Innovation Factors in Brazilian Industries

Innovation is often seen within the vantage point of knowledge sharing networks and technology. However, the decisional process that creates innovation may include other factors that can provide competitive advantages for organizations. There are a range of complementary capabilities that improve upon organizational innovation (Yam, et al., 2011).

According to the neo-Schumpeterian models there are four areas that help to create sustainability (Nelson and Winter, 1982). Technology, account operations, management, and transactions have an influence on the success of the entire business. Each of these concepts interrelates and influences the overall innovation standards. 

The factors that lead to higher levels of market performance are often embedded in other functions within the organization. For example, the personalities of the management team will determine management innovative capabilities. Research helps to improve upon the overall development of appropriate constructs for improving the overall organization. 

A proper research method for understanding and developing new constructs is through the use of case studies. Such phenomenological research allows for in-depth analysis of the main concepts. Quantitative approaches review existing constructs and measure them at a high level. To understand a concept in depth requires keep observation by exploring the associations of various components of the phenomenon. The study discussed below uses the case study approach.

The purpose Zawislak, et. al. (2013) study was to develop a greater understanding of how innovation is fostered within organizations by reviewing case studies. The study included 26 companies from the various sectors of Rio Grande do Sul. The directors and managers from ten total companies agreed to participate in the analysis of the innovation structure. Information was collected through data mining, interviews, and site visits creating triangulation of data and higher levels of validity. Four final cases were used to assess the constructs in the study. 

Results:

-The firm’s current capabilities will determine its ability to be innovative and its market strategy.

-Redevelopment of departments based upon input from universities and research centers.

-A company that provides small batch production seeks innovation through efficiency of operational functions.

-Management innovation has led to integration of functions and year-to-year revenue increase of 20% when compared to the industries 5%.

-Transactional efficiencies have led to growth and market expansion in the area. 

Analysis: 

Firms have market approaches that allow them to compete within the market. Due to the perception of management most innovations are going to be focused on their competitive strengths. To create wider matrices of improvement requires a change in management that affords new perspectives and insight. Furthermore, pushing particular vantage points may create a phenomenon called “group think” where new ideas are not forthcoming. Through the development of management innovation, transactional improvements, operational efficiencies, and restructuring organizations can further their innovative and market interests.

Nelson, R., Winter, S.(1982) An Evolutionary Theory of Economic Change. The Belknap Press of Harvard University Press, Cambridge, Ma.

Yam, R., Lo, W., Tang, E. & Lau, A. (2011). Analysis of sources of innovation, technological innovation capabilities, and performance: an empirical study of Hong Kong manufacturing industries. Research Policy, 40 (3). 

Zawislak, P., Alves, A., Tell-Gamarra, J., Barbieux, D. & Reichert, F. (2013). Influences of the internal capabilities of firms on their innovation performance: a case study investigation in Brazil. International Journal of Management, 30 (1).

Malaysian Knowledge Management and Innovation

Nations seek to develop new ways of competing on the market. As the world economy sputters along the race for development continues at a renewed pace. The Internet has afforded new ways of using information and those industries and nations that can capitalize on knowledge acquisition the most are likely to see growth in their revenue and subsequent GNP. 

Malaysia has increased in financial and social prominence throughout Southeast Asia. Many of the organizations have capitalized on the new knowledge based technologies to create international competitiveness and improve on national output (Özçelik & Taymaz, 2002). They were able to find methods of gaining, sharing, and implementing such knowledge. 

Yet such gaining, sharing and implementing is not a onetime event. Effective innovation requires a cultural change that creates sustained momentum (Davenport and Prusak, 1998). People should become accustomed through their daily routines to this sharing and developing new knowledge. 

Effective application of innovation requires the ability to put to strong use what is learned. Accordingly, knowledge gaining, knowledge sharing, and application are key components (Zheng, 2005). Such processes of learning, sharing, and implementation should be as efficient and effective as possible. 

Capitalizing on knowledge networks requires the ability to effectively tie new information together in new ways to solve problems. Gaining knowledge alone is not enough. It must be analyzed and connected to other knowledge create and effective solution. Organizations that are more able to effectively capitalize on this connecting of information have significant competitive advantages. 

Research by Tan and Mohd (2010) help to highlight innovative knowledge sharing in Malaysia. A total of 674 large manufacturing firms were found in the Malaysian states of Selangor, Pulau Pinang,

Johor, Kedah, Kuala Lumpur, and Perak for possible testing. Of these potential contributors a total of 171 usable survey responses were returned for analysis. The purpose of the study was to study the influence of knowledge management effectiveness on aspects of administrative and technology innovation.

Results:

-Knowledge management has a significant impact on firm innovation. When firms are able to share and manage knowledge both internally among agents and externally among partners they are able to link information for potential solutions.

-Knowledge gained should be put into training programs for employees and then applied to the workplace.

-Pathways should be developed that allow for transference of knowledge from company to employee, employee to employee, and employee to company.

-Companies should help to encourage employee problem solving abilities.

-With effective knowledge management firms will better be able to capitalize on technology and administrative innovations.

Analysis: 

Organizations that seek to develop stronger innovation networks to capitalize on both administrative and technological advantages need to first create these proper networks and then the cultural routines to ensure the programs are in proper use. New knowledge is gained through these networks by connecting information together in unique ways to solve problems and develop more effective solutions. Effective development of information sharing networks between organizations can lead to further development of national growth. 

Davenport, T., & Prusak, L. (1998). Working knowledge. How organization manage what they know. Boston, MA: Harvard Business Review School Press.

Tan, C. & Mohd, A. (2010). An empirical study of knowledge management effectiveness and organizational innovation in Malaysia manufacturing firms. Proceedings of the International Conference on Intellectual Capital, Knowledge management & Organizational Learning. 

Özçelik, E., & Taymaz, E. (2002). Does Innovativeness Matter for International Competitiveness in Developing Countries? The Case of Turkish Manufacturing Industries, (ERC Working Papers in Economics 01/07), [online], Ankara, Turkey: Middle East Technical University, Department of Economics, Economic Research Center. http://www.erc.metu.edu.tr/menu/series01/0107.pdf

Zheng, W. (2005). The impact of organizational culture, structure, and strategy on knowledge management effectiveness and organizational effectiveness. Published Doctoral of Philosophy dissertation. University of Minnesota, United States: Faculty of The Graduate School.

Developing Employee Innovative Structures

Encouraging employees to be agents in change is difficult due to the lack of theoretical frameworks associated with the new innovative paradigm. To ask an employee who has not contributed before to become a contributing member of organizational development is difficult until they are able to formalize such concepts into a process and then create an internalized routine of the new expectation. Developing employee innovation requires the understanding of bounded rationality and the need to create a methodology that fosters a participative process.

Employees follow a particular pattern and routine throughout their working day (Nelson and Winter, 1982). Even though these routines make for orderly workdays, ease of management, and stability of the organization they do not necessarily improve upon the organizations output. To encourage employees to act purposively, beyond daily routine, requires the ability of employees to deliberatively plan and make decisions (Kirzner, 1997). 

Of course, one cannot expect employees to suddenly become freethinking, mature, and participative employees without changing the way they view their responsibilities to the organization and themselves. In economics, organizations represent bounded rationality. Employees are part of this bounded rationality and this has an impact on the limited scope of their decision-making abilities and the possible outcomes based within the organizational culture (Conlisk, 1996).

To change the poor employee expectations bounded within an organizations culture requires changing and adjusting the processes and routines by which employees operate. The ability to help employees critically think and reflect on their experiences and work practices requires social triggers through group interaction and social exchange (Jensen and Meckling, 1976).  In other words, employee culture and social interaction  with management should change to create higher expectations of performance.

The bounded rationality of organizations must become unbounded and rebounded on new principles and perceptions. Problem solving and innovative employees will require a new way of viewing themselves, their responsibilities, and their potential contributions to the organization. Instead of seeing themselves as process following, unquestioning, and uninspired contributors, they should be encouraged to question and contribute to organizational objectives through strong management-employee relationships that foster collaboration in problem solving.

One of the greatest social exchanges in innovation is between management and employee; management having the ability to use resources to implement ideas and the employees having the ability to find solutions to problems in their daily routines. Managers should create the right atmosphere and positive regard for employee ideas even if such ideas are not practical in the short-term. Employees invest a considerable amount of face and self-image when they bring forward ideas that may be blindly ignored by management despite the merit or benefit of those ideas (Clegg et al, 2002). 

A single negative interaction with a manager will lessen the likelihood of that employee bringing forward those ideas again. Repeated among multiple employees and a culture begins to form with an ever-expanding divide between employees and management. To rectify this situation it may be beneficial for managers to write down ideas, no matter how silly they may seem at the time, and create a running battery of employee ideas for possible future development. A single idea may become a goldmine of resources in the future.

Innovation is not a process of certainty that has specific outcomes from the start. In innovation, ideas develop, transform into practical ideas, and are eventually created for the market. Because innovation is not able to be calculated numerically (Lewis, 2008) the collection of ideas today it can still help formulate future solutions to problems through the hedging of the large group of employees participating in daily organizational functioning. Management must only open up the possibility to the perspective that employees are not as incompetent as they seem.

Providing a useful framework where employees may participate based upon their abilities can be beneficial for developing employee innovative contribution. Management may have the power to implement ideas but employees know if such ideas should be adjusted or disregarded in order to make them more effective. The two responsibilities can be provided into a framework for higher levels of employee-management collaboration.

According to Kesting and Ulhoi (2010) it is possible to create employee driven innovation processes through the following methodology:

-There are managers and employees and each has their own authority level.

-Management innovation decisions are imperfect and only provide a framework.

-Employees must fill out this frame with operative and supportive decisions.

-Through trying this frame employees must go back to management to provide feedback.

-In time employee internalize routines and work off of autopilot until change is needed again.

In this methodology, management provides a framework through their authority and employees try the framework providing constant feedback on its effective utility. When adjustments are necessary, based upon this feedback, management changes the structure to improve the process. Overtime the new processes become routine and work off of processes of internalized expectation until change is needed again. In the process provided by Kesting & Ulhoi employee innovation is a supportive feedback loop to the effectiveness of management decisions. This requires the ability of management to be receptive to this feedback and implement change when necessary.

Clegg, C., Unsworth, K., Epitropaki, O.& Parker, G. (2002), Implicating trust in the innovation process. Journal of Occupational and Organizational Psychology,  75 (4), pp. 409-22.

Conlisk, J. (1996). Why bounded rationality? Journal of Economic Literature, 34, pp. 669-700.

Jensen, M.& Meckling, W. (1976), Theory of the firm: managerial behavior, agency costs, and ownership structure”, Journal of Financial Economics,  3, pp. 305-60.

Kesting, P. & Ulhoi, J.  (2010). Employee-driven innovation: extending the license to foster innovation. Management Decision,48 (1)

Kirzner, I. (1997). Entrepreneurial discovery and the competitive market process: an Austrian approach, Journal of Economic Literature, 35, pp. 60-85.

Lewis, P. (2008), Uncertainty, power and trust.  Journal of Austrian Economics, 21. pp. 103-98.

Nelson, R. and Winter, S. (1982). An Evolutionary Theory of Economic Change. Harvard University Press, Cambridge, MA.