Trust in Close Relationships. Journal of Personality and Social Psychology, 49, 95–112. Robertson, C. and Hoffman, J. (2000) How Different Are We? An Investigation of Confucian Values in the United States. Journal of Managerial Issues, 12, 34–47. Searle, R. and Ball, K. (2003) Supporting Innovation through HR Policy: Evidence from the UK. Creativity and Innovation Management, 12, 50–62. Shin, S. and Zhou, J. (2003) Transformational Leadership, Conservation, and Creativity: Evidence from Korea. Academy of Management Journal, 46, 703–14. Walsh, J. and Dewar, R. (1987) Formalization and the Organizational Life Cycle. Journal of Management Studies, 24, 215–31.
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Karen Yuan Wang (karen.yuan.wang@ uts.edu.au) is a senior lecturer at the University of Technology, Sydney, Australia. Karen’s research interests include crosscultural management issues, particularly leadership. Gian Casimir (Gian.Casimir@newcastle. edu.au )is a senior lecturer at the University of Newcastle in Australia. Gian’s primary area of research is organizational behaviour.
Appendix A Reliability 1. I am familiar with my subordinates and I can rely on them to behave in certain ways. 2. My subordinates are very predictable. I always know how they are going to act from one day to the next. 3. I sometimes avoid my subordinates because they are unpredictable and I fear saying or doing something which might create conflict (reverse coded).
Loyalty 1. Even if I have no reason to expect my subordinates to share things with me, I still feel certain that they will. 2. When I share my problems with my subordinates, I know they will respond in a loving way even before I say anything. 3. I am certain that my subordinates would not cheat on me, even if the opportunity arose and there was no chance that they would get caught. 4. My subordinates keep the promises they make to me.
Formalization 1. It is important to have job requirements and instructions spelled out in detail so that employees always know what they are expected to do. 2. Leaders should expect employees to closely follow instructions and procedures. 3. Rules and regulations are important because they inform employees what the organization expects of them.
Creativity Encouragement 1. I encourage subordinates to initiate new activities. 2. I encourage subordinates to suggest changes to the way we do things.
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Entrepreneurial Leadership and New Ventures: Creativity in Entrepreneurial Teams Ming-Huei Chen This study tests the view that new venture’s innovative capability is influenced by the interaction of a lead entrepreneur’s leadership and his or her entrepreneurial team members’ creativity, as measured by the creation of patents. Focusing on 112 entrepreneurial teams in Taiwan’s high-tech new ventures, the findings suggest that lead entrepreneurs who are risktaking, pro-active and innovative can stimulate their entrepreneurial team members’ creativity. Moreover, new venture’s innovative capability can be improved by the joint contribution of higher entrepreneurial leadership and more creativity in entrepreneurial teams. The findings also imply that the contingent impact of creativity in teams on the leadership–innovation relationship needs to be considered.
Introduction
I
n today’s competitive world, the sole entrepreneur can fail more easily than entrepreneurial teams, and most successful new ventures are started by teams (Watson, Ponthieu & Critelli, 1995). Reich (1987) argued that economic growth comes through collective entrepreneurship in which talent, energy and skills are integrated into a team, and this collective capacity to innovate becomes greater than the sum of individual contributions. Cooper (1973) found that 48 percent of high technology firms in Austin, Texas; 61 percent in Palo Alto, California; and 59 percent of 955 geographically dispersed firms were started by groups of two or more people. Kamm et al. (1990) indicated that 56 of the 100 bestperforming firms were team ventures and that team ventures had higher revenues, greater net incomes, and more successful market capitalization than non-team ventures. The activity of an entrepreneurial team made up of professionals from various disciplines required in new product development can speed product development and commercialization (Bingham & Quigley, 1989). Furthermore, despite the availability of technology, entrepreneurs, and financial resources, the factors affecting creative excellence in teams remain poorly understood (Bygrave & Timmons, © 2007 The Author Journal compilation © 2007 Blackwell Publishing
1992). Building a great team is not easy since entrepreneurial teams are difficult to assemble and keep together, and the issue of entrepreneurial teams is multi-faceted (Kamm et al., 1990). Furthermore, neither academics nor practitioners know very much about these teams and how to avoid or overcome their problems (Kamm et al., 1990). These uncertainties make the effective design and operation of such teams problematic. The lead entrepreneur, or entrepreneurial leader, is central to the entrepreneurial team. It has been suggested that such a leader is the one who has to create visionary scenarios that are necessary for selecting and mobilizing a supporting cast of interdependent members who commit to and enact the vision to achieve strategic value creation (Gupta, MacMillan & Surie, 2004; Rickards & Moger, 2006). The ability and skill in attracting other key management members and then building the team is one of the most valued capabilities for lead entrepreneurs. In addition to the critical role of entrepreneurial leader, the quality of the entrepreneurial team is strongly connected with the growth potential of a new venture (MacMillan, Zeemann & Narasimha, 1987; Watson et al., 1995). There are numerous qualities that the team needs to have, including relevant experience and skill (Long, 1983; Ibrahim & Goodwin, 1986), creativity
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(Amabile, 1997), opportunity obsession (Ardichvili, Cardozo & Ray, 2003), and interpersonal skills (Watson et al., 1995). According to Timmon’s (1999) well-known model of the entrepreneurial process, successful entrepreneurial teams devise ingenious and creative strategies to marshal and gain control of resources, and use creativity to identify entrepreneurial opportunities. Although an entrepreneurial leader and the quality of the entrepreneurial team are important to new venture success, managing such a team has its unique demands (Kamm et al., 1990; Amason & Sapienza, 1997). It is argued that the central theme driving the entrepreneurial process is a sensitivity to opportunities, so entrepreneurial leaders and their teams need to be creative to identify opportunities in market or technology, and to generate patents by implementing creative ideas (Long, 1983). In this paper, patents are used as the surrogate to measure high-tech new venture’s innovative capability for several reasons. Patents can reflect firm-specific capabilities and processes not only to invent, innovate and discover new wealth-generating opportunities, but also to capture some of the intermediate outcomes of the innovation process (Markman, Espina & Phan, 2004). Each patent protects a unique invention and cumulative patents can be seen as capturing a firm’s capability in technology-based discovery and in R&D effectiveness. Second, patents confer technologybased first-mover advantages. Unlike other sources of competitive advantage that are firm-specific, tacit, and relatively non-tradable, patents are particularly valuable resources because they are highly portable and transferable and can bring revenue to firms (Nelson & Winter, 1982; Heeley, Matusik & Jain, 2007). For these reasons, this paper considers the following three questions: (1) will entrepreneurial leadership by lead entrepreneurs stimulate new ventures’ innovative capability? (2) will entrepreneurial leadership by lead entrepreneurs stimulate creativity in entrepreneurial teams? and (3) will creativity in entrepreneurial teams moderate the relationship of entrepreneurial leadership and new ventures’ innovative capability? An entrepreneurial team is defined as two or more individuals who jointly establish and actively participate in a business in which they share ownership (Kamm & Nurick, 1993; Watson et al., 1995; Timmons, 1999). This research contributes in three significant ways: entrepreneurial leadership is examined as an antecedent of creativity, therefore extending our empirical insights of leadership in entrepreneurship. First, although leadership has been regarded as an influential indicator
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of a venture performance (Bass & Avolio, 1990), some researchers argue that in the increasingly turbulent and competitive business environment, a new type of entrepreneurial leadership distinct from other behavioural forms of leadership has emerged (Ekvall & Arvonen, 1994; Ireland & Hitt, 1999; Gupta et al., 2004). Second, creativity in entrepreneurial teams is incorporated as the moderator of the leadership–innovation relationship in the entrepreneurial team context since some researchers argue that economic growth comes from collective entrepreneurship (Reich, 1987; Kamm et al., 1990). Third, creativity has generally been defined as the production of novel and useful ideas in any domain (Amabile et al., 1996, p. 1155). Here, creativity is more specifically defined in the entrepreneurial context at the team level, involving an entrepreneurial team using its creative power in opportunity recognition and resource utilization (Timmons, 1999; Ardichvili, Cardozo & Ray, 2003).
Research Scope: Technology-Based Entrepreneurs and Research-Based Incubators in Taiwan Research has shown that most technological entrepreneurs have emerged from a researchbased academic environment, including university incubators, government research centres and non-profit institutes (Cooper, 1973). Recent public policies aiming to encourage the creation of new ventures in business incubators or science parks have been implemented in Europe, the United States and Asia. One well-known early example is the faculty and graduates of the Massachusetts Institute of Technology who acted as venture champions for their own start-ups along Route 128. Learning from such examples in 1996, the Taiwanese government SME (small and medium enterprise) Development Foundation passed the ‘Act for Facilitating Public-Private Institutes in Establishing SME Innovation Incubators’, in support of using SME funds to subsidize newly-established university incubators and non-profit incubators which could nurture tenant firms and help traditional firms advance their technology. Its support enables incubators to recruit professional and experienced employees; helps provide laboratory and operating space; as well as offering technical consulting, networking, business service and managerial consulting. The incubating centres serve as the platform not only for new ventures who are able to access the host university’s resources, but also for academic faculty to provide knowledge or input to © 2007 The Author Journal compilation © 2007 Blackwell Publishing
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Independent variable
Moderating variable
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Dependent variables New Venture’s
Entrepreneurial Leadership
Innovative Capability - Patent creation
Creativity in Entrepreneurial teams
Control variables - Entrepreneurial team size - Firm size
Figure 1. The Conceptual Model of Entrepreneurial Team Leadership, Creativity in Entrepreneurial Teams, and New Venture’s Innovative Capability
develop technologies in close proximity to entrepreneurs in start-ups (Gregorio, 2003). The act has been seen as effective in terms of numbers of incubators, new ventures, as well as in its provision of total subsidies, and amount of increased investment. There were 7 incubators initiated in 1997, increasing to a total of 65 incubators by 2004. The illustrative indicators of the Taiwanese ‘surrogateincubation’ model found that over 43 percent of Taiwan’s universities have established incubator centres (Chang et al., 2005). The number of tenant firms in incubators is also increasing (18 ventures in 1997, rising to 1,725 ventures in 2004). The subsidies granted have increased from NT$11.5 million in 1997 to NT$191 million in 2003. Moreover, in 2003, the increased investment amounted to NT$4,933 million. The results have demonstrated that research-based incubators in Taiwan have played a key role in stimulating entrepreneurship by providing their resources, knowledge, consulting services, and linking their collaborative projects with industries.
A Proposed Model and Research Hypotheses A proposed model linking entrepreneurial leadership, creativity and a venture’s innovative capability is shown in Figure 1, where entrepreneurial leadership is the independent variable, team creativity is the moderator and a new venture’s innovative capability is the dependent variable. Entrepreneurial leadership is conceptualized as the combined construct of risk-taking, pro-activeness and innovativeness (Lumpkin & Dess, 1996; Gupta et al., 2004). Creativity in entrepreneurial © 2007 The Author Journal compilation © 2007 Blackwell Publishing
teams is defined as the process through which a team using its creative power in opportunity recognition, using its imagination in limited resources, and identifying opportunities in markets and technology. Patent creation is used as the proxy of the creative product, the new venture’s yearly innovative capability (Glancey, 1998). The following section will review the relevant literature and draw the hypotheses.
Role of Entrepreneurial Leadership in a New Venture’s Innovation From a meta-analysis of the determinants of organizational innovation, Damanpour (1991) suggested that the increasing complexity of work processes and the increasingly competitive business environment have created new challenges for organizations, and that their top managers’ style of leadership has accordingly become an increasingly important determinant of organizational innovation. Since most new ventures are formed by a lead entrepreneur and a small group of people, the lead entrepreneur is central to the team and his/ her leadership style can affect organizational innovation in several different ways. First, entrepreneurial leaders frame a challenge, absorb uncertainty, maintain flexibility, build commitment, and specify limits in the face of two interrelated challenges, thereby envisaging the scenario to followers and convincing others that the scenario is achievable (Ireland & Hitt, 1999; Timmons, 1999; Gupta et al., 2004). Entrepreneurial leaders create visionary scenarios that are used to assemble and mobilize a supporting cast of interdependent members who commit and enact the vision to
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achieve strategic value creation (Gupta et al., 2004, p. 242). Second, entrepreneurial leaders tend to be tolerant of ambiguity, persistent, persevering, creative, as well as enthusiastic and dynamic leaders with high networking and communication abilities (Stuart & Abetti, 1987), and this enables them to build entrepreneurial culture and organization (Timmons, 1999). Third, entrepreneurial leaders have a propensity to act autonomously, a willingness to innovate and take risks, and a tendency to be aggressive toward competitors and proactive relative to marketplace opportunities (Lumpkin & Dess, 1996). Fourth, entrepreneurial leaders act as change agents and facilitators to implement creative problem-solving systems or process-orientation, thereby releasing creativity from the team, and empowering people in problem-solving, setting quality standards, continually improving and setting higher goals (Ekvall & Arvonen, 1994; Rickards & Moger, 1999, 2000). We can thus extend the concept of entrepreneurial leadership to indicate lead entrepreneurs’ leadership style when they are engaged in an effective combination of risk-taking, pro-activeness and innovativeness: (a) risk taking: willingness to absorb uncertainty and take the burden of responsibility for the future; (b) pro-activeness: encouraging entrepreneurial initiatives that nurture and support innovation; (c) innovativeness: encouraging team members to think out of the box and enhancing creative thinking.
Entrepreneurial Leadership and New Venture’s Innovative Capability A number of studies have highlighted the relationship between particular leader behaviours and/or leadership styles and organizational innovation. For instance, Keller (1992) found that transformational leadership positively influenced performance of research and development project teams in a large R&D organization. Greenberger and Sexton (1988) found that entrepreneurial leadership displayed by the top management team fundamentally drives innovation in firms. Top management team members can affect the development and implementation of new products by providing the leadership necessary to create a climate that stimulates innovation in the organization. The importance of effective leadership in bringing out innovation among creative people is illustrated by Andrews (1967). He obtained measures of creative performance in a sample of 200 scientists working in government, industry and academia, along with one measure of creative capacity, and found that
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the leaders tended to inhibit the introduction of new ideas, and creative potential was not related to performance. Oldham and Cummings (1996) examined a firm’s creative output among 171 engineers where creative output was assessed by patents, contributions to a suggestion programme, and supervisory ratings of creative output. Jung et al. (2003) found a direct and positive link between transformational leadership and organizational innovation assessed by patents and R&D intensity. Although these studies have reported valuable insights, an area in this emerging field is studying the effects of entrepreneurial leadership. The concept of entrepreneurial leadership has become increasingly important because organizations must be more entrepreneurial to enhance their performance, their capacity for adaptation and long-term survival (Gupta et al., 2004). Covin and Slevin (1988) emphasized that entrepreneurial effort refers to key challenges managers face and is related to the three interrelated behaviour components: the risk-taking dimension (inclined to take business-related risks), the innovation dimension (favouring change and innovation to obtain a competitive advantage for the firm), and the pro-active dimension (competing aggressively with other firms). In another study with cross-cultural samples from 62 societies and over 15,000 middle managers, Gupta et al. (2004) concluded that ‘entrepreneurial leadership is universally endorsed and that there are societal differences in its effectiveness suggests several promising areas of inquiry’ (p. 257). Therefore, Hypothesis 1 is proposed: Hypothesis 1: For high-tech new ventures, there will be a positive relationship between entrepreneurial leadership and a new venture’s innovative capability.
Entrepreneurial Leadership and Creativity in Entrepreneurial Teams The connection between entrepreneurial leadership and creativity in teams has been shown in previous studies. For instance, from their laboratory study, Sosik, Kahai and Avolio (1998) reported that groups identified as demonstrating higher levels of transformational leadership generated more original solutions and idea elaborations than groups exhibiting lower levels of transformational leadership. Jung (2000) found that leaders who encourage consideration of a wide range of alternatives, introduction of unusual solutions and appreciation of ideas from all team members can stimulate creativity. Mumford et al. (2002) © 2007 The Author Journal compilation © 2007 Blackwell Publishing
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suggested that leaders of creative ventures can facilitate the idea-generation process by providing autonomy and freedom to individuals to let creative ideas flow. Venkataraman, MacMillan and McGrath (1992) observed that a new venture idea required a champion to exert social and political effort to galvanize support for the concept. Therefore, Hypothesis 2 is proposed: Hypothesis 2: For high-tech new ventures, there will be a positive relationship between entrepreneurial leadership and creativity in entrepreneurial teams.
The Moderating Role of Creativity in Entrepreneurial Teams to the Relationship of Entrepreneurial Leadership and New Venture’s Innovative Capability Timmons (1999) argued that the central theme driving a highly dynamic entrepreneurial process is the opportunity force, by which entrepreneurs can creatively identify opportunities by deploying relevant resources. Moreover, in the obsessive pursuit of opportunities, an entrepreneurial team seeks to creatively use the lowest types of resources at each stage of the venture’ growth (Timmons, 1999). Entrepreneurs need to generate valuable ideas for new products, services or technologies that will appeal to some identifiable market and potential opportunities, and they must figure out how to bring their projects to fruition (Ward, 2004). However, identification of entrepreneurial opportunity and utilization of scarce resources is highly reliant on the entrepreneurial team’s creativity (Ardichvili, Cardozo & Ray, 2003). Creativity is important for entrepreneurial teams to search for hidden opportunities and for the generation and implementation of novel, appropriate ideas in order to establish a new venture (Ward, 2004). Resource-based theory suggests that creativity, which is an intangible resource embedded within a firm, can provide a competitive advantage (Barney, 1991). In pursuit of opportunities, the entrepreneurial team looks at resources differently from the way other teams view them. Stevenson and Jarillo (1990) concluded that successful and growth-minded entrepreneurs focus on opportunity without regard to the resources they currently control. Ardichvili, Cardozo and Ray (2003) claimed that ‘an opportunity may be the chance to meet a market need through a creative combination of resources to deliver superior value’ (p. 108). Kirzner (1997) pointed out that an opportunity © 2007 The Author Journal compilation © 2007 Blackwell Publishing
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may appear as an imprecisely-defined market need, or under-used resource or capability. An imprecisely-defined market need means that prospective customers may or may not be able to articulate their needs, interests or problems. Thus, entrepreneurial members must use their creativity to recognize potential opportunities by taking the perspective of prospective customers linked to venture performance. Underused resources include basic technologies, inventions for which no market has been defined, or ideas for products and services. Thus, entrepreneurial members use their creativity to create technology, knowledge or proprietary patents. Linking leader behaviours, creativity and firm’s innovation is highlighted in the existing literature. For instance, Amabile et al. (2004) showed that leader behaviour was positively related to the peer-rated creativity of subordinates working on creative projects in seven different companies. Similarly, Reiter-Palmon and Illies (2004) found that creative outcomes developed by employees will not be realized without a large degree of support from the organizational leaders. Regarding leaders’ styles, particularly in a highly competitive environment, Basadur (2004) argued that the most effective leaders will encourage and enable teams to think together in innovative ways, and help them to coordinate and integrate their different styles to drive change through a process of applied creativity. Jung (2000) conducted an experiment to examine the effect of different leadership styles and brainstorming conditions on team members’ divergent thinking, finding that participants in the transformational leadership condition outperformed their counterparts under transactional leadership. These previous studies all highlighted the positive linkages between leaders’ styles, teams’ creativity and performance. These linkages can be extensively examined in the new venture context, and so Hypothesis 3 is proposed: Hypothesis 3: The impact of entrepreneurial leadership on new venture’s innovative capability is moderated by the level of creativity in entrepreneurial teams.
Method Samples Research in technical entrepreneurship has identified the research-based academic environment as the predominant background from which technical entrepreneurs emerged (Cooper, 1973). Therefore, the list of all tenant firms established in government-funded incu-
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bators in Taiwan was surveyed using data from the Small and Medium Enterprises Administration, Ministry of Economics, Taiwan. The population of studied incubators in 2005 includes 54 university incubators, 6 government incubators, and 5 non-profit incubators. After using telephone and internet searches to eliminate tenant firms which did not fit the selection criteria, a total of 644 new ventures established at incubators were identified. The criteria for selecting the entrepreneurial teams were: (1) the ventures had been established less than 10 years; (2) the ventures had not yet matured to initial public offering (IPO); (3) the ventures were currently tenants in the incubators. The questionnaire was sent to one core member of the entrepreneurial team who had shared ownership and who was actively involved in the new venture (Kamm et al., 1990; Kamm & Nurick 1993). We conducted a three-wave postal survey during March– September 2005. Approximately 2–3 weeks after the earlier mailing, three follow-up letters and questionnaires were sent to nonrespondents. A total of 112 usable and valid responses were received and used in this study. Eighty-one (72.3 percent) respondents were male, and 31 (27.7 percent) were female. Fifteen (13.4 percent) respondents were 30 years old or younger, 12 (10.7 percent) were 31–35 years old, 20 (17.9 percent) were 36–40 years old, 29 (25.9 percent) were 41–45 years old, and 36 (32.1 percent) were more than 46 years old. Thirtyone (28.2 percent) respondents held a college degree, 38 (34.5 percent) held a bachelors degree, 30 (27.3 percent) held a master degree, and 11 (10 percent) held a doctoral degree. In professional background, 50 (45 percent) respondents had majored in management, 58 (52.3 percent) in engineering, 2 (1.8 percent) in humanities, and one (0.9 percent) in medicine.
ativity to break through the status quo. The five items loaded ranged from 0.65 to 0.77 on a single factor, indicating that it is appropriate to aggregate these items into a single scale because they are empirically related and constitute a distinct, uni-dimensional managerial orientation. Team creativity was measured using a four-item scale (alpha = 0.82) on tolerance for ambiguity, creativity in opportunity recognition, imagination in using parsimonious resources, and insight in technology and market opportunities. The four items loaded ranged from 0.66 to 0.84 on a single factor. The items were measured on a five-point Likerttype scale ranging from (1) strongly disagree to (5) strongly agree. Dependent Variable Patents were used to describe technological positions of firms and to assess firms’ innovative activity (Stuart & Podolny, 1996). Patents are used as surrogates of measuring new venture’s innovative capability by assessing the average number of patents the firm has been granted annually by Taiwan and other countries. Control Variables The study of entrepreneurship has become more complex and heterogeneous since the 1980s, and so we need to consider the entrepreneur, the team, the firm and the links between them (Bruyat & Julien, 2000). Thus, firm size and entrepreneurial team size are used to control for the impact of a firm’s human resources on new venture performance (Baum & Silverman, 2004).
Results and Discussions Measures Independent Variables Entrepreneurial leadership was assessed by asking a core entrepreneurial member to report on his/her lead entrepreneurial activity, using self-report items. Entrepreneurial leadership was measured using a five-item scale (alpha = 0.76) on risk-taking, pro-activeness and innovativeness. Risk-taking means that the lead entrepreneur is willing to accept uncertainties in pursuit of challenging goals. Proactiveness means that the lead entrepreneur encourages entrepreneurial initiatives that enhance the new venture’s competitive advantages. Innovativeness means that the lead entrepreneur inspires team members to commit to entrepreneurial goals and stimulates their cre-
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Descriptive Analysis for the Studied Sample Data from 112 entrepreneurial teams tenanted at government-funded incubators in Taiwan were collected and studied. The teams included 99 (88.4 percent) from university incubators, 11 (9.8 percent) from government incubators, and 2 (1.8 percent) from non-profit incubators. Sixty-four (61 percent) new ventures had less than NT$10 million capital, 26 (24.8 percent) had NT$10–50 million, 7 (6.7 percent) had NT$50–100 million, and 8 (7.6 percent) had more than NT$100 million. The average capital for each new venture was NT$28.85 million. The average size of entrepreneurial teams was about five persons. In firm size, 38 (35.2 percent) new ventures had fewer than 10 employees, 36 (33.3 percent) had © 2007 The Author Journal compilation © 2007 Blackwell Publishing
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10–29 employees, 7 (6.5 percent) had 30–49 employees, and 27 (25 percent) had more than 50 employees. The average number of employees was about 32.
The Effect of Entrepreneurial Leadership on New Venture’s Innovative Capability As shown in Table 1, results suggest no significant relationship between entrepreneurial leadership and new venture’s patent creation (b = -0.03, t = -0.24). Thus, Hypothesis 1 is not supported. There are several possible reasons why the current finding does not provide positive support for the previous studies: first, the attributes of entrepreneurial leadership are unique and consist of risktaking, innovativeness and pro-activeness (Covin & Slevin, 1988; Gupta et al., 2004), which are different from those of transformational leadership whose components are inspirational motivation, intellectual stimulation, idealized influence and individualized consideration (Bass & Avolio, 1990). Second, the construct of entrepreneurial leadership developed in this paper is a preliminary step that attempts to measure the attributes of lead entrepreneurs when they face the highly competitive and turbulent environments
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since the perceived need for entrepreneurial leadership in stable environments may actually be lower (Gupta et al., 2004). Third, the current research context is limited to small and medium sized new ventures, which can be different from the studies on general or well-established large firms.
Relationship between Entrepreneurial Leadership and Creativity in Entrepreneurial Teams Table 2 reports the correlations for all studied variables. Correlation analysis shows that new venture’s patent creation is positively and significantly correlated with firm size (r = 0.58, p < 0.01). As predicted in Hypothesis 2, entrepreneurial leadership is positively and significantly correlated with creativity in entrepreneurial teams (r = 0.42, p < 0.01). This implies that lead entrepreneurs will exhibit more risk-taking, pro-activeness and innovativeness when facing turbulent environments; and this will stimulate entrepreneurial team members to use more creative power to explore market opportunities and utilize parsimonious resources effectively. This finding provides evidence consistent with existing studies (e.g., Greenberger & Sexton, 1988;
Table 1. Results of Hierarchical Regression Analysis for the Effects of Leadership and Creativity on New Venture’s Innovative Capability (N = 112 Teams). Variables
Model 1 b
Control variables Entrepreneurial team size Firm size Independent variables Entrepreneurial team leadership Creativity in entrepreneurial teams Interaction effect Leadership ¥ Creativity R2 DR2 Model F df
0.40 -0.15
0.11 0.11 5.34** 2, 89
Model 2
Model 3
t
b
t
3.11** -1.16
0.42 -0.14
3.26** -1.08
0.46 -0.11
3.63*** -0.85
-0.03 0.18
-0.24 1.70+
-1.73 -2.71
-2.37* -2.20*
0.14 0.03 3.44* 2, 87
b
3.79 0.19 0.05* 4.01** 1, 86
t
2.36*
Notes: The variable patent creation is counted as cumulative numbers of patent creation divided by the established years. + p < 0.01, * p < 0.05, ** p < 0.01; *** p < 0.001. © 2007 The Author Journal compilation © 2007 Blackwell Publishing
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Table 2. Correlation Matrix for the All Studied Variables (N = 112 Teams) Variables 1 2 3 4 5
Entrepreneurial team size Firm size Entrepreneurial leadership Creativity in entrepreneurial teams Patents creation
Mean (SD) 4.39 31.61 4.37 3.90 1.04
(3.00) (41.91) (.43) (.55) (2.25)
1
2
3
4
– 0.58** 0.05 -0.14 0.08
– 0.06 -0.10 0.29**
– 0.42** 0.05
– 0.14
Notes: The variable patent creation is counted as cumulative numbers of patent creation divided by the established years. ** p < 0.01 (two-tailed test).
Ekvall & Arvonen, 1994; Sosik et al., 1998; Jung, 2000; Rickards, Chen & Moger, 2001).
Moderating Role of Creativity in Entrepreneurial Teams on the Relationship of Entrepreneurial Leadership and New Venture’s Innovative Capability Table 1 presents the hierarchical regression analysis for the effects of leadership and creativity on new venture’s patent creation. Control variables include entrepreneurial team size and firm size. Entrepreneurial team size and organizational size were controlled since the sample consisted of a wide range of number of entrepreneurial members and employee size. In Model 1, results indicated that the coefficient for entrepreneurial team size was significant (b = 0.40, t = 3.11, p < 0.05), suggesting that larger entrepreneurial team size can increase the human resources available for a new venture’s patent creation. In Model 2, the results indicate a positive relationship between creativity in entrepreneurial teams and new venture’s patent creation (b = 0.18, t = 1.7, p < 0.1). The results for Model 3 indicated that creativity in entrepreneurial teams positively moderates the relationship between entrepreneurial leadership and a new venture’s innovative capability (DR2 = 0.05, p < 0.05), providing support for Hypothesis 3. This model also indicated that entrepreneurial leadership can enhance a new venture’s patent creation only when entrepreneurial team members are creative. A representation of the interaction between entrepreneurial leadership and creativity in entrepreneurial teams is provided in Figure 2. This graph shows that the positive relationship between entrepreneurial leadership and new venture’s patent creation becomes stronger as the level of creativity of entrepreneurial teams is increased.
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Conclusions This paper is an empirical study drawn from Taiwan’s high-tech entrepreneurial teams that explores the moderating role of creativity in entrepreneurial teams, and how it is connected to the relationship between entrepreneurial leadership and new venture’s innovative capability. One key finding of this paper suggests that in a new venture’s context, entrepreneurial leadership can stimulate entrepreneurial team members to be more creative. The second finding suggests that when lead entrepreneurs have higher risk-taking, pro-activeness and innovativeness, they can stimulate their entrepreneurial team to be more creative during the patent creation process. It also indicates that the joint contribution of higher entrepreneurial leadership and more creative teams can enhance the creation of more patents by a new venture. While this paper makes an important and meaningful contribution to an understanding of the effects of entrepreneurial leadership and team creativity on patent creation, some research limitations merit discussion. One limitation was that patent creation was used as a single indicator of new ventures’ innovative capability for high-tech sectors. Further work could incorporate multi-indicators to measure new ventures’ innovation. In addition, one might need to bear in mind that using patents as the innovation metric for high-tech sectors might not be suitable for all types of firms. A further limitation was that only one respondent from each firm answered the questionnaire, which did not allow us to test within-group agreement. This could be an important issue because cross-cultural divergence in effectiveness of entrepreneurial leadership is typical at the micro level and reflects the varying needs, values and beliefs of people © 2007 The Author Journal compilation © 2007 Blackwell Publishing
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80
75
70
Patent Creation
65
60 Low Creativity in Entrepreneurial Teams High Creativity in Entrepreneurial Teams
55
50 Low
High
Entrepreneurial Leadership
Figure 2. Interaction of Entrepreneurial Leadership and Creativity in Entrepreneurial Teams on New Venture’s Innovative Capability
within different firms and societies (Child, 1981; Gupta et al., 2004). One future direction would be to collect data from multiple raters on the measured variables to address the issue of withinorganization agreement. The third limitation was that the current study has examined only the roles of entrepreneurial leadership and entrepreneurial teams on the patent creation process. Since organizational behaviour is far more complicated and involves more contextual and individual factors, further work can be enriched by adding more significant contextual factors into the research framework.
Acknowledgement The author would like to thank the National Science Council, Taiwan, for funding the project under grant NSC 92-2416-H-155-011.
References Amabile, T.M. (1997) Motivating Creativity in Organizations: On Doing What You Love and Loving What You Do. California Management Review, 40, 39–58. Amabile, T.M., Conti, R., Coon, H., Lazenby, J. and Herron, M. (1996) Assessing the Work © 2007 The Author Journal compilation © 2007 Blackwell Publishing
Environment for Creativity. Academy of Management Journal, 39, 1154–84. Amabile, T.M., Schatzel, E.A., Moneta, G.B. and Kramer, S.J. (2004) Leader Behaviors and the Work Environment for Creativity: Perceived Leader Support. Leadership Quarterly, 15, 5–32. Amason, A.C. and Sapienza, H.J. (1997) The Effects of Top Management Team Size and Interaction Norms on Cognitive and Affective Conflict. Journal of Management, 23, 495–516. Andrews, F.M. (1967) Creative Ability, the Laboratory Environment, and Scientific Performance. IEEE Transactions on Engineering Management, 14, 76–83. Ardichvili, A., Cardozo, R. and Ray, S. (2003) A Theory of Entrepreneurial Opportunity Identification and Development. Journal of Business Venturing, 18, 105–23. Barney, J. (1991) Firm Resources and Sustained Competitive Advantage. Journal of Management, 17, 99–120. Basadur, M. (2004) Leading Others to Think Innovative Together: Creative Leadership. Leadership Quarterly, 15, 103–21. Bass, B.M. and Avolio, B.J. (1990) The Implications of Transactional and Transformational Leadership for Individual, Team, and Organizational Development. Research in Organisational Change and Development, 4, 231–72. Baum, J.A.C. and Silverman, B.S. (2004) Picking Winners or Building Them? Alliance, Intellectual, and Human Capital as Selection Criteria in
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Venture Financing and Performance of Biotechnology Startups. Journal of Business Venturing, 19, 411–36. Bingham, F.G. and Quigley, C.J. (1989) Venture Team Application to New Product Development. The Journal of Business and Industrial Marketing, 4, 49–59. Bruyat, C. and Julien, P. (2000) Defining the Field of Research in Entrepreneurship. Journal of Business Venturing, 16, 165–80. Bygrave, W.D. and Timmons, J.A. (1992) Venture Capital at the Crossroads. Harvard Business School Press, Boston, MA. Chang, Y., Chen, M.-H., Hua, M. and Yang, P. (2005) Industrializing Academic Knowledge in Taiwan. Research Technology Management, July–August, 45–50. Child, J.D. (1981) Culture, Contingency, and Capitalism in the Cross-National Study of Organizations. In Cummings, L.L. and Staw, B.M. (eds.), Research in Organizational Behavior, vol. 3. JAI Press, New York, pp. 303–56. Cooper, A.C. (1973) Technical Entrepreneurship: What do we Know? R&D Management, 3, 59–64. Covin, J.G. and Slevin, D.P. (1988) The Influence of Organization Structure on the Utility of an Entrepreneurial Top Management Style. Journal of Management Studies, 25, 217–59. Damanpour, F. (1991) Organizational Innovation: A Meta-Analysis of Effects of Determinants and Moderators. Academy of Management Journal, 34, 555–90. Ekvall, G. and Arvonen, J. (1994) Leadership Profiles, Situation and Effectiveness. Creativity and Innovation Management, 3, 139–61. Glancey, K. (1998) Determinants of Growth and Profitability in Small Entrepreneurial Firms. International Journal of Entrepreneurial Behaviour and Research, 4, 18–27. Greenberger, D.B. and Sexton, D.L. (1988) An Interactive Model of New Venture Initiation. Journal of Small Business Management, July, 1–7. Gregorio, D. and Shane, S. (2003) Why Do Some Universities Generate More Start-Ups than Others? Research Policy, 32, 209–27. Gupta, V., MacMillan, I.C. and Surie, G. (2004) Entrepreneurial Leadership: Developing and Measuring a Cross-Cultural Construct. Journal of Business Venturing, 19, 241–60. Heeley, M.B., Matusik, S.F. and Jain, N. (2007) Innovation, Appropriability, and the Underpricing of Initial Public Offerings. Academy of Management Journal, 50, 209–25. Ibrahim, A.B. and Goodwin, J.R. (1986) Perceived Causes of Success in Small Business. American Journal of Small Business, Fall, 41–50. Ireland, R.D. and Hitt, M.A. (1999) Achieving and Maintaining Competitiveness in the 21st Century: The Role of Strategic Leadership. Academy of Management Executive, 13, 43–57. Jung, D.I. (2000) Transformational and Transactional Leadership and their Effects on Creativity in Groups. Creativity Research Journal, 13, 185–95. Jung, D.I. (2003) The Role of Transformational Leadership in Enhancing Organizational Innovation: Hypotheses and Some Preliminary Findings. Leadership Quarterly, 14, 525–44.
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Kamm, J.B. and Nurick, A.J. (1993) The Stages of Team Venture Formation: A DecisionMakingModel. Entrepreneurship Theory and Practice, Winter, 17–27. Kamm, J.B., Shuman, J.C., Seeger, J.A. and Nurick, A.J. (1990) Entrepreneurial Teams in New Venture Creation: A Research Agenda. Entrepreneurship Theory and Practice, Summer, 7–17. Keller, R.T. (1992) Transformational Leadership and the Performance of Research and Development Project Groups. Journal of Management, 13, 489– 501. Kirzner, I.M. (1997) Entrepreneurial Discovery and the Competitive Market Process: An Austrian Approach. Journal of Economic Literature, 35, 60–85. Long, W. (1983) The Meaning of Entrepreneurship. American Journal of Small Business, 8, 47–59. Lumpkin, G.T. and Dess, G.G. (1996) Clarifying the Entrepreneurial Orientation on Construct and Linking It to Performance. Academy of Management Review, 21, 135–72. MacMillan, I.C., Zeemann, L. and Narasimha, P.N.S. (1987) Criteria Distinguishing Successful from Unsuccessful Ventures in the Venture Screening Process. Journal of Business Venturing, 2, 123–37. Markman, G.D., Espina, M.I. and Phan, P.H. (2004) Patents as Surrogates for Inimitable and NonSubstitutable Resources. Journal of Management, 30, 529–44. Mumford, M.D., Scott, G.M., Gaddis, B. and Strange, J.M. (2002) Leading Creative People: Orchestrating Expertise and Relationships. Leadership Quarterly, 13, 705–50. Nelson, R.R. and Winter, S.G. (1982) An Evolutionary Theory of Economic Change. Harvard University Press, Cambridge, MA. Oldham, G.R. and Cummings, A. (1996) Employee Creativity: Personal and Contextual Factors at Work. Academy of Management Journal, 39, 607–34. Reich, R.B. (1987) Entrepreneurship Reconsidered: The Team as Hero. Harvard Business Review, May– June, 1–8. Reiter-Palmon, R. and Illies, J.J. (2004) Leadership and Creativity: Understanding Leadership from a Creative Problem-Solving Perspective. Leadership Quarterly, 15, 55–77. Rickards, T. and Moger, S. (1999) Handbook for Creative Team Leaders. Gower Press, Aldershot, UK. Rickards, T. and Moger, S. (2000) Creative Leadership Processes in Project Team Development: An Alternative to Tuckman’s Stage Model. British Journal of Management, 11, 273–83. Rickards, T. and Moger, S. (2006) Creative Leaders: A Decade of Contributions from Creativity and Innovation Management Journal. Creativity and Management Journal, 15, 4–18. Rickards, T., Chen, M.-H. and Moger, S. (2001) Development of a Self-Report Instrument for Exploring Team Factor, Leadership and Performance Relationship. British Journal of Management, 12, 243–50. Sosik, J.J., Kahai, S.S. and Avolio, B.J. (1998) Transformational Leadership and Dimensions of Creativity: Motivating Idea Generation in © 2007 The Author Journal compilation © 2007 Blackwell Publishing
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Computer-Mediated Groups. Creativity Research Journal, 11, 111–21. Stevenson, H.H. and Jarillo, P.M. (1990) ‘A Paradigm of Entrepreneurship: Entrepreneurial Management. Strategic Management Journal, 11 (Special Issue, Summer), 17–27. Stuart, R. and Abetti, P.A. (1987) Start-Up Ventures: Toward the Prediction of Initial Success. Journal of Business Venturing, 2, 215–30. Stuart, T.E. and Podolny, J.M. (1996) Local Search and the Evolution of Technological Capabilities. Strategic Management Journal, 21, 577–92. Timmons, J.A. (1999) New Venture Creation: Entrepreneurship in the 1990s, 3rd edn. Irwin, Homewood, IL. Venkataraman, S., MacMillan, I. and McGrath, R. (1992) Progress in Research on Corporate Venturing. In Sexton, D. (ed.), State of the Art in Entrepreneurship. Kent Publishing, New York, pp. 487–519. Ward, T.B. (2004) Cognition, Creativity, and Entrepreneurship. Journal of Business Venturing, 19, 173–88. Watson, W.E., Ponthieu, L.D. and Critelli, J.W. (1995) Team Interpersonal Process Effectiveness in Venture Partnerships and its Connection to Perceived Success. Journal of Business Venturing, 10, 393–411.
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Ming-Huei Chen (
[email protected]. edu.tw) is an associate professor at the Graduate Institute of Technology & Innovation Management, National Chung Hsing University, Taiwan. Dr Chen teaches graduate level and EMBA Creativity and Innovation Management courses, and lectures creative problem-solving methods in company’s training programs. She completed her PhD from the Manchester Business School, University of Manchester, UK, in 2001, a MBA and a MSc (Business Education) from Southern New Hampshire University in the United States in 1992; and a bachelor of Business Education in Taiwan in 1990.
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Leader Self-Reported Emotional Intelligence and Perceived Employee Creativity: An Exploratory Study Arménio Rego, Filipa Sousa, Miguel Pina e Cunha, Anabela Correia and Irina Saur-Amaral This research studies the relationship between six dimensions of leaders’ emotional intelligence and two dimensions of employee creativity. A sample of 138 managers from 66 organizations reported on their own emotional intelligence and the creativity of their teams. Our results point out two main findings: (a) leaders’ emotional intelligence explains significant variance of both creativity dimensions; (b) emotional intelligence dimensions with higher predictive power are self-control against criticism and empathy. The findings suggest that emotionally intelligent leaders behave in ways that stimulate the creativity of their teams.
C
reativity in the workplace can be defined as the production of novel and useful ideas or solutions (Amabile, 1988; Oldham & Cummings, 1996; Zhou & George, 2001, 2003). Novelty or originality is required for an idea to be judged creative, but ‘ideas must also be useful to be considered creative. A novel idea that has no potential value is unusual but not creative’ (Zhou & George, 2001, p. 547). Simply producing a large number of ideas is not the goal of creative performance. Rather, the goal is to solve problems, to create new products and services, to take advantage of business opportunities, and to improve organization effectiveness. Underlying this definition is the idea that employee creativity is often the starting point for innovation (Zhou & George, 2001) and a critical resource for organizational success. In modern organizations, work is increasingly more knowledge-based and less rigidly defined and specified. Environmental opportunities and challenges require new approaches and it is hoped that these are more creative than those expressed by competitors. In short, to survive and prosper, organizations need to take full advantage of their employees’ creative potential, so that innovation, change, learning, performance and competitiveness can be achieved (Woodman, Sawyer & Griffin, 1993; McAdam & Keogh, 2004).
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Organizational behaviour research on employee creativity has examined mainly contextual or organizational factors that facilitate or inhibit creativity. One key contextual factor is leadership. Several researchers have focused on identifying the role played by specific leadership behaviours on supporting, suppressing, facilitating or inhibiting creativity (e.g., Oldham & Cummings, 1996; Tierney, Farmer & Graen, 1999; Shin & Zhou, 2003; Zhou, 2003). These include transformational leadership, close monitoring, developmental feedback, supportive supervision, and controlling supervision. However, Zhou and George (2003) asserted that little theory has been developed to pinpoint the roots of these behaviours. They further suggested that one root is the leader’s emotional intelligence (EI). According to Zhou and George, modern organizations are locked in a paradox between control and creativity. Organizations and their leaders need to influence and control employees to work in predetermined ways to meet specific objectives. To ensure smooth and efficient operations, they are strongly dependent upon control systems, standardized practices and routines. But organizations also need change and improvement in their practices, routines, products and services in order to respond to environmental changes, challenges and opportunities. The paradox becomes © 2007 The Authors Journal compilation © 2007 Blackwell Publishing
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apparent when employee efforts to come up with new and better ways of doing things are hindered by those standards and controls. The tension resulting from this conflict puts enormous pressure on employees, which can lead to negative affective states, e.g., frustration and irritation. Thus, ‘numerous attempts at creativity get killed in their infancy because employees fall victim to these emotions’ (Zhou & George, 2003, p. 547). Leaders’ EI may be crucial when it comes to managing these emotions and guiding employees to take advantage of them. Leaders can foster their employees’ creativity through interaction with them and via the creation of a work climate supportive of creativity. EI can facilitate their action in both cases.
Leader Emotional Intelligence and Employee Creativity EI can be considered as a set of cognitive abilities (ability model), but other approaches combine abilities with a broad range of personality traits (mixed models). Both the ability and the mixed models have strengths and limitations (Caruso, Mayer & Salovey, 2001). The most popular mixed model was proposed by Goleman (e.g., 1995, 1998a), and includes 25 competencies grouped into five categories: self-awareness (emotional awareness, accurate self-assessment, self-confidence), selfregulation (self-control, trustworthiness, conscientiousness, adaptability, innovation), motivation (achievement drive, commitment, initiative, optimism), empathy (understanding others, developing others, service orientation, leveraging diversity, political awareness), and social skills (influence, communication, conflict management, leadership, change catalyst, bond building, collaboration, team capabilities). Thus, the model combines emotional abilities and the product of these abilities (Caruso, Mayer & Salovey, 2001). This means that there are at least four major aspects of EI: (a) appraisal and expression of emotions; (b) use of emotion to enhance cognitive processes and decision making; (c) knowledge about emotions; and (d) management of emotions (George, 2000). The first dimension encompasses the ability to accurately assess and express one’s own emotions, to be aware of, appraise and express the emotions of others, and be empathetic. The second dimension means that the individual has the ability to use emotions to focus attention. The third dimension implies that individuals know the causes and the consequences of emotions, and are aware of how emotions progress over time. The fourth dimension encompasses the © 2007 The Authors Journal compilation © 2007 Blackwell Publishing
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ability to manage and control emotions. People with higher scores on this dimension manage to maintain positive moods, to repair negative ones and to improve the management of the other three dimensions. These four dimensions are interrelated. For example, the ability to accurately assess one’s own emotions helps to manage them; and empathy facilitates the management of other people’s emotions. An abundant literature about the relationships between EI and leadership can be found (George, 2000; Caruso, Mayer & Salovey, 2001; Goleman, Boyatzis & McKee, 2002; Wong & Law, 2002; Shin & Zhou, 2003; Brown & Moshavi, 2005; Kerr et al., 2006). However, as Zhou and George (2003, p. 549) suggest, ‘little is known about why some leaders naturally exhibit creativity-enhancing behaviors while other leaders fail to do so’. These authors argue that EI can play an important role in: (a) promoting specific behaviours in leaders; (b) helping leaders to adjust their behaviours to the emotions and creativity requirements in each situation; (c) promoting a profitable relationship between leaders and employees, in such a way that employees feel free and committed to channel creativity toward better performance, while leaders create the conditions to nourish and expand the ‘creative capital’ of the organization. This paper looks for a better understanding of how the above arguments are empirically sustainable. An EI model previously developed and validated by one of the authors (Rego & Fernandes, 2005) was used. They came to a factor-structure comprising six dimensions: (1) understanding one’s emotions; (2) self-control against criticism; (3) selfencouragement; (4) emotional self-control; (5) empathy; (6) understanding of other people’s emotions. We aim to show how these dimensions of leaders’ EI explain two dimensions of employees’ creativity. We predict that the higher the leader’s EI, the more their employees produce creative ideas. Next, we present arguments and hypotheses for each EI dimension, and then we reason about the moderating role that leaders’ gender plays in the relationship between leaders’ EI and employees’ creativity.
Understanding One’s Emotions Leaders who understand their own emotions are more likely to establish and maintain supportive relationships with employees (George, 2000; Prati et al., 2003). They will probably behave in a more authentic way, thus fostering the employees’ authenticity, trust and wellbeing (Avolio & Gardner, 2005; Gardner et al., 2005; Ilies, Morgeson & Nahrgang, 2005). They
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may serve as role models for their employees, thereby enhancing employees’ trust in and respect for them (Goleman, 1998b; Barling, Slater & Kelloway, 2000; Goleman, Boyatzis & McKee, 2002). Trust and respect are important because employees feel free to propose unconventional ideas and introduce conflicting opinions without fear of reprisal (Prati et al., 2003; Mostert, 2007). By contrast, without selfawareness, leaders tend to be less cautious when evaluating employees’ ideas (Zhou & George, 2003), and less able to understand how they are being biased towards some people’s ideas. They are also less able to exercise self-constraint against negative emotions they are experiencing. In such cases, trust and respect can be undermined, a climate full of ‘personal preferences’ can arise and some people may lose the will to contribute with creative ideas for solving problems and meeting opportunities. Thus, we hypothesize that the leaders who understand their own emotions tend to foster greater employee creativity.
Self-Control Against Criticism Leaders with low self-control against criticism are more likely to take comments and suggestions of their employees as personal attacks, and become less available for accepting feedback and accepting heterodox/original ideas (Bushell, 1998; Prati et al., 2003). Trust can suffer and employees may fear proposing creative ways for solving problems and meeting opportunities (Prati et al., 2003). By contrast, leaders with higher self-control against criticism may feel less threatened by the changes that creative ideas may imply, be more inclined to welcome employees’ creative suggestions, establish higher quality exchanges with employees (characterized by trust, mutual liking and respect; Deluga, 1994; Scott & Bruce, 1994; Tierney, Farmer & Graen, 1999; Brower, Schoormanb & Tan, 2000; Dirks & Ferrin, 2002), and foster employees’ willingness to propose creative ideas (Prati et al., 2003), without fear of being criticized/ reproved. They are probably more able to provide constructive criticism and feedback in an informational (and not controlling) manner (Zhou & George, 2003). These informational practices provide employees with relevant information to improve their performance without pressure for a particular outcome. They also promote intrinsic motivation, which can act as a ‘stimulant’ for creativity (Oldham & Cummings, 1996; Amabile, 1997; Tierney, Farmer & Graen, 1999; Jaussi & Dionne, 2003; Zhou & Shalley, 2003). Intrinsic motivation is crucial for creativity because an intrinsically
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motivated person tends to be (a) curious and learning oriented, (b) cognitively flexible, (c) willing to take risks, and (d) persistent when facing obstacles, challenges and opportunities (Deci & Ryan, 1985; Utman, 1997; Zhou, 2003). Therefore, we hypothesize that the leaders who are self-controlled against criticism tend to foster greater employee creativity.
Self-Encouragement Employees who engage in creative action need to be persistent when faced with obstacles, to have the courage to develop unconventional ideas, to run counter to the status quo, and to take the challenge of coming up with something that is truly new and useful (Zhou & George, 2003). Self-encouraged leaders may nourish these strengths in employees. Such leaders would view adverse situations in a more positive light and would be willing to try new approaches and solutions without fear of failure (Rozell, Pettijohn & Parker, 2006), thus inviting/motivating employees to be persistent and to generate more and higher quality ideas (Kaufmann & Vosburg, 1997; Goleman, Boyatzis & McKee, 2002). They may elevate/ sway the team’s emotional state and inspire employees to perform with more enthusiasm, excitement and optimism (Ashforth & Humphrey, 1995; George, 2000; Prati et al., 2003; Zhou & George, 2003). These positive emotions can broaden the employees’ scope of attention (increasing the number of cognitive elements available for association) and the scope of cognition (increasing the breadth of those elements that are treated as relevant to the problem), thus increasing the probability of creative activities (Fredrickson, 2001; Wright & Cropanzano, 2004). As a result, we hypothesize that leaders high on selfencouragement tend to foster greater employee creativity.
Emotional Self-Control Identifying problems and opportunities and engaging in creative diligence often involves collaboration and interaction with co-workers. Co-workers may disagree on the routes of problem-solving and on the direction of change and improvement. This disagreement can give rise to emotionally charged debates and personalized/emotional conflict, detrimental to creativity (Zhou & George, 2003). Leaders with emotional self-control are more able to manage these conflicts and facilitate the identification of a common goal or direction as a focus for the group’s creative efforts. They tend to avoid negative ‘emotional explosions’ toward employees’ extravagant (although © 2007 The Authors Journal compilation © 2007 Blackwell Publishing
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really effective) ideas. They may feel more respected and create more supportive team/ organizational environments, which provide employees with emotional safety (Ashforth & Humphrey, 1995; Prati et al., 2003) and greater willingness to take risks and advance unconventional ideas. They can quickly control their initial irritation and frustration with an idea and instead encourage the follower to come up with new procedures and processes for possible implementation (Zhou & George, 2003). By contrast, leaders with low emotional selfcontrol may be easily frustrated or irritated, and take the employees’ creative suggestions as threats to their authority and credibility (Staw, 1995), thus inhibiting employees from suggesting further creative ideas. Thus, we hypothesize that the leaders who are more emotionally self-controlled tend to foster greater employee creativity.
Empathy Empathy is the sensitivity of an individual to the feelings and concerns of other people. Empathetic leaders are more able to understand the values, worries, fears and positive emotions of their employees, to recognize and respond to changes in their emotional states and to provide emotional support to them when needed (Rahim & Psenicka, 2005). They are more able to communicate respectfully with employees and appreciate their ideas, inducing them to feel free to disclose original/ ‘extravagant’ ideas. The co-operative environment they promote may cultivate positive moods and emotions in employees (Jones & George, 1998), inducing them to be more optimistic about the future, more confident, and more expansive in their thinking (Zhou & George, 2003), thus increasing creative thought and innovative problem solving (Isen, Daubman & Nowicki, 1987; Fredrickson, 2001; Wright & Cropanzano, 2004). Empathy is also crucial for developing trust (Cherniss & Caplan, 2001), a prerequisite for employees to feel free to propose unconventional ideas and introduce conflicting opinions without fear of reprisal (Prati et al., 2003). Leaders with higher empathy are also more likely to give feedback and evaluate employees’ ideas in an informational (and not controlling) and encouraging manner, thus reinforcing intrinsic motivation and creativity (Shalley & Perry-Smith, 2001; Zhou & George, 2003). We hypothesize therefore that more empathetic leaders tend to boost employee creativity.
Understanding Other People’s Emotions Leaders who understand people’s emotions can accurately perceive when employees are © 2007 The Authors Journal compilation © 2007 Blackwell Publishing
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losing patience or getting frustrated with an inability to obtain necessary resources or find a solution to a problem or opportunity (Zhou & George, 2003). They can help them to recover from setbacks and disappointments, pinpointing the causes of those negative emotions and helping employees to become aware of the problem and adopt a proactive approach to creatively solving it (Zhou & George, 2003). They can also perceive the employees’ frustration when facing obstacles to selling and implementing their new ideas, and can stimulate the employees to continue to believe in and improve the value of their ideas, to negotiate and compromise with others for idea implementation, and to maintain optimism about implementation (Zhou & George, 2003). These leaders can also identify positive moods in employees and then nourish their optimism to envision opportunities for improvement, thus broadening their scope of attention and cognition, and fostering their creativity (Fredrickson, 2001; Zhou & George, 2003; Wright & Cropanzano, 2004). Thus, we hypothesize that the leaders who understand others’ emotions tend to stimulate greater employee creativity.
Gender Some studies in the literature (e.g., Mayer, Caruso & Salovey, 2000; Nikolaou & Tsaousis, 2002; Mandell & Pherwani, 2003) suggest that women score higher on measures of EI than men, while others suggest no difference or even higher EI scores in men (Fatt & Howe, 2003). Other studies indicate that gender moderates the relationship between EI and dependent variables. For example, Rego and Fernandes (2005) found that the understanding of one’s emotions explains the health level of female students but not of male ones, and that EI is a better predictor of health and satisfaction with life of women than of men. We wish to explore these topics by comparing the EI levels of male and female leaders and investigating if the managers’ gender moderates the relationship between managers’ EI and employees’ creativity. Considering the exploratory nature of the topic, we do not advance any specific hypotheses.
Method A sample of 138 top and middle managers from 66 organizations operating in the European Union was analysed. Some 25 percent were female. The mean age was 39.1 years and organizational tenure 10.8 years. The companies operated in several industries (e.g., hotels, auto
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Table 1. Emotional Intelligence – Confirmatory Factor Analysis (Completely Standardized Solution) Understanding one’s emotions I really know what I am feeling. I understand the causes of my emotions. I understand my feelings and emotions. Self-control against criticism I don’t deal well with criticism. (r) I become angry when others criticize me – even if I feel that they are right. (r) It is difficult for me to accept a critique. (r) Self-encouragement (use of emotions) Usually, I am used to setting my own aims. Usually, I encourage myself to give as well as I can. I give as well as I can to achieve my goals. Emotional self-control (regulation of emotions) I am really able to control my own emotions. I can stay calm even when the others are angry. I react calmly even when I am under tension. Empathy and emotional contagion When one of my friends earns a prize, I am happy. I feel good when one of my friends receives praise. Understanding other people’s emotions I understand the emotions and feelings of my friends by seeing their behaviour. I do as well as I can to understand the others’ points of view. I really understand the feelings of the people I am related with. Fit indices Chi-square/degrees of freedom Root mean square error of approximation Goodness of fit index Adjusted goodness of fit index Comparative fit index Incremental fit index Relative fit index
(0.84) 0.74 0.72 0.87 (0.80) 0.69 0.77 0.80 (0.80) 0.70 0.79 0.77 (0.62) 0.51 0.63 0.71 (0.82) 0.71 0.94 (0.74) 0.65 0.76 0.66 1.4 0.05 0.89 0.84 0.94 0.94 0.79
Cronbach alphas in brackets. (r) = reverse-coded items.
sales, ceramics, glassmaking, food) and managers came from marketing, purchasing and production departments. Managers were invited to report their own EI through a previously developed instrument, validated by the first author (Rego & Fernandes, 2005). It comprises 23 seven-point Likert-type scales, some collected from the literature, others developed by the authors, and it measures the six dimensions mentioned above. The empirical evidence (Rego & Fernandes, 2005) suggests that this six-factor model fits the data well, the reliabilities are satisfactory, and these dimensions predict individual health, satisfaction with life and students’ academic achievement. Individuals were asked to assert the degree to which each statement applies to them (1: ‘the statement does not apply to me at all’, through to 7: ‘the statement applies to me completely’).
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Next, leaders reported the creativity of their team employees (in the aggregate), through 13 items proposed by Zhou and George (2001), who adopted three items from Scott and Bruce (1994), and developed the remaining 10 items themselves. Managers were asked to report how frequently their followers, in the aggregate, adopted the 13 creativity behaviours, on a scale ranging from 1 (never) to 5 (frequently). The answers were anonymous. Confirmatory factor analysis (Byrne, 1998) was carried out to test the fitness of the sixfactor model of EI. To improve fit indices, five items were removed according to modification indices and standardized residuals. Another item (related to the empathy dimension) was removed due to the low lambda (0.22). The resulting model fits the data adequately (see Table 1). Lambdas are higher than 0.50, with © 2007 The Authors Journal compilation © 2007 Blackwell Publishing
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Table 2. Creativity – Principal Component Analysis (with Varimax Rotation)
My subordinates suggest new ways to achieve goals or objectives. My subordinates come up with new and practical ideas to improve performance. My subordinates suggest new ways to increase quality. My subordinates promote and champion ideas to others. My subordinates exhibit creativity on the job when given the opportunity to. My subordinates develop adequate plans and schedules for the implementation of new ideas. My subordinates have new and innovative ideas. My subordinates come up with creative solutions to problems. Explained variance Cronbach alphas
five alphas above 0.70, and only one just under this level. Data on creativity were submitted to a principal component analysis (Table 2). Due to the cross-loadings, five items were removed. Two factors were extracted (Keyser-MeyerOlkin = 0.88). The first one is loaded by mixed items (i.e., some relating to new ideas and others relating to both new and useful ones). The items ‘My subordinates promote and champion ideas to others’ and ‘My subordinates exhibit creativity on the job when given the opportunity to’ seem devoid of any explicit sense of usefulness, while the other three contain useful meaning: the first concerns the implementation of new ideas, the second concerns innovative action, and the third involves solutions to problems. At least two explanations can be proposed for this mixed content of the factor. First, it is not easy to differentiate, on the whole, between the ideas that are new and those that are also useful. For example, one manager who says that ‘My subordinates come up with creative solutions to problems’ can think of subordinates who suggest many ‘creative’ (i.e., new) solutions for solving problems, most of which are not really useful for solving those problems. Second, while researchers and scholars distinguish ‘creativity’ from ‘innovation’, many practitioners do not differentiate the two terms. For example, it is plausible that some managers, answering to the item ‘My subordinates have new and innovative ideas’, do not distinguish between ‘new’ and ‘innovative’ and consider both terms as redundant and/or © 2007 The Authors Journal compilation © 2007 Blackwell Publishing
Factor 1 Creative ideas
Factor 2 Useful ideas
0.24
0.89
0.30
0.86
0.43 0.75 0.77
0.68 0.18 0.34
0.78
0.27
0.80 0.71 40.4% 0.87
0.32 0.32 30.3% 0.85
consider ‘innovative ideas’ as new/creative ones. Considering the mixed nature of the factor, we have called it ‘creative ideas’. The second factor was labelled ‘useful ideas’ given that it is loaded mainly by items focused on achieving goals and objectives, improving performance and increasing quality. An overall creativity score was also computed, comprising the eight items (alpha = 0.94). Before calculating the relationships between dependent and independent variables, Harman’s single-factor test was performed (Harman, 1967). This test is not a solution to common method variance arising from collecting data of dependent and independent variables from the same source, but it is a ‘statistical remedy’ that fits Podsakoff et al.’s (2003) recommendations. If a significant amount of common method bias exists, a factor analysis of all the variables in the model will give rise to a single factor or to a general factor accounting for the majority of the covariance amongst the measures. Unrotated factor analysis using the eigenvalue-greater-than-one criterion revealed eight factors, the first explaining 25.1 percent of the variance. This suggests that common method bias is not a serious threat to the validity of the study.
Results Means, standard deviations and correlations are shown in Table 3. The mean scores of leaders’ EI tend to be high, with the scores on self-control against criticism and emotional
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0.8 0.7 0.7 0.7 0.6 10.0 7.9 –
4.9 5.8 4.9
5.8 5.5
3.2 3.2 3.1 39.1 10.8 –
SD
5.7
* p < 0.05, ** p < 0.01, *** p < 0.001.
1. Understanding one’s emotions 2. Self-control against criticism 3. Self-encouragement (use of emotions) 4. Emotional self-control (regulation of emotions) 5. Empathy and emotional contagion 6. Understanding other people’s emotions 7. Creative ideas 8. Useful ideas 9. Overall creativity 10. Age 11. Organizational tenure 12. Gender (female: 0; male: 1)
Mean
0.17* 0.10 0.14 -0.03 -0.01 0.07
0.26**
0.15
0.37***
0.41***
0.25**
–
1
Table 3. Means, Standard Deviations and Correlations
0.27*** 0.21** 0.26** -0.04 -0.06 0.10
0.22*
0.24**
0.32***
0.10
–
2
0.28*** 0.15 0.25** -0.26** -0.19* -0.11
0.42***
0.27***
0.16
–
3
0.14 0.14 0.15 -0.10 -0.12 0.06
0.01
0.02
–
4
0.34*** 0.32*** 0.37*** -0.25** -0.24** -0.17*
0.46***
–
5
0.24** 0.25*** 0.27*** -0.19* -0.09 -0.05
–
6
– 0.66*** 0.94*** -0.28*** -0.31*** -0.10
7
– 0.84*** -0.17* -0.12 -0.18*
8
– -0.28*** -0.30*** -0.15
9
– 0.74*** -0.03
10
0.02
11
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Table 4. Regression Analysis Creative ideas
Useful ideas
1st step
1st step
2nd step
Age -0.12 -0.05 -0.19 Tenure -0.22 -0.19 0.02 Gender (female: 0; male: 1) -0.11 -0.09 -0.20* Understanding one’s emotions 0.05 Self-control against criticism 0.20* Self-encouragement (use of emotions) 0.12 Emotional self-control (regulation -0.01 of emotions) Empathy and emotional contagion 0.17* Understanding other people’s 0.02 emotions F 5.6*** 4.6*** 3.2*** 0.09 0.19 0.05 Adjusted R2 Unique variance imputable to the 10% EI dimensions Unique variance imputable to the 3% control variables
Overall creativity
2nd step
1st step
2nd step
-0.12 0.05 -0.18* -0.01 0.14 -0.01 0.07
-0.15 -0.19 -0.17*
-0.08 -0.16 -0.15 0.03 0.18* 0.05 0.04
0.19* 0.11 3.0*** 0.12 7% 2%
0.20* 0.07 6.3*** 0.11
4.8*** 0.20 9% 4%
* p < 0.05, *** p < 0.001.
self-control being more modest. Leaders describe their employees, in the aggregate, as moderately creative. The correlations between the EI dimensions are moderate, and in some cases not significant. All EI dimensions except emotional self-control correlate positively with employee creativity, but the correlation with the useful ideas dimension is more modest. Leaders’ age and organizational tenure tend to correlate negatively, although not always significantly, with their EI and with employee creativity. The correlation regarding gender suggests that females score higher in empathy (t-test: 6.0 vs. 5.7; p < 0.05) and describe their employees as stronger providers of useful ideas (t-test: 3.5 vs. 3.2; p < 0.05). When the correlation between leader gender and employee creativity is controlled by the empathy dimension, the coefficient becomes insignificant. Put differently, when the correlation between leader empathy and employee creativity is controlled by gender, the coefficient is significant (p < 0.001). This suggests that it is the higher empathy of females, and not gender per se, that explains the higher creativity score of their employees. Table 4 presents the results of hierarchical regression analysis. In the first step, the man© 2007 The Authors Journal compilation © 2007 Blackwell Publishing
agers’ age, tenure and gender were entered as control variables, because some significant correlations amongst these variables, EI and creativity were found. Other studies have also suggested that age (Mayer, Caruso & Salovey, 2000; Nikolaou & Tsaousis, 2002) and gender (Mayer, Caruso & Salovey, 2000; Nicolaou & Tsaousis, 2002; Mandell & Pherwani, 2003) relate with EI. The findings suggest that age and tenure do not explain employees’ creativity, but gender does, in such a way that female leaders tend to describe their employees as more creative. However, as noted earlier, it is the higher empathy of females and not gender itself that explains the higher employee creativity. This evidence is partially corroborated by the fact that including EI in regression analyses decreases the gender beta values. In the second step, EI dimensions were entered. Leaders’ EI explains unique variance of both employees’ creativity dimensions and of global creativity score. Dimensions with higher predictive power are self-control against criticism and empathy. The data suggest that employees are more creative when their leaders possess self-control against criticism and are more empathetic.
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6.4 5.8 6.5 5.8 6.5 6.2 3.5 3.6 3.5 36.2 9.7 5.8 5.6 5.9 5.1 6.0 5.6 3.4 3.4 3.3 37.9 8.5 6.2 3.4 6.4 5.1 6.7 6.2 3.3 3.3 3.2 38.4 10.6 5.5 5.1 6.2 3.7 6.3 5.4 3.2 3.0 3.0 39.8 11.8 5.8 4.6 5.6 4.9 5.1 5.2 2.9 3.0 2.9 39.4 12.1 4.7 3.8 5.8 3.4 6.1 6.0 2.9 3.1 3.0 39.8 11.1 4.6 4.4 4.8 4.9 5.1 4.5 2.9 3.1 3.0 44.4 12.7 Understanding one’s emotions Self-control against criticism Self-encouragement (use of emotions) Emotional self-control (regulation of emotions) Empathy and emotional contagion Understanding other people’s emotions Creative ideas Useful ideas Overall creativity Age Organizational tenure
Group 6 (n = 32) Group 5 (n = 5) Group 4 (n = 12) Group 3 (n = 41) Group 2 (n = 12) Group 1 (n = 14) Table 5. Groups Emerging from Cluster Analysis
Next, EI scores were cluster analysed (Ward method, square Euclidian distance). Seven clusters were extracted, and then compared in terms of the leaders’ EI as well as employee creativity (see Table 5). Our goal was to test whether the groups formed according to the leaders’ EI were different in terms of employee creativity. The findings suggest that the more the leaders are emotionally intelligent, the more employees are (described as) creative. Every emotional dimension seems to contribute simultaneously to employees’ creativity, in such a way that a poor leaders’ EI in a dimension tends to reflect negatively employee creativity. For example, the leader’s EI of groups 5 and 7 is similar in five dimensions. However, leaders of group 5 scored poorly in self-control against criticism. The consequence seems to be lower scores for employee creativity. These findings also show that individuals combine the scores in different EI dimensions idiosyncratically. Although EI dimensions tend to be positively correlated, some individuals show a high score in some dimensions and low scores in others. For example, although the first and fourth dimensions are positively correlated (Table 4), the managers of group 5 score high in the first one and low in the fourth one. Another example: although the second and fifth dimensions are positively correlated, the managers of group 2 score low in the first one and high in the fifth. To explore how leader gender moderates the relationship between leaders’ EI and employees’ creativity, the product of gender by EI dimensions was added to the regression analysis containing control and EI variables. No interaction term added any significant effect for predicting creativity variables. This may be due to the small sample size (mainly regarding the female sub-sample: n = 34), and in order to explore data for future studies, we performed regressions analyses for gender. Results showed that leaders’ EI is a better predictor of employee creativity in the female sample than in the male: 18 percent of unique variance vs. 6 percent for predicting creative ideas, 7 percent vs. 3 percent for predicting useful ideas, and 14 percent vs. 6 percent for predicting overall creativity. For a better understanding of this moderating effect, Figures 1 to 6 depict the employees’ overall creativity according to two levels of leaders’ EI (above and below the mean), comparing males and females. Men and women do not differ significantly regarding four EI variables, but leaders’ self-control against criticism and understanding of other people’s emotions are better predictors of employees’ creativity in the female leaders’ sub-sample than in the male one.
Group 7 (n = 22)
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4
3,5 3,4 3,3 3,1 3 2,9
Males
Employees’ overall creativity
Employees’ overall creativity
4
259
3,5 3,4 3,2 3
3,1 3 Males
Females
Females
2,5
2,5
Below the mean
Above the mean
Below the mean
Leaders’ self-encouragement
Leaders’ understanding of one’s emotions
Figure 1. Employees’ Overall Creativity According to Two Different Levels of Leaders’ Understanding of One’s Emotions – Comparison Between Males and Females
Above the mean
Figure 3. Employees’ Overall Creativity According to Two Different Levels of Leaders’ SelfEncouragement – Comparison Between Males and Females
4
4
3,5
3,2 3 2,9
Males
Employees’ overall creativity
Employees’ overall creativity
3,7 3,5 3,4 3,2 3
3,2
3 Males
Females
Females 2,5
2,5 Below the mean
Above the mean
Leaders’ self-control against criticism
Below the mean
Above the mean
Leaders’ emotional self-control
Figure 2. Employees’ Overall Creativity According to Two Different Levels of Leaders’ SelfControl Against Criticism – Comparison Between Males and Females
Figure 4. Employees’ Overall Creativity According to Two Different Levels of Leaders’ Emotional Self-Control – Comparison Between Males and Females
Discussion and Conclusions
leadership effectiveness (e.g., George, 2000; Wong & Law, 2002; Kerr et al., 2006). The EI dimensions with greater predictive value are the leader’s self-control against criticism and empathy. This means that employees feel more motivated to identify and propose creative solutions and strategies when they feel that their leaders are receptive to ideas different from their own and/or that depart from the status quo. Possibly, these leaders encourage
Main Findings Our study suggests that emotionally intelligent leaders promote creativity in their employees. This corroborates the hypotheses suggested by Zhou and George (2003) and Prati et al. (2003), as well as the literature pointing out the positive role of leader EI on © 2007 The Authors Journal compilation © 2007 Blackwell Publishing
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Employees’ overall creativity
4
3,5 3,4 3,3
3
3 2,9
Males Females
2,5 Below the mean
Above the mean
Leaders’ empathy
Figure 5. Employees’ Overall Creativity According to Two Different Levels of Leaders’ Empathy – Comparison Between Males and Females
Employees’ oveall creativity
4
3,5
3,5
3,2 3
3 2,8
Males Females
2,5 Below the mean
Above the mean
Leaders’ understanding of other people’s emotions
Figure 6. Employees’ Overall Creativity According to Two Different Levels of Leaders’ Understanding of Other People’s Emotions – Comparison Between Males and Females followers to question assumptions, face problems from different angles, and approach old situations in new ways. Furthermore, when faced with the respectful behaviour of the leaders toward their novel ideas, it is likely that employees increase their intrinsic motivation, which enables them to search for new and more effective ways of working; this in turn induces high levels of creativity. In contrast, if leaders lose control when their employees disagree with them or present ideas that go
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against their own, it is likely that employees will adopt defensive behaviours and refrain from presenting other novel and useful ideas in the future. It is also possible that empathetic leaders show greater respect and individualized consideration for employees and help them to cope with particular emotions when they face problems and opportunities that require creativity. Thus, followers may become encouraged to try new and different approaches to their tasks, operate and think independently, without fear of reprimand for being original or presenting ‘extravagant’ ideas. Feeling respected as emotional beings, it is also likely that employees tend to reciprocate (Settoon, Bennett & Liden, 1996; Eisenberger et al., 2001), becoming more committed to helping the leader and organization cope with problems and take advantage of opportunities. Our data also suggest that employees are more reactive to some EI dimensions of female leaders than to male ones. When facing female leaders with greater self-control against criticism and greater understanding of other people’s emotions, employees are more creative than when they face male leaders. We cannot extract explanations for this relationship, but some possibilities can be proposed. For example, it is possible that the communication idiosyncrasies of women (Tannen, 1995) allow them to better transmit their EI to employees. Another explanation is that women have a greater ability to emotionally ‘magnetize’ (Goleman, Boyatzis & McKee, 2002) their employees. It is also possible that women and men translate differently their EI in behaviours towards employees. In any case, without evidence that can provide an adequate explanation for our findings, and taking into account the ‘fragilities’ of the (in)significant empirical effects, a cautious interpretation is necessary and future studies must continue to explore gender as a potential moderator of the relationship between leader EI and employee creativity.
Limitations of the Study and Future Research Although the results corroborate the hypotheses grounded in the previous literature, the limitations of the paper should be considered. First, our sample size is small. Therefore, evidence must be treated with caution, especially regarding the comparison by gender. Second, capturing dependent and independent variables from the same source creates potential for common method variance. For example, emotionally intelligent leaders may be more © 2007 The Authors Journal compilation © 2007 Blackwell Publishing
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benevolent when describing employee creativity. One can even speculate whether this is the reason why female leaders with higher self-control against criticism and higher understanding of other people’s emotions describe their employees as more creative: are they more benevolent when describing employees than males? The single-factor Harman test suggested that common method variance is not a serious threat to the validity of the study, but future research should preferably use other methodologies. For example: (1) leaders report their EI some months before describing employee creativity; (2) leaders report their EI, each employee reports the creativity of the team, and employee scores are aggregated to produce team scores; (3) leaders report employee creativity, but their EI is measured with competence tests or observers’ ratings (Mayer, Salovey & Caruso, 1997; Boyatzis, Goleman & Hay/ McBer., 1999); (4) leaders’ EI is correlated with objective measures of employee creativity (Oldham & Cummings, 1996; Tierney, Farmer & Graen, 1999). Third, our research does not include mediating variables between leader EI and employee creativity. It is important to know that emotionally intelligent leaders can promote employee creativity, but it is crucial to understand which strategies and behaviours ignited it. Fourth, the study includes no moderating variables other than gender. Future studies may consider, for example, which employee characteristics and/or organizational cultures reinforce or inhibit the role of leaders’ EI to promote employee creativity. One can expect, for example, that leader EI is insufficient to promote employee creativity when organizational culture is conflict avoidant, encourages accommodation and promotes blind compliance with the status quo. One can also presume that the potential of leaders’ EI is neutralized or mitigated if creative potential of employees is weak. Fifth, our EI measurement instrument needs further improvement. The Cronbach alpha regarding one dimension is lower than 0.70. The empathy dimension is measured with only two scales, which is not satisfactory for conducting confirmatory factor analysis. Furthermore, these scales can be vulnerable to social desirability. In any event, our study helps to enrich a field that is deficient in empirical studies.
Practical Implications If companies do not take advantage of the creative potential of employees, they waste © 2007 The Authors Journal compilation © 2007 Blackwell Publishing
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important resources to solve problems, react to challenges, face opportunities and innovate. As Zhou and George (2003) suggested, creative endeavours are affect-laden. Emotionally intelligent leaders are able to understand the emotions of their followers and channel them to the production of creativity potential that nourishes the sources of organizational innovation and competitiveness. Thus, it is not surprising that theoretical and empirical evidence has suggested that EI relates to leadership effectiveness and organizational performance (e.g., Wong & Law, 2002; Holt & Jones, 2005; Rosete & Ciarrochi, 2005; Kerr et al., 2006). Organizations must make an effort to select leaders with EI competencies and implement EI training and development programmes (Bagshaw, 2000; Cherniss & Adler, 2000; Cherniss & Caplan, 2001; Prati et al., 2003; Slaski & Cartwright, 2003; Kerr et al., 2006). Some studies suggest that training programmes must be business-oriented, adapted to the context, provided by high-quality trainers with sensitivity for the specificities of business, sponsored by powerful executives, monitored, infused through the organization and ‘navigated’ by emotionally intelligent programme planners and managers (Bagshaw, 2000; Cherniss & Caplan, 2001). For development programmes, coaching processes can be especially fruitful (Bagshaw, 2000; Jay, 2003; Wall, 2006). Managers must also be encouraged to enhance their EI skills through reflexivity, and organizations must provide positive conditions for learning and improving managers’ essential EI competencies.
Acknowledgements The authors are grateful to the editor and the anonymous reviewers for their helpful comments and suggestions.
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Arménio Rego (
[email protected]) teaches organizational behavior and human resources management at the Universidade de Aveiro, Aveiro, Portugal. He has a PhD from ISCTE. His research interests include organizational justice and citizenship, emotional intelligence, authentizotic organizing, happiness, spirituality and crosscultural management. Filipa Sousa teaches management, economy and accounting at the Instituto Politécnico de Leiria, Leiria, Portugal. She has a Masters degree from the Universidade de Aveiro and is preparing her PhD. Her research topics include authentic leadership, creativity and organization development. Miguel Pina e Cunha is an associate professor at the Faculdade de Economia, Universidade Nova de Lisboa, Lisbon, Portugal. He has a PhD from Tilburg University. His major research topic is the emergent side of managing and organizing (expressed in areas such as improvisation, bricolage and serendipity).
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Anabela Correia teaches Human Resources Management at the Instituto Politécnico de Setúbal, Escola Superior de Ciências Empresariais, Portugal. She has a PhD from the Universidade de Salamanca, Spain. Her research interests include recruitment and selection. Irina Saur-Amaral is Doctoral Researcher in Industrial Management at the University of Aveiro, Portugal. She teaches Knowledge Management. Her research interests include management of R&D/innovation in pharmaceuticals, global knowledge management, diversity management, and firm internationalization.
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Enthusiasm in the Development of Radical Innovations Birgitta Sandberg People involved in the development of radical innovations tend to feel a lot of enthusiasm. It has been claimed that, in fact, this enthusiasm fosters the innovativeness. The purpose of this study is to analyse how enthusiasm is created and sustained in this process. The theoretical framework combines the previous literature on champions and enthusiasm-creating systems. The study analyses enthusiasm in five processes of radical innovation. The results indicate that it is not only champions but also innovation-development teams who contribute to spreading enthusiasm throughout organizations. Eventually, the enthusiasm also spreads outside to the customers. Five inhibitors of enthusiasm were identified: commitment, engagement, trust, results and help gaps.
Introduction
R
adical innovations are innovations that are new both to the firm and to the market. It has been claimed that their development is critical to the long-term survival of many firms, since they provide the foundation on which future generations of products or services are created (McDermott & O’Connor, 2002). The newness of these innovations creates various challenges for the firms involved. They have to cope not only with considerable technological and commercial uncertainties, but they also often face resistance from inside. Individual decision makers may find it very difficult to risk supporting a development project that might eventually fail because there is no market for the product (Christensen, 1997). Although the development of radical innovations is difficult, the individuals who are engaged in the process often feel very enthusiastic and stimulated. Nayak and Ketteringham (1986), for instance, argued that spirit and emotion within individuals fuels the creation of radical innovations. Hence, it is surprising how little research attention has been given to the enthusiasm that is prevalent in this process. Enthusiasm is often characterized as a strong feeling about something (see, for example, the definition in the Oxford Advanced Learner’s Dictionary of Current English, 1989).
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Glassman and McAfee (1990) describe it as ‘being excited or highly aroused’ or having ‘ardent zeal’ towards something. However, Collins Cobuild English Language Dictionary (1987) offers a more detailed definition: ‘great eagerness to be involved in a particular activity, because it is something you like and enjoy or that you think is important’. This definition is used in this study, since it is more extensive in that it encompasses not only feelings but also action, i.e., ‘being involved’. Marcus and Mackuen (1993) also acknowledge the behavioural aspect of enthusiasm: according to them, ‘enthusiasts throw themselves into the cause’. Feelings are an inherent component of social behaviour. They are particularly likely to influence judgements when people faced with a complex task are in need of extensive and constructive information processing. Their role is further accentuated in situations in which there is ambiguity and uncertainty, when new information needs to be assimilated, and when people desire to make accurate judgements and good decisions (Forgas & George, 2001). This description seems to fit the context of radical-innovation development. The people involved are often faced with abundant information characterized by uncertainty and ambiguity, and out of this information they have to make decisions that chart the course of their development project. In other words, they are dealing with complex
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information involving high uncertainty and the desire to be accurate. Thus, it seems that the role of feelings in their behaviour cannot be overestimated. Furthermore, past research indicates that inductive reasoning is best employed when people are enthusiastic. Enthusiastic people tend also to be more creative and are more likely to come up with a compelling vision that contrasts with existing conditions (George, 2000; Amabile et al., 2005). Although feelings play a central role in cognitive processes and behaviour, this has been largely bypassed in scientific research on organizations (Muchinsky, 2000). Traditionally, organizations have tried to control emotional expression, because feelings have been considered irrational and thus undesirable (Pescosolido, 2002), and obstacles to effective decision making (Albrow, 1992). Only recently, in conjunction with the evolution of concepts such as ‘emotional intelligence’ (e.g., Goleman, 1995), have researchers (e.g., Prince, 2003) started to call for more studies on the role of feelings in organizations. This paper is a response to these calls, the aim being to connect a strong feeling, enthusiasm, with a complicated and multifaceted organizational process, the development of radical innovations. The purpose is thus to analyse how enthusiasm is created and sustained in the development of radical innovations. It is assumed that deeper knowledge of the manifestation and creation of enthusiasm would open up new avenues of research on innovation management, and would help us to better understand the behaviour of the people involved in R&D projects. Past research (e.g., McDermott & O’Connor, 2002) has shown that people issues are particularly important in the management of radical innovations. However, the results so far have not yet greatly enhanced our understanding of how better to manage these issues. For example, it is difficult for management to turn research results concerning personality factors in R&D teams into practice since personalities consist of rather enduring traits. It is therefore assumed that research concentrating on feelings-related issues could offer more concrete and applicable managerial implications. Past studies on innovation development have tended to emphasize the role of enthusiastic behaviour at the idea-generation stage (e.g., Howell & Boies, 2004). However, it is presumed that, especially in the case of radical innovations, the enthusiasm plays an important role at later stages too, when the developers still face resistance (e.g., Veryzer, 1998). This study therefore covers the whole process, starting with the idea generation and ending at the launch.
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Drivers and Inhibitors of Enthusiasm The theoretical framework of the paper combines the previous literature on champions and enthusiasm-creating systems. Past research has emphasized the role of champions in innovation development (e.g., Schon, 1963; Maidique, 1980). Champions are individuals who emerge informally to actively promote the invention through the development stages. They adopt the project as their own and become very committed to it. They tend to utilize both formal and informal networks in communicating with colleagues, stakeholders and customers in order to gain support for the development process (Markham, 1998; Howell & Boies, 2004). In this task they ‘display persistence and courage of heroic quality’ (Schon, 1963). It is thus assumed that champions act as enthusiasm catalysts in organizations developing radical innovations; they create the enthusiasm in the first place and, provided that they are allowed to, they spread it throughout the organization. The theoretical framework covering drivers and inhibitors of change, which was developed by Senge et al. (1999) and applied by Walker (2002) to describe enthusiasm-creating systems, is used in this study as a basis for analysing its maintenance in an organization. The framework illustrates three reinforcing cycles that sustain enthusiasm. The first takes place at the individual level: enthusiastic people are willing to commit to the development project and they invest in acquiring the capabilities that lead to personal results (e.g., make tasks easier to accomplish and generate feelings of self-worth). Personal results tend to build further enthusiasm, thus enthusiasm is self-reinforcing. The second cycle leads from the change initiative to greater involvement with other people, which in turn leads to networking and diffusion. Hence, enthusiasm is contagious. The third cycle builds on the acquisition of capabilities that drive improved business performance, which in turn boosts organizational confidence in the change initiative even more. Walker (2002) charted these cycles in a building-construction project. However, since the original model developed by Senge et al. (1999) described enthusiasm on a more general level, it could be assumed that the same kind of enthusiasm cycles also occur in other organizational settings. Furthermore, Senge et al. (1999) pointed out five gaps that may prevent the initiation of organizational change, and three that could inhibit its maintenance. Walker (2002) utilized part of this model and identified six gaps that could inhibit the generation of enthusiasm. © 2007 The Author Journal compilation © 2007 Blackwell Publishing
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Table 1. Gaps Influencing the Creation and Maintenance of Enthusiasm in the Development of Radical Innovations Gap Time gap
Help gap Commitment gap Trust gap Reflection gap Openness gap Results gap Engagement gap
Features of the gap (based on Senge et al., 1999) People feel that they do not have enough time available to commit to the development of the radical innovation, or they feel that the time invested will be ineffective. Inadequate help available to the people involved in the development of the radical innovation. People are not able to commit personally to the radical innovation. They do not understand its relevance. Advocates of the radical innovation are not credible. People are not able to openly reflect on and discuss whether or not the radical innovation supports their own personal values and aims. People feel that it is not safe to raise difficult issues or give contradictory opinions. People feel concerned because the results are not as good as expected. The radical innovation may also create negative side-effects. The team developing the radical innovation is isolated from the rest of the organization, which causes conflicts between the team and others.
The way in which managers handle these six gaps seems to influence whether or not they inhibit the virtuous-enthusiasm cycle. This study is based on the foundations laid by Senge et al. (1999) and Walker (2002), and takes into account all the gaps suggested in the former: time, help, commitment, trust, reflection, openness, results and engagement (see Table 1). It is also assumed that these gaps exist in the development of radical innovations. However, because this incorporates a significant amount of uncertainty concerning new technologies and emerging markets, which tend to be emphasized differently at the idea-generation, development and launch stages (see, e.g., Veryzer, 1998), it is interesting to study whether the role of these inhibitors changes along the development process. For the purposes of this study, the development process is divided into three stages. The idea-generation stage begins with a search for or the picking up of an idea for a new product, and ends with the decision to go further with its development. The development stage could be defined as the process of putting a new idea into a physical and psychological entity that is expected to meet the needs of an audience of potential adopters (Rogers, 1983). It may be hard to tell when the innovation-development process moves from the development to the launch stage. These phases are distinguished here in terms of their emphasis: at the development stage it is on matching the innovation © 2007 The Author Journal compilation © 2007 Blackwell Publishing
with customer needs, and the focus is largely on its features, while at the launch stage it turns to interesting prospective customers in the innovation and in buying it. Figure 1 presents the a priori framework of the study. Since the literature is rather deficient in terms of enthusiasm creation and maintenance, the framework is preliminary and descriptive rather than predictive. It functions here as a preliminary conceptualization of the focal phenomenon. The term ‘development stage’ is used to refer to the particular stage, whereas ‘development process’ and ‘development’ refer to the whole process of which the stage is only a part.
Research Design A case study strategy was chosen to further understanding of the creation and maintenance of enthusiasm in radical-innovation development because it allows holistic understanding of complex phenomena that cannot easily be separated from their organizational context. A further justification for this approach is that the number of processes to be studied is rather limited. The unit of analysis, ‘a case’ in this study, is the development process of a particular radical innovation. The study relies solely on retrospective data. Although it would have been better to observe the processes throughout their unfolding, this was not a very realistic option as the focus was
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Behaviour of champions
Drivers of enthusiasm:
Personal results
Idea-generation stage Radical-innovationdevelopment process:
Inhibitors of enthusiasm:
Business performance
Networking
Development stage
Launch stage
E N T H U S I A S M
Trust gap
Help gap Time gap
Commitment gap
Openness gap Reflection gap
Results gap
Engagement gap
Figure 1. The A Priori Framework Describing the Drivers and Inhibitors of Enthusiasm During the Development of Radical Innovations on radical innovations. It would have been practically impossible to follow the development processes of hundreds of radical ideas over many years to find out if one (or any) of them had turned into a commercially successful product or service (i.e., an innovation). Accessibility constraints limited the choice of cases to Finnish radical innovations. Potential cases were mapped through expert interviews and a brief executive survey. The radical Finnish innovations mentioned by both the experts and the executives were then listed (a total of 51) and evaluated by the researcher in the light of how they seemed to fulfil the set criteria. Radical innovations were defined as new products, services or systems that required considerable change in customer behaviour, which were perceived as offering substantially enhanced benefits, and were also technologically new (cf. Veryzer, 1998). Another criterion was that they had to be commercially successful (cf. Schumpeter, 1934). Multiple cases were selected in order to give a more complete picture of the innovation phenomenon. The number of cases was determined during the research process, when certain disparities and certain congruences had become evident (cf. Glaser & Strauss, 1967). In the end, five cases seemed to provide enough information, and were still manageable. These cases were selected by means of literal replication logic, i.e., on the assumption that they would support the a priori framework (cf. Yin, 1989). In order to facilitate the
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modification of this framework to suit different types of radical innovations, a heterogeneous group was selected for further analysis. The five selected cases were: Hi-Fog (a watermist fire-extinguishing system developed for ships), Nordic Walkers (specially-designed poles for fitness walking), Spyder (a wrist-top diving computer), DyNAzyme (a thermostable DNA polymerase utilized in gene technology), and ePost Letter (an automated letter-mailing system that combines electronic communication and traditional mail). Face-to-face interviews were used as the key method of data collection. A total of 14 people were interviewed. The interviews lasted from one to three-and-a-half hours, and were taperecorded and transcribed. The number of interviewees for each case varied from two to five. This variation was natural since, in some cases, a certain person was involved in all of the phases from the idea to the launch stage, whereas in others it was not possible to form a complete picture without talking to several interviewees. In addition, shorter telephone interviews and email discussions were conducted with 10 other people who had participated in the development and launch of the case innovations. In all of the cases, the data was collected from people with an engineering background, from those responsible for marketing, and from their superiors. It has been suggested by various researchers (e.g., Yin, 1989) that interviews should be used in conjunction with written data in order to © 2007 The Author Journal compilation © 2007 Blackwell Publishing
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Radical-innovationdevelopment process:
Drivers of enthusiasm:
Idea-generation stage
Development stage
Networking
Launch stage
Personal results
Personal results
Behaviour of champions
269
Behaviour of champions
Personal results
Networking
Business performance
Networking
E N T H U S I A S M The company and development partners
Champions and core team
Inhibitors of enthusiasm:
Distributors and customers
Commitment gap
Trust gap
Commitment gap
Trust gap
Engagement gap
Results gap
Engagement gap
Help gap
Figure 2. The Modified Framework Describing the Drivers and Inhibitors of Enthusiasm During the Processes of Radical Innovation Development Under Study amplify, confirm and modify the record. Therefore, data triangulation was also utilized: information obtained from public sources was compared with the data gathered through the interviews. In the analysis stage the data was first put in chronological order and then organized thematically according to the a priori framework. The theoretical framework was linked to the cases via pattern-matching logic (cf. Yin, 1989). All in all, the data analysis was a continuous process that required repeated reading of the interview text files, the notes and the secondary data. It involved returning to the theory and to the interviewees with additional questions. This constant comparison between theory and empirical reality resulted in the creation of a modified framework.
Enthusiasm in the Cases under Study The champions in the case companies were the key persons in terms of enthusiasm creation. © 2007 The Author Journal compilation © 2007 Blackwell Publishing
At the idea-generation stage they inspired a few other key people to become engaged in the process. The key people were from diverse backgrounds, some from upper management and others from marketing. In all of the cases at least some of them were engaged in R&D activities. This group of key persons is called the ‘core team’ in this paper. At the development stage the enthusiasm spread from the champions and the core team to other parts of the organization, and in some cases also to other development partners. Finally, at the launch stage it also took hold outside among distributors and customers, for example (see Figure 2). One of the interviewees described how it was conveyed to the customers as follows: Jarmo [the champion] had such an inspiring style. And when I went through the whole thing and realized what an opportunity this was, I could hardly hold my excitement. There was even one customer who said that he couldn’t help getting excited when he saw that someone had a spark like that. That
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spark then spread throughout the organization. That was one of the main things that when you get people onboard, and there are a lot of them, then it can’t fail. I think everyone who was selling the ePost Letter at the time had that spark. (ePost Letter case) In some cases, the excited partner organizations were also able to invoke enthusiasm in the media and in that way gain free publicity for the innovation: We got more and more excited because the media was with us, so we didn’t have to try to get them interested. All we needed to do was to tell them about this amazing thing, and all the radio networks, television stations . . . all came after one phone call. (Nordic Walkers case)
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prevent openness and reflection gaps from appearing. In all of the cases the interviewees found it very natural to be openly suspicious and to reflect on the outcomes during the whole development process. No enthusiasm inhibitors seemed to be present at the idea-generation stage, possibly because this stage always requires a lot of creativity and inspiration (cf. Majaro, 1992). It was also clearly seen in the interviews that those who participated at this stage did so voluntarily, and were the kind of people who may have had a higher propensity to become enthusiastic: There was a fairly large group, the kind of people you’d call movers and shakers. We saw some risks, and just went for it and did it! (ePost Letter case) They were a certain kind of open-minded and goal-oriented people who were proud of their profession and what they were doing. (Spyder case)
Thus, in these cases the enthusiasm helped not only with the innovation development but also in terms of the market success. Its diffusion reflects the role of networking as the driver that was prevalent throughout the whole process in all of the cases. Another driver that was present at all stages was personal achievement: it became clear in all of the interviews that this was more strongly related to learning and enjoyment than to monetary incentives:
Nevertheless, the presence of four inhibitors could clearly be detected at the development stage. Gaps in commitment, engagement and trust started to emerge when the enthusiasm spread from the champions and the core team to other parts of the organization:
I don’t feel that people are forcing themselves to do this, they have a genuine interest in it and they’re interested in developing themselves. (DyNAzyme case) All my career I’ve been lucky to be in roles where I’ve been very motivated and enthusiastic – it was so hard to go home on Fridays when I had to wait until Monday to continue. (ePost Letter case)
Of course we were really enthusiastic about our jobs and that also showed. It was somewhat frowned upon, people seemed to think that we were looking down our noses at them and that we were talking about things they didn’t understand. Some also thought that this wasn’t really something that should concern us as a company. (ePost Letter case)
As suggested in the literature (e.g., Schon, 1963; Howell & Boies, 2004), the behaviour of the champions was a crucial driver at both the idea-generation and development stages. When it came to the launch stage the impact of the champions’ behaviour on enthusiasm maintenance decreased and business results started to take over. According to the background theory, there are eight inhibitors that may decrease enthusiasm during the process of developing radical innovations. Of these, five were clearly present in the studied cases. Time-, reflection- and openness-related gaps were not seen as inhibitors in any of them: on the contrary, it seems that the enthusiasm helped to close the time gap in that when people became excited about the innovation they were eager to work overtime. The basic characteristics of radical innovations, i.e., the technological and market uncertainties inherent in them, seemed to
Furthermore, the difficulties and technological uncertainties encountered at the demanding development stage contributed to the results gap:
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That final phase was really stressful and frustrating for everyone. It was hard to keep it under control when there were always new, say, software problems and disappointments and all that. It got delayed again and again. It was a challenge to keep people motivated even after a lot of difficulties when the project managers and the people themselves were tired of it. (Spyder case) Even though the development was demanding, none of the interviewees suggested that there was a help gap. Since they were creating a radical innovation, something totally different, they wanted to find novel solutions on their own: © 2007 The Author Journal compilation © 2007 Blackwell Publishing
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If I’d had more money, then I might have had some crazy idea to hire some expert and probably it would have failed. (Hi-Fog case) This kind of reasoning is in line with that put forward by Christensen (1997) that the newness of radical innovations may well prevent the utilization of external knowledge. At the launch stage, gaps in commitment, engagement and trust hindered the spread of enthusiasm to the customers and distributors: We introduced this to Finnish store executives by saying that walking with poles could become something big, as in how about it if we start taking this further together. They practically laughed in our faces; they thought nobody would start walking with poles! (Nordic Walkers case) Simultaneously, those working at the customer interface experienced a help gap, since the marketing of the radical innovation required considerably different kinds of marketing efforts than they had been used to: They were more or less afraid of the ePost Letter. They said they didn’t dare discuss it with clients because ‘if they ask something technical, I don’t know what to tell them’. That was a really big issue for our sales people. (ePost Letter case) In fact, only when the firms started to utilize marketing that allowed the diffusion of enthusiasm to the customers did they begin to gain a foothold in the market. Thus, marketing consisted of personal visits, customer education, simulations and trials.
Conclusions The results of this study indicate that it is not only the champions but also the core team who spread enthusiasm throughout organizations. Furthermore, in the cases under investigation it also spread outside – to the customers, for example. All of the radical innovations studied were commercial successes: they managed to cross the chasm between the early and the mainstream market and they have played an important role in all of the firms in terms of achieving market leadership, growth and reputation. The diffusion of enthusiasm seems to have increased market success. This suggests that enthusiasm-related issues should not be neglected or taken for granted in any firm that strives to launch radical innovations. The results indicate that the behaviour of champions was particularly important at the idea© 2007 The Author Journal compilation © 2007 Blackwell Publishing
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generation and launch stages, whereas the business performance fostered enthusiasm at the launch stage. Enthusiasm inhibitors seemed to operate at the development and launch stages: gaps in commitment, trust, engagement and results were highlighted at the development stage. Whereas results gaps originate from technological uncertainties and thus cannot be easily influenced, it seems that firms could, at least to some extent, influence the other three by fostering communication and co-operation between the core team and other parts of the organization. Since the core team is likely to be extremely busy with its project, and other employees presumably resent the innovation, it should be the primary task of top management to strive to reduce the commitment, trust and engagement gaps in the organization. Gaps in commitment, engagement, trust and help at the launch stage influenced enthusiasm. It came as a surprise in all of the case firms that their conventional marketing strategies and tactics were not suitable for these innovations, and that marketing that facilitated the diffusion of enthusiasm to customers was particularly important. This finding is of major significance since the challenges inherent in marketing radical innovations are widely acknowledged. Thus, future research on marketing should focus more on how the enthusiasm prevalent in the company could be better converted into marketing efforts. The interviews indicated that enthusiasm spreads rather naturally in small organizations in which inter-functional communication is more frequent and informal. This may require more deliberate managerial encouragement in large firms. In all of the cases, the innovation champions moved away from the lab or engineering facilities and interacted with a large variety of inner and outer stakeholders. This is illustrated in the following statement given by an engineer and innovation champion: When they had the office technology fair, I was there as well. I just stood there next to the aisle trying to lure people in and I thought it was great fun! I’ve always liked to market and sell things to people. (ePost Letter case) This study contributes to the conceptual discussion on enthusiasm, which could be of interest to those studying the role of feelings in organizational settings. In particular, it complements previous research on the role of champions and on processes of radicalinnovation development. It is further assumed that when managers know more about how enthusiasm is created and sustained in this process, they are also better able to manage it.
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It became clear that those involved in the innovation-development process, the innovation champions in particular, did not put any effort into deliberate enthusiasm creation or maintenance, because all their energy went into innovation. In fact, this energy was the enthusiasm itself! Therefore, it is argued that it should primarily be others, especially managers, who should actively try to influence the level of enthusiasm in the organization. Even though the differences between marketing and R&D people have been widely discussed (e.g., Griffin & Hauser, 1996), there were apparently no major differences in how these people experienced enthusiasm: on the contrary, the enthusiasm seemed to help to close the gap between the functions. When the developers became enthusiastic about the new technology, they wanted to spread the word to a wider audience and so they became involved in the marketing. Similarly, when the marketing people became enthusiastic about the new invention and its market potential, they also invested in learning about the new technology, and this desire made them interact more with the R&D people. Given the exploratory nature of this study, further research aimed at developing a more thorough understanding of the creation and maintenance of enthusiasm would certainly be of interest. Moreover, the general nature of this paper does not allow account to be taken of the trait affect, i.e., the generalized tendency of an individual to have a high or low propensity to be enthusiastic (cf. Watson & Walker, 1996; Schweizer, 2006). These are personality traits that should be considered in further research in this area. Additional data are required in order to evaluate the modified framework presented in this study. Quantitative research in this context is demanding, however, given the evidence from the interviews that different people define the stages of the innovationdevelopment process in different ways. Thus, it would be extremely difficult to ensure trustworthiness. Moreover, there are often many key people involved, and this would make the targeting of the survey very difficult. The limited number of radical innovations also limits opportunities for quantitative research. A more realistic option may thus be to conduct more case studies. The cases studied featured different kinds of radical innovations targeted on different kinds of markets. The only common ground was that they were all commercially successful, radical and Finnish. Thus, it would be interesting to test the framework on different types of innovation. A focus on incremental innovations would reveal to what extent enthusiasm cre-
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ation and maintenance differed. Moreover, the innovations studied were all developed in companies, and this may be reflected in the results (e.g., the importance of business performance as an enthusiasm driver at the launch stage); hence it would be useful to study the generation of enthusiasm in non-profit organizations. It would also be extremely interesting to test the framework on unsuccessful innovation-development projects in order to gain further insight into the role enthusiasm plays in innovation success.
References Albrow, M. (1992) Sine ira et studio – Or Do Organizations have Feelings? Organization Studies, 13, 313–29. Amabile, T.M., Barsade, S.G, Mueller, J.S. and Staw, B.M. (2005) Affect and Creativity at Work. Administrative Science Quarterly, 50, 367–403. Christensen, C.M. (1997) The Innovator’s Dilemma. When New Technologies Cause Great Firms to Fail. Harvard Business School Press, Boston, MA. Collins Cobuild English Language Dictionary (1987) Collins, London. Forgas, J.P. and George, J.M. (2001) Affective Influences on Judgements and Behavior in Organizations: An Information Processing Perspective. Organizational Behavior and Human Decision Processes, 86, 3–34. George, J.M. (2000) Emotions and Leadership: The Role of Emotional Intelligence. Human Relations, 53, 1027–55. Glaser, B.R. and Strauss, A.L. (1967) The Discovery of Grounded Theory: Strategies for Qualitative Research. Aldine de Gruyter, New York. Glassman, M. and McAfee, R.B. (1990) Enthusiasm: The Missing Link in Leadership. S.A.M. Advanced Management Journal, 55, 4–6, 29. Goleman, D. (1995) Emotional Intelligence. Bantam Books, New York. Griffin, A. and Hauser, J.R. (1996) Integrating R&D and Marketing: A Review and Analysis of the Literature. Journal of Product Innovation Management, 13, 191–215. Howell, J.M. and Boies, K. (2004) Champions of Technological Innovation: The Influence of Contextual Knowledge, Role Orientation, Idea Generation, and Idea Promotion on Champion Emergence. The Leadership Quarterly, 15, 123–43. McDermott, C. and O’Connor, G.C. (2002) Managing Radical Innovation: An Overview of Emergent Strategy Issues. Journal of Product Innovation Management, 19, 424–38. Maidique, M.A. (1980) Entrepreneurs, Champions, and Technological Innovation. Sloan Management Review, 21, 59–76. Majaro, S. (1992) Managing Ideas for Profit. The Creative Gap. McGraw-Hill, Berkshire. Marcus, G.E. and Mackuen, M.B. (1993) Anxiety, Enthusiasm, and the Vote: The Emotional Underpinnings of Learning and Involvement during Presidential Campaigns. American Political Science Review, 87, 672–85. © 2007 The Author Journal compilation © 2007 Blackwell Publishing
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Markham, S.K. (1998) A Longitudinal Examination of How Champions Influence Others to Support Their Projects. Journal of Product Innovation Management, 15, 490–504. Muchinsky, P.M. (2000) Emotions in the Workplace: The Neglect of Organizational Behaviour. Journal of Organizational Behavior, 21, 801–5. Nayak, P.R. and Ketteringham, J.M. (1986) Breakthroughs! Mercury Books, London. Oxford Advanced Learner’s Dictionary of Current English (1989) Oxford University Press, Oxford. Pescosolido, A.T. (2002) Emergent Leaders as Managers of Group Emotion. The Leadership Quarterly, 13, 583–99. Prince, G.M. (2003) How the Emotional Climate (Field) Impacts Performance. Creativity and Innovation Management, 12, 240–6. Rogers, E.M. (1983) Diffusion of Innovations, 3rd edn (1st edn in 1962). The Free Press, New York. Schon, D.A. (1963) Champions for Radical New Inventions. Harvard Business Review, 41, 77–86. Schumpeter, J.A. (1934) The Theory of Economic Development. An Inquiry into Profits, Capital, Credit, Interest, and the Business Cycle. Harvard University Press, Cambridge, MA. Schweizer, T.S. (2006) The Psychology of NoveltySeeking, Creativity and Innovation: Neurocognitive Aspects Within a Work-Psychological Perspective. Creativity and Innovation Management, 15, 164–72. Senge, P., Kleiner, A., Roberts, C., Ross, R., Roth, G. and Smith B. (1999) The Dance of Change: The Challenges of Sustaining Momentum in Learning Organizations. Random House, Sydney.
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Veryzer, Jr., R.W. (1998) Discontinuous Innovation and the New Product Development Process. Journal of Product Innovation Management, 15, 304– 21. Walker, D.H.T. (2002) Enthusiasm, Commitment and Project Alliancing: An Australian Experience. Construction Innovation, 2, 15–31. Watson, D. and Walker, L.M. (1996) The Long-Term Stability and Predictive Validity of Trait Measures of Affect. Journal of Personality and Social Psychology, 70, 567–77. Yin, R.K. (1989) Case Study Research. Design and Methods. Sage, Newbury Park.
Birgitta Sandberg (birgitta.sandberg@tse.fi) is Assistant Professor in International Business and coordinator of the Global Innovation Management Master’s Degree Programme at the Turku School of Economics. She holds a Doctor of Science degree in Economics and Business Administration. Her recent publications include articles in European Journal of Innovation Management and International Journal of Knowledge and Learning and she has agreed to publish a book on managing and marketing radical innovations (2008, Routledge).
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Managing Uncertainty in Innovation: The Applicability of Both Real Options and Path Dependency Theory William H.A. Johnson A debate exists on the applicability of real options theory versus path dependency to managing innovation. However, this debate is nascent in terms of empirical studies on what managers actually do in managing innovative opportunities. The value of each perspective is explored by utilizing empirical data from case studies of biopharmaceutical companies to develop grounded theory and a better understanding of the use of options theory and path dependent models in managing innovation. The empirical data suggest that not all of the arguments of the theoretical discourse may be relevant for particular cases and in fact may be the opposite of what is presupposed.
Introduction
O
ptions thinking or real options reasoning (ROR) is a relatively newly studied phenomenon in management studies, particularly in terms of its use in strategic decisionmaking processes (Luehrman, 1998). ROR is purported to help initiate technology positioning investments for firms (McGrath, 1997) and provide analogies as learning opportunities for foreign direct investment (FDI) initiatives (Peng & Wang, 2000) and international joint ventures (Kogut, 1991). Real R&D options are of interest to R&D management (Paxson, 2001), though little research has focused on how managers actually conceive of managing options and the opportunities on which they are based. Despite its potential importance to managing uncertainty, ROR as a useful conceptual tool has been criticized by proponents of path dependency and behavioural-based theory who argue that use of ROR is inadequate if investments lead to escalation of commitment to lost causes when no specific termination date is made a priori (Adner & Levinthal, 2004). Others have counter-argued that these narrow boundary conditions ignore the potential value of options theory in bridging the gap between economic positive models and behavioural theory of managerial decision making in innovation (Kogut & Kulatilaka, 2004;
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McGrath, Ferrier & Mendelow, 2004), with Zardkoohi (2004) theoretically arguing that only in certain unlikely situations will ROR result in escalation of commitment to lost causes. This paper develops grounded theory regarding how managers approach the use of ROR and path dependency by utilizing casebased data. Specifically, interview data is used from cases of a sample of biotechnological industry firms to generate and develop propositions from generated themes.
Background: The Debate Between Options and Path Dependency Studies of financial options valuation and the value of the firm in the economic and finance literatures have origins in Miller and Modigliani’s (1961) seminal paper on market valuation of the firm which showed that the firm’s value stemmed from both its present cash flows and claims on its future growth opportunities. Black and Scholes (1973) followed with their classic article on the valuation of financial options. Myers (1977), Myers and Turnbull (1977), Triantis and Hodder (1990), Dixit (1992) and others contributed to the finance literature on the nature and valuation of projects and organizational capabilities as options. © 2007 The Author Journal compilation © 2007 Blackwell Publishing
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It is important, however, to clarify that options on innovation are fundamentally different from financial options on which traditional options research is based. To that end, McGrath, Ferrier and Mendelow (2004, pp. 87–88) suggested four streams on real options reasoning (ROR) in the various literatures. The first two streams, (1) ‘option value as a component of the total value of the firm’ and (2) ‘specific investments with option-like properties’ are primarily embedded in the financial literature mentioned above. The last two streams identified were: (3) ‘choices that might pertain to one or more proposals’ and (4) ‘options reasoning as a heuristic for strategy’ and are embedded in the strategic management literature, although papers in these streams still tend to borrow and cite from the prior two streams. Trigeorgis (1993) and Merton (1998), for example, discuss trade-offs of different investment decisions that organizations might face in terms of options logic. The last stream deals mainly with the phenomenon as management scholars know it. Rita Gunther McGrath’s work has been particularly influential in this stream. McGrath (1997) demonstrated real options logic for initiating technology positioning investments. The model developed in that paper showed that the value of a technology option was a function of the value of the underlying commercialization and cost to develop a new technology and clearly defined the nature of real options ‘as costs incurred to create underlying claims on future rents’ (McGrath, 1997, p. 992). Her subsequent empirical research has demonstrated the use of ROR in the strategic decision making of firms. Most recently, McGrath and Nerkar (2004) utilized a patent database analysis to show that the pharmaceutical industry investments in R&D were consistent with the logic of ROR. The work of Bruce Kogut is also noteworthy in the real options reasoning (ROR) of strategic management, particularly his work on joint ventures as an organizational form of options logic (Kogut, 1991) and papers with colleague Nalin Kulatilaka that studied the notion of capabilities represented as options on future opportunities (Kogut & Kulatilaka, 1994, 2001). The arguments of Adner and Levinthal (2004) suggest that the literature of path dependent innovations and search processes may also be relevant to the ROR phenomenon. They argue classic studies on incremental search and evolutionary processes (March & Simon, 1958; Nelson & Winter, 1982), probe and learn (Lynn, Morone & Paulson, 1996) and innovation journeys (Van de Ven et al., 1999) may be more appropriate as guidelines to what is happening © 2007 The Author Journal compilation © 2007 Blackwell Publishing
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when managers make options-type decisions on future opportunities.
Methodology This paper is the result of an exploratory study of the management of research and development (R&D) initiatives. The case studies of R&D practices at three biopharmaceutical companies are utilized to develop a grounded understanding of what some managers actually do in utilizing ROR in their R&D decisions. A case study and structured interview approach were used to gain first-hand understanding of the phenomenon and for purposes of theory generation as per Yin (1989). Initially, about 30 firms involved in R&D and research services in the biopharmaceutical industry with operations within the Northeast USA were targeted for participation in the study. Letters were sent out to the R&D Directors or VP of R&D (or equivalent), followed by telephone calls. Three cases were identified from this initial sample. Utilizing an exploratory grounded theory design, sample representation is not considered an important issue. What is important in developing grounded theory is access to companies experiencing the phenomenon of interest and gaining new insight from their practice. The VPs of R&D or developmental services were interviewed in each company utilizing a semi-structured interview approach. Various archival data, such as annual reports and news releases, etc., were also used. Initial analysis of these cases suggests insights in generating propositions on the phenomenon from a grounded perspective. This approach aims to develop new insights that generate propositions about how managers manage the phenomenon of interest. For purposes of confidentiality, the identity of each company is not revealed. Table 1 describes some basic characteristics of each company particularly with respect to what type of R&D and innovation work they perform.
Results: Generative Themes A number of themes which help in understanding how managers apply ROR and path dependency heuristics emerged from the exploratory study. These themes are explored here along with the underlying qualitative data to generate thematic propositions regarding the management of options and opportunities in creative innovation portfolios.
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Table 1. Company Characteristics of the Three Biopharmaceutical Industry Participants Company Primary business focus Employees – approx. no. worldwide (in 2003) Revenues (000’s) Revenue/Employee R&D expenditure (000’s) R&D/Revenue R&D/Employee Main pharmaceutical product/disease groups or services offered
Alpha (W)
Biotechnology (public)
Drug development services (private)
5,600
6,500
$15,850,632 $309,819 $2,093,533
$1,574,817 $281,217 $335,256
$940,300 $144,661 N/A
21.3% $28,120 Genetic; Renal; Orthopedics; Transplant; Specialty & diagnostic products
N/A N/A Early development services; Late stage development services
13.2% $40,260 Cardiovascular and gastrointestinal; Hemophilia; Immunology & oncology; Infectious diseases; Musculoskeletal; Neuroscience; Gynecological as well as nutritional and vaccine products
Distinguishing between the opportunity and the options on that opportunity is useful to managing the phenomenon of creative innovation. When opportunities are in the distant future and technological and market uncertainties regarding them are high, the option to develop the opportunity may be potentially valuable, but the ability to choose to let the option expire can also increase as in the way one informant suggested: There was a team, for example, that was working on a drug for multiple sclerosis this past summer. They encountered some human toxicology problems and in the clinic and cardiac toxicity assays, and they acted very decisively to kill the program. They were hailed as having done a great job because they didn’t wring their hands and procrastinate; they were very decisive and in my view, made the right decision given everything they knew. Earlier, the same informant discussed how early stage, less critical projects were often given to less experienced researchers and managers, suggesting that over time, as projects become more determined, commitment to them becomes stronger. As such,
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Gamma (C)
Pharmaceuticalproprietary (public) 52,000
Theme 1: ‘Separation of Managing the Option from Managing the Opportunity’
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options are to be experimented with and played with, while opportunities (which are more developed over time and where the uncertainties have been better determined) are managed by more experienced people and given larger budgets. Proposition 1: The further away an opportunity is in time, the greater the options value on it will be, but the less the resources applied to manage it.
Theme 2: ‘Option Valuation is Relative to the Value of the Portfolio of Available Opportunities’ It is important to emphasize that evaluations of projects within a portfolio are always relative. For example, one opportunity may be seen as less valuable when it is compared with an opportunity that is more likely to be successful or profitable. One manager discussed what happened at his firm in terms of propensity to terminate projects associated with different drug compounds. At this company, management uses a numbers-based evaluation procedure or portfolio managing process (PMP) for each of its potential innovation projects in which ‘certain pre-specified series of criteria, there are about 20 or 30 of them, are judged by a panel to make sure they have all been hit’. © 2007 The Author Journal compilation © 2007 Blackwell Publishing
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While the new system was judged to provide better scrutiny of poor-performing options, a bias towards propensity to terminate projects was evident. This propensity, however, seemed to be moderated by the amount of alternative options that existed. Hence, the following statement: When a pipeline is thin . . . you will do almost anything to keep a compound alive. . . far past the point of diminishing returns. I’ve actually done this myself; kept the drug alive way too long. With a numbers based system, we’ve ended up reseeding the pipeline so deeply . . . we can make more objective decisions and stop the drug at any time, so we don’t have to look for reasons to keep it alive. Just recently, we made a tough decision on a drug we were all excited about, but it didn’t quite meet our standards, so rather than drag it out with more studies and more studies, we cut our current losses. We’ve got plenty to choose from – we can’t fund everything . . . I think that was the right decision. We wouldn’t have done that 4 or 5 years ago, when we had an empty pipeline. This may be a sign of economic consideration in terms of supply and demand of options on opportunities. It parallels McGrath and Nerkar’s (2001) finding that firms with large portfolios of successfully opened options were less likely to open new options. This notion also leads to the following generalized hypothesis. Proposition 2: The propensity to allow an option to expire (‘kill an option’) increases as the number of alternative options available increases. Separating the option from the underlying opportunity is important. The value of an option rests in its inherent flexibility. As time progresses and uncertainties are reduced for an opportunity, the flexibility in the options on that opportunity will decrease but, provided the opportunity still looks healthy, its actualized value should increase. The value of an opportunity (as opposed to only the option on that opportunity) is equal to the known value (i.e., certain NPV of cash flows) plus the value of the flexibility an option conveys due to the uncertainty of the opportunity (i.e., the uncertain value of the option). As uncertainty drops, option value drops, but, provided the investment in the opportunity is still on-going and viable, the value of the actual opportunity increases. In terms of acquiring new products as options, one informant stated: © 2007 The Author Journal compilation © 2007 Blackwell Publishing
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We have a fairly strong due diligence process here. When we look at product candidates we have people from all parts of the organization participate in what we call the due diligence team. They look at the science, the legal aspects, manufacturing, competition, clinical presentation and perception . . . to understand what it is we are buying . . . Obviously, the further upstream that you acquire, the more ambiguous it is compared to buying a product that is already in the market. Proposition 3: The value of an option is highest the further upstream the option exists; however, the value of the opportunity on which the option is based is highest the further downstream it exists. This is particularly evident in the biopharmaceutical industry. There is a point at which the valuation of a project changes from options-based to actual value-based, as uncertainties (technical, market, financial, etc.) associated with the opportunity decrease (e.g., as you move downstream in the development cycle). This is also seen in the well-known Black–Scholes (1973) formula where the parameters of volatility and time increase the value of the option. However, unlike financial stock options, R&D projects are knowledgebased, not money-based. The ‘distance’ from the ‘money’ (i.e., positive returns) and the option on a technology is greater for options based on creative innovation projects than with stock options because market uncertainties may still substantively exist even after a technology is fully developed. Of course as uncertainties are clarified, options on opportunities start to become actual opportunities (i.e., investments and commitment to courses of action become greater). If the value of an option exists because of the flexibility associated with it, it follows that the value of an option becomes less the greater the commitment becomes to the actual opportunity itself. (Though note that there may still be ‘options value’, for example, that is based on alternative uses of a technology utilized for the original opportunity.) This has a particular effect on the path dependency of any actual option with bias becoming stronger the more ‘developed’ an option becomes. For example, an informant stated: Once we get to the point where we have something we think is a project candidate, many people get involved and they include people from the business side, people from the clinical side, people from regulatory, finance and legal to form what we call a core team.
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Hence the following propositions: Proposition 4: The propensity to allow an option to expire is relatively greater the further ‘upstream’ it is compared to expiring opportunities that have made it further ‘downstream’ as major projects. Proposition 5: As options move further downstream, commitment to them increases, thus further decreasing the option value.
Theme 3: ‘Value May Spur from the Options Inherent in Failed Opportunities’ This generative theme reinforces the distinction between opportunities and the options on which they are based. Examples of this general aspect of options have been seen in the literature on ROR frameworks. Indeed, while opportunities may disappear, the options based on them may still exist! For example, McGrath (1999) describes a framework where, despite constant potentiality towards failure, entrepreneurial activity may provide option value. She demonstrates in theory the option value created in pursuing high variance outcomes, often associated with failure, and investing only when favourable conditions exist. Learning from failure and spin-offs from failed projects can also result in option value from failure. In the case studies examined here, there was some evidence of failed projects leading to valuable technologies and learning utilized for other successful projects. Does this speak to the lack of a path dependency in that any particular option may provide many paths to success (some of which may actually be the result of a path towards failure!)? This may be the case in terms of failure leading to new opportunities; however, the ability to break from existing paths of innovation is not easy. Hence, the following statement from a manager: Killing a project is probably one of the most difficult things you have to do . . . These programs have developed a life of their own and there is always another experiment you can do, one more study you could do to potentially save a product. So it is a difficult proposition and I would say that we are probably mediocre at it. People become very committed, a sense of well-being has been invested in projects that we don’t want to give up and so it’s a difficult position. But at the end of the day you only have so much money to spend, the really successful companies are those that know when to cut and run I guess. But it is a delicate balance, there are a lot of programs that are now block-
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buster products that if people were to quit at the first signs of failure these products would never have been developed. An example of a successful opportunity stemming from a failed project was discussed at Company Beta: The project was really terminated because the clinical data was not compelling enough but from the outgrowth of that program we developed an antagonist program, in other words an anti-body directed against this growth factor. We learned during our study of this growth factor in wound healing that it had bad roles to play in pathological fibrosis in a number of organs like the kidney, liver and lung. And so we have a huge program now that was a consequence of the failure of the first one. It really evolved from the understanding and the biology around this growth factor and now we are in clinical testing of this antagonist to this growth factor and we are very encouraged and optimistic that this will be a successful program. So that is just one example and there are many examples where things haven’t worked, but we have learned a lot during that effort of research and development associated with those candidates and the consequence of that was we have been able to develop alternative strategies and other directions. At this company, failure is not seen as a necessary end but a potential beginning. This does not necessarily imply that there are no checks in place to prevent over-commitment to a losing course of action, however, as demonstrated in the many terminated projects where new opportunities from failed programmes do not arise. The above comments suggest that there are both processes of options logic and path dependency in the managerial decisions of whether or not to continue with new innovation projects. Thus, path dependency is seen in the lessons stemming from the pool of knowledge and expertise of the development team. Options logic can be seen in the notion that knowledge from any particular failed project might be utilized successfully elsewhere. Indeed, this new knowledge may create options on opportunities that were not evident before the failure. Thus, the final proposition: Proposition 6: There is an iterative process of re-evaluation in the portfolio of initiatives such that new opportunities stemming from failed undertakings become options in their own right. © 2007 The Author Journal compilation © 2007 Blackwell Publishing
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Implications for Managers and Research These findings suggest that when uncertainties are highest and project portfolios are less robust for any particular portfolio of innovation opportunities, ROR is actually used and, indeed, is most applicable for portfolio selection and determination. ROR can then be used as a tool to combat the negative aspects of path dependent learning (i.e., over-commitment) to ensure a well-diversified portfolio. For any particular innovation opportunity, as time moves on and innovation paths become more determined (i.e., uncertainties regarding the particular innovations of the portfolio become less), path dependent learning models would then become more relevant to management decisions. As this takes place over time, the threat of commitment becomes greater and strategies to minimize over-commitment to a particular portfolio need to be encouraged. This finding has serious implications for management, particularly in biopharmaceuticals, where product cycles are long and highly uncertain. A case in point is the giant pharmaceutical firm, Merck, which is presently in a legal quagmire due to its COX-2 inhibitor drug, Vioxx. The heavily advertised product was touted as a saviour of Merck’s dying line of blockbuster drugs. Merck’s aggressive selection of Vioxx as their next potential blockbuster happened at a time when their pipeline of new drugs (i.e., potential new product lines under development or being clinically tested) was drying up and their previous blockbuster products, Mevacor, Zocor and Vasotec, were all about to lose patent protection. There is evidence that Merck executives initially downplayed the negative and potentially damaging health risks of Vioxx. One reason for this downplay was management’s desperate need to replace these drugs and generate future cash flow for the company. Revenue streams from one or two major products can provide the majority of cash flow revenues for a biopharmaceutical firm and are counted in billions of dollars. For example, worldwide sales of a novel antidepressant proprietary drug at one of the informant companies reached almost $3 billion in 2003. Merck’s decision was dangerous and potentially fatal, as of 2005 some analysts suggested a possible loss of as much as $US12bn (Wade, 2005). The different perspectives of ROR and path dependency theory need to be explicated in order to understand the effects of each on innovation management. For example, a close reading of Adner and Levinthal (2004) suggests that the focus of their thesis is on the containment of costs as the major aspect of © 2007 The Author Journal compilation © 2007 Blackwell Publishing
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ROR or options logic. Abandonment of opportunities is central to their criticism. They state that to ‘conform to the structure of a real option, the boundaries of these initiatives should be tightly specified ex ante’ (p. 82). This logic suggests that it is the minimization of down-side risk that makes any particular option valuable (i.e., option value comes from the ability to exit from an initiative that is clearly leading towards failure). Conversely, McGrath, Ferrier & Mendelow (2004) appear to focus mostly on the up-side risk (or opportunity!) as the source of value for options reasoning. Under that framework all path-dependent explorations would constitute options reasoning because they encompass flexibility in the face of opportunity. However, Adner and Levinthal’s (2004) argument regarding minimizing down-side risk also remains valid because any particular path taken towards an opportunity may constrain management towards a specific course of action. On the other hand, with their focus on cost minimization, Adner and Levinthal (2004) state, ‘imposing rigid criteria for abandonment may result in the underutilization of discoveries made in the context of initiatives that are failures with respect to their initial agenda but that introduce promising possibilities not previously imagined’ (p. 77). It has been shown here that ROR incorporates this notion of success from a failing course of action. This study suggests that the types of options in which firms will invest are likely also to be path dependent! For example, in the biopharmaceutical industry most companies, including the companies in this study, focus on specific disease classes to build their firmspecific competitive advantage. As such, from the beginning, there is often a constrained path dependent focus on most future opportunities. This logic parallels the findings of Reuer and Leiblein (2000), who demonstrated that down-side risks were not necessarily lessened by the argued flexibility of international expansion. However, options on new opportunities (in technologies and markets) are necessary for continual and sustainable competitive advantage and the flexibility they provide has value in and of itself. The findings of this study also speak to Barnett’s (2005) conceptual piece that argued the importance of managerial attention to the actual management of real options for R&D managers. Path dependency theory predicts that there will be a predisposition towards exploitation of existing assets or opportunities (March, 1991) but this assumes that preexisting options become actual valuable assets. The size of the real options portfolio, which is
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Fixed
Fixed
Target Market
Flexible
Path Dependent Investments
Technical Agenda Real Options Logic and Path Dependent Investments
Flexible
Figure 1. Applicability of Real Options and Path-Dependent Opportunities (cf. Adner & Levinthal, 2004)
linked to long-run organizational performance, and illustrated in Barnett (2005, p. 69, figure 2) is likely to change over time. For example, in biotechnology new firms consist almost entirely of options on future opportunities. As time develops, options become opportunities, which become money-making assets (hopefully, for the firm!) and a shift from exploration towards exploitation is created. Of course, without a shift back to exploration, most organizations would be doomed to failure. Thus, a cycle develops over time with emphases on ROR taking precedence at some points and exploitation of existing assets at other points. That is, while path dependency exerts an effect on managerial decision making towards emphasizing exploitation, ROR also exerts an effect on managerial decision making by emphasizing exploration. All of this suggests that there is merit in both frameworks because each side is speaking to different issues in the development of new opportunities. When uncertainties are far from resolution, ROR analysis will be helpful in determining the value of exploration given the inherent flexibility of the options approach. When uncertainties are more resolved, path dependent learning models will apply. This logic agrees with Adner and Levinthal’s (2004) argument suggesting low uncertainty and low irreversibility of investment is best suited to traditional net present
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value methods and that high uncertainty and high irreversibility of investment requires real options methods of valuation. However, the findings here demonstrate the opposite from what they suggested regarding flexibility in technical agenda and target markets, and the applicability of ROR versus path dependency theory. This is depicted graphically in Figure 1. This research shows that real options are applicable when both technical agenda and target markets are flexible and path dependent models are applicable in both flexible and more predictable settings because all innovation projects are path dependent to some degree. Path dependent constructs such as absorptive capacity (Cohen & Levinthal, 1990), for example, suggest constraints on the direction of innovation for any firm and thus less flexibility in the search processes of the firm. Of course, the research described in this paper is limited in terms of generalizability by its focus on specific cases. However, given the objective of generating new insights and grounded propositions for further study, the research has illuminated the potential differentiation points in determining the applicability of either real options or path dependent learning theories. Further research to test the propositions in this paper is needed, but this study has provided one of the first grounded empirical glimpses at this important phenomenon. © 2007 The Author Journal compilation © 2007 Blackwell Publishing
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References Adner, R. and Levinthal, D.A. (2004) What is Not a Real Option: Considering Boundaries for the Application of Real Options to Business Strategy. Academy of Management Review, 29, 74–85. Barnett, M.L. (2005) Paying Attention to Real Options. R&D Management, 35, 61–72. Black, F. and Scholes, M. (1973) The Pricing of Options and Corporate Liabilities. Journal of Political Economy, 81, 637–54. Cohen, W.M. and Levinthal, D.A. (1990) Absorptive Capacity: A New Perspective on Learning and Innovation. Administrative Science Quarterly, 35, 128–62. Dixit, A. (1992) Investment and Hysteresis. Journal of Economic Perspectives, 6, 107–32. Kogut, B. (1991) Joint Ventures and the Option to Expand and Acquire. Management Science, 37, 19–33. Kogut, B. and Kulatilaka, N. (1994) Options Thinking and Platform Investments: Investing in Opportunity. California Management Review, 36, 52–71. Kogut, B. and Kulatilaka, N. (2001) Capabilities as Real Options. Organization Science, 12, 744–58. Kogut, B. and Kulatilaka, N. (2004) Real Options Pricing and Organizations: The Contingent Risks of Extended Theoretical Domains. Academy of Management Review, 29, 102–10. Luehrman, T.A. (1998) Strategy as a Portfolio of Real Options. Harvard Business Review, 76, 89–99. Lynn, G.S., Morone, J. and Paulson, A.S. (1996) Marketing and Discontinuous Innovation: The Probe and Learn Process. California Management Review, 38, 8–37. McGrath, R.G. (1997) A Real Options Logic for Initiating Technology Positioning Investments. Academy of Management Review, 22, 974–96. McGrath, R.G. (1999) Falling Forward: Real Options Reasoning and Entrepreneurial Failure. Academy of Management Review, 24, 13–30. McGrath, R.G. and Nerkar, A. (2001) Real Options Reasoning and a New Look at the R&D Investment Strategies of Pharmaceutical Firms. Paper presented at the Strategic Management Society Meetings, San Francisco. McGrath, R.G. and Nerkar, A. (2004) Real Options Reasoning and a New Look at the R&D Investment Strategies of Pharmaceutical Firms. Strategic Management Journal, 25, 1–21. McGrath, R.G., Ferrier, W.J. and Mendelow, A.L. (2004) Real Options as Engines of Choice and Heterogeneity. Academy of Management Review, 29, 86–101. March, J. G. 1991. Exploration and Exploitation in Organizational Learning. Organization Science, 2, 71–87. March, J.G. and Simon, H.A. (1958) Organizations. Wiley, New York. Merton, R.C. (1998) Applications of Option-Pricing Theory: Twenty-Five Years Later. American Economic Review, 88, 323–49.
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Miller, M. and Modigliani, F. (1961) Dividend Policy, Growth, and the Valuation of Shares. Journal of Business, 34, 411–33. Myers, S.C. (1977) Determinants of Corporate Borrowing. Journal of Financial Economics, 5, 147– 76. Myers, S.C. and Turnbull, S.M. (1977) Capital Budgeting and the Capital Asset Pricing Model: Good News and Bad News. Journal of Finance, 32, 321– 33. Nelson, R.R. and Winter, S.G. (1982) An Evolutionary Theory of Economic Change. Belknap Press of Harvard University Press, Cambridge, MA. Paxson, D.A. (2001) Introduction to Real R&D Options. R&D Management, 31, 109–13. Peng, M.W. and Wang, D.Y. (2000) Innovation Capability and Foreign Direct Investment: Toward a Learning Option Perspective. Management International Review, Special Issue 2000/1, 79–93. Reuer, J.J. and Leiblein, M.J. (2000) Downside Risk Implications of Multinationality and International Joint Ventures. Academy of Management Journal, 43, 203–14. Triantis, A.J. and Hodder, J.E. (1990) Valuing Flexibility as a Complex Option. Journal of Finance, 45, 549–65. Trigeorgis, L. (1993) Real Options and Interactions with Financial Flexibility. Financial Management, 22, 202–24. Van de Ven, A.H., Pollery, D.E., Garud R. and Venkataraman, S. (1999) The Innovation Journey. Oxford University Press, New York. Wade, J. (2005) A Bitter Pill for Merck. Risk Management, 52, 9. Yin, R.K. (1989) Case Study Research: Design and Methods. Sage Publications, Newbury Park, CA. Zardkoohi, A. (2004) Do Real Options Lead to Escalation of Commitment? Academy of Management Review, 29, 111–19.
William H.A. Johnson (WJohnson@ bentley.edu) is an Assistant Professor of Operations & Technology in the Management Department of Bentley College in Waltham, MA, USA. His research examines technological innovation including collaborative innovation, proactive initiatives in subsidiary innovation, use of options thinking in strategic innovation and effective process management in new product development and R&D projects. He has published papers in a number of journals including the International Journal of Technology Management, Journal of International Management and Journal of Intellectual Capital and cited in Academy of Management Journal. He created a new track on New Product Development and Project Management at DSI in 2005.
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Making Decisions on Innovation: Meetings or Networks? John K. Christiansen and Claus J. Varnes Within some streams of thinking in the management of innovation and product development, the crux is the manager’s active engagement in the evaluation, selection and control of the various activities through gate and portfolio meetings in which information is presented and decisions are made that manage innovation projects at a distance. This traditional managerial perspective regards the meetings as (important) ‘obligatory passage points’ but cannot explain a number of observations that reveal few decisions being made at those meetings. A network process perspective on the management of innovation is derived as an alternative to the normative linear view. This alternative perspective makes it possible to explain how innovation projects actually consist of myriad actions, negotiations, and micro-decisions in the effort to create strong networks, leaving few decisions for the official gate and portfolio meetings. Through the analysis of two cases, this paper demonstrates how project managers work to stabilize the network in order to involve numerous human and non-human actors and to encourage more and more of them into joining the network. Successfully establishing stable networks and successfully filling the templates for their projects leaves little room – and requires little intervention – for decision makers at portfolio meetings, where approvals are sought rather than decisions made. This study explains how gate and portfolio management meetings are, in some instances, better viewed as checkpoints rather than as decision meetings, how decision making is displaced from the meetings, and how the use of gate and portfolio management systems have created a number of mandatory templates which must be dealt with by the project managers. These mandatory documents function as boundary objects between and among the different worlds of the actors involved and establish new obligatory passage points in the management process; thus boundary objects become transformed into obligatory passage points. Implications for managers and research are outlined, including methods of dealing with the management of product innovation projects when the focus shifts from planning, preparations and decision making toward the co-creation of technology and markets and involves interessement of human and non-human actors.
Introduction
I
n order to manage innovation, companies apply various methods and approaches, including some form of structured gates and portfolio meetings, to co-ordinate and make decisions on the portfolio of innovation activities (Griffin, 1997). In the normative literature on the management of innovation and in current business practice, companies often tend to integrate the gate meetings with portfolio management. Previous studies and observations of gate and portfolio meetings indicate that decisions on innovation are located not primarily at these meetings, but elsewhere in
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the organization. Our exploratory study provides further understanding of this phenomenon in companies. A great deal of the innovation research that focuses on decision making and decision aids is based on several assumptions: (1) that decision making occurs at meetings, (2) that meeting participants address issues from a cognitive decision-making perspective; and (3) that the meetings are important for managerial processes. Meetings are expected to be the locus for decision making and managerial intervention as well as the centre for overall management of innovation projects. However, these assumptions are based on a specific view © 2007 The Authors Journal compilation © 2007 Blackwell Publishing
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or perspective of organizational innovation processes (Borum & Christiansen, 2006), a view that has been labelled the linear perspective (Pinch & Bijker, 1989; Akrich, Callon & Latour, 2002; McCarthy, Tsinopoulos & Rose-Anderssen, 2006). There is a large number of models available for portfolio management (Heidenberger & Stummer, 1999), that focus on various performance criteria that portfolio managers and decision makers should address: achieving the best balance of projects (Wheelwright & Clark, 1992), maximizing the value of the portfolio and strategic fit (Cooper & Edgett, 1997), ensuring optimal allocation of resources (Engwall & Jerbrant, 2003), and linking the portfolio to the firm’s business strategy (Heidenberger & Stummer, 1999). Recent research studies on innovation decision making have investigated: (1) the effectiveness of knowledge sharing due to different subsets of networks and phases (Hansen et al., 2005); (2) programmed and un-programmed decision making, demonstrating that experience is an important determinant of managers’ behaviour, particularly with respect to un-programmed decisions (Perkins & Rao, 1990); (3) differences with respect to the use of hard and soft information in strategic decision making (Frishammar, 2003); and (4) the connection between launch decisions and competitors’ response (Hultink & Langerak, 2002). In addition, Lichtenthaler and Ernst (2006, p. 367) indicated that a key factor for adequate decisions is an unbiased attitude to knowledge management tasks, but this was not empirically investigated. In their review of product development research, Krishnan and Ulrich (2001) found that although different organizations make different choices and may use different methods, they all make decisions about a collection of common issues regarding the product, such as the product concept, architecture, configuration, procurement, distribution arrangements and project scheduling. Decisions were grouped into four areas: marketing, organizations, engineering design and operations management. Their view of product development is comparable to a deliberate process involving hundreds of decisions, a process that has been labelled ‘decision perspective’. Sounder and Mandakovic (1986) addressed the relationship between decision making on product development projects on the one hand and behavioural aspects on the other, and stressed the differences among several methods of calculation: portfolio mapping, project evaluation and decision methods that focus on the organizational processes. Other researchers have noted the considerable time © 2007 The Authors Journal compilation © 2007 Blackwell Publishing
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and energy that decision makers spend on interpreting how they should apply decision rules (Varnes, 2005) and on concerns about making appropriate decisions (Christiansen & Varnes, 2005; Varnes, 2005). They have also noted that senior managers actually make few decisions at gate meetings (Bragd, 2002; Varnes, 2005). We claim that to understand how and where decisions are made in and on innovation, researchers need to shift their theoretical perspective on the management of innovation, and focus on the meticulous work that project managers and other human and non-human actors undertake prior to meetings and replace the focus on meetings with a focus on network processes. We suggest a shift from the linear perspective to the network process perspective (NPP) in order to get closer to understanding decision making in and on innovation. The linear perspective is deeply rooted in a normative perspective on decision making, a perspective that makes it difficult to map the dynamic micro processes and understand how innovation is constructed. The network process perspective makes it possible to understand how project managers and others, through a large number of actions and micro-decisions, facilitate the creation of relationships through the ‘interessement’ of human and non-human actors (Latour, 2005) into actor networks (Callon, 1986a, 1986b; Law, 1992; Akrich et al., 2002). The network process perspective can help us to understand how gate and portfolio meetings that are designed to be ‘obligatory passage points’ (Callon, 1986a) in the linear managerial perspective change status as a result of the installation and use of management technologies such as mandatory templates that create new, obligatory passage points for projects. Thus, the decision power of the official gate and portfolio meetings is displaced and replaced by the interessement processes carried out in the networks prior to and outside the meetings. The network process perspective, as defined here and further explained below, is related to the network perspective (Borum & Christiansen, 2006), but is fundamentally different in several respects, including its incorporation of non-human actors, and its focus on interessement, translation and boundary objects. In this paper, we first present the network process perspective on management of innovation derived from recent research and briefly contrast the network process perspective with the linear perspective. Next, we present the methods applied in our empirical study, followed by a description of the case company, its system for managing projects,
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and its project portfolio. We then use two examples from product development to illustrate how the network process perspective can reveal new insights into the way innovation project managers work on the successful creation of strong actor networks through various means of interessement, and we derive implications for our understanding of the meaning of gate and portfolio meetings. Finally, we present our analyses, discuss implications for research and management of product development, and offer our conclusion.
Perspectives on Management of Innovation The linear perspective on innovation focuses on the formal structure, phases of innovation and analytical decision making. This perspective can be found in various models on the management of innovation such as Ulrich and Eppinger (2004), Trott (2005), Baker and Hart (1999), Schilling (2005), Crawford and Di Benedetto (2006) and Griffin (1997). Brown and Eisenhardt (1995) formulated three perspectives on product development: rational plan model, communication web and disciplined problem solving. The latter two perspectives pointed, among other things, to the importance and vision of the project leader, whereas the first and last perspective focused on the notion of deliberate planning and decision making occurring on and in innovation processes. Brown and Eisenhardt integrated these perspectives into one conceptual and causal model for management of product development. McCarthy et al. (2006) presented three alternative perspectives – a linear, a recursive and a complex adaptive system view – as alternative ways to look at innovation, and emphasized the individual characteristics and contributions of each perspective. However, they concluded, ‘the congruence of an individual NPD process is dependent on the connections and interactions between process agents’ (p. 441). Recently, Cunha and Gomes (2003) argued that an emergent perspective with a focus on organizing rather than organization, and disorder rather than order, challenges the notion of causality and predictability inherent in the integrated model; and, using a contingency argument, they present five innovation models for different environmental conditions. We propose an alternative to the linear perspective, not as a contingency option, but as a radically different perspective – one based on concepts such as a flow of objects and concepts through networks of participating allies and social worlds. The ecological view is anti-
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reductionist, considers the whole process (Star & Griesemer, 1989), and focuses on the processes and the networks between human and non-human actors (sometimes referred to as actants (Latour, 2005)), highlighting the interaction among actors and their ability to convince more and more actors using a process of interessement (Callon, 1986a, 1986b; Akrich et al., 2002; Latour, 2005). We label this ecological view the network process perspective (NPP) and claim that it can provide a possible explanation for the lack of decision making at the gate and portfolio meetings described in the cases we present here. Because the linear view implies a sequential stepwise perspective on these not-soordered processes, it is difficult to obtain a close understanding of the dynamics of product innovation. We suggest the NPP as an alternative optic and worldview on innovation processes, one that makes it possible to focus and shed some light on the micro-processes and the non-structured processes of innovation. Below we expand on these two perspectives and discuss their differences.
The Linear Perspective Some scholars relate a linear approach to innovation processes to project management methods that seek to deliver appropriate outputs on time and within costs (McCarthy et al., 2006). The linear perspective regards innovation as a series of discrete and sequential events that can be managed by analytical approaches, and that features decision making by informed decision makers using the right methods (Sounder & Mandakovic, 1986; Cooper, 1990). The linear view often represents innovation as a number of sequential progressing steps. The number of steps seems to be arbitrary (Pinch & Bijker, 1989, p. 22), but a typical sequence is: basic research; applied research; technological development; market research; product development; production; and, finally, usage (Pinch & Bijker, 1989). Each step provides information inputs to the subsequent phase, and the innovation processes are seen as moving forward linearly, directed towards the fulfilment of identified market needs. The phases are often different when talking about product development, omitting basic research and applied research as part of the sequential model, as these are considered outside product development. Some linear models within product development feature a division between activities in phases and decision making at gates (Cooper, 1990; McCarthy et al., 2006). Gates are meeting events at which high-level decision makers are © 2007 The Authors Journal compilation © 2007 Blackwell Publishing
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expected to manage the innovation projects by making informed choices (Cooper & Edgett, 1997). Decisions are supposed to be based on information about projects and their relationships to technology, markets, customers, competitors, production processes and the portfolio of innovation projects. The link between activities and decision making are made through various information systems and templates that bring information into a standardized format. This process exhibits a number of properties and three of the major characteristics are presented below. First, the linear approach focuses on decision making as a gradual allocation of resources in addition to an increase of information on the project. This procedure is intended to reduce the risk of innovation failure by carefully crafting the design and production of the new product to fit the needs of the market. The product development process is seen as a gradual and sequential process in which the likely commercial success of the project is evaluated during the process. Second, uncertainty is supposed to be present during the product development process, particularly at early phases, and information is acquired to reduce the amount of uncertainty (Galbraith, 1977, p. 38). However, the world is understood only imperfectly, and not all information about consequences and alternatives is known when decisions must be made at meetings. For each project, therefore, it is expected that there will be an investment in information gathering, up to the point at which the expected marginal cost of retrieving information equals the expected marginal return from the information gathered. Information is produced in the activity phases (in the innovation projects) and is made available to the decision makers in a standardized manner according to the criteria by which the project is to be evaluated (Cooper, 1990). Third, the phases therefore prescribe a number of different mandatory activities and calculations to ensure that the quality of decisions in the system is not compromised by absence of ‘sufficient’ information (Cooper & Edgett, 1997). A number of analyses must be carried out during the innovation process as marginal project costs and returns are calculated. These analyses must address three main issues: market/customer, technical and financial (Cooper, 1990) – and sometimes a strategic fit assessment (Cooper & Edgett, 1997). Thus, the linear perspective is based on a sequential view of innovation, and faith in forecasting and prediction, followed by a belief in risk analysis, planning and calculations. © 2007 The Authors Journal compilation © 2007 Blackwell Publishing
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The Network Process Perspective The meta-theoretical position in the network process perspective (NPP) is based on a constructivistic perspective (Latour, 2005) and focuses on the construction of strong actor networks through interessement. The networks are ‘nothing other than patterned networks of heterogeneous materials’ (Law, 1992, p. 381), and these ‘materials’ are human and nonhuman actors. Thus, the management of innovation and product development requires that actors be involved in producing the network that will eventually present itself as a fact – a new product – through the numerous involvements and the interessement of such humans as co-workers, managers, suppliers, customers, users and regulatory officers; and such non-humans as materials, molecules, factories and laboratories. Translation is the multifaceted interaction in which actors construct common definitions and meanings, define representatives, and co-opt each other in pursuit of individual and collective objectives. The translation processes are thus an important part of the interessement process (as described by Callon 1986a, 1986b), but in the present analysis, we focus on the interessement processes, and an identification of the struggles and controversies. Relationships – and subsequently networks – are created by a process labelled as interessement (Callon, 1986a, 1986b; Latour, 1991; Law, 1992; Akrich et al., 2002). Interessement is an active process of trying to establish strong relationships and networks. Research has provided several empirical studies demonstrating and expanding the perspective of interessement (Star & Griesemer, 1989; Akrich et al., 2002; Dechow & Mouritsen, 2005; Latour, 2005). Interessement may involve obligatory passage points (OPPs): a ‘passageway through which all the other entities that make up its world must pass’ (Callon 1986b, p. 26). The concept of OPPs was introduced with a case on researchers, scallops and the fishermen of St. Brieuc Bay (Callon 1986a, p. 26) and a case on the electric car innovation (Callon, 1986b), but is inspired by the thoughts of Michel Serres on networks and translations (Serres and Latour, 1995). The interessement may be loosely related to formal processes and structures, and OPPs can be created in different ways. But in a formal organization – such as a company – there may be OPPs that must be passed in order to obtain approval, resources, commitment or recognition (Callon, 1986a, 1986b). With successful interessement, recruited actors become allies and form a network, and the network builder becomes an ‘authority’ capable of speaking on
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behalf of others. Based on the thinking within the linear perspective on innovation management, it is possible to claim that a gate and portfolio meeting is intended to work as an obligatory passage point, whereas the various templates are intended to make it possible to move information from, for example, projects to the portfolio meeting. Successful interessement does not always involve the establishment, construction, or use of obligatory passage points (OPP), as other researchers, such as Latour (2005), have placed greater stress on the establishment of the overall network. The notion of OPP shares some similarities with the general idea in the linear perspective of meetings as being the locus of decision. It differs, however, in that the OPP is an object that needs interessement – not a decision-making device – and it is certainly not placed at a specific geographic location. Various strategies, including seduction, negotiation and various forms of power can be used to involve actors in the network. A commonly used strategy in innovation is ‘problematization’ (Callon, 1986b, p. 26) – a strategy aimed at creating a shared understanding of the means-ends needed to reach a specific objective – which directs the heterogeneous actors to support a specific network definition and to work in the same direction. As the original view of Callon (1986a), Latour (1990), and Law (1992) can be seen as one with a focus on a kind of funnelling, we are influenced by the views of Star and Griesemer (1989, p. 390), who do not exclude the possible existence of funnelling, but are open to the observation that organizational processes are often dependent on the creation and co-existence of several simultaneous networks having multiple centres of calculation (Czarniawska, 2004). Furthermore, not only may several networks need to be created in one social world, but different worlds need to be related, through passage points, and this is accomplished by the use of boundary objects. To Star and Griesemer, boundary objects are media through which different groups of actors connect. Boundary objects can be immaterial, such as a shared vision (Dechow & Mouritsen, 2005), or a material object such as templates used for transferring data between and among different organizational units and levels. It is not an easy undertaking to establish or translate entities into the network, because actors resist being enrolled or because there are competing possible networks to which one could belong. As Law (1992, p. 386) says: The analysis of the struggle is central to actor-network theory. The object is to describe local processes of patterning, social
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orchestration, ordering, and resistance. In short, it is to explore the process that is often called translation, which generates ordering effects such as devices, agents, institutions, or organizations. [. . .] This, then, is the core of the actor-network approach: a concern with how actors and organizations mobilize, juxtapose, and hold together the bits and pieces out of which they are composed. Thus, constructed networks are not stable: ‘[I]n the absence of one ingredient the whole would break down’ (Callon, 1986b, p. 23). Neither human nor non-human actors are easily managed; they resist any attempts to be managed and drawn into the network, as ‘juxtapositions define the conditions of operation for the actor-world’ (Callon, 1986b, p. 30). Others have described this as a fight or competition between ‘programs and anti-programs’ (Latour, 1991) because a programme (as a project idea or concept) may often compete for resources, energy or attention. The successful programme is one in which the actors, perhaps after being engaged in processes of competition, struggle and argument, manage to obtain support for that programme and not the competing anti-programme. Thus, the antiprogramme is all those things, processes or actors that do want to do something that is different from what the project managers (or others) want them to do. The network process perspective recognizes with actor-network theory (ANT) that when ‘things’ seems to be stable, aligned and in strong networks, it is merely fragile associations of heterogeneous elements that are related for some time after settling one or several controversies (Latour, 2005, p. 31), and that new struggles can start any time, and this is one of the reasons for naming this a ‘sociology of translation’ (Latour, 2005, p. 106). As the network process perspective is a constructivist perspective, people and things are given meaning through their relationships – not by or in the objects themselves. Consequently, meetings cannot be studied in isolation; we must study the way meetings relate to other actors, how meetings are part of the actor networks, and how actors are trying to relate themselves to other actor worlds. Thus, the network process perspective is grounded on a constructivist perspective that focuses on the process of interessement of human and non-human actors, the instability and weakness of relations in networks, and the dynamics of the processes, struggles, controversies, resistance, debates and politics. Some differences between the linear and network perspective of innovation is presented in Table 1. © 2007 The Authors Journal compilation © 2007 Blackwell Publishing
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Table 1. Two Perspectives on Innovation Linear perspective
Innovation process
Decision making
A linear process with sequential steps, assessment of markets and risks, and planning of processes An output of analytical processes
Locus of decision making
Official meetings – expected to make tough decisions
Knowledge
Knowledge can be transferred, and is collected in management systems
Critical management processes
Analysis of costs, risk and profit evaluation, providing information for decision making
Next we move to our explorative, case study research. The objective of our analysis is to investigate how the network process perspective can help cast some light on how decisions are taken when applying a constructivist perspective to innovation management processes. Three questions come into focus in this explorative research: How do the project managers describe the ‘actor-world network’ for their projects? How do the project managers go about trying to interest the heterogeneous human and non-human actors? Do the project managers regard the gate and portfolio meetings as important obligatory passage points – or is there another locus for successfully managing their projects?
Method With our network process perspective, we intend to study what Weick has called ‘organizing’ (Weick, 1979) as opposed to ‘organization’, and what Czarniawska (2004) has called ‘action nets’, that is, relationships in nets. Thus, we seek to avoid the problems that some authors have had with some aspects of the actor-network theory when discussing actors and their networks. Our interpretation is based on the study of human and non-human actors, © 2007 The Authors Journal compilation © 2007 Blackwell Publishing
Network process perspective (NPP) Human and non-human actors need to be enrolled through interessement A number of heterogeneous decisions with some or no direct relationship, which can be evaluated only at the end of the process Heterogeneous micro-processes, obligatory passage points and networks Data are transferred and circulated with boundary objects, and knowledge is what is agreed upon by a number of actors and made stable The interessement of more and more actors to create stable, strong actor networks
or the actants (Latour, 2005), and we are interested in the creation of networks by actants that make translations, which in turn constitute network(s). We chose a company and two of its cases of innovation for theoretical rather than statistical reasons (Eisenhardt, 1989). We evaluate our findings based on their ability for ‘framebreaking’, for ‘testing alternative theories’ (Eisenhardt, 1989), and for providing convincing evidence (Eisenhardt, 1989). We claim, as does Latour (2005), that ‘cases’ are themselves unique and constructed, given that the idea of a case is only one among many possible examples of relationships, an example that we choose because we believe it to be important. Being not only constructivist in the approach but also aware of the performative nature of the world (Latour, 2005), we focus on what is being related in a particular situation rather than on analysing a specific formal organization or company. One company was chosen for this research, because in-depth knowledge of an organization provides a good basis for conducting rich case studies (Yin, 2003) and because we believed that in-depth case studies would produce more interesting results than would, for example, a survey alone (Flyvbjerg, 2001, p. 61) – particularly because we were trying
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to understand complex phenomena. Furthermore, Latour (1987) introduced the research strategy of ‘follow the actor’ (or actant) rather than the formal organizational chart, and investigating the actants and the translations in order to understand the networks. A case study can be compared with ‘critical experiments’ (Yin, 2003, p. 40), and this company was able to provide sufficiently rich data to be ‘a single case [that] can represent a significant contribution to knowledge and theory building’ (Yin, 2003, p. 40). We chose this company, not because we believed it to be extreme or unique, but because it presents a representative case (Yin, 2003, p. 41). Data collection included semi-structured interviews, direct observation, archival sources, documents and various types of interactions with the company over a period of more than two years. Several meetings were observed and more than 30 interviews conducted in order to collect evidence (Yin, 2003). Observations and interviews were transcribed and available for coding, classification and analysis in Nvivo and in print. Additionally, we conducted a study of the company’s formal portfolio management system, which included site visits, more than 20 interviews, a survey and participation in several meetings and seminars.
The Case Company and Its Formal Portfolio Management System Plastic is a company that was established in 1992 through a merger, and is now a market leader employing a competitive strategy that focuses on adding value through innovation in plastic properties and customer services. Plastic’s main products are polyolefin: plastic raw materials consisting of polyethylene and polypropylene. The company has over 4,500 employees distributed in 10 countries on 4 continents, with sales offices in 20 countries. The firm has approximately 500 employees in R&D, which is formally organized into a central R-function; product development is located in four innovation centres. Plastic had over 60 product launches in 2005 and the company in that year had a net profit of more than €250 million. The value of the corporate portfolio of the 62 innovation projects is €241 million, measured as the sum of a net present value (NPV) multiplied by the likelihood of success for each innovation project. All types of innovation projects, including technology development, product development and production process improvement, are managed within a process called the Inno-
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vation Process (IP) system, which was initiated in 1995. The formal phase model in use for product development includes idea generation, opportunity assessment, concept development, detailed development, launch and review, with gate meetings between each phase. Since 2003 there has been increased focus on portfolio management. The management system operates as an integrated system for project, gate and portfolio management, based on the various mandatory templates used by project managers to record and distribute data. Our focus is not on the formal organization – not on a specific place in the company or on specific people or issues. Rather, we focus on the action being taken in order to make the interessement process successful and on how these actions relate to other actors (human or non-human) that the project managers consider to be significant. In this way, we borrow from the notion of action nets by Czarniawska (2004), who also suggests that the two types of actors should be replaced with the term ‘actant’, to truly show that they are of the same level of importance in the perspective here. After providing an introduction to this research project and outlining our desire to understand the interessement process, we asked project managers to help us map out their actor world – the human and nonhuman actors they must handle in order to be successful. The mapping of process networks used here is not a chronological representation, but a mapping of important actors and relationships that creates sensible narratives of events (Czarniawska, 2004). Hence, we have not followed specific topics as calculations (Åkerman & Peltola, 2006), but wanted to map actors and their controversies (Latour, 2005, p. 31) because we were cognizant that there may be not one but multiple centres of struggles and calculation (Czarniawska, 2004), each trying to impose its view and with its own battles and translation processes. We use the term ‘actor world’ (Callon, 1986b) to denote the mapping of the process networks of two projects, as depicted below. Case A is formally in the phase of concept development according to the phase model of the company, whereas Case B is being prepared for the gate meeting to formally move from the phase of concept development to the phase of detailed development.
Case A: The Actor World of Project Screw Cap Figure 1 presents the actor world map for Case Study A. The boxed capital letters A–C in © 2007 The Authors Journal compilation © 2007 Blackwell Publishing
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A B
C
Figure 1. Actor World Drawing of Project A with the Actors and Controversies Involved in the Interessement Process. Writing is partly in Norwegian
Figure 1 are added for explanatory purposes and represent central areas where the project manager is engaged in various struggles and tries to create successful interessement processes and to establish networks. The areas are described below but they do not indicate a sequence of events. (A) The goal of Project Screw Cap is to improve the properties of polymers for plastic bottles; this objective is illustrated as the performance shift in curves and the possibility of increasing the peak, as shown in the light grey line at the lower left corner of Figure 1. Properties can be manipulated by three different actors: catalysts, reactor conditions (temperature and pressure) and compounds, as suggested in the top left corner and the arrow pointing down to the performance curves for polymer properties. The initial polymer developed in the laboratory weighs 100 grams and this weight is up-scaled to one kilo if the project manager decides to develop and test it in the reactor. Outcomes of experiments depend on compounds, temperature, © 2007 The Authors Journal compilation © 2007 Blackwell Publishing
pressure and impurities in the reactor. The success rate is normally 50 percent in the reactor, depending on whether or not a conjunction of these actors is successfully established. The output of the reactor is 500 grams, which can be tested in the test plant after the laboratory has up-scaled the polymer to 500 kilos. The chance of success is 50 percent in the test plant. (B) The coordination system in the top-right corner of the drawing represents the market, where un-circled ‘x’ marks the properties of the present polymer and the circled ‘x’ represents the intended properties that ideally differentiate the product and enable an increased sales price of €50 per tonne. In Figure 1, the ‘O’s in the coordination system represent properties of competitors’ products. Even if the properties are not fully met, but are increased between 0.1 and 1.0 (dotted line), the customer can decide to test the polymer in a trial production process in its own test plant. If tests are promising, the composition of the polymer can be further refined before it is tested. The project
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manager can also decide to skip the customer test before making a test in the company plant. However, the company’s test plant manager is besieged by project managers for the 62 projects presently in the company’s portfolio and, because the standard cost of a test run is €1 million, these projects are carefully selected. Hence, the success of the Case A project also depends on other project managers, their successes and the competition for access to the pilot plant. (C) If the customer test is successful in producing properties between 0.2 and 0.3 (compared to the estimated range of 0.1– 1.0), the polymer is tested for durability in a trial plant run. However, the project manager must agree with many actors, including Asset (the plant owner) and the Business Unit (BU) about taking the polymer into trial production. Contamination is a concern because residues from the trial run can influence production of existing products. Only one polymer can be run in the production plant at any time. In addition, business units reassess the business potential of the polymer, depending on whether the properties are 0.2 or 0.3, and make a decision about whether or not it should proceed to the detailed development phase. We showed the administrative management system and the phase model to the project manager and asked him to compare it to his sketched network representation of the innovation ‘process’. He hesitated: We use everything within our area here. What we do here is subjected to some blurry decisions. And the BU goes back and starts business evaluation and concept development and detailed development . . . (break). It is difficult to compare – definitely. He added: Detailed development starts here at 4 [see Figure 1]. And you go in the plant and make it. But it may not be as expected. Then you have to go back and do again in the pilot [back to B]. And then again to the plant [C]. But then it is detailed development. What I deliver here is a concept in the range of 0.2–0.3. The project manager is continuously trying to interest heterogeneous actors constituting the actor world laid out in Figure 1. The formal management system with its phases and meetings only makes sense to the project manager through relationships with non-human actors. Through the process of interessement, this
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in-process project is stabilized or destabilized as ‘treacherous’ actors are juxtaposing the persistence of the project manager. Significantly, this project manager perceives the BU as a non-human actor that needs to be handled and that acts, resists and produces demands regarding his attempt to create a strong network for his innovation project. The formal innovation management system, in itself, is not indicated on the drawing as an actor, but the project manager must be able to fill out the templates with information that meets the expectations and requirements if he wants formal approval of the project at the upcoming meeting. Getting a project into the gate system thus requires satisfactory (high numbered) net present value (NPV) calculations, large market potential, low production costs and a competitive sales price. However, in the present project it is crucial to successfully enrol the reactor, laboratory, customers and test production, and, at the same time, get access to the test plant through the asset manager in competition with other projects. These conditions can be facilitated by having a stable network that involves many important actants such as the business unit, the molecules, and the market in the form of potential or test customers and marketing plans.
Case B: The Actor World of Bimodal Substances for Transport Packaging The project manager for Case B describes the various human and non-human actors that are to be successfully inscribed and related to the network through interessement, in order for her to be prepared to move the project formally from the concept development (CD) phase to the detailed development (DD) phase. This step is to be formally decided by a meeting. She knows that formal acceptance of the DD phase provides access to a test run in the production plant. However, she describes the various human and non-human actors with whom she has to negotiate in order to access a trial run: [. . .] and when you want to go [to the test] plant. You go from CD and then to DD. But to go there you need a trial run in one of the plants . . . then you have to ask the Business Unit: ‘Can I do the trial run?’ [. . .] and they say, ‘OK, we will support you’. Then you need to write a risk assessment – some templates you need to fill in – and send to Asset [. . .] then we need to go to the Asset Manager. And then he says: ‘OK’. And of course that is not easy. The boxed letters in Figure 2 represents actors and central areas of controversies © 2007 The Authors Journal compilation © 2007 Blackwell Publishing
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a b
c d
e
Figure 2. Actor World Drawing of Project B with the Actors and Controversies Involved in the Interessement Process. Boxed Letters (a–e) are for Explanatory Purposes and Do Not Indicate a Sequence. (A redrawing of this figure is presented in Appendix A.) involved in the interessement and creation of a strong network for this project. (a) This represents production plant management, which is concerned about losing money. The plant is managed under a regime of First Time Right (FTR), which initiates few large-volume products with as few test runs as possible. ‘They don’t like test runs because they are punished’, says the project manager. Thus the calculation of opportunity costs becomes another actor here. The project manager’s expected – or more precisely estimated – profitability also becomes an actor as the plant manager has no spare capacity and will only substitute an existing product with a more profitable one. (b) This signifies that the network must also consider Key Performance Indicators for stock volume used by Asset, the formal © 2007 The Authors Journal compilation © 2007 Blackwell Publishing
owner of all physical production facilities: ‘[w]hen you do a test run, there is greater risk of failure and you get more material you don’t like to have and then you are punished in your bonus system. So – it can be worked out, but I think for my process this is – this is difficult’. (c) This indicates that the template for Internal Product Specification (IPS) is a nonhuman actor that must be accepted by the Business Unit before the trial run can begin. The IPS template specifies properties of the product and the estimated sales volume, which, at this point, merely indicates the ambitions of the project manager. The project manager explains about the meeting: And then I forgot this Portfolio Management meeting (d) which formally decides if
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you should go from CD to DD – I mean, do a trial run. But, of course you don’t ask that before you start up this mess because you don’t know if you are supported. So, you have a new form [laughing]. And then you need to revise all the papers, your business case, tell everything you’ve been doing. And guess who is in the portfolio meeting? The General Manager of Asset! For me, this is something that is decided anyway [. . .] anyway so they are easy [marked as the ‘yes’ (e)] it is not the decision forum on whether we should have a test run, that’s here really! [Pointing to the network drawing]. In the information system, a template with risk(s) assessments must be submitted to Asset three months before the trial run; the IPS template must be submitted at least one month before. These deadlines could also be said to resist the interessement of the project manager into the actor network as they do not always correspond to the formal portfolio meeting held each quarter. The critical role of the various ‘templates’ for passing the gate and portfolio meetings becomes even clearer as the project manager related an incident. And because there were some papers missing, the project was not approved in the portfolio management meeting, and we had to go half a year [. . .] without a project, even though we were having a project. And that was not nice, because then you don’t get the pilot time, and you’re put at the bottom of the list for prioritization in the lab. The gate meeting goes smoothly only when all human and non-human actors are negotiated with and locked into a stable network before the meeting. The meeting, as such, provides no direct added value to the project or the innovation process but probably has several other functions to be addressed later in this paper. The Case B project – developing a new bimodal substance for transport packaging – is formally changing status from concept development to detailed development in the phase model. The process of interessement sketched by the project manager illustrates the actors in juxtaposition. The project can receive approval at the forthcoming meeting only if a successful conjunction can be presented on the template. The innovation system is represented in the sketch by the IPS template and by the portfolio/phase meeting, but the sketch also reveals representations from performance management systems (formally outside the innovation system) in juxtaposition with the approval of the project. Key performance indi-
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cators governing the BU, the Asset, and the Plant become part of the actor world and must be negotiated and incorporated into the templates before they can be submitted to the upcoming meeting. In this case both the template for access to (test) production facilities and the templates for access to the gate/portfolio meeting become critical, and the project manager uses the word ‘WAR’ on the drawing to illustrate the tough competition for trial production. Thus, both the templates for production access and the templates for the gate/portfolio meetings work as boundary objects, which, in our interpretation, also become obligatory passage points, ones that actually displace the meeting and the asset manager into these templates.
Discussion In our chosen research approach and perspective, we have not addressed how the organization, in a more ‘calculative rational’ way, could or should deal with more traditional portfolio management issues such as crosscompany resource allocation (Engwall et al., 2003). Rather, we have focused on trying to understand how decision making on innovations may be understood as a large number of micro-decisions and interessement processes, and that the traditionally obligatory passage points of meetings are displaced into templates that are used as part of the management information systems. Cases A and B are summarized in Table 2.
How Do the Project Managers Describe the ‘Actor-World Network’ for Their Projects? The two project managers describe their projects with words and drawings and explain how the process consists of, among other items: myriad decisions; tests; laboratory experiments; negotiations relating to resistant molecules (product properties); a resistant market, plant and test plants; and competing projects. It is innovation in the making; predictability and linearity are not a priori and processes do not evolve according to a specific order or chronology. Only by the project manager’s persistent actions can situations be shaped to ensure that the new polymer succeeds in a conjunction of enrolled and resisting actors. The complex undertaking involves a struggle with properties of polymer molecules, acquiring time in and attention at the laboratory, and obtaining time at the test plant to test the product against those of the competitors. All these endeavours, among others, must be successful in modifying the attitude toward the project in an increas© 2007 The Authors Journal compilation © 2007 Blackwell Publishing
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Table 2. Observations of Innovation and Management Processes in Cases A and B based on the Network Process Perspective Case A
Case B
Linear phase
Concept development
Innovation process
Interessement of heterogeneous human and non-human actors (e.g., molecules, performance (€50 sales price) catalyst materials) Myriad micro-decisions enrolling and mobilizing more and more actors in a tightly knit and stable network
Decision making
Critical management processes
Struggling with the disassociation of treacherous actors through interessement devices (e.g., the reactor or test plant)
ingly positive way (Latour, 1991) before the project manager can ask to officially move the project forward from one phase to another. Furthermore, the project managers’ explanations and drawing of management challenges differ greatly from the ordered, sequential image suggested in linear product development models, and show how the interessement process does not follow official hierarchical structures as suggested by some researchers (Cunha & Gomes, 2003; McCarthy et al., 2006). The focus is not on quantitative decision models (Heidenberger & Stummer, 1999), stages (Cooper, 1990), or models for project selection (Souder & Mandakovic, 1986), or assessment of the portfolio (Cooper & Edgett, 1997), but on drawing things together (Latour, 1990).
How Do the Project Managers Go about Trying to Interest the Heterogeneous Human and Non-Human Actors? The project managers are working on the interessement process with heterogeneous human and non-human actors in many ways. The challenges are many, but it is clear that the efforts are directed towards the successful completion of the mandatory templates, which provide the entrance ticket to the phase and portfolio meetings. Some of the struggles are with the molecules; others are with the calculations of expected sales of not-yet-existing © 2007 The Authors Journal compilation © 2007 Blackwell Publishing
From concept development to detailed development Constant negotiation with heterogeneous human and non-human actors in turn representing other actor worlds The meeting as a checkpoint for the approval of the stable actor network (i.e., the project) based on successful representation in the templates The portfolio management meeting template(s) as a boundary-spanning device that works as an obligatory passage point
products; and yet others are concerned with convincing Asset managers to provide them with time in the test plant. There is not a single mastermind or architect, not a single decision maker, and not one plan or major obstacle to be overcome that will result in everything settling into its final place; rather there is a multitude of processes, relationships and decisions. Following Akrich et al. (2002), who claim that innovation is, by definition, created by instability, unpredictability and recombinations, it is hard to imagine that any method or approach, however refined, could master the process. The project managers work on several issues at the same time, trying to handle various experiments, negotiations and requirements, in order to successfully create a bundle of links and relationships between and among the heterogeneous actors which will unite and present the project as being a successful one.
Do the Project Managers Regard the Phase and Portfolio Meetings as Important Obligatory Passage Points – Or Is There Another Locus for Successfully Managing Their Projects? Both project managers do regard the phase and portfolio meetings as important, but the obligatory passage points are actually the ability to negotiate successfully with important human and non-human actors and then to
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Project world (simplified)
Management world Reporting Template (1) Working as boundary object (2) Displaced into an obligatory passage point
Management meetings (Designed as obligatory passage points)
Displacement
Figure 3. The Displacement Process of Meetings into the Templates as Obligatory Passage Points – Before the Official Approval at the Meetings
be able to complete the required templates of various types, which, in turn, provide a ticket for approval at the meetings. Based on the descriptive writings on gate and portfolio systems, we originally expected that the obligatory passage point was the meeting but, as indicated above, the obligatory passage points also are the templates to be filled out before the meetings. One could say that the meetings are displaced into the templates (Callon, 1986a, p. 218). The templates represent far more than the portfolio management meeting; a rather large responsibility is actually placed on the templates, as they must represent the innovation strategy and the expectations of all innovation activities within the firm. If templates submitted to the meeting contain the required information, no serious debate will be raised or can threaten the project because actors are already locked in (Akrich et al., 2002). This confirms the findings of Krishnan and Ulrich (2001), indicating that there are multiple types of decisions taken on many types of issues. But the interessement analyses presented here show how these decisions are taken more or less independently, sometimes simultaneously, and rarely at the formal meeting. By being successful in meeting the obligatory passage points, the successful projects present a tightly knit network (Akrich et al., 2002) to the ‘decision makers’, and a decision maker would need to be pretty bold to dare to open up debate. As such, our analyses have moved ‘innovation management’ outside the gate and portfolio management meetings previously assumed to be the central forum for decision making (Cooper, 1990). On the one hand, templates are ‘immutable mobiles’ (Latour, 1990), holding information that can easily be transported but not changed; they serve as a kind of ‘boundary object’ (Star & Griesemer, 1989). These
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templates provide a condensed means for communicating between and among heterogeneous networks of actors: managers, management meetings and project managers. On the other hand, the ‘templates’ for information are not passive containers but become obligatory passage points to which project managers must direct their attention (Figure 3). In this way, the gate and portfolio meetings are ‘displaced’ by the templates (Callon, 1986a, p. 218). With the mandatory use of gate and portfolio management systems, actors – as project managers – need to successfully finish the interessement process and settle the controversies (Latour, 2005, p. 31), a result – or situation at least in this dynamic process perspective with fragile networks – that is reported in the formal templates. This subsequently leaves very little ‘management’ for managers to concern themselves with; furthermore, any manager wishing to object or debate the project would have to challenge the created network, a difficult task to assume if the project has successfully filled the template after a successful interessement process. For these reasons, the templates do not merely act as boundary objects, but serve as representatives of the displaced gate and portfolio meeting. Although we initially regarded the templates for information to the management meetings as boundary objects (Star & Griesemer, 1989) that made it possible to relate actants in the heterogeneous and dispersed network (Latour, 1990), we believe that the interpretation of the templates are more rightly viewed as obligatory passage points. Thus a radical interpretation is that the muchacclaimed gate meetings are merely to be regarded as checkpoints – not as important fora for decision making. From the viewpoint of project managers, they do not contribute to the management of product innovation projects as such. We see two important aspects © 2007 The Authors Journal compilation © 2007 Blackwell Publishing
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of gate meetings that justify the meetings in a network process perspective, both of which are rather sparsely researched until now, but which we think illuminate these meetings in a more realistic manner. First, the meetings serve to set, discuss, align and communicate the standards for what has to be done before the meetings. Second, the meetings are an opportunity for the projects and project managers to be made visible and to gain recognition for their work from managers at high levels – which, to many human actors, justifies many months of work in laboratories, struggles with molecules and the test plant, arguments with customers and employees over specifications, and related efforts. Thus, the network process perspective, as applied in our study, can provide possible explanations for the observation that so few decisions are made at the gate and portfolio meetings (Bragd, 2002; Varnes, 2005). We do not claim that this is a universal explanation. Others have made the observation that ‘decisions’ might be an artificial construct based on a bureaucratic model, where decisions must prelude actions in order to fit to the model, but where practice might actually be different, for example, actions prelude official decisions (Langley et al., 1995). They suggest that organizational decisions might be seen as interwoven, driven by linkages (Langley et al., 1995, p. 275), but do not focus on the role of interessement or networks, as we do here. However, our analysis illustrates that it may be useful or even productive for researchers in the area of management of innovation to be aware of the power and limitation of the theoretical perspectives applied when trying to understand the management of product innovation processes; we advise researchers to consider that alternative insights and observations may be produced from alternative viewpoints, such as the network process perspective presented in this paper. Based on our observations, we have arrived at three conclusions on the role of the management technologies inherent in the linear perspective, when studied from the network process perspective: • Phases and stages: Identifies the brackets within which the projects need to have enrolled, through translation and interessement processes an adequate number and type of human and non-human actors in a stable network. • Document templates: Boundary objects, some of which become obligatory passage points by displacement of requirements of meetings into templates, which are to be regarded as obligatory passage points by © 2007 The Authors Journal compilation © 2007 Blackwell Publishing
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the project managers (satisfactory calculations allow the project into the meeting for acceptance). • Phase and portfolio meetings: A checkpoint, and one where approval for resources is officially granted; thus an actor to be interessed and included into the translation process as their normative functions is an obligatory passage point. However, the meetings are displaced into the templates, which define the formal requirements for projects.
Managerial Implications We point to three observations. First, there seems to be a wide gap between the normative, linear and sequential perspective of the product innovation process and the images produced by project managers. Project managers’ experiences are closer to the network process perspective that we have presented. A theoretical perspective that focuses on networks (Borum & Christiansen, 2006) and interessement processes (Akrich, Callon & Latour, 2002) seems to provide valuable insights into new product processes – insights that are closer to the experiences of those involved, and which may be relevant when talking about second-order learning. Second, the gate and portfolio meetings do not serve as important fora for high-profile decision making, but are best viewed as settings for sending signals about which criteria are regarded as important, through the use of ‘templates’ for information and for granting recognition to hard-working employees. Thus phase and portfolio meetings exert influence with much less tough decision making than expected by the linear perspective. Third, the interessement perspective raises a long list of challenges for our understanding of the management of product innovation in this relatively complex perspective (Latour, 2005). For example, it raises such questions as: How do project managers successfully create stable actor networks? How do we increase the strength of networks? How does one make an actor change direction in order to support one’s own network?
Conclusion The research presented here explores how we can understand and explain decision making in and on innovation. Different approaches and perspectives on the management of innovation and product development are discussed, and two major lines of thoughts on
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innovation are identified: the linear management perspective and the network process perspective. The linear perspective, with its sequential phases, dominates much of the thinking on the management of innovation, as it has led to the design of various management systems with phases, meetings, etc., that place high-level decision makers in central positions as masters of projects and the portfolio of innovation activities. However, this perspective is not capable of explaining several observations of a lack of decision making at those acclaimed meetings. As we want to develop a closer understanding of actions and decision making in innovation, we derive an alternative perspective on organizational action and management: the network process perspective. The network process perspective focuses on how various actants (human and non-human actors) create networks through translation processes and interessement, which are able to present the networks as ‘facts’ – as new products or projects which fulfil the criteria for a good project or a profitable new product. The network process perspective as presented here offers an alternative explanation on how things are made strong: through interessement of actors, such as molecules, laboratories, test plants, co-workers, asset managers, customers and business unit managers, which then presents itself as a strong fact. The analysis of two cases with the network process perspective demonstrated how it is possible to have project managers help researchers to understand the dynamics and the struggles they are dealing with in trying to establish strong networks, and how those actor worlds are vastly different from those presented by the linear perspective; the network process perspective also revealed the dynamics and struggles involved rather than the normative focus on ‘do this calculation’ or ‘investigate this’. The analysis of these two cases makes it possible to suggest a possible explanation for how decisions are made on innovations, even in a company with an elaborate management system based on the linear view, which includes the use of various templates that act as boundary objects between the project worlds and the management world. These boundary objects are intended to pass information to the obligatory passage points: the management meetings. However, we suggest that the decision power of the meetings and the participants of the meetings are displaced into the templates that project managers need to complete before the meetings, and that these templates in themselves becomes obligatory passage points in the network. As a consequence, the ‘decision’ meeting becomes a
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checkpoint and a session for approval and debates on standard setting for performance. The network process perspective thus can help us to bring back an understanding of innovation and management of innovation as influenced by, and maybe only consisting of, a large number of dispersed micro-decisions in which the central struggles are on the processes of interessement of human and nonhuman actors into strong networks, which can pass the various obligatory passage points using various boundary objects that connect the different worlds, and where the role of the formal meetings are displaced into other places in the organization.
Acknowledgments We would like to thank two anonymous reviewers from Creativity and Innovation Management for their comments and suggestions on an earlier version of this paper. However, the paper is the sole responsibility of the authors.
References Åkerman, M. and Peltola, T. (2006) Constituting the Space for Decision Making – Conflicting Calculations in a Dispute over Fuel Choice at a Local Heating Plant. Geoforum, 37, 779–89. Akrich, M., Callon, M. and Latour, B. (2002) The Key to Success in Innovation. Part I: The Art of Interessement. International Journal of Innovation Management, 6, 187–206. Baker, M. and Hart, S. (1999) Product Strategy and Management. Prentice Hall, Essex, UK. Borum, F. and Christiansen, J.K. (2006) Actors and Structure: What Makes Implementation Happen? Scandinavian Journal of Management, 22, 213–37. Bragd, A. (2002) Knowing Management – An Ethnographic Study of Tinkering with a New Car. Bokförlaget BAS, Gothenberg, Sweden. Brown, S.L. and Eisenhardt, K.M. (1995) Product Development: Past Research, Present Findings, and Future Directions. Academy of Management Review, 20, 343–78. Callon, M. (1986a) Some Elements of a Sociology of Translation: Domestication of the Scallops and the Fishermen of St Brieuc Bay. Sociological Review Monograph, 32, 196–233. Callon, M. (1986b) The Sociology of an ActorNetwork: The Case of the Electric Vehicle. In Callon, M., Law, J. and Rip, A. (eds.). Mapping the Dynamics of Science and Technology. Macmillan, London, pp. 19–34. Christiansen, J.K. and Varnes, C. J. (2005) Calculative and Appropriate Decisions: How Decisions Happen at Gate Meetings. 12th International Product Development Management Conference, Denmark, Vol. 1, 279–94. © 2007 The Authors Journal compilation © 2007 Blackwell Publishing
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Cooper, R.G. (1990) Stage-Gate Systems: A New Tool for Managing New Products. Business Horizons, 33, 44–55. Cooper, R.G. and Edgett, S.J. (1997) Portfolio Management in New Product Development: Lessons from the Leaders I. Research Technology Management, 40, 16–29. Crawford, M. and Di Benedetto, A. (2006) New Products Management. McGraw-Hill/Irwin, New York, NY. Cunha, M.P. and Gomes, J.F.S. (2003), Order and Disorder in Product Innovation Models. Creativity and Innovation Management, 12, 174–87. Czarniawska, B. (2004) On Time, Space, and Action Nets. Organization, 11, 773–91. Dechow, N. and Mouritsen, J. (2005) Enterprise Resource Planning Systems, Management Control and the Quest for Integration. Accounting, Organizations and Society, 30, 691–733. Eisenhardt, K.M. (1989) Building Theories from Case Study Research. Academy of Management Review, 14, 532–50. Engwall, M. and Jerbrant, A. (2003) The Resource Allocation Syndrome: The Prime Challenge of Multi-Project Management? International Journal of Project Management, 21, 1–7. Flyvbjerg, B. (2001) Making Social Science Matter. Cambridge University Press, Cambridge. Frishammar, J. (2003) Information Use in Strategic Decision Making. Management Decision, 41, 318– 26. Galbraith, J.R. (1977) Organization Design. AddisonWesley, Reading, MA. Griffin, A. (1997) PDMA Research on New Product Development Practices: Updating Trends and Benchmarking Best Practices. Journal of Product Innovation Management, 14, 429–58. Hansen, M.T, Mors, M.L. and Lovas, B. (2005) Knowledge Sharing in Organizations: Multiple Networks, Multiple Phases. Academy of Management Journal, 48, 776–93. Heidenberger, K. and Stummer, C. (1999) Research and Development Project Selection and Resource Allocation: A Review of Quantitative Modeling Approaches. International Journal of Management Research, 1, 197–224. Hultink, E.J. and Langerak, F. (2002) Launch Decisions and Competitive Reactions: An Exploratory Market Signaling Study. Journal of Product Innovation Management, 19, 199–212. Krishnan, V. and Ulrich, K.T. (2001) Product Development Decisions: A Review of the Literature. Management Science, 47, 1–21. Langley, A., Mintzberg, H., Pitcher, P, Posada, E. and Saint-Macary, J. (1995) Opening up Decision Making: The View from the Black Stool. Organizational Science, 6, 260–79. Latour, B. (1987) Science in Action. Harvard University Press, Cambridge, MA. Latour, B. (1990) Drawing Things Together. In Lynch, M. and Woolgar, S. (eds.), Representation in Scientific Practice. MIT Press, Cambridge, MA, pp. 19–68.
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Latour, B. (1991) Technology is Society Made Durable. In Law, J. (ed.), A Sociology of Monsters: Essays on Power, Technology, and Domination. Routledge, London, pp. 103–31. Latour, B. (2005) Reassembling the Social. Oxford University Press, Oxford. Law, J. (1992) Notes on the Theory of the Actor Network: Ordering, Strategy, and Heterogeneity, Systems Practice, 5, 379–93. Lichtenthaler, U. and Ernst, H. (2006) Attitudes to Externally Organising Knowledge Management Rasks: A Review, Reconsideraqtion and Extension of the NIH Syndrome. R&D Management, 36, 367–86. McCarthy, I.P., Tsinopoulos, C., Allen P. and Roseanderssen, C. (2006) New Product Development as a Complex Adaptive System of Decisions. Journal of Product Innovation Management, 23, 437– 56. Perkins, W.S and Rao, R.C. (1990) The Role of Experience in Information Use and Decision Making by Marketing Managers. Journal of Marketing Research, 27, 1–10. Pinch, T.J. and Bijker, W.E. (1989) The Social Construction of Facts and Artifacts: Or How the Sociology of Science and the Sociology of Technology Might Benefit Each Other. In Bijker, W.E., Hughes, T.P. and Pinch, T.J. (eds.), The Social Construction of Technological Systems. MIT Press, Cambridge, MA, pp. 17–50. Schilling, M.A. (2005) Strategic Management of Technological Innovation. McGraw-Hill/Irwin, New York, NY. Serres, M. and Latour, B. (1995) Conversations on Science, Culture, and Time. Trans. Roxanne Lapidus. University of Michigan Press, Ann Arbor, MI. Sounder, T. and Mandakovic, W.E. (1986) R&D Project Selection Models. Research Management, 29, 36–42. Star, S.L. and Griesemer, J. (1989) Institutional Ecology, Translations and Coherence: Amateurs and Professionals in Berkley’s Museum of Vertebrate Zoology. Social Studies of Science, 19, 387– 420. Trott, P. (2005) Innovation Management and New Product Development. Pearson Education, Ltd., Essex, UK. Ulrich, K.T. and Eppinger, S.D. (2004) Product Design and Development. McGraw-Hill/Irwin, New York, NY. Varnes, C.J. (2005) Managing Product Innovation Through Rules – The Role of Formal and Structured Methods in Product Development. PhD dissertation 2005-01, Copenhagen Business School. Weick, K.R. (1977) The Social Psychology of Organizing. Addison-Wesley, Reading, MA. Wheelwright, S.C. and Clark, K.B. (1992) Revolutionizing Product Development: Quantum Leaps in Speed, Efficiency, and Quality. The Free Press, New York. Yin, R.K. (2003) Case Study Research – Design and Methods. Sage, Newbury Park.
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John K. Christiansen (
[email protected]) is Professor with focus on Management of Projects, IT and Product Development at the Department of Operations Management, Copenhagen Business School. His research is based on a cross-disciplinary background from industry, sociology, product development, information systems and performance management. He formerly worked in the Department of Accounting and the Department of Informatics and Management Control, in a Patent Office and as an IT project manager in the furniture industry. His present research focuses on understanding the challenges for management of innovation by implementation and application of various management technologies, and on understanding the complexities and dynamics of the processes in innovation. His past research includes implementation studies, research on evaluation of research, project management and performance management. He is presently head of the PhD
programme at Copenhagen Business School in ‘Technologies of Managing’. Claus J. Varnes (
[email protected]), PhD, is Assistant Professor at the Department of Operations Management, Copenhagen Business School. His research focuses on the role of management control in marketing, especially product development, including the use of approaches in new product development (e.g., gate systems), performance management and decision making. He is a member of the research programme at the Department of Operations Management on performance management and product development. He teaches management of product development and performance management in sales and marketing at masters level. Previously, he worked for six years in industry as a CFO, management consultant in strategic design management and advisor on corporate acquisitions with emphasis on corporate development opportunities.
Appendix A Figure 2 redrawn for illustration purposes
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A Review of Employee Well-Being and Innovativeness: An Opportunity for a Mutual Benefit Hannele Huhtala and Marjo-Riitta Parzefall By drawing on the Job Demands and Resources Model, this review article develops a conceptual framework to advance theoretical understanding of the relationship between job-related demands and resources, employee well-being and innovativeness. In conditions characterized by too high levels of demands, employees may suffer from burnout. When job resources are high, they are likely to feel engaged with their work. Burnout in turn can be seen as an inhibitor of innovativeness, and work engagement as an antecedent to innovativeness, mediating the effects of resources and demands at work on innovativeness. We further argue that innovativeness can function as a resource or a demand, depending on how it is managed. In addition to understanding the dual role of innovativeness, the identification of job-specific demands and resources is central to supporting employee well-being and, subsequently, innovativeness. The implications of the proposed conceptual framework for academic researchers and managers are discussed.
Introduction
T
o remain competitive in the global market, organizations must continuously develop innovative and high-quality products and services, and renew their way of operating. In the heart of all innovation lies creative ideas, and it is individual employees who, alone or in groups, generate, promote, discuss, modify and realize these ideas (Scott & Bruce, 1994). It is therefore not surprising that innovative employees are the chief currency for contemporary organizations and the question how to promote and support employees’ innovativeness presents a key question that both academics and managers are facing. Over recent years, a sizeable body of research has focused on identifying antecedents to innovative work behaviours and developing ways to better support employees in their creative endeavours (Janssen, Van De Vliert & West, 2004). These studies have focused on examining the influence of either personal and contextual factors or their interaction on innovation (for reviews, see, e.g., Van Der Panne, Van Der Beers & Kleinknecht, 2003; Anderson, De Dreu & Nijstad, 2004). For example, © 2007 The Authors Journal compilation © 2007 Blackwell Publishing
researchers have examined the effects that job features such as autonomy or personality characteristics such as flexibility exert on employee attitudes and behaviours relevant to innovation (Georgsdottir & Getz, 2004; Miron, Erez & Naveh, 2004; Ramamoorthy et al., 2005). Although employee well-being has received increasing attention among scholars of human resource management and organizational psychologists and it is realized that innovativeness needs to be nurtured (Deery, 2002; Florida, 2002; Guest, 2002), innovation literature has paid surprisingly little attention to employee well-being and its relationship with innovativeness. Understanding the relationship between employee well-being and innovativeness is important in order to learn how innovative employees can and should be supported. One central characteristic of contemporary work is that it requires independent decision making and creative use of knowledge, and companies increasingly rely on employees’ continuous ability to innovate (Blom, Melin & Pyöriä 2001). Thus, innovation is not just a requirement for a few select individuals but something which is expected of most employees
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in their everyday work. Therefore, it is important to comprehend how innovativeness relates to employee well-being. The objective of this review article is therefore to develop a conceptual framework for understanding the relationship between employee well-being and innovativeness. Specifically, by reviewing the existing literature and research findings, the following questions are addressed: ‘How does employee work engagement enhance innovativeness of individual employees?’ and ‘How does burnout inhibit employee innovativeness?’. We propose that in a work context characterized by high demands and a low level of resources, employees easily develop burnout, and as a result their innovativeness suffers. In contrast, in a supportive work environment that provides sufficient resources, employees feel well and are highly engaged with their work. This in turn influences positively employee innovativeness. Our conceptual framework provides the basis for empirical research at a later stage. We will start by briefly reviewing the antecedents to innovativeness and then move to discuss the concept of well-being from both burnout and work engagement perspectives by using the Job Demands and Resources Model developed by Demerouti et al. (2001). We will then turn to explore the nature of innovativeness and its relationship with wellbeing. Our central argument is threefold. First, indicating employee well-being, work engagement that captures a positive cognitiveaffective state of mind at work can be seen as a prerequisite for innovativeness. Second, employee innovativeness can be supported by providing sufficient resources that foster employee work engagement and minimize the negative impact of potential job-specific demands on employee well-being. Third, managers need to acknowledge that employee innovativeness as such can be a source of demands or resources. We conclude with some practical implications regarding how managers can aim at supporting employee well-being and promoting innovativeness.
Antecedents to Employee Innovativeness Employee innovativeness referring to employees’ propensity to innovate can be conceived as complex behaviour consisting of idea generation, idea promotion and idea realization with the aim of meeting organizational goals in novel ways (Kanter, 1988; Scott & Bruce, 1994). Individuals, alone or in groups, undertake innovative activities from the intention to derive anticipated benefits. Creativity is
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central to innovativeness, but the concepts are not synonymous. Innovation can be seen as a successful and intentional implementation of creativity, which is more subjective and context specific by its nature (Miron, Erez & Naveh, 2004). Creativity as such may be limited to idea generation alone but by definition innovation produces benefits for the people involved (Anderson, De Dreu & Nijstad, 2004). Therefore, innovativeness requires creativity, but creativity does not always lead to an innovation. Innovativeness requires that the individual is both able and willing to be innovative. With respect to abilities, above average general intellect, certain cognitive capabilities, general skills and task and context-specific knowledge, for example, facilitate innovativeness (Barron & Harrington, 1981; Taggar, 2002). Beyond knowledge and skills, innovativeness requires intrinsic motivation and a certain level of internal force that pushes the individual to persevere in the face of challenges inherent in the creative work (Georgsdottir & Getz, 2004; Shalley & Gilson, 2004). Job-, team- and organizational-related factors naturally influence employees’ innovativeness, often indirectly and in interaction with the personality characteristics (Shalley & Gilson, 2004). These factors include a number of what can be labelled as job-related resources, such as autonomy, challenge, time, materials and social relations characterized by trust and support (see Shalley & Gilson, 2004 and Anderson, De Dreu & Nijstad, 2004 for reviews). Although studies have indicated positive correlations between a number of antecedents and innovativeness, it remains unclear how these effects occur. Similarly, how certain aspects of work such as bureaucracy and lack of communication negatively influence innovativeness remains unexplored. While it is important to consider the different antecedents to innovativeness in attempts to support employee creativity, we need to avoid thinking about innovativeness in too mechanistic terms. As innovativeness is so context- and problem-specific and largely about discretionary additional behaviours that go beyond the formal job requirements in complex and ambiguous conditions, organizations are increasingly dependent on their employees’ willingness and voluntary effort to go the extra mile needed for creative and innovative solutions (Wolfe, 1994; Ramamoorthy et al., 2005). Therefore we argue that employee well-being may play a central role in innovativeness and help explaining how the characteristics of the job and work environment influence employees’ willingness to harness their creative skills and abilities for the benefit of the organization. © 2007 The Authors Journal compilation © 2007 Blackwell Publishing
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Well-Being at Work: Burnout and Work Engagement Perspectives Employee well-being can be approached from two different perspectives: from a positive well-being and a negative un-well-being perspective. Though the importance of mental health and positive well-being has been recognized for a long time (Jahoda, 1959), the vast majority of studies on employee well-being has focused on employee ‘un-well-being’, i.e., occupational stress or burnout. Recently, in line with the positive psychology movement advocated by Martin Seligman and Mihaly Csikszentmihalyi (2000), researchers have started to pay increasing attention to positive work-related well-being other than lack of stress or burnout symptoms. For example, work engagement has gained popularity among researchers of work-related well-being (Maslach, Schaufeli & Leiter, 2001; Schaufeli & Bakker, 2004; Cartwright & Holmes, 2006). However, both well-being and un-well-being should be included in frameworks attempting to explain well-being because in the light of recent research these two states are not antipodes but rather complement each other (Schaufeli & Bakker, 2004). Burnout is a stress syndrome, characterized by total physical and mental exhaustion, a cynical attitude to work and a decline in professional efficacy (Maslach & Leiter, 1997; Hakanen, 2004). While specific physical, affective or cognitive demands at work such as role conflict or work overload may cause stress in the short term, burnout develops when an exposure to the stressors is prolonged (Maslach & Leiter, 1997; Hakanen, 2004; Gonzáles-Romá et al., 2006). As a consequence of burnout, employees withdraw from their jobs emotionally and cognitively, distance themselves from their work and its objectives and their performance suffers (Bakker, Demerouti & Verbeke, 2004). Empirical research has demonstrated that burnout has a negative effect on job satisfaction, organizational commitment, extra-role behaviours and in-role behaviours (Lee & Ashforth, 1996; Bakker, Demerouti & Verbeke, 2004; Hakanen, Bakker & Schaufeli, 2006). Work-related stress in turn can be defined as ‘a situation where work is at once burdensome and produces little reward. Reward in this context does not refer exclusively to the wages received for work, but also to the employee’s opportunities to exert an influence, his standing, job security, opportunities for occupational development and the general fairness of the work community’ (Kivimäki, Vahtera & Elovainio, 2005, p. 473). Work-related stress is thought to occur in a situation where high demands on work © 2007 The Authors Journal compilation © 2007 Blackwell Publishing
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combine with a lack of opportunities for exerting influence (Karasek & Theorell, 1990). Work engagement in turn captures an enduring, positive and fulfilling affectivecognitive state of mind at work, characterized by vigour, dedication and absorption at work (Hakanen, 2004; Schaufeli & Bakker, 2004). Vigour refers to a high level of positive energy at work and willingness to invest one’s efforts in the job even in the face of difficulties. Dedication is characterized by inspiration, sense of significance and enthusiasm. Absorption captures employees’ full concentration, which may even lead to difficulties in detaching oneself from work. Although research has indicated that burnout and engagement are independent states, they correlate negatively. Therefore, not completely, but to some extent, ‘burnout erodes engagement: energy turns into exhaustion, involvement turns into cynicism and efficacy turns into ineffectiveness’ (Maslach & Leiter, 1997, p. 34). Work engagement has been found to predict self-assessed health, work ability, commitment and job satisfaction, and have negative associations, for example, with turnover intentions, absenteeism and early retirement (Bakker et al., 2003; Hakanen, 2004; Schaufeli & Bakker, 2004).
Well-Being and Job Demands and Resources Model In line with the view that burnout and work engagement are independent, although negatively correlated states, they are evoked by two distinct processes, named energetic process and motivational process that stem from demands and resources inherent in every job (see Figure 1) (Bakker et al., 2003). The energetic process refers to the negative demanding aspects of work that employees may sometimes experience as so strenuous and depleting that they lead to stress, and eventually to burnout (Demerouti et al., 2001). As in the case of negative antecedents to innovativeness, these demands can be any physical, psychological, social or organizational aspect of the job that requires physiological or psychological effort on behalf of the employee. The demands, which are job and role specific, are hence associated with a certain level of costs. When these costs become too high and in the absence of balancing resources, employees cannot cope with them and, as a consequence, they wear out (Demerouti et al., 2001). This results in burnout and can reduce employee work engagement. In addition to demands, every job has certain resources – whether physical, psychological, social and organizational – that aid employees to carry out their work and that are
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+ Energetic process
Job demands
Job resources
+
Burnout
-
Innovativeness
-
-
Work engagement
+
+
Motivational process
+ Figure 1. The Job Demands and Resources Model Applied to Well-Being and Innovativeness intrinsically fulfilling and rewarding, creating a motivational process (Schaufeli & Bakker, 2004). These resources counterbalance the job demands and help employees to cope with the occasionally consuming aspects of their work, thereby buffering against the negative effect of demands on well-being and the costs associated with them. The resources also help employees to fulfil their work-related goals and as such stimulate personal growth and intrinsic satisfaction with work, eventually contributing to their innovativeness. Consequently, as empirical research suggests, jobrelated resources are positively associated with employee work engagement and help prevent burnout (Figure 1) (Schaufeli & Bakker, 2004; Hakanen, Bakker & Schaufeli, 2006).
Employee Innovativeness from the Perspectives of the Job Demands and Resources Model and Well-Being Innovativeness and Well-Being While a certain level of stress and pressure can drive employees to excel, stress and burnout resulting from long-term demands at work are bound to negatively influence employee creativity and innovativeness (Amabile, Hadley & Kramer, 2002). Employees who suffer from burnout are likely to be detached from their work and struggle to carry out the duties that are formally required of them (Bakker, Demerouti & Verbeke, 2004). Consequently, they will not only be unwilling but most likely unable to innovate and invest their effort in something that is often seen as additional. For example, Cropanzano, Rupp and Byrne (2003) have shown that emotional exhaustion is negatively associated with organizational commitment and organizational citizenship behaviour. In
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line with this finding, in workplaces where employees’ stress levels are high, their commitment, excitement about work and motivation are also lower (Guest & Conway, 2004). Therefore, we suggest that job-related demands, when enduring, exhaust employees, and eventually affect negatively their innovativeness (Figure 1). In other words, it is through burnout that too demanding work conditions affect negatively employee innovativeness. Turning to the positive aspect of employee well-being, the concept of work engagement appears particularly relevant to the promotion and support of innovativeness in organizations. When resources in the job are high and employees are positive about their work, they are in return likely to engage in activities that are beneficial for the organization on the whole (Organ, 1988). Sometimes the experience of work engagement may itself even be equal to high performance or it occurs simultaneously with innovativeness (Amabile et al., 2005; Quinn, 2005). However, Amabile et al. (2005) convincingly demonstrate in their longitudinal study that the more positive the employee is about his or her work, the more likely is his or her creativity at work. A study by Eisenberger et al. (2005) indicates that a perceived high level of challenge and the possibility to use skills predict employees’ engagement in extra-role performance partially through creating a positive mood. In other words, if employees experience an appropriate level of challenge and can put their skills to full use, they are more likely to report a positive mood. Positive mood in turns promotes helping behaviours, creative thinking and suggestions that help the organization to better fulfil its objectives (George & Brief, 1992; Eisenberger et al., 2005). Similar to work engagement, flow, capturing an enjoyable peak experience has been found to be positively associated with employee initiative and intrinsic motivation (Csikszentmihalyi, 1991), © 2007 The Authors Journal compilation © 2007 Blackwell Publishing
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which in turn are seen as prerequisites for innovative behaviour (Andersen, De Dreu & Nijstad, 2004). This leads us to suggest that work engagement as a positive affectivecognitive state of mind functions as an antecedent to innovativeness. In sum, following the Job Demands and Resources Model, we thus argue that it is through work engagement that the effects of a supportive work environment and job-related resources influence employees’ creativity and innovativeness. At the same time, while a certain level of stimulation is beneficial and may provide the extra push needed to excel, too high a level of challenge may in the long run turn into a demand, and subsequently to increased stress levels and burnout, hindering innovativeness.
Innovativeness as a Demand or a Resource Lack of innovativeness should, however, not only be seen as an outcome of burnout, and innovativeness as a result of work engagement. Innovativeness can also turn into a source of demands in the job and thus even contribute to the development of burnout. Although the three separate stages of innovation (generation stage, promotion stage and realization stage) distinguished by the innovation literature may misleadingly suggest a straightforward process, researchers unanimously agree that innovative processes are non-linear, complex and involve several facets of the organization and its members and environment (Thamhain, 2003). Problems and incongruities characterize innovative work and one innovative course of action is always in competition with alternative courses of actions (Kanter, 1988). The complexities involved are fortified in technologybased environments, in which a large number of factors beyond organizational boundaries, including, for example, collaboration with other firms and customers, may contribute to innovative processes. Innovative work is likely to load employees with extra tasks that require complex problem solving, increasing the total workload both in quantitative and qualitative terms beyond that which is regular (Janssen, Van De Vliert & West, 2004). Uncertainty about the outcomes of innovativeness and the usefulness of time and resources invested may contribute to lack of clarity surrounding employee work role and tasks. Conflicting approaches to problem solving, competition and resistance to change that may occur in response to innovativeness constitute demands that can be exhausting to the employee (Tomkovick & Miller, 2000; Janssen, Van De Vliert & West, 2004). In other words, innovative individuals often rock the © 2007 The Authors Journal compilation © 2007 Blackwell Publishing
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boat, interrupting organizational procedures and practices and fostering competition between different interest groups. For example, Groth and Peters (1999) report in their study of over 1,700 individuals that fear is among the most cited barriers to creativity in organizations. Interestingly, it is not only fear of failure and rejection that is perceived to prevent innovativeness, but also fear of success and its implications in terms of possible changes that the innovation may bring about. Creative work may therefore appear subversive and unsettling for the parties involved, because it disrupts existing patterns of routines, thought and life, thereby causing insecurity and resistance to change among the persons who are affected by the innovation. Consequently, relations with co-workers may suffer (Janssen, 2003). Employee innovativeness may also constitute a threat to managers and thereby negatively influence employee– manager relationships. Managers may, for example, be concerned about the changes, risks and costs associated with novel ideas for which they are ultimately held responsible (Janssen, Van De Vliert & West, 2004). Managers may also be concerned with their position and power in the face of employee innovativeness. Sometimes, innovativeness can even be dysfunctional for both the innovative individuals and their employing organizations, if judged by the standards of invested effort, time and monetary constraints (Janssen, 2004; Miron, Erez & Naveh, 2004). Despite its undoubtedly demanding side, innovativeness has the potential to turn into resources with subsequent positive outcomes. As Quinn (2005, p. 632) concludes on the basis of his study on flow and performance, ‘high performance experience is consequential for the individuals who experience it, because when people experience high performance, they also tend to derive more joy from their work, feel like they have more control over their work, and worry less’. From the employee perspective, the benefits of innovation therefore go beyond economic benefits related to potential salary increases and bonuses and can include, for example, learning, personal growth, recognition, increased satisfaction, improved group cohesiveness and better interpersonal communication (West & Anderson, 1996; Andersen, De Dreu & Nijstad, 2004; Ford & Sullivan, 2004). In addition, researchers have noted that innovativeness can be seen as a coping strategy or an attempt to improve work environment and hence actually provides a mechanism to improve well-being (Janssen, Van De Vliert & West, 2004). These not-always quantifiable out-
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comes of innovation are valuable and should be acknowledged as such when promoting and supporting innovativeness. In the context of creative work, the potentially positive outcomes of innovativeness present valuable job-specific resources that will further foster employee engagement in work and protect the employee from the demanding aspects of the work. For example, Thamhain (2003) points out in his analysis of an innovative work environment, that the most significant predictors of innovative performance are resources that, in the end, are derived from innovative work itself. In his study, the three most significant predictors of innovative performance were: (1) professionally stimulating and challenging work, (2) opportunities for accomplishment and recognition, and (3) the ability to resolve conflict and problems. Noteworthily, factors such as salary, organizational structure and the characteristics of the team and project failed to have a significant association with innovative performance. Consequently, innovativeness itself can turn into a demand or resource at work. The challenges, irregularities and novel solutions surrounding innovativeness can constitute jobrelated demands that contribute to the level of stimulation at work (see Figure 1). Innovativeness can also provide a further resource at work that fosters work engagement, provided that its taxing effects are managed appropriately.
Discussion and Implications In this review, we have highlighted the importance of promoting employee well-being and innovativeness as we see the two phenomena to be intertwined. We have suggested that burnout can be seen as an inhibitor of innovativeness, and work engagement as an antecedent to employee innovativeness. It is therefore important to eliminate those demands at the workplace that cause burnout and build on those resources that contribute positively to work engagement. Furthermore, we argued that innovativeness itself can potentially function as a resource or a demand at work, thereby holding the potential of setting either a negative or positive wheel into motion, as depicted in Figure 1. However, this is likely to depend on how resources and demands are managed at the workplace. Specifically, following the Job Demands and Resources Model by Demerouti et al. (2001), we suggested that employee well-being and ultimately innovativeness are influenced by two distinct processes which begin with the demands and resources specific to each job. In a workplace, where job-related resources are in
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place and built on and where demands are kept under control, employees are likely to be positively engaged in their work and consequently display innovativeness. Innovativeness as such can function as a resource, for example, when employees are given appropriate support, when they receive positive encouragement and feedback for their creativity and when their contribution is recognized. Hence, the promotion of employee well-being has the potential to offer a win–win situation by setting the positive motivational process in motion and turning innovation into a further resource for wellbeing and innovation that benefits both the employees and the organization. Our conceptual framework shown in Figure 1 opens a number of areas for future empirical research. For example, the logic pertaining to the mediating role of well-being from both the burnout and work engagement perspectives requires empirical testing. Because the proposed framework is quite general, empirical research needs to specify demands and resources depending on the context of the empirical study. Generalizing from research on innovation promotion, time pressure and workload may be among the most commonly experienced demands that negatively influence employee innovativeness through burnout (Amabile et al., 1996, 2002). Good team-member relations and trust may in turn be among the key resources necessary for employee well-being and innovativeness (Amabile et al., 1996; Ramamoorthy et al., 2005). Further, the conceptual model presented in this review is limited to the individual level of analysis, because well-being is traditionally thought of as an individual-level phenomenon. However, more research is needed on the ways in which innovation and well-being can be supported at the team and organizational levels. The taxing side of innovative work needs to be recognized by both practitioners and researchers: innovativeness can turn into a demand. Essentially, innovativeness is about change that involves risk-taking and that can be threatening for the parties involved. Innovativeness may therefore lead to unintended costs for the innovators involved despite their intention to produce benefits (Janssen, Van De Vliert & West, 2004). When the negative side of innovativeness is recognized and appropriate measures are taken to, for example, ensure good relations, a trusting environment and a just reward mechanism, the demanding side of innovativeness can be managed. It is thus important for managers to identify the potential demands and resources in each job and realize their independent and interactive effects on employee well-being, and © 2007 The Authors Journal compilation © 2007 Blackwell Publishing
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subsequently on innovativeness. Promoting a work environment that provides sufficient resources, meets employees’ professional needs and ambitions and eliminates potential demands may, in the end, be achieved with relatively little effort compared to reengineering work processes. It does, however, require skilful management and time for reflection: managers need to understand employees’ perspectives, listen to their needs and concerns, and take care to identify what employees actually enjoy most in their jobs, and what is most demanding for them. At the same time, care must be taken not to overwhelm the employees with too difficult and too restricted tasks, or with too much control. As Tomkovick & Miller (2000, p. 419) conclude in their recommendations for innovation management, ‘if you want to kill something, just squeeze all the joy out of it, and it will die. The reciprocal is also true. If we want innovation to flourish, we need to make work our play . . . or at least play at work’.
Conclusions Our main purpose in this review has been to develop a conceptual framework for understanding the relationship between employee well-being and innovativeness and to provide insights into how they could be promoted. Our central argument is threefold. First, employee innovativeness is negatively influenced by burnout and likely to occur when employees are engaged in their work. Second, innovativeness itself has to be managed as a source of demands and resources that in turn influence burnout and engagement. Third, by supporting the resources and minimizing the demands that arise from innovative work and the work environment in general, organizations have the potential to set in motion a positive wheel of well-being and innovativeness for the benefit of both the employees and the organization.
References Amabile, T.M., Conti, R., Coon, H., Lazenby, J. and Herron, M. (1996) Assessing the Work Environment for Creativity. Academy of Management Journal, 39, 1154–84. Amabile, T., Hadley, C.N. and Kramer, S.J. (2002) Creativity under the Gun. Special Issue on the Innovative Enterprise: Turning Ideas into Profits. Harvard Business Review, 80, 52–61. Amabile, T.M., Barsade, S.G., Mueller, J.S. and Staw, B.M. (2005) Affect and Creativity at Work. Administrative Science Quarterly, 50, 367–403. © 2007 The Authors Journal compilation © 2007 Blackwell Publishing
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Anderson, N., De Dreu, C.K.W. and Nijstad, D.A. (2004) The Routinization of Innovation Research: A Constructively Critical Review of the State-ofthe-Science. Journal of Organizational Behavior, 25, 147–72. Bakker, A.B., Demerouti, E., De Boer, E. and Schaufeli, W.B. (2003) Job Demands and Job Resources as Predictors of Absence Duration and Frequency. Journal of Vocational Behavior, 62, 341– 56. Bakker, A.B., Demerouti, E. and Verbeke, W. (2004) Using the Job Demands-Resources Model to Predict Burnout and Performance. Human Resource Management, 43, 83–104. Barron, F. and Harrington, D.M. (1981) Creativity, Intelligence and Personality. Annual Review of Psychology, 32, 439–76. Blom, R., Melin, R. and Pyöriä, P. (2001) Tietotyö ja työelämän muutos. Palkkatyön arki tietoyhteiskunnassa. Gaudeamus, Helsinki. Cartwright, S. and Holmes, N. (2006) The Meaning of Work: The Challenge of Regaining Employee Engagement and Reducing Cynicism. Human Resource Management Review, 16, 199–208. Cropanzano, R., Rupp, D.E. and Byrne, Z.S. (2003) The Relationship of Emotional Exhaustion to Job Performance Ratings and Organizational Citizenship Behavior. Journal of Applied Psychology, 88, 160–9. Csikszentmihalyi, M. (1991) Flow. The Psychology of Optimal Experience. Harper Perennial, New York. Deery, S. (2002) Afterward. Employee Reactions to Human Resource Management: A Review and Assessment. Journal of Industrial Relations, 44, 458–66. Demerouti, E., Bakker, A.B., Nachreiner, F. and Schaufeli W.B. (2001) The Job Demands: Resource Model of Burnout. Journal of Applied Psychology, 86, 499–512. Eisenberger, R., Jones, J.R., Stinglhamber, F., Shanock, L. and Randall, A.T. (2005) Flow Experiences at Work: For High Need Achievers Alone? Journal of Organizational Behavior, 26, 755–75. Florida, R. (2002) The Rise of the Creative Class. And How It Is Transforming Work, Leisure and Everyday Life. Basic Books, New York. Ford, C. and Sullivan, D.M. (2004) A Time for Everything: How the Timing of Novel Contributions Influences Project Team Outcomes. Journal of Organizational Behavior, 25, 279–92. George, J.M. and Brief, A.P. (1992) Feeling Good – Doing Good: A Conceptual Analysis of the Mood at Work – Organizational Spontaneity Relationship. Psychological Bulletin, 112, 301–29. Georgsdottir, A.S. and Getz, I. (2004) How Flexibility Facilitates Innovation and Ways to Manage It in Organizations. Creativity and Innovation Management, 13, 166–75. Gonzáles-Romá, V., Schafelli, W.B., Bakker, A.B. and Lloret, S. (2006) Burnout and Work Engagement: Independent Factors or Opposite Poles? Journal of Vocational Behaviour, 68, 165–74. Groth, J. and Peters, J. (1999) What Blocks Creativity – A Manager Perspective. Creativity and Innovation Management, 8, 179–87. Guest, D. (2002) Human Resource Management, Corporate Performance and Employee Well-
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Being: Building the Worker into HRM. Journal of Industrial Relations, 44, 335–58. Guest, D. and Conway, N. (2004) Employee Wellbeing at Work and the Psychological Contract. Research Report for the CIPD. Charted Institute of Personnel and Development, London. Hakanen, J. (2004) Työuupumuksesta Työni imuun: Työhyvinvointitutkimuksen Ytimessä ja Reunaalueilla. [From Burnout to Work Engagement: Reseraching Occupational Wellbeing]. Työterveyslaitos, Helsinki. Hakanen, J.J, Bakker, A.B. and Schaufeli, W.B. (2006) Burnout and Work Engagement Among Teachers. Journal of School Psychology, 43, 495–513. Jahoda, M. (1959) Current Concepts of Positive Mental Health. Monograph Series 1. Basic Books, New York. Janssen, O. (2003) Innovative Behavior and Job Involvement at the Price of Conflict and Less Satisfactory Relations with Co-Workers. Journal of Occupational and Organizational Psychology, 76, 347–64. Janssen, O. (2004) How Fairness Perceptions Make Innovative Behavior More or Less Stressful. Journal of Organizational Behavior, 25, 201–15. Janssen, O., Van De Vliert, E. and West, M. (2004) The Bright and Dark Side of Individual and Group Innovation: A Special Issue Introduction. Journal of Organizational Behavior, 25, 129–45. Kanter, R. (1988) When a Thousand Flowers Bloom: Structural, Collective, and Social Conditions for Innovation in Organizations. In Staw, B.M. and Cummings, L.L. (eds.), Research in Organizational Behavior. JAI Press, New York, pp. 169–211. Karasek, R. and Theorell, T. (1990) Healthy Work. Basic Books, New York. Kivimäki, M., Vahtera, J. and Elovainio, M. (2005) Työ, stressi ja sydän- ja verisuonitaudit. Duodecim, 121, 473–5. Lee, R.T. and Ashforth, B.E. (1996) A Meta-Analytic Examination of the Correlates of the Three Dimensions of Job Burnout. Journal of Applied Psychology, 81, 123–33. Maslach, C. and Leiter, M.P. (1997) The Truth about Burnout: How Organizations Cause Personal Stress and What to Do about It. Jossey-Bass, San Francisco, CA. Maslach, C., Schaufeli, W.B. and Leiter, M.P. (2001) Job Burnout. Annual Review of Psychology, 52, 397– 422. Miron, E., Erez, M. and Naveh, E. (2004) Do Personal Characteristics and Cultural Values that Promote Innovation, Quality, and Efficiency Compete or Complement Each Other? Journal of Organizational Behavior, 25, 175–99. Organ, D. (1988) Organizational Citizenship Behavior: The Good Soldier Syndrome. Lexington Books, Lexington, MA. Quinn, R.W. (2005) Flow in Knowledge Work: High Performance Experience in the Design of National Security Technology. Administrative Science Quarterly, 50, 610–41. Ramamoorthy, N., Flood, P.C., Slattery, T. and Sardessai, R. (2005) Determinants of Innovative Work
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Behaviour: Development and Test of an Integrated Model. Creativity and Innovation Management, 14, 142–50. Schaufeli, W.R. and Bakker, A.B. (2004) Job Demands and Job Resources and Their Relationship with Burnout and Engagement: A MultipleSample Study. Journal of Organizational Behaviour, 25, 293–315. Scott, S.G. and Bruce, R.A. (1994) Determinants of Innovative Behaviour: A Part Model of Individual Innovation in the Workplace. Academy of Management Journal, 37, 580–607. Seligman, M. and Csikszentmihalyi, M. (2000) Positive Psychology: An Introduction. American Psychologist, 55, 5–14. Shalley, C.E. and Gilson, L.L. (2004) What Leaders Need to Know: A Review of Social and Contextual Factors That Can Foster or Hinder Creativity. Leadership Quarterly, 15, 33–53. Taggar, S. (2002) Individual Creativity and Group Ability to Utilize Individual Creative Resources: A Multilevel Model. Academy of Management Journal, 45, 315–31. Thamhain, H.J. (2003) Managing Innovative R&D Teams. R&D Management. 33, 297–311. Tomkovick, C. and Miller, C. (2000) Perspective – Riding the Wind: Managing New Product Development in an Age of Change. Journal of Product Innovation Management, 17, 413–22. Van Der Panne, G., Van Der Beers, C. and Kleinknecht, A. (2003) Success and Failure of Innovation: A Literature Review. International Journal of Innovation Management, 7, 309–39. West, M.A. and Andersen, N.R. (1996) Innovation in Top Management Teams. Journal of Applied Psychology, 81, 680–93. Wolfe, R.A. (1994) Organizational Innovation: Review, Critique and Suggested Future Research Directions. Journal of Management Studies, 31, 405– 31.
Dr Hannele Huhtala is an Academy of Finland post-doctoral fellow and a specialized researcher at the Finnish Institute of Occupational Health. Her research interests include crisis management, innovation management and management history. She has published books and articles in international and Finnish journals in her fields of specialty. Dr Marjo-Riitta Parzefall (parzefall@ hanken.fi) is a lecturer and researcher at the Swedish School of Economics and Political Science. Her current research interests include social exchange theory based concepts to study the employee–employer relationship, leadership, ethics and innovation. She has published articles on psychological contracts and innovation in Finnish and international journals.
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Assessing Job Candidates’ Creativity: Propositions and Future Research Directions Anna Malakate, Constantine Andriopoulos and Manto Gotsi Identifying and selecting creative employees is of key importance in today’s high-pace business environment. Yet, little is known about how assessors in organizational settings evaluate the creative potential of job candidates. In this paper we review the extant literature on individual and team creativity in order to identify criteria (cues) against which job candidates’ creativity could be assessed. We argue that the creative potential of job candidates could be evaluated against four key dimensions (the creative individual, the creative product, the creative process and the creative environment) and call for empirical research to further explore and test our propositions in practice.
Introduction
A
t the dawn of the 21st century organizations are more eager than ever before to sustain high levels of creative ability. Rapid technological advancements, shorter product life-cycles and intense competition in the business environment have propelled the importance of creativity to unprecedented heights (Amabile et al., 1996). Novel and useful ideas are, therefore, increasingly becoming a precious commodity and employees who generate them are sought-after resources (Andriopoulos, 2003). In an attempt to identify creative individuals, early studies have focused to a large extent on personal dispositions and other individual characteristics that may predict creative achievement (MacKinnon, 1960, 1962; McDermid, 1965; Keller & Holland, 1978). Studies have attempted to list personality correlates of creative productivity as well as to collect biographical information that might predict later creative behaviour. Research subsequently moved away from studying creativity solely from the individual perspective and shifted to a greater recognition of contextual-situational factors that may enhance or prohibit individual and/or team creativity. For instance, contemporary researchers from different dis-
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ciplines identify relationships between creativity and innovation in organizational settings and corporate strategy (Dougherty & Hardy, 1996), leadership (Redmond, Mumford & Teach, 1993; Amabile et al., 1996), structure (Burns & Stalker, 1994), climate (Amabile & Gryskiewicz, 1989), culture (Tushman & O’Reilly, 2002; Flynn & Chatman, 2004), feedback (Farris, 1972) and resources (Nohari & Gulati, 1996). Creativity is, therefore, increasingly viewed as a social phenomenon, often necessitating teamwork in organizational settings (e.g., Gilson & Shalley, 2004). In this respect, team knowledge, skills and abilities (KSAs) appear as key ingredients of creative achievement. Stevens and Campion (1999), for instance, argue that interpersonal and self-management KSAs are critical correlates of creative performance. On the one hand, conflict resolution, collaborative problem solving and communication are important interpersonal factors which distinguish a good teamworker from a bad one. On the other hand, goal setting and performance management together with planning and task coordination knowledge, skills and abilities make up the necessary selfmanagement characteristics that creative employees should possess. Additionally, previous experience in teams (Athanasaw, 2003;
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Hartenian, 2003), the frequency in which individuals have participated in teams (Athanasaw, 2003) and collective orientation and cooperation (Hartenian, 2003) have also been proposed as important factors when assessing candidates’ team KSAs. Interestingly, although recent studies highlight creativity assessment as a key antecedent to creative achievement (Bennis & Biederman, 1997; Hargadon & Sutton, 1997; Robertson, Scarbrough & Swan, 2003), the need to assess the creative potential of job candidates is the finding rather than the focus of most extant studies. Elsbach and Kramer’s (2003) seminal paper in assessing the creative potential of screenwriters in Hollywood pitch meetings has set the scene in this interesting field, yet writings in the area remain scarce. The purpose of this paper is, therefore, to review the extant literature on individual and team creativity with the aim of identifying criteria (cues) against which job candidates’ creative potential could be assessed. Based on our literature review, we define creativity assessment and then discuss key dimensions and related elements for assessing job candidates’ creativity. We develop relevant propositions and then discuss future research directions.
nizational factors (e.g., organizational culture, resources, reward systems) on individuals’ creative output in previous posts (e.g., Quinn, 1989; Amabile, 1998), assessing job candidates’ knowledge, skills and abilities at the team level is critical (Gilson & Shalley, 2004). Drawing from this framework, the following literature review of extant work on individual and team creativity highlights that individuals’ creative achievement has been linked to: the creative person and the attributes he/she possesses, his/her creative outcome and the characteristics which contribute in making a product creative, the process he/she follows in generating, evaluating and implementing novel and useful ideas, and his/her knowledge of and influence on the wider creative environment. We therefore define creativity assessment as processes through which assessors evaluate the creative potential of job candidates based on cues related to individuals’ personal dispositions, their creative output, the process(es) followed to reveal their creativity, and their understanding of and influence on the creative environment. Figure 1 depicts the proposed conceptual model summarizing elements relevant to these four dimensions that can be used in assessing job candidates’ creative potential. The following sections discuss each of these elements in detail.
Creativity Assessment Based on the definition derived from Webster’s dictionary, to assess is ‘to estimate or determine the significance, importance, or value of something’ (Guralnik, 1970). Several researchers have identified the difficulty in recognizing a creative person or product as the ‘criterion problem’ (Taylor & Holland, 1964; Shapiro, 1972). Over the years, researchers have taken a bifurcated approach in tackling this problem: some focus on the creative ability of individuals based on their reputation, others on the amount of times their work has been cited in journals or books, generally on the amount of work produced, or even on the worldwide belief that the person (Stein, 1974) or the product (Brodgen & Sprecher, 1964) studied is creative. Personality traits have long been identified as correlates of creative achievement (MacKinnon, 1960, 1962), yet, within organizational settings, the interactionist view (e.g., Woodman, Sawyer & Griffin, 1993) highlights complex person–context interactions at the team (e.g., Oldham & Cummings, 1996; Gilson & Shalley, 2004) and organizational (e.g., Shalley, 1991, 1995) levels as important elements that may support or hinder individuals’ creative output at work. Although assessors of job candidates may not be able or willing to assess the effects of orga-
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The Creative Individual The creative individual has been defined as someone who ‘must dare to differ, make changes, stand out, challenge traditions, make waves, bend rules – and make mistakes and fail’ (Davis & Rimm, 1998, p. 36). Studies on individual creativity have focused mainly on the specific characteristics, which distinguish creative from non-creative people (Oldham & Cummings, 1996; Simonton, 2000). These involve specific skills and attributes as well as personality traits assigned to creative individuals. Most of the earlier studies emphasized the importance of personality factors as predictors of creative achievement (MacKinnon, 1960, 1962; Torrance, 1962; Hall & MacKinnon, 1969). Taken as a whole, the main personality traits that have been linked to creative achievement include: risk-taking – the creative individual’s willingness to take a stand and challenge the status quo (Michael, 1979; Glassman, 1986; Sternberg, O’Hara & Lubart, 1997; Davis & Rimm, 1998); self-confidence – the tendency to have a high regard of her/himself (MacKinnon, 1960; Buel, 1965); tolerance of ambiguity – the ability to acknowledge complexity and even disorder without becoming overly anxious (MacKinnon, 1960); need for © 2007 The Authors Journal compilation © 2007 Blackwell Publishing
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Figure 1. Criteria for Assessing Job Candidates’ Creativity
achievement – creative people are generally ambitious individuals with an inner need to accomplish a combination of personal and economic goals (MacKinnon, 1962; Buel, 1965) and, lastly, autonomy and non-conformity – the desire towards autonomy in their work and social environment and a lack of concern for social norms (Buel, 1965; McDermid, 1965; Keller & Holland, 1978). Another stream of research has focused on specific cognitive processes assigned to creative individuals. Writings in this field comment on several features of cognitive style, which appear to be relevant to creativity. The main cognitive abilities correlated with creative achievement include: mental flexibility – a creative individual’s ability to break from routine constraints if s/he is to stay open and unblocked (Majaro, 1992) in order to create some space for new problem-solving strategies (Taggar, 2002); remote associations – referring to the ability to recognize similarities and make associations among elements or ideas in new ways (Mednick, 1963; Koestler, 1964; Hargadon & Sutton, 1997, 2000); and, lastly, suspension of judgement – creative individuals’ need to tolerate uncertainty and hold back from accepting the first possible solution that comes to mind so that they give their ideas time to flow (Majaro, 1992). A handful of studies exhibit a clear relationship between individuals’ cognitive processes and creative performance. More specifically, it was found that individuals high on such cognitive processes often tend to achieve better results on measures of the knowledge, skills and techniques required for a job (Ree & Earles, 1996), and are better at processing information (Schmidt, Hunter & Pearlman, 1981). © 2007 The Authors Journal compilation © 2007 Blackwell Publishing
Furthermore, motivation has been highlighted as a distinguishing factor between what a creative individual can do and what they actually do (Amabile, 1990). Personality traits, cognitive factors and knowledge directly affect what one can do, but it is one’s motivation that determines the extent to which one fully applies one’s skills in the creative output (Amabile, 1997). Several contemporary authors in this area have shown the significance of intrinsic motivation to creative achievement and have identified extrinsic team and organizational constraints that may undermine intrinsic motivation and creativity, such as: evaluation, surveillance, contracted-for reward, task constraint and competition (Collins & Amabile, 1999, p. 306). Studies have highlighted that creative potential is maximized when individuals are allowed to do something that they really love (Runco & Chand, 1995; Amabile, 1997) and thus become immersed enough to be able to change it (Csikszentmihalyi, 1999). Finally, recent writings have also identified that highly creative employees exhibit a helping behaviour that mobilizes the generation of new ideas and assists in problem solving (Hargadon & Sutton, 2000; Robertson et al., 2003). Organizations, nowadays, are faced with complex problems, which require the collaboration of individuals with a diverse range of technical knowledge and skills. However, in creative settings, simply possessing the required individual skills and knowledge to do the job at hand is not enough. Rather, creative employees are required to exhibit a helping behaviour, such as assisting colleagues with heavy workloads or providing constructive suggestions when needed.
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To sum up, studies have highlighted that creative individuals are characterized by a set of personality traits and cognitive abilities, as well as by the urge to fulfil intrinsic needs and help others in team-based contexts. We argue that these are key determinants in assessing job candidates’ creativity and offer the following propositions: Proposition 1a: The more a prospective candidate is perceived to exhibit high levels of risktaking, self-confidence, tolerance of ambiguity, need for achievement and autonomy, the more s/he will be regarded as creative by the assessor. Proposition 1b: The more a candidate is perceived to exhibit high levels of mental flexibility, remote associations, suspension of judgement, and originality of ideas, the more s/he will be regarded as creative by the assessor. Proposition 1c: The more a candidate is perceived to find their reward in the activity at hand and less on external rewards and/or recognition, the more s/he will be regarded as creative by the assessor. Proposition 1d: The more a candidate is perceived as one who will show a helping behaviour (voluntarily helping others or making constructive suggestions), the more s/he will be regarded as creative by the assessor.
The Creative Product When one assesses the creative potential of a job candidate, it is also imperative to evaluate her/his creative output. Gollan (1963) stresses the significance of studying creativity in terms of the product, an assessment method that is widely utilized in technological and industrial settings. Creative products can range from new theories, hypotheses, formulas and techniques, to machines, designs and materials (Taylor, 1959). Creative products show novelty (Brodgen & Sprecher, 1964; Runco, 1993; Amabile, 1995; Eysenck, 1997), are ‘adaptive to reality’ (Barron, 1955, pp. 478–9) and fulfil preexisting needs (Jackson & Messick, 1973). Locke and Kirkpatrick (1995) also stress the importance of domain-relevant knowledge to creative output, arguing that creative discoveries do not emerge full-blown, divorced from any prior knowledge, through mystical insights or causeless intuitions. Based on these studies, we therefore, propose: Proposition 2: The more a candidate’s output is perceived to exhibit high levels of perceived novelty, some form of utility and domainrelevant knowledge and skills, the more s/he will be regarded as creative by the assessor.
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The Creative Process Rogers (1959, p. 71) defines the creative process as ‘the emergence in action of a novel relational product, growing out of the uniqueness of the individual on the one hand, and the materials, events, people, or circumstances, of his life on the other’. The majority of extant studies have focused on the processes people follow in generating creative products (Drazin, Glynn & Kazanjian, 1999). Specifically, two main processes appear to dominate creative work: creative processes focusing on the generation of novel ideas (Osborn, 1963; Sutton & Hargadon, 1996) and processes focusing on the evaluation (Runco & Chand, 1994) and implementation of those generated ideas (Vincent, Decker & Mumford, 2002). The first set of activities, generally speaking, focuses on defining the problem (Okuda, Runco & Berger, 1991), followed by a collection of information in order to deepen one’s understanding of the problem at hand (Davidson & Sternberg, 1984). This, in turn, gives people the opportunity to connect disparate sources of information based on which new ideas are then developed (Rothenberg, 1996; Hargadon & Sutton, 1997, 2000). Creative achievement therefore necessitates individuals to follow a process whereby they generate new ideas, evaluate these ideas against the parameters initially set by the problem, and lastly implement activities that allow them to translate these ideas into tangible products. We therefore propose: Proposition 3: The more a candidate is perceived to demonstrate occasions when initial divergent thoughts were evaluated and modified to produce a better, more useable outcome, the more s/he will be regarded as creative by the assessor.
The Creative Environment Creative individuals work within a community and therefore have to be in touch with developments and beliefs of others in their field (Gruber & Wallace, 1999). Not surprisingly, general and domain-specific knowledge are therefore elements commonly assessed when selecting among job candidates (Ulrich et al., 1995; Adobor, 2004; Palmer, Ziegenfuss & Pinsker, 2004). Knowledge of the cultural, economic, political and technological contexts of any given period plays a bifurcated role in creative achievement: it firstly sparks ideas and therefore directly affects creative thinking, but it also transmits the cues that experts (gate© 2007 The Authors Journal compilation © 2007 Blackwell Publishing
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keepers) use to judge products as novel and useful (Sternberg & Lubart, 1991; Amabile, 1995). Furthermore, the environment in which creative employees operate not only comprises people that create ideas, but also people who act as judges of creative output (Kasof, 1995; Csikszentmihalyi, 1996, 1999). Creative work thus not only requires individuals to solve illdefined or novel problems but also to communicate the merits of their ideas to the expert decision makers. In this respect, Dudeck and Hall’s (1991) study with architects found that persuasive skills played a significant role in their career progression as they were pressured to be involved in business development and to persuade clients about the merits of their proposals. We therefore argue that exhibiting knowledge of the wider domain of knowledge, but also demonstrating an ability to persuade others about the merits of creative outcomes are also indicators of job candidates’ creativity. Proposition 4a: The more a candidate is perceived to be in touch with developments and beliefs of others in their domain of knowledge as the basis of proposing novel ideas that might not be readily accepted, the more s/he will be regarded as creative by the assessor. Proposition 4b: The more a candidate is perceived to demonstrate persuasive skills regarding their creative output in their domain of knowledge, the more s/he will be regarded as creative by the assessor. Table 1 summarizes all aforementioned propositions, against the four key dimensions (creative individual, creative product, creative process, creative environment) highlighted by the literature as correlates of creative achievement.
Concluding Remarks and Future Research Directions Drawing on extant literature, this paper has offered eight propositions in relation to four key dimensions that seem important when assessing job candidates’ creativity. These include criteria related to the creative individual, his/her creative product, the creative process that he/she follows, and his/her knowledge of and influence on the wider creative environment. The practical implications of our propositions for the selection of creative employees should be highlighted. First, firms should identify creative talent by assessing potential © 2007 The Authors Journal compilation © 2007 Blackwell Publishing
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candidates’ profile in the areas identified. Assessors have to focus on screening potential candidates based on their dispositional factors, cognitive skills, intrinsic motivation, task expertise, divergent thinking and their ability to stay in touch with and influence developments in their respective fields. Second, we can provide some guidelines on how assessors can actually go about selecting suitable creative talent, although the multiplicity of measures available highlights the difficulty in screening job candidates’ creativity in practice. Job candidates’ dispositional factors could be identified through the use of psychological tests, such as the Adjective Check List (Gough & Heilbrun, 1965) and the Sixteen Personality Factor Questionnaire (Cattell & Butcher, 1968). Similarly, cognitive abilities and job candidates’ intrinsic motivation levels may be measured against the Plot Titles Test (Berger & Guilford, 1969) and Amabile’s (1985) instrument, respectively. Moreover, candidates’ attitude toward team activities may be measured through Hage and Aiken’s (1969) Participating in Decision Making instrument and Jehn’s (1995) Shared Goals three-item scale. In terms of assessing candidates’ creative product, assessors may use instruments such as the Creative Product Semantic Scale (White, Shen & Smith, 2002). Additionally, in terms of the creative process, assessors may evaluate candidates using the ‘critical incident technique’ (Flanagan, 1949). Through interviews, assessors may identify candidates’ creative problem solving approach against incidents that have taken place in their previous posts. Divergent thinking may be also measured in more detail through specific instruments. For example, ‘The Alternate Uses Tests’ (Christensen et al., 1960) can be used to test candidates’ ability to present as many solutions to a problem as possible. Finally, Spreitzer et al.’s (1997) instrument can be used to identify candidates’ industry knowledge. There is substantial support in the literature for the notion that the acquisition and use of external information is critical in creative endeavours (Ancona & Caldwell, 1992; Dougherty & Hardy, 1996). Similarly, authors place importance on candidates’ ability to influence the creative developments in their own respective fields not only within their group, but also towards expert decision makers external to the group. These skills may be assessed through interviewing. For instance, candidates’ involvement in professional meetings and industry conferences and their contribution to industry or academic press may indicate candidates with persuasion skills. The future of research in assessing job candidates’ creative potential holds many exciting
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Table 1. Assessing Job Candidates’ Creativity: Research Propositions Propositions 1a. The more a prospective candidate is perceived to exhibit high levels of risk-taking, self-confidence, tolerance of ambiguity, need for achievement and autonomy, the more s/he will be regarded as creative by the assessor 1b. The more a candidate is perceived to exhibit high levels of mental flexibility, remote associations, suspension of judgement, and originality of ideas, the more s/he will be regarded as creative by the assessor 1c. The more a candidate is perceived to find their reward in the activity at hand and less on external rewards and/or recognition, the more s/he will be regarded as creative by the assessor 1d. The more a candidate is perceived as one who will show a helping behaviour (voluntarily helping others or making constructive suggestions), the more s/he will be regarded as creative by the assessor 2. The more a candidate’s output is perceived to exhibit high levels of perceived novelty, some form of utility and domain-relevant knowledge and skills, the more s/he will be regarded as creative by the assessor 3. The more a candidate is perceived to demonstrate occasions when initial divergent thoughts were evaluated and modified to produce a better, more useable outcome, the more s/he will be regarded as creative by the assessor 4a. The more a candidate is perceived to be in touch with developments and beliefs of others in their domain of knowledge as the basis of proposing novel ideas that might not be readily accepted, the more s/he will be regarded as creative by the assessor 4b. The more a candidate is perceived to demonstrate persuasive skills regarding their creative output in their domain of knowledge, the more s/he will be regarded as creative by the assessor
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Dimensions
Criteria
Creative individual
Creative individual
• • • • • •
Risk-taking Self-confidence Tolerance of ambiguity Need for achievement Autonomy Mental flexibility
• Remote associations • Suspension of judgement • Originality of ideas Creative individual
• Intrinsic motivation
Creative individual
• Collective orientation and problem-solving
Creative product
• Novelty • Domain-relevant knowledge
Creative process
• Divergent, innovative thinking
Creative environment
• General knowledge
Creative environment
• Persuasive skills
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new questions. First, although creativity theorists have generated hundreds of creativity tests,1 to date limited empirical research has been conducted within organizational settings apart from some rare exceptions (see, e.g., Elsbach & Kramer, 2003). The first task in testing this article’s propositions is, therefore, to develop a reliable and valid measure for assessing candidates’ creativity as, at this point, no widely recognized measure exists. Developing a reliable measure presents a particular challenge given the nature of the construct under consideration. The main limitation of the extant literature is that the majority of empirical studies in this realm (see, e.g., Sternberg, 1985) have looked at creativity assessment in controlled environments, such as laboratories and classrooms (and therefore have used students as either participants or judges), rather than real-life situations. These studies might therefore not offer reliable data which can be widely applied in organizations (Elsbach & Kramer, 2003). A second direction for future research on creativity assessment in organizational settings may focus on identifying and documenting the specific activities that organizations use for selecting the most creative job candidates. Although a number of different viable strategies have been identified for assessing a person’s creative ability and fit in the organization, including panel interviews (Robertson et al., 2003), giving relevant presentations to existing staff (Bennis & Biederman, 1997) or pitching ideas before expert decision makers (Elsbach & Kramer, 2003), we argue that in-depth studies of such activities may deepen our understanding in the area. Yet, future research needs to take into consideration the often complicated relationship between the assessor and the job candidate. In practice, assessors often report that one can only assess what they can observe (e.g., work experience, credentials, etc.) rather than the ‘whole person’ (including elements such as selfreliance, interpersonal sensitivity, etc.) (Brown & Hesketh, 2004). Moreover, issues of likeability may affect the assessment process. Assessors, for instance, may prefer to hire employees who share similarities with them (for instance, graduates of the same university, or common interests) (Schmitt, 1976; Howard & Ferris, 1996). Such a practice contradicts the view that creative organizations should strive
1
A full review of creativity tests and their validity is beyond the scope of this paper. We refer interested readers to Kaltsounis & Honeywell (1980), Torrance & Goff (1989) and Cropley (2000), as useful starting points.
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to ensure diversity in the workplace (Sutton, 2002). Future studies may, therefore, also focus on extending extant findings (see, e.g., Elsbach & Kramer, 2003) on the specific judgemental processes that decision makers use when assessing job candidates’ creative potential. There are also several important methodological issues that need to be taken into account in future research. For instance, a longitudinal study within various organizational settings may show the relationship of different selection strategies to creativity and innovation levels. Furthermore, different research designs may enable triangulation. For instance, action research or ethnographic approaches could enable researchers to observe the dynamic context in which creativity assessment occurs in practice. Likewise, survey studies may allow generalization and offer researchers greater control of confounding variables (e.g., creativity assessment criteria and selection methods). We choose to end on an optimistic note. In our opinion, this an exciting time for researchers in this area. Although research on the topic of creativity assessment has increased dramatically over the past decade, it still fails to consider the dynamic interaction between the job candidate and the expert decision maker. The difficulty in assessing job candidates’ creativity may focus organizational attention on the different criteria against which job candidates should be assessed and the viable methods for selecting the most creative job candidates in work settings.
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Redmond, M.R., Mumford, M.D. and Teach, R.J. (1993) Putting Creativity to Work: Leader Influences on Subordinate Creativity. Organizational Behavior and Human Decision Processes, 55, 120– 51. Ree, M.J. and Earles, J.A. (1996) Predicting Occupational Criteria: Not Much More than g. In Dennis, I. and Tapsfield, P. (eds.), Human Abilities: Their Nature and Measurement. Erlbaum, New Jersey: NJ. Robertson, M., Scarbrough, H. and Swan, J. (2003) Knowledge Creation in Professional Service Firms: Institutional Effects. Organization Studies, 24, 831–57. Rogers, C.R. (1959) Toward a Theory of Creativity. In Anderson, H. (ed.), Creativity and its cultivation. Harper, New York. Rothenberg, A. (1996) The Janusian Process in Scientific Discovery. Creativity Research Journal, 9, 207–32. Runco, M.A. (1993) Operant Theories of Insight, Originality and Creativity. American Behavioural Scientist, 37, 54–67. Runco, M.A. and Chand, I. (1994) Problem Finding, Evaluative Thinking, and Creativity, In Runco, M.A. (ed.), Problem Finding, Problem Solving, and Creativity. Ablex, Norwood, NJ, pp. 40–76. Runco, M.A. and Chand, I. (1995) Cognition and Creativity. Educational Psychology Review, 7, 243– 67. Schmidt, F.L., Hunter, J.E. and Pearlman, K. (1981) Task Differences as Moderators of Aptitude Test Validity in Selection: A Red Herring. Journal of Applied Psychology, 66, 166–85. Schmitt, N.W. (1976) Social and Situational Determinants of Interview Decisions: Implications for the Employment Interview. Personnel Psychology, 29, 79–101. Shalley, C.E. (1991) Effects of Productivity Goals, Creativity Goals, and Personal Discretion on Individual Creativity. Journal of Applied Psychology, 76, 179–85. Shalley, C.E. (1995) Effects of Coaction, Expected Evaluation, and Goal Setting on Creativity and Productivity. Academy of Management Journal, 38, 483–503. Shapiro, R.J. (1972) The Criterion Problem. In Vernon, P.E. (ed.), Creativity: Selected Readings. Penguin Books Ltd, UK. Simonton, D.K. (2000) Creativity: Cognitive, Personal, Developmental and Social Aspects. American Psychologist, 55, 151–8. Spreitzer, G.M., McCall, M.W. and Mahoney, J.D. (1997) Early Identification of International Executive Potential. Journal of Applied Psychology, 82, 6–29. Stein, M.I. (1974) Stimulating Creativity: Individual Procedures. Academic Press, New York. Sternberg, R.J. (1985) Implicit Theories of Intelligence, Creativity, and Wisdom. Journal of Personality and Social Psychology, 49, 607–727. Sternberg, R.J. and Lubart, T.I. (1991) An Investment Theory of Creativity and its Development. Human Development, 34, 1–31. Sternberg, R.J., O’Hara, L.A. and Lubart, T.I. (1997) Creativity as Investment. California Management Review, 40, 8–21.
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Stevens, M.J. and Campion, M.A. (1999) Staffing Work Teams: Development and Validation of a Selection Test for Teamwork Settings. Journal of Management, 25, 207–28. Sutton, R.I. (2002) Weird Ideas that Work: 111/2 Practices for Promoting, Managing and Sustaining Innovation. Free Press, New York. Sutton, R.I. and Hargadon, A. (1996) Brainstorming Groups in Context: Effectiveness in a Product Design Firm. Administrative Science Quarterly, 41, 685–718. Taggar, S. (2002) Individual Creativity and Group Ability to Utilize Individual Creative Resources: A Multilevel Model. Academy of Management Journal, 45, 315–31. Taylor, C.W. (1959) The Third (1959) University of Utah Research Conference on the Identification of Creative Talent. University of Utah Press, Salt Lake City, Utah. Taylor, C.W. and Holland, J. (1964) Predictors of Creative Performance. In Vernon, P.E. (ed.), Creativity: Selected Readings. Penguin Books Ltd, UK. Torrance, E.P. (1962) Guiding Creative Talent. Prentice Hall, Inc., Englewood Cliffs, NJ. Torrance, E.P. and Goff, K. (1989) A Quiet Revolution. Journal of Creative Behavior, 23, 136–45. Tushman, M.L. and O’Reilly, C. (2002) Winning through Innovation: A Practical Guide to Leading Organizational Change and Renewal. Harvard Business School Press, Cambridge, MA. Ulrich, D., Brockbank, W., Yeung, A.K. and Lake, D.G. (1995) Human Resource Competencies: An Empirical Assessment. Human Resource Management, 34, 473–95. Vincent, A.H., Decker, B.D. and Mumford, M.D. (2002) Divergent Thinking, Intelligence, and Expertise: A Test of Alternative Models. Creativity Research Journal, 14, 163–78.
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White, A., Shen, F. and Smith, B.L. (2002) Judging Advertising Creativity using the Creative Product Semantic Scale. Journal of Creative Behavior, 36, 241–53. Woodman, R.W., Sawyer, J.E. and Griffin, R.W. (1993) Toward a Theory of Organizational Creativity. Academy of Management Review, 18, 293– 321.
Anna Malakate is a doctoral candidate at the University of Aberdeen Business School. Her research focuses on assessing the creative potential of job candidates. Constantine Andriopoulos (Costas.
[email protected]) is a Lecturer at Brunel Business School, Brunel University, London. He received his PhD from the Marketing Department of the University of Strathclyde in Glasgow, Scotland. His research interests include ambidexterity in organizations and managing paradoxes evident in the creative process. Manto Gotsi is a Lecturer at Brunel Business School, Brunel University, London. Her PhD (Department of Marketing, University of Strathclyde) explored the role of service employees in corporate brand management. Her research interests focus on organizational identity and identification, corporate rebranding and change management.
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What Makes Executives Trust Each Other? The Determinants of the Willingness to Rely on Trust in Business Partnerships Francis Bidault, José de La Torre, Casimir de Rham and Michelle Sisto This paper is concerned with understanding and identifying factors that affect the willingness of business executives to rely on trust as a governance mechanism in the context of partnerships. An instrument was designed (a short business case study followed by a questionnaire) to collect data on how different executives react to the objective conditions of a business deal. Through the questionnaire, individual willingness to rely on trust, individual reaction to traditional types of trust, and sensitivity to other situations that evolve during the deal were measured. It is shown that willingness to rely on trust varies amongst executives and is not fully determined by the conditions of a deal. Furthermore, consistent with a psychosociological approach to trust, it is also shown that demographic factors are related to propensity to rely on trust, and that across nationalities, the sensitivity to factors affecting trust such as partner interaction and external information differ.
Introduction
T
rust is widely acknowledged, by academics and practitioners alike, as a critical ingredient for businesses to operate effectively and efficiently (see, for instance, Noteboom, 2000). When trust exists between actors involved in a common project, it allows them to save extensively on control mechanisms that would otherwise be needed to ensure that both parties deliver what is expected. While trust is undoubtedly also beneficial in transactions within organizations (see Rickards, 2000), this paper focuses specifically on the inter-organizational aspect of trust. It is concerned with the propensity of individuals to extend trust to a business partner (a client) with whom they would be involved in a risky project. This situation is typical of an increasing number of international partnerships and alliances: cross-border outsourcing, manufacturing joint ventures, distribution agreements, joint development of a technology, etc. While none of these types of arrangements can rea© 2007 The Authors Journal compilation © 2007 Blackwell Publishing
sonably be considered without some form of contract, it is also clear that trust between partners is required as well. However, while contract design is a well-established legal discipline, we understand a lot less about the process of trust formation and its determinants. Faced with the same business proposition, can we assume that executives will tend to have the same propensity to trust? Or will some insist on extensive contractual protections, whilst others will be agreeable to a large amount of informality? In other words, are executives willing to rely on trust to the same extent? If they differ, what are some of the factors affecting their propensity to trust? These questions are central to the multidisciplinary debate about the nature of trust and its drivers. Economists, by and large, view trust as a ‘calculation’ of the risk faced by partners to a transaction (Williamson, 1993). Trust is extended when the economic agent considers that there are limited risks that the partner will behave opportunistically, given the potential penalties that he/she would incur if
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discovered. To this extent, trusting is a rational decision. Sociologists, on the other hand, insist on the personal and social dimensions of trust, its so-called ‘embeddedness’ (Granovetter, 1985). They consider that trust is affected by a large variety of factors, such as personal profile, the institutional environment, past experience (Zucker, 1986) so that individuals, faced with the same transaction, with defined economic conditions, are thus expected to differ widely in their propensity to trust. Trust is not the result of a calculation, but the expression of a perception grounded in the psychological profile, the personal background, the cultural and institutional environment of the individual in which the transaction is ‘embedded’. This debate has generated a substantial amount of empirical research, as will be explained below, but most research has typically been based on the analysis of samples of transactions or partnerships (e.g., buyer– supplier relationships). The variety of transactions studied made it difficult to sort out the influence of the transaction conditions versus the respondents’ propensities, thereby clouding somewhat the discussion about the two main logics of trust: calculation versus ‘embeddedness’. We thought that confronting decision makers with the same transaction would allow us to contribute to the debate. Partnerships involving technology are particularly risky in nature and seem to require more trust than contracting (Poppo & Zenger, 2002). Furthermore, Rickards (2000) explained that trust is a necessary ingredient for creativity. For this reason, we drew up a business case describing a situation in which two companies were to partner for the development of a new product and we submitted it to a large sample of executives. We did so by collecting data through a questionnaire aiming to assess the respondents’ propensity to trust the hypothetical partner described in the business case. We also collected a set of demographic data that we thought might influence this propensity. Hence, this research purports to examine how executives set their willingness to rely on trust and then explores some of the factors affecting it. We are thus dealing primarily with the drivers of the reliance on trust, and not with the dynamic process of trust formation. In the first section we will present the theoretical context of our research project, grounded in the abundant theoretical literature devoted to the concept of trust. We will then introduce our research design, instrument and methodology. Lastly, we present and discuss our findings.
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The Theoretical Context: The Many Roots of Trust From Trust to the Willingness to Rely on Trust We used a definition of trust that has become quite commonly accepted in the management literature. Trust is ‘a psychological state comprising the intention to accept vulnerability based upon positive expectations of the intentions of behavior of another’ (Rousseau et al., 1998). One of the first difficulties with the concept of trust is that it refers both to inter-individual as well to inter-organizational relationships, i.e., between individuals and between ‘organizations’ (see Perrone, Zaheer & McEvily, 1998). Our research focuses on how individual executives place trust in another organization’s partnership proposal. In this context, managers will generally not act as if they were making a deal simply at a personal level. They realize that the agreement involves their organization’s responsibilities, not just their own. Accordingly, managers typically base the transaction on some kind of contract outlining the mutual commitment, rights and duties of the partners. Therefore, the contract may include different levels of safeguards to protect the partners’ interests. As noted by Das and Teng (1998), both trust and control (that comes, for instance, in the form of a contract) are necessary for partners to have confidence in the other party’s future actions. However, if a minimum of control does not hamper trust, and even enhances it (Das & Teng, 1998), demands for a high level of control would denote a reluctance to rely on trust. The number and nature of safeguards requested by partners can therefore be considered as their ‘willingness to rely on trust’ as defined by Ariño, De La Torre and Ring (2001). The greater their willingness to rely on trust, the fewer safeguards they will demand. In such a context, the core issue is not whether individuals are more or less predisposed to trust other people, a question best left to the psychologists, but to what extent do institutions and their managers tend to rely on trust in their business transactions (Ring & Van de Ven, 1992). Indeed, trusting a business partner implies accepting the risks associated with that business relationship and deriving from the actions of that partner. The amount of safeguarding will depend on a large number of factors. Obviously some have to do with the nature of the partnership (the business context and the objectives of the partners). However, because the interorganizational relationship is designed by © 2007 The Authors Journal compilation © 2007 Blackwell Publishing
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individuals, the perception of the key individuals involved in the negotiation is likely to have a great impact (Zucker, 1986). They may require more or fewer safeguards, depending on their assessment of the initial quality of the relationship (relational quality), on their experience in the negotiation process, on their past experience with this particular partner, on their reading of external events affecting the reputation of the partner (Ariño, De La Torre & Ring, 2001). A large number of protections denote a limited willingness to rely on trust on the part of at least one partner. We thus assume that the amount of safeguards expected in a specific business partnership is a measure of an individual’s willingness to rely on trust. Hypothesis 1: Executives, faced with a specific business proposition, will differ in their willingness to rely on trust.
The Three Meanings of Trust What makes someone trustworthy? This discussion of the meaning of trust leads to a review of the different dimensions of trust that have been introduced in the literature. A first meaning of trust is the presumption that the other party is not being dishonest. In other words, having trust basically means presuming that the other party will behave honestly during a transaction. This definition is widely accepted by economists and sociologists alike. It is found, for example, in Arrow (1974), Williamson (1985), Bradach and Eccles (1989) and also in Ring and Van de Ven (1992), who, by underlining fairness as the foundation of trust, clearly give the term an ethical dimension. This value is of undeniable necessity for harmonious relations between agents involved in economic transactions, and we shall refer to it as ethical trust or integrity. However, dishonesty is only one of the kinds of ‘bad’ behaviour that could affect a partner’s interests. For example, having trust in a surgeon goes beyond assuming that he is honest. It means, above all, expecting that he/she will do his/her job well (i.e., according to a certain level of expertise). Here, the other party is expected to have the necessary skills to carry out the tasks specific to the operation agreed on (Bidault & Jarillo, 1997). We shall refer to this second dimension of trust as technical trust or reliability (or ‘competence trust’ as defined by Sako, 1992). Finally, trust also refers to the other party’s behaviour and attitude. Getting back to our analogy, having trust in a surgeon’s competence is generally not enough for most patients; they would also expect him/her to © 2007 The Authors Journal compilation © 2007 Blackwell Publishing
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have good bedside manners in terms of handling their anxiety. Rather, in many transactions, it includes the ability to interact with the other actors (Bidault & Jarillo, 1997). The other party’s behaviour, be it rigid or flexible, does play a strong role in the effectiveness of the relation. We shall refer to this third dimension as behavioural trust or caring. This last dimension of trust corresponds to Sako’s ‘goodwill trust’ (Sako, 1992). It also matches the concept of ‘Join Up’ and ‘Follow Up’ discussed by Rickards (2000) in his discussion of the parallel between creative leadership and innovative horsemanship. Note that these three dimensions of trust are complementary, and they are not mutually exclusive as explained by Robert Bruce Shaw in his book Trust in the Balance (1997). For obvious reasons, a very competent but dishonest person cannot be trusted. The same applies for an honest person who is incompetent. The other implication is that, presumably, individuals will not all share the same ‘meaning’ (the three dimensions) of trust. Clearly, these dimensions cannot be dealt with equally well by contractual safeguards. It is quite straightforward to define the competence required in a transaction, but it is next to impossible to define a ‘caring behaviour’ in a contract. Consequently, the concept of trust that an individual carries is expected to influence the amount of safeguards that he/she will look for in a partnership. Hypothesis 2: The type of concerns, described in the different dimensions of trust, will affect the willingness of executives to rely on trust.
The Determining Factors of Trust: ‘Calculativeness’ versus ‘Embeddedness’ Two opposite perspectives regarding the origins of trust have been influential for management research. For sociologists, the attitude towards trusting is largely affected by the ‘background’ of individuals. This propensity (or willingness) to trust is dependent on a number of factors: ethical values (Jones & George, 1998), basic assumptions about human nature (Erikson, 1968; Schein, 1992), professional experience (Schein, 1996), self-confidence (Roussillon, 1997), the institutional context (Zucker, 1986). Zucker (1986) provides an interesting synthesis of the modes of production of trust where three levels are defined: the characteristics of the individuals (membership of a family, community, culture, religion); the nature of the institutional environment (certifications, professional standards, bench-
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marking, intermediaries) and the process of interaction (the quality of the relationship developed) (see Noteboom, 2000). Understandably, sociologists underline the importance of the social context of trust, the so-called ‘embeddedness’ of economic action. Most economists would accept that trust is an efficient mechanism to conduct transactions (Arrow), but they give it a limited role in their theories because conventional economic theory postulates that agents are primarily looking after their own interests (Teece, 1981; Williamson, 1985; Buckley & Casson, 1988; Hennart, 1988; Masten, 1993). Therefore conventional economics often consider that a client will only trust a supplier if he/she believes this supplier has no interest in cheating because of the risk of being hit with a substantial penalty in case of non-compliance to the agreement. The same logic would apply if a client knew that the supplier was worried about his/her reputation being hurt by a dispute, hampering the chances of further business with this customer or other clients. Thus, for most economists, trust arises from an assessment based on the economic conditions of the transaction. It should therefore be relatively objective. Confronted with a specific transaction, rational individuals should come up with a similar, if not identical, evaluation of the risks and claim similar, if not identical, contractual safeguards. Consequently, if trust is a calculation concerning the risk of being cheated, then the willingness to rely on trust should be a rational decision based on the objective conditions of the transaction. A set of empirical studies have been presented, in the last few years, purporting to test hypotheses based both on the sociological and economic perspectives. They generally find support for both bodies of theory (Barney & Hansen, 1994; Perrone, Zaheer & McEvily, 1998; Young-Ybarra & Wiersema, 1999). Hypothesis 3: Even though executives determine their willingness to rely on trust on the basis of a calculated risk, their ‘background’ leads them to differ substantially in their propensity to trust. Most empirical research on trust has been, so far, based on surveys of a sample of respondents involved in partnerships. In these surveys, the units of analysis were the transactions in which respondents had been involved and which they described using variables defined by the researchers. This made it difficult to separate out the influence of the ‘calculative’ and ‘embedded’ preferences regarding the willingness to rely on trust. These two logics can only be observed if different agents (individuals) were exposed
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+ Third-Party Information +/ on Willingness Trustworthiness to Rely on Trust Initial Propensity to Trust
Evidence of Trustworthiness (Timeliness, pricing, consistency)
+/ -
(Values, self-confidence, personal experience. etc.)
-
Figure 1. A Dynamic View of the Willingness to Rely on Trust Source: Adapted from Ariño, De La Torre and Ring (2001) to a same ‘business proposition’. But this requires a sufficiently large sample of respondents to ensure, to some extent at least, a sufficient reliability. We believe that this is the main reason why no attempt had been, as far as we know, made in this direction.
A Dynamic View of Trust: ‘Events’ Affecting the Level of Willingness to Rely on Trust Numerous authors consider that trust must be viewed as a dynamic process, in which the initial ‘level’ is gradually corrected on the basis of additional information arising from experience. Ariño, De La Torre and Ring (2001), for instance, proposed a model to analyse ‘relational quality’ (i.e., the extent to which the partners feel comfortable and are willing to rely on trust in dealing with one another). In this model, willingness to rely on trust can be conceived of as a variable that is both a factor of relational quality and the outcome of a process where new information is continuously fed to the partners about each other’s behaviour. Initially, partners’ willingness to rely on trust is based on the partners’ propensity to trust, which is itself influenced by the partners’ characteristics, the institutional context (including the contractual options), as well as any information they may have on the other party’s reputation. As transactions are repeated, partners collect further information on the other party’s behaviour in terms of its ability to deliver as expected (timing, quality, pricing, etc.). These will provide additional evidence about the actual trustworthiness of the partner and cause an increase (+) or decrease (-) of the willingness to rely on trust for future rounds of that transaction (see Figure 1). © 2007 The Authors Journal compilation © 2007 Blackwell Publishing
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Demographics (Last Section)
Initial Conditions
Meaning of Trust (Section B)
Partner’s Interaction (Section C)
Willingness to Rely on Trust (Section A)
Third-Party Information (Section C)
Figure 2. Research Model and Questionnaire Structure
Our survey also aimed to assess the impact of new evidence of trustworthiness on the willingness to rely on trust. This ‘new’ evidence is, a set of information regarding, for example, the partner’s background, behaviour in the negotiations, attitude with other business partners, and change in reputation. Hypothesis 4: New evidence about the partner’s behaviour, competence and values will impact the willingness to rely on trust.
Research Design: An International Survey of Executives’ Willingness to Rely on Trust We designed a case study and follow up questionnaire that we distributed to a sample of over 700 executives worldwide. The case study is a proposition to enter into a partnership and the follow-up questions are designed to measure a respondent’s willingness to rely on trust to enter into the partnership, the respondent’s sensitivity to information related to the different dimensions of trust, and the respondent’s reaction to interactions and external information that come to light during the negotiation process. By putting the same transaction before the respondents, we wanted to maximize the attention to the respondents’ propensity to trust.
Research Questionnaire: A Specific Business Partnership Proposition Our survey questionnaire presents an imaginary business proposition (although inspired by a real case) made by a company to one of its suppliers, followed by a questionnaire. The proposition (a one-page business case) is presented to Global Electronics Inc. (GEI), a fictitious company, by one of its largest clients, Print International (PI). PI requests the supplier to second five engineers (i.e., 16% of its engineering staff) to participate on a full-time basis in a major new product development. The economics of the deal is briefly presented © 2007 The Authors Journal compilation © 2007 Blackwell Publishing
as well as the potential risk incurred by the supplier. Respondents are then asked to put themselves in the ‘shoes’ of GEI’s CEO and to express their reactions to a number of statements. The questionnaire is divided into four sections (A, B, C, and demographics) and is designed to measure willingness to rely on trust, the respondents’ sensitivity to different meanings of trust, and their sensitivity to ‘events’ that could affect their willingness to rely on trust (see Figure 2). Section A is a series of four statements (A1–A4) regarding the contractual conditions under which the respondent would accept the offer of the client (Print International). These conditions are based on increasing levels of contractual safeguards (ranging from accepting without any contractual conditions, to requesting volume or pricing commitments, and up to asking for investment money). Respondents are asked to specify how much they agree or disagree with each of the four statements on a 7-point scale. We consider the responses to these questions to be measures of an individual’s willingness to rely on trust: the more safeguards required, the less the executive responding is willing to rely on trust. We use this section to test Hypothesis 1 regarding individual differences in propensity to rely on trust. The four questions in section A are shown in Table 1. Questions in the other sections use the same format, i.e., statements and scale. Section B comprises six statements regarding the concerns of the respondents. The six statements cover the whole range of the meanings of trust: ethical issues (integrity), competence issues (reliability) and behavioural issues (caring). Respondents rate each of these statements on a 7-point scale, from least to greatest concern. We look for relationships between respondents’ level of concern for certain dimensions of trust and their willingness to rely on trust to test Hypothesis 2. In Section C, respondents rate how a number of ‘events’ involving the ‘partner’
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Table 1. Section A from the Research Questionnaire SECTION A: Your Response to PI’s Request is:
Strongly Disagree . . . Strongly Agree
You accept PI’s request on its face value based on your past and continued relationship with that company. You do not place any specific conditions on them because you believe that PI has no interest or intention to take advantage of GEI. You accept PI’s request provided they commit contractually to make GEI the sole source for any subassemblies developed from this programme for at least ten years. You accept PI’s request provided they commit contractually to: (1) make GEI the sole source for any subassemblies developed from this programme for ten years; (2) establish some minimum purchase volumes; and (3) agree to a pricing formula for future deliveries. You accept PI’s request provided they commit contractually to: (1) make GEI the sole source for any subassemblies developed from this programme for ten years; (2) establish some minimum purchase volumes; (3) agree to a pricing formula for future deliveries; and (4) undertake to fund at least 50 percent of any investment in additional plant facilities that the programme may require in the future.
organization would increase or decrease their confidence level. Each of the 37 statements or events presents a piece of information that could potentially impact the level of trust in the partner. These events may occur during the negotiation process (e.g., ‘PI’s legal counsel requests that all discussions during contract negotiations be tape-recorded’), they may be information about interactions during the contract execution (e.g., ‘During the negotiation you realize that most of PI’s team speak your mother tongue fluently’) or they may involve third party gossip, be it individual or by the press (e.g., ‘A business magazine features PI as one of the most advanced manufacturers in terms of their relationships with suppliers’). These statements are designed to measure an executive’s sensitivity to the different types of information. We attempt to relate Section C responses to willingness to rely on trust and to demographics. The final survey questions involve the demographics of respondents: age, nationality, academic background, gender, religion, industry, size of organization, function, seniority and others.
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1...2...3...4...5...6...7
1...2...3...4...5...6...7
1...2...3...4...5...6...7
1...2...3...4...5...6...7
Survey Sample: An International Group of Executives Respondents were contacted in executive development seminars taught by Jose De La Torre and Francis Bidault between 1999 and 2002. During these seminars participants were asked to read over the case study presenting the business proposition and fill out the foursection questionnaire. It typically took about 40 minutes to complete the questionnaire. Each seminar yielded between 15 and 25 responses. These seminars, which took place in over a dozen countries, included executives from various levels, from Executive MBA participants to senior executives. The average age of respondents was 38.4 years (standard deviation 7.43), while the average duration of higher education was 5.83 years (standard deviation 2.34) and average seniority level was 2.15 (i.e., they were reporting to an executive who was, on average, 1.15 level below the CEO of their business unit). Respondents also reported on their company turnover, and average company sales were US$6,405 million (standard deviation US$2,530 million). © 2007 The Authors Journal compilation © 2007 Blackwell Publishing
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Table 2. Descriptive Statistics of Section A Statements
A1 A2 A3 A4 N valid (list-wise)
N
Minimum
Maximum
Mean
Standard deviation
708 702 706 707 700
1.00 1.00 1.00 1.00
7.00 7.00 7.00 7.00
2.5650 3.9615 5.0623 5.2610
1.50154 1.67211 1.39058 1.61399
Altogether 712 questionnaires were collected, of which 671 were adequate for our intial analyses. These include responses from 38 nationalities, with the most represented countries being USA, China, Finland and Chile. We acknowledge that our sample is somewhat biased due to the fact that respondents were participants in management seminars, and therefore cannot be considered as chosen randomly. On the other hand, as our sample is very large and includes considerable variation in nationality (38 different nationalities, six of which with more than 50 respondents), we believe our findings are of interest.
Statistical Analyses: A Range of Techniques We conducted a range of statistical analyses, starting with simple descriptive statistics of the main variables (average and standard deviation of all responses to the A, B and C sections). We then ran a number of t-test comparisons of sub-samples to spot significant differences across demographic groups. We also ran correlation analyses of A variables against the B and C variables as our goals were to determine if willingness to rely on trust (WTRT, as measured by responses to the A section) varied with demographics, and the trust concerns (responses to B section) as well as sensitivity to information possibly affecting the relationship (responses to the C section). We discovered that the analysis of the single 47 variables (produced by the B and C sections of the questionnaire) would not lead to significant results because of their low individual information content. The variables had to be aggregated in some way to have fewer dimensions and more information. Step-wise cluster analysis appeared to be the appropriate method for this dataset, because it allows steady reduction of the number of variables and minimizes the loss of information content (i.e., keep a maximum of information) at each reduction step. It was first applied to the 47 variables. It seems that there was a (flat) © 2007 The Authors Journal compilation © 2007 Blackwell Publishing
optimum around eight iterations. We therefore used these resulting clusters of B and C variables as independent variables in our correlation and regression analyses. The cluster analysis confirmed that the questions that we thought were related really were related, thereby grouping together questions related to the three meanings of trust (reliability, caring and integrity) and to similar events (ease of communication, etc.).
Results and Discussion Willingness to Rely on Trust Table 2 presents responses to the A statements (A1–A4). The responses do show a wide distribution of propensity to rely on trust. The standard deviations are quite substantial, resulting in significant differences among respondents (several points on the Likert scale). Two statements (A1 and A4) receive a large agreement from respondents, which is consistent with the economics theory that willingness to rely on trust is a rational decision. However, responses to A2 show a slightly different pattern, with a wider distribution compared to the other three statements, indicating greater variety in the ratings on this statement.
The Role of Demographic Factors We ran a correlation analysis of the individual section A variables against each of the demographic variables. We found that significant correlations exist between the A variables and nationality and the number of languages claimed by respondents (a = 0.05). Religion also showed a significant correlation, but as the questionnaire was poorly organized relative to this question, we concluded that the data is not useable. Gender appears to be correlated only to statement A3 (see Table 3). However, we found no significant correlations with other variables such as age, function, educational background or level of education.
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Table 3. Correlations between Section A Variables and Demographics
Age
Gender
Nationality
Claimed no. of languages Relignew
No. of years education
Pearson correlation Sig. (bilateral) N Pearson correlation Sig. (bilateral) N Pearson correlation Sig. (bilateral) N Pearson correlation Sig. (bilateral) N Pearson correlation Sig. (bilateral) N Pearson correlation Sig. (bilateral) N
A1
A2
A3
A4
-0.017 0.664 670 -0.013 0.737 636 -0.004 0.909 669 -0.004 0.907 682 0.114* 0.012 482 0.069 0.078 651
-0.015 0.707 666 -0.049 0.218 631 -0.028 0.477 664 -0.083* 0.031 677 0.175** 0.000 479 -0.011 0.777 646
0.031 0.430 669 -0.079* 0.046 635 -0.080* 0.038 668 -0.086* 0.024 680 0.118** 0.010 481 -0.051 0.194 649
-0.045 0.246 669 0.036 0.367 635 -0.094* 0.016 668 -0.041 0.287 681 0.041 0.365 481 -0.007 0.865 650
** Correlation is significant at 0.01 (bilateral). * Correlation is significant at 0.05 (bilateral).
Analysis by Nationality Since nationality had a significant correlation with the willingness to rely on trust, and as there is considerable interest in the role of nationality in management practices, we decided to explore further its impact on the willingness to rely on trust. We therefore divided our sample into separate nationalities. Of the 38 nationalities represented in our sample, we focused on the 10 with sample sizes larger than 20 and we ran a correlation analysis between the individual A questions and the clustered B and C questions for each country. Tables 4 and 5 summarize the results for only two countries, United States and Finland, which present some striking differences. Note that the A variables are in order of increasing number of safeguards, or decreasing willingness to rely on trust. The meaning of each cluster can be found on the top row of each table. The second row gives the code numbers of the B and C statements (in the questionnaire) that are included in each cluster. First, we note that not only does willingness to rely on trust differ substantially between individuals, its drivers also differ considerably by nationality. Indeed, the correlation coefficients of each cluster of variables with the A variables are substantially different between
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the two nationalities selected here. The clusters which are correlated with responses to the A statements (with a 1 percent or a 5 percent significance in bold), are quite different between the two nationalities. We see for instance that the ‘meaning of trust’ (B statements of concerns) is linked, in a significant manner, to the willingness to rely on trust (A3 and A*) for US citizens, providing support to our second hypothesis. Although not presented here, we found results similar with other countries (in particular China). The Finnish sample, in contrast, does not show any correlation between the meaning of trust and the propensity to trust. We can thus consider that willingness to rely on trust is affected by a person’s ‘meaning of trust’ in certain countries. This indicates that country of origin and meanings of trust are related, i.e., that managers of different nationalities generally may not have the same meaning of trust, or at least not weigh the different dimensions in the same manner. When it comes to the ‘events’ affecting the partners (C statements), the respondents from the United States and Finland both show strong similarities and substantial differences in how sensitive they are to third party rumours and gossip. US and Finnish citizens are, as we would expect, both sensitive to positive rumours regarding the partner’s reputa© 2007 The Authors Journal compilation © 2007 Blackwell Publishing
© 2007 The Authors Journal compilation © 2007 Blackwell Publishing
Pearson correlation Sig. (bilateral) Pearson correlation Sig. (bilateral) Pearson correlation Sig. (bilateral) Pearson correlation Sig. (bilateral) Pearson correlation Sig. (bilateral) 0.000
0.741 -0.018
0.000 0.007
0.015
0.000 0.026
0.045 0.267**
0.822 0.287**
0.000 0.277**
0.194 0.156*
0.933 0.188*
0.328**
0.101
0.147
0.664 0.113
0.002 0.034
0.175 0.238**
0.758 0.106
0.024
0.287
0.236 0.083
0.089 0.092
0.663 0.132
0.341 0.034
0.074
0.021
0.760 0.179*
0.075 -0.024
0.242 0.138
0.012 0.092
0.195*
C73
C73, 21
Positives in partners’ goodwill attitude
0.040
0.736 0.159*
0.953 0.026
0.208 0.005
0.006 0.099
0.210**
C74
C74, 22, 23, 65
Negative factors re. partner’s integrity
** Correlation is significant at 0.01 (bilateral). * Correlation is significant at 0.05 (bilateral).
A*
A4
A3
A2
A1
C41
C61
Cluster number
C31
C31, 78, 79, 24
C71, 72, 712, 411
C41, 51, 45, 46, 47, 48, 49, 32, 77
C61, 62, 42, 43, 44, 63, 410, 710, 711
B&C Statement Numbers
C71
Evidence of partners legalistic mindset
Positive indications re. partner’s dedication
Negative rumours re. partner
Positive rumours re. Partner
Table 4. Correlations for Respondents from the United States (n = 167)
0.705
0.359 -0.030
0.102 0.072
0.764 -0.127
0.000
0.880 0.268**
0.054 -0.012
0.002 0.150
0.000 0.234**
0.286**
-0.042 0.593 0.024
C52
C52, 76, 64
Positive on ease of communication
C75
C75
Insistence on Taperecorded negotiations
0.009
0.317 0.201**
0.038 0.078
0.019 0.161*
0.099 0.182*
0.128
C412
C412
Evidence of partner being in ‘tight spot’
0.275
0.236 -0.085
0.795 0.092
0.284 0.020
0.093 -0.084
-0.131
B1
B1, B2
Concerns with partner’s Ethical attitude
0.012
0.838 -0.194*
0.005 -0.016
0.057 -0.217**
0.069 -0.148
-0.141
B3
B3
Concerns with risk of commercial failure
0.308
0.24 -0.079
0.016 0.090
0.710 -0.187*
0.507 -0.029
-0.052
B4
B4, B5, B6
Concerns with reliability & caring
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Pearson correlation Sig. (bilateral) Pearson correlation Sig. (bilateral) Pearson correlation Sig. (bilateral) Pearson correlation Sig. (bilateral) Pearson correlation Sig. (bilateral)
0.199 0.065 0.030 0.782 -0.243* 0.023 -0.165 0.128 0.049 0.650
0.156
0.148 0.385**
0.000 0.329**
0.002 0.081
0.459 0.350**
0.001
0.061
0.000 0.202
0.013 0.409**
0.629 0.265*
0.377 0.053
0.096
0.530
0.462 0.068
0.475 0.080
0.794 0.078
0.686 0.028
0.044
0.044
0.678 0.217*
0.083 0.045
0.225 0.187
0.087 0.132
0.185
C73
C73, 21
Positives in partners’ goodwill attitude
0.223
0.004 -0.132
0.000 -0.303**
0.182 -0.423**
0.242 -0.145
0.127
C74
C74, 22, 23, 65
Negative factors re. partner’s integrity
** Correlation is significant at 0.01 (bilateral). * Correlation is significant at 0.05 (bilateral).
A*
A4
A3
A2
A1
C31
C61
Cluster number
C71
C31, 78, 79, 24
C71, 72, 712, 411
C41, 51, 45, 46, 47, 48, 49, 32, 77
C61, 62, 42, 43, 44, 63, 410, 710, 711
B&C Statement Numbers
C41
Evidence of partners legalistic mindset
Positive indications re. partner’s dedication
Negative rumours re. partner
Positive rumours re. Partner
Table 5. Correlations for Respondents from Finland (n = 87)
0.001
0.924 -0.362**
0.000 0.010
0.001 -0.382**
0.000
0.693 0.446**
0.027 -0.043
0.000 0.237*
0.000 0.366**
0.401**
-0.200 0.063 -0.356**
C52
C52, 76, 64
Positive on ease of communication
C75
C75
Insistence on Taperecorded negotiations
0.530
0.352 0.068
0.702 0.101
0.091 0.042
0.573 0.182
-0.061
C412
C412
Evidence of partner being in ‘tight spot’
0.248
0.234 -0.125
0.329 0.129
0.232 -0.106
0.329 -0.129
-0.106
B1
B1, B2
Concerns with partner’s Ethical attitude
0.291
0.956 -0.114
0.527 -0.006
0.592 0.069
0.101 -0.058
-0.177
B3
B3
Concerns with risk of commercial failure
0.271
0.181 0.119
0.387 0.145
0.262 -0.094
0.295 0.122
0.114
B4
B4, B5, B6
Concerns with reliability & caring
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WHAT MAKES EXECUTIVES TRUST EACH OTHER?
tion (C61), with the Finnish displaying a higher level of sensitivity (higher coefficients). The two countries also show, as expected, significant sensitivity to positive signs of a partner’s willingness to commit and flexibility (C71), to positive information regarding the partner’s goodwill (C73), and to ease of communication with the partner (C52). Surprisingly, these two countries seem to show an ‘opposite’ sensitivity to negative rumours (C41) regarding the partner’s reputation and business performance. While the Finnish respondents linked these negative rumours to a lower willingness to rely on trust (A3), the US respondents, unexpectedly, showed a positive link. The same can be found with negative information about the partner’s integrity (C74), with a negative correlation (as we expected) for the Finns, and positive for the US citizens. It would appear that US respondents do not trust the rumour, or even defy it! Finally, we observe a large difference for two ‘events’. While the US respondents did not show any sensitivity to the partner asking for the negotiations to be tape-recorded, the Finns considered this as reason to increase their willingness to trust (C75). Symmetrically, US respondents considered that having the partner in a ‘tight spot’ (C412) to be conducive to increasing their willingness to rely on trust (because of better control over the partner?), whereas the Finnish respondents did not display a visible sensitivity on this issue. We think that these results provide some support for our four hypotheses, sometimes strong, sometimes more limited. Willingness to rely on trust does differ somewhat, across individuals, and across countries (Hypothesis 1). It is somewhat affected by both the ‘meaning of trust’ that some respondents (in the US) have in mind (Hypothesis 2) and by additional information concerning the partner (‘events’) (Hypothesis 4). This would support the idea that willingness to rely on trust is not exclusively set on the basis of a rational calculation but is also affected by the social environment in which the economic agent operates (Hypothesis 3) even though it converges somewhat.
Trust and Innovation Our research provides strong support to the general assumption of the importance of trust in innovation-oriented partnerships. But, more specifically, the results of our correlations show that the ‘managerial’ dimensions of trust (trust as reliability and trust as caring) are, on the whole, more influential in affecting a person’s willingness to rely on trust than are © 2007 The Authors Journal compilation © 2007 Blackwell Publishing
327
‘ethical’ considerations. This is consistent with the organizational theory perspectives on trust-based leadership that opposes the transactional (‘carrot and stick’) approach to the transformational one (Rickards, 2000). In a business partnership, as well as within an organization, the managerial approach can be based on ‘authority’ or on ‘empowerment’. We believe that willingness to rely on trust, as measured by the amount of contractual safeguards, expresses well this dilemma. Our research cannot provide evidence about the effectiveness of one approach over the other, but it provides an interesting measurement of trust. In subsequent research, we plan to use this tool to study the link between willingness to rely on trust and creativity, through an experimental research design.
Conclusion In this article, we presented the results of large-scale survey-based research aiming to understand the determinants of the willingness to rely on trust. Data was obtained from a large, multinational sample of executives who were asked to respond to a questionnaire in which they were exposed to a hypothetical partnership proposition involving two companies. Respondents were asked to take the perspective of a supplier whose client requested a major commitment to a risky project. Our statistical analysis of the data collected showed that willingness to rely on trust varies substantially among executives. This means that the objective conditions of the deal (as put forward by the case study prefacing the questionnaire) did not fully determine the respondents’ propensity to trust. Rather, personal characteristics, as well as interaction with the partner and external information did exert an influence on respondents’ propensity to trust, consistent with the psycho-sociological approach to trust. Of particular importance, as a determinant, was nationality. There were substantial and significant differences among nationalities when it comes to propensity to trust. These differences are sometimes consistent with previous surveys on trust (UN World Values Survey) but sometimes contradictory. A surprising result came in the form of which determinants affected the willingness to rely on trust. Contrary to what was expected, these determinants seem to differ substantially from country to country. In addition, a number of factors, especially demographic characteristics, which we had expected to play a role, were, in fact, found not to be of importance. For instance, we were not
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able to link the professional background of the respondents (e.g., the functional role, the academic background or the industry sector) with the willingness to rely on trust. It is possible that this lack of finding can be attributed to an inadequate questionnaire design on some demographic parameters. This is only one of the many problems we encountered in this complex research. We have to acknowledge that the execution of our research design presented some challenges that were revealed in the analysis of our data. We intend to continue our data mining in this rich set of information which we have collected. However, despite the imperfections of this research, we believe it does contribute to the understanding of trust as a complex process, and hopefully help executives be more successful as they engineer and manage alliance and partnership agreements. Our findings also support the idea that trust is a complement to contract, and thus to coercion, but is probably better suited to foster creativity. In future research we will be exploring this issue through an experimental design involving pairs of young managers designing an innovative product.
References Ariño, A., De La Torre, J. and Ring, P.S. (2001) Relational Quality: Managing Trust in Corporate Alliances. California Management Review, 44, 109– 31. Arrow, K. (1974) Limits of Organization. W.W. Norton, New York. Barney, J. and Hansen, M. (1994) Trustworthiness as a Source of Competitive Advantage. Strategic Management Journal, 15, Special issue, 175–90. Bidault, F. and Jarillo, C. (1997) Trust in Economic Transactions. In Bidault, F., Gomez, P.-Y. and Marion, G. (eds.), Trust: Firm and Society. Macmillan, London, pp. 81–94. Bradach, J.L. and Eccles, R.G. (1989) Price, Authority and Trust: From Ideal Types to Plural Forms. Annual Review of Sociology, 97–118. Buckley, P.J. and Casson, M. (1988) A Theory of Cooperation in International Business. In Contractor, F.J. and Lorange, P. (eds.), Cooperative Strategies in International Business. Lexington Books, Lexington, MA, pp. 31–53. Das, T.K. and Teng, B.S. (1998) Between Trust and Control: Developing Confidence in Partner Cooperation in Alliances. Academy of Management Review, 23, 491–512. Erikson, E. (1968) Identity, Youth and Crisis. Norton, New York. Granovetter, M. (1985) Economic Action and Social Structure: The Problem of Embeddedness. American Journal of Sociology, 91, 481–510.
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Hennart, J.F. (1988) A Transaction Costs Theory of Equity Joint-Ventures. Strategic Management Journal, 9, 361–74. Jones, G. and George, J. (1998) The Experience and Evolution of Trust: Implications for Cooperation and Teamwork. Academy of Management Review, 23, 531–46. Masten, S. (1993) Transaction Costs, Mistakes, and Performance: Assessing the Importance of Governance. Managerial and Decision Economics, 14, 114– 29. Noteboom, B. (2000) Trust as a Governance Device. In Casson, M.C. and Godley, A. (eds.), Cultural Factors in Economic Growth. Springer, Berlin, pp. 44–68. Perrone, V., Zaheer, A. and McEvily, B. (1998) Does Trust Matter? Exploring the Effects of Interorganizational and Interpersonal Trust on Performance. Organization Science, 9, 141–59. Poppo, L. and Zenger, T. (2002) Do Formal Contracts and Relational Governance Function as Substitutes or Complements? Strategic Management Journal, 23, 707–25. Rickards, T. (2000) Trust-Based Leadership: Creative Lessons from Intelligent Horsemanship. Creativity and Innovation Management, 9, 259– 66. Ring, P.S. and Van de Ven, A.H. (1992) Structuring Cooperative Relationships between Organizations. Strategic Management Journal, 13, 483–98. Rousseau, D.M., Sitkin, S.B., Burt, R.S. and Camerer, C. (1998) Not So Different after All: A Cross-Discipline View of Trust. Academy of Management Review, 23, 393–404. Roussillon, S. (1997) Confidence Building: Origins, Processes and Consequences. In Bidault, F., Gomez, P.-Y. and Marion, G. (eds.), Trust: Firm and Society. Macmillan, London, pp. 95–106. Sako, M. (1992) Prices, Quality and Trust: Inter-Firm Relations in Britain and Japan. Cambridge University Press, Cambridge. Schein, E. (1992) Organizational Culture and Leadership. Jossey-Bass, San Francisco, CA. Schein, E. (1996) Three Cultures of Management: The Key to Organizational Learning. Sloan Management Review, 38, 9–20. Shaw, R.B. (1997) Trust in the Balance. Jossey Bass, San Francisco, CA. Teece, D.J. (1981) The Market for Know-How and the Efficient International Transfer of Technology. ANNALS, AAPSS, 458, November. Williamson, O. (1985) The Economic Institutions of Capitalism. Free Press, New York. Williamson, O. (1993) Opportunism and its Critics. Managerial and Decision Economics, 14, 97–107. Young-Ybarra, C. and Wiersema, M. (1999) Strategic Flexibility in Information Technology Alliances: The Influence of Transaction Cost Economics and Social Exchange Theory. Organization Science, 10, 439–59. Zucker, L. (1986) Production of Trust: Institutional Sources of the Economic Structure, 1840–1920. Research in Organizational Behavior, 8, 53–111.
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Professor Bidault (
[email protected]) is the Director of the MBA at ESMT in Berlin, and a Professor of Management, as well as an Adjunct Professor at the University of Nice, Institut d’Administration des Entreprises. Before this, he was Deputy Director of Theseus Institute and Dean of the MBA there (1996–2005). From 1988 until 1996, he was Professor of Technology Management and Strategy at IMD, Lausanne. During his tenure at IMD, he assumed the responsibility as Director of the MBA. From 1977 until 1988, he had several academic appointments at EM Lyon, Head of the Department ‘Business Environment’, and Vice Director of the Doctoral Program (EM Lyon/ Université Lyon III). He was awarded the accreditation (habilitation) for PhD supervision (HDR) in 1987. Francis Bidault’s areas of expertise cover industry analysis and the management of innovation, especially through alliances and partnerships. José de la Torre (delatorj@fiu.edu) is Dean of the Alvah H. Chapman Graduate School of Business at Florida International University in Miami, where he also holds the J.K. Batten Eminent Scholar Chair in Strategy. He was Professor of International Business Strategy at UCLA’s Anderson School of Management from 1986 to 2002, and Founding Director of UCLA’s Center for International Business Education and Research from 1989 until 2000. Formerly, he was Professor of International Business and Chairman of the Strategy and Environment Area at INSEAD (the European Institute of Business Administration) in Fontainebleau, France, a member of the faculty at the Institute of International Business at
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Georgia State University, and a Research Associate at the Harvard Business School. He has held short-term appointments at a number of graduate business schools in Latin America, including the Central American Institute of Business Administration (INCAE), the Universidad del Valle, Colombia, and the Universidad Adolfo Ibáñez, Chile. He served as Visiting Professor at the Institute of International Business of the Stockholm School of Economics in 1992, and at the Theseus Institute in Sophia Antipolis, France, from 1997 to 2001. Professor de Rham (
[email protected]) is teaching Operations Management at the International University of Monaco, where he also gives courses on Graph Theory and Applications for Business. From 1990 to 2002 he was senior lecturer at the Swiss Federal Institute of Technology in Zürich (ETH), where he was awarded the accreditation (habilitation) for PhD supervision in 1996. His interest is focused on large applications of graph theory and numerical optimization for road traffic equilibrium and congestion avoidance. His software POLYDROM is running in major road traffic management centres. Michelle Sisto (
[email protected]) is a faculty member at the International University of Monaco where she has been teaching Statistics and Quantitative Literacy and Methods since 1997. She has been a Visiting Faculty member of the ESMT MBA Program since 2007 and also at Theseus Institute/EDHEC in Nice, France since 2002. Michelle’s research is focused on statistics education and financial mathematics.
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