Critical Review mgmt2001

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Critical

Review

MGMT2001

Submitted by Jiayu LUOz3219847



MGMT2001 - Critical Review

Submitted by Jiayu LUO (3219847) 1

The article being reviewed is Sapprasert and Clausen’s (2012) article, which is an empirical

study on the effect of organisational innovation on the firm’s performance, as well as its effect on

future attempts at organisational innovation. This examination is an analysis of data obtained from

two CIS surveys integrating financial accounts (1994-2004), detailing the firm’s involvement in

organisational innovation, the definition of which includes not only changes in “knowledgemanagement systems” but also changes in interaction with external firms or public institutions, as

well as other types of internal organisational change.

Sapprasert and Clausen points out in their article that quantitative studies in this topic are is

quite lacking, and their approach allows for new understanding of the impact of organisational

innovation on the firm. The article begins with Section 1, an introduction to the broad definition of

organisational innovation taken. It then moves on to Section 2, which explore the definitions of

organisational innovation, and how it has been or could be applied in empirical studies. Section 3

and 4 concerns the actual empirical study, from the formation of hypotheses to the data and

method involved in this analysis. Section 5 discusses the actual findings from the analysis, andSection 6 concludes with a discussion of the results and the impact of the findings.

The article also outlines the prior research relevant to this area. In particular, the articles by

Wolfe (1994) and Damanpour et al. (2009) were used to highlight the importance of the need for

more empirical studies in the research area regarding organisational innovation. Specifically, Wolfe’s

1994 study found that the inconsistency of research results regarding organisational innovation is

the clearest finding in prior literature in this topic. Sapprasert and Clausen use Wolfe’s 1994 article

to emphasize the need for further empirical studies on the importance and effect of organisational

innovation. On the other hand, Damanpour et al. (2009) was a longitudinal study on the effect of

different types of innovation on the service industry. This article was used by Sapprasert andClausen not only to highlight the need for research in the technological side of innovation and its

effects on firm performance, but also to state that there is a need to study firms over the long term

to fully comprehend the effects of innovation on performance.

Sapprasert and Clausen take a longitudinal approach to their study, adding to the existing

research available on the topic of organisational innovation. Although their approach has its flaws,

they are making headway into the topic, and any addition to the research is welcome at this stage. In

this article, the authors attempt to limit the bias present in their data collection, and thereby achieve

more reliable results. They understand that their analysis is just a small step towards understanding

the effects of organisational innovation on performance.

Their analysis covers both technological and organisational innovation. The study found that

although innovation in manufacturing is far more prevalent, organisational innovation has gained

more popularity, particularly in the area of services. The impact of such innovation has historically

been known to be positive on firm performance (Chandler, 1962), however, research on the topic

has been lacking. Sapprasert and Clausen set out to test several hypotheses, endeavouring to

improve the information available on this topic, by analysing the effect of past innovation on both

the performance effects of current or future innovation, as well as overall influence on current

innovation, and the effect of combining both organisational and technological innovation.





In formulating the first hypothesis, the authors realise that there is some prior empirical

studies conducted indicating the importance of organisational innovation, and the positive effects it

has on firm performance. It has been previously shown that prior innovation builds on current

innovation, and it is a cumulative effect (Schumpeter, 1942). As thus, Sapprasert and Clausen believe

that past attempts at organisational innovation increases the probability of new attempts atorganisational innovation.

Although there is evidence showing that persistent innovation may be disadvantageous and

decrease firm performance (Amburgey et al. 1993), further research found that firms’ persistent

ability to cultivate technological and organisational innovation are able to benefit by having higher

adaptability to change (Kelly and Amburgey, 1991; Amburgey and Miner, 1992). Using past research

which focuses on firms’ ability to focus on persistent change in terms of technological and

organisational innovation, the authors theorise that persistent organisational innovation increases

the effects of current organisational innovation on the firm.

From previous research, technological innovation has always had a positive effect on firm

performance (Chandler, 1962). However, quantitative research on the combined effects of

innovation on firm performance is lacking (Damanpour et al., 2009). Despite this, the authors believe

that by extending the prior research, they put forth that technological and organisational innovation

has a complementary effect on firm performance.

The measurement used here is a “unique firm-level data set” integrating the annual financial

accounts (1999-2004) and two Norwegian Community Innovation Surveys, CIS3 and CIS4. This data is

used to analyse organisational innovation at the firms which were willing to report an application of

technological or organisational innovation. CIS4 was preceded by CIS3 by three years, but both were

distributed to employees to relevant firms. These firms had a greater than 30% overlap in the

respective sectors (service, technology and other), which was considered to be reasonably

representative of the overall industry. The authors then developed a two-step model which analyses

the determinants and effects of organisational innovation based on this data set.

This article stresses the importance of undertaking organisational together with technological

innovation, and exploring the effects on the firm’s performance. It is encouraging to note that

although this article has weaknesses, considering the use of data from 1999-2004, it is still an

addition to the under-researched topic of the effects of organisational innovation. Sapprasert and

Clausen found that organisational and technological innovation should be undertaken together, as

combined, they have a significant and positive connection to firm performance.

Moreover, it was found that past organisational innovation was a good indicator of future

attempts at organisational innovation, and prior experience with organisational innovation is highly

beneficial on firms undertaking current organisational innovation. However, the authors realise that

this article is only a small step in the research on the effect of organisational innovation on firm

performance. Overall, Sapprasert and Clausen have made good headway in a research area which

has been lacking in empirical studies.

While the authors have made good headway into this research area, they are only making a

very small contribution. Moreover, the lack of research relating to long-term effects of

organisational innovation on performance is still evident.





On the other hand, their research is fairly well conducted given the limitations they were

under in terms of data collection. They did, however, note down all the faults that were present in

their analysis. Overall, the article was well written and opens the doors for more research to be

undertaken in this area.

This article was chosen because it was interesting, and, for its time, a new empirical study on

the performance effect of innovation. This relates to the course as it specifically analyses the

importance of innovation and change in an organisation, and the effects on firm performance, as

well as the effects of innovation on future prospects of further change.





Bibliography

Amburgey, T.L. and Miner, A.S. (1992), “Strategic momentum. The effects of repetitive, positional,

and contextual momentum on merger activity,” Strategic Management Journal , 13, 335-348.

Amburgey, T.L., Kelly, D., and Barnett, W.P. (1993), “Resetting the clock: The dynamics of

organisational change and failure,” Administrative Science Quarterly , 38(1), 51-73.

Chandler, A. (1962), Strategy and Structure. The MIT Press: Cambridge, MA.

Damanpour, F., Walker, R.M. and Avellaneda, C.N. (2009), “Combinative effects of innovation types

and organizational performance: A longitudinal study of service organizations,” Journal of

Management Studies, 46(4), 650-675.

Kelly, D. and Amburgey, T.L. (1991), “Organizational inertia and momentum: A dynamic model of

strategic change,” Academy of Management Journal , 34(3), 591-612.

Sapprasert,K. and Clausen, T.H. (2012), “Organisational innovation and its effects,” Industrial and

Corporate Change, 21(5), 1283-1305.

Schumpeter, J. (1942), Capitalism, Socialism and Democracy . Routledge: London.

Wolfe, R.A. (1994), “Organizational innovation: Review, critique and suggested research directions,”

Journal of Management Studies, 31(3), 405-431.

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