Ambidextrous Innovation Capabilities, Antecedents And .
2014 Proceedings of PICMET '14: Infrastructure and Service Integration.Ambidextrous Innovation Capabilities, Antecedents and Performance12Yuan-Chieh Chang1, Ming-Huei Chen2, Hui-Ru Chi3, Hsing-fen Lee4Institute of Technology Management, National Tsing-Hua University; Hsinchu, TaiwanGraduate Institute of Technology Management, National Chung Hsing University, Taichung, Taiwan3Department of International Business, Asia University; Taichung, Taiwan4Department of International Management and Innovation, Middlesex University Business School,Middlesex University, United KingdomAbstract--R&D intensive firms have faced many kinds ofinnovation dilemmas which firms have to develop both radicalinnovation to tap new opportunities and incremental innovationto enhance existing capabilities. The designed organizationalstructure allows to excel at both conflicting modes of innovationcan be termed as organizational ambidexterity. However, howR&D intensive firms deal with various kinds of innovationdilemmas strategically still remain understudied. Based on theschools of organizational learning, strategic management,organizational design, and innovation studies, the study developsa notion of ambidextrous innovation capabilities (AIC) and AICscale. AIC is formed by three dimensions: commitment,searching, learning and structure ambidexterity. And elaboratesantecedents into three dimensions: corporate entrepreneurship,creative support and contingency reward. This paper proposestwo hypotheses addressing the relationships between AIC andperformance, antecedents and AIC. The survey generated 718usable questionnaires responses in 68 BUs from 32 firms. Theresults show that AIC is positively associated with performanceand antecedents are positively associated with AIC. In thefuture work, the paper concludes that the development of AICcould overcome innovation dilemmas, in turn enhance theperformance. Firms could apply the proposed instrument todiagnose the condition of AIC in order to achieve higherperformance.I. INTRODUCTIONAs competition has become increasingly fierce andproduct life-cycles is shortening [1], firms are facingdifficult decisions in articulating innovation strategies, inparticularly regarding dilemmas of innovation [27,28]. Theaccelerated rate of technological progress and complexity isconstantly challenging existing strategies and organizationalstructures [25,48]. Previous research on innovation discussedinnovation dilemmas such as short term vs. long termcommitment [109], open vs. closed innovation dilemma[21,22], and aligned and adaptable structure dilemma[41,109], etc. Meanwhile, literature in organization hasdeveloped a theory of organization ambidexterity thatresponds to conflicting demands within organizations. Theterm ambidexterity is used as an archetype to describe aninnovative capability to perform seemingly conflictingdilemmas or pursue disparate things simultaneously [69,109].We argue that organisational ambidextrous capabilities toovercome innovation dilemmas are valuable innovationcapabilities for firms to achieve better performance. Wedevelop the concept of “ambidextrous innovationcapabilities” (AICs) and further argue that in order to explainthe complexity of innovation, a multi-dimensional constructof AICs, taking into account of innovation process, and theirantecedents must be considered simultaneously. The papercontributes to the existing literature in the following aspects.Although literature in innovation pointed out problemsresulted from innovation dilemmas, few placed emphasis onorganisational solutions and their antecedents to thesedilemmas. Similarly, despite literature in organizationdeveloped a theory of organizational ambidexterity torespond to conflicting demands within organizations, fewaddressed solutions to overcome the various innovationdilemmas simultaneously. Drawing from an original surveyof R&D intensive firms, this paper investigates R&Dintensive firms’ ambidextrous organisational practices andtheir contributions in resolving dilemmas of innovation. Thecontribution of this paper therefore lies in the advancement ofour understanding in organisational capabilities and theirantecedents for an ambidextrous organisation that managesthe various innovation dilemmas effectively and enhancesfirm performance. The results show that business units’ AICsare positively associated with their performance. The studyalso identifies important antecedents such as creative support,corporate entrepreneurship and contingent rewards havepositive impacts on business units’ a AICs. This paper isorganized as follows. The concepts of AICs and antecedentsof organisational ambidexterity are developed in Section 2and Section 3.The survey, the data and analysis are detailedin Section 4. Section 5 outlines the discussion. Finally,conclusion is presented in Section 6.II. THEORETICAL BACKGROUNDA. Ambidextrous innovation capabilities (AICs)Innovation capabilities are a set of firms’ characteristicsthat facilitate and support innovation [14]. Scholars ininnovation management have long regarded firms’innovation capabilities as key drivers for firm growth andperformance. The contribution of innovation capabilities togrowth and performance are realized through their ability tocapture value from innovation. Such competences aresignificant for firms’ performance in the market and theessential quality of such competences lies in their appearedcausal ambiguity [88] difficult for competitors to imitate[86,104]. A wide range of studies have reported that strategy840
2014 Proceedings of PICMET '14: Infrastructure and Service Integration.[56,72], creativity [101], and project management [49,81],organizational capabilities [18] contribute to innovation.In particular, recent research in organizational studiessuggested organizational ambidexterity is a key quality forfirms to perform better and be sustainable in industries wheretechnology life cycles are short and uncertainty is high.Indeed, Firms often seek to be organisationally ambidextrousas they often encounter conflicting demands for resources[34,41,47,69,87]. Ref. [105] found that ambidextrouscompanies enjoy lower risks and lower exit rates.Ambidextrous companies are also found to be positivelyassociated with growth or performance [5,41,47,69,116].Combining exploration and exploitation in knowledgesearching results in a high rate of product innovations [58]and radical innovations [18]. Ref. [83] suggested thatambidextrous organisations tend to be more able to achievetheir goals. Using R&D-related excess returns, ref. [84]showed that such returns for ambidextrous organisations notonly persist for three to five years but also show little sign ofdiminishing.This suggests that while existing literature in innovationdiscusses innovation capabilities and literature inorganisational studies stresses the significance oforganisational ambidexterity to innovation and performance,a core concept that interlinks the two schools of literature hasbeen the AICs that function as innovation capabilities. Wereferred to such capabilities as AICs. In particular, ref. [109]defined organizational ambidexterity as “the ability tosimultaneously pursue both incremental and discontinuousinnovation from hosting multiple contradictory structures,processes, and cultures within the same firm.” Because itparticularly supports and facilitates innovation, we suggestthat it is close to concept of AICs that we wish to develop.While ref. [109] highlighted the sets of contradictorycapabilities to simultaneously pursue incremental and radicalinnovations, it might not be sufficient to address thecomplexity of innovation. Apart from incremental vs. radicalinnovation dilemma faced by innovators, research oninnovation has explored other types of innovation dilemmassuch as open vs. closed innovation dilemma [21,22] andaligned vs. adaptable innovation dilemma [41]. We thusargue that a multi-dimensional concept of ambidextrousinnovation capabilities (AICs) that is a construct of firms’several dual innovative capabilities [4,20,23] would servebetter to explain the complexity of innovation. The multidimensional concept of AICs is also more likely to qualifythe quality of innovation capabilities in that they could createhigher barriers to imitation. Based on the concept ofcombinative capabilities [60], firms combine differentcapabilities to maximize barriers to imitation. The ability toutilize different capabilities in different areas and domainswould also involve routines [76] and coordination [61]. Theyare types of organizational capabilities that are tacit in natureand this helps to create causal ambiguity [88]. Competitors asoutsiders therefore would not be able to figure out exactlywhat elements contribute the success of the focal firms andthus they are unable to duplicate the successful formula.The concept of AICs takes a process view of innovationand acknowledges that innovation process is characterisedwith strategic planning, idea generation, idea screening,concept development and testing, business analysis,formation of the cross-functional team, product or servicedesign, testing and pilot runs, marketing tests andcommercialization [3,93]. For instance, at the stage ofstrategic planning, innovative firms could emphasize bothlong-term and short-term commitment [41] to overcome theincremental vs. radical dilemma; at the stage ofimplementation, innovative firms could emphasize both themechanical and organic structure [37,41,109] to overcomethe aligned and adaptable dilemma. These multi-dimensionalaspects of AICs are based on arguments outlined above,ambidextrous commitment, searching, learning and structurethat are able to conduct multiple dual innovation activities areexpected to be perform better. This leads to the followinghypothesis:H1: The greater ambidextrous innovation capabilities, thegreater the performance is likely to be.B. Antecedents and AICsEnvironmental conditions represent an important factorthat affects firms’ innovative capability [40,106,112]. Ref.[87] proposed that theory of innovation ambidexterityrequires to consider simultaneous effects of contextual,structural and leadership characteristics in achievingambidextrous innovation capabilities [18]. Ref. [41]suggested that the solutions of sustaining organizationalambidexterity can be both achieved through a top-down,structural ambidexterity way, and through a bottom-up,contextual ambidexterity approach. Studies on contextualambidexterity and structural ambidexterity have alsoproposed that leadership is a critical factor in enablinginnovation ambidexterity [18] .Indeed, Ref. [41] suggested that organizational attributesshape individual and collective behaviours that in turn shapebusiness-unit capacity. Organizations may developambidexterity through inter-organizational context such ascreative support, corporate entrepreneurship, and contingentrewards [41,65]. Building on these arguments, this paperaddresses these three antecedents that are relevant to enablecontextual ambidexterity, structural ambidexterity andeffective leadership and serve as antecedents. The threeantecedents are outlined further below.As few studies have empirically brought contextualambidexterity, structural ambidexterity and effectiveleadership together to assess ambidexterity theory, thispaper’s contribution lies not only in the assessment of theantecedents of the three types of ambidexteritysimultaneously, but also in uncovering the relationshipbetween these antecedents and the AICs.841
2014 Proceedings of PICMET '14: Infrastructure and Service Integration.1) Creative Support as contextual antecedentRef.[54] found in their research that, if an organizationcould continuously transform itself and provide with definitevision and mission, it might reinforce its owncompetitiveness and thereby improve its performance.Ref.[41] focused on how organizations can create asupportive context in which individuals wear ‘two hats’ andmake their own informed judgments about how they shouldallocate their time to meet the conflicting demands. It ismanifested in the behaviour of hundreds of individual in theways described above and in the unwritten routines thatdevelop in organizations[41]. Contextual ambidexterity isreferred to as an organizational capability that simultaneouslydemonstrates exploration and exploitation across an entirecompany [41]. Organizational scholars have acknowledgedthe importance of simultaneously balancing seeminglycontradictory tensions [35,38,44,62,67,75]. Contextualantecedent is a set of processes or systems that encourageindividuals to make their own judgments about tualambidexterity [34,73,109].Ref. [54] found that, if an organization could continuouslytransform itself with definite vision and mission, it couldreinforce its own competitiveness and therefore improve itsperformance. [41] focused on how organizations can create asupportive context in which individuals wear ‘two hats’ andmake their own informed judgments about how they shouldallocate their time to meet the conflicting demands. It ismanifested in the behaviour of hundreds of individual in theways described above and in the unwritten routines thatdevelop in organizations [41]. Employees are expected tobalance the hard elements (discipline & stretch) and the softelements (support and trust) in their organizational contexts[87]. Too much attention to discipline may cause members tosuffer exhaustion and develop low prospect, while too muchemphasis on trust and support could stop work from gettingdone [41]. Therefore organisations need to establish asupport system that outlines disciplines and allows autonomyfor creativity at the same time to ensure organizationalperformance [18,41,87]. Ref. [41] stressed that a crucialantecedent for contextual ambidexterity is the sharedorganisational vision, mission and culture for employees toact on. They serve as the supporting system to guideemployees. As such organisational vision, mission andculture bound to be contextual to the organization, we referto the supporting mechanisms that enable contextualambidexterity as creative support. This leads to the followinghypothesis:H2a: Creative support is positively associated withambidextrous innovation capabilities2) Corporate Entrepreneurship as structural antecedentStructural antecedents advocate a spatial separation ofambidexterity innovation into separate business units to becoordinated by integration mechanisms, task partitioning,temporal separation, and leadership [1,39,51,87,109]. Thespatial separation acts as an efficient mechanism to stimulateorganizational performance especially when environmentswere characterized by long periods of stability and disruptedby discontinuous change [109]. Thus structuraldifferentiation could help ambidextrous organizations tomaintain different competencies that might addressconflicting demands [42]. However, inter unit coordinationamong units with different objectives could be verychallenging [1,41,79]. One solution to this is to design anadditional corporate structure that can balance the primarystructure’s shortcomings and support non routine tasks andinnovation [43]. Corporate entrepreneurship could offer asolution to maintain a company’s existing business and copewith emerging disruptive innovation [11]. Ref. [115] definescorporate entrepreneurship as “the process by which teamswithin an established company conceive, foster, launch andmanage a new business that is distinct from the parentcompany but leverages the parent’s assets, market position,capabilities or other resources.”The existence of corporate entrepreneurship helpsorganizations to maintain different competencies that addressinconsistent demands [42]. Corporate entrepreneurshipwithin organisations presents an ideal solution to supportambidextrous innovation. This leads to the followinghypothesis:H2b: Corporate entrepreneurship is positively associatedwith ambidextrous innovation capabilities.3) Contingent Rewards as leadership antecedentContingent rewards refer to monetary incentives andrecognition [95]. Ref. [83,41], ref. [41]and [109] suggestedthat supportive leaders, flexible managers and an aligned topmanagement team are important antecedents underpinningany form of ambidexterity [18]. Transformational leadershipand the development of a learning culture, characterized bypsychological safety, openness to diverse opinions, andparticipation in decision making, promote ambidexterity atthe team level [77]. While in an ambidextrous organisation,the exploration units may be small and decentralized withloose cultures and processes, the exploitation units may belarger and more centralized with tight cultures and processes[7], ref. [8] suggested that leaders play the role as facilitatorto provide contextual support to members within theorganization with diversified objectives.To encourage team members to accomplish seemlyopposite objectives and reduce conflicts, team contingentrewards could foster cooperation and create commitment toorganisational goals [10]. Team contingent rewards couldcreate an outcome interdependency among senior teammembers [96,114] and encourage them to achieve integrativevalue through identifying ways to use shared resources acrossexploratory and exploitative units [98]. According to [46],“leadership is the process of influencing others to understandand agree about what needs to be done and how it can be842
2014 Proceedings of PICMET '14: Infrastructure and Service Integration.done effectively, and the process of facilitating individualand collective efforts to accomplish the shared objectives” (p.7). Therefore, this antecedent is so called contingencyrewards leadership. Furthermore, team contingent rewardsreduce interpersonal competition and facilitate negotiationand mutual adjustment necessary for exploratory andexploitative units to coexist [85]. Research showed that inambidextrous organizations, executives use contingentrewards to transcend their unit’s direct interests and achieveintegrative value across exploratory and exploitative units(e.g. [98]). This leads to the following hypothesis:H2c: Contingent rewards are positively associated withambidextrous innovation capabilitiesWe lasted about 2.5 years for a total of 718 responses in 68BUs from 32 firms. Innovation resources resulting fromR&D input are also consistent with the relationships oforganizational ambidexterity [98]. A cover letter explainedthe general nature of the research and provided assurances ofanonymity and confidentiality. Most of our respondentssealed their surveys in envelopes provided and returned it tothe authors. All measures originally in English used in thepilot and the two field studies were translated into Chineseand back-translated by two bilinguals following theprocedures recommended by [12].The paper collected the data using a comprehensivesurvey, and all items required five-point Likert-styleresponses, ranging from 1 (“strongly disagree”) to 5(“strongly agree”). To deal with potential problemsassociated with single-informant bias and common methodbias, the research separated the measurement of theindependent and dependent variables and collected datathrough multiple respondents. The ultimate respondents areconsisted of 645 non-administrators and 73 administrators.The administrators served as senior R&D managers /BUheads/ CTO (VP) at the BU or departments offices in eachfirms. There were 559 male respondents (91% of therespondents).B. MeasuresThis paper identifies three antecedents of ambidextrousinnovation capabilities. Contextual support is used as anantecedent of contextual ambidexterity. Corporateentrepreneurship is used as an antecedent of structuralambidexterity. Contingency reward is used as an antecedentof effective leadership to achieve ambidexterity. Wehypothesise that these antecedents are positively associatedwith AICs. We also hypothesise that AI
creative support, corporate entrepreneurship, and contingent rewards [41,65]. Building on these arguments, this paper addresses these three antecedents that are relevant to enable contextual ambidexterity, structural ambidexterity and effective leadership and serve as antecedents. The three antecedents are outlined further below.
The main subject is corporate entrepreneurship and how its organizational antecedents relate to innovation performance. Besides the organizational antecedents of corporate entrepreneurship also external collaboration is included as a determinant of innovation performance because at IHC this is seen as a major contributor to innovation performance
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