Paper to be presented at the DRUID 2011

on
INNOVATION, STRATEGY, and STRUCTURE Organizations, Institutions, Systems and Regions
at
Copenhagen Business School, Denmark, June 15-17, 2011

Does organizational creativity really lead to innovation?

Mette Praest Knudsen

University of Southern Denmark
Marketing & Management, DRUID
mpk@sam.sdu.dk
zge Cokpekin

ozge@sam.sdu.dk

Abstract
Current research claims that the presence of organizational motivation, resources and a creative climate in
organizations leads to innovation. Just as strong as the relationship is carved out in the literature, just as weak is the
empirical evidence reported in the literature. This paper utilizes a survey of 147 firms from a particular region of
Denmark to analyze whether organizational creativity does lead to innovation in small firms. We follow the most often
referred creativity and innovation model and the pre-existing creative climate assessment tools to assess the stimulants
of product and process innovation. The logistic regression analyses demonstrate that organizational motivation,
resources and idea time are positively associated with product innovation. However, this result did not hold for process
innovation, where strategy and risk are important. We also found that enhanced freedom and autonomy for employees
affect probability of product innovation adversely. We conclude that indeed organizational motivation, resources and
idea time spawn product innovation, whereas managers are recommended to exercise freedom cautiously. The paper
raises three future research directions to further analyze the relationship between organizational creativity and
innovation.
Jelcodes:O32,O31

Does organizing creativity really lead to innovation?

zge Cokpekin1
Mette Prst Knudsen
Integrative Innovation Management Unit, DRUID
Dept. of Marketing & Management
University of Southern Denmark

Keywords: creative climate, organizational creativity, product innovation, process innovation

Abstract
Current research claims that the presence of organizational motivation, resources and a creative climate in
organizations leads to innovation. Just as strong as the relationship is carved out in the literature, just as
weak is the empirical evidence reported in the literature. This paper utilizes a survey of 147 firms from a
particular region of Denmark to analyze whether organizational creativity does lead to innovation in small
firms. We follow the most often referred creativity and innovation model and the pre-existing creative
climate assessment tools to assess the stimulants of product and process innovation. The logistic
regression analyses demonstrated that organizational motivation, resources and idea time are positively
associated with product innovation. However, this result did not hold for process innovation. We also
found that enhanced freedom and autonomy for employees affects the probability of product innovation
adversely. We conclude that organizational motivation, resources and idea time spawn product innovation,
whereas managers are recommended to exercise freedom cautiously. The paper raises three future
research directions to further analyze the relationship between organizational creativity and innovation.

Corresponding author: ozge@sam.sdu.dk.

[1]

1. Introduction and motivation

Creativity in an organizational context is the conceptualization and development of novel ideas, products,
processes or procedures by individuals or a group of individuals working together (Amabile, 1988, Shalley,
1991, Woodman, Sawyer and Griffin, 1993). Creativity ignites innovation, because innovation is
characterized as the successful application of what creativity produces in organizations, (Amabile, Conti,
Coon, Lazenby and Herron, 1996, Oldham and Cumming, 1996). In short, all innovation begins with creative
ideas (Amabile et al, 1996: 1154).
Creativity and innovation are perceived to be so closely linked that these terms are often used
interchangeably (Ford, 1996). Indisputable, one is guided to the presumption that creativity leads to
innovation, and just as strongly, we expect to find substantial empirical evidence confirming this
relationship. Surprisingly, only a few empirical contributions are subsequently identified in a thorough
literature review. From a qualitative viewpoint, Mohamed and Rickards (1996) study aspects of the key
relationship and Soo, Devinney, Midgley and Deering (2002) briefly discuss the difficulties of turning
creativity into innovative products. Bharadwaj and Menon (2000) provide a quantitative analysis on
creativity mechanisms in the firm and Sohn and Jung (2010) discuss but only find an indirect relationship
between creativity and innovative performance. Somewhat thought-provoking, we realize along with
Puccio and Cabra (2010, 147-148) that relevant empirical research remains surprisingly limited.
This paper aims to identify the creativity factors that stimulate innovation by analyzing the following
research question: Does the organizing of creativity increase the likelihood of product and process
innovation?
Compared to previous research, this paper extends the work of Bharadwaj and Menon (2000), by focusing
not just on organizational structuring mechanisms, but also by adding organizational motivation, specific
resources and the characteristics of a creativity stimulating climate. Additionally, we include the
availability of time for creativity in our analysis. The elements tested empirically in this paper therefore
cover a more complete range of factors for organizational creativity; organizational motivation, resources,
dedicated time for creativity and creative climate factors.
Founded on the coherent theoretical arguments, this paper delivers some intriguing empirical results.
Some aspects of organizational creativity lead to product and/or process innovation, but simultaneously
there are hampering aspects that management must consider carefully. We found that encouraging
employees toward appropriate risk taking, following a proactive strategy and allocating sufficient
resources including time, foster product innovation but do not affect process innovation. Allowing freedom
to employees, however, hampers product innovation. To obtain these results, we utilize survey data
collected in 2010 on small Danish firms. The first contribution of this paper to the existing literature is the
deepened understanding of the main effects of organizational creativity on innovation contributing thereby
to the broader innovation management research.
The second contribution of this paper is that this is the first empirical study to analyze a coherent set of
factors of organizational creativity leading to innovation. In addition to the findings, the paper raises future
research questions to explore the relationship between organizational creativity and innovation further.

[2]

The paper proceeds by presenting the main theoretical arguments for organizational creativity and
innovation leading to the formulation of main hypotheses (section 2). The details of the study are presented
along with the method applied for the test of the hypotheses (section 3). The results section presents the
analytical results based on logistic regression models (section 4). Finally, the results are discussed (section
5), and the paper concludes on the findings and discusses the recommendations for managers of innovation
processes and future research directions (section 6).

2. Linking organizational creativity and innovation

Organizational creativity
The two main organizational creativity models in the literature are Amabile`s (1988) componential model
and Woodman, Sawyer and Griffin`s (1993) interactionist model (Shalley and Zhou, 2009: 12). The
componential model defines the requirements for creativity and innovation and conceptualizes the
relationship between these. In this model, creativity is associated with individuals while innovation is
described as an organizational phenomenon.
According to Amabile (1997), an organization is motivated to innovate if it places explicit value on
innovation, is oriented towards risk rather than sticking to status-quo, takes a proactive approach to
change rather than following a defensive strategy, expresses pride in employees capabilities and efforts,
and finally provides supervisory and work team encouragement on employees. Resources needed for
innovation are defined as the financial, material and informational resources made available to employees,
training provided to improve creative thinking skills, and sufficient time allocated to think creatively and
explore new ways of doing tasks (Amabile, 1997). Appropriate managerial practices conducive to
innovation are organization of work teams according to the skills of employees, provision of regular and
clear feedback, provision of project autonomy and goal setting that is tied to the overall mission, but
flexible at procedural progress (Amabile, 1988, 1997).
Motivation, resources and skills among employees stimulate creativity and, in turn, creativity feeds
innovation if the firm is motivated to innovate, provides resources for doing innovation, and ensures
appropriate managerial practices to support the smooth flow of the innovation process (Amabile, 1997).
The interactionist model (Woodman, Sawyer and Griffin, 1993) assumes that creativity is a phenomenon
that is affected by situational and behavioral factors in particular emphasizing the interactions among
individuals, groups and organizations. The model explicitly recognizes intra-organizational influences that
either stimulate (enhancers) or inhibit (constrainers) organizational creativity. As Woodman and his
colleagues (1993) draw attention to the importance of these enhancers and constraints, several other
researchers such as Amabile and Gryskiewicz (1989), Amabile et al (1996), Oldham and Cummings, (1996),
Ekvall et al (1983) and Ekvall (1997), Shalley, Gilson and Blum (2000) also emphasize the importance of
work environment characteristics for stimulation of creativity.
Although creativity per se cannot be directly managed (Amabile, 1995: 78, Woodman, 1995: 60), the
work environment characteristics can be. Hence, innovation managers can motivate the employees and the
organization to activate the creative potential (Taggar, 2002), and subsequently to foster innovation
(Amabile, 1988, 1997, Heinze, Shapira, Rogers, Senker, 2009, Oldham and Cummings, 1996, Shalley, Gilson
and Blum, 2000, Woodman, Sawyer and Griffin, 1993).
[3]

Empirically, the literature supports the adoption of the KEYS construct (Amabile and Gryskiewics, 1989,
Amabile et al, 1996) and the Creative Climate Questionnaire (CCQ) (Ekvall, 1996). These are developed to
quantify the degree of creativity stimulants in the firm`s work environment. KEYS measures the level of
encouragement of creativity, freedom, resources, pressures and organizational impediments in a firm
(Amabile et al, 1996). CCQ covers challenge, motivation, freedom, idea-support, trust and openness,
dynamism, humor/playfulness, debate, conflict, risk-taking and idea-time measures for assessing the level
of support for creativity (Ekvall, 1996).
Following the structure of these tools, it can be inferred that an organizational climate conducive to
creativity should be characterized as challenging enough to keep the motivation of employees high to
accomplish a task, offering a certain degree of freedom to choose ways of accomplishing the task, encouraging
a healthy level of risk-taking, supporting generation of ideas, allowing some free time to try new things, and
explore unused ways to accomplish task rather than overloading employees with pre-defined work.
Determining the optimum amount of time available to balance the tradeoff between time pressure and
unconstrained space for innovative activities is important (Amabile, 1988, Hsu and Fan, 2010). A certain
amount of urgency stimulates creative thinking, but being overloaded with work within an unrealistic time
frame may completely hamper any innovative activity. A simple mechanism may remedy this tradeoff by
allocating some free time dedicated to creativity and innovation activities. This managerial initiative sends
signal to employees by securing time and space to realize the best potential in them without sacrificing
direction and planning in the process. Allocation of dedicated time may therefore release the tension of
overloading, and encourage employees to think creatively and work on innovations. The above discussion
leads us to formulate an overarching hypothesis on the link between creativity and innovation:
A firm is more likely to innovate when the managers unleash the creative potential by motivating the
employees to innovate, allocating resources for this purpose, enabling appropriate management
practices to establish the organizational climate conducive to creativity, and allocating specific time for
idea development and creativity.
Conceptualizing innovation
The above hypothesis is not directly testable, although measures are available from the literature. Hence, a
conceptualization of innovation is called for. Generally, the concept of innovation as the concept of
creativity encapsulates too much to be directly measurable.
A review reveals that it is relevant to distinguish product from process and organizational innovation
(Damanpour and Gopalakrishnan, 2001) focusing on the outcome of the innovative activity. A product is a
good or service provided to customers, while a process is the mode of production and delivery of the
good or service (Barras, 1986). Product innovation can accordingly be defined as a new technology or
combination of technologies introduced commercially to meet a user or market need (Utterback and
Abernathy, 1975:642). Process innovation is defined as the new elements introduced into the firm`s
production or service operations to produce product or render a service (Damanpour and Gopalakrishnan,
2001: 48). These two types of innovations may require similar, but still different organizational skills since
product innovations are market-driven, while process innovations concern efficiency within the firm (Ettlie
and Reza, 1992).

[4]

A number of studies reveal that product and process innovations2 are closely related and applicable
simultaneously (Damanpour and Gopalakrishnan, 2001). For example, Pisano and Wheelwright (1995)
argue that simultaneous development of products and process is necessary since the congruent adoption of
both types of innovation smoothes the launch of new products and rapid penetration of the market.
Following the literature, therefore, it is inferred that firms are not expected to do either product or process
innovation, rather they do both types of innovations, regardless of the sequence of innovation.
Consequently, we assume that any study of the link between creativity and innovation should involve both
types of innovations, rather than one over the other. Our hypothesis developed from the literature merely
specifies that creativity is important for innovation, but not whether there are distinct differences between
e.g. product and process innovation.
Hypotheses
Product innovations require continuous intelligence about customers, markets and other uncertainty
factors. Accordingly, it is crucial that the firm allocates sufficient informational, material and monetary
resources to stay tuned with the external environment. An increase in explicitly placing high value on
innovation, expressing pride and high confidence in employees` achievements, taking an attitude towards
risk taking and proactive strategy rather than retaining the ongoing activities, and establishing creativity
conducive work environment leads to higher product innovation.
Hypothesis 1: All creativity components; organizational motivation, allocation of free-time and
resources, and establishment of a stimulating work climate are expected to be positively and
significantly related to product innovation.
As mentioned above the lack of distinction of different innovation types in the creativity literature leads us
to the formulation of mirror hypotheses, that:
Hypothesis 2: All creativity components; organizational motivation, allocation of free-time and
resources, and establishment of a stimulating work climate are expected to be positively and
significantly related to process innovation.

3. Data and variables

Population and the survey
The paper is based on a survey carried out in February and March 2010. Beforehand, five qualitative
interviews were conducted to identify the most important topics of creativity and innovation to include in
the survey. The interviewees were CEOs or innovation managers in small and medium-sized companies
(from 12-300 employees) from various industries. The selected firms were considered to be at the front
end of innovation in the particular region, and therefore would more naturally speak of the topics of

How product and process innovations are related to each other and whether product innovation leads process
innovation or vice versa have been widely discussed in the innovation literature. It is not of further relevance for this
paper, how the innovative forms are related and evolve, but for key references please consult Abernathy and
Utterback (1978), Barras (1986), and Anderson and Tushman (1991).
2

[5]

interest to the survey3. The interviews lasted between 1 and 1 hours and were carried out in October
2009. The topics included in the survey4 were selected as a combination of existing questions and items
from the literature and insights from the interviews. The questions to track innovation activities were
based on the CIS format. The questionnaire consists of 20 creativity-related and 21 innovation-related
questions that are used in the subsequent test of the hypotheses. The final survey was pre-tested on a
company, which first filled out the survey, and then was interviewed about the main subjects of concern.
This interview did not highlight any particular problems related to content or formulations.
The population consisted of firms with more than 5 employees in a particular geographical area (Funen) in
Denmark. The project is concerned with service and manufacturing firms delimiting the population to 1250
companies. A further cleansing of the firms (double-registrations and branches) resulted in 897 eligible
companies. These firms received an introductory letter from the mayor and an invitation to participate. An
email linking to the electronic survey was subsequently sent, asking for the innovation manager or CEO to
respond. Two email reminders were issued resulting in 147 responses at a response rate of 16, 4%.
Approximately 64, 6% of the respondents were CEO, administrative director, vice or senior director,
research manager and leader, and the rest was marketing or group managers with titles such as sales
director, marketing director, production chief. The average tenure of the respondents was 18.4 years.
The firms that responded to the survey are primarily smaller firms with less than 10 employees, whereas
only two companies have more than 250 employees. The results are therefore relevant predominantly in a
SME context. The distribution of responses fits the original distribution of companies in the population.
Number

Percentage

Less than 10 employees

79
53,7
10-49 employees
37
25,2
50-249 employees
17
11,6
More than 250 employees
2
1,4
Total
135
91,8
Missing System
12
8,2
Total
147
100,0
Table 1: Distribution of respondents according to the number of employees

Valid
percentage
58,5
27,4
12,6
1,5
100,0

In the empirical sections, we have used the following summarized form:

Manufacturing: Industry, rock extraction and utilities. 26 firms comprising 17.7 % of the sample.
Services: Trade, transport, information & communication, and business services. 93 firms
comprising 63.3% of the sample.
Others: Agriculture, forestry and fishing, building and construction, financing and insurance and
culture. 28 firms comprising 19% of the sample.

The semi-structured interviews dealt with the topics of the financial crisis and the firms reactions to the crisis,
strategies for innovation, creative processes and creative employees, and network relationships for innovation.
4 The survey contains questions relating to the following topics, creativity and innovation in general, innovative
activity, the importance of inter-organizational relationships for innovation, creative employees, mechanisms to
stimulate creativity and the creative environment.
3

[6]

The data collection took place in a period of the financial crisis and commenced about 1 after the crisis
took off in Denmark. The crisis was strongest in the year 2009; however firms still suffered in 2010.
Approximately 53.7% of the firms have reduced the number of employees in 2009. On the positive side,
almost a fourth of the companies have increased the number of employees. The same figures for the
previous last three years are less negative. It is therefore clear, that the survey has been answered in a
period of stress for the companies, where the focus was on rationalizations and employee reductions;
however we have been unable to detect any differences within the sample.
Data issues
Collecting data for both dependent and independent variables from the same respondent at the same time
may create common method bias. Among the different sources of bias categorized by Podsakoff,
MacKenzie, Lee and Podsakoff (2003), we identify three possible sources of bias:
1) a social desirability bias to present ones firm as paying closer attention to creativity than it actually
does
2) a tendency to keep responses consistent for the creative climate measuring items
3) a tendency to choose answers around neutral rather than choosing extreme responses such as
always/perfectly applicable and never/not applicable at all.
To assess the severity of possible biases, we first performed Herman`s single-factor test producing four
unrotated factors with approximately 50% of the total variance explained. The test did not suggest the
presence of common method bias, but we did not rely on this result due to problems associated with this
diagnostic method (Podsakoff et al, 2003). As a next step, the descriptive statistics were analyzed. Most of
the variables of interest distribute skewed negatively meaning that most responses fall in the right side of
the distribution. Taken together with the associated kurtosis information, the skewness supports that
social desirability to present one`s firm positively may have slightly affected the responses, which appear
higher than the actual case. However, the relatively low negative skewness in many items clarifies some of
this doubt, thus reducing the adverse effect of the social desirability bias. To detect whether responses
tend to accumulate around the mean, the kurtosis information is checked and reported. Many items, are
distributed with having flatter tops (kurtosis~= or <3). This analysis shows that some responses varied in
the scale rather than being accumulated around the mean. A possible bias caused by the tendency to choose
neutral answers caused by lack of attention is therefore reduced as well.
The consistency bias and other types of common method bias whose sources are not detectable to the
authors (Podsakoff et al, 2003) may have affected some responses and distorted the correlation structure
of the variables (Lance, Dawson, Birkelbach and Hoffman, 2010). Common method bias is often considered
to be inflating the true correlations among the variables (Conway and Lance, 2010, p. 327), but Lance et al
(2010, pp. 436-437) have recently shown that this concern does not hold true. Therefore, even if nondetectable common method bias or consistency still exists in the study, it does not inflate correlations, as
opposed to the common concern. Thus, given the relatively low risk of the two first sources of bias, the
undetectable problems associated with the third possible bias, and the discussed irrelevance of the
multicollinearity problem, we do not take further action and treat results as common method bias free.

[7]

Variables

Dependent variables
The allocation of time for creativity and innovation is used as the dependent variable of the first model
(yes/no response category). Has your firm introduced product/processes which are new to the firm since
2007? are the questions asked to capture the innovation related dependent variables (yes/no response
categories).
Manufacturing

Services

Others

Total
49

Allocation of Time

Number of firms

34

Yes

% Within sector

39,1%

44,1%

25%

7,3%

27,4%

4,48%

% of total
Total (Yes + No)

Number of firms
% of total

23

77

24

124

18,5%

62%

19,4%

100%
68

Product
Innovation

Number of firms

17

46

"Yes"

% Within sector

65,4%

49,5%

17,9%

% of total

11,6%

31,3%

3,4%

Total (Yes+No)

Number of firms
% of total

39,5%

46,3%

26

93

28

147

17,7%

63,3%

19%

100%
67

Process
Innovation

Number of firms

14

48

"Yes"

% Within sector

53,8%

51,6%

17,9%

9,5%

32,7%

3,4%

45,6%

26

93

28

147

% of total
Total (Yes+No)

Number of firms

% of total
17,7%
63,3%
19%
100%
Table 2: Allocation of time, introduction of new products since 2007 and implementation of new processes since 2007
distributed on sectors.

Independent variables
The independent variables are selected from the componential model of Amabile (1988) and from the CCQ
of Ekvall (1997) following Moultrie and Young (2009). In the survey, the motivation to innovate and the
resources for innovation components from the componential model are adopted along with challenge,
freedom, idea support, proactiveness and idea time elements of the CCQ tool. The scale ranges from 1 to 5 for
all variables, 1 being the at the lowest level or not applicable and 5 being the at the highest level or
totally applicable.
An exploratory factor analysis (EFA) indicates that the organizational motivation component should be
divided into two sub-components namely strategy and risk and employee appraisal, whereas the
remaining factors act according to the underlying model. Factor extraction was based on the principal
component factor method with varimax rotation. In addition to the EFA, the factors were checked using
confirmatory factor analysis (the graphical interface in AMOS). The results of the CFA for the organizational
motivation and resources variables are (N<250 and number of items=11): CFI=0.850; RMSEA=0.084 and
CMIN/DF=2.04. These values indicate the model fit is at an acceptable level (Hair et. al., 2006). Extracted
variance for each of the components: strategy and risk = 0.427; employee appraisal = 0.498; resources =
[8]

0.420. These results indicate that less than 50% of the variance in the items is explained by the latent
structure. Each of the standardized regression weights are highly significant (<0.0001), and are close but
not all above the threshold value of 0.5. In particular, the resource component appears to be not correctly
specified using the suggested items and it is recommendable that these be scrutinized in future research.
The model fit for the five creative climate variables (N<250 and number of items = 14): CFI=0.967;
RMSEA=0.052 and CMIN/DF=1.39. These values indicate a solid model fit. Extracted variance for each of
the components: challenge = 0.680; freedom = 0.647; idea support = 0.749; proactiveness = 0.479; idea
time = 0.551. These results indicate a solid convergence (with VE > 0.5) for all components, but
proactiveness. All of the standardized regression weights are highly significant (<0.0001), and above the
threshold value of 0.5 (smallest value is 0.601) indicating a good representation of the latent constructs.
These results indicate that especially for the strategy and risk, employee appraisal and resources
components further validation of the items and the latent constructs must be encouraged for other samples
(see table 3 for the descriptives).
Strategy and Risk and Employee Appraisal Variables
These variables are constructed upon Amabile`s (1988, 1997) organizational motivation component. The
strategy and risk variable refers to the firm`s forward facing strategy towards opportunities and risks. The
latent factor is constituted by the measures; to what extent a firm follows opportunities and changes in its
market to achieve innovation rather than maintaining the status-quo and how explicitly the firm
demonstrates creativity to internal and external stakeholders.
The latent variable behind the employee and appraisal variable measures up to what extent a firm
encourages its employees to show a creative and an innovative attitude. The construct depicts the
psychological encouragement such as showing explicit enthusiasm and pride towards employees positive
attitude, and organizational encouragement in terms of establishing flexible management systems to
accommodate the desired behavior.
Resources
This construct includes Amabile`s (1988, 1997) resource component and captures all resources necessary
for achieving innovation. Ordinary working time available for thinking new ideas, expertise of employees to
generate new ideas for problems, widely available material and information resources and training
opportunities are measured.
Challenge
This construct measures the extent that employees emotionally involve in their tasks and put high amount
of energy. The goal is to measure how well employees capabilities match with task requirements so that
employees feel intellectually challenging and developing (Ekvall, 1996). This latent construct does not aim
to measure negative challenge in terms of excessive workload inhibiting fulfillment and job satisfaction.
Freedom
This variable refers to the freedom of the employees to plan their work and choose ones means to
accomplish an assigned task (Amabile, 1988, Ekvall, 1996).
[9]

Idea Support
This variable measures how supportive the firm is towards creative behavior; emphasizing how
constructive the climate is to support generation and development of new ideas and how much support the
firm receives from its employees for the initiatives taken (Ekvall, 1996).
Proactiveness
This variable measures how proactive the firm is towards risks and opportunities. How experimental and
tolerant towards ambiguity the firm is, besides how fast decisions are made and initiatives are taken not to
miss new opportunities. (Ekvall, 1996)
Idea Time
Idea time refers to the extent that employees use time provided as resource to work on new ideas. The
variable captures the usage of time rather than the availability (availability is the dependent variable of the
first model). It also includes how much employees have time to test spontaneous opportunities arising.
Mean
Strategy and
Risk

3,38

Std.
Dev.
0,95

Employee
Appraisal

4,17

0,78

118

Resources

3,53

0,72

118

Challange

4,14

0,77

116

Freedom

4,20

0,70

121

Idea Support

4,24

0,70

118

Proactivenes

3,54

0,84

117

Idea Time

3,05

1,14

116

121

No. of
items
3

Table 3: Descriptive statistics for independent variables

[10]

Skewness
Items
-0,14
-0,44
-0,41
-1,44
-0,78
-1,19
-0,15
-0,45
-0,29
-1,18
-0,01
-0,67
-0,91
-0,48
-0,88
-1,06
-0,79
-0,74
-0,83
-0,43
-0,57
-0,20
-0,74
-0,09
0,07

Kurtosis
of items
1,69
2,49
2,54
5,04
3,23
3,66
2,28
2,52
2,10
3,70
1,92
3,12
2,77
1,95
3,23
3,63
2,91
2,73
3,09
2,05
3,05
2,62
2,87
1,75
2,11

Cronbach`s
alpha
0,633

0,713

0,602

0,859

0,819

0,891

0,707

0,693

For the model building it is required that the independent variables are free of multicollinarity or at least
only characterized by a low correlation (below 0.3). Since the elements of the creative environment are
constructed theoretically to reflect aspects of the same overall construct and the sample size is relatively
small, correlations among independent variables are in some cases high and hence, by definition,
unsuitable for joint specification in a regression model (see table 4 for the correlations).
Hair et al. (2006:232-233) advises that one possible correction for multicollinarity is to exclude the
variables with highest correlation from the model building, and subsequently use the single correlations for
evaluation of the individual relationships between the independent (and excluded) variable with the
dependent variables. An alternative remedy would be to collapse all correlated items into one factor
constituting creative environment, but this was rejected because this procedure would suppress
important information.
Within the creative climate construct, a thorough examination needs to determine, which variables to
maintain for model building. Amabile (1988: 147) provides a ranking of variables promoting creativity
according to their percentage of being mentioned by scientists during her field research. Freedom, idea
support and challenge were mentioned by 74%, 47% and 22% of scientists respectively. As freedom is the
most frequently mentioned characteristics of creative climate, this variable is kept at the expense of idea
support and challenge. Additionally, proactiveness is excluded, because of a high correlation with idea time
and freedom. The inter-item correlations among, strategy and risk, employee appraisal and resources
for creativity are also correlated, but without the same systematic as previously and we therefore
maintain these. Hence, for the regression model, the following independent variables are included: idea
time, freedom, resources for creativity, strategy and risk and employee appraisal.
Controls
Several control variables were initially proposed for the analysis. Two variables capturing changes in the
number of employees, a service dummy to reflect differences in the industry characteristics and other three
dummies controlling the innovation-related characteristics were coded. None of the variables were
statistically significant in the regression analyses, which lead us to conclude that the sample is
homogeneous in terms of these controls. Therefore, no controls were included in the final models that are
presented below.

[11]

Prod In
Product Innovation

1.00

Process Innovation

0.3559

Proc In

AllocT

STR_R

EMP_A

RESOU

CHAL

FREE

IDEA

PROA

IDEA_T

1.00

(0.000)
Allocation of Time
STRATEGY&
RISK
EMPLOYEE
APPRAISAL
RESOURCES
CHALLANGE
FREEDOM
IDEASUPPORT
PROACTIVENESS
IDEATIME

0.2688

0.3333

1.00

(0.000)

(0.000)

0.3227

0.4157

0.4056

(0.000)

(0.000)

(0.000)

0.0689

0.10965

0.2176

0.3926

(0.4725)

(0.349)

(0.019)

(0.000)

0.2791

0.2704

0.3731

0.4662

0.4311

(0.003)

(0.008)

(0.000)

(0.000)

(0.000)

-0.0361

0.1235

0.1578

0.1838

0.4028

0.3513

(0.707)

(0.230)

(0.095)

(0.052)

(0.000)

(0.000)

-0.0642

0.1498

0.0178

0.1692

0.3350

0.3635

0.6142

(0.497)

(0.140)

(0.849)

(0.069)

(0.000)

(0.000)

(0.000)

-0.1049

0.0774

0.1361

0.1366

0.3859

0.3302

0.6047

0.6467

(0.273)

(0.453)

(0.148)

(0.149)

(0.000)

(0.000)

(0.000)

(0.000)

0.1461

-0.0102

0.1055

0.2320

0.3960

0.2977

0.4109

0.4154

0.3748

(0.126)

(0.921)

(0.263)

(0.013)

(0.000)

(0.001)

(0.000)

(0.000)

(0.000)

0.2832

0.198

0.5038

0.3469

0.2526

0.3399

0.3252

0.2541

0.2637

1.00

1.00
1.00
1.00
1.00
1.00
1.00
0.4787

(0.002)
(0.055)
(0.000)
(0.000)
(0.007)
(0.000)
(0.000)
(0.006)
(0.004)
(0.000)
Table 4: Correlation and its significance (in parenthesis) for the performance measures as dependent variables and independent variables

[12]

1.00

4. Final model and results

The first model analyzes the relationship between allocation of specific working time to idea development
and the independent variables. In all three models, the dependent variables are binary (yes/no) requiring
logistic regression analysis. The first model tests the overarching hypothesis that firms, which invest in
organizational creativity and innovation stimulating factors, allocate specific working time for creativity
and innovation activities. This model is highly significant and all creativity components, except the
employee appraisal, are significant, at least at the 10% level. This leads us to model 2 and 3, whose
respective Hosmer and Lemeshow goodness of fit test provides insignificant results (p=0.4722, p=0.3864,
and for the first model p=0.3742) indicating that the model fits are satisfactory.
The second model uses introduction of new products as the dependent variable and the third model uses
implementation of new process innovations as the dependent variable. Models test the effects of
independent variables on the probability of doing product and process innovation respectively (see table
5).
LOGIT regression results on allocation of time, product and process innovativeness of firms
Model 1-Allocation of
Time

Model 2-Product
Innovation

Model 3- Process
Innovation

Coefficient (z-value)

Coefficient (z value)

Coefficient (z-value)

Strategy and Risk

0.684* (1.85)

0.684*** (2.67)

1.210*** (3.62)

Employee Appraisal

-0.364 (-0.83)

-0.037(-0.10)

-0.627* (-1.75)

Resources

1.161** (2.38)

0.687* (1.69)

0.413 (0.91)

Freedom

-0.831** (-2.32)

-0.677** (-2.14)

0.443 (1.16)

Idea Time

1.073*** (3.87)

0.456** (2.00)

0.163 (0.64)

-5.282 (-2.68)

-2.879 (-1.70)

-4.768 (-2.59)

105

100

88

F-test

0.0001

0.0005

0.0010

McFadden`s Pseudo R2

0.3106

0.1796

0.2123

Independent
Variables

Intercept
Number of
observations

*** p<0.01, **p<0.05, *p<0.1 (Two tail test)

Table 5: Logistics regression results

An important observation relates to the number of observations (n1= 105; n2=100 and n3=88). These
numbers indicate a loss of observations from the original 147 cases. To decrease the loss of information
and to run a sensitivity analysis of the reported results, the missing cases were checked against the full set
of cases in terms of differences of means. Since these tests were insignificant, it is possible to impute the
missing values using regression analysis. The resulting logistic regression models yielded the same
significant variables and same magnitude of the coefficients. The paper therefore reports the original
models. The results of the imputed models can be obtained from the corresponding author upon request.

[13]

The results of the second model show that the strategy and risk, resources and ideatime variables are
positively but the freedom variable is negatively affecting the probability of introducing a new or improved
product on the market. Contrary to the product innovation model, the organizational motivation factors are
the only variables explaining process innovation in the third model, where strategy and risk is positive and
employee appraisal is negative. This implies that strategy and risk are always important for innovation,
whereas the other components differences can be derived from the innovation type.
Some of the independent variables are excluded from the logistic regression model (table 5) as a result of
multicollinarity. The correlations between the excluded components and the dependent variables are
investigated. However, as the correlation table shows, none of the dropped variables is significantly related
to the innovation types (table 6).

Challenge

Allocation of
Time
0.158

Process
Innovation

Product Innovation
-0.036

0.124

Idea Support

0.136

-0.105

0.077

Proactiveness

0.106

0.146

-0.010

*** p< 0.001, * * p< 0.01 level, *p<0.1 (2 tail-test)

Table 6: Correlation among the dependent variables and dropped independent variables

An overall view of the models states that the product innovation model produces significant results for
further discussion. However, the process innovation model provides limited information suggesting that
other factors must be more important for stimulating process innovation, thereby raising the process
innovation and organizational creativity link as a new research opportunity. Hence, for the remainder of
the paper, the attention is at discussing the product innovation model.
Interpretation of coefficients
Magnitudes of coefficients are not meaningful per se in logistic regression models; an exponential
transformation is required to interpret the coefficients and calculate changes in the probability of
occurrence of the dependent variable (Wooldridge 2009, p. 577, Hoetker 2007, p.332). Following this
advice, the changes in the probability of doing product innovation are calculated and graphed (figure 1).
Each line in the graph below illustrates the corresponding probabilities when responses to a significant
variable (strategy and risk, freedom, idea time and resources) vary between 1 and 5, while keeping all other
(significant or insignificant) variables at their means.

[14]

1
.8
.6
.4
.2
1

Response scale from 1 to 5 for questions

Resources responses
Strategy and Risk responses

Freedom responses
Idea time responses

Figure 1: Interpretation of the coefficients and their effect on product innovation

The average firm that has responded to all independent variables at the sample means corresponds to a
probability of achieving product innovation at 56%. Since the coefficients of resources, strategy and risk
and idea time variables are positive, the probability of doing product innovation increases when the
responses increase from average to 4 or 5 on the scale. As the freedom coefficient is negative, the
probability of doing innovation decreases when the responses of a given firm increase. Therefore, the line
representing this relationship has negative slope.

5. Discussion
This paper draws two important conclusions; first we confirm that firms investing in organizing creativity
have a higher probability of allocating special working time for innovation, and second the organizational
creativity stimulating factors are correlated with product innovation rather than process innovation. When
these two findings are evaluated together, the study reveals that the overarching hypothesis holds true for
product innovation. The firms that motivate employees, provide them with resources, establish
organizational creativity stimulating work climate, and facilitate the use of time on innovative ideas are
more likely to deliver new products to the market.
The logistic regression results provide expected positive signs and significance for the strategy and risk,
resources and idea time variables for product innovation, confirming earlier studies (e.g. Amabile, 1988,
Kanter, 1988). Being oriented towards risk and opportunities as well as linking these with an offensive
strategy corresponds with employees` innovative activities. Additionally, explicitly placing value on
creativity and innovation supports the communication among internal and external stakeholders and
conveys the message that the firm is dedicated to innovation. This type of organizational encouragement,
when felt by the employees, appears to be linking strongest with product innovation. Contrary to
expectations, emotional support such as being proud of employees or being enthusiastic towards employee
achievements do not affect the probability of doing product innovation.
[15]

The importance of financial, material, informational resources, expertise and time for doing product
innovation are also confirmed as discussed theoretically in the literature.
The increasing psychological safety needs is mostly held responsible for the insignificant outcome of the
dropped variables. Recent years with relatively difficult times accompanied with actual downsizing or the
fear of downsizing may have nullified the risk taking incentives of employees, the perceived idea support
and the need for challenge.
Freedom
The unexpected sign of the freedom variable is the most controversial finding deserving re-evaluation of
previous studies, which discuss freedom or autonomy as one of the most important characteristics of
creative climate (e.g. Amabile, 1988, Amabile 1997, Ekvall, 1983, Heinze, Shapira, Rogers and Senker,
2009). The paper demonstrates that higher levels of freedom or autonomy decrease the probability of
doing product innovation.
Previous studies analyze scientists in R&D departments of relatively large firms (Amabile, 1988, 1997,
Ekvall, 1997), whereas the sample of this study is composed of small firms operating in manufacturing and
service businesses. Therefore, the freedom hypothesis constructed upon the studies of large and heavily
R&D conducting firms may not be reflecting the priorities of small firms well. The workforce of R&D
departments is mostly comprised of highly educated scientists, who are capable of managing and
motivating themselves and handle freedom and autonomy forcefully. On the other hand, other employees
may need regular management, task distribution and supervision. Unintentionally, increasing freedom may
create confusion if employees do not have the self-management and motivation skills. Employees may be
spending the special working time provided for creativity and innovation activities on unnecessarily
complex tasks rather than focusing on improvement of the tasks for facilitation of product innovation.
A recent study by Bunderson and Boumgarden (2010) provides a different, but relevant interpretation for
the freedom finding. The study finds that self-managing teams with higher level of formalization promotes
learning by encouraging information sharing and conflict reduction. If these findings are considered for this
sample, an average level of freedom may lead to higher innovation performance facilitated by clear task
specifications, flow of information and formal reporting systems, while allowing moderate freedom.
Additionally, Yuan and Woodman (2010: 328) study individual innovative behavior and use innovativeness
as a job requirement as an explanatory variable. They find that employees who perceive innovativeness as
part of their job requirements are more likely to believe that these activities are positive for their work. If
these findings are then considered for our results, we may suspect that many employees in small firms that
perform different work tasks, often on an ad hoc basis, are more prone to feel confused by too much
freedom. We can therefore suggest that future research analyze whether job requirements specifying needs
for creativity and innovation are stimulating product innovation.
In sum, we recommend that a future study attempt to uncover why increasing freedom does not contribute
to product innovation, and what the optimum freedom level is for stimulating creativity and achieving
innovation.
Another research opportunity arises from the distinction between product and process innovation in
relation to the organizational creativity. A study focused on process innovation and organizational
[16]

creativity relationship may reveal why resources, freedom or idea time do not contribute to process
innovativeness, and simultaneously discuss what other organizational factors could be stimulating further
process innovation.

6. Conclusion and recommendations

This paper affirms that organizing creativity does lead to innovation, but only product innovation. The
relation with process innovation is much weaker and must therefore be supported by other organizational
activities. The paper delivered the first comprehensive quantitative test of the relationship between
organizational creativity and innovation. The findings from a sample of 147 firms from a particular region
of Denmark confirm that encouraging employees for innovative behavior in a stimulating work
environment, allocating resources and providing idea time play a crucial role in stimulating creativity and
supporting product innovation.
The importance of allocating idea time for creative and innovative activities is also confirmed.
Unexpectedly, higher levels of freedom are found to be acting against product innovation. This finding
started the discussion on the balance between job formalities and innovation requirements leading to a
recommendation for further research on freedom and innovation. The statistical analysis did not confirm
that other variables, challenge, proactiveness and idea support harness innovation contrary to the
discussion in the literature. The insignificant outcome of these variables has mostly been associated with
the severe economic conditions shifting the priority towards maintaining ongoing business activities as a
consequence of the financial crisis. Furthermore, a notable relationship between organizational creativity
and process innovation has not been established, and further analyses were recommended to reveal
additional important aspects of organizational creativity and process innovation.
The results of this paper are presented to validate the importance of the link between creativity and
product innovation to deepen our understanding this crucial link rather than making generalizations. At
the same time, although the sample is relatively small, we make recommendations towards managers of
innovation. Clearly, these results demonstrate that creativity is not only an individual characteristic, but is
related to the organizing priorities of management and has a strong impact on product innovation.
Therefore, managers of innovation need to balance the current dominant view on open innovation by reemphasizing internal organizational factors as important drivers of product innovation. While
acknowledging the adverse effects of the financial crisis, we recommend managers to stay oriented and
take on reasonable risk and opportunities, and link these with an offensive strategy. Simultaneously, we
recommend that managers exercise freedom cautiously to ensure that operations are carried out
effectively, while employees are allowed moderate freedom to achieve product innovation. Further,
recommendations can be developed once further studies are carried out, emphasizing the need to study
off-crisis periods.
The small sample size from a relatively homogeneous population and the ongoing effects of severe
economic conditions constitute the main limitations of this study. Once more data are collected in a less
severe economic situation the statistical analysis may yield further enlightening results. In addition to the
sample limitation, a potential bias may have been introduced by requesting that the CEO or innovation
manager of the respondent firm complete the survey, thereby capturing senior managers perceptions of
the firm rather than those of employees. Perceptions by these distinct parties may not necessarily match
[17]

and voice the real conditions in the firm, although we find that it may be easier for management to observe
employees and be aware of general perceptions and well-being in the small firm. Therefore, although we
acknowledge potential bias, we expect much of response to reflect the real creativity and innovation
stimulants in the firm as perceived by the employees, whether creative or not!

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