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Track 9.3 - Organizational Innovation development

Igor DUKEOV, Dr., Lappeenranta University of Technology
Jukka-Pekka BERGMAN, Adj. Professor, Lappeenranta University of Technology

Track's Contacts : 


It was Joseph Schumpeter who introduced the term “new industrial organization”. According to the Schumpeter’s theory among the five types of innovations, he introduced one that was called “new forms of industrial organization”. The latter is nowadays understood as organizational innovation (ORI). According to the OSLO Manual the definition of ORI is as follows: “An organizational innovation is the implementation of a new organizational method in the firm business practices, workplace organization or external relations”.
In the literature, ORI has gained a minor role in studies as it is a relatively new concept to be researched and implemented. Nevertheless it still represents a broad concept which deals with issues covered by strategic management, human research management, knowledge management and other non-technological areas of firm control and evolvement. All these areas can be considered as indicators of the internal diffusion of various practices and elements of knowledge management. The effect of ORI may be visible as the increasing level of competitiveness of a firm that introduces product, process, or marketing innovations supported by simultaneously introduced ORI. This simultaneous introduction of different types of innovations may lead to the synergy of various effects.
Scholars have provided various classifications of organizational innovation in an attempt to explain and specify their characteristics in different contexts. Thus, quite a large number of definitions for ORI can be found, not to mention interpretations of the term. One can also consider different levels of ORI. For example, these may take the form of appropriate solutions on the level of particular departments or functions of a company. They can also relate to the overall structure or the functional principles of the firm. They may well be innovations that have an impact the firm’s relationship with its environment.
Despite many studies arguing that ORI should be considered as a firms’ response to technological innovation forming a pre-condition environment for it, ORI can also play its own independent role in a firm’s development and can be considered a distinct form of innovation.
Firstly, ORI might aim at implementing new procedures in processes, operations, or behaviour in a firm. These procedures could be the first introduction of a total quality management system or a PDCA cycle, or could involve just-in-time or teamwork practices that directly impact the organizational performance of the firm. Often the innovations of this type are called procedural ORIs in comparison to structural ORIs which deal with increasing the efficiency of responsibilities, accountability, divisional structure of functions, and knowledge dissemination in a firm on its various levels. Thirdly, ORI might reduce the organizational barriers of the external environment, thus facilitating enlarging the scale of the firms’ external relations with customers, suppliers, research organizations, and governmental and non-governmental institutions.
ORI may be intended to increase a firm’s performance by reducing administrative or transaction costs, enhancing labour productivity by improving workplace satisfaction, gaining access to non-tradable assets (such as non-codified external knowledge), or reducing the costs of supplies. An organizational innovation should be based on strategic decisions taken by the management of the firm to implement organizational methods in business practices, workplace organization or external relations which are new for the firm.