International journal of Contemporary Business Studies

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International Journal of Contemporary Business Studies Vol: 3, No: 6. June, 2012 ISSN 2156-7506 Available online at http://www.akpinsight.webs.com (2011) has used strategy that is first to entry product and services into the market and product offering that will increase the performance. Blumentritt and Danis (2006) used business strategy type (marketing, R&D, project based, new lines of product or service, deal with competitors, managing procedures and firm activities). In a study of different innovation outcome between radical and incremental, Ettlie, Bridges and O'Keefe (1984) utilized the organization strategy to describe the innovation process. Technology Policy is the strategy measure for radical innovation and market dominated growth, diversification and organization size are strategies for incremental innovation (Ettlie, et al., 1984). Sahu (2004), revealed the use of strategy focused product innovation process through several process such as product mobilization through leadership, product development, aligning product design and development into product innovation, make product innovation strategy in every engineers job and as continuous process. Liang-Hung and Chun-Hsien (2008), indicates the use of corporate strategy (differentiation and cost leadership) used to enhance innovation process. In this context, differentiation strategy focus on creating new market by providing new products while cost leadership strategy focused on low cost and efficient production (Liang-Hung & Chun-Hsien, 2008). 1.2Organization Structure The second managerial lever is structure. The structure of an organization concerned about the way employee are grouped and work and thus organization should provide sufficient freedom for creativity, control to manage innovation efficiently (Adams, Bessant, & Phelps, 2006). According to the organizational theory, it is about distribution of tasks, responsibilities and power to determine organization‟s standardization, complexity and the extent of centralization role (Shen, Xu, & Shu, 2010). Structure can be modified to impact innovation inside organization and it assists to set balance between idea generation and implementation (Prakash & Gupta, 2008). Structure relates the way of various parts of organization are configured with organization‟s ability to manage innovation (Smith, Busi, Ball, & Meer, 2008). An organizational structure can differentiate between innovative and non innovative organizations (Adams, et al., 2006). Innovative firms should transform the organizational structure to motivate employee creativity, boosting innovative culture and set a standard base on innovation process (Wichitchanya, Durongwatana, & Vadhanasindhu, 2012). Conceptually, organizational structure influence the ability to manage innovation through its direct relationship with employee (Smith, et al., 2008). This is done through an organized formality of teamwork with collaborative organizational culture (Smith, et al., 2008). It is found that internal organizational structure conditions of centralization and connectedness facilitate the innovation at firm level (Chang, Hughes, & Hotho, 2011). Structure and system factors comprise of the administrative intensity of the organization (Damanpour, 1991). Among them are specialization and centralization, formalization and type of innovation (Damanpour, 1991) . In a study of the role of organizational structure towards product innovation capabilities, the effect of radical product innovation capability on new product performance is insignificant under a formal structure, while the effect is positive under the informal structures (Menguc & Auh, 2010). However, incremental product innovation has a positive effect in the formal structure and negative effect in informal structures (Menguc & Auh, 2010). Empirical evidence by the work of Terziovski (2010) indicates that a formal structure combined with innovation strategy are significant predictors to organization performance. Several items used to measure this formal structure stressed on the allocation of resource within the cross functional teams, monitoring system by the employees, facilitation of formal communication by managers, procedures and flat structures (Terziovski, 2010). This is indeed supported that by the evidence that organizational formalization accelerate the positive effect of bottom-up learning on the incremental innovation because employee focus more on the dynamic change of the job (Wei, Yi, & Yuan, 2011). While Stock and Zacharias (2011) revealed that the structure of innovation orientation in an organization depended on a specific unit who in charge of innovation have the competencies, sufficient resource and clearly regulated. Copyright © 2012. Academy of Knowledge Process 8
International Journal of Contemporary Business Studies Vol: 3, No: 6. June, 2012 ISSN 2156-7506 Available online at http://www.akpinsight.webs.com In a study to explore relationship between organization structure and perceived innovation of India manufacturing sector, five components of structure are use as the measures: vertical complexity, horizontal complexity, formalization, centralization, concentration of authority and participation indecision making (Prakash & Gupta, 2008). A positive relationship were established between horizontal complexity, formalization, participation in decision making and innovation, however negative relationship between centralization structure and innovation (Prakash & Gupta, 2008). In order to increase the number of innovations, Prakash and Gupta (2008) suggested to focus on the participation in decision making, decentralization through staff empowerment and informal network within the organization. Similarly, in the logistic service innovation, the decentralization and formalization structure showed a positive relationship whereas the specialization structure showed negative relationship (Daugherty, Chen, & Ferrin, 2011). Due to the rapid development of information technology and to recapture competitiveness in serviceenhance manufacturing firm, Shen, et al., (2010) has proposed four dimensions for its organizational structure: self-management, interdependence, centralization of power and boundary infiltration. This new dimension is proposed because it is argued that production based is no longer a traditional manufacturing companies and thus, they need to change the new organizational structure to meet the new economy (Shen, et al., 2010). Nevertheless, the role of organizational structure is open for arguments. It is noted that competitiveness issue is also related to the environment factor. Therefore, organizational structure need to balance the demands for efficiency and flexibility in the high technology firms where it is needed to facilitate innovation and adapt the dynamic change of environment (Sholes, Barnett, & Utley, 2011). Organization that is operated in a stable environment in terms of demand, competitors, low level product change is best suited by centralized decision making, formal job description and, emphasis on chain of command and well process control (Sholes, et al., 2011). On the other hand, decentralize structure is suited for the dynamic, complex technologies and competitive instable environment (Sholes, et al., 2011). Since decentralized structure focus on goal specification to allow increase in rates and intensity, its promotes proactive adaptability and innovation. The situations also differ from the perspective of innovation types. For instance, technological innovation which is more complex process is affected by the R&D level, managerial ability and investment need a structure that have rules and regulation that encourage creativity, self-directed work and learning, few layers of hierarchical to enable quick response, high level of horizontal integration to increase knowledge transfer, decentralized decision making and high level of vertical and horizontal communication to ensure action (Shi & Xin, 2006). Although few layers hierarchical is better, organization also need to flat organization so that it could made close contact among employees, department and top management (Wichitchanya, et al., 2012). 1.3Resource Allocation Consequently, the third managerial lever is resource allocation which is also important in innovation management. According to Lau, Yam and Tang (2010), resource allocation capability is referred to firm‟s ability to mobilize and expand its technological, human and financial resources in the innovation process. It is found that resource allocation has improve the performance rate of new product which contribute to the technological innovation capabilities of an organization (Lau, et al., 2010). Besides, resource allocation is also interdependence with business models and knowledge creation and this has made the innovation knowledge-intensive environment is depended upon resource allocation as one of the important lever (Grand, Krogh, Leonard, & Swap, 2004). The importance of resource is proven by a study conducted in small medium enterprise in Malaysia where firm resource drive product innovation performance (Bakar & Ahmad, 2010). 1.4Knowledge Management and Organizational Learning The fourth managerial lever is knowledge management and organizational learning. Knowledge management is identified as an important antecedent of innovation (Darroch & McNaughton, 2002). Knowledge management is closely related to organizational learning initiatives (Mundra, Gulati, & Copyright © 2012. Academy of Knowledge Process 9
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