Process & Radical HR Innovations & Organizational Effectiveness: An Empirical Study.

Date01 October 2020
AuthorChowdhury, Arup Roy

Introduction

Process and Radical HR innovation, in recent times have become center stage in research literature. However, till date due attention and focus are not being extended to the possible impacts of Process and Radical HR Innovation on Organizational Effectiveness. This study evaluates the impact of Process Innovation and Radical HR Innovation on organizational effectiveness in thirty organizations. Data from 2300 samples were collected from organizations in the steel, power, cement, IT, auto, refractories sectors in India, Singapore, Thailand and UK and were analyzed using an Analytic Hierarchy Process (AHP), Technique for Order of Preference by Similarity to Ideal Solution (TOPSIS) and Hierarchical Regression analysis.

Literature Review & Hypotheses Development

Innovation is generally defined as the generation (development) or adoption (use) of new ideas, objects or practices (Amabile, 1988; O'Toole, 1997; Rogers, 1995). The generation of innovation results in an outcome: a product, service, or practice that is new to the state of the art (or at least to an organizational population). The adoption of innovation results in the use of a product, service, or practice new to the unit of adoption such as individual, team, or organization (Damanpour & Wischnevsky, 2006). Innovation adoption is a process that generally includes three phases: initiation, adoption decision, and implementation (Damanpour & Schneider, 2006; Rogers, 1995). An innovation is implemented when it is accepted by the users (employees, clients, or customers) and is regularly used by them. Therefore, for the innovation to deliver improvements and contribute to organizational performance, it is necessary that it is implemented.

Birkinshaw, Hamel and Mol (2008) reviewed the literature on managerial innovation and defined it operationally as "the generation and implementation of a management practice, process, structure, or technique that is new to the state of the art and is intended to further organizational goals." Examples include: divisional structure, production system, total quality management (TQM), activity-based costing, modern assembly line, and quality of work-life (Birkinshaw, Hamel & Mol, 2008). As these examples suggest, innovation is conceptualized as a multidimensional construct, including structural, operational, and administrative processes. Further, because ''newness" is defined as the state of the art, these innovations are radical and their adoption may result in major changes in the organization's management systems and processes managerial inventions, as compared with product/service innovations that are introduced for use by or to serve external constituents, typically aim to increase efficiency and effectiveness of the internal organizational operating and administrative processes (Adams, John & Phelps, 2006; Birkinshaw, Hamel & Mol, 2008; Boer & During, 2001). They pertain to changes in structure, management systems, knowledge used in performing the work of management, and managerial skills that enable an organization to function efficiently and effectively (Hamel, 2006). Therefore, we conceive managerial inventions as a two-dimensional construct: an information technology (IT) dimension and an administrative dimension. Whereas the administrative dimension captures the adoption of new management systems and processes to make the work of management more effective, the IT dimension reflects the use of new management and office information systems to advance efficiency of the organization's operating systems and processes (Damanpour, Walker & Avellaneda, 2009). Together, they represent the introduction of new HR practices, processes, and techniques to further organizational adaptation and effectiveness.

Schumpeter defined innovations as being at the heart of the entrepreneurial role i.e. the creation of a linkage between new ideas and markets (Gallouj & Weinstein, 1997). Hislop (2005) defined innovation as a deliberate and radical change in existing products, processes or the organization in order to achieve an advantage over competitors. There are several aspects of innovation: (a) the introduction of something new, including new products or services, new technology or new forms of organization, (b) a process aspect, which means that there are activities or stages such as goal formulation, design and organization, implementation and monitoring, (c) development with radical leaps or incremental innovation, (d) the goal of innovation activities is to gain advantages for the organization (de Leede & Looise, 2005). Technological innovations contain both product or process innovation.

Innovative organizations support creative activities through offering employees the freedom to work independently in pursuit of new ideas (Scott & Bruce, 1994; Dobni, 2006). Employee's skills and knowledge are important factors to firm's successful innovation, since the human element is involved in the whole innovation process (Jimenez-Jimenez & Sanz-Valle, 2005).

Literature indicates the existence of at least eight types of innovation: Process Innovation, Product Innovation, Incremental Innovation, Radical HR Innovation, Administrative Innovation, Technology Innovation, Market Innovation and Value Innovation (Seng et al, 2011).

Process Innovation represents changes in the way firms produce the end product for the benefit of its customers (Seng et al, 2011). It is the implementation of a new or significantly improved production or delivery method. This includes significant changes in techniques, equipment and/or software (Guillaume, 2010).

Radical HR Innovation is a complete change, the outcome of which is new to the organization resulting in organizational effectiveness (Seng et al, 2011). Birkinshaw, Hamel, and Mol (2008) defined it operationally as "the generation and implementation of an HR system, practice, process, structure, or technique that is new to the state of the art and is intended to further organizational goals."

Innovation adoption is a process that generally includes three phases: initiation, adoption decision, and implementation (Damanpour & Schneider, 2006; Rogers, 1995). An innovation is implemented when it is accepted by the users (employees, clients, or customers) and is regularly used by them. Therefore, for the innovation to deliver improvements and contribute to organizational performance, it is necessary that it is implemented. This is particularly important because organizations may adopt an innovation in search of legitimacy without fully implementing it (Ashworth, Boyne & Delbridge, 2009; Brown & Potoski, 2003).

Product Innovation is the development of new products, changes in design of established products, or use of new materials or components in the manufacture of established products. Product Innovation reflects a change in the quality of products for the benefit of its consumers (Barlow, 1999).

Administrative innovation is the adaptation of a new administrative system for the business practices, workplace or to the external relations to improve the performance of an organization (Oslo Manual, 2005). It is the creation of a new organizational design that supports better the creation, production and delivery of products and services (Teece, 1980).

Incremental Innovation is about continuous change in products and services to better meet the needs and expectation of consumers (Mishra & Srinivasan, 2005).

Technology innovation is the application of ideas related to applied science to make changes in production processes (Seng et al, 2011). Some researchers believe that a better strategy for the organization is to focus more on customers' satisfaction and market segmentation than on its products or processes.

Market innovation is the process of exploring and exploiting new businesses through improvements in marketing activities (Johne, 1999).

Value innovation is the simultaneous pursuit of differentiation and low cost strategies. Also known as Blue Ocean Strategy (Kim & Mauborgne, 2015), it focuses on making competition irrelevant by creating a leap of value for buys and the producers, thereby opening up new and uncontested market space.

Organizational Effectiveness

Organizational effectiveness illustrates the soundness of an organization's culture, processes and structure in terms of its overall system performance (French & Bell, 1999). The practical use of assessing organizational effectiveness stems from the intent to analyze the present state of an organization to improve its performance in accordance with diagnostic findings (Lee & Brower, 2006). Assessing organizational effectiveness by means of a well-planned and well executed diagnostic process is, therefore, generally assumed to form part of a broad organizational management strategy aimed at improving overall system management (Cummings & Worley, 2005; French & Bell, 1999). The use of such a diagnostic process provides an organization with the systematic knowledge that it needs to design a set of appropriate intervention activities that should improve overall organizational effectiveness (Van Tonder & Dietrichsen, 2008).

Organizational effectiveness can be defined in terms of HR related outcomes such as turnover, job satisfaction, employee engagement etc. or organizational outcomes such as productivity, quality, efficiencies etc. (Dyer & Reeves, 1995). Moreover, it can also be defined in terms of financial indicators such as return on assets (ROA) or return on...

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