Received: 7 June 2020 Revised: 26 September 2020 Accepted: 11 March 2021

DOI: 10.1111/1467-8500.12474

R E S E A R C H A N D E VA L U A T I O N

Building a culture of innovation: How do agency

leadership and management systems promote
innovative activities within the government?

Nara Park1 Munseok Cho2 Jung Wook Lee1

1Department of Public Administration,

Yonsei University, Seodaemun-gu, Seoul, Abstract
South Korea Public organisations have strived to initiate and con-
2Department of Public Administration, solidate innovation by reforming their structures, pro-
Hansung University, Seongbuk-gu, Seoul,
South Korea cesses, and outcomes. Despite their numerous attempts,
successful innovation has not been achieved in every
Correspondence
organisation in the public sector. Analysing survey data
Nara Park, Yonsei University, 50 Yonsei-ro,
Seodaemun-gu, Seoul, South Korea. acquired from the Korean government, we find that a
Email: [email protected] leader’s support for innovative action, and the devel-
opment of a self-learning organisation that discarded
old-fashioned customs, was key to change in govern-
ment organisations. Leadership is required to promote
strategic planning and performance tools for innovation,
with both forms of management system likely to depend
on a leader’s decision. The concerns, emphasis, and
support of a leader are embodied by the strategic plan
and implemented using performance tools to motivate
organisational members. Thus, we argue that, without
supportive leadership, it is extremely difficult to estab-
lish a culture of innovation that can lead to product inno-
vation; management and evaluation efforts may not be
essential to an increase in government innovation. Ulti-
mately, we address the innovation dilemmas that many
public organisations encounter in the course of organ-
isational development. We suggest that a performance
evaluation programme that requires immediate success
can eventually limit sustainable innovation in the long

Aust J Publ Admin. 2021;1–21. wileyonlinelibrary.com/journal/aupa © 2021 Institute of Public Administration Australia 1
2 PARK et al.

term, even if innovation performance improves in the

short term.

KEYWORDS
government innovation, organisational culture, public manage-
ment, performance evaluation, supportive leadership, South
Korea

1 INTRODUCTION

Public sector innovation is a major subject in public administration, public policy, and public man-
agement (see De Vries et al., 2016; Van der Wal & Demircioglu, 2020 for a list of recent studies).
The large volume of literature on organisational innovation has highlighted why innovation needs
to be introduced in the public sector by demonstrating its positive effects (e.g. Walker et al., 2010)
and how it can be effectively achieved by identifying various determinants and establishing spe-
cific strategies (e.g. Demircioglu & Audretsch, 2017). According to existing literature, successful
organisational innovation involves modifying various organisational components such as struc-
tures, processes, and culture in a manner that helps the organisation attain its desired goals, such
as maximising the likelihood of its survival or more effectively adapting to a changing organisa-
tional environment (Gilley, 2005; Meijer, 2015). However, despite the greater understanding of the
nature of public sector innovation, a growing number of studies have highlighted the continuous
challenge of identifying a standardised recipe for the establishment of a successful organisation
(e.g. Dickinson et al., 2019; Fernandez & Rainey, 2006; Linden, 1990).
Over the past few decades, many public organisations across the world have sought to reform
their structures and innovate their processes to overcome various forms of government failure,
ranging from chronic inefficiency to economic crises (Marsh & McConnell, 2010). However, this
has occurred in an environment that is more likely to punish errors than reward excellence,
with bureaucracies evaluating their own performance as an immediate response to pressure for
accountability. Thus, most – if not all – government innovation has resulted from external pres-
sure from the central government and/or society at large rather than intrinsic motivation. This
external influence tends to encourage government organisations to pursue dramatic short-term
changes. This tendency is exacerbated by performance evaluations, which have taken on more of
a central role after the spread of New Public Management (NPM) reforms among nations (Pollitt
& Bouckaert, 2017). Central governments can promote innovation within public organisations by
establishing a performance management system that conducts regular evaluations of innovative
efforts. Because visible outcomes have become increasingly important, many government organi-
sations strive to implement additional changes that can earn them positive feedback from outside
actors even if they do not necessarily intend to adopt a specific innovation (Osborne & Brown,
2011; Walker, 2008). In these circumstances, some organisations excel at adopting and implement-
ing new changes compared to other organisations that compete for the same set of resources or
pursue similar objectives.
This study investigates public sector innovation within the Korean government and is par-
ticularly interested in identifying the factors that compelled organisations to pursue innova-
tive changes while others settled for the status quo under the government-wide innovation
agenda established by the Roh Moo-hyun Administration. In particular, we argue that leadership
PARK et al. 3

significantly influences organisational innovation in the public sector, while management efforts
such as strategic planning and performance measures inspired by NPM reforms do not have an
effective impact on the adoption of innovation programmes in government agencies. These efforts
may instead result in short-termism and provoke resistance to change, leading the organisation to
pursue process innovation on peripheral matters rather than more comprehensive forms of inno-
vation. Essentially, the performance management system established for the entire public sector
in 2006 with the passing of the Framework Act on Public Service Evaluation and the National
Finance Act may have merely transformed government-wide innovation efforts into systematic
and periodic strategic management actions.
Our main argument is that leaders play a critical role in transforming an organisation by out-
lining a vision and encouraging members to actively participate in innovation processes. Past
research has emphasised the importance of leaders who possess transformational characteris-
tics, including being an effective designer, master, mentor, challenger, catalyser, and integrator, as
well as having a clear and sustained vision (e.g. Demircioglu & Berman, 2019; Montes et al., 2005;
Valle, 1999). These leaders support and encourage innovation and individual initiatives through
the nurturing of employees’ abilities centred on learning, open communication that minimises
the cost of internal change, and the promotion of cohesive teamwork (Rogers, 2010). Our argu-
ment largely departs from the basic question of why innovation occurs in the government sector,
which is generally considered to be less innovative than the private sector. Despite the lack of
legal basis, the presidential initiative for government-wide innovation under the Roh Adminis-
tration immediately generated a number of innovation programmes within government agencies
and local governments.
Additionally, we will test whether intra-organisational management systems, such as strategic
planning, generate any differences between levels of innovation across public organisations. Well-
established strategic plans based on a detailed analysis of the internal and external environments
would be helpful for identifying new ideas and programmes for the achievement of organisational
goals and objectives (Flynn & Talbot, 1996; Joyce, 2015). Indeed, strategic planning is a catalyst for
successful organisational change and reform when legitimate goals are identified and strategic
management and performance are more strongly linked (Moore, 1995; Poister, 2010). These sec-
ondary hypotheses are related to the key mechanisms promoting innovation programmes. During
the Roh Administration, some government organisations adopted and implemented hundreds of
innovation programmes, some others less than 10 or even 0.
To examine the mechanisms that underlie innovation in public organisations with the goal of
identifying the determinants of successful organisational change, this article analyses the Gov-
ernment Innovation Index (GII) survey conducted by the Korean government. In Section 2, we
summarise existing knowledge on the factors that shape public sector innovation by reviewing
various theories. In Section 3, we present hypotheses for the current gaps in knowledge identi-
fied in the literature review. In Sections 4 and 5, we describe the methods used to address these
hypotheses and provide empirical support for our claims. Finally, we summarise the findings and
discuss the limitations of the present study in the conclusion.

2 GOVERNMENT INNOVATION: RATIONALE AND STRATEGIES

Organisations do not exist in a vacuum; to varying degrees, they constantly make formal or
informal internal adjustments to adapt to their constantly changing environment. Organisations
respond differently to environmental changes depending on their inherent characteristics and
4 PARK et al.

circumstantial factors. In this regard, some argue that there are significant differences between
public and private organisations in terms of their adaptability to environmental change. In par-
ticular, a large body of research claims that public organisations are insensitive to change and are
thus often slower to react than their private counterparts due to their many rules and hierarchies
(Crozier, 1964; Damanpour, 1991; Hage & Aiken, 1967; Kelman, 2005; Merton, 1968; Weick, 1979).
However, recent studies have asserted that public organisations, in pursuit of legitimacy, are not
only as adaptive as private organisations but can be more sensitive to stimuli due to their institu-
tional constraints and hierarchical control, which can lead to organisational innovation (Frumkin
& Galaskiewicz, 2004; Walker, 2008). Most cases of government innovation worldwide, particu-
larly since the 2000s, have been triggered by presidential orders, paradigm shifts in governance,
public demand, and/or discourse within international organisations, which explains why pub-
lic sector innovation can be more rapid once initiated (Borins, 1998; 2006; Light, 1998; Moon &
DeLeon, 2001; Schneider, 2007).
In this article, we distinguish innovation from any positive change that occurs in an organ-
isation in general. It is true that innovation and change have been discussed as highly related
concepts, which constituted a part of our long-standing knowledge about organisational dynam-
ics. However, although organisational change has been posited as an antecedent of innovation
(Burns & Stalker, 1961; Kanter, 1983), others regard it as not being directly related to organisational
innovation (Mintzberg, 1983). Indeed, strictly speaking, change – no matter how many benefits it
offers – differs from innovation not only conceptually but also empirically. For example, change
can be employed as a way to pretend to be an innovator because ‘public organizations may inno-
vate in search of legitimacy and not fully adopt an innovation’ (Walker, 2008, p. 592). Furthermore,
as Wynen and his colleagues recently asserted, a series of changes can have a negative impact on
innovation in the public sector (Wynen et al., 2017, 2020). For these reasons, we need to take a
careful approach to the analysis of public sector innovation.
Prior research has found that two types of strategy are employed to encourage ongoing innova-
tion in the public sector. The first is to regularly evaluate the outcomes of innovation efforts using
official measurement tools (Pollitt & Bouckaert, 2017). With NPM becoming widely accepted, per-
formance evaluation and management systems are commonly used to assess both performance
and organisational innovation. In fact, the introduction of these systems is often a measure of
innovation performance, which Ferlie and Geraghty (2005) referred to as a ‘hard’ version of NPM.
An increasing number of countries have attempted to facilitate innovation by actively managing
it. Some have argued that routine evaluations establish favourable conditions for the development
of organisational innovation and make it easier to hold organisations accountable for implement-
ing innovation. However, opponents claim that organisational members can grow weary of inno-
vation when frequent evaluations occur or when sanctions are stronger than employees expect,
thus hampering further innovation (Arundel et al., 2019; Berman & Kim, 2010; Demircioglu &
Audretsch, 2017, 2020).
While the strategy of encouraging innovation via regular evaluations is prevalent, some leaders
pursue an alternative strategy in which the organisational capacity for innovation is expanded
by developing strategic planning components, thus creating an organisational culture that is
favourable for innovation via effective leadership and appropriate and flexible responses to envi-
ronmental change (Albury, 2005; Lægreid et al., 2011). This strategy dates back to before the intro-
duction of performance evaluation under NPM and may thus be regarded as more conventional,
or even old-fashioned than evaluation-based approaches. The positive effects of these tactics, how-
ever, have been demonstrated in many empirical studies on organisational innovation in the pub-
lic sector (e.g. Abramson & Lawrence, 2001; Borins, 2000).
PARK et al. 5

Organisations can employ one or both strategies and, if both are used, there can be considerable
variation in the way they are adopted (e.g. whether they are adopted concurrently or sequentially
and whether they receive the same level of priority). One of the main differences between the two
strategies is that the first is an organisational response to external stimuli, such as the focus on
NPM and performance management, while the latter is more concerned with the internal neces-
sity for organisational change. The former strategy is widespread within both public and private
organisations, whereas the use of the latter has been increasing in the public sector, especially in
recent years.

3 EMBRACING INNOVATION WITHIN THE GOVERNMENT: THE

KOREAN CONTEXT

To keep up with the series of sweeping administrative reforms in central governments that
have occurred worldwide, the Korean government has also implemented a series of govern-
ment reforms since the early 1990s. Most of these reforms, if not all, have employed top-down
approaches in which each president established plans for reform at the beginning of their presi-
dency. After making considerable progress in terms of economic and social development (Caiden
& Kim, 1999; Johnson, 1999; Kohli, 1999), the Korean government pursued a range of neolib-
eral policy reforms in the 1980s and 1990s, including the Kim Young-sam presidency (1993–1998),
which acted in response to increasing demands for economic and social democratisation to fol-
low the political democratisation that had occurred at the time. Voted in after the dismantling of
the previous military regime, President Kim Young-sam became the first civilian president since
1962. He had a strong desire to re-establish the government by restructuring administrative organ-
isations and focusing on organisational, financial, and personnel management. His endeavours
were aimed at institutionalising effective democratic structures within the government, but the
outcomes were not very successful, mainly as a result of bureaucratic resistance and a lack of
practical tools to achieve the purpose of the reforms.
President Kim Dae-jung was inaugurated immediately after the financial crisis of 1998. His
plans for reform were in accordance with the then-popular neoliberal perspective, and they were
extended to the entire public sector. The reforms essentially focused on downsizing the public sec-
tor through the restructuring of government organisations, reducing the size of the bureaucracy,
privatising public enterprises, and contracting out public services.
The pursuit of neoliberalism continued with the introduction of NPM and New Public Gov-
ernance during the Kim Dae-jung presidency (1998–2003), followed by the neo-Weberian state
reform of the Roh Moo-hyun presidency (2003–2008). Pursuing a participatory and enabling gov-
ernment, the Roh Administration continued the legacies of reform from the past while exploring
new paths for public sector innovation. The Roh Administration distinguished itself from previous
administrations with the magnitude and scope of its innovation initiatives, which were often out-
lined by President Roh himself, who repeatedly affirmed his vision of government innovation. For
example, he delivered the following words in his keynote speech at an international conference,
‘A New Vision and Strategy of the Roh Administration Under Changing Leadership in Northeast
Asia’ on February 27, 2004:

The world has been changing rapidly. One year today goes as fast as ten or even 100
years in the past. We cannot but lag behind unless we undergo ceaseless change and
innovation. Now is the time when “change” spells “hope.” Korea has also witnessed
6 PARK et al.

considerable changes and suffered pain in the past year. In parallel with the efforts
to overcome the current difficulties, Korea has been making all-out endeavors for
national innovation to prepare for the future.

(Korean Overseas Information Service, 2005, p. 100)

The government innovation spearheaded by President Roh resulted in extensive changes to the
administrative system. However, transporting the necessary values, strategies, and tools into indi-
vidual government agencies proved to be difficult because holistic approaches to reform gener-
ally require effective agency-level leadership and deliberate institutional measures to drive inter-
nal innovation, both of which were lacking at the time. Thus, to generate agency-level innova-
tion, President Roh explored a new way of innovating the government. He set innovation as a
national agenda, including the vision of ‘building a leading innovative country’ with the key ele-
ments of efficiency, service quality, decentralisation, transparency, and participation. His innova-
tion agenda was successful when bureaucratic compliance and participation were high. He also
took on board new strategies, allowing authorised agency leaders to implement innovation pro-
grammes at the agency level and continuously monitored and evaluated the innovation perfor-
mance of the agencies. As a result, agency leaders were empowered to exercise their leadership to
promote autonomic innovation within their agencies to a certain degree. This was the first attempt
to innovate the government by integrating both top-down and bottom-up approaches.
During the Roh Administration, a principal organisation of government innovation was
the Presidential Committee on Government Innovation and Decentralisation (PCGID), which
designed and established many government innovation programmes. The PCGID outlined major
innovation areas – administration, personnel policy, public finance, e-government, innovation
management, policy public relations, and innovation evaluation – and then identified core inno-
vation agendas for each area (Moon, 2008). With this strong presidential initiative, the Roh
Administration took a performance-oriented approach in a series of government innovations.
Rather than pursuing structural changes, the institutional and behavioural elements of innovation
were heavily discussed at cabinet meetings, workshops, forums, and in government publications.
Government organisations were pushed to adopt innovative policy programmes such as perfor-
mance budget systems, business process reengineering, and performance-related pay. Although
the legal basis for the national evaluation system was not fully established until 2006, the degree
to which agencies introduced these new policy programmes was linked to the overall evaluation
of organisational performance, which in turn determined incentives and sanctions for the agency
and its leaders.

4 HYPOTHESES

Leadership is a critical element of public sector innovation and thus has been a subject that has
long attracted academic interest. There have been numerous attempts to clearly define leadership
(Drath & Palus, 1994; Hemphill & Coons, 1957; Hosking, 1988; Jacobs & Jaques, 1990; Katz & Kahn,
1978; Rauch & Behling, 1984; Richards & Engle, 1986; Schein, 1993), with many scholars likely to
agree with Stogdill (1974, p. 259) that ‘there are almost as many definitions of leadership as there
are persons who have attempted to define the concept’. Academic endeavours to define leader-
ship, however, have not been in vain. From the accumulated knowledge, it has been established
that there are different forms of leadership that have a strong relationship with organisational
PARK et al. 7

innovation, such as supportive leadership (House, 1981), transactional or transformational lead-

ership (Bass, 1985; Burns, 1978), transforming leadership (Yukl, 1998), servant leadership (Green-
leaf, 1970), commanding leadership (Anderson & Anderson, 2010; Reardon et al., 1998), opinion
leadership (Rogers, 2010), and logical leadership (Abbas & Asghar, 2010). In the present study, we
investigate transformational, supportive, and transactional leadership in relation to innovation
performance.
First of all, top management needs to demonstrate transformational leadership by inspiring
members to become more actively involved in innovation processes (Bankins et al., 2017; Eisen-
beiss et al., 2008). This might involve internal communication through the use of symbolic or con-
crete language related to the importance of innovation in improving organisational performance
(Campbell, 2017). Therefore, agency members will be more likely to share their ideas and imple-
ment more innovation programmes when a leader more frequently emphasises the importance
of innovation within the organisation (Rogers, 2010).
Next, we consider innovation sponsorship programmes as embodying the ethos of supportive
leadership, in which the leader plays a key role in innovation (Stata, 1989; Tushman & Nadler,
1986) and in creating a climate that encourages the abilities and practices needed to promote
innovation (Kanter, 1983). These sponsorship programmes are designed to guarantee that organ-
isational members will be free from responsibility if they fail to accomplish the goals of the pro-
grammes. Innovation is based on the creation and implementation of new programmes and meth-
ods that have never or have rarely been attempted. Individual and organisational performance will
improve if they are successful, but the risk of failure is higher than that of existing programmes
and routinised tasks. Most innovation programmes usually pose a risk of failure, so members who
have ideas for improving organisational performance are more likely to avoid suggesting their
innovation plans. Therefore, when a leader formally encourages the sharing of ideas and protects
members from the risk of innovation programme failure, subordinates are more likely to be active
in suggesting, adopting, and implementing these ideas.
Lastly, using organisational or sometimes their own resources, leaders promise subordinates
financial (or non-financial) rewards in exchange for their active participation in innovation pro-
cesses to successfully accomplish an innovative task, which is characteristic of transactional lead-
ership. Transactional leadership is often contrasted with transformational leadership (Hargis et al.,
2001; Howell & Avolio, 1993; Lowe et al., 1996; Odumeru & Ogbonna, 2013). Based on this, we pro-
pose the following hypotheses.

H1: Leadership is likely to promote organisational innovation.

H1-1: The communication from top managers regarding organisational innovation is likely to
result in additional innovation programmes.
H1-2: Having an innovation sponsorship programme is likely to result in additional innovation
programmes.
H1-3: Providing organisational members with monetary and non-monetary incentives is likely to
result in additional innovation programmes.

However, focusing on leadership style may lead to the importance of management capacity
and effort being underestimated in initiating organisational innovation (Perrow, 1970). A num-
ber of studies have differentiated between leadership and management (Bennis & Nanus, 1985;
Zaleznik, 1977), and even those who do not view leaders and managers to be fundamentally differ-
ent would agree that leading and managing are distinct processes (Bass, 1990; Hickman, 1990; Kot-
ter, 1988). Managerial systems and effort have generally been found to be effective in augmenting
8 PARK et al.

organisational performance (Coggburn & Schneider, 2003; Dilulio, 1989; Donahue et al., 2000;
Ingraham & Donahue, 2000; Ingraham et al., 2003; Lynn et al., 2000).
There are two main types of organisational management: ex-ante and ex-post management.
Organisations can take ex-ante measures such as establishing an organisational vision, goals, and
strategies to encourage organisational members to identify with the organisation and its leader-
ship. We assume that innovation is likely to be promoted in the presence of a more implementable
vision structure and when members recognise how their roles relate to the overall plan. In addi-
tion to strategic planning, it is important to have access to accurate information on the internal
and external environment. Because organisations can encounter internal and external resistance
in the pursuit of innovation, they need to identify the internal demands and external constraints
prior to adopting and implementing new innovation policies.

H2: Innovation management systems that create an innovation-friendly environment and cul-
ture are likely to promote organisational innovation.
H2-1: Having an innovation strategy is likely to result in additional innovation programmes.
H2-1a: Strategic planning is likely to result in additional innovation programmes.
H2-1b: A diagnosis of the organisational environment is likely to result in additional innovation
programmes.

Organisational innovation requires new ideas to develop new goods and services and to pro-
mote existing service quality and internal processes, including minimising risks and resistance by
adopting a new system. However, no matter how effective internally developed ideas and projects
would be in helping an organisation survive and succeed, they are likely to be discarded if they
lack support from other organisational members. Therefore, organisations must seek and acquire
legitimacy by consulting with and adopting the innovation ideas of authoritative external experts
(Røvik, 2002, pp. 113–144). Organisations often rely on external experts to disseminate and trans-
mit change-oriented skills and consultancy knowledge. With the support of experts, organisations
can more easily source innovative ideas and attempt to implement these ideas within government
agencies. Agencies attempting to introduce innovative changes may face internal and external
challenges and may suffer from a lack of both ideas and implementation tools. Though some resis-
tance can be overcome by introducing rational processes that meet internal and external demands,
opposition to change may be difficult to overcome in many cases due to uncertainty regarding the
results of the innovation or a decline in members’ demands for change within the organisation.
Therefore, innovative organisations require external ideas from expert groups who can stimulate
both organisational members and their leaders, thus providing legitimacy and mitigating internal
and external resistance.

H2-2: Consulting with an external expert group is often likely to result in additional innovation
programmes.

The spread of NPM has led to the regular evaluation of government performance, which is still
broadly accepted by government organisations in many countries. The promotion of innovation
through regular evaluation is generally perceived to be a positive strategy, thus previous literature
has promoted the use of a range of performance measures rather than the use of only a single
measure or only financial indicators (Quinn & Rohrbaugh, 1983; Venkatraman & Ramanujam,
1986). Agencies can widely use the information produced by measuring and evaluating innova-
tion performance. It can be used to reward high-performing members, to sanction low-performing
PARK et al. 9

members, and to practically reform innovation strategies and programmes. Regardless of its pur-
pose and methods, a performance evaluation system signals to organisational members that they
might be rewarded or sanctioned. Thus, organisational members are more likely to participate in
innovation activities when there is a well-established performance evaluation system.

H2-3: The presence of tools for evaluating internal and external performance is likely to result
in additional innovation programmes.
H2-3a: The presence of tools for evaluating internal efficiency is likely to result in additional inno-
vation programmes.
H2-3b: The presence of tools for evaluating customer service quality is likely to result in additional
innovation programmes.

5 DATA AND METHODS

The GII survey was used to test the hypotheses outlined above. The survey was developed by
the Headquarters for Government Innovation (HGI) under the Korean Ministry of Government
Administration and Home Affairs in 2005 and 2006. The data collection process included steps to
improve the validity and reliability of the survey using cross-validation checks. The HGI required
innovation officials from each government department established under the Roh Administration
and two other officials within each agency to answer a set of questions on innovation management
components, with the survey recording the median of the three answers. Supporting documents
were required to explain any major discrepancies between the three answers and to explain out-
liers among the government agencies. In the final model, 298 organisations, including 49 central
government agencies and 249 local government agencies, were used to test the hypotheses.
Table 1 summarises the variables used for statistical analysis, with the unit of analysis in this
study being organisational. The dependent variable was measured using the number of self-
adopted innovation programmes within each agency. The survey asked whether the agency car-
ried out an innovation implementation plan. If the answer was ‘Yes’ to this question, the agency
was required to provide the number of innovation programmes they were currently implement-
ing. In total, 298 central and local government agencies answered that they were implementing
at least one innovation programme, and nine agencies stated that they had not adopted any inno-
vation programmes. These nine agencies were removed from further analysis.
Negative binomial regression modelling (NBRM) was used to test the hypotheses. Because the
dependent variable in this research was not continuous, the ordinary least squares (OLS) assump-
tions were violated, meaning that linear regression models would be biased, inconsistent, and
inefficient (Long & Freese, 2006, p. 349). NBRM estimates the expected number of events that
will occur within a given period and corrects misestimation problems using OLS modelling and
adjusts for over-dispersion when the variance is greater than the mean using Poisson modelling
(Long, 1997). The coefficients for NBRM estimates based on the maximum likelihood method are
calculated as follows:

ln 𝑌𝑖 = 𝑋𝑖 𝛽 + 𝜀𝑖 .

In the above formula, lnYi denotes the natural logarithm of the number of adopted innovation
programmes in each agency, Xi is the covariance matrix, ß represents the model coefficient, and
εi is a random unexplained error term.
10 PARK et al.

TA B L E 1 Measurement of variables
Measurement
The number of innovative policy
programmes adopted and
Organisational innovation implemented by the agency.
Leadership Transformational leadership How often the head of the agency
emphasises the importance of
organisational innovation ranging
from 1 to 6: (1) once a year, (2)
twice a year, (3) once a quarter, (4)
once a month, and (5) two or three
times a month, and (6) once a
week.
Supportive leadership (Dummy) 1 if the organisation has
an innovation sponsorship
programme, and 0 otherwise.
Transactional leadership The number of forms of
(non-)financial incentive ranging
from 0 to 4: (1)
performance-related pay, (2)
additional points for personnel
rating, (3) special promotions, and
(4) other incentive programmes.
Innovation Innovation Strategic planning The number of innovation strategies
management strategy ranging from 0 to 5: (1) a
system long-term vision, (2) a long-term
strategic plan established within 3
years, (3) a master plan for
managing innovation, (4) a
roadmap for implementing
innovation, and (5) a basic plan
for managing changes.
Environmental The number of diagnostic analyses
diagnosis conducted by the agency ranging
from 0 to 2: (1) whether
organisational members recognise
a crisis and (2) whether there are
factors detrimental to
organisational innovation.
External sources of innovation ideas (Dummy) 1 if the organisation
accepts advice from external
experts, and 0 otherwise.
Innovation Efficiency (Dummy) 1 if the agency has a tool
Performance for measuring the level of
Tools performance and the speed of
internal processes, and 0
otherwise.
(Continues)
PARK et al. 11

TA B L E 1 (Continued)
Measurement
The number of innovative policy
programmes adopted and
Organisational innovation implemented by the agency.
Service (Dummy) 1 if the agency has a tool
Quality for measuring the quality of
service improved by innovative
activities, and 0 otherwise.
Control Budget (Logged) The total budget for a given
variables year.
Personnel (Logged) The total number of
personnel for a given year.
Central level (Dummy) 1 if the agency is at the
central level, and 0 otherwise.

Our pre-test results (not presented) show that the z-scores of Poisson regression models (PRMs)
are greater than those of NBRMs, while the coefficients between the models do not significantly
differ. The results of log-likelihood ratio tests for the NBRM and PRM, which rejects the null
hypothesis that mean and variance of each model are equal, also suggest that the NBRM is more
suitable for our data.

6 RESULTS

Table 2 presents the descriptive statistics for the dependent and independent variables used in
this study. The government organisations in Korea implemented an average of approximately 78
innovative policy programmes across all levels of government between 2005 and 2006. A total of
298 agencies conducted at least one innovative policy programme, with only nine that did not,
which represented a striking contrast to 2004, when 148 agencies did not conduct any innovative
policy programmes (Kim & Lee, 2009, p. 357). The dramatic increase in the number of innovative
policy programmes within government agencies suggests that innovation was a major focus of
the Korean government in the mid-2000s. By investigating this 2-year period, during which inno-
vation activity started to expand within the government, it is easier to distinguish between the
organisations that chose to adopt additional innovation programmes and those that did not.
Table 2 shows that the dependent variable (i.e. the number of innovative policy programmes
at each agency) had a large standard deviation. Figure 1 displays a density plot for the depen-
dent variable, showing a left skew with a median of 49.0, which necessitated the use of negative
binomial regression.
Table 3 summarises the results of the NBRM. As expected, leadership generally had a signifi-
cantly positive but partial effect on organisational innovation (H1). To boost organisational inno-
vation, a leader needed to encourage the innovation efforts of their followers through supportive
(H1-2) and transactional (H1-3) leadership. These results were returned for all models, with posi-
tive signs and statistical significance for the coefficients throughout.
However, transformational leadership (H1-1), measured by the extent to which the top man-
ager encourages organisational members by emphasising innovation, did not have a statistically
12 PARK et al.

TA B L E 2 Descriptive statistics
No. of
Obs. Mean SD Min. Max.
Organisational innovation 298 78.01 83.61 0 566
Leadership Transformational 298 1.96 0.91 1 6
leadership
Supportive 298 0.23 0.42 0 1
leadership
Transactional 298 1.65 1.35 0 4
leadership
Innovation Innovation Strategic 298 3.99 0.97 0 5
strategy planning
management
system
Environmental 298 1.18 0.78 0 2
diagnosis
External sources of innovation ideas 298 0.57 0.49 0 1
Innovation Internal 298 0.31 0.46 0 1
performance efficiency
tools
Service 298 0.32 0.47 0 1
quality
Control variables (Log) budget 298 25.47 3.63 0 30.67
(Log) personnel 298 6.71 0.90 0 11.48
Central level 298 0.16 0.37 0 1

F I G U R E 1 The density of the number

.01

of innovation programmes implemented in

government agencies in Korea [Colour
.008

figure can be viewed at

wileyonlinelibrary.com]
.006
Density
.004
.002
0

0 200 400 600

Dependent Variable: Innovation

significant effect on organisational innovation. Leaders may inspire organisation members by

periodically communicating with them, which serves as a role model, and by envisioning a bet-
ter future for the organisation (Bass, 1985). However, our findings consistently showed that this
variable was statistically insignificant, which indicates that the frequency of leader–member com-
munications may not be critical unless the target values and goals are shared and agreed upon
broadly within the organisation. The leaders of Korean government agencies tend to remain in
PARK et al. 13

TA B L E 3 Negative binomial regression results

Model 1 Model 2 Model 3 Model 4
Leadership Transformational −0.077 −0.032 −0.004 0.001
leadership (0.068) (0.070) (0.072) (0.072)
Supportive 0.434*** 0.333** 0.267* 0.275*
leadership (0.137) (0.143) (0.147) (0.150)
Transactional 0.171*** 0.125** 0.129** 0.131**
leadership (0.151) (0.054) (0.054) (0.061)
Innovation Innovation Strategic 0.111 0.079 0.082
management strategy planning (0.069) (0.071) (0.072)
system
Environmental 0.099 0.011 0.118
diagnosis (0.085) (0.085) (0.086)
External sources of 0.251* 0.257*
innovation ideas (0.135) (0.136)
Innovation Internal 0.016
performance efficiency (0.148)
tools
Service −0.064
quality (0.149)
Control variables (Log) budget −0.026 −0.025 −0.024 −0.025
(0.018) (0.017) (0.017) (0.018)
(Log) size 0.159** 0.153** 0.141** 0.147**
(0.067) (0.067) (0.067) (0.069)
Agency type −0.087 −0.078 −0.148 −0.141
(0.017) (0.176) (0.179) (0.182)
Constant 3.674*** 3.118*** 3.091*** 3.057***
(0.369) (0.460) (0.463) (0.477)
No. of Obs. 298 298 298 298
Likelihood Ratio Χ2 44.63 50.42 53.84 54.03
Log-likelihood −1575.9 −1573.0 −1571.3 −1571.2
***p < 0.01
**p < 0.05
*p < 0.1.

office for a relatively short time and the heads of local governments (i.e. mayors or governors) are
up for election every 4 years. In addition, the size of most Korean government agencies is rela-
tively large, with more than 100 employees on average. Under these circumstances, agency leaders
with a large number of members are at a disadvantage compared to leaders of smaller agencies
in regard to the opportunity to meet each member and share the organisation’s vision, goals, and
values. The assumption of transformational leadership is that the leader–member relationship
can be improved by sharing organisational goals and values (Bass, 1990). Therefore, we suspect
that the influence of leadership is likely to be limited if it is not accompanied by clear rewards and
sanctions, which is consistent with the findings from recent studies on public sector innovation
in the Asia-Pacific region (Van der Wal & Demircioglu, 2020).
Neither innovation strategy (H2-1, H2-1a, H2-1b) nor tools for innovation performance measure-
ment (H2-3, H2-3a, H2-3b) appeared to be effective in terms of promoting innovation. Given the
14 PARK et al.

positive signs for the coefficients, ex ante efforts with strategic planning and environmental diag-
nosis to cultivate an innovation-friendly environment might be helpful to some extent, but their
effect was not statistically significant. An organisation can also encourage innovation by institut-
ing an evaluation system to assess previously implemented policies that were considered inno-
vative at the time, as many previous studies have argued (Jiménez-Jiménez & Sanz-Valle, 2011).
The results of the present research, however, do not support this claim; in fact, the evidence sug-
gests that performance evaluation for services provided for external stakeholders or citizens might
even decrease organisational innovation. Although further evidence is required to corroborate this
finding, we assume that performance evaluation may prevent organisations from implementing
new innovation programmes that are not included in the existing performance management sys-
tem. While innovative behaviour and outcomes can be stimulated within the organisation using
existing programmes, as asserted by a large volume of NPM literature, new programmes are not
encouraged by existing performance management systems. When combined with other organi-
sational changes, performance evaluation may have a negative impact on innovation because the
complexity of the innovation ideas and the uncertainty of the surrounding environment signifi-
cantly affect the implementation of innovation programmes (Tidd, 2001).
Finally, the present study found that agencies that consulted with expert groups to obtain an
external source of ideas for innovation were likely to have more innovation programmes (H2-2).
The results were consistently positive and significant in Models 3 and 4. More than half of the
agencies in the GII survey replied that they communicated with experts and accepted their advice
and ideas for innovation. Expert groups can create, modify, standardise, and deliver innovation
ideas in a format that is readily transferable (Brunsson & Jacobsson, 2000). By sharing successful
stories of legitimate innovation ideas being adopted by other organisations, innovation ideas from
experts provide more options for organisations that are looking to innovate while mitigating pos-
sible risks and reducing resistance (Brunsson & Olsen, 1993, p. 6). With the assistance of external
experts, organisations can develop innovative ideas without being overly concerned about the risk
of failure, which helps them to adopt and implement more innovation programmes than organi-
sations that do not enlist their help.

7 DISCUSSION AND CONCLUSIONS

7.1 Summary and implications

This article examines the mechanisms of government innovation based on an empirical analy-
sis of the GII, which was developed within the Korean government. While several studies have
emphasised the importance of management systems that include strategic planning and evalua-
tion in promoting change within public organisations, our findings present counterevidence for
this claim. Influenced strongly by NPM reforms, the strategic planning and evaluation of organi-
sational change have been conducted to encourage further improvements. However, the results of
the present study suggest that whether an organisation has the evaluation tools to measure inter-
nal efficiency and service quality does not have a significant effect on the adoption of innovation
programmes. Innovation strategies such as strategic planning and environmental diagnosis also
do not appear to have a significant influence on organisational innovation. The results suggest
that, as Moore (1995) has argued, government organisations are more likely to adopt innovation
programmes when they are more receptive to external sources of ideas in order to appear politi-
cally and socially legitimate.
PARK et al. 15

On the other hand, we found that leaders who encourage innovation while tolerating failure
promote greater organisation innovation in the public sector, which is supported by an array of
past research (e.g. Albury, 2011; Borins, 2001; 2002; 2006; 2014; Crosby & Bryson, 2005; Torugsa &
Arundel, 2016). This is also in accordance with previous studies on the effects of organisational
culture (Berman & Kim, 2010) and leadership (Campbell, 2017) on organisational innovation in
Korean public service. These results indicate that effective leadership is more critical than inter-
nal management systems in implementing active organisational innovation, particularly if it is
a leadership style that (1) supports innovation efforts by encouraging tolerance for unintended
failure in the attempt to achieve an organisational goal and (2) provides organisational members
with both financial and non-financial incentives. Thus, organisational innovation can be encour-
aged by a leader who is adept at incorporating multiple leadership skills. This article thus sheds
light on the effects of leadership as a key moderating factor in the relationship between the toler-
ance of failure and successful innovation.
The results suggest that the adoption and implementation of innovation programmes at the
level of government agencies and local government in Korea were influenced by leaders at mul-
tiple levels (e.g. presidential, ministerial, and mayoral) and their efforts to internalise and sys-
tematise innovation. The national agenda initiated by President Roh Moo-hyun opened the door
to government-wide innovative efforts. President Roh, who held a ministerial post during the
Kim Dae-jung government, may well have understood the bureaucratic mechanisms involved
in change and innovation. Immediately after his inauguration, the PCGID was established and
strategic planning through an Innovation Roadmap was emphasised. The HGI was organised and
full-scale innovation efforts were introduced to local governments and non-government public
organisations. In this process, the roles of agency leaders and local government heads became
more important in developing innovation at the agency level. In particular, a leader’s support for
innovative action, including the realignment of administrative processes, policy management for
better services, and the development of a self-learning organisation that discarded old-fashioned
customs, was key to change in government organisations. Leadership is required to promote
strategic planning and performance tools for innovation, with both forms of management sys-
tem likely to depend on a leader’s decision. The concerns, emphasis, and support of a leader are
embodied by the strategic plan and implemented using performance tools to motivate organisa-
tional members. Thus, we argue that management and evaluation efforts may not be essential to
an increase in government innovation.

7.2 Generalisability and future research directions

Despite the contributions of this study, care should be taken in generalizing its findings. Though
this study examines public organisations at multiple levels (i.e. central, prefectural, and munici-
pal governments), they are all from Korea. While the Korean government can be a good testing
ground to investigate government innovation, its organisational forms and power structures need
to be taken into account. Bureaucratic responses to innovation within a country with a presiden-
tial system and centralised governance may differ from those countries with federalised, decen-
tralised, and/or parliamentary systems. Furthermore, Korea may still be affected by its history as
a developmental state, during which a statist decision-making process influenced bureaucratic
behaviour with regard to government innovation (Evans, 1995; Woo, 1991).
This research would also greatly benefit by expanding the temporal scope of the analysis. The
data were collected between 2005 and 2006, when innovation was a strong focus of the sitting
16 PARK et al.

government. The Roh Administration (2003–2008) distinguished itself from other regimes by ini-
tiating innovation in public organisations. Therefore, to interpret the results of this study, dif-
ferences between government administrations should be accounted for. Under the Lee Myung-
bak Administration (2008–2013), the importance of innovation was reduced as their policy stance
moved toward other issues (e.g. low carbon green growth and restoration projects for the four
major rivers). In addition, government innovation was still in its early stages in 2005 and 2006.
Given that it generally takes time for innovation to take effect, it is likely that government
organisations and their many factions were not able to fully adapt to the changing environment
within the period under investigation.
However, the government-wide innovation efforts during the Roh Administration have left
some legacies. The Framework Act on Public Service Evaluation and National Finance Act in
2006 are still in force and require government agencies to prepare and submit annual perfor-
mance plans and report to the National Assembly. Although subsequent administrations have
not emphasised innovation to the same extent as the Roh Administration did, innovation policies
of the Roh Administration would have had lasting effects on decision-making structures, organ-
isational culture, and bureaucratic behaviour. A comparison between the early and late stages of
innovation may thus reveal different causal mechanisms and organisational phenomena.
In addition, this research does not fully address member behaviour and culture in relation to
innovation processes. Institutional change in itself does not guarantee innovation in the public
sector; indeed, any change that revolves strongly around rewards and sanctions can impede inno-
vation by encouraging risk-averse behaviours among employees, although incentivisation to some
extent does appear helpful (Wynen et al., 2017, 2020). Without a culture of tolerance, the process
of encouraging and implementing more innovation strategies would be hindered by innovation
management systems, including the constant monitoring of individual performance.
Despite these limitations, the present study has particular merits. Our data reveal the results of
the innovation efforts of the Roh Moo-hyun Administration, which was in power in the early
to mid-2000s. This was when an array of policies for government innovation was introduced
in Korea, including the establishment of the PCGID (2003), the development of the GII survey
(2005), and the implementation of a national branding strategy for government innovation (2006),
to name a few. The preceding Kim Dae-jung Administration also attempted to generate positive
changes within the government in response to the need to restructure the state economy after
the economic crisis in the late 1990s. However, these efforts by the Kim Administration were offi-
cially referred to as reforms, which indicates changes to the defective, corrupt, or vicious legacies
of the past, while the Roh Administration clearly preferred the term innovation, indicating the
introduction and/or creation of new customs, practices, and programmes (Lee, 2006). The Roh
Administration was followed by two consecutive conservative governments, the Lee Myung-bak
and Park Guen-hye Administrations, and its innovation efforts were not directly inherited but
were instead diverted to different initiatives for nearly a decade. Since its inauguration in 2017,
the incumbent Moon Jae-in Administration has rekindled the innovation endeavors of the Roh
Administration. In this regard, this research offers empirical knowledge regarding the emergence
of government innovation in Korea, which in turn helps to understand where public sector inno-
vation could lead to under the Moon Administration and beyond.
Over the past few decades, the volume of knowledge about innovation has greatly increased but
is still very limited, especially in a public sector context (Bessant, 2005; Demircioglu & Audretsch,
2017; Sørensen & Torfing, 2011; Wynen et al., 2020) and non-Western contexts (De Vries et al.,
2016; Van der Wal & Demircioglu, 2020). This article, which investigates public sector innovation
in Korea, aims to reduce the underlying imbalance in the private versus public innovation and
PARK et al. 17

Western versus non-Western dichotomies. As the first empirical analysis of the GII in Korea, the
present study has both strengths and limitations. To overcome the generalisability issue, we sug-
gest various comparative studies, including a cross-sessional examination of government inno-
vation in its early stages and a time-series analysis showing the differences between regimes
and/or innovation phases. Exploring the multi-faceted nature of government innovation, such
as the variation between different innovation types (e.g. process innovation vs. product innova-
tion) and organisation types (e.g. different government ministries), could also shed further light
on public sector innovation research. These efforts will help us find an answer to the question of
how public organisations could respond more effectively to their environment given the increas-
ing uncertainty and change observed in the post-COVID era, where innovation is not a matter of
choice but one of survival.

8 KEY POINTS

∙ The adoption and implementation of innovation programmes at the level of government agen-
cies and local government in Korea were influenced by leaders at multiple levels (e.g. presiden-
tial, ministerial, and mayoral) and their efforts to internalise and systematise innovation.
∙ Leadership is required to promote strategic planning and performance tools for innovation.
∙ Without supportive leadership, it is extremely difficult to establish a culture of innovation that
can lead to product innovation.
∙ Management and evaluation efforts may not be essential to an increase in government innova-
tion.
∙ A performance evaluation programme that requires immediate success can eventually limit
sustainable innovation in the long term, even if innovation performance improves in the short
term.

ORCID
Nara Park https://orcid.org/0000-0003-3138-2630

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How to cite this article: Park, N., Cho, M., & Lee, J. W. (2021). Building a culture of
innovation: How do agency leadership and management systems promote innovative
activities within the government?. Aust J Publ Admin. 2021;1−21.
https://doi.org/10.1111/1467-8500.12474