The Relationship between Organizational Innovation and New Product Adoption

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The Relationship between Organizational
Innovation and New Product Adoption

• By Michael Aubry

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Why is it important to understand this
relationship?

• It is important to understand the influence of
  culture on organizational innovation from a
  global context. It is still difficult to
  understand the overall impact from an
  individualistic and a collectivistic perspective.
  To make a better determination of cultural
  influence, outside representations will be used
  to create a conceptual model that will
  demonstrate applicability to the field of
  international business.

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Culture

• Culture is an inclusive system of communications
  which incorporates biological and technical
  behavior of human beings with their verbal and
  nonverbal systems of expressive behavior (Herbig
  and Dunphy, 1998).
• It will be vital for this comparative study to
  determine whether or not prescribed
  characteristics are accurate, especially if the
  behavior, ideas, and material apparatus which
  must accompany the use of innovation can affect
  improvements along lines already laid down in
  culture Herbig and Dunphy (1998), which could
  lead to the possibility of the acceptance of
  products or services that are considered
  innovationary.

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The Four Dimensions

• Power Distance Index power distance represents
  the acceptance of inequality, and that it is
  endorsed by the followers as much as the
  leaders. This is an inherent quality for most
  societies as inequality amongst different social
  classes is widely accepted throughout the world.

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The Four Dimensions

• Individualism/Collectivism individualistic
  societies do not expect group cohesiveness and
  integration. Collectivistic societies are
  strongly integrated and are differentiated by
  strong familial loyalties.

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The Four Dimensions

• Masculinity/Femininity this refers to gender
  roles within a society. This could also be
  considered the the extent to which the goals of
  men dominate those of women (Harvey, 1997).

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The Four Dimensions

• Uncertainty avoidance this is considered the
  ability of a society to tolerate risk and
  uncertainty. According to Hofstede (1967-2003)
  it indicates to what extent a culture programs
  its members to feel either uncomfortable or
  comfortable in unstructured situations.

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Organizational Innovation

• Organizational innovation is an environment, a
  culture almost spiritual force that exists in
  a company and drives value creation (Buckler,
  1997). This is an essential definition that can
  be further analyzed and segmented into several
  different components.
• Organizational culture is a significant driver of
  innovation and can vary differently across
  cultures.

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Organizational Innovation

• According to Goffee and Jones (1998)
  organizational culture can be segmented into
  four dimensions based upon two initial
  categories. These inclusive categories include
  sociability, which is defined as friendliness in
  relationships between people in an organization
  and solidarity, which carries a standard
  definition of the ability of people to pursue
  shared goals efficiently and effectively for the
  larger good of the organization without much
  regard for the impact on individuals and
  relationships between them (Goffee and Jones,
  1998).

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Organizational Innovation

• The Four Dimensions of Organizational Culture
• Communal - a communal organization is highly
  sociable, and is typical in small organizations
• Fragmented - A fragmented organization is
  significantly different, due it its lack of
  solidarity, and governance
• Networked - A networked culture consists of an
  organization that has frequent water-cooler
  conversations, and colleagues going to lunch
  together and spending time in activities and
  social gatherings outside the workplace (Rashid
  and Zabid, 2003)
• Mercenary - Mercenary cultures are focused on
  strategy and effectives processes for winning in
  the marketplace (Rashid and Zabid, 2003

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Organizational Innovation

• Organizational climate is a significant function
  that may also impact a firms ability to
  innovate.
• According to Ahmed (1998), climate is defined as
  understanding and perceptions of the environment
  act as guiding mechanisms, the practices and
  procedures that come to define these perceptions
  are labeled as climate.

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Organizational Innovation

• Organizational Climate can be segmented into four
  dimensions
• Nature of Interpersonal Relationships this is a
  prime determinant of trust, and differs across
  cultural contexts
• Nature of Hierarchy this dimension is concerned
  with bureaucratic structures and how they are
  affected by individual or collectivistic
  relationships
• Nature of Work work duties or functions can
  significantly impact employee/employer
  relationships
• Focus of Support and Rewards Certain cultures
  are intrinsically motivated, while others rely on
  extrinsic benefits.

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Organizational Innovation

• Significant research has focused on
  organizational culture, and has found various
  characteristics, including the ability of culture
  to impact idea acceptance of new product
  inquisitiveness. Furthermore, according to
  Barnett (1953) he postulates a positive
  correlation between the individualism of society
  and its innovative potential the greater the
  freedom of the individual to explore and express
  opinions, the greater the likelihood of new ideas
  coming into being.

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Product Adoption

• To determine the eventual relationship between
  organizations and consumers it is important to
  understand the product adoption process.
• Prior research conducted by Hirschman (1980) has
  found the conceptualization of innovativeness
  centers on the consumers desires to obtain
  information about innovation. Furthermore,
  innovativeness is equated with the inherent
  novelty seeking and is defined as the desire to
  seek out the new and different (Hirschman,
  1980).
• The product adoption process is continuous model
  that begins with the initial consumer or
  innovator.

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Product Adoption

• The product adoption process is continuous model
  that begins with the initial consumer or
  innovator.
• The next phase of the product adoption process
  includes the early adopters. They enjoy being
  first in the consumption process, and are valued
  opinion leaders within the community.
• The third phase of the product adoption process
  includes individuals who comprise the early
  majority. These individuals analyze the
  purchasing process of the innovators and the
  early majority to determine whether or not they
  might experience cognitive dissonance.
• The fourth phase of the product adoption process
  consists of individuals who prefer to adopt a
  product within an inclusive group known as the
  late majority. They have a tendency to be slow
  with adopting new products due to misinformation
  or being lackadaisical
• This process ends with the laggards who lack
  timeliness, and may not adopt the product due to
  being sufficiently

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Product Adoption

• In the overall makeup of this model it is
  important to understand that adopters other than
  the innovators are influenced in their adoption
  of new products and ideas by the pressures of the
  social system that may take the form of
  interpersonal communications and observations,
  therefore, these influences are coming from
  sources external to the individual (Singh,
  2005).

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Product Adoption

• Although product adoption is comprised of
  nefarious phases, it is important to understand
  what leads to the overall formulation of the
  consumer decision making process.
• There is a component within the adoption process
  that is exemplified by external sense-making
  abilities.

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Product Adoption

• This overall sensemaking ability has been defined
  as the cyclical process of taking action,
  extracting information from stimuli resulting
  from that action, and incorporating information
  and stimuli from that action into the mental
  frameworks that guide further action (Seligman,
  2006).
• Sensemaking is an essential component of the
  adoption process when analyzing innovationary
  products and ideas

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Product Adoption

• The overall framework from the consumer adoption
  and sensemaking process is provided by Seligman
  (2006)

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The Relationship between Culture and Product
Consumption

• Although Hofstedes model is from an
  organizational perspective, this comparative
  analysis will try to compare it cross-culturally
  using statistical analyses that have been used in
  prior research. To make a broad generalization
  reference will be made to a study conducted by
  Singh (2005) where the cultural differences in,
  and influences on consumers propensity to adopt
  innovations will be viewed from a statistical
  perspective.

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Hypotheses

• In Singhs research, he generated 15 hypotheses
  that were related to the Hofestedian methods
  previously discussed (this study will only look
  at the hypotheses that are relevant to the
  aforementioned content). It is important to list
  these hypotheses to understand the implications
  that could significantly impact the meaning of
  this comparative study Singh (2005).

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Hypotheses

• H1 - Consumers from more individualistic
  cultures are going to display a relatively higher
  propensity to innovate as compared with those
  from less individualistic ones.
• H2 - Consumers from a more collectivist society
  are going to display a higher propensity to
  imitate as compared with those from a less
  collectivistic one.
• H3 - Consumers in smaller power distance
  cultures will display a higher propensity to
  innovate than those in large power distance
  cultures.
• H4 - Consumers in larger power distance cultures
  will display a higher propensity to imitate than
  those in smaller power distance cultures.
• H5 - Consumers in weaker uncertainty avoidance
  cultures will display a higher propensity to
  innovate than those in large power distance
  cultures.
• H6 - Consumers in stronger uncertainty avoidance
  cultures will display a higher propensity to
  imitate than those in smaller power distance
  cultures.
• H7 - Consumers in more masculine cultures will
  display a higher propensity to innovate than
  those in large power distance cultures.
• H8 - Consumers in more feminine cultures will
  display a higher propensity to imitate than those
  in smaller power distance cultures.

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Analysis

• In this study the two countries analyzed were
  France and Germany. Based upon earlier data
  generated be Hofestede it was determined that
  France was more individualistic, higher on power
  distance, higher on uncertainty avoidance, and
  they were lower on masculinity/femininity.
  Statistically, the Cronbach Alpha was just under
  the desired .70 (this could have been due to the
  number of items on the scale), however it was
  determined that the scales were satisfactory.
  Furthermore, an ANOVA was used with the country
  categorized as the independent variable, and
  consumer innovativeness and the propensity to
  imitate as the dependent variables.

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Results

• H1 Not supported due to lack of statistical
  significance
• H2 Not supported due to lack of statistical
  significance
• H3 Supported due to statistical significance
• H4 Not supported due to lack of statistical
  significance
• H5 Supported due to statistical significance
• H6 Not supported due to lack of statistical
  significance
• H7 Supported due to statistical significance
• H8 Not supported due to lack of statistical
  significance

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Results

• It is apparent that consumer innovation is
  related to many of the Hofstedian components,
  except for individualism.
• It is interesting to see that an individualistic
  culture would not have a higher propensity to
  innovate considering there is conflicting
  evidence that is thought to exist, particularly
  Shane (1992), who found that the psychological
  characteristics of independence, achievement, and
  nonconformity, all of which have been found to
  encourage innovation, are more common in
  individualistic societies.

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Results

• Based upon this findings it would be possible to
  make a generalization that products that are
  introduced in cultures that are defined by weak
  uncertainty avoidance, small power distance, low
  uncertainty avoidance would have little trouble
  in being accepted as our study has shown these
  characteristics to be conducive to adoption of
  things novel (Singh, 2005).

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The Relationship between Culture and
Organizational Innovation

• Although there is a strong relationship between
  innovative organizations and innovative consumers
  it is important to determine the cultural
  relationship impacting firms implementing a
  transnational or global strategy. It may be
  necessary to refer back to the four dimensions
  mentioned earlier in the comparative analysis to
  further understand the relationship between
  cultural variations and organizational
  innovation.

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The Relationship between Culture and
Organizational Innovation

• Conducting a comparison between Japanese and
  American firms, there are many differences,
  particularly the importance of the collective
  over the needs of the individual.
• In Japan it is Herbig and Dunphy (1998) it is
  important to minimize differences, preserve
  harmony, and reinforce group loyalty.
• The American culture has significant differences
  that has led to beliefs in self-orientation, a
  primal and individualist need to survive, and
  decisions that are based upon competitive or
  argumentative analysis.

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The Relationship between Culture and
Organizational Innovation

• In studies conducted on Japanese and American
  firms, it has been found that organizations in
  Japan have placed a significant emphasis on
  collectivistic manufacturing processes, including
  quality control and mass production (Herbig and
  Dunphy, 1998). Although these have been
  beneficial for strategic growth of Japanese
  firms, it has inhibited independent
  entrepreneurship and individual creativity,
  resulting in a detrimental effect upon radical
  innovations and inventions (Herbig and Dunphy,
  1998).

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The Relationship between Culture and
Organizational Innovation

• Conclusively, it is apparent that national
  culture can either have a positive or negative
  influence on the overall ability of a firm to
  follow an entrepreneurial or innovative path.
  According to Herbig and Dunphy (1998) cultures
  valuing creativity will continue to have a
  greater number of innovation, and those
  countries that reward technical ability and
  higher education will prosper in innovative
  pursuits
• Furthermore, the societal level of innovation is
  directly proportional to the encouragement and
  status given to entrepreneurial efforts within
  the culture and to the emphasis given it relative
  to the survival of the culture (Herbig and
  Dunphy, 1998).

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Diffusion

• In order to forge a relationship between
  innovationary organizations and consumers that
  adopt these products, it will be important to
  determine the functionary measure that brings
  these two entities together.
• Diffusion, according to Rogers (1976) is the
  process by which a product innovation is
  communicated and accepted through certain
  channels among the members of a social system
  over time.

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Diffusion

• The diffusionary process can be further
  illustrated by Frambach (1993)

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Diffusion

• This study has analyzed the various facets of
  organizational innovation, however, it is
  important to understand how these organizations
  diffuse their product to the end adopter or
  consumer.

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Diffusion

• According to Rogers (1983), there are five
  characteristics of an innovation that are
  generalized in their relation to the degree of
  adoption of that innovation in a social system.
• Advantage of innovation this is considered the
  degree to which an innovation is superior in
  perceptive terms
• Compatibility of an innovation this is
  considered the degree to which an innovation is
  perceived as consistent with current values, past
  experiences, and the needs of potential adopters
  
• Complexity of an innovation the is the
  perception of the overall difficulty related to
  the specific use of a product or service
• Trialability of an innovation can an innovation
  be tested or sample
• Observability of an innovation this is nearly
  related to the complexity of an innovation, but
  the definition is more concerned with the overall
  observation of an innovation

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Diffusion

• It is important to explore the attributes that
  comprise the nature of products and services that
  experience successful diffusion based upon
  individualized strategies of the firm. These
  attributes are based upon four key determinants
  devised by Lilien and Yoon (1989)
• Organizational factors and strategic processes
  these factors are controlled by leadership within
  an organization, and are developed using
  participatory actions by those within the upper
  echelons of the firm
• Production and RD factors these factors affect
  product superiority and the overall complexity
  and the uniqueness of a product or service. It
  is important to have a well documented structure
  that facilitates managerial involvement in this
  process
• Marketing factors marketing consists of an
  interactionary relationship between the producer
  and the consumer. These factors have different
  effectiveness levels, and will be further
  analyzed in a different section of this analysis
• Market and environmental factors these factors
  include competition within the market, which is
  believe to cause a high level of competition
  among firms in a certain industry that may
  enlarge the pressure on an individual firm to
  adopt a certain innovation (Frambach, 1993).

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Interactivity of Buyers and Suppliers

• The relationship between buyers and suppliers is
  essential for continuity in the diffusion
  process. Within this overall paradigm it is
  important to determine the validity of this
  relationship by analyzing a framework by Frambach
  (1993), that states the speed and rate of
  adoption of innovation by organizations will be
  positively related to the extent that the
  supplier firm has interacted with other parties
  (especially potential adopters of the innovation)
  more intensively during the innovation process.

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Interactivity of Buyers and Suppliers

• One of the biggest proponents of the diffusion
  process is the media according to Rogers (1995)
  mass-media channels are more effective in
  creating knowledge of innovations, whereas
  interpersonal channels are more effective in
  forming and changing attitudes toward the new
  idea, and thus influencing the decision to adopt
  or reject a new idea.

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Interactivity of Buyers and Sellers

• As the media becomes more involved in the
  diffusion process it will lead to more product or
  service awareness that has been proposed to
  affect overall efficiency related to the
  communication process during each stage in the
  new product sales cycle (Tellefesen and Takada,
  1999).

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Interactivity of Buyers and Sellers

• As this awareness increases it is important for a
  firm to devise strategy that is conducive to an
  effective relationship between the producer and
  the consumer. According to Forlani and
  Parthasarathy (2003), factors including income,
  education, the availability of mass media, and
  cultural factors will be inclusive within the
  overall diffusion pattern

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Interactivity of Buyers and Sellers

• This pattern can be further explained by the
  media availability and economic framework
  provided by Forlani and Parthasarathy (2003)

• As the mass media becomes more ingrained or
  available in a society it diffusion becomes
  rapidly progressive. More importantly a greater
  mass media presences will feature a higher
  proportions of earlier adopter and (other factors
  remaining constant) will move through the earlier
  stages of the adoption process faster than
  markets with low mass media presence (Forlani
  and Parthasarathy, 2003).

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Interactivity of Buyers and Sellers

• In a cross-continent analysis it is apparent that
  media development is significant in many Asian
  and Western countries when compared to Africa,
  which suggests that Asian countries are likely
  to move through the preliminary stages of the
  adoption process much faster than their African
  counterparts (Forlani and Parthasarathy, 2003).

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Conclusion

• The purpose of this study is to show the possible
  relationship that exists between organizational
  innovation and new product adoption. From a
  multinational perspective it could be deduced
  that international marketers studying product
  diffusion would need to conduct appropriate
  analyses before introducing new products and
  services into an unexplored market.

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Conclusion

• It would seem that innovationary organizations
  and consumers have developed characteristics that
  would be termed individualistic. Some of the
  research presented in this study would seem to be
  contradictory particularly one rejected
  hypothesis that stated consumers from more
  individualistic cultures are going to display a
  relatively higher propensity to innovate as
  compared with those from less individualistic
  ones.

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Conclusion

• It was mentioned in other research that the
  psychological characteristics of independence,
  achievement, and nonconformity, all of which have
  been found to encourage innovation, are more
  common in individualistic societies. It is
  possible that these findings are not
  representative of an entire country, and it is
  possible that this information could be
  inconclusive due to France being an
  individualistic country (though not as
  significant as Germany).

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Conclusion

• This study did provide important information for
  organizational firms looking at new markets and
  opportunities. Creating a proper organizational
  culture and climate that uses various media
  induced marketing strategies will induce product
  adoption from cultures that would be considered
  to have weak uncertainty avoidance, low power
  distance, and weak uncertainty avoidance.
• Conclusively, Aubry (2007) further research is
  definitely needed in this field to determine the
  changes that have occurred in culture, and how
  these changes have impacted the overall social
  structure of organizations that could lead to
  greater differences in the eventual diffusion and
  adoption process of innovationary concepts,
  services, and ideas.