The antecedents of employee innovativeness
The impact of absorptive capacity on employee innovativeness with effects of leadership and work environment in SMEs
Nicole Spelt 10640495
Date of submission: 21-06-2017
MSc. in Business Administration – Strategy Track Amsterdam Business School – University of Amsterdam
2 Statement of originality
This document is written by Nicole Spelt who declares to take full responsibility for the contents of this document. I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in creating it. The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents.
3 Table of contents
1. Introduction ... 5
2. Literature review: theoretical framework and hypotheses development ... 9
2.1 Absorptive capacity ... 10
2.2 Innovative work behavior ... 11
2.3 Leadership ... 14
2.4 Work environment ... 15
2.5 Hypotheses ... 17
3. Method ... 21
3.1 Procedure and sample ... 21
3.2 Measurement ... 22 3.3 Analysis ... 24 4. Results ... 24 4.1 Reliability analysis ... 25 4.2 Factor analysis ... 25 4.3 Correlation analysis ... 26 4.4 Hypotheses testing ... 27
4.5 Testing the moderating effect ... 28
5. Discussion ... 29
5.1 Discussion results ... 29
5.2 Theoretical implications ... 31
5.3 Practical implications ... 32
5.4 Limitations and future research ... 33
6. Conclusion ... 34
References ... 36
Appendix A ... 44
4 Abstract
This study investigates the importance of individuals’ absorptive capacity on innovative work behavior. Particular attention is set on the effects of the work environment and leadership style that enhance employee innovativeness. This research is based on a survey study in the form of a questionnaire. The questionnaire is filled in by 104 employees in SMEs in creative industries in Europe. The results indicate that absorptive capacity supports innovative work behavior and this relationship is enhanced by transformational leadership. Although it was expected that the work environment also enhances this relationship, it only direct supports employees’ innovative work behavior.
Keywords: absorptive capacity, transformational leadership, work environment, employee
5 1. Introduction
In the present dynamic environment, change and the ability to differentiate from competitors is seen as a requisite to survive (Kuratko, 2009; Lichtenthaler, 2009). Due to the high rate of institutional, technological and social changes, organizations have to renew and improve their processes on a continuous basis, in order to achieve profitability and growth (De Jong, 2006). In this way, the field of entrepreneurship and innovation serves as a prospect for competitive advantage in disruptive environments (Messmann & Mulder, 2012). Additionally, building on individuals’ ability to innovate is recognized as a crucial asset for organizations’ effectiveness (Messmann & Mulder, 2012; West & Farr, 1990; Yuan & Woodman, 2010). The realization of this source of innovation is essential, due to employees’ daily incremental efforts to
innovate organizations’ processes and methods (De Jong, 2006). This applies especially to the creative industries, which is one of the fast-growing sectors characterized by knowledge intensive firms (Miles et al., 1995; Wood, 2003). The competitive accent on innovation appears to have been paralleled by the rapid growth of knowledge intensive services (Wood, 2003). Most firms in this knowledge intensive business sector are recently founded firms or small-medium enterprises (SMEs) (Koch & Strotmann, 2008). Although many SMEs fail in the disruptive environment due to their size, age and limited access to resources (Bommer & Jalajas, 2002; Cohen & Klepper, 1996), their ability and flexibility to provide rapid responses is an advantage compared to large firms (Baldwin, 2000). Research on SMEs has shown that productivity and growth are highly correlated with innovation (Baldwin et al., 1994).
With the increasing importance to gain competitive advantage, the necessity of innovative work behavior has been presented in the field of entrepreneurship and innovation (De Jong, 2006; De Jong & Den Hartog, 2010; Scott & Bruce, 1994; Sharma & Chrisman, 2007). The assumption that employee innovativeness is positively related to organizational performance (De Jong & Den Hartog, 2010), increased the attention to predictors that could
6 support innovative work behavior within an organization. Therefore, research on what enables or motivates innovative work behavior is crucial (Scott & Bruce, 1994). In recent years, determinants of employee innovativeness have been explored (e.g. De Jong & Den Hartog, 2007, Scott & Bruce, 1994). For instance, researchers argue that individuals with a high self-efficacy (Farr & Ford, 1990), proactive personality (Seibert et al., 2001) and intrinsic
motivation (Yuan & Woodman, 2010) show higher levels of innovative work behavior. At the workgroup level, research shows that team leader support (Axtell et al., 2006) and external work contact (De Jong & Den Hartog, 2007) enhances employee innovativeness.
Furthermore, at the organizational level, support for innovation (Scott & Bruce, 1994) and the provision of a clear vision (De Jong & Den Hartog, 2007) also supports innovative work behavior.
Whereas most studies at the individual level examined personal characteristics as determinants of innovative work behavior (De Jong, 2006), the access to knowledge through routines is crucial for innovativeness in the knowledge intensive business sector (Koch & Strotmann, 2008). “New competencies as a precondition to generate new products or services can be seen as the result of the acquisition, assimilation, and exploitation of new knowledge – what Cohen and Levinthal (1990) called absorptive capacity (ACAP)” (Koch & Strotmann, 2008:513). Although research have examined the importance of ACAP and innovation at the firm level, the study of ACAP remains difficult due to the diversity and ambiguity of its components, definitions and outcomes (Zahra & George, 2002). While individuals are the ones that constitute the concept of ACAP (Lane, Koka & Pathak, 2006), a thorough review of the related literature reveals that ACAP at the individual level is relatively neglected in the literature (Volberda, Foss & Lyles, 2010). This is a limitation since Cohen and Levinthal (1990) argue that an organization’s ACAP is influenced by the individual’s absorptive capacities. Additionally, the ability to interact with individuals in the organization and the
7 stock of knowledge may determine the expansion of innovative outputs (Koch & Strotmann, 2008). Organizations need external knowledge expressed in new ideas or as a resource to develop new products or services, as an input for innovation (Cohen & Levinthal, 1990; Zahra & George, 2002). Based on these characteristics, it can be expected that the ability to use new external knowledge is important for innovative work behavior (Cohen & Levinthal, 1990; Matusik & Heeley, 2005). Therefore, the impact of ACAP on employee innovativeness is studied in this research.
This study used a model that particularly emphasizes the impact of ACAP on
innovative work behavior. Existing studies in the field of innovation agree that ACAP is one of the determinants at the micro level which explain innovation (e.g. Dosi, 1988; Lee, 2003, in Koch & Strotmann, 2008). The extent to which employees will be innovative during their daily work depends not only on their capacity to absorb knowledge, but contextual and social external cues could also have an impact on their innovative work behavior (Woodman et al., 1993). More specifically, innovations are created within a contextual organizational
environment (Bommer & Jalajas, 2002). Characteristics of the work environment that employees perceive around them have been studied in relation to innovation (Amabile et al., 1996; Patterson et al., 2005). Challenging environments with supportive elements encourage innovativeness, whereas environments with lack of autonomy or pressure discourage
innovative ideas. Therefore, it can be argued that the perception of the work environment is capable to influence innovation amongst employees (Patterson et al., 2005). Of all the forces that influence the daily perceptions of the organizational work environment in SMEs, the most potent social external cue is likely to be the leadership style (Amabile et al., 1998). Particular in innovating SMEs, the capabilities of the organization are linked to the leaders (Koch & Strotmann, 2008). The leader with his or her experiences and motivations is the central agent for innovative activities with strategic decisions (Johannisson, 1998). Therefore,
8 the model used in this study also explores the work environment and leadership style as potential enablers to enhance the relationship between ACAP and employee innovativeness. A research opportunity consists of a further explanation of the notion of ACAP (Volberda et al., 2010) and employee innovativeness, with social and contextual influences of leadership and work environment. Therefore, this lack in the literature will lead to the following research question: What are the effects of leadership and work environment on the relationship
between absorptive capacity and employee innovativeness in SMEs?
By examining this, the study contributes to the literature of ACAP with particular interest on the micro-foundations. Moreover, the study contributes to existing theories of the complex model of innovative work behavior by exploring determinants at the individual level. The findings will help organizations to get more insights into the benefits of routines and activities in the innovation context. With respect to practice, the study could help managers to indicate the influence of their leadership style on employees’ innovative work behavior. Furthermore, the findings gain insight on which characteristics of the work environment enhance and stimulate employee innovativeness. All in all, the study will indicate several results that may indicate how SMEs can enhance the innovativeness of their employees.
The first part of this research provides a review of the existing literature on innovative work behavior and the antecedents ACAP, leadership and work environment. The hypotheses are presented in the conceptual framework. After a description of the method and data
collection, the empirical findings are presented. Next, the study concludes with a discussion of the results, implications and suggestions for future research.
9 2. Literature review
In this chapter the theoretical model of innovative work behavior will be discussed by
outlining existing literature. Furthermore, an understanding of general relevant topics for this study will be presented. First, a clarification will be made on the concepts of ACAP and innovative work behavior. Second, the external social and contextual cues, based on the transformational leadership theory (Bass., 1985) and componential theory (Amabile et al., 1996) will be discussed. Finally, the hypotheses are presented. Following the above, the theoretical model consists of four factors: absorptive capacity (contains of recognition, assimilation, transformation and exploitation of new external knowledge), leadership with a transformational style, work environment (encompassing flexibility, innovation and
autonomy) and innovative work behavior (captured via the dimensions of idea promotion, generalization and realization).
H2 H1 H3 Employee innovativeness Absorptive capacity Leadership Transformational Work environment Flexibility & Innovation
10 2.1 Absorptive capacity
Absorptive capacity (ACAP) is considered as an important antecedent in the innovation literature and at the same time an explanation why firms differ in performance (Volberda et al., 2010; Zahra & George, 2002). Researchers have used ACAP in organizational
phenomena, such as organizational learning, especially in dynamic capabilities and resource-based perspectives (Zahra & George, 2002). Cohen and Levinthal (1990:128) defined ACAP as “the organisation’s ability to recognize the value of new information, assimilate it, and apply it to commercial ends”. Using this definition, Zahra and George (2002:193) defined ACAP as “a set of organizational routines and processes by which firms acquire, assimilate, transform, and exploit knowledge to produce a dynamic organizational capability”. Due to the vast variety of dimensions ACAP is presented as a multilevel construct. The first dimension contains the processes and routines through which the organization acquires new externally generated knowledge. Second, the routines that assimilate the knowledge consist of
processing, analysing and understanding the new generated information (Zahra & George, 2002). Transformation is encompassing the refining and developing phase of those processes and routines. Last, exploitation captures the capability of an organization to create existing or new competences after the transformed knowledge (Zahra & George, 2002).
Studies based on ACAP have examined the four dimensions of the construct (Jansen, Van Den Bosch & Volberda, 2005) and investigated several effects of organizational
mechanisms on individual behavior (Lenox & King, 2004) or individual effects and outcomes at the organizational level (Zhao & Anand, 2009). Although ACAP is typically studied at the firm-level (Zahra & George, 2002), the interactions of individuals are overlooked (Volberda et al., 2010). Previous studies have not examined the impact of ACAP on innovative work behavior at the individual level, while employee innovativeness has been identified as a key factor for gaining competitive advantage in changing environments. Researchers admit that
11 there is little known about ACAP at the individual level (Van Den Bosch, Van Wijk &
Volberda, 2003), while Cohen and Levinthal (1990) state that individuals’ ACAP determine the ACAP of the organization. Moreover, Matusik and Heeley (2005) also argue that ACAP is composed of multiple dimensions, including individuals’ absorptive abilities. Individual actors with their abilities are important factors, due to the power to enhance incoming knowledge. In this respect, micro-foundations determine organizations’ capabilities and routines (Abell, Felin & Foss, 2008; Felin et al., 2012). Based on this phenomenon, micro-foundations could open the black box of the ACAP construct (Volberda et al., 2010) and enhance the understanding of individuals’ actions and organizational mechanisms to shape innovation.
Although literature suggest several antecedents of individuals’ ACAP, like prior knowledge and experience (Cohen & Levinthal, 1990; Lenox & King; 2004; Ko, Kirsch & King, 2005), cognitive models (Cohen & Levinthal, 1990; Zahra & George, 2002) and social networks (Roberts et al., 2012), pathways of access to external knowledge first have to exist (Matusik & Heeley, 2005). Therefore, the focus is on the routines and activities to recognize, assimilate, transform and exploit new external knowledge at the individual level (Löwik, 2012). Although these routines remain under explored in the literature, individuals with innovative work behavior need the capacity the absorb knowledge to implement new ideas (Lewin & Massini, 2003; Zahra & George, 2002).
2.2 Innovative work behavior
Innovative work behavior is based on organizational psychological research with
interchangeable elements of innovation and creativity (Amabile, 1988; Martins & Terblanche, 2003; Messmann & Mulder, 2012). However, the implementation side of employee
12 implementation activities in innovative work behavior (e.g. Scott & Bruce, 1994; Yuan & Woodman, 2010). Based on West and Farr (1989:324) innovative work behavior is defined as “an employee’s intentional introduction or application of new ideas, products, processes and procedures to his or her work role, work unit, or organization”. This behavior is directed to the application and initiation of useful ideas, products and processes (De Jong & Den Hartog, 2007; Zahra & George, 2002). The definition contains both the creative dimension and the implementation stage (Messmann & Mulder, 2012). Therefore, creativity is considered to be a component of employee innovativeness. Generally, it can be argued that employee
innovativeness contains behaviors and activities, which describe the innovation development within the organization (Kanter, 1988; De Jong & Den Hartog, 2010).
Studies on employee innovativeness have determined various dimensions related to the different stages of innovation (e.g. De Jong & Den Hartog, 2010; Messmann & Mulder, 2012; Scott & Bruce, 1994). For instance, De Jong and Den Hartog (2010) distinguish between idea exploration, idea generation, idea championing and implementation. Following Scott and Bruce (1994) and Janssen (2000), innovative work behavior consists of three behavioural tasks: idea generation, promotion and realization. The first dimension encompasses the production of useful ideas (Kanter, 1988), followed by idea promotion which consists of engaging others and build a coalition of supporters for the ideas (Janssen, 2000). The last task is producing a model that can be experienced within a work role (Janssen, 2000; Kanter, 1988).
Due to the complexity of innovative work behavior in a work setting a variety of antecedents might have an effect on employee innovativeness. Existing research on organizational behavior identified several factors at the individual, work group and organization level (e.g. Anderson, De Dreu & Nijstad, 2004; West and Farr, 1989). At the individual level, early research focused primarily on innovative work behavior as a
13 personality trait. For instance, Yuan and Woodman (2010) argued that contextual and
individual factors, including employee reputation as innovative is positively related to innovative work behavior. This is in line with psychological characteristics as intrinsic motivation, autonomy and intellectual stimulation (e.g. De Jong & Den Hartog, 2007). Other studies have determined the impact of characteristics of jobs related to innovative work behavior. Additionally, at the job role level, job requirement for innovativeness is positively related to innovative work behavior (Scott & Bruce, 1994; Yuan & Woodman, 2010).
Research in the field of innovation at the work group level, for instance the antecedent leadership, is relatively smaller and overlooked (Anderson et al., 2004). “This has been a regrettable shortfall in the coverage of innovation research especially given the increasingly widespread use of teamwork in organizations” (Anderson et al., 2004:149). However, in this study the antecedent transformational leadership is taken into account. Support for innovation and supervisor relationship quality are positively related to innovative work behavior (Scott & Bruce, 1994; Yuan & Woodman, 2010). This is in line with the leader-member exchange theory, which proposes that the quality of the relationship between the leader and follower influences outcomes, such as performance and innovativeness (Scott & Bruce, 1994; Yukl, 2002).
Third, organizational factors that influence innovative work behavior encountered a wide range of research (e.g. De Jong & Den Hartog, 2005; Oldham & Cummings, 1996). For instance, the organizations’ structure or strategy could have an impact on innovation. Whereas the structure of centralization and formalization has a negative relation with innovative work behavior, specialization enhances this behavior (Damanpour, 1991). Except for organizational structures, employees’ perceptions of the work environment emphasize the importance of the organizational climate. For instance, Scott and Bruce (1994) argue that an innovative work
14 environment supports employees’ innovative work behavior. However, innovative work behavior is also enhanced by rewards at a corporate level (Ramamoorthy et al., 2005).
2.3 Leadership
Burns (1978) established the two most used and known leadership styles; transactional and transformational leadership. Transactional leaders are defined as leaders who “get things done by making, and fulfilling, promises of recognition, pay increases, and advancement for
employees who perform well” (Bass, 1990:20). According to the transactional leadership theory, transactional leadership has negative effects on employee innovativeness through contingent rewards and active and passive management by exception (Bass, 1985). More specifically, transactional leaders only give rewards for the achievement of goals and employees are not expected to go beyond further expectations. According to Burns, the
transformative leadership style creates change in the life of individuals. Therefore, the focus is on transformational leadership. Transformational leadership occurs “when leaders broaden and elevate the interests of their employees, when they generate awareness and acceptance of the purposes and mission of the group, and when they stir their employees to look beyond their own self-interest for the good of the group” (Bass, 1990:21).
The dynamic capabilities perspective (Eisenhardt & Martin, 2000) assumed that leaders can influence the behavior of individuals to increase performance, such as
innovativeness. This is in line with Zahra and George (2002), they argued that a supportive managerial style reduces motivational barriers of individuals as a social integration
mechanism. Transformational leadership consists of several dimensions; idealized influence or charisma, inspirational motivation, intellectual stimulation and individualized consideration (Judge & Piccolo, 2004). By using charisma, the leader inspires loyalty and respect
15 willing to work harder. By inspirational motivation, the leader expresses the vision and
convinces the followers how they can achieve their goals by showing his or her belief in them (Bass, 1990). Individual efforts based on innovative work processes are influenced by the articulated vision (Amabile et al., 1996). Further, using intellectual stimulation stimulates followers to create ideas and think about old problems in different ways and adopt exploratory thinking processes (Bass & Avolio, 1997; Bass, 1985). The leader elevates the interests of the followers and tries to make them proactive in unique ways to challenge the status quo. Last, individualized consideration refers to the one-to-one relationship of a leader with the follower, whereby the leader considers the needs, aspirations and skills of the followers.
In recent years, more research has been done on the relationship between leadership styles and innovation (see Mumford et al., 2002). In this research field, Scott and Bruce (1994) found that a leader has a positive influence on employee innovativeness. Moreover, Tierney et al., (1999) showed that the relationship between leader and follower is also positively related to employee innovative performance. This is also shared by Oldham and Cummings (1996), they found that supervisors with a supportive style influence employees’ creative work positively.
2.4 Work environment
Innovation is influenced by several components within the individual (Amabile, 1988;
Amabile et al., 1996). However, according to Amabile’s componential theory one exception is based on a component outside the individual, that is the work environment. Perceptions of the work environment are mostly covered in models of organizational behavior, referred to “organizational climate” (Rousseau, 1988). These perceptions implied employees’ experiences in their organizations. The concepts of climate and culture are used interchangeable since both describe these experiences (Patterson et al., 2005). First,
16 organizational climate consists of things that happen in an organization to employees. Climate is a surface manifestation of the organizational culture (Schneider, 1990), which is more behaviorally oriented for innovation (Patterson et al., 2005). More specifically, culture represents common assumptions and shared values held by individual members of the organization. For instance, firm innovativeness is defined from a collective perspective as a firm’s culture that is open to new ideas (Hurley & Hult, 1998). An assumption of research in this area of climate was the limited number of dimensions of the construct (Patterson et al., 2005). However, the number of dimensions has increased over the years and caused
confusion. Therefore, Schneider (1990) argued for a specific-interest climate approach. He suggested that dimensions of this construct depend on the criteria of interest and on the purpose of the study. Although the global approach can give an overall view of the
organizational climate, the focus is on the domain-specific approach that contributed more precise information on innovation. First, the study explores the flexibility toward innovation, encompassing the encouragement and support for innovative ideas (e.g. West & Farr, 1990). Additionally, the dimension of autonomy is also taken into account.
Build on Amabile’s componential theory (1988), three organizational factors are proposed. First, motivation and flexibility to innovate is needed as the basic orientation towards innovation. Research in the area of innovation indicated that employees need a supportive work environment that motives to exchange knowledge (Amabile et al, 1996; Jung, Chow, & Wu, 2003; Mumford & Gustafson, 1988). This is also applied to support for creativity and innovation across the organization. “Even when individuals have developed the capacity for innovation, their willingness to undertake productive efforts may be conditioned by beliefs concerning the consequences of such actions in a given environment” (Mumford & Gustafson, 1988:37). Second, organizations’ resources specified the accessibility to innovate within the environment. For instance, studies indicated the relevance of the effects of pressure
17 to produce on innovation in organizations (Amabile, 1988; Amabile et al., 1996; Andrews & Farris, 1972). Some research found that extreme pressure could undermine innovativeness, but to a certain level it could have a positive influence if it was perceived as intellectually challenging or urgent, which can enhance innovation (Amabile, 1988). This is in line with Andrews and Farris (1972), they argued that time pressure is associated with high creativity. However, excessive workload pressure to produce or the pressure for employees to meet a target decreased the innovative work behavior (Patterson et al., 2005). Last, management practices in the organization are related to autonomy and freedom in the carrying out of the work (Amabile et al., 1996). Several researchers have concluded that innovation is conducted when individual members of an organization have high autonomy in their work and a sense of control and ownership over their ideas (Amabile et al., 1996; Bailyn, 1985). According to Spector (1986), high levels of perceived control were associated with high levels of
performance. On the other hand, Yukl (2001) stated that employees can be discouraged when an organization is not highly concerned with innovation, even though they are given
autonomy. All in all, climate factors can influence innovative work behavior (West & Wallace, 1991).
2.5 Hypotheses
The role of absorptive capacity in supporting employee innovativeness. In the field
of innovation, ACAP is an important determinant of innovation at the organizational level (Dosi, 1988; Lee, 2003). In the present changing environment, SMEs rely on their employees to innovate their methods and processes. Employees need the ability to improve products, work processes and services as well as the willing to innovate (Janssen, 2000). The processes in an organization are commercial outputs of ACAP (Lane et al., 2006), which result of individuals’ ability to gain knowledge (Grant, 1996). At the individual level, the dimensions
18 of ACAP predict employees’ implementation of ideas and activities (Janssen, 2000; Scott & Bruce, 1994). First, the dimension of recognition is related to “entrepreneurial alertness”, whereby alert individuals actively search for new ideas. According to Ardichvili, Cardozo & Ray (2003), alertness is a necessary condition for the success of recognition to generate new products or concepts. Second, assimilation activities encompass the codification of knowledge with the potential to share the external knowledge among other members (Jansen et al., 2005). Individuals who are able to assimilate the external knowledge with internal knowledge will realize new processes and products (Zahra & George, 2002). Third, transformation activities rely on individuals’ creativity (Lane et al., 2006; Amabile, 1988). Individuals with “outside the box” mental activities engage in the development of ideas and solutions (Kanter, 1988). Last, the exploitation dimension consists of activities to internalize new external knowledge. Individuals need flexibility and adaptability to try new things and apply this in their work processes (Löwik, 2012).
Organizations need individual members with the ability to tap into new external knowledge to create ideas (Nonaka & Takeuchi, 1995; in Deng, Doll, & Cao, 2008). The ability of individuals to absorb knowledge due to routines and activities (Matusik & Heeley, 2005) can have an impact on their innovativeness, because their work behavior includes the generation of ideas in the implementation stage (Janssen, 2000). It is expected that employee innovativeness is higher when the dimensions of individuals’ ACAP are high. Therefore, this will lead to hypothesis 1: There is a positive relationship between individuals’ absorptive capacity and employee innovativeness.
The role of leadership in the relationship between absorptive capacity and
employee innovativeness. Following the dynamic capabilities perspective (Eisenhardt &
Martin, 2002), leaders determine what capabilities to develop (Volberda et al., 2010). Additionally, they stimulate individual’s learning processes, which motivate idea generation
19 by encouraging ideas (Amabile, 1998). The dimensions of transformational leadership may predict innovative work behavior (Yukl, 2002). First, by using charisma and inspirational motivation, the leader expresses a vision to energize employees to stimulate innovation (Jung et al., 2003). Leaders can act like innovative persons and motivate employees to explore ideas. Due to the leaders’ idealized influence, employees are willing to work harder
(Gumusluoglu & Ilsev, 2009), which can lead to the achievement of goals and higher levels of employee innovativeness. Additionally, a vision may increase effort and attention by defining directions which stimulate employees’ energies and enhance innovative activities (e.g. Bass, 1985).
Further, the dimension of intellectual stimulation stimulates employees to rethink and see problems in new ways, which increases the awareness (Yukl, 2002). It inspires and motivates employees to achieve higher expectations. Moreover, Amabile (1988) argued that this dimension of transformational leadership is expected to enhance intrinsic motivation, which is linked to creative performance. Due to intellectual stimulation, employees are more focused on specific tasks and this should create new ways of doing things, which enhance innovative work behavior (Jung et al., 2003). Last, individualized consideration refers to the relationship between the leader and the subordinate. Following the leader-member exchange theory, high-quality exchange relationships include recognition, support in situations of risk-taking and challenging tasks (Scott & Bruce, 1994). These behaviors contribute to innovative work behavior at the individual level, because support for innovation and feedback improves performance (Yukl, 2002).
Leader’s transformational leadership style is likely to act as an “innovation-enhancing force”, whereby individualized consideration “serves as a reward” for followers due to
recognition; inspirational motivation “encourages the idea generation process” and intellectual stimulation “ encourages exploratory thinking” (Bass & Avolio, 1997; Sosik, Kahai &
20 Avolio, 1998:113). Transformational leaders try to create new ways of working; therefore, innovativeness could be a function of transformational leadership. Altogether, prior studies provided theoretical evidence to expect that transformational leadership would enhance innovative work behavior among employees. This will lead to hypothesis 2: The positive relationship between absorptive capacity and employee innovativeness is moderated by transformational leadership, so that this relationship is stronger for higher values of transformational leadership.
The role of work environment in the relationship between absorptive capacity
and employee innovativeness. The work environment is a critical factor in determining employees’ innovative work behavior (Amabile, et al., 1996; Martins & Terblanche, 2003). Challenging environments with elements of support encourage innovativeness (Patterson et al., 2005). Organizations need an orientation toward change and encourage or support
individuals to use innovative approaches and new ideas (West & Farr, 1990). Particularly the importance of support for innovation have been argued to be deterministic for innovative work behavior (Yuan & Woodman, 2010). Values of support like autonomy and flexibility in the work environment will promote innovation (Martins & Terblanche, 2003).
Organizations with a flexible view towards change, allow for employees’ creative ideas (Yuan & Woodman, 2010). Autonomy as a core value is manifested in decision making and empowerment (Martins & Terblanche, 2003). Additionally, individuals with high
autonomy in their work feel a sense of ownership over their ideas (Amabile et al., 1996). This applies that employees can determine procedures and achieve their goals in a creative way (Judge et al., 2007). The more these dimensions of autonomy and flexibility indicate that innovation is appropriate, the more employees will explore innovative work behavior.
Individuals who perceive the work environment as flexible, innovative and autonomous, will perform higher levels of innovative work behavior (De Jong, 2006; Scott & Bruce, 1994).
21 Thereby, organizations with a proactive work climate use reward systems to stimulate
employees’ innovative efforts. It can be argued that the perception of the work environment can influence innovative work behavior. In line with the domain-specific approach of Schneider (1990), the mentioned dimensions of interest based on work environment lead to hypothesis 3: The positive relationship between absorptive capacity and employee
innovativeness is moderated by work environment, so that this relationship is stronger for higher values of work environment.
3. Method
This chapter consists of the procedure of the data collection and the sample. Then, the measurement methods of the constructs absorptive capacity, work environment, leadership and employee innovativeness are explained. In the end, the analysis is mentioned.
3.1 Procedure and sample
To investigate the antecedents of employee innovativeness, the overall design of the empirical study was a survey. Employees in SMEs are used as the unit of analysis. The focus was on SMEs in Europe in creative industries, especially advertising & marketing, video & computer games, and IT, software & computer services. Additionally, those industries within the creative industries are very knowledge – and technology oriented in which innovation plays an important role (Koch & Strotmann, 2008). The European business culture is treated as one sample.
The data has been collected via LinkedIn groups, based on particular practitioner communities that fulfil certain criteria. First, the description of a group consists of key words based on the size of companies, in this case “SMEs”. Second, the information about the group shows that the focus is on “Creative industries”, for example key words are: advertising,
22 marketing, computer, software, services. Last, the groups were targeted at the European level. The communities that fulfil the criteria can be found in the Appendix. Groups that met the criteria above were identified and the admin of those groups were contacted via an In-mail message. For those groups who responded positively, members of the groups have been requested to fill in the questionnaire. A post on the discussion form was distributed to gain responses from those members. A post as a reminder was sent one week later to raise the response rate. Based on the number of members in the communities, around 100.000
individuals were contacted. It is difficult to indicate how many individuals are actually active in those communities. In total, 113 respondents took part, meaning response rate of 0.11%. From the 113 respondents, 104 were reliable enough to be analysed. The sample consisted of 36.9% (n = 37) male participants and 63.7% (n = 65) female participants. To test the
understand ability and readability of the questionnaire, the survey was distributed among three employees in SMEs. The average age of the respondents is 39 (M = 38.83, SD = 11.15). The average highest accomplished level of education is higher professional education (M = 5.89, SD = 1.45) with an average of 16 years of work experience (M = 16.01, SD = 11.06). The survey was administered anonymously to avoid socially desirable answers. The data were collected through survey tool Qualtrics Survey Software.
3.2 Measurements
The questionnaire consisted of 47 questions with four variables: absorptive capacity, leadership, work environment and employee innovativeness. In this study four control variables are added: gender, age, level of education and work experience. The scales used in this study were pre-existing and validated scales in previous research. A reliability test is conducted to further obtain internal consistency of the variables. See table 1. All items were scored on seven-point Likert scales from “never” to “always”. Exceptions were the items for
23 absorptive capacity, from “strongly disagree” to “strongly agree”. The items had a specific order to increase the validity. The predictors were mentioned first in the questionnaire, followed by employee innovativeness. The end of the questionnaire consisted of a number of control variables, namely gender, age, level of education and years of work experience. The items of the variables can be viewed in the Appendix.
Absorptive capacity can be defined as abilities to tap into external knowledge, with routines and habits that allow employees to access the external knowledge. Individuals’ absorptive capacity can be measured with a 15-item scale adapted from Löwik (2012). The scale consists of four dimensions; recognition, assimilation, transformation and exploitation. Example items are: “I communicate newly acquired knowledge that might be of interest for our company” and “I constantly consider how I can apply new knowledge to improve my work”.
Leadership can be defined in different ways. In this research, the Global
Transformational Leadership scale (Carless, Wearing & Mann, 2000) is used to measure transformational leadership with seven items. An example of one item is: “My supervisor… encourages thinking about problems in new ways and questions assumptions”.
Work environment is defined as "the day-to-day social and physical environment in which you currently do most or all of your work" (Amabile, 1996:1165). The organizational climate measure is used to measure work environment (Patterson et al., 2005). This scale consisted of several subscales. Two dimensions of work environment are measured, namely flexibility and innovation and autonomy. Example items are: “People in this organization are always searching for new ways of looking at problems” and “Management trust people to take work-related decisions without getting permission first”.
Employee innovativeness can be measured by the nine-item measurement scale
24 generation, idea promotion and idea realization (Janssen, 2000; Scott & Bruce, 1994).
Following West and Farr (1989:324) innovative work behavior is defined as “an employee’s intentional introduction or application of new ideas, products, processes and procedures to his or her work role, work unit, or organization”. Examples of the items are: “Creating new ideas for difficult issues (idea generation)”; “Mobilizing support for innovative ideas (idea
promotion)”; “Transforming innovative ideas into useful applications (idea realization)”.
3.3 Analysis
First of all, the data has been checked for errors in order to optimize the reliability of the research. A multiple regression analysis is conducted to assess the relationships between the variables. Within this research, p ≤ 0.05 is considered to be an acceptable level.
4. Results
Within this chapter, the results of the study will be discussed. Table 1 presents the descriptive statistics of this study with the correlations between the variables. The Cronbach’s alpha of the constructs is also presented in table 1. Before table 1 was constructed some negatively-keyed items were recoded. More specifically, these items were phrased so that an agreement with one item represents a low level of the construct being measured. The recoded items are shown in the Appendix. Next, the reliability and factors of the constructs were analysed. After the model was tested with the Z-score method, no outliers were found. Table 2 presents the regression analyses with employee innovativeness as dependent variable. The first model includes control variables. The second model indicates the relationship between absorptive capacity and employee innovativeness. Model 3 explains the moderating effect of
transformational leadership, followed by the interaction effect of the work environment. Finally, the last model consists of all variables.
25 4.1 Reliability analysis
Reliability analyses are introduced to measure the reliability of the constructs. As presented in table 1, all scales have high reliability, with Cronbach’s Alpha > .90. The correlated items-total correlations indicated that all the items have a good correlation with the items-total score of the scales (all above .30). Also, none of the items would substantially affect reliability if they were deleted.
4.2 Factor analysis
A principle axis factor (PAF) analysis was conducted on the scales to identify latent constructs. This analysis was preferred because it accounted for co-variation, whereas the principle component analysis only interpreted for the total variance (De Winter & Dodou, 2012). First, the Kaiser-Meyer-Olkin measure verified the sampling adequacy for the absorptive capacity scale, KMO = .878. Barlett’s test of sphericity χ² (105) = 850.270, p < .001, indicated that correlations between items were sufficiently large for PAF. An initial analysis was run to obtain eigenvalues for each component of absorptive capacity. Two components had eigenvalues over Kaiser’s criterion of 1 and in combination explained 57.22% of the variance. The first component had an eigenvalue of 7.2 and the second
component had an eigenvalue of 1.2 and explains 9% of the variance. The second component is substantially less than the first component and for that reason, absorptive capacity is measured as one factor.
Second, the Kaiser-Meyer-Olkin measure verified the sampling adequacy for the leadership scale, KMO = .878. Barlett’s test of sphericity χ² (21) = 636.541, p<.001. One component had an eigenvalue of 5.13 and in combination explained 73.28% of the variance. Third, the Kaiser-Meyer-Olkin measure verified the sampling adequacy for the work
26 components explained 70,42% of the variance, namely autonomy and flexibility and
innovation. The scale is used as one factor due to the high reliability, with Cronbach’s Alpha = .938 and the second construct only explains 10.1% of the variance. Last, the Kaiser-Meyer-Olkin measure verified the sampling adequacy for the employee innovativeness scale, KMO= .896. Barlett’s test of sphericity χ² (36) = 863.693, p<.001, indicated that correlations between items were sufficiently large for PAF. One component had an eigenvalue of 6.37 and
explained 70.74% of the variance.
4.3 Correlation analysis
A bivariate correlation analysis was applied to identify the relationships between the constructs. As presented in table 1, significant correlations are found. First, table 1 shows a positive moderate significant correlation between absorptive capacity and employee
innovativeness (r = .546, n = 104, p<.01). The same positive moderate significant correlation is also found between work environment and leadership (r = .524, n = 104, p<.01). A positive weak significant correlation is found between leadership and employee innovativeness (r = .239, n = 104, p<.05), and between absorptive capacity and leadership (r = .253, n =104, p<.01). This relationship is also found between work environment and employee
innovativeness (r = .326, n = 104, p<.01). The effect of the relations between the four main constructs correlate positively with values between .239 and .546 with an exception between absorptive capacity and work environment. Further, a strong positive correlation is found between the control variables age and years of work experience (r = .946, n = 104, p <.01). Both the relationships of level of education and work experience (r = -.229, n = 104, p<.05) and age and level of education (r = -.250, n =104, p<.05) are negatively weak correlated.
27 4.4 Hypotheses testing
Based on the Pearson product-moment correlation coefficient, table 1 shows that absorptive capacity correlates positively with employee innovativeness (r = .546, n = 104, p<.01). The strength of this effect is, however, considered to be moderate. This means that as absorptive capacity increases in value, employee innovativeness also increase in value. Table 2 shows the hierarchical multiple regression to predict employee innovativeness. In model 2 absorptive capacity was entered as a predictor, after controlling for gender, age and work experiences. The model is statistically significant F (4, 101) = 13.06; p<.001 and the total variance
explained by the model was 35.0%. For each extra point on absorptive capacity it is predicted that employee innovativeness increases by .55. So, although gender explains a small part of the variance, absorptive capacity has out of these four variables by far the most predictive power on employee innovativeness. Therefore, support is found for hypothesis 1.
Variables M SD 1 2 3 4 5 6 7 8 1. Absorptive capacity 5.56 0.80 (.92) 2. Leadership 5.23 1.23 .25** (.94) 3. Work environment 4.41 1.17 .19 .52** (.91) 4. Employee innovativeness 4.92 1.19 .55* .24* .33** (.95) 5. Gender 0.64 0.48 .05 -.11 -.08 -.20* -6. Age 38.77 11.03 .01 -.05 .15 .05 -.12 -7. Level of education 5.89 1.45 .10 .05 -.10 -.06 -.25* -.16
-8. Years of work experience 16.10 11.02 .02 -.06 .13 .07 -.13 .95* -.23*
-*. Correlation is significant at the 0.05 level (2-tailed). **. Correlation is significant at the 0.01 level (2-tailed). Table 1: Means, Standard Deviations, Correlations
28
Table 2: Regression analyses
Model 1 Model 2 Model 3 Model 4 Model 5
Control variables Gender -.19 -.21** -.20** -.20** -.19** Age -.25 -.18 -.19 -.28 -.25 Work experience -.28 .20 .26 .28 .27 Direct effects ACAP .55*** .52*** .51*** .50*** Leadership .10 .05 Work environment .24*** .28*** Moderating ACAP x leadership .18* .26**
ACAP x work environment .08 .09
Constant 5.77 1.13 1.38 5.96 1.80 R² .05 .35 .39 .41 .44 Δ R² .02 .32 .04 .02 .06 F 1.59 13.06*** 9.97*** 10.80*** 9.22*** Df 3,101 4,101 6,101 6,101 8,101 * p < 0.05. ** p < 0.01. *** p < 0.001
4.5 Testing the moderating effect
In order to measure if transformational leadership and work environment influence the relationship between absorptive capacity and employee innovativeness, two separate
moderation analyses have been applied. The variables were mean-centred before calculating the interaction effects. This is done to reduce the potential for multicollinearity. Table 2 shows the results of the moderator analysis in model 3 and 4. Model 3 consists of the moderating effect of transformational leadership and is statistically significant F (6, 101) = 9,97; p<.001 with a total variance explained by the model of 38.6%. By adding leadership as a moderator, the regression coefficient for absorptive capacity*leadership is (β = .18, p <0.05) and is statistically different from zero, t (101) = 2.108, p<0.05, 95% CI [0.02, 0.57]. The interaction leads to an increase of ΔR² = .04, ΔF (2, 95) = 2.82, p <.001. Examination of this
29 model showed an enhancing effect that as absorptive capacity and transformational leadership increased, employee innovativeness increased. Thus, the effect of absorptive capacity on employee innovativeness depends on transformational leadership. Therefore, support is found for hypothesis 2.
By adding work environment as a moderator in model 4, the regression coefficient for absorptive capacity*workenvironment is (β = .08, p =.316) and is not significant t (101) = 1.008, p = .316. This means that there is no interaction effect of work environment on the relationship between absorptive capacity and employee innovativeness. Therefore, hypothesis 3 is rejected. Because the lack of a significant result for hypothesis 3, an additional analysis is conducted to analyse the main effect. As presented in table 2, work environment was entered in model 5 as a predictor and is statistically significant F (8, 101) = 9.217; p<.001 and the total variance explained by the model was 44.2%. A main effect of work environment on employee innovativeness (β = .28, p <0.01) is found and is statistically different from zero, t (101) = 2.922, p<0.05. Although hypothesis 3 is rejected, it is applicable that work
environment is a predictor of employee innovativeness, without being a moderator.
5. Discussion
In this chapter the presented findings will be discussed, based on reviewed literature.
Thereafter, the contributions for theory and practice will be discussed. In the end, limitations and future recommendations are given.
5.1 Discussion results
In recent years, innovative work behavior has become an important phenomenon in the field of innovation (e.g. De Jong & Den Hartog, 2010; Janssen, 2000; Ramamoorthy et al., 2005). Additionally, individuals’ actions are crucial for improvement and continuous innovation in
30 organizations (De Jong & Den Hartog, 2010). The aim of this study was to indicate
antecedents of employee innovativeness at the individual level. Specifically, by testing the relationship between ACAP at the individual level and employee innovativeness with the moderating function of the work environment and leadership. It was expected that ACAP positively supports employee innovativeness and that transformational leadership would enhance this relationship. This positive expectation also applies to the work environment. The results show that employee innovativeness is supported by ACAP at the individual level. This means that employees’ activities and routines to gain new external knowledge support their innovative work behavior to implement new ideas. This is in line with earlier research at the organizational level (Cohen & Levinthal, 1990; Janssen, 2000; Lewin & Massini, 2003; Matusik & Heley, 2005; Zahra & George, 2002). This means that the consistent relationship opens the black box of the ACAP construct (Volberda et al., 2010) at the individual level. This relationship is enhanced by transformational leadership. This means that leaders with a transformational leadership style can influence their subordinates’ performance. The
characteristics of transformational leaders enhance employees’ innovative work behavior. This is consistent with earlier research on leadership (Bass, 1985; Bass & Avolio, 1997), because the leadership theory supposes that leaders positively stimulate employees in their activities. Zahra and George (2002) also argued that a supportive style reduces motivational barriers of individuals. This is in line with Scott and Bruce (1994), they stated that leaders have a positive influence on innovative work behavior. Further, this study supports the dynamic capabilities perspective (Eisenhardt & Martin, 2000), based on the assumption that leaders influence the behavior of employees.
Although it was expected that the work environment also enhances this relationship, it only direct supports the innovative work behavior of employees in SMEs. Individuals that feel support and encouragement from their work environment, will be more innovative (Amabile
31 et al., 1996). This study supports Amabile’s componential theory due to the direct main effect of work environment on employee innovativeness. However, the work environment doesn’t enhance employees’ ability to tap into new external knowledge. The routines and activities to gain new external knowledge are not related to the work environment. This inconsistent finding might be explained by the role of the perceptions of individuals. Additionally, socialization tactics in the work environment may create shared values and experiences among members of the organization (Schneider, 1990). Those tactics can lead to selective perception as well as poor information search to gain new external knowledge. Socialization tactics hamper employees’ ability to acquire and assimilate new external knowledge (Cohen & Levinthal, 1990). Another explanation could be that individuals differ in prior knowledge and experiences (Lenox & King, 2004). This is in line with Cohen and Levinthal (1990), they argued that the ability to evaluate outside knowledge is largely a function of prior knowledge. This include a shared language and knowledge of most recent technological developments.
5.2 Theoretical implications
Earlier research on innovation focused on the relationship between ACAP and innovation at the organizational level. Although scholars have called for research at the individual level (Cohen & Levinthal, 1990; Lane et al., 2006; Zahra & George, 2002), the examination of this relationship with external cues remains a black box. First, this study contributes to the
literature of ACAP by shedding some light on the micro-foundations of ACAP. The study explores how ACAP at the individual level relates to innovative work behavior. Additionally, this study shows that ACAP at the individual helps to understand how employee
innovativeness in SMEs is achieved. This interesting result shows that ACAP not only applies at the organizational level, but also at the individual level. Hereby, the study contributes to the field of entrepreneurship and innovation, due to the clarification of antecedents of employee
32 innovativeness and the further explanation of the role of ACAP. It is important to indicate these antecedents, because it is applicable to improvements of performance at the individual level (Janssen, 2000).
Third, most of the studies focused on large firms in the field of innovation (e.g. Lenox & King, 2004), however, this research is specified among SMEs. Although innovative work behavior is critical in dynamic environments for knowledge – and technology oriented SMEs (Yuan & Woodman, 2010), there is limited evidence in this context. This study highlights the implications of innovative work behavior for SMEs in the creative industries. Fourth, this study contributes to the understanding of external contextual and social cues as antecedents of innovative work behavior. The findings are consistent with the existing leadership literature by showing empirically the relevance of the transformational leadership style as antecedent of employee innovativeness. The findings of transformational leadership show that this
leadership style enhances the relationship between ACAP and employee innovativeness. Additionally, this study supports the dynamic capabilities perspective that leaders stimulate individuals to be innovative (Eisenhardt & Martin, 2000).
5.3 Practical implications
Due to rapid changing environments and in order to differentiate from competitors, it is important for SMEs to be innovative (Lichtenthaler, 2009). With respect to practice, the findings of this study contribute to all SMEs in the creative industries. The insights could help supervisors to understand that their transformational leadership style stimulates employees to be innovative. Although the leadership style enhances innovative work behavior, it is
important to mention that having an innovative and flexible work environment doesn’t mean that employees absorb new external knowledge. Therefore, it is the supervisors’ responsibility to stimulate employees’ ability to gain external knowledge. For instance, due to
33 characteristics of transformational leadership as intellectual stimulation and individualized consideration (Bass & Avolio, 1997), leaders could stimulate subordinates to create routines to gain external knowledge. Organizations can facilitate individuals’ ACAP by applying HRM practices oriented towards employees’ motivation and ability (Minbaeva et al., 2003). For instance, internal communication, performance-based compensation and training could facilitate employees’ motivation and ability to tap into new external knowledge (Minbaeva et al., 2003). Moreover, with the one-to-one relationship leaders could identify the skills and needs of their followers. All in all, this study shows several results that may indicate how SMEs can enhance the innovativeness of their employees.
5.4 Limitations and future research
Although the findings are contributing to the existing literature in the field of innovative work behavior, this study has some limitations. First of all, no causality can be demonstrated due to the cross-sectional study as a web-survey. Although respondents could be reached quickly, a longitudinal research could determine causality. Moreover, differences in job roles are not taken into account. Although this research is specified in SMEs in the creative industries, a distinction can be made between jobs in the same sector. Additionally, while within these industries the need for innovation is critical, it can be expected that outcomes of innovative work behavior will differ across industries.
Contrary to SMEs where employees are close related to the dynamic environment and get involved in the realization of external knowledge, large organizations have to do with hierarchical structures and physical distance between employees. It might be reasonable to expect that within large organizations the ability for external knowledge increases. Another limitation is the way in which the work environment was measured. Work environment is an extremely complex subject with a lot of dimensions. Although the literature suggested a larger
34 scale to determine perceptions of work environment, this study only used two dimensions. While this study represents two of the most commonly dimensions of work environment in the field of innovation, there is still a debate for how this multi-dimensional construct is appropriately measured (Amabile et al., 1996; Patteron et al., 2005). This existing literature have identified a vast variety of fundamental dimensions to identify work environment. Last, other individual antecedents to predict employee innovativeness could be of interest as well such as motivation (Volberda et al., 2010).
This research sheds light on the model of innovative work behavior at the individual level by exploring the antecedents ACAP, leadership and work environment. Future studies can further explore this model by examining the antecedents of employee innovativeness in context of larger organizations. Another suggestion is to further examine the role of ACAP on innovative work behavior among other industries, while control for differences in job-roles. Furthermore, future research could use more extensive dimensions of work environment to provide more information that might have an impact on ACAP as well.
6. Conclusion
This study reveals empirical findings regarding the model of innovative work behavior by using existing literature to test the antecedents within SMEs in the creative industries. The findings show that ACAP at the individual level leads to higher levels of innovative work behavior. The moderating role of transformational leadership creates a new view for the further exploration of innovative work behavior. This means that transformational leaders enhance the relationship between ACAP and employee innovativeness at the individual level. Contrary to the expectations, the work environment had no moderating effect. Despite this fact, the work environment had a direct positive relation with employee innovativeness.
35 own leadership style. To encourage employees to be innovative, leaders should have a
transformational leadership style. Moreover, a flexible and innovative work environment can improve employees’ innovative work behavior. Therefore, it is important to create an
environment in which employees feel free to make their own choices. Hopefully, this study will stimulate future research to explore determinants of innovative work behavior.
Acknowledgement
The author wishes to acknowledge Andreas Alexiou for the valuable comments and useful tips, which contribute to the improvement of this study.
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