Author:

Abstract:

Over the course of the past decades, the world we live in has become more and more dynamic and unpredictable, affecting both individuals and companies alike. Organizations are not only subject to constant change, but that pace of change is also perceived to be accelerating. With the economic environment constantly evolving, many companies and, in their wake, academics and governments, focus their attention on innovation as a source of competitiveness and growth. For a long time, both managers and researchers have in large part concentrated on product and process innovation. At the same time, there has been a predominant focus on R&D and external cooperation as innovation's main determinants. However, this is too narrow a focus, as companies operating in changing environments also need to be inherently flexible. Hence, innovative firms also need to be capable of adapting and changing themselves. This adaptability pertains to the capability to redefine their strategic, long-term objectives but also the way their organization is structured and their decision processes are designed. In the first chapter of this work we start from a broad perspective by quantitatively analyzing the importance of organizational flexibility as an enabler and promoter of product and process innovation. Specifically, we look at various forms of organizational flexibility, i.e. as a firm's ability to adapt its internal organizational structure or to manage its external relations and its ability to integrate internal and external knowledge into the innovation process. Hence, we want to contribute to the literature on organizational flexibility by obtaining robust insights in the relationship between organizational flexibility on the one hand and various quantifiable aspects of product and process innovation performance on the other. In the second section of this work we narrow our focus from a general company perspective to the specific environment of the family firm, by quantitatively analyzing the role of organizational flexibility in the innovation processes of family firms. Building on existing theoretical and empirical work, we analyze the relationship between family ownership on the one hand and both R&D and organizational flexibility on the other hand, and on how this relationship translates into successful innovation. Specifically, we analyze whether family firms invest less in R&D but at the same time display higher levels of organizational flexibility than nonfamily firms. Subsequently, we analyze whether such higher organizational flexibility leads to a better innovation performance for family businesses. In the third chapter we aim to further bridge the gap between organizational innovation theory and practice. Therefore, we take an in-depth qualitative look at one of the main components of organizational flexibility, i.e. changes to the family firm's internal decision structure, through the lens of psychological ownership. In particular, we explore how the sense of control, psychological ownership and motivation of both family-members and non-family managers are interrelated. First and foremost, we find that organizational flexibility indeed coincides with firms' ability to innovate successfully and that this may even constitute an innovative advantage for family firms. More specifically, flexibility with respect to (1) the distribution of responsibilities and decision making power, (2) external relationship management, as well as (3) knowledge management systems shows a positive relationship with (a) turnover from goods and services that are new to the market, (b) turnover from goods and services that are only new to the firm but not to the market, (c) cost reductions due to process innovations, and (d) turnover increase due to quality improvements of the production process. Further analysis points to the importance of distinguishing between family firms and non-family firms when considering the role of organizational flexibility. In particular, our data reveals that family firms are actually better than non-family firms at flexibly changing their internal and external organization. In turn, family firms' organizational flexibility advantage is significantly and positively linked to both product and process innovation performance. Overall, we find that family firms achieve a level of product innovation performance that is similar to the one observed in non-family-owned firms and that they even outperform non-family firms in the field of process innovation. Finally, our results further our understanding of how family firms can manage organizational flexibility in practice, by clarifying how internal stakeholders' sense of psychological ownership affects their motivation and their disposition towards changes in the family firm's decision making process. We show that family owners are quite adept at stimulating a strong sense of psychological ownership and motivation in their non-family managers, in large part by delegating operational control. However, non-family managers with a strong sense of psychological ownership develop a sense of entitlement, which leads them to expect additional strategic control. Those expectations often clash with family-owners' desire to maintain strategic control over their company, thereby demotivating the non-family managers and hindering organizational flexibility. Hence, while our qualitative research confirms family owners' flexibility towards the internal distribution of responsibilities, it also reveals the limits of such flexibility and some of the potential downsides of family owners' ability to extend their own sense of commitment to their non-family managers.