Proceedings of the 3rd European Conference on Intellectual Capital

Bongani Ngwenya
<strong>the</strong>se arguments, previous empirical studies (DeCarolis and Deeds, 1999; D` Este, 2005; Geroski,
Machin, and Van Reenen, 1993; Roberts and Amit, 2003) have generally demonstrated that
variations among firms in <strong>the</strong>ir rates <strong>of</strong> accumulating new knowledge, and in <strong>the</strong>ir stocks <strong>of</strong> innovative
knowledge assets, contribute to differences in <strong>the</strong> financial performance <strong>of</strong> <strong>the</strong>se firms in <strong>the</strong>ir
different industries. For example, using a sample <strong>of</strong> United States <strong>of</strong> America biotechnology firms,
DeCarolis and Deeds (1999) found that both stocks and flows <strong>of</strong> organizational knowledge had a
positive impact on firm performance. Research has shown similar positive effects <strong>of</strong> innovative inputs
and outputs on performance in various o<strong>the</strong>r geographical and industrial settings, such as Australian
retail banking (Roberts and Amit, 2003), Spanish pharmaceuticals (D` Este, 2005), and United
Kingdom manufacturing (Geroski et al., 1993).This paper argues that, like Total Quality Management
(TQM) practices, Openness in eGovernment, and o<strong>the</strong>r organizational practices, strategic innovation
and knowledge management is an organizational practice that can also be explained and viewed from
<strong>the</strong> institutional <strong>the</strong>ory’s account <strong>of</strong> diffusion, adoption and implementation. Diffusion occurs when
new products and services begin flowing deeper within <strong>the</strong>ir initial markets, or to areas different from
<strong>the</strong> one in which <strong>the</strong>y were originally introduced (Ruggles and Little, 1997).The conventional diffusion
model mostly neglects practice implementation, yet several studies have called for viewing diffusion
practices as dynamic (Rogers, 1978; Strang and Soule, 1998) and thus for studying <strong>the</strong> details <strong>of</strong>
implementation (Edelman, 1992; Fiss and Zajac, 2006; Westphal and Zajac, 2001; Zbaracki, 1998).
The questions <strong>of</strong> why and how organizations adopt new practices have remained a central topic in <strong>the</strong>
management and organization <strong>the</strong>ory literatures (Abrahamson, 1991; Davis & Greve, 1997; Palmer,
Jennings, & Zhou, 1993; Westphal, Gulati, & Shortell, 1997). Prior research has <strong>of</strong>fered a number <strong>of</strong>
important insights into diffusion processes among populations <strong>of</strong> organizations, ranging from <strong>the</strong> role
<strong>of</strong> organization size and market power (Geroski, 2000; Hannan & McDowell, 1984) to <strong>the</strong> importance
<strong>of</strong> imitation processes (DiMaggio & Powell, 1983) and trendsetters (Abrahamson, 1996). Two distinct
approaches to explaining adoption motivation have characterized much <strong>of</strong> this literature on <strong>the</strong>
diffusion <strong>of</strong> practices and administrative technologies (Strang & Macy, 2001). The first approach is
rooted in <strong>the</strong> economic literature, building on <strong>the</strong> rational actor model, in which organizational
adoption is motivated by a desire for technical or efficiency gains and related boosts to economic
performance (Katz & Shapiro, 1987; Teece, 1980). The second approach represents a more
sociological perspective, emphasizing <strong>the</strong> social embeddedness <strong>of</strong> organizations and motivations that
stem primarily from a desire to appear legitimate to powerful constituents, peer organizations, or
outside stakeholders (Abrahamson, 1991; DiMaggio & Powell, 1983).
Perhaps <strong>the</strong> most important integration <strong>of</strong> insights from both sets <strong>of</strong> explanations is Tolbert &
Zucker`s (1983) two-stage model, according to which early adopters seek technical gains from
adoption, but later adopters are primarily interested in <strong>the</strong> social benefits <strong>of</strong> appearing legitimate.
Tolbert & Zucker consequently argued that <strong>the</strong>se later adopters implemented reforms primarily out <strong>of</strong>
a desire to appear legitimate. Similarly, in <strong>the</strong>ir study <strong>of</strong> United States hospitals, Westphal, Gulati, &
Shortell (1997) suggest that early adopters <strong>of</strong> Total Quality Management (TQM) practices were
motivated by efficiency concerns. However as TQM practices became institutionalized and thus
became expected elements <strong>of</strong> organization, <strong>the</strong> logic <strong>of</strong> evaluation shifted, and later adopters were
motivated primarily by legitimacy concerns ra<strong>the</strong>r than efficiency gains.
In this paper, developed technologies and economies, like US, UK, China and Japan that are strong
in innovation and knowledge management are considered as early adopters <strong>of</strong> strategic innovation
and knowledge management practices, while emerging technologies and economies like Zimbabwe
are viewed as later adopters <strong>of</strong> <strong>the</strong> practices. According to <strong>the</strong> institutional <strong>the</strong>ory’s account <strong>of</strong>
diffusion early adopters <strong>of</strong> <strong>the</strong>se practices are motivated by, and seeking technical gains from
adoption, but later adopters are primarily interested in <strong>the</strong> social benefits <strong>of</strong> appearing legitimate, to
realize organizational creativity and organizational development.
Although this two-stage model <strong>of</strong> diffusion has been a touchstone for many studies that apply
institutional <strong>the</strong>ory to practice diffusion (Baron, Dobbin, & Jennings, 1986; Meyer, Stephenson, &
Webster, 1985; Pangarkar & Klein, 1998; Scott, 1995; Westphal & Zajac, 1994), it has recently drawn
critical attention. For example, Lounsbury (2007) argued that segregating economic and social logics
is problematic, since <strong>the</strong> distinction between technical and social benefits is itself embedded in
institutions (Lounsbury, 2002; Thornton, 2004). By implication, technical and social motivations are
less disjointed than previously <strong>the</strong>orized (Schneiberg & Soule, 2005; Scott, Ruef, Mendel, & Caronna,
2000).
315