Does Employee Creativity lead to Innovation
Performance in Family Firms? An empirical analysis.
By Ronald Venema
S2397382
January 2018
Supervisor: Prof. Dr. D.L.M. Faems Co-Assessor: A.A. Oleksiak, MSc.
Word count: 9783
2 ABSTRACT
The topic family firms and their innovation behaviour has been investigated many times and evidence has shown that family firms are very innovative. However, the literature is still inconclusive about the input side of innovation in the case of family firms. There is a paradox because family firms are very innovative while they do not invest substantially in innovation. Nonetheless, mainly the formal investments are investigated while the literature about the informal investments of family firms is still very immature. To fill this gap, this research investigates whether employee creativity as a particular form of informal innovation input can explain this paradox. Data from a survey among 624 firms located in Northern Netherlands is used to empirically test this relation. Family firms are compared to non-family firms and it is concluded that employee creativity can have a positive effect as well as a negative effect on innovation performance. The negative effect can be turned into a positive effect by providing support for creative, while the positive effect can be tuned into a negative effect by increasing the collaboration diversity. By showing these results, this study is adding to the existing literature about family firms and informal innovation input.
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1. INTRODUCTION
Family firms are significantly involved in economies all over the world (La Porta et al., 1999). Moreover, it has turned out that family firms are remarkably innovative (Gudmundson et al., 2003; Kim et al., 2008; Llach & Nordqvist, 2010). However, family firms invest significantly less in innovation than non-family firms (De Massis et al., 2015). This phenomenon has not yet been clarified in the literature which makes it very interesting to investigate the underlying explanation that can resolve this paradox.
Previous research has investigated the paradox about family firms and their innovation behaviour by focussing on formal innovation investments and the differences between family firms and non-family firms. The results of these studies show that family firms invest less in innovation than non-family firms although they have high innovation output (Chen & Hsu, 2009; Munari et al., 2010; Muñoz-Bullón & Sanchez-Bueno, 2011; Block, 2012; Chrisman & Patel, 2012; Patel & Chrisman, 2014). Based on a meta-analysis it has turned out that this effect is even stronger when the CEO of the company is a later-generation family member (Duran et al., 2016). Another interesting finding from this meta-analysis is that the innovation input of family firms is usually measured as the Research & Development (R&D) expenditures standardized by firm size, which is a formal type of innovation input.
5 process can increase the innovation performance of the focal firm (Dodgson, 1993; Hagedoorn, 2002; Deeds & Rotharmel, 2003), although it can simultaneously weaken the impact of employee creativity on innovation performance. Nonetheless, previous research has not yet attempted to explain the paradox based on informal innovation input. Therefore, this study will empirically test the impact of employee creativity as a particular manifestation of informal innovation input on the innovation performance of family firms. These results will be compared to the results of non-family firms. By addressing this gap this study aims to contribute to the research field of informal innovation input of family firms. It is important to investigate this topic because the literature about informal innovation input is rather immature while this might potentially have significant impact on innovation performance and solve the existing paradox of family firms and their innovation behaviour (Duran et al., 2016; Chrisman et al., 2015; Bammens et al., 2015). Therefore, the research question of this study is:
To what extent does employee creativity have an effect on the innovation performance of family firms and non-family firms, and what is the effect of support for creativity and collaboration diversity on this relation?
6 positive impact on the relation between employee creativity and innovation performance. The second moderating variable is collaboration diversity. Collaborating with external partners can lead to new ideas, access to resources and sharing of risks which can eventually lead to increased innovation performance (Faems et al., 2005). Following this reasoning, it can be argued that the collaboration with external partners can weaken the exclusive impact of the internal sources of innovation on innovation performance. That is why I expect that collaboration diversity will negatively moderate the relation between employee creativity and innovation performance.
To answer the research question four hypotheses are developed. The hypotheses are statistically tested with data from the Innovation Benchmark North-Netherlands, which is a survey about innovation and performance. This survey has been sent to 5447 companies located in the north of The Netherlands in March 2017. Eventually 624 firms filled in this survey substantially. Since the survey has been sent to Small and Medium-sized Enterprises (SMEs), this research is only focusing on firms with a maximum of 250 employees. Hierarchical regressions are performed to empirically test the hypothesis. In addition, interaction plots are used to interpret the significant interaction effects that are caused by the moderators (Aiken & West, 1991).
7 family firms there is a positive relation between the amount of patents and innovation performance.
By filling the gap of informal innovation input of family firms, this study contributes to the existing literature field of informal innovation input and family firms. The results of this study provide new insights that can be used for future research. Further, managers of SMEs can benefit from the results of this study because insights are presented that can help to improve their innovation performance. Altogether, this research is contributing to our current understanding of family firms and their innovation behaviour, although, more research is needed in the future.
This study will first provide a review of the existing literature in the field of family firms and innovation performance. After that the data and method that are used for this research are described. Subsequently, the results are presented followed by the discussion and conclusion.
2. LITERATURE REVIEW
In this chapter an overview of the literature, on which this research is based, will be presented. Initially, family firms as a specific organizational form is discussed. Then, an explanation on innovation performance is presented. In addition a description and explanation of the theoretical gap will be given. Furthermore, the conceptual model will be presented. In conclusion, the variables of the conceptual model, with the corresponding hypothesis, will be presented.
Family firms
8 Fiss & Zajac, 2004). Those reasons make it very attractive to investigate what makes those family firms so innovative.
Before diving into the literature background I will present the definition of family firms that is used for this study in order to create clarity. For this research the European definition of a family firm is used, which is also used by a large Dutch research institute (CBS). This definition can be used regardless of the size of the company. A family firm is characterized as a firm in which: (1) The majority of the decision-making rights are owned by the natural person(s) that the company has established or is in possession of the natural person(s) who acquired the company's share capital has, or is in possession of, their spouses, parents, children or direct heirs of children, (2) The majority of the decision-making rights are indirect or direct, (3) At least one representative of the family or relatives is formally involved in the governance of the company. Stock market listed companies comply with the definition of family firms if the person who has established or acquired the company (share capital), either their family members or descendants possess 25 percent of the decision-making power. The definition also includes first generation family firms that have not yet been transferred to a next generation. In this research the distinction is made between family firms and non-family firms. Non-family firms are firms that do not meet the requirements to be considered as family firms.
Innovation performance
9 standardized by firm size (Duran et al., 2016). Although, this formal manner of investing in innovation that does not fully address the innovation success of family firms (Duran et al., 2016). In addition, previous research even showed a negative relation between R&D investments and the ownership by families (Chen & Hsu, 2009). Besides these contradictions, theoretical approaches fail to explain the found patterns of family firms' innovation behaviour. Chrisman & Patel (2012) suggest that according to the behavioural agency theory family firms underinvest in R&D, however the great presence of innovative family firms as mentioned earlier cannot be explained. From another perspective, the resource based view (Barney, 1991) explains several resource orchestration advantages of family firms (Sirmon et al., 2011) but fails to predict family firms’ low level of investment in innovation.
Two types of innovation input can be distinguished, formal- and informal innovation input. Formal innovation input is often defined and measured as a firm’s financial investment that is
dedicated toward the exploration and exploitation of new opportunities, in an often lengthy and complex innovation process (Cooper & Kleinschmidt, 1987; Garud et al., 2013). However, SMEs often do not invest a lot in R&D or do not even have a separated R&D department (Binz & Czarnitzki, 2008; Moilanen et al., 2014; Hervas-Oliver et al., 2015; Duran et al., 2016). This is because R&D investments can be risky and usually have a long payback time. In these firms innovation activities are undertaken across several departments, which makes it quite hard to address the resources invested in innovation (Santarelli & Sterlacchini, 1990). Duran et al. (2016) suggest that employees informally dedicate a substantial portion of their work time to create ideas for product and process improvement.
Bammens et al. (2015) studied family firms and found that employees’ innovative work
10 employees’ input and innovation output has been discussed in the literature (Cerinsek &
Dolinsek, 2009; Barsh et al., 2008; Sung & Choi, 2014). Nonetheless, the impact of employee creativity on the innovation performance of family firms is not empirically tested yet. Employees as an informal source of innovation input might address the paradox of low formal innovation input and high innovation output of SME family firms. The literature in this field is mainly conceptual (Duran et al., 2016) and the empirical evidence is missing. Altogether, informal innovation input is underdeveloped in the existing literature, as a consequence this study aims to expand that literature field and accordingly add to the academic knowledge. By addressing this literature gap this research aims to contribute to the paradox of innovation in family firms by empirically testing the impact of employees as an informal source of innovation input (Duran et al., 2016; Chrisman et al., 2015; Bammens et al., 2015).
11 Figure 1: Conceptual model.
Employee creativity
Creativity is a mental process resulting in new ideas or concepts, or new associations between existing ideas or concepts (Im & Workman, 2004). Mumford et al. (2012) define creativity as the ‘production of high quality, original and elegant solutions to problems’. In addition,
Amabile (1983) stated that creativity is the production of novel ideas that are appropriate and useful to a given situation.
12 the successful application of creativity, it can be stated that creativity ignites innovation (Amabile, 1996; Çokpekin and Knudsen, 2012; Mumford, 2000; Shalley et al., 2004).
It is very important that employees share their ideas with the organization in order to increase the pool of ideas in order to achieve innovation performance (Zhou et al., 2012). The culture in family firms can foster knowledge sharing (Zahra et al., 2004). That makes it plausible that the pool of ideas will be larger in family firms than in non-family firms. Subsequently, the chance for a successful innovation will also increase. That is why I expect that employee creativity will be positively related to innovation performance in both family firms and non-family firms, but that the impact of employee creativity will be higher in non-family firms.
Altogether, I expect that employee creativity is positively related to innovation performance, because creative employees produce ideas which are the base for innovation. When there are more creative employees in an organization, the pool of creative ideas will be larger. A larger pool of creative ideas increases the chance for a successful innovation. In addition, I expect that this effect will be stronger in the case of family firms, because sharing ideas is very important in this process and family firms are likely to have a culture that fosters sharing knowledge. That is why I propose the following hypotheses:
H1: Employee creativity has a positive effect on innovation performance in family firms that is stronger than in non-family firms.
H2: Employee creativity has a positive effect on innovation performance in non-family firms.
Support for creativity
13 scientifically. Extensive research has studied factors that stimulate employee creativity and has acknowledged the importance of a supportive work environment (Beheshtifar & Kamani-Fard, 2013; Ford, 1996; Woodman et al., 1993). In other words, the pool of ideas generated by employee creativity can be increased by supporting employees to be creative.
Following the previous statements, I expect that support for creativity will positively affect the relation between employee creativity and innovation performance. The according explanation is that employee creativity leads to a pool of ideas, which are the base for innovation. I expect that when there is support for creativity the pool of creative ideas will be larger. A larger pool of creative ideas increases the chance for a successful innovation. That is why I propose the following hypothesis:
H3: Support for creativity has a positive moderation effect on the relation between employee creativity and innovation performance.
Collaboration diversity
For this research, collaboration diversity is defined as the amount of different partners a firm cooperates with in order to achieve innovation performance. Several types of collaboration partners can be identified, but for this study I use the partner types used in the survey of the Community Innovation Survey (CIS). CIS used the following partner types in their survey: customers, consultancy bureaus, suppliers, competitors, universities or other knowledge institutions and companies from other industries. These types of partners are also recognized in the literature (Quinn, 1985; Von Hippel, 1988; Hamel, 1991; Gerwin et al., 1992; Dodgson, 1993; Shaw, 1994; Von Hippel et al., 1999; Santoro, 2000).
14 for innovation can provide access to additional assets that are crucial for making innovation projects commercially successful (Teece, 1986; Hagedoorn, 1993). Second, collaboration can lead to codified- and tacit knowledge sharing (Eisenhardt & Schoonhoven, 1996; Doz & Hamel, 1997; Lambe & Spekman, 1997; Ahuja, 2000). The combination of knowledge of several partners might lead to new ideas and the development and creation of new resources (Das & Teng, 2000). Finally, collaboration can lead to sharing costs of R&D activities among partners (Veugelers, 1998; Hagedoorn, 2002), which also results in a reduction of, sometimes high, risk of R&D projects for the partners involved.
Based on the previous statements, I expect that collaboration diversity will have a negative moderation effect on the relation between employee creativity and innovation performance. This follows the reasoning that inter-organizational collaboration can supplement internal innovation activities, although this might also mean that the impact of internal activities becomes less important in order to achieve innovation performance. Transforming creative ideas from employees is a certain manifestation of internal innovation activity. So the idea is that cooperation for innovation will to a certain extent replace the effect of employee creativity as a source of innovation performance. In other words, the amount of different collaboration partners will have a negative impact on the relation between employee creativity and innovation performance. That is why I propose the following hypothesis:
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3. METHODOLOGY
In this section information will be presented about the data that is used to test the hypotheses of this research. Then the measurement of the variables will be explained and finally the method that is used in this research is presented.
Data
An existing database is used to test the hypotheses identified in the literature review. This database is created based on a survey called ‘North Netherlands Innovation Monitor 2017’ that was send in March 2017 to 5447 SMEs located in Northern Netherlands. Many of the questions in this survey were based on questions from the Community Innovation Surveys (CIS). The CIS are surveys about innovation that are executed by national statistical offices throughout the European Union and in Norway and Iceland. Eventually, after a reminder was sent to the companies to participate in the survey, 624 companies filled in the survey substantially. This means that 11.46% of the companies responded effectively. Due to missing values, this study uses only 276 observations in total to perform the regressive analyses. From the total amount of used observations 142 are family firms (51.45%) and 134 are non-family firms (48.55%).
Variables
Innovation performance - dependent variable
16 of the turnover. The turnover can be built from (1) Products that are new to the market, (2) Products that are only new to the firm, and (3) Products that are unchanged (OECD / Eurostat, 2005, p. 110). For this research, innovation performance is measured as the percentage of turnover from products that are new to the market introduced between 2014 and 2016. The natural logarithm of is used in order to obtain a normal distribution.
Employee creativity – independent variable
For this research employee creativity is measured on the following factors: The employee comes with: (1) Breakthrough ideas that stand far from existing procedures, processes or products, (2) Ground-breaking ideas that include major changes to existing thoughts, practices or routines, (3) Ideas for minor adjustments in existing business, (4) Ideas for minor changes to existing procedures, processes or products, (5) Ideas to do things completely differently, (6) Suggestions for small improvements. These statements are rated with a Likert-scale from 1 (Totally disagree) till 5 (Totally agree).
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Support for creativity – independent variable
Support for creativity is measured on the following factors, in our company there is: (1) Much support for creative work (creating new ideas / solutions that are surprising and useful), (2) Stimulation of the development of new ideas and concepts, (3) Value given to creative work, (4) Encouragement for employees to be creative, (5) Expectation of employees to view problems in different ways, (6) Rewarding of employees who are creative in performing their function. Also these statements are rated with a Likert-scale from 1 (Totally disagree) till 5 (Totally agree).
A factor analysis was performed and it was found that there is only one factor for this variable (Table 2). A new variable was created for support for creativity that combines the means of the six factors mentioned above called: Total Support for Creativity.
Collaboration for innovation – independent variable
18 with the following partner types: (1) Customers, (2) Consultancy bureaus, (3) Suppliers, (4) Competitors, (5) Universities or other knowledge institutes, (6) Companies from another industry. These questions are binary and could be answered with (1) Yes or (2) No.
A factor analysis was performed and it was found that there is only one factor for this variable (Table 3). A new variable was created to represent the diversity in collaboration partner types. First, the answer No was translated (2=0) in order to create a high score for companies that do collaborate with a higher diversity in partner types. Second, a new variable was created that counts the answers, it has a range from 0 to 6 because there are six different types of partners, the new variable is called: Total Collaboration Diversity.
Control variables
19 Fourth, patents are a form of intellectual property protection and previous research has shown that the amount of patents are strongly positive related to innovation performance. Secrecy is more or less the same as patents; it is also a form of protection and is also found to be positively related to innovation performance. For both patents and secrecy I have created new variables which reverse the answers from (1=Yes, 2=No) to (0=No, 1=Yes) and count the answers to a total number. Finally, I controlled for market changes, because firms that are operating in highly changing markets are more likely score higher on innovation performance. Also for this variable I performed a factor analysis and found only one factor (Table 4), in addition I created a new variable that combines the answers of the sub-questions called: Total Market Changes.
A final remark about the factor analyses that are performed for this study; All Cronbach’s
Alpha values are larger than 0.7 which means that the results are acceptable for analysing and the Kaiser-Meyer-Olkin values are all above 0.70 which means that the sampling is reasonably adequate.
Method
20 Dawson (Aiken & West, 1991). Before using these interaction plots I have extracted the means of the independent variable and the moderator, additionally I have standardized the control variables as mentioned by Dawson (2014).
4. RESULTS
In this section the results of this research are presented. This section contains three parts. First, the descriptive statistics and correlations are presented. Second, the results of the hierarchical regressions are introduced and analysed. Third, the interaction plots that are created based on the hierarchical regressions are shown and interpreted.
Descriptive Statistics & Correlations
21 which is very high. This means that there is a lot of variance in the diversity of collaboration partners.
Remarkable is that the standard deviation of firm age is 33.46 while the mean is only 23.72. I found some quite old firms in the sample that might cause this high level of variance; there are no impossible values in the sample. This case is more or less the same for firm size; we see a mean of 18.36 with and standard deviation of 32.80. The firms in this sample have 1 till 250 FTE’s which means that some large firms can fairly increase the variation in firm size. I
did not find any values for firm size that should make anyone worry about the correctness. For R&D expenditures we find a mean of 0.15 that means that the firms in the sample spend on average 15% of their turnover on R&D. The standard deviation is 0.23 which is high. However, some firms almost spend their total turnover on R&D, which explains the high variation.
23 Regression Results
The results of the hierarchical regressions are presented in three tables: Table 6, 7 and 8. Table 6 shows the results of the regressions for all firms, which in this occasion means SMEs in general. In Table 7 the results of the regressions for family firms can be found and in Table 8 the regressions results for non-family firms are presented. Each table consists of 5 models. Model 1 shows the results of the regressions only with the control variables. Model 2 includes control variables and the independent variables. In Model 3 the moderator support for creativity is added to this. In Model 4 only the moderator collaboration diversity is added and in Model 5 all variables are included.
Control variables
In Table 6 we find that R&D expenditures (1.903) and secrecy (1.125) are both significant related to the innovation performance for SMEs in general. Similar results are shown for family firms (Table 7) and non-family firms (Table 8). Although, R&D expenditures have the most impact on innovation performance for family firms (3.256), indicating that increasing the R&D expenditures in family firms has relatively much impact on the amount of turnover from products that are new to the market. This is in line with the literature (Duran et al., 2016). Further, in Table 7 we see that only for family firms patents are significant related to innovation performance. This implies that when family firms increase the amount of patents they own the higher the innovation performance. This effect is not found for non-family firms or SMEs in general.
Employee creativity and innovation performance
24 incremental employee creativity on innovation performance. This indicates that increasing the incremental employee creativity will have a negative impact on the innovation performance of SMEs in general. We further see in Table 6 that there is a positive effect of radical employee creativity on the innovation performance of SMEs in general (Model 4). This means that increasing the radical employee creativity will result into higher innovation performance. The negative effect of incremental employee creativity on innovation performance is also present in Table 7 (Model 3 and Model 4). This indicates that also for family firms counts that increasing the incremental employee creativity will lower the innovation performance. In Table 8 we find a positive effect of radical employee creativity on innovation performance (Model 4). This means that the innovation performance will be higher when the radical employee creativity of non-family firms is increased. The results mentioned above reject hypothesis 1 because only a negative effect of employee creativity on innovation performance has been found for family firms. Meanwhile, the results support hypothesis 2 because a positive effect of employee creativity on innovation performance is presented.
The moderating role of support for creativity
The results show a significant moderating effect of support for creativity on the relation between incremental employee creativity and innovation performance. Despite the fact that incremental employee creativity does not significantly impact innovation performance, support for creativity is significantly moderating this relation for SMEs in general and for family firms. First, for SMEs in general we see that the moderating effect is significant in Model 3 (.362) and Model 5 (.406), which shows that the moderating effect is robust. For family firms we see that in Model 3 (.512) as well as in Model 5 (.710) the impact is even higher. We do not find any significant moderating effect of support for creativity in the case of non-family firms. Therefore, hypothesis 3 is supported.
29 Interaction effects
In order to create a better understanding of the significant interaction effects that are presented before I will present the according interaction plots to visualize the moderating effects. Although the relation between (radical / incremental) employee creativity and innovation performance is not significant in any of the cases, it makes sense to present the interaction plots because the interaction effects are significant and therefore the slopes of the lines differ (Aiken & West, 1991). As mentioned in the methodology I used the interaction plots created by J. Dawson.
Support for creativity
In Table 7 we find that incremental employee creativity has a significantly negative effect on innovation performance for SMEs in general. This means that when incremental employee creativity will be increased, this will have a negative effect on the innovation performance. In Figure 3 we see that increasing incremental employee creativity will have a negative effect on innovation performance when support for creativity is low. Meanwhile, we see that increasing incremental employee creativity will have a positive effect on innovation performance when support for creativity is high. This means that support for creativity has a positive moderating effect on the relation between incremental employee creativity and innovation performance for SMEs in general. This is in accordance with hypothesis 3 that stated that support for creativity will have a positive moderating effect on the relation between employee creativity and innovation performance.
30 increased the innovation performance will be increased. This indicates that support for creativity has a positive impact on the relation between incremental employee creativity and innovation performance. In addition, we also see that innovation performance is increased by support for creativity when there is low incremental employee creativity.
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Collaboration diversity
The results of the linear regression showed that radical employee creativity has a positive effect on innovation performance in the case of SMEs in general (Table 6, Table 7). This means that when radical employee creativity is increased, innovation performance will also increase. In Figure 4 we see that this is the case when collaboration diversity is low. However, when collaboration diversity is high, there is no increasing effect of radical employee creativity on innovation collaboration. Actually, the innovation performance is even a little bit lower when radical employee creativity is increased and there is high collaboration diversity. This means that collaboration diversity has a negative moderating effect on the relation between radical employee creativity and innovation performance for SMEs in general.
32 When there is high collaboration diversity, it does not make sense to increase the radical employee creativity because that will not improve the innovation performance. However, when there is already radical employee creativity (high or low) it does make sense to create collaboration diversity, because the innovation performance will increase.
5. DISCUSSION
The objective of this study was to contribute to the current literature about informal innovation input especially in the context of SME family firms, because the literature about this topic is inconclusive. Therefore, this research investigated the relation between employee creativity as an informal form of innovation input and innovation performance. This is done in the cases of SMEs in general, SME family firms and SME non-family firms. The moderators ‘support for creativity’ and ‘collaboration diversity’ are investigated to find if they influence
the relation between employee creativity and innovation performance.
33 family firms. This is not consistent with the expectation that employee creativity has a positive effect on innovation performance in family firms, therefore hypothesis 1 is rejected. I expected the creativity of employees to have a positive impact, because creativity is the key for idea generations and innovation always starts with ideas (Amabile, 1996). However, in this study innovation performance is measured as the amount of turnover dedicated to products that are new to the market. Such products can be considered as technologically new products and therefore contain radically new technologies (OECD / Eurostat, 1997, p. 32). Since incremental employee creativity leads to ideas that can incrementally improve products, this is probably why the negative effect was found.
Another result of this study is a significant positive impact of radical employee creativity on innovation performance for SMEs in general and non-family firms. This result is in line with my expectations which makes hypothesis 2 supported. This is consistent with the literature that states that employee creativity will lead to new ideas and accordingly lead to innovation performance (Amabile, 1996). Contrary to the negative effect that was found for incremental employee creativity and innovation performance, we see that radical employee creativity does have a positive effect on innovation performance. As mentioned in the previous paragraph, it can be explained that products that are new to the market fall into the category of radical new products. Therefore, it is likely that ideas that origin from radical employee creativity have a positive effect on the creation of radical new products.
34 innovation will be increased which makes that eventually the innovation performance will be increased.
Moreover, the results show a significant negative moderation effect of collaboration diversity and radical employee creativity for SMEs in general. This is conforming to what I expected which means that hypothesis 4 is supported. On the one hand, complementarity is confirmed between internal and external sources of innovation input which means that combining both sources eventually increases the innovation performance (Cassiman & Veugelers, 2006). On the other hand, the involvement of external partners can also negatively impact the internal innovation input, especially in the case of SMEs (Rosenbusch et al., 2011). Following this, the results are in accordance with the literature that states that the impact of internal innovation input can be weakened by involving external parties.
The research question of this paper can be answered by interpreting the results. First of all, it is important to mention that employee creativity does exist out of two parts: incremental creativity and radical creativity. This study proved that incremental employee creativity has a negative effect on the innovation performance of family firms. Furthermore, there is a positive relation between radical employee creativity and the innovation performance of non-family firms. Support for creativity has a positive moderating effect on the relation between incremental employee creativity and innovation performance. A negative moderation effect exists for collaboration diversity on the relation between radical employee creativity and innovation performance.
Theoretical implications
35 incremental creativity - which both have very contrasting impact on the turnover that SMEs dedicate to products that are new to the market. This indicates that informal innovation input does have impact on the innovation performance of SMEs and that this impact can be moderated by other variables. These new insights can serve as a foundation for future research in this research field, what is really necessary because this study has a narrow scope and therefore makes a limited contribution. The literature gap of informal innovation input and the effect on the innovation performance of family firms is filled by this study. This study empirically tested the effect employee creativity as a particular form of informal innovation input. This paper makes a contribution to the current literature field by investigating employee creativity and innovation performance of family firms (Duran et al., 2016).
Managerial implications
This study provides several insights for managers of SMEs. First of all, the most important managerial implication of this study is that incremental employee creativity has a negative effect on the innovation performance of family firms. However, this effect can be positively moderated by supporting creativity. So if a family firm is willing to increase the incremental employee creativity it is very important that there is support for creativity to create a positive effect on the innovation performance. Another important finding of this study is that collaboration diversity negatively impacts the positive relation between radical employee creativity and innovation performance. For managers this means that it makes no sense to increase radical employee creativity when the firm is already collaborating for innovation with a high diversity of partners.
Limitations and future research
36 by one respondent for each company. The role of this respondent differs among the responding firms. It could be that respondents in a certain role have another perspective on the variables used in this research than respondents with another role. For future research it would be better to interview respondents with the same role every time, or it would be even better to ask several respondents with different roles to create a better view of the situation. Third, the survey was only conducted among firms allocated in the North Netherland. To increase the reliability of the results, future research could focus on a sample that is more spread geographically.
When concerning the measurement of this study some point could be improved in future. First, creativity leads to a pool of ideas and for this study it was assumed that a larger pool of ideas leads to a higher chance for a successful innovation performance. However, if the firm is not able to successfully implement new ideas, the size of the pool does not make sense. So investigating the ability of implementing new ideas would be a valuable addition to this research.
6. CONCLUSION
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