Organizational Innovation and Structure’

Linsu Kim, Korea Development Institute

The relationship between organizational innovation and structure in 3 I manufacturing

organizations in a developing country is examined. The analysis indicates three
jindings: (I) multi-item scales developed in the U.S. are, with some revisions, reliable in
a developing context; (2) the relationships established between organizational
innovation and structural variables in the advanced context are generally supported in a
developing context: that is, organizational innovation is positively related to
professional training, professional activity, integration, and inversely related to job
codification and hierarchy of authority; and (3) the relationships generally hold
regardless of size and age of the organizations.

This study addresses two important questions: What pattern of

organization may be most compatible in the developing context in
dealing with the changing environment? Are organization and
management theories that are developed in the advanced countries valid
and useful in the developing context? This article examines empirically
the relationship between organizational innovation and structural
patterns in 3 1 manufacturing organizations in Korea, one of the most
rapidly developing countries in the world.
In recent years, organization theorists have given increased attention
to the subject of innovation. Many organizations are facing rapidly
changing environments. An important challenge to today’s organization
is that of responding to changing conditions and adapting to external
stress [2 I]. In response to this challenge, several organization theorists
have recently attempted to identify particular organizational
characteristics that might be most compatible in dealing with the
changing environment [e.g., 6, 14, 21, 23, 25, 47, 48, 50). These
studies, however, are limited in number, widely fragmented [40], and
concentrated mainly in the U.S. and U.K. [46].

Address correspondence to: Linsu Kim. Korea Development Institute. P.O. Box 11.3,
Cheongyang-ri. Seoul, Korea.
1This article was prepared while the author was at the Center for Policy Alternatives, Massachu-
setts Institute of Technology. The author is indebted to Professors James M. Utterback. Henry P.
Sims, Jr.. and anonymous referees for their critical comments on an earlier draft, and to Professor
Jerald Hage for making available the structural scales used in this study. The research underlying
this article was supported by the John H. Edwards Fellowship of Indiana University and by a grant
from the Alfred P. Sloan Foundation to the Center for Policy Alternatives at the Massachusetts
Institute of Technology.

JOURNAL OF BUSINESS RESEARCH 225

0 Elsevier North Holland, Inc., 1980 0148-2963/80/02225-21SO1.75
226 Linsu Kim

Many developing countries have made significant progress in

industrial, educational, and technological development, while others
are making the initial efforts to follow the same path. As a nation
develops from an agriculture-dominant traditional society to an
industry-dominant modem society, the organization and its
management become increasingly essential in government, education,
and public and private enterprise. The development of organizations
that are capable of dealing with the changing nature of technology,
market structure, consumer needs, and competition are important issues
in many developing countries.

Theoretical Background
Organizational Innovation The term “innovation” is used in three
different contexts, as Zaltman et al. [50] noted. First, the term is
considered to be synonymous with invention. In this context, innovation
refers to a creative process whereby two or more existing concepts or
entities are combined to produce a new configuration [e.g., 28, 431.
Second, the term may be synonymous with a new idea. In this case, the
essential implication is describing why something is novel [e.g., 4, 16,
39, 591. Third, innovation is used to describe the process whereby an
individual or a social system accepts, develops, and implements new
ideas [e.g., 7, 20, 26, 27, 41, 44, 45, 471. It is in the last context that
innovation is defined in this study.
This definition recognizes that innovation is a multistage process that
occurs over time. Several different models have been conceptualized
that classify the innovation process into different stages. Zaltman et al.
[50] and Pierce and Delbecq [33] provide a useful review of these
models. However, there seems to be more similarities than differences
among them. Variations appear to stem largely from differences in
terminology and perspective rather than in substance. That is, as noted
by Zaltman et al. [50], most of them imply two major stages: (1)
initiation, which includes such substages as awareness, search and
evaluation, and adoption, and (2) implementation, which includes
substages such as implementation, routinization, and stabilization.
Pierce and Delbecq [33] view adoption as a major intermediate stage.
The subject of innovation has received increased attention from
disciplines such as rural sociology, medical sociology, education,
marketing, and industrial engineering. Rogers and Shoemaker [39]
reviewed over 1500 articles covering a broad range of innovation topics.
These studies address mainly the following questions at the individual
Organizational Innovation and Structure 221

level: What are the attributes of new ideas that are widely accepted by
individuals? What are the characteristics of those individuals who
accept new ideas earlier than others? What is the role of opinion leaders
in innovation and diffusion? These studies, however, contribute little to
the explanation of innovation at the organizational level. Organizational
innovation is an explicit action of the organization in response to stimuli
from the environment. But within a similar task environment some
organizations are thought to be more innovative than others. An
important question to be raised is what are the characteristics of these
innovative organizations? Recent studies suggest that structural
properties are much more highly associated with organizational
innovation than characteristics or attitudes of individuals within the
organization. Hage and Aiken [ 141 found that structural properties were
highly associated with organizational innovation, whereas the
relationships between two personality factors (value and prochange
factor and self-interest and antichange factor) and organizational
innovation were contradictory and inconclusive. Similarly, Baldridge
and Bumham (3) found that organizational properties and environment
were much more important than the characteristics of its participants in
predicting the adoption of changes.
Structural Variables Many scholars have attempted to delineate the
dimensions of organizational structure. Most of these scholars used
Weber’s basic model [see 131 of bureaucracy as a point of departure
[37]. Pugh et al. [34] hypothesized six primary dimensions of
organizational structure: specialization, standardization, formalization,
centralization, configuration, and flexibility. They later tested this
conceptualization empirically and found that there were four basic
dimensions of structure: structuring of activities, concentration of
authority, line control of workflow, and size of supportive component
[35]. Reimann [38], in a study of 19 manufacturing plants, found three
basic dimensions of structure: decentralization, specialization, and
formalization. That is, the structuring of activity dimension of Pugh et
al. [35] formed two independent dimensions of specialization and
formalization.
In their study of innovation, Hage and Aiken [ 14,151 delineated three
structural dimensions related to organizational innovation: complexity,
centralization, and formalization. Zaltman et al. [50], in their model of
organizational innovation, suggest that capability to deal with conflict,
which may be interpreted as integration, is an addition to the three
dimensions suggested by Hage and Aiken [ 151. Lawrence and Lorsch
[2 1] also postulate that integration is an important structural variable for
organizational studies. Taken together, these studies suggest, in
228 Linsu Kim

general, four structural dimensions: complexity, formalization,

centralization, and integration.
There appear to be two groups of studies which are concerned with
the relationship between organizational innovation and structure.
Studies in the first group are concerned with how organizational
structure is related to innovation, ignoring the stages therein [e.g., 3,6,
14, 251. For example, a hypothesis tested by these studies is that
formalization is negatively related to innovation. Studies in the second
group are concerned with the contingency notion that organizational
structure is related differently to the different stages of the innovation
process [e.g., 33,42,47, 501. For example, formalization is negatively
related to initiation but positively related to implementation.
Studies in the second group, mostly conceptual in nature, seem to
offer a useful framework for the understanding of the relationship
between organizational innovation and structure, but pose some
empirical problems for research. According to this contingency view,
organizations may be studied with longitudinal analysis, as suggested
by Pierce and Delbecq [33]. This approach assumes that the
organization can change its structural pattern at the different stages of
the innovation process. In reality, it is not easy to change quickly the
structure of an ongoing organization and to expect its members to
behave accordingly as an innovation progresses from one stage to
another. Nor is it desirable to change the structural pattern according to a
change in the process stage of one particular innovation while there may
be other innovations at different stages.
Another plausible way to investigate the contingency relationship
between organizational structure and the different stages of the
innovation process may be to assume that the organization has different
subunits to deal with different stages. For example, in the
manufacturing sector, the research and development department may be
viewed as focusing on the initiation stage and the production department
on the implementation stage, as implied in Lawrence and Lorsch [2 11.
An exploratory attempt as part of this study to investigate this
relationship was not fruitful. This article, therefore, limits itself to the
first approach and reports the relationship between organizational
structure and innovation (ignoring stages therein) as observed in a
developing country.
Compfexitt-: The complexity of an organization refers to the extensity
and intensity of knowledge in the organization and, according to Hage
and Aiken [ 15). may be measured by ( 1) the number of occupational
specialties, (2) the degree of professional training, and (3) the degree of
professional activities. The diversity and depth of occupational
Organizational Innovation and Structure 229

background will bring into play a variety of sources of information for

the organization, which in turn will facilitate the recognition of needs
and/or opportunities. A high degree of professional training and activity
also enables the members of the organization to keep abreast of
developments in the field. The complexity of an organization not only
facilitates the recognition of needs and knowledge, but also establishes
the organizational capability to translate these needs into technical
feasibility, thus leading to innovation. Several empirical studies
undertaken in advanced countries support the relationship between
organizational innovation and complexity. Hage and Aiken [ 141, in a
study of health and welfare organizations in the U.S., found a
significant correlation between the adoption of new programs and the
measures of complexity. In R&D organizations, Pelz and Andrews [32]
found that organizations whose participants had a wide and diverse
academic background tend to be more creatively productive. Paulson
[3 I] also found the same relationship between organizational innovation
and complexity in his interorganizational study.
Others [e.g., 7,33,41,47,50] supported the contingency notion that
the high degree of complexity leads to the initiation of innovation
proposals, but at the same time makes it difficult to implement the
proposals. However, as noted by Cooke [50], it may be that the positive
relationship between complexity and initiation is greater than the
negative relationships between complexity and implementation. That
is, the organization that has a high degree of complexity may be more
innovative simply as a result of more being proposed.
Hypotheses I: These previous studies suggest the following
hypotheses which are directed to the general relationship between
organizational innovation and complexity.
H 1(a) Occupational specialty is positively related to organizational
innovation.
H 1(b) Professional training is positively related to organizational
innovation.
H 1(c) Professional activity is positively related to organizational
innovation.
Formalization: The formalization of an organization refers to ( 1) the
degree of codification specifying who is to do what, where, and when,
and (2) the degree of diligence exerted in enforcing these rules [ 151.
Bums and Stalker [6] suggest that an organic type of organization has
more potential for gathering and processing information for decision-
making than a mechanistic type of organization. The organic type of
organization has, among other things, frequent adjustment and
230 Linsu Kim

continued redefinition of task (low job codification), less hierarchy of

control (low hierarchy of authority), and lateral communication (high
integration). Rules and their rigid observation inhibit organizational
participants from seeking new sources of information which might lead
to awareness of a performance gap between what the organization is
doing and what the participants perceive it should be doing.
Furthermore, rigid rules and procedures provide little latitude for
organization participants to consider new alternatives and thus
discourage initiative in suggesting new ideas that might bridge a
previously perceived gap. A few studies also undertaken in the
advanced countries supported the relationship between organizational
innovation and formalization. Hage and Aiken [ 141 found that job
codification was negatively correlated with the adoption of new
programs, while rule observation had no significant association with the
adoption of new programs. More recently, Miller [25], in his empirical
study of 16 American and European steel firms, found that the
technologically innovative organization was organic rather than
bureaucratic.
While formalization’s negative relationship to the initiation of
innovation is generally accepted, some [9, 11, 26, 501 suggest that
initiated ideas are more likely to be implemented when there is less
conflict among participants through a high degree of formalization.
However, as suggested by Pierce and Delbecq [33], formalization’s
negative relationship with initiation may be greater than its positive
relationship with implementation. Thus, less formalized organizations
may be more innovative because they foster the greater numbers of new
ideas.
Hypotheses 2: These previous studies suggest the following
hypotheses which are directed to the general relationship between
organizational innovation and formalization.
H2(a). Job codification is inversely related to organizational
innovation.
H2(b). Rule observation is inversely related to organizational
innovation.
Centralization: Centralization is conceptualized in terms of (1) the
hierarchy of authority, and (2) the degree of participation in decision-
making in the organization. Ideas for innovation are often generated at
some distance from the decision-making center in the organization and
therefore must be communicated to the decision-making center through
a hierarchy [42]. This implies that the more centralized the decision-
making function, the more channels through which the communication
Organizational Innovation and Structure 231

of new ideas must travel. Read [36] suggests that an emphasis on

hierarchy of authority often causes the members of an organization to
adhere to specified channels of communication and to selectively
feedback only positive information regarding their jobs. Very often,
negative feedback helps the organization to recognize the need for
innovation. Thus, a high degree of hierarchy of authority might restrict
the flow of communication and reduce the amount of critical’
information available to the organization. At the same time, greater
participation in decision-making may bring useful sources of
information and insights that are essential to effective decision making.
Participation also increases participant understanding of translating
decisions into more specific forms, and evokes commitment to work
through difficult implementation. Bums and Stalker [6] suggest that an
organic structure, with shorter hierarchy of authority and wider
participation in decision-making, is more effective in the rapidly
changing conditions that often accompany attempts at innovation.
Miller [25] also found that the innovative organization was organic
rather than bureaucratic. Hage and Aiken [14] found a positive
relationship between participation in decision-making and the adoption
of new programs, and a negative relationship between the hierarchy of
authority and the adoption of new programs.
On the other hand, several studies [e.g., 9, 41, 42, 47. 501 suggest
that if a decentralized decision process allows different groups and
individuals to express disagreement, it might frustrate attempts to
implement innovations. Others [24, 331, however, suggest that more
participation in decision-making increases organization members’
commitment to the implementation of proposals.
Hypotheses 3: These previous studies suggest the following
hypotheses, which are directed to the general relationship between
organizational innovation and centralization.
H3(a) Hierarchy of authority is inversely related to organizational
innovation.
H3(b) Participation in decision-making is positively related to
organizational innovation.
Integration: In this study, integration refers to the structural devices
designed to integrate the workings of various subsystems to attain the
common goals of the organization. Diversity in occupational
background, specialization in individual tasks, and horizontal
departmentalization according to function are important in operating a
complex organization. However, innovation is not the outcome of one
individual or one department alone. For example, successful new
232 Linsu Kim

product innovation is the result of integrated efforts among all

departments concerned, such as marketing, R&D, and production.
Information on the technology involved, the consumer’s expected
reaction to innovation, the competitor’s expected behavior, the
financial capability of the organization, possible effects on other
organizational tasks, and so on, is essential to the innovation decision.
These pieces of information come from various boundary-spanning
subsystems of the organization as well as from the technical core. Even
after the decision is made, constant coordination among the various
subunits is needed for implementation. Several studies support this
argument. Lawrence and Lorsch [2 I] found that effective organizations
in a rapidly changing environment not only had high differentiation, but
also high integration. Young [49] found that the rate of innovation in
production technology was positively related to the degree of
integration among various subunits within the organization. Zaltman et
al. [50] suggest that organization capacity to deal with conflict among
individuals and groups facilitates innovation. That is, an organization’s
integrating device to confront the conflict can provide opportunity to
reduce disagreement and to lead to consensus on what changes should
be made. These studies lead to the following hypothesis.
Hypothesis 4: Integration is positively related to organizational
innovation.
Contextual Variables Several recent organization studies whose
propositions are based on empirical studies across a relatively large
number of organizations, suggest that size is the major variable that
predicts the pattern of organizational structure [2, 5, 8, 171. There are
also a few other studies which indicate a possible relationship between
organizational innovation and size [3, 22, 271. These findings, in
combination, then raise the question of whether the size of an organiza-
tion confound the above relationship between organizational innovation
and structural variables. In addition, Kim [ 181 found that in a
developing context the organization’s technological capability develops
as the organization accumulates experience in production and product
design. The organization in a developing country tends to become
technologically foreign dependent in the early period of development
and then gradually accumulates its technological capability by exerting
indigenous efforts for assimilation and improvement of imported
foreign technologies. It then raises the question of whether the age of
organization also confound the relationship between organizational
innovation and structural variables in a developing country. To answer
the above two questions, the relationship between organizational
Organizational Innovation and Structure 233

innovation and the structural variables are reexamined after controlling

for size and age.

Method
Sample The data for this study were collected from 3 1 consumer and
industrial electronic equipment (end products) manufacturing fums and
divisions (in the case of multisector conglomerates) in Korea. The
electronics industry in Korea is a rapidly growing industry. Since 1966,
the industry’s production volume has grown more than 50% every year,
exports have increased more than 100 times, and the number of firms
has increased from 70 in 1966 to 457 in 1975. Of these 457, 102 firms
produced the end products in 1975 [ 12J.
The 3 1 organizations were selected from these 102 firms on the basis
of “chunk” sampling methods so as to have as much variability as
possible in terms of product lines, size, and age of the organization.
“Chunk” sampling refers to a procedure used to select representative
samplings on an a priori basis through multistages [ 191. Table 1 shows
the distribution of the sampling. The product lines covered in this study
accounted for more than 85% of the total end product production in the
electronics industry in 1975.
The data for structural variables were obtained through questionnaires
from 306 individual respondents in the 31 organizations. These
respondents include department heads, section heads, and randomly
selected salaried workers, but do not include those in finance, personnel
or purchasing departments, nor clerical and assembly line workers as
they are considered to have little bearing on innovation decision-
making.

Measures
Orpnizational Innovation: Knight [20] categorizes organizational
innovation in terms of application as: (I) product or service innovation;
(2) production process innovation; (3) structural innovation; and (4)
people innovation. In this study organizational innovation refers to the
first two, which are often called technological innovation, for two
reasons; first, the other two innovations are not readily measurable, and
second. in manufacturing, especially where technology changes rapidly
as in the electronics industry, technological innovation may be the
predominant innovation in the organization.
Various methods have been used to measure organizational innova-
tion. Some scholars have used the number of publications, patent data,
the amount of R&D expenditures, and/or the economic value of innova-
tions [&I], while others have counted the number of innovations [e.g.,
234 Linsu Kim

Table 1: Distribution of Samples by Size, Age, and Product Line

Comm. Semicon. Preci. Multi- Total

TV Audio0 equipb equipc equipd linee (N = 31)

Below 99 3 1 2 6
100-499 3 3 3 4 13
Size
500-1000 2 1 1 2 6
Over 1000 1 1 4 6

Total 1 9 5 4 2 10 31

150rmore 1 2 2 4 9
10-14 2 1 1 2 6
Age 7-9 2 1 1 1 5
4-6 1 1 1 1 4
3 or less 2 2 3 7

a Audio includes radio, tape recorder, stereo equipment, etc.

b Communication equipment includes radio communication equipment as well as
broadcasting equipment.
c Semiconductor equipment includes electronic calculator and electronic watch.
d Precision equipment includes all testing instruments.
e Multi-product lines refer to the organizations that produce all or most of products
exhibited in this table.

14. 25, 3 11. Argyris [ 1] used individual physchological properties,

while Thompson [44] suggests organizational properties as a surrogate
measure of organizational innovation. Unable to find an objective
measure of organizational innovation, Thompson [44] further suggests
that “research in organizational innovation will have to make pragmatic
use of whatever measurements are available in the context of the
specific research project” (p. 69).
Organizational innovation is defined in this study as the rate of
technological change in products and processes, and is measured by the
total number of technological changes that have occurred in products
and processes in the previous five years, divided by the number of years
over which the organization has operated during the five years. The data
for the number of technological changes were collected through two
steps. The investigator first identified new or improved products or
processes through product catalogs and through RD&E (research,
development, and engineering) records. Comparing a series of product
catalogs issued over years, the investigator identified products with a
new model number. While catalogs provided preliminary information at
Organizational Innovation and Structure 235

the outset of firm visit, RD&E records gave more thorough, technical
information. The records include every project that has gone through the
R&D department and show for each project total expenditures and the
nature of RD&E work involved. Then, interviews provided the investi-
gator an opportunity to discuss with principal participants of R&D
departments the nature of technological changes in nontechnical terms.
For some small firms that kept no RD&E records, interviews played an
important role in determining technological changes. In other words,
the investigator used, whenever possible, the three different sources of
information in determining the number of technological changes in each
organization. Through this process, he eliminated those which involved
only ‘ ‘cosmetic” changes. The cosmetic change refers to a change that
only affected exterior design.
This measure appears to be most useful in the context of this study,
partly because the innovations encountered are relatively homogenous
in nature and quality. In other words, all innovations encountered in the
study were involved in the development of new products that also
changed the techniques and process of production to a certain degree.
None was directed simply at improving the productivity while pro-
ducing the same products. Although these products were generally
imitations or imitative improvements of foreign products, a substantial
search and development effort was exerted by local organizations.
Thus, they may be classified as innovations in the local context. For
example, one organization under study revealed that the average
investments per new product development covered in this study was
about W 10 million (W480 per US $l), equivalent to about 200 man-
months of a junior member of the R&D department and that deviations
from the average were not significant. And it is this investigator’s
observation that most innovations encountered in the study are not much
different from the above example.
Structural Variables: Structural variables and their definitions are:
1. Occupational specialty: the number of different kinds of work
that exist in an organization.
2. Professional training: the degree of formal or professional
training.
3. Professional activity: the degree of participation in professional
organization and activity by organization members.
4. Job codification: the degree of codification of jobs.
5. Rule observation: the degree of diligence exerted in enforcing
rules.
6. Hierarchy of authority: the locus of authority.
236 Linsu Kim

7. Participation in decision-making: the degree of participation in

decision making by organization members.
8. Integration: the degree of effort exerted or the number of
meetings designed to integrate the workings of various sub-
organizations for innovation.
Structural variables were measured by the scales developed by Hage
and Aiken [ 141. The translation of the instruments took two steps: first,
the instruments were translated into Korean and administered to a
Korean businessman residing in the U.S. who had middle management
experience in Korea. The translation was revised on the basis of his
suggestions. And he compared the translation and original version.
Second, the revised translation was reexamined by two Korean social
scientists who hold PhDs from American universities.
These structural variable instruments were administered, as
mentioned above, to 306 individuals in 31 organizations. Information
obtained from individual respondents was pooled to reflect the
characteristics of the organization. Aggregating individual data presents
methodological problems, since individuals at different levels of
hierarchy might perceive rules and authority differently and have a
different degree of participation in decision-making. This study,
therefore, compensated for this problem by computing an organiza-
tional score from the means of hierarchical position within the
organization [ 141. The procedure may best be expressed by the
following mathematical formula:

Organization score = -
: 2 (; x Xi3

where n = number of hierarchical levels covered in the study, m; =

number of respondents in hierarchical level i, and X, = score from
respondentj in hierarchical level i.
The data collected for occupational specialties were so vague and
general that it was not feasible to count the number of specialties in this
study. Thus, hypothesis l(a) could not be tested.
In this study, four of the structural variables-job codification, rule
observation, hierarchy of authority, and participation in decision-
making-were measured by means of multi-item scales. The scales
have been tested several times for construct validity and reliability with
samples of health and welfare organizations in the United States. It is
necessary, however, to undertake similar tests to check reliability of
these scales when applied to manufacturing organizations in a
Organizational Innovation and Structure 237

developing country. Cronbach alpha was used for both item analysis
and reliability testing. An iterative technique was used, dropping items
which did not add to the reliability of the scale. The final results showed
that at the aggregate organizational level the alpha coefficients were
.67, .70. .68, and .92 for job codification, rule observation, hierarchy
of authority, and participation in decision-making, respectively.
Contextual Vuriubfes: Size refers to the number of workers in the
organization. Age refers to the number of years passed since the
organization established production facilities for the product lines
covered in this study.

Results
This study reports bivariate correlational relationships observed
between organizational innovation and each of the seven structural
variables, together with second-order partial correlations, controlling
for size and age. A multivariate analysis was performed but did not give
fruitful results.
The means and standard deviations for the variables are listed in
Table 2. The relationships between organizational innovation and the
structural and contextual variables are presented in Table 3. Organiza-
tional innovation was positively related, as hypothesized, to profes-
sional training (r = .54,p< .OOl), professional activity (r = .28,p<. 1)
and integration (r = .65, p < .OOl), and inversely related to job
codification (r = - .58, p< .OOl) and hierarchy of authority (r = - .74,
p < .OOl). On the other hand, organizational innovation was not
significantly related to rule observation and participation in decision-
making.
Although this study failed to specifically measure the number of
occupational specialties, it was nevertheless observed during interviews
that organizations under study had a number of different specialties such
as industrial engineers, electromechanical designers, cosmetic
designers, scheduling specialists, quality control specialists, etc. Thus,
professional training shows the degree of specialization among these
N‘“...,
specialties, indicating orgamzational complexity.
A high correlation between organizational innovation and job
codification indicates that members in innovative organizations appear
to have more discretion and flexibility in their works than those in less
innovative organizations. On the other hand, rule observation was
found to have a positive but statistically insignificant relationship with
organizational innovation. The positive relationship is opposite to
Hypothesis 2(b). This opposite and insignificant relationship is
surprisingly consistent with the findings of Hage and Aiken [ 141.
238 Linsu Kim

Table 2: Mean and Standard Deviation of Variables

Standard deviation
Mean (N = 31)

Professional Training 1.25 0.57

Professional Activity 0.68 0.41
Job Codification 16.15 1.91
Rule Observation 4.80 0.69
Hierarchy of Authority 17.43 2.01
Participation in Decision Making 41.13 7.08
Integration 8.48 5.28
Size 778.14 534.37
Age 9.13 6.55
Innovationa 5.28 3.20

a Number of innovations per year.

Table 3: Correlation between Organizational Innovation and

Structure

Second Order
partial coma
Zero order (N = 31)

Complexity Hi(b) Professional training .54** .28t

Hi(c) Professional activity .28t .04

Formalization H2(a) Job codification -.58** -.28t

H2(b) Rule observation .19 .09

Centralization H3(a) Hierarchy of

authority -.74** -.65**
H3(b) Participation in
decision making .lO -.07

Integration H4 .65** .49**

Contextual Size .34*

variables Age -.31*

t Significance level <. 1.

* Significance level <.OS.
** Significance level <.Ol.
a Both size and age are controlled.
Organizational Innovation and Structure 239

While decision-making about work (hierarchy of authority) was

strongly correlated with organizational innovation, the degree of
decision-making about promotion, budget, policy change, and work
allocation (participation in decision-making) was positively correlated,
as hypothesized, with organizational innovation, but was statistically
insignificant. This finding is at variance with that of Hage and Aiken
[l41.
Integration was significantly correlated in a hypothesized direction
with organizational innovation. While high complexity and decentrali-
zation indicate a differentiation among functional specialties or groups,
integration indicates the degree of integrating efforts of these dif-
ferentiated groups. Thus, the findings support the notion that in a
changing environment the innovative organization needs both dif-
ferentiation and integration.

Second-order partial correlation coefficients were found for the

relationships between organizational innovation and structural
variables, controlling the effects of size and age. Although the strength
of correlation was noticeably weakened, organizational innovation was
significantly related, as hypothesized, to professional training (r = .28,
p < I ), job codification (r = - .28, p< l), hierarchy of authority (r =
- .65, p< .001) and integration (r = .49,p< .05), regardless of size and
age. The only exception was professional activity. The weak relation-
ship observed between organizational innovation and professional
activity virtually disappeared when the two contextual variables were
controlled.
Post Hoc Analysis The intercorrelations among these seven structural
variables are shown in Table 4. For instance, professional training was
highly correlated with professional activity, job codification, hierarchy
of authority, and integration, while job codification was highly cor-
related with hierarchy of authority and integration. These intercorrela-
tions among the structural variables imply the existence of more general
structural dimensions, some of which might include more than one
aspect of the seven structural variables. This raises a problem about
discriminant validity among some of the theoretically separate
variables. Factor analysis may be an alternative to identifying under-
lying structural dimensions but, given the number of variables and
number of observations, it cannot be appropriately used. The second
alternative may be to combine some of more highly correlated variables
judgementally. However, the investigator reports the findings as they
are in order to maintain comparability with previous studies.
 Table 4: Intercorrelation among Structural Variables

Professional Professional Job Rule Hierarch of Participation Integration

training activity codification observation authority in decision (N = 31)

Professional training 1 .oo

Professional activity .60** 1.00

Job codification -.68** -.31* 1.00

Rule observation .42* .43* -.18 1.00

Hierarchy of authority -.52** -.25t .12** -.06 1 .oo

Participation in
decision making .47* .44 -.09 .lO .03 1.00

Integration .64** .22 -.83** .39* -.14** -.06 1.00

t Significance level C.01.

* Significance level <.05.
** Significance level <.Ol.
Organizational Innovation and Structure 241

Summary and Discussion

Most innovation studies focus their analysis at the individual level. The
limited number of recent attempts to investigate innovation at the
organizational level are concentrated in a few advanced countries. This
study, in contrast, examined the relationship between organizational
innovation and structural properties in a developing country, Korea. A
contingency view of the relationship between the different stages of
organizational innovation and structure appears to offer a better
framework but poses problems in empirical study. This study, there-
fore, related organizational innovation and structure without con-
sidering the different stages.
The results of this study support in general the findings of previous
works undertaken in advanced countries, particularly those of Hage and
Aiken. Their study [ 141 was conducted with service organizations in an
advanced economy to examine the relationship between structural
properties and program changes, while this study was undertaken with
manufacturing organizations in a developing economy to examine the
relationship between structural properties and more frequent product
changes. There are noticeable differences between the two studies in
terms of development setting (developed vs developing), organizational
setting (service vs manufacturing), and the category of innovation
(program change vs product change). However, findings on the
relationship between commonly used structural variables and
organizational innovation are strikingly consistent between the two
studies. The only exception lies with the inconsistent findings with two
centralization variables. As Downs and Mohr [IO] argue, this
inconsistency shows evidence that centralization relevant to innovation
depends upon what is being decided. That is, resource allocation
decision-making was found to be significantly related to program
changes in service organizations, while decision-making about work
was found to be significantly related to more frequent product changes
in manufacturing organizations. A plausible explanation may be that
major program changes such as a new workshop, training program, new
services, etc. , in social welfare organizations require the addition of
personnel, budget, and often new organizational units; thus, program
change was found to have a significant correlation with the degree of
decision-making about resource allocations (participation in decision-
making). On the other hand, more frequent product changes within
given personnel and organizational settings may require more freedom
in assessing market and technological opportunities; thus, product
innovation was found to have a significant correlation with the degree of
242 Linsu Kim

decision-making about work (hierarchy of authority) but not with

decision-making in resource allocations.
Consequently, the results of this study lead to a tentative conclusion
that an organization theory with respect to the relationship between
innovation and structure appears to be cross-culturally transferable at
least to the industry investigated in this study. However, in order to
generalize the findings of this study and develop a contingency theory of
the relationship, it is essential to replicate the study in different
industries where the environment may be more or less turbulent than the
electronics industry investigated in this study. Equally essential is to
replicate the study in different developing countries; for instance, in
countries at different levels of development or with abundant natural
resources but without trained human resources. (Korea, where this
study was undertaken, has poor natural resources but has accumulated
skilled human resources.)
The results also show that, unlike health and welfare organizations
where distinction is clear among professional specialties, the instrument
of Hage and Aiken [ 141 was not adequate to discriminate occupational
specialties found in manufacturing organizations in this study. Other-
wise, their scales developed for health and welfare service orgnizations
in the U.S. were, with some revisions, reliable for use with manu-
facturing organizations in a developing country. This is a significant
contribution to comparative management studies. While organizational
theory studies are concentrated in a few advanced countries. recently
emerging cross-cultural comparative management studies have
generally not progressed beyond impressionistic description and
ecological classification (except for some behavioral studies) due
mainly to difficulty in operationally defining variables and to the lack of
validated instruments. Thus, certain scholars [e.g., 29, 301 have
recently sought to marry the two seemingly related areas in order to
bridge the gap between them. However, most efforts are still at the
conceptual level. Equally important are empirical validation of
available measurements and testing of established relationships in
different cultural settings to provide a base for both theoretical and
empirical development of the two related areas.
Although the results of this study could not establish causal or
independent relationship between organizational innovation and each of
the structural variables, it still offers several tentative implications for
the management of organizations in a developing country. If innovation
is essential for organizations to survive and grow in a competitive
environment in a developing economy (in fact, to an exploratory
question, 25 out of 3 I or 8 1% of organizations under study responded
Organizational Innovation and Structure 243

that product innovation was one of the three most important strategies
for survival and growth), it appears essential to have a high level of
knowledge and expertise and organic structural properties. In an
uncertain and changing environment, as experienced by the electomics
industry under study, diversity and depth of occupational background
enable the organization to bring a variety of sources of information to
bear on innovation, which in turn facilitate a recognition of need and/or
opportunity. Furthermore, a high level of knowledge and expertise
enables the organization to translate its needs and opportunities into new
products and processes. The organization should also provide room for
discretion and freedom in dealing with undefined, changing situations.
Rigid rules and procedures produce less opportunity to become aware of
potential market and technical opportunities. They also become
detrimental to the generation of creative ideas and their implementation.
The organization should also allow more participation of its members in
innovation decision-making. Greater participation in decision-making
may provide new insights and alternatives for innovation decision-
making and at the same time motivate participants to increase their
commitment to successful implementation of adopted ideas. And, the
organization should have devices to integrate specialized tasks of
functional groups, as successful innovation is the result of integrated
efforts among all the departments and individuals concerned.
Finally, the seven structural variables used in this study show high
intercorrelations. implying the existence of more general structural
dimensions. This raises a problem about discriminate validity of
theoretically separate variables used in this and previous studies. Future
research should identify new structural dimensions.

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