Innovation strategy that outlines how organizations intend to achieve their innovative goals is critical for organizations to attain competitive advantage [1
]. However, organizations have increasingly realized that it is easier to formulate innovation strategy than how to implement it. The way organizations sense and behave towards the environment has been identified as an important cause of difficulty in implementing innovation strategy [2
]. The literature suggests that to enable innovation strategy implementation and achieve superior innovation performance, organizations should combine their shared norms and values with the strategy requirement [3
]. This indicates that the fit between innovation strategy and organizational culture is critical for effective and efficient implementation of innovation strategy [4
]. However, many organizations are still facing the difficult challenges of managing organizational culture in ways that successfully enable innovation strategy implementation [5
]. Although this issue is of great theoretical and practical importance, the current understanding about how organizational culture should be managed to facilitate innovation strategy implementation and how this affects innovation performance is still limited.
Investigating this complex theoretical and managerial problem presents two significant challenges. First, organizational culture and innovation strategy have been widely treated as multidimensional phenomena that comprise different but interconnected elements [6
]. Although past studies have posited interrelationships between particular innovation strategic types and particular elements of organizational culture, few studies have simultaneously evaluated the relationship between the multi-dimensional constructs from a holistic perspective [8
]. As Burton et al. [5
] stated, “largely missing in the prior work is the study of the interrelationships between organizational culture and strategy, and how these factors interact to affect firm performance”. Therefore, evaluating the culture–strategy fit in holistic terms requires simultaneous assessment of the relationships among the variables that comprise organizational culture and innovation strategy.
Second, successfully managing organizational culture to implement innovation strategy involves reconciling multiple and often conflicting contingencies. For example, some studies argued that organizational culture can strengthen the relationship between innovation strategies and organizational performance [10
], while others argued that organizational culture may negatively or not influence the strategy–performance relationships [11
]. These conflicting findings make the identification of correct configuration of organizational culture needed to implement a particular innovation strategy extremely difficult [9
]. Therefore, how to assess whether all the elements of organizational culture are managed in ways that enable the implementation of a particular innovation strategy is important.
In the current study, we draw on configuration theory to develop a conceptual model that links various elements of organizational culture managed in ways that enable innovation strategy to reap the value of innovation speed and innovation quality. This study makes two main contributions. First, we empirically examine the interrelationships between organizational culture and innovation strategy in holistic perspective. Our findings provide empirical insights about the conceptualization of the fit between organizational culture and innovation strategy. Although organizational culture and innovation strategy are important constructs in organization literature, little is known about the interrelationship between the two multi-dimensional constructs from configuration theory [4
]. Hence, the present study contributes to configuration theory literature by helping to ‘build out’ the set organizational phenomena that should be included in configurational theorizing. Second, we examine the innovation performance impact of culture–strategy fit. Our results provide empirical support for previously untested argument on the relationship between culture–strategy fit and innovation performance [12
]. Therefore, our finding enriches the innovation literature that the fit between organizational culture and innovation strategy is an important driver of strategy implementation success. Importantly, our finding suggests the need for making innovation strategy decisions to develop a holistic assessment of organizational culture characteristics.
The rest of the study is organized as follows. In the next section, we mainly conceptualize exploratory and exploitative innovations as the specific components of innovation strategy based on the innovation literature [7
], and adopt the competing values framework to define clan, adhocracy, hierarchical, and market cultures as the specific components of organizational culture [13
]. Furthermore, we apply configuration theory to define the fit between organizational culture and innovation strategy. In Section 3
, we empirically examine the innovation performance implications of the culture–strategy fit. Section 4
describes the empirical research design and data analysis. Section 5
shows the fit analytic process and hypotheses testing results. Finally, implications and issues for future research are discussed.
3. Hypotheses Development
The fit between organizational culture and innovation strategy is desirable to achieve superior innovation performance (e.g., [50
]). Organization theorists have suggested that organizational culture and innovation strategy are intimately connected. The choice of innovation strategy reflects desired behaviors of managers and employees within an organization [51
]. In the implementation of the given innovation strategy, organizations must create an appropriate culture that fosters innovation strategy by ensuring employee skills, providing incentives, and removing obstacles [52
]. The different emphases on exploratory or exploitative innovation strategy require different support of cultural values and orientations, and thus, the implementation of different innovation strategies needs different configurations of cultural characteristics. For example, exploratory innovation strategy is more likely to embrace flexible cultural values, whereas exploitative innovation strategy may emphasize on control and stability values [9
Following the above ideas, we propose that the degree to which an organization’s culture and innovation strategy are aligned is likely to have an important effect on innovation speed and innovation quality. Specifically, as the important indicator of efficiency, innovation speed refers to the extent to which an organization can develop and implement new products and processes quicker than competitors [53
]. Configuration theory indicates that for efficiency-maximizing organizations of each innovation strategic type, an ideal organization culture exists in which the configuration of organizational culture enables the implementation of given innovation strategy in a way that leads to superior innovation speed [39
]. Specifically, when innovation strategy and organizational culture are aligned, organizational strategic focus and employees’ shared values will be in fit. Such a fit could facilitate employees adopting intended manners to implement innovation strategy, which would lower behavioral barriers among employees [54
]. This can speed up responses to customer requirements by enhanced knowledge sharing or transfer [56
], reinforcing shared understanding [54
] and resolving conflict [51
For example, by documenting processes in detail and providing information that employees need for task fulfillment, hierarchy culture can fit with exploitative innovation strategy to accelerate operational processes for meeting customer requirements [57
]. Similarly, by emphasizing the creation and maintenance of expertise among workplace [58
], clan culture could fit with exploitative innovation strategy based on teamwork and employee involvement, which can improve efficiency of innovative activities. In addition, by accumulating knowledge about the opportunities that appear in the market, adhocracy culture could be aligned with exploratory innovation strategy to adapt to a changing environment, thereby ensuring the timeliness of new product launches [12
]. Similarly, market culture could be aligned with exploratory innovation strategy by increasing employees’ willingness to embrace new and helpful information from outside sources, which could reduce the cycle of new product development [12
Conversely, when the requirements of innovation strategy are inconsistent with organizational culture, employees are less likely to engage in behaviors required to implement a planned innovation strategy [59
]. The lack of fit may lead employees to resistant implementing innovation strategy because of the conflict of values and norms (e.g., [60
]). The resistance would force organizations to spend more time to introduce innovation strategy, and to persuade employees to accept the strategy [51
]. Under this condition, organizations would not easily implement a given innovation strategy, thereby losing competitive advantage of attaining quicker response to new product development than their competitors (e.g., [61
]). In sum, we hypothesize that:
Hypothesis 1 (H1).
The greater the fit between an organization’s innovation strategy and its organizational culture, the greater innovation speed.
From the effectiveness perspective, the literature highlights the need to focus on quality [32
]. Innovation quality, which represents the degree to which a product satisfies customer requirements, is often described by variables, such as amount, effectiveness, features, reliability, costs, complexity, innovation degree, and value to the customer [32
]. Fit between innovation strategy and organizational culture should be positively associated with innovation quality. Specifically, configuration theory has argued that the effectiveness values achieved by organizations should be greater when an organization’s culture fits well with its strategy [39
]. The culture–strategy fit allows organizations to invest few resources in promoting intra-organizational communication and developing control systems (e.g., [4
]), which may increase the effectiveness of resource utilization.
Moreover, the culture–strategy fit ensures employees to have strong organizational commitment when their organization implements innovation strategy [63
], which is essential for improving innovation quality [65
]. For example, adhocracy culture emphasizes flexibility and autonomy of employees [12
]. Aligning this culture with exploratory innovation strategy could promote employees’ conformity to explore ideas flexibly and independently, which may increase the novelty of product development [66
]. Similarly, clan culture can fit with exploratory innovation strategy based on its focus on flexibility, which would be conducive to innovation quality. In addition, by focusing on change in the market—such as customer demands, the fit between market culture, and exploratory innovation strategy—organizations could better gather market information and deeply understand customer demands, which is helpful for providing creative products and offering attractive solutions to the market [12
]. Hierarchical culture focuses on employees’ desire for security and emphasizes adherence to given procedures, which are necessary for implementing exploitative innovation strategy [5
]. In this event, the cost burden of new product development can be met, and reliable and standardized production with minimal variation or defects can be achieved [65
]. Therefore, we propose the following hypothesis.
Hypothesis 2 (H2).
The greater the fit between an organization’s innovation strategy and its organizational culture, the greater innovation quality.
This study represents the first attempt to test the general hypotheses that an organization’s innovation performance is influenced by ‘fit’, which is defined as the extent to which an organization’s culture profile matches its innovation strategy. Based on configuration theory, we apply the fit as a ‘profile deviation’ approach to explore the fit between organizational culture and innovation strategy, and how this fit is associated with innovation speed and innovation quality. The results offer insights into the specific configuration between multiple components of innovation strategy and organizational culture. The results about the profiles of the ideal organizational culture indicated that the top-performing organizations of each innovation strategic group have distinctive configurations of organizational culture. This finding is consistent with previous propositions regarding cultural differences between organizations implementing different innovation strategies [9
The current study finds that for organizations with exploratory and exploitative innovation strategy, the culture–strategy fit is important in achieving superior innovation speed and innovation quality. Specifically, the culture–strategy fit could explain 50% and 41% variance of innovation speed and innovation quality for exploratory organization, respectively, and could explain 13% and 10% variance of innovation speed and innovation quality for exploitative organizations, respectively. All the findings support the hypotheses that the fit between organizational culture and innovation strategy is critical for superior innovation speed and innovation quality.
However, our results indicate that the fit between organizational culture and innovation strategy is not significant for achieving superior innovation speed and innovation quality for ambidextrous organizations. This finding is interesting, but inconsistent with our hypothesis. The potential explanation may be that ambidextrous organizations normally focused on organization–environment coevolution which leads them to concentrate less on the configuration of organizational culture. Specifically, empirical evidence has presented that ambidextrous innovation strategy is the top priority for firms operating in an environment characterized by high dynamism and competitiveness [78
]. Ambidextrous strategy requires organizations to effectively respond to environment changes through adapting their management effectively and efficiently [80
]. However, “organizational culture is stable, difficult to change, and represents the accumulated learning of a group” [81
] (p. 312). This indicates that configuring organizational culture with ambidextrous strategy would be difficult and time-consuming. In this view, organizations would find it impossible to reach ideal innovation speed and innovation quality through configuring organizational culture and ambidextrous innovation strategy.
6.1. Theoretical Implications
Our study has several implications for innovation and culture researchers. First, our study presents the fit between innovation strategy and organizational culture from a holistic perspective, and provides empirical evidence for the innovation performance impact of the culture–strategy fit. Our findings extend the existing understanding of the interrelationships between innovation strategy and organizational culture. Specifically, prior studies have presented the interrelationships between particular dimensions of organizational culture and particular types of innovation strategy [8
]. Our findings provide the benchmarking organizational culture profiles including four cultural components across the exploratory, exploitative, and ambidextrous innovation strategic groups. Our study unpacks the composition of organizational culture and innovation strategy simultaneously, and offers fine-grained insights into the nature of the culture–strategy fit from a holistic perspective. Importantly, our findings suggest the need for implementing innovation strategy to develop a holistic assessment of organizational culture characteristics.
Second, our study finds that innovation performance would be negatively affected by the deviation from an ‘ideal’ organizational culture profile for executing a given innovation strategy. This finding suggests that it is not innovation strategy selection per se that drives inter-firm innovation performance differences, but rather how well a given strategy type is implemented based on organizational culture. Prior literature has highlighted the importance of strategy implementation as a source of competitive advantage [82
]. However, our findings imply that the culture–strategy fit will be a key source of competitive advantage for organizations, rather than the pure strategy. This finding enhances our understanding about the specific configurations of organizational culture under different innovation strategic groups, which are important for superior innovation speed and innovation quality.
Finally, by employing configuration theory, our study crystallizes the theoretical argument on how different components of innovation strategy and organizational culture fit as well as how this fit affect innovation performance, thereby extending configuration theory. Specifically, our study integrates the insights between innovation management and organizational culture, and empirically verifies the importance of the fit between innovation strategy and organizational culture by adopting configuration theory [39
]. Although configuration theory has been widely applied to assess complex, multidimensional phenomena in strategy management [38
], knowledge management [83
], human resource management [43
], and marketing [42
], its ability to shed light on the interdisciplinary research between innovation and culture had yet to be formally tested prior to the present study, despite recent researchers’ calls for the importance of the configuration between innovation strategy and organizational culture [4
]. In this view, configuration theory may provide a good perspective to understand the nature of cross-domain synergies between innovation and culture, and thus, we urge more researchers to investigate interdisciplinary research between innovation and culture from the lens of configuration theory.
6.2. Practical Implications
The current research has some practical implications for managers. First, our findings suggest that managers should prioritize the repositioning of the benefits resulting from innovation strategy into the culture–strategy fit. The fit perspective can help managers extend their understanding about the synergies and conflicts between different types of innovation strategy and organizational culture. This understanding can facilitate managers to be more proactive when deciding on innovation strategy and organizational culture priorities. Specifically, managers should carefully evaluate and arrange the multiple organizational cultures in ways that fit the implementation requirements of different innovation strategy. For example, we suggest that managers control clan culture and promote hierarchy culture when they try to implement exploitative innovation strategy successfully. Meanwhile, we suggest that developing adhocracy culture will be helpful for implementing exploratory innovation strategy.
Second, the current research suggests that managers should not seek a fixed organizational culture template that favors both innovation quality and speed. Indeed, our results suggest that different configurations of organizational culture are required depending on whether the organization is seeking to maximize innovation quality or speed. Therefore, when designing innovation strategic goals, managers should hold an ‘innovation strategy meeting’ with both strategy and culture designers. In this event, managers should perform more informed evaluations about the extent to which they can create or maintain culture conditions that are compatible with innovation strategy decision alternatives.
6.3. Limitations and Future Research
This study has some limitations. First, we conducted the survey in China. The national context may limit the generalizability of our findings. Future research must be cautious when applying our findings in other contexts. Scholars can obtain data from multi-national organizations, and compare the innovation mechanisms of fit between different cultural, economic, and societal contexts.
Second, we collected data from one senior executive from each organization. Although the single respondent has been widely applied to strategy and culture research, it is limited in reflecting the reality of the organization. Therefore, future research may use multiple source data to explore how the culture–strategy fit affects innovation performance.
Finally, we tested our hypotheses with cross-sectional survey data. Such data limited the empirical establishment of the causality between fit and innovation performance (Yang and Li, 2011). A longitudinal study that can better reflect the causal relationship between these variables should be conducted.