Corporate culture and product innovation: evidence from a firm survey

Abstract

ABSTRACT Despite the recognition that the determinants of exploratory and exploitative innovation differ, whether and how corporate culture affects exploratory and exploitative innovation has not been examined much in the literature. This study aims to fill this gap in the literature and empirically examines the relationship between corporate culture and product innovation using a unique survey of Japanese firms. From the survey, we identify four types of corporate culture in the Competing Values Framework and two types of product innovations (product novelty): explorative innovations (new-to-market products) and exploitative innovations (new-to-firm products). We employ a bivariate probit model to examine the effect of corporate culture on making new-to-market products and new-to-firm products. We find that firms that selected the words ”market impact” and ”creativity”, both of which represent a Create-oriented culture, to describe their corporate culture in the survey are more likely to introduce new-to-market products. In contrast, firms that selected ”bottom-up approach”, which represents a Collaborate-oriented culture, have a higher likelihood of introducing new-to-firm products. The results suggest that the link between corporate culture and product innovation depends on whether a firm pursues explorative or exploitative innovations.