Impacts of Organizational Innovation Capability and Leadership Styles on Innovation Performance for Electronics Information Industry in Taiwan

1
Impacts of Organizational Innovation Capability
and Leadership Styles on Innovation Performance
for Electronics Information Industry in Taiwan

• Hsien-Che Lee
• Department of Business Management, Tatung
  University
• Chinese Taibei
• hclee_at_ttu.edu.tw
• Yi-Wen Liu
• Department of Business Management, Tatung
  University
• Chinese Taibei
• Wawaliu9121_at_hotmail.com

2
Outline

• Introduction
• Literature
• Research methodology
• Statistical analysis
• Conclusions and suggestions

3

• Introduction

4
Background

• Innovate or perish
• In the age of information, due to the rapid
  
• changes of environment, enterprise must keep
• up grading itself. In recent years, people pay
  much
• attention to the issue of innovation.

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• Leadership style
• In general, the failure rate of new
  products is more than 70 . It is important for a
  manager to have an insight into the future trend,
  and inspire RD personnel to do their best to
  innovate new product in order to match the
  changes of external environment. The leadership
  styles play a crucial role in the performance
  improvement.

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• Process-based approach
• Most of previous studies were focused on
  the
• entire organizaton performance. There has been a
• paucity of empirical research on the
  relationship
• between organizational innovation capability and
  
• innovation performance.

7
Research objectives

• This paper attempts to explore the relationships
  among innovation capability, leadership styles
  and innovation performance with illustration of
  electronics information industry in Taiwan.
  Specifically, research objectives are as follows
  

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• 1) to examine the relationship between the
  organizational innovation capability and
  innovation performance
• (2) to identify the relationship between the
  leadership styles and organizational innovation
  performance
• (3) to analyze the moderating effect of
  leadership styles on the relationship between
  organizational innovation capability and
  innovation performance

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• Literature Review

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Innovation Capability

• Definitions of Innovation
• Due to different interests of scholars,
  varied
• definitions and viewpoints have been
• proposed.( Schumpeter 1934 Marquish 1982
  Drucker 1986 Robbins 1996 Lai, Wang and Huang
  1997 and Lin ,2001).

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Types of Innovation Capability

• Knight(1967)--(1)product or service innovation
  (2)production process innovation
  (3)organizational structure innovation (4)staff
  innovation
• Daft(1978)--(1)management innovation (2)technique
  innovation
• Holt(1983)--(1)technique innovation (2)management
  innovation (3)social or organizational innovation
  (4)financial innovation (5)marketing innovation
• Betz(1987)--(1)product innovation (2)process
  innovation and (3)service innovation
• Chacke(1988)--(1)product innovation (2)process
  innovation (3)organizational innovation
• Frankel(1990)--(1)continuous innovation
  (2)dynamic continuous innovation (3)discontinuous
  innovation

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• Wu(1998)-- (1)process innovation (2)product
  innovation (3)organizational innovation
  (4)strategic innovation
• Jiang(2000) (1)product innovation (2)technique
  innovation (3)service innovation
• Lin(2001)-- (1) management innovation (2)
  technique innovation
• Chuang (2003)--(1)technique innovation (2)talent
  innovation (3)organizational innovation (4)public
  welfare innovation
• Guan Ma(2003)--(1)learning capability
  (2)research and development capability
  (3)resource exploiting capability
  (4)manufacturing capability (5)marketing
  capability (6)organizational capability
  (7)strategic capability
• Chang (2004)--(1) management innovation
  (2)service innovation (3)research and development
  innovation

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• In innovation-related literature, different types
  of innovation classification were proposed.
  Classification of innovation capability in this
  paper is as follow
• (1) RD capability,(2) manufacturing capability
• (3) marketing capability and(4) organization
  capability

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Leadership Definition

• Stogdill (1957) defined leadership as the
  individual behavior to guide a group to achieve
  the common target
• Richards Engle (1986) defined leadership as
  establishment of vision, value and creation of
  environment so that the objective can be
  accomplished

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Evolution of Leadership Theory

• Traits theory in 1930s focus on the innate
  leadership qualities and competence
  (Stogdill,1948)
• Behavioral theory from late 1940s to late 1960s
  leadership behavior may be trained or learned
  through experience(Ohio U.,1945)
• Contingency theory in late 1960sno optimum
  leadership model(Fiedler,1967)
• Contemporary leadership theory since
  1970sleadership is a interactive process with
  environment (Bass,1977)

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Leadership Styles

• Bass Avolio (1990) proposed transactional
  leadership and transformation leadership.
• (1)Transactional leadership is the basis for
  most leadership theories. It focuses on the
  exchange relationship between the leader and the
  subordinate (Fry, 2003Northouse, 2001). Pounder
  (2001) believed that transactional leadership is
  demand-oriented and possesses reasonable standard
  procedure control. It is a benefit-exchange
  process. Kreiter Kinicki (2001) believed that
  transactional leadership is a transactional
  process in which the supervisor and the
  subordinate are interdependent.

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• (2) Transformation leadership- alter intrinsic
  work value and faith of staff at the same time
  enhance staff trust and respect for their leader
  in order to elicit work capabilities they would
  not have thought possible. With charisma viewed
  as an essential element, transformation leader
  provide incentives for subordinates, enhance
  subordinate potential and development. (Fry,
  2003).

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Organizational Innovation Performance

• Dess Robinson (1984) believed that in strategic
  management most common indicators were Return on
  Asset, ROA and sales growth.
• Venkatraman Ramanujam (1986) proposed 3
  indicators to measure performance (1)Financial
  performance-business economic goals such as sales
  growth, profitability and earning per share etc.
  (2)Business performance includes financial
  performance, and operational performance.
  Operational performance refers to non-financial
  indices such as market share, new product release
  in the market, product quality and marketing
  efficiency etc. (3)Organizational
  effectiveness-the most extensively used
  definition on organizational performance covers
  the above two items in addition to conflict
  resolution during the goal accomplishment process
  and various goal accomplishments of interested
  parties.

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• Vickery (1991) believed that production
  performance is reflected on financial and
  marketing performance. Performance measurement
  items are set to be ROA, market share, and growth
  rate. Su (1998) used five indices as basis in
  measuring organizational performance namely
  (1)financial index--profitability , ROA,
  (2)marketing index--sales growth, market share,
  (3)adaptive performance--success rate for new
  product release, (4)manpower resource
  performance--staff morale, employee turn over,
  staff productivity, and (5) overall company
  performance.

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• After reviewing related innovation performance
  studies and analyzing many scholars viewpoint,
  most of them were focus on organizaitonal
  financial performance.
• This study adopt organizational innovation
  performance as performance construct which
  consists in (1)product innovation (2)process
  innovation (3)innovation will and(4)employee
  satisfaction

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• RESEARCH METHOLOGY

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Research Framework
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Hypotheses

• H1 Organizational innovation capability has a
  positively significant effect on organizational
  innovation performance.
• H2 Leadership style has a positively significant
  effect on organizational innovation performance.
• H2a Transactional leadership style has a
  positively significant effect on organizational
  innovation performance.
• H2b Transformation leadership style has a
  positively significant effect on organizational
  innovation performance.
• H2c Transformation leadership style has more
  significant effect on organizational innovation
  performance than those of transactional
  leadership style.

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• H3 The leadership style variable has moderating
  effects on organizational innovation capability
  and organizational innovation performance.

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Measurement of Constructs
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Data Collection

• The instrument sent to 408 companies. The
  mailings yielded 149 valid samples. The valid
  response rate is 36.52. The structure of
  respondents
• (1)62.42 of companies are listed, and others
  are OTC.
• (2) RD department accounts for 40.94
  management department, 16.78 manufacture
  department ,11.43 marketing department, 8.73.

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• Statistical Analysis

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Reliability of Constructs

• We adopt two-stage method to do statistical
  analysis. The first stage is confirmatory factor
  analysis (CFA) and the second stage is structural
  equation modeling (SEM).The following table
  shows the result of reliabilities of constructs.
  All reliabilities are greater than 0.7 and most
  of them are greater than 0.9. Therefore,
  measurement items have very good internal
  consistency and correctness.

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Reliability of Construct
30
Measurement Model l
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Discriminant Validity

• All Chi-square difference statistic for every two
  constructs exceed ?2(1, 0.05)3.841, any two
  constructs has good discriminant validity.

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• The discriminant validity is the degree of
  correlation among the constructs, and it should
  be low. The Chi-square difference test can be
  applied to evaluate the discriminant validity of
  two constructs by calculating the difference of
  the Chi-square statistics for the constrained and
  unconstrained measurement models. Discriminant
  validity is achieved if the Chi-Square difference
  (with 1 df) is significant, meaning that the
  model in which the two constructs were viewed as
  distinct (but correlated) factors is superior.

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Convergent Validity
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• When we measured the same concepts by different
  indicators, there is the strong relationship
  between the concepts, called convergent validity.
  The convergent validity generally tested by t-
  test. As shown in the above table, all t-values
  are above 3.29, it represented that all
  constructs had convergent validity.

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Fitting of Measurement Model

• The results of the measurement model as shown in
  the following table are as follows
  CMIN/?22.136, GFI0.918, AGFI0.849, CFI0.974,
  NFI0.953 and IFI0.953. Except AGFI (which
  approaches to 0.9), the others all higher than
  0.9 RMSEA0.088 is quite close to the lowest
  acceptable value 0.08. According to Marcoulidess
  and Schumackers 1999fit criteria of model
  fitting, The structural model ? has a quite good
  fit.

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The Best Fitting Model I
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Standardized regression coefficients
plt0.05
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• A completely standardized solution produced by
  the AMOS maximum likelihood method shown in above
  figure. The standardized regression coefficients
  are significant at 5 level of significance.
  Hence H1 and H2 are supported. That means
  innovation capability and leadership style have
  positively significant effects on organizational
  innovation performance respectively.

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• In order to understand the relationships of
  different leadership styles and organizational
  innovation performance, we use statistical
  software AMOS 6.0 to establish structural model
  II shown as following figure to test H2a and H2b.

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• By the outcomes of the model fit of model II,
  CMIN/?21.738, GFI0.973, AGFI0.919, CFI0.990,
  NFI0.977 and IFI0.990, all of them are more
  than the criterion 0.9 RMSEA0.071 meets the
  lowest acceptable value 0.08. Structural model II
  also has a good fit.

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Standardized regression coefficients
plt0.01
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• According to the statistical results of model
  II.The standardized regression coefficients are
  significant at 5 level of significance.
  Therefore, H2a and H2b are supported.

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• We adopt independent T test to discuss the
  influence of organizational innovation
  performance under different leadership styles.
  According to the Levenes test shown in following
  table, F8.572, P0.004(lt0.05). It shows that
  these two groups have significant difference.
  Then we check the 95 confidence interval of the
  difference, if the interval does not include
  zero, it means these two groups have
  significant difference. The mean of
  transformation leadership (M3.5488) is greater
  than the mean of transactional leadership
  (M4.0244). Therefore, the outcome of
  transformation leadership style is better than
  transactional leadership style, H2c is supported.

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• Then we examine the moderating effect of
  leadership styles by Singh method 1996. Based
  on leadership styles measurement, 54 respondents
  are identified as transactional leadership, 95
  respondents are identified as transformational
  leadership. We develop two structural models one
  is unconstrained structural model and the other
  is a constrained structural model. Based on a
  ?2 difference test of unconstrained and
  constrained model, we can verify if there is a
  moderating effect exists. As shown in the
  following table , the Chi-square difference
  exceeds the values of Chi-square test statistic
  ?2 (1, 0.05) 3.841, moderating effect exists.
  Therefore, H3 is supported.

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• Conclusions and suggestions

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conclusions

• (1). Statistical analysis results show that
  organizational innovation capability has a
  positively significant effect on organizational
  innovation performance. The result is consistent
  with the study of Damanpour Evan 1995.
• (2). Both transactional leadership style and
  transformation leadership style have positively
  significant relationship with innovation
  performance. Furthermore, the innovation
  performance of transformation leadership style is
  better than those of transactional leadership
  style. The findings are consistent with the
  results of Chien 2001 and Chen2006

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• (3).Leadership style plays the role as moderating
  variable in the relationship between
  organizational innovation capability and
  organizational innovation performance.
  Furthermore, the innovation performance of
  transformation leadership style is better than
  those of transactional leadership style. The
  findings are consistent with the results of Chien
  2001 and Chen 2006.

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Suggestions

• (1).Cultivate innovative atmosphere Under the
  fiercer competition, innovation is a niche that
  allows an organization to survive. Manager ought
  to make an effort to reshape employee
  conservative mindset and introduce the vigor of
  innovation in order to create innovative
  organization atmosphere.
• (2). Elicit innovation ideas --Innovation
  requires courage and creativity. Leaders should
  make sure organizational goals shared by
  employees in order to build up a strong sense of
  responsibility and work enthusiasm. When
  innovation elicitation comes, manager should
  encourage, recognize and reward employee
  contribution of innovation, new concepts and
  ideas. Let every employee bring his/her talent
  into full play, and build up competitive
  advantages of the organization.

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• (3). Survival model selection-- the purpose of
  innovation is to create disparity. In the fierce
  battlefield, an organization only has two
  choices one is to create better products than
  others at lower costs and the other is to open up
  new doors to innovation and create disparity
  from competitors in order to make a profit.

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Limitations

• Subjective bias
• This paper adopts Likert-scale to
  measure the perception of interviewer. It is easy
  to subject to subjective bias. It is particularly
  true in organizational innovation and performance
  measurements.
• Resource limitation
• Only 408 copies of questionnaires had
  been sent out and yielded 149 valid samples .
  More comprehensive survey is necessary to be
  conducted in the future.

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• External validity limitation
• The industry selected for this research is
  electronic information industry. Whether it is
  applicable in other industries requires further
  verification.