Chapter 1 - Introduction

Purpose and Significance of the Study

Every company has its own unique culture. A company’s organizational

culture is important because it influences the organization’s actions and

approaches to conducting business (Denison, 1995). It is very crucial for

business to function effectively in a highly competitive, rapidly changing

environment. It is recognised that innovation is of utmost importance in

maintaining a proactive and entrepreneurial organization (Johannessen et al,

2001). Innovation has become widely recognized as a key to competitive

success (Francis & Bessant, 2005).

A review of the literature on organizational culture demonstrates that it is

a complex phenomenon that researchers continuously struggle to understand.

There is still debate over how to define organizational culture, whether

organizational culture should be assessed only with qualitative methods, and

the extent to which culture impacts organizational performance especially with

non financial measures of performance, such as innovation.

Studies have acknowledged the existence of a relationship between

organizational culture and organizational innovation (Kotter and Heskett, 1998);

and have proposed theories about its nature, and recommend that innovative

organizations perform better (Hurley and Hult, 1998).

Since organizational innovation implies organizational change (King and

Anderson, 1995) the ability of an organization to adopt innovations is likely

related to its structure, processes and values. According to Rousseau (1990)

and Pettigrew (1990), an organization’s structure, processes and values are

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manifestations of organizational culture and thus provide insight into the

content of an organization’s culture.

In McKinsey Global Survey (October, 2007), executives firmly believe

that innovation is central to a company’s strategy and performance, but getting

it right is as hard as ever. Some 70 percent of corporate leaders say innovation

is among their top three priorities for driving growth. But the way companies

manage and govern innovation does not reflect that importance. Most

companies do not focus on innovations they say will have the greatest effect on

performance. There are also disparities in executives’ perceptions of how their

companies react to failure in innovation. The group agrees organizational

cultural would improve the innovation performance of their companies.

From the literature, researchers understand very little about the

organizational-level characteristics related to innovation. Ashley and Bryan

(2009) presented their findings in 11th Annual Best of Organizational Summit

on the topic of: Organizational Culture and Innovation: Exploring the Link. It

was found organization’s with strong cultures ranked higher in new product

development and expected to grow more in the future, based on growth

assumptions in their stock prices. A balanced culture can help an organization

be innovative. It was also found that traits of involvement and adaptability are

important to execution and implementation resulting in innovation (Denison,

1990; Denison & Mishra, 1995; Gordon & DiTomaso, 1992; Kotter & Heskett,

1992; Sorenson, 2002).

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Objectives of the Study

This study attempts to fill the gap through a qualitative research that

examines the relationship between organizational culture and innovation using

a comprehensive practice-based framework of organizational culture.

In this study, we investigate the relationship between organizational

culture and innovation; specifically it aims to determine the impact of

organizational culture on its innovation. This study is rooted in research that

has already established key traits of organizational culture as major drivers of

increased levels of performance in organizations (Denison, 1990). The

organizational culture will be examined by referring to Denison Organizational

Culture Model.

Identifying and applying aspects of culture that might positively improve

organizational innovation is relevant towards developing a better understanding

of organizational culture in all sectors.

Research Questions

Two research questions to this study are:

First, does organizational culture influence the depth of innovation in Malaysian

organizations?

Second, which dimension of the organizational culture – empowerment, team

orientation, capability development, creating change, customer focus and

organizational learning, is most influential in driving innovation for an

organization?

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Scope of the Study

The scope of this study is opened to all sectors (government sector and

private sector) in Malaysia. As such, the generalizability of this study’s results

may be limited beyond similar populations of employees in Malaysia.

This study used 30 items to calculate the organizational culture and 12

items for innovation. The variables in this study consisted of 12 independent

variables (empowerment, team orientation, capability development, creating

change, customer focus, and organizational learning) and one dependent

variable (innovation).

Organization of the Study

Five chapters were developed and depicted for this research study.

Chapter 1 provided an overview of the study. It comprised objectives of the

study, the purpose and significance of the study, objectives of the study,

research questions, and scope of the study as well as the organization of the

study.

Chapter 2 of the study provided a detailed literature review about

organizational culture and innovation. In this chapter, a critical analysis of

theoretical literature and measures of six cultural variables (empowerment,

team orientation, capability development, creating change, customer focus,

organizational learning) was presenting. Through reviewing literature, the

hypothesized model and hypotheses in this study were derived from the

literature gaps.

Chapter 3 exhibited the research methodology to test the research

questions and hypotheses. It consisted of development of the hypotheses, the

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research design, the target population, sampling, instruments, procedure of

data collection, ethical considerations and data analysis techniques.

Chapter 4 describes not only the summary statistics, analyses of

measures and testing of hypotheses but also the summary of research results.

Chapter 5 finally, presented the conclusions, interpretations, and

implications of the findings. In addition, the chapter provided limitations of the

study and suggestions for future research.

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