The Impact of Organizational Innovation on the firm’s performance

1. The Impact of Organizational Innovation on the firm’s performance • Organizational Innovation ??? • Invention VS Innovation (Schumpeter) • Invention – an idea or model for a new product or system, not yet entered the economic system. • Innovation – accomplished with commercial transaction involving new product or system. It is a part of the economic system Koson Sapprasert Centre for Technology, Innovation and Culture (TIK)

2. Schumpeter Innovation – exploiting inventions/commercialization of new products, new processes and new forms of organization. • Chris Freeman (1987) • Innovation Systems – product, process, market, managerial, organizational innovations (at the enterprise level) + labor market, social and institutional innovations (at the national level). •  Malerba (9.06am GMT) - organizational innovation Lundvall’s Innovation “Innovation really has something to do with TECHNOLOGY” So… Organizational Changes ≠ Organizational Innovation Koson Sapprasert Centre for Technology, Innovation and Culture (TIK)

3. ‘ORGANIZATIONAL’ INNOVATION Innovative changes • customary / institutional manner • relatively non-technological • related more to organizational nature, structure, arrangements, practices, beliefs, rules and norms-rather than to product and process trait. (e.g. Pettigrew and Fenton, 2000) Adoption of novelties into the organization (Damanpour, 1991; Sorensen and Stuart, 2000) Koson Sapprasert Centre for Technology, Innovation and Culture (TIK)

4. ‘ORGANIZATIONAL’ INNOVATION The implementation of new or significant changes in firm structure or management methods intended to improve the firm’s use of knowledge, quality of goods and services, or work flow’s efficiency. (Community Innovation Surveys 4 / 2002 - 2004) Koson Sapprasert Centre for Technology, Innovation and Culture (TIK)

5. The Impact of Organizational Innovation on the firm’s performance • Organizational routines - ways of doing things in the firm (Nelson and Winter, 1982) • Obsolete routines (Dosi and Nelson, 1994) • Revolution / Organizational innovation is of crucial Importance to the firm’s survival and competitiveness (Anderson and Tushman, 1990; Romanelli and Tushman, 1994) Koson Sapprasert Centre for Technology, Innovation and Culture (TIK)

6. The Impact of Organizational Innovation on the firm’s performance • Heterogeneity (e.g. Nelson and Winter, 1982) • Differences in connection with organizational innovation (Downs, 1967; Levinthal and March, 1993; Hannan and Freeman, 1984) • Size does matter !!! (Schumpeter 1934, 1950) Koson Sapprasert Centre for Technology, Innovation and Culture (TIK)

7. The Impact of Organizational Innovation on the firm’s performance • Large firms, in general … • More resources (e.g., financial)  Innovate More • Organizational rigidity and Structural inertia (Downs, 1967) & Path Dependency (Levinthal and March 1993)  Resistance to Organizational changes  Benefit less !! Koson Sapprasert Centre for Technology, Innovation and Culture (TIK)

8. The Impact of Organizational Innovation on the firm’s performance • Small firms, in general … • Less resources & more constraints  innovate less • Less complex structure & hierachy • Low inertial force (Hannan and Freeman, 1984) + More flexible and adaptive • Benefit more !! Koson Sapprasert Centre for Technology, Innovation and Culture (TIK)

9. DATASET • Community Innovation Survey IV (2002 - 2004) from Norway • Real micro data • Special Emphasis on Organizational innovation • 4450 firms in both manufacturing and service industries (About 1300 ‘organizational’ innovators) Koson Sapprasert Centre for Technology, Innovation and Culture (TIK)

10. CIS IV questionnaire Koson Sapprasert Centre for Technology, Innovation and Culture (TIK)

11. METHODOLOGY & MODEL • Independent variables (Organizational innovation + other control variables) • New knowledge management system (1) • Major change to the organization of work (2) • Significant change in the relation with other firms (3) • (1) | (2) | (3) = ORorg (0-1) • (1) + (2) + (3) = CNTorg (0-3) • CNTorg * Log(emp) Koson Sapprasert Centre for Technology, Innovation and Culture (TIK)

12. METHODOLOGY & MODEL Koson Sapprasert Centre for Technology, Innovation and Culture (TIK)

13. METHODOLOGY & MODEL • Dependent variables • Reduced time to respond to customer needs (1) • Improved quality of goods or services (2) • Reduced costs per unit output (3) • Reduced employee turnover (4) • Increased capacity (5) • Increased profitability (6) • (1) + (2) + (3) + (4) + (5) + (6) = CNTorgEF (0-18) Koson Sapprasert Centre for Technology, Innovation and Culture (TIK)

14. METHODOLOGY & MODEL • Descriptive Statistics • Econometrics • Tobit Regression (Feldman, 1994; Laursen and Salter, 2006) • Dosi (2007)  OLS Koson Sapprasert Centre for Technology, Innovation and Culture (TIK)

15. PRELIMINARY RESULTS • Across Sectors  both manufacturing, e.g., chemical products, electronic and communication equipments & services, e.g., Post and telecommunication, computer related activities and R&D (ICT) Koson Sapprasert Centre for Technology, Innovation and Culture (TIK)

16. PRELIMINARY RESULTS  CNTorg * Log(emp)  Koson Sapprasert Centre for Technology, Innovation and Culture (TIK)

17. The Impact of Organizational Innovation on the firm’s performance • More big firms undertaking organizational innovation • These big firms do it more intensely • Most firms benefit from organizational innovation (cost cutting, quality and satisfaction improvement, capacity and profitability) • The more the organizational innovation, the better the performance Koson Sapprasert Centre for Technology, Innovation and Culture (TIK)

18. The Impact of Organizational Innovation on the firm’s performance • Size Effect on the impact ?? CNTorg * Log(emp) ??? • Process Innovation ?? • Different types of organizational innovation  Different effects on the firm’s performance • The impact on different industries (manufacturing/services) Koson Sapprasert Centre for Technology, Innovation and Culture (TIK)