Industrial Marketing Management 36 (2007) 349 359 Leadership and organizational learnings role on innovation and performance: Lesso

o ns from Spain J. Alberto Aragon-Correa a,b,*, Vctor J. Garca-Morales b, Eulogio Cordon-Pozo b a Rotterdam-Erasmus University, The Netherlands b University of Granada, Spain Received 3 January 2005; received in revised form 7 April 2005; accepted 27 Sept ember 2005 Available online 15 December 2005 Abstract Leadership style has been traditionally emphasized as one of the most i mportant individual influences on firm innovation. Scholars are now paying growi ng attention to the possibility that the collective capability of organizational learning plays a key role in determining innovation. We propose that leadership style, an individual feature, and organizational learning, a collective process , simultaneously and positively affect firm innovation. A structural equation mo del and data from 408 large firms in four sectors supported our hypotheses. Orga nizational learning had a stronger direct influence on innovation than CEO trans formational leadership for our sample; however, leadership had a strong, signifi cant influence on organizational learning, indirectly affecting firm innovation. Additionally, innovation positively and significantly influenced performance. O rganizational learning also positively affected performance, but interestingly m ainly through innovation. D 2005 Published by Elsevier Inc. Keywords: Innovation; Organizational learning; Transformational leadership; Perf ormance; Organizational capabilities 1. Introduction Market orientation and subsequent firm innovation are widely rec ognized to be essential for the survival and growth of organizations (Bello, Loh tia, & Sangtani, 2004; Damanpour & Gopalakrishnan, 2001; Hurley & Hult, 1998). P orter (1990) suggested that by the late twentieth century, most industrial econo mies had moved to an innovation-driven stage, during which firms competed on how to rapidly and profitably innovate. In this context, it is especially important to gain a better understanding of factors influencing the successful development of firm innovations. Different definitions of innovation have been proposed (e.g., Knight, 1967; Zaltman, Duncan, & Holbek, 1973). We accepted for our work the de finition of innovation stated by the Product Development and Management Associat ion (PDMA, 2004): A new idea, method, or device. The act of creating a new product or process. The act includes invention * Corresponding author. School of Economics and Business, University of Granada, Campus Cartuja, s.n., Granada 18071, Spain. Tel.: +34 958 24 23 54; fax: +34 95 8 24 62 22. E-mail addresses: jaragon@ugr.es (J..A. Aragon-Correa), victorj@ugr. es (V.J. Garca-Morales), ecordon@ugr.es (E. Cordon-Pozo). 0019-8501/$ - see front matter D 2005 Published by Elsevier Inc. doi:10.1016/j.indmarman.2005.09.006 as well as the work required to bring an idea or concept into final form. Although firm innovation is widely prescribed as a means to improve organizational perfo rmance, many firms do not or cannot properly develop it. Researchers have urged attention to what makes it possible for firms to develop innovation, looking for answers beyond semiautomatic stimulus-response processes (Zollo & Winter, 2002, p. 341). Many authors have focused their attention on analyzing whether specific ma nagerial characteristics influence the generation of innovation in organizations , while others have focused on analysis of organizational factors. We want to hi ghlight the simultaneous influence of both kinds of factors. Leadership style ha s been emphasized as one of the most important individual influences on firm inn ovation, because leaders can directly decide to introduce new ideas into an orga nization, set specific goals, and encourage innovation initiatives from subordin ates (Harbone & Johne, 2003; McDonough, 2000; Sethi, 2000). Specifically, severa l writers have linked transformational leadership to innovation (e.g. Howell & Avoli

o, 1993). Transformational leaders concentrate their efforts on longerterm goals ; value and emphasize developing a vision and

350 J.A. Aragon-Correa et al. / Industrial Marketing Management 36 (2007) 349 359 inspiring followers to pursue the vision; change or align systems to accommodate their vision rather than work within existing systems; and coach followers to t ake on greater responsibility for both their own and others development (Howell & Avolio, 1993). Attention to the organizational influences on innovation is also important. Although several such influences have been analyzed, scholars are pa ying growing attention to the possibility that the collective capability of orga nizational learning plays a key role in determining innovation (Senge, 1990; Sen ge, Roberts, Ross, Smith, & Kleiner, 1994; Tushman & Nadler, 1986). Organization al learning has been defined as a collective capability based on experiential an d cognitive processes and involving knowledge acquisition, knowledge sharing, an d knowledge utilization (e.g., DiBella, Nevis, & Gould, 1996; Zollo & Winter, 20 02). We propose that both collective (organizational learning) and individual (t ransformational leadership) factors influence firms to develop and implement org anizational innovation. Many previous studies, although contributing significant ly to the understanding of innovation, have not addressed how the efficacy of in novation may vary with the simultaneous influence of different organizational fa ctors and have not analyzed both direct and indirect influences (Van de Ven, 199 3). Identifying and better understanding those influences will complement the ge neral prescription that firms should innovate. Additionally, the ultimate purpos e of firm innovation is new knowledge and new applications, especially those con nected to organizational improvements, and many researchers have claimed a posit ive relationship between organizational learning and performance. We sought to r einforce this work by contributing to the analysis of the influence of innovatio n on performance. Further, we sought to show how the influence of organizational learning on performance is strengthened by the generation of innovation. In thi s article, our focus is primarily on research questions that concern firm innova tion. We first examine the nature and strength of transformational leadership an d organizational learning as antecedents of firm innovation. We then investigate whether firm innovation, organizational learning and transformational leadership affect financial performance. And finally, using these research findings, we de velop a model of direct and indirect influences to guide future research in this arena and offer managerial implications. 2. Framework and hypotheses Capabiliti es require that multiple characteristics be already embedded in a firm (Grant, 1 991). Like any other capability, organizational innovation depends on the presen ce of capabilities by which firms synthesize and acquire knowledge resources and generate new applications from those resources (e.g., Calantone, Cavusgil, & Zh ao, 2002; Celuch, Kasouf, & Peruvemba, 2002). All these antecedents have to be a nalyzed globally and integrated to achieve systemic thinking. In the following s ections, we present a model consisting of five hypotheses about how transformati onal leadership and organizational learning simultaneously condition firm innova tion. We also propose an indirect relationship between transformational leadersh ip and innovation through organizational learning. We recognize that other varia bles might be considered in such a model; however, it was necessary to limit our model to be able to offer empirical evidence for our arguments, and we chose th ese two factors to represent a focus on individual and on collective explanation s for innovation activity, respectively. Our aim here was simultaneous considera tion of these relevant antecedents of firm innovation. Additionally, we develope d two hypotheses about innovations effect on performance. Fig. 1 illustrates the proposed model. 2.1. The influence of organizational learning on firm innovation Many works in the growing literature on organizational learning have noted a po sitive relationship between organizational learning and firm innovation (e.g., C alantone et al., 2002; Tushman & Nadler, 1986). Organizational learning supports creativity (e.g., Sanchez & Mahoney, 1996), inspires new knowledge and ideas (e .g., Damanpour, 1991; Dishman &

1 Organizational Learning H3(+) 1 Transformational Leaders ip H4(+) H1(+) 3 Performance H2(+) 2 Innovation H5(+) Fig. 1. Hypot esized model.

J.A. Aragon-Correa et al. / Industrial Marketing Management 36 (2007) 349 359 351 Pearson, 2003), and increases ability to understand and apply t em (e.g., Damanp our, 1991). Generative learning, t e most advanced form of organizational learni ng, occurs w en an organization is willing to question long- eld assumptions abo ut its mission, customers, capabilities, or strategy and generate c anges in its practices, strategies, and values (e.g., Argyris & Sc on, 1996; Senge, 1990). T is kind of learning is a necessary underpinning for radical innovations in prod ucts and processes (Senge et al., 1994). T ese ideas ave recently begun to rece ive some empirical attention. Hurley and Hult (1998) focused on a large agency o f t e US federal government to s ow t at organizational innovativeness was posit ively associated wit a culture t at emp asizes adaptation, innovation, and lear ning. Meeus, Oerlemans, and Hage (2001) analyzed a sample of innovator firms to s ow t at more comple innovative activities urged firms to coordinate and e c a nge information between users and producers, w ic implies strong interactive le arning. T ese arguments lead to our first ypot esis: Hypot esis 1. Organization al learning positively influences firm innovation. 2.2. T e influence of transfo rmational leaders ip on firm innovation Leaders play a significant role in s api ng firms potential to generate innovations by encouraging an appropriate environm ent and making decisions t at promote successful generation and implementation o f knowledge (Kanter, 1983; Van de Ven, 1993). T e analysis of firm leaders c arac teristics (e.g., education, background, personality, or attitudes) as generated wide attention from innovation researc ers (Storey, 2000; Tus man & Nadler, 198 6). Style of leaders ip as been ig lig ted as an especially important influenc e on innovation (Harbone & Jo ne, 2003; Kanter, 1983; McDonoug , 2000; Set i, 20 00). Transformational leaders ip, w ic as been contrasted wit Ftraditional_ o r Ftransactional_ leaders ip, includes a wide strategic vision about t e advanta ges of c ange and adaptation (Dess & Picken, 2000), significant interest in a co mmunicative culture (Hult, Ferrell, Hurley, & Giunipero, 2000), attention to t e development of people (Barczak & Wilemon, 1992), and acceptance of mistakes (Sn ell, 2001). It is important to ig lig t t at managers perceptions about t eir ow n roles in t eir organizations strongly influence t eir capability to promote t is kind of leaders ip in an organization. Several features of transformational l eaders ip are relevant for firm innovation. Transformational leaders ave an int eractive vision, paying ma imum attention to effective communication and s aring values (e.g., Adair, 1990; Quinn, 1988) and encouraging an appropriate environm ent for innovative teams (Tus man & Nadler, 1986). T ey support collective proce sses of organizational learning (Manz, Barstein, Hostager, & S apiro, 1989), rec iprocal trust between organization members and leaders (Scott & Bruce, 1994), an d favorable attitudes toward proactivity and risk (Lefebvre & Lefebvre, 1992). Transformational leaders perce ive t eir role more as coordination t an as command and control (Barczak & Wilem on, 1992). All t ese features toget er allow a better understanding of t e stron g relations ips between collaborative, innovative transformational leaders ip an d factors positively influencing organizational innovation (e.g., Farr & Ford, 1 990; Kanter, 1983). Transformational leaders ip is more often linked to successf ul innovation t an is transactional leaders ip (Dess & Picken, 2000; Manz et al. , 1989). T ese arguments lead to t e ne t ypot esis: Hypot esis 2. Transformati onal leaders ip positively influences firm innovation. Simultaneously, it is imp ortant for our work to ig lig t t at transformational leaders ip and organizati onal learning are also related. T is circumstance implies indirect influences on organizational innovation, influences t at ave usually been absent from previo us researc analysis. Many aut ors ave asserted relations ips between leaders i p and organizational learning (e.g., Senge, 1990; Senge et al., 1994; Tus man & Nadler, 1986). Traditional leaders ip as been c aracterized as ig ly individua listic and asystematic and as making t e learning of organizational teams diffic ult; owever, transformational leaders ip is focused on active promotion of empl

oyees participation in collective decisions and activities (Adair, 1990; Bass, 19 91). Transformational leaders s ould be able to build teams and provide t em wit direction, energy, and support for processes of c ange and organizational lear ning (Blackler & McDonald, 2000; McDonoug , 2000; Nadler & Tus man, 1990). More specifically, transformational leaders ip fuels organizational learning by promo ting intellectual stimulation, inspirational motivation, and self-confidence amo ng organization members (Coad & Berry, 1998). A capability for transformational leaders ip as been even described as one of t e most important means of develop ing learning organizations (e.g., Maani & Benton, 1999; Slater & Narver, 1995; S nell, 2001). T us, we predict: Hypot esis 3a. Transformational leaders ip positi vely influences organizational learning. Hypot esis 3b. Transformational leaders ip positively and indirectly influences firm innovation t roug organizational learning. 2.3. T e influence on performance 2.3.1. Effects of organizational lea rning on performance T e importance of organizational learning for a companys sur vival and effective performance as been ig ly emp asized in t e literature (e. g., Argyris & Sc on, 1996; Huber, 1991; Senge, 1990; Za ay & Handfield, 2004). H owever, empirical analysis of t is relations ip as been limited. Some recent wo rks ave begun to verify t is positive relations ip. Sc roeder, Bates, and Juntt ila (2002) developed

352 J.A. Aragon-Correa et al. / Industrial Marketing Management 36 (2007) 349 359 resource-based ypot eses and s owed a positive relations ip between internal an d e ternal learning and organizational performance in 164 manufacturing plants f rom si different countries. Bontis, Crossan, and Hulland (2002) used respondent s in 32 Canadian funds to s ow t at Fstocks of learning_ at all organizational l evels ad a positive relations ip wit business performance. Finally, Za ra, Ire land, and Hitt (2000) s owed a strong relations ip between international diversi ty and mode of market entry and t e breadt , dept , and speed of a new venture f irms tec nological learning, especially w en a firm undertook formal knowledge in tegration. T us: Hypot esis 4. Organizational learning will be positively associ ated wit performance. 2.3.2. Effects of firm innovation on performance Firm inn ovation as been traditionally focused on t e improvement of organizational perf ormance (Damanpour, 1991; Zaltman et al., 1973). Some previous work as noted t at only certain c aracteristics of an innovation and not t e innovation itself i s positively linked to organizational performance (e.g., Danneels & Kleinsc midt , 2001; Gopalakris nan, 2000). In any case, t e vast majority of previous public ations agree t at organizational innovation positively influences performance. F or illustration, we now provide some e amples. Irwin, Hoffman, and Lamont (1998) used a resource-based view to s ow t e positive relations ip between tec nologi cal innovations and organizational performance and stated t at t e innovation c aracteristics of rarity, value, and inimitability moderated t is relations ip. H urley and Hult (1998) demonstrated positive relations ips between organizational innovation, a market orientation, and organizational learning and s owed t at a ll t ese elements toget er influenced t e potential for good performance. Capron (1999) s owed similar relation s ips after mergers and acquisitions and, finally, Loof and Hes mati (2002) s owed t e negative impact of avoiding innovations. In view of t e positive relations ips seen in previous researc , our ypot esis is : Hypot esis 5. Firm innovation will positively influence performance. 3. Met od ology 3.1. Sample and procedures T e sample of firms was randomly selected from t e Dun and Bradstreet 2001 database, w ic includes t e 50,000 biggest companie s operating in Spain. T e final sample contained 900 firms in four wide categori es: farming, manufacturing, construction, and services. We defined t ese categor ies to control for confounding effects. C oosing a sample of firms located in a relatively omogeneous geograp ic, cultural, legal, and political space enabled us to minimize t e impact of variables t at could not be controlled (Hofstede, 1 980). T e Spanis market is relatively well developed, is w olly integrated into t e European Union, and as ad a slig tly better rate of growt in recent years t an t e European market overall. However, Spain as received relatively little attention from organizational res earc ers. Drawing on our interviews wit five managers and si academics interes ted in t e topic and familiar wit t e Spanis market, we developed a structured questionnaire to investigate ow organizations face learning and innovation iss ues. T ese developmental interviewees did not provide data for t e empirical inv estigation. We decided to use CEOs as our key informants since t ey receive info rmation from a wide range of departments and, t erefore, are a very valuable sou rce for evaluating aspects of organizations. T ey also play a major role in form ing and molding organizational c aracteristics by determining t e types of be av ior t at are e pected and supported (Baer & Frese, 2003). In addition, use of CE Os meant t at informants were similar across organizations, and t us t at t eir levels of influence in t eir organizations was constant, w ic increased t e val idity of t e variables measurements (Glick, 1985). Because t e vast majority of t e CEOs were native Spanis speakers, t e questionnaire was written in Spanis t o avoid any problem wit t e language. T e questionnaires were mailed to t e CEO s of t e 900 randomly selected firms along wit a cover letter. We used t is met od rat er t an interviews because a mailed survey enabled us to reac a greater number of firms at a lower cost, put less pressure for an immediate response on

t e potential informants, and gave respondents a greater feeling of autonomy. T o reduce possible desirability bias, we promised t at we would keep all individu al responses completely confidential and confirmed t at our analyses would be re stricted to an aggregated level t at would prevent t e identification of any org anization. We mailed eac CEO w o ad not yet responded t ree reminders. Four u ndred twenty-t ree CEOs finally answered t e questionnaire but, because of missi ng values, only 408 questionnaires were included in t e researc . T e response r ate was 45.33%. We did not find significant differences in type of business or n umber of employees between t e respondents and t e sample or between early and l ate responders. Furt ermore, since all measures were collected wit t e same sur vey instrument, we tested for t e possibility of common met od bias using Harmans one-factor test (e.g., Scott & Bruce, 1994). A principal components factor anal ysis on t e questionnaire measurement items yielded four factors wit eigenvalue s greater t an 1.0 t at accounted for 66% of t e total variance. Since several f actors, as opposed to one factor, were identified, and since t e first factor di d not account for most of t e variance, common met od variance did not appear to be present (Podsakoff & Organ, 1986). 3.2. Measures Scales are important in des igning a survey instrument in management researc . As no single measure can prec isely capture be avior, researc ers usually combine two or more measures into a scale to gauge eac variable. Given t at developing new scales is a comple task , w erever possible we

J.A. Aragon-Correa et al. / Industrial Marketing Management 36 (2007) 349 359 353

used pretested scales from past empirical studies to ensure t eir validity and r eliability. 3.2.1. Transformational leaders ip T e strategic literature includes researc t at measures and evaluates transformational leaders ip (e.g., Coad & Berry, 1998; Hult et al., 2000; Podsakoff, Mackenzie, & Bommer, 1996). Style of leaders ip is broadly based on a managers assumption about is/ er role in an org anization. T erefore, we drew five items from t e scale designed by Podsakoff et al. (1996) to assess aspects of transformational leaders ip. We asked CEOs w et er t ey gave priority to seeking new opportunities for t eir organizations; tri ed to develop a clear common view of final aims more t an s ort-term objectives; emp asized motivating t e rest of t e company more t an controlling; acted as t e organizations leading force more t an as supervisor; and, finally, coordinated t eir colleagues on t e job. All t e items in t is paper used a Likert-type 7-p oint scale (1, totally disagree to 7, totally agree). A confirmatory 2 factor analy v 5 = 14.25, normed fit inde [NFI] = 0.97, nonnormed fit inde [NNFI] = 0.96, g oodness-of-fit inde [GFI] = 0.99, comparative fit inde [CFI] = 0.98, adjusted goodness-of-fit inde [AGFI] = 0.98) subsequently verified t e scales unidimensio nality and its ig validity and reliability (a = 0.850). 3.2.2. Organizational learning T e capability of organizational learning as received muc more t eore tical t an empirical attention. Additionally, t ere are wide differences among t e assumptions, procedures, and objectives of previous measures. We took measure s from two previous scales t at ad close conceptual links wit our researc , re flected prior trends well, and ad been verified in detail. We used t e first tw o items of Kale, Sing , and Perlmutters (2000) scale and added two items based on Edmondsons (1999) work. T is four-item organizational learning scale asked respo ndents w et er, over t e last 3 years, t eir organizations ad acquired muc new and relevant knowledge, if organizational members ad acquired critical capacit ies and skills, if organizational improvements ad been influenced by t e entry of new knowledge, and if t eir organizations were learning organizations. T is s cale was similar to ot er recently proposed measures of e ternal and internal le arning (e.g., Sc roeder et al., 2002). We conducted a 2 confirmatory factor anal ysis to validate our scales (v 2 = 2.40, NFI = 0.99, NNFI = 0.99, GFI = 0.99, CF I = 0.99, AGFI = 0.99). Results s owed t at final scale was unidimensional and ad ig reliability (a = 0.919). 3.2.3. Firm innovation Numerous researc ers av e analyzed organizations innovation using reliable and valid scales. We based our scale on Miller and Friesens (1983) work. We first defined firm innovation (in c ontrast to industry or market innovation) for respondents and t en asked t em to evaluate ow ig , relative to competitors, t eir firms rates of new product/ser vice introduction and c anges in internal operating practices were for t e last 3 years. A confirmatory factor analysis s owed t at our scale was u nidimensional and reliable (a = 0.777). We also included questions allowing t e CEO respondents to offer precise quantitative data on organizational innovation and innovation radicality (e.g. number of new products in t e last 3 years). We included questions tapping bot types of assessment in our interviews (subjectiv e evaluation and quantitative data), but t e managers were more open to offering t eir perceptions t an to offering precise quantitative data (only 61 offered q uantitative data). T erefore, we tested t e model using a perceptual measure of firm innovation in w ic eac respondent rated is or er organizations innovatio n relative to t at of ot er firms in t e. W ere possible, we calculated t e corr elation between t e objective and subjective data. T ese were ig and statistic ally significant (0.76, p < 0.01). 3.2.4. Performance Having reviewed ow perfor mance was measured in different works of strategic researc (e.g., Venkatraman & Ramanujan, 1986), we drew up an eig t-item scale to measure organizational perf ormance. T e CEOs were asked to evaluate t eir firms performance for t e last 3 y ears, measured as return on assets, return on internal resources, and sales grow t in t eir main products or services and markets. T ey were also asked to compa

re t ese measures wit t eir principal competitors performance, noting w ic were above t e mean. T e use of scales evaluating performance in comparison wit mai n competitors is one of t e practices most widely used in recent studies to prov ide an objective reference for sampled managers (Steensman & Corley, 2000). Many researc ers ave used managers subjective perceptions to measure beneficial outc omes for firms. Ot ers ave preferred objective data, suc as return on assets. Sc olars ave widely establis ed t at t ere is a ig correlation and concurrent validity between objective and subjective data on performance, w ic implies t at bot are valid w en calculating a firms performance (e.g., Dess & Robinson, 19 84; Venkatraman & Ramanujan, 1986). We included questions involving bot types o f assessment in our interviews, but t e managers were more open to offering t ei r general views t an to offering precise quantitative data; t erefore, we tested t e model using a perceptual measure of financial performance (t ree items, sev en-point scale). W en possible, we calculated t e correlation between objective and subjective data, and t ese were ig and significant. A confirmatory factor analysis 2 (v 20 = 285.95, NFI = 0.92, NNFI = 0.90, GFI = 0.96, CFI = 0.93, AGFI = 0.92) s owed t at t e scale was unidimensional and ig ly reliable (a = 0.889 ). 3.2.5. Control variables Size may affect an organizations ability to learn (Di Bella et al., 1996; Tsang, 1997) or to innovate (Damanpour, 1992; Vossen, 1998). T e size indicators initially used for t is researc were firm income and numbe r of employees. Information for t ese variables was gat ered t roug t e survey and validated using Dun and Bradstreet; correlation coefficients between t ese s ources were strong and significant.

354 J.A. Aragon-Correa et al. / Industrial Marketing Management 36 (2007) 349 359 Table 1 Means, standard deviations and correlation Variable 1. 2. 3. 4. 5. Trans formational Leaders ip Organizational Learning Innovation Performance Size Mean 5.22 5.37 4.67 4.83 3.4 S.D. 0.94 1.14 1.19 1.02 1.68 1 1.000 0.473*** 0.387*** 0.456*** 0.068 2 1.000 0.587*** 0.488*** 0.010 3 4 5 1.000 0.509*** 0.071 1.000 0.009 1.000 *** Significant at p < 0.001 (two-tailed); n = 408.fs In addition, because size and income were ig ly correlated, we used number of e mployees only in our model (Weaver, Trevino, & Coc ran, 1999). Major industry ty pe was measured at t e two-digit SIC code level and t en aggregated to four wide categories, as described under Sample and procedures above. T is variable contr ols t e potential influence of industry on learning (Li, 1995) and profitability . T e survey asked managers to name t e industry from w ic t e company generate d most of its sales. 3.3. Model and analysis T e LISREL 8.30 program was used to test t e t eoretical model. Fig. 1 s ows t e basis of t e model proposed, toget er wit t e ypot eses to be tested. We used a recursive nonsaturated model, ta king transformational leaders ip (n 1) as t e e ogenous latent variable, organiz ational learning (g 1) as a first-grade endogenous latent variable, and innovati on (g 2) 1 OL1 y11=.94 2 OL2 y12=.92

and organizationa p rformanc (g 3) as s cond-grad ndog nous at nt variab s . Through f xib int rp ay b tw n th ory and data, this structura quation m od approach bridg s th or tica and mpirica know dg to a ow a b tt r und rstanding of th r a wor d. Such ana ysis a ows for mod ing bas d on both at nt and manif st variab s, a prop rty w suit d to th hypoth siz d mod , wh r most of th r pr s nt d constructs ar abstractions of unobs rvab ph nom n a. Furth r, structura quation mod ing tak s into account rrors in m asur m n t, variab s with mu tip indicators, and mu tip -group comparisons. 4. Ana ys is and r su ts In this s ction w pr s nt th main r s arch r su ts. First, Tab 1 shows th m ans and standard d viations as w as th int rfactor corr ati on matrix for th study variab s. Th r ar significant and positiv corr atio ns among transformationa 3 OL3 4 OL4 y14=.86 1 PERFOR1 y38=.94 PERFOR2 y39=.96 31 = .24** PERFOR3 y310=.91 P 4 y311=.86 PERFOR5 y312=.93 32 = .73*** 8 9 10 11 12 13 14 15 y13=.86 1 2 3 4 5 LEADER1 x11=.73 LEADER2 x12=.87 LEADER3 x13=.81 LEADER4 x14=.78 LEADER5 1 Organi ationa 11= .81*** Learnin 1 Transformational Leadership 21= .37*** x15=.81 21 = .56*** 3 P rformanc

2 Innovation 2 y25=.73 INNOVA1 5 y26=.75 INNOVA2 6 y27=.87 INNOVA3 7 3 PERFOR6 y313=.97 PERFOR7 y314=.88 y315=.94 PERFOR8 p < 0.1; * p < 0.05; ** p < 0.01; *** p < 0.001 (two-tai Fig. 2. R su ts of structura quation mo .

).

 J.A. Aragon-Corr a t a . / In ustria Mark ting Manag m nt 36 (2007) 349 359 355 a rs ip, organi ationa arning, innovation an p rformanc . A s ri s of t s ts ( .g., to ranc , an varianc inf ation factor) s ow t a s nc of mu tic o in arity (Hair, An rson, Tat am, & B ack, 1999). W p rform structura qua tion mo ing (Bo n, 1989) to stimat ir ct an in ir ct ff cts, using LISR EL an using t corr ation matrix an asymptotic covarianc matrix as input. T is typ of ana ysis as t a vantag of corr cting for unr ia i ity of m asur s an a so giv s information on t ir ct an in ir ct pat s tw n mu tip constructs aft r pot ntia y confoun ing varia s ar contro for. Fig. 2 s ows t stan ar i structura co ffici nts. T is iagram s ows on y pat s t at ar significant at t 0.5 v . T magnitu of t co ffici nts of t vari a s r f cts t ir r ativ importanc . Wit r sp ct to t qua ity of t m a sur m nt mo for t samp , t constructs isp ay satisfactory r ia i ity, as in icat y composit r ia i iti s ranging from 0.78 to 0.92 an s ar var ianc co ffici nts ranging from 0.62 to 0.85 (Ta 2). Conv rg nt va i ity t xt nt to w ic maxima y iff r nt att mpts to m asur t sam conc pt agr can ju g y ooking at ot t significanc of factor oa ings an s ar var ianc . T amount of varianc s ar or captur y a construct s ou gr at r t an t amount of m asur m nt rror (s ar varianc >0.50). A t mu ti-it m constructs m t t is crit rion, ac oa ing (k) ing significant y r at to its un r ying factor (t-va u s gr at r t an 28.29). Lik wis , a s ri s of c i-squar iff r nc t sts on t factor corr ations s ow t at iscriminant va i ity t gr to w ic a construct iff rs from ot rs is ac i v among a constructs (An rson & G r ing, 1988). In Ta 2 Va i ity, r ia i ity an int rna consist ncy Varia It m Param t r V a i ity, r ia i ity an int rna consist ncy k* Transformationa LEADER1 L a r s ip LEADER2 LEADER3 LEADER4 LEADER5 Organi ationa OL1 L arning OL2 OL3 OL4 Inn ovation INNOVA1 INNOVA2 INNOVA3 P rformanc PERFOR1 PERFOR2 PERFOR3 PERFOR4 PERF OR5 PERFOR6 PERFOR7 PERFOR8 kx 11 kx 12 kx 13 kx 14 kx 15 k 11 k 12 ky 13 ky 14 ky 25 ky 26 ky 27 ky 38 ky 39 ky 310 ky 311 ky 312 ky 313 ky 314 ky 315 0.73 (f. p.) 0.87*** 0.81*** (32.60) 0.78*** (30.07) 0.81*** (30.37) 0.94 (f.p.) 0.92*** (67.04) 0.86*** (60.53) 0.86*** (44.93) 0.73 (f.p.) 0.75*** (28.29) 0.87*** (31. 18) 0.94 (f.p.) 0.96*** (70.13) 0.91*** (55.33) 0.86*** (59.09) 0.93*** (68.24) 0.97*** (70.06) 0.88*** (63.71) 0.94*** (66.86) R2 0.53 0.76 0.65 0.61 0.66 0.88 0.84 0.74 0.74 0.53 0.56 0.76 0.87 0.91 0.83 0.74 0.87 0.94 0.78 0.88 A.M. a = 0.850 C.R. = 0.899 S.V. = 0.642 a = 0.919 C.R. = 0.941 S.V. = 0.800 a = 0.777 C.R. = 0.827 S.V. = 0.616 a = 0.88 9 C.R. =0.978 S.V. = 0.853 k* = stan ar i structura co ffici nt; R 2 = r ia i ity; a = a p a Cron ac ; C.R. = compoun r ia i ity; S.V. = s ar varianc ; f.p. = fix param t r; A. M. = a justm nt m asur m nt. *** Significanc at p < 0.001 (two-tai ). particu ar, w sta is iscriminant va i ity tw n ac pair of at nt var ia s y constraining t stimat corr ation param t r tw n t m to 1.0 a n t n p rforming a c isquar iff r nc t st on t va u s o tain for t co nstrain an unconstrain mo s (s An rson & G r ing, 1988). T r su ting significant iff r nc s in c i-squar in icat t at t constructs ar not p rf ct y corr at an t at iscriminat va i ity is ac i v . T ov ra fit m a sur s, t mu tip squar corr ation co ffici nts of t varia s, an t s igns an significanc v s of t pat co ffici nts a in icat t at t mo fits t 2 ata w (v 165 = 0.34, p < 0.001; NFI = 0.93; NNFI = 0.93; GFI = 95; CFI = 0.94; AGFI = 0.94). T ypot si mo 2 was a significant y tt r fit t an t nu mo (v 190 = 2 14953.36, p < 0.001; Dv 25 = 13939.02, p < 0.001). A of t mo ification in ic s for t ta pat ways tw n major vari a s w r sma , sugg sting t at a ing a itiona pat s wou not significant

y improv t fit. T r si ua s of t covarianc s w r a so sma an c ntr aroun ro. If w ook at t stan ar i param t r stimat s, t fin ings s ow t at innovation is aff ct y organi ationa arning ( 21 = 0.56, p < 0.00 1), supporting Hypot sis 1. As m ntion pr vious y, muc ar i r r s arc as monstrat t is r ation. As pr ict in Hypot sis 2, innovation app ars to a so inf u nc strong y y transformationa a rs ip (c 21 = 0.37, p < 0.0 01). Our r s arc s ows t at innovation is strong y aff ct y transformationa a rs ip an organi ationa arning (R 2 = 0.78). T r su ts a so s ow t at transformationa a rs ip is ig y r at (R 2 = 0.65) to an aff cts organ i ationa arning (c 11 = 0.81, p < 0.001). T us, as pr ict in Hypot s s 3a an 3 , on of t ss ntia c aract ristics t at firms must consi r in ana y ing organi ationa arning is transformationa a rs ip. A transformationa a rs ip sty improv s t v opm nt of arning wit in an organi ation. Fur t rmor , w o s rv an in ir ct ff ct (0.45, p < 0.001) of transformationa a rs ip on innovation t roug organi ationa arning (0.81 0.56; s , for inst anc , Bo n, 1989, for ca cu ation ru s). T g o a inf u nc of transformati ona a rs ip on innovation is t us 0.82 ( p < 0.001). Comparing t magnitu s of t s ff cts in icat s t at t ir ct ff ct of transformationa a rs ip on organi ationa arning is significant y arg r t an t ir ct ff ct of transformationa a rs ip on innovation. Fina y, Hypot s s 4 an 5 r at or gani ationa arning an innovation to organi ationa p rformanc (R 2 = 0.89). Hypot sis 4 o s caus t param t r stimat s v rify a positiv an statis tica y significant association tw n organi ationa arning an p rformanc , ot ir ct y ( 31 = 0.24, p < 0.01) an in ir ct y, via innovation (0.41, p < 0.001). T tota ff ct ( ir ct an in ir ct) of organi ationa arning on p rformanc is 0.65 ( p < 0.001). T positiv , significant r ations ip tw n i nnovation an p rformanc ( 32 = 0.73, p < 0.001) supports Hypot sis 5. Of t s two varia s (organi ationa arning an innovation), innovation s ows t gr at st inf u nc on organi ationa p rformanc . In a ition to t s ff cts, w o s rv an

356 Ta

3 Param t r an r ations ip Param t r an r

ations ip

J.A. Aragon-Corr a t a . / In ustria Mark ting Manag m nt 36 (2007) 349 359

Dir ct Eff cts g11 Transformationa L a rs ip Y Organi ationa L arning 0.81*** (25.43) g21 Transformationa L a rs ip Y Innovation 0.37*** (4.67) 0.56*** (7. 34) 21 Organi ationa L arning Y Innovation 31 Organi ationa L arning Y P rfo rmanc 0.24** (3.04) 32 Innovation Y P rformanc 0.73*** (9.11) In ir ct Eff ct s Transformationa L a rs ip Y Innovation Transformationa L a rs ip Y P rform anc Organi ationa L arning Y P rformanc Tota Eff cts Transformationa L a r s ip Y Innovation Transformationa L a rs ip Y P rformanc Organi ationa L arn ing Y P rformanc .

5. Discussion Firms n innovation to improv t ir p rformanc in r a if c a nging usin ss nvironm nts. Our work contri ut s to suc p rformanc improv m n t y s owing t at organi ationa innovation is as on mu tip an simu tan ou s inf u nc s of in ivi ua an co ctiv f atur s. Sp cifica y, r su ts suppor t a our ypot s s, s owing t at in our samp firms, a manag m nt sty of t ransformationa a rs ip an t co ctiv capa i ity of organi ationa arn ing ot simu tan ous y inf u nc innovation. T co ctiv capa i ity of organ i ationa arning as a strong r ir ct inf u nc on firm innovation for our sa mp t an t transformationa a rs ip of t CEO; ow v r, a rs ip s ows a v ry ig an significant inf u nc on organi ationa arning, in ir ct y aff cting firm innovation. A itiona y, our r su ts s ow a positiv an significan t inf u nc of innovation on p rformanc . Organi ationa arning a so positiv y aff cts p rformanc , ut sp cia y o s so t roug firm innovation. A major i mp ication of t is work for practition rs an sc o ars is t at innovation is not ir ct y avai a to a organi ations at a tim s, ut on y to firms wit t appropriat int rna c aract ristics. Wi pr scriptions for innovation av o ft n cr at s rious pro ms for manag rs in t rms of inappropriat proc ss s f or g n rating r a innovation. T os pro ms ar not a imitation of innovation in its f, ut t cons qu nc of imit un rstan ing of t comp x con itio ns t at ar n c ssary for succ ssfu innovation. Hug r sourc s may not noug (or v n may not n ) to ac i v innovation. Transformationa a rs ip an t capa i ity of organi ationa arning ar r vant xamp s of t int rna con itions t at firms n to av in or r to innovat . W iscuss ow s om ot r imp ications of our r su ts for t r ations ips tw n t ana y c aract ristics an firm innovation an cons qu nc s of t inf u nc of firm i nnovation on p rformanc . Our r s arc supports t t or tica argum nts off r in pr vious it ratur a out t xist nc of a positiv r ations ip tw n organi ationa arning an firm innovation ( .g., Argyris & Sc on, 1996; Dis ma n & P arson, 2003; S ng t a ., 1994; Za ay & Han fi , 2004). On t ot r a n , our r su ts a so support t importanc of transformationa a rs ip in 0.45*** (7.48) 0.79*** (25.38) 0.41*** (5.27) 0.82*** (21.13) 0.79*** (25.38) 0.65*** (11.15) k* = stan ar i structura co ffici nt. Significanc at p < 0.1; ***Significan c at p < 0.001 (two-tai ). in ir ct ff ct (0.79, p < 0.001) of transformationa via organi ationa arning (0.19, p < 001), innovation rgani ationa arninginnovation (0.33, p < 0.001). T s ow significant inf u nc for t samp firms (Ta a rs ip on p rformanc (0.27, p < 0.001), an o contro varia s o not 3). In t sting t t o

propos t or tica mo , an most parsimonious mo k*

r pr s nt .

(Fig. 2) t

pr f rr , most acc pta


r tica fram work, w fit s v ra n st mo s, ac incorporating iff r nt as sumptions a out param t rs. Comparisons wit r asona a t rnativ mo s ar r comm n as a m ans of s owing t at a ypot si mo is t st r pr s nt ation of t ata. Comparison is consi r to an important part of ass ssing mo fit (K oway, 1995). T summary statistics in Ta 4 in icat t at Mo 1 is pr f rr to t ot rs, supporting t inc usion of a mo wit t s r ations ips among t ana y constructs. For xamp , if w compar t t o r tica mo (Mo 1) wit a mo t at o s not consi r t r ations ip t w n innovation an p rformanc (Mo 6), w can s t at t att r as poor r va u s on t xp ct crossva i ation in x (DECVI = 0.15), Akaik information crit rion (DAIC = 53.62), an stimat nonc ntra ity param t r (DNCP= 54.62). H nc , r su ts s ow t at innovation aff cts p rformanc an t at Mo 1 is pr f ra to Mo 6 (Dv 2 = 55.62, D f = 1). Lik wis , w s t at t t or tica mo is pr f ra to t r maining mo s formu at (Ta 4). L ngt r stri ctions pr v nt a tai iscussion of ac mo , ut a w o r port is avai a from t aut ors. In sum, Ta 4 Param t r, r ations ip an goo n ss of fit statistics Mo D scription 1 2 3 4 5 6 v2 f Dv 2 NFI NNFI GFI CFI 0.93 0.93 0.93 0.93 0.93 0.93 0.93 0.93 0.93 0.93 0.93 0.95 0.9 5 0.95 0.95 0.95 0.95 0.95 0.94 0.94 0.94 0.94 0.94 0.94 AGFI ECVI AIC 0.94 0.94 0.94 0.94 0.94 0.94 2.98 2.98 3.03 3.05 2.99 3.13 1104.3 4 1104.34 1121.67 1127.26 1107.83 1157.96 PGFI NCP 0.75 0.75 0.75 0.75 0.75 0.75 849.34 849.34 867.67 873.26 853.83 903.96 T or tica 1014.34 165 W.R. Transformationa L a rs ip Y Organi ationa L arni ng 1014.34 165 W.R. Transformationa L a rs ip Y Innovation 1033.67 166 19.33 W .R. Organi ationa L arning Y Innovation 1039.26 166 24.92 W.R. Organi ationa L arning Y P rformanc 1019.83 166 5.49 W.R. Innovation Y P rformanc 1069.96 166 55.62 W.R. = wit out r ations ip. n = 408.

J.A. Aragon-Corr a t a . / In ustria Mark ting Manag m nt 36 (2007) 349 359 357

g n rating innovation ( .g., D ss & Pick n, 2000; Hu t t a ., 2000; McDonoug , 2000; S t i, 2000). T is r su t is sp cia y app a ing caus it supports t c aract ri ation of transformationa a rs ip as mor conc rn wit co ctiv cisions, co ctiv goa s, an t g n ration of capa i iti s t an is tra it iona a rs ip, w ic focus s mor on top- own cisions, stan ar i proc u r s, an t pro uction of pro ucts an s rvic s. T r for , a common p rsp ctiv int grating an motivating organi ationa m m rs is a pr r quisit for firm i nnovation. A CEOs wi ingn ss to acc pt risks an mistak s is a so pro a y on o f t first st ps of t proc ss of innovation. A itiona y, transformationa a rs ip as s own its pot ntia to p organi ation m m rs cr at an us kn ow g ( .g., S ng t a ., 1994; Sn , 2001). Transformationa a rs ip con tri ut s to a goo int rna nvironm nt for co a oration an work among t am m m rs. Furt r, on of its main outputs s ou t a sorption of i as promot ing organi ationa arning an t r for promoting a transformationa a rs i ps in ir ct inf u nc on firm innovation t roug organi ationa arning. Fina y , t r su ts of t is stu y a so s a itiona ig t on innovations positiv im p ications for firm p rformanc . T s r su ts support pr vious it ratur stati ng suc positiv ff cts of innovation ( .g., Damanpour, 1991; Irwin t a ., 199 8). Our r su ts s ow som a itiona an app a ing asp cts of t in ir ct r at ions ips among organi ationa arning, firm innovation, an p rformanc . First, organi ationa arning not on y ir ct y inf u nc s ot p rformanc an innov ation, ut a so inf u nc s p rformanc t roug innovation. S con , in our samp t r ations ip tw n organi ationa arning an firm innovation was v n s trong r t an t at tw n organi ationa arning an p rformanc . W want to av oi a finitiv ass ssm nt a out t s ns of t ana y r ations ips tw n organi ationa arning, firm innovation, an p rformanc . As iscuss ow, futur ongitu ina works s ou p to comp t t s fin ings. 6. Manag ria imp ications Our r s arc s ows t importanc of transformationa a rs ip f or improving financia p rformanc an t us promoting firm innovation an organi ationa arning. Tra itiona r ations ips tw n a rs ip an manag rs s o u t n r vi w . It is sp cia y important r to un rstan t importan c an p cu iariti s of transformationa a rs ip. First, transformationa a rs ip inc u s v ry sp cia att ntion to t v opm nt of t p op in a fi rm. Human r sourc s ar t most important ass ts for t s a rs. Transformat iona a rs conc ntrat t ir fforts on va u an mp asi v oping a visi on an inspiring fo ow rs to pursu t vision; t y c ang or a ign syst ms to accommo at t ir vision rat r t an work wit in xisting syst ms; an t y coa c fo ow rs to tak on gr at r r sponsi i ity for ot t ir own an ot rs v opm nt. S con y, sty of a rs ip is roa y as on a manag rs assumption a out is/ r ro in an organi ation. It is ig y important t at t transform ationa a r act in a way t at is co r nt wit is/ r stat m nts. Transformationa a rs av to o ff r a t ir r sourc s to avoi any sk ptica avior in t firm (Wick & L o n, 1995). His/ r own compromis wit t a i iti s of arning p ays a k y ro in promoting a cu tur of s ar know g in t firm. T ir y, our work s ows t importanc of transforming a t s attitu s into organi ationa routin s . L a rs p ay a significant ro in s aping firms pot ntia to g n rat innovati ons y ncouraging an appropriat nvironm nt an making cisions t at promot succ ssfu g n ration an imp m ntation of know g . Innovation sp cia y n s t co ctiv ffort of organi ationa arning, an it as to as on c o ctiv an continuous mp oy s fforts to s ar an g n rat n w know g mo r t an on in ivi ua int ntions. A t s f atur s tog t r a ow a tt r un rstan ing of t strong r ations ips tw n co a orativ transformationa a rs ip an factors positiv y inf u ncing organi ationa innovation an arni ng. 7. Conc usions, imitations, an futur ir ctions T is stu y (1) ana y s t


simu tan ous inf u nc on firm innovation of transformationa a rs ip an organi ationa arning; (2) s ows t at a t oug ot ir ct y inf u nc innovat ion, t co ctiv proc ss of organi ationa arning as a strong r ir ct inf u nc on innovation for our samp t an transformationa a rs ip; (3) ow v r, a so s ows t at a rs ip as a strong an significant inf u nc on organi a tiona arning; an (4) mp asi s t positiv an significant inf u nc of fi rm innovation on p rformanc . Our r s arc monstrat s t importanc of an int grat ana ysis of ir ct an in ir ct ff cts of in ivi ua an organi ationa t rminants of firm innovation an r inforc s pr vious it ratur on t impor tanc of organi ationa innovation for organi ationa p rformanc . Our r su ts m ust on y cautious y g n ra i caus t is stu y as s v ra imitations t at sugg st furt r possi i iti s for mpirica r s arc . First, surv y ata as on s f-r ports may su j ct to socia sira i ity ias (Po sakoff & Organ, 1986). How v r, an assuranc of anonymity can r uc suc ias v n w n r spon s s conc rn s nsitiv topics (Hair t a ., 1999). T ow risk of socia sira i ity ias in t is stu y was, ow v r, in icat y t comm nts of s v ra mana g rs w o not t at it ma no s ns for t ir compani s to go yon r gu atory comp ianc in t innovation ar na. Furt r, w t st t possi i ity of commo n m t o ias using Harmans on -factor t st, an non app ar to pr s nt (Po sakoff & Organ, 1986; Scott & Bruc , 1994). S con y, t stu y is imit y it s cross-s ctiona sign. A t oug w t st t most p ausi ir ctions for t pat ways in our mo , ongitu ina r s arc is n to ass ss t ir ctio n of causa ity of t r ations ips an to t ct possi r ciproca proc ss s. W av tri to t mp r t is imitation t roug att ntion to t or tica argum nts rationa i ing t ana y r ations ips (Hair t a ., 1999) an t roug int grating t mpora consi rations into m asur m nt of t varia s. Fina y, our r su ts must cautious y

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ana y in vi w of t g ograp ica an usin utur r s arc s ou pay mor att ntion to t of inf u nc s on organi ationa innovation. It ia s xp ain an acc pta amount of varianc p rformanc . In any cas , ot rs cou ana

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ni ationa c ang an r sign: I as an insig ts for improving p rformanc (pp . 269 294). N w York Oxfor Univ rsity Pr ss. V nkatraman, N., & Ramanujan, V. (1 986). M asur m nt of usin ss p rformanc in strat gy r s arc : A comparison of approac s. Aca my of Manag m nt R vi w, 11, 801 814. Voss n, R. W. (1998). R ativ str ngt s an w akn ss s of sma firms in innovation. Int rnationa Sma Busin ss Journa , 16(3), 88 95. W av r, G. R., Tr vino, L. K., & Coc ran, P. L. (1999). Int grat an coup corporat socia p rformanc : Manag m nt commi tm nts, xt rna pr ssur s, an corporat t ics practic s. Aca my of Manag m n t Journa , 42(5), 539 552. Wick, C.W., & L on, L.S. (1995). From i as to action : Cr ating a arning organi ation. Human R sourc Manag m nt, 34(2), 299 311. Z a ay, D. L., & Han fi , R. B. (2004). T ro of arning an t c nica capa i iti s in pr icting a option of B2B t c no ogi s. In ustria Mark ting Manag m nt, 33, 627 641. Za ra, S. A., Ir an , R. D., & Hitt, M. A. (2000). Int rnatio na xpansion y n w v ntur firms: Int rnationa iv rsity, mo of Mark t ntr y, t c no ogica arning, an p rformanc . Aca my of Manag m nt Journa , 43, 9 25 950. Za tman, G., Duncan, R., & Ho k, J. (1973). Innovations an organi ati ons. N w York Jo n Wi y & Sons. Zo o, M., & Wint r, S. G. (2002). D i rat arning an t vo ution of ynamic capa i iti s. Organi ation Sci nc , 13, 339 351. Juan A rto Aragon-Corr a is C airman of t D partm nt of Manag m nt at t Univ rsity of Grana a (Spain) an visiting prof ssor at t Rott r am Manag m nt Sc oo (t N t r an s). H r c iv is P D from t Univ rsity of S vi an comp t a post octora f ows ip at t Saint Marys Univ rsity (Cana a). His primary r s arc int r sts inc u corporat nvironm nta strat gi s, firm innovation an ynamic capa i iti s. H as pu is in mu tip journa s suc as Aca my of Manag m nt Journa , Aca my of Manag m nt R vi w, or Journa of Bu sin ss R s arc . Vctor J. Garca-Mora s is an assistant prof ssor at t Univ rsit y of Grana a (Spain). H r c iv is P D from t Univ rsity of Grana a an is primary r s arc int r sts inc u t organi ationa capa i iti s of know g manag m nt an organi ationa arning. H as pu is in mu tip journa s s uc as Int rnationa Journa of T c no ogy Manag m nt, Int rnationa Journa of S rvic In ustry Manag m nt or R vista Europ a Dir ccion y Economa a Empr sa. Eu ogio Cor o n-Po o ( cor on@ugr. s) is an assistant prof ssor an coor ina tor of t D partm nt of Manag m nt at t Univ rsity of Grana a (Spain). H r c iv is P D from t Univ rsity of Grana a an is primary r s arc int r sts inc u pro uct innovation an ig t c no ogy activiti s. H as pu is in m u tip journa s suc as T c no ogy Ana ysis an Strat gic Manag m nt, Int rnati ona Journa of T c no ogy Manag m nt, R vista Europ a Dir ccion y Economa a Empr sa, or Economia In ustria .