ARCHITECTURE OF INNOVATION: A THEORETICAL REVIEW AND INTEGRATION

Researchers have made extensive efforts to understand the dynamics of various organizational elements that enhance innovativeness. They have identified certain organizational solutions in terms of structures, systems, and processes that contribute to innovations in organizations. Most of the existing research literature related to innovation had suggested designing sequential functions and/or changes in organization structural attributes as solutions to building innovative organization. The existing literature can be broadly classified into two categories namely, technically oriented ‘process’ approach and organizational design oriented ‘structural’ approach. But these ‘process’ and ‘structural’ approaches to innovativeness do not provide a complete answer to the problem and nor they are free from contradictions. Recently, cultural aspects of organization are receiving the serious attention, and developing the organization culture and climate that support innovation strategies is viewed as a primary task to enhance the innovative capabilities of organizations. Along the same vein, organizational researchers posit that cognition and knowledge serve as organizational DNA or a meta-capability that shapes the culture and climate required for innovation and creativity. This paper first reviews the extant research on the role and limitations of organization structure, culture, and technical process routines on enhancing innovation. This paper further argues that certain organizational cultural attributes will provide better means for building an innovative organization. Next, this paper points out how knowledge management and organization culture can support the structural and process changes, and create the climate required for successful implementation of innovation strategy. Electronic copy available at: https://ssrn.com/abstract=1332740 3 ARCHITECTURE OF INNOVATION: A THEORETICAL REVIEW AND INTEGRATION Introduction More than ever, the need for organizing around change management and channeling resources for innovations is strongly emphasized in managerial circles. Increased global competition, sharp reduction in technological and product life cycles, and swift changes in customers’ need patterns have put greater emphasis on firms’ commitment to and capability for managing technological innovations and organizational change (Katz, 1988; Van de Ven, 1986; Nystrom, 1990). Innovativeness is also significant to the growth, industrialization, and competitiveness of national economies (Hayes and Abernathy, 1980). In an abstract sense, innovation is a creation of future (Nystrom, 1990). But in concrete practical terms, innovation is the process of developing new products, services, technologies, or new administrative systems (Van de Ven, 1986; Nystrom, 1990; Daft, 1986). Drucker (1954), years ago, indicated that innovation is one of the two basic functions of any business enterprise (the other being marketing). Today, the concept and management of innovation are becoming popular topics for management courses and bestselling books. Many successful business firms such as 3M, Hewlett-Packard and GE have already formalized innovation as a major strategic thrust. (Van de Ven, 1986). Van de Ven (1986) noted, “Of all issues that surfaced in his meeting with over 30 CEOs of large public and private firms, management of innovation was the most central concern in managing their enterprises. ” Innovation management is complex and is of greater significance, because it involves a whole range of organizational design and development activities that are associated with the process of change and innovation. The difference between innovation and change is only whether the idea is Electronic copy available at: https://ssrn.com/abstract=1332740 4 new to the industry or new to the organization. However, within organizations, the processes of innovation and change are nearly identical (Daft, 1986). To achieve innovative capabilities, a firm must first orient its strategies toward innovation and other words, the internal environment and the operational goals should be consistent with the innovation strategies. Orienting the whole organization towards innovation is a complex process, and it requires top management’s continuous commitment, and special resources beyond those identified in operating budgets (Kanter, 1983). The innovation strategies should also be responsive to external task environments such as suppliers, customers, regulating agencies, and competitors. Researchers have made extensive efforts to understand the dynamics of various organizational elements that enhance innovativeness. They have identified certain organizational solutions in terms of structures, systems, and processes that contribute to innovations in organizations. Most of the existing research literature related to innovation has suggested designing sequential functions (Cooper, 1992; Marquis, 1969; Booz, Allen, and Hamilton, 1982), and/or changes in organization structural attributes as solutions to building innovative organization (Child, 1972; Covin and Slevin, 1988; Moch, 1976; Hage and Aiken, 1969; Burns and Stalker, 1969). The existing literature can be broadly classified into two categories namely, technically oriented ‘process’ approach and organizational design oriented ‘structural’ approach. But these ‘process’ and ‘structural’ approaches to innovativeness do not provide a complete answer to the problem and nor they are free from contradictions. Several researchers have identified the limitations of process approach (Wilemon and Millson, 1994) and there are classical debates centered around the structural solutions too (Gerwin, 1981; Normann, 1971; Daft, 1978). Recently, the cultural aspects of organization are receiving the serious attention, and developing the organization culture and climate that support innovation strategies is viewed as a primary task to enhance the innovative Electronic copy available at: https://ssrn.com/abstract=1332740 5 capabilities of organizations. Along the same vein, organizational researchers posit culture and climate required for innovation and creativity. This paper first reviews the existing literature on relationship between innovativeness and organization structure and culture, and technical process approaches, and identifies their limitations in building innovative capabilities. This paper further argues that certain organizational cultural attributes will provide better means for building an innovative organization. Next, this paper points out how knowledge management and organization culture can support the structural and process changes and create the climate required for successful implementation of innovation strategy.