The contribution of an employee-driven
innovation-approach to technological
innovations: a mixed methods study
In what way and to what extend does an EDI-approach contribute to the
technological innovativeness of Dutch manufacturing companies?
Master thesis Business Administration – Strategic Management
Anne-Marie Huijskes
s4135040
Supervisor: Dr. P.M.M. Vaessen
2
ndexaminer: Prof. dr. J. Jonker
The contribution of an employee-driven
innovation-approach to technological innovations: a mixed methods
study
Master Thesis - Strategic Management
Supervisor: Dr. P.M.M. Vaessen
Second examiner: Prof. dr. J. Jonker
Abstract
With the development in which knowledge-based globalized economies such as the Netherlands are shifting away from the R&D model for innovation, research on employee-driven innovation (EDI) is an emerging phenomenon. EDI contains the acknowledgement of the importance of all employees, regardless of their job description, to innovation. Although the importance of human capital for innovation is acknowledged, EDI is still not a well-documented field of research in the relevant innovation literature, with in particular underexposed the outcomes of stimulating EDI. This thesis seeks therefore to explain in what way and to what extend an EDI-approach enhances the technological innovativeness of Dutch manufacturing firms. Mixed-methods are used as previous work has failed to use the recommended method of combining a quantitative and qualitative study. Analyses of a survey sample of the Dutch EMS (N=139) and semi-structured interviews within five firms in the Dutch manufacturing reveal several findings. First, stimulating and implementing measures that can stimulate employees to contribute to innovation, the so-called EDI-approach, can be used as a stand-alone strategy for innovation, as positive effects of this approach on technological sophistication and radical product innovativeness are found in the quantitative study. No quantitative support is found that an EDI-approach positively affects the incremental product innovativeness. Second, the qualitative results highlight the importance of the external network to the technological innovativeness of Dutch manufacturing firms. Therefore, the findings reveal that applying an internal perspective while using the RBV is not enough to develop a good framework to study the EDI-concept. The ‘open innovation’ concept should be considered when studying the EDI-concept. Finally, R&D and EDI currently do not reinforce each other according to the quantitative results, although three of the interviewed firms stated that the stimulation of internal collaboration, which is part of an EDI-approach, can ensure that this effect does occur.
Key words: employee-driven innovation; employee participation; human capital; involvement; management;
Preface
This thesis is the final product of my master program Business Administration, specializing in Strategic Management. The title of this study is ‘The contribution of an employee-driven innovation-approach to technological innovations: a mixed methods study’. It was not an easy road and stressful times have appeared, but I am proud of this achievement. With submitting this thesis, I conclude a fantastic and memorable year in which I learned a lot and in which I developed myself tremendously. It was not possible for me to reach this without the contribution of the following people.
First and foremost, I would like to thank dr. Peter Vaessen for his advice and guidance in this process. He has been very supportive during the study and invested a lot of time and effort in my research, which enabled me to improve the content for which I’m very grateful. Besides my supervisor, I also would like to highlight my appreciation for the time my second examiner prof. dr. Jan Jonker made available for me.
Furthermore, I would like to thank all the people who welcomed me for an interview and were willing to give me insights in their organizations. It is because of you that I was able to see the link between the academic world and the “real world”, which resulted in an enormous boost of motivation for me to finish this study.
Additionally, my thanks goes out to my friends who not only provided a listening ear and pleasant distractions at the university and beyond, but who also challenged me on an academic level to improve my thesis. A special thanks to Dick and Elly, thanks to whom it was possible for me to quickly continue my thesis in a short time.
Finally, I would like to thank my family and boyfriend for their unconditional support throughout all stages of this process. It was not easy for me, but you were always there for which I’m very grateful. Thank you very much!
I hope you enjoy reading this study.
Anne-Marie Huijskes
Table of contents
Chapter 1 – Introduction ... 1
Chapter 2 – Theoretical framework ... 4
2.1 Introduction ... 4 2.2 Innovation ... 4 2.2.1 Introduction to innovation ... 4 2.2.2 Definition of innovation ... 4 2.2.3 Process innovation ... 5 2.2.4 Product innovation ... 6
2.2.4.1 Incremental product innovation ... 6
2.2.4.2 Radical product innovation ... 7
2.3 An employee driven innovation-approach ... 7
2.3.1 Introduction to the EDI concept ... 7
2.3.2 Resource-based view ... 8
2.3.3 EDI-related concepts ... 9
2.3.4 Advantages and limitations of EDI ... 10
2.3.5 Conditions for an EDI-approach ... 11
2.3.5.1 Competence development ... 11
2.3.5.2 Leader support ... 12
2.3.5.3 Collaboration ... 12
2.3.5.4 Autonomy ... 13
2.4 R&D-driven innovation ... 14
2.5 Causal relations between the concepts ... 14
2.5.1 The autonomous effects of an EDI-approach ... 14
2.5.1.1 An EDI-approach and technological process innovation ... 14
2.5.1.2 An EDI-approach and incremental technological product innovation ... 16
2.5.1.3 An EDI-approach and radical technological product innovation ... 16
2.5.2 The interaction effects of an EDI-approach & R&D ... 18
2.5.2.1 Interaction effect of an EDI-approach and R&D on technological process innovation ... 18
2.5.2.2 Interaction effect of an EDI-approach and R&D on incremental technological product innovation ... 19
2.5.2.3 Interaction effect of an EDI-approach and R&D on radical technological product innovation .. ... 20
2.6 Conceptual Model ... 21
Chapter 3 – Methodology ... 22
3.1 Introduction ... 22
3.2 Research design ... 22
3.3 Quantitative method - European Manufacturing Survey ... 22
3.3.1 Operationalization ... 24
3.3.2 Missing data ... 27
3.4 Qualitative method – Semi-structured interviews ... 27
3.5 Validity & reliability ... 28
3.6 Research ethics ... 28
3.7 Limitations ... 29
Chapter 4 – Quantitative study and results ... 30
4.1 Introduction ... 30
4.2 Sample characteristics ... 30
4.3 Variable construction ... 31
4.3.1 Construction of the dependent variables ... 31
4.3.2 Construction of the explanatory variable using a Principal Components analysis ... 32
4.3.3 Construction of the interaction variable R&D ... 33
4.3.4 Construction of the control variables ... 33
4.4 Univariate analysis ... 33
4.5 Bivariate analysis ... 37
4.6 Multivariate analysis ... 39
4.6.1 EDI and technological process innovation ... 39
4.6.1.1 Autonomous effect of an EDI-approach upon technological sophistication ... 40
4.6.1.2 Interaction effect of an EDI-approach & R&D ... 41
4.6.1.3 Other findings ... 42
4.6.2 An EDI-approach and product innovation ... 43
4.6.2.1 Autonomous effect of an EDI-approach upon product innovation ... 44
4.6.2.2 Interaction effect of an EDI-approach & R&D ... 46
4.6.2.3 Other findings ... 48
4.7 Firms without R&D employees ... 48
4.8 Summary of the main findings ... 49
Chapter 5 – Qualitative study and results ... 50
5.1 Introduction ... 50
5.2 Technological process and product innovation ... 51
5.3 An EDI-approach and innovation outcomes ... 51
5.4 An EDI-approach combined with R&D and innovation outcomes ... 57
5.5 Summary of the main findings from the interviews ... 59
5.6 Addition of qualitative research to quantitative research ... 61
Chapter 6 – Conclusion and discussion ... 63
6.1 Conclusion ... 63
6.1.1 Research summary ... 63
6.1.2 Answering the main research question ... 65
6.2 Discussion ... 67
6.2.1 Importance of external network ... 67
6.2.2 The combination of bottom-up and top down approach ... 69
6.3 Theoretical implications ... 69
6.4 Practical implications ... 70
6.5 Limitations ... 70
References ... 72
Appendices ... 77
Appendix I – Quantitative operationalization of the concepts ... 78
Appendix II – Qualitative operationalization ... 79
Appendix III – Interview guide ... 81
Appendix IV - Items used from the European Manufacturing Survey 2012 ... 84
Appendix V – Principal Components analysis - EDI ... 87
Appendix VI – SPSS output – Univariate analysis ... 97
Appendix VII – SPSS Output - Linear regression analysis ... 98
Appendix VIII – SPSS Output – Multinomial logistic regression analysis ... 102
Appendix IX – Interview transcripts ... 108
Interview 1 – MM1 ... 109
Interview 2 – ME1 ... 117
Interview 3 – MM2 ... 121
Interview 4 – TLPB ... 128
Interview 5 – ME2 ... 135
Appendix X – Interview coding ... 142
Interview 1 – MM1 ... 142
Interview 2 – ME1 ... 150
Interview 3 – MM2 ... 155
Interview 4 – TLPB ... 163
Interview 5 – ME2 ... 171
List of Tables and Figures
Tables
Table 1. Technological Process innovation practices and EMS indicators 24
Table 2. EDI-elements including EMS indicators 26
Table 3. Overview firm size by category 30
Table 4. Overview frequency by industry sector 31
Table 5. Final EDI-items 32
Table 6. Frequency of number of implemented EDI-practices within firms 34
Table 7. Frequency of EDI-practice 35
Table 8. Improvements in the skewness and kurtosis of ‘R&D’ 35 Table 9. Improvements in the skewness and kurtosis of ‘firm age’ 36 Table 10. Improvements in the skewness and kurtosis of ‘educational level’ 36
Table 11. Summary univariate analysis 36
Table 12. Pearson correlation coefficients 38
Table 13. Linear regression analysis – autonomous effect of EDI 41 Table 14. Linear regression analysis – interaction effect of EDI*R&D 42 Table 15. Variables’ unique contributions in the multinomial logistic regression (N = 117) 44 Table 16. Parameter estimates and model statistics autonomous effect EDI 45 Table 17. Parameter estimates and model statistics interaction effect R&D*EDI 47 Table 18. EDI practices non-R&D firms 48 Table 19. EDI practices firms - minimal 1% R&D employees 48
Table 20. Summary of hypotheses 49
Table 21. Overview of interviewees 50
Table 22. EDI-elements and corresponding EMS items 87
Figures
Figure 1. Different types of innovations with the focus area (technical innovation) of this thesis outlined 5
Figure 2. Conceptual model 21
Figure 3. Distribution firm age 31
Abbreviations
CIS Community Innovation Survey
EDI Employee-driven innovation
EUWIN European Workplace Innovation Network
HRM Human resource management
ISI Institute for Systems and Innovation Research
OECD Organization for Economic Cooperation and Development
PCA Principal components analysis
RBV Resource-based view
R&D Research and development
Chapter 1 – Introduction
Innovation is seen as a critical engine for firms in order to survive and grow in today’s highly competitive landscape (Gressgard, Amundsen, Aasen & Hansen, 2014). There are different approaches to what is seen as major source of innovation. The ability to generate new knowledge by research and development (R&D) is generally regarded as a key driver for firms’ innovation success (Rammer, Czarnitzki, & Spielkamp, 2009). Therefore, during the previous decades R&D activities have received the greatest degree of study in an attempt to explain the levels of, among others, innovation (Som & Kirner, 2015; Brouwer & Kleinknecht, 1997). However, there is growing evidence that a significant proportion of innovation does not stem from formal R&D (Zhen, Lui & Zhu, 2012). Recent work on European firms shows that about half of the innovating firms do not have a formal in-house R&D department (Arundel, Bordoy, & Kanerva, 2008; Huang, Arundel, & Hollanders, 2010; Barge-Gil, Jesus Nieto & Santamaría, 2011). In the Netherlands only 1.3% of all firms conduct formal R&D with own employees (CBS, 2015) and around 40% of all firms are technology innovative (CBS, 2018). Therefore, a strong focus on R&D might ignore the great variety of technological innovations that are present in firms in general. Especially manufacturing firms with little or no internal R&D activities are under the risk to be systematically underestimated by academics and policy makers with regard to their ability for innovation making (Arundel et al. 2008; Santamaría, Nieto & Barge-Gil, 2009; Som, Kirner & Jäger, 2013).
Research on external sources of innovation, such as open innovation and user-driven innovation, has already attracted much attention within the field of strategic management. However, the resource-based view (RBV) indicates that competitive advantage is achieved by internal resources and capabilities rather than external factors (Lin & Wu, 2014). With regard to this internal perspective, a development trend is seen in which research on employee-driven innovation (EDI) is an emerging phenomenon. A systematic use of ideas, knowledge and experience and stimulating creativity of non-R&D employees can positively impact the organizations’ overall innovation capability, resulting in competitive advantage (Høyrup, 2012). “Ordinary” employees, or in other words, non-R&D employees, are therefore more and more recognized as important sources for innovation and continuous producers of new knowledge, new ideas and solutions (Kesting & Ulhøi, 2010; Høyrup, 2012). This is caused by more global competition, a fast and ever-changing technology and shorter product life cycles in modern industries (González, Miles-Touya & Pazó, 2016). As a result, an increasing number of “ordinary” employees develop from (replaceable) low-skilled mechanical workers to (unique) life-long-learning human resources. Consequently, as stated by Kesting & Ulhøi (2010), human capital has become an important production factor not only at top management level but also for shop-floor workers. This trend is especially strongly applicable to the manufacturing sector (McKinsey, 2012), where a skilled workforce is regarded as main driver for competitiveness (Taisch, 2014).
With the development in which knowledge-based globalized economies such as the Netherlands are shifting away from the R&D model and are giving more emphasis to other major sources of the innovation process, understanding of how organizations build up resources for innovation has become a crucial challenge to find new ways of supporting innovation in all areas of activity (CERI/STI, 2010). Although the importance of human capital for innovation is acknowledged, EDI is still not a well-documented field of research in the relevant innovation
literature. Innovation by non-R&D employees is an underexplored area in many organizations (Aasen et al., 2012) and an EDI-approach is therefore seldom included in enterprises’ norms (Teglborg et al., 2012; Lundkvist & Gustavsson, 2017). This is because even though employees are considered as an important driver for innovation, it is not easy for managers to determine the employees’ added value as their knowledge, ideas and innovations are intangible (Lundkvist & Gustavsson, 2017). Additionally, research on EDI is currently mainly focused on the conditions for EDI instead of the on the implications of EDI. The quantified technological innovation outcomes, meaning the number of technological innovation outcomes, of management practices that can stimulate EDI are in particular underexposed (Hasu, Honkaniemi & Saari, 2013; Amundsen, Aasen, Gressgård & Hansen, 2014). Additionally, there is a lack of more detailed examples and outcomes of EDI-practices in the relevant literature, which can be provided by qualitative research (Li, 2016), probably caused by the fact that there is no best practice for EDI, as it can be stimulated and can occur in different ways (Lundkvist & Gustavsson, 2017). This study will therefore try to narrow the previous described gaps in research, by researching in what ways and to what extend a so-called EDI-approach leads autonomously to technological innovations in Dutch manufacturing firms.
Besides lack of a systematic analysis of the quantified effects of an EDI-approach on technological innovations, there is also lack of knowledge on other types or dimensions of innovation affected by employee-driven innovations, such as R&D-driven innovation (Hasu et al., 2013). There are firms where management has delegated the task to innovate and/or develop to internal R&D employees. R&D-driven innovation is regarded as a top-down approach, based on scientific and technological knowledge and learning and therefore mainly used to enhance technological innovations. Stimulating EDI, on the other hand, is about stimulating non-R&D employees to innovate as well and is therefore regarded as a bottom-up approach that has an experience-based mode of learning and innovation (Jensen, Johnson, Lorenz & Lundvall, 2007). Although Jensen et al. (2007) found that innovation performance is significantly enhanced when firms combine science-based learning with experience-based learning, a more recent study found that most studies still often neglect how R&D performing firms can generate non-R&D innovations as well (Lee and Walsh, 2015). In order to fill the gap in the conflicting literature that describes the relation between an EDI-approach and R&D-driven innovation, this research will also study whether EDI and R&D-driven innovations are complementary approaches.
Hence, the purpose of this study is not only to report the measured static effects from an EDI-approach, autonomously and in interaction with R&D, but also to gain more practical insights in how an EDI-approach occurs and in what way this leads to more technological innovations. Subsequently, the research question is:
“In what way and to what extend does an EDI-approach contribute to the technological innovativeness of Dutch manufacturing companies?”
With this central question as a guiding pillar, the following sub-questions are addressed:
(1) Does an EDI-approach autonomously affect technological process innovation and if yes, to what extent? (2) Does an EDI-approach autonomously affect incremental and/or radical technological product innovation
(3) Does an EDI-approach strengthen the effect of formal R&D on technological process innovation, and if yes, to what extent?
(4) Does an EDI-approach strengthen the effect of formal R&D on incremental and/or radical product innovation, and if yes, to what extent?
A mixed-methods study is used to study the research question. This is a recommended method because the quantitative approach provides documentation of quantifiable profit of stimulation of EDI practices (an EDI-approach), whereas qualitative research enables the researcher to gain more insight into the consequences of the organizational choices and conditions that can promote EDI and to get more examples of EDI in practice (Høyrup, 2012). Hence, a cross-industry database of Dutch manufacturing firms resulting from the European Manufacturing Survey 2012 is used to test quantitatively whether an EDI-approach leads to more technological innovations. Because every firm has its unique characteristics additional qualitative research is conducted to get a more in-depth understanding of how EDI is stimulated and what outcomes such EDI-approach has within manufacturing firms.
This study is relevant for several reasons. First, this thesis starts with a literature study in order to present an overview of the existing academic literature on the concept ‘employee-driven innovation’. Second, a study on practices that stimulate EDI and its effects on technological innovations will contribute to a better understanding of the value of a bottom-up approach to innovation within manufacturing firms. While studying this and applying the RBV, more understanding is realized on how firms currently build up their resources and where innovation potential can be found. Additionally, this study will contribute to filling a knowledge gap on the autonomous effects of an EDI-approach on technological innovation outcomes. This study also explores if an interaction effect exists if a science-based mode of learning and a practice-based mode of learning are combined in order to try to fill a gap in the literature. Another reason why this study is relevant is because the combination of quantitative and qualitative research is not commonly used in the EDI literature, although it is a recommended method to study the EDI concept. This method will provide the researcher the opportunity to explore the EDI-concept from different angles in order to get a better understanding of its outcomes. Finally, theoretical as well practical implications based on this study will be discussed. This could support managers to establish a more bottom-up approach within their firms through organizational measures in order to realize more technological innovations.
In order to examine the contribution of an EDI-approach on the innovation performance in Dutch Manufacturing firms, a thorough understanding of the relevant core concepts is crucial. Hence, these are addressed in Chapter 2. In addition, a conceptual framework based on the findings of discussed literature is proposed. Chapter 3 addresses the methods used. Chapter 4 contains the quantitative study in which several hypotheses based on the literature will be tested with the EMS data. In Chapter 5, the qualitative results are presented. Finally, in Chapter 6 the conclusion is presented, including an answer to the main research question, and additionally the discussion of the research is attached.
Chapter 2 – Theoretical framework
2.1 Introduction
This chapter discusses the theoretical framework concerning the research. The dependent variables in this study are technological process and product innovations. In order to understand the concept innovation, paragraph 2.2 provides a definition based on the existing literature and further elaborates on the difference between technological process and product innovations. Paragraph 2.3 describes and further specifies the EDI-concept and such approach within a firm, as an EDI-approach is the independent variable in this study. Additionally, R&D-driven innovation is discussed in paragraph 2.4. Furthermore, paragraph 2.5 contains the hypothesized relations based on the relevant literature. First, paragraph 2.5.1 discusses the hypothesized autonomous effects of practices that could support EDI on the technological innovation outcomes. Secondly, paragraph 2.5.2 discusses the expected interaction-effect between an EDI-approach and R&D. Finally, based upon the derived hypotheses, a conceptual model is presented in paragraph 2.6.
2.2 Innovation
2.2.1 Introduction to innovation
Nowadays, firms in all industries need an ability to develop and implement innovations, because this is increasingly important in order to survive in markets that are more global and competitive than ever before (Santamaría et al., 2009). Through innovation, companies are able to respond to changes in their environment. A firm’s innovative capabilities are seen as important predictors of innovation, which in turn is an important source of competitive advantage (Annique Un & Montoro-Sanchez, 2010). However, innovation is in itself a very complex phenomenon as the term innovation constitutes three different things: innovation as an outcome, innovation as a process and innovation as a mindset (Kahn, 2018). Innovation as an outcome emphasizes what output is sought, which includes product innovation, process innovation and organizational innovation. Innovation as a process consists of the way how innovation should be organized in order to get to innovation outcomes. Innovation as a mindset is about the internalization of innovation by individual members of the organization (Kahn, 2018). New ideas for new products or new processes must be generated and in order to create value these ideas must be implemented. Therefore, the innovation process is seen as a two-stage process: first, idea generation and then the implementation phase (Kesting & Ulhøi, 2010). In order to create new ideas, creativity and innovative behaviour are required from the employees’ side.
2.2.2 Definition of innovation
Because of its complexity, many different definitions of innovation appeared in the literature. A widely used definition of innovation in the innovation literature is given by the third Oslo Manual (OECD, 2005, p.46) in which innovation is defined as “The implementation of a new or significantly improved product (good or service), or process, a new marketing method, or a new organizational method in business practices, workplace organization or external relations.” The definition distinguishes the following three types of innovations: technological and non-technological innovations, product and process innovations, and radical and incremental innovations.
While discussing the distinction between technological and non-technological innovations the framework of Armbruster, Kirner and Lay (2006), based on Kinkel, Lay and Wengel (2004) (see Figure 1) is used, which separates technical from non-technical innovations. This distinction is applied in this study as well and this study will only focus on technological innovation-outcomes as dependent variables. This is because factors that influence the level of employee-driven innovations (an EDI-approach) are related to the non-technological aspects of an organization. Therefore, including non-technological outcomes would make it hard to find causal effects.
Figure 1. Different types of innovations (Armbruster, Kirner and Lay, 2006) with the focus area (technical
innovation) of this thesis outlined
Distinguishing between non-technological (or so-called administrative) innovations and technological innovations is very important as this distinction relates to a more general distinction between social structure and technology (Evan, 1966). On firm-level, technological innovations are related to the basic work activity of an organization as they pertain to products, services1 and production process technology, according to Damanpour (1988). Non-technological innovations are indirectly related to these basic work activities and more directly related to its management. Additionally, it involves organizational structure and administrative processes (Damanpour & Evan, 1984). More specifically, technological innovations are typically characterized by developing or using new technologies, whereas non-technological innovations are about using new organizational concepts and other immaterial ways of changing business activities (Schmidt & Rammer, 2007). The technological element is generally recognized to be of crucial importance in securing competitive advantage for the individual firm, nation and the world economy as a whole (Lund Vinding, 2006). As discussed before, a further distinction can be made between product and process innovations and radical and incremental innovations. A more detailed description of these categorizations is briefly discussed in the next subparagraphs, in which product innovation is further dividend into radical and incremental innovations.
2.2.3 Process innovation
Armbruster et al. (2006) defined a process innovation as “Something that aims at finding new process technologies in order to produce more cheaply, faster and in higher quality”. Hence, process innovations are modifications in the production process (Damanpour, 1988). According to the OECD (2015), the new or significantly improved production or delivery method includes significant changes in techniques, equipment and/or software. Therefore, process innovations have an internal focus and are focused on ensuring efficiency (Utterback & Abernathy, 1975).
1 Services are not included in the study of this master thesis, because these are non-technological innovations based on the applied framework (Figure 1).
Technical process innovations include new material goods (for example machinery and IT equipment) that come into use in a certain production process (Ellström, 2010, p.4). It is important to distinguish between process and product innovations, because these two types of innovations follow different paths and they do not necessarily have the same determinants. Additionally, their economic and social impact may be different (Becheikh, Landry & Amara, 2006). Process innovations can have controversial effects because a common phenomenon is that the introduction of more efficient processes leads to a lower demand of employees. This is often not well perceived on the labour market in contrast to product innovations that mainly lead to more employment opportunities (Edquist, Hommen & Mckelvey, 2001). However, although the determinants can differ, it should be acknowledged that both types of innovation are often interrelated; product innovation creates the need for process innovations and vice versa (Hullova, Trott & Simms, 2016; Kahn, 2018).
Another important distinction worth mentioning is between process innovation and the innovation process. As discussed before, the innovation process is about the way innovation should be organized in order to get to innovation outcomes, whereas the primary focus of process innovations is the efficiency improvement of the production process for ‘product innovations’ (Utterback, 1996).
2.2.4 Product innovation
Product innovations relate to new goods (technological) or services (non-technological) (Ellström, 2010). Product innovations can increase a firm’s competitive advantage through at least two features. It can help firms to differentiate themselves from their competitors and it can also enhance a firm’s cost advantage over competitors by introducing similar products at a lower cost (Hoonsopon & Ruenrom, 2012, p.252). Product innovation is recognized as a key to organizational renewal and success as it results in more employment and higher profits (Slater, Mohr & Sengupta, 2013).
Product innovation can be further distinguished into radical and incremental innovation. This distinction is important as both forms of product innovation have different consequences for firms, which will be further elaborated on in the next subparagraphs. It is useful to understand the effect of EDI on the different forms of innovation because it is well documented that managing radical (or the so-called discontinuous / breakthrough / explorative) innovations is quite different from managing incremental (continuous/exploitative) innovation (Chang, Chang, Chi, Chen & Deng, 2012). An important note is that the distinction between radical and incremental innovations is not one of hard and fast categories, as labelling innovation by a company depends on the perceptions of those familiar with the degree of departure of the innovation from the state of knowledge prior to its introduction (Dwar & Dutton, 1986). It is argued that both types of innovation are equally important, and that EDI even encourages employees to explore an alternative form of innovation, which is known as hybrid innovation, which encompasses both radical and incremental breakthroughs (Høyrup, 2012) and it encourages actors to collaborate and work together. However, because both types of innovation occur within firms, the next subparagraphs will briefly elaborate on the two different forms of product innovations.
2.2.4.1 Incremental product innovation
Incremental product innovation can be explained as innovation building on existing knowledge and resources (Wihlman, Hoppe, Wihlman & Sandmark, 2014). It is about the development of products through minor changes in attributes. These changes are therefore regarded as minimal from customer perspective, although these changes
are often based on the needs of the customers (Hoonsopon & Ruenrom, 2012). Products that are new to the firm, but not new to the market are also often perceived as incremental innovations, which are referred to in the relevant literature as imitations (Anker Lund Vinding, 2006). Incremental product innovation is commonly perceived as not important, because radical innovation is challenging, may require special resources and reflects a substantial risk. However, incremental product innovation contains less risk and it can balance the innovation effort by allowing small wins in pursuit of big wins (Kahn, 2018). Although a company might imitate its competitors, it can still gain a competitive advantage if incremental product innovations are combined with process innovations and organizational capabilities (Kahn, 2018).
2.2.4.2 Radical product innovation
Radical innovation causes fundamental changes in activities and behaviour in an organization or branch (Wihlman et al., 2014). The capability to introduce radical product innovations can lead to products that offer unprecedented performance benefits, substantial cost reductions or the ability to create new businesses (Slater et al., 2014, p.553). However, although radical innovations can provide more benefits than incremental product innovations, it also faces an inherently more uncertain development process, a more complex customer adoption process and a more difficult marketing process. Knowledge depth is also more important. Radical product innovations therefore require a different set of organizational skills than incremental product innovation (Leifer et al., 2000; Slater et al., 2014). Additionally, radical product innovation is recognized as a riskier business than the other forms of technological innovations because the high development costs will be lost if the new product does not succeed in the market (Kahn, 2018). An important note is that although organizations may need radical product innovations in the long-term to achieve a satisfactory level of economic development (Kesting & Ulhøi, 2010), true radical product innovations are perceived as rare (Garcia & Calantone, 2002).
2.3 An employee driven innovation-approach
This study aims to explore the contribution of the introduction of practices with the goal to stimulate innovation by non-R&D employees to technological innovations. The previous paragraph described the dependent variables. Therefore, this paragraph is concerned with elaborating on the concept employee-driven innovation (EDI) and more specifically, the stimulation of this type of innovation, which is the explanatory variable in this study. The aim of the literature review is to give an overview of what the concept EDI constitutes and what definition will be used in throughout this master thesis.
EDI is not a new concept as researchers have been studying employee involvement in innovation for many years (Bessant, 2003; Jong & Hartog, 2007; Kesting & Ulhøi, 2010; Høyrup, 2012; Amundsen et al., 2014; Jensen et al., 2016; Smith, 2017). However, during the last years, an increase in studies acknowledging the importance of ordinary employees to innovation has been observed, while approaching the concept in different ways. This thesis will elaborate on this by introducing the EDI-concept based on current theoretical observations in the relevant literature, using the RBV as a theoretical lens.
2.3.1 Introduction to the EDI concept
Although the significance of employee involvement in the innovation process has started in 1871 (Amundsen et al., 2014), an increase in research on the concept ‘employee-driven innovation’ has been noticed in the last few years and a growing number of both private and public organizations have even implemented the EDI approach in their organizations (Teglborg-Lefèvre, 2010). The EDI approach means that the senior management, who is concerned with the duty to make decisions concerning innovation, include ordinary employees in participating in the innovation process. This can be all kind of innovations such as products, processes, organization and markets innovations, at any level of intensity, that is incremental or radical (Kesting & Ulhøi, 2008; Høyrup, 2010). Therefore, instead of applying a top-down approach by assigning the task to innovate to the R&D or engineering department only who must be innovative per se, and not expecting non-R&D employees to take part in the innovation process, a more bottom-up approach is applied.
It is important to note that EDI has been approached in different ways and therefore different definitions and perspectives appeared in the relevant literature. Terms such as ‘employee’s innovative behavior’ (Jong & Hartog, 2007), ‘bottom-up innovation’ (Smith, Ulhøi & Kesting, 2012) and ‘work(er)-driven innovation’ (Smith, 2017) are also used to describe the EDI phenomenon and often used interchangeable. With regard to the different EDI definitions, it is concluded that the definitions are mainly corresponding or overlapping. The Danish Confederation of Trade Unions (2007, p.9) stated that EDI refers to the event that “The employees generally contribute actively and systematically to the innovation process”. Smith et al. (2008, p.1) defined EDI as “… the generation and implementation of novel ideas, products and processes originated by a single employee or by joint efforts of two or more employees”. Kesting & Ulhøi (2010, p.66) extended this definition with the note that it should be “employees who are not assigned to this task”. This is an important addition, because it elaborates on the term ‘ordinary’ employees: people who are not formally assigned to the task of being innovative.
According to Kesting & Ulhøi (2010), the EDI concept suggests a bottom-up approach by assuming that ideas, knowledge and creativity from employees outside the boundaries of his/her primary job responsibilities are used to innovate. Høyrup (2012) has another perspective on EDI, as his research describes EDI as an umbrella concept that covers a broad range of innovation processes and issues and explains that EDI is not only about innovation at the job and at worker level. Høyrup therefore states that innovation – including EDI– is a social process which includes interaction between several actions that may include employees and managers as well. Isolating EDI as a pure bottom-up process may therefore be difficult as the process is often not isolated from the management but related to the management. The importance of the role of the management will be further elaborated on in paragraph 2.3.5.2.
2.3.2 Resource-based view
EDI is about making use of the knowledge, experience and ideas of the company’s employees for innovation (Høyrup, 2010). To study this concept, the resource-based view (RBV) is used as theoretical lens. The RBV indicates that firms generate competitive advantages through their unique resources (Yanting, Xiao & Gang, 2016; Teece, Pisano & Shuen, 1997). These unique resources are rather internal resources than external factors (Barney, 1991) and consist of the available human, organizational and physical resources (Aaltonen & Hytti, 2014). Research on human resources in organizations focuses on specific characteristics such as skills and work experience or the diverse combination of different skills and abilities within teams or in the workforce (Aaltonen & Hytti, 2014). Organizational resources include the structure of the firm, the corporate culture and relationships
within a firm. Physical resources include equipment, information technology and tools (Giannopoulou, Gryszkiewicz & Barlatier, 2014; in: Aaltonen & Hytti, 2014). However, not all resources result in a competitive advantage: only unique resources will be strategic relevant for achieving competitive advantage. In other words, sustained competitive advantage can be generated if the resource is valuable, rare, substitutable and non-imitable. Resources are valuable when they enable a firm to conceive of or implement strategies that improve its efficiency and effectiveness (Barney, 1991). A resource is rare if it is not possessed by a large number of competitors or potentially competing firms. Non-substitutable means there’s no strategic equivalent available for others and lastly, non-imitable means that it has to be costly to imitate the resource for competitors (Barney, 1991). According to Kesting and Ulhøi (2010), the basic idea of EDI is based on the underlying assumption that employees have hidden abilities for innovation and this potential can be made visible, recognized and exploited to the benefit of both the firm and its employees. In terms of the RBV, these hidden abilities can be understood as an existing, albeit underutilized, resource (Rumelt & Lamb, 1984; Wernerfelt, 1984; in: Kesting & Ulhøi, 2010). In other words, the RBV is a theory that supports EDI by conceptualizing the enterprise’s employees as a “bundle of unique resources” (Penrose, 1959). The combination of the RBV and the EDI-approach implies that employees at all levels of the organization are perceived as innovation capital or innovation assets (Kesting & Ulhøi, 2010, p.66). Employee-driven innovation can thus be seen as a strategy that implies a more influential role for employees in innovation (Amundsen et al., 2014) in which an understanding of the importance of not only formal but also informal structures of firm organization is key (Teece, 1996). If an organization knows how to manage and further develop these valuable intangible resources, this is perceived as a main source for competitive advantage (Teece et al., 1997), because business development is a complex process and it is almost impossible for competitors to copy intangible organizational capabilities such as tacit know-how. Therefore, studying EDI through the lens of the RBV acknowledges the importance of the human resources to innovation and consequently to the competitive advantage of an organization.
2.3.3 EDI-related concepts
There are several other theories that acknowledge the importance of the involvement of ordinary employees in the innovation process as well. These theories can be linked to EDI (Jensen, Jensen & Broberg, 2016). What the theories have in common is that these are all focused on the non-technological aspects of an organization and that these non-technological aspects, if a wider perspective is taken, can be seen as social innovations that therefore cover issues such as work organization, human resources policies as well as marketing strategies and collaboration with external partners (Oeij, Rus & Pot, 2017). However, some differences between the concepts can be noticed. In order to better understand how the EDI approach is positioned, a comparison is made between EDI and three other related theories.
Innovative Work Behavior (IWB)
Several authors (Janssen, 2000; De Spiegelaere, Van Guys & Van Hootegem, 2014) describe IWB as a behavioural variable, that focuses on employees generating ideas, developing these ideas and propose these ideas for implementation and actual application within the organization. The main difference between EDI and IWB is that IWB does not look at the innovative outcome of these employees’ initiatives on an organizational level. It observes only if employees show innovative behaviour outside their job descriptions, but that doesn’t say anything about
the content and type of innovation activities in which the employees are engaged (Høyrup, 2012). Therefore, EDI goes further as it focuses on innovations that are implemented because of the initiative and involvement of employees in the process (De Spiegelaere, 2014, p.20). De Spiegelaere (2014) describes EDI therefore as an outcome of a successful series of IWBs.
High-Performance Work Systems (HPWS)
In the strategic literature, HRM-practices as a system have been named as High-Performance Work Systems (Chen & Wang, 2010). Boxall and Macky (2009) argue that the HPWS literature is based on the central claim that ‘there exists a system of work practices that leads in some way to superior organizational performance’. Therefore, the HPWS literature is focused on discovering which set of human resources practices are effective in changing behaviour patterns of employees in order to increase overall performance (De Spiegelaere, 2014, p.21). These HRM practices are, among others, related to job security, job design and financial reward. The application of a set of human resources practices can be a useful tool for achieving EDI. However, this is seen as only one useful tool in order to establish EDI. Because EDI is a complex phenomenon, more factors are relevant, which will be discussed in paragraph 2.3.5.
Workplace Learning
Workplace learning can be defined as “processes by which human capacities are expanded in, for and through the workplace” (Evans et al., 2006). It constitutes both informal, ‘on-the-job learning’ and more formal learning through work related training and is seen as an important tool to promote and develop the innovative potential of employees and organizations (European Commission, 2010). Therefore, innovation and workplace learning are related to each other. However, they are not interchangeable (De Spiegelaere, 2014, p.78). Relevant to discuss is that learning occurs in different ways, which results in different drivers of innovation. Jensen et al. (2007, p.8) conceptualized two modes of learning and innovation, namely: 1) the STI-mode (science, technology and innovation mode), based on the production and use of codified and technical knowledge and 2) the DUI-mode, an experience-based mode of learning and innovation, based on Doing, Using and Interacting that relies on informal processes of learning and experience-based know-how (Høyrup, 2010). The STI-mode is related to R&D-driven innovation, whereas the DUI-mode is practice-based learning and related to employee-driven innovation.
2.3.4 Advantages and limitations of EDI
Employee involvement in the innovation process is increasingly stimulated because it has several advantages. Companies should find new ways to innovate to stay relevant to their customers because of the role of globalization and the increased competition within the market. The traditional innovation model in which innovation decisions are made by the senior management and new ideas must stem from the R&D department has as a consequence that firms often cannot respond quickly enough to changes in the market. Making use of employees’ knowledge can result in a constant stream of ideas, which is perceived as an important resource for improvement and innovation. In addition, Tidd & Bessant (2009) showed that businesses that make use of employee involvement practices have a higher rate of return on capital and higher profits per employee compared to business that only perform R&D, probably due to the fact that R&D innovation is a lengthy process and therefore an extremely costly way to organize innovation. Additionally, this way of innovating also prevents individual researchers and engineers from getting a big picture easily (Høyrup, 2010). Another advantage is that employee autonomy has
positive impacts on employee satisfaction and retainment of good employees (Kesting & Ulhøi, 2010). Furthermore, employee involvement does have the consequence that the imperfection of management decisions can be minimized (Kesting & Ulhøi, 2010). This is explained by the fact that employees often have more knowledge about what actually happens at the work floor, whereas the management has the duty to make innovation decisions but who are bounded rationally2 at the same time. However, at least two obstacles have been recognized in the literature as well, which are linked to 1) employee’s attitude towards involvement in innovation and 2) manager’s fear to weaken their position (Kesting & Ulhøi, 2010). With regard to the first point, it is important to realize that sometimes employees simply do not have enough skills and knowledge in order to support innovation process (Kesting & Ulhøi, 2010). Managers must distinguish those employees by splitting them from those who have a desire to innovate. The second point directs again towards the problem that managers are bounded rationally and that they can have to fear to lose control and be less powerful if they delegate their responsibilities, because they are assigned with the task to make good decisions. This can negatively affect the positive effects that EDI strives for. However, because the advantages are perceived to outweigh the obstacles, the next paragraph will further elaborate on the conditions in order to talk of an EDI approach.
2.3.5 Conditions for an EDI-approach
In order to have a better understanding of what EDI constitutes, more specific elements of the concept will be discussed. As pointed out in Chapter 1, many studies have focused on the antecedents of EDI. Kesting and Ulhøi (2010) identified five drivers that foster EDI: incentives; management support; favourable environment; decision structure; corporate culture and climate. Smith et al. (2008) identified the following four EDI antecedents that influence the success and potential of the concept, which are: leader support, autonomy, cooperation and innovation culture. Four years later (2012) the same authors identified the following factors: leader support, autonomy, collaboration & organizational norms of exploration. An important note is that, among others, Smith et al. (2008; 2012) and Kesting and Ulhøi (2010) could not find one ‘best practice’ for EDI, due to fact that EDI is not only rooted in organizational aspects, but also in personal traits, and these are different for every organization (Lundkvist & Gustavsson, 2017). Therefore, employees’ learning and innovation capacity may be a matter of workplace design (Ellström, 2011; Lundkvist & Gustavsson, 2017). This is why this study will summarize and discuss the most important elements to realize EDI, based on the existing literature and different views on EDI antecedents. In order to speak of an EDI-approach, the following elements must be available and visible within an organization: competence development, leader support, collaboration and autonomy. If these are present within a firm, it is assumed that an organizational culture exists that is necessary to realize innovations by non-R&D employees. The following subparagraphs will discuss the four elements in more detail.
2.3.5.1 Competence development
Making use of employees’ knowledge can result in a constant stream of ideas, which is perceived as an important resource for improvement and innovation (Tidd & Bessant, 2009). The starting point of employee-driven innovation is that every employee has the potential to innovate. In order to realize this potential, learning is perceived as a key activity to improve employees’ knowledge, thereby increasing the human capital of the firm
and its absorptive capacity (Cohen and Levinthal, 1990). Absorptive capacity was originally defined as the “ability to identify, assimilate and exploit knowledge from the environment” (Cohen and Levinthal, 1989, p.569) and is nowadays defined as “a set of organizational routines and processes by which firms acquire, assimilate, transform and exploit knowledge to produce a dynamic organizational capability” (Zahra & George, 2002, p.186; Gressgård et al., 2014, p.635). EDI is perceived as practice-based learning in which an increase of the absorptive capacity lead to more innovations because employees are able to recognize more potential resources for innovation. This learning process can be facilitated in formal and informal learning activities. It must be acknowledged that among different types of employees (R&D and non-R&D) different work practices exists and that learning is built through different processes (Lee & Walsh, 2015). Jones & Grimshaw (2012) conducted a meta-analysis to investigate the impact of training and skill development on economic performance and innovation performance of 32 studies and found that the level of expenditures on formal and informal training is positively associated with innovative firms (Jones & Grimshaw, 2012, p.4). Therefore, the concept of workplace learning, as discussed in the previous paragraph, is perceived as an important activity to develop employees’ competences in order to be more innovative and therefore an important element to stimulate EDI.
2.3.5.2 Leader support
Management support is seen as an essential part of the EDI-concept, because without the given possibility to apply knowledge employees would not innovate. Several authors identified leader support as one of the main drivers of employee participation in innovation (Kesting & Ulhøi, 2010; Borins, 2006; Smith et al., 2008; Smith et al., 2012), if not the most influential factor for employee’s motivation to innovation (Howell & Avolio, 1993; Mumford et al, 2002; Amabile et al., 2004). Managers’ support can work in two different ways, according to Kesting and Ulhøi (2010). First, managers can take the mentor-role, which means employees can be supported by managers thorough the whole innovation process (starting from the idea generation to the implementation phase). This is supported by the findings of Harter, Schmidt & Hayes (2012), who conducted a meta-analysis, in which they collected 36 companies and 7939 business units and found that supervisors play an important role in helping people to see how their work connects to a broader purpose and a larger context. Additionally, they found that leaders can influence the quality outcomes of employees by providing some quality-related goals and metrics and increasing the opportunities for employees to have interaction about these outcomes. Secondly, managers can have a more active role by supporting employees to use some working time and resources for participation in innovation projects. According to Amabile et al. (2004), employees will rarely take the initiative to participate without this second type of support. If a closer look is taken at the two phases in which innovations occur, support and protection are seen as main managerial responsibilities in the idea generation phase, whereas management focus should shift towards resource allocation in the implementation phase (Amundsen et al., 2014). Incidentally, this suggestion is supported by longitudinal studies of Norwegian companies (Gjelsvik, 2004, in: Amundsen et al. 2014).
2.3.5.3 Collaboration
Many innovations that lead to enhanced business competitiveness and performance are due to internal collaboration as these innovations are generated by interaction, dialogue and exploration within the workplace (EUWIN, 2016, p.14). That is why collaboration (or cooperation) is perceived as another important element that positively influences employee-driven innovation (Smith et al., 2008; Smith et al., 2012). Collaboration means
working together and sharing information and knowledge, which effects are based on the assumption that collaboration results in an exposure to a higher degree of reflection than when working alone because working in a group stimulates people to make additional associations (Smith et al., 2012). Smith. et al. (2008) argued that collaborative groups are generally more creative than individuals when it comes to the generation and exchange of new ideas. As creativity is closely related to innovation it is assumed that collaboration has a positive influence on innovation performance (De Jong & Hartog, 2007). Examples of tools that are used in order to stimulate collaboration are the creation of cross-functional teams, joint workshops, knowledge information systems for open cross-functional communication and innovation circles to initiate a temporary exchange of personnel across units (Rammer et al., 2009).
Although this study is focusing on internal-driven innovations by employees it cannot be ignored that employees have external sources of information, as external collaboration with for example suppliers and customers takes place besides all internal collaboration. However, the RBV is still relevant, because it is about the internal capabilities that gives an organization advantages and this study assumes that EDI is about the combination of resources that gives an organization competitive advantage. Therefore, external collaboration can be a source of knowledge and can realize cross-fertilization of ideas as well, which can increase the innovation capacity of employees. Amundsen et al. (2014) propose that EDI practices are closely interwoven with practices associated with another form of innovation: open innovation. With regard to open innovation and the ‘absorptive capacity’ can be stated that this internal capability and external collaboration are viewed as complementary (Cohen and Levinthal, 1989; 1990; Lund Vinding, 2006). According to Lund Vinding (2006, p.507), scholars dealing with technological change may use different approaches, but they tend to agree upon the fact that inter-firm relations are of crucial importance to technological development. Because the focus of this study is on the contribution of an EDI-approach, external collaboration will only be studied in the context of sources of knowledge for employees. Summarized, this study perceives collaboration as an important element of EDI and a distinction is made between internal and external collaboration.
2.3.5.4 Autonomy
Autonomy means that employees have a high level of influence over the tasks they carry out (EUWIN, 2016). Therefore, employees have the opportunity to perform their tasks without supervision or extensive control (Amundsen et al., 2014), which assumes a more decentralized organization. Autonomy is perceived as an important factor that influences employee-driven innovation (Smith et al., 2008; 2012), because by providing autonomy a positive and safe atmosphere is created that encourages openness and risk taking which as a result encourages idea generation and application (Jong & Den Hartog, 2007). A qualitative study conducted by Gressgård et al. (2014) found that autonomy may be an important factor for realization of the creative potential of employees. Autonomy is therefore regarded as an antecedent of IWB (De Spiegelaere et al., 2014). This is supported by the findings of Rangus & Slavec (2017) who analysed a sample of 421 manufacturing and service firms and found that decentralization is positively connected to employee involvement, absorptive capacity, and firm’s innovation performance. Besides that, increasing employee autonomy has positive impacts on employee satisfaction and the retainment of good employees (Kesting & Ulhøi, 2010). Although autonomy has positive sides, some degree of monitoring seems necessary to ensure short-term effectiveness and efficiency (Jong & Den
Hartog & 2007). Finding the perfect balance between stimulating innovative behaviour and securing efficiency and effectiveness is therefore regarded as a challenge for managers.
To conclude, in order to realize EDI an approach is necessary that contains a combination of practices that are related to both HRM and organizational elements, which results in stimulating non-R&D employees to contribute to the whole innovation process. The introduction of new practices or adjustments of these practices are organizational innovations (in other words, non-technological innovations) and are perceived to support the processes for employee participation in innovation (Amundsen et al., 2014).
2.4 R&D-driven innovation
To study the effects of a bottom-up approach (EDI) on technological innovations, it is not possible to ignore R&D-driven innovation, because this top-down approach is often seen as the most important input to innovation as discussed in Chapter 1. This study will therefore explore if an EDI-approach and R&D strengthen each other with regard to technological innovations.
Formal R&D is used by firms to continuously develop its technological capabilities, which are perceived as critical to a firms’ competitive advantage (Teece, 1986; Schumpeter, 1942). If a formal R&D (or engineering) department is present within a firm, creative work is undertaken on a systematic basis to increase the stock of knowledge (OECD, 2002). According to Arundel et al. (2008) the term “systematic” refers to purposeful effort rather than accidental discovery. As discussed before, R&D-driven innovation has a different learning mode compared to employee-driven innovation. R&D innovation is based on scientific and technological knowledge and is often conducted by educated researchers with a scientific background. R&D is seen as an innovation input, which means that management assigns the task to innovate to the R&D department. The innovation input says nothing about the innovation output. It can therefore affect both product and process innovations. However, although R&D is often perceived as main driver for innovation, many innovative firms do not conduct formal R&D. This is due to several drawbacks of using R&D: investing in R&D is associated with high costs and risk. That is why according to Rammer et al. (2009) any firm will have to balance between the expected benefits from successful R&D and the costs and probability of failure when engaging in R&D.
2.5 Causal relations between the concepts
This paragraph will discuss the expected relations between the previous discussed concepts. First, the expected autonomous effect of the exploratory variable ‘an EDI-approach’ on technological process innovation and incremental- and radical technological product innovation are discussed. Secondly, a further elaboration of the expected effects of a formal R&D department within an organization on the relationship between ‘EDI’ and the dependent variables are discussed. Based on the expected relationships, six hypotheses are formulated.
2.5.1 The autonomous effects of an EDI-approach
2.5.1.1 An EDI-approach and technological process innovation
The bottom-up approach which the EDI-concept entails is a useful approach with regard to decision making as it can minimize the imperfection of management decisions. Employees on the work floor are the people who are dealing with the execution of the production and they know exactly how processes are working. It is therefore
expected that these non-R&D employees have more work-specific skills. This can be useful in order to decide which improvements are needed within the production process. They might not have to be particularly creative, but they can facilitate technical process innovation because they have easy access to state-of-the-art ideas and can test these ideas and their variations (Dewar & Dutton, 1986, p.1430). In other words, it is expected that they can bring the highest contribution to process innovation (Haneda & Ito, 2018). However, in order to realize EDI, employees need to be motivated to contribute to process innovations in the first place, because otherwise they feel not encouraged to find ways to work efficient through improving the processes (Laviolette, Redien-Collot & Teglborg, 2016). Leader support can motivate employees to participate in the innovation process. If other measures are also taken, such as stimulating cooperation and giving a certain autonomy, an innovative culture can be created which is expected positively influence the contribution of non-R&D employees on process innovation. Creating an innovative culture is necessary, because changes in the production processes can only be realized if these are supplemented with a climate in which employees feel supported to denounce problems and think new (Bear & Frese, 2003). An example of outcomes of before mentioned EDI-elements on process innovation is found in the study of Zwick (2004). He found in his sample (N=2085) that the introduction of team-work and autonomous work group and a reduction of hierarchies (which are all important elements of promoting EDI) significantly increased the productivity impact of involved shop-floor employees. This is supported by Haneda & Ito (2018) who found that interdivisional cooperation/teams through for example team work have a significant effect on process innovation.
Additionally, Lee and Walsh (2015) argue that many R&D-based perspectives neglect the possibility of informal deliberate learning and innovation in non-R&D work. Process innovation may be driven by learning-by-doing. This is a form of problem solving or experimentation that takes place on the production floor rather than in R&D (Bogers, 2009, p.7). An important element of employee-driven innovation is competence development through workplace learning because it leads to finding new ideas, knowledge and solutions to problems. Through workplace learning there is an increased innovation capability among employees and they are therefore able to recognize innovation opportunities faster. Therefore, workplace learning can produce, in terms of tangible results, process innovation, such as new production processes and working methods (Ellström, 2010, in: Høyrup, 2012).
As mentioned before, the introduction of practices that stimulate EDI are organizational innovations. Camisón and Villar-Lopez (2014) found empirical evidence from a survey of 144 Spanish industrial firms that organizational innovation favours the development of technological innovation capabilities, in which organizational innovation directly positively affects the development of the process innovation capacity. This is supported by Hervas-Oliver & Sempere-Ripoll (2015), who analysed 9369 organizational innovators from CIS data and found that the development of both technological process and organizational innovation capabilities combined creates a complex, but superior innovation capability. Additionally, Piening & Salge (2015) sum up some relevant organizational aspects that were found to influence process innovation success, namely employees’ skills, motivation and commitment (Cooper and Zmud, 1990), organizational structures (Douglas & Judge, 2001); and climate (e.g. management support (Choi & Chang, 2009). Therefore, the following hypothesis is conducted:
2.5.1.2 An EDI-approach and incremental technological product innovation
According to Kesting and Ulhøi (2010), incremental product innovations are not EDI, but user-driven innovations. They argue that very successful radical innovations (such as such as Sony’s Walkman and 3M’s Post It’s) are EDI because these innovations wouldn’t have been likely to evolved if senior management had involved existing users and/or customers and therefore employees are regarded as most important sources for these radical innovations. However, this line of reasoning is not fully supported by other authors. Although it is acknowledged that companies can use employee involvement as a way to strengthen user-driven innovation (LO Denmark, 2007), which is linked to an ‘outer-directed’ perspective as part of the open innovation concept by Chesbrough (2003), it can be argued that the EDI-approach is ‘inner-focused’ as it contains practices that are part of the work organization, the types of leadership used and the organizational culture and therefore relies on the strength and expertise of its own non-R&D employees (Høyrup, 2010). This does not mean that the EDI-concept ignores the fact that employees’ knowledge can be based on their external contacts as well. It does mean that the starting point is not to look at external contacts as the main source of innovation, but what is done internally in the organization to develop employees’ innovative capability as much as possible. Therefore, incremental product innovations can be EDI as well. Amundsen et al. (2014) found support for the statement that enterprises that implemented the most practices for EDI reported the best results, which is in line with findings of Tidd & Bessant (2009), who found that the introduction of systematic approaches to the general involvement of employees in innovation and the increasing awareness of the inherent innovation potential of employees in innovation are both factors for successful EDI. Implementing EDI-practices stimulates a positive learning climate, which positively influences firm innovativeness (p<.01), according to a tested model developed by Calantone, Cavusgil & Zhao (2002) who used data collected from large US firms. Calantone et al. focused on product innovations, although they stated that their findings are applicable to process innovations as well, which is an additional argument for hypothesis 1. According to the authors, components of a learning climate are: commitment to learning, shared vision, open-mindedness and intra-organizational knowledge sharing. The EDI-elements ‘competence development’, ‘internal collaboration’ and ‘leader support’ can stimulate these components. The findings are supported by the studies of Hernandez-Espallardo et al. (2012) and Soosay et al. (2008) who both found that the internal knowledge creation capability allows a company to improve the efficiency and reliability of incremental innovation performance (Forés and Camisón, 2016). Additionally, the study conducted by Forés and Camisón (2016), based on data collected from Spanish industry firms (N=952), showed that incremental innovation performance is positively affected by internal knowledge creation and absorptive capabilities. Therefore, the following hypothesis is conducted:
Hypothesis 2: An EDI-approach will have a positive effect on incremental technological product innovation
2.5.1.3 An EDI-approach and radical technological product innovation
Kesting and Ulhøi’s (2010) argument that EDI leads to radical product innovation is supported by Jensen et al. (2016). Jensen et al. state as well that a benefit of turning towards EDI-thinking is that EDI can breed more radical innovative thinking, whereas user-driven innovation tends to focus on sub-optimization and incremental design changes. However, this line of reasoning still doesn’t provide evidence that an EDI-approach indeed leads to radical innovations. Empirical evidence for a positive effect of an EDI-approach on radical product innovations is not easy to find in the literature. This can be explained by several factors. First of all, the literature suggests that
