Management Innovation: Management as Fertile Ground for Innovation

Introduction

As innovation is considered central to firms' competitive advantage, innovation research has become a cornerstone of strategic management inquiry. By far the greatest part of research has been devoted to understanding how firms can stimulate technological innovation (Crossan and Apaydin, 2010). More recently, however, some researchers have begun to revisit the benefits of management innovation. Management innovation refers to the introduction of management practices, processes and structures that are intended to further organizational goals (Birkinshaw et al., 2008). The emergent dialogue consists of conceptual work (e.g., Birkinshaw et al., 2008), historical outlines of various management innovations (e.g., Chandler, 1962; Mol and Birkinshaw, 2007) and empirical studies (e.g., Damanpour et al., 2009; Vaccaro et al., 2012a, 2012b).

Despite the recent surge in academic interest, management innovation remains an under-researched topic. Crossan and Apaydin's (2010) comprehensive and systematic literature review reveals that generally only 3% of innovation-related papers focus on management innovation. However, as recent work emphasizes the importance of management innovation for firm performance, both as a complement to technological innovation (Damanpour et al., 2009) and as an independent phenomenon (Mol and Birkinshaw, 2009; Volberda and Van den Bosch, 2004, 2005), a better understanding of management innovation should be high on the research agenda. For example, Feigenbaum and Feigenbaum (2005: 96) argue that ‘the systematization of management innovations will be a critical success factor for 21st century companies’. Moreover, Mol and Birkinshaw (2009: 1269) state that it is ‘one of the most important and sustainable sources of competitive advantage’ as well as ‘needed to make technological innovation work’ (Mol and Birkinshaw, 2006: 26)

The purpose of this introductory paper is to advance our understanding of management innovation, its underlying dimensions, its antecedents, its impact on performance, and the contextual factors that affect management innovation. We first discuss the old paradigm and the new emerging model of innovation research. Subsequently, we further conceptualize management innovation in order to advance understanding and we develop an integrative framework that can be used to identify where research findings about management innovation converge and where gaps in our understanding exist. Moreover, we point out several emerging research themes that have been under-researched, such as the relationship between technological and management innovation and its differential effects on performance. Finally, we specify the issues for further research derived from our integrative framework, position the papers in this special issue and how they contribute to our research agenda, and select five research priorities that in our view may speed up progress and knowledge advancement in the relatively young field of management innovation.

The old paradigm of industrial innovation under scrutiny

Innovation is considered to be the primary driving force of progress and prosperity, both at the level of the individual firm and of the economy in general (Schumpeter, 1934; Nelson and Winter, 1982; Tushman and Nadler, 1986). In particular, the ability to innovate has become increasingly central as studies have revealed that innovative firms tend to demonstrate higher profitability, greater market value, superior credit ratings, and greater chances of survival (Geroski et al., 1993; Hall, 2000; Czarnitzki and Kraft, 2004). Notwithstanding these positive outcomes of innovation, innovation research itself is subject to creative destruction. The old paradigm of industrial innovation based on technological inventions seems today to be accompanied by many other forms of different types of innovations: organizational innovation (Damanpour et al., 1989; Totterdill et al., 2002), management innovation (Birkinshaw and Mol, 2006; Hamel, 2006), institutional innovation, and, sustainable development and eco-innovation (Kemp et al., 2005). These new areas sometimes fit the old industrial innovation paradigm, but more often they raise new analytical challenges. New ways of carrying out research outside the industrial research laboratory, sometimes in collaboration with others, have started to emerge. Totally new forms of innovation without traditional research are becoming commonplace; ‘open’ innovation is being pursued by some (but not all) firms, involving much greater participation by users (Chesbrough, 2003; Prahalad and Ramaswamy, 2004; Von Hippel, 2005). Moreover, non-technological innovation, often referred to as management innovation, is playing an increasingly important role in helping us to better understanding innovation and its impact on competitiveness of enterprises and countries. Management innovations can involve changing organizational form, applying new management practices and developing human talent with the effect of leveraging the firm's knowledge base and improving organizational performance (Volberda and Van den Bosch, 2005, Volberda et al., 2006).

The new paradigm of innovation research: various modes of non-technological innovation

What all of this suggests is that innovation as a research topic seems to be particularly prone to new innovative approaches. Hence, there is a need for a better conceptualization of the various notions of innovation. Scholars have produced a vast amount of research that addresses different types of innovation, predominantly technological. In this way, research has centred upon issues such as radical and incremental innovation (Dewar and Dutton, 1986; Ettlie et al., 1984) and product and process innovation (Utterback and Abernathy, 1975). In spite of the undeniable importance of technological innovation, which has been prominent in academic literature and also contributed over the years to – amongst other things – the development of more advanced products, components, and production technology, other types of innovation have successfully been introduced outside the domain of technology.

As firms are faced with increased competition and an accelerating pace of technological change, they need to consider non-technological innovation that is more difficult to replicate (Teece, 2007) and may contribute to a longer lasting competitive advantage. These non-technological forms of innovations have been referred to as administrative innovation, organizational innovation, and management innovation. These concepts have a significant overlap and are used to discriminate from technological process innovations, and from product and service innovations (Damanpour and Aravind, 2011). However, despite their overlap, administrative innovation, organizational innovation, and management innovation are not identical. Administrative innovation has a narrower focus than organizational innovation, for example (Vaccaro, 2010). In comparison with management innovation, administrative innovation is typically associated with a narrower range of innovations around resource allocation, organizational structure and human resource policies (Evan, 1966), and excludes operations and marketing management (Birkinshaw et al., 2008). The concept of management innovation is more encompassing as it refers to alterations in the way the work of management is performed (Hamel, 2006). Furthermore, organizational innovation has often been used in broader terms to span changes that are either technological or administrative (e.g., Daft, 1978; Damanpour, 1991; Kimberly and Evanisko, 1981). In a review, Crossan and Apaydin (2010) define organizational innovation in very broad terms to include the pursuit of any innovative activity within the firm. This definition however does not capture the role of managers as the central actors within organizations or changes to how the work of management is performed (Birkinshaw et al., 2008).

Management innovation research

Whereas technological innovation is concerned with the introduction of changes in technology relating to an organization's main activity (Daft and Becker, 1978), management innovation reflects changes in the way management work is done, involving a departure from traditional processes (i.e., what managers do as part of their jobs); in practices (i.e., the routines that turn ideas into actionable tools); in structure (i.e., the way in which responsibility is allocated); and in techniques (i.e., the procedures used to accomplish a specific task or goal) (Birkinshaw et al., 2008; Hamel, 2006, 2007). In relation to this, Birkinshaw and Mol (2006) propose that management innovation tends to emerge through necessity, as opposed to technological innovations that may first be developed in a laboratory and for which an application may subsequently be found. Further, due to its nature, management innovation is likely to constitute a rather diffuse and difficult-to-replicate attribute for any firm who successfully develops one (Birkinshaw and Goddard, 2009). Table 1 provides several definitions of management innovation. Birkinshaw et al. (2008: 829) define management innovation as ‘The generation and implementation of a new management practice, process, structure, or technique that is new to the state of the art and is intended to further organizational goals’. Regarding the novelty of management innovation, ‘new’ can be entirely new to the world or new to the firm (Birkinshaw et al., 2008).

Management innovation covers changes in the ‘how and what’ of what managers do in setting directions, making decisions, coordinating activities and motivating people (Hamel, 2006; Birkinshaw, 2010; Van den Bosch, 2012). These changes reveal themselves by new managerial practices, structures, or processes (Vaccaro, 2010) and they are context-specific (Mol and Birkinshaw, 2009), ambiguous and hard to replicate, making them an important source of competitive advantage (Birkinshaw and Mol, 2006; Hamel, 2006; Damanpour and Aravind, 2011). Although a firm may build on the management innovations of other firms, its success is also determined by how those management innovations are adapted to the unique context of the organization (Ansari et al., 2010).

Classic types of management innovation are Ford's moving assembly line (Chandler, 1977) and the multidivisional structure of DuPont and General Motors (Chandler, 1962). More recent types of management innovation include total quality management (TQM) programmes (e.g., Zbaracki, 1998), ISO certifications (e.g., Benner and Tushman, 2002) and self-managed teams (e.g., Hamel, 2011; Vaccaro et al., 2012b). While it is a requirement for innovation, change does not in itself constitute management innovation (West and Farr, 1990). For instance, downsizing may bring about changes to an organization, but cannot be regarded as management innovation if the managerial work itself continues unchanged (Vaccaro, 2010). Genuine management innovation must involve substantial changes in how the organization is managed, reflected in the introduction of new practices, processes, structures and techniques.

Management innovation usually has the purpose of increasing the effectiveness and efficiency of internal organizational processes (e.g., Adams et al., 2006; Birkinshaw et al., 2008; Walker et al., 2011). Consequently, management innovation increases the productivity and competiveness of firms (Hamel, 2006) and enables economic growth (Teece, 1980). Nonetheless, developing a management innovation is a complex process (Vaccaro, 2010) and involves internal and external change agents (Birkinshaw et al., 2008). Internal change agents include a firm's managers and employees who are involved in the management innovation. External change agents can be consultants, academics or other external actors who influence the adoption of a management innovation (Birkinshaw et al., 2008; Vaccaro, 2010). They initiate and drive the process (Birkinshaw et al., 2008), and the typically intangible, tacit and complex management innovations emerge without a dedicated infrastructure (Vaccaro et al., 2012a).

An integrative framework of management innovation

Innovation is a highly diverse field, as is evident in the multitude of theoretical perspectives and empirical constructs that have been brought to bear on the topic. To facilitate the accumulation of scientific knowledge of management innovation, we provide an integral framework that highlights the main antecedents and outcomes of management innovation (see Figure 1). The framework identifies common areas of research in terms of antecedents of management innovation (managerial, intra-organizational, and inter-organizational); dimensions of management innovation (new practices, processes, structures and techniques); outcomes of management innovation in terms of various dimensions of performance (e.g., firm performance, productivity growth, quality of work, group satisfaction); and contextual factors that affect management innovation (such as organizational size and competitiveness of the industry).

The framework is used to identify where research findings about management innovation converge in this relatively new field and where gaps in our understanding exist. Below we discuss the building blocks and outcomes of management innovation as well as the contextual factors that affect it.

Emerging research themes of management innovation

The framework of Figure 1 also points to emerging themes that are as yet under-researched. For instance, the multidirectional causalities between management innovation and technological innovation and the differential effects on performance are a source of much debate in the innovation field.

Future research agenda and positioning of the papers

In this special issue, we want to stimulate academic inquiry by providing a platform for sharing ideas and state-of-the art research on management innovation. On the basis of the integrative framework of management innovation and the emerging research themes which we derived from it, we developed a ‘research agenda for future research in management innovation’ (see Box A). In particular, we formulated a list of future research issues for which we have drawn on the conceptual contributions in the innovation literature, the multilevel antecedents of management innovation (managerial, intra-organizational, and inter-organizational), the consequences of management innovation, and the methodological approaches in management innovation research.

At a EURAM mini-conference on management innovation at the Rotterdam School of Management, more than 40 empirical, conceptual, and practitioner-oriented papers from a plurality of theoretical perspectives, units of analyses, contexts, and research designs were presented. In this special issue, we selected those papers that deepen our understanding of management innovation in several ways and provide answers to various future research issues (see Box B).

Hecker and Ganter (2013) examine in their paper how external contingency factors – product market competition and rapid technological change – are related to management innovation and technological innovation. The authors find that product market competition has an inverted U-shaped relationship with a firm's preference for introducing technological innovation, and has a positive relationship with management innovation. Furthermore, they provide new insights into how management innovation is associated with rapid technological change. The authors underline that the relationship between innovation and competition should include a contingency perspective.

The conceptual paper by Hollen et al. (2013) uses an inter-organizational perspective to examine how different new-to-the-firm management activities are required for performing technological process development in an external test facility, thereby enabling the firm to achieve technological process innovation. The authors argue that making use of this inter-organizational context and the associated required management innovation allow a firm to overcome intra-organizational tensions and so to reconcile competing pressures for exploration of new and exploitation of existing process technologies. One of the authors' conclusions is that an inter-organizational level of analysis broadens the group of external change agents that may influence management innovation.

The paper by Khanagha et al. (2013) examines how management innovation is related to the adoption of an emerging core technology. The authors argue that relatively few scholars have examined how management innovation is related to an incumbent's success in adopting an emerging technology. By studying the adoption of cloud computing in a large multinational telecommunication firm, the authors find that management innovation is required in order to accumulate knowledge of emerging technologies in a dynamic environment. They highlight how a novel structural approach enables a firm to overcome inertia and to adopt an emerging core technology.

These three papers can easily be plotted into our integrative framework of management innovation (see Figure 2).

The paper by Hollen et al. (2013) is mainly conceptual and takes both a firm and an inter-organizational perspective by examining how new-to-the-firm management activities enable technological process development in an inter-organizational context of an external test facility, leading to eventual technological process innovation within the firm. The paper provides new insights as to how management innovation enables technological process innovation. By contrast, in their paper Khanagha et al. (2013) examine how management innovation enables technological innovation. They find that adaptation in the structure is a precursor of technology adoption. The paper by Hecker and Ganter (2013) complements these two papers. Using German data of the Community Innovation Survey (CIS), the authors examine how technological dynamic markets are associated with management innovation. They also provide new insights how the degree of product market competition influences technological innovation and management innovation. However, in contrast to Hollen et al. (2013) and Khanagha et al. (2013), these authors do not elaborate on the sequence of management innovation versus technological innovation, but do provide further insights in the significantly different determinants of technological and management innovation.

Priorities in management innovation research

How should we continue our journey into management innovation research and focus on management as a fertile ground for innovation? Although research into management innovation has gained momentum over recent years, among all different subsets of innovation it is still relatively under-researched (Crossan and Apaydin, 2010). Considering our research agenda as described in Box A and the contributions of the papers as described in Box B, we therefore have to set priorities (see Box C).

As emphasized before, the progress of research in management innovation and the accumulation of knowledge will depend on how management innovation is conceptualized and defined. While definitions can illuminate, too much variety can also hamper progress. Striking a balance therefore becomes imperative. We suggest, therefore, that with management innovation research currently in an embryonic stage of development, it is important to have some degree of variety in definition, though these definitions need to complement one another. The definitions of management innovation used by Hollen et al. (2013) and Hecker and Ganter (2013) illustrate this point: the first is based on a generic conceptual definition of management activities (Birkinshaw, 2010), while the latter provides three empirically-related sub-types of management innovation: workplace organization, knowledge-management, and external relations. In a similar way, Volberda et al. (2006) distinguished management innovation into new organizational forms, dynamic managerial capabilities, new ways of working, and co-creation. These theories and empirically-driven conceptualizations address management innovation from different perspectives and may usefully complement each other.

The second priority is the need to understand how management innovation and technological innovation are related, taking a complementary perspective (Milgrom and Roberts, 1995). As discussed above, at present three perspectives could be discerned regarding the relationship between management innovation and technological innovation: management innovation preceding technological innovation, technological innovation preceding management innovation, and a third one, namely dual interactions between management innovation and technological innovation over time. In all three perspectives, management innovation and technological innovation are in a sense complementary. While technological innovations are developed within organizational boundaries (whether within the firm itself or within an external laboratory), management innovations seem to emerge through interactions with the outside world or, as Birkinshaw and Mol (2006: 82) observe, ‘on the fringes of the organization rather than the core’. It is important to increase our understanding of the nature and temporal processes of complementarity in each perspective and of the subsequent impact on performance. A more co-evolutionary approach to studying the development and introduction of management innovation versus technological innovation over time, one which involves different levels of analysis and also takes into account institutional and environmental changes as well as the intentions of management, could be very promising (Huygens et al., 2001; Volberda and Lewin, 2003).

Our third priority should be to examine the usefulness of pluralism in research methods as a means of speeding up the contributions of management innovation research to establish a more coherent body of knowledge. Many papers on innovation are cross-sectional (Damanpour et al., 2009) or focused on one type of innovation (Crossan and Apaydin, 2010). Future research should examine with a longitudinal research design how management innovation may complement other types of innovation. Longitudinal and in-depth case studies are important for unravelling causality issues, process dimensions and the role of power in implementing management innovation. Moreover, research on management innovation via simulations, laboratory research and participative field research will increase our understanding of complex management innovation processes involving several levels of analysis. Comparative research among firms using large-scale cross-country surveys will reveal the impact on management innovation of factors such as the national institutional environment, but may also provide insights into how management innovation is diffused across countries, and what affects that process.

Over the last couple of years several such initiatives have been started in order to gain new knowledge on management innovation. These initiatives include the Management Innovation Lab (MLab) in London, the Management Innovation eXchange (MIX), and the Erasmus Competition and Innovation Monitor. In the MLab, academics, organizations, institutions and some other stakeholders work together to enable management innovation. The Erasmus Competition and Innovation Monitor, developed by INSCOPE, measures the level of management innovation of firms over time in the Netherlands. INSCOPE, a joint initiative by several universities and research institutes, aims to increase the fundamental understanding of management innovation and its influence on technological innovation, productivity and competitiveness of firms. In addition to the Erasmus Competition and Innovation Monitor, INSCOPE also conducts research on specific industry contexts, such as the Dutch care industry and the Port of Rotterdam. In collaboration with local partners, INSCOPE is also expanding its annual measurement of management innovation to cover other countries, such as Belgium, the UK, Germany and Italy. Such international measurements provide opportunities to detect differences between countries which can act as a foundation for increasing the competitiveness of firms or even certain industries or national economies as a whole.

The fourth priority concerns the effect of management innovation on exploration. Management innovation relates mainly to the effectiveness and efficiency of internal organizational processes (e.g., Adams et al., 2006; Birkinshaw et al., 2008; Walker et al., 2011). However, few scholars have examined how management innovation contributes to exploratory innovation. To survive in the short term and in the longer run, firms need to invest sufficiently in exploration and exploitation (March, 1991; Levinthal and March, 1993) and process management practices may affect exploration (Benner and Tushman, 2002). For instance, Douglas and Judge (2001) argued that in firms with a more exploration-oriented structure, implementation of TQM practices is more strongly related to performance. Future research should examine how management innovation is related to exploratory innovation.

The fifth research priority is to examine the extent to which management innovations are generic or specific. The existing literature on management innovation is either conceptual (e.g., Benner and Tushman, 2003; Hamel, 2006) or operationalized as a specific type of management innovation, such as TQM or ISO certifications (e.g., Benner and Tushman, 2002). However, the operationalization of management innovation as a very specific type of management may raise certain concerns. For example, De Cock and Hipkin (1997) suggested that a specific management innovation has a rather short life expectancy, because managers quickly move beyond a specific management innovation to further increase organizational effectiveness. Additionally, the adoption and diffusion of management innovations are firm-specific, dependent on the context and do not generate uniform outcomes (De Cock and Hipkin, 1997; Ansari et al., 2010; Damanpour and Aravind, 2011). Even within a certain management innovation, varying results can be obtained due to different practices that various firms implement (Zbaracki, 1998; Benner and Tushman, 2002). Furthermore, the distinction among specific management innovations can be rather vague and the underlying philosophies, tools and techniques of certain management innovations may have a large overlap (Currie, 1999; Parast, 2011). On the other hand, different types of management innovation may be interdependent (Currie, 1999) and firms that adopt particular innovations are more likely to adopt other, related management innovations (Lorente et al., 1999). Future research should examine whether management innovation should be considered and measured as a generic construct or based on specific types of management innovation (Mol and Birkinshaw 2009; Van den Bosch, 2012; Vaccaro et al., 2012a).

Conclusion

While innovation is surprisingly one of the most addressed topics in practitioner as well as academic outlets, most research has tended to address innovation as the development of new technology, products and services. As a consequence, technological innovation has dominated innovation research, with related notions such as product development, radical versus incremental innovation, as well as diffusion and adoption receiving most attention. However, falling trade-barriers, decreasing transaction costs, stagnating developed markets and overheating emerging markets are forcing firms to look for other areas in which to innovate as a means of gaining and maintaining competitive advantage. This entails a search not only for new products and new technologies but also for changes in the nature of management within the firm, that is, management innovation.

In this spirit, this introductory paper has briefly reviewed progress in innovation research and claimed that management itself may be a fertile ground for innovation. We have provided a clear conceptualization of this phenomenon and developed an integrative framework to advance our understanding of the various antecedents and outcomes of management innovation, as well as the contextual factors that affect management innovation. Moreover, we have provided a future research agenda and selected what are, in our view, the most important research priorities for advancing knowledge in the management innovation domain. We hope that the insights shared in this special issue will stimulate additional scholarly conversation on important innovation research topics as well as on the crucial role of new modes of management.