Approximate reading time: 5-7 min. In innovative environments, companies face a control problem. On the one hand, management needs to guide employees by monitoring goals and behaviors. But on the other hand, management must also ensure that employees have enough space to search for innovative solutions and to respond to new opportunities. While previous research considered management control systems (MCS) to be detrimental to innovation, later studies take a more positive perspective. A new study followed the latter research focus. The researchers focus on solving management problems in connection with innovation. This is done by examining how MCS can be used to help companies transform investment into innovation capabilities for innovation. The researchers thus offer a more thorough picture of the innovation process due to the fact that focusing here on the prerequisites for innovation instead of innovation itself.
Based on the resource-based view of the company, researchers are driving the thesis that neither innovation nor MCS alone is sufficient to achieve successful innovation. They hypothesize that objective performance measurement prevents companies’ ability to transfer investments in innovation capacity to innovation, while cultural controls are appropriate in this context in view of its more discreet nature. In a next step, researchers argue that the benefits of cultural controls are an increasing function of perceived uncertainty in the environment. To test the hypotheses, researchers used both questionnaire and patent data as correlated.
The result of the study – to materialize investments in innovation capabilities
The researchers show that objective performance evaluation negatively impacts companies ability to transform investment into innovation capabilities (measured by patents), while cultural controls help companies to transform investment into innovation capability for innovation. The study also finds evidence that the positive effects of cultural controls increase as a function of perceived uncertainty in the company’s environment (for example, technology manifests in the industry).
The study contributes to previous research by taking a more nuanced view of the innovation process. In addition, the researchers believe that they also contribute to the understanding of the benefits of cultural controls. Finally, the study also makes a contribution to research on complementarity among organizational choices by broadening the set of choice of variables companies have at their disposal.
Results from the study are very interesting. They highlight the importance of actively working with corporate culture. For example by demonstrating concrete to employees that corporate culture and implements good ideas. This at the same time as one might even try to avoid measuring innovation from different aspects.
• Work actively with corporate culture.
• Avoid trying to measure innovation from different perspectives.
• This more important when uncertainty in the company’s environment and the outside world increases.
Posch, A., Wabnegg, M., 2016. Materializing Investments in Innovation Capabilities: The Role of Management Control Systems. August 15, 2016.
Available from http://ssrn.com/abstract=2823884
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