Being the best one can be: The influence of organizational virtue orientation on firms' innovation

Abstract

Innovation as key driver of success has been widely studied. Despite the influence of firm and top management team characteristics little is known about the underlying mechanisms that promote and inhibit innovative behavior in companies. Going beyond classical innovation research, we analyze the underlying virtuous mechanism by evaluating the relation between firms’ organizational virtue orientation and innovation. We find that the dimensions of OVO influence innovative behavior in firms and highlight the contrary effects when differentiating between high- and low-tech firms. Additionally, by examining the moderation effect of technology diversification, we find implications that the relationship between OVO and innovation in high-tech firms is strongly influenced by the level of technological diversification. We base our study on secondary data of S&P 500 U.S. manufacturing firms accounting for 1,520 firm-year observations. For our analysis we utilize a unique and comprehensive set of data: We determine innovation as output measures via hand-collected product announcements, derive a measure of OVO based on computer-aided text analysis of MD&A sections and utilize patents data for the derivation of technological diversification.