Different Types of Innovation

8/12/2019 Different Types of Innovation

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~ Pergamon

Omega, Int. J . Mg mt Sci. Vo|. 24, No. 6, pp. 631-647, 1996

Copyright 1996 Elsevier Science Ltd

Printed in Great Britain. All rights reserved

S0305-0483(96)00031-X 0305-0483/96 $15.00 + 0.00

Organizational Innovativeness: Exploring

the Relat ionship Between Organizat ional

Determinants of Innovat ion, Types of

Innovat ions , and Measures of

Organizational Performance

A S U B R A M A N I A N

University of Missouri, St. Louis, USA

S N I L A K A N T A

Iowa State University, Ames, USA

Received Septem ber 1995; accepted after revision June 1996)

This research study examines the relationships between innovativencss of firms, thei r organizational

characteristics , and organizational performance. Previous studies that have examined these

relationships have yielded conflicting results. A fundamental assumption of this research is that these

conflicting resul ts may be due to a narrow definition of the construct of innovativeness. This research

demonstrates that by using a multidimensional measure of innovativeness, the reasons for the

conflicting findings of past research becomes evident. The results of this study show that substantive

relationships do exis t between organizational factors, organizational innovativeness, and

organizat ional performance. These relationships, however, are complex, and can only be detected i f

innovativeness is measured as a multidimensional construct. Each of the organizational factors

examined in this study showed significantly different effects on each dimension of two types of

organizational innovativeness - - technical and administrative innovativeness. Further, the results show

tha t innovativeness does improve organizational performance. However, each dimension of the two

types of innovativeness affects different aspects of organizational performance. Copyright 1996

Elsevier Science Ltd

K e y w o r d s - - in n o v a t io n ,

management, management of innovation, organizational studies,

measurement, methodology

1. IN TRO DUC TIO N 1.

THE STUDY OF INNOVATIONS is a mu l t id isc i -

p l i n a r y e f f o r t . I n n o v a t i o n r e s e a r c h h a s b e e n

c o n d u c t e d i n d i s c i p l i n e s s u c h a s a n t h r o p o l o g y ,

s o c i o l o g y , e d u c a t i o n , e t c . R e s e a r c h e r s i n t h e

b u s i n e s s a d m i n i s t r a t i o n d i s c i p l i n e h a v e a l s o

f o c u s e d e f f o r t s i n t h i s a r e a o f r e s e a r c h . I n t h i s

d i sc i pl in e t w o m a j o r s c h o o ls o f i n n o v a t i o n

r e s e a r c h c a n b e i d e n t i f i e d :

631

R e s e a r c h e r s i n a r e a s s u c h a s m a r k e t i n g

a r e p r i m a r i l y i n t e r e s t e d i n u n d e r s t a n d i n g t h e

c a u s e s o f i n n o v a t i v e b e h a v i o r o f c o n s u m e r s .

I n o t h e r w o r d s , t h e u n i t o f a n a l y s is is t h e i n -

d i v i d u a l c o n s u m e r . C o n s u m e r s w h o d i s p l a y

a c o n s i s te n t t e n d e n c y t o b u y n e w a n d i n n o -

v a t i v e p r o d u c t s a r e t h e t a r g e t o f th i s r e s e a rc h

b e c a u s e i t i s b e l i e v e d t h a t t h e s e c o n s u m e r s

a r e o p i n i o n l e a d e r s , a n d t h e y s i g n i f i c a n t l y

i n f l u e n c e t h e b u y i n g b e h a v i o r o f o t h e r


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Subramanian, Nilakanta--Organizational Innovativeness

non-innovative consumers [4]. Marketers are

motivated to identify the characteristics of

these innovative consumers so that the

effectiveness of marketing strategies may be

enhanced by focusing marketing efforts on

these innovative consumers.

2. Researchers in areas such as organizational

theory and strategic management use the

organization as the unit of analysis. Research

in this domain is, primarily, interested in the

organizational characteristics of innovative

organizations--i.e, organizations that con-

sistently adopt innovative products and

processes, and the effect of the adoption o f

innovations on organizational performance.

This is because it is believed that the adopt ion

of innovations galvanizes an organization and

leads to better organizational performance.

The implicit assumptions of this body of

research are:

a. Innovation adoptions are organizational

responses to external environmental

changes. Proponents of the contingency

theory believe that an organization's

external environment is uncontrollable. In

order to be successful an organization

must adapt to the changing environmental

conditions by altering its organizational

characteristics such as its structure or its

processes [23].

b. The adoption of innovations by an

organization is a consequence of strategic

initiatives proactively pursued by decision

makers in the organization. Proponents of

the strategic choice theory believe that

organizations do not merely react to

external environmental changes instead

they proactively take strategic actions that

change the environment [6]. Much of the

research in strategic management is based

on this assumption.

c. The adopt ion o f innovations is desirable.

Innovations energize the adopting organ-

izations and enhance their organizational

performance [16].

d. Innovative organizations have identifiable

organizational characteristics that dis-

tinguish them from their non-innovative

counterparts [9].

This study contributes to the second category

of research which employs organizations as the

units of analyses. The first step in all research

studies in this category is the identification of

innovative firms. The categorization of an

organization as innovative or non-innovative

depends on the definition of innovativeness

adopted by the researchers. Thus, some studies

categorize firms as innovative firms if they adopt

an innovation earlier than the majority of their

counterparts in the industry. Hence, the time of

adoption of an innovation determines the

innovativeness o f a firm [37]. Other studies view

adopters of innovat ions as innovative firms and

non-adopters as non-innovative firms. This

rationale is based on the assumption that

any new product or process adopted by an

organization represents an innovation to the

organization, regardless of how many other

firms in the industry have adopted it earlier.

Therefore, the firm that adopts a new product

or process is considered to be innovative [8].

In these types of studies, innovativeness is

determined by the number of innovations

adopted by firms.

The objective of this study is to examine the

relationships between innovativeness of firms,

their organizational characteristics, and organ-

izational performance. Past research that has

examined these relationships, has yielded con-

flicting results. This research is motivated by our

belief that these conflicting results could be due

to weaknesses in the measurement of innova-

tiveness. We believe that a measure that rectifies

these weaknesses, would be able to better

explain the variability in the results of past

research. Specifically, the objectives of this

research are:

1. To reconceptualize innovativeness as a

multidimensional construct. Further, this

study extends previous research by examining

the influence of organizational characteristics

such as organizational size, organizational

structure, and organizational resource slack,

on each dimension o f innovativeness.

2. To examine if there are differences in the

influence of the above stated organizational

characteristics on technical innovativeness

and administrative innovativeness. In other

words, to study if the dimensions of technical

innovativeness are influenced by a different set

of organizational characteristics than are the

dimensions o f administrative innovativeness.

3. To examine if the above stated types of

innovativeness are associated with different


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Ome ga , Vo l . 24 , No . 6 633

types of measures of performance. Specifi-

cally, to determine if t he two types of

innovativeness have different impacts on the

effectiveness and efficiency of organizations.

2 . P R E V I O U S R E S E A R C H

Innovation adoption research can be divided

into two major categories. One category of

research is concerned with examining the

process of adoption of an innovation. This

category will, henceforth, be referred to as

'innovation process research'. Another category

of research has focused on the association

between innovativeness of firms, their organiz-

ational characteristics, their external environ-

ment, and their organizational performance.

This category of research will, henceforth, be

referred to as 'innovation variance research'.

2.1. Innovation process

research

Research studies in this stream, typically,

examine the diffusion of an innovation in an

industry or market [31]. Research in marketing

in the area of new product diffusion has labeled

early adopters as innovators and those who

adopt innovations later as imitators [4]. In the

fields of organizational theory and strategic

management, the focus is on the identification

of organizational characteristics and processes

that distinguish early adopters of innovations

from late adopters. Early adoption has been

found to be associated with aggressive manage-

ment strategies, frequency of communications

with external sources, decentralized structure,

and perceptions of external environmental

uncertainty [26, 41].

2,2.

nnovation vari ance

research

The focus of this stream of research is not on

the process of innovation adoption. Instead,

research in this stream examines the association

between innovativeness of firms and organiz-

ational factors, external environmental factors,

and organizational performance. The strengths

of the associations are determined by the

amount of variance of the dependent variable

that is explained by the independent variables.

Typically, innovativeness is measured by deter-

mining the number of innovation adoptions

across a cross section of firms in an indus-

try[19]. Innovation variance research has

addressed issues in two major areas. These two

areas of variance research form the basis for the

questions addressed in this study. One area of

research has focused on identifying and

examining the organizational determinants of

innovation adoptions. This research stream has

identified several organizational characteristics

that appear to facilitate the adoption of

innovations. The literature in this area is

relevant to objectives 1 and 2. Another stream

of research has concentrated on examining the

effect of innovation adoptions on organizational

performance. This body of research is relevant

to objective 3.

3 . T H E O R E T I C A L F R A M E W O R K

The following sections discuss the literature

relevant to each of the stated objectives o f this

study, and formulate hypotheses based on the

discussions. Firs t, in Section 3.1 the need for a

multidimensional measure o f innovativeness is

identified by highlighting the weaknesses of

measures o f innovativeness used by innovation

process researchers and innovation variance

researchers. Subsequent ly, in Sections 3.2 and

3.3, hypotheses about substantive relationships

between organizational characteristics, organiz-

ational innovativeness, and organizational per-

formance are developed based on the

innovation variance literature.

3.1. Dimensions of organizational

innovativeness

Innovativeness, by definition, is an enduring

organizational trait. Truly innovative organiz-

ations are those that exhibit innovative behavior

consistently over time. Any valid measure of

innovativeness must, therefore, capture this

temporal dimension of innovativeness.

In previous studies, innovativeness has been

conceptualized as an unidimensional construct.

Innovation process research studies have em-

ployed the time of innovation adoption as a

measure of innovativeness. Innovation variance

research studies have measured innovativeness

by determining the number of innovation

adopted by a firm [11, 12]. These conceptualiz-

ations and measurements of innovativeness,

used in past research, have a number of

shortcomings:

1. Innovation process research, typically, is

concerned with the diffusion of one or a few

types of innovations. Innovativeness is


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measured by the time of adoption o f an inno-

vation. Because this measure is based on the

adoption of a single innovation (or, at best, a

few) the results are not generalizable to other

innovations. If a firm adopted an innovation

earlier than others, it does not necessarily

mean that it will exhibit the same behavior for

all other innovations. Hence, valid measures

of innovativeness must be based on the

adopt ion of several innovations [9].

2. Studies that have assessed innovativeness

based on the number o f innovation adoptions

have not considered the time of adoption of

each of the innovations. This measure, in

essence, regards adopters of innovations as

innovative firms and non-adopters as non-

innovative firms. By excluding the time of

adoption , however, important differences in a

firm's readiness and propensity to innovate

cannot be determined. This may be a

significant shortcoming because past research

in strategic management has shown that 'first

mover' advantages are real, and significant

competitive advantages may accrue to firms

that innovate earlier than others [28, 29, 40].

3. Almost all studies of innovation adoption

have assessed innovativeness at one point in

time. A notable exception is that of

Damanpour and Evan[13] who measured

innovativeness by determining changes in the

mean number of innovation adoptions over

two periods o f time. Because the external and

internal environments of an organization

rarely remain unchanged over time, it is

logical to assume (based on the theories of

contingency and strategic choice) that innova-

tiveness will also change over time. However,

if innovativeness is truly an enduring trait,

innovat ive firms will remain highly innovative

over time--i .e, innovat ive firms will display a

consistently high level o f innovativeness o ver

t ime.

This consistency in innovativeness has

been ignored by past research.

Thus, it is evident that innovativeness is a

multidimensional construct. First, any valid

measure of innovativeness must be based on

adoptions of several innovations. Second, in

addition to the number o f innovations adopted,

the time of adoption of each innovation must

also be considered. Third, the consistency of

adoption patterns over time must also be

measured i.e. the measure must discriminate

between firms that consistently adopt inno-

vations early (or late) from those that are

inconsistent with respect to the time of adoption

of innovations over time. Firms that adopt a

larger number of innovations consistently

earlier than other firms are more innovative

than the other firms. Therefore, the measure of

innovativeness used in this study encompasses

three dimensions, namely, mean number of

innovations adopted over time, mean time of

adoption of innovations, and the consistency

of the time of adoption of innovations.

3.2. Organizational fac tor s and innovation

The first stream of variance research has

examined associations between levels of innova-

tiveness and organizational factors. The under-

lying assumption of this stream of research is

that organizational innovativeness is facilitated

and influenced by organizational characteristics

such as size, degree of centralization, degree of

formalizat ion, resource slack, degree of special-

ization etc. [21, 22]. Centra lization refers to

the centrality of location of decision making

authority. Formalization refers to the existence

of formal job descriptions, policies and pro-

cedures for an organization's personnel.

Specialization refers to the existence of person-

nel with specialized skills in various functional

areas of an organization. Slack resources refers

to the existence of surplus resources that are

available for experimenting with innovations.

Statistically significant associations between the

adoption of innovations and organizational

characteristics have been found [41].

A number of theories have been offered by

researchers to explain the effect of organiz-

ational factors on organizational innovative-

ness. Thus, for instance, there is a widespread

belief that decentralized and informal organiz-

ational structures facilitate innovativeness. The

flexibility and openness of these types of

organizations, is believed to enhance innova-

tiveness by encouraging new ideas. Conversely,

the concentration of power in centralized

organizations is considered to be a major

impediment to the adoption of inno-

vations [I, 5, 36]. High degree of specialization

of individuals within an organization has been

found to facilitate innovation. It has been

hypothesized that a greater variety of specialists

would provide a broader knowledge base in an

organization and increase the cross fertilization


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O m e g a , V o l . 2 4 , N o . 6 635

of new ideas [1 , 22]. S l ack re sources a re be l i eved

to enhance innova t iveness because t hey enab le

o r g a n i z a ti o n s t o e x p e r im e n t w i t h n e w p r o d u c t s

and proce sses [32].

T h i s s t r e a m o f r e se a r c h h a s , h o w e v e r , c o m e

under c r i t i c i sm because o f ex t reme va r i ances i n

the f indings of m an y s tudies [17, 26] . In a b id to

exp la in t he va r i a t i on in re su l t s , a number o f

sub theo r i e s o f o rgan iza t iona l i nn ova t ion h ave

b e e n p r o p o s e d . F o r e x a m p l e , D a f t [ 7 ] h a s

p r o p o s e d t h a t o r g a n i z a t i o n a l i n n o v a t i o n s c a n

be b road ly ca t egor i zed as t echn ica l and

admin i s t ra t i ve . Th i s i s known as t he ' dua l co re '

mo de l o f i nn ova t ions [8, 14 ] . Sw anson [35 ] i n a

r e c e n t p a p e r h a s e x t e n d e d t hi s d u a l c o r e m o d e l

a n d p r o p o s e d a ' tr i - c o re ' m o d e l o f i n n o v a ti o n s .

However , t h i s mode l i s u sed to desc r ibe

i n f o r m a t i o n s y s te m s in n o v a t io n s . D e w a r a n d

D u t t o n [ 1 5 ] a n d E t t l i e

et a l .

[18] d is t inguish

be twee n rad i ca l and inc rem en ta l i nnova t ions .

M a r i n o [ 2 4 ] a n d Z m u d [ 4 1 ] d i st in g u i sh b e t w e e n

the i n i ti a t ion and im p lemen ta t i on s t ages o f the

a d o p t i o n o f i n n o v a t i o n s .

A c o m m o n t h r e a d

running through a l l these sub theories i s tha t a l l

innova t ions are no t s imi lar , there fore , organiz -

a t io n a l cha ra c te r i s t ic s wi l l ha ve d i f fe ren t imp a c t s

o n d i f f e ren t t yp es o f i n n o va t io n s . Thus , fo r

instance, D af t [7] suggests that h igh form al iza-

t i on and cen t ra l i za t i on fac i l i t a t e s t he adop t ion

of admin i s t ra t ive i nnova t ions . C onverse ly , low

formal i za t i on and cen t ra l i za ti on i s be l i eved to

fac i li t a te t he a dop t ion o f t echn ica l i nnova t ions .

D a m a n p o u r [ 9 ] f o u n d t h a t h i g h l e v e l s o f

o rgan iza t ion re source s l ack and h igh l eve l s o f

spec i a li za t ion p ro m ote t he ado p t ion o f t echn ica l

innova t ions ra the r t han admin i s t ra t i ve i nno-

vat ions. S imi lar ly , organizat ional s ize has

been found to be s ign i f i can t ly co r re l a t ed wi th

innova t ion adop t ions . La rge o rgan iza t ions t end

to adop t more i nnova t ions t han the i r sma l l e r

cou nter par ts [10, 22] . I t i s bel ieved that th is

i s because l a rge o rgan iza t ions have g rea t e r

r e s o u r c e s t o e x p e n d i n t h e a d o p t i o n a n d

implemen ta t i on o f i nnova t ions [13 ] .

Cons i s t en t w i th t h i s p rev ious re sea rch , t h i s

s tudy p roposes t ha t o rgan iza t iona l cha rac t e r -

i s t ics such as s ize , s t ructure , resource s lack e tc .

may have d i f fe ren t e f fec t s on o rgan iza t iona l

innova t iveness . Fu r the r , t hese o rgan iza t iona l

characteri s t ics may have s igni f icant ly d i fferent

e f fect s on t echn ica l and admin i s t ra t i ve i nno-

va t ions . As d i scussed ea r l i e r , h igh deg rees o f

fo rmal i za t i on and cen t ra l i za t i on a re be l ieved to

fac i li t a te t he ado p t ion o f admin i s t ra t i ve i nno-

va t ions . Converse ly , l ow degrees o f fo rmal i za -

t ion and c ent ra l iza t ion are bel ieved to faci l i ta te

the adop t io n o f techn ica l innova t ions [8 ] .

Fu r the r , pas t re sea rch a l so sugges t s t ha t h igh

l eve l s o f o rgan iza t ion re source s l ack , and h igh

level s o f speci a li za ti on , p ro mo te t he ad op t io n o f

t echn ica l i nnova t ions , ra the r t han admin i s t ra -

t ive inno vat ion s [9]. This leads to the fo l lowing

hypo theses .

H 1 H igh levels of cent ra l iza t ion and formal iza-

t ion wi l l be associa ted wi th h igh levels of

admin i s t ra t i ve i nnova t iveness .

H2 Lo w level s o f cen t ra l iza t i on and fo rm al i za -

t ion wi l l be associa ted wi th h igh levels of

technical innovat iveness .

H3 Hig h levels of specia l izat ion wi ll b e

assoc ia ted wi th h igh levels of technical

innovat iveness .

H 4 Hig h levels of orga nizat ion al s lack wi ll be

asso cia ted wi th h igh levels of techn ical

innovat iveness .

H5 Organizat ional s ize wi l l be d i rect ly associ -

a ted wi th technical and adm inis t ra t ive in-

nova t iveness .

3 .3 . Or gan iza t iona l per f o rman ce and nn ovat ion

A second s t ream o f va r iance re sea rch has

examined the a ssoc i a t i ons be tween l eve l s o f

innova t iveness and o rgan iza t iona l pe r fo rm-

a n c e [ 3 ]. C o m p a r e d t o t h e p r e v i o u s s t re a m o f

variance research, there are re la t ively few

s tud ies t ha t have examined the impac t o f

innova t iveness on o rgan iza t iona l pe r fo rmance .

These s tud i es have , u sua l ly , found tha t h igh

levels of innovat iven ess are assoc ia ted wi th h igh

level s o f o rgan iza t iona l pe r fo rma nce . How ever ,

D a m a n p o u r a n d E v a n [ 1 3] i n th e i r s t u d y f o u n d

no d i f fe rences i n pe r fo rmance be tween f i rms

wi th d i fferent levels of innovat iveness . In

ano th e r recen t s tudy An tone l l i [2 ] foun d tha t

l a te adop te rs o f t e l ecomm unica t ions i nno-

va t ions pe r fo rme d s ign i f ican t ly be t t e r t han ea r ly

adop te rs .

In t he f i eld o f s tra t eg ic m anage me n t t he re a re

several s tudies that have indi rect ly examined the

impac t o f i nnova t iveness on o rgan iza t iona l

pe r fo rmance . Organ iza t iona l s t ra t egy has been

concep tua l i zed and measu red in many d i f fe ren t

ways . Fo r i n s t ance , P o r t e r [28] has de f ined th ree

gener i c t ypes o f s t ra t eg i es - - l ow cos t , d i f fe ren -

t i a ti on , and midd le o f t he road . M i les and


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636 Subramanian, Nilakanta--Organizational Innovativeness

Snow [25] have defined four generic types o f

strategic orientations adopted by firms--

prospector, analyzer, defender, and reactor.

Venkatraman[39], on the other hand, has

developed a measure of strategy that utilizes an

interval scale variable instead of one that uses

categorical variables to represent strategies.

Regardless of the manner in which strategy has

been conceptualized, innovativeness is con-

sidered to be an integral dimension of

organizational strategy. High levels of innova-

tiveness are representative of aggressive and

creative strategies such as Miles and Snow's [25]

prospectors.

The findings in this area, however, are

equivocal. For instance, Hambrick [20] found

that defenders outperformed prospectors in

innovative as well as non-innovative industries

when cash flow and profitability were used as

measures of performance. When market share

was used as a measure of performance,

prospectors outperformed defenders only in the

innovative industries. Snow and Hrebiniak [34]

found that firms adopting various strategic

orientations can be financially successful.

However, they found that the nature of the

environment affects the relationship between

innovativeness and organizational performance.

Past research studies have employed several

measures of organizational performance. The

dilemma faced by researchers is that no single

measure of performance may fully account for

all aspects of organizational performance [34].

In a bid to address this problem researchers

have resorted to the use of multiple measures of

organizational performance [30]. Some studies

have employed measures such as return on asset

or profitability. However, as noted by Ham-

brick[20], prospectors who are the most

innovative firms in the Miles and Snow

typology, might not have high financial

performance, but are, often, high performers in

the area of market share. Furthe r, past research

has shown that there are distinct categories of

innovations which may have fundamentally

different characteristics e.g. technical and

administrative innovations. These innovations

could affect different aspects of organizational

performance. As organizations become larger,

they may emphasize administrative innovations

more than technical innovations because admin-

istrative innovations enhance coordination [8].

This, in turn, may reduce costs and promote

efficiency. Thus, administrative innovations

may have very different performance impli-

cations than those of technical innovations.

Thus, in summary, organizational perform-

ance has been measured using a variety of

measures. There are no guidelines available to

help researchers choose an appropriate measure

of organizational performance. Even when

multiple measures of organizational perform-

ance have been used, their selection has been

rather arbitrary and without any basis in theory.

One way to address this problem is to view

measures of organizational performance as a

dichotomy. Thus, organizational performance

may be measured using measures of efficiency

and/or measures of effectiveness. Measures of

efficiency have a cost-benefit focus--they

usually comprise a ratio of some inputs and

outputs. Financial ratios such as return on

assets, return on equity etc. are measures of

efficiency [30]. Measures of effectiveness have a

revenue generation focus-- and are measured by

variables such as market share, sales etc. This is

the approach adopted in this study.

This research proposes tha t there is a substan-

tive relationship between types of measures of

organizational performance and different types

of innovations. Using the dichotomy of

technical and administrative innovations, this

research proposes that technical innovations

and administrative innovations will lead to

improvements in fundamentally different types

of performance measures. Because administra-

tive innovations are believed to enhance

organizational coordination, it is expected that

high levels of this type of innovativeness will

lead to high levels of organizational efficiency.

Technical innovations, on the other hand, are

designed to make an organization more

competitive in the market, hence, high levels of

technical innovativeness are expected to lead to

high levels of organizational effectiveness. This

leads to the following hypotheses.

H6 There will be a direct association between

administrative innovativeness and organiz-

ational efficiency.

H7 There will be a direct association between

technical innovativeness and organiz-

ational effectiveness.

However, because this research has intro-

duced a new multidimensional measure of


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Omega, Vol . 24, No. 6 637

organizational innovativeness, there is no prior

research to guide the formulation of specific

hypotheses about substantive relationships

between each dimension of organizational

innovativeness, organizational characteristics,

and measures of organizational performance.

Thus, for instance, because there is no prior

research about the effects of organizational

formalization and centralization on the consist-

ency of innovation adoptions, any hypotheses in

this area will lack a theoretical basis. Hence, due

to the absence of relevant prior research, this

part of the research is exploratory in nature.

4 . R E S E A R C H M E T H O D A N D V A R I A B L E S

The data for this s tudy were collected using a

questionnaire based survey (see Appendix). The

domain of the sample was the banking industry,

specifically, banks in the mid-west region of t h e

United States. Approximately 350 banks were

contacted to participate in this study. In order

to ensure that the most appropriate respondent

answered our questionnaire, we first contacted

the CEO, or a high ranking executive in each

bank, and obtained their support for the

project. This individual examined our question-

naire and selected one or more respondents who

were considered to be the most qualified to

answer our questionnaire. The respondents

were, mainly, senior bank managers. Seven-

hundred questionnaires were mailed out and

200 responses were received. However, there

were missing data in some questionnaires which

were eliminated from the analyses. The final

sample comprised 143 responses. There was one

respondent from each bank, with the exception

of two banks, which had two respondents. Thus,

the data represented 141 banks. Bank perform-

ance data were collected from the accounting

information for banks compiled by Shesunoff

and Co. [33]. A more detailed description of the

operationalizations of the variables used in this

study is given below.

4.1 . I nn ova t iveness

We adopted the 'dual core' typology of

innovations in our study. A list of technical and

administrative innovations in the banking

industry was compiled using a literature search.

This list was then pre-tested using a panel of

banking industry executives. We distinguished

between the two types of innovations using the

following criteria stated by Damanpour e t a l .

([14], p. 588).

Administrative innovations are defined

as those that occur in the administrative

component and affect the social system of

an organization. The social system of an

organization consists of the organizational

members and the relationships among

them. It includes those rules, roles,

procedures, and structures that are related

to the communication and exchange

between organizational members. Admin-

istrative innovations constitute the intro-

duction of a new management system,

administrative process, or s taff develop-

ment program. An administrative inno-

vation does not provide a new product or

a new service, but it indirectly influences

the introduction of new products or

services or the process of producing them.

Technical innovations are defined as those

that occur in the operating component

and affect the technical system of an

organization. The technical system con-

sists of the equipment and methods of

operations used to transform raw ma-

terials or information into products or

services. A technical innovat ion, therefore,

can be the adoption of a new idea

pertaining to a new product or service, or

the introduction of new elements in an

organization's production process or ser-

vice operations.

This distinction between the two types of

innovations was also conveyed to the panel

of bank executives. After several iterations of

pre-testing and consolidation, a final list of 8

technical and 14 administrative innovat ions was

compiled and incorporated in the questionnaire.

The questionnaire was used to collect data

about the time of adoption of each innovation,

if the innovation was adopted and implemented

by a firm. The three dimensions of innovative-

ness were derived in the following way:

4 .1 .1 . M ean numbe r o f nnova tion adopt ions .

The total number of innovations adopted by

each firm was determined. The majority of the

technical innovat ion adoptions occurred during

t h e

1980-87 time period, and the administrative

innovations spanned the 1970-87 time period.


8/17

6 3 8 Subramanian, Nilakanta--Organizational lnnovativeness

Damanpour and Evan [13], in their study, used

data spanning 5 years because they believed tha t

a 5-year time period was sufficiently long to

manifest the effects of innovations on organiz-

ational performance.

The mean number of innovation adoptions

for each firm was computed in the following

manner: First, the number of years between the

adoptions of the first and last innovations was

determined. Second, the total number of

innovations adopted by the firm over this time

period (time period between the first and last

innovation adoptions) was determined. Finally,

the mean number of innovation adoptions was

computed by dividing the total number of

innovation adoptions by the number of years

between the first and last innovation adoptions.

4.1.2. M ean time o f innovation adoption. This

variable was used to measure the time of

innovat ion adoption of each firm relative to the

other firms. For each innovation, the adoption

time of the last adopting firm was determined.

The time of adoption of each innovation, for

each firm, was computed by adding one to the

last year of adoption of each innovation, and

subtracting the year of adoption of that

innovation. For example, in the case of the

ATM innovation-- if firm 'X' adopted ATMs in

1984, and if the last adopter of ATMs adopted

it in 1987, then the time of adoption o f firm 'X'

was computed by subtracting 1984 from 1988

(1987 + 1). If, however, another firm adopted

ATMs in 1986, then its time of adoption would

be computed by subtracting 1986 from 1988

(1987 + 1). Thus, early adopters would have

higher scores on this dimension than late

adopters and the last adopter of each inno-

vation would have a score of 1. In addition,

those firms that did not adopt an innovation

were assigned a score of zero. Thus, non-

adopters of innovations were treated as very late

adopters--their scores were lower than those of

the actual last adopters. The mean time of

adoption was then computed, for each firm, for

all its innovations.

4.1.3. Con sistency of the time of adopt ion.

This variable was used to measure the

consistency with which firms adopted inno-

vations early (or late). This variable was

operationalized for each firm by determining the

coefficient of variability of the times of adoption

of each innovation . The coefficient of variabil ity

is a normalized measure. It is computed by

dividing the standard deviation o f a set of scores

by the mean value of that set of scores. Thus,

firms that adopted innovations

consistently

earlier (or later) than others would have lower

coe~cients o f variability than firms which were

relatively inconsistent in their times o f adoption .

4.2. Organizational performance

Past research has employed several measures

of organizational performance. Unfortunately,

it is also well known that no single measure of

performance may fully account for all aspects of

organizational performance [34]. Many studies

have employed measures such as return on

assets or profitability. In this study two

measures of organizational performance were

utilized. Organizational efficiency was measured

by return on assets. Organizational effectiveness

was measured by the share of deposits for each

bank. Because banks compete with each other

for customer deposits, 'deposit share' may be

viewed as a measure of market share in the

banking industry. The data were obtained from

accounting information on banks compiled by

Shesunoff and Co. [33] for the year 1987.

4.3. Organizational characteristics

Five organizational characteristics were uti-

lized in this research--degree of centralization,

degree of formalization, degree of specializ-

ation, amount of organizational slack resources,

and organizational size.

The extent of centralization, formalization,

and specialization were measured by multiple

items in the questionnaire. Mean scores were

used as measures of centralization, formaliza-

tion and specialization. Table 1 shows the

reliabilities of the items used to measure these

factors. All items show acceptable levels of

reliability.

The amount o f organizational slack resources

was measured by net income because it

represents resources that are available for the

development and adopt ion of innovations [9].

Organizational size was measured by the

T ab l e 1 . R e l iab i l i ti e s o f o rg an i za t i o n a l m eas u res

O rg an i z a t i o n a l ch a ra c t e r i s t i c s I n t e r - i t em co r r e l a t i o n ( r e l i ab il i t y )

C e n t r a l i z a t i o n 0 . 8 9

F o r m a l i z a t i o n 0 . 9 1

S i ze n o t ap p l i cab l e~

S l a c k n o t a p p l i c a b l e~

S p ec i a l i za t i o n 0 . 8 7

' S iz e a n d s l a c k w e r e m e a s u r e d u s i n g o b j e ct i v e r a t i o s c a le d m e a s u r e s .


9/17

Omega, V ol. 24, No. 6 639

Share of

Deposits

Retum on

Assets

Mean Number

of Innovation

Adoptions

Mean Time

of Innovation

Adoptions

Consistencyof Time

of Innovation

Adoptions

Centralization

Formalization

Size

Slack

Specialization

Fig. 1. Research model,

number of employees in the organization. The

data on organizational slack and size were

obtained from Shesunoff and Co. [33]. All these

data about organizational factors were collected

in 1987.

5. RESULTS

5 .1 . T e s t o f hy p o th e s es H 1 - H 5

Path analyses were performed on the data

using the research model depicted in Fig. 1. Two

separate path analyses were conducted for the

two types of innovations. The results of the two

path analyses are shown in Figs 2 and 3 which

depict the statistically significant path co-

efficients between the relevant variables.

Past research has suggested that organiz-

ational characteristics such as centralization,

formalization etc. are correlated. Therefore, in

our path models we specified the organizational

characteristics to be correlated. Furthermore,

we also specified the three dimensions of

innovativeness to be correlated. These corre-

lations, however, are not depicted in Figs 2 and

3 in the interests of clarity. Table 2 (a) and (b)

depict the correlations among all the relevant

variables. The results relevant to hypotheses

H1-H5 are displayed in Tables 3 and 4.

For the administrative innovations, central-

ization, formalization, size, and specialization

were significantly associated with innovative-

ness. High levels of centralization were associ-

ated with early and consistent adoptions.

High levels of formalization were significantly

associated with consistent adoptions. Large

organizations adopted a larger number of

administrative innovations than their smaller

counterparts. Finally, organizations with high

levels of specialization adopted administrative

innovations late and inconsistently. Thus,

overall, hypotheses H1 and H5 were supported.

The negative association between specialization

and administrative innovations, however, was

an unhypothesized (although not surprising)

result. It suggests that an organization with a

large number of specialists may find it harder to

adopt and implement administrative inno-

vations than one with fewer specialists.

For the technical innovations, centralization,

size, specialization, and organizational slack

were significantly associated with innovative-

ness. Centralization was negatively associated

with the number of innovation adoptions and

the time of adoptions. Organizational size

was significantly associated with the time of

adoptions. Specialization and organizational

slack were significantly associated with all three


10/17


d imens ions o f innova t iveness . Thus , ove ra l l ,

h y p o t h e s e s H 2 - H 5 w e r e s u p p o r t ed . H y p o t h e s i s

H2, however was on ly pa r t ia l ly suppor ted be -

cause there was no s ta t is t ica l ly s ignif icant nega-

t ive a ssoc ia t ion be tween fo rmal iza t ion and any

of the d imens ions o f t echn ica l innova t iveness .

Overa l l , the re su l t s show tha t o rgan iza t iona l

cha rac te r i s ti c s d id n o t have a un i fo rm re la t ion -

sh ip wi th each d imens ion o f innova t iveness .

Fur the rmore , o rgan iza t iona l fac to rs had d i f fe r -

en t a f fec t s on the adop t ion o f the two types o f

innova t ions . H igh degrees o f cen t ra l iza t ion and

fo rmal iza t ion , toge the r , a f fec t a l l th ree d imen-

s ions o f admin is t ra t ive innova t iveness. O rgan iz -

a t iona l s ize d i rec t ly a f fec ted the number o f

admin is t ra t ive innova t ions tha t were adop ted .

Organ iza t iona l spec ia l iza t ion ac tua l ly h indered

ea r ly and cons i s ten t adop t ion o f admin is t ra t ive

innova t ions . When techn ica l innova t ions were

adop ted , however , h igh o rgan iza t iona l spec ia l -

iza t ion and the ava i lab i l i ty o f o rgan iza t iona l

s lack posi t ively affected a l l three d imensions of

techn ica l innova t iveness . La rge o rgan iza t ions

adop ted techn ica l innova t ions ea r ly . F ina l ly ,

h igh degree o f cen t ra l iza t ion nega t ive ly af fec ted

t h e n u m b e r o f t e c h n i c a l i n n o v a t i o n s a d o p t e d

and a l so h indered ea r ly adop t ions o f t echn ica l

innovations. These resul ts , overal l , a re consis t-

en t wi th the f ind ings o f p rev ious re sea rch .

5 .2 . T es t s o f h ypo theses 1 16 and H 7

The resu lt s o f the pa th ana lyses a l so show the

assoc ia t ions be tween o rgan iza t iona l pe r fo rm-

ance and innova t iveness . These re su l t s a re

repor ted in Tab les 5 and 6 .

Adminis tra t ive innovativeness was s ignif i -

cant ly associa ted with organizat ional eff ic iency

measured by ROA. Specif ical ly , organizat ions

t h a t a d o p t e d a l a r g e r n u m b e r o f a d m i n i st r a ti v e

innova t ions pe r fo rm ed mo re e f f ic ient ly than the

o the rs . Thus , hypo thes i s H6 was suppor ted .

Hypo thes i s H7 which s ta ted tha t t echn ica l

innova t iveness wou ld be a ssoc ia ted wi th o rgan-

izat ional effect iveness was a lso suppo rted.

However , the re su l t s ind ica te tha t t echn ica l

innovativeness is d irect ly associa ted with

both

re turn on assets (organizat ional eff ic iency) and

deposi ts share (organizat ional effect iveness) .

Specif ical ly , ear ly adoptions of technical inno-

vat ions enhanced organizat ional effect iveness .

In add i t ion , o rgan iza t iona l e f fic iency was

e n h a n c e d b y a d o p t i n g m o r e t e c h n i c a l i n n o -

va t ions and adop t ing them in a cons i s ten t

manner . Th is sugges t s tha t admin is t ra t ive

innovativeness leads to s ignif icant improve-

ments in organizat ional eff ic iency. Technical

innova t iveness , on the o the r hand , improves

orga nizat io nal eff ic iency and effectiveness .

Share

o

Deposi ts

Re tu rn on

Assets

0

Mean Number

of Innovation

Adoptions

Moan Time

of Innovation

Adoptions

Consistency of Time

of Innovation

Adoptions

j 7

Fig . 2 . Admini s t ra t ive innovat ions ,

Centralization

Formalizat ion

Size

Slack

Specialization


11/17

Ome ga , Vo l . 24 , No . 6 641

S h a r e o f

Deposits

R e t u r n o n

A s s e t s

Mean Number

of Innovat ion

Adopt ions

Me an Time

of Innovat ion

Adopt ions

C o n s i s t e n c y o f T i m e

of Innovat ion

Adopt ions

C e n t r a l i z a t i o n

F o r m a l i z a t i o n

Size

Slack

S p e c i a l i z a t i o n

Fig. 3. Technical innovat ions.

6. DISCUSSION

There is a large body of research on the

adoption of innovations. Although research

studies in this area are motivated by many

different objectives, there is a common thread

that runs t hrough all of them- -the identification

of innovative firms. The identification of

innovative firms is closely linked to the manner

in which innovativeness is measured. A variety

of measures of innovativeness have been

employed in past research studies. However, as

discussed earlier, the conceptualization of

innovativeness as a unidimensional construct is

inappropriate. Innovativeness refers to an

enduring trait that is consistently exhibited by

truly innovative firms over a period of time.

This study has proposed and used a multidimen-

sional measure of innovativeness that incorpor-

ates three dimensions:

1. Mean number of innovation adoptions

over time.

2. Mean time of innovation adoption over

time.

3. Consistency of the time of innovation

adoption.

As stated in Sections 3.2 and 3.3 , past

research studies examining the relationships

between organizational innovativeness and

organizational characteristics have yielded equi-

vocal results. Some researchers have concluded

that this is because there are various types of

innovations that have fundamentally different

characteristics. Thus, for instance, it is believed

that technical and administrative innovations

have different relationships with organizational

characteristics. Similarly, research examining

the impact of innovativeness on organizational

performance has also yielded mixed results.

Furthermore, a variety of performance

measures have been utilized, thus making it

difficult to draw any generalizable conclusions

from this body of research.

One o f the motivations for this research was

our belief that these conflicting results could be

due to weaknesses in the measurement of

innovativeness. We believed that a comprehen-

sive measure, that recognized and incorporated

the temporal nature of organizational innova-

tiveness, would be better able to explain the

variability in the results of past research.

Our belief has been borne out by the results

of this study. For example, it was found that

high degrees of organizational centralization

and size were associated with high levels of

administrative innovativeness--a result that

supports past research. However, centralization

and size do not affect all three dimensions of


12/17

642


Table 2. Correlation matrix

Mean Time Consist

1.0000

0.1803 1.0000

0.1286 0.0605 1.0000

-0.015 1 0.3133 -0. 326 2

0.2814 0.1801 -0 .3 36 6

0.1901 0.2104 -0. 09 02

0.0015 0.1223 -0 .0 75 7

-0.0 053 -0.00 01 0.0067

0.0224 0.1591 0.0669

0.2174 -0 .0 59 4 0.0031

(a) Administrative innovations

Cent F orm Size Slack Spec Depsh ROA

1 . 0 0 0 0

0.3964 1.0000

0.0668 0.2085 1.0000

0.0676 0.0927 0.6243 1.0000

0.5178 0.4272 -0. 07 33 -0 .0 77 0 1.0000

0.0152 0.1511 0.2503 0.3307 - 0.0511 1.0000

-0.0431 -0.0031 -0.047 6 -0.0123 -0.0326 -0.0172 1.0000

(b) Technical innovations

1.0000

0.1930 1.0000

0.3410 -0 .0 32 6 1.0000

--0.0439 -0.0744 -0.0028

0.0573 0.0415 0.0008

0.0974 0.5395 -0 .1 12 7

0.2321 0.5581 -0. 229 1

0.1450 0.1622 -0. 187 1

0.1472 0.2153 0.0750

0.3781 -0.0333 --0.0601

1 . 0 0 0 0

0.3964 1.0000

0.0668 0.2085 1.0000

0.0676 0.0927 0.6243 1.0000

0.5178 0.4272 -0. 073 3 -0 .0 77 0 1.0000

0.0152 0.1511 0.2503 0.3307 -0 .0511

-0.0431 -0.0031 -0.0476 -0.0123 -0.0326

1.0000

- 0 . 0 1 7 2 1 . 0 0 0 0

Mean = mean number of innovation adoptions

Time = mean time of innovation adoptions

Consist = consistency of time of innovation adoptions

Cent = centralization

Form = formalization

Size = size

Slack = slack

Spec = specialization

Depsh = share of deposits

ROA = return on assets

administrative innovativeness equally. High

degrees of centralization lead to early and

consistent adoptions, however, they do no t have

any effect on the number of administrative

innovations adopted. Organizational size, on the

other hand, significantly influences the number

of administrative innovations adopted. This may

be due to the fact that centralization of

decision-making results in quicker decisions

because fewer individuals are involved than in a

decentralized organization. Also, when the same

set of individuals makes decisions, the decisions

may be more consistent than when different

individuals are involved in each decision.

Although the centralization of decision-making

results in consistently early adoptions, it need not

necessarily lead to a large number of adoptions.

The number of administrative innovations

adopted is a function of the coordination needs

of the organization. Large organizations have a

greater need for coordination than smaller ones.

As a result, organizational size determines the

number of administrative innovations adopted.

Thus, the difference in the impact of organiz-

ational centralization on each dimension of

innovativeness sheds light on the inconsistent

findings of previous research. If administrative

innovativeness had been measured based only on

the mean number of adoptions, such as in past

research, no significant relationships would have

been found between centralization and innova-

tiveness. However, if administrative innovative-

ness were measured based on the time of

adoption, one would find a significant associ-

ation between centralization and administrative

innovativeness.

Table 3. Administrative innovations

Organizational characteristics

Innova tivene ss Centralizatio n Formali zation Size Slack resources Specialization

Mean number of in n o v a t io n a d o p t io n s -0. 10 0.33' 0.23 -0. 17 -0.0 9

M e a n t i m e o f i n n o v a t i o n a d o p t io n s

0.39~ 0.09 0.17 -0. 04 -0. 23 '

Variability (consistency) of time of innovation adoptions b -0. 37 -0. 35 0.04 -0. 02 0.35'

'Statis ticall y significant at a = 0.05

bA n e g a t iv e a s so c ia t i o n between variability of time of ado ption and organizational factors implies a p o s i t i v e a s so c ia t i o n b e t w e e n c o n s i s t e n c y

of time of adoption a n d o r g a n iz a t io n a l f a c t or s .


13/17

Omega, Vol. 24, No. 6

T a b l e 4 . T e c h n i c a l i n n o v a t i o n s

6 4 3

O r g a n i z a t i o n a l c h a r a c t e r i s t ic s

I n n o v a t i v e n e s s C e n t r a l i z a t i o n F o r m a l i z a t i o n S iz e S l a c k r e s o u r c e s S p e c i a li z a t io n

M e a n n u m b e r o f i n n o v a t io n a d o p t i o n s - 0 . 2 9 ~ 0 .1 4 - 0 . 0 9 0 . 3 1 ' 0 .2 5~

M e a n t im e o f i n n o v a t i o n a d o p t i o n s - 0 . 3 2 ' - 0 . 0 1 0 . 3 4 ' 0 .4 0 0 .3 9

V a r i a b i l it y ( c o n s i st e n c y ) o f t i m e o f i n n o v a t i o n a d o p t i o n s b 0 . 1 3 0 . 0 6 0 . 0 2 - - 0 . 2 8 - - 0 . 3 0

Stat i s t i ca l ly s igni f i cant a t ~t = 0 .05

b A n e g a t iv e a s s o c i a t i o n b e t w e e n v a r i a b i l it y o f t i m e o f a d o p t i o n a n d o r g a n i z a t i o n a l f a c t o r s i m p l ie s a p o s i ti v e a s s o c i a t i o n b e t w e e n c o n s i s te n c y

o f t i m e o f a d o p t i o n a n d o r g a n i z a t i o n a l f a c t o r s .

T a b l e 5 . A d m i n i s t r a t i v e i n n o v a t i o n s

I n n o v a t i v e n e s s

O r g a n i z a t i o n a l M e a n n u m b e r o f M e a n t i m e o f i n n o v a t i o n V a r i a b i l i ty ( c o n s is t e n c y ) o f t i m e o f

p e r f o r m a n c e i n n o v a t i o n a d o p t i o n s a d o p t i o n s i n n o v a t io n a d o p t i o n s

D e p o s i t s h a r e - 0 . 0 1 0 . 16 0 . 0 6

R e t u r n o n a s s e t s 0 . 2 4~ - 0 . 1 - 0 . 0 2

S t a t i s t i ca l ly s i g n i f i can t a t c t = 0 . 0 5

~ A n e g a ti v e a s s o c i a t i o n b e t w e e n v a r i a b i l i t y o f t im e o f a d o p t i o n a n d o r g a n i z a t i o n a l p e r f o r m a n c e i m p l i es a p o s i ti v e a s s o c i a t io n b e t w e e n

c o n s i s t e n c y o f t i m e o f a d o p t i o n a n d o r g a n i z a t i o n a l p e r f o r m a n c e .

Anothe r i n t e res t i ng f i nd ing was t he s t a t i s t i -

ca l l y s ign i f i can t nega t ive a ssoc i a t i on be tween

the deg ree o f o rgan iza t iona l spec i a li za t ion an d

two d imens ions o f admin i s t ra t i ve i nnova t ive -

n e s s - - n a m e l y , t im e o f a d o p t i o n , a n d c o n s i st -

ency o f t ime o f adop t ion . Techn ica l spec i a l i s t s

a re b rough t i n to o rgan iza t ions t o hand le

complex t echn ica l func t ions . They , t yp i ca l ly ,

have dec i s ion -mak ing au tho r i t y i n t he i r a rea

o f exper ti se . As a re su l t , t he i n t rodu c t ion

of admin i s t ra t i ve i nn ova t ions i n an a rea

requ i res t he coope ra t ion o f the re l evan t

spec ia l is t s . The t a sk o f ob t a in ing c oope ra t ion

m a y b e c o m e c o m p l e x a n d s l ow i f a l a rg e

number o f t echn ica l spec i a l i s t s a re i nvo lved .

Th i s may l ead to s low and incons i s t en t pa t t e rns

o f admin i s t ra t i ve i nnova t ion ado p t ions . Once

again , these resul t s help expla in the inconsis ten-

cies in the f indings of prior rese arch. I f

admin i s t ra t i ve i nnova t iveness were measu red

us ing

o n ly

t h e m e a n n u m b e r o f i n n o v a t i o n

adop t ions , a s i n p rev ious re sea rch , one wou ld

conc lude tha t o rgan iza t iona l spec i a l i za t i on has

no a f fec t on admin i s t ra t i ve i nnova t iveness .

How ever , i f admin i s t ra t i ve i nnova t iveness were

measu red us ing the t ime o f i nnova t ion adop-

t ion , one would f ind a s ta t i s t ica l ly s igni f icant

re l a t i onsh ip be tween the deg ree o f o rgan iz -

a t ional specia l izat ion and adminis t ra t ive inno-

vat iveness .

F rom our re su l t s and the above d i scuss ion i t

i s ev iden t t ha t o rgan iza t iona l fac to rs have

signi f icant ly d i fferent inf luences on each dimen-

s ion o f o rgan iza t iona l i nnova t iveness . Som e

fac to rs fac i li t at e t he adop t ion o f a la rge num ber

o f i nnova t ions , o the rs fac i l it a t e ea r ly ado p t ions ,

a n d s o m e o t h e r s p r o m o t e c o n s i s t e n c y i n t h e

pa t t e rn o f adop t ion . C onseque n t ly , we be l ieve ,

pas t re sea rch s tud i es t ha t have employed

var ious un id imens iona l m easu res o f i nnova t ive -

ness have obta ined confl ic t ing resul t s .

S imi l a r reason ing can be ex t ended to t he

re l a ti onsh ips be tween innova t iveness ( t echn ica l

and admin i s t ra t i ve ) , and o rgan iza t iona l pe r -

fo rmance . I t was found tha t t he ado p t ion o f a

l a rge num ber o f techn ica l and adm in i s t ra t i ve

innova t ions l eads t o g rea t e r o rgan iza t iona l

eff ic iency. If , however, innovat iveness were

m e a s u r e b a s e d

only

on the t ime o f adop t ion ,

o n e w o u l d c o n c l u d e t h a t e a r l y a d o p t i o n s o f

T a b l e 6 . T e c h n i c a l i n n o v a t i o n s

I n n o v a t i v e n e s s

O r g a n i z a t i o n a l M e a n n u m b e r o f M e a n t i m e o f i n n o v a t i o n V a r i a b i l it y ( c o n s is t e n c y ) o f t i m e o f

p e r f o r m a n c e i n n o v a t i o n a d o p t i o n s a d o p t i o n s i n n o v a t i o n a d o p t i o n

D ep o s i t s h a r e 0 . 0 9 0 . 2~ 0 . 0 5

R e t u r n o n a s s e t s 0 . 4 8~ - 0 .13 - 0 .23

'S t a t i s t i ca l l y s i g n i f i can t a t ~ t = 0 . 0 5

b A n e g a t iv e a s s o c i a t i o n b e t w e e n v a r i a b i l i t y o f ti m e o f a d o p t i o n a n d o r g a n i z a t i o n a l p e r f o r m a n c e i m p l i es a p o s i ti v e a s s o c i a t io n b e t w e e n

c o n s i s t e n c y o f t i m e o f a d o p t i o n a n d o r g a n i z a t i o n a l p e r f o r m a n c e .


14/17

644 Subramanian, Nilakanta--Organizational lnnovativeness

i nnova t ions have no e f fec t on o rgan iza t iona l

eff ic iency. S imi lar ly , i t was a lso found that the

t im e o f a d o p t i o n o f t e c h n ic a l i n n o v a t i o n s

signi f icant ly affects an organizat ion 's effect ive-

ness . Onc e again , i f technical innov at ivenes s

w e r e a s s e s s e d b a s e d o n l y o n t h e n u m b e r o f

t echn ica l i nnova t ions adop ted , one wou ld

c o n c l u d e t h a t t h e n u m b e r o f i n n o v a ti o n s

adop ted has no a f fec t on an o rgan iza t ion ' s

effectiveness.

In add i t i on to exp la in ing the i ncons i s t enc i es

o f pas t re sea rch , t h is s t ud y p rov ides o the r

in terest ing insights . Fo r instance, ou r resul t s

describ ing the effect of levels of technical and

admin i s t ra t i ve i nnova t iveness on o rgan iza t iona l

p e r f o r m a n c e s h o w t h a t b o t h t y p e s o f i n n o v a -

t iveness pr om ote o rgan izat iona l eff ic iency.

Specifically, orga niz atio nal efficiency is facil i-

t a t e d b y t h e a d o p t i o n o f l ar g e n u m b e r s o f b o t h

t y p e s o f i n n o v a ti o n s . E q u a l l y i m p o r t a n t w a s t h e

finding that f i rms that were consis tent in thei r

t ime o f ado p t ion pe r fo rme d m ore e f f ic i ent ly

than f i rms tha t va r i ed t he i r t ime o f adop t ion .

Thus , e f f ic i ency ga ins can be ach i eved b y

a d o p t i n g a l a rg e n u m b e r o f i n n o v a t io n s , a n d

hav ing a cons i s t en t s t ra t egy o f adop t ion . I t is

genera l l y be l i eved tha t i nnov a t ion ad op t ion

faci l i ta tes o rgan izat ion al learning [38]. There -

f o r e , f r e q u e n t a n d c o n s i s t e n t a d o p t i o n o f

innova t ions cou ld m ake a f i rm m ore e ff ic ien t i n

i t s performance than i t s r ivals . This consis tency

in i nnova t iveness has been ignored by pas t

re sea rch . Our re su l t s sugges t t ha t f i rms tha t

a d o p t e d a s t r at e g y o f c o n s i s te n t i n n o v a t i o n

a d o p t i o n m a y h a v e p r o g r e s s e d f a s t e r o n t h e

' l ea rn ing cu rve ' , and consequen t ly , become

more eff ic ient than o thers [27 , 38] .

Ano the r i n t e res t i ng re su l t was t he re l a t i on -

sh ip be twee n o rgan iza t iona l e f fec ti veness and

the two types o f i nnova t iveness . O ur re su l t s a l so

ind ica t e t ha t f i rms tha t adop ted t echn ica l

innova t ions ea r ly , were mo re e f fec t ive i n ga in ing

marke t sha re t han those t ha t were l a t e adop te rs .

Thus , admin i s t ra t i ve i nnova t ions do no t en -

hance o rgan iza t iona l e f fec ti veness . Techn ica l

innova t ions , however , s i gn i f i can t ly improve

organ iza t iona l e f fec t i veness

only

i f t he i nno-

va t ions a re adop ted ea r ly . Th i s re in fo rces pas t

f i nd ings t ha t t he re a re i nhe ren t ' f i r s t mover '

adv anta ges [16]. Inn ova t ive f i rms ca n s ignif i-

c a n t l y o u t p e r f o r m t h e i r c o m p e t i t o r s b y a d o p t -

ing t echn ica l i nnova t ions ea r ly . The adop t ion o f

a l a rge num ber o f techn ica l i nnova t ions , o r t he

ex i s t ence o f a cons i s t en t pa t t e rn o f adop t ion ,

does no t make an o rgan iza t ion s ign i f i can t ly

more compe t i t i ve .

7 . CONCLUSION

Pas t re sea rch s tud i es t ha t have examined

the o rgan iza t iona l d e t e rminan t s o f i nnova t ion

adop t ion s , an d the ef fec t o f i nnova t ions on

organ iza t iona l pe r fo rmance have de l ive red

inconclusive f indings. This s tud y was based on

the a ssumpt ion tha t t he mixed re su l t s were due

to t he na r row and pa roch ia l v i ew o f i nnova t ive -

ness employed by pas t re sea rch s tud i es .

The re su l t s ob t a ined in t h i s s t udy show tha t

subs t an t ive re l a t i onsh ips do ex i s t be tween

organ iza t iona l fac to rs , o rgan iza t iona l i nnova-

t iveness , and o rgan iza t iona l pe r fo rm ance . These

re l a ti onsh ips , howe ver , a re complex , and can be

de t ec t ed on ly i f i nnova t iveness i s mea su red as a

mul t i d imens iona l cons t ruc t . E ach o f t he o rgan -

i za t i ona l fac to rs examined in t h i s s t udy showed

signi f icant ly d i fferent effects on each dimension

of t he two types o f o rgan iza t iona l i nnova t ive -

ness . Furth er , the resul t s sho w that innov at ive-

ness does improve o rgan iza t iona l pe r fo rmance .

H o w e v e r , e a c h d i m e n s i o n o f t h e t w o t y p e s

o f i nnova t iveness a f fec t s d i f fe ren t a spec t s o f

o rgan iza t iona l pe r fo rmance .

Al though the re su l t s a re i n t e res t i ng and

promis ing , t hey mus t be v i ewed wi th cau t ion

because there are l imi ta t ions in th is research.

As men t ioned in t he l i t e ra tu re rev i ew, some

resea rche rs have d i s t i ngu i shed be tween inno-

va t ions based up on the ' r ad i ca lness ' o f the

innova t ions [15 , 18 ] . In ou r re sea rch we have

chosen to d i s t i ngu i sh be tween innova t ions

based on the i r p r imary pu rpose ( t echn ica l v s

adminis t ra t ive) . Thus, we have impl ic i t ly as-

sumed tha t t he i nnova t ions a re s imi l a r w i th

respec t t o the i r ' r ad ica lness '. Fu tu re re sea rch in

th is area c an exten d th is line of research b y

d i s ti ngu i sh ing be tween rad i ca l (and inc remen-

t a l ) t echn ica l i nnova t ions and rad i ca l (and

inc remen ta l ) admin i s t ra t i ve i nnova t ions . Fu r -

the r, even thou gh the re l i ab i l it y o f t he

ins t rumen t u sed to measu re o rgan iza t iona l

fac to rs i s accep tab l e , i t mu s t be po in t ed ou t t ha t

i t i s a non-va l ida t ed in s t rumen t . Fu tu re re sea rch

e f fo r t s i n t h i s a rea shou ld be conduc ted us ing

va l ida t ed measu res o f o rgan iza t iona l fac to rs .

F ina l ly , because the o rgan iza t iona l pe r fo rma nce

m e a s u r e s w e r e o b t a i n e d a t t h e e n d o f


15/17

Ome ga , Vo l . 24 , No . 6 645

t h e r e l e v a n t t i m e p e r i o d , t h e y m a y a l s o b e

a f f e c t e d b y f a c t o r s o t h e r t h a n t h e i n n o v a t i o n s

a d o p t e d .

I n c o n c l u s i o n , t h e r e c o n c e p t u a l i z a t i o n o f

i n n o v a t i v e n e s s a s a m u l t i d i m e n s i o n a l c o n s t r u c t

p r o p o s e d i n t h i s s t u d y h e l p s e x p l a i n t h e m i x e d

r e s u l ts o f p a s t r e s e a r c h . I t e m p i r i c a l l y v a l i d a t e s

s u b s t a n t i v e r e l a t i o n s h i p s s u g g e s t e d b y p a s t

r e s e a r c h . F u t u r e r e s e a r c h i n t h e a r e a o f

i n n o v a t i o n a d o p t i o n s m u s t u t i l i z e c o m p r e h e n -

s iv e m e a s u r e s o f i n n o v a t i v e n e s s s u c h a s th e o n e

p r o p o s e d i n t h i s s t u d y . F i n a l l y , t h e s u b s t a n t i v e

r e l a t i o n s h i p s e x p l o r e d i n t h i s r e s e a r c h s h o w

e v i d e nc e o f c o m p l e x i n t e r a c ti o n s b e t w e e n

v a r i o u s d i m e n s i o n s o f t h e o r e t i c a l c o n s t r u c t s .

C o n c l u s i v e a n d g e n e r a l iz a b l e r e s u lt s c a n e m e r g e

i f r e s e a r c h e r s r e c o g n i z e t h e m u l t i d i m e n s i o n a l

n a t u r e o f t h e o r e t i c a l e n ti t ie s i n t h i s d o m a i n o f

r e s e a r c h , a n d f o c u s t h e i r e f f o r t s o n u n d e r s t a n d -

i n g th e c o m p l e x i t y o f t h e r e l a t i o n s h i p s b e t w e e n

t h e s e t h e o r e t i c a l e n t i t i e s .

A P P E N D I X

T h i s A p p e n d i x r e p r o d u c e s t h e q u e s t i o n n a i r e

u s e d i n t h e r e s e a r c h r e p o r t e d i n t h e p a p e r .

INNOVATIONS

Pleas e ind icate a ) i f your bank of fers or uses

the fo l lowing services whichever i s appl icable) ,

and b) the year in which these services were f irs t

adopted by your bank .

Type

of Service Service Year o f

o f fered Adopt ion

Discount brokerage Yes No

service

Full service brokerage Yes No ....

service

Cash management Yes No

accounts

Automated Teller Yes No

Machines (ATMs)

Debit cards Yes No

Point of Sale (POS) Yes No

terminals

Electronic Yes No

communication to

customers

Lease financing Yes No

Please ind icate whether your bank has adopted

the fo l lowing administrat ive mechanisms. I f yes ,

p lease ind icate the year in which each of these

mechanisms were f irs t adopted .

Type

o f M e c h a n i s m M e c h a n i s m Y e a r o f

adopted Adopt ion

Automated personnel Yes No

records

Form al strategic Yes No

planning

Management by Yes No

objectives

Zero-based budgeting Yes No

Continuing education Yes No

programs for employees

Job rotation Yes No

Flex-time Yes No

Special task force for Yes No

ad-hoc problems

Incentive/reward Yes No

systems for officers

Incentive/reward Yes No

systems for non-officers

Formal feedback Yes No

systems for custom ers

Custom er information Yes No

files

Database management Yes No

systems

Facsimile transmissions Yes No

ORGANIZATIONAL CHARACTERISTICS

The fo l lowing i tems measure some structural

character is t ic s o f your organizat ion. P lease

answer by se lec t ing the a l ternat ive that best

descr ibes your organizat ional character is t ic s .

Forma l i za t ion . C o m p a r e d t o o t h e r b a n k s i n

y o u r a r e a , t h e u s e o f w r i tt e n j o b d e s c r i p t i o n s f o r

a l l c l a s s e s o f e m p l o y e e s is:

a . l i m i t e d b . m o d e r a t e

c . e x t e n s i v e d . w r i t t e n d e s c r i p t i o n s d o n o t e x i s t

Compared to o ther banks in your area , the use

of wri t ten pol ic ies and procedures to gu ide the

act ions o f bank employees i s :

a . l i m i te d b . m o d e r a t e

c . e x t e n s iv e d . w r i t t e n p o l i c i e s / p r o c e d u r e s d o

n o t e x i s t

Centra l izat ion.

When an operat ing department

produces resu l t s which deviate from i t s p lans , the

instruct ions to tak e appropriate correc t ive ac t ions

usual ly come from:

a . T o p m a n a g e m e n t

b . T h e o p e r a t i n g d e p a r t m e n t i t s e l f

c . U n c e r t a i n ; s o m e t i m e s t h e t o p m a n a g e -

m e n t , a n d o t h e r t i m e s t h e o p e r a t i n g

d e p a r t m e n t

Consider a recent projec t undertaken by your

bank that required set t ing up a spec ia l task force .


16/17


There may have been situations when this task

force encountered deviat ion from what was

planned. During these situations, the instructions

to take corrective action usually came from:

a. Top managemen t

b. The opera ting departme nt i tself

c. Uncertain; sometimes the top manage-

ment, and other t imes the operating

depar tment

S p e c i a l i z a t i o n Organizations differ in their

wil l ingness and abil i ty to transfer employees

among d i f ferent departments . Employees may be

hired and trained to handle only specific tasks in

specific departments, or they may be hired and

trained to handle a variety of tasks across

different departments. Please indicate which of

the fol lowing best characterizes your bank.

a. We seldom transfer empl oyees across

depar tments

b. We often transfer employees across de-

par tments

c. Some of our employees are seldom

transferred across depart ments while some

are often transferred

d. We do not really have a policy o n

employee transfers

Please indicate which of the fo l lowing best

describes your criteria for hiring employees

a. We select individu als that fully meet ou r

requi rement s for specific technical skills in

each functional area

b. We select individ uals with gene ral skills

and then train them in-house in functional

areas

c. We define a min im um set of skills and

select individuals that meet our min imu m

set of technical skill requirements

d. We do not have a well defined policy or

criteria for hiring employees

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MO 63121, USA.

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Different Types of Innovation

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