IMPACT OF CORPORATE CULTURE ON INNOVATION PERFORMANCE A CONCEPTUAL FRAMEWORK45329

Based on analyzing and summarizing outstanding research results on corporate culture and innovation, this paper proposes a conceptual framework using six cultural dimensions: adhocracy c

IMPACT OF CORPORATE CULTURE

ON INNOVATION PERFORMANCE -

A CONCEPTUAL FRAMEWORK

Le Thi Tu Anh”

ABSTRACT

Innovation has become a core element in the success of a firm in the context of the industrial revolution 4.0 Based on analyzing and summarizing outstanding research results on corporate culture and innovation, this paper proposes a conceptual framework using six cultural dimensions: adhocracy culture, clan culture, market culture, hierarchical culture, innovation-oriented culture and learning culture to examine the impact of corporate culture on innovation performance The conceptual framework can be used in future studies

on cultural dimension that promote firm’s innovation in Vietnam

Keywords: Corporate culture, innovation performance, innovation- oriented culture, learning culture

1 INTRODUCTION

Faced with the challenges of industrial revolution 4.0, innovation is an indispensable requirement for every firm to grow and succeed in the market The rapid development of technology

1 Center for Business Administration Studies - VNU University of Economics and Busines

*Corresponding author: tuanh.[t209@gmail.com

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has shortened the life cycle of products, accelerated the speed of new products research and development This makes businesses always innovate to adapt and catch up with the general trend In this context, innovation becomes a central element in a firm’s strategies as well as in building and developing corporate culture In fact, recent researches showed that the corporate culture plays a significant role

in firm performance, and particularly in terms of innovation

Concerning corporate culture, Organizational Culture

Assessment Instrument (OCAI) is one of the most popular methods that allows to assess and analyze four cultural dimensions, including:

adhocracy culture, clan culture, market culture and _ hierarchical

culture The competing value framework of Cameron and Quinn

(2006) is also used in a large number of studies on the linkage between

corporate culture and innovation to measure the impact of these cultural dimensions on promoting innovation in firms However, regarding the characteristics of innovation in current context, this model does not mention the cultural dimensions that promote organizational learning as well as creative ideas in new products and processes development In order to clarify the impact of different cultural dimensions on innovation, this paper proposes a conceptual framework based on the inheritance and development of four cultural dimensions in OCAI by adding innovation-oriented culture and learning culture This framework will provide suggestions for future research related to the relationship between corporate culture and innovation as well as the conditions for promoting innovation

2 LITERATURE REVIEW

In the twenty-first century, the importance of corporate culture in performance improvement is increasingly realized in both theory and practice Researchers working on corporate culture and

International Conference Proceedings 107 innovation insisted that different dimension of corporate culture have significant impact on innovative and creative activities of firms

In this paper, certain dimensions are examined to clarify the impact

of corporate culture on innovation performance of a firm

2.1 Corporate culture

Corporate culture plays a significant role in increasing productivity and profitability of a firm Many researchers have defined corporate culture in different ways Corporate culture is

usually considered as a set of values, attitudes, behaviors, rituals, beliefs, norms, expectations, socialization, and assumptions of

employees which are shared within a firm and help determine its employees’ manners (Robbins and Judge, 2013)

Regarding the literature on relationship between culture and

performance of a firm, different dimensions of corporate culture

have been addressed The Hofstede and Hofstede (2005) revealed

five dimensions of culture: power distance, uncertainty avoidance, individualism, masculinity, long-term orientation These dimensions

are frequently used in cross-cultural research in order to define the border of corporate culture and societal culture (Shi and Wang,

2011) Robbins and Judge (2013) determine seven dimensions of

corporate culture, including: innovation and risk taking, attention

to detail, outcome orientation, people orientation, team orientation,

ageressiveness, and stability In studying the influence of culture on performance in terms of innovation, competing value framework has been commonly used in different context (Deshpandé and

Farley, 2004; Cameron and Quinn, 2006; Tian et al., 2018) Four

dimensions of cultural values and norms consist of hierarchical

culture, clan culture, adhocracy/developmental culture, and the rational/market culture.

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2.2 Innovation

According to Shahzad et al (2017), innovation is an efficient

execution of creative thoughts within an organization Innovation

is often considered as encouraging creativity and implementing creative ideas A series of concepts related to innovation are frequently mentioned in academic include new and innovative ideas, research and development, new technology and design, new product development Innovation can be implemented in different ways, such as market innovation — the adoption ofa new marketing program

or finding and entering a new potential markets for new and existing products; innovation in process - the introduction of contemporary production and management methods, innovative technology and improvement in product management systems (Wang and Ahmed,

2004; Shahzad et al., 2017)

Despite the diversity of approaches, there are two aspects

involved: (1) innovation is a process of creating new ideas and transforming these ideas into new or improved products, services and processes; (2) innovation is related to the use of new products,

services, technologies, organizational structures or management

systems to improve firm performance (Tian et al., 2018) Based on

innovation, firms can achieve competitive advantage and sustainable development in the market In fact, firms with higher innovation

capacity can adapt more quickly to changes in business environment

and be more successful

2.3 Impact of corporate culture on innovation performance

‘The role of corporate culture in encouraging innovation has been examined in various studies Corporate culture will facilitate the implementation of creative solutions to solve problems in innovative

International Conference Proceedings 109

ways in case this culture enables a creative and relaxed environment for employees to propose innovative ideas and participate in innovation strategies Hislop (2013) showed that innovation and learning of firm are impacted by several components of corporate culture, such

as values, beliefs, work environment, knowledge sharing

A number of empirical studies found that corporate culture has significant impact on firm performance, and _ particularly

on innovation (innovation absorption capacity, innovation

performance ) Several dimensions of corporate culture, such as strategy, structure, behavior and communication could support or

inhibit creativity and innovation (Martins and Terblanche, 2003)

The cultural values of firm and corresponding norms could shape corporate culture to influence employee behaviors like innovation (Hogan and Coote, 2014) When innovation capacity, tolerates tisk of employees are incited by corporate culture and climate,

innovativeness could be enhanced

Such an innovative culture could be based on eight elements:

innovative mission and vision statements; democratic culture; safe innovative environments; flexibility; external collaboration; sharing and teaching across business units and alliances; incentive schemes

based in work teams; and leadership that encourages innovation

(Skerlavaj et al., 2010)

3 METHODOLOGY

This paper used thematic analysis methods for the synthesis

of several secondary data sources A number of existing researches relating to corporate culture, innovation and the impacts of corporate culture on innovation performance were analyzed for identifying, classifying and interpreting the selected documents (Fink, 1998)

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Studies published from 2000 to 2018 were taken into account in order to identify research gaps Then, the reviewed researches were analyzed inductively The use of an inductive method allows to identify the conceptual content of the field and develop a conceptual framework from the material by means of generalization (Mayring, 2003) The proposed conceptual framework in this paper was in line

with resource based view (Wernerfelt, 1984)

4 CONCEPTUAL FRAMEWORK

Based on the cited literature, this paper posits corporate culture

as antecedent of innovation A conceptual framework for measuring impact of corporate culture on innovation performance is proposed

as shown in Figure 1 The scales of this framework are described in detail in Figure 1

0CAI

Adhocracy culture

Clan culture

Hierarchical culture Innovation performance Innovation-oriented culture Z2

Learning culture

Figure 1: Proposed conceptual framework

Source: Proposed by author.

International Conference Proceedings TH Corporate culture

In order to measure corporate culture, this paper follows the

Organizational Culture Assessment Instrument (OCAI) methodology

of Cameron and Quinn (2006) The competing value framework

developed by Cameron and Quinn (2006) is one of the most popular theoretical models used in researches related to influences

of corporate culture on performance in terms of innovation Thus, there are four dimensions of corporate culture ti have been adopted, including: adhocracy culture, clan culture, market culture and hierarchical culture These dimensions have been also used in recent

studies to examine the culture of firms (Obenchain and Johnson,

2004; Naranjo-Valencia et al., 2010)

Adhocracy culture: Adhocracy culture promotes flexibility and external focus This culture also emphasizes future orientation, risk

taking, openness, rewards for change and organizational learning (Naranjo-Valencia et al., 2010; Ruvio et al., 2014; Tian et al.,

2018) These cultural characteristics allow firms to easily adapt to

changes in business environment, linking important resources to the

implementation of innovative and creative projects A number of studies showed the linkage between corporate culture and innovation

through human resource management The study of Wei et al (2011)

pointed out that strategic human resource management has a positive impact on product innovation of firms and this impact is strong in the firms with adhocracy culture Although adhocracy culture has

a number of characteristics in favor of new product development

and process innovation, other characteristics could reduce the

effectiveness of innovation The firms with adhocracy culture can focus too much on flexibility and growth goals in the future, so they do not sufficiently study the market or anticipate potential risk

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factors Restrictions in risk management can lead to difficulties in

implementing breakthrough ideas, which is potentially risky

Clan culture: This culture is characterized by creating a friendly working environment, sharing ideas among members, having cohesion and solidarity for common long-term goals (Cameron and

Quinn, 2006) Study of Barczak et al (2010) found that culture

that enhances human development, the participation of individuals and emotional intelligence will help promote the group’s trust and creativity In order to encourage creativity and innovative ideas, it

is important to build clan culture which helps to create a friendly atmosphere, link individuals and emphasize teamwork for long-term goals However, in order to connect employees in firms, it is necessary

to focus on the aspect of resolving dissent, respecting diversity, and maintaining long-term harmony

Market culture: The firms with market culture aim at the values that are outside of themselves They emphasize competitiveness, while the achievement of result is based on strict control The attention

of firms paid on outward focus can help timely grasp changes and emerging ideas in the market, thereby promote innovation within firms However, there is a limited number of studies showing the clear impact of market culture on innovation capacity as well as

innovation performance Therefore, there is a need for theoretical and

empirical studies of the relationship between this cultural dimension

and innovation

Hierarchical culture: Hierarchical culture emphasizes the structure, stability, predictability and efficiency of firms (Cameron and Quinn, 2006) In the firms with hierarchy culture, internal control is focused Because of this characteristic, hierarchical culture can reduce impacts of new ideas or information outside the

International Conference Proceedings Tỗ firms, limiting learning, thereby negatively impacting innovation

However, the effect of this culture needs to be verified more clearly through empirical studies to consider the possibility of effective decentralization in the firms that can promote creative information exchange between leaders and employees

Besides the four cultural dimensions mentioned in the OCAI

model, this paper adds two other dimensions: innovation-oriented culture and learning culture

Innovation-oriented culture: Innovation-oriented culture refers

to a set of cultural values, norms and artifacts which support creativity

in firms (Stock et al., 2013) In this environment, corporate culture

becomes an invisible strategic resource which promotes innovation, risks acceptance, future market orientation, open thinking and learning Firms are more interested in research and development

projects, services and processes improvement Moreover, innovation-

oriented culture requires participation and shared responsibility of all members in order to maximize human resources and motivate

employees to work towards innovation (Tian et al., 2018) Several

scholars have agreed that corporate culture should be seen as a key to innovate a firm’s resources, promoting its growth, and enhancing its firm performance

Learning culture: Innovation is usually associated with learning The constructs of culture such as information acquisition, information interpretation, and behavior and awareness change greatly favor learning, thereby create an appropriate environment for learning and knowledge transfer towards innovation in both product and process (Brettel and Cleven, 2011) Learning culture motivates employees

to seek learning opportunities, encourage self-improvement of work processes through learning

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Table 1: Description of scales

oriented culture

Adhocracy culture | This scale describes the extent of Cameron and Quinn (2006);

which a firm's culture focuses on Ruvio et al (2014); Tian et flexibility, future orientation, al (2018)

and risk taking

Clan culture This scale describes the extent of Cameron and Quinn (2006);

which a firm's culture emphasizes Barezak et al (2010) cohesion, solidarity and creating

friendly working place

Market culture This scale describes the extent of Cameron and Quinn (2006);

which a firm's culture focuses on Tian et al (2018) outside changes and requests

Hierarchical This scale describes the extent Cameron and Quinn (2006) culture of which firm's culture focus on

structure and stability

Innovation- This scale describes the extent Brettel and Cleven (2011)

of which a firms culture supports creativity and innovativeness

Learning culture This scale describes the extent

of which firm's culture enhances

learning and sharing knowledge

Skerlavaj et al (2010)

Innovation

performance

This scale measures the extent

of which a firm emphasizes and implements innovation in products

and processes

Wang and Lin (2012); Shahzad et al (2017)

Innovation performance

Innovation performance could be

Source: Author

considered as the

accomplishment of innovation through which the firm achieves its goals Many studies have emphasized that corporate culture plays an