An Examination of The Relationships Between Organizational Learning Culture, Structure, Organizational Innovativeness and Effectiveness: Evidence From Taiwanese Organizations

An Examination o f the Relationships Between Organizational Learning Culture, Structure,
Organizational Innovativeness and Effectiveness: Evidence From Taiwanese Organizations
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Yueh-Ysen Lin
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ABSTRACT
Sustained performance has been a critical objective for organizations that they must
pursue in order to survive in todays keenly competitive business environment. Researchers
in the field o f organization studies tend to follow one of the two main approaches, namely
organizational and economic perspectives, to explain firm performance. Although neither
of these perspectives can be neglected, advocates of the resource-based view argue that in
order to outperform competitors, organizations must possess valuable and scare resources.
Innovativeness, in this regard, is deemed as an intangible asset and becomes a key factor
supporting organizations sustained competitive advantages.
Existing studies on organizational innovativeness suffer from two major shortcomings.
First, most studies fail to provide sufficient evidence and suggestions of how organizations
can strengthen their organizational innovativeness. Second, most of the previously
conducted studies define innovativeness with a technological orientation. Both
shortcomings constrain the generalizability of findings to a wider variety of organizations
in the real world. Departing from the perspective of seeing organizational innovativeness
as a type o f climate, this study defines organizational innovativeness as an organizations
capability to embrace an organization-wide atmosphere that is willing to accept diverse
ideas and is open to newness, and that encourages its individual members to think in novel
ways.
The primary question this study sought to answer was: How do organizational-level
factors as antecedents affect organizational innovativeness and effectiveness? More
specifically, the study examined the relationships among organizational level factors (i.e.,
organizational learning culture, structure, and collectivist orientation), organizational
absorptive capacity, organizational innovativeness, and effectiveness. A hypothesized

model suggested that organizational learning culture, structural organicity, and collectivist
orientation jointly influence an organizations innovativeness, which subsequently
enhances a firms performance.
The study used a survey research method and structural equation modeling techniques
to examine the hypothesized relationships among constructs using data collected from 246
business organizations in Taiwan. The results of the study using structural equation
modeling analysis shows that (a) organizational learning culture plays a crucial role to
enhance organizational absorptive capacity and innovativeness; (b) the influence of
structural organicity on innovativeness is not as significant as shown in previous studies;
and (c) both absorptive capacity and innovativeness are critical to organizational
effectiveness.
TABLE OF CONTENTS
A BSTR A C T ................................................................................................................................................i
TABLE OF CONTENTS.......................................................................................................................iii
LIST OF TA BLES...................................................................................................................................vi
LIST OF FIGURES............................................................................................................................... vii
CHAPTER ONE : INTRO DUCTIO N ............................................................................................... 1
O rganizational P erformance and C ompetitive A dv anta g e ...................................... 1
The Economic versus Organizational Perspectives........................................................1
The Resources-based Theory o f the Firm.........................................................................2
Problem S tatement ...................................................................................................................... 4
D efinitions of K ey T e r m s .......................................................................................................... 8
H ypotheses .....................................................................................................................................10
S ignificance of the S t u d y ....................................................................................................... 10
CHAPTER TWO : LITERATURE REVIEW A N D HYPO THESES...................................... 14
Innovation an d Organizational Innovativeness ........................................................... 15
Innovation...............................................................................................................................15
Organizational Innovativeness......................................................................................... 17
Organizational L earning a nd the Learning Organization .....................................19
Organizational Learning.....................................................................................................19
The Learning Organization and Organizational Learning Culture..........................21
Organizational Learning Culture and Innovativeness................................................ 24
A bsorptive C apacity ................................................................................................................. 27
Absorptive Capacity............................................................................................................27
Organizational Learning and Absorptive C apacity.....................................................28
Absorptive Capacity and Innovativeness...................................................................... 30
Organizational S tructure .....................................................................................................31
Organizational Structure.....................................................................................................31
Organizational Structure and Innovativeness................................................................32
C ollectivist O rientation ........................................................................................................ 35
Collectivist Orientation......................................................................................................35
Collectivist Orientation and Innovativeness..................................................................36
Organizational E ffectiveness..................................................................................... 38
Organizational Effectiveness.................................................................................... 38
Innovativeness and Organizational Effectiveness.................................................. 39
Absorptive Capacity and Organizational Effectiveness.........................................41
Summary of H ypotheses................................................................................................. 41
CHAPTER THREE : METHODS............................................................................................44
Research Design ...............................................................................................................44
Positivistic Survey Research.................................................................................... 44
Target Population....................................................................................................... 45
Data Collection Procedures...................................................................................... 46
Institutional Review Board....................................................................................... 48
Sample D escription ..........................................................................................................48
M easurements .................................................................................................................. 51
Questionnaire.............................................................................................................. 51
Translations................................................................................................................ 51
Construct Definitions and M easures........................................................................52
Item Analysis..............................................................................................................56
Data A nalysis.................................................................................................................... 74
Structural Equation Modeling (SEM)...................................................................... 74
Advantages o f SEM Techniques............................................................................... 75
CHAPTER FOUR : RESULTS................................................................................................ 76
Assessing Measurement M odels..............................................................................76
Assessing Structural Equation Model.......................................................................84
Decomposition of Effects..........................................................................................86
Adjusted SEM Analysis with the General Factor................................................... 89
Summary..................................................................................................................... 93
CHAPTER FIVE : SUMMARY, DISCUSSION, CONCLUSIONS, AND IMPLICATIONS
.................................................................................................................... 95
Summary .............................................................................................................................95
D iscussion ...........................................................................................................................99
Organizational Learning and Innovativeness..........................................................99
Organizational Learning Culture and Absorptive Capacity
........................100
Absorptive Capacity and Innovativeness.............................................................. 101

Structural Organicity and Innovativeness.............................................................. 102
Explanations o f Organizational Effectiveness....................................................... 102

C o n c lu sio n s ................................................................................................................................103
Complexity between Organizational Learning and Outcomes............................ 104

An Integration o f Organizational and Economic Perspectives............................ 105
Implications a n d L imitations ............................................................................................... 105
Dynamic Capabilities and Sources of Competitive Advantage........................... 105

Individual-level Outcomes and Longitudinal Research.......................................107
Improvement o f Measurement Instruments........................................................... 109
REFERENCES.......................................................................................................................... 113
APPENDIX A : Notification o f IRB Exempt Study............................................................. 124
APPENDIX B ' Consent Form (English).............................................................................. 125
APPENDIX C : Consent Form (Chinese)............................................................................. 127
APPENDIX D Construct Measures......................................................................................128
APPENDIX E : Questionnaire (English)............................................................................... 133
APPENDIX F : Questionnaire (Chinese).............................................................................. 139
LIST OF TABLES
Table 3.1.
Respondent Characteristics.................................................................................. 49
Table 3.2.
Characteristics of Organizations.......................................................................... 50
Table 3.3.
List of Construct and Items Information............................................................. 52
Table 3.4.
Retained Items for Innovativeness.......................................................................60
Table 3.5.
Model Comparison for Innovativeness............................................................... 60
Table 3.6.
Retained Items for Absorptive Capacity............................................................. 62
Table 3.7.
Model Comparison for Absorptive Capacity......................................................63
Table 3.8.
Retained Items for Organizational Learning Culture......................................... 64
Table 3.9.
Model Comparison for Organizational Learning Culture..................................65
Table 3.10. Retained Items for Collectivist Orientation.........................................................67

Table 3.11. Model Comparison for Collectivist Orientation................................................. 67
Table 3.12. Model Comparison for Organizational Structure...............................................69
Table 3.13. Retained Items for Organizational Structure...................................................... 70
Table 3.14. Retained Items for Collectivist Orientation.........................................................72
Table 3.15. Model Comparison for Organizational Effectiveness........................................72
Table 4.1.
Pattern Matrix o f Exploratory Factor Analysis................................................... 78
Table 4.2.
Correlation Coefficients between Constructs...................................................... 79
Table 4.3.
Correlation Coefficients of Indicators ................................................................ 81
Table 4.4.
Standardized Path Coefficients of the Initial Model............................................... 85
Table 4.5.
Fit Indices................................................................................................................. 86
Table 4.6.
Decomposition of Effects (Initial Model)................................................................ 87
Table 4.7.
Reproduced Correlation Matrix of Latent Constructs (Initial Model).................... 88
Table 4.8.
Model Comparison and Standardized Path Coefficients........................................ 90
Table 4.9.
Decomposition of Effects (Modified Model)......................................................... 91
Table 4.10. Reproduced Correlation Matrix of Latent Constructs (Modified Model).............. 93

Table 5.1.
Hypothesis and Test Results..................................................................................97
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LIST OF FIGURES
Figure 2.1. Conceptual path diagram between constructs....................................................... 14

Figure 2.2. Hypothetical relationships between constructs.................................................... 42
Figure 3.1. Scree plots for exploratory factor analysis............................................................ 58
Figure 3.2. Standardized factor loadings
for innovativeness.............................................61
for absorptive capacity..................................... 63
for organizational learning .............................65
for collectivist orientation................................ 68
for organizational structure.............................. 71
for organizational effectiveness.......................73
Figure 4.1. Confirmatory factor analysis of constructs with standardized coefficients and
residuals..................................................................................................................................83
Figure 4.2. Standardized paht coefficients of the initial model.................................................. 84
Figure 4.3. Standardized path coefficients of the modified model......................................... 89
CHAPTER ONE
INTRODUCTION
Organizational Performance and Competitive Advantage
Todays business environment is characterized by its fast changing pace and keen
competition. This challenging environment accelerates the life cycle of organizations, and
the major objectives for organizations must include survival before they can begin to
compete with and outperform their competitors. Thus, how organizations obtain a
competitive advantage for the sake of both survival and profitability is increasingly
becoming crucial for modem firms.
The Economic versus Organizational Perspectives
Numerous determinants account for a firms performance. These determinants can be
categorized into two perspectives: economic and organizational (Hansen & Wemerfelt,
1989). The economic perspective explains a firms performance from the viewpoint of its
industrial structure and the market in which it competes. Major determinants of firm-level
profitability include industrial characteristics, the firms competitive positions, its
production efficiency, and the quality and quantity of its resources (see, for example, Porter,
1981; Scherer, 1980). Therefore, a firms competitive advantages come from its speed in
establishing a leading position in a specific product market. In other words, a firm is said to
be successful when it establishes certain entry barriers for new competitors with either an
absolute cost advantage, a significant degree of product differentiation, or economies of
scale (Ghemawat, 2002). This economic perspective, however, assumes homogeneity and
restricted resource mobility among firms in the same industry (Barney, 1991). As a result,
it is not sufficient to address performance heterogeneity among firms within the same
industry in the same business environment.

The organizational perspective, on the other hand, attempts to examine the causes of
performance difference from an intra-organizational viewpoint by emphasizing the
influences o f internal factors, such as structure, motivation, policies, practices, reward and
control systems, and leadership, on the performance at both the individual and
organizational levels (see, for example, Marcoulides & Heck, 1993; Robertson, Callinan, &
Bartram, 2002). Seeing from inside the organization, this organizational perspective
provides a basis for explaining the heterogeneity across firms, and suggests that managers
establish a context in which employee behavior and organizational performance can be
affected by deliberately designed structure, reward, control and information systems.
As part o f their attempt to integrate both economic and organizational perspectives,
Hansen and Wemerfelts (1989) study found that an integrated model containing factors
related to both economic and organizational perspectives complementarily accounted for
more variance o f firm performance than using each model individually. Separating both
models revealed that the behavioral model accounted for twice as much variation in firm
performance as the economic model. These findings showed the importance of using an
organizational perspective to explain firm performance. It also suggested that members
within an organization play essential roles in enabling firms to achieve the desired
performance. Likewise, good administrative practices by the organizational management
serve as a vehicle to enhance employees individual performance.
The Resources-based Theory o f the Firm
The resources-based view, proposed by Penrose (1959), is one of the main schools in
the strategic management literature that explains firm performance. The major argument
for the resource-based view is that superior product market position rests on the
ownership of scarce, firm-specific resources (Ghemawat, 2002, p. 67). The term
resources here refers to any type of tangible or intangible asset possessed and considered
by the firm as strength (Wemerfelt, 1984). These resources can include physical capital
resources, human capital resources, and organizational resources such as capabilities,
processes, culture, firm attributes, information, or knowledge, etc. (Barney, 1991).
Resources and assets are critical since they enable firms to manage and implement their
strategic planning processes for the purpose of improving efficiency and effectiveness
(Daft, 1983).
The resource-based view assumes that firms within an industry are likely to be
heterogeneous with respect to the strategic resources they control. Only resources that are
valuable, rare, imperfectly imitable, and hard to replace with equivalent substitutes can be
considered as potential sources o f competitive advantage (Barney, 1991). These features
limit the mobility o f resources among firms and thus heterogeneity can be long lasting.
Therefore, by effectively integrating different resources within an organization, the firm is
expected to find ultimate configurations that become sources of sustained competitive
advantage and help organizations gain a competitive edge.
Many researchers and managerial practitioners emphasize the importance of
organizational innovation and innovativeness on performance (Basadur & Gelade, 2006;
Calantone, Cavusgil, & Zhao, 2002; Christensen, Anthony, & Roth, 2004; Hamel, 2006;
Hult, Hurley, & Knight, 2004; Jin, Hewitt-Dundas, & Thompson, 2004; Wang & Ahmed,
2004). An innovation is generally defined as any idea, process, technology, or service that
is perceived to be new by the adopting entities (Thompson, 1965). Different innovations
have different impacts on organizational operations, and through the adoption of new
innovations, organizations attempt to reduce production cost, to increase efficiency, and to
improve performance (Damanpour, 1991).
Since organizations generate and adopt innovations to achieve better performance,
organizational innovativeness, namely an organizations capability to innovative, becomes
one critical determinant of organizational competitiveness (Wang & Ahmed, 2004).
Advocates o f organizational innovativeness have argued that only when organizations
possess a strong innovative capability can they be more efficient in responding to a
fast-changing environment and market (Christensen et al., 2004; Clark & Tracey, 2004).
This innovative capability also enhances the ability of members of the organization to
manage difficult situations and non-routine problems, thus strengthening the probabilities
of organizational survival and success. Therefore, organizational innovativeness, when
well developed and utilized, is considered as a potential source of competitive advantage.
Nevertheless, an organizations innovative capability is not formed within a short time
period. The development o f organizational innovativeness is an incremental process. Time,
a high quality o f human resources, systematic policies and practices, and support from the
organization as a whole are required in order to cultivate and strengthen it, and it is
constructed on the existing foundation of the organization (Freel, 2005).
Problem Statement
Organizational innovation and innovativeness have been studied for decades
(Damanpour, 1991; Wang & Ahmed, 2004). The earliest attempts focused on technological
breakthroughs at the industrial level. Organizations were considered innovative when they
effectively adopted and diffused new innovations in order to catch up with their
competitors. Nowadays, organizational innovativeness is gaining increasing attention since
it strengthens an organizations ability to generate and accept new ideas and creative
solutions.
Numerous previous studies discussed the determinant factors of organizational
innovativeness (see Damanpour, 1991, for a comprehensive review). Most of these studies
focused on descriptive characteristics such as size, ownership, or structural dimensions
(e.g., centralization, formalization, specialization, or professionalism) of innovative
organizations (Aiken & Hage, 1971; Daft, 1978; Gudmundson, Tower, & Hartman, 2003;
Mohr, 1969). Other studies examined the effects of leadership and managers emphases of
market orientation on organizational innovation and innovativeness (Hult et al., 2004;
Hurley & Hult, 1998; Hyvonen, Tuominen, & Eralinna, 2004).
Despite the extensive studies on organizational innovativeness, two problems deserve
further attention. First, since most studies focused almost exclusively on the descriptive
aspect of organizational features, few efforts have been made to discover the dynamic
mechanisms through which organizations can develop and strengthen their innovative
capability. Even though many scholars have stressed the importance of organizational
learning to organizational innovativeness at the conceptual level (Basadur & Gelade, 2006;
Clark & Tracey, 2004; Cohen & Levinthal, 1990), only a few empirical studies have been
conducted to support this argument (see Calantone et al., 2002; Hult et al., 2004, for
example). Therefore, it is imperative to identify those antecedent variables that influence
organizational innovativeness and effectiveness. In addition, empirical studies are
necessary to help researchers and practitioners understand the relationship between
organizational learning and innovativeness, as well as how organizational learning can

enhance an organizations innovative capability.
The second problem that requires further attention has to do with the applicability and
generalizability o f existing research findings. Since most of the existing studies have
operationalized organizational innovativeness with retrospective measures on numbers of
innovations adopted during a specific time frame, speeds of innovation or patent generation,
or the relative earliness with which organizations implemented innovations compared to
their competitors, most o f the research findings are more applicable to organizations which
are financially capable o f placing a strong emphasis on technology, product developments,
and innovation adoption. However, these research results may not be fully applicable to
organizations that are small in size, or who do not have the financial resources to invest in
innovation generation, development, or adoption. In other words, innovation may have
different implications for these small and medium size firms. In order to understand
organizational innovativeness as the source of an organizations sustained competitive
advantage, the focus must extend beyond any specific type of breakthroughs in technology,
product, or managerial practices, and treat organizational innovativeness as an overarching
phenomenon. In so doing, a wider range of organizations can benefit from the research
findings.
The purpose o f this study is to determine how organizational learning culture and
structure can be integrated and considered jointly to account for an organizations
innovativeness, as well as the firm-level performance. The major argument for this
approach is that organizations that embrace a strong learning culture and an organic type of
structure are more innovative with respect to their organizational climate. This strong
innovative capability further enhances their employees ability to search for solutions to
problems on a daily basis which, in turn, strengthens the organizations performance.
Organizational learning culture and structure are considered as the primary
antecedents for innovativeness for two reasons. First, contemporary business organizations
commonly attempt to solve performance problems by focusing on strategies that can
potentially help the firm gain a leading market position or increase its industrial value.
However, this strategic orientation undervalues the importance of intra-organizational
factors such as processes and capabilities for the firms performance. Structure and culture
are considered two major organizational-level factors that have a strong impact on
intra-organizational processes and capabilities (Daft, 1983). Meanwhile, in the area of
organizational change and development, cultural change and organizational restructuring
are two major initiatives that are frequently considered. Therefore, a deeper understanding
of the relationship between organizational culture, structure, and innovativeness plays a
pivotal role in managements efforts to enhance an organizations innovative capability and,
in turn, improve organizational performance.
Second, exploring the influential relationships between learning culture, structure, and
innovative capability helps organizational researchers become aware of the many
mechanisms that link organizational-level factors and performance. For example, Ellinger,
Ellinger, Yang, and Howtons (2002) study found a positive influence of the learning
culture on organizational financial performance. However, Hult et al.s (2004) examination
of the relationships between organizational learning orientation, innovativeness, and
performance showed that, when ignoring innovativeness as the intervening variable, no
significant direct effect was found between the learning orientation and organizational
performance. Organizational innovativeness, in this case, was seen as a mechanism that

mediated the influences o f the organizations learning culture on its performance. In
addition, even though many researchers have argued the importance o f the innovative
capability to enable organizations to outperform their competitors, only a few empirical
studies have examined the relationship between organizational innovativeness and
organizational outcome variables (Calantone et al., 2002; Hult et al., 2004). As a result, a
more comprehensive and integrated model needs to be developed in order to determine
how these critical factors influence organizational innovativeness and performance.
Definitions of Key Terms
This section provides definitions of the six major constructs. Comprehensive reviews
of each of these constructs construct are presented in Chapter Two.
Organizational innovativeness. Organizational innovativeness is defined as the
propensity o f a firm to actively support new ideas, novelty, experimentation, and creative
solutions (Lumpkin & Dess, 1996). Innovativeness in this study refers to an overall
capability with which an organization embraces an atmosphere of willingness and
openness to newness (Calantone et al., 2002; Wang & Ahmed, 2004). Unlike a traditional
yet common perspective, which tends to define innovativeness with observations on
innovations generated or implemented by the adopting organizations (Thompson, 1965),
organizational innovativeness as an overall capability and atmosphere-related concept is
identified based on organizational members perceptions.
Organizational learning culture. A learning culture is defined as a cultural orientation
possessed by an organization that values and deliberately enhances its learning activities by
making efforts to remove barriers, to expand its learning capacity, and to encourage
continuous improvement and transformation within the organization in pursuit of its

competitive edges (Marsick & Watkins, 2003; Senge, 1990).
Absorptive capacity. Absorptive capacity is defined as the ability of a firm to
recognize the value o f new external information, to assimilate the new information, and to
apply it to commercial ends (Cohen & Levinthal, 1990).
Collectivist orientation. Collectivist orientation is defined as the degree to which a
society or group makes a priority of the demands and interests of the collective as a whole
over individual needs and interests (Wagner, 1995). In a collectivist-oriented group, the
collectives well-being, harmony, and cohesion are strongly emphasized (Hofstede, 1984;
Triandis, 1995).
Organizational structure. The structural dimensions of an organization are defined by
the hierarchy o f authority, division of labors, the arrangement of workflow, coordination
and control o f work, and communication channels (Scott, 2003). An organizations
structure is used by researchers and organizational analysts to describe the internal
characteristics o f the focal organization so that comparisons can be made to highlight
inter-organizational similarity and differences (Daft, 1983).
Organizational effectiveness. Organizational effectiveness, the construct used in this
study to define organizational performance, refers to the degree to which an organization,
in terms of its ability, acquires and efficiently uses the available resources to achieve
specific goals (Steers & Black, 1993). Even though a variety of perspectives have been
proposed to define organizational effectiveness, this study focuses on organizational
members perceptions o f the overall performance at the organizational level as an indicator
of how well the organization is doing in terms of criteria such as efficiency, organizational
10
flexibility, and adaptability (Mott, 1972; Scott, 2003).
Hypotheses
Seven hypotheses were proposed for testing in this study. These hypotheses are stated
as follows:
Hypothesis 1: Organizational learning culture is positively related to organizational
innovativeness.
absorptive capacity.
Hypothesis 3: An organizations absorptive capacity is positively related to
organizational innovativeness.
Hypothesis 4\ Organizations with a higher degree of structural organicity are more
likely to be innovative.
Hypothesis 5: Collectivist orientation is positively related to organizational
innovativeness.
Hypothesis 6: Organizational innovativeness is positively related to organizational
effectiveness.
Hypothesis 7: Organizational absorptive capacity is positively related to
organizational effectiveness.
Significance of the Study

This study integrates the resource-based view and the organizational perspective of
performance to create a strong theoretical foundation with which to explore the effects of
organizational-level factors on organizational innovativeness and performance. As
suggested by Hansen and Wemerfelt (1989), organizational structure can be treated as a set
of determinants that influence employee behavior and firm performance from the
11
organizational perspective. Barney (1986) also discussed the possibility that organizational
culture serves as a potential source of competitive advantage as long as the culture is
valuable, inimitable, and cannot be acquired or substituted within a short time. With this
framework, this study is expected to break new ground by implementing a new integrative
perspective to account the heterogeneity of organizational performance.
The significance o f this study is twofold. First, this study provides empirical evidence
to bridge the knowledge gap with regard to the relationships between organizational
learning, innovativeness, and performance. Even though organizational learning and the
learning organization are considered critical concepts and practices for modem
organizations, most o f the existing literature focuses on the conceptual level and considers
knowledge creation and acquisition as the primary outcome variables o f organizational
learning. Few studies have attempted to examine the influences o f organizational learning
on individual-level outcomes, such as innovative behavior, creativity, or problem solving
ability. This study regards the enhancement of organizational innovativeness as a product
of organization learning. More specifically, in addition to the acquisition o f new knowledge
or skills at the individual level, organizational learning can affect an individuals behavior
and attitudes, thus enhancing their organizational innovative capability.
Second, rather than measuring the speeds of innovation adoption and generation, this
study utilizes a climate-oriented perspective to define organizational innovativeness. The
general emphasis on organizational climate has given rise to some confusion regarding the
distinction between two important organizational descriptors: culture and climate. Schein
(1992) defined organizational culture as a pattern of shared basic assumptions (p. 12)
that organizational members learn through the process of socialization. Schein considered
12
organizational culture as being well-accepted and considered by organizational members to

be a valid guide to behavior. Climate, according to Scheins (2000) argument, is seen as a
cultural artifact resulting from espoused values and shared tacit assumptions (p. xxiv),
referring to organizational members feeling about the organization, the authority system,
and the degree o f employee involvement and commitment (p. xxiii). In contrast, Denison
(1996) compared culture and climate research and concluded that these two constructs are
actually substitutable based on the definitions in the literature, and this it is difficult to
make a clear distinction between them.
It is generally agreed among organizational researchers on culture and climate that
climate is a way to measure culture (Payne, 2000). In this study no effort has been made to
distinguish organizational culture and climate. However, since organizational
innovativeness is treated as an organization-wide atmosphere, namely a propensity felt by
organizational members to be open to considering and encouraging new ideas,
organizational innovativeness as a climate becomes the major emphasis for the definition.
Consequently, organizational innovativeness is no longer simply the result of a set of
determinants that leads to some sort of financial performance. Rather, organizational
innovativeness becomes an overarching organizational atmosphere which influences every
single organizational member from every possible angle. Examining organizational
innovativeness as a climate construct makes it possible to further help organizations
understand its important influences on individual members behavior. As a result,
organizational members are expected to have an open mind and an innovative thinking
style when confronting problems and difficulties, as well as searching for innovative
solutions in their daily life.
13
Meanwhile, to expand the definition of innovativeness to the abstract level enhances

the generalizability o f such findings to all types of organizations. In particular, through this
study organizations that do not have professional in-house R&D or are not financially able
to adopt innovations on a regular base can appreciate the importance of becoming an
innovative organization. Also, such a definition offers the possibility and opportunity to
explore how innovativeness affects organizational members attitudes and behavior, as well
as organizational-level outcomes such as adaptability and flexibility.
This studys primary focus on non-programmed, small-scale, and non-radical types of
innovation does not imply that radical and large scale innovations are beyond the scope of
the model. In fact, in a series o f research on innovation, Van de Ven and colleagues (1999)
discovered that most innovations come from unexpected coincidental events that later
become triggers for the initiation of innovations. Additionally, seeing innovativeness as an
intra-organizational capability, an internal perspective must be adopted in order to
determine how critical organizational antecedents affect such capability. It also suggests
that the focus o f organizational practices and systems that encourage innovation should be
expanded beyond the department of research and development or technology to include
every member within the organization.
14
CHAPTER TWO
LITERATURE REVIEW AND HYPOTHESES
As discussed in Chapter One, the purpose of this study is to examine the effects of
organizational learning culture and structure on organizational innovativeness and
performance. The organizational perspective of organizational performance and the
resource-based view in the strategic management literature have been integrated to provide
the foundation o f this study. Figure 2.1 presents a conceptual framework based on this
theoretical integration and comprehensive reviews of the existing literature on
innovativeness. Each o f the six constructs and the hypothetical relationships among them
are reviewed and discussed in this chapter.
Org.
Learning
Absorptive
Capacity
Structural
Organicity
Org.
x
Innovativeness
Collectivism
Figure 2.1. Conceptual path diagram between constructs.
Org.
Effectiveness
15
Innovation and Organizational Innovativeness

Innovation
Innovation has been a long-standing concept in the field of business and industry.
Its earliest appearance in the literature can be traced back to social economist Schumpeter
(1934) who argued that innovation is the driver of economic development. In Schumpeters
view, innovation refers to certain technological or product breakthroughs that have a
dramatic impact on a particular industry or on the society as a whole. In this regard, an
innovation is seen as a creative process to combine existing concepts or entities into new
configurations in novel ways (Zaltman, Duncan, & Holbeck, 1973). These new
configurations, also considered creative destructions, usually introduce a revolutionary
type o f change in the industrial and macroeconomic conditions and lead to a dramatic leap
in the advance o f products and technologies industry- or society-wide.
In addition to emphasizing the creation of something destructive yet novel to existing
industries or society, innovation is also used to describe the adoption or internalization
process by which an innovation becomes a part of the adopting organizations (Zaltman et
al., 1973). Innovation in this context indicates the successful introduction into an applied
situation of means or ends that are new to that situation (Mohr, 1969, p. 112). This is a
process-oriented perspective o f organizational innovation and is composed of multiple
stages ranging from initiation through acceptance and implementation to diffusion (Daft,
1978; Thompson, 1965). A third way to define innovation uses a more general and broad
viewpoint. Here, innovation refers to any proposed ideas, thoughts, behavior, or things that
are new or qualitatively different from existing forms, and how it changes organizational
members behavior for the purpose of problem solving or improving performance (Barnett,
16
1953; Gross, Giacquinta, & Bernstein, 1971).

The indication o f newness regarding an innovation has triggered a great deal of
discussion among researchers. For some, an innovation is called an innovation only when it
is absolutely new to the environment. Thus, when an adopter is said to be innovative in
this regard, it means that the adopter is among the first few adopters to accept that
innovation. For other researchers, innovation is a subjective perception o f the adopting
entities, regardless o f its newness to the environment or other entities. In this case, an
innovation can be perceived as new or different by the unit adopting it and can be either
mentally organized ideas or tangibly expressed objects (Rogers & Shoemaker, 1971;
Zaltman et al., 1973).
Organizational innovations can be observed in five different organizational
dimensions: product or service innovations, production process innovations, structure
innovations, people innovations, and policy innovations (Knight, 1967; Knight & Wind,
1968; Zaltman et al., 1973). A product or service innovation pertains to what organizations
provide to their markets, customers, or clients. A production-process innovation refers to
new methods applied by the organization to solve production difficulties, to lower
production costs, or to increase production efficiency. The third type of innovation has to
do with organizational structure, whereby organizations implement new systems, decision
making processes, or some new form of structuring. People innovations are related to
different types of programs implemented within an organization that focus on
organizational members behavior or activities. Policy innovations, involve major strategic
changes in the organization for the purpose of goal achievement.
17
Organizational Innovativeness
The concept of innovativeness was initially utilized to describe individual consumers
attitudes and acceptance toward new products in the literature of communication and
diffusion o f innovations (Rogers, 1983). Briefly, consumers with a characteristic of
innovativeness are more likely to try and accept new products in the market than other
individuals. Many innovations, however, maximize utility in the organizational context, or
must be adopted by a collective before they are accepted by individual members (Rogers,
1983). In this case, organizations become the major adopters. Organizational
innovativeness thus becomes an indication of the degree to which an organization is
willing to accept and implement innovations. Generally defined, organizational
innovativeness refers to an organizations capability to innovate. Unlike innovations, which
concern the process or outcomes, innovativeness usually refers to a dynamic capability in
initiating, developing, or implementing new ideas, products, or technologies. Therefore,
innovativeness is similar to innovative capability and both terms are used interchangeably
in this study.
Organizational innovativeness takes different meanings when used in different
contexts. For example, the innovative capability can refer to organizations ability to create
and invent new products, technologies, process, or services. Innovativeness in this regard
emphasizes the originality o f innovation creators or inventors. The innovative capability
can also refer to the earliness and easiness with which an organization adopts a new
innovation. That is, an organization is considered as innovative when it is among the very
first groups to accept and implement a new innovation compared with others with similar
goals (Becker & Whisler, 1967). In this context, the newness of an adopted innovation
18
connotes an absolute sense defined by the environment rather than the organization which
adopts it.
A third way to define organizational innovativeness uses a cultural lens and considers
organizational innovativeness as part of an organizations cultural competitiveness (Hult,
Ketchen, & Nichols, 2002). Organizational innovativeness in this respect represents an
organizational trait/propensity/capability of embracing an atmosphere of willingness and
openness to new ideas (Calantone et al., 2002; Hult, Snow, & Kandemir, 2003; Hult et al.,
2004).
Wang and Ahmed (2004) reviewed the existing literature on innovativeness and
identified five main areas that are components of an organizations overall innovative
capability. These dimensions include product innovativeness, market innovativeness,
process innovativeness, behavioral innovativeness, and strategic innovativeness. Wang and
Ahmed (2004) defined organizational innovativeness as an organizations overall
innovative capability o f introducing new products to the market, or opening up new
markets, through combining strategic orientation with innovative behavior and process (p.
304).
By broadening the scope of organizational innovativeness, this overall capability
perspective places an emphasis on the atmosphere at the organizational climate level,
which can exert considerable influence upon each organizational members behavior and
attitude. Thus, viewing organizational innovativeness as an overall capability bypasses the
restriction imposed by a specific focus on such functional departments as marketing or
research and development. Moreover, this definition expands the study of innovativeness to
include the organization as a whole. Innovativeness, in this case, becomes an
19
organization-wide perception of organizational members about an organizations openness

and support for new ideas and novelty (Hurley & Hult, 1998), as well as its tendency to
engage in experimentation and creative processes (Lumpkin & Dess, 1996).
Organizational Learning and the Learning Organization

Organizational Learning
Organizational learning refers to the process by which organizations acquire and
develop knowledge. This learning process consists of four primary elements: knowledge
acquisition, information distribution, information interpretation and organizational memory
(Huber, 1991). Many researchers have likened organizational learning to an individual
learning process that occurs at the organizational level (see Lahteenmaki, Toivonen, &
Mattila, 2001, for a comprehensive review). Undoubtedly, individual members within an
organization are the primary agents for organizational learning. However, it must be
pointed out that organizational learning is not simply the sum of individual learning. The
outcomes produced by the individual learning process must then go through
organizational-level processes such as organization-wide interpretation, distribution, and
systematic storage and memorization before they can produce organizational-level
outcomes.
Different groups o f scholars explain organizational learning using different
perspectives. Among the very first researchers in the field, Cyert and March (1963)
developed their theory o f organizational learning with a focus on cognitive information
processing and decision making. With an emphasis on the assumption of bounded
rationality, as well as limited human cognition, organizations find it impossible to perform
20
comprehensive search over all the alternative options for every single decision-making
situation. Therefore, organizations must learn from experience and routinize processes in
order to economize cognitive usage and increase efficiency. Organizational learning in this
respect is a routine-based, history-dependent, and target-oriented process (Levitt & March,
1988). In other words, learning occurs when organizations encode inferences from history
and experience into routines that they then use to guide future behaviors. In addition to
routine formation, learning also takes place when organizations adjust or change an
existing routine to create a new one through a process of trial-and-error or by searching for
better options when the current protocol is not satisfactory for a specific situation.
In contrast to Cyert and Marchs behavioral perspective of the firm (1963), which
considers efficiency increase and cognition economization through routine formation and
utilization as major goals o f organizational learning, Argyris and Schon (1978) focused on
the defensive mechanisms inside an organization and emphasized the improvement of
action effectiveness as the primary objective for organizational learning. According to
Argyris and Schon, in order to be the primary outcome of organizational learning, effective
actions must meet three criteria: they must be persistent, consistent with the original
intention, and they must do so without harming the existing level of organizational
performance. That is, through the creation of new knowledge, insights, and understandings,
the ultimate purpose for organizations to learn is to produce actions that meet all the three
of these criteria.
In Argyris and Schons viewpoint, two types of theories exist in an organization: the
espoused theory and the organizational theory-in-use. The espoused theory, which is
composed o f values, beliefs, and ideals, is the theory of action which is advanced to
21
explain or justify a given pattern of action, while the theory-in-use, inferred and
constructed by observation of practical organizational actions, refers to the theory of
action which is implicit in the performance of that pattern o f activity (Argyris & Schon,
1978, p. 13). Argyris and Schons theory of action argues that organizational learning takes
place through consecutive processes of detection and correction of error. More specifically,
organizational theory-in-use provides a framework for organizational members to use to
predict the expected outcomes o f specific actions taken. When organizational members
detect a match between the actual outcomes and the expectation, the theory-in-use is
confirmed and enhanced, while any mismatch disconfirms the theory-in-use, indicating
that a correction is required.
Argyris and Schon (1978) also distinguished between two types of organizational
learning. Single-loop learning occurs when the correction of errors takes place at the level
of organizational theory-in-use, while double-loop learning refers to the learning process in
which both the espoused theory and theory-in-use are modified based on outcome
feedbacks. O f the two, double-loop learning, through which the underlying values and
beliefs are consistently and adequately examined and corrected, is more critical for modem
organizations than single-loop learning since this type of learning helps organizations
engage in continuous self-examination of their organizational values and assumptions. In
so doing, organizations can maintain flexibility and the capacity needed to absorbing new
information and knowledge (Clark & Tracey, 2004)
The Learning Organization and Organizational Learning Culture
Organizational members as learning agents produce learning; however, organizations
must also enable learning activities by creating favorable conditions. Organizations that
22
deliberately remove barriers to learning, expand their learning capacity, and encourage
continuous improvement and transformation within the organization for the creation of its
future are considered learning organizations (Marsick & Watkins, 2003; Pedler, Burgoyne,
& Boydell, 1991; Senge, 1990). Notwithstanding the close interrelation between
organizational learning and the learning organization, a brief distinction can be made. On
the one hand, organizational learning refers to the dynamic process through which
organizations learn (acquire, assimilate, store, and utilize knowledge and information);
while on the other hand, the learning organization represents a type of organizations within
which learning is supported, encouraged, and facilitated at both the individual and the
organizational levels.
Researchers studying the topic of the learning organization have concentrated their
work on discovering critical characteristics of the learning organization. For example,
Senge (1990) suggested in his popular book, The Fifth Discipline, that systems thinking,
personal mastery, mental models, shared vision, and team learning are the means necessary
for the building of a learning organization. Covering the perspectives of policies, structure,
strategies, formal systems, and inter-organizational interactions, Pedler et al. (1991) also
identified eleven characteristics that a company should possess in order to be a successful
learning organization. DiBella and Nevis (1998) used ten facilitating factors to describe
normative determinants that allow learning to emerge and flourish within an organization,
namely scanning imperative, performance gap, concern for measurement, organizational
curiosity, climate o f openness, continuous education, operational variety, multiple
advocates, an involved leadership, and systems perspectives.
Other researchers have used a cultural perspective to define the learning organization.
23
In this respect, important cultural features are identified to describe the learning
organization. An organizations learning culture, therefore, serves as an indication of the
degree to which the organization commits itself to learning (Hult et al., 2004). Such a
learning culture also represents a kind of organizational trait or orientation which aims at
the enhancement o f an organizations learning capacity as well as the promotion of
organization-wide learning activities (Calantone et al., 2002). For example, Hult and
colleagues decomposed the learning orientation into four factors: (a) commitment to
learning: the degree to which an organization values and promotes learning; (b) shared
vision: an organization-wide focus on learning; (c) open-mindedness: the willingness to
critically evaluate the organizations operational routine and to accept new ideas; and (d)
intra-organizational knowledge sharing: the collective beliefs or behavioral routines related
to the spread o f learning among different units within an organization (Calantone et al.,
2002; Hult & Ferrell, 1997; Hurley & Hult, 1998). Marsick and Watkins (2003) proposed a
seven-dimension model to delineate the construct of organizational learning culture.
According to them, organizations that value learning show distinctive features in seven
cultural dimensions: creating continuous learning opportunities; promoting inquiry and
dialogue; encouraging collaboration and team learning; establishing systems to capture and
share learning; empowering people towards a collective vision; connecting the organization
to its environment; and leaders who model and support learning.
The learning organization is strategically advocated by the management in modem
organizations not only because it is seen as a source for organizations to obtain knowledge
as competitive advantage (Huysman, 2000), but also because it has embedded the capacity
to adapt or to respond quickly in novel ways (Marsick & Watkins, 2003). Therefore,
24
transforming oneself into a learning organization is a critical objective that modem

organizations should pursue.
Knowledge development and the establishment of a systematic storage mechanism are
the most commonly-acknowledged objectives and outcomes for organizational learning.
Particularly in the modem business environment, knowledge is considered a critical
competitive advantage that enables organizations to outperform their competitors (Barney,
1991; Clark & Tracey, 2004). Meanwhile, the value of organization-possessed knowledge
increases when organizations establish a solid knowledge system to enhance the
accessibility of knowledge and its effective use by organizational members. However,
other than the primary outcomes of knowledge creation and acquisition, organizations
embracing the learning culture also exert a considerable influence on many aspects of their
employees. More specifically, the learning organization, as a collective of individuals,
serves as the contextual environment that influences how individuals think and act (Argyris
& Schon, 1978). For example, individuals of organizations with a strong emphasis on
learning are expected to have a better understanding of the value of learning, an open mind
capable of embracing and appreciating diverse perspectives, and a flexible attitude that
allows subjective discussions using critical thinking. These organizational members are
also likely to engage in frequent self-examination and reflection, and are able to recognize,
analyze, integrate, and utilize information in the surrounding environment.
Organizational Learning Culture and Innovativeness
The dimensions o f the learning culture are often found as indicators of organizational
learning and the learning organization in studies examining the influences of
organizational learning on organizational outcomes (Calantone et al., 2002; Lahteenmaki
25
et al., 2001). However, one point is worth noticing. By measuring organizational learning
from the perspective o f the learning culture, a positively reinforced relationship between
organizational learning and the learning culture must be assumed. That is to say,
organizations that are characterized by a strong learning culture have a better ability to
learn. Meanwhile, organizations with better learning processes find this enhances their
learning culture.
In a conceptual article, Covin and Slevin (1991) articulated the importance of an
organizational culture for organizational innovation and innovativeness. They consider
that organizational culture is a key determinant in fostering employees innovative
behavior. Since an organizations innovative capability can be seen as an outcome that is
enhanced by organizational learning, given the overlapping features between innovation
and knowledge creation, treating the learning culture as one contextual factor of
organizational innovativeness is a reasonable approach to adopt. When an organization
has a culture that both encourages employees to express novel ideals and positively
supports change and innovation, the organizational members embedded in it are more
willing to keep open minds and accept different ideas. This argument of a positive
relationship between organizational learning and innovativeness has been affirmed by
several empirical studies (see, for example, Calantone et al., 2002; Hult et al., 2004).
However, most o f these studies were not consistent with regard to their definitions of
innovativeness, and were overly focused on the rate of innovation adoption as the method
of measuring innovativeness.
The influences o f the learning culture on organizational innovativeness can be
addressed in three ways. First, organizations committed to a learning culture tend to have
26
frequent interactions with the external environment (Marsick & Watkins, 2003). This
connection with the environment facilitates an organizations knowledge of new and
up-to-date technologies, as well as information (Calantone et al., 2002). Therefore,
organizations o f this type are more likely to be innovative with regard to introducing new
ideas, processes, and technology. Additionally, frequent interaction with the environment
helps organizations sensitively detect potential market demand, so that organizations are
more likely to devote resources to innovate new products and services and thus benefit
from mew market opportunities.
Second, internally, organizations that embrace a learning culture encourage members
to engage in dialogue and collaborations (Marsick & Watkins, 2003), and these dialogues
and collaborations stimulate new ideas. As Aiken and Hage (1971) argued, a
communication mechanism that enhances both inter- or intra-organization information
transfers is very important for organizational innovation. That is, innovative organizations
are those that possess mechanisms to infuse and stimulate new ideas. Meanwhile,
organizational members are more likely to learn diverse perspectives and opinions given
the multiple channels from different individuals, so members of these organizations are
more likely to be open-minded. Additionally, they are more willing to consider different
suggestions and information. As a result, the innovative capability of these organizations is
likely to be stronger.
Third, a learning organization promotes continuous individual learning (Marsick &
Watkins, 2003). Therefore, individual members ability and mastery of specific subject area
will be enhanced through these continuous learning opportunities. Consequently, these
organizational members are more capable of creating new ideas, assimilating new
27
technologies, and innovating given their up-to-date knowledge and capabilities. All three of
these points explain the importance of an organizations learning culture for innovativeness,
which leads to the first hypothesis:
Hypothesis 1 : Organizational learning culture is positively related to
Absorptive Capacity
Absorptive Capacity
First proposed by Cohen and Levinthal (1990), absorptive capacity has become a new
and popular approach to explain the connection between organizational learning and
innovation. Absorptive capacity is defined as the ability of a firm to recognize the value of
new external information, assimilate it, and apply this new information to commercial
ends (p. 128). Zahra and George (2002) further considered absorptive capacity as a
dynamic capability embedded in organizational processes, arguing that it influences an
organizations capability in knowledge creation and utilization which, in turn, enhances a
firms ability to gain and sustain a competitive advantage. According to Zahra and George,
absorptive capacity consists of four capabilities: knowledge acquisition, assimilation,
transformation, and exploitation. The first two components are termed potential capacity,
while the latter two are termed realized capacity.
Zahra and George (2002) proposed two antecedents to a firms absorptive capacity: (a)
a firms exposure to diverse and complementary external sources of knowledge, and (b)
experience. Therefore, an organizations absorptive capacity usually has two features. First,
it is usually firm-specific and thus cannot be easily acquired by and integrated into other
28
firms. Second, absorptive capacity is cumulative. That is, an organizations absorptive

capacity increases as a firm acquires more relevant knowledge of a specific domain. This
cumulativeness results in the path- or history-dependent nature of absorptive capacity.
Meanwhile, absorptive capacity is characterized by its domain specificity, given that prior
relevant knowledge helps reinforce a firms absorptive capacity.
To summarize, when a firm is said to possess high absorptive capacity, it implies that
this firm has a strong ability to identify important new information from its external
environment. This capacity also enables the firm to better digest this new information, as
well as better integrate it into its pre-existing knowledge base, so that the firm can
effectively apply this new acquired knowledge to its ongoing activities.
In addition to a direct relationship between organizational learning and innovativeness,
absorptive capacity provides another way to bridge organizational learning and
innovativeness. More specifically, organizational learning affects a firms absorptive
capacity which, in turn, affects its innovativeness. To explain this in another way,
organizations that learn better are more likely to have better absorptive capacity. This better
absorptive capacity further enhances these organizations innovative capability. These
mediating relationships between organizational learning, absorptive capacity, and
innovativeness will be divided into parts and discussed in turn in the following section.
Organizational Learning and Absorptive Capacity
Before explaining the relationship between organizational learning and absorptive
capacity, several points are worth further discussion. First, when an organization is said to
learn better than others, there are three potential explanations: (a) a better preexisting
knowledge base, (b) better learning experiences, and (c) a better learning mechanism. As
29
mentioned previously, organizational learning refers to the learning process composed of

knowledge acquisition, distribution, interpretation, and memorization/storage (Huber,
1991). This process can be seen as a process of information/knowledge internalization for
the organization that learns. The connections between organizational learning and
absorptive capacity will be discussed in the following three paragraphs.
A complete learning mechanism enhances absorptive capacity. The first explanation
for organizational learning and absorptive capacity has to do with the sub-processes of
learning itself. When an organization is said to learn better, it engages in learning activities
more frequently. As a result, these organizations tend to have more complete learning
processes. Each sub-process of learning is easily triggered because all individual members,
units, and departments are familiar with the occurrence of learning activities. As a result,
the completeness o f and familiarity with the learning process facilitates future learning and
cultivates better absorptive capacity.
Prior knowledge enhances absorptive capacity. As argued by Cohen and Levinthal
(1990), absorptive capacity is cumulative in nature, since prior relevant knowledge
enhances it. Therefore, organizations that previously learned better are likely to memorize
more relevant knowledge on specific domains. Similar to psychologists arguments that
prior knowledge helps learners to establish linkages through associative learning,
organizations prior knowledge base enables these learning organizations to effectively and
efficiently recognize, understand, and utilize important new information. As a result, these
organizations have better absorptive capacity compared with organizations that learn and
possess less relevant knowledge.
Prior learning experience enhances absorptive capacity. The third mechanism
30
suggested to enhance an organizations absorptive capacity is the previous experience of

learning tasks (Cohen & Levinthal, 1990). This mechanism is referred to by some
researchers as learning to learn (see, for example, Ellis, 1965, cited in Cohen &
Levinthal, 1990). In this case, organizations that previously learn better are likely to have
learned more skills o f learning. These learning skills promote the organizations ability to
discover linkages and associations between old knowledge and new information that may
have never been considered before (Cohen & Levinthal, 1990).
All these three explanations work correlatively to address the relationship between
organizational learning and an organizations absorptive capacity. More specifically, these
explanations justify the argument that organizations that previously learned better are
likely to have better absorptive capacity.
Absorptive Capacity and Innovativeness

As suggested previously, organizational learning affects organizational innovativeness
by enhanced absorptive capacity. In the existing literature, the concept of absorptive
capacity has been widely studied by researchers as an important factor that affects the
innovative performance of R&D within organizations. As defined by Cohen and Levinthal
(1990), absorptive capacity confers an ability to recognize the value of new information
assimilate it, and apply it to commercial ends (p. 128). This definition highlights the
importance o f absorptive capacity for organizations who wish to exploit and explore new
knowledge and information existing either internally or externally to the organization for
31
the enhancement of organizational innovativeness.

Previous studies have found positive association between organizational absorptive
capacity and innovativeness (Chen, 2004; Tsai, 2001). The major influence of absorptive
capacity on organizational innovativeness is that it enhances an organizations ability to
process information. In order to be innovative, organizations need an enormous amount of
information and knowledge from both their external environment and internal units.
However, the existence o f internal and external information does not guarantee success if
an organization is not able to recognize, digest, and utilize this information. Absorptive
capacity plays a role in enhancing a firms ability to recognize and assimilate critical
information. A strong absorptive capacity also strengthens a firms ability to interpret,
internalize, and utilize newly-obtained information. With this capacity, organizations need
not worry about omitting any information sources and are more effective in exploiting new
information to enhance their performance. Therefore,
Organizational Structure
Organizational structure refers to the definition of authority relationships, the division
of labor, the arrangement o f workflow, coordination and control of work, and
communication within an organization (Scott, 2003). Several key dimensions, such as
formalization, specialization, standardization, centralization, hierarchy of authority,
professionalism, and complexity, have been postulated to label an organizations structure
32
in order to provide descriptions about the internal characteristics of the organization (Daft,
1983; Pugh, Hickson, & Hinings, 1968).
Bums and Stalker (1961) distinguished between two types o f structures, the
mechanistic and the organic, as the two extremes of the management system. The
mechanistic form o f structure, which corresponds to the bureaucratic perspective of
organization, is characterized by a rigid/strict hierarchy of authority and conformity,
centralized control and decision making, and limited interpersonal interaction and
communication. Communicational contents in a mechanistic organization are mainly
commands and orders, rather than information and advice. A mechanistic structure also
displays a high degree o f role specification, task simplicity, procedural standardization, and
formalization. Such type o f structure sees efficiency and imperative control as the major
organizational objectives.
In contrast to the mechanistic form of management system, an organic structure
represents a more adjustable and flexible form of organizing. Organizations inclining to an
organic form o f management system have a less hierarchical system of authority and
control. Lateral interaction and communication among people of different ranks are
encouraged to transfer information and advice rather than instructions, orders, and
commands. Tasks are specified with an emphasis on the relationship with other task units
(Bums & Stalker, 1961). This organicity-oriented perspective sees organizations as an open
system where interactions, both within the organization or with the external environment,
are highly valued since they help the organization to survive and thrive.
Organizational Structure and Innovativeness
Numerous studies on innovation have found organizational structure to be a major
33
organizational dimension affecting organizational innovation. A specific focus has been on

Bums and Stalkers (1961) distinction between organic and mechanistic management
systems when examining the relationship between structural factors and organizational
innovativeness. For example, Thompson (1965) discussed the relationship between
organizational structure and innovation and argued that a hierarchically structured
organization pursuing production efficiency actually rendered organizational innovation
and creativity. Zaltman et al. (1973) also argued that the bureaucratic and mechanistic
organizational structure reduces an organizations capacity to innovate because it embraces
monocratic concepts, lacks mechanisms for dealing with conflicts, and overemphasizes
certainty. Meanwhile, other structural features commonly seen in modem bureaucratic
organizations, such as oversimplified tasks, centralization of power and authority, an
emphasis on extrinsic reward systems, and conformity, by no means facilitate innovation
(Thompson, 1965).
Aiken and Hage (1971) argued that organizations inclining to an organic form of
structure are more likely to be innovative. An innovative organization will be characterized
by structural looseness, with less emphasis on narrow, non-duplicating, non-overlapping,
definitions o f duties and responsibilities. An innovative organization is also ready to
promote a new approach to departmentalization by integrating personnel from different
departments to minimize parochialism as well as the resistance to new ideas from outside
the organization. Zaltman et al. (1973) integrated previous studies and modeled
organizational innovation using a set of structural variables. They decomposed the
innovation process into two major stages, generation and adoption, and suggested two
distinctive structural foci for organizations seeking to generate or adopt an innovation.
34
According to them, an organizational structure characterized by low formalization,

decentralization, and high complexity helps with the generation of innovation proposals.
On the other hand, an organizational structure featuring high formalization, centralization,
and low complexity facilitates the process of innovation adoption and implementation.
Rogers (1983) also reviewed previous studies on organizational innovativeness and listed a
number of structural variables considered influential to an organizations innovative
capability. According to Rogers, complexity, interconnectedness, size, and organizational
slack are positively associated with the level of organizational innovativeness, while
centralization and formalization have a negative influence on an organizations innovative
capability.
Since the variable o f innovativeness in this study refers to the degree to which an
organization is willing to accept new ideas, it is more relevant to the initiating stage of the
innovation process, in which cultural openness to the innovation is the most critical drive
(Hult et al., 2004; Zaltman et al., 1973). Such an open atmosphere requires the individuals
involved to possess diverse perspectives and a flexible mindset in order to allow new ideas
and opinions to be brought up for discussion and consideration. Organizational structure in
this regard is considered to be the primary platform that enables interaction,
communication, discussion, and information exchange to take place within the
organization.
As mentioned previously, a structure with an organic form is characterized by a less
rigid hierarchy, more lateral communications, and more interactions among individuals at
different levels. These features reinforce organizational members feelings of
empowerment and flexibility, as well as their motivation by being decision makers.
35
Meanwhile, increasing the frequency of lateral communications and interactions helps

organizational members keep an open mind so that they are willing to listen and understand
diverse perspectives and opinions. As a result, an organic structure is preferred to a
mechanistic structure for organizations to enhance innovativeness. This leads to the next
hypothesis:
Hypothesis 4: Organizations with a higher degree o f structural organicity are more
Collectivist Orientation
Collectivist Orientation
In his theory o f national culture, Hofstede (1980, 1991) identified five dimensions as
criteria that determinate a nations culture. These five dimensions are Power Distance,
Uncertainty Avoidance, Individualism versus Collectivism, Masculinity versus Femininity,
and Long-term versus Short-term orientation. Among these dimensions, collectivism has
been argued as a strong feature for Asian countries such as Taiwan, Korea, Singapore, and
Hong Kong (Hofstede, 1984; Triandis, 1995). This individualismcollectivism dimension
has to do with the extent to which members in a society connect to other members, and
describes the relationship between the individual and the collectivity they belong to.
Individuals in a collectivist-oriented society tend to define themselves in terms of the
environment and group they are in (Hofstede, 1984).
In management practices, an individualist-oriented society emphasizes autonomy,
individual responsibility for results, personal achievement, and individual-level rewards. In
contrast, a collectivist-oriented society reflects this character in their emphasis on work
36
unit solidarity, team-based reward, sense of security, and ingroup harmony (Newman &
Nollen, 1996; Triandis, 1995).
Collectivist Orientation and Innovativeness
Hofstedes theory o f national culture has provided a foundation for many
cross-cultural studies. Nevertheless, none of the existing studies on organizational
innovativeness have taken into consideration the national cultural dimensions. The
dimension o f collectivism was selected in this study for two reasons. First, the study
focuses on organizations in Taiwan, which has been categorized as a highly
collectivist-oriented country (Hofstede, 1984; Triandis, 1995). This dimension was
therefore expected to have a manifest effect on organizational processes.
Second, research by Hofstede (1984) has suggested that the individualismcollectivism dimension relates most closely to a countrys level of economic development.
He argued that since a collectivist-oriented society emphasizes traditions and norms, the
introduction of new technologies is seen by the society as a force toward the shift of
societal norms (p. 153). Consequently, such a society tends to limit the scope of
technology transfer in order to maintain established norms and traditions as well as to
stabilize members behavioral patterns. In Hofstedes view, technology transfer is
considered as an antecedent of economic growth, and the correlation between a nations
wealth and its individualism index1 is remarkably high (r= .82, Hofstede, 1984, p. 165).
Yet, the direction o f the positive relationship between individualism and national wealth
reverses to negative when national wealth reaches a certain level. In other words, for
1 In Hofstedes statement, individualism and collectivism are the two extremes o f the continuum. Hofstede
used the so-called individualism index as an indicator for this dimension. A nation with a high score in the
individualism index w ill thus score low in collectivism.
37
wealthier countries, higher collectivism/lower individualism accelerates their economic

growth.
To link this finding to the organizational level, an organizations ability to accept
technology transfer must be considered as organizational innovativeness. Therefore,
collectivism restricts technology transfer and thus is negatively associated with
innovativeness. This inference, however, is derived only tentatively, since a certain degree
of political force is implied. It is this top-down force that constrains the openness toward
new technology o f a given society.
Viewing this from a bottom-up perspective, a different way to justify the relationship
between innovativeness and collectivist orientation emerges. In a collectivist-oriented
society, group harmony, concerns for the feelings of others, and avoidance of devaluation
of others are strongly emphasized (Hofstede, 1984). These features emphasize the quality
of communication contexts and respectful attitudes toward others opinions (Kim, Sharkey,
& Singelis, 1994; Triandis, 1994). Wagners (1995) study also found that the collectivistorientation as a moderating variable is positively associated with group cooperative
behavior.
Since organizational innovativeness is a collective phenomenon and requires inputs
from all o f the organizational members, a collectivist-oriented value in this regard might
indeed enhance, rather than suppress, an organizations innovative capability. Therefore, it
is hypothesized that:
innovativeness.
38
Organizational Effectiveness
Organizational effectiveness, generally defined as an indicator of how well an
organization is doing according to some set of criteria (Scott, 2003), has always been an
essential concern for both management and scholars. Assessments of organizational
effectiveness are conducted in order to understand the extent to which organizations
achieve their general strategic objectives as well as their goals related to profitability and
growth in sales and market share (Hult et al., 2004).
Organizational effectiveness has become more salient in recent years because of the
increased intensity o f global competition, since organizations need to enhance the level of
their multi-faceted outcomes in order to survive (Scott, 2003). Despite being viewed as an
important construct for evaluating organizational performance, organizational effectiveness
is a controversial topic and has been the subject of intensive discussion in both academic
and practical fields (Cameron, 1986; Walton & Dawson, 2001). A number of criteria have
been developed to represent the perspectives of different stakeholder groups of an
organization. Some o f these criteria focus on the individual level, evaluating organizational
effectiveness in terms o f employee satisfaction, retention, and turnover rate (e.g.,
Friedlander & Pickle, 1968), while other criteria use organizational-level outcomes, such as
productivity, profitability, flexibility, adaptability, and efficiency, to assess organizational
effectiveness (e.g., Mott, 1972). Still other criteria include the firms survival, its control
over its environment, the optimal balance of differentiation and integration, and resource
acquisition (e.g., Yuchtman & Seashore, 1967).
Since these various criteria reveal the complexity and inconsistent perspectives among
39
different groups o f organizational scholars, the objective reality about an organizations

effectiveness and performance is difficult to discern (Cameron & Whetton, 1983).
Organizational effectiveness is considered to be a value-laden construct because the choice
of a specific set of criteria is influenced by the users (i.e., scholars, organizational analysts,
or management) preference and values about certain aspect of organizational outcomes. In
order to establish an integrated view of organizational effectiveness, Quinn and Rohrbaugh
(1983) proposed a three-dimensional competing values model to synthesize existing
models of organizational effectiveness. Their three dimensions consist of values and
preferences for focus (internal versus external to organization), for structure (flexibility and
change versus stability and control), and for process-result (means versus ends). This
three-dimensional model provides a fundamental framework for researchers and
organizational assessors to decide which kind of effectiveness criteria is most suitable for
the specific outcomes they are interested in.
Innovativeness and Organizational Effectiveness
Several studies have demonstrated that organizational innovativeness is influential for
organizational performance. For example, Hult et al. (2004) argued that strengthening their
organizational innovativeness assists organizations to attain superior business performance.
In their study, Hult et al. used market orientation, learning orientation, and entrepreneurial
orientation as antecedents o f organizational innovativeness and found innovativeness to be
an important mediator between antecedent orientations and firms general performance, as
well as their performance in terms of profitability, growth in sales, and market share. Other
researchers have also demonstrated similar results showing a positive relationship between
a firms innovativeness and performance (Calantone et al., 2002; Hyvonen et al., 2004).
40
Even though a positive association between innovativeness and performance

(generally financial performance) has been proven by some existing studies, few have used
perceptual measures as the means to assess an organizations overall effectiveness.
However, as mentioned previously, organizational effectiveness is an important indicator
for modem business organizations. Meanwhile, the increasing complexity and rapid
changes in the current environment make the organizational capabilities that supported past
performance insufficient to ensure a firms success in the future (McCann, 2004).
Organizational innovativeness in this regard becomes crucial, since it influences
organizational performance in three aspects.
First o f all, organizational innovativeness enhances efficiency. Since innovative
organizations are more open to considering and accepting new knowledge, processes, and
technologies, such a capability helps the organizations members discover new methods of
production for the purpose of quality and quantity improvement. Meanwhile, new
production methods are also likely to help lower production costs. As a result,
organizational innovativeness is likely to increase production efficiency.
Second, innovativeness enhances flexibility. When an organization encounters an
unanticipated change in the external environment, prompt reactions and quick search for
solutions are critical for the organization to manage the situation. Innovative organizations
are also more flexible in responding to market and customer demands given their ability to
find creative ideas. Third, innovativeness enhances adaptability. An innovative firm is
considered to have higher level o f adaptability because of its willingness to engage in and
adopt innovations. This adaptability helps organizations to survive and compete in the
industrial environment. This leads to the next hypothesis:
41

effectiveness.
Absorptive Capacity and Organizational Effectiveness

In addition to organizational innovativeness, absorptive capacity is also posited to
have a positive influence on organizational effectiveness for two reasons. First, since
absorptive capacity helps organizations recognize the value and importance of external
information, organizations with a strong absorptive capacity are more likely to discover
emerging market trends and demands. Second, their sensitivity to market information helps
these organizations to utilize relevant knowledge and techniques to develop products and
services that satisfy market needs and increases their chance of gaining a first-mover
advantage. As a result, organizational performance is improved. This leads to the following
hypothesis:
Summary of Hypotheses
To summarize, in order to test the plausibility of the model, seven hypotheses were
proposed to examine the relationship between critical constructs. These seven hypothetical
relationships are listed below and presented in Figure 2.2, along with the expected
directions o f the influences between constructs.
Hypothesis 1: Organization learning culture is positively related to organizational
innovativeness.
Hypothesis 2\ Organizational learning culture is positively related to organizational
42

Hypothesis 4: Organizations with a higher degree of structural organicity are more
innovativeness.
effectiveness.
Org.
Learning
Absorptive
Capacity
Structural
Organicity
Org.
N
Innovativeness
Org.
Effectiveness
Collectivism
Figure 2.2.
Hypothetical relationships between constructs
As shown in the path diagram, organizational learning culture, structural organicity,

and collectivism act as the exogenous variables, and all three are related to organizational
innovativeness. Among the three endogenous variables, absorptive capacity and
organizational innovativeness are posited to have direct effects on organizational
43
effectiveness. The path diagram also indicates that the three exogenous dimensions,
organizational learning culture, structural organicity, and collectivism, are all proposed to
be interrelated.
44
CHAPTER THREE
METHODS
Research Design
Positivistic Survey Research
This study adopted a quantitative approach using cross-sectional survey research
technique. Survey research is a flexible research method since it can be adapted to suit a
wide range o f topics and purposes (Singleton & Straits, 1999). For the proposed study, the
research objective is to examine the relationships between organizational-level variables
(i.e., organizational learning culture, structure, and collectivist orientation), organizational
innovativeness, and organizational outcomes (i.e., effectiveness). However, given that it is
difficult to conduct a study incorporating cultural and structural change interventions in
order to observe the influences on targeted organizations within a short time period, the
survey method provides the most suitable way to collect data from organizations. A
questionnaire was therefore used as the primary instrument with which to collect data from
informants of sampled organizations at a single point in time.
Using survey research has several advantages (Singleton & Straits, 1999). First,
survey research is an effective and cost-efficient way to collect large samples within a short
time period. With the probability sampling procedures, a survey study can obtain a larger
number o f participants than is possible with either experimentally-designed or qualitative
studies. At the same time, with well-developed measurement tools, the findings of a survey
study can more reasonably be generalized to the population of interest given the level of
detailed and precise information that is provided for large heterogeneous samples.
Moreover, in contrast to experimental research, which can investigate only a few variables
45
at a time, survey research allows researchers to investigate the relationships between

multiple variables.
The primary limitation o f a cross-sectional survey study, however, has to do with the
inference o f cause-and-effect relationships between variables (Singleton & Straits, 1999).
Unlike experimental research, which enables rigid control of contextual factors in order to
ensure the inference o f causality between independent and dependent variables, a
cross-sectional survey study attempts to establish cause-and-effect relationships between
multiple variables with sophisticated statistical analysis techniques, such as path analysis
and structural equation modeling (Maruyama, 1997). Another shortcoming of
cross-sectional survey research is its lack of flexibility, as it is not possible to modify the
research procedures once the survey instrument has been developed and administered in
the field. Survey research also inevitably encounters a problem of systematic measurement
errors, such as social desirability and informants response bias when responding to survey
questions (Singleton and Straits, 1999).
Target Population
Since the major purpose o f this study is to understand the influence of
organizational-level factors on firms overall performance, the unit o f primary interest is
the organization. In this study the business organizations in Taiwan were selected as the
target population. Business organizations in Taiwan have been crucial to the growth o f the
local economy. In recent years, however, given rising labor costs and decreasing profits,
there has been a trend for large-scale companies to shift their focus and move orders to
other parts o f Asian with cheaper labor and production costs. This movement has had a
huge impact on the industrial structure in Taiwan, and the resulting downturn in the
46
economy has forced many business organizations to shut down. Numerous small-medium
firms were forced to close their door because they do not have the financial resources
needed to move to other areas with lower production costs. Therefore, it is extremely
important for the local business to find ways to survive, to obtain a competitive advantage,
and to achieve sustained performance.
Data Collection Procedures
This study adopted the convenience sampling approach to collect data. The
convenience sampling approach is an easy, quick, and inexpensive way for case selection
based on availability (Chein, 1981). This approach, however, suffers from major
shortcoming o f constrained generalizability o f results, since case selection based on
availability often results in some difficulty in determining to whom, other than the sample
itself, the results might apply (Singleton & Straits, 1999). This weakness was addressed in
this study by including a variety of EMBA students from different organizations in
different industries.
Three instructors in the Executive Master of Business Administration (EMBA)
program at three universities in Taiwan were contacted by the researcher to obtain
permission to administer a questionnaire to EMBA students in their classes. Since the focus
of interest in this study was the organization, only one response was collected to represent
each individual organization. Thus, the informant technique was used to determine the
optimum person to answer the questionnaire for each organization.
The informant technique, first developed and utilized in anthropological and
ethnographical field studies (Mead, 1953), refers to an information collection process in
which a small number of knowledgeable participants are relied on by researchers to obtain
47
information on observed social relationships (Seidler, 1974). In other words, the informant
technique helps researchers collect culture-related information by interviewing someone
who is an articulate member of the studied culture who enters into a more or less personal
relationship with the investigator for a relatively long period of time (Paul, 1953, p. 443).
The informant technique gained popularity among organizational studies when
researchers started to focus on the analysis of many organizations in a single study.
Advances in statistical analysis techniques have also increased researchers use of this
technique. Note, however, that a distinction must be made between the respondent and
informant approaches (Seidler, 1974). In studies using the respondent approach,
respondents are selected to represent the target population as well as to answer questions
based on their own opinions and feelings. In contrast, organizational informants serve as
internal agents who observe and summarize the organizational phenomena that researchers
are interested in. Consequently, rather than randomly choosing respondents within an
organization, an informant is selected based upon a set of criteria to ensure they possess
sufficient knowledge and understanding of that organization to enable them to supply
researchers with valuable information.
In order to ensure the quality and precision of information collected through the
questionnaire, two criteria were applied to identify suitable informants for this study. First,
the informant must have been working in the organization for at least one year, so that she
or he has a certain degree of familiarity and understanding about the organization. Second,
the informant must hold a managerial or supervisory position, so that she or he can have a
more comprehensive picture o f the organizations characteristics, operation, and
performance.
48
Institutional Review Board

The study was approved by the Institutional Review Board (IRB) at the University of
Minnesota (see Appendix A for approval letter). A consent form was included with the
questionnaire to illustrate the purpose, the format, the procedure, the benefit, and potential
harm of the study (see Appendix B and C for English and Chinese versions). Contact
information for the researcher, IRB personnel, and the researchers advisor were also listed
in the consent form, as well as being provided on the cover page of the questionnaire.
Since this was an anonymous study, it was not necessary for the informants to sign and
return the consent form to the researcher.
No information about personal identification or about the company name was asked in
the questionnaire. Returned responses were coded and saved as an electronic file in the
researchers personal computer. The data file was and will only be accessed by the
researcher and her advisor for the purpose of data analysis.
Sample Description
Table 3.1 lists the characteristics of the respondents. A total of 279 responses were
received. Among these responses, 126 questionnaires were answered and returned via
electronic mail, while the other 153 were returned in the form o f hard copies. Thirty-three
questionnaires with more than one incomplete item were deleted from the data, resulting in
246 valid responses, each representing a single organization. One hundred and thirty-five
respondents (54.9%) were male and 111 respondents (45.1%) were female. Twenty-nine
respondents reported themselves to be the owner o f the business, representing 11.8% of the
sample. The average tenure for the informants in the organization they currently work with
49
was 7.27 years (N= 242, S.D. =6.55).
Table 3.1.
Respondent Characteristics
N
Format
279
Paper
Electronic mail
Gender
Female
Male
Owner o f Business
Yes
No
Note: Valid N=246
Frequency
Percentage (%)
153
126
54.84
45.12
246
111
135
44.1
54.9
245
29
216
11.8
88.2
The average organizational age was 19.04 years (N=228, S.D. = 15.30) at the time of
the survey. Table 3.2 shows the descriptive information for the industrial groups. Eighty-six
respondents reported their organizations as belonging to the manufacturing sector, while
the other eighty-three organizations were in the service sector (including general service,
education, finance, insurance, wholesale/retail trade, and transportation services),
representing 34.95% and 33.73% of the total sample, respectively. Forty-four organizations,
about 17.89%, were in the information industry. These three sectors (manufacturing,
service, and information) make up the three major industrial groups in Taiwan and
accounted for about 87% o f the total sample.
A hundred and forty-seven (60.49%) respondents reported their organizations as being
primarily local businesses, and the other ninety-six organizations (39.51%) were reported
50
by the informants as being international companies, meaning that they are either branch
offices of foreign companies, or headquartered in Taiwan with overseas operations (see
Table 3.2).
Table 3.2.
Characteristics o f Organizations
N
Frequency
Percentage (%)
86
34.95
83
33.73
Information6
44
17.89
Other0
33
13.41
96
39.51
Industry
Manufacturing
Service3
International Organization
Yes
246
243
60.49
No
147
No. of Local Employees
67.41
1 -2 0 0
151
201 -5 0 0
27
12.05
224
14
501 -1 0 0 0
6.25
1001 and above
11.61
26
a Educational service, finance/insurance/real estate, health service,
wholesale/retail trade, service-general, and transportation.
bInformation, mass communication and journalism.
c Non-profit/government/national-operated organization,
construction/civil engineering, and international trade.
The questionnaire asked informants to provide the number o f employees of their
organizations without considering employees in their overseas offices, if any. Their
responses show that the distribution of organizational sizes ranged from 3 to 23,000.
According to Table 3.2, 61.38%, or 151 organizations, had less than 200 employees in their
local offices in Taiwan. Twenty-seven organizations had employee numbers ranging
between 201 and 500, representing 11% of the sample. Fourteen companies, or 5.69%, of
51
the sample organizations had more than 501 but less than 1,000 employees. Six of the 32
organizations with more than 1,001 employees actually had employee numbers of 10,000
or more.
Measurements
Questionnaire
There are six latent constructs in this study: organizational learning culture (ORGL),
structural organicity (STRU), collectivism (COLL), innovativeness (INNO), absorptive
capacity (ABCA), and organizational effectiveness (EFFE). The questionnaire was
formulated by integrating six subscales from existing studies and includes four main
sections (see Appendix D).
Table 3.3 lists the constructs, abbreviations, and items used to measure each construct.
The first part o f the questionnaire consists of 40 items to assess organizational
innovativeness (item 1-14), absorptive capacity (item 15-26), organizational learning
culture (item 27-33), and collectivistic orientation (item 34-40). The second and third
sections consist of six and seven items to measure organizational performance and
structural organicity, respectively. The last section of the questionnaire asks the
respondents to provide basic characteristics of the organization they represent, as well as
personal demographic information.
Translations
Since Chinese is the most commonly-used language in Taiwan, the English-based
questionnaire (Appendix E) was translated into Chinese to help informants respond easily.
The translation procedure was undertaken by two native Chinese speakers who also speak
English fluently. Additionally, both translators have sufficient academic training in the field
52
of management and organizational behavior to ensure their familiarity and knowledge of

subject-specific terminologies. A translated version of the questionnaire is included as
Appendix F.
Table 3.3.
List o f Construct and Items Information
Construct
Section
Item
No.
Abbr.
Innovativeness
1-14
IN1-IN14
Absorptive Capacity
15-26
AC1-AC12
Organizational Learning Culture
27-33
OL1-OL7
Collectivism
34-40
C 01-C 07
Structural Organicity
1-6
ST1-ST7
1-7
OE1-OE6
Construct Definitions and Measures

The following paragraphs provide the definitions and measures of the six major
constructs used in this study.
Organizational learning culture. An organizational learning culture is defined as the
cultural orientation possessed by an organization that values and deliberately enhances its
learning activities by making efforts to remove barriers, to expand its learning capacity,
and to encourage continuous im provem ent and transformation w ithin the organization in
pursuit of a competitive edge (Marsick & Watkins, 2003; Senge, 1990).

The learning culture was measured by a shorter version of the Dimensions of
Learning Organization Culture Questionnaire (DLOQ). First developed by Watkins and
53
Marsick (1997), the original version of DLOQ consisted of 42 items that measured the
seven dimensions o f learning organization culture. This was later modified by Yang (2003)
to create a shorter version that retains seven items to form a succinct measurement of a
learning culture with an acceptable reliability estimate (a= .84). The informants were
asked to indicate on a 6-point Likert-type scale the extent to which each description fit
their perception o f their organizations. The rating of each item represents the individual
organizations score on the specific dimension of learning culture, while the average score
of the seven items represents the overall tendency of the target organization to incline
towards a learning culture.
Organizational structure. The structural dimensions of an organization define the
hierarchy of authority, division of labor, arrangement o f workflow, coordination and
control of work, and communication channels (Scott, 2003). An organizations structure is
used by researchers and organizational analysts to describe the internal characteristics of
the focal organization so that comparisons can be made that highlight inter-organizational
similarities and differences (Daft, 1983).
Organizational structure was measured using a seven-item scale developed by
Khandwalla (1977) to understand the extent to which an organization is structured in
organic versus mechanistic manners. Respondents are asked to indicate on a 7-point scale
how close his or her organization is to either of the contrasting statements in each item.
The ratings on these items were than averaged to obtain a single organicity index for the
organization. The higher the index, the more organic the firms structure inclines to. A
previous study indicated that this scale has a Cronbach-a value of .83 (Naman & Slevin,
1993).
54
Organizational innovativeness. Organizational innovativeness is defined as the

propensity o f a firm to actively support new ideas, novelty, experimentation, and creative
solutions (Lumpkin & Dess, 1996). Innovativeness in this study refers to the overall
capability with which an organization embraces an atmosphere of willingness and
openness to newness (Calantone et al., 2002; Wang & Ahmed, 2004). Unlike a traditional
yet common perspective, which tends to define innovativeness in terms of innovations
generated or implemented by the adopting organizations (Thompson, 1965), organizational
innovativeness as an overall capability and atmosphere-related concept is identified based
on organizational members perception.
Organizational innovativeness was measured by a 14-item scale with a focus on the
general perception of the behavioral and process aspects of organizational innovativeness.
Questions were selected from two innovativeness scales previously developed by Hurley &
Hult (1998) and Wang and Ahmed (2004). Since organizational innovativeness in this
study refers to a type o f atmosphere at the organizational level rather than frequencies,
rates, or numbers o f innovations adoption by the focal organizations, questions of this type
contained in the original scales were excluded from the newly-composed scale.
Respondents were asked to respond to a 6-point Likert scale on which 1 indicates strongly
disagree and 6 indicates strongly agree.
Absorptive capacity. Absorptive capacity is defined as the ability of a firm to
recognize the value o f new external information, to assimilate, and to apply new
information to commercial ends (Cohen & Levinthal, 1990). In this study, absorptive
capacity was measured by a scale consisting of 12 items. The scale was adapted from
Jansen, Van den Bosch, and Volberda (2005), which originally consisted of four
55
dimensions and 21 items. To make the scale suitable to the characteristics of the focal
organizations being studied, some items were deleted while others were adjusted and
revised to fit the purpose o f the study. Respondents were asked to respond to a 6-point
Likert scale on which 1 indicates strongly disagree and 6 indicates strongly agree.
Collectivist orientation. Collectivist orientation is defined as the degree to which a
society or group makes a priority of the demands and interests of the collective as a whole
over individual needs and interests (Wagner, 1995). In a collectivist-oriented group, the
collectives well-being, harmony, and cohesion are strongly emphasized (Hofstede, 1984;
Triandis, 1995).
Collectivist orientation was assessed using the scale developed by Erez and Earley
(1987). Seven items were included in the scale. Respondents were asked to respond to a
6-point Likert scale on which 1 indicates strongly disagree and 6 indicates strongly
agree. Item 35, 39 and 40 were individualist-oriented statements and thus were reverse
coded by being subtracted from 7 to obtain scores of collectivist orientation.
Organizational effectiveness. Organizational effectiveness, the construct used in this
study to define organizational performance, refers to the degree to which an organization,
in terms o f its ability, acquires and efficiently uses its available resources to achieve
specific goals (Steers & Black, 1993). Even though a variety of perspectives have been
proposed to define organizational effectiveness, this study focuses on organizational
members perception o f the overall performance at the organizational level and is
considered as an indicator of how well an organization is doing according to such criteria
as efficiency, organizational flexibility, and adaptability (Mott, 1972; Scott, 2003).
Organizational effectiveness was measured by a 6-item scale that asked informants to
56
supply their perceptions about their organizational performance for six different aspects
using key competitors performance as the reference point. A perceptual measurement was
adopted since a large portion of the organizations in Taiwan are small-medium companies,
most o f which do not have systematic records or archival data that provides precise
information about the financial aspects of firm performance. Restricting informants to
those holding a managerial or supervisory position ensures they have a good understanding
concerning the performance of their own organizations and key competitors, as well as the
reliability of the information collected from the questionnaire.
Item Analysis
Bollen (1989) suggested that the selection of three to five indicators for each
individual construct is desirable in order to obtain optimal results on structural equation
analysis. Therefore, a close examination o f the indicators for each latent construct is a
necessity before advancing to the phase of structural equation analysis. In order to identify
adequate indicators, three steps were engaged. First, the researcher utilized exploratory
factor analysis to reveal the factor structures of each construct. Second, three to five items
with highest factor loadings for each construct were retained based on Bollens (1989) and
Hair et al.s (1995) suggestion. Third, confirmatory factor analysis and reliability test were
performed to compare and ensure good model fit for each construct with fewer items.
Figure 3.1 shows the scree test results for each construct using an eigenvalue of 1 as
the determinate criterion. Among the six latent constructs, five (innovativeness, absorptive
capacity, organizational learning, structure, and effectiveness) show clear
uni-dimensionality. That is, for each of the five constructs, there exists one major factor
that accounts for the highest proportion of the common variance shared by items. The only
57
exception discovered is collectivist orientation, which according to the scree test displays a
two-factor solution, with eigenvalues for the two actors of 2.44 and 1.96, respectively. This
result will be addressed in more detail in a later section.
58
Innovativeness
Absorptive Capacity
13
13
>
a
a
>
10
11
12
13
14
Factor Number
10
11
12
Factor Number
Organizaitonal Learning
Collectivistic Orientation
2. 0 -
am
.5'
at)
UJ
0 .0 .
Factor Number
Factor Number
4.03.5
3.0l
3.0
2 .0 -
2.0
3
D
13
aqj
an
1 .0 '
<u
-5-
1aj
1. 0 -
at)
tS 0.0.
0.0.
Factor Number
Factor Number
Figure 3.1. Scree plots fo r exploratory factor analysisa
P lots w ere g en era ted b y SPSS. Extraction M ethod: Maximum Likelihood.

Rotation M ethod: P rom ax w ith K a iser N orm alization.
59
Figures 3.2 to 3.7 display the estimated loadings and residuals for the confirmatory
factor analysis. Each figure consists of two path diagrams: the top diagram including the
full items and the lower one the reduced items. A corresponding table is also provided for
each construct in order to show the comparative results of the goodness-of-fit indices and
the Cronbachs a values for both complete and reduced items.
Innovativeness.
The original measurement scale consisted of 14 items, with a scale
mean and standard deviation of 61.00 and 11.48. Item means ranged between 3.87 (INI 1,
S.D. = 1.15) and 4.96 (IN3, S.D. = .97). The factor loadings in Figure 3.2 show that most
of the loadings ranged from .68 to .85, except for item IN4 (People are not penalized for
new ideas that do not w o r k factor loading = .58). The residual value of .67 indicated that
only 33% o f the variance o f item IN4 can be explained by the construct Innovativeness. Yet,
the loading values o f all the 14 items are statistically significant at the .01 level (t= 9.22 to
15.44,/?< .01).
Table 3.4 lists five items with the highest factor loadings retained to form the
reduced scale (IN4, IN9, IN11, IN12, and IN13, representing questions 4, 9, 11, 12, and 13
in Part I, Appendix E). The factor loadings for the reduced items ranged from .68 to .89 (t
= 11.65 to 16.67, p< .01), while the inter-item correlation coefficients were between .52
and .78. The overall model fit improved, and GFI and CFI increased from .84 and .91
to .95 and .96, respectively (Table 3.5). Even though the Cronbachs reliability coefficient
(a) dropped from .94 to .90, this is still considered highly reliable.
60
Table 3.4.
Retained Items fo r Innovativeness

Item No.
Statement
IN4
We get a lot o f support from managers if we want to try new ways of doing things.
IN 9
We encourage people to think and behave in original and novel ways.
INI 1
Our company is creative in its methods of operation.
IN12
Our company frequently tries out new ideas.
IN13
Our company seeks out new ways to do things.
Table 3.5.
Model Comparison fo r Innovativeness
Item
GFI
X2(df)
Numbers
.84
14
316.88(77)
CFI
RMR
RMSEA
Cronbachs a
.91
.06
.11
.94
.95
.96
.05
.16
.90
34.81(5)
61
INNOVATIVENESS
INNOVATIVENESS
Figure 3.2. Standardized factor loadings fo r innovativeness
R ep ro d u ced with p erm ission o f th e copyright ow ner. Further reproduction prohibited w ithout p erm ission
62
Absorptive capacity. Figure 3.3 shows the confirmatory factor analysis for absorptive
capacity. The original measurement scale consisted of 12 items, with a scale mean and
standard deviation o f 51.19 and 9.86. Item means ranged from 4.09 (AC5, AC6, S.D.= 1.25
and 1.24, respectively) to 4.41 (AC8, S.D. =1.08). Factor loadings ranged from .55 to .82.
The lowest loading (= .55) occurred on item AC1 (We collect industry information through
informal means, e.g., lunch with industry friends, talks with trade partners) with a residual
value of .70, indicating that only 30% of the variance can be accounted for by the construct
of Absorptive Capacity. Nevertheless, all the items showed statistical significance (t= 9.02
or higher, p< .01).
Table 3.6 lists the five retained items with the highest loadings (AC3, AC4, AC7, AC9,
AC12, representing questions 17,18,21, 23, and 26 in Part I, Appendix E). Factor loadings
for the reduced items ranged from .73 to .85. Inter-item correlations were between .51
and .79. Table 3.7 showed that the GFI value improved dramatically from .79 to .90. The
CFI and RAR values also indicated improved fit for the reduced model. The Cronbachs a
decreased slightly (from .93 to .89), yet remained at a desirable level.
Table 3.6.
Retained Items fo r Absorptive Capacity
No.
Statement
AC3
We quickly recognize shifts in our market (e.g., competition, regulation, demography).
AC4
We quickly analyze and interpret changing market demands.

Our organization quickly recognizes the usefulness of new external knowledge to
existing knowledge.
AC9
We easily grasp the opportunities for our organization from new external knowledge.
^ ur organization regularly considers the consequences of changing market demands

_________ in terms o f new products and services._________________________________________
63
Table 3.7.
Model Comparison fo r Absorptive Capacity

Numbers
X2(df)
GFI
CFI
RMR
RMSEA
Cronbachs a
12
389.00(54)
66.55(5)
.87
.93
.076
.79
.90
.16
.22
.93
.89
.049
ABSORPTIVE
CAPACITY
.55
.73
.77
.79
.76
.70
.82
.64
.80
.76
.74 ^ .79
AC1
AC12
AC3
AC4
AC5
AC6
AC7
AC8
AC9
AC10
AC11
AC12
0.70
0.47
0.41
0.37
0.42
0.51
0.33
0.59
0.36
0.42
0.45
0.37
ABSORPTIVE
CAPACITY
.84
.85
AC3
AC4
0.30
0.27
.81
AC7
0.34
.73
.76
AC9
AC12
0.47
0.43
Figure 3.3. Standardized factor loadings fo r absorptive capacity
64
Organizational learning culture. Figure 3.4 shows the results of confirmatory factor
analysis for organizational learning culture. The original measurement scale consisted of
seven items (scale mean and S.D. were 28.93 and 6.25). Item means ranged between 3.61
(OL6, S.D.= 1.33) and 4.64 (OL5, S.D.= 1.07). Factor loadings of the items ranged
from .62 to .80, and all were statistically significant at the .01 level (t= 10.13 or higher,
p< .01).
Two items with the lowest factor loadings (OL4 = .65, OL6= .62) were deleted, which
left five items for the purpose o f future structural equation analysis (see Table 3.8). Since
the seven items o f organizational learning culture were adopted from the well-developed
DLOQ by Watkins and Marsick (1997) and Yang (2003), the model showed good fit (GFI
= .89, CFI= .89, RMR = .08, RMSEA= .16). The reduced scale with only five items
showed a slight increase in both GFI and CFI from .89 to .90 and .91, respectively (Table
3.9). Inter-item correlations ranged from .49 to .71. The reliability coefficient a deceased
from .88 to .86, but this is still considered to represent a reliable measure.
Table 3.8.
Retained Items fo r Organizational Learning Culture
No.
OL1
Statements
In my organization, people are rewarded for learning.
OL2 In my organization, people spend time building trust with each other.
qt t In my organization, teams/groups revise their thinking as a result of group discussions
or information collected.
OL5
My organization recognizes people for taking initiative.
OL7 In my organization, leaders continually look for opportunities to learn.
65
Table 3.9.
Model Comparison fo r Organizational Learning Culture

Numbers
X2(df)
GFI
CFI
RMR
RMSEA
Cronbachs a
102.84(14)
.89
.89
.08
.16
.88
66.04(5)
.90
.91
.08
.22
.86
ORG.
LEARNING
.71
.80
.78
.65
.69
.62
OL1
OL2
OL3
OL4
OL5
OL6
OL7
.49
.36
.40
.58
.52
.62
.49
ORG
LEARNING
.71
.80
.77
.71
.73
OL1
OL2
OL3
OL5
OL7
.50
.36
.40
.50
.47
Figure 3.4. Standardized factor loadings fo r organizational learning
66
Collectivist orientation. The original scale for collectivist orientation consisted of

seven items. As indicated previously, exploratory factor analysis showed a two-factor
solution for this seven-item measurement. The upper part of Figure 3.5 shows the result of
the initial confirmatory factor analysis. Item 3 (C03) clearly had the lowest loading among
the seven items and thus was deleted, producing the result shown in the middle part o f the
diagram with three items loaded on each of the two factors (factor loadings= .64 to .83, t=
9.26 or higher, p= .00). The correlation between the two factors was .20 (7=2.5,/?<.01).
The three items belonging to each factor are listed in Table 3.10. The first factor
placed a strong emphasis on groups as the priority and desirable working condition for the
organization. The second factor, on the other hand, showed a strong individualistic
orientation, emphasizing personal success as the first priority. As a result, the first factor
with the three items was retained as the measure of collectivist orientation in this study.
The bottom diagram o f Figure 3.5 shows the factor loadings of the three items retained,
which were .67, .83, .and 68, respectively.
A comparison of the overall model fit indices is listed in Table 3.11. As the table
shows, the overall model fit increased from .78 (seven with the single-factor model) to .97
(two-factor model). The CFI also significantly improved from .56 to .95, suggesting that
the two-factor model is a better solution.
67
Table 3.10.
Retained Items fo r Collectivist Orientation

Factor
Item No.
Statement
Factor 1
COl
C 04
C05
In my organization, employees like to work in a group rather than by

themselves.
In my organization, problem solving by groups gives better results
than problem solving by individuals.
In my organization, the needs of people should take priority over
personal needs.
Factor 2
C 02
In my organization, one does better work working alone than in a

group.
C 06
In my organization, a man must stand alone to be superior.
C 07
In my organization, individuals would rather struggle through a

personal problem by oneself than discuss it with friends.
LISREL output indicated a perfect fit for the model of one factor with three items
(x2= .00, p=1.00). The reduced items had means of 4.63 (S.D .- .94), 4.66 (S.D.- 1.11),
and 4.67 (S.D. = .97). The correlation coefficients ranged from .46 to .55. Cronbachs a
increased from .65 to .76, which is considered acceptable for a scale.
Table 3.11.
Model Comparison fo r Collectivistic Orientation
Factor
GFI
CFI
RMR
RMSEA
Cronbachs a
X2(df)
1
244.25(14)
.56
.26
.65
.78
.250
2
.65
.92
.88
.12
.130
70.89(13)
2
6
.68
.95
.08
.095
25.66(8)
.97
1
3
.76
n/a
n/a
.000
0.00(0)
n/a
a The values o f fit indices were not presented since LISREL output indicated a perfect
model fit (p=1.00)
Item
7
68
.14
FACT0R2
FACTOR1
.66
.45
.78
.64
.74
.64
.79
COl
C 03
C 04
C 05
C 02
C 06
C 07
.56
.80
.39
.46
.59
.59
.38
.20
FACTOR2
FACTOR1
.67
.83
.67
.64
.64
.78
COl
C 04
C 05
C 02
C 06
C 07
.54
.31
.55
.59
.59
.39
COLLECTIVISM
.67
.83
.68
COl
C 04
C 05
.55
.32
.54
Figure 3.5. Standardized factor loadings fo r collectivist orientation
69
Organizational structure. The original scale of organizational structure consisted of

seven items, with a scale mean and standard deviation o f 28.08 and 8.12, respectively. Item
means ranged from 3.63 (ST3, S.D.=1.70) to 4.44 (ST2, S .D -1.63). The factor loading
values ranged from .53 to .81, five of which showed moderate loadings (.53 to .61) while
the remaining two items had factor loadings of .81 and .72, respectively (see Figure 3.6).
All the paths were statistically significant (t values range between 8.28 and 14.15, p< .01).
The overall fit for the model with seven items was actually quite high (GFI= .95, CFI=.96,
see Table 3.12 for detail).
After deleting two items with the lowest factor loading values, the reduced measure
retained items ST1, ST4, ST5, ST6, and ST7, representing questions 1, 4, 5, 6, and 7 in
Part III, Appendix E (see Table 3.13). Inter-item correlations were between .26 and .61.
The reduced model had slightly increased values on fit indices (GFI= .98, CFI=.98).
However, the Cronbachs a value dropped from .82 to .78, which is still within acceptable
range.
Table 3.12.
Model Comparison fo r Organizational Structure
Numbers
X2(df)
GFI
CFI
RMR
RMSEA
Cronbachs a
7
5
40.93(14)
12.80(5)
.95
.98
.96
.98
.13
.10
.09
.08
.82
.78
70
Table 3.13.
Retained Items fo r Organizational Structure

Item No.
ST1
Statements
Highly structured channels of communication and a highly restricted
access to important financial and operating information.
Open channels o f communication with important financial and operating
information flowing quite freely throughout the organization.
ST4
A strong emphasis on holding fast to tried and true management principals

despite any changes in business conditions.
A strong emphasis on adapting freely to changing circumstances without
too much concern for past practice.
ST5
A strong emphasis on always getting personnel to follow the formally laid

down procedures.
A strong emphasis on getting things done even if it means disregarding
formal procedures.
ST6
Tight formal control o f most operations by means of sophisticated control

and information systems.
Loose, informal control; heavy dependence on informal relationships and
norms o f cooperation for getting work done.
ST7
A strong emphasis on getting line and staff personnel to adhere closely to

formal job description.
A strong tendency to let the requirements of the situation and the
individuals personality define proper on-job behavior.
Note: Each item has two statements since organizational structure is measured with
contrasting statements.
71
ORGANIC
STRUCTURE
.56
ST1
ST2
.68
.69
.53
.61
.81
.58
ST3
ST4
ST5
.72
.62
.34
ST6
ST7
.66
.47
ORGANIC
STRUCTURE
.53
.57
.84
.74
.61
ST1
ST4
ST5
ST6
ST7
.72
.68
.30
.63
.46
Figure 3.6. Standardized factor loadings fo r organizational structure
72
Organizational effectiveness. Figure 3.7 shows the results o f confirmatory factor

analysis for organizational effectiveness. The original scale had a mean of 22.61 and
standard deviation o f 4.67. Item means ranged from 3.30 (OE4, S.D.= 1.17) to 4.03 (OE2,
S.D.= .1.02). Two o f the six items displayed a relative low loading value (OE3= .40,
OE4= .36), and thus were deleted from the scale. The four retained items are listed in Table
3.14 (OE1, OE2, OE5, and OE6, representing items 1, 2, 5, and 6 in Part II, Appendix A).
The reduced scale had a nearly perfect model fit (GFI= .99; CFI= .99, RMR= .03,
RMSEA= .08, see Table 3.15). Inter-item correlations were between .44 and .66. Factor
loadings for the four items ranged between .57 and .82 (t = 8.89 or higher, p< .01). The
reliability coefficient a improved from .79 to .81.
Table 3.14.
Retained Items fo r Collectivist Orientation
Statement
OE1
Compared with key competitors, my organization has a better return on investment.
Qg 2 Compared with key competitors, my organization has better average productivity per
employees.
OE5
Compared with key competitors, my organization grows faster.
OE6
Compared with key competitors, my organization has lower cost per business
transaction.
Table 3.15.
Model Comparison fo r Organizational Effectiveness
Numbers
(df)
GFI
CFI
RMR
RMSEA
Cronbachs a
98.02(9)
.88
.81
.14
.20
.79
5.35(2)
.99
.99
.03
.08
.81
73
ORG
EFFECTIVENESS
.79
.78
.40
.36
.71
OE1
OE2
OE3
OE4
OE5
OE6
.33
.33
.36
.53
.68
.68
ORG
EFFECTIVENESS
.82
.80
.69
.57
OE1
OE2
OE5
OE6
.33
.36
.53
.68
Figure 3.7. Standardized factor loadings fo r organizational effectiveness
74
Data Analysis
Two sets o f software were used for data analysis: SPSS 11.0 (SPSS Inc., 2001) and
LISREL 8.51 (Scientific Software Inc., 2001). SPSS was used in the descriptive data
analysis and reliability tests, while LISREL was mainly used for the analysis of the
structural equation model.
Structural Equation Modeling (SEM)
As discussed previously, a cross-sectional survey study requires more sophisticated
statistical analysis techniques to obtain causality explanations between variables. In this
study, structural equation modeling techniques (Joreskog, 1973; 1993; Joreskog & Sorbom,
1996; Wright, 1921,1934) were utilized to analyze the proposed relationships between the
constructs o f learning culture, structure, organizational innovativeness, and performance.
Structural equation modeling (SEM), also known as covariance structure analysis, latent
variable analysis, or causal modeling, is a multivariate statistical modeling technique that
can be used to study the relationships among multiple constructs of interests. SEM
techniques provide complete and concurrent tests of all the relationships between the
constructs o f a proposed structural model in which the hypothesized casual relationships
between constructs are presented (Hair, Anderson, Tatham, & Black, 1995).
A structural model implies a structure of the covariance matrix of the measures. Once
the parameters of the structural model have been obtained from estimation, a predicted
covariance matrix of the resulting model can be compared to the observed covariance
matrix from collected data. If the two matrices are consistent with one another, the
proposed structural model can be considered a plausible explanation for the collected data
(Maruyama, 1997).
75
Advantages o f SEM Techniques

SEM was selected as the preferred technique in this study for two reasons (Hair et al.,
1995; Maruyama, 1997). First, in social science research interrelations between variables
of interest are common and often lead to difficulties in explaining the influence of specific
predictors on the dependent variable. The SEM approach in this regard enables researchers
to decompose the covariances of variables into causal and non-causal components.
The second advantage o f using the SEM technique is for circumstances in which the
hypothesized model contains more than one dependent variable, and one of the dependent
variables becomes the independent variable of another dependent variable. To take this
study as an example, the ultimate dependent variable is organizational performance.
However, organizational innovativeness is also considered as a dependent variable of the
learning culture, structure, and absorptive capacity, while at same time serving as an
independent variable for organizational performance. With the SEM technique, these
complex relationships can be comprehensively examined simultaneously.
76
CHAPTER FOUR
RESULTS
A two-step approach was utilized to examine the measurement model and theoretical
structural model separately (Anderson & Gerbing, 1988). In the first step, the measurement
model with six constructs and indicators was analyzed by performing an exploratory
confirmatory factor analysis to examine the discriminant validity of constructs and their
measures. A confirmatory factor analysis was further performed to allow correlations
between latent constructs and constrained measurement items to load the factor/construct
that it was proposed to represent. The factor model was evaluated using various fit indices.
The second step o f the two-step approach involved the structural equation modeling (SEM)
technique to examine the measurement model and the proposed conceptual model of
organizational learning culture, structural, innovativeness and effectiveness simultaneously.
Assessing Measurement Models
In order to examine the discriminant validity o f the six constructs used in the study, an
exploratory factor analysis (EFA) was conducted using SPSS. A six-factor solution was
specified with a maximum likelihood extract method and oblique rotation. This factor
solution revealed a simple factor structure when .30 was used as the criteria in interpreting
the factor loadings. However, five items designated to measure the construct of absorptive
capability were split into two factors, with two items loaded on one factor and three other
items loaded on another factor. In addition, the three items selected to measure the
construct o f collectivism and the five items measuring organizational learning culture have
loaded on one factor. Consequently, the six-factor solution was not interpretable as
expected and the measures designed to assess these six constructs failed to show adequate
77
discriminant validity. Therefore, a five-factor model was generated using the same factoring
method mentioned previously.
Table 4.1 shows the result of the pattern matrix of the five-factor structure with oblique
rotation. The pattern matrix o f the exploratory factor analysis result revealed that three items
of collectivist orientation were loaded on the same factor o f the items measuring
organizational learning culture, indicating that a considerable portion of the construct of
collectivism shares common components with the construct of organizational learning
culture. Consequently, the construct of collectivism with three items was excluded and five
other constructs (i.e., organizational learning culture, structural organicity, innovativeness,
absorptive capacity, and organizational effectiveness) were retained for further analysis.
After determining the optimal indicators for each of the five latent constructs, a
covariance matrix was produced by LISREL8.51 for further analysis o f the structural model.
Item numbers, means, standard deviation, reliability coefficients, and Pearson correlation
coefficients o f the five subscales are listed in Table 4.2. Most of the correlation coefficients
between constructs ranged between .33 and .50, indicating moderate associations between
constructs at the significant level of .01. The correlations between organizational
innovativeness, absorptive capacity, and organizational learning are considerably higher
compared to other correlation coefficients, with values of .72, .74, and .74. The reliability
coefficients o f each subscale of constructs ranged from .79 to .90, suggesting that all the
scales are reliable measures of each construct.
78
Table 4.1.
Pattern Matrix o f Exploratory Factor Analysis

Indicators
FI
F2
F3
OL1
.60
OL2
.58
OL3
.60
OL5
.66
OL7
.58
COl
.69
C 04
.68
C05
.87
AC9
.31
.92
AC3
.99
AC4
AC7
.51
AC12
.32
.43
IN4
.36
.40
.52
IN9
.33
IN11
.79
IN12
.99
INI 3
.66
ST1
ST4
ST5
ST6
ST7
OE1
OE2
OE5
OE6
Note: All the coefficients were significant at the .001 level.
Only values larger than .30 were shown in the table,
F4
F5
.46
.41
.71
.76
.85
.79
.73
.61
.56
79
Table 4.2.
Correlation Coefficients between Constructs (n=246)
Items
MEAN
S.D.
1. Organizational
Effectiveness
3.95
.88
(.79)
2. Innovativeness
4.17
.92
.51**
(.90)
3. Absorptive
.50**
.74**
5
4.29
.84
(.89)
capacity
4. Organizational
.74**
5
4.24
.92
.48**
.72**
(.86)
learning
5. Structural
.33**
.42**
.44**
(.82)
5
4.00
1.24
.45**
organicity
**p < .01, two-tailed.
Note: Structural organicity was measured with a 7-point Likert scale, while the other four
constructs were measured on a 6-point Likert scale.
Note: Reliability coefficients o f each subscale are shown in diagonal elements.
Table 4.3 shows the means, standard deviations, and correlations between individual
items. As can be observed in Table 4.3, items within the same construct show higher
correlations compared to correlations between items across different constructs. According
to Campbell and Fiske (1959), this convergent-divergent pattern of correlation coefficients
provides another piece o f evidence to support the discriminant validity among constructs,
since correlations among indicators (also termed manifest variables) within a single
construct are generally greater than the correlations among the indicators across different
constructs. For example, as shown in Table 4.3 the correlation coefficients between the first
item (OE1) and other items (OE2, OE4, OE5, and OE6) of organizational effectiveness
ranged between .44 and .66, which were considerably higher compared with correlations
80
between OE1 and items o f other constructs (ranged from .12 to .41). Similarly, correlations
between the second indicator (OE2) and three other indicators (OE4, OE5, and OE6) of
organizational effectiveness ranged from .44 to .66 (most of them are listed in the second
column of the matrix), which were greater than its correlations with those indicators
measuring other constructs (ranged from .15 to .42). Likewise, the correlations of the
fourth measurement item with three other items were .44, .44, and .47 as indicated in the
fourth row o f the matrix, all o f which were higher than that with 20 other items of the other
four constructs (ranged from . 11 to .29, as indicated in the fourth column of the correlation
matrix). This described correlation pattern was shown for the majority of measurement
items in Table 4.3. Consequently, it was concluded that the correlation coefficients among
all measurement indicators provide evidence of the convergent-divergent validity for the
five constructs used in the study.
A confirmatory factor analysis was further performed using LISREL. Figure 4.1
shows the five-factor solution o f the constructs. The Chi-square value is 439.49 {df= 240).
The fit indices indicate that the five-factor structure fits the data moderately well (CFI= .94,
IFI= .94, NNFI= .88, GFI= .87, AGFI= .87, RMSEA= .058, RMR= .11). The standardized
loadings for the indicators ranged from .56 to .87, all of which can be considered
moderately- to highly- related to the constructs. The t values of standardized estimated
loadings shown on Figure 4.1 ranged from 8.77 and above, indicating that the loadings
were statistically significant at the significance level of .001. This information suggested
that all the variables were significantly related to the latent constructs that they were
supposed to represent.
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.84
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.70
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.82
Innovativeness
.86
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^
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.85
Absorptive
Capacity
.59
.85
.48 -
OL1
.72
.24
^
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.51
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.70
.44
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.75
.78
.39
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.36
OE1
.38
OE2
.79
.47
OE5
.73
.69
OE6
.68
ST1
.71
.52
Organizational
Learning
.59
.57
.48
.80
.53
Effectiveness
.78
.38
.56
.63
ST4
.61
.33
ST5
.67
ST6
.82
.58
.48
ST7
Structural
Organicity
.72
Figure 4.1. Confirmatory factor analysis o f constructs with standardized coefficient and residuals
84
Figure 4.1 also shows the residuals of each indicator. The significant paths between
indicators and corresponding residuals suggested that each indicator had unique variances
not accounted for by the latent constructs. Correlation paths were added to two pairs of
residuals (OL2 and OL3; AC3 and AC4) based on the modification indices provided by
SEM software output to help improve model fit. Although not perfectly strong, this
analysis result provided a piece o f evidence to the discriminant dimensions among the five
constructs.
Assessing Structural Equation Model
After determining the optimal indicators for each of the six latent constructs, a
covariance matrix was produced by LISREL8.51 for further analysis of the complete
model including both measurement and structural models. The standardized estimates of
path coefficients for the structural model are listed in Figure 4.2 and Table 4.4.
. 56
Org.
Learning
.53
Structural
Organicity
.83
Absorptive
Capacity
.44
.43
.08
'
Org.
'
Innovativeness
.34
.33
Org.
'
Effectiveness
.50
F igure 4.2. S ta n d a rd ize d p a th coefficients o f the in itia l m o d el
As seen in Table 4.4, most of these coefficients are statistically significant at the level
o f .01, except for the path between organizational structure and innovativeness (t = .1.48,
.77
85
p< .10). The squared multiple correlations (R2) serve as indicators o f the proportions o f
variances o f each endogenous variables that are accounted for by the model (McDonald &
Ho, 2002). According to Table 4.4, 68% of the variance of absorptive capacity was
explained by the structural model. Additionally, 75% of the variance o f innovativeness was
accounted for by the constructs o f organizational learning culture, structural organicity, and
absorptive capacity jointly. Likewise, 40% of the variance of organizational effectiveness
was explained by the structure model.
Table 4.4.
Standardized Path Coefficients
Endogenous Constructs
Absorptive
Capacity
Absorptive
Capacity
Organizational
Innovativeness
Organizational
Effectiveness
i
p < .05
Innovative
-ness
Organizational
Learning
Structural
Organicity
Squared Multiple
Correlations^/?2)
.83
.43**
Exogenous Constructs
.34*
.68
.08
.33
.75
.40
.......
p < .01 (two-tailed)
The statistics o f the goodness of fit indices suggest a fair model fit. The Chi-square
(x2) value o f 560.44 (df=245, p=.00) is statistically significant. The root mean square error
of approximation (RMSEA) has a value of .073, which is considered as falling inside the
acceptable range o f .08 or less (Hair et al., 1995). The goodness-of-fit index (GFI) value
of .84 and the adjusted goodness of fit index (AGFI) value of .80 are both at a marginal
acceptance level, based on .90 as a threshold value that reflects a good model fit. The
non-normed fit index (NNFI), comparative fit index (CFI), and incremental fit index (IFI)
86
are .89, .91, and .91, respectively. Consequently, although the proposed model does not fit
the data perfectly well, it is still considered as acceptable based on various fit indices (see
Table. 4.5).
Table 4.5.
Fit Indices
X2
df
1 2 /d f
GFI
IFI
NNFI
AGFI
CFI
RMR
RMSEA
560.44
245
2.03
.84
.91
.89
.80
.91
.11
.073
Index
Note: NNFI= Non-normed fit index, C F I- comparative fit index,

IFI= Incremental fit index, GFI= Goodness o ffit index,
AGFI= Adjusted goodness o f fit index,
RMR=Root mean square residual
RMSEA= Root mean square error o f approximation
Decomposition o f Effects
Table 4.6 shows the decomposed effect size for each endogenous construct (i.e.,
organizational effectiveness, innovativeness, and absorptive capacity). As shown, both
organizational learning culture and absorptive capacity have considerable effects on
innovativeness. The effect of organizational learning culture on innovativeness can be
decomposed into direct and indirect parts, with effect sizes of .44 and .35, respectively.
Absorptive capacity shows a direct effect o f .43 on innovativeness. Structural organicity
also has a direct effect on organizational innovativeness; however, the effect size was as
small as .08.
In addition, organizational learning culture show s a rather strong direct effect o f .83
on absorptive capacity. For organizational effectiveness, innovativeness shows a direct

effect of .33, while both organizational learning culture and structural organicity have
indirect effects of .54 and .03. More specifically, without a direct path, the effect of
87
organizational learning culture on organizational effectiveness was a result of three indirect

paths through intervening variables, for example, absorptive capacity and innovativeness.
That is, organizational learning culture influences effectiveness through (a) enhancing an
organizations absorptive capacity (path coefficient = .83), which further positively affects
its effectiveness (path coefficient = .34); (b) strengthening absorptive capacity (path
coefficient - .83), which enhances its organizational innovativeness (path coefficient = .43)
and, subsequently, its organizational effectiveness (path coefficient = .33); and (c)
enhancing organizational innovativeness (path coefficient = .44), which in turn, affects its
effectiveness (path coefficient = .33). The effect of absorptive capacity on organizational
effectiveness consists o f both direct and indirect parts, with effect sizes of .34 and .14,
respectively.
Table 4.6.
Decomposition o f Effects on Endogenous Constructs (standardized solution)
Organizational
Structure
Innovativeness
Effects
Learning
Direct
.33*
.54*
.03
Indirect
Total
.54*
.03
.33*
Innovativeness
.44*
Direct
.08
.35*
Indirect
Total
.79*
.08
Absorptive Capacity
Direct
Indirect
Total
. . .
' p< . 05 (two-tailed)
.83*
.83*
Absorptive
Capacity
.34*
.14*
.48*
.43*
.43*
88
Table 4.7 shows the reproduced correlation matrix of the five constructs. As shown,
the correlations between organizational learning culture, innovativeness, and absorptive
capacity were as high as .82 and .83, indicating a potential problem of multicollinearity
among constructs. This problem of multicollinearity among constructs is likely due to the
common method variance bias, namely the bias resulted from variance attributable to the
measurement method (Podsakoff, MacKenzie, Lee, & Podsakoff, 2003). This common
variance method bias is likely to cause measurement error and yield misleading
conclusions about study results (Campbell & Fiske, 1959). Consequently, the high
correlations between the constructs might be a result o f the common method bias because
of a systematic effect since all the measures were responded by a single respondent.
Table 4.7
Reproduced Correlation Matrix o f Latent Constructs
1
1. Organizational Effectiveness
1.00
2. Organizational Innovativeness
.60
1.00
3. Absorptive Capacity
.61
.82
1.00
4. Organizational Learning
.55
.83
.83
1.00
5. Structural Organicity
.31
.50
.44
.53
1.00
According to Podsakoff et al. (2003), statistic procedures can be adopted as remedies

to minimize the influence o f bias on the findings. Hence, a general factor (G-factor) was
included in the model with an attempt to partial out the covariance due to common method
in this study.
89
Adjusted SEM Analysis with the General Factor

Figure 4.3 shows the standardized path coefficients of structural equation analysis
with the inclusion of a general factor. As shown in Table 4.8, comparison between the
initial model and the modified model reveals that the magnitudes of path coefficients
decreased considerably, with differences ranged between .13 and .44. The most dramatic
change occurred at the path coefficients between organizational learning culture and
absorptive capacity, decreasing from .83 to .29. The coefficient between structural
organicity and innovativeness was the only one that revealed rather small change.
.96
Org.
Learning
.29
.19
.15
Structural
Organicity
.08
Absorptive
Capacity
.25
.20
Org.
>
Innovativenes;
.20
.93
Figure 4.3. Standardized path coefficients o f the modifiedl model
Org.
Effectiveness
.95
90
Table 4.8.
Model Comparison and Standardized Path Coefficients

Endogenous Constructs
Absorptive
Capacity
Initial model
Absorptive
Capacity
Org.
Learning
Structural
Organicity
Squared
Multiple
Correlations
(R1)
.83*
Innovativeness
.43*
Effectiveness
.34*
Modified model
Absorptive
Capacity
Innovative
-ness
Exogenous Constructs
.44*
.68
.08
.33*
.40
.29*
Innovativeness
.25f
Effectiveness
*
p < .05 (two-tailed),
.20*
.75
.19t
.08
.08
,20t
.14
.10
Tp < .10 (two-tailed)
According to the result of the modified model, most of these coefficients are
statistically significant at the level of .10, except for the path between organizational
structure and innovativeness (t = .95,p< .40). The variance of the endogenous constructs
accounted for by the model decreased from 68%, 75%, and 40%, to 8%, 14%, and 10%,
respectively.
Table 4.9 shows the decomposition of effects of each construct on endogenous
constructs. Most o f the effect sizes decreased considerably compared to the result of the
initial model. This shrunk magnitudes of effects and accounted variances were results of
taking into consideration the common method variance bias. Despite many of the estimates
showed statistically significant at a marginal level, the modified result still contributed to
91
the finding given its providing a relatively clear model.
Table 4.9.
Decomposition o f Effects on Endogenous Constructs (standardized solution)
Organizational Structural
Absorptive
Effects
Innovativeness
Learning
Capacity
Organicity
Effectiveness
Direct
.20*
Indirect
.11*
.02
.05*
Total
.11*
.02
.20*
.25*
Innovativeness
,19t
Direct
.08
.25*
.07
Indirect
.08
Total
.26*
.25*
Absorptive
Capacity
Direct
.29*
Indirect
.29*
Total
*
+
*p< .05, */>< .10 (two-tailed)
Table 4.10 shows the comparison of fit indices between the initial and modified
models. Comparison of the model fit indices between the initial and modified models
shows a considerable improvement on the modified model (see Table 4.10). The NNFI,
CFI, and IFI improved from .89, .91, and .91 to .94, .95, and .95, respectively, while the
GFI and AGFI increased from .84, and .80 to .89 and .85, respectively. The RMR and
RSMEA values decreased from .11 and .073 to .062 and .055, respectively. The t d f ratio
also decreased from 2.03 to 1.74. The fit indices suggested that the modified mode with a
general factor fitted the data superior to the initial model.
92
Table 4.10.
Fit Indices
Index
x?
d f 1 2 /d f GFI IFI NNFI AGFI CFI
Initial model
560.44 245 2.03
.84
.91
.89
.80
.91
Modified model
383.62 221
1.74
.89
.95
.94
.85
.95
Note: NNFI= Non-normed f it index, CFI= comparative fit index,
IFI= Incremental f it index, GFI= Goodness offit index,
AGFI= Adjusted goodness o f fit index,
RMR=Root mean square residual
RMSEARoot mean square error o f approximation
RMR
RMSEA
.11
.073
.062
.055
Table 4.11 shows the reproduced correlation matrix for the constructs of the modified
model. As shown, the values of correlation coefficients between constructs shrunk
considerably. The correlations between structural organicity and effectiveness and
absorptive capacity decreased dramatically to .03 and .04, respectively. The values of
correlation coefficients between organizational learning and effectiveness and
innovativeness also dropped to .11 and .12, respectively. These shrunk magnitudes on
correlation coefficients were also results of controlling the common method variance bias
by including a general factor.
93
Table 4.11.
Reproduced Correlation Matrix o f Latent Constructs (Modified Model)

1
1. Organizational Effectiveness
1.00
2 Organizational Innovativeness
.26
1.00
3. Absorptive Capacity
.26
.31
1.00
4. Organizational Learning
.11
.12
.29
1.00
5. Structural Organicity
.03
.27
.04
.15
1.00
Summary
In this chapter, a two-step approach was used for data analysis. The first step was to
focus on the measurement model by performing confirmatory factor analysis to understand
the representativeness o f measurement items and the discriminant validity of each
construct. The result revealed that indicators of collectivist orientation and those of the
organizational learning culture were loaded on the same single factor. Consequently, the
construct o f collectivist orientation was removed from the full model. Confirmatory factor
analysis with a five-factor solution showed reasonable discriminant validity among
constructs.
The second step o f data analysis focused on the full structural equation model. Except
for the path between structural organicity and innovativeness, all the other paths were
statistically significant at the level of .05. Some of the reproduced correlation coefficients
from the initial analysis o f full model, however, were considerably high, indicating a
possible problem caused by common method variance bias. In order to control such shared
variance resulted from the common method bias, a rigid statistical method was adopted to
94
include a general factor as remedies. Despite of similar predicted directions, the analysis of
the modified model showed decreased magnitudes of effect sizes and variances accounted
for by the model. The improved fit indices suggested that the modified model with a
general factor fitted the data better than the initial model.
95
CHAPTER FIVE
SUMMARY, DISCUSSION, CONCLUSIONS, AND IMPLICATIONS
Summary
Before turning to the discussion, this section first provides a brief review of the
problem that motivated this study and the research questions which this study addressed, as
well as a summary of the results and findings reported in previous chapters.
Sustained performance has been a critical objective for organizations that they must
pursue in order to survive in todays keenly competitive business environment. Researchers
in the field o f organization studies tend to follow one of the two main approaches, namely
organizational and economic perspectives, to explain firm performance. Although neither
of these perspectives can be neglected, advocates of the resource-based view argue that in
order to outperform competitors, organizations must possess valuable and scare resources.
Innovativeness, in this regard, is deemed as an intangible asset and becomes a key factor
supporting organizations sustained competitive advantages.
Existing studies on organizational innovativeness suffer from two major shortcomings.
First, most studies fail to provide sufficient evidence and suggestions of how organizations
can strengthen their organizational innovativeness. Second, most of the previously
conducted studies define innovativeness with a technological orientation. Both
shortcomings constrain the generalizability of findings to a wider variety of organizations
in the real world. Departing from the perspective of seeing organizational innovativeness
as a type of climate, this study defines organizational innovativeness as an organizations
capability to embrace an organization-wide atmosphere that is willing to accept diverse
ideas and is open to newness, and that encourages its individual members to think in novel
96
ways.
The primary question this study sought to answer was: How do organizational-level
factors as antecedents affect organizational innovativeness and effectiveness? More
specifically, the study examined the relationships among organizational level factors (i.e.,
organizational learning culture, structure, and collectivist orientation), organizational
absorptive capacity, organizational innovativeness, and effectiveness. A hypothesized
model suggested that organizational learning culture, structural organicity, and collectivist
orientation jointly influence an organizations innovativeness, which subsequently
enhances a firms performance. The study used a survey research method and structural
equation modeling techniques to examine the hypothesized relationships among constructs
using data collected from 246 business organizations in Taiwan.
Seven hypotheses were originally proposed for testing in this study. These hypotheses
are stated as follows:
innovativeness.
Hypothesis 4: Organizations with a higher degree of structural organicity are more
innovativeness.
effectiveness.
97

The confirmatory factor analysis found that the measurement items of the constructs
of collectivist orientation and organizational learning culture were loaded on a single factor.
Thus, the construct o f collectivist orientation was removed from the full model and
Hypothesis 5 was not tested. Table 5.1 summarizes the test results for the hypotheses.
These hypotheses were examined through investigating the reproduced bivariate
correlations, the path coefficients, and the total effect sizes of the constructs in the
modified model. Overall, the six hypotheses were supported by the data.
Table 5.1.
Hypothesis and Test Results
Hypotheses
HI
ORGL
-
INNO
H2
ORGL
>
ABCA
H3
ABCA
>
INNO
H4
STRU
-
INNO
H5
COLL
INNO
H6
INNO
H7
ABCA
->
->
EFFE
EFFE
.26
.26
.20*
.20*
Reproduced
Bivariate
Correlation
Path Estimates/
Direct Effects
.12
.29
.31
.27
.19+
.29*
.25*
.08
Indirect Effects
.07
.05*
Total Effects
.26t
.29*
.25*
.08
.20*
.25*
N/A
*p< .05, f p< .10 (two-tailed)
98
Examining the modified structural equation model with a general factor suggested
several findings. First, organizational learning culture plays a crucial role to enhance both
organizational absorptive capacity and innovativeness. Second, the influence of structural
organicity on innovativeness is not as significant as was shown in previous studies. Finally,
both absorptive capacity and innovativeness are critical to organizational effectiveness.
Two points merit further articulation. First of all, a distinction must be made between
the conventional approach and that used in this study to define organizational
innovativeness. The conventional viewpoint, with a strong focus on output measures, sees
organizational innovativeness as the capability an organizational possesses to generate,
accept, or implement innovations that are new to the organization, to the industry, or to the
market and the society (see, for example, Damanpour, 1991). In this study, organizational
innovativeness is defined as a capacity of an organization to embrace a climate that is
willing to consider and accept newness, and that encourages its members to open their
minds and think in novel ways. Organizational innovativeness, therefore, becomes a
collective phenomenon, meaning that it represents an organizational-level propensity.
Such an organization-wide climate is expected to promote intraorganizational innovative
behavior (Mathisen & Einarsen, 2004). At the individual behavioral level, this is revealed
by such behavioral indicators as the flexibility to consider diverse opinions and ideas, as
well as the ability to subjectively assess alternative options.
Second, the initial analysis using structural equation modeling revealed remarkably
high correlations among constructs and thus, suggested a possible problem caused by the
common method variance bias. Hence, an advanced analysis was performed to include a
common factor with an attempt to account for the common variance shared by
99
measurement items due to responses from same single informant. In so doing, the
magnitudes o f correlation coefficients among constructs, as well as the significance of path
coefficients and the squared multiple correlations (R2) were decreased considerably.
Despite the inclusion of a general factor might exceedingly remove the true correlation
among constructs and leads to the result that the modified model accounted for
considerably less amount o f variance compared to the initial model, this post-hoc analysis
still generated a relatively clean and statistically rigor model.
Discussion
Having summarized the research question, design, and analysis results of this study,
the discussion then focused on the empirical results obtained in this study and their
comparison with existing findings.
Organizational Learning and Innovativeness
The relationship between organizational learning culture and innovativeness has not
only been conceptually emphasized (e.g., Clark & Tracey, 2004), but also empirically
tested in some previous studies (e.g., Calantone et al., 2002; Hult et al., 2004). Hence, a
strong proposition concerning the positive influence of organizational learning culture on
organizational innovativeness was put forward in this study with two perspectives from
both outside and inside the organization. Externally, organizations with a strong learning
culture emphasize frequent interactions with their environment. These connections
facilitate the organizations acquisition of new knowledge, information, and up-to-date
technologies. Meanwhile, these interactions increase the organizations sensitivity to
emerging market changes and demands.
100
Internally, an organizations learning culture at the individual level emphasizes

continuous learning and personal mastery. Skilled and knowledgeable personnel are
certainly necessary conditions for an innovative organization to succeed, since skills and
knowledge should help individual members to behave innovatively. Consequently, this
study, utilizing a well-developed organizational learning culture measure, further provided
a consistent and valuable piece o f evidence to enhance the affirmed relationship between
organizational learning and an organizations innovative climate.
Organizational learning culture and absorptive capacity
To be innovative, organizations need not only plenty of information, but also the
sufficient ability to process this information. The ability to efficiently obtain information,
to learn new technologies, and to detect market trends stimulates organizations
innovativeness in terms o f their product, service, market, and process innovation.
Notwithstanding Cohen and Levinthal (1990) argued that organizational learning can exert
its influence on an organizations absorptive capacity, no empirical studies have been
conducted to examine such a relationship. This study proposed that an organizational
learning culture affects absorptive capacity with its pre-established complete learning
mechanism, solid foundation and knowledge base, and rich experience of learning. The
finding demonstrated the positive influence of the organizational learning culture on an
organizations absorptive capacity. As a result, organizational learning culture helps
organizations to quickly recognize useful and valuable external information. Moreover, an
organizations learning culture also helps organizations to consider ways to utilize
newly-obtained information and apply their knowledge to applicable situations.
101
Absorptive capacity and innovativeness

With a technological orientation to define and measure organizational innovativeness,
previous studies have found a positive relationship between an organizations absorptive
capacity and its innovativeness (Chen, 2004; Tsai, 2001). The finding of this study further
confirmed the positive influence of absorptive capacity on innovativeness as a climate
construct. In this case, absorptive capacity is considered critical since it can enhance an
organizations ability to recognize, assimilate, interpret, internalize, and utilize
newly-obtained information and knowledge. Consequently, organizations do not need to
worry about omitting any information sources and are more effective in exploiting new
information to enhance their performance.
The close interrelationships between organizational learning, innovativeness, and
absorptive capacity are intuitive to most people. With a systematic examination, this
studys findings further provide an empirical piece of evidence to support such an intuitive
proposition. This study contributes to the literature with the finding that absorptive
capacity is a critical outcome for organizational learning. Moreover, absorptive capacity
indeed plays a critical role to mediate the effect of organizational learning on
innovativeness. The research findings suggest that organizational learning culture affects
innovativeness both directly and indirectly through the mediating construct of absorptive
capacity. That is, other than the direct effect, the influence o f organizational learning
culture on innovativeness relies on the strength o f an organizations absorptive capacity. If
an organization has a strong absorptive capacity, the influence of organizational learning
culture on innovativeness will be enhanced. In contrast, if an organization has a weak
absorptive capacity, the influence of organizational learning culture on innovativeness will
102
be discounted.
Structural organicity and innovativeness
Previous studies (see Aiken & Hage, 1971; Damanpour, 1991; and Zaltman et al.,
1973, for examples) have shown that there is a significant influence of structural organicity
on organizational innovative capability, in particular for the stage of innovation generation
and development. An organization with an organic structure has such features as frequent
interactions and information sharing among people, organizational members feeling of
empowerment, and an emphasis on flexibility instead of formalization (Aiken & Hage,
1971). These features help organizations establish a platform for members to liberally
communicate and interact with each other, regardless of their position or ranks.
The positive relationship discovered previously was confirmed in the present study;
nonetheless, the effect size o f .08 was relatively small and not statistically significant,
meaning that the influence o f an organic structure on innovativeness is not as strong as it
was previous argued.
Explanations o f Organizational Effectiveness
In this study, organizational effectiveness was measured by asking informants about
their perceptions o f their own organizational performance compared with that of their key
competitors. The finding about organizational effectiveness and its determinants was
similar to those reported in previous studies. Constructs such as the organizational learning
culture, innovativeness, and absorptive capacity all show either direct or indirect effects on
This finding suggests that all the organizational factors connect to and have an impact
on organizational outcomes to a certain degree, whether large or small. However, the
103
overall model only explained 10 % of the performance variances among organizations.

One reason for the small percentage accounted for by the model is that the modified model
with a general factor removed not only shared variances due to common method bias, but
also the true correlation shared by constructs. In addition, another possible explanation is
that other factors are also important for organizational performance. These factors can
include such dimensions as strategies, industrial groups, market features, leadership and
management styles, and so on. The integration o f a variety of organizational factors is
expected to increase the explanatory power of models that focus on performance
heterogeneity across organizations.
Conclusions
To conclude, despite o f the small to moderate magnitude of significance, most of
research findings were congruent with expectations and major existing studies. Some
organizational scholars see organizations as being open systems, whose survival primarily
relies on inputs from and interactions with their external environment (Katz & Kahn, 1978;
Scott, 2003). This study found organizational effectiveness to be the outcome of a series of
input-process-output processes. Organizations rely on learning activities to input
knowledge and information. Learning culture and structure are influential contextual
factors that affect organizational processes such as their ability to absorb and innovate,
which subsequently have an effect on performance outcomes.
Thus, in order to establish an innovative organization, several organizational
dimensions must be considered. For example, an organization must commit itself to
learning and a learning culture, so that information and knowledge can be acquired through
104
a well-established mechanism. This learning culture also enhances an organizations

absorptive capacity, which is critical to enable organizations to be innovative. Meanwhile,
an organic structure also provides an important context and a platform for information to
flow, to be transferred, and to be conveyed interpersonally within an organization.
Complexity between Organizational Learning and Outcomes
An organizations learning culture not only directly influences its innovativeness, it
also has a strong impact on an organizations absorptive capacity, and thus indirectly
affects an organizations innovative capability. This point reveals the complex mechanism
that links organizational learning and outcomes. For researchers, this type of delicate
mechanism must be examined with care. The outcomes of organizational learning must be
specified in a very sophisticated way so that the effects of organizational learning on
concrete outcomes can be precisely understood. For practitioners, the specification of
outcome measures is particularly important, since the evaluation of mistaken outcomes
weakens the legitimacy o f promoting organizational initiatives for learning practices.
In addition, the complex model also suggests the importance for managers to possess
a systems thinking style. For example, an organic organization that has no learning culture
can have open channels to maintain internal information flows and decentralized decision
making and empowerment. This organization, nevertheless, has limited information and
knowledge inputs from the external environment if it does not encourage learning activities.
The emphasis on multiple dimensions in building an innovative organization corresponds
to the approach used in the systems theory (Kauffman, 1980). Systems theorists argue that
by treating an organization as a system, one must understand the interrelations among parts
and how a change in one piece affects other pieces, as well as the system as a whole
105
(Kauffman, 1980; Ruona, 1998). Thus, organizational management and practitioners must
have a systems thinking style, so that sensitivity to the interrelationships between different
organizational dimensions can always be considered when taking action.
An Integration o f Organizational and Economic Perspectives
In this study, absorptive capacity measures organizations sensitivity toward the
market and external environment, and thus it is considered an economic-oriented factor.
Organizational learning, structure, and collectivistic orientation all have to do with internal
climates and contextual aspects, and thus are considered to be categorized into the
organizational perspective. This study provides another piece of evidence to demonstrate
the importance o f the integration of different perspectives to explain organizational
performance. However, the model explains only thirty-nine percent of the variance among
organizational performance, implying that there are other factors that also affect
organizational performance. This suggests that factors covering other organizational
dimensions are necessary in order to account for firm performance in a more sufficient and
complete way.
Implications and Limitations

The findings o f this study reveal implications for both practitioners and researchers in
related fields. Four major implications are addressed in this section.
Dynamic Capabilities and Sources o f Competitive Advantage
Eisenhardt and Martin (2000) defined dynamic capabilities as a firms organizational
and strategic processes for resources integration, configuration and recombination in order
to create values for the firm in dynamic markets. According to Eisenhardt and Martin, the
106
possession o f either rare and valuable resources, or various dynamic capabilities, is not
sufficient for organizations to obtain sustained competitive advantage in todays
fast-changing markets and business environment. In fact, dynamic capabilities play key
roles for organizations as they continuously adjust their configurations of resources to
maximize both the efficiency and effectiveness for the purpose of creating value for the
firm (Eisenhardt & Martin, 2000).
The model examined in this study represents a chain mechanism as well as a dynamic
process internal to an organization. More specifically, the learning culture possessed by an
organization can enhance its ability to learn at different levels within the organization. The
ability to learn helps organizations to acquire knowledge, and enhances an organization
capacity to absorb newly-acquired knowledge and information. Subsequently, these
capabilities to learn and absorb knowledge strengthen the organizations capability to
innovate.
The ability o f an organization to learn and to absorb new knowledge and valuable
information, and to be innovative can be considered as dynamic capabilities, or empirically
termed best practices in the industry. Organizations that are strong in these dimensions
become benchmarks o f other organizations. This idea of benchmarking implies the
replicability o f such capabilities; thus, dynamic capabilities by themselves cannot be
sources of competitive advantage (Eisenhardt & Martin, 2000). As Eisenhardt and Martin
argued, the effect o f a specific dynamic capability largely depends on the market which the
capability is applied to. Thus, successful implementation of a single best practice does not
necessarily lead to desirable outcomes.
The findings o f this study provide an alternative way to justify the possibility for
107
dynamic capabilities to become potential sources of competitive advantage. According to

the model, the influential process from organizational learning culture to innovative
capability involves complex mechanisms, as the strengths of each capability are closely
influenced by each other. Each capability (i.e., learning, absorbing, and innovating) has its
own determinant factors. For example, an organizations past experiences and culture are
likely to have unique impacts on any one of these capabilities, and thus result in the feature
of history-dependence. Similarly, in spite of the confirmed positive relationship between
absorptive capacity and innovativeness, no absolutely right level of absorptive capacity
can be specified for other firms to adopt (Adams, Bessant, & Phelps, 2006). Therefore,
even though other organizations may attempt to transplant the whole model, the effect and
outcomes produced are not easily duplicated.
In summary, although single capabilities cannot easily become sources of competitive
advantage, a dynamic process consisting of multiple capabilities is possible, since the
complexity of such processes increases the difficulty for competitors who try to perfectly
replicate the recipe for success. For organizations which intend to establish such
processes as parts o f their sources of competitive advantage, efforts must be made to adjust
various organizational dimensions and tailor the so-called best practices according to
their own experiences and histories.
Individual-level Outcomes and Longitudinal Research
Treacy (2003) argued that the value of modem business organizations comes from the
provision of optimal solutions to their customers. An innovative organization is not only
profitable, but their innovative capability can also strengthen the organizations ability to
solve problems and provide solutions. The study confirmed a major hypothesis that
108
organizational learning culture, structural organicity, and absorptive capacity have

influences on innovativeness. The organizational learning culture even has a strong impact
on absorptive capacity. In this study, these constructs were operationalized at the
organizational level, and the innovative behavior at the individual level is not o f concern.
Such a research design restricted the inference of the linkage between individual learning
activities, organizational innovativeness and outcomes of individual innovative behavior.
The organization, however, is composed of individual members, and undoubtedly, human
resources is one o f the most critical assets for organizations to enable them to compete in
the competitive era. Therefore, cross-level observation and examination is essential, as it
helps reveal the influence o f organizational-level factors on individual-level outcomes.
For now, knowledge acquired by organizational learning activities is valuable only
when it has increased firms market performance. Linkage of outcomes o f learning
activities at the individual level to the organizational-level outcomes has not gained much
attention. Undoubtedly, individual members play critical roles in knowledge acquisition
and application. Organizational factors such as learning culture introduce opportunities for
individuals to learn, and to achieve personal mastery. Moreover, organizational-level
culture, climate, and structure can also exert an influence on individual members
behavioral outcomes or attitudes (Hansen & Wemerfelt, 1989). For example, knowledge
acquisition and creation, along with the establishment of systematic knowledge
management practices, are the outcomes most commonly discussed by researchers on the
field of organizational learning. However, few studies have addressed the influence of a
learning culture on employees behavior and attitude outcomes such as increasing
frequency o f self-reflection and re-examination of personal values and assumptions, or the
109
possession of ability with flexible thinking style.

Take organizations innovative climate as another example. Organizations with
innovative climates are characterized by the way they encourage members to propose ideas
and maintain open minds to be ready for all types of possibilities. However, whether an
innovative climate helps improve employees proactiveness and self-initiation, or whether
organizational innovativeness motivates employees to search for and assess alternative
solutions for best results, is not clear.
Thus, longitudinal research designs offer an intriguing approach for future studies for
the purpose of increasing an understanding of organizational-level influences on individual
members behavioral outcomes. Through conducting longitudinal studies, the influence of
organizational learning culture or innovative climates on changes of employees behavior
and attitude can be further examined. With such a mechanism o f individual behavioral
change, each organizational member is likely to become a potential solution provider for
all the types o f problems the organization encounters.
Improvement o f Measurement Instruments
The findings o f this study suggested that both organizational innovativeness and
absorptive capacity are important aspects for successful organizational performance.
Existing studies have commonly used proxy measures as indicators o f an organizations
innovative capability. Common proxies include examples such as information of number of
patents generated and innovation adoption and implementation. However, these types of
measurements restrict the result applicability of innovation research to technological
contexts, ignoring its connection with diverse organizational aspects (Adams et al., 2006;
Leonard & Sensiper, 1998; Rothwell, 1992).
110
In addition, there is no adequate measure focusing on the overall climate of

innovativeness. The lack o f well-developed measurements covering various aspects of
organizational innovation and innovativeness hamper the advance of researchers and
practitioners understanding o f the innovation management phenomenon and constrains the
opportunities for practitioners to effectively and efficiently manage innovation processes
(Adams et al., 2006). Although Wang and Ahmed (2004) proposed a scale consisted of five
dimensions in order to capture different aspects of organizational innovativeness, this scale
was only at the initial stage o f development.
Moreover, notwithstanding the intention of this study to focus on an overall
atmosphere, the construct measure of organizational innovativeness was in fact adapted
from two major dimensions o f Wang and Ahmeds organizational innovativeness scale:
process and behavioral innovativeness. However, both exploratory and confirmatory factor
analyses failed to affirm the two-dimensional solution as proposed by Wang and Ahmed.
This result indicates some instability of Wang and Ahmeds organizational innovativeness
scale. To improve the scale will require further efforts on validation and analysis.
Likewise, absorptive capacity is yet another construct that requires a better-developed
assessment tool. Absorptive capacity plays a critical role in this study, particularly as a
mediating variable between organizational learning and innovativeness. The results suggest
that an organizations absorptive capacity should be considered as an evident outcome of
organizational learning and, at the same time, one critical determinant o f organizational
innovativeness and organizational performance. Previous studies have used measures of
rates of patent application or R&D intensity to operationalize absorptive capacity, leading
to rather technology-focused measures and are thus not easily applied to non-technical
Ill
contexts.
The scale developed by Jansen et al. (2005) was one of the very first attempts to
assess organizations absorptive capacity using measurement instruments. Jansen et al.,
however, agreed that the scale needs further analysis to assess the validity in order to be
more elaborate. Similar to organizational innovativeness, an organizational perspective
should be adopted to broaden the technology-oriented definition of absorptive capacity to a
more general context, so that the critical capacity can be appropriately measured to provide
valuable evaluations for a variety of organizations across industries and other
organizational characteristics.
Lastly, the measurement instruments adopted in this study were translated into
Chinese which differs from the originally-developed version. Even though the
qualifications o f the translators were specified to ensure the quality of translation, the items
in the Chinese questionnaire still show some language ambiguity that increases the
difficulty as informants try to respond. More effort is needed to fine-tune the translated
items and strict procedures must be undertaken to examine the validity and reliability of
the measures so that their application in a different cultural context can be proven.
To summarize, this study has both practical and theoretical implications. For
practitioners in both the fields o f management and human resources development in real
business settings, this study provides empirical evidence to substantiate the importance of
organizational learning, structure, and value orientation, as well as highlighting their
influences on organizational innovativeness and performance. In particular, due to the
linkage between organizational learning and innovativeness, HRD professionals can
demonstrate the values o f HRD activities such as learning for overall organizational
112
performance.
Organizational learning and cultural issues have long been considered as soft
elements from a traditional economic viewpoint. As a result, the impact o f such factors on
organizational outcomes has not yet been fully acknowledged (Lin & Yang, 2006). This
study provides a fresh perspective for researchers interested in organizational learning,
innovativeness, and performance. Future studies should focus on developing and validating
measurement instruments that better assess organizational capabilities and tangible
outcomes. In so doing, more powerful evidence can be discovered to articulate the
influence o f such soft elements on performance.
113
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124
APPENDIX A
Notification of IRB Exempt Study
irb@ um n.edu <irb@ um n.edu>
To: Iinx0164@ um n.edu
Mon, May 22, 2006 at 10:51 AM
T he IRB: Hum an S ubjects Com mittee determ ined that th e referenced study is
exem pt from review under federal guidelines 45 CFR Part 46.101(b) category
#2 SURVEYS/INTERVIEWS; STANDARDIZED EDUCATIONAL TESTS;
OBSERVATION OF PUBLIC BEHAVIOR.
Study Number: 0605E86489
Principal Investigator: Yueh-Ysen Lin
Title(s):
An Examination of th e Relationships Between Learning Culture, Structure and
O rganizational Innovativeness and Perform ance: Evidence From Small-Medium
C om panies in Taiwan
The study num ber above is assig n ed to your research. T hat num ber and the
title of your study m ust be u sed in all com munication with th e IRB office.
R esearch th at involves observation can be approved under this category
without obtaining consent.
SURVEY OR INTERVIEW RESEARCH APPROVED AS EXEMPT UNDER
THIS CATEGORY IS LIMITED TO ADULT SUBJECTS.
This exem ption will last for th ree years from the d ate of this co rrespondence
and will be filed inactive at that time. If this research will extend beyond three
years, you m ust subm it a new application to the IRB a month prior to the study's
expiration.
Upon receipt of this email, you may begin your research.
questions, p le a se call th e IRB office at (612) 626-5654.
If you have
You may go to th e View C om pleted section of e R e search Central at

http ://eresearch .um n.ed u / to view further details on your study.
The IRB w ishes you s u c c e ss with this research.
125
APPENDIX B
CONSENT FORM (ENGLISH VERSION)
You are invited to be in a research study of the relationships between organizational factors
and innovativeness and performance. You were selected as a possible participant because
you were recommended by the owner of the organization for your comprehensive
understanding o f organizational operations. We ask that you read this form and ask any
questions you may have before agreeing to be in the study.
This study is being conducted by: Yueh-Ysen Lin, a Ph.D. candidate p f Human Resources
Development at the University o f Minnesota.
Background Information
The purpose o f this study is to understand how organizational learning culture and
structure affect organizational innovativeness and performance.
Procedures:
If you agree to be in this study, we would ask you to fill out a self-administrated
questionnaire. The questionnaire takes about 10 minutes to finish.
Risks and Benefits of being in the Study
This study will give you an opportunity to view your organization from cultural and
structural perspectives. It may provide new ideas as to how to enhance organizational
innovativeness and performance in your organizational from different angles. The study
might cause a slight dissatisfaction if you come across some unsatisfactory aspects of your
organization.
Confidentiality:
The records o f this study will be kept private. In any sort of report the researcher might
publish, no private or company-specific information will be revealed to make it possible to
identify your company. Research records will be stored securely and only the researcher
and the researchers advisor will have access to the data.
Voluntary N ature o f the Study:
Participation in this study is voluntary. Your decision on whether or not to participate will
not affect your current or future relations with the University of Minnesota or your
organization. If you decide to participate, you are free to not answer any question or
withdraw at any time without affecting those relationships.
126
Contacts and Questions:

For any questions you have about the study, please feel free to contact Yueh-Ysen Lin at
linxO 164@unm.edu or by calling 02-26865901. The researchers advisor is Dr. Baiyin
Yang. You may contact Dr. Baiyin Yang at vinvang@umn.edu.
If you have any questions or concerns regarding this study and would like to talk to
someone other than the researcher(s), you are encouraged to contact the Research
Subjects Advocate Line, D528 Mayo, 420 Delaware St. Southeast, Minneapolis,
Minnesota 55455; (612) 625-1650.
The completion o f the survey implies consent to participate in the research

You may make a copy o f this form fo r your records.
THANK YOU VERY MUCH!
127
APPENDIX C
CONSENT FORM (CHINESE VERSION)
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Email: 1inx0164@umn. edu Tel: 02-26865901
4a^-$t$ Dr. Baiyin Yang yinvangjumn. edu
University of Minnesota- Twin c it i e s
Research Subjects Advocate Line,

(612) 625-1650.
D528 Mayo, 420 Delaware St.
Southeast, Minneapolis, Minnesota 55455
128
APPENDIX D
CONSTRUCT MEASURES
Organizational Innovativeness
1. Innovation in our organization is encouraged.
2. We are constantly improving our business processes
3. People are not penalized for new ideas that do not work.
4.
We get a lot of support from managers if we want to try new ways of doing things
During the past five years, our company has developed many new management
approaches
Key executives o f the firm are willing to take risk to seize and explore chancy
growth opportunities
7. In our company, we tolerate individuals who do things in a different way.
8. We are willing to try new ways of doing things and seek unusual, novel solutions.
9. We encourage people to think and behave in original and novel ways.
,~
When we cannot solve a problem using conventional methods, we improvise on new

methods.
11. Our company is creative in its methods of operation.

12. Our company frequently tries out new ideas.
13.
Our company seeks out new ways to do things.
. *
Our com pany changes production m ethods as a great speed in com parison with our
competitors
Adapted from Hurley & Hult (1998), Wang & Ahmed (2004)
129
Absorptive Capacity
,
We collect industry information through informal means (e.g., lunch with industry
friends, talks with trade partners.)
2. New opportunities to serve our clients are quickly understood

~ We are slow to recognize shifts in our market (e.g. competition, regulation,
' demography) (Reserve-coded)
4.
We quickly analyze and interpret changing market demands
~ Our organization periodically organizes special meetings with customers or third

' parties to acquire new knowledge
6 . Employees record and store newly acquired knowledge for future reference
7
Our organization quickly recognizes the usefulness of new external knowledge to

' existing knowledge
8. Employees hardly share practical experience (Reverse-coded)

g
We laboriously grasp the opportunities for our organization from new external
' knowledge (Reverse-coded)
, q Our organization periodically meets to discuss consequences o f market trends and

' new product development
11. We constantly consider how to better exploit knowledge
.7
Our organization regularly considers the consequences of changing market demands

in terms o f new products and services
Adaptedfrom Jansen et al. (2005)
130
Collectivistic Orientation
j
My organization emphasizes that employees should work in a group rather than by

themselves.
2. In my organization, individual does better work working alone than in a group.

^
My organization emphasizes that an employee should accept the groups decision

even when personally he or she has a different opinion.
In my organization, problem solving by groups gives better results than problem

solving by individuals.
In my organization, the needs of other people should take priority over my personal
needs.
6 . My organization emphasizes that to be superior, a man must stand alone.

_
My organization emphasizes that one should struggle through a personal problem by

oneself than discuss it with friends.
Adapted from Erez and Earley, (1987).
131
Structural Organicity
In general, the operating management philosophy in my organization favors....
H ighly structured channels o f

com m unication and a highly
restricted a ccess to important
financial and operating
information.
A strong insistence on a
uniform m anagerial style
throughout the organization.
3.
5.
A strong em phasis on giving

the m ost to say in decision
making to form al line
managers.
A strong em phasis on holding
fast to tried and true
m anagem ent principals despite
any changes in business
conditions.
A strong em phasis on alw ays
getting personnel to fo llo w the
form ally laid dow n
procedures.
6.
Tight formal control o f m ost

operations by m eans o f
sophisticated control and
information system s.
7.
A strong em phasis on getting

line and staff personnel to
adhere c lo se ly to formal job
description.
1 2
1 2 3
Open channels o f
com m unication with important
financial and operating
inform ation flow ing quite
freely throughout the
organization.
M anagers operating styles

allow ed to range freely from
7 the very formal to the very
informal.
A strong tendency to let the
expert in a given situation have
the m ost say in decision
7 m aking even i f this m eans
temporary bypassing o f formal
line authority.
A strong em phasis on adapting
freely to changing
7 circum stances without too
m uch concern for past practice.
A strong em phasis on getting

things done even i f it m eans
disregarding formal
procedures.
L oose, informal control; heavy

dependence on informal
relationships and norms o f
cooperation for getting work
done.

requirements o f the situation
and the individuals personality
define proper on-job behavior.
Source: Khandwalla, 1977; Naman & Slevin, 1993
132
Organizational Learning Culture

1.
In my organization, people are rewarded for learning
2.
In my organization, people spend time building trust with each other
In my organization, teams/groups revise their thinking as a result of group

discussions or information collected
4.
My organization makes its lessons learned available to all employees
5.
My organization recognizes people for taking initiative
6.
My organization works together with the outside community to meet mutual needs
7.
In my organization, leaders continually look for opportunities to learn
Source: Marsick & Watkins, 1997; Yang, 2003
Comparing with key competitors, my organization:
1.
Has a better retune on investment
2.
Has better average productivity per employees
3.
Take less time to market for products and services
4.
Take less time to take care customer needs/complaints
5.
Grows faster
6.
Has lower cost per business transaction
133
APPENDIX E
QUESTIONNAIRE (ENGLISH VERSION)
ORGANIZATIONAL INNOVATIVENESS AND PERFORM ANCE
DEAR FRIEND,
The purpose o f this study is to understand how organizational learning culture and
structure affect organizational innovativeness and performance. If you agree to be in this
study, we would ask you to fill out a self-administrated questionnaire. The questionnaire
takes about 10 minutes to finish.
This study will give you an opportunity to view your organization from cultural and
structural perspectives. It may provide new ideas as to how to enhance organizational
innovativeness and performance in your organizational from different angles. The records
of this study will be kept private. In any sort o f report the researcher might publish, no
private or company-specific information will be revealed to make it possible to identify
your company. Research records will be stored securely and only the researcher and the
researchers advisor will have access to the data.
Contacts and Questions:

For any questions you have about the study, please feel free to contact the following
researcher:
Yueh-Ysen Lin, Ph.D. Candidate
University o f Minnesota -Twin cities
linxO 164@umn. edu.
134
PART A:
Please read each statem ent carefully and indicate h ow you agree on each statement according
to your observations o f the organization you are working w ith by fillin g the number on the
left blank column. There is no right or wrong answer to each question. H owever, your
precise inform ation is very help to this study, so please respond as accurate as possible.
Strongly
D isagree
Strongly
A gree
1.
Innovation in our organization is encouraged. .................................................
2.
We are constantly improving our business processes. ....................................
3.
People are not penalized for new ideas that do not work. ..............................
4.
We get a lot o f support from managers if we want to try new ways o f doing
things.
5.
During the past five years, our company has developed many new
management approaches. ......................................................................................
6.
Key executives o f the firm are willing to take risk to seize and explore
chancy growth opportunities. ..........................................................................
7.
8.
In our company, we tolerate individuals who do things in a different

w a y . ...........................
We are willing to try new ways o f doing things and seek unusual, novel
solutions.
9.
We encourage people to think and behave in original and novel ways.
10.
When we cannot solve a problem using conventional methods, we

improvise on new methods. .................................................................................
11.
Our company is creative in its methods o f operation. .....................................
12.
Our company frequently tries out new ideas. ...................................................
13.
Our company seeks out new ways to do things. ..............................................
14.
Our company changes production methods as a great speed in comparison

with our competitors. .............................................................................................
15.
We collect industry information through informal means (e.g., lunch with

industry friends, talks with trade partners.) .......................................................
135
Strongly
Disagree
Strongly
Agree
16.
New opportunities to serve our clients are quickly understood. .............................
17.
We are fast to recognize shifts in our market (e.g. competition, regulation,

dem ography)....................................................................................................................
18.
We quickly analyze and interpret changing market d e m a n d s.................................
19.
Our organization periodically organizes special meetings with customers or

third parties to acquire new knowledge. .....................................................................
20 .
Employees record and store newly acquired knowledge for future reference.
21 .
Our organization quickly recognizes the usefulness o f new external knowledge

to existing knowledge. ...................................................................................................
22 .
Employees share practical experience. .......................................................................
23.
We quickly grasp the opportunities for our organization from new external
k n o w le d g e ........................................................................................................................
24.
Our organization periodically meets to discuss consequences o f market trends

and new product development. ....................................................................................
25.
We regularly consider how to better exploit knowledge. .........................................
26.
Our organization regularly considers the consequences o f changing market

demands in terms o f new products and services. ......................................................
27.
In my organization, people are rewarded for learning. ............................................
28.
In my organization, people spend time building trust with each other. .................
29.
In my organization, teams/groups revise their thinking as a result o f group

discussions or information c o lle c t e d ..........................................................................
30.
My organization makes its lessons learned available to all e m p lo y e e s ................
136
Strongly
Disagree
Strongly
Agree
My organization recognizes people for taking initiative. ........................................
My organization works together with the outside community to meet mutual

needs. ................................................................................................................................
33. In my organization, leaders continually look for opportunities to learn. ...............
My organization emphasizes that an employee should accept the groups

decision even when personally he or she has a different opinion. .........................
In my organization, problem solving by groups gives better results than problem

solving by in d ivid u als....................................................................................................
In my organization, the needs o f other people should take priority over my

personal n e e d s .................................................................................................................
39. My organization emphasizes that to be superior, a man must stand alone.
4 Q My organization emphasizes that one should struggle through a personal

problem by oneself than discuss it with friends. .......................................................
31.
My organization emphasizes that employees should work in a group rather than

by themselves. .................................................................................................................
35. In my organization, individual does better work working alone than in a group.
2^
2g
PART B:
Based on your know ledge and understandings, please indicate the level to w h ich you agree on the
each o f performance statem ents o f your organizational relative to your k ey com petitors and fill
the number in the left blank column.
Comparing with key com petitors, m y organization:_____________________________________________
Strongly
Disagree
Strongly
Agree
1.
Has a better return on investment. ............................................................... ..............
2.
Has better average productivity per employees. ....................................... ..............
3.
Take less time to market for products and services. .................................
............
4.
Take less time to take care customer needs/com plaints.........................
5.
Grows fa s t e r ..................................................................................................... .............
6 . Has lower cost per business tran saction .................................................... ..............
137
PART C:
Presented b elow are several contrasting statements. Please select a number on the scale
according to h ow close your organization is to either statement and fill the number in the left
blank column.
In general, the m anagem ent in m y organization favors:
4.
Highly structured channels o f

communication and a highly restricted
access to important financial and
operating information.
A strong insistence on a uniform
managerial style throughout the
organization.
A strong emphasis on giving the most

to say in decision making to formal line
managers.
A strong emphasis on holding fast to
tried and true management principals
despite any changes in business
conditions.
A strong emphasis on always getting

personnel to follow the formally laid
down procedures.
Tight formal control o f most operations

by means o f sophisticated control and
information systems.
A strong emphasis on getting line and

staff personnel to adhere closely to
formal job description.
1 2
1 2
1 2 3
1 2
1 2
1 2
4 5
6 7
6 7
Open channels o f communication with

important financial and operating
information flowing quite freely
throughout the organization.
Managers operating styles allowed to
range freely from the very formal to
the very informal.
A strong tendency to let the expert in a
given situation have the most say in
decision making even if this means
temporary bypassing o f formal line
authority.
A strong emphasis on adapting freely
to changing circumstances without too
much concern for past practice.
A strong emphasis on getting things

done even if it means disregarding
formal procedures.
Loose, informal control; heavy

dependence on informal relationships
and norms o f cooperation for getting
work done.

requirements o f the situation and the
individuals personality define proper
on-job behavior.
138
PART D; ORGANIZATIONAL INFORMATION
I.
What is the industry o f your organization?
Manufacturing
Educational Services
Finance/insurance/real estate
Health Services
Information
W holesale/R etail Trade
Other (P lease specify:
II.
Is your organization an international business:
III.
The number o f em p loyees in Taiwan:
IV.
H ow old is your organization?
V.
What is your primary responsibility w ithin the organization?
VI.
H ow m any years have you been w ith the organization?
VII.
H ow m any years have you been in your current position?
VIII. Your gender
IX.
Are you the ow ner o f the business?
Than you very much for your cooperation!
139
A PPE N D IX F
Q U ESTIO N N A IR E (CH IN ESE V E R SIO N )
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An Examination of The Relationships Between Organizational Learning Culture, Structure, Organizational Innovativeness and Effectiveness: Evidence From Taiwanese Organizations

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An Examination o f the Relationships Between Organizational Learning Culture, Structure,

Organizational Innovativeness and Effectiveness: Evidence From Taiwanese Organizations

IN PARTIAL FULFILLMENT OF THE REQUIREMENT

UMI Number: 3243353

All rights reserved.

ProQuest Information and Learning Company

Yueh-Ysen Lin 2006

This is to certify that I have examined this copy of a doctoral dissertation by

and have found that it is complete and satisfactory in all respects,

Name of Faculty Aaviser

Signature of Faculty Adviser

absorptive capacity, organizational innovativeness, and effectiveness. A hypothesized

Absorptive Capacity and Innovativeness.............................................................. 101

Explanations o f Organizational Effectiveness....................................................... 102

Complexity between Organizational Learning and Outcomes............................ 104

Dynamic Capabilities and Sources of Competitive Advantage........................... 105

List of Construct and Items Information............................................................. 52

Retained Items for Innovativeness.......................................................................60

Model Comparison for Innovativeness............................................................... 60

Retained Items for Absorptive Capacity............................................................. 62

Model Comparison for Absorptive Capacity......................................................63

Retained Items for Organizational Learning Culture......................................... 64

Model Comparison for Organizational Learning Culture..................................65

Table 3.10. Retained Items for Collectivist Orientation.........................................................67

Pattern Matrix o f Exploratory Factor Analysis................................................... 78

Correlation Coefficients between Constructs...................................................... 79

Correlation Coefficients of Indicators ................................................................ 81

Standardized Path Coefficients of the Initial Model............................................... 85

Decomposition of Effects (Initial Model)................................................................ 87

Reproduced Correlation Matrix of Latent Constructs (Initial Model).................... 88

Model Comparison and Standardized Path Coefficients........................................ 90

Decomposition of Effects (Modified Model)......................................................... 91

Table 4.10. Reproduced Correlation Matrix of Latent Constructs (Modified Model).............. 93

Hypothesis and Test Results..................................................................................97

Figure 2.1. Conceptual path diagram between constructs....................................................... 14

Figure 3.3. Standardized factor loadings

for absorptive capacity..................................... 63

Figure 3.4. Standardized factor loadings

for organizational learning .............................65

Figure 3.5. Standardized factor loadings

for collectivist orientation................................ 68

Figure 3.6. Standardized factor loadings

for organizational structure.............................. 71

Figure 3.7. Standardized factor loadings

for organizational effectiveness.......................73

industry in the same business environment.

organizational learning and innovativeness, as well as how organizational learning can

performance. Organizational innovativeness, in this case, was seen as a mechanism that

continuous improvement and transformation within the organization in pursuit of its

flexibility, and adaptability (Mott, 1972; Scott, 2003).

Significance of the Study

organizational culture as being well-accepted and considered by organizational members to

Meanwhile, to expand the definition of innovativeness to the abstract level enhances

Figure 2.1. Conceptual path diagram between constructs.

Innovation and Organizational Innovativeness

1953; Gross, Giacquinta, & Bernstein, 1971).

organization-wide perception of organizational members about an organizations openness

Organizational Learning and the Learning Organization

transforming oneself into a learning organization is a critical objective that modem

firms. Second, absorptive capacity is cumulative. That is, an organizations absorptive

mentioned previously, organizational learning refers to the learning process composed of

suggested to enhance an organizations absorptive capacity is the previous experience of

Absorptive Capacity and Innovativeness