Abstract
The notion that firms can improve their innovativeness by tapping users and customers for knowledge has become prominent in innovation studies. Similar arguments have been made in the marketing literature. We argue that neither literatures take sufficient account of firm organization. Specifically, firms that attempt to leverage user and customer knowledge in the context of innovation must design an internal organization appropriate to support it. This can be achieved in particular through the use of new organizational practices, notably, intensive vertical and lateral communication, rewarding employees for sharing and acquiring knowledge, and high levels of delegation of decision rights. In this paper, six hypotheses were developed and tested on a data set of 169 Danish firms drawn from a 2001 survey of the 1,000 largest firms in Denmark. A key result is that the link from customer knowledge to innovation is completely mediated by organizational practices.This work is licensed under a Creative Commons Attribution 4.0 International License. You are free to copy, distribute, transmit and adapt this work, but you must attribute this work as “Organization Science. Copyright © 2017 INFORMS. https://doi.org/10.1287/orsc.1100.0584 , used under a Creative Commons Attribution License: http://creativecommons.org/licenses/by/4.0/ .”
Highlights
In terms of innovation performance, do firms gain from being orientated toward, perhaps even working directly with, their customers and other users of their products and services? And if so, what role do firms’ organizational practices play in this process? A substantial body of research, built since the 1980s, would seem to confirm the first assumption but has not systematically addressed the role of organizational practices
We suggest the use of structural equation modeling (LISREL) to help overcome this problem because it allows for a deeper causal structure running from broadband interaction with customers over delegation, to knowledge incentives and internal communication, and to higher innovation performance
We find strong support for Hypothesis 5 (“The more the focal firm engages in internal communication, the higher will be its innovation performance”), because the correlation coefficient between these constructs is significant at the 1% level (t-value of 2.58)
Summary
In terms of innovation performance, do firms gain from being orientated toward, perhaps even working directly with, their customers and other users of their products and services? And if so, what role do firms’ organizational practices play in this process? A substantial body of research, built since the 1980s, would seem to confirm the first assumption but has not systematically addressed the role of organizational practices. The user innovation literature (Lilien et al 2002, Neale and Corkindale 1998, Rosenberg 1982, Urban and von Hippel 1988) and substantial parts of the open innovation literature (Chesbrough 2003, Laursen and Salter 2006, Lichtenthaler 2008) argue that established firms can improve their innovation performance by working closely with users and customers in the innovation process This literature says little about the role of firms’ internal organization in this process. This work typically studies only isolated practices or considers such practices to be part of the market orientation construct (e.g., Slater and Narver 1994) It provides an incomplete account of how customer and user knowledge might be leveraged in the context of innovation. Our line of argument is that under many circumstances customers will either have initiated
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