The interplay of decentralization, employee involvement and absorptive capacity on firms’ innovation and business performance
Keywords:
Innovation;
Decentralization;
Employee involvement;
Absorptive capacity
Author(s):
- Dr. Kaja Rangus, University of Ljubljana Faculty of Economics
- Dr. Alenka Slavec, University of Ljubljana Faculty of Economics
Purpose of this article:
This paper investigates the relationship between organizational characteristics and firm’s innovation and business performance. Specifically, we examine how decentralization, absorptive capacity, and employee involvement (in light of the open innovation literature) impact firm’s innovation, which in turn affects business performance.
Target audience:
For SMEs and large companies
Article’s subject:
We test the proposed model on a large sample of 421 manufacturing and service firms and find decentralization being positively connected to employee involvement, absorptive capacity, and firm’s innovation performance. Moreover, the results show that employee involvement and absorptive capacity mediate the relationship between decentralization and firm’s innovation performance. The results also suggest that firm’s innovation performance positively influence firm’s business performance. Implications for managers and future research are discussed.
Added value for companies, recommendations for management:
The study highlights that managers should keep in mind that stimulating employees to become more proactive in terms of interactions with internal and external environment, might increase new product, service and process development. Competencies of employees might be raised by forming rotational assignments through which different interactions internally and externally enhance the sharing and borrowing of ideas (O’Connor, 2005). Employee involvement may be enhanced by establishing and stimulating R&D structures that support effective communications among unrelated groups in the company (Dodgson et al., 2006). All employees, not only those involved in R&D, should be encouraged to express their ideas for new or improved products and services (van de Vrande et al., 2009). However, a firm’s absorptive capacity plays an important role in finding, assimilating and exploiting newly acquired knowledge. Absorptive capacity may also be enhanced through decentralized culture and employee involvement. As evident in the Procter & Gamble case, the stimulation of employees to search for external opportunities and technologies strengthened the firm’s absorptive capacity and consequently influenced the firm’s innovation and business performance (Huston and Sakkab, 2006). Managers should pay attention to development of a relaxed, less formalized organizational culture that would stimulate the interaction of internal and external environments, consequently boosting a firm’s creativity and innovation.
Journal:
Technological forecasting and social change, [in press] 2017
Indexing:
1A1 (Z, A”, A’, A1/2); uvrstitev: Scopus (d), SSCI, MBP; tipologija ni verificiranatočke: 69.87
CiteScore: 3.28
Impact Factor: 2.678
5-Year Impact Factor: 3.005
Source Normalized Impact per Paper (SNIP): 1.752
SCImago Journal Rank (SJR): 1.348
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