Industrial Management & Data Systems

Organizational innovation management: An organization-wide perspective

Shui-Yee Wong Kwai-Sang Chin
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IMDS
107,9 Organizational innovation
management
An organization-wide perspective
1290
Shui-Yee Wong and Kwai-Sang Chin
Department of Manufacturing Engineering and Engineering Management,
City University of Hong Kong, Kowloon, Hong Kong, China

Abstract
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Purpose – Organizational innovation management (OIM) is one of the critical means to sustain
competitiveness in organizational innovation in the long term. Although literature in innovation
management has discussed the notions of OIM, an organization-wide OIM framework has not yet been
developed and validated. This project is thus carried out to develop and validate an organization-wide
OIM framework.
Design/methodology/approach – From an extensive review of literature, core values and concepts
of an OIM conceptual system are developed. Then, OIM critical factors are identified and validated by
questionnaires and interviews in the HK/PRD manufacturing industry.
Findings – The OIM critical factors are validated by examining the importance of OIM critical
factors and the relationship between company accomplishment in individual factors and performance
in organizational innovation. Also an organization-wide OIM hierarchical framework is formulated
based on the OIM factors, with an evaluation of the HK/PRD manufacturing industry.
Research limitations/implications – Although the identified critical OIM factors and the
developed OIM framework could cover all types of industries, this research has only been done in the
electronics and electrical consumer products manufacturing industry in HK/PRD region.
Practical implications – The developed organization-wide OIM hierarchical framework builds a
foundation for a comprehensive study in OIM. It provides a useful reference for managers to
understand critical success factors of OIM. Furthermore, this framework can be further applied for any
other organization-wide OIM-based management, such as OIM improvement programmes and OIM
assessment systems.
Originality/value – An organization-wide OIM framework is developed and validated.
Keywords Organizational innovation, Critical success factors, Hong Kong, China
Paper type Research paper

Introduction
Globalization intensifies competition all over the world. Businesses nowadays are not
just facing challenges from cost to quality. While an immutable product specification no
longer promises a gain in most of the consumer markets, gaining customer loyalty is a
great challenge. In order to satisfy their customer’s unlimited expectations, companies
need to orientate themselves to their customers’ wants, as well as latent needs, and as a
result provide products and services which are perceived to be valuable.
Becoming an innovative organization is a means to compete in this dynamic and
Industrial Management & Data changing business environment (Dooley and Sullivan, 2003). As revealed by several
Systems researchers in the field, innovation is one of the paths to maintaining growing and
Vol. 107 No. 9, 2007
pp. 1290-1315 promising organizational performance (Cottam et al., 2001). It is also pinpointed as an
q Emerald Group Publishing Limited essential element for sustaining competitiveness and ensuring an organization’s future
0263-5577
DOI 10.1108/02635570710833974 potential (Krause, 2004).
 In fact, achieving successful innovation is not simple for most organizations as it Organizational
innately cannot easily be interpreted (Dougherty and Hardy, 1996). A combination of innovation
innovative ideas and good organizational innovation management (OIM) is the key to
sustaining competitive organizational innovation in the long-term (Ahmed, 1998a; management
Adams et al., 2006). Although innovative ideas usually are incidentally brought up and
may differ from company to company, OIM is manageable and shares common ground
between companies. 1291
Owing to the critical role of OIM in competitive organizational innovation, a lot of
research has addressed OIM issues (Chanal, 2004; Huergo, 2006). Even though a
number of studies have been done, many organizations fail to manage organizational
innovation well and still suffer from an inability to sustain innovation over the
long-term (Ahmed, 1998a; Cormican and O’Sullivan, 2004). The main reason is that
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organizational innovation research has been done in an inconclusive and inconsistent

way, and is characterized by low levels of explanation (Cooper, 1998; Adams et al.,
2006). As a result, organizations fail in capturing ideas in a comprehensive view and so
they are unable to transform these into practical means.
Many OIM related studies have been conducted and the need for an OIM framework
is addressed in the literature (Verhaeghe and Kfir, 2002; Cormican and O’Sullivan,
2004). Most, however, only discuss the inadequacies of OIM issues in one or some
particular areas. A complete organization-wide view is not yet available. Adams et al.
(2006, p. 21) describes this view further:
It is difficult to identify a bounded body of literature in which a comprehensive discussion of
innovation measurement issues might be located . . . The consequence of this is the absence of
a holistic framework covering the range of activities required to turn ideas into useful and
marketable product . . .
In consideration of the recognized impact of some widely applied and influential
organization-wide management frameworks and on the corresponding topics on
the manufacturing industry, such as the management framework of ISO 9000 for
quality management excellence (Boys et al., 2005; Vouzas and Gotzamani, 2005) and
the management framework of the Malcolm Baldrige National Quality Award
(MBNQA) for performance excellence (Prybutok and Cutshall, 2004; BNQP, 2005), it is
believed that an organization-wide OIM framework will have an impact on competitive
organizational innovation (Adams et al., 2006). Furthermore, an organization-wide OIM
framework is believed to be advantageous in the pursuit of competitive organizational
innovation (Rothwell, 1992; Porter and Ketels et al., 2003), like the reference
frameworks for quality excellence (Boys et al., 2005; Vouzas and Gotzamani, 2005; IOS,
2006).
The research described in this paper therefore aims to develop an organization-wide
OIM framework that could provide a useful reference for managers in implementing
OIM. This paper attempts to present how the authors identify and validate a list of
critical factors and a management framework for organization-wide OIM.

Literature review
Definition of terms
Organizational innovation in this study is addressed as the development or adoption of
an idea or behaviuor into business operations that is new to the whole organization. It is
 IMDS the actualization of new technology or new administrative practices in terms of new
107,9 products or new processes. New products include tangible products and intangible
services and new processes include direct processes and support operations in an
organization. New technology and new administrative practices can either already
exist or be newly developed.
The overall concept of OIM has been discussed and focused on in much literature
1292 (Huergo, 2006). It is, however, difficult to find a single definition. As suggested by
Keegan and Turner (2002), management of innovative ideas is an important step
towards effective organizational innovation project management. OIM in this study is
addressed as a kind of managerial method, which provides an organization with an
underlying momentum for innovation, encouraging and facilitating the development of
innovative ideas in a company.
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Reviewing the recognized international reference management frameworks, a

generalized organization-wide management framework should be built on:
. fundamental core values and concepts;
.
critical factors of the particular management issues; and
.
an implementation system.

Furthermore, critical factors in an organization-wide perspective should be established

through using a complete list of related management issues in the particular area in an
organization, rather than a partial list related to a few items (BNQP, 2005; Wong, 2005;
EFQM, 2006; IOS, 2006).

Core values and concepts

The critical OIM factors are developed by firstly determining a set of core values and
concepts, which forms the basic philosophy of organization-wide OIM practice. These
values and concepts are the embedded behaviours found in innovative organizations.
Seven core values and concepts are identified, namely continuous innovation, system
adaptability, leadership, value of people, focus on customer, continuous learning and
use of knowledge, and are elaborated on as follows:
(1) Continuous innovation. One of the basic philosophies of OIM is to continuously
enhance and enrich the existing merits of the organization (Ahmed, 1998b).
Continuous innovation can happen radically or incrementally depending on the
extent of the changes. Integrating the concept of continuous innovation into an
organization’s mission or belief system is essential in establishing a clear
direction for a firm (Tang, 1998). Developing an innovative mindset for
managers, as well as employees, is beneficial to their company’s growth and
even survival (Wan et al., 2003). These organizations possess sufficient
mechanisms for support and dissemination of the concept of continuous
innovation into the entire organization (Tang, 1998; Chanal, 2004).
(2) System adaptability. Organizations deal with a dynamic environment and
change is inevitable. The ability of organizations to adapt to change is essential
for the successful management of innovation projects. System adaptability
refers to the company’s flexibility to accommodate changes and their ability to
cope with changes due to the development and implementation of innovative
ideas. Flexible project team structures (Lemon and Sahota, 2003), regulation of
 dynamic strategies (Guan and Ma, 2003) and the adoption of formal or informal Organizational
means of communication (Souitaris, 2002) are some examples for coping with innovation
the turbulent environment within a company.
(3) Leadership. This embraces purposeful events which with collective intervention
management
enable the job to get done (Borgelt and Falk, 2007). It is a strong predictor for the
realization of innovative ideas and management of organizational innovation
(Lee and Chang, 2006) as innovation begins with top management who believe 1293
organizational innovation is the way to survival. For example, top management
has to set directions, create values and establish expectations for the benefit of
the company (Tang, 1999). Top management with an effective leadership style
also creates an environment for innovation within the company. It should be
able to inspire and motivate the entire work force and encourage involvement,
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development and learning for the employees (Borgelt and Falk, 2007). Although
top management may not be highly involved with OIM, intrinsic involvement
through appropriate encouragement and support is also a good means to
facilitate innovation (Mohamed, 2002).
(4) Value of people. This addresses company attitudes towards human resources.
Human resources play a critical role in driving companies’ success as people are
the source of innovative ideas. As a result, human competence in an innovative
organization should be emphasized and focused on. People are the important
assets in organization innovation management. Their voices and ideas should
be heard and respected even though the ideas may not be able to make an
instant impact on the organization (Martins and Terblanche, 2003).
Furthermore, mutual trust should also be emphasized between a company
and its employees (Tang, 1999).
(5) Focus on customers. Every profit making company’s ultimate goal is to gain
profit from their products with a competitive margin. A strong market vision
ensures the organization knows the direction in which it is heading (Ong et al.,
2003). As market competition intensifies, understanding existing customer need
and forecasting future customer needs are essential in gaining customer loyalty.
Focus on the customer is therefore the underlying goal for management of
organizational innovation (Krause, 2004). The motivation for creating an
innovative culture (Lemon and Sahota, 2003), developing innovation strategy
(Ong et al., 2003) and acquiring external knowledge (Souitaris, 2002) is to create
something new and valuable to their existing or potential customers.
(6) Continuous learning. This has an important role in innovation since personal
creativity can be acquired and organizational innovation capabilities can be
enhanced through continuous learning. An organization’s stock of knowledge is
created, communicated and expanded through the continuous learning process
which is why innovative organizations provide on-the-job training and ongoing
and experimental learning to appropriate employees (Larsen et al., 1991). A
learning culture should be promoted in an innovative organization (Guan and
Ma, 2003) with continuous reviewing of different aspects of jobs as well as a
continuous learning process being emphasized (Chanal, 2004).
(7) Use of knowledge. This includes processes and practices concerned with the
creation, acquisition, capture, sharing and application of knowledge and skills
 IMDS (Swan et al., 1999). In fact, knowledge capabilities in a firm are based on
107,9 knowledge acquisition, integration and application. Management of
organizational innovation can be enhanced by a good knowledge
management system that is able to facilitate the capture of new information,
and interpret this for the organization (Prasracos et al., 2002) and maintain it in
knowledge bases (Chanal, 2004).
1294
OIM critical success factors
In order to realize the core values and concepts of OIM discussed before, critical
success factors of OIM implementation are developed accordingly (Wong and Chin,
2006b). These critical factors are those essential operational elements leading to the
successful implementation of a good OIM system. There are 16 critical factors
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identified through intensive literature review, as shown in Table I. Based on the

characteristics of the 16 factors, they can be categorized into three main OIM categories
and seven focus areas which are further developed under each OIM category, as shown
in Table I. This proposed categorization forms the basis for the development of a
hierarchical framework for the OIM critical factors. This will be verified in the
questionnaire survey and follow-up interviews and as a result, to formulate an OIM
hierarchical framework.

Organizational innovation performance indicators

Various management factors for organizational innovation have been linked with the
performance of organizational innovation in previous research (Damanpour, 1991;
Wan et al., 2003). The relationships between the proposed OIM critical factors and
organizational innovation performance (OIP) should also be discussed in order to
confirm the impact of the tentative OIM critical factors on OIP in practice. Multiple OIP
indicators are adopted to develop a set of measures to better demonstrate the actual
performance of organizational innovation in a company. Having evaluated several
indicators for performance measurement in organizational innovation, as shown in
Table II, several OIP approaches/indicators are selected finally and categorized into
three groups with respect to their properties.
The first group is “Rate of product innovation,” including:
.
number of product changed to total product;
.
change in sales (due to product change) to total sales; and
.
change in profit (due to product change) to total profit.

The second group is “Rate of process innovation,” including:

.
number of process changes to total processes; and
.
change in overall productivity due to product change.

The third group is “Technology indicators,” including:

.
percentage of expenditure on R&D to total sales;
.
number of technologies adopted externally; and
.
number of patents developed internally.
 Downloaded by UNIVERSITAET OSNABRUCK At 09:33 09 March 2016 (PT)

OIM factors Descriptions Relevant literature

Organizational Organizational culture and Culture of innovation Culture of innovation addresses Ahmed (1998b), Kramer et al.
infrastructure belief management of a set of widely (2003), Wan et al. (2003), and Yam
adopted values, norms and et al. (2004)
attitudes towards organizational
innovation
Other corporate culture Other corporate culture addresses Tang (1998), Guan and Ma (2003),
management of other areas of and Martins and Terblanche
organizational culture which (2003)
include the values, norms and
attitudes adopted throughout the
organization to facilitate
organizational innovation
Structural dimension for Structural complexity Structural complexity addresses Calantone et al. (2002), and
innovation management of patterns of the Lemon and Sahota (2003)
structure that an organization
employs so as to facilitate
organizational innovation
Distance of power Distance of power addresses Damanpour (1991), Moenaert et al.
management of distribution and (2000), and Mohamed (2002)
formalization of power under its
hierarchical structure
(continued)
innovation
management
Organizational

categories
critical factors and
Descriptions of OIM
1295

Table I.
 Downloaded by UNIVERSITAET OSNABRUCK At 09:33 09 March 2016 (PT)

107,9
IMDS

Table I.
1296
OIM factors Descriptions Relevant literature

Human resources Management leadership and Management leadership and Jung et al. (2003), Kramer et al.
competence commitment commitment addresses (2003), and Mumford and
management in managerial Licuanan et al. (2004)
characteristics, abilities and
attitudes that direct innovation
management
Employee capability and Employee capability and attitude Mascitelli (2000), and Souitaris
attitude addresses management of (2002)
essential elements for employees
in traits, abilities, attitudes,
commitment and job satisfaction
that result in organizational
innovation
Innovation policy Strategy for innovation Strategy development for Strategy development for Kramer et al. (2003),
management innovation innovation addresses andAlegre-Vidal et al. (2004)
management of the direction of
innovation strategy that
facilitates organizational
innovation
Strategy deployment for Strategy and deployment of Moenaert et al. (2000), and Yam
innovation innovation addresses et al. (2004)
management of an effective and
efficient implementation of
corresponding strategies in
actual organizational innovation
Support mechanism for Mechanism for resource Mechanism for resource Damanpour (1991), and Wan et al.
innovation management management addresses (2003)
management of the allocation of
resources that facilitates
organizational innovation
(continued)
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OIM factors Descriptions Relevant literature

Mechanism for recognition Mechanism for recognition and Ravichandran (2000), and Shelton
and tolerance tolerance addresses management and Darling (2003)
of a recognition and reward
system as well as tolerance of
ambiguity, failure and conflict
regarding organizational
innovation
Mechanism for continuous Mechanism for continuous Tang (1999), Mumford et al.
improvement improvement addresses (2002), and Chanal (2004)
management of revision and
improvement mechanisms for
former projects and current
projects that influence
organizational innovation
Knowledge Knowledge development Internal knowledge Internal knowledge development Tang (1998), and Chanal (2004)
management and acquisition development addresses management of the
development and exploration of
knowledge generated internally
for organizational innovation
External knowledge External knowledge acquisition Tang (1999), Souitaris (2001),
acquisition and exchange and exchange addresses Guan and Ma (2003), and Mason
management of external et al. (2004)
information influencing
organizational innovation in
terms of competition, market,
acquisition and the
communication of technology

(continued)
innovation
management
Organizational

1297

Table I.
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107,9
IMDS

Table I.
1298

OIM factors Descriptions Relevant literature

Knowledge dissemination Organizational learning Organizational learning Guan and Ma (2003)

and accumulation addresses management of
learning and education
mechanisms for organizational
innovation
Knowledge communication Knowledge communication and Carneiro (2000), and Rodan (2002)
and utilization utilization addresses
management of a communication
mechanism and the use of
knowledge in an organization
Knowledge accumulation Knowledge accumulation Tang (1998), Wan et al. (2003),
addresses management of a and Chanal (2004)
knowledge storage mechanism in
managing the flow of information
and technology and its effect on
organizational innovation
 Organizational
Approach/indicator Evaluation and selection Relevant literature
innovation
The number of The incremental/radical innovation is OECD (1997), Souitaris management
incrementally or radically simplified into product change only. (2001), Krause (2004)
innovative products Radical or incremental sometimes is quite
introduced subjective; it may be indistinguishable
from an organizational level if asked in 1299
the questionnaire. Furthermore, similar
questions are asked under process
innovation. Decision: accept with
modification, i.e. number of products
changed to total product; number of
process changes to total processes
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The percentage of current The incremental/radical innovation is OECD (1997), Souitaris

sales due to simplified into product change only. (2001), Caloghirou et al.
incrementally/radically Radical or incremental sometimes is quite (2004) and Krause (2004)
innovative products subjective; it may be indistinguishable
introduced in the last three from an organizational level if asked in
years the questionnaire. Furthermore, similar
questions are asked under process
innovation. As well, change in profit is
also focused on so as to determine the
actual benefit from the new product.
Decision: accept with modification, i.e.
change in sales (due to product change) to
total sales; change in profit (due to
product change) to total profit; change in
overall productivity due to product
change
Number of innovations Since, the definition of an innovation Nystorn et al. (2002)
introduced project varies from company to company,
it may not be a good question for
checking this kind of information by
questionnaire. Decision: reject
Time taken to adopt Time taken depends on project properties. Parjogo et al. (2007)
innovations It is not comparable from company to
company if the nature of project is
different. Decision: reject
Annual R&D expenditure R&D expenditure represents the Souitaris (2001), Jung et al.
as a percentage of gross commitment and sometimes the actual (2003), Krause (2004)
revenues performance of organizational
innovation. Decision: accept, i.e.
percentage of expenditure on R&D to
total sales
Number of technological Number of technologies adopted is a kind Brandyberry (2003)
adoptions in the last year of indicator of technological performance.
Decision: accept, i.e. number of
technologies adopted externally
The number of patents in The number of patents obtained does Kivimaki et al. (2000) and
the organization show the achievement of technological Jung et al. (2003)
performance in a company. Decision: Table II.
accept, i.e. number of patents developed Selection of OIP
internally indicators
 IMDS Additionally, the (9) overall benefit from organizational innovation is also used in order
107,9 to get the “overall picture” of a company’s satisfaction in their performance in
organizational innovation.

Research methodology
1300 Survey design
To validate the identified critical factors described above, survey studies were
conducted to examine the importance of OIM critical factors and the relationship
between OIM and OIP by questionnaire and company interviews.
The questionnaire design is divided into three main sections. Company profile and
some company background information (e.g. location, type of ownership, operation
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mode and number of employees, major products, percentage of education level,

respondents’ position, working experience, contact phone, and e-mail) are obtained in
the first section. The meaning of OIM factors are outlined and explained in the second
section of the questionnaire. This section has two main focuses. The first is to obtain
ratings for the factor importance of OIM critical factors (FI of OIM critical factors)
based on company experience and the second is to obtain ratings for company
accomplishment in OIM critical factors (CA of OIM critical factors) based on a
company’s situation. For this questionnaire, a seven-point itemized rating scale is
adopted in the second section of the questionnaire. In addition, items in not important
(NI) and not applicable (NA) are added to the ratings of factor importance and company
accomplishment, respectively. In order to determine the existence of any OIM factors
other than the suggested factors, any other factor is asked in the questionnaire.
Similarly, respondents can give ratings for these “additional OIM factors” depending
on their situations. In the third section of the questionnaire, the measurements of OIP
indicators are obtained for the respondent company. Both objective figures in actual
achievement and subjective judgments of the performance satisfaction level are
obtained. A seven-point itemized rating scale is adopted in third section. The opening
paragraphs explain the aim, definition of organizational innovation, and the
confidentiality of the questionnaire. The authors’ appreciation is also expressed in
the latter paragraphs. Finally, the contact information, including company name,
company address and contact person is acquired. The Appendix shows the main
content design of the questionnaire.
A semi-open interview is adopted for the company interviews. The general
interview content design requests the interviewees to:
.
indicate the importance of each of the OIM factors in competitive organizational
innovation;
.
explain the relationships between each OIM factor and organizational innovation
performance indicators; and
.
evaluate the OIM hierarchical framework.

Furthermore:
.
an evaluation of the OIM situation in the HK/PRD industry; and
.
suggestions for possible best practices that cultivate organizational innovation
for each factor are also gleaned from the interviews.
 Generally speaking, the total time spent for each interview was about one-and-a-half to Organizational
two hours.
innovation
Data collection procedure management
The population of the survey companies is from the light industry in Hong
Kong/Pearl River Delta (HK/PRD) in China with headquarters or regional offices
located in Hong Kong. According to the statistics report from the Census and Statistics 1301
Department (2004), the total number of established manufacturing companies was
around 16,000 up to December. The target respondents of the questionnaire, Hong
Kong-based PRD manufacturers were selected from the Hong Kong Directory at:
hkenterprise.com from the Hong Kong Trade Development Council. The database up
to March 2005 provided 100,000 Hong Kong business contacts of different business
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natures, including manufacturers, buying offices, service companies, etc. (Hong Kong
Directory, 2005). The selection of the target respondent was narrowed down into the
categories of manufacturer of electronics and electrical products.
When deciding the sample size, the level of precision, the confidence level and
degree of variability were taken into account. The level of precision, or sampling error,
is the range in which the true value of the population is estimated to be. The confidence
level, for example 95 percent confidence level, implies that 95 out of 100 samples will
have the true population value within the range of precision specified. Degree of
variability refers to the distribution of attributes in the population. While a proportion
of 0.5 indicates the maximum variability in a population, it is commonly used in
determining a more conservative sample size (Israel, 1992). A target of 201 valid
responses is required in order to gain a 95 percent confidence level, p ¼ 0.5 and
a ^ /2 7 percent precision level for the industry. To compensate for the risk of
non-response, the total number of companies approached in the questionnaire was
around 2,100 with an assumption of a usual response rate of around 10 percent for
conducting a questionnaire survey of HK/PRD firms (Landry et al., 2005).
The questionnaire was firstly verified by four experienced advisers in both the
industry and academic field. Two advisers are qualified associate professors in the
field of innovation management in Hong Kong and China. One is completing an
engineering doctorate degree with more than ten years’ solid experience in the industry
with proven records in management of organizational change for innovative
organization and another is a guest speaker in the City University of Hong Kong with
more than 15 years solid experience in management consultancy to the manufacturing
industry. Improvement and modification of the questionnaire, therefore, was done by
revision and evaluation with the advisers.
Questionnaires were finally sent in 2005 as both mail survey and web survey to
around 2,100 manufacturing companies in the HK/PRD. With the careful screening
process, the total number of returns was 209 (Response rate: , 10 percent). The
respondents were mainly directors, departmental managers, and senior engineers from
the companies contacted. Finally, a 95 percent confidence level, p ¼ 0.5 and
a ^ 7 percent precision level for the HK/PRD industry was obtained. The general
information on the questionnaire is listed in Table III.
Interviews were used to ensure that the survey findings were not only statistically
well proven, but also the explanations were rational and reasonable in practice. The
validation of OIM critical factors can be done by discussing their impact on
organizational innovation and their relationship with OIP. As well, any further OIM
 IMDS Regions HK/PRD
107,9
Estimated population ,16,000
Geographical basis Hong Kong/Pearl River Delta (HK/PRD) in China with
headquarters or regional offices located in Hong Kong
No. of companies contacted ,2,100
No. of valid responses 209 manufacturing companies
1302 Response rate ,10 percent
Collection method Mail and online survey
Confidence level, precision level 95 percent confidence level, p ¼ 0.5 and a ^ 7 percent precision
and degree of variability level
Table III. Analysis unit Enterprise
Questionnaire response Year of study 2005
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information Respondents Mainly directors, departmental managers, senior engineers, . . . etc.

factor in organization was sought in the interview. Face-to-face interviews were

employed because the interactions between the interviewer and respondents could be
facilitated. This ensured that the responses were properly understood and without
doubts and any underlying problems that may have been experienced by the
respondents could be more accurately detected using the face-to-face interview.
Seven interviews were conducted. The interviewees satisfied the following
requirements, namely:
.
target companies belong to the light manufacturing industry – the electronics
and electrical industry in the region, i.e. the targeted group of this study;
.
interviewees possess solid experience and background in innovation
management with at least ten years of experience in the managerial level; and
.
interviewees should understand thoroughly the company and industry situation
and companies may have obtained significant recognition in innovation related
achievement from the industry, e.g. awardees of the Hong Kong Awards for
Industry, which recognizes the outstanding achievements of Hong Kong-based
enterprises in their move towards higher technology and higher value-added
activities.

Professional views from the industry were also sought in order to capture ideas in
another perspective. The tight selection criteria ensured that the selected companies
and professionals had a trustworthy performance record and were reputable in
innovation management within the industry. Hence, they are credible in validating the
OIM critical factors and hierarchical framework.

Result and discussion

Validation of OIM critical factors
The impact of the OIM critical factors on organizational innovation is confirmed by
examining their factor importance in OIM critical factors (FI in OIM critical factors)
and the relationship between company accomplishment in OIM critical factors (CA in
OIM critical factors) and OIP indicators. The acceptance level of FI in OIM critical
 factors is designed to be greater than the mid-point value of the scale (greater than four) Organizational
so as to show the tendency and confirm the importance of the OIM factors. From the innovation
survey result, the ranking scores of FI in OIM critical factors illustrate that those
factors are important for organizational innovation (Wong and Chin, 2006a). As shown management
in Table IV, the means for factor importance (FI) in the OIM critical factors are ranged
from 5.34 to 5.99 with a fairly stable standard deviation ranging from 1.07 to 1.32.
Furthermore, the relationship between OIM and OIP indicators is examined in order 1303
to substantiate the impact of the set of OIM critical factors on the performance of
organizational innovation. Factor analysis is able to reduce the number of variables, if
the statistical requirements of the variables are fulfilled. A reduction of variables is
carried out for CA in OIM critical factors and OIP indicators.
Table V shows that the factor loadings conform to the recommended minimum
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0.7 (between 0.793 and 0.944) and the percentage of total variance explained in each
group is greater than the recommended 60 percent. After grouping the testing
variables, correlation analysis is carried out to investigate the relationship between
variables in OIM critical factors and OIP indicators as displayed in Table VI.
In Table VI, Spearman correlations range from 0.433 to 0.540 with p # 0.001.
Significant positive relationships are found between CA in OIM and OIP. A positive
relationship betweens OIM critical factors and OIP indicators is found as a result
which confirms the impact of the OIM factors on the performance of organizational
innovation in practice.
In addition to the support from the questionnaire survey results, company
interviews were carried out in the HK/PRD regions to further examine and confirm the
questionnaire findings. From the discussion results of the interviews, companies
generally agree with the importance of the OIM critical factors for competitive
organizational innovation and with the positive linkage between company
accomplishment in OIM critical factors and OIP indicators. Furthermore, they also

Factor importance (FI in OIM critical factors) Mean SD

Culture of innovation 5.64 1.28

Other corporate culture 5.35 1.30
Structural complexity 5.42 1.26
Distance of power 5.34 1.28
Management leadership and commitment 5.99 1.07
Employee capability and attitude 5.82 1.12
Strategy development for innovation 5.78 1.18
Strategy deployment for innovation 5.50 1.15
Mechanism for resource management 5.42 1.13
Mechanism for recognition and tolerance 5.45 1.16
Mechanism for continuous improvement 5.72 1.11
Internal knowledge development 5.72 1.08
External knowledge acquisition and exchange 5.71 1.12
Organizational learning 5.46 1.36 Table IV.
Knowledge communication and utilization 5.40 1.17 Mean, standard deviation
Knowledge accumulation 5.57 1.32 of FI in OIM critical
N ¼ 209 factors
 IMDS Eigenvalue/variance
107,9 Constructs Factor loading explained (percent) Cronbach a

Organizational infrastructure 4.121/68.72 0.908

Culture of innovation 0.830
Other corporate culture 0.793
Structural complexity 0.845
1304 Distance of power 0.826
Management leadership and commitment 0.848
Employee capability and attitude 0.829
Innovation policy management 3.706/74.13 0.912
Strategy development for innovation 0.876
Strategy deployment for innovation 0.876
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Mechanism for resource management 0.859

Mechanism for recognition and tolerance 0.815
Mechanism for continuous improvement 0.877
Knowledge development and acquisition 3.596/71.92 0.901
Internal knowledge development 0.867
External knowledge acquisition and exchange 0.818
Organizational learning 0.859
Knowledge communication and utilization 0.881
Knowledge accumulation 0.814
Rate of product innovation 2.342/78.07 0.859
PSL of number of product changed to total
product 0.857
PSL of change in sales (due to product change) to
total sales 0.928
PSL of change in profit (due to product change) to
total profit 0.864
Rate of process innovation 1.782/89.11 0.878
PSL of number of process changes to total
processes 0.944
PSL of change in overall productivity due to
product change 0.944
Technology indicator 2.181/73.69 0.813
PSL of percentage of expenditure on R&D to total
Table V. sales 0.814
Results of factor analysis PSL of number of technologies adopted externally 0.830
for CA in OIM critical PSL of number of patents developed internally 0.910
factors and OIP
indicators Notes: KMO test – 0.500 2 0.762; Bartlett’s test – Sig.: 0.000

agree that the OIM critical factors can be considered to be organization-wide

and complete. On one hand, the identification of the OIM critical factors is made by an
extensive review of literature, and on the other, no more OIM factors become evident
from the questionnaire and company interviews.
As a result, a set of organization-wide OIM critical factors is successfully confirmed.
While the development of OIM critical factors is mostly based on the literature of
innovation management, the above result verifies that the OIM critical factors are the
important management factors for organizational innovation and have a significant
positive relationship with the actual performance of organizational innovation.
 Evaluation of OIM hierarchical framework Organizational
With the OIM critical factors validated, the evaluation of the OIM hierarchical innovation
framework is carried out. Factor analysis is a multivariate statistical method that
identifies the extent to which the responses to the items have common variances management
(Joseph and Hair, 2006). By using confirmatory factor analysis, the grouping of the
OIM framework can be evaluated (Prybutok and Cutshall, 2004). As suggested by
Marcoulides and Hershberger (1997), one of the possible testing methods for deciding 1305
the grouping of variables is to examine the proportion of contribution by a factor. One
of the key points that should be noted is that judgment should be based on the
reasonableness of the number of factors and their potential interpretation (Marcoulides
and Hershberger, 1997). Therefore, the formulation of the OIM hierarchical framework
is examined with respect to the proposed structure, as shown in Table I. This ensures
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that the judgment that formulates this OIM hierarchical model is confirmed not only by
statistical findings, but also by the rationale of their interpretation.
The basic assumptions for the use of factor analysis in this study are listed as
follows, namely no selection bias/proper specification (i.e. relatively broad coverage of
industry and random selection in the same population), interval data (i.e. ordinal data is
assumed to be interval), moderate to moderate-high intercorrelations without
multi-collinearity (i.e. Barlett’s test of sphericity and KMO statistics are examined.
Barlett’s test of sphericity demonstrates sufficiently high values at p # 0.000. As
suggested, the minimum standard of KMO should be 0.50 or higher to proceed with
factor analysis (Joseph and Hair, 2006), and the total number of sample should be
adequate (i.e. as suggested, there must be at least more cases than factors which is
confirmed in this study) (Garson, 2006).
As shown in Tables V and VII, the factor loadings in each group conform to the
recommended minimum 0.7 (between 0.793 and 0.961) and the percentage of total
variance explained in each group is greater than the recommended 60 percent. Barlett’s
test of sphericity demonstrated sufficiently high values at p # 0.000. The KMO test
result lies between 0.500 and 0.882 which conforms to the suggested minimum
standard of 0.50 required to proceed with factor analysis (Joseph and Hair, 2006). As
well, evaluation of the OIM hierarchical framework was done in the company
interviews. The OIM hierarchical framework can be regarded as rational and
reasonable in the practical OIM situation for a company. The OIM hierarchical
framework is successfully formulated and the levels of hierarchy are listed in
Table VIII.

Rate of
Rate of product process Technology Overall
Variables innovation innovation indicators benefit

Mean 4.17 4.08 3.70 4.46

Table VI.
SD 1.20 1.18 1.25 1.38
Mean, standard deviation
Organizational infrastructure 4.22 1.17 0.470 * 0.444 * 0.473 * 0.419 *
and Spearman
Innovation policy management 4.14 1.17 0.454 * 0.437 * 0.492 * 0.433 *
correlations of company
Knowledge management 4.12 1.19 0.500 * 0.495 * 0.540 * 0.479 *
accomplishment (CA) in
Note: *p # 0.001 OIM and OIP
 IMDS Factor Eigenvalue/
107,9 Constructs Loading variance explained (percent) Cronbach a

Organizational culture and belief 1.733/86.64 0.846

Culture of innovation 0.933
Other corporate culture 0.929
1306 Structural dimension for innovation 1.765/88.26 0.867
Structural complexity 0.943
Distance of power 0.936
Human resource competence 1.715/85.75 0.834
Management leadership and commitment 0.933
Employee capability and attitude 0.919
Strategy for innovation 1.833/91.63 0.908
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Strategy development for innovation 0.961

Strategy deployment for innovation 0.953
Support mechanism for innovation 2.349/78.31 0.861
Mechanism for resource management 0.886
Mechanism for recognition and tolerance 0.884
Mechanism for continuous improvement 0.905
Knowledge development and acquisition 1.684/84.19 0.812
Internal knowledge development 0.940
External knowledge acquisition and exchange 0.894
Knowledge dissemination and accumulation 2.319/77.30 0.851
Organizational learning 0.878
Knowledge communication and utilization 0.897
Table VII. Knowledge accumulation 0.862
Results of factor analysis
in CA in OIM factors Notes: KMO test – 0.500 2 0.882, Bartlett’s test – Sig.: 0.000

Case study
Evaluation of recognition of OIM critical factors and hierarchical framework
The developed OIM hierarchical framework is further examined in a case study in the
HK/PRD manufacturing industry. The experience of management of organizational
innovation in the selected case is discussed. The case company has had five successive
years of award from Hong Kong Awards for Industries, Consumer Product Design
Category, from 2000 to 2005 and has been active in Hong Kong since 1950 s. This is a
multi-national company and is considered a large manufacturing company in the
HK/PRD region. Recently, they have evolved into a market-driven and
service-orientated organization. The company’s portfolio includes a diverse range of
electronics goods for businesses as well as end-consumers. They design and
manufacture lighting products, domestic appliances and high-end consumer
electronics. For business products and solutions, their scope of product is further
widened by offering energy efficient lighting solutions, communication systems, and
medical systems.
“Customer focus is the origin of innovation” might be too simplistic a term to
demonstrate the whole concept of organizational innovation in this company. But, it
does convey an important message that the customer is the main focus of organizational
innovation. While strengthening their brand in the minds of customers, their products
have demonstrated that they focus on answering customers’ needs by simplicity, i.e.
committing to “make technology easier for customers’ unique needs” with advanced
 Organizational
First level of hierarchy Second level of hierarchy Third level of hierarchy
innovation
Organizational Organizational culture and belief Culture of innovation management
infrastructure Other corporate culture
Structural dimension for innovation Structural complexity
Distance of power
Human resources competence Management leadership and 1307
commitment
Employee capability and attitude
Innovation policy Strategy for innovation Strategy development for innovation
management Strategy deployment for innovation
Support mechanism for innovation Mechanism for resource management
Mechanism for recognition and
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tolerance
Mechanism for continuous
improvement
Knowledge Knowledge development and Internal knowledge development
management acquisition External knowledge acquisition and
exchange
Knowledge dissemination and Organizational learning
accumulation Knowledge communication and Table VIII.
utilization OIM hierarchical
Knowledge accumulation framework

product function. Regarding their experience of innovation management, management

of organizational innovation is and has been a process of building up an appropriate
culture, devising constructive policies and setting up support systems. In this process,
the involvement and integration of different OIM critical factors from the developed OIM
hierarchical framework is observed.
Organizational infrastructure. Organizational innovation is embedded in the
environment and culture of this company. It is what employees bear in mind and
integrate into their daily operations. The message of continuous innovation is well
communicated and gives direction to all people within the organization. Shared values
in terms of openness, teamwork, participation and continuous improvement are well
understood in this case company.
They believe that one of the best methods to encourage organizational innovation in
a project team is by a matrix structure. Under this structure, people from diversified
backgrounds are able to generate high-quality solutions. Although this case company
is a large-sized company, the distance between top management and employees is
close, e.g. by means of breakfast meetings, e-mails, informal activities, etc.
Top management in the studied company respect employees’ work and creativity and
provide opportunities for employees to voice their ideas. The management listens to their
views and gives sufficient attention to any potential ideas. Employees are competent and
have a positive attitude towards their work. Diversified backgrounds in specialized areas
and professionalism can be found in the company because they believe that a mixture of
people is better able to facilitate the generation of innovative ideas.
Innovation policy management. Strategies for initiating innovation projects are
developed depending on the actual and potential market needs. It is understood that
 IMDS innovation projects sometimes are risky. In the period of new product development,
107,9 several stages of pilot run and customer needs’ evaluation would be carried out in order
to ensure that their innovative products are on the right track.
The company understands their existing and potential market well. They
comprehend their customers’ wants and hence set up their priorities and the direction
of their projects accordingly. Their resources are allocated depending on the actual
1308 business needs. For well performing employees, recognition through publicity is one of
the means to praise their achievements. For the sake of a better understanding of the
projects’ progress, regular project revision will be carried out and a review report will
be sent to the relevant person for follow up and for future reference.
Knowledge management. Knowledge development strategy in this case company
depends on the potential impact of the technologies on the company. They invest in
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special techniques in-house which are strategically essential to the industry and exploit
and acquire other technologies externally, e.g. collaboration projects with universities,
knowledge exchange with business partners, etc.
Through annual appraisal, top management and employees figure out targets for
the year for employees to achieve. These targets could be directly or indirectly related
to business operations. Regular seminars, conferences, meetings, communication
boards, e-mails and an internal web page are some of the means to facilitating their
internal communication. A knowledge database is maintained which collects and
shares the important information throughout the company.
Evaluation of OIM implementation system. In the case study, it is observed that the
OIM focus areas, namely, organizational culture and belief, structural dimension of
innovation and human resources competences, strategy for innovation and support
mechanisms for innovation, knowledge development and acquisition and knowledge
dissemination and accumulation, as listed in Table I, are linked as per the system of
implementation of organizational innovation shown in Figure 1.
The OIM implementation system connects and integrates the OIM critical factors to
their corresponding focus areas. For the organizational environment, there is an OIM
system (dot line) which is comprised of the OIM categories and OIM focus areas. The
categories and focus areas are connected and affect each other through company OIM
practices. With the support and integration of the OIM focus areas, the OIM system
facilitates the development of innovative ideas into action plans. Through action plans,
the actual achievement of organizational innovation can be accomplished. The
information obtained from the realized plan will be feedback into the knowledge
management categories to further knowledge development and acquisition. Thereby,
review can be conducted through the OIM system. In addition, some external
information (e.g. market situation, competition, product trend, etc.) will also be
acquired, disseminated and accumulated through the system. Important information
will be transmitted to knowledge management category which further supports
decisions for other OIM focus areas in the system (e.g. new market information may
change the company innovation strategy, to capture trends in technology, companies
may require different varieties of human resource competence in the company, etc).
This system, although it still needs more research to generalize it for the entire
industry, provides a reference for the HK/PRD manufacturers to implement the OIM
critical factors.
 Organization
Organizational
innovation
Internal management
Innovation Policy Organizational Environment
Management Infrastructure

1309
Support Structural
Human
Mechanisms Dimension
Resources
for of
Competences
Innovation Innovation

Organizational Innovation
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Organizational

Achievement of
Strategy for
Culture and
Innovation
Belief

Action Plans
Knowledge
Knowledge Management
Dissemination
and
Accumulation

Knowledge
Development
and
Acquisition Figure 1.
External OIM implementation
Environment system

Managerial implications for organizational innovation management

A foundation for a comprehensive study in OIM is established based on the identified
and validated critical OIM factors and the organization-wide OIM hierarchical
framework, as well as the OIM implementation system. This foundation can be applied
to any other area of research in organization-wide OIM. Furthermore, this study has
some implications for the facilitation of management of organizational innovation in
the academic arena, the industry, government and professional bodies.

Promotion of OIM in the industry

Very limited research has been done in the area of OIM in the HK/PRD manufacturing
industry. From the results of the company interviews, a clearer picture of the situation
of OIM in the region is obtained. Similar to the global trend in light industry, for
organizational innovation, in terms of product and technology, it is important to the
HK/PRD industry to be competitive in the ever-changing environment. However,
management of organizational innovation is often lacking. It is observed from the
 IMDS interviewed companies that a number of manufacturing companies in the HK/PRD
107,9 region have insufficient commitment towards OIM as monetary benefit from OIM
sometimes cannot be seen immediately. Even though some top management in these
companies may comprehend the importance of OIM and may possess enough
commitment towards OIM, they lack an organization-wide OIM concept and hence
have difficulties in identifying improvement areas for OIM in a complete picture.
1310 Furthermore, there is a lack of tools or assistance to support the implementation of
OIM in manufacturing companies in the HK/PRD manufacturing industry.
To deal with the above situation, some suggestions are provided based on this
organization-wide OIM study. These suggestions not only are suitable for the HK/PRD
industry, but also could inspire companies in other locations which may need to improve
OIM implementation. Firstly, the OIM critical factors and OIM hierarchical framework are
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able to provide a reference for managers to understand critical success factors of OIM
within a complete picture in their company. Secondly, OIM improvement programmes, for
example seminars, training, workshops or booklets from governmental statutory bodies,
universities, professional associations, can be further developed to disseminate the
importance of OIM to the industry. Thirdly, some OIM tools, e.g. OIM assessment scheme,
could be established in an organization-wide perspective in order to build up companies’
OIM capability. Fourthly, successful companies in the industry can share their success
stories in OIM with other companies in a more comprehensive picture with reference to the
OIM hierarchical framework. The best performers do not only foster the growth of the
latecomers, but also fulfill their social responsibilities towards the community.

Motivation for organizational innovation management scheme

To further facilitate the implementation of OIM in the industry, it is suggested that an
OIM scheme which is an assessment for OIM implementation achievement can be
established based on the developed organization-wide OIM hierarchical framework.
Assessment is able to facilitate the continuous development of management issues in
an organizational environment. This can identify gaps between current and desired
achievement, problems and needs, and provide information that can be used in
developing action plans to improve performance and is believed to be a critical means
to provide some effective tools for OIM assessment in the region.
It is plausible that certain OIM critical factors may have a larger impact on the
competitive organizational innovation than others. Similar to the framework of
MBNQA, priority weights, for example by the Analytical Hierarchy Process, could be
further assigned to the OIM critical factors. By developing the assessment check items
and knowledge bases of good OIM practices in each factor, the OIM scheme can be
developed. It is expected that the scheme could practically help companies to assess the
managerial practices of organizational innovation in the industry, to figure out
improvement directions for OIM, and to understand the benchmark situation for OIM
practices across the industry.

Conclusion
The identified and validated critical OIM factors and the organization-wide OIM
hierarchical framework, as well as the observed OIM implementation system build a
foundation for a comprehensive study in OIM. This framework can be applied as a
foundation to any other study in the area of organization-wide OIM. In addition, it provides
 a useful reference for managers to understand critical success factors of OIM within a Organizational
complete picture. By applying it to OIM improvement programmes, this framework is able innovation
to practically help organizations to facilitate their OIM implementation. As well, a
competitive OIM scheme, which provides a series of measurement tools for the management
manufacturing industry to determine their status in managerial practices of
organizational innovation, would be established. By further assigning priority weights
and developing the assessment check items and knowledge bases of good OIM practices of 1311
each factor, the OIM assessment system can be developed. These OIM assessment
systems could practically help companies to monitor and evaluate their OIM practices. By
comparing their existing situation with the desired situation, OIM shortcomings can be
diagnosed and potential OIM improvement areas can be figured out.
This study covered the light industry, i.e. the electronics and electrical consumer
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products manufacturing industry, in HK/PRD region. To obtain a wider validity of the

instrument, similar studies are being undertaken across different locations, such as
Mainland China (Shanghai/Yangtze River Delta, Beijing/Beijing, Tianjin and
Tangshan regions) and Taiwan area and a comparative study in OIM situations
across different locations is expected.

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 Appendix. Questionnaire design Organizational
Section 1: Company Profile innovation
Location for Production plant ? Guangdong ? Hong Kong ? Shanghai ? Beijing ? Not applicable ? Others: ________
Ownership ? Domestic Funded Enterprise management
? State-owned Enterprise ? Collective-owned Enterprise
? Private Enterprise ? Others: ___________________
? Enterprises with Funds from Hong Kong, Macau and Taiwan
? Foreign Funded Enterprise
? Others: __________________ 1315
Operation mode ? Original Equipment Manufacturer ? Original Design Manufacturer
? Original Brand Manufacturer ? Others: __________
Major Product(s)
Number of Employees Management: ____ ; R & D: ____ ; Clerical: ____ ; Worker: ____; Others: _____
Management Undergraduate Degree / Diploma or above:___%;
% of Education Level Postgraduate degree or above :___%
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R&D Undergraduate Degree / Diploma or above:___%;

Postgraduate degree or above :___%
Position of Respondent
Year of Experience ? < 5 Years ? 5 - 10 Years ? 10 – 15 Years ? > 15 Years
Email and Phone

Section 2: Organizational Innovation Management Factors

(1) Based on Company Experience, please indicate the importance ofeach factor.
(2) Based on Company Situation, please indicate the company accomplishment of each factor.
Internal Factors influencing (1) Factor (2) Company
Organizational Innovation Importance Accomplishment
Item NI Weak Strong NA Low High
2A Culture for Innovation 0 1 2 3 4 5 6 7 0 1 2 3 4 5 6 7
2B Other Corporate Culture 0 1 2 3 4 5 6 7 0 1 2 3 4 5 6 7
2C Structural Complexity 0 1 2 3 4 5 6 7 0 1 2 3 4 5 6 7
2D Distance of Power 0 1 2 3 4 5 6 7 0 1 2 3 4 5 6 7
…

2P Knowledge Accumulation 0 1 2 3 4 5 6 7 0 1 2 3 4 5 6 7
2Q Any other factor(s):____________ 0 1 2 3 4 5 6 7 0 1 2 3 4 5 6 7
2R ____________________________ 0 1 2 3 4 5 6 7 0 1 2 3 4 5 6 7
2S ____________________________ 0 1 2 3 4 5 6 7 0 1 2 3 4 5 6 7

Section 3: Organizational Innovation Performance

Based on the company situation in the last two years, please indicate the actual achievements and the performance
satisfaction level for the following items.
(1) (2) Performance
Achieved Satisfaction Level
Weak Strong
No. of product changed to total product % 1 2 3 4 5 6 7
Change in sales (due to product change) to total sales +/- % 1 2 3 4 5 6 7
Change in profit (due to product changed) to total profit +/- % 1 2 3 4 5 6 7
No. of process changed to total process % 1 2 3 4 5 6 7
Change in overall productivity due to product change +/- % 1 2 3 4 5 6 7
% of expenditure on R&D to total sales 1 2 3 4 5 6 7
Number of technologies adopted externally 1 2 3 4 5 6 7
Number of patents developed internally 1 2 3 4 5 6 7
How much did your organization benefit from organizational 1 2 3 4 5 6 7
innovation?

Corresponding author
Shui-Yee Wong can be contacted at: zoiewong@cityu.edu.hk

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