International Academic Research Journal of Social Science 1(2) 2015 Page 118-124

Organizational Culture And Its Effect On Organizational

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Article Information Abstract

Keywords The natural selection of today’s higher education Institutions (HEI) depends
organizational culture, on how these institutions adapt to change, better practices and
organizational innovativeness,
dynamic capabilities, competitiveness. One important area these organisations need to pay
innovative capabilities. attention to is organizational culture, which can create a supportive
environment where innovation can flourish and be competitive. Thus, this
work proposes to look into the relationship between organizational culture
and organizational innovativeness. A scientific research gap has been
searched, through an intensive assessment of a previous study, in the
literature on the relationship between organizational culture and
organizational innovativeness. Afterwards, based on dynamic capabilities
theory, this work seeks to fill gap between constructs for competitive
advantage. A conceptual framework has been aimed in this research field,
as considerably as a contribution towards the enhancement of the related
literature

PROBLEM STATEMENT

Organizations today have a fierce competition . This challenging environment accelerates the life cycle of the
organization, and the organization should prepare themselves before they can start to compete and overcome
their rivals. Therefore, how organizations gain competitive advantage and create profit becomes increasingly
important .

Higher education institutions are also involved in raising the reputation and has a complex role. The launch of
the National Higher Education Strategic Plan (NHESP) by the former Prime Minister in 2007, started the
transformation of HEIs. It was the start of a process towards greater transformation in higher education
(Khaled, 2008). The main objective of the transformation of higher education is to improve the performance of
higher education institutions in Malaysia, to the ‘world class' institution (Khaled, 2008). This transformation
requires an emphasis on competitiveness, creativity, and innovation. Basically, NHESP outlines aspects to
change the quality of human capital in higher education with a focus on all the attributes necessary to determine
a first class mentality .

Changes in internal and external environments of organizations indicate trends, challenges members in
institutions of higher learning. However, the development of corporate culture in higher education institutions
have built administrators and academics to act as entrepreneurs and promote their research, in a variety of
services and expertise(Hussein et al., 2014).

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Contextually, there is an important role in the persistence of innovation in the innovativeness and development
organization (Nonaka and Takeuchi, 1995; Subramanian and Nilakanta, 1996; Tiono and Ahmad, 2006).
Innovation can be considered as a determinant of development, while the quality could be a decisive advantage.
Both, innovation and quality that can be seen as the determining the market (Cho and Buick, 2005, Hult et al.,
2004, Wang and Ahmed, 2004) .

Innovation is one of the most influential determinants of organization’s long term success because of its
function in assisting the organization to deal with the turbulence of external environment (Baker and Sinkula,
2002; Hult et al., 2004; Montes et al., 2005, Hussein et al., 2014). Innovation may have a number of types
including product or process innovation, radical or incremental innovation, administrative or technological
innovation, etc. (Utterback, 1994; Cooper, 1998; Zaltman et al., 1973). A number of authors have focused on
the meaning of different proportions. For instance, Capon et al. (1992) took on three dimensions of
organizational innovativeness (OI) including market innovativeness, strategic tendency to pioneer, and
technological sophistication. Likewise, Miller and Friesen (1983) concentrated on four dimensions of
innovativeness including new product or service innovation, methods of production or rendering of services,
risk taking by key executives, and seeking unusual and new results. Moreover, Schumpeter (1934) proposed a
number of likely innovative alternatives such as preparing new merchandise or services, developing new
methods of production, identifying new markets, finding new sources of supply, and developing new
organizational patterns. Based on different subjects, Wang and Ahmed (2004) has identified five principal
countries which grow an organization’s overall innovativeness. These five main areas include product
innovativeness, market innovativeness, process innovativeness, behavioural innovativeness, and strategic
innovativeness.

At the same time, organizations usually pay attention to an integral factor, for example, organizational culture to
grow and sustain innovation friendly environment. Organizational culture (OC) can be seen as an appropriate
concept to discuss the influence of several human factors on innovation because of its relationship with values,
beliefs and work arrangements that encourage creativity. OC may also act as a mutual frame of reference for
fluctuations in the organization making it an integral aspect for successful implementation of changes in the
system, structure or process to support employee creativity (Skerlavaj et al., 2010, S. Yesil, 2012, Valencia et al.
2010, Valencia et al. 2011, Sanz- Valle, 2011).

Some scholars have discussed the importance of innovation and cultural ties that limited number of studies. For
example, McLean (2005) conducted a literature review and noted that "the existing literature exploring the
relationship between organizational culture or climate and creativity or innovation was limited and the literature
on organizational culture and creativity and innovation is not extensive".

As per literature related to growth assumptions of stock prices, during new product growth, strong cultures are
not only ranked higher, but likewise are expected to grow more in the time to come. On the reverse, a balanced
culture can aid the organization in innovativeness (Ashley and Bryan, 2009). A few students have also notified
the qualities of adaptability and involvement as integral to perform and implement which can result in
innovation (Denison, 1990; Denison and Mishra, 1995; Kotter and Heskett, 1992; Sorenson, 2002). However,
in contrast to Yrigoyen’s (2011) arguments, organizational culture and innovation strategy are not necessarily to
be significant for innovativeness of a firm in the context of traditional micro and small enterprise.

A few scholars including Valencia et al., (2010) suggested use of organizational culture model of Cameron and
Quinn (1999) to study organizational culture (OC) and organizational innovativeness (OI). Hence, an empirical
study discussing the connection between OC and OI may serve as a substantial contribution to the literature.
This work is accepted in a developing rural area which also is anticipated to raise the understanding of OC and
OI from a dissimilar view.

This research proposes to test the association between OC and OI where the former will be studied by referring
to Competing Values Framework (CVF) Model which is a well-proven theory for discussing the central
qualities of organizational culture as important determinants of improved organizational performance (Rahul
Raj, 2013, Deshpande et al., 1993; Valencia et al. 2011; Sanz- Valle, 2011). Identifying and applying parts of
culture that may have a positive impact on innovation is relevant for developing an improved understanding of
organizational culture across all contexts.

According to some previous studies on the importance of OC and OI , and saw a gap that needs to be filled ,
therefore, the focus of this study is to explore the relationship between organizational culture and organizational
innovativeness in higher education institutions (HEI) in Malaysia .

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LITERATURE REVIEW

Organizational Innovativeness

Many alternative models and conceptualizations for the analysis of observed data have been provided by the
growth of innovation literature. Consequently, an innovation can be a novel service or product, a new
administrative organization or structure, a new production process technology, or a new plan or program relating
to organizational members. Hence, innovativeness, or OI, is usually measured by the level of the acceptance of
innovations, even though other measures have been used by a few studies (Damanpour, 1991, Hilmi et al, 2010).
It is crucial to realize the types of innovation and their features because a specific type of innovation requires
unique and sophisticated responses from an organization (Lam A., 2010; Wang & Ahmed, 2004, Hilmi et al.,
2010). Researchers have produced a typology of innovation in different ways. In the innovation literature, either
there was a similar name used for different inventions or the same innovation categorized into different
typologies (Garcia & Calantone, 2002). Although previous innovation studies suggested several typologies of
innovations, the most prominent case of innovation comprises the following categories: technological versus
administrative innovation, incremental versus radical innovation, and product versus process innovation
(Cooper, 1988).

Organizational innovativeness (OI) describes an organization’s acceptance and implementation of new ideas,
processes, products, or services and propensity to change through adopting new technologies, resources, skills,
and administrative systems (Hurley, Hult, & Knight, 2005). An organization’s innovative orientation has been
shown to influence its ability to satisfy customers’ requirements, meet growing consumer expectations, and
respond to rapidly changing environments (O’Reagan, Ghobadian, & Sims, 2006). While OI includes an
organization’s capacity to be innovative and to produce innovative offerings (Ozer, 2006), it is founded upon the
innovative behaviors of individual organization members. Besides organizational benefits, an OI has been
shown to strongly improve employees’ job attitudes, job satisfaction, and organizational commitment (Zhou,
Gao, Yang, & Zhou, 2005) as well as encourage the establishment of personal innovativeness. In this regard, an
innovative orientation shares many of the same characteristics as a learning organization (Senge, 1994).

Organizational innovativeness is related to various factors, and thus is influenced by internal and external
factors that are different (Bullinger et al. 2007; Egbetokun et al. 2007). While innovation is a complex concept ,
the research also identified five key areas that affect the organization's ability to innovate. The effect is related
to leadership , opportunistic behavior , culture and change , learning and networking and relationship building.
As per literature highlighted, the study suggests that organizational culture as an important factor affecting
organizational innovation .

Organizational Culture

The concept of organizational culture (OC) has been defined by a number of scholars leading to a missing
universally accepted definition (Rollisnon and Broadfield, 2002). For instance, Deal and Kennedy (1982)
defined OC as “the way things get done around here”. Moreover, Schein (1985) perceived OC as “a pattern of
basic assumptions values, and norm which invented, discovered or developed by a given group as it learns to
cope with its problems of external adaptation and internal integration.” In addition, Park et al., (2004) defined it
as “the shared, basic assumptions that an organization learns while coping with the environment and solving
problems of external adaptation and internal integration that are taught to new members as the correct way to
solve those problems”. OC influences all the processes and outcomes related to individuals and the overall
organization which enhances its significance.

Ball and Quinn (2001) defined OC as “an organization’s values, beliefs, practices, rites, rituals, and stories, and
all of which combine to make an organization unique”. The shared beliefs, expectations, norms and values of
employees in an organization develops it corporate culture. Despite the lack of universal definition, many agree
to the definition of OC proposed by Abu-Jarad et al., (2010). They defined it as “something that is holistic,
historically determined (by founders or leaders), related to things anthropologists study (like rituals and
symbols), socially constructed (created and preserved by the group of people who together form the
organization), soft, and difficult to change”.

Organizational culture has been categorised in various ways. For instance, Cameron and Quinn (1999)
developed their ‘Competing Values Framework Model’ which has been used by a number of studies conducted
on the subject of OC (Obenchain and Johnson, 2004; Stock et al., 2007; Valencia et al., 2010). Their model
includes four different types of OC including adhocracy, clan, market and hierarchy.

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Organizational culture also have various consequences for the employees and organisations. For instance, it has
significant impact on employee behaviour, learning and development (Shu, 2014; Saeed and Hassan, 2000),
creativity and innovation (Ahmed, 1998; Martins and Terblache, 2003), knowledge management (Liao et al,
2012; Tseng, 2010), performance (Han et al., 1998; Kim et al., 2004; Oparanna, 2010; Saeed and Hassan, 2000;
Tseng, 2010; Zain et al., 2009). There is a large amount of literature that discusses the effect of organizational
culture on different outcomes, however, impact of organizational culture on innovation is relatively limited
(McLean, 2005; Vincent et al., 2004). It serves as the base of this study where it is argued that organizational
culture affects organizational innovativeness of the firms.

Organizational Culture and Organizational Innovativeness

The culture of the organisation is what sets them apart from different organisations; therefore the organisation
can position itself in the environment through its culture. However one of the most used definition of
organizational culture which identifies the role of culture and how culture plays its part in the success of the
organisations activities, was stated by Schein (2004) who noted that organizational culture (OC) is "A pattern of
basic assumptions that the group learned as it solved its problems of external adaptation and integration that has
worked well enough to be considered valid and, therefore, to be taught to new members as the correct way to
perceive, think, and feel in relation to those problems”.

Organizational culture can also be defined as a form of shared values, routines, norms and objectives shared by
the employees of the organization. Therefore, OC is created on a foundation of communication, socializing and
common trust and understanding. Furnham and Gunter(1993) reviewed the basic functions of how OC can be
incorporated as internal integration which can be formed through socializing between members of the
organization and creating a community of trust and identity within personnel and commitment to the
organization.

Literature discusses the importance of OC in most of the use of innovation (To and Wei, 2008) which makes
consensus that organizational culture is important in any shift in the organization . However , there are no
studies on the type of OC that supports business innovation and transformation (Skerlavaj et al., 2010), except
for a few recent studies that examine a range of issues only (e.g. Kandemir and Hult, 2005; Martins and
Terblanche, 2003; Merx-Chermin and Nijhof, 2005; Sarros et al., 2008).

Darroch (2005) and Kotter (2008) identified that the culture that is appropriate for organizations pursuing long-
term innovation , is in need of adjustment in a viable environment , culture is also a culture of learning that
foster and promote innovation . In the process of innovation , Muffatto (1998) suggest that the establishment and
professional knowledge regarding innovative climate and competencies required to assist the activities of
innovation.

In addition, Tseng (2010) pointed out that organizational culture is an important block in order to generate
“knowledge -friendly culture”, which brings positive results to improve organizational performance and
innovation. In addition, he highlighted the fact that the characteristics of the organizational culture as a common
culture , beliefs and ideas that much productive work has important contributions in the application of effective
knowledge management . A positive relationship is examined by Liao et al. (2012) and Sanz - Valle (2011)
between organizational innovation and cultural organizations and associations of impacts on competitive
advantage . Other scholars such as Cernzze, et al. (2012) and Muffatto (1998) also suggested that to support the
innovative culture, it is significant to have innovative climate and associated professional knowledge. Chang
and Lee (2007) also stated that innovative and supportive culture significantly effects administrative and
technical innovation.

Dynamic Capabilities Theory

Dynamic capabilities theory explains how organisations acquire and deploy resources according to the market
environment to achieve superior organizational functioning and success (Teece et al., 1997). Dynamic
capabilities as proposed theory in this framework, are what HEI need to concentrate on the main competencies
and how the purpose of management builds, changes and adapts to the changing forces that could bear on the
competencies and how these the HEI's capabilities can operate round the changing elements of the business
environment. It is also provides the fundamental organizational processes that facilitate HEI to be advanced
within the whole system. Organizations fail to sustain their business and performance through the changing
market and technologies. Organizations need to maintain their competitive advantage, therefore, they would

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have to make do, influence and adjust their competencies and assets in society to reach and maintain their
competitive advantage (Wang and Ahmed, 2007).

Culture can affect different aspects of the organization’s dynamic capabilities such as its innovation, employee’s
involvement, its openness to change, teamwork, morale, customer service and trust. Culture creates the basis for
the company's employees ; it is also created by staff not company itself . The organization will only provide
objective, mission and goals , but the workers will develop the culture and how to manage and achieve the
objectives . Organizational culture plays a big role in the company's strategic direction, goals , tasks, decisions ,
communication and cooperation . Some organizations will form their OC based on creativity and innovation to
ensure their sustainability. However , OC affects the ability to increase innovation dynamics that influence the
behavior or structure of a firm(Wang and Ahmed, 2007).

In order for the organization to achieve a sustainable OC, management should generate values that encourage
creativity for example, encouraging staff to come forward with new ideas and not to be afraid of stepping up to
different tasks. Introducing a more open communication policy allows the employees to feel comfortable with
one another while sharing their ideas, knowledge and opinions in order to gain new views and outlooks, this
supports the idea of creating a creative and innovative based culture.

THEORETICAL FRAMEWORK

A thorough critique of literature about the characteristics of OC and its dimensions support the feelings that each
dimension of organizational culture can impact the innovativeness of organizations. Literature presents a
readable perspective of these proportions and their connection with OI. This study considers four dimensions of
organizational culture including clan, adhocracy, market and hierarchy. As per Cameron (2004), clan culture is
‘a friendly place with an extended family working together’. It is characterized with loyalty, team spirit,
commitment, tradition, collaboration, teamwork, participation, and consensus, individual development
(Cameron, 2004; Cameron and Quinn, 2006; Tseng, 2010). Adhocracy culture is based on a dynamic,
entrepreneurial, innovative and creative workplace (Cameron, 2004; Cameron and Quinn, 2006; Tseng, 2010).
It concentrates on the maturation of new product and services, growth, change, and experimentation (Cameron,
2004; Cameron and Quinn, 2006; Tseng, 2010). The third dimension is market culture which is regarded as a
results-oriented workplace with emphasis on winning, outpacing the competition, escalating share price, and
market leadership (Cameron, 2004; Cameron and Quinn, 2006). The final dimension is hierarchy culture which
is categorized with a formalized and structured place along with procedures, well-defined processes and a
smooth-running organization (Cameron, 2004). It is contended that these features may influence OI of the firms
(Cameron, 2004; Tseng, 2010). Therefore, a logical and reasonable hypothesis derived from these theoretical
and empirical studies would be as follows;

H1: Clan culture dimension of organizational culture is positively related to organizational innovativeness of
the firms
H2: Adhocracy culture dimension of organizational culture positively influences organizational
innovativeness of the firms
H3: Market culture dimension of organizational culture positively affects organizational innovativeness of the
firms
H4: Hierarchy culture dimension of organizational culture has negative association with organizational
innovativeness of the firms

Based on the literature reviewed the theoretical framework shown in figure 1 is proposed
FIGURE I
PROPOSED CONCEPTUAL FRAMEWORK FOR PREDICTING RELATIONSHIP BETWEEN ORGANIZATIONAL CULTURE AND ORGANIZATIONAL
INNOVATIVENESS.

Organizational
Culture Organizational Innovativeness

Clan culture, Product Innovation

Adhocracy culture, Market Innovation

Market culture Behavioral Innovation

Hierarchy Culture Strategic Innovation

CONCLUSION

This work discussed the meaning of organizational culture (OC) and organizational innovativeness (OI).
Therefore, it has shown contribution to the literature by proposing a conceptual framework based on the
dynamic capabilities theory. The framework proposes the direct effect of organizational culture (consisting clan
culture, adhocracy culture, market culture, and hierarchy culture) on organizational innovativeness (consisting
product innovation, market innovation, behavioral innovation, and strategic innovation). Nevertheless, this
conceptual framework is still grounded on an intensive literature review and has not been empirically tested
which is a future research opportunity. Nevertheless, this survey can serve as a foundation for future research to
analyze the significant factors towards enhanced innovation and competitive advantage.

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