Firm-level creativity and innovation performance in SME’s; empirical
analysis of moderating factors.
MSc. BA SIM Thesis
Bouke Krediet
Rijksuniversiteit Groningen, Faculty of Economics and Business, Groningen, 9700 AV, The Netherlands Supervisor: Prof. dr. D.L.M. Faems
Date: 20-6-2016 Word count: 7.981
Abstract
Creativity and innovation have been researched in tandem for many years, as well as the relation between them. Rather than looking at both creativity and innovation, in this research we will look at the relationship between creativity and innovation on the firm-level. Next to that, the influence of organizational creativity stimulation measures implemented by management and the organicity of the organizational structure on this relation will be tested. By analyzing questionnaire data of 423 firms we conclude that not creativity is a leading factor in innovation performance by firms, but rather the creativity stimulation mechanisms and organicity of structure together significantly influence innovation performance. With this we add to existing creativity-innovation relation literature showing proposed importance of organizational context and finish with recommendations for future research.
2
Introduction
Innovation has been closely related to creativity for a long time. Creativity is known to be a crucial element in the larger process of innovation (Amabile, A model of creativity and innovation in organizations, 1988). Where creativity is concerned with the production of novel ideas, innovation focuses on production, adoption and implementation of said ideas (Anderson, Potočnik, & Zhou, 2014) (Scott & Bruce, 1994). By stimulating creativity which facilitates idea generation (Massetti, 1996), the subsequent process of idea implementation in innovation can take place (Axtell et al, 2000). Innovative performance thus relies on both the potential, generated ideas, and the realized, implemented ideas. West (2002) argues that in terms of difficulty, implementation of ideas stimulated by high external demand far outweighs the generation of these ideas, which is stimulated by a climate of freedom and safety. The procedures management follows in organizing both creativity and innovation should greatly influence the outcomes in terms of generated ideas through creativity and implemented ideas through innovation.
Where creativity consists of intra-personal and inter-personal processes, such as
brainstorming (Farr, 1990), innovation focuses on the inter-individual processes, where multiple people collaborate and complete the steps which distinguish innovation from invention. Up to now, the creativity literature seems to focus around two key questions; firstly, the ‘why’ of why people engage in creativity in the first place and secondly, the ‘what’ as in what triggers individuals to exhibit creative behavior (Unsworth, 2001). In previous academic research, creativity is something mostly identified as a personal or individual factor (Shalley, 1991) (Taggar, 2002), less as a group factor or organizational factor (Goncalo & Staw, 2006) (Bharadwaj & Menon, 2000). And while individual creativity relates to the factors to facilitate personal idea generation or the more ‘pure’ form of creativity,
organizational creativity mechanisms on the other hand seem rather focused on coordination and implementation mechanisms. This lends credibility to the idea that creativity in essence is a personal process.
The innovation literature can be seen as a black box, and where fields like sociology,
3 indicate in their conclusion; ”four relevant interfaces hold out real promise: (a) the
individual-team (I-T) interface, where individual employee ideas or proposals are taken up by a team and pursued toward implementation:…”(p. 1324). Additionally, both creativity and
innovation can be encouraged or deterred by management procedures, which has been researched by numerous authors. However, the influence of management procedures on the actual relationship between creativity and subsequent innovation has not been researched to this extent. Therefore, in this research we will set out to try and answer the following question: To what extent does creativity influence innovation, and what is the effect of
management decisions on this relation?
To answer this we will investigate the separate variables of creativity, innovation and
managerial procedures in a sample of Dutch SME’s in the Northern Dutch provinces. First of all, creativity will be measured on a firm level, as the questionnaire items ask for perceived firm-wide creativity of employees. Secondly, innovation will be measured by an indicated percentage of revenue generated from products new to the market. Thirdly, based on
questions in the questionnaire, management procedures are scaled to be creativity stimulating or not, and structure as organic or mechanistic (Khandwalla, 1977). Through statistical
analysis we will set out to confirm a set of hypotheses related to both the relationship between creativity and innovation, and the effect that the management procedure of creativity
stimulation structure and have on this relationship. Creativity and the higher perceived levels of that creativity are expected to have a positive relationship with subsequent innovation. Next to that, the existing creativity stimulation procedures are thought to have a positive moderating effect on the creativity-innovation relationship, same as the positive moderating effect of how organically the structure of a firm is organized.
This research sets out to bridge an apparent gap between the creativity and innovation literature. Where creativity is a largely personal factor but also inter-personal, extensively researched by fields of psychology and organizational studies, innovation seems to be more fixated on the fields of management and business research. By combining these we might uncover important new venues of research expanding our knowledge in the field of
management influence on the creativity-innovation relationship. In this research we will first take a closer look at the theoretical background of the variables and state hypotheses. After that, the methodology of the research will be discussed, followed by the actual analysis of the data. Next, the hypotheses are tested, the results discussed, managerial implications
4
Theoretical background
In this part of the research we will take a closer look at the trends in the research fields of creativity and innovation respectively and the relationship between them. Subsequently, the moderating role of the management procedure of creativity stimulation and structure on the earlier mentioned relation will be discussed. Lastly, a number of hypotheses representing these relations will be proposed and tested in a later stage of this research.
Creativity
Every renewal, innovation, improvement or introduction of a new product or service starts with an idea. These ideas, when found to be novel, non-obvious and useful in any given domain are identified as creative (Amabile, Conti, Coon, Lazenby, & Herron, 1996). Ideas, creative or not, originate within an individual and subsequently gets discussed in groups. This creative idea is part of the creative process which entails an individual, an idea and a product that captures the idea. Together these components in the process can be termed creativity (Simonton, 2012).
In the broadest sense, creativity is often divided into two main streams, the earlier mentioned ‘why’ and ‘what’ streams. Firstly, the steam of ‘why’ is more related to personal factors of a humans psyche and discussed mostly by psychology scholars trying to answer the question why people would engage in creative behavior (Gino & Wiltermuth, 2014) (Beaty & Silvia, 2012) (Amabile, 1983). Secondly, the ‘what’ stream relates to what triggers or stimulates this creativity within individuals. This stream is dominated by business & management and organizational behavior researchers (Fairbank & Williams, 2001) (Amabile, Conti, Coon, Lazenby, & Herron, 1996). Especially these triggers or stimulants should matter to modern day business, as identifying them could increase the possibility of drawing out and utilizing employee creativity.
5 (Pirola‐Merlo & Mann, 2004). The way researchers deal with this issue is often to focus on either individual influences on creative processes (Stein, 2014), broader and contextual effects on creativity (Shalley & Gilson, 2004), or individual contributions to group creativity (Shin, Kim, Lee, & Bian, 2012). This particular focus did not remain unnoticed, and gave rise to a trend of cross-level reviews integrating both individual and collective creativity (Anderson, Potočnik, & Zhou, 2014) (de Jesus, Rus, Lens, & Imaginário, 2013). From this point on we will refer to creativity on an organizational level as firm-level creativity.
Innovation
The definition and boundaries of innovation have not differed greatly between authors over the years. Where Amabile (1988) mentiones the development of ideas into products, services and processes, Anderson, Potočnik, & Zhou (2014), emphasize the actual implementation of ideas towards better products, procedures and practices in organizations. Other authors specify within innovation to include the first step of invention, and after that successfully developing and commercializing this invention by market introduction (Baregheh, Rowley, & & Sambrook, 2009). Innovation’s relation with invention is well illustrated by the following definition: Innovation is a process that follows invention, being separated from invention in
time. Invention is the creative act, while innovation is the first or early employment of an idea by one organization or a set of organizations with similar goals (Becker and Whisler, 1967, p.
463).
Innovation, being the employment of an idea by an organization after it has been developed sufficiently from being merely an idea, is how we will specify innovation from this point on. Starting from the terms introduced by Anderson, Potočnik, & Zhou (2014) that in the process of innovation we have passed the generation phase of ideas, and are focused on the
implementation of said ideas into real-world products, services or processes.
6 organizational culture, structure and project management (Adams, Bessant, & Phelps, 2006). In the remainder of this paper we will refer to innovation on an organizational level as
firm-level innovation.
Creativity and innovation
Once the creative ideas are developed into actual products, processes or services, one can speak of innovation, where the first is a necessary but not sufficient condition for the second. (Amabile, 1988 p.1155). Through this and the earlier discussed backgrounds of creativity and innovation we can clearly see that the two share sequential relationship. Creativity is an essential prerequisite for innovation in organizations, in other words; without creativity, no innovation. Once the creativity in organizations is stimulated, it can in turn lead to innovation in those organizations when properly channeled and reviewed (Bharadwaj & Menon, 2000). First of all, creativity in groups starts on an individual level. Within organizations this individual creativity is bundled with that of others in teams to form firm-level creativity (Woodman, Sawyer, & Griffin, 1993).
Whether this individual and later collective creativity is properly supported and channeled depends on the ‘rules of the game’ or procedures within that company set by management (Mumford, 2000). Jung, Chow, & Wu (2003) show in their research that leadership decisions have a direct and significant effect on firm-level innovation. This logic starts as culture, being the set of values and beliefs that are communicated by management to employees which in turn forms the structure, practice and policy of the firm. This set thus forms the internal culture of the firm which indirectly influences the amount of creativity that can effectively become firm-level innovation (Martins & Terblanche, 2003). This organizational culture therefore influences the level of innovation through dictating the tolerated level of creativity and creative behavior in for example problem solving. This relation demonstrates the
essentiality of managerial procedures to the creativity-innovation performance relationship through the culture they influence.
7
Table 1. Literature overview
Creativity literature selection Level of analysis Theoretical basis Main findings
Amabile, T. M., Conti, R., Coon, H.,
Lazenby, J., & Herron, M. (1996) Firm level
- Organizational creativity - Environmental theory
Encouragement (+), work group support(+), challenge(+) and organizational impediments (-) influence creativity
Woodman, R. W., Sawyer, J. E., &
Griffin, R. W. (1993) Firm level
- Organizational creativity - Interaction theory
- Motivation theory
Individual, group and organizational characteristics -> creative behavior & creative situation -> Org. creativity Taggar, S. (2002) Individual, group
& organizational level
- Interaction theory - Organizational culture - Organizational creativity
Individual creativity -> group creativity, Moderated (+) by team creativity relevant processes
Shalley, C. E., & Gilson, L. L. (2004) Individual, group & organizational
level
- Leadership theory - Organizational creativity - Organizational climate
Creativity support, communication and a diverse climate are essential facilitators of creativity at all levels
Innovation literature selection
Bharadwaj, S., & Menon, A. (2000)
Firm level
- Creativity stimulation mechanisms
- Organizational innovation
Creativity mechanisms positively influence innovation performance, both on an
individual and organizational level Brown, S. L., & Eisenhardt, K. M. (1997)
Firm level
- Complexity theory Strategy theory - Organizational theory
Limited structures, extensive communication and role freedom positively influence innovation performance on a firm level Jung, D. I., Chow, C., & Wu, A. (2003)
Firm level
- Leadership style theory - Organizational innovation - Organizational climate
Transformational leadership styles (inspiration and motivation) (+) organizational level innovations Ekvall, G. (1996)
Firm level
- Organizational climate - Organizational structure - Organizational innovation
8 Grounding hypotheses
As discussed before, the amount of firm-level creativity influences the level of innovation possible in a firm through its role as an essential predecessor of innovation (Amabile, 1988). Where no creativity would leave very few options for innovation, increasing levels of creativity facilitate increasing levels of innovation, or as increasing levels of idea generation give room for increasing levels of idea implementation (Anderson, Potočnik, & Zhou, 2014). This would infer that these generated ideas are ‘pushed’ through the firm further towards becoming innovations. With these points taken together we could hypothesize that:
H1: Firm-level creativity positively influences firm-level innovative performance in firms.
Next, where this creativity influences innovation, it must be allowed to develop from its initial form as an idea to its final form as innovation. Creativity can manifest in the minds of employees within a firm, but can be impeded or stimulated as soon as it leaves the mind of that individual by the internal environment of the organization this individual is in. This effect of affect on
creativity is shown to have either positive or negative effects of an individual’s future efforts to share creative ideas to others within that same setting (Amabile, Barsade, Mueller, & Staw, 2005).
The sharing and development of these creative ideas can be encouraged by management through the introduction of organizational creativity mechanisms. These mechanisms refer to “the extent
to which the organization has instituted formal approaches and tools, and provided resources to encourage meaningfully novel behaviors within the organization” (Bharadwaj & Menon, p.425, 2000). Once these formal approaches and novel behaviors have properly been internalized into the firm they become part of that firm’s culture, also known as “the way things are done around here”. This culture can be influenced by management and the decisions made by it, through the lifecycle of the company.
A number of factors dictated by management influence the company. Team diversity increases information sharing and allows for multiple views to solve problems (West, 2002) (Gassmann, 2001), and feeling of trust from management in employees lets people feel capable and trusted to engage in proactive and risk-taking behavior, leading to increased innovation performance
9 connected to the firm as a whole rather than a specific group in a specific department (Hull & Hage, 1982), encouraging them to think not only in terms of their own divisions but also for the firm as a whole. Together these factors encompass the openness of a firm’s culture (Stulz & Williamson, 2003).
An essential part of this openness is that higher levels of it will stimulate risk taking behavior taken and tolerated in an organization, especially when discussing creative and new ideas or solutions in groups (Ekvall, 1996). The culture of a firm, and its openness, is communicated top-down through an organization by management and subsequently shows employees what is expected from them in terms of behavior (Bharadwaj & Menon, 2000) (Martins & Terblanche, 2003). This means that management can for example influence employee risk taking or
communication and discussion of creative ideas and thus, more can be actually developed into actual innovations. This effect should show as an increase in use of creativity stimulating
practices resulting in an increased positive relation between firm-level creativity and innovation. Following this we hypothesize:
H2:The use of creativity stimulating practices in organizations positively moderates the firm-level creativity-innovation relationship
Next to creativity stimulating practices, organizational structure has been identified as one of the influencing factors on creativity and innovation (Martins & Terblanche, 2003). Early work by Burns & Stalker (1961) identified two distinct typologies of organizational structure: organic and mechanic structures. Organic structures are characterized by low formality and hierarchy, where mechanistic structures are high in both aspects. Ardito, Messeni Petruzzelli, & Albino, (2015) add to this the influence of structure, size and ownership in the overall manouvrebility of the firm. Firms being large, causing their structures to become increasingly complex, could
negatively affect reaction to internal and external influences. A part of this internal influences are the creative ideas which could be developed into innovations.
10 might have sufficient creativity might lack the innovative capabilities to implement there
generated ideas, and strict companies might have the capabilities to implement creative ideas, but lack the generatition skills which are a necessary but not sufficient condition for innovation (Amabile, 1988).
However, much of this existing research focuses on the effects of organizational structure on creativity and innovation. Where the two are often taken together, it might be interesting to see what role organizational structure plays on the creativity-innovation relationship, as it might not only be an essential part of generating creativity or innovation but rather an influential factor for creativity to become innovation. Earlier mentioned organic structures would allow more
creativity to be discussed between hierarchical layers in the firm and increased reaction ability to new creative ideas. For that reason we will test for a moderating effect of organizational structure on the relationship central to this research. Therefore, we can hypothesize:
H3: Organicity of firm structures positively moderates the firm-level creativity-innovation performance relationship.
The relations specified before can be seen together in the conceptual model (Fig.1) below:
Figure 1: conceptual model
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Methodology
Data
Early 2016, 2701 SME’s in the Northern provinces of the Netherlands which applied for a subsidy at SNN (Samenwerkingsverband Noord-Nederland) were invited to participate in the Northern-Netherlands Innovation monitor. In an effort to minimize selection problems we also invited 294 SME’s from the same region, which did not apply for a subsidy at the SNN, to also participate in the research. These 294 firms were registered in the ORBIS database by contact information and financial data. In total 432 SME’s from the Northern three provinces of the Netherlands substantially filled out the questionnaire, which indicates a response rate of 14,4%. After this a number of firms were excluded due being too large to be classified SME, resulting in a total usable respondents of 423. The results in this research are based on the responses obtained from the questionnaires filled out by the firms.
Variables
First of all, firm-level creativity, or rather perceived firm-level creativity in the questionnaire has been measured by asking participants to rate six statements related to the creativity of employees in the participating firm on a 5-point scale, ranging from very incorrect (1) to very correct (5) (Madjar, Oldham, & Pratt, 2002). Employees where rated here as being one group, so the ratings given should represent a reliable average of the entire firm, as interpreted by one of their
managers.
Firm-level Innovation performance is measured along the lines of the Oslo manual (OECD, 2005), where firms indicate whether they have introduced a new or significantly improved product or service, process or organizational innovation (Amara, Landry, Becheikh, & Ouimet, 2008). In this case, performance is measured by an indicated percentage of revenue in 2015 generated by an innovation new to the market between 2013-2015. This measure excludes innovations only new to the focal firm and not to the market and unchanged or marginally improved products bought from other firms.
12 these creative works and rewarding of creative employees, all on a formal level specified as work-support (Madjar, Oldham, & Pratt, 2002).
To measure the structure of the firm participants were asked to answer a number of two-tailed statements related to the structure of said company, based on the structure questionnaire
developed by Khandwalla (1977) with a 5-point aswer possibility. The extremes of these answers will indicate whether a firm is structured organically (5) or rather mechanically (1).
Control variables
Next to the variables discussed before we will control for a number of possible influencing variables which might influence the explained variance in the analysis . Firm size measured in number of employees in full time employments (FTE’s) helps to control the variance in
innovation performance in the group of SME’s which range from 0 to 250 FTE’s per definition (European commission, 2016). As older firms might have more experience in information processing for innovation (Calantone, Cavusgil, & Zhao, 2002), or young firms exist because of the innovation introduced (Huergo & Jaumandreu, 2004), we will also control for the firm age. Environmental intellectual property protection structures might cause firms to act differently in order to protect their knowledge assets, by either employing secrecy or patents to ensure innovative performance (James, Leiblein, & Lu, 2013). Considering the use of patents and secrecy answered by yes/no a dummy variable has been included to control if the use of these protection mechanisms influences the innovation performance’s variation. Lastly, a firms R&D
intensity, measured as the percentage of revenue that has been reinvested into R&D, has been
seen to positively influence innovative output on the organizational level (Artz, Norman,
Hatfield, & Cardinal, 2010) (Parisi, Schiantarelli, & Sembenelli, 2006) (Shefer & Frenkel, 2005). Due to this we will also include it in this research.
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Analysis and research findings
Firstly, when analyzing the gathered data the first step was integrating the various questionnaire items of creativity, creativity stimulation and structure. Through principal component analysis the total of 15 items were successfully reduced into the three earlier mentioned components of
creativity, creativity stimulation and organicity. Per component the separate items showed no high correlations (<0.8), tested significant (KMO & sphericity), high loadings on the three separate components (>0.65) and high Cronbach’s alpha values (>0.7). The variables of innovation performance, firm age and firm size showed a number of extreme values, however none of these where classified as abnormal. Secondly, we tested the variables used in the
hypothesized relations and the control variables indicated to compare means, standard deviations and correlations between them. See table 2 for an overview.
Table 1: Descriptive statistics and correlations
From this table we can see that respondent indicated that their workforce is rather creative (3,64), creativity is stimulated in the organizations (3,95) and that firm structure on average favors the organic ideal (3,80) even considering the standard deviations. In the case of the dependent variable in this research, innovation performance, we see an average of 19,72%. This indicates that almost twenty percent of revenues in 2015 generated in this sample came from innovative products and services introduced in the period 2013-2015. However, the standard deviation here
14 shows that there is quite some variation in the data which shows when looking at the histogram where the variable seems skewed towards the left, which is not a large surprise considering that many SME’s do not have the assets to invest into developing innovations but rather adapt to innovations introduced in the market by competitors. The same can be said of firm age and size as both show a heavy skew and score significant on the Shapiro-wilk test of normality. Again, this data will still be used due to these firms being part of our research group, the SME in the Northern provinces no matter their age or size, as long it is below the 250 FTE cut-off point. The independent variable of creativity only shows a significant correlation with innovation performance (,155**). Concerning the control variables used in this research, significant positive correlations can be seen between respectively patenting, secrecy, R&D intensity and the
dependent variable innovation performance. This indicates that where increased values of these control variables are observed, a similar but smaller increase in innovation performance is also observed. This fits the idea that firms not investing in innovation creation and protection and have very little or no income from innovation. Significant negative correlations are seen between firm age and size and innovation performance, indicating that older and larger firms have lower percentages of revues originating in innovations new to the market introduced recently. This relation is also not surprising, as Chandy & Tellis (2000) indicate that incumbent firms rely on improvements on existing products rather than products completely new to the market.
Although the dependent variable of innovation performance does not exactly meet the assumptions of individuality, normality and homoscedasticity, where a plot of the residuals shows a slight unwanted pattern, no extreme positive or negative show . Also, some data points lie outside the normally used upper bound of +3 in the plot; however, this is only the case for a few points with minimal exceedance. Due to our sample size being sufficiently large we don’t expect any problems with the sample not being representable of the overall population (Kotrlik & Higgins, 2001).
15 Table 3: Hierarchical Linear Regression results
Control variables
Model 1 of the regression results summarizes the effects of the control variables and the amount of variance in innovation performance they explain (27,7%). Secrecy and R&D intensity show a significant value in all 5 models, slightly decreasing once other variables are introduced. This indicates that both secrecy and R&D intensity, when increased, have a positive effect on innovation performance ( p<,01).
Organizational creativity and innovation performance
First of all, when looking at the effect of the independent variable creativity on the dependent variable innovation performance, while having a positive correlation seen in table 2, the same effect seems not to be existent in the regression. Here we observe a non-significant, small, negative effect once creativity is introduced in model 2 of table 3. Creativity’s rather large standard-error term (1,43) implies its values differ quite a lot from the expected regression line. Due to this result being non-significant it is impossible to confirm the hypothesized positive effect of creativity on innovation performance. Hypothesis 1 therefore, is not supported.
B SE B SE B SE B SE B SE Intercept 10,53** 2,39 10,52** 2,41 11,41** 2,55 11,33** 2,56 10,71** 2,647 Control variables Firm age -0,06 0,05 -0,06 0,05 -0,06 0,05 -0,06 0,05 -,057 ,052 Firm size -0,04 0,04 -0,04 0,04 -0,04 0,04 -0,04 0,04 -,037 ,045 Patenting 5,46 4,34 5,46 4,35 5,28 4,36 5,52 4,42 6,047 4,428 Secrecy 9,15** 3,01 9,16** 3,05 8,77** 3,08 8,68** 3,09 8,67** 3,090 R&D intensity 0,51** 0,06 0,51** 0,06 0,49** 0,07 0,49** 0,07 0,47** ,067 Main effects Creativity -0,04 1,43 -1,01 1,68 -1,00 1,68 -1,02 1,71 Creativity stimulation 1,65 1,80 1,34 1,93 1,39 1,94 Organicity 0,68 1,61 0,95 1,65 Interaction effects Creativity X Stimulation -0,542 0,991 -0,31 1,28 -0,76 1,47 Creativity X Organicity -0,44 1,60 -2,56 1,94 Stimulation X Organicity 3,62* 1,83
Creativity X Stimulation X Organicity 0,25 0,71
R^2 ΔR^2 Note: N=333 respondents ** p< ,01 *p< ,05 0,001** 0,009** Innovation Performance 0,277** 0,277 0,281 0,281 0,29
Model 1 Model 2 Model 3 Model 4 Model 5
Variables
16 The addition of the independent variable to the regression model did not lead to an increase in explained variance of innovation performance as the R2 has not changed.
Creativity stimulation and organicity
The second hypothesis stated a positive moderating effect of creativity stimulation practices in the organization. This moderating effect should then strengthen the positive effect of creativity on innovation performance. When observing model 3 we see that the coefficient of creativity has indeed increased, however, become increasingly negative (-0,04 -1,01), while still non-significant. The interaction effect between creativity stimulation and creativity also seems to be non-significant. Because of this hypothesis 2 is not supported. Introduction of creativity
stimulation increased the R2 value only slightly, though significantly, meaning it only increases the total explained variance in innovation performance very slightly.
In model 4 the second hypothesized moderating factor of organicity is introduced to the regression under the name of structure. As hypothesis 3 states, a higher value for organicity would mean that firms that are more organically structured should see an increase in the effect of creativity on innovation performance. The interaction effect between creativity and organicity also does not have a significant effect in the regression. From the regression table we can see that this effect is not apparent, nor significant, and therefore does not support hypothesis 3. The introduction of organicity also does not increase explained variance in innovation performance, as the R2 shows no increase, which is statistically significant.
Interaction effects
17
Discussion
Contrary to the earlier mentioned literature and stated hypotheses, our sample did not provide any support to the hypothesized relations. Firstly, creativity did not show significant values through all five models with introduction of the other variables. This indicates that here we see no
indication of a relation between managers’ perception of their employees’ creativity and revenues generated by recently introduced innovative products that are new to the market, similar to the findings of Gumusluoglu & Ilsev (2009). This result resonates with the earlier mentioned statement of Amabile (1988) that creativity is necessary but not sufficient condition for
innovation. This could also mean that in this research one or more connecting factors that ensure creativity is transformed into innovation are missing. This idea is shown in the research by Hurley & Hult (1998) where structural and cultural factors first have to form innovative capacity before it can influence performance. Also, even if creativity is generated in the company, the findings of Perry-Smith & Shalley (2003) indicate that this creativity might not be able to reach the groups responsible for innovation due to these parties having weak ties rather than strong ties. R&D groups, mostly consistent of a few individuals with strong ties between them, but weak ties with other parts of the firm.
Secondly, Somech & Drach-Zahavy (2013) show that climate for innovation within the company has a significant effect of connecting team creativity and innovation. Without it the level of implemented innovation is lower in firms with high creativity than in firms with low creativity operating under a climate that supports creativity. This again emphasizes the importance of factors related to climate and structure.
As the relation of firm-level creativity and innovation performance remains insignificant after the introduction of creativity stimulation and organicity, but together these hypothesized moderators show a significant effect on innovation performance a mediation effect might exist. However, due to the time limitations of this research, this will be have to be discussed in future research
18 According to our findings connecting these two will be difficult without proper creativity
stimulation and organicity within the firm attempting to increase innovation performance. The importance of creativity stimulation and organicity over creativity of employees is also emphasized by Amabile et al. (1996): “Creative ideas from individuals and teams within
organizations sow the seeds of successful innovation; scholars of innovation must seriously consider characteristics of the organizational context that can impede or support the generation of those ideas.” (p. 1178). The results from this research seem to confirm this assumption by
showing that creativity does not seem to affect the innovation performance of firms, but that the combined effect of creativity stimulation and organicity does affect innovation performance. These two might be part of a broader ‘climate for innovation’ that properly combines firm-level creativity and innovation performance.
In the simplest sense, in this sample, firm-level creativity has a significant relation with
innovation performance. However, once the variables of firm age, size, use of patents or secrecy and R&D intensity are controlled for, the relationship of firm-level creativity and innovation performance becomes insignificant in both the moderator and mediator models.
The control variables of secrecy and R&D intensity showed significant effects where the others did not. The correlation table shows these two also having the largest significant correlations with innovation performance. Apparently, firms that grow larger and older or patent more of their inventions do not also increase their innovation performance, which is supported by Hansen (1992).
Managerial implications
19 increased innovative performance, according to the results of this research. This means managers should first of all thoroughly evaluate their companies, which might be challenging without the objective view of a third-party spectator.
Secondly, innovation in the three Northern provinces of Friesland, Groningen and Drenthe has received attention through the SSN trying to stimulate the SME’s to invest in innovative,
sustainable and inclusive growth. The efforts of the SNN combined with the innovation subsidies provided can interest the managers in innovation of existing products, services or practices. After this initial interest is created, the SNN should ensure the subsequent action taken by managers is directed towards establishing or enhancing internal factors, i.e. a R&D practices or external factors, i.e. partnering with suppliers or buyers to improve existing products, services or practices. In this way the SNN could act as the earlier mentioned objective third party.
Limitations/recommendations
Generalizability
To extend the findings of this sample to the entire SME population in the Northern three
provinces, first of all respondents should be equal for all three. The sample used was made up of 151 Frisian firms, 131 from Groningen, and 112 from Drenthe. Substantial differences in this make up could skew results in favor of effects seen in one province. Also, the data used in the research was measured at one point in time, where an extension in time frames, for example multiple years of measurement could improve future studies.
Measurement
20
Additional factors
The two hypothesized moderating factors of creativity stimulation and organicity probably are not the entirety of effects within firms that hinder or promote creativity becoming innovation. This research could be extended with additional factors, and to form a more complete picture of an influencing ‘organizational climate’. Additionally, the relation between creativity and
innovation probably is different from the one depicted in the model as shown by the analysis and discussion. This could be solved by a more complete, integrated model in future research. As mentioned before, the future of creativity research could achieve more results when focusing on the organizational ‘climate for innovation’, due to the large influence this could have on either success or failure when developing creativity into actual innovations.
The optimum for organic or mechanistic structure normally is dependent on the level of
technology and the pace of change in a market (Lam, 2010). An optimal balance is expected in limited structures, where too little and too much structure negatively influence inventiveness. Thus, in turbulent markets firms should benefit from being more organic, while in calmer markets firms can be more mechanistic. This research did not include industry type or market; future studies might benefit from including these when researching the creativity-innovation relationship.
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Appendix 1: interview questions
Creativity
Employees in this firm are:
1. … a source of creative ideas (1) 2. … show creativity in their work (2)
3. … suggest radically new ways to execute their work (3) 4. … use existing ideas in new ways (4)
5. … are good in adapting existing ideas (5)
6. … easily adapt existing practices to new situations (6) Creativity stimulation
In my organization:
1. There is a lot of support for new ideas (1)
2. The development of new ideas or procedures is stimulated (2) 3. Creative work is valued highly. (3)
4. Employees are stimulated to behave creatively (4)
5. Employees are expected to view problems from different perspectives (5) 6. Employees who execute their jobs in a creative way are rewarded (6) Organicity
In my organization we see:
Tight formal control aided by advanced control and information systems (1); Loose, informal control aided by informal relations and cooperation (5)
A stong emphasis on always following formal procedures (1); strong emphasis on the possibility to avert from formal procedures when this is needed (5).
22
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