Literature Review On Innovation Management Essay

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Innovation is defined as "the successful implementation of creative ideas within an organization" (Amabile, 1983, 1998; Amabile et al., 1996).It is also well said that one of the most important factors that affect innovation of an organization is leadership (Cummings and O'Connell, 1978). The influence of leaders on different organizational characteristics like culture, strategy, structure, reward systems, resources can also lead towards innovation (Woodman, Sawyer, and Griffin, 1993), or they can also directly affect the creativity of an employee (Oldham and Cummings, 1996), and motivation (Tierney, Farmer, and Graen, 1999). Leaders can play an important role in guiding and helping their followers to display high standard of originality at work (Shin and Zhou, 2003), and making the workplace which supports creativeness can also be established by leaders (Amabile et al., 2004; Amabile et al., 1996), and can create an organizational climate which serves as a guiding principle for more creative/innovative work processes (Scott and Bruce, 1994).

One of the important and indirect feature of innovation is that it should produce useful result (Gronhaug & Kaufman 1988;Padmore, Schuetze & Gibson 1997; Cooper 1998) . This staemnts enable us to distinguish the innovation from a invention because it's not necessary that invention always have practical application. When we talk in business sense, it is necessary that innovation should add to the performance of an organization.

Innovation can also be defined as concrete and practical steps that different organizations take to bring technological advancement ( Lundvall, B.Å. 1999).

Organizational innovation

The competition among the organization is increasing due to intense globalization. In order to be competitive the multinationals have recognized the innovation as fundamental constituent for survival and profitability in this technological advanced age.Organisational innovation is vibrant process in which new idea is generated or existing products are modified which results in products, services, processes or structures which are new for the organization. (Zhuang 1995; Nohria & Gulati 1996).

Organizational innovation is when organizations embrace the ideas or behaviors that are contemporary to the organizations. So organization innovation can be a new product, technology, service or management practices (Damanpour 1988, 1991, Daft& Becker 1978, Hage 1980, Hage & Aiken 1970, Zaltman, Duncan & Holbek 1973, Oerlemans et al 1998, Wood 1998, Zummato & O.Connor 1992).

The creation of an organization is an underlying element to the process of innovation.

(Van de Van et al1999). Innovation makes up the system which has produced it.

Schumpeter (1950) states that organizational does not include only new product or process but it also constitute new markets as well.

The relationship that exists between the organization and innovation is complicated, dynamic and manifold."Organizational innovation may be a necessary precondition for technological innovation, rather than treating this process uniformly as a response to external forces, and focuses on the processes of internal organizational reform and transformation that are necessary to create such preconditions (AliceLan2004)."

The term organizational innovation has been defined differently by different researchers and professors but the core concept behind the term "organizational innovation" is the same. Organizational innovation can be defined as to create valuable and useful new products and services within an organizational circumstances.(Woodman et al., 1993).

Two types of support is being provided to the organization to bring the innovation, 1) internal support, 2) External support. Internally the organisation may reinforce innovation by encouraging, acknowledging and giving rewards to the individuals providing creative and unique ideas and also giving them access to adequate resources like human resource, financial and time to pursue that idea. (Cohen and Levinthal, 1990; Woodman et al., 1993; Scott and Bruce, 1994).

The internal support perceived by the employees in their organization give rise to psychological perspective of innovation in their mind, which in turn will greatly impact their creative work. (Amabile et al., 1996). Scott and Bruce (1994) state that "climate represents signals individuals receive concerning organizational expectations for behavior and potential outcomes of behavior". That is what employees' perceive, that at the workplace, upto what extent the creativity is encouraged, and the extent to which organizational resources are allocated to supporting creativity, this will likely influence their innovative behavior.

The important source for the external innovation is the knowledge and the expertise gained from the external environment of organization. Woodman et al. (1993) says that important relative variable that's affects the innovation of organization is the exchange of information among the environment and the organization. Damanpour (1991), in his meta-analytical review of the organizational innovation studies, reported a positive association between external communication and innovation. Cohen and Levinthal (1990) suggested that together the external knowledge and the firm's own knowledge contributes to the critical source of organization innovation.

 (Joanna Barsh, Marla M. Capozzi, and Jonathan Davidson,2008) states that in one of the survey more than 70% of senior executives says that among the top three growth drivers for their company, innovation is one of that driver in nest 3 to 5 years. While some other executives believes that innovation and creativity is one of the most important way to speed up the change in today global business environment.


As my researches' main element is leadership so to understand that what is leadership and what is the impact of leadership on different variables is very important. Basic ideas of leadership are about power and its use, about control of resources, and how they are disposed, initiatives in social interpretation, sense making and shaping of meaning and the place of individuals in the context of social control options like the law (Peterson & Hunt, 1997). And well said by (John.F.Kennedy) "Courage - not complacency - is our need today. Leadership-not salesmanship. And the only valid test of leadership is the ability to lead. Our ends will not be won by rhetoric. We can have faith in the future only if we have faith in ourselves." In other context the Leadership has also been defined as "the ability of a superior to influence the behavior of Subordinates and persuade them to willingly follow a desired course of action" (Jolson et al., 1993).

( Amabile, T, Schatzel 2001) Leaders play vital role in providing the right direction to the creative and innovative ideas of its employees. Leaders are the one who are aware of that the creativity of employees should be motivated intrinsically or extrinsically. Leaders also play a significant role in setting devising the vision of the company and create the culture with in the organization that fosters or discourages the creativity of workers.

Transformational Leadership

(Northouse, 2001) states that transformational leadership can be defined as a process or method to change or transform the individual. It can also be referred as ability that makes people to want the change or to improve the existing system, product or service. It also involves carefully analyzing motives of associates then satisfying their needs and then rewarding and valuing them. (Bernard Bass, 1990) says that transformational leadership is one of the leadership style in which leaders extend and promote the interests of their workers by creating awareness and acceptance of the mission and rationale of the company and they motivate the workers to look beyond and work for the interest of the whole group instead of their self interest.

(Dr. Olga Epitropaki) states that it has been found that the relationship between the organizational performance and long term market share and customer satisfaction is positively related. (Burns, 1978) transformational leadership occurs when more than one people interacts with each other which enhances their motivation and morality. This style of leadership creates the transforming outcome by boosting the conduct and moral desire of the both the leader and followers as well.

(Boehnke et al. 1997) found that in one of the research it has been found that one of the most important reason of exceptional performance stated by most of the executives is the transformational leadership. From last few decades, transformational leadership came up with one of the most well-known theory of organizational behavior. It is in total contrast with the traditional style of leadership which focuses on the individual gain and providing the rewards for the hard work and effort being put by the workers but transformational leadership allows the leaders to give direction and provide inspiration to the employees effort by creating awareness and importance of the values, mission and outcomes of the organization. Transformational leaders play an important role in changing the perception regarding the goal content and perception. ( Donald P. Moynihan1, 2009)

(Avolio, Waldman, and Yammarino 1991)ther are four important characteristics that are associated with the transformational leadership which are denoted as 4Is. These four factors include idealized influence, inspirational motivation, intellectual stimulation, and individualized consideration.( Bernard M. Bassbruce J. Avolio, 2000) founds that transformational leadership has been very effective for motivating the workers(Rainey and Steinbauer (1999).transformational leadership is all about authorizing the employees so that they can take initiative and bring creative ideas in their job, stimulating to build their self confidence and strengthening their commitment to the organization. Transformational leaders play very important role in cultivating culture in an organization by paying attention to the priorities and apprehensions, sensibly responding to the emergency and crisis situations, acting as role model for workers and astute provision of rewards and clearly stating the success criteria.

Transformational leadership fosters capacity development and brings higher levels of personal commitment amongst 'followers' to organizational objectives. According to Bass (1990b, p. 21) transformational leaders is the one who plays significant role in broadening and raising the interests of its workers, when they have accepted and are working for the purpose and the mission of the organization. They encourage employees to look beyond their individual interest to the group interest. Both the commitment and increased competence leads to great effort which in turn improves the productivity (Barbuto, 2005; Leithwood & Jantzi, 2000; Spreitzer, Perttula & Xin, 2005).Transformational leaders elevate people from low levels of need, focussed on survival (following Maslow's hierarchy), to higher levels (Kelly, 2003; Yukl, 1989). They can also motivate their employees to go beyond their self interest and work for the collective benefit (Feinberg, Ostroff & Burke, 2005, p. 471) along with satisfying the individual needs they particularly urge them to higher level needs (e.g. to love, to learn, and to leave a legacy). Transformational leaders are believed to be stimulating devotion, appreciation, trust and esteem among their followers (Barbuto, 2005, p. 28) this type of leadership demands from the leaders to connect with followers as whole people instead of treating or confronting as an employee only. So they are the one accentuate the actualization of followers (Rice, 1993). This style of leadership is also believed to be philosophically changing the moral standadrs and beliefs by leaders as well as followers. It is said to involve leaders and followers raising one another's achievements, morality and motivations to levels that might otherwise have been impossible (Barnett, 2003; Chekwa, 2001; Crawford, Gould & Scott, 2003; Southwest Educational Development Laboratory, 2004).

Transformational leadership and Organizational Innovation

Transformational leaders are said to be stirring motivators and prompt thinkers which plays very important role in organizational innovation (Elkins and Keller, 2003). Transformational leaders encourage and promote unique and inventive ideas in their organization and the behaviors of these type of leaders is referred to as productivity and creativity boosters; individualized consideration "serves as a reward" for the followers, intellectual stimulation "enhances exploratory thinking", and inspirational motivation "provides encouragement into the idea generation process" (Sosik, Kahai, and Avolio, 1998). This behavior makes the transformational leaders as title holders or champions. (Howell and Higgins, 1990). Transformational leaders extend self-confidence, self-efficacy, and self-esteem of his/her followers (Bass, 1990). Leaders using this type of style are believed to be motivated and inspire their followers by their vision creates eagerness to perform above standards and motivates and encourage them to bring inventive ideas. This enhanced level of motivation among employees will give rise to increased organizational innovation.(Mumford et al., 2002). There are number studies and researches carried to study the positive relationship between transformational leaders and innovation of an organization (Keller, 1992; Waldman and Atwater, 1994). In these studies the main focus was kept on the R&D units and they were strongly related to organizational innovation. Now the focus of studies has been shifted to the relationship of transformational leadership on overall organizational innovation. For example, (Jung et al., 2003) conduct studies and found that substantial and positive relationship exists between the organizational innovation and transformational leadership. This was measured by the R&D expenses and number of patents that were obtained during the last few years.

(Jung, D. I., Chow, C., and Wu, A, (2003) conducted a study which broaden the literature on leadership and organizational innovation in two important ways. First, it proposes a consolidative model which relates the organizational innovation and transformational leadership directly as well as through intermediaries at organizational and environmental level. Second, this study measures the organizational innovation from multiple aspects that is more broad and complete as compare to the previous research. It considers R&D expenditure measures percent of gross revenue which has already been used in prior studies and it is considered as indicator showing the company's emphasis on innovation and inventiveness (Balkin et al., 2000). Data was collected from the employees of 53 Taiwanese firms. Three types of surveys were conducted to draw the results. The company's demographic characteristics and CEO's transformational leadership was measured through Survey A. Survey A was completed by three senior-level managers from each firm. The other set of managers (four mid- to senior-level managers per firm) completed Survey B that measured their companies' empowerment and organizational climate. The last group of managers (usually four mid- to senior-level managers per firm) was given Survey C that measured their perception of their companies' organizational structure. There were 146, 149, and 202 completed responses to Surveys A, B, and C, respectively. Transformational leadership was measured using (Bass and Avolio's, 1997) Multifactor Leadership Questionnaire (MLQ). Employees' perception of empowerment was measured using a 12-item scale developed by (Spreitzer, 1995). Existence of an innovation supporting organizational climate was measured with a 22-item scale originally developed by (Siegel and Kaemmerer, 1978). The data collected generally supported the expectation that transformational leadership increases organizational innovation.

(Lale Gumusluoglu and Arzu Ilsev, 2003) this study determines the internal and external support relative conditions for innovations which then influence the outcome of transformational leadership on organizational innovation. As it is assumed that the transformational leadership has a positive and direct relationship with the organizational innovation. This relationship id held back by the internal support for the innovation, while internal support is the climate of the organization motivating the creativity and proper allocation of resources to produce those ideas. The external support has also significant importance among this relationship. External support including the information collection and acquisition of resources is also important to restrain the relationship among transformational leadership and organizational innovation.

(Sosik, et al., 1998), says that when u infuse a vision within an organization it leads towards the creative output. (Shamir et al.1993) conducted a study in which finds out there is close between the level of motivation and performance.( De Jong 2006) finds out in his study that vision that is based on innovation and creativity enhance the inventive and creative work behavior among employees. Vision plays an important role in directing the activities and general guidelines for the prospective future of organization.

Transformational leaders promote inventive ideas which promote innovation within an organization (Sosik, kahai and Avolio, 1998). Followers are continuously encouraged and motivated by the leaders to work ahead of expectations which boost their level of motivation and self-esteem (Gumusluouglu and Ilsev, 2009; Mumford et al., 2002).

(Klenke 1994) transformational leaders together with information technology, has given rise new form of organization. The relationship between innovation and technology is not very clear because leaders' exhibits number of functional behaviors and there is also large range of information technologies. Both the information technology and leadership has mutual relationship; change in anyone demand the change in other as well. Brown (1994) hypothesized that in order to evolve technological organization transformational leaders are required. Collectively, we are moving into the era of accelerated change from controlled change. This accelerated change is ahead of control.

Howell and Higgins (1990a, 1990b, 1990c) argue that people which support innovation and creativity are more transformational as compare to the people who do not advocate innovation. In an organization the supporter of innovation makes key decision in an organization. They promote the better use of technology.

Crawford (1998), Crawford and Strohkirch (1997a, 1997b, 2000), and Crawford, Gould, and Scott (2003) established the argument that individual innovation is closely related to transformational leadership. They found that the transformational style of leadership more inventive and creative as compare to transactional and laissez-faire leaders. One of most important characteristic knowledge managers is innovation and creativity. The leader's ability to create and administer information and knowledge is the expression of innovation. (Howell & Higgins, 1990) says that transformational leaders are the one who can express exceptional and creative behavior and act as a role model for innovation in the organization. Howell said that "Because transformational leaders put more emphasis on articulate an appealing and challenging future vision, they can focus on increasing followers' intrinsic motivation to reach the future goal of innovation"

(Jung, Chow, & Wu (2003) say that transformational leaders have ability to assist exceptional and innovative thinking for their followers by presenting logical inspiration. While playing a role of mentor, transformational leaders can provide complete assistance in generating productive performance through creativity and innovation.

(Mavis Yi-Ching Chen ) states that an effective transformational leader has ability to induce organizational innovation by creating a vision that is exciting and can embrace innovation successfully. They carefully watch on changing environmental trends and communicate them frequently with the organizations, select and encourage change agents and finally they such organization culture which cultivate organizational innovation. (Hasenfeld, 1983) they have ability to enhance the organizational competence to innovate and invent by providing resources and energy for executing new ideas and legitimately allowing them to innovate activities. (Bass, 1985; Howell and Higgins, 1990) identified that transformational leadership is the ultimate style for endorsing innovation.

Transformational leaders expect for their followers to think beyond individual level and be superior performers and lead themselves (Bass, 1985). In order to motivate creativity among followers and to enhance their ability to bring novelty, transformational leaders use charisma, personal consideration, influence and intellectual motivation. They always try to unify employees and encourage them to turn the vision of an organization into reality (Bryman,1992). Transformational leaders play an important role in creating a vision that leads to a change and reducing the resistance to the change and at the same time encouraging and motivating followers to explore, attain and embrace new and different ways of doing work for the organization (Bass, 1998; Tichy & Ulrich, 1984).