Factors that facilitate innovation in the conventional heavy engineering industry.

AuthorSahay, Yamini Prakash

This study explores the relationship between components of structure and innovation. Components of structure include hierarchy, formalization, empowerment, centralization and participative decision making. Innovation is measured by number of innovations and perceived innovativeness. Results were analyzed using both quantitative and qualitative (content analysis) techniques. Significant relationship was found between hierarchy and innovation. A positive and significant relationship was found between formalization and innovation. A negative and significant relationship was found between centralization and innovation. A positive and significant relationship was found between participative decision making and innovation.

Introduction

The design and practice of organization can be optimized to provide a base for constant innovation (Moore, 2004). Arora, Belenzon and Rios (2014) propose that firms pursuing innovations need a well-matched supporting structure for the purpose of innovations. Structure not only shapes innovation but plays an active role in successful implementation. Therefore the distinguishing organizational characteristics of innovative firms are of interest to researchers (Souitaris, 2002; Subramanian & Nilakanta, 1996). Subramanian and Nilakanta (1996) found the relationship between organizational characteristics and firm innovativeness. According to them innovativeness is a multidimensional construct. Organizational characteristics they studied were centralization, formalization and specialization. Truly innovative organizations, according to Subramanian (1996), are those that exhibit innovative behavior consistently over time. He proposes that an organization's strategic orientation reflects long-term or temporally enduring behaviors, innovativeness is also an enduring organizational trait.

Broadly innovation not only includes development of new products and services, but also new operating practices, processes, managerial tactics and even business strategies. It may not always be a process of creating, it is rather a process of building, improving and adapting (Youtie, 2003). An organization's structure can best be studied by using perceptual measures. Researchers like Hage and Aiken (1977), Daftaur (1988), Reddy (1997), Singh and Pestonjee(1988) among many others have studied and measured organization structure as a perceptual/behavioral variable. The current study is an exploratory research, partly behavioral in nature. The approach to the study of structure-innovation relationship suggested in the study may be regarded as a basis for speculative thinking and future research.

Objective

To study the relationship between components of structure and innovation in the heavy engineering industry of India.

Literature Review

Opportunity for growth and promotions is an important motivating/rewarding factor for employees to innovate (Anderson, Dreu & Nijstad, 2004). Smith and Ainsworth (2005) found that hierarchy presents opportunities for managers to meet power, authority and status needs, and have motivational affect for encouraging innovations. Leavitt (2003) found that despite their negative reputations many hierarchies have proved quite capable of change and have demonstrated impressive adaptability to change. He posits that hierarchies deliver a real, practical and psychological value by fulfilling a deep human need for order and security, hence, can facilitate innovations. On the basis of the above research, the following proposition was generated.

Proposition 1: Hierarchy has significant relationship with perceived innovativeness.

Significant positive correlation between formalization and implementation of innovations was found by Khandwalla (1995) in bureaucratic organizations of India. Weick (1998) found that formalization is required for effective implementation of creative ideas. Formalization settles ambiguity and uncertainty and greater autonomy and flexibility at implementation stage might even be harmful for innovations according to Drach-Zahany, Somech, Granot and Spitzer (2004). They found that formalization settles ambiguity and uncertainty. Wijnberg, Ende and Wit (2002) report that formalization increases accountability of decision makers towards each other and towards the organization. On the basis of the above researches the following proposition was generated.

Proposition 2: Formalization has positive relationship with perceived innovativeness.

Decentralization or low centralization according to Subramanian and Nilakanta (1996) facilitates innovativeness by encouraging new ideas as it promotes flexibility and openness in an organization. West (2000) found high centralization to be a negative predictor of innovations. In his study Vedamanickam (2001) found that decentralization was positively correlated with workplace innovativeness. Shavinina (2003) suggests that empowered multi-functional teams are more successful innovators. Kanter (2004) also found innovative organizations to be decentralized. McNulty and Ferlie(2004) posit that innovations increasingly require decentralization today. Findings of Khandwalla and Mehta (2004) indicate that extensive decentralization helped innovations. Hence, for Samaratunge (2003), decentralization facilitates innovation by improving democratic decision making, fostering responsiveness among employees, and enhancing the ability of junior management to influence senior management through empowered decision making. As for Stevenson (2012), centralized leadership promotes a mechanistic system, which is exhausted and no longer meets the needs of the growing complex systems today; as it assumes that only one or a few persons in an organization know everything, hence, can make the right decision. Schraagen, Veld and De Koning (2010) say that in response to the dynamic environment, organizations are increasingly adopting decentralized, team-based organizations, which have distributed power structures. In one research on an Indian sample Singh, Kodvani and Agrawal (2012) found that empowerment has a motivational effect on employees and significantly improves their performance and effectiveness. On the basis of above researches the following proposition was generated.

Proposition 3: Centralization has negative relationship with perceived innovativeness.

West (1990) defines "Participative Safety" as a sense in team members that they can participate in the decision making process and share ideas without fear. He considers it important for innovation because participation in decision making engenders participative safety in employees. Khandwalla (1995) found positive correlations between participation in decision making and innovation in an Indian sample. Strauss, Heller, Pusic and Wilpert (1998) say participation fosters integration as they found that where there was high level of participation in decision making, there was greater information sharing and interaction within groups. These groups were more likely to work through difficulties associated with introduction of innovations and benefit from participation. Participative decision making for innovations is more effective in comprehensively solving an informational conflict. This not only increases the chances of success of innovations, but also increases receptivity to future innovation. Khandwalla and Mehta (2004) found that decisions in innovative-organic structures emerged through participation of those employees who were involved in and affected directly by a decision. Nayar (2010) discussing the participative environment of HCL Technologies, an Indian organization, says that employees are well connected providing each other with an environment that offers many alternative sources of information and...

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