Innovation in entrepreneurial organisations: A platform for contemporary management change and a value creator

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Authors: N.S. Jarrar, M. Smith

Publication Year: 2014

Source: http://www.sciencedirect.com/science/article/pii/S0890838913000541

Volume: 46

Issue: 1

Categories: Innovation, Adaptive Cycle


Abstract

This article examines the significance of innovation to organisations following strategies of entrepreneurial orientation. In particular, the study looks at the significance innovation adds to the implementation of contemporary management control systems (MCSs) and to improved performance in these organisations. A quantitative analysis was conducted based on a random sample of Australian manufacturing companies. A structural equation modelling approach was adopted to test the study hypotheses. Results suggest that innovation mediates the relationships between entrepreneurial strategy and each of participative budgeting, the balanced score card (BSC), total quality management (TQM), just in time (JIT), and organisational performance. The study does not indicate a significant relationship between entrepreneurial strategy and activity based costing (ABC), even when innovation is in place. The study empirically tests the vital role of innovation in the organisational adaptive cycle to entrepreneurial strategies, described earlier by Miles and Snow (1978). Further, the study validates a multi-dimensional strategy model first suggested by Langfield-Smith (1997).


Critical Reflection

The article at hand provides empirical evidence on the importance of innovation, meaning the organization’s ability to locate and exploit new products and market opportunities. This ability is especially needed during the “crisis” phase of the adaptive cycle of resilience. Only with the ability to innovate can the organization gain new insights into its current situation and create new scenarios of the future. Without innovation, the organization could not reach the quadrant of “new combinations” and therefore would be unable to progress in the adaptive cycle of resilience. While in some cases it may be possible for the organization to survive by shrinking and reverting back to the equilibrium stage, in other cases a lack of the ability to innovate may well lead to the organization’s ultimate destruction. The article adds to the accumulated knowledge on the adaptive cycle of resilience in organizations. It does so by examining the effectiveness of implementing administration and production tools during the transition from “crisis” to “new combinations”. Here, a tool is considered effective if it allows the organization to implement the innovative solution that is to mitigate the effects of changes in the organization’s environment. Unfortunately, the research paper does not link the performance data it collected to the phase of the adaptive cycle of resilience the organization was currently experiencing. This could have provided a more refined picture on the actual impact of the tools during the different phases. Nevertheless, the results of this research still support organizations in applying the adaptive cycle of change.