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Malaysia is a middle-income country that has transformed itself since the 1970s from a producer of raw materials into an emerging multi-sector economy. According to Prime Minister NAJIB talk, Malaysia is attempting to achieve high-income status by 2020 and to move farther up the value-added production chain by attracting foreign investments in high technology industries, medical technology, and pharmaceuticals. Government is trying to lessen its dependence on state oil producer Petronas, which supplies at least 40% of government revenue.
Malaysia has targeted to be a high-income country and this aspiration of climbing up the income ladder is only possible through innovation. In today's organizational environment, innovativeness has increasingly been recognised as a key element of successful organizations (George, 2007). Recent reviews also suggest that organisational factors such as HRM practices are likely to play an important role in promoting innovative behaviour (Shalley, Zhou and Oldham, 2004). Hence, Malaysia has to promote the importance of innovation in government sectors as well as private sectors to get engaged in innovation, more seriously than before. Here, the challenge is not only to boost innovation capabilities but also to do it so quickly.
Innovation is a multi-dimensional outcome influenced by many factors and players. It applies to products, processes, and organizations, and involves both the creation and diffusion of knowledge. Given this complexity, policy approaches that facilitate rather than direct innovation are likely to stand the greatest chance of success. Thus, Malaysia can address the innovation challenge by improving innovation capabilities and enhancing the driving force of innovation in working places.
To provide guidance for Malaysian managers in today's dynamic, competitive marketplace, we integrated ideas from earlier leadership theories with ideas from theories of HRM as well as leadership styles, organizational change and strategic market structure. We explain how Malaysian leaders at all levels can use some particular behaviors to trigger subordinates' innovation in workplaces. Effective leaders adapt their behaviors to changing situations and find an appropriate balance for tradeoffs and competing demands. They are guided by relevant internal values and a strong core ideology for the organization.
2.1 Definition of innovation
Innovation has been defined in various ways and as both a process and a product. As a process, Amabile (1988) defined innovation as the "successful implementation of creative ideas within an organization". Innovation is thus a process through which individuals and groups of individuals attempt to change some aspect of their work or their work products in order to gain some benefit they value. Some of these benefits are higher productivity, better product or service quality, better working conditions, and improved interpersonal processes (West & Farr, 1990).
Burgelman & Sayles (1986) and Utterback (1994) have defined innovation as phenomena that involve radically different management styles and structures. This general definition of innovation can be divided into four subcomponents of innovation (Bogota & Oslo, 2009). First, the Product Innovation that is the introduction of a good or service that is new or substantially improved. Second, the Process Innovation that is the introduction of a new or significantly improved production or delivery method. Third, the Marketing Innovation that is the implementation of a new marketing method involving significant changes in product design or packaging, product promotion or pricing. Fourth, the Organizational Innovation that involves the creation or modification of business practices, workplace organization, or external relations.
According to Schumpeter (1912, 1942), who invented the modern usage of the word, innovation is the process whereby a firm brings new technology into the economy. Firms that develop innovative and cheaper ways of producing existing goods can lower their costs, and so make extra profits from the prevailing price for their output. Firms that develop new and better products can similarly earn profits in excess of their input costs because they alone can produce the new products.
However it is significant to note that, both the quantity of innovations and the quality of innovations implemented (West, 1990) is the matter of importance. Since innovations do not always lead to higher performance, it is important to consider the quality of the innovations and not just the number of innovations implemented. According to West (1990), the quality of an innovation can be assessed in relation to its newness, to its significance, and to its effectiveness.
1. 2 Significance of Innovation
All organizations are faced with periods during which they must adapt to the external environment or perish. For some organizations the need for major change occurs infrequently, while for other organizations there is a need for continuous change. Adapting to the external environment involves responding to threats and opportunities resulting from changes in technology, economic conditions, competitor actions, and customer needs and expectations. Adaptation also involves finding ways to acquire necessary materials and resources, and doing things to increase the sale of products and services to customers. To enhance adaptation and initiate changes in organizations, innovation is an essential process. In the last few decades, corporate executives and public policy makers throughout the world come to accept that innovation in general is something to be urged forward - that the benefits of innovation greatly outweigh the costs.
1.3 The Life cycle of innovation
Once innovation occurs, innovations may be spread from the innovator to other individuals and groups. The life cycle of innovations can be described as a S-curve. The S-curve shows growth of a firm's revenue or productivity against time. In the early stage of a particular innovation, growth is relatively slow as the new product establishes itself. At some point customers begin to demand and the product allow growth to continue. Towards the end of its life cycle growth slows and may even begin to decline. In the later stages, no amount of new investment in that product will yield a normal rate of return.
Innovative companies will typically be working on new innovations that will eventually replace older ones. Then, successive s-curves will come along to replace older ones and continue to drive growth upwards.
1.4 The Need for Innovative behaviors
Malaysian firms must pursue innovative behaviors to overcome the challanges and the risks that derive from the rapid pace of changes in external environment as well as pressures originate from the global competition. The managers of an established firm must convince everyone of the need and usefulness of the new idea and encourage them to promote innovative behaviors across the organization.
Innovative behavior is defined as behavior directed towards the initiation and application (within a group or organization) of new and useful ideas, processes, products or procedures. Innovative behavior linked with practicing innovative methods and processes that make the firms in competitive positioning market share and to be a winner. To initiate innovations employees have to generate ideas by engaging in behaviors to explore opportunities, identify performance gaps such as when the firm recognize a specific customer segments that existing but competitors neglect, or existing customer needs that the organization is not serving them well or in general to produce solutions for problems.
Some authors have identified and discussed about differences between innovative behavior and creativity. Unlike creativity, innovative behavior is intended to produce some kind of benefit. Innovative behavior has a clearer applied component since it is expected to result in innovative output. However, it cannot be said that it comprises application that only direct to the production of novel products, services and/or work processes (West and Farr, 1990; Scott and Bruce, 1994). In that sense, creativity can be seen as a part of innovative behavior that is most evident in the first phase of the innovation process, where problems or performance gaps are recognized and ideas are generated in response to a perceived need for innovation (West, 2002).
2. The Determinants of Innovation on Organizations
2.1 The Effect of Firm' Size
Small and medium sized enterprises (S&MSE), have rapid reaction to changing market positions and can initiate quick innovative moves. Smaller firms have advantage in innovation because they have ability to change in easy way by managerial control and flexible to adapt and move to change in demand and technology (Mazzucato, 2002). However, on the other hand, innovation can represent a large financial risk for S&MSE as well. As accessing to external capital for innovation is critical and costly for smaller firms because cost of capital can be relatively high.
On the other hand, large firms have better access to stable internally generated funds and resources (Cohen and Levin, 1989). They are able to borrow a great amount of external capital compared to smaller firms. Moreover large firms are able to attract highly skilled specialist and can support the establishment of a large R&D laboratory. And also they can take advantage of economies of scale and learning curve economies through investment in production (Fisher and Temin, 1973). However, large firms are often controlled by risk-averse accountants, and managers become bureaucrats and have a lack in dynamism. For large firms regulation often is applied more strictly. Moreover, another observable disadvantage about large firms is that internal communications tend to be heavy, with long decision-making chains and therefore resulting in slow reaction times.
Therefore, Schumpeter (1942) developed a theory where a company's ability to innovate was mainly connected to its size. He proposed that small companies should be in a better position due to their flexibility while large companies might get trapped in bureaucratic structures. Consistently, Rothwell and Dodgson, (1994) argue that small firms business organization enjoy behavioral advantages as opposed to material advantages accruing to larger competitors. Rothwell and Dodgson, (1994) emphasize that bureaucratic structures of large firms may hinder the undertaking of new projects due to resistance spreading across their organizational layers, while the entrepreneurial management of small firms may benefit from rapid decision-making to grab technological and market opportunities.
In this respect, we suggest Malaysian firms to avoid growing in size in order to be inflexible to external changes and environmal threats. For this purpose, they can oursource those of operations that are not their core-competence activities. In this way they can concentrate on their core activities and take innovating actions on their core-competencies which eventually will lead them to achieve competitive advantage over other firms operationg across the world.
2.2 The Effect of Market Structure
Market structure influences the innovation effort of organizations as well. Studies suggest that a competitive context would allow a high rate of innovation where the entry barriers of market is relatively low (Levin et al., 1985). Schumpeter (1942) explains that larger corporations with some degree of monopolistic influence could have an advantage to develop innovations. Hence, Malaysian frims should always welcome the new market enterent because they will force them to be more creative and innovative than before and this event will help them to grow and advance in their industry.
2.3 The Effect of Internal Factors
The determinants of innovations has been enriched by a deeper analysis of the firm internal and organizational factors that influence its behavior (Teece D.J., 1992; 1996). These internal or organizational factors are composed of the quality of the human capital employed, the firm experience, the productive diversification, and the vertical integration. Regarding human capital and firms experience, they relate to learning processes and to the ability to use new technologies, and are relevant because of the tacit and cumulative nature of the innovative processes. The last two factors mainly relate to the ability to better exploit the innovation: diversification makes innovations developed in a sector can be easily transferred in another one, lowering the average cost of research activity, while vertical integration improves the effectiveness of systemic innovations that require to contextually act at different stages of production. In addition to above four internal factors, the organizational features and the intensity of backward and forward linkages are important. These features help organizations to exchange and communicate information effectively with the market, customers and suppliers.
To foster general organizational environment ready for innovation, we propose that Malaysian firms only employ only human resources who are qualified and innovative who are always ready to learn in organization. They have to avoide hiring passive and alieniated employess who are not willing to participate in innovation and organizational changes and instead have to recruit motivated people. Also managers need to restructure the organizational hierarchy if its current structure is not vertically integrated.
2.4 The Effect of External Factors
Firm's innovativeness is dependent on some external factors, too. Among them, the dimension of the market and the growth of the demand play a very relevant role as they have an influence on the incentive to innovate. In the terms of market dimention, the total output of the firm affects the average cost of the research activity and of the investments in innovation. The growth of demand help firms to catch new buyers by product innovations and then the firm widens its market share and its profits. Many empirical analyses have investigated the importance of these factors (Cohen W., 1995).
For those of the Malaysian firms which domestic market is stagnated for their products or their growth rate has started to diminish, we suggest to expand their businesses oversees and look for export strategy or partnership strategy to sell their products over there. In this way they can increase their demand growth rate but they have to be conscious about the culture and regulations of the host countries where they will operate.
3. The Determinants of Innovation on individuals
The generation of creative ideas must begin with individuals, who then choose whether to offer their creative ideas to the group for further discussion and development (Agrell & Gustafson, 1996; Drazin, Glynn, and Kazanjian, 1999; Rosenfeld & Servo, 1990; West, 1990). Thus, it is so important to figure out what factors can influence on innovative behavior of individual employees.
3.1 The Effect of Social Knowledge
Social information can result in individual creativity and innovation. Some individuals hold divergent and creative ideas based on their individual social knowledge and experiences. Rather than individual information, orgaizational knowledge can also be the cornerstone of innovative activities of employees (Victor, Francisco and Antonio, 2008). The circulation of knowledge acquired from the outside or inside the firm, creates a knowledge flow that through various processes of transformation results organizational learning, then this new knowledge leads to innovation.
To create the opportunity of effective organizational learning in Malaysian firms, we suggest that outsourcing becomes part of the organizational strategy. Then employees throughout the entire organization are often subject to communicate and learn from outsiders with higher knowledge. Actually, outsourcing provides companies the opportunity to add more experts to their resource pool. By adding new nodes to the network in the form of other organizational entities, the chances of increasing innovative performance may improve. As new people are added to the mix of problem solvers, Malaysian companies can benefit from their fresh perspective and ties to a common goal. However, managers should ensure that the goals of team members are closely linked via outsourcing.
3.2 The Effect of Particular Behaviors of Leaders on Innovation
Leadership is a process of influencing others towards achieving some kind of desired organizational outcomes. Effective leaders encourage subordinates to trigger their individual innovative potentialsand enhance such a behavior. Innovation process is composed of two main phases of idea generation and application of new idea or behaviour. Jong and Hartong (2007) suggest a series of leaders' behaviors influencing on both idea generation and application of those innovative behaviors in subordinates.
3.2.1 Intellectual stimulation
Individual simulation involves increasing employees' awareness of problems and stimulating them to generate ideas by tempting and enticing them to do so. Malaysian leaders have to arouse this potential on employess and develop it.
3.2.2 Stimulating knowledge diffusion
Stimulating the dissemination of information among subordinates enhances idea generation. Idea generation ability of employees depends on their awareness of needs, trends and problems within their professional and business environment. So Malaysian leaders have to attempt to feed their followers with required knowledge and help them to interpret them easily.
3.2.3 Providing vision
leaders attempt to communicate their ambitions with followers through lofty visions. Providing an overarching vision is believed to enhance both idea generation and application behavior of subbordinates. Managers have to try to be visonary and inspire followers to help them achieving these goals.
Researches represent that asking followers to participate in decision-making process would be a strong determinant of innovative behavior. Leaders are convinced of the value of asking subordinates for their opinion. Therefore, Malaysian leaders has to act as a coach and facilitator for their subordinates to guide them find the best way of doing their careers.
leaders can influence the innovation process by granting their subordinates freedom and autonomy to make their own decision. So Malaysian managers should promote delegation in their working places and let employess feel that they are worthful.
3.2.6 Support for innovation
In innovative processes, mistakes should be ignored and instead should be considered a learning opportunity. Leaders dont have to punish subbordinates for their mistakes otherwise they will hinder their innovative capabilities to flourish.
3.2.7 Organizing feedback
Although Malaysian leaders can provide feedback from current organizational processes, but if they ask their subordinates to take on this role and ask them to prepare feedback, will impact on innovative behaviors of them in generating new ideas.
Malaysian leaders should be keen to recognize innovative contributions. They should appreciate innovative subordinates and listen to their new ideas, even if they do not like to approve them.
The financial rewards are helpful to appreciate employees' efforts when they are trying to implement new services or work processes. So Malaysian leaders have to establish an effective reward system in their organization, if it doesnt exist, to fulfill both intrinsict and extrinct needs of subordinates.
3.2.10 Providing resources
As soon as the decision to implement a promising idea is made, providing the necessary resources is essential. Leaders have to support their subordinates' plans by providing necessary organizational resources for them to move forward their innovative thoughts.
Controlling and supervision are negatively related to employ's creative performance. The non-innovation situations appeared to have strong monitoring standards. Thus, Malaysian leaders has to prohibit controlling actions, especially for those of followers who are professional and educated.
3.2.12 Task assignment
Task assignment is another imporant role of leadership that have to be done effectively. Leaders has to assign particular tasks to those employees who have related expertise and experience on that job, otherwise the result would not be satisfactory.
3.2.13 innovative role modelling
Leaders have to be a good example of innovative behavior. They have to learn how to exploite opportunities , generate ideas and put efforts in development. Then followers will imitate this behavior of them and learn how to be effective from his/her leader. So Malaysian leaders should be innovative as well and create such a behavior in their own.
The Effect of Leadership Style on Innovation
Victor, Francisco and Antonio (2008) found evidence that leadership style as a strategic factor impacts on innovation and knowledge generation in an organization. They showed that applying transformational leadership style, unlike transactional leadership style, stimulates innovation and knowledge in organizations.
Transformational leadership style inspires organizational learning by helping employees to discover their mental models and believe in themselves. They promote knowledge distribution by investing substantially and continuously in developing organizational knowledge and providing external required information to organizations agents who will use them in practice. These leaders also encourage search for new opportunities that makes employees to undertake greater responsibilities and efforts for innovation at work.
Transformational leaders initiate changes and implement new ideas in organizations. These leaders create a lofty vision and then communicate the vision with subordinates to make them learn and follow it. Transformational leaders empower their followers and grand them the authority of making their own decisions. They always care employees and try to meet their needs. Also this style of leadership promotes organizational learning and allows the organization to learn through experimentation, communication, dialogue, personal mastery and organizational knowledge creation. Transformational leaders play a crucial role in generating innovation by creating an innovative climate and then encourage innovative behaviours of followers by an effective reward system.
To nurture the environment of innovation, we suggest that Malaysian leaders commit themselves to perform this style of leadership in their organizations and help their subordinates to develop their full potential in creativity and innovation.
3.3.1 Creation of an Innovation Climate
The innovation climate is the atmosphere established by a leadership that is committed to the pursuit of new ideas and the encouragement of individuals to express his/her innovative idea. If a person believes that the climate is open and that their input is valued, then individuals are more likely to use their capabilities to innovate. However if they feel more distant from one another, whether in the form of geographic or socio-emotional distance or both, tend to be less innovative. Scott, S. and Bruce, R. (1994) found evidence that there is strong relationship between innovative behavior and organizational climate. Furthermore, the study supported when the task is routine or individual discretion is low, the relationship between innovative behavior and climate is less than when the task is non-routine and high discretion.
The behavior of leaders is crucial in sustaining a positive innovative climate (Jong and Hartog, 2007). To maintain a vibrant innovative climate, especially when teams are distanced by space and time or psychological factors or race, Malaysian leaders need to focus on ways to reinforce innovator confidence. Leaders must focus on infusing the innovative atmosphere with positive reinforcement and cultural experiences that help distanced workers acclimate to their teams and in turn, together create radical or incremental innovations. Frequent communication, messages of encouragement, and visits in person to those responsible for the ideas of tomorrow, will help to stave off widespread negativity. These actions will help malaysian leaders to create a free-flowing atmosphere conducive to the generation of new ideas.
3.3.2 Creation of Psychological Safety
To avoid potential threats to creativity and innovation, a number of researchers have pointed to the importance of "safe" climates and "psychological safety" (e.g., Edmonson, 1999; Kahn, 1990; Nystrom, 1979; Smith, 1993; West, 1990). Unsafe climates are seen to reduce a group member's willingness to take risks (Edmonson, 1999; Smith 1993); to share ideas (Nystrom, 1979; Smith, 1993); to be self-expressive (Kahn, 1990); to engage in group learning (Edmonson, 1999), and to engage in the process of change (Edmonson, 1999; Kahn, 1990; West, 1990). Since innovation in groups often involves trial-and-error learning and experimentation with alternative solutions and requires the sharing of information within the group, group psychological safety should be essential for innovation.
Therefore, Malaysian leaders have to provide mentally psychological safety for their followers and avoid any sort of punishment when they are representive innovative behavior, instead they should be motivated and encouraged to fulfill their job.
4. The determinants of Innovation on Work Groups
Not only Malaysian leaders can play important role on organizational innovation, but also group of followers can assist organizations much to implement innovative decisions effectively.
4.1Group support for Innovation
Group support for innovation is defined as "the expectation, approval, and practical support of attempts to introduce new and improved ways of doing things in the work environment" (West & Anderson, 1996, p. 686). Group support for innovation is the degree to which the group cooperatively allocates resources to the discussion, development, assessment, and implementation of creative ideas. Group resources include time, material, ideas, and information possessed by the group. Several field studies have found group support for innovation to be a relatively strong predictor of group innovation (Burningham & West, 1995; Pirola-Merlo & Mann, 2004; West & Anderson, 1996).
Group support can be achieved when individuals perceive their group or organizational climate to be supportive of creativity and innovation, then they will tend to engage more often in creative and innovative acts. A supportive climate is described in various ways including mutual trust among team members (Scott & Bruce, 1994; Tierney, 1999), cooperation within the group (Scott & Bruce, 1994; West, 1990), shared commitment to goals and projects (Amabile, et al., 1996; Siegel & Kaemmerer, 1978), and interpersonal support (Tierney, 1999; West, 1990). West (1990) defines group support for innovation as "the expectation, approval, and practical support of attempts to introduce new and improved ways of doing things in the work environment". Their measure included the "extent to which time, cooperation, verbal support, and resources were given by team members to implement new ideas and proposals" (West & Anderson, 1996, p. 686).
Thus, Malaysian employees , on the other hand, have to foster individual behaviors by which they participate fully in the group's task-oriented activities. That is once a group member initiates an innovation process by generating and proposing creative ideas, group members must support and cooperate with him/her sustain the process.
4.2 Individual innovativeness
Individual innovativeness was defined as the degree to which group members propose new and useful ideas to their group. The higher the overall level of individual innovativeness within the group, the greater should be the group's support for innovation. Taggar (2002) states "groups should perform best when they contain creative group members and effective team creativity-relevant processes" (p. 318). Similarly, West and Anderson (1996) stated that since the innovation process in teams begins with the generation of ideas by individuals, "a significant proportion of the variance in team innovation will therefore be explained by the proportion of individuals in the team with a high propensity to innovate" (p. 682). Research by Bunce and West (1995), Burningham and West (1995), and West and Anderson (1996) has provided support for this proposition. Although West and colleagues found a direct relationship between propensity to innovate and group innovation, it is likely that the level of individual innovativeness in the group will positively influence group support for innovation.
Therefore, Malaysian must develop innovation potentialities on their own and improve their related capabalities over time.
4.3 Social Information
The group's provision of social information can influence creative and innovative behavior. Social information from the group can promote creative action in groups when it increases a member's perceived need for change in a work role (Farr & Ford, 1990); when it promotes group members' self-efficacy for implementing change (Farr & Ford, 1990; Redmond, Mumford, & Teach, 1993); when it provides verbal and material support for change efforts (Farr & Ford, 1990; West & Farr, 1989); and when members provide relevant information and multiple perspectives for the individual to consider (Farr & Ford, 1990).
However, innovative individuals sometimes may choose to keep their ideas to themselves in order to avoid disapproval by the group or because they do not trust their own intuition (Asch, 1956; Nemeth & Owens, 1996; Nemeth & Staw, 1989). Pressures to conform to majority views are another reason why individuals may be unwilling to offer their ideas to the group. According to Jehn (1995), "group pressure toward agreement can also squelch the creativity need to complete nonroutine tasks effectively, because members will focus on building consensus rather than entertaining innovative ideas" (p. 260).
In this respect, Malaysian employees have to attempt to increase their social knowledge through watching media, reading books and another conventional and unconventional way of equipting to required knowlege needed for organizational improvement.
We believe this paper makes several contributions to our understanding of innovation in Malaysian working places. First, this paper provides determinants of innovation on organizations. As indicated above, much of the scant research on organization innovation has looked at the influence of factors, such as the firm's size, the market structure of firm, External and internal environmental factors. This paper addresses how Malaysian leaders can control these factors to make the given organization generally innovative.
Second, this paper provides the determinates of innovation on individual subordinates in Malaysian organizations. Much of the recent works on employees' creativity and innovation in organizations have emphasized the importance of social knowlege, leaders' particular behaviors and leadership style. We explained that transformational leadership is influencial and in line with triggering innovative behaviors in followers. For enhancing innovation in Malaysian organizations, leaders should commit themselves to this style of leadership and view problems in new ways as well as help their subordinates to develop their full potential. Also, we have elaborated the role of working groups in the process of innovation in Malaysia. we believe that in Malysian work groups, expectancy theory has an important role in explaining whether group members will commit their own resources in support of the innovation process.
Generally, we discuss that besides the importance of leadership influential behaviors as well as the leadership style that can stimulate innovation in subordinates, employees' innovative behaviors also is very important. Employees' innovative behaviors depend greatly on their interaction with others in the workplace and outside environment. In the other words, high-quality relationships among followers have a positive impact on the deep establishment of innovative behaviors in Malaysian organizations. Also the quality of the relationship between a leaders and followers is significant. This type of relationship, subsequently, brings many valuable outcomes such as subordinates' satisfaction, higher level of performance and organizational commitment.