Does organizational innovation facilitate product innovation? Evidence from Korean Manufacturing Firms

Abstract

Production innovation enables businesses to remain relevant and drives economic growth. However, many business leaders struggle to identify existing innovation opportunities and are unsure how to execute them with existing resources. This article suggests that organizational innovation—the innovation of a firm’s management practices—helps managers maximize product innovation outcomes. Drawing from firm-level data from the Corporate Innovation Survey of Korea, we find that product/service innovation is positively associated with three types of organizational innovation—the innovation of human resource practices, production processes, and value chain relationships. This suggests that business leaders can maximize their product innovation outcomes by engaging in organizational changes together with product innovation activities. In addition, we explore the channels through which organizational changes enhance product innovation: innovating the management control system helps managers retain top creative talent; value chain innovation leverages the external knowledge necessary for innovation; all three types of organizational innovation are advantageous for acquiring knowledge sources, helping organizational members develop new ideas and novel solutions.