Critical Review

MGMT2001
Submitted by Jiayu LUO z3219847

MGMT2001 - Critical Review

The article being reviewed is Sapprasert and Clausens (2012) article, which is an empirical study on the effect of organisational innovation on the firms performance, as well as its effect on future attempts at organisational innovation. This examination is an analysis of data obtained from two CIS surveys integrating financial accounts (1994-2004), detailing the firms involvement in organisational innovation, the definition of which includes not only changes in knowledge management systems but also changes in interaction with external firms or public institutions, as well as other types of internal organisational change. Sapprasert and Clausen points out in their article that quantitative studies in this topic are is quite lacking, and their approach allows for new understanding of the impact of organisational innovation on the firm. The article begins with Section 1, an introduction to the broad definition of organisational innovation taken. It then moves on to Section 2, which explore the definitions of organisational innovation, and how it has been or could be applied in empirical studies. Section 3 and 4 concerns the actual empirical study, from the formation of hypotheses to the data and method involved in this analysis. Section 5 discusses the actual findings from the analysis, and Section 6 concludes with a discussion of the results and the impact of the findings. The article also outlines the prior research relevant to this area. In particular, the articles by Wolfe (1994) and Damanpour et al. (2009) were used to highlight the importance of the need for more empirical studies in the research area regarding organisational innovation. Specifically, Wolfes 1994 study found that the inconsistency of research results regarding organisational innovation is the clearest finding in prior literature in this topic. Sapprasert and Clausen use Wolfes 1994 article to emphasize the need for further empirical studies on the importance and effect of organisational innovation. On the other hand, Damanpour et al. (2009) was a longitudinal study on the effect of different types of innovation on the service industry. This article was used by Sapprasert and Clausen not only to highlight the need for research in the technological side of innovation and its effects on firm performance, but also to state that there is a need to study firms over the long term to fully comprehend the effects of innovation on performance. Sapprasert and Clausen take a longitudinal approach to their study, adding to the existing research available on the topic of organisational innovation. Although their approach has its flaws, they are making headway into the topic, and any addition to the research is welcome at this stage. In this article, the authors attempt to limit the bias present in their data collection, and thereby achieve more reliable results. They understand that their analysis is just a small step towards understanding the effects of organisational innovation on performance. Their analysis covers both technological and organisational innovation. The study found that although innovation in manufacturing is far more prevalent, organisational innovation has gained more popularity, particularly in the area of services. The impact of such innovation has historically been known to be positive on firm performance (Chandler, 1962), however, research on the topic has been lacking. Sapprasert and Clausen set out to test several hypotheses, endeavouring to improve the information available on this topic, by analysing the effect of past innovation on both the performance effects of current or future innovation, as well as overall influence on current innovation, and the effect of combining both organisational and technological innovation.

Submitted by Jiayu LUO (3219847)

MGMT2001 - Critical Review

In formulating the first hypothesis, the authors realise that there is some prior empirical studies conducted indicating the importance of organisational innovation, and the positive effects it has on firm performance. It has been previously shown that prior innovation builds on current innovation, and it is a cumulative effect (Schumpeter, 1942). As thus, Sapprasert and Clausen believe that past attempts at organisational innovation increases the probability of new attempts at organisational innovation. Although there is evidence showing that persistent innovation may be disadvantageous and decrease firm performance (Amburgey et al. 1993), further research found that firms persistent ability to cultivate technological and organisational innovation are able to benefit by having higher adaptability to change (Kelly and Amburgey, 1991; Amburgey and Miner, 1992). Using past research which focuses on firms ability to focus on persistent change in terms of technological and organisational innovation, the authors theorise that persistent organisational innovation increases the effects of current organisational innovation on the firm. From previous research, technological innovation has always had a positive effect on firm performance (Chandler, 1962). However, quantitative research on the combined effects of innovation on firm performance is lacking (Damanpour et al., 2009). Despite this, the authors believe that by extending the prior research, they put forth that technological and organisational innovation has a complementary effect on firm performance. The measurement used here is a unique firm-level data set integrating the annual financial accounts (1999-2004) and two Norwegian Community Innovation Surveys, CIS3 and CIS4. This data is used to analyse organisational innovation at the firms which were willing to report an application of technological or organisational innovation. CIS4 was preceded by CIS3 by three years, but both were distributed to employees to relevant firms. These firms had a greater than 30% overlap in the respective sectors (service, technology and other), which was considered to be reasonably representative of the overall industry. The authors then developed a two-step model which analyses the determinants and effects of organisational innovation based on this data set. This article stresses the importance of undertaking organisational together with technological innovation, and exploring the effects on the firms performance. It is encouraging to note that although this article has weaknesses, considering the use of data from 1999-2004, it is still an addition to the under-researched topic of the effects of organisational innovation. Sapprasert and Clausen found that organisational and technological innovation should be undertaken together, as combined, they have a significant and positive connection to firm performance. Moreover, it was found that past organisational innovation was a good indicator of future attempts at organisational innovation, and prior experience with organisational innovation is highly beneficial on firms undertaking current organisational innovation. However, the authors realise that this article is only a small step in the research on the effect of organisational innovation on firm performance. Overall, Sapprasert and Clausen have made good headway in a research area which has been lacking in empirical studies. While the authors have made good headway into this research area, they are only making a very small contribution. Moreover, the lack of research relating to long-term effects of organisational innovation on performance is still evident.

Submitted by Jiayu LUO (3219847)

MGMT2001 - Critical Review

On the other hand, their research is fairly well conducted given the limitations they were under in terms of data collection. They did, however, note down all the faults that were present in their analysis. Overall, the article was well written and opens the doors for more research to be undertaken in this area. This article was chosen because it was interesting, and, for its time, a new empirical study on the performance effect of innovation. This relates to the course as it specifically analyses the importance of innovation and change in an organisation, and the effects on firm performance, as well as the effects of innovation on future prospects of further change.

Submitted by Jiayu LUO (3219847)

MGMT2001 - Critical Review Bibliography

Amburgey, T.L. and Miner, A.S. (1992), Strategic momentum. The effects of repetitive, positional, and contextual momentum on merger activity, Strategic Management Journal, 13, 335-348. Amburgey, T.L., Kelly, D., and Barnett, W.P. (1993), Resetting the clock: The dynamics of organisational change and failure, Administrative Science Quarterly, 38(1), 51-73. Chandler, A. (1962), Strategy and Structure. The MIT Press: Cambridge, MA. Damanpour, F., Walker, R.M. and Avellaneda, C.N. (2009), Combinative effects of innovation types and organizational performance: A longitudinal study of service organizations, Journal of Management Studies, 46(4), 650-675. Kelly, D. and Amburgey, T.L. (1991), Organizational inertia and momentum: A dynamic model of strategic change, Academy of Management Journal, 34(3), 591-612. Sapprasert,K. and Clausen, T.H. (2012), Organisational innovation and its effects, Industrial and Corporate Change, 21(5), 1283-1305. Schumpeter, J. (1942), Capitalism, Socialism and Democracy. Routledge: London. Wolfe, R.A. (1994), Organizational innovation: Review, critique and suggested research directions, Journal of Management Studies, 31(3), 405-431.

Submitted by Jiayu LUO (3219847)