The Relationship between Organizational Innovation and New Product Adoption

1. The Relationship between Organizational Innovation and New Product Adoption By Michael Aubry

2. 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.

3. 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”.

4. 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.

5. 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.

6. 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).

7. 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”.

8. 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.

9. 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).

10. 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

11. Organizational Innovation • Organizational climate is a significant function that may also impact a firm’s 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”.

12. 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.

13. 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.

14. 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”.

15. 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

16. 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).

17. 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.

18. 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

19. Product Adoption • The overall framework from the consumer adoption and sensemaking process is provided by Seligman (2006):

20. The Relationship between Culture and Product Consumption • Although Hofstede’s 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.

21. Hypotheses • In Singh’s 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).

22. 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”.

23. 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.

24. 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

25. 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”.

26. 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).

27. 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.

28. 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.

29. 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).

30. 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).

31. 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”.

32. Diffusion • The diffusionary process can be further illustrated by Frambach (1993):

33. 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.

34. 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

35. 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 R&D 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).

36. 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”.

37. 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.

38. 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).

39. 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

40. 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).

41. 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).

42. 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.

43. 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”.

44. 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).

45. 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”.