Barriers of Organizational Innovation Management in China


Chapter 2

Literature Review


2.1 Introduction of Organizational Innovation (OI)

            It has been emphasized that organizational creation is fundamental to the process of innovation, which then constitutes part of the system that produces it. The ability and capacity of an organization to innovate is a precondition for the successful utilization of inventive resources and new technologies. Thus, in this sense, the introduction of new technologies often presents complex opportunities and challenges for organizations, leading to changes in managerial practices and the emergence of new organizational forms. Therefore, organizational and technological innovations are intertwined. In essence, the term organizational innovation refers to the creation or adoption of an idea or behavior new to the organization (Lam, 2004). As such, the innovation can be a new product, a new service, a new technology, or a new administrative practice (Hage, 1999), which provides the edge or competitive advantage of an organization in its respective market. In this sense, OI, such as through the introduction of new products and new services, can provide new employment opportunities and positive balances of trade, thus, protecting the nation’s standard of living. Practically, since a nation’s economic development depends largely on the continued launching of new products, governments have become concerned about innovation. This is because many organizations and nations alike perceive the innovation of products, services, technologies, and administrative practices as assisting with the articulation of study of significant breakthroughs in science, the development of superior military equipments, the creation of interdisciplinary programs in higher education, the reform of welfare, and many others. In other words, the study and the recognition of the importance of OI concerns some of the most basic problems in the society, and thus, can be deemed as important and relevant (Hage, 1999). 


2.2 Introduction of Organizational Innovation Management (OIM)

            It has been stressed that businesses nowadays have come to realize the importance of innovation for survival in a world of global competition (Hage, 1999). This is because every organization in today’s generation has been exposed and has already been aware of the fast-paced market and industrial environment that it has due to the continuous, simultaneous, and dynamic changes that happen in relation to science, technology, and communication. Because the concept of OI pertains to the adoption or creation of a new idea or behavior in an organization, the management of such a concept would also be relevant. It has been reported that in the management literature, innovation serves to drive corporate success and is a strategic endeavor contributing to the differentiating capacity of an organization. Innovation is said to be a high-risk activity, unpredictable, complex, dynamic, non-routine based, involves creativity, and is difficult to control (Huizenga, 2004). With such characteristics, it can be perceived that an organization that would be devoting itself to innovation would be needing the magic hands of management in order to govern, control, and direct its success. In this regard, the concept of Organizational Innovation of Management or OIM pertains to the management of the chances, the risks, and the changes in the organization, in relation to its dedication and commitment in implementing and adapting to innovation. This also involves directing and committing to the development of the organization through determining the potential pitfalls and uncertain, high-cost and results. It pertains to the appropriate delegation of resources that might render value in the long run. More importantly, OIM is about enhancing and inspiring change in the organization, thus, involving and developing people to recognize, learn, and perform changes in terms of work, skills, and competencies in the organization (Huizenga, 2004).


2.3 Relationship between OI and OIM

            As stated and emphasized earlier, the concept of OI pertains to the creation or adoption of a new idea or behavior in an organization, while the concept of organization innovation management or OIM pertains to the management of the creation or adoption of a new idea or behavior in an organization. From the definitions of the two concepts themselves, it can be understood and deduced that a significant relationship exists between them. This is because in order for an organization to effectively and efficiently undergo its needed changes, it must then be able to come up with a new idea or behavior that would serve to be a relevant and appropriate answer to its needs. However, the utilization and implementation of the said changes or innovation strategies in the organization would not be as useful and significant without proper management, control, and direction. This is because through effective management, the use and the implementation of innovations in the organization would be based on scientific research and data, which would be appropriate for responding to the needs of the organization, the demands of consumers, its environment, its workers or employees, and its industry. The concept of OI is deemed to be closely integrated with the concept of OIM, given the different factors that interplay between them.

            It has been reported that there are two types of innovation that can be used by an organization, namely, autonomous and systemic innovation. An autonomous innovation is one that can be introduced to the market or to the consumers without massive modification of related products and processes. An example of this kind of innovation is the introduction of power steering, which did not initially require any significant alternatives to the design of cars or engines (Lam, 2004). This form of innovation is usually what is being done by most organizations, as through autonomous innovation, less research, fewer costs, and fewer alterations of products and processes are involved. In this regard, an organization would be able to effectively respond to the needs of its customers, with fewer expended money or budget, but with increased profits. Aside from increased profits, products in the market, which underwent autonomous innovation still pertain to the previous products targeting previous customers, who would be perceived to retain loyalty to the use of that particular product. On the other hand, the second type of innovation is systemic innovation, which favors integrated enterprises because it requires complex coordination amongst various subsystems, and hence is usually accomplished under one roof. An example of a systemic innovation is the complete redesigning of many automobiles in the 1980s, producing front-wheel drive vehicles (Lam, 2004). From this, it can be perceived that the primary relationship of OI and OIM is effectively determining the type of innovation an organization needs to undergo or implement. An organization must first determine the type of innovation they need before coming up with the next step or plan. In this sense, this involves determining the problems of the company or organization, which need to be addressed through innovations. As such, an organization must not be able to adopt or create a new idea or behavior immediately without thinking and planning about it. Therefore, the relationship of the two concepts involve integrating together in order to determine the problems or issues in the organization that need to be addressed through innovations. An example of this would be to determine first why a certain brand of a house appliance, such as a microwave is not profiting in the market. Identifying the problem would mean choosing this particular brand of microwave to undergo innovation or significant changes.

            Identification of the problem, which needs to be answered or addressed through innovation leads to careful planning, organizing, and research. After identification of the problem, the organization can now determine what type of innovation its product/s can undergo. Basing on the current example, innovation of the microwave in question would mean it has to undergo autonomous innovation. Research for the organization would mean the company would be obtaining relevant data and information regarding the performance of the microwave in the market, involving the feedback of consumers and users of the product. In addition, the costs, duration, and processes involved in its production must also be taken note of in order to critically analyze and evaluate the overall performance of the product to be undergone innovation. After relevant research and data gathering, planning would be the next step to take. Through effective and efficient planning, the company would then be able to synchronize its resources and its objectives to the changes that must be done to the product. Careful planning would then lead to organizing, which would allow the company or organization align their goals to the interests of their customers. In this sense, the second factor or aspect in stating the relationship between OI and OIM involves assisting organizations to careful data gathering, research, and planning, which would be helpful for implementing changes in the organization. Careful and critical planning of the steps to be taken by the organization in relation to the changes or innovations it may take would be the best strategy to do, as this would help the organization lessen future problems and crises, during the actual implementation of the said changes.

            It has been pointed out that managers in an organization need to be trained to create mechanisms and systems that support and facilitate innovation, which is not confined to the management of researchers, engineers, and advertising professionals alone. More and more, managers of all functional areas must need to know how to create an optimal level of OI in their departments (Fischer, 2001). In this regard, it can be stressed that the third indicator of the existing relationship between OI and OIM is providing and emphasizing the skills and competencies managers must have in order for the organization to effectively and efficiently implement innovations and changes needed by the company. The relationship between the two concepts emphasizes the need for managers to possess a number of skills and competencies, and assume roles in the organization. Such skills include strong leadership skills, the ability to develop people, excellent communication skills, good interpersonal skills, the ability to handle stress effectively, problem-solving skills, and time management skills (Gido and Clements, 2005).

            The most important indicator that emphasizes the relationship that exists between OI and OIM is the presence of strategies or interventions that would assist the organization and its members to undergo the process of change or innovation. The presence of strategies or interventions, such as individual, group, inter-group, and organizational interventions (Rotwell and Sullivan, 2005) indicate that an organization values the development and improvement of its human resources in order to cope or adapt to the changes that must be implemented in the organization. In addition, the fact that organizations bother themselves with strategic and organizational planning and analysis means that the coping with the changes happening in the organization matter to them, as such changes significantly influence the many processes that would determine the success or failure of the organization in its respective industry.


2.4 China Manufacturing Industry, OI and OIM Situation


Background of China Manufacturing Industry

            Manufacturing is one of the most fundamental activities of human beings and the cornerstone of survival and development for society through creating tremendous public wealth. Its industry is the foundation of national productivity and the pillar of the national economy. This holds true for China, as its manufacturing industry is rapidly rising the world as never before. This has been brought about by its reform and opening up to the outside world, along with its entry into the World Trade Organization. As such, China is now the 4th largest manufacturing power in the world, second only to the United States, Japan, and Germany. From 2001 to 2002, China accounted for 9.6% high-tech share of total manufacturing output, next to Japan with 20% and the United States with 36% (Ni, 2004). It has been emphasized that its important mark in its sudden emergence is the rapid expansion of China’s production capability. In support of this, it has been reported that China’s improvement in terms of productivity accounts for 35.30% of GDP and 78.68% of all industries in 2003. The taxes paid account for about 90% of those by all industries, and the workers about 90.7% of the total of all industries. In relation to foreign trade, China’s exports accounted for 91.2% of the exports of the whole country, and the actual forein direct investments totaled 70% of all actual foreign investments in the country (as cited in Limin et al., 2005). In addition, over 100 kinds of products of 10 trades including household appliances, medicines, electronic devices, toys and many others rank the first in the world in terms of output. The total trade value of export and import in mainland China has been up to US$ 1150 billion in 2004, second only to the United States and Germany (as cited in Limin et al., 2005). In addition to this, its population reached over 1.3 billion people in the middle of 2007, thus, making it the world’s largest and most populous country (Rosenberg, 2007). This is in comparison with the population of other countries, wherein the second most populated country is India, with 1.1 billion people, and the third most populated country in the world is the United States, with 303 million, as of early 2008 (“List of Countries by Population”, 2008). This is because as of the start of the 21st century, the population of China is composed of 70% of elderly, an abnormal ratio of males to females, and an abnormal quality of society. The society of China can be deemed as such, for the current population policy of China has a “negative selection” process that requires urban residents and couples with higher social and education status to have fewer children, while granting poor farmers the right to have more (Xizhe, 2004). Thus, its large population contributes to its increase in terms of production in the manufacturing industry, as more and more citizens become the hands that drive the many and large manufacturing industries in the country. The increase then of the population leads to the increase of individuals that China can induce for labor. Moreover, the liberalization of China’s economy, most especially its manufacturing sector led to produce a devastating effect not only to the Mexican economy, but to the American economy as well. This is because jobs are going overseas at an increasingly rapid rate, mostly to China (McManus, 2006). Recently, in 2006, the profit growth of home appliance manufacturing industry grew considerably, which was greatly associated to the sharp rise of profit growth of the refrigerating appliance industry. In addition, the home electronics industry in accelerating, with the increase of the color TV and video recorder industry. This continued on until 2007, as air-conditioner industry, led by the Gree brand is achieving more evident competitive advantages, and the leading position of Qingdao Haiers refrigerator business, which would be sponsoring the 2008 Beijing Olympic Games (“China Stock Listed Home Appliance Companies Report 2006-2007”, 2007). In this sense, the multinational organizations that have dominated the market of China, along with significant impacts of globalization in the world have contributed to the development of the manufacturing industry of the country. Thus, it can be deduced that the opening up of the economy and market of China has done the country, its economy, and its society good.

However, despite the high regard for the massive production associated with the manufacturing industry of China, it has been stressed that the gap between its own manufacturing industry and the industrially developed countries is becoming noticeable. China’s manufacturing industry can be described as large, but not strong, and is still way behind developed countries in terms of the enterprise scale, technical level or the international market scale, international competitiveness, and the position in international division of labor. This is because a number of problems or loopholes can be seen through China’s manufacturing industry, such as the low level of technical standards and the lack of professional talent versed in technical standards. Problems with the standardization field of China include serious backwardness, lag in standards, serious divorce of formulation of standards from market demand, and the lack of professional talent familiar with, and versed in technical standards, such as of ISO standards. In this sense, the presence and the persistence of such problems serve to hamper and be regarded as constraints to the development of China’s economy, especially in terms of the development of its manufacturing industry (Limin et al., 2005).

From this, it can be perceived that China’s manufacturing industry serves to be one of the largest producers in the world, and this is brought about by the economic and business opportunities provided by the multinational organizations and investors. Along this is the large number of its population, serving to increase the number of individuals to be used for labor. However, the presence of problems and loopholes in China’s manufacturing industry means that a lot of polishing must still be done. Thus, in this sense, the role of OI and OIM comes into the picture.


OI in China

            It has been reported that OI is the premise and basis for technology innovation. Chinese companies normally conduct organizational reforms when adjusting agencies and appointing new leaders (Zhouying, 2005). Thus, with its opening, it can be assumed that Chinese enterprises were dedicated in the process of OI in order to improve and develop its economy. In emphasizing the process of OI in China, a number of factors must be taken note of. In addition, both internal and external OI must also be emphasized. It has been stressed that internal OI in organizations refers to the system by which internal venture companies are formed, internal project organizations are formed and branch companies are established. This may also be referred to as facilitating ‘intrapreneurship’, which is a good way to create an innovative environment, in order to protect the company against the loss of creative talent (Zhouying, 2005). This is usually done by establishing a number of company branches within the country in order to gather more talents and manpower to drive the operations of a company. On the other hand, external OI in the company involves the flexible operation of coordination technology, merger technology, and virtual-organization technology, which are all aimed at increasing enterprise competitiveness. Making use of virtual manufacturing methods to gain access to external resources and to more effectively employ internal resources of the company are examples (Zhouying, 2005). One way of doing this is through mergers or acquisitions, which would incorporate the technology of one firm to the other, thus, would provide more innovation and power for the combined technologies and company.

            The process of OI in China can be emphasized through the changes that can be observed in its economy. These changes are said to be part of China’s dedication to innovate, as such changes enable the nation to be regarded as one of the largest market in the world, which significantly participates in the overall development of the world economy. Primarily, it has been stated that after 15 years of negotiation, China’s accession to the World Trade Organization membership has rapidly demonstrated price competitive impacts on OECD economies (Gu and Dodgson, 2006). Competition is increasingly more vigorous, and extends everywhere, from domestic market to global market, from technology alliance to virtual organization, and from outer environment of enterprise to inner one. At the same time, the innovation enterprises in China are increasingly more frequent and rapid. Nowadays, the innovation actually becomes the main driving force of enterprise growth, thus, emphasizing the fact that it is inevitable to lose in the global market competition if enterprises or companies have no innovation activity (Xu et al., 2002). In addition, regional case studies include the development and innovation in consumer goods manufacturing clusters in China, local cluster earning in the context of the global value chain, Chinese cell phone manufacturers’ regulation, technology, market, skills and competence, mass customization of life and health insurance, and Shanghai regional innovation systems for generating economic development. Aside from the development of its manufacturing and service industries, it has also be pointed out that the development of Hong Kong from trade hub to innovation hub is explored in the role of Hong Kong innovation system in linking China to global markets. The global Chinese diaspora network is examined as entry point to knowledge-based development in local economies (Gu and Dodgson, 2006). From this, it can be perceived that the innovations of China, including the city of Hong Kong emphasize the development and improvement of its economy.

            However, given the changes that happen to the present generation in terms of the development of technology and communication, China has also been actively coping with such changes. One way of coping through such changes is its rapid catch-up with computer industrial technologies. It is widely predicted that the Chinese market will continue to experience rapid growth and will become one of the world’s largest in the early years of the new millennium. The share of domestic makers will continue to rise. This has to be viewed in the context that the computer market is one of the most open and competitive markets in China, and the competitiveness of Chinese domestic PC makers is based mostly on price and performance. Another indication of its innovation is the fact that China is catching up in the computer industry as a net exporter of computer electronics goods around the world. Although foreign-invested firms played important roles in this respect, indigenous Chinese firms such as Legend and China Great Wall Computer are among the largest exporters. In fact, Legend is now one of the world’s largest suppliers of computer motherboards and add-on cards. In addition, indication that China’s computer industry is catching up includes sophisticated computer information systems integration technologies. This is best demonstrated by China’s technology leadership in markets for pictographic electronic publishing system (Lu, 2000). With these accomplishments, it can be seen that the potential of the Chinese industry to be regarded as it is has been proven, thus, making it highly capable of innovation, not only in the organizational level, but in a national level as well.

            Aside from the telecommunication and computer industries, OI in China is also evident in both the food and toy manufacturing industries. Following the increase in the population of China is the development in its food manufacturing industry, to produce more food for the growing population. The food industry of China is expected to generate an income of US1.8 billion in 2005, which is a 325% increase in 8 years. Its post-Communist market is being driven by the increased spending power and changing food habits of the country’s ever-wealthier people. However, there are significant risks with an emerging market of this size, complexity, and relative immaturity (“The Food Industry in China”, 2005). Thus, with this, it can be understood that the agricultural and manufacturing industries in China cannot cope up with the sudden upsurge of China’s population. In order to do so, several strategies are being implemented by the nation, which in one way or another produces negative or undesirable effects. Lastly, in terms of China’s OI, its toy manufacturing industry becomes one of the most evident proofs. It has been reported that cheap, plastic toys the kind found in stores, fast food restaurants, fairs, daycare centers, cereal boxes and homes in many countries, almost all come from China. The Chinese toy industry, the largest in the world, generates billions of dollars in export profits and employs millions of people in thousands of factories. These factories are in important part of the economic boom that has lifted many out of poverty in the country. However, it has its own dark side too, as it entails excessive working hours, dangerous equipment and chemicals, cramped employee dormitories, abusive managers, crooked hiring practices, and pay below even China’s minimum wage (“The Toy Industry in China”, 2005).


OIM in China

            From the above discussion, it can be pointed out that the OI in China involves the development of its different sectors, through development of different products and services, through mass production of goods, and through international and global communication and interrelationships. In this sense, it can be perceived that amongst other developing countries, China seems to be the country that would be best fitted to develop into a First World Country. This is because despite its increase in population, China has been continually improving its standing in terms of communication, technologies, strategies, and management. It can be seen that the performance of Hong Kong as one of Asia’s information and technological hub has brought about advantages in China as a whole. Its opening up to other markets has increased Western influence in the country, thus, granting and providing China its changes in terms of technology, language, and management. However, despite the fact that OI in different firms and industries in China presents positive effects to its economy and world image, many still believe that China is immature and not ready and stable to be regarded as such. Thus, in this regard, such immaturity produces a number of setbacks or problems in China’s manufacturing industry, which would surely produce problems in individual organizations. Given such problems and setbacks, the role of OIM comes into the picture. This is because, through OIM, the many problems or setbacks in the manufacturing industry of China, along with its individual organizations can be lessened or controlled effectively.

            However, before pointing out the specific strategies and ways of managing OI in the Chinese industry, the evaluation and discussion of the type of organizations and its employees, including the culture and practices evident in organizations must be stressed. This is because knowing the specific culture and practices in Chinese organizations would be relevant information in specifying how Chinese organizations manage the process of OI.

            Lockett (1988) emphasizes four important points evident in the Chinese culture that affect organizations, namely, respect for age and hierarchy, group orientation, face, and the importance of relationships. In terms of respect for age and hierarchy, it can be emphasized that the widespread Chinese respect for age and seniority comes from Confucian values, as an older person is often seen as more experienced, wiser, and in some not clearly defined way, superior to those younger in the organization and other types of groups. In addition, such respect stems from the fact that Chinese are influenced and conscious of social stratification, deeming the society as a pyramid shaped structure, with a paramount ruler at the top, a variety of officials in the middle, and the rest of the individuals at the bottom (Bucknall, 2007). The recognition of each individuals belonging to each level of the pyramid is believed to be the cause of peaceful coexistence of each individuals in the organization, thus, extending the sense and importance of respect to older individuals and to superiors. In relation to this is the second major influence that affects the management of Chinese organizations, which is group orientation. In relation to the concept of the pyramid, group orientation pertains to the recognition of the members of the organization of their respective groups and standings or positions in the organization. Thus, with such group orientations, an individual belonging in the lowest level of the organization cannot mingle or interact with the members belonging to the highest or elite level. As such, it is already innate and natural for Chinese workers to regard their specific group levels and classification, whether in the organization or in the larger context of the society. In addition, the concept of group orientation emphasizes the high regard of the Chinese for their families. It has been reported that the group tradition was reinforced by their experience of communism, where people were forced to participate in group discussions and any individual who stood out might later be punished. The group is seen as a source of strength and comfort, and business decisions are generally made on a consensus basis, within the framework dictated by the highest authority of the top management, be it a highly placed politician or public servant, the owner of the firm, or the Chief Executive Officer. This second factor indicates that many adult Chinese are unwilling to make decisions on their own. Thus, a seemingly one-person problem in a particular factory may eventually be solved by a decision taken only after extended discussion by the group, otherwise, it might not be solved at all (Bucknall, 2007).

The third factor that influences the management of organizations in China is the concept of face. Face, in the literal context of the Chinese culture means ‘honour’, ‘good reputation’, or ‘respect’. It has been emphasized that four types of face can be recognized, namely, 1) Diu-mian-zi, or the situation when one’s actions or deeds have been exposed to people; 2) Gei-mian-zi, which involves the giving of face to others through showing respect; 3) Liu-mian-zi, which is developed by avoiding mistakes and showing wisdom in action; and 4) Jiang-mian-zi, wherein the face is increased through others, such as when someone complementing a person to an associate (“China – Language, Culture, Customs, and Etiquette”, 2008). In essence, losing face means the degradation of one’s honour, which is mostly avoided by members of the organization, and generally by most Chinese. The last major influence of the Chinese culture in relation to organizational management is the importance of relationships. It has been stressed that harmony is an important part of the Confucian heritage being observed and practiced by the Chinese. It is believed that if everyone in the society or the community plays an important role, then overall harmony will be preserved. For this particular reason, self-discipline and moderation are important elements of human behavior, which influences harmony (Bucknall, 2007). In addition, aside from literally avoiding forthright conflicts and confrontations between and among individuals of the group, the Chinese also uses non-verbal communication in order to express what they want and what they feel regarding a certain situation. It has been pointed out that since the Chinese strive for harmony and are dependent with their groups, they rely heavily on facial expression, tone of voice, and posture to tell them what someone feels. They interpret frowning as a sign of disagreement, making them maintain an impassive facial expression when speaking. It is also disrespectful to stare into another person’s eyes, thus, in crowded places, the Chinese avoids eye contact in order to give themselves privacy (“China – Language, Culture, Customs, and Etiquette”, 2008). Aside from these four major influences that affect that management of organizations in China, several other characteristics of the Chinese can be pointed out, which present significant impacts to the management of Chinese organizations.

Chinese are said to be collectivistic, in contrast to the individualistic Westerners. Collective social control is being achieved through shame or face, and personalistic governance is attained through guanxi (Alon and Shenker, 2003). It has been pointed out that to get over a major barrier to communications due to the habit of the Chinese to divide people into insiders and outsiders, people develop a network of contacts and personal relationships for whom they do favors and from whom they ask favors in return. This is guanxi, which means possessing influence or “pull” that one can use with the contacts he or she have developed in the right places. Without guanxi, it is difficult for an individual to accomplish much, and with it a person can have more opportunities and achieve a surprising number of things (Bucknall, 2007). In addition to this, the Chinese are said to have relationships that are business focused, making ones network as his or her principal mechanism of organizing. Thus, this makes the negotiations between and among the Chinese are contingent upon the nature of their relationships. For the Chinese, reciprocation, personal integrity, trust, and other qualities of gentlemanly conduct are important. An autocratic type of leadership is being followed, as power is attained through ascription, rules are followed through paternalism, and consciousness of high status is being observed. In this sense, it would be best important to become intuitive for the Chinese in treating problems as wholes and in order to cultivate unfolding change. Moreover, fortune, luck, and the belief in the spirits are being observed, in order to maintain harmony and consensus among the group, thus, observing cooperation and group interests (Alon and Shenker, 2003). From these characteristics, it can be observed that the approach in Chinese organizations is entirely different compared to a Western approach in terms of management. Using such characteristics of the Chinese organization, the management of its OI would be emphasized.

            Based on the above discussion, the OI for China involves the mass production of their needs and the needs of other individuals in other countries, such as food, toys, textile, appliances such as computers and cellular phones, health products, and the development of its knowledge-based economy. The shift of the economy of China indicates that it is now more open to changes and to more investments from First World countries in order to further develop and uplift the economy of the country. However, the characteristics of the Chinese organization discussed earlier differentiate Chinese organizations from other organizations in the world. This is because China has a rich culture that is deeply rooted from its ancestors and in the system of the Chinese citizens, thus, making the management of OI far different from the management of organizational innovations of other countries. Nevertheless, such rich culture embedded in the system of the Chinese may somehow contribute to its immaturity in terms of effective management of organizational innovation.

It has been reported that Chinese conceptions of organizing are essentially “psychophysical”, which involves simultaneous and spontaneous thought-action, while being patterned through harmonic coordination of interrelated parts. Its organizational forms and management styles are substantively different from the scientific organization traditionally adopted in Western organizations, which involves diffused network structures and roles with flexible goals and qualitative judgment. Chinese management styles are heavily dependent upon relationships and informality, with unclear accountability and authority based on trust. Fuzzy or unclear, common-sensical, multivalued, or multivalent thinking is the characteristic of Chinese cognition that most markedly distinguishes it from other Western organizations (Alon and Shenker, 2003). In this sense, it just means that the Chinese manage the transformation of its manufacturing industry based on establishing relationships in the organization. This is in their belief that existing and established harmony in the organization would enable a certain firm to fulfill all its goals and objectives in relation to mass production. In doing this, each organization in the Chinese industry has an enterprise life-support system, which assists workers to fulfill necessities of everyday life as housing, healthcare, childcare and education, and even recreation and entertainment. Such enterprise life-support systems involve the employing firm in assisting a worker’s entire family in meeting their daily needs, and they represent a large proportion of any enterprise’s daily operating concerns. An example of a Chinese firm committed to this kind of system is the First Automobile Works in Changchun, where some 80% of 60,000 total workers of the firm are employed in ways totally unrelated to car production, thus, placing bigger burden to the factory head, in comparison to the factory heads in other countries (Shenkar, 1991). Thus, in this sense, it can be perceived that managing organizational innovation in Chinese firms involves providing not only for the employee, but for his or her whole family as well, which can be seen as a way in exercising and establishing harmony in the organization.

It has been emphasized that in terms of leadership, Chinese managers are regarded as more bureaucratic, perhaps because of the skills, which have been required to operate in a centrally-planned environment for the past 40 years (Pan, 2000). However, the reform and transformation of its economy led Chinese organizations to rely on consensus and entrepreneurship, thus, being now regarded as more entrepreneurial (Pan, 2000), making OI easily accepted in firms. This is because one of the major elements of Chinese economic reform has been the introduction of new organizational forms to complement the older State-Owned Enterprise structure. It is believed that through the introduction of appropriate foreign management techniques, Joint Ventures will help move Chinese management to a more market-oriented outlook, with improved organization and improved performance (Pan, 2000). As such, the adoption of foreign ways of management is another way on who Chinese organizations manage organizational innovation. This is because the adoption of foreign forms of management is regarded to be inclined to market orientation, innovation, flexibility, entrepreneurship, and external orientation. Moreover, as a response for OIM, foreign-investment entrepreneurial ventures are being used by Chinese organizations, which help train Chinese technicians and managers, thus, providing them with technical know-how, advanced managerial techniques, and related technological human resources (Matthews et al., 1996).

Another way or strategy of Chinese organizations in adapting to changes in ideas and products in their firms is through its reward system. Aside from the life-support system provided to employees, effective management of organizational innovation in China would involve management of its employees or workers through incentives and rewards. Given the traditional characteristic of the Chinese who have high respect for age and hierarchy, Chinese organizations allocate rewards on the basis of seniority and task competence. This is considered to be one of the most resilient Chinese organizational values practiced, even in the face of pragmatic needs to adapt when the type of business requires changes (Silverthorne, 2005).

Furthermore, it has been pointed out that while both the internal and external management environments for entrepreneurial development in China are strengthening, there is still room for improvement. The focus of management on short and long-term strategic planning plays an important role in firm operations, survival, and profitability. The increasing number of companies that would like to produce and market in China neutralizes the current labor cost advantage. In turn, the investments being directed at China will be used to develop sources of electricity, frequent changes in local government policies, lack of infrastructure support, and high employee turnover (Matthews et al., 1996). Therefore, it can be understood that one way to sustain the management of organizational innovation in Chinese firms is through using foreign investments and funds, thus, helping to maintain the operations and productivity of firms. Because many international organizations perceive China as a potential market in the future due to the increase or upsurge of its population, investing in the country and in its organizations would be one way to sustain their own businesses and to sustain the economy of China and its organizations.    

The last strategy in managing organizational innovation in Chinese organizations is through using socio-political support systems, which are designed to advance a specific ideology to the employees of the firm. This is considering the fact that Chinese organizations are politically dominated and designed in part with ideological purposes in mind (Shenkar, 1991). In this sense, through socio-political support systems, the adoption of new behaviors and ideas would easily be instilled and inculcated in the minds of the workers. This support system would also help the employees effectively and easily adapt to new practices in terms of production, thus, making the process of organizational innovation or OI easy to be managed and directed to the desires of the company.



Chapter 6

Solution for the Identified Barriers to OIM


In order to lessen the negative impacts of the identified sources of barriers of OIM in the Chinese manufacturing industry, several solutions must be provided.


6.1 Top Management Support

One of the proposed solutions to the sources of barriers is for the top management of the organization, which must provide support for the implementation of OIM in the organization. The top management of an organization includes the CEO’s, chairmen, presidents (Andrew et al., 2007), managers, stakeholders, and the supervisors in the company, who are the most content with their company’s return on innovation spending, with the CEOs proving the biggest optimist (Andrew et al., 2007). It has been reported that the top management can play an important role in directing resources and attention to innovation by focusing on areas of innovation required for the future of the firm (Keegan and Turner, 2000).  Because the top management plays an important role in directing attention and resources to the process of innovation, it should provide assistance and support to all participating departments, such as through providing relevant trainings, seminars, and knowledge for all involved employees. In this sense, the top management must be able to efficiently come up and effectively implement appropriate strategies in the organization that would be helpful for it to facilitate and generate good profits from the innovation process and its management. One effective way of doing this is by placing much support on the work of the Human Resource Department, as this is the department that would be in charged of the dissipation of information and the facilitation of trainings and seminars for the different employees and departments thereafter. It can be recognized that individual or group employee training and development programs can be beneficial to the company and to the employees themselves. This is because training and development programs help ensure and maintain an appropriate balance between the needs of the organization and the needs of the employees, maintain and sustain the knowledge and skills that the organization demands of its employees, and build up an attractive personality portfolio of capability, which will be valued both inside the current organization and by other potential employers (Sloman, 1999). Through the support of a particular company’s or organization’s Human Resource Department, with the governance and assistance of the top management, the company would be able to assess and evaluate the competent performance of its employees, thus, entailing gathering relevant data and sources regarding their current competencies, skills, and needs. Once their strengths and competencies were already determined, further individual learning and development can be facilitated through coaching, demonstrations, instructions, and group discussions and activities. In relation to the roles and responsibilities, that the top management has is the issue on transformational leadership and the Five-Factor model of personality that was introduced by Judge and Bono in 2000 (as cited in Shao and Webber, 2006). This is related to this discussion because it can be suggested that one effective solution for Chinese organizations to effectively and appropriately manage its innovation in the organization is by allowing its top management, particularly its leaders to have adequate knowledge and skills regarding transformational leadership. By definition, transformational leadership is a type of leadership that places greater emphasis upon intellectual capability and creativity, tends to be more abstract, and emphasizes visions over goals. In this sense, a transformational leader tends to be idealized, oriented to change, and places to greater attention organizational transformation and behavioral change of individuals (Connor, 2004). As such, because this form of leadership allows one to focus on change, it becomes one good form of leadership that the members of the tope management could use in addressing OI and OIM. Transformational leadership is related to the concept of the Five-Factor model of personality, which includes neurocitism, extraversion, openness to experience, agreeableness, and conscientiousness, and such personalities predict and indicate the tendency of leaders to implement transformational leadership. In discussion, extraversion is related to articulation and social dominance, wherein, a particular leader must be able to communicate the value of the desired goal in an appealing way, and be able to exhibit initiative taking and social interaction stimulation. Another personality is openness to experience, which is reflected through the intellectual stimulation, or the instigation of a cognitive reappraisal of current circumstances, thus, leading to a questioning of old and perhaps comfortable assumptions. The next trait is conscientiousness, which is exhibited by Chinese leaders by taking a holistic approach to look after the employees and their families, not only helping subordinates develop career plans but also solve their family and personal issues. The fourth personality is neurocitism, or having characteristics such as anxiety and depression due to lack of self-confidence and self-esteem. Lastly is the trait of agreeableness, which is the display of individual concerns. In the Chinese culture and business organizations, using the five types of personalities as basis, it has been found out that certain characteristics, such as having a high power distance, high uncertainty avoidance, and collectivism, fundamentally reinforces the hierarchical and conformist attributes of the top down command structure. This kind of structure emphasizes a centralized authority and leadership, which is characterized by stability and predictability that create barriers for the emergence of transformational leaders, who tend to challenge the status quo and raise performance expectations (Shao and Webber, 2006). In this sense, it can be suggested that in order for the Chinese organizations to facilitate and govern effective and efficient OI and OIM, it must then encourage its top management and all its members to have a grasp on transformational leadership, along with the change of its organizational culture. Through such changes in terms of leadership and culture, it can be assumed that the Chinese organization would be able to manage its innovation effectively.

In addition to trainings and seminars and to the improvement of the leadership style to be adopted by the organization’s top management, the top management can support the funding of its Research & Development department in order to be able to find out the best way in order to provide knowledge and skills to the people in the organization. Through research and collaboration with the HR Department, the organization, along with the top management would be able to come up with useful, relevant, and up-to-date strategies, which would facilitate greater chances of survival and success for the manufacturing organization. It has been emphasized that innovation is an important area of the management theory (Keegan and Turner, 2000), thus, becoming important for project-based firms in the context of the new management paradigm facing organizations (Keegan and Turner, 2000). Because of this importance and the support of the organization’s Research & Development, it would be easier for the Chinese company to focus on the best strategy/s that would provide the organization with the highest profits and gains. One way to do this is through upgrading, which is used to indicate a shift towards a specialization in higher value-added goods within the same sector in studies on the dynamics of specialization. The concept of ‘upgrading’ is used as a synonym for innovation, yet it is also intended as the outcome of an innovation process. When the concept or the process of upgrading is recognized, it is often stressed that this is the outcome of some activity aimed at building capacity, thus, it requires continuous investment by the local firms themselves in people, organization, and equipments, probably having in mind some notion of technological capabilities. Technological capabilities refer to investments undertaken in the production process, or generally refer to capabilities without further categorizations and details, and can be obtained through a variety of sources, such as FDI, joint ventures, licensing, and imported equipments, and integrating it with in-house efforts and costly investments in learning, R&D, and technical assistance (Morrison et al., 2006). In this sense, it can be perceived that improving and developing an organization’s Research & Development would involve acquiring new technological capabilities through different sources and assessing if such technological capabilities can be used in order to help the organization improve and address its initiatives regarding innovation. Another way of improving and developing an organization’s Research & Development is through building and establishing partnerships with universities. The methods of partnership are firms contracting research to universities, joint research between universities and organizations, internships for university students in organizations, and university funding for firms (Kuchiki, 2007). In this sense, it can be understood that organizations acknowledge the need to better understand the relationship between them in order to maximize the efficiency of the transfer mechanisms that allow private organizations to benefit from academic research (Brusoni et al., 2002). In order to do so, transfer of knowledge, learning, and technological capabilities must also happen. It has been emphasized that the transfer of knowledge and technology to a firm is not like transferring a physical product, but it includes essential elements of capability building. In this process, learning plays a central role, and its success depends on the efficacy with which markets and institutions function, uncertainty is coped with, externalities tapped, and coordination achieved (Morrison et al., 2006). In this regard, it can be understood and emphasized that through the organization’s endeavors in Research & Development, it would be able to acquire new knowledge and skills that would be essential for its management and use of innovation. As such, it can be perceived that through trainings, seminars, and researches, the entire organization would be able to be founded upon effective and efficient communication and cooperation, which would not only be essential for the implementation of the concept of OIM, but also on the improvement and development of the entire organization as well. Through effective communication and cooperation, its different departments would be able to detect and prevent problems, issues, and conflicts, provide adequate solutions, allocate needed resources, and provide more chances for individual development through learning, change and development.


6.2 The second major solution for the identified sources of barriers of OIM in Chinese manufacturing organizations is through the support of professional parties. The support of professional parties being pointed out here is the support of a professional group, such as the ISO or the International Organizational for Standardization. It has been reported that the ISO is the world’s largest developer and publisher of International Standards, and is a network of the national standards institutes of 157 countries that forms a bridge between the public and private sectors, enabling a consensus to be reached on solutions that meet both the requirements for business and the broader needs of the society (“About ISO”, 2008). Up to the present, it has been observed that there seems to be no professional bodies or groups that compile a united standard or guideline, such as the ISO series for factories to follow. This leads one to emphasize that standards make an enormous and positive contribution to most aspect of the lives of individuals in the society. This is because standards ensure desirable characteristics of products and services, including quality, environmental friendliness, safety, reliability, efficiency, and interchangeability, at an economical cost (“Discover ISO”, 2008). In addition, standards, such as the standards being set by the ISO make the development, manufacturing, and supply of products and services more efficient, safer, and cleaner. They facilitate fairer trade between different countries, and provide governments with a technical base for health, safety and environmental legislation, and conformity assessment. Standards share technological advances and good management practice. They disseminate innovation, and safeguard consumers and users in general, in terms of product and services use. In summing up, standards, such as the standards set by the ISO make lives simpler by providing efficient and effective solutions to common problems. From such benefits, the many industries that can benefit through standards can be taken note of. It has been reported that setting standards provides technological, economic, and societal benefits to different sectors in the society. Primarily, businesses benefit as they can compete on many more markets around the world. Their suppliers would be able to develop and offer products and services that meet international acceptance and specifications. Second, the innovators of technologies also benefit from ISO standards, as terminology, compatibility, and safety speed up the dissemination of innovations and their development into manufacturable and marketable products. Third, customer also benefit, as worldwide compatibility of technology is achieved when products and services are based on International Standards, thus, providing them with a wide array of choices. Fourth, International Standards provide governments with technological and scientific bases that strengthen health, safety, and environmental legislation. Fifth, standards benefit trade officials, by creating “a level playing field” for all competitors on different markets, creating technical barriers to trade. In this sense, International Standards are the technical means by which political trade agreements can be put into practice. International Standards also benefit developing countries, as standards become an important source of technological know-how. They serve as basis for making the right decisions when investing their scarce resources, thus, preventing unsound decisions. In simple terms, setting International Standards benefit everyone and everything in the society and in the planet. This is because setting International Standards helps preserve the environment and contributes to the improvement of the quality of life of peoples around the world by ensuring the effective and efficient manufacture, innovation, and transport of products and services (“Discover ISO”, 2008). From such benefits and advantages, it can be perceived that professional parties, such as the ISO are needed as they may build up a guideline on OIM for the factories.

It has been emphasized that the latest International Standards, including the ISO 9000 systems, information systems, audit programs, review programs, and team-based problem solving contribute to the implementation of the results of the innovation projects in the primary processes of the organizations (Bossink, 2002). The standards set by the ISO would enable the Chinese manufacturing industries to follow certain rules and objectives regarding their production, facilities, wages, and human resources. It has been stressed that ISO 9000 quality systems were used by organizations to assure that innovation capabilities that were developed in the innovation projects became integrated in their primary processes. In addition, information systems were used to store and gain access to the information needed to develop sustainable innovations. Audit and review programs were used to measure and assure a certain level of sustainability, while team-based problem solving was used to integrate distinctive disciplines and to work together on complex innovative concepts (Bossink, 2002). From this, it can be perceived that setting standards, such as the International Standards for Chinese manufacturers would be important for its effective and efficient operations and production. In this way, it would be easier for the manufacturing firms, which are family businesses to operate in its respected industry, thus, preventing conflicts with other manufacturing firms and with its internal affairs.

Moreover, through professional parties, including the International Organization for Standards, the manufacturing firms would be able to have further researches regarding OIM. Professional parties, being the body that holds the different manufacturing firms together would help manufacturing firms regarding the implementation of OIM in their organization. This body would then hold great deal of information and knowledge regarding OIM, especially with regards to the different strategies organizations can use with its implementation. It can be pointed out that research in relation to the performance of Chinese manufacturing firms can include their technological opportunity, which is generally measured at the industry level and has been defined as the extent to which an industry lies on science-based research. It is expected to positively influence Research & Development investments (Peeters and van Pottelsberghe de la Potterie, 2003). In this regard, it can be emphasized that because the ISO hold much useful and relevant information regarding the strategies and ideas that Chinese manufacturers can use, including technological opportunity, it would essential that International Standards for Chinese manufacturing companies and firms must be established. Furthermore, it has been mentioned that there are various potential external information sources Chinese organizations or firms can use in their innovation projects. Such external information sources include the customers, suppliers and competitors, scientific institutions like universities and research institutes, consultants, and also patent databases, the scientific literature, and market surveys (Peeters and van Pottelsberghe de la Potterie, 2003). It can be perceived that because the ISO holds key information to different strategies and information that would be helpful and relevant for innovating organizations, it also holds key access and connections to such external information sources mentioned. In this sense, if Chinese organizations and firms would be able to facilitate research with the ISO, they would be able to apply and adapt new and improved strategies in their organizations, which would contribute to their success in terms of production, operations, and innovation. This would also contribute to the ability of the Chinese organizations or firms to manage their company, in a way that would be in line with the standards set by the ISO. Through such research endeavors, it would be easier for the ISO to execute their plans for developing countries, including China. It has been reported that the ISO has five key objectives for developing countries for 2010. The first key objective is to improve awareness of key stakeholders in developing countries of the role of standardization in economic growth, world trade, and sustainable development. This objective is particularly important for the dissemination of technology, the improvement of the quality of products and services, and the promotion of good business and management practices (ISO Central Secretariat, 2004). This objective typically includes the need of Chinese organizations to adopt innovation management to ensure efficiency and effectiveness in producing world-class products and services. However, this can be better achieved through the guidance of the ISO. Second objective of the ISO is to build capacity of ISO members and stakeholders involved in developing the standardization infrastructure and participating in international standardization work. This objective encourages and assists developing countries in identifying their priorities and developing the adequate capacity for their active involvement in international standardization (ISO Central Secretariat, 2004). Through this objective, it can be seen that the ISO has already been conceptualizing plans and opportunities for developing countries, including China, which is just starting to open its market to external markets and businesses. In this case, this would help the Chinese manufacturers become involved in the standardization of their factories, most especially in persuading its government and key stakeholders to do so. The third objective of the ISO is to increase national and regional cooperation to share experiences, resources, training, information and communications technologies (ISO Central Secretariat, 2004). This would significantly contribute to the advancement and the management of innovations in Chinese manufacturing firms to cooperate, collaborate, and communicate with other Chinese organizations in order to further improve its overall performance. The fourth objective of the ISO is develop electronic communication and expertise in IT tools to participate in international standardization work, reach out to stakeholders and make efficient use of ISO e-services (ISO Central Secretariat, 2004). This objective would serve to support the capabilities of Chinese organizations to communicate and collaborate with one another, as they would be able to cooperate and communicate directly with the ISO in order for them to set standards for their factories. Last objective is to increase participation in governance and technical work of ISO to voice priorities, contribute and influence the technical content of ISO deliverables. This objective emphasizes the fact that the ISO, being a non-government organization is dependent on technical and financial assistance received from its members, international development and aid agencies, governments and donor organizations involved in assistance to developing countries (ISO Central Secretariat, 2004). This objective emphasizes that along with the help of the ISO to set standards and share relevant and useful information for Chinese organizations in terms of development and improvement, the ISO seeks help and support from such organizations in order to sustain and maintain its operations. Thus, this emphasizes the interdependence of organizations from one another in order to achieve a common goal.   


6.3 Lastly, the sources of barriers can be given a solution through government support. It has been emphasized that the Chinese economy is currently undergoing a historical transition, wherein a shrinking centrally planned sector coexists and interacts with a growing market sector. This transition led to the transformation of state-owned enterprises or SOEs from planned producers to market-oriented organizations. However, because of SOEs’ long dependence on government planning, most of them are inefficient, lack market experience and associated competitive advantage (Li et al., 2007). In this case, it can be suggested that one effective solution for the barriers of OI and OIM in Chinese organizations is through government support.

            It has been reported that technological innovation has played an important role in business success and has frequently been regarded as crucial to organizational competitiveness and success in a dynamic and turbulent market environment. In addition, a rapidly changing environment reduces structural rigidity and organizational inertia, therefore opening up opportunities for innovation. The concept of innovation is not a single function, but rather a network that interacts with all value-chain activities. It plays different roles for SOEs and for the government. It has been mentioned that SOEs develop new products through innovation in order to gain competitive edge in the market place, while the government uses innovation policies to enhance the innovative capacity of various industries, as well as overall economic development (as cited in Li et al., 2007). However, as mentioned, some Chinese manufacturing firms lack the experience and competitive advantage to manage its endeavors of innovation. In this sense, it can be suggested and perceived that for Chinese manufacturing firms to be able to effectively and efficiently facilitate the management of innovation, the Chinese government must be able to extend support and strategies that would be helpful for the overall improvement and development of Chinese manufacturing firms and of the Chinese economy as well.    

            One way of providing a solution to the barriers of OI and OIM is by persuading the government of China to provide courses and seminars periodically for factories and allow them to have the most updated information regarding OIM. It has already been mentioned that trainings and seminars in any organization or firm contribute to learning, development, and changes in the company that each employees and the entire organization would be able to use in their job and their simultaneous development. The employees and its top management in the organization would not only be able to gain new insights and knowledge regarding their job and their working environment, but trainings and seminars would also provide them with a means to communicate with other employees in the organization. Aside from this, the collaboration and communication involved in conducting seminars and trainings would be essential for coming up with new ideas and concepts for the benefit of the whole organization. In relation to this, it has been reported that the Chinese Government has been continuously boosting and deepening the reform of the economic, scientific, technological, and educational systems of China and its organizations (Yujian, 2004). With this endeavor, it can be suggested that one way for the Chinese Government to be able to conduct effective and appropriate seminars and trainings for the employees of Chinese manufacturing firms is by collaboration and partnership with universities and other organizations that may help manufacturing firms with researches. Beijing, the capital of China is the center of education for science and technology, economic policy, information dispatch, and politics and culture (Kuchiki, 2007). From this information, it can be assumed that the manufacturing firms in Beijing and in other parts of China that are centers for education, technology, and advancement could be at their edge in terms of innovation management. With this, other Chinese manufacturing firms could obtain relevant information and knowledge from such firms, which they can utilize for their trainings and seminars. A concrete example of this move is when the Beijing Municipal People’s Government plays a large role in promoting the agglomeration in the hi-tech industry in the Zhongguancun Science Park. The Beijing Municipal People’s Government enacted a municipal ordinance on the ZSP at the end of 2000, and currently arranges tours for overseas inspection. Its main development promotion policy prescribes fund support, attract human resources, land policy, and tax policy (Kuchiki, 2007). In this particular case, it is not impossible for the government of China to fund and support the projects of organizations, most especially, if it would benefit the society. Thus, in this sense, it can be perceived that the government can also support the projects of Chinese manufacturing firms and organizations in relation to providing effective, relevant, and useful seminars and trainings regarding OI and OIM. This is because such seminars and training would be crucial means for the employees, the top management, and the entire organization to gain useful knowledge, skills, and competencies that would boost overall improvement and development of the organization.

            In addition, through such courses and seminars, promotions to small firms can also be achieved and encourage them to process OIM by citing its importance in industry firms. The support of the government would seem the most important type of support that organizations are able to get, as this means that the entire country, along with its government is in favor of improving and developing its manufacturing industry. Being in favor of the development and improvement of its manufacturing industry would mean that the Chinese government is also in favor of the development of its whole economy, politics, and society, thus, entirely supporting the welfare of its people. In this sense, it would be beneficial not only for the welfare of the manufacturing organization, but also for the welfare of the entire Chinese society as well. In this sense, it can be perceived that the people would be attaining improvement in their lives in terms of education, knowledge, technology, and many other aspects.




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